ACIT CEN CIR 45, MUMBAI V. PARAMSHAKTI STEELS P. LTD, MUMBAI

ITA 5586/MUM/2013

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5020 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 26-04-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 30-08-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS ANITA HARDASANI D R S; N N SINGH
• Assessee Lawyers: SANJAY R PARIKH
• Keywords: Unexplained cash credit; Opportunity of being heard; Source of fund; Retrospective amendment; Bad and doubtful debts; Accommodation entries; Assessment record
• Section: 143(3); 142(1); 68

Judgement Text

P A G E | 1 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. IN THE INCOME TAX APPELLATE TRIBUNAL ' C ' BENCH, MUMBAI BEFORE SHRI G. MANJUNATHA , ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO. 5586/MUM/2013 (ASSESSMENT YEAR: 200 9 - 10 ) ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 45,6 TH FLOOR, ROOM NO. 658, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400 20 VS. M/S PARAMSHAKTI STEELS P. LTD. 203, LOHA BHAVAN, PD MELLO ROAD, MUMBAI - 400009 PAN AAFCS7494A (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI N.N. SINGH, & MRS. ANITA HARDASANI, D .R S RESPONDENT BY: SHRI SANJAY R. PARIKH , A .R DATE OF HEARING : 25 .01.2019 DATE OF PRONOUNCEMENT : 30 .01.2019 O R D E R PER RAVISH SOOD , JM THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 36, MUMBAI, DATED 05.062013 , WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT I.T. ACT), DATED 23.12.2011. THE REVENUE ASSAILING THE ORDER OF THE CIT(A) HAS RAISED BEFORE US THE FOLLOWING GROUNDS OF APPEAL: P A G E | 2 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE L D. CIT(A) ERRED IN DELETING THE ADDITION MADE U/S 41(1) WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT SATISFACTORILY RECONCILED THE AMOUNT OF LIABILITY SH OWN AGAINST M/S PARAMSHAKTI DISTRIBUTORS PUT. LTD (PDPL). 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE L D. CIT(A) ERRED IN DELETING THE ADDITION MADE U/S 41 (1) WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE WHILE RECONCILING THE AMOUNT OF LIABILITY SHOWN AGAINST M/S PARAMSHAKTI DISTRIBUTORS PUT. LTD (PDPL), HAS TAKEN INTO ACCOUNT THE TRANSACTIONS OF OTHER ASSOCIATED ENTITIES OF THE ASSESSEE AS WELL AS M/S PDPL EVEN THOUGH THESE ASSOCIATED ENTITIES ARE INDEPENDENT ENTITIES AS FAR AS INCO ME TAX IS CONCERNED. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE L D. CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF BAD DEBTS WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT FULFILLED THE CONDITIONS U/S 36(1)(VII) FOR CLAIMING THE ALLOWABILITY OF BAD DEBTS. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE L D. CIT(A) ERRED IN DELETING THE ADDITION MADE U/S 41(1) OF THE I.T.ACT, 1961 AND THE ADDITION MADE ON ACCOUNT OF BAD DEBTS WITHOUT APP RECIATING THE FACT THAT THE A.O WAS NOT GIVEN AN OPPORTUNITY AS PER PROVISIONS OF RULE 46A OF THE I. T. RULES, 1961, TO RECORD HER COMMENTS OR OBJECTIONS. 5. ON THE FACTS AND CIRCUMSTANC ES OF THE CASE AND IN LAW, THE L D. CIT(A) ERRED IN DELETING THE ADDITION MADE UNDER SECTION 68 OF THE I. T.ACT, 1961 WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE COULD NEITHER ESTABLISH THE IDENTITY OF THE CREDITORS NOR WERE THE DIRECTORS OF THE COMPANY PRODUCED BEFORE THE A.O. 6. ON THE FACTS AND CIRCUMSTANC ES OF THE CASE AND I N LAW, THE L D. IT(A) ERRED IN DELETING THE ADDITION MADE UNDER SECTION 68 OF THE I. T.ACT, 1961 WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE COULD NOT JUSTIFY THE QUANTUM OF SHARE PREMIUM CHARGED FROM THE SHARE APPLICANTS NOR COULD QUANTIFY THE NET ASSE T VALUE OF THE COMPANY OR THE P/ E RATIO OF THE ASSESSEE COMPANY. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND AND/OR A D D NEW GROUNDS WHICH MAY BE NECESSARY. 2. BRIEFLY STATED, THE ASSESSEE WHICH IS PUBLIC LIMITED COMPANY ENGAGED I N THE BUSINESS OF MANUFACTURING OF IRON AND STEEL PRODUCTS HAD FILED ITS RETURN OF INCOME FOR A.Y. 2009 - 10 ON 29.09.2009, P A G E | 3 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. DECLARING TOTAL INCOME AT RS.2,02,23,240/ - . SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2) OF THE ACT. 3. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE HAD SHOWN A PARTY V IZ. M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD. AS A CREDITOR FOR RS.7,59,83,195/ - AS ON 31.03.2009. IT WAS OBSERVED BY THE A.O THAT THE OUTSTANDING BALANCE AGAINST THE AFORESAID PARTY WAS THE SAME AS ON 01.04.2008. ON A PERUSAL OF THE RECORDS OF M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD., IT WAS NOTICED BY THE A.O THAT THE LATTER CONCERN HAD SHOWN THE ASSESSEE AS A DEBTOR FOR AN AMOUNT OF RS.3,08,984/ - AS ON 31.03.2009. IN THE BACKDROP OF THE AFORESAID FACTS THE A.O CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY THE DIFFERENCE OF RS. 7,56,74,211/ - MAY NOT BE TREATED AS REMISSION OF LIABILITY UNDER SEC. 41(1) OF THE I.T. ACT AND ADDED TO ITS TOTAL INCOME. ON FURTHER PERUSAL OF THE RECORDS IT WAS NOTICED BY THE A.O THAT THE LIABILITY AGAINST THE NAME OF THE AFOREMENTIO NED PARTY VIZ. M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD. WAS ON ACCOUNT OF PURCHASES MADE BY THE ASSESSEE FROM THE SAID PARTY IN FINANCIAL YEAR 2006 - 07 AND THE EARLIER YEARS. THE A.O OBSERVED THAT THE ASSESSEE DESPITE HAVING BEEN AFFORDED SUFFICIENT OPPORTUNI TY HAD FAILED TO DISCHARGE THE ONUS CAST UPON IT TO PROVE THE CORRECTNESS OF THE AFOREMENTIONED LIABILITY. ON THE BASIS OF HIS AFORESAID OBSERVATIONS THE A.O CHARACTERISED THE LIABILITY OF RS.7,56,74,211/ - AS AN INFR U CTUOUS LIABILITY AND HOLDING THE SAME AS HAVING BEEN REMITTED UNDER SEC. 41(1) MADE AN ADDITION OF THE SAME TO THE RETURNED INCOME OF THE ASSESSEE . 4. FURTHER, IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE HAD DURING THE YEAR UNDER CONSIDERATION RECEIVED AN AMOUNT OF RS.7,43,40,000/ - AS S HARE PREMIUM . THE A.O CALLED UPON THE ASSESSEE TO PROVIDE THE P A G E | 4 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. NAME S AND ADDRESS ES OF THE PARTIES WHO HAD BEEN ALLOTTED SHARES AT PREMIUM, ALONGWITH THEIR CONFIRMATION LETTERS, COPY OF ACCOUNTS ETC. IN COMPLIANCE, THOUGH THE ASSESSEE FILED THE NAME S AND ADDRESS E S OF THE PARTIES FROM WHOM SHARE PREMIUM WAS RECEIVED, HOWEVER IT FAILED TO FILE THE REQUISITE DOCUMENTS TILL THE CULMINATION OF THE ASSESSMENT PROCEEDINGS . IN THE BACKDRO P OF THE OF THE AFORESAID FACTS THE A.O HELD A CONVICTION THAT THE ASSESSEE BY FAILING TO PRODUCE BEFORE HIM THE SHAREHOLDER REGISTER, SHARE APPLICATION FORMS, SHARE TRANSFER REGISTER, CONFIRMATIONS OF THE SUBSCRIBERS AND THEIR RETURNS OF INCOME HAD FAILED TO DISCHARGE THE PRIMARY ONUS AS WAS CAST UPON IT. ON THE BASIS OF HIS AFORESAID DELIBERATIONS IT WAS OBSERVED BY THE A.O THAT THE IDENTITY, CREDITWORTHINESS OF THE SUBSCRIBERS AND THE GENUINENESS OF THE TRANSACTIONS HAD REMAINED UNPROVED . FURTHER, IT WAS O BSERVED BY THE A.O THAT THE AS SESSEE HAD MERELY RECEIVED THE SHARE PREMIUM FROM CERTAIN NAMESAKE OR FICTITIOUS COMPANIES WHICH WERE ESTABLISHED ONLY ON PAPER FOR THE PURPOSE OF GIVING ACCOMMODATION ENTRIES. IN THE BACKDROP OF HIS AFORESAID OBSERVATIONS THE A.O TREATING THE AFORESAID AMO UNT OF RS.7,43,40,000/ - RECEIVED BY THE ASSESSEE DURING THE YEAR AS A BOGUS AND AN UNEXPLAINED CREDIT, ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE UNDER SEC.68 OF THE I.T. ACT. STILL FURTHER, IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE HAD DEBITED A SUM OF RS.27,01,881/ - ON ACCOUNT OF BAD DEBTS DURING THE YEAR. HOWEVER, THE A.O BEING OF THE VIEW THAT AS THE ASSESSEE HAD NOT FURNISHED COMPLETE DETAILS TO PROVE THE ALLOWABILITY OF ITS CLAIM IN RESPECT OF THE BAD DEBTS , THUS CONCLUDED THAT THE SAME COULD NOT BE ALLOWED AS A DEDUCTION WHILE COMPUTING THE TAXABLE INCOME OF THE ASSESSEE IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. THE A.O BEING OF VIEW THAT AS THE ASSESSEE HAD FAILED TO ESTABLISH THAT PROPER EFFORTS WERE MADE FOR THE RECOVERY OF THE BAD DEBTS OF RS.27,08,881/ - AND TH A T THE SAME WERE WRITTEN OFF BY IT BONAFIDELY , THUS DISALLOWED THE SAID SUM AND P A G E | 5 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. ADDED BACK THE SAME TO THE RETURNED INCOME OF THE ASSESSEE.ON THE BASIS OF HIS AFORESAID DELIBERATIONS THE A.O ASSESSED THE INCOME OF THE ASSESSEE AT RS.17,29,46,330/ - . 5 . AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER DELIBERATING ON THE CONTENTIONS ADVANCED BY THE ASSESSEE BEFORE HIM OBSERVE D THAT AS PER THE BOOKS OF AC COUNT OF THE ASSESSEE AN AMOUNT OF RS. 7,56,74,211/ - WAS OUTSTANDING AS PAYABLE ON 31.03.2009 TO M/S PARAMSHAKTI DISTRIBUTORS PRIVATE LIMITED. HOWEVER, AS PER THE LETTER FILED BY M/S PARAMSHAKTI DISTRIBUTORS PRIVATE LIMITED WITH THE A.O AN AMOUNT OF RS. 3,0 8,984/ - (DR) WAS CLAIMED BY THE SAID CONCERN TO BE RECEIVABLE FROM THE ASSESSEE COMPANY. IT WAS NOTICED BY THE CIT(A) THAT AS THE DIRECTOR OF THE AFORESAID CONCERN VIZ. M/S PARAMSHAKTI DISTRIBUTORS PRIVATE LIMITED WAS NOT IN GOOD TERMS WITH THE ASSESSEE DUE TO AN ONGOING LITIGATION, THEREFORE , FOR THE SAID REASON THE NECESSARY RECONCILIATION OF THE ACCOUNT IN RESPECT OF THE SAID PARTY COULD NOT BE FURNISHED BY THE ASSESSEE WITH THE A.O. IT WAS OBSERVED BY THE CIT(A) THAT THE A.O ON THE BASIS OF THE AFORESAID DIFFERENCE IN THE BALANCE REFLECTED BY THE ASSESSEE AGAINST THE NAME OF THE AFORESAID PARTY IN ITS BOOKS OF ACCOUNT [RS.7,59,83,195/ - ( C R) ON 31.03.2009], AS AGAINST THE AMOUNT OF [RS.3,08,984/ - ( DR ) ON 31.03.2009] SHOWN BY THE AFOREMENTIONED PARTY VIZ. M/S M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD. CONCLUDED THAT AS LIABILITY TO THE EXTENT OF RS.7,56,74,211/ - STOOD REMITTED THUS , AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. IT WAS OBSERVED BY THE CIT(A) THAT THE ASSESSEE HAD SUBMITTED BEFORE THE A.O THAT THE LIABILITY TO WARDS THE AFORESAID PARTY WAS SHOWN AS OUTSTANDING DUE TO S OME DEBIT BALANCE S OF OTHER RELATED CONCERN S OF M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD. FURTHER, IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE CIT(A) THAT THAT DUE TO P A G E | 6 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. AN ONGOING LITIGATION WITH M/S PA RAMSHAKTIDISTRIBUTORS PVT. LTD ITS COUNSEL HAD ADVISED NOT TO WRITE OFF ANY CREDITOR AGAINST ANY DEBT. I T WAS OBSERVED BY THE CIT(A) THAT THE ASSESSEE IN ITS ATTEMPT TO RECONCIL E THE DIFFERENCE HAD FURNISHED THE STATEMENT FOR THE SAID CREDIT AND DEBIT BALANCE S AMONGST THE ASSESSEE COMPANY (BEING A PARTY TO RAJENDRA KUMAR CHAUDHARI GROUP REFERRED TO AS R.C. GROUP ENTIT Y ) AND PARAMSHAKTI DISTRIBUTORS PVT. LTD. (BEING A PARTY TO ANIL GUPTA GROUP REFERRED TO AS AG. GROUP ENTITY ), AS UNDER: NAME GROUP DEBIT CREDIT NET BALANCE PARAMSHAKTI DISTRIBUTORS PVT. LTD. RC - RS. 7,59,83,195/ - RS. 7,59,83,195/ - (CR) SKS ISPAT AND POWER LTD. AC RS. 11,55,81,507/ - RS. 11, 55,81,507/ - (DR) BALANCE RECEIVABLE RS. 3,95,98,312/ - (DR) 6. IT WAS FURTHER OBSERVED BY THE CIT(A) THAT FROM A PERUSAL OF THE ORDER OF THE HONBLE HIGH COURT OF BOMBAY AND CONSENT TERMS /DEED OF SETTLEMENT MADE BETWEEN THE ASSESSEE AND ANIL GUPTA GROUP IT STOOD REVEALED THAT M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD. AND M/S SKS. ISPAT& POWER LTD. BELONG ED TO THE SAME GROUP I.E. A G GROUP ENTIT IES . IN THE BACKDROP OF HIS AFORESAID OBSERVATION S THE CIT(A) NOTICED THAT A NET BALANCE OF RS.3,95,98,312/ - (DR.) WAS RECEIVABLE BY THE ASSESSEE AND NO LIABILITY WAS THEREFORE REQUIRED ON ITS PART TO BE DISCHARGED TOWARDS M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD. FURTHER, IT WAS OBSERVED BY THE CIT(A) THAT AS PER THE CONSENT TERMS/DEED OF SETTLEMENT, DATED 18.11.2011 THE BALANCE RECEIVABLE BY THE ASSESSEE ( R.C. GROUP ENTIT Y) FROM SKS ISPAT& POWER LTD. WAS SHOWN AT RS. 11,51,81,507/ - (DR.) AND THE LIABILITY TOWARDS M/S PARAMSHAKTI DISTRIBUTOR S PVT. LTD. WAS RS.3,47,28,822/ - (CR) , AS AGAINST RS.7,59,83,195/ - (CR.) APPEARING IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE COMPANY. AS REGARDS THE DIFFERENCE OF RS.4,12,54,373/ - [RS. 7,59,83,195/ - ( - ) RS. 3,47,28,822/ - ] , IT WAS OBSERVED BY THE CIT(A) P A G E | 7 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. THAT THE SAME WAS FO R THE REASON THAT M/S RAJENDRA KUMAR & COMPANY (R.C GROUP ENTITY) HAD TO RECEIVE THE AMOUNT OF RS. 4,12,54,373/ - (DR) FROM M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD. ON THE BASIS OF HIS AFORESAID OBSERVATIONS IT WAS NOTICED BY THE CIT(A) THAT THE LIABILITY O F RS.3,47,28,822/ - (CR) WAS RECONCILED BY THE ASSESSEE, AS UNDER: LIABILITY IN THE BOOKS OF PARAMSHAKTI STEEL PVT. LTD. (I.E ASSESSEE) RS. 7,59,83,195/ - (CR) AMOUNT RECEIVABLE IN THE BOOKS OF RAJENDRA KUMAR & CO. RS.4,12,54,373/ - (DR) NET BALANCE APPEARING IN THE CONSENT TERM RS. 3,47,28,822/ - (CR). ON THE BASIS OF THE AFORESAID DELIBERATIONS THE CIT(A) BEING OF THE VIEW THAT AS THE A.O HAD FAILED TO PLACE ON RECORD ANY MATERIAL WHICH COULD SHOW AS TO HOW THE BALANCE S WERE RECONCILED IN THE OTHER PARTIES ASSESSMENT PROCEEDINGS OR WHETHER THERE WAS ANY ADDITION ON ACCOUNT OF REMISSION OR ALLOWING OF BAD DEBTS IN THOSE PARTIES CASE S , NOR HAD OFFERED ANY COMMEN TS IN RESPECT OF THE SAID ISSUE IN HIS REMAND REPORT, THUS DELETED THE ADDITION OF RS.7,56,7 4,211/ - MADE BY THE A.O UNDER SEC.41(1) OF THE ACT. 7. THE CIT(A) ADVERTING TO THE ADDITION OF RS.7,43,40,000/ - MADE BY THE A.O UNDER SEC.68 IN RESPECT OF THE AMOUNT RECEIVED BY THE ASSESSEE TOWARDS SHARE PREMIUM OBSERVED THAT THE ASSESSEE HAD IN COMPLIAN CE TO THE DIRECTIONS OF THE A.O , VIDE HIS LETTER DATED 09.12.2011 HAD PLACED ON RECORD SHARE APPLICATION FORM S,BOARD RESOLUTION AND PAN CARDS OF THE RESPECTIVE SHARE APPLICANT SWITH THE A.O FOR NECESSARY VERIFICATION. FURTHER, THE ASSESSEE HAD ALSO FURNISHE D THE BASI C DETAILS VIZ. NAME S OF THE SHARE APPLICANTS, PAN DETAILS AND ADDRESS ES OF THE PARTIES FROM WHOM SHARE APPLICATION MONEY WAS RECEIVED. THE CIT(A) OBSERVED THAT THE A.O HAD IN HIS REMAND REPORT STATED THAT THE RESPECTIVE PARTIES C OULD NOT BE LOCATED BY HIS INSPECTOR AT THE ADDRESS ES GIVEN I N THE SHARE APPLICATION FORM S . P A G E | 8 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. IN THE BACKDROP OF THE AFORESAID FACTS THE ASSESSEE WAS DIRECTED BY THE CIT(A) TO PROVIDE THE DETAILS AS REGARDS THE PRESENT ADDRESSES OF THE SAID PARTIES. SUBSEQUENTLY, THE AS SESSEE WAS IN RECEIPT OF CORRESPONDENCES FROM THE SAID PARTIES AS REGARDS THEIR PRESENT ADDRESSES. FURTHER, THE CIT(A) IN ORDER TO VERIFY THE GENUINENESS A ND VERACITY OF THE TRANSACTIONS DIRECTED THE ASSESSEE TO PRODUCE THE PARTIES ALONG WITH THE DETAILS, P ROOF OF ADDRESS ES AND REASONS FOR SHIFTING FROM THE IR EARLIER ADDRESSES . IN COMPLIANCE, THE ASSESSEE PRODUCED THE SAID PARTIES ALONG WITH THE REQUISITE DETAILS VIZ. RETURNS OF INCOME, AFFIDAVIT S AND THE PROOF OF ADDRESS ES BEFORE THE CIT(A). IN THE BACKDROP OF THE AFORESAID FACTS THE CIT(A) WAS OF THE VIEW THAT THE ASSESSEE HAD FILED THE BASIC DETAILS VIZ. NAME S , PAN DETAILS AND ADDRESS ES OF THE PARTIES FROM WHOM SHARE APPLICATION MONEY OF RS.7,43,40,000/ - WAS RECEIVED BY IT . FURTHER, IT WAS ALSO NOTICED BY THE CIT(A) THAT THE ASSESSEE HAD ALSO PRODUCED THE COPIES OF PAN CARD S , BOARD RESOLUTION AND SHARE APPLICATION FORM S ALONG WITH THE CHEQUE DETAILS MENTIONED BEFORE THE A.O. THE CIT(A) WAS OF THE VIEW THAT THE FACT THAT THE PARTIES FROM WHOM SHARE PREMIUM WAS RECEIVED WERE CORPORATE ENTITIES WHICH WERE SUBJECT TO THE RIGOURS OF THE C OMPANIES ACT, 1956 AND WERE REGULARLY FILING THEIR ANNUAL ACCOUNTS AND REPORT SWITH THE R EGISTRAR OF COMPANIES (ROC), THE SAME INSPIRED CONFIDENCE AS REG ARDS THE VERACITY OF THE TRANSACTIONS OF THE ASSESSEE WITH THEM . THE CIT(A) NOTICED THAT THE AFOREMENTIONED PARTIES WERE REGULARLY ASSESSED TO TAX AND HAD PLACED ON RECORD THE REQUISITE CONFIRMATIONS ALONG WITH THEIR BANK STATEMENT S , FINANCIAL STATEMENTS A ND RETURNS OF INCOME. STILL FURTHER, THE SAID RESPECTIVE PARTIES HAD APPEARED BEFORE HIM DURING THE COURSE OF THE APPELLATE PROCEEDINGS. ON THE BASIS OF THE AFORESAID OBSERVATIONS THE CIT(A) WAS OF THE VIEW THAT THE ASSESSEE HAD DISCHARGE D THE ONUS AS WAS CAST UPON IT AND HAD ESTABLISHED THE IDENTITY OF THE PARTIES BEYOND DOUBT.FURTHER, HE P A G E | 9 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. WAS OF THE VIEW THAT THE CAPACITY OF THE PARTIES COULD SAFELY BE GATHERED ON A PERUSAL OF THEIR RESPECTIVE FINANCIAL STATEMENTS FOR THE RELEVANT YEAR IN WHICH THEY HAD AD VANCED THE SHARE APPLICA TION MONEY TO THE ASSESSEE. IN SOFAR, THE GENUINENESS OF THE TRANSACTIONS WAS CONCERNED, IT WAS OBSERVED BY THE CIT(A) THAT AS THE TRANSACTIONS WERE CARRIED OUT THROUGH ACCOUNT PAYEE CHEQUES , THUS THE SAME TOO STOOD PROVED BEYOND DOU BT. FURTHER, THE CIT(A) OBSERVED THAT THE BOOK VALUE OF THE SHARE OF THE ASSESSEE COMPANY WAS RS.81.85. IT WAS NOTICED BY THE CIT(A) THAT THE ASSESSEE HAD ASSETS VIZ. LAND, FACTORY, BUILDING, OFFICE PREMISES ETC. WHOSE MARKET VALUE WAS ON MUCH HIGHER SIDE THAN THAT APPEARING IN ITS BOOKS OF ACCOUNTS. IN THE BACKDROP OF THE AFORESAID FACTS IT WAS OBSERVED BY THE CIT(A) T HAT THE NET ASSET VALUE OF THE ASSESSEE COMPANY AND RESULTANT VALUE PER SHARE WAS ALMOST NEAR TO THE BOOK VALUE OF THE SHARE AS ON 31.03.2008 AS PER THE FINANCIAL STATEMENTS ALREADY ON RECORD. ON THE BASIS OF HIS AFORESAID OBSERVATIONS THE CIT(A) DELETED THE ADDITION OF RS. 7,43,40,000/ - MADE BY THE A.O IN RESPECT OF SHARE PREMIUM UNDER SEC. 68 OF THE ACT. 8. I N SOF AR , THE DISALLOWANCE OF THE CLAIM OF BAD DEBTS WRITTEN OFF BY THE ASSESSEE AMOUNTING TO RS.23,81,268/ - WAS CONCERNED , IT WAS OBSERVED BY THE CIT(A) THAT THE BASIC DETAILS PERTAINING TO THE SAID CLAIM WERE PROVIDED BY THE ASSESSEE DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. IT WAS NOTICED BY THE CIT(A) THAT THE SAID DEBTS WERE WRITTEN OFF BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT S AND A SOFT COPY OF THE SAME WAS ALREADY AVAILABLE WITH THE A.O. FURTHER, IT WAS OBSERVED BY THE CIT(A) THAT THE INCOME IN RELATION TO THE AFOREMENTIONED DEBTS WAS OFFERED BY THE ASSESSEE IN THE EARLIER YEARS. IT WAS TAKEN NOTE OF BY THE CIT(A) THAT THE ASSESSEE IN SUPPORT OF ITS AFORESAID CLAIM OF BAD DEBTS HAD FURNISHED WITH THE A.O THE REQUISITE P A G E | 10 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. DOCUMENTARY EVIDENCE VI Z. (I) DETAILS OF PARTY WISE BAD DEBTS WRITTEN OFF; (II) COPY OF LEDGER ACCOUNTS OF PARTIES WHOSE ACCOUNTS WERE WRITTEN OFF AS BAD DEBTS ; AND (III) COPY OF LEDGER ACCOUNT OF BAD DEBTS WRITTEN OFF. THE CIT(A) NOTICED THAT THE FACT THAT THE ASSESSEE HA D WRITTEN OFF THE DEBT S AMOUNTING TO RS.23,81,268/ - IN ITS PROFIT AND LOSS ACCOUNT , AND AS WAS DISCERNIBLE FROM THE DETAILS AND THE LEDGER C OPIES OF THE RESPECTIVE PARTIES THE SAID AMOUNT WAS ALSO OFFERED AS INCOME IN THE EARLIER YEARS . IN THE BACKDROP OF THE AFORESAID FACTS THE CIT(A) WAS OF THE CONSIDERED VIEW THAT THE REQUISITE CONDITIONS FOR ALLOWABILITY OF BAD DEBTS UNDER SEC.36(I)(VII) WERE FOUND TO HAVE DULY BEE N SATISFIED BY THE ASSESSEE. IN SOFAR, THE ISSUE PERTAINING TO ESTABLISHING THAT THE DEBT HAD ACTUALLY BEC A ME BAD, THE CIT(A) WAS OF THE VIEW THAT SUBSEQUENT TO THE JUDGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF T.R.F. LTD VS. CIT (2010) 323 ITR 0397 (SC)I T WAS NO MORE NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT HAD IN FACT BECA ME IRRECOVERABLE AND IT WAS SUFFICIENT IF THE DEBT HAD BEEN WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. ON THE BASIS OF HIS AFORESAID DELIBERATIONS THE CIT(A) VACATED THE DISALLOWANCE O F THE BAD DEBTS OF RS.23,81,268/ - CLAIMED BY TH E ASSESSEE . HOWEVER, THE BALANCE AMOUNT OF RS.3,27,613/ - CLAIMED BY THE ASSESSEE AS BAD DEBTS WAS CONFIRMED BY HIM. 9. THE CIT(A) AFTER NECESSARY DELIBERATIONS ON THE AFOREMENTIONED ISSUE S, DELETED THE ADDITIONS/DISALLOWANCE MADE BY THE A.O AND PARTLY ALLOWED THE APPEAL. 10. THE REVENUE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) ADVERTING TO THE DELETION OF THE ADDITION OF RS.7,56,74,211/ - WHICH WAS MADE BY THE AO UNDER SEC. 41 (1) OF THE I.T. ACT, TOOK US THROUGH THE OBSERVATIONS OF THE LOWER AUTHORITIES IN P A G E | 11 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. CONTEXT OF THE ISSUE UNDER CONSIDERATION. IT WAS SUBMITTED BY THE LD. D.R THAT THE CIT(A) HAD BY WAY OF A NON - SPEAKING AND RATHER CRYPTIC ORDER DELETED THE AFORESAID DISALLOW ANCE. FURTHER, IT WAS AVERRED BY THE LD D.R THAT EVEN OTHERWISE THE ASSESSEE HAD FAILED TO RECONCILE ANY FURTHER THE DIFFERENCE BETWEEN THE AMOUNT OF RS. 3,47,28,822/ - (CR) [AS PROJECTED BY THE ASSESSEE ON THE BASIS OF A RECONCILIATION] AND THE AMOUNT OF RS . 3,08,984/ - (DR) SHOWN IN THE BOOKS OF ACCOUNT OF M/S PARAMSHAKTI DISTRIBUTORS PRIVATE LIMITED ON 31.03.2009. INSOFAR, THE ADDITION OF RS. 7,43,40,000/ - MADE BY THE A.O UNDER SEC. 68 WAS CONCERNED , IT WAS SUBMITTED BY THE LD. D.R THAT DESPITE SPECIFIC DI RECTIONS NO DETAILS SUBSTANTIATING THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS WERE FURNISHED BY THE ASSESSEE BEFORE THE A.O. IT WAS AVERRED BY THE LD. D.R THAT IN THE COURSE OF THE REMAND PROCEEDINGS THE A.O COULD NOT LOCATE THE CON CERNED PARTIES AT THE ADDRESSES GIVEN ON THE SHARE APPLICATION FORMS. THE LD. D.R IN ORDER TO FORTIFY HIS AFORESAID CONTENTION DREW OUR ATTENTION TO THE REMAND REPORT, DATED 15.02.2013 THAT WAS FILED BY THE A.O WITH THE CIT(A) [ PAGE 67 - 69 OF APB]. RATHER, IT WAS THE CONTENTION OF THE LD. D.R THAT IN CASES OF CERTAIN PARTIES COMMON ADDRESSES WERE GIVEN IN THE SHARE APPLICATION FORMS. THE LD. D.R REFERRING TO THE FINANCIAL CREDIBILITY OF THE SHAR E APPLICANT COMPANIES SUBMITTED THAT THE SAME WERE PAPE R COMPANIES WHICH WERE FOUND TO HAVE RETURNED ZERO INCOME. THE LD. D.R IN SUPPORT OF HIS AFORESAID CONTENTION THAT IF THE ASSESSEE FAILS TO SUBSTANTIATE THE CREDITWORTHINESS OF SUBSCRIBERS AND GENUINENESS OF TRANSACTIONS THEN ADDITION IS REQUIRED TO BE MADE U/S.68, RELIED ON THE JUDGMENT OF T H E HONBLE HIGH COURT OF BOMBAY IN THE CASE OF KONARK STRUCTURAL ENGINEERING (P) LTD. VS. DCIT (2018) 254 TAXMANN 184 (BOM). APART THEREFROM, THE LD. D.R ADVERTING TO THE DELETION BY THE CIT(A) OF THE DISALLOWANCE OF THE CLAIM OF THE BAD DEBTS OF RS.23,81,268/ - MADE BY THE A.O, RELIED ON THE ASSESSMENT ORDER. P A G E | 12 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. 11. PER CONTRA, THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE REBUTT ED THE AFORESAID CONTENTION S OF THE REVENUE AND SUBMITTED THAT THE CIT(A) AFTER DULY APPRECIATING THE FACTS OF THE CASE IN THE RIGHT PERSPECTIVE HAD RIGHTLY DELETED THE ADDITION MADE BY THE A.O UNDER SEC. 41(1) OF THE ACT. THE LD. A.R TOOK US THROUGH THE ORDER OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF ANIL GUPTA VS. PARAMSHAKTI STEEL LTD. AND ORS. ( C OMPANY A PPEAL NO 9 OF 2011; DATED 02.01.2012) ( P AGE 125 - 126 ) OF THE ASSESSE S PAPER BOOK (FOR SHORT APB) . FURTHER, THE LD. A.R DREW OUR ATTENTION TO THE CONSENT TERMS ENTERED INTO BETWEEN THE AFORE MENTIONED PARTIES VIZ. SHRI ANIL GUPTA AND M/S PARAMSHAKTI STEEL LTD. AND ORS, DATED 18.12.2011 ( P AGE 127 - 131 OF APB). IT WAS SUBMITTED BY THE LD. A.R , THAT THE HONBLE HIGH COURT REFERRING TO THE OVERALL SETTLEMENT BETWEEN THE AFOREMENTIONED GROUPS AND PARTIES VIZ. SHRI ANIL GUPTA AND M/S PARAMSHAKTI STEEL LTD. AND ORS . HAD OBSERVED THAT AS NO SUBSISTING GRIEVANCE S REMAIN ED AFTER THE SETTLEMENT, THUS THE COMPANY APPEAL ARISING OUT OF THE ORDER OF THE C OMPANY LAW BOA RD, MUMBAI BENCH, (FOR SHORT CLB) IN COMPANY PETITION NO. 5 OF 2009 NEED NOT BE PROCEED ED WITH. THE LD. A.R AVERRED THAT THE CONSENT TERMS/DEED OF SETTLEMENT EXECUTED BETWEEN THE AFOREMENTIONED PARTIES WAS TAKEN ON RECORD BY THE HONBLE HIGH COURT AND WA S MARKED AS X FOR IDENTIFICATION. IN THE BACKDROP OF THE AFORESAID FACTS THE LD. A.R TOOK US THROUGH THE CONSENT TERMS/DEED OF SETTLEMENT EXECUTED BETWEEN THE AFOREMENTIONED PARTIES ( P AGE 127 TO 131 OF APB). THE LD. A.R DREW OUR ATTENTION TO THE RELEVANT EXTRACT OF THE AFORESAID CONSENT TERMS/SETTLEMENT DEED AT P AGE 129 WHEREIN IT WAS STATED THAT THERE WERE CERTAIN DEBIT/CREDIT BALANCE S OF A.G. GROUP ENTITIES IN THE BOOKS OF ACCOUNT S OF THE R.C. GROUP ENTITIES AS ON 30.09.2011. FURTHER, THE LD. A.R DRAWING OUR ATTENTION TO PAGE 129 - P ARA 2 OF THE APB SUBMITTED THAT IT WAS AGREED P A G E | 13 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. BETWEEN THE PARTIES THAT THE RESPECTIVE GROUP ENTITIES WOULD EITHER WRITE OFF/WRITE BACK OR ADJUST AGAINST THE CLAIM RELATED TO PURCH ASE/SALE TRANSACTIONS OF EARLIER YEARS IN THEIR RESPECTIVE BOOKS OF ACCOUNTS , SO THAT THERE IS NOTHING DUE OR PAYABLE OR RECEIVABLE FROM EACH OTHER TOWARDS THE BALANCE S IN THEIR RESPECTIVE BOOKS OF ACCOUNT . IT WAS FURTHER STATED THAT THE SAID ADJUSTMEN TS SHALL BE DONE BY THE RESPECTIVE GROUP ENTITIES WITHIN A PERIOD OF 3 YEARS FROM THE DATE OF SIGNING OF THE AFORESAID CONSENT TERMS/DEED OF SETTLEMENT . IN THE BACKDR OP OF HIS AFORESAID CONTENTIONS IT WAS SUBMITTED BY THE LD. A.R THAT THE CIT(A) TAKING COG NIZANCE OF THE RECONCILIATIONS WHICH DULY EXPLAINED THE DIFFERENCE IN THE BALANCE OF THE AFOREMENTIONED PARTY VIZ. M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD. , WHICH STOOD REFLECTED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AT RS.7,59,83,195/ - (CR) AS ON 31.03.2009, AS AGAINST THAT SHOWN AS RECOVERABLE IN THE BOOKS OF ACCOUNT OF THE SAID PARTY VIZ. M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD. AT RS.3,08,984/ - (DR) ON 31.03.2009, HAD RIGHTLY VACATED THE ADDITION OF RS.7,56,74,211/ - [RS. 7,59,83,195/ - ( - ) RS. 3,08,984/ - ] MADE BY THE A.O UNDER SEC. 41(1) IN THE HANDS OF THE ASSESSEE. IN SO FAR, THE DELETION BY THE CIT(A) OF THE ADDITION OF RS. 7,43,40,000/ - MADE BY THE A. O IN RESPECT OF THE SHARE PREMIUM R ECEIVED BY THE ASSESSEE COMPANY WAS CONCERNED, THE LD. A.R RELIED ON THE ORDER OF THE CIT(A). T HE LD. A.R TOOK US THROUGH THE DETAILS AS WERE CALLED FOR BY THE A.O VIDE HIS NOTICE ISSUED UNDER SEC. 142(1) AND SUBMITTED THAT THE ASSESSEE WAS ONLY CALLED UPON TO PLACE ON RECORD THE DETAILS OF THE LIST OF EQUITY SHARE HOLDERS WHO WERE HOLDING SHARES OF MORE THAN 10 PERCENT INDIVIDUALLY ALONGWITH THEIR ADDRESSES/PAN , AND ALSO TO FURNISH REQUISITE DETAILS AS REGARDS THE SAID PE RSONS.( PAGE 36 SR. NO. 21 ) OF THE APB . THE LD. A.R SUBMITTED THAT THE REQUISITE DETAILS AS WERE CALLED FOR BY THE A.O WERE DULY FILED BY THE ASSESSEE [ PAGE 48 OF APB]. FURTHER, THE LD. A.R SUBMITTED THAT THE DETAILS OF INCREASE IN P A G E | 14 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. THE SHARE CAPITAL WAS ALSO FURNISHED WITH THE A.O [ PAGE 53 & PAGE 58 - 59 ] OF APB. THE LD. A.R SUBMITTED THAT THE DETAILS OF THE COMPANIES FROM WHOM SHARE PREMIUM W AS RECEIVED DURING THE YEAR WAS ALSO PLACED ON RECORD OF THE A.O [ PAGE 60 - 61 OF APB]. FURTHER, IT WAS SUBMITTE D BY THE LD. A.R THAT THE FACT THAT IN THE COURSE OF THE REMAND PROCEEDINGS THE INSPECTOR OF INCOME - TAX WAS NOT ABLE TO LOCATE THE PARTIES AT THE ADDRESSES GIVEN BY THEM IN THEIR SHARE APPLICATION FORMS WAS NOT BROUGHT TO THE NOTICE OF THE ASSESSEE WHO LEA RNT ABOUT THE SAME ONLY FROM THE REMAND REPORT . THE LD. A.R SUBMITTED THAT IN THE BACKDROP OF THE SAID FACTS THE ASSESSEE ON BEING DIRECTED BY THE CIT(A) HAD REQUESTED THE PARTIES TO FURNISH THEIR PRESENT ADDRESSES, WHICH ON BEING RECEIVED WERE FURNISHED WITH THE CIT(A). IT WAS SUBMITTED BY THE LD. A.R THAT IN THE COURSE OF THE APPELLATE PROCEEDINGS THE ASSESSEE WAS CALLED UPON BY THE CIT(A) TO PRODUCE THE PARTIES ALONGWITH THEIR DETAILS VIZ. RETURNS OF INCOME, AFFIDAVITS AND PROOF OF ADDRESS ES . THE LD. A.R SUBMITTED THAT IN COMPLIANCE TO THE AFORESAID DIRECTIONS THE RESPECTIVE PARTIES WERE PRODUCED BEFORE THE CIT(A) ALONGWITH THE DETAILS AS WERE CALLED FOR BY HIM . IN SUPPORT OF H IS AFORESAID CONTENTION THE LD . A.R DREW OUR ATTENTION TO PAGE 24 OF THE ORDER OF THE CIT(A) . THE LD. A.R DISTINGUISHING ON FACTS THE ORDER OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF KONARK STRUCTURAL ENGINEERING (P) LTD. VS. DCIT (2018) 254 TAXMANN 184 (BOM), SUBMITTED THAT UNLIKE THE FACTS INVOLVED IN THE CASE BEFORE THE HONBLE HIGH COURT, IN THE CASE OF THE ASSESSEE THE PARTIES HAD APPEARED BEFORE THE CIT(A). IT WAS SUBMITTED BY THE LD. A.R THAT AS THE ASSESSEE HAD DULY DISCHARGED THE ONUS CAST UPON IT AND PROVED TO THE HILT THE IDENTITY AND CREDITWORTHINESS OF THE PARTIES AS WELL AS THE GENUINENESS OF THE TRANSACTIONS, THUS THE CIT(A) HAD RIGHTLY DELETED THE ADDITION OF RS. 7,43,40,000/ - MADE BY THE A.O UNDER SEC. 68 OF THE ACT. THE LD. A.R IN P A G E | 15 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. SUPPORT OF HIS AFORE SAID CONTENTION RELIED ON THE FOLLOWING JUDICIA L PRONOUNCEMENTS : (I). CIT VS. GAGANDEEP INFRASTRUCTURE PVT. LTD. (2017) 394 ITR 690 (BOM) (II). CIT VS. ORCHID INDUSTRIES PVT. LTD. (2017) 397 ITR 136 (BOM) (III). PR. CIT - 13, MUMBAI VS. M/S VEEDHATA TOWER PVT. LTD. [ITA NO. 815 OF 2015; DT. 17.04.2018] (BOM) (IV) KLR INDUSTRIES LTD. VS. DCIT (2015) 125 DTR (HYD)(TRIB.)33 IN SOFAR, THE DISALLOWANCE OF THE CLAIM OF BAD DEBTS OF RS.23,81,268/ - BY THE A.O WAS CONCERNED, THE LD. A.R RELIED ON T HE ORDER OF THE CIT(A). IT WAS SUBMITTED BY THE LD. A.R THAT THE ISSUE UNDER CONSIDERATION WAS COVERED BY THE ORDER OF THE TRIBUNAL IN THE ASSESSES OWN CASE FOR A.Y 2008 - 09 IN ACIT - CC 45, MUMBAI VS. M/S PARAMSHAKTI STEEL LTD. [ITA NO. 5587/MUM/2013]. IT WAS SUBMITTED BY THE LD. A.R THAT INVOLVING IDENTICAL FACTS THE TRIBUNAL IN ITS AFORESAID ORDER HAD UPHELD THE DELETION OF THE DISALLOWANCE OF BAD DEBTS BY THE CIT(A). THE LD. A.R AVERRED THAT IN THE SAID ORDER IT WAS OBSERVED BY THE TRIBUNAL THAT AS HE LD BY THE HONBLE SUPREME COURT IN THE CA S E OF TRF LTD. VS. CIT (2010) 323 ITR 397 AND VIJAYA BANK VS. CIT (2010) 323 ITR 167, AFTER THE AMENDMENT IN THE TAXATION LAWS W.E.F 01.04.1989, THE REQUIREMENT OF DEMONSTRATING THAT THE DEBTS HAD BECOME BAD HAD BEEN DISPENSED WITH AND THE ONLY REQUIREMENT THAT REMAINED WAS THAT THE ASSESSEE SHOULD HAVE WRITTEN OFF THE AMOUNT IN ITS BOOKS OF ACCOUNTS. IT WAS SUBMITTED BY THE LD. A.R THAT AS THE ASSESSEE AS PER THE MANDATE OF LAW HAD WRITTEN OFF THE AMOUNTS IN ITS BOOKS OF P A G E | 16 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. ACCOUNT, THUS THE CIT(A) FINDING THAT THE CLAIM OF BAD DEBT OF RS.23,81,268/ - WAS IN ORDER HAD RIGHTLY VACATED THE SAID DISALLOWANCE. 12. WE HAVE HEARD THE AUTHORISED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE M ATERIAL AVAILABLE ON RECORD. IN SOFAR THE ADDITION OF RS.7,56,74,211/ - MADE BY THE A.O UNDER SEC. 41(1) IS CONCERNED , WE FIND THAT THE SAME ON APPEAL WAS DELETED BY THE CIT(A). IN THE C OURSE OF HEARING OF THE APPEAL ON AN EARLIER OCCASION THE ASSESSEE HAD PLACED ON RECORD THE COPIES OF THE LEDGER ACCOUNTS OF THE ANIL GUPTA GROUP ENTITIES, VIZ. (I). M/S PARAMSHAKTI DISTRIBUTOR PVT. LTD; (II). M/S SHREE KRISHNA STRUC TURES PVT. LTD; (III). M/S GUPTA STEEL COPORATION; (IV). M/S PARAMSHAKTIDISTRI. PVT. LTD.; AND (V) M/S SKS ISPATPVT. LTD. FURTHER, THE COP Y OF ACCOUNT OF THE ASSESSEE AS APPEARING IN THE BOOKS OF ACCOUNT OF M/S RAJENDRA KUMAR AND COMPANY (I.E AN ASSESSEE GROUP ENTITY) WAS ALS O FILED. ON BEING CONFRONTED WITH THE AFORESAID COPIES OF ACCOUNTS , IT WAS SUBMITTED BY THE LD. D.R THAT THE TOTAL LIABILITY OF THE ASSESSEE TOWARDS M/S PARAMSHAKTI DISTRIBUTOR PVT. LTD . , AS APPEARING IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE WAS AS UNDER: LIABILITY IN THE BOOKS OF PARAMSHAKTI STEEL PVT. LTD. RS. 7,59,83,195/ - (CR) AMOUNT RECEIVABLE IN THE BOOKS OF RAJENDRA KUMAR & CO. RS. 4,12,54,373/ - (DR) NET BALANCE APPEARING IN THE CONSENT TERM RS. 3,47,28,822/ - (CR) IN PURSUANCE OF THE AFORESAID FACTS T HE TRIBUNAL HAD IN THE COURSE OF HEARING OF THE APPEAL CALLED FOR A REMAND REPORT FROM THE A.O. THE A.O IN COMPLIANCE TO THE AFORESAID DIRECTIONS OF THE TRIBUNAL HAD PLACED ON RECORD HIS REMA ND REPORT, DATED 06.02.2018 STATING AS UNDER (RELEVANT EXTRACT) : P A G E | 17 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. 3. CLOSE SCRUTINY OF THE SUBMISSION OF THE ASSESSEE; ASSESSMENT ORDER, CIT(A)S ORDER AND T HE DIRECTIONS GIVEN BY THE HONBLE ITA T IN ITS INTERIM ORDER REFERRED ABOVE REVEALED THAT THE ISSUE INVOLVED RELATE TO THE NET ADDITION OF RS. 7,56,74,211/ - MADE U/S 41(1) IN RESPECT OF THE PARTY NAMELY - M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD., AFTER NETTING OFF THE BALANCE OF ASSESSES ACCOUNT O F RS. 3,08,984/ - SHOWN IN THE BOOKS OF M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD. THE ASSESSEE HAS EXPLAINED THAT THE WHOLE LIABILITY OF RS. 7,59,83,195/ - APPEARING IN ITS BOOKS TOWARDS M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD. STANDS DISCHARGED AGAINST THE AMOUN TS RECEIVABLE FROM OTHER ENTITIES OF SAME GROUP I.E ANIL GUPTA (AG) GROUP TO WHICH M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD. ALSO BELONGS TO. FURTHER, ATTENTION IS ALSO DRAWN TO THE AMOUNT OF RS. 3,47,28,822/ - APPEARING IN THE CONSENT TERMS AGAINST THE ACTUAL LIABILITY IN THE BOOKS OF THE ASSESSEE STANDING AT RS. 7,59,83,195/ - FOR THE YEAR UNDER CONSIDERATION AND THE REASON THEREOF. THE ASSESSEE SUBMITS THAT THE CONSENT TERMS WERE DRAWN BETWEEN RC GROUP ENTITIES AND AG GROUP ENTITIES ON 18.11.2011 AND ACCORDIN GLY, WHATEVER BALANCES APPEARED IN THE BOOKS OF RC GROUP ENTITIES WERE TO BE CANCELLED AS NOT PAYABLE/RECEIVABLE ANY FURTHER. ON A PERUSAL OF ALL THE LEDGERS OF OF CONCERNED PARTIES OF AG GROUP ENTITIES, IT IS NO T ED THAT THE LIABILITY STANDING AT RS. 7,59 ,83,195/ - AGAINST M/S PARAMSHAKTI DEVELOPERS PVT. LTD. WAS REDUCED TO RS. 3,47,28,822/ - ON ACCOUNT OF AN ENTRY PASSED ON 02.04.2011 IN RESPECT OF AN AMOUNT OF RS. 4,12,54,373/ - RECEIVABLE FROM M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD. BY RAJENDRA KUMAR & CO. 4. DUE TO THE SAID ENTRY ALREADY PASSED ON 02.04.2011; THE CONSENT TERMS SHOWED ONLY THE EXISTING NET LIABILITY AS ON 18.11.2011 AGAINST THE PARTY NAMELY M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD. ACCORDINGLY, THE AMOUNT OF RS. 3,47,28,822 / - APPEARING IN CONSENT TERMS AGAINST THE PARTY NAMELY M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD. INSTEAD OF RS. 7,59,83,195/ - STANDS EXPLAINED AND RECONCILED AS UNDER : - S.NO. NAME OF THE PARTY AMOUNT AS PER THE CONSENT TERMS REMARKS 1. GUPTA STEEL CORPORAT ION RS. 48,56,144/ - RS. 43,25,164/ - PERTAINS TO RECEIVABLE FROM SAID PARTY IN BOOKS OF THE ASSESSEE AND RS. 5,30,980/ - PERTAINS TO RECEIVABLE FROM SAID PARTY IN BOOKS OF THE RAJENDRA KUMAR & CO. 2. SKS ISPAT AND POWER LTD. RS. 11,55,81,507/ - PERTAINS TO THE RECEIVABLE FROM SAID PARTY IN BOOKS OF THE ASSESSEE. 3. SHREE KRISHNA STRUCTURES PVT. LTD. RS. 30,00,000/ - PERTAINS TO THE RECEIVABLE FROM SAID PARTY IN BOOKS OF THE ASSESSEE. 5. IT IS NOTED THAT THE ASSESSEE HAS MAINTAINED 2 ACCOUNTS OF PART M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD. IN THE NAME OF M/S PARAMSHAKTI DISTRIBUTOR PVT. LTD. AND M/S PARAMSHAKTIDISTRI. PVT. LTD. THE BALANCE OF M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD. SHOWS ADJ USTMENT OF RS. 4,12,54,372/ - RECEIVABLE BY P A G E | 18 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. RAJENDRAKUMAR & CO. FROM M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD. AND OTHER ACCOUNT M/S PARAMSHATIDISTRI. PVT. LTD. SHOWS THE ADJUSTMENT OF BALANCES OF OTHER PARTIES M/S SHREE KRISHNA STRUCTURES PVT. LTD. AND M/S GU PTA STEEL CORPORATION. THE CLOSING BALANCES OF THESE 2 PARTIES ARE THEN TRANSFERRED TO M/S SKS ISPAT AND POWER LTD. FURTHER, SIMILARLY, LEDGER ACCOUNT OF M/S GUPTA STEEL CORPORATION IN THE BOOKS OF RAJENDRA KUMAR & CO. IS CLOSED AND THE AMOUNT OF RS. 5,30, 080/ - IS TRANSFERRED TO M/S SKS ISPAT AND POWER LTD. IN THE BOOKS OF THE ASSESSEE. THUS, ALL THE ACCOUNTS OF AG GROUP IN BOOKS OF ASSESSEE AND RAJENDRA KUMAR & CO. ARE ADJUSTED AND CLOSED BARRING A SINGLE ACCOUNT NAMELY M/S SKS ISPA AND POWER LTD. IN THE B OOKS OF THE ASSESSEE WHOSE BALANCE AS ON 31.03.2012 STANDS AT RS. 8,87,08,828/ - . IN VIEW OF THE ABOVE; THE LEDGER ACCOUNTS OF M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD., M/S GUPTA STEEL CORPORATION, M/S SKS ISPAT AND POWER LTD. AND M/S SHREE KRISHNA STRUCTUR ES PVT. LTD ARE VERIFIED AND RECONCILED WITH THE AMOUNT APPEARING IN THE CONSENT TERMS AS ON 18.11.2011 AGREED UPON BETWEEN THE TWO GROUPS RC AND AG GROUP ENTITIES AND AS PER THE ORDER PASSED BY THE HONBLE BOMBAY HIGH COURT. THE ISSUE MAY BE DECIDED ON MERITS. SUBMITTED. YOURS FAITHFULLY SD/ - (TUSHAR K. INAMDAR) JOINT COMMISSIONER OF INCOME - TAX (OSD) CENT. CIRCLE - 8(2), MUMBAI. SUBSEQUENTLY, THE CIT, D.R HA S FILED BEFORE US A LETTER DATED 18.05.2018 OF THE A.O, WHEREIN IT IS STATED THAT THE REMAND REPORT FILED IN PURSUANCE TO THE INTERIM ORDER OF THE ITAT, DATED 14.11.2017 WAS O NLY IN RESPECT OF THE ISSUE FOR WHICH IT WAS CALLED FOR AND THE SAME DID NOT REC ONCILE THE FIGURES OF RS. 3.08 LAC (DR) (AS APPEARING IN BOOKS OF ACCOUNTS OF M/S PARAMSHAKTI DISTRIBUTOR PVT. LTD .) AND RS. 7.59 (CR) (AS APPEARING IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE) ON THE BASIS OF WHICH THE ADDITION OF RS. 7,56,72,211/ - WAS MAD E IN THE HANDS OF THE ASSESSEE UNDER SEC. 41(1) OF THE I.T ACT. FURTHER, IT IS STATED THAT A PERUSAL OF THE ASSESSMENT RECORDS OF THE ASSESSEE VIZ. M/S PARAMSHAKTI STEELS PVT. LTD. IN NO WAY HAD HELPED IN RECONCILING THE AFORESAID AMOUNT OF RS. 7,56,72,211 / - . APART THEREFROM, IT IS STATED BY THE A.O THAT THE ASSESSMENT RECORDS OF M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD. FOR THE A.Y 2008 - 09 & A.Y 2009 - 10 COULD ALSO NOT BE TRACED. IT IS ALSO STATED BY HIM THAT FOR WANT OF AUTHORITY THE DETAILS COULD NOT BE CALL ED FROM M/S PARAMSHAKTI DISTRIBUTORS PVT.LTD. P A G E | 19 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. FURTHER, THE CIT, D.R VIDE HIS LETTER DATED 03.07.2018 HAS STATED THAT THOUGH THE A.O HAD VIDE HIS REMAND REPORT, DATED 06.02.2018 ( FILED IN RESPONSE TO THE DIRECTION OF THE TRIBUNAL ) ACCEPTED THE CONTENTION OF THE ASSESSEE, BUT AS THE CONSENT TERM WAS MUCH LATER THAN THE YEAR END , THEREFORE, THE FIGURES OF RS. 3.08 LAC (DR) AND RS. 7.59 (CR) AS ON 31.03.2009ON THE BASIS OF WHICH ADDITION WAS MADE IN THE HANDS OF THE ASSESSEE UNDER SEC . 41(1) WERE REQUIRED TO BE RECONCILED ON THAT SPECIFIC DATE. 13. WE HAVE DELIBERATED AT LENGTH ON THE ISSUE UNDER CONSIDERATION IN THE BACKDROP OF THE MATERIAL AVAILABLE ON RECORD AND THE CONTENTIONS ADVANCED BY THE REPRESENTATIVES FOR BOTH THE PARTIES. ADMITTEDLY, IT IS A MATTER OF RECORD THAT DUE TO CERTAIN DISPUTES AND DIFFERENCES BETWEEN RC GROUP AND A . G . GROUP A CONSENT TERM/DEED OF SETTLEMENT WAS ENTERED INTO BETWEEN THEM ON 18.11.2011. T HE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF ANIL GUPTA VS. PARAMSHAKTI STEEL LTD. AND ORS. (COMPANY APPEAL NO 9 OF 2011; DATED 02.01.2012) REFERRING TO THE OVERALL SETTLEMENT BETWEEN THE AFOREMENTIONED GROUPS AND PARTIES VIZ. SHRI ANIL GUPTA AND M/S PARAMSHAKTI STEEL LTD. AND ORS. , HAD OBSERVED THAT AS NO SUBS ISTING GRIEVANCES REMAINED AFTER THE SETTLEMENT, THUS THE COMPANY APPEAL ARISING OUT OF THE ORDER OF THE COMPANY LAW BOARD, MUMBAI BENCH IN COMPANY PETITION NO. 5 OF 2009 NEED NOT BE PROCEEDED WITH (PAGE 125 - 126 OF APB) . THE CONSENT TERMS/DEED OF SETTLEMENT EXECUTED BETWEEN THE AFOREMENTIONED PARTIES WAS TAKEN ON RECORD BY THE HONBLE HIGH COURT AND MARKED AS X FOR IDENTIFICATION. IN THE CONSENT TERMS/DEED OF SETTLEMENT EXECUTED BETWEEN THE AFOREMENTIONED PARTIES IT IS STATED THAT THERE WERE CERTAIN DEBIT/CREDIT BALANCES OF A.G. GROUP ENTITIES IN THE BOOKS OF ACCOUNTS OF THE R.C. GROUP ENTITIES AS ON 30.09.2011. I T IS THE CLAIM OF THE ASSESSEE THAT P A G E | 20 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. IN ORDER TO SETTLE THE DISPUTE THE AFOREMENTIONED ENTITIES IN BOTH THE GROUPS I.E RC GROUP AND A . G GROUP HAD RECONCILED THEIR RESPECTIVE BOOKS OF ACCOUNTS BETWEEN THEMSELVES AND HAD DECIDED TO FOREGO THE AMOUNTS PAYABLE OR RECEIVABLE BY THEM. 14. IN OUR CONSIDERED VIEW BEFORE PROCEEDING FURTHER IT WOULD BE RELEVAN T TO CULL OUT THE RESPECTIVE ENTITIES OF THE AFORESAID GROUPS VIZ. RC GROUP AND A . G . GROUP , WHICH AS PER THE DETAILS FURNISHED BY THE ASSESSEE ARE AS UNDER: SR. NO. NAME OF ENTITIES IN RC GROUP NAME OF ENTITIES IN AG GROUP 1. PARAMSHA K TI STEELS LTD. ( I.E THE ASSESSEE) SHREE KRISHNA STRUCTURES PVT. LTD. 2. RAJENDRA KUMAR & CO. RADHAKRISHNA ROADWAYS LTD. (FORMERLY KNOWN AS PARAMSHAK T I D I STRIBUTORS PVT. LTD.) 3. ORBIT CORPORATION SKS ISPAT AND POWER LTD. 4. NUPUR INTERNATIONAL GUPTA STEEL CORPORATION 15. WE SHALL NOW DELIBERATE ON THE SUBMISSIONS THAT WERE ADVANCED BY THE ASSESSEE IN THE COURSE OF THE REMAND PROCEEDINGS BEFORE THE A.O , AS UNDER : (I). THE A.O OBSERVED THAT AS ON 31.03.2009 AN AMOUNT OF RS. 7,59,83,195/ - (CR) WAS SHOWN BY THE ASSESSEE [RC GROUP ENTITY] AS PAYABLE TO M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD . [A.G. GROUP ENTITY] . ON THE OTHER HAND AN AMOUNT OF RS. 3,08,984/ - (DR.)WAS SHOWN AS RECEIVABLE BY THE AFOREMENTIONED CONCERN VIZ. M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD FROM THE ASSESSE E. THE A.O TREATED THE DIFFERENCE OF RS. 7,56,74,211/ - [ I.E RS. 7,59,83,195 / - ( - ) RS. 3,08,984/ - ] AS AN INFRUCT U OUS LIABILITY THAT STOOD REMITTED AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE UNDER SEC. 41(1) OF THE I.T . ACT . P A G E | 21 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. (II). THE TRIBUNAL VIDE ITS INTERIM ORDER , DATED 14.11.2017 CALLED FOR A REMAND REPORT FROM THE A.O IN RESPECT OF THE NET BALANCE OF RS. 3,47,28,822/ - (CR) [I.ERS. 7,59,83 ,195/ - ( - ) RS. 4,12,54,373/ - ] AS WAS APPEARING IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. (III). THE ASS ESSEE HAD IN ITS REPLY FILED WITH THE A.O IN THE COURSE OF THE REMAND PROCEEDINGS SUBMITTED THAT AN AMOUNT OF RS. 4,12,54,373/ - (DR) WAS RECOVERABLE BY M/S RAJENDRA KUMAR & CO. [ I.E RC GROUP ENTITY] FROM PARAMSHAKTI DISTRIBUTORS PVT.LTD. [I.E A.G GROUP ENTITY ]. IT WAS SUBMITTED BY THE ASSESSEE THAT ON 02.04.2011 THE AFORESAID AMOUNT OF RS. 4,12,54,373/ - (DR) WAS ADJUSTED IN THE ASSESSES ACCOUNT APPEARING IN THE BOOKS OF ACCOUNT OF M/S RAJENDRA KUMAR & CO. [I.E RC GROUP ENTITY] AND THE CORRESPONDING ENTRIES WE RE ALSO PASSED BY THE ASSESSEE. AS A CONSEQUENCE, THE AMOUNT PAYABLE BY THE ASSESSEE TO M/S PARAMSHAKTI DISTRIBUTORS PVT.LTD. [A.G GROUP ENTITY] STOOD REDUCED TO RS. 3,47,28,822/ - (CR) [ I.E RS. 7,59,83,195 ( - ) RS. 4,12,54,373/ - ], AS UNDER: LIABILITY IN THE BOOKS OF ACCOUNT OF M/S PARAMSHAKTI STEEL PVT. LTD.(I.E ASSESSEE COMPANY - A RC GROUP ENTITY) AS PAYABLE TO M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD. RS. 7,59,83,195/ - (CR) AMOUNT RECEIVABLE BY M/S RAJENDRA KUMAR & CO. (RC GROUP ENTITY) FROM M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD. RS. 4,12,54,373/ - (DR) NET BALANCE PAYABLE BY THE ASSESSEE COMPANY (AS APPEARING IN THE CONSENT TERMS/DEED OF SETTLEMENT, DATED 18.11.2011) RS. 3,47,28,822/ - (CR) IT WAS SUBMITTED BY THE ASSESSEE THAT ON THE BASIS OF THE AFORESAID NETTING OF BALANCES ON 02.04.2011 THE BALANCE PAYABLE BY THE ASSESSEE COMPANY TO M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD [ A.G GROUP ENTITY] I.E ON 18.11.2011 IN THE CONSENT TERMS/DEED OF SETTLEMENT WAS SHOWN A T RS. 3,47,28,822/ - (CR) ( PAGE 129 OF APB). P A G E | 22 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. (III). THE ASSESSEE HAD SUBMITTED BEFORE THE A.O THAT AS ON THE DATE ON WHICH THE CONSENT TERMS/DEED OF SETTLEMENT WAS DRAWN I.E ON 18.11.2011, THE BALANCES OF THE A . G GROUP ENTITIES IN THE BOOKS OF ACCOUNTS OF RC GROUP ENTITIES WAS AS UNDER: NAME OF THE COMPANY (AG GROUP ENTITIES) AMOUNT M/S GUPTA STEEL CORPORATION (I). IN BOOKS OF ACCOUNTS OF THE ASSESSEE :RS. 43,25,164 / - (DR) (II).IN BOOKS OF ACCOUNTS OF M/S RAJENDRA KUMAR & CO. :RS. 5,30,980/ - (DR)] RS. 48,56,144/ - (DR) M/S SKS ISPAT POWER LTD. ( IN BOOKS OF ACCOUNTS OF THE ASSESSEE ) RS. 11,55,81,507/ - (DR) M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD. ( IN BOOKS OF ACCOUNTS OF THE ASSESSEE ) RS. 3,47,28,822/ - (CR) M/S SHREE KRISHNA STRUCTURES PVT. LTD . ( IN BOOKS OF ACCOUNTS OF THE ASSESSEE ) RS. 30,00,000/ - (DR) TOTAL RS. 8,87,08,829/ - (DR) (IV). FURTHER, IT WAS SUBMITTED BY THE ASSESSEE THAT SUBSEQUENT TO THE CONSENT TERMS/DEED OF SETTLEMENT THE ASSESSEE AN D M/S RAJENDRA KUMAR & CO. [ BOTH RC GROUP ENTITIES] HAD CLOSED ALL THE LEDGER ACCOUNTS IN THEIR BOOKS OF ACCOUNTS PERTAINING TO AG GROUP ENTITIES AND HAD TRANSFERRED ALL THE BALANCES OF THESE ACCOUNTS TO THE LEDGER ACCOUNT OF M/S SKS ISPAT AND POWER LTD. (AS APPEARING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE). IN RESULT, THE CLOSING BALANCE OF THE SAID CONCERN VIZ. M/S SKS ISPAT AND POWER LTD. (IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE) STOOD REFLECTED AT RS. 8,87,08,829/ - (DR) . 1 6 . WE FIND THAT THE A.O AFTER DELIBERATING ON THE AFORESAID SUBMISSIONS OF THE ASSESSEE HAD ACCEPTED ITS CLAIM THAT ALL THE ACCOUNTS OF THE A . G GROUP ENTITIES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND M/S RAJENDRA KUMAR & CO. (BOTH RC GROUP ENTITIES) W ERE ADJUSTED AND CLOSED BARRING A SINGLE ACCOUNT NAMELY M/S SKS P A G E | 23 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. ISPAT AND POWER LTD. IN THE BOOKS OF ACCOUNT OF THE ASSESSEE , WHOSE BALANCE AS ON 31.03.2012 CONSEQUENT TO THE SAID INTRA ACCOUNT ADJUSTMENTS STOOD REFLECTED AT RS. 8,87,08,828/ - (DR). WE FIND THAT THE A.O IN HIS REMAND REPORT HAD ACCEPTED THAT THE AMOUNT OF 7,59,83,195/ - (CR) PAYABLE BY THE ASSESSEE TO M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD . ON 31.03.2009 WAS ON 02.04.2011 PARTLY ADJUSTED AGAINST THE AMOUNT OF RS. 4,12,54,373/ - (DR) THAT WAS RECEIVABLE BY M/S RAJENDR A KUMAR & CO. (RC GROUP ENTITY) FROM THE AFORESAID CONCERN VIZ. M/S PARAMSHAKTI DISTRIBUTOR PVT. LTD . FURTHER , THE A.O ON A PERUS AL OF THE ACCOUNTS OF THE ASSESSEE VIZ. M/S PARAMSHAKTISTELS P. LTD. HAD ALSO RETURNED A FINDING THAT THE BALANCES OF OTHER RC GROUP ENTITIES W ERE ADJUSTED AGAINST THE AMOUNT OF RS. 11,55,81,507/ - (DR) THAT WAS RECOVERABLE BY THE ASSESSEE [RC GROUP ENTITY] FROM M/S SKS ISPAT AND POWER LTD. [A . G GROUP ENTITY], AS A RESULT WHEREOF THE AMOUNT RECEIVABLE BY THE ASSESSEE FROM M/S SKS ISPAT AND POWER LTD. WAS REDUCED TO RS. 8,87,08,828/ - (DR). 17. WE FIND THAT IT IS THE CLAIM OF THE ASSESSEE THAT THE AMOUNT OF 7, 59,83,195/ - (CR) THAT WAS PAYABLE BY IT TO M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD . ON 31.03.2009 WAS ON 02.04.2011 ADJUSTED AGAINST THE AMOUNT OF RS. 4,12,54,373/ - (DR) THAT WAS RECEIVABLE BY M/S RAJENDRA KUMAR & CO. (RC GROUP ENTITY) FROM THE SAID CONCERN VIZ. M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD ., WHICH RESULTANTLY HAD REDUCED THE OUTSTANDING LIABILITY OF THE ASSESSEE TOWARDS THE SAID CONCERN VIZ. M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD . TO AN AMOUNT OF RS. 3,47,28,822/ - (CR) . IN OUR CON SIDERED VIEW THE AFORE SAID CLAIM OF THE ASSESSEECAN SAFELY BE GATHERED FROM THE CONSENT TERMS/DEED OF SETTLEMENT EXECUTED BETWEEN THE RC GROUP AND A . G GROUP ON 18.11.2011 , WHICH AS OBSERVED BY US HEREINABOVE WAS TAKEN ON RECORD BY THE HONBLE HIGH COUR T AS X ( FOR IDENTIFICATION ) WHILE DISPOSING OFF P A G E | 24 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. THE COMPANY PETITION NO. 5 OF 2009 BETWEEN THE SAID GROUPS. WE THUS ARE OF THE CONSIDERED VIEW THAT THE REDUCTION OF THE OUTSTANDING LIABI LITY OF RS. 7,59,83,195/ - (CR) ON 31.03.2009 TO AN AMOUNT OF RS. 3,47 ,28,822/ - (CR) ON 18.11.2011 STANDS DULY EXPLAINED AND CAN SAFELY BE HELD TO HAVE BEEN RECONCILED BY THE ASSESSEE.BE THAT AS IT MAY, NOW WHEN IT IS A MATTER OF RECORD THAT THE ASSESSEE HAD INDIRECTLY IN THE AFOREMENTIONED MANNER DISCHARGED PART OF ITS OUTSTANDING LIABILITY OF RS. 4,12,54,373/ - (CR) [I.ERS. 7,59,83,195/ - (C R) ( - ) RS. 3,47,28,822/ - (C R)] THAT WAS DUE TOWARDS THE AFOREMENTIONED CREDITOR VIZ. M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD ., THEREFORE, NO REMISSION OR CESSATION OF LIABILITY IN TERMS OF SEC. 41(1) OF THE I.T ACT CAN BE IN FERRED TO THE SAID EXTENT IN ITS HANDS. 18. INSOFAR, THE BALANCE LIABILITY OF RS. 3,47,28,822/ - IS CONCERNED, WE FIND THAT IT IS THE CLAIM OF THE ASSESSEE THAT SUBSEQUENT TO THE CONSENT TERMS/DEED O F SETTLEMENT THE ASSESSEE AND M/S RAJENDRA KUMAR & CO. [ BOTH RC GROUP ENTITIES] HAD CLOSED ALL THE LEDGER ACCOUNTS OF AG GROUP ENTITIES IN THEIR BOOKS OF ACCOUNTS AND HAD TRANSFERRED ALL THE BALANCES OF THESE ACCOUNTS TO THE LEDGER ACCOUNT OF M/S SKS ISPAT AND POWER LTD. (AS APPEARING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE), AS UNDER: NAME OF THE COMPANY (AG GROUP ENTITIES) AMOUNT M/S GUPTA STEEL CORPORATION (I). IN BOOKS OF ACCOUNTS OF THE ASSESSEE :RS. 43,25,164 / - (DR) (II). IN BOOKS OF ACCOUNTS OF M/S RAJENDRA KUMAR & CO. :RS. 5,30,980/ - (DR)] RS. 48,56,144/ - (DR) M/S SKS ISPAT POWER LTD. ( IN BOOKS OF ACCOUNTS OF THE ASSESSEE ) RS. 11,55,81,507/ - (DR) M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD. ( IN BOOKS OF ACCOUNTS OF THE ASSESSEE ) RS. 3,47,28,822/ - (CR) M/S SHREE KRISHNA STRUCTURES PVT. LTD . ( IN BOOKS OF ACCOUNTS OF THE ASSESSEE ) RS. 30,00,000/ - (DR) P A G E | 25 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. TOTAL RS. 8,87,08,829/ - (DR) RESULTANTLY, THE CLOSING BALANCE OF THE SAID CONCERN VIZ. M/S SKS ISPAT AND POWER LTD. (IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE) STOOD REFLECTED AT RS. 8,87,08,829/ - (DR). ADMITTEDLY, THE AFORESAID CLAIM OF THE ASSESSEE HAD BEEN ACCEPTED BY THE A.O IN HIS REMAND R EPORT, DATED 06.02.2018 FILED WITH THE TRIBUNAL. HOWEVER, WE FIND SUBSTANTIAL FORCE IN THE CONTENTION OF THE LD. D.R THAT THE VERACITY OF THE SAID CLAIM OF INTRA ACCOUNTS ADJUSTMENT S IN THE BOOKS OF ACCOUNTS BY THE ASSESSEE MUCH SUBSEQUENT TO THE FINANCIAL YEAR UND ER CONSIDERATION I.E 31.03.2009 AND THE EXECUTION OF THE CONSENT TERMS/DEED OF SETTLEMENT ON 18.11.2011 BETWEEN THE AFOREMENTIONED PARTIES CANNOT BE ACCEPTED ON THE VERY FACE OF IT. IN OUR CONSIDERED VIEW , THE VERACITY OF THE INTRA ACCOUNT ADJUSTMENTS CARRIED OUT BY THE ASSESSEE SUBSEQUENT TO THE CONSENT TERMS/DEED OF SETTLEMENT EXECUTED ON 18.11.2011 REQUIRES TO BE VERIFIED IN THE BACKDROP OF THE RECORDS OF THE CREDITOR VIZ. M/S PARAMSHAKTI DISTRIBUT ORS PVT. LTD . APART THEREFROM, NECESSARY VERIFICATIONS ARE ALSO REQUIRED TO BE MADE FROM THE OTHER A.G GROUP ENTITIES AGAINST WHOSE ACCOUNTS THE OUTSTANDING LIABILITY OF THE ASSESSEE AMOUNTING TO RS.3,47,28,822/ - (CR) IS CLAIMED TO HAVE BEEN ADJUSTED BY T HE ASSESSEE . WE THUS RESTORE THE MATTER TO THE FILE OF THE A.O WHO IS DIRECTED TO VERIFY THE FACTUAL POSITION AS REGARDS THE INTRA ACCOUNT ADJUSTMENT S OF THE OUTST ANDING LIABILITY OF THE ASSESSEE TOWARDS M/S PARAMSHAKTI DISTRIBUTOR PVT. LTD / AMOUNTING TO RS.3,47,28,822/ - (CR), AS IS DISCERNIBLE FROM THE BOOKS OF ACCOUNTS OF THE ASSESSEE, BY CALLING FOR THE RECORDS /INFORMATIONFROM M/S PARAMSHAKTI DISTRIBUTORS PVT. LTD. AND MAKING NECESSARY VERIFICATIONS TO THE EXTENT RELEVANT FROM THE OTHER GROUP ENTITIES OF A.G GROUP VIZ. (I). M/S GUPTA STEEL CORPORATION; (II). M/S KRISHNA STRUCTURES PVT. LTD; AND (III). M/S SKS ISPAT AND POWER LTD. FURTHER , THE A.O SHALL ALSO MAKE NECESSARY VERIFICATION FROM M/S RAJENDRA KUMAR & CO. (RC P A G E | 26 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. GROUP ENTITY) IN RESPECT OF THE ADJUSTMENT O F THE AMOUNT OF RS. 5,30,980/ - (D R) THAT WAS RECEIVABLE BY IT FROM M/S GUPTA STEEL CORPORATION, AGAINST THE ACCOUNT OF M/S SKS ISPAT AND POWER LTD (AS APPEARING IN THE BOOKS OF THE ASSESSEE). NEEDLES TO SAY, THE A.O SHALL IN THE COURSE OF THE SE T ASIDE PROCEEDINGS AFFORD REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE WHO SHALL REMAIN AT A LIBERTY TO SUBSTANTIATE ITS AFORESAID CLAIM ON THE BASIS OF FRESH MATERIAL. WE THUS IN TERMS OF OU R AFORESAID OBSERVATIONS UPHOLD THE ORDER OF THE CIT(A) TO THE EXTENT HE HAS DELETED THE ADDITION OF RS. 4,12,54,373/ - . APART THEREFROM, WE SET ASIDE THE ORDER OF THE CIT(A) TO THE EXTENT HE HAD DELETED THE ADDITIONOF RS.3,47,28,822/ - MADE BY THE A.O UNDER SEC. 41(1), AND RESTORE THE SAME TO THE FILE OF THE A.O FOR FRESH ADJUDICATION INTERMS OF OUR AFORESAID OBSERVATIONS. THE GROUNDS OF APPEAL NO. 1,2 AND 4 ARE PARTLY ALLOWED . 1 9. WE SHALL NOW ADVERT TO THE DELETION BY THE CIT(A) OF AN ADDITION OF RS. 7,43,40,000/ - THAT WAS MADE BY THE A.O BY TREATING THE SHARE PREMIUM RECEIVED BY THE ASSESSEE COMPANY AS AN UNEXPLAINED CASH CREDIT IN TERMS OF SEC. 68 OF THE I.T. ACT. WE FIND THAT THE CIT(A) HAD OBSERVED THAT THAT THE ASSESSEE IN CO MPLIAN CE TO THE DIRECTIONS OF THE A.O HAD VIDE HIS LETTER DATED 09.12.2011 PLACED ON THE RECORD OF THE A.O SHARE APPLICATION FORMS, BOARD RESOLUTION AND PAN CARDS OF THE RESPECTIVE SHARE APPLICANTS FOR NECESSARY VERIFICATION.IT WAS NOTICED BY THE CIT(A) THAT THE BASIC DETAILS VIZ. NAMES OF THE SHARE APPLICANTS, PAN DETAILS AND ADDRESSES OF THE PARTIES FROM WHO M SHARE APPLICATION MONEY WAS RECEIVED BY THE ASSESSEE WERE ALSO PLACED ON THE RECORD OF THE A.O. WE FIND THAT THE CIT(A) TAKING COGNIZANCE OF THE FACT AS WAS BROUGHT TO HIS NOTICE BY THE A.O IN HIS REMAND REPORT THAT THE RESPECTIVE PARTIES COULD NOT BE LOCATED BY HIS INSPECTOR AT THE ADDRESSES GIVEN ON THE SHARE APPLICATION FORMS, HAD DIRECTED THE P A G E | 27 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. ASSESSEE TO PROVIDE THE DETAILS AS REGARDS THE PRESENT ADDRESSES OF THE SAID PARTIES , AS WELL AS PRODUCE THE PARTIES ALONG WITH THE REQUISITE DETAILS, PROOF OF ADDRESSES AND REASONS FOR SHIFTING FROM THE IR EARLIER ADDRESSES . IN COMPLIANCE TO THE AFORESAID DIRECTIONS THE ASSESSEE AFTER OBTAINING THE DETAILS AS REGARDS THE PRESENT ADDRESSE S OF THE PARTIES HAD FILED THE SAME WITH THE CIT(A). FURTHER, IN COMPLIANCE TO THE AFORESAID DIRECTIONS THE ASSESSEE HAD PRODUCED THE PARTIES ALONG WITH THE REQUISITE DETAILS VIZ. COPIES OF RETURNS OF INCOME, AFFIDAVITS AND THE PROOF OF ADDRESSES BEFORE THE CIT(A). WE FIND THAT THE CIT(A) OBSERVED THAT THE ASSESSEE HAD FILED BEFOR E THE A.O THE BASIC DETAILS OF THE SHARE APPLICANTS VIZ. NAMES AND ADDRESSES , PAN DETAILS ,COPY OF BOARD RESOLUTION, SHARE APPLICATION FORMS AND THE CHEQUE DETAILS OF THE PARTIES FROM WHOM SHARE APPLICATION MONEY OF RS.7,43,40,000/ - WAS RECEIVED BY IT. IT WAS OBSERVED BY THE CIT(A) THAT THE AFORESAID PARTIES WHICH WERE CORPORATE ENTITIES AND WERE REGULARLY FILING THEIR ANNUAL ACCOUNTS AND REPORT SWITH THE REGISTRAR OF COMPANIES (ROC) AND WERE REGULARLY BEING ASSESSED TO TAX , HAD IN COMPLIANCE TO HIS DIREC TIONS APPEARED BEFORE HIM DURING THE COURSE OF THE APPELLATE PROCEEDINGS ALONGWITH THE REQUISITE DOCUMENTARY EVIDENCES VIZ. CONFIRMATIONS, BANK STATEMENTS, FINANCIAL STATEMENTS AND RETURNS OF INCOME . IN THE BACKDROP OF THE AFORESAID FACTS THE CIT(A) WAS OF THE VIEW THAT THE IDENTITY OF THE AFORESAID PARTIES STOOD ESTABLISHED. FURTHER, HE WAS OF THE VIEW THAT THE CAPACITY OF THE PARTIES COULD SAFELY BE GATHERED ON A PERUSAL OF THEIR RESPECTIVE FINANCIAL STATEMENTS FOR THE RELEVANT YEAR IN WHICH THEY HAD ADVA NCED THE SHARE APPLIC ATION MONEY TO THE ASSESSEE. IN SOFAR, THE GENUINENESS OF THE TRANSACTIONS WAS CONCERNED, IT WAS OBSERVED BY THE CIT(A) THAT AS THE TRANSACTIONS WERE CARRIED OUT THROUGH ACCOUNT PAYEE CHEQUES, THUS THE SAME TOO STOOD PROVED BEYOND DOUBT . ON A PERUSAL OF THE ORDER OF THE CIT(A) , WE FIND THAT HE HAD ALSO OBSERVED THAT THE NET ASSET VALUE OF THE ASSESSEE COMPANY P A G E | 28 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. AND THE RESULTANT VALUE PER SHARE WAS ALMOST NEAR TO THE BOOK VALUE OF THE SHARE AS ON 31.03.2008 AS PER THE FINANCIAL STATEME NTS ALREADY ON RECORD. ON THE BASIS OF HIS AFORESAID OBSERVATIONS THE CIT(A) HA D DELETED THE ADDITION OF RS. 7,43,40,000/ - MADE BY THE A.O IN RESPECT OF SHARE PREMIUM UNDER SEC. 68 OF THE ACT. 20 . WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ISSUE BEFOR E US IN THE BACKDROP OF THE CONTENTIONS OF THE AUTHORISED REPRESENTATIVES AND THE MATERIAL AVAILABLE ON RECORD. ON A PERUSAL OF THE ORDERS OF THE CIT(A) , WE ARE PERSUADED TO SUBSCRIBE TO HIS VIEW THAT THE ASSESSEE HAD DULY ESTABLISHED THE IDENTITY AND CR EDITWORTHINESS OF THE AFOREMENTIONED PARTIES, AS WELL AS PROVED THE GENUINENESS OF THE TRANSACTIONS UNDER CONSIDERATION. THE PARTIES HAD FURNISHED BEFORE THE A.O BASIC DETAILS OF THE SHARE APPLICANTS VIZ. NAMES AND ADDRESSES, PAN DETAILS, COPY OF BOARD RESOLUTION, SHARE APPLICATION FORMS ALONGWITH THE CHEQUE DETAILS O F THE PARTIES FROM WHOM SHARE APPLICATION MONEY OF RS.7,43,40,000/ - WAS RECEIVED BY IT.FURTHER, IN PURSUANCE TO THE DIRECTIONS OF THE CIT(A) THE ASSESSEE HAD PRODUCED THE SAID PARTIES ALONG WITH THE REQUISITE DETAILS VIZ. COPIES OF RETURNS OF INCOME, AFFID AVITS AND THE PROOF OF ADDRESSES BEFORE THE CIT(A). 2 1 . WE FIND THAT THE LD. A.R IN ORDER TO DRIVE HOME HIS CONTENTION THAT NO ADDITION OF THE SHARE PREMIUM COULD HAVE BEEN MADE IN THE HANDS OF THE ASSESSEE COMPANY HAD RELIED ON A HOST OF JUDICIAL PRONOUNCEMENTS. WE ARE OF THE CONSIDERED VIEW THAT AS THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS UNDER CONSIDERATION HAD BEEN ESTABLISHED, THUS NO ADDITION OF THE SHARE PREMIUM OF RS. 7,43,40,000/ - COULD HAVE BEEN MADE BY THE A.O UNDER SEC. 68 OF THE I.T. ACT. HOWEVER, EVEN OTHE RWISE IF THE A.O HAD ANY DOUBTS AS REGARDS THE SOURCE OF FUNDS OF THE SHARE APPLICANT PARTIES , THENNO ONUS WAS CAST UPON THE ASSESSEE COMPANY TO CONVINCE P A G E | 29 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. THE A.O ABOUT THE SOURCE OF FUNDS WITH THE SAID PARTI ES WHICH WERE SEPARATELY BEING ASSESSED TO TAX AND WHOSE BOOKS OF ACCOUNTS DULY REFLECTED THE FUNDS THAT HAVE BEEN UTILISED BY THEM FOR SUBSCRIBING TO THE SHARES OF THE ASSESSEE COMPANY. OUR AFORESAID VIEW STANDS FORTIFIED BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX VS. LOVELY EXPORTS (P) LTD. (2008) 6 DTR 308 (SC) . THE HONBLE APEX COURT IN ITS AFORESAID ORDER WHILE DISMISSING THE SPECIAL LEAVE PETITION OF THE REVENUE AGAINST THE JUDGMENT OF THE HONBLE HIGH COURT OF DELHI, HAD OBSERVED AS UNDER: 2. CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME UNDER S. 68 OF IT ACT, 1961? WE FIND NO MERIT I N THIS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT. 3. SUBJECT TO THE ABOVE, SPECIAL LEAVE PETITION IS DISMISSED. FURTHER, WE ARE OF THE CONSIDERED VIEW THAT PRIOR TO THE INSERTION OF FIRST PROVISO TO SEC.68 BY THE FINANCE ACT, 2012 W.E.F. 01.04.2013, IT WAS NOT OBLIGATORY ON THE PART OF THE ASSESSEE TO EXPLAIN THE SOURCE OF THE SOURCE OF A CREDIT APPEARING IN ITS BOOKS OF ACCOUNTS. OUR AFORESAID VIEW STANDS FORTIFIED BY THE JUDGMENT OF THE HONBLE HIGH COURT OF BO MBAY IN THE CASE OF CIT VS. GAGANDEEP INFRASTRUCTURE PVT. LTD. (2017) 394 ITR 680 (BOM) , WHEREIN IT WAS OBSERVED THAT IT WAS OBLIGATORY ON THE PART OF AN ASSESSEE TO PROVE THE SOURCE OF SOURCE OF A CASH CREDIT APPEARING IN ITS BOOKS OF ACCOUNTS ONLY SUBS EQUENT TO THE INSERTION OF THE FIRST PROVISO TO SEC. 68, VIDE THE FINANCE ACT, 2012 W.E.F 01.04.2013. IT WAS HELD BY THE HONBLE HIGH COURT, AS UNDER: (E) WE FIND THAT THE PROVISO TO SECTION 68 OF THE ACT HAS BEEN INTRODUCED BY THE FINANCE ACT 2012 WITH EFFECT FROM 1 ST APRIL, 2013. THUS IT WOULD BE EFFECTIVE ONLY FROM THE ASSESSMENT YEAR 2013 - 14 ONWARDS AND NOT FOR THE SUBJECT ASSESSMENT YEAR. IN FACT, BEFORE THE TRIBUNAL, IT WAS NOT EVEN THE CASE OF THE REVENUE THAT SECTION 68 OF THE ACT AS IN FORCE DURING THE SUBJECT YEARS HAS TO P A G E | 30 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. BE READ/UNDERSTOOD AS THOUGH THE PROVISO ADDED SUBSEQUENTLY EFFECTIVE ONLY FROM 1 ST APRIL, 2013 WAS ITS NORMAL MEANING. THE PARLIAMENT DID NOT INTRODUCE TO PROVISO TO SECTION 68 OF THE ACT WITH RETROSPECTIVE EFFECT NOR DOES THE PROVISO SO INTR ODUCED STATES THAT IT WAS INTRODUCED FOR REMOVAL OF DOUBTS OR THAT IT IS DECLARATORY. THEREFORE IT IS NOT OPEN TO GIVE IT RETROSPECTIVE EFFECT, BY PROCEEDING ON THE BASIS THAT THE ADDITION OF THE PROVISO TO SECTION 68 OF THE ACT IS IMMATERIAL AND DOES NOT CHANGE THE INTERPRETATION OF SECTION 68 OF THE ACT BOTH BEFORE AND AFTER THE ADDING OF THE PROVISO. IN ANY VIEW OF THE MATTER THE THREE ESSENTIAL TESTS WHILE CONFIRMING THE PRE - PROVISO SECTION 68 OF THE ACT LAID DOWN BY THE COURTS NAMELY THE GENUINENES S OF THE TRANSACTION, IDENTITY AND THE C APACITY OF THE INVESTOR HAVE ALL BEEN EXAMINED BY THE IMPUGNED ORDER OF THE TRIBUNAL AND ON FACTS IT WAS FOUND SATISFIED. FURTHER IT WAS A SUBMISSION ON BEHALF OF THE REVENUE THAT SUCH LARGE AMOUNT OF SHARE PREMIUM G IVES RISE TO SUSPICION ON THE GENUINENESS (IDENTITY) OF THE SHAREHOLDERS I.E. THEY ARE BOGUS. THE APEX COURT IN LOVELY EXPORTS (P) LTD. (SUPRA) IN THE CONTEXT TO THE PRE - AMENDED SECTION 68 OF THE ACT HAS HELD THAT WHERE THE REVENUE URGES THAT THE AMOUNT OF SHARE APPLICATION MONEY HAS BEEN RECEIVED FROM BOGUS SHAREHOLDERS THEN IT IS FOR THE INCOME TAX OFFICER TO PROCEED BY REOPENING THE ASSESSMENT OF SUCH SHAREHOLDERS AND ASSESSING THEM TO TAX IN ACCORDANCE WITH LAW. IT DOES NOT ENTITLE THE REVENUE TO ADD TH E SAME TO THE ASSESSEE S INCOME AS UNEXPLAINED CASH CREDIT. FURTHER, A SIMILAR VIEW WAS ARRIVED AT BY THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF PR. CIT - 13, MUMBAI VS. VEEDHATA TOWER PVT.LTD.(2018) 403 ITR 415 (BOM) . THE HONBLE HIGH COURT IN ITS SAI D JUDGMENT HAD OBSERVED THAT AS PER THE PRE - AMENDED SEC. 68, I.E PRIOR TO A.Y 2013 - 14, IT WAS NOT OBLIGATORY FOR THE ASSESSEE TO EXPLAIN THE SOURCE OF THE SOURCE OF A CREDIT APPEARING IN ITS BOOKS OF ACCOUNT. THE HONBLE HIGH COURT HAD HELD AS UNDER : 7. THE GRIEVANCE OF THE APPELLANT IS THAT, EVEN IN THE ABSENCE OF THE AMENDMENT TO SECTION 68 OF THE ACT, IT IS FOR THE RESPONDENT - ASSESSEE TO EXPLAIN THE SOURCE OF THE SOURCE OF THE FUNDS RECEIVED BY AN ASSESSEE. IT IS SUBMITTED THAT THE RESPONDENT HAS NOT A BLE TO EXPLAIN THE SOURCE OF THE FUNDS IN THE HANDS OF M/S. LFPL AND THEREFORE THIS APPEAL NEEDS TO BE ADMITTED. 8. THIS COURT IN COMMISSIONER OF INCOME TAX V/S. GANGA N DEEP INFRASTRUCTURE PVT. LTD, 394 ITR680 HAS HELD THAT THE PROVISO TO SECTION 68 OF THE ACT HAS BEEN INTRODUCED BY THE FINANCE ACT, 2012 W.E.F. 1 ST APRIL, 2013 AND THEREFORE IT WOULD BE EFFECTIVE ONLY FROM ASSESSMENT YEAR 2013 - 14 ONWARDS AND NOT FOR THE EARLIER ASSESSMENT YEARS. IN THE ABOVE DECI SION, RELIANCE WAS PLACED UPON THE DECISION OF THE APEX COURT IN LOVELYEXPORTS (SUPRA) IN THE CONTEXT OF THE PRE - AMENDED SECTION 68 OF THE ACT. IN THE ABOVE CASE, THE APEX COURT WHILE DISMISSING THE REVENUE S APPEAL FROM THE DELHI HIGH COURT HAD OBSERVED T HAT, WHERE THE REVENUE URGES THAT THE MONEY HAS BEEN RECEIVED FROM BOGUS SHAREHOLDERS THEN IT IS FOR THE REVENUE TO PROCEED AGAINST THEM IN ACCORDANCE WITH LAW. THIS WOULD NOT ENTITLE THE REVENUE TO INVOKE SECTION 68 OF THE ACT P A G E | 31 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. WHILE ASSESSING THE RESPONDE NT FOR NOT EXPLAINING THE SOURCE OF ITS SOURCE. IN ANY EVENT, THE IMPUGNED ORDER OF THE TRIBUNAL HAS RAISED A FINDING OF FACT THAT THE RESPONDENT HAD DISCHARGED THE ONUS WHICH IS CAST UPON IT IN TERMS OF THE PRE - AMENDED SECTION 68 OF THE ACT BY FILING THE NECESSARY CONFIRMATION LETTERS OF THE CREDITORS, THEIR AFFIDAVITS, THEIR FULL ADDRESS AND THEIR PAN. 9. THUS, THE TRIBUNAL HAS RENDERED A FINDING OF FACT WHICH IS NOT SHOWN TO BE PERVERSE. IN ANY EVENT, THE QUESTION AS PROPOSED IN LAW OF THE OBLIGATION TO EXPLAIN THE SOURCE OF THE SOURCE PRIOR TO 1 ST APRIL, 2013, ASSESSMENT YEAR 2013 - 14, STANDS CONCLUDED AGAINST THE REVENUE BY THE DECISION OF THIS COURT IN GAGANDEEP INFRASTRUCTURE (SUPRA). ALSO , A SIMILAR VIEW WAS TAKEN BY THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF PRINCIPAL CIT VS. M/S S.D.B STATES PVT. LTD. (ITA NO. 1356 OF 2015 ; DATED 27.03.2018) (BOM) . 2 2 . WE THUS NOT BEING ABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE CONT ENTIONS ADVANCED BY THE LD. D.R AND FINDING NO INFIRMITY IN THE DELETION BY THE CIT(A) OF THE ADDITION OF RS. 7,43,40,000/ - THAT WAS MAD E BY THE A.O UNDER SEC. 68, UPHOLD HIS ORDER IN CONTEXT OF THE ISSUE UNDER CONSIDERATION . THE GROUNDS OF APPEAL NO. 5 AND 6 ARE DISMISSED. 2 3 . IN SOFAR, THE DELETION BY THE CIT(A) OF THE DISALLOWANCE OF THE CLAIM OF BAD DEBTS OF RS.23,81,268/ - BY THE A.O IS CONCERNED, WE FIND THAT THE ISSUE IS SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL IN THE ASSESSES OWN CASE FOR THE IMMEDIATELY PRECEDING YEAR VIZ. A.Y 2008 - 09 IN ACIT - CC 45, MUMBAI VS. M/S PARAMSHAKTI STEEL LTD. [ITA NO. 5587/MUM/2013] (COPY PLACED ON RECORD). WE HAVE PERUSED THE ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL AND FIND THAT THE ORDER OF THE CIT(A) DELETING THE DISALLOWANCE OF BAD DEBTS ON IDENTICAL FACTS WAS THEREAFTER ON APPEAL BY THE REVENUE UPHELD BY THE TRIBUNAL , AND THE APPEAL OF THE REVENUE ON THE SAID COUNT WAS DISMISSED.WE FIND THAT THE TRIBUNAL IN ITS AFORESAID ORDER FOLLOWING THE JUDGMENT OF THE HONBLE SUPREME COUR T IN THE CASE OF TRF LTD. VS. CIT (2010) 323 ITR 397 (SC) AND VIJAYABANK VS. CIT (2010) 323 ITR 167 (SC ) , HAD OBSERVED THAT AFTER THE AMENDMENT IN THE TAXATION LAWS W.E.F P A G E | 32 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. 01.04.1989 THE REQUIREMENT OF DEMONSTRATING THAT THE DEBTS HAD BECOME BAD HAD BEEN DISPENSED WITHAND THE ONLY REQUIREMENT THAT REMAINED WAS THAT THE ASSESSEE SHOULD HAVE WRITTEN OFF THE AMOUNT IN ITS BOOKS OF ACCOUNTS. WE FIND THAT IN THE PRESENT CASE THE ASSESSEE AS PER T H E MANDATE OF LAW HAD WRITTEN OFF THE AMOUNTS IN ITS BOOKS OF ACCOUNT, WHICH HOWEVER WAS DISALLOWED BY THE A.O ON THE GROUND THAT THE ASSESSEE HAD FAILED TO ESTABLISH T HAT THE DEBT HAD BECOME BAD. IN SOFAR, THE FACT THAT THE INCOME IN RELATION TO SUCH DEBTS WAS OFFERED IN EARLIER YEARS , THE SAME IS NOT IN DOUBT. APART THEREFROM , THE FACT THAT THE ASSESSEE HAD WRITTEN OFF THE AMOUNT OF BAD DEBTS IN ITS BOOKS OF ACCOUNT IS ALSO ADMITTED. WE THUS RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN THE ASSESSES OWN CASE FOR A.Y 2 008 - 09 I.E ACIT - CC 45, MUMBAI VS.M/S PARAMSHAKTI STEEL LTD. [ITA NO. 5587/MUM/2013], UPHOLD THE DELETION OF THE DISALLOWANCE OF BAD DEBTS OF RS. 23,81,268/ - BY THE CIT(A) . THE GROUND OF APPEAL NO. 3 IS DISMISSED. 2 4 . THE APPEAL OF THE REVENUE IS PARTLY ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS . ORDER PRONOUNCED IN THE OPEN COURT ON 30.0 1.2019 SD/ - SD/ - (G.MANJUNATHA) (RAVISH SOOD) ACCOUNTA NT MEMBER JUDICIAL MEMBER MUMBAI ; 30 . 01.2019 PS. ROHIT P A G E | 33 ITA NO. 5586/MUM/2013 AY. 2009 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CC - 45 VS. M/S PARAMSHAKTI STEELS P. LTD. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI