Vandana Forgings Pvt. Ltd., Raipur, Raipur V. Deputy Commissioner of Income Tax-1(1), Raipur, Raipur

ITA 85/RPR/2023

• Counselvise Citation: [2024] 130 COUNSELVISE.COM (IT) 1327 (ITAT-RAIPUR)
• Duration Of Justice: 1 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 08-01-2024
• Assessment Year: 2013-2014
• Appeal Filed On: 12-03-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ILA M. PARMAR
• Assessee Lawyers: R.B DOSHI
• Keywords: Opportunity of being heard; Unexplained cash credit; Earning of tax free income
• Section: 143(3); 143(2); 68; 133(6); 14A

Judgement Text

आयकर अपीलȣय अͬधकरण Ûयायपीठ रायप ु र मɅ। IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI ARUN KHODPIA, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No. 85/RPR/2023 Ǔनधा[रण वष[ / Assessment Years : 2013-14 Vandana Forgings Private Limited Vandana Building M.G. Road, Raipur-492 001(C.G.) PAN : AAACV7613H .......अपीलाथȸ / Appellant बनाम / V/s. The Deputy Commissioner of Income Tax-1(1), Raipur (C.G.) ......Ĥ×यथȸ / Respondent Assessee by : Shri R.B Doshi, CA Revenue by : Smt. Ila M. Parmar, CIT-DR स ु नवाई कȧ तारȣख / Date of Hearing : 09.01.2024 घोषणा कȧ तारȣख / Date of Pronouncement : 19.03.2024 2 Vandana Forgings Pvt. Ltd. vs. DCIT-1(1), Raipur (C.G.) ITA No. 85/RPR/2023 आदेश / ORDER PER RAVISH SOOD, JM: The present appeal filed by the assessee company is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 30.01.2023, which in turn arises from the order passed by the A.O. u/s. 143(3) of the Income-tax Act, 1961 (for short ‘Act’), dated 29.03.2016 for A.Y. 2013-14. The assessee company has assailed the impugned order on the following grounds of appeal before us: “1. Ld. CIT(A) erred in confirming disallowance of Rs.25,05,951/- made by AO invoking sec. 14A r.w.s 8D. The disallowance made by AO & confirmed by Ld. CIT(A0 is arbitrary and not justified. 2. Ld. CIT(A) erred in confirming addition of Rs.3,00,00,000/- made by AO on account of share capital received by the appellant invoking sec. 68. The addition made by AO and confirmed by Ld. CIT(A) is arbitrary, illegal and not justified. 3. The appellant reserves the right to add, amend or modify any of the ground/s of appeal.” 2. Succinctly stated, the assessee company, which is engaged in the business of wholesale trading of iron and steel products a/w. manufacturing of ingots had filed its return of income for A.Y.2013-14 on 30.11.2013, declaring an income of Rs.4,89,460/-. The case of the assessee company was selected for scrutiny assessment u/s. 143(2) of the Act. 3. During the course of assessment proceedings, the A.O observed that though the assessee company had made an investment of Rs.50.95 crore (approx.) in 3 Vandana Forgings Pvt. Ltd. vs. DCIT-1(1), Raipur (C.G.) ITA No. 85/RPR/2023 shares of Vandana Rolling Mills Ltd., Rose Merchants Pvt. Ltd., Nortel Commodeal Pvt. Ltd., and Dheera Vinimay Pvt. Ltd., the income from which was exempt from tax, but had not offered on a suo-moto basis any disallowance of the corresponding expenditure u/s.14A of the Act,. Accordingly, the A.O called upon the assessee company to put forth an explanation as to why disallowance may not be worked out in its hands u/s 14A of the Act. In reply, the assessee company claimed that as it had made the aforementioned investments out of its interest-free funds, and no expenditure was incurred for earning the exempt income, therefore, no disallowance was called for u/s. 14A of the Act. Apart from that, it was the claim of the assessee that it had during the year only invested Rs.1.68 crore in its aforesaid exempt income-yielding shares. However, the aforesaid explanation of the assessee did not find favor company with the A.O. Observing, that the assessee company was obligated to discharge the onus that was cast upon it, and thus, prove that the investment in the exempt income-yielding shares was made out of its interest-free funds both in the preceding years and during the year under consideration, the A.O rejected its claim that no part of the interest expenditure was liable for disallowance as investments were made out of its interest-free funds. Also, the A.O. did not find favor with the unsubstantiated claim of the assessee company that it had not incurred any expenditure for earning exempt income. Rebutting the aforesaid claim, the A.O observed that as per clause (iii) of Section 14A, the provisions of Section 14A(2) shall apply to a case where the assessee claims that no expenditure was incurred concerning the income which does not form part of his total income. Accordingly, the 4 Vandana Forgings Pvt. Ltd. vs. DCIT-1(1), Raipur (C.G.) ITA No. 85/RPR/2023 A.O based on his aforesaid observations worked out the disallowance u/s.14A r.w.r.8D(2)(iii) of Rs.25,05,951/- i.e. @ 0.5% of average opening and closing balance of investments. 4. Also, the A.O observed that the assessee company had during the subject year received share capital aggregating to Rs.3 crore from its two group entities, as under: It was observed by the A.O. that the aforementioned share subscriber companies were group entities having a common director. The A.O to verify the creditworthiness of the aforesaid investor companies, and also the genuineness of the transaction of receipt of share capital/premium by the assessee company, vide his note sheet on 17.03.2016 directed the assessee company to furnish supporting documentary evidence. As is discernible from the assessment order, the assessee company failed to establish the identity, creditworthiness, and genuineness of the transaction of receipt of share capital/premium from the aforementioned investor companies. In fact, the A.O. observed that the assessee company had on 22.03.2016 only placed on record PAN, address of the aforementioned shares subscriber companies, along Sl. No. Particulars Name Amount (Rs.) 1. Wise Commodeal Pvt. Ltd. 70,00,000/- 2. Dheera Vinimay Pvt. Ltd. 2,30,00,000/- Total 3,00,00,000/- 5 Vandana Forgings Pvt. Ltd. vs. DCIT-1(1), Raipur (C.G.) ITA No. 85/RPR/2023 with the fact that respective investments were made by the investor companies through banking channels, viz., RTGS. 5. Referring to one of the investor companies, viz. Dheera Vinimay Pvt. Ltd., i.e. a group company, the A.O. observed that the said investor company had received funds through banking channels (RTGS) from various entities details as regards which were not furnished by the assessee company. Referring to the details filed by the assessee company, the A.O. observed that M/s. Dheera Vinimay Pvt. Ltd. (supra), in turn, had received funds through banking channels, viz., RTGS from two concerns viz. (i) Aritro Supply Pvt. Ltd.; & (ii) Bellash Supply Pvt. Ltd. The A.O. to verify the genuineness of the claim that was raised by the assessee company, i.e. amount received by M/s. Dheera Vinimay Pvt. Ltd. (supra) was towards investment in its shares by two companies, viz. (i) Aritro Supply Pvt. Ltd.; & (ii) Bellash Supply Pvt. Ltd., deputed an Income Tax Team from Raipur to verify both the existence of the said respective companies and also the genuineness of the investments claimed to have been made by them towards shares of the aforementioned company, viz. M/s. Dheera Vinimay Pvt. Ltd. However, the A.O. was informed by the Income Tax Team that as both the aforesaid companies were not available at their addresses that were provided by the assessee company, therefore, no verification could be carried out. 6. Considering the aforesaid facts, the A.O. observed that the assessee company had failed to establish the identity of the companies viz. (i) Aritro Supply 6 Vandana Forgings Pvt. Ltd. vs. DCIT-1(1), Raipur (C.G.) ITA No. 85/RPR/2023 Pvt. Ltd.; & (ii) Bellash Supply Pvt. Ltd., which were stated to have invested in M/s. Dheera Vinimay Pvt. Ltd. (supra), which funds were, thereafter, diverted/utilized by the latter share applicant/subscriber company for investing in the share capital with the assessee company. Also, the A.O held a firm conviction that the assessee company had failed to substantiate the genuineness and creditworthiness of the share subscriber companies, viz. (i) Wise Commodeal Pvt. Ltd. and (ii) Dheera Vinimay Pvt. Ltd. which would have otherwise proved that they had made their respective investments with the assessee company. 7. Further, the A.O. observed that the assessee company had claimed to have received an amount of Rs.10,00,000/- from M/s. Graceful Vincom Pvt. Ltd. which as intimated to him by the Investigation Wing of the Income-tax department, Kolkata was a paper/shell company that was engaged in laundering the unaccounted money of the investors through various layers of companies. The A.O, based on his aforesaid deliberations and referring to Section 68 of the Act (post amendment), observed that the assessee company had failed to discharge the onus that was cast upon it as regards proving the authenticity of its claim of having received genuine share capital from the aforementioned companies. The A.O. based on his aforesaid observations, thus, held the entire amount of share capital received by the assessee company from its aforementioned group entities, viz. (i). Wise Commodeal Pvt. Ltd.; and (ii). Dheera Vinimay Pvt. Ltd. as unexplained cash credits u/s.68 of the Act. Accordingly, the A.O. vide his order passed u/s. 143(3) of the Act dated 29.03.2016 determined the income of the assessee company at Rs.3,29,95,410/-. 7 Vandana Forgings Pvt. Ltd. vs. DCIT-1(1), Raipur (C.G.) ITA No. 85/RPR/2023 8. Aggrieved the assessee carried the matter in appeal before the CIT(Appeals) but without success. Apropos the disallowance made by the A.O u/s. 14A of the Act, the assessee had before the first appellate authority come forth with two-fold contentions, viz. (i) that as it was not in receipt of any exempt dividend income during the subject year, therefore, no disallowance u/s. 14A was called for in its case; and (ii) that as the investment in the exempt income-yielding shares was made out of its interest-free funds, therefore, disallowance made by the A.O u/s. 14A could not be sustained. Ostensibly, the CIT(Appeals) though had reproduced at length the contentions of the assessee on the aforesaid issue and also, culled out the observations of the A.O, but he had not arrived at any independent finding and merely endorsed the view taken by the A.O on the ground that he had duly discussed and considered the submissions of the assessee company concerning the issue in hand. Apropos the contentions advanced by the assessee company that it had received share capital/premium of Rs.3 crores from the aforementioned share applicant/subscriber companies, viz. (i) M/s. Wise Commodeal Pvt. Ltd.: Rs.70 lacs; and (ii) M/s. Dheera Vinimay Pvt. Ltd.: 2.30 crore, the same also did not find favor with the CIT(Appeals) who upheld the addition made by the A.O. 9. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 10. We have heard the ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as 8 Vandana Forgings Pvt. Ltd. vs. DCIT-1(1), Raipur (C.G.) ITA No. 85/RPR/2023 well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. 11. At the threshold, we may herein observe that the contentions advanced by the Ld. A.R. to substantiate its claim that no disallowance u/s. 14A r.w.r 8D was called for in the hands of the assessee company is based on misconceived facts. As is discernible from the assessment order, the A.O. had worked out the disallowance u/s. 14A r.w.r.8D(2)(iii) i.e. concerning administrative expenses which the assessee would have incurred for earning of the exempt dividend income. On the contrary, the Ld. A.R had tried to impress upon us that no disallowance u/s. 14A was called for in its case as it had sufficient interest-free funds for making investments in the exempt income-yielding shares. Nothing has been stated by the assessee either before the lower authorities or by the Ld. A.R in the course of the proceedings before us as to why no disallowance of administrative expenses incurred towards earning of the exempt income was called for u/s. 14A r.w.r 8D (2)(iii) of the Act. 12. At the same time, we find substance in the claim of the Ld. AR that as the assessee company had not earned any exempt income during the year under consideration, no disallowance u/s. 14A could have been made in its hand. Admittedly, as per Section 14A of the Act, i.e. before 01.04.2022, in the absence of any exempt income having been earned by the assessee, no disallowance u/s. 14A could have been made in its hand. Our aforesaid view is fortified by the judgment of 9 Vandana Forgings Pvt. Ltd. vs. DCIT-1(1), Raipur (C.G.) ITA No. 85/RPR/2023 the Hon’ble Supreme Court in the case of CIT Vs. Chettinad Logistics Pvt. Ltd. (2018) 257 Taxmann 2 (SC) and also of the Hon’ble High Court of Delhi in the case of Cheminvest Limited Vs. CIT, (2015) 378 ITR 33 (Delhi). However, as the claim of the assessee company that it was not in receipt of any exempt income during the year under consideration, is not borne out from the record, therefore, in all fairness, the matter requires to be restored to the file of the A.O with a direction to verify the authenticity of the said claim of the assessee. In case, the claim of the assessee is found to be in order, then the A.O. shall vacate the disallowance of Rs. 25,05,951/- made u/s. 14A of the Act.-. Thus, the Ground of Appeal No.1 raised by the assessee company is allowed for statistical purposes in terms of our aforesaid observations. 13. Apropos the view taken by the lower authorities that the amounts received by the assessee company towards share capital from its group entities, viz. (i) Wise Commodeal Pvt. Ltd.; and (ii) Dheera Vinimay Pvt. Ltd. were unexplained cash credits u/s. 68 of the Act, we have given thoughtful consideration to the observations of the lower authorities in the backdrop of the contentions advanced by the Ld. Authorized representatives of both parties and considered the documentary evidence filed before us. Before adverting to the aforesaid issue in hand, we think it apt to cull out Section 68 of the Act (post-amended as applicable to the year under consideration), which reads as under: “68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing 10 Vandana Forgings Pvt. Ltd. vs. DCIT-1(1), Raipur (C.G.) ITA No. 85/RPR/2023 Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year : Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.” On a perusal of the aforesaid statutory provision, it transpires that w.e.f. A.Y 2013- 14, an assessee company (not being a company in which the public is substantially interested) that receives share application money, share capital, share premium, or any such amount by whatever name called, is obligated to substantiate not only the identity and creditworthiness of the share applicant/subscriber along with the genuineness of the transaction of the amount credited in its books of account but is also subjected to an additional obligation, as per which it is obligated to come forth with an explanation of the resident share subscriber/applicant, i.e the investor in whose name credit is recorded in the books of the assessee company, about the nature and source of such sum so credited. 14. We shall now in the backdrop of the aforesaid mandate of law, i.e. Section 68 of the Act verify as to whether or not the assessee company had discharged the 11 Vandana Forgings Pvt. Ltd. vs. DCIT-1(1), Raipur (C.G.) ITA No. 85/RPR/2023 onus that was cast upon it of having received share capital from the aforesaid group companies, viz. (i). Wise Commodeal Pvt. Ltd.; and (ii). Dheera Vinimay Pvt. Ltd. 15. As the share capital that the assessee company had claimed to have received from the aforementioned share applicant/subscriber companies, viz. (i) M/s. Wise Commodeal Pvt. Ltd.: Rs.70 lacs; and (ii) M/s. Dheera Vinimay Pvt. Ltd.: Rs. 2.3 crore, had been held as unexplained cash credits by the A.O u/s. 68 of the Act, therefore, we shall first deal with the same as under: A). M/s. Dheera Vinimay Pvt. Ltd. : Rs.2.30 crore 16. As is discernible from the assessment order, it was, inter alia, observed by the A.O. that the aforementioned investor company and the assessee company had certain common directors. The A.O. further observed that the assessee company despite specific directions had failed to substantiate the creditworthiness of the aforementioned investor company and also, the genuineness of the transaction of receipt of share capital from the latter. Referring to the source of source, i.e, source of the aforesaid investment made with the assessee company, the A.O had observed that the assessee company except for placing on record PAN Nos. and address of the persons/entities from which the aforementioned investor company, viz. M/s. Dheera Vinimay Pvt. Ltd. had received the funds, however, had failed to establish the identity, creditworthiness, and genuineness of the funds so received by the said investor company. Elaborating further, the A.O. had observed that though the aforementioned investor company, viz. M/s. Dheera Vinimay Pvt. Ltd., the 12 Vandana Forgings Pvt. Ltd. vs. DCIT-1(1), Raipur (C.G.) ITA No. 85/RPR/2023 assessee's group company, had stated to have received money through RTGS from two concerns/entities, viz. (i) Aritro Supply Pvt. Ltd.; and (ii) Bellash Supply Pvt. Ltd. as an investment in shares, but the income tax team that was deputed by his office to verify the genuineness and existence of both the aforementioned companies were unable to locate either of them at their respective address provided by the assessee company. The A.O., considering the fact that the assessee company had failed to establish the identity, creditworthiness, and genuineness of the aforementioned two concerns/entities, viz. (i) Aritro Supply Pvt. Ltd.; and (ii) Bellash Supply Pvt. Ltd., i.e. discharge the statutory onus that was cast upon it as regards establishing the source of source of the funds received towards share capital by the assessee company, thus, held the amount of Rs. 2.30 crore received from the aforementioned investor company, viz. M/s. Dheera Vinimay Pvt. Ltd. as an unexplained cash credit u/s. 68 of the Act. 17. We have thoughtfully considered the observations of the lower authorities in the backdrop of the contentions advanced by the Ld. authorized representatives of both parties. As can be gathered from the assessment order, the A.O. had drawn adverse inferences as regards the authenticity of the assessee's claim of having received share capital from the aforementioned investor company, viz. M/s. Dheera Vinimay Pvt. Ltd. on the ground that it had failed to substantiate the source, out of which, the investment was made by the investor company. It was observed by the A.O. that though the said investor company, viz. M/s. Dheera Vinimay Pvt. Ltd. was in receipt of money towards investment in its shares through banking channels from 13 Vandana Forgings Pvt. Ltd. vs. DCIT-1(1), Raipur (C.G.) ITA No. 85/RPR/2023 two companies, viz. (i) Aritro Supply Pvt. Ltd.; and (ii) Bellash Supply Pvt. Ltd., but the assessee company had failed to establish the identity and creditworthiness of the said parties, and also the genuineness of the transaction of receipt of share capital by the investor company from the said concerns. Although, the A.O. had observed that the Income Tax Team that was deputed from Raipur to verify the existence of the aforementioned parties from whom the investor company, M/s. Dheera Vinimay Pvt. Ltd. had received money (through banking channels), but neither of the said companies could be located at their respective addresses that were provided by the assessee company, but we find, that as stated by the Ld. AR, the said factual position was not brought to the notice of the assessee company. As stated by the Ld. AR, and rightly so, the A.O. could not have based on an inquiry carried out at the back of the assessee company drawn adverse inferences without confronting the inquiry report to the assessee company. In our view, only based on the report of the Income Tax team which had informed the A.O about the unavailability of the aforementioned concerns, viz. (i) Aritro Supply Pvt. Ltd.; and (ii) Bellash Supply Pvt. Ltd., at their respective address provided by the assessee company, adverse inferences could not have been summarily drawn without confronting the same to the assessee company. As stated by the Ld. AR, and rightly so, the report obtained by the A.O absolutely at the back of the assessee company, which thereafter had been used for drawing adverse inferences as regards the authenticity of the assessee's claim of having received share capital from the 14 Vandana Forgings Pvt. Ltd. vs. DCIT-1(1), Raipur (C.G.) ITA No. 85/RPR/2023 aforementioned investor company is in clear violation of the basic principles of natural justice. 18. Also, we find that the A.O. had observed that the assessee company had only provided the PAN Nos. and addresses of the concerns from whom the investor company had received funds which were utilized for investing with the assessee company, and thus, failed to come forth with an explanation as regards the “nature” and “source” of the funds in the hands of the investor company. On the contrary, as brought to our notice by Shri. R.B Doshi, the Ld. AR, the assessee company had in the course of assessment proceedings in the discharge of the primary onus that was cast upon it as regards proving the “nature” and “source” of the funds in the hands of the investor company, inter alia, filed various documents, viz. summary/explanation of the source of source of investment made with the assessee company, Page 77 of APB; and copies of ledger accounts of the aforementioned parties from whom the investor company had received funds, which were invested as share capital with the assessee company, Page 73-74 of APB, as under: Name, Address & PAN no. of share applicant Details of share application received Explanation of source of source of share applicant Documents provided in support of explanation Date Amt Dheera Vinimay Pvt. Ltd., 40 Weston Street, 3rd floor, Kolkata-13, PAN : AADCD0773D 31.08.2012 4500000 The share applicant company has received Rs 5000000/- in it bank from M/s Jwalia Merchants Pvt Ltd against the sales of its investment. Out of this amount Rs 4500000.00 has been given to the copy of bank book for the relevant period In the books of share applicant and the ledger copy of account of respective parties from whom amount is received against sales of 03.09.2012 7000000 03.09.2012 8500000 04.09.2012 3000000 15 Vandana Forgings Pvt. Ltd. vs. DCIT-1(1), Raipur (C.G.) ITA No. 85/RPR/2023 Apart from that, the Ld. AR had drawn our attention to various other documents that were filed in the course of the assessment proceedings by the assessee company to prove the authenticity of its claim of having received share capital of Rs. 2.30 crores from the aforesaid investor company, viz. bank statement of the investor company from where funds were received by the assessee company, Page 58 of APB, copy of return of income, Page 59 of APB, audited financial statements of the investor company, Page 60-71 of APB, schedule of investment of the investor company (disclosing investment made with the assessee company) alongwith investment in other group/entities, Page 70 of APB. The claim of the Ld. AR of having furnished the aforementioned supporting documentary evidence by the assessee company in discharge of the primayl onus that was cast upon it as regards proving authenticity of its claim of having received share capital/premium from the aforementioned investor company, viz. M/s. Dheera Vinimay Pvt. Ltd. had neither assessee company. On 01.09.2012 the share applicant company has received Rs.18500000.00 form various entities against sales of its investments. This received amount assessee company towards shares has been given to the assessee company towards shares allotment. investment is enclosed herewith. 16 Vandana Forgings Pvt. Ltd. vs. DCIT-1(1), Raipur (C.G.) ITA No. 85/RPR/2023 been rebutted by the Ld. DR nor any material proving to the contrary had been placed before us in the course of hearing of the appeal. 19. As observed by us hereinabove, the A.O. while framing the assessment had drawn adverse inferences as regards the very existence of the concerns, viz. (i). Aritro Supply Pvt. Ltd.; and (ii). Bellash Supply Pvt. Ltd., i.e. the concerns from which the investor company, viz. M/s. Dheera Vinimay Pvt. Ltd. had received money that was utilized for investing with the assessee company. Ostensibly, the aforesaid adverse inferences were drawn by the A.O based on a report of the Income Tax Team which had not only carried out verifications as regards the aforesaid concerns at the back of the assessee company but also, the said report that was acted upon by the A.O was at no stage ever confronted to the assessee. Also, we find that there is no whisper of a word about the substantial documentary evidence that was filed by the assessee company in its attempt to discharge the primary onus that was cast upon it as regards proving the authenticity of its claim of having received share capital from the aforementioned investor company. Considering the fact, that not only the A.O. based on verifications carried out at the back of the assessee company, and acting upon a report of the Income-tax team that was never confronted to the assessee, had drawn adverse inferences as regards its explanation about the “nature” and “source” of the investment made by the investor company, viz. M/s Dheera Vinimay Pvt. Ltd., had acted in defiance of the basic principles of natural justice; but also had most arbitrarily overlooked the substantial documentary evidence that was filed by the assessee company to prove the authenticity of its 17 Vandana Forgings Pvt. Ltd. vs. DCIT-1(1), Raipur (C.G.) ITA No. 85/RPR/2023 claim of having received share capital from the aforesaid investor company, we are unable to persuade ourselves to concur with such adverse inferences which in turn are based on premature observations. 20. Our aforesaid view that in a case where the assessee had placed on record sufficient documentary evidence to prove the authenticity of its claim of having received genuine share application money from the investor, viz. confirmation letter, PAN details, assessment report, mode of payment for share application money (through banks), bank account statements, cheque numbers, copy of balance sheet, Profit & Loss account for the year under consideration, the A.O cannot merely based on generalized observation draw adverse inferences as regards the authenticity of the transaction without considering the documents placed by the assessee company before him, is supported by the judgments of the Hon'ble High Court of Delhi in the case of Pr. CIT Vs. Laxman Industrial Resources Ltd. (2017) 397 ITR 106 (Del) and CIT Vs. Vrindavan Farms (P) Ltd., ITA No.71-72 & 84 of 2015 dated 12.08.2015. It was observed by the Hon'ble High Court that where the assessee had produced sufficient documents in the discharge of its initial onus of proving the identity and creditworthiness of the share applicant/subscriber company, then, it is incumbent on the part of the A.O to undertake some inquiry and investigation before concluding on the issue of creditworthiness, failing which, no addition could be made u/s. 68 of the Act. 18 Vandana Forgings Pvt. Ltd. vs. DCIT-1(1), Raipur (C.G.) ITA No. 85/RPR/2023 21. In our considered view, the matter in the totality of the facts involved qua the investment made by the aforementioned share applicant/subscriber company, viz. M/s. Dheera Vinimay Pvt. Ltd., in all fairness requires to be revisited by the A.O. The A.O is directed to consider the documentary evidence that had been filed by the assessee company in its attempt to discharge the primary onus that was cast upon it as regards proving authenticity of its claim of having received share capital from the aforesaid investor company, and also confront the report of the Income Tax Team about unavailability of the aforementioned concerns/entities, viz. (i) Aritro Supply Pvt. Ltd.; and (ii) Bellash Supply Pvt. Ltd. to the assessee company in the course of the set-aside proceedings. Needless to say, the A.O. in the course of the set-aside proceedings shall afford a reasonable opportunity of being heard to the assessee company which shall remain at liberty to substantiate its claim/explanation based on fresh documentary evidence. B). M/s. Wise Commodeal Pvt. Ltd. : Rs.70 lacs 22. As observed by us hereinabove, the assessee company had claimed to have received share capital of Rs.70 lacs from the aforementioned investor company. As is discernible from the assessment order, the A.O. had observed that the investor company, viz. M/s. Wise Commodeal Pvt. Ltd. was a group entity of the assessee company with certain common directors. Referring to the material that was placed on record in the course of assessment proceedings, the A.O. observed that the assessee company had failed to substantiate the genuineness and creditworthiness 19 Vandana Forgings Pvt. Ltd. vs. DCIT-1(1), Raipur (C.G.) ITA No. 85/RPR/2023 of the share capital that was raised by the aforementioned investor company. Elaborating further, the A.O. had, inter alia, observed that the assessee company had failed to establish the identity, creditworthiness, and genuineness of the funds that were received by the aforementioned investor company, viz. M/s. Wise Commodeal Pvt. Ltd. which were utilized for investing with the assessee company. It was further observed by him that the assessee company had during the course of assessment proceedings only placed on record the PAN and addresses of the entities from whom the abovementioned investor company, viz. M/s. Wise Commodeal Pvt. Ltd. had received funds. As observed by us hereinabove, the A.O holding a firm conviction that the assessee company had failed to discharge the onus that was cast upon it as regards proving the authenticity of its claim of having received share capital from the aforementioned company, thus, held the entire amount of Rs.70 lac as an unexplained cash credit u/s. 68 of the Act. 23. We have thoughtfully considered the aforesaid issue in the backdrop of the contentions advanced by the Ld. authorized representatives of both parties. Although the A.O. claims that the assessee had failed to discharge the onus that was cast upon it as regards proving the authenticity of its claim of having received share capital from the aforementioned investor company, but as stated by the Ld. AR the said observation of the A.O. is found to be factually incorrect. As brought to our notice by the Ld. AR, the assessee company in the course of the proceedings before the A.O, to substantiate the genuineness of its claim of having received share capital from the aforementioned investor company, had placed on his record 20 Vandana Forgings Pvt. Ltd. vs. DCIT-1(1), Raipur (C.G.) ITA No. 85/RPR/2023 substantial documentary evidence, viz. (i) bank statement of the investor company from where payment was made towards share capital with the assessee company, Page 39-40 of APB; (ii) copy of the return of income of the investor company, Page 41 of APB; (iii) copy of the audited financial statements of the investor company, Page 42 to 54 of APB. Apart from that, the Ld. AR had drawn our attention to a 'Chart' explaining the "nature" and "source" of the money in the hands of the aforementioned investor company, which is stated to have been filed during the course of the assessment proceedings, Page 77 of APB, which reads as under: Name, Address & PAN no. of share applicant Details of share application received Explanation of source of source of share applicant Documents provided in support of explanation Date Amt Wise Commodeal Pvt. Ltd., 40 Weston Street, 3rd floor, Kolkata-13, PAN : AAACW7923R 31.08.2012 1500000 The share applicant 31.08.2012 1500000 company has received Rs 1500000.00 from MIS Pease commosales Pvt Ltd on dt 31.08.2012 towards sales of its shares . Out of the received amount the share applicant Company has given the amount to the assessee company towards share application money. On 01.09.2012 the share applicant company received Rs 2500000 from M/s Neminath VYapaar Pvt Ltd and on 03.09.2012 the share applicant company received amount from M/S Bhakti Vin trade against sales of its investment and from Vintrade Pvt Ltd copy of bank book for the relevant period In the books of share applicant and the ledger copy of account of respective parties from whom amount is received against sales of investment is enclosed herewith. 03.09.2012 2500000 04.09.2012 3000000 21 Vandana Forgings Pvt. Ltd. vs. DCIT-1(1), Raipur (C.G.) ITA No. 85/RPR/2023 24. Based on his aforesaid contention, the Ld. AR submitted that now when the assessee company in the course of the proceedings before the A.O. had duly explained the "nature" and "source" of the amount of Rs.70 lac that was received by it towards share capital from the aforementioned investor company, viz. M/s. Wise Commodeal Pvt. Ltd., and also, had discharged the additional onus that was cast upon it as per the "1st proviso" to Section 68 of the Act, there was no justification on the part of the A.O to have held the said amount as an unexplained cash credit under the said statutory provision. 25. We have given a thoughtful consideration and find substance in the claim of the Ld. AR. As stated by the Ld. A.R, though the assessee company is stated to have placed on record the aforementioned documentary evidence while discharging the primary onus that was cast upon it as regards proving the authenticity of its claim of having received share capital of Rs. 70 lac from the aforementioned investor company, but there is no whisper of a word about the said documents in the body of the assessment order. Also, we find that though the assessee company is stated to have furnished complete details about the source of source of the aforementioned investment of Rs.70 lacs received from the investor company, and had filed with the Rs.4300000.00 against sales of its investment, and from the received amount it gave amount to assessee company towards share allotment. 22 Vandana Forgings Pvt. Ltd. vs. DCIT-1(1), Raipur (C.G.) ITA No. 85/RPR/2023 A.O the requisite details along with a copy of the ledger accounts of the parties/entities from whom money was received by the investor company against the sale of investments, which amount was utilized for investing towards share capital with the assessee company, Page 55-57 of APB, but no reference of the said material/documents can be traced in the body of the assessment order. Apart from that, we find substance in the claim of the Ld. AR that now when the assessee company in the immediately preceding year, i.e. A.Y. 2012-13 had received share capital/premium of Rs.1.50 crore from the aforementioned investor company, viz. M/s. Wise Commodeal Pvt. Ltd., Page 82A of APB, which, thereafter, had been accepted by the A.O. while framing the assessment of the assessee company for the said preceding year vide his order u/s. 143(3) of the Act dated 29.03.2015, Pages 83-85 of APB, therefore, the said fact further substantiates the identity and creditworthiness of the investor company in so far the investment of Rs.70 lacs made with the assessee company during the year under consideration was concerned. For the sake of clarity, the observation of the A.O. wherein he had while framing the assessment in the case of the assessee company for A.Y.2012-13 vide his order u/s. 143(3) of the Act dated 29.03.2015, inter alia, accepted the transaction of receipt of share capital/premium by the assessee company from the aforementioned share applicant/subscriber company, viz. M/s. Wise Commodeal Pvt. Ltd. is culled out as under: "3. This case was selected for scrutiny By CASS to examine (1) Large interest expenses and ; (2) large share premium received. The counsel for the has been asked to file a specific clarification on these two issues. In the written reply filed on 17/03/2015 a detailed explanation 23 Vandana Forgings Pvt. Ltd. vs. DCIT-1(1), Raipur (C.G.) ITA No. 85/RPR/2023 alongwith supporting evidences have been filed. The same is placed on record after verification from the books of accounts produced during the course of assessment proceedings. To examine the share capital received letters u/s 133(6) have been issued to the addressee given by the assessee. It has been stated that the share premium has been received by the company from its sister concerns and almost all letters sent u/s 133(6) have been complied by the respective concerns. All details in respect of share premium received along with supporting evidences have been received in this office by Regd. post the same were placed on record after verification. On both the issues a detailed explanation has been filed and placed on record after examination." (emphasis supplied by us) 26. We, thus, in terms of our aforesaid observations are of the view that not only the A.O had failed to give reasons as to why the substantial documentary evidence that were filed by the assessee company in its attempt to discharge the primary onus that was cast upon it as regards proving the authenticity of its claim of having received share capital of Rs. 70 lac from the aforementioned investor company were not to be considered and acted upon, but also had failed to point out as to why the explanation of the assessee company as regards the source of money in the hands of the investor company as was explained based on supporting documentary evidence, was not to be accepted. Also, the A.O had lost sight of the material fact that the receipt of share capital/premium of Rs.1.50 crore by the assessee company from the investor company in the immediately preceding year, i.e. A.Y.2012-13 had been accepted by the A.O after necessary deliberations, vide his order passed u/s. 143(3) of the Act dated 29.03.2015. Considering the aforesaid facts, we are of the view that the A.O. had drawn the adverse inferences regarding the assessee's claim of having received share capital from the aforementioned investor company based 24 Vandana Forgings Pvt. Ltd. vs. DCIT-1(1), Raipur (C.G.) ITA No. 85/RPR/2023 on pre-mature observations. Accordingly, in our view, the matter in all fairness requires to be revisited by the A.O. who is directed to re-adjudicate the same after considering the material/documents that were placed on record by the assessee company in the course of the assessment proceedings. Needless to say, the A.O. shall in the course of the set-aside proceedings afford a reasonable opportunity of being heard to the assessee company which shall remain at liberty to substantiate its claim/explanation based on fresh documentary evidence. Thus, the Ground of Appeal No.2 raised by the assessee company is allowed for statistical purposes in terms of our aforesaid observations. 27. The Ground of appeal No.3 being general in nature is dismissed as not pressed. 28. In the result, the appeal of the assessee company is allowed for statistical purposes in terms of our aforesaid observations. Order pronounced in open court on 19th day of March, 2024. Sd/- Sd/- ARUN KHODPIA RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायप ु र/ RAIPUR ; Ǒदनांक / Dated : 19th March, 2024. ***SB आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to :- 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The CIT(Appeals)-1, Raipur (C.G.) 4. The Pr. CIT-1, Raipur (C.G.) 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, रायप ु र बɅच, 25 Vandana Forgings Pvt. Ltd. vs. DCIT-1(1), Raipur (C.G.) ITA No. 85/RPR/2023 रायप ु र / DR, ITAT, Raipur Bench, Raipur. 6. गाड[ फ़ाइल / Guard File. आदेशान ु सार / BY ORDER, // True Copy // Ǔनजी सͬचव / Private Secretary आयकर अपीलȣय अͬधकरण, रायप ु र / ITAT, Raipur.