M/S MOIRA STEEL LTD., Indore V. THE DCIT 1(1), Indore

ITA 893/IND/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5684 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 10-04-2019
• Assessment Year: 2007-2008
• Appeal Filed On: 26-08-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K G GOEL
• Assessee Lawyers: V P RA W KA
• Keywords: Capital asset; Income from undisclosed sources; Source of fund
• Section: 143(3); 14A; 133(6); 68

Judgement Text

MOIRA STEEL LTD ITA NO.893/IND/2016 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HON'BLE KUL BHARAT, JUDICIAL MEMBER AND HON'BLE MANISH BORAD, ACCOUNTANT MEMBER ITA NO.893/IND/2016 ASSESSMENT YEAR 2007-08 REVENUE BY SHRI K.G. GOEL , SR.DR ASSESSEE BY S HRI V.P. RA W KA, CA DATE OF HEARING 1 0 .04 . 201 9 DATE OF PRONOUNCEMENT 14 .0 5 . 201 9 O R D E R PER MANISH BORAD, AM. THE ABOVE CAPTIONED APPEAL IS FILED AT THE INSTANCE OF ASSESSEE PERTAINING TO ASSESSMENT YEAR 2007-08 AND IS DIRECT ED AGAINST THE ORDERS OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-I (IN S HORT LD.CIT(A)], INDORE DATED 25.05.2016 WHICH IS ARISING OUT OF TH E ORDER U/S 143(3) OF THE INCOME TAX ACT 1961(IN SHORT THE ACT) DATED 0 9.12.2009 FRAMED BY DCIT, CIRCLE-1(1), INDORE. M/ S. MOIRA STEEL LTD, 103, LAXMI TOWER, 576, M.G. ROAD, INDORE VS. D CIT - 1(1) , INDORE ( APPELLANT ) (RESPONDENT ) PAN A ABCM2051K MOIRA STEEL LTD ITA NO.893/IND/2016 2 2. ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL; ASSESSMENT YEAR 2000-01 1. THAT THE LEARNED CIT(A) ERRED IN LAW AND FACTS OF T HE CASE AND CONFIRMED THE ADDITION MADE BY ASSESSING OFFICER AN ACCOUNT OF UN EXPLAINED SHARE APPLICATION MONEY. THE ADDITION MADE AND CONFIRMED BY CIT IS WRONG AND ILLEGAL ON THE FACTS OF THE CASES. 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER AND/OR AME ND ANY OF THE GROUND AT OR BEFORE HEARING. 3. BRIEF FACTS OF THE CASE AS CULLED OUT FROM THE RECO RDS ARE THAT THE ASSESSEE IS A LIMITED COMPANY ENGAGED IN TRADING AN D MANUFACTURING OF STEEL INGOTS. E-RETURN WAS FILED ON 31.10.2007 DECL ARING NIL INCOME AFTER CLAIMING SET OF CARRIED FORWARD LOSSES. CASE SELECT ED FOR SCRUTINY ASSESSMENT FOLLOWED BY SERVING OF NOTICES U/S 143(2 ) AND 142(1)(II) OF THE ACT. LD. A.O NOTICED THAT DURING THE YEAR ASSESSEE RECEIVED SHARE APPLICATION MONEY OF RS.50,00,000/- FROM TWO COMPAN IES NAMELY ROLLED GOLD INDUSTRIES LTD (RS. 20,00,000/-) AND BPO FINA NCE & INVESTMENTS PVT. LTD (RS.30,00,000/-). ASSESSEE WAS ASKED TO F URNISH NECESSARY DOCUMENTS TO PROVE THE IDENTITY, GENUINENESS AND CR EDITWORTHINESS OF THE CASH CREDITORS. SUBMISSIONS WERE MADE BY THE ASSESS EE ALONG WITH THE DETAILS BUT IT COULD NOT FIND FAVOUR FROM THE LD. A O AS HE WAS OF THE VIEW MOIRA STEEL LTD ITA NO.893/IND/2016 3 THAT THE GENUINENESS AND CREDITWORTHINESS OF BOTH T HE SHARE APPLICANTS ARE NOT PROVED AS THEY HAVE MEAGER FIXED ASSETS, NO REGULAR BUSINESS AND TRANSACTIONS IN THE BANK STATEMENT REFLECTS THAT MA XIMUM INFLOW AND OUTFLOW ARE OF AMOUNTS WHICH HAVE NO NEXUS WITH TH E TURNOVER OF THE COMPANIES. IN VIEW OF THESE OBSERVATIONS ADDITION U/S 68 OF THE ACT WAS MADE AT RS.50,00,000/- AND DISALLOWANCE WAS ALSO MA DE U/S 14A OF THE ACT AT RS.1,66,845/-. INCOME ASSESSED AT RS. NIL A FTER ALLOWING SET OFF OF BROUGHT FORWARD BUSINESS LOSS TO THE EXTENT OF RS. 1,35, 22,601/-. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE LD. CIT( A) AND PARTLY SUCCEEDED AS THE DISALLOWANCE U/S 14A WAS DELETED W HEREAS ADDITION MADE U/S 68 OF THE ACT FOR UNEXPLAINED SHARE APPLIC ATION MONEY AT RS.50,00,000/- CONFIRMED. 4. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL R AISING SOLE ISSUE OF ADDITION OF RS.50,00,000/- MADE U/S 68 OF THE AC T FOR UNEXPLAINED SHARE APPLICATION MONEY RECEIVED FROM TWO COMPANIES . 5. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT NECESSA RY DETAILS IN THE FORM OF BALANCE SHEET, SHARE APPLICATION FORM, BOAR D RESOLUTION, BANK STATEMENT, PAN NUMBER HAVE BEEN FILED IN THE CASE O F ROLLED GOLD INDUSTRIES LTD. IN THE CASE OF BPO FINANCE & INVES TMENT PVT. LTD, INCOME MOIRA STEEL LTD ITA NO.893/IND/2016 4 TAX RETURNS, SHARE APPLICATION FORMS, BOARD RESOLUT ION, REGISTRATION CERTIFICATE AS NBFC, BANK STATEMENT AND BALANCE SH EET HAVE BEEN FILED. THESE DOCUMENTS ARE SUFFICIENT ENOUGH TO PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE CASH CREDITORS AND THER EFORE NO ADDITION WAS CALLED FOR U/S 68 OF THE ACT. LD. COUNSEL FOR THE ASSESSEE FURTHER REFERRED TO THE FOLLOWING WRITTEN SUBMISSIONS; THE ASSESSEE COMPANY HAD RECEIVED SHARE APPLICATIO N MONEY AT RS. 30 LACS AND RS. 20 LACS RESPECTIVELY WAS RECEIVED FROM ROLL ED GOLD INDUSTRIES LTD & BPO FINANCE & INVESTMENTS PVT. LTD. IN ORDER TO SATISFY THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THESE SHARE APPLICANTS, VARIOUS DETAILS AND DOCUMENTS WERE SUBMITTED AS MENTIONED ABOVE. THE SAID DOCUMENTS WE RE OVERLOOKED BY THE AO AND HE PASSED THE ASSESSMENT ORDER WITHOUT EVEN COM MENTING ON THE DOCUMENTS SUBMITTED BY ASSESSEE. AND FURTHER LD. CIT(A) ALSO ERRED IN FACTS OF THE CASE BY NOT PROPERLY LOOKING INTO THE DETAILS GIVEN BY ASSE SSEE AND COMMENTING ON THE SAME. IT MAY KINDLY BE APPRECIATED THAT THE ASSESSEE VERY WELL PROVED THE IDENTITY OF THE ASSESSEE BY SUBMITTING THEIR PAN AND INCOME TAX RETURNS. THEIR GENUINENESS AND CREDITWORTHINESS WERE ALSO BEEN ESTABLISHED THR OUGH THE BANK ACCOUNTS, BOARD RESOLUTIONS, SHARE APPLICATION FORMS, AUDITED BALANCE SHEETS, ETC. IN CASE OF ROLLED GOLD INDUSTRIES LTD., LD. AO OBSE RVED THAT THE DIRECTORS OF THE COMPANIES DID NOT APPEARED PERSONALLY ON ISSUE OF S UMMONS. IN THIS REGARDS, IT IS SUBMITTED THAT THOUGH THEY HAVE NOT APPEARED PERSON ALLY BUT ALL THE DOCUMENTS REQUIRED BY THEM WERE DULY FURNISHED FROM TIME TO T IME WITH THE AO. THEY HAVE DULY FILED THEIR REPLIES ALONG WITH ITRS AND FINAL ACCOUNTS WHICH ITSELF PROVES THEIR OWN IDENTITY AND THE IDENTITY OF THE COMPANY AS WEL L OF WHICH THEY ARE THE MOIRA STEEL LTD ITA NO.893/IND/2016 5 DIRECTORS. ALSO THE IDENTITY OF SHARE APPLICANTS AND ITS DIREC TORS WAS NO WHERE QUESTIONED BY THE LD. AO AND LD. CIT(A). THIS MEANS THAT BOTH OF THEM RELIED ON THE DOCUMENTS GIVEN BY ASSESSEE IN THIS REGARDS, BUT NO NE OF THEM COMMENTED ON THE SAME IN THEIR FINDINGS. ANOTHER ISSUE CONSIDERED BY THE AO WAS NON SERVING OF NOTICE ULS 133(6) TO THE COMPANY BPO FINANCE & INVESTMENTS PVT. LTD. THE ISSUE HERE WAS RELATED TO THE CHANGE IN ADDRESS OF THE SAID COMPANY. NEW ADDRESS OF THE COMPANY WAS DULY CONVEYED TO THE AO BY ASSESSEE THROUGH A LETTER DAT ED 26.10.2009 COPY OF WHICH IS ENCLOSED HEREWITH. YOUR HONOR MAY APPRECIATE THAT DESPITE OF UPDATING ASSESSING OFFICER WITH THE NEW ADDRESS OF BPO FINANCE & INVESTMENTS PVT. LTD., HE DID NOT CONSIDERED THE SAME AND NOT PANICKED TO REISSUE THE NOTICES AT NEW ADDRESS AND ENQUIRE THEN. THE LD. CIT(A) ALSO ERRED IN THE FACTS OF THE CASE BY NOT LOOKING INTO THIS MATTER AND NOT OBSERVING THE LACK IN THE PROCEDURES FOLLOW ED BY LD. AO. THE ASSESSEE THEREFORE MADE AVAILABLE ALL THE DETAI LS AND DOCUMENTS TO THE SATISFACTION OF AO AND LD. CIT(A) REGARDING THE IDE NTITY, GENUINENESS AND CREDITWORTHINESS OF THE SHARE APPLICANTS. THE LD. A O ALMOST AT EVERY STAGE FAILED TO POINT OUT WHETHER ASSESSEE LACKED IN REPRODUCING HIM WITH ANY EXPLANATION OR DOCUMENT. FROM THE DOCUMENTS RELATED TO THE IDENTIT Y OF THE COMPANIES AND THEIR SHARE HOLDERS; AND GENUINENESS AND CREDITWORTHINESS OF THE SAME, ALL DETAILS WERE MADE AVAILABLE TO TH~ LD. AO. BUT THE FACTUAL ASPECT HAS BEEN TOTALLY IGNORED BY THE LD. AO AND LD. CIT(A) AS NEITHER OF THEM COMMENTED ON THESE DOCUMENTS OR POINTED OUT WHETHER THERE WAS ANY FAIL URE ON THE PART OF ASSESSEE TO REPRODUCE ANYTHING. THUS THE ONUS HAS BEEN DULY DISCHARGED BY THE ASSES SEE BY PROVING WITH THE BASIC CRITERIA OF IDENTITY, GENUINENESS AND CREDITW ORTHINESS. IN THIS REGARD, MOIRA STEEL LTD ITA NO.893/IND/2016 6 REFERENCE IS INVITED TO CASE OF COMMISSIONER OF INC OME TAX VS STL EXTRUSION (P) LTD. (2011)333 ITR 0269 ( HIGH COURT OF MADHYA PRAD ESH : INDORE BENCH) EXTRACTS OF WHICH ARE REPRODUCED HEREIN BELOW:- REFERENCE IS FURTHER INVITED TO HONBLE MADHYA PRAD ESH HIGH COURT DECISION IN THE OF COMMISSIONER OF INCOME TAX VS PEOPLES GENERAL HO SPITAL LTD., (2013) 356ITR 0065 RELIANCE IS BEING PLACED ON VARIOUS JUDGMENTS:- 1. CIT VS ANTARCTICA INVESTMENT (P) LTD. (HIGH COUR T OF DELHI) (2003) 262 ) ITR 0493 2. CIT VS SAMIR BIO-TECH (P) LTD. (HIGH COURT OF DE LHI) (2010) 325 ITR 0294 3. CIT VS GANGOUR INVESTMENT LTD. (HIGH COURT OF DE LHI) (2011) 335 ITR 0359 4. BARKHA SYNTHETICS LTD. VS ACIT (HIGH COURT OF RA JASTHAN) (2006) 283 ITR 0377 5. CIT VS DOLPHIN CAN PACK LTD. (HIGH COURT OF DEL HI) (2006) 283 ITR 0190 6. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE SUBMITTE D THAT THE FINANCIAL STATEMENTS OF BOTH THE CASH CREDITORS SHO WS THAT THEY ARE NOT INTO ANY REGULAR BUSINESS BUT ARE ACCOMMODATION PRO VIDERS AND THE GENUINENESS OF THE ALLEGED TRANSACTIONS AND CREDITW ORTHINESS OF THE ALLEGED CASH CREDITORS ARE NOT PROVED. DETAILED IN VESTIGATION HAVE BEEN MADE BY THE LD. A.O. THE ISSUE RAISED IN THIS APPE AL IS SQUARELY COVERED AGAINST THE ASSESSEE BY THE LATEST JUDGMENT OF HON 'BLE SUPREME COURT OF INDIA CIVIL APPEAL NO. SLP 29855 OF 2018 DATED 05.0 3.2019 IN THE CASE OF MOIRA STEEL LTD ITA NO.893/IND/2016 7 PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL)-1 V/ S NRA IRON & STEEL PVT. LTD. 7. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE R ECORDS PLACED BEFORE US. THE ASSESSEES SOLE GRIEVANCE IS AGAINS T THE ORDER OF LD. RS.(A) CONFIRMING THE ADDITION FOR UNEXPLAINED SHARE APPLI CATION MONEY MADE U/S 68 OF THE ACT AT RS.50,00,000/- RECEIVED FROM F OLLOWING TWO COMPANIES; (I) ROLLED GOLD INDUSTRIES LTD RS. 20 LAKHS (II) BPO FINANCE & INVESTMENTS PVT. LTD RS.30 LAKHS 8. LD. COUNSEL FOR THE ASSESSEE HAS REFERRED TO VARIOU S DOCUMENTS INCLUDING AUDITED BALANCE SHEET, PAN NUMBER, I.T. R ETURNS, FINANCIAL AND BANK STATEMENTS IN ORDER TO PROVE THE IDENTITY, GEN UINENESS AND CREDITWORTHINESS OF THE TRANSACTION WITH THE ALLEGE D CASH CREDITORS. LD. A.O HOWEVER WAS NOT SATISFIED WITH THESE DOCUMENTS BEING IN SUFFICIENT TO PROVE THE GENUINENESS AND CREDITWORTHINESS OF THE T RANSACTION OF ALLEGED SHARE APPLICATION MONEY ON ACCOUNT OF FOLLOWING OBS ERVATIONS OF FACTS; IN THE ASSESSMENT ORDER THE AO HAS GIVEN FOLLOWING FACTS ABOUT THE SHARE APPLICATION MONEY RECEIVED FROM THESE TWO CONCERNS. MOIRA STEEL LTD ITA NO.893/IND/2016 8 THE ASSESSEE'S BALANCE SHEET REFLECTS RECEIPT OF SH ARE APPLICATION MONEY AMOUNTING TO RS. 50,00,000/- FROM TWO PERSONS VIZ. ROLLED GOLD INDUSTRIES LIMITED, INDORE AND BPO FINANCE AND INVESTMENT PVT. LTD., KOLKATA. IT WAS ASKED TO EXPLAIN THE GENUINENESS OF THE SUBSCRIPTION AS A LSO THE IDENTITY AND CREDITWORTHINESS OF THE. SUBSCRIBERS. IN RESPONSE, THE COPIES OF BALANCE SHEET, BOARD RESOLUTION, APPLICATION FORM AND BANK STATEME NTS WERE FILED. ON PERUSAL OF THE ABOVE DOCUMENTS, FOLLOWING OBSERVATIONS ARE MAD E: ROLLED GOLD INDUSTRIES. INDORE (I) IT HAS FIXED ASSETS WORTH RS. 55,000/- ONLY. (II) ENTIRE CAPITAL IS INVESTED IN SHARES AND ADVANCES A GAINST CAPITAL ASSETS. (III) NO PROFIT AND LOSS ACCOUNT HAS BEEN PRODUCED. IT AP PEARS THAT THE PROFIT AND LOSS ACCOUNT HAS NOT BEEN PREPARED. (IV) COPY OF ACCOUNT OPENING FORM WAS REQUISITIONED FROM THE BANK IN WHICH THIS COMPANY MAINTAINS ACCOUNT. IT REFLECTS THAT NAMES O F THE DIRECTORS AS SHRI SUNIL CHOUDHARY AND SHRI MAHENDRA JAISWAL. SUMMONS U/S 13 I WERE ISSUED TO THE ABOVE PERSONS. SHRI .SUNIL CHOUDHARY HAS REQUESTED FOR EXEMPTION FROM PERSONAL APPEARANCE FOR THE REASON THAT HE WAS NOT A DIRECTO R. HE HAS FILED A COPY OF HIS RETURN 'OF INCOME ONLY. SHRI MAHENDRA JAISWAL HAS N OT RESPONDED TO THE SUMMONS. (V) THE COMPANY HAS NO PREMISES OF ITS OWN OR LEAS E HOLD WHICH IS APPARENT FROM THE FACT THAT NEITHER RENT HAS BEEN DEBITED 10 THE PROFIT AND LOSS ACCOUNT NOR ANY ASSET OF THIS NATURE FIGURES IN THE BALANCE SHEET. (VI) THE BANK STATEMENT REFLECTS THAT MAXIMUM CREDI TS IN THE SAID ACCOUNTS ARE BY WAY OF TRANSFERS FROM FEW ACCOUNT NUMBERS FROM WHIC H NATURE OF TRANSACTION CAN MOIRA STEEL LTD ITA NO.893/IND/2016 9 NOT BE ASCERTAINED. (VII) THE NAMES REFLECTED IN THE REPLY AS DIRECTORS OF TH E COMPANY ARE SHOWN AS SHRI SUDIP NEGI & SHRI NITIN JOSHI. SUMMONSES WERE ISSUED TO THE ABOVE PERSONS. SHRI NITIN JOSHI SENT A REPLY ALONGWITH HIS FINAL A CCOUNTS IN RESPECT OF HIS BUSINESS MIS PARSHWANATH . GARMENTS. SURPRISINGLY, THE FINAL ACCOUNTS DO NOT INDICATE ANY INVESTMENT OR ANY EARNING FROM THE COM PANY. HE AVOIDED APPEARING IN PERSON DESPITE SECOND NOTICE TO HIM. (VIII) SHRI SUDIP NEGI ALSO FILED A REPLY WITH FIN AL ACCOUNTS. THESE FINAL ACCOUNTS ALSO DO NOT SHOW ANY EARNING FROM THE COMPANY OR IN VESTMENT THEREIN. HE ALSO REQUESTED FOR EXEMPTION FROM PERSONAL APPEARANCE. (IX) THE ASSESSEE WAS ASKED TO PRODUCE PRINCIPAL OF FICERS OF THE SUBSCRIBING COMPANY BUT IT ALSO FAILED TO DO SO. ABOVE PICTURE CLEARLY SHOWS THAT THE COMPANY HAS PROVIDED ACCOMMODATION ENTRY TO THE ASSESSEE CO MPANY. IN FACT, IT IS A PAPER COMPANY ONLY, ITS DIRECTORS ARE NOT IN THE FINANCIA L POSITION TO INVEST SUBSTANTIAL MONEY RATHER TO SAY EVEN MINIMUM SUBSCRIPTION IN TH E COMPANY. NO REMUNERATION HAS BEEN RECEIVED BY THEM, OBVIOUSLY, THEY ARE NAME LENDERS ONLY. IN VIEW OF THE ABOVE, THE SUBSCRIPTION. AMOUNTING T O RS.30,00,000/- IS NOT ACCEPTABLE AS GENUINE. THE ASSESSEE HAS, IN/ACT, IN TRODUCED THIS AMOUNT FROM OUT OF ITS INCOME FROM UNDISCLOSED SOURCES THROUGH THE CONDUIT OF M/S ROLLED GOLD INDUSTRIES LTD. ACCORDINGLY IT IS ASSESSED U/S 68 OF THE INCOME TAX ACT. M/S B.P.O. FINANCE INVESTMENT P. LTD. KOLKATTA, I) NOTICE U/S 133(6) ISSUED TO THIS COMPANY HAS BEEN R ECEIVED BACK UN SERVED WITH THE POSTAL REMARK 'NOT KNOWN'. II) COPY OF RETURN OF INCOME WAS FILED BY THE ASSES SEE IN WHICH ADDRESS OF M/S B.P.O. FINANCE & INVESTMENT P. LTD. HAS BEEN GIVEN AS 'CHAMBER 304 N AIWALA HAVING PIN 110005 WHICH APPEARS TO BE SOME LOCALITY OF NE,1/ DELHI, MOIRA STEEL LTD ITA NO.893/IND/2016 10 III) THE BANK ACCOUNT OF COMPANY REFLECTS TRANSFER IN & TRANSFER OUT OF FUNDS WITH THE RESULT THAT ONLY ON FEW OCCASIONS THE BALA NCE CROSSED THE FIGURE OF RS 1,00, 000/-. IV) THE COMPANY HAS NO FIXED ASSETS. V) IT NEITHER HAS LEASED ACCOMMODATION NOR FREE HOL D. THE PROFIT & LOSS ACCOUNT OF THE COMPANY SHOWS NET LOSS OF RS. 75,4801- WHICH HA PPENS TO BE ON ACCOUNT OF ADMINISTRATIVE EXPENSES. NO WORKING PROFIT OR LOSS IS INDICATED. THE CAPITAL OF THE COMPANY IS RSL,99,96,60{)1- AND IT HAS SHARE PREMIU M RESERVE (RS,125,38,56, 600/- VI) THE ABOVE RESERVE AND CAPITAL HAS BEEN UTILIZE D TO THE MAXIMUM EXTENT IN THE SUBSCRIPTION OF SHARES VARIOUS COMPANIES WHOSE NAMES HAVE 170T BEEN GIVEN. VII) ABOVE PICTURE CLEARLY SHOWS THAT IT IS ONLY NA ME LENDING COMPANY. IT HAS NOT EARNED EVEN A SINGLE PENNY IN SHAPE OF DIVIDEND. NO PRUDENT BUSINESSMAN WOULD INVEST MORE THAN RS. 27 CRORE IN THE COMPANIES FROM WHICH NO RETURN IS EXPE CTED. IN VIEW OF FORGOING PARAS, IT IS CLEAR THAT THE AS SESSEE HAS INTRODUCED A SUM OF RS 20 LAKHS IN THE NAME OF ABOVE COMPANY AS SHARE APPLICA TION MONEY, FROM OUT OF ITS INCOME FROM UNDISCLOSED SOURCES. HENCE, THE SAM E IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE U/S 68. ' 9. WHEN THE ISSUE CAME UP BEFORE LD. CIT(A) HE AFTER EXAMINING THE RECORDS CONFIRMED THE ACTION OF THE LD. A.O PLACING RELIANCE ON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. NAVODAYA CASTLES PVT. LTD ITA NO.320/2012 GIVING A FINDING THAT THE MOIRA STEEL LTD ITA NO.893/IND/2016 11 CREDITWORTHINESS OF THE SHARE APPLICANTS WAS NOT P ROVED BY THE APPELLANT. THE SHARE APPLICATIONS WERE PRIVATE PLACEMENT, HENC E THE APPLICANTS HAD FULL KNOWLEDGE ABOUT THE SHARE APPLICANTS AND WAS D EFINITELY IN A POSITION TO PRODUCE THE PRINCIPLE OFFICERS OF THE COMPANIES WHICH HE FAILED TO DO SO. BY NOT DOING SO THE APPLICANT FAILED TO DISCHAR GE ITS ONUS U/S 68 OF THE ACT. 10. LD. COUNSEL FOR THE ASSESSEE HAS REFERRED AND REL IED ON VARIOUS JUDGMENTS BUT THEY WILL NOT FIND FAVOUR TO THE ASSE SSEE AS RECENTLY THE HONBLE APEX COURT IN THE CASE OF PRINCIPAL COMMISS IONER OF INCOME TAX (CENTRAL)-1 V/S NRA IRON & STEEL PVT. LTD ADJUDICA TING THE SIMILAR ISSUE DECIDING IN FAVOUR OF THE REVENUE OBSERVING AS FOLL OWS; 11. THE PRINCIPLES WHICH EMERGE WHERE SUMS OF MONEY ARE CREDITED AS SHARE CAPITAL/PREMIUM ARE: I. THE ASSESSEE IS UNDER A LEGAL OBLIGATION TO PROV E THE GENUINENESS OF THE TRANSACTION, THE IDENTITY OF THE CREDITORS, AND CREDIT-WORTHINESS OF THE INVESTORS WHO SHOULD HAVE THE FINANCIAL CAPACITY TO MAKE THE INVESTMENT IN QUESTION, TO THE SATISFACTION OF THE AO, SO AS TO DISCHARGE THE PRIMARY ONUS. II. THE ASSESSING OFFICER IS DUTY BOUND TO INVESTIG ATE THE CREDIT- WORTHINESS OF THE CREDITOR/SUBSCRIBER, VERIFY THE I DENTITY OF THE SUBSCRIBERS, AND ASCERTAIN WHETHER THE TRANSACTION IS GENUINE, OR MOIRA STEEL LTD ITA NO.893/IND/2016 12 THESE ARE BOGUS ENTRIES OF NAME-LENDERS. III. IF THE ENQUIRIES AND INVESTIGATIONS REVEAL THA T THE IDENTITY OF THE CREDITORS TO BE DUBIOUS OR DOUBTFUL, OR LACK CR EDIT-WORTHINESS, THEN THE GENUINENESS OF THE TRANSACTION WOULD NOT B E ESTABLISHED. IN SUCH A CASE, THE ASSESSEE WOULD NOT HAVE DISCHAR GED THE PRIMARY ONUS CONTEMPLATED BY SECTION 68 OF THE ACT. 12. IN THE PRESENT CASE, THE A.O. HAD CONDUCTED DETAILE D ENQUIRY WHICH REVEALED THAT: I. THERE WAS NO MATERIAL ON RECORD TO PROVE, OR EVEN R EMOTELY SUGGEST, THAT THE SHARE APPLICATION MONEY WAS RECEI VED FROM INDEPENDENT LEGAL ENTITIES. THE SURVEY REVEALE D THAT SOME OF THE INVESTOR COMPANIES WERE NON-EXISTENT, A ND HAD NO OFFICE AT THE ADDRESS MENTIONED BY THE ASSESSEE. FOR EXAMPLE: THE COMPANIES HEMA TRADING CO. PVT. LTD. AND ETERNI TY MULTI TRADE PVT. LTD. AT MUMBAI, WERE FOUND TO BE NON-EXI STENT AT THE ADDRESS GIVEN, AND THE PREMISES WAS OWNED BY SO ME OTHER PERSON. A. THE COMPANIES AT KOLKATTA DID NOT APPEAR BEFORE TH E A.A., NOR DID THEY PRODUCE THEIR BANK STATEMENTS TO SUBST ANTIATE THE SOURCE OF THE FUNDS FROM WHICH THE ALLEGED INVE STMENTS WERE MADE. B. THE TWO COMPANIES AT GUWAHATI VIZ. ISPAT SHEET LTD. AND NOVELTY TRADERS LTD., WERE FOUND TO BE NONEXISTENT AT THE ADDRESS PROVIDED. MOIRA STEEL LTD ITA NO.893/IND/2016 13 THE GENUINENESS OF THE TRANSACTION WAS FOUND TO BE COMPLETELY DOUBTFUL. II. THE ENQUIRIES REVEALED THAT THE INVESTOR COMPAN IES HAD FILED RETURNS FOR A NEGLIGIBLE TAXABLE INCOME, WHIC H WOULD SHOW THAT THE INVESTORS DID NOT HAVE THE FINANCIAL CAPACITY TO INVEST FUNDS RANGING BETWEEN RS. 90,00,000 TO RS. 95,00,000 IN THE ASSESSMENT YEAR 2009-10, FOR PURCH ASE OF SHARES AT SUCH A HIGH PREMIUM, FOR EXAMPLE: NEHA CASSETES PVT. LTD. - KOLKATTA HAD DISCLOSED A TAXABLE INCOME OF RS. 9,744/- FOR A.Y. 2009-10, BUT HAD PUR CHASED SHARES WORTH RS, 90,00,000 IN THE ASSESSEE COMPANY. SIMILARLY WARNER MULTIMEDIA LTD. - KOLKATTA FILED A NIL RETURN, BUT HAD PURCHASED SHARES WORTH RS. 95,00,00 0 IN THE ASSESSEE COMPANY - RESPONDENT. ANOTHER EXAMPLE IS OF GANGA BUILDERS LTD. - KOLKATT A WHICH HAD FILED A RETURN FOR RS. 5,850 BUT INVESTED IN SH ARES TO THE TUNE OF RS. 90,00,000 IN THE ASSESSEE COMPANY - RESPONDENT, ETC. III. THERE WAS NO EXPLANATION WHATSOEVER OFFERED AS TO WHY THE INVESTOR COMPANIES HAD APPLIED FOR SHARES OF TH E ASSESSEE COMPANY AT A HIGH PREMIUM OF RS. 190 PER S HARE, EVEN THOUGH THE FACE VALUE OF THE SHARE WAS RS. 10/ - PER SHARE. MOIRA STEEL LTD ITA NO.893/IND/2016 14 IV. FURTHERMORE, NONE OF THE SO-CALLED INVESTOR COM PANIES ESTABLISHED THE SOURCE OF FUNDS FROM WHICH THE HIGH SHARE PREMIUM WAS INVESTED. V. THE MERE MENTION OF THE INCOME TAX FILE NUMBER OF A N INVESTOR WAS NOT SUFFICIENT TO DISCHARGE THE ONUS UNDER SECT ION 68 OF THE ACT. 13. THE LOWER APPELLATE AUTHORITIES APPEAR TO HAVE IGNORED THE INVESTIGATIONS CARRIED OUT BY HIS OFFICE. THE AUTHO RITIES BELOW HAVE ERRONEOUSLY HELD THAT MERELY BECAUSE THE RESPO NDENT COMPANY - ASSESSEE HAD FILED ALL THE PRIMARY EVIDEN CE, THE ONUS ON THE ASSESSEE STOOD DISCHARGED. THE LOWER APPELLATE AUTHORITIES FAILED TO APPRECIAT E THAT THE INVESTOR COMPANIES WHICH HAD FILED INCOME TAX RETUR NS WITH A MEAGRE OR NIL INCOME HAD TO EXPLAIN HOW THEY HAD IN VESTED SUCH HUGE SUMS OF MONEY IN THE ASSESSE COMPANY - RESPOND ENT. CLEARLY THE ONUS TO ESTABLISH THE CREDIT WORTHINESS OF THE INVESTOR COMPANIES WAS NOT DISCHARGED. THE ENTIRE TRANSACTIO N SEEMED BOGUS, AND LACKED CREDIBILITY. THE COURT/AUTHORITIES BELOW DID NOT EVEN ADVERT TO THE FIELD ENQUIRY CONDUCTED BY THE AO WHICH REVEALED THAT IN SEVERAL CASES THE INVESTOR COMPANIES WERE FOUND TO BE NON-E XISTENT, AND THE ONUS TO ESTABLISH THE IDENTITY OF THE INVESTOR COMPANIES, WAS NOT DISCHARGED BY THE ASSESSEE. 14. THE PRACTICE OF CONVERSION OF UN-ACCOUNTED MONE Y THROUGH THE CLOAK OF SHARE CAPITAL/PREMIUM MUST BE SUBJECTED TO CAREFUL SCRUTINY. THIS WOULD BE PARTICULARLY SO IN THE CASE OF PRIVATE PLACEMENT OF SHARES, WHERE A HIGHER ONUS IS REQUIRE D TO BE MOIRA STEEL LTD ITA NO.893/IND/2016 15 PLACED ON THE ASSESSEE SINCE THE INFORMATION IS WIT HIN THE PERSONAL KNOWLEDGE OF THE ASSESSEE. THE ASSESSEE IS UNDER A LEGAL OBLIGATION TO PROVE THE RECEIPT OF SHARE CAPI TAL/PREMIUM TO THE SATISFACTION OF THE AO, FAILURE OF WHICH, WOULD JUSTIFY ADDITION OF THE SAID AMOUNT TO THE INCOME OF THE ASSESSEE. 15. ON THE FACTS OF THE PRESENT CASE, CLEARLY THE A SSESSEE COMPANY - RESPONDENT FAILED TO DISCHARGE THE ONUS R EQUIRED UNDER SECTION 68 OF THE ACT, THE ASSESSING OFFICER WAS JUSTIFIED IN ADDING BACK THE AMOUNTS TO THE ASSESSEE'S INCOME. 16. THE APPEAL FILED BY THE APPELLANT - REVENUE IS ALLOWED. IN THE AFORESAID FACTS AND CIRCUMSTANCES, AND THE LAW LAID DOWN ABOVE, THE JUDGMENT OF THE HIGH COURT, THE I TAT , AND THE ' CIT ARE HEREBY SET-ASIDE. THE ORDER-PASSED BY THE AO IS RES TORED. PENDING APPLICATIONS, IF ANY ARE DISPOSED OF. ORDERED ACCORDINGLY. 11. NOW EXAMINING THE FACTS OF THE INSTANT APPEAL IN TH E LIGHT OF THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF PRINC IPAL COMMISSIONER OF INCOME TAX (CENTRAL)-1 V/S NRA IRON & STEEL PVT. LT D , WE FIND THAT THE FACTS ARE ALMOST SIMILAR SO MUCH SO THAT THE SHARE APPLICATION WAS RECEIVED FROM TWO COMPANIES BASED AT INDORE AND KOL KATA. APART FROM FURNISHING THE FINANCIAL STATEMENT, BANK STATEMENTS AND INCOME TAX RETURNS ASSESSEE COULD NOT PRODUCE ANY OF THE PRINC IPAL OFFICER OF THE COMPANY. DETAILED INVESTIGATION WAS CARRIED OUT BY LD. ASSESSING OFFICER MOIRA STEEL LTD ITA NO.893/IND/2016 16 GIVING NO POSITIVE RESULTS FAVOURING ASSESSEE. A PE RUSAL OF THE FINANCIAL STATEMENT SHOWS THAT IN THE CASE OF BPO FINANCE & I NVESTMENTS PVT. LTD THERE IS NO TURNOVER DURING THE YEAR. PETTY EXPENSE S OF RS.57,531/- WERE INCURRED AGAINST NIL REVENUE AND NET LOSS OF RS.57, 531/- WAS CARRY FORWARDED. AS AGAINST THIS PICTURE OF PROFIT & LOS S ACCOUNT HAVING NIL TURNOVER AND LOSS OF RS.57,531/- THERE STANDS RESER VE AND SURPLUS OF RS. 125.38 CRORES ON THE LIABILITY SIDE. INVESTMENT IN OTHER COMPANIES IS AT RS.127.31 CRORES ON THE ASSET SIDE. BANK TRANSACTIO NS IN BPO FINANCE & INVESTMENT PVT. LTD PLACED AT PAGE 10 & 11 SHOWS TH AT HUGE INFLOW AND OUTFLOW OF THE HUGE AMOUNTS APPEARING ROUND OF THE YEAR BUT HAVING NO NEXUS WITH THE REGULAR BUSINESS OF THE COMPANY FOR WHICH IT IS INCORPORATED. 12. SIMILAR IN THE CASE OF ROLLED GOLD INDUSTRIES LTD THERE IS NO PROFIT & LOSS ACCOUNT PREPARED FOR THE YEAR AS THERE IS NO I NCOME AND REVENUE BUT THERE STANDS SHARE CAPITAL OF RS.99,00,000/- AND SH ARE PREMIUM OF RS.2,96,79,000/- . IN THIS CASE ALSO IN THE BANK S TATEMENT REGULAR TRANSACTIONS OF HUGE AMOUNTS IN WHICH SIMILAR AMOUN T OF DEBIT AND CREDIT ENTRIES APPEARING IN SHORT SPAN AND IT GOES ROUND T HE YEAR BUT AGAIN THERE IS NO NEXUS WITH THE BUSINESS ACTIVITY OF THE COMPANY. THE ABOVE MOIRA STEEL LTD ITA NO.893/IND/2016 17 REFERRED FACTS WHICH ARE SIMILAR TO THOSE OBSERVED BY THE HONBLE APEX COURT IN THE CASE OF PCIT V/S NRA IRON & STEEL PVT. LTD (SUPRA) CLEARLY SHOWS THAT GENUINENESS OF THE TRANSACTIONS OF THE S HARE APPLICATION MONEY OF RS.50,00,000/- HAS NOT PROVED AND ALSO THE CREDITWORTHINESS OF BOTH THE SHARE APPLICANTS NAMELY ROLLED GOLD INDUST RIES AND BPO FINANCE INVESTMENT PVT. LTD HAS NOT PROVED AS THEY HAVE NO REGULAR MEANS TO INVEST IN THE SHARE CAPITAL OF THE ASSESSE E COMPANY. WE THEREFORE RESPECTFULLY FOLLOWING THE JUDGEMENT OF H ONBLE APEX COURT AND IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE AR E INCLINED TO HOLD THAT LD. A.O HAS JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT MAKING THE ADDITION FOR UNEXPLAINED SHARE APPLICATI ON MONEY OF RS.50,00,000/- AS THE ASSESSEE HAS MISERABLY FAILED TO PROVE THE GENUINENESS OF THE TRANSACTION OF RECEIVING SHARE A PPLICATION MONEY AND TO PROVE THE CREDITWORTHINESS OF ALLEGED TWO SHARE APPLICANTS. WE THEREFORE FIND NO REASON TO INTERFERE IN THE FINDIN GS OF LD. CIT(A). ACCORDINGLY GROUND NO.1 RAISED BY THE ASSESSEE IS DISMISSED. 13. GROUND NO.2 RAISED BY THE ASSESSEE IS GENERAL IN N ATURE WHICH NEEDS NO ADJUDICATION. MOIRA STEEL LTD ITA NO.893/IND/2016 18 14. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 14.05.20 19. SD/- SD/- ( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED MAY, 2019 /DEV COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE