ACIT, Circle-1, Burdwan, Burdwan V. M/s. Bardhaman Dharmaraj Paper Mill Pvt. Ltd., Burdwan

ITA 910/KOL/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9955 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-12-2019
• Assessment Year: 2015-2016
• Appeal Filed On: 25-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Unexplained cash credit; Business income; Depreciation; Share purchase agreement; Source of fund; Accommodation entries; Onus to prove; Bogus
• Section: 131; 68; 143(3); 201; 208; 64; 113; 48; 9(1); 9(1); 9(1); 13; 20

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 910 / KOL / 2019 ASSESSMENT YEAR : 2015-16 ACIT, CIRCLE-1 BURDWAN, COURT COMPOUND, KANCHARI ROAD, P.OI.& DIST. PURBA BURDWAN-713101 V/S . M/S BARDHMAN DHARMARAJ PAPER MILL PVT. LTD., VILLAGE-KONERPARA, P.O.KALANABAGRAM, DIST. PURBA BURDWAN-713124 [ PAN NO.AAECB 0141 J ] /APPELLANT .. / RESPONDENT ITA NO.1187 / KOL / 2019 ASSESSMENT YEAR : 2015-16 BARDHAMAN DHARMARAJ PAPER MILLS (P) LTD., C/O SUBASH AGARWAL & ASSOCIATES, ADVOCATES, SIDDHA GIBSON,1, GIBSON LANE, SUITE 213, 2 ND FLOOR,KOLKATA-700069 [ PAN NO.AAECB 0141 J ] V/S . ACIT, CIRCLE-2, AAYAKAR BHAWAN, ANNEXE, COURT COMPOUND, BURDWAN- 713101 /APPELLANT .. / RESPONDENT /BY ASSESSEE SHRI SUBASH AGARWAL, ADVOCATE /BY REVENUE SMT. RANU BISWAS, ADDL.CIT-DR /DATE OF HEARING 17-12-2019 /DATE OF PRONOUNCEMENT 03-01-2020 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- ITA NO.910 & 1187/KOL/2019 A.Y. 2015-16 ACIT CIR-1/2 BWN VS. M/S BARDHAMAN DHARMAR AJ PAPER MILL PVT. LTD. PAGE 2 THE REVENUE AND ASSESSEE HAVE FILED THEIR CROSS-AP PEAL FOR ASSESSMENT YEAR 2015-16 AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-BURDWANS COMMON ORDER DATED 06.02.2019 P ASSED IN CASE NO.138/CIT(A)-BWN/CIR-1/BWN/17-18, INVOLVING PROCEE DINGS U/S 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILE(S) PERUSED. 2. THE REVENUES SOLE SUBSTANTIVE GROUND IN ITS APP EAL IS THAT ALTHOUGH THE CIT(A) HAS RIGHTLY CONFIRMED THE IMPUGNED SEC. 68 A DDITION MADE BY THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER DATED 29. 12.2017, HE HAS ERRED IN HOLDING THE ABOVE SUM AS BUSINESS RECEIPTS ENTITLED TO BE SET OFF AGAINST THE BUSINESS LOSS AMOUNTING TO 750,93,533/-.IT THEREFORE PLEADS THAT SUCH ADDITION AMOUNT OF UNEXPLAINED CASH CREDITS U/S 68 OUGHT NOT HAVE BEEN HELD ELIGIBLE FOR SET OFF OF LOSS UNDER BUSINESS HEAD AS PER HON'BLE KERALA HIGH COURTS JUDGMENT IN COMMISSIONER OF INCOME TAX VS. KERALA SPONGE IRON L TD. (2017) 79 TAXMANN.COM 350 (KER). 3. THE ASSESSEES FORMER GRIEVANCE IN ITS APPEAL IT A NO.1187/KOL/2019 CHALLENGES CORRECTNESS OF BOTH THE LOWER AUTHORITIE S ACTION TREATING ITS SHARE CAPITAL SUM OF 3.25 CRORES AS UNEXPLAINED CASH CREDITS. IT IS IN THIS BACKDROP OF FACTS THAT WE PROCEED TO EXAMINE THIS COMMON ISSUE OF UNEXPLAINED OF ASSESSEES SHARE CAPITAL AM OUNTING TO 3.25 CRORES AS UNEXPLAINED CASH CREDITS. 4. THERE IS NO DISPUTE ABOUT THE IMPUGNED SUM TO HA VE COME FROM THREE PARTIES M/S CELEBRATION VINTRADE PVT. LTD., M/S NIC E COMMOTRADE PVT. LTD., AND M/S SAMRAT RICE MILL PVT. LTD., INVOLVING 21,50 ,000, 7,00,000 & 4,00,000 SHARES SOLD FOR 2,15,00,000/-, 7,00,000/- & 4,00,000/-; RESPECTIVELY. WE ARE TAKEN TO CIT(A)S DETAILED DISCUSSION AFFIRMING ASSESSING OFFICERS ACTION TO THIS EFFECT READING AS UNDER:- 4.2 GROUND OF APPEAL NO. 2 TO 5 : ITA NO.910 & 1187/KOL/2019 A.Y. 2015-16 ACIT CIR-1/2 BWN VS. M/S BARDHAMAN DHARMAR AJ PAPER MILL PVT. LTD. PAGE 3 THESE GROUNDS RELATE TO THE ADDITION MADE BY THE LD . AO TO THE TUNE OF RS.3,25,00,000/- U/S 68 BY TREATING THE SAME AS UNE XPLAINED CASH CREDIT ON ACCOUNT OF ALLEGED NON-GENUINE TRANSACTIONS WITH THE 3 COM PANIES NAMELY, CELEBRATION VINTRADE PVT. LTD., NICE COMMOTRADE PVT. LTD., AND SAMRAT RICE MILL PVT. LTD. I HAVE LOOKED AT THE MERITS OF THE ASSESSEE AFTER P ERUSING THE MATERIAL ON RECORD & STATEMENT OF FACTS IN THE APPEAL. I. M/S CELEBRATION VINTRADE PVT. LTD. 21,50,000 S HARES FOR RS.2,15,00,000/- II. M/S NICE COMMOTRADE PVT. LTD. 7,00,000 SHARES FOR RS.70,00,000/- III. M/S SAMRAT RICE MILL PVT. LTD. -4,00,000 SHARE S FOR RS.40,00,000/- TOTAL: RS.3,25,00,000/- 4.3. THE ASSESSEE HAS CONTESTED ABOVE ADDITIONS/ DI SALLOWANCE MADE IN THE ASSESSMENT ORDER. IN THE CASE OF PEE AAR SECURITIES LTD. VS DCIT ITAT, DELHI' A' BENCH, THE HOU'BLE BENCH HAS HELD THAT ASSESSEE HAD RECEIVED RS 80 LAKH AS SHARE CAPITAL SUBSCRIPTION FROM TWO ENTITIES. THE AO HAD GOOD REASONS TO BELIEVE THAT THESE WERE MERELY ACCOMMODATION ENTRIES AS THE ASSESSEE C OMPANY SIMPLY SUBMITTED THE NAMES AND ADDRESSES OF THE ENTITIES WHO CONTRIBUTED TO SHARE CAPITAL, AND DID NOT FURNISH ANY DETAILS OF SOURCE OF FUNDS RECEIVED. SINCE THE ASSESSEE IS A PRIVATE LIMITED COMPANY WHI CH IS BY LAW, PROHIBITED FROM OFFERING ITS SECURITIES FOR SUBSCRIPTION BY GENERAL PUBLIC, IT IS NOT OPEN TO THE ASSESSEE TO CONTEND THAT IT HAS NO CLUE ABOUT THE IDENTITY O F THE SUBSCRIBERS TO ITS SHARE CAPITAL. ASSESSEE IS NOT ABLE TO PRODUCE THE BRAINS BEHIND T HESE COMPANIES AND THE DOCUMENTS WITH RESPECT TO THEIR FINANCIALS EITHER. AS PER THE DECISION OF THE TRIBUNAL IN THE CASE OF TG GROUP, THESE ENTITIES AS WELL AS OTHER GROUP ENTITIES WERE NEVER INVOLVED IN ANY GENUINE BUSINESS ANYWAY AND WERE ON LY IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES. IT WOULD, THEREFORE, NOT REA LLY APPROPRIATE TO BE SWAYED BY THE DOCUMENTS LIKE PAN CARDS, BOARD RESOLUTIONS PAS SED BY THESE ENTITIES, COPIES OF DISTINCTIVE SHARE CERTIFICATES, COPIES OF LETTERS F ROM THESE TWO ENTITIES CONFIRMING THE FACT OF SHARE SUBSCRIPTIONS AND EXTRACTS FROM THE M INUTES OF MEETING OF THE DIRECTORS. THUS, IT IS IMPOSSIBLE TO COME TO THE CONCLUSION TH AT THESE TRANSACTIONS REPRESENT BONA FIDE INVESTMENT TRANSACTIONS. THERE IS NOTHING TO ESTABLISH GENUINENESS OF THE SH ARE SUBSCRIPTION TRANSACTIONS ON THE FACTS OF THIS CASE. ASSESSEE DOES NOT KNOW ANYTHING ABOUT THE INVESTOR COMPANIES. ONUS OF THE ASSESSEE OF EXPLAINING NATURE AND SOURCE OF CREDIT DOES NOT GET DISCHARGED MERELY BY FILING CONFIRMATORY LETTERS OR DEMONSTRATING THA T THE TRANSACTIONS ARE DONE THROUGH THE BANKING CHANNELS OR EVEN BY FILING THE INCOME-T AX ASSESSMENT PARTICULARS. THEREFORE, ADDITION IN RESPECT OF THE ALLEGED SHARE SUBSCRIPTION RECEIVED FROM THE SAID TWO COMPANIES IS UPHELD. 4.4 IT IS ALSO WORTHWHILE TO REFER TO THE JUDGMENT OF THE HON'BLE HIGH COURT IN THE CASE OF CIT VS. RUBY TRADERS AND EXPORTERS LTD. [ 134 TAXMAN 29 (CAL)] WHEREIN IT WAS HELD THAT IT IS INCUMBENT ON THE ASSESSEE TO PROVE AND ESTABLISH THE IDENTITY OF THE SUBSCRIBERS, THEIR CREDITWORTHINESS AND THE GENUINE NESS OF THE TRANSACTION. ONCE MATERIALS TO PROVE THESE INGREDIENTS ARE PRODUCED, IT IS FOR THE ASSESSING OFFICER TO FIND OUT WHETHER ON THESE MATERIALS. IT IS FOR THE ASSESSING OFFICER TO FIND OUT AS TO WHETHER THESE MATERIALS, THE ASSESSEE AS ABLE TO ES TABLISH THE INGREDIENTS MENTIONED ABOVE. ITA NO.910 & 1187/KOL/2019 A.Y. 2015-16 ACIT CIR-1/2 BWN VS. M/S BARDHAMAN DHARMAR AJ PAPER MILL PVT. LTD. PAGE 4 IT IS SIGNIFICANT TO NOTE THAT THE COMPANY, WHICH I S A PRIVATE LIMITED COMPANY, HAS NO TRACK RECORD OR ASSET BASE IS ASKING FOR ASTRONOMIC ALLY HIGH PREMIUM PER SHARE DEFYING ALL COMMERCIAL AND FINANCIAL PRUDENCE AND L OGIC. THERE WAS NO NOTICEABLE BUSINESS ACTIVITY OR BOOK V ALUE/EARNING PER SHARE WHICH CAN JUSTIFY THE VERY HIGH SHARE PREMIUM. IT IS ALSO OBSERVED THAT WHEN SUMMONS U/S 131 OF TH E INCOME TAX ACT, 1961 WAS ISSUED TO THE DIRECTORS OF THE ASSESSEE COMPANY TO EXAMINE THE BASIS OF PREMIUM AND ALSO WHEN THE ASSESSEE COMPANY WAS REQUESTED TO PRODUCE THE DIRECTORS OF THE INVESTOR COMPANY FOR VERIFYING THEIR IDENTIFY, GENU INENESS OF TRANSACTION AND THEIR CREDITWORTHINESS FOR SUCH INVESTMENTS, NEITHER THE DIRECTORS OF ASSESSEE COMPANY APPEARED NOR THE DIRECTORS OF THE INVESTOR COMPANY APPEARED. THUS, THE FACTS AND CIRCUMSTANCES OF THE CASE SUGGE ST THAT THE ASSESSEE COMPANY HAS FAILED TO CORROBORATE THE CREDITWORTHINESS OF T HE INVESTOR'S DESPITE REASONABLE OPPORTUNITY. 4.5 IN THIS CONTEXT, IT IS RELEVANT TO QUOTE THE JU DGMENT OF LD. ITAT BENCH IN THE CASE OF M/S BISAKHA SALES PVT. LTD. VS CIT -11, KOLKATA IN ITA NO. 1493/K0L/2013 , THE RELEVANT EXCERPT OF WHICH IS REPRODUCED AS UNDER 'A PERUSAL OF THE ORDER OF THE LD. CIT FURTHER SHOW S THAT THERE ARE A NUMBER OF COMPANIES IN THIS REGARD, DOING THE BUSINESS OF MON EY LAUNDERING UNDER THE GUISE OF SHARE CAPITAL INTRODUCTION .... ALLEGEDLY VARIOUS DOCUMENTS IN RESPECT OF SHARE CAPITAL INTRODUCTION ARE ALSO PLACED BEFOR E THE AO .. TAX AVOIDANCE IS AN ACCEPTED PRINCIPLE. ANY PERSON IS ENTITLED TO ADJUST ITS AFFAIRS IN SUCH MANNER AS TO MINIMIZE TAX LIABILITY. HOWEVER, THE M ETHODOLOGY AND ACTS DONE IN SUCH CASES OF CAPITAL FORMATION IS NOT TAX AVOID ANCE. IT IS MORE IN THE NATURE OF TAX EVASION BY MONEY LAUNDERING. THESE TRANSACTI ONS HAVE IN EFFECT THREE LIMBS. THE FIRST LIMB IS THE CREATION OF THE SHELL COMPANIES WITH SUBSTANTIAL SHARE CAPITAL WHICH IS BALANCED WITH INVENTORIES IN THE FORM OF SHARES IN OTHER SHELL COMPANIES. THE SECOND LIMB IS THE TRANSFER OF SUCH SHELL COMPANIES TO PERSONS WHO DESIRE TO USE SUCH SUBSTANTIAL SHARE CA PITAL COMPANIES FOR CONVERTING THEIR UNACCOUNTED MONEY INTO ACCOUNTED F UNDS AND USE SUCH SHELL COMPANIES TO DO LEGITIMATE BUSINESS. THE THIRD LIMB IS WHEN THE SHELL COMPANIES AFTER BEING TAKEN OVER, THE ASSETS IN THE FORM OF INVENTORIES ARE ENCASHED WHEREBY THE UNACCOUNTED MONIES ARE LAUNDER ED AND BROUGHT INTO THE COMPANY FOR CONDUCTING THE LEGITIMATE BUSINESS. ' A PERUSAL OF THE BALANCE SHEET AND PROFIT & LOSS AC COUNT IN THE CASE OF THE ASSESSEE SHOWS THAT THE SHARE APPLICATION MONIES RE CEIVED BY THE ASSESSEE ALONG WITH THE PREMIUM ARE REPRESENTED IN THE BALAN CE SHEET IN THE FORM OF CURRENT ASSETS BEING THE UNQUOTED EQUITY SHARES IN OTHER SUCH COMPANIES. THAT IS THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE IS USED FOR MAKING FURTHER INVESTMENTS IN OTHER SUCH SIMILAR SH ELL COMPANIES FROM WHOM CASH IS TAKEN AND REROUTED THROUGH CHEQUES. THESE S HELL COMPANIES WHICH ARE ACQUIRED BY THE INTERESTED THIRD PARTIES PURCHA SE THESE COMPANIES AT A FRACTIONAL AMOUNT OF THE VALUE OF THE SHARES. THAT MEANS A COMPANY WHOSE SHARE VALUE IS RS.10/-, THE SHARE IS ISSUED AT A PR EMIUM OF RS.490/- TOTAL VALUE OF THE SHARE BECOMES RS.500/-. THIS CONTAINS FIRST PORTION OF THE UNACCOUNTED CASH BROUGHT IN OR CONVERTED THROUGH TH E ACCOMMODATION ENTRY. NOW THIS 500 RUPEES SHARED IS PURCHASED BY THE THIR D PARTY OR THE INTERESTED PERSON IN TAKEN OVER THE COMPANY OF THE PURPOSE OF UTILIZING ITS CAPITAL. IT MAY BE TWO RUPEES OR THREE RUPEES PER SHARE. HERE THE P URCHASE PRICE IS EVEN BELOW THE FACE VALUE OF THE SHARES OR AT THE FACE V ALUE. THE PREMIUM IS IN EFFECT THE BONUS. THE PREMIUM ALREADY INTRODUCED SI TS IN THE LIABILITY SIDE AS A ITA NO.910 & 1187/KOL/2019 A.Y. 2015-16 ACIT CIR-1/2 BWN VS. M/S BARDHAMAN DHARMAR AJ PAPER MILL PVT. LTD. PAGE 5 RESERVE AN ON THE ASSET SIDE AS INVESTMENTS IN OTHE R SHELL COMPANIES. HOW ONCE THE CONTROLLING INTEREST IS TAKEN, THEN THE BA LANCE SHEET HAS TO BE CLEANED. THE BALANCE SHEET WHICH NOW HOLDS IN CURRE NT ASSETS THE UNQUOTED SHARES OF OTHER SHELL COMPANIES AND LOANS AND ADVAN CES GET CLEANED BY AGAIN LIQUIDATING THESE CURRENT ASSETS. NOW THESE C URRENT ASSETS REPRESENTING THE SHARE APPLICATION MONEY OR THE INVENTORIES BEIN G SHARES IN THE UNQUOTED COMPANIES ARE SITTING AT A PREMIUM BECAUSE THESE SH ARES HAVE ALSO BEEN APPLIED FOR AND PURCHASED AT A PREMIUM. HOW THIS MO NEY WAS BROUGHT BACK INTO THE COMPANY HAS NOT BEEN EXAMINED. WHEN THIS H AS COME BACK HAS NOT BEEN EXAMINED AND WHO ARE THE PEOPLE RESPONSIBLE WH EN THESE TRANSACTIONS TOOK PLACE HAS NOT BEEN EXAMINED. HERE THE SECOND R OUND OF LAUNDERING OF UNACCOUNTED FUNDS IS DONE. MUCH LESS BEING EXAMINED THE DETAILS ARE NOT AVAILABLE NOR GIVEN. THIS IS BECAUSE THE INVENTORIE S ARE ALSO SHARES OF SHELL COMPANIES AND NO INVESTOR WORTH HIS SALT WOULD ACQU IRE THE SHARES OF SUCH SHELL COMPANIES AT SUCH PREMIUM. THE QUESTION WOULD ARISE ALSO AS TO WHETHER ANY OF THESE SHELL COMPANIES IN WHICH THE A SSESSEE COMPANY HAS MADE THE INVESTMENT, HAVE ALSO BEEN SOLD OR TRANSFE RRED, IN SUCH A CASE, IT BECOMES MORE INTRICATE. THERE IS NO INFORMATION AS TO WHETHER THERE IS A CLAIM OF CAPITAL LOSS OR THERE IS AN OFFER OF CAPITAL GAI NS IN THE RETURNS OF INCOME OF THE ASSESSEE HOW THESE SHARES MORE SO THE CURRENT A SSETS WERE CLEANED FORM THE BALANCE SHEET. THESE ARE CASES OF CLEAR HU MAN INGENUINITY WITH THE CLEAR AND CONTUMACIOUS INTENTION TO DEFRAUD THE REV ENUE. IT IS NOT THE HANDIWORK OF ONE PERSON ALONE. ONE PERSON HAS CREAT ED THE SHELL ANOTHER HAS FUNDED THE SHELL WITH AN INTENTION TO LAUNDER U NACCOUNTED FUNDS AND AFTER HAVING ACQUIRED THE SHELL HAS USED IT FOR CONVERTIN G ITS FUNDS ALSO. THERE IS NO INFORMATION AS TO WHO ARE THE LATEST BENEFICIARIES OF SUCH SHELL COMPANIES AND FOR WHAT PURPOSE THE COMPANIES ARE BEING USED. THIS IS JUST THE REASON WHY THE PROVISION OF SECTION 56(VIIB) HAS BEEN INTRODUC ED.' AS ANOTHER IMPORTANT ASPECT WHICH SHOULD ALSO BE BO RNE IN MIND IN THIS CASE. THESE SHARES WERE RECEIVED AFTER PAYING HUGE PREMIU M BY THE ALLOTTEES. THESE WERE SUBSEQUENTLY TRANSFERRED AT FACE VALUE O R EVEN AT DISCOUNT. THIS MEANS THAT ON TRANSFER OF SHARES THE ALLOTEE DID NO T RECEIVE ANY PREMIUM. THIS MEANS THAT HUGE AMOUNT WAS RECEIVED AND PAID A S SHARE PREMIUM WITH FULL KNOWLEDGE THAT THERE WILL NO RECOVERY OR THERE IS NO SCOPE OF RECOVERY OF SHARE PREMIUM. THIS WAS DESIGNED FACILITATE THE TRA NSFER OF THESE COMPANIES TO OTHER PERSONS ON PAYMENT OF NOMINAL DISCOUNTED V ALUE OF SHARES. IN OTHER WORDS THE VALUE EMBEDDED IN THE SHARE PREMIUM, WAS MEANT TO BE TRANSFERRED UNDER HAND, AN PRIMA FACIE IT APPEARS T HAT TRANSFER TOOK PLACE UPON PAYMENT OF UNDER HAND MONEY. THIS IS A CLASSIC CASE OF MONEY LAUNDERING AND THE SHARE PREMIUM WAS BEING REVIVED AND PAID TO LAUNDER BACK MONEY. THIS HAPPENS AT THE SECOND LIB I.E., WH EN THE DIRECTORS CHANGE AND COMPANY CHANGES HAND.' FURTHER, THE OBSERVATION OF THE HON'BLE ITAT KOLKAT A, IN THE CASE OF BISHAKHA SALES PVT., ON NON-COMPLIANCE AGAINST SUMMONS U/S 131, MA Y BE REPRODUCED AS UNDER:- ''THIS ALSO CLEARLY SHOWS THE REVISIONARY TACTICS T HAT ARE BEING ADOPTED TO WRIGGLE WAY OUT OF THE CORNER IT HAS PUT ITSELF INT O BY ITS OWN ACTS AND COMMISSIONS. A PECULIARITY IN SUCH CASES THAT IS NO TICED IS THAT SHEAVES OF PAPER DOCUMENTS ARE READILY PRODUCED BUT WHEN A SUM MON IS ISSUED THE RESPONSIBLE PERSONS CONVENIENTLY DISAPPEAR. ONLY TH E ASSESSEE KNOWS THE INTRICACIES OF ITS ACCOUNTS. IT IS FOR THE ASSESSEE TO PROVE ITS M OF SHARE CAPITAL/APPLICATION MONEY INTRODUCTION AND ITS AFFA IRS IN RESPECT OF ITS ACCOUNTS. MERELY DUMPING PAPERS AND DOCUMENTS ON THE TABLE OF THE ASSESSING AUTHORITY DOES NOT IN ANY WAY MEAN COMPLIANCE. THE BURDEN OF PROOF CANNOT ITA NO.910 & 1187/KOL/2019 A.Y. 2015-16 ACIT CIR-1/2 BWN VS. M/S BARDHAMAN DHARMAR AJ PAPER MILL PVT. LTD. PAGE 6 BE SHIFTED ON THE REVENUE BY CART LOADS OF DOCUMENT S. THE DOCUMENTS SUBMITTED MUST BE EXPLAINED. WE DO UNDERSTAND THE P REDICAMENT OF THE ASSESSEE IN SO FAR AS IF ANY RESPONSIBLE PERSON APP EARS THEN HE WOULD HAVE TO ANSWER MANY UNPLEASANT QUESTIONS WHICH COULD LEA D TO THE REOPENING OF ASSESSMENTS IN MULTIPLE ASSESSMENT YEARS AND MULTIP LE ASSESSES. BUT THEN WHAT HAS BEEN CREATED AND KNOTTED UP BY THE ASSESSE E MUST BE ANSWERED AND UNRAVELED ONLY BY THE ASSESSEE AND NONE ELSE WO ULD KNOW THE FACTS BETTER THAN THE ASSESSEE ITSELF.' FURTHER, IT WOULD BE RELEVANT TO REFER AND TO PLACE RELIANCE ON DECISIONS OF THE HON'BLE SUPREME COURT ON THIS ISSUE, WHICH ARE AS UNDER: 4.6 CASH CREDIT (SEC. 68 ) (I) KALE KHAN MOHAMMED HANIF VS. CIT 50 ITR 1 (SC) :- 'WHETHER THE BURDEN OF PROVING THE SOURCE OF THE CA SH CREDITS IS ON THE ASSESSEE?' IT SEEMS TO US THAT THE ANSWER TO THIS QUESTION MUS T BE IN THE AFFIRMATIVE AND THAT IS HOW IT WAS ANSWERED BY THE HIGH COURT. IT I S WELL ESTABLISHED THAT THE ANS. OF PROVING THE SOURCE OF A SUM OF MONEY FOUND TO HAVE BEEN RECEIVED BY THE ASSESSEE IS ON HIM. IF HE DISPUTES LIABILITY FO R TAX, IT IS FOR HIM TO SHOW EITHER THE RECEIPT WAS NOT INCOME OF THAT IF IT WAS , IT WAS EXEMPT FROM TAXATION UNDER THE PRO VISIONS OF THE ACT. IN THE ABSENCE OF SUCH PROOF THE ITO IS ENTITLED TO TREAT IT AS TAXABLE INCOME. (II) SUMATI DAYAL VS CIT 214 ITR 801 (SC) :- AS LAID DOWN BY THIS COURT, APPARENT MUST BE CONSID ERED REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO BELIEVE THAT THE APPARENT IS N OT THE REAL AND THAT THE TAXING AUTHORITIES ARE ENTITLED TO LOOK INTO THE SURROUNDI NG CIRCUMSTANCES TO FIND OUT THE REALITY AND THE MATTER HAS TO BE CONSIDERED BY APPL YING THE TEST OF HUMAN PROBABILITIES. (III) CIT VS DURGA PRASAD MORE 82 ITR 540 (SC) :- 'THE LAW DOES NOT PRESCRIBE ANY QUANTITATIVE TEST T O FIND OUT WHETHER THE ONUS IN A PARTICULAR CASE HAS BEEN DISCHARGED OR NOT. IT ALL DEPENDS ON THE FACTS AND CIRCUMSTANCES OF EACH CASE, IN SOME CASES, THE ONUS MAY BE HEAVY WHEREAS, IN OTHERS, IT MAY BE NOMINAL. THERE IS NOTHING RIGID A BOUT IT.' 4.7 IT IS ALSO WELL SETTLED LAW THAT ONUS OF PROVIN G CREDITS IN ITS BOOK OF ACCOUNTS LIES SQUARELY ON THE ASSESSEE AND SUCH PROOF CONSIST OF PROVING THE IDENTITY OF THE SUBSCRIBER OR CREDITOR, CAPACITY OF SUCH CREDITOR O R SUBSCRIBER TO MAKE PAYMENT AND ALSO TO PROVE THE GENUINENESS OF THE TRANSACTION. I T IS ONLY WHEN THE ASSESSEE DISCHARGES THIS PRIMARY ONUS, THAT ONUS SHIFTS TO T HE DEPARTMENT. MERELY ESTABLISHING THE IDENTITY OF THE CREDITOR IS NE SUFFICIENT. THIS IS THE RATIO IN A LARGE NUMBER OF DECISION HELD BY VARIOUS COURTS IN THE FOLLOWING CA SE INCLUDING SHANKAR INDUSTRIES VS. CIT (1978) 114 ITR 689 (CAL); C. KANT & CO. VS. CIT , (1980) 126 ITR 63 (CAL); PRAKASH TEXTILE AGENCY VS. CIT, (1980) 121 ITR 890 (CAL); ORIENTAL WIRE INDUSTRIES P. LTD. VS. CIT, (1981) 131 ITR 688 (CAL); CIT VS. UNITED COMMERCIAL & INDUSTRIES CO. (P) LTD., (1991) 187 ITR 596, 599 (CAL); M.A. U NNEERIKUTTI VS. CIT, (1992) 198 ITR 147,150 (KER), SPECIAL LEAVE PETITION DISMISSED BY THE SUPREME COURT (1993) 201 ITR (ST.) 23 (SC); CIT VS. PRECISION FINANCE PV T. LTD .. (1994) 208 ITR 465, 470 (CAL). IT IS ALSO REITERATED THAT THE MANNER OF PAY MENT BY THE ACCOUNT PAYEE CHEQUE IS ALSO NOT SACROSANCT AND THIS CANNOT MAKE A BOGUS TR ANSACTION AS GENUINE ONE AS HELD IN [CIT VS. PRECISION FINANCE PVT. LTD., ($) 2 08 ITR 465, 470, 471 (CAL). CF. NIZAM WOOL AGENCY VS. CIT, (1992) 193 ITR 318, 320 (ALL)] ITA NO.910 & 1187/KOL/2019 A.Y. 2015-16 ACIT CIR-1/2 BWN VS. M/S BARDHAMAN DHARMAR AJ PAPER MILL PVT. LTD. PAGE 7 CIT VS. SOPHIA FINANCE LTD. [(1993) 113 CTR (DEL) F B 472 ] A FULL BENCH HELD IN THE CONTEXT OF SECTION 68 OF T HE ACT THAT (I) THE ASSESSEE HAS TO PRIMA FACIE PROVE ' (1) THE IDENTITY OF THE CREDITOR/SUBSCRIBER (2) THE GENUINENESS OF THE TRANSACTION NAMELY WHETHER IT HAS BEEN TRANS MITTED THROUGH BANKING OR THEIR INDISPUTABLE CHANNELS, (3) THE CREDITWORTHINE SS OR FINANCIAL STRENGTH OF THE CREDITOR/SUBSCRIBER ' II) IF THE RELEVANT DETAILS OF THE ADDRESS AND PAN IDENTITY IF THE CREDITOR/SUBSCRIBER ARE FURNISHED TO THE DEPARTMENT ALONG WITH COPIES OF SH AREHOLDERS REGISTER, SHARE APPLICATION FORMS, SHARE TRANSFER REGISTER ETC, IT WOULD CONSTITUTE ACCEPTABLE PROOF OR ACCEPTABLE EXPLANATION BY THE ASSESSEE. III) THE DEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWI NG ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCRIBER FAILS OR NEGLECTS TO RESPON D TO ITS NOTICES. IV) THE ONUS WOULD NOT STAND DISCHARGED IF THE CRED ITOR/SUBSCRIBER DENIES OR REPUDIATES THE TRANSACTION SET UP BY THE ASSESSEE N OR SHOULD THE AO TAKE SUCH REPUDIATION AT FACE VALUE AND CONSTRUE IT AGAINST T HE ASSESSEE. V) THE AO IS DULY BOUND TO INVESTIGATE THE CREDITWO RTHINESS OF THE CREDITOR/SUBSCRIBER, THE GENUINENESS OF THE TRANSACTION AND VERACITY OF THE REPUDIATION. IT WOULD BE RELEVANT TO RELY ON VARIOUS JUDICIAL PR ONOUNCEMENTS WHICH ARE RELEVANT TO THE SUBJECT 1. CIT VS. MAF ACADEMY (V) LTD. 361 ITR 258 WHERE HON'BLE DELHI COURT HELD THAT WHERE ASSESSEE, A PRIVATE LIMITED COMPANY, SOLD ITS SHARES TO UNRELATED PARTIES AT A HUGE PREMIUM A ND THEREUPON WITHIN SHORT PENDING OF TIME THOSE SHARES WERE PURCHASED BACK EVEN AT A LOSS SHARE TRANSACTIONS IN QUESTION WERE TO BE REGARDED AS BOGUS AND THUS, AMO UNT RECEIVED WAS TO BE ADDED AS ASSESSEE'S TAXABLE INCOME UNDER SECTION 68. IT W AS HELD AS FOLLOWS:- THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND IN TH E FACTUAL MATRIX. AND THE ASSESSEE HAS NOT BEEN ABLE TO DISCHARGE THE INITIAL ONUS AND HAS NOT BEEN ABLE TO ESTABLISH THE IDENTITY, CREDITWORTHINESS OF THE SHARE APPLICANTS AND THE GENUINENESS OF THE TRANSACTION. THEREFORE, THE ADDI TIONS MADE BY THE ASSESSING OFFICER WERE JUSTIFIED AND SUSTAINABLE. 2. CIT VS. NIVUN BUILDERS & DEVELOPERS (P) LTD (350 ITR 407) :- WHERE HORI'BLE HIGH COURT HELD THAT WHERE ASSESSEE FAILED TO PROVE IDENTITY AND CAPACITY OF SUBSCRIBER COMPANIES TO PAY SHARE A PPLICATION MONEY, AMOUNT SO RECEIVED WAS LIABLE TO BE TAXED UNDER SEC TION 68. 3. CIT VS. NOVA PROMOTERS & FINLEASE (D) LTD.(342 I TR 169) :- WHEREIN HON'BLE DELHI HIGH COURT HELD THAT AMOUNT R ECEIVED BY ASSESSEE FROM ACCOMMODATION ENTRY PROVIDER IN GARB OF SHARE APPLICATION MONEY, WAS TO BE ADDED TO ITS TAXABLE INCOME UNDER SECTION 68. 4. CIT VS. ULTRA MODERN EXPORTS (D) LTD. (220 TAXMA N 165) :- WHERE HON'BLE DELHI HIGH COURT HELD THAT WHERE IN O RDER TO ASCERTAIN GENUINENESS OF ASSESSEE'S CLAIM RELATING TO RECEIPT OF SHARE APPLICATION MONEY, ASSESSING OFFICER SENT NOTICES TO SHARE APPL ICANTS WHICH RETURNED UNSERVED, HOWEVER ASSESSEE STILL MANAGED TO SECURE DOCUMENTS SUCH AS THEIR INCOME TAX RETURNS AS WELL AS BANK ACCOUNT PA RTICULARS IN SUCH CIRCUMSTANCES. ASSESSING OFFICER WAS JUSTIFIED IN D RAWING ADVERSE INFERENCE ITA NO.910 & 1187/KOL/2019 A.Y. 2015-16 ACIT CIR-1/2 BWN VS. M/S BARDHAMAN DHARMAR AJ PAPER MILL PVT. LTD. PAGE 8 AND ADDING AMOUNT IN QUESTION TO ASSESSEE'S TAXABLE INCOME UNDER SECTION 68. 5. RICK LUNSFORD TRADE & INVESTMENT LTD. VS CIT :- R2016 - TIQL-2007-SC-IT(SUPREME COURT) WHEREIN HORI 'BLE SUPREME COURT DISMISSED SLP UPHOLDING THAT IT IS OPEN TO THE REVE NUE DEPARTMENT TO MAKE ADDITION ON ACCOUNT OF ALLEGED SHARE CAPITAL U/S 68 , WHERE THE ASSESSEE COMPANY HAS FAILED TO SHOW GENUINENESS OF ITS SHARE HOLDERS. 6. CIT VS. EMPIRE BUILTECH (P) LTD. (366 ITR 110) :- WHERE HONBLE DELHI HIGH COURT HELD THAT IN RESPECT OF SHARE APPLICATION MONEY, UNDER SECTION 68 IT IS NOT SUFFICIENT FOR AS SESSEE TO MERELY DISCLOSED ADDRESS AND IDENTITIES OF SHAREHOLDERS, IT HAS TO S HOW GENUINENESS OF SUCH INDIVIDUALS OR ENTITIES. 7. IN THE CASE OF ITO WARD 9(1) VS. SOHAIL FINANCIA LS LTD. ITA NO. 4867/DEL./2011 ASSTT. YEAR, 2008-09, THE HON'BLE ITAT HAS UPHELD T HE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SHARE APPLICATION M ONEY AND SHARE PREMIUM AS THE SURROUNDING CIRCUMSTANCES AND TEST OF HUMAN PROBABI LITIES SHOWS THAT THERE IS NO REASON TO INVEST BY THESE COMPANIES IN THE SHARES O F THE ASSESSEE COMPANY AT SUCH A HUGE PREMIUM. THEREFORE, THE RATIO LAID DOWN BY T HE HON HON'BLE SUPREME COURT IN THE CASE LAWS OF SUMATI DAYAL ( 214 ITR 801 ) AND SREELEKHA BANERJEE'S CASE (1963) 49 ITR (SC) 112 SQUARELY APPLIES IN THE CASE OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENTS, THE ORD ER OF THE A.O. MAKING AN ADDITION OF RS.3,25,00,000/- UNDER SECTION 68 READ OF THE IN COME TAX ACT, 1961 IS CONFIRMED . 5 GROUND OF APPEAL NO. 6 : GROUND OF APPEAL NO 6 PERTAINS TO CONTENTION OF THE APPELLANT REGARDING THAT THE SETTING OFF OF THE ADDITION FROM THE ASSESSED BUSIN ESS LOSS, SHOULD BE MADE AND AFTER THAT THE REMAINING ASSESSED BUSINESS LOSS IS REQUIRED TO BE CARRIED FORWARD, BUT THE LEARNED A.O. DID NOT ALLOW THE SETTING OFF, WHI CH WAS AGAINST THE APPLICABLE PROVISION OF THE INCOME TAX ACT, 1961. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A.R. FOR THE APPELLANT AND HAVE ALSO PERUSED THE FACTS ON RECORD AND THE ASSESSMENT ORDE R PASSED BY THE ASSESSING OFFICER. 5.1 FOLLOWING FACTS ARE OBSERVED (I) THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANU FACTURING KRAFT PAPER. (II)THE APPELLANT HAS CLAIMED FOR ALLOWING THE SET OFF OF THE IMPUGNED ADDITION MADE ON ACCOUNT OF ALLEGED INGENUINE TRANSACTIONS( WITH THE THREE SUNDRY CREDITORS ) U/S 68 WITH THE ASSESSED BUSINESS LOSS DURING THE RELEV ANT FINANCIAL YEARS (III) IT IS SEEN THAT THE ENTIRE AMOUNT HAS BEEN CR EDITED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THEREFORE, IT CAN BE IMPLIED THAT THESE R ECEIPTS ARE IN THE NATURE OF BUSINESS RECEIPTS. THIS VIEW IS SUPPORTED BY THE DE CISION OF THE HONBLE SUPREME COURT IN THE CASE OF LAKSHMICHAND BAIJNATH VS. CIT 35 ITR 416 WHERE SUMS FOUND CREDITED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE WE RE TREATED AS BUSINESS PROFITS SIMILAR VIEW HAS ALSO BEEN TAKEN BY HON'BLE CALCUTT A HIGH COURT IN THE CASE OF CIT VS MARGTTRET'S HOPE TEA CO. LTD. 201 ITR 747 AND MA NSFIELD AND SONS VS. CIT 48 ITR 254. THE HON'BLE CALCUTTA HIGH COURT OBSERVED : - ITA NO.910 & 1187/KOL/2019 A.Y. 2015-16 ACIT CIR-1/2 BWN VS. M/S BARDHAMAN DHARMAR AJ PAPER MILL PVT. LTD. PAGE 9 7. A SIMILAR QUESTION CAME UP BEFORE THIS COURT IN I. T.REF. NO. 5 OF 1984 (CIT VS. HASIMARA INDUSTRIES LTD.), WHERE TILE JUDGEMENT BY THIS BENCH WAS DELIVERED 011 JULY 25, 1989. THERE, TILE BENCH, AFT ER, CONSIDERING THE DECISION IN DAULATRAM RAWATMULL V. CIT (1967) 64 ITR 593, OB SERVED AS FOLLOWS,' 'THERE IS NO DISPUTE AS TO TILE FACT TH AT THE CASH CREDIT ACCOUNT WAS APPEARING IN TILE ASSESSEE'S TEA GARDEN BOOKS OF AC COUNT I.E. BUSINESS BOOKS OF ACCOUNT. TILE CASH CREDITS CONTINUED THROU GHOUT TILE ACCOUNTING PERIOD. THE ASSESSEE'S MAIN ACTIVITY WAS TILE CULTIVATION, MANUFACTURE AND SALE OF TEA. FOR THE ASSESSMENT YEAR 1974-75, TILE TRIBUNAL ON ALL IDENT ICAL SET OF FACTS UPHELD TILE VIEW OF TILE COMMISSIONER OF INCOME TAX (APPEALS) THAT, IN SUCH CIRCUMSTANCES, THE AMOUNT INCLUDED AS UNDISCLO SED INCOME UNDER SECTION 68 OF TILE ACT SHOULD BE TREATED AS B USINESS INCOME. TILE PRINCIPLES LAID DOWN BY THIS COURT IN DAULATRAM RAW ATMULL V. CIT (1967) 64 ITR 593 WILL APPLY TO TILE FACTS OF TILE CASE TOO.' FURTHER, THE ACT HAS ALSO BEEN AMENDED TO DENY SET OFF OF LOSS FOR SUCH KIND OF INCOME BUT TILE AMENDMENT IS EFFECTIVE FROM 01.0 4.2017. IN VIEW OF THE ABOVE, THE GROUND OF APPEAL RAISED B Y THE APPELLANT IS ALLOWED AND TILE A.O. IS DIRECTED TO SET-OFF OF BUSINESS LO SS AMOUNTING TO RS.7,50,93,533/- AGAINST THE ADDITION MADE OF RS. 3 ,25,00,000 PERTAINING TO UNEXPLAINED CASH CREDITS. 6. GROUND OF APPEAL I HAVE CONSIDERED THE WRITTEN S UBMISSIONS OF THE APPELLANT AND ALSO EXAMINED THE ASSESSMENT ORDER. I HAS RIGHTLY D ISALLOWED THE DEPRECIATION TO THE TUNE OF RS.67,73,103/- SINCE THE APPELLANT HAS CLAI MED EXCESS DEP. THEREFORE, THIS GROUNDS OF APPEAL IS DISMISSED . 5. CASE FILE AND MORE PARTICULARLY PAGE-2 OF THE AS SESSMENT ORDER DATED 29.12.2017 INDICATES THAT THIS IS NOT AN INSTANCE O F OUTRIGHT SALE OF SHARES AS IT IS PROJECTED AT THE REVENUES BEHEST. THE ASSESSEE HAD SHOWN ADDITION TO SHAD & BUILDING OF 228,97,653/- ALONGWITH LAND AND LAND DEVELOPMENT OF 98,55,600/-. IT HAD DECLARED TOTAL ADDITION OF 2,26,44,400/- AGAINST ALL THE THREE PARTIES WHEREAS LAND AND LAND DEVELOPMENT HAD BEEN SHOWN IN CASE OF M/S CELEBRATION VINDTRDE PVT. LTD. ONLY. THERE IS F URTHER NO QUARREL THAT INSTEAD OF MAKING PAYMENT OF THE SAID SUM(S) TO THESE THREE PARTIES, THE ASSESSEE OPTED FOR ISSUING SHARE CAPITAL OF 3.25 CRORES IN ISSUE. RELEVANT INVOICE IN CASE OF ABOVE FIXED ASSETS & AS PER ASSESSMENT ORDE R ARE DATED 04.08.2014, 30.08.2014 INVOLVING 9,85,560/- AND 11,644,000/- IN CASE OF M/S CELEBRATION VINDTRADE PVT. LTD.; DATED 08.08.2014 A MOUNTING TO 7,00,000/- ITA NO.910 & 1187/KOL/2019 A.Y. 2015-16 ACIT CIR-1/2 BWN VS. M/S BARDHAMAN DHARMAR AJ PAPER MILL PVT. LTD. PAGE 10 FOR M/S NICE COMMOTRADE PVT. LTD. & DATED 10.08.201 0 PERTAINING TO M/S SAMRAT RICE MILL PVT. LTD. OF 40,00,000/-; RESPECTIVELY. WE MAKE IT CLEAR THAT THE REVENUE IS FAIR ENOUGH IN NOT DISPUTING THE CLI NCHING FACTUAL ASPECTS OF ADDITION OF THE CORRESPONDING FIXED ASSETS. NOR THE RE IS ANY EVIDENCE THAT THE ASSESSEES ASSETS DO NOT EXIST AS PER PHYSICAL VERI FICATION. WE ARE OF THE VIEW IN THIS FACTUAL BACKDROP THAT BOTH THE LOWER AUTHOR ITIES HAVE ERRED IN LAW AND ON FACTS IN TREATING THE ABOVE PURCHASE OF FIXED AS SETS FOLLOWED PAYMENT BY WAY OF SHARE CAPITAL SUBSCRIPTION AS AN INSTANCE OF UNEXPLAINED CASH CREDITS U/S. 68 OF THE ACT. THIS TRIBUNALS CO-ORDINATE BEN CHS DECISION IN INCOME TAX OFFICER WARD-5(3) VS. M/S BHAGWAT MARCOM PVT. LTD. , IN ITA NO.2236/KOL/2017 DECIDED ON 31.07.2019 HAS TAKEN INTO CONSIDERATION THE ENTIRE CASE LAW TO CONCLUDE THAT SUCH AN INSTANCE N OT INVOLVING ANY CASH CREDITS PURSUING CANNOT BE TREATED AS UNEXPLAINED U /S 68 OF THE ACT AS UNDER:- 4. THE LEARNED DR SUBMITTED THAT THE SHARE CAPITAL AND SHARE PREMIUM AMOUNT CREDITED IN THE BOOKS OF ACCOUNT OF THE ASSE SSEE COMPANY REPRESENTED CASH CREDIT U/S 68 AND SINCE THE PRIMAR Y ONUS TO ESTABLISH THE IDENTITY AND THE CAPACITY OF THE CONCERNED SHARE AP PLICANTS AS WELL AS TO PROVE THE GENUINENESS OF THE RELEVANT TRANSACTIONS WAS NO T SATISFACTORILY DISCHARGED BY THE ASSESSEE, ADDITION U/S 68 WAS RIGHTLY MADE B Y THE AO BY TREATING THE SAME AS UNEXPLAINED CASH CREDIT. HE CONTENDED THAT THE LD.CIT(A) HOWEVER DID NOT APPRECIATE THE FACTS AND CIRCUMSTANCES INVO LVED IN THE ASSESSEE'S CASE AND DELETED THE ADDITION MADE BY THE AO U/S 68 INTER ALIA ON THE GROUND THAT THERE BEING NO INFLOW OF CASH, SECTION 68 WAS NOT APPLICABLE. HE CONTENDED THAT THE RELIANCE OF THE LD. CIT(A) ON TH E DECISION OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF JATIA INVESTMENT CO. (SUPRA) TO COME TO THIS CONCLUSION IS CLEARLY MISPLACED IN AS MUCH AS THE F ACTS INVOLVED IN THE SAID CASE BEFORE THE HON'BLE CALCUTTA HIGH COURT WERE EN TIRELY DIFFERENT. HE SUBMITTED THAT ONLY NOTIONAL ENTRIES WERE FOUND REC ORDED IN THE SAID CASE AND THERE WAS NO REAL TRANSACTIONS INVOLVED ATTRACTING THE PROVISION OF SECTION 68. HE CONTENDED THAT THE FACTS INVOLVED IN THE PRESENT CASE HOWEVER ARE DIFFERENT, IN AS MUCH AS THERE WERE REAL TRANSACTIO NS INVOLVING ISSUE OF SHARE CAPITAL IN LIEU OF INVESTMENT IN SHARES AND THESE T RANSACTIONS HAVING BEEN REFLECTED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE W ITH CREDIT MADE TO THE SHARE CAPITAL AND SHARE PREMIUM AMOUNT SECTION 68 W AS CLEARLY ATTRACTED. IN SUPPORT OF THIS CONTENTION, HE RELIED ON THE DECISI ON OF HON'BLE MADHYA PRADESH HIGH COURT IN THE CASE OF V.I.S.P. (P) LTD. VS CIT 265 ITR 202 AND THE DECISION OF MUMBAI BENCH OF THIS TRIBUNAL IN TH E CASE OF PANNA S. KHATAU VS ITO RENDERED VIDE ITS ORDER DATED 03.07.2015 PAS SED IN ITA NO. 3596/MUM/2012 . THE LEARNED DR CONTENDED THAT THE RELIEF GIVEN BY THE LD. CIT(A) TO THE ASSESSEE ON THE ISSUE UNDER CONSIDERA TION BY HOLDING THAT SECTION 68 IS NOT APPLICABLE THUS IS NOT JUSTIFIED AND THE MATTER SHOULD GO BACK TO THE ASSESSING OFFICER FOR DECIDING THE SAME AFRE SH ON MERIT IN THE LIGHT OF ITA NO.910 & 1187/KOL/2019 A.Y. 2015-16 ACIT CIR-1/2 BWN VS. M/S BARDHAMAN DHARMAR AJ PAPER MILL PVT. LTD. PAGE 11 RELEVANT DETAILS AND DOCUMENTS FURNISHED BY THE ASS ESSEE BEFORE THE LD. C I T ( A ) W H I C H W E R E N O T A V A I L A B L E T O T H E A O . 5. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, SUBMITTED THAT THE SHARES AT PREMIUM WERE ISSUED BY THE ASSESSEE C OMPANY DURING THE YEAR UNDER CONSIDERATION TO OTHER COMPANIES IN LIEU OF T HE SHARES HELD BY THE SAID COMPANIES AND SINCE NO CASH WAS INVOLVED IN THESE T RANSACTIONS, SECTION 68 WAS NOT APPLICABLE AS RIGHTLY HELD BY THE LD. CIT(A ) BY RELYING ON THE DECISION OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF JATIA INVESTMENT CO. HE CONTENDED THAT THE RATIO OF THE SAID DECISION OF TH E HON'BLE JURISDICTIONAL HIGH COURT IS SQUARELY APPLICABLE TO THE FACTS OF THE PR ESENT CASE AND DISTINCTION SOUGHT TO BE MADE BY THE LEARNED DR IS NOT CORRECT. HE ALSO INVITED OUR ATTENTION TO THE VOLUMINOUS PAPERS PLACED IN THE PA PER BOOK AND SUBMITTED THAT THE SAME FILED BEFORE THE AO AS WELL AS BEFORE THE LD. CIT(A) WERE SUFFICIENT TO ESTABLISH THE IDENTITY AND CAPACITY O F THE CONCERNED SHARE APPLICANTS AS WELL AS THE GENUINENESS OF THE RELEVA NT TRANSACTIONS. HE CONTENDED THAT THE AO COMPLETELY OVERLOOKED THIS VI TAL AND RELEVANT DOCUMENTARY EVIDENCE FILED BY THE ASSESSEE WHILE TH E LD. CIT(A) CONSIDERED AND APPRECIATED THE SAME IN THE RIGHT PERSPECTIVE TO ARRIVE AT THE CONCLUSION THAT THE PRIMARY ONUS TO ESTABLISH THE IDENTITY AN D CAPACITY OF THE CONCERNED SHARE APPLICANTS AS WELL AS GENUINENESS OF THE RELE VANT TRANSACTIONS HAVING BEEN ESTABLISHED BY THE ASSESSEE ON EVIDENCE, ADDIT ION MADE BY THE AO US 68 WAS NOT SUSTAINABLE ON MERIT ALSO. HE, THEREFORE , STRONGLY SUPPORTED THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) GIVING RELI EF TO THE ASSESSEE ON THIS ISSUE AND URGED THAT THE SAME DESERVES TO THE UPHEL D. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT I TS SHARES WERE ISSUED BY THE ASSESSEE COMPANY DURING THE YEAR UNDER CONSIDERATIO N IT PREMIUM TO CERTAIN COMPANIES IN LIEU OF THE SHARES HELD BY THE SAID CO MPANIES AND THERE WAS THUS NO INFLOW OF CASH INVOLVED IN THESE TRANSACTIO NS. THE SAID TRANSACTIONS WERE ENTERED INTO IN THE BOOKS OF ACCOUNT OF THE AS SESSEE COMPANY BY WAY OF JOURNAL ENTRIES AND IT DID NOT INVOLVE ANY CREDIT T O THE CASH AMOUNT. THE LEARNED DR AT THE TIME OF HEARING HAS NOT BROUGHT A NYTHING ON RECORD TO REBUT OR CONTROVERT THIS POSITION. HE HOWEVER HAS CONTEND ED BY RELYING ON THE DECISION OF HON'BLE MADHYA PRADESH HIGH COURT IN TH E CASE OF V.I.S.P. (P) LTD. (SUPRA) AS WELL AS THE DECISION OF MUMBAI BENC H OF HIS TRIBUNAL IN THE CASE OF PANNA S. KHATAU (SUPRA) THAT SECTION 68 WAS STILL APPLICABLE IN THE PRESENT CASE INVOLVING CREDIT TO THE SHARE CAPITAL AND SHARE PREMIUM AMOUNT. IT IS HOWEVER OBSERVED THAT THE ACTS INVOLVED IN TH E CASE OF V.I.S.P. (P) LTD. WERE DIFFERENT IN AS MUCH AS THE LIABILITY IN QUEST ION IN THE AID CASE REPRESENTED TRADING LIABILITY OF THE ASSESSEE ACCRU ING AS A RESULT OF PURCHASES MADE BY THE ASSESSEE LURING THE RELEVANT YEAR AND S INCE THE SAID LIABILITY WAS FOUND TO BE A BOGUS LIABILITY, ADDITION MADE BY THE AO WAS HELD TO BE SUSTAINABLE BY THE HON'BLE MADHYA PRADESH HIGH COUR T. 7. IN THE CASE OF PANNA S. KHATAU (SUPRA) CITED BY THE LEARNED DR, BOTH SECTION 68 AND 56(2)(VI) WERE HELD TO BE APPLICABLE BY THE TRIBUNAL BUT NO CONCRETE OR COGENT REASONS WERE GIVEN TO JUSTIFY TH E APPLICABILITY OF SECTION 68 TO THE CREDITS NOT INVOLVING ANY RECEIPT OR INFLOW OF CASH IN THE RELEVANT YEAR . ITA NO.910 & 1187/KOL/2019 A.Y. 2015-16 ACIT CIR-1/2 BWN VS. M/S BARDHAMAN DHARMAR AJ PAPER MILL PVT. LTD. PAGE 12 MOREOVER, THE VIEW TAKEN BY THE TRIBUNAL IN THE SAI D CASE IS CONTRARY TO THE DECISION OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF JATIA INVESTMENT CO. (SUPRA) RELIED UPON BY THE LD. CIT(A) TO GIVE RELIE F TO THE ASSESSEE ON ISSUE UNDER CONSIDERATION IN THE PRESENT CASE. IN THE SAI D CASE, THE THREE NBFCS HAD TAKEN LOANS FROM PROPRIETARY CONCERN BELONGING TO THE SAME GROUP. SINCE THE SAID LOANS WERE REQUIRED TO BE LIQUIDATED AS PE R THE RBI GUIDELINES AND THERE WAS NO CASH AVAILABLE WITH THE NBFCS TO REPAY THE LOANS, THE SHARES HELD BY THE THREE NBFCS WERE TRANSFERRED TO A PARTN ERSHIP FIRM NAMELY JATIA INVESTMENT CO., AND THE AMOUNT RECEIVABLE AGAINST T HE SAID SALE OF SHARES WAS ADJUSTED BY THE NBFCS AGAINST THE LOAN AMOUNT P AYABLE TO PROPRIETARY CONCERN. THE PARTNERSHIP FIRM OF M/S. JATIA INVESTM ENT CO. THUS RECEIVED SHARES FROM THE THREE NBFCS AND ALSO TOOK OVER THE LOANS PAYABLE BY THE SAID NBFCS TO THE PROPRIETARY CONCERN. THESE TRANSA CTIONS WERE ENTERED INTO IN ITS BOOKS OF ACCOUNT BY THE PARTNERSHIP FIRM THR OUGH CASH BOOK BY DEBITING THE INVESTMENT IN SHARES AND CREDITING THE LOAN AMO UNT F THE PROPRIETARY CONCERN. THIS CREDIT APPEARING IN THE BOOKS OF ACCO UNT OF THE PARTNERSHIP FIRM, M/S. JATIA INVESTMENT CO. WAS TREATED BY THE AO AS UNEXPLAINED CASH CREDIT U/S 68 AND ON CONFIRMATION OF THE SAME, WHEN THE MA TTER REACHED TO THE HON'BLE CALCUTTA HIGH COURT, IT IS HELD BY THEIR LO RDSHIP THAT WHEN THE CASH DID NOT PASS AT ANY STAGE AND SINCE THE RESPECTIVE PART IES DID NOT RECEIVE CASH NOR DID PAY ANY CASH, THERE WAS NO REAL CREDIT OF C ASH IN THE CASH BOOK AND THE QUESTION OF INCLUSION OF THE AMOUNT OF THE ENTR Y AS UNEXPLAINED CASH CREDIT COULD NOT ARISE. IN OUR OPINION, THE RATIO OF THIS DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF JATIA INVE STMENT CO. (SUPRA) IS SQUARELY APPLICABLE IN THE FACTS OF THE PRESENT CAS E AND THE LD. CIT(A) WAS FULLY JUSTIFIED IN DELETING THE ADDITION MADE BY TH E AO U/S 68 BY HOLDING THAT T H E S A I D P R O V I S I O N W A S N O T A P P L I C A B L E . WE ADOPT THE DETAILED REASONING MUTATIS MUTANDIS TO HOLD THAT BOTH THE LEARNED AUTHORITIES HAVE ERRED IN LAW AND ON FACTS IN TREATING THE SUM IN ISSUE OF 3.25 CRORES AS UNEXPLAINED CASH CREDITS. THE SAME I S DIRECTED TO BE DELETED. NECESSARY COMPUTATION SHALL FOLLOW AS PER LAW. THE ASSESSEE SUCCEEDS IN ITS FORMER GRIEVANCE WHEREAS THE REVENU ES SOLE SUBSTANTIVE GROUND AND MAIN APPEAL ITA NO.910/KOL/2019 FAILS. 6. NEXT COMES ASSESSEES SECOND SUBSTANTIVE GROUND THAT BOTH THE LOWER AUTHORITIES HAVE ERRED IN DISALLOWING ITS DEPRECIAT ION CLAIM OF 67,73,103/-. WE NOTICE DURING THE COURSE OF HEARING THAT THIS IS NO T AN INSTANCE OF DISALLOWANCE OF DEPRECIATION PER SE SINCE THE LEARNED LOWER AUTHORITIES HAVE MADE IT C LEAR THAT THE ASSESSEES DEPRECIATION CLAIM ON FIXED ASS ET OF 449,88,165/- WAS IN FACT THAT OF 388,15,062/-ONLY. WE DEEM IT APPROPRIATE TO REPRODU CE THE ASSESSING OFFICERS DETAILED DISCUSSION TO THIS EFF ECT AS UNDER:- ITA NO.910 & 1187/KOL/2019 A.Y. 2015-16 ACIT CIR-1/2 BWN VS. M/S BARDHAMAN DHARMAR AJ PAPER MILL PVT. LTD. PAGE 13 7.1 IT IS SEEN FROM THE RETURN OF INCOME THAT THE A SSESSEE HAS CLAIMED THE DEPRECIATION OF RS.4,49,24,859/-. IT WAS CLAIMED CO NSIDERING OPENING WDV, ADDITION DURING THE YEAR, DEDUCTION DURING THE YEAR . IT IS NOTICED THAT THE ASSESSEE HAS TAKEN WDV AS ON 01.04.2014 FOR RS.30,6 1,41,844/-. HOWEVER, ON VERIFICATION ON FIXED ASSET SCHEDULE PREPARED AS PER IT RULE FOR AY 2014- 15, IT IS SEEN THAT THE WDV OF FIXED ASSET AS PER S CHEDULE PREPARED AS PER IT RULE WAS RS.27,74,98,360/- AS ON 31.03.2014. THEREF ORE, THE SAME SHOULD HAVE BEEN CARRIED OVER TO AY 2015-16 AND THE WDV A S ON 01.04.2014 SHOULD HAVE BEEN SHOWN AT RS.27,74,98,360/-. SINCE THERE WAS MISTAKE IN TAKING WDV AS ON 01.04.2014, THE SCHEDULE OF DEPREC IATION FOR AY 2015-16 HAS BEEN REVISED AS PER THE PROVISION IT RULE. DEPRECIATION BALANCE ON 01.04.14 ADDITION SALE/RETURN TOTAL RATE IN % DEPRECIATION BALANCE ON 31.03.15 LAND & LAND DEVELOPMENT 41,35,644 -* 41,35,644 - -- 41,35,644 SHED & BUILDING 6,07,13,773 2,53,253 6,09,67,026 10 60,96,702* 5,4 8,70,324 PLANT & MACHINERY 17,27,86,854 67,29,025* 17,95,15,879 15 2,66,93,20 2* 15,28,22,677 MISC. FIXED ASSETS 2,20,497 -- 2,20,497 15 33,074 1,87,4 23 ELECTRICAL INSTALLATION 3,89,23,727 2,104 91,831 3,88,34,000 15 58,25,100 3,30,08,900 COMPUTER 1,12,245 1,12,245 60 67,347 44,898 FURNITURE & FIXTURE 18,900 18,900 10 1,890 17,010 AIR CONDITIONER 1,25,120 1,25,120 15 18,768 1,06,352 WEIGHT BRIDGE 4,16,895 64,923 4,81,818 15 72,273 4,09,545 MOTOR CYCLE 44,705 44,705 15 6,706 37,999 TOTAL 27,74,98,360 70,49,305 91,831 28,44,55,834 3 ,88,15,062 24,56,40,772 * THE DISALLOWANCE MADE ABOVE ON ACCOUNT OF ADDITION TO SHAD AND BUILDING AND PLANT AND MACHINERY HAS BEEN CONSIDERE D WHILE RECASTING THE ABOVE SCHEDULE. 7.2 CONSIDERING THE ABOVE DEPRECIATION ON ACCOUNT O F FIXED ASSETS ALLOWED TO THE ASSESSEE AT RS.3,88,15,062/-. SINCE THE ASSESSEE HAS CLAIM DEPRECIATION ON FIXED ASSETS OF RS.4,49,88,16 5/- THE BALANCE AMOUNT OF RS.67,73,103/- DISALLOWED AS EXCESS DEPRECIATION AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE AMOUNT OF DISALLOWANCE OF RS.67,73,103/- INCLUDES DISALLOWANCE OF DEPRECIATION ON ACCOUNT OF ADDITION TO SHAD AND BUILDING AND ADDITION TO PLANT AND MACHINERY. SINCE THE ASSESSEE HAS CONCEALED PARTICULAR OF INCOME PENALTY PROCEEDING I S INITIATED SEPARATELY. 7. THE ASSESSEE FAILS TO PIN-POINT ANY IRREGULARITY IN THE ABOVE DEPRECIATION CHART INDICATING THE CORRECT FIGURE OF 3,88,15,062/- AS AGAINST THAT CLAIM OF 4,49,88,165/-. WE ACCORDINGLY UPHOLD THE IMPUGNED D EPRECIATION DISALLOWANCE THEREFORE. THE ASSESSEES SECOND SUBST ANTIVE GROUND IS REJECTED. ITS APPEAL ITA NO.1187/KOL/2019 IS PARTLY ACCEPTED. ITA NO.910 & 1187/KOL/2019 A.Y. 2015-16 ACIT CIR-1/2 BWN VS. M/S BARDHAMAN DHARMAR AJ PAPER MILL PVT. LTD. PAGE 14 8. THE REVENUES APPEAL ITA NO.910/KOL/2019 IS DISMISSED AND ASSESSEES CROSS-APPEAL ITA NO.1187/KOL/2019 IS PARTLY ALLOWED IN ABOVE TERMS. ORDER PRONOUNCED IN THE OPEN COURT 03 /01/2020 SD/- SD/- ( ) () ) ( A.L.SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP *- 03 / 01 /20 20 / COPY OF ORDER FORWARDED TO:- 1. /ASSESSEE-M/S BARDHAMAN DHARMARAJ PAPER MILL PVT. L TD. VILLGE-KONERPARA,P.O. KALANABAGRAM, DI ST. PURBA BURDWAN-713124/C/O SUBASH AGARWAL & ASSOCIATES, ADVOC ATES SIDDHA GIBSON,1, GIBSON LANE, SUITE-213 2 ND FLOOR, KOLKATA-69 2. /REVENUE-ACIT,CIRCLE-1, COURT COMPOUND, KANCHARI RO AD, P.O. & DIST. PURBA BURDWAN-713101/ACIT, CIR-2, AAYAKAR BHAWAN, ANNEXE, COURT COMPOUND, BURDWANN-7 13101 3. 5 6 / CONCERNED CIT KOLKATA 4. 6- / CIT (A) KOLKATA 5. ))5, 5, / DR, ITAT, KOLKATA 6. = / GUARD FILE. BY ORDER/ , /TRUE COPY/ 5,