SHREE GOVIND REALITY PVT LTD,BHOPAL V. ACIT (CENTRAL)- II, BHOPAL, BHOPAL

ITSSA 64/IND/2023

AI Insights

The case involves multiple appeals by Shree Govind Reality Pvt. Ltd. against the additions made by the Assessing Officer under section 68 of the Income-tax Act, 1961, for the assessment years 2013-14 to 2015-16, and an appeal by the revenue against the deletion of such additions for the assessment year 2016-17. The Tribunal examined the legality and merits of the additions, focusing on the issues of unexplained share capital and unsecured loans. The Tribunal found that the additions were not justified due to the lack of incriminating material and the failure to establish the companies involved as shell companies. The Tribunal also considered various judicial precedents and the principles of law regarding the burden of proof in cases of unexplained cash credits.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 36936 (ITAT-INDORE)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 20-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Other Referred Cases: PCIT Vs. Abhishar Buildwell Pvt. Ltd., Divine Leasing & Finance Ltd., CIT v. Kamdhenu Steel & Alloys Limited, M/s Tirupati Construction Ujjain
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: FORASSESSEEFIRSTLYCARRIEDUSTOPARAOF; FORREVENUESUBMITTEDTHATMSVRRRECEIVEDMONEYSFROM; FORASSESSEEDREWUSTOPARAOFASSESSMENTORDERWHERETHEAOHASMADE; FORREVENUERELIEDUPONORDERSOFLOWERAUTHORITIES; FORASSESSEEANDYETUPHELDTHEADDITIONSON; FORREVENUERELIEDUPONPARANO.OFORDEROFHONBLE; FORREVENUETOPROVE; FORREVENUECOULDNOTSHOWASTO; FORREVENUEHASRELIEDUPONDECISIONOFHONBLECALCUTTAHIGHCOURTINBST; SHRIRAM KUMAR YADAV
• Assessee Lawyers: SHRIASHISH GOYAL; N.D. PATWA; ARS
• Keywords: Additional evidence; Unexplained cash credit; Onus to prove; TDS; Bogus Share capital; Audi alteram partem; Penny stocks; Bogus
• Section: 143(3); 119; 64; 132; 153A; 68; 131; 22; 13; 20

Judgement Text

"Page 1 of 36 आयकरअपीलीयअिधकरण, इंदौरɊायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER IT(SS)A No.63 to 65/Ind/2023 (AYs: 2013-14 to 2015-16) Shree Govind Reality Pvt. Ltd. Lower basement, 1st Floor Aashima Mall, Bhopal (PAN: AALCS8605F) बनाम/ Vs. ACIT, Central -II, Bhopal (Assessee/Appellant) (Revenue/Respondent) IT(SS)A No.16/Ind/2024 (AY: 2016-17) ACIT, Central-2, Bhopal बनाम/ Vs. Shri Govind Reality Pvt. Ltd. Lower basement, 1st Floor Aashima Mall, Bhopal (PAN: AALCS8605F) (Revenue/Appellant) (Assessee/Respondent) Assessee by Shri Ashish Goyal & N.D. Patwa, ARs Revenue by Shri Ram Kumar Yadav, CIT-DR Date of Hearing 12.12.2024 Date of Pronouncement 20.01.2025 आदेश/ O R D E R Per Bench: There are four appeals as per following details: (i) IT(SS)A No. 63 to 65/Ind/2023 are three appeals by assessee against a consolidated order of first-appeal dated 11.08.2023 passed by learned Commissioner of Income-tax (Appeals)-3, Bhopal [“CIT(A)”] which in turn arises out of assessment-order dated 08.09.2021 passed by ACIT, Central- Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 2 of 36 II, Bhopal [“AO”] u/s 153A r.w.s. 143(3) of the Income-tax Act, 1961 [“the Act”] for three Assessment Years [“AY”] 2013-14 to 2015-16. (ii) IT(SS)A No. 16/Ind/2024 is an appeal by revenue against order of first- appeal dated 18.12.2023 passed CIT(A) which in turn arises out of very same assessment-order dated 08.09.2021 passed by AO u/s u/s 153A r.w.s. 143(3) of the Act for AY 2016-17. 2. The background facts leading to these appeals are such that the assessee is a private limited company engaged in construction, sale and renting of shopping mall. A search u/s 132 was conducted upon assessee on 16.05.2018 pursuant to which assessments of preceding AYs 2009-10 to 2018-19 were framed u/s 153A r.w.s. 143(3) and assessment of current AY 2019-20 was framed u/s 143(3) vide a consolidated order dated 08.09.2021. Presently, the assessee is in appeal for three AYs 2013-14 to 2015-16 and the revenue is in appeal for one AY 2016-17. In these years under consideration, the AO passed assessment-orders after making certain additions which the assessee challenged in first appeals before CIT(A). The CIT(A) decided first-appeals and aggrieved by same, the respective parties have come before us for their grievances. 3. Since these appeals relate to the same assessee, are represented by same counsels and certain issues are identical; they were heard together at the request of parties and are being disposed of by this consolidated order for the sake of convenience, brevity and clarity. Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 3 of 36 4. We first take up assessee’s appeal for AY 2013-14. The grounds raised in this appeal are as under: Assessee’s IT(SS)A No. 63/Ind/2023 of AY 2013-14: “1. The Ld. AO was not justified in passing the order, which is bad-in-law, void ab initio, barred by limitation, illegal, contrary to the facts and circumstances of the case, liable to be annulled. 2. That Ld. CIT(A) was not justified in confirming the addition of Rs.1,00,00,975 u/s. 68 on merits as unexplained share capital which is bad-in-law, void ab initio, barred by limitation, illegal, contrary to the facts and circumstances of the case, liable to be annulled. 3. That Ld. CIT(A) was not justified in confirming the addition of Rs. 15,00,000 u/s 68 on merits as unsecured loans which is bad-in-law, void ab initio, barred by limitation, illegal, contrary to the facts and circumstances of the case, liable to be annulled.” Ground No. 1: 5. This ground is general and was not pleaded during hearing. Therefore, it does not require any adjudication by us. Ground No. 2: 6. In this ground, the assessee claims that the CIT(A) was not justified in confirming the addition of Rs. 1,00,00,975/- made by AO u/s 68 on account of unexplained share capital. 7. Apropos to this ground, Ld. AR for assessee firstly carried us to Para 8 of assessment-order where the AO has made the impugned addition. The AO has noted that during assessment-proceeding, vide questionnaire dated 11.01.2021, the assessee was asked to furnish details of shareholding pattern/allotment of equity shares. On perusal of assessee’s reply, the AO found that the assessee has Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 4 of 36 received share application money from two investors, namely (i) Rs. 50,00,000/- from VRR Financial Services Pvt. Ltd. [“M/s VRR”] and (ii) Rs. 50,00,975/- from Pramila Investment&Finance Ltd.[“M/sPramila”],aggregating to Rs. 1,00,00,975/-. The AO has thereafter noted in Para 8.2 that the (i) inquiries and investigations have been done during the search and post-search investigations about the genuineness of investment made by companies in share applications and summons were issued to those companies but no reply was received, and (ii) that the directors of those companies have admitted in sworn statements u/s 131 that the companies are entry providers. The AO has also re- produced statement of Shri Rajesh Vyas, director of M/s VRR in assessment-order. The AO has also given his analysis of financials of M/s VRR and M/s Pramila and observed that the financials of those companies were weak. The AO has also noted that M/s Pramila has not filed any ITR after AY 2011-12 nor it has made any filing to ROC since FY 2010-11 and according to master data available on website of ROC, M/s Pramila has been struck-off. 8. Then, Ld. AR carried us to the order of first-appeal passed by CIT(A). He submitted that the CIT(A) has deleted addition on legality ground but upheld on merit. To demonstrate this, he carried us to following paras of orders of CIT(A): (i) Firstly, Ld. AR referred Para 3.1.2 / Page 14-25 wherein the CIT(A) has dealt a legal ground raised by assessee that the AY 2013-14 was an unabated assessment-year and the AO did not have any incriminating material found during search qua this addition, hence the addition cannot be made in the proceedings of section 153A. The CIT(A) has, following the decision in PCIT Vs. Abhishar Buildwell Pvt. Ltd. in Civil Appeal No. 6580 of 2021 dated 24.04.2023 (Supreme Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 5 of 36 Court), accepted assessee’s legal ground and held that the addition made by AO is legally not sustainable. (ii) Then, he drew us to Para No. 3.3.3 to 3.3.4 / Page 52-55 wherein the CIT(A) has upheld addition on merit as under: “3.3.3….. In view of the above settled law and discussion, I have examined the facts of the appellant's case which is being discussed below:- (i) M/s VRR Financial Services Pvt Ltd (Rs. 50,00,000/-):- The appellant has submitted details which have been gathered from MCA portal. The investor company is having CIN-U74140MP2009PTC021855 and has registered address as per banking record at 43, Jati Colony, Rambagh, Indore. Except this no other detail has been furnished by the appellant. The Ld. AO has also mentioned in para 8.2 of the assessment order that during post search enquiries, summons were issued to this investor company but no reply was received. Further, the appellant has failed to file any confirmation from the investor company. Therefore, the identity of the investor is not proved. The appellant in order to prove creditworthiness of the lender has not filed any documentary evidence on record and has only claimed that the investor company has filed annual return with ROC till FY 2021-22. The appellant failed to furnish return of income and statement of accounts. However, the Ld. AO after gathering data from ROC has complies the same and the same is tabulated on page no 23 to 25 of the assessment order. On perusal of the data it can be seen that the investor company is having genuine business activities and has also shown PAT of 10,91,494/-. However, statement of Shri Rajesh Vyas was recorded during post search investigation before the Ld. DDIT(Inv)-II, Indore, wherein, he admitted that his company is involved in providing accommodation entry and has no real business activity. Thus, in light of statement of director of the lender company it can be presumed that the financial statements filed by the investor before ROC does not reflect true and correct picture and therefore, cannot be relied upon. Thus, the appellant has failed to establish creditworthiness of the investor company. The appellant for proving genuineness of the transaction has filed copy of bank account statement of the investor. On perusal of the same, I find that the investor received funds through transfer and the same were subsequently transferred to appellant company. Before and after the transfer of funds the investor had meager account balance. The creditworthiness, as discussed above, is also not proven. Therefore, the genuineness of the transaction is not proven satisfactorily. (ii) M/s Pramila Investment & Finance Ltd (Rs. 50,00,975/-):- The appellant in order to explain identity of the investor has filed copy of order of Hon'ble ITAT Indore bench of the investor company (ITA no 350/Ind/2012 dated Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 6 of 36 31.05.2013). The investor is having PAN-AABCP8031A and having registered address at 40, Moti Mahal, Itwari Bazar, Indore. The order of Hon'ble ITAT in the case of above investor company proves the identity. However, the Ld. AO has also mentioned in para 8.2 of the assessment order that during post-search enquiries, summons were issued to this investor company but no reply was received. Further, the appellant has failed to file any confirmation from the investor company. Thus, before the Ld. AO the appellant failed to establish the identity of the investor company. But in view of the above order of the Hon'ble ITAT, the identity of the investor company is treated as proved. The appellant for proving creditworthiness of the lender has not filed any documentary evidence on record. The Ld. AO however, on further verification found that the investor company has not filed return of income with ROC after AY 2011-12. Therefore, the creditworthiness of the investor is not proven satisfactorily by the appellant. The appellant for proving genuineness of the transaction has filed copy of bank account statement of the investor. On perusal of the same, I find that the investor received funds from M/s Juni Indore Sakh Sahkrita Mydt. The appellant has also filed coy of bank account statement of M/s Juni Indore Sakh Sahkrita Mydt. On perusal of the same, I find that M/s Juni Indore Sakh Sahkrita Mydt has maintained bank balance of Rs. 43,60,293/- out of which sum of Rs.40,00,000/- was transferred to appellant, however, the balance amount of Rs. 10,00,000/- was transferred after cash deposit of Rs. 11,00,000/-. Therefore, the genuineness and source of source to the extent of Rs. 40,00,000/- is explained. The appellant has also not filed any confirmation in this regard for the investor company. The creditworthiness, as discussed above, is also not proven. Therefore, the genuineness of the transaction is not proven satisfactorily. It can be seen from the above factual discussion that enquiry results only prove the identity of the investor company M/s Pramila Investment & Finance Ltd, but the creditworthiness of the said investors and genuineness of transaction alongwith source of source has not been established by the appellant. Considering the evidences on record, it can safely be held that the appellant has failed to discharged its onus of proving creditworthiness of the investor and genuineness of the transaction. The burden/onus is cast on the appellant and the appellant is required to explain to the satisfaction of the AO cumulatively about the identity and capacity/creditworthiness of the creditors along with the genuineness of the transaction. All the constituents are required to be cumulatively satisfied. If one or more of them is absent, then the AO can make the additions u/s 68 of the Act as an income. In view of the above discussion, I am of the considered view that merely submission of the name and address of the investors, bank account statement of the investors etc. is not sufficient as the AO is to be satisfied as to their creditworthiness as well as to the genuineness of the transaction entered into. Applying the settled law to the facts of present case as narrated above reveal that the appellant is unable to discharge the initial onus cast upon it. Therefore, the Ld. AO is justified in making addition on account of unexplained cash credit u/s 68 of the Act. 3.3.4 In view of discussion made in preceding paras, addition of Rs. 1,00,00,975/- in AY 2013-14 on account of bogus share capital u/s 68 of the Act is hereby confirmed. Therefore, appeal on this ground is dismissed. Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 7 of 36 [Emphasis supplied] (iii) Then, he carried us to Para No. 3.3.5 / Page 56 wherein the CIT(A) has concluded as under: “3.3.5. Although, I have confirmed the addition of Rs.1,00,00,975/- on account of unexplained share application money u/s.68 of the Act on merit for the A.Y 2013-14, however, the above amount of income shall not be considered for determining total income of the appellant for the A.Y 2013-14 unless the decision taken in para 3.1.2 of this order is reversed by the higher court.” 9. Having shown thus, Ld. AR made following contentions: [A] M/s VRR: (i) The summon u/s 131 claimed to have been issued by AO, has not been brought to the knowledge of assessee. Without prejudice, even if the summon issued to party is not responded, the assessee cannot be blamed as per decisions in Orissa Corporation 25 Taxman 80 (SC); Rohini AL Builders 127 Taxman 523 (Guj.); Nathu Ram Premchand 49 ITR 461 (All). (ii) In Para 8.2 of assessment-order, the AO has relied upon statements of Shri Rajesh Vyas, director of M/s VRR but the statement of Shri Rajesh Vyas re- produced by AO clearly show that those statements were taken on 19.05.2015 whereas the search was conducted upon assessee on 16.05.2018. Thus, the AO has wrongly relied upon statements which are unrelated to present proceedings. Further, the statement nowhere contains the name of assessee. Without prejudice, no opportunity of cross- examination of statements was given to assessee. Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 8 of 36 (iii) That the assessee has filed following documents to discharge the primary onus cast upon it u/s 68: (a) Sum of Rs. 50,00,000/- was received through banking channel. Copy of bank statement of the investor company, bank statement proving source of source & bank statement of the appellant company are at PB- 40-44. (b) Form-2 filed with the ROC, Gwalior allotting 37,385 shares to the investor company has been submitted to the AO. PB 36-39. (c) The investor company [CIN: U74140MP2009PTC021855] had filed its annual return with ROC till FY 2021-22 which is evident from MCA Portal. (iv) That the CIT(A) has made an observation that no detail was furnished by the assessee which is factually wrong. The CIT(A) has made another incorrect observation that the statements of Shri Rajesh Vyas were recorded during post-search investigation, it is very much clear that the statements are dated 19.05.2015 which was prior to conduct of search on 16.05.2018. Further, the CIT(A) is wrong in concluding that the identity of M/s VRR, creditworthiness of M/s VRR and genuineness of transaction are not proved. [B] M/s Pramila: (i) The summon u/s 131 claimed to have been issued by AO, has not been brought to the knowledge of assessee. (ii) The AO has not brought on record statement of any person with regard to this addition. Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 9 of 36 (iii) That the assessee has filed following documents to discharge the primary onus cast upon it u/s 68: (a) Sum of Rs. 50,00,000/- was received through banking channel and Rs. 975/- was received in cash. Copy of bank statement of the investor company, bank statement proving source of source & bank statement of the appellant company are at PB-45-55. (b) Form-2 filed with the ROC, Gwalior allotting 37385 shares to the investor company has been submitted to the AO. (iv) The case of M/s Pramila was decided by ITAT, Indore in Pramila Investment and Finance Ltd. and Others v. Income Tax Officer and Others [ITA No. 350/Ind/2012 to 352/Ind/2012]. This shows that M/s Pramila is a genuine company. This point was also brought to the notice of CIT(A) and the CIT(A) has accepted that because of ITAT’s order, the identity of M/s Pramila is proved. However, the CIT(A) has wrongly concluded that the creditworthiness of M/s Pramila and genuineness of transaction are not proved. 10. Per contra, Ld. DR for revenue submitted that M/s VRR received moneys from Rajesh Vyas and Rajesh Vyas himself accepted as involved in providing accommodation, therefore creditworthiness of M/s VRR cannot be said to be proved. He submitted that section 68 has been amended and proviso therein has been inserted which obligates the assessee to explain source of source. Ld. DR also relied upon the orders of lower authorities and decision of Hon’ble Calcutta High Court in PCIT Vs. Swati Bajaj dated 28.03.2022. 11. We have considered rival submissions of both sides and perused the case record including the orders of lower authorities. The issue here is the addition made Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 10 of 36 by AO u/s 68 on account of unexplained share capital. The CIT(A) has examined the issue of assessee from both angles, legality as well as merit. So far as legality is concerned, the CIT(A) has accepted that impugned addition was made without having any incriminating material but the same could not be validly made as per decision of Hon’ble Supreme Court in Abhishar Buildwell. The revenue is not against this conclusion of CIT(A), therefore the conclusion taken by CIT(A) is upheld. In so far as merit of issue is concerned, the assessee has received share application of Rs. 50,00,000/- from M/s VRR and Rs. 50,00,975/- from M/s Pramila which the AO has treated as unexplained credits u/s 68 and made addition and the CIT(A) has approved AO’s order. We give our anlaysis as under: [A] M/s VRR: Precisely, the AO has cited three-fold reasons for making addition. The first reason cited is such that summon was issued to investor company but no reply was received. However, the assessee claims that no such summon was brought to the notice of assessee. “Audi alteram partem” is an accepted principle of law according to which nobody can be condemned without hearing. Further, it is also a judicial view that if the party does not respond to summon, the assessee cannot be blamed [Rohini AL Builders 127 Taxman 523 (Guj.) discussed in a later para]. Therefore, the first reasoning of AO is dissolved. The second reason assigned by AO, accepted by CIT(A) and also emphasised by Ld. DR is such that during search proceeding, Shri Rajesh Vyas, director of M/s VRR has admitted that the company/he was engaged in providing accommodation but Ld. AR has successfully shown that there is no statement of Rajesh Vyas recorded during search brought on record. The statement Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 11 of 36 of Rajesh Vyas re-produced by AO in assessment-order is dated 19.05.2015 whereas the search itself was conducted on 16.05.2018. Therefore, the very basis adopted by AO is unrelated to search for which present assessment u/s 153A has been made. The CIT(A) has also wrongly mentioned that the statement of Shri Rajesh Vyas was recorded during search. That apart, the assessee is also justified in claiming that no opportunity of cross-examination of Rajesh Vyas was provided to him. Therefore, the principle of “Audi alteram partem” is violated here also. Hence, the second objection of AO is also dissolved. The AO’s third objection of weak financials is also not convincing because the company M/s VRR has sufficient net worth, inventories, bank balance, sales/gross receipts, purchases, salary/wages expenditure, other expenses and net profit. Even the CIT(A) has himself made a positive finding “On perusal of the data, it can be been that the investor company is having genuine business activities and has also shown PAT of 10,91,494/-” but then he has given importance to the statement of Rajesh Vyas which were not at all recorded during search as discussed earlier. It is also seen that M/s VRR has made investment of Rs. 50,00,000/- in shares of assessee through banking channel and the assessee has also filed statutory Form-2 under Companies Act i.e. return of allotment of shares with ROC, Gwalior. Thus, the conclusion taken by Ld. AO that M/s VRR was a shell company or that the receipt of share application money was not proved by assessee, is not a valid conclusion. The decision of Swati Bajaj (supra) quoted by Ld. DR concerned with issue of bogus capital gain from penny stocks and there were different facts, hence the same is not applicable to present case. Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 12 of 36 Therefore, the addition made by AO of Rs. 50,00,000/- qua the share application money received from M/s VRR is not sustainable and we delete the same. [B] M/s Pramila: In this case, the AO has cited two-fold reasons for making addition. The first reason cited is such that summon was issued to M/s Pramila but no reply was received. However, the assessee claims that no such summon was brought to the notice of assessee. “Audi alteram partem” is an accepted principle of law according to which nobody can be condemned without hearing. Further, it is also a judicial view that if the party does not respond to summon, the assessee cannot be blamed [Rohini AL Builders 127 Taxman 523 (Guj.) discussed in a later para]. Therefore, the first reasoning of AO is dissolved. The AO’s second objection of weak financials is also not convincing because the limited financial data of M/s Pramila extracted by AO in assessment-order shows that M/s Pramila has sufficient net worth, loans & advances, creditors, sales/gross receipts, profit after tax, etc. It is also notable that the CIT(A) has accepted the identity of M/s Pramila having regard to ITA No. 350/Ind/2012 decided by ITAT, Indore in which M/s Pramila was itself an appellant. The CIT(A) has merely objected against genuineness and creditworthiness by passing following order: “The appellant for proving genuineness of the transaction has filed copy of bank account statement of the investor. On perusal of the same, I find that the investor received funds from M/s Juni Indore Sakh Sahkrita Mydt. The appellant has also filed coy of bank account statement of M/s Juni Indore Sakh Sahkrita Mydt. On perusal of the same, I find that M/s Juni Indore Sakh Sahkrita Mydt has maintained bank balance of Rs. 43,60,293/- out of which sum of Rs.40,00,000/- was transferred to appellant, however, the balance amount of Rs. 10,00,000/- was transferred after cash deposit of Rs. 11,00,000/-. Therefore, the genuineness and source of source to the extent of Rs. 40,00,000/- is explained. The appellant has also not Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 13 of 36 filed any confirmation in this regard for the investor company. The creditworthiness, as discussed above, is also not proven. Therefore, the genuineness of the transaction is not proven satisfactorily.” The assessee has received application money of Rs. 50,00,975/- from M/s Pramila. The CIT(A) has clearly accepted that the assessee filed bank statement of M/s Pramila which reflects the moneys having been invested in assessee through banking channel. Even the CIT(A) has gone into the source available to M/s Pramila and clearly accepted genuineness and source to the extent of Rs. 40,00,000/- but then he has only suspected the source of excess (which would be Rs. 10,00,975/-) since there was a prior cash deposit of Rs. 10,00,000/- in the bank a/c of M/s Pramila. Interestingly, the CIT(A) has, in the end, sustained entire addition of Rs. 50,00,975/- made by AO. In our considered view, there is a serious fallacy in the adjudication of CIT(A). Firstly, when he has admitted genuineness and source of Rs. 40,00,000/-, how could there be sustenance of entire addition? Be that as it may, even for cash deposit of Rs. 10,00,000/- in the bank a/c of M/s Pramila, it is not a case of revenue that the same was deposited by assessee. Needless to mention that the investor company has made investment of Rs. 50,00,975/- in shares of assessee, out of which the investment of Rs. 50,00,000/- was made through banking channel and only a small amount of Rs. 975/- was in cash. The assessee has also filed statutory Form-2 under Companies Act i.e. return of allotment of shares with ROC, Gwalior. Thus, the conclusion taken by lower authorities that M/s Pramila was a shell company or that the receipt of share application money therefrom was not proved by assessee, is not a valid conclusion. Hence, the addition made by AO of Rs. 50,00,975/- qua the share application money received from M/s Pramila is not sustainable and we delete the same. Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 14 of 36 12. In view of above discussion, assessee’s Ground No. 2 is allowed. Ground No. 3: 13. In this ground, the assessee claims that the CIT(A) was not justified in confirming the addition of Rs. 15,00,000/- made by AO u/s 68 on account of unexplained unsecured loan taken from M/s Palasia Leasing & Investment Pvt. Ltd. 14. On perusal of impugned order passed by CIT(A), we find that the CIT(A) has adjudicated this issue as under: (i) Firstly, in Para 3.1.2 / Page 14-25 of impugned order, the CIT(A) has dealt a legal ground raised by assessee that the AY 2013-14 was unabated assessment-year and the AO did not have any incriminating material found during search qua this addition, hence addition cannot be made in the proceedings of section 153A. The CIT(A) has, following the decision in PCIT Vs. Abhishar Buildwell Pvt. Ltd. in Civil Appeal No. 6580 of 2021 dated 24.04.2023 (Supreme Court), accepted assessee’s ground and held that the addition made by AO is legally not sustainable. (ii) Then, in Para 3.4.3 / Page 68-93 of impugned order, the CIT(A) has upheld addition on merit by observing thus: “……Hon'ble jurisdictional ITAT Indore bench in the case of DCIT vs M/s Modern Laboratories ITA No 277/Ind/2014 dated 10.08.2017 by placing reliance upon the decision of Hon'ble jurisdictional MP High Court, in the case of case of CIT v. Rathi Finlease Ltd. [2008] 215 CTR (MP) 429 has sustained the addition under section 68 of the Act in respect of M/s. Plasia Leasing & Investment Pvt. Ltd. In para 11, the Hon'ble High Court held that in the case of Palasia Leasing & Finance Company, entry was not accepted on the ground that merely by filing the confirmation letter, the burden could not be discharged when the inquiries reveal that Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 15 of 36 the company was not in existence nor any books of accounts or directors were traceable. Thus, from the above, it is very clear that identity of the company PLIPL has not been proved by the appellant.” (iii) Finally, in Para 3.4.5 / Page 93, the CIT(A) has concluded as under: “3.4.5 Although, I have confirmed the addition of Rs. 15,00,000/- in AY 2013-14, …… on account of unexplained unsecured loan u/s 68 of the Act on merit, however, the above amount of income shall not be considered for determining total income of the appellant for the AY 2013-14, …… unless the decision taken in para 3.1.2 of this order is reversed by the higher court.” 15. Thus, the CIT(A) has though deleted addition on illegality following the decision of Hon’ble Supreme Court in PCIT Vs. Abhishar Buildwell Pvt. Ltd but upheld on merit following the decision of ITAT, Indore in DCIT vs M/s Modern Laboratories ITA No 277/Ind/2014 dated 10.08.2017 which in turn has again relied upon the decision of Hon'ble jurisdictional MP High Court in CIT v. Rathi Finlease Ltd. [2008] 215 CTR (MP) 429. Finally, the CIT(A) has concluded that although he has confirmed the addition of Rs. 15,00,000/- on merit, however, this amount of income shall not be considered for determining total income of the appellant for the AY 2013-14 unless the decision taken in para 3.1.2 of his order is reversed by the higher court. We do not find any error in this adjudication made by CIT(A) which is based on pre-existing court rulings. Therefore, the order of CIT(A) qua this issue is upheld. Consequently, all pleadings made by Ld. AR and the assessee’s ground No. 3 are dismissed. 16. In the result, the assessee’s appeal of AY 2013-14 is partly allowed. 17. Now, we take up assessee’s appeals of AY 2014-15 and 2015-16 together since the issues are similar and the adjudication would also be common. The assessee has raised following grounds in these appeals: Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 16 of 36 Assessees’ IT(SS)A No. 64/Ind/2023 of AY 2014-15: “1. The Ld. AO was not justified in passing the order, which is bad-in-law, void ab initio, barred by limitation, illegal, contrary to the facts and circumstances of the case, liable to be annulled. 2. That Ld. CIT(A) was not justified in confirming the addition of Rs.70,00,000/- u/s 68 on merits as unsecured loan which is bad-in-law, void ab initio, barred by limitation, illegal, contrary to the facts and circumstances of the case, liable to be annulled.” Assessee’s IT(SS)A No. 65/Ind/2023 of AY 2015-16: “1. The Ld. AO was not justified in passing the order, which is bad-in-law, void ab initio, barred by limitation, illegal, contrary to the facts and circumstances of the case, liable to be annulled. 2. That Ld. CIT(A) was not justified in confirming the addition of Rs. 20,00,000 u/s 68 on merits as unsecured loan which is bad-in-law, void ab initio, barred by limitation, illegal, contrary to the facts and circumstances of the case, liable to be annulled.” Ground No. 1 of both years: 18. These grounds are general and were not pleaded during hearing. Therefore, they do not require any adjudication from us. Ground No. 2 of both years: 19. In these grounds, the assessee claims that the CIT(A) was not justified in confirming the addition of Rs. 70,00,000/- in AY 2014-15 and Rs. 20,00,000/- in AY 2015-16 made by AO u/s 68 on account of unexplained unsecured loans. 20. Ld. AR for assessee drew us to Para 9 of assessment-order where the AO has made impugned additions in respect of loans taken by assessee from different lenders as under: AY Amount of Loan Taken from Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 17 of 36 2014-15 70,00,000/- M/s Star Vision Media Private Ltd [“M/s SMPL”]. 2015-16 20,00,000/- M/s Excellent Infrabuild Pvt. Ltd. [“M/s EIPL”]. 21. Referring to AO’ notings in the very same para, Ld. AR showed that the AO has made impugned additions for three reasons, namely (i) he has considered the lenders as shell companies, (ii) he has noted that the assessee failed to file bank statements of lenders, and (iii) he has noted that summons u/s 131 issued to some of the lenders returned unserved and some were not responded by lenders. 22. Ld. AR next carried us to the order of CIT(A). He submitted that the CIT(A) has deleted addition on legality ground but upheld on merit. To demonstrate this, he carried us to following paras of orders of CIT(A): (i) Firstly, Ld. AR referred Para 3.1.2 / Page 14-25 wherein the CIT(A) has dealt a legal ground raised by assessee that the AY 2014-15 and 2015-16 were unabated assessment-years and the AO did not have any incriminating material found during search qua this addition, hence addition cannot be made in the proceedings of section 153A. The CIT(A) has, following the decision in PCIT Vs. Abhishar Buildwell Pvt. Ltd. in Civil Appeal No. 6580 of 2021 dated 24.04.2023 (Supreme Court), accepted assessee’s ground and held that the addition made by AO is legally not sustainable. (ii) Then, Ld. AR referred Para 3.4.3-3.4.4 / Page 68-93 wherein the CIT(A) has upheld addition on merit as under: “[H] Starvision Media Pvt Ltd (In short SMPL):- Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 18 of 36 ➤Identity of the investor company Regarding the identity of SMPL the appellant before AO as well as before me submitted that SMPL is a private limited company duly registered under the erstwhile Companies Act, 1956 having PAN-AALCS8605F. The registered office of SMPL is situated at D-25A 1st floor, Laxmi Nagar, Delhi-110092. The lender company has also filed return of income for AY 2014-15 on 09.02.2015. Thus, from the above, it is very clear that identity of the company SMPL has been proved by the appellant with supportive documents. ➤Genuineness of the transaction Regarding the genuineness of the transaction the appellant submitted that all the transactions have taken place through account payee cheques. Appellant in support has filed copies of bank account statement of SMPL. A copy of confirmation letter of SMPL has also been filed by the appellant. From the above it is very clear that all the transactions have been executed through banking channels and the AO has simply doubted the genuineness of the transaction without having any incriminating material on record. Further, the appellant AY 2014-15 has credited interest of Rs. 2,34,569/- after deducting TDS of Rs. 23,457/-. Therefore, the genuineness of the transaction is explained by the appellant with supportive documents. ➤Creditworthiness of the investor company Regarding the creditworthiness of SMPL the appellant has filed copies of audited financial statements of SMPL along with Auditors' Report, for AY 2014-15. On perusal of audited balance sheet for AY 2014-15, it was observed that the company SMPL as on 31.03.2014 have owned funds of Rs. 1,39,84,041/- by way of share capital and reserves & surplus. However, on perusal of balance sheet, I find that the same is undated and is not signed by all the directors and has also not been signed by the auditor. Therefore, the genuineness of the financial statements is found to be doubtful. Further, the lender has shown meager income of Rs. 1,61478/- only. Therefore, the creditworthiness of the lender is not proved by the appellant with supportive credible evidences. XXX [A] Excellent Infrabuild Pvt Ltd (In short EIPL):- ➤Identity of the investor company Regarding the identity of EIPL the appellant before AO as well as before me submitted that EIPL is a private limited company duly registered under the erstwhile Companies Act, 1956 having PAN-AACCE1956C. The registered office of EIPL is situated at 282, Rabindra Sarani, Kolkata-700007. The lender company has also filed return of income for AY 2015-16 on 19.03.2016. Thus, from the above, it is very clear that identity of the company EIPL has been proved by the appellant with supportive documents. ➤Genuineness of the transaction Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 19 of 36 Regarding the genuineness of the transaction the appellant submitted that all the transactions have taken place through account payee cheques. Appellant in support has filed copies of bank account statement of EIPL. A copy of confirmation letter of EIPL has also been filed by the appellant. From the above it is very clear that all the transactions have been executed through banking channels and the AO has simply doubted the genuineness of the transaction without having any incriminating material on record. Therefore, the genuineness of the transaction is explained by the appellant with supportive documents. ➤Creditworthiness of the investor company Regarding the creditworthiness of EIPL the appellant has filed copies of audited financial statements of EIPL along with Auditors Report, for AY 2015-16. On perusal of audited balance sheet for AY 2015-16, it was observed that the company EIPL as on 31.03.2015 have owned funds of Rs. 5,30,27,420/- by way of share capital and reserves & surplus. However, on perusal of balance sheet, I find that the same is not signed by any directors and has only been signed by the auditor. Therefore, the genuineness of the financial statements is found to be doubtful. Therefore, the creditworthiness of the lender is not proved by the appellant with supportive credible evidences. XXX 3.4.3 Furthermore, on perusal of assessment order, it has been found that the Ld. AO has not made any independent inquiry to disprove the identity creditworthiness and genuineness of transaction. The Ld. AO has also not enquired into the nature and source of unsecured loans. The Ld. AO has only given emphasis on some enquiries which may have been conducted in the past and given a general findings by making remark 'Confirmed shell company as per the investigation carried on by Income Tax Department' and made the impunged additions. No specific finding about the companies proving the transactions done in the year under consideration bogus, has been given in the assessment order. The appellant has filed ample information and documents to discharge its onus as envisaged in section 68 of the Act. It has been found that all loans had been received by the appellant from the companies under consideration through proper banking channel and the appellant has paid interest thereon after deducting applicable TDS. Repayment of loans have been done and interest thereon has been paid and due TDS has also been made in few of the cases. All transactions are done through banking channel. No investigation has been conducted to discredit such information or documents. 3.4.4 In view of discussions made in preceding paras, the appellant failed to discharge its onus of proving identity and creditworthiness of the lender and therefore, addition of Rs. 15,00,000/- in AY 2013-14 (M/s Palasia Leasing & Investment Pvt Ltd.), Rs. 70,00,000/- in AY 2014-15 (M/s Starvision Media Pvt. Ltd) & Rs. 20,00,000/- in AY 2015-16 (M/s Excellent Infrabuild Pvt. Ltd.) are hereby confirmed and appellant gets relief of Rs. 4,85,00,000/- in AY 2013-14, Rs. 4,38,00,000/- in AY 2014-15. Therefore, appeal on these grounds is partly allowed.” (iii) Then, he carried us to Para 3.4.5 / Page 93 wherein the CIT(A) has concluded as under: Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 20 of 36 “3.4.5 Although, I have confirmed the addition of ….. Rs. 70,00,000/- in AY 2014-15 & Rs. 20,00,000/- in AY 2015-16 on account of unexplained unsecured loan u/s 68 of the Act on merit, however, the above amount of income shall not be considered for determining total income of the appellant for the AY ……. 2014-15 & 2015-16 respectively unless the decision taken in para 3.1.2 of this order is reversed by the higher court.” 23. Having shown thus, Ld. AR made following submissions qua the loans taken from respective lenders: [A] M/s SMPL:- (i) That the AO has wrongly mentioned that the bank statement of lender was not filed. In fact, the assessee filed bank statement of lender to AO vide page 7 of reply-letter dated 20.07.2021 filed in response to notice u/s 142(1), copy at Page 4-13 of Written-Synopsis [filed in Revenue’s Appeal IT(SS)A No. 16/Ind/2024]. The reply-letter of assessee is duly acknowledged by the seal of AO’s office. (ii) With regard to AO’s noting of summon u/s 131, Ld. AR has filed following submission in Written-Synopsis and reiterated the same during hearing: “3. Issue of summons: a. Any summon issued is not in the knowledge of the assessee and such an action was behind the back of the assessee. b. The summon so issued, if any, was never brought on record. c. It is unknown that to which parties, the summon was issued. Whether summon was issued to present lender company or not is not known. d. Further, the summon returned \"un-served in many cases\" and \" no reply was received in remaining cases\". It is unknown whether the summon was served or whether reply was received or not. e. Lastly, in any case, it is a trite law that even if the parties do not respond to the summon, the assessee cannot be blamed for it. Reliance is placed on Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 21 of 36 Orissa Corporation 25 Taxman 80 (SC); Rohini AL Builders 127 Taxman 523 (Guj.); Nathu Ram Premchand 49 ITR 461 (All).” (iii) That the CIT(A) has passed an adverse order by mentioning that genuineness of transaction is explained by supportive documents but the creditworthiness of lender is not explained. He exclaimed how it can be? He submitted that (i) the loan was taken through banking channel, (ii) A/c confirmation was filed, (iii) ITR of lender was filed, (iv) Bank statement of lender was filed, and (v) Ledger A/c of lender in the books of assessee was filed. All these documents are also placed in Paper-Book at Page 63-67. Thus, the assessee discharged initial onus. (iv) He further submitted a very important point that the assessee paid interest to the lender after deducting TDS. The TDS was remitted to Income-tax Department which is given effect to without any objection. That apart, the interest expenditure claimed by assessee as deduction is not disallowed by AO. [B] M/s EIPL:- (i) That the AO has wrongly mentioned that the bank statement of lender was not filed. In fact, the assessee filed bank statement of lender to AO vide page 8 of reply-letter dated 20.07.2021 filed in response to notice u/s 142(1), copy at Page 4-13 of Written-Synopsis [filed in Revenue’s Appeal IT(SS)A No. 16/Ind/2024]. The reply-letter of assessee is duly acknowledged by the seal of AO’s office. Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 22 of 36 (ii) With regard to AO’s noting of summon u/s 131, Ld. AR made same pleadings as in case of SMPL (noted above). (iii) That the CIT(A) has passed an adverse order by accepting identity of the lender but not accepting the creditworthiness of lender and genuineness of transaction. He submitted that (i) the loan was taken through banking channel, (ii) ITR of lender was filed, and (iii) Bank statement of lender was filed. All these documents are also filed in Paper-Book at Page 69-70. Thus, the assessee discharged initial onus. (iv) He further submitted a very important point that the assessee paid interest to the lender after deducting TDS. The TDS was remitted to Income-tax Department which is given effect to without any objection. That apart, the interest expenditure claimed by assessee as deduction is not disallowed by AO. 24. Ld. DR for revenue relied upon orders of lower authorities. 25. We have considered rival submissions of both sides and perused the case- record including the documents held in Paper-Book to which our attention has been drawn. We have also carefully examined the orders of lower-authorities. After a careful consideration, we find that there are identical reasons assigned by AO for making additions in both cases. The first reason given by AO is that the lenders were shell companies but the assessee has filed sufficient documentary evidences including ITRs and Bank statements of lenders from which identity of lenders is clearly established. Even the CIT(A) has also accepted identity of both lenders. The Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 23 of 36 revenue is not against the acceptance of CIT(A). Therefore, the first objection of AO is dissolved. The second objection of AO that the assessee failed to furnish bank statements of lenders is clearly wrong since the assessee has filed bank statements to AO alongwith reply-letter dated 20.07.2021, copy of which is placed on record by Ld. AR alongwith Written-Submission. Hence, the second objection is also dissolved. The third objection of Ld. AO is that the summons u/s 131 issued to some of the lenders returned unserved and some were not responded by lenders. For this, the assessee has a strong merit in claiming that the summon issued is not in the knowledge of the assessee and such action was behind the back of the assessee; that the AO has made a general statement that summon returned \"un-served in many cases\" and \"no reply was received in remaining cases\", it is unknown whether the summon was served or whether reply was received or not to these lenders; and that even if the parties do not respond to the summon, the assessee cannot be blamed as held in Rohini AL Builders 127 Taxman 523 (Guj.) [The case of Rohini AL Builders shall be discussed in later para]. That apart, it is a fact that the loans were taken through banking channel and the assessee has filed sufficient documents in the shape of (i) ITRs of lenders, (ii) Bank statement of lenders and thus discharged the initial onus. It is also a notable point that the assessee has paid interest to lenders after deducting TDS. The TDS was remitted to Income-tax Department which is given effect to without any objection. That interest expenditure claimed by assessee as deduction is also allowed by AO as deduction. When these are the facts, the AO is not correct in treating the loans as unexplained credits and the CIT(A) is also not correct in approving AO’s order. Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 24 of 36 26. Interestingly, we also notice the following Para of impugned order in which the CIT(A) has given positive findings for assessee and yet upheld the additions on merit, which again is wrong: Para 3.4.3 / Page 92: “3.4.3 Furthermore, on perusal of assessment order, it has been found that the Ld. AO has not made any independent inquiry to disprove the identity creditworthiness and genuineness of transaction. The Ld. AO has also not enquired into the nature and source of unsecured loans. The Ld. AO has only given emphasis on some enquiries which may have been conducted in the past and given a general findings by making remark 'Confirmed shell company as per the investigation carried on by Income Tax Department' and made the impunged additions. No specific finding about the companies proving the transactions done in the year under consideration bogus, has been given in the assessment order. The appellant has filed ample information and documents to discharge its onus as envisaged in section 68 of the Act. It has been found that all loans had been received by the appellant from the companies under consideration through proper banking channel and the appellant has paid interest thereon after deducting applicable TDS. Repayment of loans have been done and interest thereon has been paid and due TDS has also been made in few of the cases. All transactions are done through banking channel. No investigation has been conducted to discredit such information or documents.” 27. In view of above discussions and reasons stated therein, we are inclined to hold that the additions made by AO are not sustainable on merit even. Consequently, we delete the impugned additions on merit while upholding deletion already done by CIT(A) on illegality basis. 28. In the result, the assessee’s appeals of AY 2014-15 and 2015-16 are allowed. Revenue’s IT(SS)A No. 16/Ind/2024 for AY 2016-17: 29. The grounds raised in this appeal are as under: “1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 5,91,00,000/- made on account of unsecured loans made u/s 68 of the Act taken from M/s East West Finvest India Limited? Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 25 of 36 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 5,91,00,000/- made on account of unsecured loans made u/s 68 of the Act taken from M/s East West Finvest India Limited without appreciating that: a) mere submission of ITR, PAN, confirmation and Bank Statement by the lender does not necessarily prove creditworthiness of the lender and genuineness of transaction? b) perusal of Balance Sheet of M/s East West Finvest India Limited reveals that the said company has no fixed assets, it has huge accumulated losses and reserves are mainly from \"Security premium\" & \"Share Forfeit Reserve\" and during the year, it incurred losses of Rs. 5.69 crores? c) perusal of the lender company revealed that it advanced loan to the assessee in 23 tranches and in each case, amounts were credited in the bank account of the company from Jay Jyoti India Pvt Ltd (a shell company) and on the same day or the very next day, the money got transferred to the assessee company? d) during the assessment proceedings, summons u/s 131 of the IT Act were issued to the lenders, however summons returned un-served in many cases and no reply was received in remaining cases? 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 55,00,000/- and Rs. 25,00,000/- made on account of unsecured loans made u/s 68 of the Act taken from Lays Impex Pvt Ltd and Neema Investment Pvt Ltd respectively on the ground that such loans pertained to different AY, without appreciating: a) that he has admitted additional evidence in contravention of the Rule 46A of the Income Tax Rules? b) Without prejudice to (a) above, the wide powers available to him under the Income Tax Act to make or cause to be made any such further enquiry as he thought fit and correct the possible mistake done by the AO (to make the addition in the correct AY), in terms of the ratio of SC decision in case of Commissioner of Income Tax Vs. Kanpur Coal Syndicate (1964) 53 ITR 225 ?” Ground No. 1 & 2: 30. In these grounds, the revenue claims that CIT(A) was not justified in deleting the addition of Rs. 5,91,00,000/- made by AO u/s 68 in respect of unsecured loans taken by assessee from M/s East West Finvest India Ltd. Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 26 of 36 31. The AO has made this addition vide Para 9 of assessment-order holding the lender as a shell company. Further, in Para 9.1, the AO noted that the assessee failed to furnish bank statement of lender and thereafter in Para 9.2, the AO also noted that the summons u/s 131 were issued to various lenders but they returned unserved in many cases and no reply was received in remaining cases. 32. During first-appeal, the CIT(A) has reversed AO’s order accepting the lender as a genuine company. Therefore, at first we re-produce the order passed by CIT(A) in this regard: “3.4.4 Furthermore, after analyzing and considering evidences on record, I find that the appellant before the AO as well as before me in order to explain identity & creditworthiness of the lenders and genuineness of the transactions qua loan of Rs. 5,91,00,000/- from M/s East West Finvest India Limited, has filed following details of the lenders and for itself :- (i) Confirmation of lender. (ii) Bank account statement of lender. (iii) ITR of lender company. (iii) Bank Statement of the appellant. (iv) Copies of audited financial accounts. (v) Copy of data as per MCA portal (vi) Copy of form 16A for deduction of TDS and interest payment. I have examined the facts of the appellant's case which are discussed and decided hereunder:- The appellant during the year under consideration has taken loan of Rs. 5,91,00,000/- from M/s East West Finvest India Limited. The appellant during assessment as well as appellate proceedings filed various documentary evidences such as confirmation the lender, bank account statement of the lender, copy of ITR, details of interest paid and TDS deducted, copy of audited accounts. PAN & address details etc. My discussion and decision with regard to the subject issue is as follows:- M/s East West Finvest India Limited (In short EFIPL):- Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 27 of 36 ➤Identity of the investor company Regarding the identity of EFIPL the appellant before AO as well as before me submitted that EFIPL is a private limited company duly registered under the erstwhile Companies Act, 1956 having PAN-AADCE1236G. The registered office of EFIPL is situated at Kamla Hai Villa, Besides Apollo Society, Vidhya Nagar Main Road, Bilaspur, Chhattisgar - 495001. The lender company has also filed return of income for AY 2016-17 on 16.10.2016. Most importantly, the lender company is a certified NBFC as per Certificate of Registration B-03.00161 dated 20.12.2002 issued by Reserve Bank of India. Thus, from the above, it is very clear that identity of the company EFIPL has been proved by the appellant with supportive documents. ➤Genuineness of the transaction Regarding the genuineness of the transaction the appellant submitted that all the transactions have taken place through account payee cheques. Appellant in support has filed copies of bank account statement of EFIPL. A copy of confirmation letter of EFIPL has also been filed by the appellant. From the above it is very clear that all the transactions have been executed through banking channels and the AO has simply doubted the genuineness of the transaction without having any incriminating material on record. Further, the appellant AY 2016-17 has credited interest of Rs. 43,60,340/- after deducting TDS of Rs.4,36,034/-. Therefore, the genuineness of the transaction is explained by the appellant with supportive documents. ➤Creditworthiness of the investor company Regarding the creditworthiness of EFIPL the appellant has filed copies of audited financial statements of EFIPL along with Auditors Report, for AY 2016-17. On perusal of audited balance sheet for AY 2016-17, it was observed that the company EFIPL as on 31.03.2016 have owned funds of Rs. 241,93,90,959/- by way of share capital and reserves & surplus. Therefore, the lender company has sufficient funds in the form of share capital and reserves & surplus which have been given to appellant as unsecured loans. Further, the lender is a registered NBFC and therefore, its creditworthiness cannot be doubted. Therefore, the creditworthiness of the lender is proved by the appellant with supportive evidences. It is worth mentioning here that in the case of Mr Girish Kumar Sharda (IT(SS)A No. 30 to 33/Ind/2012 dated 30.01.2014), Hon'ble ITAT Indore has held that M/s. East West Finvest India Limited is genuine company and is not a dummy company. The following are judicial Pronouncements wherein it has been held that the unsecured loans advanced by M/s. East West Finvest India Limited was genuine: S.No. Judicial Pronouncement Tribunal Citation 1 M/s Shalimar Housing & Finance Limited ITAT ‘G’ Bench Mumbai ITA No. 4079/Mum/2019 2 Girish Kumar Sharda ITAT, Indore ITA Nos. 30 to 33/Ind/2012 & CO Nos. 19 to 22/Ind/2014 Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 28 of 36 3 Pramod Kumar Sethi ITAT, Indore ITA No.383, 383 and 392/Ind/2014 4 M/s Tirupati Construction Ujjain ITAT, Indore ITA No.522/Ind/2014 Considering the above findings of the Hon'ble ITAT, the lender company cannot be declared as dummy company. In this case cash credit in the name of this lender was treated as genuine by the Hon'ble ITAT. Following the decision of jurisdictional ITAT, cash credit in the name of EFIPL is treated as genuine. On perusal of the above, it is evident that the appellant has filed necessary documents to prove identity, creditworthiness of lender company and also filed bank statement reflecting the transactions. In my opinion, nothing in form of cogent evidences has been brought on record by the Id. AO in support of his findings. The Id. A.O should have acted on the details furnished by the appellant, but he did not do so. Hon'ble Delhi High Court in the case of Oasis Hospitalities P. Ltd. reported in 333 ITR 119 (2011) has held as under: \"11. It is clear from the above that the initial burden is upon the assessee to explain the nature and source of the share application money received by the assessee. In order to discharge this burden, the assessee is required to prove: (a) Identity of shareholder; (b) Genuineness of transaction; and (c) Creditworthiness of shareholders. 12. In case the investor/shareholder is an individual, some documents will have to be filed or the said shareholder will have to be produced before the AO to prove his identity. If the creditor/subscriber is a company, then the details in the form of registered address or PAN identity, etc. can be furnished. 13. Genuineness of the transaction is to be demonstrated by showing that the assessee had, in fact, received money from the said shareholder and it came from the coffers from that very shareholder. The Division Bench held that when the money is received by cheque and is transmitted through banking or other indisputable channels, genuineness of transaction would be proved. Other documents showing the genuineness of transaction could be the copies of the shareholders register, share application forms, share transfer register, etc. 14. As far as creditworthiness or financial strength of the creditor/ subscriber is concerned, that can be proved by producing the bank statements of the creditors/subscribers showing that it had sufficient balance in its accounts to enable it to subscribe to the share capital. This judgment further holds that once these documents are produced, the assessee would have satisfactorily discharged the onus cast upon him. Thereafter, it is for the AO to scrutinize the same and in case he nurtures any doubt about the veracity of these documents to probe the matter further. However, to discredit the documents produced by the assessee on the aforesaid aspects, there has to be some Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 29 of 36 cogent reasons and materials for the AO and he cannot go into the realm of suspicion.\" Considering the above decision, the appellant had discharged its onus by producing ample evidences. Without any investigation and cogent material, Id. AO treated the same as unexplained which is not sustainable in view of following judgments: (i). Divine Leasing & Finane Ltd. (2008) 299 ITR 268 (Delhi), wherein it was held that: \"16. In this analysis, a distillation of the precedents yields the following propositions of law in the context of s. 68 of the IT Act. 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 transmitted through banking or other indisputable channels; (3) the creditworthiness or financial strength of the creditor/subscriber: (4) if relevant details of the address or PAN identity of the creditor/subscriber are furnished to the Department along with copies of the shareholders register, share application forms, share transfer register, etc. it would constitute acceptable proof or acceptable explanation by the assessee; (5) the Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices; (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessee nor should the AO take such repudiation at face value and construe it, without more, against the assessee; (7) the AO is duty bound to investigate the creditworthiness of the creditor/ subscriber, the genuineness of the transaction and the veracity of the repudiation. (ii). CIT v. Kamdhenu Steel & Alloys Limited and Other (2014) 361 ITR 220 (Delhi) wherein it is held that: \"38. Even in that instant case, it is projected by the Revenue that the Directorate of Income Tax (Investigation) had purportedly found such a racket of floating bogus companies with sole purpose of lending entries. But, it is unfortunate that all this exercise if going in vain as few more steps which should have been taken by the Revenue in order to find out causal connection between the case deposited in the bank accounts of the applicant banks and the assessee were not taken. It is necessary to link the assessee with the source when that link is missing, it is difficult to fasten the assessee with such a liability.\" 3.4.5 Furthermore, on perusal of assessment order, it has been found that the Ld. AO has not made any independent enquiry to disprove the identity, creditworthiness and genuineness of transaction. The Ld. AO has also not enquired into the nature and source of unsecured loans. The Ld. AO has only given emphasis on some enquiries which may have been conducted in the past and given a general findings by making remark 'Confirmed shell company' as per the investigation carried on by Income Tax Department' and made the said addition. No specific finding about the company proving the transactions done in the year under consideration bogus, has been given in the assessment order. The appellant has filed ample information and documents to discharge its onus as envisaged in section 68 of the Act. It has been Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 30 of 36 found that the loan had been received by the appellant from the company under consideration through proper banking channel and the appellant has paid interest thereon after deducting applicable TDS. All transactions are done through banking channel. No investigation has been conducted to discredit such information or documents. 3.4.6 In view of discussion made in preceding paras, the appellant has discharged its onus of proving identity and creditworthiness of the lender and genuineness of the transaction and therefore, addition of Rs. 5,91,00,000/- in AY 2016-17 is hereby directed to be deleted. 3.4.7 Accordingly, appeal on this ground is allowed.” 33. Thus, the CIT(A) has vehemently analysed various documentary evidences, as mentioned in impugned order, filed by assessee and held that all three ingredients of section 68, namely the identity and creditworthiness of lender and genuineness of transaction were satisfied. Further, the CIT(A) has also followed one decision of ITAT, Mumbai and three decisions of ITAT, Indore wherein the additions made by assessing authorities in respect of loans taken from the very same lender i.e. M/s East West Finvest India Ltd. were deleted. These decisions as mentioned in CIT(A)’s order are (i) M/s Shalimar Housing & Finance Ltd., ITA No. 4079/Mum/2019 (ITAT, Mumbai), (ii) Girish Kumar Sharda, IT(SS)A No. 30 to 33/Ind/2012 order dated 30.01.2014 (ITAT, Indore), (iii) Pramod Kumar Sethi, ITA No. 382, 383 and 392/Ind/2014 (ITAT, Indore) and (iv) M/s Tirupati Construction, ITA No. 522/Ind/2014 (ITAT, Indore). 34. Before us, Ld. DR for revenue relied upon Para No. 20 of order of Hon’ble Calcutta High Court in PCIT (Central)-2 Vs. BST Infratech Ltd. (2024) 161 taxmann.com 668 (Calcutta), to support the addition made by AO: “20. With regard to the identity, creditworthiness and genuineness of the transaction and the onus of prove, the Hon'ble Court held as follows:- Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 31 of 36 “30. What we perceive and regard as correct position of law is that the court or tribunal should be convinced about the identity, creditworthiness and genuineness of the transaction. The onus to prove the three factum is on the assessee as the facts are within the assessee's knowledge. Mere production of incorporation details, PAN Nos. or the fact that third persons or company had filed income tax details in case of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up. These facts indicate and reflect proper paper work or documentation but genuineness, creditworthiness, identity are deeper and obtrusive. Companies no doubt are artificial or juristic persons but they are soulless and are dependent upon the individuals behind them who run and manage the said companies. It is the persons behind the company who take the decisions, controls and manage them. 31. Identity, creditworthiness or genuineness of the transaction is not established by merely showing that the transaction was through banking channels or by account payee instrument. It may, as in the present case required entail a deeper scrutiny. It would be incorrect to state that the onus to prove the genuineness of the transaction and creditworthiness of the creditor stands discharged in all cases if payment is made through banking channels. Whether or not onus is discharged depends upon facts of each case. It depends on whether the two parties are related or known to each; the manner or mode by which the parties approached each other, whether the transaction was entered into through written documentation to protect the investment, whether the investor professes and was an angel investor, the quantum of money, creditworthiness of the recipient, the object and purpose for which payment/investment was made etc. These facts are basically and primarily in knowledge of the assessee and it is difficult for revenue to prove and establish the negative. Certificate of incorporation of company, payment by banking channel, etc. cannot in all cases tantamount to satisfactory discharge of onus. The facts of the present case noticed above speak and are obvious. What is unmistakably visible and apparent, cannot be spurred by formal but unreliable pale evidence ignoring the patent and what is plain and writ large.” 35. In reply, Ld. AR for assessee made following submissions: (i) That in Para 9.1 of assessment-order, the AO has wrongly mentioned that the bank statement of lender was not filed. In fact, the assessee filed bank statement of lender to AO vide page 9 of reply-letter dated 20.07.2021 filed in response to notice u/s 142(1), copy at Page 4-13 of Written-Synopsis. The reply-letter of assessee is duly acknowledged by the seal of AO’s office. Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 32 of 36 (ii) With regard to AO’s noting of summon u/s 131, Ld. AR has filed following submission in Written-Synopsis and reiterated the same during hearing: “6. Ld. AO also noted on pg. 44 (top) that summons u/s. 131 of the Income- tax Act were issued asking for requisite loan details, however, the same returned un- served in many cases and no reply was received in remaining cases. It is submitted that: a. Any summon issued is not in the knowledge of the assessee and such an action was behind the back of the assessee. b. The summon so issued, if any, was never brought on record. c. It is unknown that to which parties, the summon was issued. Whether summon was issued to East West Finvest India Ltd or not is not known. d. Further, the summon returned \"un-served in many cases\" and \" no reply was received in remaining cases\". It is unknown whether the summon was served or whether reply was received or not. e. Lastly, in any case, it is a trite law that even if the parties do not respond to the summon, the assessee cannot be blamed for it. Reliance is placed on Orissa Corporation 25 Taxman 80 (SC); Rohini AL Builders 127 Taxman 523 (Guj.); Nathu Ram Premchand 49 ITR 461 (All).” (iii) That the decision of BST Infratech Ltd. (supra) relied by Ld. DR dealt a case of issue of shares whereas in present appeal, we are concerned with unsecured loan taken by assessee. Moreover, in BST Infratech Ltd. (supra), there were multiple “surrounding circumstances” of adverse nature as noted in Para 6-10 of Hon’ble High Court’s order but in present case, there is no “surrounding circumstance” explained by AO in assessment-order. Therefore, the BST Infratech Ltd. (supra) is clearly distinguishable on facts and does not have any application to present assessee’s case. (iv) That the CIT(A) has passed a vehement order after considering contemporary evidences filed by assessee to establish the three ingredients of section 68. Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 33 of 36 Further, the CIT(A) has adopted the view taken by ITAT, Mumbai & ITAT, Indore qua the very same lender. Therefore, the order of CIT(A) is correct and in order and deserves to be upheld. 36. In rejoinder, Ld. DR submitted that it is immaterial where share capital or unsecured loan is involved. He submitted that in either case, the requirement of section 68 remains same. 37. We have considered rival submissions of both sides and carefully perused the orders of lower authorities. We find that the AO has made impugned addition for three reasons, namely (i) he has considered the lender company M/s East West Finvest India Ltd. as a “shell company”, (ii) he has noted that the assessee failed to file bank statement of lender, and (iii) he has noted that summons u/s 131 issued to some of the lenders were returned unserved and some were not responded by lenders. The observation No. (i) of AO is reversed by CIT(A) by analysing various documents of lender/transactions filed by assessee and also following the earlier decisions of ITAT, Mumbai and ITAT, Indore. Ld. DR for revenue could not show as to why those decisions relied by Ld. CIT(A) are not applicable to present case. The observation No. (ii) of AO is successfully also dislodged by Ld. AR by showing that the bank statement of lender was in fact filed to the AO alongwith reply-letter dated 20.07.2021 and the AO has made an incorrect finding. So far as observation No. (iii) of AO is concerned, Ld. AR has a strong merit in submitting that the summon u/s 131 was never brought to the assessee’s knowledge; that the AO has made a general comment that “the same (i.e. summons) returned unserved in many cases and no reply was received in remaining cases”; that it is not known as to which parties Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 34 of 36 summons were issued and whether the summon was issued or not to the impugned lender; and that even if the lender has not responded to the summon, the assessee cannot be blamed or punished as held in CIT Vs. Orissa Corporation 25 Taxman 80 (SC) / Rohini Builders 127 Taxman 523 (Guj). In Para 7 of Rohini Builders, the Hon’ble Gujrat High Court held thus: “7…..Merely because summons issued to some of the creditors could not be served or they failed to attend before the Assessing Officer, cannot be a ground to treat the loans taken by the assessee from those creditors as non-genuine in view of the principles laid down by the Supreme Court in the case of Orissa Corporation [1986] 159 ITR 78. In the said decision the Supreme Court has observed that when the assessee furnishes names and addresses of the alleged creditors and the GIR numbers, the burden shifts to the Department to establish the Revenue's case and in order to sustain the addition the Revenue has to pursue the enquiry and to establish the lack of creditworthiness and mere non-compliance of summons issued by the Assessing Officer under section 131, by the alleged creditors will not be sufficient to draw an adverse inference against the assessee.” 38. Thus, none of the adverse observations made by AO is tenable. The Ld. DR for revenue has relied upon decision of Hon’ble Calcutta High Court in BST Infratech Ltd. (supra) but the Ld. AR has a strong merit in submitting that the facts of that case are quite different in as much as there were multiple “surrounding circumstances” of adverse nature as noted in Para 6-10 of Hon’ble High Court’s order but in present case, there is no such adverse circumstance explained by AO in assessment-order. Therefore, the decision is distinguishable on facts and cannot govern present case. 39. In view of above discussions and for the reasons stated therein, we do not find any infirmity or error in the impugned order of Ld. CIT(A). Hence, we are not inclined to make any interference with impugned order, the same is hereby upheld. These grounds of revenue are dismissed. Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 35 of 36 Ground No. 3: 40. In this ground, the revenue claims that CIT(A) was not justified in deleting the additions of Rs. 55,00,000/- and Rs. 25,00,000/- made by AO u/s 68 in respect of unsecured loans taken by assessee from M/s Lays Impex Pvt Ltd and M/s Neema Investment Pvt Ltd respectively. 41. Having heard learned Representatives of both sides and on perusal of order of CIT(A), we find that the CIT(A) has deleted this addition vide Para 3.4.3 of impugned order with an undisputable finding that these loans were not taken during the previous year 2015-16 relevant to AY 2016-17 under consideration. The loan from M/s Lays Impex Pvt Ltd was taken on 29.01.2011/13.05.2011 and loan from M/s Neema Investment Pvt Ltd was taken on 26.11.2010 and during the year under consideration, only outstanding balances were brought forward. Based on these facts, the CIT(A) has held that no addition can be made u/s 68 in AY 2016-17 under consideration. Although Ld. DR dutifully relied upon order of AO yet he could not point out any mistake in the adjudication made by CIT(A). Therefore, we uphold the order passed by CIT(A) in absence of any error or illegality. The revenue’s ground is thus dismissed. 42. In the final result, this appeal of revenue is dismissed. 43. Resultantly, Assessee’s IT(SS)A No. 63/Ind/2023 of AY 2013-14 is partly allowed; Assessee’s IT(SS)A Nos. 64 & 65/Ind/2023 of AY 2014-15 & 2015-16 are allowed and Revenue’s IT(SS)A No. 16/Ind/2024 is dismissed. Shri Govind Reality Pvt. Ltd. IT(SS)A Nos. 63 to 65/Ind/2023- AYs 2013-14 to 2015-16 IT(SS)ANo.16/Ind/2024 -A.Y.2016-17 Page 36 of 36 Order pronounced by putting on notice board as per Rule 34 of ITAT Rules, 1963 on 20/01/2025 Sd/- sd/- (VIJAY PAL RAO) (B.M. BIYANI) VICE PRESIDENT ACCOUNTANT MEMBER Indore िदनांक/ Dated : 20/01/2025 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE Sr Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore "