Income Tax Appellate Tribunal – Delhi
Prime Comfort Products P. Ltd., … vs Acit, Circle-20(1), New Delhi on 4 October, 2019 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F” NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A. No.267/DEL/2019 Assessment Year: 2015-16 Prime Comfort Products P. vs. ACIT, Circle-20(1),
Ltd., New Delhi.
L-7A (LGF), South
Extension, Part-II,
New Delhi.
TAN/PAN: AAFCP 2306Q
(Appellant) (Respondent) Appellant by: S/Shri Raj Kumar & Sumit Goel, CA
Respondent by: Shri Surender Pal, Sr.D.R.
Date of hearing: 11 07 2019
Date of pronouncement: 04 10 2019 ORDER

PER AMIT SHUKLA, JM:

The aforesaid appeal has been filed by the assessee
against the impugned order dated 20.11.2018, passed by
Commissioner of Income Tax (Appeals)-VII, New Delhi for the
quantum of assessment passed u/s.143(3) for the
Assessment Year 2015-16. In the grounds of appeal, the
assessee has raised following grounds:

“1. That under the facts and circumstances, the Ld. A.O. exceeded his jurisdiction in examining the receipt of share capital/premium for Rs.3,18,00.000 w.r.t. sec.68 of the Act although it was a limited scrutiny case for examining only the issue of shares only w.r.t. sec.56 (2) (viib), without seeking mandatory permission from PCIT
I.T.A. No.267/DEL/2019 2 for extending the scope of examination for including the examination u/s.68 of the I.T. Act and without complying with the mandatory procedure as laid down for extending the scope of limited scrutiny cases.

2. That under the facts and circumstances, both the lower authorities grossly erred in law and on merits in making and sustaining addition of Rs.3,18,00,000/- u/s.68 of the I.T. Act for share capital/premium received from Avishkar Marketing (P) Ltd., by not accepting the source in the hands of Avishkar Marketing company being loans taken by Avishkar Marketing company from following parties:-

Rs.2,68,00,000/- Raju Investment (P) Ltd. Rs. 50,00,000/- M/s Superb Developers (P) Ltd. Rs.3,18,00,000/- Total 2.1 That without prejudice, the assessee fully discharged his onus to prove the ingredients of sec.68 for Rs.3,18,00.000 and the Ld. A.O. exceeded his jurisdiction and scope of examination by extending his inquiries for source of the source of the source, which is not permissible U/s.68 of the I.T. Act.

2.2 That without prejudice, under the facts and circumstances and in view of the documents information’s and explanation furnished, even the source of the source stands fully proved.”
2. The facts in brief are that assessee-company is engaged
in the business of manufacturing various kinds of PU foam.
The return of income was filed on 24.09.2015 declaring
income of Rs.4,30,61,880/-. The assessee’s case was selected
for limited scrutiny under CASS for the reasons ‘Large Share
Premium received’. During the course of assessment
I.T.A. No.267/DEL/2019 3 proceedings and on perusal of the balance sheet, the
Assessing Officer noted that assessee has received share
capital amounting to Rs.3,68,00,250/- from M/s. Aviskar
Marketing Pvt. Ltd. M/s. Prime Holding is the holding
company of M/s. Aviskar Marketing Pvt. Ltd. and the
Directors of both the companies were common. In order to
verify the identity, genuineness and creditworthiness of M/s.
Aviskar Marketing Pvt. Ltd., notice u/s. 133(6) was issued by
the Assessing Officer asking various details. As per the
Assessing Officer, no communication was received from the
said party. However, on 14.11.2017 assessee had stated as
under:

“during the year, the equity shares of face value of Rs.10/- per share has been issued at Rs.150/- per share i.e. at premium of Rs.140/- per share. The issue price was determined as per DCF (Discounted free cash flow) method, as per accountants report dated 25.03.2015 attached. As per accountant’s report, the value per equity shares stands calculated at Rs.150.05 per share.”

3. From the confirmation, the ld. Assessing Officer has
observed that M/s. Aviskar Marketing Pvt. Ltd has no revenue
from operations or any other income during the year. It has
received unsecured loan from various parties which were then
transferred to the assessee-company towards share capital
and share premium. He has also incorporated the balance
sheet and P&L account of M/s. Aviskar Marketing Pvt. Ltd.
for the Financial Year 2014-15 which reveal that it had Share
Capital of Rs.20 lacs and Reserves and Surplus of Rs.3.76
I.T.A. No.267/DEL/2019 4 crores and Long Term Borrowings of Rs.4,15,50,000/-. The
Revenue from operation was ‘Nil’. Entire balance-sheet and
P&L account of this company has been incorporated in
assessment order from pages 3 to 5. Ld. Assessing Officer
further observed that the said company has taken unsecured
loan from M/s. Raju Investments Pvt. Ltd. which had a
closing balance of Rs.1.88 crore; and from Superb Developers
Pvt. Ltd. with closing balance of Rs.77,50,000/-. These
unsecured loans were taken immediately before subscribing
of shares along with share premium from the assessee
company. He also verified from MCA website about these
lender companies and issued notices u/s. 133(6) to these
companies for further clarification. In response, they had filed
their confirmations, bank statement (filed subsequently
during the course of assessment proceedings), audited
financial accounts and their income tax returns. Later, on
08.12.2017, a reply was received to the Assessing Officer from
M/s. Aviskar Marketing Pvt. Ltd. on e-mail, therein they had
stated as under:

“In this regard, it appears that these 05 names and the amount have been taken from the audited balance sheet of Aviskar as on 31.03.2015. In fact, the source of Rs.6,68,00,000/- given to Prime in this year is only from following 03 companies namely.

Raju Investments (P) Ltd. 2,68,00,000/- Superb Developers (P) Ltd. 50,00,000/- Mahesh Wood Products P Ltd. 50,00,000/- Total 3,68,00,000/-”
I.T.A. No.267/DEL/2019 5 4. AO further observed that these parties had not
submitted any bank statement, ledger account etc., therefore,
identity, genuineness and creditworthiness of the above
parties remain questionable and no one was produced by the
assessee. The assessee’s detailed submission wherein various
documents were filed to discharge the onus u/s.68 and the
source of the funds have been discussed in detail as
incorporated by the Assessing Officer from pages 7 to 11 of
the assessment order.

5. In sums and substance, the relevant contents of the
assessee’s reply enlisting the evidences /documents filed was
as under:

 Firstly, the documents filed to discharge the onus:-
(i) confirmation letter dated 21.11.2017;
(ii) confirmed copy of account in the books of M/s. Aviskar Marketing Pvt. Ltd.;
(iii) ITR;
(iv) Audited Financial statement for the Assessment Years 2015-16;
(v) Investment in assessee’s company appearing in the balance sheet by way of note no.6;
(vi) Form PAS-3 filed in ROC for allotment of share;
(vii) Board Resolution for allotment of shares to Aviskar;
(viii) Relevant Bank statement of Union Bank of India of Aviskar;
(ix) Share valuation report dtd. 25.03.2015 (as per DCF method);
I.T.A. No.267/DEL/2019 6 (x) Emailed reply sent to Assessing Officer directly by Aviskar on 05.12.17.

 Thus, it was stated that the source in the hands of assessee stands proved.

 Further to prove the source of the source, it was explained that M/s Aviskar had received following loans which were utilized for investment of Rs. 3,68,00,000/- in the shares of assessee as under:

Loan from Raju Investment Pvt. Ltd.: Rs.2,68,00,000/-

Loan from Superb Developers Pvt. Ltd.: Rs. 50,00,000/-

Loan from Mahesh wood Products Pvt. Ltd.: Rs. 50,00,000/-

Total Rs.3,68,00,000/-

 In support of above, following documents are attached:

o Confirmed ledger a/c of Raju Investment Pvt. Ltd in books of Aviskar for A. Y. 15-16 showing loan of Rs. 2,68,00,000/- to Aviskar.

o ITR of Raju Investment Pvt. Ltd of A. Y. 15-16.

o Confirmed ledger a/c of Superb in books of Aviskar for A. Y. 15-16 showing loan of Rs.50,00,000/- to Aviskar.

o ITR of Superb of A. Y. 15-16.

o Confirmed ledger a/c of Mahesh in books of Aviskar for A. Y. 15-16 showing loan of Rs. 50,00,000/- to Aviskar. o ITR of Mahesh of A. Y. 15-16  It was thus contended that the above documents goes to show that these loans have been given by these three parties
I.T.A. No.267/DEL/2019 7 to Aviskar. The assessee had also filed the confirmed ledger a/c of assessee in books of Aviskar, bank a/c of Aviskar. From all above documents, it was submitted that direct nexus is apparent, that is, these three companies have given loan to Aviskar which is coming in the bank a/c of Aviskar and from the bank a/c of Aviskar same amounts has been given to assessee. In the bank a/c of Aviskar, the name of the assessee is appearing showing that Aviskar has given these amounts to assessee. Thus even the source of the source stands explained by the assessee.

6. Ld. Assessing Officer without adverting to the
documents filed went to observe that assessee did not
produce any of the Directors of M/s. Aviskar Marketing Pvt.
Ltd., M/s. Raju Investments Pvt. Ltd. and Superb Developers
Pvt. Ltd., despite that assessee-company is the holding
company of M/s. Aviskar Marketing Pvt. Ltd. He has also
analyzed the bank statement of M/s. Aviskar Marketing Pvt.
Ltd. and found that there were immediate credits in the bank
account of the company before the loan was given to the
assessee and there is a regular trend in the account of the
company of credits followed by exact amount and this
company has shown very meager income. He had also
perused the bank statement of M/s. Raju Investment Pvt. Ltd.
and M/s. Superb Developers Pvt. Ltd. alleged to have given
unsecured loan to M/s. Aviskar Marketing Pvt. Ltd. After
detailed discussion, and observing that the directors of the
assessee-company and other company M/s. Aviskar
Marketing Pvt. Ltd. and other two lending companies were
I.T.A. No.267/DEL/2019 8 given loan to M/s. Aviskar Marketing Pvt. Ltd were common
but also there is no revenue from operations by subscribing
company. On these reasonings, he made the addition u/s.68
of Rs.3,18,00,000/-.

7. Ld. CIT (A) too has confirmed the said addition, rejecting
all the contentions of the ld. counsel and has also quoted
catena of judgment including the following ones;-

(i) CIT vs. Nipun Builders and Developers P. Ltd., (2013) 350 ITR 407 (Delhi).

(ii) CIT vs. N.R. Portfolio Pvt. Ltd. (2014) 2 ITR-OL 68 (Delhi) (iii) CIT v. Gold Leaf Capital Corporation Ltd. (2013) 353 ITR 163 (Delhi).

(iv) Riddhi Promoters P. Ltd. vs. CIT, (2015) 377 ITR 641 (Delhi) (v) PCIT vs. Bikram Singh, (2017) 399 ITR 407.

8. Before us, the ld counsel, Shri Raj Kumar Gupta, first of
all, challenging the addition on the ground that the same is
beyond the scope of limited scrutiny, submitted that the
reasons for selection of scrutiny under CASS was to inquire
the share premium vis-à-vis the applicability of Section
56(2)(viib) and the scrutiny for selection was not covered to
examine the share premium u/s.68. He pointed out that in
assessee’s case, during the year, assessee has received loan of
Rs.12.86 crore and had it be the selection of case u/s.68,
then same would have been entirely for whole of the amount.
Thus, the additions cannot be made or sustained in beyond
I.T.A. No.267/DEL/2019 9 the limited scrutiny guidelines. In support he also referred to
CBDT Instructions issued from time to time.

9. On the other hand, ld. DR submitted that the selection
of the case for scrutiny was to examine the large share
premium and share capital received during the year and the
Assessing Officer has right to examine the issue of share
capital from all the angles intrinsically linked with share
premium, not only Section 56(2)(viib) but also u/s.68.
Otherwise also, the purpose of selection limited scrutiny was
to flag doubtful transaction to further scrutiny by the
Assessing Officer to get fruitful and focused result and
Assessing Officer is duly empowered under the Act to call for
any information which is relevant to adjudicate the ground for
scrutiny from all angles.

10. After considering the aforesaid submission qua the
validity of additions being beyond the scope of limited
scrutiny proceedings, as noted above, the case was selected
for limited scrutiny to examine the “Large share premium
received during the year (verify applicability of Section
56(2)(viib))”. Once, the Assessing Officer has the mandate to
examine the large share premium received during the year,
then he has to examine the transaction as a whole and it does
not restrict him only to see the applicability of Section
56(2)(viib), which has bracketed to verify its applicability. AO
has to examine the transaction of share premium received
holistically, whether, same is genuine or not and its taxability
I.T.A. No.267/DEL/2019 10 from all the angles under the Act including in terms of
Section 56(2)(viib). If the selection for scrutiny under CASS
was to examine the large share premium received during the
year, then Assessing Officer cannot circumscribe himself to a
particular section and put blinkers when he during the
course of assessment proceedings find that it is taxable under
different section. His power to examine the issue
encompasses under different sections also including u/s 68.
It is not a case here that Assessing Officer has gone to issues
other than share premium received during the year, albeit he
has restricted himself to large share premium received and
genuineness of share capital only. Had it been a case that
Assessing Officer had transgressed himself to examine other
issues other than the point of selection without any approval
from the higher authority or beyond the limited scrutiny
guidelines, then perhaps it could have been held that
Assessing Officer could not have made the addition on the
other issues. Thus, we do not find any merits in the grounds
raised by the ld. counsel that Assessing Officer could not have
examine the issue which was selected for scrutiny under
section 68 and accordingly his contentions are dismissed.

10. In so far as the merit of the addition is concerned, Ld.
Counsel submitted that the shares were issued to M/s.
Aviskar Marketing Pvt. Limited at Rs.150/-, which had a face
value of Rs.10/- and premium of Rs.140/- and has received
the share application money of Rs.3,68,00,000/-. The source
I.T.A. No.267/DEL/2019 11 of the loan taken by M/s. Aviskar Marketing Pvt. Ltd. was
from following three companies:

Raju Investment (P) Ltd. Rs.2,68,00,000/-

Superb Developers (P) Ltd. Rs. 50,00,000/-

Mahesh Wood Products (P) Ltd. Rs. 50,00,000/-
Total Rs. 3,68,00,000/- Out of which, Assessing Officer has accepted amount of
Rs.50 lacs received from M/s. Mahesh Wood Products Pvt.
Ltd. Thus, same transaction from one party has been
accepted to be genuine.

11. At the outset, Ld. Counsel submitted that assessee-
company is not a holding company of M/s. Aviskar Marketing
Pvt. Ltd. and it has wrongly been mentioned by the Assessing
Officer at many places. Further, M/s. Aviskar Marketing Pvt.
Ltd. is neither under investigation nor has been identified by
the Department as an entry provider nor there is any material
or adverse report against M/s. Aviskar Marketing Pvt. Ltd.
During the course of assessment proceedings, the assessee
had furnished following documents before the Assessing
Officer in support of receipt of share application money:

• Confirmed copy of a/c of assessee in books of Avishkar; • ITR ack. of Avishkar – A. Y. 15-16;
• Audited financial statement of Avishkar – A.Y.15-16 (this amt. / addition in investment is appearing in bal. sheet); • Form PAS-3 (filed to ROC for allotment of shares by assessee);
I.T.A. No.267/DEL/2019 12 • Board resolution of assessee for allotment of shares to Avishkar;
• Relevant bank statement of Avishkar;
• Notice u/s. 133 (6) Dtd.23.11.17 sent by A.O. to Avishkar ; • Reply to notice u/s. 133 (6) by Avishkar (confirming the investment of 3.68 Cr in shares of assessee).

12. No such discrepancies or short coming has been pointed
out in the above documents by the Assessing Officer. Not only
that, here the assessee has even proven the source of the
source, i.e., the source of the fund in the hands of M/s.
Aviskar Marketing Pvt. Ltd. which were out of loan taken by
the said company from two other parties which is evident
from the bank statement of M/s. Aviskar Marketing Pvt. Ltd..

13. In so far as loan received from M/s. Raju Investments
Pvt. Ltd., it was clearly pointed out that it is a NBFC who had
given the loan out of ITS own funds and entire loan has been
repaid by M/s. Aviskar Marketing Pvt. Ltd. mostly in the same
assessment year and the balance in the two subsequent year.
The proof of which, were given before the Assessing Officer
and the Ld. CIT (A). The documents furnished to the
Assessing Officer or collected by the Assessing Officer in
respect of the loan received by M/s. Aviskar Marketing Pvt.
Ltd. from M/s. Raju Investment were as under:

• Notice u/s.133 (6) Dtd.21.11.17 issued to Raju Investment, which was received to the said party;
• Letter Dtd.25.11.17 by Raju Investment to A.O. in reply to Sec. 133 (6);
I.T.A. No.267/DEL/2019 13 • Confirmation from Raju Investment to A.O. in reply to Sec. 133 (6);
• ITR ack. of Raju to A.O. in reply to Sec. 133 (6); • Ledger a/c of Raju in books of Avishkar – A.Y.16-17, 17-18 (showing the return of loan by Avishkar to Raju); • Bank statement of Avishkar (showing the return of loan to Raju);
• Audited financial statement of Raju – A.Y. 15-16 (Showing the loan outstanding receivable from Avishkar).

14. Similarly with regard to the loan from M/s Super
Developers Pvt. Ltd. received by M/s. Aviskar Marketing Pvt.
Ltd. again the documents furnished to Assessing Officer in
relation to receipts given were as under:-

• Notice u/s. 133 (6) Dtd.21.11.17 issued to Superb • Letter Dtd.25.11.17 by Superb to A.O. in reply to Sec. 133(6) • Confirmation from Superb to A.O. in reply to Sec. 133 (6) • ITR ack. of Superb to A.O. in reply to Sec. 133 (6) • Ledger a/c of Superb in books of Avishkar – A.Y.16-17 (showing the return of loan by Avishkar to Superb) • Bank statement of Avishkar (showing the return of loan to Superb) • Audited financial statement of Superb – A.Y.15-16 (Showing the loan outstanding receivable from Avishkar) • Bank statement of Superb (showing loan given to Avishkar.

15. Thus, not only the source but also the source of the
source stood explained by the assessee but onus cast upon
the assessee stood fully discharged. Here, in this case, the
identity is proved by ROC records, bank a/c, ITRs and reply
I.T.A. No.267/DEL/2019 14 u/s. 133(6). Apart from that, source of fund to the extent of
Rs.50,00,000/-, received from Mahesh Wood Products (P) Ltd.
given to Aviskar Marketing Pvt. Ltd, who in turn has utilized
the same for paying for share capital and share premium
stands accepted by the A.O. Further, the genuineness of the
transaction stands proved by confirmation letters from the
parties, their bank statements and the entire transaction is
appearing in the audited balance sheet of Avishkar Marketing
Pvt. Ltd, who is assessed to income tax including the reply
u/s. 133(6) directly given to the Assessing Officer by
Avishkar. Lastly, the creditworthiness also stands explained
because, the source of funds in the hands of Avishkar, was
duly explained and not only that, the source of the source
also was explained with evidence. It is not a case where the
share application money has been given out of income but it
has been given out of the loans taken from other parties out
of which major amount has come from Raju Investments,
which is a registered NBFC. In support of all his contentions,
Ld. Counsel has also relied upon the catena of judgments.

16. On the other hand, ld. DR strongly relied upon the order
of the Assessing Officer and Ld. CIT (A) and further relied
upon the following judgments:-

a. PCIT vs. NRA Iron & Steel Pvt. Ltd. (SC) dated 05.03.2019 b. PCIT vs. NDR Promoters Pvt Ltd. (2019-TIOL-172-HC-DEL-IT) c. CIT vs. MAF Academy (P) Ltd. (361 ITR 258) d. CIT vs. Navodaya Castle Pvt. Ltd. (2014) 367 ITR 306 (Del) e. Konark Structural Engineering P. Ltd. v. DCIT (2018) 96 taxmann.com 255 (SC)
I.T.A. No.267/DEL/2019 15 f. Pratham Telecom India Pvt. Ltd. vs. DCIT (2018-TIOL-1983- HC-MUM-IT) g. CIT vs. Nipun Builders & Developers (P) Ltd., 30 taxmann.com
292 h. CIT vs. Nova Promoters & Finlease (P) Ltd. (18 taxmann.com
217) i. CIT vs. N R Portfolio Pvt. Ltd., (2014) 42 taxmann.com 339. j. CIT vs. Empire Builtech P. Ltd., 366 ITR 110 k. PCIT vs. Bikram Singh, (2017) 85 taxmann.com 104 l. ITO (Exemptions) vs. M/s. Synergy Finlease Pvt. Ltd., ITA No.4778/Del/2013.

17. We have heard the rival submissions and perused the
relevant finding given in the impugned order as well as
material referred to before us. The assessee company had
received share application/share premium money of
Rs.3,68,00,000/- received from M/s. Aviskar Marketing Pvt.
Ltd. The Assessing Officer at various places had stated that it
is a holding company of the assessee, whereas in paragraph 3
of the his assessment order, he himself has mentioned that
M/s. Prime Holding is the holding company of M/s. Aviskar
Marketing Pvt. Ltd. (which is a different entity from the
assessee company) and Directors of both the companies are
common. Common directors cannot make it a holding
company except for the fact that these companies may be
held to be related companies. But nothing turns around from
this fact because, what is to be examined here is, whether,
there is any colourable transaction and whether the onus cast
upon the assessee company has been discharged or not and
what the material has been brought on record by the
I.T.A. No.267/DEL/2019 16 Assessing Officer to dislodge the assessee’s explanation and
the evidences. During the course of assessment proceedings,
as stated above, the assessee has filed various documents to
prove the identity, genuineness and creditworthiness of the
parties subscribing to the shares and paying share capital
share premium to the assessee company, like, confirmed copy
of account, ITRs, audited financial statements where the
amount invested has been duly disclosed in the balance
sheet, documents filed in the ROC for allotment of share by
the assessee to the subscribing company, board resolution for
allotment of shares, relevant bank statement and most
importantly, in response to notice u/s.133(6) sent by the
Assessing Officer to M/s. Aviskar Marketing Pvt. Ltd., same
has been duly responded to wherein all the details have been
filed directly before the Assessing Officer. From the perusal of
the balance sheet, it is seen that M/s. Aviskar Marketing Pvt.
Ltd has long term borrowings of Rs.4,15,50,000/- and
reserves and surpluses to the tune of Rs. 3,76,05,866/-. This
company before the Assessing Officer had stated that the
source of share application money was given out of unsecured
loan received from three companies, namely, M/s. Raju
Investment Rs. 2,68,00,000/-, Super Developers Pvt. Ltd.
Rs.50,00,000/- and Mahesh Wood Products Pvt. Ltd.
Rs.50,00,000/-, out of which total amount of share money
invested at Rs.3,68,00,000/-. As stated above, amount of
Rs.50 lacs, i.e., the share application money to the tune of
Rs.50 lacs subscribed by M/s. Aviskar Marketing Pvt. Ltd.
I.T.A. No.267/DEL/2019 17 has been accepted by the Assessing Officer, which inter-alia
means that the genuineness of part of the transaction of
share capital and share premium stands accepted. The M/s.
Aviskar Marketing Pvt. Ltd. before the Assessing Officer had
filed the confirmations of the parties, who had given loan to it
alongwith their ITRs, copy of ledger account, audited financial
statements, etc. One of the major loan had come from M/s.
Raju Investment Pvt. Ltd. who is a registered NBFC, has given
loan of Rs.2,68,00,000/- and the loan taken by M/s. Aviskar
Marketing Pvt. Ltd. from the said company has been returned
back mostly in this year and partly in the subsequent year.
Even the audited financial statement of M/s. Raju Investment
Pvt. Ltd. reflects the loan outstanding/receivable from M/s.
Aviskar Marketing Pvt. Ltd. Similarly, loan given by Super
Developers to M/s. Aviskar Marketing Pvt. Ltd. has also been
substantiated by providing audited financial statement, bank
statement, confirmation, ITRs etc. Both these companies in
response to notice u/s. 133(6) have also furnished their
documents before the Assessing Officer.

18. Under the deeming provision of Section 68, the primary
onus lies upon the assessee to prove the nature and source of
credit. Here, in this case, the nature has been stated to be
share application money which has been duly allotted by the
assessee company to the subscribing company for which all
the documentary evidences, including from ROC has been
filed. The source of credit has been explained from the bank
statement of the subscribing company, audited balance sheet,
I.T.A. No.267/DEL/2019 18 ITRs, etc. Further, the subscribing company, M/s. Aviskar
Marketing Pvt. Ltd has also explained the source of fund
received by it from three other companies who have also
furnished the entire details of the loan given to the said
company. No adverse material has been brought on record by
the Assessing Officer after assessee had filed these evidences
against these companies nor any inquiry have been made that
the entire transactions by these companies are colourable or
sham. Here, it is not a case of any accommodation entry
provider nor there is any investigation or report or inquiry
that either M/s. Aviskar Marketing Pvt. Ltd. or two other
companies who had given loan to M/s. Aviskar Marketing Pvt.
Ltd. were involved in any bogus accommodation entry or were
in collusion. One of the reason given by the Assessing Officer
is that revenue from operations of M/s. Aviskar Marketing
Pvt. Ltd. was Nil/ meager. However, in the balance sheet itself
incorporated by him in the assessment order it is clearly
borne out that there is huge availability of fund in the form of
long term borrowings of more than Rs. 4.15 crores and
reserves and surpluses of Rs. 3.76 crores. If the said company
has stated that it has subscribed to the share application
money out of borrowing and has also proved the genuineness
and creditworthiness of the loan taken from the 3 parties
directly before the Assessing Officer, then primary onus cast
upon the assessee stands fully discharged. It is not the case
here that any adverse material has been unearthed or has
I.T.A. No.267/DEL/2019 19 been found that all these transactions are ‘make believe
arrangements’ or all the evidences are mere paper trail.

19. One of key reasons harped upon by the Assessing
Officer is that there were common directors. Commonality of
Directors will not render a transaction non- genuine or
colourable, unless any inquiry or material is found to prove
the nexus of the directors involved in some kind of
accommodation entry routing any unaccounted income of the
assessee company. If these entities are separate corporate
entities having separate legal identity and separately assessed
to tax, then they have to be treated independently, unless
there is any doubt regarding the source of credit or source of
the source is colourable. In that case the same needs to be
examined by the Department in the case of the person who
has given the money and if anything adverse is found
regarding source; or source of the source then, onus shifts
heavily upon the assessee. The Assessing Officer cannot
presume the transaction to be bogus sans any inquiry or
material. Doubt cannot be raised on the explanation backed
by evidences without any adverse material coming before
Assessing Officer. Here the genuineness of the transaction is
proven from the fact that M/s. Aviskar Marketing Pvt. Ltd.
has subscribed the shares on premium out of loan taken from
NBFCs and has given the immediate source; and not only
that, it has also given the documents and confirmations from
the NBFC companies confirming the loan given to the
subscribing company who in turn has subscribed the share of
I.T.A. No.267/DEL/2019 20 the assessee company. Under these circumstances and facts
of the case and without there any material that any
unaccounted money has been routed through various
channels, then simply based on presumption and hypothesis
deeming fiction cannot be invoked. If the assessee has proved
the source as well as the source of the source of the fund then
onus shifts upon the Assessing Officer to carry some prima
facie inquiry to rebut the explanation given by the assessee.
In absence of any such exercise, addition cannot be sustained
simply based on certain hypothesis.

20. Another reasoning given by the Assessing Officer for
rejecting all the evidences was that assessee has not
produced the directors. Now when the party subscribing the
shares and paying the money has confirmed the transaction
and has proved the source from where it has got the funds
directly before the Assessing Officer by giving all the evidences
as discussed above, then mere non-appearance will not make
the transaction doubtful or colourable. It is only when there
are inconsistencies in the explanation and the evidences filed
then the Assessing Officer may ask the assessee to produce.
One has to see in such cases, firstly, whether primary onus of
proving the nature and source of credit has been discharged,
that is, identity, creditworthiness and genuineness of the
transaction; and secondly, post such onus, Assessing Officer
has made any inquiry or has some material to rebut the
explanation and the evidences filed by the assessee. If there
are any inconsistencies, then Assessing Officer may ask the
I.T.A. No.267/DEL/2019 21 assessee to produce the person and if assessee is unable to do so for certain reasons, then Assessing Officer has the power to issue summons u/s 131 to ensure the presence. Otherwise Assessing Officer cannot simply doubt the entire the entire credit which is share application money and shares have been allotted.

21. Lastly, the judgments relied upon by the Ld. DR are not applicable on the facts of the case as discussed above, as the entire share application money and premium received by the assessee company stands proved by the assessee company and also by the subscribing company, which has even proved the source of money given to the assessee company. Here it is not case of any accommodation entry provider nor there is any report of investigation wing nor has any inquiry been conducted by the Assessing Officer to allay or rebut the evidences filed by the assessee company or by the subscribing company. Thus, ratio of all these judgments will not apply in the present case.

22. In view of our reasoning given above, we hold that share application money received by the assessee company from M/s. Aviskar Marketing Pvt. Ltd cannot be held to be non- genuine. Accordingly, the addition made u/s.68 is directed to be deleted. In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 4th October, 2019.

Sd/- Sd/- [PRASHANT MAHARISHI] [AMIT SHUKLA] [ACCOUNTANT MEMBER] JUDICIAL MEMBER
DATED: 4th October, 2019

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