REPORTABLE IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. OF 2019 (Arising out of SLP (Civil) No. 29855 of 2018) Principal Commissioner of Income Tax (Central) - 1 Appellant Versus NRA Iron & Steel Pvt. Ltd. Respondent JUDGMENT INDU MALHOTRA, J. Leave granted. 1. present appeal arises out of Judgment and Order dated 26.02.2018 passed by division bench of Delhi High Court in Income Tax Appeal No. 244 of 2018. Revenue has challenged judgment of High Court by way of present Appeal. 2. issue which arises for consideration is that in case Signature Not Verified where Share Capital/Premium is credited in books of Digitally signed by MUKESH KUMAR Date: 2019.03.05 16:34:27 IST Reason: account of Assessee company, onus of proof is on 1 assessee to establish by cogent and reliable evidence of identity of investor companies, credit-worthiness of investors, and genuineness of transaction, to satisfaction of Assessing Officer. 3. facts of case, briefly stated are as under : 3.1. instant case pertains to Assessment Year of 2009 10, for which Respondent Company Assessee had filed original Return of Income on 29.9.2009 declaring total income of Rs.7,01,870. Notice was issued u/S. 148 of Act to re-open assessment on 13.04.2012 for reasons recorded therein. 3.2. Assessee filed submissions on 23.04.2012 to Notice u/S. 148, and objections on 30.04.2012. objections were rejected on 13.08.2012. Show Cause Notice was issued on 13.01.2014. Assessee filed detailed Written Submissions on 22.01.2014. 3.3. Assessee Company in its Return showed that money aggregating to Rs. 17,60,00,000/- had been received through Share Capital/Premium during Financial Year 2009-10 from following companies situated at Mumbai, Kolkatta, and Guwahati: 2 S. No. Name of shareholder Amount (A)Mumbai Based Companies 1. Clifton Securities Pvt. Ltd. 95,00,000 2. Lexus Infotech Ltd. 95,00,000 3. Nicco Securities Pvt. Ltd. 95,00,000 4. Real Gold Trading Company Pvt. Ltd. 90,00,000 5. Hema Trading Company Pvt. Ltd. 95,00,000 6. Eternity Multi-trade Pvt. Ltd. 90,00,000 (B)Kolkata Based Companies 1. Neha Cassettes Pvt. Ltd. 90,00,000 2. Warner Multimedia Ltd. 95,00,000 3. Gopikar Supply Pvt. Ltd. 90,00,000 4. Ganga Builders Ltd. 90,00,000 5. Gromore Fund Management Co. Ltd. 95,00,000 6. Bayanwala Brothers Pvt. Ltd. 95,00,000 7. Super Finance Ltd. 90,00,000 8. Shivalaxmi Export Ltd. 95,00,000 9. Natraj Vinimay Pvt. Ltd. 95,00,000 10. Neelkanth Commodities Pvt. Ltd. 95,00,000 11. Prominent Vyapaar Pvt. Ltd. 95,00,000 (C) Guwahati based companies 1. Ispat Sheets Ltd. 90,00,000 2. Novelty Traders Ltd. 90,00,000 Total Amount 17,60,00,000 It is pertinent to mention that shares had face value of Rs. 10 per share, were subscribed by investor companies at Rs. 190 per share. 3.4. issue before Assessing Officer (hereinafter referred to as AO ) was whether amount of Rs. 17,60,00,000/-allegedly raised by Respondent through share capital/premium were genuine transactions or not. 3.5. Respondent Company Assessee was called upon to furnish details of amounts received, and provide evidence to establish identity of investor companies, 3 credit-worthiness of creditors, and genuineness of transaction. AO issued detailed questionnaire to Assessee to provide information with respect to amount of Rs. 17,60,00,000 shown to have been received as Share Capital/Premium from various legal entities. AO gave various opportunities to A.R. of Assessee to attend proceedings, and file necessary clarification on queries raised. 3.6. Assessee inter alia submitted that entire Share Capital had been received by Assessee through normal banking channels by account payee cheques/demand drafts, and produced documents such as income tax return acknowledgments to establish identity and genuineness of transaction. It was submitted that, there was no cause to take recourse to Section 68 of Act, and that onus on Assessee Company stood fully discharged. 3.7. AO had issued summons to representatives of investor companies. Despite summons having been served, nobody appeared on behalf of any of investor companies. Department only received submissions 4 through dak, which created doubt about identity of investor companies. 3.8. AO independently got field enquiries conducted with respect to identity and credit-worthiness of investor companies, and to examine genuineness of transaction. Enquiries were made at Mumbai, Kolkatta, and Guwahati where these Companies were stated to be situated. result of enquiry is summarised by A.O. in his Order as under : S. No. Name of AO s Enquiries Amounts Investor invested & Company Tax returns filed 1. Clifton Notice Served on 29.11.2011 at 95,00,000 Securities given address but no reply Pvt. Ltd.- received till date. Mumbai 2. Lexus Notice Served on 19.11.2011 at 95,00,000 Infotech given address but no reply Ltd.- received till date. Mumbai 3. Nicco Notice Served on 29.11.2011 at 95,00,000 Securities given address but no reply Pvt. Ltd. received till date. Mumbai 4 Real Gold Address incorrect. correct 90,00,000 Trading Co. address is 2 florr, Big Three nd Pvt. Ltd.- Building where office found Mumbai closed bearing name Hema Trading Co. 5. Hema Notice could not be served as 95,00,000 Trading Co. Respondent-Assessee not Pvt. Ltd.- available at address given. Mumbai premises is owned by some 5 other person. 6. Eternity Notice could not be served as 90,00,000 Multi Trade Respondent-Assessee not Pvt. Ltd.- available at address given. Mumbai premises is owned by some other person. 7. NehaCasset submission on 15.12.2011 es Pvt. Ltd.- through dak was received Kolkatta wherein it was submitted, that Rs. 90,00,000 company had applied for invested on 45,000 equity shares of Rs. 10/- 21.10.2008 of NRA Iron and Steel Pvt. Ltd. Returned each at premium of Rs. 190/- income Rs. each. Company had not 9744 given any reason for paying such high premium. (45,00,000/- Ch. No. 039302 dt. 21.10.2008 & Rs. 45,00,000/- Ch. No. 039315 dt. 21.10.2008 drawn on Axis Bank. Company had shown total income of Rs. 9,744/- in return for A.Y. 2009-10 8. Warner submission on 15.12.2011 Multimedia through dak was received Rs. 95,00,000 Ltd. wherein it was submitted, that invested on Kolkatta company had applied for 21.10.2008 47,500 equity shares of Rs. 10/- Returned of NRA Iron and Steel Pvt. Ltd. income Rs. each at premium of Rs. 190/- Nil each. Company had not given any reason for paying such high premium. (50,00,000/- Ch. No. 000084 dt. 21.10.2008 & Rs. 45,00,000/- Ch. No. 000083 dt. 21.10.2008 drawn on Kotak Mahindra Bank. Company had shown Nil income for A.Y. 2009-10. 9. Gopikar submission on 15.12.2011 Supply Pvt. through dak was received Rs. 90,00,000 Ltd. wherein it was submitted, that invested on Kolkatta company had applied for 21.10.2008 45,000 equity shares of Rs. 10/- Return of NRA Iron and Steel Pvt. Ltd. income each at premium of Rs. 190/- Rs.28,387 each. Company had not 6 given any reason for paying such high premium. (50,00,000/- Ch. No. 000040 dt. 21.10.2008 & Rs. 40,00,000/- Ch. No. 000039 dt. 21.10.2008 drawn on Kotak Mahindra Bank. Company had shown income of Rs. 28,387/- for A.Y. 2009-10. 10. Ganga It was submitted, that Builders company had applied for shares Rs. 90,00,000 Ltd. of NRA Iron and Steel Pvt.Ltd. invested on Kolkatta However, they had not specified 21.10.2008 how many shares, and at what Return premium they had purchased. income Company had not enclosed Rs.5850 their Bank Statement showing source of fund for share application money. (50,00,000/- Ch. No. 000001 dt. 24.10.2008 & Rs. 40,00,000/- Ch. No. 000002 dt. 24.10.2008 drawn on Kotak Mahindra Bank. Company had shown income of Rs. 5,850/- for A.Y. 2009-10 11. Gromore It was submitted, that Fund company had applied for 47,500 Rs. 95,00,000 Managemen equity shares of Rs. 10/- of NRA invested on t Ltd. Iron and Steel Pvt. Ltd. each at 24.10.2008 Kolkatta premium of Rs. 190/- each. Return Company had not given any income reason for paying such high Rs.14130 premium. Company had shown income of Rs. 14,130/- for A.Y. 2009-10 12. Bayanwala It was submitted, that Brothers company had applied for 47,500 Rs. 95,00,000 Pvt. Ltd. equity shares of Rs. 10/- of NRA invested on Kolkatta Iron and Steel Pvt. Ltd. each at 6.11.2008 premium of Rs. 190/- each. Return Company had not given any income Rs. reason for paying such high 10626 premium. (50,00,000/- Ch. No. 000020 dt. 06.11.2008 & Rs. 45,00,000/- Ch. No. 000021 dt. 06.11.2008 drawn on Kotak Mahindra Bank 7 Company had shown income of Rs. 10,626/- for A.Y. 2009-10 13. Super It was submitted, that Finance Ltd. company had applied for shares Kolkatta of NRA Iron and Steel Pvt. Ltd. Rs. 90,00,000 However, they had not specified invested on how many shares, and at what 17.11.2008 premium they had purchased. Return Company had not enclosed income Rs. their Bank Statement showing 10730 source of fund for share application money. (50,00,000/- Ch. No. 069123 dt. 17.11.2008 & Rs. 40,00,000/- Ch. No. 069124 dt. 17.11.2008 drawn on Deutsche bank. Company had shown income of Rs. 10,730/- for A.Y. 2009-10 14. Shivlaxmi It was submitted, that Export Ltd. company had applied for 47,500 Kolkatta equity shares of Rs. 10/- of NRA Rs. 95,00,000 Iron and Steel Pvt. Ltd. each at invested on premium of Rs. 190/- each. 18.11.2008 Company had not given any Return reason for paying such high income premium. (50,00,000/- Ch. No. Rs.10480 121824 dt. 18.11.2008 & Rs. 45,00,000/- Ch. No. 121825 dt. 18.11.2008 drawn on Deutsche Bank. Company had shown income of Rs. 10,480/- for A.Y. 2009-10 15 Natraj It was submitted, that Vinimay Pvt. company had applied for 41,500 Rs. 95,00,000 Ltd. equity shares of Rs. 10/- of NRA invested on Kolkatta Iron and Steel Pvt. Ltd. each at 19.11.2008 premium of Rs. 190/- each. Return Company had not given any income reason for paying such high Rs.42083 premium. (50,00,000/- Ch. No. 000098 dt. 19.11.2008 & Rs. 45,00,000/- Ch. No. 000009 dt. 19.11.2008 drawn on Kotak Mahindra Bank. Company had shown income of Rs. 42,083/- for A.Y. 2009-10 8 16 Neelkanth It was submitted, that 95,00,000 Commoditie company had applied for 47,500 Return s Pvt. Ltd. equity shares of Rs. 10/- of NRA income Kolkatta Iron and Steel Pvt. Ltd. each at Rs.9420 premium of Rs. 190/- each. Company had not given any reason for paying such high premium. (50,00,000/- Ch. No. 209681 dt. 5.12.2008 & Rs. 45,00,000/- Ch. No. 209677 dt. 5.12.2008 drawn on Centurion Bank of Punjab Rs. 95 lakhs invested on 5.12.2008 By 2 cheques Company had shown income of Rs. 9,470/- for A.Y. 2009-10 17 Prominent It was submitted, that Vyappar company had applied for 47,500 Rs. 95,00,000 Pvt. Ltd. equity shares of Rs. 10/- of NRA invested on Kolkatta Iron and Steel Pvt. Ltd. each at 5.12.2008 premium of Rs. 190/- each. By 2 cheques Company had not given any Return reason for paying such high income premium. (50,00,000/- Ch. No. Rs.10307 205185 dt. 5.12.2008 & Rs. 45,00,000/- Ch. No. 205189 dt. 5.12.2008 drawn on HDFC (Centurion Bank of Punjab) Company had shown income of Rs. 10,307/- for A.Y. 2009-10 TOTAL 17,60,00,000 AO recorded that enquiries at Mumbai revealed that out of four companies at Mumbai, two companies were found to be non-existent at address furnished. With respect to Kolkata companies, response came through dak only. However, nobody appeared, nor did they produce their bank statements to substantiate 9 source of funds from which alleged investments were made. With respect to Guwahati companies Ispat Sheet Ltd. and Novelty Traders Ltd., enquiries revealed that they were non-existent at given address. 3.9. On basis of detailed enquiries conducted, A.O. held that Assessee had failed to prove existence of identity of investor companies and genuineness of transaction. A.O. found that : i. None of investor-companies which had invested amounts ranging between Rs. 90,00,000 and Rs. 95,00,000 as share capital in Respondent Company Assessee during A.Y. 2009-10, could justify making investment at such high premium of Rs. 190 for each share, when face value of shares was only Rs. 10; ii. Some of investor companies were found to be non- existent; iii. Almost none of companies produced bank statements to establish source of funds for making such huge investment in shares, even though 10 they were declaring very meagre income in their returns; iv. None of investor-companies appeared before A.O., but merely sent written response through dak. AO held that Assessee had failed to discharge onus by cogent evidence either of credit worthiness of so-called investor-companies, or genuineness of transaction. As consequence, amount of Rs. 17,60,00,000/- was added back to total income of Assessee for assessment year in question. 4. Respondent Company Assessee filed Appeal before Commissioner of Income Tax (Appeals)-I, New Delhi. Reliance was placed on decision of Delhi High Court in CIT v. Lovely Exports Pvt. Ltd1. wherein it was held that : In case of company following are propositions of law under section 68. assessee has to prima facie prove (1) identity of creditor/subscriber; (2) genuineness of transaction, namely, whether it has been transmitted through banking or other indisputable cannels; (3) creditworthiness or financial strength of creditor/subscriber; (4) if relevant details of address of PAN indetity of creditor/subscriber alongwith copies of 1 (2008) 299 ITR 268 (Delhi) 11 shareholders register, share application forms, share transfer register, etc, it would constitute acceptable proof or acceptable explanation by assessee; (5) Department would not be justified in drawing adverse inference only because creditor/subscriber fails or neglects to respond to its notice; Assessing Officer is duty bound to investigate creditworthiness of creditor/subscriber genuineness of transaction and veracity of repudiation. SLP filed against judgment was dismissed. Commissioner of Income Tax (Appeals)-I, New Delhi vide Order dated 11.04.2014 deleted addition made by A.O. on ground that Respondent had filed confirmations from investor companies, their Income Tax Return, acknowledgments with PAN numbers, copies of their bank account to show that entire amount had been paid through normal banking channels, and hence discharged initial onus under Section 68 of Act, for establishing credibility and identity of shareholders. 5. Revenue filed Appeal before Income Tax Appellate Tribunal (hereinafter referred to as ITAT ). ITAT dismissed appeal, and confirmed order of CIT(A) vide Order dated 16.10.2017 on ground that Assessee had discharged their primary onus to establish identity and 12 credit-worthiness of investors, especially when investor companies had filed their returns and were being assessed. 6. Revenue filed Appeal bearing I.T.A. No. 244/2018 u/S. 260A of Act before Delhi High Court to challenge order of Tribunal. Respondent Company Assessee did not appear before High Court. Hence, matter proceeded ex-parte. High Court dismissed Appeal filed by Revenue vide Impugned Order dated 26.02.2018, and affirmed decision of Tribunal on ground that issues raised before it, were urged on facts, and lower appellate authorities had taken sufficient care to consider relevant circumstances. Hence no substantial question of law arose for their consideration. 7. Aggrieved by Order passed by High Court, Revenue filed present S.L.P. (C) No. 29855/2018 before this Court. This Court issued Notice on 12.11.2018 returnable in six weeks. After service was effected on Respondent Company Assessee, matter was listed on 02.01.2019. However, none appeared on behalf of Respondent Company Assessee. Consequently, matter was adjourned for two weeks, and posted on 18.01.2019, when it was ordered that in 13 case Respondent Company Assessee chooses not to enter appearance, matter would be disposed of ex-parte. matter was thereafter listed again on 23.01.2019, when following Order was passed: Notice was issued in matter on 12.11.2018, Office report dated 22.12.2018 indicated that notice was served upon sole Respondent but none had entered appearance. By order dated 02.01.2019, last opportunity was given to Respondent and it was indicated that if Respondent chose not to enter appearance, matter would be disposed of ex-parte. Even then none has entered appearance. Having gone through matter, we give one more opportunity to Respondent to enter appearance and make submissions with respect to merits of matter. If Respondent still chooses not to appear, matter shall definitely be decided ex-parte. Respondent Company Assessee however remained unrepresented even on subsequent dates i.e. on 31.01.2019 and 05.02.2019. matter was finally heard on 05.02.2019, when judgment was reserved. 8. We have heard Ld. Counsel for Revenue, and examined material on record. 8.1. issue which arises for determination is whether Respondent / Assessee had discharged primary onus to 14 establish genuineness of transaction required under Section 68 of said Act. Section 68 of I.T. Act (prior to Finance Act, 2012) read as follows: 68. Cash credits- Where any sum is found credited in book of Assessee maintained for any previous year, and Assessee offers no explanation about nature and source thereof or explanation offered by him is not, in opinion of Assessing Officer, satisfactory, sum so credited may be charged to income-tax as income of Assessee of that previous year (emphasis supplied) use of words any sum found credited in books in Section 68 of Act indicates that section is widely worded, and includes investments made by introduction of share capital or share premium. 8.2. As per settled law, initial onus is on Assessee to establish by cogent evidence genuineness of transaction, and credit-worthiness of investors under Section 68 of Act. assessee is expected to establish to satisfaction of Assessing Officer2 : Proof of Identity of creditors; 2 CIT v. Precision Finance Pvt. Ltd. (1994) 208 ITR 465 (Cal) 15 Capacity of creditors to advance money; and Genuineness of transaction This Court in land mark case of Kale Khan Mohammad Hanif v. CIT3 and, Roshan Di Hatti v. CIT4 laid down that onus of proving source of sum of money found to have been received by assessee, is on assessee. Once assessee has submitted documents relating to identity, genuineness of transaction, and credit-worthiness, then AO must conduct inquiry, and call for more details before invoking Section 68. If Assessee is not able to provide satisfactory explanation of nature and source, of investments made, it is open to Revenue to hold that it is income of assesse, and there would be no further burden on revenue to show that income is from any particular source. 8.3. With respect to issue of genuineness of transaction, it is for assessee to prove by cogent and credible evidence, that investments made in share capital are genuine borrowings, since facts are exclusively within assessee s knowledge. 3 [1963] 50 ITR 1 (SC) 4 [1977] 107 ITR (SC) 16 Delhi High Court in CIT v. Oasis Hospitalities Pvt. Ltd.5, held that : initial onus is upon assessee to establish three things necessary to obviate mischief of Section 68. Those are: (i) identity of investors; (ii) their creditworthiness/investments; and (iii) genuineness of transaction. Only when these three ingredients are established prima facie, department is required to undertake further exercise. It has been held that merely proving identity of investors does not discharge onus of assessee, if capacity or credit-worthiness has not been established. In Shankar Ghosh v. ITO6, assessee failed to prove financial capacity of person from whom he had allegedly taken loan. loan amount was rightly held to be assessee s own undisclosed income. 8.4. Reliance was also placed on decision of CIT v. Kamdhenu Steel & Alloys Limited and Other7 wherein Court that : 5 333 ITR 119 (Delhi)(2011) 6 [1985] 23 TTJ (Cal.) 7 (2012) 206 Taxaman 254 (Delhi) 17 38. Even in that instant case, it is projected by Revenue that Directorate of Income Tax (Investigation) had purportedly found such 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 Revenue in order to find out causal connection between case deposited in bank accounts of applicant banks and assessee were not taken. It is necessary to link assessee with source when that link is missing, it is difficult to fasten assessee with such liability. 9. Judgments cited hold that Assessing Officer ought to conduct independent enquiry to verify genuineness of credit entries. In present case, Assessing Officer made independent and detailed enquiry, including survey of so- called investor companies from Mumbai, Kolkata and Guwahati to verify credit-worthiness of parties, source of funds invested, and genuineness of transactions. field reports revealed that share-holders were either non-existent, or lacked credit-worthiness. 10. On issue of unexplained credit entries /share capital, we have examined following judgments : 18 i. In Sumati Dayal v. CIT8 this Court held that : if explanation offered by assessee about nature and source thereof is, in opinion of Assessing Officer, not satisfactory, there is prima facie evidence against assessee, vis., receipt of money, and if he fails to rebut same, said evidence being unrebutted can be used against him by holding that it is receipt of income nature. While considering explanation of assessee, department cannot, however, act unreasonably ii. In CIT v. P. Mohankala9 this Court held that: bare reading of section 68 of Income- tax Act, 1961, suggests that (i) there has to be credit of amounts in books maintained by assessee ; (ii) such credit has to be sum of money during previous year ; and (iii) either (a) assessee offers no explanation about nature and source of such credits found in books or (b) explanation offered by assessee, in opinion of Assessing Officer, is not satisfactory. It is only then that sum so credited may be charged to Income-tax as income of assessee of that previous year. expression assessee offers no explanation means assessee offers no proper, reasonable and acceptable explanation as regards sums found credited in books maintained by assessee. 8 [1995] 214 ITR 801 (SC) 9 291 ITR 278 19 burden is on assessee to take plea that, even if explanation is not acceptable, material and attending circumstances available on record do not justify sum found credited in books being treated as receipt of income nature. (emphasis supplied) iii. Delhi High Court in recent judgment delivered in PR.CIT -6, New Delhi v. NDR Promoters Pvt. Ltd.10 upheld additions made by Assessing Officer on account of introducing bogus share capital into assessee company on facts of case. iv. Courts have held that in case of cash credit entries, it is necessary for assessee to prove not only identity of creditors, but also capacity of creditors to advance money, and establish genuineness of transactions. initial onus of proof lies on assessee. This Court in Roshan Di Hatti v. CIT11, held that if assessee fails to discharge onus by producing cogent evidence and explanation, AO would be justified in making additions back into income of assessee. 10 410 ITR 379 11 (1992) 2 SCC 378 20 v. Guwahati High Court in Nemi Chand Kothari v. CIT12 held that merely because transaction takes place by cheque is not sufficient to discharge burden. assessee has to prove identity of creditors and genuineness of transaction. : It cannot be said that transaction, which takes place by way of cheque, is invariably sacrosanct. Once assessee has proved identity of his creditors, genuineness of transactions which he had with his creditors, and creditworthiness of his creditors vis-a-vis transactions which he had with creditors, his burden stands discharged and burden then shifts to revenue to show that though covered by cheques, amounts in question, actually belonged to, or was owned by assessee himself (emphasis supplied) vi. In recent judgment Delhi High Court13 held that credit-worthiness or genuineness of transaction regarding share application money depends on whether two parties are related or known to each other, or mode by which parties approached each other, whether transaction is entered into through 12 [2003] 264 ITR 254 (Gau.) 13 CIT v. N.R. Portfolio (P.) Ltd.[2014] 42 taxmann.com 339/222 Taxman 157 (Mag.) (Delhi) 21 written documentation to protect investment, whether investor was angel investor, quantum of money invested, credit-worthiness of recipient, object and purpose for which payment/investment was made, etc. incorporation of company, and payment by banking channel, etc. cannot in all cases tantamount to satisfactory discharge of onus. vii. Other cases where issue of share application money received by assessee was examined in context of Section 68 are CIT v. Divine Leasing & Financing Ltd.14, and CIT v. Value Capital Service (P.) Ltd.15 11. principles which emerge where sums of money are credited as Share Capital/Premium are : i. assessee is under legal obligation to prove genuineness of transaction, identity of creditors, and credit-worthiness of investors who should have financial capacity to make investment in question, to satisfaction of AO, so as to discharge primary onus. 14 (2007) 158 Taxman 440 15 [2008]307 ITR 334 22 ii. Assessing Officer is duty bound to investigate credit-worthiness of creditor/ subscriber, verify identity of subscribers, and ascertain whether transaction is genuine, or these are bogus entries of name-lenders. iii. If enquiries and investigations reveal that identity of creditors to be dubious or doubtful, or lack credit-worthiness, then genuineness of transaction would not be established. In such case, assessee would not have discharged primary onus contemplated by Section 68 of Act. 12. In present case, A.O. had conducted detailed enquiry which revealed that : i. There was no material on record to prove, or even remotely suggest, that share application money was received from independent legal entities. survey revealed that some of investor companies were non-existent, and had no office at address mentioned by assessee. For example: 23 a. companies Hema Trading Co. Pvt. Ltd. and Eternity Multi Trade Pvt. Ltd. at Mumbai, were found to be non-existent at address given, and premises was owned by some other person. b. companies at Kolkatta did not appear before A.O., nor did they produce their bank statements to substantiate source of funds from which alleged investments were made. c. two companies at Guwahati viz. Ispat Sheet Ltd. and Novelty Traders Ltd., were found to be non- existent at address provided. genuineness of transaction was found to be completely doubtful. ii. enquiries revealed that investor companies had filed returns for negligible taxable income, which would show that investors did not have financial capacity to invest funds ranging between Rs. 90,00,000 to Rs. 95,00,000 in Assessment Year 2009-10, for purchase of shares at such high premium. For example: 24 Neha Cassetes Pvt. Ltd. - Kolkatta had disclosed taxable income of Rs. 9,744/- for A.Y. 2009-10, but had purchased Shares worth Rs, 90,00,000 in Assessee Company. Similarly Warner Multimedia Ltd. Kolkatta filed NIL return, but had purchased Shares worth Rs. 95,00,000 in Assessee Company Respondent. Another example is of Ganga Builders Ltd. Kolkatta which had filed return for Rs. 5,850 but invested in shares to tune of Rs. 90,00,000 in Assessee Company Respondent, etc. iii. There was no explanation whatsoever offered as to why investor companies had applied for shares of Assessee Company at high premium of Rs. 190 per share, even though face value of share was Rs. 10/- per share. iv. Furthermore, none of so-called investor companies established source of funds from which high share premium was invested. v. mere mention of income tax file number of investor was not sufficient to discharge onus under Section 68 of Act. 25 13. lower appellate authorities appear to have ignored detailed findings of AO from field enquiry and investigations carried out by his office. authorities below have erroneously held that merely because Respondent Company Assessee had filed all primary evidence, onus on Assessee stood discharged. lower appellate authorities failed to appreciate that investor companies which had filed income tax returns with meagre or nil income had to explain how they had invested such huge sums of money in Assesse Company - Respondent. Clearly onus to establish credit worthiness of investor companies was not discharged. entire transaction seemed bogus, and lacked credibility. Court/Authorities below did not even advert to field enquiry conducted by AO which revealed that in several cases investor companies were found to be non-existent, and onus to establish identity of investor companies, was not discharged by assessee. 14. practice of conversion of un-accounted money through cloak of Share Capital/Premium must be subjected to careful scrutiny. This would be particularly so in case of private placement of shares, where higher onus is required to be 26 placed on Assessee since information is within personal knowledge of Assessee. Assessee is under legal obligation to prove receipt of share capital/premium to satisfaction of AO, failure of which, would justify addition of said amount to income of Assessee. 15. On facts of present case, clearly Assessee Company - Respondent failed to discharge onus required under Section 68 of Act, Assessing Officer was justified in adding back amounts to Assessee s income. 16. Appeal filed by Appellant Revenue is allowed. In aforesaid facts and circumstances, and law laid down above, judgment of High Court, ITAT, and CIT are hereby set-aside. Order passed by AO is restored. Pending applications, if any are disposed of. Ordered accordingly. ...........................J. (UDAY UMESH LALIT) ... J. (INDU MALHOTRA) New Delhi, March 5, 2019. 27 28 Principal Commissioner of Income-tax (Central) - 1 v. NRA Iron & Steel Pvt. Ltd