Unexplained cash credits under Section 68 require both substantiation of identity and genuineness of transactions, with mere suspicion being insufficient.

ORDER

PER WASEEM AHMED, ACCOUNTANT MEMBER:

These appeals are filed by the assessee against the order of the CIT(A) – 11, Bengaluru vide order dated 23/08/2024 for the assessment years 2013-14 and 2014-15.

First, we take up ITA No. 1771/Bang/2024, an appeal by the assessee appeal for A.Y. 2013-14

2. The assessee in the memo of appeal has raised as many as 9 grounds of appeal. The Ground Nos. 6 & 7 pertain to issue raised on the merit. We first proceed to adjudicate the issue raised by the assessee on the merit of the addition.

3. The issue raised by the assessee through Ground No. 6 & 7 are that the learned CIT(A) erred in confirming the addition of Rs. 1.35 crore being unsecured loan and Rs. 20 crores being share application money along with premium by treating them as unexplained credit u/s 68 of the Act.

4. The relevant facts are that the assessee is a public company and engaged in the business of manufacturing of HDPE Bags. The assessee company was subject to search proceedings under section 132 of the Act as on 12^th June 2014. Inconsequence to the search, a notice under section 153A of the Act was issued on 3^rd December 2014, in response to which, the assessee filed return of income declaring total income at Rs. 1,44,15,010/- which was the same as income declared in original return filed u/s 139(1) of the Act.

5. The AO during the assessment proceedings notices that the assessee has unsecured loan from certain parties and the differences between the opening outstanding balance and closing balance are detailed asunder:

1. Akansha Vayapar Pvt Ltd. Rs. 1,12,03,775/-

2. Bhavatarini Promoters Pvt Ltd Rs. 6,34,433/-

3. Manikaran Commodities Pvt Ltd Rs. 5,00,000/-

4. Excellent Fintrade Pvt Ltd Rs. 8,01,990/-

5. S. L. Investors & Traders Pvt Ltd. Rs. 4,43,537/-

5.1 It was also noted that the assessee also received share application money and share premium of Rs. 10 crores (1 cr share + 9 cr premium) from each party namely M/s Akansha Vayapar Pvt Ltd and Manikaran Commodities Pvt Ltd.

5.2 The AO observed that all these companies are run and controlled by the family members of the Klene Paks group (assessee group) and have common directors. The first three companies are registered at same address being “Marshal House 33/1, Netaji Subhash Road, Kolkata” and remaining 2 were based in Bangalore. The AO further observed that there were thousands of companies registered at the above-mentioned Kolkata address. On the impugned address, besides above mentioned 3 companies, there were other companies also registered being run and controlled by the assessee group which includes M/s Paramite Retailer Pvt Ltd.

5.3 The AO from the income tax returns of Kolkata based companies which have advanced loan and paid share application money & premium does not have income in commensurate with the amount being advanced as loan and invested in share capital premium. Furthermore, in case of remaining 2 companies registered at Bangalore address, it was found that these companies have received funds from Kolkata based companies M/s Akansha Vayapar Pvt Ltd and M/s Paramite Retailer Pvt Ltd before making advanced to the assessee company.

5.4 To verify the genuineness of those companies, commission was issued to DDIT (Inv.) unit-1(3), Kolkata. The DDIT (Inv.) in its report has submitted that these companies are not existing at the given address neither their name & existent are known by the local persons. Therefore, these companies appear shell or paper companies. In case of M/s Paramite Retailer Pvt. Ltd,, a statement of Shri Amit Aggarwal (director from Nov-1997 till January 2010) who is further director in more than 30 companies was recorded in which he admitted he was mere a dummy director. Further statement of one