The Commissioner Of Income Tax, Office Of The Principalcommissioner Of Income Tax, Guwahati, Aayakar Bhawan,Seventh Floor, G.s. Road, Guwahati – v. M/S Goldstone Cements Limited, Village-Musiang Lamare (Old),Khliehriat, East Jaintia Hills, Meghalaya

GAHC010094612022 2024:GAU-AS:12811-DB THE GAUHATI HIGH COURT (HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH) INCOME TAX APPEAL NO.08 OF 2022 1. The Commissioner of Income Tax, Office of the PrincipalCommissioner of Income Tax, Guwahati, Aayakar Bhawan,Seventh Floor, G.S. Road, Guwahati – 781005.Commissioner of Income Tax, Guwahati, Aayakar Bhawan,Seventh Floor, G.S. Road, Guwahati – 781005. 2. Income Tax Officer, DCIT/ACIT, Circle-3, Guwahati, Officeof the Principal Commissioner of Income Tax, Guwahati,Aayakar Bhawan, Seventh Floor, G.S. Road, Guwahati –781005.of the Principal Commissioner of Income Tax, Guwahati,Aayakar Bhawan, Seventh Floor, G.S. Road, Guwahati –781005. ..Appellants …… -Versus- M/s Goldstone Cements Limited, Village-Musiang Lamare (Old),Khliehriat, East Jaintia Hills, Meghalaya-793200. (PAN NO. ). ……..Respondent – B E F O R E– HON’BLE MR. JUSTICE LANUSUNGKUM JAMIRHON’BLE MR. JUSTICE KAUSHIK GOSWAMI For the Appellants : Mr. S.C. Keyal, Standing Counsel, CBDT, IT For the Respondent : Dr. A. Saraf, Senior Advocate, assisted by Mr. P.K. Bora, Advocate Date of Hearing : 05.12.2024. Date of Judgment : 17.12.2024. (Kaushik Goswami, J) J UDGMENT & ORDER (CAV) Heard Mr. S.C. Keyal, learned Standing Counsel, CBDT, IT forthe appellants as well as Dr. A. Saraf, learned Senior Counsel assistedby Mr. P.K. Bora, learned counsel for the respondent. 2. This appeal is preferred under the provision of Section 260Aof the Income Tax Act, 1961 (hereinafter referred to as the ‘IT Act’)against the impugned order dated 10.12.2021 passed by the IncomeTax Appellate Tribunal, Gauhati Bench in I.T.A. Nos. 126 to131/GAU/2020 for the Assessment Year 2011-12 to 2015-16 & 2017-18. 3. The facts relevant for the purpose of this appeal are asfollows:- Upon a search and seizure as per Section 132 of the IT Actbeing conducted in the office premises of the respondent companyas well as in the residence of family members and other businessconcerns etc., the Assessing Authority having doubted the saletransaction in respect of few companies, framed assessment underSection 153A/143 (3) of the IT Act and determined the assessedincome of the respondent company for the annual year 2017-19. TheAssessing Authority, doubted the genuineness of the transaction inrespect of share capital received from M/s. Orchid Finlease Pvt. Ltd.amounting to Rs. 1,75,54,848/- and M/s. Shantidham Marketing Pvt.Ltd. amounting to Rs. 32,94,00,000/- and accordingly added Rs.34,69,54,848/- to the income of the respondent company underSection 68 of the IT Act. Aggrieved by the aforesaid order of theAssessing Officer, the respondent preferred an appeal before thelearned Commissioner of Income Tax (Appeals), Guwahati-2(hereinafter referred to as the ‘Appellate Authority’) and the saidAppellate Authority was pleased to delete the aforesaid additionmade by the Assessing Authority by order dated 18.03.2020.Aggrieved by the aforesaid order of the Appellate Authority, theappellants filed an appeal before the learned Income Tax AppellateTribunal, Guwahati Bench (hereinafter referred to as the ‘SecondAppellate Tribunal’). The learned Second Appellate Tribunal by orderdated 10.12.2021 dismissed the aforesaid appeal of the Appellate Authority. Accordingly, the present third appeal is being preferred bythe Appellants. Authority. Accordingly, the present third appeal is being preferred bythe Appellants. 4.Mr. S.C. Keyal, learned Standing Counsel for the appellantssubmits that the impugned order of the Second Appellate Tribunal istotally erroneous. He further submits that the respondent/assesseehas not been able to establish the source of source as regards thetransaction in question and as such, the order of the AssessingAuthority under Section 68 of the IT Act is valid and ought not tohave been interfered with by both the Appellate Authorities. Hefurther submits that under Section 68 of the IT Act, the obligationstands with the assessee to explain the source of source and hence,in the present case, since the assessee has not been able to explainthe source of source as regards the transaction in question, theAssessing Officer has rightly added the sum to be charged to incometax as the income of the respondent/assessee for the assessing yearin question. He further relies upon the decision of the Apex Court inthe case of Principal Commissioner of Income Tax (Central) 1vs. NRA Iron & Steel Pvt. Ltd.,reported in (2019) 15 SCC 529. 5. Per contra, Dr. A. Saraf, learned Senior Counsel appearingfor the respondent/assessee submits that the present appeal beingfiled before the Third Appellate Court, this Court shall not go to thefactual matrix of the case and shall also not disturb the concurrentfindings of the Appellate Authority and the Second AppellateTribunal. He further submits that there is no substantial question of law involved in this appeal and hence, the appeal is notmaintainable. He further submits that the Appellate Authority as wellas the Second Appellate Tribunal elaborately discussed the materialsplaced by both parties and by discussing the same has returned theverdict against the Assessing Authorities/Appellants. Accordingly, hesubmits that this appeal warrants to be rejected at the outset. Hefurther relies upon the following decisions:- (1) Karnataka Board of Wakf vs. Anjuman-E-IsmailMadris-Un-Niswan, reported in (1999) 6 SCC 343.(Apex Court)Madris-Un-Niswan, reported in (1999) 6 SCC 343.(Apex Court) (2) Hamida & Ors. vs. Md. Khalil, reported in (2001) 5SCC 30. (Apex Court)SCC 30. (Apex Court) (3) Aradhna Oil Mills vs. Commissioner of Income Tax &Anr., reported in (2001) 252 ITR 607. (High Court ofMadhya Pradesh)Anr., reported in (2001) 252 ITR 607. (High Court ofMadhya Pradesh) (4) Commissioner of Income Tax vs. Gom Industries Ltd.,reported in (2007) 292 ITR 406. (High Court ofMadhya Pradesh)reported in (2007) 292 ITR 406. (High Court ofMadhya Pradesh) (5) Commissioner of Income Tax vs. AntarticaInvestment Pvt. Ltd., reported in (2003) 262 ITR 493.(High Court of Delhi)Investment Pvt. Ltd., reported in (2003) 262 ITR 493.(High Court of Delhi) (6) Principal Commissioner of Income Tax vs. GauravBagaria, reported in (2023) 453 ITR 513. (High Courtof Rajasthan)Bagaria, reported in (2023) 453 ITR 513. (High Courtof Rajasthan) (7) Commissioner of Income Tax, New Delhi vs. OdeonBuilders Pvt. Ltd., reported in (2020) 17 SCC 311.(Apex Court) (8) Commissioner of Income Tax, Orissa vs. OrissaCorporation (P) Ltd., reported in (1986) (Supp) SCC110. (Apex Court) (9) Dhanalaxmi Steel Re-Rolling Mills vs. Commissionerof Income Tax, reported in (1997) 228 ITR 780. (HighCourt of Andhra Pradesh)of Income Tax, reported in (1997) 228 ITR 780. (HighCourt of Andhra Pradesh) (10) Commissioner of Income Tax vs. Baishnab CharanMohanty, reported in (1995) 215 ITR 827. (High Courtof Orissa)Mohanty, reported in (1995) 215 ITR 827. (High Courtof Orissa) 6.We have given our prudent consideration to the arguments madeby the learned counsels appearing for the contesting parties and haveperused the materials available on record and have also considered thecitations submitted at the bar. (8) Commissioner of Income Tax, Orissa vs. OrissaCorporation (P) Ltd., reported in (1986) (Supp) SCC110. (Apex Court) (9) Dhanalaxmi Steel Re-Rolling Mills vs. Commissionerof Income Tax, reported in (1997) 228 ITR 780. (HighCourt of Andhra Pradesh)of Income Tax, reported in (1997) 228 ITR 780. (HighCourt of Andhra Pradesh) (10) Commissioner of Income Tax vs. Baishnab CharanMohanty, reported in (1995) 215 ITR 827. (High Courtof Orissa)Mohanty, reported in (1995) 215 ITR 827. (High Courtof Orissa) 6.We have given our prudent consideration to the arguments madeby the learned counsels appearing for the contesting parties and haveperused the materials available on record and have also considered thecitations submitted at the bar. 7.Apt at the outset to refer to Section 260A of the IT Act under whichthe present appeal has been filed, which reads as hereunder:- “260A.Appeal to High Court. (1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal [before the date of establishment of the National Tax Tribunal], if the High Court is satisfied that the case involvesa substantial question of law. (2) The [Principal Chief Commissioner or Chief Commissioner] or the [Principal Commissioner or Commissioner] or an assessee aggrieved by any order passed by the Appellate Tribunal may file an appeal to the High Court and such appeal under this sub-section shall be— (a) filed within one hundred and twenty days from the date onwhich the order appealed against is received by the assessee or thePrincipal Chief Commissioner or Chief Commissioner or PrincipalCommissioner or Commissioner; (b) [***] (c) in the form of a memorandum of appeal precisely stating thereinthe substantial question of law involved. (2A) The High Court may admit an appeal after the expiry of the period ofone hundred and twenty days referred to in clause (a) of sub-section (2),if it is satisfied that there was sufficient cause for not filing the samewithin that period. (3) Where the High Court is satisfied that a substantial question oflaw is involved in any case, it shall formulate that question. (4) The appeal shall be heard only on the question so formulated, andthe respondents shall, at the hearing of the appeal, be allowed to arguethat the case does not involve such question: Provided that nothing in this sub-section shall be deemed to take away orabridge the power of the court to hear, for reasons to be recorded, theappeal on any other substantial question of law not formulated by it, if itis satisfied that the case involves such question. (5) The High Court shall decide the question of law so formulated anddeliver such judgment thereon containing the grounds on which suchdecision is founded and may award such cost as it deems fit. (6) The High Court may determine any issue which— (a) has not been determined by the Appellate Tribunal; or (b) has been wrongly determined by the Appellate Tribunal,by reason of a decision on such question of law as is referred toin sub-section (1). (7) Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this section.” 8. Reading of the aforesaid provision, it is apparent that the appealunder Section 260A of the IT Act shall be maintainable only if it involvessubstantial question of law. It further appears that the provisions ofsecond appeal as contained under Section 100 of Code of Civil Procedure,1908 (hereinafter referred to as ‘CPC’), is made applicable in respect ofappeal filed under Section 260A of the IT Act. 9. Pertinent that this Court while admitting the appeal on24.05.2023 formulated the following substantial questions of law:- (7) Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this section.” 8. Reading of the aforesaid provision, it is apparent that the appealunder Section 260A of the IT Act shall be maintainable only if it involvessubstantial question of law. It further appears that the provisions ofsecond appeal as contained under Section 100 of Code of Civil Procedure,1908 (hereinafter referred to as ‘CPC’), is made applicable in respect ofappeal filed under Section 260A of the IT Act. 9. Pertinent that this Court while admitting the appeal on24.05.2023 formulated the following substantial questions of law:- (a) Whether the learned Tribunal erred in law in holding that assessee had discharged its burden of substantiation of the identity, creditworthiness and genuineness of the transactionsinvolving receipt of share application monies? (b) Whether the learned Tribunal was justified in deleting the addition under Section 68 of share application money of Rs. 34,69,54,848/- received from Shantidham Marketing Pvt. Ltd.,and Orchid Finlease Pvt. Ltd?” 10. Apt therefore to first determine whether the questions framed bythis Court as stated above involves a substantial question of law or not.The Apex Court in the case of Hero Vinoth (Minor) vs. Seshammal,reported in (2006) 5 SCC 545 has held in paragraphs Nos. 21 – 24 ashereunder:- “21. The phrase “substantial question law”, as occurring in the amendedSection 100 of the CPC is not defined in the Code. The word substantial, asqualifying “question of law”, means - of having substance, essential, real, ofsound worth, important or considerable. It is to be understood as somethingin contradistinction with – technical, of no substance or consequence, oracademic merely. However, it is clear that the legislature has chosen not toqualify the scope of “substantial question of law” by suffixing the words “ofgeneral importance” as has been done in many other provisions such asSection 109 of the Code or Article 133(1)(a) of the Constitution. Thesubstantial question of law on which a second appeal shall be heard neednot necessarily be a substantial question of law of general importance. InGuran Ditta v. T. Ram Ditta (AIR 1928 PC 172), the phrase `substantialquestion of law’ as it was employed in the last clause of the then existingSection 100 CPC (since omitted by the Amendment Act, 1973) came up forconsideration and their Lordships held that it did not mean a substantialquestion of general importance but a substantial question of law which wasinvolved in the case. In Sri Chunilal’s case (supra), the Constitution Benchexpressed agreement with the following view taken by a full Bench of theMadras High Court in Rimmalapudi Subba Rao v. Noony Veeraju (AIR 1951Mad. 969) “When a question of law is fairly arguable, where there is room fordifference of opinion on it or where the Court thought it necessary to dealwith that question at some length and discuss alternative views, then thequestion would be a substantial question of law. On the other hand if thequestion was practically covered by the decision of the highest court or if thegeneral principles to be applied in determining the question are well settledand the only question was of applying those principles to be particular factsof the case it would not be a substantial question of law.” This Court laiddown the following test as proper test, for determining whether a question oflaw raised in the case is substantial” “When a question of law is fairly arguable, where there is room fordifference of opinion on it or where the Court thought it necessary to dealwith that question at some length and discuss alternative views, then thequestion would be a substantial question of law. On the other hand if thequestion was practically covered by the decision of the highest court or if thegeneral principles to be applied in determining the question are well settledand the only question was of applying those principles to be particular factsof the case it would not be a substantial question of law.” This Court laiddown the following test as proper test, for determining whether a question oflaw raised in the case is substantial” “The proper test for determining whether a question of law raised in thecase is substantial would, in our opinion, be whether it is of general publicimportance or whether it directly and substantially affects the rights of theparties and if so whether it is either an open question in the sense that it isnot finally settled by this Court or by the Privy Council or by the FederalCourt or is not free from difficulty or calls for discussion of alternative views.If the question is settled by the highest court or the general principles to beapplied in determining the question are well settled and there is a mere question of applying those principles or that the plea raised is palpablyabsurd the question would not be a substantial question of law.” 22. In Dy. Commnr. Hardoi v. Rama Krishna Narain (AIR 1953 SC 521)also it was held that a question of law of importance to the parties was asubstantial question of law entitling the appellant to a certificate under (thethen) Section 100 of the CPC. 23. To be “substantial” a question of law must be debatable, notpreviously settled by law of the land or a binding precedent, and must havea material bearing on the decision of the case, if answered either way,insofar as the rights or the parties before it are concerned. To be a questionof law “involving in the case” there must be first a foundation for it laid inthe pleadings and the question should emerge from the sustainable findingsof fact arrived at by court of facts and it must be necessary to decide thatquestion of law for a just and proper decision of the case. An entirely newpoint raised for the first time before the High Court is not a question involvedin the case unless it goes to the root of the matter. It will, therefore, dependon the facts and circumstance of each case whether a question of law is asubstantial one and involved in the case, or not; the paramount overallconsideration being the need for striking a judicious balance between theindispensable obligation to do justice at all stages and impelling necessity ofavoiding prolongation in the life of any lis. (See : Santosh Hazari v.Purushottam Tiwari (deceased) by Lrs. [(2001) 3 SCC 179]. 24. The principles relating to Section 100 CPC, relevant for this case, maybe summerised thus:- (i) An inference of fact from the recitals or contents of a document is aquestion of fact. But the legal effect of the terms of a document is a questionof law. Construction of a document involving the application of any principleof law, is also a question of law. Therefore, when there is misconstruction ofa document or wrong application of a principle of law in construing adocument, it gives rise to a question of law. (ii) The High Court should be satisfied that the case involves a substantialquestion of law, and not a mere question of law. A question of law having amaterial bearing on the decision of the case (that is, a question, answer towhich affects the rights of parties to the suit) will be a substantial question (i) An inference of fact from the recitals or contents of a document is aquestion of fact. But the legal effect of the terms of a document is a questionof law. Construction of a document involving the application of any principleof law, is also a question of law. Therefore, when there is misconstruction ofa document or wrong application of a principle of law in construing adocument, it gives rise to a question of law. (ii) The High Court should be satisfied that the case involves a substantialquestion of law, and not a mere question of law. A question of law having amaterial bearing on the decision of the case (that is, a question, answer towhich affects the rights of parties to the suit) will be a substantial question of law, if it is not covered by any specific provisions of law or settled legalprinciple emerging from binding precedents, and, involves a debatable legalissue. A substantial question of law will also arise in a contrary situation,where the legal position is clear, either on account of express provisions oflaw or binding precedents, but the court below has decided the matter,either ignoring or acting contrary to such legal principle. In the second typeof cases, the substantial question of law arises not because the law is stilldebatable, but because the decision rendered on a material question,violates the settled position of law. (iii) The general rule is that High Court will not interfere with concurrentfindings of the Courts below. But it is not an absolute rule. Some of the wellrecognized exceptions are where (i) the courts below have ignored materialevidence or acted on no evidence; (ii) the courts have drawn wronginferences from proved facts by applying the law erroneously; or (iii) thecourts have wrongly cast the burden of proof. When we refer to ‘decisionbased on no evidence’, it not only refers to cases where there is a totaldearth of evidence, but also refers to any case, where the evidence, takenas a whole, is not reasonably capable of supporting the finding.” 11. The test as laid down by the Apex Court for determining whether a question of law raised in the case is substantial or not, thus is whether itis of general public importance or whether it directly and substantiallyaffect the rights of the parties, and if so, whether it is either debatable, notpreviously settled by law of the land and there is no binding precedent. 12. In the present case, upon reading the first substantial question oflaw formulated by this Court, i.e., whether the learned Tribunal erred inlaw in holding that assessee had discharged its burden of substantiation ofthe identity, creditworthiness and genuineness of the transactions involvingreceipt of share application money, it appears that the same is essentially aquestion of fact. 13.It appears that the Appellate Authority, in the appeal filed by therespondent/assessee before the Commissioner of Income Tax (Appeals)Guwahati, by order dated 18.03.2020 after examining the information anddocuments furnished by the share holders i.e., M/s. Orchid Finlease Pvt.Ltd. and M/s. Shantidham Marketing Pvt. Ltd. held that both the shareholders were genuine and that the identity, creditworthiness andgenuineness of the two share holders were established and thereforedeleted the impugned addition made in the assessment year in question. 14. It further appears that the Second Appellate Tribunal has alsoexamined the explanation and materials produced by the respondentassessee and has held that no fresh credit has been received by therespondent/assessee in the financial year in question and that unsecuredloan has been converted into equity capital by way of journal entry.Accordingly, the Second Appellate Tribunal has held that the AppellateAuthority has rightly held that no addition was warranted under Section 68of the IT Act in relation to the conversion of loan into equity. 15. It further appears that the Second Appellate Tribunal has also 14. It further appears that the Second Appellate Tribunal has alsoexamined the explanation and materials produced by the respondentassessee and has held that no fresh credit has been received by therespondent/assessee in the financial year in question and that unsecuredloan has been converted into equity capital by way of journal entry.Accordingly, the Second Appellate Tribunal has held that the AppellateAuthority has rightly held that no addition was warranted under Section 68of the IT Act in relation to the conversion of loan into equity. 15. It further appears that the Second Appellate Tribunal has also accepted the explanation for source of source provided by therespondent/assessee. It further appears that the Second AppellateTribunal has examined the investment made by the concerned shareholdercompany and has held that the share holders had actually advanced loanto the respondent/assessee pursuant to loan cum share purchaseagreement. Relevant portion of the First Appellate order is reproducedhereunder for ready reference:- “11.13 Having regard to the above legal position, we now proceed toexamine the facts of the case on hand. We note that the assessee,when called upon by the AO to explain the nature and source of thecredit entries for the respective AYs, has discharged its burden byfurnishing the necessary details inter alia including the name, PAN,address of the share subscribers, details of share application moniesreceived, shares allotted along with bank statements evidencing thatall payments were received through banking channel. After goingthrough the details submitted the AO had made verification/enquiriesu/s 133(6) of the Act from the shareholders, who in response had filedcopies of their Income-tax Acknowledgments, financial statements,bank statements, explanation regarding source of their funds, copiesof assessment orders etc. in support of their identity, creditworthinessand genuineness of these transactions. Thus, the inference that flowsfrom the aforesaidfacts is that the initial burden imposed undersection 68 of the Act stood discharged. The details filed by theassessee were cross verified by the AO from the shareholder and noinfirmity was pointed out in the same, except making a bald statementthat the "source of source" of funds of the application monies was notproperly explained. Having perused the orders impugned before us inlight of the documents furnished by the shareholders, we find that theAO only looked with suspicious the "source of source" brought to hisnotice and other than making a bald statement that "source of source"was not fully explained, the AO failed to bring any material orevidence on record, which suggested that the amount credited in thebooks of the assessee did not belong to the shareholder but that of theassessee. For this, let us now into the relevant facts of each investor/swhich invested money in the company in the form of share capitalalong with share premium. -- “(I) Orchid Finlease Pvt. Ltd. (AY 2017-18- Rs. 1.75,54,848) -- “(I) Orchid Finlease Pvt. Ltd. (AY 2017-18- Rs. 1.75,54,848) (i) We note from pages 1057-1144 of the paper book, the details ofM/s. Orchid Finlease Pvt Ltd are set out. Perusal of the replyfurnished by this shareholder in response to the notice issued u/s133(6) of the Act, shows that the shareholder is a registered nonbanking finance company (NBFC) holding certificate of registration No.B.08.00108, having PAN and CIN: U65929AS1996PTC004898, which regularly filed its return of income and isassessed under the jurisdiction of ITO Ward 3(1), Guwahati. It isnoted that this shareholder had actually advanced loan to theassessee of Rs.2,55,00,000/- in the earlier FY 2015-16 pursuant to aloan cum share purchase agreement dated 11-01-2016. Copy of thesaid agreement and board resolution approving the same is foundplaced at Pages 1065 to 1069 of the paperbook. We further note thatthe said company has provided detailed break-up of loans advancedalong with the bank statement evidencing the advancement of loan,copy of which is enclosed at Pages 1070 to 1073 of the paperbook. Itis noted that the net owned funds of the company was in excess ofRs.2611 lacs and therefore it is evident that the companyhad sufficient net worth to justify the loan advanced to the assessee.The details of source of source of loan advanced to the assessee wasalso provided by the shareholder, which is found placed at Pages1060-1062 & 1074-1080 of the Paper book. It is noted that the sourceof funds of the shareholder for advancement of such loan was mainlythe proceeds of Rs.1,95,50,000/- received on sale of investmentholdings in M/S VRC Technologies Pvt. and M/s Parasmani Planning& Development Pvt. Ltd. to M/s Darkwell Dealers Pvt. Ltd., details ofwhich along with copies of sale bills are found placed at Pages 1074-1080 of the paperbook. (ii) In the relevant FY 2016-17, M/s Orchid Finlease Pvt. Ltd. did notpay any fresh sum to the assessee company. From the documentsavailable on record, it is noted that the assessee vide BoardResolution dated 04-05-2016 had exercised their right available under the loan agreement to convert the unsecured loan into equityshares. Having regard to the fair market value of the sharesdetermined in accordance with Rule 11UA, the company allotted4,04,761 equity shares at Rs.63 per share to this shareholder. Copyof the allotment letters issued by the assessee are found placed atPages 1063 & 1064 of the Paperbook. Having regard to these facts,we therefore note that there was no fresh credit received by theassessee in the relevant AY 2017-18 from M/s Orchid Finlease Pvt.Ltd. It was a case where the unsecured loan has been converted intoequity capital by way of journal entry. In absence of there being anyfresh credit received during the relevant year, the provisions ofSection 68 of the Act could not have been invoked or applied in AY2017-18. For this, we find support in the decisions of the Hon'bleCalcutta High Court in the case of Jatia Investment &Company vs CIT(206 ITR 718) and Hon'ble Madhya Pradesh High Court in the case ofVISP Pvt. Ltd. (265 ITR 202). We therefore hold that the Ld. CIT(A) hadrightly held that no addition was warranted u/s 68 of the Act inrelation to the conversion of loan into equity to the extent ofRs.1.75,54,848/-in AY 2017-18. (iii) Even otherwise, it is noted that the explanation regarding sourceof source of funds to the extent of Rs.1,95,50,000/- was paymentsreceived from M/s Darkwell Dealers Pvt. Ltd. It is noted that the AOchose to believe this source of source to the extent of Rs. 19,95,152/-and disbelieved sum of Rs.1,75,54,848/-. We find that no reasonswere given by the AO for believing some sums and disbelieving somesums in relation to the same source of source of funds. Even the Ld.CIT, DR was unable to throw light on this apparent irrational action ofthe AO. In such a scenario, when the A.O is found to be satisfied withthe source of source to the extent of Rs.19,95,152/- paid by them, hisaction of not accepting the balance sum of Rs. 1,75,54,848/- cannotbe countenanced. (iv) Perusal of alleged cash trail prepared by the AO in relation to M/sOrchid FinleasePvt Ltd, shows that it was the source of source of M/sDarkwell Dealers Pvt. Ltd. where cash deposits in the account of thepayers to the extent of Rs.97,67,000/- were found. Hence, going bythis chart, suspicion, if any, gets raised qua the source of source ofM/s Darkwell Dealers Pvt. Ltd and not the assessee. There was noevidence whatsoever brought on record by the AO to show that the cash deposits made in the accounts of the proprietary concernsrepresented unaccounted monies provided by the assessee or anyevidence regarding nexus with the assessee. We thus find that thiscash trail extracted by the AO in his order raises doubt but due tolack of any adverse material to connect the assessee with theproprietary concern, no adverse view can be taken against theassessee. (v) For the reasons discussed in the foregoing, it is held that theassessee had discharged its onus of substantiating the identity,creditworthiness and genuineness of the transaction with M/s OrchidFinlease Pvt Ltd. and also the source of source of funds. (J) Shantidham Marketing Pvt. Ltd. (AY 2017-18 - Rs.32.94,00,000) (i) We note from pages 1145-1266 of the paper book, the details ofM/s. Shantidham Marketing Pvt. Ltd. are set out. It is observed thatthe AO had issued notice u/s 133(6) dated 27.11.2019 upon thisshareholder requisitioning several details and inter alia requiring it tosubstantiate its source of funds out of which it paid the shareapplication monies to the assessee. Perusal of their response revealsthat the shareholder belongs to the UFM Group of companies(promoter of the assessee) and is engaged in the business ofpromoting and marketing of cement and trading of poly weave bags.The shareholder and CIN: a GST registered entityhaving PAN U51909 AS2010PTC012266, which regularly filed itsreturn of income and is assessed under the jurisdiction of ITO, Ward2(1), Kolkata. The shareholder had explained the strategic businessobjective behind infusion of share capital into the assessee company,for the reason that it was in the last leg of completion andcommissioning of its cement plant. It is noted that the investment wasmade at the fair market value computed in terms of Rule 11UA of theRules. Copy of the valuation report is found placed at Pages 1255 to1264 of the paperbook. Therefore, the justification regarding sharepremium stands fulfilled. (ii) It is noted that during AY 2017-18, the assessee had receivedshare application monies of Rs.55,62,50,814/- from M/s ShantidhamMarketing Pvt Ltd. qua the application monies aggregating to (ii) It is noted that during AY 2017-18, the assessee had receivedshare application monies of Rs.55,62,50,814/- from M/s ShantidhamMarketing Pvt Ltd. qua the application monies aggregating to Rs.22,68,50,814/-, the AO has accepted the identity,creditworthiness & genuineness of the transaction but chose todispute sum to the extent of Rs.32,94,00,000/-. We find that noreasons were ascribed by the AO for believing some sums are correctand disbelieving some part of share transactions from the sameshareholder, particularly when similar documentation in as much aseven the explanation regarding source of source of funds werefurnished by the shareholder in the same manner as sought for by theAO under the cover of the same letter furnished in response to AO'snotice u/s 133(6) of the Act. The AO has instead made a baldassertion that some of the source of source of funds remainedunexplained without giving any cogent basis or reasoningwhatsoever. When confronted with this fact, even the Ld. CIT, DR wasunable to explain this irrational action of the AO. In such a scenario,when the A.O is found to be satisfied with the identity,creditworthiness and genuineness of the shareholder by his action ofaccepting the share application of Rs.22.68,50,814/- paid by them,his action of not accepting the balance sum of Rs.32,94,00,000/-, isheld to be un tenable/un-reasonable/irrational being arbitrary. (iii) From the audited financial statements furnished, which are foundplaced at Pages 1180 to 1195 of the paperbook, it is noted that thecompany was having sufficient own funds in the form of capital andfree reserves to the tune of Rs.46,42,76,005/- as on 31-03-2017which is sufficient to cover the cost of investments made by theshareholder during the relevant year. As regards the source of sourceof funds, it is noted that the company had placed on record the copyof the bank statement for the relevant period at Page 1161 to 1179 ofthe Paper book. On examination of the bank statement it is taken notethat there is no deposit of cash and all transfer have been madethrough proper banking channels. The details of source of source offunds received by the assessee were also provided by theshareholder, in the manner as prescribed in the notice u/s 133(6) ofthe Act, which is found placed at Page 1157 to 1160 & 1245 to 1254of the Paper book. It is noted that the source of funds of theshareholder was primarily deposits from channel partners and/orsale of investment holdings, details of which along with name, PAN &address are found placed at Pages 1245 to 1254 of the paperbook. (iv) Shri Dudhewewala pointed out that M/s ShantidhamMarketingPvt Ltd was an associate concern and that the director ofthe said shareholder company and the assessee were common. Heinvited our attention to the details of the directors of the shareholder,which is available at Page 1155 of the paper book, from which it isnoted that Shri Vishal Jain, who is also the director of the assessee.Perusal of the statement of Shri Vishal Jain, which was recordedunder oath by the AO on 28-11-2019, shows that the director hadalso affirmed the transactions between M/s Shantidham MarketingPvt Ltd and the assessee and nothing adverse came out from hisstatement. When enquired about the source of funds of theshareholders, the Director stated that the shareholder was engaged inthe business of marketing of clinkers and cement in North Bengal,Bhutan and Nepal and that the names, addresses and PANS of thepayers had been provided to the AO so that the AO can makeenquiries from the respective source of sources. It is also noted thatupon insistence of the AO, the Director collated and furnished varioussupporting documents viz, which includes invoices, bank statementsas well as confirmations from the payers of the shareholders insupport of source of source of funds under the cover of his letter dated21.12.2019, which is found placed at Pages 1267 to 1507 of thepaperbook. Having perused the same, we find that the assessee hadfurnished relevant evidences in support of the source of source offunds and that even the AO was unable to point out any defect norany falsity or infirmity in the documents submitted before him. (v) It is also noted that this shareholder was also subjected toincome-tax scrutiny u/s 143(3) of the Act in AY 2017-18. Perusal ofthe assessment order, copy of which is at Pages 1265-1266 of paperbook, shows that the AO of the shareholder did not draw any adverseinference regarding the source of investments made by theshareholder in the assessee company. In the circumstances when thesource of funds of the investor had been accepted to be genuine by theAO of the investor, we hold that the AO, in the present case, wasunjustified in holding that the source of source of funds remainedunexplained. Having regard to the aforesaid facts, we find that notonly did the assessee discharge its onus of establishing the identity,creditworthiness and genuineness of the transaction but even thesource of source of funds was explained. 11.14 In light of the above, we now proceed to examine whetherthe decision of the Hon'ble Supreme Court in the case of Pr.CIT v. NRAIron & Steel (P) Ltd (412 ITR 161) relied upon by the Ld. DR is apt inthe facts and circumstances of the present case? For this, let us soexamine the principles laid down by the Hon'ble Supreme Court in thecase of Pr.CIT v. NRA Iron & Steel (P) Ltd (supra) and whether it isapplicable to the present facts of the case or not. In the decided case,the assessee-company received share capital and premium ofRs.17.60 crores in all from nineteen parties (six from Mumbai, elevenfrom Kolkata and two from Guwahati). The shares had a face value ofRs.10/- and were subscribed by the investor-companies at a premiumof Rs. 190 per share. The AO made the addition of Rs. 17,60 croresafter carrying out various inquiries as under- (i) To verify the veracity of the transactions, the notices were servedon three investor- companies namely Clifton Securities Pvt. Ltd.-Mumbai, Lexus Infotech Ltd.-Mumbai, Nicco Securities Pvt. Ltd.Mumbai but no reply was received. (ii) The address with respect to a company namely Real GoldTrading Co. Pvt. Ltd.- Mumbai was not correct. (iii) The notice could not be served on two investor-companies, namelyHema Trading Co. Pvt. Ltd.-Mumbai,Eternity Multi Trade Pvt. Ltd.-Mumbai. (i) To verify the veracity of the transactions, the notices were servedon three investor- companies namely Clifton Securities Pvt. Ltd.-Mumbai, Lexus Infotech Ltd.-Mumbai, Nicco Securities Pvt. Ltd.Mumbai but no reply was received. (ii) The address with respect to a company namely Real GoldTrading Co. Pvt. Ltd.- Mumbai was not correct. (iii) The notice could not be served on two investor-companies, namelyHema Trading Co. Pvt. Ltd.-Mumbai,Eternity Multi Trade Pvt. Ltd.-Mumbai. (iv) Submissions from nine companies were received (Neha CassetesPvt. Ltd.-Kolkata, Warner Multimedia Ltd. Kolkata, Gopikar SupplyPvt. Ltd. Kolkata, Gromore Fund Management Ltd. Kolkata,Bayanwala Brothers Pvt. Ltd. Kolkata, Shivlaxmi Export Ltd. Kolkata,Natraj Vinimay Pvt. Ltd. Kolkata, Neelkanth Commodities Pvt. Ltd.Kolkata, Prominent Vyappar Pvt. Ltd. Kolkata), however, they had notgiven any reasons for paying such a huge premium. (v) The details of share purchased and the amount of premium werenot specified by certain companies, namely Super Finance Ltd.Kolkata, Ganga Builders Ltd. Kolkata. Furthermore, these companieshad not enclosed the bank statement. (vi) In addition to above, AO found that: a. Out of the four companies at Mumbai, two companies were foundto be non-existent at the address furnished. b. With respect to the Kolkata companies, nobody appeared nor didthey produce their bank statements to substantiate the allegedinvestments. c. Guwahati companies - Ispat Sheet Ltd. and Novelty Traders Ltd.,were found non-existent at the given address. d. None of the investor-companies appeared before the A.O. 11.15 It was in light of the above conspectus of facts that it washeld by the Hon'ble Apex Court, that the Assessee-Company failed todischarge the onus required under Section 68 of the Act. However inthe case on hand, we find that, the assessee and all the shareholdershad discharged the onus casted upon them under the provisions ofSection 68 of the Act which has been elaborated in the precedingparagraph.” 16. Reading the aforesaid paragraphs of the impugned SecondAppellate Tribunal’s order, it is manifestly apparent that the decision of theSecond Appellate Tribunal is based on evidence. This Tribunal whileexercising jurisdiction under section 260A of the IT Act, cannot re-appreciate the evidences on record. It is trite law that the SecondAppellate Court under Section 100 of CPC shall not disturb the concurrentfindings of the Trial Court and the First Appellate Court unless and untilthe same is totally perverse. The provisions of section 100 of CPC beingapplicable in the case of appeal under Section 260A of the IT Act, theThird Appellate Court, i.e. this Court shall not interfere such finding offacts recorded by the First Appellate Tribunal. 17. Reference is made to the decision of the Apex Court in the caseof Karnataka Board of Wakf(supra). Paragraphs 11, 12, 13 & 14 & 15of the aforesaid judgment are reproduced hereunder for ready reference:- “11. A perusal of this question hardly gives an impression that the saidquestion involves any question of law much less a substantial questionof law. In the ordinary course, what we have stated above would havesufficed for the disposal of this appeal. However, the approach of theHigh Court in this case has been in total contravention of the law laiddown by this Court in a catena of decisions. 12. This Court had repeatedly held that the power of the High Court tointerfere in second appeal under Section 100 CPC is limited solely todecide a substantial question of law, if at all the same arises in thecase. It has deprecated the practice of the High Court routinelyinterfering in pure findings of fact reached by the courts below withoutcoming to the conclusion that the said finding of fact is either perverseor not based on material on record. 13. In Ramanuja Naidu v. V. Kanniah Naidu this Court held: (SCCHeadnote) 12. This Court had repeatedly held that the power of the High Court tointerfere in second appeal under Section 100 CPC is limited solely todecide a substantial question of law, if at all the same arises in thecase. It has deprecated the practice of the High Court routinelyinterfering in pure findings of fact reached by the courts below withoutcoming to the conclusion that the said finding of fact is either perverseor not based on material on record. 13. In Ramanuja Naidu v. V. Kanniah Naidu this Court held: (SCCHeadnote) ‘It is now well settled that concurrent findings of fact of trial court andfirst appellate court cannot be interfered with by the High Court inexercise of its jurisdiction under Section 100 of Civil Procedure Code.The Single Judge of the High Court totally misconceived his jurisdictionin deciding the second appeal under Section 100 of the Code in theway he did.’ 14. In Navaneethammal v. Arjuna Chetty this Court held: (SCC Headnote) ‘Interference with the concurrent findings of the courts below by the HighCourt under Section 100 CPC müst be avoided unless warranted bycompelling reasons. In any case, the High Court is not expected toreappreciate the evidence just to replace the findings of the lowercourts. ... Even assuming that another view is possible on areappreciation of the same evidence, that should not have been done bythe High Court as it cannot be said that the view taken by the firstappellate court was based on no material.’ 15. And again in Secy., Taliparamba Education Society v. MoothedathMallisseri Illath M.N. this Court held: (SCC p. 486, para 5) ‘The High Court was grossly in error in trenching upon the appreciation ofevidence under Section 100 CPC and recording reverse finding of factwhich is impermissible." 18.Reference is also made to the decision of the Apex Court in thecase of Hamida & others(supra). Paragraph No. 6 is reproducedhereunder for ready reference:- “The High Court has upset the finding of fact recorded by the firstappellate court, taking a different view merely on reappreciation ofevidence in the absence of valid and acceptable reasons to say that thefin