M/s. Sayaji Marketing Pvt. Ltd.,[Now merged with Subhalaxmi Compusis (P) Ltd.,], Kolkata V. ITO, Ward - 5(2), Kolkata, Kolkata

CO 39/KOL/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0423 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 05-09-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 21-03-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M KATARUKA
• Assessee Lawyers: MD USMAN
• Keywords: Unexplained cash credit; Unexplained investment; Principle of natural justice; Question of law; Onus to prove; Sham transactions
• Section: 143(3); 260A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA [BEFORE HONBLE SHRI S.S. GODARA, JM & SHRI M.BAL AGANESH, AM ] I.T.A NO. 282/KOL/201 4 ASSESSMENT YEAR : 2010-1 1 ITO, WARD-5(2), KOLKATA -VS- M/S SAYAJI MARK ETING PVT. LTD. [PAN: AAGCS 0147 M] (APPELLANT) (RESPOND ENT) C.O. NO. 39/KOL/2018 (ARISING OUT OF I.T.A NO. 282/KOL/2014) ASSESSMENT YEAR : 2010-1 1 M/S SAYAJI MARKETING PVT. LTD. -VS- ITO, W ARD-5(2), KOLKATA [PAN: AAGCS 0147 M] (CROSS OBJECTOR) (RESPO NDENT) FOR THE ASSESSEE : MD. USMAN, CIT DR FOR THE DEPARTMENT : SHRI M. KATARUKA, ADVOC ATE DATE OF HEARING : 29.08.2018 DATE OF PRONOUNCEMENT : 05.09.2018 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE REVENUE AND THE CROSS OBJECT ION BY THE ASSESSEE ARISES OUT OF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-VI, KOLKATA [IN SHORT THE LD CIT(A)] IN APPEAL NO. 78/CIT(A)-VI/WD-5(2)/1 3-14/KOL DATED 19.11.2013 AGAINST THE ORDER PASSED BY THE ITO, WARD-5(2), KOL KATA [ IN SHORT THE LD AO] UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHOR T THE ACT) DATED 28.03.2013 FOR THE ASSESSMENT YEAR 2010-11. 2 ITA NO.282/KOL/2014 & C.O. NO. 39/KOL/2018 M/S SAYAJI MARKETING PVT. LTD. A.YR. 2010-11 2 2. AT THE OUTSET, WE FIND THERE IS AN INORDINATE DE LAY OF 1462 DAYS IN FILING OF CROSS OBJECTION BY THE ASSESSEE BEFORE US. THE REASON ADD UCED BY THE ASSESSEE BY WAY OF AFFIDAVIT FOR CONDONING THE DELAY WAS THAT IT HAD B EEN ADVISED BY THE SENIOR ADVOCATE TO PREFER CROSS OBJECTION BEFORE THIS TRIBUNAL PURS UANT TO DISCUSSIONS WITH THE LEARNED SENIOR ADVOCATE DURING DISCUSSIONS FOR PREFERRING A TAX CASE APPEAL IN THE CASE OF A GROUP COMPANY I.E. M/S BLESSING COMMERCIAL PVT. LT D. BEFORE THE HONBLE CALCUTTA HIGH COURT. IN OTHER WORDS, THIS CROSS OBJECTION WA S PREFERRED BY THE ASSESSEE BASED ON THE ADVICE OF LD. SENIOR ADVOCATE HANDLING THE INCO ME TAX APPEAL BEFORE THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF GROUP COMPANY OF THE ASSESSEE. THE PRELIMINARY OBJECTION RAISED BY THE ASSESSEE IN ITS CROSS OBJEC TION IS THAT THE ASSESSMENT WAS FRAMED ON A NON-EXISTENT PERSON INASMUCH AS THE ASSESSEE C OMPANY STOOD AMALGAMATED WITH M/S SUBHLAXMI COMPUSIS PVT. LTD. VIDE ORDER OF HON BLE CALCUTTA HIGH COURT DATED 17.05.2012 WITH EFFECTIVE DATE FROM 31.03.2010. THE ASSESSEE COMPANY STATED THAT THE ASSESSMENT U/S 143(3) WAS FRAMED BY THE LD. AO ON 2 8.03.2013 FOR THE ASSESSMENT YEAR 2010-11, ON WHICH DATE , THE ASSESSEE COMPANY WAS NOT IN EXISTENCE. 3. WE HAVE HEARD RIVAL SUBMISSIONS. WE FIND THAT TH E ASSESSEE COMPANY GOT AMALGAMATED WITH M/S SUBHLAXMI COMUSIS PVT LTD WITH APPOINTED DATE FROM 31.03.2010. THIS AMALGAMATION HAS BEEN DULY APPROVE D BY THE HONBLE CALCUTTA HIGH COURT VIDE ITS ORDER DATED 17.05.2012. THE ASSESSEE COMPANY HAD DULY FILED CERTIFIED COPY OF THE COURT ORDER IN THE PRESCRIBED STATUTORY FORM NO. 21 BEFORE THE MINISTRY OF CORPORATE AFFAIRS ON 06.06.2012 (I.E. WITHIN THE PR ESCRIBED TIME AS PER THE COMPANIES ACT, 1956) INTIMATING THE FACTUM OF AMALGAMATION WI TH SUBHLAXMI COMPUSIS PVT. LTD. HAVING APPOINTED DATE AS ON 31.03.2010. WHILE THIS IS SO, THE ASSESSEE COMPANY OUGHT TO HAVE INTIMATED THE AO DURING THE COURSE OF ASSESSME NT PROCEEDINGS SO AS TO ENABLE THE LD. AO TO FRAME THE ASSESSMENT IN THE HANDS OF THE AMALGAMATED COMPANY IN ACCORDANCE WITH LAW. FROM THE MATERIALS AVAILABLE ON RECORD, T HERE IS NO EVIDENCE TO PROVE THAT THE ASSESSEE HAD INTIMATED THE LD. AO WITH REGARD TO TH E FACT OF AMALGAMATION, WHICH 3 ITA NO.282/KOL/2014 & C.O. NO. 39/KOL/2018 M/S SAYAJI MARKETING PVT. LTD. A.YR. 2010-11 3 RESORTED IN AO FRAMING AN ASSESSMENT IN THE HANDS O F THE ASSESSEE COMPANY I.E. SAYAJI MARKETING PVT. LTD. U/S 143(3) OF THE ACT DATED 28. 03.2013 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 1,89,99,97,780/-. 4. WE FIND THE ASSESSEE ITSELF HAD PREFERRED AN APP EAL BEFORE THE LD. CIT(A) BY FILING STATUTORY FORM NO. 35 IN THE NAME OF M/S SAYAJI MAR KETING PVT. LTD. ONLY IGNORING THE FACTUM OF AMALGAMATION. THE LD. CIT(A) GRANTED RELI EF TO THE ASSESSEE AGAINST WHICH THE REVENUE HAS PREFERRED AN APPEAL BEFORE US IN I. T.A. NO. 282/KOL/2014 WHEREIN THE NAME OF THE RESPONDENT HAS BEEN MENTIONED AS M/S SA YAJI MARKETING PVT. LTD. 5. THE ABOVE PROCEEDINGS IN THE NAME OF M/S SAYAJI MARKETING PVT. LTD. I.E. THE ASSESSEE COMPANY, CLEARLY GOES TO PROVE THAT EVEN THE ASSESSEE COMPANY HAS NOT PROVIDED THE FACTUM OF AMALGAMATION BEING APPROVED BY THE HIGH COURT ORDER W.E.F 31.03.2010 TO THE NOTICE OF THE INCOME TAX DEPARTME NT. 6. WE HOLD THAT THE ASSESSEE HAD NOT PROPERLY EXPLA INED THE REASONS FOR THE DELAYED FILING OF CROSS OBJECTIONS BEFORE US INSPITE OF THE FACT THAT IT WAS AWARE OF THE FACT OF AMALGAMATION WITH APPOINTED DATE FROM 31.3.2010. I N VIEW OF THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSEE COMPANY HAD NOT PROPERLY EXPLAINED THE REASONS FOR THE DELAY IN FILING THE CROSS OBJECTION BEFORE US. ACCORDINGLY, WE ARE NOT INCLINED TO CONDONE THE DELAY IN FILING THE CROSS OBJECTION BY THE ASSESSEE IN THE INSTANT CASE. HENCE CROSS OBJECTION OF THE ASSESSEE IS DISMISSED AS MAI NTAINABLE. 7. ON MERITS OF THE ADDITION CONTESTED BY THE REVEN UE BEFORE US IN RESPECT OF DELETION OF ADDITION MADE TOWARDS SHARE CAPITAL IN THE SUM OF R S. 190,00,00,000/-, WE FIND THAT THE ISSUE HAS BEEN DECIDED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL ON THE EXACTLY SIMILAR SET OF FACTS AND CIRCUMSTANCES IN THE GROUP COMPANY OF THE ASSESSEE M/S BLESSING 4 ITA NO.282/KOL/2014 & C.O. NO. 39/KOL/2018 M/S SAYAJI MARKETING PVT. LTD. A.YR. 2010-11 4 COMMERCIAL PVT. LTD. IN I.T.A. NO. 271/KOL/2014 FOR ASSESSMENT YEAR 2010-11 DATED 28.06.2017. FOR THE SAKE OF CONVENIENCE THE SAID OR DER IS REPRODUCED HEREUNDER: THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-VI, KOLKATA, (HEREINAFTER THE LD. CIT(A)), DT. 19/11/2013, PASSED U/S 250 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE A CT), RELATING TO ASSESSMENT YEAR 2010-11. 2. FACTS IN BRIEF:- THE ASSESSEE IS A COMPANY AND IS ENGAGED IN THE BUS INESS OF FINANCE AND INVESTMENT. IT FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011-12 ON 22/09/2010, DECLARING NIL- INCOME. IT SHOWED A LOSS OF RS.668/-. THE FACTS AS RECORDED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER ARE EXTRACTED BELOW:- PARA 1.2.1 THE ASSESSEE HAS SHOWN RECEIPT OF UNDER MENTIONED SHARE CAPITAL OF RS.1,90,00,000/- & SHARE PREMIUM OF RS.188,10,00,00 0/- DURING THE ASST. YEAR 2010-11. THE ASSESSEE CREDITED RS.1,90,00,000/- IN TOTAL IN ITS BOOKS AGAINST THE ABOVE RECEIPTS. THE ASSESSEE CLAIMED THAT THE DETAI L OF RECEIPTS ARE AS UNDER :- TABLE-1 PARTICULARS OF RECEIPTS OF SHARE CAPITAL/INVESTMENT DURING ASST. YEAR 2010-11 DATE OF APPLICATION : 05-06-2009 DATE OF ALLOTEMENT : 22-06-2009 PARA 1.2.2. THE ASSESSEE HAS SHOWN SUBSEQUENT INVESTMENT AGAIN ST THIS HUGE RECEIPT. THERE IS NOTHING EXTRAORDINARY THAT THE RECEIPT WAS UTILI ZED IN INVESTMENT WITH OTHERS. BUT THE MOST SI NO. NAME & ADDRESS OF THE SHARE HOLDER NO. OF SHARE CAPITAL AMOUNT OF SHARE CAPITAL (FACE VALUE : @ 10/-) AMOUNT OF SHARE PREMIUM (VALUE : @ 990/-) TOTAL AMOUNT (TOTAL VALUE : @ 1,000/-) 1 DOUBLE PLUS SOFTWRE PVT. LTD. 10159, PADAM SINGH ROAD, KAROL BAGH, NEW DELHI 110 007. PAN: AABCD3206F 650000 65,00,000 64,35,00,000 65,00,00,000 2 SAYAJI MARKETING PVT. LTD 5, RUSSEL STREET, 1 ST FLOOR, KOL.-71. PAN : AAGCS0147M 650000 65,00,000 64,35,00,000 65,00,00,000 3 STEPHENSFINANCIAL SERVICES PVT. LTD. VASUNDHARA, 6 TH FLOOR, 2/7, SARAT BOSE ROAD, KOLKATA- 700 020. PAN : AAGCS2740G. 600000 60,00,000 59,40,00,000 60,00,00,000 19000000 19,00,00,000 188,10,00,000 190,00,00,000 5 ITA NO.282/KOL/2014 & C.O. NO. 39/KOL/2018 M/S SAYAJI MARKETING PVT. LTD. A.YR. 2010-11 5 EXTRAORDINARY FACT IS THAT THE ASSESSEE HAS SHOWN I TS INVESTMENT WITH THE SAME COMPANIES WITH SAME DENOMINATION & MOST INTERESTINGLY THROUGH THE SAME THROUGH THE SAME CHEQUE, DETAILS OF WHICH ARE GIVEN BELOW IN TABLE-2 : - TABLE 2 PARTICULARS OF INVESTMENT DURING ASST. YEAR 2010-11 DATE OF ALLOTMENT : 22-06-2009 S.I. NO. PARTICULARS OF THE COMPANY IN WHICH INVESTMENT WAS MADE NO. OF SHARE APPLIED FOR & ALLOTMENT RECEIVED AMOUNT OF SHARE APPLIED FOR & ALLOTMENT RECEIVED (FACE VALUE: @ 10/-) AMOUNT OF SHARE PREMIUM (VALUE : @ 990/-) TOTAL AMOUNT OF SHARE APPLIED FOR & ALLOTMENT RECEIVED (TOTAL VALUE : @ 1,000/-) 1 DOUBLE PLUS SOFTWARE PVT. LTD. 650000 65,00,000 6 4,35,00,000 65,00,00,000 2 SAYAJI MARKETING PVT. LTD. 650000 65,00,000 64,35 ,00,000 65,00,00,000 (SEE NOTE -1 BELOW) 3 STEPHENS FINANCIAL SERVICES PVT. LTD. 600000 60,00,000 59,40,00,000 60,00,00,000 19000000 19,00,00,000 188,10,00,000 190,00,00,000 NOTE 1 : ALTHOUGH THE ASSESSEE HAS SHOWN RECEIPT OF RS.65 CRORE AS SHARE APPLICATION MONEY FROM M/S SAYAJI MARKETING PVT. LTD., IN LATER STAGE IT APPEARS THAT THE TOTAL RECEIPTS FROM M/S SAYAJI MARKETING PVT. LTD. WAS RS.130 CRORE. ON BEING ASKED, THE A/R CUM DIRECTOR EXPLAINED THAT THE ASSE SSEE COMPANY RECEIVED SHARE APPLICATION OF RS. 130 CRORE FROM M/S. SAYAJI MARKE TING PVT. LTD. BUT ALLOTMENT WAS MADE FOR RS.65 CRORE AND BALANCE AMOUNT OF RS.6 5 CRORE REFUNDED TO M/S SAYAJI MARKETING PVT. LTD. 3. THE SUBMISSIONS OF THE ASSESSEE BEFORE THE ASSES SING OFFICER ARE AS FOLLOWS:- A) CHEQUES WERE RECEIVED AS CHEQUES OR ENDORSEME NT OF CHEQUES, AS SHARE APPLICANTS MONEY, FOR ALLOTMENT OF SHARES FROM THRE E COMPANIES AND THEREAFTER THE VERY SAME CHEQUE WERE ENDORSED TO ANOTHER COMPA NY FOR ALLOTMENT OF SHARES OR AS REFUND OF THE AMOUNT RECEIVED. B) ALL THE ABOVE TRANSACTIONS ARE VALID TRANSACTION S UNDER THE NEGOTIABLE INSTRUMENTS ACT, 1881 AND THAT THERE IS NO EMBARGO OR PROHIBITION ON SUCH TRANSACTIONS. C) THE TRANSACTION CAN BE TERMED AS CRISS CROSS HOL DING. THE ASSESSING OFFICER THEREAFTER VERIFIED THE CLAIM S OF THE ASSESSEE AND THIS PROCESS IS RECORDED AT PARA 1.4. TO 1.4.1. OF THE A SSESSMENT ORDER. 3.1. THE A.O. CONCLUDED THAT THE ASSESSEE HAS NOT P ROVED THE GENUINENESS AND CREDITWORTHINESS OF THE CASH CREDITS. AT PARA 1.5 AND 1.6 OF HIS ORD ER HE HELD AS FOLLOWS:- 6 ITA NO.282/KOL/2014 & C.O. NO. 39/KOL/2018 M/S SAYAJI MARKETING PVT. LTD. A.YR. 2010-11 6 PARA 1.5 MODUS OPERANDI OF THE TRANSACTION: - FROM THE ABOVE DISCUSSION IT IS CLEAR THAT THE FOUR COMPANIES INCLUDING THE ASSESSEE COMPANY ARE CIRCULATING THE ABOVE MENT IONED FOUR CHEQUES AMONG THEMSELVES BY ENDORSEMENT ONLY ONE AFTER ANOTHER UN TIL IT RETURNS TO THE ISSUER. THE MODUS OPERANDI OF THE ASSESSEE COMPANY & OTHER THREE COMPANIES IS TO RAISE FICTITIOUS FUNDS THROUGH BOOK ENTRY. THE ASSESSEE & OTHER THREE COMPANIES RAISED THEIR CAPITAL TO THE TUNE OF RS.190,00,00,00 0/- EACH THROUGH THIS FICTITIOUS BOOK ENTRY. PARA 1.6 CONCLUSION: - THE ABOVE FACTS & CIRCUMSTANCES LEADS TO A REASONAB LE CONCLUSION THAT THE ABOVE ARRANGEMENT WERE MADE BY THE ASSESSEE WITH OTHER TH REE COMPANIES. THE IDEA OF COUNTERBALANCING THE CAPITAL RAISE BY WAY OF INVEST MENT OF SIMILAR NATURE DOES NOT SOUND NOVEL OR WORTH MENTIONING. THE UNIQUE FEA TURE OF THE OVERALL TRANSACTIONS LIES IN A DIFFERENT FIELD AND SMACKS O F METICULOUS PLANNING IN ORDER TO THROW DIRT IN THE EYES OF ALL AND SUNDRY. ON A C AREFUL ANALYSIS OF THE DATA MADE THREADBARE IN THE DISCUSSION ABOVE, IT IS CRYSTAL C LEAR THAT THE LABYRINTH WOVEN BY THE ASSESSEE COMPANY IN CONVENIENCE WITH THE OTHER THREE COMPANIES IS NOTHING BUT A MARE'S NEST. AS IS APPARENT FROM THE RECORD A ND AS SUBMITTED BY THE ASSESSEE COMPANY ITSELF, THE SAID FOUR CHEQUES ONLY MADE THEIR WAYS BETWEEN THE INTERACTING COMPANIES WITHOUT EVER BEING DEPOSITED IN ANY BANK A/C AND ULTIMATELY REACHED BACK TO THE ISSUING COMPANY. THU S NO MONEY HAS EVER CHANGED HANDS AND THE RECEIPTS OF ALLEGED CAPITAL & ALLEGED INVESTMENT WERE SIMPLY ON PAPER, MADE CONTRA ENTRIES AND COUNTER BA LANCING EACH OTHER AND THE ENTIRE TRANSACTION WERE MADE THROUGH BOOK ENTRY. TH IS IS ALSO A CLEAR INSTANCE THAT THE ASSESSEE MUST HAVE CONTROL ANY WAY WITH TH E ALLEGED SHAREHOLDERS AND THE MONEY SO FAR INTRODUCED/CREDITED BY THE ASSESSE E IN ITS BOOKS THROUGH THE ALLEGED SHAREHOLDERS IS NOTHING BUT A SHAM TRANSACT ION. BY ISSUING CHEQUE AND ENDORSING IT TO OTHERS AND FURTHER ENDORSING IT, TH E ASSESSEE TRIED TO GIVE IT A LOOK OF REAL TRANSACTION, WHICH IT FAILED TO ESTABLISH. HONOURABLE CALCUTTA HIGH COURT IN THE CASE OF BHOLA SHANKAR COLD STORAGE (P.) LTD. V. JOINT COMMISSIONER OF INCOME-T AX [2005] 144 TAXMAN 889 (CAL.) OBSERVED AS UNDER: - 'WHETHER SINCE ASSESSEE FAILED TO ESTABLISH GENUINE NESS OF TRANSACTION AND CREDITWORTHINESS OF INVESTORS, ADDITION MADE BY ASSESSING OFFICER WAS VALID - HELD, YES'. IT IS ALSO TO BE MENTIONED IN THIS CONNECTION THAT THE ASSESSEE COMPANY SHOWN THE SOURCE OF RECEIPTS OF SHARE CAPITAL OF RS .190,00,00,000/- (AS CREDITED IN ITS BOOKS) AS RECEIPTS THROUGH THE ABOVE FOUR CH EQUES, WHICH IT FAILED TO ESTABLISH. THEREFORE, THE CONCERNED INVESTMENT THRO UGH THOSE FOUR CHEQUES IS ALSO NOT ESTABLISHED. WITHOUT INTRODUCTION OF ANY ACTING MONEY OR BANK TRANSACTION, THE ASSESSEE HAS MANAGED TO INTRODUCE SHARE CAPITAL IN THE BOOKS OF THESE COMPANIES. 7 ITA NO.282/KOL/2014 & C.O. NO. 39/KOL/2018 M/S SAYAJI MARKETING PVT. LTD. A.YR. 2010-11 7 IN VIEW OF THE FACTS & CIRCUMSTANCES AND FORGOING D ISCUSSIONS, IT IS HELD THAT THE ARGUMENTS, EXPLANATIONS & SUBMISSIONS PLAC ED BY THE ASSESSEE COMPANY HAVE NO LEGS TO STAND UPON. THE ENTIRE TRANSACTIONS PROVIDE NO SEQUENCE OR CONSEQUENCE AND ARE FOUND TO BE UNFIT FOR CONSIDERA TION TO BE VALID. IT IS FACT THAT (A) THE ASSESSEE CREDITED A SUM OF RS.190,00,00,000 /- IN TOTAL IN ITS BOOKS FOR ASST. YEAR 2010-11 AS RECEIPTS OF SHARE CAPITAL & P REMIUM AND (B) THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT SATISFAC TORY. THEREFORE, THE SUM OF RS.190,00,00,000/- IS TO BE CHARGED TO INCOME TAX A S INCOME OF THE ASSESSEE FOR THE PREVIOUS YEAR ENDED 31-03-2010. IN VIEW OF THE ABOVE, THE ENTIRE SUM OF RS.190,00,00,000/- IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE FOR T HE ASST. YEAR 2010-11 AS UNEXPLAINED CASH CREDIT. THE ASSESSEE FURNISHED INACCURATE PARTICULARS IN T HIS REGARD AND BY THIS WAY UNDERSTAND ITS INCOME. HENCE, PENALTY PROC EEDING U/S 271(1)(C) IS APPLICABLE IN THIS ISSUE AND ACCORDINGLY INITIATED. ACCORDINGLY, TOTAL INCOME OF THE ASSESSEE FOR THE A SST. YEAR 2010-11 IS ASSESSED & CALCULATED AS UNDER:- TOTAL RETURNED INCOME TOTAL LOSS AS PER RETURN : : RS. NIL -668 ADD: (I) UNEXPLAINED CASH CREDIT, AS IN PARA 1.6 : 190,00,00,000.00 ----------------------------------- TOTAL ASSESSED INCOME = RS.189,99,99,332.00 RS.189,99,99,330.00 ----------------------------------- TAX ON ASSESSED INCOME RS.189,99,99,330/-, AS ABOVE : RS.56,99,99,799.00 FOR TAX COMPUTATION, SEE SEPARATE SHEET ENCLOSED HE REWITH. --------------------------------------------------- ----------------- : ----------------------- TOTAL PAYABLE BY THE ASSESSEE 87,83,01,290/- --------------------------------------------------- ------------------ : ------------------------ PENALTY PROCEEDING U/S 271(1)(C) ALREADY INITIATED AGAINST THE ASSESSEE. ASSESSED U/S 143(3) OF THE INCOME TAX ACT, 1961. COPY OF THE ORDER, DEMAND NOTICE &CHALLAN ISSUED T O THE ASSESSEE. 4. THE A.O. MADE AN ADDITION OF RS.190 CRORES U/S 6 8 OF THE ACT, AS UNEXPLAINED CASH CREDIT. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEA L BEFORE THE FIRST APPELLATE AUTHORITY. THE LD. CIT(A) GRANTED RELIEF BY HOLDING THAT : (A) THE ASSESSING OFFICER HAS TREATED THE TRANSACTI ONS AS SHAM AND THERE IS SOME FORCE IN IT. 8 ITA NO.282/KOL/2014 & C.O. NO. 39/KOL/2018 M/S SAYAJI MARKETING PVT. LTD. A.YR. 2010-11 8 (B) THESE ARE MERE PAPER TRANSACTIONS. (C) THE TRANSACTIONS DO NOT LEAD TO ANY CONCLUSION THAT THE SHARE CAPITAL SHOWN TO BE RECEIVED IN THIS MATTER CAN BE TREATED AS UNEXPLAIN ED CASH CREDIT U/S 68 OF THE ACT. (D) NO MONEY HAS ACTUALLY BEEN RECEIVED BY THE ASSE SSEE AND IT WAS ONLY A CASE OF INCREASE IN CAPITAL BY WAY OF BOOK ENTRIES. (E). THE AMOUNT OF CAPITAL HAS BEEN COUNTER BALANCE D BY SIMULTANEOUS INVESTMENT IN SHARE CAPITAL OF OTHER COMPANIES WITHOUT ACTUAL MOV EMENT OF FUNDS. (F). ALL THE PARTIES HAVE CONFIRMED THE TRANSACTION S AND THE ASSESSE HAS DISCHARGED THE ONUS THAT LAY ON IT AND HENCE NO ADDITION CAN BE MA DE. (G) IF THE TRANSACTIONS ARE SHAM TRANSACTIONS, AS H ELD BY THE A.O., NO ADDITION CAN BE MADE. (H) HE CONCLUDED THAT SECTION 68 OF ACT, DOES NOT A PPLY. HE DELETED THE ADDITION AND ALLOWED THE APPEAL OF T HE ASSESSEE. 6. AGGRIEVED THE REVENUE IS IN APPEAL ON THE FOLLOW ING GROUNDS:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) ERRED IN HOLDING THAT PROVISIONS OF SECTION 68 ARE NOT ATTRA CTED IN THE ADDITION OF RS.190 CR. ON ACCOUNT OF SHARE CAPITAL, IGNORING THE FACTS THAT THE APPELLANT FAILED TO ESTABLISH THE GENUINENESS OF THE TRANSACTION, SOURC E OF CAPITAL RECEIVED AND CREDITWORTHINESS OF THE INVESTORS DURING THE COURSE OF ASSESSMENT IN RESPECT OF CAPITAL OF RS. 190 CR. RECEIVED DURING THE PERIOD. 2. THE APPELLANT CRAVES LEAVE TO ADDUCE ADDITION AN D / OR SUPPLEMENTARY GROUND / GROUNDS AND TO AMEND AND / OR ALTER THE GROUND / GR OUNDS ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 7. THE LD. COUNSEL FOR THE REVENUE, MR. GOULENHANGS HING, CIT, DR., SUBMITTED THAT SECTION 68 OF THE ACT, APPLIES ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AS THE ASSESSEE HAS SHOWN A CREDIT IN ITS BOOKS OF ACCOUNT. HE CONTENDED THAT T HE ASSESSEE RECEIVED A CHEQUE AND AFTER CREDITING THE SAME IN ITS BOOKS OF ACCOUNT, ENDORSE D IT TO A THIRD PARTY. THE MODE OF UTILISATION OF THE CREDIT, AS PER THE LD. CIT, DR, IS NOT RELEV ANT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND WHAT IS TO BE SEEN IS WHETHER THE THREE INGREDI ENTS I.E. THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE CREDIT TRANSACTIONS HAVE BEEN PR OVED BY THE ASSESSEE. HE TOOK THIS BENCH THROUGH THE ORDER OF THE LD. A.O. AND SUBMITTED THA T CIRCULAR TRANSACTIONS HAVE BEEN UNDERTAKEN BY THE ASSESSEE AT HUGE PREMIUM, WITHOUT ANY JUSTIF ICATION. HE POINTED OUT TO THE CASH BALANCEAVAILABLE IN THE BANK ACCOUNT OF THESE COMPA NIES ON VARIOUS DATES, WHICH ARE AT TABLE 5 OF THE ASSESSMENT ORDER AND SUBMITTED THAT, AGAINST A BALANCE OF RS.11,288/-,A CHEQUE OF RS.65 CRORES WAS ISSUED ON 05/06/2009. SIMILAR CHEQUES WE RE ISSUE ON DIFFERENT DATES BY OTHER ENTITIES FOR CRORES OF RUPEES THOUGH THEIR BANK BAL ANCES WERE ONLY A FEW THOUSAND RUPEES. HENCE HE SUBMITS THAT THE ASSESSE HAS NOT PROVED TH E CREDITWORTHINESS OF THE CREDIT. HE VEHEMENTLY CONTENDED THAT THERE IS NO JUSTIFICATION , WHATSOEVER, FOR THE PREMIUM CHARGED AND THAT THIS IS A CASE WHERE GENUINENESS OF THE TRANSA CTIONS HAS NOT BEEN PROVED. HE PRAYED THAT THE ORDER OF THE A.O. BE UPHELD AND THE ORDER OF TH E LD. CIT(A) BE REVERSED. 9 ITA NO.282/KOL/2014 & C.O. NO. 39/KOL/2018 M/S SAYAJI MARKETING PVT. LTD. A.YR. 2010-11 9 8. THE LD. COUNSEL FOR THE ASSESSEE,SHRI MANOJ KATA RUKA, ON THE OTHER HAND, SUBMITTED THAT SECTION 68 OF THE ACT DOES NOT APPLY TO THE FACTS A ND CIRCUMSTANCES OF THE CASE AS, NO SUM OF MONEY WHATSOEVER WAS RECEIVED BY THE ASSESSEE. HE R ELIED ON THE WORDING OF SECTION 68 OF THE ACT AND SUBMITTED THAT ADMITTEDLY THE ENTIRE TRANSA CTIONS WERE BOOK ENTRIES WITHOUT ACTUAL RECEIPT OF MONEY. FOR THE INTERPRETATION OF THE TER M ANY SUM HE RELIED ON THE FOLLOWING CASE- LAWS:- H.H. SRI RAMA VERMA VS. COMMISSIONER OF INCOME TAX (1991) 187 ITR 308 (SC) D.C.I.T. VS. BHARTIYA HOTELS LTD. KOLKATA A BENCH OF THE KOLKTA TRIBUNAL ITA NO. 941/KOL/2011 JATIA INVESTMENT CO. VS. COMMISSIONER OF INCOME TAX (1994) 206 ITR 0718 ACIT VS. MAHENDRA KUMAR AGARWAL (2011) 142 TTJ 0035 (UO) ACIT VS. KERALA TRANSPORT CO. (1994) 50 TTJ 0189 8.1. ALTERNATIVELY AND WITHOUT PREJUDICE TO HIS ARG UMENT THAT SECTION 68 OF THE ACT IS NOT ATTRACTED TO THE FACTS AND CIRCUMSTANCES OF THE CAS E, HE SUBMITTED THAT THE ASSESSEE HAD PRODUCED CONFIRMATION LETTER, COPY OF FORM-2, EVIDE NCES ALLOTMENT OF SHARES AS FILED WITH THE REGISTER OF COMPANIES, ALL RECORDS DECLARING ROC FI LINGS ETC. TO PROVE THE IDENTITY OF THE PERSONS, GENUINENESS OF THE TRANSACTIONS AND CREDIT WORTHINESS OF THE PARTY. HE SUBMITTED THAT THE CHEQUE THAT HAS BEEN RECEIVED FROM THE CREDITOR IS THE SOURCE OF THE FUNDS AND THE SOURCE OF SOURCE IS ANOTHER CHEQUERECEIVED BY THE CREDITOR FR OM ANOTHER COMPANY AND WHICH IN TURN HAD RECEIVED SIMILAR CHEQUE FROM YET ANOTHER COMPANY BY WAY OF CIRCULAR TRANSACTIONS. THUS HE SUBMITS THAT THE IDENTITY AS WELL AS THE CREDITWORT HINESS IS PROVED. HE VEHEMENTLY CONTENDED THAT THE THREE REQUIREMENTS OF SECTION 68 OF THE AC T, HAVE BEEN COMPLIED WITH, IN THIS CASE. THE GENUINENESS OF THE TRANSACTION IS PROVED AS THE PAR TIES HAVE CONFIRMED THE TRANSACTION. HE FURTHER SUBMITTED THAT IF IT IS THE REVENUES CASE THAT THE ENTIRE TRANSACTIONS ARE SHAM TRANSACTIONS, THEN THE TRANSACTIONS SHOULD BE IGNOR ED AND NO COGNIGENCE SHOULD BE TAKEN OF THE SAME AND HENCE NO ADDITION CAN BE MADE. HE ARGUED T HAT NO MONEY WHATSOEVER WAS RECEIVED BY ANY OF THE COMPANIES AND IT WAS A CASE OF BOOK BUILDING BY EXCHANGE OF SHARE CAPITAL. HE RELIED ON THE ORDER OF THE LD. CIT(A) AND ARGUED TH AT THE SAME MAY BE UPHELD AS THIS IS A CASE WHERE NO REAL INCOME HAS ACCRUED TO THE ASSESSEE. 9. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERAT ION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, A PERUSAL OF THE PAPERS ON RECORD AS WELL AS OF THE ORDER OF THE AUTHORITIES BELOW AND CASE LAWS CITED, WE HOLD AS FOLLOWS:- 9.1. SECTION 68 OF THE ACT, READS AS FOLLOWS: 68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE N ATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITE D MAY BE CHARGED TO INCOME- TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR (EMPHASIS OUR) 9.2. IN THIS CASE ADMITTEDLY, THE ASSESSEE HAS RECE IVED CHEQUES AS CONSIDERATION FOR ALLOTMENT OF SHARE CAPITAL AT A PREMIUM. 10 ITA NO.282/KOL/2014 & C.O. NO. 39/KOL/2018 M/S SAYAJI MARKETING PVT. LTD. A.YR. 2010-11 10 9.3. THE ASSESSEE CREDITED THESE CHEQUES IN ITS BOO KS OF ACCOUNT. THE MANNER IN WHICH THE CREDIT HAS BEEN USED SUBSEQUENTLY IS NOT RELEVANT F OR THE APPLICATION OF SECTION 68 OF THE ACT. THE CONTENTION OF THE ASSESSEE WAS THAT CROSSED & CO CHEQUES WERE RECEIVED AND SUBSEQUENTLY THESE VERY CHEQUES WERE ENDORSED TO AN OTHER COMPANY FOR ALLOTMENT OF SHARE CAPITAL AT A PREMIUM. IT WAS CONTENDED BEFORE THE R EVENUE AUTHORITIES THAT ALL THESE TRANSACTIONS ARE LEGALLY VALID AND THAT THE NEGOTIA BLE INSTRUMENTS ACT AUTHORIZES SUCH ENDORSEMENTSAND UNDER THE COMPANIES ACT, SHARE CAPI TAL (AT A PREMIUM) HAS BEEN VALIDLY ALLOTTED. THUS, THE AMOUNT RECEIVED BY CHEQUE AND E NTERED INTO THE BOOKS OF ACCOUNTS OF THE ASSESSEE AS A CREDIT, IN OUR VIEW, SATISFIES THE RE QUIREMENTS OF SECTION 68 OF THE ACT WHICH STARTS WITH THE WORDING WHERE ANY SUM IS FOUND CREDITED I N THE BOOKS OF THE ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR.. 9.3. THE CONTENTION OF THE ASSESSEE THAT RECEIVING A CHEQUE AND NOT ENCASHING THE SAME BUT ENDORSING THE SAME TO A THIRD PARTY DOES NOT TANTAM OUNT TO SUM FOUND CREDITED IN THE BOOKS IS DEVOID OF MERIT. IN THE CASE ON HAND, THE SUM WA S CREDITED IN THE BOOKS AS APPLICATION MONEY FOR ALLOTMENTSOF SHARE CAPITAL. CHEQUE VALIDLY RECE IVED UNDER THE NEGOTIABLE INSTRUMENT ACT 1881 IS ANY SUM AND THIS SUM WAS FOUND CREDITED I N THE BOOKS OF ACCOUNT. 9.4. RELIANCE PLACE BY THE ASSESSEE IN THE CASE OF H.H. SRI RAMA VERMA VS. COMMISSIONER OF INCOME TAX (SUPRA) IS MISPLACED AS IN THAT CASE, TH E HONBLE COURT WAS INTERPRETING THE TERM ANY SUMS PAID. THE HONBLE COURT HELD THAT ANY SU M PAID CONTEMPLATES PAYMENT OF AMOUNT OF MONEY AND NOT A DONATION IN KIND, THOUGH CONVERT IBLE INTO MONEY AT A LATER STAGE. IT WAS NOT A CASE WHERE PAYMENT WAS MADE BY WAY OF CHEQUE. EQU ITY SHARES WERE DONATED.IN THE CASE ON HAND, A CHEQUE WAS RECEIVED BY THE ASSESSEE AND A C HEQUE COMES WITHIN THE DEFINITION OF THE TERM ANY SUM AS IT IS A PAYMENT OF AMOUNT OF MONE Y. 9.4.1. THE DECISION OF THE COCHIN TRIBUNAL IN THE C ASE OF KERALA TRANSPORT CO. (SUPRA), DOES NOT APPLY TO THE FACTS OF THE CASE, AS THE HONBLE TRIBUNAL WAS IN THAT CONSIDERING A CASE WHERE ACCOUNTING ENTRIES WERE PASSED BY DEBITING ACCOUNTS OF SISTER CONCERNS WITHOUT ACTUAL INFLOW OF CASH. HERE A VALID CHEQUE WAS RECEIVED AND CREDITED IN THE BOOKS OF ACCOUNT AS VALUABLE CONSIDERATION FOR ALLOTMENT OF SHARES. 9.4.2. SIMILARLY, IN THE CASE OF ACIT VS. MAHENDRA KUMAR AGARWAL(SUPRA), THE JAIPUR BENCH OF THE TRIBUNAL WAS CONSIDERING A CASE OF UNEXPLAINED INVESTMENT, WHERE THERE WERE CERTAIN JOURNAL ENTRIES PASSED WITHOUT ANY CASH TRANSACTION S. IT WAS NOT A CASE WHERE CHEQUES HAVE BEEN ISSUED. THUS, ON FACTS THIS CASE LAW DOES NOT APPLY. 9.4.3. IN THE CASE OF JATIA INVESTMENT CO. (SUPRA), THE FACTS WERE THAT ENTRIES WERE MADE IN THE BOOKS OF ACCOUNT SO AS TO COMPLY WITH THE DIRECTION S OF RBI GIVEN TO NBFCS. THESE DIRECTIONS WERE IN THE PUBLIC DOMAIN. THE RBI HAD DIRECTED THE THREE COMPANIES BELONGING TO JATIA GROUP TO MAINTAIN A PARTICULAR RATIO OF LOANS TO SHARE CA PITAL AND RESERVES. THIS REQUIRED DISCHARGE OF LOANS AND THROUGH A TRANSPARENT ARRANGEMENT THESE T HREE COMPANIES SOLD SHARES HELD BY THEM IN VARIOUS OTHER COMPANIES OF JATIA GROUP AND THE C ONSIDERATION RECEIVED THROUGH BOOK ENTRIES WERE UTILIZED FOR REPAYMENT OF LOANS BORROWED FROM A PROPRIETARY CONCERNS OF ONE OF THE PARTNERS. UNDER SUCH CIRCUMSTANCES, THE HONBLE JUR ISDICTIONAL HIGH COURT HELD THAT THERE IS NO REAL CASH ENTRY ON THE CREDIT SIDE OF THE CASH B OOK. THE HONBLE HIGH COURT FOUND FAULT WITH THE TRIBUNAL FOR REFUSING TO TAKE NOTICE OF THE DIR ECTIONS OF THE RBI. IN THE CASE ON HAND, THE TRANSACTIONS UNDERTAKEN BY THE ASSESSEE ARE NOT FOR COMPLYING WITH ANY OF ANY AUTHORITY, MUCH 11 ITA NO.282/KOL/2014 & C.O. NO. 39/KOL/2018 M/S SAYAJI MARKETING PVT. LTD. A.YR. 2010-11 11 LESS TO COMPLY WITH ANY LAW. WHEN THE ASSESSEE HAD RECEIVED THE CHEQUE AND THEREAFTER UTILIZED THE SAME FOR ALLOTMENT OFSHARE CAPITAL, IT IS A CRE DIT OF A SUM IN THE BOOKS OF ACCOUNT. 10. THUS, IN OUR VIEW, THESE CASE LAWS DO NOT COME TO THE RESCUE OF THE ASSESSE. HENCE IN OUR VIEW, THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSES SEE THAT SECTION 68 OF THE ACT, PER SE WOULD NOT BE ATTRACTED, IS DEVOID OF MERIT AND HENCE REJE CTED. 11. THE SECOND ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE, IS THAT THE ASSESSEE HAS PROVED THE IDENTITY AND CREDITWORTHINESS OF THE CREDITOR COMPA NY AS WELL AS THE GENUINENESS OF THE TRANSACTIONS. WE ARE NOT ABLE TO AGREE WITH THE SAM E. A 10 RUPEES SHARE HAS BEEN ISSUE AT A PREMIUM OF 990 RUPEES . ON A QUESTION, THE ASSESSEE HAS NOT EVEN ATTEMPTE D TO JUSTIFY THE AMOUNT OF SHARE PREMIUM. A PERUSAL OF THE AUDITED S TATEMENT OF ACCOUNTS OF THESE COMPANIES DEMONSTRATE THAT THERE IS HARDLY ANY INCOME WAS DIS CLOSED OR ANY EXPENDITURE WORTH MENTIONING WAS CLAIMED. THERE IS NO ACTIVITY WHATSO EVER IN THESE COMPANIES. THE RESERVE BANK OF INDIA, THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA, AND CERTAIN OTHER ORGANISATIONS, HAVE LAID DOWN VARIOUS METHODS BASED ON WHICH THE AMOUNT OF SHARE PREMIUM CAN BE DECIDED. NONE OF THESE METHODS HAVE BEEN FOLLOWED IN THIS CASE. T HE EXORBITANT QUANTUM OF SHARE PREMIUM COLLECTED SHOCKS THE CONSCIENCE OF ANY REASONABLE P ERSON. A MOCKERY HAS BEEN MADE OF THE WHOLE SYSTEM. THESE ARE NOT TRANSACTIONS WHICH CAN BE JUSTIFIED BY ANY STRETCH OF IMAGINATION. THUS, IN OUR VIEW, THE GENUINENESS OF THESE TRANSAC TIONS IS NOT PROVED. 12. THESE BEING COMPANIES, WHICH ARE REGISTERED WIT H ROC,ARE ARTIFICIAL INDIVIDUAL PERSONS AND HENCE, THEIR IDENTITY HAS BEEN PROVED. COMING T O THE CREDITWORTHINESS OF THE CREDITOR, THE EXAMINATION OF THE BALANCE SHEET, PROFIT & LOSS ACC OUNT AS WELL AS BALANCES IN THE BANK ACCOUNT DEMONSTRATE THAT THEY ARE NOT MORE THAN A C OUPLE HUNDREDS OF RUPEES OR FEW THOUSANDS OF RUPEES. NO FIGURES ARE IN LAKHS ALSO, EXCEPT THE CHEQUE ISSUED. BANK BALANCE ARE AROUND RS.12,000/- THUS IN OUR VIEW THE CREDITWORTH INESS IS NOT PROVED. AS THE GENUINENESS OF THE TRANSACTIONS AND THE CREDITWORTHINESS OF THE PA RTIES HAVE NOT BEEN PROVED, THE ADDITION HAS BEEN CORRECTLY MADE U/S 68 OF THE ACT BY THE A.O. 13. THE LAST CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE IS THAT, IF THESE CREDITS AS WELL AS INVESTMENTS ARE SHAM, THEN NO ADDITION WHATSOEVER C AN BE MADE AS THESE ARE NOT REAL TRANSACTIONS. HE SUBMITS THAT WHEN THE A.O. GIVES A CATEGORICAL FINDING THAT THESE ARE FICTITIOUS BOOK ENTRIES, THEN LOGICALLY NO ADDITIONS SHOULD BE MADE. IN OUR VIEW, THIS ARGUMENT HAS TO BE DISMISSED FOR THE REASON THAT CREDIT ENTRY HAS BEEN MADE IN THE BOOKS OF ACCOUNT CONSEQUENT TO RECEIPT OF CHEQUES AGAINST WHICH SHARE CAPITAL HAS BEEN ALLOTTED BY THE ASSESSE COMPANY WHICH, BY THE ADMISSION OF THE ASSESSEE, ARE LEGALLY VALID TRANSACTION. THE REQUIREMENTS OF THE NEGOTIABLE INSTRUMENTS ACT AND THE COMPANIES ACT AR E FULFILLED IN THIS CASE. SHARES HAVE BEEN LEGALLY ALLOTTED. AMOUNTS HAVE BEEN VALIDLY RECEIVE D BY CHEQUE. THERE IS NO VIOLATION OF LAW. THUS, IT CANNOT BE SAID THAT THESE ARE FICTITIOUS O R SHAM ENTRIES AND NO COGNIGENCE SHOULD BE TAKEN OF THESES ENTRIES. THESE ARE NOT UNREAL TRANS ACTIONS AS HELD BY THE A.O. THESE TRANSACTIONS ARE VALID IN LAW. 13.1. HENCE, THE CREDIT RECORDED IN THE BOOKS OF AC COUNTS OF THE ASSESSEE IS NOT A FICTITIOUS CREDIT AND HAS LEGAL SANCTION. IN VIEW OF THE DISCU SSIONS THESE ARGUMENTS OF THE LD. COUNSEL FOR THE ASSESSEE IS DISMISSED AS DEVOID OF MERIT. 14. WE FIND THAT THE TRANSACTIONS UNDERTAKEN BY THE SE GROUPS OF COMPANIES ARE SCANDALOUS. A NUMBER OF COMPANIES HAVE BEEN FLOATED AND NONE OF T HEM HAVE ANY BUSINESS NOR ANY ASSET 12 ITA NO.282/KOL/2014 & C.O. NO. 39/KOL/2018 M/S SAYAJI MARKETING PVT. LTD. A.YR. 2010-11 12 WORTH MENTIONING. THE FIRST COMPANY ISSUES A CHEQUE TO THE SECOND COMPANY FORALLOTMENT OF SHARES AT A HUGE PREMIUM AND THE SECOND COMPANY ALL OTS SHARES TO THE FIRST COMPANY. THE SECOND COMPANY INSTEAD OF ENCASHING THE CHEQUE ENDO RSES THIS CHEQUE TO THE THIRD COMPANY AS CONSIDERATION OF ALLOTMENT OF SHARES AT A HEAVY PRE MIUM IN THAT COMPANY. THE THIRD COMPANY DOES NOT ENCASH THE CHEQUE BUT IN TURN ENDORSES THI S CHEQUE TO THE FOURTH COMPANY TOWARDS CONSIDERATION OF ALLOTMENT OF SHARES AT A HUGE PREM IUM BY THE FOURTH COMPANY. THE FOURTH COMPANY IN TURN ENDORSES THIS CHEQUE TO THE FIRST C OMPANY AS CONSIDERATION FOR THE ALLOTMENT OF SHARES AT A HUGE PREMIUM BY THE FIRST COMPANY TO TH E FOURTH COMPANY. BY THIS PROCESS THE CIRCUITOUS ROUTE OF ROUND TRIPPING IS COMPLETED. TH ROUGH THIS PROCESS ALL THE FOUR COMPANIES HAVE HUGE SHARE CAPITAL AND RESERVES AND CORRESPOND ING ASSET BY WAY OF INVESTMENTS IN SHARES OF THE OTHER GROUP COMPANIES. WE COME TO UNDERSTAND THE MODUS OPERANDI IS TO SELL THESE COMPANIES HAVING HUGE SHARE CAPITAL AND INVESTMENTS , TO PERSONS WHO HAVE UNACCOUNTED MONEY, BY TRANSFER OF THE SHARES AT A NOMINAL AMOUN T. THE SHARES IN THESE COMPANIES ARE SOLD AT A RIDICULOUSLY LOW VALUE AND CONSEQUENTLY THE MA NAGEMENT AND CONTROL OF THIS COMPANY IS TRANSFERRED. THE PURCHASERS OF SHARES OF THE COMPAN IES THEREAFTER, SHOW BOGUS SALE OF THE INVESTMENTS HELD BY SUCH COMPANY TO THIRD PARTIES T HROUGH A CHAIN OF TRANSACTIONS, BY WAY OF LAYERING AND BRING IN THEIR UNACCOUNTED MONEY INTO THAT COMPANY. 14.1. SUCH PRACTICES HAVE TO BE DEPRECIATED. IN SUC H CASES THE ASSESSEES CANNOT CLAIM THAT THE ENTIRE TRANSACTIONS ARE BOGUS TRANSACTIONS AND HENC E THE PROVISIONS OF LAW WILL NOT APPLY AND NO ADDITION CAN BE MADE U/S 68. WE DISMISS THIS ARG UMENT AS DEVOID OF MERIT. 15.THE B BENCH OF THE ITAT, DELHI IN ITA NO. 378& 2164/DEL/2008, ASSESSMENT YEAR 2000- 2001, ITO VS. M/S. SBS PROPERTIES &FINVESTPVT. LTD. , ORDER DT. 30.05.2016, WHEREIN ONE OF US IS THE AUTHOR OF THE DECISIONS, HAS HELD AS FOLLOWS : 27. WE NOW CONSIDER THE MERITS OF THE ADDITION WITH OUT TAKING INTO CONSIDERATION THE STATEMENT OF SHRI S.K. JAIN OR THE MATERIAL FOUND D URING THE SEARCH OF SHRI S.K. JAIN. ON A PERUSAL OF THE DOCUMENTS SUBMITTED BY TH E ASSESSEE, WE ARE OF THE CONSIDERED OPINION THAT THE GENUINENESS OF THE TRAN SACTION AND THE CREDITWORTHINESS OF THE CREDITORS HAS NOT BEEN DEMONSTRATED BY THE A SSESSEE. THE AO IN HIS ORDER AT PAGE 7 HAS CLEARLY RECORDED THAT THE ASSESSEE COMPA NY HAS NO FINANCIAL BASE OR BUSINESS AND THE MONEY RECEIVED BY IT WAS WITHDRAWN THE VERY SAME DAY OR THE NEXT DAY. MORE IMPORTANT HE HAS RECORDED THAT THE ASSESS EE HAS NOT GIVEN ANY, LET ALONE SATISFACTORY EXPLANATION FOR THE HIGH PREMIUM CHARG ED ON THE SHARES. WHEN SHARES ARE ALLOTTED WITHIN A SPAN OF LESS THAN ONE MONTH, THE REASON FOR CHARGING HIGH PREMIUM IN THE CASE OF VPC FINANCIAL SERVICES P LTD . ,KILLA FINANCIAL SERVICES PVT. LTD., HIGHYIELD SECURITIES PVT. LTD. , MEHULFINVEST PVT. LTD. AND SYNERGY FINLEASE P. LTD. AND REASON FOR NOT CHARGING PREMIUM IN THE CASE OF M/S. TIMELY FINCAP PVT. LTD. AND GRAPH FINANCIAL SERVICES PVT. LTD. IS NOT AT ALL EXPLAINED. THE EXPLANATION GIVEN THAT THE LD. COUNSEL FOR THE ASSESSEE THAT CH ARGING OF PREMIUM IS THE SOLE DISCRETION OF THE COMPANY AND THAT PRICE IS A CONTR ACT ENTERED BETWEEN TWO PARTIES AND CANNOT BE QUESTIONED BY THE REVENUE IS DEVOID O F MERIT. THE AO CANNOT BE EXPECTED TO WEAR BLINKERS AND ACCEPT BALD EXPLANATI ONS OF THE ASSESSEE. THERE SHOULD BE SOME EXPLANATION WHICH IS LOGICAL AND RAT IONALE. LD. COUNSEL COULD NOT DEMONSTRATE THAT THE ASSESSEE COMPANY WAS IN FACT, CARRYING ON THE BUSINESS OF FINANCE AND INVESTMENT. IT IS COMMON SENSE THAT SHA RES OF LOSS MAKING COMPANIES DO 13 ITA NO.282/KOL/2014 & C.O. NO. 39/KOL/2018 M/S SAYAJI MARKETING PVT. LTD. A.YR. 2010-11 13 NOT COMMAND A PREMIUM. THE FINANCIAL STATUS OR THE PROJECTED CASH FLOW OF THE ASSESSEE COMPANY OR ANY SUCH RECORD HAS BEEN PRODUC ED BY THE ASSESSEE TO JUSTIFY THE CHARGING OF SUCH PREMIUMS FOR ALLOTMENT. DISCOU NTED CASH FLOW MATTER IS ONE OF THE ACCEPTED METHODS TO DETERMINE PREMIUM CHARGEABL E ON SHARE CAPITAL. CERTAIN OTHER METHODS HAVE ALSO BEEN PRESCRIBED. PREMIUM CA NNOT BE CHARGED AS PER THE WHIMS AND FANCIES OF THE COMPANY. IN CASES WHERE EX PLANATION OR JUSTIFICATION OF THE VALUATION OF SHARES IS GIVEN, TO EXPLAIN THE BA SIS ON WHICH SHARE PREMIUM HAS BEEN FIXED, THEN NO ADDITION CAN BE MADE, AS THE GE NUINENESS OF THE TRANSACTION CAN BE HELD AS EXPLAINED. IN THIS CASE NO EXPLANATION W HATSOEVER HAS BEEN GIVEN. UNDER THESE CIRCUMSTANCES WE ARE OF THE CONSIDERED OPINIO N THAT THE ASSESSEE HAS NOT DISCHARGED THE BURDEN THAT LAY ON IT IN PROVING THE GENUINENESS OF THE CASH CREDITS. WE ALSO FIND THAT THE AO WAS RIGHT IN HOLDING THAT THE ASSESSEE HAS NOT PROVED THE CREDITWORTHINESS OF THE SHARE HOLDER COMPANIES. THE BALANCE SHEETS, INCOME TAX ASSESSMENTS ETC. SHOW THAT THE RESOURCES OF THESE C OMPANIES ARE LIMITED. WE NOW DISCUSS THE CASE LAW ON THE SUBJECT. 28. IN THE CASE OF NOVA PROMOTORS AND FINLEASE (P) LTD. THE HON'BLE DELHI HIGH COURT AT PARA 18 AND 19 HELD AS FOLLOWS: '18. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, T HE ASSESSEE HAD ADDUCED DOCUMENTARY EVIDENCE IN AN ATTEMPT TO PROVE ALL THE THREE INGREDIENTS OF SECTION 68 VIZ. (I) IDENTITY OF THE CREDITOR, (II) CREDITWORTH INESS OF THE CREDITOR AND (III) THE GENUINENESS OF THE TRANSACTION. BUT THE QUESTION BE FORE US CANNOT BE RESOLVED MERELY ON THE BASIS OF THE DOCUMENTARY EVIDENCE. TH E EVIDENCE ADDUCED BY THE ASSESSEE HAS TO BE EXAMINED NOT SUPERFICIALLY BUT I N DEPTH AND HAVING REGARD TO THE TEST OF HUMAN PROBABILITIES AND NORMAL COURSE OF HU MAN CONDUCT. BEFORE WE PROCEED TO NOTE THE FINDINGS OF THE TRIBUNAL AND DE CIDE WHETHER THEY HAVE BEEN PROPERLY ARRIVED AT, IT IS RELEVANT TO NOTE A FEW J UDGMENTS OF THE SUPREME COURT. IN CIT V .DURGA PRASAD MORE [1971] 82 ITR 540 HEGDE J. SPEAKING FOR THE SUPREME COURT OBSERVED AS UNDER: - 'NOW WE SHALL PROCEED TO EXAMINE THE VALIDITY OF TH OSE GROUNDS THAT APPEALED TO THE LEARNED JUDGES. IT IS TRUE THAT THE APPARENT MUST B E CONSIDERED REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO BELIEVE THAT THE APPARENT IS NOT THE REAL. IN A CASE OF THE PRESENT KIND A PARTY WHO RELIES ON A RECITAL IN A D EED HAS TO ESTABLISH THE TRUTH OF THOSE RECITALS, OTHERWISE IT WILL BE VERY EASY TO M AKE SELF- SERVING STATEMENTS IN DOCUMENTS EITHER EXECUTED OR TAKEN BY A PARTY AND R ELY ON THOSE RECITALS. IF ALL THAT AN ASSESSEE WHO WANTS TO EVADE TAX IS TO HAVE SOME RECITALS MADE IN A DOCUMENT EITHER EXECUTED BY HIM OR EXECUTED IN HIS FAVOUR TH EN THE DOOR WILL BE LEFT WIDE OPEN TO EVADE TAX. A LITTLE PROBING WAS SUFFICIENT IN TH E PRESENT CASE TO SHOW THAT THE APPARENT WAS NOT THE REAL. THE TAXING AUTHORITIES W ERE NOT REQUIRED TO PUT ON BLINKERS WHILE LOOKING AT THE DOCUMENTS PRODUCED BE FORE THEM. THEY WERE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY OF THE RECITALS MADE IN THOSE DOCUMENTS.' IN CIT VS. DAULAT RAM RAWATMULL [1973] 87 ITR 349, THE SUPREME COURT DEALT WITH THE QUESTION AS TO WHEN THE FINDINGS OF FACTS RECOR DED BY THE TRIBUNAL CAN BE INTERFERED WITH IN A REFERENCE MADE UNDER SECTION 66 OF THE INDIAN INCOME TAX ACT, 14 ITA NO.282/KOL/2014 & C.O. NO. 39/KOL/2018 M/S SAYAJI MARKETING PVT. LTD. A.YR. 2010-11 14 1922. THE SUPREME COURT REFERRED TO THE LEADING CAS E OF EDWARDS ( INSPECTOR OF TAXES) V. BAIRSTOW [1955] 28 ITR 579 (H.L.) DECIDED BY THE HOUSE OF LORDS IN WHICH VISCOUNT SIMONDS OBSERVED AS UNDER: 'FOR IT IS UNIVERSALLY CONCEDED THAT, THOUGH IT IS A PURE FINDING OF FACT, IT MAY BE SET ASIDE ON GROUNDS WHICH HAVE BEEN STATED IN VARIOUS WAYS BUT ARE, I THINK, FAIRLY SUMMARIZED BY SAYING THAT THE COURT SHOULD TAKE THA T COURSE IF IT APPEARS THAT THE COMMISSIONERS HAVE ACTED WITHOUT ANY EVIDENCE OR UP ON A VIEW OF THE FACTS WHICH COULD NOT REASONABLY BE ' IN THE SAME CASE LORD RADCLIFFE EXPRESSED HIMSELF I N THE FOLLOWING WORDS: 'IF THE CASE CONTAINS ANYTHING EXFACIE WHICH IS BAD LAW AND WHICH BEARS UPON THE DETERMINATION, IT IS, OBVIOUSLY, ERRONEOUS IN POINT OF LAW. BUT, WITHOUT ANY SUCH MISCONCEPTION APPEARING EX FACIE, IT MAY BE THAT TH E FACTS FOUND ARE SUCH THAT NO PERSON ACTING JUDICIALLY AND PROPERLY INSTRUCTED AS TO THE RELEVANT LAW COULD HAVE COME TO THE DETERMINATION UNDER APPEAL. IN THOSE CI RCUMSTANCES, TOO, THE COURT MUST INTERVENE.' REFERENCE WAS ALSO MADE TO THE OBSERVATIONS OF BHAG WATI, J. (SPEAKING FOR THE MAJORITY) IN THE CASE OF MEHTA PARIKH & CO. V. CIT [1956] 30 ITR 181(SC), WHICH ARE AS UNDER:- 'IT FOLLOWS, THEREFORE, THAT FACTS PROVED OR ADMITT ED MAY PROVIDE EVIDENCE TO SUPPORT FURTHER CONCLUSIONS TO BE DEDUCED FROM THEM, WHICH CONCLUSIONS MAY THEMSELVES BE CONCLUSIONS OF FACT AND SUCH INFERENCES FROM FACTS PROVED OR ADMITTED COULD BE MATTERS OF LAW. THE COURT WOULD BE ENTITLED TO INTE RVENE IF IT APPEARS THAT THE FACT- FINDING AUTHORITY HAS ACTED WITHOUT ANY EVIDENCE OR UPON A VIEW OF THE FACTS, WHICH COULD NOT REASONABLY BE ENTERTAINED OR THE FACTS FO UND ARE SUCH THAT NO PERSON ACTING JUDICIALLY AND PROPERLY INSTRUCTED AS TO THE RELEVANT LAW WOULD HAVE COME TO THE DETERMINATION IN QUESTION.' IN DIT V. BHARAT DIAMOND BOURSE [2003] 259 ITR 280 / 126 TAXMAN 365 , THE SUPREME COURT AGAIN REITERATED THE AFORESAID POSITI ON AND HELD AS UNDER: - 'AS A PRINCIPLE, THIS COURT DOES NOT DISTURB FINDIN GS OF FACT UNLESS THE FINDINGS OF FACT ARE PERVERSE. IT APPEARS TO US THIS IS ONE OF THOSE EXCEPTIONAL CASES WHERE THE CORRECT CONCLUSION RECORDED BY THE ASSESSING OFFICE R, AND AFFIRMED BY THE APPELLATE AUTHORITY, HAS BEEN REVERSED BY THE TRIBUNAL ON ACC OUNT OF PERVERSE REASONING, AS WE SHALL PRESENTLY SEE.' 19. THE POSITION THUS IS THAT EVEN WHERE A REFERENC E OF A QUESTION OF LAW IS MADE TO THE HIGH COURT UNDER SECTION 66 OF THE INDIAN INCOME TAX ACT, 1922 OR SECTION 256 OF THE INCOME TAX ACT, 1961 OVER WHICH THE HIGH COU RT EXERCISES ADVISORY JURISDICTION, AND NOT APPELLATE JURISDICTION, WHERE NORMALLY THE FINDINGS OF FACT RECORDED BY THE TRIBUNAL ARE BINDING ON THE HIGH CO URT, IT HAS BEEN HELD BY THE SUPREME COURT THAT THE FINDINGS ARE NOT BINDING ON THE HIGH COURT IF THEY ARE PERVERSE OR IF THE FINDINGS ARE SUCH THAT NO PERSON ACTING JUDICIALLY AND PROPERLY INSTRUCTED AS TO THE RELEVANT LAW COULD HAVE COME T O THE DETERMINATION UNDER APPEAL. THE POSITION IN AN APPEAL UNDER SECTION 260A OF THE ACT IS 'A FORTIORI' AS 15 ITA NO.282/KOL/2014 & C.O. NO. 39/KOL/2018 M/S SAYAJI MARKETING PVT. LTD. A.YR. 2010-11 15 THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF BH ARAT DIMOND BOURSE, (SUPRA) WOULD SHOW. WE SHALL DEMONSTRATE IN THE FOLLOWING P ARAGRAPHS AS TO HOW BOTH THE CIT (APPEALS) AND THE TRIBUNAL HAVE FAILED TO APPRE CIATE THE EVIDENCE IN THE PROPER PERSPECTIVE AND ON THE LINES INDICATED BY THE HEGDE J. IN THE CASE OF DURGA PRASAD MORE (SUPRA). THE PRESENT CASE IS ALSO NOT ONE, AS WE SHALL SHOW PRESENTLY, WHERE THE CONCLUSION OF THE TRIBUNAL IS A REASONABLE CONC LUSION WHICH SHOULD NOT NORMALLY BE DISTURBED EVEN IF THE APPELLATE COURT W OULD HAVE TAKEN A DIFFERENT VIEW ON THE SAME EVIDENCE AND MATERIAL. IN THE PRESENT A PPEAL THE EVIDENCE AND MATERIAL ON RECORD, PROPERLY CONSIDERED IN THE LIGHT OF THE SURROUNDING CIRCUMSTANCES AND WITHOUT ATTACHING WEIGHT TO NEUTRAL CIRCUMSTANCES O R CIRCUMSTANCES OF NO RELEVANCE, POINT TO ONLY ONE CONCLUSION, NAMELY, TH AT THE MONIES INTRODUCED BY THE ASSESSEE AS SHARE SUBSCRIPTIONS FROM 15 COMPANIES W ERE ITS OWN UNACCOUNTED MONIES. 29. AT PARA 41 HE FURTHER HELD AS FOLLOWS :- '41. IN THE CASE BEFORE US, NOT ONLY DID THE MATERI AL BEFORE THE ASSESSING OFFICER SHOW THE LINK BETWEEN THE ENTRY PROVIDERS AND THE A SSESSEE-COMPANY, BUT THE ASSESSING OFFICER HAD ALSO PROVIDED THE STATEMENTS OF MUKESHGUPTA ANDRAJANJASSAL TO THE ASSESSEE IN COMPLIANCE WITH T HE RULES OF NATURAL JUSTICE. OUT OF THE 22 COMPANIES WHOSE NAMES FIGURED IN THE INFO RMATION GIVEN BY THEM TO THE INVESTIGATION WING, 15 COMPANIES HAD PROVIDED THE S O- CALLED ''SHARE SUBSCRIPTION MONIES' TO THE ASSESSEE. THERE WAS THUS SPECIFIC IN VOLVEMENT OF THE ASSESEE- COMPANY IN THE MODUS OPERANDI FOLLOWED BY MUKESH GU PTA AND RAJANJASSAL. THUS, ON CRUCIAL FACTUAL ASPECTS THE PRESENT CASE STANDS ON A COMPLETELY DIFFERENT FOOTING FROM THE CASE OF OASIS HOSPITALITIES (P) LTD. (SUPR A).' 30. THE CASE ON HAND THE ASSESSEE COMPANY HAS LINKS WITH THE ENTRY OPERATOR OF SHRI S.K. JAIN. THIS IS EVIDENT FROM THE DETAILS FILED B Y THE ASSESSEE COMPANY IN THE FORM OF ASSESSMENT ORDERS OF THE COMPANIES WHICH HAVE MA DE SHARE APPLICATIONS. INDEPENDENT OF THIS LINK WE HOLD THAT THE ASSESSEE HAS NOT PROVED THE GENUINENESS OF THE TRANSACTION IN THIS CASE. THE HON'BLE HIGH COUR T HAS LAID DOWN THAT THE EVIDENCE ADDUCED IN THE ASSESSEE HAS TO BE EXAMINED , NOT SUPERFICIALLY, BUT IN DEPTH AND HAVING REGARD TO THE TEST OF HUMAN PROBABILITIE S AND NORMAL COURSE OF HUMAN CONDUCT. WHEN WE DO SO IN THIS CASE WE HAVE TO UPHO LD THE ACTION OF THE AO. 31. IN THE CASE OF CIT VS. GLOBAL SECURITIES & FINANCE (P .) LTD. (2014) 264 CTR 481 (DELHI) IT IS HELD AS UNDER :- '11. THE RESPONDENT ASSESSEE IS A PRIVATE LIMITED C OMPANY. IT IS NOT THE CASE OF THE RESPONDENT THAT THEIR DIRECTORS OR PERSONS BEHIND T HE COMPANIES, WHO HAD PURPORTEDLY MADE INVESTMENT IN THE SHARES WERE RELA TED OR KNOWN TO THEM. IN THE PRESENT CASE SUBSTANTIAL INVESTMENT HAS BEEN MADE I N A PRIVATE LIMITED COMPANY WHICH INCLUDES SHARE PREMIUM @ RS.40/- PER SHARE AM OUNTING TO RS.41 ,88,000/-. IT IS NOT A CASE OF THE RESPONDENT ASSESSEE THAT THEY HAD A PROVEN GOOD PAST TRACK RECORD JUSTIFYING A HEFTY PREMIUM, FOUR TIMES THE F ACE VALUE. WHAT WAS PLACED ON RECORD WERE CERTAIN PAPERS WHICH SHOWED THAT THE RE SPONDENT ASSESSEE HAD TAKEN CARE TO ENSURE LEGAL COMPLIANCES. THE SAID EVIDENCE IS PRIMARILY DOCUMENTARY 16 ITA NO.282/KOL/2014 & C.O. NO. 39/KOL/2018 M/S SAYAJI MARKETING PVT. LTD. A.YR. 2010-11 16 EVIDENCE. BUT, WHAT THE TRIBUNAL HAS NOTICED BUT NO T GIVEN DUE CREDENCE TO ARE THE SURROUNDING CIRCUMSTANCES WHICH INCLUDE A HUGE PREM IUM I.E. FOUR TIMES OF THE FACE VALUE OF THE SHARES, CREDIT ENTRIES IN THE BANK ACC OUNTS BEFORE TRANSFER OF MONEY TO THE ASSESSEE, FAILURE OF THE COMPANIES TO FILE DETA ILS OF THE INVENTORIES AND THE FACT THAT THE ASSESSEE COMPANY HAD NOT CHARGED ANY PREMI UM EARLIER. IDENTITY, CREDITWORTHINESS OF THE SHAREHOLDERS AND GENUINENESS OF THE TRANSACTION IN ALL CASES IS NOT ESTABLISHED BY ONLY SHOWING THAT T HE TRANSACTION WAS THROUGH BANKING CHANNELS OR ACCOUNT PAYEE INSTRUMENT. IT WO ULD BE INCORRECT TO STATE THAT THE ONUS TO PROVE GENUINENESS OF THE TRANSACTION AN D CREDITWORTHINESS OF THE CREDITOR STANDS DISCHARGED IN ALL CASES IF PAYMENT IS MADE THROUGH BANKING CHANNELS. SURROUNDING AND CORROBORATIVE FACTUAL DET AIL ARE EQUALLY IMPORTANT AND MAY JUSTIFY FURTHER PROOF OR DETAILS BEFORE IT IS H ELD THAT ONUS IS DISCHARGED. AS HELD IN N.R. PORTFOLIO (P.) LTD. (SUPRA) THE QUESTION OF DISCHARGE OF ONUS DEPENDS UPON WHETHER THE TWO PARTIES ARE RELATED OR KNOWN TO EAC H OTHER, THE MANNER IN WHICH THE PARTIES APPROACHED EACH OTHER, WHETHER THE TRANSACT ION WAS ENTERED INTO THROUGH WRITTEN DOCUMENTS TO PROTECT THE INVESTMENT, WHETHE R THE INVESTOR PROFESSES AND WAS AN ANGEL INVESTOR, THE QUANTUM OF MONEY , CREDITWOR THINESS OF THE RECIPIENT. THE OBJECT AND PURPOSE FOR WHICH PAYMENT WAS MADE ETC. THESE FACT ARE PRIMARILY IN KNOWLEDGE OF THE ASSESSEE AND IT IS DIFFICULT FOR R EVENUE TO PROVE AND ESTABLISH THE NEGATIVE. THUS, MERE RELIANCE ON NEUTRAL DOCUMENTAR Y EVIDENCE CANNOT ALWAYS BE REGARDED A SATISFACTORY DISCHARGE OF ONUS. 12. INVESTMENT DECISIONS, THAT TOO OF INVESTING IN SHARE CAPITAL AT A PREMIUM IN A PRIVATE LIMITED COMPANY, IN THE NORMAL CIRCUMSTANCE S, UNLESS THERE ARE OTHER PECULIAR OR PERSONAL REASONS, ENTAILS DUE DILIGENCE BY BOTH THE SHARE APPLICANT AND THE RECIPIENT COMPANY. THIS IMPLIES INQUIRY AND VER IFICATION BY THE PERSONS BEHIND THE ARTIFICIAL ENTITY. THERE HAVE BEEN A SPATE OF C ASES WHERE PRIVATE LIMITED COMPANIES HAVE PURPORTEDLY RECEIVED SHARE APPLICATI ON MONEY FROM UNCONCERNED, UNRELATED PARTIES WITHOUT SECURING ADEQUATE PROTECT ION OF THEIR INVESTMENT AND WITH OTHER SURROUNDING CIRCUMSTANCES CLEARLY INDICATIVE OF RACKET OR A SEAM. WE REPRODUCE A PORTION THE RULING IN ONKARNATH V. DELHI ADMINISTRATION AIR 1977 SC 1108, WHEREIN IT WAS STATED: '6. THE LIST OF FACTS MENTIONED IN SECTION 57 OF WHICH THE COURT CAN TAKE JUDICIAL NOTICE IS NOT EXHAUSTIVE AND INDEED THE PURPOSE OF THE SECTION IS TO PROVIDE THAT THE COURT SHALL TAKE JUDICIAL NOTICE OF CERTAIN FACTS R ATHER THAN EXHAUST THE CATEGORY OF FACTS OF WHICH THE COURT MAY IN APPROPRIATE CASES T AKE JUDICIAL NOTICE. RECOGNITION OF FACTS WITHOUT FORMAL PROOF IS A MATTER OF EXPEDI ENCY AND NO ONE HAS EVER QUESTIONED THE NEED AND WISDOM OF ACCEPTING THE EXI STENCE OF MATTERS WHICH ARE UNQUESTIONABLY WITHIN PUBLIC KNOWLEDGE . .......... ........ NO COURT THEREFORE INSISTS ON FORMAL PROOF , BY EVIDENCE, OF NOTORIOUS FACTS OF HISTORY, PAST OR PRESENT. THE DATE OF POLL' PASSING AWAY OF A MAN OF EMINENCE AND EVENTS THAT HAVE ROCKED THE NATION NEED NO PROOF AN D ARE JUDICIALLY NOTICED. JUDICIAL NOTICE, IN SUCH MATTERS, TAKES THE PLACE OF PROOF A ND IS OF EQUAL FORCE. IN FACT, AS A MEANS OF ESTABLISHING NOTORIOUS AND WIDELY KNOWN FA CTS IT IS SUPERIOR TO FORMAL MEANS OF PROOF..... ' 17 ITA NO.282/KOL/2014 & C.O. NO. 39/KOL/2018 M/S SAYAJI MARKETING PVT. LTD. A.YR. 2010-11 17 13. IT IS IMPORTANT, TO SEGREGATE CASES OF BONAFIDE OR GENUINE INVESTMENTS BY THIRD PERSONS IN A PRIVATE LIMITED COMPANY, FROM CASES WH ERE RECEIPT OF SHARE APPLICATION MONEY IS ONLY A FACADE FOR CONVERSION OF UNACCOUNTE D FOR MONEY OR MONEY LAUNDERING. THE SAID QUESTION CANNOT BE DECIDED WIT HOUT TAKING NOTICE OF THE SURROUNDING FACTS AND CIRCUMSTANCES, BY MERELY RELY ING UPON PAPER WORK WHICH AT BEST IN SOME CASES WOULD BE A NEUTRAL FACTOR. THE P APER WORK THOUGH IMPORTANT MAY NOT BE ALWAYS CONCLUSIVE OR DETERMINATIVE OF THE FI NAL OUTCOME OR FINDING WHETHER THE TRANSACTION WAS GENUINE. WHEN AND UNDER WHAT CI RCUMSTANCES ONUS IS DISCHARGED, AS HELD IN NR.PORTFOLIO (P.) LTD. (SUPR A), CANNOT BE PUT IN A STRAIT JACKET UNIVERSAL FORMULA. IT WILL DEPEND UPON SEVERAL RELE VANT FACTORS. CUMULATIVE EFFECT HAS TO BE ASCERTAINED AND UNDERSTOOD BEFORE FORMING ANY OBJECTIVE OPINION WHETHER OR NOT ONUS HAS BEEN DISCHARGED BY THE ASSESSEE. OF COURSE SUSPICION OR DOUBTS MAY NOT BE SUFFICIENT AND CARE AND CAUTION HAS TO BE TA KEN THAT THE ASSESSEE HAS LIMITATIONS BUT THIS CANNOT BE A GROUND TO IGNORE C ONTRARY INCRIMINATING EVIDENCE OR MATERIAL WHICH WHEN CONFRONTED, MEETS SILENCE OR NO ANSWER.' (EMPHASIS OWN) 32. THE PROPOSITION OF LAW LAID DOWN BY THE HON'BLE HIGH COURT IN THE CASE REFERRED ABOVE AND THE SURROUNDING FACTS AND CIRCUMSTANCES C ONSIDERED BY IT ARE APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE ASSESSEE COMP ANY. ON A CAREFUL CONSIDERATION OF THE DOCUMENTS FILED BY THE ASSESSEE AND THE EXPL ANATIONS GIVEN BY IT, AND WITHOUT REFERENCE TO EVIDENCES IN THE FORM OF STATEMENT REC ORDED FROM SHRI S.K. JAIN OR THE MATERIAL SEIZED BY THE INVESTIGATION WING TO THE EX TENT USED AGAINST THE ASSESSEE, WE HOLD THAT THE ASSESSEE HAS NOT DISCHARGED THE BURDE N OF PROOF THAT LAY OUT ON IT, TO PROVE THE GENUINENESS OF THESE CASH CREDITS AS WELL AS THE CREDITWORTHINESS OF THE SHARE APPLICANT COMPANIES. IN VIEW OF THE ABOVE DIS CUSSIONS, THE ADDITION MADE BY THE AO U/S 68 OF THE ACT IS UPHELD AND THE ORDER OF THE LD. CIT(A) IS VACATED. 33. IN THE RESULT WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE ORDER OF THE AO. THE APPEALS OF THE REVENUE ARE ALLOWED. 15. RESPECTFULLY APPLYING THE PROPOSITIONS OF LAW L AID DOWN BY THE CO-ORDINATE BENCH OF THE TRIBUNAL TO THE FACTS OF THE CASE, WE FIND THAT SEC TION 68 OF THE ACT APPLIES TO THE FACTS OF THIS CASE AS A SUM OF MONEY WAS CREDITED, IN THE BOOKS O F THE ASSESSEE AND THE ASSESSEE COULD NOT PROVE THE GENUINENESS OF THESE CREDITS AS WELL AS T HE CREDITWORTHINESS OF THE CREDITOR. HENCE IN OUR VIEW THE ADDITION HAS RIGHTLY BEEN MADE BY THE A.O. 16. THE LD. CIT(A) WAS WRONG IN CONCLUDING THAT SEC TION 68 OF THE ACT DOES NOT APPLY AS THE TRANSACTION IS A FRAUDULENT TRANSACTION AND AS IT I S A SHAM TRANSACTION. HE WAS ALSO IN ERROR IN HOLDING THAT THE ASSESSEE HAS DISCHARGED THE ONUS T HAT LAY ON IT. THE GENUINENESS OF THE TRANSACTIONS HAS NOT BEEN PROVED BY THE ASSESSEE. W E REVERSE THESE FINDINGS OF THE LD. CIT(A). 17. IN VIEW OF THE ABOVE DISCUSSION, WE SET ASIDE T HE ORDER OF THE FIRST APPELLATE AUTHORITY AND RESTORE THE ORDER OF THE ASSESSING OFFICER. 18. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALL OWED. 18 ITA NO.282/KOL/2014 & C.O. NO. 39/KOL/2018 M/S SAYAJI MARKETING PVT. LTD. A.YR. 2010-11 18 RESPECTFULLY FOLLOWING THE CO-ORDINATE BENCH DECISI ON OF THIS TRIBUNAL REFERRED TO SUPRA WE ALLOW THE GROUNDS RAISED BY THE REVENUE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED AND CROSS OBJECTION OF THE ASSESSEE IS DISMISSED AS NOT MAINTAINABLE. ORDER PRONOUNCED IN THE COURT ON 05.09.2018 SD/- SD/- [S.S. GODARA] [ M .BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 05.09.2018 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. ITO, WARD-5(2), KOLKATA, P-7, CHOWRINGHEE SQUARE , 8 TH FLOOR, ROOM NO.6, KOLKATA- 69 2. M/S SAYAJI MARKETING PVT. LTD., NO. 5, RUSSEL ST REET, 1 ST FLOOR, KOLKATA-71. 3..C.I.T(A).- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S