Kuv Investments Private Limited, Kolkata V. ACIT, Circle - 9, Kolkata, Kolkata

CO 44/KOL/2010

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8381 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 14 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 21-03-2013
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 11-07-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 07-05-2010
• Court: TRIBUNAL
• Department Lawyers: H N SINGH
• Keywords: Gift; Business income; Business expenditure; Income from undisclosed sources; Search and seizure; Opportunity of being heard; Principle of natural justice; Question of law; Accommodation entries; Retraction
• Section: 143(3); 133(6); 68; 69

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA () BEFORE . . . . . . . . , /AND ! '! , ) [BEFORE SHRI P. K. BANSAL, AM & SHRI MAHAVIR SINGH, JM] # # # # / I.T.A NO. 1979/KOL/2009 '$% &' '$% &' '$% &' '$% &'/ // / ASSESSMENT YEAR: 200 6- 0 7 ASSISTANT COMMISSIONER OF INCOME-TAX, VS. M/S. KU V INVESTMENTS PVT. LTD. CIRCLE-9, KOLKATA. (PAN: AACCK2226R) ()* /APPELLANT ) (+,)*/ RESPONDENT ) & C.O. NO.44/KOL/2010 IN # # # # / I.T.A NO. 1979/KOL/2009 '$% &' '$% &' '$% &' '$% &'/ // / ASSESSMENT YEAR: 200 6- 0 7 M/S. KUV INVESTMENTS (P) LTD. VS. ASSISTANT COMM ISSIONER OF INCOME-TAX, CIRCLE-9, KOLKATA. (CROSS OBJECTOR) (RESPONDENT) DATE OF HEARING: 21.03.2013 DATE OF PRONOUNCEMENT: 21.03.2013 FOR THE REVENUE: SHRI H. N. SINGH, SR. DR FOR THE ASSESSEE/CROSS OBJECTOR : SHRI S. R. BARASIA, FCA - / ORDER PER BENCH: THIS APPEAL BY REVENUE AND CROSS OBJECTION BY ASSES SEE ARE ARISING OUT OF ORDER OF CIT(A) - VIII, KOLKATA IN APPEAL NO. 513/CIT(A)-VII I/KOL/08-09 DATED 15.09.2009. ASSESSMENT WAS FRAMED BY ACIT, CIRCLE-9, KOLKATA U/ S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSME NT YEAR 2006-07 VIDE HIS ORDER DATED 26.12.2008. 2. THE FIRST COMMON ISSUE IN THIS APPEAL OF REVENU E AND THE CROSS OBJECTION OF ASSESSEE IS AS REGARDS TO THE ADDITION OF SHARE APPLICATION MON EY U/S. 68 OF THE ACT RECEIVED BY ASSESSEE FROM DIFFERENT COMPANIES. FOR THIS, REVENUE HAS RA ISED FOLLOWING GROUND NO.1: 1. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE LD. CIT(A)-VIII IS CORRECT IN NOT INVOKING SECTION 68 OF THE I T ACT W ITH REGARD TO SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE FROM DIFFERENT COMPANIES. AND ASSESSEE HAS RAISED FOLLOWING GROUND NO. 1 IN I TS CROSS OBJECTION: 1. THE ASSESSING OFFICER HAD ADJUDICATED THE SHARE APPLICATION MONEY AS BOGUS AND THEREBY TREATED THE SAME AS CASH CREDIT U/S. 68 OF THE INCOME TAX ACT, 1961 WHILE 2 ITA NO.1979/K/2009 & C.O. 44 OF 2010 KUV INVESTMENTS PVT. LTD. 2006-07 OVERLOOKING THE FACTS OF THE CASE AND EVIDENCES PRO VIDED BY THE ASSESSEE AND THE EVIDENCES OBTAINED BY THE ASSESSING OFFICER HIMSELF IN RESPONSE TO THE NOTICE U/S. 133(6) AND PERSONAL ATTENDANCE IN RESPONSE TO THE SUMMON U/S. 131. 3. BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAS ACCEPTED SH ARE APPLICATION MONEY FOR AN AMOUNT OF RS.36 LAKH AS UNDER: THE AO ISSUED NOTICE U/S. 133(6) OF THE ACT AND EV EN SHOW CAUSE NOTICE DATED 22.04.2008 WHICH WERE NOT SERVED DUE TO INCORRECT A DDRESS. ACCORDING TO AO, HE ISSUED AGAIN NOTICE U/S. 133(6) OF THE ACT. THE AO AFTER VERIFYING THE CASH MOVEMENT NOTED THE FACT AS UNDER: AFTER THAT, BANK STATEMENT OF CAMPUS GRAPHICS WHIC H WAS RECEIVED FROM CANARA BANK ON DATED 15.07.2008, THERE WAS FOUND THAT HUGE CASH WAS DEPOSITED AND THIS MONEY WAS TRANSFERRED TO DIFFERENT ACCOUNTS, TOTAL AMOUNT WAS DEPOSITED RS. 3,15,81,950/- . HIS ADDRESS IS 24, KALAKAR STREET, 2ND FLOOR, KOLKATA. 3 ITA NO.1979/K/2009 & C.O. 44 OF 2010 KUV INVESTMENTS PVT. LTD. 2006-07 ITS CLEAR THAT, IF BLAISE HAS SOLD SHARES OF DIFFE RENT COMPANY THEN CAMPUS GRAPHICS MUST ALSO SOLD SOME SHARES TO THE DIFFERENT COMPANY TO ARRANGE THE FUND. THIS TRANSACTION CAN BE DONE ONLY THROUGH CHEQUE. BUT HU GE CASH WAS DEPOSITED IN KALAKAR STREET, IT SEEMS THAT NO TRANSACTION HAS BE EN ACTUALLY DONE BETWEEN BLAISE AND CAMPUS GRAPHICS. HOWEVER, CAMPUS GRAPHICS IS NOT TRACEABLE, HENCE, A DDITION CANNOT BE MADE IN THE HANDS OF CAMPUS GRAPHICS. THIS IS ASSESSEES MONEY WHCH IS ROUTED THROUGH CA MPUS GRAPHICS. FURTHER, IT WAS FOUND THAT CASH DEPOSITED IN CAMPUS GRAPHICS WAS TRANSFERRED IN FOLLOWING ACCOUNTS: 1. BHANU FINVEST P LTD 2. MYSOL ENGINEERING P LTD. 3. NEEL KANTH GOODS P LTD. 4. DALAL STREET HOLDINGS P LTD. 5. MELCO SALES P LTD. 6. BLAISE IMPEX P LTD AS PER BANKS INFORMATION, CAMPUS GRAPHICS ACCOUNTS WAS INTRODUCED BY MELCO SALES P LTD. ON THE BASIS OF ABOVE OBSERVATION, ALL ABOVE COMPAN IES ARE JAMAKARCHI COMPANY AND HUGE CASH WAS DEPOSITED AND THESE MONEY WAS ROU TED THROUGH AS SHARE APPLICATION TO THE DIFFERENT ACCOUNTS. HENCE, IT IS CLEAR THAT ALL SHARE APPLICATION MONEY ARE BOGUS AND AS A RESULT IS TREATED AS CASH CREDITS U/S. 68 OF THE I T ACT. 4. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT( A), WHO DELETED THE ADDITION BY REFERRING TO VARIOUS DECISIONS AND BY RECORDING AS UNDER: THE ASSESSMENT ORDER INDICATES THAT FUNDS WERE AVA ILABLE TO THE SHARE APPLICANTS. HOWEVER, IT ALSO MENTIONS THAT THE SOURCE OF MUCH O F THE FUNDS IS M/S. CAMPUS GRAPHICS OF 24, KALAKAR STREET, 2ND FLOOR, KOLKATA. THE ASSE SSMENT ORDER MAKES IT CLEAR THAT THE BANK ACCOUNT OF M/S. CAMPUS GRAPHICS HAS BEEN STUDI ED BY THE A.O. HOWEVER, WHAT IS NOT CLEAR IS WHY AFTER LOCATING M/S. CAMPUS GRAPHIC S AND ITS BANK ACCOUNT IS THE A.O. REFERRING TO IT AS NOT TRACEABLE HENCE, ADDITION CA NNOT BE MADE N THE HANDS OF CAMPUS GRAPHICS. IF THE SAD ORGANIZATION, AS APPEARS FROM THE ASSESSMENT ORDER, HAS AN IDENTITY OF ITS OWN, THERE CANNOT BE ANY REASON AS TO WHY IT CANNOT BE ASSESSED. IT IS TO BE MENTIONED, THAT, THOUGH THE ASSESSMENT ORDER MENTIO NS THAT MONEY FROM M/S. CAMPUS GRAPHICS HAS BEEN TRANSFERRED TO THE ACCOUNTS OF OT HER SHARE APPLICANTS ALSO, THE NATURE OF THE TRANSACTIONS BETWEEN THOSE APPLICANTS AND M/ S. CAMPUS GRAPHICS HAS NOT BEEN QUESTIONED. IN RESPECT OF M/S. BLAISE IMPEX PVT. LI MITED, ALSO, THE PHYSICAL REALITY OF THE SALE OF SHARES HAS NOT BEEN DISPROVED THROUGH ANY I NQUIRY. THE ASSESSMENT ORDER STATES THAT ITS CLEAR THAT, IF BLAISE HAS SOLD SHARES OF DIFFERENT COMPANY THEN CAMPUS GRAPHICS MUST ALSO SOLD SOME SHARES TO THE DIFFERENT COMPANY TO ARRANGE THE FUND. THE A.O. IS ENTITLED TO SUSPECT BUT MERE SUSPICION CANNOT LEAD TO A CONCLUSION THAT IT SEEMS THAT NO TRANSACTION HAS BEEN ACTUALLY DONE BETWEEN BLAISE A ND CAMPUS GRAPHICS, AS STATED IN THE ASSESSMENT ORDER. SALE OF SHARES IS A PHYSICAL PROCESS AND, IN MY OPINION, AN ENQUIRY WAS REQUIRED TO ESTABLISH THAT ACTUALLY NO SUCH TRANSACTION HAS TAKEN PLACE. NO SUCH ENQUIRY IS EVIDENT ON RECORD. AGGRIEVED, NOW REVENUE IS IN APPEAL BEFORE US. 5. AT THE OUTSET, LD. SR. DR SHRI H. N. SINGH STATE D THAT RECENTLY HONBLE DELHI HIGH COURT IN THE CASE OF ITA NO.342 OF 2011, CIT VS. NO VA PROMOTERS & FINLEASE (P) LTD. DATED 15.02.2012 HAS LAID DOWN CERTAIN PRINCIPLES CONSID ERING ALL THE JUDGMENTS AND DECISIONS CITED 4 ITA NO.1979/K/2009 & C.O. 44 OF 2010 KUV INVESTMENTS PVT. LTD. 2006-07 BY CIT(A) AS WELL AS AO AND THE FACTS OF THIS CASE SHOULD BE EXAMINED FROM THE ANGLE OF THIS DECISION. HENCE, HE REQUESTED THE BENCH TO SET ASI DE THE ISSUE TO THE FILE OF AO FOR DECIDING THE ISSUE IN TERMS OF THE PRINCIPLES LAID DOWN BY HONB LE DELHI HIGH COURT IN THE CASE OF NOVA PROMOTERS & FINLEASE P. LTD. (SUPRA). ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE SHRI S. R. BARSIA, FCA HAS NOT OBJECTED TO SET ASIDE THE MATTER TO THE FILE OF AO. SINCE LD. COUNSEL FOR THE ASSESSEE HAS NOT OBJECTED TO SET ASIDE THE ISSUE TO THE FILE OF AO, WE ARE OF THE CONSIDERED VIEW THAT LET THE AO BE EXAMINED THE ISS UE OF SHARE APPLICATION MONEY IN THE LIGHT OF THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF NOVA PROMOTERS & FINLEASE P. LTD (SUPRA) AND OTHER DECISIONS AS WILL BE BROUGHT TO H IS NOTICE BY THE ASSESSEES COUNSEL. HONBLE DELHI HIGH COURT IN THE CASE OF NOVA PROMOTERS & FI NLEASE P. LTD (SUPRA) HAS HELD AS UNDER : 25. IN THE LIGHT OF THE ABOVE FACTS, THE EVIDENTIA RY VALUE OF THE AFFIDAVITS IS OPEN TO SERIOUS DOUBTS. THE INDORE BENCH OF THE MADHYA PRADESH HIGH COURT IN THE CASE OF SMT.GUNWATI BAI RATI LAL VS. CIT(MP) 146 ITR 140 EXPLAINED THE JUDG MENT OF THE SUPREME COURT IN THE CASE OF MEHTA PARIKH AND COMPANY VS. CIT (SUPRA) AND HELD T HAT THE SAID DECISION CANNOT BE CONSIDERED TO HAVE LAID DOWN THE PROPOSITION THAT U NLESS THE DEPONENTS OF THE AFFIDAVITS ARE CROSS-EXAMINED, THE AFFIDAVITS CANNOT BE REJECTED. IT WAS EXPLAINED THAT THE DECISION OF THE SUPREME COURT LAYS DOWN THAT IF THERE IS NO MATERI AL WHATSOEVER ON RECORD FOR DOUBTING THE VERACITY OF THE STATEMENTS MADE IN THE AFFIDAVITS A ND IF THE DEPONENTS HAVE ALSO NOT BEEN SUBJECTED TO CROSS-EXAMINATION FOR BRINGING OUT THE VALIDITY OF THEIR STATEMENTS, THEN THE TRIBUNAL WOULD NOT BE JUSTIFIED IN DOUBTING THE COR RECTNESS OF THE STATEMENT MADE BY THE DEPONENTS IN THE AFFIDAVITS. THUS THE AFFIDAVITS N EED NOT BE ACCEPTED AS RELIABLE WHEN THERE IS ENOUGH MATERIAL ON RECORD TO DOUBT THE VERACITY OF THE TRANSACTION. IN SUCH A CASE IT CANNOT BE SAID THAT THE AFFIDAVITS CAN BE REJECTED ONLY AFTER CROSS EXAMINATION. IN THE PRESENT CASE, THERE IS ENOUGH MATERIAL ON RECORD TO NEGATE THE CLAIM OF GENUINENESS OF THE TRANSACTIONS AND IN THE LIGHT OF OVER-WHELMING MATERIAL, THE PLEA THAT THE ASSESSING OFFICER SHOULD NOT HAVE REJECTED THE AFFIDAVITS WITHOUT CROSS EXAMINATION OF THE DEP ONENTS HAS NO FORCE. THE SAID EXERCISE HAS RESULTED IN COMPLETE MISCARRIAGE OF JUSTICE. 26. THE AFFIDAVITS RETRACTING THEIR EARLIER STATEME NTS, FILED BY MUKESH GUPTA AND RAJAN JASSAL WERE FILED IN DECEMBER, 2007, THAT IS AFTER MORE TH AN THREE YEARS AFTER THEY WROTE LETTERS TO THE ADDL. CIT, INVESTIGATION WING, UNIT-1, DELHI SOMETI ME IN MAY, 2004 ADMITTING TO THEIR ROLE AS ENTRY PROVIDERS. NO REASON HAS BEEN ADVANCED BY THE ASSESSEE FOR SUCH LONG DELAY IN RETRACTING THE EARLIER LETTERS. RELIANCE ON THE SAID AFFIDAVIT S IGNORING THE APPARENT, EX FACIE AND FACTUAL ASPECTS HAS VITIATED THE IMPUGNED ORDER. SEVERAL AS PECTS HAVE NOT BEEN KEPT IN VIEW BY THE TRIBUNAL. THOUGH IT WAS AWARE OF THE FACT THAT THE RETRACTION WAS MADE AFTER A CONSIDERABLE PERIOD OF TIME, THE TRIBUNAL FAILED TO ADDRESS THIS ASPECT. FAILURE TO APPEAR AND ANSWER QUESTIONS WAS EQUALLY RELEVANT BUT AGAIN IGNORED. 27. SO FAR AS THE REQUEST OF THE ASSESSEE FOR CROSS -EXAMINATION OF MUKESH GUPTA AND RAJAN JASSAL IS CONCERNED, THE SAME SOUNDS HOLLOW. THE AS SESSING OFFICER, AS WE HAVE ALREADY NOTED, ISSUED SUMMONS TO THEM AS WELL AS THE DIRECTORS OF THE COMPANIES WHICH ALLEGEDLY ADVANCED THE SHARE SUBSCRIPTION MONIES TO THE ASSESSEE, BUT THEY WERE EITHER RETURNED OR REMAINED UNCOMPLIED WITH. IN THE CASE OF SUMMONS TO THE ABOV E TWO PERSONS, IT IS RECORDED IN THE ASSESSMENT ORDER THAT SUMMONS WERE ISSUED TO THEM O N 23-10-2007 AND 26-11-2007 BUT THOUGH THEY WERE SERVED THEY DID NOT RESPOND TO THE SUMMONS. WHEN THEY DID NOT APPEAR BEFORE THE ASSESSING OFFICER IN RESPONSE TO THE SUM MONS, IT WOULD BE UNFAIR TO EXPECT THE ASSESSING OFFICER TO OFFER THEM FOR CROSS EXAMINATI ON TO THE ASSESSEE. IT IS HOWEVER NOTEWORTHY THAT WITHIN ONE OR TWO MONTHS THEREAFTER, ON 4-12-2 007 THE ASSESSEE WAS ABLE TO OBTAIN AFFIDAVITS FROM THEM AND PRODUCE THE SAME BEFORE TH E ASSESSING OFFICER. EVEN WHEN THE AO COMPLIED WITH THE DIRECTION OF THE CIT (A) TO ISSUE SUMMONS TO THESE TWO PERSONS AND THE DIRECTORS OF 5 ITA NO.1979/K/2009 & C.O. 44 OF 2010 KUV INVESTMENTS PVT. LTD. 2006-07 THE COMPANIES WHO ALLEGEDLY SUBSCRIBED TO THE SHARE S, THEY DID NOT APPEAR IN RESPONSE TO THE SUMMONS ISSUED ON 24-4-2009. IN LIGHT OF THIS, THE ARGUMENT THAT THE AO OUGHT TO HAVE AFFORDED THE ASSESSEE AN OPPORTUNITY TO CROSS EXAMI NE THESE TWO WITNESSES LOSES FORCE AND IT IS RATHER ODD FOR THE ASSESSEE TO RELY ON THESE AFFIDA VITS. IT IS ALSO NOT FACTUALLY CORRECT TO SAY THAT THE ASSESSING OFFICER DID NOT FURNISH THE COPIES OF THE STATEMENTS OF MUKESH GUPTA AND RAJAN JASSAL GIVEN BY THEM TO THE INVESTIGATION WING IN M AY 2004 TO THE ASSESSEE-COMPANY. IT HAS BEEN RECORDED IN THE ASSESSMENT ORDER THAT AFTER TH E CHANGE OF COUNSEL MADE BY THE ASSESSEE ON 12-11-2007 A REQUEST WAS MADE FOR SUPPLY OF THE STATEMENTS AND ALL OTHER DOCUMENTS/ADVERSE MATERIAL COLLECTED BY THE INVESTI GATION WING AND THESE WERE SUPPLIED TO THE ASSESSEE. IT IS QUITE STRANGE THAT DESPITE THE EFFO RTS TAKEN BY THE ASSESSING OFFICER TO ENFORCE THE ATTENDANCE OF MUKESH GUPTA AND RAJAN JASSAL AND THE DIRECTORS OF THE COMPANIES WHO HAVE ALLEGEDLY PAID THE MONIES TO THE ASSESSEE, THE CIT( A) HAS OBSERVED THAT IF SUMMONS HAD BEEN SERVED IT WOULD MEAN THAT THE PARTIES WERE PRESENT AT THE ADDRESSES AND EVEN IF THEY WERE NOT FOUND BY THE INSPECTOR AT THE ADDRESSES FURNISHED B Y THE ASSESSEE, IT WAS FOR THE ASSESSING OFFICER TO HAVE MADE ENQUIRIES FROM THE POST OFFICE REGARDING THE WHEREABOUTS OF THE ADDRESSEES. WE DO NOT THINK THAT THERE WAS, IN THIS CASE, ANY SUCH DUTY CAST ON THE ASSESSING OFFICER. 28. IT IS RATHER UNFORTUNATE THAT THE ASSESSEE SEEM S TO HAVE SENT THE ASSESSING OFFICER ON A VAIN CHASE. IT WAS FIRST PLEADED THAT THE STATEMENTS OF MUKESH GUPTA AND RAJAN JASSAL SHOULD BE GIVEN TO IT FOR REBUTTAL. THEY WERE GIVEN ALONG WIT H OTHER MATERIAL AVAILABLE WITH THE ASSESSING OFFICER. WHEN THE ASSESSEE MADE A REQUEST FOR CROSS EXAMINATION BY LETTER DATED 16-11-2007 (AFTER THE CHANGE OF COUNSEL) THE ASSESSING OFFICER TOOK EFFORTS TO ISSUE SUMMONS TO THEM. THEY WERE SERVED, BUT THOSE PERSONS DID NOT APPEAR. ON 4 -12-2007 AFFIDAVITS FROM THEM, ALONG WITH AFFIDAVITS FROM SOME OTHER PERSONS CONNECTED WITH T HE SUBSCRIBER-COMPANIES WERE FILED BEFORE THE ASSESSING OFFICER. IN THESE AFFIDAVITS THE EARL IER STATEMENTS WERE RETRACTED AND THE ADVANCING OF MONIES TO THE ASSESSEE AS SHARE APPLIC ATION MONIES WAS CONFIRMED. THE ASSESSING OFFICER DID NOT ACCEPT THE AFFIDAVITS. ON APPEAL, T HE CIT(A) ISSUED A DIRECTION TO THE ASSESSING OFFICER TO EXAMINE THE DEPONENTS OF THE AFFIDAVITS. THE ASSESSING OFFICER ISSUED SUMMONS ON 24-4-2009 BUT NOBODY APPEARED. HE THEREFORE REPORTE D TO THE CIT(A) THAT EXAMINATION OF THE DEPONENTS ON THEIR AFFIDAVITS WAS NOT POSSIBLE. THE CIT(A) HELD THAT THE AFFIDAVITS REMAIN UNCONTROVERTED AND THEREFORE OUGHT TO HAVE BEEN ACC EPTED. THE AFORESAID CONCLUSION IS FALLACIOUS. THE TRIBUNAL, HOWEVER, ENDORSED THE FIN DING OF THE CIT(A). THE ATTEMPT OF THE ASSESSEE IS THERE TO SEE. IT HAD BEEN BLOCKING ANY ENQUIRY BY THE ASSESSING OFFICER AT EVERY STAGE ON SOME PLEA OR THE OTHER, INCLUDING A FRIVOL OUS PLEA EVEN BEFORE THE CIT (APPEALS) THAT NO CROSS-EXAMINATION OF MUKESH GUPTA AND RAJAN JASS AL WAS ALLOWED, OVERLOOKING THAT ONCE THEY FILED THE AFFIDAVITS RETRACTING FROM THEIR EAR LIER STATEMENTS THE PLEA LOSES FORCE. THERE IS NO EXPLANATION AS TO WHY THE DEPONENTS COULD NOT BE PR ODUCED AND DID NOT APPEAR. 29. THE FINDINGS OF THE TRIBUNAL CANNOT BE UPHELD A S THEY ARE BASED ON IRRELEVANT MATERIAL OR HAVE BEEN ENTERED BY IGNORING RELEVANT MATERIAL. TH E FINDING THAT THE SHARE APPLICATION MONIES HAVE COME THROUGH ACCOUNT PAYEE CHEQUES IS, AT BEST , NEUTRAL. THE QUESTION REQUIRED A THOROUGH EXAMINATION AND NOT A SUPERFICIAL EXAMINAT ION. IF ANYTHING, IN THE LIGHT OF THE MATERIAL GATHERED BY THE INVESTIGATION WING ABOUT T HE MODUS OPERANDI FOLLOWED BY THE ENTRY PROVIDERS, THE STATEMENTS OF MUKESH GUPTA AND RAJAN JASSAL THE PLEA THAT THE MONEY WAS SENT THROUGH BANKING CHANNELS LOSES ALL FORCE. THE TRIBU NAL OUGHT TO HAVE SEEN THAT THE MODUS OPERANDI INVOLVES RECEIPT BY THE ENTRY PROVIDERS OF EQUIVALENT AMOUNT OF CASH FROM THE ASSESSEE. THE FACT THAT THE COMPANIES WHICH SUBSCRI BED TO THE SHARES WERE BORNE ON THE FILE OF THE ROC IS AGAIN A NEUTRAL FACT. EVERY COMPANY INCO RPORATED UNDER THE COMPANIES ACT, 1956 HAS TO COMPLY WITH STATUTORY FORMALITIES. THAT THES E COMPANIES WERE COMPLYING WITH SUCH FORMALITIES DOES NOT ADD ANY CREDIBILITY OR EVIDENT IARY VALUE. IN ANY CASE, IT DOES NOT IPSO FACTO PROVE THAT THE TRANSACTIONS ARE GENUINE. THE FINDIN G THAT MUKESH GUPTA AND RAJAN JASSAL WERE INVOLVED WITH ONLY 4 OUT OF THE 16 COMPANIES WHICH ADVANCED MONIES IS ONLY PART OF THE PICTURE. THEY HAD STATED BEFORE THE INVESTIGATION W ING THAT THEIR OPERATIONS WERE ROUTED THROUGH 22 COMPANIES WHOSE NAMES WERE ALSO GIVEN. F IFTEEN OUT OF THOSE 22 COMPANIES HAVE SUBSCRIBED TO THE SHARES OF THE ASSESSEE. THEREFORE EVEN IF THEY WERE NOT DIRECTORS OF 12 COMPANIES, THE FACT REMAINS, AS ADMITTED BY THEM, T HAT THEIR ENTRY PROVIDING OPERATIONS WERE 6 ITA NO.1979/K/2009 & C.O. 44 OF 2010 KUV INVESTMENTS PVT. LTD. 2006-07 CARRIED OUT THROUGH 22 COMPANIES, 15 OF WHICH HAVE SUBSCRIBED TO THE SHARES OF THE ASSESSEE- COMPANY. THE TRIBUNAL HAS IGNORED THIS VITAL ASPECT AND HAS EXAMINED THE ISSUE RATHER SUPERFICIALLY. COMPLIANCE WITH STATUTORY NORMS AND REQUIREMENTS IS ONLY ONE ASPECT, BUT IN THE PRESENT CASE A DEEPER SCRUTINY WAS REQUIRED AND THE CAMOUFLAGE ADOPTED WAS THE PRIMARY ASPECT THAT REQUIRED ADJUDICATION. THIS ASPECT HAS BEEN IGNORED. BONAFIDE AND GENUINENESS OF THE TRANSACTIONS WAS THE ISSUE. 30. THE FINDING THAT SINCE THE SUMMONS ISSUED TO MU KESH GUPTA, RAJAN JASSAL AND THE DIRECTORS OF 12 COMPANIES BOTH DURING ASSESSMENT AN D REMAND PROCEEDINGS WERE SERVED ON THEM, THEIR EXISTENCE OR IDENTITY STOOD ESTABLISHED , EVEN IF THIS FINDING IS ASSUMED TO BE CORRECT IN THE TECHNICAL SENSE OVERLOOKS THEIR NON-APPEARAN CE. THEY WERE EVEN OTHERWISE NOT READY AND WILLING TO APPEAR BEFORE THE ASSESSING OFFICER. THE GENUINENESS OF THE TRANSACTIONS CANNOT BE SAID TO HAVE BEEN ESTABLISHED FOR THE SAME REASO N. THE GENUINENESS OF THE TRANSACTION CRITICALLY HINGES ON THE TRUE AND VERACITY OF THE C LAIM MADE BY THE ASSESSEE. MATERIAL WAS GATHERED BY THE INVESTIGATION WING AND MADE AVAILAB LE TO THE ASSESSING OFFICER, WHO IN TURN HAD MADE IT AVAILABLE TO THE ASSESSEE. NOTHING HAS BEEN SAID BY THE TRIBUNAL ABOUT THE SAID MATERIAL. THUS THE TRIBUNAL, WITH RESPECT, SEEMS TO HAVE IGNORED RELEVANT MATERIAL. 31. THE TRIBUNAL ALSO ERRED IN LAW IN HOLDING THAT THE ASSESSING OFFICER OUGHT TO HAVE PROVED THAT THE MONIES EMANATED FROM THE COFFERS OF THE AS SESSEE-COMPANY AND CAME BACK AS SHARE CAPITAL. SECTION 68 PERMITS THE ASSESSING OFFICER T O ADD THE CREDIT APPEARING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IF THE LATTER OFFERS NO EXP LANATION REGARDING THE NATURE AND SOURCE OF THE CREDIT OR THE EXPLANATION OFFERED IS NOT SATISF ACTORY. IT PLACES NO DUTY UPON HIM TO POINT TO THE SOURCE FROM WHICH THE MONEY WAS RECEIVED BY THE ASSESSEE. IN A. GOVINDARAJULU MUDALIAR V CIT, (1958) 34 ITR 807, THIS ARGUMENT ADVANCED BY THE ASSESSEE WAS REJECTED BY THE SUPREME COURT. VENKATARAMA IYER, J., SPEAKING FOR T HE COURT OBSERVED AS UNDER (@ PAGE 810): - NOW THE CONTENTION OF THE APPELLANT IS THAT ASSUMI NG THAT HE HAD FAILED TO ESTABLISH THE CASE PUT FORWARD BY HIM, IT DOES NOT FOLLOW AS A MATTER OF LAW THAT THE AMOUNTS IN QUESTION WERE INCOME RECEIVED OR ACCRUED DURING THE PREVIOUS YEAR, THAT IT WAS THE DUTY OF THE DEPARTMENT TO ADDUCE EV IDENCE TO SHOW FROM WHAT SOURCE THE INCOME WAS DERIVED AND WHY IT SHOULD BE TREATED AS CONCEALED INCOME. IN THE ABSENCE OF SUCH EVIDENCE, IT IS ARGUED, THE FINDING IS ERRONEOUS. WE ARE UNABLE TO AGREE. WHETHER A RECEIPT IS TO BE TREATED AS INCOME OR NOT, MUST DEPEND VERY LARGELY ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. IN THE PRESENT CASE THE RECEIPTS ARE SHOWN IN THE ACCOUNT BOOKS OF A FIRM O F WHICH THE APPELLANT AND GOVINDASWAMY MUDALIAR WERE PARTNERS. WHEN HE WAS CA LLED UPON TO GIVE EXPLANATION HE PUT FORWARD TWO EXPLANATIONS, ONE BE ING A GIFT OF RS. 80,000 AND THE OTHER BEING RECEIPT OF RS. 42,000 FROM BUSINESS OF WHICH HE CLAIMED TO BE THE REAL OWNER. WHEN BOTH THESE EXPLANATIONS WERE REJECTED, AS THEY HAVE BEEN IT WAS CLEARLY UPON TO THE INCOME-TAX OFFICER TO HOLD THAT THE INCOME MUST BE CONCEALED INCOME. THERE IS AMPLE AUTHORITY FOR THE POSITION T HAT WHERE AN ASSESSEE FAILS TO PROVE SATISFACTORILY THE SOURCE AND NATURE OF CERTA IN AMOUNT OF CASH RECEIVED DURING THE ACCOUNTING YEAR, THE INCOME-TAX OFFICER IS ENTITLED TO DRAW THE INFERENCE THAT THE RECEIPT ARE OF AN ASSESSABLE NATURE. THE C ONCLUSION TO WHICH THE APPELLATE TRIBUNAL CAME APPEARS TO US TO BE AMPLY WARRANTED B Y THE FACTS OF THE CASE. THERE IS NO GROUND FOR INTERFERING WITH THAT FINDING, AND THESE APPEALS ARE ACCORDINGLY DISMISSED WITH COSTS. (EMPHASIS SUPPLIED) SECTION 68 RECOGNIZES THE AFORESAID LEGAL POSITION. THE VIEW TAKEN BY THE TRIBUNAL ON THE DUTY CAST ON THE ASSESSING OFFICER BY SECTION 68 IS CONT RARY TO THE LAW LAID DOWN BY THE SUPREME COURT IN THE JUDGMENT CITED ABOVE. EVEN IF ONE WERE TO HOLD, ALBEIT ERRONEOUSLY AND WITHOUT BEING AWARE OF THE LEGAL POSITION ADUMBRATED ABOVE, THAT THE ASSESSING OFFICER IS BOUND TO SHOW THAT THE SOURCE OF THE UNACCOUNTED MONIES WAS THE COFFERS OF THE ASSESSEE, WE ARE 7 ITA NO.1979/K/2009 & C.O. 44 OF 2010 KUV INVESTMENTS PVT. LTD. 2006-07 INCLINED TO THINK THAT IN THE FACTS OF THE PRESENT CASE SUCH PROOF HAS BEEN BROUGHT OUT BY THE ASSESSING OFFICER. THE STATEMENTS OF MUKESH GUPTA A ND RAJAN JASSAL, THE ENTRY PROVIDERS, EXPLAINING THEIR MODUS OPERANDI TO HELP ASSESSEES HAVING UNACCOUNTED MONIES CONVERT THE SAME INTO ACCOUNTED MONIES AFFORDS SUFFICIENT MATER IAL ON THE BASIS OF WHICH THE ASSESSING OFFICER CAN BE SAID TO HAVE DISCHARGED THE DUTY. TH E STATEMENTS REFER TO THE PRACTICE OF TAKING CASH AND ISSUING CHEQUES IN THE GUISE OF SUBSCRIPTI ON TO SHARE CAPITAL, FOR A CONSIDERATION IN THE FORM OF COMMISSION. AS ALREADY POINTED OUT, NAM ES OF SEVERAL COMPANIES WHICH FIGURED IN THE STATEMENTS GIVEN BY THE ABOVE PERSONS TO THE IN VESTIGATION WING ALSO FIGURED AS SHARE- APPLICANTS SUBSCRIBING TO THE SHARES OF THE ASSESSE E-COMPANY. THESE CONSTITUTE MATERIALS UPON WHICH ONE COULD REASONABLY COME TO THE CONCLUSION T HAT THE MONIES EMANATED FROM THE COFFERS OF THE ASSESSEE COMPANY. THE TRIBUNAL, APART FROM A DOPTING AN ERRONEOUS LEGAL APPROACH, ALSO FAILED TO KEEP IN VIEW THE MATERIAL THAT WAS RELIED UPON BY THE ASSESSING OFFICER. THE CIT (APPEALS) ALSO FELL INTO THE SAME ERROR. IF SUCH MA TERIAL HAD BEEN KEPT IN VIEW, THE TRIBUNAL COULD NOT HAVE FAILED TO DRAW THE APPROPRIATE INFER ENCE. 32. SINCE STRONG RELIANCE WAS PLACED BY THE ASSESSE E ON THE ORDER OF THE SUPREME COURT IN THE CASE OF CIT V LOVELY EXPORTS P. LTD., (2008) 216 CT R (SC) 195 IT WOULD BE NECESSARY TO EXAMINE THE FACTS OF THAT CASE AND THE RATIO LAID D OWN THEREIN IN ORDER TO DECIDE THE APPLICABILITY OF THAT CASE TO THE ONE BEFORE US. IT WOULD ALSO BE NECESSARY TO EXAMINE THE STRING OF DECISIONS OF THIS COURT ON THE QUESTION OF APPLI CABILITY OF SECTION 68 OF THE ACT TO MONIES RECEIVED AS SHARE CAPITAL. 33. THE FACTS OF CIT V LOVELY EXPORTS (P) LTD. (SUP RA) HAVE BEEN SET OUT IN THE JUDGMENT OF THIS COURT IN THAT CASE, REPORTED AS CIT VS (1) DIVINE L EASING & FINANCE LTD. (2) GENERAL EXPORTS AND CREDITS LTD. AND (3) LOVELY EXPORTS P. LTD. IN (2008) 299 ITR 268. IN THAT CASE, THE SHARE CAPITAL SUBSCRIPTION WAS RECEIVED THROUGH BANKING C HANNELS AND COMPLETE RECORDS WERE MAINTAINED BY DIVINE LEASING & FINANCE LTD. THE ASS ESSING OFFICER ISSUED SUMMONS U/S.131 AND THEREAFTER IMPOUNDED THE SHAREHOLDERS REGISTER , SHARE APPLICATION FORMS AND SHARE TRANSFER REGISTER. IT WAS CONTENDED BY THE ASSESSEE IN THAT CASE THAT BECAUSE OF THE ACTION OF THE ASSESSING OFFICER, IT WAS NOT ABLE TO FURNISH ANY D ETAILS ABOUT THE SHARE SUBSCRIBERS. THE TRIBUNAL FOUND THAT THE ALLOTMENT OF SHARES WAS MAD E AS PER THE RELEVANT RULES OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 AS WELL AS THOSE O F THE DELHI STOCK EXCHANGE. NO EVIDENCE HAD BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER TO INDICATE THAT THE SHAREHOLDERS WERE EITHER BENAMIDARS OF THE ASSESSEE-COMPANY OR FICTIT IOUS OR THAT THE SHARE APPLICATION MONIES WERE THE UNACCOUNTED INCOME OF THE ASSESSEE-COMPANY . THE TRIBUNAL ACCORDINGLY HELD THAT THE ONUS THAT LAY ON THE ASSESSEE UNDER SEC.68 STOOD DI SCHARGED. 34. IN RESPECT OF THE OTHER ASSESSEE, NAMELY, GENER AL EXPORTS & CREDITS LTD., THE MONIES WERE RECEIVED BY THE SAID COMPANY ON ISSUE OF RIGHTS SHA RES TO FIVE COMPANIES PURSUANT TO THE RENUNCIATION OF RIGHTS BY SEVERAL INDIVIDUAL SHAREH OLDERS. A SEARCH HAD BEEN CONDUCTED ON THE PREMISES OF THE ASSESSEE, BUT THOSE RENUNCIATION FO RMS WERE NOT FOUND WITH THE ASSESSEE. AS IN THE CASE OF DIVINE LEASING & FINANCE LTD., THE FIVE COMPANIES WERE REGISTERED IN SIKKIM AT THE SAME ADDRESS. THEY ALL FILED REPLIES TO THE DEPARTM ENT ASKING FOR FURTHER TIME TO PROVIDE THE DETAILS OF THEIR INVESTMENTS. THEY HAD ALSO FILED R ETURNS OF INCOME UNDER THE SIKKIM TAXATION MANUAL AND HAD SUBSCRIBED TO THE SHARES THROUGH BAN KING CHANNELS. MOREOVER, THE INVESTIGATIONS CARRIED OUT INTO THOSE COMPANIES BY THE INCOME-TAX DEPARTMENT AT CALCUTTA AND THE ADVERSE FINDINGS THEREIN HAD BEEN STRUCK DOWN A S BEING WITHOUT JURISDICTION IN APPEALS FILED BY THOSE COMPANIES AND THEREFORE THE ASSESSIN G OFFICER HAVING JURISDICTION OVER GENERAL EXPORTS AND CREDITS LTD. IN BULANDSHAHAR COULD NOT RELY UPON THEM. IN THESE CIRCUMSTANCES, THE TRIBUNAL HAD DELETED THE ADDITION MADE U/S.68 O N THE GROUND THAT THE IDENTITY OF THE SHAREHOLDERS HAD BEEN PROVED. THIS COURT DID NOT AP PROVE OF THE GROUND ON WHICH THE TRIBUNAL HAD CANCELLED THE ADDITION AND OBSERVED THAT THE JU DGMENT OF THE FULL BENCH OF THIS COURT IN SOPHIA FINANCE (1994) 205 ITR 98 (DELHI) COULD NOT BE UNDERSTOOD TO HAVE ENUNCIATED THAT ONCE THE IDENTITY OF THE SHAREHOLDERS IS PROVED THE RE CAN BE NO ADDITION IN THE HANDS OF THE COMPANY WHICH RECEIVED THE SHARE MONIES. THE COURT HOWEVER REFUSED TO ATTACH ANY IMPORTANCE TO THE VIOLATION OF THE PROVISIONS OF TH E COMPANIES ACT, 1956 IN THE MATTER OF RENUNCIATION OF THE RIGHT TO SUBSCRIBE TO THE SHARE S AND HELD THAT IT WAS A MATTER OF CONCERN 8 ITA NO.1979/K/2009 & C.O. 44 OF 2010 KUV INVESTMENTS PVT. LTD. 2006-07 ONLY OF THE APPROPRIATE AUTHORITY UNDER THAT ACT. A CCORDINGLY, THE ULTIMATE DECISION OF THE TRIBUNAL CANCELLING THE ADDITION WAS UPHELD. 35. THE FACTS OF LOVELY EXPORTS P. LTD., AS NOTED B Y THIS COURT, ARE THESE. THE ASSESSEE- COMPANY IN THAT CASE HAD FURNISHED THE NECESSARY DE TAILS SUCH AS PAN NO./INCOME TAX WARD NO./RATION CARD OF THE SHARE APPLICANTS AND SOME OF THEM WERE ASSESSED TO TAX. THE MONIES WERE RECEIVED THROUGH BANKING CHANNELS. IN SOME CAS E, AFFIDAVITS/CONFIRMATIONS OF THE SHARE APPLICANTS CONTAINING THE ABOVE INFORMATION WERE FI LED. THE ASSESSING OFFICER DID NOT CARRY OUT ANY INQUIRY INTO THE INCOME TAX RECORDS OF THE PERSONS WHO HAD GIVEN THEIR FILE NUMBERS IN ORDER TO ASCERTAIN WHETHER THEY WERE EXISTENT OR NO T. HE NEITHER CONTROVERTED NOR DISAPPROVED THE MATERIAL FILED BY THE ASSESSEE. FURTHER, THE AS SESSEE HAD SPECIFICALLY INVITED THE ASSESSING OFFICER TO CARRY OUT AN ENQUIRY AND EXAMINE THE ASS ESSMENT RECORDS OF THE SHARE APPLICANTS WHOSE INCOME TAX FILE NUMBERS WERE GIVEN. THOUGH TH E ASSESSING OFFICER HAD SUFFICIENT TIME TO CARRY OUT THE EXAMINATION, HE DID NOT DO SO, BUT PU T FORTH AN EXCUSE THAT THE ASSESSEE WAS TAKING SEVERAL ADJOURNMENTS. THIS COURT OBSERVED TH AT IT IS FOR THE ASSESSING OFFICER TO MANAGE HIS SCHEDULE AND HE SHOULD HAVE ENSURED THAT BECAUS E OF THE ADJOURNMENTS HE DID NOT RUN OUT OF TIME FOR DISCHARGING THE DUTIES CAST ON HIM BY L AW. IT WAS HELD THAT WHEN DETAILS WERE FURNISHED BY THE ASSESSEE, THE BURDEN SHIFTED TO TH E ASSESSING OFFICER TO INVESTIGATE INTO THE CREDITWORTHINESS OF THE SHARE APPLICANTS WHICH HE W AS UNABLE TO DISCHARGE. THUS, THE ORDER OF THE TRIBUNAL DELETING THE ADDITION WAS HELD NOT GIV ING RISE TO ANY QUESTION OF LAW, MUCH LESS ANY SUBSTANTIAL QUESTION OF LAW. 36. IT IS NOT ONLY RELEVANT TO NOTE THE ABOVE FACTS , WHICH DISTINGUISH THOSE THREE CASES (SUPRA) FROM THE CASE BEFORE US, BUT IT IS ALSO RELEVANT TO NOTE THE FOLLOWING OBSERVATIONS MADE BY THIS COURT IN THE ABOVE THREE CASES: THERE CANNOT BE TWO OPINIONS ON THE ASPECT THAT TH E PERNICIOUS PRACTICE OF CONVERSION OF UNACCOUNTED MONEY THROUGH THE MASQUER ADE OR CHANNEL OF INVESTMENT IN THE SHARE CAPITAL OF A COMPANY MUST B E FIRMLY EXCORIATED BY THE REVENUE. EQUALLY, WHERE THE PREPONDERANCE OF EVIDEN CE INDICATES ABSENCE OF CULPABILITY AND COMPLEXITY OF THE ASSESSED IT SHOUL D NOT BE HARASSED BY THE REVENUES INSISTENCE THAT IT SHOULD PROVE THE NEGATI VE. IN THE CASE OF A PUBLIC ISSUE, THE COMPANY CONCERNED CANNOT BE EXPECTED TO KNOW EVERY DETAIL PERTAINING TO THE IDENTITY AS WELL AS FINANCIAL WOR TH OF EACH OF ITS SUBSCRIBERS. THE COMPANY MUST, HOWEVER, MAINTAIN AND MAKE AVAILA BLE TO THE AO FOR HIS PERUSAL, ALL THE INFORMATION CONTAINED IN THE STATU TORY SHARE APPLICATION DOCUMENTS. IN THE CASE OF PRIVATE PLACEMENT THE LEG AL REGIME WOULD NOT BE THE SAME. A DELICATE BALANCE MUST BE MAINTAINED WHILE W ALKING THE TIGHTROPE OF SECTIONS 68 AND 69 OF THE IT ACT. THE BURDEN OF PRO OF CAN SELDOM BE DISCHARGED TO THE HILT BY THE ASSESSED; IF THE AO H ARBOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRIPTION HE IS EMPOWERED, NAY DUTY BOUND, TO CARRYOUT THOROUGH INVESTIGATIONS. BUT IF THE AO FAILS TO UNE ARTH ANY WRONG OR ILLEGAL DEALINGS, HE CANNOT OBDURATELY ADHERE TO HIS SUSPIC IONS AND TREAT THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANY. WE MAY ALSO NOTE THAT A REFERENCE WAS MADE BY THIS COURT TO SEVERAL AUTHORITIES, INCLUDING AT LEAST SEVEN JUDGMENTS OF THIS COURT ON THE QUESTION OF APPLICABILITY OF SECTION 68 TO SHARE APPLICATION MONIES, AND THE POSITION WAS PITHILY SU MMED UP AS FOLLOWS AT PAGE 282 (OF 299 ITR): IN THIS ANALYSIS, A DISTILLATION OF THE PRECEDENTS YIELDS THE FOLLOWING PROPOSITIONS OF LAW IN THE CONTEXT OF SECTION 68 OF THE IT ACT. THE ASSESSED HAS TO PRIMA FACIE PROVE (1) THE IDENTITY OF THE CREDIT OR/SUBSCRIBER; (2) THE GENUINENESS OF THE TRANSACTION, NAMELY, WHETHER IT HAS BEEN TRANSMITTED THROUGH BANKING OR OTHER INDISPUTABLE CHANNELS; (3) THE CREDITWORTHINESS OR FINANCIAL STRENGTH OF THE CREDITOR/SUBSCRIBER. (4) IF RELEVANT DETAILS OF THE ADDRESS OR PAN IDENTITY OF THE CREDITOR/SUBSCRIBER ARE FURNISHED TO THE 9 ITA NO.1979/K/2009 & C.O. 44 OF 2010 KUV INVESTMENTS PVT. LTD. 2006-07 DEPARTMENT ALONG WITH COPIES OF THE SHAREHOLDERS RE GISTER, SHARE APPLICATION FORMS, SHARE TRANSFER REGISTER ETC. IT WOULD CONSTI TUTE ACCEPTABLE PROOF OR ACCEPTABLE EXPLANATION BY THE ASSESSED. (5) THE DEP ARTMENT WOULD NOT BE JUSTIFIED IN DRAWING AN ADVERSE INFERENCE ONLY BECA USE THE CREDITOR/SUBSCRIBER FAILS OR NEGLECTS TO RESPOND TO ITS NOTICES; (6) TH E ONUS WOULD NOT STAND DISCHARGED IF THE CREDITOR/SUBSCRIBER DENIES OR REP UDIATES THE TRANSACTION SET UP BY THE ASSESSED NOR SHOULD THE AO TAKE SUCH REPU DIATION AT FACE VALUE AND CONSTRUE IT, WITHOUT MORE, AGAINST THE ASSESSED. (7 ) THE ASSESSING OFFICER IS DUTY-BOUND TO INVESTIGATE THE CREDITWORTHINESS OF T HE CREDITOR/SUBSCRIBER THE GENUINENESS OF THE TRANSACTION AND THE VERACITY OF THE REPUDIATION. 37. THE JUDGMENT OF THIS COURT IN THE ABOVE THREE C ASES WAS CARRIED IN APPEAL TO THE SUPREME COURT BY THE REVENUE WHICH FILED SLP NO.11993/2007. THE PETITION FOR LEAVE TO APPEAL WAS DISMISSED BY THE SUPREME COURT OBSERVING AS BELOW: - DELAY CONDONED. CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISC LOSED INCOME UNDER S.68 OF IT ACT, 1961? WE FIND NO MERIT IN THIS SPEC IAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY I S RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAME S ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN TH EIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT. SUBJECT TO THE ABOVE, SPECIAL LEAVE PETIT ION IS DISMISSED. 38. THE RATIO OF A DECISION IS TO BE UNDERSTOOD AND APPRECIATED IN THE BACKGROUND OF THE FACTS OF THAT CASE. SO UNDERSTOOD, IT WILL BE SEEN THAT W HERE THE COMPLETE PARTICULARS OF THE SHARE APPLICANTS SUCH AS THEIR NAMES AND ADDRESSES, INCOM E TAX FILE NUMBERS, THEIR CREDITWORTHINESS, SHARE APPLICATION FORMS AND SHARE HOLDERS REGISTER , SHARE TRANSFER REGISTER ETC. ARE FURNISHED TO THE ASSESSING OFFICER AND THE ASSESSING OFFICER HAS NOT CONDUCTED ANY ENQUIRY INTO THE SAME OR HAS NO MATERIAL IN HIS POSSESSION TO SHOW THAT T HOSE PARTICULARS ARE FALSE AND CANNOT BE ACTED UPON, THEN NO ADDITION CAN BE MADE IN THE HAN DS OF THE COMPANY UNDER SEC.68 AND THE REMEDY OPEN TO THE REVENUE IS TO GO AFTER THE SHARE APPLICANTS IN ACCORDANCE WITH LAW. WE ARE AFRAID THAT WE CANNOT APPLY THE RATIO TO A CASE, SU CH AS THE PRESENT ONE, WHERE THE ASSESSING OFFICER IS IN POSSESSION OF MATERIAL THAT DISCREDIT S AND IMPEACHES THE PARTICULARS FURNISHED BY THE ASSESSEE AND ALSO ESTABLISHES THE LINK BETWEEN SELF-CONFESSED ACCOMMODATION ENTRY PROVIDERS, WHOSE BUSINESS IT IS TO HELP ASSESSEES BRING INTO THEIR BOOKS OF ACCOUNT THEIR UNACCOUNTED MONIES THROUGH THE MEDIUM OF SHARE SUBS CRIPTION, AND THE ASSESSEE. THE RATIO IS INAPPLICABLE TO A CASE, AGAIN SUCH AS THE PRESENT O NE, WHERE THE INVOLVEMENT OF THE ASSESSEE IN SUCH MODUS OPERANDI IS CLEARLY INDICATED BY VALID M ATERIAL MADE AVAILABLE TO THE ASSESSING OFFICER AS A RESULT OF INVESTIGATIONS CARRIED OUT B Y THE REVENUE AUTHORITIES INTO THE ACTIVITIES OF SUCH ENTRY PROVIDERS. THE EXISTENCE WITH THE ASSE SSING OFFICER OF MATERIAL SHOWING THAT THE SHARE SUBSCRIPTIONS WERE COLLECTED AS PART OF A PRE -MEDITATED PLAN A SMOKESCREEN CONCEIVED AND EXECUTED WITH THE CONNIVANCE OR INVOL VEMENT OF THE ASSESSEE EXCLUDES THE APPLICABILITY OF THE RATIO. IN OUR UNDERSTANDING, T HE RATIO IS ATTRACTED TO A CASE WHERE IT IS A SIMPLE QUESTION OF WHETHER THE ASSESSEE HAS DISCHAR GED THE BURDEN PLACED UPON HIM UNDER SEC.68 TO PROVE AND ESTABLISH THE IDENTITY AND CRED ITWORTHINESS OF THE SHARE APPLICANT AND THE GENUINENESS OF THE TRANSACTION. IN SUCH A CASE, THE ASSESSING OFFICER CANNOT SIT BACK WITH FOLDED HANDS TILL THE ASSESSEE EXHAUSTS ALL THE EVI DENCE OR MATERIAL IN HIS POSSESSION AND THEN COME FORWARD TO MERELY REJECT THE SAME, WITHOUT CAR RYING OUT ANY VERIFICATION OR ENQUIRY INTO THE MATERIAL PLACED BEFORE HIM. THE CASE BEFORE US DOES NOT FALL UNDER THIS CATEGORY AND IT WOULD BE A TRAVESTY OF TRUTH AND JUSTICE TO EXPRESS A VIEW TO THE CONTRARY. 39. THE CASE OF ORISSA CORPORATION (1986) 159 ITR E XEMPLIFIES THE CATEGORY OF CASES WHERE NO ACTION IS TAKEN BY THE ASSESSING OFFICER TO VERIFY OR CONDUCT AN ENQUIRY INTO THE PARTICULARS ABOUT THE CREDITORS FURNISHED BY THE ASSESSEE, INCL UDING THEIR INCOME-TAX FILE NUMBERS. IN THE SAME CATEGORY FALL CASES DECIDED BY THIS COURT IN D OLPHIN CANPACK (2006) 283 ITR 190, CIT V MAKHNI AND TYAGI P. LTD. (2004) 267 ITR 433, CIT V ANTARTICA INVESTMENT P. LTD. (2003) 262 10 ITA NO.1979/K/2009 & C.O. 44 OF 2010 KUV INVESTMENTS PVT. LTD. 2006-07 ITR 493 AND CIT V ACHAL INVESTMENT LTD. (2004) 268 ITR 211. TO PUT IT SIMPLY, IN THESE CASES THE DECISION WAS BASED ON THE FUNDAMENTAL RULE OF L AW THAT EVIDENCE OR MATERIAL ADDUCED BY THE ASSESSEE CANNOT BE THROWN OUT WITHOUT ANY ENQUI RY. THE RATIO DOES NOT EXTEND BEYOND THAT. THE BOUNDARIES OF THE RATIO CANNOT BE, AND SHOULD N OT BE, WIDENED TO INCLUDE THEREIN CASES WHERE THERE EXISTS MATERIAL TO IMPLICATE THE ASSESS EE IN A COLLUSIVE ARRANGEMENT WITH PERSONS WHO ARE SELF-CONFESSED ACCOMMODATION ENTRY PROVIDE RS. 40. REFERENCE WAS ALSO MADE ON BEHALF OF THE ASSESS EE TO THE RECENT JUDGMENT OF A DIVISION BENCH OF THIS COURT IN CIT V. OASIS HOSPITALITIES P RIVATE LIMITED, (2011) 333 ITR 119. WE HAVE GIVEN UTMOST CONSIDERATION TO THE JUDGMENT. IT DISP OSES OF SEVERAL APPEALS IN THE CASE OF DIFFERENT ASSESSEES. EXCEPT THE CASE OF CIT V OASIS HOSPITALITIES P LTD. (ITA NOS.2093 & 2095/2010), THE OTHER CASES FALL UNDER THE CATEGORY OF ORISSA CORPORATION (SUPRA). HOWEVER, IN THE CASE OF OASIS HOSPITALITIES P LTD., THERE IS REFERENCE TO INFORMATION RECEIVED BY THE ASSESSING OFFICER FROM THE INVESTIGATION WING OF TH E REVENUE ON THE BASIS OF WHICH IT WAS FOUND THAT SIX INVESTORS BELONG TO ONE MAHESH GARG GROUP WHO WERE NOT CARRYING ON ANY REAL BUSINESS ACTIVITY AND WERE ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES. THEY WERE ENTRY OPERATORS AND THE ASSESSEE IN THAT CASE WAS ALLEGED TO BE A BENEFICIARY. WHILE DISPOSING OF THESE APPEALS, THIS COURT OBSERVED: - THE ASSESSEES FILED COPIES OF PAN, ACKNOWLEDGEMENT OF FILING INCOME TAX RETURNS OF THE COMPANIES, THEIR BANK ACCOUNT STATEM ENTS FOR THE RELEVANT PERIOD, I.E., FOR THE PERIOD WHEN THE CHEQUES WERE CLEARED. HOWEVER, THE PARTIES WERE NOT PRODUCED IN SPITE OF SPECIFIC DIRE CTION OF THE AO INSTEAD OF TAKING OPPORTUNITIES IN THIS BEHALF. SINCE THE SO-C ALLED DIRECTORS OF THESE COMPANIES WERE NOT PRODUCED ON THIS GROUND COUPLED WITH THE OUTCOME OF THE DETAILED INQUIRY MADE BY THE INVESTIGATING WING OF THE DEPARTMENT, THE AO MADE THE ADDITION. THIS ADDITION COULD NOT BE SU STAINED AS THE PRIMARY ONUS WAS DISCHARGED BY THE ASSESSEE BY PRODUCING PA N NUMBER, BANK ACCOUNT, COPIES OF INCOME TAX RETURNS OF THE SHARE APPLICANTS, ETC. WE ALSO FIND THAT THE ASSESSING OFFICER WAS INFLUENCED BY T HE INFORMATION RECEIVED BY THE INVESTIGATING WING AND ON THAT BASIS GENERALLY MODUS OPERANDI BY SUCH ENTRY OPERATORS IS DISCUSSED IN DETAIL. HOWEVER, WH ETHER SUCH MODUS OPERANDI EXISTED IN THE PRESENT CASE OR NOT WAS NOT INVESTIGATED BY THE AO. THE ASSESSEE WAS NOT CONFRONTED WITH THE INVESTIGAT ION CARRIED OUT BY THE INVESTIGATING WING OR WAS GIVEN AN OPPORTUNITY TO C ROSS-EXAMINE THE PERSONS WHOSE STATEMENTS WERE RECORDED BY THE INVESTIGATING WING. THESE QUOTED OBSERVATIONS CLEARLY DISTINGUISH THE P RESENT CASE FROM CIT V OASIS HOSPITALITIES P LTD. (SUPRA). EXCEPT FOR DISCUSSING THE MODUS OPE RANDI OF THE ENTRY OPERATORS GENERALLY, THE ASSESSING OFFICER IN THAT CASE HAD NOT SHOWN WHETHE R ANY LINK BETWEEN THEM AND THE ASSESSEE EXISTED. NO ENQUIRY HAD BEEN MADE IN THIS REGARD. F URTHER, THE ASSESSEE HAD NOT BEEN CONFRONTED WITH THE MATERIAL COLLECTED BY THE INVES TIGATION WING OR WAS GIVEN AN OPPORTUNITY TO CROSS EXAMINE THE PERSONS WHOSE STATEMENTS WERE REC ORDED BY THE INVESTIGATION WING. 41. IN THE CASE BEFORE US, NOT ONLY DID THE MATERIA L BEFORE THE ASSESSING OFFICER SHOW THE LINK BETWEEN THE ENTRY PROVIDERS AND THE ASSESSEECOMPANY , BUT THE ASSESSING OFFICER HAD ALSO PROVIDED THE STATEMENTS OF MUKESH GUPTA AND RAJAN J ASSAL TO THE ASSESSEE IN COMPLIANCE WITH THE RULES OF NATURAL JUSTICE. OUT OF THE 22 COMPANI ES WHOSE NAMES FIGURED IN THE INFORMATION GIVEN BY THEM TO THE INVESTIGATION WING, 15 COMPANI ES HAD PROVIDED THE SO-CALLED SHARE SUBSCRIPTION MONIES TO THE ASSESSEE. THERE WAS THU S SPECIFIC INVOLVEMENT OF THE ASSESSEE- COMPANY IN THE MODUS OPERANDI FOLLOWED BY MUKESH GU PTA AND RAJAN JASSAL. THUS, ON CRUCIAL FACTUAL ASPECTS THE PRESENT CASE STANDS ON A COMPLE TELY DIFFERENT FOOTING FROM THE CASE OF CIT V OASIS HOSPITALITIES P. LTD. (SUPRA). 11 ITA NO.1979/K/2009 & C.O. 44 OF 2010 KUV INVESTMENTS PVT. LTD. 2006-07 6. THE SECOND ISSUE IN THIS APPEAL OF REVENUE AND T HE CROSS OBJECTION OF ASSESSEE IS AS REGARDS TO ALLOWANCE OF BUSINESS EXPENSES AGAINST T HE INCOME OF EARNING OF CAPITAL GAINS. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.2: 2. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE LD. CIT(A)-VIII IS CORRECT IN ALLOWING EXPENSES AS BUSINESS EXPENSES W HEREAS LD. CIT(A) HIMSELF IN HIS ORDER HAS STATED EXPENSES WERE USED FOR THE PURPOSE OF EARNING CAPITAL GAIN. AND ASSESSEE HAS ALSO RAISED FOLLOWING GROUND NO.2: 2. THE ASSESSING OFFICER HAD STATED THAT THE TOTAL EXPENDITURE FOR THE FINANCIAL YEAR 2005-06 RELEVANT TO THE ASSESSMENT YEAR 2006-07 WAS RS.313,989.50 WHICH WAS TOWARDS EARNING EITHER SHORT TERM CAPITAL GAINS OR LONG TER M CAPITAL GAINS. THE ASSESSING OFFICER CONTINUES TO STATE THAT AS PER SECTION 37(1 ), THESE EXPENSES WILL BE ALLOWED TO THE ASSESSEE FOR THE EARNING OF BUSINESS INCOME ONLY IF THE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS INCOME. 7. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE AS W ELL AS LD. SR. DR FAIRLY STATED THAT NONE OF THE AUTHORITIES BELOW HAVE EXAMINED THE ISSUE BY GOING THROUGH THE FACTS OF THE CASE, HENCE, THIS ISSUE ALSO NEEDS RECONSIDERATION AT THE LEVEL OF AO. IN SUCH CIRCUMSTANCES, WE ARE OF THE VIEW THAT LET THE ISSUE BE EXAMINED BY AO AFRESH AF TER ALLOWING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. AO WILL GIVE FACTUAL FINDING QUA THIS ASPECT. THEREFORE, BOTH THESE ISSUES ARE ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, BOTH THE APPEAL AND CROSS OBJECTI ON ARE ALLOWED FOR STATISTICAL PURPOSES. 9. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- . . . . . . . . , ! ! ! ! '! '! '! '! , (P. K. BANSAL) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( . . . .) )) ) DATED : 21ST MARCH, 2013 /0 '$12 '3 JD.(SR.P.S.) 12 ITA NO.1979/K/2009 & C.O. 44 OF 2010 KUV INVESTMENTS PVT. LTD. 2006-07 - 4 +''5 65&7- COPY OF THE ORDER FORWARDED TO: 1 . )* / APPELLANT ACIT, CIRCLE-9, KOLKATA 2 +,)* / RESPONDENT M/S. KUV INVESTMENTS PVT. LTD., C/O SHRI S. R. BARSIA & ASSOCIATES, 27, BRABOURNE ROAD, 6 TH FLOOR, ROOM NO. 601, KOLKATA-700 001. 3 . '-$ ( )/ THE CIT(A), KOLKATA 4. 5. '-$ / CIT KOLKATA 5 <'= +'$ / DR, KOLKATA BENCHES, KOLKATA ,5 +'/ TRUE COPY, -$>/ BY ORDER, ! 2 /ASSTT. REGISTRAR .