INFOMEDIARY INDIA PVT LTD V. COMMISSIONER OF INCOME TAX

ITA/1229/2010

AI Insights

The case involves multiple appeals by the Revenue against different companies concerning additions made under Section 68 of the Income Tax Act, 1961, which pertains to unexplained cash credits. The Revenue contended that the share application money received by these companies was from non-genuine sources and constituted undisclosed income. The companies, on the other hand, provided substantial documentary evidence including PAN details, bank statements, and share application forms to prove the genuineness of the transactions and the creditworthiness of the shareholders. The Income Tax Appellate Tribunal had earlier deleted the additions made by the Assessing Officer, which the Revenue challenged in the High Court. The court, after examining the evidence and the legal provisions, upheld the Tribunal's decision, emphasizing the need for the Revenue to conduct thorough investigations if it harbors doubts about the genuineness of the transactions.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 762684 (HC-DELHI)
• Appeal Type: Others
• Pronouncement Date: 23-12-2011
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax Vs. Lovely Exports (P) Ltd., Commissioner of Income Tax Vs. Divine Leasing and Finance Ltd., Commissioner of Income Tax Vs. Steller Investment Ltd., Commissioner of Income Tax Vs. Sophia Finance Ltd., Commissioner of Income Tax Vs. Arunananda Textiles Pvt. Ltd., Commissioner of Income Tax Vs. Dolphin Canpack Ltd., Commissioner of Income Tax Vs. Value Capital Services Pvt. Ltd., Commissioner of Income Tax Vs. M/s Creative World Telefilms Ltd., Commissioner of Income Tax Vs. P. Mohanakala, Commissioner of Income Tax Vs. Rathi Finlease Ltd., Commissioner of Income Tax Vs. Kundan Investment Ltd., Commissioner of Income Tax Vs. SFIL Stock Broking Ltd., Commissioner of Income Tax Vs. Sarthak Securities Co. Pvt. Ltd., Commissioner of Income Tax Vs. Dwarkadhish Investment (P) Ltd., Commissioner of Income Tax Vs. M/s. Bahri Brass Ltd., Commissioner of Income Tax Vs. M/s. Signature Hotels (P) Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: KIRAN BABU
• Assessee Lawyers: AJAY VOHRA; RAKESH GUPTA
• Keywords: Assessment; Bogus companies; Income Tax; Reassessment; Unexplained share application money
• Section: 148; 68; 69; 69C

Judgement Text

"Digitally Signed By:AMULYA Certify that the digital file and physical file have been compared and the digital data is as per the physical file and no page is missing. Signature Not Verified r IN TI{E HIGH COUR.T OF DELhII AT R{EW DEI-HI I'll'A Flo,9 72 of 2OO9, ITA h{o. L324 of 2OO8, ITA l 1o.29 of 2OLO, i[TA No.1228 of 2O10/ ITA No.L229 of' 2010, ITA No.L230 of 2O1O, ITA No.tr 71,O/2O1,O, ITA No.E of ?ALL. ITA No.339 of 2OLL( ITA No.613 of 2OtL ancl ITA No.726 of 2O1\"! ,' Reserved on: 2Srh November, 2077 Pronounced on: 23'd Dql:qnhgr, 2077 ITA No.972l2OO9 Cornmissiorre:r of Income Tax -II, Central Revenue Building, New Delhi VERSUS Kamdhenu Steel & Alloys Ltd. I'rA ruo.rS24l2OOE Gupta Citi Shelters Ltd. VERSUS Ccmmissioner of Income Tax, New Delhi ITA lr{o=29|,?ALO Commissioner of Income Tax /ERSUS Vijay Foils P. Ltd. ITA F|o.L228/2O1O Infomediary India Pvt. Ltd. VERSUS . . . Appellant . Respondent . . Appellant ,.Respondent . . Appellant . Respondent . . . Appellant t3 o/o 1) T -ii ao 2) 3) 4) ITA No,972 of 2009 Page 1 of 58 Commissioner of .Income Tax 5) trTA No'1229/2o1o InfomediarY India Pvt' Ltd' VERSUS , aommissioner of Income Tax ' 'Respondent 6) ITA No'123o/2o1o Infomediary India Pvt. Ltd. VERSUS Commissioner of Income Tax 7) ITA No.171o12oLo . ..1J. CIT VERSUS lH Finvest Pvt. Ltd. B) ITA No.8/2o11 CIT VERSUS North Delhi Construction . & Investment Pvt. Ltd. ' 9) ITI No'339/2O11 , ' CIT . . . Appellant . . .Respondent . . . Appellant , . .Respondent . . Appellant ..Respondent . . . Appellant VERSUS Laxman Industrial Resources Ltd ' 'Respondent , 10) XTA No.6L3/2o11 'tq t/ . . .Respondent . . . Appellant ITA No.972 of 2009 Page 2 of 58 7-a JBA Enterprises (Pvt,) Ltd ' ' Appellant VERSUS Income Ta>< Officer, Ward 4(I), New Delhi '' ' 'Respondent 11) IlfA No.726l2o11 Commissioner of Income Tax-III ' ' ' Appellant VERSUS Sham Mohan Pvt. Ltd counsel for theAssessee - Mr. Ajay Vohra with Ms.KavitaJhaandMr.SomnathShuk|a,Advocates' Dr. Rakesh Gupta with Ms. Rani Kiyala & Ms.'Poonam Ahuja, Advocates' t Mr. Salil Kapoor with Mr. sanat Kapoor, Mr. Ankit Gupta and Mr. Vikas Jain, Advocates. Mr. Chandra Shekahar with Mr. Manoj Agrawal and Ms. Meghna De' Advocates. Mr. S.K' Arora with Mr. Bharat Arora, Advocates' Mr. C.S. Aggarwal with Mr. Prakash Kumar, Advocates' counsel for the Revenue - Mr. Kiran Babu, sr' standing 'counse|,Ms.RashmiChopra,Sr'StandingCounse|,M.|.N.|'Sahni,Sr. standing counsel, Mr. sanjeev sabharwal, sr' standing counsel, Mr' \" sanieev-Raipal, sr. standing counsel, Mr. Kamal sawhney, sr' standing Counsel. CORAM :- I{ON'BLE THE ACTIIVG CI-{IEF JTJSTICE I.ION,BLE MR. JUSTICE M.I.' MEI'ITA A.K.'SIKRI (Actinq Chief Justice) 'J 1. The issue relating to the additions made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961- (hereinafter referred to as 'the Act') on account ol' unexplained share application money is becoming mercurial ITA No.972 of 2009 Page 3 of 58 ^t and mercurial by the day. Though plethora of case law is available deciding various facets of this issue and the principles which are to be applied have almost been crystallized and pumped up by the series of decisions of the Apex Court and various High courts, the issue keeps bouncing back with new dimensions and intricacies' In all these appeals, we are again confronted with the additions which were made by the Ao under section 68 of the Act. All these appeals, which pertain to different assessees, are filed by the Revenue as the Income Tax Appellate Tribunal (hereinafter referred to as 'the Tribunal') has deleted the additions made by the Assessing Officer' 2. Before we embark upon the discussion on factual aspects, in the appeals, which prompted the Aos to make the additions, it would be appropriate to revisit the legal position as enunciated in various judgments interpreting the provisions of Section 68/69 of the Act. we may record that this very Bench had the occasion to deal with another batch of appeals touching upon this very issue, which culminated into judgment dated 31.1.2OLt with lead case entitled crl ws. oasis hiospitalities, (2011) 333 ITR 119, As catena of' judgments were taken note of and the ratio culled out: ITA No.972 of 2009 Page 4 of 58 ?' 9J, :l therein after undertaking in-depth analysis, we are\"of the view that our purpose can be served by borrowing liberally from the said ludgment to state the legal position. Some more cases which have been decided thereafter or cited before us now, but not taken note of in the said judgment would be added thereafter. operative portion of that judgment reads as underi .2.Section68oftheActdeaIswithunexpIained incomes and is couched in the following language: \"Section 68 CASH CREDITS. Where any sum is found credited in the books of an assessee maintained for any previous year' and assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to incbme-tax as the income of the assessee of , that Previous Year.\" 3. As per the provisions of this Section, in case the assessee has not been able to give satisfactory explanation in respect of certain expenditure or where any sum is found credited in the books of accounts, the AO can treat the same as undisclosed income and add to the ihcome of the assessee. The assessee is required to give satisfactory explanation about the \"nature and iource\" of such sum found credited in the books of accounts. 4. It is a common knowledge that insofar as the companies incorporated under the Indian companies Act are concerned, whether private limited or public limited companies, they raise their capital through shares, though the manner of raising the share capital in the private limited companies on the one hand and public ii1nitud companies on the other hand, would be different' ITA No.972 of 2009 Page 5 of 58 .J x3 .t-> In the case of private limited companies, normally' the shares are subscribed by fam.ily members or persons known/close to the promoters' Public limited companies' on the other hand, generilly raise public issue inviting genera|pub|icat|argeforsubscriptionoftheseshares. Vet, it is also possible that in case of public limited companies, the share capital is issued in a close circuit' 5. When the companies incorporated under the companies Act raise their capital through shares, various persons would apply for shares and thus give share application money' These amounts received from such shareholders would, naturally, be the sums credited in the books of account of the assessee. if the Ao doubts the genuineness of the investors, who had purportedly Iubscribed to the share capital, the Ao may asl< the assessee to explain the nature and source of those sums received by the assessee on account of share capital. It is in this scenario, the question arises about the genuineness of transactions. The plain language of 5ection 68 of the Act suggests that when the assessee is to give satisfactory explanation, burden of proof is on the urrltte\" to provide nature and source of those receipts' 6. What kind of proof is to be furnished by the assessee, is the question. It has come up for discussion in various judgments rendered by this Court, other Courts as well as the supreme court. The larnr was discussed by a Division Bench of this Court in the case of comrnissioner of Income Tax Vs. Divine LeasinE and FinanceLtd'|2ggITR268].Sincetheentiregamutof case law as on that date was visited in the said judgment, we may initiate our discussion by taking note of this case. In this case, the Court highlighted the menace of conversion of unaccounted money through the masquerade or such channels of investment in the share capital of a company and thus stressed upon the duty of the Revenue to firmly curb the same' It was also observed that, in the process, the innocent assessee should not be unnecessary harassed. A delicate balance must be maintained' It was, thus, stressed: \"15. There cannot be two opinions on the aspect that the pernicious practice of conversion of unaccounted money through the masquerade or channel of investment in the share capital of a company must be firmly excoriated by the Revenue. Equally, where the preponderance of evidence indicates absence of culpability and \"-l ITA No.972 of 2009 Page 6 of 58 complexity of the assessed it should not be 'huru'rred'bytheRevenue'sinsiste'rrcethatitshould prove the negative. 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 worth of each of its' subscribers' The Company must, however, maintain and make available to the AO for his perusal, all the information contained in the statutory share application documents' In the case of private piacement the legal regime would not be the same' A delicate balance must be maintained while walking the tightrope of Section 68 and 69 of the IT Ac[. The burden of proof can seldom be discharged to the hilt by the assessed; if the AO harbours doubts of the legitimacy of 9ny subscription he is empowered, nay duty-bound' to carry out thorough investigations' But if the AO fails to unearth any wrong or illegal dealings' he cannot obdurately adhere to his suspicio ns and treat the subscribed capital as the undisclosed income of the ComPanY.\" 7. Taking note of the earlier judgment of Full Bench of this Court in the case of Commissioner of Income Tax Vs. Sophia Finance Ltd. [(L994)'2O5 ITR' 98], the court observed that the Full Bench had enunciated that Section 68 reposes in the Income-tax Officer or AO the jurisdiction to inquire from the assessed the nature and ,orr.\" of the sum found credited in its Books of Accounts' If the Explanation preferred by the assessed is found not to be satisfactory, further enquiries can be made by the Income-tax Officer himself, both in regard to the nature and the source of the sum credited by the assessed in its Books of Accounts, since the wording of Section 68 is very wide. The Full Bench opined that if the shareholders exiit then, possibly, no further enquiry need. be made' But if the Income-tax officer finds that the alleged shareholders do not exist then, in effect, it would mean that there is no valid issuance of share capital. shares cannot be issued in the name of non-existing persons' if the shareholciers are identified and it is established that they have invested money in the purchase of shares then theamountreceivedbythecompanywouIdberegarded as a capital receipt but if the assessed offers no Expla nation at all or the Explanation' offered is not satisfactory then, the provisions of Section 68 may be invoked. ).Y .t /t a Il'A No.972 of 2009 Page 7 of 58 2t B.TheCourtaIsoreferredtotheear|ierDivision Bench judgment in the case of Commissioner of Income Tax Vs. Dolphin Canpack l-td' l(2A06) 283 ITR 19OI and quoted the following observation: \". credit entry relates to the issue of share capital, the ITO is also entitled to examine whether the alleged shareholders do in fact exist or not' Such an inquiry was conducted by the AO in the present case' In the course of the said inquiry, the asSessed had disclosed to the AO not only the names and the particulars of the subscribers of the shares but also their bank accounts and the PAN issued by the IT Department' Super added to all this was the fact that the amount received by the company was all by way of cheques' This material was, in the opinion of the Tribunal, sufficient to discharge the onus that lay upon the assessed'\" 9. The Court took note of many other judgments of different High courts and on the analysis of those judgments formulated the following propositions, which emerged as under: ' *18. 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 creditor/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 Department along with copies of the Shareholders Register, Shared Application Forms, Share Transfer Register etc' it would constitute acceptable proof or acceptable Explanation by the assessed' (5) The Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices; (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessed nor should the AO take such repudidtion at face Page 8 of 58 .- ITA No.972 of 2009 value and construe it/ without more, against the assessed' (7) The Assessing Officer is duty-bound to investigite the creditworthiness of the creditor/subscribqr the genuineness of the transaction and the veracity of the repudiation'\" I 10. By this common judgment, the Division Bench decided these appeals of which one appeal related to Lovely. Exports P. Ltd.. Against the said judgment' Specijl Leave Petition was preferred, which was dismissed by the Supreme Court vide orders dated 11.01.2008 and is reported as Commissioner of Income Tax Vs. Lovely Exports (P) Ltd' [216 CTR igS (SC)1. The Court while dismissing the SLP recorded some reasons as well atbeit in brief, which is as under: '2. Can the amount of share money be regarded as undisclosed income under s'68 of IT Act, 1961? WefindnomeritinthisSpecial'LeavePetitionfor the simple reason that if the bhare application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to [roceed to reopen their'individual assessments in accordancewith|aw.Hence,wefindnoinfirmity with the impugned judgment' \"\"\"\"\"\"\" 11. It is clear from the above that the initial burden is upon the assessee to bxplain the nature and source of the ,huru application money received by the assessee' In order to discharge this burden, the assessee is required to prcve: (a) IdentitY of shareholder; (b) Genuineness of transaction; and (c) Credit worthiness of shareholders' L2. In case the investor/shareholder is an individual, some documents will have to be filed or the said shareholder will have to be produced 'before the AO to prove his identity. If the creditor/subscriber is a company, then the details in the form of registered address or PAN irJentity, etc' can be furnished' 13. Genuineness of the transaction is to be demonstrated by showing that the assessee had, in fact' received money from the. said shareholder and it came from the coffers from that very shareholder. The Division )e I ITA No.972 of 2009 Page 9 of 58 Bench held that when the money is received by cheque and is transmitted through banking or other indispuiable channels, genuineness of transaction would be proved' other documents showing the genuineness of transaction couldbethecopiesoftheshareholdersregister,share application forms, share transfer register, etc' 14. As far as creditworthiness or financial strength of the credit/subscriber is concerned, that can be proved by producing the bank statement of the creditors/subscribers showingltrut it had sufficient balance in its accounts to enable it to subscribe to the share capital, This judgment further holds that once these documents are produced, the assessee would hqve satisfactorily discharge the onus cast upon him. Thereafter, it is for the AO to scrutinize the same and in case he nurtures any doubt about.the veracity of these documents to probe the matter further. However, to discredit tlre documents produced. by the assessee on the aforesaid aspects, there has to be some cogent reasons and materials for the AO and he cannot go into the realm of'susPicion' 15, At this stage, we would lilce to refer to the judgment of the Bombay High Court in the case of CIT Vs'-M/sCreativeWorldTelefitmsLtd.(inITANo.21B2 of ZO0g decided on 12.10.2009). The relevant portion of this order is reProduced below: \"In the case in hand, it is not disputed that the assessee had given the details of name and address of the shareholder, their PA/GIR number and had also given the cheque number, name of the bank. It was expected on the part of the Assessingofficer.tomakeproperinvestigationand reach the shareholders. The Assessing Officer did nothinE except issuing surnmons whicfr were uttimately returned back with an endorsement 'not traceable'. In ou!' considered view, the Assesslng Offlcer ought to have found out their details throug!'r FAN cards, bank account details or from their bankers so as to reach the shareholders since all the relevant material details and particulars were given by the assessee to the Assessing Officer. In the above circumstances, the view taken by the Tribunal cannot be faulted' No substantial question of law is involved in the appeal. Page 10 of 58 >l ITA No.972 of 2009 In the result, the appeal is dismissed in limini with no order as to costs' (ernphasis suPPlied)\" 16. The Court thus. clearly held that once documents like PAN Card, bank account details or details from the bankers were given by the assessee' onus shifts upon the Assessing Off]cer and it is on him to reach the sharehollers and the Assessing Officer cannot burden the assessee merely on the ground that summons issues to the investors were returned back with the endorsement 'not traceable'. Same view i3 taken by the Karnataka High Court in Madhuri Investments Pvt' Ltd' Vs' ACtrT 1in-ffnNo.110of2OO4,decidedon1B'02'2006)'Inthis case also, some of share applicants did not appear and notices sent to them were returned with remarks 'with no such person,. Addition was made on that basis which was turned down by the High Court in the following words: '6. Having heard the learned counsel for the ' parties, we notice that whenever a company invites app|icationsforal|otmentofsharesfromdifferent applicants, there is no procedure contemplated to find out the genuineness of the address or the genuinenity of the applicants before allotting the ihat\"s. If for any reasori tfre address given in the application were to be incorrect or for any reason if the said applicants have changes their residence or the notices sent by the assessing officer has not been received by such applicants, the assessee company cannot be blamed. Therefore, we are of the view that the Tribunal was not justified in allowing the appeal of the revenue only relying upon the statement of Sri Anil Raj Mehta, a Chartered Accountant.\" t7.' However, in Commissioner of Incorme Tax Vs' Arunananda Textiles itvt' Ltd. (in ITA No'1515 of 2005, decided on 02.03.2010), the Karnataka High Court went to the extent of observing that it was not for the assessee to place material before the Assessing officer in regard to creditworthiness of the shareholders. once the companyhadgiventheaddressesoftheshareho|ders and their identity was not in dispute, it was for the Assessing officer to make further inquiry. It was borne by the following discussion in the said judgment: '6. The question raised in this appeal are squarely covered by several judgments of the 2_Q i: d oa ITA No.972 of 2009 Page 11 of 58 Supreme Court and also the judgment of this Court passed in ASK Brothers Ltd' Vs' Commissioner of Income Tax, wherein this Court following the judgments of the Supreme Court in the case of Commissioner of Income Tax Vs' Lovely Exports (P) Ltd. reported in (20089) 216 CTR (SC 19i) and also in the case of Commissioner of Income Tax Vs. Steller Investment Ltd' ' reported in (2001) 25I ITR 263 (SC) has ruled that it not for the assessee to place material before the Assessing Officer in regard to cieditworthiness of the shareholders' If the company has given the addressesoftheshareholdersandtheiridentityis not in dispute, where they were capable of -investing,theassessingofficersha||.investigate'It is not for the assessee company to establish but it is for.the department to enquire with the investor about their capacity to invest the amount in the shares. Therefore, we are of the view that the substantial questions of law framed in this appeal are to be answered against the revenue and In favouroftheassessee.Accordingly,thisappeaIis dismissed.\" 18. Rajasthan High Court had an occasion to deal with the submission of the Revenue predicated on Benami transactions in the case of Cammissioner of Income Tax Vs, AKJ Granites (F) Ltd. reported as 301 ITR 298 (Raj.)andtheargumentsweredea|twithinthefol|owing mannerl *3. So far as question No' 1 is concerned, it is stated by learned counsel for the appellant that the issue embedded in tlre said question has already been decided by this Court and governed by the ratio laid down in tsarkha Synthetics Ltd' Vs' Asst. CIT (2OO5) 197 CTR (Rai') 432' It has been pointed out that share applications are made by number of persons, may bb in their own names oi benami, but the fact that share applications received from different places accompanied with share application money, no presumption can be drawn that same belong to the assessee and cannotbeassesseeinhishandsashisundisc|osed incomeun|essSomenexusisestab|ishedthatshare application money for.augmenting the investment in business has flown from asssessee's own money' In coming to this conclusion, the Court relied on 2_7 -9 ITA No.972 of 2009 Page 12 of 58 o CIT Vs. Steller Investment Ltd. (7997) 99 CTR (Del.) 4O, which has since been affirmed by the Supreme Court in CIT vs, Steller Investment I-td. (2OOO) 764 CTR 6A) 287. In view thereof, this question need not be decided again.\" 19. This very aspect came up for consideration before different Courts on number of occasion and was dealt with in favour of the assessee. 20. The observations of the Supreme Court in the case of Lovely Exports (supra) go. to suggest that the Department is free to proceed to reopen the individual assessment in case of alleged bogus .shareholders in accordance with law and, thus, not renrediless. It is, thus, for the AO to make further inquiries with regard to the status of these parties to bring on record any advei-se findings regarding'their creditworthiness. This would be moreso where the assessee is a public limited company and has issued the share capital to the public at large, as in such cases the company cannot be expected to know every detail pertaining to the identity and the financial worth of the subscribers. Furiher initial burden on the assessee would be somewhat heavy in case the assessee is a private limited company where the shareholders are family friends/close acquaintances, etc. It is because of the reason that in such circumstance, the assessee cannot feign ignorance about the status of these parties. 2L We may also usefully refer to the judgment of the Supreme Court in the case of Commissioner of Income Tax Ys. P. Mohanakala [(ZOO7) 29r. ITR 2ZB (SA)I. in that case, the assessee had received foreign gifts from one common donor. The payments were made to them by instruments issued by l'oreign banks and credited to the respective accounts of the assessees by negotiations through bank in India. The evidence indicated that the donor was to receive suitable' compensation from the assessees. The AO held that the gifts though apparent were not real and accordingly treated all those amounts which were credited in the books of account of the assessee, as their income applying Section 68 of the Act. The assessee did not contend that even if their explanation was not satisfactory the amounts were not of the nature of income. The CIT (A) confirmed the assessment. On further appeal, there was a difference of opinion between the two Members of the Appellate Tribunal and the matter was referred to the Vice iTA No.972 of 2009 Page 13 of 58 ..1 a( president who concurred with the findings and conclusions '/ of the AO and the CIT (A)' On appeal, the High Court re- appreciated the evidence ahd substituted its own findings and came to the conclusion that the reasons assigned by the Tribunal were in the realm of surmises, conjecture and suspicion. On appeal to the Supreme Court,.the court while reversing the decision of the High court held that the findings of the Ao, cIT (A) and the Tribunal were based on the material on record and not on any conjectures and surmises. That the money came by way of bank cheques and was paid through the process of banking transaction as not by itself of any consequence' The High court misdirected itself and erred in disturbing the concurrent findings of fact. While doing so, the legal position contained in Section 68 of the Act was explained by the supreme court by assessing that a bare reading of Section 68 of the Act suggests that (i) there has to be credit of amounts in the books maintained by the assessee; (ii) such credit has to be a sum of money during the previous year; and (iii) either (a) the assessee offers no explanation about the nature and source of such credits found in the books or (b) the explanation offered by the assessee, in the opinion of the AO, is not satisfactory. It is only then that the sum so credited may be charged to income tax as the income of the assessee of that previous year. The expression \"the assessee offers no explanation\" means the assessee offers no proper, reasonable and acceptable explanation as regards th\" tr-t found credited in the books maintained by the assessee. The opinion of the AO for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on the record. The opinion of the Ao is required to be formed objectively with reference to the material on record. Application of mind is the sine qua non for forming the opinion. In cases where the explanation offered by the assessee about the nature and source of the sums found credited in the books is not satisfactory there is, prima facie, evidence against the assessee, viz', the receipt of money. The burden is on the dssessee to rebut the ru.\", and, if he fails to rebut it, it can be held against the assessee that it was a receipt of an i.ncome nature. The burden is on the assessee to take the plea that even if the explanation is not acceptable, the material and attending circumstances available on record do not justify the sum found credited in the books being treated as a receiot of income nature' ITA Nc.972 of 2009 Page 14 of 58 jz- 22'Wewou|d|iketorefertoanotherjudgmentofthe DivisionBenchofthisCourtinthecaseofCommissioner .oflncomeTaxVs,ValueCapitalservicesP'Ltd' I(2oo8)3o7ITR'334(De|hi)].TheCourtinthatcase held that the additional burderl was on the Department to showthatevenifshareapp|icationdidnothavethe means to make investment, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. In the absence of such findings, addition could nbt be made in the income of the assessee under Section 68 of the Act' 23, It is' a|so of re|evance to point out that in CommissioneroftrncomeTaxVs.Ste//arlnvestment Ltd.t(1991)ITR287(De|')]wheretheincreasein subsciited capital of the respondent company accepted bythelTRoandrejectedbytheClTonthegroundthata detailed investigation was required regarding the genuinenessofsubscriberstosharecapita|,astherewas adeviceofconvertingb|ackmoneybyissuingshareswith thehe|pofformationofaninvestmentwhichWas reu\"rs\"d by the Tribunal, this Court held that even if it be assumed tt\"'ut the subscribers to the increased share capitalwerenotgenuine,undernocircumstancesthe amount of share cJpital could be regarded as undisclosed incomeofthecompany.Thisviewwasconfirmedbythe ApexCourtinCITVs'Sfel/arlnvestmentLtd.[(2oo1) 2s1 rTR 263 (SC)1.\" 24. It is, thus, clear that initial burden lies on the assessee to explain the nature and source of the share application money received by the assessee. It is also clear that the . assessee has to satisfactorily establish the identity of the l shareholders, the genuineness of the transaction and the creditworthiness of the sharehol'ders' The manner in which such a burden is to be discharged has been explained in vario.us judgments and noted ITA No.972 of 2009 us above. At the same Page 15 of 58 by 33 time, it is also well established principle of law that in any matter, the onus brought is not a static one. Though initial burden is upon the assessee, once he proves the identity of credits/share application by either furnishing Permanent Account Numbers or copies of bqnk accounts and shows the genuineness of the transaction by showing money in the banks is by account payee cheques or by draft, etc., then the onus to prove the same would shift to.the assessee. The question which assumes importance at,,this stage is to what the Revenue is supposed to do to dislodge the initial burden discharged by the assessee and to throw the ball again in the assessee's court demanding the assessee to give some more proofs, as the documents produced earlier by the assessee either become suspect or are rendered insufficient in view of the material produced by the Department rebutting the assessee's documentary evidence' This is the aspect which has to be gone into in all these cases. Before that, we would like to refer to the observations of some courts touching the core issue .relating to discharge of I t\" burden. A) CllT Vs. the Court held iTA No.972 of 2009 R.athi Finlease Ltd', 215 CTR. 167 (M.P') as under :- Page 15 of 58 3 '17. .....'S'68 of the Act enjoined the assessee to offer a'n'lxpianatiiln about the nature and source of the sum found credited in his books and if the explanation was not satisfactory' the amount can be credited and charged to income-tax as income of the assessee' Since the assessee' though tried ' to exptuin the genuineness of the credit on the basis ii l\"ti\"tt if confirmation' it could not he explainea as to how the transaction was -\"a.,iuiited when the companies w:re not in ' existence and the amount was paid by cheque . onfy *-thu date on which the amount was credited totheaccountofthecompany.Itwasforthe assessee to discharge this burden\"\"\"\"\"\"\" B)'Calcutta High Court in CIT vs' Kundan Investrnent Ltd., 263 ITR 626 (Cal') held as under:- I t C) This Court ln Con'lmissioner of trncome.. Tax vs' Sophia Flnance Limited, 2O5 trTR' 98 (De[) dealt with tlre issue as under :- \"..........Under Section 68, tire Income-tax Officer is empowered to lift the veil of corporate ldentity and find out. as to whether the apparent is real. it is the assessee on whom the onus lies' Unless sufficient materials are produced' the onus does not shift on the Revenue' But once the materiaNs are scrutiurized and the resullt of the scrutiny is commurlicated to the assessee' the onus shifts frorn the Revenue to tlre assessee. Then the assessee has to take appropriate steps for proving its case' Unless there are sufficient materials after such communication' produced by the assessee, the Income-tax Officer can do no further\"' \"...........As we read Section 68 it appears that *hunuu\"r a sum is found credited in the books of accountoftheassesseethen,irrespective.o.f'th.e colour or the nature of the sum received which is Page 17 of 5B iTA No.972 of 2009 3s- U sought to be given by the assessee, the Income tax Officer has the jurisdiction to enquire from the assessee the nature and source of the said amount. When an explanation in regard thereto is given by the assessee, then it is for the Income tax Officer to be satisfied whether the said explanation is correct or not. It is in this regard that enquiries are usually made in order to find out as to wl'rether, firstly, the persons fronr whom money is alleged to have btien neceived actually existed or not. Secondly, depending upon the facts of each case, the Inconre tax Officer may even be justified in trying to ascertain the source of the depositor, assuming he is identified, in order to determine whether that depositor !s a rnere name lender or not. Be that as.it ffiay, it is' clear that the f ncome tax Officer has jurisdiction to make enquiries with negard to the nature and source of a sum credited in the books of account of an assessee and it would be immaterial as to whether the amount so credited is given the colour of a loan or a sum representing the sale proceeds or even receipt of share application money. The use of the words .,any sum found credited in the books,, in section 68 indicates that the said section is very widely worded and an Income tax officer is not precluded from making an enquiry as to the true nature and source thereof even if the same is credited as receipt of share application money. XXXX XXXX XXXX XXXX .On the basis of the language used under Section 68 and the various decisions of drfferent High Courts and the Apex Court, the only conclusion which could be arrived at is: (i)that there is no distinction between the cash credit entry existing in the books of tne firm whether it is of a partner or of a third party, (ii) that the burden to prove the identity, capacity and genuineness has to be on the assessee, (iii) if the cash credit is not satisfactorily explained the Income Tax Officer is justified to treat it'as Income from ',undisclosed sources\", (iv) the firm has io establish that the amount was actually given by the lender, (v) the genuineness and regularity in the maintenance of the account has to be taken into consideration by Page 18 of 58 IjI'A No,972 of 2009 the taxing authorities, 1ui; if the explanation is not supported by any documentary or other evidence, then the deeming fiction credited by section 68 can be invoked. In these circumstances, we are of the view that simply because the amount is credited in the books- of the firm in the partner,s capital account it cannot be said that it is not the undiscrosed income of the firm and in ail cases it has to be assessed as an undiscrosed income of the partner alone. In these circumstances, we are of the view that the Tribunal was not justified in - hording that the cash credits of Rs. nisaz in the account of Shri Kishorilal, one of the partners, courd not be assessed in the hands of the firm and in deleting the same. since the matter was not considered by the Tribu nal on the merits, the Tribunal would be free to hear the arguments of both the parties and decide afresh in iiew of the observations made above. Accordingly, the reference is answered in favour of the Revenue and against the assessee.', D) crr vs. Korlay Trading co. Ltd., 232 rrR s2o (cai) was cited by the Revenue to press the following:_ \"..........There should be a Eenuine transaction. The income tax file nurnber has been given but that is not enough to pnove the genuineness of the cash cnedit. -Admittedly, there is no affidavit to this effect, by the creditor, on record. Cohsidering these facts, we find that the finding of the Tribunal in this regard is perverse. The assessee has failed to prove the genuineness of the cash credit,..... . ?5' Following dicta of the Apex court judgment in surnaff I Dayal vs' crr, 2r4 rrR gor (sc) was heaviry reried upon by the Revenue:_ 3( v \"It is no doubt true that in all cases in which a receipt is sought to be taxed as Income, the burden lies upon the Department to prove that it is within the taxing provision and if a receipt is in the ITA No.972 of 2009 Page 19 of 58 5+ lr.. nature of income, the burden of oroving that it is not taxable because it falls within the exemption provided'by the Act lies upon the assessee' (See Farimisetti Seetharamamma [1965] 57 ITR 532 at page 536). But, in view of Section 68 of the Act' *tl1t\" uny ,urn is found credited in the books of the assessee for any previous year/ the same may be charged to income tax as the income of the ars\"sre6 of that previous year if the explanation offered by the assessee about the nature ano source thereof is, in the opinion of the Assessing Offi.\"r, not satisfactory' In such a case there is' prima iacie, evidence against the assessee, viz' the receipt of money, and if he fails to rebut it the said evidence being unrebutted, can be used against him by holding that it was a receipt of an income nature. While considering the explanation of the assessee the Department cannot, however' act unreasonablY. XXXX XXXX XXXX XXXX .This raises the question whether the apparent can be considered as the real' As laia aown by this Court the apparent rnust be considered the real until it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look irlto the surroundinE circumstances to find out the reality and the matter has to be considered bY applying tlre test of lruman probabilities....... XXXX XXXX XXXX XXXX This, in our opinion, is a superficial approach to the problem. The matter has to'be considered in the iight of human probabilities'...'.\"\"\"\"\" 26. t With this discourse on the (EmPhasis suPPlied) legal position, we advert to the cases at hand. In these appeals, there is a common thread which runs through all these cases insofar as nature of ITA No.972 of 2009 Page 20 of 58 38 v transaction is concerned. As would be seen when we discuss the facts of this case, the share applicants are all companies incorporated under the Indian Companies Act, either public limited or private limited companies. Since these companies are incorporated under the provisions of Indian Companies Act, their identity, at least on papers, is established. Here, they are assessed to income tax as well. These companies have PAN numbers and are filing regular income tax returns. The assessee companies which have received share applicant money from such applicants have produced documents in the form of PAN, income tax returns, copies of the bank accounts through which the funds were transferred by way of credit entries, deposits in the accounts of such applicants, etc. by furnishing such kinds of proofs/documents, the assessees have been able to 'discharge their initial burden. Notwithstanding the same, as per the AO(s), the applicants werb bogus companies which were only paper companies and there is no real existence. In certain cases, it was also found that just before issuing the cheques by th.e applicants towards share applicant money, cash was deposited in their bank accounts. Except in ITA No.726/2011, in other cases, the AOs also relied upon ITA No.972 of 2009 Page 2L of 58 ( o \"q L)( Y 28, the investigation report of Director of Income Tax (Investigation), the detairs whereof would be mentioned at the appropriate stage, , From the aforesaid and some other aspects peculiar to each case, the Ao(s) was of the opinion that the assessees had not discharged the burden. 27. with this background, we now pick up one of the appeals, the outcome whereof would determine the fate oi all these appeals. ITA No.972 of 2O09 In the case of this assessee, w€ are concerned with Assessment Year 2004-05. while scrutinizing this case, Ao found that the balance-sheet revealed that during period relevant to the year under assessment, the assessee had received share application money of <2.74 crores from various applicants. The assessee filed details of all the share applicants and the amounts received along with their confirmation and copies of the bank accounts of such investors from as many as 32 share applicants. All these applicants were private limited companies. The Ao was of the opinion that the creditors were not genuine parties and were only entry providers. He referred to the report dated ITA No.972 of 2009 Page 22 of 58 the the the .J 02.3.2006 of the Directorate of Income Tax (Investigation), lo Unit-V, New Delhi in this beharf. He issued detailed questionnaire 6n 09.11.2006 wherein he also gave specific reasons in respect of each of the applicant which was of the following nature: (i) In the bank account of the various share applicants, they had deposited cash for specific purpose for applying for. share in addition to providing entry to the assessee, the same modus was adopted in the other cases as well. (ii) Many companies did not exist at the addresses furnished. The registered letters sent to them had been received back undelivered. (iii) There were reports of the Inspectors (Income Tax) that many parties were not genuine assessees and were not in existence. 29. The assessee had given reply to the said questionnaire in which it had summed the position as under: '1. All the share applicants are existing assessees. 2. These companies are registered with the Registrar of Companies. 3. The share applicants have filed their respective confirmations. Page 23 of 58 ITA No.972 of 2009 L, 4. The companies are genuine existing share holder' ( | a 5. T'he investments have been made by them by account Payee cheques' 6 AO's remarks that the shaie applicants are \"entry providers\" have not basis' 7. The assessee company is not accountable for the share applicants depositing cash in their accounts before investing bY cheques' B. AO's remarks \"not a genuine tax payer\" is. the Department.and the share applicant in which the assessee has not role to PlaY g.Theassesseehasnotmeanstoproducethe shareholders PhYsicallY' 10. The postal remarks on the communications to the share applicants were not made available to the assessee company' 11. The report of the Directorate is one sided' L2. The proposal of the AO to treat the credits received as share application money runs contrary in law to the judgment of the Hon'ble Supreme Coyi! in the case of M/s. Steller Investments Ltd' (115 Taxman Page 99)'\" 30. The AO was not convinced with this explanation' He was of theVieWthatthoughcontentionsappearedgood theoretically, but the assessee had miserably failed to discharge burden, in the background of the facts on record, in totality. He maintained that the companies were bogus, as they were not found at the existing address and the cash was also deposited by these companies just before issuing the cheques. The fact that the assessee had showed its ITA No.972 of 2009 Page 24 of 58 q> inabiIitytoproducethemWaSalsoviewedagainstthe assessee. The Ao relied upon the report of the Directorate of .the Income Tax (Investigation) which had concluded that all these companies were bogus companies floated by one Mr. Mahesh'Garg, who was master behlnd it, with intent to provide entries. He inter alia observed: ''Theassesseecompanyhascompliedwithelementary requirements by fiting confirmations from the share applicants with their Permanent Account Numbers and copiesofbankaccountsthroughwhichthefundswere transferredbywayofcreditentries'Inmostofthecases inwhichtheassesseecompanyfi|edbankstatementsof theshareappIicants,thedepositsintheaccountsofsuch applicants were shown to have been received by way of tiansfer of funds to them but when such statements were requisitioned directly from the banlJ >m c- OJ ( ' U ; z. -uv (nm c)! sc g(o c) p OJ - (. z. tt uut -(U - e-Y fo O -';'i d! rI, L= -co qr 23 M/s. Suma Finance Investme nt Ltd. 29t9, Corpn. Bank, Karol I Bash, 3-Mar-01 Page 51 of 58 I New --__l Delhi ___ ITA No.972 of 2009 0J 9? 5bE qO.l19 o l*'o P 3E g 6g - = E t1 3 1 1108 2578 3025 30258 302581 450592 64. 65. Furthermore, after extracting the aforesaid particulars, the AO recorded following reasons: i , \"3. In view of the above information, it is evident that the , assessee company has introduced its own unaccounted' moneyinitsbankbyWayofaccommodationentries. Therefore, I have reasons to believe that the income amounting to {43,65,776/- has escaped assessment, which is required to be assessed to tax under the provision of Secfion 147 of the I'T. Act, 1961.\" It is clear from the above that the AO acted mechanically on the information supplied by the Directorate of Income Tax (Investigation) without applying his own mind. He did not even care to . see the apparent mistake in the particulars where three entries were repeated twice each. Almost on identical facts, a Division Bench of this Court set aside such a notice under section I47/LAB of the Act in the case Sarthak Securities Co, P\" !-td.,Vs. ITO (Deltti)' 329 ITR .110. After taking note of various judgrnents delineating the scope of Section 148 of the Ac! as well as law regarding undisclosed income under Section 68 of the Act, the Court held that: ITA No.972 of 2009 Page 52 of 58 1o '.The obtaining factual matrix has to be tested on the anvil of the aforesaid pronouncement of law. In the case at hand, as is evincible, the assessing officer was aware of the existence of four companies with whom the assessee had entered into transaction. Both the orderd clearly exposit that the assessing officer was made aware of the situation by the investigalion wing and there is no mention that these companies are fictitious companies. Neither the reasons in the initial notice nor the communication providing reasons remotely indicate independent application of mind. True it is, at that stage, it is not necessary to have the established fact of e'scapement of income but what is necessary is that there is relevant material on which a reasonable person could have formed the requisite belief. To 'elaborate, the conclusive proof is not germane at this stage but the formation of belief must be on the base or foundation or platform of prudence which a reasonable person is required to apply. As is manifest from the perusal of the supply of reasons and the order of rejection of objections, the names of the companies were available with the authority' Their existence is not disputed. What is mentioned is that these companies were used as conduits. In that view of the matter, the principle laid down in Lovely Exports (P) Ltd' (supra) gets squarely attracted. The same has not been referred to while passing the order of rejection. The assessee in his objections had clearly stated that the companies had banl< accounts and payments were made to the assessee company through banking channel' The identity of the companies was not disputed' Under these circumstances, it would not be appropriate to require the assessee to go through the entire gamut of proceedings' It is totally unwarranted.\" 66. Similar view is taken by another Division Bench of this Court in The Commissioner of Incorne Tax III Vs, SFIL Stack tsrokinE {.td. (ITA that case also, the similar manner, Deputy Director took the view No. 1056/2009, decided on 27 .4.2010) ' In AO had recorded the reasons to belilve in viz., more information received from 'the of Income Tax.(Investigation) and the Court that these were no reasons within the ITA Nb.972 of 2009 Page 53 of 58 7l meaning of Section 148 of the Act. Following discussion in this behalf needs to be noted: 9. In the present case, we find that the first sentence of the so-called reasons recorded by the Assessing Officer is mere information received from the Deputy Director of Income Tax (Investigation). The second sentence is a direction given by the very same Deputy Director of Income Tax (Investigation) to issue a notice under Section 148 and the third sentence again comp.rises of a direction given by the Additional Commission'er of Income Tax to initiate proceedings under Section 148 in respect of cases pertaining to the relevant ward. These three sentence are followed by the following sentence, which is the concluding portion of the so-called reasons:- \"Thus, I have sufficient information in my possession to issue notice u/s 748 in the case of M/s SFIL Stock Broking Ltd. on the basis of reasons recorded as above.\" 10. From the above, it is clear that the Assessing Officer referred to the info,rmation and the two . directions as \"reasons\" on the basis of which he was proceeding to issue notice under Section 148. We are afraid that these cannot be the reasons for proceeding under Section L47/14B of the said Act. The first part is only an information and the second and the third parts of the beginning paragraph of the so- called reasons are mere directions. From the so-called reasons, it is not at all discernible as to whether the Assessing Officer had applied his mind to the information and independently arrived at a belief that, on the basis of the material which he had before him, income hacj escaped assessment. Consequently, we find that the Tribunal has arrived at the correct conclusion on facts, The law is well settled. There is no substantial question of law which arises for our consideration. The appeal is dismissed.\" 67. In view of that, we need not go into the merits of the rt addition made by the AO. As pointed out above, the CIT (A) ITA filo,972 of 2009 Page 54 of 58 h- 68. 69. had deleted the addition on merits and the Tribunal has simply remitted the case back to the AO. There is another recent judgment dated 2L7.2O1,L of this Court in Signature Hotels (P) Ltd, Vs. Income Tax officer-Ward s(4) &. Anr. tW.P,(C) Nb.Bo6i/2010). That was also a case where the notice was issued on the basis of information received frorn Dii-ectorate, Income Tax (Investigation). The Court first set out the approach that is to be adopted. in such cases, by mentioning as under in para t2: \"12. In these circumstances, we are examining the reasons given by the Assessing Officer in the proforma seeking permission/approval of the Commissioner and whether the same satisfy the pre-conditions mentioned in Section 147 of the Act.\" On examination, the Court set aside the notice under Section 148 of the Act and in the process, discussion therein is as under: \"14. The first sentence of the reasons states that information had been received from Director of Income-Tax (Investigation) that the petitioner had introduced money amounting to Rs.5 lacs during financial year 2OO2-03 ab per the details given in Annexure. The said Annexuie, reproduced above, relates to a cheque received by the petitioner on 9th October, 2OO2 from Swetu Stone PV from the bank and the account number mentioned therein' The last sentence records that as per the information, the amount received was nothing but an accommodation entry and the assessee was the beneficiary' ITA No.972 of 2009 Page 55 of 58 t- ;L ')e /o o 15. The aforesaid reasons do not satisfy the requirements of Section L47 of the Act. The reasons and the information referred to is extremely scanty and vague. There is no reference to any document or statement, except Annexure, which has been quoted above. Annexure cannot be regarded as a material or evidence that prima facie shows or establishes nexus or link which discloses escapement of income. Annexure is not a pointer and does not indicate escapement of income. Further, it is apparent that tlre Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. The Assessing Officer accepted the plea on the basis of vague information in a mechanical manner. The Commissioner also acted on the same basis by mechanically giving his approval. The reasons recorded reflect that the Assessing Officer did not independently apply his mind to the information received from the Director of Income-Tax (Investigation) and arrive at a belief whether or not any income had escaped assessment. 16. It may be noted here that a company by the name of Swetu Stone Pvt. Ltd. had applied for and was allotted shares in the petitioner company on payment by cheque of Rs.5 lacs. As noticed above, in the Annexure the name of the company/account holder is mentioned as Swetu Stone PV. The same is also mentioned in the undated reasons mentioned above. 17. In the counter affidavit it is stated that M/s Swetu Stone Pvt. Ltd. had applied for allotment of shares worth Rs.5 lacs and the same were allotted by the petitioner. It is further stated that statements of Mahesh Garg and Shubhash Gupta were recorded by the Director of Income-Tax (Investigation) and on the basis of the statements they have come to the conclusion that the said persons were entry operators. Copy of the statements of Mahesh Garg and Shubhash Gupta have not been placed on record by the respondent. The peLitioner, has, however, enclosed copy of statements of Mahesh Garg and Shubhash Gupta recorded on different dates. The said persons have not specifically named the petitioner though other parties have been named and details have been given .and it is stated that they were provided accommodation entries. However, it is stated that the entries were made by giving cheque/DD/PO after receiving cash and sometimes expenses entries were provided. The reasons recorded by the Assessing Officer do not make reference to any statement of Mahesh Garg or Shubhash Gupta. This may not also be necessary, if the statements were on record and it is . claimed and prima facie established that they were examined by the Assessing Officer before or at the time of recording reasons. On the other hand, in the present case, 3 ITA No.972 of 2009 Page 55 of 58 1 € information as enclosed as Annexure, has been reierred. This is the only material relied upon by the Assessing Officer. The said Annexure has been quoted above. In this connection, we may notice that M/s Swetu Stone Pvt. Ltd. is an incorporated company and the petitioner has pleaded and stated that the said company has a paid-up capital of Rs.90 lacs. The company was incorporated on 4th Januaiy, 1989 and was also allotted a permanent account number in September, 20OL. To this extent, there is no dispute. In these circumstances, we feel the judgments of the Delhi High Court in Commissioner of Xncoine Tax versus SFII_ Stock Broking Limited, [2010] 325 ITR 285 (Delhi) and Sarthak Securities Company Private Limited versus Income Tax Officer,.2070 (329) ITR 110 (Delhi), in which CIT versus Lovely Exports (p) Limited, (2009) 216 CTR 195 (SC) has been applied and followed, are applicable. We may notice here that the respondent in their counter affidavit have stated that Swetu Stone pvt. Ltd. is unidentifiable and, therefore, the aforesaid decisions should not be applied and the ratio of the decision dated 7th January, 2011 in Writ Petition (Civil) No. 7SL7/2OLO, AGR Investment Limited versus Additional Commissioner of Income Tax and Another should be applied. In the said decision, decisions in the case of Sarthak Securities Company Private .Limited (supra) and SFII_ Stock Broking Limited (supra) was distingLjished by giving the following reasons: \"22. ....In SFIL Stock Broking Ltd. (supra), the bench has interfered as it was not discernible whether the assessing officer had applied his mind to the information and independenily arrived at a belief on the basis of material which he had before him that the income had escaped assessment. In our considered opinion, the decision rendered therein is not applicable to the factual matrix in the case at hand. In the case of Sarthak Securities .Co. Pvt. Ltd. (supra), the Division Bench had noted that certain companies were used as conduits but the Assessee had, at the stage of original assessment, furnished the names of the companies with which it had entered into transaction and the assessing officer was made aware of the situation and further the reason recorded does not indicate application of mind. That apart, the existence of the companies was not disputed and the companies had bank accounts and payments ITA No.972 of 2009 Page 57 of58 were made to the Assessee company through the banking channel. Regard being had to the aforesaid fact situation, this Court had interfered. Thus, the said decision is also distinguishable on the factual score.\" 18. The facts indicated above do not show that M/s Swetu Stone Pvt. Ltd. is a non-existing and a fictitious entity/person. Decision in AGR fnvestment Limited (supra), therefore, does not help the case of the respondent. 19. For the reasons stated above, the present writ petition is allowed and writ of certiorari is issued quashing the proceedings under Section 148 of the Act, In the facts of the case, there will be no order as to costs.\" 70. In respect of Assessment year 20O2-O3 also additions were made under Section 68 read with Section 69C of the Act after reopening assessment under section J,47/L4Bof the Act. For the aforesaid reasons, even notice for this year also stands quashed. The question No.(1) is accordingly answered in favour of the assessee and for this reason, we are not going into the second question TL As a result, appeals of the assessee are allowed. ilr z') ' axl ,a1>' v nlJJ \"- ACTING CI-IIEF JI,.!STtrCE 1, --e 'f-T^JJ (M\"L.'h4E[-{rA) J[.JDGE DECEMBER.23, 2011 ' pmc ITA No.972 of 2009 Page 58 of 5B "