Appeal Details
Counselvise Citation
[2019] 118 COUNSELVISE.COM (IT) 0146 (ITAT-KOLKATA)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
3 year(s) 8 month(s) 5 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
29-03-2019
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
B
Next Hearing Date
29-01-2019
Assessment Year
2012-2013
Appeal Filed On
24-07-2015
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL B, BENC H KOLKATA BEFORE SHRI A.T.VARKEY, JM &DR. A.L.SAINI, AM ./ITA NO.1038/KOL/2015 ( / ASSESSMENT YEAR:2012-13) ITO, WARD-2(1), SILIGURI VS. M/S MEGASUN MERCHANTS PVT. LTD. RAJANI BAGAN, HILL CART ROAD, SILIGURI- 734001. ./ ./PAN/GIR NO.: AAECM 8521 B (ASSESSEE) .. (REVENUE) ASSESSEE BY : SHRI ROBIN CHOUDHURY, ADDL. CIT SR. DR RESPONDENT BY : SHRI SUBASH AGARWAL, ADVOCATE / DATE OF HEARING : 29/01/2019 /DATE OF PRONOUNCEMENT : 29/03/2019 / O R D E R PER DR. A. L. SAINI: THE CAPTIONED APPEAL FILED BY THE REVENUE, PERTAIN ING TO ASSESSMENT YEAR 2012-13, IS DIRECTED AGAINST AN ORDER PASSED BY T HE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-SILIGURI, (IN SHORT THE LD. CI T(A)], WHICH IN TURN ARISES OUT OF ANASSESSMENT ORDER PASSED BY THE ASSESSING OFFI CER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) DATED 30 .03.2015. 2. AT THE OUTSET, WE NOTE THAT THE REVENUE IN THE I NSTANT APPEAL HAS RAISED A MULTIPLE GROUNDS OF APPEAL, BUT AT THE TIME OF HEAR ING, THE MAIN GRIEVANCE OF THE REVENUE HAS BEEN CONFINED TO THE ISSUE THAT THE LD. CIT(A) WAS ERRED IN FACTS AS M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 2 22 2 WELL AS IN LAW, IN DELETING THE ADDITION OF RS. 1,6 0,00,000/- MADE BY THE ASSESSING OFFICER UNDER SECTION 68 OF THE INCOME TAX ACT ACT, 1961. 3. THE BRIEF FACTS QUA THE ISSUE ARE THAT THE ASSES SEE COMPANY FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2012-13 ON 28.09.2012, D ECLARING A TOTAL INCOME TO THE TUNE OF RS. NIL. LATER, THE ASSESSEES CASE WAS SEL ECTED FOR SCRUTINY U/S 143(2) OF THE ACT. THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND INCORPORATED ON 20.10.2005. THE ASSESSEE COMPANY IS ENGAGED IN REAL ESTATE BUSINESS.THE FOLLOWING ARE THE DIRECTORS AND SHAREHOLDERS OF THE ASSESSEE COMPANY. M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 3 33 3 AUTHORIZED CAPITAL OF THE ASSESSEE COMPANY IS RS. 2 0,00,000/- AUTHORIZED NO. OF SHARE OF ASSESSEE IS 2,00,000/- FACE VALUE OF THE S HARES IS RS. 10/-, ISSUED AND SUBSCRIBED NO. OF SHARE IS AT 1,82,000/-.ABOVE COMP ANIES MENTIONED IN SL. NO. 5 TO SL. NO. 11 (HEREINAFTER REFER AS INVESTING COMPANY) SUBSCRIBED THE SHARES OF ASSESSEE COMPANY HAVING FACE VALUE OF RS. 10 AT A P REMIUM OF RS. 490/- AND PAID THE AMOUNT. 4. THE ASSESSEE, DURING THE ASSESSMENT PROCEEDINGS, SUBMITTED NAME AND ADDRESS OF THE INVESTING COMPANIES (AS STATED ABOVE) AND NO TICE UNDER SECTION 133(6) WERE ISSUED BY ASSESSING OFFICER AND CONFIRMATIONS WERE RECEIVED, CONFIRMING THE ASSESSEES CLAIM. IN THE CONFIRMATION, INVESTING CO MPANIES FORWARDED PAN, ACKNOWLEDGEMENT COPY OF THE IT RETURN, RELEVANT POR TION OF THE BANK STATEMENT, COPY OF THE AUDITED ACCOUNT.THE SOURCE OF THE FUNDS OF THE INVESTOR COMPANIES AND THEIR PAN NUMBER AND ADDRESSES WERE ALSO FURNISHED BEFORE THE ASSESSING OFFICER. 5. AUDITED ACCOUNTS OF THE INVESTING COMPANIES WERE ANALYZED BY THE ASSESSING OFFICER. SOME OF THE COMPANYS FINANCIAL STATEMENT ARE REPRODUCED BELOW: M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 4 44 4 THE ASSESSING OFFICER ON PERUSAL OF THE ABOVE ACCOU NT STATEMENT NOTED THAT PRIMA FACIE CREDITWORTHINESS OF THE INVESTING COMPANIES A PPEARED TO BE NOT REASONABLE. THEREFORE, THE ASSESSEE WAS ASKED TO PRODUCE THE DI RECTOR OF THE COMPANIES FOR EXPLAINING THE ISSUES. IN THE MEANTIME AN INSPECTOR WAS DEPUTED TO CONDUCT ENQUIRY. 6.ON CONDUCTING THE ENQUIRY, THE INSPECTOR REPORTED THAT HE COULD NOT FIND THE INVESTING COMPANIES IN THE GIVEN ADDRESSES. THIS IS SUE WAS BROUGHT TO THE NOTICE OF THE ASSESSEE COMPANY AND THEY WERE REQUESTED TO PRO DUCE THE DIRECTORS OF THE ABOVE INVESTING COMPANIES AS A WITNESS IN SUPPORT O F THEIR CLAIM BUT NEITHER THEY COULD PROVIDE ANY TENABLE EXPLANATION FOR THE SAME NOR COULD PRODUCE THE DIRECTORS OF ABOVE INVESTING COMPANIES. THUS, AO N OTED THAT THEASSESSEE AND INVESTING COMPANIES WERE NOT COMING FORWARD WITH TH E EXPLANATIONS, HENCE THE FINANCIAL STATEMENT AND OTHER RELEVANT DATA SUBMITT ED BY THEM IN THE ROC WERE OBTAINED BY AO. 7. AFTER GOING THROUGH THE ABOVE MENTIONED DOCUMENT S AND EVIDENCES, THE ASSESSING OFFICER, NOTED THAT THE ASSESSEE COMPANY HAS FAILED TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE SHARE SUBSCRIBER COMPANIES THEREFORE HE MADE AN ADDITION TO THE TUNE OF RS. 1, 60,00,000/-. M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 5 55 5 8. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS DELETED THE ADDITION. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD, WE NOTE THATACCORDING TO SECTION 68 OF THE INCOME TAX ACT, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT SATISFACTORY IN T HE OPINION OF THE ASSESSING OFFICER, THE SUM SO CREDITED MAY BE CHARGED TO INCO ME TAX AS THE INCOME OF THE ASSESSEE OF THAT ASSESSMENT YEAR. THE ASSESSING OFF ICER MAY CONSIDER SUCH SUM AS CASH CREDIT DUE TO LACK OF SUFFICIENT EXPLANATION.I T IS WELL KNOWN THAT PROVISIONS OF SECTION 68 HAVE BEEN INTRODUCED INTO THE TAXING ENA CTMENTS STEP BY STEP IN ORDER TO PLUG LOOPHOLES. EVEN LONG PRIOR TO THE INTRODUCTION OF SECTION 68 OF THE ACT, IN THE STATUTE BOOK, COURTS HAD HELD THAT WHERE ANY AMOUNT S WERE FOUND CREDITED IN THE BOOKS OF THE ASSESSEE IN THE PREVIOUS YEAR AND THE ASSESSEE OFFERED NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANAT ION OFFERED WAS, IN THE OPINION OF THE ASSESSING OFFICER, IS NOT SATISFACTORY, THE SUMS SO CREDITED COULD BE CHARGED TO INCOME-TAX AS INCOME OF THE ASSESSEE OF THE RELE VANT ASSESSMENT YEAR. WE NOTE THAT WITH EFFECT FROM ASSESSMENT YEAR 2013-14, SECT ION 68 OF THE INCOME TAX ACT HAS BEEN AMENDED TO PROVIDE THAT IF A CLOSELY HELD COMPANY FAILS TO EXPLAIN THE SOURCE OF SHARE CAPITAL, SHARE PREMIUM OR SHARE APP LICATION MONEY RECEIVED BY IT TO THE SATISFACTION OF THE ASSESSING OFFICER, THE S AME SHALL BE DEEMED TO BE THE INCOME OF THE COMPANY UNDER SECTION 68 OF THE ACT. WE NOTE THAT THE AMENDED PROVISIONS OF SECTION 68, IS NOT APPLICABLE TO THE ASSESSEE COMPANY UNDER CONSIDERATION, AS THE ASSESSEE`S, ASSESSMENT YEAR I S 2012-13.THE HON`BLE BOMBAY HIGH COURT, IN THE CASE OF GAGANDEEP INFRASTRUCTUR E 80TAXMANN.COM272 (BOM), HELD THAT AMENDMENT TO SECTION 68 IS PROSPECTIVE AN D APPLICABLE ONLY FROM ASSESSMENT YEAR 2013-14. WITH THIS BACKGROUND, NOW WE SHALL PROCEED TO EXAMI NE IN THE ASSESSEE`S CASE UNDER CONSIDERATION, WHETHER ASSESSEE HAS DISCHARGE D HIS ONUS TOPROVE, PRIMA M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 6 66 6 FACIE, THE IDENTITY, CREDITWORTHINESS AND GENUINENE SS OF THE SHARE CAPITAL AND SHARE PREMIUM RECEIVED BY IT FROM SHARE SUBSCRIBERS COMP ANIES. 10. WE NOTE THAT DURING THE YEAR, THE ASSESSEE HAS RECEIVED A TOTAL SUM OF RS 1,60,00,000/- FROM THE FOLLOWING COMPANIES ON ACCOU NT OF ISSUE OF SHARES TO THEM @ RS. 10 PER SHARE WITH SHARE PREMIUM OF RS. 490 PE R SHARE. 1. FUSION DEALTRADE (P) LTD, RS. 48,00,000/- (FOR 9 ,600 SHARES). 2. MAHAMANIVINIMOY (P) LTD. RS. 15,00,000/- (FOR 3, 000 SHARES). 3. NATURAL SUPPLIERS (P) LTD. RS. 19,00,000/- (FOR 3,800 SHARES). 4.SHIVAANGAN MERCHANDISE (P) LTD. RS. 24,00,000/- ( FOR 4,800 SHARES). 5. PRAGYA COMMODITIES (P) LTD. RS. 9,00,000/- (FOR 1,800 SHARES). 6. DEW DROPS MERCANTILE (P) LTD. RS. 25,00,000/- (F OR 5,000 SHARES) 7.SIDDHESWARIVAYAPAR (P) LTD. RS. 20,00,000/- (FOR 4,000 SHARES). 11.BEFORE ADDRESSING THE LEGAL ISSUE INVOLVED IN TH IS CASE, WE WOULD LIKE TO BRING ON RECORD THE VARIOUS DOCUMENTS RELATING TO THE SUB SCRIBERS WHICH ARE AVAILABLE IN THE PAPER BOOK. (A). FUSION DEALTRADE (P) LTD: IN RESPONSE TO NOTICES U/S 133(6),THIS COMPANY HAD CONFIRMED THE TRANSACTIONS AND PROVIDED THE FOLLOWI NG DOCUMENTS TO THE ASSESSING OFFICER: (I)RETURN OF INCOME, (II)AUDITED BALANCE SHEETS, PROFIT AND LOSS ACCOUNT AND ANNEXURES TO THE FINANCIAL STATEMENTS. (III). BANK STATEMENTS OF SHARE SUBSCRIBING COMPANI ES, EVIDENCING THE PAYMENT MADE TO ASSESSEE COMPANY. (IV). AMOUNT HAS BEEN PAID BY ACCOUNT PAYEE CHEQUES TO THE ASSESSEE COMPANY TO PURCHASE THE SHARE CAPITAL AND SHARE PREMIUM. (V) ROC DETAILS (VI) PAN NUMBER (VII) CONFIRMATIONS: IN RESPONSE TO NOTICES U/S 133 (6) OF THE ACT,THIS COMPANY HAS CONFIRMED THE TRANSACTIONS WITH ASSESSEE COMPANY. M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 7 77 7 (B). MAHAMANIVINIMOY (P) LTD . IN RESPONSE TO NOTICES U/S 133(6),THIS COMPANY HAD CONFIRMED THE TRANSACTIONS AND PROVIDED THE FOL LOWING DOCUMENTS TO THE ASSESSING OFFICER: (I)RETURN OF INCOME, (II)AUDITED BALANCE SHEETS, PROFIT AND LOSS ACCOUNT AND ANNEXURES TO THE FINANCIAL STATEMENTS. (III). BANK STATEMENTS OF SHARE SUBSCRIBING COMPANI ES, EVIDENCING THE PAYMENT MADE TO ASSESSEE COMPANY. (IV). AMOUNT HAS BEEN PAID BY ACCOUNT PAYEE CHEQUES TO THE ASSESSEE COMPANY TO PURCHASE THE SHARE CAPITAL AND SHARE PREMIUM. (V) ROC DETAILS (VI) PAN NUMBER (VII) CONFIRMATIONS: IN RESPONSE TO NOTICES U/S 133 (6) OF THE ACT,THIS COMPANY HAS CONFIRMED THE TRANSACTIONS WITH ASSESSEE COMPANY. (C ).NATURAL SUPPLIERS (P) LTD .IN RESPONSE TO NOTICES U/S 133(6),THIS COMPANY HAD CONFIRMED THE TRANSACTIONS AND PROVIDED THE FOLLOWI NG DOCUMENTS TO THE ASSESSING OFFICER: (I)RETURN OF INCOME, (II)AUDITED BALANCE SHEETS, PROFIT AND LOSS ACCOUNT AND ANNEXURES TO THE FINANCIAL STATEMENTS. (III). BANK STATEMENTS OF SHARE SUBSCRIBING COMPANI ES, EVIDENCING THE PAYMENT MADE TO ASSESSEE COMPANY. (IV). AMOUNT HAS BEEN PAID BY ACCOUNT PAYEE CHEQUES TO THE ASSESSEE COMPANY TO PURCHASE THE SHARE CAPITAL AND SHARE PREMIUM. (V) ROC DETAILS (VI) PAN NUMBER (VII) CONFIRMATIONS: IN RESPONSE TO NOTICES U/S 133 (6) OF THE ACT,THIS COMPANY HAS CONFIRMED THE TRANSACTIONS WITH ASSESSEE COMPANY. M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 8 88 8 (D) SHIVAANGAN MERCHANDISE (P) LTD. IN RESPONSE TO NOTICES U/S 133(6),THIS COMPANY HAD CONFIRMED THE TRANSACTIONS AND PROVIDED THE FOLLOWING DOCUMENTS TO THE ASSESSING OFFICER: (I)RETURN OF INCOME, (II)AUDITED BALANCE SHEETS, PROFIT AND LOSS ACCOUNT AND ANNEXURES TO THE FINANCIAL STATEMENTS. (III). BANK STATEMENTS OF SHARE SUBSCRIBING COMPANI ES, EVIDENCING THE PAYMENT MADE TO ASSESSEE COMPANY. (IV). AMOUNT HAS BEEN PAID BY ACCOUNT PAYEE CHEQUES TO THE ASSESSEE COMPANY TO PURCHASE THE SHARE CAPITAL AND SHARE PREMIUM. (V) ROC DETAILS (VI) PAN NUMBER (VII) CONFIRMATIONS: IN RESPONSE TO NOTICES U/S 133 (6) OF THE ACT,THIS COMPANY HAS CONFIRMED THE TRANSACTIONS WITH ASSESSEE COMPANY. (E ).PRAGYA COMMODITIES (P) LTD. IN RESPONSE TO NOTICES U/S 133(6),THIS COMPANY HAD CONFIRMED THE TRANSACTIONS AND PROVIDED THE FOL LOWING DOCUMENTS TO THE ASSESSING OFFICER: (I)RETURN OF INCOME, (II)AUDITED BALANCE SHEETS, PROFIT AND LOSS ACCOUNT AND ANNEXURES TO THE FINANCIAL STATEMENTS. (III). BANK STATEMENTS OF SHARE SUBSCRIBING COMPANI ES, EVIDENCING THE PAYMENT MADE TO ASSESSEE COMPANY. (IV). AMOUNT HAS BEEN PAID BY ACCOUNT PAYEE CHEQUES TO THE ASSESSEE COMPANY TO PURCHASE THE SHARE CAPITAL AND SHARE PREMIUM. (V) ROC DETAILS (VI) PAN NUMBER (VII) CONFIRMATIONS: IN RESPONSE TO NOTICES U/S 133 (6) OF THE ACT,THIS COMPANY HAS CONFIRMED THE TRANSACTIONS WITH ASSESSEE COMPANY. M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 9 99 9 (F ).DEW DROPS MERCANTILE (P) LTD. IN RESPONSE TO NOTICES U/S 133(6),THIS COMPANY HAD CONFIRMED THE TRANSACTIONS AND PROVIDED THE FOLLOWING DOCUMENTS TO THE ASSESSING OFFICER: (I)RETURN OF INCOME, (II)AUDITED BALANCE SHEETS, PROFIT AND LOSS ACCOUNT AND ANNEXURES TO THE FINANCIAL STATEMENTS. (III). BANK STATEMENTS OF SHARE SUBSCRIBING COMPANI ES, EVIDENCING THE PAYMENT MADE TO ASSESSEE COMPANY. (IV). AMOUNT HAS BEEN PAID BY ACCOUNT PAYEE CHEQUES TO THE ASSESSEE COMPANY TO PURCHASE THE SHARE CAPITAL AND SHARE PREMIUM. (V) ROC DETAILS (VI) PAN NUMBER (VII) CONFIRMATIONS: IN RESPONSE TO NOTICES U/S 133 (6) OF THE ACT,THIS COMPANY HAS CONFIRMED THE TRANSACTIONS WITH ASSESSEE COMPANY. (G). SIDDHESWARIVAYAPAR (P) LTD. IN RESPONSE TO NOTICES U/S 133(6),THIS COMPANY HAD CONFIRMED THE TRANSACTIONS AND PROVIDED THE FOL LOWING DOCUMENTS TO THE ASSESSING OFFICER: (I)RETURN OF INCOME, (II)AUDITED BALANCE SHEETS, PROFIT AND LOSS ACCOUNT AND ANNEXURES TO THE FINANCIAL STATEMENTS. (III). BANK STATEMENTS OF SHARE SUBSCRIBING COMPANI ES, EVIDENCING THE PAYMENT MADE TO ASSESSEE COMPANY. (IV). AMOUNT HAS BEEN PAID BY ACCOUNT PAYEE CHEQUES TO THE ASSESSEE COMPANY TO PURCHASE THE SHARE CAPITAL AND SHARE PREMIUM. (V) ROC DETAILS (VI) PAN NUMBER (VII) CONFIRMATIONS: IN RESPONSE TO NOTICES U/S 133 (6) OF THE ACT,THIS COMPANY HAS CONFIRMED THE TRANSACTIONS WITH ASSESSEE COMPANY. 12.WITH HELP OF THESE PLETHORA DOCUMENTS, EVIDENCES AND PERSONAL APPEARANCE BEFORE THE AO IN RESPONSE TO NOTICE U/S 131 OF THE ACT, DURING THE ASSESSMENT M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 1 11 10 00 0 PROCEEDINGS, THE LD COUNSEL CLAIMED THAT THE ASSESS EE COMPANY HAS PROVED THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF ALL T HESE THREE SHARE APPLICANT COMPANIES IN THE FOLLOWING MANNER. IDENTITY OF ALL THE SHARE APPLICANTS HAVE BEEN PROVED BY THE ASSESSEE WITH HELP OF PAN NUMBER, ROC DETAILS AND BANK STATEMENTS. WE NOT E THAT BEFORE ISSUING PAN, THE INCOME TAX DEPARTMENT REQUIRES ADDRESS PR OOF. SIMILARLY, R.O.C REQUIRES THE ADDRESS PROOF OFTHE REGISTERED OFFICE OF THE SHARE APPLICANT COMPANIES. MOREOVER, BANK ACCOUNT REQUIRES THE ADDR ESS PROOF BEFORE OPENING OF ACCOUNT. THEREFORE, IDENTITY OF THESE SHARE APPLICANTS HAVE BEEN PROVED BY THE ASSESSEE WITH HELP OF PAN, ROC DETAILS AND BANK STA TEMENTS. CREDITWORTHINESS OF THESE SHARE APPLICANTS HAVE BEEN PROVED BY THE ASSESSEE BY SUBMITTING, COPY OF BALANCE SHEET, PROFIT AND LOSS ACCOUNT, DETAILS OF INVESTMENTS SOLD, BANK STATEMENT, EXPLANATION ALON G WITH EVIDENCE OF SOURCE OF SOURCE OF THE FUNDS OF THE SHARE APPLICANT COMPANIE S. GENUINENESS OF THESE SHARE APPLICANTS HAVE BEEN PROVED BY THE ASSESSEE BY SUBMITTING, AUDITED ACCOUNTS OF THE SHARE APPLICAN T COMPANIES, INCOME TAX RETURN OF SHARE APPLICANT COMPANIES, COPY OF THE BA NK STATEMENT OF SHARE APPLICANT COMPANIES WHERE FROM THE AMOUNT WAS DEBIT ED, COPIES OF BANK STATEMENT OF THE ASSESSEE COMPANY WHERE THE SHARE APPLICATION MONEY AND PREMIUM WERE CREDITED. 13. WE NOTE THAT THE AO HAD ISSUED NOTICES U/S 13 3(6) OF THE ACT, FOR VERIFICATION OF THESE TRANSACTIONS. IN RESPONSE TO NOTICES U/S 1 33(6), THESEABOVE MENTIONEDCOMPANIES CONFIRMED THE TRANSACTIONS AND F URNISHED TO THE AO THEIR RETURN OF INCOME, AUDITED BALANCE SHEETS AND THEIR BANK STATEMENTS. THE AO ANALYSED THE CREDITWORTHINESS OF THESE COMPANIES A ND CONCLUDED THAT THEY DONOT HAVE CAPACITY TO ADVANCE THESE CREDITS OR MAKE SUCH INVESTMENTS. ACCORDINGLY, THE AO ADDED RS. 1,60,00,000/- UNDER SECTION 68 OF THE ACT, TREATING SUM SO RECEIVED BY ASSESSEE COMPANY, AS CASH CREDIT.WE NOTE THAT AL L THE AMOUNTS WERE RECEIVED M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 1 11 11 11 1 FROM SHARE SUBSCRIBERS, BY ACCOUNT PAYEE CHEQUES AN D HAVE BEEN CONFIRMED BY THESE SHARE SUBSCRIBERS HENCE HE PROVED THE GENUINE NESS AND IDENTITY OF THE TRANSACTIONS.THEREFORE, THE LD COUNSEL CITED BEFORE US, THE FOLLOWING JUDGEMENTSVIZ: S HASTIMAL VS CIT (1963) 49 ITR 273 (MAD), NORTHERN BENGAL JUTE TRADING COMPANY VS. CIT (1968) 70 ITR 407 (CAL ), CIT VS STELLAR INVESTMENTS LTD. (2000) 164 CTR (SC) 287 : (2001) 2 51 ITR 263 (SC), CIT VS LOVELY EXPORTS PVT LTD (2008) 216 CTR195 (SC), CIT VS DATAWARE PVT LTD, ITAT NO 263 OF 2011, GA NO 2856 OF 2011 DATED 21.09.2011 . THE SUM AND SUBSTANCE OF ALL THESE JUDGMENTS ARE THAT IF THE ASSESSEEHAD DISCHARGED ITS ONUS TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE S HARE APPLICANTS BY SUBMITTING THE PAN DETAILS, BANK ACCOUNT STATEMENTS, AUDITED F INANCIAL STATEMENTS, BALANCE SHEET, PROFIT AND LOSS ACCOUNT AND INCOME TAX ACKNO WLEDGMENTS AND CONFIRMATIONS, THE ADDITION UNDER SECTION 68 IS NOT WARRANTED. 14. WE NOTE THAT THE ASSESSEE HAS RAISED SHARE CAP ITAL OF RS. 1,60,00,000/- DURING THE YEAR UNDER CONSIDERATION. THIS CAPITAL WAS RAIS ED BY WAY OF ISSUE OF 32000 SHARES OF RS. 10/- EACH AT A PREMIUM OF RS. 490/- P ER SHARE TO SHAREHOLDERS MENTIONED IN ASSESSMENT ORDER PAGE 2 VIDE TABLE S.N O.5 TO 11. THE SHAREHOLDERS MENTIONED IN S.NO.1 TO 4, IN THE SAID TABLE HAVE BE EN ISSUED SHARES AT RS.10 EACH WITHOUT PREMIUM. THE AO ADDED BACK THE ENTIRE SHARE APPLICATION MONEY RAISED FROM THE SHARE APPLICANTS DURING THE YEAR UNDER CON SIDERATION PRIMARILY ON THE PREMISE THAT DIRECTORS OF THE SHAREHOLDER COMPANIES FAILED TO APPEAR BEFORE HIM AND ASSESSEE COMPANY FAILED TO PROVE IDENTITY, CREDITWO RTHINESS AND GENUINENESS OF THE TRANSACTION. THE LD. DR APPEARING ON BEHALF OF THE REVENUE ASSAILED THE ORDER OF THE LD. CIT(A). THE LD. DR ARGUED THAT MERE DOCUMEN TARY EVIDENCES WERE NOT SUFFICIENT TO DISCHARGE THE GENUINENESS OF THE TRAN SACTIONS AND THAT THE PERSONAL APPEARANCE OF DIRECTORS OF SHARE APPLICANTS WAS IND EED A PRE-REQUISITE TO ASCERTAIN WHETHER THE THREE INGREDIENTS PRESCRIBED IN SECTION 68 STOOD SATISFIED. THE LD. DR THEREAFTER TOOK US THROUGH THE RELEVANT DOCUMENTS F URNISHED BY THE ASSESSEE COMPANY IN THEIR PAPERBOOK. WITH REGARD TO THE IDEN TITY OF THE SHARE SUBSCRIBERS, HE SUBMITTED THAT ALL THE SHARE APPLICANTS WERE PAPER COMPANIES. THE LD. DR FURTHER SUBMITTED THAT THE ASSESSEE HAD NOT JUSTIFIED THE R EASONS FOR ISSUING SHARES AT A HIGH PREMIUM AND THAT THIS PARTICULAR ASPECT WAS NOT DEA LT WITH BY THE LD. CIT(A).THEREFORE, ACCORDING TO THE LD. DR, THE GENU INENESS OF THE TRANSACTION M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 1 11 12 22 2 REMAINED UN-PROVED. HE THEREFORE VEHEMENTLY ARGUED THAT THE ORDER OF THE LD. CIT(A) BE REVERSED AND THAT THE ORDER OF THE AO BE RESTORED. 15. ON THE OTHER HAND, THE LD. COUNSEL FIRST DREW O UR ATTENTION TO THE GROUNDS RAISED BY THE REVENUE IN THE APPEAL, EACH OF WHICH RELATED TO ALLEGED DELETION OF ADDITION MADE U/S 68 ON ACCOUNT OF SHARE CAPITAL AN D SHARE PREMIUM. THEREAFTER ON THE MERITS OF THE CASE, OUR ATTENTION WAS DRAWN BY THE LD. COUNSEL TO RELEVANT PAGES OF THE PAPER BOOK FROM WHERE WE NOTE THAT THE SEVEN SHAREHOLDERS HAD SUBMITTED THE FOLLOWING RELEVANT DETAILS AS CALLED FOR AND HA D CONFIRMED THE TRANSACTION WITH THE ASSESSEE COMPANY. THE EVIDENCES WHICH WERE FILE D BEFORE THE AO, INCLUDED THE FOLLOWING DETAILS. (I) RETURN OF INCOME, (II) AUDITED BALANCE SHEETS, PROFIT AND LOSS ACCOUN T AND ANNEXURES TO THE FINANCIAL STATEMENTS. (III). BANK STATEMENTS OF SHARE SUBSCRIBING COMPANI ES, EVIDENCING THE PAYMENT MADE TO ASSESSEE COMPANY. (IV). AMOUNT HAS BEEN PAID BY ACCOUNT PAYEE CHEQUES TO THE ASSESSEE COMPANY TO PURCHASE THE SHARE CAPITAL AND SHARE PREMIUM. (V) ROC DETAILS (VI) PAN NUMBER (VII) CONFIRMATIONS: IN RESPONSE TO NOTICES U/S 133 (6) OF THE ACT, THIS COMPANY HAS CONFIRMED THE TRANSACTIONS WITH ASSESSEE COMPANY. 16. THE LD. COUNSEL SUBMITTED THAT THE DETAILS OF P AN, IT ACKNOWLEDGMENT, AND THE ROC DETAILS FURNISHED BY THE SHARE APPLICAN TS WITH THE ROC DULY PROVED THE IDENTITY OF THE SHARE SUBSCRIBERS. HE FURTHER P OINTED OUT THAT IN ALL CASES THE NOTICES ISSUED BY THE AO WERE DULY SERVED UPON THE SHARE APPLICANTS THROUGH THE POSTAL AUTHORITIES, AND SHARE APPLICANTS PROVIDED T HE CONFIRMATIONS, BANK STATEMENTS AND AUDITED ACCOUNTS, WHICH FURTHER FORTIFIED THE E XISTENCE OF SHARE APPLICANTS AT THEIR GIVEN ADDRESSES. THE LD. COUNSEL THEREAFTER I NVITED OUR ATTENTION TO THE RESPECTIVE BALANCE SHEETS OF THE SHARE APPLICANTS T O SHOW THAT EACH OF THEM HAD SUFFICIENT FUNDS AVAILABLE AT THEIR DISPOSAL TO MAK E INVESTMENT IN THE ASSESSEE COMPANY. REFERRING TO THE RESPECTIVE BANK STATEMENT S, IT WAS FURTHER POINTED OUT THAT THE TRANSACTIONS WERE CONDUCTED THROUGH PROPER BANKING CHANNEL. HE ALSO INVITED OUR ATTENTION TO THE EXPLANATION FURNISHED BY EACH OF THE SHARE APPLICANTS M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 1 11 13 33 3 REGARDING THEIR SOURCE OF FUNDS. IT WAS THUS SUBMIT TED THAT THE FUND FLOW POSITION OF THE SHARE APPLICANT AND NOT THE PROFITABILITY WAS T HE DECISIVE CRITERIA TO EXAMINE THE CREDITWORTHINESS OF THE SHARE APPLICANTS. REFERRING TO THE LD. CIT(A)S ORDER, IT WAS SUBMITTED THAT THESE FACTUAL ASPECTS WERE TAKEN INT O CONSIDERATION AND THEREAFTER THE LD. CIT(A) WAS PLEASED TO HOLD THAT THE CREDITWORTH INESS OF THE SHARE APPLICANTS HAD BEEN ESTABLISHED. THE LD. COUNSEL ALSO INVITED OUR ATTENTION TO THE ASSESSMENT ORDERS PASSED BY THE INCOME-TAX DEPARTMENT IN THE R ESPECTIVE TAX ASSESSMENTS OF THE SHARE APPLICANTS TO FURTHER SUBSTANTIATE THE GE NUINENESS OF THE TRANSACTIONS AS WELL AS THE IDENTITY & CREDITWORTHINESS OF THE SHAR E SUBSCRIBERS. 17. WHEN A QUESTION AS TO THE CREDITWORTHINESS OF A CREDITOR IS TO BE ADJUDICATED AND IF THE CREDITOR IS AN INCOME TAX ASSESSEE, IT I S NOW WELL SETTLED BY THE DECISION OF THE CALCUTTA HIGH COURT THAT THE CREDITWORTHINES S OF THE CREDITOR CANNOT BE DISPUTED BY THE AO OF THE ASSESSEE BUT THE AO OF TH E CREDITOR. IN THIS REGARDS OUR ATTENTION WAS DRAWN TO THE DECISION OF THE HON'BLE HIGH COURT, CALCUTTA IN THE COMMISSIONER OF INCOME TAX, KOLKA TA-ILL VERSUS DAT AWARE PRIVATE LIMITED ITAT NO. 263 OF 2011 DATE: 21ST SEP TEMBER, 2011 WHEREIN THE COURT HELD AS FOLLOWS: IN OUR OPINION, IN SUCH CIRCUMSTANCES, THE ASSESSI NG OFFICER OF THE ASSESSEE CANNOT TAKE THE BURDEN OF ASSESSING THE PROFIT AND LOSS ACCOUNT OF THE CREDITOR WHEN ADMITTEDLY THE CREDITOR HIMSELF IS AN INCOME T AX ASSESSEE. AFTER GETTING THE PAN NUMBER AND GETTING THE INFORMATION THAT THE CRE DITOR IS ASSESSED UNDER THE ACT, THE ASSESSING OFFICER SHOULD ENQUIRE FROM THE ASSESSING OFFICER OF THE CREDITOR AS TO THE GENUINENESS' OF THE TRANSACTION AND WHETH ER SUCH TRANSACTION HAS BEEN ACCEPTED BY THE ASSESSING OFFICER OF THE CREDITOR B UT INSTEAD OF ADOPTING SUCH COURSE, THE ASSESSING OFFICER HIMSELF COULD NOT ENT ER INTO THE RETURN OF THE CREDITOR AND BRAND THE SAME AS UNWORTHY OF CREDENCE. SO LONG IT IS NOT ESTABLISHED THAT THE RETURN SUBMI TTED BY THE CREDITOR HAS BEEN REJECTED BY ITS ASSESSING OFFICER, THE ASSESSING OF FICER OF THE ASSESSEE IS BOUND TO ACCEPT THE SAME AS GENUINE WHEN THE IDENTITY OF THE CREDITOR AND THE GENUINENESS' OF TRANSACTION THROUGH ACCOUNT PAYEE CHEQUE HAS BEE N ESTABLISHED. WE FIND THAT BOTH THE COMMISSIONER OF INCOME TAX (A PPEAL) AND THE TRIBUNAL BELOW FOLLOWED THE WELL-ACCEPTED PRINCIPLE WHICH AR E REQUIRED TO BE FOLLOWED IN CONSIDERING THE EFFECT OF SECTION 68 OF THE ACT AND WE THUS FIND NO REASON TO INTERFERE WITH THE CONCURRENT FINDINGS OF FACT RECO RDED BY BOTH THE AUTHORITIES. 18. OUR ATTENTION WAS ALSO DRAWN TO THE DECISION OF THE HON'BLE SUPREME COURT WHILE DISMISSING SLP IN THE CASE OF LOVELY EXPORTS AS HAS BEEN REPORTED AS JUDGMENT DELIVERED BY THE CTR AT 216 CTR 295: M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 1 11 14 44 4 'CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDIS CLOSED INCOME UNDER SECTION 68 OF THE INCOME TAX ACT, 1961? WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MON EY IS 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 THEIR I NDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. HENCE, WE FIND NO INFIRMITY WI TH THE IMPUGNED JUDGMENT. 19. OUR ATTENTION WAS ALSO DRAWN TO THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT WHILE RELYING ON THE CASE OF LOVELY EXPORTS, IN THE APPEAL OF COMISSIONER OF INCOME TAX, KOLKATA-IV VS ROSEBERRY MERCANTILE (P) LTD., ITAT NO. 241 OF 2010 DATED 10- 01-2011 HAS HELD: 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) OUGHT TO HAVE UPHELD THE ASSESSMENT ORDER AS THE TRANSACTION ENTERED INT O BY THE ASSESSEE WAS A SCHEME FOR LAUNDERING BLACK MONEY INTO WHITE MONEY OR ACCO UNTED MONEY AND THE LD. CIT (A) OUGHT TO HAVE HELD THAT THE ASSESSEE HAD NOT ES TABLISHED THE GENUINENESS OF THE TRANSACTION. ' IT APPEARS FROM THE RECORD THAT IN THE ASSESSMENT P ROCEEDINGS IT WAS NOTICED THAT THE ASSESSEE COMPANY DURING THE YEAR UNDER CONSIDERATIO N HAD BROUGHT RS. 4,00,000/- AND RS.20,00,000/- TOWARDS SHARE CAPITAL AND SHARE PREMIUM RESPECTIVELY AMOUNTING TO RS.24,00,000/- FROM FOUR SHAREHOLDERS BEING PRIVATE LIMITED COMPANIES. THE ASSESSING OFFICER ON HIS PART CALLED FOR THE DETAILS FROM THE ASSESSEE AND ALSO FROM THE SHARE APPLICANTS AND ANALYZED THE FACTS AND ULTIMATELY OBSERVED CERTAIN ABNORMAL FEATURES, WHICH WERE MENTIONED IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER, THEREFORE, CONCLUDED THAT NATURE AND SOURCE OF SUCH MONEY WAS QUESTIONABLE AND EVIDENCE PRODUCED WAS UNSATISFACTO RY. CONSEQUENTLY, THE ASSESSING OFFICER INVOKED THE PROVISIONS UNDER SECT ION 68/69 OF THE INCOME TAX ACT AND MADE ADDITION OF RS.24,00,000/-. ON APPEAL THE LEARNED CIT (A) BY FOLLOWING THE DECI SION OF THE SUPREME COURT IN THE CASE OF CLT. VS. M/S. LOVELY EXPORTS PVT. LTD., REPORTED IN (2008) 216 CTR 195 ALLOWED THE APPEAL BY HOLDING -THAT SHARE CAPITAL/P REMIUM OF RS. 24,00,000/- RECEIVED FROM THE INVESTORS WAS NOT LIABLE TO BE TR EATED UNDER SECTION 68 AS UNEXPLAINED CREDITS AND IT SHOULD NOT BE TAXED IN T HE HANDS OF THE APPELLANT COMPANY. AS INDICATED EARLIER, THE TRIBUNAL BELOW DISMISSED THE APPEAL FILED BY THE REVENUE. AFTER HEARING THE LEARNED COUNSEL FOR THE APPELLANT AND AFTER GOING THROUGH THE DECISION OF THE SUPREME COURT IN THE CASE OF CLT. V S. M/S. LOVELY EXPORTS PVT. LTD. [SUPRA], WE ARE AT ONE WITH THE TRIBUNAL BELOW THAT THE POINT INVOLVED IN THIS APPEAL IS COVERED BY THE SAID SUPREME COURT DECISION IN FA VOUR OF THE ASSESSEE AND THUS, NO SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN THIS APP EAL. THE APPEAL IS DEVOID OF ANY SUBSTANCE AND IS DISMISSED. 20. OUR ATTENTION WAS DRAWN TO THE DECISION OF THE HON'BLE HIGH COURT, CALCUTTA IN THE CASE OF COMMISSIONER OF INCOME TAX VS M/S. N ISHAN INDO COMMERCE LTD DATED 2 DECEMBER, 2013 IN INCOME TAX APPEAL NO.52 O F 2001 WHEREIN THE COURT HELD AS FOLLOWS: M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 1 11 15 55 5 THE ASSESSING OFFICER WAS OF THE VIEW THAT THE INC REASE IN SHARE CAPITAL BY RS.52,03,500/- WAS NOTHING BUT THE INTRODUCTION OF THE ASSESSEE'S OWN UNDISCLOSED FUNDS/INCOME INTO THE BOOKS OF ACCOUNTS OF THE ASSE SSEE COMPANY. THE ASSESSING OFFICER ACCORDINGLY TREATED THE INVESTMENT AS UNEXP LAINED CREDIT UNDER SECTION 68 OF THE INCOME TAX ACT AND ADDED THE SAME TO THE INC OME OF THE ASSESSEE. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFOR E THE COMMISSIONER OF INCOME TAX (APPEALS) BEING THE FIRST APPELLATE AUTHORITY A ND CONTENDED THAT THE ASSESSING OFFICER HAD NO MATERIAL TO SHOW THAT THE SHARE CAPI TAL WAS THE INCOME OF THE ASSESSEE COMPANY AND AS SUCH THE ADDITION MADE BY T HE ASSESSING OFFICER UNDER SECTION 68 OF THE ACT WAS WRONG. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AF TER HEARING THE DEPARTMENT AND THE ASSESSEE COMPANY DELETED THE ADDITION OF RS . 52,03,500/- TO THE INCOME OF THE ASSESSEE COMPANY DURING THE ASSESSMENT YEAR IN QUESTION. THE LEARNED COMMISSIONER OF INCOME TAX APPEALS FOUND THAT THERE WERE AS MANY AS 2155 ALLOTTEES, WHOSE NAMES, ADDRESSES AND RESPECTIVE SH ARES ALLOCATION HAD BEEN DISCLOSED. THE COMMISSIONER OF INCOME TAX APPEALS, FURTHER FOU ND THAT THE ASSESSEE COMPANY RECEIVED THE APPLICATIONS THROUGH BANKERS T O THE ISSUE, WHO HAD BEEN APPOINTED UNDER THE GUIDELINES OF THE STOCK EXCHANG E AND THE ASSESSEE COMPANY HAD BEEN ALLOTTED SHARES ON THE BASIS OF ALLOTMENT APPROVED BY THE STOCK EXCHANGE. THE ASSESSEE COMPANY HAD DULY FILED THE RETURN OF A LLOTMENT WITH THE REGISTRAR OF COMPANIES, GIVING COMPLETE PARTICULARS OF THE ALLOT TEES. THE COMMISSIONER OF INCOME TAX (APPEALS) FOUND THAT INQUIRES HAD CONFIRMED THE EXISTENCE OF MOST OF THE SHAREHOLDERS AT THE ADDRES SES INTIMATED TO THE ASSESSING OFFICER, BUT THE ASSESSING OFFICER TOOK THE VIEW TH AT THEIR INVESTMENT IN THE ASSESSEE COMPANY WAS NOT GENUINE, ON THE BASIS OF S OME EXTRANEOUS REASONS. THE COMMISSIONER OF INCOME TAX (APPEALS) TOOK NOTE OF T HE OBSERVATION OF THE ASSESSING OFFICER THAT ENQUIRY CONDUCTED BY THE INC OME TAX INSPECTOR HAD REVEALED THAT NINE PERSONS MAKING APPLICATIONS FOR 900 SHARES WERE NOT AVAILABLE AT THE GIVEN ADDRESS AND RIGHTLY CONCLUDED THAT THE TOTAL SHARE CAPITAL ISSUED BY THE ASSESSEE COMPANY COULD NOT BE ADDED AS UNEXPLAINED CASH CREDIT UNDER 'SECTION 68 OF THE INCOME TAX ACT. MOREOVER, IF THE NATURE A ND SOURCE OF INVESTMENT BY ANY SHAREHOLDER, IN SHARES OF THE ASSESSEE COMPANY REMA INED UNEXPLAINED, LIABILITY COULD NOT BE FOISTED ON THE COMPANY. THE CONCERNED SHAREHOLDERS WOULD HAVE TO EXPLAIN THE SOURCE OF THEIR FUND. THE LEARNED COMMISSIONER ON CONSIDERING THE SUBMISS IONS OF THE, RESPECTIVE PARTIES AND CONSIDERING THE MATERIALS, FOUND THAT T HE ASSESSING OFFICER HAD APPLIED THE PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT ARBITRARILY AND ILLEGALLY AND IN ANY CASE WITHOUT GIVING THE ASSESSEE ADEQUATE OPPOR TUNITY OF REPRESENTATION AND/OR HEARING. LEARNED TRIBUNAL AGREED WITH THE FACTUAL FINDINGS O F THE LEARNED COMMISSIONER AND ACCORDINGLY THE LEARNED TRIBUNAL DISMISSED THE APPEAL OF THE REVENUE AND AFFIRMED THE DECISION OF THE LEARNED COMMISSIONER. MR. DUTTA APPEARING ON BEHALF OF THE PETITIONERS CI TED JUDGMENT OF THE DIVISION BENCH OF THIS COURT IN COMMISSIONER OF INCOME TAX V S. RUBY TRADERS AND EXPORTERS LIMITED REPORTED IN 236 (2003) ITR 3000 W HERE A DIVISION BENCH OF THIS COURT HELD THAT WHEN SECTION 68 IS RESORTED TO, IT IS INCUMBENT ON THE ASSESSEE COMPANY TO PROVE AND ESTABLISH THE IDENTITY OF THE SUBSCRIBERS, THEIR CREDIT WORTHINESS AND THE GENUINENESS OF THE TRANSACTION. M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 1 11 16 66 6 THE AFORESAID JUDGMENT WAS RENDERED IN THE CONTEXT OF THE FACTUAL BACKGROUND OF THE AFORESAID CASE WHERE, DESPITE SEVERAL OPPORTUNI TIES BEING GIVEN TO THE ASSESSEE, NOTHING WAS DISCLOSED ABOUT THE IDENTITY OF THE SHA REHOLDERS. IN THE INSTANT CASE, THE ASSESSEE DISCLOSED THE IDENTITY AND ADDRESS AND PARTICULARS OF SHARE ALLOCATION OF THE SHAREHOLDERS. IT WAS ALSO FOUND ON THE FACTS THAT ALL THE SHAREHOLDERS WERE IN EXISTENCE. ONLY NINE SHAREHOLDERS SUBSCRIBING TO AB OUT 900 SHARES OUT OF 6, 12,000 SHARES WERE NOT FOUND AVAILABLE AT THEIR ADDRESSES, AND THAT TOO, IN COURSE OF ASSESSMENT PROCEEDINGS IN THE YEAR 1994, I.E., ALMO ST 3 YEARS AFTER THE ALLOTMENT. BY AN ORDER DATED 2ND MAY, 2001, THIS COURT ADMITTE D THE APPEAL ON THREE QUESTIONS WHICH ESSENTIALLY CENTRE AROUND THE QUEST ION OF WHETHER THE APPELLATE COMMISSIONER ERRED IN LAW IN DELETING THE ADDITION OF RS. 52,03,500/- TO THE INCOME OF THE ASSESSEE AS MADE BY THE ASSESSING OFF ICER. WE ARE OF THE VIEW THAT THERE IS NO QUESTION OF LAW INVOLVED IN THIS APPEAL FAR LESS ANY SUBSTANTIAL QUESTION OF LAW. THE LEARNED TRIBUNAL HAS CONCURRED WITH THE LEARNED COMMISSIONER ON FACTS AND FOUND THAT THERE WERE MATERIALS TO SHOW THAT THE AS SESSEE HAD DISCLOSED THE PARTICULARS OF THE SHAREHOLDERS. THE FACTUAL FINDIN GS CANNOT BE INTERFERED WITH, IN APPEAL. WE ARE OF THE VIEW THAT ONCE THE IDENTITY A ND OTHER RELEVANT PARTICULARS OF SHAREHOLDERS ARE DISCLOSED, IT IS FOR THOSE SHAREHO LDERS TO EXPLAIN THE SOURCE OF THEIR FUNDS AND NOT FOR THE ASSESSEE COMPANY TO SHO W WHEREFROM THESE SHAREHOLDERS OBTAINED FUNDS. 21. FURTHER, OUR ATTENTION WAS DRAWN TO THE DECISI ON OF THE HON'BLE HIGH COURT, CALCUTTA IN THE CASE OF COMMISSIONER OF INCOME TAX VS M/S. LEONARD COMMERCIAL (P) LTD ON 13 JUNE, 2011 IN ITAT NO 114 OF 2011 WHE REIN THE COURT HELD AS FOLLOWS: THE ONLY QUESTION RAISED IN THIS APPEAL IS WHETHER THE COMMISSIONER OF INCOME- TAX (APPEALS) AND THE TRIBUNAL BELOW ERRED IN LAW I N DELETING THE ADDITION OF RS.8,52,000/-, RS. 91,50,000/- AND RS. 13,00,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SHARE CAPITAL, SHARE APPLICATION MONE Y AND INVESTMENT IN HTCCL RESPECTIVELY. AFTER HEARING MD. NIZAMUDDIN, LEARNED ADVOCATE APPE ARING ON BEHALF OF THE APPELLANT AND AFTER GOING THROUGH THE MATERIALS ON RECORD, WE FIND THAT ALL SUCH APPLICATION MONEY WERE RECEIVED BY THE ASSESSEE BY WAY OF ACCOUNT PAYEE CHEQUES AND THE ASSESSEE ALSO DISCLOSED THE COMPLETE LIST O F SHAREHOLDERS WITH THEIR COMPLETE ADDRESSES AND GIR NUMBERS FOR THE RELEVANT ASSESSMENT YEARS IN WHICH SHARE APPLICATION WAS CONTRIBUTED. IT FURTHER APPEA RS THAT ALL THE PAYMENTS WERE MADE BY THE APPLICANTS BY ACCOUNT PAYEE CHEQUES. IT APPEARS FROM THE ASSESSING OFFICERS ORDER THAT H IS GRIEVANCE WAS THAT THE ASSESSEE WAS NOT WILLING TO PRODUCE THE PARTIES WHO HAD ALLEGEDLY ADVANCED THE FUND. IN OUR OPINION, BOTH THE COMMISSIONER OF INCOME-TAX (APPEALS) AND THE TRIBUNAL BELOW WERE JUSTIFIED IN HOLDING THAT AFTER DISCLOSU RE OF THE FULL PARTICULARS INDICATED ABOVE, THE INITIAL ONUS OF THE ASSESSEE WAS SHIFTED AND IT WAS THE DUTY OF THE ASSESSING OFFICER TO ENQUIRE WHETHER THOSE PARTICUL ARS WERE CORRECT OR NOT AND IF THE ASSESSING OFFICER WAS OF THE VIEW THAT THE PART ICULARS SUPPLIED WERE INSUFFICIENT TO DETECT THE REAL SHARE APPLICANTS, TO ASK FOR FUR THER PARTICULARS. M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 1 11 17 77 7 THE ASSESSING OFFICER HAS NOT ADOPTED EITHER OF THE AFORESAID COURSES BUT HAS SIMPLY BLAMED THE ASSESSEE FOR NOT PRODUCING THOSE SHARE APPLICANTS. IN OUR VIEW, IN THE CASE BEFORE US SO LONG THE ASSE SSING OFFICER WAS UNABLE TO ARRIVE AT A FINDING THAT THE PARTICULARS GIVEN BY T HE ASSESSEE WERE FALSE, THERE WAS NO SCOPE OF ADDING THOSE MONEY UNDER SECTION 68 OF THE INCOME- TAX ACT AND THE TRIBUNAL BELOW RIGHTLY HELD THAT THE ONUS WAS VALID LY DISCHARGED. WE, THUS, FIND THAT BOTH THE AUTHORITIES BELOW, ON CONSIDERATION OF THE MATERIALS ON RECORD, RIGHTLY APPLIED THE CORRECT LAW WHICH ARE R EQUIRED TO BE APPLIED IN THE FACTS OF THE PRESENT CASE AND, THUS, WE DO NOT FIND ANY R EASON TO INTERFERE WITH THE CONCURRENT FINDINGS OF FACT BASED ON MATERIALS ON R ECORD. THE APPEAL IS, THUS, DEVOID OF ANY SUBSTANCE AND IS DISMISSED SUMMARILY AS IT DOES NOT INVOLVE ANY SUBSTANTIAL QUESTION OF LAW. 22. IN THE LIGHT OF THE AFORESAID DECISION OF THE H ONBLE APEX COURT AND JURISDICTIONAL HIGH COURT AND OTHER HIGH COURTS LET US EXAMINE THE PRESENT CASE IN HAND. WE WILL EXAMINE EACH SHARE SUBSCRIBERS. THE L D. COUNSEL TOOK PAINS TO BRING OUT THE RELEVANT FACTS IN RESPECT OF EACH SHARE SUB SCRIBERS WHICH WILL THROW LIGHT AS TO THE IDENTITY, CREDITWORTHINESS AND GENUINENESS O F THE SHARE SUBSCRIBERS. WE NOTE FROM PAGES 32 TO 39 OF THE PAPER BOOK WHERE THE DET AILS OF M/S FUSION DEALTRADE PVT. LTD . IS GIVEN. WE NOTE THAT THIS COMPANY INVESTED A SU M OF RS. 48 LACS IN THE ASSESSEE COMPANY. THE SHARE APPLICATION WAS MADE BY A/C PAYEE CHEQUE. THIS COMPANY WAS INCORPORATED UNDER THE COMPANIES ACT HA VING PROPER IDENTIFICATION NUMBER. THIS COMPANY DULY FILED ITS RETURN OF INCO ME BEFORE ITO, WARD-1(4), KOLKATA AND WAS HAVING PAN NO. AABCF6365R. THIS COM PANY WAS HAVING PAID UP CAPITAL WITH FREE RESERVE AND SURPLUS TO THE TUN E OF RS. 23,26,11,402/- AS ON 31.03.2012. THE COPY OF THE BANK STATEMENT OF THE C OMPANY IS DULY AVAILABLE IN THE PAPER BOOK. ON EXAMINATION OF THE BANK STATEMEN T IT IS TAKEN NOTE THAT THERE WAS NO DEPOSIT OF CASH.THE DETAILS OF SOURCE OF FUN DS FROM WHICH THIS COMPANY HAD MADE THE SHARE APPLICATION ARE ALSO AVAILABLE F ROM A PERUSAL OF THE BANK STATEMENT AND OTHER DETAILS AVAILABLE IN THE PAPER BOOK. THIS COMPANY HAS SUFFICIENT FUND TO INVEST IN THE ASSESSEE COMPANY, THEREFORE, THE CREDITWORTHINESS, GENUINENESS AND IDENTITY OF THIS COMPANY HAS BEEN P ROVED BEYOND ANY DOUBT. 23. IN RESPECT OF MAHAMANIVINIMAY PVT. LTD ., THE LD. COUNSEL DREW OUR ATTENTION FROM PAGES 41 TO 47 OF PAPER BOOK, WHEREIN THE DETA ILS OF THIS COMPANY ISGIVEN. M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 1 11 18 88 8 WE NOTE THAT THIS COMPANY INVESTED A SUM OF RS. 15 LACS IN THE ASSESSEE COMPANY. THE SHARE APPLICATION WAS MADE BY ACCOUNT PAYEE CHE QUE. THIS COMPANY WAS INCORPORATED UNDER THE COMPANIES ACT HAVING PROPER IDENTIFICATION NUMBER. THIS COMPANY DULY FILED ITS RETURN OF INCOME BEFORE ITO, WARD-2(1), KOLKATA AND WAS HAVING PAN NO. AAHCM 7689M. THIS COMPANY WAS HAVING PAID UP CAPITAL WITH FREE RESERVE AND SURPLUS TO THE TUNE OF RS. 5,20,86 ,232/- AS ON 31.03.2012. THE COPY OF THE BANK STATEMENT OF THE COMPANY IS DULY A VAILABLE IN THE PAPER BOOK. ON EXAMINATION OF THE BANK STATEMENT IT IS TAKEN NOTE THAT THERE WAS NO DEPOSIT OF CASH.THE DETAILS OF SOURCE OF FUNDS FROM WHICH THIS COMPANY HAD MADE THE SHARE APPLICATION ARE ALSO AVAILABLE FROM A PERUSAL OF TH E BANK STATEMENT AND OTHER DETAILS AVAILABLE IN THE PAPER BOOK. THIS COMPANY H AS SUFFICIENT FUND TO INVEST IN THE ASSESSEE COMPANY, THEREFORE, THE CREDITWORTHINE SS, GENUINENESS AND IDENTITY OF THIS COMPANY HAS BEEN PROVED BEYOND ANY DOUBT. 24. IN RESPECT OF NATURAL SUPPLIERS PVT. LTD ., THE LD. COUNSEL DREW OUR ATTENTION FROM PAGES 48 TO 60 OF PAPER BOOK, WHEREIN THE DETA ILS OF THIS COMPANY IS GIVEN. WE NOTE THAT THIS COMPANY INVESTED A SUM OF RS. 19 LACS IN THE ASSESSEE COMPANY. THE SHARE APPLICATION WAS MADE BY ACCOUNT PAYEE CHE QUE. THIS COMPANY WAS INCORPORATED UNDER THE COMPANIES ACT HAVING PROPER IDENTIFICATION NUNBER. THIS COMPANY DULY FILED ITS RETURN OF INCOME BEFORE ITO, WARD-9(4), KOLKATA AND WAS HAVING PAN NO. AADCN 4238M. THIS COMPANY WAS HAVING PAID UP CAPITAL WITH FREE RESERVE AND SURPLUS TO THE TUNE OF RS. 39,10,3 6,507/- AS ON 31.03.2012. THE COPY OF THE BANK STATEMENT OF THE COMPANY IS DULY A VAILABLE IN THE PAPER BOOK. ON EXAMINATION OF THE BANK STATEMENT IT IS TAKEN NOTE THAT THERE WAS NO DEPOSIT OF CASH.THE DETAILS OF SOURCE OF FUNDS FROM WHICH THIS COMPANY HAD MADE THE SHARE APPLICATION ARE ALSO AVAILABLE FROM A PERUSAL OF TH E BANK STATEMENT AND OTHER DETAILS AVAILABLE IN THE PAPER BOOK.THIS COMPANY HA S SUFFICIENT FUND TO INVEST IN THE ASSESSEE COMPANY, THEREFORE, THE CREDITWORTHINE SS, GENUINENESS AND IDENTITY OF THIS COMPANY HAS BEEN PROVED BEYOND ANY DOUBT. 25. IN RESPECT OF M/S SHIVAANGAN MERCHANDISE PVT. LTD., THE LD. COUNSEL DREW OUR ATTENTION FROM PAGES 61 TO 71 OF PAPER BOOK, WH EREIN THE DETAILS OF THIS M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 1 11 19 99 9 COMPANY IS GIVEN. WE NOTE THAT THIS COMPANY INVESTE D A SUM OF RS. 24 LACS IN THE ASSESSEE COMPANY. THE SHARE APPLICATION WAS MADE BY ACCOUNT PAYEE CHEQUE. THIS COMPANY WAS INCORPORATED UNDER THE COMPANIES ACT HA VING PROPER IDENTIFICATION NUMBER. THIS COMPANY DULY FILED ITS RETURN OF INCO ME BEFORE ITO, WARD-5(1), KOLKATA AND WAS HAVING PAN NO. AAOCS 8980M. THIS CO MPANY WAS HAVING PAID UP CAPITAL WITH FREE RESERVE AND SURPLUS TO TH E TUNE OF RS. 50,30,61,092/- AS ON 31.03.2012. THE COPY OF THE BANK STATEMENT OF THE C OMPANY IS DULY AVAILABLE IN THE PAPER BOOK. ON EXAMINATION OF THE BANK STATEMEN T IT IS TAKEN NOTE THAT THERE WAS NO DEPOSIT OF CASH.THE DETAILS OF SOURCE OF FUN DS FROM WHICH THIS COMPANY HAD MADE THE SHARE APPLICATION ARE ALSO AVAILABLE F ROM A PERUSAL OF THE BANK STATEMENT AND OTHER DETAILS AVAILABLE IN THE PAPER BOOK. THIS COMPANY HAS SUFFICIENT FUND TO INVEST IN THE ASSESSEE COMPANY, THEREFORE, THE CREDITWORTHINESS, GENUINENESS AND IDENTITY OF THIS COMPANY HAS BEEN P ROVED BEYOND ANY DOUBT. 26. IN RESPECT OF M/S PRAGYA COMMODITIES PVT. LTD ., THE LD. COUNSEL DREW OUR ATTENTION FROM PAGES 72 TO 82 OF PAPER BOOK, WHEREI N THE DETAILS OF THIS COMPANY IS GIVEN. WE NOTE THAT THIS COMPANY INVESTED A SUM OF RS. 9 LACS IN THE ASSESSEE COMPANY. THE SHARE APPLICATION WAS MADE BY ACCOUNT PAYEE CHEQUE. THIS COMPANY WAS INCORPORATED UNDER THE COMPANIES ACT HA VING PROPER IDENTIFICATION NUMBER. THIS COMPANY DULY FILED ITS RETURN OF INCO ME BEFORE ITO, WARD-CIRCLE- ITW AND WAS HAVING PAN NO. AABCP 5764 C. THIS COMPA NY WAS HAVING PAID UP CAPITAL WITH FREE RESERVE AND SURPLUS TO THE TUN E OF RS. 78,66,62,451/- AS ON 31.03.2012. THE COPY OF THE BANK STATEMENT OF THE C OMPANY IS DULY AVAILABLE IN THE PAPER BOOK. ON EXAMINATION OF THE BANK STATEMEN T IT IS TAKEN NOTE THAT THERE WAS NO DEPOSIT OF CASH.THE DETAILS OF SOURCE OF FUN DS FROM WHICH THIS COMPANY HAD MADE THE SHARE APPLICATION ARE ALSO AVAILABLE F ROM A PERUSAL OF THE BANK STATEMENT AND OTHER DETAILS AVAILABLE IN THE PAPER BOOK.THIS COMPANY HAS SUFFICIENT FUND TO INVEST IN THE ASSESSEE COMPANY, THEREFORE, THE CREDITWORTHINESS, GENUINENESS AND IDENTITY OF THIS COMPANY HAS BEEN P ROVED BEYOND ANY DOUBT. 27. IN RESPECT OF DEWDROP MERCHANDISE PVT. LTD ., THE LD. COUNSEL DREW OUR ATTENTION FROM PAGES 83 TO 92 OF PAPER BOOK, WHERE IN THE DETAILS OF THIS COMPANY M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 2 22 20 00 0 IS GIVEN. WE NOTE THAT THIS COMPANY INVESTED A SUM OF RS. 25 LACS IN THE ASSESSEE COMPANY. THE SHARE APPLICATION WAS MADE BY ACCOUNT PAYEE CHEQUE. THIS COMPANY WAS INCORPORATED UNDER THE COMPANIES ACT HA VING PROPER IDENTIFICATION NUMBER. THIS COMPANY DULY FILED ITS RETURN OF INCO ME BEFORE ITO, WARD-9(1), KOLKATA AND WAS HAVING PAN NO. AAACD 8961G. THIS CO MPANY WAS HAVING PAID UP CAPITAL WITH FREE RESERVE AND SURPLUS TO TH E TUNE OF RS. 80,54,51,076/- AS ON 31.03.2012. THE COPY OF THE BANK STATEMENT OF THE C OMPANY IS DULY AVAILABLE IN THE PAPER BOOK. ON EXAMINATION OF THE BANK STATEMEN T IT IS TAKEN NOTE THAT THERE WAS NO DEPOSIT OF CASH.THE DETAILS OF SOURCE OF FUN DS FROM WHICH THIS COMPANY HAD MADE THE SHARE APPLICATION ARE ALSO AVAILABLE F ROM A PERUSAL OF THE BANK STATEMENT AND OTHER DETAILS AVAILABLE IN THE PAPER BOOK.THIS COMPANY HAS SUFFICIENT FUND TO INVEST IN THE ASSESSEE COMPANY, THEREFORE, THE CREDITWORTHINESS, GENUINENESS AND IDENTITY OF THIS COMPANY HAS BEEN P ROVED BEYOND ANY DOUBT. 28. IN RESPECT OF SIDDHESWARIVYAPAAR PVT. LTD ., THE LD. COUNSEL DREW OUR ATTENTION FROM PAGES 93 TO 99 OF PAPER BOOK, WHEREI N THE DETAILS OF THIS COMPANY IS GIVEN. WE NOTE THAT THIS COMPANY INVESTED A SUM OF RS. 20 LACS IN THE ASSESSEE COMPANY. THE SHARE APPLICATION WAS MADE BY ACCOUNT PAYEE CHEQUE. THIS COMPANY WAS INCORPORATED UNDER THE COMPANIES ACT HA VING PROPER IDENTIFICATION NUMBER. THIS COMPANY DULY FILED ITS RETURN OF INCO ME BEFORE ITO, WARD- 4(2)/WBG/WB/104/02, KOLKATA AND WAS HAVING PAN NO. AANCS 2337J. THIS COMPANY WAS HAVING PAID UP CAPITAL WITH FREE RESERV E AND SURPLUS TO THE TUNE OF RS. 72,54,29,956/- AS ON 31.03.2012. THE COPY OF TH E BANK STATEMENT OF THE COMPANY IS DULY AVAILABLE IN THE PAPER BOOK. ON EXA MINATION OF THE BANK STATEMENT IT IS TAKEN NOTE THAT THERE WAS NO DEPOSI T OF CASH.THE DETAILS OF SOURCE OF FUNDS FROM WHICH THIS COMPANY HAD MADE THE SHARE AP PLICATION ARE ALSO AVAILABLE FROM A PERUSAL OF THE BANK STATEMENT AND OTHER DETA ILS AVAILABLE IN THE PAPER BOOK. THIS COMPANY HAS SUFFICIENT FUND TO INVEST IN THE A SSESSEE COMPANY, THEREFORE, THE CREDITWORTHINESS, GENUINENESS AND IDENTITY OF THIS COMPANY HAS BEEN PROVED BEYOND ANY DOUBT. M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 2 22 21 11 1 29. TAKING NOTE OF THE AFORESAID DOCUMENTS THE LD. CIT(A) WAS OF THE OPINION THAT ASSESSEE HAD DISCHARGED ITS ONUS TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE SHARE SUBSCRIBERS AND DELETED TH E ADDITION MADE U/S. 68 OF THE ACT. BEFORE WE ADJUDICATE AS TO WHETHER THE LD. CI T(A)S ACTION IS RIGHT OR ERRONEOUS, LET US LOOK AT SECTION 68 OF THE ACT AND THE JUDICIAL PRECEDENTS ON THE ISSUE AT HAND. SECTION 68 UNDER WHICH THE ADDITION HAS BEEN MADE B Y THE ASSESSING OFFICER READS AS UNDER: '68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS O F AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATI ON ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OP INION OF THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. ' THE PHRASEOLOGY OF SECTION 68 IS CLEAR. THE LEGISLA TURE HAS LAID DOWN THAT IN THE ABSENCE OF A SATISFACTORY EXPLANATION, THE UNEXPLAI NED CASH CREDIT MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. IN THIS CASE THE LEGISLATIVE MANDATE IS NOT IN TERMS OF THE WORDS S HALL BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR'. THE SUPREME COURT WHILE INTERPRETING SIMILAR PHRASEOLOGY USED IN SECTION 69 HAS HELD THAT IN CREATING THE LEGAL FICTION THE PHRASEOLOGY EMPLOYS THE WORD 'MAY ' AND NOT 'SHALL'. THUS THE UN-SATISFACTORINESS OF THE EXPLANATION DOES NOT AND NEED NOT AUTOMATICALLY RESULT IN DEEMING THE AMOUNT CREDITED IN THE BOOKS AS THE INC OME OF THE ASSESSEE AS HELD BY THE SUPREME COURT IN THE CASE OF CIT V. SMT. P. K. NOORJAHAN [1999] 237 ITR 570. WE NOTE THAT AGAINST THE SAID DECISION OF HON' BLE GUJARAT HIGH COURT THE SPECIAL LEAVE PETITION FILED BY THE REVENUE HAS ALS O BEEN DISMISSED BY THE HON'BLE APEX COURT. 30. THE MAIN PLANK ON WHICH THE AO MADE THE ADDITIO N WAS BECAUSE THE DIRECTORS OF THE SHARE SUBSCRIBERS DID NOT TURN UP BEFORE HIM . IN SUCH A CASE THE HON'BLE APEX COURT IN THE CASE OF ORISSA CORPN. (P) LTD. (S UPRA) 159 ITR 78 AND THE HON'BLE GUJARAT HIGH COURT, IN THE CASE OF DY. CIT V. ROHINI BUILDERS [2002] 256 ITR 360 /[2003] 127 TAXMAN 523 , HAS HELD THAT ONUS OF THE ASSESSEE (IN WHOSE BOOKS OF ACCOUNT CREDIT APPEARS) STANDS FULLY DISCH ARGED IF THE IDENTITY OF THE CREDITOR IS ESTABLISHED AND ACTUAL RECEIPT OF MONEY FROM SUCH CREDITOR IS PROVED. IN M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 2 22 22 22 2 CASE, THE ASSESSING OFFICER IS DISSATISFIED ABOUT T HE SOURCE OF CASH DEPOSITED IN THE BANK ACCOUNTS OF THE CREDITORS, THE PROPER COURSE W OULD BE TO ASSESS SUCH CREDIT IN THE HANDS OF THE CREDITOR (AFTER MAKING DUE ENQUIRI ES FROM SUCH CREDITOR). IN ARRIVING AT THIS CONCLUSION, THE HON'BLE COURT HAS FURTHER STRESSED THE PRESENCE OF WORD 'MAY' IN SECTION 68. RELEVANT OBSERVATIONS AT PAGES 369 AND 370 OF THIS REPORT ARE REPRODUCED HEREUNDER:- 'MERELY BECAUSE SUMMONS ISSUED TO SOME OF THE CREDI TORS COULD NOT BE SERVED OR THEY FAILED TO ATTEND BEFORE THE ASSESSING OFFICER, CANNOT BE A GROUND TO TREAT THE LOANS TAKEN BY THE ASSESSEE FROM THOSE CREDITORS AS NON-GENUINE IN VIEW OF THE PRINCIPLES LAID DOWN BY THE SUPREME COURT IN THE CA SE OF ORISSA CORPORATION [1986] 159 ITR 78. IN THE SAID DECISION THE SUPREME COURT HAS OBSERVED THAT WHEN THE ASSESSEE FURNISHES NAMES AND ADDRESSES OF THE A LLEGED CREDITORS AND THE GIR NUMBERS, THE BURDEN SHIFTS TO THE DEPARTMENT TO EST ABLISH THE REVENUE'S CASE AND IN ORDER TO SUSTAIN THE ADDITION THE REVENUE HAS TO PURSUE THE ENQUIRY AND TO ESTABLISH THE LACK OF CREDITWORTHINESS AND MERE NON -COMPLIANCE OF SUMMONS ISSUED BY THE ASSESSING OFFICER UNDER SECTION 131, BY THE ALLEGED CREDITORS WILL NOT BE SUFFICIENT TO DRAW AND ADVERSE INFERENCE AGAINST TH E ASSESSEE. IN THE CASE OF SIX CREDITORS WHO APPEARED BEFORE THE ASSESSING OFFICER AND WHOSE STATEMENTS WERE RECORDED BY THE ASSESSING OFFICER, THEY HAVE ADMITT ED HAVING ADVANCED LOANS TO THE ASSESSEE BY ACCOUNT PAYEE CHEQUES AND IN CASE T HE ASSESSING OFFICER WAS NOT SATISFIED WITH THE CASH AMOUNT DEPOSITED BY THOSE C REDITORS IN THEIR BANK ACCOUNTS, THE PROPER COURSE WOULD HAVE BEEN TO MAKE ASSESSMEN TS IN THE CASES OF THOSE CREDITORS BY' TREATING THE CASH DEPOSITS IN THEIR B ANK ACCOUNTS AS UNEXPLAINED INVESTMENTS OF THOSE CREDITORS UNDER SECTION 69. 31. IN THE CASE OF NEMI CHAND KOTHARI 136 TAXMAN 21 3, (SUPRA), THE HON'BLE GUAHATI HIGH COURT HAS THROWN LIGHT ON ANOTHER ASPE CT TOUCHING THE ISSUE OF ONUS ON ASSESSEE UNDER SECTION 68, BY HOLDING THAT THE S AME SHOULD BE DECIDED BY TAKING INTO CONSIDERATION THE PROVISION OF SECTION 106 OF THE EVIDENCE ACT WHICH SAYS THAT A PERSON CAN BE REQUIRED TO PROVE ONLY SUCH FACTS W HICH ARE IN HIS KNOWLEDGE. THE HON'BLE COURT IN THE SAID CASE HELD THAT, ONCE IT I S FOUND THAT AN ASSESSEE HAS ACTUALLY TAKEN MONEY FROM DEPOSITOR/LENDER WHO HAS BEEN FULLY IDENTIFIED, THE ASSESSEE/BORROWER CANNOT BE CALLED UPON TO EXPLAIN, MUCH LESS PROVE THE AFFAIRS OF SUCH THIRD PARTY, WHICH HE IS NOT EVEN SUPPOSED TO KNOW OR ABOUT WHICH HE CANNOT BE HELD TO BE ACCREDITED WITH ANY KNOWLEDGE. IN THI S VIEW, THE HON'BLE COURT HAS LAID DOWN THAT SECTION 68 OF INCOME-TAX ACT, SHOULD BE READ ALONG WITH SECTION 106 OF EVIDENCE ACT. THE RELEVANT OBSERVATIONS AT P AGE 260 TO 262, 264 AND 265 OF THE REPORT ARE REPRODUCED HEREIN BELOW:- 'WHILE INTERPRETING THE MEANING AND SCOPE OF SECTIO N 68, ONE HAS TO BEAR IN MIND THAT NORMALLY, INTERPRETATION OF A STATUTE SHALL BE GENERAL, IN M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 2 22 23 33 3 NATURE, SUBJECT ONLY TO SUCH EXCEPTIONS AS MAY BE L OGICALLY PERMITTED BY THE STATUTE ITSELF OR BY SOME OTHER LAW CONNECTED T HEREWITH OR RELEVANT THERETO. KEEPING IN VIEW THESE FUNDAMENTALS OF INTE RPRETATION OF STATUTES, WHEN WE READ CAREFULLY THE PROVISIONS OF SECTION 68 , WE NOTICE NOTHING IN SECTION 68 TO SHOW THAT THE SCOPE OF THE INQUIRY UN DER SECTION 68 BY THE REVENUE DEPARTMENT SHALL REMAIN CONFINED TO THE TRA NSACTIONS, WHICH HAVE TAKEN PLACE BETWEEN THE ASSESSEE AND THE CREDITOR N OR DOES THE WORDING OF SECTION 68 INDICATE THAT SECTION 68 DOES NOT AUTHOR IZE THE REVENUE DEPARTMENT TO MAKE INQUIRY INTO THE SOURCE(S) OF TH E CREDIT AND/OR SUB- CREDITOR. THE LANGUAGE EMPLOYED BY SECTION 68 CANNO T BE READ TO IMPOSE SUCH LIMITATIONS ON THE POWERS OF THE ASSESSING OFF ICER. THE LOGICAL CONCLUSION, THEREFORE, HAS TO BE, AND WE HOLD THAT AN INQUIRY UNDER SECTION 68 NEED NOT NECESSARILY BE KEPT CONFINED BY THE ASS ESSING OFFICER WITHIN THE TRANSACTIONS, WHICH TOOK PLACE BETWEEN THE ASSE SSEE AND HIS CREDITOR, BUT THAT THE SAME MAY BE EXTENDED TO THE TRANSACTIO NS, WHICH HAVE TAKEN PLACE BETWEEN THE CREDITOR AND HIS SUB-CREDITOR. TH US, WHILE THE ASSESSING OFFICER IS UNDER SECTION 68, FREE TO LOOK INTO THE SOURCE(S) OF THE CREDITOR AND/OR OF THE SUB-CREDITOR, THE BURDEN ON THE ASSES SEE UNDER SECTION 68 IS DEFINITELY LIMITED. THIS LIMIT HAS BEEN IMPOSED BY SECTION 106 OF THE EVIDENCE ACT WHICH READS AS FOLLOWS: 'BURDEN OF PROVING FACT ESPECIALLY WITHIN KNOWLEDGE .-WHEN ANY FACT IS ESPECIALLY WITHIN THE KNOWLEDGE OF ANY PERSON, THE BURDEN) OF PROVING THAT FACT IS UPON HIM. ' ******** WHAT, THUS, TRANSPIRES FROM THE ABOVE DISCUSSION IS THAT WHITE SECTION 106 OF THE EVIDENCE ACT LIMITS THE ONUS OF THE ASSESSEE TO THE EXTENT OF HIS PROVING THE SOURCE FROM WHICH HE HAS RECEIVED THE C ASH CREDIT, SECTION 68 GIVES AMPLE FREEDOM TO THE ASSESSING OFFICER TO MAK E INQUIRY NOT ONLY INTO THE SOURCE(S)OF THE CREDITOR BUT ALSO OF HIS (CREDI TOR'S) SUB-CREDITORS AND PROVE, AS A RESULT, OF SUCH INQUIRY, THAT THE MONEY RECEIVED BY THE ASSESSEE, IN THE FORM OF LOAN FROM THE CREDITOR, THOUGH ROUTE D THROUGH THE SUB- CREDITORS, ACTUALLY BELONGS TO, OR WAS OF, THE ASSE SSEE HIMSELF. IN OTHER WORDS, WHILE SECTION 68 GIVES THE LIBERTY TO THE AS SESSING OFFICER TO ENQUIRE INTO THE SOURCE/SOURCE FROM WHERE THE CREDITOR HAS RECEIVED THE MONEY, SECTION 106 MAKES THE ASSESSEE LIABLE TO DISCLOSE O NLY THE SOURCE(S) FROM WHERE HE HAS HIMSELF RECEIVED THE CREDIT AND IT IS NOT THE BURDEN OF THE ASSESSEE TO PROVE THE CREDITWORTHINESS OF THE SOURC E(S) OF THE SUB-CREDITORS. IF SECTION 106 AND SECTION 68 ARE TO STAND TOGETHER , WHICH THEY MUST, THEN, THE INTERPRETATION OF SECTION 68 ARE TO STAND TOGET HER, WHICH THEY MUST, THEN THE INTERPRETATION OF SECTION 68 HAS TO BE IN SUCH A WAY THAT IT DOES NOT MAKE SECTION 106 REDUNDANT. HENCE, THE HARMONIOUS C ONSTRUCTION OF SECTION 106 OF THE EVIDENCE ACT AND SECTION 68 OF T HE INCOME- TAX ACT WILL BE THAT THOUGH APART FROM ESTABLISHING THE IDENTITY OF THE CREDITOR, THE ASSESSEE MUST ESTABLISH THE GENUINENESS OF THE TRAN SACTION AS WELL AS THE CREDITWORTHINESS OF HIS CREDITOR, THE BURDEN OF THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTIONS AS WELL AS THE CRED ITWORTHINESS OF THE CREDITOR MUST REMAIN CONFINED TO THE TRANSACTIONS, WHICH HAVE TAKEN PLACE BETWEEN THE ASSESSEE AND THE CREDITOR. WHAT FOLLOWS , AS A COROLLARY, IS THAT IT IS NOT THE BURDEN OF THE ASSESSEE TO PROVE THE G ENUINENESS OF THE TRANSACTIONS BETWEEN HIS CREDITOR AND SUB-CREDITORS NOR IS IT THE BURDEN OF THE ASSESSEE TO PROVE THAT THE SUB-CREDITOR HAD THE CREDITWORTHINESS TO ADVANCE THE CASH CREDIT TO THE CREDITOR FROM WHOM T HE CASH CREDIT HAS BEEN. EVENTUALLY, RECEIVED BY THE ASSESSEE. IT, THE REFORE, FURTHER LOGICALLY FOLLOWS THAT THE CREDITOR'S CREDITWORTHINESS HAS TO BE JUDGED VIS-A-VIS THE M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 2 22 24 44 4 TRANSACTIONS, WHICH HAVE TAKEN PLACE BETWEEN THE AS SESSEE AND THE CREDITOR, AND IT IS NOT THE BUSINESS OF THE ASSESSE E TO FIND OUT THE SOURCE OF MONEY OF HIS CREDITOR OR OF THE GENUINENESS OF THE TRANSACTIONS, WHICH TOOK BETWEEN THE CREDITOR AND SUB-CREDITOR AND/OR CREDIT WORTHINESS OF THE SUB- CREDITORS, FOR, THESE ASPECTS MAY NOT BE WITHIN THE SPECIAL KNOWLEDGE OF THE ASSESSEE. ' ********** ' ... IF A CREDITOR HAS, BY ANY UNDISCLOSED SOURCE, A PARTICULAR AMOUNT OF MONEY IN THE BANK, THERE IS NO LIMITATION UNDER THE LAW ON THE PART OF THE ASSESSEE TO OBTAIN SUCH AMOUNT OF MONEY OR PART THE REOF FROM THE CREDITOR, BY WAY OF CHEQUE IN THE FORM OF LOAN AND IN SUCH A CASE, IF THE CREDITOR FAILS TO SATISFY AS TO HOW HE HAD ACTUALLY RECEIVED THE SAID AMOUNT AND HAPPENED TO KEEP THE SAME IN THE BANK, THE SAID AMO UNT CANNOT BE TREATED AS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCE. IN OTHER WORDS, THE GENUINENESS AS WELL AS THE CREDITWORTHINESS OF A CR EDITOR HAVE TO BE ADJUDGED VIS-A-VIS THE TRANSACTIONS, WHICH HE HAS W ITH THE ASSESSEE. THE REASON WHY WE HAVE FORMED THE OPINION THAT IT IS NO T THE BUSINESS OF THE ASSESSEE TO FIND OUT THE ACTUAL SOURCE OR SOURCES F ROM WHERE THE CREDITOR HAS ACCUMULATED THE AMOUNT, WHICH HE ADVANCES, AS L OAN, TO THE ASSESSEE IS THAT SO FAR AS AN ASSESSEE IS CONCERNED, HE HAS TO PROVE THE GENUINENESS OF THE TRANSACTION AND THE CREDITWORTHINESS OF THE CREDITOR VIS-A-VIS THE TRANSACTIONS WHICH HAD TAKEN PLACE BETWEEN THE ASSE SSEE AND THE CREDITOR AND NOT BETWEEN THE CREDITOR AND THE SUB-CREDITORS, FOR, IT IS NOT EVEN REQUIRED UNDER THE LAW FOR THE ASSESSEE TO TRY TO F IND OUT AS TO WHAT SOURCES FROM WHERE THE CREDITOR HAD RECEIVED THE AMOUNT, HI S SPECIAL KNOWLEDGE UNDER SECTION 106 OF THE EVIDENCE ACT MAY VERY WELL REMAIN CONFINED ONLY TO THE TRANSACTIONS, WHICH HE HAD' WITH THE CREDITO R AND HE MAY NOT KNOW WHAT TRANSACTION(S) HAD TAKEN PLACE BETWEEN HIS CRE DITOR AND THE SUB- CREDITOR ' ********** 'IN OTHER WORDS, THOUGH UNDER SECTION 68 AN ASSESSI NG OFFICER IS FREE TO SHOW, WITH THE HELP OF THE INQUIRY CONDUCTED BY HIM INTO THE TRANSACTIONS, WHICH HAVE TAKEN PLACE BETWEEN THE CREDITOR AND THE SUB-CREDITOR, THAT THE TRANSACTION BETWEEN THE TWO WERE NOT GENUINE AND TH AT THE SUB-CREDITOR HAD NO CREDITWORTHINESS, IT WILL NOT NECESSARILY ME AN THAT THE LOAN ADVANCED BY THE SUB-CREDITOR TO THE CREDITOR WAS IN COME OF THE ASSESSEE FROM UNDISCLOSED SOURCE UNLESS THERE IS EVIDENCE, D IRECT OR CIRCUMSTANTIAL, TO SHOW THAT THE AMOUNT WHICH HAS BEEN ADVANCED BY THE SUB-CREDITOR TO THE CREDITOR, HAD ACTUALLY BEEN RECEIVED BY THE SUB -CREDITOR FROM THE ASSESSEE .' ********** 'KEEPING IN VIEW THE ABOVE POSITION OF LAW, WHEN WE TURN TO THE FACTUAL MATRIX OF THE PRESENT CASE, WE FIND THAT SO FAR AS THE APPELLANT IS CONCERNED, HE HAS ESTABLISHED THE IDENTITY OF THE C REDITORS, NAMELY, NEMICHANDNAHATA AND SONS (HUF) AND PAWAN KUMAR AGAR WALLA. THE APPELLANT HAD ALSO SHOWN, IN ACCORDANCE WITH THE BU RDEN, WHICH RESTED ON HIM UNDER SECTION 106 OF THE EVIDENCE ACT, THAT THE SAID AMOUNTS HAD BEEN RECEIVED BY HIM BY WAY OF CHEQUES FROM THE CREDITOR S AFOREMENTIONED. IN FACT THE FACT THAT THE ASSESSEE HAD RECEIVED THE SA ID AMOUNTS BY WAY OF CHEQUES WAS NOT IN DISPUTE. ONCE THE ASSESSEE HAD E STABLISHED THAT HE HAD RECEIVED THE SAID AMOUNTS FROM THE CREDITORS AFOREM ENTIONED BY WAY OF M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 2 22 25 55 5 CHEQUES, THE ASSESSEE MUST BE TAKEN TO HAVE PROVED THAT THE CREDITOR HAD THE CREDITWORTHINESS TO ADVANCE THE LOANS. THEREAFT ER THE BURDEN HAD SHIFTED TO THE ASSESSING OFFICER TO PROVE THE CONTR ARY. ON MERE FAILURE ON THE PART OF THE CREDITORS TO SHOW THAT THEIR SUB-CR EDITORS HAD CREDITWORTHINESS TO ADVANCE THE SAID LOAN AMOUNTS T O THE ASSESSEE, SUCH FAILURE, AS A COROLLARY, COULD NOT HAVE BEEN AND OU GHT NOT TO HAVE BEEN, UNDER THE LAW, TREATED AS THE INCOME FROM THE UNDIS CLOSED SOURCES OF THE ASSESSEE HIMSELF, WHEN THERE WAS NEITHER DIRECT NOR CIRCUMSTANTIAL EVIDENCE ON RECORD THAT THE SAID LOAN AMOUNTS ACTUA LLY BELONGED TO, OR WERE OWNED BY, THE ASSESSEE. VIEWED FROM THIS ANGLE , WE HAVE NO HESITATION IN HOLDING THAT IN THE CASE AT HAND, THE ASSESSING OFFICER HAD FAILED TO SHOW THAT THE AMOUNTS, WHICH HAD COME TO THE HANDS OF THE CREDITORS FROM THE HANDS OF THE SUB-CREDITORS, HAD ACTUALLY BEEN RECEIVED BY THE SUB-CREDITORS FROM THE ASSESSEE. IN THE ABSE NCE OF ANY SUCH EVIDENCE ON RECORD, THE ASSESSING OFFICER COULD NOT HAVE TRE ATED THE SAID AMOUNTS AS INCOME DERIVED BY THE APPELLANT FROM UNDISCLOSED SOURCES. THE LEARNED TRIBUNAL SERIOUSLY FELL INTO ERROR IN TREATING THE SAID AMOUNTS AS INCOME DERIVED BY THE APPELLANT FROM. UNDISCLOSED SOURCES MERELY ON THE FAILURE OF THE SUB-CREDITORS TO PROVE THEIR CREDITWORTHINESS. 32. FURTHER, IN THE CASE OF CIT V. S. KAMALJEET SIN GH [2005] 147 TAXMAN 18(ALL.) THEIR LORDSHIPS, ON THE ISSUE OF DISCHARGE OF ASSESSEE'S ONUS IN RELATION TO A CASH CREDIT APPEARING IN HIS BOOKS OF ACCOUNT, HAS OBSERVED AND HELD AS UNDER:- '4. THE TRIBUNAL HAS RECORDED A FINDING THAT THE AS SESSEE HAS DISCHARGED THE ONUS WHICH WAS ON HIM TO EXPLAIN THE NATURE AND SOURCE O F CASH CREDIT IN QUESTION. THE ASSESSEE DISCHARGED THE ONUS BY PLACING (I) CONFIRM ATION LETTERS OF THE CASH CREDITORS; (II) THEIR AFFIDAVITS; (III) THEIR FULL ADDRESSES AND GIR NUMBERS AND PERMANENT ACCOUNT NUMBERS. IT HAS FOUND THAT THE AS SESSEE'S BURDEN STOOD DISCHARGED AND SO, NO ADDITION TO HIS TOTAL INCOME ON ACCOUNT OF CASH CREDIT WAS CALLED FOR. IN VIEW OF THIS FINDING, WE FIND THAT T HE TRIBUNAL WAS RIGHT IN REVERSING THE ORDER OF THE AA C, SETTING ASIDE THE ASSESSMENT ORDER. 33. WE ALSO TAKE NOTE OF THE DECISION OF THE HON'BL E HIGH COURT, CALCUTTA IN THE CASE OF S.K. BOTHRA& SONS, HUF V. INCOME-TAX OFFICE R, WARD- 46(3), KOLKATA 347 ITR 347 WHEREIN THE COURT HELD AS FOLLOWS: 15. IT IS NOW A SETTLED LAW THAT WHILE CONSIDERING THE QUESTION WHETHER THE ALLEGED LOAN TAKEN BY THE ASSESSEE WAS A GENUINE TRANSACTIO N, THE INITIAL ONUS IS ALWAYS UPON THE ASSESSEE AND IF NO EXPLANATION IS GIVEN OR THE EXPLANATION GIVEN BY THE APPELLANT IS NOT SATISFACTORY, THE ASSESSING OFFICE R CAN DISBELIEVE THE ALLEGED TRANSACTION OF LOAN. BUT THE LAW IS EQUALLY SETTLED THAT IF THE INITIAL BURDEN IS DISCHARGED BY THE ASSESSEE BY PRODUCING SUFFICIENT MATERIALS IN SUPPORT OF THE LOAN TRANSACTION, THE ONUS SHIFTS UPON THE ASSESSING OFF ICER AND AFTER VERIFICATION, HE CAN CALL FOR FURTHER EXPLANATION FROM THE ASSESSEE AND IN THE PROCESS, THE ONUS MAY AGAIN SHIFT FROM THE ASSESSING OFFICER TO ASSESSEE. 16. IN THE CASE BEFORE US, THE APPELLANT BY PRODUCI NG THE LOAN-CONFIRMATION- CERTIFICATES SIGNED BY THE CREDITORS, DISCLOSING TH EIR PERMANENT ACCOUNT NUMBERS AND ADDRESS AND FURTHER INDICATING THAT THE LOAN WA S TAKEN BY ACCOUNT PAYEE CHEQUES, NO DOUBT, PRIMA FACIE, DISCHARGED THE INIT IAL BURDEN AND THOSE MATERIALS M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 2 22 26 66 6 DISCLOSED BY THE ASSESSEE PROMPTED THE ASSESSING OF FICER TO ENQUIRE THROUGH THE INSPECTOR TO VERIFY THE STATEMENTS. 34. IN A CASE WHERE THE ISSUE WAS WHETHER THE ASSES SEE AVAILED CASH CREDIT AS AGAINST FUTURE SALE OF PRODUCT, THE AO ISSUED SUMMO NS TO THE CREDITORS WHO DID NOT TURN UP BEFORE HIM, SO AO DISBELIEVED THE EXISTENCE OF CREDITORS AND SADDLED THE ADDITION, WHICH WAS OVERTURNED BY LD. CIT(A). HOWE VER, THE TRIBUNAL REVERSED THE DECISION OF THE LD. CIT(A) AND UPHELD THE AOS DECISION, WHICH ACTION OF TRIBUNAL WAS CHALLENGED BY THE HON'BLE HIGH COURT, CALCUTTA IN THE CASE OF CRYSTAL NETWORKS (P.) LTD. V. COMMISSIONER OF INCOME-TAX 35 3 ITR 171 WHEREIN THE TRIBUNALS DECISION WAS OVERTURNED AND DECISION OF LD. CIT(A) UPHELD AND THE HONBLE HIGH COURT HAS HELD THAT WHEN THE BASIC EV IDENCES ARE ON RECORD THE MERE FAILURE OF THE CREDITOR TO APPEAR CANNOT BE BASIS T O MAKE ADDITION. THE COURT HELD AS FOLLOWS: 8. ASSAILING THE SAID JUDGMENT OF THE LEARNED TRIBU NAL LEARNED COUNSEL FOR THE APPELLANT SUBMITS THAT INCOME-TAX OFFICER DID NOT C ONSIDER THE MATERIAL EVIDENCE SHOWING THE CREDITWORTHINESS AND ALSO OTHER DOCUMEN TS, VIZ., CONFIRMATORY STATEMENTS OF THE PERSONS, OF HAVING ADVANCED CASH AMOUNT AS AGAINST THE SUPPLY OF BIDIS. THESE EVIDENCE WERE DULY CONSIDERED BY THE C OMMISSIONER OF INCOME-TAX (APPEALS). THEREFORE, THE FAILURE OF THE PERSON TO TURN UP PURSUANT TO THE SUMMONS ISSUED TO ANY WITNESS IS IMMATERIAL WHEN THE MATERI AL DOCUMENTS MADE AVAILABLE, SHOULD HAVE BEEN ACCEPTED AND INDEED IN SUBSEQUENT YEAR THE SAME EXPLANATION WAS ACCEPTED BY THE INCOME-TAX OFFICER. HE FURTHER CONTENDED THAT WHEN THE TRIBUNAL HAS RELIED ON THE ENTIRE JUDGMENT OF THE C OMMISSIONER OF INCOME-TAX (APPEALS), THEREFORE, IT WAS NOT PROPER TO TAKE UP SOME PORTION OF THE JUDGMENT OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AND TO IGN ORE THE OTHER PORTION OF THE SAME. THE JUDICIAL PROPRIETY AND FAIRNESS DEMANDS T HAT THE ENTIRE JUDGMENT BOTH FAVOURABLE AND UNFAVOURABLE SHOULD HAVE BEEN CONSID ERED. BY NOT DOING SO THE TRIBUNAL COMMITTED GRAVE ERROR IN LAW IN UPSETTING THE JUDGMENT IN THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS). 9. IN THIS CONNECTION HE HAS DRAWN OUR ATTENTION TO A DECISION OF THE SUPREME COURT IN THE CASE OF UDHAVDASKEWALRAM V. CIT [19671 66 IT R 462. IN THIS JUDGMENT IT IS NOTICED THAT THE SUPREME COURT AS PROPOSITION OF LA W HELD THAT THE TRIBUNAL MUST IN DECIDING AN APPEAL, CONSIDER WITH DUE CARE, ALL THE MATERIAL FACTS AND RECORD ITS FINDING ON ALL THE CONTENTIONS RAISED BY THE ASSESS EE AND THE COMMISSIONER IN THE LIGHT OF THE EVIDENCE AND THE RELEVANT LAW. 10. WE FIND CONSIDERABLE FORCE OF THE SUBMISSIONS O F THE LEARNED COUNSEL FOR THE APPELLANT THAT THE TRIBUNAL HAS MERELY NOTICED THAT SINCE THE SUMMONS ISSUED BEFORE ASSESSMENT RETURNED UNSERVED AND NO ONE CAME FORWARD TO PROVE. THEREFORE, IT SHALL BE ASSUMED THAT THE ASSESSEE FA ILED TO PROVE THE EXISTENCE OF THE CREDITORS OR FOR THAT MATTER THE CREDITWORTHINESS. AS RIGHTLY POINTED OUT BY THE LEARNED COUNSEL THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS TAKEN THE TROUBLE OF EXAMINING OF ALL OTHER MATERIALS AND DOC UMENTS, VIZ., CONFIRMATORY STATEMENTS, INVOICES, CHALLANS AND VOUCHERS SHOWING SUPPLY OF BIDIS AS AGAINST THE ADVANCE. THEREFORE, THE ATTENDANCE OF THE WITNESSES PURSUANT TO THE SUMMONS ISSUED, IN OUR VIEW, IS NOT IMPORTANT. THE IMPORTAN T IS TO PROVE AS TO WHETHER THE M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 2 22 27 77 7 SAID CASH CREDIT WAS RECEIVED AS AGAINST THE FUTURE SALE OF THE PRODUCT OF THE ASSESSEE OR NOT. WHEN IT WAS FOUND BY THE COMMISSIO NER OF INCOME-TAX (APPEALS) ON FACTS HAVING EXAMINED THE DOCUMENTS THAT THE ADV ANCE GIVEN BY THE CREDITORS HAVE BEEN ESTABLISHED THE TRIBUNAL SHOULD NOT HAVE IGNORED THIS -FACT FINDING. INDEED THE TRIBUNAL DID NOT REALLY TOUCH THE AFORES AID FACT FINDING OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AS RIGHTLY POI NTED OUT BY THE LEARNED COUNSEL. THE SUPREME COURT HAS ALREADY STATED AS TO WHAT SHOULD BE THE DUTY OF THE LEARNED TRIBUNAL TO DECIDE IN THIS SITUATION. IN TH E SAID JUDGMENT NOTED BY US AT PAGE 464, THE SUPREME COURT HAS OBSERVED AS FOLLOWS : 'THE INCOME-TAX APPELLATE TRIBUNAL PERFORMS A JUDIC IAL FUNCTION UNDER THE INDIAN INCOME-TAX ACT; IT IS INVESTED WITH AUTHORIT Y TO DETERMINE FINALLY ALL QUESTIONS OF FACT. THE TRIBUNAL MUST, IN DECIDING A N APPEAL, CONSIDER WITH DUE CARE ALL THE MATERIAL FACTS AND RECORD ITS FIND ING ON ALL THE CONTENTIONS RAISED BY THE ASSESSEE AND THE COMMISSIONER, IN THE LIGHT OF THE EVIDENCE AND THE RELEVANT LAW. ' 11. THE TRIBUNAL MUST, IN DECIDING AN APPEAL, CONSI DER WITH DUE CARE ALL THE MATERIAL FACTS AND RECORD ITS FINDING ON ALL CONTEN TIONS RAISED BY THE ASSESSEE AND THE COMMISSIONER, IN THE LIGHT OF THE EVIDENCE AND THE RELEVANT LAW. IT IS ALSO RULED IN THE SAID JUDGMENT AT PAGE 465 THAT IF THE TRIBUN AL DOES NOT DISCHARGE THE DUTY IN THE MANNER AS ABOVE THEN IT SHALL BE ASSUMED THE JU DGMENT OF THE TRIBUNAL SUFFERS FROM MANIFEST INFIRMITY. 12. TAKING INSPIRATION FROM THE SUPREME COURT OBSER VATIONS WE ARE CONSTRAINED TO HOLD IN THIS MATTER THAT THE TRIBUNAL HAS NOT ADJUD ICATED UPON THE CASE OF THE ASSESSEE IN THE LIGHT OF THE EVIDENCE AS FOUND BY T HE COMMISSIONER OF INCOME-TAX (APPEALS). WE ALSO FOUND NO SINGLE WORD HAS BEEN SP ARED TO UP SET THE FACT FINDING OF THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT TH ERE ARE MATERIALS TO SHOW THE CASH CREDIT WAS RECEIVED FROM VARIOUS PERSONS AND S UPPLY AS AGAINST CASH CREDIT ALSO MADE. 13. HENCE, THE JUDGMENT AND ORDER OF THE TRIBUNAL I S NOT SUSTAINABLE. ACCORDINGLY, THE SAME IS SET ASIDE. WE RESTORE THE JUDGMENT AND ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS). THE APPEAL IS ALLOWED. 35. OUR ATTENTION WAS ALSO DRAWN TO THE DECISION OF THE HON'BLE SUPREME COURT WHILE DISMISSING SLP IN THE CASE OF LOVELY EXPORTS AS HAS BEEN REPORTED AS JUDGMENT DELIVERED BY THE CTR AT 216 CTR 295: 'CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDIS CLOSED INCOME UNDER SECTION 68 OF THE INCOME TAX ACT, 1961? WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MON EY IS 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 THEIR I NDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. HENCE, WE FIND NO INFIRMITY WI TH THE IMPUGNED JUDGMENT. 36. OUR ATTENTION WAS ALSO DRAWN TO THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT WHILE RELYING ON THE CASE OF LOVELY EXPORTS, IN THE APPEAL OF COMISSIONER OF INCOME TAX, KOLKATA-IV VS ROSEBERRY MERCANTILE (P) LTD., ITAT NO. 241 OF 2010 DATED 10- 01-2011 HAS HELD: M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 2 22 28 88 8 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) OUGHT TO HAVE UPHELD THE ASSESSMENT ORDER AS THE TRANSACTION ENTERED INT O BY THE ASSESSEE WAS A SCHEME FOR LAUNDERING BLACK MONEY INTO WHITE MONEY OR ACCO UNTED MONEY AND THE LD. CIT (A) OUGHT TO HAVE HELD THAT THE ASSESSEE HAD NOT ES TABLISHED THE GENUINENESS OF THE TRANSACTION. ' IT APPEARS FROM THE RECORD THAT IN THE ASSESSMENT P ROCEEDINGS IT WAS NOTICED THAT THE ASSESSEE COMPANY DURING THE YEAR UNDER CONSIDERATIO N HAD BROUGHT RS. 4, 00, 000/- AND RS.20,00,000/- TOWARDS SHARE CAPITAL AND SHARE PREMIUM RESPECTIVELY AMOUNTING TO RS.24,00, 000/- FROM FOUR SHAREHOLDERS BEING PRIVATE LIMITED COMPANIES. THE ASSESSING OFFICER ON HIS PART CALLED FOR THE DETAILS FROM THE ASSESSEE AND ALSO FROM THE SHARE APPLICANTS AND ANALYZED THE FACTS AND ULTIMATELY OBSERVED CERTAIN ABNORMAL FEATURES, WHICH WERE MENTIONED IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER, THEREFORE, CONCLUDED THAT NATURE AND SOURCE OF SUCH MONEY WAS QUESTIONABLE AND EVIDENCE PRODUCED WAS UNSATISFACTO RY. CONSEQUENTLY, THE ASSESSING OFFICER INVOKED THE PROVISIONS UNDER SECT ION 68/69 OF THE INCOME TAX ACT AND MADE ADDITION OF RS.24,00,000/-. ON APPEAL THE LEARNED CIT (A) BY FOLLOWING THE DECI SION OF THE SUPREME COURT IN THE CASE OF CL. T. VS. M/S. LOVELY EXPORTS PVT. LTD ., REPORTED IN (2008) 216 CTR 195 ALLOWED THE APPEAL BY HOLDING -THAT SHARE CAPITAL/P REMIUM OF RS. 24,00,000/- RECEIVED FROM THE INVESTORS WAS NOT LIABLE TO BE TR EATED UNDER SECTION 68 AS UNEXPLAINED CREDITS AND IT SHOULD NOT BE TAXED IN T HE HANDS OF THE APPELLANT COMPANY. AS INDICATED EARLIER, THE TRIBUNAL BELOW DISMISSED THE APPEAL FILED BY THE REVENUE. AFTER HEARING THE LEARNED COUNSEL FOR THE APPELLANT AND AFTER GOING THROUGH THE DECISION OF THE SUPREME COURT IN THE CASE OF CL. T. VS. M/S. LOVELY EXPORTS PVT. LTD. [SUPRA], WE ARE AT ONE WITH THE TRIBUNAL BELOW THAT THE POINT INVOLVED IN THIS APPEAL IS COVERED BY THE SAID SUPREME COURT DECISION IN FA VOUR OF THE ASSESSEE AND THUS, NO SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN THIS APP EAL. THE APPEAL IS DEVOID OF ANY SUBSTANCE AND IS DISMISSED. 37. OUR ATTENTION WAS DRAWN TO THE DECISION OF THE HON'BLE HIGH COURT, CALCUTTA IN THE CASE OF COMMISSIONER OF INCOME TAX VS M/S. N ISHAN INDO COMMERCE LTD DATED 2 DECEMBER, 2013 IN INCOME TAX APPEAL NO.52 O F 2001 WHEREIN THE COURT HELD AS FOLLOWS: THE ASSESSING OFFICER WAS OF THE VIEW THAT THE INC REASE IN SHARE CAPITAL BY RS.52,03,500/- WAS NOTHING BUT THE INTRODUCTION OF THE ASSESSEE'S OWN UNDISCLOSED FUNDS/INCOME INTO THE BOOKS OF ACCOUNTS OF THE ASSE SSEE COMPANY. THE ASSESSING OFFICER ACCORDINGLY TREATED THE INVESTMENT AS UNEXP LAINED CREDIT UNDER SECTION 68 OF THE INCOME TAX ACT AND ADDED THE SAME TO THE INC OME OF THE ASSESSEE. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFOR E THE COMMISSIONER OF INCOME TAX (APPEALS) BEING THE FIRST APPELLATE AUTHORITY A ND CONTENDED THAT THE ASSESSING OFFICER HAD NO MATERIAL TO SHOW THAT THE SHARE CAPI TAL WAS THE INCOME OF THE ASSESSEE COMPANY AND AS SUCH THE ADDITION MADE BY T HE ASSESSING OFFICER UNDER SECTION 68 OF THE ACT WAS WRONG. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AF TER HEARING THE DEPARTMENT AND THE ASSESSEE COMPANY DELETED THE ADDITION OF RS . 52, 03,500/- TO THE INCOME OF THE ASSESSEE COMPANY DURING THE ASSESSMENT YEAR IN QUESTION. THE LEARNED M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 2 22 29 99 9 COMMISSIONER OF INCOME TAX APPEALS FOUND THAT THERE WERE AS MANY AS 2155 ALLOTTEES, WHOSE NAMES, ADDRESSES AND RESPECTIVE SH ARES ALLOCATION HAD BEEN DISCLOSED. THE COMMISSIONER OF INCOME TAX APPEALS, FURTHER FOU ND THAT THE ASSESSEE COMPANY RECEIVED THE APPLICATIONS THROUGH BANKERS T O THE ISSUE, WHO HAD BEEN APPOINTED UNDER THE GUIDELINES OF THE STOCK EXCHANG E AND THE ASSESSEE COMPANY HAD BEEN ALLOTTED SHARES ON THE BASIS OF ALLOTMENT APPROVED BY THE STOCK EXCHANGE. THE ASSESSEE COMPANY HAD DULY FILED THE RETURN OF A LLOTMENT WITH THE REGISTRAR OF COMPANIES, GIVING COMPLETE PARTICULARS OF THE ALLOT TEES. THE COMMISSIONER OF INCOME TAX (APPEALS) FOUND THAT INQUIRES HAD CONFIRMED THE EXISTENCE OF MOST OF THE SHAREHOLDERS AT THE ADDRES SES INTIMATED TO THE ASSESSING OFFICER, BUT THE ASSESSING OFFICER TOOK THE VIEW TH AT THEIR INVESTMENT IN THE ASSESSEE COMPANY WAS NOT GENUINE, ON THE BASIS OF S OME EXTRANEOUS REASONS. THE COMMISSIONER OF INCOME TAX (APPEALS) TOOK NOTE OF T HE OBSERVATION OF THE ASSESSING OFFICER THAT ENQUIRY CONDUCTED BY THE INC OME TAX INSPECTOR HAD REVEALED THAT NINE PERSONS MAKING APPLICATIONS FOR 900 SHARES WERE NOT AVAILABLE AT THE GIVEN ADDRESS AND RIGHTLY CONCLUDED THAT THE TOTAL SHARE CAPITAL ISSUED BY THE ASSESSEE COMPANY COULD NOT BE ADDED AS UNEXPLAINED CASH CREDIT UNDER 'SECTION 68 OF THE INCOME TAX ACT. MOREOVER, IF THE NATURE A ND SOURCE OF INVESTMENT BY ANY SHAREHOLDER, IN SHARES OF THE ASSESSEE COMPANY REMA INED UNEXPLAINED, LIABILITY COULD NOT BE FOISTED ON THE COMPANY. THE CONCERNED SHAREHOLDERS WOULD HAVE TO EXPLAIN THE SOURCE OF THEIR FUND. THE LEARNED COMMISSIONER ON CONSIDERING THE SUBMISS IONS OF THE, RESPECTIVE PARTIES AND CONSIDERING THE MATERIALS, FOUND THAT T HE ASSESSING OFFICER HAD APPLIED THE PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT ARBITRARILY AND ILLEGALLY AND IN ANY CASE WITHOUT GIVING THE ASSESSEE ADEQUATE OPPOR TUNITY OF REPRESENTATION AND/OR HEARING. LEARNED TRIBUNAL AGREED WITH THE FACTUAL FINDINGS O F THE LEARNED COMMISSIONER AND ACCORDINGLY THE LEARNED TRIBUNAL DISMISSED THE APPEAL OF THE REVENUE AND AFFIRMED THE DECISION OF THE LEARNED COMMISSIONER. MR. DUTTA APPEARING ON BEHALF OF THE PETITIONERS CI TED JUDGMENT OF THE DIVISION BENCH OF THIS COURT IN COMMISSIONER OF INCOME TAX V S. RUBY TRADERS AND EXPORTERS LIMITED REPORTED IN 236 (2003) ITR 3000 W HERE A DIVISION BENCH OF THIS COURT HELD THAT WHEN SECTION 68 IS RESORTED TO, IT IS INCUMBENT ON THE ASSESSEE COMPANY TO PROVE AND ESTABLISH THE IDENTITY OF THE SUBSCRIBERS, THEIR CREDIT WORTHINESS AND THE GENUINENESS OF THE TRANSACTION. THE AFORESAID JUDGMENT WAS RENDERED IN THE CONTEXT OF THE FACTUAL BACKGROUND OF THE AFORESAID CASE WHERE, DESPITE SEVERAL OPPORTUNI TIES BEING GIVEN TO THE ASSESSEE, NOTHING WAS DISCLOSED ABOUT THE IDENTITY OF THE SHA REHOLDERS. IN THE INSTANT CASE, THE ASSESSEE DISCLOSED THE IDENTITY AND ADDRESS AND PARTICULARS OF SHARE ALLOCATION OF THE SHAREHOLDERS. IT WAS ALSO FOUND ON THE FACTS THAT ALL THE SHAREHOLDERS WERE IN EXISTENCE. ONLY NINE SHAREHOLDERS SUBSCRIBING TO AB OUT 900 SHARES OUT OF 6, 12,000 SHARES WERE NOT FOUND AVAILABLE AT THEIR ADDRESSES, AND THAT TOO, IN COURSE OF ASSESSMENT PROCEEDINGS IN THE YEAR 1994, I.E., ALMO ST 3 YEARS AFTER THE ALLOTMENT. BY AN ORDER DATED 2ND MAY, 2001, THIS COURT ADMITTE D THE APPEAL ON THREE QUESTIONS WHICH ESSENTIALLY CENTRE AROUND THE QUEST ION OF WHETHER THE APPELLATE COMMISSIONER ERRED IN LAW IN DELETING THE ADDITION OF RS. 52, 03, 500/- TO THE INCOME OF THE ASSESSEE AS MADE BY THE ASSESSING OFF ICER. WE ARE OF THE VIEW THAT THERE IS NO QUESTION OF LAW INVOLVED IN THIS APPEAL FAR LESS ANY SUBSTANTIAL QUESTION OF LAW. M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 3 33 30 00 0 THE LEARNED TRIBUNAL HAS CONCURRED WITH THE LEARNED COMMISSIONER ON FACTS AND FOUND THAT THERE WERE MATERIALS TO SHOW THAT THE AS SESSEE HAD DISCLOSED THE PARTICULARS OF THE SHAREHOLDERS. THE FACTUAL FINDIN GS CANNOT BE INTERFERED WITH, IN APPEAL. WE ARE OF THE VIEW THAT ONCE THE IDENTITY A ND OTHER RELEVANT PARTICULARS OF SHAREHOLDERS ARE DISCLOSED, IT IS FOR THOSE SHAREHO LDERS TO EXPLAIN THE SOURCE OF THEIR FUNDS AND NOT FOR THE ASSESSEE COMPANY TO SHO W WHEREFROM THESE SHAREHOLDERS OBTAINED FUNDS. 38. FROM THE DETAILS AS AFORESAID WHICH EMERGES FRO M THE PAPER BOOK FILED BEFORE US AS WELL AS BEFORE THE LOWER AUTHORITIES, IT IS VIVID THAT ALL THE SHARE APPLICANTS ARE (I) INCOME TAX ASSESSEES, (II) THEY ARE FILING THEIR RETURN OF INCOME, (III) THE SHARE APPLICATION FORM AND ALLOTMENT LETT ER IS AVAILABLE ON RECORD, (IV) THE SHARE APPLICATION MONEY WAS MADE BY ACCOUNT PAYEE C HEQUES, (V) THE DETAILS OF THE BANK ACCOUNTS BELONGING TO THE SHARE APPLICANTS AND THEIR BANK STATEMENTS, (VI) IN NONE OF THE TRANSACTIONS THE AO FOUND DEPOSIT IN CA SH BEFORE ISSUING CHEQUES TO THE ASSESSEE COMPANY, (VII) THE APPLICANTS ARE HAVI NG SUBSTANTIAL CREDITWORTHINESS WHICH IS REPRESENTED BY A CAPITAL AND RESERVE AS NO TED ABOVE. 39. AS NOTED FROM THE JUDICIAL PRECEDENTS CITED ABO VE, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE THEN THERE IS A DUTY CASTED UPON THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF CREDIT FOUND IN HI S BOOKS. IN THE INSTANT CASE, THE CREDIT IS IN THE FORM OF RECEIPT OF SHARE CAPITAL W ITH PREMIUM FROM SHARE APPLICANTS. THE NATURE OF RECEIPT TOWARDS SHARE CAP ITAL IS SEEN FROM THE ENTRIES PASSED IN THE RESPECTIVE BALANCE SHEETS OF THE COMP ANIES AS SHARE CAPITAL AND INVESTMENTS. IN RESPECT OF SOURCE OF CREDIT, THE A SSESSEE HAS TO PROVE THE THREE NECESSARY INGREDIENTS I.E. IDENTITY OF SHARE APPLIC ANTS, GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF SHARE APPLICANTS. FOR PROVI NG THE IDENTITY OF SHARE APPLICANTS, THE ASSESSEE FURNISHED THE NAME, ADDRES S, PAN OF SHARE APPLICANTS TOGETHER WITH THE COPIES OF BALANCE SHEETS AND INCO ME TAX RETURNS. THESE TRANSACTIONS ARE ALSO DULY REFLECTED IN THE BALANCE SHEETS OF THE SHARE APPLICANTS, SO CREDITWORTHINESS IS PROVED. EVEN IF THERE WAS ANY D OUBT IF ANY REGARDING THE CREDITWORTHINESS OF THE SHARE APPLICANTS WAS STILL SUBSISTING, THEN AO SHOULD HAVE MADE ENQUIRIES FROM THE AO OF THE SHARE SUBSCRIBERS AS HELD BY HONBLE JURISDICTIONAL HIGH COURT IN CIT VS DATAWARE (SUPRA ) WHICH HAS NOT BEEN DONE, SO NO ADVERSE VIEW COULD HAVE BEEN DRAWN. THI RD INGREDIENT IS GENUINENESS OF THE TRANSACTIONS, FOR WHICH WE NOTE THAT THE MON IES HAVE BEEN DIRECTLY PAID TO M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 3 33 31 11 1 THE ASSESSEE COMPANY BY ACCOUNT PAYEE CHEQUES OUT O F SUFFICIENT BANK BALANCES AVAILABLE IN THEIR BANK ACCOUNTS ON BEHALF OF THE S HARE APPLICANTS. IT WILL BE EVIDENT FROM THE PAPER BOOK THAT THE APPELLANT HAS EVEN DEM ONSTRATED THE SOURCE OF MONEY DEPOSITED INTO THEIR BANK ACCOUNTS WHICH IN TURN HA S BEEN USED BY THEM TO SUBSCRIBE TO THE ASSESSEE COMPANY AS SHARE APPLICAT ION. HENCE THE SOURCE OF SOURCE IS PROVED BY THE ASSESSEE IN THE INSTANT CASE, THOU GH THE SAME IS NOT REQUIRED TO BE DONE BY THE ASSESSEE AS PER LAW AS IT STOOD/ APPLIC ABLE IN THIS ASSESSMENT YEAR 2012-13. THE SHARE APPLICANTS HAVE CONFIRMED THE SH ARE APPLICATION IN RESPONSE TO THE NOTICE U/S 133(6) OF THE ACT AND HAVE ALSO CONF IRMED THE PAYMENTS WHICH ARE DULY CORROBORATED WITH THEIR RESPECTIVE BANK STATEM ENTS AND ALL THE PAYMENTS ARE BY ACCOUNT PAYEE CHEQUES. 40. WE ALSO NOTE THAT RECENTLY THE ITAT KOLKATA IN SEVERAL CASES HAS DELETED THE ADDITION ON ACCOUNT OF SHARE APPLICATION IN SIM ILAR CIRCUMSTANCES. THE RELEVANT PORTION OF THE DECISIONS ARE AS FOLLOWS: (A) THE LD ITAT KOLKATA. IN DCIT VS GLOBAL MERCANTI LESPVT.LTD IN ITA NO. 1669/KOL/2009 DATED 13-01-2016. IN THIS THE DECISIO N THE LD. TRIBUNAL HELD AS FOLLOWS: 3.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE DETAILED PAPER BO OK FILED BY THE ASSESSEE. THE FACTS STATED HEREINABOVE REMAIN UNDIS PUTED ARE NOT REITERATED HEREIN FOR THE SAKE OF BREVITY. WE FIND THAT THE ASSESSEE HAD GIVEN THE COMPLETE DETAILS ABOUT THE SHARE APPLICAN TS CLEARLY ESTABLISHING THEIR IDENTITY, CREDITWORTHINESS AND GENUINENESS OF TRANSACTION PROVED BEYOND DOUBT AND HAD DULY DISCHARGED ITS ONUS IN FU LL. NOTHING PREVENTED THE LEARNED AO TO MAKE ENQUIRIES FROM THE ASSESSING OFFICERS OF THE CONCERNED SHARE APPLICANTS FOR WHICH EVERY DETAILS WERE VERY MUCH MADE AVAILABLE TO HIM BY THE ASSESSEE. WE FIND THAT THE RELIANCE PLACED BY THE LEARNED LD. CIT(1) ON THE DECISION OF THE HON'BLE A PEX COURT IN THE CASE OF CIT VS LOVELY EXPORTS (P) UD REPORTED IN (2008) 216 CTR 195 (SC) IS VERY WELL FOUNDED, WHEREIN, IT HAS BEEN VERY CLEARL Y HELD THAT THE ONLY OBLIGATION OF THE COMPANY RECEIVING THE SHARE APPLI CATION MONEY IS TO PROVE THE EXISTENCE OF THE SHAREHOLDERS AND FOR WHI CH THE ASSESSEE HAD DISCHARGED THE ONUS OF PROVING THEIR EXISTENCE AND ALSO THE SOURCE OF SHARE APPLICATION MONEY RECEIVED. 3.4. 1. WE ALSO FIND THAT THE IMPUGNED ISSUE IS ALS O COVERED BY THE DECISION OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT V S ROSEBERRY MERCANTILE (P) LTD IN GA NO. 3296 OF 2010 ITAT NO. 241 OF 2010 DATED 10.1.2011, WHEREIN THE- QUESTIONS RAISED BEFORE THEIR LORDSHIP S AND DECISION RENDERED THEREON IS AS UNDER:- M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 3 33 32 22 2 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) OUGHT TO HAVE UPHELD THE ASSESSMENT ORDER AS THE TR ANSACTION ENTERED INTO BY THE ASSESSEE WAS A SCHEME FOR LAUND ERING BLACK MONEY INTO WHITE MONEY OR ACCOUNTED MONEY AND THE L D. CIT(A) OUGHT TO HAVE HELD THAT THE ASSESSEE HAD NOT ESTABL ISHED THE GENUINENESS OF THE TRANSACTION. ' IT A NO. 1669/KOI/2009-C-AM M/S. GLOBAL MERCANTILES PVT. LTD 11 HELD AFTER HEARING THE LEARNED COUNSEL FOR THE APPELLANT AND AFTER GOING THROUGH THE DECISION OF THE SUPREME COURT IN THE CA SES OF CIT VS M/S LOVELV EXPORTS PVT LTD, WE ARE AT ONE WITH THE TRIB UNAL BELOW THAT THE POINT INVOLVED IN THIS APPEAL IS COVERED BY THE SAI D SUPREME COURT DECISION IN FAVOUR OF THE ASSESSEE AND THUS, NO SUB STANTIAL QUESTION OF LAW IS INVOLVED IN THIS APPEAL. THE APPEAL IS DEVOID OF ANY SUBSTANCE AND IS DISMISSED. 3.4.2. IN VIEW OF THE AFORESAID FINDINGS AND RESPEC TFULLY FOLLOWING THE DECISION OF THE APEX COURT (SUPRA) AND JURISDICTION AL HIGH COURT (SUPRA) , WE FIND NO INFIRMITY IN THE ORDER OF THE LEARNED CI T(A) AND ACCORDINGLY, THE GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED. 4. THE LAST GROUND TO BE DECIDED IN THIS APPEAL OF THE REVENUE IS AS TO WHETHER THE LEARNED CIT(A) IS JUSTIFIED IN DELETING THE ADDITION U/S 68 OF THE ACT MADE IN RESPECT OF ALLOTMENT OF SHARES TO 2 0 INDIVIDUALS FOR AN AMOUNT OF RS.57,00,000/- IN THE FACTS AND CIRCUMSTA NCES OF THE CASE. 4. 1. THE BRIEF FACT OF THIS ISSUE IS THAT THE ASSE SSEE HAD RECEIVED SHARE APPLICATION MONIES FROM 20 INDIVIDUALS IN THE EARLI ER YEAR WHICH WERE KEPT IN SHARE APPLICATION MONEY ACCOUNT. DURING THE ASST YEAR UNDER APPEAL, THE ASSESSEE ALLOTTED SHARES TO THESE 20 INDIVIDUAL S OUT OF TRANSFERRING THE MONIES FROM SHARE APPLICATION MONEY ACCOUNT TO SHAR E CAPITAL ACCOUNT. THE DETAILS OF 20 INDIVIDUALS ARE REFLECTED IN PAGE 6 & 7 OF THE LEARNED CIT(A) ORDER. THE LEARNED AO ASKED THE ASSESSEE TO PRODUCE THE SHAREHOLDERS BEFORE HIM. HE FOUND THAT THE ASSESSEE DID NOT DO SO BUT FURNISHED COPIES OF PAY ORDERS USED FOR PAYMENTS TO THE ASSESSEE COMPANY AND ALSO FURNISHED INCOME TAX PARTICULARS AND BALAN CE SHEETS OF ALL THE SHAREHOLDERS. THE LEARNED AO ON ANALYZING ALL THE B ALANCE SHEETS OBSERVED THAT THE SHAREHOLDERS HAVE PALTRY INCOME A ND SMALL SAVINGS AND NONE OF THEM HAVE ANY BANK ACCOUNT AND HUGE CASH BA LANCES WERE SHOWN IN THEIR HANDS OUT OF WHICH PAY ORDERS WERE OBTAINE D. BASED ON THIS, THE LEARNED AO CONCLUDED THAT THESE SHAREHOLDERS DO NOT HAVE CREDITWORTHINESS TO INVEST IN THE ASSESSEE COMPANY AND BROUGHT THE ENTIRE SUM OF RS. 57,00,000/- TO TAX AS UNEXPLAINED CASH C REDIT U/S 68 OF THE ACT. 4.2. ON FIRST APPEAL, THE LEARNED CIT(A) OBSERVED T HAT ENTIRE SHARE APPLICATION MONIES OF RS. 57,00,000/- WE RECEIVED D URING THE PREVIOUS YEAR 2004-05 RELEVANT TO ASST YEAR 2005-06 FROM 20 PERSO NS AND THE SHARES WERE ALLOTTED TO THEM DURING THE ASST YEAR UNDER AP PEAL. HE OBSERVED THAT THE ASSESSEE HAD FURNISHED DETAILS OF THE SHARE APP LICANTS GIVING THE DATE WISE RECEIPTS, MODE OF PAYMENT, AMOUNT, NAME, ADDRE SS, INCOME TAX RETURNS, PA NO. OF SHARE APPLICANTS ALONG WITH THEI R BALANCE SHEET. THE LEARNED CITA ALSO OBSERVED THAT THE ASSESSEE IN ITS REPLY TO SHOW CAUSE NOTICE BEFORE THE LEARNED AO HAD REQUESTED HIM TO U SE HIS POWER AND AUTHORITY FOR THE PHYSICAL APPEARANCE OF THE SHAREH OLDERS WHICH WAS NOT EXERCISED BY THE LEARNED AO. INSTEAD THE LEARNED AO CONTINUED TO INSIST ON THE ASSESSEE TO PRODUCE THE SHAREHOLDERS BEFORE HIM. HE ULTIMATELY CONCLUDED THAT THE ASSESSEE HAD DULY DISCHARGED ITS ONUS OF PROVIDING M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 3 33 33 33 3 COMPLETE DETAILS OF THE SHAREHOLDERS AND IN ANY CAS E, NO ADDITION COULD BE MADE U/S 68 OF THE ACT IN THE ASST YEAR UNDER APPEA L AS NO SHARE APPLICATION MONIES WERE RECEIVED DURING THE ASST YE AR UNDER APPEAL. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US BY FI LING THE FOLLOWING GROUND:- 'THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE U/S 68 IN R ESPECT OF THE ALLOTMENT OF SHARES TO 20 NUMBERS OF INDIVIDUAL INV ESTORS FOR AN AMOUNT OF RS. 57 LAKHS, WHERE GENUINENESS OF THE TR ANSACTIONS AND CREDITWORTHINESS OF THE INVESTORS WERE NOT ESTABLIS HED. 4.3. THE LEARNED DR PRAYED FOR ADMISSION OF THE ADD ITIONAL GROUND RAISED BEFORE US AND VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED AO. IN RESPONSE TO THIS, THE LEARNED AR FAIRLY CONCEDED TO ADMISSION OF THIS ADDITIONAL GROUND AND VEHEMENTLY SUPPORTED THE ORDE R OF THE LEARNED CIT(A). 4.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD INCLUDING THE DETAILED PAPER BO OK FILED BY THE ASSESSEE. WE FIND THAT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE SEPARATELY BEFORE US VIDE ITS COVERING LETTER DATED 9. 12.2011 IS ADMITTED AS IT APPEARS TO BE A GENUINE AND BONAFIDE ERROR OF OM ISSION ON THE PART OF THE REVENUE FROM NOT RAISING THIS GROUND IN THE ORI GINAL GROUNDS OF APPEAL FILED ALONG WITH THE MEMORANDUM OF APPEAL. MOREOVER , IT DOES NOT REQUIRE ANY FRESH EXAMINATION OF FACTS. HENCE THE SAME IS A DMITTED HEREIN FOR THE SAKE OF ADJUDICATION. 4.4. 1. WE FIND FROM THE DETAILS AVAILABLE ON RECOR D THAT THE SHARE APPLICATION MONIES FROM 20 INDIVIDUALS IN THE SUM O F RS.57,00,000/- HAS BEEN RECEIVED BY THE ASSESSEE DURING THE FINANCIAL YEAR 2004-05 RELEVANT TO ASST YEAR 2005-06 AND ONLY THE SHARES WERE ALLOT TED TO THEM DURING THE ASST YEAR UNDER APPEAL. ADMITTEDLY NO MONIES WERE R ECEIVED DURING THE ASST YEAR UNDER APPEAL AND HENCE THERE IS NO SCOPE FOR INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT. HENCE WE HOLD THAT THE ORDER PASSED BY THE LEARNED CITA IN THIS REGARD DOES NOT REQUIRE AN Y INTERFERENCE. ACCORDINGLY THE GROUND NO. 3 RAISED BY THE REVENUE IS DISMISSED. (B) THE ITAT KOLKATA IN R.B HORTICULTURE & ANIMAL PROJECTS CO. LTD, ITA NO. 632/KOLL2011 DATED 13-01-2016. IN THIS THE DECISION THE LD. TRIBUNAL HELD AS FOLLOWS: 6. WE HAVE HEARD THE LEARNED DR AND WHEN THE CASE WAS CALLED ON FOR HEARING , NONE WAS PRESENT ON BEHALF OF THE ASSESSEE. HOWEVER , WE FIND FROM THE FILE THAT THE ASSESSEE HAD FILED A DETAILED PAPER BOOK AND WRITTE N SUBMISSIONS. HENCE THE CASE IS DISPOSED OFF BASED ON THE ARGUMENTS OF THE LEARN ED DR AND WRITTEN SUBMISSIONS AND PAPER BOOK ALREADY AVAILABLE ON RECORD. THE FAC TS STATED IN THE LEARNED CIT(A) WERE NOT CONTROVERTED BY THE LEARNED DR BEFO RE US. WE FIND THAT THE ASSESSEE HAD GIVEN THE COMPLETE DETAILS ABOUT THE S HARE APPLICANTS CLEARLY ESTABLISHING THEIR IDENTITY, CREDITWORTHINESS AND G ENUINENESS OF TRANSACTION PROVED BEYOND DOUBT AND HAD DULY DISCHARGED ITS ONUS IN FU LL. NOTHING PREVENTED THE LEARNED AO TO MAKE ENQUIRIES FROM THE ASSESSING OFF ICERS OF THE CONCERNED SHARE APPLICANTS FOR WHICH EVERY DETAILS WERE VERY MUCH M ADE AVAILABLE TO HIM BY THE ASSESSEE. WE FIND THAT THE RELIANCE PLACED BY THE L EARNED CITA ON THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT VS LOVELV EXPORTS (P) LTD REPORTED IN M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 3 33 34 44 4 (2008) 216 CTR 195 (SC) IS VERY WELL FOUNDED, WHERE IN, IT HAS BEEN VERY CLEARLY HELD THAT THE ONLY OBLIGATION OF THE COMPANY RECEIV ING THE SHARE APPLICATION MONEY IS TO PROVE THE EXISTENCE OF THE SHAREHOLDERS AND F OR WHICH THE ASSESSEE HAD DISCHARGED THE ONUS OF PROVING THEIR EXISTENCE AND ALSO THE SOURCE OF SHARE APPLICATION MONEY RECEIVED. 6. 1. WE ALSO FIND THAT THE IMPUGNED ISSUE IS ALSO COVERED BY THE DECISION OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS R OSEBERRV MERCANTILE (P) LTD IN GA NO. 3296 OF 2010 ITAT NO. 241 OF 2010 DATED 10.1 .2011, WHEREIN THE QUESTIONS RAISED BEFORE THEIR LORDSHIPS AND DECISIO N RENDERED THEREON IS AS UNDER:- - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) OUGHT TO HAVE UPHELD THE ASSESSMENT ORDER AS THE TRANSACTION ENTERED INTO BY THE ASSESSEE WAS A SCHEME FOR LAUNDERING BLACK MONEY IN TO WHITE MONEY OR ACCOUNTED MONEY AND THE LD. CIT(A) OUGHT TO HAVE HE LD THAT THE ASSESSEE HAD NOT ESTABLISHED THE GENUINENESS OF THE TRANSACT ION.' HELD AFTER HEARING THE LEARNED COUNSEL FOR THE APPELLANT AND AFTER GOI NG THROUGH THE DECISION OF THE SUPREME COURT IN THE CASES OF CIT VS M/S LOV ELY EXPORTS PVT LTD, WE ARE AT ONE WITH THE TRIBUNAL BELOW THAT THE POIN T INVOLVED IN THIS APPEAL IS COVERED BY THE SAID SUPREME COURT DECISION IN FA VOUR OF THE ASSESSEE AND THUS, NO SUBSTANTIAL QUESTION OF LAW IS INVOLVE D IN THIS APPEAL. THE APPEAL IS DEVOID OF ANY SUBSTANCE AND IS DISMISSED. 6.2. WE FIND THAT THE ISSUE IS ALSO COVERED BY THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS VALUE CAPITAL SERVICES P LTD REPORTED IN (2008) 307 ITR 334 (DEL) , WHEREIN IT WAS HELD THAT: 'IN RESPECT OF AMOUNTS SHOWN AS RECEIVED BY THE ASS ESSEE TOWARDS SHARE APPLICATION MONEY FROM 33 PERSONS, THE ASSESSING OF FICER REQUIRED THE ASSESSEE TO PRODUCE ALL THESE PERSONS. WHILE ACCEPT ING THE EXPLANATION AND ITA NO. 632/KOI12011--C-AM M/S. R.B HORTICULTURE 6 & ANIMAL PROJ. CO. LTD THE STATEMENTS GIVEN BY THREE PERSONS THE ASSES SING OFFICER FOUND THAT THE RESPONSE FROM THE OTHERS WAS EITHER NOT AVAILAB LE OR WAS INADEQUATE AND ADDED AN AMOUNT OF RS. 46 LAKHS PERTAINING TO 3 0 PERSONS TO THE INCOME OF THE ASSESSEE. THE COMMISSIONER (APPEALS) UPHELD THE DECISION OF T HE ASSESSING OFFICER. ON APPEAL, THE TRIBUNAL SET ASIDE THE ORDER OF THE COMMISSIONER (APPEALS) AND DELETED THE ADDITIONS. ON FURTHER APPEAL: HELD, DISMISSING THE APPEAL, THAT THE ADDITIONAL BU RDEN WAS ON THE DEPARTMENT TO SHOW THAT EVEN IF THE SHARE APPLICANT S DID NOT HAVE THE MEANS TO MAKE THE INVESTMENT, THE INVESTMENT MADE B Y THEM ACTUALLY EMANATED FROM THE COFFERS OF THE ASSESSEE SO AS TO ENABLE IT TO BE TREATED AS THE UNDISCLOSED INCOME OF THE ASSESSEE. NO SUBSTANT IAL QUESTION OF LAW AROSE. ' 6.3. WE FIND THAT THE ARGUMENT OF THE LEARNED DR TO SET ASIDE THIS ISSUE TO THE FILE OF THE LEARNED AO FOR VERIFICATION OF SHARE SUBSCRI BERS WOULD NOT SERVE ANY PURPOSE AS THE RATIO DECIDED IN THE ABOVE CASES IS THAT IN ANY CASE, NO ADDITION COULD BE MADE IN THE HANDS OF THE RECIPIENT ASSESSE E. IN VIEW OF THE AFORESAID FINDINGS AND RESPECTFULLY FOLLOWING THE DECISION OF THE APEX COURT (SUPRA), JURISDICTIONAL HIGH COURT (SUPRA) AND DELHI HIGH CO URT (SUPRA) , WE FIND NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) AND AC CORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 3 33 35 55 5 (C) THE LD. ITAT KOLKATA IN ITA NO.1061/KO1/2012 I N THE CASE OF ITO WD.3(2) KOL, VS. M/S. STEEL EMPORIUM LTD DATED 05-0 2-2016. IN THIS THE DECISION THE LD. TRIBUNAL HELD AS FOLLOWS: 10. WE HAVE HEARD BOTH THE RIVAL PARTIES AND PERUS ED THE MATERIALS AVAILABLE ON RECORD. THE LD. DR VEHEMENTLY SUPPORTED THE ORDER O F THE AO. BEFORE US THE LD. AR SUBMITTED THAT THE ASSESSEE RAISED SHARE APPLICA TION MONEY DURING THE YEAR FROM 25 APPLICANTS. THE AO WAS FURNISHED WITH THE C OPY OF FORM 2 OF ALLOTMENT OF SHARES TO THE APPLICANTS AS FILED WITH THE REGISTRA R OF COMPANIES, WEST BENGAL. ON THE DATE OF RECEIPT OF SHARE APPLICATIONS FROM THE APPLICANTS, THEY FURNISHED THEIR ADDRESSES, WHICH WERE RECORDED IN THE REGISTER OF M EMBERS. THE AO OBSERVED THAT AS PER ROC RECORDS THE ADDRESSES OF THE NINE COMPAN IES WERE DIFFERENT FROM THE ADDRESS AS PER FORM FILED WITH HIM. THE AO ISSUED N OTICES U/S.133(6) TO ALL THE COMPANIES AT THE ADDRESSES FURNISHED IN FORM 2 AS F ILED WITH HIM, WHICH WERE DULY SERVED AT THE GIVEN ADDRESSES. THE A0 ARGUED THAT T HE LETTERS SHOULD NOT HAVE BEEN SERVED AT THE GIVEN ADDRESS BY THE ASSESSEE. HE SER VED A SHOW A CAUSE NOTICE DATED 09.12.2011 ASKING FOR THE EXPLANATION FROM THE ASSE SSEE AS TO HOW THE NOTICES U/S. 133(6) COULD BE SERVED TO THESE NINE COMPANIES WHO HAD DIFFERENT ADDRESS AS PER ROC RECORDS. THE AO WAS EXPLAINED VIDE LETTER DATED 20.12.2011 OF THE ASSESSEE THAT THOSE COMPANIES HAD CHANGED THEIR ADDRESSES SI NCE FILING OF FORM 2 WITH THE REGISTRAR. FURTHER, IT WAS NONE OF THE BUSINESS OF THE ASSESSEE TO QUESTION THE ADDRESSES OF THE APPLICANTS AS LONG AS THEY AFFIRM THE ADDRESS. THE APPLICANTS WERE DULY INCORPORATED BODIES UNDER THE COMPANIES ACT. 1 956 SINCE LONG. THEY HAVE BEEN REGULARLY FILING THEIR RETURNS OF INCOME UNDER THE INCOME TAX ACT AND ARE BEING ASSESSED BY THE REVENUE SINCE LONG. SOME OF T HEM ARE EVEN REGISTERED AS NON-BANKING FINANCIAL COMPANIES WITH RESERVE BANK O F INDIA. THEY HAVE BEEN FILING RETURNS REGULARLY WITH REGISTRAR OF COMPANIE S AND RBI SINCE LONG. THE LETTERS MIGHT HAVE BEEN RECEIVED AT THEIR OLD ADDRE SSES BECAUSE IN CASE OF CHANGE IN THE ADDRESS, PEOPLE INSTRUCT THE INCUMBENTS AT O LD ADDRESSES NOT TO REFUSE THE RECEIPT OF LETTERS AND RECEIVE THE SAME. JUST BECAU SE, A LETTER WAS RECEIVED AT THE OLD ADDRESS INSTEAD OF PRESENT ADDRESS, IT CANNOT B E SAID THAT THE IDENTITY OF THE APPLICANT HAS NOT BEEN VERIFIED. ALL OF THESE COMPA NIES HAD DULY REPLIED TO NOTICE U/S. 133(6) AND CONFIRMED THE TRANSACTION WITH ALL THE EVIDENCES. THE AO HAS NOT RAISED ANY OBJECTION ON ANY OF THE INFORMATION FURN ISHED BEFORE HIM. THE AO HAS NOT ASKED THE RESPECTIVE COMPANY APPLICANTS ALSO TO EXPLAIN THE ALLEGED DISCREPANCY IN THE ADDRESS. THE AO HAS NOT BROUGHT ANY MATERIAL ON ACCOUNT OF RECORD TO DISBELIEF THE EVIDENCES FURNISHED WITH HI M AND TREAT THE TRANSACTION AS NOT GENUINE. THE ASSESSEE SUBMITTED THE FOLLOWING M ATERIAL AT THE TIME OF ASSESSMENT. A) COPY OF SHARE APPLICATIONS FROM THE SHARE APPLIC ANTS (COPIES ENCLOSED) B) COPY OF FORM 2 FILED WITH REGISTRAR OF COMPANIES , WEST BENGAL (COPY ENCLOSED) C) COPY OF FORM 18 ABOUT THE REGISTERED OFFICE OF T HE APPLICANTS FOR CHANGE OF ADDRESS SUBSEQUENT TO THE DATE OF ALLOTMENT, I.E. 3 1.03.2009 (COPIES ENCLOSED) D) MEMBERS REGISTER E) SHARE APPLICATION & ALLOTMENT REGISTER F) COPY OF BOARD RESOLUTION. M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 3 33 36 66 6 G) REPLIES FROM SHARE APPLICANTS TO THE NOTICE U/S. 133(6) ISSUED TO THEM BY THE AO SEEKING INFORMATION AND DOCUMENTS ABOUT THE SOURCE S AND TO EXAMINE THEIR IDENTITY, GENUINENESS OF THE TRANSACTION AND THEIR CREDITWORTHINESS. (COPY ENCLOSED). H) COPY OF AUDITED ACCOUNTS. I) COPY OF BANK STATEMENTS. J) COPY OF INCOME TAX ACKNOWLEDGMENT OF RETURN FILE D FOR AY 2009- K) COPY OF PAN CARD. L) DETAILS OF SOURCES OF FUNDS. M) COPY OF COVERING LETTER FOR DELIVERY OF SHARES. N) COPY OF MASTER DATA AS PER MINISTRY OF COMPANY A FFAIRS RECORDS. O) COPY OF ANNUAL RETURN. P) COPY OF MEMORANDUM AND ARTICLES OF ASSOCIATION. FINALLY THE LD. AR RELIED ON THE ORDER OF THE LD. C IT(A 10. 1 FROM THE AFORESAID DISCUSSION WE FIND THAT THE AO HAS MADE THE ADDITIO N OF THE SHARE APPLICATION MONEY BECAUSE ALL THE NINE COMPANIES WERE HAVING TH E COMMON ADDRESS AND THE NOTICE SENT UNDER SECTION 133(6) WAS RECEIVED BY TH E SINGLE PERSON. ACCORDINGLY THE AO OPINED THAT THE ASSESSEE HAS USED ITS UNACCO UNTED MONEY IN THE SHARE APPLICATION TRANSACTIONS. HOWEVER WE FIND THAT ALL THE MONEY RECEIVED IN THE FORM OF SHARE CAPITAL IS DULY SUPPORTED WITH THE REQUISI TE DOCUMENT AS DISCUSSED ABOVE. TO OUR MIND THE BASIS ON WHICH THE ADDITION WAS MAD E BY THE AO IS NOT TENABLE. THE LD. DR ALSO COULD NOT BROUGHT ANYTHING ON RECOR D TO CONTROVERT THE FINDINGS OF THE LD. CIT(A). IN VIEW OF ABOVE WE FIND NO REASON TO INTERFERE IN THE ORDER OF THE ID. CIT(A). ACCORDINGLY THE GROUND RAISED BY REVENU E IS DISMISSED. (D) THE LD ITAT KOLKATA IN ITO VS CYGNUS DEVELOPERS (I) P LTD IN ITA NO. 282/KOL/2012 DATED 2.3.2016. IN THIS THE DECISION T HE LD. TRIBUNAL HELD AS FOLLOWS: 6. ON APPEAL BY THE ASSESSEE THE CIT(A) DELETED TH E ADDITION MADE BY THE AO OBSERVING AS FOLLOWS '6) I HAVE CONSIDERED THE SUBMISSION OF THE APPELLA NT AND PERUSED THE ASSESSMENT ORDER. I HAVE ALSO GONE THROUGH THE DETAILS AND DOC UMENTS FILED BY THE APPELLANT COMPANY IN THE COURSE OF ASSESSMENT: PROCEEDINGS VI DE LETTER DT. 3-10-2007. ON CAREFUL CONSIDERATION OF THE FACTS AND IN LAW I AM OF THE OPINION THAT THE AO WAS NOT JUSTIFIED IN MAKING, THE ADDITION AGGREGATING T O RS.54,00,000/- U/S.68 OF THE ACT BEING THE AMOUNT OF SHARE APPLICATION MONEY BY HOLD ING THAT THE APPELLANT COMPANY HAS FAILED TO PROVE THE IDENTITY, AND CREDI TWORTHINESS OF THE CREDITORS AS WELL AS THE GENUINENESS OF TRANSACTIONS. IT IS OBSE RVED THAT ALL THE THREE SHARE APPLICANT COMPANIES I.E. M/S. SHREE SHYAMTREXIM PVT . LTD., M/S NAVALCO COMMODITIES PVT. LTD. AND M/S. JEWELLOCKTREXIM PVT. LTD. HAD FILED THEIR CONFIRMATIONS WHEREIN EACH OF THEM CONFIRMED THAT T HEY HAD APPLIED FOR SHARES OF THE APPELLANT -COMPANY. ALL THE THREE COMPANIES PRO VIDED- THE CHEQUE NUMBER, COPY OF BANK STATEMENTS AND THEIR PAN. IT IS OBSERV ED THAT THESE COMPANIES ALSO FILED, COPIES OF THEIR RETURN OF INCOME AND FINANCI AL STATEMENTS FOR AS WELL AS COPY OF THEIR ASSESSMENT ORDER U/S. 143(3) OF THE I. T A CT FOR AY 2005-06. IN THE CASE OF M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 3 33 37 77 7 M/S. JEWELLOCKTREXIM PVT. LTD. THE ASSESSMENT FOR A Y 2005-06 WAS COMPLETED BY THE ITO WARD 9(3), KOLKATA AND THE ASSESSMENTS IN T HE CASE OF M/S. NAVALCO COMMODITIES PVT. LTD. AND M/S. SHREE SHYAMTREXIM PV T. LTD. FOR A. Y.2005-06 AND AY.2004-05 RESPECTIVELY WERE COMPLETED BY THE I TO, WARD 9(4), KOLKATA. UNDER THE CIRCUMSTANCES, I AM OF THE OPINION THAT THE AO WAS NOT JUSTIFIED IN HOLDING THAT THE SHARE APPLICANT COMPANIES WERE NOT IN EXISTENCE . THE ASSESSMENT ORDERS WERE COMPLETED ON THE ADDRESS AS PROVIDED BY THE APPELLA NT COMPANY IN THE COURSE OF ASSESSMENT PROCEEDINGS. IT IS NOT KNOWN AS TO HOW T HE AO'S INSPECTOR HAD REPORTED THAT THE AFORESAID COMPANIES WERE NOT IN EXISTENCE AT THE GIVEN ADDRESS. SINCE THE APPELLANT COMPANY HAD PROVIDED SUFFICIENT DOCUMENTA RY EVIDENCES IN SUPPORT OF ITS CLAIM OF RECEIPT OF SHARE APPLICATION MONEY, I AM O F THE OPINION THAT THE NO ADDITION U/S.68 COULD BE MADE IN THE HANDS OF APPEL LANT COMPANY. ON GOING THROUGH THE VARIOUS JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT, IT IS OBSERVED THAT THE VIEW TAKEN AS ABOVE IS ALSO SUPPO RTED BY THEM. IN VIEW OF ABOVE THE AO IS DIRECTED TO DELETE THE ADDITION OF RS.54, 00,000/ -. THE GROUND NOS. 2 AND 3 ARE ALLOWED, ' 7. AGGRIEVED BY THE ORDER OF CIT{A) THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 8. WE HAVE HEARD THE SUBMISSIONS OF THE LEARNED DR , WHO RELIED ON THE ORDER OF AO. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF CIT(A) AND FURTHER DREW OUR ATTENTION TO THE DECISION OF HON'B LE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS RAJ KUMAR AGARWAL VIDE ITA NO. 179/2 008, DATED 17. 11.2009 WHEREIN THE HON 'BLE ALLAHABAD HIGH COURT TOOK A VI EW THAT NON PRODUCTION OF THE DIRECTOR OF A PUBLIC LIMITED COMPANY WHICH IS REGUL ARLY ASSESSED TO INCOME TAX HAVING PAN, ON THE GROUND THAT THE IDENTITY OF THE INVESTOR IS NOT PROVED CANNOT BE SUSTAINED. ATTENTION WAS ALSO TO THE SIMILAR RULING OF THE ITAT KOLKATA BENCH IN THE CASE OF ITO VS DEVINDER SINGH SHANT IN IT A NO.20BI KO112009 VIDE ORDER DATED 17.04.2009. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS., WE A RE OF THE VIEW THAT ORDER OF CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. IT MA Y BE SEEN FROM THE GROUNDS OF APPEAL RAISED BY THE REVENUE THAT THE REVENUE DISPU TED ONLY THE PROOF OF IDENTITY OF THE SHAREHOLDER. IN THIS REGARD IT IS SEEN THAT FOR A Y.2004-05 SHREE SHYAMTREXIM PVT. LTD., WAS ASSESSED BY ITO, WARD- 9 (4), KOLKATA AND THE ORDER OF ASSESSMENT U/S/143(3) DATED 25.01.2006 IS PLACED IN THE PAPER BOOK. SIMILARLYNAVALCO COMMODITIES PVT. LTD., WAS ASSESSE D TO TAX U/S 143(3) FOR A Y.2005-06 BY I TO, WARD- 9(4), KOLKATA BY ORDER DAT ED 20.03.2007. SIMILARLYJEWELLOCKTREXIM PVT. LTD WAS ASSESSED TO T AX FOR A Y.2005-06 BY THE VERY SAME ITO- WARD- 9(3), KOLKATA ASSESSING THE ASSESSE E. IN THE LIGHT OF THE ABOVE FACTUAL POSITION WHICH IS NOT DISPUTED BY THE REVEN UE, IT CANNOT BE SAID THAT THE IDENTITY OF THE SHARE APPLICANTS REMAINED NOT PROVE D BY THE ASSESSEE. THE DECISION OF THE HON'BLE ALLAHABAD HIGH COURT AS WELL AS ITA T KOLKATA BENCH ON WHICH RELIANCE WAS PLACED BY THE LEARNED COUNSEL FOR THE ASSESSEE ALSO SUPPORTS THE VIEW THAT FOR NON PRODUCTION OF DIRECTORS OF THE INVESTO R COMPANY FOR EXAMINATION BY THE AO IT CANNOT BE HELD THAT THE IDENTITY OF A LIMITED COMPANY HAS NOT BEEN ESTABLISHED. FOR THE REASONS GIVEN ABOVE WE UPHOLD THE ORDER OF CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. ' 41. RELIANCE IN THIS REGARD IS ALSO PLACED ON THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF CIT VS GANGESHWARI METAL (P) L TD (ITA NO. 597 OF 2012) DATED 21.01.2012. IN THIS CASE THE ASSESSEE HAD RE CEIVED SHARE APPLICATION MONEY OF RS.55.50 LACS DURING THE YEAR IN QUESTION. THE A SSESSEE FILED THE COMPLETE M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 3 33 38 88 8 NAMES, ADDRESSES OF THE SHARE APPLICANTS, CONFIRMAT ORY LETTERS FROM THEM, COPIES OF BANK STATEMENTS OF BOTH THE COMPANY AS WELL AS THE SHARE APPLICANTS AND COPIES OF SHARE APPLICATION FORMS. IN SPITE OF THE AFORESAID DOCUMENTARY EVIDENCES THE AO HELD THE EXPLANATION TO BE UNACCEPTABLE AND TREATED THE SHARE APPLICATION AS UNEXPLAINED CASH CREDIT THEREBY MAKING ADDITION UND ER SECTION 68 OF THE INCOME- TAX ACT, 1961. ON APPEAL THE CIT(APPEALS) DELETED T HE AFORESAID ADDITION HOLDING THAT THE IDENTITY OF THE SHARE APPLICANTS STOOD EST ABLISHED BEYOND DOUBT, ALL THE PAYMENTS WERE THROUGH ACCOUNT PAYEE CHEQUES AND THE SHARE APPLICANTS WERE REGULAR INCOME-TAX ASSESSEES. THE CIT(APPEALS) FURT HER HELD THAT THE REVENUE DID NOT BRING ANY EVIDENCE ON RECORD TO SUGGEST THAT TH E SHARE APPLICATION HAD BEEN RECEIVED BY THE ASSESSEE FROM ITS OWN UNDISCLOSED S OURCES NOR ANY MATERIAL WAS BROUGHT ON RECORD TO SHOW THAT THE APPLICANTS WERE BOGUS. THE REVENUE WAS NEITHER ABLE TO CONTROVERT THE DOCUMENTARY EVIDENCE S FILED BY THE APPELLANT NOR PROVE THAT THE SHARE APPLICATION WERE INGENUINE OR THE APPLICANTS WERE NON- CREDITWORTHY. THE FINDINGS OF THE CIT(APPEALS) WERE UPHELD BY THE INCOME-TAX APPELLATE TRIBUNAL. ON APPEAL TO THE HIGH COURT, TH E REVENUE PLACED STRONG RELIANCE ON THE DECISION OF ANOTHER COORDINATE BENC H OF THE SAME COURT IN THE' CASE OF CIT VS NOVO PROMOTERS &FINLEASE (P) LTD (34 2 ITR 169). THE HIGH COURT HOWEVER HELD THAT THE AFORESAID JUDGMENT WAS DISTIN GUISHABLE FROM THE FACTS OF THE PRESENT CASE. THE COURT OBSERVED THAT IN THAT JUDGM ENT THE ASSESSING OFFICER HAD BROUGHT ON RECORD ENOUGH CORROBORATIVE EVIDENCE TO SHOW THAT THE ASSESSEE HAD ROUTED UNACCOUNTED MONIES INTO ITS BOOKS THROUGH ME DIUM OF SHARE SUBSCRIPTION. THE SHARE APPLICANTS HAD CONFESSED THAT THEY WERE ' ACCOMMODATION ENTRY PROVIDERS'. THE ASSESSING OFFICER IN THE LATTER CAS E WAS ABLE TO PROVE WITH ENOUGH MATERIAL THAT THE SHARE SUBSCRIPTION WAS A PRE-MEDI TATED PLAN TO ROUTE UNACCOUNTED MONIES. IN THE PRESENT CASE HOWEVER, THE DEPARTMENT WAS UNABLE TO BRING ANY MATERIAL WHATSOEVER SHOWS THAT SHARE APPLICATION WA S IN THE NATURE OF ACCOMMODATION ENTRIES. THE COURT OBSERVED THAT THE APPELLANT HAD FILED SUFFICIENT DOCUMENTARY EVIDENCES TO ESTABLISH THE IDENTITY AND CREDITWORTHINESS OF THE SHARE APPLICANT AND THE GENUINENESS OF THE TRANSACTION. T HE AO HOWEVER CHOSE TO SIT BACK WITH FOLDED HANDS TILL THE ASSESSEE EXHAUSTED ALL THE EVIDENCE IN HIS POSSESSION AND THEN MERELY REJECT THE SAME WITHOUT CONDUCTING ANY INQUIRY OR M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 3 33 39 99 9 VERIFICATION WHATSOEVER. THE COURT THUS HELD THAT T HE DECISION OF CIT VS NOVO PROMOTERS &FINLEASE (P) LTD (342 ITR 169) WAS NOT A PPLICABLE TO THE FACTS OF THE CASE. INSTEAD IT WAS HELD THAT THE ISSUE IN HANDS W AS ON THE LINES OF THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT VS LOVELY EXPO RTS PVT LTD (319 ITR 5). ACCORDINGLY. THE ADDITION MADE UNDER SECTION 68 ON ACCOUNT OF SHARE APPLICATION WAS DELETED. 42. WE WOULD LIKE TO REPRODUCE THE HON'BLE HIGH CO URT ORDER IN CIT VS. GANGESHWARI METAL P.LTD. IN ITA NO. 597/2012 JUDGEM ENT DATED 21.1.2013, THE HON'BLE HIGH COURT AFTER CONSIDERING THE DECISIONS IN THE CASE OF NOVA PROMOTERS AND FINLEASEPVT. LTD. 342 ITR 169 AND JUDGEMENT IN THE CASE OF CIT VS. LOVELY EXPORTS 319 ITR (SAT 5)(5. C) HELD AS FOLLOWS:- AS CAN BE SEEN FROM THE ABOVE EXTRACT, TWO TYPES O F CASES HAVE BEEN INDICATED. ONE IN WHICH THE ASSESSING OFFICER CARRIES OUT THE EXERCISE WHICH IS REQUIRED IN LAW AND THE OTHER IN WHICH THE ASSESSING OFFICER 'S ITS BACK WITH FOLDED HANDS' TILL THE ASSESSEE EXHAUSTS ALL THE EVIDENCE OR MATERIAL IN HIS POSSESSION AND THEN COMES FORWARD TO MERELY REJECT THE SAME ON THE PRESUMPTIO NS. THE PRESENT CASE FALLS IN THE LATTER CATEGORY. HERE THE ASSESSING OFFICER AFT ER NOTING THE FACTS, MERELY REJECTED THE SAME. THIS WOULD BE APPARENT FROM THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER TO THE FOLLOWING EF FECT:- ''INVESTIGATION MADE BY THE INVESTIGATION WING OF T HE DEPARTMENT CLEARLY SHOWED THAT THIS WAS NOTHING BUT A SHAM TRANSACTION OF ACCOMMODATION ENTRY. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE SAID AMOUNT OF RS.1,11,50,000/- MAY NOT BE ADDED TO ITS INCOME. IN RESPONSE, THE ASSESSEE HAS SUBMITTED THAT THERE IS NO SUCH CREDIT IN THE B OOKS OF THE ASSESSEE. RATHER, THE ASSESSEE COMPANY HAS RECEIVED THE SHARE APPLICATION MONEY FOR ALLOTMENT OF ITS SHARE. IT WAS STATED THAT THE ACTUAL AMOUNT RECEIVED WAS RS.55,50,000/- AND NOT RS.1,11,50,000/- AS MENTIONE D IN THE NOTICE. THE ASSESSEE HAS FURNISHED DETAILS OF SUCH RECEIPTS AND THE CONTENTION OF THE ASSESSEE IN RESPECT OF THE AMOUNT IS FOUND CORRECT. AS SUCH THE UNEXPLAINED AMOUNT IS TO BE TAKEN AT RS.55,50,000/-. THE ASSESS EE HAS FURTHER TRIES TO EXPLAIN THE SOURCE OF THIS AMOUNT OF RS.55,50,000/- BY FURNISHING COPIES OF SHARE APPLICATION MONEY, BALANCE4 SHEET ETC. OF THE PARTIES MENTIONED ABOVE AND ASSERTED THAT THE QUESTION OF ADDITION IN THE INCOME OF THE ASSESSEE DOES NOT ARISE. THIS EXPLANATION OF THE AS SESSEE HAS BEEN DULY CONSIDERED AND FOUND NOT ACCEPTABLE. THIS ENTRY REM AINS UNEXPLAINED IN THE HANDS OF THE ASSESSEE AS HAS BEEN ARRIVED BY TH E INVESTIGATION WING OF THE DEPARTMENT. AS SUCH ENTRIES OF RS.5~50/000/- RE CEIVED BY THE ASSESSEE ARE TREATED AS AN UNEXPLAINED CASH CREDIT IN THE HA NDS OF THE ASSESSEE AND ADDED TO ITS INCOME. SINCE I AM SATISFIED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME/ PENALTY PROCE EDINGS UNDER SECTION 271(1)(C) ARE BEING INITIATED SEPARATELY. THE FACTS OF NOVA PROMOTERS AND FINLEASE (P) LTD. ( SUPRA) FALL IN THE FORMER CATEGORY AND THAT IS WHY THIS COURT DECIDED IN FAVO UR OF THE REVENUE IN THAT CASE. HOWEVER, THE FACTS OF THE PRESENT CASE ARE CLEARLY DISTINGUISHABLE AND FALL IN THE M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 4 44 40 00 0 SECOND CATEGORY AND ARE MORE IN LINE WITH FACTS OF LOVELY EXPORTS (P) LTD. (SUPRA). THERE WAS A CLEAR LACK OF INQUIRY ON THE PART OF TH E ASSESSING OFFICER ONCE THE ASSESSEE HAD FURNISHED ALL THE MATERIAL WHICH WE HA VE ALREADY REFERRED TO ABOVE. IN SUCH AN EVENTUALITY NO ADDITION CAN BE MADE UNDE R SECTION 68 OF THE INCOME TAX ACT 1961. CONSEQUENTLY, THE QUESTION IS ANSWERED IN THE NEGATIVE. THE DECISION OF THE TRIBUNAL IS CORRECT IN LAW 43. THE CASE ON HAND CLEARLY FALLS IN THE CATEGORY WHERE THERE IS LACK OF ENQUIRY ON THE PART OF THE A. O. AS IN THE CASE OF GANJESHW ARI METALS (SUPRA). B) IN THE CASE OF FINLEASE PVT LTD. 342 ITR 169 (SU PRA) IN ITA 232/2012 JUDGEMENT DT. 22.11.2012 AT PARA 6 TO 8/ IT WAS HEL D AS FOLLOWS. '6. THIS COURT HAS CONSIDERED THE SUBMISSIONS OF TH E PARTIES. IN THIS CASE THE DISCUSSION BY THE COMMISSIONER OF INCOME TAX (A PPEALS) WOULD REVEAL THAT THE ASSESSEE HAS FILED DOCUMENTS INCLUDING CER TIFIED COPIES ISSUED BY THE ROC IN RELATION TO THE SHARE APPLICATION AFFIDA VITS OF THE DIRECTORS, FORM 2 FILED WITH THE ROC BY SUCH APPLICANTS CONFIR MATIONS BY THE APPLICANT FOR COMPANY'S SHARES, CERTIFICATES BY AUD ITORS ETC. UNFORTUNATELY, THE ASSESSING OFFICER CHOSE TO BASE HIMSELF MERELY ON THE GENERAL INFERENCE TO BE DRAWN FROM THE READING OF THE INVES TIGATION REPORT AND THE STATEMENT OF MR. MAHES GARG. TO ELEVATE THE INFEREN CE WHICH CAN BE DRAWN ON THE BASIS OF READING OF SUCH MATERIAL INTO JUDICIAL CONCLUSIONS WOULD BE IMPROPER, MORE SO WHEN THE ASSESSEE PRODUC ED MATERIAL. THE LEAST THAT THE ASSESSING OFFICER OUGHT TO HAVE DONE WAS TO ENQUIRE INTO THE MATTER BY, IF NECESSARY, INVOKING HIS POWERS UNDER SECTION 131 SUMMONING THE SHARE APPLICANTS OR DIRECTORS. NO EFFORT WAS MA DE IN THAT REGARD. IN THE ABSENCE OF ANY SUCH FINDING THAT THE MATERIAL DISCL OSED WAS UNTRUSTWORTHY OR LACKED CREDIBILITY THE ASSESSING OFFICER MERELY CONCLUDED ON THE BASIS OF ENQUIRY REPORT, WHICH COLLECTED CERTAIN FACTS AN D THE STATEMENTS OF MR.MAHESH GARG THAT THE INCOME SOUGHT TO BE ADDED F ELL WITHIN THE DESCRIPTION OFS.68 OF THE INCOME TAX ACT 1961. HAVI NG REGARD TO THE ENTIRETY OF FACTS AND CIRCUMSTANCES, THE COURT IS S ATISFIED THAT THE FINDING OF THE TRIBUNAL IN THIS CASE ACCORDS WITH THE RATIO OF THE DECISION OF THE SUPREME COURT IN LOVELY EXPORTS (SUPRA). THE DECISION IN THIS CASE IS BASED ON THE PECULIAR FACTS WHICH ATTRACT THE RATIO OF LOVELY EXPORTS (SUPRA). WHERE THE ASSESSEE ADDUCES EVIDENCE IN SUPPORT OF THE SHARE APPLICATION MONIES, IT IS OPEN TO THE ASSESSING OFFICER TO EXAMINE IT AND REJECT IT ON TENABLE GROUNDS. IN CASE HE WISHES TO RELY ON THE REPORT OF THE INVESTIGATION AUTHORITIES, SOME M EANINGFUL ENQUIRY OUGHT TO BE CONDUCTED BY HIM TO ESTABLISH A LINK BETWEEN THE ASSESSEE AND THE ALLEGED HAWALA OPERATORS, SUCH A LINK WAS SHOWN TO BE PRESENT IN THE CASE OF NOVA PROMOTERS &FINLEASE (P) LTD. (SUPRA) RELIED UPON BY THE REVENUE. WE ARE THEREFORE NOT TO BE UNDERSTOOD TO CONVEY THA T IN ALL CASES OF SHARE CAPITAL ADDED UNDER SECTION THE RATIO OF LOVELY EXPORTS (SUPRA) IS ATTRACTED, I RRESPECTIVE OF THE FACTS, EVIDENCE AND MATERIAL. ' 44. TO CONCLUDE, IN THIS CASE ON HAND, THE ASSESSEE HAD DISCHARGED ITS ONUS TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENES S OF THE SHARE APPLICANTS, THEREAFTER THE ONUS SHIFTED TO AO TO DISPROVE THE D OCUMENTS FURNISHED BY M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 4 44 41 11 1 ASSESSEE,CANNOT BE BRUSHED ASIDE BY THE AO TO DRAW ADVERSE VIEW, CANNOT BE COUNTENANCED. IN THE ABSENCE OF ANY INVESTIGATION, MUCH LESS GATHERING OF EVIDENCE BY THE ASSESSING OFFICER, WE HOLD THAT AN ADDITION CANNOT BE SUSTAINED MERELY BASED ON INFERENCES DRAWN BY CIRCUMSTANCE. A PPLYING THE PROPOSITIONS LAID DOWN IN THESE CASE LAWS TO THE FACTS OF THIS CASE, WE ARE INCLINED TO UPHOLD THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL S).SECTION 68 OF THE ACT PROVIDES THAT IF ANY SUM FOUND CREDITED IN THE YEAR IN RESPECT OF WHICH THE ASSESSEE FAILS TO EXPLAIN THE NATURE AND SOURCE SHALL BE ASS ESSED AS ITS UNDISCLOSED INCOME. IN THE FACTS OF THE PRESENT CASE, BOTH THE NATURE & SOURCE OF THE SHARE APPLICATION RECEIVED WAS FULLY EXPLAINED BY THE ASSESSEE. THE A SSESSEE HAD DISCHARGED ITS ONUS TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINE NESS OF THE SHARE APPLICANTS. THE PAN DETAILS, BANK ACCOUNT STATEMENTS, AUDITED F INANCIAL STATEMENTS AND INCOME TAX ACKNOWLEDGMENTS WERE PLACED ON AO'S RECO RD. ACCORDINGLY ALL THE THREE CONDITIONS AS REQUIRED U/S. 68 OF THE ACT I.E . THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION WAS PLACED BEFO RE THE AO AND THE ONUS SHIFTED TO AO TO DISPROVE THE MATERIALS PLACED BEFORE HIM. WITHOUT DOING SO, THE ADDITION MADE BY THE AO IS BASED ON CONJECTURES AND SURMISES CANNOT BE JUSTIFIED. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED AB OVE, NO ADDITION WAS WARRANTED UNDER SECTION 68 OF THE ACT. THEREFORE, WE CONFIRM THE ORDER OF LD CIT(A) IN DELETING THE ADDITION OF RS.1,60,00,000/- 45. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE COURT ON 29.03.2019 SD/- ( A.T.VARKEY ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA; / DATE: 29/03/2019 ( SB, SR.PS ) M/S MEGASUN MERCHANTS PVT. LTD. ITA NO.1038/KOL/2015 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 4 44 42 22 2 COPY OF THE ORDER FORWARDED TO: 1. ITO, WARD-2(1), SILIGURI 2. M/S MEGASUN MERCHANTS PVT. LTD. 3. C.I.T(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, KOLKA TA BENCHES
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