Vijay Aggarwal, Delhi V. ITO, Ward- 48(5), New Delhi

ITA 1077/DEL/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4707 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 11-02-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P V GUPTA
• Assessee Lawyers: SHYAM SUNDER ARS
• Keywords: Reopening of assessment; Unexplained cash credit; Unexplained investment; Income from undisclosed sources; Search and seizure; Share purchase agreement; Question of law; Cost of acquisition; Tangible material; Fair market value; Corroborative evidences; Accommodation entries; Competent authority; Onus to prove; Reason to believe; Reassessment proceedings
• Section: 143(3); 142(1); 56(2); 143(1); 195; 69B; 32; 147; 69; 148; 68

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH A, NEW DELHI BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 1077/DEL/2019 ASSESSMENT YEAR: 2010-11 SHRI VIJAY AGARWAL, C - 169, PUSHPANJALI ENCLAVE, PRITAMPURA, DELHI (PAN- AFSPA8080P) (APPELLANT) VS. INCOME - TAX OFFICER, WARD 48(5), NEW DELHI (RESPONDENT) ITA NO. 1078/DEL/2019 ASSESSMENT YEAR: 2010-11 SHRI RAJ GUPTA, C - 169, PUSHPANJALI ENCLAVE, PRITAMPURA, DELHI (PAN- AGSOG2661F) (APPELLANT) VS. INCOME - TAX OFFICER, WARD 48(5), NEW DELHI (RESPONDENT) ITA NO. 1079/DEL/2019 ASSESSMENT YEAR: 2010-11 SMT. SHEELA DEVI, 1756, NAI BASTI NAYA BAZAR, DELHI (PAN- AAAPD3717F) (APPELLANT) VS. INCOME - TAX OFFICER, WARD 47(1), NEW DELHI (RESPONDENT) ITA NO. 1080/DEL/2019 ASSESSMENT YEAR: 2010-11 SHRI MANOJ AGARWAL, 1756, NAI BASTI, NAYA BAZAR, DELHI (PAN- ADCPA1665J) (APPELLANT) VS. INCOME - TAX OFFICER, WARD 48(2), NEW DELHI (RESPONDENT) ITA NOS. 1077 TO 1081/DEL/2019 2 ITA NO. 1081/DEL/2019 ASSESSMENT YEAR: 2010-11 SHRI MANISH AGARWAL, C - 169, PUSHPANJALI ENCLAVE, PRITAMPURA, DELHI (PAN- AEWPA7232G) (APPELLANT) VS. INCOME - TAX OFFICER, WARD 48(5), NEW DELHI (RESPONDENT) APPELLANT BY S/SH. RAJEEV SAXENA, R.P. MALL, ADVOCATES S/SH. AJIT KUMAR JHA AND SHYAM SUNDER, ARS RESPONDENT BY SH. P.V. GUPTA, SR. DR ORDER PER L.P. SAHU, A.M.: THE AFORESAID BUNCH OF APPEALS BY DIFFERENT ASSESS EES ARE DIRECTED AGAINST THE SEPARATE ORDERS OF LD. CIT(A)-16, NEW D ELHI DATED 28.12.2018 FOR THE ASSESSMENT YEAR 2010-11. SINCE THE GROUNDS RAIS ED, ISSUES INVOLVED AND THE CONTENTIONS MADE BY BOTH THE PARTIES ARE IDENTI CAL, THE SAME WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLID ATED ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. BOTH THE PARTIES AGREED TH AT THE DECISION IN ONE APPEAL SHALL EQUALLY APPLY TO THE OTHER APPEALS. WE , THEREFORE, TAKE UP THE APPEAL OF THE ASSESSEE, SHRI VIJAY AGARWAL IN ITA N O. 1077/DEL/2019 FIRST. 2. THE GROUNDS RAISED IN THIS APPEAL READ AS UNDER : 1. THAT, THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER AND J USTIFYING THE REASSESSMENT PROCEEDINGS BECAUSE: DATE OF HEARING 25.04.2019 DATE OF PRONOUNCEMENT 30.05.2019 ITA NOS. 1077 TO 1081/DEL/2019 3 A. HE HAS FAILED TO APPRECIATE THAT THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT WITHOUT SATISFYING THE STA TUTORY PRE- CONDITIONS ENVISAGED IN THE ACT AND THIS GROUND ITS ELF DESERVES THE ASSESSMENT TO BE QUASHED. B. THE AO HAS FAILED TO FORM THE BELIEVE THAT ANY I NCOME HAS ESCAPED THE ASSESSMENT AND MERELY ON ASSUMPTION ON PRESUMPTION, IMAGINARY FIGURES HAVE BEEN ADOPTED WHICH HAS NO RE LEVANCE WITH THE FACTS OF THE CASE. C. THE AO HAS INITIATED THE PROCEEDINGS ON THE BASI S OF MERE INFORMATION RECEIVED WITHOUT INDEPENDENT APPLICATIO N OF MIND WHICH IS MANDATORY TO REOPEN THE ASSESSMENT AND TO FORM AN OPINION THAT INCOME HAS ESCAPED THE ASSESSMENT. D. THE ASSESSMENT PROCEEDINGS ARE BARRED BY LIMITAT ION BEING INITIATED AFTER THE PERIOD OF SIX YEARS. E. THE ASSESSING OFFICER HAS NOT FULFILLED EITHER T HE CONDITION FOR ISSUING NOTICE OR FOR COMPLETING THE ASSESSMENT PRO CEEDINGS. F. BOTH THE AUTHORITIES HAVE FAILED TO NOTICE THAT PROVISIONS OF SECTION 147 ARE NOT APPLICABLE ONCE SEARCH MATERIAL FOUND DURING SEARCH WAS RELIED UPON AND PROVISIONS OF 153C ARE S EPARATELY PROVIDED FOR THIS SPECIFIC PURPOSE WHILE NO SUCH SA TISFACTION HAD BEEN RECORDED AND IN ORDER TO OVERCOME THE LACUNA, SUCH PROVISIONS HAVE BEEN APPLIED. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS O N FACTS IN CONFIRMING THE ADDITION MADE BY THE AO OF RS. 3,51, 52,680/- WHILE REFERRING THE PROVISIONS OF SECTION 56(2)(VII)(C)(I I), IGNORING THE FACTS THAT THE ASSESSEE HAD ACQUIRED SHARES BEFORE THE COMMENC EMENT OF SAID PROVISION OF THE INCOME TAX ACT, 1961. 3. THAT, THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AS WELL ON FACTS IN CONFIRMING THE ADDITION MADE BY THE AO OF RS. 25,00 ,000/- U/S 68 OF THE INCOME TAX ACT, 1961 RELATING TO THE UNSECURED LOAN RAISED BY THE ASSESSEE FROM M/S VIDYA SHANKER INVESTMENT PRIVATE LIMITED. ITA NOS. 1077 TO 1081/DEL/2019 4 3. THE BRIEF FACTS PERTAINING TO THIS APPEAL ARE TH AT A SEARCH AND SEIZURE OPERATION WAS CARRIED OUT ON 14.09.2010 ON THE DIF FERENT PERSONS/ COMPANIES RELATED TO THE 'JAGAT GROUP' WHERE VARIOUS INCRIMIN ATING DOCUMENTS WERE FOUND AND SEIZED FROM THE RESIDENTIAL PREMISES OF T HE KEY PERSON SRI SATISH PAWA. DOCUMENTS SO FOUND RELATED TO ACQUISITION/ PU RCHASE OF A PAPER COMPANY, M/S INDEX SECURITIES & RESEARCH PVT. LTD. IN THE SHAPE OF A CHART CONTAINING THE DETAILS OF PURCHASE OF SHARES AT A V ERY LOW PRICE. ON THE BASIS OF INFORMATION RECEIVED FROM DCIT, CENTRAL CIRCLE-09, TO THE ABOVE EFFECT, THE ASSESSING OFFICER ISSUED NOTICE U/S. 148 AFTER RECO RDING THE FOLLOWING REASONS : SEARCH AND SEIZURE OPERATION WAS CARRIED OUT ON 14 .09.2010 ON THE DIFFERENT PERSONS/ COMPANIES RELATED TO THE 'JAGAT GROUP'. VARIOUS INCRIMINATING DOCUMENTS WERE FOUND AND SEIZED FROM THE RESIDENTIA L PREMISES OF THE KEY PERSON SRI SATISH PAWA. DOCUMENTS RELATED TO ACQUISITION/ PURCHASE OF A PAPER COMPANY, M/S INDEX SECURITIES & RESEARCH PVT. LTD. IN THE SH APE OF A CHART CONTAINING THE DETAILS OF PURCHASE OF SHARES AT A VERY LESS INTRIN SIC VALUE WAS FOUND AND SEIZED. ACCORDINGLY, INFORMATION IN THE CASE OF SH. VIJAY A GGARWAL HAS BEEN RECEIVED FROM THE DCIT, CENTRAL CIRCLE-9 (ERSTWHILE), NEW DELHI V IDE HIS LETTER F.NO. DCIT/CC- 09/12-13/2015, DATED 09.07.2013. 2. VIDE LETTER F. NO. DCIT/CC-09/12-13/190, DATED 2 5.06.2013, HE HAD INFORMED THAT ON 15.09.2009, SH. VIJAY AGGARWAL HAD PURCHASED 3,94,000 SHARES OF M/S INDEX SECURITIES & RESEARCH PVT. LTD. (PAN : AA ACI2919K) FROM M/S LOTUS REALCON PVT. LTD. @ RS.2.25 PER SHARE. TOTAL VALUE PAID OF RS.8,86,500/-. SH. VIJAY AGGARWAL ALONG WITH 18 OTHER PERSONS (ALL ARE RELAT ED TO THE 'JAGAT GROUP') HAD PURCHASED THE TOTAL SHAREHOLDING OF THE SAID COMPAN Y FROM DIFFERENT ENTITIES. BY THIS WAY, THE COMPANY WAS TOTALLY ACQUIRED BY THE 'JAGAT GROUP'. THE TOTAL CONTROL OVER THE AFFAIRS OF THE COMPANY WAS UNDERTAKEN TO PASS O N THE ASSETS HOLDING TO VARIOUS RELATIVES/ FAMILY MEMBERS IN THE SHAPE OF UNSECURED LOANS, WHICH WERE LATER UTILIZED IN THE DIFFERENT ONGOING BUSINESS PROJECTS OF THE GROUP. THE CONTROL OVER THIS COMPANY WAS EARLIER HELD/ MANAGED BY SHRI S.K. JAIN , A WELL KNOWN ENTRY OPERATOR, WHO HAD SOLD THIS PAPER COMPANY TO THE 'JAGAT GROUP '. THIS WHOLE EXERCISE WAS FOUND TO BE AN ACCOMMODATION ENTRY. 2.2. FURTHER, VIDE LETTER F. NO. DCIT/CC-09/12-13/ 215, DATED 09.07.2013, HE HAD INFORMED THAT SH. VIJAY AGGARWAL HAD RECEIVED UNSEC URED LOAN OF RS. 25,00,000/- FROM M/S VIDHYA SHANKAR INVESTMENTS PVT. LTD. HOWEV ER, THIS COMPANY WAS PURCHASED BY THE PERSONS CONNECTED TO AND CONTROLLE D BY JAGAT GROUP AND HIS ITA NOS. 1077 TO 1081/DEL/2019 5 ASSOCIATES. DURING THE COURSE OF SEARCH AT D-842, I IND FLOOR, NEW FRIENDS COLONY, NEW DELHI, CERTAIN INCRIMINATING DOCUMENTS WERE FOU ND AND SEIZED WHICH SHOWS THAT THE SHARES OF THE COMPANY STANDING IN THE NAME OF VARIOUS INVESTORS WHO HAD ALLEGEDLY GIVEN SHARE CAPITAL/SHARE PREMIUM, DURING THE YEAR UNDER CONSIDERATION WERE TRANSFERRED TO VARIOUS PERSONS IN F.Y. 2009-10 CONNECTED AND CONTROLLED BY JAGAT GROUP. THE PURCHASERS OF THE SHARES ARE EITHE R EMPLOYEES OF JAGAT GROUP OR RELATIVES OF THE KEY PERSONS OF JAGAT GROUP SRI S ATISH KUMAR PAWA AND SH. SANT LAL AGARWAL.THUS, THEY ARE CONNECTED AND CONTROLLED BY THESE TWO PERSONS. THE LIST OF PURCHASERS CLEARLY REVEAL THAT THE SHARES OF M/S. V IDYA SHANKAR INVESTMENTS PVT. WERE SOLD TO JAGAT GROUP AT THE PRICE OF RS.3.5 PER SHARE AGAINST THEIR FACE VALUE OF RS.10/- AND BOOK VALUE OF RS.90.25 PER SHARE. THE F ACT ITSELF SHOWS THAT THE ASSESSEE COMPANY WAS A FRONT COMPANY TO INTRODUCE UNDISCLOSE D INCOME OF THE JAGAT GROUP IN THE GARB OF SHARE CAPITAL AND SHARE PREMIUM ROUT ED THROUGH VARIOUS COMPANIES MENTIONED IN THE LIST. IT IS BEYOND COMPREHENSION T HAT IF THESE COMPANIES WERE NOT THE FACILITATORS TO THE JAGAT GROUP, HOW THEY SOLD THEIR SHARES IN THE ASSESSEE COMPANY AT A SUCH A CHEAP PRICE WHEN THE BOOK VALUE OF SHARES OF THE ASSESSEE COMPANY WAS MORE THAN RS.90/- PER SHARE AND HOW JAG AT GROUP COULD BE ABLE TO PURCHASE THE ENTIRE COMPANY FOR A CONSIDERATION OF RS.87,44,750/-, WHEREAS I THE MONTH IN WHICH THIS TRANSFER TOOK PLACE SHARE CAPIT AL AND RESERVE AND SURPLUS OF THE COMPANY WAS RS.22,54,99,727/-. THE INTENTION WAS NO T THE PROFIT MOTIVE AND THE WHOLE FAADE WAS CREATED TO GIVE THE COLOUR OF GENU INENESS TO THE UNDISCLOSED INCOME OF THE JAGAT GROUP. THUS, M/S. VIDHYA SHANKA R INVESTMENTS PVT. LTD. IS ONE OF THE GROUP COMPANIES OF JAGAT GROUP. THE LOAN OF RS. 25,00000/- FROM M/S. VIDHYA SHANKAR INVESTMENTS PVT. LTD. IS NOTHING BUT THE AS SESSEES OWN FUNDS ROUTED INTO ITS BOOKS OF ACCOUNT THROUGH THESE COMPANIES IN THE GAR B OF UNSECURED LOANS. 3. A PERUSAL OF THE RETURN OF INCOME DOWNLOADED FRO M THE SYSTEM REVEALS THAT THE ASSESSEE HAS NEITHER SHOWN ANY INVESTMENT IN UN QUOTED SHARES, NOR HAS HE SHOWN ANY UNSECURED LOAN. HENCE, IT IS CLEAR THAT S H. VIJAY AGGARWAL HAD PURCHASED 3,94,000 SHARES OF M/S. INDEX SECURITIES & RESEARCH PVT. LTD. @ 2.25 PER SHARE FOR AN AMOUNT OF RS.8,86,500/-, WHEREAS THE BOOK VALUE OF THE SHARES WERE RS.91.47 PER SHARE, THEREBY TOTAL VALUE OFRS.3,60,39,180 (RS.3,6 0,39,180 RS.8,86,500). FURTHER, IT IS ALSO CLEAR THAT THE AMOUNT OF RS.25,00,000/- CLAIMED TO BE UNSECURED LOANS FROM M/S. VIDHYA SHANKAR INVESTMENTS PVT. LTD. IS NOTHIN G BUT ASSESSEES UNDISCLOSED INCOME. IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, I HAVE REASON TO BELIEVE THAT THE INCOME OF THE ASSESSEE OF MORE THA N RS.1.0 LAC FOR THE A.Y. 2010-11 HAS ESCAPED FROM ASSESSMENT AND HENCE THIS IS A FIT CASE FOR INITIATION OF PROCEEDINGS IN TERMS OF SECTION 147 OF THE IT ACT, 1961. 7. IT IS PERTINENT TO MENTION THAT IN THE CASE OF C IT VS. NOVA PROMOTERS & FINLEASE PRIVATE LTD. (ITA NO. 342 OF 2011) DATED 1 5.02.2012, THE HONBLE DELHI HIGH COURT WHICH IS THE JURISDICTIONAL HIGH COURT HAS HELD THAT AS LONG AS THERE IS A LIVE LINK BETWEEN THE DOCUMENT/INFORMATION WHICH WAS PL ACED BEFORE THE ASSESSING ITA NOS. 1077 TO 1081/DEL/2019 6 OFFICER AT THE TIME WHEN REASONS FOR REOPENING WERE RECORDED, PROCEEDINGS U/S. 147 WOULD BE VALID. THE COURT ALSO HELD WE ARE AWARE OF THE LEGAL POSITION THAT AT THE STA GE OF ISSUING THE NOTICE U/S. 148 THE MERITS OF THE MATTER ARE NOT RELEVANT AND T HE ASSESSING OFFICER AT THAT STAGE IS REQUIRED TO FORM ONLY A PRIMA FACIE BELIEF OR OPINION THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. 8. FURTHER MORE, IN THE CASE OF JYOTI GOYAL VS. ITO , ITA NO. 1250/DEL/2010, THE HONBLE ITAT DELHI HELD THAT AS REGARDS THE OTHER CONTENTIONS OF THE ASSESSEE TH AT THE REOPENING WAS DONE IN A MECHANICAL MANNER WITHOUT APPLICATION OF MIND, WE FIND THERE IS NOTHING ON RECORD TO SUPPORT SUCH A CONTENTION. THERE IS A LIV E LINK BETWEEN THE INFORMATION WHICH WAS AVAILABLE WITH THE ASSESSING OFFICER AND HIS FORMATION OF BELIEF THAT INCOME HAS ESCAPED ASSESSMENT, SUFFIC IENCY OF SUCH INFORMATION CANNOT BE GONE INTO WHILE DECIDING THE ISSUE OF VALI DITY OF REOPENING. THE ASSESSING OFFICER CAN ALSO NOT MAKE ENQUIRIES AS NO PROCEEDINGS WERE PENDING BEFORE HIM FOR THE RELEVANT ASSESSMENT YEAR. IN THE ABOVE VIEW OF THE MATTER, WE ARE IN AGREEMENT WITH FINDING OF THE LD. CIT(A) THA T THE REOPENING OF ASSESSMENT U/S 147 OF THE ACT WAS VALID. 9. THE LIVE LINK BETWEEN THE MATERIAL PROVIDED BY T HE INVESTIGATION WING AND THE REASONS FOR BELIEF THAT INCOME HAS ESCAPED ASSE SSMENT HAS BEEN SUFFICIENTLY DEMONSTRATED. SINCE, NO ASSESSMENT HAS BEEN COMPLET ED U/S. 143(3) OF THE ACT, AND PERIOD OF 4 YEARS HAS ELAPSED, HENCE, FORWARDED TO THE PR. COMMISSIONER OF INCOME TAX-16, NEW DELHI FOR CONSIDERATION AND NECESSARY A PPROVAL IN ACCORDANCE WITH THE PROVISO APPENDED WITH SECTION 151(1) OF THE I.T. AC T, 1961 FOR ISSUANCE OF NOTICE U/S. 148 OF THE IT ACT. 3.1 THE ASSESSING OFFICER, THEREAFTER, ISSUED NOTIC ES U/S 143(2) AND 142(1) FOR PROVIDING REQUISITE INFORMATION & DOCUMENTS. IN RESPONSE, THE REQUISITE DOCUMENTS AND INFORMATION WERE PROVIDED BY THE ASSE SSEE AND VIDE HIS LETTER DATED 26.04.2017 ALSO FILED A COPY OF RETURN OF INC OME FOR THE ASSESSMENT YEAR 2010-11 WHICH WAS ORIGINALLY FILED ON 14.03.20 11 ON A TOTAL INCOME OF RS.5,69,194/- AFTER DEDUCTION UNDER CHAPTER VL-A OF RS. 44,936/-. HE REQUESTED TO TREAT THIS RETURN TO HAVE BEEN FILED I N RESPONSE TO NOTICE ISSUED ITA NOS. 1077 TO 1081/DEL/2019 7 U/S 148. COPY OF REASONS WAS SUPPLIED BY THE ASSESS ING OFFICER TO THE ASSESSEE. 3.2. FROM THE REASONS RECORDED, BASED ON THE IMPUGN ED INFORMATION, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD PU RCHASED 3,94,000 SHARES OF M/S INDEX SECURITIES & RESEARCH PVT. LTD @ RS 2. 25 PER SHARE FOR AN AMOUNT OF RS. 8,86,500/ WHEREAS THE BOOK VALUE OF THE SHAR ES WERE RS. 91.47 PER SHARE AND ACCORDINGLY, THE TOTAL VALUE OF SHARES PU RCHASED COMES TO RS. 3,60,39,180/-. THIS LED THE ASSESSING OFFICER TO OB SERVE THAT THE ASSESSEE HAS MADE UNDISCLOSED INVESTMENT OF RS. 3,51,52,680/- (R S. 3,60,39,180- RS. 8,86,500). IN THIS REGARD, THE ASSESSEE WAS ASKED T O PRODUCE SHARE APPLICATION FORMS, SHARE CERTIFICATES AND COPY OF AUDIT REPORT, BALANCE SHEET & PROFIT & LOSS ACCOUNT ALONGWITH ALL THE ANNEXURES OF M/S IND EX SECURITIES & RESEARCH PVT. LTD FOR THE PERIOD ENDING 31.03.2010. THE ASSE SSEE WAS ALSO REQUIRED TO EXPLAIN THE SOURCES OF ABOVE INVESTMENT MADE BY HI M. IN RESPONSE, THE ASSESSEE VIDE HIS LETTER DATED 14.11.2017 PRODUCED THE COPY OF SHARE CERTIFICATE ISSUED BY M/S INDEX SECURITIES & RESEAR CH PVT. LTD. IT WAS FOUND THAT THE ORIGINAL ALLOTTEE WAS M/S LOTUS REALCON PV T. LTD AND THE SHARE CERTIFICATE AFTER PURCHASE OF SHARES BY ASSESSEE ST OOD DULY TRANSFERRED IN THE NAME OF ASSESSEE AS WAS CLEAR FROM THE MUTATION ON THE BACK SIDE OF SHARE CERTIFICATE. THE ASSESSEE ALSO PROVIDED COPY OF BAN K STATEMENT OF STATE BANK OF PATIALA INDICATING THE PAYMENT OF RS. 8,86,500/ FOR THE PURCHASE OF SAID SHARES. VIDE LETTER DATED 23.11.2017, THE ASSESSEE ALSO PRODUCED THE COPIES OF AUDIT REPORT, BALANCE SHEET AND PROFIT & LOSS ACCOU NT OF M/S INDEX SECURITIES & RESEARCH PVT. LTD FOR THE PERIOD ENDING 31.03.201 0 ALONGWITH ALL THE ITA NOS. 1077 TO 1081/DEL/2019 8 ANNEXURES, AS REQUIRED BY THE ASSESSING OFFICER. TH E ASSESSEE FURTHER INFORMED THE ASSESSING OFFICER THAT HE DID NOT PURC HASE SHARES DIRECTLY FROM THE COMPANY BUT PURCHASED FROM OTHER COMPANY WHO WA S HOLDING THESE SHARES AND HENCE SHARE APPLICATION FORM WAS NOT PRO DUCED. HAVING EXAMINED ALL THESE DOCUMENTS, THE ASSESSEE WAS FURTHER ASKE D TO PROVIDE COPY OF ANNUAL RETURN FILED BY M/S INDEX SECURITIES & RESEA RCH PVT. LTD FOR THE FINANCIAL YEAR ENDING 31.03.2010 AND COPY OF SHARE HOLDERS LIST OF M/S INDEX SECURITIES & RESEARCH PVT. LTD FOR THE PERIOD ENDIN G 31.03.2010. THE ASSESSEE PRODUCED THE COPY OF ROC RETURN ALONGWITH SHARE HO LDERS LIST, ON PERUSAL OF WHICH IT WAS FOUND THAT THE NAME OF THE ASSESSEE WA S THERE AT SR. NO. 42 OF THE SHARE HOLDERS LIST WITH THE HOLDING OF 3,94,000 SHA RES. 3.3. THE ASSESSEE WAS AGAIN ASKED TO EXPLAIN THE SO URCES OF INVESTMENT OF SHARES AND WHETHER, THE SHARES UNDER CONSIDERATION ARE STILL HELD BY HIM. IN RESPONSE, THE ASSESSEE INFORMED THAT THE SHARES AR E STILL HELD BY THE ASSESSEE AND A LOAN OF RS 25 LACS WAS RAISED FROM ONE M/S VI DHYA SHANKAR INVESTMENTS PVT. LTD IE RS. 15 LACS ON 30.06.2009 AND RS. 10 LA CS ON 28.08.2009. THE AMOUNT OF RS 10 LACS WAS USED FOR INVESTMENT UNDER CONSIDERATION. HE HAS INFORMED THAT IT IS EVIDENT FROM THE COPY OF BANK S TATEMENT OF STATE BANK OF PATIALA. 3.4. THE ASSESSEE WAS FURTHER ASKED TO FURNISH FOLL OWING DOCUMENTS/INFORMATION IN CONNECTION WITH THE LOAN R AISED FROM M/S VIDHYA SHANKAR INVESTMENTS PVT. LTD. : ITA NOS. 1077 TO 1081/DEL/2019 9 1. CONFIRMATIONS 2. COPY OF ITR ALONGWITH COMPUTATION OF INCOME. 3. COPY OF AUDIT REPORT, PROFIT & LOSS ACCOUNTS AND BALANCE SHEET AS ON 31.03.2010 ALONGWITH ANNEXURE OF LOANS & ADVANCE S INDICATING THE NAME OF ASSESSEE WITH AMOUNT OF LOAN GIVEN TO HIM. 4. WHETHER, LOAN IS STILL OUTSTANDING? 3.5. THE AR PROVIDED WITH THE COPY OF CONFIRMATIONS , COPIES OF ITR AND COMPUTATION OF INCOME, COPIES OF AUDIT REPORT, PROF IT & LOSS ACCOUNTS AND BALANCE SHEET WITH ALL THE ANNEXURES AS ON 31/03/20 10 OF M/S VIDHYA SHANKAR INVESTMENTS PVT. LTD. ON GOING THROUGH THE SAID DOCUMENTS, THE AO OBSERVED THAT M/S VIDHYA SHANKAR INVESTMENTS P. LTD HAS FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 ON A TOTAL I NCOME OF RS. 1,02,69,910/-. THE NAME OF THE ASSESSEE IS APPEARIN G IN THE LIST OF LOANS & ADVANCES. THE COPY OF CONFIRMATIONS IS ALSO EXAMINE D AND AS ON RECORDS. M/S VIDHYA SHANKAR INVESTMENT PVT. LTD ALSO CHARGED INT EREST OF RS. 1,43,200/- FROM THE ASSESSEE AS THE SAME IS EVIDENT FROM CONFI RMATION. THE AR HAS ALSO INFORMED THAT SAID LOANS RECEIVED WAS NOT SQUARED U P AS THE BALANCE OF RS. 25,29,700/- IS STILL OUTSTANDING AS ON 31.03.2010. ONLY RS. 1,13,500/- WAS PAID AND INTEREST AMOUNT OF RS. 1,43,200/- WAS ACCUMULAT ED. 3.6. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSES SEE, THE AO, HOWEVER, BEING DISSATISFIED OBSERVED AS UNDER : THE SUBMISSION OF THE ASSESSEE HAS BEEN CONSIDERED AND FROM THE RECORDS, IT IS SEEN THAT THE SHARES WERE THOUGH TRANSFERRED IN THE NAME OF THE ASSESSEE ON 18.09.2009 BUT THE PAYMENT AGAINST THE SAME HAS BEEN ITA NOS. 1077 TO 1081/DEL/2019 10 CLEARED FROM THE BANK ACCOUNT OF THE ASSESSEE ON 01 .10.2009. THERE IS NO DOUBT TO THE FACT THAT THE SHARES WERE PURCHASED OF F LINE I.E. NOT THROUGH ANY RECOGNIZED STOCK EXCHANGE THROUGH D-MAT A/C. THE RE IS INVESTIGATION REPORT THAT THE PURCHASE OF SHARES OF M/S INDEX SEC URITY & RESEARCH PVT. LTD WAS ALL MANIPULATED BY THE PERSONS BELONGING TO JAGAT GROUP. THEREFORE, THERE IS NO DENIAL TO THE FACT THAT THE T RANSFER OF SHARES CERTIFICATES IN THE NAME OF THE ASSESSEE PRIOR TO 0 1.10.2009 WITHOUT HAVING RECEIVED THE SALE CONSIDERATION WAS ALSO DONE TO EV ADE THE PROVISIONS OF SECTION 56(2) (VII) OF THE ACT. EVEN PERUSAL OF THE BANK ACCOUNT OF THE ASSESSEE REVEALS THAT THE ASSESSEE HAD NOT SUFFICIE NT BALANCE ON THE DATE OF TRANSFER OF SHARES IN HIS NAME. IT IS ONLY WHEN FUN DS WERE RECEIVED ON 26.09.2009 FROM M/S VIDHYA SHANKAR INVESTMENTS (P) LTD., ANOTHER COMPANY CONTROLLED BY THE PERSONS OF JAGAT GROUP, T HAT PAYMENT AGAINST PURCHASES OF SHARES HAS BEEN CLEARED FROM THE BANK ACCOUNT OF THE ASSESSEE. THIS FURTHER LEADS TO DRAW SUSPICION OVER THE PERIOD AS TO WHEN THE TRANSACTION OF PURCHASE OF SHARES TOOK PLACE. H AD THERE BEEN NO MALAFIDE INTENTION OF BOTH THE PARTIES THEN THE TRA NSFER OF SHARES IN THE NAME OF THE ASSESSEE SHOULD HAVE TAKEN ONLY AFTER T HE RECEIPT OF THE SALE CONSIDERATION. FROM THE ABOVE DISCUSSIONS, IT IS HELD THAT THE ACT UAL TRANSACTIONS OF PURCHASE OF SHARES BY THE ASSESSEE TOOK PLACE ON 01 .10.2009. THEREFORE THE PROVISIONS OF SECTION 56(2) (VII) OF THE INCOME TAX ACT ARE SQUARELY APPLICABLE IN THE CASE OF THE ASSESSEE. SINCE THE A SSESSEE HAD ACQUIRED THE SHARES FOR THE CONSIDERATION WHICH IS LESS THAN THE AGGREGATE FAIR MARKET VALUE OF SHARES, THE AMOUNT OF RS. 3,51,52,680 IS A SSESSED IN THE HANDS OF THE ASSESSEE U/S 56(2) (VII) OF THE ACT. FURTHER IT IS ALSO CLEAR THAT THE AMOUNT OF RS. 25 LAKHS CLAIMED TO BE UNSECURED LOAN S FROM M/S VIDHYA SHANKAR INVESTMENT P. LTD IS NOTHING BUT ASSESSEE'S UNDISCLOSED INCOME AND IS ASSESSED U/S 68 OF THE INCOME TAX ACT, 1961. 3.7. ACCORDINGLY, THE ASSESSING OFFICER MADE ADDITI ON OF RS.3,51,52,680/- BEING THE DIFFERENCE BETWEEN THE ACTUAL PURCHASE VA LUE AND THE AGGREGATE FAIR MARKET VALUE OF SHARES AS PER PROVISIONS OF SECTION 56(2)(VII) AND ADDITION OF ITA NOS. 1077 TO 1081/DEL/2019 11 RS.25,00,000/-, BEING UNEXPLAINED UNSECURED LOAN FR OM M/S. VIDHYA SHANKAR INVESTMENT P. LTD. UNDER SECTION 68 OF THE ACT. 3.8. AGGRIEVED BY THE AFORESAID ADDITIONS, THE ASSE SSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHERE HE FILED DETAILED WRITT EN SUBMISSIONS AND RELIED ON VARIOUS CASE LAWS. THE LD. CIT(A), HOWEVER, BEIN G DISSATISFIED BY THE SUBMISSIONS OF THE ASSESSEE, DISMISSED THE APPEAL B Y ENDORSING THE VIEW TAKEN BY THE AO. AGGRIEVED, THE ASSESSEE IS IN APPE AL BEFORE THE TRIBUNAL. 4. REITERATING THE SUBMISSIONS MADE BEFORE THE LD. AUTHORITIES BELOW, THE LD. AR OF THE ASSESSEE ALSO SUBMITTED A CONSOLIDATE D WRITTEN SYNOPSIS PERTAINING TO ALL THESE APPEALS, WHICH STATES AS UN DER : 1. THE CAPTIONED FIVE APPEALS ARE DIRECTED AGAINST THE RESPECTIVE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS) AND ARE FIXED TOGETHER HAVING COMMON ISSUE TO BE DECIDED BY THE HONBLE BENCH THAT: A. WHETHER AN ADDITION CAN BE MADE BY APPLYING THE PRO VISIONS OF SECTION 56(2)(VII) OF THE ACT WHICH PROVISION WAS APPLICABL E W.E.F. 01.10.2009, WHEREAS THE TRANSACTION OF THE PURCHASE OF THE SHAR ES TOOK PLACE IN THE MONTH OF SEPTEMBER, 2009 I.E. SHARES WERE TRANSFERR ED IN THE NAME OF THE APPELLANT ON 18.09.2009 AND CONSIDERATION FOR THE P URCHASE OF SHARES WERE ALSO GIVEN BY CHEQUE DATED 15.09.2009 I.E. PRI OR TO 01.10.2009. B. WHETHER THE UNSECURED LOANS RECEIVED BY THE APPELLA NT HAVE CORRECTLY BEEN ADDED U/S 68 OF THE ACT WITHOUT APPRECIATING T HAT NEITHER THE IDENTITY NOR THE CREDITWORTHINESS HAS BEEN DOUBTED AND ONLY GENUINENESS HAS BEEN DOUBTED THAT TOO PURELY ON ASSUMPTIONS AND PRESUMPTIONS AND APPELLANTS HAVE FURNISHED COMPLETE DOCUMENTARY EVID ENCES AND NONE OF THE EVIDENCES HAS BEEN DISPUTED? ITA NOS. 1077 TO 1081/DEL/2019 12 APART FROM THE AFORESAID, ONE MORE ISSUE COMMON IN ALL THE FIVE APPEALS ARE AS UNDER: C. WHETHER THE PROCEEDINGS U/S 147 OF THE ACT CAN BE I NITIATED ON THE LAST DATE OF EXPIRY OF LIMITATION SOLELY ON THE BASIS OF THE INFORMATION RECEIVED FROM DCIT, CC-09, NEW DELHI IN THE YEAR 2013, WITHO UT HAVING ANY TANGIBLE MATERIAL TO FORM A REASON TO BELIEVE THAT APPELLANT HAS MADE ANY UNDISCLOSED INVESTMENT OR THE UNSECURED LOAN TO BE TREATED AS THE UNDISCLOSED INCOME OF THE APPELLANT. 2. IT IS SUBMITTED THAT ALL THE AFORESAID ASSESSEE HAV E ENTERED INTO AN AGREEMENT ON 15 TH SEPTEMBER 2009 WITH THE TRANSFEROR COMPANIES TO PU RCHASE THE SHARES OF M/S INDEX SECURITIES & RESEARCH PVT. LTD. IT IS SUBMITT ED THAT TO PURCHASE THE SHARES OF THE AFORESAID COMPANY, THE APPELLANTS HAVE ALSO REC EIVED INTEREST BEARING LOAN FROM M/S VIDHYA SHANKAR INVESTMENTS PVT. LTD AND ISSUED CHEQUES ON 15 TH SEPTEMBER 2009 I.E. ON THE DATE OF THE ENTERING INTO AGREEMEN T FOR THE PURCHASE OF THE SHARES. SR. NO. NAME OF THE APPELLANTS DATE OF ENTERING INTO AGREEMENT PAYMENT OF CONSIDERATION 1 VIJAY AGGARWAL 15.09.2009 CHEQUE NO. 19213 DATED 15/09/2009 DRAWN ON STATE BANK OF INDIA 2 RAJ GUPTA 15.09.2009 CHEQUE NO. 332739 DATED 15/09/2009 DRAWN ON STATE BANK OF PATIALA 3 SHEELA DEVI 15.09.2009 CHEQUE NO. 880314 DATED 15/09/2009 DRAWN ON STATE BANK OF PATIALA 4 MANOJ AGGARWAL 15.09.2009 CHEQUE NO. 258353 DATED 15/09/2009 DRAWN ON STATE BANK OF PATIALA 5 MANISH AGGARWAL 15.09.2009 CHEQUE NO. 258126 DATED 15/09/2009 DRAWN ON STATE BANK OF PATIALA ITA NOS. 1077 TO 1081/DEL/2019 13 RELEVANT AGREEMENTS, CONFIRMATION, MUTATION OF SHAR ES, BANK STATEMENTS, RECEIPTS ETC. ARE PLACED IN THE PAPER BOOK OF EACH OF THE AS SESSEE SEPARATELY, HOWEVER, FOR THE CONVENIENCE SAKE, CHARTS ARE PREPARED GIVING BRIEF DESCRIPTION OF RELEVANT DATES OF THESE TRANSACTIONS WHICH ARE ENCLOSED WITH THIS SYN OPSIS AS ANNEXURE A TO E. 3. IT IS SUBMITTED THAT ALL THE AFORESAID ASSESSEES A RE RELATIVES AND DONT HAVE SUBSTANTIAL INCOME AND WERE NOT HAVING SUFFICIENT F UNDS TO INVEST OUT OF THEIR OWN RESOURCES AND SO, HAVE TAKEN INTEREST BEARING LOAN FROM M/S VIDHYA SHANKAR INVESTMENTS PVT. LTD. COPY OF ITR AND BANK STATEMEN TS ARE ENCLOSED IN THE PAPER BOOK AT PAGES 8-9 AND 31-35 IN THE CASE OF VIJAY AG GARWAL AND SIMILARLY AT PAGES 5-6 AND 12-27 OF SMT. RAJ GUPTA MOTHER OF VIJAY AGGARWA L AND MANISH AGGARWAL, AT PAGES 8-9 AND 80-83 OF SMT SHEELA DEVI MOTHER OF SH RI MANOJ AGGARWAL WHOSE ITR AND BANK STATEMENTS ARE PLACE ALSO AT PAGES 5-6 AND 11-19. THE ITR AND BANK STATEMENT OF SHRI MANISH AGGARWAL ARE PLACED AT PAG ES 9-10 AND 162-164 RESPECTIVELY OF THE SEPARATE PAPER BOOK. IT WOULD B E SEEN THAT THE INCOME EARNED FOR AY 2010-11 AND CREDIT BALANCES IN THE BANK ACCOUNT OF EACH OF THE ASSESSEE ON 26/29.09.2009 I.E. BEFORE 01.10.2009 FOR PURCHASE O F SHARES, ARE AS UNDER: SR. NO. ASSESSEE INCOME BANK BALANCE INVESTMENT 1 VIJAY AGGARWAL 5,69,194/ - 10,53,904/ - 8,86,500/ - 2 RAJ GUPTA 1,80,410/ - 10,26,674/ - 8,91,000/ - 3 SHEELA DEVI 1,67,576/ - 10,03,189/ - 8,88,750/ - 4. MANOJ AGGARWAL 2,52,706/ - 10,10,234/ - 8,93,250/ - 5. MANISH AGGARWAL 1,89,547/ - 10,27,341/ - 8,97,750/ - 4. THAT FROM THE AFORESAID FACTUAL DETAILS, IT WOULD B E SEEN THAT AFORESAID ASSESSEES HAVE PURCHASED THE SHARES OF M/S INDEX SECURITIES & RESEARCH PVT. LTD. IN THE MONTH OF SEPTEMBER, 2009 AND HAVE ALSO PAID THE CONSIDERA TION AS SUCH, TRANSACTION OF THE PURCHASE OF THE SHARES WERE COMPLETE IN THE MONTH O F SEPTEMBER, 2009, I.E. BEFORE THE DATE OF 1 ST OCTOBER, 2009, AND HENCE PROVISION OF SECTION 56(2 )(VII)(C)(II) IS INAPPLICABLE. 5. IT IS HOWEVER SUBMITTED THAT THE ASSESSING OFFICER HAS RE-OPENED ALL THE ASSESSMENT U/S 147 AND NOTICE U/S 148 WAS ISSUED ON THE LAST D ATE I.E. 31.03.2017 ON THE BASIS OF CERTAIN INFORMATION RECEIVED FROM THE DCIT, CC-0 9, NEW DELHI. IN THE REASONS TO BELIEVE, IT WAS ALLEGED THAT M/S INDEX SECURITIES & RESEARCH PVT. LTD. WAS ACQUIRED ITA NOS. 1077 TO 1081/DEL/2019 14 BY THE APPELLANTS ALONGWITH OTHER PERSONS RELATED T O JAGAT GROUP AND LOAN WAS RECEIVED FROM M/S VIDHYA SHANKAR INVESTMENTS PVT. L TD TO PURCHASE THESE SHARES. IT WAS FURTHER OBSERVED THAT RETURN OF INCOME REVEALS THAT ASSESSEE HAS NEITHER SHOWN ANY INVESTMENT NOR SHOWN ANY UNSECURED LOAN. HENCE, LEARNED AO FORMED A BELIEF THAT THE ASSESSEE HAS PURCHASED SHARES @ RS. 2.25 P ER SHARE, WHEREAS BOOK VALUE OF THE SHARES WERE 91.47 PER SHARE, THEREBY ASSESSEE H AS MADE AN UNDISCLOSED INVESTMENT AND LOAN FROM VIDHYA SHANKAR INVESTMENTS PVT. LTD. IS UNDISCLOSED INCOME. 5.1 IT IS SUBMITTED THAT IN ORDER TO INITIATE RE-ASSESS MENT PROCEEDINGS IT IS NECESSARY THAT THE AO HAS REASON TO BELIEVE THAT ANY INCOME HAS ESCAPED ASSESSMENT. THUS, IT IS NECESSARY FIRSTLY THAT AO MUST HAVE REASON TO BE LIEVE, SECONDLY THERE HAS TO BE INCOME WHICH HAS ESCAPED ASSESSMENT. BOTH THE CONDI TIONS ARE NOT SATISFIED AS AO HIMSELF HAS RE-OPENED REASSESSMENT ON THE BORROWED INFORMATION WHICH WAS NOT EXAMINED BY HIMSELF BEFORE ISSUING NOTICE U/S 148 W HICH WAS ON LAST DAY WHEN IT WAS BECOMING BARRED BY LIMITATION. WHEREAS THE INFO RMATION WAS RECEIVED BY HIM IN 2013 AND IN 4 YEARS THEREAFTER THE AO DID NOT E NQUIRE ANY THING FROM THE ASSESSEE OR COLLECTED ANY MATERIAL TO ARRIVE AT REA SON TO BELIEVE WHICH IS A MANDATORY CONDITION AS THE LEGISLATURE SPECIFICALLY STATES ABOUT AOS BELIEF AND NOT OTHERS. THE AOS REFERENCE OF ITR WAS ALSO WITHOUT ANY FOOTINGS AS ITR DURING A.Y. 2010-11 DOES NOT HAVE RELEVANT COLUMN TO SHOW INVES TMENT OR LOANS RECEIVED. 5.2 IT IS THUS SUBMITTED THAT IN THE INSTANT CASE THERE IS NO MATERIAL MUCH LESS VALID MATERIAL. IT IS SUBMITTED THAT ASSUMPTIONS WHICH AR E MERELY IN THE NATURE OF SUSPICION CANNOT BE THE FOUNDATION FOR PROCEEDINGS U/S 147 OF THE ACT. IT IS THEREFORE SUBMITTED THAT, REASONS RECORDED ARE HIGH LY VAGUE, INDEFINITE, FAR-FETCHED, REMOTE AND CANNOT BY ANY STANDARD OF IMAGINATION LE AD TO A CONCLUSION OF THE ESCAPEMENT OF INCOME AND THEY ARE MERELY PRESUMPTUO US IN NATURE. IN SUPPORT OF THE AFORESAID SUBMISSIONS, RELIANCE IS PLACED ON TH E FINDING OF THE HONBLE COURT IN THE CASE OF PCIT VS. MEENAKSHI OVERSEAS (P.) LTD . REPORTED IN [2017] 395 ITR 677 (DELHI) WHEREIN IT HAS BEEN HELD AS UNDER: 23. THUS, THE CRUCIAL LINK BETWEEN THE INFORMATION MADE AVAILABLE TO THE AO AND THE FORMATION OF BELIEF IS ABSENT. THE REASONS MUST BE SE LF EVIDENT, THEY MUST SPEAK FOR THEMSELVES. THE TANGIBLE MATERIAL WHICH FORMS THE BAS IS FOR THE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT MUST BE EVIDENT FROM A READING OF THE REASONS. THE ENTIRE MATERIAL NEED NOT BE SET OUT. HOWEVER, SOMETH ING THEREIN WHICH IS CRITICAL TO THE FORMATION OF THE BELIEF MUST BE REFERRED TO. OTHERWIS E THE LINK GOES MISSING. 24. THE REOPENING OF ASSESSMENT UNDER SECTION 147 IS A POTENT POWER NOT TO BE LIGHTLY EXERCISED. IT CERTAINLY CANNOT BE INVOKED CASUALLY OR MECHANICALLY. THE HEART OF THE PROVISION IS THE FORMATION OF BELIEF BY THE AO THAT INCOME HAS ESCAPED ASSESSMENT. THE REASONS SO RECORDED HAVE TO BE BASED ON SOME TANGIBLE MATERIAL AND THAT SHOULD BE EVIDENT FROM READING THE REASONS. IT CANNOT BE SUPPL IED SUBSEQUENTLY EITHER DURING THE PROCEEDINGS WHEN OBJECTIONS TO THE REOPENING ARE CO NSIDERED OR EVEN DURING THE ITA NOS. 1077 TO 1081/DEL/2019 15 ASSESSMENT PROCEEDINGS THAT FOLLOW. THIS IS THE BARE MINIMUM MANDATORY REQUIREMENT OF THE FIRST PART OF SECTION 147 (1) OF THE ACT. 25. AT THIS STAGE IT REQUIRES TO BE NOTED THAT SINCE TH E ORIGINAL ASSESSMENT WAS PROCESSED UNDER SECTION 143 (1) OF THE ACT, AND NOT SECTION 143 (3) OF THE ACT, THE PROVISO TO SECTION 147 WILL NOT APPLY. IN OTHER WOR DS, EVEN THOUGH THE REOPENING IN THE PRESENT CASE WAS AFTER THE EXPIRY OF FOUR YEARS FRO M THE END OF THE RELEVANT AY, IT WAS NOT NECESSARY FOR THE AO TO SHOW THAT THERE WAS ANY FAILURE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. 26. THE FIRST PART OF SECTION 147 (1) OF THE ACT REQUI RES THE AO TO HAVE 'REASONS TO BELIEVE' THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAP ED ASSESSMENT. IT IS THUS FORMATION OF REASON TO BELIEVE THAT IS SUBJECT MATTE R OF EXAMINATION. THE AO BEING A QUASI JUDICIAL AUTHORITY IS EXPECTED TO ARRIVE AT A SUBJECTIVE SATISFACTION INDEPENDENTLY ON AN OBJECTIVE CRITERIA. WHILE THE R EPORT OF THE INVESTIGATION WING MIGHT CONSTITUTE THE MATERIALON THE BASIS OF WHICH H E FORMS THE REASONS TO BELIEVE THE PROCESS OF ARRIVING AT SUCH SATISFACTION CANNOT BE A MERE REPETITION OF THE REPORT OF INVESTIGATION. THE RECORDING OF REASONS TO BELIEVE A ND NOT REASONS TO SUSPECT IS THE PRE- CONDITION TO THE ASSUMPTION OF JURISDICTION UNDER S ECTION 147 OF THE ACT. THE REASONS TO BELIEVE MUST DEMONSTRATE LINK BETWEEN THE TANGIBLE MATERIAL AND THE FORMATION OF THE BELIEF OR THE REASON TO BELIEVE THAT INCOME HAS E SCAPED ASSESSMENT. 5.3 FURTHER HONBLE COURT IN THE CASE OF SABH INFRASTRUCTURE LTD. V. ACIT IN W P. (C) 1357/2016 DATED 25.09.2017 HAS LAID DOWN THE GUIDELINES FOR ISSUING NOTICE U/S 148 OF THE ACT. THE OBSERVATION OF THIS HONBLE COU RT IN THE AFORESAID CASE READS AS UNDER: 19. BEFORE PARTING WITH THE CASE, THE COURT WOULD LIKE TO OBSERVE THAT ON A ROUTINE BASIS, A LARGE NUMBER OF WRIT PETITIONS ARE FILED CH ALLENGING THE REOPENING OF ASSESSMENTS BY THE REVENUE UNDER SECTIONS 147 AND 1 48 OF THE ACT AND DESPITE NUMEROUS JUDGMENTS ON THIS ISSUE, THE SAME ERRORS A RE REPEATED BY THE CONCERNED REVENUE AUTHORITIES. IN THIS BACKGROUND, THE COURT W OULD LIKE THE REVENUE TO ADHERE TO THE FOLLOWING GUIDELINES IN MATTERS OF REOPENING OF ASSESSMENTS: (I) WHILE COMMUNICATING THE REASONS FOR REOPENING T HE ASSESSMENT, THE COPY OF THE STANDARD FORM USED BY THE AO FOR OBTAINING THE APPRO VAL OF THE SUPERIOR OFFICER SHOULD ITSELF BE PROVIDED TO THE ASSESSEE. THIS WOULD CONTA IN THE COMMENT OR ENDORSEMENT OF THE SUPERIOR OFFICER WITH HIS NAME, DESIGNATION AND DATE. IN OTHER WORDS, MERELY STATING THE REASONS IN A LETTER ADDRESSED BY THE AO TO THE ASSESSEE IS TO BE AVOIDED; (II) THE REASONS TO BELIEVE OUGHT TO SPELL OUT ALL T HE REASONS AND GROUNDS AVAILABLE WITH THE AO FOR RE-OPENING THE ASSESSMENT - ESPECIALLY I N THOSE CASES WHERE THE FIRST PROVISO TO SECTION 147 IS ATTRACTED. THE REASONS TO BELIEVE OUGHT TO ALSO PARAPHRASE ANY INVESTIGATION REPORT WHICH MAY FORM THE BASIS OF TH E REASONS AN ANY ENQUIRY CONDUCTED BY THE AO ON THE SAME AND IF SO, THE CONC LUSIONS THEREOF; (III) WHERE THE REASONS MAKE A REFERENCE TO ANOTHER DOCUMENT, WHETHER AS A LETTER OR REPORT, SUCH DOCUMENT AND/ OR RELEVANT PORTIONS OF SUCH REPORT SHOULD BE ENCLOSED ALONG WITH THE REASONS; ITA NOS. 1077 TO 1081/DEL/2019 16 (IV) THE EXERCISE OF CONSIDERING THE ASSESSEES OBJ ECTIONS TO THE REOPENING OF ASSESSMENT IS NOT A MECHANICAL RITUAL. IT IS A QUAS IJUDICIAL FUNCTION. THE ORDER DISPOSING OF THE OBJECTIONS SHOULD DEAL WITH EACH O BJECTION AND GIVE PROPER REASONS FOR THE CONCLUSION. NO ATTEMPT SHOULD BE MADE TO ADD TO THE REASONS FOR REOPENING OF THE ASSESSMENT BEYOND WHAT HAS ALREADY BEEN DISCLOSED. 5.4 THAT IN THE CASE OF PCIT VS. RMG POLYVINYL (I) LTD. REPORTED IN [2017] 396 ITR 5 (DELHI) , IT HAS BEEN HELD AS UNDER: 12. RECENTLY, IN ITS DECISION DATED 26TH MAY, 2017 IN ITA NO. 692/2016 PR. CIT V. MEENAKSHI OVERSEAS [2017] 82 TAXMANN.COM 300 (DELHI) , THIS COURT DISCUSSED THE LEGAL POSITION REGARDING REOPENING OF ASSESSMEN TS WHERE THE RETURN FILED AT THE INITIAL STAGE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT AND NOT UNDER SECTION 143(3) OF THE ACT. THE REASONS FOR THE REOPENING OF THE ASSESSMENT IN THAT CASE WERE MORE OR LESS SIMILAR TO THE REASONS IN THE PRESENT CASE, VIZ., INFORMATION WAS RECEIVED FROM THE INVESTIGATION WING REGARDING ACCOMMODATION ENTRIES PROVIDED BY A 'KNOWN' ACCOMMODATION ENTRY PROVIDER. THERE, ON FACTS, THE COURT CAME TO THE CONCLUSION THAT THE REASONS WERE, IN FACT, IN THE FORM OF CONCLUSIO NS 'ONE AFTER THE OTHER' AND THAT THE SATISFACTION ARRIVED AT BY THE AO WAS A 'BORROWED S ATISFACTION' AND AT BEST 'A REPRODUCTION OF THE CONCLUSION IN THE INVESTIGATION REPORT.' 13. AS IN THE ABOVE CASE, EVEN IN THE PRESENT CASE, THE COURT IS UNABLE TO DISCERN THE LINK BETWEEN THE TANGIBLE MATERIAL AND THE FORMATION OF THE REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. IN THE PRESENT CASE TOO, THE INFORMATION RECEIVED FROM THE INVESTIGATION WING CANNOT BE SAID TO BE TANGIBLE M ATERIAL PER SE WITHOUT A FURTHER INQUIRY BEING UNDERTAKEN BY THE AO. IN THE PRESENT C ASE THE AO DEPRIVED HIMSELF OF THAT OPPORTUNITY BY PROCEEDING ON THE ERRONEOUS PRE MISE THAT ASSESSEE HAD NOT FILED A RETURN WHEN IN FACT IT HAD. 5.5 FURTHER RELIANCE IS PLACED ON THE FOLLOWING JUDGMEN TS WHEREIN IT HAS BEEN HELD THAT INFORMATION RECEIVED FROM THE INVESTIGATION WING PE R SE WOULD NOT CONSTITUTE TANGIBLE MATERIAL, UNLESS THE SOME FURTHER MATERIAL HAS BEEN BROUGHT ON RECORD AND ASSESSING OFFICER HAS APPLIED HIS MIND TO SUCH INFO RMATION/MATERIAL: I. CIT VS. MULTIPLEX TRADING & INDUSTRIAL CO. LTD. IN ITA NO.356/2013 DATED 22.09.2015 (HONBLE DELHI HIGH COURT); II. SIGNATURE HOTELS P. LTD. VS. INCOME TAX OFFICER RE PORTED IN [2011] 338 ITR 51, III. COMMISSIONER OF INCOME TAX VERSUS SFIL STOCK BROKIN G LIMITED, REPORTED IN [2010] 325 ITR 285 (DELHI) IV. SARTHAK SECURITIES COMPANY PRIVATE LIMITED VERSUS I NCOME TAX OFFICER, REPORTED IN 329 ITR 110 (DELHI), V. PCIT VS. SHRIGOVINDKRIPA BUILDERS P. LTD (ITA 486/2 015 DATED 04.08.2015) VI. CIT VS. ASHIAN NEEDLES PVT.LTD. (ITA 226/2015 DATED 24.08.2015) HC (DELHI) VII. CIT VS. INSECTICIDES (INDIA) LTD. 357 ITR 330 (DELH I) ITA NOS. 1077 TO 1081/DEL/2019 17 6. IT IS FURTHER SUBMITTED THAT EVEN OTHERWISE THERE H AS TO BE INCOME WHICH HAS ESCAPED ASSESSMENT. THE NOTIONAL INCOME CANNOT BE A BASIS WHICH OTHERWISE DOES NOT ARISE. THE ASSESSEE HAS MADE INVESTMENT AND THE ITR AS ON 31.03.2010 I.E. RELEVANT FOR AY 2010-11 DOES NOT HAVE ANY SUCH COL UMN TO SHOW THE INVESTMENT. THE INVESTMENT WAS MADE THROUGH BANKING CHANNEL AND THERE WAS NOT EVEN A WHISPER THAT ANY MONEY WAS TRANSACTED OTHER THAN TH E INVESTMENT MADE BY THE ASSESSEE. THE INCOME DECLARED BY THE ASSESSEES AND BANK STATEMENTS CLEARLY SHOW THAT THERE WERE NOT SUFFICIENT AMOUNT AVAILABLE WIT H THEM FOR MAKING INVESTMENT AND SO, LOAN WAS RECEIVED BY THEM. THUS THE CONDITI ON NECESSARY TO BE FULFILLED FOR REOPENING THE ASSESSMENT THAT THERE HAS TO BE INCOM E WHICH HAS ESCAPED ASSESSMENT. THE ASSESSING OFFICER DID NOT BRING ANY MATERIAL ON RECORD OTHER THAN THE DOCUMENTS SHOWING INVESTMENT THAT ANY INCOME HA S ESCAPED ASSESSMENT. 7. IT IS FURTHER SUBMITTED THAT IN THE REASONS TO BELI EVE, IT HAS BEEN ALLEGED THAT APPELLANT HAD MADE UNDISCLOSED INVESTMENT, HOWEVER BEFORE MAKING SUCH ALLEGATION, NO MATERIAL AT ALL HAS BEEN BROUGHT ON RECORD THAT THE APPELLANT HAS PAID ANY SUM OVER AND ABOVE THE DECLARED CONSIDERATION. IT IS SUBMITTED THAT TO BRING TO TAX ANY UNDISCLOSED INVESTMENT, THE AO IN 3 CASES ( SHEELA DEVI, MANOJ & MANISH AGGARWAL) ADMITTED THAT AFTER INTRODUCTION OF SECTI ON 56(2)(VII), IT IS NOT RELEVANT (PAGE 8 OF AO). IT IS SUBMITTED THAT THE BURDEN IS ON THE REVENUE TO PROVE THAT THE REAL INVESTMENT EXCEED THE INVESTMENT SHOWN IN THE ACCOUNT BOOKS OF THE ASSESSEE. THAT THE RELIANCE IS PLACED ON THE FOLLOWING JUDGME NTS: I. K.P. VARGHESE V. ITO [1981] 131 ITR 597 (SC) II. CIT V. PUNEET SABHARWAL [2011] 338 ITR 485 III. CIT VS. SHANKUNTALA DEVI, 316 ITR 46 IV. CIT VS. SURAJ DEVI, 328 ITR 604 V. CIT V. VINOD SINGHAL (I.T.APPEAL NO. 482 OF 2010 DA TED 5-5-2010) VI. 226 ITR 344 SMT. AMAR KUMARI SURANA VS. CIT VII. CIT VS. SMT. VINDHAVASINI DEVI CASE ITA NO. 265 OF 2008, HC (ALL) 7.1 IT IS SUBMITTED THAT MERELY ON THE BASIS OF THE DIF FERENCE BETWEEN THE BOOK VALUE AND ACTUAL CONSIDERATION NO ADDITION CAN BE MADE UN DER SECTION 69B OF THE ACT. RELIANCE IS PLACED ON THE ORDER OF THE TRIBUNAL IN THE CASE OF RUPEE FINANCE REPORTED IN 119 TTJ 643 , WHEREIN IT HAS BEEN HELD THAT, MERELY BECAUSE ASS ESSEE PURCHASED CERTAIN SHARES AT VALUE MUCH LESS THAN MA RKET PRICE, DIFFERENCE IN PURCHASE COST AND MARKET PRICE CANNOT BE ADDED U/S 69 OF THE ACT. THAT THE AFORESAID ORDER OF THE TRIBUNAL WAS AFFIRMED BY THE BOMBAY HIGH COURT IN ITA NO.1208 DATED 20.10.2008. 7.2 FURTHER IN THE CASE OF ACIT VS. ASSOCIATED TECHNO PLASTICS (P.) LTD. REPORTED IN [1999] 106 TAXMAN 65 (DELHI) (MAG.), WHEREIN THE ASSESSEE-COMPANY PURCHASED A HUGE NUMBER OF SHARES OF A COMPANY HCL FROM ITS HOLDER-INVESTMENT COMPANY. THE ASSESSING OFFICER FOUND THAT WHILE THE QUOTED PRICE OF THOSE SHARES ITA NOS. 1077 TO 1081/DEL/2019 18 WAS RS. 41 PER SHARES AND FACE VALUE WAS RS. 10 PER SHARES, THE SELLER SOLD SAME AT A PRICE AS LOW AS RS. 6.02 PER SHARES. EVEN THOUGH, C ERTIFICATE OF THE SELLER WAS SUBMITTED THAT THE SHARES WERE SOLD AT RS. 6.02 PER SHARES, THE ASSESSING OFFICER, ASSUMING THAT SHARES WERE SOLD AT QUOTED PRICE OF T HAT DAY, MADE NECESSARY ADDITION TO THE INCOME OF THE ASSESSEE AS UNDISCLOS ED INVESTMENT UNDER SECTION 69B. ON APPEAL, THE COMMISSIONER (APPEALS) FOLLOWED THE DECISION OF THE SUPREME COURT IN THE CASE OF K.P. VARGHESE V. ITO [1981] 131 ITR 597 AS THE COMPANY WAS AN INVESTMENT COMPANY. SHE HELD THAT UNTIL IT WAS PROV ED BEYOND DOUBT THAT THE CONSIDERATION ACTUALLY PASSED WAS MORE THAN WHAT HA D BEEN RECORDED, SECTION 69B COULD NOT BE INVOKED. SINCE THE ASSESSING OFFICER C OULD NOT CATEGORICALLY FIND ANY SUCH FACT, SHE DELETED THE ADDITION MADE BY THE ASS ESSING OFFICER. ON REVENUES APPEAL, HONBLE TRIBUNAL HELD THAT T HE SELLER COMPANY HAD ADMITTED TO HAVE SOLD THE SHARES AT THE PRICE AS CLAIMED BY THE PURCHASER ASSESSEE- COMPANY. THE ASSESSING OFFICER HAD NOT BEEN ABLE TO ESTABLISH THAT ANYTHING M ORE THAN WHAT HAD BEEN ADMITTED TO HAVE BEEN PAID AND RECEIVED HAD PASSED H ANDS IN ORDER TO INVOKE PROVISIONS OF SECTION 69B. AS NOTHING HAD BEEN PROVE D TO SHOW THAT ANY OTHER AMOUNT THAN ADMITTED HAD BEEN PAID BY THE ASSESSEE IN ORDE R TO BUY SHARES , THE COMMISSIONER (APPEALS) WAS JUSTIFIED IN DELETING TH E ADDITION. 7.3 FURTHER HONBLE TRIBUNAL IN 80 TTJ 69 AFFIRMED BY G UJ HC IN 182 CTR 370, HELD THAT HOWEVER, THE FACT REMAINS THAT THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO INDICATE THAT THE ASSESSEES INVOLVED IN THESE AP PEALS WHO ADMITTEDLY BELONG TO UTTAMCHANDANI FAMILY WHO IS HAVING 50 PER CENT SHAR E IN M/S JJ CORPORATION, HAVE IN TACT PAID ANY 'ON MONEY' TO M/S JJ CORPORATION I N RESPECT OF THE SHOPS PURCHASED BY THEM. THE AO HAS MADE THESE ADDITIONS PRESUMABLY BY INVOKING THE PROVISIONS OF S. 69B AND AS SUCH THE ONUS IS ON HIM TO PROVE B Y EVIDENCE THAT THE ASSESSEES HAVE IN FACT PAID ANY 'ON MONEY' OVER AND ABOVE THE MONEY WHICH HAS BEEN RECORDED IN THE BOOKS OF ACCOUNT FOR MAKING INVESTM ENTS IN THE PURCHASE OF SHOPS. SINCE NO EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE AO IN THIS REGARD, THE ADDITIONS MADE ON ACCOUNT OF ALLEGED UNEXPLAINED IN VESTMENTS IN THE PURCHASE OF SHOPS BY ALLEGED UNDERSTATEMENT OF CONSIDERATION CA NNOT BE SUSTAINED. 7.4 FURTHER RELIANCE IS PLACED ON THE FOLLOWING ORDERS OF THE TRIBUNAL: I. VISHAL P. MEHATA V. DY. CIT [ITA NO. 3586/MUM/2009, DATED 26.02.2010] II. SMT. NINA P. MEHTA THE DY.COMMISSIONER OF INCOME-TA X [ITA NO.3585/MUM/2009 DATED 30TH DAY OF MARCH 2010] 8. FURTHER IN RESPECT OF THE UNSECURED LOAN RECEIVED F ROM M/S VIDHYA SHANKAR INVESTMENT PVT. LTD., IT IS SUBMITTED THAT APPELLAN TS HAVE RECEIVED INTEREST BEARING LOANS FROM THE AFORESAID COMPANY BY ACCOUNT PAYEE C HEQUES. THE AFORESAID COMPANY IS AN INCOME TAX ASSESSEE AND HAS DULY BEEN ASSESSED. FURTHER IT IS SUBMITTED THAT AFORESAID COMPANY IS A NON BANKING F INANCE COMPANY (NBFC) AND IS ENGAGED IN THE BUSINESS OF SALE, PURCHASE AND TRADI NG OF THE SHARES AND GIVING LOANS ITA NOS. 1077 TO 1081/DEL/2019 19 AND ADVANCES. FROM THE PERUSAL OF THE PROFIT AND LO SS ACCOUNT OF THE AFORESAID COMPANY IT WOULD BE SEEN THAT DURING THE YEAR UNDER CONSIDERATION, AFORESAID COMPANY HAS EARNED INTEREST INCOME OF RS. 1,37,47,0 82/-. THE APPELLANT HAS FURNISHED COMPLETE DOCUMENTARY EVIDENCES TO SUBSTAN TIATE THE BURDEN U/S 68 OF THE ACT. THE LEARNED AO WHILE FORMING HIS REASONS TO BE LIEVE WITHOUT ANY TANGIBLE MATERIAL AND SOLELY ON THE BASIS OF THE INFORMATION RECEIVED FROM THE DCIT, CC-09, NEW DELHI HAS ARBITRARILY FORMED A REASON TO BELIEV E THAT LOAN RECEIVED BY THE APPELLANT FROM M/S VIDHYA SHANKAR INVESTMENT PVT. L TD. IS NOTHING BUT THE APPELLANTS OWN FUND ROUTED INTO ITS BOOKS OF ACCOUN T THROUGH THE AFORESAID COMPANY. 9. IN VIEW OF THE AFORESAID, IT IS SUBMITTED THAT SINC E THERE IS NO MATERIAL THAT THE APPELLANT HAD MADE ANY UNDISCLOSED INVESTMENT OR TH E LOAN RECEIVED BY THE APPELLANT IS ITS OWN FUNDS. IT IS SUBMITTED THAT IT IS SETTLED LAW THAT THE REASONS FOR THE FORMATION OF THE BELIEF MUST HAVE A RATIONAL CO NNECTION WITH OR RELEVANT BEARING ON THE FORMATION OF THE BELIEF. RATIONAL CONNECTION POSTULATES THAT THERE MUST BE A DIRECT NEXUS OR LIVE LINK BETWEEN THE MATERIAL COMI NG TO THE NOTICE OF THE INCOME-TAX OFFICER AND THE FORMATION OF HIS BELIEF THAT THERE HAS BEEN ESCAPEMENT OF THE INCOME OF THE ASSESSEE FROM ASSESSMENT. THE AFORESAID SUBM ISSION OF THE APPELLANT IS SUPPORTED BY THE JUDGMENT OF TH E APEX COURT IN THE CASE OF ITO VS. LAKHMANI MEWAL DAS REPORTED IN 103 ITR 437 WHEREIN AT PAGE 448, THEIR LORDSHIPS HAVE HELD AS UNDER: AS STATED EARLIER, THE REASONS FOR THE FORMATION O F THE BELIEF MUST HAVE A RATIONAL CONNECTION WITH OR RELEVANT BEARING ON THE FORMATION OF THE BELIEF. RATIONAL CONNECTION POSTULATES THAT THERE MUST BE A DIRECT NE XUS OR LIVE LINK BETWEEN THE MATERIAL COMING TO THE NOTICE OF THE INCOME-TAX OFF ICER AND THE FORMATION OF HIS BELIEF THAT THERE HAS BEEN ESCAPEMENT OF THE INCOME OF THE ASSESSEE FROM ASSESSMENT IN THE PARTICULAR YEAR BECAUSE OF HIS FAILURE TO DISCLOSE F ULLY AND TRULY ALL MATERIAL FACTS. IT IS NO DOUBT TRUE THAT THE COURT CANNOT GO INTO THE SUFF ICIENCY OR ADEQUACY OF THE MATERIAL AND SUBSTITUTE ITS OWN OPINION FOR THAT OF THE INCO ME-TAX OFFICER ON THE POINT AS TO WHETHER ACTION SHOULD BE INITIATED FOR REOPENING ASS ESSMENT. AT THE SAME TIME WE HAVE TO BEAR IN MIND THAT IT IS NOT ANY AND EVERY M ATERIAL, HOWSOEVER VAGUE AND INDEFINITE OR DISTANT, REMOTE AND FAR- FETCHED, WHI CH WOULD WARRANT THE FORMATION OF THE BELIEF RELATING TO ESCAPEMENT OF THE INCOME OF T HE ASSESSEE FROM ASSESSMENT. THE FACT THAT THE WORDS 'DEFINITE INFORMATION' WHICH WE RE THERE IN SECTION 34 OF THE ACT OF 1922 AT ONE TIME BEFORE ITS AMENDMENT IN 1948 ARE NO T THERE IN SECTION 147 OF THE ACT OF 1961 WOULD NOT LEAD TO THE CONCLUSION THAT ACTIO N CANNOT BE TAKEN FOR REOPENING ASSESSMENT EVEN IF THE INFORMATION IS WHOLLY VAGUE, INDEFINITE, FAR-FETCHED AND REMOTE. THE REASON FOR THE FORMATION OF THE BELIEF MUST BE HE LD IN GOOD FAITH AND SHOULD NOT BE A MERE PRETENCE. ITA NOS. 1077 TO 1081/DEL/2019 20 10. THE ASESSEE SUBMITS THAT HONBLE APEX COURT IN THE CASE OF CIT VS KELVINATOR OF INDIA LTD. REPORTED IN 320 ITR 561 (SC) HAS HELD THAT LAW AS TO REOPENING OF ASSESSMENT HAS UNDERGONE A CHANGE W.E.F. 1.4.1989 T HAT PROCEEDINGS CANNOT BE INITIATED UNLESS BASED ON FRESH MATERIAL. THE SUBM ISSION OF ASSESSEE IS THAT MERE INFORMATION IS INSUFFICIENT UNLESS SUPPORTED BY T ANGIBLE MATERIAL. IT IS SUBMITTED THAT ASSUMPTIONS WHICH ARE MERELY IN THE NATURE OF SUSPICION CANNOT BE THE FOUNDATION FOR PROCEEDINGS U/S 147 OF THE ACT. IT IS SUBMITTED THAT, REASONS RECORDED ARE HIGHLY VAGUE, INDEFINITE, FAR-FETCHED, REMOTE AND CANNOT BY ANY STANDARD OF IMAGINATION LEAD TO A CONCLUSION OF THE ESCAPEMENT OF INCOME AND THEY ARE MERELY PRESUMPTUOUS IN NATURE. 10.1 FURTHER TO THE AFORESAID, IT IS SUBMITTED THAT APART FROM THE AFORESAID, IT IS SUBMITTED THAT IN THE INSTANT CASE, APPROVAL FOR TH E INITIATION OF THE PROCEEDINGS HAS ALSO BEEN GRANTED MECHANICALLY, AND HENCE ALSO INIT IATION OF THE REASSESSMENT PROCEEDINGS IS BAD IN LAW. RELIANCE IS PLACED ON TH E FOLLOWING JUDGMENTS: I. PR. CIT VS. N. C. CABLES LTD (IN ITA 335/2015 ORDER DATED 11.01.2017 ), IT WAS HELD THAT SECTION 151 OF THE ACT CLEARLY STIPUL ATES THAT THE CIT (A), WHO IS THE COMPETENT AUTHORITY TO AUTHORIZE THE REASSESSME NT NOTICE, HAS TO APPLY HIS MIND AND FORM AN OPINION. THE MERE APPENDING OF THE EXPRESSION APPROVED SAYS NOTHING. IT IS NOT AS IF THE CIT (A ) HAS TO RECORD ELABORATE REASONS FOR AGREEING WITH THE NOTING PUT UP. AT THE SAME TIME, SATISFACTION HAS TO BE RECORDED OF THE GIVEN CASE WHICH CAN BE R EFLECTED IN THE BRIEFEST POSSIBLE MANNER. IN THE PRESENT CASE, THE EXERCISE APPEARS TO HAVE BEEN RITUALISTIC AND FORMAL RATHER THAN MEANINGFUL, WHIC H IS THE RATIONALE FOR THE SAFEGUARD OF AN APPROVAL BY A HIGHER RANKING OFFICE R. II. CENTRAL INDIA ELECTRIC SUPPLY CO. LTD. VS ITO AND A NR. 333 ITR 237 HC (DELHI ): MERELY AFFIXING A YES STAMP AND SIGNING UNDERN EATH SUGGESTED THAT THE DECISION WAS TAKEN BY THE BOARD IN A MECHA NICAL MANNER AS SUCH, THE SAME WAS NOT A SUFFICIENT COMPLIANCE UNDER SECTION 151 OF THE ACT. III. UNION OF INDIA V. M.L. CAPOOR AND ORS., AIR 1974 SC 87 IV. GERMAN REMEDIES LTD VS. DY. CIT (2006) 287 ITR 494 (BOM). V. ITO V. DIRECT SALES (P) LTD. ITAT (DELHI) [2015 ]: MERELY STATING APPROVED IS NOT SUFFICIENT SANCTION OF CIT AND RE NDERS REOPENING VOID. COMMISSIONER HAS TO APPLY MIND AND DUE DILIGENCE BE FORE ACCORDING SANCTION TO THE REASONS RECORDED BY THE AO. VI. SHRIAMARLAL BAJAJ VS.THE ACIT (I.T.A. NO.611/MUM/20 04 DATED 24.07.2013 ): COMMISSIONER HAS SIMPLY PUT APPROVED AND SIGNE D THE REPORT THEREBY GIVING SANCTION TO THE AO. VII. WHILE ACCORDING SANCTION, THE JOINT COMMISSIONER, I NCOME TAX HAS ONLY RECORDED SO YES, I AM SATISFIED IS NOT A PROPER S ATISFACTION ( CIT VS. S. GOYANKA LIME & CHEMICAL LTD. (2015) 64 TAXMANN.CO M 313 (SC) ). ITA NOS. 1077 TO 1081/DEL/2019 21 IN VIEW OF THE AFORESAID, IT IS SUBMITTED THAT REOP ENING OF THE ASSESSMENT IS UNSUSTAINABLE IN LAW. 11. IT IS FURTHER SUBMITTED THAT THOUGH IN THE REASONS TO BELIEVE, THE LEARNED AO HAS FORMED A REASONS TO BELIEVE THAT APPELLANT HAS MADE UNDISCLOSED INVESTMENT IN THE PURCHASE OF THE SHARES, HOWEVER W HILE FRAMING THE ASSESSMENT, WHEN IT WAS FOUND THAT THERE IS NO TANG IBLE MATERIAL TO COME TO A CONCLUSION THAT APPELLANT HAS MADE ANY UNDISCLOSED INVESTMENT IN THE PURCHASE OF THE SHARES, AS SUCH, LEARNED AO MADE T HE ADDITION BY INVOKING SECTION 56(2)(VII) OF THE ACT WHICH PROVISION IS AL SO INAPPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE . 12. IT IS SUBMITTED THAT THE AO HAS APPLIED SECTION 56( 2)(VII) IN ORDER TO ARRIVE AT NOTIONAL INCOME WHICH WAS INTRODUCED BY THE LEGISL ATURE SPECIFICALLY TO BE APPLICABLE W.E.F. 01.10.2009, HOWEVER SINCE THE TRA NSACTION OF THE PURCHASE OF THE SHARES WERE COMPLETE BEFORE THAT DATE, AS SUCH, EVE N THE AFORESAID PROVISION IS ALSO INAPPLICABLE. 13. IT IS SUBMITTED THAT IN THE CAPTIONED APPEALS, IT W OULD BE SEEN THAT APPELLANTS HAVE ENTERED INTO AGREEMENT FOR THE PURCHASE OF THE SHAR ES OF M/S INDEX SECURITIES & RESEARCH PVT. LTD. ON 15.09.2009 AND ALSO PAID THE CONSIDERATION BY WAY OF CHEQUE DATED 15.09.2009. THE SHARES WERE ALSO MUTATED IN T HE NAME OF THE APPELLANTS ON 18.09.2009. THE APPELLANTS HAVE TAKEN LOAN FROM M/S VIDHYA SHANKAR INVESTMENT PVT. LTD. AND LOAN AMOUNT WAS ALSO CREDITED IN THE BANKS OF THE APPELLANT ON 26/29.09.2009 AND CHEQUES GIVEN BY THE APPELLANT WA S SUBSEQUENTLY CLEARED. IT IS SUBMITTED THAT SINCE THE TRANSACTION OF THE PURCHAS E OF SHARES ARE COMPLETE BEFORE THE 01.10.2009, AS SUCH, PROVISIONS OF SECTION 56(2 )(VII) IS INAPPLICABLE. 14. IT IS SUBMITTED THAT ANNUAL GENERAL MEETING OF THE COMPANY WAS HELD ON 24.09.2009. THAT UNDER THE COMPANIES ACT, 1956 PREV AILING AT THAT TIME, THE COMPANY HAS TO FILE DETAILS OF THE SHAREHOLDERS AS ON THE DATE OF AGM ALONGWITH ANNUAL RETURN TO BE FILED FOR EACH YEAR. THE COPY OF THE ANNUAL RETURN ALONGWITH ITS ANNEXURE CLEARLY SHOWS THAT AP PELLANTS BECAME SHAREHOLDER AS ON THE DATE OF AGM I.E. 24.09.2009. COPY OF THE ANNUAL RETURN ALONGWITH ITS ANNEXURE IS ENCLOSED HEREWITH . IT IS SUBMITTED THAT SINCE THE TRANSFER OF SHARES HAS ALREADY TAKEN PLACE BEFORE 2 4.09.2009, AND AFORESAID DOCUMENT IS A CONCLUSIVE PROOF OF TRANSFER OF SHARE S IN THE NAME OF APPELLANT. IT IS FURTHER SUBMITTED THAT RELEVANCE OF CONSIDERATION P ASSING SUBSEQUENTLY HAS NO RELEVANCE. IT IS ALSO HIGHLY RELEVANT TO BE STATE T HAT UNDER THE ACT FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN, DATE OF TRANSFER IS RE LEVANT AND NOT THE DATE OF PASSING OF THE CONSIDERATION. IN ANY CASE, IN THIS CASE CON SIDERATION WAS ALSO GIVEN ON THE DATE OF THE TRANSFER AND MERELY CHEQUES WERE REALIS ED SUBSEQUENTLY . ITA NOS. 1077 TO 1081/DEL/2019 22 15. IT IS SUBMITTED THAT UNDER THE INDIAN CONTRACT ACT , THE CONTRACT IS TREATED TO BE COMPLETE ON THE DATE WHEN BOTH THE PARTIES HAVE AGR EED AND CONSIDERATION IS SETTLED. (SECTION 3 & 4), HOWEVER, THE CONTRACT CAN BE REVOKED BEFORE ITS ACCEPTANCE IS COMPLETE OR ACCEPTANCE MAY BE REVOKED BEFORE THE COMMUNICATION OF ACCEPTANCE IS COMPLETE AS AGAINST THE ACCEPTOR BUT NOT AFTERWA RDS (SECTION 5). IT IS SUBMITTED THAT IN THE PRESENT CASE BOTH THE PARTIES HAVE SIGN ED THE AGREEMENT ON 15.09.2009 AND SO, SECTION 5 OF INDIAN CONTRACT ACT HAS NO REL EVANCE AND THE CONTRACT CAN BE REVOKED ONLY AS PER SITUATIONS GIVEN IN SECTION 6. IN ACCORDANCE WITH SECTION 6, VARIOUS SITUATIONS ARE GIVEN, WHICH ARE ALSO NOT AR ISING IN THE PRESENT CASE AS THE CONDITIONS HAVE ALREADY BEEN FULFILLED AND CONSIDER ATION SETTLED HAS BEEN ACCEPTED WITHOUT ANY DISPUTE. 16. IT IS SUBMITTED THAT MERELY BECAUSE THE CHEQUES WER E CLEARED ON 01.10.2009 AND IN ONE CASE ON 19.10.2009 (SHRI. MANOJ AGGARWAL ITA NO .: 1080/DEL/2019) SAME IS IRRELEVANT AS IT IS SETTLED LAW THAT THE DATE OF PA YMENT OF CONSIDERATION WOULD BE DATE WHEN THE CHEQUES WERE HANDED OVER AND NOT THE DATE WHEN THE CHEQUE IS CLEARED AS WHEN A CHEQUE IS HANDED OVER AND SUCH CH EQUE IS ENCASHED SUBSEQUENTLY, SAME WOULD RELATE BACK TO THE DATE WHEN THE CHEQUE WAS ISSUED AND NOT WHEN IT WAS ENCASHED OR CREDITED TO ACCOUNT. 17. IN FELIX HADLEY & CO. V. HADLEY (L.R. (1898) 2 CH.D.680, BYRNE J. EXPRESSED THE SA ME IDEA IN THE FOLLOWING PASSAGE IN HIS JUDGMENT AT PA GE 682 : 'IN THIS CASE I THINK WHAT TOOK PLACE AMOUNTED TO A CONDITIONAL PAYMENT OF THE DEBT; THE CONDITION BEING THAT THE C HEQUE OR BILL SHOULD BE DULY MET OR HONOURED AT THE PROPER DATE. IF THAT BE THE TRUE VIEW, THEN I THINK THE POSITION IS EXACTLY AS IF AN AGREEMENT HAD BEEN EXP RESSLY MADE THAT THE BILL OR CHEQUE SHOULD OPERATE AS PAYMENT U NLESS DEFEATED BY DISHONOUR OR BY NOT BEING MET; AND I TH INK THAT THAT AGREEMENT IS IMPLIED FROM GIVING AND TAKING TH E CHEQUES AND BILLS IN QUESTION.' 18. THE FOLLOWING OBSERVATIONS OF LORD MAUGHAM IN RHOKANA CORPORATION V. INLAND REVEUE COMMISSIONERS (L.R. [1938] AC 380 AT P.399) ARE ALSO APPOSITE: 'APART FROM THE EXPRESS TERMS OF SECTION 33, SUB-SE CTION 1, A SIMILAR CONCLUSION MIGHT BE FOUNDED ON THE WELL KNO WN COMMON LAW RULES AS TO THE EFFECT OF THE SENDING OF A CHEQUE IN PAYMENT OF A DEBT, AND IN THE FACT THAT THOUGH THE PAYMENT IS SUBJECT TO THE CONDITION SUBSEQUENT THAT THE CHEQUE MUST BE MET ON PRESENTATION, THE DATE OF PAYMENT, IF THE CH EQUE IS DULY MET, IS THE DATE WHEN THE CHEQUE WAS POSTED.' ITA NOS. 1077 TO 1081/DEL/2019 23 19. IT IS SUBMITTED THAT AFORESAID JUDGMENT HAS BEEN FO LLOWED BY THE APEX COURT IN THE CASE OF CIT V. OGALE GLASS WORKS LTD. [1954] 25 ITR 529 WHEREIN IT WAS HELD THAT EVEN IF THE CHEQUES WERE TAKEN CONDITIONALLY, THE C HEQUES NOT HAVING BEEN DISHONOURED BUT HAVING BEEN CASHED, THE PAYMENT REL ATED BACK TO THE DATES OF THE RECEIPT OF THE CHEQUES AND IN LAW THE DATES OF PAYM ENTS WERE THE DATES OF THE DELIVERY OF THE CHEQUES. THE FINDINGS OF THE APEX C OURT ARE AS UNDER: IN THE CASE BEFORE US NONE OF THE CHEQUES HAS BEEN DISHONOURED ON PRESENTATION AND PAYMENT CANNOT, THE REFORE, BE SAID TO HAVE BEEN DEFEATED BY THE HAPPENING OF T HE CONDITION SUBSEQUENT, NAMELY, DISHONOUR BY NON-PAYM ENT AND THAT BEING SO THERE CAN BE NO QUESTION, THEREFORE, THAT THE ASSESSEE DID NOT RECEIVE PAYMENT BY THE RECEIPT OF THE CHEQUES. THE POSITION, THEREFORE, IS THAT IN ONE VI EW OF THE MATTER THERE WAS, IN THE CIRCUMSTANCES OF THIS CASE , AN IMPLIED AGREEMENT UNDER WHICH THE CHEQUES WERE ACCEPTED UNCONDITIONALLY AS PAYMENT AND ON ANOTHER VIEW, EVE N IF THE CHEQUES WERE TAKEN CONDITIONALLY, THE CHEQUES NOT H AVING BEEN DISHONOURED BUT HAVING BEEN CASHED, THE PAYMENT REL ATED BACK TO THE DATES OF THE RECEIPT OF THE CHEQUES AND IN LAW THE DATES OF PAYMENTS WERE THE DATES OF THE DELIVERY OF THE CHEQUES. 20. THE AFORESAID JUDGMENT OF THE APEX COURT HAS BEEN F OLLOWED IN THE VARIOUS JUDGMENTS TO THE PROPOSITION THAT IF THE CHEQUE HAS BEEN ISSUED IN DUE COURSE, UNLESS THE CHEQUE IS DISHONOURED, IT WILL HAVE TO B E PRESUMED THAT THE AMOUNT WAS PAID ON THE DATE ON WHICH THE CHEQUE WAS GIVEN: I. CIT VS. DEWAN RUBBER INDUSTRIES [2014] 42 TAXMANN. COM 249 (ALLAHABAD) II. DIT (EXEMPTION) V. RAUNAQ EDUCATION FOUNDATION [2013] 350 ITR 420/213 TAXMAN 19/29 TAXMANN.COM. 150 . IN THIS CASE HONBLE SUPREME COURT HAVE GONE TO THAT EXTENT WHERE POST DATED CHEQUE WAS IS SUED AND THE RECEIPT WAS ISSUED BY THE TRUST ON THE DATE ON WHICH CHEQUE WAS HANDED OVER. THE RECEIPT ISSUED WAS TREATED TO BE VALID AND AFTER CLEARING OF THE CHEQUE THE SAME WAS HELD TO BE VALID AND NO ACTION 13(1)(C) WA S TAKEN AGAINST THE TRUST WITH REGARD TO BENEFITING INTERESTED PERSONS. 21. IN SUCH CIRCUMSTANCES, IT IS RESPECTFULLY SUBMITTED THAT SINCE THE PROVISIONS OF SECTION 56(2)(VII) WAS INSERTED W.E.F. 01.10.2009, AND TRANSACTION OF THE PURCHASE OF SHARES WERE COMPLETE BEFORE THAT DATE, HENCE, ADDIT ION MADE BY THE LEARNED AO BY APPLYING THE AFORESAID PROVISION IS UNSUSTAINABLE I N LAW. ITA NOS. 1077 TO 1081/DEL/2019 24 22. IT IS FURTHER SUBMITTED THAT WHILE MAKING THE IMPU GNED ADDITION, MORE OR LESS IN DIFFERENT LANGUAGES, FOLLOWING REASONS WERE GIVEN BY THE AOS IN VARIOUS ASSESSMENT ORDERS: (A) SHARES WERE THOUGH TRANSFERRED IN THE NAME OF ASSESSEE BUT THE PAYMENT AGAINST THE SAME HAS BEEN CLEARED FROM THE BANK ACC OUNT OF THE ASSESSEE ON 01.10.2009. (B) ASSESSEES HAD NOT SUFFICIENT BALANCE ON THE DA TE OF TRANSFER OF SHARES IN THEIR NAMES. IT IS ONLY WHEN FUNDS WERE RECEIVED ON 26.09 .2009 FROM VIDHYA SHANKAR INVESTMENTS PVT. LTD, PAYMENTS AGAINST PURC HASES WERE CLEARED FROM THE BANK ACCOUNT OF THE ASSESSEES. (C) THE TRANSACTION IS COMPLETE ONLY WHEN THE CHEQU ES ISSUED FOR THE PURCHASE OF SHARES IS CLEARED FROM THE BANK ACCOUNT OF THE A SSESSEES AND NOT BEFORE THAT. THE APPELLANTS HAVE ALREADY MADE THE SUBMISSIONS I N PARAS HEREINBEFORE THAT AFORESAID FINDINGS OF THE AO/CIT IS UNSUSTAINA BLE IN VIEW OF THE LAW LAID DOWN BY THE APEX COURT. (D) THE DEAL OF PURCHASE OF SHARES WAS NOT A NORMA L TRANSACTION BUT A MANAGED DEAL BEFORE 01.10.2009. IT IS SUBMITTED THAT IF THE APPELLANT HAS ENTERED INTO THE PURCHASE OF THE TRANSACTION BEFORE 01.10.2009, SAME DOES NOT CALL F OR AN ADVERSE INFERENCE. RELIANCE IS PLACED ON THE JUDGMENT OF THE APEX COUR T IN THE CASE OF VODAFONE INTERNATIONAL HOLDINGS B.V. VS. UNION OF INDIA REPO RTED IN 341 ITR 1 WHEREIN IT HAS BEEN HELD AS UNDER: 117. REVENUE CANNOT TAX A SUBJECT WITHOUT A STATUTE TO SUPPORT AND IN THE COURSE WE ALSO ACKNOWLEDGE THAT EVERY TAX PAYER IS ENTITLED TO ARRANGE HIS AFFAIRS SO THAT HIS TAXES SHALL BE AS LOW AS POSSIB LE AND THAT HE IS NOT BOUND TO CHOOSE THAT PATTERN WHICH WILL REPLENISH THE TREASU RY. REVENUE'S STAND THAT THE RATIO LAID DOWN IN MCDOWELL IS CONTRARY TO WHAT HAS BEEN LAID DOWN IN AZADI BACHAO ANDOLAN CASE ( SUPRA ) , IN OUR VIEW, IS UNSUSTAINABLE AND, THEREFORE, CALLS FOR NO RECONSIDERATION BY A LARGER BRANCH. (E) THAT M/S INDEX SECURITIES & RESEARCH PVT. LTD ALLOTTED THE SHARES TO THE TRANSFER COMPANY ON 18.09.2009 AND ON THE SAME DATE , SUCH SHARES WERE TRANSFERRED, WHICH SHOWS THAT THE TRANSACTION IS NO T GENUINE. IT IS RESPECTFULLY SUBMITTED THAT AFORESAID OBSERV ATION IS FACTUALLY INCORRECT AS SHARES WERE ALLOTTED TO THE TRANSFEROR COMPANIES ON 31.03.2007 AS IS EVIDENT FROM FORM 2 FILED WITH ROC. IT IS RELEVANT TO STATE HERE THAT SUBSEQUENTLY, THE SHARES WERE SPLITTED W.E.F. 30.06.2008 AND AFTER TH E SPLIT, THOUGH THE DETAILS ITA NOS. 1077 TO 1081/DEL/2019 25 OF THE SHARES I.E. NUMBER OF THE SHARES AND FOLIO N UMBER WERE AVAILABLE WITH THE TRANSFEROR COMPANIES HOWEVER THEY DID NOT RECEI VE THE NEW SHARE CERTIFICATE AND HENCE AFTER THE AGREEMENT, WHEN THE OLD CERTIFICATES WERE HANDED OVER TO THE COMPANY FOR MUTATION, NEW SHARE CERTIFICATES WERE ISSUED AND ENDORSEMENT WERE MADE IN THE NAMES OF THE APPEL LANTS. HENCE THE OBSERVATION MADE BY THE AO AND CIT(A) THAT SHARES W ERE ALLOTTED ON THE SAME DATE TO THE TRANSFEROR COMPANIES IS FACTUALLY INCORRECT. 23. IT IS SUBMITTED THAT THE HONBLE ITAT IN THE RECENT DECISION IN THE CASE OF DCIT VS. SUBODH MENON 103 TAXMANN.COM 15 (MUMBAI) HAVE DISCU SSED AT LENGTH AND ANALYSED SECTION 56(2)(VII) AND HELD THAT WHERE OF FER MADE WAS ACCEPTED BEFORE 1 ST OCTOBER 2009, THE PROVISIONS OF SECTION 56(2)(VII) DO NOT APPLY TO THE CONTRACT EXECUTED PRIOR 01.10.2009 (PARA 20 OF THE DECISION ENCLOSED). 24. IT IS SUBMITTED THAT THE HONBLE ITAT ALSO REFERRED TO EXPLANATORY NOTES TO SECTION 56(2)(VII) OF THE INCOME TAX ACT WHEREIN THEY HAVE CLARIFIED THAT THE PROVISION WAS INTRODUCED IN ORDER TO COUNTER EVASION MECHANISM TO PREVENT LAUNDERING OF UNACCOUNTED INCOME ONCE, IT IS FOUND THAT THERE IS NOT EVEN A WHISPER ABOUT MONEY LAUNDERING BY THE AO IN THE ASSESSMENT ORDER THE PR OVISION OF 56(2)(VII) WOULD NOT BE APPLICABLE. IN THIS CONNECTION THE HONBLE ITAT HAVE REFERRED TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF KP VARGHESE V S. ITO 131 ITR 597 IN CONTEXT OF SECTION 52(2) OF THE ACT AND HELD AS UNDER: THE OBJECT AND PURPOSE OF SUBSECTION 2 AS EXPLICATE D FROM THE SPEECH OF FINANCE MINISTER, WAS NOT TO STRIKE AT HONEST AND BONAFIDE T RANSACTION WHERE THE CONSIDERATION FOR THE TRANSFER WAS CORRECTLY DISCLOSED BY THE ASS ESSEE BUT BRING WITHIN THE NET OF TAXATION THOSE TRANSACTION WHERE THE CONSIDERATION IN RESPECT OF TRANSFER WAS SHOWN AT LESSER FIGURE THEN THAT ACTUALLY RECEIVED BY THE AS SESSEE SO THAT THEY DO NOT ESCAPE THE CHARGE OF TAX ON CAPITAL GAINS BY UNDER STATEMENT O F THE CONSIDERATION. THIS WAS THE REAL OBJECT AND PURPOSE OF THE ENACTMENT OF SUB-SECT ION 2 AND INTERPRETATION OF THIS SECTION MUST FALL IN LINE WITH ADVANCEMENT OF THAT OBJECT AND PURPOSE. WE MUST, THEREFORE, ACCEPT AS THE UNDERLYING ASSUMPTION OF S UB-SECTION (2) THAT THERE IS UNDER STATEMENT OF CONSIDERATION IN RESPECT OF THE TRANSF ER AND SUB-SECTION (2) APPLIES ONLY WHERE ACTUAL CONSIDERATION RECEIVED BY THE ASSESSEE IS NOT DISCLOSED AND THE CONSIDERATION DECLARED IN RESPECT OF THE TRANSFER I S SHOWN AT LESSER FIGURE THAN THE ACTUALLY RECEIVED. 25. APART FROM THE AFORESAID, IT IS SUBMITTED THAT THE APPELLANT IN THE CASE OF SMT. SHEILA DEVI, SHRI. MANOJ AGGARWAL AND SHRI. MANISH AGGARWA L ALSO FILED SUPPORTING EVIDENCES TO THE EVIDENCES ALREADY FILED BEFORE THE LEARNED AO, AS DURING THE COURSE OF THE ASSESSMENT, LEARNED AO DID NOT ACCEPT SUCH D OCUMENTS ON THE GROUND THAT FILES ARE WITH THE HIGHER AUTHORITY. IT IS RELEVANT TO STATE THAT SIMILAR EVIDENCES WERE ITA NOS. 1077 TO 1081/DEL/2019 26 FILED IN THE REMAINING TWO CASES I.E. SHRI. VIJAY A GGARWAL AND SMT RAJ GUPTA WHO WERE BEING ASSESSED BY DIFFERENT ASSESSING OFFICER, HOWEVER SINCE IN THESE CASES, THE ASSESSING OFFICER WAS HANDICAPPED DUE TO LACK OF AV AILABILITY OF RELEVANT FILES. IT IS SUBMITTED THAT THE SUPPORTING DOCUMENTS AS WAS FILE D BY THE SUCH APPELLANTS WERE ALSO FORWARDED TO THE LEARNED AO FOR HIS COMMENTS A ND APPELLANTS ALSO FILED ITS REJOINDER SUBMISSIONS HOWEVER LEARNED CIT(A) DID NO T ADMIT SUCH EVIDENCES. IT IS SUBMITTED THAT SUCH AN ACTION OF THE LEARNED CIT(A) IS UNSUSTAINABLE IN LAW AS DOCUMENTS FURNISHED BEFORE HER WERE NOT THE ADDITIO NAL EVIDENCES BUT WERE ONLY THE SUPPORTING EVIDENCES. 26. IT IS SUBMITTED THAT IN THE PRESENT CASE ALSO THERE WAS NOT EVEN A WHISPER ABOUT MONEY LAUNDERING BY THE AO IN THE ASSESSMENT ORDER INFACT AS ALREADY STATED AO AT PAGE 8 IN REPLY TO SUCH ARGUMENT STATED IT IS NOT R ELEVANT AFTER INTRODUCTION OF SECTION 56(2)(VII). THE TRANSACTIONS WERE MADE THRO UGH ACCOUNT PAYEE CHEQUES AND ACCEPTED BY THE SELLER OF THE SHARES. HENCE THE AD DITION MADE BY APPLYING THE PROVISIONS OF SECTION 56(2)(VII) IS UNSUSTAINABLE I N LAW. 27. WITH REGARD TO THE ADDITION MADE IN RESPECT OF UNSE CURED LOAN RECEIVED FROM M/S VIDHYA SHANKAR INVESTMENTS PVT LTD., IT IS SUBMITTE D THAT AFORESAID COMPANY IS A NON BANKING FINANCE COMPANY (NBFC) AND IS ENGAGED I N THE BUSINESS OF SALE, PURCHASE AND TRADING OF THE SHARES AND GIVING LOANS AND ADVANCES. FROM THE PERUSAL OF THE PROFIT AND LOSS ACCOUNT OF THE AFORESAID COM PANY IT WOULD BE SEEN THAT DURING THE YEAR UNDER CONSIDERATION, AFORESAID COMPANY HAS EARNED INTEREST INCOME OF RS. 1,37,47,082/-. THE APPELLANT HAS FURNISHED COMPLETE DOCUMENTARY EVIDENCES TO SUBSTANTIATE THE BURDEN U/S 68 OF THE ACT. M/S VIDHYA SHANKER INVESTMENTS PVT. LTD. ADDRESS: AK - 94, 1 ST FLOOR, SHALIMAR BAGH, DELHI 110008 PAN: AAACV4336K 28. IT IS SUBMITTED THAT THE APPELLANTS HAVE RECEIVED I NTEREST BEARING LOANS FROM THE AFORESAID COMPANY THROUGH BANKING CHANNELS. TO SUBS TANTIATE THE AFORESAID TRANSACTION, ASSESSEE HAS FILED THE FOLLOWING DOCUM ENTARY EVIDENCES: I. COPY OF THE CONFIRMATION OF M/S VIDHYA SHANKER INVE STMENTS PVT. LTD. II. COPY OF THE ITR OF M/S VIDHYA SHANKER INVESTMENTS P VT. LTD. III. COPY OF RELEVANT BANK STATEMENT OF M/S VIDHYA SHANK ER INVESTMENTS PVT. LTD. IV. COPY OF RELEVANT BANK STATEMENT OF THE ASSESSEE. V. COPY OF THE MEMORANDUM OF ASSOCIATION AND ARTICLES OF ASSOCIATION. VI. COPY OF THE ORDER OF THE HONBLE TRIBUNAL IN THE CA SE OF M/S VIDHYA SHANKER INVESTMENTS PVT. LTD ITA NOS. 1077 TO 1081/DEL/2019 27 VII. COPY OF THE JUDGMENT OF THE HIGH COURT IN THE CASE OF M/S VIDHYA SHANKER INVESTMENTS PVT. LTD 29. IT IS SUBMITTED THAT M/S VIDHYA SHANKER INVESTMENT PVT. LTD IS ALSO ASSESSED TAX AND ASSESSMENT OF THE AFORESAID CREDITOR FOR THE AY 200 5-06 TO 2011-12 WAS MADE U/S 153C OF THE ACT ON 28.03.2013 AND WHILE MAKING THE ASSESSMENT OF THE AFORESAID CREDITOR, LOAN ADVANCED BY THE AFORESAID CREDITOR T O THE ASSESSEE HAS NOT BEEN DOUBTED. IN FACT, ORDER OF ASSESSMENT MADE IN THE C ASE OF M/S VIDHYA SHANKER INVESTMENT PVT LTD WAS NOT FOUND SUSTAINABLE BY THE LEARNED CIT(A) AND SUCH ORDER OF THE CIT(A) HAS BEEN UPHELD BY THE HONBLE TRIBUN AL AND HONBLE HIGH COURT OF DELHI WHICH IS ALSO REPORTED IN [2017] 86 TAXMANN.COM 84 (DELHI). 30. IT IS SUBMITTED THAT ALLEGATION MADE BY THE AO/CIT( A) THAT LOAN RECEIVED BY THE ASSESSEE IS NOTHING BUT ITS OWN FUNDS WHICH WAS ROU TED IN ITS BOOKS FROM THE AFORESAID COMPANY IS ENTIRELY INCORRECT. IT IS SUBM ITTED THAT THERE IS NO BASIS FOR SUCH AN ALLEGATION. IT IS SUBMITTED THAT THE ASSESSEE HA S RECEIVED THE LOAN FROM THE AFORESAID COMPANY WHICH WAS CREDITED IN ITS BOOKS O F ACCOUNT, AND APPELLANT ALSO REQUESTED THE LEARNED AO TO ENQUIRE FROM THE M/S VI DHYA SHANKER INVESTMENT PVT LTD HOWEVER NO SUCH ENQUIRY WAS MADE BY THE AO/CIT( A). 31. IT IS THUS, SUBMITTED THAT ONCE THE LENDERS HAVE DU LY CONFIRMED THE FACTUM OF UNSECURED LOAN TO THE ASSESSEE NO ADDITION CAN BE M ADE UNDER SECTION 68 OF THE ACT IN THE HANDS OF THE ASSESSEE, AS HELD BY THE APEX C OURT IN THE JUDGMENT REPORTED IN 292 ITR 682 , CIT VS. K. CHINNATHAMBAN (SC), WHERE IT HAS BEEN HELD BY THEIR LORDSHIPS OF THE APEX COURT WHERE A TRANSACTION STANDS CONFIRMED BY THE THIRD PARTY OF AN INVESTMENT NO ADDITION COULD POSSIBLY BE MADE U /S 68 OF THE ACT, IN THE HANDS OF THE ASSESSEE IN WHOSE, BOOKS OF ACCOUNTS CREDIT APP EARS. 32. IT IS FURTHER SUBMITTED THAT IT HAS NOT EVEN BEEN E STABLISHED THAT UNSECURED LOAN RECEIVED BY THE ASSESSEE HAS BEEN ORIGINATED FROM T HE COFFERS OF THE ASSESSEE. IN SUPPORT OF THE AFORESAID, THE APPELLANT SEEKS TO PL ACE RELIANCE ON THE JUDGMENT OF THE HIGH COURT OF DELHI IN THE CASE OF CIT VS VALUE CAPITAL SERVICES (P) LTD. REPORTED IN 307 ITR 334 , WHEREIN THEIR LORDSHIPS HAVE HELD AS UNDER: LEARNED COUNSEL FOR THE REVENUE SUBMITS THAT THE CREDITWORTHINESS OF THE APPLICANTS CAN NEVERTHELESS BE EXAMINED BY THE ASSESSING OFFICER. IT IS QUITE OBVI OUS THAT IS VERY DIFFICULT FOR THE ASSESSEE TO SHOW THE CREDITW ORTHINESS OF STRANGERS. IF THE REVENUE HAS ANY DOUBT WITH REGARD TO THEIR ABILITY TO MAKE THE INVESTMENT, THEIR RETURNS MAY BE RE-OPENED BY THE DEPARTMENT. IN ANY CASE, WHAT IS CLINCHING IS THE ADDITIONAL BU RDEN ON THE REVENUE. IT MUST SHOW THAT EVEN IF THE APPLI CANT ITA NOS. 1077 TO 1081/DEL/2019 28 DOES NOT HAVE THE MEANS TO MAKE THE INVESTMENT, THE INVESTMENT MADE BY THE APPLICANT ACTUALLY EMANATED FROM THE COFFERS OF THE ASSESSEE SO AS TO ENABLE IT TO BE TREATED AS THE UNDISCLOSED INCOME OF THE ASSESSEE . THIS HAS NOT BEEN SHOWN INSOFAR AS THE PRESENT CASE IS CONCERNED AND THAT HAS BEEN NOTED BY THE TRIBUNAL A LSO. [EMPHASIS SUPPLIED] 33. THE ASSESSEE ALSO SUBMITS THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. REAL TIME MARKETING (P) LTD. REPORTED IN 306 ITR 55 HAS HELD THAT BURDEN IS ON THE ASSESSING OFFICER TO SHOW THAT MONEY RECEIVED O RIGINATED FROM THE COFFERS OF THE ASSESSEE COMPANY. THE FINDING OF THE HIGH COURT AR E AS UNDER: 8. THERE IS A FINDING OF FACT GIVEN BY THE TWO AUT HORITIES NAMELY CIT(A) AND THE TRIBUNAL TO THE EFFECT THAT:- THE CONFIRMATION OF M/S. ACL HAS BEEN FILED BY THE ASSESSEE. THE SAID COMPANY WAS ASSESSED TO TAX. THE SOURCE OF ACL HAD BEEN EXPLAINED AS OUT OF TRANSFER OF FUNDS FROM THE ACCOUNTS OF M/S. BTL. THUS, THE ASSESSEE DISCHARGED ITS BURDEN OF PROVING IDENTITY, CAPACITY AND GENUINENESS OF THE TRANSACTI ON. THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL TO SHOW THAT THE FUNDS TO ACL WERE PROVIDED BY THE ASSESSEE . UNDER THE CIRCUMSTANCES, IT CANNOT BE SAID THAT THE CASH CREDIT IN QUESTION HAS REMAINED UNEXPLAINED. THERE IS ABSOLUTELY NO MATERIAL TO LINK THE ASSESSEE WITH THE SUM OF RS.22,97,000/- DEPOSITED IN CASH IN THE BANK ACCOUN T OF M/S. FBSL. 9. IN VIEW OF THE CONCURRENT FINDINGS OF THE FACT G IVEN BY THE TWO AUTHORITIES THAT THERE IS NO MATERIAL TO LI NK THE ASSESSEE WITH A SUM OF RS.22,97,000/- DEPOSITED IN CASH IN THE BANK ACCOUNT OF M/S. FBSL, AS SUCH, NO CASE IS MADE OUT FOR MAKING ADDITION UNDER SECTION 68 OF THE ACT, SI NCE THERE WAS NO MATERIAL WITH THE ASSESSING OFFICER TO COME TO THE CONCLUSION REGARDING ANY GENUINENESS OR FICT ITIOUS IDENTITY OF THE ENTRIES OR NON CAPACITY OF THE LEND ER. 10. UNDER THESE CIRCUMSTANCES, WE DO NOT FIND ANY I NFIRMITY OR PERVERSITY IN THE ORDER PASSED BY THE TRIBUNAL AND IN OUR OPINION NO SUBSTANTIAL QUESTION OF LAW ARISES IN TH IS CASE. WITH ITA NOS. 1077 TO 1081/DEL/2019 29 THE RESULT, THE PRESENT APPEAL IS NOT MAINTAINABLE AND THE SAME IS HEREBY DISMISSED. [EMPHASIS SUPPLIED] 34. ALSO GUJARAT HIGH COURT IN THE CASE OF DCIT VS. ROHINI BUILDERS REPORTED IN 256 ITR 360 FOLLOWING THE JUDGMENT OF APEX COURT IN THE CASE OF ORISSA CORPORATION REPORTED IN 159 ITR 78 HAS HELD THAT, BURDEN U/S 68 STANDS DISCHARGED BY PROVING THE IDENTITY OF THE CREDITORS BY GIVING THE COMPLETE ADDRESS AND, PERMANENT ACCOUNT NUMBERS, WHICH HAS BEEN DULY COMPLIED BY THE ASSESSEE. IT HAS BEEN HELD IN THE AFORESAID JUDGMENT AS UNDER: THUS IT IS CLEAR THAT THE ASSESSEE HAD DISCHARGED THE INITIAL ONUS WHICH LAYS ON IT TERMS OF SECTION 68 BY PROVIN G THE IDENTITY OF THE CREDITORS BY GIVING THEIR COMPLETE ADDRESSES, GIR NUMBER/PERMANENT ACCOUNTS NUMBER AND THE COPIES OF ASSESSMENT ORDERS WHEREVER READILY AVAILABLE . IT HAS ALSO PROVED THE CAPACITY OF THE CREDIOTRS BY SHOWING THAT THE AMOUNTS WERE RECEIVED BY THE ASSES SEE BY ACCOUNT PAYEE CHEQUES DRAWN FROM BANK ACCOUNTS OF T HE CREDITORS AND THE ASSESSEE IS NOT EXPECTED TO PROVE THE SOURCE OF THE CREDITS IN ITS BOOKS OF ACCOUNT BUT NOT THE SOURCE OF THE SOURCE AS HELD BY THE BOMBAY HIGH COURT IN THE CASE OF ORIENT TRADING CO. LTD. VS. CIT [1963] 49 ITR 723. THE GENUINENESS OF THE TRANSACTION IS PROVED BY THE FACT THAT THE P AYMENT TO THE ASSESSEE AS WELL S REPAYMENT OF THE LOAN BY THE ASSESSE TO THE DEPOSITORS IS MADE BY ACCOUNT PAYEE CHEQUES AND THE INTEREST IS ALSO PAID BY THE ASSESSEE TO THE CR EDITORS BY ACCOUNT PAYEE CHEQUES . MERELY BECAUSE SUMMONS ISSUED TO SOME OF THE CREDITORS COULD NOT BE SERVED OR THEY F AILED TO ATTEND BEFORE THE ASSESSING OFFICER CANNOT BE AGROU ND TO TREAT THE LOANS TAKEN BY THE ASSESSEE FROM THOSE CREDITOR S AS NON- GENUINE IN VIEW OF THE PRINCIPLES LAID DOWN BY THE SUPREME COURT IN THE CASE OF ORISSA CORPORATION [1986[ 159 ITR 78. IN THE SAID DECISION THE SUPREME COURT HAS OBSERVED TH AT WHEN THE ASSESSEE FURNISHES NAMES AND ADDRESSES OF THE A LLEGED CREDITORS AND THE GIR NUMBERS, THE BURDEN SHIFTS TO THE DEPARTMENT TO ESTABLISH THAT REVENUES 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 AN ADVERSE INFERENCE AGAINST THE ASSESSEE . IN THIS CASE OF SIX CREDITORS WHO APPEARED BEFOR E THE ASSESSING OFFICER, THEY HAVE ADMITTED HAVING ADVANC ED LOANS TO THE ASSESSEE BY ACCOUNT PAYEE CHEQUES AND IN CASE THE ITA NOS. 1077 TO 1081/DEL/2019 30 ASSESSING OFFICER WAS NOT SATISFIED WITH THE CASH A MOUNT DEPOSITED BY THOSE CREDITORS IN THEIR BANK ACCOUNTS , THE PROPER COURSE WOULD HAVE BEEN TO MAKE ASSESSMENTS I N THE CASES OF THOSE CREDITORS BY TREATING THE CASH D EPOSITS IN THEIR BANK ACCOUNTS AS UNEXPLAINED INVESTMENTS OF T HOSE CREDITORS UNDER SECTION 69 [EMPHASIS SUPPLIED] 35. IT IS THUS SUBMITTED THAT, ENTIRE MONIES ORIGINATED FROM THE BANK ACCOUNT OF THE CREDITOR WHO IS DULY IDENTIFIABLE AND HAVE ALSO CONFIRMED ADVANCING LOAN TO THE ASSESSEE, AS SUCH, ADDITION MADE BY THE AO I S UNSUSTAINABLE IN LAW. 36. FURTHER, IT IS SETTLED LAW THAT IF AN ASSESSEE HAS FURNISHED THE EVIDENCES/MATERIAL TO ESTABLISH THE TRANSACTION, AND THE LEARNED AO IS NO T INCLINED TO BELIEVE THE MATERIAL PLACED BY ASSESSEE, THEN BURDEN IS ON HIM TO BRING MATERIAL TO REBUT THE SAME AS HAS BEEN HELD BY THE HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT V GENESIS COMMET (P) LTD REPORTED IN 163 TAXMAN 482. THE ASSESSEE ALSO SUBMITS THAT WHERE NO ADVERSE MATERIAL HAS BEEN BROUGHT ON RECORD, NO ADD ITION CAN BE MADE IN RESPECT OF THE SHARE APPLICATION MONEY IN THE HANDS OF THE ASS ESSEE. RELIANCE IS PLACED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: I) ITA NO. 212/2012 (DEL) DATED 11.04.2012 CIT VS. GOE L SONS GOLDEN ESTATE (P) LTD II) ITA NO. 298/2012 (DEL) DATED 16.05.2012 CIT VS. DAL MIA BROS PVT. LTD. III) ITA NO. 1257/2011 (DEL) DATED 20.07.2012 CIT VS. EX PO GLOBE INDIA LTD IV) 357 ITR 146 (DEL) CIT VS. FAIR FINVEST LTD. V) 361 ITR 10 (DEL) CIT VS. GANGESHWARI METAL (P) LTD . VI) ITA NO. 871/D/2010 A.Y. 2003-04 DATED 25.05.2012 IT O VS. M/S EXCELLANCE TOWN PLANNER (P) LTD. VII) ITA NO. 1125/D/2012 A.Y. 2002-03 DATED 01.06.2012 I TO VS. M/S HI TECH ACCURATE COMMUNICATION (P) LTD. VIII) ITA NO. 1177/D/2012 A.Y. 2001-02 DATED 05.10.2012 I TO VS. INDIA TEXFAB MARKETING LTD. IX) ITA NO. 4498/D/2010 A.Y. 2003-04 DATED 30.12.2010 I NTIMATE JEWELS (P) LTD. X) ITA NO. 1078/D/2013 A.Y. 2002-03 (DEL) MITHILA CRED IT SERVICES LTD. VS. ITO XI) ITA NO. 5656/D/2012 A.Y. 2004-05 (DEL) GULATI GLASS INDUSTRIES (P) LTD. XII) 367 ITR 217 (ALL) CIT VS. VACMET PACKAGING (INDIA) (P) LTD. XIII) 44 TAXMANN.COM 460 (RAJ) CIT VS. SUPERTECH DIAMOND TOOLS (P.) LTD. XIV) 51 TAXMANN.COM 198 (MAD) CIT VS. PRANAV FOUNDATION LTD. XV) 50 TAXMANN.COM 416 (MAD) VICTORY SPINNING MILLS LTD . ITA NOS. 1077 TO 1081/DEL/2019 31 XVI) ITA NO. 2082/D/2011 DATED 8.12.2014 A.Y. 2007-08 AC IT VS. DIVINE (INDIA) INFRASTRUCTURE LTD. XVII) ITA NO. 1644/D/2012 DATED 28.11.2014 A.Y. 2003-04 A CIT VS. GULSHAN POLYOLS LTD. XVIII) ITA NO. 4122/D/2009 DATED 22.10.2014 A.Y. 2001-02 I TO VS. N.C. CABLES LTD XIX) ITA NO. 2821/D/2011 DATED 16.10.2014 ITO VS. RAKAM MONEY MATTERS (P) LTD. XX) ITA NO. 645/2012 DATED 13.1.2015 FUNNAY TIME FINVEST LTD. 37. IT IS SUBMITTED THAT THE UNSECURED LOAN HAS BEEN RE CEIVED BY THE ASSESSEE THROUGH PROPER BANKING CHANNELS. IT IS RESPECTFULLY SUBMIT TED THAT IT IS SETTLED LAW THAT IT IS NOT THE BUSINESS OF THE ASSESSEE TO FIND OUT THE SO URCE OF MONEY OF THE CREDITOR. THAT IN A LATEST JUDGMENT, PRONOUNCED ON 21.12.2015, HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. M/S SHIV DOOT I PEARLS & INVESTMENT LTD. (429/2003), HAS HELD AS UNDER: 12. THE COURT HAS EXAMINED THE DECISION OF THE GAUH ATI HIGH COURT IN NEMI CHAND KOTHARI (SUPRA). THEREIN THE GA UHATI HIGH COURT REFERRED TO SECTION 68 OF THE ACT AND OBSERVE D THAT THE ONUS OF THE ASSESSEE TO THE EXTENT OF HIS PROVING THE SOURCE WHOM WHICH HE HAS RECEIVED THE CASH CREDIT. THE HI GH COURT HELD THAT THE AO HAD AMPLE FREEDOM TO MAKE INQUIR Y NOT ONLY INTO THE SOURCE(S) OF THE CREDITOR, BUT ALSO OF HIS (CREDITORS) SUB-CREDITORS AND PROVE, AS A RESULT, OF SUCH INQUI RY, THAT THE MONEY RECEIVED BY THE ASSESSEE, IN THE FORM OF LOAN FROM THE CREDITOR, THOUGH ROUTED THROUGH THE SUB-CREDITORS, ACTUALLY BELONGS TO, OR WAS OF, THE ASSESSEE HIMSELF. THERE AFTER, THE HIGH COURT, ON A HARMONIOUS CONSTRUCTION OF SECTION 106 OF THE EVIDENCE ACT AND SECTION 68 OF THE ACT, HELD AS UND ER: WHAT, THUS, TRANSPIRES FROM THE ABOVE DISCUSSION I S THAT WHILE 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 CASH CREDIT, SECTION 68 GIVES AMPLE FR EEDOM TO THE ASSESSING OFFICER TO MAKE INQUIRY NOT ONLY INTO THE SOURCE(S) OF THE CREDITOR, BUT ALSO OF HIS (CREDITOR'S) SUBCREDI TORS AND PROVE, AS A RESULT, OF SUCH INQUIRY, THAT THE MONEY RECEIV ED BY THE ASSESSEE, IN THE FORM OF LOAN FROM THE CREDITOR, TH OUGH ROUTED THROUGH THE SUB-CREDITORS, ACTUALLY BELONGS TO, OR WAS OF, THE ASSESSEE HIMSELF. IN OTHER WORDS, WHILE SECTION 68 GIVES THE LIBERTY TO THE ASSESSING OFFICER TO ENQUIRE INTO TH E SOURCE/SOURCES FROM WHERE THE CREDITOR HAS RECEIVED THE ITA NOS. 1077 TO 1081/DEL/2019 32 MONEY, SECTION 106 MAKES THE ASSESSEE LIABLE TO DIS CLOSE ONLY THE SOURCE(S) FROM WHERE HE HAS HIMSELF RECEIVED TH E CREDIT AND IT IS NOT THE BURDEN OF THE ASSESSEE TO SHOW TH E SOURCE(S) OF HIS CREDITOR NOR IS IT THE BURDEN OF THE ASSESSE E TO PROVE THE CREDITWORTHINESS OF THE SOURCE(S) OF THE SUBCREDITO RS. IF SECTION 106 AND SECTION 68 ARE TO STAND TOGETHER, WHICH THE Y 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 CONSTRUCTION OF SECTION 106 O F THE EVIDENCE ACT AND SECTION 68 OF THE INCOME TAX ACT W ILL 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 B URDEN OF THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTIO NS AS WELL AS THE CREDITWORTHINESS 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 GENUINENESS OF THE TRANSACTIONS BETWEEN HIS CREDITO R AND SUB-CREDITORS NOR IS IT THE BURDEN OF THE ASSESSEE TO PROVE THAT THE SUB-CREDITOR HAD THE CREDITWORTHINESS TO A DVANCE THE CASH CREDIT TO THE CREDITOR FROM WHOM THE CASH CREDIT HAS BEEN, EVENTUALLY, RECEIVED BY THE ASSESSEE. IT, THEREFORE, FURTHER LOGICALLY FOLLOWS THAT THE CREDITOR'S CREDI TWORTHINESS HAS TO BE JUDGED VIS-A-VIS THE TRANSACTIONS, WHICH HAVE TAKEN PLACE BETWEEN THE ASSESSEE AND THE CREDITOR, AND IT IS NOT THE BUSINESS OF THE ASSESSEE TO FIND OUT THE SOURCE OF MONEY OF HIS CREDITOR OR OF THE GENUINENESS OF THE TRANSACTI ONS, WHICH TOOK BETWEEN THE CREDITOR AND SUB-CREDITOR AN D/OR CREDITWORTHINESS OF THE SUB-CREDITORS, FOR, THESE A SPECTS MAY NOT BE WITHIN THE SPECIAL KNOWLEDGE OF THE ASSE SSEE . (EMPHASIS SUPPLIED) 13. THE ABOVE OBSERVATIONS, FAR FROM SUPPORTING THE CASE OF THE REVENUE, DOES THE OPPOSITE. IN THE SUBSEQUENT DECIS ION OF THIS COURT IN MOD. CREATIONS PVT. LTD. V. INCOME TAX OFFICER (2013) 354 ITR 282 (DEL) , THE POSITION WAS CLARIFIED BY THE COURT AND IT WAS HELD: IT WILL HAVE TO BE KEPT IN MIND THAT SECTION 68 OF THE I.T. ACT ONLY SETS UP A PRESUMPTION AGAINST THE ASSESSEE WHE NEVER UNEXPLAINED CREDITS ARE FOUND IN THE BOOKS OF ACCOU NTS OF THE ASSESSEE. IT CANNOT BUT BE GAINSAID THAT THE PRESUM PTION IS ITA NOS. 1077 TO 1081/DEL/2019 33 REBUTTABLE. IN REFUTING THE PRESUMPTION RAISED, THE INITIAL BURDEN IS ON THE ASSESSEE. THIS BURDEN, WHICH IS PL ACED ON THE ASSESSEE, SHIFTS AS SOON AS THE ASSESSEE ESTABLISHE S THE AUTHENTICITY OF TRANSACTIONS AS EXECUTED BETWEEN TH E ASSESSEE AND ITS CREDITORS. IT IS NO PART OF THE ASSESSEE'S BURDEN TO PROVE EITHER THE GENUINENESS OF THE TRANSACTIONS EXECUTED BETWEEN THE CREDITORS AND THE SUB-CREDITORS NOR IS IT THE B URDEN OF THE ASSESSEE TO PROVE THE CREDIT WORTHINESS OF THE SUB- CREDITORS. 14. IN MOD. CREATIONS PVT. LTD. (SUPRA) THIS COURT NEGATIVED THE CASE OF THE REVENUE THAT THE ONUS WAS ON THE ASSESS EE TO PROVE THE SOURCE OF THE SUB-CREDITOR. IT WAS OBSERVED AS UNDER: 14. WITH THIS MATERIAL ON RECORD IN OUR VIEW AS FA R AS THE ASSESSEE WAS CONCERNED, IT HAD DISCHARGED INITIAL O NUS PLACED ON IT. IN THE EVENT THE REVENUE STILL HAD A DOUBT W ITH REGARD TO THE GENUINENESS OF THE TRANSACTIONS IN ISSUE, OR AS REGARDS THE CREDIT WORTHINESS OF THE CREDITORS, IT WOULD HAVE H AD TO DISCHARGE THE ONUS WHICH HAD SHIFTED ON TO IT. A BA LD ASSERTION BY THE A.O. THAT THE CREDITS WERE A CIRCULAR ROUTE ADOPTED BY THE ASSESSEE TO PLOUGH BACK ITS OWN UNDISCLOSED INC OME INTO ITS ACCOUNTS, CAN BE OF NO AVAIL. THE REVENUE WAS R EQUIRED TO PROVE THIS ALLEGATION. AN ALLEGATION BY ITSELF WHIC H IS BASED ON ASSUMPTION WILL NOT PASS MUSTER IN LAW. THE REVENUE WOULD BE REQUIRED TO BRIDGE THE GAP BETWEEN THE SUSPICIONS A ND PROOF IN ORDER TO BRING HOME THIS ALLEGATION. THE ITAT, IN O UR VIEW, WITHOUT ADVERTING TO THE AFOREMENTIONED PRINCIPLE L AID STRESS ON THE FACT THAT DESPITE OPPORTUNITIES, THE ASSESSE E AND/OR THE CREDITORS HAD NOT PROVED THE GENUINENESS OF THE TRA NSACTION. BASED ON THIS THE ITAT CONSTRUED THE INTENTIONS OF THE ASSESSEE AS BEING MALAFIDE. IN OUR VIEW THE ITAT OU GHT TO HAVE ANALYZED THE MATERIAL RATHER THAN BE BURDENED BY TH E FACT THAT SOME OF THE CREDITORS HAD CHOSEN NOT TO MAKE A PERS ONAL APPEARANCE BEFORE THE A.O. IF THE A.O. HAD ANY DOUB T ABOUT THE MATERIAL PLACED ON RECORD, WHICH WAS LARGELY BANK S TATEMENTS OF THE CREDITORS AND THEIR INCOME TAX RETURNS, IT C OULD GATHER THE NECESSARY INFORMATION FROM THE SOURCES TO WHICH THE SAID INFORMATION WAS ATTRIBUTABLE TO. NO SUCH EXERCISE H AD BEEN CONDUCTED BY THE A.O. IN ANY EVENT WHAT BOTH THE A. O. AND THE ITAT LOST TRACK OF WAS THAT IT WAS DEALING WITH THE ASSESSMENT OF THE COMPANY, I.E., THE RECIPIENT OF THE LOAN AND NOT THAT OF ITS DIRECTORS AND SHAREHOLDERS OR THAT OF THE SUB-CREDI TORS. IF IT HAD ANY DOUBTS WITH REGARD TO THEIR CREDIT WORTHINESS, THE REVENUE COULD ALWAYS BRING IT TO TAX IN THE HANDS OF THE CR EDITORS AND/OR ITA NOS. 1077 TO 1081/DEL/2019 34 SUB-CREDITORS. [SEE CIT V. DIVINE LEASING & FINANCE LTD. (2008) 299 ITR 268 (DELHI) AND CIT V. LOVELY EXPORT S (P) LTD. (2008) 216 CTR 195 (SC) ].' 38. THAT IN THE CASE OF CIT VS. DAULAT RAM RAWATMULL REPORTED IN 87 ITR 349 AT PAGE 359 , HONBLE APEX COURT HAS HELD AS UNDER: THE EXPLANATION FURNISHED ABOUT THE SOURCE OF RS. 5,00,000 IN FIXED DEPOSIT IN THE NAME OF BISWANATH WAS THAT HE HAD KEPT AN AMOUNT OF RS. 4,50,000 WITH M/S. SOORAJMAL NAGARMAL AND RS. 50,000 IN DEPOSIT WITH COMILLA BANK. THE AMOUNT OF RS. 4,50,000 WAS STATED TO HAVE BEEN WITHDRAWN BY BISWA NATH FROM M/S. SOORAJMAL NAGARMAL IN JANUARY, 1941, WHIL E THE OTHER AMOUNT OF RS. 50,000 WAS WITHDRAWN FROM COMIL LA BANK IN MARCH, 1942. THE AMOUNT OF RS. 5,00,000 WAS THEN TRANSFERRED BY BISWANATH TO HIS NATIVE PLACE, RATAN GARH (DESH) IN RAJASTHAN DUE TO BOMBING PANIC IN CALCUTTA. WHEN WAR SITUATION IMPROVED, THE MONEY WAS TAKEN FROM DESH T O JAMNAGAR FOR DEPOSIT. THIS EXPLANATION WAS FOUND TO BE FALSE IN VIEW OF THE ADMITTED POSITION THAT THE AMOUNT OF RS . 5,00,000 IN FIXED DEPOSIT IN THE NAME OF BISWANATH IN JAMNAG AR BANK HAD BEEN TENDERED AT BURRABAZAR CALCUTTA BRANCH OF THE CENTRAL BANK ON NOVEMBER 15, 1944, AND THEREAFTER W AS TRANSFERRED THROUGH BOMBAY HEAD OFFICE OF THE BANK TO JAMNAGAR. THERE WERE ALSO OTHER CIRCUMSTANCES WHICH POINTED TO THE FALSITY OF THE ABOVE EXPLANATION. THE FALSIT Y OF THE ABOVE EXPLANATION OF BISWANATH, IN THE OPINION OF THE HIG H COURT, DID NOT WARRANT THE CONCLUSION THAT THE AMOUNT OF RS. 5 ,00,000 BELONGED TO THE ASSESSEE. WE CAN FIND NO FLAW OR IN FIRMITY IN THE ABOVE REASONING OF THE HIGH COURT. THE QUESTION WHICH AROSE FOR DETERMINATION IN THIS CASE WAS NOT WHETHE R THE AMOUNT OF RS. 5,00,000 BELONGED TO BISWANATH, BUT W HETHER IT BELONGED TO THE RESPONDENT-FIRM. THE FACT THAT BISW ANATH HAS NOT BEEN ABLE TO GIVE A SATISFACTORY EXPLANATION RE GARDING THE SOURCE OF RS. 5,00,000 WOULD NOT BE DECISIVE EVEN O F THE MATTER AS TO WHETHER BISWANATH WAS OR WAS NOT THE OWNER OF THAT AMOUNT. A PERSON CAN STILL BE HELD TO BE THE OWNER OF A SUM OF MONEY EVEN THOUGH THE EXPLANATION FURNISHED BY HIM REGARDING THE SOURCE OF THAT MONEY IS FOUND TO BE N OT CORRECT. FROM THE SIMPLE FACT THAT THE EXPLANATION REGARDING THE SOURCE OF MONEY FURNISHED BY A, IN WHOSE NAME THE MONEY IS LYING IN DEPOSIT, HAS BEEN FOUND TO BE FALSE, IT WOULD BE A REMOTE AND FAR-FETCHED CONCLUSION TO HOLD THAT THE MONEY BELON GS TO B. ITA NOS. 1077 TO 1081/DEL/2019 35 THERE WOULD BE IN SUCH A CASE NO DIRECT NEXUS BETWE EN THE FACTS FOUND AND THE CONCLUSION DRAWN THEREFROM. 38.1 THAT IN THE CASE OF CIT V. DWARKADHISH INVESTMENT (P.) LTD , REPORTED IN [2011] 330 ITR 298 (DELHI) HONBLE HIGH COURT HAS HELD AS UNDER: 8. IN ANY MATTER, THE ONUS OF PROOF IS NOT A STATIC O NE. THOUGH IN SECTION 68 PROCEEDINGS, THE INITIAL BURDEN OF PR OOF LIES ON THE ASSESSEE YET ONCE HE PROVES THE IDENTITY OF THE CRE DITORS/SHARE APPLICANTS BY EITHER FURNISHING THEIR PAN NUMBER OR INCOME- TAX ASSESSMENT NUMBER AND SHOWS THE GENUINENESS OF TRANSACTION BY SHOWING MONEY IN HIS BOOKS EITHER BY ACCOUNT PAYEE CHEQUE OR BY DRAFT OR BY ANY OTHER MODE, THEN THE ONUS OF PROOF WOULD SHIFT TO THE REVENUE. JUST BECAUSE T HE CREDITORS/SHARE APPLICANTS COULD NOT BE FOUND AT TH E ADDRESS GIVEN, IT WOULD NOT GIVE THE REVENUE THE RIGHT TO I NVOKE SECTION 68. ONE MUST NOT LOSE SIGHT OF THE FACT THAT IT IS THE REVENUE WHICH HAS ALL THE POWER AND WHEREWITHAL TO TRACE AN Y PERSON. MOREOVER, IT IS SETTLED LAW THAT THE ASSESSEE NEED NOT TO PROVE THE SOURCE OF SOURCE. 38.2 FURTHER RELIANCE IS PLACED ON THE FOLLOWING JUDICIA L PRONOUNCEMENTS: I. [2014] 361 ITR 220 (DELHI) CIT V. KAMDHENU STEEL & ALLOYS LTD. II. [2015] 57 TAXMANN.COM 176 (GUJARAT) SMT. NEELAMBEN GOPALDAS AGRAWAL V. ITO III. [1997] 224 ITR 180 (P&H) CIT VS. RAM NARAIN GOEL IV. [2014] 366 ITR 217 (RAJASTHAN) CIT V. JAI KUMAR BAKLIWAL V. [2013] 214 TAXMAN 440 (ALLAHABAD) ZAFA AHMAD & CO. V. CIT VI. 103 ITR 344 AT 349-350 ( PATNA) SARAOGI CREDIT CORPORATION V CIT VII. 59 ITR 632 AT 636 (ASSAM) TOLARAM DAGA V CIT VIII. 49 ITR 273 AT 279 (MAD) S. HASTIMAL V CIT IX. 151 ITR 150 AT 156-157 (PAT) ADDL. CIT, BIHAR V HANUMAN AGGARWAL X. 154 ITR 244 AT 247 (PAT) ADDL CIT V BAHRI BROS. (P) LT XI. 264 ITR 254 AT 261-266 (GAU) NEMICHAND KOTHARI V. CIT XII. 280 ITR 512 AT 518 (GUJ) MURLIDHAR LAHORIMAL VS. CIT XIII. [2008] 219 CTR (RAJ.) 571 AT 577 LABH CHAND BOHRA V. ITO XIV. 256 ITR 360 AT 369 (GUJ) DCIT VS ROHINI BUILDERS IT IS NECESSARY TO STATE THAT THESE LOANS ARE INTER EST BEARING LOAN AND AO HAS ALSO NOTICED THAT PART OF THE SAME HAS BEEN RETURNED AND INTEREST HAS BEEN CREDITED AND CONFIRMATION OF THE SAME WAS ALSO FILED BEFORE THE LEARNED AO. THE AO HIMSELF HAS ACCEPTED THE IDENTITY AND CREDITWORTHINESS. AS REGA RDS TO GENUINENESS, THE AO DID NOT POINT OUT ANY REASON BUT MADE AN ALLEGATION WIT HOUT ANY BASIS AND PURELY ON ITA NOS. 1077 TO 1081/DEL/2019 36 SUSPICION AND SURMISES. IT IS FURTHER SUBMITTED THA T WHILE MAKING THE IMPUGNED ADDITION, LEARNED AO DID NOT BRING ANY EVIDENCE TO REBUT THE EVIDENCES FURNISHED BY THE ASSESSEE AND MADE THE ADDITION ON SUSPICION AND SPECULATIONS. IT IS SUBMITTED THAT IT IS SETTLED LAW THAT SUSPICION HOWSOEVER STR ONG CANNOT PARTAKE THE CHARACTER OF EVIDENCE. RELIANCE FOR THIS PROPOSITION IS PLACE D ON 37 ITR 271 (SC) UMA CHARAN SHAW & BROS. CO. V. CIT . IT HAS BEEN FURTHER HELD IN THE FOLLOWING CASES T HAT SUSPICION HOWSOEVER STRONG CANNOT TAKE THE PLACE OF PROOF: I) DHAKESWARI COTTON MILLS LTD. VS. CIT 26 ITR 775 (SC ) AT 782 (SC) II) OMAR SALAY MOHAMMAD SAIT V CIT 37 ITR 151(SC) III) DHIRAJLAL GIRDHARILAL V CIT, BOMBAY 26 ITR 736 (SC) IV) LAL CHAND BHAGAT AMBICA RAM V CIT 37 ITR 288 (SC) V) KRISHNAND VS. STATE OF MADHYA PRADESH AIR 1977 SC 7 96 VI) JAYADAYAL PODDAR VS. MST BIBI HAZRA AIR 1974 SC 171 VII) CIT VS. K. MAHIM UDMA 242 ITR 133 (KER) 39. IT IS THEREFORE SUBMITTED THAT THE ADDITION MADE BY THE LEARNED AO AND SUSTAINABLE BY THE LEARNED CIT (A) IN RESPECT OF UNSECURED LOAN RECEIVED BY THE APPELLANT IS UNSUSTAINABLE IN LAW. 5. THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORD ERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT SINCE ON THE DATE OF TRANS FER OF FUND AS CONSIDERATION OF SHARE, THE PROVISIONS OF SECTION 5 6(2)(VII) WERE APPLICABLE, THE LD. AUTHORITIES BELOW HAVE RIGHTLY DETERMINED T HE VALUE OF SHARES AFTER CONSIDERING THE AGGREGATE FAIR MARKET VALUE THEREOF . ALL THE COMPANIES, I.E., SELLER, PURCHASER (ASSESSEE) AND LENDER (VIDHYA SHA NKER INVESTMENT PVT. LTD.) WERE THE ENTITIES OF JAGAT GROUP AND THEREFORE, THE AO HAS RIGHTLY DETERMINED THE VALUE OF SHARES AS PER AGGREGATE FAIR MARKET VA LUE OF SHARES AS PER INFORMATION RECEIVED FROM DCIT, CENTRAL CIRCLE-9, N EW DELHI. IT WAS ALSO SUBMITTED THAT THE LD. CIT(A) WAS JUSTIFIED IN REJE CTING THE LEGAL PLEAS OF THE ASSESSEE RAISED AGAINST VALIDITY OF REOPENING OF AS SESSMENT. THE CASE LAWS CITED BY ASSESSEE WITH RESPECT TO THE REOPENING OF ASSESSMENT DO NOT APPLY IN ITA NOS. 1077 TO 1081/DEL/2019 37 THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE. H E, THEREFORE, SUBMITTED THAT THE DECISION REACHED BY THE LD. CIT(A) NEEDS NO INT ERFERENCE. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GON E THROUGH THE ENTIRE MATERIAL ON RECORD INCLUDING THE DECISIONS CITED BY BOTH THE PARTIES. AS FAR AS THE LEGAL GROUND OF THE ASSESSEE IS CONCERNED, THE ASSESSEE APPEARS TO HAVE CHALLENGED THE REOPENING OF ASSESSMENT ON MULTIPLE GROUNDS, SUCH AS, REOPENING ON THE BASIS OF PRESUMPTION, REOPENING ON LY ON THE BASIS OF INFORMATION RECEIVED WITHOUT APPLICATION OF MIND, P ROCEEDINGS BEING BARRED BY LIMITATION, HAVING BEEN INITIATED AFTER A PERIOD OF SIX YEARS AND REOPENING OF ASSESSMENT U/S. 147 RATHER THAN SPECIFIC PROVISION U/S. 153C FOR THE PURPOSE, BY RECORDING PROPER SATISFACTION AND SO ON. THE ASS ESSEE HAS ALSO RELIED ON SEVERAL DECISIONS TO CHALLENGE THE VALIDITY OF REOP ENING, IN HIS WRITTEN SYNOPSIS. WE, HOWEVER, DO NOT FIND ANY SUBSTANCE IN THE CONTENTIONS OF THE ASSESSEE THAT THE REOPENING OF ASSESSMENT IS NOT LE GALLY VALID. IT IS NOTABLE THAT THE REOPENING OF ASSESSMENT HAS BEEN MADE ON THE BA SIS OF INFORMATION RECEIVED FROM DCIT, CENTRAL CIRCLE, WHICH HAS BEEN CONSIDERED AS TANGIBLE MATERIAL BY VARIOUS AUTHORITIES WHEN THE ASSESSING OFFICER HAS MADE PROPER APPLICATION OF MIND ON SUCH INFORMATION. IN THE INS TANT CASE, WE DO NOT FIND NON-APPLICATION OF MIND BY THE ASSESSING OFFICER, A S THE IMPUGNED INFORMATION HAS BEEN VIEWED BY THE AO IN THE LIGHT OF ASSESSEE S STATE OF AFFAIRS AND BOOKS OF ACCOUNT. BESIDES, THE ASSESSING OFFICER HAS MADE DEEP EXAMINATION BY CALLING FOR PLENTY OF DOCUMENTARY EVIDENCES IN THE LIGHT OF ALLEGATIONS MADE IN THE INFORMATION RECEIVED, AS IS EVIDENT FROM THE AS SESSMENT ORDER. THEREFORE, IT CANNOT BE SAID THAT THE AO HAS NOT APPLIED HIS M IND. THE ALLEGATION OF PROCEEDINGS BEING BARRED BY LIMITATION, I.E, BEYOND SIX YEARS, TOO IS NOT ITA NOS. 1077 TO 1081/DEL/2019 38 SUSTAINABLE, INASMUCH AS, THE NOTICE U/S. 148 WAS I SSUED ON 31.03.2017 AND SIX YEARS TIME FROM THE ASSESSMENT YEAR UNDER CONS IDERATION EXPIRES ON 31.03.2017, AS IN THE INSTANT CASE, IT IS NOT IN DI SPUTE THAT THE RETURN OF THE ASSESSEE WAS PROCESSED U/S. 143(1)(A) OF THE ACT. B ESIDES, THE RE-ASSESSMENT PROCEEDINGS HAVE BEEN INITIATED ON THE BASIS OF INF ORMATION RECEIVED AND EXAMINING THE SAME IN THE LIGHT OF ASSESSEES STATE OF AFFAIRS, IT CANNOT BE ACCEPTED THAT THE ASSESSING OFFICER WAS OBLIGED TO MAKE ASSESSMENT U/S. 153C OF THE ACT. IN PRESENCE OF ALL THESE PECULIAR CIRCU MSTANCES, THE DECISIONS RELIED BY THE LD. COUNSEL ON LEGAL GROUNDS, ARE NOT FOUND APPLICABLE TO THE PRESENT CASE, BEING DISTINGUISHABLE ON FACTS. ACCORDINGLY, THE STAND OF ASSESSEE ON VALIDITY OF REASSESSMENT PROCEEDINGS, DESERVES TO F AIL. 7. NOW, ADVERTING TO THE MERITS OF THE CASE, ON PER USAL OF ASSESSMENT ORDER AND THE SUBMISSIONS OF BOTH THE PARTIES, WE FIND TH AT THE ONLY QUESTIONS, WHICH NOW REQUIRE ADJUDICATION ARE WHETHER THE LD. AUTHORITIES BELOW ARE JUSTIFIED IN MAKING ADDITION OF RS.3,51,52,680/- BY APPLYING THE PROVISIONS OF SECT ION 56(2)(VII) OF THE ACT IN THE ATTENDING FACTS AND CIRCUMSTANCES OF THE CAS E ? WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. AUTHORITIES BELOW ARE JUSTIFIED IN MAKING ADDITION OF RS.25,00, 000/- U/S 68 OF THE ACT, AS UNEXPLAINED UNSECURED LOAN FROM VIDHYA SHAN KAR INVESTMENT PVT. LTD. OR NOT ? 8. ADDRESSING TO THE FIRST QUESTION, WE OBSERVE FRO M THE RECORD THAT THE ASSESSEE HAD PURCHASED THE SHARES OF M/S INDEX SECU RITIES & RESEARCH PVT. LTD. IN THE MONTH OF SEPTEMBER, 2009 AND HAVE ALSO ISSUED THE CHEQUE FOR ITA NOS. 1077 TO 1081/DEL/2019 39 CONSIDERATION ON 15.09.2009 ITSELF, ON WHICH DATE N O SUFFICIENT BALANCE WAS AVAILABLE IN THE BANK ACCOUNT OF THE ASSESSEE. THE SHARES ALSO STOOD TRANSFERRED IN THE NAME OF ASSESSEE ON 18.09.2009. THE ASSESSEE HAD RAISED UNSECURED LOAN FROM VIDHYA SHANKAR INVESTMENT PVT. LTD., WHICH TOO WAS CREDITED IN THE BANK ACCOUNT OF ASSESSEE ON 26.09.2 009, MEANING THEREBY, AFTER 26.09.2009 THE ASSESSEE HAD SUFFICIENT BALANC E IN ITS BANK ACCOUNT TO HONOUR THE CHEQUE ISSUED. THE ASSESSING OFFICER HAS APPLIED THE PROVISIONS OF SECTION 56(2)(VII), WHICH CAME INTO FORCE FROM 01.1 0.2009, ON THE PREMISE THAT THE SAID CHEQUE WAS CLEARED FROM THE BANK ON 0 1.10.2009 AND THEREFORE, THE SHARE TRANSACTION WOULD NOT BE DEEMED TO HAVE B EEN COMPLETED BEFORE 01.10.2009. IN THIS CONTEXT, IT IS NOTABLE THAT ALL THE DOCUMENTARY EVIDENCE SUBMITTED BY THE ASSESSEE UNEQUIVOCALLY GO TO PROVE THE TRANSFER OF SHARES IN THE NAME OF ASSESSEE IN THE MONTH OF SEPTEMBER, 200 9. SIMPLY BECAUSE THE CONSIDERATION WAS PASSED ONTO THE SELLER ON 01.10.2 009, IT CANNOT BE SAID THAT THE SHARE TRANSACTION WAS NOT COMPLETE PRIOR TO THI S DATE ONCE ALL THE DOCUMENTARY EVIDENCE AS REQUIRED BY THE AO WERE FUR NISHED BY THE ASSESSEE REGARDING COMPLETION OF SHARE TRANSACTIONS IN THE M ONTH OF SEPTEMBER, 2009. FOR THIS VIEW OF OURS, WE GET SUPPORT FROM THE DECI SION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. OGALE GLASS WORKS LTD. , 25 ITR 529, WHEREIN IT WAS HELD THAT EVEN IF THE CHEQUES WERE TAKEN CONDITIONA LLY, THE CHEQUE NOT HAVING BEEN DISHONOURED BUT HAVING BEEN ENCASHED, THE PAYM ENT RELATED BACK TO THE DATE OF THE RECEIPT OF THE CHEQUES AND IN LAW THE D ATES OF PAYMENTS WERE THE DATES OF THE DELIVERY OF THE CHEQUES. THE RELEVANT PORTION OF THE DECISION IS REPRODUCED ABOVE. IN THE LIGHT OF THIS DECISION, IN OUR OPINION, THE PROVISIONS OF SECTION 56(2)(VII) WOULD NOT APPLY TO THE PRESEN T CASE. ITA NOS. 1077 TO 1081/DEL/2019 40 9. FURTHER, THE CO-ORDINATE BENCH OF TRIBUNAL IN TH E CASE OF SUBODH MENON 103 TAXMANN.COM 15 (MUMBAI) HAVE DISCUSSED AT LENGT H AND ANALYSED THE SECTION 56(2)(VII) AND HELD THAT WHERE OFFER MADE WAS ACCEPTED BEFORE 1ST OCTOBER 2009, THE PROVISIONS OF SECTION 56(2)(VII) DO NOT APPLY TO THE CONTRACT EXECUTED PRIOR 01.10.2009. PARA 20 OF THIS ORDER IS REPRODUCED AS UNDER : 20. MOREOVER, THE PROVISIONS OF SECTION 56(2)(VII) ARE APPLICABLE ONLY FROM 1ST OCTOBER, 2009. IN THE INSTANT CASE, THE OF FER WAS MADE BY THE COMPANY TO THE SHAREHOLDERS TO SUBSCRIBE FOR THE SH ARES ON 7 SEPTEMBER, 2009 PURSUANT TO RESOLUTION PASSED BY BOARD OF DIRE CTORS ON THE SAME DATE. FURTHER, ON 21ST SEPTEMBER, 2009, THE COMPANY INFORMED THE SHAREHOLDERS ABOUT THE ACCEPTANCE OF SHARES OFFERED BY THE COMPANY. THEREFORE, THE OFFER MADE BY THE COMPANY WAS ACCEPTE D BY THE SHAREHOLDERS BEFORE 1ST OCTOBER, 2009 HENCE, THE CO NTRACT BETWEEN THE COMPANY AND THE SHAREHOLDER FOR ISSUE BY THE COMPAN Y OF SHARES WAS COMPLETED BEFORE 1ST OCTOBER, 2009. ACCORDINGLY, TH E PROVISIONS OF SECTION 56(2)(VII) DO NOT APPLY TO AS THE CONTRACT WAS EXEC UTED PRIOR TO 1ST OCTOBER 2009. IT WAS ONLY THE FORMAL ROUTINE ACT OF ISSUANCE OF THE SHARE CERTIFICATE BY THE COMPANY WHICH TOOK PLACE AFTER 1 OCTOBER, 2009. THE REVENUE HAS ALSO RELIED ON THE PROVISIONS OF SECTIO N 17 THAT THERE WOULD BE A TAX LIABILITY UNDER SECTION 17, EVEN IF SECTION 5 6(2)(VII) DOES NOT APPLY, AS THE ASSESSEE BEING AN EMPLOYEE OF THE COMPANY. THE A LLOTMENT OF SHARES BY THE COMPANY THE HOLDING OF THE ASSESSEE CAME DOW N FROM 34.57% TO 33.30%, I.E., SHAREHOLDING OF THE ASSESSEE WITNESSE S A DECLINE AFTER THE SHARES WERE ALLOTTED BY THE COMPANY, NO BENEFIT WAS RECEIVED BY THE ASSESSEE AND THEREFORE, EVEN THE PROVISIONS OF SECT ION 17 OF THE ACT ARE NOT APPLICABLE. IN VIEW OF ABOVE DECISIONS AND THE ATTENDING FACTS OF THE PRESENT CASE, IN OUR CONSIDERED OPINION, THE LD. AUTHORITIES BELOW WERE NOT JUSTIFIED IN MAKING ADDITION BY INVOKING THE PROVISIONS OF SECTION 56(2 )(VII) OF THE ACT BY DETERMINING THE VALUE OF SHARES ON THE BASIS OF AGG REGATE FAIR MARKET VALUE AS ITA NOS. 1077 TO 1081/DEL/2019 41 AGAINST THE ACTUAL VALUE THEREOF SUPPORTED BY VARIO US DOCUMENTARY EVIDENCE. ACCORDINGLY, THE FIRST QUESTION IS DECIDED IN FAVOU R OF THE ASSESSEE AND AGAINST THE REVENUE. 10. ADVERTING TO THE SECOND ADDITION OF RS.25,00,00 0/- U/S. 68 AS UNEXPLAINED UNSECURED LOAN FROM M/S. VIDHYA SHANKAR INVESTMENT PVT. LTD., IT IS NOT IN DISPUTE THAT THE ASSESSEE HAD FILED AL L THE DOCUMENTARY EVIDENCES IN SUPPORT AS REQUIRED BY THE ASSESSING OFFICER. THERE IS NOTHING ON RECORD TO REBUT THE CONTENTION OF ASSESSEE THAT HE HAD ALREAD Y FILED FOLLOWING DOCUMENTS BEFORE THE AUTHORITIES BELOW : COPY OF THE CONFIRMATION OF M/S VIDHYA SHANKER INVE STMENTS PVT. LTD. COPY OF THE ITR OF M/S VIDHYA SHANKER INVESTMENTS P VT. LTD. COPY OF RELEVANT BANK STATEMENT OF M/S VIDHYA SHANK ER INVESTMENTS PVT. LTD. COPY OF RELEVANT BANK STATEMENT OF THE ASSESSEE. COPY OF THE MEMORANDUM OF ASSOCIATION AND ARTICLES OF ASSOCIATION. COPY OF THE ORDER OF THE HONBLE TRIBUNAL IN THE CA SE OF M/S VIDHYA SHANKER INVESTMENTS PVT. LTD COPY OF THE JUDGMENT OF THE HIGH COURT IN THE CASE OF M/S VIDHYA SHANKER INVESTMENTS PVT. LTD 11. IT IS EVIDENT FROM THE ASSESSMENT ORDER ITSELF THAT M/S. VIDHYA SHANKER INVESTMENT PVT. LTD. HAS DECLARED TO HAVE ADVANCED LOAN OF RS.25.00 LAKHS TO THE ASSESSEE, AS WAS ALSO FOUND PROVED FROM THE ACC OUNTS OF THE LENDER. IT IS ALSO NOT IN DISPUTE THAT THE LENDER COMPANY M/S. VI DHYA SHANKER INVESTMENT PVT. LTD. IS ASSESSED TO TAX AND ASSESSMENT OF THE AFORESAID CREDITOR FOR THE AY 2005-06 TO 2011-12 WAS MADE U/S 153C OF THE ACT ON 28.03.2013 AND WHILE MAKING THE ASSESSMENT OF THE AFORESAID CREDITOR, LO AN ADVANCED TO THE ASSESSEE HAS NOT BEEN DOUBTED, WHICH WAS NOT FOUND SUSTAINABLE BY THE LEARNED CIT(A) AND THE ORDER OF THE CIT(A) STOOD UP HELD BY THE TRIBUNAL AND HONBLE JURISDICTIONAL HIGH COURT, REPORTED IN [201 7] 86 TAXMANN.COM 84 ITA NOS. 1077 TO 1081/DEL/2019 42 (DELHI). MOREOVER, ONCE THE ASSESSEE HAS FILED ALL THE DOCUMENTARY EVIDENCE, AS STATED ABOVE, WHEREIN NO DEFECTS HAVE BEEN POINT ED OUT BY AO, NOR IS THERE ANY OBJECTION AS TO THE IDENTITY AND CREDITWORTHINE SS OF THE CREDITOR, THERE REMAINS NO JUSTIFICATION TO INVOKE THE PROVISIONS O F SECTION 68 ONLY FOR THE PURPOSE OF ADDITION. ON PERUSAL OF THE BALANCE SHEE T OF THE CREDITOR, WE FIND THAT THERE WAS TOTAL SHAREHOLDER FUNDS OF RS.23,21, 43,367/- AND THE GROSS REVENUE EARNED DURING THE YEAR IS RS.1,37,61,631/-, WHICH IS MAINLY INTEREST INCOME. THE LOAN AMOUNT RECEIVED BY ASSESSEE WAS TH ROUGH BANKING CHANNEL. THE CREDITOR HAS CONFIRMED TO HAVE CHARGED INTEREST OF RS.1,43,200/- FROM THE ASSESSEE IN HIS CONFIRMATION AND IT WAS CLEARLY INF ORMED TO THE AO THAT THE SAID LOAN WAS NOT SQUARED UP AS THE BALANCE OF RS.2 5,29,700/- IS STILL OUTSTANDING AS ON 31.03.2010 AND ONLY A SUM OF RS.1 ,13,500/- WAS PAID. THE INTEREST AMOUNT OF RS.1,43,200/- WAS STATED TO BE A CCUMULATED. THE ASSESSMENT ORDER IS QUITE SILENT ON THESE CONTENTIO NS OF THE ASSESSEE MADE BEFORE THE ASSESSING OFFICER. THERE IS NOT EVEN AN IOTA OF EVIDENCE OR CIRCUMSTANCE TO DOUBT THAT AMOUNT RECEIVED BY THE A SSESSEE FROM THE CREDITOR WAS GENERATED FROM THE COFFERS OF ASSESSEE. IN PRES ENCE OF ALL THESE FACTS, AND IN VIEW OF VARIOUS DECISIONS, RELIED BY THE LD. AR IN ITS WRITTEN SYNOPSIS, WE ARE OF THE OPINION THAT THE LD. CIT(A) WAS NOT JUSTIFIE D TO SUSTAIN THE ADDITION OF RS.25,00,000/- MADE BY THE AO U/S. 68 OF THE IT ACT WITHOUT CONTROVERTING THE CONTENTIONS MADE BY THE ASSESSEE AND EVIDENCES FILE D BY HIM. WE, ACCORDINGLY, DO NOT FIND ANY JUSTIFICATION TO SUSTAIN THIS ADDIT ION TOO IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THIS CASE. AS A RESULT, THE AP PEAL OF THE ASSESSEE DESERVES TO BE ALLOWED. ITA NOS. 1077 TO 1081/DEL/2019 43 12. AS ALREADY SEEN, THE FACTS INVOLVED IN APPEALS OF OTHER ASSESSEES, CAPTIONED ABOVE, ARE IDENTICAL AND ARGUMENTS AND GR OUNDS ARE ALSO COMMON BARRING THE QUANTUM OF ADDITIONS, OUR AFORESAID DEC ISION IN APPEAL OF SHRI VIJAY AGGARWAL SHALL APPLY MUTATIS MUTANDIS IN REMA INING APPEALS OF DIFFERENT ASSESSEES BEFORE US. 13. IN THE RESULT, ALL THE APPEALS OF DIFFERENT ASS ESSEES ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH MAY, 2019. SD/- SD/- (BHAVNESH SAINI) (L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30 TH MAY, 2019 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI