M/s Lotus Integrated Taxpark Ltd., Barnala V. DCIT, Sangrur

ITA 1138/CHANDI/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1599 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 18-09-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 23-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: ADITY A KUMARCA
• Keywords: Capital asset; Gift; Depreciation; Income from undisclosed sources; Share purchase agreement; Opportunity of being heard; Proportionate interest; Additional evidence; Question of law; Corroborative evidences; Assessment record; Capital receipt; Onus to prove; Revenue expenditure; Capital expenditure
• Section: 143(3); 133(6); 131; 68; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO. 1138/CHD/2014 ASSESSMENT YEAR: 2010-11 M/S LOTUS INTEGRATED TAXPARK LTD., VS THE DCIT, TRIDENT COMPLEX, CIRCLE, HANDIAYA ROAD, SANGRUR. DHAULA, BARWALA. PAN: AABCL2655E & ITA NO. 1139/CHD/2014 ASSESSMENT YEAR: 2011-12 M/S LOTUS INTEGRATED TAXPARK LTD., VS THE ADDL.CIT , TRIDENT COMPLEX, RANGE, HANDIAYA ROAD, SANGRUR. DHAULA, BARWALA. PAN: AABCL2655E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI KUMAR, CA & SHRI ADITYA KUMAR,CA RESPONDENT BY : SHRI JITENDER KUMAR DATE OF HEARING : 18.09.2015 DATE OF PRONOUNCEMENT : 01.10.2015 O R D E R PER BHAVNESH SAINI,JM BOTH THE APPEALS BY ASSESSEE ARE DIRECTED AGAINST DIFFERENT ORDERS OF LD. CIT(APPEALS) PATIALA DATED 20.11.2014 FOR ASSESSMENT YEAR 2010-11 AND DATED 21.11.2014 FOR ASSESSMENT YEAR 2011-12. 2 2. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PA RTIES, PERUSED FINDINGS OF AUTHORITIES BELOW AND CONSIDERE D THE MATERIAL AVAILABLE ON RECORD. BOTH THE APPEALS ARE DECIDED AS UNDER. ITA 1138/2014 3. ON GROUND NO. 1 ASSESSEE CHALLENGED THE ORDER OF LD. CIT(APPEALS) IN UPHOLDING THE ADDITION OF RS.3,70,0 0,000/- RECEIVED BY THE ASSESSEE AS SHARE CAPITAL AND SHARE PREMIUM FROM NON-RESIDENT COMPANY M/S GLACIS INVESTMENT LIMITED. THE FACTS ARE THAT THE ASSESSE E HAS ALLOCATED 740000 SHARES TO M/S GLACIS INVESTMENT LI MITED AT PREMIUM. THE ASSESSING OFFICER ASKED FOR THE IN COME TAX RETURN, ASSESSEE'S PAN NUMBER, MODE OF ACCEPTAN CE OF MONEY WITH DATE, BANK ACCOUNT OF M/S GLACIS INVESTM ENT LIMITED TO PROVE IDENTITY, CREDIT WORTHINESS AND GENUINENESS OF THE TRANSACTIONS. THE ASSESSEE CONT ENDED THAT M/S GLACIS INVESTMENT LIMITED IS NON RESIDENT COMPANY AT MAURITIUS. IT WAS ALSO SUBMITTED THAT A MOUNT WAS RECEIVED THROUGH BANK AND RESERVE BANK OF INDIA HAS CONFIRMED THE INFLOW OF THE AMOUNT INVESTED. THE ASSESSING OFFICER THEREAFTER CONTENDED THAT THESE DOCUMENTS DOES NOT PROVE THE CREDIT WORTHINESS OF T HE PARTY AND GENUINENESS OF THE TRANSACTION IN THE MAT TER. THE ASSESSEE FURTHER CONTENDED THAT CERTIFICATE OF INCORPORATION OF THE INVESTOR COMPANY IS PLACED ON RECORD AND RELIED UPON VARIOUS CASE LAWS. THE ASSESSING O FFICER, HOWEVER, NOTED THAT ASSESSEE FAILED TO PROVE THE CR EDIT 3 WORTHINESS OF THE PARTY AND GENUINENESS OF THE TRAN SACTION AND MADE THE ADDITION. 4. THE ASSESSEE CHALLENGED THE ADDITION BEFORE LD. CIT(APPEALS). DURING THE APPELLATE PROCEEDINGS, TH E ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE ASS ESSING OFFICER. IT WAS FURTHER CONTENDED THAT AS PER PROV ISIONS OF SECTION 68, ASSESSEE IS ONLY TO PROVE THE NATURE AN D SOURCE OF THE CASH CREDIT AND IDENTITY OF THE INVESTOR. I T WAS SUBMITTED THAT IN THIS CASE, IDENTITY IS PROVED BY WAY OF ADDRESS GIVEN, CERTIFICATE OF INCORPORATION AND TAX RESIDENCE CERTIFICATE. CREDIT WORTHINESS WAS PROVE D AS TRANSACTION IS THROUGH BANKING CHANNEL APPROVED BY RESERVE BANK OF INDIA. IT WAS ALSO SUBMITTED THAT CONFIRMATION IN THIS CASE HAS BEEN OBTAINED AND SUB MITTED AN ADDITIONAL EVIDENCE UNDER RULE 46A OF THE IT RUL ES AND THE INABILITY TO PRODUCE THE BANK STATEMENT DOES NO T FALSIFY THE CREDIT WORTHINESS OF THE CREDITOR. THE ASSESSE E SUBMITTED THAT CONFIRMATION COULD BE OBTAINED ONLY AFTER CULMINATION OF ASSESSMENT PROCEEDINGS. AS REGARDS GENUINENESS OF THE TRANSACTION, SAME IS PROVED AS T HE TRANSACTION IS THROUGH BANKING CHANNEL. THE ASSESSE E RELIED UPON DECISION IN THE CASE OF CIT V STELLER INVESTMENTS LTD. 251 ITR 263 (S.C) AND CIT V LOVELY EXPORTS PVT. LTD. 299 ITR 268 (DELHI) ETC. THE ASSE SSING OFFICER IN THE COUNTER COMMENTS, RELIED UPON ASSESS MENT ORDER, HOWEVER HE DID NOT REBUT THE SUBMISSIONS REG ARDING ADDITIONAL EVIDENCE FILED BEFORE LD. CIT(APPEALS). THE LD. CIT(APPEALS) NOTED THAT IN THIS CASE, IDENTITY OF T HE 4 SHAREHOLDER IS PROVED BY WAY OF CERTIFICATE OF INCORPORATION. HOWEVER, THE ASSESSEE HAS FAILED TO PRODUCE THE BANK STATEMENTS OR BALANCE SHEET ETC. OF THE SU BSCRIBER COMPANY AS SUBMITTED BY THE ASSESSING OFFICER IN TH E COUNTER COMMENTS ALSO. THE LD. CIT(APPEALS), THERE FORE, NOTED THAT ASSESSEE HAS FAILED TO PROVE CREDIT WORT HINESS OF THE SUBSCRIBER. THEREFORE, ADDITION WAS RIGHTLY MA DE UNDER SECTION 68 OF THE ACT. THE LD. CIT(APPEALS) FURTHE R NOTED THAT EVEN IF ADDITIONAL EVIDENCE I.E. CONFIRMATION OF THE SUBSCRIBER IS ADMITTED, IT WOULD NOT MAKE ANY DIFFE RENCE BECAUSE THE CONFIRMATION WOULD NOT JUSTIFY THE CRED IT WORTHINESS OF THE PARTY. THIS GROUND WAS, ACCORDING LY, DISMISSED. 5. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW. HE HAS FILED APPLICATION FOR ADMISSION OF THE ADDITIONAL EVIDENC E UNDER RULE 29 OF THE INCOME TAX APPELLATE TRIBUNAL RULES AND SUBMITTED THAT DURING THE PROCEEDINGS BEFORE THE AUTHORITIES BELOW, ASSESSEE WAS NOT ABLE TO OBTAIN COPY OF THE BALANCE SHEET OF M/S GLACIS INVESTMENT LIMITED, A NON RESIDENT COMPANY INCORPORATED IN MAURITIUS. NOW TH E ASSESSEE HAS BEEN ABLE TO OBTAIN COPY OF THE SAME. THE LD. COUNSEL FOR THE ASSESSEE, BY REFERRING TO THE BALAN CE SHEET OF THE SUBSCRIBER SUBMITTED THAT THE PRINCIPAL ACTI VITY OF THE COMPANY IS THAT OF INVESTMENT HOLDING AND HAS SUFFICIENT ASSETS TO MAKE INVESTMENT IN THE ASSESSE E COMPANY AND ALSO SUBMITTED THAT THE BALANCE SHEET O F M/S GLACIS INVESTMENT LIMITED SHOWS THAT SUBSCRIBER COM PANY 5 HAS MADE INVESTMENT IN ASSESSEE COMPANY M/S LOTUS INTEGRATED TAXPARK LTD.(PB-21). ON THE OTHER HAND, LD. DR OBJECTED TO THE ADMISSION OF ADDITIONAL EVIDENCE AN D SUBMITTED THAT THE SUBSCRIBER COMPANY WAS NOT HAVIN G ANY INCOME IN ASSESSMENT YEAR UNDER REFERENCE AND THAT THE ENTIRE AMOUNT HAS BEEN INVESTED IN THE ASSESSEE COM PANY CREATES A DOUBT. HE HAS, THEREFORE, SUBMITTED THAT ADDITIONAL EVIDENCE MAY NOT BE ADMITTED. 6. WE HAVE HEARD RIVAL SUBMISSIONS. THE LD. CIT(APPEALS) IN HIS FINDINGS NOTED THAT ASSESSEE HA S FAILED TO PRODUCE THE BANK STATEMENTS OR BALANCE SHEET ETC . OF THE SUBSCRIBER COMPANY AND AS SUCH, ASSESSEE FAILED TO PROVE CREDIT WORTHINESS OF THE SUBSCRIBER COMPANY BEING A FOREIGN INVESTMENT. IN THE OPINION OF THE LD. CIT( APPEALS), THE FILING OF THE BALANCE SHEET WAS NECESSARY TO PR OVE CREDIT WORTHINESS OF THE SUBSCRIBER COMPANY. THEREF ORE, THE BALANCE SHEET OF THE SUBSCRIBER COMPANY IS RELEVANT DOCUMENT AND GOES TO THE ROOT OF THE MATTER. THE A SSESSEE HAS EXPLAINED THE REASONS THAT AT THE PROCEEDINGS B EFORE AUTHORITIES BELOW, THE BALANCE SHEET COULD NOT BE O BTAINED WHICH IS NOW AVAILABLE TO THE ASSESSEE, THEREFORE, SAME WAS FILED FOR CONSIDERATION. THE HON'BLE SUPREME COURT IN THE CASE OF TEK RAM 262 CTR 118 ADMITTED THE ADDITIONAL EVIDENCE BEING THE SAME RELEVANT AND REQUIRED TO BE LOOKED INTO. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN T HE CASE OF MUKTA METAL WORKS 336 ITR 555 HELD THAT THE REPORT OF FORENSIC SCIENCE LABORATORY WAS THE RELEV ANT MATERIAL AND SO WAS THE AFFIDAVIT OF THE SEARCHED P ERSONS. 6 THE ADDITIONAL EVIDENCE WAS NECESSARY FOR JUST DECI SION OF THE MATTER. THE TRIBUNAL WAS NOT JUSTIFIED IN DECL INING TO CONSIDER ADDITIONAL EVIDENCE COMPRISING THE OPINION OF THE LABORATORY OF THE GOVERNMENT EXAMINER AND ALSO THE AFFIDAVIT OF THE AUTHOR OF THE DIARY. THOUGH THE D OCUMENTS HAD A DIRECT BEARING ON THE ISSUE . 7. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT O F THE ABOVE DECISIONS, IT IS CLEAR FROM THE FINDINGS OF T HE LD. CIT(APPEALS) THAT BALANCE SHEET OF THE SUBSCRIBER C OMPANY WAS RELEVANT DOCUMENT TO PROVE THE CREDIT WORTHINES S OF THE SUBSCRIBER COMPANY AND WOULD GO TO THE ROOT OF THE MATTER. THEREFORE, THE ADDITIONAL EVIDENCE IN THE FORM OF BALANCE SHEET OF THE SUBSCRIBER COMPANY IS ADMITTED FOR HEARING. THE APPLICATION OF THE ASSESSEE FOR ADMISS ION OF THE ADDITIONAL EVIDENCE IS ALLOWED. 8. THE LD. COUNSEL FOR THE ASSESSEE, ON MERITS REIT ERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW. HE HAS REFERRED TO PB-27 WHICH IS THE CERTIFICATE OF INCOR PORATION OF M/S GLACIS INVESTMENT LIMITED, PB-28 IS TAX RESI DENCE CERTIFICATE OF M/S GLACIS INVESTMENT LIMITED, PB-29 IS CERTIFICATE OF RESERVE BANK OF INDIA TAKING NOTE OF TRANSACTIONS BETWEEN ASSESSEE AND M/S GLACIS INVEST MENT LIMITED, MAURITIUS, PB-30 IS SHARE CERTIFICATES ISS UED BY THE ASSESSEE TO M/S GLACIS INVESTMENT LIMITED, PB-3 8 IS CONFIRMATION OF M/S GLACIS INVESTMENT LIMITED OF MA KING INVESTMENT IN ASSESSEE COMPANY IN A SUM OF RS. 3.70 CR ON ALLOTMENT OF 740000 EQUITY SHARES, PB-47 IS CERTIFI CATE OF 7 MAURITIUS GOVERNMENT GRANTING GLOBAL BUSINESS LICEN SE TO M/S GLACIS INVESTMENT LIMITED UNDER THE FINANCIAL SERVICES ACT. THE LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE IDENTITY OF THE SUBSCRIBER COMPANY IS NOT IN DISPUTE. HE HAS ALSO FILED COPY OF BANK ACCOUNT OF ASSESSEE SHOWING THE RECEIPT OF MONEY IN QUESTION I .E. RS. 3,70,00,000/- THROUGH TRANSFER IN THE ACCOUNT OF TH E ASSESSEE (PB-2 1). HE HAS ALSO FILED BALANCE SHE ET OF THE ASSESSEE ENDING MARCH, 2010. THE LD. COUNSEL FOR T HE ASSESSEE, THEREFORE, SUBMITTED THAT THE INITIAL ONU S UPON ASSESSEE TO PROVE GENUINE TRANSACTION IN THE MATTER HAS BEEN DISCHARGED. THE CREDIT WORTHINESS OF THE SUBS CRIBER IS PROVED BEING THE AMOUNT RECEIVED THROUGH BANKING CHANNEL WITH APPROVAL OF THE RESERVE BANK OF INDIA. NO EVIDENCE HAS BEEN BROUGHT ON RECORD THAT IT WAS THE MONEY OF THE ASSESSEE WHICH IS ROUTED THROUGH THE SUBSCRI BER. HE HAS RELIED UPON FOLLOWING DECISIONS IN SUPPORT OF H IS CONTENTION : I) DECISION OF DELHI HIGH COURT IN THE CASE OF CIT V STELLER INVESTMENT LTD. 192 ITR 287 IN WHICH IT WAS HELD AS UNDER : IF IT BE ASSUMED THAT THE SUBSCRIBERS TO THE INCRE ASED SHARE CAPITAL WERE NOT GENUINE, EVEN THEN UNDER NO CIRCUMSTANCES COULD THE AMOUNT OF SHARE CAPITAL BE REGARDED AS UNDISCLOSED INCOME OF THE AS SESSEE. IT MAY BE THERE WERE SOME BOGUS SHAREHOLDERS AND THE MONEY MAY HAVE BEEN PROVIDED BY SOME OTHER PERSONS. IT WOULD HAVE BEEN MORE SENSIBL E TO RE-OPEN, THE ASSESSMENTS OF THE PERSONS ALLEGED TO HAVE ADVANCED THE MONEY. HOW THIS AMOUNT OF INCREASED SHARE CAPITAL COULD BE ASSESSED IN THE HANDS OF THE COMPANY ITSELF WAS BEYOND UNDERSTANDING. 8 THIS DECISION IS CONFIRMED BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT V STELLER INVESTMENT LTD. 251 ITR 263. II) DECISION OF DELHI HIGH COURT IN THE CASE OF CIT V DIVINE LEASING & FINANCE LTD. 299 ITR 268 IN WHICH IT WAS HELD AS UNDER : IN THE INSTANT CASE THE TRIBUNAL NOTED THAT THE AS SESSEE WAS A PUBLIC LIMITED COMPANY, WHICH HAD RECEIVED SUBSCRIPTIONS T O THE PUBLIC ISSUE THROUGH BANKING CHANNELS AND THE SHARES WERE ALLOTT ED IN CONSONANCE WITH THE PROVISIONS OF THE SECURITIES CONTRACT REGULATIO N ACT, 1956, AS ALSO THE RULES AND REGULATIONS OF THE DELHI STOCK EXCHANGE. COMPLETE DETAILS APPEARED TO HAVE BEEN FURNISHED. THE TRIBUNAL FURTH ER RECORDED THAT THE ASSESSING OFFICER HAD NOT BROUGHT ANY POSITIVE MATE RIAL OR EVIDENCE, WHICH WOULD INDICATE THAT THE SHAREHOLDERS WERE (A) 'BENAMIDARS' OR (B) FICTITIOUS PERSONS OR (C) THAT ANY PART OF THE SHAR E CAPITAL REPRESENTED THE COMPANY'S OWN INCOME FROM UNDISCLOSED SOURCES. [PARA 19] FURTHER THE TRIBUNAL HAD CATEGORICALLY HELD THAT TH E ASSESSEE HAD DISCHARGED ITS ONUS OF PROVING THE IDENTITY OF THE SHARE SUBSCRIBERS. HAD ANY SUSPICION STILL REMAINED IN THE MIND OF THE ASS ESSING OFFICER, HE COULD HAVE INITIATED 'COERCIVE PROCESS', BUT THAT COURSE OF ACTION HAD NOT BEEN ADOPTED. IN VIEW OF THE CONCURRENT FINDING, PERTAIN ING TO THE FACTUAL MATRIX, THERE WAS NO MERIT IN THOSE APPEALS WHICH W ERE, ACCORDINGLY, TO BE DISMISSED. III) DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT V LOVELY EXPORTS P.LTD. 216 CTR 195 IN WHICH IT WAS HELD AS UNDER : IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE A SSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN T O THE ASSESSING OFFICER, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW BUT THIS AMOUNT OF SHARE MONEY CANNOT BE REGARDED AS UNDISCLOSED INCOME UNDER SECTION 68 OF THE ASSESSEE COMPANY. 9 IV) DECISION OF HON'BLE PUNJAB & HARYANA HIGH COU RT IN THE CASE OF CIT V GP INTERNATIONAL LTD. 325 ITR 25 IN WHICH IT WAS HELD AS UNDER: HELD , DISMISSING THE APPEAL, (I) THAT DURING THE P ROCEEDINGS UNDER SECTION 143(3) READ WITH SECTION 250 OF THE ACT, THE ASSESS EE FURNISHED A CONFIRMATION CERTIFICATE FROM A ALONG WITH PAN NUMBER, THE ASSE SSEE HAD CONFIRMED THAT THE LIABILITY WAS STILL OUTSTANDING. HENCE SECTION 41(1) WAS NOT APPLICABLE.(II) THAT AT THE TIME OF THE ORIGINAL AS SESSMENT, THE ASSESSEE HAD HAD SUPPLIED THE LIST OF THE PERSONS TO WHOM THE SH ARES WERE SOLD ALONG WITH THEIR ADDRESSES. THE ASSESSING OFFICER DID NOT DOUB T THE IDENTITY OF THE PERSONS FROM WHOM THE ASSESSEE HAD SHOWN RECEIPT OF APPLICA TION MONEY. MERELY BECAUSE SOME OF THE PERSONS DID NOT RESPOND TO THE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTION 133(6) OF THE ACT, IT COULD NOT BE TAKEN THAT THE TRANSACTION WAS NOT GENUINE. THE AMOUNT COULD N OT BE TAKEN AS UNEXPLAINED INCOME IN THE HANDS OF THE ASSESSEE. V) DECISION OF DELHI HIGH COURT IN THE CASE OF CIT V REAL TIME MARKETING (P) LTD. 306 ITR 35 IN WHICH IT WAS HELD AS UNDER : SECTION 68 OF THE INCOME-TAX ACT, 1961 - CASH CREDI TS - ASSESSMENT YEAR 2001-02 - ASSESSEE-COMPANY TOOK SOME UNSECURED LOAN FROM ACL AND ALSO FILED CONFIRMATION THEREOF - ASSESSING OFFICER ASKED ASSESSEE TO FILE A COPY OF INCOME-TAX RETURN OF ACL ALONG WITH ITS AUD ITED PROFIT AND LOSS ACCOUNT, BALANCE SHEET AND COPY OF BANK STATEMENT F OR RELEVANT PERIOD - ASSESSEE FURNISHED ALL DOCUMENTS ASKED FOR - FROM B ANK STATEMENT OF ACL, ASSESSING OFFICER NOTICED THAT FUNDS WERE TRANSFERR ED THROUGH INTERNAL TRANSFER TO ACL AND THEN IN SAME MANNER IN BANK ACCOUNT OF A SSESSEE-COMPANY - ASSESSING OFFICER, THEREFORE, TREATED SAME AS UNEXP LAINED CASH CREDITS UNDER SECTION 68 - ON APPEAL, COMMISSIONER (APPEALS) HELD THAT ASSESSEE HAD DISCHARGED ITS BURDEN OF PROVING IDENTITY, CAPACITY AND GENUINENESS OF TRANSACTION AND IN THOSE CIRCUMSTANCES, ADDITION MA DE BY ASSESSING OFFICER WAS NOT JUSTIFIED - AN APPEAL PREFERRED THEREAGAINS T BY REVENUE WAS DISMISSED BY TRIBUNAL - WHETHER SINCE THERE WAS NO MATERIAL W ITH ASSESSING OFFICER TO COME TO CONCLUSION REGARDING ANY INGENUINENESS OR F ICTITIOUS IDENTITY OF ENTRIES OR NON-CAPACITY OF LENDER, ADDITION WAS RIGHTLY DEL ETED - HELD, YES. 10 VI) DECISION OF DELHI HIGH COURT IN THE CASE OF CIT V VALUE CAPITAL SERVICES (P) LTD. 307 ITR 334 IN WHIC H IT WAS HELD AS UNDER : IF DEPARTMENT WANTS TO MAKE ADDITION ON ACCOUNT OF SHARE APPLICATION MONEY, BURDEN IS ON DEPARTMENT TO SHOW THAT EVEN IF APPLICANT DID NOT HAVE MEANS TO MAKE INVESTMENT, INVESTMENT MADE BY A SSESSEE ACTUALLY EMANATED FROM COFFERS OF ASSESSEE SO AS TO ENABLE I T TO BE TREATED AS UNDISCLOSED INCOME OF ASSESSEE. VII) DECISION OF DELHI HIGH COURT IN THE CASE OF CI T V ORBITAL COMMUNICATION (P) LTD. 327 ITR 560 IN WHICH IT WAS HELD AS UNDER : WHERE ASSESSEE HAD PRODUCED SUBSTANTIAL EVIDENCE TO ESTABLISH IDENTITY AND CREDITWORTHINESS OF CREDITORS AND GENUINENESS OF SH ARE APPLICATION, MERELY BECAUSE IT FAILED TO PRODUCE CREDITORS, SHARE APPLICATION M ONEY COULD NOT BE REGARDED AS UNDISCLOSED INCOME OF ASSESSEE UNDER SECTION 68 [IN FAVOUR OF ASSESSEE]. VIII) DECISION OF DELHI HIGH COURT IN THE CASE OF C IT V DWARKADHISH INVESTMENT (P) LTD. 330 ITR 298 IN WHIC H IT WAS HELD AS UNDER : IN ANY MATTER, THE ONUS OF PROOF IS NOT A STATIC ON E. THOUGH IN SECTION 68 PROCEEDINGS, THE INITIAL BURDEN OF PROOF LIES ON TH E ASSESSEE, YET ONCE HE PROVES THE IDENTITY OF THE CREDITORS/SHARE APPLICANTS BY E ITHER FURNISHING THEIR PAN NUMBERS OR INCOME-TAX ASSESSMENT NUMBERS 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 PRO OF WOULD SHIFT TO THE REVENUE. JUST BECAUSE THE CREDITORS/SHARE APPLICANT S COULD NOT BE FOUND AT THE ADDRESS GIVEN, IT WOULD NOT GIVE THE REVENUE THE RI GHT TO INVOKE SECTION 68. ONE MUST NOT LOSE SIGHT OF THE FACT THAT IT IS THE REVENUE WHICH HAS ALL THE POWERS AND WHEREWITHAL TO TRACE ANY PERSON. MOREOVE R, IT IS SETTLED LAW THAT THE ASSESSEE NEED NOT TO PROVE THE 'SOURCE OF SOURC E. IX) DECISION OF DELHI HIGH COURT IN THE CASE OF CIT V 11 WINSTRAL PETROCHEMICALS (P) LTD. 330 ITR 603 IN WHI CH IT WAS HELD AS UNDER : UNDISPUTEDLY THE SHARE APPLICATION MONEY WAS RECEIV ED BY THE ASSESSEE BY WAY OF ACCOUNT PAYEE CHEQUES, THROUGH NORMAL BANKIN G CHANNELS. IT WAS NOT THE CASE OF THE REVENUE THAT THE PAYMENT OF SHARE A PPLICATION MONEY WAS NOT MADE FROM THE BANK ACCOUNT OF THE APPLICANT-COMPANI ES. ADMITTEDLY, COPIES OF APPLICATIONS FOR ALLOTMENT OF SHARES WERE ALSO P ROVIDED TO THE ASSESSING OFFICER. IT WAS NOT THE CASE OF THE REVENUE THAT TH E SHARE APPLICATIONS WERE NOT SIGNED ON BEHALF OF THE APPLICANT-COMPANIES AND WER E FORGED DOCUMENTS OR THE SHARES WERE NOT ACTUALLY ALLOTTED TO THE COMPAN IES. THEREFORE, THE COMMISSIONER (APPEALS) AND THE TRIBUNAL WERE JUSTIF IED IN HOLDING THAT THE GENUINENESS OF THE TRANSACTIONS HAD BEEN DULY ESTAB LISHED BY THE ASSESSEE. X) DECISION OF DELHI HIGH COURT IN THE CASE OF CIT V FAIR FINVEST LTD. 357 ITR 146 IN WHICH IT WAS HELD AS UN DER: 'WHERE ASSESSEE HAD FILED DOCUMENTS INCLUDING CERTI FIED COPIES ISSUED BY REGISTRAR OF COMPANIES IN RELATION TO SHARE APPLICA TION, AFFIDAVITS OF DIRECTORS, FORM 2 FILED WITH REGISTRAR OF COMPANIES BY SUCH APPLICANTS, CONFIRMATIONS BY APPLICANTS FOR COMPANY'S SHARES, C ERTIFICATES BY AUDITORS, ETC., ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITION UNDER SECTION 68 ON ACCOUNT OF SHARE APPLICATION MONEY MERELY ON GENERAL INFERENCE TO BE DRAWN FROM THE READING OF THE INVESTIGATION REPO RT. THE LEAST THAT ASSESSING OFFICER OUGHT TO HAVE DONE WAS TO ENQUIRE INTO MATTER BY, IF NECESSARY, INVOKING HIS POWERS UNDER SECTION 131 SU MMONING THE SHARE APPLICANTS OR DIRECTORS. XI) DECISION OF DELHI HIGH COURT IN THE CASE OF CIT V GANGESHWARI METAL P.LTD. 361 ITR 10 IN WHICH IT WAS HELD AS UNDER : HELD, DISMISSING THE APPEAL THAT THERE WAS A CLEAR LACK OF INQUIRY ON THE PART OF THE ASSESSING OFFICER ONCE THE ASSESSEE HAD FURNISHED ALL THE MATERIAL. IN SUCH AN EVENTUALITY NO ADDITION COULD BE MADE UNDER SECTION 68 OF THE ACT. 9. THE LD. COUNSEL FOR THE ASSESSEE, THEREFORE, SUB MITTED THAT ASSESSEE HAS PROVED THE CREDIT WORTHINESS OF T HE 12 SUBSCRIBER COMPANY, ITS CREDIT WORTHINESS AND GENUI NENESS OF THE TRANSACTION IN THE MATTER. THE ASSESSEE IS NOT CONNECTED WITH THE SUBSCRIBER COMPANY. HE HAS, THEREFORE, SU BMITTED THAT ADDITION IS WHOLLY UNJUSTIFIED. ON THE OTHER HAND, LD. DR RELIED UPON ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT COPY OF THE BANK ACCOUNT OF SUBSCRIBER COMPANY WAS NOT FILED, THEREFORE, CREDIT WORTHINESS OF THE CREDITOR IS NOT PROVED. THE SUBSCRIBER COMPANY DID NOT DO ANY BUSI NESS IN THIS YEAR AND WAS ESTABLISHED ON 05.02.2009. THERE IS NO FULL SIGNATURE ON THE CONFIRMATION. THE ENTIRE MON EY HAVE BEEN GIVEN BY THE CREDITOR, THEREFORE, IT WAS NOT A GENUINE TRANSACTION IN THE MATTER. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT I S NOT IN DISPUTE THAT THE ASSESSEE HAS ALLOCATED 740000 SHAR ES TO M/S GLACIS INVESTMENT LIMITED AT PREMIUM. THE ASSESSING OFFICER HAS NOT DISPUTED THE SHARES ISSUED TO THIS COMPANY AT PREMIUM VALUE. NO INVESTMENTS HAVE BEEN MADE IN TH IS REGARD. THE LD. DR ALSO ADMITTED THAT THE REASONS FOR ISSUING THE SHARES TO THE SUBSCRIBER COMPANY AT PAID UP VAL UE AND AT PREMIUM HAVE NOT BEEN INVESTIGATED BY THE ASSESSING OFFICER AT ASSESSMENT STAGE. THE ASSESSEE HAS FILED COPY O F THE CERTIFICATE OF INCORPORATION OF M/S GLACIS INVESTME NT LIMITED WHICH IS A REGISTERED COMPANY IN REPUBLIC OF MAURIT IUS. THE LD. CIT(APPEALS) CONSIDERING THE SUBSCRIBER COMPANY TO BE A COMPANY BEING LEGAL ENTITY HELD THAT THE IDENTITY O F THE SHAREHOLDER IS PROVED. THE ASSESSEE ALSO FILED COP Y OF THE TAX RESIDENCE CERTIFICATE ISSUED BY MAURITIUS REVEN UE AUTHORITIES, CERTIFYING THAT M/S GLACIS INVESTMENT LIMITED 13 INCORPORATED IN MAURITIUS IS A COMPANY RESIDENT IN MAURITIUS FOR INCOME TAX PURPOSES UNDER THE INCOME TAX ACT. THE ASSESSEE ALSO PRODUCED THE CERTIFICATE OF RESERVE B ANK OF INDIA IN WHICH THE RESERVE BANK OF INDIA BY REFERRI NG TO LETTER OF THE ASSESSEE HAS REFERRED TO THE TRANSACTION HEL D BETWEEN ASSESSEE AND M/S GLACIS INVESTMENT LIMITED, MAURITI US FOR ISSUING THE SHARES AT PAID UP VALUE AND PREMIUM FOR 740000 EQUITY SHARES WERE RECORDED BY THE RESERVE BANK OF INDIA IN THEIR RECORDS. THE LD. DR SUBMITTED THAT THE NAME OF M/S GLACIS INVESTMENT LIMITED IS WRONGLY RECORDED IN TH E RESERVE BANK OF INDIA CERTIFICATE. IT APPEARS TO BE TYPOGR APHICAL ERROR AND IS NOT HAVING MUCH SIGNIFICANCE ON THE SA ME BECAUSE THE ASSESSEE HAS ISSUED 740000 EQUITY SHARE S TO THE SHAREHOLDER COMPANY WHICH IS THE SAME AND ONLY TRAN SACTION CARRIED OUT BETWEEN THE ASSESSEE AND THE SHAREHOLDE R COMPANY. THE ASSESSEE ALSO FILED COPY OF THE SHARE CERTIFICATE TO SHOW THAT ACTUAL SHARE CERTIFICATES 740000 IN NUMBER HAVE BEEN ISSUED TO THE SHAREHOLDER COMPANY. THE SHAREHOLDER COMPANY HAS ALSO ISSUED A CONFIRMATORY LETTER IN FAVOUR OF THE ASSESSEE CERTIFYING THAT M/S GLACIS I NVESTMENT LIMITED HAS INVESTED RS. 3,70,00,000/- FOR ALLOTMEN T OF 740000 EQUITY SHARES IN ASSESSMENT YEAR UNDER APPEA L. THE REPUBLIC OF MAURITIUS ALSO CERTIFIED THAT GLOBAL BU SINESS LICENSE UNDER FINANCIAL SERVICES ACT HAVE BEEN GRAN TED TO M/S GLACIS INVESTMENT LIMITED. THE BALANCE SHEET O F THE SHAREHOLDER COMPANY M/S GLACIS INVESTMENT LIMITED I S ALSO FILED ON RECORD WHICH IS ADMITTED AS ADDITIONAL EVI DENCE WHICH PROVED THAT THE PRINCIPAL ACTIVITY OF THIS CO MPANY IS THAT OF INVESTMENT HOLDING AND WAS HAVING THE SUFFI CIENT 14 FUNDS/ASSETS TO MAKE INVESTMENT IN ASSESSEE COMPANY AND THAT THE INVESTMENT MADE IN ASSESSEE COMPANY HAVE B EEN CERTIFIED IN THE BALANCE SHEET. THE BANK STATEMENT OF THE ASSESSEE IS ALSO FILED ON RECORD WHICH SUPPORT THE CONTENTION OF THE ASSESSEE THAT RS. 3,70,00,000/- HAVE BEEN IN VESTED BY SHAREHOLDER COMPANY IN ASSESSEE COMPANY THROUGH TRA NSFER ENTRIES I.E. BANKING CHANNELS. THE DECISIONS RELIE D UPON BY LD. COUNSEL FOR THE ASSESSEE CLEARLY SUPPORT THE CO NTENTION OF THE ASSESSEE THAT ASSESSEE HAS PROVED THE CREDIT WO RTHINESS OF THE SHAREHOLDER COMPANY AND GENUINENESS OF THE TRANSACTION IN THE MATTER. THE DOCUMENTARY EVIDENC ES PRODUCED ON RECORD ALSO SUPPORT THE CONTENTION OF A SSESSEE THAT THE SHAREHOLDER COMPANY M/S GLACIS INVESTMENT LIMITED, MAURITIUS HAS MADE INVESTMENT IN ASSESSEE COMPANY I N 740000 EQUITY SHARES BY INVESTING RS. 3,70,00,000/- . THE SHAREHOLDER COMPANY ALSO FILED CONFIRMATION TO THAT EFFECT WHICH IS SUPPORTED BY TAX RESIDENCE CERTIFICATE, AL LOTMENT OF SHARE CERTIFICATES AND GLOBAL BUSINESS LICENSE GRAN TED BY REPUBLIC OF MAURITIUS AND THE BANK STATEMENT OF THE ASSESSEE. 10(I) IN THE CASE OF LOVELY EXPORTS PVT. LTD. (SUP RA), HON'BLE SUPREME COURT HELD THAT IF SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE ASSESSIN G OFFICER, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW BUT T HIS AMOUNT OF SHARE MONEY CANNOT BE REGARDED AS UNDISCL OSED INCOME UNDER SECTION 68 OF THE ACT OF THE ASSESSEE COMPANY. 15 THE OTHER DECISIONS RELIED UPON BY LD. COUNSEL FOR THE ASSESSEE SUPPORT THE FACT THAT ASSESSEE HAS RECEIVE D GENUINE SHARE APPLICATION MONEY FROM THE SHAREHOLDER COMPAN Y. 10(II) THE ITAT INDORE BENCH IN THE CASE OF PEOPLES GENERAL HOSPITAL LTD. IN ITA 57/2007 VIDE ORDER DATED 28.09 .2007 CONSIDERING THE IDENTICAL ISSUE HELD IN PARA 11 TO 12.2 AS UNDER : 11. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND MATERIAL ON RECORD. WE HAVE BESTOWED OUR CAREFUL CONSIDERATION AND DO NO T FIND ANY JUSTIFICATION TO INTERFERE IN THE ORDER OF THE LD. CIT(A). 11.1 FULL BENCH OF DELHI HIGH COURT IN THE CASE OF CIT VS. SOPHIA FINANCE LTD. 205 ITR 98 HELD UNDER SECTION 68 OF THE INCOME-TAX ACT, 1961, THE INCOME-TAX OFFICER HAS JURI SDICTION TO MAKE ENQUIRIES WITH REGARD TO THE NATURE AND SOURCE OF A SUM CREDITED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND IT IS IMMATE RIAL AS TO WHETHER THE AMOUNT SO CREDITED IS GIVEN THE COLOUR O F A LOAN OR A SUM REPRESENTING SALE PROCEEDS OR EVEN RECEIPT OF SHARE APPLICATION MONEY. THE USE OF THE WORDS ANY SUM FOUND CREDITED IN THE BOOKS. SECTION 68 INDICATES THAT THE SECTION IS VERY WIDEL Y WORDED AND THE INCOME TAX OFFICER IS NOT PRECLUDED FROM MAKING AND ENQUIRY AS TO THE TRUE NATURE AND SOURCE OF A SUM CREDITED IN THE ACCO UNT BOOKS EVEN IF IT IS CREDITED AS RECEIPT OF SHARE APPLICATION MONEY . THE MERE FACT THAT THE (ASSESSEE) COMPANY CHOOSE TO SHOW THE RECEIPT O F THE MONEY AS CAPITAL DOES NOT PRELUDE THE INCOME-TAX OFFICER FROM G OING INTO THE QUESTION WHETHER THIS IS ACTUALLY SO. WHERE, THEREFORE, AN ASSESSEE- COMPANY REPRESENTS THAT IT HAD ISSUED SHARES ON THE RECEIPT OF SHARE APPLICATION MONEY THEN THE AMOUNT SO RECEIVED WOULD BE CREDITED IN THE BOOKS OF ACCOUNT OF THE COMPANY. THE INCOME-TAX OFFICER WOULD BE ENTITLED, AND IT WOULD INDEED BE HIS DUTY, TO ENQUIRE WHE THER THE ALLEGED SHARE HOLDERS DO IN FACT EXIST OR NOT. IF THE S HARE HOLDERS EXIST THEN, POSSIBLY, NO FURTHER ENQUIRY NEED BE MADE. BUT I F THE INCOME-TAX OFFICER FINDS THAT THE ALLEGED SHAREHOLDERS DO NOT EXI ST THEN, IN EFFECT, IT WOULD MEAN THAT THERE IS NO VALID ISSUANCE OF SHAR E CAPITAL. SHARES 16 CANNOT BE ISSUED IN THE NAME OF NON-EXISTING PERSONS . THE USE OF THE WORDS MAY BE CHARGED IN SECTION 68 CLEARLY INDICAT ES THAT THE INCOME-TAX OFFICER WOULD THEN HAVE THE JURISDICTION, IF THE FACTS SO WARRANT, TO TREAT SUCH A CREDIT TO BE THE INCOME OF THE AS SESSEE. IF THE SHARE HOLDERS ARE IDENTIFIED AND IT IS ESTA BLISHED THAT THEY HAVE INVESTED MONEY IN THE PURCHASE OF SHARES, THEN THE AMOUNT RECEIVED BY THE COMPANY WOULD BE REGARDED AS A CAPITA L RECEIPT AND TO THAT EXTENT THE OBSERVATIONS IN CIT V. STELLAR IN VESTMENT LTD., [1991] 192 ITR 287 (DELHI), ARE CORRECT; BUT THE OBSERVATIONS IN THAT CASE TO THE EFFECT THAT EVEN IF THE SUBSCRIBERS TO THE CAPIT AL WERE NOT GENUINE UNDER NO CIRCUMSTANCE COULD THE AMOUNT OF SHARE CAP ITAL BE REGARDED AS UNDISCLOSED INCOME OF THE [COMPANY] ARE NOT. M.P. HIGH COURT IN THE CASE OF CIT VS. DHAR ISPAT (P ) LTD., 134 TAX MAN 747 (180 CTR 491) , HELD SEC. 68 IS APPLICABLE IN RESPECT OF SHARE APPLICATION MONEY; HOWEVER, THE QUES TION OF GENUINENESS OF THE ENTRIES REGARDING SHARE APPLICAT ION MONEY IS A QUESTION OF FACT TO BE DECIDED BY THE ASSESSEE AUTHORITY ON THE BASIS OF EVIDENCE AVAILABLE ON RECORD. DELHI HIGH COURT IN THE CASE OF CIT VS. STELLAR INV ESTMENT LTD., 192 ITR 287 , HELD THAT, EVEN IF IT BE ASSUMED THAT THE SUBSCRIBERS TO THE INCREASED SHARE CAPITAL WERE NOT G ENUINE, UNDER NO CIRCUMSTANCES COULD THE AMOUNT OF SHARE CAP ITAL BE REGARDED AS UNDISCLOSED INCOME OF THE COMPANY. NO QUE STION OF LAW AROSE OUT OF THE TRIBUNALS ORDER. HON'BLE SUPREME COURT IN THE CASE OF CIT VS. STELLA R INVESTMENT LTD., 251 ITR 263 , HELD WE HAVE READ THE QUESTION WHICH THE HIGH COURT ANSWERED AGAINST THE REVENUE. W E ARE IN AGREEMENT WITH THE HIGH COURT. PLAINLY, THE TRIBUNAL CAME TO A CONCLUSION ON FACTS AND NO INTERFERENCE IS CALLED FOR. THE APPEAL IS DISMISSED. NO ORDER AS TO COSTS. DELHI HIGH COURT IN THE CASE OF CIT VS. DOLPHIN CA NPACK LTD., 283 ITR 190 , HELD IN ITS RETURN FOR THE ASSESSMENT YEAR 1998-99, THE ASSESSEE CLAIMED TO HAVE RECEIVED SHARE APPLICATION MONEY OF RS. 62 LAKHS. THE ASSESSING OFFI CER REJECTED THE EXPLANATION OF THE ASSESSEE AND ADDED THE AMOUNT TO THE TAXABLE INCOME OF THE ASSESSEE. THE TRIBUNAL FO UND THAT THE ASSESSEE HAD FURNISHED COMPLETE DETAILS TO THE AS SESSING OFFICER REGARDING THE TRANSACTIONS IN QUESTION, WHIC H INCLUDED CONFIRMATION DETAILS OF BANK ACCOUNTS AND THE PERMAN ENT ACCOUNT NUMBERS OF THE PARTIES IN WHOSE FAVOUR THE SHARE CAPITAL WAS SUBSCRIBED. THE TRIBUNAL ALSO NOTED THAT ALL T HE PAYMENTS WERE RECEIVED BY THE ASSESSEE BY CHEQUES AN D THAT THE ASSESSEE HAD, IN THE PROCESS, FULLY DISCHARGED THE ONU S THAT 17 LAY UPON IT FOR PROVING THE IDENTITY OF THE SUBSCRIBE RS AND THE GENUINENESS OF THE TRANSACTIONS. ON THAT BASIS, IT DELE TED THE ADDITION MADE BY THE AUTHORITIES BELOW. ON APPEAL TO TH E HIGH COURT: HELD, DISMISSING THE APPEAL, THAT IN THE ABSENCE OF ANY PERVERSITY IN THE VIEW TAKEN BY THE TRIBUNAL OR ANYTH ING TO ESTABLISH CONCLUSIVELY THAT THE FINDING REGARDING THE GENUINENESS OF THE SUBSCRIBERS AND THE TRANSACTIONS SUFFERED FROM ANY IRRATIONALITY, NO SUBSTANTIAL QUESTION OF LAW A ROSE FROM THE ORDER OF THE TRIBUNAL. THE DELETION OF THE AMO UNT WAS JUSTIFIED. GAUHATI HIGH COURT IN THE CASE OF CIT VS. DOWN TO WN HOSPITAL PVT. LTD., 267 ITR 439 , HELD THAT REGARDING AMOUNTS RECEIVED AS SHARE APPLICATION MONEYS, THE TRIBUNAL HAD GIVEN CLEAR FINDING AFTER APPRECIATION OF THE MATERIAL ON RE CORD THAT THE ASSESSEE HAD FILED THE DETAILS REGARDING THE SOURC E OF FUNDS OF SHARES AND THEIR INCOME TAX FILE NOS. BEFORE AO. AC CORDING TO THE TRIBUNAL THE ASSESSEE HAD ALSO SUBMITTED BEFORE TH E AO THE CONFIRMATION FROM THE CREDITORS WHERE FULL ADDRESSES, INCOME TAX NO. ETC. WERE GIVEN. THE TRIBUNAL WAS JUSTIFIED IN DELETING THE ADDITION. RAJASTHAN HIGH COURT IN THE CASE OF SHREE BARKHA SYNTHETICS LTD. VS. CIT, 283 ITR 377 , HELD IF THE TRANSACTIONS ARE MADE THROUGH BANKING CHANNELS AND ONCE THE EXIST ENCE OF PERSONS BY NAME IN THE SHARE APPLICATIONS IN WHOSE NAME THE SHARES HAVE BEEN ISSUED IS SHOWN, THE ASSESSEE-COMPANY CANNOT BE HELD RESPONSIBLE TO PROVE WHETHER THAT PERS ON HIMSELF HAS INVESTED THE SAID MONEY OR SOME OTHER PE RSON HAD MADE INVESTMENT IN THE NAME OF THAT PERSON. THE BURD EN THEN SHIFTS ON THE REVENUE TO ESTABLISH THAT SUCH INVEST MENT HAS COME FROM THE ASSESSEE-COMPANY ITSELF. DELHI HIGH COURT IN THE CASE OF CIT VS. DWARKADHIS H FINANCIAL SERVICES,148 TAXMAN 54 , HELD THE ASSESSEE HAD PRODUCED ALL RELEVANT EVIDENCE TO ESTABLISH THAT THE S HARE APPLICATION MONEY RECEIVED BY THE ASSESSEE WAS A RE SULT OF GENUINE TRANSACTION. IT HAD BEEN NOTICED EVEN IN TH E IMPUGNED ORDER THAT EVIDENCE WAS PRODUCED BY THE ASSESSEE IN CLUDING AFFIDAVITS, COPIES OF THE SHARE APPLICATION FORMS, COP IES OF THE CONFIRMATION FROM THE APPLICANT-COMPANIES, COPIES OF B OARD OF DIRECTORS RESOLUTION APPROVING SUCH TRANSACTIONS AS WELL AS CHEQUE NUMBER, BRANCH AND ADDRESS OF THE BANK THROUGH WH ICH THE INVESTMENT WAS MADE. IT WAS ALSO NOTICED THAT THE ASSESSING OFFICER HIMSELF HAD NOTICED IN HIS ORDER THAT THE APPLICANT-S HARE HOLDERS WERE INCOME-TAX PAYEES. IN SUCH CIRCUMSTANCES , IT COULD NOT BE PRESUMED THAT THE SHARE HOLDER WHO WAS ASSESSED TO TAX WAS NOT IN EXISTENCE. THAT WOULD TANTAM OUNT TO CONTRADICTION IN THE STAND OF THE DEPARTMENT ITSELF. ITAT, JODHPUR BENCH (TM) IN THE CASE OF UMA POLYM ERS (P) LTD. VS. DCIT, 124 TTJ 124 , HELD IN RESPECT OF SHARE CAPITAL 18 MONEY, THE ASSESSEE-COMPANY HAS TO PROVE ONLY THE EX ISTENCE OF THE PERSON IN WHOSE NAME SHARE APPLICATION IS REC EIVED AND THERE IS NO FURTHER BURDEN ON THE ASSESSEE TO PROVE WHETHER THAT PERSON HIMSELF HAS INVESTED THE MONEY OR SOME O THER PERSON HAS MADE THE INVESTMENT IN HIS NAME; DISTINCT ION BETWEEN A PUBLIC COMPANY AND A PRIVATE COMPANY IS N OT VERY MATERIAL FOR THIS PURPOSE. MADHYA PRADESH HIGH COURT IN THE CASE OF CIT VS. METACHEM INDUSTRIES, 245 ITR 160 , HELD ONCE IT IS ESTABLISHED THAT THE AMOUNT HAS BEEN INVESTED BY A PARTICULAR P ERSON, BE HE A PARTNER OR AN INDIVIDUAL, THEN THE RESPONSIBILITY OF THE ASSESSEE IS OVER. WHETHER THAT PERSON IS AN INCOME-TA X PAYER OR NOT AND WHERE HE HAD BROUGHT THIS MONEY FROM, IS NOT THE RESPONSIBILITY OF THE FIRM. THE MOMENT THE FIRM GIVES A SATISFACTORY EXPLANATION AND PRODUCES THE PERSON WH O HAS DEPOSITED THE AMOUNT, THEN THE BURDEN OF THE FIRM IS DISCHARGED AND IN THAT CASE THAT CREDIT ENTRY CANNOT BE TREATED TO BE THE INCOME OF THE FIRM OR THE PURPOSES OF INCOME-TAX. ITAT INDORE BENCH IN THE CASE OF ACIT VS. M/S VIND HYA SOYA LIMITED, ITA NO. 227/IND/ 2004 , HELD IN THE INSTANT CASE, THE CIT (A) IN ANNEXURE OF HIS ORDER HAS MENTIO NED DETAILS OF THE SHARE HOLDER, THEIR ADDRESSES, HOLDING OF AGRICU LTURAL LAND, PERMANENT ACCOUNT NUMBER OF SOME OF THE SHARE HOLDERS, AMOUNT OF DEPOSIT, THEIR OCCUPATION AND EVIDENCE FILE D IN FORM OF CONFIRMATION LETTER, COPY OF ACKNOWLEDGEMENT RECE IPT OF SOME OF THE SHARE HOLDERS FILING RETURN OF INCOME, EVIDENC E OF AGRICULTURAL HOLDING, ETC. WE HAVE ALSO NOTED THAT THE A SSESSEE COMPANY HAS FURNISHED COMPLETE DETAILS OF ALL THE SHARE HOLDERS. THEREFORE, BEFORE DRAWING ANY CONCLUSION THE AO SHOULD HAVE ISSUED SUMMONS U/S 131 TO THESE SHARE HOLDERS T O ARRIVE AT THE TRUTH ABOUT THE INVESTMENT MADE BY TH EM. HOWEVER, NO SUCH EXERCISE WAS CARRIED OUT BY THE AO AND SIMPLY FOR THE REASON THAT THE AMOUNT WAS DEPOSITED I N CASH, HE HELD THAT THE CREDIT WORTHINESS OF AND GENUINENES S OF TRANSACTION WAS NOT PROVED. THE AO HAS NOT DOUBTED T HE IDENTITY OF THE SHARE HOLDERS. FROM THE ABOVE IT APPEAR S THAT THE AO MADE THE ADDITION ON SURMISES AND CONJECTURES . THEREFORE, IN VIEW OF THE ABOVE FACTS AND CIRCUMSTAN CES AND PLACING RELIANCE ON THE DECISIONS DISCUSSED (SUPRA), WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT (A). HENCE, THE APPEAL OF THE REVENUE IS DISMISSED. DELHI HIGH COURT IN THE CASE OF CIT VS. GLOCOM IMPEX P. LTD. , 205 CTR 571 , HELD ONCE IT WAS ESTABLISHED THAT THE SHARE HOLDER WAS A GENUINE PERSON AND ALSO CREDITWORTH Y AND THAT SHE HAD THE REQUISITE AMOUNT FOR MAKING THE INV ESTMENT IN QUESTION, NO ADDITION COULD BE MADE UNDER S. 68 IN THE HANDS OF THE ASSESSEE-COMPANY ; REVENUE COULD NOT GO FURTHE R TO FIND OUT WHETHER THE PERSON FROM WHOM THE SHARE HOLDER HA D RECEIVED MONEY THROUGH CHEQUE WAS ALSO A GENUINE PAR TY AND CREDITWORTHY. 19 HON'BLE GAUHATI HIGH COURT IN THE CASE OF NEMICHAND KOTHARI VS. CIT 264, ITR 254 , HELD THAT THE ASSESSEE HAD ESTABLISHED THE IDENTITY OF THE CREDITORS. THE ASSESSE E HAD ALSO SHOWN, IN ACCORDANCE WITH THE BURDEN, WHICH RESTED ON HIM UNDER SECTION 106 O F THE EVIDENCE ACT, THAT THE SAI D AMOUNTS HAD BEEN RECEIVED BY HIM BY WAY OF CHEQUES FROM THE CREDITORS WHICH WAS NOT IN DISPUTE. ONCE THE ASSESSEE HAD ESTAB LISHED THESE, THE ASSESSEE MUST BE TAKEN TO HAVE PROVED THA T THE CREDITOR HAD THE CREDITWORTHINESS TO ADVANCE THE LOA NS. THEREAFTER, THE BURDEN HAD SHIFTED TO THE ASSESSING OFFICER TO PROVE THE CONTRARY. THE FAILURE ON THE PART OF THE C REDITORS TO SHOW THAT THEIR SUB-CREDITORS HAD CREDITWORTHINESS TO ADVANCE THE SAID LOAN AMOUNTS TO THE ASSESSEE, COULD NOT, UNDE R THE LAW BE TREATED AS THE INCOME FROM UNDISCLOSED SOURCE S OF THE ASSESSEE HIMSELF, WHEN THERE WAS NEITHER DIRECT NOR CIRCUMSTANTIAL EVIDENCE ON RECORD THAT THE SAID LOAN A MOUNTS ACTUALLY BELONGED TO, OR WERE OWNED BY, THE ASSESSEE. TH E ASSESSING OFFICER FAILED TO SHOW THAT THE AMOUNTS, WH ICH HAD COME TO THE HANDS OF THE CREDITORS FROM THE HANDS O F THE SUB- CREDITORS, HAD ACTUALLY BEEN RECEIVED BY THE SUB-CREDI TORS FROM THE ASSESSEE. THEREFORE, THE ASSESSING OFFICER COULD NOT HAVE TREATED THE SAID AMOUNTS AS INCOME DERIVED BY THE A SSESSEE FROM UNDISCLOSED SOURCES. HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. FIRST POINT FINANCE LTD. 286 ITR 477 , HELD THAT IT WAS NOT DENIED THAT ALL THE SHARE HOLDERS/ SHARE APPLICANTS WERE GENU INELY EXISTING PERSONS. IT WAS ALSO NOT DENIED THAT EACH OF THEM WAS AN INCOME-TAX ASSESSEE AND COPIES OF THE RETURN OF THEIR INCOME WERE ALSO PLACE BEFORE THE ASSESSING OFFICER. THERE W AS NO PRESUMPTION THAT THE ASSESSEE WAS THE BENAMI OWNER OF THE INVESTMENT MADE BY THE EXISTING PERSONS. THE TRIBUNA L WAS JUSTIFIED IN DELETING THE ADDITION. HON'BLE DELHI HIGH COURT IN THE RECENT DECISION IN T HE CASE OF CIT VS. ILLAC INVESTMENT PVT. LTD. 287 ITR 135 , HELD THE RESPONDENT-ASSESSEE HAD FOR THE ASSESSMENT YEAR 198 9-90 DISCLOSED IN ITS RETURN SUM OF RS. 4,75,000 RECEIVED AS SHARE APPLICATION MONEY. THE ASSESSING OFFICER ADDED THE SAID AMOUNT TO THE TAXABLE INCOME OF THE ASSESSEE UNDER SECTION 68 OF THE INCOME-TAX ACT, 1961, ON THE GROUND THAT THE IDENTITY OF THE SUBSCRIBERS HAD NOT BEEN ESTABLISHED. IN AN APPE AL FILED BY THE ASSESSEE AGAINST THE SAID ORDER, THE COMMISSIONE R OF INCOME-TAX (APPEALS) HELD THAT THE ASSESSEE HAD SATISF ACTORILY ESTABLISHED IDENTITY OF THE SHARE SUBSCRIBERS. THE VIE W TAKEN WITH THE ASSESSING OFFICER WAS, ACCORDINGLY, REVERSED . THE INCOME-TAX APPELLATE TRIBUNAL HAS IN A FURTHER APPEAL FILED BY THE REVENUE BEFORE IT PLACED RELIANCE UPON THE DECIS ION OF THIS COURT IN CIT V. ANTARCTICA INVESTMENT P. LTD. [2003] 262 ITR 493 AND CIT V. SOPHIA FINANCE LTD. [1994] 205 ITR 98 (DELHI) [FB] TO HOLD THAT THE RESPONDENT ASSESSEE HAD DISCHARGED THE ONUS BY REFERENCE TO THE MATERIAL PRODUCED TO ESTABLISH THE IDENTITY OF THE SUBSCRIBERS. THE TRIBUNAL HAS OBSERVED: 20 ON GOING THROUGH THE VARIOUS ORDERS TO WHICH REFE RENCE HAS BEEN MADE BY THE LEARNED COUNSEL FOR ASSESSEE, IT IS FOUND THAT ON SIMILAR FACTS THE ADDITIONS MADE BY THE ASSESSING OFFICER HAVE BEEN DELETED. SO FAR AS THE PRESENT CASE IS CONCERNED, THE LEARNED COMMISSIONER O F INCOME-TAX (APPEALS) HAS CONSIDERED THE FACTS AND CIRCUMSTANCES IN DETAIL AND HAS RECORDED FINDINGS OF FACT. HE HAS ALSO PLACED RELIANCE ON THE DECISION IN THE CA SE OF CIT V. SOPHIA FINANCE LTD. [1994] 205 ITR 98 (DELHI) [F B]. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ALSO CONSIDERED THE PROVISIONS OF SECTIONS 72,75 AND 77 OF THE COMPANIES ACT AND HAS ALSO TAKEN INTO CONSIDERATION THE DETAILS FURNISHED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER INCLUDING THE CERTIFICA TE OF INCORPORATION OF SUBSCRIBERS, COPIES OF THEIR BANK STATEMENTS AND COPIES OF THEIR ASSESSMENT ORDERS AS WELL AS THE COPIES OF THEIR AUDITED ACCOUNTS. THE FINDINGS RECORDED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ARE BASED ON A PROPER APPRAISAL OF THE MATER IAL AND WE DO NOT FIND ANY SCOPE TO INTERFERE WITH THE SAME. CONSEQUENTLY, THE ORDER OF THE LEARNED COMMISSIONER O F INCOME-TAX (APPEALS) IS UPHELD. 12. IT IS ADMITTED FACT THAT THE ASSESSEE FILED THE CONFIRM ATION LETTER FROM M/S. ALLIANCE INDUSTRIES LTD. CONFIRMING TH AT IT HAS TRANSFERRED FOREIGN CURRENCY FROM THEIR BANK TO THE ACCOUNT OF THE ASSESSEE AND IN THE SAID CONFIRMATION ALL THE DETAILS OF SEVERAL PAYMENTS ARE MENTIONED. IT IS ALSO ADMITTED FACT THAT THE SAID NRI COMPANY IS REGISTERED COMPANY AND WHICH FACT IS ALSO PROVED BY THE CERTIFICATE OF INCORPORATION OF M/S. ALLIANCE IN DUSTRIES LTD. WHICH IS ALSO CERTIFIED BY THE NOTARY PUBLIC AND IS COUNTERSIGNED BY THE GOVERNOR AND COMMANDER IN CHIEF OF THE CITY O F GIBRALTAR. THESE CERTIFICATES ARE SUPPORTED BY LATER ON BY FAR IA AND ASSOCIATES CHARTERED ACCOUNTANTS. THE IDENTITY OF THE FOREIGN INVESTOR M/S. ALLIANCE INDUSTRIES LTD. IS THEREFORE ES TABLISHED BEYOND DOUBT. THE AO ALSO DID NOT DISPUTE THE IDENTITY AND EXISTENCE OF THE SHAREHOLDER M/S. ALLIANCE INDUSTRIES L TD. THE AO ALSO DID NOT DISPUTE TRANSFER OF MONEY BY M/S. ALLIANCE INDUSTRIES LTD. TO THE ASSESSEE FOR THE PURCHASE OF SHARES OF T HE ASSESSEE COMPANY AND THE AMOUNT INVESTED IN THE ASSESSEE COM PANY ON ACCOUNT OF SHARE CAPITAL/SHARE PREMIUM. THE ASSESSEE FROM THE CERTIFICATE OF THE GOVT. OF INDIA HAS ESTABLISHED THA T M/S. ALLIANCE INDUSTRIES LTD. INVESTED THE MONEY IN THE BUSINESS O F THE ASSESSEE AFTER OBTAINING THE PERMISSION OF THE GOVT. OF INDIA. THE FORMS FILED WITH THE RBI WOULD ALSO INDICATE THAT THE FOREIGN REM ITTANCES 21 RECEIVED FROM M/S. ALLIANCE INDUSTRIES LTD. WERE DULY A PPROVED BY RBI FOR INVESTMENT IN THE SHAREHOLDING OF THE ASSESSE E COMPANY. THE ASSESSEE ALSO FILED SEVERAL CERTIFICATES ISSUED T IME TO TIME BY THE STATE BANK OF INDIA, COMMERCIAL BRANCH, BHOPAL EXPLA INING THEREIN THAT ON SEVERAL DATES THE FOREIGN REMITTANCES WERE ORDERED, TO BE CREDITED TO THE ACCOUNT OF THE ASSESSEE WITH ST ATE BANK OF INDIA, BY M/S. ALLIANCE INDUSTRIES LTD. THE ASSESSEE AT THE APPELLATE STAGE FILED A CONSOLIDATED CERTIFICATE ISSU ED BY STATE BANK OF INDIA, COMMERCIAL BRANCH, BHOPAL EXPLAINING THERE IN THAT STANDARD CHARTERED BANK, DUBAI HAS CONFIRMED THAT ALL THE REMITTANCES SENT IN FAVOUR OF THE ASSESSEE COMPANY B Y M/S. ALLIANCE INDUSTRIES LTD. ARE ROUTED THROUGH THE BANK ACCOUNT OF M/S. ALLIANCE INDUSTRIES LTD. THE DETAILS OF PAYMENTS, D ATE AND USD ARE THE SAME AS HAVE BEEN MENTIONED IN THE CONFI RMATION LETTER OF M/S. ALLIANCE INDUSTRIES LTD. FILED BEFORE THE AO AND ARE ON THE SAME LINE ON WHICH ASSESSEE FILED SEVERAL CERT IFICATES BEFORE THE AO. THE STANDARD CHARTERED BANK ALSO FILED CERTIFICATE CONFIRMING THE ABOVE POSITION AND THAT M/S. ALLIANCE INDUSTRIES LTD. MAINTAINED BANK ACCOUNT WITH THEM AND THE ACCOUN T IS CONDUCTED TO THEIR SATISFACTION. THE AO NEITHER AT T HE ASSESSMENT STAGE NOR AT THE APPELLATE STAGE DISPUTED THE GENUIN ENESS OF THESE DOCUMENTARY EVIDENCES AND ALSO DID NOT MAKE ANY MEAN INGFUL INQUIRY ON SUCH EVIDENCES. STATE BANK OF INDIA, BHOPAL CONFIRMED THE NAME OF M/S. ALLIANCE INDUSTRIES LTD. IN THE CERT IFICATES WHO HAS TRANSFERRED THE USD TO THE ASSESSEE. THE ENTRIES IN THE CONFIRMATION ARE THEREFORE CONFIRMED BY THE STATE B ANK OF INDIA, BHOPAL ALSO. FROM THE ABOVE IT IS CLEARLY PROVED BY THE ASSESSEE THAT THE AMOUNT IN QUESTION HAVE COME TO THE ASSESS EE COMPANY FROM THE BANK ACCOUNT OF M/S. ALLIANCE INDUSTRIES LTD. THROUGH PROPER BANKING CHANNEL AND IT IS THE MONEY OF M/S. ALLIA NCE INDUSTRIES LTD. THAT HAS COME TO THE ASSESSEE AND TH AT M/S. ALLIANCE INDUSTRIES LTD. HAD THE CAPACITY TO INVEST TH IS MUCH OF THE AMOUNT DURING THE FY RELEVANT TO THE AY IN QUESTION. THE TRANSFER OF FOREIGN CURRENCY FROM THE BANK ACCOUNT OF M/S. ALL IANCE INDUSTRIES LTD. CLEARLY PROVED THE CREDITWORTHINESS OF M/S. A LLIANCE INDUSTRIES LTD. IT IS A SETTLED LAW THAT THE INCOME-TA X AUTHORITY CANNOT ASK THE ASSESSEE TO PROVE SOURCE OF THE SOUR CE. ALL THE ISSUE OF THE SHARES TO M/S. ALLIANCE INDUSTRIES LTD. H AVE ALREADY 22 BEEN REPORTED BY THE ASSESSEE TO THE REGISTRAR OF C OMPANIES. AS PER SUBMISSION OF LD. COUNSEL FOR ASSESSEE THOUGH THE DIRECTORATE OF ENFORCEMENT GOVT. OF INDIA CONDUCTED CERTAIN INQU IRIES AGAINST THE ASSESSEE UNDER THE PROVISIONS OF FOREIGN EXCHAN GE MANAGEMENT ACT BUT NO FURTHER INQUIRY HAS BEEN MADE INTO THE MATTER. IT WOULD ALSO PROVE THAT THE MONEY IN QUESTION FLOW FROM M/S. ALLIANCE INDUSTRIES LTD. THEREFORE AO WAS NOT JUS TIFIED IN DRAWING ADVERSE INFERENCE AGAINST THE ASSESSEE. THE AO HAS NOT BROUGHT ANY EVIDENCE ON RECORD THAT THE SHARE APPLI CATION MONEY RECEIVED BY ASSESSEE FROM M/S. ALLIANCE INDUSTRIES LTD . BELONG TO THE ASSESSEE OR THAT IT WAS THE ASSESSEES OWN MONEY WHICH IT HAD RECEIVED IN THE SHAPE OF DOLLARS FROM THE NRI COM PANY. IT IS THEREFORE NOT IN THE NATURE OF INCOME OF THE ASSESS EE BECAUSE THE MONEY RECEIVED WAS ON ACCOUNT OF SHARE CAPITAL/SHARE PREMIUM. THE LD. CIT(A) HAS GIVEN CATEGORICAL FINDING IN THE IMPUGN ED ORDER THAT THE AO HIMSELF HAD ACCEPTED THE SIMILAR DEPOSITS IN TH E EARLIER AYS 2001-02 AND 2002-03 AS GENUINE. HE ALSO OBSERVED IN FACT ASSESSEE ORDER RELATING TO AY 2001-02 WAS PASSED AFT ER INQUIRY U/S 143(3) WHEREIN SIMILAR INVESTMENT FROM SAME NRI C OMPANY M/S. ALLIANCE INDUSTRIES LTD. TO THE TUNE OF RS.4,64,71,32 2/- WAS ACCEPTED AS GENUINE AND INVESTMENT OF RS.9,47,81,895/- F ROM THE SAME COMPANY WAS ALSO ACCEPTED IN SUBSEQUENT AY 2002 -03 U/S 143(1). LD. COUNSEL FOR ASSESSEE ALSO ARGUED AND MADE TH E ABOVE SUBMISSION BEFORE THE TRIBUNAL AS CONSIDERED BY LD. C IT(A). DURING THE COURSE OF ARGUMENTS, LD. DR DID NOT DISPUTE THE AB OVE FACTS RECORDED BY THE LD. CIT(A) IN THE IMPUGNED ORDER AND TH EREFORE IT STANDS PROVED THAT IN THE EARLIER YEARS THE AO DID N OT DISPUTE THE IDENTITY OF M/S. ALLIANCE INDUSTRIES LTD., GENUINENESS OF TRANSACTION AND ITS CREDITWORTHINESS IN RESPECT OF SHARE APPLICATION MONEY REMITTED BY THE ABOVE FOREIGN INVESTOR. WE DO N OT FIND IF THERE IS ANY DEVIATION OF THE FACTS OF THE INVESTMEN T IN RESPECT OF THE SAME NRI COMPANY M/S. ALLIANCE INDUSTRIES LTD. WE MAY ALSO NOTE THAT IN AY 2001-02, THE ASSESSMENT ORDER U/S 143 (3) WAS PASSED BY THE SAME AO SHRI YOGENDRA DUBEY, ACIT-2(1), B HOPAL ACCEPTING THE IDENTICAL SUBMISSION OF THE ASSESSEE. TH EREFORE, THERE WAS NO JUSTIFICATION ON THE PART OF SAME AO S HRI YOGENDRA DUBEY FOR NOT ACCEPTING THE CREDITS IN THIS YEAR AS G ENUINE. LD. DR SUBMITTED THAT PRINCIPLE OF RES-JUDICATA IS NOT APPLI CABLE AND AO IS 23 COMPETENT TO MAKE INQUIRY ON THE SAME FACTS IN THE S UBSEQUENT YEAR. HONBLE M.P. HIGH COURT IN THE CASE OF CIT VS. GODA WARI CORPN. LTD., 156 ITR 835 HELD WITH REGARD TO THE THIRD POINT, WE WOULD LIKE TO SAY THAT THE QUESTION POSED BEFORE US IS NOT WHETHER THE TRIBUNAL HAS COMMITTED AN ERROR OF LAW IN APPLYING THE PRINCIPLES OF RES-JUDICATE. HOWEVER, THOUGH IT IS TRUE THAT THE PRINCIPLES OF RES-JUDICATA DO NOT APPLY, THE RULE OF C ONSISTENCY DOES APPLY. IN THE INSTANT CASE, THE DEPARTMENT HAS FAILED TO POINT OUT THAT THE CIRCUMSTANCES FOR TREATING THE GAIN IN THE TRANSACTIONS FOR THE ASSESSMENT YEAR 1972-73 AS A CAPITAL GAIN WERE DIF FERENT FROM THOSE IN THE ASSESSMENT YEARS 1962-63 AND 1963 -64 AND, AS SUCH, THE FINDING HAS TO BE CONSISTENT. THE TRIBUNAL H AS, THEREFORE, NOT COMMITTED ANY ERROR. IN THIS RESPECT, WE WOULD LI KE TO SET OUT HEREINBELOW AN EXCERPT FROM THE DECISION OF THE ORIS SA HIGH COURT IN CIT VS. BELPAHAR REFRACTORIES LTD. [1981] 128 ITR 610 AT PP. 613-614. HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. VIKAS CHEMI GUM INDIA, 276 ITR 32 HELD THAT SINCE THE APPELLANT DID NOT CHALLENGE THE ORDER PASSED BY THE TRIBUNAL IN RELATION TO THE ASSESSMENT YEAR 1986-87 BY WHICH IT CONFIRMED THE ORDER OF THE COMMISSIONER(APPEALS) DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF VALUE OF BARDANA USED FOR STORING C HURI AND KORMA, IT COULD NOT CHALLENGE A SIMILAR ORDER PASSED IN RELATION TO THE AY 1988-89. HONBLE SUPREME COURT IN THE CASE OF BERGER PAINTS IN DIA LTD. VS. CIT, 266 ITR 99 HELD HIGH COURT-DECISION IN THE C ASE OF ONE ASSESSEE-DEPARTMENT ACCEPTING AND NOT CHALLENGING CORRECTNESS-NOT OPEN TO DEPARTMENT TO CHALLENGE IN THE CASE OF OTHER ASSESSEES, WITHOUT JUST CAUSE. IN VIEW OF THE ABOVE FACTS AND DECISIONS NOTED, WE D O NOT FIND ANY MERIT IN THE SUBMISSION OF LD. DR, THE SAME IS THER EFORE REJECTED. LD. DR ALSO SUBMITTED THAT BALANCE SHEET OF M/S. ALLIA NCE INDUSTRIES LTD. IS NOT FILED AS IS CONSIDERED RELEVANT IN THE CASE OF M/S. KALANI INDUSTRIES LTD. (SUPRA). WE DO NOT AGREE WIT H THE SUBMISSION OF LD. DR BECAUSE EVERY CASE HAS ITS OWN FACTS AND THE FINDINGS ARE DEPENDANT UPON THE APPRECIATION OF THE EVIDENCE 24 AVAILABLE ON RECORD. IN THE CASE OF PRESENT ASSESSEE , THE ENTIRE DOCUMENTARY EVIDENCE AVAILABLE ON RECORD AND THE PRE VIOUS HISTORY OF ASSESSEE NOTED ABOVE IN RESPECT OF THE S AME NRI COMPANY M/S. ALLIANCE INDUSTRIES LTD. CLEARLY PROVED THE CASE OF THE ASSESSEE THAT THE SHARE APPLICATION MONEY RECEI VED BY THE ASSESSEE IS NOT IN THE NATURE OF INCOME OF THE ASSE SSEE. THE ASSESSEE ALSO ABLE TO PROVE CREDITWORTHINESS OF M/S. ALLI ANCE INDUSTRIES LTD. THIS CONTENTION OF LD. DR IS ALSO REJEC TED. LD. DR ALSO CONTENDED THAT AO RAISED SERIOUS DOUBT ABOUT TH E GENUINENESS OF TRANSACTION BECAUSE NO PRUDENT BUSIN ESSMAN WOULD MAKE HUGE INVESTMENT FOR GETTING LESSER SHAREH OLDING IN THE COMPANY. IT APPEARS FROM THE ABOVE SUBMISSION FROM TH E LD. DR THAT HE HIMSELF CONTRADICTED HIS SUBMISSION BECAUSE A CCORDING TO HIS SUBMISSION FOR PROVING GENUINE CREDIT U/S 68 TH E ASSESSEE SHALL HAVE TO PROVE IDENTITY OF CREDITOR, GENUINENESS O F TRANSACTION AND CREDITWORTHINESS OF THE CREDITOR WHICH ASSESSEE IN THIS CASE HAS ALREADY PROVED. WHAT THE BUSINESSMAN HAS TAKEN A DECISION IS ENTIRELY DEPENDANT UPON THEIR BUSINESS NEEDS WHI CH IS NOT OPEN TO CHALLENGE BY THE REVENUE THEREFORE IT WAS NOT RELEV ANT CRITERIA TO DISBELIEVE THE VERSION OF THE ASSESSEE. LD. DR ALSO SU BMITTED THAT NRI COMPANY WAS NOT KNOWING MUCH ABOUT THE ASSESSEE BEFORE MAKING THE HUGE INVESTMENT. IT APPEARS THAT LD. DR FORG OT TO NOTE THAT THE SAME NRI COMPANY HAD MADE INVESTMENT IN THE ASSESSEE COMPANY IN THE EARLIER YEARS WHICH IS NOT DISPUTED BY THE AO THEREFORE CONTENTIONS OF THE LD. DR HAVE NO MERITS AND ARE REJ ECTED. THE RELIANCE OF LD. DR ON THE ORDER OF ITAT, DELHI BENCH IN THE CASE OF A-ONE HOUSING COMPLEX LTD.(SUPRA) IS MISPLACED BECAU SE ULTIMATELY IN THIS CASE IT WAS HELD WHETHER ONUS OF ASSESSEE IN THE CASE OF SHARE CAPITAL BY PUBLIC ISSUE IS LIGHTER ONE AND THEREFORE SUCH ONUS WOULD STAND DISCHARGED IF IDENTI TY OF SHARE APPLICANT IS ESTABLISHED-HELD-YES. THIS CASE IS NOT AP PLICABLE IN FAVOUR OF THE REVENUE BECAUSE THE AMOUNT IS NOT REC EIVED FROM CLOSE RELATIVE OR FRIEND. 12.1 ON GOING THROUGH THE ABOVE DOCUMENTARY EVIDENCES ON RECORDS AND THE JUDICIAL PRONOUNCEMENTS REFERRED T O ABOVE, IT IS CLEAR NEITHER THE AO NOR THE LD. DR APPEARING FOR THE REVENUE HAVE 25 DISPUTED THE DOCUMENTARY EVIDENCES FILED BY THE ASSE SSEE BEFORE THE AUTHORITIES BELOW. THE ONLY POINT AGITATED BY THE A O WAS CREDITWORTHINESS OF M/S. ALLIANCE INDUSTRIES LTD. WHICH IS ALSO SATISFACTORILY PROVED BY THE ASSESSEE. THE DECISION OF THE FULL BENCH OF DELHI HIGH COURT IN THE CASE OF M/S. SOPHIA FINANCE LTD. (SUPRA) HOLDS THE FIELD. HONBLE MP HIGH COURT IN THE CA SE OF DHAR ISPAT PVT. LTD. HELD THAT THE QUESTION OF GENUINENESS OF ENTRIES REGARDING SHARE APPLICATION MONEY IS A QUESTION OF FACT TO BE DECIDED ON THE BASIS OF EVIDENCE AVAILABLE ON RECORD. THE A SSESSEE ON THE BASIS OF EVIDENCE AVAILABLE ON RECORD HAS BEEN ABLE T O PROVE CREDITWORTHINESS OF M/S. ALLIANCE INDUSTRIES LTD. THE RATIO OF THE DECISIONS RELIED UPON BY THE LD. COUNSEL FOR ASSESSEE AND REFERRED TO BY US IN THIS ORDER ARE SQUARELY APPLICABLE TO TH E FACTS AND CIRCUMSTANCES OF THIS CASE. THE ASSESSEE THROUGH THE EVIDENCES ON RECORD HAS BEEN ABLE TO PROVE THE IDENTITY OF SHAREHO LDER, ITS EXISTENCE AND TRANSFER OF MONEY FROM THE BANK ACCOU NT OF M/S. ALLIANCE INDUSTRIES LTD., WHICH FACT HAVE NOT BEEN DIS PUTED BY THE AO. THE ASSESSEE PRODUCED SUFFICIENT AND RELIABLE MAT ERIAL AND EVIDENCE BEFORE THE AO TO PROVE THAT THE AMOUNT IN QUESTION HAVE BEEN INVESTED BY M/S. ALLIANCE INDUSTRIES LTD. THE LD. CI T(A) ON THE BASIS OF THE MATERIAL ON RECORD WAS JUSTIFIED IN ACCEPTING THE CONTENTION OF THE ASSESSEE THAT THE SHARE APPLICANT IN FACT EXIST. THE CREDITWORTHINESS OF THE SHAREHOLDER IS ALSO PROVED BECAUSE ALL THE PAYMENTS HAVE BEEN MADE THROUGH BANKING CHANNEL THROUGH THE ACCOUNT PAYEE CHEQUE WHICH FACT COULD BE VERIFIE D FROM THE RESPECTIVE BANK AND IN FACT THE RESPECTIVE BANKS NA MELY SBI, BHOPAL AND STANDARD CHARTERED BANK HAVE CERTIFIED TH E SAME FACT. THE GENUINENESS OF THE TRANSACTION IS NOT DISP UTED. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE IN THE LIGHT OF THE MATERIAL AND EVIDENCE ON RECORD, WE A RE OF THE VIEW THAT ASSESSEE HAS DISCHARGED THE ONUS LAY UPON IT T O PROVE IDENTITY AND EXISTENCE OF THE SHAREHOLDER M/S. ALLIANCE INDUSTRIES LTD., ITS CREDITWORTHINESS AND GENUINENESS OF TRANSACTI ON. THE AO HAS HOWEVER NOT BROUGHT ANY EVIDENCE CONTRARY TO TH E EVIDENCE FILED BY ASSESSEE. THE DECISIONS CITED BY LD. DR HAVE BE EN CONSIDERED IN THE LIGHT OF FACTS AND CIRCUMSTANCES OF THE CASE AND WE ARE OF THE OPINION THAT THE SAME COULD NOT SUPPORT THE CONTENTION OF LD. DR. WE MAY ALSO NOTE THAT HONBLE SUPREME COU RT 26 IN THE CASE OF CIT VS. P. MOHAN KALA, AS RELIED UPON BY LD. DR HAS CONSIDERED THE FACT IN WHICH THE AO HELD THAT THE GI FT THOUGH APPARENT WERE NOT REAL AND ACCORDINGLY TREATED ALL TH E AMOUNTS OF THE GIFT AS INCOME OF THE ASSESSEE U/S 68 OF THE IT ACT. THE ASSESSEE DID NOT CONTEND THAT EVEN IF THERE EXPLANA TION WAS NOT SATISFACTORY, THE AMOUNT WERE NOT OF THE NATURE OF I NCOME. THE LD. CIT(A) CONFIRMED THE ORDER AND THE TRIBUNAL THROUGH M AJORITY VIEW CONFIRMED THE ORDERS OF THE AUTHORITIES BELOW. ON AN APPEAL, THE HIGH COURT RE-APPRECIATED THE EVIDENCE AND SUBSTITUT ED ITS OWN FINDING AND CAME TO THE CONCLUSION THAT THE REASONS ASSIGNED BY THE TRIBUNAL WERE IN THE REALM OF SURMISES, CONJECTU RE AND SUSPICION. HONBLE SUPREME COURT ON SUCH FACTS HELD, RE VERSING THE DECISION OF THE HIGH COURT, THAT THE FINDINGS OF THE AO, THE COMMISSIONER (APPEALS) AND THE TRIBUNAL WERE BASED ON THE MATERIAL ON RECORD AND NOT ON ANY CONJECTURES AND SUR MISES. THAT THE MONEY CAME BY WAY OF BANK CHEQUES AND WAS PAID THROUGH THE PROCESS OF BANKING TRANSACTION WAS NOT BY ITSELF OF ANY CONSEQUENCE. THE HIGH COURT MISDIRECTED ITSELF AND ER RED IN DISTURBING THE CONCURRENT FINDINGS OF FACT. HOWEVER, THE FACTS AND CIRCUMSTANCES OF THE APPEAL BE FORE US ARE CLEARLY DISTINGUISHABLE AS NOTED ABOVE. THE RELIANC E OF LD. DR ON THE CASES REFERRED TO ABOVE ARE THEREFORE MISPLACE D. 12.2 CONSIDERING THE ABOVE DISCUSSION, WE DO NO T FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). THE APPEAL OF THE REVENUE HAS NO MERIT AND IS ACCORDINGLY DISMISSED. NO OTHER POI NT IS ARGUED OR PRESSED. 11. THE AFORESAID ORDER OF THE INDORE BENCH HAVE BE EN CONFIRMED BY HON'BLE MADHYA PRADESH HIGH COURT IN T HE CASE OF CIT V PEOPLES GENERAL HOSPITAL LTD. 356 ITR 65 I N WHICH THE HON'BLE HIGH COURT FOLLOWING THE DECISION OF HO N'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS PVT. LT D. (SUPRA) HELD AS UNDER ; HELD, DISMISSING THE APPEALS, THAT IF THE ASSESSEE HAD RECEIVED SUBSCRIPTIONS TO THE PUBLIC OR RIGHTS ISSUE THROUGH BANKING CHANNELS 27 AND FURNISHED COMPLETE DETAILS OF THE SHAREHOLDERS, NO ADDITION COULD BE MADE UNDER SECTION 68 OF THE INCOME-TAX ACT, 1961, IN THE ABSENCE OF ANY POSITIVE MATERIAL OR EVIDENCE TO INDICATE THAT THE SHAREHOLDERS WERE BENAMIDARS OR FICTITIOUS PERSONS OR THAT ANY PA RT OF THE SHARE CAPITAL REPRESENTED THE COMPANY'S OWN INCOME FROM U NDISCLOSED SOURCES. IT WAS NOBODY'S CASE THAT THE NON-RESIDENT INDIAN COMPANY WAS A BOGUS OR NON-EXISTENT COMPANY OR THAT THE AMO UNT SUBSCRIBED BY THE COMPANY BY WAY OF SHARE SUBSCRIPTION WAS IN FACT THE MONEY OF THE ASSESSEE. THE ASSESSEE HAD ESTABLISHED THE I DENTITY OF THE INVESTOR WHO HAD PROVIDED THE SHARE SUBSCRIPTION AND THAT THE TRANSACTION WAS GENUINE. THOUGH THE ASSESSEE'S CONTE NTION WAS THAT THE CREDITWORTHINESS OF THE CREDITOR WAS ALSO ESTABLIS HED, IN THIS CASE, THE ESTABLISHMENT OF THE IDENTITY OF THE INVESTOR ALO NE WAS TO BE SEEN. THUS, THE ADDITION WAS RIGHTLY DELETED. 12. IN THE PRESENT CASE, ASSESSEE COMPANY HAD RECEI VED MONEY ON ALLOTMENT OF SHARES FROM M/S GLACIS INVEST MENT LIMITED THROUGH BANKING CHANNEL AND FURNISHED COMPL ETE DETAILS OF THE SHAREHOLDER, NO ADDITION WOULD BE MA DE UNDER SECTION 68 OF THE ACT, IN THE ABSENCE OF ANY POSITI VE MATERIAL OR EVIDENCE TO INDICATE THAT THE SHAREHOLDER COMPAN Y WAS BENAMIDAR OR FICTITIOUS COMPANY OR THAT ANY PART OF THE SHARE CAPITAL REPRESENTED THE ASSESSEE'S OWN INCOME FROM UNDISCLOSED SOURCES. THE ASSESSEE ON THE BASIS OF THE DOCUMENTARY EVIDENCE ON RECORD HAS BEEN ABLE TO PRO VE THAT NON RESIDENT COMPANY I.E. M/S GLACIS INVESTMENT LIM ITED WAS AN EXISTING COMPANY AND THAT THE SHAREHOLDER CO MPANY MADE INVESTMENT IN THE ASSESSEE COMPANY WOULD PROVE THAT ASSESSEE RECEIVED GENUINE SHARE APPLICATION MONEY F ROM THIS NON-RESIDENT COMPANY. THUS, ASSESSEE HAD ESTABLISH ED THE IDENTITY OF THE SHAREHOLDER COMPANY AND THAT TRANSA CTION WAS 28 GENUINE. THE ASSESSEE HAS ALSO PROVED THE CREDIT W ORTHINESS OF THE SHAREHOLDER COMPANY, THEREFORE, AUTHORITIES BELOW WERE NOT JUSTIFIED IN MAKING THE HUGE ADDITION AGAINST T HE ASSESSEE. 13. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCU MSTANCES ON THE BASIS OF THE EVIDENCES ON RECORD AND IN THE LIGHT OF THE JUDICIAL PRONOUNCEMENTS NOTED ABOVE, WE ARE OF THE VIEW THAT ASSESSEE HAS BEEN ABLE TO PROVE THE IDENTITY OF THE CREDITOR WHICH IS NOT IN DISPUTE, CREDIT WORTHINESS OF THE S HAREHOLDER COMPANY AND GENUINENESS OF THE TRANSACTION IN THE M ATTER. THEREFORE, ADDITION OF RS. 3.70 CR UNDER SECTION 68 OF THE ACT IS WHOLLY UNJUSTIFIED. WE, ACCORDINGLY, SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND DELETE ADDITION OF RS. 3.70 C R. IN THE RESULT, GROUND NO. 1 OF APPEAL OF THE ASSESSEE IS A LLOWED. 14. ON GROUND NO. 2, ASSESSEE CHALLENGED THE ORDER OF THE LD. CIT(APPEALS) IN UPHOLDING THE DISALLOWANCE OF A SUM OF RS. 3 CR PAID TO M/S ABHISHEK INDUSTRIES LTD. FOR U P- GRADATION OF POWER STATION REQUIRED FOR SUPPLY OF P OWER TO THE ASSESSEE COMPANY. BRIEFLY THE FACTS ARE THAT ASSES SEE IN THE SCHEDULE OF FIXED ASSETS HAS SHOWN THE ADDITION OF RS. 3 CR AS EXPENDITURE ON UP-GRADATION OF SUB STATION OWNED BY THE COMPANY. WHEN CONFRONTED, THE ASSESSEE, DURING THE COURSE OF ASSESSMENT PROCEEDINGS SUBMITTED THAT THE ASSESS EE COMPANY HAS DEVELOPED TEXTILE CAPITAL WITH A CLUSTE R OF UNITS SO AS TO ENSURE POWER SUPPLY AND MOU WAS MADE BETW EEN ABHISHEK INDUSTRIES AND THE ASSESSEE COMPANY FOR UNINTERRUPTED SUPPLY OF POWER BY ABHISHEK INDUSTRIE S 29 ASSESSEE'S COMPANY. THE ASSESSEE AGREED TO BEAR COS T OF RS.3 CRORES FOR UP GRADATION OF EXISTING POWER STATION O F ABHISHEK INDUSTRIES LTD. AND THE SAME AMOUNT WAS AMORTIZED O VER A PERIOD OF 10 YEARS @ OF 10% ON STRAIGHTLINE BASIS. THE ASSESSEE RELIED ON VARIOUS DECISIONS, HOWEVER, ASSE SSING OFFICER DID NOT ACCEPT THE SUBMISSION OF THE ASSESS EE CONTENDING THAT EXPENDITURE IS INCURRED FOR UP-GRAD ATION OF THE SUB STATION AND THEREFORE, IT IS A CAPITAL EXPE NDITURE. THE EXPENDITURE HAS ALSO NOT BEEN SHOWN IN THE PROFIT & LOSS ACCOUNT MEANING THEREBY THAT IT IS NOT REVENUE EXPE NDITURE. THE A.O. RELIED UPON THE CASE OF SUDARSON CHEMICAL INDUSTRIES LTD. VS. ACITVS. ITAT PUNE (110) ITD 171 ETC. THE A.O. ALSO DISTINGUISHED THE CASE RELIED UPON BY THE ASSESSEE. IT WAS NOTED THAT THE ASSETS IN THIS CASE ARE ACTUA LLY SHOWN BY THE ASSESSEE IN THE LIST OF FIXED ASSETS AND, TH EREFORE, OWNED BY THE ASSESSEE. THE A.O. ALSO HELD THAT DEPR ECIATION IS NOT ALLOWED ON THIS CAPITAL EXPENDITURE AS THIS EXPENDITUREE IS MADE OUT OF THE GRANT RECEIVED FROM THE MINISTRY OF TEXTILE. 14(I) DURING THE COURSE OF APPELLATE PROCEEDINGS, T HE ASSESSEE REITERATED THE SAME SUBMISSIONS BEFORE THE LD. CIT(APPEALS). THE LD. CIT(APPEALS) NOTED THAT ASSE TS CREDITED ARE SHOWN AS OWNED BY THE COMPANY AND, THEREFORE, ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE SAME C ONSIDERING IT TO BE CAPITAL EXPENDITURE. FURTHER, DEPRECIATION HAS BEEN RIGHTLY DISALLOWED BECAUSE, THE EXPENDITURE IS MADE THROUGH THE GRANTS IN AID. THE APPEAL OF THE ASSESSEE ON TH IS GROUND WAS ACCORDINGLY DISMISSED. 30 15. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE P ARTIES. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS MADE BEFORE AUTHORITIES BELOW. HE HAS FAIRLY STATE D THAT THE ISSUE WHETHER THE EXPENDITURE WAS REVENUE OR CAPIT AL IN NATURE HAS BEEN DECIDED AGAINST THE ASSESSEE BY HO N'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V SH REYANS INDUSTRIES LTD. 303 ITR 393 IN WHICH IT WAS HELD AS UNDER : HELD, (I) THAT SETTING UP OF A SYSTEM/PLANT AND CREA TION OF OTHER INFRASTRUCTURE IN AN INDUSTRIAL UNIT IS ALWAYS A CAPITAL EXPENDITURE AND THE RIGHT ACQUIRED BY THE ASSESSEE F OR CREATION OF CHANNEL TO DISCHARGE EFFLUENTS WAS CAPITAL IN NATURE. THE EXPENDITURE IN QUESTION ENABLED THE ASSES SEE TO USE THE DRAIN FORA/I TIMES TO COME AND EVEN TO TRANS FER SUCH A RIGHT. IT WAS FURTHER RELEVANT THAT FOR USE OF THE RIGHT TO TRANSPORT ITS EFFLUENT THROUGH FOREST LAND, THE ASSESSEE HAD T RANSFERRED ITS OWN LAND. DURING SUBSEQUENT YEARS ON THE MAINTENA NCE THEREOF, THE EXPENSE WAS AROUND RS. 8 TO 10 LAKHS, WHI CH WAS BEING ALLOWED AS REVENUE EXPENDITURE. THEREFORE, THE EX PENSE MADE BY THE ASSESSEE DURING THE FIRST YEAR WHEN THE DRAIN WAS DUG OUT WAS CAPITAL IN NATURE. THE EXPENDITURE WA S NOT DEDUCTIBLE. 15(I) HE HAS FURTHER SUBMITTED THAT THE MATTER IS R EMANDED BACK TO THE HIGH COURT IN THE MATTER REPORTED IN 31 4 ITR 302. HE HAS, HOWEVER, SUBMITTED THAT DEPRECIATION ON THE CAPITAL EXPENDITURE IS LIABLE TO BE ALLOWED BY THE AUTHORIT IES BELOW. HE HAS SUBMITTED THAT THE GRANT-IN-AID AS IS NOTED BY THE LD. CIT(APPEALS) ON THIS ISSUE FOR DENYING DEPRECIATION IN THE CASE OF ASSESSEE, WAS GRANTED BY MINISTRY OF TEXTIL ES, GOVERNMENT OF INDIA IN SEPTEMBER,2005 INTRODUCED IN A SCHEME NAMELY SCHEME FOR INTEGRATED TEXTILE PARKS (SITP OR 31 THE SCHEME ) BY MERGING ITS ERSTWHILE TEXTILE PAR KS FOR EXPORT SCHEMES AND TEXTILE CENTRE INFRASTRUCTURE DEVELOPMENT SCHEME. THE AIM OF THE SCHEME IS TO EN COURAGE GROUP OF ENTREPRENEURS TO COME TOGETHER AND ESTABLI SH INTEGRATED TEXTILE PARKS WITH WORLD CLASS INFRASTRU CTURE UNDER A PUBLIC PRIVATE PARTNERSHIP FRAME WORK. UNDER THE SCHEME, MINISTRY OF TEXTILES WOULD PRO VIDE A GRANT UPTO 40 % OF THE APPROVED CAPITAL COST OF EACH TEXTILE PARK SUBJECT TO CEILING OF RS. 40 CR TO THE SPECIAL PURPOSE VEHICLE ESTABLISHE D FOR SETTING UP THE TEXTILE PARK. THE OBJECTIVE TO GRAN T-IN-AID TO THE ENTREPRENEURS WAS TO DEVELOP TEXTILE PARKS UNDE R THE SCHEME. THE DETAILS OF THE SAME IS ALSO FILED ON T HE SUBJECT. HE HAS SUBMITTED THAT THE INCENTIVE/GRANT-IN-AID CO ULD NOT BE CONSIDERED AS A PAYMENT DIRECTLY OR INDIRECTLY T O MEET ANY PORTION OF THE ACTUAL COST AND THUS, HAD FELL OUTSI DE THE PROVISIONS OF SECTION 10 TO SECTION 43(1) OF THE AC T. THEREFORE, THE DEPRECIATION IS ALLOWABLE TO THE ASS ESSEE AND THE GRANT-IN-AID AMOUNT COULD NOT BE REDUCED FROM T HE COST OF THE CAPITAL ASSET. IN SUPPORT OF HIS CONTENTION , HE HAS RELIED UPON FOLLOWING DECISIONS : I) DECISION OF MADRAS HIGH COURT IN THE CASE OF CIT V STANDARD FIREWORKS P.LTD. 326 ITR 498 IN WHICH IT WAS HELD AS UNDER : (II) THAT THE TRIBUNAL WAS RIGHT IN TREATING THE SUBSIDY AS A CAPITAL RECEIPT AND DELETING THE ADDITION REPRESENTING THE WIND MILL SUBSIDY AND NOT REDUCING IT FROM THE COST OF THE WIND MILLS TO WORK OUT THE VALUE FOR CALCULATING DEPRECIATION. 32 II) DECISION OF ALLAHABAD HIGH COURT IN THE CASE OF CIT V P. GLASS WORKS 333 ITR 355 IN WHICH IT WAS HELD AS UNDER : (II) THAT IN COMPUTING THE ACTUAL COST FOR PURPOSES OF DEPRECIATION GOVERNMENT SUBSIDY WAS NOT DEDUCTIBLE. CIT V. P. J. CHEMICALS LTD. [1994] 210 ITR 830 (SC) FOL LOWED. (III) THAT THE ASSESSING OFFICER HAD GIVEN DEPRECIA TION ON GENERATORS AT THE RATE OF 15 PER CENT. THIS WAS I E NHANCED TO 20 PER CENT, BY THE COMMISSIONER (APPEALS) AND CONFIRMED BY THE TRIBUNAL. DEPRECIATION OF 20 ' PER CENT, WAS INCORRECT AND WAS ON THE HIGHER SIDE BUT THE GR ANT OF DEPRECIATION OF 15 PER CENT, BY THE ASSESSING OFFICER WAS NOT CHALLENGED BY THE DEPARTM ENT AND IT COULD NOT BE DONE IN THE REFERENCE. III) ORDER OF ITAT VISHAKHAPATNAM BENCH IN THE CAS E OF SASISRI EXTRACTIONS LTD. V ACIT 122 ITD 428 (307 ITR (AT) 127 IN WHICH IT WAS HELD AS UNDER HELD ALLOWING THE APPEAL, THAT THE SCHEME WAS INTEN DED TO ACCELERATE INDUSTRIAL DEVELOPMENT OF THE STATE AND THE INCENTIVE WAS GIVEN FOR SETTING UP OF INDUSTRIES IN ANDHRA PR ADESH. THE AMOUNT OF SUBSIDY TO BE GIVEN WAS DETERMINED BY TAK ING THE COST OF ELIGIBLE INVESTMENT AS THE BASIS. THE INCENTIVE IN THE FORM OF SUBSIDY COULD NOT BE CONSIDERED AS A PAYMENT DIRECTLY OR INDIRECTLY TO MEET ANY PORTION OF THE ACTUAL COST AND THUS IT FELL OUTSIDE THE KEN OF EXPLANATION 10 TO SECTION 43(1) OF THE INCOM E-TAX ACT 1961. THE SUBSIDY AMOUNT COULD NOT BE REDUCED FROM THE AC TUAL COST OF THE CAPITAL ASSET. IV) ORDER OF ITAT HYDERABAD BENCH IN THE CASE OF INVENTAA CHEMICAL LTD. V ACIT 42 SOT 249 IN WHICH IT WAS HELD AS UNDER : II. SECTION 43(1) OF THE INCOME-TAX ACT, 1961 - ACTUAL COST - ASSESSMENT YEAR 2003-04 - ASSESSEE HAD RECEIVED RS. 20 LAKHS ON ACCOUNT OF STATE SUBSIDY - REVENUE HELD TH AT SAID SUBSIDY HAD TO BE REDUCED FROM COST OF FIXED ASSETS FOR PURPOSE OF ARRIVING AT DEPRECIATION - WHETHER IF PA YMENT OF SUBSIDY IS NOT RELATED TO ACTUAL ACQUISITION OF ASS ETS AND SUBSIDY IS GRANTED ON CAPITAL INVESTMENT ON LAND, B UILDING AND MACHINERY THEN IT CANNOT BE REDUCED FROM VALUE OF ASSET (WRITTEN DOWN VALUE) - HELD, YES - WHETHER FURTHER, IF THERE IS NO SPECIAL MENTION REGARDING INTENTION TO ADJUST SA ID SUBSIDY AGAINST ACTUAL COST OF MACHINERY, THEN THAT AMOUNT OF SUBSIDY CANNOT BE REDUCED FROM COST OF PLANT AND MACHINERY - HELD, 33 YES - WHETHER IN VIEW OF ABOVE, ISSUE WAS TO BE SET ASIDE TO FILE OF ASSESSING OFFICER TO EXAMINE TERMS AND COND ITIONS OF SANCTION OF SUBSIDY AND IF SUBSIDY WAS NOT GIVEN TO MEET COST OF ANY SPECIFIC CAPITAL ASSET AND AMOUNT OF SUBSIDY SO RECEIVED WAS QUANTIFIED ACCORDING TO INVESTMENT MAD E BY ASSESSEE IN PLANT AND MACHINERY AND BUILDING, CLAIM OF ASSESSEE WAS TO BE ALLOWED - HELD, YES. V) ORDER OF ITAT PUNE BENCH IN THE CASE OF SOHAM ELECTROPLAST PVT. LTD. V ITO IN ITA NO. 1578/PN/2008 DATED 28.10.2008 IN WHICH THE TRIBUNAL FOLLOWING THE DECISION OF VISHAKHAPATNAM BENCH IN THE CASE OF SASISRI EXTRACTIONS LTD. V CIT (SUPRA) HAS HELD THE SIMILAR CLAIM OF ASSESSEE. 16. ON THE OTHER HAND, LD. DR RELIED UPON ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT EXPLANATION 10 TO SECTION 43(1) APPLIES IN THE CASE OF THE ASSESSEE, THEREFORE, NO DEPRECIATION IS ALLOWABLE. 17. WE HAVE CONSIDERED RIVAL SUBMISSIONS. IT IS NOT IN DISPUTE THAT IN THE SCHEDULE OF FIXED ASSETS, ASSES SEE HAS SHOWN THE ADDITION OF RS. 3 CR AS EXPENDITURE ON UP - GRADATION OF SUB-STATION OWNED BY THE ASSESSEE COMP ANY. THE ASSESSEE MADE AGREEMENT WITH M/S ABHISHEK INDUS TRIES FOR UNINTERRUPTED SUPPLY OF POWER AND MET THE COST OF THE UPGRADATION OF EXISTING POWER STATION. THE AMOUNT WAS ALSO AMORTIZED IN THE BOOKS OF ACCOUNT. THE EXPENDITURE HAS ALSO NOT BEEN SHOWN IN THE PROFIT & LOSS ACCOUNT, WOULD MEAN THAT ASSESSEE DID NOT CLAIM IT TO BE REVENUE EXPEND ITURE. THE AUTHORITIES BELOW WERE, THEREFORE, JUSTIFIED IN HOL DING IT TO BE CAPITAL EXPENDITURE AND THE SIMILAR CLAIM OF ASSESS EE HAS ALREADY BEEN DISALLOWED BY HON'BLE PUNJAB & HARYANA HIGH 34 COURT IN THE CASE OF SHREYANS INDUSTRIES LTD.(SUPRA ) IN WHICH ALSO LD. COUNSEL FOR THE ASSESSEE ACCEPTED THAT THE ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE. THEREFORE, WE C ONFIRM THE ORDERS OF AUTHORITIES BELOW THAT EXPENDITURE INVOLV ED ON THIS ISSUE IS CAPITAL IN NATURE. 18. NOW THE QUESTION IS LEFT WHETHER ON THE CAPITAL EXPENDITURE WHICH IS SHOWN IN THE SCHEDULE OF FIXED ASSETS, ASSESSEE WOULD BE ENTITLED FOR DEPRECIATION ON RS. 3 CR WHICH IS NOT IN DISPUTE THAT THE ASSESSEE IN THE SCHEDULE OF FIXED ASSETS HAS SHOWN THE ADDITION OF RS. 3 CR ON UP-GRA DATION OF THE SUB-STATION OWNED BY THE ASSESSEE COMPANY. THE REFORE, IT WOULD INCREASE THE VALUE OF THE FIXED ASSETS BY AN AMOUNT OF RS. 3 CR AND SAME WAS CAPITAL IN NATURE. THE LD . CIT(APPEALS), HOWEVER, CONFIRMED THE ADDITION HOLDI NG THAT SINCE THIS AMOUNT WAS MADE THROUGH THE GRANT-IN-AID , THEREFORE, NO DEPRECIATION IS ALLOWABLE ON RS. 3 CR ADDITION. EXPLANATION 10 TO SECTION 43(1) OF THE INCOME TAX A CT READS AS UNDER : 'EXPLANATION 10. - WHERE A PORTION OF THE COST OF A N ASSET ACQUIRED BY THE ASSESSEE HAS BEEN MET DIRECTLY OR INDIRECTLY BY THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT OR ANY AUTHORITY ESTABLISHED UNDER ANY L AW OR BY ANY OTHER PERSON, IN THE FORM OF A SUBSIDY OR GRANT OR REIMBURSEMENT (BY WHATEVER NAME CALLED), THEN, SO MUCH OF THE COST AS IS RELATABLE TO SUCH S UBSIDY OR GRANT OR REIMBURSEMENT SHALL NOT BE INCLUDED IN THE ACTUAL C OST OF THE ASSET TO THE ASSESSEE: PROVIDED THAT WHERE SUCH SUBSIDY OR GRANT OR REIMBU RSEMENT IS OF SUCH NATURE THAT IT CANNOT BE DIRECTLY RELATABLE TO THE ASSET A CQUIRED, SO MUCH OF THE AMOUNT WHICH BEARS TO THE TOTAL SUBSIDY OR REIMBURSEMENT O R GRANT THE SAME PROPORTION AS SUCH ASSET BEARS TO ALL THE ASSETS IN RESPECT OF OR WITH REFERENCE TO WHICH THE SUBSIDY OR GRANT OR REIMBURSEMENT IS SO RECEIVED, S HALL NOT BE INCLUDED IN THE ACTUAL COST OF THE ASSET TO THE ASSESSEE.' 35 19. FOR APPLYING THE ABOVE PROVISIONS AGAINST THE A SSESSEE, IT IS NECESSARY TO PROVE THAT PORTION OF COST OF AS SET ACQUIRED BY THE ASSESSEE HAS BEEN MET DIRECTLY OR INDIRECTLY BY THE GOVERNMENT OR THE AUTHORITY ESTABLISHED UNDER ANY L AW OR BY ANY OTHER PERSON IN THE FORM OF SUBSIDY OR GRANT OR REIMBURSEMENT BY WHATEVER NAME CALLED. IN THE DECI SIONS RELIED UPON BY LD. COUNSEL FOR THE ASSESSEE REPRODU CED ABOVE, THE VARIOUS HIGH COURTS AND THE DIFFERENT BENCHES O F THE TRIBUNAL, CONSIDERED THE IDENTICAL ISSUE IN THE LIG HT OF THE PROVISIONS CONTAINED UNDER SECTION 43(1) OF THE INC OME TAX ACT AND ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE . IN THE CASE OF SASISRI EXTRACTIONS LTD. (SUPRA) ITAT VISHA KHAPATNAM BENCH, AFTER CAREFUL PERUSAL OF THE SCHEME IN QUEST ION, NOTED THAT IT WAS INTENDED TO ACCELERATE INDUSTRIAL DEVEL OPMENT OF THE STATE AND THE INCENTIVE WAS GIVEN FOR SETTING U P OF INDUSTRIES IN THE STATE AND FOR THE PURPOSE OF DETE RMINING THE AMOUNT OF SUBSIDY TO BE GIVEN, COST OF ELIGIBLE INV ESTMENT WAS TAKEN AS BASIS. UNDER THOSE CIRCUMSTANCES, THE INC ENTIVES IN THE FORM OF SUBSIDY COULD NOT BE CONSIDERED AS PAYM ENT DIRECTLY OR INDIRECTLY TO MEET ANY PORTION OF ACTUA L COST AND THUS, IT WAS HELD THAT SAME WOULD FALL OUTSIDE THE PROVISIONS OF EXPLANATION 10 TO SECTION 43(1) OF THE INCOME TA X ACT AND DEPRECIATION WAS ALLOWED. THE LD. COUNSEL FOR THE ASSESSEE HAS EXPLAINED THE SCHEME FORMULATED BY MINISTRY OF TEXTILES, GOVERNMENT OF INDIA, THE AIM OF THE SCHEME OF INTE GRATED TEXTILE PARKS WAS TO ENCOURAGE GROUP OF ENTREPRENEU RS TO COME TOGETHER AND ESTABLISH INTEGRATED TEXTILE PARK S WITH WORLD CLASS INFRASTRUCTURE UNDER A PUBLIC PRIVATE P ARTNERSHIP FRAME WORK. THEREFORE, THE SCHEME IN THE CASE OF T HE 36 ASSESSEE WAS INTENDED TO ENCOURAGE THE GROUP OF ENTREPRENEURS TO COME TOGETHER AND ESTABLISH INTEGR ATED TEXTILE PARKS WITH WORLD CLASS INFRASTRUCTURE UNDER A PUBLIC PRIVATE PARTNERSHIP FRAME WORK AND THE GRANT-IN-AID WAS GIVEN FOR SETTING UP OF THE INDUSTRIES/TEXTILE PARK S IN THE STATE, THEREFORE, THE GRANT-IN-AID COULD NOT BE CON SIDERED AS A PAPYMENT DIRECTLY OR INDIRECTLY TO MEET ANY PORTI ON OF ACTUAL COST AND THUS, IT WOULD FALL OUTSIDE THE PUR VIEW OF EXPLANATION 10 TO SECTION 43(1) OF THE ACT. ALL TH E DECISIONS RELIED UPON BY LD. COUNSEL FOR THE ASSESSEE ARE ON IDENTICAL POINT AND SUPPORT THE CONTENTION OF THE ASSESSEE TH AT ASSESSEE IS ENTITLED FOR DEPRECIATION ON THE SAME A MOUNT. 20. CONSIDERING THE ABOVE DISCUSSION IN THE LIGHT O F THE SCHEME FORMULATED BY THE GOVERNMENT OF INDIA AND IN THE LIGHT OF THE JUDICIAL PRONOUNCEMENTS REFERRED TO AB OVE, WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND DIRECT TH EM TO GRANT DEPRECIATION TO ASSESSEE ON THE AMOUNT OF RS. 3 CR BEING THE CAPITAL EXPENDITURE. IN THE RESULT, PART OF THIS G ROUND OF APPEAL OF ASSESSEE IS ALLOWED. 21. ON GROUND NO. 3, ASSESSEE CHALLENGED THE ORDER OF LD. CIT(APPEALS) IN UPHOLDING THE DISALLOWANCE OF DEPRE CIATION AMOUNTING TO RS. 3,04,63,791/-. THE FACTS ARE THAT IN THIS CASE, THE ASSESSEE HAS RECEIVED GRANT-IN-AID OF RS. 40 CR FROM THE MINISTRY OF TEXTILES, NEW DELHI UNDER THE SCHEM E OF INTEGRATED TAXPARK (SITP). OUT OF TOTAL GRANT OF R S. 40 CR., RS. 36 CR WAS RECEIVED UPTO 31.03.2010 INCLUDING RS . 12 CR RECEIVED DURING THE YEAR UNDER CONSIDERATION. AS P ER 37 PROVISIONS OF SECTION 43(1) EXPLANATION 10, THE AS SESSING OFFICER CONFRONTED AS TO WHY THE GRANT MAY NOT BE R EDUCED FROM THE CAPITAL ASSETS AND DEPRECIATION MAY NOT BE RECOMPUTED ON THE REDUCED VALUE OF THE FIXED ASSETS . THE ASSESSEE, DURING THE COURSE OF ASSESSMENT PROCEEDIN GS HAS MADE HIS SUBMISSION WHICH IS NOTED IN THE ASSESSMEN T ORDER. IT WAS SUBMITTED THAT GRANT WAS SANCTIONED FOR UTIL IZATION AGAINST THE PROJECT AS A WHOLE I.E. FOR DEVELOPMENT OF TEXTILE PARK AND WAS NEITHER SANCTIONED NOR DISBURSED FOR T HE SPECIFIC ASSETS INDIVIDUALLY. THE ASSESSING OFFICE R NOTED THAT TOTAL APPROVED PROJECT COST WAS RS. 110.26 CR AND G RANT-IN- AID WAS SANCTIONED FOR RS. 40 CR. THE ASSESSING OFF ICER REPRODUCED THE SANCTION ORDER IN THE ASSESSMENT ORD ER. AS PER PROJECT REPORT SUBMITTED DURING THE COURSE OF A SSESSMENT PROCEEDINGS, THE TOTAL COST IS RS. 129.25 CR AND EX CLUDING THE COST OF LAND, THE FIGURE IS RS. 110.26 CR. SINCE TH E ASSESSEE HAS NOT FURNISHED HEAD-WISE GRANT RECEIVED AND MONE Y UTILIZED FOR EACH SPECIFIC HEAD OF ASSETS, THEREFOR E, THE ASSESSING OFFICER APPORTIONED THE AMOUNT IN RATIO O F THE COST OF ALL FIXED ASSETS AGAINST VARIOUS HEADS. THEREAF TER, ACTUAL COST OF THE ASSET WAS ACCORDINGLY WORKED OUT. AFTE R DEDUCTING THE GRANT-IN-AID, THE ASSESSING OFFICER R ECOMPUTED DEPRECIATION ALLOWABLE AND BALANCE DEPRECIATION CLA IMED WAS DISALLOWED. 22. THE ASSESSEE REITERATED THE SUBMISSIONS MADE BE FORE AUTHORITIES BELOW AND REFERRED BEFORE LD. CIT(APPE ALS) THE NOTE OF THE AUDITORS THAT THE GRANT RECEIVED IS NOT TO BE DEDUCTED FROM THE COST OF THE ACQUISITION OF FIXE D ASSETS FOR 38 THE PURPOSE OF COMPUTING DEPRECIATION AS THE AMOUNT IS IN THE NATURE OF CONTRIBUTION TOWARDS THE TOTAL SUBSID Y OUTLAY. IT WAS SUBMITTED THAT THE GRANT WAS GIVEN TO STIMUL ATE GROWTH IN THE TEXTILE INDUSTRY. THE LD. CIT(APPEALS), HOW EVER, NOTED THAT SINCE GRANT-IN-AID WAS USED TO MEET THE COST O F ASSETS, THEREFORE, IN THIS CASE SECTION 43(1) EXPENDITURE-1 0 IS CLEARLY APPLICABLE AND ACCORDINGLY, DISMISSED THIS GROUND O F APPEAL OF THE ASSESSEE. 23. AFTER CONSIDERING RIVAL SUBMISSIONS, WE ARE OF THE VIEW THE ISSUE IS SAME AS HAVE BEEN CONSIDERED ON GROUND NO. 2 ABOVE IN WHICH WE HAVE HELD THAT EXPENDITURE 10 TO SECTION 43(1) IS NOT APPLICABLE IN THIS CASE BECAUSE THE SC HEME OF THE GOVERNMENT WAS TO ENCOURAGE GROUP OF ENTREPRENEURS TO COME TOGETHER AND ESTABLISH INTEGRATED TEXTILE PARKS WIT H WORTH CLASS INFRASTRUCTURE UNDER A PUBLIC PRIVATE PARTNER SHIP FRAME WORK. THE GRANT-IN-AID WAS GRANTED TO THE ENTREPRE NEURS TO DEVELOP TEXTILE PARKS UNDER THE SCHEME. FOLLOWING THE REASONS FOR DECISION ON GROUND NO. 2 ABOVE, WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND DIRECT THE AUTHORIT IES BELOW TO GRANT DEPRECIATION TO THE ASSESSEE WITHOUT REDUC ING THE GRANT RECEIVED FROM MINISTRY OF TEXTILES. THIS GRO UND OF APPEAL OF THE ASSESSEE IS ACCORDINGLY, ALLOWED. 24. IN THE RESULT, THIS APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED, AS INDICATED ABOVE. ITA 1139/CHD/2014 ( A.Y. 2011-12) 25. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL: 1. THAT ORDER PASSED BY THE LD. CIT (APPEALS), PATIALA U/S 250(6) 39 IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO DISALLOW DEPRECIATION AMOUNTING TO RS. 2,95,97,2 121- DUE TO REDUCTION IN BROUGHT FORWARD BALANCES FROM THE LA ST YEAR. HE WAS NOT JUSTIFIED TO UPHOLD THE ACTION OF THE LD. ASSESSING OFFICER IN REDUCING THE AMOUNT OF RS. 36.00 CRORES FROM THE VALUE OF TOTAL BLOCK OF ASSETS RECEIVED BY THE APPELLANT AS GRANT- IN-AID. 2. THAT HE WAS FURTHER NOT JUSTIFIED TO UPHOLD THE DISALLOWANCE OF A SUM OF RS. 1,00,00,000/- CRORE PA ID TO M/S ABHISHEK INDUSTRIES LIMITED FOR UPGRADATION OF POWER SUB-STA TION REQUIRED FOR SUPPLY OF POWER TO THE APPELLANT COMPANY. 3. THAT THE LD. CIT (APPEALS) WAS NOT JUSTIFIED TO ARB ITRARILY UPHOLD THE FOLLOWING OUT OF INTEREST ACCOUNT:- A) A SUM OF RS.81,62,546/- IN RESPECT OF CAPITAL ADVAN CES WHICH WERE ADVANCED OUT OF OWN FUNDS AS WELL AS GRANT-IN-AID R ECEIVED FROM MINISTRY OF TEXTILES IN EARLIER YEARS. B) A SUM OF RS. 30,68,339/- IN RESPECT OF AMOUNTS SPEN T TOWARDS CAPITAL WORK IN PROGRESS. INSPITE OF THE FACT THAT THESE AMOUNTS WERE PAID OUT OF OWN FUNDS AS WELL AS GRANTS-IN-AID RECEIVED FROM MINISTRY OF TEXTILES. 26. THE LD. CIT(APPEALS) ON GROUND NOS. 1 & 2 ABOVE , FOLLOWED HIS ORDER FOR ASSESSMENT YEAR 2010-11 AND CONFIRMED THE DISALLOWANCE OF THE DEPRECIATION AND DISMISSED THESE GROUNDS OF APPEAL OF THE ASSESSEE. IN ASSESS MENT YEAR 2010-11 IN ITA 1138/2014, WE HAVE ALLOWED THESE GRO UNDS OF APPEAL OF THE ASSESSEE AND DIRECTED THE AUTHORITIES BELOW TO GRANT DEPRECIATION TO THE ASSESSEE. BOTH THE PARTI ES STATED THAT THESE ISSUES ARE SAME AS HAVE BEEN DECIDED IN ASSESSMENT YEAR 2010-11 ON GROUND NO. 2 & 3. THEREF ORE, FOLLOWING THE ORDER FOR ASSESSMENT YEAR 2010-11 IN ITA 1138/2014, WE SET ASIDE THE ORDERS OF AUTHORITIES B ELOW AND DIRECT THE AUTHORITIES BELOW TO GRANT DEPRECIATION TO THE ASSESSEE. ACCORDINGLY, GROUND NOS. 1 & 2 OF APPEAL OF THE ASSESSEE ARE ALLOWED. 27. AS REGARDS GROUND NO. 3, THE FACTS ARE THAT THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF PROPORTI ONATE 40 INTEREST ON INTEREST FREE ADVANCES. FIRSTLY, IT WA S NOTICED THAT THE ASSESSEE HAS GIVEN INTEREST FREE CAPITAL A DVANCED AMOUNTING TO RS. 5,93,61,080/- AS PER DETAILS REPRO DUCED IN THE ASSESSMENT ORDER. WHILE AT THE SAME TIME, ASSE SSEE HAS PAID INTEREST OF RS. 2.08 CR ON TERM LOAN @ 13.75%. DURING ASSESSMENT PROCEEDINGS, ASSESSEE SUBMITTED THAT THE SE PAYMENTS WERE MADE OUT OF INTEREST FREE GRANT-IN-AI D RECEIVED FROM THE GOVERNMENT OF INDIA AND FROM THE OPERATING INCOME. HOWEVER, THE ASSESSING OFFICER HELD THAT ENTIRE FUN D IS KEPT IN A COMMON KITTY AND THE4REFORE, DECISION RENDERED IN THE CASE OF CIT V ABHISHEK INDUSTRIES LTD. 286 ITR 1 (P &H) IS CLEARLY APPLICABLE. THE ASSESSING OFFICER, ACCORDI NGLY, DISALLOWED PROPORTIONATE INTEREST OF RS. 81,62,546. THE ASSESSING OFFICER FURTHER NOTICED THAT ASSESSEE HAS SHOWN CAPITAL WORK IN PROGRESS AT RS. 4.93 CR AS PER DETA ILS GIVEN IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER HELD T HAT AS PER PROVISIONS OF SECTION 36(1)(III) OF THE ACT , THE I NTEREST PAID ON THE CAPITAL WORK IN PROGRESS IS TO BE DISALLOWED AND CAPITALIZED TILL THE ASSETS COULD BE USED. SINCE T HE ASSETS WERE NOT PUT TO USE DURING THE FINANCIAL YEAR, THER EFORE, RS. 30,68,339/- WAS DISALLOWED. DURING ASSESSMENT PROCE EDINGS, THE ASSESSEE SUBMITTED THAT THE PAYMENTS WERE MADE OUT OF INTEREST FREE GRANT-IN-AID AND FROM OPERATING INCOM E. THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT THE CONT ENTION AS NO SUCH CORROBORATIVE EVIDENCES WERE FILED. 28. THE ASSESSEE CHALLENGED BOTH THE ADDITIONS BEFO RE LD. CIT(APPEALS) AND AS REGARDS ADDITION OF RS. 81,62,5 46/-, IT WAS SUBMITTED THAT CAPITAL ADVANCE WAS MADE AGAINST WORK 41 ORDERS WHICH WAS COMPLETE IN THE FINANCIAL YEAR 201 0-11 AND 2012-13. HOWEVER, THE ASSESSING OFFICER, ON THE BA SIS OF ASSESSMENT RECORDS HAS SUBMITTED THAT NO DETAILS OF SUCH WORK ORDERS WERE FILED. REGARDING ADDITION OF RS. 30,68,339/- ASSESSEE SUBMITTED THAT FIXED ASSETS WE RE CAPITALIZED AGAINST THE OUTSTANDING BALANCE IN TERM LOANS AND THAT OPERATING ACTIVITY WAS STARTED IN FINANCIAL YE AR. FURTHER INVESTMENTS WERE MADE OUT OF OWN FUNDS I.E. SHARE C APITAL AND RESERVES AND NO BORROWED FUNDS HAVE BEEN USED. THE LD. CIT(APPEALS), HOWEVER, NOTED THAT EVEN DURING THE A PPELLATE PROCEEDINGS, NO DETAILS HAVE BEEN SUBMITTED IN SUPP ORT OF THE CONTENTION THAT THE AMOUNTS WERE GIVEN AGAINST WORK ORDER. EVEN NO PLEA WAS TAKEN BEFORE ASSESSING OFFICER. T HE ASSESSEE IS HAVING COMMON KITTY OUT OF WHICH EXPENS ES WERE MADE. NO EVIDENCE IS SUBMITTED THAT ADVANCE IS MAD E OUT OF INTEREST FREE GRANT-IN-AID. FURTHER, NO EVIDENCE R EGARDING ASSETS HAVING BEEN PUT TO USE IN ASSESSMENT YEAR 20 10-11 HAVE BEEN SUBMITTED AND ACCORDINGLY, THIS GROUND WA S DISMISSED. 29. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE P ARTIES. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS MADE BEFORE AUTHORITIES BELOW AND REGARDING DISALLO WANCE OF INTEREST IN RESPECT OF CAPITAL ADVANCES, IT WAS SUB MITTED THAT CAPITAL ADVANCES OF RS. 5.93 CR WERE MADE AS ADVANC ES AGAINST THE WORK ORDER WHICH WAS COMPLETED IN FINAN CIAL YEAR. THE CAPITAL ADVANCES WERE DULY SET OFF WITH THE BIL LS FOR RS. 3.04 CR, SECURITY OF RS.65.27 LACS AND THE BALANCE AMOUNT OF RS. 2.24 CR WERE DULY RECEIVED BACK. THE DETAILS OF ADVANCES 42 ALONGWITH DETAILS OF SOURCES WERE FILED WITH THE RE PLY BEFORE THE ASSESSING OFFICER. OUT OF TOTAL ADVANCES OF RS . 5.93 CR, A SUM OF RS. 4.74 CR WAS PAID OUT OF GOVERNMENT GRANT RECEIVED WHICH WAS TOTALLY INTEREST FREE AND NO INT EREST WAS REQUIRED TO BE DISALLOWED. HE HAS RELIED UPON DECI SION OF THE HON'BLE SUPREME COURT IN THE CASE OF S.A. BUILDERS VS CIT 288 ITR 1. AS REGARDS DISALLOWANCE OF INTEREST OF RS. 30,68,339/- IN RESPECT OF CAPITAL WORK IN PROGRESS, IT WAS SUBMITTED THAT ASSESSEE COMPANY WAS HAVING OUTSTAND ING BALANCE IN TERM LOAN ACCOUNT OF RS. 14.27 CR AS ON 31.03.2010 AGAINST WHICH THE FIXED ASSETS OF RS. 56 .18 CR WERE CAPITALIZED AND OPERATING ACTIVITY WAS ALSO ST ARTED IN FINANCIAL YEAR ITSELF. AGAIN IN FINANCIAL YEAR 201 1-12, AGAINST INCREASE IN TERM LOAN OF RS. 5.10 CR ADDITION TO TH E FIXED ASSETS WAS MADE TO THE TUNE OF RS. 14.97 CR WHICH C LEARLY SHOWS THAT INVESTMENT IN CAPITAL WORK IN PROGRESS W AS MADE OUT OF OWN FUNDS I.E. SHARE CAPITAL AND RESERVE AND NOT OUT OF BORROWED FUNDS. HE HAS FILED DETAILS OF CAPITAL AD VANCES WITH ACCOUNTS OF THE FOUR PARTIES NAMELY LOTUS INFRA BUI LD LTD. (ADVANCE LANDSCAPING ), LOTUS INFRA BUILD LTD. ( AD VANCE PACK IV) LOTUS INFRA BUILD LTD. (ADVANCE PACK V) AN D LOTUS INFRA BUILD LTD. (ADVANCE PACK VII) FOR A SUM OF RS . 5.93 CR. HE HAS REFERRED TO SOURCE OF THE FUNDS OUT OF SHARE CAPITAL, RESERVE AND SURPLUS, EQUITY SHARE WARRANTS AND SECU RED LOANS FOR A SUM OF RS. 80.84 CR. HE HAS REFERRED TO SCHE DULE V OF FIXED ASSETS TO SHOW THAT IN PRECEDING ASSESSMENT Y EAR 2010- 11, THE NET BLOCK WAS OF RS. 54.81 CR AND IN ASSESS MENT YEAR 43 UNDER APPEAL, IT IS RS. 68.08 CR. HE HAS, THEREFOR E, SUBMITTED THAT INVESTMENTS HAVE BEEN MADE OUT OF OW N FUNDS AND NO BORROWED FUNDS HAVE BEEN USED. 30. ON THE OTHER HAND, LD. DR RELIED UPON ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT NO DETAILS WER E FILED BEFORE THE AUTHORITIES BELOW, THEREFORE, ADDITION I S JUSTIFIED. 31. WE HAVE CONSIDERED RIVAL SUBMISSIONS. THE ASSE SSEE PLEADED BEFORE THE AUTHORITIES BELOW THAT THE INVES TMENTS WERE MADE OUT OF INTEREST FREE GRANT-IN-AID RECEIV ED FROM GOVERNMENT OF INDIA AND FROM OPERATING INCOME. THE ASSESSING OFFICER, HOWEVER, RELIED UPON DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF ABHISHEK INDUSTRIES LTD. (SUPRA) HOLDING THAT WHEN ENTIRE FU ND IS KEPT IN COMMON KITTY, THEREFORE, THIS DECISION WOULD APP LY AGAINST THE ASSESSEE. HON'BLE PUNJAB & HARYANA HIGH COURT IN ITS SUBSEQUENT UNREPORTED DECISION IN THE CASE OF BRIGH T ENTERPRISES PVT. LTD. V CIT IN ITA 224 OF 2013 DATE D 24.07.2015 CONSIDERED THE SIMILAR ISSUE OF DISALLOW ANCE OF INTEREST UNDER SECTION 36(1)(III) OF THE ACT OF ON ACCOUNT OF DISALLOWANCE OF INTEREST PAID TO THE BANK ON THE GR OUND THAT ASSESSEE HAD ADVANCED AN INTEREST FREE LOAN TO ITS SISTER CONCERN, ALTHOUGH THE ASSESSEE HAD NO BUSINESS DEAL INGS WITH THE SISTER CONCERN. THE HON'BLE PUNJAB & HARY ANA HIGH COURT ALSO CONSIDERED ITS EARLIER DECISION IN THE C ASE OF M/S ABHISHEK INDUSTRIES (SUPRA). HON'BLE HIGH COURT HA S ALSO CONSIDERED THE DECISION OF THE HON'BLE SUPREME COUR T IN THE CASE OF S.A. BUILDERS LTD. (SUPRA) AND ITS EARLIE R DECISION IN 44 THE CASE OF CIT V MARUDHAR CHEMICALS & PHARMACEUTIC ALS LTD. 319 ITR 75 AND HAS ACCEPTED THE CONTENTION OF THE ASSESSEE THAT THE AMOUNT WAS ADVANCED FOR COMMERCIA L EXIGENCY. IN THE SAME JUDGEMENT ALSO, HON'BLE HIGH COURT HAS CONSIDERED THAT THE FUNDS/RESERVES OF THE ASSES SEE WERE SUFFICIENT TO COVER THE INTEREST FREE ADVANCES MADE BY IT TO THE SISTER CONCERN AND AGREED WITH THE JUDGEMENT OF THE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES & POWER LTD. 313 ITR 340 AND ANSWERED THE QUESTION IN FAVOU R OF THE ASSESSEE AND AGAINST THE DEPARTMENT. THE ORDER OF THE TRIBUNAL WAS SET ASIDE. THE DETAILS FURNISHED BY TH E ASSESSEE SHOW THAT ASSESSEE WAS HAVING SUFFICIENT FUNDS TO M AKE ADVANCES OUT OF ITS OWN SOURCES. THE DETAILS OF CA PITAL ADVANCES HAVE ALSO BEEN FILED WHICH ACCORDING TO TH E LD. CIT(APPEALS), WERE NOT FILED BEFORE THE AUTHORITIES BELOW. THE AUTHORITIES BELOW SHOULD ALSO GIVE A FINDING WHETHE R AMOUNTS ARE ADVANCED FOR COMMERCIAL EXIGENCIES. THEREFORE M ATTER SHOULD BE REMANDED TO ASSESSING OFFICER. 32. CONSIDERING THE MATERIAL PRODUCED BEFORE US IN THE LIGHT OF THE LATER DECISION OF HON'BLE PUNJAB & HARYANA H IGH COURT, WE ARE OF THE VIEW THAT THE MATTER REQUIRES RE-CONS IDERATION AT THE LEVEL OF THE ASSESSING OFFICER. WE, ACCORDI NGLY, SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND RESTORE T HIS ISSUE TO THE FILE OF ASSESSING OFFICER WITH DIRECTION TO RE- DECIDE THIS ISSUE IN ACCORDANCE WITH LAW BY GIVING REASONABLE S UFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 45 33. IN THE RESULT, THIS GROUND OF APPEAL OF THE ASS ESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 34. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 35. IN THE RESULT, BOTH APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (RANO JAIN) (BHAVNES H SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 1 ST OCT., 2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT/CHD