DCIT, Ludhiana V. M/s Unicorn Impex Ltd., Malerkotla

ITA 125/CHANDI/2010

• Counselvise Citation: 12521514 RSA 2010
• Duration Of Justice: 2 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 12-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 01-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJEET SINGH
• Assessee Lawyers: SUDHIR SEHGAL
• Keywords: Additional evidence
• Section: 68; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO.125/CHD/2010 (ASSESSMENT YEAR : 2006-07) THE D.C.I.T., VS. M/S UNICORN IMPEX LTD., CIRCLE-IV, DEFENCE COLONY, NABHA MANDI, LUDHIANA. MALERKOTLA. PAN: AAACU4062D AND C.O.NO.13/CHD/2010 ARISING OUT OF ITA NO.125/CHD/2010 (ASSESSMENT YEAR : 2006-07) M/S UNICORN IMPEX LTD., VS. THE D.C.I.T., DEFENCE COLONY, NABHA MANDI, CIRCLE-IV, MALERKOTLA. LUDHIANA. PAN: AAACU4062D (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUDHIR SEHGAL DEPARTMENT BY : SHRI MANJEET SINGH, DR DATE OF HEARING : 22.11.2012 DATE OF PRONOUNCEMENT : 29.11.2012 O R D E R PER SUSHMA CHOWLA, J.M, : THE APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-II, LUDHIANA DA TED 09.11.2009 RELATING TO ASSESSMENT YEAR 2006-07 AGAINST THE ORD ER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). THE ASSESSEE HAS FILED CROSS OBJECTIONS AGAINST THE APPEAL FILED BY THE RE VENUE. 2 2. THE APPEAL OF THE REVENUE AND THE CROSS OBJECTIO NS FILED BY THE ASSESSEE WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 3. THE REVENUE IN ITA NO.125/CHD/2010 HAS RAISED FO LLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A)-II HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.22,50,000/- OUT OF ADDITION OF RS.31,40,000/- MADE ON ACCOUNT OF UNACCOUNTED SHARE APPLICATION MONEY, BY ADMITTING ADDITIONAL EVIDENCE FILED BY THE ASSESSEE UNDER RULE 46A. 2. THAT ON MERITS ALSO, THE LD_CIT(A)-II HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.22,50,000/- OUT OF ADDITION OF RS.31,40,000/- MADE ON ACCOUNT OF UNACCOUNTED SHARE APPLICATION MONEY. 3. THAT THE LD. CIT(A)-II HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.43,388/- MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST ON THE INTEREST FREE LOANS ADVANCED TO THE SISTER CONCERN. 4. THAT THE ORDER OF THE CIT(A)-II BE SET ASIDE A ND THAT OF THE A.O. BE RESTORED. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUND OF APPEAL BEFORE IT IS FINALLY DISPOSED OFF. 4. THE ASSESSEE IN C.O.NO.13/CHD/2010 HAS RAISED FO LLOWING GROUNDS OF APPEAL: 1. THAT THE LEARNED CIT(A)-II HAS ERRED IN SUSTAI NING AN ADDITION OF RS.8,90,000/- ON ACCOUNT OF SHARE APPLICATION MO NEY OUT OF TOTAL ADDITION OF RS.31,40,000/- AS MADE BY THE ASSESSIN G OFFICER. 2. THAT THE LD. CIT (A) HAS ALSO ERRED IN NOT CONS IDERING THE EVIDENCE FILED IN RESPECT OF SOME OF THE PARTIES. 3. THAT THE RESPONDENT CRAVES LEAVE TO ADD OR AMEN D ANY GROUND OF CROSS-OBJECTIONS BEFORE THE APPEAL IS FINALLY HE ARD OR DISPOSED OFF. 5. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD INTRODUCED SHARE APP LICATION MONEY 3 TOTALING RS.34,75,000/-. THE PERSON-WISE DETAILS O F 45 PERSONS FROM WHOM SHARE APPLICATION MONEY HAD BEEN RECEIVED BY T HE ASSESSEE IS TABULATED AT PAGES 1 TO 6 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER CALLED FOR THE SOURCES OF ADDITION ALONGWITH DOCUME NTARY EVIDENCE INCLUDING PAN NUMBERS AND ALSO THE COMPLETE ADDRESS ES OF THE PERSONS MAKING THE SAID INVESTMENT. THE DOCUMENTARY EVIDEN CE FURNISHED BY THE ASSESSEE IN SUPPORT OF EACH OF THE SHARE APPLICANT IS ALSO MENTIONED IN THE SAID TABULATED DETAILS AT PAGES 1 TO 6 OF THE A SSESSMENT ORDER. ON PERUSAL OF THE SAID DOCUMENTS/EVIDENCE FILED BY THE ASSESSEE, THE ASSESSING OFFICER NOTED THAT EXCEPT FOR IN THE CASE OF DARSHAN SINGH, (SR.NO.4) WHERE PAYMENT WAS RECEIVED IN CHEQUE, THE BALANCE PAYMENTS WERE RECEIVED IN CASH. FEW OF THE PERSONS WERE FOU ND TO BE EXISTING ASSESSEES, WHO WERE FILING THEIR RETURNS OF INCOME AND OUT OF THE REMAINING CASES, MAJORITY OF THE PERSONS WERE AGRIC ULTURISTS, BUT NO DOCUMENTARY EVIDENCE REGARDING OWNERSHIP OF AGRICUL TURAL LAND OR FOR MAKING THE SAID PAYMENT WAS FURNISHED BY THE ASSESS EE. FURTHER, IN THE CASE OF FEW AGRICULTURISTS J FORMS FILED BY THE A SSESSEE WERE NOT RELATABLE TO THE PERIOD UNDER CONSIDERATION. THE A SSESSEE WAS, THEREFORE, AGAIN SHOW CAUSED TO PRODUCE THE DOCUMENTARY EVIDEN CE REGARDING THE SOURCE OF PAYMENT AND ALSO PROOF OF FILING THE RETU RNS BY THE EXISTING ASSESSEES. VARIOUS COMMUNICATIONS WERE FILED BY TH E ASSESSEE WHICH ARE INCORPORATED AT PAGES 6 AND 7 OF THE ASSESSMENT ORD ER. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE SAID E VIDENCES AND SUM OF RS.31,40,000/- WAS ADDED AS INCOME OF THE ASSESSEE I.E. AFTER ACCEPTING THE SUM OF RS.3,35,000/- RECEIVED BY CHEQUE BY THE ASSESSEE. 6. BEFORE THE CIT (APPEALS) THE ASSESSEE FURNISHED ADDITIONAL EVIDENCE WHICH WAS REQUESTED TO BE ADMITTED UNDER R ULE 46A OF INCOME TAX RULES. THE SAID EVIDENCE WAS FORWARDED TO THE ASSESSING OFFICER, 4 WHO IN TURN SUBMITTED HIS REMAND REPORT. AFTER CON SIDERING THE SAID RECORD THE CIT (APPEALS) ADMITTED THE ADDITIONAL EV IDENCE OUT OF WHICH PART OF THE INFORMATION WAS TREATED TO HAVE BEEN FI LED DURING THE ASSESSMENT PROCEEDINGS. THE CIT (APPEALS) VIDE PAR A 3.9 HELD THAT THE ADDITIONAL EVIDENCE SOUGHT TO BE ADMITTED TO PROVE THE CREDITWORTHINESS, IDENTITY OF THE CREDITOR AND GENUINENESS OF THE TRA NSACTION WAS BEING ADMITTED. THEREAFTER THE SUBMISSIONS OF THE LEARNE D A.R. FOR THE ASSESSEE ON THE MERITS OF THE ADDITION ARE REPRODUC ED UNDER PARA 3.10 AT PAGES 7 AND 8 OF THE APPELLATE ORDER AND THE REMAND REPORT OF THE ASSESSING OFFICER IS REPRODUCED UNDER PARA 3.11 AT PAGE 8 TO 14 OF THE APPELLATE ORDER. THE REJOINDER OF THE LEARNED A.R. FOR THE ASSESSEE TO THE SAID REPORT IS REPRODUCED UNDER PARA 3.12 AT PAGES 14 TO 16 OF THE APPELLATE ORDER. THE CIT (APPEALS) RELYING UPON TH E RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN CIT VS. LOVELY EXPORTS (P) LTD. [216 CTR 195 (SC)] OBSERVED THAT AS PER THIS DECISION THE RE QUIREMENT FROM THE ASSESSEE SIDE IN THE CASE OF PUBLIC LIMITED COMPANY WAS TO GIVE THE IDENTITY OF THE SHAREHOLDERS AND ONCE THE IDENTITY OF THE SHAREHOLDERS WAS PROVED THEN NO ADDITION COULD BE MADE UNDER SEC TION 68 OF THE ACT FOR INVESTMENT OF SUCH SHAREHOLDERS IN THE SHARE AP PLICATION MONEY WITH A PUBLIC LIMITED COMPANY. THE CIT (APPEALS) WAS FU RTHER OF THE VIEW THAT EVEN WHERE THERE WERE DISCREPANCIES IN THE EVI DENCE FILED BY THE ASSESSEE IN THE SHAPE OF BANK STATEMENT AND/OR J FORM IN RESPECT OF AGRICULTURAL INCOME, THE SAID DISCREPANCIES WOULD N OT CHANGE THE POSITION THAT THE IDENTITY OF THE PERSON HAD BEEN P ROVED AND FURTHER IN THE DECLARATION FILED BEFORE THE ASSESSING OFFICER THAT THEY HAD ADMITTED TO HAVE MADE THE SAID INVESTMENT AND SUCH INVESTMEN T COULD NOT BE ADDED IN THE HANDS OF THE ASSESSEE COMPANY UNDER TH E PROVISIONS OF SECTION 68 OF THE ACT. 5 7. THE CIT (APPEALS) FURTHER VIDE PARA 4.5 IN THE C ASE OF SMT.SHWETA AND SUNIL KUMAR FROM WHOM SUM OF RS.60,000/- AND RS .50,000/- RESPECTIVELY WERE RECEIVED, ADDED THE SAID AMOUNT O F RS.1,10,000/- AS INCOME OF THE ASSESSEE AS THE IDENTITY PROOF WAS NO T FILED BY THE ASSESSEE. FURTHER VIDE PARA 4.6 THE CIT (APPEALS) NOTED THAT IN RESPECT OF FOUR PERSONS; NAMELY SHRI JASWINDER KUMAR, SHRI SHAM KUMAR, MS.RAJ RANI AND MS.MANDEEP KAUR TOTALING RS.4,05,00 0/-, THE IDENTITY PROOF AND CONFIRMATION WERE FILED AT A LATER DATE A ND THE INFORMATION WAS NOT ATTACHED ALONGWITH THE APPLICATION UNDER RULE 4 6A OF INCOME TAX RULES AND HENCE THE SAME WAS NOT FORWARDED TO THE A SSESSING OFFICER. ACCORDINGLY, THE SAID SUM AGGREGATING TO RS.4,05,00 0/- WAS ADDED TO THE INCOME OF THE ASSESSEE UNDER SECTION 68 OF THE ACT. VIDE PARA 4.9, THE CIT (APPEALS) NOTED CERTAIN DISCREPANCIES IN THE C ONFIRMATION FILED BY THE ASSESSEE I.E. BY WAY OF SIGNATURE ON THE IDENTI TY PROOF IN CASE S/SHRI G.S.NAIR, VIKAS SHARMA, RAHUL NAIR, MRS.PROMILA NAI R, SHRI SURESH KUMAR, NANCY GOYAL AND SHRI SUNIL KUMAR, TOTALING R S.3,75,000/-. THE ADDITION OF RS.3,75,000/- WAS CONFIRMED BY THE CIT (APPEALS). THE ADDITION ON ACCOUNT OF BALANCE SHARE APPLICATION MO NEY RECEIVED FROM DIFFERENT PERSONS TOTALING RS.22,50,000/- WAS DELET ED BY THE CIT (APPEALS) IN VIEW OF THE EVIDENCE AVAILABLE ON RECO RD AS PER ANNEXURE-I ANNEXED TO THE ORDER OF THE CIT (APPEALS) IN WHICH THE EVIDENCES FILED BY THE ASSESSEE TO PROVE ITS STAND WERE REFERRED TO . 8. THE REVENUE IS IN APPEAL AGAINST THE RELIEF ALLO WED OF RS.22,50,000/- AND THE ASSESSEE IS IN APPEAL AGAINS T UPHOLDING OF ADDITION OF RS.8,90,000/-. ELABORATE SUBMISSIONS W ERE MADE BY BOTH THE AUTHORIZED REPRESENTATIVES FROM DAY TO DAY AND VARI OUS PAPER BOOKS, EXPLANATIONS AND TABULATED DETAILS HAVE BEEN FILED BY BOTH THE AUTHORIZED REPRESENTATIVES TO PUT-FORWARD THEIR CASES. THE LE ARNED A.R. FOR THE 6 ASSESSEE ALSO FURNISHED AN APPLICATION FOR ADMISSIO N OF ADDITIONAL EVIDENCE TO PROVE THE IDENTITY OF THE PERSONS AND A LSO THEIR CAPACITY TO ADVANCE THE SAID LOANS IN RESPECT OF SHARE APPLICAT ION MONEY TOTALING RS.22,50,000/-. 9. THE LEARNED D.R. FOR THE REVENUE, ON THE OTHER H AND, FURNISHED THE CHART TITLED AS CHART-I EXPLAINING THE DISCREPANCIE S BETWEEN UNDERTAKINGS FILED ON PLAIN PAPER DURING THE ASSESSMENT PROCEEDI NGS AND SHARE APPLICATION FORMS FILED BY THE ASSESSEE BEFORE THE CIT (APPEALS) AND OTHER GLARING DISCREPANCIES NOTED IN THE SUBMISSION S MADE BY THE ASSESSEE BEFORE THE CIT (APPEALS). THE SAID TABULA TED DETAILS WERE IN RESPECT OF SHARE APPLICATION MONEY TOTALING RS.22,5 0,000/-, AGAINST WHICH THE CIT (APPEALS) HAD ALLOWED THE RELIEF TO T HE ASSESSEE. THE LEARNED D.R. FOR THE REVENUE FURTHER PLACED RELIANC E ON THE ORDER OF THE CHANDIGARH BENCH OF THE TRIBUNAL IN DCIT VS. M/S FO REX FASTNERS (P) LTD. IN ITA NO.405/CHD/2011 FOR ASSESSMENT YEAR 200 5-06, ORDER DATED 19.9.2011 UNDER WHICH IT HAS BEEN HELD THAT IN CASE OF SHARE APPLICATION MONEY, IDENTITY AND CREDITWORTHINESS OF THE SHARE A PPLICANT HAS TO BE PROVED. RELIANCE IS ALSO PLACED ON THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S POWE R DRUGS LTD. VS. CIT & ANOTHER [ITA 194 OF 2011]. 10. THE LEARNED A.R. FOR THE ASSESSEE IN REJOINDER CLEARLY POINTED OUT THAT IN RESPECT OF SHARE APPLICATION TOTALING RS.22 ,50,000/- THE APPLICATION FOR FILING ADDITIONAL EVIDENCE MAY BE A DMITTED AND THE MATTER BE RESTORED BACK TO THE CIT (APPEALS) FOR RECONSIDE RATION,. IN RESPECT OF SHARE APPLICATION MONEY TOTALING RS.8,50,000/- WHER E ADDITION WAS CONFIRMED BY THE CIT (APPEALS) THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT THAT IN RESPECT OF THE ADDITION MADE VI DE PARA 4.6 TOTALING RS.4,05,000/- AND AS PER PARA 4.5 TOTALING RS.1,10, 000/-, THE ISSUE IS NOT 7 PRESSED. HOWEVER, IN RESPECT OF THE ADDITION MADE VIDE PARA 4.9 BY THE CIT (APPEALS) TOTALING RS.3,75,000/- THE EVIDENCES WERE FILED BY THE ASSESSEE AND THE SAME WERE NOT CONSIDERED IN ENTIRE TY BY THE CIT (APPEALS). 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE REVENUE VIDE GROUND NOS.1 AND 2 AND THE ASSESSEE VI DE GROUND NO.1 OF CROSS OBJECTION HAVE RAISED THE ISSUE IN RESPECT OF THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE TOTALING RS.31,40,00 0/-. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD RECEIVED TO TAL SUM OF RS.34,75,000/- AS SHARE APPLICATION MONEY FROM VARI OUS PARTIES AS TABULATED AT PAGES 2 TO 6 OF THE ASSESSMENT ORDER. ALL THE SAID SHARE APPLICATION MONEY WAS RECEIVED BY THE ASSESSEE IN C ASH FROM DIFFERENT PERSONS EXCEPT SHARE APPLICATION MONEY OF RS.3,35,0 00/- RECEIVED FROM ONE SHRI DARSHAN SINGH, WHICH HAS BEEN RECEIVED BY CHEQUE. THE ASSESSING OFFICER HAD MADE ADDITION OF RS.31,40,000 /- IN VIEW OF THE ASSESSEE HAVING FAILED TO ESTABLISH THE IDENTITY AN D CREDITWORTHINESS OF THE PERSONS ADVANCING THE SAID SHARE APPLICATION MO NEY. THE CIT (APPEALS), HOWEVER ALLOWED RELIEF TO THE EXTENT OF RS.22,50,000/- AND CONFIRMED THE ADDITION OF RS.8,50,000/-. BOTH THE REVENUE AND THE ASSESSEE ARE CONTESTING THE ORDER OF THE CIT (APPEA LS). 12. WE FIND THAT THE CIT (APPEALS) HAD ALLOWED THE CLAIM OF THE ASSESSEE IN TURN PLACING RELIANCE ON THE JUDGMENT O F THE HON'BLE SUPREME COURT IN LOVELY EXPORTS (P) LTD. (SUPRA). HOWEVER, THE FACTS BEFORE THE HON'BLE SUPREME COURT AND THE FACTS OF THE PRESENT CASE ARE AT VARIANCE. SIMILAR FACTS AROSE IN THE CASE OF M/S POWER DRUGS LTD. (SUPRA). THE HON'BLE PUNJAB & HARYANA HIGH COURT IN TURN UPHOLDI NG THE ORDER OF THE TRIBUNAL HAD OBSERVED AS UNDER: 8 3. WE HAVE HEARD LD. COUNSEL FOR THE APPELLANT. 4. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT TH E TRIBUNAL HAD ERRED IN TREATING THE INCOME ON ACCOUNT OF SHAR E APPLICATION MONEY TO BE UNDISCLOSED INCOME OF THE ASSESSEE. ACC ORDING TO HIM, THE DEPARTMENT COULD HAVE PROCEEDED AGAINST THE IND IVIDUALS IN WHOSE NAME THE SHARE APPLICATION MONEY WAS DEPOSITED. HE RELIED UPON THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN CIT V LOVELY EXPORTS P.LTD. (2008) 216 CTR (S.C) 195 AND THE JUD GMENT OF THE DELHI HIGH COURT IN ITA NO.1469 OF 2010, CIT V NEW AGE INFOSYS PVT.LTD. DECIDED ON 27.9.2010. LD. COUNSEL ALSO UR GED THAT THE DISALLOWANCE OF RS.6,00,000/- ON ACCOUNT OF INTERES T RELATABLE TO ADVANCES TO MR.ASHOK ANAND AND MRS. RAJ RANI ANAND UNDER SECTION 36(1)(III) OF THE ACT WAS UNSUSTAINABLE. 5. WE DO NOT FIND ANY SUBSTANCE IN THE SUBMISSION M ADE BY LD. COUNSEL FOR THE ASSESSEE. THE TRIBUNAL WHILE UPHOLD ING THAT THE AMOUNT OF RS.42,78,756/- RECEIVED BY THE ASSESSEE A S SHARE APPLICATION MONEY WAS INFACT UNDISCLOSED INCOME OF THE ASSESSEE HAD ADJUDICATED THE SAID ISSUE AGAINST THE ASSESSEE WIT H THE FOLLOWING OBSERVATIONS : 7 THE ASSESSEE IS A UNLISTED COMPANY AND HAD NOT M ADE ANY PUBLIC ISSUE. DURING THE YEAR UNDER CONSIDERA TION, THE ASSESSEE HAD RECEIVED RS. 42,78,756 AS SHARE APPLI CATION MONEY THROUGH PRIVATE PLACING. THE ASSESSEE WAS AS KED TO FURNISH THE DETAILS THEREOF. IN REPLY THE ASSESSEE FURNISHED THE NAMES OF PERSONS AS PER ANNEXURE II WHERE MOSTLY TH E AMOUNTS WERE SHOWN TO HAVE BEEN RECEIVED FROM SOME NAMES OF VILLAGE AND P.O. ALEWA, JIND, HARYANA AS NOTED B Y THE ASSESSING OFFICER. THE ASSESSING OFFICER WAS OF TH E VIEW THAT THE ASSESSEE HAD FAILED TO DISCHARGE PRIMARY ONUS TO ESTABLISH THE IDENTITY, CREDIT WORTHINESS AND GENUI NENESS OF THE TRANSACTIONS. THE ASSESSING OFFICER OBSERVED T HAT THE ASSESSEE HAD NOT DISCHARGED THE PRIMARY ONUS AND ON PERUSAL OF THE INFORMATION NOTED AS UNDER:- I NAMES ONLY II INCOMPLETE ADDRESS IN VIEW ONLY VILLAGE AND POS T OFFICE ALEWA III SHARE APPLICATION FORMS WHICH DO NOT BEAR PHOTO GRAPHS OF THESE PERSONS IV SOME OF APPLICATIONS JUST BEAR THUMB IMPRESSIO N V NONE OF THEM IS AN INCOME TAX ASSESSEE AND DO NOT EVEN HAVE PAN EXCEPT MS. REKHA GOAL WHO HAS ALLEGEDLY AD VANCED AN AMOUNT OF RS. 2.00 LAKHS IN CASH. THE MOST IMPO RTANT FACT TO BE NOTED IS THAT HUGE AMOUNTS IN LAKHS OF RUPEES HAVE BEEN DEPOSITED IN CASH BY NON ASSESSEES HAVING NO PAN, W ITHOUT ANY PHOTOGRAPHS AND WITHOUT ANY EVIDENCE REGARDING THEIR CREDIT WORTHINESS TO ADVANCE SUCH LARGE AMOUNT IN C ASH. 8. THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 68 OF IT ACT AND MADE THE ADDITION OF RS. 42,78,756 /-. 9. BEFORE THE CIT(A) THE STAND OF THE ASSESSEE WAS THAT UNDER THE COMPANYS ACT THE ASSESSEE CAN RECEIVE SH ARE APPLICATION MONEY EITHER IN CASH OR CHEQUE. IT WAS FURTHER 9 SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE BEFOR E THE CIT(A) THAT THE APPLICANTS DID NOT POSSESS ANY PAN AND THE COPIES OF SHARE APPLICATION FORMS WERE FURNISHED BE FORE THE ASSESSING OFFICER, WHICH HAD REQUISITE DETAILS OF T HE SAID PERSON. IT WAS FURTHER POINTED OUT BY THE LD. COUN SEL FOR THE ASSESSEE THAT IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN CIT V. LOVELY EXPORT PVT LTD [(200 8) 216 CTR (S.C) 195] EVEN THOUGH THE SHARE APPLICATION MO NEY WAS RECEIVED FROM ALLEGED BOGUS SHARE HOLDERS WHOSE NAM ES WERE GIVEN, NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE COMPANY AND ACTION, IF ANY, IS TO BE TAKEN ONLY IN THE CASE OF THE SHARE APPLICANTS. THE CIT(A) HELD THAT THE ASS ESSEE HAD NOT DISCHARGED HIS PRIMARY ONUS OF ESTABLISHING IDE NTITY, CREDIT WORTHINESS AND GENUINENESS OF TRANSACTION U /S 68 OF IT ACT MOREOVER ENTIRE SUM WAS RECEIVED IN CASH WHERE GENUINENESS OF TRANSACTION IS ALWAYS IN DOUBT. TH E CIT(A) FURTHER HELD THAT THE ASSESSEE HAD FAILED TO FILE T HE CONFIRMATION FROM THE CREDITORS AND ONUS NOT BEING DISCHARGED, THE ADDITION MERITS TO BE UPHELD. THE LD. A.R. FOR THE ASSESSEE DREW OUR ATTENTION TO THE SHARE APPLI CATION FORMS RECEIVED FROM 28 PERSONS PLACED AT PAGES 7 TO 34 OF THE PAPER BOOK IN WHICH THE REQUISITE DETAILS OF EACH P ERSONS WAS GIVEN. THE LD. D.R. FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF CIT(A) AND POINTED OUT THAT THE AMOUNTS IN QUESTION WERE RECEIVED IN CASH AND THE IDENTITY OF THE SHARE HOLDERS NOT HAVING BEEN ESTABLISHED, THE ADDITION MERITS TO BE UPHELD. 10 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. THE ASSESSEE COMPANY DURING THE YEAR UNDER CONSIDERATION HAD RAISED SHARE APPLICATION MONEY OF RS. 42,78,756. THE ENTIRE SHARE APPLICATION MONEY WAS RECEIVED IN CASH AND AS PER THE CLAIM OF THE ASSESSEE THE SU M WAS RECEIVED FROM 28 PERSONS. THE ASSESSEE HAD FURNISH ED ON RECORD THE COPIES OF SHARE APPLICATION FORMS SUBMIT TED FOR ALLOCATION OF SHARES, COPIES OF WHICH ARE PLACED AT PAGES 7 TO 34 OF THE PAPER BOOK. THE PERUSAL OF SAID SHARE AP PLICATION FORMS REVEALED THE ASSESSEE TO HAVE FURNISHED THE N AMES, FATHERS NAME AND ADDRESSES OF THE PARTIES WHICH WE RE FOUND TO BE INCOMPLETE BY THE ASSESSING OFFICER/CIT(A). IN SOME CASES EVEN THE ADDRESS WERE FOUND TO BE INCOMPLETE. 11. THE ISSUE INVOLVED IN THE PRESENT GROUND CAME U P FOR CONSIDERATION BEFORE THE HON'BLE APEX COURT IN CIT VS. LOVELY EXPORTS (P) LTD (SUPRA). THE HIGH COURT WH ILE DECIDING THE ISSUE AS REPORTED IN LOVELY EXPORTS (P ) LTD VS CIT 299 ITR 268 WAS OF THE VIEW THAT IN THE CONTEXT OF SECTION 68 OF THE INCOME TAX ACT, THE ASSESSING OFFICER HAS TO PRIMA- FACIE ESTABLISH (I) THE IDENTITY OF THE CREDITOR II ) THE GENUINENESS OF THE TRANSACTIONS, WHETHER TRANSMITTE D THROUGH BANKING INDISPUTABLE CHANNELS III) THE CREDITWORT HINESS OR FINANCIAL STRENGTH OF THE CREDITOR. THE COURT FUR THER OBSERVED THAT IF THE RELEVANT DETAILS OF THE ADDRES S OR PAN IDENTITY OF THE CREDITOR / SUBSCRIBER WERE FURNISHE D ALONG WITH OTHER DETAILS I.E. SHARE HOLDER REGISTER, SHARE APP LICATION FORM, SHARE TRANSFER REGISTER ETC. IT WOULD CONSTIT UTE ACCEPTABLE PROOF OR ACCEPTABLE EXPLANATION BY THE A SSESSEE. THE ONUS OF THE ASSESSEE THEREIN WAS HELD TO STAND DISCHARGED WHERE THE IDENTITY OF THE CREDITOR / SUBSCRIBER WAS PROVED AND 10 IT WAS FURTHER HELD THAT THE ASSESSING OFFICER WAS DUTY BOUND TO INVESTIGATE THE CREDITWORTHINESS OF THE CREDITOR / SUBSCRIBER AND THE GENUINENESS OF THE TRANSACTIONS AND THE VER ACITY OF THE REPUDIATION OF THE CREDITOR / SUBSCRIBER. THE SPECI AL LEAVE PETITION FILED BY THE REVENUE AGAINST THE SAID DECI SION OF THE COURT WAS DISMISSED BY THE SUPREME COURT VIDE ITS D ECISION REPORTED IN (2008) 216 CTR SC 195, WHICH READS AS U NDER:- CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME UNDER SECTION 68 OF THE INCOME TAX ACT? WE FIND NO IN SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE ASSESSING OFFICER, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. HENCE, NO INFIRMITY IS FOUND WITH THE IMPUGNED JUDGMENT. 12. THE HON'BLE DELHI HIGH COURT IN CIT V WINSTRAL PETRO CHEMICALS PVT LTD (ITA NO. 592/2010 DATE OF JUDGMENT 12.5.2010 AFTER RELYING ON THE RATIO LAID DOWN BY THE APEX COURT IN LOVELY EXPORTS (P) LTD (SUPRA) OBSERVED THAT WHERE THE IDENTITY OF THE SUBSCRIBER HAS BEEN ESTABLISHED BY WAY OF DIFFERENT PROOFS FILED I N THIS REGARD AND IF THE ASSESSING OFFICER ENTERTAINS ANY DOUBT ABOUT THE GENUINENESS OF THE DOCUMENTS, THE SAME CO ULD HAVE BEEN VERIFIED BY HIM FROM THE RECORDS AVAILABL E WITH THE AUTHORITIES. FROM THE ABOVE SAID, IT TRA NSPIRES THAT THE ONUS IS UPON THE ASSESSEE TO ESTABLISH THE IDENTITY OF THE SUBSCRIBER IN RELATION TO THE SHARE APPLICATION MONEY RECEIVED. WHERE THE ASSESSEE FA ILS TO ESTABLISH THE IDENTITY OF THE SUBSCRIBER, THE ON US CAST UPON THE ASSESSEE TO PROVE THAT THE CREDITS ARE GEN UINE DOES NOT STAND DISCHARGED. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON THE PERUSAL OF THE INFORMATION FURNISHED BY THE ASSESSE E FOUND THE ASSESSEE TO HAVE ONLY DISCLOSED THE NAMES OF THE PERSONS AND INCOMPLETE ADDRESSES WERE FURNISHED BY THE ASSESSEE AND SOME OF THE SHARE APPLICATIONS WER E BEARING ONLY THUMB IMPRESSION. THE TOTAL SHARE APPLICATION MONEY WAS RECEIVED IN CASH AND NOT THRO UGH BANKING CHANNELS AND NONE OF THE SAID PERSONS WERE INCOME TAX ASSESSEES NOR HAD ANY PAN NUMBERS. I N THE FACTS OF THE PRESENT CASE THE ASSESSEE HAS FAI LED TO PROVE THE IDENTITY OF THE SUBSCRIBER AND APPLYING T HE RATIO LAID DOWN IN THE CASE OF LOVELY EXPORTS (P) L TD (SUPRA), WE ARE IN CONFORMITY WITH THE ORDER OF CIT (A) AND UPHOLD THE ADDITION OF RS. 42,78,756/-. 6. THE ASSESSEE WAS UNABLE TO ESTABLISH THE IDENTI TY, CREDIT WORTHINESS AND THE GENUINENESS OF THE TRANSACTION S O AS TO ESCAPE FROM THE PROVISIONS OF SECTION 68 OF THE ACT. WHET HER AN ADDITION IS TO BE MADE IN THE HANDS OF THE COMPANY OR INDIVIDUA L ASSESSEE IN SUCH CIRCUMSTANCES DEPENDS UPON THE FACTS OF EACH C ASE. THE PRIMARY ONUS LIES UPON THE ASSESSEE TO ESTABLISH TH AT THE ASSESSEE IS NOT LIABLE FOR ADDITION UNDER SECTION 68 OF THE ACT AS THE AMOUNT IN FACT BELONGS TO THE PERSONS WHO HAD APPLIED AND SUB MITTED SHARE 11 APPLICATION MONEY. THE ASSESSEE HAVING FAILED TO D ISCHARGE SUCH ONUS IN THE PRESENT CASE, THE TRIBUNAL HAD RIGHTLY UPHELD THE ADDITIONS IN THE HANDS OF THE COMPANY. 13. THE JURISDICTIONAL HIGH COURT IN THE CASE OF M/ S POWER DRUGS LTD. (SUPRA) HAVE LAID DOWN THE PRINCIPLE THAT THE ONUS IS UPON THE ASSESSEE TO ESTABLISH THE IDENTITY OF THE SUBSCRIBER IN RELATIO N TO THE SHARE APPLICATION MONEY RECEIVED AND ALSO TO PROVE ITS CA PACITY. THE LEARNED A.R. FOR THE ASSESSEE FAIRLY ADMITTED TO THE SAME A ND HAS FURTHER FURNISHED ON RECORD EVIDENCE IN RESPECT OF DIFFEREN T SHARE APPLICANTS ESTABLISHING THEIR IDENTITY AND THEIR CAPACITY TO A DVANCE THE SAID SHARE APPLICATION MONEY TO THE ASSESSEE COMPANY. IN ALL FAIRNESS WE ARE OF THE VIEW THAT AS THE NECESSARY EVIDENCES ARE AVAILABLE WITH THE ASSESSEE, EQUITY DEMANDS THAT THE ISSUE BE DECIDED AFTER LOOK ING INTO THE SAID EVIDENCES AVAILABLE WITH THE ASSESSEE. IN VIEW THE REOF, WE DEEM IT FIT TO RESTORE THE ISSUE OF SHARE APPLICATION RECEIVED BY THE ASSESSEE TO THE FILE OF THE CIT (APPEALS) TO DECIDE THE SAME DE-NOVO AFT ER TAKING INTO CONSIDERATION THE VARIOUS EVIDENCES AVAILABLE WITH THE ASSESSEE AND AFTER CONFRONTING THE SAID EVIDENCES TO THE ASSESSING OFF ICER. HOWEVER, AS ADMITTED BY THE LEARNED A.R. FOR THE ASSESSEE SHARE APPLICATION MONEY RECEIVED FROM THE UNDERMENTIONED PERSONS TOTALING R S.5,15,000/-, BEING THE ISSUE NOT PRESSED BY THE ASSESSEE, IS ADDED AS INCOME OF THE ASSESSEE: NAME AMOUNT SHRI JASWINDER KUMAR RS. 65,000.00 SHRI SHAM KUMAR RS.2,20,000.00 SMT.RAJ RANI RS. 60,000.00 SMT.MANDEEP KAUR RS. 60,000.00 ---------------- 4,05,000/- SMT.SWETA RS. 60,000.00 SHRI SUNIL KUMAR RS. 50,000.00 --------------- 1,10,000/- 14. THE CIT (APPEALS) HAD ALSO CONSIDERED THE EVIDE NCE FILED IN RESPECT OF THE SHARE APPLICATION MONEY TOTALING RS. 3,75,000/- WHICH WAS 12 CONFIRMED IN THE FIRST AROUND OF APPELLATE PROCEEDI NGS. THE CIT (APPEALS) IS DIRECTED TO AFFORD REASONABLE OPPORTUN ITY OF HEARING TO THE ASSESSEE AND DECIDE THE ISSUE IN LINE WITH OUR DIRE CTIONS IN PARAS HEREINABOVE AND IN ACCORDANCE WITH LAW. GROUND NO S.1 AND 2 RAISED BY THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES AN D GROUND NO.1 RAISED BY THE ASSESSEE IN ITS CROSS OBJECTION IS PARTLY AL LOWED. 15. GROUND NO.3 RAISED BY THE REVENUE IS AGAINST TH E DELETION OF ADDITION OF RS.43,388,/-. THE ASSESSING OFFICER DU RING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THE ASSESSEE TO HAVE M ADE THE ADVANCES TO SISTER CONCERN TOTALING RS.15,25,000/-. THE ASSESS ING OFFICER DISALLOWED THE INTEREST RELATABLE TO SUCH INTEREST FREE ADVANC ES MADE TO M/S UNICORN INTERNATIONAL IN VIEW OF THE RATIO LAID DOWN BY THE PUNJAB & HARYANA HIGH COURT IN CIT VS. ABHISHEK INDUSTRIES [286 ITR 1(P&H)] DISALLOWED SUM OF RS.43,388/-. THE CIT (APPEALS) VIDE PARA 8 OBSERVED AS UNDER: 8. I HAVE CAREFULLY CONSIDERED THE CONTENTION OF T HE LD. COUNSEL FOR THE APPELLANT AND PERUSED THE RELEV ANT RECORD. THE ADMITTED POSITION IN THIS CASE IS THAT NO INTEREST HAS BEEN CHARGED BY THE APPELLANT ON THE S AID ADVANCE GIVEN TO ITS SISTER CONCERN. HOWEVER AS RI GHTLY POINTED OUT BY THE LD. COUNSEL AND ALSO OBSERVED BY THE A.O. IN THE ASSESSMENT ORDER ITSELF THE AMOUNT WAS ADJUSTED AGAINST THE PURCHASES MADE BY THE APPELLAN T FROM THE SAID SISTER CONCERN DURING THE FINANCIAL Y EAR 2007-08. THUS THERE IS CONSIDERABLE FORCE IN THE CONTENTION OF THE LD. COUNSEL THAT THE AMOUNT WAS ADVANCED FOR BUSINESS EXPEDIENCY. IT WAS ALSO EXPLAINED BY THE LD. COUNSELS DURING THE APPEAL PROCEEDINGS THAT THE APPELLANT HAD BEEN MAKING PURCHASES FROM THE SAID CONCERN IN THE PRECEDING YE ARS ALSO AND THAT THE SAID AMOUNT THOUGH REMAINING WITH THE SAID SISTER CONCERN FOR SLIGHTLY LONGER PERIOD BECAUSE OF CERTAIN EXCEPTIONAL CIRCUMSTANCES, WAS ULTIMATELY ADJUSTED AGAINST THE PURCHASES MADE FROM THE SISTER CONCERN ONLY. THEREFORE, IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F M/S S.A.BUILDERS REPORTED AT 288 ITR 1 AND WHICH DECISION HAS BEEN RELIED UPON BY THE LD. COUNSEL, N O PART OF CORRESPONDING INTEREST COULD BE DISALLOWED FOLLOWING THE DECISION OF THE ABHISHEK INDUSTRIES L TD. (SUPRA), RELIED UPON BY THE A.O. IN VIEW OF THE AB OVE 13 DISCUSSION DISALLOWANCE OF RS.43,388/- IS DELETED A ND THIS GROUND OF APPEAL IS ALLOWED. 16. THE LEARNED D.R. FOR THE REVENUE HAS FAILED TO CONTROVERT THE FINDINGS OF THE CIT (APPEALS) THAT THE SAID ADVANCE TO M/S UNICORN INTERNATIONAL WAS MADE IN DUE COURSE OF CARRYING ON THE BUSINESS I.E. AGAINST PURCHASES MADE BY THE ASSESSEE FROM ITS SIS TER CONCERN AND THE SAID AMOUNT WAS ADJUSTED AGAINST THE PURCHASES MADE IN THE FINANCIAL YEAR 2007-08. IN VIEW THEREOF, WE FIND NO MERIT IN THE SAID DISALLOWANCE OF RS.43,388/- WHERE THE SAID AMOUNT WAS ADVANCED F OR BUSINESS EXPEDIENCY. THE GROUND NO.3 RAISED BY THE REVENUE IS THUS DISALLOWED. 17. THE ASSESSEE HAS ALSO FILED ADDITIONAL GROUND O F APPEAL IN ITS CROSS OBJECTION WHICH READS AS UNDER: THAT THE WORTHY COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN SUSTAINING THE ADDITION OF RS.2,84,899/- ON ACCOUNT OF EMPLOYEES CONTRIBUTION TOWARDS PROVIDENT FUND AND ESI, WHICH HAS BEEN DEPOSITED BEFORE THE DUE DATE OF FILING THE RETURN. 18. THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT T HAT THE SAID ISSUE BEING DECIDED BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. RAI AGRO INDS. LTD. [334 ITR 122 (P&H)], MERITS TO BE ADMITTED BEING PURELY LEGAL ISSUE. WE FIND THAT THE ASSESSEE IS A GGRIEVED BY THE DISALLOWANCE OF RS.2,84,899/- ON ACCOUNT OF EMPLOYE ES CONTRIBUTION TOWARDS PF AND ESI. THE SAID AMOUNT WAS PAID BY TH E ASSESSEE BEYOND THE DUE DATE OF PAYMENT BUT WAS DEPOSITED BEFORE TH E DUE DATE OF FILING THE RETURN OF INCOME. THE TABULATED DETAILS OF ACT UAL DATE OF PAYMENTS OF EMPLOYEES CONTRIBUTION TO ESI AND PF ARE INCORPORA TED UNDER PARA 8.1 AT PAGE 7 OF THE ASSESSMENT ORDER. THE PERUSAL OF THE SAME REFLECTS THAT THE AMOUNT ATTRIBUTABLE TO EMPLOYEES CONTRIBUTION TO E SI TOTALING RS.34,888/- HAS BEEN PAID BEFORE THE DUE DATE OF FI LING THE RETURN OF INCOME AND HENCE THE SAME IS TO BE ALLOWED AS A DED UCTION IN VIEW OF THE 14 RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIG H COURT IN CIT VS. RAI AGRO INDS. LTD. (SUPRA). FURTHER IN RESPECT OF EMPLOYEES CONTRIBUTION TO PF, THE ASSESSEE HAD DEPOSITED EMPL OYEES CONTRIBUTION TILL UP TO THE MONTH OF DECEMBER, 2005 BEFORE THE D UE DATE OF FILING THE RETURN OF INCOME AND IN RESPECT OF JANUARY TO MARCH , 2006, THE AMOUNTS HAVE NOT BEEN DEPOSITED. THE ASSESSING OFFICER SHA LL VERIFY THE CLAIM OF THE ASSESSEE ON HAVING DEPOSITED THE SAME BEFORE TH E DUE DATE OF FILING THE RETURN OF INCOME AND IN CASE NO AMOUNTS WERE DE POSITED FOR THE PERIOD RELATING TO JANUARY TO MARCH, 2006, THE SAID AMOUNT I.E. RS.19,797/- + RS.19,346/- + RS.19,482/- ARE TO BE A DDED AS INCOME OF THE ASSESSEE. HOWEVER, THE AMOUNTS RELATABLE TO UPTO D ECEMBER, 2005 ARE DIRECTED TO BE ALLOWED AS DEDUCTION. THUS ADDITION AL GROUND OF APPEAL RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 19. IN THE RESULT, BOTH THE APPEAL OF THE REVENUE A ND THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH DAY OF NOVEMBER, 2012. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 29 TH NOVEMBER, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH