Raj Kumar Chawla, Delhi V. ACIT, New Delhi

ITA 1323/DEL/2015

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 9713 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 05-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PARAMITA TRIPATHI
• Keywords: Unexplained cash credit; Bogus Share capital; Business income; Income from undisclosed sources; Search and seizure; Salary income; Share purchase agreement; Principle of natural justice; Additional evidence; Question of law; Deemed dividend; Accommodation entries; Onus to prove; Retraction; Documents seized
• Section: 143(3); 133A; 131; 68; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBE R & SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 1323/DEL/2015 ( ASSESSMENT YEAR: 2010-11) RAJ KUMAR CHAWLA A-7, NIRMAN VIHAR, DELHI. AALPC1209J VS ACIT CENTRAL CIRCLE-IX NEW DELHI. APPELLANT RESPONDENT ASSESSEE BY S/SH. VED JAIN, ADV. ASHISH CHADHA, CA, KISLAYA PARASHAR, ADV. REVENUE BY SMT. PARAMITA TRIPATHI, CIT (DR) ORDER PER SHRI BHAVNESH SAINI, J.M. THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST T HE ORDER OF LD. CIT(APPEALS)-XXVII, NEW DELHI DATED 15.12.20 14 FOR AY 2010-11. 2. BRIEFLY THE FACTS OF THE CASE AS NOTED IN THE IM PUGNED ORDERS ARE THAT THE ASSESSEE IS AN INDIVIDUAL WHO DURING T HE ASSESSMENT YEAR UNDER CONSIDERATION DERIVED INCOME FROM SALARY , HOUSE DATE OF HEARING 04.09.2018 DATE OF PRONOUNCEMENT 26.09.2018 2 ITA NO. 1323/DEL/2015 PROPERTY AND OTHER SOURCES. A SEARCH AND SEIZURE O PERATION U/S 132 OF THE I.T. ACT, 1961 ALONGWITH SURVEY OPERATIO NS U/S 133A OF THE ACT WERE CONDUCTED ON 26.03.2010 AT THE VARIOUS RESIDENTIAL AND BUSINESS PREMISES OF SH. ASEEM KUMAR GUPTA GROU P OF CASES WHO WERE ENGAGED IN THE BUSINESS OF PROVIDING ACCOM MODATION ENTRIES TO SEVERAL BENEFICIARIES WITH THE HELP OF S EVERAL BANK ACCOUNTS OPENED IN THE NAME OF SEVERAL PROPRIETARY CONCERNS AND COMPANIES IN WHICH EITHER SHRI ASEEM KUMAR GUPTA HI MSELF OR HIS EMPLOYEES, WERE PROPRIETOR OR DIRECTOR. THE PR EMISES OF THE VARIOUS BENEFICIARIES, INCLUDING THE ASSESSEE, WERE ALSO SIMULTANEOUSLY COVERED UNDER THE SAID OPERATIONS. THE ASSESSEE FILED THE RETURN OF INCOME U/S 139 OF THE I.T. ACT DECLARED THE TOTAL INCOME OF RS. 19,75,660/-, WHICH WAS PROCESSED U/S 143(1) OF THE ACT. THE ASSESSMENT PROCEEDINGS WERE CONDUCTED TIM E TO TIME AND ASSESSEE FILED THE NECESSARY DETAILS WHICH WERE PLACED ON RECORD. THEREUPON, THE ASSESSMENT WAS COMPLETED IN TERMS OF AN ORDER U/S 143(3) AT A TOTAL INCOME OF RS. 2,54,31,9 10/- AS AGAINST RETURNED INCOME OF RS. 19,75,660/-, WHEREIN THE AO MADE THE FOLLOWING ADDITIONS: 3 ITA NO. 1323/DEL/2015 1. ADDITION ON ACCOUNT OF INCOME FROM HOUSE PROPERTY R S. 4,36,036/-; 2. ADDITION ON ACCOUNT OF UN-EXPLAINED LOAN OF RS. 2,29,73,630/-; 3. ADDITION ON ACCOUNT OF DEEMED DIVIDEND U/S 2(22)(E) ON PROTECTIVE BASIS RS. 46,588/-. 3. THE ASSESSEE CHALLENGED THE ABOVE ADDITIONS BEFO RE THE LD. CIT(A) AND RAISED VARIOUS GROUNDS OF APPEAL. THE A SSESSEE ALSO FILED APPLICATION UNDER RULE 46A OF THE I.T. RULES, 1962 FOR ADMISSION OF THE ADDITIONAL EVIDENCES. THE COPY OF THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE FOR ADMISSION OF THE ADDITIONAL EVIDENCES UNDER RULE 46A ALONG WITH THE PAPER BOOK CONTAINING ADDITIONAL EVIDENCES WERE SENT TO THE AO FOR GOING THROUGH THE CONTENTIONS OF THE ASSESSEE, EXAMINATION OF THE ADD ITIONAL EVIDENCES FILED AND TO SUBMIT HIS REMAND REPORT. T HE AO SUBMITTED THE REMAND REPORT, WHICH IS NOTED IN THE APPELLATE ORDER IN WHICH THE AO REPORTED THAT A SUM OF RS. 2,29,73, 630/- WAS FOUND CREDITED IN THE BOOKS OF THE ASSESSEE. OUT O F THIS AMOUNT, ASSESSEE SAID TO HAVE BEEN RECEIVED LOAN OF RS. 2,2 0,75,000/- FROM M/S GANPATI FINCAP SERVICES P. LTD. AND INTEREST OF RS. 8,98,630/- HAS BEEN CREDITED ON ACCOUNT OF THAT LOAN. IT HAS BEEN ESTABLISHED DURING ASSESSMENT PROCEEDINGS OF THE ASSESSEE AND A SSESSMENT PROCEEDINGS OF M/S GANPATI FINCAP SERVICES P. LTD. U/S 153C OF 4 ITA NO. 1323/DEL/2015 THE ACT, THAT M/S GANPATI FINCAP SERVICES P. LTD. D ID NOT HAVE ANY REAL BUSINESS ACTIVITY. THE MATERIAL SEIZED FROM T HE OFFICE PREMISES OF SH. ASEEM KUMAR GUPTA IN THE FORM OF CASH DEPOSI T SLIPS, SIGNED CHEQUE BOOKS, DOCUMENTS CONTAINING DETAILS O F ACCOMMODATION ENTRIES, LETTER HEAD/ LETTER PADS OF M/S GANPATI FINCAP SERVICES P. LTD., ETC. AND THE FACT AVAILABL E ON THE RECORD CLEARLY ESTABLISHED THAT SH. ASEEM KUMAR GUPTA HAD BEEN RUNNING THE BUSINESS OF PROVIDING ACCOMMODATION ENT RIES WITH THE HELP OF ENTITIES OWNED BY HIM OR USED AND CONTROLLE D BY HIM AND M/S GANPATI FINCAP SERVICES P. LTD. WAS ONE OF SUCH INTER- MEDIARY COMPANY USED FOR THE PURPOSE OF PROVIDING ACCOMMODATION ENTRIES. ACCORDINGLY, LOAN PROVIDED BY SUCH A PAPER COMPANY WAS DISALLOWED BY THE AO. THE AO REP ORTED THAT ASSESSEE HAS NOW IN SUPPORT OF HIS CLAIM HAS SUBMIT TED COPY OF THE LOAN AGREEMENT, CONFIRMATION FROM THE PARTY, AU DIT REPORT, ITR, PAN, ETC. TO PROVE THAT THE LOANS HAVE BEEN RECEIVE D BUT THESE ADDITIONAL EVIDENCES ARE PAPER WORK ONLY. IT IS AL SO REPORTED THAT AO HAS NOT SIMPLY RELIED UPON THE STATEMENT OF SH. ASEEM KUMAR GUPTA BUT HIS FINDINGS ARE BASED ON VARIOUS OTHER E VIDENCES DISCUSSED IN DETAIL. 5 ITA NO. 1323/DEL/2015 4. COPY OF THE REMAND REPORT WAS PROVIDED TO THE AS SESSEE, THE ASSESSEE FILED THE REJOINDER WHICH IS REPRODUCED IN THE APPELLATE ORDER IN WHICH THE ASSESSEE BRIEFLY EXPLAINED THAT ASSESSEE HAS RECEIVED AN AMOUNT OF RS. 2,20,75,000/- FROM M/S GA NPATI FINCAP SERVICES P. LTD. ALSO AN AMOUNT OF RS. 8,98,630/- WAS ACCRUED AS INTEREST ON THE SAID LOAN FOR THE YEAR UNDER CONSID ERATION. THE AO GROSSLY ERRED IN RELYING ON THE STATEMENT OF SH. AS EEM KUMAR GUPTA RECORDED DURING THE COURSE OF SEARCH. M/S GA NPATI FINCAP SERVICES P. LTD. PROVIDED UNSECURED LOAN OUT OF THE IR OWN FUNDS AND THE ASSESSEE PRODUCED ALL THE DOCUMENTARY EVIDE NCES TO PROVE THE GENUINE LOAN RECEIVED. THE VARIOUS DOCUMENTS H AVE BEEN PROCURED AFTER COMPLETION OF ASSESSMENT WHICH REQUI RES TO BE ADMITTED AS ADDITIONAL EVIDENCES. THE CREDITOR IS AN NBFC WHICH WAS ENGAGED IN THE BUSINESS OF PROVIDING LOANS WHIC H IS SUPPORTED BY ALL THE DOCUMENTS. THE AO MADE ADDITION OF RS. 2,29,73,630/- AS AGAINST A SUM OF RS. 2,14,73,630/- ACTUALLY RECE IVED BY ASSESSEE. THUS, THE ADDITION OF RS. 15 LAKHS WHICH HAS BEEN PAID BY THE ASSESSEE TO THE SAID PARTY DURING THE YEAR U NDER CONSIDERATION IS LIABLE TO BE DELETED. THE ASSESSE E AGAIN REITERATED THAT ALL THE DOCUMENTARY EVIDENCES AND BANK STATEME NTS WERE 6 ITA NO. 1323/DEL/2015 FILED WHICH SUPPORT M/S GANPATI FINCAP SERVICES P. LTD. HAS WORTH OF RS. 568.47 LAKHS TO GIVE IMPUGNED LOAN TO THE AS SESSEE. PARTY HAS ALSO CONFIRMED GIVING LOAN TO THE ASSESSEE. CO PY OF THE BANK ACCOUNT IS ALSO FILED WHICH SUPPORT EXPLANATION OF THE ASSESSEE. THE CBDT HAS ISSUED A CIRCULAR THAT NO STATEMENT BE RECORDED DURING THE COURSE OF SEARCH UNDER THREAT OR PRESSUR E WITHOUT BRINGING ANY MATERIAL ON RECORD. ALL THE STATEMENT S OF SH. ASEEM KUMAR GUPTA ALONG WITH OTHER DOCUMENTS SEIZED AT HI S PREMISES HAVE BEEN OBTAINED AT THE BACK OF THE ASSESSEE AND HAVE NEVER BEEN PROVIDED TO THE ASSESSEE. THE ASSESSEE HAS NE VER BEEN ACCORDED AN OPPORTUNITY TO CROSS EXAMINE SH. ASEEM KUMAR GUPTA. THEREFORE, SUCH EVIDENCE CANNOT BE RELIED U PON IN EVIDENCE AGAINST THE ASSESSEE. THE ASSESSEE RELIED UPON THE DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS. DIVINE LEASING & FINANCE LTD. 299 ITR 268 (DEL.), DECISION OF SUPR EME COURT IN THE CASE OF KISHANCHAND CHELARAM VS. CIT 125 ITR 71 3, DECISION OF SUPREME COURT IN THE CASE OF CIT VS. ORISSA CORP ORATION PVT. LTD. 159 ITR 78 (SC), DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS. VALUE CAPITAL SERVICES (P). LTD. 307 ITR 33 2 (DEL.) AND OTHERS. 7 ITA NO. 1323/DEL/2015 5. THE LD. CIT(A) CONSIDERING THE EXPLANATION OF TH E ASSESSEE AND MATERIAL ON RECORD ADMITTED THE ADDITIONAL EVID ENCES. THE LD. CIT(A) THEREAFTER, PROCEEDED TO DECIDE THE ADDITION ON MERITS. 6. IT IS NOTED BY THE AO THAT A SUM OF RS. 2,29,73, 630/- WAS CREDITED IN THE BOOKS OF THE ASSESSEE WHICH COMPRIS ED OF LOAN OF RS. 2,20,75,000/- SAID TO HAVE BEEN RECEIVED FROM M /S GANPATI FINCAP SERVICES P. LTD. AND INTEREST OF RS. 8,98,63 0/- CREDITED ON ACCOUNT OF THE SAID LOAN. IN THE COURSE OF ASSESSM ENT PROCEEDINGS U/S 153C OF THE ACT IN THE CASE OF M/S GANPATI FINC AP SERVICES P. LTD., IT WAS ESTABLISHED THAT THE SAID COMPANY DID NOT HAVE ANY REAL BUSINESS ACTIVITY AND IS A FICTITIOUS ENTITY C ONTROLLED BY SH. ASEEM KUMAR GUPTA FOR PROVIDING ACCOMMODATION ENTRI ES. THE STATEMENT OF SH. ASEEM KUMAR GUPTA U/S 133A AND 131 OF THE I.T. ACT ARE REPRODUCED IN THE ASSESSMENT ORDER IN WHICH HE HAS ADMITTED TO HAVE PROVIDED ACCOMMODATION ENTRIES TO SEVERAL BENEFICIARIES BY RECEIVING CASH FROM THEM. AO ALSO OBSERVED THAT SH. ASEEM KUMAR GUPTA PROVIDED A LIST OF BENEFICIAR IES IN WHICH THE NAME OF THE ASSESSEE, HIS HUF AND HIS WIFE WAS CLEARLY MENTIONED. THE LIST OF BENEFICIARIES IS ALSO NOTED IN THE ORDER. THE 8 ITA NO. 1323/DEL/2015 AO ALSO OBSERVED FROM THE BANK STATEMENT OF THE ENT ITIES THAT SOME WERE FULLY CONTROLLED OR OWNED BY SH. ASEEM KU MAR GUPTA AND THAT FUNDS WERE FLOWN INTO THE BANK ACCOUNT OF THE ASSESSEE FROM THE BANK ACCOUNT OF THE ENTITIES FULLY CONTROL LED OR OWNED BY SH. ASEEM KUMAR GUPTA. THE ASSESSEE WAS ASKED TO E XPLAIN THE GENUINENESS OF THE ALLEGED LOAN TAKEN FROM M/S GANP ATI FINCAP SERVICES P. LTD. THE AO OBSERVED THAT ASSESSEE FA ILED TO FURNISH ANY PLAUSIBLE EXPLANATION IN THIS REGARD. THE AO N OTED THAT UNACCOUNTED CASH OF ASSESSEE WHICH WAS DEPOSITED IN THE BANK ACCOUNT OF BOGUS PROPRIETARY CONCERNS THAT WAS ROOT ED BACK TO THE ASSESSEE THROUGH CHEQUE, DISGUISED AS A LOAN FROM M /S GANPATI FINCAP SERVICES P. LTD. AFTER LAYERING IT INTO SEVE RAL INTERMEDIARY COMPANIES. AO ALSO NOTED DETAILS OF VALUE PER SHAR E PURCHASED AND MAJOR SHAREHOLDERS OF M/S GANPATI FINCAP SERVIC ES P. LTD. IN THE ASSESSMENT ORDER. IT WAS, THEREFORE, NOTED THA T MAJOR SHAREHOLDERS WERE ALSO CONTROLLED BY SH. ASEEM KUMA R GUPTA OR HIS EMPLOYEE SH. MANOJ KUMAR. THE AO, THEREFORE, O BSERVED THAT THE SAID COMPANY WAS NEITHER IN EXISTENCE, NOR HAD THE CAPACITY TO LEND SUCH HUGE LOAN. THEREFORE, IT WAS HELD THAT A N AMOUNT OF RS. 2,29,73,630/- INCLUDING INTEREST CREDITED IN THE BO OKS OF ACCOUNT 9 ITA NO. 1323/DEL/2015 OF THE ASSESSEE AS UNEXPLAINED AND ADDED TO THE INC OME OF THE ASSESSEE U/S 68 OF THE I.T. ACT. 7. THE ASSESSEE CHALLENGED THE ADDITION BEFORE LD. CIT(A). THE ASSESSEE REITERATED THE SUBMISSIONS ALREADY MADE BE FORE THE AUTHORITIES BELOW. THE WRITTEN SUBMISSION OF THE A SSESSEE IS INCORPORATED IN THE APPELLATE ORDER IN WHICH THE AS SESSEE BRIEFLY EXPLAINED THAT INTEREST ON THE LOAN CANNOT BE ADDED . THE AMOUNT OF RS. 15 LAKH WAS PAID BY THE ASSESSEE TO THE SAID PARTY DURING THE YEAR UNDER CONSIDERATION AND THUS, THE BALANCE OF THE SAID PARTY IN THE BOOKS OF THE ASSESSEE WAS RS. 2,14,73, 630/-. THE AMOUNT WAS RECEIVED THROUGH PROPER BANKING CHANNEL AND DULY DEPOSITED IN THE BANK ACCOUNT OF THE ASSESSEE. AT THE YEAR END I.E. ON 31.03.2010, ASSESSEE SHOWED THAT AMOUNT UNDER TH E HEAD UNSECURED LOANS ON THE LIABILITY SIDE OF THE BALA NCE SHEET IN THE NAME OF M/S GANPATI FINCAP SERVICES P. LTD. THE AS SESSEE FILED ALL THE DOCUMENTARY EVIDENCES IN SUPPORT OF THE GEN UINE LOAN RECEIVED FROM THE SAID PARTY. THE AO GAVE JUST THR EE DAYS TIME TO FILE REPLY AND THE DOCUMENTS. FURTHER QUERIES WERE ALSO RAISED, WHICH WERE COMPLIED BY THE ASSESSEE. THE ASSESSEE ASKED THE AO 10 ITA NO. 1323/DEL/2015 TO PROVIDE COPIES OF THE SEIZED MATERIAL EVIDENCE A ND THE STATEMENTS. THE ASSESSEE FILED COPY OF THE LOAN AG REEMENT, CONFIRMATION OF INVESTOR COMPANY, LEDGER ACCOUNT OF INVESTOR COMPANY IN THE BOOKS OF THE ASSESSEE, ITR AND BANK ACCOUNT OF INVESTOR COMPANY. THE ASSESSEE ALSO FILED DETAILS OF PARTIES FROM WHOM SHARES OF M/S GANPATI FINCAP SERVICES P. LTD. WERE ACQUIRED IN THE YEAR UNDER CONSIDERATION. THE NET WORTH OF THE INVESTOR WAS RS. 568.47 LAKHS IN ASSESSMENT YEAR UN DER APPEAL AND OUT OF SAME THE LOAN OF RS. 220.75 LAKHS WAS GI VEN TO THE ASSESSEE. THE ASSESSEE FILED SHARE CERTIFICATES IS SUED BY THE INVESTOR COMPANY. SUMMONS WERE ISSUED U/S 131 OF T HE ACT TO THE INVESTOR AT THE ADDRESS GIVEN BY THE ASSESSEE, WHICH WERE SERVED. THE AO SOLELY RELIED UPON THE STATEMENT OF SH. ASEEM KUMAR GUPTA RECORDED DURING THE COURSE OF SEARCH. BUT ASSESSEE HAS NEVER BEEN ACCORDED AN OPPORTUNITY TO CROSS EXA MINE SH. ASEEM KUMAR GUPTA. SH. ASEEM KUMAR GUPTA WAS NEITH ER A DIRECTOR IN THE INVESTOR COMPANY, NOR HE WAS AN AUT HORIZED SIGNATORY IN THE SAME. THERE WAS NO BASIS TO RELY UPON HIS STATEMENT. THE ASSESSEE RELIED UPON SEVERAL DECISI ONS IN SUPPORT OF HIS CONTENTION THAT HE HAS RECEIVED GENUINE LOAN IN THE MATTER. 11 ITA NO. 1323/DEL/2015 IN FURTHER SUBMISSIONS, IT WAS SUBMITTED THAT M/S G ANPATI FINCAP SERVICES P. LTD. IS AN EXISTING COMPANY AND ITS DIR ECTORS APPEARED BEFORE TAX AUTHORITIES AND STATEMENTS OF DIRECTORS WERE RECORDED IN WHICH THEY HAVE CONFIRMED GIVING LOAN TO THE ASSESS EE. THE ASSESSEE ALSO PROVED SOURCES OF THE SOURCE, THOUGH NOT REQUIRED BY THE LAW. 8. THE LD. CIT(A) CONSIDERING THE ISSUE NOTED THAT AO MADE THE ADDITION ON THE BASIS OF MATERIAL FOUND DURING THE COURSE OF SEARCH AND SURVEY AND ON THE BASIS OF STATEMENT OF SH. ASE EM KUMAR GUPTA WHO HAS ADMITTED TO HAVE PROVIDED ACCOMMODATI ON ENTRIES. THE LD. CIT(A) ON THAT BASIS AND FOLLOWING THE TEST OF HUMAN PROBABILITIES CONFIRMED THE ADDITION AND DISMISSED THE APPEAL OF THE ASSESSEE. 9. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBM ISSIONS MADE BEFORE THE AUTHORITIES BELOW. PB-87 IS REPLY BEFORE AO GIVING COMPLETE DETAILS OF TAKING LOAN ALONG WITH THE DOCU MENTS ON QUERIES RAISED BY THE AO. PB-90 IS LOAN AGREEMENT WITH M/S GANPATI FINCAP SERVICES P. LTD., WHICH IS NBFC. PB 94 IS CONFIRMATION FROM M/S GANPATI FINCAP SERVICES P. LT D. (INVESTOR 12 ITA NO. 1323/DEL/2015 COMPANY), PB-96 IS ITR OF THE INVESTOR, PB-97 ONWAR DS BANK STATEMENT OF THE INVESTOR COMPANY. PB-145 IS ANOTH ER REPLY FILED BEFORE AO GIVING FURTHER DETAILS OF THE LOAN ALONG WITH BALANCE SHEET OF INVESTOR COMPANY SHOWING ITS NET WORTH. P B-151 IS BALANCE SHEET TO SHOW THE SHAREHOLDING OF THE INVES TOR COMPANY WAS SAME IN EARLIER YEAR AS WELL AS IN ASSESSMENT Y EAR UNDER APPEAL. THERE IS NO NEW FUND RECEIVED BY THE INVES TOR SO THERE IS NO QUESTION OF UNACCOUNTED AMOUNT RECEIVED BY THE I NVESTOR. THE INVESTOR WAS SUMMONED AND ASSESSEE AS A DIRECTOR WA S EXAMINED. THE INVESTOR IS AN EXISTING ASSESSEE AND ASSESSED T O TAX. SOURCE OF THE LOAN AMOUNT RECEIVED HAS BEEN EXPLAINED. TH E AO SHALL HAVE TO CONSIDER NET WORTH OF THE INVESTOR COMPANY WHICH IS PROVED BY THE ASSESSEE FOR PROVING THE GENUINE LOAN . NO INCRIMINATING MATERIAL FOUND AGAINST THE ASSESSEE. INTEREST RECEIVED IS DECLARED AS INCOME. PB 158 IS BALANCE SHEET, LOAN AND ADVANCE ACCOUNT IN THE BOOKS OF INVESTOR COMPANY SH OWN IN THE NAME OF THE ASSESSEE UNDER THE HEAD LOANS AND ADVA NCES. THE DISCREPANCY IN THE ADDITION HAS BEEN EXPLAINED. SU BSTANTIVE ADDITION HAS BEEN MADE IN THE CASE OF SH. MANOJ KUM AR ALSO AS PER ASSESSMENT ORDER DATED 27.12.2011 IN HIS CASE. LD. COUNSEL 13 ITA NO. 1323/DEL/2015 FOR THE ASSESSEE RELIED UPON THE SAME CASE LAW AS H AVE BEEN RELIED UPON BEFORE THE AUTHORITIES BELOW. 10. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT INVESTOR IS A PAPER COMPANY. AS SESSEE IS A DIRECTOR OF INVESTOR WAS EXAMINED BY THE AO. HE DO ES NOT KNOW DETAILS OF INVESTOR. AO PROVED AS TO HOW MONEY CAM E TO THE ASSESSEE. MAY BE ASSESSEE FILED ALL THE DOCUMENTS, BUT AO HAS RIGHTLY DIFFERED WITH THE SAME ON THE BASIS OF THE MATERIAL ON RECORD AND MATERIAL COLLECTED IN SEARCH. THE UNACC OUNTED MONEY BELONGS TO THE ASSESSEE. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. IN THIS CASE, IT IS AN ADMITTED FACT THAT ASSESSEE FILED COPY OF THE LOAN AGREEMENT WITH CALCULATION OF INTEREST BEFORE AO ALONG WITH CONFIRMATION OF THE A CCOUNT OF THE ASSESSEE WITH INVESTOR, LEDGER ACCOUNT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE ALONG WITH COPY OF ITR OF INVESTOR AND COPY OF THE BANK STATEMENTS. ALL THE DOCUMENTS HAVE NOT BEEN D ISPUTED BY THE AO THROUGH ANY EVIDENCE ON RECORD. THE INVESTO R IS ADMITTEDLY NBFC AND WAS IN BUSINESS OF GIVING LOAN TO OTHERS F OR BUSINESS 14 ITA NO. 1323/DEL/2015 PURPOSES. IT IS A REGISTERED COMPANY. THE BALANCE SHEET OF THE INVESTOR SHOWS LOAN HAVE BEEN GIVEN TO THE ASSESSEE , THE INVESTOR WAS HAVING NET WORTH AS NOTED ABOVE TO GIVE LOAN TO THE ASSESSEE. THE ASSESSEE SUBMITTED COMPLETE DETAILS BEFORE AO. THE BALANCE SHEET OF THE INVESTOR COMPANY SHOWS THAT SHARE CAPI TAL, RESERVES AND SURPLUS AND SHARE APPLICATION MONEY WERE SAME I N ASSESSMENT YEAR UNDER APPEAL AS WELL AS IN THE PREC EDING AY 2009-10. IT WOULD, THEREFORE, PROVE THAT THERE IS NO NEW FUND RECEIVED BY THE INVESTOR COMPANY SO AS TO PROVE THA T IT HAS RECEIVED ANY UNACCOUNTED CASH AMOUNT FROM ANY THIRD PERSON. THE LOAN AMOUNTS HAVE BEEN RECEIVED THROUGH BANKING CHANNEL, WHICH IS SUPPORTED BY THE BANK STATEMENT OF THE INV ESTOR. THEREFORE, ALLEGATION OF THE AO THAT AMOUNT HAVE BE EN RECEIVED AS ACCOMMODATION ENTRY ON ROOTING THE CASH IS IMPROPER AND SUCH FINDING HAVE NOT BEEN CORROBORATED BY ANY MATERIAL OR EVIDENCE ON RECORD. THE FINDINGS OF THE AO ARE UNJUSTIFIED THA T CASH HAVE BEEN ROUTED IN THIS CASE FOR GIVING LOAN BECAUSE IN THE COURSE OF THE SEARCH, NO MATERIAL WAS FOUND THAT ANY CASH HAS BEE N PAID BY THE ASSESSEE. THE STATEMENTS OF VARIOUS PERSONS WERE R ECORDED DURING THE COURSE OF SEARCH AS WELL AS POST SEARCH PROCEED INGS AND IN 15 ITA NO. 1323/DEL/2015 NONE OF THE STATEMENTS, ANYBODY HAS MADE ALLEGATION AGAINST ASSESSEE OF PROVIDING CASH. THE ASSESSEE SPECIFICA LLY SUBMITTED BEFORE LD. CIT(A) THAT ALL THE STATEMENTS OF SH. AS EEM KUMAR GUPTA ALONG WITH VARIOUS DOCUMENTS SEIZED AT HIS PR EMISES HAVE BEEN OBTAINED AT THE BACK OF THE ASSESSEE AND HAVE NEVER BEEN PROVIDED TO THE ASSESSEE. EVEN THE ASSESSEE HAS NE VER BEEN ACCORDED AN OPPORTUNITY TO CROSS EXAMINE SH. ASEEM KUMAR GUPTA. THE ASSESSEE, THEREFORE, PLEADED THAT ACTIO N OF THE AO OF PASSING THE ASSESSMENT ORDER IS AGAINST PRINCIPLE O F NATURAL JUSTICE AND THE ASSESSMENT ORDER PASSED BY THE AO I S LIABLE TO BE QUASHED AS NOTHING WAS CONFRONTED TO THE ASSESSEE A T THE STAGE OF THE ASSESSMENT PROCEEDINGS. THERE IS NO FINDING GI VEN BY THE AO ON SUCH SUBMISSIONS OF THE ASSESSEE IN THE REMAND O RDER PASSED BY THE AO. THE LD. CIT(A) HAS ALSO NOT DEALT WITH THE SUBMISSIONS OF THE ASSESSEE SPECIFICALLY IN THE APPELLATE ORDER . IT IS WELL SETTLED LAW THAT ANY MATERIAL EVIDENCE COLLECTED AT THE BAC K OF THE ASSESSEE AND NOT CONFRONTED TO THE ASSESSEE AT ASSE SSMENT STAGE COULD NOT BE READ IN EVIDENCE AGAINST THE ASSESSEE. WE RELY UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF KISHANCHAND CHELARAM VS. CIT 125 ITR 713. THE AUTH ORITIES 16 ITA NO. 1323/DEL/2015 BELOW SOLELY MADE ADDITION AGAINST THE ASSESSEE BEC AUSE OF THE MATERIAL SEIZED DURING THE COURSE OF SEARCH FROM SH . ASEEM KUMAR GUPTA AND HIS STATEMENT RECORDED AT THE BACK OF THE ASSESSEE. THEREFORE, SUCH MATERIAL CANNOT BE USED AGAINST THE ASSESSEE. THE ASSESSEE ALSO FILED PB 269 WHICH IS RETRACTION LETTER BY SH. ASEEM KUMAR GUPTA TO THE AO, RETRACTING FROM HIS STATEMENT GIVEN AT THE TIME OF SEARCH. THEREFORE, THERE WERE NO BASIS TO MAKE ADDITION AGAINST THE ASSESSEE. IT MA Y ALSO BE NOTED HERE THAT THE ASSESSEE APPEARED BEFORE THE AO FOR R ECORDING HIS STATEMENT AS A DIRECTOR OF THE INVESTOR COMPANY IN WHICH HE DID NOT DENY GIVING OF LOAN BY THE INVESTOR COMPANY TO THE ASSESSEE. LD. DR POINTED OUT CERTAIN DISCREPANCIES AND THE AN SWERS NOT GIVEN BY THE ASSESSEE SPECIFICALLY TO THE QUESTIONS RAISED BY THE AO. HOWEVER, IT WOULD NOT BE MATERIAL BECAUSE THE INVESTOR COMPANY HAS CONFIRMED GIVING LOAN TO THE ASSESSEE, WHICH WAS CORROBORATED BY THE LOAN AGREEMENT SUBJECT TO INTER EST AND AS AN NBFC IT WAS ITS BUSINESS ACTIVITY TO GIVE LOAN TO O THERS. THEREFORE, SUCH DISCREPANCY IN HIS STATEMENT WOULD NOT BE RELE VANT TO REJECT THE EXPLANATION OF THE ASSESSEE. THE AO ALSO RECOR DED IN THE ASSESSMENT ORDER THAT THE INVESTOR HAS BEEN ASSESSE D BY HIM U/S 17 ITA NO. 1323/DEL/2015 153C FOR ASSESSMENT YEARS 2004-05 TO 2010-11, IT WA S AN EXISTING COMPANY AND ASSESSED TO TAX. THE ASSESSEE, THEREFO RE, PROVED THAT INVESTOR IS IN EXISTENCE. THERE IS NO EVIDENC E BROUGHT ON RECORD, IF ASSESSEE GAVE ANY CASH TO THE INVESTOR C OMPANY FOR GIVING LOAN. THE ASSESSEE PROVED THAT INVESTOR HAD SOLD INVESTMENT DURING THE YEAR AND HAS GIVEN ADVANCE TO THE ASSESSEE. THE ONUS UPON ASSESSEE TO PROVE IDENTITY OF THE INV ESTOR, ITS CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION HAVE BEEN DULY DISCHARGED. IT IS WELL SETTLED LAW THAT ASSES SEE IS NOT REQUIRED TO PROVE SOURCES OF THE SOURCE. WE, RELY UPON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF DWARKADHISH INVESTMENT P. LTD. 330 ITR 298 AND DECISION OF THE GUJARAT HIG H COURT IN THE CASE OF ROHINI BUILDERS LTD. 256 ITR 360. IT MAY B E NOTED HERE THAT IT IS A CASE OF INTEREST BEARING LOAN TAKEN BY THE ASSESSEE AND THERE IS NOTHING ILLOGICAL AND THERE IS NO MATERIAL FOUND DURING THE COURSE OF SEARCH OR ANY ADVERSE STATEMENT AGAINST T HE ASSESSEE ABOUT THE LOAN AS EXPLAINED ABOVE. LD. COUNSEL FOR THE ASSESSEE REFERRED TO THE ASSESSMENT ORDER U/S 143(3) OF THE ACT DATED 27.12.2011 IN THE CASE OF SH. MANOJ KUMAR PROPRIETO R OF AMB TRADERS AND SHIVA TRADING COMPANY, COPY OF WHICH IS FILED AT PAGE 18 ITA NO. 1323/DEL/2015 28 OF ANOTHER PAPER BOOK. LD. COUNSEL FOR THE ASSE SSEE RIGHTLY POINTED OUT THAT THIS ADDITION CANNOT BE MADE ON TH E GROUND OF SOURCE OF THE SOURCE AS THE AO HIMSELF HAS RECORDED A FINDING IN THE CASE OF SOURCE OF THE SOURCE I.E. SH. MANOJ KUM AR, THAT THE CASH DEPOSITED BELONGS TO SH. MANOJ KUMAR. AO NOTE D IN THE CASE OF SH. MANOJ KUMAR THAT HE HAD DEPOSITED CASH IN HI S BANK ACCOUNT, THEREFORE, TOTAL CASH DEPOSIT OF RS. 18,81 ,45,000/- AND RS. 50,93,77,676/- AS OTHER DEPOSITS. THEREFORE, O NE SUBSTANTIVE ADDITION IS MADE IN THE CASE OF SH. MANOJ KUMAR, NO FURTHER ADDITION SHOULD BE MADE IN THE HANDS OF THE ASSESSE E. THEREFORE, THERE WERE NO BASIS TO MAKE THE ADDITION AGAINST TH E ASSESSEE. IN SUPPORT OF ABOVE FINDINGS, WE RELY UPON THE FOLLOWI NG DECISIONS: I. CIT VS. FAIR INVESTMENT LTD., 357 ITR 146 IN WHICH IT WAS HELD THAT A.O. DID NOT SUMMON INVESTORS AND DID NOT MAKE EFFORTS. THERE IS NO FINDING THAT MATERIAL DISCLOSED WAS UNTRUSTWORTHY. THE APPELLATE AUTHORIT IES RIGHTLY DELETED THE ADDITION. II. DECISION OF SUPREME COURT IN THE CASE OF CIT VS. LO VELY EXPORTS PVT. LTD., (2008) 216 CTR 195 IN WHICH IT W AS HELD AS UNDER: IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH 19 ITA NO. 1323/DEL/2015 LAW, BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF ASSESSEE COMPANY. III. DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT VS. KAMDHENU STEEL AND ALLOYS LTD., & ORS. 361 ITR 220 (DEL.) IN WHICH IT WAS HELD AS UND ER: ONCE ADEQUATE EVIDENCE/MATERIAL IS GIVEN, WHICH WOULD PRIMA FACIE DISCHARGE THE BURDEN OF THE ASSESSEE IN PROVING THE IDENTITY OF SHAREHOLDERS, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE SHAREHOLDERS, THEREAFTER IN CASE SUCH EVIDENCE IS TO BE DISCARDED OR IT IS PROVED THAT IT HAS CREATED EVIDENCE, THE REVENUE IS SUPPOSED TO MAKE THOROUGH PROBE BEFORE IT COULD NAIL THE ASSESSEE AND FASTEN THE ASSESSEE WITH SUCH A LIABILITY U/S 68; AO FAILED TO CARRY HIS SUSPICION TO LOGICAL CONCLUSION BY FURTHER INVESTIGATION AND, THEREFORE, ADDITION U/S 68 WAS NOT SUSTAINABLE. IV. DECISION OF HON HIE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT VS. VRINDAVAN FARMS PVT. LTD., ETC. ITA.NO.7 1 OF 2015 DATED 12 TH AUGUST, 2015 (DEL.), IN WHICH IT WAS HELD AS UNDER : THE SOLE BASIS FOR THE REVENUE TO DOUBT THEIR CREDITWORTHINESS WAS THE LOW INCOME AS REFLECTED IN THEIR RETURN OF INCOME. IT WAS OBSERVED BY THE ITAT THAT THE AO HAD NOT UNDERTAKEN ANY INVESTIGATION OF THE VERACITY OF THE DOCUMENTS SUBMITTED BY THE ASSESSEE, THE DEPARTMENTAL APPEAL WAS DISMISSED BY THE HONBLE HIGH COURT. V. DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE O F CIT VS. LAXMAN INDUSTRIAL RESOURCES PVT. LTD., ITA.NO. 169 OF 2017 DATED 14 TH MARCH, 2017, IN WHICH IT WAS HELD AS UNDER : 20 ITA NO. 1323/DEL/2015 THE CIT(A) TOOK NOTE OF THE MATERIAL FILED BY THE ASSESSEE AND PROVIDED OPPORTUNITY TO THE AO IN REMAND PROCEEDINGS. THE AO MERELY OBJECTED TO THE MATERIAL FURNISHED BUT DID NOT UNDERTAKE ANY VERIFICATION. THE CIT(A) DELETED THE ADDITION BY RELYING UPON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF LOVELY EXPORTS PVT. LTD. (SUPRA) AND JUDGEMENT OF DELHI HIGH COURT IN THE CASE OF CIT VS DIVINE LEASING & FINANCE LTD. [2008] 299ITR 268. THE ITAT CONFIRMED THE OPINION OF THE LD.CIT(A). HONBLE HIGH COURT IN VIEW OF THE ABOVE FINDINGS NOTED THAT THE ASSESSEE HAD PROVIDED SEVERAL DOCUMENTS THAT COULD HAVE SHOWED LIGHT INTO WHETHER TRULY THE TRANSACTIONS WERE GENUINE. THE ASSESSEE PROVIDED DETAILS OF SHARE APPLICANTS I.E. COPY OF THE PAN, ASSESSMENT PARTICULARS, MODE OF AMOUNT INVESTED THROUGH BANKING CHANNEL, COPY OF RESOLUTION AND COPIES OF THE BALANCE SHEET. THE AO FAILED TO CONDUCT ANY SCRUTINY OF THE DOCUMENT, THE DEPARTMENTAL APPEAL WAS ACCORDINGLY DISMISSED. VI. DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F EARTH METAL ELECTRIC PVT. LTD., VS. CIT DATED 30 TH JULY, 2010 IN SLP.NO.21073 OF 1999, IN WHICH IT WAS HELD AS UNDER : WE HAVE EXAMINED THE POSITION, WE FIND THAT THE SHAREHOLDERS ARE GENUINE PARTIES. THEY ARE NOT BOGUS AND FICTITIOUS THEREFORE, THE IMPUGNED ORDER IS SET ASIDE. VII. DECISION OF HONBLE M.P. HIGH COURT IN THE CASE OF CIT VS. PEOPLES GENERAL HOSPITAL LTD., (2013) 356 ITR 6 5, IN WHICH IT WAS HELD AS UNDER: DISMISSING THE APPEALS, THAT IF THE ASSESSEE HAD RECEIVED SUBSCRIPTIONS TO THE PUBLIC OR RIGHTS ISSUE THROUGH BANKING CHANNELS AND FURNISHED COMPLETE DETAILS OF THE SHAREHOLDERS, NO ADDITION COULD BE MADE UNDER SECTION 68 OF 21 ITA NO. 1323/DEL/2015 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 PART OF THE SHARE CAPITAL REPRESENTED THE COMPANY'S OWN INCOME FROM UNDISCLOSED SOURCES. IT WAS NOBODY'S CASE THAT THE NON-RESIDENT INDIAN COMPANY WAS A BOGUS OR NON-EXISTENT COMPANY OR THAT THE AMOUNT SUBSCRIBED BY THE COMPANY BY WAY OF SHARE SUBSCRIPTION WAS IN FACT THE MONEY OF THE ASSESSEE. THE ASSESSEE HAD ESTABLISHED THE IDENTITY OF THE INVESTOR WHO HAD PROVIDED THE SHARE SUBSCRIPTION AND THAT THE TRANSACTION WAS GENUINE. THOUGH THE ASSESSEE'S CONTENTION WAS THAT THE CREDITWORTHINESS OF THE CREDITOR WAS ALSO ESTABLISHED, IN THIS CASE, THE ESTABLISHMENT OF THE IDENTITY OF THE INVESTOR ALONE WAS TO BE SEEN. THUS, THE ADDITION WAS RIGHTLY DELETED. CIT V. LOVELY EXPORTS P. LTD. [2009] 319ITR (ST.) 5 (SC) APPLIED. VIII. DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT VS. (I) DWARKADHISH INVESTMENT P. LTD. (ITA NO. 911 OF 2010) AND (II) DWARKADHISH CAPITAL P. LTD. ( ITA NO. 913 OF 2010) (2011) 330 ITR 298 (DEL.) (HC), IN WHICH IT WAS HELD AS UNDER: IN ANY MATTER, THE ONUS OF PROOF IS NOT A STATIC ONE. THOUGH IN SECTION 68 OF THE INCOME TAX ACT, 1961, THE INITIAL BURDEN OF PROOF LIES ON THE ASSESSES YET ONCE HE PROVES THE IDENTITY OF THE CREDITORS/ SHARE APPLICANTS BY EITHER FURNISHING THEIR PAN NUMBER OR INCOME-TAX ASSESSMENT NUMBER AND SHOWS THE GENUINENESS OF TRANSACTION BY SHOWING MONEY IN HIS BOOKS EITHER BY ACCOUNT PAYEE CHEQUE OR BY DRAFT OR BY ANY OTHER MODE, THEN THE ONUS OF PROOF WOULD SHIFT TO THE REVENUE. JUST BECAUSE THE CREDITORS/SHARE APPLICANTS COULD NOT BE FOUND AT THE ADDRESS GIVEN, IT WOULD NOT GIVE THE 22 ITA NO. 1323/DEL/2015 REVENUE THE RIGHT TO INVOKE SECTION 68. ONE MUST NOT LOSE SIGHT OF THE FACT THAT IT IS THE REVENUE WHICH HAS ALL THE POWER AND WHEREWITHAL TO TRACE ANY PERSON. MOREOVER, IT IS SETTLED LAW THAT THE ASSESSEE NEED NOT TO PROVE THE 'SOURCE OF SOURCE'. THE ASSESSEE- COMPANY WAS ENGAGED IN THE BUSINESS OF FINANCING AND TRADING OF SHARES. FOR THE ASSESSMENT YEAR 2001-02 ON SCRUTINY OF ACCOUNTS, THE ASSESSING OFFICER FOUND AN ADDITION OFRS. 71,75,000 IN THE SHARE CAPITAL OF THE ASSESSEE. THE ASSESSING OFFICER SOUGHT AN EXPLANATION OF THE ASSESSEE ABOUT THIS ADDITION IN THE SHARE CAPITAL. THE ASSESSEE OFFERED A DETAILED EXPLANATION. HOWEVER, ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE FAILED TO EXPLAIN THE ADDITION OF SHARE APPLICATION MONEY FROM FIVE OF ITS SUBSCRIBERS. ACCORDINGLY, THE ASSESSING OFFICER MADE AN ADDITION OF RS.35,50,000/- WITH THE AID OF SECTION 68 OF THE ACT, 1961 ON ACCOUNT OF UNEXPLAINED CASH CREDITS APPEARING IN THE BOOKS OF THE ASSESSEE. HOWEVER, IN APPEAL, THE COMMISSIONER OF INCOME-TAX (APPEALS) DELETED THE ADDITION ON THE GROUND THAT THE ASSESSEE HAD PROVED THE EXISTENCE OF THE SHAREHOLDERS AND THE GENUINENESS OF THE TRANSACTION. THE INCOME-TAX APPELLATE TRIBUNAL CONFIRMED THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AS IT WAS ALSO OF THE OPINION THAT THE ASSESSEE HAD BEEN ABLE TO PROVE THE IDENTITY OF THE SHARE APPLICANTS AND THE SHARE APPLICATION MONEY HAD BEEN RECEIVED BY WAY OF ACCOUNT PAYEE CHEQUES. ON APPEAL TO THE HIGH COURT: HELD, DISMISSING THE APPEALS, THAT THE DELETION OF ADDITION WAS JUSTIFIED. 23 ITA NO. 1323/DEL/2015 IX. DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT VS. WINSTRAL PETROCHEMICALS P. LTD., 330 ITR 603, IN WHICH IT WAS HELD AS UNDER: DISMISSING THE APPEAL, THAT IT HAD NOT BEEN DISPUTED THAT THE SHARE APPLICATION MONEY WAS RECEIVED BY THE ASSESSEE-COMPANY BY WAY OF ACCOUNT PAYEE CHEQUES, THROUGH NORMAL BANKING CHANNELS. ADMITTEDLY, COPIES OF APPLICATION FOR ALLOTMENT OF SHARES WERE ALSO PROVIDED TO THE ASSESSING OFFICER. SINCE THE APPLICANT COMPANIES WERE DULY INCORPORATED, WERE ISSUED PAN CARDS AND HAD BANK ACCOUNTS FROM WHICH MONEY WAS TRANSFERRED TO THE ASSESSEE BY WAY OF ACCOUNT PAYEE CHEQUES, THEY COULD NOT BE SAID TO BE NON-EXISTENT, EVEN IF THEY, AFTER SUBMITTING THE SHARE APPLICATIONS HAD CHANGED THEIR ADDRESSES OR HAD STOPPED FUNCTIONING. THEREFORE, THE COMMISSIONER (APPEALS) AND THE TRIBUNAL WERE JUSTIFIED IN HOLDING THAT THE GENUINENESS OF THE TRANSACTIONS HAD BEEN DULY ESTABLISHED BY THE ASSESSEE. X. DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT VS. VALUE CAPITAL SERVICES P. LTD., (2008) 3 07 ITR 334 (DEL.) (HC), IN WHICH IT WAS HELD AS UNDER: DISMISSING THE APPEAL, THAT THE ADDITIONAL BURDEN WAS ON THE DEPARTMENT TO SHOW THAT EVEN IF THE SHARE APPLICANTS DID NOT HAVE THE MEANS TO MAKE THE INVESTMENT, THE INVESTMENT MADE BY THEM ACTUALLY EMANATED FROM THE COFFERS OF THE ASSESSEE SO AS TO ENABLE IT TO BE TREATED AS THE UNDISCLOSED INCOME OF THE ASSESSEE. NO SUBSTANTIAL QUESTION OF LAW AROSE. 12. CONSIDERING THE FACTS OF THE CASE, IN THE LIGHT OF THE MATERIAL ON RECORD, IT IS CLEAR THAT ASSESSEE PRODUCED SUFFI CIENT 24 ITA NO. 1323/DEL/2015 DOCUMENTARY EVIDENCES BEFORE AO TO PROVE THE INGRED IENTS OF SECTION 68 OF THE ACT. THE AO, HOWEVER, DID NOT MA KE FURTHER ENQUIRY ON THE DOCUMENTS FILED BY THE ASSESSEE. TH E AO HAS THUS, FAILED TO CONDUCT SCRUTINY OF THE DOCUMENTS AT ASSE SSMENT STAGE AND MERELY SUSPECTED THE TRANSACTION BETWEEN THE IN VESTOR COMPANY AND THE ASSESSEE BECAUSE SOME MATERIALS FOU ND DURING THE COURSE OF SEARCH IN THE CASE OF SH. ASEEM KUMAR GUPTA OR HIS STATEMENT RECORDED, BUT THESE WOULD NOT PROVE ANYTH ING AGAINST THE ASSESSE. IT IS NOT REPORTED, IF ANY, CASH WAS FOUND DEPOSITED IN THE ACCOUNT OF THE INVESTOR BEFORE MAKING INVESTMEN T IN ASSESSEE COMPANY. THEREFORE, THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, CLEARLY PROVE THAT ASSESSEE DISCHARGED IT S INITIAL ONUS TO PROVE THE IDENTITY OF THE INVESTOR COMPANY, ITS CRE DITWORTHINESS AND GENUINENESS OF THE TRANSACTION IN THE MATTER. WE, ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIE S BELOW AND DELETE THE ADDITION OF RS. 2,29,73,630/- ON ACCOUNT OF UNEXPLAINED LOAN. GROUND NOS. 1 TO 7 OF THE APPEAL OF ASSESSEE ARE ALLOWED. 13. ON GROUND NO. 8, ASSESSEE CHALLENGED THE ADDITI ON OF RS. 4,36,036/- ON ACCOUNT OF INCOME FROM HOUSE PROPERTI ES MADE BY 25 ITA NO. 1323/DEL/2015 THE AO ON TWO PROPERTIES I.E. NO. (I) 200, PATPARGA NJ, NEW DELHI AND (II) 323, PATPARGANJ, NEW DELHI. THE AO NOTED THAT ASSESSEE HAS NOT DECLARED RENTAL INCOME IN RESPECT OF THE AB OVE PROPERTIES. THEREFORE, RENTAL INCOME IN RESPECT OF THESE PROPER TIES SHOULD BE PRIMA FACIE TAKEN U/S 23(1)(A) OF THE ACT. THE ASSESSEE SUBMIT TED THAT BOTH THESE PROPERTIES ARE USED FOR BUSINESS PU RPOSES OF M/S KAPISH PRINT PACK PVT. LTD. AND M/S CHAWLA PACKAGIN G PVT. LTD. THE AO, HOWEVER, NOTED THAT ASSESSEE DID NOT HAVE A NY BUSINESS INCOME FROM BOTH THESE COMPANIES. THEREFORE, RENTA L INCOME FROM THESE PROPERTIES WAS TAKEN AT RS. 6,22,908/- AND AF TER GIVING DEDUCTION U/S 24(A) OF THE ACT, AO MADE ADDITION OF RS. 4,36,036/-. THE LD. CIT(A) DISMISSED THIS GROUND OF APPEAL OF ASSESSEE. 14. LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT T HERE IS AN ERROR IN MAKING ADDITION. HE HAS SUBMITTED THAT IN AY 2009-10 AO HAS TAKEN THE NET ANNUAL VALUE OF BOTH THE PROPE RTIES AT RS. 1,88,760/- EACH TOTALING TO RS. 3,77,520/- AND BY E NHANCING THE SAME BY 10%, HAS WORKED OUT THE AMOUNT OF RS. 4,15, 272/-. THE AO, HOWEVER, IN RESPECT OF PROPERTY NO. (I) 323 PAT PARGANJ, NEW 26 ITA NO. 1323/DEL/2015 DELHI HAS TAKEN IT AT RS. 4,15,272/- AND ALSO TAKEN FAIR RENT OF OTHER PROPERTY NO. (II) 200 PATPARGANJ, NEW DELHI A T RS. 2,07,636/. THUS, THE CORRECT FIGURE OF BOTH THESE PROPERTIES A S PER AO WOULD BE RS. 4,15,272/-. HE HAS FURTHER SUBMITTED THAT A O WAS NOT JUSTIFIED IN ENHANCING THE RENT 10% EVERY YEAR. HE HAS FILED A CHART IN SUPPORT OF THE SAME CONTENTION. HE HAS SU BMITTED THAT AT THE MOST AO COULD HAVE TAKEN THE ASSUMED RENT AT RS . 1,14,000/- IN CASE OF PROPERTY NO. 200 PATPARGANJ, NEW DELHI A S WAS TAKEN IN AY 2004-05 AND AT RS. 1,71,600/- FOR PROPERTY NO. 3 23 PATPARGANJ AS WAS TAKEN IN AY 2008-09. THEREFORE, THE TOTAL W ILL BE RS. 2,85,600/- AND AFTER ALLOWING DEDUCTION OF 30% U/S 24(A) THE ADDITION COULD BE OF RS. 1,99,920/- AND NOT RS. 4,3 6,036/-. LD. DR, HOWEVER, RELIED UPON THE ORDERS OF THE AUTHORIT IES BELOW. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. THERE IS A TOTALING ERROR IN COMPUTATION OF THE INCOME FROM HOUSE PROPERTY. THE AO INSTEAD OF TAKING TOTAL NET FAIR RENTAL VALUE OF BOTH THE P ROPERTIES AT RS. 4,15,272/- AS EXPLAINED ABOVE HAS MADE FURTHER ADDI TION OF RS. 2,07,636/-. THUS, THE ERROR SHOULD BE CORRECTED BY THE AO. 27 ITA NO. 1323/DEL/2015 FURTHER, AS PER CHART FILED BY THE ASSESSEE, AO HAS BEEN INCREASING THE RENT 10% EVERY YEAR WHICH IS NOT JUSTIFIED, WHI CH WAS EVEN AS PER RENT CONTROL ACT, THE RENT COULD BE ENHANCED AF TER THREE YEARS. IN THE ABSENCE OF ANY JUSTIFICATION OR REASONS, WE ARE OF THE VIEW THAT RENT SHOULD NOT BE ENHANCED EVERY YEAR BY THE AO PARTICULARLY WITHOUT THERE BEING ANY EVIDENCE WITH THE AO. WE MAY NOT NOTE THAT IN AY 2009-10, AO HAS MADE THE AD DITION OF RS. 3,77,520/- ON ACCOUNT OF INCOME FROM HOUSE PROPERTY FOR BOTH THESE PROPERTIES AFTER ALLOWING STATUTORY DEDUCTION . IT APPEARS THAT ASSESSEE DID NOT CHALLENGE THE SAME COMPUTATIO N BEFORE THE APPELLATE AUTHORITIES. THEREFORE, CONSIDERING THE PAST HISTORY OF THE ASSESSEE AND THE ANNUAL RENTAL VALUE DECIDED BY THE AO IN PRECEDING AY 2009-10 AT RS. 3,77,520/- FOR BOTH THE PROPERTIES, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AN D DIRECT THE AO TO ADOPT THE SAME AMOUNT AS INCOME FROM HOUSE PROPE RTY IN A SUM OF RS. 3,77,520/- AND MAKE ADDITION ACCORDINGLY . THE ADDITION IS, THEREFORE, RESTRICTED TO RS. 3,77,520/ - INSTEAD OF RS. 4,36,036/-. THIS GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 28 ITA NO. 1323/DEL/2015 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.09 .2018 SD/- SD/- (L.P. SAHU) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 26.09.2018 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 17.09.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 19.9.18 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P S/PS 26.9.18 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 26.9.18 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 26.9.18 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT 26.9.18 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER 29 ITA NO. 1323/DEL/2015