The DCIT, Circle-4, Ahmedabad V. Gujarat Infotech Limited, Ahmedabad

ITA 1371/AHD/2015

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6671 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 15-05-2015
• Result in Favour of: Set Aside
• Court: TRIBUNAL
• Department Lawyers: SAURABH SINGH
• Assessee Lawyers: S N DIVATIA
• Keywords: Source of fund; Additional evidence; Accommodation entries
• Section: 68; 143(3)

Judgement Text

ITA NO. 1371/AHD/2015 DCIT VS. GUJARAT INFOTECH LTD ASSESSMENT YEAR : 2011-12 PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR VP AND MAHAVIR PRASAD JM] ITA NO. 1371/AHD/2015 ASSESSMENT YEAR: 2011-12 THE DEPUTY COMMISSIONER OF INCOME-TAX ........ ..........APPELLANT CIRCLE 2(1)(1), AHMEDABAD VS. GUJARAT INFOTECH LIMITED ............................RESPONDENT A-2, 2 ND FLOOR, JAY TOWER, ANKUR COMPEX, NR. ANKUR BUS STOP, NAVRANGPURA, AHMEDABAD-380006 [PAN : AABCG 6123 E] APPEARANCES BY: SAURABH SINGH, FOR THE APPELLANT S N DIVATIA, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 30.11.2018 DATE OF PRONOUNCING THE ORDER : 28.02.2019 O R D E R PER PRAMOD KUMAR, VICE PRESIDENT : 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CHALLENGED CORRECTNESS OF LEARNED CIT(A)S ORDER DATED 4 TH FEBRUARY 2015, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2011-12. 2. GRIEVANCES RAISED BY THE APPELLANT ARE AS FOLLOW S:- 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS BY ADMITTING THE ADDITIONAL EVIDENCES SUBMITTED BY ASSESSEE DURING APPELLATE PR OCEEDINGS, IN VIOLATION OF PROVISIONS OF RULE 46(A)(1) OF IT RULES. THE ASSESS EE'S CASE IS NOT COVERED BY ANY OF THE CLAUSE A,B,C OR D OF RULE 46A OF THE I.T. RULES. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN D ELETING THE ADDITION OF RS.42.4 LACS OUT OF RS. 69.25 LACS, BEING THE AMOUN T OF SHARE APPLICATION MONEY RECEIVED FROM 74 PERSONS, BY INVOKING PROVISI ONS OF SECTION 68 OF THE I.T. ACT DESPITE THE FACT THAT THE CREDIT WORTHINES S OF THE PARTIES WERE NEITHER PROVED AT THE TIME OF ASSESSMENT PROCEEDINGS NOR IN THE ADDITIONAL EVIDENCES SUBMITTED DURING THE APPELLATE PROCEEDINGS. 3. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS BY N OT TAKING INTO CONSIDERATION, THE PROVISO TO SEC 68, WHEREIN, IT I S MENTIONED THAT IN THE CASE OF INTRODUCTION OF SHARE APPLICATION MONEY, THE PER SON IN WHOSE NAME CREDIT HAS BEEN RECORDED, ALSO HAS TO OFFER AN EXPLANATION ABOUT THE NATURE OF ITA NO. 1371/AHD/2015 DCIT VS. GUJARAT INFOTECH LTD ASSESSMENT YEAR : 2011-12 PAGE 2 OF 8 SOURCE OF SUCH. IN THE CASE OF THE ASSESSEE THE BAN K STATEMENT OF THE PARTIES HAD NOT BEEN ATTACHED AND THEIR CREDITWORTHINESS HA D NOT BEEN PROVED. 3. TO ADJUDICATE ON THIS APPEAL, ONLY A FEW MATERIA L FACTS NEED TO BE TAKEN NOTE OF. THE ASSESSEE BEFORE US IS ENGAGED IN THE BUSINE SS OF DATA ENTRY, DATA PROCESSING, PRINTING JOB WORK, NETWORKING ETC. DU RING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT ASSESSEE COMPANY HAS RECEIVED SHARE APPLICATION MONEY, AGGREGATING TO RS .76,00,000 FROM 81 DIFFERENT PERSONS. WHEN HE PROBED THE MATTER FURTHER, THE AS SESSEE FURNISHED NAMES, ADDRESSES AND OCCUPATIONS OF THESE PERSONS. THE AS SESSING OFFICER REPRODUCED THE CHART CONTAINING THESE DETAILS AND OBSERVED AS FOLL OWS:- 3.3 FROM, THE ABOVE MENTIONED CHART, IT IS EVIDENT THAT THE ONLY FEW PARTIES ARE FILLING THEIR RETURN OF INCOME THAT TO VERY LOW INCOME. AND THE MOST OF THE PARTIES ARE EMPLOYEES OF THE ASSESSEE COMPANY, WHO ARE MANAGING THEIR BREAD AND BUTTER WITH THE SALARY. THE ASSESSEE FAIL ED TO PRODUCE THE RELEVANT BANK STATEMENTS OF THE PARTIES ALSO AND FEW BANK ST ATEMENT FURNISHED SHOWS THAT THE MONEY INVESTED IN ASSESSEE COMPANY WAS REC EIVED FROM SOMEWHERE ELSE IN THE ACCOUNT ONLY ONE OR TWO DAYS BEFORE ISS UING CHEQUES IN FAVOR OF COMPANY. THE CREDITWORTHINESS OF THE PARTIES IS NOT ESTABLISHED. 4. THE INITIAL ONUS IS UPON THE ASSESSEE TO ESTABLI SH THREE THINGS NECESSARY TO OBVIATE THE MISCHIEF OF SECTION 68 OF THE ACT, THES E ARE : (I) THE IDENTITY OF INVESTORS; (II) THEIR CREDITWORTHINESS/INVESTMENTS, AND (III) THE GENUINENESS OF THE TRANSACTION. IN THE PRESENT CASE, THE ASSESSEE COMPANY FAILED TO PROVE ALL THREE CONDITIONS CUMULATIVELY. 5. FURTHER, AN ASSESSEE'S EXPLANATION OF THE NATURE AND SOURCE OF THE CREDITS CANNOT BE ENTERTAINED AND HELD SATISFACTORY UNLESS AND UNTIL THE GROUND REALITY I.E. THE DE FACTO EXISTENCE OF THE CREDITOR IS FIRS T ESTABLISHED, IS PRIMA FACIE PAVING THE WAY FOR THE EXAMINE FURTHER THE CAPACITY AND GENUINENESS ASPECTS. HENCE MERELY BASED ON ARRANGED AFFAIRS AND SUPPORTI NG DOCUMENTS, THE IDENTITY CANNOT BE SAID TO BE ESTABLISHED, AND IN M ANY CASE NOT THE CAPACITY AND GENUINESNESS OF TRANSACTION. THEREFORE , I AM NOT SATISFIED WITH THE EXPLANATION OFFERED BY THE ASSESSEE COMPAN Y. 6. AS REGARDS THE ASSESSEE'S CONTENTION THAT THE TRANSACTIONS HAVE BEEN RECEIVED THROUGH CROSSED CHEQUES. I HAVE TO STATE T HAT MERELY ACCEPTING THE ENTRY THROUGH CROSSED CHEQUES SHOULD NOT PROVE THE GENUINENESS OF THE TRANSACTIONS. PAYMENT BY ACCOUNT PAYEE CHEQUE IS NO T SACROSANCT. THIS VIEW IS ALSO SUPPORTED BY THE KOLKATA HIGH COURT IN THE CASE OF CIT V. PRECISION FINANCER LTD. - (1994) 121 CTR 20. IN THE CASE OF S UBSCRIPTION TO THE SHARE CAPITAL OF A COMPANY, THE PRINCIPAL INGREDIENT THAT HAS TO BE SATISFIED IS TO ESTABLISH THE IDENTITY OF THE SUBSCRIBERS, PROVE TH EIR CREDITWORTHINESS AND FURTHER PROVE GENUINENESS OF THE TRANSACTION, 4. HE THEN EXTENSIVELY PRODUCED EXTRACTS FROM VARIO US JUDICIAL PRECEDENTS, INCLUDING FROM CIT VS. P. MOHANAKALA [(2007) 161 TA XMAN 169 (SC)], PRATIBHA FINVEST PVT LTD VS. ITO [29 TAXMANN.COM 420 (DEL)] , DR. D. SIVA SANKARA RAO VS. ITA NO. 1371/AHD/2015 DCIT VS. GUJARAT INFOTECH LTD ASSESSMENT YEAR : 2011-12 PAGE 3 OF 8 ITO [29 TAXMANN.COM 17 (AP)(2013)], CIT VS. FROSTAI R PVT LTD [26 TAXMANN.COM 11 (DEL) (2012)], CIT VS. HINDON FORGE PVT LTD [25 TAX MANN.COM 239 (ALL) (2012)], CIT VS. INDEPENDENT MEDIA PVT LTD [25 TAXAMNN.COM 276 ( DEL) (2012)], KAVERI ASSOCIATES VS. ACIT [26 TAXMANN.COM 221 (KAR) (2012 )], CIT VS. AARTI JANA [35 TAXMANN.COM 2 (CAL) (2013)], CIT VS. NR PORTFOLIO L TD, [2 ITR-OL 68 (DEL) (2014)] AND FINALLY CONCLUDED AS FOLLOWS:- 8. FURTHER, THE ASSESSEE COMPANY FROM HIS SUBMISSI ON FAILED TO PROVE CAPACITY OF THE PARTIES EXCEPT PARTIES NAMED YOGESH SUTHAR (RS. 1,25,000), VIJAY P. PATE! (RS. 1,00,000), MADANLAL M. SHARMA ( RS.50,000), PIYUSH PAREKH (RS. 1,50,000), JAYESH F. SHAH (RS.50,000), PARUL JAYESH SHAH (RS.50,000), ALKESH NAYAK (RS. 1,50,000). ALL OTHER S PARTY'S CREDITWORTHINESS AND CAPACITY TO PAY, IS NOT PROVED BY THE ASSESSEE. WITH RESPECT TO THESE 7 PARTIES, RETURN OF INCOME WAS FURNISHED BY THE ASSE SSEE COMPANY AND THESE 7 PARTIES HAVING A RETURNED INCOME MORE THAN THEIR INVESTMENTS, THEREFORE KEEPING THEM OUT OF THE ADDITION. THE OTHER REMAIN ING SHARE APPLICATION MONEY RECEIPT ENTRIES ARE FOUND IN THE BOOKS OF ACC OUNT AND IT IS FOR THE ASSESSEE TO PROVE NOT ONLY THE IDENTITY OF THE PART IES BUT ALSO TO PROVE THE CAPACITY OF THE CREDITORS TO ADVANCE THE MONEY AND GENUINENESS OF THE TRANSACTIONS. AND HERE THE ASSESSEE COMPANY FAILED TO DO SO. 9. IN VIEW OF THE DETAILED DISCUSSION MADE SUPRA AN D IN VIEW OF THE LEGAL AND FACTUAL ASPECTS, THE SHARE APPLICATION MONEY OF RS. 69,25,000/- ALLEGED TO HAVE BEEN RECEIVED FROM THE PARTIES WHOSE CREDITWOR THINESS & CAPACITY TO PAY IS NOT PROVED AND FOR THE SAID PARTIES THE ASSESSEE COMPANY FAILED TO PROVE ALL THREE ESSENTIAL CONDITIONS OF SECTION 68 CUMULATIVE LY, IS TREATED AS INCOME OF THE ASSESSEE COMPANY AS PER THE PROVISION OF SECT ION 68 OF THE ACT. 5. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). LEARNED CIT(A) DELETED THE ADDITION TO THE EXTENT OF RS.42. 40 LAKHS BY OBSERVING AS FOLLOWS:- SR. NO. PARTICULARS NO. OF SHARE HOLDER APPLICATION AMOUNT 1 PAST & PRESENT EMPLOYEE SHARE HOLDER 49 3920000 2 NO KYC / IDENTITY PROOF 5 230000 3 KYC & ITR SUBMITTED (OTHER THAN EMPLOYEE) 4 550000 4 KYC & INCOME PROOF SUBMITTED (OTHER THAN EMPLOYEE) 12 1735000 5 KYC SUBMITTED (OTHER THAN EMPLOYEE) 4 720000 74 6925000 THE DETAILS FURNISHED SHOW THAT OUT OF THESE SHARE APPLICANTS UP TO SI. NO. 49 ARE THE PERSONS WHO ARE EMPLOYEES OR EX-EMPLOYEES O F THE APPELLANT COMPANY AND TOTAL SHARE CAPITAL PERTAINING TO THESE APPLICANTS TOTALS TO 36.90 LAKHS. IN RESPECT OF THESE APPLICANTS, IT IS NOTED THAT THE MAXIMUM AMOUNT THAT HAS BEEN RECEIVED IS RS. 2.5 LAKH AND BALANCE PERSO NS HAVE PAID AN AMOUNT RANGING FROM 45,000 TO 1 LAKH AND SO ON. IT IS FURT HER NOTED THAT THE PAYMENTS ITA NO. 1371/AHD/2015 DCIT VS. GUJARAT INFOTECH LTD ASSESSMENT YEAR : 2011-12 PAGE 4 OF 8 HAVE BEEN RECEIVED THROUGH CHEQUE/BANKING CHANNEL. ALL THE EMPLOYEES HAVE CONFIRMED THE PAYMENT. THE DETAILS ON RECORD SHOW T HAT THE COMPANY HAD GIVEN SOME BONUS OR SOME AMOUNT TO THEM OUT OF WHIC H THE PAYMENT FOR SHARE APPLICATION MONEY HAS BEEN MADE. REGARDING CR EDITWORTHINESS, IT IS NOTED THAT ALL THE DETAILS WERE THERE ON RECORD. TH E AMOUNT HAS COME THROUGH THE BANK ACCOUNT. THE SHAREHOLDERS ARE WORKING WITH THE APPELLANT AND HAVE RECEIVED DIVIDEND FOR THE LAST ONE-TWO YEAR. THE AM OUNTS RECEIVED ARE ALSO NOT SUBSTANTIAL. IT IS ALSO NOTED THAT THESE SHARE APPLICATIONS ARE NOT IN THE NATURE OF ACCOMMODATION ENTRIES AND THE PERSONS WHO HAVE APPLIED TOR SHARES ARE NOT KNOWN TO BE IN THE BUSINESS OF PROVI DING ACCOMMODATION ENTRIES FOR COMMISSION AND OTHER REMUNERATION. IN V IEW OF ALL THESE FACTS SEEMS THE APPELLANT HAS GIVEN SUFFICIENT EVIDENCES RELATED TO THE TRANSACTION AND THE IDENTITY OF THE SHAREHOLDER NO ADDITION CAN BE MADE IN THE HANDS OF THE APPELLANT COMPANY IN RESPECT OF THE SHARE SUBSC RIPTION MONEY RECEIVED FROM EMPLOYEES AND EX-EMPLOYEES. THEREFORE, THE ADD ITION OF RS. 36.9 LAKH IS DIRECTED TO BE DELETED. REGARDING THE PERSONS AT SI. NO. 50, 51, 52, 53 AND 54 IT IS NOTED THAT THE APPELLANT COULD NOT GIVE ANY EVIDENCE REGARDING IDE NTITY OF THESE PERSONS. THE AMOUNT IS RECEIVED FROM THESE PERSONS TOTALS TO RS. 2.30 LAKHS. SINCE THE IDENTITY OF THESE PERSONS IS NOT PROVED THE ONUS HA S NOT BEEN DISCHARGED BY THE APPELLANT IN RESPECT OF THESE PERSON. THEREFORE , THE ADDITION OF RS.2.30 LAKHS MADE BY THE AO IN RESPECT OF THESE PERSONS IS UPHELD. REGARDING THE OTHER TYPE OF PERSONS, FROM SERIAL NU MBER 55 TO 58,IT IS NOTED THAT THE APPELLANT HAS RECEIVED RS. 5.50 LAKHS FROM FOUR PERSONS WHICH ARE NOT EMPLOYEES BUT THE APPELLANT HAS GIVEN IDENTITY AND INCOME TAX RETURN OF THESE PERSONS. SINCE THE APPELLANT HAS DISCHARGED ITS ONU S OF GIVING THE INFORMATION IN RESPECT OF THESE PERSONS, THE AMOUNT HAS BEEN RE CEIVED THROUGH BANKING CHANNEL AND THE PERSONS ARE FILING RETURN OF INCOM E THE ONUS UNDER SECTION 68 HAS BEEN DULY DISCHARGED BY THE APPELLANT AND NO AD DITION IN THIS RESPECT CAN BE MADE. THE ADDITION OF RS. 5.50 LAKH IS THEREFORE , DIRECTED TO BE DELETED. 6. THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIEF SO GRANTED BY THE CIT(A) AND IS IN APPEAL BEFORE US. 7. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 8. A PLAIN LOOK AT THE REASONING WHICH PREVAILED WI TH THE CIT(A), RESULTING IN IMPUGNED RELIEF, WOULD SHOW THAT GENUINENESS OF THE TRANSACTIONS HAS NOT BEEN EXAMINED AT ALL. IT IS ONLY IN FOUR CASES THAT COP IES OF INCOME TAX RETURNS ARE PLACED ON RECORD, AND TOTAL SHARE APPLICATION MONEY RECEIV ED IN THESE FOUR CASES IS RS.5,50,000/-. IN THE REMAINING 49 CASES OF SHAREH OLDERS, THE RELIEF HAS BEEN GRANTED SIMPLY ON THE BASIS OF THE STATEMENT THAT T HESE PERSONS WERE PRESENT AND FORMER EMPLOYEES OF THE ASSESSEE COMPANY. QUITE IN TERESTINGLY, THE SOURCE OF FUNDING IS INDICATED, IN A RATHER VAGUE MANNER, BY OBSERVING THAT THE DETAILS ON RECORD SHOW THAT THE COMPANY HAS GIVEN SOME BONUS O R SOME AMOUNT TO THEM OUT OF WHICH THE PAYMENT FOR SHARE APPLICATION MONEY HAS B EEN MADE . THIS OBSERVATION IS ITA NO. 1371/AHD/2015 DCIT VS. GUJARAT INFOTECH LTD ASSESSMENT YEAR : 2011-12 PAGE 5 OF 8 MADE IN THE ORDER OF THE CIT(A) BUT, IF ANYTHING, T HIS OBSERVATION RAISES DOUBTS ABOUT GENUINENESS OF TRANSACTIONS. THE DETAILS OF SUCH P AYMENTS BY THE COMPANY SHOULD HAVE BEEN EXAMINED IN GREATER DETAILS, RATHER THAN IN THIS SUPERFLUOUS MANNER, AND THE GENUINENESS OF TRANSACTIONS SHOULD HAVE BEEN EX AMINED. IT IS CERTAINLY AN UNUSUAL POSITION THAT A COMPANY GIVES BONUS OR MAKE S SOME OTHER VOLUNTARY PAYMENT TO ITS EMPLOYEES AND ALL SUCH PAYMENTS FIND ITS WAY BACK TO THE COMPANY AS SHARE CAPITAL. IF THAT IS WHAT HAS HAPPENED, THE GENUINENESS OF THE TRANSACTION IS TO BE EXAMINED WITH DUE CARE. 9. AS WE DEAL WITH THIS ASPECT OF THE MATTER, WE MA Y USEFULLY REFER TO A DECISION OF THIS TRIBUNAL IN THE CASE OF PAVANKUMAR M. SANGH VI VS. ITO (165 ITD 260), WHICH HAS BEEN CONFIRMED BY HONBLE GUJARAT HIGH COURT (4 04 ITR 601) AGAINST WHICH SLP IS DISMISSED BY HONBLE SUPREME COURT (97 TAXMANN.C OM 398), AS FOLLOWS:- 7. IN MY CONSIDERED VIEW, SO FAR AS THE LEGAL FOUN DATION OF THE IMPUGNED ADDITIONS IS CONCERNED, IT CONSISTS OF ASSESSEE'S I NABILITY TO SATISFY THE ASSESSING OFFICER ABOUT ALL THE THREE ESSENTIAL ING REDIENTS OF A CREDIT ENTRY IN THE BOOKS OF ACCOUNTS- EXISTENCE OF THE LENDER, ABI LITY OF THE LENDER TO ADVANCE FUNDS IN QUESTION, AND, ABOVE ALL, GENUINENESS OF T HE TRANSACTION. THERE IS NO DISPUTE ABOUT THE BASIC LEGAL POSITION ABOUT SECTIO N 68 WHICH PROVIDES THAT WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF ACC OUNTS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCES THEREOF, OR THE EXPLAN ATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTO RY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. THE EXPRESSION 'NATURE AND SOURCE' APPEARING IN SEC TION 68 HAS TO BE UNDERSTOOD AS A REQUIREMENT OF IDENTIFICATION OF SO URCE AND ITS GENUINENESS. IT IS ALSO A SETTLED LEGAL POSITON THAT THE ONUS OF TH E ASSESSEE, OF EXPLAINING NATURE AND SOURCE OF CREDIT, DOES NOT GET DISCHARGE D MERELY BY FILING CONFIRMATORY LETTERS, OR DEMONSTRATING THAT THE TRA NSACTIONS ARE DONE THROUGH THE BANKING CHANNELS OR EVEN BY FILING THE INCOME T AX ASSESSMENT PARTICULARS. IN THE CASE OF CIT V. UNITED COMMERCIAL AND INDUSTR IAL CO (P.) LTD [1991] 187 ITR 596/56 TAXMAN 304 (CAL) , HON'BLE CALCUTTA HIGH COURT HAS HELD THAT 'IT WAS NECESSARY FOR THE ASSESSEE TO PROVE PRIMA FACIE THE IDENTITY OF CREDITORS, THE CAPACITY OF SUCH CREDITORS AND LASTLY THE GENUI NENESS OF TRANSACTIONS'. SIMILARLY, IN THE CASE OF CIT V. PRECISION FINANCE (P.) LTD [1994] 208 ITR 465/[1995] 82 TAXMAN 31 (CAL), IT WAS OBSERVED THAT 'IT IS FOR THE ASSESSEE TO PROVE THE IDENTITY OF CREDITORS, THEIR CREDITWORTHI NESS AND GENUINENESS OF TRANSACTIONS'. THERE IS THUS NO ESCAPE FROM PROVING GENUINENESS OF A TRANSACTION. . 8. AS I PROCEED TO DEAL WITH GENUINENESS ASPECT, IT IS IMPORTANT TO BEAR IN MIND THE FACT THAT WHAT IS GENUINE AND WHAT IS NOT GENUINE IS A MATTER OF PERCEPTION BASED ON FACTS OF THE CASE VIS--VIS THE GROUND REALITIES. THE FACTS OF THE CASE CANNOT BE CONSIDERED IN ISOLATION WITH THE GROUND REALTIES. 9. I AM REMINDED OF HON'BLE SUPREME COURT'S O BSERVATION, IN THE CASE OF CIT V. DURGA PRASAD MORE [1971] 82 ITR 540, TO THE EFFECT THAT 'SCIENCE HAS NOT YET INVENTED ANY INSTRUMENT TO TES T THE RELIABILITY OF THE ITA NO. 1371/AHD/2015 DCIT VS. GUJARAT INFOTECH LTD ASSESSMENT YEAR : 2011-12 PAGE 6 OF 8 EVIDENCE PLACED BEFORE A COURT OR TRIBUNAL. THEREFO RE, THE COURTS AND TRIBUNALS HAVE TO JUDGE THE EVIDENCE BEFORE THEM BY APPLYING THE TEST OF HUMAN PROBABILITIES'. SIMILARLY, IN A LATER DECISION IN T HE CASE OF SUMATI DAYAL V. CIT [1995] 214 ITR 801/80 TAXMAN 89 (SC), HON'BLE SUPRE ME COURT REJECTED THE THEORY THAT IT IS FOR ALLEGER TO PROVE THAT THE APP ARENT AND NOT REAL, AND OBSERVED THAT, THIS, IN OUR OPINION, IS A SUPERFICI AL APPROACH TO THE PROBLEM. THE MATTER HAS TO BE CONSIDERED IN THE LIGHT OF HUM AN PROBABILITIES...................SIMILARLY THE OBSER VATION .......................... THAT IF IT IS ALLEGED THAT THESE TICKETS WERE OBTAINED THROUGH FR AUDULENT MEANS, IT IS UPON THE ALLEGER TO PROVE THAT IT IS SO, IGNORES THE REA LITY. THE TRANSACTION ABOUT PURCHASE OF WINNING TICKET TAKES PLACE IN SECRET AN D DIRECT EVIDENCE ABOUT SUCH PURCHASE WOULD BE RARELY AVAILABLE ........... .......IN OUR OPINION, THE MAJORITY OPINION AFTER CONSIDERING SURROUNDING CIRC UMSTANCES AND APPLYING THE TEST OF HUMAN PROBABILITIES HAS RIGHTLY CONCLUDED T HAT THE APPELLANT'S CLAIM ABOUT THE AMOUNT BEING HER WINNING FROM RACES IS NO T GENUINE. IT CANNOT BE SAID THAT THE EXPLANATION OFFERED BY THE APPELLANT IN RESPECT OF THE SAID AMOUNTS HAS BEEN REJECTED UNREASONABLY'. I WILL BE SUPERFICIAL IN MY APPROACH IN CASE I DONOT EXAMINE THE CLAIM OF THE ASSESSEE O N THE BASIS OF DOCUMENTS AND AFFIDAVITS FILED BY THE ASSESSEE AND OVERLOOK C LEAR THE UNUSUAL PATTERN IN THE DOCUMENTS FILED BY THE ASSESSEE AND PRETEND TO BE OBLIVIOUS OF THE GROUND REALITIES. AS HON'BLE SUPREME COURT HAS OBSE RVED, IN THE CASE OF DURGA PRASAD MORE(SUPRA), ....................IT IS TRUE THAT AN APPARENT MUST BE CONSIDERED REAL UNTIL IT IS SHOWN THAT THERE ARE RE ASONS TO BELIEVE THAT THE APPARENT IS NOT THE REAL PARTY WHO RELIES ON A RECI TAL IN A DEED HAS TO ESTABLISH THE TRUTH OF THOSE RECITALS, OTHERWISE IT WILL BE V ERY EASY TO MAKE SELF-SERVING STATEMENTS IN DOCUMENTS EITHER EXECUTED OR TAKEN BY A PARTY AND RELY ON THOSE RECITALS. IF ALL THAT AN ASSESSEE WHO WANTS T O EVADE TAX IS TO HAVE SOME RECITALS MADE IN A DOCUMENT EITHER EXECUTED BY HIM OR EXECUTED IN HIS FAVOUR THEN THE DOOR WILL BE LEFT WIDE OPEN TO EVADE TAX. A LITTLE PROBING WAS SUFFICIENT IN THE PRESENT CASE TO SHOW THAT THE APPARENT WAS N OT THE REAL. THE TAXING AUTHORITIES WERE NOT REQUIRED TO PUT ON BLINKERS WH ILE LOOKING AT THE DOCUMENTS PRODUCED BEFORE THEM. THEY WERE ENTITLED TO LOOK IN TO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY OF THE RECITA LS MADE IN THOSE DOCUMENTS'. AS A FINAL FACT FINDING AUTHORITY, THIS TRIBUNAL CA NNOT BE SUPERFICIAL IN ITS ASSESSMENT OF GENUINENESS OF A TRANSACTION, AND THI S CALL IS TO BE TAKEN NOT ONLY IN THE LIGHT OF THE FACE VALUE OF THE DOCUMENT S SIGHTED BEFORE THE TRIBUNAL BUT ALSO IN THE LIGHT OF ALL THE SURROUNDING CIRCUM STANCES, PREPONDERANCE OF HUMAN PROBABILITIES AND GROUND REALTIES. GENUINENES S IS A MATTER OF PERCEPTION BUT ESSENTIALLY A CALL ON GENUINENESS OF A TRANSACTION IS TO BE TAKEN IN THE LIGHT OF WELL SETTLED LEGAL PRINCIPLES. THER E MAY BE DIFFERENCE IN SUBJECTIVE PERCEPTION ON SUCH ISSUES, ON THE SAME S ET OF FACTS, BUT THAT CANNOT BE A REASON ENOUGH FOR THE FACT FINDING AUTH ORITIES TO AVOID TAKING SUBJECTIVE CALLS ON THESE ASPECTS, AND REMAIN CONFI NED TO THE FINDINGS ON THE BASIS OF IRREFUTABLE EVIDENCES. HON'BLE SUPREME COU RT HAS, IN THE CASE OF DURGA PRASAD MORE (SUPRA), OBSERVED THAT 'HUMAN MIN DS MAY DIFFER AS TO THE RELIABILITY OF A PIECE OF EVIDENCE BUT IN THAT SPHE RE THE DECISION OF THE FINAL FACT FINDING AUTHORITY IS MADE CONCLUSIVE BY LAW'. THIS FAITH IN THE TRIBUNAL BY HON'BLE COURTS ABOVE MAKES THE JOB OF THE TRIBUNAL EVEN MORE ONEROUS AND DEMANDING AND, IN MY CONSIDERED VIEW, IT DOES REQUI RE THE TRIBUNAL TO TAKE A ITA NO. 1371/AHD/2015 DCIT VS. GUJARAT INFOTECH LTD ASSESSMENT YEAR : 2011-12 PAGE 7 OF 8 HOLISTIC VIEW OF THE MATTER, IN THE LIGHT OF SURROU NDING CIRCUMSTANCES, PREPONDERANCE OF PROBABILITIES AND GROUND REALITIES , RATHER THAN BEING SWAYED BY THE NOT SO CONVINCING, BUT APPARENTLY IN ORDER, DOCUMENTS AND EXAMINING THEM, IN A PEDANTIC MANNER, WITH THE BLINKERS ON. I MAY ALSO ADD THAT THE PHENOMENON OF SHELL ENTITIES BEING SUBJECTED TO DEE P SCRUTINY BY TAX AND ENFORCEMENT OFFICIALS IS RATHER RECENT, AND THAT, T ILL RECENTLY, LITTLE WAS KNOWN, OUTSIDE THE UNDERBELLY OF FINANCIAL WORLD, ABOUT MO DUS OPERENDI OF SHELL ENTITIES. THERE WERE, THEREFORE, NOT MANY QUESTIONS RAISED ABOUT GENUINENESS OF TRANSACTIONS IN RESPECT OF SHELL ENTITIES. THAT IS NOT THE CASE ANY LONGER. JUST BECAUSE THESE ISSUES WERE NOT RAISED IN THE PA ST DOES NOT MEAN THAT THESE ISSUES CANNOT BE RAISED NOW AS WELL, AND, TO THAT EXTENT, THE EARLIER JUDICIAL PRECEDENTS CANNOT HAVE BLANKET APPLICATION IN THE CURRENT SITUATION AS WELL. AS HON'BLE SUPREME COURT HAS OBSERVED IN THE CASE IN MUMBAI KAMGAR SABHA V. ABDULBAHI FAIZULLABHAI AIR 1976 SC 1455 'I T IS TRITE, GOING BY ANGLOPHONIC PRINCIPLES THAT A RULING OF A SUPERIOR COURT IS BINDING LAW. IT IS NOT OF SCRIPTURAL SANCTITY BUT OF RATIO-WISE LUMINOSITY WITHIN THE EDIFICE OF FACTS WHERE THE JUDICIAL LAMP PLAYS THE LEGAL FLAME. BEYO ND THOSE WALLS AND DE HORS THE MILIEU WE CANNOT IMPART ETERNAL VERNAL VALUE TO THE DECISIONS, EXALTING THE PRECEDENTS INTO A PRISON HOUSE OF BIGOTRY, REGARDLE SS OF THE VARYING CIRCUMSTANCES AND MYRIAD DEVELOPMENTS. REALISM DICT ATES THAT A JUDGMENT HAS TO BE READ, SUBJECT TO THE FACTS DIRECTLY PRESE NTED FOR CONSIDERATION AND NOT AFFECTING THE MATTERS WHICH MAY LURK IN THE DAR K'. GENUINENESS OF TRANSACTIONS THUS CANNOT BE DECIDED ON THE BASIS OF INFERENCES DRAWN FROM THE JUDICIAL PRECEDENTS IN THE CASES IN WHICH GENUI NENESS DID COME UP FOR EXAMINATION IN A VERY LIMITED PERSPECTIVE AND IN TH E TIMES WHEN SHELL ENTITIES WERE VIRTUALLY NON-EXISTENT. AS THE THINGS STAND NO W, GENUINENESS OF TRANSACTIONS IS TO BE EXAMINED IN THE LIGHT OF THE PREVAILING GROUND REALITIES, AND THAT IS PRECISELY WHAT I HAVE DONE.... 10. IN VIEW OF THESE DISCUSSIONS AND BEARING IN MIN D ENTIRETY OF THE CASE, WE DEEM IT FIT AND PROPER TO REMIT THE MATTER TO THE F ILE OF THE CIT(A) FOR ADJUDICATION DE NOVO IN THE LIGHT OF ABOVE OBSERVATIONS AND SPECIFICALL Y DEALING WITH GENUINENESS ASPECT. WHILE DOING SO, THE CIT(A) WILL BEAR IN MI ND BINDING JUDICIAL PRECEDENTS AND GIVE DUE AND REASONABLE OPPORTUNITY OF HEARING TO T HE ASSESSEE. ORDERED, ACCORDINGLY. 11. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIS TICAL PURPOSES IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON THE 28 TH FEBRUARY, 2019. SD/- SD/- MAHAVIR PRASAD PRAMOD KUMAR (JUDICIAL MEMBER) (VICE PRESIDENT) AHMEDABAD, THE 28 TH DAY OF FEBRUARY, 2019 *BT ITA NO. 1371/AHD/2015 DCIT VS. GUJARAT INFOTECH LTD ASSESSMENT YEAR : 2011-12 PAGE 8 OF 8 COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD 1. DATE OF DICTATION: 28.02.2019.. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: .. 28.02.2019......... 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR . P.S./P.S.: .... 28.02.2019...... 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT:... 28.02.2019.. 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : .... 28.02.2019.................. 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK : . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 8. DATE OF DESPATCH OF THE ORDER: ......