DCIT, CC - XXIV, Kolkata, Kolkata V. UIC Udyog Ltd., Kolkata

ITA 1398/KOL/2008

• Counselvise Citation: 139823514 RSA 2008
• Duration Of Justice: 2 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2000-2001
• Appeal Filed On: 18-07-2008
• Court: TRIBUNAL
• Department Lawyers: L S NEGI
• Assessee Lawyers: K K C; R P AGARWALSUBASH AGARWAL
• Keywords: Unexplained investment; Search and seizure; Share purchase agreement; Opportunity of being heard; Period of limitation; Difference of opinion; Assessment record; Block assessment; Onus to prove; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 68; 263

Judgement Text

1 , B , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- B , KO LKATA [ . . . . . .. . , ,, , . .. . ! ! ! !. .. . , , , , '# ] BEFORE SHRI B.R.MITTAL, JUDICIAL MEMBER & SRI C.D. RAO, ACCOUNTANT MEMBER $ $ $ $ / ITA NO. 1398 (KOL) OF 2008 %& '( / ASSESSMENT YEAR 2000-01 DY.COMMISSIONER OF INCOME-TAX C.C.-XXIV, KOLKATA. M/S. UIC UDYOG LTD., KOLKATA. (PAN-AAACU3431C) (+, / APPELLANT ) - % - - VERSUS - (/0+,/ RESPONDENT ) +, 1 2 '/ FOR THE APPELLANT: / SRI L.S. NEGI /0+, 1 2 ' / FOR THE RESPONDENT: / S/SRI R.P.AGARWAL,SUBASH AGARWAL & K.K.CHHAPARIA '3 / ORDER ( . . . . . .. . ), (B.R.MITTAL), JUDICIAL MEMBER : THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSME NT YEAR 2000-01 AGAINST THE ORDER OF LD. C.I.T.(A), CENTRAL-III, KOLKATA DATED 08/05/2008 ON THE FOLLOWING GROUND : 1. THAT LD. CIT(A) ERRED ON FACT AS WELL AS IN LAW BY ALLOWING THE APPEAL OF THE ASSESSEE ON THE GROUND THAT THE ACTION OF THE A.O. BY ISSUIN G U/S. 148 IS ILLEGAL. IT WAS OBSERVED FROM THE ASSESSMENT RECORDS OF THE ASSESSEE THAT TH E SHARE CAPITAL OF THE ASSESSEE COMPANY WAS INCREASED FROM RS.5,80,00,000/- IN THE ASSESSMENT YEAR 1999-2000 TO RS.11,00,00,000/- IN THE ASSESSMENT YEAR 2000-01. THUS THERE WAS AN INTRODUCTION OF FRESH CAPITAL (THROUGH ROUTING OF THE UIC GROUPS U NACCOUNTED MONEY) TO THE TUNE OF RS.5,20,00,000/- IN THE ASSESSMENT YEAR 2000-01 INT O THE BOOKS OF THE ASSESSEE. AS SUCH, THE INCOME OF THE ASSESSEE FOR THE YEAR HAS E SCAPED ASSESSMENT AND THE ASSESSMENT FOR THE ASSESSMENT YEAR 2000-01 WAS REOP ENED AFTER OBTAINING PRIOR APPROVAL OF LD. CIT. SO THERE WAS NO LAPSE ON THE PART OF THE A.O. TO REOPEN THE CASE BY ISSUING NOTICE U/S. 148. SUBSEQUENTLY, THE DEPARTMENT VIDE LETTER DATED 06/3 /2009 REVISED THE ABOVE GROUND OF APPEAL AS UNDER :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS IN FACTS BY HOLDING THAT THE ISSUE OF NOTICE U/S 148 IS ILLEGAL WHEN THE AO HAS RECORDED HIS SATISFACTION THAT AN AMOUNT OF RS.5,20 ,00,000/- HAS ESCAPED ASSESSMENT FOR THE AY 2000-01 AND DUE APPROVAL OF THE CIT HAS BEEN TAKEN BEFORE ISSUE OF NOTICE U/S 148. DEPARTMENT VIDE LETTER DATED 03/5/2009 HAS TAKEN AN ADDITIONAL GROUND AS UNDER :- 2 1. THAT ON THE FACTS AND CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.5,20,00,000/-. 2. ON PERUSAL OF THE ABOVE GROUND AS WELL AS REVIS ED GROUND AND ADDITIONAL GROUND, IT IS OBSERVED THAT THE DEPARTMENT HAS DISPUTED THE ORDER OF LD. C.I.T.(A) - (A) IN HOLDING THAT THE NOTICE U/S. 148 OF THE ACT IS ILLEGAL; AND (B) IN DELETING THE ADDITION OF RS. 5,20,00,000/- MADE BY THE A.O. ON PROTECTIVE BASIS. 3. IT IS RELEVANT TO STATE THAT THIS APPEAL IS ARI SING OUT OF REASSESSMENT ORDER PASSED BY THE A.O. DATED 31/12/2007 U/S. 143(3)/147 OF THE ACT. THE RELEVANT FACTS GIVING RISE TO THIS APPEAL ARE THAT ORIGINALLY THE ASSESSEE FIL ED RETURN ON 29/11/2000 DECLARING LOSS OF RS.1,28,13,140/-. THE SAID RETURN WAS PROCESSED U/ S. 143(1) OF THE ACT ON 11/5/2001. SUBSEQUENTLY, THERE WAS A SEARCH & SEIZURE OPERATIO N CONDUCTED IN THE UIC GROUP OF COMPANIES ON 07/5/2002. IT IS RELEVANT TO STATE TH AT ASSESSEE-COMPANY IS ONE OF THE GROUP COMPANIES OF UIC GROUP AND OTHER COMPANIES AR E UIC INDUSTRIES LTD., UIC FINANCE PVT. LTD., UIC HOLDINGS PVT. LTD. AND UIC A GRO LTD., THE DETAILS OF WHICH ARE GIVEN AT PAGE-6 OF THE ASSESSMENT ORDER. DURING TH E COURSE OF SEARCH & SEIZURE OPERATION, SHARE SCRIPS OF THE ASSESSEE-COMPANY AND OTHER GROUP COMPANIES WERE FOUND AND SEIZED FROM THE CORPORATE OFFICE AT 227, A.J.C. BOSE ROAD, KOLKATA. IN VIEW OF ABOVE, NOTICE WAS ISSUED U/S. 158BC OF THE ACT TO F ILE BLOCK RETURN FOR THE BLOCK PERIOD AND THE ASSESSEE FILED THE RETURN FOR THE BLOCK PER IOD DECLARING NIL UNDISCLOSED INCOME. IT IS RELEVANT TO STATE THAT BLOCK ASSESSMENT WAS C OMPLETED VIDE ORDER DATED 31/5/2004 AT NIL UNDISCLOSED INCOME AFTER OBTAINING APPROVAL OF ADDL. C.I.T. AS PER PROVISIONS OF THE ACT. A COPY OF THE SAID BLOCK ASSESSMENT ORDER DAT ED 31/5/2004 IS PLACED AT PAGES 14 TO 23 OF THE PAPER BOOK. 3.1. PRIOR TO THE PRESENT REASSESSMENT PROCEEDINGS , IT IS RELEVANT TO STATE THAT A NOTICE U/S. 148 OF THE ACT WAS ALSO ISSUED EARLIER ON 05/1 /2004 REOPENING THE INTIMATION PASSED U/S. 143(1) OF THE ACT ON 11/5/2001 AND REASSESSMEN T ORDER WAS PASSED U/S. 147 OF THE ACT VIDE ORDER DATED 24/3/2005. A COPY OF THE SAID REASSESSMENT ORDER IS PLACED AT PAGES 2 & 3 OF THE PAPER BOOK. 3.2. IN RESPECT OF THE PRESENT PROCEEDINGS BEFORE US, THE A.O. ISSUED NOTICE U/S. 148 OF THE ACT ON 30/3/2007 TO REOPEN THE REASSESSMENT COM PLETED ON 24/3/2005 U/S. 147 OF THE ACT AND THE REASONS RECORDED BY THE A.O. ARE CONTAI NED AT PAGES 84 TO 91 OF THE PAPER BOOK. THE A.O. IN THE ASSESSMENT ORDER DATED 31/12/ 2007 PASSED U/S. 143(3)/147 OF THE 3 ACT HAS STATED THE SAID REASONS AT PAGES 1 TO 7 OF THE ORDER. THEREAFTER THE A.O. HAS STATED THAT THE ASSESSEE-COMPANY FILED A STATEMENT OF ALLOTMENT OF SHARES DURING THE PERIOD 01/4/1999 TO 31/3/2000 OF AGGREGATE SUM OF R S.5,20,00,000/-, THE DETAILS OF WHICH ARE AS UNDER 4 3.3. THE A.O. HAS STATED THAT THE ASSESSEE INTRODU CED THE SAID SHARE CAPITAL OF RS. 5,20,00,000/- ROUTED THROUGH ITS UNACCOUNTED MONEY VIA ABOVE-MENTIONED COMPANIES. THE ENTIRE AMOUNT IS UNACCOUNTED MONEY OF THE ASSES SEE WHICH WAS GIVEN IN CASH TO FOUR PERSONS, VIZ. (I) SRI RAJENDRA KR. SURANA, (II ) SRI SUNIL KR. JAIN, (III) SRI SURENDRA KR. HIRWAT, & (IV) SRI SHANKAR LAL GODH AND, ACCORD INGLY, ADDED BACK THE SAID AMOUNT IN THE HANDS OF THE ASSESSEE ON PROTECTIVE BASIS. BEING AGGRIEVED, ASSESSEE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4. LD. C.I.T.(A) HAS OBSERVED THAT IN RESPECT OF B LOCK ASSESSMENT ORDER PASSED BY THE A.O. DATED 31/5/2004, LD. C.I.T. VIDE ORDER U/S . 263 OF THE ACT DATED 23/3/2007 SET ASIDE THE BLOCK ASSESSMENT ORDER WITH A DIRECTION T O MAKE DE NOVO ASSESSMENT AFTER EXAMINING THE EVIDENCES AND GIVING THE ASSESSEE REA SONABLE OPPORTUNITY OF BEING HEARD. A COPY OF THE SAID ORDER DATED 23/3/2007 IS PLACED AT PAGES 37 TO 56 OF THE PAPER BOOK. THE ASSESSEE FILED APPEAL BEFORE THE I.T.A.T. AGAIN ST THE SAID ORDER OF LD. C.I.T. AND I.T.A.T. VIDE ITS ORDER DATED 21/9/2007 QUASHED THE ORDER PASSED BY LD. C.I.T. U/S. 263 OF THE ACT. A COPY OF THE SAID ORDER OF I.T.A.T. IS P LACED AT PAGES 75 TO 83 OF THE PAPER BOOK. LD. C.I.T.(A) HAS OBSERVED IN PARA-5 OF THE IMPUGNED ORDER THAT ACTION OF THE A.O. TO ISSUE NOTICE U/S. 148 IS ILLEGAL. HE HAS S TATED THAT THE REASONS RECORDED IN THE NOTICE U/S. 148 OF THE ACT ARGUE JUST THE OPPOSITE WITHOUT ANY ADDITIONAL MATERIAL TO JUSTIFY THE CHANGE OF OPINION THAT THE SHARE APPLIC ATION MONEY WAS THE INCOME OF THE ASSESSEE-COMPANY. HE FURTHER STATED THAT THE SUBSTA NTIVE ASSESSMENTS ARE IN THE CASES OF COMPANIES WHICH APPLIED FOR AND PAID FOR ALLOTMENT OF SHARES AND IF THAT FAILS, IN THE ALTERNATIVE, THE SAME AMOUNT HAS TO BE TREATED AS T HE INCOME OF THE ASSESSEE-COMPANY WHICH ISSUED SHARES AND RECEIVED SHARE APPLICATION MONEY. LD. C.I.T.(A) HAS STATED THAT IT IS NOT JUSTIFIED IN VIEW OF FINDING IN THE ORDER OF I.T.A.T. DATED 21/9/2007 THAT THE ACTION OF A.O. TREATING THE SHARE APPLICATION MONEY AS THE INCOME OF THE APPLICANT COMPANIES ONLY WAS CORRECT. HE HAS FURTHER STATED THAT REOPENING HAS TO BE PROCEEDED BY FORMATION OF BELIEF THAT INCOME HAD ESCAPED ASSE SSMENT AND THE A.O. SHOULD BE CERTAIN ABOUT THE NATURE OF THE INCOME AND ITS ASSE SSABILITY IN THE CASE OF THE ASSESSEE IN THE ASSESSMENT YEAR IN QUESTION. HOWEVER, CONTENTS IN THE NOTICE U/S. 148 OF THE ACT BEING CONTRARY TO A.O.S OWN EARLIER ACTION AND THE ORDER OF I.T.A.T., THE VERY IDEA OF REASSESSMENT FOR THE PURPOSE OF MAKING PROTECTIVE A SSESSMENT CUTS DOWN THE BRANCH ON 5 WHICH IT STANDS. THE A.O. MUST GIVE A FINDING, HOWS OEVER TENTATIVE AND SUBJECT TO FUTURE INVESTIGATION, THAT CERTAIN SUM IS THE INCOME OF TH E ASSESSEE-COMPANY AND IT WAS NOT TAXED EARLIER. BUT BY PROPOSING TO TAX IT ONLY PRO TECTIVELY, IT IS ADMITTED THAT AFTER ALL THERE MAY NOT BE ESCAPEMENT OF INCOME. LD. C.I.T.( A) HAS STATED THAT SEC. 147 OF THE ACT IS NOT THE INSTRUMENT TO BRING INTO EXISTENCE A PROTECTIVE ASSESSMENT ORDER AND HAS RELIED ON HONBLE BOMBAY HIGH COURT DECISION IN THE CASE OF TANNA BUILDERS PVT. LTD. VS. SMT. NEELA KRISHNAN & ORS. [283 ITR 448 (BOM)]. THE RELEVANT PORTION OF THE SAID JUDGMENT QUOTED BY HIM IS AS UNDER :- THE REASONS RECORDED FOR REOPENING THE ASSESSMENT D O NOT STATE THAT THERE IS ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ANY MATERIAL FACTS. THE MERE FACT THAT A PROTECTIVE ASSESSMENT HAS BEEN MAD E IN THE CASE OF SOME OTHER ASSESSEE ON THE GROUND THAT THE INCOME OF THAT ASSE SSEE IS ASSESSABLE IN THE HANDS OF THE ASSESSEE HEREIN CANNOT BE A GROUND TO REOPEN THE CONCLUDED ASSESSMENT OF THE ASSESSEE. IN VIEW OF ABOVE, LD. C.I.T.(A) HAS CANCELLED THE I MPUGNED ASSESSMENT ORDER BY ALLOWING THE APPEAL OF THE ASSESSEE. HENCE THE DEP ARTMENT IS IN APPEAL BEFORE THE TRIBUNAL. 5. LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT I.T.A.T. ORDER DATED 21/9/2007 IS AGAINST ORDER PASSED BY LD. C.I.T. U/S. 263 OF T HE ACT DATED 23/3/2007. HE SUBMITTED THAT LD. C.I.T.(A) RELIED ON I.T.A.T. ORDER DATED 2 1/9/2007, WHEREAS A.O. INITIATED REASSESSMENT PROCEEDINGS ON 30/3/2007 AND, THEREFOR E, THE FINDINGS GIVEN BY I.T.A.T. IN ITS ORDER DATED 21/9/2007 CANNOT BE CONSIDERED WHIL E ADJUDICATING THE VALIDITY OF ACTION TAKEN U/S. 148 OF THE ACT. HE SUBMITTED THAT SEC. 1 48 OF THE ACT IS A PROCEDURAL SECTION AND IS TO BE INTERPRETED TO GIVE EFFECT TO THE PROV ISIONS OF THE ACT AND NOT TO OBSTRUCT TO FIND OUT THE ESCAPED INCOME. HE FURTHER SUBMITTED T HAT VARIOUS LAYERS WERE USED TO DEPOSIT INITIALLY THE AMOUNT IN CASH WHICH ULTIMATE LY CAME THROUGH 3-4 LAYERS OF DIFFERENT COMPANIES TO THE ASSESSEE-COMPANY IN THE FORM OF SHARE CAPITAL. HE SUBMITTED THAT THE ASSESSEE-COMPANY IS THE ULTIMATE BENEFICIA RY TO RECEIVE THE SAID MONEY AND HENCE IT HAS BEEN RIGHTLY ASSESSED BY THE A.O. ON P ROTECTIVE BASIS AS THE SUBSTANTIVE ADDITION HAS TO BE MADE AFTER ASCERTAINING AS TO WH OM THIS MONEY ACTUALLY BELONGED. HE SUBMITTED THAT HUMAN PROBABILITY HAS TO BE CONSIDER ED IN THE CASE OF THE TRANSACTIONS ENTERED INTO AS THE SHARE APPLICANTS, WHO APPLIED F OR THE SHARES IN THE ASSESSEE-COMPANY, DID NOT HAVE SUFFICIENT MEANS TO MAKE THE APPLICATI ONS FOR WHICH THE SHARES WERE 6 ALLOTTED BY THE ASSESSEE-COMPANY. HE FURTHER SUBMI TTED THAT MERELY BECAUSE THE AMOUNT HAD COME TO THE ASSESSEE-COMPANY BY WAY OF CHEQUE F ROM THE COMPANIES, THE DETAILS OF WHICH ARE GIVEN BY THE A.O. AT PAGES 7 & 8 OF THE A SSESSMENT ORDER, IT CANNOT BE SAID THAT THE A.O. HAS NOT RIGHTLY TREATED THE SHARE APP LICANTS AS NOT GENUINE AND THEREBY MAKING THE ASSESSMENT IN THE HANDS OF THE ASSESSEE ON PROTECTIVE BASIS. HE FURTHER SUBMITTED THAT SUFFICIENCY OF REASONS IS NOT JUSTIF IABLE AND ONLY THE EXISTENCE OF REASONS IS TO BE LOOKED INTO AT THE STAGE OF ISSUE OF NOTIC E AND REFERRED TO FOLLOWING THREE DECISIONS :- DESH RAJ UDYOG VS. ITO [318 ITR 6 (ALL.)] RAYMOND WOOLLEN MILLS VS. ITO [236 ITR 34 (SC)] INDO-ADEN SALT MFG. & TRADING CO. (P) LTD. VS. CI T [159 ITR 624 (SC)] HE SUBMITTED THAT THE ORDER OF THE A.O. SHOULD BE C ONFIRMED. 6. ON THE OTHER HAND ON BEHALF OF THE ASSESSEE, TH E LD. A/R SUBMITTED THAT THE PRESENT REASSESSMENT PROCEEDINGS WERE INITIATED BY ISSUING NOTICE ON 30/3/2007 BY STATING THE REASONS WHICH HAVE BEEN STATED BY LD. C .I.T. WHILE PASSING THE ORDER U/S. 263 OF THE ACT DATED 23/3/2007 VIDE WHICH LD. C.I.T. SE T ASIDE BLOCK ASSESSMENT ORDER DATED 31/5/2004. HE SUBMITTED THAT THE REASSESSMENT PROC EEDINGS HAVE BEEN INITIATED SIMULTANEOUSLY WITH THE ORDER PASSED U/S. 263 OF TH E ACT AND MOREOVER WHEN THE BLOCK ASSESSMENT ORDER BECAME OPEN AS PER ORDER OF LD. C. I.T. DATED 23/3/2007 TO CONSIDER THE SAME INCOME WHICH WAS THE SUBJECT MATTER OF BLOCK P ERIOD. THE LD. A/R REFERRED PAGES 84 TO 91 OF THE PAPER BOOK WHICH CONTAINED COPY OF THE REASONS RECORDED AND SUBMITTED THAT IN THE REASONS RECORDED THERE IS NO MENTION TH AT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULL FACTS DUE TO WHICH THE IN COME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE LD. A/R RELYING ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CARGO CLEARING AGENCY (GUJARAT) VS. J.C.I.T . [307 I.T.R. 1 (GUJ)] SUBMITTED THAT WHEN ACTION HAD BEEN TAKEN U/S. 158BC OF THE ACT AN D THAT TOO WHEN A BLOCK ASSESSMENT ORDER HAD ALREADY BEEN MADE, THERE IS NO QUESTION O F INITIATING REASSESSMENT PROCEEDINGS BY ISSUING NOTICE U/S. 148 OF THE ACT. LD. A/R SUB MITTED THAT SEC. 147 OF THE ACT IS APPLICABLE ONLY WHEN ONE HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. HE FURTHER SUBMITTED THAT THE NOTICE U/S. 148 DATED 30/3/2007 WAS ISSUED JUST SEVEN DAYS AFTER PASSING THE ORDER U/S. 263 OF THE ACT DATED 23/3/2007 AND THE REASONS RECORDED ARE VERBATIM TO THE ORDER PASS ED U/S. 263 AND, THEREFORE, IT IS A 7 DIRECTIVE FROM LD. C.I.T. TO INITIATE REASSESSMENT PROCEEDINGS. HE SUBMITTED THAT IT IS NOT PERMISSIBLE AND RELIED ON THE DECISION OF HONBLE A PEX COURT IN THE CASE OF CIT VS. GREENWORLD CORPORATION [314 ITR 81 (SC)]. LD. A/R FURTHER SUBMITTED THAT IN THE REASONS ITSELF IT IS STATED TO INITIATE REASSESSMEN T PROCEEDINGS U/S. 148 OF THE ACT ON PROTECTIVE BASIS AND, ACCORDINGLY, THE A.O. ALSO CO MPLETED THE ASSESSMENT ON PROTECTIVE BASIS. LD. A/R SUBMITTED THAT THE SAID ASSESSMENT ORDER IS CONTRARY TO THE FINDING GIVEN BY I.T.A.T. IN ITS ORDER DATED 21/9/2007, THE ORDER PASSED BY QUASHING THE ORDER U/S. 263 OF THE ACT OF LD. C.I.T. HE REFERRED PARA-16 OF SAI D ORDER OF I.T.A.T., COPY PLACED AT PAGES 75 TO 83 OF THE PAPER BOOK AND SUBMITTED THAT I.T.A.T. HAS MENTIONED THAT THERE IS NO INFIRMITY IN THE A.O.S ACTION IN THE BLOCK ASSE SSMENT ORDER PASSED IN NOT CONSIDERING THE SHARE CAPITAL RAISED AS THE ASSESSEE-COMPANYS INCOME BUT LEAVING THE ISSUE FOR CONSIDERATION IN THE HANDS OF THE SHAREHOLDING COMP ANIES AS THE MATERIAL AVAILABLE ON RECORD SO INDICATED. LD. A/R SUBMITTED THAT I.T.A.T . HAS STATED THAT SAID SHARE CAPITAL IS TO BE ASSESSED IN THE HANDS OF THE SHARE APPLICANTS AND NOT IN THE HANDS OF THE ASSESSEE- COMPANY. AT THE TIME OF HEARING, LD. A/R SUBMITTED THAT THE DEPARTMENT HAS ALREADY CONSIDERED IN RESPECT OF SOME OF THE SHARE APPLICAN TS THE ABOVE SHARE APPLICATION MONEY AS THEIR UNDISCLOSED INCOME ON SUBSTANTIVE BASIS AN D ALSO FILED COPIES OF ASSESSMENT ORDERS IN RESPECT OF THE SHARE APPLICANT COMPANIES AND TO SUBSTANTIATE HIS CONTENTION, HE FILED COPIES OF THE ASSESSMENT ORDER AND ORDER OF L D. C.I.T.(A) IN THE CASE OF STANDARD DEALCOM PVT. LTD. CONFIRMING THE ADDITION OF THE SH ARE APPLICATION MONEY MADE IN THE ASSESSEE-COMPANY AS UNDISCLOSED INCOME OF THE SHARE APPLICANT COMPANY. HE SUBMITTED THAT THE REASSESSMENT PROCEEDING INITIATED IS NOT J USTIFIED AND IT IS MERELY BASED ON SUSPICION AND THERE WAS NO REASON TO BELIEVE THAT T HE INCOME CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE HAD ESCAPED ASSESSMENT. 7. LD. DEPARTMENTAL REPRESENTATIVE IN HIS REPLY TO THE SUBMISSION OF LD. A/R SUBMITTED THAT PROTECTIVE ASSESSMENT MADE IS ALSO J USTIFIED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. HE FURTHER SUBMITTED TH AT EVEN IF THE REASONS RECORDED IS REPLICA OF THE ORDER PASSED U/S. 263, THE SAID REAS ONS COULD NOT BE HELD TO BE INVALID KEEPING IN VIEW THE SURROUNDING CIRCUMSTANCES AND H UMAN PROBABILITIES. HE SUBMITTED THAT IF THE SUBSTANTIVE ADDITION MADE IN THE HANDS OF THE SHARE APPLICANT IS DELETED AT ANY POINT OF TIME, THE SAID INCOME WILL GO UNTAXED. HE , THEREFORE, SUBMITTED THAT THE ORDER OF A.O. SHOULD BE CONFIRMED. 8 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE ORDERS OF AUTHORITIES BELOW . WE HAVE ALSO GONE THROUGH THE EARLIER ORDERS PASSED BY THE A.O., LD. C.I.T. U/S. 263 OF THE ACT AS ALSO THE EARLIER ORDER OF I.T.A.T. DATED 21/9/2007 AND CONSIDERED THE DECI SIONS CITED BEFORE US. WE OBSERVE THAT THERE WAS A SEARCH AND SEIZURE OPERATION IN TH E CASE OF UIC GROUP OF COMPANIES ON 7/5/2002 AND DURING THE COURSE OF SAID SEARCH, IT W AS REVEALED THAT HUGE SHARE SCRIPS INVOLVING CRORES OF RUPEES ALLOTTED IN THE NAMES OF VARIOUS OTHER COMPANIES WERE FOUND IN POSSESSION, INTER ALIA, WITH THE ASSESSEE-COMPAN Y. IT WAS INFERRED THAT THE SHARE CERTIFICATES WERE NOT PREPARED AFTER ALLOTMENT BUT RATHER AT ONE POINT OF TIME THOUGH THE BALANCE SHEET REVEALED INTRODUCTION OF SHARE CAPITA L DURING DIFFERENT FINANCIAL YEARS, I.E. 1997-98 TO 1999-2000. IT IS RELEVANT TO STATE THAT THE SHARE CAPITAL OF THE ASSESSEE- COMPANY HAD INCREASED FROM RS.5,80,00,000/- IN THE ASSESSMENT YEAR 1999-2000 TO RS. 11,00,000/-IN THE ASSESSMENT YEAR UNDER CONSIDERATI ON, I.E. 2000-01. THUS THERE WAS AN INTRODUCTION OF FRESH SHARE CAPITAL OF RS.5,20,00,0 00/- IN THE ASSESSMENT YEAR UNDER CONSIDERATION. THE A.O. HAS GIVEN THE DETAILS OF T HE ALLOTMENT OF SHARES DURING FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATIO N AT PAGES 7 & 8 OF THE ASSESSMENT ORDER, THE DETAILS OF WHICH HAVE ALREADY BEEN MENTI ONED HEREINABOVE. WE OBSERVE THAT THE A.O. HAS CONSIDERED THAT CASH WAS DEPOSITED INI TIALLY IN FOUR BOGUS ACCOUNTS STANDING IN THE NAMES OF SRI RAJENDRA KR. SURANA, S RI SUNIL KR. JAIN, SRI SURENDRA KR. HIRWAT AND SRI SHANKAR LAL GODH. THESE FOUR PERSON S HAD FOUR BANK ACCOUNTS, VIZ. ACCOUNT NOS. 4886, 4914, 4933 & 4934 RESPECTIVELY W ITH FEDERAL BANK OF INDIA. THE A.O. HAS STATED THAT THIS FORMED FIRST LAYER AND SU BSEQUENTLY SUBSTANTIAL SUM OF MONEY FROM THE BANK ACCOUNTS OF THESE FOUR PERSONS WERE T RANSFERRED TO THE ACCOUNTS OF THE COMPANIES, DETAILS OF WHICH ARE GIVEN BY THE A.O. A T PAGES 5 & 6 OF THE ASSESSMENT ORDER, AND ALLEGED THAT IF FORMED SECOND LAYER. TH E A.O. HAS STATED THAT THESE SECOND LAYER COMPANIES WERE CONTROLLED BY SRI S. SINGHI. HE HAS FURTHER STATED THAT FROM THESE COMPANIES SOME CHEQUES WERE ISSUED TO THIRD LAYER C OMPANIES WHICH WERE CONTROLLED BY SRI RAJESH JAJODIA AND HIS BROTHER OF SRI SUJIT SAH A. ULTIMATELY THE SECOND AND THIRD LAYER COMPANIES ISSUED CHEQUES FOR PURCHASE OF SHAR ES OF THE ASSESSEE-COMPANY AND ITS GROUP COMPANIES. 8.1. WE OBSERVE THAT ON THE BASIS OF THE ABOVE FAC TS, THE BLOCK ASSESSMENT ORDER WAS MADE U/S. 158BC OF THE ACT, BUT THE SAID BLOCK ASSE SSMENT ORDER WAS COMPLETED ON 9 31/5/2004 ASSESSING THE UNDISCLOSED INCOME AT NIL. WE FURTHER OBSERVE THAT LD. C.I.T. IN EXERCISE OF HIS JURISDICTION U/S. 263 OF THE ACT SE T ASIDE THE SAID BLOCK ASSESSMENT ORDER VIDE ORDER DATED 23/3/2007 AND DIRECTED THE A.O. TO REDO THE SAME DE NOVO AFTER CONSIDERING THE EVIDENCES AND GIVING ADEQUATE OPPOR TUNITY OF BEING HEARD TO THE ASSESSEE. A COPY OF THE SAID ORDER PASSED U/S. 263 OF THE ACT DATED 23/3/2007 IS PLACED AT PAGES 37 TO 74 OF THE PAPER BOOK. WE OBSERVE TH AT THE ASSESSEE FILED APPEAL AGAINST THE SAID ORDER OF LD. C.I.T. DATED 23/3/2007 AND PE NDING THAT APPEAL BEFORE THE TRIBUNAL, THE A.O. RECORDED REASONS AND ISSUED NOTICE U/S. 14 8 OF THE ACT FOR REOPENING THE ASSESSMENT AND IT IS OBSERVED THAT THE REASONS RECO RDED ARE VERBATIM OF THE ORDER OF LD. C.I.T. PASSED U/S. 263 OF THE ACT DATED 23/3/2007. IT IS OBSERVED THAT I.T.A.T. DECIDED THE APPEAL FILED AGAINST ORDER PASSED U/S. 263 OF T HE ACT VIDE ORDER DATED 21/9/2007 AND QUASHED THE LD. C.I.T.S ORDER DATED 23/3/2007. A COPY OF THE SAID ORDER OF I.T.A.T. IS PLACED AT PAGES 75 TO 83 OF THE PAPER BOOK. DURING THE COURSE OF HEARING, REFERENCE WAS MADE TO PARA 16 OF THE SAID ORDER OF I.T.A.T., WHIC H WE CONSIDER PRUDENT TO REPRODUCE AS UNDER :- 16. BEFORE PARTING WITH THE ISSUE, WE WOULD LIKE TO OBSERVE HERE THAT THE A.O. HAS SUFFICIENTLY ENSURED THAT THERE IS NO LEAKAGE OF RE VENUE. HE HAS RECORDED HIS SATISFACTION (SATISFACTION NOTE PLACED AT PAGE 86 O F THE PAPER BOOK) AND INITIATED PROCEEDINGS U/S 158BD AGAINST THE SHAREHOLDER COMPA NIES CONTROLLED BY SHRI RAJESH KR. JAJODIA AND SHRI SANDIP KUMAR SINGHI AFT ER RECORDING THAT A PART OF THE FUNDS OF THE SHAREHOLDING COMPANIES HAD COME FROM F OUR BANK ACCOUNTS STANDING IN THE NAME OF SHRI RAJENDRA KR. SURANA, SHRI SUNIL KR . JAM, SHRI SHANKARLAL GODH AND SHRI SURENDRA KR. HIRAWA. HE HAS FURTHER STATED THAT HE HAS STRONG REASONS TO BELIEVE THAT THE ABOVE NAMED COMPANIES CONTROLLED B Y SHRI JAJODIA & SINGHI HAVE ROLE IN CHANNELISING THEIR OWN MONEY THROUGH THESE BANK ACCOUNTS. AFTER ELABORATE DISCUSSION HEREINBEFORE, WE ARE OF THE OPINION THAT THERE IS NO INFIRMITY IN THE A.O.S ACTION IN NOT CONSIDERING T HE SHARE CAPITAL RAISED AS THE ASSESSEE COMPANYS INCOME BUT LEAVING THE ISSUE FOR CONSIDERATION IN THE HANDS OF THE SHAREHOLDING COMPANIES AS THE MATERIA1 AVAILABL E ON RECORD SO INDICATED. WE OBSERVE THAT IN VIEW OF THE SAID ORDER OF I.T.A. T., THE ORDER OF LD. C.I.T. U/S. 263 OF THE ACT DATED 23/3/2007 SETTING ASIDE THE BLOCK AS SESSMENT ORDER DATED 31/3/2004 HAS BECOME NON-EXISTENT AND CONSEQUENTLY THE SAID BLOCK ASSESSMENT ORDER DATED 31/5/2004 BECOMES OPERATIVE. AT THE TIME OF HEARING, A QUERY WAS RAISED AS TO WHETHER THE ASSESSEE FILED ANY APPEAL AGAINST SAID BLOCK ASSESSMENT ORDE R DATED 31/5/2004. IT WAS INFORMED THAT NO FURTHER APPEAL WAS FILED AS THERE WAS NIL U NDISCLOSED INCOME ASSESSED. IT WAS 10 ALSO INFORMED AT THE TIME OF HEARING BY THE LD. REP RESENTATIVES OF THE PARTIES THAT NO FURTHER APPEAL WAS FILED AGAINST ORDER OF I.T.A.T. DATED21/9/2007 QUASHING LD. C.I.T.S ORDER PASSED U/S. 263 OF THE ACT DATED 23/3/2007. IN VIEW OF ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE SAID BLOCK ASSESSMENT ORDE R DATED 31/5/2004 HAS BECOME FINAL. 9. IN THE LIGHT OF THE ABOVE FACTS, THE QUESTION A RISES AS TO WHETHER THE ACTION OF THE A.O. TO INITIATE REASSESSMENT PROCEEDINGS U/S. 148 OF THE ACT BY RECORDING REASONS ON 30/3/2007 IS VALID OR NOT. WE ARE OF THE CONSIDERE D VIEW THAT THE ABOVE ISSUE IS SQUARELY COVERED BY THE ORDER OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CARGO CLEARING AGENCY (GUJARAT) VS. J.C.I.T. (SUPRA). WE CONSIDER IT PRUDENT TO REPRODUCE PARAS 32 TO 34 APPEARING ON PAGES 24 TO 26 OF THE SAID JUDGMENT OF HONBLE GUJARAT HIGH COURT AS UNDER :- THERE IS ONE MORE ASPECT OF THE MATTER. ENTIRE CHA PTER XIV-B OF THE ACT RELATES TO ASSESSMENT OF SEARCH CASES, VIZ., UNDISCLOSED INCOM E FOUND AS A RESULT OF SEARCH. ONE CANNOT ENVISAGE ESCAPEMENT OF UNDISCLOSED INCOM E ONCE A SEARCH HAS TAKEN PLACE AND MATERIAL RECOVERED, ON PROCESSING OF WHIC H UNDISCLOSED INCOME IS BROUGHT TO TAX. SECTION 147 OF THE ACT ITSELF INDIC ATES THAT THE SAME IS IN RELATION TO INCOME ESCAPING ASSESSMENT AND APPLIES IN A CASE WH ERE EITHER INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY VIRTUE OF EITHER N ON-DISCLOSURE BY WAY OF NON-FILING OF RETURN, OR NON-DISCLOSURE BY WAY OF OMISSION TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS FOR THE PURPOSE OF ASSESSMENT, OR PR OCESSING OF MATERIAL ALREADY AVAILABLE ON RECORD, IF THE SAME IS WITHIN THE STIP ULATED PERIOD OF LIMITATION. THEREFORE, TO CONTEND THAT UNDISCLOSED INCOME HAS E SCAPED ASSESSMENT DESPITE AN ASSESSMENT HAVING BEEN FRAMED UNDER CHAPTER XIV-B O F THE ACT BY ADOPTING THE SPECIAL PROCEDURE PRESCRIBED BY THE SAID CHAPTER IS TO CONTEND WHAT IS INHERENTLY NOT POSSIBLE. IT CANNOT BE A CASE OF NON-FILING OF RETURN CONSIDERING THE PROVISIONS OF SECTION 158BC OF THE ACT. IT CANNOT BE A CASE OF NO N-DISCLOSURE OF MATERIAL FACTS CONSIDERING THE FACT THAT EVERYTHING WHICH WAS UNDI SCLOSED HAS ALREADY BEEN UNEARTHED AT THE TIME OF SEARCH AND THE DEFINITION OF UNDISCLOSED INCOME ITSELF INDICATES THAT NOT ONLY WHAT HAS BEEN SEIZED OR REC OVERED, BUT EVEN INCOME OR PROPERTY WHICH HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSE OF THE ACT HAS BEEN ROPED IN. FURTHERMORE, SECTION 158BB O F THE ACT ALSO PROVIDES FOR NOT ONLY FOR REQUISITION OF BOOKS OF ACCOUNT OR OTHER D OCUMENTS, BUT ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH AND SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE WITH THE ASSESSING OFFICER, UNDISCLOSED I NCOME OF THE BLOCK PERIOD SHALL BE COMPUTED. THEREFORE, EVEN IF, ASSUMING FOR THE SAKE OF ARGUMENT, SOME INCOME HAS NOT BEEN DISCLOSED IN THE RETURN FURNISHED UNDER SE CTION 158BC OF THE ACT, THE ASSESSING OFFICER IS BOUND TO ASSESS ALL UNDISCLOSE D INCOME AFTER PROCESSING THE ENTIRE MATERIAL AVAILABLE WITH THE ASSESSING OFFICE R. THE ASSESSING OFFICER CANNOT BE HEARD TO STATE THAT UNDISCLOSED INCOME HAS ESCAP ED ASSESSMENT BECAUSE THE OFFICER FAILED TO APPLY HIS MIND TO THE MATERIAL AV AILABLE ON RECORD, THERE BEING NO LACK OF DISCLOSURE. 11 THE LAST OF THE AMENDMENTS MADE BY THE FIN ANCE ACT, 2002, AS EXPLAINED IN THE CENTRAL BOARD OF DIRECT TAXES CIRCULAR NO. 8/02, DA TED AUGUST 27, 2002 [2002] 258 ITR (ST.) 13), FURTHER GOES TO SUPPORT THE STAND OF THE PETITIONERS. THE LEGISLATURE HAS PROVIDED THAT THE BLOCK ASSESSMENT OF UNDISCLOS ED INCOME IS TO BE BASED NOT ONLY ON THE EVIDENCE FOUND AT THE TIME OF SEARCH, BUT AL SO ON THE BASIS OF MATERIAL AND INFORMATION GATHERED DURING THE INQUIRIES MADE AFTE R THE SEARCH PROCEEDINGS. HOWEVER, ON THE BASIS OF EVIDENCE FOUND DURING THE SEARCH PROCEEDINGS CERTAIN FURTHER INQUIRIES ARE UNDERTAKEN BY THE ASSESSING O FFICER RESULTING IN COLLECTION OF MATERIAL OR INFORMATION GATHERED DURING SUCH INQUIR IES. THE ASSESSMENT FOR THE BLOCK PERIOD SHALL ALSO INCLUDE COMPUTATION OF SUCH INCOM E AS A CONSEQUENCE OF SUCH INQUIRIES. THUS, THERE WOULD BE NO SCOPE FOR ANY IN COME ESCAPING OR REMAINING UNDISCLOSED WHEN THE SPECIAL PROCEDURE LAID DOWN BY CHAPTER XIV-B OF THE ACT IS RESORTED TO. THE CONTENTION, ON BEHALF OF THE REVEN UE, THAT THERE MIGHT BE INCOME WHICH MIGHT HAVE YET ESCAPED ASSESSMENT FROM THE BL OCK ASSESSMENT CANNOT BE ACCEPTED BECAUSE THE SCHEME ITSELF PROVIDES FOR BRI NGING TO TAX ALL UNDISCLOSED INCOME, WHETHER RECOVERED DURING THE COURSE OF SEAR CH PROCEEDINGS OR RECOVERED IN THE COURSE OF POST SEARCH INQUIRIES MADE ON THE BAS IS OF MATERIAL COLLECTED DURING SEARCH. HENCE, THE LEGISLATIVE INTENT IS CLEAR. ONC E A BLOCK ASSESSMENT IS FRAMED THE SAME IS FINAL UNLESS AND UNTIL DISTURBED IN AN APPR OPRIATE PROCEEDING TAKEN BEFORE THE HIGHER FORUM. 10. FROM THE ABOVE IT IS OBSERVED THAT HONBLE GU JARAT HIGH COURT HAS HELD THAT ONCE A BLOCK ASSESSMENT ORDER IS PASSED PURSUANT TO THE SEARCH & SEIZURE OPERATIONS, ONE CANNOT ENVISAGE ESCAPEMENT OF UNDISCLOSED INCOME. SEC.147 OF THE ACT ITSELF INDICATES THAT IT IS IN RELATION TO INCOME ESCAPING ASSESSMEN T AND APPLIES IN A CASE WHERE EITHER INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY VIRTUE OF EITHER NON-DISCLOSURE BY WAY OF NON-FILING OF THE RETURN, OR NON-DISCLOSURE BY WAY OF OMISSION TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS FOR THE PURPOSE OF ASS ESSMENT, OR PROCESSING OF MATERIAL ALREADY AVAILABLE ON RECORD. WHEN THE BLOCK ASSESSM ENT ORDER IS PASSED, THE A.O. IS BOUND TO ASSESS ALL UNDISCLOSED INCOME AFTER PROCES SING THE ENTIRE MATERIAL AVAILABLE WITH HIM AND SUBSEQUENTLY A.O. COULD NOT BE HEARD T O STATE THAT UNDISCLOSED INCOME HAS ESCAPED ASSESSMENT BECAUSE THE A.O. FAILED TO APPLY HIS MIND TO THE MATERIAL AVAILABLE ON RECORD, THERE BEING NO LACK OF DISCLOSURE. THER EFORE, WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO QUESTION OF A.O.S ISSUING NOTICE U/S. 148 OF THE ACT FOR REOPENING OF SUCH ASSESSMENT AS THE SAID CONCEPT IS REPUGNANT TO THE SPECIAL SCHEME OF ASSESSMENT OF UNDISCLOSED INCOME FOR THE BLOCK PERIOD. IN THE FAC TS OF THE CASE BEFORE US WE OBSERVE THAT THE SAME VERY FACTS ON THE BASIS OF WHICH A.O. INITIATED REASSESSMENT PROCEEDINGS HAD BEEN CONSIDERED WHEN THE BLOCK ASSESSMENT ORDER WAS PASSED. FURTHER, THE A.O. HAS INITIATED THE REASSESSMENT PROCEEDINGS TO MAKE PROT ECTIVE ASSESSMENT IN THE HANDS OF THE 12 ASSESSEE-COMPANY, MEANING THEREBY THE A.O. HIMSELF WAS SUSPICIOUS AND HAVING NO REASONABLE BELIEF THAT THE INCOME CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE HAD ESCAPED ASSESSMENT. THE CONTENTION OF LD. DEPARTME NTAL REPRESENTATIVE THAT AT THE STAGE OF ISSUE OF NOTICE U/S. 148 OF THE ACT ONLY EXISTEN CE OF REASONS IS TO BE CONSIDERED AND NOT THE SUFFICIENCY OF THE REASONS HAS NO MERIT. N OT ONLY THIS, EVEN WHEN THE ASSESSMENT WAS COMPLETED BY THE A.O., HE HAS PASSED THE ASSESS MENT ORDER ON PROTECTIVE BASIS. WE ALSO OBSERVE THAT THE A.O. HIMSELF HAS STATED THAT THE SAID SHARE CAPITAL AGGREGATING TO RS.5,20,00,000/- HAD COME BY WAY OF ACCOUNT PAYEE C HEQUES FROM THE ABOVE-MENTIONED TWENTY COMPANIES WHOSE IDENTITY THE A.O. HAS NOT DI SPUTED. WE ALSO OBSERVE THAT IN RESPECT OF SOME OF THE SHARE APPLICANTS, THE DEPART MENT HAS ALREADY CONSIDERED THE SAID SHARE APPLICATION MONEY ON SUBSTANTIVE BASIS AND AS UNDISCLOSED INCOME IN THEIR HANDS. AT THE TIME OF HEARING LD. DEPARTMENTAL REPRESENTAT IVE COULD NOT BRING ANY FACTS ON RECORD THAT THE DEPARTMENT HAS DELETED THE ADDITION IN THE HANDS OF ANY OF THE SHARE APPLICANTS CONSIDERING THAT THE SAID SHARE APPLICAT ION MONEY WAS NOT THE MONEY OF THE SHARE APPLICANTS BUT MONEY OF THE ASSESSEE-COMPANY. CONSIDERING THE ABOVE FACTS AND THE DECISION OF HONBLE GUJARAT HIGH COURT REFERRED TO ABOVE, WE HOLD THAT THE REASSESSMENT PROCEEDINGS INITIATED BY THE A.O. WAS ILLEGAL AND, THEREFORE, WE DO NOT CONSIDER NECESSARY TO DISCUSS THE OTHER CONTENTIONS OF THE LEARNED REPRESENTATIVES OF THE PARTIES AS TO WHETHER REASONS RECORDED WERE SUFFICI ENT OR NOT OR WHETHER THE REASSESSMENT PROCEEDINGS WERE INITIATED BY THE DIRE CTION OF LD. C.I.T. OR BY A.O. SUO MOTU. 11. BE THAT AS IT MAY, WE OBSERVE THAT THERE IS NO DISPUTE OF THE FACT OF RECEIPT OF SHARE APPLICATION MONEY BY ACCOUNT PAYEE CHEQUES FR OM THE ABOVE 20 SHARE APPLICANTS BY THE ASSESSEE AGAINST ALLOTMENT OF SHARES, DETAIL S OF WHICH ARE GIVEN AT PAGE-3 OF THIS ORDER. THE IDENTITY OF THESE SHARE APPLICANTS HAS ALSO NOT BEEN DISPUTED BY THE A.O. WE FURTHER OBSERVE THAT THE A.O. FAILED TO ESTABLISH T HAT THE SHARE APPLICANTS DID NOT HAVE THE MEANS TO MAKE THE INVESTMENT AND THAT SUCH INVESTME NT ACTUALLY EMANATED FROM THE COFFERS OF THE ASSESSEE-COMPANY. THE RECEIPT OF SH ARE APPLICATION MONEY HAS BEEN DULY RECORDED IN THE BOOKS OF THE ASSESSEE-COMPANY. WE F URTHER OBSERVE THAT DEPARTMENT HAS ALREADY CONSIDERED IN RESPECT OF SOME OF THE SHARE APPLICANTS THE ABOVE SHARE APPLICATION MONEY AS THEIR UNDISCLOSED INCOME ON SU BSTANTIVE BASIS AND IN SOME CASES 13 ON PROTECTIVE BASIS. EVEN THE DEPARTMENT COULD NOT BRING ANY FACTS ON RECORD THAT IT HAS DELETED THE ADDITION IN THE HANDS OF ANY OF THE SHA RE APPLICANTS CONSIDERING THAT THE SAID SHARE APPLICATION MONEY WAS NOT THE MONEY OF THE SH ARE APPLICANTS BUT MONEY OF THE ASSESSEE-COMPANY. CONSIDERING THE ABOVE FACTS ON R ECORD, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE HAS NOT ONLY PROVED THE IDEN TITY OF SHARE APPLICANTS BUT HAS ALSO ESTABLISHED THE CREDITWORTHINESS OF SHARE APPLICANT S AND GENUINENESS OF THE TRANSACTIONS. THEREFORE, WHEN ALL THE INGREDIENTS CONTAINED IN SE C. 68 ARE FULFILLED, THERE IS HARDLY ANY SCOPE TO INVOKE THAT SECTION ALLEGING INTRODUCTION OF UNEXPLAINED FUND BY WAY OF SHARE APPLICATION, MORE SO WHEN NO EVIDENCE COULD BE BROU GHT ON RECORD BY THE DEPARTMENT TO THE CONTRARY. 11.1. THE HONBLE RAJASTHAN HIGH COURT HAS HELD IN THE CASE OF BARKHA SYNTHETICS LTD. VS. ACIT [2005] 197 CTR 432 (RAJ.) THAT THE PRINCIP LE RELATING TO BURDEN OF PROOF CONCERNING ASSESSEE IS THAT WHETHER THE MATTER CONC ERNS THE MONEY RECEIPTS BY WAY OF SHARE APPLICATION FROM INVESTORS, THROUGH BANKING C HANNELS, ASSESSEE HAS TO PROVE EXISTENCE OF PERSONS IN WHOSE NAME THE SHARE APPLIC ATION IS RECEIVED. ONCE THE EXISTENCE OF INVESTOR IS PROVED, IT IS NO FURTHER B URDEN OF THE ASSESSEE TO PROVE WHETHER THAT PERSON ITSELF HAS INVESTED THE SAID MONEY OR S OME PERSON MADE INVESTMENT IN THE NAME OF THAT PERSON. THE BURDEN THEN SHIFTS ON REVE NUE TO ESTABLISH THAT SUCH INVESTMENT HAS COME FROM ASSESSEE-COMPANY ITSELF. IN THE CASE BEFORE US, AS STATED ABOVE, DEPARTMENT DOUBTS INTRODUCTION OF SHARE CAPITAL BY THE SHARE APPLICANTS WHEN IT IS STATED BY THE A.O. THAT VARIOUS LAYERS WERE USED TO DEPOSI T INITIALLY THE AMOUNT IN CASH WHICH ULTIMATELY CAME THROUGH 3-4 LAYERS OF DIFFERENT COM PANIES TO THE ASSESSEE-COMPANY IN THE FORM OF SHARE CAPITAL. HOWEVER, NO EVIDENCE IS BROUGHT ON RECORD BY THE DEPARTMENT THAT THE SHARE APPLICATION MONEY HAS BEEN BROUGHT I N THE NAME OF THE SHARE APPLICANTS BY THE ASSESSEE-COMPANY AND THE ASSESSEE-COMPANY WA S THE ULTIMATE BENEFICIARY OF THE SHARE APPLICATION MONEY RECEIVED FROM DIFFERENT COM PANIES AND THE MONEY TRAIL LED TO THE CASH DEPOSIT OF THE ASSESSEE, WHICH WAS ROUTED BACK THROUGH INTERMEDIARIES. HONBLE APEX COURT IN THE CASE OF CIT VS. DAULAT RANT RAWATMULI [87 ITR 349 (SC)] HAS HELD THAT ONUS TO PROVE THAT THE APPARENT IS NOT THE REAL IS ON THE PERSON WHO CLAIMS IT TO BE SO. THEREFORE, THE ONUS IS ON THE DEPARTMENT TO PROVE T HAT THE SHARE APPLICATION MONEY SUBSCRIBED TO THE SHARE CAPITAL OF THE ASSESSEE-COM PANY BY THE ABOVE NAMED SHARE APPLICANTS IS NOT THE MONEY OF THE SHARE APPLICANTS BUT OF THE ASSESSEE-COMPANY, IS ON 14 THE DEPARTMENT. HOWEVER, THE DEPARTMENT HAS NOT BRO UGHT ANY MATERIAL ON RECORD TO ESTABLISH THE SAME. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE A.O. DOUBTED THE GENUINENESS OF THE SHARE APPLICATION MO NEY ON SURMISES AND CONJECTURE AND HAS NOT BROUGHT ANY COGENT MATERIAL ON RECORD TO ES TABLISH HIS SUCH DOUBT THAT THE ASSESSEES OWN UNACCOUNTED MONEY CAME BACK TO IT BY WAY OF FAKE INTRODUCTION OF SHARE CAPITAL. 11.2. THIRD MEMBER DECISION OF I.T.A.T., JODHPUR BE NCH IN THE CASE OF POLYMERS (P) LTD. VS. DCIT [111 TTJ 112] HAS HELD THAT IN RESPEC T OF SHARE APPLICATION MONEY, ASSESSEE-COMPANY HAS TO PROVE EXISTENCE OF PERSONS IN WHOSE NAME SHARE APPLICATION IS RECEIVED. NO BURDEN IS CAST ON THE ASSESSEE TO PROV E WHETHER THAT PERSON HIMSELF HAS INVESTED OR SOME OTHER PERSON HAS MADE INVESTMENT I N HIS NAME. THE BURDEN TO PROVE THAT THE MONEY DID NOT BELONG TO HIM BUT TO SOME BO DY ELSE IS ON THE REVENUE. IT WAS FURTHER HELD THAT IF ANY OF THE SHAREHOLDERS IS FOU ND TO HAVE MADE UNEXPLAINED INVESTMENT, THEN ADDITION OF SUCH INVESTMENT IS REQ UIRED TO BE MADE IN THE HANDS OF THE SHAREHOLDERS AND NOT IN THE HANDS OF THE ASSESSEE. ACCORDINGLY, IT WAS HELD THAT THE A.O. WAS NOT JUSTIFIED IN TREATING THE INVESTMENT M ADE BY THE SEVERAL SHAREHOLDERS IN THE ASSESSEE-COMPANY AS BOGUS AND TO MAKE ADDITION U/S. 68 OF THE ACT. 11.3. THE HONBLE APEX COURT HAS CONSIDERED THE SI MILAR ISSUE IN THE CASE OF CIT VS. M/S. LOVELY EXPORTS (P) LTD. [216 C.T.R. 195 (SC)] AND HELD AS UNDER :- CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISC LOSED INCOME UNDER S. 68 OF I.T. ACT, 1961? WE FIND NO MERIT IN THIS SPECIAL L EAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEI VED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GI VEN TO THE A.O., THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIV IDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. HENCE, WE FIND NO INFIRMITY WITH THE IMP UGNED JUDGMENT. 11.4. HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. DWARKADHISH INVESTMENT P. LTD. [2011] 330 ITR 298 (DELHI) HAS HELD THAT WHERE THE COMPANY HAD ESTABLISHED THE IDENTITY OF THE SUBSCRIBERS TO THE SHARE CAPITAL, T HE BURDEN IS SHIFTED TO THE DEPARTMENT, SO THAT SHARE SUBSCRIPTIONS COULD NOT BE TREATED AS INCOME OF THE COMPANY IN THE ABSENCE OF ANY EVIDENCE TO SHOW THAT THE FUNDING WAS DONE B Y THE COMPANY ITSELF. IT IS PERTINENT TO MENTION HERE THAT SPECIAL LEAVE WAS DISMISSED BY HONBLE APEX COURT, REPORTED IN [2009] 319 ITR (ST.) 5, FOLLOWING ITS OWN RULING IN CIT V. LOVELY EXPORTS (P) LTD. (SUPRA). 15 11.5. IN VIEW OF ABOVE FACTS AND RESPECTFULLY FOL LOWING THE DECISIONS CITED SUPRA, WE ARE OF THE CONSIDERED VIEW THAT A.O. COULD NOT MAKE OUT HIS CASE WITH EVIDENTIARY DOCUMENTS IN SUPPORT OF TREATING THE SHARE APPLICAT ION MONEY OF RS.5,20,00,000/- AS ASSESSEES UNACCOUNTED MONEY. ON THE ABOVE REASONIN GS ALSO, THE A.O.S ACTION IN THIS REGARD IS UNSUSTAINABLE. 12. IN VIEW OF ABOVE, THE ORDER OF LD. C.I.T.(A) I S CONFIRMED BY REJECTING THE GROUNDS OF APPEAL TAKEN BY THE DEPARTMENT 13. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED. 4 '3 #5' 6 5% 7 48 THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON 30.06 .2011 SD/- SD/- ( . .. . ! ! ! !. .. . ) '# ( . . . . . .. . ) (C.D.RAO) , ACCOUNTANT MEMBER (B.R.MITTAL) , JUDICIAL MEMBER ( (( (!# !# !# !#) )) ) DATE: 30 -06-2011 '3 1 /9 :'9';- COPY OF THE ORDER FORWARDED TO: 1. +, / THE APPELLANT : D.C.I.T., C.C.-XXIV, KOLKATA. 2 /0+, / THE RESPONDENT : UIC UDYOG LTD., ROOM NO.406, 4A, P OLLOCK STREET, KOLKATA 700 001. 3. 3% () : THE CIT(A), CENTRAL-III, KOLKATA. 4. 3%/ THE CIT, KOL- 5 ?7 /% / DR, ITAT, KOLKATA BENCHES, KOLKATA 6 GUARD FILE . 09 // TRUE COPY, '3%5/ BY ORDER, (DKP) @ A / DY/ASSTT. REGISTRAR .