PRATHAM TELECOM INDIA P.LTD, MUMBAI V. DCIT 9(2), MUMBAI

ITA 1468/MUM/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9228 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 11-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 22-02-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PREMANAND J
• Assessee Lawyers: VIJAY KOTHARI
• Keywords: Unexplained cash credit; Question of law; Accommodation entries; Assessment record; Onus to prove; Revenue expenditure
• Section: 131; 148; 68

Judgement Text

, L LL LH HH H INCOME TAX APPELLATE TRIBUNAL,MUMBAI - C BENCH. , ! , BEFORE S/SH.VIJAY PAL RAO, JUDICIAL MEM BER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 1468/MUM/2013, ' ' ' ' # # # # / ASSESSMENT YEAR-2009-10 PRATHAM TELECOM INDIA PVT. LTD. NO.1,201, DHRUV (SHYAM BABA HOUSE) UPPER GOVIND NAGAR, MALAD (E), MUMBAI-400097 PAN: AAACCI1195H VS DCIT 9(2), AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 ( $% / APPELLANT) ( &'$% / RESPONDENT) '() '() '() '() * * * * / ASSESSEE BY :SHRI VIJAY KOTHARI + * / REVENUE BY :SHRI PREMANAND J. ' ' ' ' + ++ + ), ), ), ), / DATE OF HEARING : 11.03.2015 -.# + ), / DATE OF PRONOUNCEMENT : 25.03.2015 ' ' ' '1961 1961 1961 1961 + + + + 254 254 254 254( (( (1 11 1) )) ) )7) )7) )7) )7) 8 8 8 8 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM ! ! ! ! ' ' ' ' : CHALLENGING THE ORDER DT.13.12.2012 OF CIT(A)-V20,M UMBAI THE ASSESSEE HAS FILED FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 1,45,00,000/- U/S. 68 OF UNSECURED LOANS, THE DETAILS OF WHICH ARE AS UNDER: UNSECURED LOAN RECEIVED, THE DETAILS OF W HICH ARE ASUNDER: S.NO. NAME OF THE PARTY AMOUNT (RS.) 1. M/S ASTHAL COMMERCIAL PVT. LTD. 50, 00,000 2. M/S LAMBODAR MACHINE TOOLS PVT. LTD. 25,00,000 3. M/S SITALA TIMBER PVT. LTD. 10,00,0 00 4. M/S SUNVIEW VANIJYA PVT. LTD. 10,00 ,000 5. M/S TAPTI TRADE LINK PVT. LTD. 50,0 0,000 TOTAL RS. 1,45,00,000 2.THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE APPELLANT HAS FULLY ESTABLISHED THE GENUINENESS OF THE PARTY AND ALSO THE CREDIT WORTHI NESS BY FILING I) CONFIRMATION OF LETTERS II) PAN NO. III) BANK A/C. IV) RETURN OF INCOME V) ROC REPORT AND THEREFORE, THE CONFIRMATION OF THE ADDITION IS TOTALLY CONTRARY TO WELL ESTABLISHED PRINCIPLES AND HAS FAILED TO PASS SPEAKING ORDER IN RESPECT OF VARIOUS CASES FILED IN THE COURSE OF PROCEEDINGS. 3.THE LEARNED CIT(A) HAS ERRONEOUSLY CONCLUDED THAT THE PARTIES WERE NOT AVAILABLE AT THEIR ADDRESS AND THEREFORE THE NOTICES WERE RETURNED IN SERVING AND FAILED TO APPRECIATE THAT THE SAME ADDRESS HAS BEEN GIVEN IN THE RETURN OF INCOME, IN THE BANK A/C ., IN THE ROC REPORT AND THEREFORE, MERELY ON ACCOUNT OF THE FAILURE ON THE PART OF THE DEPARTMEN T IN SERVING THE NOTICE, SUCH LARGE ADDITION PARTY WISE CANNOT BE CONFIRMED. 4.THE CIT(A) FAILED TO APPRECIATE THAT THE ASSESSEE HAS FULLY DISCHARGED THE BURDEN AS HAS BEEN EXPLAINED BY THE HON'BLE HIGH COURT IN THE CASE OF CIT VS. ORISSA CORPORATION PVT. LTD. 159 ITR 78 AND THE CATENA OF CASES FILED DURING THE PROCEED INGS. 2 ITA NO.1468/MUM/2013 PRATHAM TELECOM INDIA PVT. LTD . 2 5.THE APPELLANT CRAVES LEAVE TO ADD ALTER, AMEND AN Y OF THE AFOREMENTIONED GROUNDS AT THE TIME OF HEARING. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF TRADING IN TELECOMMUNICATION EQUIPMENTS,FILED ITS RETURN OF INCOME ON 30.09.2009,DECLARING TOTAL INCO ME OF RS.(-)77.01 LAKHS/-.ASSESSING OFFICER (AO)FINALISED THE ASSESSMENT U/S.143(3) OF THE ACT, ON 28.12.2011,DETERMINING THE TOTAL INCOME AT RS.1.02 CRORES/-. 2. EFFECTIVE GROUND OF APPEAL PERTAINS TO ADDITION MAD E U/S.68 OF THE ACT,AMOUNTING TO RS.1.45CRORES.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD SHOWN UNSECURED LOAN OF RS.1,50,00,000/- IN THE NAM E OF SIX PARTIES.HE ISSUED NOTICES U/S. 133(6)OF THE ACT TO THOSE PARTIES.IN RESPONSE TO THE SAME,THREE NOTICES WERE RETURNED UNSERVED AND THERE WAS NO REPLY BY OTHER TWO PARTIE S AND ONLY ONE PARTY NAMELY M/S. SAMARTH AGENTS PVT.LTD.HAD CONFIRMED THE LOAN OF RS .5,00,000/-.HE ASKED THE ASSESSEE TO EXPLAIN SUCH DISCREPANCY AND FURNISH THE LATEST ADD RESS AVAILABLE TO SEND NOTICE U/S.133(6) OF THE ACT.AS PER THE AO,THE ASSESSEE DID NOT FURNI SHED ANY DETAILS IN THIS REGARD TO SUBSTANTIATE THE SAME.ON 26.12.2011,IT SUBMITTED A LETTER ALONG WITH CONFIRMATION OF UNSECURED LOANS.THE AO FOUND THAT THE ADDRESS MENT IONED THEREIN CONTAINED THE SAME ADDRESS TO WHICH NOTICES U/S.133(6)WERE ISSUED BUT WERE RETURNED UN-SERVED.HE HELD THAT THE VALIDITY OF THE CONFIRMATION LETTERS FURNISHED BY THE ASSSSEE WAS DOUBTFUL.REJECTING THE CONFIRMATIONS FILED BY THE ASSESSEE,HE REACHED TO THE CONCLUSION THAT THE ASSESSEE WAS NOT BEEN ABLE TO PROVE THE GENUINENESS OF THE UNSEC URED LOANS BORROWED DURING THE YEAR, THAT IT HAD NOT PROVED THE CREDITWORTHINESS OF THE CREDITORS, DESPITE AVAILING SUFFICIENT TIME.FINALLY,HE MADE AN ADDITION OF RS. 1,45,00,000 /-,TO THE TOTAL INCOME OF THE ASSESSEE. 3. AGAINST THE ORDER OF THE AO,THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEAL AUTHORITY (FAA).BEFORE HIM THE ASSESSEE CONTENDED THAT CONFIR MATION LETTERS OF THE ASSESSEE ADVANCING LOANS HAD BEEN FURNISHED,THAT OTHER DEATAILS LIKE R EGISTRATION CERTIFICATES,BANK STATEMENTS, COPIES OF RETURNS OF INCOME WERE ALSO MADE AVAILABL E TO THE AO. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND THE ASSESSMENT ORDER,HE HELD THAT THAT THE ASSESSEE HAD SIMPLY REFERRED TO THE CONFIR MATION LETTERS, PAN NO.,BANK A/CS. RETURNS OF INCOME AND ROC REPORTS,THAT IT HAD COMPL ETELY FAILED TO ESTABLISH THE GENUINENESS OF LOANS,THAT THE AO HAD MADE ENQUIRY B Y EXERCISING POWER U/S.133(6) OF THE ACT,THAT THAT THREE PARTIES WERE NOT AVAILABLE AT T HEIR ADDRESS AND DUE TO THAT THESE NOTICES U/S.133(6) RETURNED UNSERVED,THAT IN RESPECT OF TWO CASES THERE WAS NO REPLY TO THE SPECIFIC NOTICES,THAT EXCEPT M/S.SAMARTH AGENTS PVT .LTD.IDENTITY OF M/S.ASTHAL COMMER- CIAL PVT.LTD.(ACPL),M/S.LAMBODAR MACHINE TOOLS PVT. LTD.(LMTPL),M/S. SITLA TIMBER PVT.LTD.(STPL),M/S. SUNVIEW VANIJYA PVT. LTD.(SVPL) AND M/S. TAPTI TRADE LINK PVT. LTD.(TTLPL)HAD NOT BEEN ESTABLISHED BEYOND DOUBT,TH AT WHEN CONFIRMATION LETTERS WERE FURNISHED IT WAS NOTICED BY THE AO THAT SAME ADDRES S HAD BEEN GIVEN ON WHICH EITHER NOTICE WERE NOT SERVED/RECEIVED AT THAT ADDRESS OR THERE WAS NO REPLY OF REST OF TWO PARTIES AT WHICH ADDRESS/NOTICES WERE SENT,THAT THE IDENTI TY OF THOSE COMPANIES WERE FOUND TO BE DOUBTFUL,THAT MERELY ON THE BASIS OF RETURN OF INCO ME OR PAN THEIR IDENTITY COULD NOT BE PRESUMED TO BE ESTABLISHED.THE FAA FOUND THAT THE A SSESSEE HAD SUBMITTED SOME OF THE DOCUMENTS WHICH WERE NOT SUBMITTED BEFORE THE AO,TH AT THE SAID PAPERS DID NOT PROVE THE GENUINENESS OF TRANSACTION OR THE CREDITWORTHINESS OF THE PARTIES,THAT IN THE CASE OF ACPL, IT HAD SHOWN RS.50,00,000/- AS LOAN AND IN SUPPORT OF CONTENTION IT HAD SUBMITTED COPY OF THE RETURN OF INCOME AND COPY OF BANK STATEMEN,THAT ACPL WAS HAVING UNVERIFIABLE ADDRESS AT SHOP NO.4,13,KHUDIRAM BOSE SARANI,MALL E NCLAVE,NAGAR BAZAR, KOLKATA,THAT THE RETURN OF INCOME OF ACPL ITSELF REVEALED THE FA CT THAT IT WAS NOT A GENUINE 3 ITA NO.1468/MUM/2013 PRATHAM TELECOM INDIA PVT. LTD . 3 COMPANY,THAT IN BANK STATEMENT THERE WAS A HUGE DEP OSITS OF SEVERAL CRORES,THAT THE RETURN OF INCOME SHOWED PAYMENT OF TAX OF RS.510/, THAT ACPL HAD SHOWN TOTAL INCOME OF RS.1,652/- ONLY,THAT ONLY WITH A VIEW TO GIVE SU CH ENTRIES OF LOAN ACPL HAD BEEN FLOATED,THAT BECAUSE OF THAT REASON NO NOTICE WAS S ERVED ON THIS ADDRESS,THAT THE ASSESSEE WAS ABLE TO PRODUCE THE PARTY BEFORE THE AO. IN RES PECT OF LMTPL,THE FAA OBSERVED THAT IT WAS A KOLKATA BASED COMPANY,THAT IN THE CONFIRMA TION LETTER THE ASSESSEE HAD SHOWN ADDRESS OF THIS COMPANY AS 2B, GRANT LANE,4TH FLOOR ,ROOM NO.65, KOLKATA, THAT IN RETURN OF INCOME ASSESSEE HAD SHOWN ADDRESS OF THAT COMPAN Y AS FLAT NO.27A, METCALF STREET, KOLKATA,THAT THERE WAS HUGE DEPOSITS WHICH WAS SEVE RAL CRORES OF RUPEES, THAT THE EXISTEN -CE OF SUCH COMPANY WAS DOUBTFUL.IN CASE OF THE STP L,THAT FAA FOUND THAT IT HAD SHOWN INCOME OF RS.69, 230/- ONLY,THAT THERE WAS A HUGE D EPOSITS ON VARIOUS OCCASIONS IN ITS BANK ACCOUNT,THAT THE ADDRESS OF STPL WAS SAME AS T HAT OF LMTPL,THAT THE ADDRESS OF STPL WAS MENTIONED AS FLAT NO.27A, METCALF STREET, KOLKATA WHEREAS IN BANK ACCOUNT ADDRESS OF STPL HAD BEEN MENTIONED AS 1A,GRANT LANE ,MEZZANINE FLOOR, ROOM NO. 114, KOLKATA, THAT SUCH FACTORS REVELED THAT IT WAS ALS O A FLOATED COMPANY HAVING NO SUBSTANTIVE SOURCE OF INCOME,THAT IT HAD SHOWN BANK TRANSACTIONS WORTH CRORES OF RUPEES, THAT IDENTITY OF STPL WAS DOUBTFUL.IN RESPECT OF SP L, THE FAA HELD THAT THE ASSESSEE HAD SUBMITTED CONFIRMATION OF ACCOUNT AND PAN WITHOUT E STABLISHING THE GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OR IDENTITY,THAT T HE ADDRESS GIVEN IN CONFIRMATION LETTER WAS 460, JHAWTALA ROAD, KOLKATTA WAS ALSO NOT FOUND VERIFIABLE BY THE AO,THAT MERELY ON THE BASIS OF CREATED DOCUMENTS GENUINENESS OF LOAN WAS TO BE REJECTED.AS REGARDS, LOANS SHOWN IN THE NAME OF TTPL,THE FAA FOUND THAT THE AS SESSEE WAS NOT AVAILABLE AT ITS GIVEN ADDRESS,THAT IT HAD SHOWN INCOME OF RS.878/-, THAT IT HAD PAID TAX OF RS.272/-,THAT THE ASSESSEE WAS NOT ABLE TO PROVE BEYOND DOUBT THE GENUINENESS OF THE TRANSACTION,ACTUAL BUSINESS OF THE COMPANY,ACTUAL EXISTENCE OF THE COM PANY, PROPER IDENTIFICATION OF THE COMPANY OR ACTUAL CREDITWORTHINESS OF THE COMPANY.H E FURTHER HELD THAT ROUTING THE TRANSACTIONS THROUGH BANKING CHANNELS WAS NOT SUFF ICIENT AND ACCEPTABLE UNLESS IDENTITY OF SUCH PARTY WAS ESTABLISHED BEYOND DOUBT,THAT IN ALL THE ABOVE CASES THE ASSESSEE HAD NOT BEEN ABLE TO ESTABLISH LEGAL REQUIREMENTS,THAT CASE LAWS RELIED UPON BY THE ASSESSEE WERE NOT AT ALL APPLICABLE TO THE PECULIAR FACTS OF THE CASE UNDER APPEAL.HE HELD THAT MERELY ESTABLISHING THE IDENTITY OF THE CREDITOR WA S NOT ENOUGH.HE RELIED UPON THE CASES OF SHANKAR INDUSTRIES(114ITR689).C.KANT& CO.(126 IT R63),PRAKASH TEXTILE AGENCY (121ITR890),PRECISION FINANCE PVT. LTD.(208 ITR 465 ).HOLDING TAT MERE FILING OF CONFIRMATORY LETTERS DID NOT DISCHARGE THE ONUS THA T LIED ON THE ASSESSEE,THE FAA RELIED UPON THE JUDGMENT OF BHARATI P.LTD.(111ITR951),UNIT ED COMMERCIAL & INDUSTRIES CO.(P) LTD.(187ITR596).HE REFERRED TO THE MATTERS OF PRECI SION FINANCE PVT. LTD. (SUPRA), NIZAM WOOL AGENCY (193 ITR318)AND HELD THAT MERE FURNISHI NG OF THE PARTICULARS WAS NOT ENOUGH,THAT MERE PAYMENT BY ACCOUNT PAYEE CHEQUE WA S ALSO NOT SACROSANCT NOR COULD IT MAKE A NON-GENUINE TRANSACTION GENUINE ONE. FINALLY ,HE UPHELD THE ORDER OF THE AO. 4. BEFORE US,THE AUTHORISED REPRESENTATIVE(AR)ARGUED T HAT THE ASSESSEE HAD SUBMITTED ALL THE NECESSARY DOCUMENTS THAT PROVED THE CREDITWORTHINES S OF THE PARTIES IN QUESTION,THAT IDENTITY AND GENUINENESS OF THE TRANSACTION WAS ALSO PROVED,THAT NOT ONLY THE COPIES OF RETURNS OF INCOME BUT ALSO THE CONFIRMATIONS WERE FILED,THAT NON SERVICE OF NOTICES CANNOT BE A DECIDING FACTOR, THAT THE TRANSACTION WERE COMMERCIAL WORLD TRANSACTIONS,THAT IT WAS EFFORT OF NETWORKING OF THE ASSESSEE THAT RESULTED IN GETTING LOANS FROM THE KOLKATA PAR ITES,THAT THE ASSESSEE COULD NOT COMPEL THE CREDITORS TO APPEAR BEFORE THE AO.HE REFERRED TO PA GE NO.13,18,31,42,44,45 OF THE PAPER BOOK(PB.)HE RELIED UPON THE CASES OF VISHNU JAISWAL (149 TTJ165),PADAM PRAKASH(104ITD1) AND RANCHHOD JIVABHAI NAKHAVA(208TAXMANN.COM159).DE PARTMENTAL REPRESENTA- TIVE STATED THAT THE AO HAD MADE SPECIFIC QUERY ABO UT THE LATEST ADDRESSES OF THE LENDERS AFTER THE NOTICES U/S.133(6)OF THE ACT WERE RECEIVED UNSERVED ,THAT THE ASSESSEE FAILED TO DISCHARGE THE ONUS 4 ITA NO.1468/MUM/2013 PRATHAM TELECOM INDIA PVT. LTD . 4 THAT HAD SHIFTED TO IT AFTER NON SERVICE OF NOTICE, THAT THE ASSESSEE WAS A COMPANY OF 10 LAKHS AND HAD BORROWED RS.2 CRORES FROM KOLKATA COMPANIES,THA T CIRCUMSTANTIAL EVIDENCES WERE AGAINST THE ASSESSEE,THAT THE ASSESSEE HAD NOT PROVED GENU INENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE FIVE PARTIES AS WELL AS THE GENUINENESS.ON A SPECIFIC QUERY BY THE BENCH ABOUT THE DETAILS OF SCHEDULE XVII, THE AR ADMITTED THAT SAME WERE NOT A VAILABLE ON RECORD. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.FACTS OF THE CASE ARE THAT THE ASSESSEE HAD CLAIMED TO HAVE RECEIVED LOAN S FROM SIX PARTIES,THAT OUT OF THAT ONLY ONE PARTY CONFIRMED LOAN TRANSACTION,THAT NOTICES ISSUE D BY THE AO,U/S.133(6)OF THE ACT, TO THREE PARTIES COULD NOT BE SERVED,THAT THOSE THREE PARTIE S WERE NOT AVAILABLE ON THE GIVEN ADDRESSES,THAT IN RESPECT OF TWO CASES THERE WAS NO REPLY TO THE S PECIFIC NOTICE,THAT THE ASSESSEE HAD FURNISHED THE CONFIRMATIONS,PAN,COPIES OF RETURNS OF INCOME,COPIE S OF BANK STATEMENTS OF THOSE PARTIES ALONG WITH REGISTRATION CERTIFICATES,THAT ALL THE FIVE CO MPANIES WERE FORM KOLKATA,THAT THE AO AND THE FAA HAD HELD THAT THE GENUINENESS OF THE TRANSACTIO N,IDENTITY OF PARTY AND CREDITWORTHINESS OF THE LENDERS WAS NOT PROVED.BOTH THE AUTHORITIES,INVOKIN G THE PROVISIONS OF SECTION 68,HAVE REJECTED THE CLAIM MADE BY THE ASSESSEE-COMPANY. 5.1. COURTS ARE OF THE VIEW THAT THE OBJECTIVE BEHIND TH E PROVISIONS OF SECTION 68 IS TO HOLD THE ASSESSEE ACCOUNTABLE FOR EACH SUM FOUND CREDITED IN HIS BOOKS OF ACCOUNTS BY RESPONDING TO THE CALL OF THE AO TO GIVE SATISFACTORY EXPLANATION ABO UT NATURE AND SOURCE OF SUCH SUMS.THE QUESTION AS TO WHAT KIND OF PROOF IS TO BE FURNISHED BY THE ASSESSEE TO DISCHARGE SUCH BURDEN, HOWEVER, HAS BEEN THE SUBJECT MATTER OF ADJUDICATION IN A NUMBER OF JUDICIAL PRONOUNCEMENTS, INCLUDING BIJU PATNAIK (160 ITR674),CRYSTALLISING EVENTUALLY IN TH E VIEW UPHELD BY THE SUPREME COURT IN THE CASE OF LOVELY EXPORTS PVT. LTD.(216CTR 95).BUT,THE COURTS ARE UNANIMOUS, THAT IF NO EXPLANATION IS FORTHCOM -ING OR THE EXPLANATION GIVEN IS FOUND TO BE UNSATISFACTORY, THE SUM OF MONEY SO CREDITED MAY BE LAWFULLY INCLUDED IN THE INCOME OF THE ASSESSEE FOR THE CORRESPONDING PERIOD. SIMULTA -NEOUSLY, IT HAS ALSO BEEN HELD THAT THE AU THORITY TO BRING TO TAX UNACCOUNTED MONEY BY EXERCISING THE POWER GIVEN TO THE AO UNDER SECTION 68 IS OF GREAT IMPORTANCE,THAT IT IS EXPECTED THAT THE AO WOULD RESORT TO THIS PROVISION WITH ALL REQUISITE CIRCUMSPECTION.PROVISIONS OF SECTION 68 ARE AMONG THOSE SECTION THAT CAST BURDEN OF PROO F ON THE AO OR THE ASSESSEE,DEPENDING ON FACTS.IT IS SAID THAT THE LAW DOES NOT PRESCRIBE AN Y QUANTITATIVE TEST TO FIND OUT WHETHER THE ONUS IN A PARTICULAR CASE HAS BEEN DISCHARGED OR NOT. IT AL L DEPENDS ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. AGAIN IN SOME CASES THE ONUS MAY BE HEAVY, WH EREAS, IN OTHER CASES IT MAY BE NOMINAL. IN CERTAIN CIRCUMSTANCES, THE ONUS CAN SHIFT FROM TIME TO TIME. THE AUTHORITIES ARE ENTITLED TO LOOK INTO THE MATERIAL ON RECORD, DOCUMENTS AND OTHER SU RROUNDING CIRCUMSTANCES.VARIOUS FACTORS MAY COME INTO THE RECKONING OF THIS QUESTION INCLUDING REASONABLE PROBABILITIES AND LEGAL INFERENCES ARISING FROM PROVED OR ADMITTED FACTS.IN SHORT,IT D EPENDS UPON THE FACTS OF A PARTICULAR MATTER AND SURROUNDING CIRCUMSTANCES.PRINCIPLE OF SURROUNDING CIRCUMSTANCES HAS BEEN ACCEPTED BY THE HONBLE COURTS TO DECIDE VARIOUS ISSUES,INCLUDING T HE ISSUES OF I.CASH CREDITS(357 ITR 197& 350ITR407), II.CAPITAL OR REVENUE EXPENDITURE(284 ITR 129 & 231 ITR 849) III.ASCERTAINING THE INTENTION OF THE CONTRACTING P ARTIES(278ITR47), IV.INTENTION OF THE PARTIES TO CARRY ON A BUSINESS AND SHARE ITS PROFITS(252ITR438), V.TREATING A SUM PROVISION OR RESERVE(247ITR186), VI.ALLOWING OF THE EXPENDITURE OF SECTION 40A(3)R.W .R.6DD OF RULES(240ITR902), VII.PARTNERSHIP LAW INCLUDING GENUINENESS OF FIRM(2 11.914), VIII.SALE WITH CONDITION TO REPURCHASE OR MORTGAGE BY CONDITIONAL SALE(222ITR16), IX.CARRYING OUT CHARITABLE ACTIVITIES(217ITR118) 5 ITA NO.1468/MUM/2013 PRATHAM TELECOM INDIA PVT. LTD . 5 IN THE MATTER OF SUMATI DAYAL(214ITR801) AND DURGA PRASAD MORE(82ITR540),THE HONBLE APEX COURT HAVE ALSO UPHELD THE APPLICABILITY OF PRINCIP LES OF SURROUNDING CIRCUMSTANCES AND HUMAN PROBABILITY. 5.2. NOW,WE WOULD LIKE TO DISCUSS A RECENT CASE DEALING WITH SECTION 68 OF THE ACT. ON 11.03.2015,THE HONBLE DELHI HIGH COURT,IN THE CASE OF JANSAMPARK ADVERTISING AND MARKETING(P)LTD.(92 CCH 0100 DEL.HC),HAS DELIBERATE D UPON ALL THE ARGUMENTS TAKEN BY THE AR BEFORE US.IN THAT MATTER, FOLLOWING SUBSTANTIAL QUE STIONS OF LAW WERE FRAMED: 2.1 WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE LD. ITAT WAS CORRECT IN ALLOWING THE APPEAL OF THE ASSESSEE IN REGARD TO ADDITION OF RS. 71,00,000/- ON ACCOUNT OF UNEXPLAINED CREDIT U/S 68 OF THE INCOME TAX ACT. 2.2 WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE LD. ITAT WAS CORRECT IN ALLOWING THE APPEAL OF THE ASSESSEE IN REGARD TO ADDITION OF RS.1,42,00 0/- ON ACCOUNT OF COMMISSION PAID ON ENTRY TAKEN FROM ENTRY PROVIDER. FACT OF THE CASE WERE THAT THE ASSESSEE HAD FILED I TS RETURN OF INCOME FOR AY 2004-05 ON 01.11. 2004,DECLARING INCOME OF RS.3,180/-. THE SAID ORIGI NAL RETURN WAS ACCEPTED.IT WAS STATED THAT SOME TIME IN 2007,THE AO WAS IN RECEIPT OF INFORMAT ION FROM THE INVESTIGATION WING OF THE DEPARTMENT THAT THE ASSESSEE HAD BEEN IN RECEIPT OF ACCOMMODATION ENTRIES FROM THE ENTRY PROVIDERS.THE AO WAS OF THE OPINION THAT THAT INCOM E HAD ESCAPED ASSESSMENT,SO,HE RE-OPENED THE CASE U/S.147 OF THE ACT AND ISSUED NOTICE UNDER SECTION 148.DURING THE ASSESSMENT PROCEED - INGS,THE AO NOTICED THAT THE ASSESSEE HAD RAISED SH ARE CAPITAL FROM THE 11PARTIES,AMOUNTING TO RS. 71 LAKHS.AS PER THE AO ON EXAMINATION OF THE DETAIL S AND AS PER THE INFORMATION COLLECTED ON THE BASIS OF INVESTIGATION CARRIED OUT,IT WAS FOUND THA T THE ASSESSEE HAD RECEIVED SHARE CAPITAL FROM THREE ENTRY OPERATORS WHO WERE ALLEGEDLY ENGAGED IN THE BUSINESS OF GIVING ACCOMMODATION ENTRIES.IN ORDER TO VERIFY THE GENUINENESS OF THE C LAIM OF RECEIPT OF SHARE APPLICATION MONEY, SUMMONS WERE ISSUED UNDER SECTION 131 OF THE ACT TO THE TWELVE ENTITIES IN RESPONSE TO WHICH, NO ONE APPEARED AND SOME OF THE PROCESSES RETURNED UN- DELIVERED WITH THE POSTAL REMARKS LEFT/NO SUCH PERSON.THE AO CALLED UPON THE ASSESSEE TO PRO DUCE THE PARTIES/PERSONS IN QUESTION WHICH DIRECTION WAS NOT COMPLIED WITH.AS A RESULT,HE TREA TED THE AMOUNT OF RS.71 LACS AS UNEXPLAINED CREDIT IN TERMS OF THE PROVISION CONTAINED IN SECTI ON 68 OF THEACT AND ADDED IT TO THE INCOME OF THE ASSESSEE.THE ASSESSEES EXPLANATION WAS REJECTED BY DRAWING ADVERSE INFERENCES ON THE FOLLOWING REASONING:- (I) MERE PAYMENT OF A/C PAYEE CHEQUE WAS NOT SACROS ANCT,(II) BANK ACCOUNT REVEALED A UNIFORM PATTERN OF CASH DEPOSIT OF EQUAL AMOUNT BY CASH OR CHEQUE IN RESPECTIVE ACCOUNTS,(III) ASSESSEE FAILED TO PRODUCE THE DIRECTORS OF THE COM PANIES FROM WHOM THE SHARE APPLICATION MONEY WAS RECEIVED,(IV) SUMMONS U/S 131 OF THE ACT WERE I SSUED, BUT SOME OF THE SUMMONS WERE RECEIVED UNSERVED WITH POSTAL REMARKS 'LEFT/NO SUCH PERSON' ; NONE APPEARED IN RESPONSE TO SERVED SUMMONS. IN THE APPELLATE PROCEEDINGS BEFORE THE FAA THE ASS ESSEE CONTENDED THAT IT WAS NEVER CONFRONTED WITH CORRESPONDENCE PROVING NON SERVICE OF SUMMONS, THAT IT HAD DISCHARGED THE PRELIMINARY BURDEN IN TERMS OF SEC . 68 FOR THE EXISTENCE OF THE CREDITORS,THAT COPIES O F APPLICATION FOR SUBSCRIPTION OF SHARES,CONFIRMATIONS,COPIES OF COMP ANY MASTER DATA FROM THE OFFICE OF ROC., ACKNOWLEDGMENTS OF FILING OF INCOME TAX RETURNS WIT H PERMANENT ACCOUNT NUMBER ETC. WERE MADE AVAILABLE TO THE AO OF THE PARTIES PARTIES FRO M WHOM IT HAS RECEIVED SHARE APPLICATION MONEY,THAT THE CREDIT WORTHINESS OF THE PARTIES TO PAY SUCH SHARE APPLICATION MONEY TO THE ASSESSEE HAD BEEN ESTABLISHED ON THE BASIS OF COPY OF ANNUAL ACCOUNTS OF THE SUBSCRIBER COMPANIES,COPY OF BANK STATEMENTS ETC., FILED DURIN G ASSESSMENT PROCEEDINGS,THAT THE GENUINENESS OF THE TRANSACTION I.E. THE NATURE OF R ECEIPTS BY THE ASSESSEE BY WAY OF SHARE APPLICATION MONEY WAS ESTABLISHED BY THE FACT THAT THE AMOUNTS WERE RECEIVED THROUGH BANKING CHANNELS,THAT SHARES WERE ALLOTTED AGAINST THE AMOU NTS RECEIVED.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,THE FAA ALLOWED THE APPEAL.HE RELIE D UPON THE CASE OF LOVELY EXPORTS PVT. LTD. (216CTR 195).THE AO AND THE ASSESSEE APPROACHED THE TRIBUNAL. 6 ITA NO.1468/MUM/2013 PRATHAM TELECOM INDIA PVT. LTD . 6 THE ITAT NOTED THAT IN THE CASE OF RE-ASSESSMENT,TH E ASSESSEE HAD BEEN ASKED TO SHOW THE IDENTITY AND GENUINENESS OF THE SHARE APPLICANTS AND CREDITW ORTHINESS OF THE TRANSACTIONS AND THAT THE ASSESSEE HAD RESPONDED BY CLARIFYING THAT THE SHARE APPLICATION MONIES HAD BEEN RECEIVED THROUGH ACCOUNT PAYEE CHEQUES,THAT IF HAD FILED CONFIRMATIONS OF THE PARTIES ,C OPIES OF INCOME -TAX RETURNS ALONG WITH SUPPORTING STATEMENTS,COPIES OF THE BANK STATEMENTS,COPIES OF THE BOARD RESOLUTION OF THE RESPECTIVE SHARE HOLDING COMPANIES FOR SUBSCRIB ING THE SHARE APPLICATIONS, COPIES OF ALLOTMENT LETTERS,COPIES OF THE REGISTRATION CERTIFICATES OF THE SHARE HOLDER COMPANIES FROM REGISTRAR OF COMPANIES DISCLOSING EXISTENCE OF THE COMPANIES AS PER MASTER DATA FROM THE OFFICE OF ROC ALONG WITH THE SUBSCRIPTION OF THE CAPITAL DETAILS, NUMBE R AND DATES OF PAYMENTS. ARGUMENT OF LACK OF INQUIRY ON THE PART OF THE AO,WAS ACCEPTED BY THE TRIBUNAL.IN THIS REGARD THE TRIBUNAL HELD THAT THE ASSESSEE WAS ASKED TO PRODUCE THE PARTIES FOR P HYSICAL VERIFICATION,THAT IT WAS SUBMITTED THAT IT WAS NOT POSSIBLE FOR THE ASSE SSEE TO ENFORCE ATTENDANCE OF ANY PERSON TO PHYSICALLY BRING HIM BEFORE ANY INCOME-TAX AUTHORIT Y,THAT THE ASSESSEE HAD NEITHER THE POWERS NOR THE ABILITY TO CONVINCE THE PARTIES TO COME WITH IT TO ATTEND BEFORE THE AO,THAT ON A LATER DATE THE ASSESSEE WAS ONLY INTIMATED THAT SOME 131 SUMMONS W ERE ISSUED FIVE DAYS PRIOR TO THE FRAMING OF THE ASSESSMENT,THAT THE ASSESSEE WAS NEVER MADE AWA RE WHICH WERE THE SOME PARTIES TO WHOM SUMMONS WERE ISSUED OR WHICH WERE THE SOME PARTIES WHOSE SUMMONS CAME BACK OR WHO WERE SOME PARTIES FOR WHICH NON-APPEARED,THAT THE ASSESS EE EXPRESSED HIS INABILITY TO PRODUCE THE PARTIES IN SHORT PERIOD,THAT THE ADDITIONS WERE MAD E WITHOUT CONDUCTING ANY INQUIRY AND THE AO SITTING IN HIS CHAMBER HELD THAT ASSESSEE DID NOT D ISCHARGE ITS BURDEN,THAT THE ENTIRE EDIFIES OF THE AO DRAWING THE ADVERSE INFERENCE WAS ON WRONG PREMI SE I.E. WITHOUT CONDUCTING ANY INQUIRY , VERIFICATION OF INCOME-TAX RECORD AND WITHOUT ANY C ONFRONTATION TO THE ASSESSEE,THAT IN THE ABSENCE OF ANY EXERCISE WHAT SO EVER BY ASSESSING OFFICER , THE ASSESSEE 'S PRIMARY BURDEN COULD NOT BE HELD TO HAVE BEEN REBUTTED BY THE AO.FINALLY,THE TRIBUNA L REJECTED THE APPEAL FILED BY HIM. BEFORE THE HONBLE COURT IT WAS ARGUED THAT THE ENTITIES WHICH HAD GIVEN SHARE CAPITAL TO THE ASSESSEE COMPANY WERE SAME AS HAD SIMILARLY GIVEN S HARE CAPITAL TO ANOTHER ENTITY ALSO,THAT THE BANK ACCOUNTS STATEMENTS INDICATE THAT THERE WAS A UNIFORM PATTERN OF TRANSACTION WHEREIN ISSUE OF CHEQUES WAS IMMEDIATELY PRECEDED BY THE DEPOSITS OF EQUAL AMOUNTS IN THE ACCOUNT EITHER IN CASH OR THROUGH CHEQUES/ TRANSFER ENTRIES.RELIANCE WAS P LACED ON THE MATTER OF NOVA PROMOTERS AND FINLEASE (P) LTD.(342ITR169).DECIDING THE MATTER TH E HONBLE COURT HELD AS UNDER: THE CIT (APPEALS), AS ALSO THE ITAT, UNJUSTIFIABLY CRITICIZED THE AO FOR NOT HAVING CONFRONTED THE ASSESSEE WITH THE FACTS REGARDING RETURN OF SOME OF THE SUMMONS UNDER SECTION 131 OR NOT HAVING GIVEN OPPORTUNITY FOR THE IDENTITY OF ALL THE SHARE APPLICANTS TO BE PROPERLY ESTABLISHED. THE ORDER SHEET ENTRIES TAKEN NOTE OF IN THE ORDER OF CIT (AP PEALS) SEEM TO INDICATE OTHERWISE. THE ORDER OF CIT (APPEALS), WHICH WAS CONFIRMED BY ITAT IN THE S ECOND APPEAL, DOES NOT DEMONSTRATE AS TO ON THE BASIS OF WHICH MATERIAL IT HAD BEEN CONCLUDED T HAT THE GENUINENESS OF THE TRANSACTIONS HAD BEEN DULY ESTABLISHED. THERE IS VIRTUALLY NO DISCUS SION IN THE SAID ORDERS ON SUCH SCORE, EXCEPT FOR VAGUE DESCRIPTION OF THE MATERIAL SUBMITTED BY THE ASSESSEE AT THE APPELLATE STAGE. WHILST IT DOES APPEAR THAT THE TIME GIVEN TO THE ASSESSEE FOR PROV ING THE IDENTITY OF THE THIRD PARTY WAS TOO SHORT, AND FURTHER THAT IT IS PROBABLY NOT ALWAYS POSSIBLE FOR THE ASSESSEE PLACED IN SUCH SITUATION TO BE ABLE TO ENFORCE THE PHYSICAL ATTENDANCE OF SUCH THI RD PARTY (WHO, IN THE CASE OF SHARE APPLICANTS VIS--VIS A COMPANY, WOULD BE INDIVIDUALS AT LARGE AND MAY NOT BE EVEN IN DIRECT OR PERSONAL CONTACT), THE CURTAINS ON SUCH EXERCISE AT VERIFICATION MAY N OT BE DRAWN AND ADVERSE INFERENCES REACHED ONLY ON THE BASIS OF RETURNING UNDELIVERED OF THE SUMMONSES UNDER SECTION 131.CONVERSELY, WITH DOUBTS AS TO THE GENUINENESS O F SOME OF THE PARTIES PERSISTING ON ACCOUNT OF NON-DELIVERY OF THE PROCESSES, THE INITIAL BURDE N ON THE ASSESSEE TO ADDUCE PROOF OF IDENTITY CANNOT BE TREATED AS DISCHARGED.(EMPHASIS BY US) THE COURT WAS INCLINED TO AGREE WITH THE CIT (APPEA LS), AND CONSEQUENTLY WITH ITAT, TO THE EXTENT OF THEIR CONCLUSION THAT THE ASSESSEE HEREIN HAD CO ME UP WITH SOME PROOF OF IDENTITY OF SOME OF THE ENTRIES IN QUESTION. BUT, FROM THIS INFERENCE, OR F ROM THE FACT THAT THE TRANSACTIONS WERE THROUGH BANKING CHANNELS, IT DOES NOT NECESSARILY FOLLOW TH AT SATISFACTION AS TO THE CREDITWORTHINESS OF THE PARTIES OR THE GENUINENESS OF THE TRANSACTIONS IN Q UESTION WOULD ALSO HAVE BEEN ESTABLISHED. 7 ITA NO.1468/MUM/2013 PRATHAM TELECOM INDIA PVT. LTD . 7 THE AO HERE MAY HAVE FAILED TO DISCHARGE HIS OBLIGA TION TO CONDUCT A PROPER INQUIRY TO TAKE THE MATTER TO LOGICAL CONCLUSION. BUT CIT (APPEALS), HA VING NOTICED WANT OF PROPER INQUIRY, COULD NOT HAVE CLOSED THE CHAPTER SIMPLY BY ALLOWING THE APPE AL AND DELETING THE ADDITIONS MADE. IT WAS ALSO THE OBLIGATION OF THE FIRST APPELLATE AUTHORITY, AS INDEED OF ITAT, TO HAVE ENSURED THAT EFFECTIVE INQUIRY WAS CARRIED OUT, PARTICULARLY IN THE FACE OF THE ALLEGATIONS OF THE REVENUE THAT THE ACCOUNT STATEMENTS REVEAL A UNIFORM PATTERN OF CASH DEPOSITS OF EQUAL AMOUNTS IN THE RESPECTIVE ACCOUNTS PRECEDING THE TRANSACTIONS IN QUESTION. (E MPHASIS BY US). THIS NECESSITATED A DETAILED SCRUTINY OF THE MATERIAL SUBMITTED BY THE ASSESSEE IN RESPONSE TO THE NOTICE UNDER SECTION 148 ISSUED BY THE AO, AS ALSO THE MATERIAL SUBMITTED AT THE STAGE OF APPEALS, IF DEEMED PROPER BY WAY OF MAKING OR CAUSING TO BE MADE A FURTHER INQUIRY IN EXERCISE OF THE POWER UNDER SECTION 250(4). THIS APPROACH NOT HAVING BEEN ADOPTED, THE IMPUGNED ORDER OF ITAT, AND CONSEQUENTLY THAT OF CIT (APPEALS), CANNOT BE APPROVED OR UPHELD . THE INITIAL BURDEN IS UPON THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF THE SHARE APPLICATION MONEY AND IN ORDER TO DISCHARGE THIS ONUS,THE ASSES SEE SHOULD PROVE (A) THE IDENTITY OF SHAREHOLDER; (B) GENUINENESS OF THE TRANSACTION; AN D (C) CREDITWORTHINESS OF SHAREHOLDERS. HONBLE COURT ALSO HELD THAT GIVEN THE LARGER OBJEC TIVE BEHIND THE PROVISION CONTAINED IN SECTION 68, THE PRIMARY AIM OF WHICH WAS TO ENSURE THAT NO MONETARY TRANSACTION REMAINED UNACCOUNTED, THAT THE INITIAL BURDEN WAS ON THE RECIPIENT OF THE MONEY,THAT FOR THAT PURPOSE THE ASSESSEE IN RECEIPT OF MONEY (BY WHATEVER NAME CALLED, INCLUDIN G IN THE FORM OF SHARE APPLICATION MONEY CREDITED IN ITS BOOK BY A COMPANY) MUST COLLECT AND SHOULD HAVE IN ITS POSSESSION SOME PROOF TO SATISFY, WHEN THE NEED ARISES,THE ASSESSING AUTHORI TIES NOT ONLY AS TO THE IDENTITY OF THE PARTY MAKING THE PAYMENT,BUT ALSO ITS CREDITWORTHINESS AS INDEED THE GENUINENESS OF THE TRANSACTION, THAT FOM THE ORDERS PASSED BY THE THREE AUTHORITIES BELO W IT APPEARED THAT THE ASSESSEE IN THE CASE AT HAND HAD SUBMITTED SOME DOCUMENTS RESPECTING THE TW ELVE ENTITIES INDICATIVE OF THEIR IDENTITY/ EXISTENCE,THAT SOME FURTHER MATERIAL APPEARED TO HA VE BEEN SHARED BY THE ASSESSEE WITH THE AO TO SHOW THAT THE SHARE APPLICATION MONEY IN EACH CASE HAD COME TO ITS CREDIT THROUGH BANKING CHANNELS, THAT FROM THE CONCLUSIONS REACHED BY FAA AND THE ITAT IT APPEARED THAT THE FAA WAS SATISFIED WITH THE EXPLANATION OF THE ASSESSEE ONLY BECAUSE THE IDENTITY OF THE SHAREHOLDERS HAD BEEN ESTABLISHED,THAT HE REJECTED THE ADDITIONS MAD E BY THE AO, IN WHICH RESULT THE ITAT CONCURRED,ON THE REASONING THAT THE AO HAD FAILED T O POINT OUT ANY DISCREPANCY IN THE EVIDENCE RELIED UPON BY THE ASSESSEE AND BECAUSE THE AO HAD FAILED TO PURSUE THE MATTER FURTHER FOR MAKING INQUIRIES,INASMUCH AS IT WAS EQUALLY THE D UTY OF THE AO TO HAVE TAKEN STEPS TO VERIFY THEIR ASSESSMENT RECORDS. FOLLOWING ARE THE FURTHER OBSERVATIONS OF THE HONB LE COURT WITH REGARD TO THE CASH CREDITS APPEARING IN THE BOOKS OF ACCOUNTS OF AN ASSESSEE: WHEN THE AO SETS ABOUT SEEKING EXPLANATION FOR THE UNACCOUNTED CREDIT ENTRIES IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE IN TERMS OF SECTION 68, IT IS LEGITIMATELY EXPECTED THAT THE EXERCISE WOULD BE TAKEN TO THE LOGICAL END, IN ALL FAIRNESS TAKING INTO ACCOUNT THE MATERIAL SUBMITTED BY THE ASSESSEE IN SUPPORT OF HIS ASSERTION THAT THE PERSO N MAKING THE PAYMENT IS REAL, AND NOT NON- EXISTENT, AND THAT SUCH OTHER PERSON WAS ACTUALLY T HE SOURCE OF THE MONEY FORMING THE SUBJECT MATTER OF THE TRANSACTION AS INDEED THAT THE TRANSA CTION IS REAL AND GENUINE, SAME AS IT IS REPRESENTED TO BE..WHILST IT IS TRUE THAT THE ASSE SSEE CANNOT BE CALLED UPON TO ADDUCE CONCLUSIVE PROOF ON ALL THESE THREE QUESTIONS, IT IS NONETHELE SS LEGITIMATE EXPECTATION OF THE PROCESS THAT HE WOULD BRING IN SOME PROOF SO AS TO DISCHARGE THE IN ITIAL BURDEN PLACED ON HIM.SINCE SECTION 68 ITSELF DECLARES THAT THE CREDITED SUM WOULD HAVE TO BE INCLUDED IN THE INCOME OF THE ASSESSEE IN THE ABSENCE OF EXPLANATION, OR IN THE EVENT OF EXPLANAT ION BEING NOT SATISFACTORY, IT NATURALLY FOLLOWS THAT THE MATERIAL SUBMITTED BY THE ASSESSEE WITH HI S EXPLANATION MUST ITSELF BE WHOLESOME OR NOT UNTRUE. IT IS ONLY WHEN THE EXPLANATION AND THE MAT ERIAL OFFERED BY THE ASSESSEE AT THIS STAGE PASSES THIS MUSTER THAT THE INITIAL ONUS PLACED ON HIM WOU LD SHIFT LEAVING IT TO THE AO TO START INQUIRING INTO THE AFFAIRS OF THE THIRD PARTY.THE CIT (APPEA LS), AS ALSO THE ITAT, IN THE CASE AT HAND, IN OUR VIEW, UNJUSTIFIABLY CRITICIZED THE AO FOR NOT HAVIN G CONFRONTED THE ASSESSEE WITH THE FACTS REGARDING RETURN OF SOME OF THE SUMMONS UNDER SECTI ON 131 OR NOT HAVING GIVEN OPPORTUNITY FOR THE IDENTITY OF ALL THE SHARE APPLICANTS TO BE PROP ERLY ESTABLISHED. 8 ITA NO.1468/MUM/2013 PRATHAM TELECOM INDIA PVT. LTD . 8 FINALLY,THE HONBLE COURT HELD THAT THE FAA HAD FAI LED TO MAKE FURTHER INQUIRY,THAT THE APPROACH ADOPTED BY IT AND THE TRIBUNAL COULD NOT BE ENDORSE D,THAT THE QUESTION OF LAW RAISED BEFORE IT HAD TO BE DECIDED IN FAVOUR OF THE AO. 5.2.A. IN THE MATTER OF DELHI NIPUN DEVELOPERS AND BUILDE RS PVT.LTD.( 350 ITR 407)THE HONBLE DELHI HIGH COURT HAS LAID DOWN SOME PRINCIPLES ABOU T SECTION 68 WHILE DISCUSSING THE ISSUE OF SHARE APPLICATION MONEY.IN OUR OPINION,SAME APPLIES TO LOANS RECEIVED BY THE ASSESSE ALSO.HONBLE COURT HAS HELD AS UNDER: IN AN APPROPRIATE CASE, IF THE FACTS AND CIRCUMSTAN CES JUSTIFY, IT WOULD BE OPEN TO THE ASSESSING OFFICER TO SEEK INFORMATION FROM THE ASSESSEE AS TO THE CREDITWORTHINESS OF THE CREDITOR/SHARE APPLICANT WHICH MAY INCLUDE INFORMATION AS TO THE S OURCES OF THE CREDITOR/SHARE APPLICANT. IF PROVING THE CREDITWORTHINESS OF THE CREDITOR/SHARE APPLICANT IS NOW JUDICIALLY ACCEPTED AS ONE OF THE INGREDIENTS OF THE ONUS CAST ON THE ASSESSEE UN DER SECTION 68 OF THE INCOME-TAX ACT, 1961, PROOF OF THE RESOURCES OF THE CREDITOR/SHARE APPLIC ANT CANNOT BE COMPLETELY EXCLUDED FROM THE SWEEP OF THE BURDEN. IT MAY NOT BE REQUIRED OF THE ASSESSEE TO GIVE IN-DEPTH PARTICULARS AND DETAILS ABOUT THE RESOURCES OF THE CREDITOR OR THE SHARE AP PLICANT, BUT THE MINIMUM REQUIRED OF HIM WOULD BE INFORMATION THAT WILL PRIMA FACE SATISFY THE ASS ESSING OFFICER ABOUT THE CREDITWORTHINESS. MERE FURNISHING OF THE BANK STATEMENTS OF THE SHARE APPL ICANTS WITHOUT ANY EXPLANATION FOR THE DEPOSITS IN THE ACCOUNTS MAY NOT MEET THE REQUIREMENTS OF SE CTION 68 . IT MAY BE NECESSARY TO KNOW THE BUSINESS ACTIVITIES OF THE SHARE APPLICANTS IN ORDE R TO ASCERTAIN WHETHER THEY ARE FINANCIALLY SOUND AND ARE ABLE TO PURCHASE SHARES FOR SUBSTANTIAL AMO UNTS ; IF THEY HAVE BORROWED MONIES FOR MAKING THE INVESTMENT, WHETHER THEY WERE CAPABLE OF REPAYING THEM HAVING REGARD TO THE NATURE OF THEIR BUSINESS, VOLUME OF THE BUSINESS, ETC. THESE ARE VERY RELEVANT TO ESTABLISH THE CREDITWORTHINESS OF THE INVESTORS. IT IS FOR THIS P URPOSE THAT IT IS NECESSARY FOR THE ASSESSEE, IN APPROPRIATE CASES WHERE THE FACTS AND SURROUNDING C IRCUMSTANCES JUSTIFY, TO SEEK THE ASSISTANCE OF THE PRINCIPAL OFFICER OF THE SUBSCRIBING COMPANIES AND PRESENT HIM BEFORE THE ASSESSING OFFICER SO THAT HE WILL BE IN A POSITION TO EXPLAIN IN DETAIL THE SOURCE FROM WHICH THE SHARES WERE SUBSCRIBEDTHAT THOUGH THE DIFFICULTY THAT MAY BE FACED BY AN ASSESSEE TO UNIMPEACHABLY ESTABLISH THE CREDITWORTHINESS OF THE SHARE APPLICA NTS, MERE FURNISHING OF THE COPIES OF THE BANK ACCOUNTS OF THE APPLICANTS WAS NOT SUFFICIENT TO PR OVE THEIR CREDITWORTHINESS. THERE MUST BE SOME POSITIVE EVIDENCE TO SHOW THE NATURE AND SOURCE OF THE RESOURCES OF THE SHARE APPLICANT HIMSELF AND, THEREFORE, IT WAS NECESSARY FOR HIM TO COME BE FORE THE ASSESSING OFFICER AND CONFIRM HIS SOURCES FROM WHICH HE SUBSCRIBED TO THE CAPITAL.TH AT THERE WAS NO EXAMINATION BY THE TRIBUNAL OF THE ASSESSMENT PROCEEDINGS IN ANY DETAIL IN ORDE R TO DEMONSTRATE THAT THE ASSESSEE HAS DISCHARGED ITS ONUS TO PROVE NOT ONLY THE IDENTITY OF THE SHARE APPLICANTS, BUT ALSO THEIR CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSAC TIONS. NO ATTEMPT WAS MADE BY IT TO SCRATCH THE SURFACE AND PROBE THE DOCUMENTARY EVIDENCE IN SOME DEPTH, IN THE LIGHT OF THE CONDUCT OF THE ASSESSEE AND OTHER SURROUNDING CIRCUMSTANCES IN ORD ER TO SEE WHETHER THE ASSESSEE HAD DISCHARGED ITS ONUS UNDER SECTION68. THERE HAD ONLY BEEN A MECHANICAL REFERENCE TO THE CASE LAW ON THE SUBJECT WITHOUT ANY SERIOUS APPRAISAL OF THE FACTS AND CIRCUMSTANCES OF THE CASE. THUS, THE ORDER DELETING THE ADDITION COULD NOT BE SUSTAINED. 5.3. FROM THE ABOVE DISCUSSION,IN OUR OPINION,IT CAN SAF ELY BE STATED THAT MERE PRODUCTION OF PAN OR ASSESSMENT PARTICULARS DOES NOT ESTABLISH THE ID ENTITY OF A PERSON. THE IDENTIFICATION OF A PERSON INCLUDES THE PLACE OF WORK,THE STAFF AND THE FACT T HAT THAT PERSON WAS ACTUALLY CARRYING ON BUSINESS AND FURTHER RECOGNITION OF THE COMPANY OR INDIVIDUA L IN THE EYES OF PUBLIC.PAN.S ARE ALLOTTED ON THE BASIS OF APPLICATIONS WITHOUT ACTUAL DE FACTO V ERIFICATION OF THE IDENTITY OR ASCERTAINMENT OF THE ACTIVE NATURE OF BUSINESS ACTIVITY.PAN.S ARE ALLOTT ED AS A FACILITY TO THE REVENUE TO KEEP TRACK OF TRANSACTIONS.PAN.S CANNOT BLINDLY AND WITHOUT CONSI DERATION OF SURROUNDING CIRCUMSTANCES BE TREATED AS SUFFICIENTLY DISCLOSING THE IDENTITY OF THE PERSON.IN A CASE OF ACCOMMODATION ENTRIES, IN VIEW OF THE LINK BETWEEN THE ENTRY PROVIDERS AND IN CRIMINATING EVIDENCE, THE MERE FILING OF PAN.S,ACKNOWLEDGMENT OF INCOME-TAX RETURNS OF THE E NTRY PROVIDERS AND BANK ACCOUNT STATEMENTS, IS NOT SUFFICIENT TO DISCHARGE THE ONUS ON THE ASSESSEE. 9 ITA NO.1468/MUM/2013 PRATHAM TELECOM INDIA PVT. LTD . 9 IN THE CASE OF PRIVATE LIMITED COMPANIES,GENERALLY PERSONS ADVANCING LOANS WOULD BE KNOWN TO THE DIRECTORS OR SHAREHOLDERS DIRECTLY OR INDIRECTLY.AF TER ADVANCING LOANS THEY WILL NOT LOSE TOUCH OR BECOME INCOMMUNICADO.IN SUCH CASES THE ASSESSEE CAN NOT SIMPLY FURNISH DETAILS AND REMAIN QUIET EVEN WHEN NOTICES ISSUED TO THE CREDITORS ARE RETUR NED UNSERVED AND UNCOMPLIED WITH. THE ASSESSEE CANNOT PLEAD AS A GENERAL PROPOSITION THAT THEY HAD RECEIVED SUMMONS AND IT WAS FOR THE AO TO ENFORCE THE ATTENDANCE OF THE SHAREHOLDERS. T HE COURT OR TRIBUNAL SHOULD BE CONVINCED ABOUT THE IDENTITY, CREDITWORTHINESS AND GENUINENES S OF THE TRANSACTIONS. THE ONUS TO PROVE THE THREE FACTUM IS ON THE ASSESSEE AS THE FACTS ARE WI THIN THE PERSONAL KNOWLEDGE OF THE ASSESSEE. MERE PRODUCTION OF INCORPORATION DETAILS, PAN.S OR INCOME-TAX RETURNS MAY NOT BE SUFFICIENT WHEN SURROUNDING AND ATTENDING FACTS PREDICATE A CO VER-UP. THE PRODUCTION OF INCORPORATION DETAILS, PERMANENT ACCOUNT NUMBERS OR INCOME-TAX DE TAILS MAY INDICATE COMPLETION OF PAPER WORK OR DOCUMENTATION BUT THE GENUINENESS, CREDITWORTHIN ESS AND IDENTITY OF THE INVESTMENT AND THE INVESTORS ARE DEEPER AND OBTRUSIVE THAN MERE COMPLE TION OF PAPER WORK OR DOCUMENTATION. COMING UP WITH SOME PROOF OF IDENTITY OF SOME OF TH E ENTRIES IN QUESTION COULD LEAD TO SOME KIND OF INFERENCE,BUT,FROM THAT INFERENCE OR FROM THE FA CT THAT THE TRANSACTIONS WERE THROUGH BANKING CHANNELS,IT DOES NOT NECESSARILY FOLLOW THAT SATISF ACTION AS TO THE CREDITWORTHINESS OF THE PARTIES OR THE GENUINENESS OF THE TRANSACTIONS IN QUESTION WOU LD ALSO HAVE BEEN ESTABLISHED. 5.4. WHILE GOING THROUGH THE PAPERS FILED BY THE ASSESSE E IN PB WE FIND THAT IN CASE OF ACPL (PG.30) WITHDRAWAL AND DEPOSIT OF MONEY IS ON SAME DAY OR NEXT DAY,THE PAID UP OF CAPITAL IS OF 28.01LAKHS,THE GROSS TOTAL INCOME OF THE COMPANY IS RS.1652(PG.23)AND IT HAD PAID TAX OF RS.510/- .NO OTHER DETAILS ARE AVAILABLE ON RECORD ABOUT ACP L.AS PER PG.33,LMTPL HAD PAID TAXES OF RS. 6,070/- DURING THE YEAR WHEN LOAN WAS ADVANCED TO T HE ASSESSEE.IT IS ALSO FOUND THAT THE PATTERN OF DEPOSIT AND WITHDRAWAL OF CHEQUES IS SAME AS THAT O F ACPL,THAT IN THE ADDRESS MENTIONED IN THE RETURN OF INCOME IS NOT MATCHING WITH THE ADDRESS A PPEARING IN THE ROC REGISTER. ADDRESSES OF STPL IN THE INCOME TAX RETURN AND BANK STATEMENT AR E NOT MATCHING.IT IS ALSO FOUND THAT THE ADDRESS OF STPL AND LMPTL IS SAME I.E.METCALF STREE T.IN THE CASE OF SVPL THE ASSESSEE HAS FILED ONLY TWO PAPERS-PAGE NO.43 AND 44.IT HAS NOT FILED THE BANK STATEMENT,COPY OF RETURN OF INCOME OR CERTIFICATE ISSUED BY ROC.PAGES 45TO ARE ABOUT TTPL .AS PER THESE PAPERS THE ASSESSEE HAD FILED RETURN OF RS.878/- AND TAX PAYABLE TAX WAS RS.272/- ONLY AND THE PATTERN OF DEPOSIT AND WITHDRAWAL WAS SIMILAR TO ABOVE REFERRED ENTETIES.I F WE CONSIDER ALL THESE SURROUNDING CIRCUMSTAN -CES ALONG WITH THE OTHER FACTORS LIKE NON SERVICE OF NOTICES AT THE GIVEN ADDRESSES, AUTHORISED AND PAID UP CAPITAL OF THE ASSESSEE-COMPANY WE ARE OF T HE OPINION THAT THE ASSESSEE HAD NOT DISCHARGED THE BURDEN OF PROOF AND HAD NOT ESTABLISHED CREDITW ORTHINESS OF THE LENDERS OR GENUINENESS OF THE TRANSACTION.THEREFORE,WE ARE OF THE OPINION THAT TH E ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY. 5.5. LASTLY,WE WOULD LIKE TO DISCUSS THE CASES RELIED UP ON BY THE ASSESSEE.AS FAR AS CASE OF PADAM PAREKH (SUPRA)IS CONCERNED IT DEALS WITH THE ISSUE OF HOW THE DECISIONS OF SPECIAL BENCH OR THIRD MEMBER SHOULD BE GIVEN PREFERENCE WHILE DECIDING TH E ISSUE BY BENCHES OF THE TRIBUNAL.IN OUR OPINION,IT HAS NO RELEVANCE TO THE FACTS OF THE CAS E.NOW,IN THE CASE OF VISHNU JAISAWAL(SUPRA)IT WAS HELD BY THE BENCH THAT IF THE AO HAD DOUBTED TH E CREDITWORTHINESS OF THE LENDERS,HE SHOULD HAVE DIRECTED THE ASSESSEE TO PRODUCE THE CREDITORS OR EXAMINED THE CREDITORS DIRECTLY.IN THE MATTER BEFORE US,THE AO HAD ISSUED NOTICE U/S.133(6)OF THE ACT IN FIVE CASES AND OUT OF THAT THREE REMAINED UN-SERVED,THAT IN TWO OTHER CASES THERE WA S THERE WAS NO REPLY TO THE SPECIFIC NOTICES. THE FAA IN HIS ORDER HAS HIGHLIGHTED THE SURROUNDIN G CIRCUMSTANCES THAT LEAD TO THE CONCLUSION THAT HIS ORDER WAS LEGALLY SUSTAINABLE.THE FACTS OF RANCHOD JIVABHAI(SUPRA)ARE DISTINGUISHABLE FROM THE FACTS OF THE PRESENT CASE.IN THAT MATTER T HE ASSESSEE AO HAD NOT VERIFIED THE ACCOUNTS OF ONE PERSON WHO WAS NAMED V BY THE HONBLE COURT.IN OUR OPNION,THE CASES RELIED UPON BY THE FAA SUPPORT THE VIEW TAKEN BY US.THEREFORE,CONFIRMI NG THE SAME,WE DECIDE EFFECTIVE GROUND OF APPEAL AGAINST THE ASSESSEE. 10 ITA NO.1468/MUM/2013 PRATHAM TELECOM INDIA PVT. LTD . 10 AS A RESULT ,APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. ( 9 '() + ' : + ) ;<. ORDER PRONOUNCE D IN THE OPEN COURT ON 25TH, MARCH,2015 . 8 + -.# > ?' 25 EKPZ , 201 5 . + 7 @ SD/- SD/- ( / VIJAY PAL RAO) ( ! ! ! ! / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, ?' /DATE:25.03 . 2015. SK 8 8 8 8 + ++ + &) &) &) &) A #) A #) A #) A #) / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT(A)/ B C , 4. THE CONCERNED CIT / B C 5. DR C BENCH, ITAT, MUMBAI / D7 &)' L LL LH HH H , . . . 6. GUARD FILE/ 7 E ') ') ') ') &) &)&) &) //TRUE COPY// 8' / BY ORDER, F / ; DY./ASST. REGISTRAR , /ITAT, MUMBAI.