M/s Agrawal Coal Corporation P Ltd, V. The Add.CIT 5,

ITA 151/IND/2009

• Counselvise Citation: 15122714 RSA 2009
• Duration Of Justice: 2 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 25-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 25-03-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Keywords: Unexplained cash credit; Unexplained investment; Unexplained expenditure; Income from undisclosed sources; Source of fund; Additional evidence; Question of law; Accommodation entries; Onus to prove
• Section: 69C; 260A; 133(6); 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NOS. 151/IND/2009 AND 283/IND/2010 A.YS. 2005-06 AND 2006-07 M/S. AGRAWAL COAL CORPORATION P.LTD INDORE PAN AACCA-8468K ... APPELLANT VS ADDL. COMMISSIONER OF INCOME TAX RANGE 5, INDORE RESPONDENT ITA NOS. 136/IND/2009 AND 34/IND/2010 A.YS. 2005-06 AND 2006-07 M/S. AGRAWAL TRANSPORT CORPORATION P.LTD INDORE PAN AAECA-1502C APPELLANT 2 VS ADDL. COMMISSIONER OF INCOME TAX RANGE 5, INDORE ... RESPONDENT ITA NO. 190/IND/2009 A.Y. 2005-06 AD-MANUM FINANCE LIMITED INDORE PAN AABCA-4980F ... APPELLANT VS ADDL. COMMISSIONER OF INCOME TAX CIRCLE 5, INDORE ...RESPONDENT ITA NO. 158/IND/2010 A.Y. 2004-05 AD-MANUM PACKAGING LIMITED INDORE PAN AABCA 4240 A ... APPELLANT VS ADDL. COMMISSIONER OF INCOME TAX CIRCLE-5(1), INDORE RESPONDENT 3 ITA NOS. 196/IND/2009 AND 193/IND/2010 A.YS. 2005-06 AND 2006-07 M/S INDIRA EXPORTS PVT. LTD INDORE PAN AAACI-3883Q ... APPELLANT VS ASSTT. COMMISSIONER OF INCOME TAX 5(1), INDORE ... RESPONDENT ITA NO. 137/IND/09 A.Y. 2005-06 M/S AGRAWAL MONEY FINANCE INDORE PAN AAIFA-3838N ... APPELLANT VS ASSTT. COMMISSIONER OF INCOME TAX 5(1), INDORE ... RESPONDENT ASSESSEES BY : SHRI P.M. CHAUDHARY, SHRI AJAY TULSIYAN, SHRI HITESH CHIMNANI, RESPONDENT BY : SHRI KESHAVE SEXENA, CIT DR, SHRI R.K. CHOUDHARY AND SHRI K.K. SINGH, LD. COMMISSIONERS DATE OF HEARING : 7.09.2011 DATE OF PRONOUNCEMENT : 31.10.2011 4 O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THIS BUNCH OF 9 APPEALS IS PREFERRED BY DIFFERENT ASSESEES AGAINST THE ORDERS OF THE LEARNED CIT(A) DATED 5.12 .2008, 3.3.2010, 11.12.2008, 7.12.2009, 22.1.2009, 28.1.20 10, 6.1.2009, 18.12.2009 AND 5.12.2008, RESPECTIVELY, O N THE FOLLOWING COMMON GROUNDS :- ITA NO. 151/IND/2009 1. THAT THE LEARNED CIT(A) ERRED IN UPHOLDING ADDI TION MADE BY THE ASSESSING OFFICER U/S 68 OF THE INCOME TAX ACT, 1961 OF RS. 50,00,000/- ALLEGING THE SAME AS UNEXPLAINED CREDITS. IT IS SUBMITTED THAT THE SAID AMOUNT REPRESENTING SHARE CAPITAL AND SHARE PREMIUM RECEIV ED FROM HINDUSTAN CONTINENTAL LTD. OF RS. 40,00,000/- AND FROM OPTIMATES TEXTILE INDUSTRIES LTD. OF RS. 10,00 ,000/- WAS PROPERLY EXPLAINED AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ADDITION IS WRONG AN D NOT IN ACCORDANCE WITH LAW. IT IS, THEREFORE, PRAYED T HAT THE SAID ADDITION REQUIRES TO BE NOW DELETED. 2. THAT THE LEARNED CIT(A) ERRED IN UPHOLDING AD HO C DISALLOWANCE OF RS. 1,00,000/- MADE BY THE ASSESSIN G OFFICER OUT OF TELEPHONE EXPENSES WHICH ON FACTS AN D IN THE CIRCUMSTANCES OF THE CASE IS WRONG AND UNWARRANTED. IT IS, THEREFORE, PRAYED THAT THE SAI D ADDITION REQUIRES TO BE NOW DELETED. ITA NO. 283/IND/2010 THAT THE LEARNED CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OF RS. 2,40,000/- OUT OF INTEREST PAID ON UNSECURED LOANS. 5 THAT THE SAID INTEREST EXPENDITURE HAVING PROPERLY INCURRED BY THE APPELLANT ON THE UNSECURED LOANS ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE IS ALLOW ABLE TO THE APPELLANT. ITA NO. 136/IND/2009 1. THAT THE LEARNED CIT(A) ERRED IN UPHOLDING THE ADDITION MADE BY THE ASSESSING OFFICER U/S 68 OF TH E INCOME TAX ACT, 1961 OF RS. 50,00,000/- ALLEGING TH E SAME AS UNEXPLAINED CREDITS. IT IS SUBMITTED THAT THE SAID AMOUNT RECEIVED AS UNSECURED LOANS FROM VARIOUS PARTIES WAS PROPERLY EXPLAINED AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE SAID ADDITION IS PATENTLY WRONG AND NOT IN ACCORDANCE WI TH LAW. IT IS, THEREFORE, PRAYED THAT THE SAID ADDITI ON REQUIRES TO BE NOW DELETED. 2. THAT THE LEARNED CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OF RS. 6,17,878/- PAID AS INTEREST ON ABOVE UNSECURED LOAN ALLEGING THAT THE SAID INTEREST IS IN RESPEC T OF ACCOMMODATION ENTRIES. THAT THE SAID INTEREST EXPENDITURE HAVING PROPERLY INCURRED BY THE APPELLANT ON THE UNSECURED LOANS, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE IS ALLOWABLE TO THE APPELLANT. IT IS THEREFORE PRAYED THAT THE SAID ADDITION REQUIRES TO BE NOW DELETED. 3. THAT THE LEARNED CIT(A) ERRED IN UPHOLDING THE A D HOC DISALLOWANCE MADE BY THE ASSESSING OFFICER OF RS. 80,000/- ON ACCOUNT OF TELEPHONE EXPENSES FOR ALLEGED PERSONAL USE WHICH ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE IS WRONG AND UNCALLED FOR . IT IS, THEREFORE, PRAYED THAT THE SAID ADDITION REQ UIRES TO BE NOW DELETED. ITA NO. 34/IND/2010 THAT THE LEARNED CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OF 6 RS. 8,92,890/- PAID AS INTEREST ON UNSECURED LOANS. THAT THE SAID INTEREST EXPENDITURE HAVING PROPERLY INCURRED BY THE APPELLANT ON THE UNSECURED LOANS ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE IS ALLOWABLE TO THE APPELLANT. ITA NO. 190/IND/2009 1. THAT THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.5,00,000/- MADE BY THE A.O. AS ALLEGED UNEXPLAINED CREDIT U/S 68. IT IS SUBMITTED THAT THE SAID UNSECURED LOAN RECEIVED FROM M/S OPTIMATES TEXTILE INDUSTRIES LTD. WAS PROPERLY EXPLAINED AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW TH SAID ADDITION IS WRONG AND NOT IN ACCORDANCE WITH LAW. IT IS, THEREFORE, PRAYED THAT THE SAID ADDITION REQUIRES TO BE NOW DELETED. 2. THAT THE LEARNED CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE OF INTEREST OF RS. 62,055/- PAID TO M/ S OPTIMATES TEXTILE INDUSTRIES LTD. IT IS SUBMITTED THAT THE SAID DISALLOWANCE IS WRONG AND UNCALLED FOR ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. IT IS, THEREFORE, PRAYED THAT THE SAID ADDIT ION REQUIRES TO BE NOW DELETED. 3. THAT THE LEARNED CIT(A) ERRED IN CONFIRMING THE AD HOC DISALLOWANCE OF RS. 50,000/- MADE BY THE A.O. OUT OF COMMUNICATION EXPENSES. IT IS SUBMITTED THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE SAID ADDITION IS WRONG AND UNCALLED FOR. IT IS,THEREFORE, PRAYED THAT THE SAID ADDITION REQUIRES TO BE NOW DELETED. ITA NO. 158/IND/2010 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-II,INDORE, HAS ERRED IN 7 1. MAINTAINING THE ADDITION OF RS. 10 LACS BY TREAT ING THE SAME AS UNEXPLAINED CASH CREDITS. 2. MAINTAINING THE DISALLOWANCE OF INTEREST PAID OF RS.42,658/- ON UNSECURED LOANS TREATED AS UNEXPLAINED IN GROUND NO. 1 ITA NO. 196/IND/2010 1. THAT, THE LEARNED CIT(A) ERRED IN CONFIRMING THE AD HOC DISALLOWANCE OF RS. 25000/- MADE BY THE A.O. OUT OF TELEPHONE EXPENSES. IT IS SUBMITTED THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE SAID ADDITION IS WRONG AND UNCALLED FOR. IT IS, THEREFORE, PRAYED THAT THE SAID ADDITION REQUIRES TO BE NOW DELETED. 2. THAT THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.10,00,000/- MADE BY THE A.O. AS ALLEGED UNEXPLAINED CREDIT U/S 68. IT IS SUBMITTED THAT THE SAID UNSECURED LOAN RECEIVED FROM M/S OPTIMATES TEXTILE INDUSTRIES LTD. WAS PROPERLY EXPLAINED AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE SAID ADDITION IS WRONG AND NOT IN ACCORDANCE WITH LAW. IT IS, THEREFORE, PRAYED THAT THE SAID ADDITION REQUIRES TO BE NOW DELETED. ITA NO. 193/IND/2010 1. THAT THE LEARNED CIT(A) ERRED IN UPHOLDING THE PENALTY LEVIED BY THE ASSESSING OFFICER U/S 271(1)(C) OF RS. 19000/-. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE PENALTY LEVIED HAS BEEN WRONGLY UPHELD BY THE LEARNED CIT(A). 2. THAT THE LEARNED CIT(A) ERRED IN UPHOLDING PENAL TY LEVIED BY THE ASSESSING OFFICER ON THE BASIS OF DISALLOWANCE MADE U/S 69C OF INTEREST OF RS. 54257/- PAID ON UNSECURED LOAN FROM M/S 8 OPTIMATES TEXTILES INDUSTRIES LTD. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEVY OF PENALTY IS WRONG. ITA NO. 137/IND/2010 1. THAT THE LEARNED CIT(A) ERRED IN UPHOLDING ADDIT ION MADE BY THE ASSESSING OFFICER OF UNSECURED LOAN OF RS.20,00,000/- RECEIVED FROM M/S HINDUSTAN CONTINENTAL LTD. AS UNEXPLAINED CASH CREDITS U/S 68 OF THE INCOME TAX ACT, 1961. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE SAID UNSECURED LOAN WAS PROPERLY EXPLAINED AND THE ADDITION IS WRONG AND UNJUSTIFIED. IT IS, THEREFORE , PRAYED THAT THE SAID ADDITION NOW REQUIRES TO BE DELETED. 2. THAT THE LEARNED CIT(A) ERRED IN UPHOLDING AN ADDITION MADE BY THE ASSESSING OFFICER U/S 69C OF RS. 1,61,096/- BEING INTEREST PAID, AS UNEXPLAINED EXPENDITURE WHICH ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE IS WRONG AND UNCALLED FOR AND THE SAME REQUIRES TO BE NOW DELETED. 2. DURING HEARING OF THESE APPEALS, WE HAVE HEARD S HRI P.M. CHAUDHARY AND SHRI AJAY TULSIYAN, THE LEARNED COUNS ELS FOR THE ASSESSEE AND S/SHRI KESHAV SAXENA, SHRI R.K.CHAUDHA RY, SHRI K.K. SINGH, LEARNED COMMISSIONERS OF INCOME TA X ALONG WITH SHRI ARUN DEWAN, LEARNED SENIOR DR. THE LEARN ED REPRESENTATIVES FROM BOTH THE SIDES CONTENDED THAT THE FACTS AND THE ISSUE REGARDING SHARE APPLICATION MONEY IN VOLVED IN THESE APPEALS IS IDENTICAL AS THE SHARE CAPITAL AND SHARE 9 PREMIUM WAS ALLEGED TO BE RECEIVED FROM HINDUSTAN CONTINENTAL LIMITED AND OPTIMATES TEXTILE INDUSTRIE S LIMITED AND OTHER CONCERNS AS APPLICABLE TO THE RESPECTIVE APPEALS. 3. SINCE THE FACTS ARE IDENTICAL, THEREFORE, THESE APPEALS CAN BE DISPOSED OF BY A COMMON AND CONSOLIDATED ORDER. WE WOULD LIKE TO DEAL WITH ITA NO. 151/IND/2009 FIRST. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS A PRIVATE LIMITED C OMPANY ENGAGED IN THE BUSINESS OF TRADING IN COAL. THE A SSESSEE COMPANY, IN THE YEAR, UNDER CONSIDERATION, ENTERED IN POWER GENERATION WITH INSTALLATION OF TWO WIND MILLS. TH E ASSESSEE DECLARED INCOME OF RS. 83,46,090/- IN ITS RETURN FI LED FOR THE ASSESSMENT YEAR 2005-06 ON 30.10.2005. DURING SCRU TINY PROCEEDINGS THE ASSESSING OFFICER NOTED THAT HINDUS TAN CONTINENTAL LIMITED (IN SHORT HEREINAFTER AS HCL) APPLIED FOR 40,000 SHARES OF THE ASSESSEE COMPANY ON THE FACE V ALUE OF RS. 10/- EACH AND PREMIUM OF RS.90/- PER SHARE. SI MILARLY, OPTIMATES TEXILES INDUSTRIES LIMITED (IN SHORT HER EINAFTER AS OTIL) ALSO APPLIED FOR 10,000 SHARES OF THE SAME FACE VALUE AND THE PREMIUM PER SHARE. THE LEARNED ADDITIONAL CIT 10 (ASSESSING OFFICER), REFERRED TO THE REPORT OF ACIT 5(1), INDORE, WHEREIN IT WAS INFORMED THAT THE INVESTIGATION CARR IED OUT BY HIM IN SOME OTHER CASES ALSO FOUND THAT HCL AND OTIL AR E NOT THE GENUINE COMPANIES AND THESE MERELY EXIST ON PAPERS. SUCH REPORT FINDS PLACE IN THE ASSESSMENT ORDER. THIS R EPORT WAS CONFRONTED TO THE ASSESSEE COMPANY, DURING THE ASSE SSMENT PROCEEDINGS, AND AFTER CONSIDERING THE REPLY THE LE ARNED ASSESSING OFFICER CONCLUDED THAT THE ALLEGED SHARE CAPITAL, CLAIMED TO BE APPLIED BY THESE COMPANIES, IS UNEXPL AINED, THEREFORE, THE SAME WAS ADDED TO THE INCOME OF THE ASSESSEE COMPANY. THE RELEVANT PORTION FROM THE ASSESSMENT O RDER IS EXTRACTED BELOW :- THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE. ASSESSEE HAS RELIED UPON THE DECISION OF HONBLE I. T.A.T., INDORE BENCH, IN CASE OF ACIT VS. KALANI INDUSTRIES LTD. THE SAID DECISION WAS NOT ACCEPTABLE TO THE DEPARTMENT AND IS BEING CONTESTED BEFORE HON'BLE HIGH COURT OF M.P. ASSESSEE HAS TRIED TO PROVE GENUINENESS OF TRANSACT ION BY FURNISHING CONFIRMATION, COPY OF BANK ACCOUNT AND ACKNOWLEDGEMENT OF RETURN. IT HAS ALSO FURNISHED V ARIOUS DECISION IN SUPPORT OF ITS CONTENTIONS. BUT IT IS EVIDENT FROM THE INVESTIGATION MADE BY ACIT 5(1), INDORE THAT BO TH THESE COMPANY ARE NOT EXISTING COMPANIES IN THE REAL SENS E. THESE COMPANIES ARE PAPER COMPANIES ONLY AND EXIST NOWHERE AND WERE USED TO GIVE ACCOMMODATION ENTRIES TO VARIOUS PARTIES WHO WANT TO LAUNDER THEIR UNACCOUNT ED 11 MONEY IN THE GUISE OF SHARE APPLICATION OR UNSECURE D LOAN OR LONG TERM CAPITAL GAIN. THE ASSESSEE IS A CLOSELY HELD PVT. LTD. COMPANY I N WHICH PUBLIC IS NOT SUBSTANTIALLY INTERESTED. THUS AS PER SECTION 68 ONUS WAS UPON THE ASSESSEE TO ESTABLISH DEPOSITORS IDENTITY, CREDITWORTHINESS AND GENUINEN ESS OF TRANSACTION. ASSESSEE IN ITS WRITTEN SUBMISSION ST ATED THAT COMPANY HAS RECEIVED SHARE APPLICATION MONEY OF RS. 40,00,000/- FROM HINDUSTAN CONTINENTAL LTD. 19, SHU BH KAMNA APARTMENT, GUL BAZAR, JABALPUR. AS PER THE RE PORT OF THE ACIT 5(1), INDORE, IT IS CLEAR THAT NO SUCH COMPANY EXIST AT THE GIVEN ADDRESS. THE CREDITWORTHINESS OF THE COMPANY HAS ALSO NOT BEEN ESTABLISHED IN VIEW OF TH E FACT THAT THERE IS HUGE INFLOW AND OUTFLOW OF FUND IN TH E BANK ACCOUNT WITHOUT ANY LOGIC. THERE IS HUGE CASH DEPO SIT IN THE BANK ACCOUNT OF HINDUSTAN CONTINENTAL LTD. MAIN TAINED UTI BANK LTD. COPY OF WHICH IS FILED BY THE ASSESSE E IN SUPPORT OF ITS CONTENTION. THE COMPANY IS NOT EXIS TING IN REAL SENSE THE GENUINENESS OF TRANSACTION IS ALSO D OUBTFUL. SINCE ASSESSEE FAILED ESTABLISHED IDENTITY, CREDITW ORTHINESS AND GENUINENESS OF TRANSACTION, CREDIT IN THE ACCOU NT OF THE ASSESSEE ON ACCOUNT OF SHARE APPLICATION MONEY FRO M HINDUSTAN CONTINENTAL LTD. RS. 4,00,000/- AND SHARE PREMIUM AMOUNT OF RS. 36,00,000/- ARE BEING TREATED AS UNEXPLAINED CREDIT U/S 68 AND ADDED BACK TO TAXABLE INCOME. SIMILARLY, ASSESSEE HAS TRIED TO ESTABLISH IDENTITY OF M/S OPTIMATES TEXTILE INDUSTRIES LTD., BUT IT IS EVIDENT FROM THE REPORT OF THE ACIT 5(1), INDORE TH AT COMPANY IS ALSO A PAPER COMPANY USED TO PROVIDING ACCOMMODATION ENTRIES ONLY. ENQUIRIES REVEALED THA T NO SUCH COMPANY EXISTS AT THE ADDRESS AS PROVIDED BY THE ASSESSEE. ACIT 5(1), INDORE REPORTED THAT TH E ASSISTANT DIRECTOR OF INCOME TAX INVESTIGATION IX(3 ), MUMBAI HAD CONFIRMED IN HIS REPORT THAT M/S OPTIMAT ES TEXTILE INDUSTRIES LTD. DOES NOT EXIST AT THE GIVEN ADDRESS AND SEEMS TO BE BOGUS. ASSESSEE HAS GIVEN THE ADDR ESS OF THE COMPANY AS TO DEV KARAN MENSION IIND FLOOR 63B PRINCES ESTATE MUMBAI WHEREAS THE BANK ACCOUNT OF T HE COMPANY HAS BEEN MENTIONED IN INDORE IN WHICH THE 12 ADDRESS OF THE COMPANY WAS GIVEN AS 13, SOUTH HATI PALA, INDORE. THIS COMPANY IS ALSO NOT EXISTING IN REAL S ENSE AND ONLY ACCOMMODATION ENTRIES ARE BEING GIVEN TO THE BENEFICIARIES IN THE FORM OF SHARE APPLICATION MONE Y OR UNSECURED LOANS. SINCE ASSESSEE FAILS TO ESTABLISH IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION S, SHARE APPLICATION MONEY CREDITED ON ACCOUNT OF M/S OPTIMATES TEXTILE INDUSTRIES LTD. RS. 1,00,000/- SH ARE PREMIUM RS.9,00,000/- IS TREATED UNEXPLAINED U/S 68 AND ADDED BACK TO TAXABLE INCOME. TOTAL ADDITION UNDER THIS HEAD IS RS. 50,00,000/- 4. ON APPEAL BEFORE THE LD. FIRST APPELLATE AUTHORI TY, THE LD. COUNSEL FOR ASSESSEE PREFERRED WRITTEN SUBMISSIONS DEALING WITH EACH FINDING OF THE LEARNED ASSESSING OFFICER AND PLACED RELIANCE UPON CERTAIN JUDICIAL PRONOUNCEMENTS. HOWE VER, LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DID NO T AGREE WITH THE SUBMISSIONS OF THE ASSESSEE BY HOLDING THA T THE ASSESSEE HAS NOT ESTABLISHED THE GENUINENESS OF CRE DITS INTRODUCED IN THE FORM OF SHARE CAPITAL AND THUS CO NFIRMED THE ADDITION. 5. BEFORE US, THE WHOLE THRUST OF ARGUMENTS ON BEHA LF OF THE ASSESSEE IS THAT ALL THE INGREDIENTS OF SECTION 68 WERE FULFILLED BY THE ASSESSEE WHEREAS THE CRUX OF ARGUMENTS ON BE HALF OF THE REVENUE IS THAT EVEN THE IDENTITY OF THESE COMP ANIES WAS 13 NOT ESTABLISHED BY THE ASSESSEE AND THESE COMPANIES MERELY EXISTS ON PAPERS. IT WAS ALSO CONTENDED THAT THE N OTICES ISSUED TO THESE PARTIES AT THE ADDRESSES SUPPLIED BY THE L D. COUNSEL FOR ASSESSEE RETURNED UNSERVED WITH THE REMARK THAT NO SUCH COMPANIES EVER EXISTED AT THE GIVEN ADDRESSES. THE INSPECTOR WAS DEPUTED TO KNOW THE WHEREABOUTS OF THESE COMPAN IES WHO ALSO REPORTED THAT NO SUCH COMPANIES WERE IN EX ISTENCE AT THE GIVEN ADDRESS. BEFORE COMING TO ANY CONCLUSION, WE ARE REPRODUCING HEREUNDER THE RELEVANT PROVISIONS OF SE CTION 68 OF THE ACT WHICH DEALS WITH CASH CREDITS :- 68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE [ASSESSING] OFFICER, SATISFACTOR Y, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. 6 . BEFORE US, THE LD. COUNSEL FOR ASSESSEE SUBMITTED I N REGARD TO THE CORRECTNESS AND VALIDITY OF THE ADDIT ION MADE BY AO U/S 68 CREDITS IN RESPECT OF SHARE CAPITAL AND S HARE PREMIUM RECEIVED FROM TWO COMPANIES VIZ M/S HINDUS TAN CONTINENTAL LTD (RS 40 LACS) & FROM M/S OPTIMAT TE XTILE 14 INDUSTRIES LTD ( RS 10 LACS), THAT THE PRESENT APPE AL RELATES TO AY 2005-06 , IN RESPECT OF WHICH THE ASSESSEE HAS F ILED ITS RETURN OF INCOME ON 31/10/05 DECLARING TOTAL INCOME AT RS 83,46,090/- (COPY OF COMPUTATION & ACKNOWLEDGMENT OF RETURN AT PAGE 1 TO 3 OF THE COMPILATION, COPY OF ANNUAL R ETURN CONTAINING BALANCE SHEET , P& L A/C ETC AT PAGE 4 T O 23 AND COPY OF TAX AUDIT REPORT AT PAGE 24 TO 43 OF THE CO MPILATION). DURING THE COURSE OF THE SCRUTINY PROCEEDINGS, THE LD. COUNSEL FOR ASSESSEE FILED DETAILS IN RESPECT OF INCREASE I N SHARE CAPITAL VIDE REPLIES DATED 16/10/07 (PAGE 47 TO 49 ) OF COM PILATION , REPLY DATED 7/12/07 (PAGE 50 TO 54) , REPLY DATED 1 7/12/07 (PAGE 55 TO 58) AND REPLY DATED 28/12/07(PAGE 60 TO 64) OF THE COMPILATION ALONG WITH DOCUMENTS (PAGE 67 TO 96). T HE LEARNED AO VIDE HIS ORDER OF ASSESSMENT DATED 28/12 /07, RELYING UPON SOME REPORT OF ACIT 5(1) INDORE, IN SO ME OTHER CASES, REPORT OF INSPECTOR, WHO WAS DEPUTED TO KNOW S THE WHEREABOUTS OF THESE COMPANIES AND THE REPORT OF TH E POSTAL DEPARTMENT THAT NO SUCH COMPANIES WERE EXISTING AT THE GIVEN ADDRESSES AND CAME TO THE CONCLUSION THAT THE IDENT ITY OF THESE 15 COMPANIES, M/S HINDUSTAN CONTINENTAL LTD & M/S OPTI MAT TEXTILES INDUSTRIES LTD FORMERLY KNOWN AS PRIYANSH SARI IND LTD IS NOT ESTABLISHED. RELYING UPON THESE REPORTS, THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE COMPANIES A RE PAPER COMPANIES ONLY, NOT EXISTING IN REAL SENSE. THE LD. COUNSEL FOR ASSESSEE SUBMITTED THAT IT IS PERTINENT TO NOTE THA T NO INDEPENDENT ENQUIRY HAS BEEN CONDUCTED BY ASSESSING OFFICER IN THE CASE OF ASSESSEE NOR ANY SUMMONS ETC WAS ISS UED BY ASSESSING OFFICER TO THE AFORESAID COMPANIES, THUS, NO ATTEMPT HAS BEEN MADE BY ASSESSING OFFICER ON HIS PART TO VERIFY THE EXISTENCE AND IDENTITY OF THESE TWO COMPANIES WITH REFERENCE TO VOLUMINOUS EVIDENCE PLACED ON RECORD BY THE PRESENT ASSESSEE TO PROVE THE IDENTITY AND CAPACITY OF THES E TWO COMPANIES TO INVEST THEIR MONEY IN SHARE CAPITAL OF ASSESSEE COMPANY. THE LD. COUNSEL FOR ASSESSEE HAS ALSO CLAI MED THAT THE TRANSACTION HAS BEEN CARRIED THROUGH BANKING CH ANNELS, WHICH PRIMA FACIE PROVES THE GENUINENESS OF THE TRA NSACTION. HE SUBMITTED THAT AS SUCH THE ASSESSEE HAS PLACED O N RECORD THE VOLUMINOUS MATERIAL TOWARDS DISCHARGE OF ITS IN ITIAL BURDEN 16 TO PROVE THE IDENTITY AND CAPACITY OF THE SHARE H OLDER COMPANIES AS ALSO THE GENUINENESS OF THE TRANSACTIO N. THE LD. COUNSEL FOR ASSESSEE INVITED OUR ATTENTION BY CLAIM ING THAT FOLLOWING INFORMATION AND DOCUMENTS DISCHARGED ITS PRIMARY BURDEN . NAMES AND ADDRESSES OF THE SHARE HOLDERS ALONG WI TH DETAILS OF THEIR PAN FURNISHED ALONG WITH REPLY DAT ED 7/12/07. A LIST OF FRESH SHARE CAPITAL RECEIVED DURING THE Y EAR ALONG WITH NAMES AND ADDRESS OF THE SHARE HOLDERS A ND PAN AGAIN GIVEN ALONG WITH REPLY DATED 17/12/07 ON DEMAND FROM AO . COPIES OF BOARD RESOLUTION AND SHARE APPLICATION FORMS OF ALL SHARE HOLDERS INCLUD ING THE ABOVE TWO COMPANIES ALSO FILED ALONG WITH THE REPLY. THE LD. COUNSEL FOR ASSESSEE SUBMITTED THAT VARIOUS DOCUMENTS FOR ABOVE TWO COMPANIES WERE FILED BEFORE THE ASSESSING OFFICER TO PROVE THE IDENTITY, CAPACITY A ND GENUINENESS OF THE TRANSACTIONS BUT THE ASSESSING O FFICER HAS BRUSHED ASIDE THE SAME AND MERELY RELYING UPON THE REPORT OF ANOTHER AUTHORITIES HELD THAT THE COMPANIES IN QUES TION ARE PAPER COMPANIES AND NOT EXISTING IN REAL SENSE AND HAS MADE 17 THE AFORESAID ADDITION U/S 68 OF THE IT ACT, WITHOU T APPLICATION OF MIND. 7. SO FAR AS THE LEGAL POSITION IN RESPECT OF APPLI CABILITY OF SECTION 68 TO THE CREDITS IN RESPECT OF SHARE APPLI CATION MONEY/ SHARE CAPITAL CREDITS TOWARDS SHARE APPLICATION MON EY/ SHARE CAPITAL IS CONCERNED, THE LD. COUNSEL FOR ASSESSEE SUBMITTED THAT IT HAS TAKEN DIFFERENT TURNS. HE SUBMITTED THA T VARIOUS DECISIONS HAVE TWO ASPECTS I.E. (I) REGARDING APPLI CABILITY OF SECTION 68 TO SUCH CREDITS AND (II) IF SECTION 68 I S APPLICABLE, THEN THE EXTENT OF BURDEN ON ASSESSEE. 8. REGARDING APPLICABILITY OF SECTION 68 TO SUCH C REDITS, THE LD. COUNSEL FOR ASSESSEE RELIED UPON THE FOLLOWING DECISIONS :- 1. STELLAR INVESTMENT; 192 ITR 287 (DEL) 2. SOPHIA FINANCE LIMITED; 205 ITR 98 (DEL) 3. CIT V. LOVELY EXPORTS PVT. LTD.; 216 CTR (SC) 195 INVITING OUR ATTENTION TO THE AFORESAID JUDGMENTS, THE LEARNED COUNSEL FOR ASSESSEE SUBMITTED THAT A COMBINED READ ING OF ALL THE ABOVE DECISIONS VIZ THE DECISION OF DELHI HIGH COURT , WHICH HAS BEEN AFFIRMED BY SUPREME COURT IN THE CASE OF S TELLAR 18 INVESTMENT, READ WITH THE LATER DECISION OF SUPREM E COURT IN CASE OF LOVELY EXPORTS SHOWS THAT EVEN IF SUCH AMOU NTS ARE RECEIVED BY SUCH ASSESSEE COMPANY FROM THE ALLEGED BOGUS SHARE HOLDERS, NO ADDITION U/S 68 CAN BE MADE IN TH E HANDS OF THE COMPANY. IT WAS CANVASSED THAT THE HON'BLE DEL HI HIGH COURT HAS HELD THAT IF THE ASSESSMENTS OF THE PERSO NS WHO ARE ALLEGED TO HAVE REALLY ADVANCED MONEY IS SOUGHT TO BE REOPENED, THAT WOULD HAVE SOME SENSE BUT THE AMOUNT OF INCREASED CAPITAL CANNOT BE ADDED IN THE HANDS OF T HE COMPANY ITSELF . 9. THE LD. COUNSEL FOR ASSESSEE FURTHER SUBMITTED T HAT THE LAW LAID DOWN BY THE SUPREME COURT IS BINDING ON AL L COURTS, TRIBUNALS AND AUTHORITIES UNDER ARTICLE 141 OF THE CONSTITUTION OF INDIA AND NO ADDITION CAN BE MADE IN RESPECT OF THE AMOUNT INVESTED BY THE AFORESAID TWO COMPANIES. IT WAS FUR THER SUBMITTED THAT EVEN IF IT IS ASSUMED WITHOUT ADMITT ING THAT THE SAID SHARE HOLDER COMPANIES ARE NON EXISTING COMPAN IES, NO ADDITION COULD BE MADE IN RESPECT OF THE AMOUNTS IN VESTED BY THE AFORESAID TWO COMPANIES. HE INVITED OUR ATTENTI ON TO THE 19 DECISION OF SUPREME COURT IN CIT VS STELLAR INVESTM ENT CO LTD (SUPRA) BEING ON DISMISSAL OF CIVIL APPEAL ARISING OUT OF THE DECISION OF DELHI HIGH COURT, WHICH CONSTITUTES AFF IRMATION OF THE DECISION AND AMOUNTS TO THE DECLARATION OF LAW. IT WAS CANVASSED THAT SIMILARLY THE ORDER OF THE HON'BLE S UPREME COURT, DISMISSING THE SLP IN THE CASE OF LOVELY EXP ORTS PVT LTD (SUPRA), ALSO HAS A BINDING EFFECT FOR WHICH RELIAN CE WAS PLACED UPON FOLLOWING DECISIONS :- 1. KUNHAYAMMED & OTHERS VS STATE OF KERALA & ANOTHER REPORTED IN 245 ITR 360 WHERE THEIR LORDSHIPS HAV E HELD THAT IF THE ORDER REFUSING SPECIAL LEAVE TO A PPEAL IS A SPEAKING ORDER I.E IT GIVES REASON FOR REFUSING T HE GRANT OF LEAVE , THEN THE ORDER HAS TWO IMPLICATIONS. FIR STLY , THE STATEMENT OF LAW CONTAINED IN THE ORDER IS DECLAR ATION OF LAW BY SUPREME COURT WITHIN THE MEANING OF ARTICLE 1 41 WHICH WILL OBVIOUSLY BE BINDING ON ALL COURTS AND TRIBUNALS IN INDIA AND CERTAINLY THE PARTIES THERE TO . SECONDLY OTHER THEN DECLARATION OF LAW , WHATEVER IS STATED IN THE ORDER ARE FINDINGS RECORDED BY SUPREME COURT WHICH WOULD BE BINDING ON THE PARTIES AND THE COURTS, T RIBUNAL OR AUTHORITIES WHOSE ORDERS WAS UNDER CHALLENGE . 2. S SHANMUGAVEL NADAR VS STATE OF TAMILNADU REPORTED IN 263 ITR 658 . THEIR LORDSHIPS HAVE HELD THAT A SUMMARY DISMISSAL BY SUPREME COURT WITHOUT LAYING DOWN ANY LAW IS NOT A DECLARATION OF LAW ENVISAGED UNDER A RTICLE 141 BUT WHEN REASONS ARE GIVEN, THE DECISION OF THE S UPREME COURT WOULD BE BINDING ON ALL COURTS WITHIN THE TE RRITORY OF INDIA 3. SNOWCEM INDIA LTD VS DCIT REPORTED 313 ITR 170(B OM) 20 WHERE THEIR LORDSHIPS HAVE HELD THAT ONCE THE AP PEAL AGAINST THE JUDGMENT OF THE HIGH COURT IS DISMISSE D , IT CAN BE SAID THAT THE DECISION OF THE HIGH COURT HAS BE EN AFFIRMED BY THE SUPREME COURT 10. THE LD. COUNSEL FOR ASSESSEE, SUBMITTED THA T IN VIEW OF THE LEGAL POSITION SETTLED BY THE HON'BLE SUPREM E COURT AGAINST THE JUDGMENT OF DELHI HIGH COURT IN THE CAS E OF STELLAR INVESTMENT (SUPRA) AND DISMISSAL OF SLP AGAINST JUD GMENT OF DELHI HIGH COURT IN CASE OF LOVELY EXPORTS (P) LTD (SUPRA), THE PROPOSITION OF LAW THAT EVEN IF IT IS ASSUMED THAT SOME OF THE SHARE HOLDERS ARE BOGUS, NO ADDITION CAN BE MADE U/ S 68 OF THE ACT IN THE HANDS OF ASSESSEE COMPANY, WHICH IS BIND ING ON ALL COURTS INCLUDING THIS TRIBUNAL. HE, THEREFORE, SUB MITTED THAT ASSUMING WITHOUT ADMITTING THAT AS HELD BY AO THE A BOVE TWO COMPANIES VIZ HINDUSTAN CONTINENTAL LTD AND OPTIMAT TEXTILES INDUSTRIES LTD ARE CONSIDERED AS NON-EXISTENT COMPA NIES, IN THAT EVENT ALSO, NO ADDITION U/S 68 COULD BE MADE I N THE HANDS OF THE ASSESSEE COMPANY, FOR WHICH FURTHER RELIANCE WAS PLACED ON THE DECISION OF DELHI HIGH COURT IN THE C ASE OF CIT VS AANCHAL INVESTMENT CO LTD REPORTED IN 268 ITR211 WHEREIN DELHI HIGH COURT HAS APPLIED DECISION IN TH E CASE OF 21 STELLAR INVESTMENT AND ON THAT BASIS UPHELD THE ORD ER OF TRIBUNAL. 11. THE LD. COUNSEL FOR ASSESSEE FURTHER SUBMITTED THAT RECENTLY THE HON'BLE DELHI HIGH COURT APPLIED THE D ECISION OF LOVELY EXPORTS (SUPRA) IN THE CASES OF CIT VS JAGAT DIAGNOSTICS PVT LTD., CIT VS HLT FINANCE PVT. LTD. AND CIT VS MERITONS TOWER PVT LTD.(UNREPORTED) WHICH SHOWS THA T EVEN THE DELHI HIGH COURT IS TREATING THE DECISION OF SUPREM E COURT AS BINDING PRECEDENT AND NOT FOLLOWING THE FULL BENCH DECISION IN CASE OF SOPHIA FINANCE (SUPRA). HE FURTHER INVITED OUR ATTENTION TO THE FOLLOWING DECISIONS APPLYING THE PRINCIPLE L AID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXP ORTS (SUPRA) :- (I) ACIT VS VEKATESHWAR ISPAT PVT LTD REPORTED IN ( 2010) 14 ITJ 83 (CHHATISGARH). (II) ACIT VS HITKARNI PRAKASHAN LTD REPORTED IN (20 10) 14 ITJ 689 (I.T.A.T., JABALPUR). (III) ACIT VS M/S SHRI KELA PRAKASHAN PVT LTD REPOR TED IN (2010) 14 ITJ 539 (I.T.A.T., INDORE) 22 12. SO FAR AS APPLICATION OF SECTION 68 OF THE ACT IS CONCERNED, THE LD. COUNSEL FOR ASSESSEE ON THE ISSU E OF BURDEN OF THE ASSESSEE, SUBMITTED THAT ASSUMING WIT HOUT ADMITTING THAT THE VIEW EXPRESSED BY THE FULL BENCH OF DELHI HIGH COURT IN CASE OF SOPHIA FINANCE LTD (SUPRA) S TILL HOLDS GOOD AND THE PROVISIONS OF SECTION 68 ARE APPLICAB LE TO THE CREDITS IN RESPECT OF SHARE APPLICATION MONEY/ SHAR E CAPITAL , ALL THAT IS REQUIRED TO BE DONE IS THAT THE ASSESSEE IS REQUIRED TO PROVE THE EXISTENCE OF THE SHARE HOLDERS BECAUSE AS HELD BY THE FULL BENCH OF THE DELHI HIGH COURT, IF THE SHAR E HOLDERS EXISTS THEN, POSSIBLY NO FURTHER ENQUIRY NEEDS TO B E MADE. HE, THEREFORE, SUBMITTED THAT AS TO THE EXISTENCE OF TH E SHARE HOLDERS, OF COURSE, THE ASSESSEE IS REQUIRED TO PLA CE THE PRIMARY EVIDENCE AND DISCHARGE THE PRIMARY BURDEN, FOR WHICH RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS . 1. CIT VS DIVINE LEASING & FINANCING LTD REPORTED IN 158 TAXMANN 440 (DEL) , WHEREIN THEIR LORDSHIPS HAVE HELD THAT A DISTILLATION OF THE PRECEDENTS YIE LDS FOLLOWING PROPOSITIONS OF LAW IN THE CONTEXT OF SEC TION 68. THE ASSESSEE HAS TO PRIMA FACIE PROVE (I) THE IDEN TITY OF THE CREDITOR/ SUBSCRIBER (II) THE GENUINENESS OF TH E TRANSACTION ,VIZ, WHETHER IT HAS BEEN TRANSMITTED T HROUGH BANKING OR OTHER INDISPUTABLE CHANNELS (III) THE CR EDIT 23 WORTHINESS OR FINANCIAL STRENGTH OF THE CREDITOR/SU BSCRIBER (IV) IF RELEVANT DETAILS OF ADDRESS OR PAN IDENTITY ARE FURNISHED TO THE DEPARTMENT ALONG WITH THE COPIES O F SHARE HOLDER REGISTER, SHARE APPLICATION FORM , SHA RE TRANSFER REGISTER ETC , IT WOULD CONSTITUTE ACCEPTA BLE PROOF OR ACCEPTABLE EXPLANATION BY ASSESSEE . FURTHER ,(I ) THE DEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWING AN ADV ERSE INFERENCE ONLY BECAUSE THE CREDITOR / SUBSCRIBER FA ILS OR NEGLECT TO RESPOND THE NOTICES (II) THE ONUS WOULD NOT STAND DISCHARGE IF THE CREDITOR / SUBSCRIBER DENIES OR REPUDIATE THE TRANSACTION SET UP BY ASSESSEE NOR SH OULD THE AO TAKE SUCH REPUDIATION ON FACE VALUE AND CONS TRUE IT , WITHOUT MORE EVIDENCE AGAINST THE ASSESSEE (II I) THE AO IS DUTY BOUND TO INVESTIGATE THE CREDIT WORTHINE SS OF THE CREDITOR / SUBSCRIBER , THE GENUINENESS OF THE TRANSACTION AND VERACITY OF THE REPUDIATION . IN TH AT CASE , THEIR LORDSHIPS UPHELD THE ORDER OF TRIBUNAL HOLDI NG THAT THE AO HAD NOT BROUGHT ANY POSITIVE MATERIAL OR EVI DENCE TO INDICATE THAT THE SHARE HOLDERS WERE BENAMIDARS OR FICTITIOUS PERSONS OR THAT ANY PART OF THE SHARE CA PITAL REPRESENTED COMPANYS OWN INCOME FROM UNDISCLOSED SOURCES .' 2. CIT VS DWARKADHISH INVESTMENT (P) LTD REPORTED I N 167 TAXMANN 321 (DEL) 3. CIT VS DWARKADHISH FINANCIAL SERVICES REPORTED I N 148 TAXMANN 54 , WHERE IT WAS HELD THAT IN VIEW OF THE EVIDENCE TO ESTABLISH THAT IDENTITY OF SHARE HOLDE RS SUCH AS AFFIDAVITS , COPIES OF THE SHARE APPLICATIO N FORMS, CONFIRMATION FROM APPLICANT COMPANIES COPIES OF BO ARD RESOLUTION, DETAILS OF CHEQUE NOS., BRANCH AND ADDR ESS OF THE BRANCH THROUGH WHICH THE INVESTMENTS ARE MADE ALONG WITH THE FACT THAT SHARE HOLDERS ARE TAX PAYE RS, IT WAS HELD THAT IT COULD NOT BE PRESUMED THAT THE SHA RE HOLDERS, WHO ARE ASSESSED TO TAX, ARE NOT IN EXIS TENCE . 4. CIT VS GANGOR INVESTMENT LTD REPORTED IN 179 TAXMANN , WHEREIN THE HIGH COURT HELD THAT THE ASSESSEE HAD FILED SUBSCRIPTION FORM FOR EACH OF INVESTORS. THE SAID SUBSCRIPTION FORM CONTAINED DETAILS, WHICH SET OUT NOT ONLY THE IDENTITY OF SUBSCRIBER, BUT ALSO GAVE 24 INFORMATION WITH RESPECT TO THEIR ADDRESSES AS WELL AS PANS . DURING SCRUTINY AO HAD ALSO ASKED FOR AND WA S SUPPLIED WITH A COPY OF STATEMENT OF BANK ACCOUNT O F THE SUBSCRIBER.THE PAYMENTS WERE MADE BY CHEQUES. IN VI EW OF THIS THE COURT HELD THAT NO ADDITION COULD BE MA DE U/S 68 BECAUSE ASSESSEE HAS DISCHARGED THE ONUS IN RESP ECT OF VERACITY OF THE TRANSACTIONS . 5. CIT VS KC FIBERS LTD REPORTED IN 187 TAXMANN 53 ( DEL) , WHEREIN IT IS HELD THAT NO MATERIAL IS BROUGHT BY AO TO HOLD THAT SHARE HOLDERS COMPANIES ARE UMBRELLA COMPANY OR HAVE ANY RELATION WITH EACH OTHER AND TH E AMOUNT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE RECIPIENT ASSESSEE COMPANY. IT ALSO HELD THAT IT IS NOT FOR THE ASSESSEE COMPANY TO PROBE AS TO THE SOURCE . IT WAS FOR AO TO ENQUIRE INTO THE AFFAIRS OF THE INVESTOR COMPANY THEIR LORDSHIPS HAVE APPLIED THE RATIO OF THE DECI SION IN CASE OF LOVELY EXPORTS PVT LTD (SUPRA) . 6. CIT VS DOLPHINE CANPACK LTD 283 ITR 190 ( DEL) ---- SHARE APPLICATION MONEY TRIBUNAL WHILE OBSERVING DETAILS INCLUDING CONFIRMATION DETAILS OF BANK ACCO UNT, PAN OF SUBSCRIBER AND THAT PAYMENTS MADE BY CHEQUE JUSTIFIED IN DELETING ADDITION U/S 68. ALTHOUGH THE LORDSHIPS APPLIED DECISION IN SOPHIA FINANCE LTD , THEY CAME TO THE CONCLUSION THAT THE SCOPE IS LIMITED TO EXAMINING THE EXISTENCE OF SHARE HOLDERS AND SINCE THE ASSESSEE HAS FURNISHED SUFFICIENT MATERIAL TO DISCHARGE THE ONUS , DELETION OF ADDITION WAS CORRECT . 7. CIT VS DOWN TOWN HOSPITALS PVT LTD REPORTED IN 2 67 ITR 489 (GAUHATI) HELD THAT THE ASSESSEE FILED DETAILS REGARDING SOURCE OF FUNDS OF THE PARTY AND THEIR IT FILE NUMBERS ETC NO ADDITION U/S 68 IS PERMISSIBLE WHE RE SHARE HOLDERS ARE IDENTIFIED AND IT IS ESTABLISHED THAT THEY HAD INVESTED THE MONEY IN PURCHASE OF SHARES . (PAG E 127 TO 131 OF JUDGMENT COMPILATION). 8. CIT VS ILLAC INVESTMENT PVT LTD REPORTED IN 287 ITR 135 HELD THAT ASSESSEE SATISFACTORILY ESTABLISHED IDENTITY OF SHARE HOLDERS , THE ADDITION U/S 68 RIGHTLY 25 DELETED NO SUBSTANTIAL QUESTION OF LAW ARISES ( P AGE 146 & 147 OF JUDGMENT COMPILATION) . 9. DCIT VS ROHINI BUILDERS REPORTED IN 256 ITR 360 ASSESSEE FURNISHED ADDRESSES OF ALL CREDITORS ALONG WITH GIR NO / PAN AS WELL AS CONFIRMATIONS ALONG WITH COPIES OF ASSESSMENT ORDERS IN CASE OF INDIVIDUAL CREDITO RS WHEREVER AVAILABLE AND COPIES OF RETURNS FILED BY C REDITORS IN OTHER CASES . ALL LOANS RECEIVED AND REPAID BY A CCOUNT PAYEE CHEQUES RIGHTLY DELETED . ( PAGE NO 116&117 O F JUDGMENT COMPILATION) 10. CIT VS SHRI BARKHA SYNTHETICS LTD REPORTED IN 2 70 ITR 477 (RAJ) --- ASSESSEE DISCHARGED ITS INITIAL BURDEN IN RESPECT OF SIX OUT OF SEVEN COMPANIES BUT REVENUE F AILED TO DISCHARGE ITS BURDEN AS IT DID NOT HOLD ANY ENQU IRY INTO GENUINENESS, ADDITION RIGHTLY DELETED . ( PAGE NO 1 07 TO 115 OF JUDGMENT COMPILATION) 11. SHREE BARKHA SYNTHETIC LTD. VS ACIT REPORTED IN 283 ITR 377 (RAJ.) THE PRINCIPLE RELATING TO BURDEN OF PROOF CONCERNING THE ASSESSEE IS THAT WHERE THE MATTER CONCERNS THE MONEY RECEIPTS BY WAY OF SHARE APPLICA TION FROM INVESTORS THROUGH BANKING CHANNELS, THE ASSESSEE HAS TO PROVE THE EXISTENCE OF THE PERSON IN WHOSE N AME SHARE APPLICATION IS RECEIVED . ONCE THE EXISTENCE OF THE INVESTOR IS PROVED, IT IS NO FURTHER BURDEN OF THE ASSESSEE TO PROVE WHETHER THAT PERSON HIMSELF INVESTED THE M ONEY OR SOME OTHER PERSON MADE INVESTMENT IN THE NAME OF THAT PERSON . THE BURDEN THEN SHIFTS TO THE REVENUE TO ESTABLISH THAT SUCH INVESTMENT HAS COME FROM ASSES SEE COMPANY ITSELF. ( DECISION IN CASE OF CIT VS SHRI B ARKHA SYNTHETICS LTD (SUPRA) FOLLOWED). 12. WITHOUT PREJUDICE TO ABOVE CONTENTION BASED ON LOVELY EXPORTS CASE, THE LD. COUNSEL FOR ASSESS EE SUBMITTED THAT AN ANALYSIS OF ALL THE ABOVE JUDGMEN TS THUS GOES TO SHOW THAT EVEN IF THE PRINCIPLE LAID D OWN BY THE HON'BLE DELHI HIGH COURT IN SOPHIAS CASE (SUP RA) IS HELD AS APPLICABLE EVEN THEN THE ASSESSEES BURDEN IS RESTRICTED TO ESTABLISHING THE EXISTENCE OF SHAREHO LDERS 26 AND ONCE THAT IS ESTABLISHED , THE ASSESSEE IS NOT REQUIRED TO PROVE ANYTHING FURTHER. 13. THE LD. COUNSEL FOR ASSESSEE SUBMITTED THAT AS PER THE PRINCIPLE LAID DOWN IN THE CASE OF SOPHIA (SUPR A) THE ASSESSEE HAS DISCHARGED THE ONUS LAY UPON IT. IT WA S, THEREFORE, SUBMITTED BY THE LD. COUNSEL FOR ASSESSE E THAT EVEN IF THE PRINCIPLE LAID DOWN IN THE CASE OF SOPHIA FI NANCE LTD (SUPRA) IS TO BE APPLIED THEN EVEN IN SUCH CASE ALS O, THE ASSESSEE IS ONLY REQUIRED TO PROVE THE EXISTENCE OF THE SHARE HOLDERS AND THE FACT THAT THE MONEY HAS BEEN INVEST ED BY SHARE HOLDING COMPANY AND NOT BY THE ASSESSEE COMPA NY. IT WAS SUBMITTED THAT SINCE VARIOUS DOCUMENTS WERE SUB MITTED BY THE ASSESSEE, PRIMARY BURDEN WHICH LAY UPON THE ASS ESSEE, HAS BEEN DISCHARGED. IT WAS STRONGLY CONTENDED THA T THE TRIBUNAL IN THE CASE OF KALANI INDUSTRIES LIMITED ( 2007) 8 ITJ 165 HAS ACCEPTED THE EXISTENCE AND IDENTITY OF THE SE COMPANIES, APART FROM THE QUESTION OF DISCHARGE OF PRIMARY ONUS AND SHIFTING OF BURDEN TO THE DEPARTMENT, WHIC H HAS MISERABLY FAILED TO DISCHARGE ITS ONUS. HE FURTHER SUBMITTED 27 THAT THERE IS ANOTHER FACT THAT BOTH THESE COMPANIE S VIZ M/S HINDUSTAN CONTINENTAL LTD. & M/S OPTIMAT TEXTILES I NDUSTRIES LTD HAVE BEEN HELD TO BE EXISTING COMPANIES ON THE BASIS OF THE SIMILAR EVIDENCE BY THE EARLIER BENCH OF THIS T RIBUNAL. IT WAS ALSO SUBMITTED THAT THE DECISION OF THE HIGHER FORU MS HAS TO BE FOLLOWED FOR WHICH RELIANCE WAS PLACED UPON THE FOL LOWING DECISIONS :- 1. KAMALAKSHI FINANCE CORPORATION LTD; 55 ELT 433 2. M/S AGRAWAL WAREHOUSING & LEASING LTD REPORTED IN 257 ITR 235 (MP) 3. DUNLOP INDIA LTD. REPORTED IN 154 ITR 172(SC) 14. THE LD. COUNSEL FOR ASSESSEE ASSERTED THAT IN VIEW OF ABOVE JUDGMENT IN CASE OF ACIT VS KALANI INDUSTRIES LTD (SUPRA), THE IDENTITY AND EXISTENCE OF BOTH THE COM PANIES CANNOT BE DISPUTED. AS TO THE INVESTMENT OF THE MON EY, HE SUBMITTED THAT THERE IS NO MATERIAL TO SHOW THAT TH E SAID MONEY HAS FLOWN FROM THE ASSESSEE COMPANY. HE FURTHER SUB MITTED THAT IT IS WELL ESTABLISHED PRINCIPLE OF LAW THAT O NCE THE TRANSACTION HAS TAKEN PLACE THROUGH BANKING CHANNEL S, THE GENUINENESS OF TRANSACTION CANNOT BE DISPUTED. HE SUBMITTED 28 THAT IT IS ALSO WELL ESTABLISHED PROPOSITION OF LAW THAT THE ASSESSEE IS NOT REQUIRED TO PROVE SOURCE OF A SOURC E. HE, THEREFORE, SUBMITTED THAT IN THIS VIEW OF THE MATTE R, THE ADDITION MADE BY THE AO IS CLEARLY UNSUSTAINABLE IN LAW ON A LL COUNTS . 15. AS REGARDS THE QUESTION OF DISCHARGE OF ASSESS EES BURDEN IN REGARD TO SECTION 68, THE LD. COUNSEL FOR ASSESSEE SUBMITTED THAT EVEN ON GENERAL PRINCIPLES, IT IS WE LL ESTABLISHED THAT THE ASSESSEE HAS ONLY THE PRIMARY BURDEN TO PR OVE IDENTITY, CAPACITY AND GENUINENESS. IN THIS REGARD HE PLACED RELIANCE ON THE FOLLOWING DECISIONS . 1.SAROGI CREDIT CORPORATION VS CIT REPORTED IN 103 ITR 344 . THE ASSESSEE HAS ONLY THE PRIMARY BURDEN TO PROVE THE IDENTITY OF CREDITOR AND PLACED MATERIAL POINTING OUT THAT THE ENTRY IS NOT FICTITIOUS . IT IS NOT FOR THE ASSESSEE TO EXPLAIN FURTHER AS TO HOW AND IN W HAT CIRCUMSTANCES THE THIRD PARTY OBTAINED MONEY OR HO W OR WHY HE CAME TO MADE AN ADVANCE AS LOAN TO THE ASSESSEE . 2.ADDITIONAL COMMISSIONER VS BAHARI BROTHERS PVT LT D 154 ITR 244 3 ASHOK LAL DAGA VS CIT REPORTED IN 220 ITR 452 (MP ). 4.CIT VS REAL TIME MARKETING PVT LTD 306 ITR 35 (DE L) 5.CIT VS META CHEM INDUSTRIES REPORTED IN 245 ITR 160 6.NEMICHAND KOTHARI VS CIT 264 ITR 254 (GAUHATI) 29 7.PK SETHI VS CIT 286 ITR 318 ( GAUHATI) 8.CIT VS BARJATIYA CHILDREN TRUST 225 ITR 640 9.CIT VS LAUL TRANSPORT CORPORATION 180 TAXMANN 185 (P&H) 10.ARAVALII TRADING CO VS ITO 187 TAXMANN 338 (RAJ) . THE LD. COUNSEL FOR ASSESSEE FURTHER SUBMITTED THAT THE LEARNED CIT HAS MERELY PUT THE SEAL OF APPROVAL WIT HOUT APPRECIATING THE LEGAL POSITION IN REGARD TO THE CR EDITS FOR SHARE APPLICATION MONEY/SHARE CAPITAL. HE CANVASSED THAT IT IS IMPORTANT TO NOTE THAT INSPITE OF REFERRING TO THE EVIDENCE PLACED ON RECORD BY THE ASSESSEE IN DISCHARGE OF ITS BURDE N TO PROVE THE IDENTITY AND EXISTENCE OF THE COMPANY, THE LEAR NED CIT INSTEAD OF APPLYING AND FOLLOWING THE DECISION OF T HIS ITAT IN THE CASE OF KALANI INDUSTRIES LTD (SUPRA) HAS TRIED TO FIND FAULTS WITH THE SYSTEM OF REGISTRATION OF COMPANIES, ISSUI NG PAN OR ABOUT THE OPENING OF BANK ACCOUNT ETC . HE SUBMITT ED THAT THE APPROACH OF THE CIT (A) TO SAY THE LEAST APPEARS TO BE PERVERSE IN THE MATTER. AS TO THE DUTY OF THE AO T O MAKE ENQUIRIES BY PURSUING THE MATTER AND BY MAKING INDE PENDENT ENQUIRIES, THE LD. COUNSEL FOR ASSESSEE RELIED UPON THE 30 DECISION OF SUPREME COURT IN THE CASE OF CIT VS ORI SSA CORPORATION PVT LTD REPORTED IN 159 ITR 78, WHEREIN THEIR LORDSHIPS HAVE HELD THAT WHEN IT IS IN THE KNOWLEDG E OF THE REVENUE THAT THE CREDITORS ARE INCOME TAX ASSESSEES , THEIR INDEX NUMBERS ARE IN THE FILE OF REVENUE, NO ADDITI ON COULD BE MADE. THE LD. COUNSEL FOR ASSESSEE CONTENDED THAT THE DEPARTMENT APART FROM ISSUING NOTICES U/S 131 OF TH E ACT, DID NOT PURSUE THE MATTER FURTHER AND NO EFFORT WAS MAD E TO PURSUE THE ALLEGED CREDITORS. HE FURTHER SUBMITTED THAT TH E AO HAS MADE NO EFFORT ON HIS PART TO EVEN ISSUE THE SUMMON S U/S 131 TO THE AFORESAID COMPANIES NOR ANY PROPER ENQUIRES HAVE BEEN MADE FROM REGISTRAR OF COMPANIES TO FIND OUT ALL DE TAILS ABOUT THE COMPANIES IN QUESTION. THE LD. COUNSEL FOR ASSE SSEE POINTED OUT THAT THESE COMPANIES ARE INCORPORATED A ND REGISTERED UNDER THE COMPANIES ACT, 1956 AND THE R EGISTRAR OF COMPANIES IS A STATUTORY AUTHORITY POSSESSING D ETAILS OF COMPANIES. ALL REGISTERED COMPANIES ARE REQUIRED TO MAKE STATUTORY COMPLIANCE AND FILE PERIODIC RETURNS ETC UNDER COMPANIES ACT BEFORE THE REGISTRAR. RELIANCE IS ALS O PLACED ON 31 THE DECISION OF GAUHATI HIGH COURT IN THE CASE OF K HANDELWAL CONSTRUCTION VS CIT REPORTED IN 227 ITR 900, WH EREIN IT HAS BEEN HELD THAT SECTION 68 EMPOWERS THE AO TO MAKE E NQUIRY REGARDING CASH CREDITS. IF HE IS SATISFIED THAT ENT RIES ARE NOT GENUINE HE HAS EVERY RIGHT TO ADD THIS IN INCOME F ROM OTHER SOURCES. THE SATISFACTION OF THE AO IS THE BASIS OF INVOCATION OF POWERS U/S 68 AND THE SATISFACTION MUST BE DERIVED FROM RELEVANT FACTORS ON THE BASIS OF PROPER ENQUIRY . T HE ENQUIRY MUST BE JUST AND REASONABLE. THE LD. COUNSEL FOR AS SESSEE CONTENDED THAT THE ENQUIRY WAS NOT PROPERLY MADE AN D ON THE BASIS OF SUCH ENQUIRY THE AO COULD NOT COME TO THE CONCLUSION THAT THE CREDITORS WERE FICTITIOUS. HE SUBMITTED TH AT IN THE INSTANT CASE ALSO, THE AO HAS FAILED TO MAKE PROPER ENQUIRI ES OR RATHER HAS NOT AT ALL MADE ENQUIRIES HIMSELF AS SUCH, THE FINDING AND CONCLUSION ABOUT NON EXISTENCE OF THE COMPANIES CAN NOT BE SUSTAINED AND HAS TO BE TREATED AS WITHOUT PROPER M ATERIAL/ EVIDENCE. THE AO HAS FAILED TO DISCHARGE THE ONUS T O DISPROVE THE IDENTITY , CAPACITY AND GENUINENESS. THE LD. CO UNSEL FOR ASSESSEE PLACED RELIANCE ON THE FOLLOWING DECISIONS :- 32 1. ITAT DELHI AQUATECH INTERNATIONAL CASE- (2008)119TTJ(DELHI) 2. ITAT DELHI ITO VS NOVA PROMOTERS & FIN LEASE P VT LTD (2010)44 DTR 1. 16. BEFORE US, THE LD. COUNSEL FOR ASSESSEE VEHEME NTLY ARGUED THAT EVEN OTHERWISE AS HELD BY THE ITAT, IND ORE BENCH IN THE CASE OF KALANI INDUSTRIES LTD (SUPRA), A LIM ITED COMPANY DULY INCORPORATED AND REGISTERED UNDER THE COMPANIE S ACT CANNOT BE SAID TO BE AN NONEXISTENT COMPANY IN VIEW OF THE LEGAL POSITION THAT THE COMPANY IS A JURISTIC PERSO N HAVING SEPARATE EXISTENCE APART FROM ITS MEMBERS UNDER THE LAW. THE COMPANY HAS ITS LEGAL BIRTH UNDER THE LAW ON ITS I NCORPORATION AND THE COMPANYS EXISTENCE CAN COME TO END ONLY BY ITS LEGAL DEATH IN ACCORDANCE WITH THE PROVISIONS OF COMPANIE S ACT I.E BY LIQUIDATION UNDER THE COMPANY LAW, WHICH TAKES P LACE ONLY THROUGH HIGH COURT. IN THIS RESPECT THE LD. COUNSEL FOR ASSESSEE REFERRED TO THE PROVISIONS OF SECTIONS 13 & 17 OF THE INDIAN COMPANIES ACT, WHICH DEAL WITH REQUIREMENTS WITH RESPECT TO MEMORANDUM AND ARTICLE OF ASSOCIATION, C HANGE OF 33 MEMORANDUM, CHANGE OF REGISTERED OFFICE ETC., SECTI ON 21 OF THE COMPANIES ACT PRESCRIBING PROCEDURES FOR CHANGE OF NAME. HE FURTHER SUBMITTED THAT IT WOULD ALSO BE USEFUL T O REFER TO SECTION 34 REGARDING EFFECT OF REGISTRATION OF MEMO RANDUM ACCORDING TO WHICH ON REGISTRATION OF MEMORANDUM, T HE REGISTRAR IS REQUIRED TO CERTIFY THAT COMPANY IS IN CORPORATED. SUB SECTION (2) PROVIDES THAT ON AND FROM DATE OF I NCORPORATION THE SUBSCRIBERS OF MEMORANDUM AND OTHER PERSONS, AS MAY FROM TIME TO TIME THE MEMBERS OF THE COMPANY, SHALL BE A BODY CORPORATE HAVING PERPETUAL SUCCESSION AND CO MMON SEAL. SIMILARLY SECTIONS 72 , 73 & 75 ETC. WHICH DE AL WITH THE PROCEDURE FOR APPLICATION, ALLOTMENT OF SHARE ETC. ALSO THROW LIGHT ON THE CORPORATE EXISTENCE OF THE COMPANY. IT WAS SUBMITTED THAT EVEN THE PROVISION REGARDING APPOINT MENT AND CHANGE OF AUDITORS ETC THROW LIGHT ON THE CORPORATE EXISTENCE OF THE COMPANY UNDER THE LAW. HE SUBMITTED THAT IN TH E LIGHT OF THESE STATUTORY PROVISIONS UNDER THE COMPANIES ACT GOVERNING THE AFFAIRS OF COMPANY RIGHT FROM ITS INCORPORATION TILL WINDING UP IT IS DIFFICULT TO CONCEIVE AN IDEA THAT A COMPANY DULY 34 INCORPORATED UNDER THE ACT CAN BE SAID TO BE A NONE XISTENT COMPANY. 17. REGARDING THE CORRECTNESS OF AD-HOC DISALLOWAN CE OUT OF TELEPHONE EXPENSES, THE LEARNED COUNSEL FOR ASSESSEE RELIED UPON THE SUBMISSIONS MADE BEFORE THE CIT(A) AND SUBMITTED THAT THE DISALLOWANCE IS ARBITRARY AND UN REASONABLE AND OUGHT TO HAVE BEEN DELETED BY CIT(A). 18. SO FAR AS CERTAIN DOCUMENTS RELATING TO SOME COMPANIES FILED BY THE REVENUE ARE CONCERNED, IT WA S CONTENDED BY THE LD. COUNSEL FOR ASSESSEE THAT THE SHARE HOLDER COMPANIES ARE PAPER COMPANIES. THE LD. COUNS EL FOR ASSESSEE OBJECTED TO THE SAME ON THE GROUND THAT TH E REVENUE IS TRYING TO RELY ON CERTAIN FACTS WHICH ARE TOTALL Y NEW AND NOT BORNE OUT FROM RECORD. THE SAID FACTS DO NOT FIND P LACE EITHER IN THE ORDER OF AO OR THE CIT(A). SO FAR AS THE DOCUME NTS FILED BY THE REVENUE IN PAPER BOOKS PAGE NO 21 TO 125, IT WA S SUBMITTED THAT BY THE LD. COUNSEL FOR ASSESSEE THAT THESE PAPERS/DOCUMENTS, NOT BEING PART OF RECORD, SHOULD NOT BE TAKEN INTO CONSIDERATION AND THE SAME DESERVE TO BE SUMMARILY 35 REJECTED. HE SUBMITTED THAT EVEN OTHERWISE THE FACT S AND THE DOCUMENTS SOUGHT TO BE RELIED UPON BY THE RESPONDEN TS DO NOT HAVE ANY BEARING ON THE ISSUE INVOLVED IN THE PRESE NT CASE. 19. ON THE OTHER HAND, THE LEARNED CIT DR STRONGLY DEFENDED THE IMPUGNED ORDERS BY SUBMITTING THAT ONU S IS ON THE ASSESSEE AT LEAST TO ESTABLISH THE IDENTITY OF SHARE APPLICANTS. THE NOTICES/ COMMISSION SENT AT 4 PLAC ES, NAMELY, INDORE, MANDSAUR, JABALPUR AND MUMBAI WERE FOUND TO BE NON- EXISTING, CONSEQUENTLY, IT WAS CONTENDED THAT THESE ARE MERELY PAPER COMPANIES CLAIMED TO HAVE GIVEN HUGE SUMS OF CREDIT IN THE FORM OF SHARE CAPITAL OR LOANS TO LARGE NUMBER OF ASSESSEES AND THEN DISAPPEARED IN THIN AIR AFTER PROVIDING AC COMMODATION ENTRIES. IT WAS STRONGLY CONTENDED BY THE LEARNED C IT DR THAT NEITHER CORRECT ADDRESSES OF CREDITORS WERE GIVEN B Y THE ASSESSEE NOR THE CREDITORS WERE PRODUCED BEFORE THE ASSESSING OFFICER FOR EXAMINATION AND THE ASSESSMEN T PROCEEDINGS WERE COMPLETELY STALLED AS THE FACTS OF SUCH TRANSACTIONS CAN EITHER BE EXPLAINED BY THE ASSESSE E OR THE CREDITORS WHO KNOWS ENTIRE BASIS OF SUCH CREDITS. RELIANCE WAS 36 PLACED UPON THE DECISION IN KALE KHAN MOHD. HANIF ( 1963) 50 ITR 1 (SC). OUR ATTENTION WAS INVITED TO THE PAPER BOOK DATED 4.5.2010 BY SPECIFICALLY POINTING OUT THAT HUGE CAS H WAS DEPOSITED IN NUMBER OF BANK ACCOUNTS, NAMELY, SAHAY ATA MARKETING, YASH ASSOCIATE, G.R. INVESTMENT AND V.S. TRADERS, ETC. FROM WHERE THE AMOUNTS WERE TRANSFERRED TO CRE DITORS ACCOUNT AND FROM THERE TO THE ASSESSEE. IT WAS STRO NGLY ASSERTED THAT UNACCOUNTED CASH WAS FLOWN BACK IN TH E ACCOUNTS OF THE ASSESSEE AND THE SOURCE OF SUCH CAS H REMAINED UNEXPLAINED AS THE PARTIES IN WHOSE ACCOUN TS THE CASH WAS INTRODUCED WERE FOUND NON-EXISTENT BECAUSE EVEN SUMMONS COULD NOT BE SERVED UPON THEM AT THEIR KNOW N ADDRESSES. RELIANCE WAS PLACED UPON THE DECISION O F SUMATI DAYAL; 214 ITR 801 (SC). A PLEA WAS ALSO RAISED TH AT THE ONUS/BURDEN STILL REMAINED FASTENED TO THE ASSESSEE FOR WHICH RELIANCE WAS PLACED ON THE DECISION IN THE CASE OF NIVENDAN VANIJYA NIYOJAY LIMITED; 182 CTR (CAL) 605 AND HIND USTAN TEA TRADING COMPANY; 182 CTR (CAL) 585. THE DECISION I N THE CASE OF M/S RATHI FINLEASE (2008) 215 CTR (MP) 429 WAS TIME 37 AND AGAIN REITERATED BY THE LEARNED CIT DR ALONG WI TH THE DECISION IN SOPHIA FINANCE LIMITED; 205 ITR 98 (DEL ) (FB); CIT VS. PRECISION FINANCE PRIVATE LTD.; 208 ITR 465 (CA L) AND STELLAR INVESTMENT; 251 ITR 263 (SC). 20. MR. SAXENA, THE LEARNED CIT DR STRONGLY CONTEN DED THAT WHEN THE LANGUAGE USED IN THE STATUTORY PROVIS IONS IS CLEAR, THE COURT IS NOT EMPOWERED TO READ ANYTHING INTO A STATUTORY PROVISION WHICH IS PLAIN AND UNAMBIGUOUS FOR WHICH RELIANCE WAS PLACED UPON THE DECISION IN PRAKASH NA TH KHANNA; 266 ITR 1 (SC), KESHAJIV RAOJI & COMPANY; 1 83 ITR 1 (SC) AND SMT. TARULATA SHYAM; 108 ITR 345 (SC). IT WAS FURTHER CONTENDED THAT THE DECISION IN THE CASE OF M/S STELLAR INVESTMENT LIMITED (SUPRA) IS MERELY A DISMISSAL OF APPEAL SIMPLICITOR AND NOT A DECLARATION OF LAW AND HENCE IT IS NOT A BINDING PRECEDENCE AS HELD IN THE CASE OF M/S HINDU STAN TEA TRADING COMPANY; 263 ITR 289 (CAL) AND S. SHYAMUGHV EL NADAR; 263 ITR 658 (SC). A STRONG PLEA WAS RAISED BY THE LEARNED CIT DR THAT THE DECISION IN THE CASE OF M/S LOVELY EXPORTS PRIVATE LIMITED IS NOT APPLICABLE TO THE FA CTS OF THE 38 PRESENT APPEALS AS THE HON'BLE DELHI HIGH COURT HAS CLEARLY DIFFERENTIATED CASES OF SHARE CAPITAL OF PRIVATE LI MITED COMPANY FROM PUBLIC LIMITED COMPANY. IT WAS ALSO SUBMITTED THAT IN THE DECISION OF LOVELY EXPORTS PRIVATE LIMITED THE HON' BLE APEX COURT MERELY DISMISSED SLP AND IT IS NO LONGER A SP EAKING ORDER AS IT IS NEITHER EXPRESSION OF JUDICIAL VIEW NOR A BINDING PRECEDENT FOR WHICH RELIANCE WAS PLACED UPON THE DE CISION IN CIT V SHRI MANJU NATHESHWARA PACKING PRODUCTS AND C AMPHOR WORKS; 231 ITR 53 (SC), LATE NAWAB SIR MIR OSMAN AL I KHAN; 162 ITR 888 (SC), CIT V. QUALITY (PAT); 224 ITR 77. A STRONG PLEA WAS ALSO RAISED BY THE LEARNED CIT DR THAT MAN Y HIGH COURTS HAVE DISTINGUISHED THE DECISION IN LOVELY EX PORTS PRIVATE LIMITED BECAUSE IT WAS MERELY DISMISSAL OF SLP FOR WHICH OUR ATTENTION WAS INVITED TO THE DECISION IN CIT V. OASIS HOSPITALITIES PRIVATE LIMITED (2011) 333 ITR 119 (D EL). RELIANCE WAS ALSO PLACED UPON THE DECISION IN M/S STL EXTRUS ION PVT. LTD.; 333 ITR 269 (MP). IT WAS SUBMITTED THAT THE DECISION IN RATHI FINLEASE LIMITED (SUPRA) IS A BINDING PRECEDE NT FOR WHICH RELIANCE WAS PLACED IN GEOFFREY MANNERS & COMPANY L IMITED; 39 221 ITR 695, TAYLOR INSTRUMENT COMPANY LIMITED; 232 ITR 771 (DEL); MOHANLAL KANSAL; 114 ITR 583 (P&H); JORHANT GROUP LIMITED; 289 ITR 422 (GAU); VRAJLAL MANILAL & COMPA NY; 127 ITR 512 (MP). 21. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON FILE. BRIEF FACT S OF THE CASE ARE THAT THE ASSESSEE (M/S AGRAWAL COAL CORPORATION PRIVATE LIMITED) IS A PRIVATE LIMITED COMPANY ENGAGED IN TH E TRADING BUSINESS. IN THE YEAR UNDER CONSIDERATION THE COMPA NY ENTERED IN THE FIELD OF POWER GENERATION WITH INSTALLATION OF TWO WIND MILLS AND DECLARED INCOME OF RS.83,46,090/- IN ITS RETURN FILED ON 30.10.2005 FOR ASSESSMENT YEAR 2005-06. THE CA SE WAS SELECTED FOR SCRUTINY. THE LEARNED ASSESSING OFFICE R, DURING THE ASSESSMENT PROCEEDINGS, NOTED THAT M/S HINDUSTAN CO NTINENTAL LIMITED, APPLIED FOR 40,000 SHARES OF THE ASSESSEE COMPANY OF THE COUNTENANCE VALUE OF RS.10/- EACH AT A PREMIUM OF RS.90/- PER SHARE. SIMILARLY, OPTIMATES TEXTILE INDUSTRIES LIMITED ALSO APPLIED FOR 10,000 SHARES OF THE ASSESSEE COMPANY O F THE SAME VALUE AND PREMIUM PER SHARE. THE LEARNED ADDIT IONAL 40 CIT, INDORE (ASSESSING OFFICER), HAS REFERRED THE R EPORT OF ACIT 5(1), INDORE, WHEREIN IT WAS FOUND THAT ON THE BASI S OF INVESTIGATION CARRIED OUT BY HIM IN SOME OTHER CASE S, M/S HINDUSTAN CONTINENTAL LIMITED AND OPTIMATES TEXTILE S LIMITED ARE NOT THE GENUINE COMPANIES. THE REPORT OF ACIT 5(1) HAS BEEN REPRODUCED IN THE ASSESSMENT ORDER. THIS REPORT WAS CONFRONTED TO THE ASSESSEE COMPANY BY THE ASSESSING OFFICER, DURING THE ASSESSMENT PROCEEDINGS, AND AFT ER CONSIDERING THE REPLY OF THE ASSESSEE COMPANY IT WA S HELD THAT THE SHARE CAPITAL CLAIMED TO BE APPLIED BY THE SE COMPANIES IS UNEXPLAINED, THEREFORE, THE SAME WAS A DDED TO THE INCOME OF THE ASSESSEE COMPANY. THE RELEVANT EXTRACT FROM THE ASSESSMENT ORDER IS EXTRACTED HERE UNDER :- THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE. ASSESSEE HAS RELIED UPON THE DECISION OF HONBLE I.T.A.T., INDORE BENCH, IN CASE OF ACIT VS. KALANI INDUSTRIES LTD. THE SAID DECISION WAS NOT ACCEPTABL E TO THE DEPARTMENT AND IS BEING CONTESTED BEFORE HON'BL E HIGH COURT OF M.P. ASSESSEE HAS TRIED TO PROVE GENUINENESS OF TRANSACTION BY FURNISHING CONFIRMATI ON, COPY OF BANK ACCOUNT AND ACKNOWLEDGEMENT OF RETURN. IT HAS ALSO FURNISHED VARIOUS DECISION IN SUPPORT O F ITS CONTENTIONS. BUT IT IS EVIDENT FROM THE INVESTIGAT ION MADE BY ACIT 5(1), INDORE THAT BOTH THESE COMPANY A RE NOT EXISTING COMPANIES IN THE REAL SENSE. THESE COMPANIES ARE PAPER COMPANIES ONLY AND EXIST 41 NOWHERE AND WERE USED TO GIVE ACCOMMODATION ENTRIES TO VARIOUS PARTIES WHO WANT TO LAUNDER THEIR UNACCOUNTED MONEY IN THE GUISE OF SHARE APPLICATION OR UNSECURED LOAN OR LONG TERM CAPITAL GAIN. THE ASSESSEE IS A CLOSELY HELD PVT. LTD. COMPANY IN WHICH PUBLIC IS NOT SUBSTANTIALLY INTERESTED. T HUS AS PER SECTION 68 ONUS WAS UPON THE ASSESSEE TO ESTABL ISH DEPOSITORS IDENTITY, CREDITWORTHINESS AND GENUINEN ESS OF TRANSACTION. ASSESSEE IN ITS WRITTEN SUBMISSION STATED THAT COMPANY HAS RECEIVED SHARE APPLICATION MONEY OF RS. 40,00,000/- FROM HINDUSTAN CONTINENTAL LTD. 19, SHUBH KAMNA APARTMENT, GUL BAZAR, JABALPUR . AS PER THE REPORT OF THE ACIT 5(1), INDORE, IT IS C LEAR THAT NO SUCH COMPANY EXIST AT THE GIVEN ADDRESS. THE CREDITWORTHINESS OF THE COMPANY HAS ALSO NOT BEEN ESTABLISHED IN VIEW OF THE FACT THAT THERE IS HUGE INFLOW AND OUTFLOW OF FUND IN THE BANK ACCOUNT WITHOUT ANY LOGIC. THERE IS HUGE CASH DEPOSIT IN THE BANK ACCO UNT OF HINDUSTAN CONTINENTAL LTD. MAINTAINED UTI BANK L TD. COPY OF WHICH IS FILED BY THE ASSESSEE IN SUPPORT O F ITS CONTENTION. THE COMPANY IS NOT EXISTING IN REAL SE NSE THE GENUINENESS OF TRANSACTION IS ALSO DOUBTFUL. S INCE ASSESSEE FAILED ESTABLISHED IDENTITY, CREDITWORTHIN ESS AND GENUINENESS OF TRANSACTION, CREDIT IN THE ACCOU NT OF THE ASSESSEE ON ACCOUNT OF SHARE APPLICATION MONEY FROM HINDUSTAN CONTINENTAL LTD. RS. 4,00,000/- AND SHARE PREMIUM AMOUNT OF RS. 36,00,000/- ARE BEING TREATED AS UNEXPLAINED CREDIT U/S 68 AND ADDED BACK TO TAXABLE INCOME. SIMILARLY, ASSESSEE HAS TRIED TO ESTABLISH IDENTIT Y OF M/S OPTIMATES TEXTILE INDUSTRIES LTD., BUT IT IS EV IDENT FROM THE REPORT OF THE ACIT 5(1), INDORE THAT COMPA NY IS ALSO A PAPER COMPANY USED TO PROVIDING ACCOMMODATION ENTRIES ONLY. ENQUIRIES REVEALED THA T NO SUCH COMPANY EXISTS AT THE ADDRESS AS PROVIDED BY T HE ASSESSEE. ACIT 5(1), INDORE REPORTED THAT THE ASSI STANT DIRECTOR OF INCOME TAX INVESTIGATION IX(3), MUMBAI HAD CONFIRMED IN HIS REPORT THAT M/S OPTIMATES TEXTILE INDUSTRIES LTD. DOES NOT EXIST AT THE GIVEN ADDRESS AND SEEMS TO BE BOGUS. ASSESSEE HAS GIVEN THE ADDRESS OF THE COMPANY AS TO DEV KARAN MENSION IIND FLOOR 63B PRINCES ESTATE MUMBAI WHEREAS THE BANK ACCOUNT OF T HE 42 COMPANY HAS BEEN MENTIONED IN INDORE IN WHICH THE ADDRESS OF THE COMPANY WAS GIVEN AS 13, SOUTH HATI PALA, INDORE. THIS COMPANY IS ALSO NOT EXISTING IN REAL SENSE AND ONLY ACCOMMODATION ENTRIES ARE BEING GIVE N TO THE BENEFICIARIES IN THE FORM OF SHARE APPLICATI ON MONEY OR UNSECURED LOANS. SINCE ASSESSEE FAILS TO ESTABLISH IDENTITY, CREDITWORTHINESS AND GENUINENES S OF THE TRANSACTIONS, SHARE APPLICATION MONEY CREDITED ON ACCOUNT OF M/S OPTIMATES TEXTILE INDUSTRIES LTD. RS . 1,00,000/- SHARE PREMIUM RS.9,00,000/- IS TREATED UNEXPLAINED U/S 68 AND ADDED BACK TO TAXABLE INCOME . TOTAL ADDITION UNDER THIS HEAD IS RS. 50,00,000/- 22. THE ABOVE FINDING WAS CONFRONTED TO THE ASSESSE E DURING APPELLATE PROCEEDINGS AGAINST WHICH THE ASSESSEE PR EFERRED WRITTEN SUBMISSIONS. DURING THE FIRST APPELLATE ST AGE AS WELL AS BEFORE US, THE LD. COUNSEL FOR ASSESSEE HAS CHALLEN GED THE FINDING OF ACIT ON THE GROUND THAT THE SAID COMPANY IS A LISTED COMPANY ON STOCK EXCHANGE AND THE ASSESSING OFFICER WAS IN KNOWLEDGE AND POSSESSION OF THE INCOME TAX RETURN O F THE COMPANY. OUR ATTENTION WAS INVITED TO THE DETAILS OF CAPITAL WORK IN PROGRESS AND LICENCE CAPACITY OF HCL LIMIT ED BY ARGUING THAT THE EXISTENCE AND CREDIT WORTHINESS OF HCL IS ESTABLISHED SINCE IT IS HAVING SHARE CAPITAL OF RS. 8.09 CRORES. DURING HEARING BEFORE US, THE LD. COUNSEL FOR ASSES SEE MR. CHOUDHARY, INVITED OUR ATTENTION TO DEPOSIT OF CASH IN BANK 43 ACCOUNT OF M/S SAHAYATA MARKETING AND TRANSFER THER EOF THROUGH ACCOUNT PAYEE CHEQUE TO THE BANK ACCOUNT OF M/S SUNIL SHARES STOCKS PRIVATE LIMITED AND THEREAFTER TO THE ULTIMATE BENEFICIARY. IT WAS SUBMITTED THAT THE TR ANSACTIONS OF CASH TRANSFER AND DEPOSITION OF CASH HAS NOTHING TO DO WITH THE ASSESSEE. A STRONG PLEA WAS RAISED BY THE LD. COUN SEL FOR ASSESSEE THAT IDENTITY OF SHARE APPLICANTS IS ESTAB LISHED WHICH WAS STRONGLY DENIED BY THE LEARNED CIT DR. AT THIS STAGE, A QUERY WAS RAISED BY THE BENCH AS TO WHETHER THE ASS ESSEE IS IN A POSITION TO PRODUCE BEFORE THIS BENCH ANY O F THE DIRECTORS OR THE EMPLOYEES OF THESE COMPANIES ? THE LD. COUNSEL FOR ASSESSEE CONVENIENTLY CONTENDED THAT TH E ASSESSEE CANNOT BE PUT TO ADVERSE BURDEN MEANING THEREBY THAT THE ASSESSEE WAS NOT IN A POSITION TO PRODUCE SUCH PERSONS. THE BENCH AGAIN CONTENDED THAT IN VI EW OF THE ABOVE REPLY OF THE LD. COUNSEL FOR ASSESSEE, AN ADVERSE VIEW MAY BE TAKEN AGAINST THE ASSESSEE. TH E LD. COUNSEL FOR ASSESSEE REMAINED MUM AND NOTHING WAS CANVASSED AGAINST THE QUERY RAISED BY THE BENCH . 44 23. THE NOTICES ISSUED U/S 133(6) OF THE ACT TO M/S HCL LIMITED AND M/S OPTIMATES TEXTILES INDUSTRIES LIMIT ED COULD NOT BE SERVED AS THESE COMPANIES WERE FOUND NON-EXISTEN T AT THE ADDRESSES SUPPLIED TO THE DEPARTMENT BY THE ASSESSE E. THEREAFTER, COMMISSION WAS ISSUED TO ADIT(INV.) UNI T-IX-3, MUMBAI, TO VERIFY THE EXISTENCE/GENUINENESS OF THES E COMPANIES, WHO ALSO REPORTED THAT THE SAID COMPANIE S DID NOT EXIST AT THE GIVEN ADDRESSES. THE WHOLE ISSUE FOR ADJUDICATION IS WHETHER THE IDENTITY OF THESE COMPANIES WAS ESTA BLISHED ? DURING HEARING, THE LD. COUNSEL FOR ASSESSEE CLAIME D THAT IDENTITY OF BOTH THESE COMPANIES HAS BEEN ESTABLISH ED AS BOTH THESE COMPANIES WERE REGISTERED WITH REGISTRAR OF C OMPANIES AND THEIR INCOME TAX RETURNS WERE FILED AND BOTH AR E HAVING PANS/BANK ACCOUNTS. WE ARE NOT AGREEING WITH THIS P ROPOSITION BECAUSE AT THE TIME OF REGISTRATION, THESE COMPANIE S MAY BE EXISTING EITHER ON PAPERS OR IN REAL SENSE BUT THER EAFTER WERE SPECIFICALLY FOUND NON-EXISTENT AS THE SUMMONS/ NOT ICES ISSUED WERE RETURNED BACK UNSERVED AND THE COMMISSION ISSU ED WITH THIS PURPOSE ALSO FOUND THAT THESE COMPANIES WERE N ON- 45 EXISTENT. AT THE SAME TIME, NONE OF THE CERTIFICAT ES, CLAIMED TO BE ISSUED BY VARIOUS AUTHORITIES, DOES NOT ESTABLIS H THE IDENTITY OF THE SHARE APPLICANTS AS THE CERTIFICATES WERE IS SUED WITHOUT PHYSICALLY VERIFYING THE EXISTENCE OF APPLICANTS, S UCH AS INCOME TAX DEPARTMENT RECEIVES RETURNS OF INCOME OR DOCUME NTS WITHOUT VERIFICATION OF EXISTENCE OF THE PERSONS FI LING THE RETURNS/DOCUMENTS. PAN IS ALSO ALLOTTED TO THE APP LICANTS ON THE BASIS OF APPLICATIONS WITHOUT VERIFYING THE EXI STENCE OF APPLICANTS AT THE ADDRESS GIVEN IN THE APPLICATION. LIKEWISE, REGISTRAR OF COMPANIES ALSO REGISTER A COMPANY WITH OUT PHYSICAL VERIFICATION OF THE EXISTENCE OF THE APPLI CANT COMPANY. THERE IS A SPECIFIC FINDING THAT ON VERIFICATION BY THE ACIT IN THE CASE OF M/S SAHAYATA MARKETING COMPANY NEITHER THE OPERATORS OF THE ACCOUNTS WERE AVAILABLE AT THE ADD RESSES GIVEN TO THE BANK NOR THE INTRODUCER. THEREFORE, TH E ASSESSEE CANNOT CLAIM TO HAVE ESTABLISHED THE IDENTITY OF BO TH THESE COMPANIES ON THE BASIS OF SOME DOCUMENTS. LEAVE IT APART, AS MENTIONED ABOVE, THE LD. COUNSEL FOR ASSESSEE, IN R EPLY TO A SPECIFIC QUERY REGARDING PRODUCTION OF ANY OF THE D IRECTORS OR 46 THE EMPLOYEES OF THE SHARE APPLICANTS BEFORE THE BE NCH, THE ASSESSEE DID NOT COMPLY WITH THE DIRECTIONS OF THE BENCH, THEREFORE, TO THIS LIMITED EXTENT, WE ARE OF THE VI EW THAT THESE SHARE APPLICANTS ARE NON-EXISTENT AND THEIR IDENTIT Y IS NOT PROVED. IT IS PERTINENT TO MENTION HERE THAT THERE IS A DIFFERENCE BETWEEN A PRIVATE AND PUBLIC LIMITED COMPANY AS IN A PRIVATE LIMITED COMPANY, THE PUBLIC AT LARGE IS NOT SUBSCRI BING THE SHARES AS THE SHARES ARE ALLOTTED TO CLOSE RELATIVE S, FRIENDS AND OTHER KNOWN PERSONS WHO ARE HAVING FAITH IN THE SUB SCRIBING COMPANY ON PERSONAL RELATIONS WHEREAS THERE IS AN I NVITATION TO THE PUBLIC AT LARGE BY A PUBLIC LIMITED COMPANY AND NOT NECESSARILY HAVING PERSONAL RELATIONS AND IN THAT C ASE, THE INDIVIDUAL RELATIONS ARE NORMALLY FOUND TO BE NON-E XISTENT. IN VIEW OF THESE FACTS, THE SHARE APPLICANTS ARE KNOWN TO THE ASSESSEE COMPANY, BEING PRIVATE LIMITED COMPANY, AN D THERE SHOULD BE NO DIFFICULTY TO PRODUCE THEM OR THEIR RE PRESENTATIVE TO ENABLE THE ASSESSING OFFICER TO VERIFY THE IDENT ITY, GENUINENESS OF THE CAPITAL CLAIMED TO BE SUBSCRIBED BY THEM, THEREFORE, THE ASSESSEE CANNOT CLAIM IGNORANCE ABOU T THESE 47 COMPANIES. UNLESS THE ASSESSEE IS ABLE TO ESTABLIS H IDENTITY OF THE COMPANIES WHO HAVE SUBSCRIBED IN THEIR SHARE CA PITAL, HOW THE DEPARTMENT WILL PROCEED AGAINST THESE COMPANIES IN TERMS OF THE VERDICT OF THE HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS (SUPRA). ANY ADDITION IN THE HANDS OF SUCH SUBSCRIBING COMPANIES IS ONLY POSSIBLE WHEN THE ASS ESSEE IS ABLE TO ESTABLISH IDENTITY OF THESE COMPANIES WHICH THE ASSESSEE HAS GROSSLY FAILED NOT ONLY BEFORE THE ASS ESSING OFFICER BUT ALSO BEFORE LEARNED COMMISSIONER OF INC OME TAX (APPEALS) AND THE TRIBUNAL. UNDER THESE FACTS AND CIRCUMSTANCES, THERE IS NO QUESTION OF APPLY THE PR OPOSITION OF LAW AS SUGGESTED BY THE LD. COUNSEL FOR ASSESSEE. 24. ON THE ISSUE OF DISCHARGE OF ONUS/BURDEN, THE ASSERTION OF THE LD. COUNSEL FOR THE ASSESSEE IS TH AT THE ONUS SHIFTED TO THE DEPARTMENT WHEN COPY OF SHARE APPLIC ATION FORM, PAN, NAME AND ADDRESSES AND ROC REGISTRATION, ETC. WERE FILED BY THE ASSESSEE. WE ARE NOT AGREEING WITH TH E SUBMISSION OF THE ASSESSEE IN VIEW OF THE FACT THAT AT THE ADDRESSES (4 PLACES) GIVEN TO THE DEPARTMENT, THESE 48 COMPANIES WERE FOUND TO BE NON-EXISTENT. EVEN THE I NSPECTOR WAS DEPUTED TO VERIFY THE ADDRESSES WHO ALSO REPORT ED THAT THESE COMPANIES WERE NOT AVAILABLE AT THE GIVEN ADD RESSES. IT IS NOT POSSIBLE THAT THE COMPANIES MAKING HUGE INVE STMENT IN THE FORM OF SHARE APPLICATION ARE NOT FOUND AT THE GIVEN ADDRESSES. THERE IS A POSSIBILITY THAT THERE MAY B E A CHANGE OF ADDRESS BUT TILL THE STAGE OF THE TRIBUNAL, NOT TO TALK OF THE ASSESSING OFFICER OR THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS), NO SUCH ADDRESS WAS FURNISHED BY THE ASS ESSEE, THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT TH E ONUS WAS NOT DISCHARGED AS THE ASSESSEE NEITHER FURNISHED TH E CORRECT ADDRESSES NOR THE CREDITORS WERE PRODUCED RATHER TH E ASSESSEE TRIED TO STALL THE ASSESSMENT PROCEEDINGS BY GIVING MISLEADING FACTS AND INCORRECT ADDRESSES. EVEN AS PER PREPONDE RANCE OF PROBABILITIES, ALL FACTS GO AGAINST THE ASSESSEE AN D THE RATIO LAID DOWN BY THE HON'BLE APEX COURT IN THE CASE OF SUMAT I DAYAL (214 ITR 801) GOES AGAINST THE ASSESSEE. HON'BLE C ALCUTTA HIGH COURT IN THE CASE OF NIVENDAN VANIJYA NIYOJAY LIMITED (SUPRA) (PAGE 14) HELD AS UNDER :- 49 AFTER THE INITIAL ONUS WAS DISCHARGED BY ASSESSEE , THE INCOME TAX AUTHORITIES HAVE MADE ENQUIRIES AND HAD COMMUNICATED THE RESULT OF THE ENQUIRY TO THE ASSESSEE AND REQUIRED THE ASSESSEE TO PRODUCE THE SUBSCRIBERS WHO PROVIDED SUCH CREDIT, IN ORDER TO ESTABLISH ITS CASE. BUT THE ASSESSEE DID NOT DO SO . ON THIS BASIS ADDITION MADE BY THE A.O. U/S 68 OF I .T. ACT WAS CONFIRMED. IDENTICALLY, THE HON'BLE CALCUTTA HIGH COURT IN TH E CASE OF HINDUSTAN TEA TRADING COMPANY LIMITED; 182 CTR 585 AT PAGE 23 (PARA 21) WHERE THE IDENTITY OF 12 PERSONS WHO WERE NOT FOUND AT THE ADDRESSES IT WAS HELD THAT IDENTIT Y IS NOT ESTABLISHED. ON THE ISSUE OF ONUS, IT WAS HELD THA T PRINCIPLE REGARDING ONUS IS LAID DOWN U/S 68 WHEREBY ONCE A R EASONABLE ENQUIRY IS MADE, THEN THE ASSESSING OFFICER CAN DO NO FURTHER EXCEPT ARRIVING AT A CONCLUSION. WHEN SUCH CONCLUSI ON IS COMMUNICATED TO ASSESSEE, ONUS SHIFTS ON THE ASSESS EE. LIKEWISE, HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S RATHI FINLEASE LIMITED; 215 CTR 429 AT PAGE 28 WHE N COMPANY IS NOT FOUND AT THE GIVEN ADDRESS AGAINST T HE SUMMONS ISSUED BY THE ASSESSING OFFICER OBSERVED AS UNDER THE ASSESSEE TRIED TO EXPLAIN THE GENUINENESS OF T HE CREDIT ON THE BASIS OF LETTERS OF CONFIRMATIONS. I T COULD NOT BE EXPLAINED AS TO HOW THE TRANSACTION WAS 50 MATERIALISED WHEN THE COMPANIES WERE NOT IN EXISTEN CE AND THE AMOUNT WAS PAID BY CHEQUE ONLY ON THE DATE ON WHICH THE AMOUNT WAS CREDITED TO THE ACCOUNT OF THE COMPANY. THE ASSESSEE FAILED TO DISCHARGE THE BURDE N WITH REGARD TO THE CREDIT IN ITS BOOKS AND THE EXIS TENCE OF THE CREDITORS TO INDICATE THE GENUINENESS OF THE TRANSACTION. THE FULL BENCH OF HON'BLE DELHI HIGH COURT IN THE C ASE OF M/S SOPHIA FINANCE LIMITED; 205 ITR 98 OBSERVED AS UNDE R :- THE ITO WOULD BE ENTITLED TO ENGAGE AND IT WOULD INDEED BE HIS DUTY TO DO SO WHETHER THE ALLEGED SHAREHOLDERS DO IN FACT EXIST OR NOT. IF THE SHARE HOLDERS EXIST THEN POSSIBLY NO FURTHER ENQUIRY NEED TO BE M ADE. BUT IF THE ITO FINDS THAT THE SHARE HOLDERS DO NOT EXIST, THEN IN EFFECT IT WOULD MEAN THAT THERE IS NO VALID ISSUANCE OF SHARE CAPITAL. SHARES CANNOT BE ISSUED IN THE NAME OF NON-EXISTING PERSONS. THE USE OF WORDS MAY BE CHARGEDIN SECTION 68 CLEARLY INDICATES THA T THE ITO WOULD THEN HAVE THE JURISDICTION IF THE FACTS S O WARRANTS TO TREAT SUCH CREDIT TO BE THE INCOME OF T HE ASSESSEE. THE HON'BLE CALCUTTA HIGH COURT IN PRECISION FINANC E PRIVATE LIMITED; 208 ITR 465 HELD THAT INQUIRY OF ITO REVEA LED THAT EITHER THE ASSESSEE WAS NOT TRACEABLE OR THERE WAS NO SUCH FILE AND ACCORDINBGLY THE FIRST INGREDIENT AS TO THE IDE NTITY OF THE CREDITORS HAS NOT BEEN ESTABLISHED. IF THE IDENTIT Y OF THE CREDITOR HAS NOT BEEN ESTABLISHED, CONSEQUENTLY, TH E QUESTION OF ESTABLISHMENT OF THE GENUINENESS OF THE TRANSACT ION OR THE 51 CREDIT WORTHINESS OF THE CREDITORS DID NOT AND COUL D NOT ARISE. DURING HEARING RELIANCE WAS PLACED UPON THE DECISIO N IN THE CASE OF STELLAR INVESTMENT LIMITED; 251 ITR 263 (SC ) WHEREIN THE ISSUE WAS SUBSCRIPTION OF SHARE CAPITAL OF A PU BLIC LIMITED COMPANY WHEREAS IN THE PRESENT APEPALS, PRIVATE LIM ITED COMPANIES ARE INVOLVED, THEREFORE, THERE IS A MATER IAL DIFFERENCE BETWEEN THE TWO AS DISCUSSED EARLIER, TH E SHARES OF PRIVATE LIMITED COMPANIES ARE GENERALLY GIVEN TO AP PLICANTS KNOWN TO THE DIRECTORS WHEREAS IN A PUBLIC LIMITED COMPANY THE APPLICANTS ARE UNKNOWN TO THE DIRECTORS. IT IS PER TINENT TO MENTION THAT WHILE COMING TO A PARTICULAR CONCLUSIO N, THE FULL BENCH OF DELHI HIGH COURT IN THE CASE OF SOPHIA FIN ANCE LIMITED (SUPRA) DULY CONSIDERED THE CASE OF STELLAR INVESTMENT LIMITED. EVEN IN THE CASE OF M/S LOVELY EXPORTS PR IVATE LIMITED (SUPRA) THE HON'BLEBLE DELHI HIGHCOURT IN PARA 4 OBSERVED AS UNDER :- REFERENCE TO SECTION 68 OF THE IT ACT IS CONSPICUOUS BY ITS ABSENCE, THE STELLAR INVESTMENT LIMITED RATIO CANNOT BE STRESSED TO THE EXTENT THAT IT PARTAKES AS A REFLECTION ON SECTION 68, WHEN THE INQUIRY PERTAINED ONLY TO SECTION 263. 52 25. IN VIEW OF THE FACTS NARRATED ABOVE AND THE JU DICIAL PRONOUNCEMENTS DISCUSSED HEREINABOVE, IT CAN BE SAI D THAT THE ASSESSEE DID NOT DISCHARGE THE ONUS CAST UPON IT BY THE PROVISIONS OF THE ACT. WE TEND TO REPRODUCE SECTIO N 68 OF THE ACT :- 68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AN D THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HI M IS NOT, IN THE OPINION OF THE [ASSESSING] OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. IF THE AFORESAID PROVISION OF THE ACT IS ANALYSED, IT SPEAKS ABOUT CASH CREDITS AND THE SUM FOUND CREDITED IN THE BOOK S OF AN ASSESSEE AND THE ASSESSEE OFFERS NO EXPLANATION ABO UT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION IS NOT FOUND SATISFACTORY BY THE ASSESSING OFFICER THEN THE SAME MAY BE CHARGED TO TAX AS THE INCOME OF THE ASSESSEE. IN T HE PRESENT APPEAL, AT ANY STAGE THE ASSESSEE DID NOT FILE ANY EXPLANATION REGARDING THE IDENTITY OF THE SHARE APPLICANTS, THE REFORE, THE ONUS WAS NOT DISCHARGED BY THE ASSESSEE. A BARE RE ADING OF SECTION 68 SUGGEST THAT THERE HAS TO BE CREDITS OF AMOUNTS IN 53 THE BOOKS MAINTAINED BY THE ASSESSEE THAT SUCH CRED IT HAS TO BE OF A SUM DURING THE PREVIOUS YEAR AND THE ASSESS EE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH CREDIT OR THE EXPLANATION OFFERED BY THE ASSESSEE IN THE OPIN ION OF THE ASSESSING OFFICER IS NOT SATISFACTORY, IT IS ONLY T HEN THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. WE ARE AWARE THAT THE OPINION OF THE ASSESSING OFFICER IS REQUIRED TO BE FORMED O BJECTIVELY WITH REFERENCE TO THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT APPEALS, THE ASSESSING OFFICER WAS NEVER SA TISFIED AND THE NOTICES/SUMMONS ISSUED TO THE SUBSCRIBING COMP ANIES, WERE FOUND TO BE FICTITIOUS OR NON-EXISTENT, THEREF ORE, ONE FACT OOZING OUT THAT THE ASSESSEE HAS NOT FULFILLED THE REQUIREMENT OF SECTION 68. A CLOSE READING OF SECTION 68 MAKES IT CLEAR THAT IN CASE OF SECTION 68 THERE SHOULD BE CREDIT ENTRY IN THE BOOKS OF ACCOUNT. THIS IS A FUNDAMENTAL DIFFERENCE BETWEEN T HESE TWO PROVISIONS. THE LAW IS WELL SETTLED THAT THE ONUS O F PROVING THE SOURCE OF A SUM OF MONEY FOUND TO HAVE BEEN RECEIVE D BY AN ASSESSEE IS ON HIM WHERE THE NATURE AND SOURCE OF A RECEIPT 54 WHETHER IT BE OF MONEY OR OTHER PROPERTY, CANNOT BE SATISFACTORILY EXPLAINED BY THE ASSESSEE, IT IS OPE N TO THE REVENUE TO HOLD THAT IT IS THE INCOME OF THE ASSESS EE AND NO FURTHER BURDEN LIES ON THE REVENUE TO SHOW THAT THE INCOME IS FROM ANY PARTICULAR SOURCE FOR WHICH WE ARE SUPPORT ED BY THE DECISION OF THE HON'BLE APEX COURT IN ROSHAN DI HAT TI VS. CIT; 107 ITR 938 AND KALE KHAN MOHD. HANIF VS. CIT; 50 I TR 1 (SC). IT IS FOR THE ASSESSEE TO PROVE THAT EVEN IF CASH CREDIT REPRESENTS INCOME IT IS INCOME FROM A SOURCE WHICH HAS ALREADY BEEN TAXED FOR WHICH WE ARE SUPPORTED BY TH E DECISION IN CIT V. DEVIPRASAD VISHWANATHPRASAD; 72 ITR 194 ( SC). THE HONBLE APEX IN THE CASE OF SUMATI DAYAL VS. CIT; 2 14 ITR 801 CLEARLY HELD THAT IF THE EXPLANATION OF THE ASSESSE E IS UNSATISFACTORY, THE AMOUNT CAN BE TREATED AS INCOME OF THE ASSESSEE. THERE ARE CONTRARY DECISION LIKE ADDL. C IT V. BAHRI BROTHERS; 154 ITR 244 (PAT) HOLDING THAT IDENTITY O F CREDITORS IS NOT RELEVANT FOR CHEQUE TRANSACTIONS BUT AT THE SAM E TIME IT IS NOT SACROSANCT AS WAS HELD IN NEMICHAND KOTHARI VS. CIT; 264 ITR 254 (GAU). IN THE CASE OF SHRI BARKHA SYNTHETI CS LIMITED 55 VS. ACIT; 155 TAXMAN 289 THE HONBLE RAJASTHAN HIGH COURT HELD THAT WHERE THE MATTER CONCERNS MONEY RECEIPTS BY WAY OF SHARE APPLICATION FROM THE INVESTORS THROUGH BANKIN G CHANNEL, THE ASSESSEE HAS TO PROVE THE EXISTENCE OF THE PERSON I N WHOSE NAME THE SHARE APPLICATION IS RECEIVED . ONCE THE EXISTENCE OF THE INVESTOR IS PROVED, IT IS NOT FURT HER THE BURDEN OF THE ASSESSEE TO PROVE WHETHER THAT PERSON ITSELF HAS INVESTED THE MONEY OR SOME OTHER PERSON HAS MADE INVESTMENT IN THE NAME OF THAT PERSON. THE BURDEN THEN SHIFTS TO THE REVENUE TO ESTABLISH THAT SUCH INVESTMENT HA S COME FROM THE ASSESSEE COMPANY ITSELF. 26. ONCE THE RECEIPT OF THE CONFIRMATION LETTER F ROM THE CREDITOR IS PROVED AND THE IDENTITY AND EXISTENCE O F THE INVESTOR HAS NOT BEEN DISPUTED, NO ADDITION ON ACCOUNT OF S HARE APPLICATION MONEY IN THE NAME OF SUCH INVESTOR CAN BE MADE IN THE HANDS OF THE ASSESSEE. IN THE CASE OF CIT V. DI VINE LEASING & FINANCE; 158 TAXMAN 440 (DEL), THE HON'BLE COURT CLEARLY HELD THAT IN CASE OF PUBLIC ISSUE THE COMPANY CONCE RNED CANNOT BE EXPECTED TO KNOW EVERY DETAIL PERTAINING TO IDENTITY 56 AS WELL AS FINANCIAL WORTH OF EACH OF ITS SUBSCRIBE RS. THE COMPANY MUST HOWEVER MAINTAIN AND MAKE AVAILABLE TO THE ASSESSING OFFICER FOR HIS PERUSAL ALL THE INFORMATI ON CONTAINED IN THE SHARE APPLICATION DOCUMENTS. THE HON'BLE COURT CLEARLY HELD THAT IN CASE OF PRIVATE PLACEMENT, THE LEGAL REGIME WOULD NOT BE SAME . A DELICATE BALANCE MUST BE MAINTAINED WHILE WALKING THE TIGHT ROPE OF SECTION 68 AND 69. THE BURDEN OF PROOF CAN SELDOM BE DISCHARGED TO THE HILT BY THE ASSESSEE. HOWEVER, IF THE ASSESSING OFFICER HARBO URS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRIPTION, HE IS EMPOWE RED RATHER DUTY BOUND TO CARRY OUT INVESTIGATIONS. THE ASSESS EE MERELY WANTS TO TAKE SHELTER OF THE DECISION OF THE HON'BL E APEX COURT IN THE CASE OF LOVELY EXPORTS PRIVATE LIMITED WHERE IN IT WAS HELD THAT EVEN THE SHARE APPLICANTS ARE BOGUS, IT C ANNOT BE ADDED IN THE HANDS OF THE ASSESSEE. IN THAT CASE T HE TRIBUNAL CLEARLY NOTED THAT THE ASSESSEE WAS A PUBLIC LIMITE D COMPANY AND SUBSCRIPTIONS WERE RECEIVED FROM PUBLIC AT LARG E THROUGH BANKING CHANNEL AND THE SHARES WERE ALLOTTED IN CON SONANCE WITH THE PROVISIONS OF THE SECURITIES CONTRACT (REG ULATION) ACT, 57 1956 AS ALSO THE RULES AND REGULATIONS OF DELHI STO CK EXCHANGE AND IN PARA 12 THE HON'BLE DELHI HIGH COURT HAS CLE ARLY DIFFERENTIATED THE CASES OF SHARE CAPITAL OF PRIVAT E LIMITED COMPANY FROM PUBLIC LIMITED COMPANY BY SAYING IN T HE CASE OF PRIVATE PLACEMENT, THE LEGAL REGIME WILL NOT BE THE SAME. THEREFORE, THE FACTS OF THAT CASE ARE NOT APPLICABL E TO THE CASE OF THE ASSESSEE AS IT IS A PRIVATE LIMITED COMPANY OR CLOSELY HELD COMPANY. BESIDES THIS, IN CASE OF M/S LOVELY E XPORTS LIMITED (IN PARA 23), THE HON'BLE DELHI HIGH COURT NOTED THAT THE ASSESSING OFFICER HAS NEITHER CONTROVERTED NOR DISPROVED THE MATERIAL FILED BY THE ASSESSEE. HOWEVER, IN T HE PRESENT CASE, THE ASSESSING OFFICER AFTER MAKING INQUIRY DI SAPPROVED THE VERY FIRST INFORMATION REGARDING IDENTITY OF SU CH CREDITORS AS THEY WERE FOUND NON-EXISTENT AT ALL THE GIVEN ADDRE SSES. SO FAR AS THE ARGUMENT OF THE LEARNED CIT DR THAT DISMISSA L OF SLP IN THE CASE OF LOVELY EXPORT, WHERE THERE IS NO MERGER OF ORDER, IS NOT AN EXPRESSION OF JUDICIAL VIEW NOR A BINDING PR ECEDENT. WE ARE NOT GOING INTO THIS CONTROVERSY BECAUSE THE FAC TS OF THE PRESENT APPEALS ARE DISTINGUISHABLE FROM THE FACTS OF LOVELY 58 EXPORTS PRIVATE LIMITED. HONBLE DELHI HIGH COURT I N A LATTER DECISION IN CIT V. OASIS HOSPITALITIES PRIVATE LIMI TED (2011) 333 ITR 119 HELD AS UNDER :- WE ARE OF THE VIEW THAT RATIO LAID DOWN IN STELLE R INVESTMENT LTD. (2001) 251 ITR 263 IS APPLICABLE ON LY IN THOSE CASES WHERE THE ASSESSEE IS A LIMITED COMPANY AND THE SHARES WERE QUOTED IN THE STOCK EXCHANGE. BUT WHENEVER THE ISSUE IS SUBSCRIBED WITHOUT QUOTING IT ON THE STOCK EXCHANGE BY A LIMIT ED OR PRIVATE LIMITED COMPANY, THE PRESUMPTION IS VERY STRONG AGAINST THE ASSESSEE THAT SUBSCRIPTION IS AVAILABLE ONLY TO THE CLOSELY CONNECTED PERSONS OF THE ASSESSEE. ONCE THE INFERENCE IS AGAINST THE ASSESS EE THAT THE ISSUE IS SUBSCRIBED BY ITS CLOSELY CONNECT ED PERSON, THE ONUS IS UPON THE ASSESSEE TO PROVE THE IDENTITY OF THE SUBSCRIBERS AND THEIR CREDITWORTHIN ESS. 27. THERE IS ANOTHER PERCEPTION TO LOOK INTO THE D ECISION OF THE HON'BLE APEX COURT IN THE CASE OF LOVELY EXP ORTS PRIVATE LIMITED WHEREIN THE HON'BLE APEX COURT HELD THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE FROM ALLEGED BOGUS SHARE HOLDERS, WHOSE NAMES ARE GIVEN TO THE A SSESSING OFFICER, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENT IN ACCORDANCE WITH LAW, BUT I T CANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE COMP ANY. IN OUR VIEW, FIRST OF ALL, THE ALLEGED BOGUS SHARE HOL DERS SHOULD BE 59 IN EXISTENCE, ONLY THEN THE DEPARTMENT MAY BE IN A POSITION TO REOPEN THEIR INDIVIDUAL ASSESSMENT. HOWEVER, IN THE PRESENT APPEALS, THE SHARE APPLICANTS/SHARE SUBSCRIBERS ARE NO MORE IN EXISTENCE MEANING THEREBY THEIR IDENTITY IS NOT PRO VED, THEREFORE, HOW THE DEPARTMENT CAN PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS. 28. THE HON'BLE MADHYA PRADESH HIGH COURT AFFIRMED THE DECISION OF M/S RATHI FINLEASE LIMITED (SUPRA) IN THE CASE OF M/S STL EXTRUSION PRIVATE LIMITED (2011) 333 ITR 269, RELIED UPON BY BOTH THE SIDES BEFORE US. WE FIND THAT TH E FACTS IN STL EXTRUSION ARE MATERIALLY DIFFERENT FROM BOTH TH E ASSESSEES, NAMELY, M/S AGRAWAL COAL CORPORATION AS WELL AS FRO M M/S RATHI FINLEASE LIMITED. IN THE CASE OF M/S STL EXTR USION ON RECEIPT OF CONFIRMATION OF SHARE APPLICANTS, EXCEPT OBSERVING DISCREPANCIES IN CONFIRMATION, THE ASSESSING OFFICE R NEITHER ASKED ANYTHING FROM THE ASSESSEE NOR MADE ANY INQUI RY TO ARRIVE AT THE CONCLUSION THAT SHARE APPLICANTS WERE BOGUS. HOWEVER, IN THE PRESENT APPEAL, DETAILED INQUIRIES WERE MADE, NOTICES RECEIVED UNSERVED, COMMISSION ALSO RETURNED EMPTY 60 HANDED AS THE SHARE SUBSCRIBING COMPANIES WERE FOUN D NON- EXISTENT. IN THAT SITUATION, THE HON'BLE HIGH COUR T CONCLUDED THAT ONCE EXISTENCE OF AN INVESTOR/SHARE HOLDER IS PROVED, ONUS SHIFTS TO THE REVENUE TO ESTABLISH THAT EITHER THE SHARE APPLICANTS ARE BOGUS OR IMPUGNED MONEY BELONGS TO T HE ASSESSEE ITSELF. THE CONTRARY FINDING IN THESE CASE S WERE CONFRONTED TO THE ASSESSEE BY THE ASSESSING OFFICER BUT THE ASSESSEE IN SPITE OF SUFFICIENT OPPORTUNITY PROVIDE D, FAILED TO PROVE THE EXISTENCE OF SUCH SHARE APPLICANTS COMPAN IES AS THE CORRECT ADDRESSES WERE NOT PROVIDED TO THE ASSESSIN G OFFICER AND EVEN THE DIRECTORS OR ANY OF THE EMPLOYEES OR B OOKS OF ACCOUNT WERE NOT PRODUCED. THEREFORE, THE ONLY CON CLUSION ARRIVED AT BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S RATHI FINLEASE LIMITED THAT THE ASSESSEE FAILED TO DISCHARGE BURDEN WITH REGARD TO CREDITS IN ITS BOOK S AND THE EXISTENCE OF ITS CREDITORS, CONSEQUENTLY, ADDITION U/S 68 WAS SUSTAINED. THIS DECISION IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT APPEALS BECAUSE IDENTITY OF SHARE APPLI CANT ITSELF WAS NOT PROVED. THE PRINCIPLE LAID DOWN IN THE CAS E OF M/S 61 RATHI FINLEASE LIMITED WAS RECENTLY AFFIRMED BY HON 'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF STL EXTRUS IONS, IT HAS BECOME BINDING PRECEDENT ON THE TRIBUNAL ESPECIALLY WHEN THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF L OVELY EXPORTS WAS VERY MUCH AVAILABLE. HON'BLE JURISDICT IONAL HIGH COURT WHILE COMING TO A PARTICULAR CONCLUSION FOLLO WED THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN CIT V. ASK BROTHERS LIMITED (2011) 333 ITR 333 AND DULY CONSID ERED THE DECISION FROM THE HON'BLE APEX COURT IN CIT V. LOV ELY EXPORTS PRIVATE LIMITED AND STELLER INVESTMENT LIMITED (SU PRA). IN ANOTHER LATEST DECISION IN CIT V. OASIS HOSPITALITI ES PRIVATE LIMITED, UP BONE MILLS INDIA LIMITED AND VIJAY POWE R GENERATORS LIMITED, ETC. (2011) 333 ITR 119 (DEL), IDENTICALLY HELD THAT IDENTITY AND CREDIT WORTHINESS OF SHARE A PPLICANTS WAS NOT PROVED, THEREFORE, THE ADDITION U/S 68 OF THE A CT WAS JUSTIFIED. WHILE COMING TO THE AFORESAID DECISION T HE HON'BLE DELHI HIGH COURT CONSIDERED THE FOLLOWING DECISIONS :- 1. BHOLA SHANKAR COLD STORAGE P. LTD. V. JCIT; (200 4)270 ITR 487 (CAL (PARA 40) 2. CIT V. AKJ GRANITES P. LTD. (2008) 301 ITR 298 ( RAJ) (PARA 18) 62 3. CIT V. ARUNANANDA TEXTILES P. LTD. (2011) 333 IT R 116 (KARN) (PARA 17) 4. CIT V. ASK BROTHERS LTD. (2011) 333 ITR 111 (KAR N) 5. CIT VS. CREATIVE WORLD TELEFILMS LTD. (2011) 333 ITR 100 (BOM) 6. CIT VS. DIVINE LEASING & FINANCE LTD. (2008) 299 ITR 268 (DEL) 7. CIT V. DOLPHIN CANPACK LTD. (2006) 283 ITR 190 ( DELHI) 8. CIT V. K.C. FIBERS LTD. (2011) 332 ITR 481 (DEL HI) 9. CIT V. LOVELY EXPORTS P. LTD. (2009) 319 ITR (ST .) 5 (HC) 10.CIT V. MOHANKALA (P) (2007) 291 ITR 278 (SC) 11.CIT V. SOPHIA FINANCE LTD. (1994) 205 ITR 98 (DE L) 12.CIT V. STELLER INVESTMENT LTD. (1991) 192 ITR 28 7 (DEL) 13.CIT V. STELLER INVESTMENT LTD. (2001) 251 ITR 26 3 (S.C.) 14.CIT V. VALUE CAPITAL SERVICES P. LTD. (2008) 307 ITR 334 (DEL) 15. MADHURI INVESTMENT PVT. LTD. V. ACIT(ITA NO. 11 0 OF 2004 DATED 18.2.2006 (KARN.) 16. SHREE BARKHA SYNTHETICS LTD. VS. ACIT; (2006) 2 83 ITR 377 (RAJ.) 29. AS PER THE PROVISIONS OF SECTION 68 OF THE ACT, IN CASE THE ASSESSEE HAS NOT BEEN ABLE TO GIVE SATISFACTORY EXPLANATION IN RESPECT OF NATURE AND SOURCE OF ANY SUM OR IF IN THE OPINION OF THE ASSESSING OFFICER SUCH EXPLANATION IS NOT SA TISFACTORY, THE ASSESSING OFFICER MAY TREAT THE SAME AS UNDISCL OSED INCOME AND ADD IT TO THE INCOME OF THE ASSESSEE ME ANING THEREBY THE ASSESSEE IS REQUIRED TO GIVE SATISFACTO RY EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH SUM S FOUND CREDITED IN THE BOOKS OF ACCOUNT. WHAT KIND OF PRO OF IS TO BE FURNISHED BY THE ASSESSEE IS A QUESTION. IT HAS CO ME UP FOR DISCUSSION IN VARIOUS JUDGMENTS RENDERED BY VARIOUS HON'BLE 63 COURTS INCLUDING HON'BLE SUPREME COURT AND HIGH COU RTS. THE LAW DISCUSSED BY THE HON'BLE COURT IN THE CASE OF C IT V. DIVINE LEASING & FINANCE LIMITED (2008) 299 ITR 268 IS ALS O AN IMPORTANT DECISION TO QUOTE. A DELICATE BALANCE HA S TO BE MAINTAINED. THE HON'BLE DELHI HIGH COURT IN CIT V. DOLPHIN CANPACK LTD.; 283 ITR 190 QUOTED AT PAGE 193 THE FO LLOWING OBSERVATIONS :- ....CREDIT ENTRY RELATES TO THE ISSUE OF SHARE CAP ITAL, THE INCOMETAX OFFICER IS ALSO ENTITLED TO EXAMINE WHETH ER THE ALLEGED SHAREHOLDERS DO IN FACT EXIST OR NOT. S UCH AN INQUIRY WAS CONDUCTED BY THE ASSESSING OFFICER I N THE PRESENT CASE. IN THE COURSE OF THE SAID INQUIR Y, THE ASSESSEE HAD DISCLOSED TO THE ASSESSING OFFICER NOT ONLY THE NAMES AND THE PARTICULARS OF THE SUBSCRIBE RS OF THE SHARES BUT ALSO THEIR BANK ACCOUNTS AND THE PERMANENT ACCOUNT NUMBERS ISSUED BY THE INCOMETAX DEPARTMENT. SUPER ADDED TO ALL THIS WAS THE FACT TH AT THE AMOUNT RECEIVED BY THE COMPANY WAS ALL BY WAY O F CHEQUES. THIS MATERIAL WAS, IN THE OPINION OF THE TRIBUNAL, SUFFICIENT TO DISCHARGE THE ONUS THAT LAY UPON THE ASSESSEE. THE HON'BLE HIGH COURT TOOK NOTE OF MANY OTHER JUDG MENTS OF MANY OTHER HIGH COURTS AND ON ANALYSIS OF THOSE JUD GMENTS, FORMULATED THE FOLLOWING PROPOSITIONS WHICH EMERGE AS UNDER (DIVINE LEASING & FINANCE LIMITED; 299 ITR PAGE 282 (DEL) :- 64 IN THIS ANALYSIS, A DISTILLATION OF THE PRECEDENTS YIELDS THE FOLLOWING PROPOSITIONS OF LAW IN THE CONTEXT OF SEC TION 68 OF THE INCOME TAX ACT. THE ASSESSEE HAS TO PRIMA F ACIE PROVE THE IDENTITY OF THE CREDITOR/SUBSCRIBER THE GENUINENESS OF THE TRANSACTION, NAMELY, WHETHER IT HAS BEEN TRANSMITTED THROUGH BANKING OR OTHER UNDISPUTABLE CHANNELS THE CREDIT WORTHINESS OR FINANCIAL STRENGTH OF THE CREDITOR/SUBSCRIBER IF RELEVANT DETAILS OF ADDRESS OR PAN, IDENTITY OF THE CREDITOR/SUBSCRIBER ARE FURNISHED TO THE DEPARTMENT ALONG WITH COPIES OF THE SHARE HOLDERS REGISTER, SHARE APPLICATION FORMS, SHARE TRANSFER REGISTERS, ETC. I T WOULD CONSTITUTE ACCEPTABLE PROOF OR ACCEPTABLE EXPLANATI ON BY THE ASSESSEE. THE DEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWING AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCRI BER FAILS OR NEGLECTS TO RESPOND TO ITS NOTICES THE ONUS WOULD NOT STAND DISCHARGED IF THE CREDITOR/SUBSCRIBER DENIES OR REPUDIATES THE TRANSA CTION SET UP BY THE ASSESSEE NOR SHOULD THE ASSESSING OFF ICER 65 TAKE SUCH REPUDIATION AT FACE VALUE AND CONSTRUE IT , WITHOUT MORE, AGAINST THE ASSESSEE AND THE ASSESSING OFFICER IS DUTY BOUND TO INVESTIGATE THE CREDIT WORTHINESS OF THE CREDITOR/SUBSCRIBER, THE GENUINENESS OF THE TRANSACTION AND THE VERACITY OF THE REPUDIATION. 30. IF THE TOTALITY OF FACTS AND THE JUDICIAL PRON OUNCEMENTS DISCUSSED HEREINABOVE ARE KEPT IN JUXTAPOSITION, IT IS CLEAR THAT THE INITIAL BURDEN IS UPON THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF SHARE APPLICATION MONEY RECEIVED BY T HE ASSESSEE. IN ORDER TO DISCHARGE ITS BURDEN, THE AS SESSEE IS REQUIRED TO PROVE THE IDENTITY OF THE SHARE HOLDER THE GENUINE OF TRANSACTION THE CREDIT WORTHINESS OF THE SHARE HOLDER DURING HEARING, SHRI R.K. CHAUDHARY AND SHRI K.K. S INGH THE LEARNED COMMISSIONERS OF INCOME TAX CONTENDED THAT HINDUSTAN CONTINENT PVT. LTD.; AGRAWAL ROAD CARRIER S PVT. LTD. AND SUNI SHARES AND STOCK LIMITED (INTER-CONNECTED WITH EACH OTHER), ARE PAPER CONCERNS. THESE COMPANIES PROVID ED 66 ACCOMMODATION ENTRY TO VARIOUS PARTIES OF INDORE, B HOPAL, GWALIOR, NAGPUR, SURAT, MUMBAI, AHMEDABAD, VADODARA , AND IN VARIOUS OTHER CITIES THROUGH THEIR BANK ACCOUNTS MAINTAINED AXIS BANK, INDORE, DURING THE PERIOD 1.4.2002 TO 31 .3.2005. THE MODUS OPERANDI OPERATED WAS THAT THE ACCOMMODAT ION ENTRIES WOULD FIRST PAY THE CASH WHICH WAS DEPOSITE D IN BANK ACCOUNTS MAINTAINED IN THE NAME OF M/S YASH ASSOCIA TES, M/S G.R. INVESTMENTS, M/S V.S. TRADERS, PATH PRADARSHAK FINVEST PVT. LTD., M.S. RIBEKA GARG AND BHANURAJ SINGH RANA WAT, ETC. MAINTAINED IN THE SAME BANK BRANCH (IN DUE COURSE O LD ACCOUNTS WERE CLOSED AND NEW ACCOUNTS IN THE NAME O F NEW CONCERNS WERE OPENED). THEREAFTER, THE AMOUNT WAS TRANSFERRED IN ANY OF THE ACCOUNT OF HINDUSTAN CONT INENTAL PRIVATE LIMITED, AGRAWAL ROAD CARRIERS PRIVATE LIMI TED AND SUNIL SHARES & STOCK LIMITED. IT WAS SUBMITTED THA T ON CERTAIN OCCASION THERE IS INTER-TRANSFER OF FUNDS AMONGST T HE THREE COMPANIES, THEN THE CHEQUES WERE ISSUED TO DESIRING PARTIES IN THE GARB OF LOAN OR SHARE CAPITAL. NOT ONLY THAT, THE SHARES OF HINDUSTAN CONTINENTAL WERE CLAIMED TO BE TRADED BY SUNIL 67 SHARES & STOCK LIMITED, M/S JAI SHARE FIN LIMITED A ND OTHERS THROUGH MANIPULATION GIVING RISE TO ARTIFICIAL HEIG HT SO AS TO ENABLE CERTAIN PARTIES TO RE-INTRODUCE THEIR BLACK MONEY AS HUGE CAPITAL GAIN. IT WAS CLAIMED THAT IN THOSE CA SE ALSO THE CASH WAS DEPOSITED FIRST IN CERTAIN ACCOUNT AND THE REAFTER THE FUNDS WERE TRANSFERRED TO THE SHARE BROKERS INVOLVE D IN THE MANIPULATION AND THEN ULTIMATELY TO THE ACCOUNTS OF THE PARTY CONCERNED AS SALE PROCEEDS OF SHARES. IT WAS ALSO SUBMITTED THAT SEBI HAS EVEN PENALISED HINDUSTAN CONTINENTAL PRIVATE LIMITED AND SUNIL SHARES & STOCK PRIVATE LIMITED. THIS ASSERTION OF THE LEARNED COMMISSIONER OF INCOME TAX WAS NOT CONTROVERTED BY THE ASSESSEE BUT MERELY ARGUED THAT THE MONEY WAS TRANSACTED THROUGH BANKING CHANNEL AND IN VIEW OF THE DECISION IN THE CASE OF LOVELY EXPORTS THEIR IN DIVIDUAL ACCOUNTS CAN BE REOPENED. HOWEVER, AS MENTIONED E ARLIER, THE EXISTENCE OF THESE SHARE SUBSCRIBERS/SHARE APPL ICANTS WAS NOT FOUND EXISTENT, THEREFORE, WHERE IS THE QUESTIO N OF REOPENING THEIR INDIVIDUAL ASSESSMENTS. TRANSACTIO N ENQUIRY WAS ALSO MADE (PAGES 1 TO 104) OF THE PAPER BOOK FI LED ON 68 4.5.2010. PAGES 108 TO 125 OF THE PAPER BOOK DATED 4.5.2010 CONTAINS THE ADJUDICATION ORDER U/S 151 OF THE SECU RITIES AND EXCHANGE BOARD OF INDIA ACT READ WITH RULE 5(1) O F THE SEBI (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTI ES BY THE ADJUDICATING OFFICER). RULES 1995 AGAINST OPTIMATES TEXTILES INDUSTRIES LIMITED (FORMERLY KNOWN AS PRIYANSH SARE E INDUSTRIES LIMITED). VIDE PARA 17 OF THE ORDER (PA GE 125) IT HAS BEEN HELD THAT SUNIL SHARES & STOCKS PRIVATE LIMITE D FAILED TO PROVIDE NECESSARY INFORMATION TO THE INVESTIGATING AUTHORITY OF SEBI AND PENALTY OF RS. 2 LACS WAS IMPOSED IN TERMS OF PROVISIONS OF SECTION 15A(A) OF SEBI ACT, 1992 FOR FAILURE TO PROVIDE NECESSARY INFORMATION TO SEBI. 31. THE HON'BLE APEX COURT IN THE CASE OF VIJAY K UMAR TALWAR V. CIT (2011) 330 ITR 1 (S.C.) ON THE ISSUE U/S 68 READ WITH SECTION 260A DECIDED IN FAVOUR OF THE REVENUE . IDENTICAL RATIO WAS LAID DOWN BY THE HON'BLE SUPREME COURT IN CASE OF CIT V. BIJU PATNAIK; 160 ITR 674. 32. SO FAR AS THE CONTENTION OF THE LD. COUNSEL FO R ASSESSEE TO THE EFFECT THAT THE ISSUE IS SQUARELY C OVERED BY THE 69 DECISION OF THE COORDINATE BENCH IN THE CASE OF KAL ANI INDUSTRIES IS CONCERNED, WE DO NOT FIND ANY SUBSTAN CE IN THE SAME IN VIEW OF THE FACT THAT THE ADDITION MADE IN THE CASES BEFORE US WAS AFTER PASSING OF THE ORDER BY THE TRI BUNAL AND THE INQUIRY CONDUCTED BY THE DEPARTMENT THEREAFTER. THE ENQUIRY SO CONDUCTED BY THE DEPARTMENT AFTER THE RE LEVANT ASSESSMENT YEARS INVOLVED IN THE CASE OF KALANI IND USTRY, IT WAS FOUND THAT NEITHER THE SHARE APPLICANTS WERE FO UND EXISTING AT THE ADDRESS GIVEN BY THE ASSESSEE NOR A T DIFFERENT ADDRESSES SUPPLIED BY THE ASSESSEE TO THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. AS THE FACTS OF SUBSEQUENT YEAR ARE DIFFERENT, THE DECISION ARRIVED AT BY THE TRIBUNAL IN ASSESSMENT YEAR 2003-04 CANNOT BE APPLI ED TO THE ASSESSMENT YEARS 2005-06 & 2006-07, FACTS OF WHICH ARE MATERIALLY DIFFERENT. 33. THE CONTENTION OF THE LD. COUNSEL FOR ASSESSEE THAT IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COUR T IN THE CASE OF LOVELY EXPORTS, THE ISSUE IS COVERED IN FAV OUR OF THE ASSESSEE, AS PER OUR CONSIDERED VIEW, THE CASE OF L OVELY 70 EXPORTS (SUPRA) WILL BE APPLICABLE ONLY AFTER THE I DENTITY OF THE SHARE APPLICANT IS ESTABLISHED. SINCE IN THE INSTA NT APPEALS BEFORE US, THE IDENTITY ITSELF HAS NOT BEEN ESTABLI SHED, THERE IS NO JUSTIFICATION TO APPLY THE RATIO LAID DOWN BY TH E HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS (SUPRA) . 34. THE HONBLE JURISDICTIONAL HIGH COURT IN THE C ASE OF RATHI FINLEASE (SUPRA) HAS CLEARLY LAID DOWN THE PR OPOSITION WITH RESPECT TO CIRCUMSTANCES WHEREIN THE IDENTITY IS ESTABLISHED IN CASE THE SHARE APPLICANTS ARE COMPAN IES. IT WAS HELD THAT EVEN FILING OF CONFIRMATION OF SHARE APPL ICANTS BY THE ASSESSEE WILL NOT SERVE THE PURPOSE OF ESTABLISHING THE IDENTITY INSOFAR AS THE INQUIRY CONDUCTED BY THE ASSESSING O FFICER AND THE LETTER ISSUED BY THE ASSESSING OFFICER WERE RET URNED UNSERVED BY THE POSTAL DEPARTMENT WITH THE REMARK T HAT THE ADDRESSEES ARE NOT EXISTING AT THE GIVEN ADDRESSES WHICH CLEARLY ESTABLISHES THAT EITHER THE SHARE APPLICANT S ARE NON- EXISTENT OR IF EXIST, THEN MERELY EXIST ON PAPERS A ND NOT IN REAL SENSE, THEREFORE, THEIR IDENTITY IS NOT PROVED. WI TH ALL RESPECT, WITHIN THE TERRITORIAL JURISDICTION OF MADHYA PRADE SH, WE ARE 71 BOUND TO FOLLOW THE PROPOSITION OF LAW LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT, WHICH WAS FURTHER CONFIR MED BY HON'BLE HIGH COURT IN THE CASE OF STL EXTRUSION (SU PRA), AFTER CONSIDERING THE PROPOSITION LAID DOWN IN THE CASE O F LOVELY EXPORT (SUPRA), THE FACTS OF WHICH ARE PARI MATERIA ESPECIALLY WHEN THE FACTS OF THE INSTANT APPEALS BEFORE US AR E IDENTICAL TO THE FACTS WHEREIN THE HONBLE HIGH COURT HAS DECIDE D IN FAVOUR OF THE REVENUE WHEREAS THE FACTS IN THE CASE OF LOV ELY EXPORTS ARE DISTINGUISHABLE, AS DISCUSSED ABOVE. 35. SO FAR AS THE CONTENTION OF THE LD. COUNSEL FO R THE ASSESSEE THAT THE COMPANY CAN ONLY BE WOUND UP BY T HE ORDER OF THE HONBLE HIGH COURT AND DEATH OF THE COMPANY IS KNOWN TO THE PROCESS OF LAW AND ALSO THAT THE COMPANY IS STILL AVAILABLE ON THE WEBSITE OF THE COMPANY LAW BOARD I S CONCERNED, WE ARE NOT AGREEING WITH THIS PROPOSITIO N OF THE ASSESSEE BECAUSE HERE IT IS NOT A CASE OF WINDING P ROCESS RATHER IT IS A CASE OF ADMISSIBILITY OF CLAIM OF TH E ASSESSEE U/S 68 OF THE ACT. SINCE THE SHARE APPLICANTS/SHARE S UBSCRIBERS IDENTITY IS NOT PROVED, THEREFORE, THE ASSESSEE CAN NOT BE 72 PERMITTED TO TAKE SHELTER OF TECHNICALITIES. EVEN OTHERWISE, WEBSITE EXISTENCE ON THE COMPANY LAW BOARD IS NOT A SOLE PROOF THAT IN FACT THE SHARE APPLICANTS ARE IN EXIS TENCE ESPECIALLY WHEN RIGHT FROM THE ASSESSMENT STAGE TO THE STAGE OF THE TRIBUNAL (THREE STAGES) THE ASSESSEE DID NOT PROVE THE IDENTITY OF THE SHARE APPLICANTS. TECHNICALITIES A LSO HELP THOSE WHO ARE WITH CLEAN HANDS. HOWEVER, WE ARE IN AGREEM ENT WITH THE ARGUMENT OF THE ASSESSEE THAT THE WINDING UP PO WERS OF A COMPANY LIES WITH THE HONBLE HIGH COURT BUT THIS I SSUE IS NOT BEFORE US, THEREFORE, WE ARE REFRAINING OURSELVES T O COMMENT FURTHER. IT WAS FAIRLY ACCEPTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT IN THE PRESENT APPEALS MERELY THE ASS ESSEE FILED CERTAIN DOCUMENTS WHICH DID NOT PROVE THE IDENTITY BUT DID NOT PRODUCE THE SHARE APPLICANTS/SUBSCRIBERS. AT THE SA ME TIME, THE LEARNED CIT DR TIME AND AGAIN IS HARPING THAT T HE SHARE APPLICANTS ARE MERELY PAPER COMPANIES. THEREFORE, F ROM THIS ANGLE ALSO, WE ARE NOT CONVINCED WITH THE ARGUMENT OF THE ASSESSEE. WITH REGARD TO THE CONTENTION OF LD. AR T HAT COPY OF THE INQUIRY CONDUCTED BY THE ASSESSING OFFICER WAS FURNISHED 73 TO THE ASSESSEE ONLY ONE DAY PRIOR TO THE COMPLETIO N OF ASSESSMENT, WE FOUND THAT THE ASSESSEE HAS GOT FULL OPPORTUNITY TO SUBSTANTIATE ITS CLAIM AND NEGATE TH E REPORT BEFORE THE LD. CIT(A) BUT THE ASSESSEE GROSSLY FAIL ED TO REBUT THE REPORT REGARDING NON-ESTABLISHMENT OF IDENTITY OF SHARE APPLICANTS. THE LD. CIT(A) HAS GOT CO-TERMINUS POWE RS TO DO WHAT THE ASSESSING OFFICER HAS FAILED TO DO. PROCEE DIGNS BEFORE LD. CIT(A) IS ALSO EXTENSION OF ASSESSMENT P ROCEEDINGS IN ADDITION TO THE APPELLATE PROCEEDINGS. HOWEVER, INSPITE OF FULL OPPORTUNITY THE ASSESSEE FAILED TO REBUT THE CONTEN TS OF THE REPORT WHICH INDICATED THAT NO SHAREHOLDERS EXIST I N THE NAME OF THE COMPANIES SO PROVIDED BY THE ASSESSEE. EVEN THO UGH, THE REPORT RELIED BY THE ASSESSING OFFICER WAS IN RESPE CT OF ANOTHER ASSESSEE BUT THE FACT REMAINS THAT THE INQUIRY WAS IN THE CASE OF SAME SHARE SUBSCRIBERS I.E. M/S. HINDUSTAN CONTI NENTAL LTD. & M/S. OPTIMATES TEXTILES IND. LTD. UNDER THESE CIR CUMSTANCES, THE INQUIRY CONDUCTED IN RESPECT OF M/S. HINDUSTAN CONTINENTAL LTD. & M/S. OPTIMATES TEXTILES IND. LTD. WHICH ARE COMMON APPLICANTS IN THE CASE OF ALL THE ASSESSEES BEFORE US, COULD NOT 74 BE SAID TO BE A RELEVANT AND NOT CONCERNING TO THE ASSESSEE IN THE INSTANT CASES. 36. EVEN IF THE CASES RELIED UPON BY THE LD. COUNS EL FOR THE ASSESSEE, AS MENTIONED/CITED/DISCUSSED IN THE P RECEDING PARAS OF THIS ORDER LIKE DIVINE LEASING & FINANCE L IMITED, DWARKADHEESH INVESTMENT PRIVATE LIMITED, GANGOR INV ESTMENT LIMITED, K.C. FIBRES LIMITED, DOLPHIN CANPACK LIMIT ED, SHREE BARKHA SYNTHETICS (RAJ.), DOWN TOWN HOSPITALS PRIVA TE LIMITED, ILLAC INVESTMENTS PRIVATE LIMITED, ROHINI BUILDERS AND SHREE BARKHA SYNTHETICS (RAJ.) (SUPRA) ARE CONS IDERED, THE HONBLE COURTS HAVE CLEARLY HELD THAT AT LEAST THE ASSESSEE HAS TO POVE THE IDENTITY/EXISTENCE OF THE PERSON IN WHO SE NAMES SHARE APPLICATIONS ARE RECEIVED MEANING THEREBY THE BURDEN LIES ON THE ASSESSEE IS TO ESTABLISH THE IDENTITY/E XISTENCE OF SUCH SHARE HOLDINGS AND ONCE IT IS ESTABLISHED, THE ASSESSEE IS NOT REQUIRED TO PROVE ANYTHING FURTHER. THEREFORE, THESE JUDICIAL PRONOUNCEMENTS ARE IN FAVOUR OF THE REVENUE AND MAY NOT HELP THE ASSESSEE BECAUSE THE ASSESSEE HAS NOT PROVED TH E IDENTITY OF SUCH SHARE APPLICANTS. 75 37. THE CONTENTION OF THE LD. COUNSEL FOR ASSESSEE TO THE EFFECT THAT THE DECISION OF RATHI FINLEASE BY THE J URISDICTIONAL HIGH COURT WAS RENDERED MUCH PRIOR TO THE DECISION OF THE SUPREME COURT IN THE CASE OF LOVELY EXPORTS (SUPRA) THEREFORE, THE PROPOSITION LAID DOWN BY THE JURISDICTIONAL HIG H COURT IN RATHI FINLEASE CANNOT BE APPLIED AFTER THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS , HAVE NO LEGS TO STAND INSOFAR AS THE JURISDICTIONAL HIGH CO URT IN THE CASE OF STL EXTRUSION WHEREIN CASE OF LOVELY EXPORT WAS RELIED ON, DULY APPROVED ITS PREVIOUS PROPOSITION LAID DOWN IN CASE OF RATHI FINLEASE. HE FURTHER SUBMITTED THAT JURISDICT IONAL HIGH COURT IN THE CASE OF ACIT VS. SHREE KELA PRAKASHAN PRIVATE LIMITED AFFIRMED THE DECISION OF THE TRIBUNAL REPOR TED AT (2010) 14 ITJ 539 DATED 8.10.2009, THEREFORE, THE LATER DE CISION HAS TO BE FOLLOWED. AS PER OUR CONSIDERED VIEW, THE CONTEN TION OF THE LD. COUNSEL FOR ASSESSEE IS WHOLLY MISPLACED INSOFA R AS DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LO VELY EXPORTS (SUPRA) ITSELF PRESUPPOSES THE ESTABLISHMEN T OF IDENTITY AS A PRE-CONDITION FOR NOT MAKING ADDITION IN THE H ANDS OF THE 76 ASSESSEE COMPANY. IN THE CASE OF SHRI KELA PRAKASH AN PRIVATE LIMITED, THE TRIBUNAL HAS GIVEN A CATEGORIC AL FINDING THAT THE ASSESSEE HAS PROVED THE IDENTITY OF THE SU BSCRIBERS. THEREFORE, NO ADDITION WAS WARRANTED IN THE HANDS O F THE ASSESSEE. HOWEVER, IN THE INSTANT CASE BEFORE US, THE IDENTITY OF THE SUBSCRIBERS HAS NOT BEEN ESTABLISHED AS PER OUR DISCUSSION DETAILED HEREINABOVE. THIS FINDING OF TH E TRIBUNAL WAS AFFIRMED BY THE HON'BLE HIGH COURT AND, THEREFO RE, THE APPEAL FILED BY THE REVENUE WAS DISMISSED, WHEREAS IN THE PRESENT APPEAL THE MATTER WAS INVESTIGATED BY THE A SSESSING OFFICER AND EVEN THE INSPECTOR OF THE DEPARTMENT WH O WAS DIRECTED BY THE ASSESSING OFFICER TO KNOW THE WHERE ABOUTS REPORTED THAT THE SHARE SUBSCRIBING COMPANIES ARE N ON-EXISTENT AND THE ADDRESSEES GIVEN OF FOUR PLACES WERE ALSO F OUND TO BE FICTITIOUS. THE SUMMONS/NOTICES ISSUED BY THE DEPAR TMENT WERE ALSO RETURNED UNSERVED BY THE POSTAL DEPARTMENT WIT H THE REMARK THAT NO SUCH COMPANIES ARE EXISTING AT THE G IVEN ADDRESSES, THEREFORE, IN THE PRESENT APPEALS, THE I DENTITY OF SHARE HOLDERS WAS NOT PROVED AT ANY STAGE, CONSEQUE NTLY, THE 77 DECISION IN THE CASE OF SHRI KELA PRAKASHAN PRIVATE LIMITED IS NOT APPLICABLE BEING ON DIFFERENT FINDINGS, THEREFO RE, MAY NOT HELP THE ASSESSEE. LIKEWISE, THE HON'BLE KARNATKA HIGH COURT IN THE CASE OF CIT VS. ARUNANANDA TEXTILES PRIVATE LIMITED (2011) 333 ITR 116 DEALT WITH IDENTICAL ISSUE AND T HAT TOO AFTER CONSIDERING THE DECISION IN THE CASE OF LOVELY EXPO RTS PRIVATE LIMITED AND STELLER INVESTMENT LIMITED. THE HON'BLE COURT HELD AS UNDER :- IT IS NOT FOR THE ASSESSEE TO PLACE MATERIAL BEFOR E THE ASSESSING OFFICER IN REGARD TO THE CREDIT WORTHINES S OF THE SHARE HOLDERS. IF THE ASSESSEE HAS GIVEN THE ADDRESSES OF THE SHARE HOLDERS AND THEIR IDENTITY IS NOT IN D ISPUTE , WHETHER THEY WERE CAPABLE OF INVESTING, THE ASSESSI NG OFFICER SHALL INVESTIGATE. IT IS NOT FOR THE ASSES SEE TO ESTABLISH BUT IT IS FOR THE DEPARTMENT TO INQUIRE W ITH THE INVESTORS ABOUT THEIR CAPACITY TO INVEST THE AMOUNT IN THE SHARES . IF THE AFORESAID CONCLUSION IS ANALYSED, ONE FACT I S CLEAR THAT THE IDENTITY OF THE SHARE HOLDERS HAS TO BE PROVED BY T HE ASSESSEE. HOWEVER, IN THE PRESENT APPEALS THE IDENTITY ITSEL F IS IN DISPUTE, THEREFORE, THE AFORESAID DECISION CLEARLY SUPPORTS THE CASE OF THE REVENUE. 78 38. LIKEWISE IN THE CASE OF CIT V. ASK BROTHERS ( 2011) 333 ITR 111 (KARN.) THE SHAREHOLDERS ADMITTED THE P AYMENT OF AMOUNT FOR SHARES TO BE ALLOTTED. IN THESE CIRCUMS TANCES, HON'BLE COURT HELD THAT THE AMOUNTS OF SHARE CAPITA L CANNOT BE ADDED IN THE ASSESSEES HANDS. HOWEVER, IN THE PRES ENT APPEALS, THE SHARE APPLICANTS ITSELF ARE NON-EXISTE NT, CONSEQUENTLY, THERE IS NO QUESTION OF ADMITTING BY THE SHARE HOLDERS REGARDING MONEY INVESTED BY THEM AND THEN S HARES ALLOTTED TO THEM. THIS JUDICIAL PRONOUNCEMENT ALSO GOES AGAINST THE ASSESSEE. HON'BLE DELHI HIGH COURT IN A LATER DECISION IN VIJAY POWER GENERATORS LIMITED V. DIRECTOR OF INCOM E TAX AND OTHERS (ITA NO. 514 OF 2007) (2011) 333 ITR 119 (DE L) AT PAGE 136 THE APPEAL WAS ADMITTED ON THE FOLLOWING QUESTI ON OF LAW :- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE INCOME TAX APPELLATE TRIBUNAL HAS ERRED I N LAW IN SUSTAINING THE ADDITION OF RS. 25,23,500/- O N ACCOUNT OF RECEIPT OF SHARE APPLICATION MONEY ? 37. THE FACTS LEADING TO THE ADMISSION OF THE AFORESAID QUESTION WERE AS FOLLOWS :- THE ASSESSEE IN THE INCOME TAX RETURN FOR THE ASSESSMENT YEAR 1997-98 HAD SHOWN RECEIPTS IN THE FORM OF SHARE MONEY SUBSCRIBED OF 15 PER CENT TO WH OM THE SHARES WERE LATER ON ALLOCATED. TOTAL MONEY ON THIS 79 ACCOUNT RECEIVED BY THE ASSESSEE WAS RS. 25,23,500. THE INVESTMENT IN THESE SHARES WAS RANGING FROM RS . 1 LAKH TORS. 2.5 LAKHS. IN ORDER TO VERIFY THE GENUIN ENESS OF THESE TRANSACTIONS, THE ASSESSING OFFICER ISSUED SUMMONS TO THESE PARTIES WHICH WERE RECEIVED BACK EITHER WITH THE REMARKS INCOMPLETE ADDRESS OR IN SPITE OF BEST EFFORTS THE ADDRESS NOT FOUND OR NOT MET OR NO SUCH PERSON OR NOT FOUND, ETC. THE ASSESSING OF FICER THEREAFTER ASKED THE ASSESSEE TO PRODUCE THESE PERS ONS WHO HAD INTRODUCED THE SHARE CAPITAL IN THE COMPANY . THE ASSESSEE WAS ALSO ASKED TO FURNISH CHEQUE NUMBERS/DRAFT NUMBERS FOR PAYMENT OF SHARE APPLICAT ION MONEY ALONG WITH THE NAMES OF THE DRAWEE BANK AND BRANCH OF THE BANK. HOWEVER, NO DETAILS WERE FURN ISHED DESPITE VARIOUS OPPORTUNITIES. THE ASSESSEE COULD N OT EVEN IDENTIFY THE ENTRIES IN THE BANK ACCOUNT REGAR DING THE RECEIPTS OF THE SHARE APPLICATION MONEY NOR COU LD HE PRODUCE THE RELEVANT LEDGER FOR VERIFYING THE RECEI PTS, ACCORDING TO THE ASSESSING OFFICER. ULTIMATELY, TH E ASSESSEE PRODUCED FIVE PERSONS WHOSE STATEMENTS WERE RECORDED. THE ASSESSEE DID NOT CROSS EXAMINE THESE PERSONS. THEY DID NOT FURNISH ANY PROOF OF TH EIR IDENTITY IN THE FORM OF RATION CARD, ELECTION CARD OR PASSPORT DESPITE REQUEST BY THE ASSESSING OFFICER. THE ASSESSING OFFICER AFTER ANALYSING THE STATEMENTS OF THESE PERSONS OBSERVED THAT THESE FIVE PERSONS WERE SMALL AGRICULTURISTS AND HAD NO MEANS TO MAKE INVESTMENT IN THE COMPANY. 38 . IN THESE CIRCUMSTANCES, THE ENTIRE RECEIPT OF RS.25,23,500/- IN RESPECT OF THESE FIVE PERSONS WAS TREATED AS UNEXPLAINED INVESTMENT AND MADE THE ADDI TION U/S 68 OF THE ACT. 39. THE LEARNED COMMISSIONER RE-EXAMINED THE ENTIR E ISSUE ANALYSING THE EVIDENCE IN THE LIGHT OF THE JU DGMENT IN THE CASE OF STELLER INVESTMENT LIMITED AND SOPHIA FINAN CE LIMITED (SUPRA) AND ULTIMATELY CONFIRMED THE ADDITION. ON FURTHER 80 APPEAL, THE TRIBUNAL AFFIRMED THE DECISION OF LEARN ED COMMISSIONER OF INCOME TAX (APPEALS) IN THE FOLLOWI NG MANNER :- 15. HAVING CAREFULLY EXAMINED THE MATERIAL AVAILABLE ON RECORD AND THE ORDERS OF THE LOWER AUTHORITIES, WE FIND THAT SHARES WERE NOT QUOTED ON THE STOCK EXCHANGE AND IT WAS SUBSCRIBED BY THE PERSONS WHO WERE KNOWN TO THE ASSESSEE BUT DURING THE COURS E OF HEARING DESPITE VARIOUS OPPORTUNITIES THE ASSESS EE COULD NOT PRODUCE THEM FOR VERIFICATION NOR WAS ANY EVIDENCE FILED WITH REGARD TO THEIR FINANCIAL STATU S. OUT OF 15 SUBSCRIBERS, 5 SUBSCRIBERS WERE PRODUCED BEFO RE THE ASSESSING OFFICER AND DURING THE COURSE OF THE EXAMINATION IT WAS ADMITTED THAT THEY WERE SMALL AGRICULTURISTS AND WERE CULTIVATING THE AGRICULTURA L LAND AFTER TAKING IT ON LEASE FROM OTHER AGRICULTURISTS. NO EVIDENCE REGARDING THE AGRICULTURAL HOLDINGS WERE PRODUCED BEFORE THE ASSESSING OFFICER NOR HAVE THEY FILED ANY EVIDENCE WITH REGARD TO THEIR FINANCIAL SOUNDNESS WHEREAS THE INVESTMENT IN SHARES WERE MADE BETWEEN RS. 1 LAKH TO RS. 2.5 LAKHS. COPY OF T HE STATEMENT ARE (SIC. IS) PLACED ON RECORD AND FROM I TS PERUSAL ONE WOULD FIND THAT ALL THESE 5 PERSONS ARE OF ORDINARY STATUS AND THEY HAVE NO MEANS TO INVEST A HUGE SUM IN SHARES WITH THE ASSESSEE. 16. SO FAR AS THE LEGAL POSITION AND THE JUDGMENT OF THE APEX COURT IN THE CASE OF STELLER INVESTMENT LTD. (2001) 251 ITR 263 IS CONCERNED, WE ARE OF THE VIEW THAT THE RATIO LAID DOWN IN STELLER INVESTMENT LTD. (2001) 251 ITR 263 IS APPLICABLE ONLY IN THOSE CASE S WHERE THE ASSESSEE IS A LIMITED COMPANY AND THE SHARES WERE QUOTED IN THE STOCK EXCHANGE. ONCE THE SHARES ARE QUOTED IN THE STOCK EXCHANGE AND THE SUBSCRIPTION IS OPEN TO PUBLIC AT LARGE, THE ASSESS EE CANNOT HAVE CONTROL OVER THE SUBSCRIPTION AND ALSO CANNOT MAKE A VERIFICATION OF THE SUBSCRIBERS AS SUBSCRIPTION CAN BE DONE BY ANY PERSON. BUT 81 WHENEVER THE ISSUE IS SUBSCRIBED WITHOUT QUOTING IT ON THE STOCK EXCHANGE BY A LIMITED OR PRIVATE LIMITED COMPANY THE PRESUMPTION IS VERY STRONG AGAINST THE ASSESSEE THAT SUBSCRIPTION IS AVAILABLE ONLY TO THE CLOSELY CONNECTED PERSONS OF THE ASSESSEE. ONCE TH E INFERENCE IS AGAINST THE ASSESSEE THAT THE ISSUE IS SUBSCRIBED BY ITS CLOSELY CONNECTED PERSONS, THE ON US IS UPON THE ASSESSEE TO PROVE THE IDENTITY (SIC. IDENTIFICATION) OF THE SUBSCRIBERS AND THEIR CREDIT WORTHINESS. THEIR LORDSHIPS OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF BHOLA SHANKAR COLD STORA GE P. LTD. V. JOINT CIT (2004) 270 ITR 487 HAVE EXAMIN ED THE JUDGMENT OF THE APEX COURT IN THE CASE OF STELL ER INVESTMENT LTD. AND THAT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF SOPHIA FINANCE LTD (1994) 205 ITR 98 AND HAVE HELD THAT IN THE CASE OF STELLER INVESTMENT LTD. THE RATIO LAID DOWN BY THE FULL BEN CH OF THE DELHI HIGH COURT WAS NOT OVERRULED AND IT STILL HOLDS THE FIELD. WHENEVER THE ISSUE WAS SUBSCRIBED BY CLOSELY CONNECTED PERSONS OF THE ASSESSEE AND THE ASSESSEE HAS FAILED TO PROVE THE IDENTITY AND CREDITWORTHINESS THE ADDITION UNDER SECTION 68 CAN BE MADE IN THE HANDS OF THE ASSESSEE. IN THE INSTANT CASE, THE ASSESSEE COULD NOT PLACE ANY EVIDENCE ON RECORD TO PROVE THE IDENTITY AND THE CREDITWORTHINE SS OF THE SO-CALLED SUBSCRIBERS AND THE ASSESSING OFFICER WAS JUSTIFIED IN TREATING THIS INVESTMENT AS UNEXPL AINED AND MADE THE ADDITION UNDER SECTION 68 OF THE INCOM E TAX ACT. WE, THEREFORE, FIND NO INFIRMITY IN THE OR DER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). ACCORDINGLY, WE CONFIRM THE SAME. XXX XXX XXX XXX 42. WE HAVE CONSIDERED THESE SUBMISSIONS IN SO FAR AS THE STATEMENTS OF THE PERSONS WHO ARE PRODUC ED ARE CONCERNED, THEY ARE GONE INTO AND ANALYSED BY T HE THREE AUTHORITIES BELOW ON THE BASIS OF WHICH FINDI NG OF FACT IS ARRIVED AT THAT NEITHER THEIR IDENTITY IS E STABLISHED NOR THEIR CAPACITY TO INVEST THIS KIND OF MONEY IS PROVED. THEY ARE ALL AGRICULTURISTS AND HAD NOT 82 PRODUCED A SINGLE DOCUMENT TO SUPPORT THEIR VERSION . THIS IS A FINDING OF FACT AND THERE IS NO REASON TO INTERFERE WITH THE SAME. LEARNED COUNSEL FOR THE REVENUE HAD DRAWN OUR ATTENTION TO VIEW ALL THESE STATEMENTS. ONE MR. SUKH LAL SINGH IN HIS STATEMEN T HAD STATED THAT HE HAD PURCHASED THE SHARES OF RS. 1,90,000. OUT OF THE SHARE MONEY, HE HAD PAID RS. 70,000 OUT OF HIS OWN SOURCE AND RS. 1,20,000 WAS RECEIVED BY HIM FROM HIS FRIENDS AND WAS PAID IN MA NY INSTALMENTS. LIKEWISE ONE MR. VIJAY KUMAR WHO ALSO PURPORTEDLY PURCHASED THE SHARES OF RS. 1.90 LAKHS STATED THAT THE PAYMENTS WERE MADE BY HIM IN CASH I N MANY INSTALMENTS. HE ALSO STATED THAT HE PERSONALL Y KNEW THE DIRECTORS OF THE COMPANY AND HAD VERY OLD RELATION WITH HIM. ON THE BASIS OF SUCH STATEMENT WITHOUT AN IOTA OF DOCUMENTARY EVIDENCE TO SUPPORT, WE ARE OF THE OPINION THAT THE FINDINGS OF THE AUTHORITIES BELOW CANNOT BE TREATED AS PERVERSE. IT IS ON PROPER ANALYSIS O F THE STATEMENTS OF THESE PERSONS WHICH WERE RECORDED BY THE ASSESSING OFFICER. WHEN WE KEEP IN MIND THE PRINCIPLE OF LAW LAID DOWN IN THE RATIO IN THE AFOR ESAID DECISIONS AND APPLY THE SAME TO THE FACTS OF THIS C ASE, IT IS DIFFICULT TO FIND FAULT WITH THE APPROACH OF THE TRIBUNAL. WE HAVE TO KEEP IN MIND THAT THE RATIO IN A DECISION CANNOT BE APPLIED IN EACH CASE. THE FACTS AND CIRCUMSTANCES OF EACH CASE ARE TO BE WEIGHED AND EXAMINED AS TO WHETHER A PARTICULAR RATIO DECIDED I N A PARTICULAR CASAE COULD BE APPLIED. AS NOTED ABOVE, THE INITIAL ONUS IS UPON THYE ASSESSEE TO ESTABLISH THR EE THINGS NECESSARY TO OBVIATE THE MISCHIEF OF SECTION 68 OF THEACT. THESE ARE : (I) THE IDENTITY OF INVESTOR S; (II) THEIR CREDITWORTHINESS/INVESTMENTS, AND (III) THE GENUINENESS OF THE TRANSACTION. ONLY WHEN THESE THREE INGREDIENTS ARE ESTABLISHED PRIMA FACIE IT IS ONLY THEN THE DEPARTMENT IS REQUIRED TO UNDERTAKE FURTHE R EXERCISE AS DISCUSSED ABOVE. IN THE INSTANT CASAE, NO SUCH DOCUMENTS ARE FILED AND NO STEPS TAKEN BY THE ASSESSEE WHICH COULD ESTABLISH THE AFORESAID THREE INGREDIENTS. 83 ADDITIONAL EVIDENCE IN THE FORM OF BANK STATEMENT, ETC. IS GIVEN BUT THE ASSESSEE HAS NOT DONE ANYTHIN G TO PROVE THESE BANK ACCOUNTS. ON THIS EVIDENCE PRODUCED BY THE ASSESSEE REMAND REPORT WAS CALLED FOR AND THE ASSESSING OFFICER IN HIS REMAND REPORT DATED DECEMBER 23, 2003 SUBMITTED AS UNDER :- NONE OF THE 6 ALLEGED SHAREHOLDERS PRODUCED ANY DOCUMENTS IN SUPPORT OF THEIR IDENTITY. THE FA CT WAS INTIMATED TO THE ASSESSEE VIDE ORDER SHEET ENTRIES DATED JUNE 13, 2002 AND MARCH 17, 2003 . THEY ARE NOT ASSESSED TO TAX. THEY HAVE NOT PRODUCED ANY DOCUMENTARY EVIDENCE SHOWING THAT THEY ARE CAPABLE OF SAVING/INVESTING ANY AMOUNT AT ALL. IF THE PERSONS PRODUCVED ARE NOT CARRYING REL EVANT DOCUMENTS TO ESTABLISH THEIR IDENTITY, CREDITWORTHI NESS AT THE TIME OF RECORDING OF THE STATEMENTS AND FURNISHING PHOTO COPY OF SOME DOCUMENTS AFTER A GAP OF SUBSTANTIAL PERIOD, IT IS NOT POSSIBLE TO VERIFY ITS CORRECTNESS UNLESS THE CONCERNED PERSONS ARE PRODUCED WITH NECESSARY DOCUMENTARY EVIDENCE (IN ORIGINAL) IN SUPPORT OF THEIR IDENTITY AND CREDITWORTHINESS. THE ASSESSEE HAS NOT EVEN FURNISHED BASIC REQUIREMENTS OF SHARE CAPITAL I.E. CHEQUE NUMBER, DATE, AMOUNT(S), DETAILS OF DRAWEE BANK, ETC. THE ASSESSEES BANK ACCOUNT WAS ALSO NOT PRODUCED. HENCE, THE ASSESSEES CLAIM REGARDING INVESTMENT BY THE SHAREHOLDERS REMAINED UNVERIFIABLE. NO COMMENT S CAN NOW BE OFFERED AT THIS STAGE WITHOUT NECESSARY VERIFICATION. PROOF OF IDENTITY PRODUCED AT A LATE R STAGE CANNOT BE VERIFIED IN THE ABSENCE OF CONCERNED PERSONS ORIGINAL DOCUMENTS. 45. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) CLEARLY DEMONSTRATES THAT THIS REMAND REP ORT WAS SENT TO THE ASSESSEE WHO HAD SUBMITTED HIS REPL Y DATED FEBRUARY 10, 2004 WHICH IS EVEN REPRODUCED IN THE ORDER AND THEREAFTER THE LEARNED COMMISSIONER O F INCOME TAX (APPEALS) DISCUSSED THE SAME IN THE LIGH T OF CERTAIN DECISIONS CITED BEFORE HIM AND CAME TO T HE CONCLUSION THAT THE ASSESSEE HAD NOT GIVEN SATISFACTORY EVIDENCE TO DISCHARGE THE ONUS. IT HA D 84 MERELY GIVEN NAMES OF THE PARTIES WITHOUT ANYTHING MORE. THAT WOULD NOT BE SUFFICIENT COMPLIANCE. EV EN THE BANK STATEMENT OF THE ASSESSEE WHICH WAS SUBMITTED HAS NOT BEEN PROVED. 46. FOR ALL THESE REASONS, WE ARE OF THE VIEW THAT THE ASSESSEE HAD NOT BEEN ABLE TO DISCHARGE THE ONU S PROBANDI AND ADDITION WAS RIGHTLY MADE. WE, THEREFO RE, ANSWER THE QUESTION IN THE NEGATIVE AND DISMISS THI S APPEAL OF THE ASSESSEE. 40. IF THE AFORESAID CONCLUSION DRAWN BY THE HON'B LE HIGH COURT IS KEPT IN JUXTAPOSITION WITH THE FACTS OF TH E PRESENT APPEAL, ONE FACT IS CLEARLY OOZING OUT THAT THE ASS ESSEE HAS NOT DISCHARGED ITS ONUS TO THE SATISFACTION OF THE ASSE SSING OFFICER AND EVEN DID NOT PROVE THE IDENTITY OF THE SHARE AP PLICANTS. MERELY GIVING THE NAMES OF SUCH SHARE APPLICANTS IS NOT ENOUGH ESPECIALLY WHEN THESE APPLICANTS WERE FOUND NON- EXISTENT, THEREFORE, THIS JUDICIAL PRONOUNCEMENT CL EARLY GOES AGAINST THE ASSESSEE. IT IS PERTINENT TO MENTION H ERE THAT WHILE COMING TO THE AFORESAID CONCLUSION THE HON'BLE COUR T ALSO DISCUSSED THE DECISIONS LIKE AKJ GRANITES PRIVATE L IMITED; 301 ITR 291 (RAJ), CIT V. ARUNALANDA TEXTILES PVT. LTD. (2011) 333 ITR 116 (KARN.) (PARA 17) ORDER DATED 2 ND MARCH, 2010, CIT V. ASK BROTHERS (2011) 333 ITR 111 (KARN.) ORDER DATED 18 TH 85 FEBRUARY, 2010 . IN BOTH THESE CASES, THE HON'BLE KARNATAKA HIGH COURT HAS DULY DISCUSSED THE DECISION IN LOVEL Y EXPORTS PVT. LTD. AND STELLER INVESTMENT LTD. (SUPRA) MEANI NG THEREBY THAT BOTH THESE DECISIONS WERE RENDERED AFTER THE PRONOUNCEMENTS OF DECISIONS FROM HON'BLE APEX COURT IN LOVELY EXPORTS PRIVATE LIMITED (SUPRA). AS DISCUSS ED IN OTHER PARAS OF THIS ORDER, SO FAR AS THE DECISION IN THE CASE OF M/S STL EXTRUSION VS. DCIT (2010) 15 ITJ 872 (I.T.A.T., INDORE) IS CONCERNED, THAT DECISION WAS RENDERED BY THE BENCH ON THE FACTS THAT SINCE THE ASSESSEE PROVED THE IDENTITY O F THE INVESTORS, THEREFORE, IT WAS HELD THAT NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE COMPANY WHEREAS IN THE PR ESENT APPEALS, THE EXISTENCE/IDENTITY OF SHARE SUBSCRIBER S WAS NOT PROVED, CONSEQUENTLY, THESE JUDICIAL PRONOUNCEMENTS RATHER HELPS THE REVENUE AND NOT THE ASSESSEE. 41. EVEN OTHERWISE, IF THE RATIO LAID DOWN BY THE HON'BLE APEX COURT IN THE CASE OF LOVELY EXPORTS PRIVATE LI MITED, WHILE DISMISSING THE SPECIAL LEAVE PETITION, IT IS CLEAR THAT THE INITIAL BURDEN IS UPON THE ASSESSEE TO PROVE THE IDENTITY O F SHARE 86 SUBSCRIBERS AND ONCE THE IDENTITY IS PROVED, IN CAS E OF BOGUS INVESTMENT, ADDITION CAN BE MADE IN THEIR INDIVIDUA L CAPACITY AND NOT IN THE CASE OF THE COMPANY. HOWEVER, IN TH E PRESENT APPEALS EVEN THE IDENTITY OF SUCH SHARE HOLDERS IS NOT PROVED AS WE HAVE DISCUSSED ABOVE, THEREFORE, THE INITIAL ONUS HAS NOT BEEN DISCHARGED BY THE ASSESSEE ESPECIALLY WHEN THE ASSESSEE WAS CONFRONTED WITH THE FINDING OF THE COM MISSION (INSPECTOR), SUMMONS/NOTICES RETURNED UNSERVED AND THE ADDRESSES GIVEN BY THE ASSESSEE ITSELF THAT TOO AT FOUR PLACES WERE FOUND TO BE FICTITIOUS. THE ASSESSEE HAS NOT GIVEN SATISFACTORY EVIDENCE TO DISCHARGE THE ONUS. IT HA S MERELY GIVEN THE NAMES OF FICTITIOUS PARTIES AND IN OUR HU MBLE OPINION THIS IS NOT A SUFFICIENT COMPLIANCE, THEREFORE, THE DECISION FROM HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS MAY NOT HELP THE ASSESSEE. IN A LATER DECISION DATED 25 TH OCTOBER, 2010 THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE O F CIT V. STL EXTRUSION (P) LIMITED; (2011) 17 ITJ 648 (MP) EVEN CONSIDERED VARIOUS DECISIONS INCLUDING THE OFF-QUOTED DECISION OF DIVINE LEASING & FINANCE LIMITED, RATHI FINLEASE LIMITED, STELLER 87 INVESTMENT LIMITED AND OF COURSE LOVELY EXPORTS PRI VATE LIMITED WHEREIN THE ASSESSEE FILED LIST OF ALL SUBS CRIBERS AND GAVE AFFIDAVITS OF ALL SUBSCRIBERS IN THE FORM OF C ONFIRMATIONS AND IN THAT SITUATION THE HON'BLE COURT HELD THAT T HE ASSESSEE IS REQUIRED TO ESTABLISH THE IDENTITY AND SOURCE OF CR EDITS AND FURTHER HELD THAT IF THE CONFIRMATION IS GIVEN, NO ADDITION COULD BE MADE AGAINST THE ASSESSEE WHEREAS IN THE CASE OF THE ASSESSEE THE SHARE APPLICANTS WERE FOUND TO BE NON- EXISTENT, THEREFORE, THIS JUDICIAL PRONOUNCEMENT FROM THE HON 'BLE JURISDICTIONAL HIGH COURT CLEARLY GOES AGAINST THE ASSESSEE. 42. THE NEXT GROUND PERTAINS TO UPHOLDING THE AD H OC DISALLOWANCE OF RS. 1 LAC MADE OUT OF TELEPHONE EXP ENSES. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND TH AT THE LEARNED ASSESSING OFFICER MADE AD HOC DISALLOWANCE OF RS. 1 LAC OUT OF TOTAL EXPENSES OF RS. 12,29,154/-. WE FIND THAT FIR ST NO REASON HAS BEEN ASSIGNED FOR MAKING SUCH AD HOC DISALLOWAN CE BY THE ASSESSING OFFICER AND SECONDLY WE ARE OF THE VIEW T HAT SINCE THE COMPANY IS A JURISTIC PERSON, NO DISALLOWANCE O F PERSONAL NATURE CAN BE MADE IN THE CASE OF A COMPANY. WE, T HEREFORE, 88 REVERSE THE ORDERS OF THE AUTHORITIES BELOW ON THIS ISSUE AND ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED. 43. IN THE CASE OF AD-MANUM PACKAGING LIMITED (ITA NO. 158/IND/2010) FOR THE ASSESSMENT YEAR 2004-05 THE F IRST GROUND RELATES TO MAINTAINING THE ADDITION OF RS. 10 LACS ON ACCOUNT OF LOAN TAKEN BY THE ASSESSEE FROM HINDUSTAN CONTINENT AL LIMITED AND ADDITION AS CASH CREDIT U/S 68. THE LD. COUNSEL FOR THE ASSESSEE, MR. HITESH CHIMNANI, CONTENDED THAT THE L EARNED ASSESSING OFFICER/THE LEARNED COMMISSIONER OF INCOM E TAX (APPEALS) HAVE GONE STRAY IN PASSING LENGTHY ORDERS DISCUSSING ABOUT CAPITAL GAINS ON SHARES OF M/S HINDUSTAN CONT INENTAL AND THE INVESTMENT OF THE SAME COMPANY IN FIXED ASSETS AND CAPITAL WORK IN PROGRESS. THE FINANCIAL POSITION OF M/S HIN DUSTAN CONTINENTAL WAS HIGHLIGHTED BEFORE US BY FURTHER SU BMITTING THAT THE LENDER COMPANY IS A QUOTED PUBLIC LIMITED COMPA NY, THE LOAN AMOUNT WAS ADVANCED BY ACCOUNT PAYEE CHEQUE AN D RETURNED WITH INTEREST. IT WAS CONTENDED THAT THE I DENTITY, 89 CAPACITY AND GENUINENESS OF THE TRANSACTION WERE FU LFILLED BY THE LENDER COMPANY, M/S HINDUSTAN CONTINENTAL LIMIT ED. THE NEXT GROUND RELATES TO DISALLOWANCE OF INTEREST OF RS.42,658/- PAID ON THE SAID AMOUNT OF LOAN OF RS. 10 LACS WHIC H WAS ARGUED TO BE CONSEQUENTIAL. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISION IN METCHEM INDUSTRIES; 245 ITR 160 (MP); 225 ITR 640 (MP), KALANI INDUSTRIES, 119 TTJ 140 (DEL) AND 245 DTR 281 (DEL). ON THE OTHER HAND, THE LEA RNED CIT DR DEFENDED THE IMPUGNED ORDER BY SUBMITTING THAT S INCE THE IDENTITY OF M/S HINDUSTAN CONTINENTAL LIMITED WAS N OT ESTABLISHED, THEREFORE, THE ASSERTION MADE BY THE L D. COUNSEL FOR THE ASSESSEE FAILS AT THE INITIAL STAGE ITSELF. SINCE IN THE CASE OF AGRAWAL COAL CORPORATION, IDENTICAL SUBMISSIONS HAVE ALREADY BEEN CONSIDERED, THEREFORE, WE DO NOT FIND ANY MERIT IN THIS APPEAL OF THE ASSESSEE ALSO, CONSEQUENTLY, IT IS DISMISSED. 44. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND TH E FACTS NARRATED BEFORE US AND FURTHER THE DISCUSSION MADE HEREINABOVE, SINCE THE IDENTITY OF THE LENDER COMPA NY IS NOT ESTABLISHED AS SUCH COMPANIES WERE FOUND NON-EXISTE NT AT THE 90 GIVEN FOUR ADDRESSES, THEREFORE, VARIOUS DOCUMENTS ALLEGED TO BE FILED BEFORE THE ASSESSING OFFICER IN RESPECT OF NON-EXISTING COMPANIES ARE OF NO USE. WE FIND NO MERIT IN THIS GROUND OF THE ASSESSEE AND DISMISS THE SAME. 45. THE IDENTICAL GROUNDS IN OTHER APPEALS RELATIN G TO ADDITIONS MADE UNDER SECTION 68 OF THE ACT, AS DISC USSED ABOVE ARE ALSO DISMISSED FOLLOWING THE REASONINGS G IVEN ABOVE. 46. SO FAR AS THE GROUND RELATING TO AD HOC DISALL OWANCE OF RS. 80,000/- ON ACCOUNT OF TELEPHONE EXPENSES IS CONCERNED (ITA NO. 136/IND/2009), WE ARE OF THE VIEW THAT SIN CE THE ASSESSEE COMPANY IS A JURISTIC PERSON, NO AD HOC DI SALLOWANCE FOR PERSONAL PURPOSES CAN BE MADE IN THE HANDS OF T HE COMPANY. WE, THEREFORE, ALLOW THIS GROUND OF THE AS SESSEE. 47. SO FAR AS THE DISALLOWANCE OF RS.6,17,878/- PA ID AS INTEREST ON UNSECURED LOANS IN RESPECT OF ACCOMMODA TION ENTRIES IS CONCERNED, WE ARE OF THE VIEW THAT SINCE THE ADDITION MADE U/S 68 HAS BEEN SUSTAINED, THEREFORE, THERE I S NO QUESTION OF PAYMENT OF INTEREST AS THE ADDITION U/S 68 WAS 91 FOUND TO BE ON PAPER ONLY AND NOT IN REAL SENSE, TH EREFORE, THIS GROUND IS ALSO DISMISSED. THIS WILL ALSO COVER THE IDENTICAL GROUND RAISED IN ITA NO. 283/IND/2010 AND ITA NO. 34/IND/2010. 48. IN ITA NO. 190/IND/2009 GROUND NOS. 1 AND 2 AR E IDENTICAL, THEREFORE, DISMISSED. THE NEXT GROUND PE RTAINS TO AD HOC DISALLOWANCE OF RS. 50,000/- OUT OF TELEPHONE E XPENSES. FOR THE REASONS DISCUSSED ON IDENTICAL ISSUE IN ITA NO. 136/IND/2009, NO AD HOC DISALLOWANCE OF PERSONAL NA TURE CAN BE MADE IN THE CASE OF A COMPANY, THEREFORE, THIS G ROUND IS ALLOWED, CONSEQUENTLY, THIS APPEAL IS PARTLY ALLOWE D. ITA NO. 158/IND/2010 49. GROUND NOS. 1 AND 2 ARE IDENTICAL AS WE HAVE DISCUSSED IN PRECEDING PARAS OF THIS ORDER, THEREFO RE, THESE GROUND ARE DISMISSED. GROUND NO. 3 IS GENERAL IN N ATURE, THEREFORE, THIS APPEAL IS DISMISSED. 92 ITA NOS. 196/IND/2009 50. GROUND NO. 1 PERTAINS TO CONFIRMING THE AD HOC DISALLOWANCE OF RS. 25,000/- MADE OUT OF TELEPHONE EXPENSES. AS DISCUSSED ABOVE, NO ADHOC DISALLOWANCE OF PERSON AL NATURE CAN BE MADE IN THE CASE OF A COMPANY, THEREFORE, TH IS GROUND OF THE ASSESSEE IS ALLOWED. 51. GROUND NO. 2 PERTAINS TO ADDITION OF RS. 10 LA CS AS UNEXPLAINED CREDIT U/S 68 OF THE ACT. FOR THE REAS ONS DISCUSSED IN THE PRECEDING PARAS IN DETAIL, THIS GR OUND OF THE ASSESSEE IS DISMISSED, THEREFORE, THIS APPEAL OF TH E ASSESSEE IS PARTLY ALLOWED. ITA NOS. 193/IND/2009 52. GROUND NO. 2 PERTAINS TO DISALLOWANCE MADE U/S 69C OF THE ACT AS INTEREST OF RS. 54,257/- PAID ON UNSE CURED LOAN. AS DISCUSSED ABOVE, IT HAS BEEN MADE ON PAPERS ONLY AND ACTUALLY NOT INCURRED, THEREFORE, THIS GROUND IS DI SMISSED. 53. THE FIRST GROUND PERTAINS TO LEVY OF PENALTY O F RS.19,000/- U/S 271(1)(C) OF THE ACT. THE CLAIM OF THE ASSESSEE 93 IS THAT THE INTEREST WAS RIGHTLY CLAIMED AS FOR THE PROVISIONS OF SECTION 36(1)(III) AND SECONDLY NO DISALLOWANCE CAN BE MADE BY INVOKING THE PROVISIONS OF SECTION 69C OF THE ACT. WE DO NOT FIND ANY MERIT IN THE CLAIM OF THE ASSESSEE AS WE H AVE DISMISSED THE IDENTICAL GROUND OF PAYMENT OF INTERE ST, THEREFORE, SINCE THE ASSESSEE CLAIMED BOGUS INTERES T EXPENSES RESULTING INTO SUPPRESSION OF INCOME, THEREFORE, TH E PENALTY WAS RIGHTLY IMPOSED, CONSEQUENTLY, THIS APPEAL OF THE A SSESSEE IS DISMISSED. ITA NOS. 137/IND/2009 54. BOTH THE GROUNDS RAISED IN THIS APPEAL PERTAIN TO UNSECURED LOAN OF RS. 20 LACS RECEIVED FROM M/S HIN DUSTAN CONTINENTAL LIMITED AND CONSEQUENT ADDITION MADE U/ S 68 AND FURTHER THE AMOUNT OF RS. 1,61,096/- CLAIMED AS INT EREST PAID. AS WE HAVE DISCUSSED ABOVE, THEREFORE, BOTH THESE G ROUNDS ARE DISMISSED. FINALLY, ITA NO.151/IND/2009 IS PARTLY ALLOW ED ITA NO. 283/IND/2010 IS DISMISSED ITA NO.136/IND/2009 IS PARTLY ALLOWED. 94 ITA NO. 34/IND/2010 IS DISMISSED. ITA NO.190/IND/2009 IS PARTLY ALLOWED. ITA NO.158/IND/2010 IS DISMISSED ITA NO.196/IND/2009 IS PARTLY ALLOWED. ITA NO.193/IND/2010 IS DISMISSED ITA NO.137/IND/2009 IS DISMISSED. SD/- SD/- (R.C. SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED - 31 ST OCTOBER, 2011 COPY TO APPELLANT/RESPONDENT/CIT/CIT(A)/DR DN/-