Thanigaivelan Spinners Private Limited, Coimbatore V. ACIT, Coimbatore

ITA 1742/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1104 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 27-02-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 18-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAILENDRA MAMIDI
• Assessee Lawyers: N DEVANATHAN
• Keywords: Bogus Share capital; Principle of natural justice; Additional evidence; Corroborative evidences
• Section: 133A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER] I.T.A.NO.1742/MDS/2012 ASSESSMENT YEAR : 2005-06 M/S THANIGAIVELAN SPINNERS PVT. LTD 431A, MASANDIPALAYAM KARGOUNDAMPALAYAM POST ANNUR,COIMBATORE 641 697 VS THE ASSTT. COMMISSIONER OF INCOME-TAX COMPANY CIRCLE IV(1) COIMBATORE [PAN AACCT 2000 L] (APPELLANT) (RESPONDENT) I.T.A.NO.1814/MDS/2012 ASSESSMENT YEAR : 2005-06 THE ASSTT. COMMISSIONER OF INCOME-TAX COMPANY CIRCLE IV(1) COIMBATORE VS M/S THANIGAIVELAN SPINNERS PVT. LTD 431A, MASANDIPALAYAM KARGOUNDAMPALAYAM POST ANNUR, COIMBATORE 641 697 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI N. DEVANATHAN, ADVOCATE DEPARTMENT BY : SHRI SAILENDRA MAMIDI, CIT/DR DATE OF HEARING : 27-02-2013 DATE OF PRONOUNCEMENT : 08-03-2013 I.T.A.NO.1742 & 1814/12 :- 2 -: O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THESE ARE CROSS APPEALS FILED BY T HE ASSESSEE AND THE REVENUE AGAINST THE ORDER OF THE CIT(A)-I, COIMBATO RE, DATED 20.7.2012. 2. IN THE ASSESSEES APPEAL, THE SOLE ISSUE INVOLVED IS THAT THE CIT(A) ERRED IN CONFIRMING THE ADDITION OF ` 26,63,100/- RECEIVED AS SHARE APPLICATION MONEY U/S 68 OF THE ACT AS UNEXP LAINED CASH CREDIT. 3. IN THE APPEAL OF THE REVENUE, THE SOLE ISSUE INVOLV ED IS THAT THE CIT(A) ERRED IN DELETING THE ADDITION OF ` 37,17,000/- ON ACCOUNT OF UNEXPLAINED SHARE APPLICATION MONEY RECEIVED FRO M 13 PERSONS U/S 68 OF THE ACT. 4. AS THE FACTS AND ISSUE INVOLVED ARE COMMON IN BOTH THE APPEALS, THEY ARE BEING DISPOSED OF TOGETHER AS UND ER: 5. THE BRIEF FACTS OF THE CASE ARE THAT A SURVEY U/S 133A OF THE ACT WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE ON 18.12.2006 WHEREIN SHRI SENTHIL KUMAR, MANAGING DIR ECTOR OF THE COMPANY, IN THE STATEMENT RECORDED DURING THE COURS E OF SURVEY, OFFERED AN ADDITIONAL INCOME OF ` 1,01,800/- ON ACCOUNT OF INSUFFICIENT I.T.A.NO.1742 & 1814/12 :- 3 -: DETAILS PROVIDED ON CERTAIN INVESTORS OF SHARE ADVA NCE MONEY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE SUBMITTED THAT THESE SHARE INVESTORS CAN BE PRODUCED BEFORE THE AS SESSING OFFICER FOR EXAMINATION VIDE ITS LETTER DATED 21.12.2006. THE ASSESSING OFFICER REJECTED THIS PLEA OF THE ASSESSEE ON THE GROUND T HAT SUFFICIENT OPPORTUNITY TO PRODUCE THE SAME WAS ALREADY TO THE ASSESSEE. THE ASSESSEE ALSO STATED THAT THESE PERSONS WERE THE CL OSE ASSOCIATES OF ONE OF ITS DIRECTOR SHRI V.SUBRAMANIAM WHO WAS IN T HE BUSINESS TO TOBACCO. IT WAS SUBMITTED THAT THESE PERSONS INVES TED IN THE SHARE OF THE COMPANY ON THE GOODWILL OF THE ABOVE DIRECTOR A ND THAT THE INVESTORS WERE FARMERS. IT WAS ALSO STATED AT THE TIME OF SURVEY THAT IF ENQUIRIES WERE MADE WITH THESE PERSONS DIRECTLY THE Y WOULD PRESS FOR RETURN OF THE ABOVE INVESTMENTS AND HENCE THE ASSE SSEE UNDERTOOK TO PAY TAX ON THE ABOVE SUM OF ` 1,01,800/- TO AVOID SUCH A SITUATION. THEREFORE, THE ASSESSING OFFICER MADE ADDITION OF ` 1,01,800/- TO THE INCOME OF THE ASSESSEE. 6. BEING AGGRIEVED BY THE SAID ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). 7. THE ASSESSEE FILED WRITTEN SUBMISSION BEFORE THE C IT(A) WHICH IS AS FOLLOWS: I.T.A.NO.1742 & 1814/12 :- 4 -: AT THE TIME OF SURVEY ON 18.12.2006, SHRI V.S.SENT HIL KUMAR WAS ACTING AS MANAGING DIRECTOR OF THE COMPANY AND THEN HIS AGE WAS ABOUT 26 YEARS. HE WAS THE SON OF THE MAIN PROMOTER OF THE C OMPANY SHRI V.SUBRAMANIAM WHO WAS COTTON AND TOBACCO MERCH ANT. AT THE TIME OF SURVEY, SHRI V.SUBRAMANIAM WAS BED RIDDEN D UE TO AN ACCIDENT AND THEREFORE HIS SON SHRI V.S.SENTHIL KUM AR WAS LOOKING AFTER THE AFFAIRS OF THE COMPANY. DURING THE COURSE OF RECORDING STATEMENTS, A LIST CONTAINING 50 PERSONS WITH ADDRESSES FOR THE SHARE APPLICATION MONEY-WAS SUBMITTED TO THE ASSESSING OFFICER. FURTHER DETAILS REGARDING THE IDENTITY OF THE SHARE APPLICATIONS WERE GIVEN WITH REGARD TO PERSONS IN SERIAL NOS.1 TO 16. SUBSEQUENTLY, THE MANAGING DIRECTOR HAS SUBMITTED A LETTER DATED 19.1 2.2006 ADMITTING TO TAX A SUM OF RS.1,01,08,100/-. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE AR IN LETTER DATED 21.12.2006 SUBMI TTED THAT THEY COULD PRODUCE THE CONCERNED PERSONS' NAME IN S.NOS. 17 TO 50 FOR VERIFICATION: BUT THE ASSESSING OFFICER HAD REJECTE D THE OFFER WHICH IS EVIDENT FROM THE ASSESSMENT ORDER. THE PROMOTER HAS MOBILIZED CAPITAL FROM VARIOUS LOCAL PEOPLE BY HIS GOODWILL W HICH IS EARNED OVER SEVERAL YEARS. WE RELY ON THE DECISION OF PUNJ AB & HARYANA HIGH COURT IN THE CASE OF CLT VS MANDEEP SINGH 328 ITR 169 (P & H). WE ARE HEREWITH FILING THE CONFIRMATION LETTERS WIT H DETAILS OF ADDRESSES, WITH REFERENCE TO THE SHARE APPLICATIONS FROM S. NOS.17 TO 50. IT IS ALSO TO BE MENTIONED HERE THAT THE SHARE MONEY RECEIVED WAS CONVERTED INTO SHARES AND THE STATEMENT OF SHAR E CAPITAL ADVANCE RECEIVED AND ALLOTMENT OF SHARES AGAINST SUCH ADVAN CE ARE ENCLOSED HEREWITH. THE VARIOUS COURTS HAVE HELD THAT THE SHA RE CAPITAL ACCOUNT BY ADDED TO THE INCOME OF THE COMPANY. THE ASSESSIN G OFFICER HAS NOT CAUSED ANY NECESSARY ENQUIRIES NOR GIVEN US ANY OPPORTUNITY TO PRODUCE THE SHARE APPLICANTS FOR VERIFICATION. UNLE SS CORROBORATIVE EVIDENCES WERE FOUND, THE ADDITION CANNOT BE MADE. THE ASSESSING OFFICER HAS VERIFIED ONLY PART OF THE CREDITORS AND BALANCE WAS OMITTED FOR THE REASON THAT THE CREDITS APPEARING IN S.NOS. 17 TO 50 WAS ADMITTED AS INCOME IN THE STATEMENT RECORDED DURING THE COURSE' OF SURVEY. SO, THE ADMISSION OF THE ASSESSEE IS A PIEC E OF EVIDENCE. HOWEVER, SUBSEQUENTLY, THE ASSESSEE PROVIDED ALL TH E DETAILS WHICH DEMONSTRATED THAT THE SHARE APPLICATIONS ARE GENUIN E AND MONEY WAS RECEIVED FROM THEM. 8. THE CIT(A), AFTER CONSIDERING THE ABOVE SUBMISSIONS , CONFIRMED THE ADDITION TO THE EXTENT OF ` 26,63,100/- AND DELETED THE ADDITION OF ` 37,17,000/- FOR THE REASONS STATED IN HIS ORDER. I.T.A.NO.1742 & 1814/12 :- 5 -: 9. THE A.R OF THE ASSESSEE ARGUED THAT IN THE CASE OF CIT VS STELLAR INVESTMENTS, 251 ITR 263(S.C.), IT WAS HELD BY THE HON'BLE SUPREME COURT THAT EVEN FOR THE SAKE OF ARGUMENT, W ITHOUT ADMITTING, IT IS ASSUMED THAT THE SUBSCRIPTIONS TO THE INCREAS ED SHARE CAPITAL WERE NOT GENUINE, UNDER NO CIRCUMSTANCES THE AMOUNT OF S HARE CAPITAL COULD BE REGARDED AS UNDISCLOSED INCOME OF THE COMPANY. 10. ON THE OTHER HAND, THE CIT/DR SUBMITTED THAT THE HO N'BLE DELHI HIGH COURT IN THE CASE OF CIT VS M/S NOVA PRO MOTERS & FINLEASE(P) LTD, [2012] 342 ITR 169, HAS HELD THAT THE TRIBUNAL ERRED IN LAW IN HOLDING THAT THE ASSESSING OFFICER OUGHT TO HAVE PROVED THAT THE MONIES EMANATED FROM THE COFFERS OF THE ASSESSE E-COMPANY AND CAME BACK AS SHARE CAPITAL. SECTION 68 PERMITS THE ASSESSING OFFICER TO ADD THE CREDIT APPEARING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IF THE LATTER OFFERS NO EXPLANATION REGARDING THE NATURE A ND SOURCE OF THE CREDIT OR THE EXPLANATION OFFERED IS NOT SATISFACTO RY. IT PLACES NO DUTY UPON HIM TO POINT TO THE SOURCE FROM WHICH THE MONE Y WAS RECEIVED BY THE ASSESSEE. 11. HE FURTHER RELIED ON THE DECISION OF THE HON'BLE DE LHI HIGH COURT IN THE CASE OF CIT VS M/S N.R PORTFOLIO PVT. LTD, IN I.T.A.NO. 134/2012, ORDER DATED 21.12.2012, WHEREIN IT WAS HE LD THAT THE COURT I.T.A.NO.1742 & 1814/12 :- 6 -: WAS CONSCIOUS OF THE VIEW TAKEN IN SOME OF THE PREV IOUS DECISIONS THAT THE ASSESSEE CANNOT BE FAULTED IF THE SHARE APPLIC ANTS DO NOT RESPOND TO SUMMONS AND THAT THE STATE OR REVENUE AUTHORITIE S HAVE THE WHEREWITHAL TO COMPEL ANYONE TO ATTEND LEGAL PROCEE DINGS. HOWEVER, THAT IS MERELY ONE ASPECT. AN ASSESSEES DUTY TO E STABLISH THAT THE AMOUNTS WHICH THE ASSESSING OFFICER PROPOSES TO ADD BACK, UNDER SECTION 68 ARE PROPERLY SOURCED, DOES NOT CEASE BY MERELY FURNISHING THE NAMES, ADDRESSES AND PAN PARTICULARS, OR RELYI NG ON ENTRIES IN A REGISTRAR OF COMPANIES WEBSITE. ONE MUST REMEMBER THAT IN ALL SUCH CASES, MORE OFTEN THAN NOT, THE COMPANY IS A PRIVAT E ONE, AND SHARE APPLICANTS ARE KNOWN TO IT, SINCE THEY ARE ISSUED O N PRIVATE PLACEMENT, OR EVEN REQUEST BASIS. IF THE ASSESSEE HAS ACCESS TO THE SHARE APPLICANTS PAN PARTICULARS, OR BANK ACCOUNT STATEM ENT, SURELY ITS RELATIONSHIP IS CLOSER THAN ARMS LENGTH. THE CIT/ DR SUBMITTED THAT IN THE PRESENT CASE ALSO THE ASSESSEE IS A PRIVATE LI MITED COMPANY AND SHARE APPLICATION MONEY WAS RECEIVED THROUGH PRIVAT E PLACEMENT AND THEREFORE, THE DECISION OF THE HON'BLE DELHI HIGH C OURT QUOTED ABOVE WAS APPLICABLE IN THE FACTS OF THE PRESENT CASE. 12. IN REPLY TO THIS, THE A.R OF THE ASSESSEE RELIED O N THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CAS E OF CIT VS VALUE I.T.A.NO.1742 & 1814/12 :- 7 -: CAPITAL SERVICES PVT. LTD, [2008] 307 ITR 334 WHERE IN IT WAS HELD THAT THE DEPARTMENT MUST SEE THAT THE INVESTMENT MADE BY THE SUBSCRIBERS ACTUALLY EMANATED FROM COFFERS OF THE ASSESSEE TO BE TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE ACT. 13. THE A.R OF THE ASSESSEE ALSO RELIED ON THE DECISI ON OF THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF ANNAI WIND FARMS INDIA P. LTD VS DEPARTMENT OF INCOME TAX, IN I.T.A.NO. 39 4 & 395/MDS/2012, ORDER DATED 9.7.2012, AND SUBMITTED T HAT THE TRIBUNAL IN PARA 6 OF ITS ORDER HAS STATED THAT PERUSAL OF T HE ORDERS OF THE LOWER AUTHORITIES SHOWS THAT AS AGAINST THE TOTAL APPLICA TION MONEY ` 49,94,000/- RECEIVED BY THE ASSESSEE, THE ASSESSIN G OFFICER WAS ABLE TO VERIFY THE SOURCE/INVESTORS TO THE TUNE OF ` 24,92,000/-. AS PER THE ALLEGED ADMISSION OF THE ASSESSEE, SOURCE OF INVES TMENT TO THE TUNE OF ` 25,02,000/- COULD NOT BE EXPLAINED, THEREFORE, OFF ERED FOR ADDITION UNDER THE PROVISIONS OF SECTION 68 OF THE ACT. THE HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS P. LTD, 216 CTR 195, HAS HELD THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE-COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GI VEN TO THE ASSESSING OFFICER, THEN THE DEPARTMENT IS FREE TO P ROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW . THUS, THE I.T.A.NO.1742 & 1814/12 :- 8 -: AMOUNT RECEIVED BY THE ASSESSEE AS SHARE APPLICAT ION MONEY CANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE. THEREFORE, ADDITION UNDER SECTION 68 OF THE ACT CANNOT BE MADE ON THIS ACCOUNT AND CONFIRMED THE ORDER OF THE CIT(A) AND DISMISSED THE APPEAL OF THE REVENUE. HENCE, IT WAS HIS SUBMISSION THAT THE APP EAL OF THE ASSESSEE SHOULD BE ALLOWED AND THAT OF THE REVENUE SHOULD BE DISMISSED. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED T HE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAIL ABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSEE CLAIMED TO HAVE REC EIVED SHARE APPLICATION MONEY AMOUNTING TO ` 2.3 CRORES DURING THE YEAR UNDER CONSIDERATION. DURING THE SURVEY CONDUCTED U/S 13 3A OF THE ACT, THE ASSESSEE OFFERED ADDITIONAL INCOME OF ` 1,01,08,000/- ON ACCOUNT OF INSUFFICIENT DETAILS PROVIDED ON CERTAIN INVESTORS OF SHARE APPLICATION MONEY. HOWEVER, DURING THE COURSE OF ASSESSMENT PR OCEEDINGS, THE ASSESSEE OFFERED TO PRODUCE THE SHARE INVESTORS VID E ITS LETTER DATED 21.12.2006. HOWEVER, THE ASSESSING OFFICER REJECT ED THIS OFFER OF THE ASSESSEE AND BROUGHT TO TAX THE SHARE APPLICATION M ONEY OF ` 1,01,08,000/- ON THE BASIS OF THE ADMISSION MADE BY THE ASSESSEE I.T.A.NO.1742 & 1814/12 :- 9 -: DURING THE COURSE OF SURVEY ON 18.12.2006. BEING A GGRIEVED AGAINST THIS ORDER, THE ASSESSEE FILED APPEAL BEFORE THE C IT(A). 15. THE CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSE SSING OFFICER ON THE SUBMISSIONS OF THE ASSESSEE. THE A SSESSING OFFICER DEPUTED INCOME TAX INSPECTOR FOR VERIFICATION OF TH E SHARE APPLICANTS AT THE ADDRESSES PROVIDED BY THE ASSESSEE. IN THE REMAND REPORT DATED 3.7.2012 FILED BY THE ASSESSING OFFICER TO TH E CIT(A) IT WAS STATED THAT THE ENQUIRY REPORT DATED 2.7.2012 OF TH E ITI WAS VERIFIED WITH REGARD TO ADDITIONAL EVIDENCES FILED AND EXAMI NED BY HIM. AS PER THE ITIS ENQUIRY REPORT, 12 PARTIES WERE FOUND GEN UINE AND SHARE APPLICATION MONEY RECEIVED FROM THEM AMOUNTED TO ` 36,75,000/-. FURTHER, THE NUMBER OF INVESTORS WHO STATED THAT TH EY HAVE NOT INVESTED IN THE SHARE APPLICATION MONEY WERE 9 AND THE AMOUNT SHOWN AS RECEIVED FROM THEM WAS ` 26,63,100/-. FURTHER, WITH REGARD TO 13 PERSONS, THE ITI COULD NOT VERIFY THE DETAILS BECAU SE OF THE SPECIFIC LOCATION OF THE VILLAGE IN THE FOREST AREA AND THE AMOUNT SHOWN AS RECEIVED FROM THEM WAS ` 37,17,000/-. BASED ON THIS REMAND REPORT OF THE ASSESSING OFFICER, THE CIT(A) DELETED THE AD DITION OF ` 36,75,000/- RECEIVED FROM 12 PERSONS WHICH WAS FOUN D ON ENQUIRY BY ITI THAT THEY CONFIRMED HAVING INVESTED IN THE SHAR E CAPITAL OF THE I.T.A.NO.1742 & 1814/12 :- 10 -: COMPANY. THE CIT(A) ALSO DELETED THE ADDITION WITH RESPECT TO 13 PERSONS FROM WHOM THE AMOUNT OF ` 37,17,000/- WAS RECEIVED BECAUSE THE ITI HAS NOT VERIFIED THE SAME THEY BEIN G LOCATED IN REMOTE FOREST AREA ON THE GROUND THAT THE ASSESSEE FURNIS HED EVIDENCE ESTABLISHING THE IDENTITY OF SHAREHOLDERS WITH DETA ILS OF SHARE APPLICATIONS AND ALLOTMENT OF SHARES. THE CIT(A) C ONFIRMED THE ADDITION OF SHARE APPLICATION MONEY OF ` 26,63,100/- RECEIVED FROM 9 PERSONS WHO DENIED HAVING BEEN MADE ANY INVESTMENT IN SHARE CAPITAL OF THE COMPANY. THE ASSESSEE IS AGGRIEVED AGAINS T THIS ADDITION OF ` 26,63,100/- WHEREAS THE REVENUE IS AGGRIEVED AGAINS T DELETION OF ADDITION OF ` 37,17,000/- ON ACCOUNT OF SHARE APPLICATION MONEY RECEIVED FROM 13 PERSONS. 16. THE CIT/DR HAS RELIED ON THE DECISIONS OF THE HON'B LE DELHI HIGH COURT IN THE CASE OF CIT VS M/S NOVA PROMOTERS & FINLEASE (P) LTD. (SUPRA) AND CIT VS M/S N.R.PORTFOLIO PVT. LT D (SUPRA) SUBMITTING THAT IT HAS BEEN HELD BY THE HON'BLE HIGH COURT THA T MERELY FURNISHING THE NAMES, ADDRESSES AND PAN PARTICULARS OF THE SH ARE APPLICANTS OR RELYING ON ENTRIES IN A REGISTRAR OF COMPANIES WEBS ITE WAS NOT SUFFICIENT COMPLIANCE WITH THE PROVISIONS OF SECTIO N 68 OF THE ACT. THE ASSESSEE HAS TO ESTABLISH THE IDENTITY AND THE CRED ITWORTHINESS OF THE I.T.A.NO.1742 & 1814/12 :- 11 -: SHARE APPLICANTS TO THE SATISFACTION OF THE ASSESSI NG OFFICER AND THAT IT WAS NOT THE BURDEN OF THE ASSESSING OFFICER TO PROV E THAT THE MONIES EMANATED FROM THE COFFERS OF THE ASSESSEE-COMPANY A ND CAME BACK AS SHARE CAPITAL BEFORE MAKING ADDITION U/S 68 OF THE ACT ON ACCOUNT OF UNEXPLAINED SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE. 17. WE FIND THAT THE HON'BLE DELHI HIGH COURT VERY RECE NTLY IN THE CASE OF CIT VS GANESHWARI METAL PVT. LTD., VIDE ORDER DATED 21.1.2013, IN I.T.A.NO. 597/2012 HAS HELD AS UNDER: AS CAN BE SEEN FROM THE ABOVE EXTRACT, TWO TYPES O F CASES HAVE BEEN INDICATED. ONE IN WHICH THE ASSESSING OFF ICER CARRIES OUT THE EXERCISE WHICH IS REQUIRED IN LAW A ND THE OTHER IN WHICH THE ASSESSING OFFICER 'SITS BACK WITH FOLD ED HANDS' TILL THE ASSESSEE EXHAUSTS ALL THE EVIDENCE OR MATERIAL IN HIS POSSESSION AND THEN COMES FORWARD TO MERELY REJECT THE SAME ON THE PRESUMPTIONS. THE PRESENT CASE FALLS IN THE LATTER CATEGORY. HERE THE ASSESSING OFFICER, AFTER NOTING THE FACTS, MERELY REJECTED THE SAME. THIS WOULD BE APPA RENT FROM THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE AS SESSMENT ORDER TO THE FOLLOWING EFFECT: - 'INVESTIGATION MADE BY THE INVESTIGATION WING OF TH E DEPARTMENT C LEA RL Y SHOWED TH A T THIS WA S NOTHING BUT A SHAM TRANSACTION OF ACCOMMODATION ENT RY. TH E ASS E SSEE WAS ASKED TO EXPLAIN AS TO WHY THE SAID AMOUNT OF ` 1 ,1 1 , 50,000/- MAY NOT BE ADDED TO ITS INCOME. IN RESPONSE, THE ASSESSEE HAS SUBMITTED THAT THERE IS NO SUCH CREDIT IN THE B OOKS OF THE ASSESSEE. RATHER, THE ASSESSEE COMPANY HAS RECEIVED THE SHARE APPLICATION MONEY FOR ALLOTMENT OF ITS SHARE. IT WAS STATED THAT THE ACTUAL AMOUNT RECEIVED WAS ` 55 , 50,000/- AND NOT ` 1,11 , 50,000/- AS MENTIONED IN THE NOTICE. THE ASS E SSEE HAS FURNISHED DETAILS OF SUCH RECEIPTS AND THE CONT ENTION OF THE ASSESSEE IN RESPECT OF THE AMOUNT IS FOUND CORR ECT . AS I.T.A.NO.1742 & 1814/12 :- 12 -: SUCH THE UNEXPLAINED AMOUNT IS TO BE TAKEN AT ` 55,50,000/-. THE ASSESSEE HAS FURTHER TRIED TO EXPLAIN THE SOURC E OF THIS AMOUNT OF ` 55,50,000/- BY FURNISHING COPIES OF SHARE APPLICATION MONEY, BALANCE SHEET, ETC. OF THE PARTI ES MENTIONED ABOVE AND AS S ERT E D THAT THE QUESTION OF ADDITION IN THE INCOME OF THE ASSESSEE DOES NOT A RI SE. THIS EXPLANATION OF THE ASSESSEE HAS BEEN DULY CONSIDERE D AND FOUND NOT ACCEPTABLE. THIS ENTRY REMAINS UNEXPLAINE D IN THE HANDS OF THE ASSESSEE AS HAS BEEN ARRIVED BY THE INVESTIGATION WING OF THE DEPARTMENT . AS SUCH ENTRIES OF ` 55,50,000/- RECEIVED BY THE ASSESSEE ARE TREATED AS AN UNEXPLAINED CA S H CREDIT IN THE HANDS OF THE ASSESSEE AND ADDED TO ITS INCOME. SINCE I AM SATISFI E D THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF I TS INCOME , PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) ARE BEING INITI ATED SEPARATELY . ' THE FACTS OF NOVA PROMOT E RS AND FINLEASE (P) LTD. (SUPRA) FALL IN THE FORM E R CATEGORY AND THAT IS WHY THIS COURT DECIDED IN FAVOUR OF THE REVENUE IN THAT CASE. HOWE V E R, THE FACTS OF THE PRESENT CASE ARE CLEARLY DISTINGUISHAB LE AND FALL IN THE SECOND CATEGORY AND ARE MORE IN LINE WITH FA CTS OF LOVELY EXPORTS (P) LTD. (SUPRA). THERE WAS A CLEAR LACK OF INQUIRY ON THE PART OF THE ASSESSING OFFICER ONCE T HE ASSESSEE HAD FURNISHED ALL THE MAT E RIAL WHICH WE HAVE ALREADY REFERRED TO ABOVE. IN SUCH AN EVENTUALITY NO ADDITION CAN BE MADE UNDER SECTION 68 OF THE ACT . CONSEQUENTLY, THE QU E STION IS ANSWERED IN THE NEGATIVE. THE DECISION OF THE TRIBU NAL IS CORRECT IN L A W. TH E APPEAL IS DISMISSED. 18. WE FIND THAT IN SO FAR AS THE ISSUE OF ` 37,17,000/- RECEIVED AS SHARE APPLICATION MONEY FROM 13 PERSONS IS CONCE RNED, THE FACTS OF THE ASSESSEES CASE ARE IDENTICAL TO THE SAID DECI SION OF THE HON'BLE DELHI HIGH COURT. HEREIN ALSO THE ASSESSEE HAS GI VEN THE NAMES AND I.T.A.NO.1742 & 1814/12 :- 13 -: ADDRESSES OF 13 SHARE APPLICANTS FROM WHOM THE ASS ESSEE RECEIVED SHARE APPLICATION MONEY OF ` 37,17,000/-. THE ASSESSING OFFICER DID NOT ALLOW THE ASSESSEE TO PRODUCE THE SHARE APPLIC ANTS WHEN THE ASSESSEE WANTED TO PRODUCE THEM BEFORE HIM. HE CHO SE TO SEND ITI IN THE REMAND PROCEEDINGS TO VERIFY THE SAME. THE ITI DID NOT VISIT THE ADDRESSES OF THE SHARE APPLICANTS BECAUSE THEY WERE IN REMOTE FOREST AREA. THUS, NO MATERIAL HAS BEEN BROUGHT ON RECORD AFTER VERIFICATION BY THE ASSESSING OFFICER TO SHOW THAT THE SHARE APP LICATION MONEY RECEIVED BY THE ASSESSEE WAS NOT GENUINE. THEREFO RE, WE DO NOT FIND ANY GOOD AND JUSTIFIABLE REASON TO INTERFERE WITH T HE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF ` 37,17,000/-. HENCE, THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 19. WITH REGARD TO THE APPEAL OF THE ASSESSEE IN RESPE CT OF ADDITION OF ` 26,63,100/- RELATING TO SHARE APPLICATION BY 9 PER SONS, THE MAIN CONTENTION OF THE ASSESSEE IS THAT THE A SSESSEE WAS NEVER ALLOWED ANY OPPORTUNITY TO CROSS EXAMINE THE PERSON S WHO DENIED HAVING MADE THE SHARE APPLICATION NOR WAS ALLOWED A NY OPPORTUNITY OF HEARING IN THIS RESPECT BY THE ASSESSING OFFICER BE FORE SUBMITTING THE REMAND REPORT. HE POINTED OUT FROM THE REMAND REPO RT THAT THE ASSESSING OFFICER OBSERVED THAT THE COMMISSIONER OF INCOME TAX I.T.A.NO.1742 & 1814/12 :- 14 -: (APPEALS)-I IN HIS LETTER IN I.T.A.NO. 81/09-10, DA TED 08/12/2010 ENCLOSING THE ADDITIONAL EVIDENCES IN SUPPORT OF A SSESSEES CLAIM AND DIRECTED THIS OFFICE TO EXAMINE THE GENUINENESS OF THE SAME, AFTER GIVING AN OPPORTUNITY TO THE ASSESSEE. ACCORDINGL Y, THE ASSESSEE WAS REQUESTED TO APPEAR BEFORE THIS OFFICE AND THE CASE WAS POSTED FOR HEARING ON 05/07/2011. IN RESPONSE TO THIS OFFICE LETTER DATED 24/06/2011, SHRI VARADARAJAN, CA, THE AUTHORISED RE PRESENTATIVE OF THE ASSESSEE APPEARED ON 08/06/2011 AND THE CASE W AS DISCUSSED. 20. THE ASSESSING OFFICER ALLOWED OPPORTUNITY OF HEARIN G TO THE ASSESSEE ON 5.7.2011. FURTHER, THE ASSESSING OFFIC ER NOTED FROM THE REPORT OF THE ITI DATED 2.7.2012 THAT 9 OF THE SHAR E APPLICANTS DENIED HAVING MADE SHARE APPLICATION INVESTMENT WITH THE A SSESSEE-COMPANY. AFTER THIS ITI REPORT, NEITHER THE ASSESSING OFFICE R INFORMED THE ASSESSEE THE OUTCOME OF THE ITIS VERIFICATION NOR ALLOWED ANY OPPORTUNITY OF HEARING TO THE ASSESSEE NOR ALLOWED ANY OPPORTUNITY TO CROSS EXAMINE SUCH SHARE APPLICANTS AND SUBMITTED H IS REMAND REPORT DRAWING AN ADVERSE INFERENCE AGAINST THE ASSESSEE. THUS, THE ASSESSEE WAS DENIED PROPER OPPORTUNITY OF SHOWING T HAT THE ADVERSE INFERENCE DRAWN AGAINST IT WAS NOT PROPER AND THIS WAS IN VIOLATION OF I.T.A.NO.1742 & 1814/12 :- 15 -: THE PRINCIPLES OF NATURAL JUSTICE. THE A.R CONTEND ED THAT THE ADDITION SO MADE SHOULD HAVE BEEN DELETED BY THE CIT(A). 21. ON THE OTHER HAND, THE CIT/DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES AND SUBMITTED THAT IN ANY CASE TH E ORDER SHOULD NOT BE ANNULLED AND IF ANY IRREGULARITY HAS TAKEN PLACE THEN THE DEPARTMENT SHOULD BE ALLOWED AN OPPORTUNITY TO REDO THE ASSESSMENT AFTER REMOVING THE IRREGULARITY. 22. WE FIND THAT THE HON'BLE SUPREME COURT IN THE CASE OF POORAN MALL & SONS, 96 ITR 390(S.C), HAS HELD THAT NOT FOLLOWING THE PROCEDURAL PROVISIONS LIKE ALLOWING CROSS EXAMINATI ON WILL NOT MAKE AN ASSESSMENT NULL AND VOID. AT BEST, IT CAN BE AN IR REGULARITY LIABLE TO BE CURED AND IN SUCH A CASE THE ASSESSMENT COULD BE SE T ASIDE TO BE REDONE. AN ADDITION MADE DOES NOT CEASE TO BE AN A DDITION MERELY BY REASONS FOR WANT OF CROSS EXAMINATION. IT WILL BE A PROCEEDING LIABLE TO BE CHALLENGED AND CORRECTED. 23. WE, THEREFORE, SET ASIDE THE ORDERS OF THE LOWER AU THORITIES ON THIS ISSUE AND REMAND THE MATTER BACK TO THE FIL E OF THE ASSESSING OFFICER FOR ADJUDICATION OF THE ISSUE AFRESH AFTER PROVIDING ALL THE MATERIALS AVAILABLE ON RECORD TO THE ASSESSEE AND AFTER ALLOWING SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO BRING ON RECORD THE MATERIALS I.T.A.NO.1742 & 1814/12 :- 16 -: IT WISHES AND AFTER HEARING THE ASSESSEE. THUS, T HE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 24. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S ALLOWED FOR STATISTICAL PURPOSES WHEREAS THE APPEAL OF THE REVE NUE IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 08 TH OF MARCH, 2013, AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED:8 TH MARCH, 2013 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR