The ACIT- 1(2), Bhopal V. M/s People's General Hospital Pvt. Ltd., Bhopal

ITA 181/IND/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74772 (ITAT-INDORE)
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 04-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N D
• Keywords: Reopening of assessment; Unexplained cash credit; Gift; Income from undisclosed sources; Salary income; Share purchase agreement; Rule of consistency; Source of fund; Question of law; Capital receipt; Onus to prove
• Section: 143(3); 142(1); 115JB; 133(6); 131; 68; 37

Judgement Text

1 INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.243/IND/2013 ASSESSMENT YEAR: 2002-03 ACIT-2(1), BHOPAL .....APPELLANT 7 V/S. PEOPLES GENERAL HOSPITAL PVT. LTD., 6, MALVIYA NAGAR, BHOPAL (PAN AACCP 0310 R) .....RESPONDENT IT(SS)A NOS.78 TO 81/IND/2013 ASSESSMENT YEARS: 2004-05 TO 2007-08 ALONG WITH ITA NO.181/IND/2013 ASSESSMENT YEAR: 2006-07 ACIT-2(1), BHOPAL .....APPELLANT V/S. PEOPLES GENERAL HOSPITAL PVT. LTD., 6, MALVIYA NAGAR, BHOPAL (PAN AACCP 0310 R) .....RESPONDENT 2 AND, IT(SS)A NO.107/IND/2013 & ITA NO.244/IND/2013 ASSESSMENT YEARS: 2009-10 & 2010-11 ACIT-1(2), BHOPAL .....APPELLANT V/S. PEOPLES INTERNATIONAL & SERVICE PVT. LTD., PROJECT OFFICE, PEOPLES CAMPUS, KAROND BHANPUR BYE PASS, RASLAKHEDI, BHOPAL (PAN AAECP 7746 B) .....RESPONDENT REVENUE BY SMT. MRIDULA BAJPAI ASSESSEES BY S/SHRI H.P. VERMA & N.D. PATWA DATE OF HEARING 01.1.2014 DATE OF PRONOUNCEMENT 27.1.2014 ORDER PER JOGINDER SINGH, JM THE REVENUE HAS PREFERRED THESE EIGHT APPEALS AGAINST THE ORDERS DATED 14.2.2013, 28.1.2013 (CONSOLIDATED O RDER) AND 25.2.2013 (CONSOLIDATED ORDER) OF LD. FIRST APPELL ATE AUTHORITY, BHOPAL. IN ALL THE YEARS, COMMON GROUNDS HAVE BEEN TAKEN BY THE REVENUE WITH REGARD TO THE ADDITION OF UNEXPLAINED CASH CREDIT/SHARE CAPITAL RECEIVED FROM M/S ALLIANCE INDUSTRIES LIMITED, ADDED U/S 68 OF THE I.T . ACT. 3 AS COMMON GROUNDS ARE INVOLVED IN THESE APPEALS, WE HA VE HEARD THESE APPEALS TOGETHER AND NOW DISPOSE OF THE SAM E BY THIS CONSOLIDATED ORDER. 2. DURING HEARING OF THESE APPEALS, WE HAVE HEARD SMT. MRIDULA BAJPAI, LD. CIT/DR AND SHRI H.P. VERMA ALONG WIT H SHRI N.D. PATWA, LD. COUNSEL FOR THE ASSESSEE. THE CR UX OF ARGUMENTS ADVANCED BY THE LD. CIT/DR IS THAT ADDITION WAS RIGHTLY MADE BY THE ASSESSING OFFICER AS THE IDEN TITY, CREDITWORTHINESS OF THE SUBSCRIBING COMPANY WAS NOT ESTABLISHED. IT WAS PLEADED THAT THE LD. CIT(A) DELETED THE ADDITIONS WITHOUT ASSIGNING ANY COGENT REASON AND THE EVIDENCE GATHERED BY THE ASSESSING OFFICER. ON THE O THER HAND, THE LD. COUNSEL FOR THE ASSESSEE SHRI H.P. VERM A STRONGLY DEFENDED THE IMPUGNED ORDER BY SUBMITTING THAT THE FACTUAL MATRIX WAS DULY CONSIDERED BY THE LD. CIT( A) BY PASSING WELL REASON ORDERS. IT WAS ALSO CONTENDED THAT O N IDENTICAL FACTS, THE MATTER TRAVELLED TO THE HONBLE HI GH 4 COURT WHEREIN THE ORDERS OF THE LD. CIT(A) AS WELL AS OF THE TRIBUNAL WERE CONSIDERED AND THE TRIBUNAL ORDER WAS AFFIRMED BY THE HONBLE HIGH COURT VIDE ORDER DATED 27.6.2013, FOR WHICH, OUR ATTENTION WAS INVITED TO PAG ES 1 TO 12 OF THE PAPER BOOK AND PAGES 13 TO 116 TO THE ORD ER PASSED BY THE TRIBUNAL. BROADLY, IT WAS CONTENDED THAT THE FACTS ARE EXACTLY IDENTICAL, THEREFORE, NO OTHER VIEW I S PERMISSIBLE, MORE SPECIFICALLY WHEN THE ORDER OF THE TRIBUNAL HAS BEEN AFFIRMED BY HON'BLE HIGH COURT AND FOLLOWED BY THE LD. CIT(A). THIS FACTUAL MATRIX WAS NO T CONTROVERTED BY THE REVENUE WITH THE HELP OF ANY POS ITIVE MATERIAL. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL, AVAILABLE ON RECORD, AND ALSO GONE THROUGH THE ORDER OF THE HON'BLE HIGH COURT ALONG WITH THE ORDER OF THE TRIBUNAL. BEFORE COMING TO ANY CONCLUSION, WE ARE 5 REPRODUCING HEREUNDER THE RELEVANT PORTION OF THE OR DER OF THE TRIBUNAL DATED 31 ST JANUARY, 2011: THE ASSESSEE HAS PREFERRED THE APPEAL AGAINST THE O RDER OF LD. CIT(A)- I, BHOPAL, DATED 13.3.2009 FOR THE ASSESSMENT YEAR 2005-06 WHEREAS THE REVENUE HAS PREFERRED THE APPEAL AGAINST THE OR DER OF THE LD. CIT(A)-1, BHOPAL, DATED 27.4.2007 FOR THE ASSESSMEN T YEAR 2004-05. IN BOTH THE YEARS, COMMON GROUNDS HAVE BEEN TAKEN B Y THE REVENUE AND THE ASSESSEE WITH REGARD TO THE ADDITION OF SHA RE CAPITAL RECEIVED FROM M/S ALLIANCE INDUSTRIES LIMITED. AS COMMON GR OUNDS ARE INVOLVED IN BOTH THE APPEALS, WE HAVE HEARD THE APPEALS TOGE THER AND NOW DISPOSE OF THE SAME BY THIS CONSOLIDATED ORDER. 2. THE FACTS, IN BRIEF, ARE THAT DURING THE YEAR, U NDER CONSIDERATION, THERE WAS INCREASE IN THE SHARE CAPITAL AS WELL AS SHARE PREMIUM. M/S ALLIANCE INDUSTRIES LIMITED, A FOREIGN COMPANY, HAS MADE THE INVESTMENT IN SHARES OF THE ASSESSEE COMPANY IN THE EARLIER YEAR AND ALSO DURING THE YEAR UNDER CONSIDERATION. IN THE AS SESSMENT YEAR 2001-02 THERE WAS ADDITION OF RS.61.92 LACS IN SHAR E CAPITAL ACCOUNT AND RS. 309.60 LACS IN SHARE PREMIUM ACCOUNT OUT OF THIS INVESTMENT BY M/S. ALIANCE INDUSTRIES LIMITED WAS RS. 464.71 L ACS. UNDER THE SCRUTINY, ASSESSMENT ORDER WAS FRAMED U/S 143(3) AN D THE ENTIRE INVESTMENT WAS ACCEPTED BY THE DEPARTMENT. FOR THE ASSESSMENT YEAR 2002-03 SHARE CAPITAL OF RS. 94.78 LACS WAS INTRODU CED ALONG WITH THE SHARE PREMIUM OF RS.853.03 LACS OUT OF THIS INVEST MENT BY M/S. ALIANCE INDUSTRIES LIMITED WAS RS. 947.81 LAS AND T HE RETURN WAS ACCEPTED U/S 143(1) OF THE ACT. IN THE ASSESSMENT YEAR 2003-04 SIMILAR ADDITION OF SHARE CAPITAL WAS THERE TO THE TUNE OF RS.212.75 LACS AND SHARE PREMIUM OF RS. 19.14 LACS. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE SHARE CAPITAL INTRODUCED BY M/S ALLIANCE INDUSTRIES LIMITED AMOUNTING TO RS. 212.75 LCAS AND THE ADDITI ON WAS MADE. IN AN APPEAL FILED BEFORE THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS), THE ENTIRE ADDITION IN RESPECT OF SHARE CAPITAL INTRODUCED BY M/S ALLIANCE INDUSTRIES LIMITED WAS DELETED AND TH E ORDER OF THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) WAS CON FIRMED BY THE TRIBUNAL BY REJECTING THE REVENUES APPEAL. IN THE ASSESSMENT YEAR 2004-05 THERE WAS ADDITION OF SHARE CAPITAL AND SHA RE PREMIUM. IN THE ASSESSMENT FRAMED U/S 143(3) THERE WAS ADDITION OF RS.1890.11 LACS IN RESPECT OF SHARE CAPITAL RECEIVED FROM M/S ALLIANCE INDUSTRIES LIMITED. IN AN APPEAL FILED BEFORE THE LEARNED COM MISSIONER OF INCOMETAX (APPEALS), THE LEARNED COMMISSIONER OF IN COMETAX (APPEALS) ALLOWED THE APPEAL OF THE ASSESSEE AND TH E ADDITION WAS 6 DELETED IN FULL. IN THE ASSESSMENT YEAR 2005-06 TH ERE WAS ADDITION OF SHARE CAPITAL OF RS.4250.47 LACS. IN THE SCRUTINY ASSESSMENT FRAMED U/S 143(3) OF THE ACT THE ASSESSING OFFICER HAS MAD E THE ADDITION OF RS.4250.47 LACS IN RESPECT OF SHARE CAPITAL INTRODU CED BY M/S ALLIANCE INDUSTRIES LIMITED. IN AN APPEAL FILED BEFORE THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS), ADDITION SO MADE BY THE ASS ESSING OFFICER WAS CONFIRMED BY THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS). BEFORE US, THE REVENUE IS IN APPEAL FOR THE ASSESSM ENT YEAR 2004-05 AGAINST DELETION OF ADDITION ON ACCOUNT OF SHARE CA PITAL FROM M/S ALLIANCE INDUSTRIES LIMITED WHEREAS FOR THE ASSESSM ENT YEAR 2005-06 THE ASSESSEE IS IN APPEAL WITH RESPECT TO THE ADDIT ION CONFIRMED BY THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) FOR THE SHARE CAPITAL RECEIVED FROM M/S ALLIANCE INDUSTRIES LIMITED. IT IS VERY PERTINENT TO MENTION HERE THAT THE ISSUE WITH REGARD TO GENUINEN ESS OF SHARE CAPITAL INTRODUCED BY M/S ALLIANCE INDUSTRIES LIMIT ED WAS FULLY EXAMINED BY THE TRIBUNAL IN ITA NO. 57/IND/2007 VID E ORDER DATED 28.9.2007 FOR THE ASSESSMENT YEAR 2003-04, WHEREIN THE ENTIRE ADDITION MADE IN RESPECT OF SHARE CAPITAL RECEIVED FROM M/S ALLIANCE INDUSTRIES LIMITED WAS HELD TO BE NOT JUSTIFIED. TH E TRIBUNAL HAS EXAMINED NOT ONLY THE IDENTITY OF M/S ALLIANCE INDU STRIES LIMITED BUT ALSO THE GENUINENESS OF THE TRANSACTION OF INTRODUC TION OF SHARE CAPITAL AND ALSO CREDIT WORTHINESS OF M/S ALLIANCE INDUSTRI ES LIMITED. AFTER DISCUSSING VARIOUS JUDICIAL PRONOUNCEMENTS IN THIS REGARD, IT WAS HELD THAT THE IDENTITY OF M/S ALLIANCE INDUSTRIES LIMITE D IS FULLY ESTABLISHED. AS THE SHARE CAPITAL WAS INTRODUCED THROUGH BANKING CHANNEL, AFTER EXAMINING ALL THE DOCUMENTARY EVIDENCE, THE TRIBUNA L FOUND THAT THE TRANSACTION OF SHARE CAPITAL WAS GENUINE AND THE SH ARE APPLICANT WAS HAVING CREDIT WORTHINESS TO CONTRIBUTE THE AMOUNT O F SHARE CAPITAL. SINCE THE TRANSACTION OF SHARE CAPITAL WAS BY THE S AME PARTY I.E. M/S ALLIANCE INDUSTRIES LIMITED, WHICH HAS ALREADY BEEN EXAMINED IN DETAIL BY THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR IMME DIATELY PRECEDING ASSESSMENT YEAR 2003-04 AND THE FACTS AND CIRCUMSTA NCES DURING THE YEARS UNDER CONSIDERATION, ARE IN PARI MATERIAL, WE , RESPECTFULLY FOLLOW THE DECISION OF THE TRIBUNAL WITH RESPECT TO THE ID ENTITY, GENUINENESS AND CREDIT WORTHINESS OF M/S ALLIANCE INDUSTRIES LI MITED, INTRODUCING THE SHARE CAPITAL DURING THE ASSESSMENT YEARS 2004- 05 AND 2005-06 UNDER OUR CONSIDERATION. 2.1 AS THE APPEAL OF THE ASSESSEE WAS ARGUED FIRST, THEREFORE, WE TEND TO TAKE UP THIS APPEAL FIRST FOR DISPOSAL. DURING H EARING OF THIS APPEAL, WE HAVE HEARD SHRI H.P. VERMA ALONG WITH SHRI ASHIS H GOYAL & SHRI GIRISH AGRAWAL, LD. COUNSEL FOR THE ASSESSEE AND SH RI K.K. SINGH, LD. CIT DR. AT THE OUTSET, IT WAS CLAIMED BY THE LD. CO UNSEL FOR THE ASSESSEE THAT THE IMPUGNED ISSUE IS COVERED BY THE DECISION OF THE 7 TRIBUNAL DATED 28.9.2007 (ORDER IN ITA NO.57/IND/20 07). IT WAS ALSO POINTED OUT THAT EVEN THE DIRECTORATE OF ENFORCEMENT CONDUCTED INQUIRY LONG BACK AGAINST THE ASSESSEE AND SINCE TH E ASSESSEE DID NOT GET ANY COMMUNICATION THEREAFTER IN THIS REGARD, IT SEEMS THAT NOTHING ADVERSE WAS FOUND AGAINST THE ASSESSEE. A PLEA WAS ALSO RAISED THAT ALL THE TRANSACTIONS ARE THROUGH BANKING CHANNEL AN D IT IS NOT A CASE OF CASH ENTRY. TO PROVE THE CREDIT WORTHINESS, A CERT IFICATE WAS ALSO FILED BY THE AUDITOR/CERTIFIED PUBLIC ACCOUNTANT M/S FAIR A & ASSOCIATES, 21, HINTON AVENUE, UK, BEFORE THE LOWER AUTHORITIES, WH ICH DULY CERTIFIES FINANCIAL CAPACITY OF M/S M/S ALLIANCE INDUSTRIES L IMITED TO INVEST IN THE SHARES OF THE ASSESSEE COMPANY. THE LEARNED AR FUR THER CONTENDED THAT BALANCE-SHEET OF M/S ALLIANCE INDUSTRIES LIMIT ED AS ON 30.6.2005 WAS ALREADY PROCURED BY THE DEPARTMENT IN THE SUBSE QUENT YEAR ASSESSMENT PROCEEDINGS AND THE SAME IS IN THEIR PRO VISION BUT THE DEPARTMENT HAS NOT FURNISHED THE COPY OF THE SAME B EFORE THE TRIBUNAL. THE LEARNED AR WAS DIRECTED TO FILE THE SAME BEFORE THE BENCH. IT WAS SUBMITTED THAT THE ASSESSEE HAS PROV ED THE ONUS LAY UPON IT AND THE ASSESSEE IS NOT SUPPOSED TO PROVE T HE SOURCE OF SOURCE. IT WAS FOR THE DEPARTMENT TO PROVE OTHERWIS E. THE SUSTENANCE OF ADDITION BY THE LD. FIRST APPELLATE AUTHORITY WA S STRONGLY DISPUTED BEING THE AMOUNT IN THE FORM OF SHARE CAPITAL/SHAR E PREMIUM. IT WAS PLEADED THAT THE ADDITION OF THE IMPUGNED AMOUNT AS UNEXPLAINED CREDIT U/S 68 IS QUITE UNJUSTIFIED. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT IT IS A CLEAR DEPARTURE FROM THE EARLIER STAND AND THE BANK ACCOUNT OF THE INVESTOR WAS NEVER CONS IDERED. IT WAS PLEADED THAT THE FACTS IN THE PRESENT APPEAL ARE CL EARLY IDENTICAL TO EARLIER YEARS EXCEPT THAT AT THE APPELLATE STAGE, T HE ASSESSING OFFICER BROUGHT THE BANK A/C OF THE INVESTOR COMPANY TO THE NOTICE OF THE LD. CIT(A). IT WAS ALSO PLEADED THAT KEEPING IN VIEW TH E PRINCIPLE OF JUDICIAL DISCIPLINE, THE LD. FIRST APPELLATE AUTHOR ITY IS NOT SUPPOSED TO CRITICIZE THE DECISION OF THE HIGHER APPELLATE AUTH ORITY, FOR WHICH RELIANCE WAS PLACED UPON THE DECISION OF THE HONBL E CALCUTTA HIGH COURT IN THE CASE OF VOEST-ALPINE IND. GMBH V. ITO; 246 ITR 745 (CAL) AND OF THE HONBLE SUPREME COURT IN THE CASE OF KHA LID AUTOMOBILE VS. UNION OF INDIA (1995) [4 SCC (SUPPL.) 653]. 3. ON THE OTHER HAND, THE LEARNED CIT DR CONTENDED THAT NO DISRESPECT HAS BEEN SHOWN BY THE LEARNED FIRST APPE LLATE AUTHORITY TO THE ORDER OF THE HIGHER FORUM/TRIBUNAL. THE AMOUNT INVOLVED IN THE PRESENT APPEAL CAME FROM A FOREIGN INVESTOR NAMED M /S ALLIANCE INDUSTRIES LIMITED, HAVING ITS REGISTERED OFFICE AT GIBRALTAR AND MANAGEMENT HEAD OFFICE AT SHARJAH. IT WAS CONTENDE D THAT THE ASSESSEE NEVER PRODUCED THE BALANCE SHEET OF THE SA ID COMPANY. IT WAS POINTED OUT THAT IT IS A WELL KNOWN FACT THAT T HERE IS A PROLIFERATION 8 OF SHELL COMPANIES IN THE COUNTRIES KNOWN AS TAX HE AVENS AND THESE COMPANIES DO NOT HAVE THE MEANS TO LEND MONEY. THE IMPUGNED ORDER WAS DEFENDED. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON FILE. BRIEF FACTS ARE THAT THE ASSESSE E IS A PRIVATE LIMITED COMPANY INCORPORATED ON 25.5.1999 VIDE REGISTRATION NO. 13543 AND IS REGULARLY ASSESSED TO TAX. DURING THE YEAR UNDER C ONSIDERATION THE ASSESSEE FILED THE RETURN SHOWING INCOME OF RS. 37, 71,314/-. ADMITTEDLY, THE ACCOUNTS OF THE ASSESSEE ARE REGULA RLY AUDITED U/S 44AB OF THE ACT AS WELL AS UNDER THE COMPANIES ACT, 1956. THE STATEMENTS LIKE ANNUAL RETURNS, SHARE ALLOTMENT IN FORM NO. 2, AUDITED ACCOUNTS, ETC. WERE FILED BEFORE THE REGISTRAR OF C OMPANIES AS PER THE REQUIREMENTS OF THE COMPANIES ACT. ONE FOREIGN INVE STOR NAMELY ALLIANCE INDUSTRIES LIMITED HAVING ITS REGISTERED O FFICE AT GIBRALTAR AND MANAGEMENT OFFICE AT SHARJAH, UAE, INVESTED IN THE S HARE CAPITAL OF THE ASSESSEE COMPANY. THE ASSESSEE OBTAINED NECESSA RY PERMISSION FROM RBI/OTHER AUTHORITIES WHO LOOK AFTER THE FOREI GN INVESTMENT SECTION AND AFTER RECEIVING THE SHARE MONEY FROM TH E FOREIGN INVESTOR COMPANY, NECESSARY INTIMATION WAS GIVEN TO RBI AND OTHER RELEVANT AUTHORITIES. THE SHARE CAPITAL WAS RECEIVED THROUG H STATE BANK OF INDIA/BANKING CHANNEL FOR WHICH A CERTIFICATE WAS I SSUED BY SBI TO THE EFFECT THAT ACCOUNT OF THE ASSESSEE IS CREDITED BEI NG THE AMOUNT OF FOREIGN CURRENCY REMITTANCE, ORDERED BY ALLIANCE IN DUSTRIES LIMITED. A CONFIRMATION TO THIS EFFECT WAS ALSO OBTAINED FROM ALLIANCE INDUSTRIES LIMITED AND WAS DULY SUBMITTED BEFORE THE REVENUE A UTHORITIES. A CERTIFICATE FROM STANDARD CHARTERED BANK EVIDENCING THAT THE MONEY WAS TRANSFERRED FROM CURRENT ACCOUNT NO. 0257019601 OF M/S. ALLIANCE INDUSTRIES LIMITED AND ALSO A CERTIFICATE FROM THE AUDITOR M/S. FARIA AND ASSOCIATES, 21, HINTON AVENUE, HOUNSLOW, MIDDLE SEX, TW4 6AP, UK, REGISTERED ACCOUNTANT, STATING FINANCIAL CAPACI TY OF THE INVESTOR COMPANY WAS ALSO FILED BEFORE THE AO. THE STAND OF THE REVENUE IS THAT THE CREDITWORTHINESS/FINANCIAL CAPACITY OF THE INVESTOR IS NOT PROVED, CONSEQUENTLY, THE ENTIRE MONEY RECEIVED AS SHARE PREMIUM AND SHARE ALLOTMENT OF RS.42,50,47,744/- WAS ADDED AS UNEXPLAINED CREDIT UNDER SECTION 68 OF THE ACT, WHICH WAS CONFI RMED BY THE LEARNED CIT(A) AND IS UNDER CHALLENGE BEFORE THE TRIBUNAL. 5. THE STAND OF THE ASSESSEE IS THAT THE FOLLOWING DOCUMENTS/INFORMATION SUBMITTED BY THE ASSESSEE COM PANY ESTABLISHES THE CREDIT WORTHINESS OF THE INVESTORS :- 9 1. CERTIFICATE DATED 30.11.1998 ISSUED BY THE NOTAR Y PUBLIC, GIBRALTAR CERTIFYING THE DOCUMENTS OF THE COMPANY, M/S ALLIAN CE INDUSTRIES LIMITED. 2. CERTIFICATE FROM GOVERNOR AND COMMANDER IN CHIEF OF GIBRALTAR CERTIFYING THAT THE DOCUMENTS SIGNED BY MR. E.C. ELLU R, THE NOTARY PUBLIC ARE CORRECT. 3. THE ACCOUNT OF THE FOREIGN INVESTOR OF THE ASSES SEE IS ALSO KYC (KNOW YOUR CUSTOMER) CERTIFIED, WHEREIN THE BANKERS OF THE FOREIGN INVESTORS CONFIRMED TO ASSESSEES BANK THAT THE FOR EIGN INVESTOR HAS ITS ACCOUNTS WITH THEM FOR OVER 9 YEARS AND THERE IS NO THING ADVERSE AGAINST THEM. 4. CERTIFICATE ISSUED BY SHRI SUDHIR CHOPRA, DIRECT OR M/S ALLIANCE INDUSTRIES LIMITED STATING THE STATUS OF THE SHAREH OLDERS AND THE COMPANY. 5. DURING THE ASSESSMENT PROCEEDINGS, AS DESIRED BY AO, THE ADDRESS IN INDIA OF THE DIRECTOR OF FOREIGN INVESTOR M/S AL LIANCE INDUSTRIES LTD., WERE PROVIDED WHICH SUBSTANTIATES THE BONA FIDES OF THE INVESTORS. 6. CONFIRMATION OF INVESTMENT DURING THE F.Y. 2004- 05 BY M/S ALLIANCE INDUSTRIES LIMITED 7. LETTER DATED 19.09.2007 OF FARIA & ASSOCIATES, A UDITORS OF THE FOREIGN INVESTOR OF THE ASSESSEE BASED IN UK WHO IS UK REGISTERED ACCOUNTANT, CONFIRMING THAT THE INVESTMENT WAS FUND ED BY THE TRADING ACTIVITIES OF THE COMPANY, WITHOUT THE NEED FOR THE COMPANY TO SEEK EXTERNAL FUNDING AND WHICH IS REFLECTED IN THE BALA NCE SHEET OF THE COMPANY, ALTHOUGH THE DOCUMENT ALREADY FURNISHED BY THE ASSESSEE CLEARLY ESTABLISHED THIS ASPECT ALSO. 8. LETTER DATED 28.01.2008 OF M/S FARIA & ASSOCIATE S, AUDITORS OF THE INVESTOR COMPANY CERTIFYING THAT THE FOREIGN INVEST OR OF THE ASSESSEE HAD A BUSINESS TURNOVER OF 1055.076 MILLION US DOLL ARS AS ON 30 TH JUNE, 2005 AS PER THE CONFIRMATION PROVIDED AGAINST BY FARIA & ASSOCIATES, AUDITORS OF THE FOREIGN INVESTOR OF THE ASSESSEE BASED IN UK WHICH IS APPROXIMATELY EQUIVALENT TO INDIAN RUPE ES 5275 CRORES AND ON THE BASIS OF THIS INFORMATION THE PERCENTAGE OF INVESTMENT MADE BY THE FOREIGN INVESTOR IN THE ASSESSEE COMPAN Y BY WAY OF SHARE CAPITAL AND SHARE PREMIUM IS ONLY ABOUT 0.81%. 9. COPY OF CERTIFICATE FROM STATE BANK OF INDIA CON FIRMING THAT ALL THE REMITTANCES WERE ROUTED THROUGH THE ACCOUNT NO. 025 7019610 OF M/S ALLIANCE INDUSTRIES LIMITED WITH STANDARD CHARTERED BANK, DUBAI. 10. COPY OF CERTIFICATE ISSUED BY STANDARD CHARTERE D BANK, SHARJAH CONFIRMING THAT THE INVESTOR COMPANY M/S ALLIANCE I NDUSTRIES LIMITED HAS CURRENT ACCOUNT NO. 02570196101 WITH THEM. 11. CERTIFICATE OF INCORPORATION OF INVESTOR COMPAN Y, M/S ALLIANCE INDUSTRIES LIMITED 10 12. COPY OF BRIEF COMPANY PROFILE OF M/S ALLIANCE I NDUSTRIES LIMITED, UAE. 13. PERMISSION DATED 06.02.2004 GRANTED BY GOVERNME NT OF INDIA, MINISTRY OF FINANCE, DEPARTMENT OF ECONOMICS AFFAIRS FIPB UNIT REGARDING APPLICATION FOR FOREIGN COLLABORATION (ST A REGD. NO. FCI 503 DATED 01.01.2004) 14. COPY OF FORM FC-GPR SUBMITTED TO RESERVE BANK O F INDIA ALONGWITH CERTIFICATE ISSUED FROM STATE BANK OF IND IA, COMMERCIAL BRANCH, BHOPAL, REGARDING FOREIGN INWARD REMITTANCE . 15. COPY OF SHARE CERTIFICATES ISSUED BY THE ASSESS EE COMPANY IN THE NAME OF M/S ALLIANCE INDUSTRIES LIMITED. 16. COPY OF RETURN OF ALLOTMENT OF SHARES IN FORM N O. 2 SUBMITTED BY THE ASSESSEE COMPANY TO REGISTRAR OF COMPANIES. 17. COPY OF SHARE CAPITAL AND SHARE PREMIUM ACCOUNT . 18. COPY OF RESPECTIVE SCHEDULE OF RESERVE BANK OF INDIA REGARDING PURCHASE BY PERSON RESIDENT OUTSIDE INDIA OF EQUITY SHARES ISSUED BY AN INDIAN COMPANY. 6. WE HAVE EXAMINED ALL THE ABOVE DOCUMENTS AND CER TIFICATE WHICH CLEARLY PROVE THE IDENTITY, GENUINENESS AND CREDIT WORTHINESS OF M/S ALLIANCE INDUSTRIES LIMITED. IN THE LIGHT OF THE A BOVE, NOW THE QUESTION ARISES WHETHER THE ASSESSEE HAS PROVED THE CREDIT W ORTHINESS OF THE FOREIGN INVESTORS AND ALSO WHETHER THE ASSESSEE IS TO PROVE THE SOURCE OF SOURCE. IT IS AN UNDISPUTED FACT THAT DURING THE ASSESSMENT PROCEEDINGS ITSELF THE ASSESSEE VIDE LETTER DATED 1 3.9.2007 ASKED THE AO THAT IN CASE OF ANY DOUBT ABOUT THE IDENTITY, GE NUINENESS AND CREDIT WORTHINESS OF THE INVESTOR COMPANY, SUMMONS U/S 131 MAY BE ISSUED TO THE INVESTOR COMPANY FOR WHICH THE ASSESS EE AGREED TO BEAR THE COST OF EXPENSES, IF ANY. HOWEVER, IN ITS WIS DOM, THE LEARNED AO, WITHOUT ISSUING ANY SUMMONS U/S 131 TO THE INVESTOR COMPANY AND ALSO WITHOUT BRINGING ANY ADVERSE MATERIAL ON RECOR D, ADDED THE ENTIRE SUM INVESTED AS SHARE CAPITAL AND SHARE PREMIUM AS UNEXPLAINED CREDIT U/S 68 OF THE ACT. IT IS PERTINENT TO MENTI ON HERE THAT FOR THE ASSESSMENT YEAR 2003-04 AND 2004-05, IDENTICAL ADDI TION WAS MADE U/S 68 OF THE ACT FOR SHARE CAPITAL AND SHARE PREMI UM RECEIVED IN THE RESPECTIVE YEARS. HOWEVER, THE LEARNED CIT(A) VIDE APPELLATE ORDER DATED 9.11.2006 (ASSESSMENT YEAR 2003-04) AND DATED 27.4.2007 (ASSESSMENT YEAR 2004-05) DELETED THE ENTIRE ADDITI ON ON THE GROUND THAT THE MONEY RECEIVED FROM FOREIGN INVESTORS WAS GENUINE AND ALL THE THREE INGREDIENTS OF SECTION 68 I.E. IDENTITY, GENUINENESS AND CREDIT WORTHINESS OF THE INVESTOR WERE FULLY ESTABLISHED. HOWEVER, THE ORDER OF LD. CIT(A) FOR THE ASSESSMENT YEAR 2003-04 WAS F URTHER CONFIRMED BY THE TRIBUNAL VIDE ORDER DATED 28.9.2007 IN ITA N O. 57/IND/07. THE 11 FACTUAL POSITION OF THE PRESENT ASSESSMENT AS WELL AS ASSESSMENT YEARS 2001-02 TO 2005-06 IS SUMMARIZED AS UNDER :- A.Y. SHARE APPLICATION SHARE CAPITAL SHARE PREMIUM TOTAL INVESTMENT ASSESSMENT POSITION APPEAL POSITION 01-02 93,18,602/- 61,92,120 3,09,60,600 4,64,71,322 U/S 143(3) AND INVESTMENT WAS ACCEPTED BY THE DEPARTMENT NO APPEAL 02-03 -- 94,78,180 8,53,03,715 9,47,81,895 U/S 143( 1) AND INVESTMENT WAS ACCEPTED BY THE DEPARTMENT NO APPEAL 03-04 -- 2,12,75,050 19,14,75,353 21,27,50,403 U/S 143(3) ADDITION FOR RS.21,27,50,403 WAS MADE THE APPEAL WAS ALLOWED IN FULL BY THE CIT(A)-I, BHOPAL, AND FURTHER THE ITAT HAS UPHELD THE ORDER OF THE CIT(A) 04-05 -- 1,89,01,120 17,01,10,080/ - 18,90,11,200 U/S 143(3) ADDITION FOR RS.18,90,11,200 WAS MADE THE APPEAL WAS ALLOWED IN FULL BY THE CIT(A)-I, BHOPAL AND DEPARTMENTAL APPEAL IS PENDING WITH THE ITAT 05-06 -- 4,25,04,770 38,25,42,930 42,50,47,700 U/S 143(3) ADDITION FOR RS.42,50,47,744 WAS MADE THE APPEAL IS REJECTED BY THE CIT(A)-I, BHOPAL AND APPEAL OF THE ASSESSEE IS PENDING BEFORE ITAT 6.1 THE LEARNED FIRST APPELLATE AUTHORITY IN ITS OR DER HAS OBSERVED THAT THE ASSESSEE HAS NOT PROVED THE CREDIT WORTHINESS O F THE INVESTOR COMPANY AND THAT HIS PREDECESSOR WHO ALLOWED THE AP PEAL, MUST SIT UP AND INSIST THAT THE ASSESSEE SHOULD PROVE THE CREDI T WORTHINESS OF INVESTOR COMPANY. WE ARE OF THE VIEW THAT SUCH AN A PPROACH IS NOT JUSTIFIED BECAUSE THE TRIBUNAL IN ITS ORDER FOR THE ASSESSMENT YEAR 2003-04 HAS ALREADY CONSIDERED ALL THE ASPECTS AND DOCUMENTARY EVIDENCE PLACED ON RECORD AND REACHED TO THE CONCLU SION THAT ALL THE THREE INGREDIENTS LIKE IDENTITY, GENUINENESS AND CR EDIT WORTHINESS OF M/S ALLIANCE INDUSTRIES LIMITED WAS ESTABLISHED BEY OND DOUBT. THEREFORE, THE COMMENTS OF THE LEARNED CIT(A) ARE N OT IN GOOD TASTE BECAUSE THE JUDICIAL DISCIPLINE SHOULD NOT BE DISCA RDED AT ANY LEVEL. THE ORDER OF THE TRIBUNAL DATED 28.9.2007 WAS ALREA DY BEFORE THE LD. CIT(A) WHEN HE DISPOSED THE APPEAL VIDE ITS ORDER D ATED 13.3.2009. IN SUCH A SITUATION, WE ARE QUOTING THE DECISION OF TH E HONBLE JURISDICTIONAL HIGH COURT IN AGRAWAL WAREHOUSING & LEASING LIMITED (257 ITR 235) WHEREIN IT WAS HELD AS UNDER :- THE ORDERS PASSED BY THE TRIBUNAL ARE BINDING ON A LL THE REVENUE AUTHORITIES FUNCTIONING UNDER THE JURISDICTION OF T HE TRIBUNAL. THE 12 PRINCIPLE OF JUDICIAL DISCIPLINE REQUIRE THAT THE O RDER OF THE HIGHER AUTHORITIES SHOULD BE FOLLOWED UNRESERVEDLY BY THE SUBORDINATE AUTHORITIES... 6.2 THE HONBLE HIGH COURT HELD THAT THE CIT(A) NOT ONLY COMMITTED JUDICIAL IMPROPRIETY BUT ALSO ERRED IN LAW IN REFUS ING TO FOLLOW THE ORDER OF THE APPELLATE TRIBUNAL. THE MEMBERS OF THE TRIBU NAL WHO DECIDED THE APPEAL UPHOLDING THE VIEW TAKEN BY THE CIT(A) A LSO DID NOT OBSERVE THE DUE PROCEDURE. WHILE COMING TO THE AFO RESAID CONCLUSION, THE HONBLE COURT CONSIDERED VARIOUS DECISIONS (AS AVAILABLE AT PAGE 236 OF THE ORDER) INCLUDING THE DECISIONS OF THE HO NBLE APEX COURT IN THE CASE OF CLOTH TRADERS PRIVATE LIMITED (118 ITR 243), DISTRIBUTORS BARODA PRIVATE LIMITED (155 ITR 120) (SC), KAMAL TE XTILES VS. ITO; 189 ITR 339 (M.P.), PRADEEP CHANDRA PARIJA (254 ITR 99 (SC), SAYAJI IRON & ENGG. COM. V. CIT; 253 ITR 749 (GUJ.), ETC. EV EN OTHERWISE, THE RULE OF CONSISTENCY HAS TO BE FOLLOWED UNLESS A ND UNTIL ANY CONTRARY MATERIAL IS BROUGHT ON RECORD. OUR VIEW IS SUPPORT ED BY THE FOLLOWING JUDGMENTS :- 1. CWT V. ALLIED FINANCE PVT. LTD.;289 ITR 318(DEL) 2. BERGER PAINTS INDIA LTD. VS. DCIT; 266 ITR 99 (S C) 3. CIT V NEO POLYPACK PVT. LTD.; 245 ITR 492 (DEL) 4. CIT V. A.R.J. SECURITY PRINTERS; 264 ITR 276 (DE L) 5. UOI V. KUMUDINI N.DALAL; 249 ITR 219 (SC) 6. UOI VS. SATISH PANNALAL SHAH; 249 ITR 221 (SC) 7. CIT V. SHIVSAGAR ESTATE; 257 ITR 59 (SC) 8. DCIT V. UNITED VANSAPATI LTD.; 275 ITR 124(CHD. ITAT) 9. CIT V. NARENDRA DOSI; 254 ITR 606 10.RADHASWAOMY SATSANG V. CIT; 193 ITR 321 (SC) 11. DCIT VS. MANGALAM CEMENTS LTD.; 92 ITD 44 (JAIP UR) (TM) 6.3 IN THE AFORESAID CASES, ON THE ISSUE OF CONSIST ENCY, THE RATIO LAID DOWN IS THAT THE ISSUE CONSIDERED AND DECIDED IN A PARTICULAR MANNER, WHEN THERE IS NO MATERIAL CHANGE IN FACTS, ANY CONT RARY DECISION TO THE EARLIER IS NOT JUSTIFIED AND THE BENCH OF THE EQUAL STRENGTH IS SUPPOSED TO FOLLOW THE DECISION OF A COORDINATE BENCH. 6.4 IN THE CASE OF MANGALAM CEMENTS LIMITED (SUPRA) THE BENCH HELD THAT THE DECISION OF A COORDINATE BENCH OF THE SAME STRENGTH IS REQUIRED TO BE ACCEPTED BY THE BENCH OF THE SAME ST RENGTH, THEREFORE, IN THE ABSENCE OF ANY CONTRARY DECISION, THE DECISI ON OF THE COORDINATE BENCH HAS TO BE FOLLOWED/RESPECTED. IN THE CASE OF CWT V. ALLIED FINANCE PRIVATE LIMITED; 289 ITR 318(DEL), THE HON BLE DELHI HIGH COURT VIDE ORDER DATED 3.2.2005 (SWATANTRAKUMAR AND MADAN B. LOKUR; HONBLE JUDGES) HELD AS UNDER :- 13 THAT THE VIEW TAKEN BY THE TRIBUNAL IN ITS ORDERS DATED MAY 4, 1998, AND MAY 18, 1998, HAD REMAINED UNCHALLENGED I N RESPECT OF SEVERAL ASSESSMENT YEARS. SUBSEQUENT ORDERS WHICH MERELY FOLLOWED THESE TWO ORDERS HAD BEEN CHALLENGED, WITH OUT ANY JUST CAUSE HAVING BEEN SHOWN FOR THE DEPARTURE BY THE RE VENUE. SINCE THE REVENUE HAD ACCEPTED THE TWO BASIC ORDERS , THE REVENUE COULD NOT BE PERMITTED TO RANDOMLY CHALLENG E A SUBSEQUENT ORDER IN RESPECT OF AN ASSESSEE OR IN RE SPECT OF A RANDOM ASSESSMENT YEAR. 6.5 THE LEARNED CIT(A) HAS FURTHER COMMENTED/SUGGES TED THAT MONEY LENDING PRACTICES/STRATEGIES ARE BEING FOLLOWED IN TAX HEAVEN COUNTRIES ALL OVER THE WORLD BY USING THE WORD SHELL COMPANI ES. WITHOUT COMMENTING FURTHER, WE ARE OF THE VIEW THAT UNLESS AND UNTIL ANY CONCRETE MATERIAL IS BROUGHT ON RECORD, ANY UNWARRA NTED/UNDESIRABLE OBSERVATION SHOULD BE AVOIDED. ON JUDICIAL DISCIPL INE, RELIANCE CAN BE PLACED UPON THE DECISION IN THE CASE OF VOEST-ALPIN E IND. GMBH 246 ITR 745 (CAL) WHEREIN IT WAS HELD THAT THE ITO CANN OT REFUSE TO FOLLOW THE ORDER OF THE TRIBUNAL. EVEN OTHERWISE, THE ORDE R OF THE TRIBUNAL HAS ATTAINED FINALITY AS NO ORDER FROM ANY HONBLE HIGHER FORUM REVERSING THE STAND OF THE TRIBUNAL WAS PLACED BEFO RE US. RELIANCE CAN ALSO BE PLACED UPON THE FOLLOWING DECISIONS: 1. CIT V. RALSON INDUSTRIES LIMITED; 288 ITR 322 ( SC), 2. CLOTH TRADERS (P) LIMITED V. ADDL. CIT VS. 118 ITR 243 (SC), 3. AGRAWAL WAREHOUSING AND LEASING LIMITED V. CIT; 257 ITR 235 (MP), 4. KAMAL TEXTILES AND OTHERS V. ITO; 189 ITR 339 ( MP), 5. CHUNNILAL ONKARMAL PVT. LTD. V. CIT; 224 ITR 23 3 (MP), AND 6. CIT VS. RALSON INDUSTRIES LIMITED; 276 ITR 368 (MP). 6.6 THE RATIO OF THESE JUDICIAL PRONOUNCEMENTS IS T HAT THE LOWER AUTHORITIES ARE BOUND TO FOLLOW THE ORDERS PASSED B Y THE HIGHER AUTHORITIES UNLESS AND UNTIL ANY CONTRARY FACTS ARE AVAILABLE ON RECORD. IF ANY PARTY IS NOT SATISFIED WITH ANY ORDER, THERE IS A PROVISION OF APPEAL AVAILABLE ON THE STATUTE BUT IN ANY SITUATIO N, NO DISRESPECT SHOULD BE SHOWN AGAINST ANY HIGHER FORUM. ON THE IS SUE OF CONSISTENCY, SUPPORT CAN BE DRAWN FROM THE DECISION OF THE HONBLE DELHI HIGH COURT IN CIT V. A.R.J. SECURITY PRINTERS ; 264 ITR 276 (DEL),CIT V. NEO POLY PACK (P) LIMITED; 245 ITR 492 , CIT V. ALLIED FINANCE P. LTD.; 289 ITR 318 AND THE DECISION OF TH E HONBLE APEX COURT IN BERGER PAINTS INDIA LIMITED V.CIT; 266 ITR 99,UNION OF INDIA V. KAUMUDINI NARAYAN DALAL AND OTHERS; 249 ITR 219 , UNION OF INDIA V. SATISH PANNALAL SHAH; 249 ITR 221 AND CIT V. SHI VSAGAR ESTATE; 257 ITR 59. IDENTICAL RATIO WAS LAID DOWN BY THE CHAND IGARH BENCH OF THE 14 TRIBUNAL IN DCIT VS. UNITED VANASPATI LIMITED; 275 ITR 124 (AT). THE PRINCIPLE LAID DOWN IN THESE CASES IS THAT THOUGH T HE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE TO INCOME-TAX PROCEEDING S BUT STILL IT IS VERY DESIRABLE THAT THERE SHOULD BE FINALITY AND CERTAIN TY IN ALL LITIGATIONS INCLUDING THE LITIGATIONS ARISING OUT OF INCOME-TAX ACT. THE HONBLE APEX COURT ITSELF IN PRAVARA SAHKARI SHAKKAR KARKHA NA LIMITED V. CIT; 94 ITR 321 (SC) SET ASIDE THE ORDER OF THE HONBLE HIGH COURT TO CALL FOR A REFERENCE ON THE SAME ISSUE ON WHICH THE REFE RENCE WAS EARLIER REJECTED BY THE HIGH COURT AND SPECIAL LEAVE PETITI ON WAS DISMISSED, NOTWITHSTANDING THE INAPPLICABILITY OF PRINCIPLES O F RES JUDICATA. THE HONBLE DELHI HIGH COURT IN DIRECTOR OF INCOME-TAX V. LOVELY BAL SHIKSHA PARISHAD (266 ITR 349) UPHELD THE ORDER OF THE TRIBUNAL ACCEPTING THE CLAIM FOR EXEMPTION U/S 10(22)(AS THE N IT WAS) BECAUSE THE CLAIM HAD BEEN ACCEPTED NOT ONLY IN EARLIER YEA RS BUT IN A LATER YEAR ON THE SAME FACTS. IDENTICAL RATIO WAS LAID D OWN IN CIT V. A.R.J. SECURITY PRINTERS (264 ITR 276) (DEL), SHRI RAJEND RA MILLS LIMITED V. JOINT CTO (1971) 28 STC 483 (MAD), SENTHIL RAJA MET AL V. CTO (1990) 79 STC 38 (MAD), AND UNION OF INDIA V. KAMALAKSHI F INANCE CO. LTD.; AIR 1992 SC 711. 7. DURING HEARING OF THIS APPEAL, THE LEARNED COUNS EL FOR THE ASSESSEE INVITED OUR ATTENTION TO THE LANGUAGE USED BY THE L EARNED CIT(A) TO THE EFFECT TRUE FACTS HAVE NOT BEEN MENTIONED IN THE IMPUGNED ORDER ESPECIALLY PAGE 2 PARA 2.3. THE LEARNED COUNSEL TH ROUGH ITS PAPER BOOK (PAGE 62 TO 74) POINTED OUT THAT RATHER NECESS ARY DETAILS WERE NOT NOTICED BY THE LEARNED CIT(A) REGARDING THE DET AILS WHEREFROM THE MONEY WAS DEPOSITED IN THE ACCOUNT TO THE EFFECT TH AT THE MONEY IS ALL BY TRANSFER AND NOT A CASH DEPOSIT. SO FAR AS THE A PPLICATION OF SECTION 68 OF THE ACT IS CONCERNED, ADMITTEDLY THE THREE IN GREDIENTS I.E. IDENTITY, GENUINENESS AND CREDIT WORTHINESS HAVE TO BE PROVED BY THE ASSESSEE. IF THE TOTALITY OF FACTS IS ANALYSED, WE ARE OF THE OPINION THAT THE ONUS HAS BEEN DULY DISCHARGED BY THE ASSESSEE. THE LEARNED CIT(A) HAS MENTIONED THE ORDER IN THE CASE OF M/S R ATHI FINLEASE LIMITED (2008) 215 CTR 429 (MP). THE SALIENT FACTS OF BOTH THE CASES ARE COMPARED AS UNDER : FINLEASE CASE CASE OF THE ASSESSEE (I) FURNISHED COPIES OF ONLY A FURNISHED ALL RE LEVANT FACTS FEW SHARE APPLICANTS (II) FLAGE SYNTHETICS LTD., INDORE, AN INVESTOR IDENTITY, CREDIT WORTHINESS AND GENUINENESS OF TRANSACTION WAS ESTABLISHED 15 (III) PALASIA LEASING & INVESTMENT (P) LTD., INDORE, AN INVESTOR -DO- (IV) M/S PATNI INDUSTRIES LTD., INDORE SAME AS (II) ABOVE -DO- (V) (CASH) DEPOSITED THE DAY THE CHEQUE WAS ISSUED FOR SHARE APPLICATION MONEY THE DEPOSITS ARE BY TRANSFER ENTRIES THAT COULD BE VERIFIED BY THE DEPARTMENT BUT IT WAS NOT DONE SO FOR THE REASON BEST KNOWN THE DEPARTMENT (VI) ASSESSEE WAS CONFRONTED BY THE ASSESSEE FILED REPLY THE DEPARTMENT REGARDING THE FINDINGS. ASSESSEE DID NOT EXPLAIN 7. IN VIEW OF THE ABOVE, IT CAN BE SAID THAT THE FAC TS IN THE CASE OF CIT V. RATHI FINLEASE LIMITED ARE DIFFERENT, THE REFORE, NOT APPLICABLE TO THE FACTS OF THE PRESENT APPEAL. SO F AR AS THE DECISION IN THE CASE OF SUMATI DAYAL VS. CIT (214 ITR 801) (SC) IS CONCERNED, IT IS APPLICABLE TO BOTH PARTIES, THE REFORE, CANNOT BE USED SELECTIVELY. SIMILAR IS THE SITUATION IN OTHER CASES RELIED UPON BY THE LEARNED CIT(A). 8. THE DIRECTORATE OF ENFORCEMENT VIDE THEIR COMMUNI CATION DATED 20 TH AUGUST, 2008 ADDRESSED TO THE ASSESSEE MADE CERTAI N INQUIRIES AND ASKED THE ASSESSEE TO FURNISH CERTAIN INFORMATION. THIS ORDER/INQUIRY WAS IN TERMS OF SECTION 37 OF THE PROVISIONS OF FEMA, 1999 AND THE ASSESSEE WAS DIRECTED TO COMPLY WI TH WITHIN 15 DAYS. THE ASSESSEE VIDE LETTER DATED 3 RD SEPTEMBER, 2008 FURNISHED THE INFORMATION AND TILL DATE NEITHER ANY ADVERSE WAS COMMUNICATED TO THE ASSESSEE NOR ANY ACTION WAS TAKE N. 9. THE TRIBUNAL IN ITA NO. 57/IND/07 (A.Y. 2003-04) AFTER CONSIDERING THE FACTS OF THE CASE, ARGUMENTS OF BOT H THE PARTIES 16 AND THE LEGAL POSITION IN THE LIGHT OF THE DECISION S OF THE HONBLE SUPREME COURT AS ALSO OF VARIOUS HIGH COURTS, HELD AS UNDER :- THIS APPEAL BY DEPARTMENT IS DIRECTED AGAINST THE ORDER OF CIT(A)-I, BHOPAL DATED 9.11.2006 FOR AY 2003-04 ON THE FOLLOWING GROUND OF APPEAL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN 1. DELETING THE ADDITION OF RS.21,27,50,400/- MADE U/S 68 OF THE INCOME-TAX ACT, ON ACCOUNT OF UNEXPLAINED CASH CREDIT AS THE ASSESSEE HAD FAILED T O PROVE THE CREDITWORTHINESS OF THE CREDITOR BEYOND DOUBT ASD WAS RIGHTLY DISALLOWED BY THE ASSESSING OFFICER. 2. LATER ON, VIDE LETTER F. NO. ACIT- 2(1)/BHOPAL/ APPEAL/2007-08/1010 DATED 23.8.2007 ON RECORD, DEPARTMENT SUBMITTED REVISED GROUNDS OF APPEAL, WHICH ARE AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN 1. DELETING THE ADDITION OF RS.21,27,50,400/- MADE U/S 68 OF THE INCOME-TAX ACT, 1961 ON ACCOUNT OF UNEXPLAINED CASH CREDIT AS THE ASSESSEE HAD FAILE D TO PROVE THE CREDITWORTHINESS OF THE CREDITOR BEYON D DOUBT AND WAS RIGHTLY DISALLOWED BY THE ASSESSING OFFICER. 2. FACTS IN LAW IN ADMITTING FRESH EVIDENCES IN VIOLATION RULE 46A OF THE IT RULE 1962. 3. FACTS IN LAW IN RELYING UPON SUCH FRESH EVIDENCES WITHOUT GIVING SUFFICIENT AND PROPER OPPORTUNITY TO AO INQUIRE INTO SUCH FRESH EVIDENCES AND/OR NOT CONDUCTING FURTHER INQUIRIES HIMSELF BEFORE RELYING ON SUCH FRESH EVIDENCES. 17 2 WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. LD. DR FILED WRITTEN SUBMISSION. LD. COUNSE L FOR ASSESSEE ALSO FILED WRITTEN SUBMISSION AND DETAILED PAPER BOOK CONTAINING THE EVIDENCES AND DETAILS FILED BEFORE THE AUTHORITIES BELOW. 3 FACTS OF THE CASE ARE THAT RETURN DECLARING TOTAL INCOME NIL (AFTER SET-OFF OF B/F LOSS OF RS.7,18,69 8/- OF EARLIER YEAR) WAS FURNISHED ON 13.10.2003. TAX AUDIT REPORT U/S 44AB IN FORM NO.3CA AND 3CD WHICH IS DATED 28.6.2003 WAS ALSO ENCLOSED AND FURNISHED WITH THE RETURN. THE RETURN WAS ALSO ACCOMPANIED TH E AUDITORS REPORT DATED 28.6.2003 ALONG WITH THE AUDITED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT. COMPUTATION OF TOTAL INCOME U/S 115JB SHOWING TOTAL TAX PAYABLE AT RS.3,77,096/- ACCOMPANIED BY THE REPORT U/S 115JB WAS ALSO ENCLOSED WITH THE RETURN. THE RETURN WAS PROCESSED U/S 143(1) ON AST VIDE INTIMATION DATED 3.1.2.2003 AND REFUND OF RS.24,13,259/- WAS ISSUED VIDE CHEQUE NO.3461. 3.1 AT THE ASSESSMENT STAGE, THE AR OF THE ASSESSEE WAS ASKED TO PROVE THE FINANCIAL CAPACITY OF THE NR I PARTY FROM WHOM SHARE MONEY/CAPITAL WAS RECEIVED BY THE ASSESSEE CO. DURING THE YEAR. ACCORDINGLY, T HE AR OF THE ASSESSEE APPEARED ON 13.2.2006 AND FILED COPY OF BANK STATEMENT OF IDBI WHICH WAS PLACED ON RECORD. HE HOWEVER REQUESTED FOR FURTHER TIME TO MAKE PENDING COMPLIANCE AND ACCORDINGLY, THE CASE WAS FINALLY ADJOURNED TO 28.2.2006. SHRI PATERIYA, ACCORDINGLY APPEARED ON 28.2.2006 AND FILED WRITTEN REPLY (WITH ENCLOSURES). AUDITED ACCOUNTS ETC. PRODUCED WERE EXAMINED. HOWEVER, IN VIEW OF THE ARS FURTHER REQUEST FOR A DAYS SHORT ADJOURNMENT TO FILE FURTHER WRITTEN SUBMISSIONS, HEARING WAS ADJOURNED TO 1.3.2006 FOR FINAL DISCUSSION/EXAMINATION OF THE CASE. THE CASE WAS 18 FINALLY HEARD WHEN THE AR OF THE ASSESSEE ATTENDED ON 1.3.2006 AND FURNISHED FURTHER WRITTEN LETTER WI TH ENCLOSURES MENTIONED THEREIN. 3.2 THE ASSESSING OFFICER OBSERVED THAT THE ASSESSE E CO., WHICH WAS INCORPORATED ON 26.5.1999, IS ENGAGE D IN THE BUSINESS OF PROVIDING MEDICAL SERVICES OF VARIOUS KINDS AT BHOPAL. TILL 31.3.2001, THE CO. CO ULD START ONLY A SMALL HOSPITAL THAT TOO IN RENTED PREMISES. THE TOTAL HOSPITAL RECEIPTS FOR THE YEAR 2000-01 WERE LESS THAN RS.28 LAKHS. THERE WAS NO PA ST HISTORY/ANTECEDENTS EITHER OF THE ASSESSEE CO. OR I TS PROMOTERS, MEANING THEREBY THAT THE INTANGIBLE ASSE T BEING GOODWILL WAS ALSO NIL. IN A PLACE LIKE BHOPAL , WHERE BHOPAL MEMORIAL HOSPITAL RESEARCH CENTRE IS ALREADY FUNCTIONING AND CATERING TO THE GAS AFFECTE D PEOPLE AND AIIMS IS ALSO COMING UP WHICH PROVIDE MEDICAL SERVICES AT CHEAPER RATE, THERE DID NOT APPEAR TO BE ANY SIGNIFICANT SCOPE FOR ESTABLISHING ANY BIG HOSPITAL [MORE THAN 1000 BEDS] IN THE NEAR FUTURE. 3.3 UNDER SUCH FACTS AND CIRCUMSTANCES, ASSESSING OFFICER WAS OF THE VIEW THAT IT IS NOT BELIEVABLE T HAT ANY FOREIGN CO. WILL INVEST RS.4.64 CRORES [TILL 31.3.2001] FOR ACQUIRING A MINORITY STAKE OF ONLY 7,12,398 SHARES IN THE ASSESSEE CO. WHEREAS THE MAI N PROMOTER SHRI S.N. VIJAYVARGIYA HAS ACQUIRED 10,09,110 SHARES FOR ONLY RS.1.01 CRORES. INTERESTINGLY, THE SUM OF RS.1.01 CRORES INVESTED B Y SHRI S.N. VIJAYVARGIYA WAS ALSO NOT HIS OWN. AS ON 31.3.2001, HE HAD TAKEN A LOAN OF RS.17,76,733/- FROM SHRI SUDHIR CHOPRA[NRI] WHO IS ALSO THE DIRECT OR OF M/S. ALLIANCE INDUSTRIES LTD., GIBRALTAR. DURING FY 2000-01, HE RECEIVED NRI GIFT OF RS.67,68,744/- FRO M THE SAME SHRI SUDHIR CHOPRA [NRI] WHO IS ALSO THE DIRECTOR OF M/S. ALLIANCE INDUSTRIES LTD., GIBRALTA R. THUS, OUT OF THE TOTAL SUM OF RS.1.01 CRORES INVEST ED BY SHRI S.N. VIJAYVARGIYA, RS.85.45 LAKHS WERE 19 RECEIVED FROM THE SAME SHRI SUDHIR CHOPRA [NRI] WHO IS ALSO THE DIRECTOR OF M/S. ALLIANCE INDUSTRIES LT D., GIBRALTAR. 3.4 THE ASSESSING OFFICER FURTHER OBSERVED THAT DURING THE YEAR UNDER CONSIDERATION, 21,27,505 SHAR ES WERE ALLOTTED TO THE M/S. ALLIANCE INDUSTRIES LTD., GIBRALTAR [@RS.10/- PER SHARE FACE VALUE + SHARE PREMIUM OF RS.90/- PER SHARE] FOR INVESTMENT OF RS.21,27,50,500/- WHEREAS SHRI S.N. VIJAYVARGIYA HA D BEEN ALLOTTED 7,40,000 SHARES @RS.10/- PER SHARE FACE VALUE FOR INVESTMENT OF RS.74,00,000/- I.E. WITHOUT PAYING ANY SHARE PREMIUM. FURTHER, THE SHAR E PREMIUM WAS DEBITED AND BONUS SHARES WERE ALLOTTED IN WHICH SHRI S.N. VIJAYVARGIYA GOT BONUS SHARES WO RTH RS.8,57,18,850/- WHEREAS M/S. ALLIANCE INDUSTRIES LTD. GOT ONLY BONUS SHARES WORTH RS.2,18,15,790/-. THUS, EVEN AFTER PAYING A NOMINAL AMOUNT TOWARDS SHARE CAPITAL AS COMPARED TO THE M/S. ALLIANCE INDUSTRIES LTD., SHRI S.N. VIJAYVARGIYA STILL HOLDS MAJORITY SHAREHOLDING IN THE CO. WHICH SPEAKS FOR ITSELF. 3.5 THE AO FURTHER OBSERVED THAT M/S. ALLIANCE INDUSTRIES LTD., GIBRALTAR WAS STATED TO BE INCORPORATED AND REGISTERED IN GIBRALTAR ON 10.7.19 98 AND 30.11.1998. ITS REGISTERED OFFICE WAS STATED TO BE 117, MAIN STREET, GIBRALTAR AND ITS MANAGEMENT HEAD OFFICE AT BLOCK H-3, SAIF ZONE, P.O. BOX 7768, SHARJAH, UAE. IT IS A OVERSEAS BODY CORPORATE 100% OWNED BY NRIS MR. SUDHIR CHOPRA AND MR. VIVEK GULATEE. 3.6 DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED FROM THE BALANCE SHEET A S AT 31.3.2002 THAT THERE WAS INCREASE IN SHARE CAPIT AL BY 13.62 CRORES AS WELL AS INCREASE IN ASSETS BY AB OUT RS.23 CRORES DURING THE YEAR AS COMPARED TO THE IMMEDIATELY PRECEDING YEAR. SIMILARLY, FROM THE 20 AUDITED ACCOUNTS, IT WAS ALSO OBSERVED THAT UNDER T HE HEAD RESERVES & SURPLUS, THERE WAS INCREASE IN SHARE PREMIUM BY RS.8,39,19,713/- DURING THE YEAR A S COMPARED TO THE LAST YEAR. 3.7 IN VIEW OF THE ASSESSEES BACKGROUND AS DISCUSSED ABOVE, ASSESSING OFFICER VIDE QUESTIONNAIRE/NOTICE U/S 142(1) DATED 6.10.2005 ASKED THE ASSESSEE, INTER ALIA, TO FURNISH THE RELE VANT DETAILS OF SUCH FUND AS WELL AS PROVE THE GENUINENE SS THEREOF AND ALSO TO EXPLAIN THE NATURE OF INCREASE IN SHARE PREMIUM FURNISHING ALL RELEVANT DETAILS. AS P ER ASSESSING OFFICER, NEEDLESS TO MENTION THAT IT IS A SETTLED LAW THAT IN RESPECT OF CASH CREDITS IT IS INCUMBENT ON THE ASSESSEE TO PROVE AND ESTABLISH TH E IDENTITY OF THE SUBSCRIBER AND PROVE THEIR CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTION. THE FURNISHING OF MATERIAL IS NOT SUFFICIENT. THE INCOME-TAX AUTHORITY HAS A RIGHT TO PIERCE THE VEIL AND FIND OUT THE REAL NATURE OF THE TRANSACTION. ACCORDINGLY, DUE QUERIES WERE MADE BY THE ASSESSING OFFICER IN THIS REGARD. IT IS NOT OUT OF PLACE TO MENTION THAT AS REQUESTED BY THE ARS OF TH E ASSESSEE, ADJOURNMENTS WERE ALLOWED ON 21.10.2005 AND 16.11.2005 BUT AN INCOMPLETE WRITTEN REPLY WAS FURNISHED ON 8.12.2005. FURTHER, ADJOURNMENTS WERE ALSO GRANTED ON 27.12.2005 AND 12.1.2006. AS SUCH, SUFFICIENT OPPORTUNITIES WERE ALLOWED TO THE ASSESS EE AND ON 13.2.2006, THE ASSESSEE WAS SPECIFICALLY ASK ED TO PROVE THE FINANCIAL CAPACITY OF THE NRI PARTY FR OM WHOM SHARE MONEY/CAPITAL WAS CLAIMED TO HAVE BEEN RECEIVED BY THE ASSESSEE CO. DURING THE YEAR. 3.8 TO THE QUERIES MADE IN THIS REGARD, THE ASSESSE E FILED WRITTEN REPLY DATED 8.12.2005 AS UNDER: 4. DURING THE YEAR, THERE WAS INCREASE IN TOTAL ASSETS BY RS.22,44,85,505/- IN COMPARISON TO PREVIO US YEAR. LIKEWISE, THERE WAS INCREASE OF 21 RS.22,44,85,505/- IN SHAREHOLDERS FUND AND LIABILIT IES IN COMPARISON TO PREVIOUS YEAR. THE DETAILS OF INCREASE IN SHAREHOLDERS FUND IS AS UNDER: I) INCREASE IN SHARE CAPITAL: S.N. VIJAY 74,00,000/- ALLIANCE INDUSTRIES LTD. 2,12,75,050/- RAMVILAS VIJAY (BONUS SHARES) 3,500/- S.N. VIJAY (BONUS SHARES) 8,57,18,850/- ALLIANCE INDUSTRIES LTD. (BONUS SHARES) 2,18,15,790/- URMILA VIJAY (BONUS SHARES) 3,500/- MEGHA VIJAY (BONUS SHARES) 3,500/- NEHA VIJAY (BONUS SHARES) 3,500/- SAVITRI VIJAY (BONUS SHARES) 3,500/- I.H. SIDDIQUI (BONUS SHARES) 3,500/- 13,62,30,690/- II) INCREASE IN SHARE PREMIUM 8,39,19,713/- III) INCREASE IN DEFERRED TAX LIABILITY 43,35,102/- 22,44,85,505/- 3.9 THE ASSESSEE FURTHER EXPLAINED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS RECEIVED SHARE PREMIUM AMOUNTING TO RS.6,59,86,650/-, RS.4,80,34,530/- AND RS.7,74,54,270/- AGGREGATING T O RS.19,14,75,450/- FROM M/S. ALLIANCE INDUSTRIES LTD ., BLOCK-H, ROOM NO.3 IGZ, SHARJAH, UAE. THE COPY OF SHARE PREMIUM ACCOUNT WAS ENCLOSED AS ANNEXURE-5. THE DETAILS OF THE SHARE PREMIUM IS AS UNDER: OPENING BALANCE OF THE ACCOUNT 12,46,51,057/- ADD: SHARE PREMIUM RECEIVED DURING THE YEAR FROM M/S. ALLIANCE INDUSTRIES LTD. 19,14,75,450/- 31,61,26,507/- LESS: TRANSFERRED TO SHARE CAPITAL A/C FOR BONUS SHARES ISSUED 10,75,55,737/- 20,85,70,770/- 3.10 THE ASSESSEES FURTHER WRITTEN REPLY BEFORE AO, DATED 28.2.2006 WAS AS UNDER: 22 INVESTMENT OF RS.21,27,50,403/- IN THE COMPANY IT IS SUBMITTED THAT THE ASSESSEE HAS RECEIVED RS.21,27,50,403/- FROM M/S. ALLIANCE INDUSTRIES LTD ., SHARJAH, UAE, AN NRI COMPANY ON VARIOUS HEADS AS UNDER: S.NO. PARTICULARS AMOUNT (RS.) 1 SHARE CAPITAL 2,12,75,050 2 SHARE PREMIUM 19,14,75,353 TOTAL (RS.) 21,27,50,403 YOU HAVE ASKED TO FILE DETAILS/EVIDENCE REGARDING IDENTITY, CAPACITY AND GENUINENESS OF TRANSACTION PERTAINING TO TRANSFER OF ABOVE FUNDS. IN THIS RESPECT, WE ARE FILING THE CONFIRMATION CERTIFICATE DATED 13.2.2006. IT IS SUBMITTED THAT T HE INVESTOR IS AN NRI COMPANY HAVING ITS HEAD OFFICE A T GIBRALTAR AND BRANCH AT SHARJAH, UAE. THEY HAVE INVESTED THE MONEY IN THE ASSESSEES COMPANY THROUGH PROPER CHANNEL BY SEEKING PERMISSION FROM RESERVE BANK OF INDIA AND THE AMOUNT IS DEPOSITED I N STATE BANK OF INDIA, INDUSTRIAL FINANCE BRANCH, BHOPAL. IN SUPPORT OF OUR CONTENTION WE ARE ENCLOSI NG HEREWITH THE FOLLOWING DOCUMENTS: I) CERTIFICATE OF INCORPORATION OF INVESTOR COMPANY. M/S. ALLIANCE INDUSTRIES LTD. WHICH IS REGISTERED VIDE REG. NO.65521 DATED 10.7.1998 WITH REGISTRAR OF COMPANIES, GIBRALTAR. II) CERTIFICATE ISSUED BY SHRI SUDHIR CHOPRA, DIRECTOR OF M/S. ALLIANCE INDUSTRIES LTD. STATING T HE STATUS OF THE SHAREHOLDERS AND THE COMPANY. III) CERTIFICATE DATED 30.11.1998 ISSUED BY THE NOTARY PUBLIC, GIBRALTAR REGARDING CERTIFICATION OF 23 DOCUMENTS OF THE COMPANY, M/S. ALLIANCE INDUSTRIES LTD. IV) CERTIFICATE FROM GOVERNOR AND COMMANDER IN CHIEF OF GIBRALTAR CERTIFYING THAT THE DOCUMENTS SIGNED BY MR. E.C. ELLUR, THE NOTARY PUBLIC ARE CORRECT. V) COPY OF FORM FC-GPR SUBMITTED TO RBI ON 11.10.2002. VI) COPY OF FORM FC-GPR SUBMITTED TO RBI ON 18.6.2002. VII) PERMISSION DATED 6.2.2004 GRANTED BY GOVERNMENT OF INDIA, MINISTRY OF FINANCE, DEPARTMEN T OF ECONOMIC, AFFAIRS FIPB UNIT REGARDING APPLICATIO N FOR FOREIGN COLLABORATION (STA REGN. NO. FCI 503 DATED 1.1.2004). VIII) CERTIFICATE ISSUED FROM STATE BANK OF INDIA, INDUSTRIAL FINANCE BRANCH, BHOPAL REGARDING FOREIGN INWARD REMITTANCE AS UNDER: SR. NO. DATE AMOUNT EQUIVALENT TO INDIAN RUPEES 1 4.4.2002 4391668 2 10.4.2002 4324217 3 12.4.2002 5857868 4 17.4.2002 6109517 5 18.4.2002 6103167 6 19.4.2002 6099943 7 26.4.2002 6111916 8 2.5.2002 6108167 9 10.5.2002 6109933 10 15.5.2002 6117541 11 29.5.2002 4891166 12 31.5.2002 4894266 13 14.6.2002 6115766 14 16.7.2002 4872900 15 17.7.2002 4870169 16 26.7.2002 4859171 17 26.7.2002 4857671 18 14.8.2002 7276150 24 19 16.8.2002 7272445 20 23.8.2002 4843173 21 4.9.2002 4837174 22 12.9.2002 4837174 23 13.9.2002 4834675 24 16.1.2003 5983344 25 29.1.2003 5254933 26 31.1.2003 5963347 27 2.2.2003 5957410 28 28.2.2003 5946161 29 13.3.2003 5230736 30 17.3.2003 5233486 31 25.3.2003 5231286 32 27.3.2003 4744038 , FROM ABOVE IT IS CLEAR THAT THE INVESTMENT O F RS.21,27,50,403/- MADE BY M/S. ALLIANCE INDUSTRIES LTD. IN SHARE CAPITAL, SHARE PREMIUM AND SHARE APPLICATION ACCOUNT ARE PROPER AND GENUINE AND INVESTED THROUGH PROPER CHANNEL I.E. RBI AND STATE BANK OF INDIA AND THUS THE IDENTITY, GENUINENESS AN D CAPACITY IS CLEARLY ESTABLISHED FROM ABOVE DOCUMENTS. 3.11 CONSIDERING THE AFORESAID WRITTEN REPLIES/SUBMISSIONS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS ADMITTEDLY RECEIVED RS.21,27,50,403/- FROM M/S. ALLIANCE INDUSTRIES LTD ., SHARJAH, UAE, AN NRI COMPANY ON VARIOUS HEADS AS UNDER: S.NO. PARTICULARS AMOUNT (RS.) 1 SHARE CAPITAL 2,12,75,050 2 SHARE PREMIUM 19,14,75,353 TOTAL (RS.) 21,27,50,403 25 3.12 ON GOING THROUGH THE ABOVE DETAILS FURNISHED BY THE ASSESSEE, ASSESSING OFFICER WAS OF THE VIEW THAT IT IS CLEAR THAT ALTHOUGH THEY INDICATE THE IDENTITY OF THE NRI COMPANY AND THE MODE OF TRANSFE R OF MONEY TO THE ASSESSEE BUT EVIDENTLY LACK IN PROV ING CREDITWORTHINESS OF THE NRI COMPANY. THE TRANSACTIONS SHOWN BY THE ASSESSEE THROUGH THE BANKING CHANNELS IPSO FACTO DO NOT ESTABLISH THE FINANCIAL CAPACITY OF THE NRI COMPANY. FURTHER, IT CANNOT BE SAID THAT A TRANSACTION, WHICH TAKES PLAC E BY WAY OF CHEQUE, IS INVARIABLY SACROSANCT. FURTHERMORE, THE PERMISSION RECEIVED FROM THE RBI B Y THE ASSESSEE ALSO DOES NOT PROVE THE FINANCIAL CAPACITY OF THE ASSESSEE. DESPITE REPEATED AND SUFFICIENT OPPORTUNITIES ALLOWED TO THE ASSESSEE AS MENTIONED SUPRA. IT HAS NOT PROVED THE FINANCIAL CAPACITY OF THE AFORESAID NRI COMPANY WITH REGARD T O THE ABOVE INVESTMENT OF RS.21,27,50,403/- IN SHARE CAPITAL/PREMIUM DURING THE YEAR. AS SUCH, THE ABOVE INVESTMENT OF RS.21,27,50,403/- REMAINED TO BE PROVED AND ESTABLISHED AS FROM A GENUINE SOURCE. UNDER THE FACTS AND IN CIRCUMSTANCES OF THE ASSESSEES CASE, PROVISIONS OF SECTION 68 OF THE IT ACT, 1961 ARE FOUND CLEARLY ATTRACTED AND THE RATIO OF T HE DECISION IN THE CASE OF CIT VS. RUBY TRADERS AND EXPORTERS LTD. [2003] 263 ITR 300 (CAL) IS FOUND APPLICABLE. WHILE DECIDING THE CASE, THE HONBLE COURT HAD OCCASION TO REFER THE FOLLOWING OTHER COU RT DECISIONS: I) STELLAR INVESTMENT LTD., (1991) 192 ITR 287 (DELHI); II) STELLAR INVESTMENT LTD., (2001) 251 ITR 263 (SC); III) SOPHIA FINANCE LTD., (1994) 205 ITR 98 (DELHI) (FB); AND IV) CIT VS. KORLAY TRADING CO. LTD., (1998) 232 ITR 820 (CAL). 26 THE HONBLE COURT IN THE CASE OF CIT VS. RUBY TRADE RS AND EXPORTERS LTD., [2003] 263 ITR 300 (CAL) HAD OBSERVED AS UNDER: IN OUR VIEW, WHEN SECTION 68 IS RESORTED TO, IT IS INCUMBENT ON THE ASSESSEE TO PROVE AND ESTABLISH TH E IDENTITY OF THE SUBSCRIBERS, THEIR CREDIT WORTHINES S AND THE GENUINENESS OF THE TRANSACTION. ONCE MATERIALS TO PROVE THESE INGREDIENTS ARE PRODUCED, IT IS FOR THE ASSESSING OFFICER TO FIND OUT AS TO WHET HER ON THESE MATERIALS THE ASSESSEE WAS ABLE TO ESTABLI SH THE INGREDIENTS MENTIONED ABOVE. IF THE FINDING IS IN AFFIRMATIVE, IN THAT EVENT, SECTION 68 CANNOT BE ATTRACTED. IF THE FINDING IS IN THE NEGATIVE, THEN SECTION 68 IS DEFINITELY APPLICABLE. IT IS NOW A SE TTLED PROPOSITION OF LAW THAT THE ASSESSING OFFICER CAN L IFT THE VEIL AND ENQUIRE INTO THE REAL NATURE OF THE TRANSACTION AND ENTER INTO THOSE QUESTIONS . . IN THE DECISIONS IN THE CASE OF CIT VS. KORLAY TRADING CO. LTD. [1998] 232 ITR 820 (CAL), IT WAS H ELD THAT MERE FURNISHING OF INCOME-TAX FILE NUMBERS ARE NOT SUFFICIENT. IN FACT, ONCE THESE MATERIALS HAVE BEEN PRODUCED, IT IS INCUMBENT ON THE ASSESSING OFFICER TO ENQUIRE INTO THE SAME. IN THIS CASE, IN RESPECT OF SHARES WORTH RS.3,80,000, DIRECTION WAS RIGHTLY GIVEN TO UNDERTAKE INVESTIGATION IN ORDER T O ESTABLISH THE CREDITWORTHINESS OF THE SUBSCRIBER AN D GENUINENESS OF THE TRANSACTION. BUT IN RESPECT OF T HE REST OF THE SHARES WORTH RS.19,88,750 EXCEPT DISCLOSING THE LIST OF SUBSCRIBERS NOTHING HAS BEEN PRODUCED BEFORE THE AUTHORITY EITHER FOR ESTABLISHI NG THE IDENTITY OF THE SUBSCRIBERS OR FOR PROVING THEI R CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTION. EVEN IF SUCH PAYMENTS ARE MADE THROUGH BANK AND BY CHEQUES STILL THEN IN VIEW OF THE SETTL ED PROPOSITIONS OF LAW, THE ASSESSING OFFICER CAN ENQU IRE INTO THE SAME AND IT IS THE ASSESSEE WHO HAS TO SAT ISFY THE ASSESSING OFFICER ABOUT THE GENUINENESS OF THE 27 SAME IN THE MANNER AS DISCUSSED ABOVE AND IN HINDUSTHAN TEA TRADING CO. LTD.S CASE [2003] 263 I TR 289 (CAL.) ON FAILURE TO DO SO, SECTION 68 WOULD VI SIT THE ASSESSEE WITH ALL ITS CONSEQUENCES. 3.13 CONSIDERING THE TOTALITY OF FACTS OF THE CASE OF THE ASSESSEE AND RELYING ON THE ABOVE CASE LAWS, TH E ASSESSING OFFICER FOUND THAT THE GENUINENESS OF CLAIMED INVESTMENT OF RS.21,27,50,403/- TOWARDS SHARE CAPITAL/PREMIUM FROM M/S. ALLIANCE INDUSTRIES LTD., SHARJAH, UAE, AN NRI COMPANY, IN THE ASSESSEE COMPANY DURING THE YEAR HAS NOT BEEN PROVED AS THE FINANCIAL CAPACITY OF THE ABOVE NRI COMPANY WAS NOT PROVED/ESTABLISHED BY THE ASSESSEE DURING THE COURS E OF ASSESSMENT PROCEEDINGS DESPITE DUE OPPORTUNITY ALLOWED TO IT. THE ALLEGED INVESTMENT OF RS.21,27,50,403/- WAS, THEREFORE, TREATED AS UNEXPLAINED CREDIT U/S 68 OF THE IT ACT, 1961 AND ADDED IN COMPUTATION OF THE TOTAL INCOME OF THE ASSESSEE FOR AY 2003-04. THE AFORESAID UNEXPLAINED CREDIT OF RS.21,27,50,403/- WAS TREATED AS INCOME FROM UNDISCLOSED SOURCES AND ADDITION WAS ACCORDINGLY MADE. 4 THE ABOVE ADDITION WAS CHALLENGED BEFORE THE LD. CIT(A) AND IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT ASSESSING OFFICER WAS NOT JUSTIFIED I N MAKING AN ADDITION OF RS.21,27,50,403/- ON ACCOUNT OF UNEXPLAINED CREDIT U/S 68 AS ASSESSEE HAD DULY EXPLAINED THE RECEIPT OF AMOUNT OF RS.21,27,50,403/ - . THIS AMOUNT WAS RECEIVED BY THE ASSESSEE FROM M/S . ALLIANCE INDUSTRIES LTD. IT WAS FURTHER SUBMITTED T HAT ASSESSEE IS A LIMITED COMPANY INCORPORATED ON 25.5.1999 VIDE REGISTRATION NO.13543. IT IS REGULAR LY ASSESSED TO TAX SINCE ITS INCEPTION. DURING THE YEA R UNDER CONSIDERATION, ASSESSEE HAD FILED ITS RETURN SHOWING NIL INCOME AFTER CLAIMING SET OFF OF BROUGH T FORWARD LOSSES OF RS.7,18,698/-. THE ACCOUNTS OF TH E ASSESSEE ARE REGULARLY SUBJECTED TO AUDIT U/S 44AB OF 28 THE INCOME-TAX ACT AS WELL AS UNDER COMPANIES ACT. ALL THE YEARLY STATEMENTS VIZ. ANNUAL RETURNS, SHAR E ALLOTMENTS IN FORM NO.2, AUDITED ACCOUNTS ETC. WERE FILED BEFORE THE REGISTRAR OF COMPANIES, GWALIOR IN TIME AS REQUIRED UNDER COMPANIES ACT, 1956. 4.1 BEFORE LD. CIT(A), IT WAS FURTHER SUBMITTED ON BEHALF OF ASSESSEE THAT AS IN THE EARLIER AYS, THI S YEAR ALSO ONE FOREIGN INVESTOR NAMELY M/S. ALLIANCE INDUSTRIES LTD. A PUBLIC LIMITED COMPANY HAVING ITS REGISTERED OFFICE AT GIBRALTER AND MANAGEMENT HEAD OFFICE AT SHARJAH UAE, WHICH IS THE EXISTING SHAREHOLDER OF THE ASSESSEE COMPANY, HAS FURTHER INVESTED IN SHARE CAPITAL OF THE ASSESSEE COMPANY. ASSESSEE CO. HAD OBTAINED NECESSARY PERMISSION FROM RBI AND OTHER GOVERNMENT AGENCIES THAT LOOK AFTER FOREIGN INVESTMENT FOR ISSUE OF SHARE CAPITAL AND SHARE PREMIUM IN FAVOUR OF FOREIGN INVESTOR CO. AFT ER OBTAINING MONEY FROM FOREIGN INVESTOR COMPANY REQUIRED INTIMATION WAS GIVEN TO RBI AND OTHER AUTHORITIES PRESCRIBED UNDER THE LAW. ALL THE MONEY WAS RECEIVED THROUGH PROPER BANKING CHANNEL AND STATE BANK OF INDIA HAD DULY CERTIFIED THAT ACCOUNT S OF ASSESSEE CO. IS CREDITED WITH THE AMOUNT OF FOREIGN CURRENCY REMITTANCE ORDERED BY M/S. ALLIANCE INDUSTRIES LTD. A CONFIRMATION TO THIS EFFECT WAS OBTAINED FROM M/S. ALLIANCE INDUSTRIES LTD. AND PLACED BEFORE THE ASSESSING OFFICER. IT WAS ALSO SUBMITTED THAT ALL RELEVANT DOCUMENTS WITH REGARD T O RECEIPT OF AMOUNTS FROM M/S. ALLIANCE INDUSTRIES LT D. WERE SUBMITTED BEFORE THE ASSESSING OFFICER. 4.2 BEFORE LD. CIT(A), IT WAS FURTHER SUBMITTED ON BEHALF OF THE ASSESSEE THAT M/S. ALLIANCE INDUSTRIE S LTD. AS MENTIONED ABOVE IS REGISTERED AT GIBRALTAR AND MANAGEMENT HEAD OFFICE AT SHARJAH UAE WHERE IT ALSO MAINTAINS AN ACCOUNT WITH STANDARD CHARTERED BANK AT SHARJAH, DUBAI. HE FURTHER SUBMITTED THAT FROM THIS ACCOUNT OF M/S. ALLIANCE INDUSTRIES LTD., AN 29 AMOUNT OF RS.21,27,50,403/- HAS FLOWN TO THE CREDIT OF THE ASSESSEE THROUGH STATE BANK OF INDIA, BHOPAL . IT WAS REITERATED THAT M/S. ALLIANCE INDUSTRIES LTD. H AS MAINTAINED ACCOUNT NO. 02570196101 WITH STANDARD CHARTERED BANK, AT SHARJAH, DUBAI AND FROM THIS ACCOUNT, AN AMOUNT OF RS.21,27,50,403/- WAS GIVEN T O THE ASSESSEE THROUGH STATE BANK OF INDIA, BHOPAL. I T WAS FURTHER SUBMITTED ARGUED THAT STATE BANK OF INDIA, BHOPAL WHICH HAS CREDITED AN AMOUNT OF RS.21,27,50,403/- TO THE ACCOUNT OF ASSESSEE HAD AL SO CERTIFIED THAT IT HAD RECEIVED THIS AMOUNT FROM M/S . ALLIANCE INDUSTRIES LTD. UNDER DEBIT TO THE ACCOUNT WITH STANDARD CHARTERED BANK, SHARJAH, DUBAI. 4.3 BEFORE LD. CIT(A), IT WAS FURTHER SUBMITTED ON BEHALF OF THE ASSESSEE THAT ASSESSEE ALSO RECEIVED SIMILAR AMOUNTS FROM THE SAME FOREIGN INVESTOR I.E. M/S. ALLIANCE INDUSTRIES LTD. IN THE AYS 2001-02 AN D 2002-03 AND THE SAME HAS BEEN ACCEPTED BY THE ASSESSING OFFICER WHILE PASSING ORDER IN THE CASE O F THE ASSESSEE AS PER DETAILS GIVEN BELOW: ASSESSMENT YEAR SHARE APPLICATION SHARE CAPITAL SHARE PREMIUM TOTAL INVESTMENT ASSESSMENT POSITION 2001 - 2002 93,18,602/ - 61,92,120/ - 3,09,60,600/ - 4,64,71322/ - U/S 143(3) 2002 - 2003 ---- 94,78,180/ - 8,53,03,715/ - 9,47,81,895/ - U/S 143(3) 4.4 BEFORE LD. CIT(A), IT WAS PLEADED ON BEHALF OF THE ASSESSEE THAT THERE IS NO DIFFERENCE AT ALL IN THE RECEIPT OF MONEY FROM THE SAME SHARE HOLDER THIS YEAR AS WAS THE CASE IN THE AYS 2001-02 AND 2002-03 . THEREFORE, ASSESSING OFFICER OUGHT TO HAVE ACCEPTED THE AMOUNT RECEIVED FROM M/S. ALLIANCE INDUSTRIES LTD. IN THIS YEAR ALSO AS GENUINE. TAKING DIFFERENT STAND THIS YEAR VIS--VIS IN EARLIER AYS ON SAME SE T OF FACTS, IS NOT JUSTIFIED. ASSESSING OFFICER HAD NOT GIVEN REASONS WHATSOEVER FOR TAKING DIFFERENT STAND THIS YEAR IN RESPECT O F AMOUNT RECEIVED THIS YEAR FROM 30 WHAT HE HAD TAKEN EARLIER WHILE PASSING ORDER U/S 143(3) IN CASE OF ASSESSEE ITSELF FOR THE AY 2001-0 2 WHEREIN A SUM OF RS.4,64,71,322/- WAS RECEIVED BY THE ASSESSEE FROM THE SAME CO. SIMILARLY, AN INVESTMENT OF RS.9,47,81,895/- WAS ACCEPTED DURING AY 2002-03 U/S 143(1) FROM THE SAME INVESTOR. IT WA S VEHEMENTLY ARGUED THAT FACTS AND CIRCUMSTANCES OF THE INVESTMENT BY FOREIGN INVESTOR THIS YEAR REMAIN THE SAME AS THESE WERE IN THE PRECEDING AYS. THEREFORE, ASSESSING OFFICER OUGHT TO HAVE CONSISTENCY IN HIS APPROACH WHILE TAKING DECISION W ITH REGARD TO INVESTMENT MADE THIS YEAR ALSO. IT WAS ARGUED THAT ASSESSMENT FOR THE AY 2001-02 WAS PASSED U/S 143(3) AFTER DETAILED ENQUIRY AND DETAIL ED INVESTIGATION. 4.5 BEFORE LD. CIT(A), IT WAS FURTHER SUBMITTED ON BEHALF OF THE ASSESSEE THAT ASSESSING OFFICER WAS SATISFIED WITH THE IDENTITY AND GENUINENESS OF TRANSACTIONS AS IS EVIDENT FROM THE FINDING RECORDE D BY HIM IN THE ASSESSMENT ORDER. HOWEVER, ASSESSING OFFICER WAS NOT SATISFIED WITH THE CREDIT OF THE SA ME SHARE HOLDER WAS NOT IN DISPUTE IN IMMEDIATELY PRECEDING TWO AYS AND THAT IS WHY HE ACCEPTED DEPOSITS IN EARLIER YEARS. 4.6 BEFORE LD. CIT(A), IT WAS FURTHER ARGUED ON BEHALF OF THE ASSESSEE THAT THE FACTS OF THE CASE RELIED UPON BY THE ASSESSING OFFICER ARE DISTINGUISHABLE ON FACTS. THEREFORE, THE RULINGS OF HONBLE HIGH COURTS AS QUOTED AND RELIED UPON BY TH E ASSESSING OFFICER IN THE ORDER OF ASSESSMENT WHILE MAKING THIS ADDITION ARE NOT AT ALL RELEVANT AND APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. IT WAS FURTHER SUBMITTED THAT ASSESSING OFFICER HAD RELIED UPON THE DECISION OF HONBLE CALCUTTA HIGH COURT IN CASE OF CIT VS. KORLAY TRADING COMPANY LTD. AT 232 ITR 820 (CAL.), HINDUSTAN TEA TRADING CO. LTD. VS. CIT REPORTED AT (2003) 263 ITR 289 (CAL.) AND CIT VS. R UBY 31 TRADERS & EXPORTERS LTD. REPORTED AT (2003) 263 ITR 300 (CAL.). ASSESSING OFFICER ALSO HAD REFERRED TO THE OTHER DECISIONS AS QUOTED ON PAGE 7. IT WAS FURTHER SUBMITTED THAT AS A MATTER OF FACT, THE CASES AS CI T VS. STELLAR INVESTMENT LTD. (1991) 192 ITR 287 (DEL HI), CIT VS. STELLAR INVESTMENT LTD. (2001) 251 ITR 263 (SC) AND CIT VS. SOPHIA FINANCE LTD. (1994) 205 ITR 98 (DEL.) (FB) SUPPORT THE CASE OF THE ASSESSEE RATHER THAN OF ASSESSING OFFICER. AS REGARDS FACTS OF CASE S AS MENTIONED ABOVE IN CASE OF CIT VS. KORLAY TRADING COMPANY REPORTED AT 237 ITR 820 (CAL.), HINDUSTAN TEA TRADING CO. LTD. VS. CIT REPORTED AT (2003) 263 ITR 289 (CAL.) AND CIT VS. RUBY TRADERS & EXPORTERS LTD. REPORTED AT (2003) 263 ITR 300 (CAL.) ARE CLEA RLY DISTINGUISHABLE WITH THE FACTS OF THE ASSESSEES CA SE. IN CASE OF CIT VS. RUBY TRADERS & EXPORTERS LTD. REPORTED AT (2003) 263 ITR 300 (CAL.), SHARE APPLICATION MONEY WAS RECEIVED FROM ITS DIRECTORS, PROMOTERS AS WELL AS FROM PUBLIC WHEREAS IN CASE OF ASSESSEE THERE IS ONLY ONE SHARE APPLICANT KNOWN AS M/S. ALLIANCE INDUSTRIES LTD. IN THIS CASE, THE HON BLE CALCUTTA HIGH COURT HELD THAT EXCEPT DISCLOSING THE LIST OF SUBSCRIBERS TO ITS CAPITAL, ASSESSEE COMPAN Y DID NOT PRODUCE EVIDENCE FOR ESTABLISHING THE IDENTITY OF THE SUBSCRIBERS OR PROVING THEIR CREDIT WORTHINESS AND GENUINENESS OF TRANSACTIONS AND, THEREFORE, HONBLE HIGH COURT HELD THAT ADDITION U/S 68 IS JUSTIFIED A ND IN THIS CASE THE HONBLE HIGH COURT HAD FOLLOWED ITS O WN JUDGMENT IN CASE OF HINDUSTAN TEA TRADING COMPANY LTD. VS. CIT REPORTED AT (2003) 263 ITR 289 (CAL.), WHEREAS IN CASE OF ASSESSEE, IDENTITY OF SHARE APPLICANT AND GENUINENESS OF TRANSACTIONS ARE NOT I N DISPUTE. THEREFORE, THE FACTS OF THESE CASES AS REL IED BY THE ASSESSING OFFICER ARE CLEARLY DISTINGUISHABL E FROM THE FACTS OF THE ASSESSEES CASE. ASSESSEE HAD PROVIDED EVIDENCE BEFORE THE ASSESSING OFFICER WITH REGARD TO IDENTITY OF THE SHARE APPLICANT, WHICH IN FACT WAS NOT DISPUTED BY THE ASSESSING OFFICER. ALL AMOUNTS HAVE BEEN RECEIVED THROUGH BANKING 32 CHANNELS AND THUS GENUINENESS OF TRANSACTIONS WAS ALSO NOT DOUBTED BY THE ASSESSING OFFICER. THE ASSESSEE HAD FURNISHED SUFFICIENT MATERIALS BEFORE LD. CIT(A) NAMELY: (I) CERTIFICATE OF INCORPORATION OF INVESTOR COMPANY, M/S. ALLIANCE INDUSTRIES LTD. WHICH IS REGISTERED VIDE REGISTRATION NO. 65521 DATED 10.7.9 8 WITH REGISTRAR OF COMPANIES, GIBRALTAR. (II) CERTIFICATE ISSUED BY SHRI SUDHIR CHOPRA, DIRECTOR OF M/S. ALLIANCE INDUSTRIES LTD. STATING T HE STATUS OF THE SHAREHOLDERS AND THE COMPANY. (III) CERTIFICATE DATED 30.11.1998 ISSUED BY THE NOTARY PUBLIC, GIBRALTAR CERTIFICATION OF DOCUMENTS OF THE COMPANY, M/S. ALLIANCE INDUSTRIES LTD. (IV) CERTIFICATE FROM GOVERNOR AND COMMANDER IN CHIEF OF GIBRALTAR CERTIFYING THAT THE DOCUMENTS SIGNED BY MR. E.C. ELLUR, THE NOTARY PUBLIC ARE CORRECT. (V) COPY OF FORM FC-GPR SUBMITTED TO RBI ON 11.10.2002. (VI) COPY OF FORM FC-GPR SUBMITTED TO RBI ON 18.6.2002. (VIII) PERMISSION DATED 6.2.2004 GRANTED BY GOVERNMENT OF INDIA, MINISTRY OF FINANCE, DEPARTMEN T OF ECONOMICS AGGAIRS FIPB UNIT REGARDING APPLICATIO N FOR FOREIGN COLLABORATION (STA REGD. NO. FCI 503 DATED 1.1.2004). (IX) COPY OF FORM FC-GPR SUBMITTED TO RBI ON 25.4.2003. (X) COPY OF RESPECTIVE SCHEDULE OF RBI REGARDING PURCHASE BY A PERSON RESIDENT OUTSIDE INDIA OF EQUI TY SHARES ISSUED BY AN INDIAN COMPANY. (XI) COPY OF CERTIFICATE FROM M/S. FARIA & ASSOCIATES, 21, HNTON AVENUE, HOUNSLOW, MIDDLESEX TW4 6AP, THE CHARTERED ACCOUNTANTS OF THE LENDER COMPANY M/S. ALLIANCE INDUSTRIES LTD., UAE REGARDIN G CREDITWORTHINESS OF THE LENDER COMPANY. 33 (XII) COPY OF BRIEF COMPANY PROFILE OF M/S. ALLIANCE INDUSTRIES LTD. (XIII) COPY OF CERTIFICATE FROM STATE BANK OF INDIA CONFIRMING THAT ALL THE REMITTANCES WERE ROUTED THROUGH THE ACCOUNT NO. 02570196101 OF M/S. ALLIANC E INDUSTRIES LTD. WITH STANDARD CHARTERED BANK, DUBAI . (XIV) COPY OF CERTIFICATE ISSUED BY STANDARD CHARTERED BANK, SHARJAH CONFIRMING THAT THE INVESTO R COMPANY M/S. ALLIANCE INDUSTRIES LTD. HAS CURRENT ACCOUNT NO.02570196101 WITH THEM. (XV) COPY OF SHARE CERTIFICATES ISSUED BY THE ASSESSEE COMPANY IN THE NAME OF M/S. ALLIANCE INDUSTRIES LTD . (XVI) COPY OF RETURN OF ALLOTMENT OF SHARES IN FORM NO.2 SUBMITTED BY THE ASSESSEE COMPANY TO REGISTRAR OF COMPANIES. (XVII) COPY OF LETTER DATED 19.2.2004 OF DIRECTORATE OF ENFORCEMENT, GOVERNMENT OF INDIA WHICH CONDUCTED ENQUIRIES REGARDING INVESTMENT IN SHARE CAPITAL MAD E BY FOREIGN INVESTMENT COMPANY AND DETAILS OF SHARES ALLOTTED TO THEM. 4.7 FOR ESTABLISHING THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF TRANSACTIONS, ASSESSEE HAD SUBMITTED BEFORE LD. CIT(A) THAT AMOUNT FROM FOREIG N INVESTOR HAS COME TO THE ASSESSEE CO. WITH PROPER PERMISSION OF RBI AND FERA. IT ONLY MEANS THAT AMOUNT BELONGING TO M/S. ALLIANCE INDUSTRIES LTD. HAVE COME TO THE ASSESSEE THROUGH PROPER BANKING CHANNELS. IT WAS SUBMITTED THAT THE POWER OF ASSESSING OFFICER TO INVOKE PROVISIONS OF SECTION 6 8 IN RESPECT OF FOR PROBING SHARE APPLICATION MONEY HAS NOT BEEN QUESTIONED BUT NO ADDITION IS REQUIRED TO JUSTIFIED U/S 68 IN CASE OF ASSESSEE WHEN IT HAD GI VEN SUFFICIENT EVIDENCE ABOUT THE IDENTITY, GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS SINCE SHARE APPLICANT MONEY FROM ITS BANK ACCOUNT STANDING IN A FOREIGN COUNTRY HAS COME TO THE ACCOUNT OF THE ASSESSEE THROUGH BANK, THERE DOES NOT REMAIN ANY DOUBT ABOUT THE CREDITWORTHINESS OF THE SHARE 34 APPLICANT I.E. M/S. ALLIANCE INDUSTRIES LTD. THE ASSESSEE HAD RELIED UPON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. STELLAR INVESTMENT LTD. (1991) 192 ITR 287 (DELHI), WHEREIN THE HONBLE HIGH COURT HELD THAT SHARE CAPITAL-EVE N IF IT BE ASSUMED THAT THE SUBSCRIBERS TO THE INCREA SED SHARE CAPITAL WERE NOT GENUINE, UNDER NO CIRCUMSTANCES, CAN THE AMOUNT OF SUCH CAPITAL BE REGARDED AS UNDISCLOSED INCOME OF ASSESSEE-COMPANY- IF CERTAIN SHAREHOLDERS WERE BOGUS AND MONEY WAS PROVIDED BY SOME OTHER PERSONS, REOPENING OF ASSESSMENT OF SUCH PERSONS WOULD BE SENSIBLE- TRIBUNAL, THEREFORE, JUSTIFIED IN SETTING ASIDE REVISIONAL ORDER AND NO QUESTION OF LAW ARISES. TH E DECISION OF DELHI HIGH COURT IN THIS CASE HAS BEEN UPHELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. STELLAR INVESTMENT LTD. REPORTED AT (2001) 251 ITR 263 (SC) WHEREIN THE HONBLE SUPREME COURT HELD THAT EVEN IF THE SUBSCRIBERS TO THE INCREASED SHAR E CAPITAL OF ASSESSEE-COMPANY WERE NOT GENUINE, THE AMOUNT COULD NOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE-COMPANY, AND NO QUESTION OF LAW AROSE FOR REFERENCE. 4.8 BEFORE LD. CIT(A), THE ASSESSEE HAD ALSO RELIED UPON THE JUDGMENT OF FULL BENCH OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SOPHIA FINANCE LT D. REPORTED AT (1994) 205 ITR 98 (DEL.) (FB) IN SUPPOR T OF HIS ARGUMENT THAT THOUGH SECTION 68 CAN BE INVOKED FOR PROBING INVESTMENT IN SHARE CAPITAL BUT WHERE T HE SHARE HOLDERS ARE GENUINE, NO ADDITION U/S 68 IS JUSTIFIED. THE DECISION OF FULL BENCH OF HONBLE DE LHI HIGH COURT HAS OPINED HAS UNDER: - UNDER SECTION 68 OF THE INCOME-TAX ACT, 1961, THE ITO HAS JURISDICTION TO MAKE ENQUIRIES WITH REGARD TO THE NATURE AND SOURCE OF A SUM CREDITED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND IT IS IMMATERIAL AS T O WHETHER THE AMOUNT SO CREDITED IS GIVEN THE COLOUR 35 OF A LOAN OR A SUM REPRESENTING SALE PROCEEDS OR EVE N RECEIPT OF SHARE APPLICATION MONEY. THE USE OF THE WORDS ANY SUM FOUND CREDITED IN THE BOOKS IN SECTION 68 INDICATES THAT THE SECTION IS VERY WIDEL Y WORDED AND THE ITO IS NOT PRECLUDED FROM MAKING AN ENQUIRY AS TO THE TRUE NATURE AND SOURCE OF A SUM CREDITED IN THE ACCOUNT BOOKS EVEN IT IS CREDITED AS RECEIPT OF SHARE APPLICATION MONEY. THE MERE FACT THAT THE (ASSESSEE) COMPANY CHOOSES TO SHOW THE RECEIPT OF THE MONEY AS CAPITAL DOES NOT PRECLUDE TH E ITO FROM GOING INTO THE QUESTION WHETHER THIS IS ACTUALLY SO. WHERE, THEREFORE, AN ASSESSEE-COMPANY REPRESENTS THAT IT HAD ISSUED SHARES ON THE RECEIPT OF SHARE APPLICATION MONEY THEN THE AMOUNT SO RECEIVED WOULD BE CREDITED IN THE BOOKS OF ACCOUNT OF THE COMPANY. THE ITO WOULD BE ENTITLED, AN IT WOULD INDEED BE HIS DUTY, TO ENQUIRE WHETHER THE ALLEGED SHAREHOLDERS DO IN FACT EXIST OR NOT. IF THE SHAREHOLDERS EXIST THEN, POSSIBLY, NO FURTHER ENQUIRY NEED BE MADE. BUT IF THE ITO FINDS THAT THE ALLEGED SHAREHOLDERS DO NOT EXIST THEN, IN EFFECT, IT WOULD MEAN THAT THERE IS NO VALID ISSUANCE OF SHARE CAPITA L, SHARES CANNOT BE ISSUED IN THE NAME OF NON-EXISTING PERSONS. THE USE OF THE WORDS MAY BE CHARGED IN SECTION 68 CLEARLY INDICATES THAT THE ITO WOULD THEN HAVE THE JURISDICTION, IF THE FACTS SO WARRANT, TO TREAT SUCH A CREDIT TO BE THE INCOME OF THE ASSESSEE . IF THE SHAREHOLDERS ARE IDENTIFIED AND IT IS ESTABLISHED THAT THEY HAVE INVESTED MONEY IN THE PURCHASE OF SHARES, THEN THE AMOUNT RECEIVED BY THE COMPANY WOULD BE REGARDED AS A CAPITAL RECEIPT AND TO THAT EXTENT THE OBSERVATIONS IN CIT VS. STELLAR INVESTMENT LTD. [1991] 192 ITR 287 (DELHI), ARE CORRECT. IT WAS THEREFORE SUBMITTED THAT IN CASE OF ASSESSEE, ASSESSING OFFICER HIMSELF HAD ADMITTED AF TER EXAMINATION OF EVIDENCE PRODUCED BEFORE HIM THAT 36 SHARE APPLICANT I.E. M/S. ALLIANCE INDUSTRIES LTD. IS GENUINE THAT BEING SO NO ADDITION U/S 68 IS JUSTIFI ED IN CASE OF THE ASSESSEE. MOREOVER, ASSESSEE HAD PLACED SUFFICIENT EVIDENCE TO THE EFFECT THAT MONEY HAD FLOWN FROM THE ACCOUNT OF THE FOREIGN INVESTOR EXISTING IN FOREIGN BANK. IT WAS FURTHER SUBMITTED THAT AS PER OBSERVATION OF HONBLE DELHI HIGH COURT FULL BENCH, IT BECOMES CLEAR THAT IF THE SHAREHOLDERS ARE IDENTIFIED AND I T IS ESTABLISHED THAT THEY HAVE INVESTED MONEY IN THE PURCHASE OF SHARES THEN AMOUNT RECEIVED BY THE COMPANY WOULD BE RECORDED AS A CAPITAL RECEIPT AND TO THAT EXTENT THE OBSERVATION IN CIT VS. STELLAR INVESTMENT LTD. [1991] 192 ITR 287 (DELHI) ARE CORRECT. 4.9 BEFORE LD. CIT(A), THE ASSESSEE HAS PROVIDED THE ACCOUNT NO. OF FOREIGN INVESTOR WITH STANDARD CHARTERED BANK AT SHARJAH, DUBAI FORM WHICH AMOUNTS HAVE BEEN RECEIVED THROUGH STATE BANK OF INDIA, BHOPAL, FROM WHICH IT WAS INFERRED THAT IT W AS ONLY THE AMOUNT BELONGING TO M/S. ALLIANCE INDUSTRI ES LTD. WHICH WAS UTILIZED FOR THE ALLOTMENT OF SHARES OF THE ASSESSEE COMPANY. THEREFORE, ALL THE INGREDIENT S FOR TREATING THE DEPOSIT U/S 68 AS GENUINE IN RESPE CT OF SHARE APPLICATION MONEY I.E. IDENTITY OF THE SHA RE APPLICANT, ITS CREDITWORTHINESS AND GENUINENESS OF TRANSACTIONS ARE SATISFIED, NO ADDITION IS REQUIRED TO BE MADE AS HAS BEEN DONE BY ASSESSING OFFICER. 4.10 BEFORE LD. CIT(A), IT WAS ALSO SUBMITTED ON BEHALF OF THE ASSESSEE THAT PRIMA-FACIE REASONABLE EXPLANATION CANNOT BE REJECTED ON CAPRICIOUS OR ARBITRARY GROUNDS OR ON MERE SUSPICION OR ON IMAGINARY OR IRRELEVANT GROUNDS. ASSESSEE FURNISHED REASONABLE EXPLANATION IN RESPECT OF RECEIPT OF AMOUNTS, THERE IS NO JUSTIFICATION FOR NOT ACCEPTIN G THE SAME. RELIANCE WAS PLACED ON THE DECISION OF 37 HONBLE ORISSA HIGH COURT IN CASE OF DEONANI ATHA V S. CIT (1978) 112 ITR 837 (ORISSA) WHEREIN IT WAS HELD BY THE HONBLE HIGH COURT THAT WHERE ASSESSEES EXPLANATION IS REJECTED WITHOUT MAKING PROPER ENQUIRY THE ADDITION CANNOT BE SUSTAINED. ASSESSEE S EXPLANATION IS TO BE JUDICIALLY CONSIDERED. IF THE EXPLANATION SHOWS THAT THE RECEIPT WAS NOT OF AN INCOME NATURE, THE DEPARTMENT CANNOT ACT UNREASONABLY AND REJECT THE EXPLANATION TO HOLD THA T IT WAS INCOME. THE DECISION OF HONBLE SUPREME COURT IN CASE OF CIT VS. KS KUNCHI KNUI (1973) 87 I TR 395 (SC) WAS ALSO REFERRED TO IN SUPPORT OF ARGUMEN T THAT EXPLANATION FURNISHED BY THE ASSESSEE CANNOT B E ARBITRARILY REJECTED. THE JUDGMENT OF HONBLE PATNA HIGH COURT IN CASE OF SAROJNI CREDIT CORPORATION VS . CIT (1976) 103 ITR 344 (PATNA) WAS ALSO RELIED UPON IN SUPPORT OF ARGUMENT THAT ASSESSEE CANNOT BE PURSUED TO HAVE SPECIAL KNOWLEDGE ABOUT THE SOURCE OF SOURC E AND ORIGIN OF ORIGIN. IT WAS PLEADED THAT ASSESSEE HAD SUBMITTED ALL RELEVANT DOCUMENTS NECESSARY TO PROVE THAT AMOUNT INVESTED BY THE NRI INVESTOR COMPANY CAME FROM ABROAD THROUGH BANKING CHANNELS AND THE TRANSACTIONS ARE GENUINE. 4.11 BEFORE LD. CIT(A), IT WAS PLEADED ON BEHALF OF THE ASSESSEE THAT ASSESSING OFFICER HAD NOT PLACED ON RECORD ANY EVIDENCE THAT AMOUNT TRANSFERRED FROM SHARJAH, DUBAI FROM THE ACCOUNT OF SHARE APPLICANT IS IN FACT ASSESSEES OWN INCOME. ASSESSEE HAS NO OFFI CE OR BANK AT SHARJAH, DUBAI. ASSESSING OFFICER HAS NO T PLACED ON RECORD ANY EVIDENCE THAT ASSESSEE HAD RECEIVED ITS OWN MONEY IN THE SHAPE OF DOLLARS WHIC H WAS DEPOSITED IN SHARJAH, DUBAI BANK IN THE FOREIGN INVESTOR ACCOUNT FROM WHERE THE MONEY FLOATED TO THE ACCOUNT OF THE ASSESSEE. IT WAS FURTHER PLEADED THAT THE ASSESSEE HAD SUFFICIENTLY PROVED AND PLACE D ON RECORD EVIDENCE THAT AMOUNT TRANSFERRED FROM SHARJAH, DUBAI BANK ACCOUNT IS THAT OF FOREIGN INVESTOR I.E. OF M/S. ALLIANCE INDUSTRIES LTD. THE 38 OBSERVATION OF HONBLE MP HIGH COURT IN CASE OF CIT VS. METACHEM INDUSTIRES, 245 ITR 160 (MP) WAS ALSO RELIED UPON BY ASSESSEE, WHEREIN THE HONBLE MP HIG H COURT OPINED THAT ONCE IT IS ESTABLISHED THAT AMOUNT HAS BEEN INVESTED BY A PARTICULAR PERSON BE HE A PARTNER OR AN INDIVIDUAL THEN THE RESPONSIBILITY OF THE ASSESSEE FIRM IS OVER. THE ASSESSEE FIRM CANNOT ASK THAT PERSONS WHO MAKES INVESTMENT WHETHER THE MONEY INVESTED IS PROPERLY TAXED OR NOT. THE ASSESSEE IS ONLY TO EXPLAIN THAT THIS INVESTMENT HAS BEEN MADE BY THE PARTICULAR INDIVIDUAL AND ITS RESPONSIBILITY OF THE INDIVIDUAL TO ACCOUNT FOR THE INVESTMENT MADE BY HIM IF THAT PERSON OWNS THAT ENTRY THAT THE BURDEN OF THE ASSESSEE FIRM IS DISCHARGED. 4.12 BEFORE LD. CIT(A), THE JUDGMENT OF ITAT, INDORE BENCH IN ITA NO.502/IND/2003 FOR THE AY 1998-99 IN CASE OF MAKALSUTA COTTON COMPANY PVT. LTD. WAS RELIED UPON ON BEHALF OF THE ASSESSEE, WHEREIN THE ITAT OBSERVED THAT REVENUE TO ESTABLISH THAT SUCH INVESTMENT HAS COM FROM THE ASSESSEE COMPANY ITSELF. THE DECISION OF ITAT, JODHPUR BENCH IN CASE OF SWAGAT SYNTHETICS PVT. LTD. VS. ITO, (2002) 77 T TJ 987 WAS ALSO RELIED UPON BY ASSESSEE IN SUPPORT OF ARGUMENT THAT ASSESSING OFFICER WAS NOT JUSTIFIED I N MAKING ADDITION OF AN AMOUNT OF RS.21,27,50,403/-. IN THAT CASE, THE ITAT OPINED ASSESSEE COMPANY HAVING ESTABLISHED THE IDENTITIES OF THE SHARE APPLICANTS AND ALSO PROVED THAT MONEY WAS INVESTED BY THEM, NO ADDITION COULD BE MADE U/S 68 ON ACCOUNT OF SHARE APPLICATION MONEY. THE DECISION OF ITAT, LUCKNOW BENCH IN THE CASE OF DCIT VS. SAHA RA INDIA FINANCIAL CORPORATION LTD., 81 TTJ 389 WAS AL SO RELIED ON BY ASSESSEE WHEREIN ITAT HELD THAT IN A CASE WHERE IDENTITY OF THE SHAREHOLDER IS ESTABLISHED AND THE SHAREHOLDER CONFIRMS THAT HE HAS INVESTED MONEY IN PURCHASE OF SHARES THEN NO FURTHER ENQUIRY CAN BE MADE AGAINST THE COMPANY 39 FOR THE PURPOSE OF MAKING ADDITION U/S 68. THE ADDITION TO BE CONFINED ONLY TO CASES WHERE SHAREHOLDERS ARE TO BE FOUND NON-EXISTENCE. IT WAS FURTHER SUBMITTED THAT ASSESSEE HAD GENUINELY ACCEPTED THE AMOUNT OF RS.21,27,50,403/- FROM M/S. ALLIANCE INDUSTRIES LTD., AND HAD ALLOTTED THE SHAR ES TO M/S. ALLIANCE INDUSTRIES LTD. A PUBLIC LIMITED COMPANY HAVING ITS REGISTERED OFFICE AT GIBRALTAR A ND MANAGEMENT HEAD OFFICE AT SHARJAH, UAE. ALL THE MONEY WAS ROUTED THROUGH PROPER BANKING CHANNEL. MONEY IS TRANSFERRED DIRECTLY FROM THE STANDARD CHARTERED BANK, SHARJAH, DUBAI WHERE THE SHARE APPLICANT COMPANY MAINTAINED ITS ACCOUNT. THUS, IDENTITY OF THE FOREIGN SHARE APPLICANT COMPANY IS BEYOND DOUBT AND THE GENUINENESS OF TRANSACTIONS AR E CLEARLY ESTABLISHED THAT SHARE APPLICANT COMPANY HA D INVESTED ITS OWN MONEY OUT OF ITS WON CAPITAL AND T HE INVESTMENT HAS BEEN SHOWN IN THE BALANCE SHEET OF THE INVESTING COMPANY. AS IS EVIDENT FROM THE CERTIFICATE ISSUED BY THE AUDITOR OF THE INVESTOR COMPANY M/S. ALLIANCE INDUSTRIES LTD., IT IS CLEAR THAT THE INVESTOR COMPANY HAS INVESTED THE MONEY OUT OF ITS OWN CAPITAL AND THE INVESTMENT IS SHOWN IN THE BALANCE SHEET OF THE INVESTOR COMPANY. THUS, CREDITWORTHINESS OF THE INVESTOR COMPANY IS ALSO ESTABLISHED. THEREFORE, IT WAS PLEADED THAT ASSESSI NG OFFICER WAS NOT AT ALL JUSTIFIED IN MAKING ADDITION OF RS. 21,27,50,403/- U/S 68 OF THE IT ACT, 1961. 4.13 BEFORE LD. CIT(A), THE ASSESSEE ALSO FURTHER REFERRED TO THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF SHREE BARKHA SYNTHETICS LTD. V S. ACIT, (2006) 283 ITR 377 (RAJ.) IN SUPPORT OF HIS ARGUMENTS THAT ADDITION U/S 68 IN CASE OF THE ASSESSEE OF AN AMOUNT OF RS. 21,27,50,403/- RECEIVE D FROM M/S. ALLIANCE INDUSTRIES LTD. IS NOT AT ALL JUSTIFIED. IN THIS CASE, HONBLE RAJASTHAN HIGH COU RT HELD THAT IF THE TRANSACTION ARE MADE THROUGH BANKING CHANNELS AND ONCE THE EXISTENCE OF 40 PERSONS BY NAME IN THE SHARE APPLICATIONS IN WHOSE NAME THE SHARE HAVE BEEN ISSUED IS SHOWN, THE ASSESSEE COMPANY CANNOT BE HELD RESPONSIBLE TO PROVE WHETHER THAT PERSON HIMSELF HAS INVESTED THE SAID MONEY OR SOME OTHER PERSON HAD MADE INVESTMENT IN THE NAME OF THAT PERSON. THE BURDEN THAN SHIFTS ON THE REVENUE TO ESTABLISH THAT SUCH INVESTMENT HAS COME FROM THE ASSESSEE COMPANY ITSELF. BEFORE LD. CIT(A), THE ASSESSEE FURTHER RELIED UPON THE JUDGMENT OF ITAT, INDORE BENCH DECIDED ON 15.7.1997 IN CASE OF DYNA TRANS LAMINA PVT. LTD., BHOPAL VS. ACIT, CIRCLE-I, BHOPAL IN ITA NO.810/IND /82 WHEREIN THE ITAT OBSERVED AS UNDER: - THE IDENTITY OF THE ABOVE PERSONS TO WHOM THE SHARES WERE EVENTUALLY ALLOTTED IS NOT, THEREFORE, I N DOUBT. IF THAT BE SO, THE RATIO OF FULL BENCH DECISIO N OF DELHI HIGH COURT IN THE CASE OF CIT VS. SOFIA FINANCE LTD., 205 ITR 98 SQUARELY APPLIES TO THE FAC TS OF THE ASSESSEES CASE. IN THE CASE, IT HAS BEEN HE LD THAT UNLIKE CASH CREDIT FOR INVESTMENT IN SHARE CAPITAL, THE ASSESSEE COMPANY KS NOT REQUIRED TO PROVE CREDIT WORTHINESS OF SHARE HOLDERS. WHAT IS EXPECTED OF THE ASSESSEE IS ONLY TO PROVE THE EXISTENCE OF SHARE-HOLDER AND THE RECEIPT OF MONEY FROM THEM. IN THE INSTANT CASE, TO OUR MIND, THE ASSESSEE ESTABLISHED THE EXISTENCE OF SHARE-HOLDERS AND THE RECEIPT OF MONEY FROM THEM. WE, THEREFORE, HOLD THAT THE ASSESSEE HAD SUCCEEDED IN EXPLAINING THE IMPUGNED CREDITS AND, THEREFORE, THE ADDITION U/S 68 IS NOT JUSTIFIED AT ALL. 5 DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE LD. CIT(A), THE ASSESSING OFFICER WAS PROVID ED A SPECIFIC OPPORTUNITY VIDE CIT(A)S LETTER DATED 13.7.2006 ENCLOSING THEREWITH CERTAIN DOCUMENTS WHICH INCLUDES (I) COPY OF CERTIFICATE FROM M/S. FA RIA & ASSOCIATES, 21, HNTON AVENUE, HOUNSLOW, MIDDLESEX TW4 6AP, THE CAS OF THE LENDER CO. M/S. 41 ALLIANCE INDUSTRIES LTD., UAE REGARDING CREDITWORTHINESS OF THE LENDER COMPANY. (II) COPY O F BRIEF COMPANY PROFILE OF M/S. ALLIANCE INDUSTRIES L TD., UAE. (III) COPY OF CERTIFICATE FROM STATE BANK OF I NDIA CONFIRMING THAT ALL THE REMITTANCES WERE ROUTED THROUGH THE ACCOUNT NO. 02570196101 OF M/S. ALLIANC E INDUSTRIES LTD. WITH STANDARD CHARTERED BANK, DUBAI . (IV) COPY OF CERTIFICATE ISSUED BY STANDARD CHARTER ED BANK, SHARJAH CONFIRMING THAT THE INVESTOR COMPANY M/S. ALLIANCE INDUSTRIES LTD. HAS CURRENT ACCOUNT N O. 02570196101 WITH THEM. (V) COPY OF CERTIFICATES ISSUED BY THE ASSESSEE CO. IN THE NAME OF M/S. ALLIANCE INDUSTRIES LTD. (VI) COPY OF RETURN OF ALLOTMENT OF SHARES IN FORM NO.2 SUBMITTED BY THE ASSESSEE CO. TO REGISTRAR OF COMPANIES. (VII) COPY OF LETTER DATED 19.2.2004 OF DIRECTORATE OF ENFORCEMEN T, GOVT. OF INDIA WHICH CONDUCED ENQUIRIES REGARDING INVESTMENT IN SHARE CAPITAL MADE BY FOREIGN INVESTMENT COMPANY AND DETAILS OF SHARES ALLOTTED T O THEM, FOR SUBMISSION OF REPORT. IN RESPONSE, THE ASSESSING OFFICER SUBMITTED HIS REPORT VIDE LETTER DATED 3.11.2006 AND OFFERED HIS COMMENTS ON THE FRESH DOCUMENTS FURNISHED BY THE ASSESSEE DURING TH E COURSE OF APPELLATE PROCEEDINGS BEFORE LD. CIT(A). IN THIS REPORT, ASSESSING OFFICER DEFENDED THE ADDITIO N MADE BY HIM WHILE PASSING THE ASSESSMENT ORDER APPEALED AGAINST. REPORT OF THE ASSESSING OFFICER W AS REQUIRED ON SUCH DOCUMENTS WHICH WERE PLACED BEFORE LD. CIT(A) FOR THE FIRST TIME DURING THE APPELLATE PROCEEDINGS AND IT WAS CONSIDERED NECESSARY TO ADJUDICATE THE GROUNDS TAKEN IN APPEAL . WHILE DECIDING THIS GROUND, LD. CIT(A) TOOK DUE NOT E OF SUCH REPORT OF THE ASSESSING OFFICER ON THESE DOCUMENTS. 6 AFTER CONSIDERATION OF THE SUBMISSIONS ON BEHALF OF THE ASSESSEE AND EXAMINATION OF THE MATERIAL AVAILABLE ON RECORD, THE LD. CIT(A) DELETED THE ADDITION OF RS. 21,27,50,403/- MADE BY THE ASSESSIN G 42 OFFICER U/S 68 OF THE IT ACT, 1961 ON ACCOUNT OF UNEXPLAINED CASH CREDIT. PARA 5 HAVING FINDINGS OF LD. CIT(A) IS REPRODUCED AS UNDER: 5. I HAVE VERY CAREFULLY CONSIDERED THE DETAILED SUBMISSIONS OF THE LD. COUNSEL AS DISCUSSED ABOVE THAT ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITION OF RS. 21,27,50,403/- ON THE GROUND THAT FINANCIAL CAPACITY OF THE NRI COMPANY WAS NOT PROVED/ESTABLISHED BY THE APPELLANT FOR MAKING THE INVESTMENT. I HAVE ALSO VERY CAREFULLY PERUSED THE REASONS GIVEN BY THE ASSESSING OFFICER FOR JUSTIFYI NG HIS ACTION FOR MAKING ADDITION OF RS. 21,27,50,403/ - U/S 68 OF THE INCOME-TAX ACT, 1961. I HAVE ALSO GIV EN DUE CONSIDERATIONS TO THE REPORT OF THE ASSESSING OFFICER AS SUBMITTED BY HIM ON FRESH EVIDENCE PLACE D BEFORE ME DURING THE COURSE OF APPELLATE PROCEEDING S BY THE LD. COUNSEL OF THE APPELLANT. AFTER DUE CONSIDERATION OF THE MATTER, I HOLD THAT ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING AN ADDITION OF RS. 21,27,50,403/- U/S 68 OF THE INCOME-TAX ACT, 1961 BECAUSE APPELLANT HAD FULLY DISCHARGED THE BURDEN CAST UPON IT U/S 68 FOR EXPLAINING THE DEPOSIT/INVESTMENT RECEIPT FROM M/S. ALLIANCE INDUSTRIES LTD. I FIND THAT M/S. ALLIANCE INDUSTRIE S LTD. IS A NRI COMPANY HAVING ITS REGISTERED OFFICE AT GIBRALTAR AND MANAGEMENT HEAD OFFICE AT SHARJAH, UAE AND THIS FACT IS NOT DISPUTED BY THE ASSESSING OFFICER. THEREFORE, IDENTITY OF THE FOREIGN INVESTO R IS ESTABLISHED BEYOND ANY DOUBT. APPELLANT HAD RECEIVED THE DEPOSITS FROM M/S. ALLIANCE INDUSTRIES LTD. DURING FY 2002-2003 THROUG H STATE BANK OF INDIA, COMMERCIAL BRANCH, HOSHANGABAD ROAD, BHOPAL WHICH VIDE ITS LETTER DATED 24.5.2006 CERTIFIED THAT THE DEPOSITS HAVE BEEN ROUTED THROUG H THE ACCOUNT NUMBER 02570196101 OF M/S. ALLIANCE INDUSTRIES LTD. THIS FACT IS ESTABLISHED FROM THE 43 CERTIFICATE GIVEN BY THE STATE BANK OF INDIA WHICH IS QUOTED HEREIN BELOW: - TO WHOM SO EVER IT MAY CONCERN THIS IS TO CERTIFY THAT STANDARD CHARTERED BANK, DUBAI HAS CONFIRMED THAT ALL THE REMITTANCES SENT IN FAVOUR OF M/S. PEOPLE GENERAL HOSPITAL PVT. LTD. BY M/S. ALLIANCE INDUSTRIES LTD. TILL DATE (INCLUDING THOSE IN THE FINANCIAL YEAR 01/04/2002 T O 31/03/2003) ARE ROUTED THROUGH THE ACCOUNT NUMBER 02570196101 OF M/S. ALLIANCE INDUSTRIES LTD. THE LIST OF REMITTANCES RECEIVED BY M/S. PEOPL E GENERAL HOSPITAL PVT. LTD. FROM M/S. ALLIANCE INDUSTRIES LTD. DURING 01/04/2002 TO 31/03/2003 IS AS UNDER: - DATE USD AMO UNT IN RUPEES 4.4.2002 89985.00 4391068.00 10.4.2002 98885.00 4394217.00 12.4.2002 119985.00 5857868.00 17.4.2002 124985.00 6109517.00 18.4.2002 124985.00 6103167.00 19.4.2002 124985.00 6099943.00 26.4.2002 124985.00 6111916.00 2.5.2002 124985.00 6108167.00 10.5.2002 124970.00 6109933.00 15.5.2002 124985.00 6117541.00 29.5.2002 99985.00 4891166.00 31.5.2002 99985.00 4894266.00 14.6.2002 124985.00 6115766.00 16.7.2002 100000.00 4872900.00 17.7.2002 99985.00 4870169.00 26.7.2002 99985.00 4859171.00 26.7.2002 99985.00 4857671.00 14.8.2002 150000.00 7276150.00 16.8.2002 149970.00 7272445.00 23.8.2002 99985.00 4843173.00 44 4.9.2002 99985.00 4837174.00 12.9.2002 99985.00 4837174.00 13.9.2002 99985.00 4834675.00 03.10.2002 99985.00 4827176.00 04.10.2002 99985.00 4827176.00 04.10.2002 99985.00 4827176.00 17.10.2002 99985.00 4829175.00 13.01.2003 125000.00 5984625.00 16.01.2003 124985.00 5983344.00 29.01.2003 109985.00 5254933.00 29.01.2003 109985.00 5254933.00 31.01.2003 124985.00 5963347.00 05.02.2003 124985.00 5957410.00 28.02.2003 124985.00 5957410.00 28.02.2003 124985.00 5957410.00 13.03.2003 109985.00 5230736.00 17.03.2003 109985.00 5233486.00 25.03.2003 109985.00 5231286.00 27.03.2003 99985.00 4744038.00 SINCE APPELLATE HAD RECEIVED AMOUNT AGGREGATING TO RS. 21,27,50,403/- FROM M/S. ALLIANCE INDUSTRIES LIMITE D THROUGH PROPER BANKING CHANNEL, THE TRANSACTIONS AR E ESTABLISHED BEYOND ANY DOUBT. FARIA AND ASSOCIATES, CHARTERED CERTIFIED ACCOUNTAN TS HAD SUBMITTED VIDE THEIR LETTER DATED 11/04/2006 PLACED BEFORE ME DURING THE COURSE OF APPELLATE PROCEEDINGS BY THE LD. COUNSEL OF THE APPELLANT, TH E RELEVANT EXTRACT OF WHICH ARE QUOTED AS UNDER: - PEOPLE GENERAL HOSPITAL LTD/ALLIANCE INDUSTRIES LTD AT THE REQUEST OF THE DIRECTORS AND SHAREHOLDERS OF ALLIANCE INDUSTRIES LTD (THE COMPANY) WE WRITE TO CONFIRM THAT THE COMPANY, TRADING IN COMMODITIES, I S REGISTERED IN GIBRALTAR, WITH ITS HEAD OFFICE IN SH ARJAH, UAE. 45 WE ARE THE AUDITORS OF THE COMPANY AND FURTHER CONFIRM THAT IN THE PERIOD 1 APRIL 2002 TO 30 MARCH 2003, THE COMPANY INVESTED US$4,00,000 IN THE SHARES OF PEOPLE GENERAL HOSPITAL LTD., BHOPAL, IND IA. THESE SUMS OF MONEY WERE ALL DONE BY BANK TRANSFERS . FURTHER, WE CONFIRM THAT THIS INVESTMENT WAS FUNDED BY THE TRADING ACTIVITIES OF THE COMPANY, WITHOUT T HE NEED FOR THE COMPANY TO SEEK EXTERNAL FUNDING. THIS FACT, TOGETHER WITH THE INVESTMENT IS REFLECTED IN THE COMPANYS BALANCE SHEET AT 30 JUNE 2003. TO OUR BELIEF, AND BASED ON THE LAST SET OF AUDITED ACCOUNTS FOR THE YEAR ENDED ON 30 JUNE 2004, THE COMPANY HAS A HEALTHY CREDITWORTHY NET ASSET POSITION, AND IS NOT INDEBTED TO ANY THIRD PARTIES. I WOULD ALSO LIKE TO QUOTE EXTRACT FROM THE LETTER DATED 12/03/2006 ADDRESSED TO M/S. ALLIANCE INDUSTRIES LIMITED, P.O. BOX 7768, SHARJAH, UAE BY STANDARD CHARTERED BANK AS UNDER: - CURRENT A/C NO. 02-5701961-01 IN THE NAME OF ALLIANCE INDUSTRIES LTD. THIS IS TO CERTIFY THAT ALLIANCE INDUSTRIES LTD MAI NTAINS THE ABOVE MENTIONED ACCOUNT WITH OUR BRANCH SINCE 14/01/1999 AND THE ACCOUNT IS CONDUCTED TO OUR SATISFACTION AS OF DATE. THIS CERTIFICATE IS ISSUED AT YOUR REQUEST AND WITH OUT ANY RISK OR RESPONSIBILITY ON THE PART OF THE BANK OR ANY OF ITS SIGNING OFFICIALS. FROM THE ABOVE, IT IS VERY MUCH CLEAR THAT AMOUNTS AGGREGATING TO RS. 21,27,50,403/- HAVE FLOWED TO TH E APPELLANT FROM THE CURRENT ACCOUNT NUMBER 02570196101 OF M/S. ALLIANCE INDUSTRIES LIMITED AT 46 SHARJAH THROUGH PROPER BANKING CHANNEL AND IT IS TH E MONEY OF M/S. ALLIANCE INDUSTRIES LIMITED THAT HAS COME TO THE APPELLANT AND M/S. ALLIANCE INDUSTRIES LIMIT ED HAD THE CAPACITY TO INVEST THIS MUCH OF AMOUNT WITH THE APPELLANT DURING THE F.Y. 2002-2003. THUS, CREDIT WORTHINESS OF M/S. ALLIANCE INDUSTRIES LIMITED, ALS O STANDS ESTABLISHED. SINCE ALL THE INGREDIENTS AS AR E REQUIRED TO BE SATISFIED FOR ACCEPTING THE DEPOSIT AS GENUINE U/S 68 ARE FULFILLED IN RESPECT OF THIS INV ESTMENT OF RS. 21,27,50,403/- BY M/S. ALLIANCE INDUSTRIES L IMITED WITH THE APPELLANT COMPANY, IN MY CONSIDERED VIEW ASSESSING OFFICER WAS NOT JUSTIFIED IN DRAWING ADVE RSE INFERENCE IN RESPECT OF THIS AMOUNT UNDER REFERENCE . MOREOVER, ASSESSING OFFICER HAD NOT BROUGHT ON RECO RD ANY EVIDENCE. OTHERWISE THAT IS TO SAY THAT ASSESSI NG OFFICER HAD NOT ESTABLISHED BY MAKING ENQUIRY THAT IT WAS APPELLANTS OWN MONEY WHICH IT HAS RECEIVED IN THE SHAPE OF DOLLARS FROM THE NRI COMPANY. ASSESSING OFFICER HIMSELF HAS ACCEPTED THE IDENTITY OF THE SH ARE APPLICANT COMPANY AND ALSO GENUINENESS OF TRANSACTI ONS IN RESPECT OF THIS DEPOSIT. I FIND THAT ASSESSING O FFICER HIMSELF HAD ACCEPTED THE SIMILAR DEPOSITS IN THE EA RLIER AYS 2001-2002 AND 2002-2003 AS GENUINE. IN FACT ASSESSMENT ORDER RELATING TO AY 2001-2002 WAS PASSE D AFTER ENQUIRY U/S 143(3) WHEREIN SIMILAR INVESTMENT FROM THE SAME NRI COMPANY TO THE TUNE OF RS.4,64,71,322/- WAS ACCEPTED AS GENUINE AND INVESTMENT OF RS.9,47,81,895/- FROM THE SAME COMPAN Y WAS ALSO ACCEPTED U/S 143(1) FOR THE AY 2002-2003. SINCE THERE IS NO DEVIATION IN THE FACTS OF THE INV ESTMENT THIS YEAR VIS--VIS INVESTMENTS MADE BY THE SAME COMPANY WITH THE APPELLANT IN EARLIER YEARS AS MENTIONED ABOVE, I DO NOT FIND ANY JUSTIFICATION FO R NOT ACCEPTING THE DEPOSIT THIS YEAR AS GENUINE. ASSESSI NG OFFICER HAD NOT GIVEN ANY REASON WORTHWHILE FOR TAK ING DIFFERENT VIEW THIS YEAR IN RESPECT OF SIMILAR DEPO SIT AS HE HAD TAKEN WHILE ACCEPTING SUCH DEPOSITS AS GENUI NE IN THE EARLIER ASSESSMENT YEARS. BUT HE HAD TAKEN T HE DEPOSIT THIS YEAR AS NOT GENUINE. I PLACE RELIANCE ON THE 47 DECISION OF HONBLE HIGH COURT IN CASE OF GODAVARI CORPORATION LIMITED REPORTED AT 156 ITR 835 WHEREIN THE HONBLE MP HIGH COURT HELD THAT SIMILAR CASH CREDIT HAVING BEEN ACCEPTED AS GENUINE IN THE EARLI ER YEAR, THE SAME EXPLANATION OUGHT TO HAVE BEEN ACCEPTED IN THE SUBSEQUENT YEAR. I ALSO PLACE RELIANCE ON THE DECISIONS OF HONBLE BOMBAY HIGH COURT IN CA SE OF H.A. SAHA & COMPANY VS. CIT REPORTED AT 30 ITR 6 18 AND ALSO ON THE OBSERVATION OF HONBLE CALCUTTA HIG H COURT IN CASE OF CIT VS. HINDUSTAN MOTORS REPORTED AT 92 ITR 619 ON THIS ISSUE. I FIND THAT RULING OF HONBLE CALCUTTA HIGH COURT G IVEN IN CASE OF M/S. HINDUSTAN TEA TRADING COMPANY LIMITED VS. CIT AND CIT VS. RUBY TRADERS & EXPORTERS LTD. CITED SUPRA ARE NOT APPLICABLE TO THE FACTS OF THE APPELL ANTS CASE AS THE FACTS OF THESE CASES ARE CLEARLY DISTINGUISHABLE FROM THE FACTS OF THE APPELLANTS C ASE. IN MY CONSIDERED VIEW, DECISION OF HONBLE DELHI HIGH COURT IN CASE OF CIT VS. SOPHIA FINANCE LTD. CITED SUPRA IS APPLICABLE IN THE CASE OF APPELLANT WHEREIN IT H AD BEEN OBSERVED THAT THOUGH SECTION 68 CAN BE INVOKED FOR PROBING INVESTMENT IN SHARE CAPITAL, BUT WHERE THE SHAREHOLDERS ARE GENUINE, NO ADDITION U/S 68 IS JUS TIFIED. UNDER SIMILAR CIRCUMSTANCES HONBLE RAJASTHAN HIGH COURT IN CASE OF M/S. BARKHA SYNTHETICS VS. ACIT REPORTED AT 283 ITR 377 (RAJ.) HELD THAT NO ADDITIO N U/S 68 IS JUSTIFIED IN CASE OF SHARE APPLICATION MONEY WHERE SHAREHOLDERS ARE GENUINE. THE HONBLE HIGH COURT IN THAT CASE HAS OBSERVED THAT WHERE THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPA NY THROUGH BANKING CHANNEL, ASSESSEE HAS ONLY TO PROVE THE EXISTENCE OF THE PERSONS IN WHOSE NAME SHARE APPLICATION IS RECEIVED. ADDITIONS COULD NOT BE SUS TAINED WHERE THE EXISTENCE OF THE INVESTOR IS NOT DOUBTED AND THE INVESTMENT IS NOT SHOWN TO HAVE BEEN MADE BY SOMEBODY ELSE. 48 I FIND IT RELEVANT TO QUOTE THE OBSERVATION OF HON BLE HIGH COURT OF M.P. IN CASE OF CIT VS. METACHEM INDUSTRIES REPORTED AT (2000) 245 ITR 160 (MP) WHER EIN THE HONBLE HIGH COURT HELD THAT ONCE IT IS ESTABLISHED THAT AMOUNT HAS BEEN INVESTED BY A PARTICULAR PERSON, BE HE A PARTNER OR AN INDIVIDUAL , THEN THE RESPONSIBILITY OF THE ASSESSEE FIRM IS OVE R. ASSESSEE FIRM CANNOT ASK THAT PERSON WHO MAKES SUCH INVESTMENT WHETHER THE MONEY INVESTED PROPERLY TAXED OR NOT. ASSESSEE IS ONLY TO EXPLAIN THAT THIS INVESTMENT HAS BEEN MADE BY THE PARTICULAR INDIVIDUAL AND IT IS THE RESPONSIBILITY OF THAT INDIVIDUAL TO ACCOUNT FOR THE INVESTMENT MADE BY HIM. IF THAT PERSON OWNS THAT ENTRY THEN THE BURDEN OF THE ASSESSEE FIRM IS DISCHARGED. ACCORDINGLY, IN VIEW OF THE DECISION BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. STELLAR INVEST MENT LTD. REPORTED AT (2001) 251 ITR263 (SC), DECISIONS OF HONBLE HIGH COURTS IN CASES CIT VS. SOPHIA FINANCE LTD. REPORTED AT (1994) 205 ITR 98 (DEL) (FB), CIT VS. S TELLAR INVESTMENT LTD. REPORTED AT (1991) 192 ITR 287 (DEL HI), CIT VS. METACHEM INDUSTRIES REPORTED AT (2000) 245 ITR 160(MP), SHRI BARKHA SYNTHETICS LTD VS. ACIT REPORT ED AT (2006) 283 ITR 377 (RAJ.), ASHOKPAL DAGA (HUF) VS. CIT REPORTED AT (1996) 220 ITR 452 (MP) AND DECISIONS O F LD. ITAT IN CASES SWAGAT SYNTHETICS PRIVATE LIMITED VS. ITO REPORTED AT (2002) 77 TTJ 987 (JODHPUR), DY. CIT VS . SHARA INDIA FINANCIAL CORPORATION LIMITED REPORTED AT (2003) 81 TTJ 389 (LUCKNOW) AND DECISIONS OF JURISDICTIONAL LD. ITAT INDORE BENCH IN CASE OF DYN A TRANS LAMINA PVT. LTD. VS. ACIT IN ITA NO.810/IND./ 82 AND MAKALSUTA COTTON COMPANY PVT. LTD. VS. ITO IN I TA NO.502/IND/2003, I HOLD THAT ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITION OF RS. 21,27,50,403/-. THUS, THIS ADDITION BEING UNSUSTAINABLE IN LAW AND ON FAC TS IS HEREBY DELETED. ALL THESE GROUNDS ARE DECIDED IN FA VOUR OF THE APPELLANT. 49 7 LD. DR AT THE OUTSET SUBMITTED THAT BEFORE ARGUIN G ON MAIN GROUND OF APPEAL ON MERITS, WE WOULD LIKE T O ARGUE ON ADMISSION OF GROUND NO.2 AND 3 OF THE REVI SED GROUNDS OF APPEAL. LD. DR SUBMITTED THAT THE DOCUME NTS FILED BEFORE LD. CIT(A), ITEM (SERIAL) NO.XI TO XVII MENTIONED HEREINBELOW WERE ADDL. EVIDENCE IN NATURE : (XI) COPY OF CERTIFICATE FROM M/S. FARIA & ASSOCIATES, 21, HNTON AVENUE, HOUNSLOW, MIDDLESEX TW4 6AP, THE CHARTERED ACCOUNTANTS OF THE LENDER COMPANY M/S. ALLIANCE INDUSTRIES LTD., UAE REGARDING CREDITWORTH INESS OF THE LENDER COMPANY. (XII) COPY OF BRIEF COMPANY PROFILE OF M/S. ALLIANCE INDUSTRIES LTD. (XIII) COPY OF CERTIFICATE FROM STATE BANK OF INDIA CONFIRMING THAT ALL THE REMITTANCES WERE ROUTED THR OUGH THE ACCOUNT NO. 02570196101 OF M/S. ALLIANCE INDUST RIES LTD. WITH STANDARD CHARTERED BANK, DUBAI. (XIV) COPY OF CERTIFICATE ISSUED BY STANDARD CHARTERED BANK, SHARJAH CONFIRMING THAT THE INVESTOR COMPANY M/S. ALLIANCE INDUSTRIES LTD. HAS CURRENT ACCOUNT NO.02570196101 WITH THEM. (XV) COPY OF SHARE CERTIFICATES ISSUED BY THE ASSESSEE COMPANY IN THE NAME OF M/S. ALLIANCE INDUSTRIES LTD . (XVI) COPY OF RETURN OF ALLOTMENT OF SHARES IN FORM NO.2 SUBMITTED BY THE ASSESSEE COMPANY TO REGISTRAR OF COMPANIES. (XVII) COPY OF LETTER DATED 19.2.2004 OF DIRECTORATE OF ENFORCEMENT, GOVERNMENT OF INDIA WHICH CONDUCTED ENQUIRIES REGARDING INVESTMENT IN SHARE CAPITAL MAD E BY 50 FOREIGN INVESTMENT COMPANY AND DETAILS OF SHARES ALLOTTED TO THEM. LD. DR SUBMITTED THAT ASSEESSE AT 42 OF PAPER BOOK HAS MENTIONED THAT ABOVE DOCUMENTS WERE FILED BEFORE LD . CIT(A) IN ORDER TO STRENGTHEN ITS CASE WHICH WERE N OT FILED BEFORE THE AO. LD. DR THEREFORE SUBMITTED THA T LD. CIT(A) DID NOT PROVIDE SUFFICIENT OPPORTUNITY TO TH E AO TO MAKE INQUIRY AND INVESTIGATION INTO SUCH EVIDENC E AND FURTHER SUBMITTED THAT LD. CIT(A) HAS NOT ADMITTED THESE EVIDENCE AT THE APPELLATE STAGE THEREFORE RULE 46-A HAS BEEN VIOLATED IN THIS CASE. LD. DR SUBMITTED THAT A BOVE ADDL. GROUNDS HAVE BEEN RAISED AT THE EARLIEST OPPORTUNITY AND ARE BASED ON FACTS ON RECORD AND AR E VITAL FOR PROPER ADJUDICATION OF ISSUE INVOLVED IN THE APPEAL. LD. DR RELIED UPON FOLLOWING DECISIONS AND SUBMITTED THAT THE SAME ADDL. GROUNDS MAY BE ADMITT ED BEING LEGAL IN NATURE: DECISION OF HONBLE SUPREME COURT IN THE CASE OF NATIOANL THERMAL POWER CO. 229 ITR 383, DECISIONS O F MP HIGH COURT IN THE CASE OF BHOPAL SUGAR INDUSTRIA L, 233 ITR 429, AND NATIONAL NEWS PRINT AND PAPER MILLS LT D. 223 ITR 688 AND ORDER OF ITAT, INDORE BENCH IN THE CASE OF RAHUL PRODUCTS LTD., 6 ITJ 273. LD. DR FURTHER SUBMITTED THAT LD. CIT(A) WROTE A LETTER DATED 13.7.2006 TO THE AO TO FILE A REMAND R EPORT AND HIS COMMENTS ON THE ABOVE ADDL. DOCUMENTS ON WHICH AO FILED HIS REMAND REPORT DATED 3.11.96. LD DR THEREFORE SUBMITTED THAT LD. CIT(A) WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE AO AND WITHOUT CONDUC TING INQUIRY HIMSELF RELIED UPON THE ADDL. EVIDENCES AND THEREFORE RULE 46-A IS VIOLATED. LD. DR THEREFORE SUBMITTED THAT ABOVE REVISED GROUND NOS.2 AND 3 MAY BE ADMITTED FOR HEARING. 7 ON THE OTHER HAND, LD. COUNSEL FOR ASSESSEE OBJECTED TO THE SUBMISSIONS OF THE LD. DR AND SUBMI TTED 51 THAT ASSESSEE IS A EDUCATIONAL INSTITUTION AND ADDL . GROUNDS ARE FILED BELATEDLY. LD. COUNSEL FOR ASSESS EE SUBMITTED THAT ASSESSEE FILED SUFFICIENT EVIDENCES BEFORE THE AO IN ORDER TO PROVE THAT ALL THE THREE CONDITIONS OF GENUINE CASH CREDITS ARE PROVED. HE H AS SUBMITTED THAT AO HAS NOT DISPUTED IDENTITY OF THE NRI COMPANY (SHAREHOLDER) AND THE TRANSFER OF MONEY IN THE ACCOUNT OF ASSESSEE. HE HAS SUBMITTED THAT THE EVIDENCES FILED BEFORE LD. CIT(A) FOR THE FIRST TIM E WERE EXPLANATORY IN NATURE EXPLAINING THE EARLIER EVIDEN CES FILED BEFORE THE AO THEREFORE THOSE WERE NOT PRACTI CALLY ADDL. EVIDENCE IN NATURE. LD. COUNSEL FOR ASSESSEE FURTHER SUBMITTED THAT LD. CIT(A) GAVE SUFFICIENT OPPORTUNITY AS PER RULE 46-A TO THE AO AND CALLED F OR THE REMAND REPORT ON THOSE DOCUMENTS AND ALL THOSE DOCUMENTS WERE HANDED OVER TO THE AO IN PERSON AND THE AO ALSO APPEARED BEFORE THE LD. CIT(A) AT THE APPELLATE STAGE AND FILED THE REMAND REPORT IN WHIC H HE HAS VIRTUALLY NOT DISPUTED THESE DOCUMENTS. THE AO IN THE REMAND REPORT HAS SUBMITTED BEFORE LD. CIT(A) T HAT HE HAS PLENARY POWERS IN DISPOSING OF APPEAL AND HI S POWERS ARE COTERMINOUS TO THAT OF THE AO TO MAKE TH E INQUIRY ON THE ISSUE INVOLVED IN THE CASE THEREFORE THERE ARE NO SUBSTANCE IN THE GROUND NO.2 AND 3. HE HAS SUBMITTED THAT AO DID NOT ASK FOR ANY TIME TO EXAMI NE THESE DOCUMENTS. LD. COUNSEL FOR ASSESSEE SUBMITTED THAT AO DELAYED THE MATTER EVEN BEFORE THE CIT(A) A ND SUBMITTED THAT SINCE IT WAS A CASE OF AMOUNT RECEIV ED ON ACCOUNT OF SHARE CAPITAL THEREFORE ASSESSEE DISCHARGES INITIAL ONUS TO PROVE CREDITWORTHINESS O F THE SHAREHOLDER M/S. ALLIANCE INDUSTRIES LTD. LD. COUNS EL FOR ASSESSEE ACCORDINGLY SUBMITTED THAT THERE ARE NO ME RITS IN THESE GROUNDS, THE SAME MAY NOT BE ADMITTED FOR HEARING. 8 WE HAVE CONSIDERED RIVAL SUBMISSIONS AND MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE FILED CONFIRMATION FROM ALLIANCE INDUSTRIES LTD. BE FORE AO GIVING THE DETAILS OF AMOUNT INVESTED BY THE NRI 52 COMPANY ON ACCOUNT OF SHARE CAPITAL. THE ASSESSEE A LSO FILED CERTIFICATE OF INCORPORATION OF THE SHAREHOLD ER (ALLIANCE INDUSTRIES LTD.) BEFORE THE AO EXPLAINING THE BOARD OF DIRECTORS ETC. THE DETAILS WERE CERTIFIED BY NOTARY PUBLIC AND WAS ALSO COUNTERSIGNED BY GOVERNO R AND COMMANDER IN CHIEF, GIBRALTAR. THE ASSESSEE ALS O FILE COPY OF THE PERMISSION OF THE GOVT. OF INDIA REGARDING FOREIGN COLLABORATION BY M/S. ALLIANCE INDUSTRIES LTD. ALONG WITH COPIES OF THE RETURNS/FO RMS SUBMITTED TO RBI FOR TRANSFER OF FOREIGN CURRENCY I N THE ACCONT OF THE ASSESSEE BY M/S. ALLIANCE INDUSTRIES LTD. THE ASSESSEE ALSO FILED SEVERAL CERTIFICATES OF STA TE BANK OF INDIA, COMMERCIAL BRANCH, BHOPAL GIVING CERTIFIC ATE TO THE ASSESSEE THAT THE FOREIGN CURRENCY REMITTANC ES HAVE BEEN CREDITED TO THE ACCOUNT OF THE ASSESSEE A S ORDERED BY M/S. ALLIANCE INDUSTRIES LTD. THE DOCUME NTS ABOVE WOULD EXPLAIN AS TO WHAT IS THE NATURE OF DOCUMENTS FILED BY ASSESSEE FOR THE FIRST TIME BEFO RE THE LD. CIT(A). 8.1 THE LD.DR POINTED OUT THE ABOVE DOCUMENTS STATED TO BE FILED FOR THE FIRST TIME BEFORE THE LD. CIT(A ) WHICH WE DEAL AS UNDER: 1 CERTIFICATE OF M/S. FARIA & ASSOCIATES EXPLAINED TH E INCORPORATION OF M/S. ALLIANCE INDUSTRIES LTD. AND FUNDS TRANSFERRED BY THEM TO THE ASSESSEE ON WHICH ASSESS EE HAS ALREADY FILED SUFFICIENT DOCUMENTS BEFORE THE A O. 2 COPY OF BRIEF PROFILE OF M/S. ALLIANCE INDUSTRIES L TD. ON WHICH ASSESSEE HAS ALREADY MADE SUBMISSIONS BEFO RE THE AO. 3 CERTIFICATE OF STATE BANK OF INDIA, COMMERCIAL BRANCH, BHOPAL GIVING CERTIFICATE THAT M/S. ALLIANC E INDUSTRIES LTD. TRANSFERRED THE FUNDS TO THE ASSESS EE ON SEVERAL DATES THROUGH STANDARD CHARTERED BANK, DUBA I ON WHICH ASSESSEE HAS ALREADY SUBMITTED SEVERAL COP IES OF CERTIFICATES OF STATE BANK OF INDIA, COMMERCIAL BRANCH, BHOPAL AS MENTIONED ABOVE. 53 4 COPY OF CERTIFICATE OF STANDARD CHARTERED BANK FROM WHERE AMOUNTS WERE TRANSFERRED TO THE ACCOUNT OF TH E ASSESSEE WHICH FACT IS ALREADY EXPLAINED BEFORE THE AO AND EXPLAINED IN THE CERTIFICATES OF SBI, BHOPAL. 5 COPY OF SHARE CERTIFICATES ISSUED IN THE NAME OF M/ S. ALLIANCE INDUSTRIES LTD. THE AO DID NOT DOUBT THE IDENTITY OF M/S. ALLIANCE INDUSTRIES LTD. AND ISSUE OF SHARE CERTIFICATES IN ITS NAME BECAUSE THE AO ONLY DOUBTED THE CREDITWORTHINESS OF NRI COMPANY. 6 COPY OF RETURN SUBMITTED BEFORE REGISTRAR OF COMPANIES. THE SAME IS ALSO NOT DOUBTED BY THE AO. 7 COPY OF QUERY LETTER OF DIRECTORATE OF ENFORCEMENT CONDUCTING INQUIRIES REGARDING INVESTMENT IN SHARE CAPITAL BY NRI COMPANY. THIS IS NOT DISPUTED BY THE AO. 8.2 THE ABOVE FACTS WOULD CLEARLY EXPLAIN THAT THESE ARE APPARENTLY NOT NEW EVIDENCES AND WOULD ONLY CLA RIFY THE EVIDENCES ALREADY SUBMITTED BEFORE THE AO. DESP ITE THAT THE LD. CIT(A) GAVE A REASONABLE AND SUFFICIEN T OPPORTUNITY TO THE AO TO EXAMINE THE ABOVE EVIDENCE S VIDE HIS LETTER DATED 13.7.2006 DIRECTING THE AO TO GIVE HIS REPORT CAREFULLY AND COMPREHENSIVELY AND APPEAL WAS ADJOURNED TO 31.8.2006. IT IS ALSO NOT IN DISPUTE T HAT THE AO JOINED THE APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A) AND AS PER LETTER OF THE LD. CIT(A) ALL THES E DOCUMENTS WERE HANDED OVER TO THE AO IN PERSON FOR HIS COMMENTS. HOWEVER, THE AO DID NOT FILE ANY REPORT B Y 31.8.2006 AND FILED THE REMAND REPORT ONLY ON 3.11. 2006 AND IN THAT REMAND REPORT ALSO AO HAS NOT DISPUTED GENUINENESS OF THESE DOCUMENTS. THE AO MERELY STATE D THAT SINCE THESE DOCUMENTS WERE NOT FILED BEFORE AO THEREFORE SAME MAY NOT BE CONSIDERED AT THE APPELLA TE STAGE. THE AO IN PARA 8 OF HIS REMAND REPORT SUBMIT TED THAT THE CIT(A) HAS PLENARY AND COTERMINOUS POWER T O THAT OF THE AO THEREFORE HE MAY MAKE REQUISITE INQU IRY ON THE ISSUE INVOLVED IN THE CASE. IT WOULD THEREFO RE SHOW THAT DESPITE SUFFICIENT OPPORTUNITY GIVEN TO T HE AO AT THE APPELLATE STAGE, THE AO DID NOT MAKE ANY PRO PER INQUIRY ON THESE DOCUMENTS AND RATHER REQUESTED THE 54 CIT(A) TO MAKE INQUIRY HIMSELF. WE THEREFORE DO NOT FIND AS TO HOW LD. CIT(A) VIOLATED RULE-46A IN THE MATTE R AND HOW LD. CIT(A) HAS NOT GIVEN SUFFICIENT PROPER OPPORTUNITY TO THE AO TO ENQUIRE INTO SUCH FRESH EVIDENCE. HONBLE PUNJAB AND HARYANA HIGH COURT IN THE RECENT DECISION IN THE CASE OF CIT VS. KULDEEP INDUSTRIAL CORPORATION REPORTED IN 209 CTR (P & H) 400 (DELIVERED ON 4.4.2007) HELD AO, WHO WAS PRESENT AT THE TIME OF FURNISHING OF ADDL. EVIDENCE BEFORE CIT(A) HAVING RAISED NO OBJECTION, THE OPPORTUNITY ENVISAGED UNDER RULE-46A STOOD SATISFIED. 8.3 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE NOTED ABOVE, THE ORDER OF TRIBUNAL IN THE CASE OF M/S. RAHUL PRODUCTS LTD. (SUPRA) CANNOT BE GIVEN PREFERENCE. WE MAY ALSO ADD HERE THAT THE REVENUE FILED THE APPEAL ORIGINALLY ON GROUND NO.1 WHICH WA S APPROVED BY THE LD. CIT, BHOPAL U/S 253(2) OF THE I T ACT. THE ABOVE APPEAL WAS UNDER CONSIDERATION AND WAS HEARD PARTLY ON 3.8.2007 AND ON THE REQUEST OF THE LD. DR, THE SAME WAS ADJOURNED TO 7.8.2007. AGAIN ON 7.8.2007, THE APPEAL WAS PARTLY HEARD AND ON THE REQUEST OF LD. DR, THE APPEAL WAS ADJOURNED TO 30 TH AUGUST, 2007. THE RECORD REVEALED THAT REVENUE DEPARTMENT FILED REVISED GROUNDS OF APPEAL IN THE REGISTRY ON 24.8.2007 RAISING THREE GROUNDS MENTION ED ABOVE. AGAIN THE APPEAL WAS ADJOURNED ON 30.8.2007 ON THE REQUEST OF LD. DR. THESE FACTS WOULD SHOW THAT THE REVENUE DEPARTMENT THROUGH ACIT-2(1) BHOPAL WITHOUT LEAVE OF THE TRIBUNAL HIMSELF FILED THE REVISED GRO UNDS OF APPEAL ON 24.8.2007. THESE REVISED GROUNDS ARE A LSO NOT APPROVED BY LD. CIT, BHOPAL U/S 253(2) OF THE I T ACT. WE MAY ALSO NOTE THAT ASSESSMENT ORDER IN THIS CASE WAS PASSED BY SHRI YOGENDRA DUBEY, DCIT-2(1), BHOPAL. T HE APPEAL IS ALSO FILED BY SHRI YOGENDRA DUBEY, DCIT-2 (1), BHOPAL ON THE ORIGINAL GROUNDS OF APPEAL IN WHICH THE CONCERNED AO DID NOT RAISE ANY GROUND OF VIOLATION OF RULE-46A BECAUSE AO WAS GIVEN REASONABLE SUFFICIENT 55 OPPORTUNITY TO EXAMINE THE ADDL. EVIDENCE BY THE LD . CIT(A). THE AO CHOOSE NOT TO EXAMINE ANY EVIDENCE A ND ALSO DID NOT DISPUTE GENUINENESS OF THE DOCUMENTS. THEREFORE, GROUND NO.2 AND 3 WERE NOT RIGHTLY RAISE D BY THE CONCERNED AO. HOWEVER, WE FIND THAT REVISED GROUNDS OF APPEAL ARE FILED BY SHRI SHRAVAN KUMAR MEENA, ACIT-2(1), BHOPAL WITHOUT ANY PERMISSION OR LEAVE OF THE TRIBUNAL. IT WOULD THEREFORE APPEAR TH AT THESE REVISED GROUNDS OF APPEAL NO.2 AND 3 ARE FILE D WITH CERTAIN EXTRANEOUS CONSIDERATION WITHOUT KNOWLEDGE OF THE CIT, BHOPAL AND WITHOUT THE LEAVE OF THE TRIBUNAL. NO APPLICATION IS FILED SEEKING LEAVE OF THE TRIBUNAL TO RAISE ADDL. GROUNDS OF APPEAL. RULE-11 OF APPELLATE TRIBUNAL RULES PROVIDES THAT THE APPELLAN T SHALL NOT, EXCEPT BY LEAVE OF THE TRIBUNAL, URGE OR BE HEARD IN SUPPORT OF ANY GROUND NOT SET FORTH IN THE MEMORANDUM OF THE APPEAL, BUT THE TRIBUNAL, IN DECIDING THE APPEAL SHALL NOT BE CONFINED TO THE GR OUNDS SET FORTH IN THE MEMORANDUM OF THE APPEAL OR TAKEN BY LEAVE OF THE TRIBUNAL UNDER THIS RULE. AS NOTED ABO VE, THE AO DID NOT SEEK ANY LEAVE OF THE TRIBUNAL IN FI LING REVISED (ADDL.) GROUNDS OF APPEAL OR FOR RAISING NE W GROUNDS OF APPEAL NOT RAISED IN THE MEMORANDUM OF APPEAL ORIGINALLY FILED. THEREFORE, THE REQUEST OF LD. DR IS LIABLE TO BE REJECTED. 8.4 CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES AND THAT LD. CIT(A) HAS NOT VIOLATED RULE-46A IN THE MA TTER AND NO LEAVE OF THE TRIBUNAL IS SOUGHT IN FILING RE VISED GROUNDS OF APPEAL, WE DO NOT FIND ANY MERIT IN THES E GROUNDS OF APPEAL FOR THE PURPOSE OF ADMITTING THE SAME FOR HEARING. SINCE THERE ARE NO MERIT IN BOTH THE G ROUND NO.2 AND 3 THEREFORE THERE IS NO PURPOSE IN ADMITTI NG THE SAME FOR HEARING. THE DECISIONS CITED BY LD. DR ARE THEREFORE CLEARLY DISTINGUISHABLE ON FACTS NOTED AB OVE. BOTH THESE GROUNDS ARE ACCORDINGLY NOT ADMITTED AND REQUEST OF LD. DR IS REJECTED. 56 9 NOW WE CONSIDER THE APPEAL OF THE REVENUE ON MERITS. LD. DR SUBMITTED THAT ASSESSEE HAS NOT PROV ED CREDITWORTHINESS OF M/S. ALLIANCE INDUSTRIES LTD. B ECAUSE NO BALANCE SHEET IS FILED. LD. DR SUBMITTED THAT SHAREHOLDER HAS NO KNOWLEDGE OF THE BUSINESS ACTIVI TY OF THE ASSESSEE. LD. DR SUBMITTED THAT ONUS ON THE ASSESSEE TO ESTABLISH AND PROVE THE IDENTITY AND EXISTENCE OF THE PERSON, GENUINENESS OF TRANSACTION AND THEIR CREDITWORTHINESS WHICH PROPOSITION IS ALSO SE TTLED BY THIS BENCH IN THE CASE OF ACIT VS. KALANI INDUST RIES, 8 ITJ 165. LD. DR SUBMITTED THAT THE CAPITAL CONTRIBU TION BY THE FOREIGN COMPANY AT A HAFTY PREMIUM WITHOUT PROPER JUSTIFICATION IS NOT JUSTIFIED AND REFERRED TO THE REMAND REPORT OF THE AO FILED BEFORE LD. CIT(A) IN WHICH IT WAS EXPLAINED THAT NO PRUDENT BUSINESSMAN WOULD BUY THE SHARES OF MINOR SHAREHOLDING AND THAT TOO WHEN MONEY IS COMING FROM GIBRALTAR. HE HAS SUBMITTED TH AT THE FACTS HIGHLIGHTED BY THE AO RAISES SERIOUS DOUB TS ABOUT THE GENUINENESS OF TRANSACTION AND IN THAT WA Y THERE WILL BE GREATER ONUS ON THE ASSESSEE TO ESTAB LISH CREDITWORTHINESS OF THE SHAREHOLDER MAKING HUGE CAP ITAL CONTRIBUTION. THE ORDER OF ITAT, DELHI BENCH, IN TH E CASE OF A-ONE HOUSING COMPLEX LTD., 15 SOT 574 IS RELIED UPON. LD. DR FURTHER SUBMITTED THAT THE DECI SION IN THE CASE OF STELLAR INVESTMENT AS CONFIRMED BY T HE SUPREME COURT IS DOUBTED BY THE FULL BENCH OF DELHI HIGH COURT IN THE CASE OF SOPHIYA FINANCE LTD., 205 ITR 98. LD. DR RELIED UPON FOLLOWING DECISIONS: DECISION OF THE M.P. HIGH COURT IN THE CASE OF CIT VS. DHAR ISPAT (P) LTD., 134 TAX MAN 747 (180 CTR 491), IN WHICH IT WAS HELD SEC. 68 IS APPLICABLE IN RESPECT OF SHARE APPLICATION MONEY; HOWEVER, THE QUESTION OF GENUINENESS OF THE ENTRIES REGARDING SHARE APPLICATION MONEY IS A QUESTION OF FACT TO BE DECIDED BY THE ASSESSEE AUTHORITY ON THE BASIS OF EVIDENCE AVAILABLE ON RECORD. 57 DECISION OF CALCUTTA HIGH COURT IN THE CASE OF CIT VS. RUBY TRADERS AND EXPORTERS LTD., 263 ITR 300, IN WHICH IT WAS HELD EXCEPT DISCLOSING THE LI ST OF THE SUBSCRIBERS TO ITS CAPITAL, ASSESSEE-COMPANY HAVING PRODUCED NOTHING FOR ESTABLISHING THE IDENTI TY OF THE SUBSCRIBERS OR FOR PROVING THEIR CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTION, S. 68 WAS ATTRACTED AND ADDITION WAS JUSTIFIED. DECISION OF CALCUTTA HIGH COURT IN THE CASE OF CIT VS. KUNDAN INVESTMENT LTD., 263 ITR 626, IN WHICH IT WAS HELD OUT OF 82 SHARE HOLDER SELECTED FOR NOTICE UNDER S. 133(6), 48 SHARE HOLDER DID NOT RESPOND TILL THE ASSESSMENT WAS MADE AND THIS INFORMATION WAS COMMUNICATED TO THE ASSESSEE. IT FURTHER APPEARS THAT THE ASSESSEE DID NOT TAKE ANY STEPS EITHER TO OBTAIN CONFIRMATORY LETTERS FROM THESE NON-RESPONDING SUBSCRIBERS NOR HAD ATTEMPTED TO PRODUCE THE SUBSCRIBERS NOR ANY TO DISCLOSE THE INCOME-TAX FILE NUMBERS OF THESE SUBSCRIBERS. NEITH ER HE HAD EVER APPLIED FOR ISSUING ANY NOTICE/SUMMONS UNDER S. 131 NOR TOOK ANY OTHER STEPS TO PROVE THE SAME. THE BURDEN, WHICH WAS INITIALLY DISCHARGED BY THE ASSESSEE SHIFTED ON THE REVENUE. THIS STOOD DISCHARGED BY THE REVENUE AFTER THE ENQUIRY WAS MADE THROUGH ISSUING NOTICE UNDER S. 133(6). WHEN THIS WAS SO COMMUNICATED TO THE ASSESSEE, IT WAS INCUMBENT ON THE ASSESSEE TO TAKE APPROPRIATE STEPS TO SUBSTANTIATE THE CREDITWORTHINESS OF THE SUBSCRIBERS AND PROVE THE GENUINENESS OF THE TRANSACTIONS. BUT, IT HAD NOT DONE SO. THEREFORE, TH E FINDING OF THE TRIBUNAL WITH REGARD TO THE PUBLIC ISSUE IN RESPECT OF THESE 30 PER CENT SUBSCRIBERS SEEMS TO BE PERVERSE. THEREFORE, THE TRIBUNALS FINDING WITH REGARD TO THE PUBLIC ISSUE CANNOT BE ACCEPTED. THE DECISION OF THE CIT (A) WITH REGARD THERETO IS AFFIRMED. 58 DECISION OF CALCUTTA HIGH COURT IN THE CASE OF BHOLA SHANKAR COLD STORAGE PVT. LTD. VS. JCIT, 27 0 ITR 487 IN WHICH IT WAS HELD THE QUESTION IS A QUESTION OF ESTABLISHMENT OF THE IDENTITY OF THE SUBSCRIBERS, WHICH, IN THIS CASE, HAS SINCE BEEN ESTABLISHED. THE NEXT POINT IS THE CREDITWORTHINESS OF THE INVESTORS AND THE LAST ONE IS WITH REGARD TO THE ESTABLISHMENT OF THE GENUINENESS OF THE TRANSACTION . IN THE COURSE OF DEPOSITION, THE APPLICANTS HAD STA TED THAT THEIR RESPECTIVE ANNUAL INCOME WAS BETWEEN RS. 8,000 AND RS. 10,000. THEY HAD ALSO DISCLOSED THAT THEY HAD VERY NEGLIGIBLE QUANTUM OF AGRICULTURAL LAND. APART FROM THE AGRICULTURAL LAND, THEY DID NO T DISCLOSE THAT THEY HAD ANY OTHER SOURCE OF INCOME O R BUSINESS. IT WAS CONCLUDED THAT OPINION FORMED BY AO ABOUT NON-GENUINENESS OF CASH CREDITS AND CREDITWORTHINESS OF CREDITORS WHO WERE SMALL FARMER S BEING NOT PERVERSE ON THE MATERIAL ON RECORD, NO INTERFERENCE WAS CALLED FOR. LD. DR FURTHER SUBMITTED THAT LAW DECLARED MUST BE SPEAKING AND ONLY THEN IT WOULD BE BINDING ON TH E COURTS. HE PLACES RELIANCE UPON THE DECISION OF SUP REME COURT IN THE CASE OF SHALMUGAVEL NADAR VS. STATE OF TAMILNADU, 263 ITR 658 AND ACCORDINGLY SUBMITTED TH AT THE DECISION OF SUPREME COURT IN THE CASE OF STELLA R INVESTMENT IS NOT BINDING. LD. DR SUBMITTED THAT TH E EVIDENCE OF RECORD SHOULD BE THUS BY APPLYING THE T EST OF HUMAN PROBABILITY AND RELIED UPON DECISIONS OF T HE SUPREME COURT IN THE CASES OF D.D. MORE, 82 ITR 540 AND SUMATI DAYAL, 241 ITR 801. LD. DR FURTHER SUBMITTED THAT ALL THE THREE REQUIREMENTS TO PROVE GENUINE CA SH CREDIT ARE ON THE ASSESSEE AND RELIED UPON DECISION OF KARNATAKA HIGH COURT IN THE CASE OF VISHWANATH AND CO. REPORTED IN 292 ITR 225. LD. DR SUBMITTED THAT DECI SION OF M.P. HIGH COURT IN THE CASE OF METACHEM INDUSTRI ES LTD., 245 ITR 160 CANNOT BE SAID TO BE APPLICABLE T O THIS CASE BECAUSE SAME IS DISTINGUISHABLE ON FACTS AND I S TO BE READ AND UNDERSTOOD IN THE LIMITED CONTEXT OF FA CTS OF THE CASE. LD. DR ALSO RELIED UPON DECISION OF SU PREME 59 COURT IN THE CASE OF MOHD. KALE KHAN AND ALSO SUBMI TTED THAT MERELY BECAUSE SHARE APPLICATION MONEY OF THE SAME SHAREHOLDER M/S. ALLIANCE INDUSTRIES LTD. IS ACCEPTED BY THE AO IN THE EARLIER YEAR WOULD NOT BE HELPFUL TO THE ASSESSEE BECAUSE PRINCIPLE OF RES-JU DICATA IS NOT APPLICABLE TO THE INCOME-TAX PROCEEDINGS AND WOULD NOT DEBAR THE REVENUE TO INVESTIGATE THE ISSU E IN THE LATTER YEAR. LD. DR RELIED UPON DECISION OF HON BLE SUPREME COURT IN THE CASE OF CIT VS. P. MOHAN KALA, 291 ITR 278 REGARDING THE TWO NATURE AND SCOPE OF PROVI SIONS OF SECTION 68 OF THE IT ACT. LD. DR ALSO SUBMITTED THAT DECISION IN THE CASE OF ASHOK PAL, 220 ITR 452 (MP) IS ON THE DIRECTION U/S 256(2). LD. DR ALSO SUBMITTED THA T THE DECISION OF MP HIGH COURT IN THE CASE OF SUMERMAL J AIN, 292 ITR 241 IS WITH REGARD TO GENUINENESS OF PURCHA SES. LD. DR LASTLY SUBMITTED THAT THE DOCUMENTS FILED BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW, COPIES OF WH ICH ARE FILED FROM PAGES 54 TO 71 WOULD ONLY ESTABLISH THE IDENTITY OF THE CREDITOR/SHAREHOLDER M/S. ALLIANCE INDUSTRIES LTD. LD. DR ACCORDINGLY SUBMITTED THAT S INCE ASSESSEE FAILED TO ESTABLISH CREDITWORTHINESS OF TH E SHAREHOLDER THEREFORE ORDER OF THE CIT(A) MAY BE REVERSED AND ORDER OF THE AO MAY BE RESTORED. 10 ON THE OTHER HAND, LD. COUNSEL FOR ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND SUBMITTED THAT THE AO DID NOT DISPUTE THE IDENTITY AND EXISTENCE OF THE SHAREHOLDER M/S. ALLI ANCE INDUSTRIES LTD. AS WELL AS DID NOT DISPUTE THE MODE OF TRANSFER OF MONEY FROM NRI COMPANY M/S. ALLIANCE INDUSTRIES LTD. TO THE ASSESSEE. HE HAS SUBMITTED T HAT AO ALSO DID NOT DISPUTE THAT THE SAID TRANSACTION T OOK PLACE THROUGH THE BANKING CHANNEL WITH THE PERMISSI ON OF THE RBI AND GOVT. OF INDIA. LD. COUNSEL FOR ASSE SSEE ALSO SUBMITTED THAT ASSESSEE FILED DETAILED EVIDENC ES AND CONFIRMATIONS FROM THE SHAREHOLDER ALONG WITH B ANK CERTIFICATES FROM STATE BANK OF INDIA, BHOPAL AND STANDARD CHARTERED BANK TO EXPLAIN THE CREDITWORTHI NESS OF THE SHAREHOLDER M/S. ALLIANCE INDUSTRIES LTD. LD . 60 COUNSEL FOR ASSESSEE SUBMITTED THAT AO CANNOT ASK T O EXPLAIN SOURCE OF THE SOURCE. HE HAS SUBMITTED THAT AO DID NOT DISPUTE THAT MONEY WAS TRANSFERRED THROUGH BANKING CHANNEL FROM GIBRALTAR COMPANY TO THE ASSES SEE UNDER THE RBI PERMISSION. HE HAS SUBMITTED THAT THE DECISION OF MP HIGH COURT IN THE CASE OF METACHEM INDUSTRIES (SUPRA) IS DIRECTLY APPLICABLE TO THIS C ASE. HE HAS ALSO RELIED UPON DECISION OF THE FULL BENCH OF DELHI HIGH COURT IN THE CASE OF SOPHIA FINANCE LTD. (SUPR A). LD. COUNSEL FOR ASSESSEE ALSO SUBMITTED THAT IN EAR LIER YEAR THE ASSESSEE RECEIVED SHARE APPLICATION MONEY FROM THE SAME SHAREHOLDER M/S. ALLIANCE INDUSTRIES LTD. WHICH WAS NOT DOUBTED BY THE AO AND NO ADDITION IS MADE. LD. COUNSEL FOR ASSESSEE SUBMITTED THAT RULE OF CONSISTENCY ARE APPLICABLE TO THE INCOME-TAX PROCEEDINGS. LD. COUNSEL FOR ASSESSEE SUBMITTED THA T ASSESSEE HAS DISCHARGED INITIAL ONUS TO PROVE IDENT ITY OF THE SHAREHOLDER, GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF THE SHAREHOLDER THEREFORE BURDE N STOOD DISCHARGED AND AO HAS NOT BROUGHT ANY EVIDENC E ON RECORD TO DISPROVE THE FINDINGS OF THE LD. CIT(A ). LD. COUNSEL FOR ASSESSEE ALSO RELIED UPON DECISION OF M .P. HIGH COURT IN THE CASE OF ASHOK PAL DAGA, 220 ITR 4 52 IN WHICH IT WAS HELD THAT WHEN THE ASSESSEE SATISFIED THE AO AS TO THE IDENTITY OF THE THIRD PARTY AND ALSO S UPPLIES SUCH OTHER EVIDENCE WHICH WOULD SHOW THAT THE ENTRY IS NOT FICTITIOUS, THE INITIAL BURDEN LIES ON HIM CAN BE SAID TO BE DISCHARGED BY HIM. HE HAS ALSO RELIED UPON DECISION OF PATNA HIGH COURT IN THE CASE OF SARAOGI CREDIT CORPN., 103 ITR 344 AND DECISION OF GAUHATI HIGH COURT IN THE CASE OF NEMICHAND KOTHARI, 264 ITR 254 AND DECISION OF M.P. HIGH COURT IN THE CASE OF SUMER CHANDRA JAIN, 292 ITR 241 IN WHICH IT WAS HELD THAT WHEN THE IDENTITY OF PARTIES IS GIVEN, THE GENUINEN ESS OR THE CAPACITY OF THE LENDERS AND TRANSACTION ARE NOT TO BE DISCARDED ON THE GROUND THAT THE ASSESSEE HAD NOT EXPLAINED SATISFACTORILY THE CASH CREDITS IN THE BO OKS OF ACCOUNT OF THE FIRM AND DISCHARGED THE BURDEN. LD. 61 COUNSEL FOR ASSESSEE THEREFORE SUBMITTED THAT APPEA L OF REVENUE HAS NO MERITS AND THE SAME MAY BE DISMISSED . 11 WE HAVE CONSIDERED RIVAL SUBMISSIONS AND MATERIAL ON RECORD. WE HAVE BESTOWED OUR CAREFUL CONSIDERATI ON AND DO NOT FIND ANY JUSTIFICATION TO INTERFERE IN T HE ORDER OF THE LD. CIT(A). 11.1 FULL BENCH OF DELHI HIGH COURT IN THE CASE OF CIT VS. SOPHIA FINANCE LTD. 205 ITR 98 HELD UNDER SECTION 68 OF THE INCOME-TAX ACT, 1961, THE INCOME-TAX OFFICER HAS JURISDICTION TO MAKE ENQUIRI ES WITH REGARD TO THE NATURE AND SOURCE OF A SUM CREDITED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AN D IT IS IMMATERIAL AS TO WHETHER THE AMOUNT SO CREDIT ED IS GIVEN THE COLOUR OF A LOAN OR A SUM REPRESENTING SALE PROCEEDS OR EVEN RECEIPT OF SHARE APPLICATION MONEY. THE USE OF THE WORDS ANY SUM FOUND CREDITED IN THE BOOKS. SECTION 68 INDICATES THAT T HE SECTION IS VERY WIDELY WORDED AND THE INCOME TAX OFFICER IS NOT PRECLUDED FROM MAKING AND ENQUIRY AS TO THE TRUE NATURE AND SOURCE OF A SUM CREDITED IN THE ACCOUNT BOOKS EVEN IF IT IS CREDITED AS RECEIPT OF SHARE APPLICATION MONEY. THE MERE FACT THAT THE (ASSESSEE) COMPANY CHOOSE TO SHOW THE RECEIPT OF TH E MONEY AS CAPITAL DOES NOT PRELUDE THE INCOME-TAX OFFICER FROM GOING INTO THE QUESTION WHETHER THIS I S ACTUALLY SO. WHERE, THEREFORE, AN ASSESSEE-COMPANY REPRESENTS THAT IT HAD ISSUED SHARES ON THE RECEIPT OF SHARE APPLICATION MONEY THEN THE AMOUNT SO RECEIVED WOULD BE CREDITED IN THE BOOKS OF ACCOUNT OF THE COMPANY. THE INCOME-TAX OFFICER WOULD BE ENTITLED, AND IT WOULD INDEED BE HIS DUTY, TO ENQUIRE WHETHER THE ALLEGED SHARE HOLDERS DO IN FACT EXIST OR NOT. IF THE SHARE HOLDERS EXIST THEN, POSSIBLY, NO FURTHER ENQUIRY NEED BE MADE. BUT IF THE INCOME-TAX OFFICER FINDS THAT THE ALLEGED SHAREHOLDERS DO NOT EXIST TH EN, IN EFFECT, IT WOULD MEAN THAT THERE IS NO VALID ISSUANCE OF SHARE CAPITAL. SHARES CANNOT BE ISSUED IN 62 THE NAME OF NON-EXISTING PERSONS. THE USE OF THE WORDS MAY BE CHARGED IN SECTION 68 CLEARLY INDICATES THAT THE INCOME-TAX OFFICER WOULD THEN HAVE THE JURISDICTION, IF THE FACTS SO WARRANT, TO TREAT SUCH A CREDIT TO BE THE INCOME OF THE ASSESSE E. IF THE SHARE HOLDERS ARE IDENTIFIED AND IT IS ESTABLISHED THAT THEY HAVE INVESTED MONEY IN THE PURCHASE OF SHARES, THEN THE AMOUNT RECEIVED BY THE COMPANY WOULD BE REGARDED AS A CAPITAL RECEIPT AND TO THAT EXTENT THE OBSERVATIONS IN CIT V. STELLAR INVESTMENT LTD., [1991] 192 ITR 287 (DELHI), ARE CORRECT; BUT THE OBSERVATIONS IN THAT CASE TO THE EFFECT THAT EVEN IF THE SUBSCRIBERS TO THE CAPITAL WERE NOT GENUINE UNDER NO CIRCUMSTANCE COULD THE AMOUNT OF SHARE CAPITAL BE REGARDED AS UNDISCLOSED INCOME OF THE [COMPANY] ARE NOT. M.P. HIGH COURT IN THE CASE OF CIT VS. DHAR ISPAT (P) LTD., 134 TAX MAN 747 (180 CTR 491) , HELD SEC. 68 IS APPLICABLE IN RESPECT OF SHARE APPLICATION MONEY; HOWEVER, THE QUESTION OF GENUINENESS OF THE ENTRIES REGARDING SHARE APPLICATION MONEY IS A QUESTION OF FACT TO BE DECID ED BY THE ASSESSEE AUTHORITY ON THE BASIS OF EVIDENCE AVAILABLE ON RECORD. DELHI HIGH COURT IN THE CASE OF CIT VS. STELLAR INVESTMENT LTD., 192 ITR 287 , HELD THAT, EVEN IF IT BE ASSUMED THAT THE SUBSCRIBERS TO THE INCREASED SHARE CAPITAL WERE NOT GENUINE, UNDER NO CIRCUMSTANCES COULD THE AMOUNT OF SHARE CAPITAL BE REGARDED AS UNDISCLOSED INCOME OF THE COMPANY. NO QUESTION OF LAW AROSE OUT OF THE TRIBUNALS ORDER. HON'BLE SUPREME COURT IN THE CASE OF CIT VS. STELLAR INVESTMENT LTD., 251 ITR 263 , HELD WE HAVE READ THE QUESTION WHICH THE HIGH COURT 63 ANSWERED AGAINST THE REVENUE. WE ARE IN AGREEMENT WITH THE HIGH COURT. PLAINLY, THE TRIBUNAL CAME TO A CONCLUSION ON FACTS AND NO INTERFERENCE IS CALLED F OR. THE APPEAL IS DISMISSED. NO ORDER AS TO COSTS. DELHI HIGH COURT IN THE CASE OF CIT VS. DOLPHIN CANPACK LTD., 283 ITR 190 , HELD IN ITS RETURN FOR THE ASSESSMENT YEAR 1998-99, THE ASSESSE E CLAIMED TO HAVE RECEIVED SHARE APPLICATION MONEY OF RS. 62 LAKHS. THE ASSESSING OFFICER REJECTED THE EXPLANATION OF THE ASSESSEE AND ADDED THE AMOUNT TO THE TAXABLE INCOME OF THE ASSESSEE. THE TRIBUNAL FOUND THAT THE ASSESSEE HAD FURNISHED COMPLETE DETAILS TO THE ASSESSING OFFICER REGARDING THE TRANSACTIONS IN QUESTION, WHICH INCLUDED CONFIRMATI ON DETAILS OF BANK ACCOUNTS AND THE PERMANENT ACCOUNT NUMBERS OF THE PARTIES IN WHOSE FAVOUR THE SHARE CAPITAL WAS SUBSCRIBED. THE TRIBUNAL ALSO NOTED THAT ALL THE PAYMENTS WERE RECEIVED BY THE ASSESSEE BY CHEQUES AND THAT THE ASSESSEE HAD, IN THE PROCESS, FULLY DISCHARGED THE ONUS THAT LAY UPON IT FOR PROV ING THE IDENTITY OF THE SUBSCRIBERS AND THE GENUINENESS OF THE TRANSACTIONS. ON THAT BASIS, IT DELETED THE ADDITION MADE BY THE AUTHORITIES BELOW. ON APPEAL TO THE HIGH COURT: HELD, DISMISSING THE APPEAL, THA T IN THE ABSENCE OF ANY PERVERSITY IN THE VIEW TAKEN BY THE TRIBUNAL OR ANYTHING TO ESTABLISH CONCLUSIVELY THAT THE FINDING REGARDING THE GENUINENESS OF THE SUBSCRIBERS AND THE TRANSACTIONS SUFFERED FROM ANY IRRATIONALITY, NO SUBSTANTIAL QUESTION OF LAW AROSE FROM THE ORDER OF THE TRIBUNAL. THE DELETION OF THE AMOUNT WAS JUSTIFIED. GAUHATI HIGH COURT IN THE CASE OF CIT VS. DOWN TOWN HOSPITAL PVT. LTD., 267 ITR 439 , HELD THAT REGARDING AMOUNTS RECEIVED AS SHARE APPLICATION MONEYS, THE TRIBUNAL HAD GIVEN CLEAR FINDING AFTER APPRECIATION OF THE MATERIAL ON RECOR D THAT THE ASSESSEE HAD FILED THE DETAILS REGARDING T HE 64 SOURCE OF FUNDS OF SHARES AND THEIR INCOME TAX FILE NOS. BEFORE AO. ACCORDING TO THE TRIBUNAL THE ASSESSEE HAD ALSO SUBMITTED BEFORE THE AO THE CONFIRMATION FROM THE CREDITORS WHERE FULL ADDRESSES, INCOME TAX NO. ETC. WERE GIVEN. THE TRIBUNAL WAS JUSTIFIED IN DELETING THE ADDITION. RAJASTHAN HIGH COURT IN THE CASE OF SHREE BARKHA SYNTHETICS LTD. VS. CIT, 283 ITR 377 , HELD IF THE TRANSACTIONS ARE MADE THROUGH BANKING CHANNELS AND ONCE THE EXISTENCE OF PERSONS BY NAME IN THE SHARE APPLICATIONS IN WHOSE NAME THE SHARES HAVE BEEN ISSUED IS SHOWN, THE ASSESSEE-COMPANY CANNOT BE HELD RESPONSIBLE TO PROVE WHETHER THAT PERSON HIMSELF HAS INVESTED THE SAID MONEY OR SOME OTHER PERSON HAD MADE INVESTMENT IN THE NAME OF THAT PERSON. THE BURDEN THEN SHIFTS ON THE REVENUE TO ESTABLISH THAT SUCH INVESTMENT HAS COME FROM THE ASSESSEE-COMPANY ITSELF. DELHI HIGH COURT IN THE CASE OF CIT VS. DWARKADHISH FINANCIAL SERVICES,148 TAXMAN 54 , HELD THE ASSESSEE HAD PRODUCED ALL RELEVANT EVIDENCE TO ESTABLISH THAT THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE WAS A RESULT OF GENUINE TRANSACTION. IT HAD BEEN NOTICED EVEN IN TH E IMPUGNED ORDER THAT EVIDENCE WAS PRODUCED BY THE ASSESSEE INCLUDING AFFIDAVITS, COPIES OF THE SHARE APPLICATION FORMS, COPIES OF THE CONFIRMATION FROM THE APPLICANT-COMPANIES, COPIES OF BOARD OF DIRECTORS RESOLUTION APPROVING SUCH TRANSACTIONS A S WELL AS CHEQUE NUMBER, BRANCH AND ADDRESS OF THE BANK THROUGH WHICH THE INVESTMENT WAS MADE. IT WAS ALSO NOTICED THAT THE ASSESSING OFFICER HIMSELF HAD NOTICED IN HIS ORDER THAT THE APPLICANT-SHARE HOLDERS WERE INCOME-TAX PAYEES. IN SUCH CIRCUMSTANCES, IT COULD NOT BE PRESUMED THAT THE SHARE HOLDER WHO WAS ASSESSED TO TAX WAS NOT IN 65 EXISTENCE. THAT WOULD TANTAMOUNT TO CONTRADICTION IN THE STAND OF THE DEPARTMENT ITSELF. ITAT, JODHPUR BENCH (TM) IN THE CASE OF UMA POLYMERS (P) LTD. VS. DCIT, 124 TTJ 124 , HELD IN RESPECT OF SHARE CAPITAL MONEY, THE ASSESSEE- COMPANY HAS TO PROVE ONLY THE EXISTENCE OF THE PERSON IN WHOSE NAME SHARE APPLICATION IS RECEIVED AND THERE IS NO FURTHER BURDEN ON THE ASSESSEE TO PROVE WHETHER THAT PERSON HIMSELF HAS INVESTED THE MONEY OR SOME OTHER PERSON HAS MADE THE INVESTMENT IN HIS NAME; DISTINCTION BETWEEN A PUBLI C COMPANY AND A PRIVATE COMPANY IS NOT VERY MATERIAL FOR THIS PURPOSE. MADHYA PRADESH HIGH COURT IN THE CASE OF CIT VS. METACHEM INDUSTRIES, 245 ITR 160 , HELD ONCE IT IS ESTABLISHED THAT THE AMOUNT HAS BEEN INVESTED BY A PARTICULAR PERSON, BE HE A PARTN ER OR AN INDIVIDUAL, THEN THE RESPONSIBILITY OF THE ASSESSEE IS OVER. WHETHER THAT PERSON IS AN INCOME- TAX PAYER OR NOT AND WHERE HE HAD BROUGHT THIS MONEY FROM, IS NOT THE RESPONSIBILITY OF THE FIRM. THE MOMENT THE FIRM GIVES A SATISFACTORY EXPLANATION AND PRODUCES THE PERSON WHO HAS DEPOSITED THE AMOUNT, THEN THE BURDEN OF THE FIRM IS DISCHARGED AND IN THAT CASE THAT CREDIT ENTRY CANNOT BE TREATE D TO BE THE INCOME OF THE FIRM OR THE PURPOSES OF INCOME-TAX. ITAT INDORE BENCH IN THE CASE OF ACIT VS. M/S VINDHYA SOYA LIMITED, ITA NO. 227/IND/ 2004 , HELD IN THE INSTANT CASE, THE CIT (A) IN ANNEXURE O F HIS ORDER HAS MENTIONED DETAILS OF THE SHARE HOLDER , THEIR ADDRESSES, HOLDING OF AGRICULTURAL LAND, PERMANENT ACCOUNT NUMBER OF SOME OF THE SHARE HOLDERS, AMOUNT OF DEPOSIT, THEIR OCCUPATION AND EVIDENCE FILED IN FORM OF CONFIRMATION LETTER, COPY OF ACKNOWLEDGEMENT RECEIPT OF SOME OF THE SHARE 66 HOLDERS FILING RETURN OF INCOME, EVIDENCE OF AGRICULTURAL HOLDING, ETC. WE HAVE ALSO NOTED THAT THE ASSESSEE COMPANY HAS FURNISHED COMPLETE DETAILS OF ALL THE SHARE HOLDERS. THEREFORE, BEFORE DRAWING ANY CONCLUSION THE AO SHOULD HAVE ISSUED SUMMONS U/S 131 TO THESE SHARE HOLDERS TO ARRIVE AT THE TRU TH ABOUT THE INVESTMENT MADE BY THEM. HOWEVER, NO SUCH EXERCISE WAS CARRIED OUT BY THE AO AND SIMPLY FOR THE REASON THAT THE AMOUNT WAS DEPOSITED IN CASH, HE HELD THAT THE CREDIT WORTHINESS OF AND GENUINENESS OF TRANSACTION WAS NOT PROVED. THE AO HAS NOT DOUBTED THE IDENTITY OF THE SHARE HOLDERS. FROM THE ABOVE IT APPEARS THAT THE AO MADE THE ADDITION ON SURMISES AND CONJECTURES. THEREFORE, IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AND PLACING RELIANCE ON THE DECISIONS DISCUSSED (SUPRA) , WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CI T (A). HENCE, THE APPEAL OF THE REVENUE IS DISMISSED. DELHI HIGH COURT IN THE CASE OF CIT VS. GLOCOM IMPEX P. LTD. , 205 CTR 571 , HELD ONCE IT WAS ESTABLISHED THAT THE SHARE HOLDER WAS A GENUINE PERSON AND ALSO CREDITWORTHY AND THAT SHE HAD THE REQUISITE AMOUNT FOR MAKING THE INVESTMENT IN QUESTION, NO ADDITION COULD BE MADE UNDER S. 68 IN THE HANDS OF THE ASSESSEE-COMPANY ; REVENUE COULD NOT GO FURTHER TO FIND OUT WHETHER THE PERSON FROM WHOM THE SHARE HOLDER HAD RECEIVED MONEY THROUGH CHEQUE WAS ALSO A GENUINE PARTY AND CREDITWORTHY. HON'BLE GAUHATI HIGH COURT IN THE CASE OF NEMICHAND KOTHARI VS. CIT 264, ITR 254 , HELD THAT THE ASSESSEE HAD ESTABLISHED THE IDENTITY OF THE CREDITORS. THE ASSESSEE HAD ALSO SHOWN, IN ACCORDANCE WITH THE BURDEN, WHICH RESTED ON HIM UNDER SECTION 106 O F THE EVIDENCE ACT, THAT THE SA ID AMOUNTS HAD BEEN RECEIVED BY HIM BY WAY OF CHEQUES FROM THE CREDITORS WHICH WAS NOT IN DISPUTE. ONCE T HE ASSESSEE HAD ESTABLISHED THESE, THE ASSESSEE MUST B E 67 TAKEN TO HAVE PROVED THAT THE CREDITOR HAD THE CREDITWORTHINESS TO ADVANCE THE LOANS. THEREAFTER, THE BURDEN HAD SHIFTED TO THE ASSESSING OFFICER TO PROVE THE CONTRARY. THE FAILURE ON THE PART OF THE CREDITORS TO SHOW THAT THEIR SUB-CREDITORS HAD CREDITWORTHINESS TO ADVANCE THE SAID LOAN AMOUNTS TO THE ASSESSEE, COULD NOT, UNDER THE LAW BE TREATE D AS THE INCOME FROM UNDISCLOSED SOURCES OF THE ASSESSEE HIMSELF, WHEN THERE WAS NEITHER DIRECT NOR CIRCUMSTANTIAL EVIDENCE ON RECORD THAT THE SAID LOA N AMOUNTS ACTUALLY BELONGED TO, OR WERE OWNED BY, THE ASSESSEE. THE ASSESSING OFFICER FAILED TO SHOW THAT THE AMOUNTS, WHICH HAD COME TO THE HANDS OF THE CREDITORS FROM THE HANDS OF THE SUB-CREDITORS, HAD ACTUALLY BEEN RECEIVED BY THE SUB-CREDITORS FROM TH E ASSESSEE. THEREFORE, THE ASSESSING OFFICER COULD NOT HAVE TREATED THE SAID AMOUNTS AS INCOME DERIVED BY THE ASSESSEE FROM UNDISCLOSED SOURCES. HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. FIRST POINT FINANCE LTD. 286 ITR 477 , HELD THAT IT WAS NOT DENIED THAT ALL THE SHARE HOLDERS/ SHARE APPLICANTS WERE GENUINELY EXISTING PERSONS. IT WAS ALSO NOT DENIED THAT EACH OF THEM WAS AN INCOME-TAX ASSESSEE AND COPIES OF THE RETURN OF THEIR INCOME WERE ALSO PLACE BEFORE THE ASSESSING OFFICER. THERE WAS NO PRESUMPTION THAT THE ASSESSEE WAS THE BENAMI OWNER OF THE INVESTMENT MADE BY THE EXISTING PERSONS. THE TRIBUNAL WAS JUSTIFIED IN DELETING THE ADDITION. HON'BLE DELHI HIGH COURT IN THE RECENT DECISION IN THE CASE OF CIT VS. ILLAC INVESTMENT PVT. LTD. 28 7 ITR 135 , HELD THE RESPONDENT-ASSESSEE HAD FOR THE ASSESSMENT YEAR 1989-90 DISCLOSED IN ITS RETURN SUM OF RS. 4,75,000 RECEIVED AS SHARE APPLICATION MONEY . THE ASSESSING OFFICER ADDED THE SAID AMOUNT TO THE TAXABLE INCOME OF THE ASSESSEE UNDER SECTION 68 OF THE INCOME-TAX ACT, 1961, ON THE GROUND THAT THE 68 IDENTITY OF THE SUBSCRIBERS HAD NOT BEEN ESTABLISHE D. IN AN APPEAL FILED BY THE ASSESSEE AGAINST THE SAID ORDER, THE COMMISSIONER OF INCOME-TAX (APPEALS) HEL D THAT THE ASSESSEE HAD SATISFACTORILY ESTABLISHED IDENTITY OF THE SHARE SUBSCRIBERS. THE VIEW TAKEN WITH THE ASSESSING OFFICER WAS, ACCORDINGLY, REVERSED. THE INCOME-TAX APPELLATE TRIBUNAL HAS IN A FURTHER APPEAL FILED BY THE REVENUE BEFORE IT PLACE D RELIANCE UPON THE DECISION OF THIS COURT IN CIT V. ANTARCTICA INVESTMENT P. LTD. [2003] 262 ITR 493 AND CIT V. SOPHIA FINANCE LTD. [1994] 205 ITR 98 (DELHI) [FB] TO HOLD THAT THE RESPONDENT ASSESSEE H AD DISCHARGED THE ONUS BY REFERENCE TO THE MATERIAL PRODUCED TO ESTABLISH THE IDENTITY OF THE SUBSCRIBE RS. THE TRIBUNAL HAS OBSERVED: ON GOING THROUGH THE VARIOUS ORDERS TO WHICH REFERENCE HAS BEEN MADE BY THE LEARNED COUNSEL FOR ASSESSEE, IT IS FOUND THAT ON SIMILAR FACTS THE ADDITIONS MADE BY THE ASSESSING OFFICER HAVE BEEN DELETED. SO FAR AS THE PRESENT CASE IS CONCERNED, T HE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS CONSIDERED THE FACTS AND CIRCUMSTANCES IN DETAIL AN D HAS RECORDED FINDINGS OF FACT. HE HAS ALSO PLACED RELIANCE ON THE DECISION IN THE CASE OF CIT V. SOPHI A FINANCE LTD. [1994] 205 ITR 98 (DELHI) [FB]. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ALSO CONSIDERED THE PROVISIONS OF SECTIONS 72,75 AN D 77 OF THE COMPANIES ACT AND HAS ALSO TAKEN INTO CONSIDERATION THE DETAILS FURNISHED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER INCLUDING THE CERTIFIC ATE OF INCORPORATION OF SUBSCRIBERS, COPIES OF THEIR BA NK STATEMENTS AND COPIES OF THEIR ASSESSMENT ORDERS AS WELL AS THE COPIES OF THEIR AUDITED ACCOUNTS. THE FINDINGS RECORDED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ARE BASED ON A PROPER APPRAISAL OF THE MATERIAL AND WE DO NOT FIND ANY SCOPE TO INTERFERE WITH THE SAME. CONSEQUENTLY, THE 69 ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IS UPHELD. 12 IT IS ADMITTED FACT THAT THE ASSESSEE FILED THE CONFIRMATION LETTER FROM M/S. ALLIANCE INDUSTRIES L TD. CONFIRMING THAT IT HAS TRANSFERRED FOREIGN CURRENCY FROM THEIR BANK TO THE ACCOUNT OF THE ASSESSEE AND IN TH E SAID CONFIRMATION ALL THE DETAILS OF SEVERAL PAYMENTS AR E MENTIONED. IT IS ALSO ADMITTED FACT THAT THE SAID N RI COMPANY IS REGISTERED COMPANY AND WHICH FACT IS ALS O PROVED BY THE CERTIFICATE OF INCORPORATION OF M/S. ALLIANCE INDUSTRIES LTD. WHICH IS ALSO CERTIFIED BY THE NOTARY PUBLIC AND IS COUNTERSIGNED BY THE GOVERNOR AND COMMANDER IN CHIEF OF THE CITY OF GIBRALTAR. THESE CERTIFICATES ARE SUPPORTED BY LATER ON BY FARIA AND ASSOCIATES CHARTERED ACCOUNTANTS. THE IDENTITY OF T HE FOREIGN INVESTOR M/S. ALLIANCE INDUSTRIES LTD. IS T HEREFORE ESTABLISHED BEYOND DOUBT. THE AO ALSO DID NOT DISPU TE THE IDENTITY AND EXISTENCE OF THE SHAREHOLDER M/S. ALLIANCE INDUSTRIES LTD. THE AO ALSO DID NOT DISPUT E TRANSFER OF MONEY BY M/S. ALLIANCE INDUSTRIES LTD. TO THE ASSESSEE FOR THE PURCHASE OF SHARES OF THE ASSESSEE COMPANY AND THE AMOUNT INVESTED IN THE ASSESSEE COMPANY ON ACCOUNT OF SHARE CAPITAL/SHARE PREMIUM. THE ASSESSEE FROM THE CERTIFICATE OF THE GOVT. OF I NDIA HAS ESTABLISHED THAT M/S. ALLIANCE INDUSTRIES LTD. INVESTED THE MONEY IN THE BUSINESS OF THE ASSESSEE AFTER OBTAINING THE PERMISSION OF THE GOVT. OF INDIA. THE FORMS FILED WITH THE RBI WOULD ALSO INDICATE THAT T HE FOREIGN REMITTANCES RECEIVED FROM M/S. ALLIANCE INDUSTRIES LTD. WERE DULY APPROVED BY RBI FOR INVES TMENT IN THE SHAREHOLDING OF THE ASSESSEE COMPANY. THE ASSESSEE ALSO FILED SEVERAL CERTIFICATES ISSUED TIM E TO TIME BY THE STATE BANK OF INDIA, COMMERCIAL BRANCH, BHOPAL EXPLAINING THEREIN THAT ON SEVERAL DATES THE FOREIGN REMITTANCES WERE ORDERED, TO BE CREDITED TO THE ACCOUNT OF THE ASSESSEE WITH STATE BANK OF INDIA, B Y M/S. ALLIANCE INDUSTRIES LTD. THE ASSESSEE AT THE APPELLATE STAGE FILED A CONSOLIDATED CERTIFICATE IS SUED BY 70 STATE BANK OF INDIA, COMMERCIAL BRANCH, BHOPAL EXPLAINING THEREIN THAT STANDARD CHARTERED BANK, DU BAI HAS CONFIRMED THAT ALL THE REMITTANCES SENT IN FAVO UR OF THE ASSESSEE COMPANY BY M/S. ALLIANCE INDUSTRIES LT D. ARE ROUTED THROUGH THE BANK ACCOUNT OF M/S. ALLIANC E INDUSTRIES LTD. THE DETAILS OF PAYMENTS, DATE AND U SD ARE THE SAME AS HAVE BEEN MENTIONED IN THE CONFIRMATION LETTER OF M/S. ALLIANCE INDUSTRIES LTD . FILED BEFORE THE AO AND ARE ON THE SAME LINE ON WHICH ASSESSEE FILED SEVERAL CERTIFICATES BEFORE THE AO. THE STANDARD CHARTERED BANK ALSO FILED CERTIFICATE CONFIRMING THE ABOVE POSITION AND THAT M/S. ALLIANC E INDUSTRIES LTD. MAINTAINED BANK ACCOUNT WITH THEM A ND THE ACCOUNT IS CONDUCTED TO THEIR SATISFACTION. THE AO NEITHER AT THE ASSESSMENT STAGE NOR AT THE APPELLAT E STAGE DISPUTED THE GENUINENESS OF THESE DOCUMENTARY EVIDENCES AND ALSO DID NOT MAKE ANY MEANINGFUL INQU IRY ON SUCH EVIDENCES. STATE BANK OF INDIA, BHOPAL CONFIRMED THE NAME OF M/S. ALLIANCE INDUSTRIES LTD. IN THE CERTIFICATES WHO HAS TRANSFERRED THE USD TO THE ASSESSEE. THE ENTRIES IN THE CONFIRMATION ARE THERE FORE CONFIRMED BY THE STATE BANK OF INDIA, BHOPAL ALSO. FROM THE ABOVE IT IS CLEARLY PROVED BY THE ASSESSEE THAT THE AMOUNT IN QUESTION HAVE COME TO THE ASSESSEE COMPAN Y FROM THE BANK ACCOUNT OF M/S. ALLIANCE INDUSTRIES L TD. THROUGH PROPER BANKING CHANNEL AND IT IS THE MONEY OF M/S. ALLIANCE INDUSTRIES LTD. THAT HAS COME TO THE ASSESSEE AND THAT M/S. ALLIANCE INDUSTRIES LTD. HAD THE CAPACITY TO INVEST THIS MUCH OF THE AMOUNT DURING T HE FY RELEVANT TO THE AY IN QUESTION. THE TRANSFER OF FOREIGN CURRENCY FROM THE BANK ACCOUNT OF M/S. ALLI ANCE INDUSTRIES LTD. CLEARLY PROVED THE CREDITWORTHINESS OF M/S. ALLIANCE INDUSTRIES LTD. IT IS A SETTLED LAW T HAT THE INCOME-TAX AUTHORITY CANNOT ASK THE ASSESSEE TO PRO VE SOURCE OF THE SOURCE. ALL THE ISSUE OF THE SHARES T O M/S. ALLIANCE INDUSTRIES LTD. HAVE ALREADY BEEN REPORTED BY THE ASSESSEE TO THE REGISTRAR OF COMPANIES. AS PER SUBMISSION OF LD. COUNSEL FOR ASSESSEE THOUGH THE DIRECTORATE OF ENFORCEMENT GOVT. OF INDIA CONDUCTED 71 CERTAIN INQUIRIES AGAINST THE ASSESSEE UNDER THE PROVISIONS OF FOREIGN EXCHANGE MANAGEMENT ACT BUT N O FURTHER INQUIRY HAS BEEN MADE INTO THE MATTER. IT W OULD ALSO PROVE THAT THE MONEY IN QUESTION FLOW FROM M/S . ALLIANCE INDUSTRIES LTD. THEREFORE AO WAS NOT JUSTI FIED IN DRAWING ADVERSE INFERENCE AGAINST THE ASSESSEE. THE AO HAS NOT BROUGHT ANY EVIDENCE ON RECORD THAT THE SHA RE APPLICATION MONEY RECEIVED BY ASSESSEE FROM M/S. ALLIANCE INDUSTRIES LTD. BELONG TO THE ASSESSEE OR THAT IT WAS THE ASSESSEES OWN MONEY WHICH IT HAD RECEIVED IN THE SHAPE OF DOLLARS FROM THE NRI COMPANY. IT IS THEREFORE NOT IN THE NATURE OF INCOME OF THE ASSESS EE BECAUSE THE MONEY RECEIVED WAS ON ACCOUNT OF SHARE CAPITAL/SHARE PREMIUM. THE LD. CIT(A) HAS GIVEN CATEGORICAL FINDING IN THE IMPUGNED ORDER THAT THE AO HIMSELF HAD ACCEPTED THE SIMILAR DEPOSITS IN THE EA RLIER AYS 2001-02 AND 2002-03 AS GENUINE. HE ALSO OBSERVE D IN FACT ASSESSEE ORDER RELATING TO AY 2001-02 WAS PASS ED AFTER INQUIRY U/S 143(3) WHEREIN SIMILAR INVESTMENT FROM SAME NRI COMPANY M/S. ALLIANCE INDUSTRIES LTD. TO T HE TUNE OF RS.4,64,71,322/- WAS ACCEPTED AS GENUINE AN D INVESTMENT OF RS.9,47,81,895/- FROM THE SAME COMPAN Y WAS ALSO ACCEPTED IN SUBSEQUENT AY 2002-03 U/S 143( 1). LD. COUNSEL FOR ASSESSEE ALSO ARGUED AND MADE THE ABOVE SUBMISSION BEFORE THE TRIBUNAL AS CONSIDERED BY LD. CIT(A). DURING THE COURSE OF ARGUMENTS, LD. DR DID NOT DISPUTE THE ABOVE FACTS RECORDED BY THE LD. CIT (A) IN THE IMPUGNED ORDER AND THEREFORE IT STANDS PROVED T HAT IN THE EARLIER YEARS THE AO DID NOT DISPUTE THE IDE NTITY OF M/S. ALLIANCE INDUSTRIES LTD., GENUINENESS OF TRANSACTION AND ITS CREDITWORTHINESS IN RESPECT OF SHARE APPLICATION MONEY REMITTED BY THE ABOVE FOREIGN INVESTOR. WE DO NOT FIND IF THERE IS ANY DEVIATION OF THE FACTS OF THE INVESTMENT IN RESPECT OF THE SAME NRI COMPANY M/S. ALLIANCE INDUSTRIES LTD. WE MAY ALSO N OTE THAT IN AY 2001-02, THE ASSESSMENT ORDER U/S 143(3) WAS PASSED BY THE SAME AO SHRI YOGENDRA DUBEY, ACIT-2(1 ), BHOPAL ACCEPTING THE IDENTICAL SUBMISSION OF THE ASSESSEE. THEREFORE, THERE WAS NO JUSTIFICATION ON THE 72 PART OF SAME AO SHRI YOGENDRA DUBEY FOR NOT ACCEPTI NG THE CREDITS IN THIS YEAR AS GENUINE. LD. DR SUBMITT ED THAT PRINCIPLE OF RES-JUDICATA IS NOT APPLICABLE AN D AO IS COMPETENT TO MAKE INQUIRY ON THE SAME FACTS IN THE SUBSEQUENT YEAR. HONBLE M.P. HIGH COURT IN THE CAS E OF CIT VS. GODAWARI CORPN. LTD., 156 ITR 835 HELD WIT H REGARD TO THE THIRD POINT, WE WOULD LIKE TO SAY THA T THE QUESTION POSED BEFORE US IS NOT WHETHER THE TRIBUNA L HAS COMMITTED AN ERROR OF LAW IN APPLYING THE PRINCIPLE S OF RES-JUDICATE. HOWEVER, THOUGH IT IS TRUE THAT THE PRINCIPLES OF RES-JUDICATA DO NOT APPLY, THE RULE O F CONSISTENCY DOES APPLY. IN THE INSTANT CASE, THE DEPARTMENT HAS FAILED TO POINT OUT THAT THE CIRCUMSTANCES FOR TREATING THE GAIN IN THE TRANSACT IONS FOR THE ASSESSMENT YEAR 1972-73 AS A CAPITAL GAIN W ERE DIFFERENT FROM THOSE IN THE ASSESSMENT YEARS 1962-6 3 AND 1963-64 AND, AS SUCH, THE FINDING HAS TO BE CONSISTENT. THE TRIBUNAL HAS, THEREFORE, NOT COMMIT TED ANY ERROR. IN THIS RESPECT, WE WOULD LIKE TO SET OU T HEREINBELOW AN EXCERPT FROM THE DECISION OF THE ORI SSA HIGH COURT IN CIT VS. BELPAHAR REFRACTORIES LTD. [1 981] 128 ITR 610 AT PP. 613-614. HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. VIKAS CHEMI GUM INDIA, 276 ITR 32 HELD THAT SI NCE THE APPELLANT DID NOT CHALLENGE THE ORDER PASSED BY THE TRIBUNAL IN RELATION TO THE ASSESSMENT YEAR 1986-87 BY WHICH IT CONFIRMED THE ORDER OF THE COMMISSIONER(APPEALS) DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF VALUE OF BARDANA USED FOR STORING CHURI AND KORMA, IT COULD NOT CHALLENGE A SIMILAR ORDER PASSED IN RELATION TO THE AY 1988-89. HONBLE SUPREME COURT IN THE CASE OF BERGER PAINTS INDIA LTD. VS. CIT, 266 ITR 99 HELD HIGH COURT-DECISION IN THE CASE OF ONE ASSESSEE-DEPARTMENT ACCEPTING AND NOT CHALLENGING CORRECTNESS-NOT OPEN TO DEPARTMENT TO CHALLENGE IN THE CASE OF OTHER ASSESSEES, WITHOUT JUST CAUSE. 73 IN VIEW OF THE ABOVE FACTS AND DECISIONS NOTED, WE DO NOT FIND ANY MERIT IN THE SUBMISSION OF LD. DR, THE SAME IS THEREFORE REJECTED. LD. DR ALSO SUBMITTED THAT BALANCE SHEET OF M/S. ALLIANCE INDUSTRIES LTD. IS N OT FILED AS IS CONSIDERED RELEVANT IN THE CASE OF M/S. KALAN I INDUSTRIES LTD. (SUPRA). WE DO NOT AGREE WITH THE SUBMISSION OF LD. DR BECAUSE EVERY CASE HAS ITS OWN FACTS AND THE FINDINGS ARE DEPENDANT UPON THE APPRECIATION OF THE EVIDENCE AVAILABLE ON RECORD. I N THE CASE OF PRESENT ASSESSEE, THE ENTIRE DOCUMENTARY EVIDENCE AVAILABLE ON RECORD AND THE PREVIOUS HISTO RY OF ASSESSEE NOTED ABOVE IN RESPECT OF THE SAME NRI COMPANY M/S. ALLIANCE INDUSTRIES LTD. CLEARLY PROVE D THE CASE OF THE ASSESSEE THAT THE SHARE APPLICATION MON EY RECEIVED BY THE ASSESSEE IS NOT IN THE NATURE OF IN COME OF THE ASSESSEE. THE ASSESSEE ALSO ABLE TO PROVE CREDITWORTHINESS OF M/S. ALLIANCE INDUSTRIES LTD. T HIS CONTENTION OF LD. DR IS ALSO REJECTED. LD. DR ALSO CONTENDED THAT AO RAISED SERIOUS DOUBT ABOUT THE GENUINENESS OF TRANSACTION BECAUSE NO PRUDENT BUSINESSMAN WOULD MAKE HUGE INVESTMENT FOR GETTING LESSER SHAREHOLDING IN THE COMPANY. IT APPEARS FROM THE ABOVE SUBMISSION FROM THE LD. DR THAT HE HIMSELF CONTRADICTED HIS SUBMISSION BECAUSE ACCORDING TO HI S SUBMISSION FOR PROVING GENUINE CREDIT U/S 68 THE ASSESSEE SHALL HAVE TO PROVE IDENTITY OF CREDITOR, GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF THE CREDITOR WHICH ASSESSEE IN THIS CASE HAS ALREADY PR OVED. WHAT THE BUSINESSMAN HAS TAKEN A DECISION IS ENTIRE LY DEPENDANT UPON THEIR BUSINESS NEEDS WHICH IS NOT OP EN TO CHALLENGE BY THE REVENUE THEREFORE IT WAS NOT RELEVANT CRITERIA TO DISBELIEVE THE VERSION OF THE ASSESSEE. LD. DR ALSO SUBMITTED THAT NRI COMPANY WA S NOT KNOWING MUCH ABOUT THE ASSESSEE BEFORE MAKING T HE HUGE INVESTMENT. IT APPEARS THAT LD. DR FORGOT TO N OTE THAT THE SAME NRI COMPANY HAD MADE INVESTMENT IN TH E ASSESSEE COMPANY IN THE EARLIER YEARS WHICH IS NOT DISPUTED BY THE AO THEREFORE CONTENTIONS OF THE LD. DR 74 HAVE NO MERITS AND ARE REJECTED. THE RELIANCE OF LD . DR ON THE ORDER OF ITAT, DELHI BENCH IN THE CASE OF A- ONE HOUSING COMPLEX LTD.(SUPRA) IS MISPLACED BECAUSE ULTIMATELY IN THIS CASE IT WAS HELD WHETHER ONUS O F ASSESSEE IN THE CASE OF SHARE CAPITAL BY PUBLIC ISS UE IS LIGHTER ONE AND THEREFORE SUCH ONUS WOULD STAND DISCHARGED IF IDENTITY OF SHARE APPLICANT IS ESTABL ISHED- HELD-YES. THIS CASE IS NOT APPLICABLE IN FAVOUR OF THE REVENUE BECAUSE THE AMOUNT IS NOT RECEIVED FROM CLO SE RELATIVE OR FRIEND. 12.1 ON GOING THROUGH THE ABOVE DOCUMENTARY EVIDENCES ON RECORDS AND THE JUDICIAL PRONOUNCEMENT S REFERRED TO ABOVE, IT IS CLEAR NEITHER THE AO NOR T HE LD. DR APPEARING FOR THE REVENUE HAVE DISPUTED THE DOCUMENTARY EVIDENCES FILED BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW. THE ONLY POINT AGITATED BY THE A O WAS CREDITWORTHINESS OF M/S. ALLIANCE INDUSTRIES LT D. WHICH IS ALSO SATISFACTORILY PROVED BY THE ASSESSEE . THE DECISION OF THE FULL BENCH OF DELHI HIGH COURT IN T HE CASE OF M/S. SOPHIA FINANCE LTD. (SUPRA) HOLDS THE FIELD . HONBLE MP HIGH COURT IN THE CASE OF DHAR ISPAT PVT . LTD. HELD THAT THE QUESTION OF GENUINENESS OF ENTRIES REGARDING SHARE APPLICATION MONEY IS A QUESTION OF FACT TO BE DECIDED ON THE BASIS OF EVIDENCE AVAILABLE ON RECORD. THE ASSESSEE ON THE BASIS OF EVIDENCE AVAIL ABLE ON RECORD HAS BEEN ABLE TO PROVE CREDITWORTHINESS O F M/S. ALLIANCE INDUSTRIES LTD. THE RATIO OF THE DECI SIONS RELIED UPON BY THE LD. COUNSEL FOR ASSESSEE AND REF ERRED TO BY US IN THIS ORDER ARE SQUARELY APPLICABLE TO T HE FACTS AND CIRCUMSTANCES OF THIS CASE. THE ASSESSEE THROUG H THE EVIDENCES ON RECORD HAS BEEN ABLE TO PROVE THE IDENTITY OF SHAREHOLDER, ITS EXISTENCE AND TRANSFER OF MONEY FROM THE BANK ACCOUNT OF M/S. ALLIANCE INDUST RIES LTD., WHICH FACT HAVE NOT BEEN DISPUTED BY THE AO. THE ASSESSEE PRODUCED SUFFICIENT AND RELIABLE MATERIAL AND EVIDENCE BEFORE THE AO TO PROVE THAT THE AMOUNT IN QUESTION HAVE BEEN INVESTED BY M/S. ALLIANCE INDUST RIES LTD. THE LD. CIT(A) ON THE BASIS OF THE MATERIAL ON 75 RECORD WAS JUSTIFIED IN ACCEPTING THE CONTENTION OF THE ASSESSEE THAT THE SHARE APPLICANT IN FACT EXIST. TH E CREDITWORTHINESS OF THE SHAREHOLDER IS ALSO PROVED BECAUSE ALL THE PAYMENTS HAVE BEEN MADE THROUGH BANKING CHANNEL THROUGH THE ACCOUNT PAYEE CHEQUE WHICH FACT COULD BE VERIFIED FROM THE RESPECTIVE BA NK AND IN FACT THE RESPECTIVE BANKS NAMELY SBI, BHOPAL AND STANDARD CHARTERED BANK HAVE CERTIFIED THE SAME FAC T. THE GENUINENESS OF THE TRANSACTION IS NOT DISPUTED. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE IN THE LIGHT OF THE MATERIAL AND EVIDENCE ON RECORD, WE ARE OF THE VIEW THAT ASSESSEE HAS DISCHA RGED THE ONUS LAY UPON IT TO PROVE IDENTITY AND EXISTENC E OF THE SHAREHOLDER M/S. ALLIANCE INDUSTRIES LTD., ITS CREDITWORTHINESS AND GENUINENESS OF TRANSACTION. TH E AO HAS HOWEVER NOT BROUGHT ANY EVIDENCE CONTRARY TO TH E EVIDENCE FILED BY ASSESSEE. THE DECISIONS CITED BY LD. DR HAVE BEEN CONSIDERED IN THE LIGHT OF FACTS AND CIRCUMSTANCES OF THE CASE AND WE ARE OF THE OPINION THAT THE SAME COULD NOT SUPPORT THE CONTENTION OF L D. DR. WE MAY ALSO NOTE THAT HONBLE SUPREME COURT IN THE CASE OF CIT VS. P. MOHAN KALA, AS RELIED UPON B Y LD. DR HAS CONSIDERED THE FACT IN WHICH THE AO HELD THA T THE GIFT THOUGH APPARENT WERE NOT REAL AND ACCORDINGLY TREATED ALL THE AMOUNTS OF THE GIFT AS INCOME OF TH E ASSESSEE U/S 68 OF THE IT ACT. THE ASSESSEE DID NOT CONTEND THAT EVEN IF THERE EXPLANATION WAS NOT SATISFACTORY, THE AMOUNT WERE NOT OF THE NATURE OF INCOME. THE LD. CIT(A) CONFIRMED THE ORDER AND THE TRIBUNAL THROUGH MAJORITY VIEW CONFIRMED THE ORDERS OF THE AUTHORITIES BELOW. ON AN APPEAL, THE HIGH COURT RE- APPRECIATED THE EVIDENCE AND SUBSTITUTED ITS OWN FINDING AND CAME TO THE CONCLUSION THAT THE REASONS ASSIGNED BY THE TRIBUNAL WERE IN THE REALM OF SURMI SES, CONJECTURE AND SUSPICION. HONBLE SUPREME COURT ON SUCH FACTS HELD, REVERSING THE DECISION OF THE HIG H COURT, THAT THE FINDINGS OF THE AO, THE COMMISSIONE R (APPEALS) AND THE TRIBUNAL WERE BASED ON THE MATERI AL ON RECORD AND NOT ON ANY CONJECTURES AND SURMISES. THAT 76 THE MONEY CAME BY WAY OF BANK CHEQUES AND WAS PAID THROUGH THE PROCESS OF BANKING TRANSACTION WAS NOT BY ITSELF OF ANY CONSEQUENCE. THE HIGH COURT MISDIRECT ED ITSELF AND ERRED IN DISTURBING THE CONCURRENT FINDI NGS OF FACT. HOWEVER, THE FACTS AND CIRCUMSTANCES OF THE AP PEAL BEFORE US ARE CLEARLY DISTINGUISHABLE AS NOTED ABOV E. THE RELIANCE OF LD. DR ON THE CASES REFERRED TO ABO VE ARE THEREFORE MISPLACED. 12.2 CONSIDERING THE ABOVE DISCUSSION, WE DO NOT FI ND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). THE A PPEAL OF THE REVENUE HAS NO MERIT AND IS ACCORDINGLY DISMISSED. NO OTHER POINT IS ARGUED OR PRESSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH SEPTEMBER, 2007. 10. IN THE AFORESAID ORDER DATED 28 TH SEPTEMBER, 2007, THE BENCH HAS ALREADY CONSIDERED THE FACTS OF THE C ASE IN DETAIL ALONG WITH VARIOUS JUDICIAL PRONOUNCEMENTS, THEREFORE, THE SAME ARE NOT BEING REPEATED HERE FOR THE SAKE OF BREVITY AND MAY BE READ AS PART AND PARCEL OF THIS ORDER BEING MATTER OF RECORD. NOW COMING TO THE OBSERVATION OF THE LEARNED COMMISSIONER OF INCOMETA X (APPEALS) TO THE EFFECT THAT THE ASSESSEE HAS NOT F ILED BALANCE SHEET OF M/S ALLIANCE INDUSTRIES LIMITED, T HEREFORE, CREDIT WORTHINESS OF THE INVESTOR COMPANY, M/S ALLI ANCE INDUSTRIES LIMITED, IS NOT PROVED. WE FIND THAT BEF ORE THE LOWER AUTHORITIES THE ASSESSEE HAS FURNISHED CERTIF ICATE OF AUDITOR OF M/S ALLIANCE INDUSTRIES LIMITED CONFIRMI NG THAT THE INVESTMENT WAS FUNDED BY TRADING ACTIVITIES OF M/S ALLIANCE INDUSTRIES LIMITED WITHOUT THE NEED FOR TH E COMPANY TO SEEK EXTERNAL FUNDING WHICH IS REFLECTED IN THE BALANCE SHEET OF THE COMPANY. ONE MORE CERTIFICATE WAS ALSO FILED BY THE AUDITOR, M/S FARIA & ASSOCIATE OF M/S ALLIANCE INDUSTRIES LIMITED TO THE EFFECT THAT FORE IGN INVESTOR OF THE ASSESSEE HAS BUSINESS TURNOVER OF 77 RS.1055.076 MILLION US DOLLAR AS ON 30 TH JUNE, 2005 WHICH IS APPROXIMATELY EQUIVALENT TO INDIAN RUPEES 5275 CROR ES AND ON THE BASIS OF THIS, THE PERCENTAGE OF INVESTMENT MADE BY THE FOREIGN INVESTMENT IN THE ASSESSEE COMPANY BY W AY OF SHARE CAPITAL AND SHARE PREMIUM WORKS OUT TO BE ONL Y 0.81%. THESE CERTIFICATES BY THE AUDITOR OF M/S AL LIANCE INDUSTRIES LIMITED CLEARLY PROVE THE CREDIT WORTHIN ESS OF THE INVESTOR COMPANY. WE ALSO FIND THAT THE MAIN PROMOTER MR. SUDHIR CHOPRA WAS EXAMINED BY THE DEPARTMENT AND HIS STATEMENT WAS RECORDED U/S 132(4 ). COPIES OF THESE STATEMENTS WERE FILED BY THE LEARNE D CIT DR BEFORE US. WE HAVE CAREFULLY GONE THROUGH THESE STATEMENTS AND FIND THAT THE BALANCE SHEET OF M/S A LLIANCE INDUSTRIES LIMITED WAS OBTAINED BY THE DEPARTMENT F ROM STANDARD CHARTERED BANK WHERE THE INVESTOR COMPANY MAINTAINED ITS ACCOUNT. VIDE QUESTION NO. 99 SHRI SUDHIR CHOPRA WAS SHOWN THE BALANCE SHEET AND PROFIT AND L OSS ACCOUNT AND OTHER FINANCIAL REPORTS OF M/S ALLIANCE INDUSTRIES LIMITED, GIBRALTOR AND HE HAS CONFIRMED THE BUSINESS AFFAIRS OF M/S ALLIANCE INDUSTRIES LIMITED . THESE FINANCIAL STATEMENTS WERE FOR THE PERIOD JUNE, 2004 TO JUNE, 2008 WHICH VERY MUCH FALLS DURING THE RELEVAN T ASSESSMENT YEARS UNDER OUR CONSIDERATION. THE DEPA RTMENT HAS ALSO SHOWN THE RETURN OF ALLOTMENT OF SHARES FI LED BY THE COMPANY WHEREIN VIVEK GULATI WAS APPOINTED AS COMPANY SECRETARY WITH 5,40,000 SHARES AND MR. CHOP RA AS A CHARTERED ACCOUNTANT WITH 3,60,000 SHARES ON 7.4. 2000. SHRI SUDHIR CHOPRA WAS ALSO SHOWN BALANCE SHEET OF M/S ALLIANCE INDUSTRIES LIMITED AS ON 30 TH JUNE, 2004 WHEREIN TANGIBLE ASSETS OF USD 5448 AND INVESTMENT OF USD 13508174 WAS SHOWN. IN QUESTION NO. 101 SHRI SUDHI R CHOPRA WAS ASKED REGARDING TANGIBLE ASSETS. VIDE Q UESTION NO. 102 HE WAS ASKED ABOUT STOCK POSITION OF M/S AL LIANCE INDUSTRIES LIMITED. VIDE QUESTION NO. 103 THE POSI TION REGARDING DEBTORS IN THE BALANCE SHEET WAS ASKED FO R AND VIDE QUESTION NO. 104 PROFIT AND LOSS ACCOUNT OF 20 07 WAS INQUIRED INTO. VIDE QUESTION NO. 105 PROFIT AND LO SS ACCOUNT OF JUNE, 2007 WAS SHOWN AND INFORMATION WAS ASKED REGARDING THE ADMINISTRATIVE EXPENSES OF THE 78 COMPANY. VIDE QUESTION NO. 106 ALLIANCE F.Z.C. COMP ANY LEASE INCOME PAID BY ALLIANCE F.Z.C. TO M/S ALLIANC E INDUSTRIES LIMITED WAS INQUIRED INTO. VIDE QUESTIO N NO. 107 PROFIT AND LOSS ACCOUNT AND BALANCE SHEET OF JUNE, 2008 WAS INQUIRED INTO. WE ALSO FIND THAT THE ASSESSEE S BANK ACCOUNT IN THE STANDARD CHARTERED BANK, SHARJAHA, W AS OBTAINED AND DETAINED BY THE DEPARTMENT IN THE COUR SE OF ASSESSMENT FOR THE ASSESSMENT YEAR 2005-06. THE DEP OSITS IN THIS ACCOUNT WERE FOUND TO BE THROUGH TRANSFERS. IN THE APPELLATE ORDER FOR THE ASSESSMENT YEAR 2005-06 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) WRITES AT PAGE 2 PARA 2.3 OF HIS ORDER AO FILED A COPY OF BA NK ACCOUNT OF M/S ALLIANCE INDUSTRIES LIMITED AT SHARJ AHA A PERUSAL OF WHICH SHOWS THAT THERE WAS NO BUSINESS TRANSACTION OF THE COMPANY REFLECTED THEREIN. THI S BANK STATEMENT IS KEPT AT PAGES 62 TO 74 OF THE PAPER BO OK WHEREIN THE LEARNED COMMISSIONER OF INCOMETAX (APP EALS) DID NOT NOTICE THE DETAILS AS TO WHEREFROM THE MONE Y WAS DEPOSITED IN THIS ACCOUNT. FIRST FIVE PAGES OF PAP ER BOOK 62 TO 66 CLEARLY SHOW THE SOURCE OF DEPOSITS AS FROM T RANSFER AND NOT BY CASH DEPOSITS. WE ALSO FIND THAT BESIDE S PAYMENTS TO THE ASSESSEE COMPANY, THE PAYMENTS WERE ALSO MADE TO OTHERS. WHEN THE DEPOSIT IN THE ACCOUN TS MENTIONS NUMBER OF INSTRUMENTS THROUGH WHICH THE AM OUNT WAS DEPOSITED, THE LEARNED COMMISSIONER OF INCOMETA X (APPEALS) COULD NOT HAVE DOUBTED THE ORIGIN OF THE MONEY BUT HE DOUBTED IT WITHOUT BRINGING ANY EVIDENCE TO SUPPORT HIS VIEW. THE SOURCE OF SOURCE IN THIS CASE WHEN T HE INVESTOR IS NOT RELATED WITH THE DIRECTORS OF THE A SSESSEE COMPANY IS NOT THE BURDEN ON THE ASSESSEE TO PROVE. IN THIS REGARD THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) HAS WRONGLY PLACED RELIANCE ON THE DECISI ON OF BANARSI PRASAD; 301 ITR 1 AND M/S KORTAY TRADING CO MPANY LIMITED; 232 ITR 820. WE FIND THAT IN THE CASE OF BANARSI PRASAD (SUPRA) CREDITS WERE IN THE NAMES OF WIFE AN D MINOR SON WHO WERE NON-EARNING PERSONS. THEREFORE, INVEST MENT WAS INQUIRED INTO FOR SATISFACTORY EXPLANATION. OT HERWISE SECTION 68 DOES NOT PROVIDE FOR ASKING TO PROVE SOU RCE OF SOURCE OR ORIGIN OF ORIGIN. IN THE INSTANT CASE, S OURCE OF 79 SHARE CAPITAL WAS FROM M/S ALLIANCE INDUSTRIES LIMI TED BANK ACCOUNT AND THE SOURCE OF DEPOSITS IN THE BANK ACCO UNT OF M/S ALLIANCE INDUSTRIES LIMITED WAS THROUGH CREDIT BY TRANSFER ENTRIES AND NOT BY WAY OF CASH DEPOSIT. H ERE IT IS NOT THE RESPONSIBILITY OF THE ASSESSEE COMPANY TO P ROVE AND EXPLAIN CREDIT IN THE BANK ACCOUNT OF M/S ALLIANCE INDUSTRIES LIMITED. ANOTHER CASE REFERRED TO BY T HE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) WAS KOR LAY TRADING COMPANY (SUPRA). IN THIS CASE, THE ASSESSE E FURNISHED INCOME TAX NUMBER AND NOTHING-ELSE. HOWEV ER, IN THE INSTANT CASE BEFORE US, THE INVESTOR COMPANY HA S FURNISHED CONFIRMATION LETTERS AND ALSO BANK ACCOUN T THROUGH WHICH CREDIT WAS GIVEN. THE RELEVANT PROPO SITION OF LAW HAS BEEN LAID DOWN BY THE HONBLE SUPREME CO URT IN THE CASE OF M/S ORISSA CORPORATION PRIVATE LIMITED; 159 ITR 78. IN THIS CASE, THE CREDITORS WERE INCOME TAX PA YERS AND FURNISHED CONFIRMATIONS AND DISCHARGED HUNDIES. NO TICE U/S 131 SENT BY THE DEPARTMENT WAS RETURNED UNSERVE D WITH THE REMARK LEFT. THE HONBLE SUPREME COURT HELD THAT THE ASSESSEE HAS DISCHARGED THE ONUS AND THE DEPARTMENT SHOULD HAVE PERSUADED INQUIRIES IF SO DE SIRED BY THE DEPARTMENT. THE ADDITIONS SO MADE WERE HELD TO BE NOT JUSTIFIED. IN THE INSTANT CASE BEFORE US, THE DEPARTMENT HAS INQUIRED ABOUT THE SOURCE OF THE SOU RCE BUT NOTHING ADVERSE WAS FOUND AGAINST THE ASSESSEE. IT IS CLEAR FROM THE FACT THAT A LETTER DATED 19.2.2004 WAS REC EIVED BY THE ASSESSEE FROM THE DIRECTORATE OF ENFORCEMENT AN D THE ASSESSEE HAS REPLIED IMMEDIATELY. THEREAFTER, NOTH ING IN THIS REFERENCE WAS HEARD BY THE ASSESSEE. IT INDIC ATES THAT NOTHING ADVERSE WAS FOUND EVEN BY THE DIRECTOR OF ENFORCEMENT. THE DEPARTMENT MUST BE KNOWING THIS FA CT BUT THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) DID NOT MAKE REFERENCE TO IT. UNDER SUCH FACTS AND CIRCUMSTANCES, THE LEARNED COMMISSIONER OF INCOMETA X (APPEALS) COULD NOT HAVE ANY REASON TO DOUBT AGAINS T THE ASSESSEE. WITH REGARD TO THE CIT(A)S OBJECTION AT PAGE 14 PARA 6.2 TO THE EFFECT THAT WHEN AFFORDED AN OPPOR TUNITY TO EXPLAIN THE ENTRIES IN THE ACCOUNT, THE APPELLAN T DID NOT SAY A WORD IN DEFENCE, WE FIND THAT IT IS A CALL D EPOSIT 80 ACCOUNT. THE DEPOSITS IN THAT ACCOUNT ARE FROM INVE STORS REGULAR ACCOUNTS. THE INVESTMENTS WITH THE ASSESSE E COMPANY ARE FROM SENDERS OWN ACCOUNTS. MONEY WAS SENT FROM FOREIGN ACCOUNT. IT DID NOT ARISE/ACCRUE AS INCOME/DEEMED TO ARISE OR ACCRUED IN INDIA. 10.1 AFTER GOING THROUGH THE STATEMENT OF SHRI SUDHIR CHOPRA RECORDED U/S 132(4) WHICH WAS FILED B EFORE THE BENCH BY THE LEARNED CIT DR, WE FIND THAT THE B ALANCE SHEET OF THE YEARS WHICH FALL FOR OUR CONSIDERATION WERE ALREADY WITH THE DEPARTMENT. WE ASKED THE LEARNED COUNSEL FOR THE ASSESSEE TO PLACE COPY OF SUCH BALA NCE SHEET BEFORE THE BENCH ALSO. SINCE THE DEPARTMENT HAS NOT FILED COPY OF THIS BALANCE SHEET, THE LEARNED COUNS EL FOR THE ASSESSEE FILED COPY OF BALANCE SHEET WHICH IS A LREADY IN THE POSSESSION OF THE DEPARTMENT AND SHRI SUDHIR CH OPRA HAD SHOWN THESE BALANCE SHEETS DURING HIS INTERROGA TION U/S 132(4) OF THE ACT. THIS AUDITED BALANCE SHEET INDICATES TURNOVER OF THE ASSESSEE COMPANY 1,055,076,212 US D OLLAR FOR THE YEAR ENDING 2005 AND US DOLLAR 934,411,746 IN THE YEAR ENDING 2004. THE GROSS PROFIT FOR THE RESPECT IVE YEARS WAS US DOLLAR 11,630,956 AND US DOLLAR 9,699,043 FO R THE YEARS 2005 AND 2004, RESPECTIVELY. THE PROFIT ON O RDINARY ACTIVITIES WAS SHOWN AT US DOLLAR 12,050,834 AND US DOLLAR 10,273,015 FOR THE YEARS 2005 AND 2004, RESPECTIVEL Y. THE FIXED ASSETS OF THE COMPANY HAD BEEN SHOWN AT US DO LLAR 26,507,257 AND 13,513,622 US DOLLAR FOR THE YEARS 2 005 AND 2004, RESPECTIVELY. THE INVESTMENT OF M/S ALLIANCE INDUSTRIES LIMITED HAD BEEN SHOWN AT US DOLLAR 26, 500,000 AND US DOLLAR 13,508,174 FOR THE YEARS 2005 AND 200 4, RESPECTIVELY. NOTE 5 OF THE BALANCE SHEET GIVES BR EAK UP AND THESE INVESTMENTS WHICH ARE IN THE SHARES OF M/ S PEOPLES GENERAL HOSPITAL PRIVATE LIMITED, BHOPAL, W HICH IS THE ASSESSEE COMPANY BEFORE US. A NOTE HAS ALSO BE EN GIVEN TO THE EFFECT THAT M/S ALLIANCE INDUSTRIES LI MITED HOLDS 39.62% OF THE SHARES IN THE INVESTMENT AS ON 31 ST MARCH, 2005. THE NET PROFIT OF THIS COMPANY WAS IN DIAN RS.3,630,248 AND NET ASSETS OF INDIAN RS. 1,004,926 ,662/-. AFTER GOING THROUGH THE CERTIFICATE FILED BY THE AU DITOR, M/S 81 FAIRA & ASSOCIATES BEFORE THE LOWER AUTHORITIES WIT H REGARD TO BUSINESS WORTH OF M/S ALLIANCE INDUSTRIES LIMITE D AND AFTER GOING THROUGH THE DOCUMENTS, AS DISCUSSED ABO VE, WE FIND THAT M/S ALLIANCE INDUSTRIES LIMITED IS HAVING SUFFICIENT CREDIT WORTHINESS TO INVEST IN THE SHARES OF THE AS SESSEE COMPANY. THUS, THE OBJECTION OF THE LEARNED COMMISS IONER OF INCOMETAX (APPEALS) TO THE EFFECT THAT THE ASSES SEE HAS NOT PROVED THE CREDIT WORTHINESS OF M/S ALLIANCE IN DUSTRIES LIMITED HAS NO SUBSTANCES. IT IS PERTINENT TO MENT ION HERE THAT WE ARE CONCERNED WITH THE CREDIT COMING TO THE ACCOUNT OF THE ASSESSEE ON ACCOUNT OF SHARE CAPITAL . THERE ARE VARIOUS DECISIONS OF DELHI HIGH COURT AND HONB LE SUPREME COURT IN THE CASES OF LOVELY EXPORTS, ETC. WHICH CLEARLY PROVIDE THAT IN CASE OF SHARE CAPITAL, THE PRIMARY BURDEN ON THE ASSESSEE IS TO PROVE THE IDENTITY AND GENUINENESS OF THE TRANSACTION. HOWEVER, IN THIS C ASE, THE ASSESSEE HAS NOT ONLY PROVED THE IDENTITY AND GENUI NENESS BUT ALSO THE CREDIT WORTHINESS IN TERMS OF DOCUMENT S PLACED ON RECORD AS DISCUSSED HEREINABOVE. 10.2 IN VIEW OF THESE FACTS, WE HOLD THAT THE LEARNED FIRST APPELLATE AUTHORITY IS NOT JUSTIFIED IN CONFI RMING THE ADDITION MADE U/S 68 OF THE ACT ESPECIALLY WHEN THE IDENTITY, GENUINENESS AND CREDIT WORTHINESS OF THE INVESTOR HA VE BEEN PROVED BY THE ASSESSEE. IT IS A SETTLED PRINCIPLE O F LAW THAT THE ASSESSEE IS NOT SUPPOSED TO PROVE THE SOURCE OF SOU RCE. EVEN THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. DIVIN E LEASING & FINANCE LIMITED (2008) 299 ITR 268 (DEL) HELD THAT T HE ADDITION OF PART OF SHARE CAPITAL U/S 68 OF THE ACT IS NOT J USTIFIED. THE HONBLE APEX COURT IN THE CASE OF CIT V. LOVELY EXP ORTS PVT. LTD. (2008) 216 CTR (SC) 195 EVEN WENT TO THE EXTENT THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY EVEN FROM THE ALLEGED BOGUS SHARE HOLDERS, WHOSE NAM ES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PRO CEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WI TH LAW, BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASS ESSEE COMPANY. AT ANY STAGE, THE LEARNED AO HAS NOT BROU GHT ON RECORD ANY EVIDENCE EVIDENCING THAT OWN MONEY OF THE ASSESSEE WAS ROUTED THROUGH BANKING CHANNEL. THE DEPARTMENT IS MERELY TRYING TO CATCH A STRAW IN THE WHIRLWIND THAT TOO WITHO UT BRINGING 82 ANY CONTRARY MATERIAL ON RECORD. MERE ALLEGATION C ANNOT TAKE THE SHAPE OF EVIDENCE HOWSOEVER STRONG IT MAY BE AS THE SAME HAS TO BE PROVED ON THE JUDICIAL SCALE. EVEN OTHERWISE NO NEW FACTS CONTROVERTING THE EARLIER ORDER OF THE TRIBUNAL HAVE BEEN BROUGHT TO OUR NOTICE. BY FOLLOWING THE AFOREQUOTED DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN AGRAWAL WAREHOU SING & LEASING LIMITED, WE ARE BOUND TO PAY RESPECT TO THE DECISION OF THE COORDINATE BENCH. WE, THEREFORE, FOLLOWING THE DECISION OF THE TRIBUNAL (SUPRA) THAT TOO IN THE CASE OF THIS AS SESSEE ITSELF, HOLD THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN CON FIRMING THE ADDITION MADE BY THE AO U/S 68 OF THE ACT. IN THIS VIEW OF THE MATTER, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORIT IES AND DELETE THE ADDITION. 10.3 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. 11. NOW, WE SHALL TAKE THE APPEAL OF THE DEPARTMENT ( ITA NO.427/IND/2007) WHEREIN ONLY GROUND RAISED IS UNDE R: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN DELETING THE ADDITION OF RS.18,90,11,200/- MADE BY THE ASSESSING OFFICER U/S 68 OF I.T. ACT ON ACCOUNT OF UNEXPLAINED CASH CREDIT, WHICH WAS RIGHTLY ADDED IN ACCORDANCE WITH THE PROVISIONS UNDER THE ACT. 12. LATER ON, VIDE LETTER F.NO.ACIT-2(1)/BPL/2008- 2009/1010 DATED 16 TH MARCH, 2009 ON RECORD, DEPARTMENT HAS PREFERRED ADDITIONAL GROUNDS OF APPEAL, WHICH ARE A S UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) ERRED IN: - 1. DELETING THE ADDITIONS WITHOUT GIVING AN OPPORTUNITY OF HEARING TO ASSESSING OFFICER AS PER MANDATE OF PROVISIONS OF SECTION 250(2) OF I.T. ACT. 2. PASSING AN ORDER IN UNDUE HASTE AND HURRY RESULTING IN MISCARRIAGE OF JUSTICE AS NO PROPER OPPORTUNITY WA S GIVEN TO ASSESSING OFFICER. 83 3. GRANTING THE RELIEF WITHOUT PASSING A DETAILED A ND WELL REASONED ORDER AS PER STATUTORY MANDATE AS PER PROVISIONS OF SECTION 250(6). 13. AFTER CONSIDERING THE RIVAL SUBMISSIONS, IT IS SEEN THAT FOR ASSESSMENT YEAR 2003-04, THE ADDITION MADE U/S 68 FOR THE MONEY RECEIVED AS SHARE CAPITAL WAS DELETED BY THE LD. CIT(A) VIDE ORDER DATED 9.11.2006 WHICH WAS CHALLENGED BEF ORE THE TRIBUNAL BY THE DEPARTMENT. THE TRIBUNAL VIDE AFORE SAID ORDER DATED 28.9.2007 AFFIRMED THE STAND OF THE LD. CIT(A) AND DISMISSED THE APPEAL OF THE REVENUE. THE LD. CIT(A) FOLLOWED THE DECISION OF ASSESSMENT YEAR 2003-04 (SUPRA) AND DECIDED IN FAVOUR OF THE ASSESSEE WHICH IS UNDER CHALLENGE BEF ORE THIS TRIBUNAL. THE CRUX OF ARGUMENTS BY LD. CIT DR IS THAT THE OWN MONEY WAS ROUTED THROUGH HAWALA TRANSACTION, THEREF ORE, IT SHOULD BE ADDED IN THE HANDS OF THE ASSESSEE. ON TH E OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CON TENDED THAT NOTICE DATED 20 TH AUGUST, 2008 [NO.T-3/1-IND/2008(AKS)] WAS ISSUED TO THE ASSESSEE BY THE DIRECTORATE OF ENFORC EMENT WHEREIN CERTAIN QUERIES WERE RAISED FOR WHICH OUR A TTENTION WAS INVITED TO THE AFORESAID LETTER WHICH HAS BEEN MADE PART OF THE PAPER BOOK. AS PER THIS LETTER, THE DIRECTORATE MAD E CERTAIN INQUIRIES UNDER THE PROVISIONS OF FEMA 1999 AND THE ORDER WAS ISSUED IN TERMS OF SEC. 37 OF THE FOREIGN EXCHANGE M ANAGEMENT ACT, 1999 R.W.S. 133(6) OF THE I.T. ACT, 1961. OUR A TTENTION WAS ALSO INVITED TO THE REPLY OF THE ASSESSEE DATED 3.9 .2008 WHICH HAS BEEN MADE PART OF THE PAPER BOOK. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. IT IS SEEN THAT THE ASSESSEE VI DE AFORESAID REPLY DATED 3.9.2008 WHEREIN REFERENCE HAS BEEN MAD E TO EARLIER LETTER OF THE ASSESSEE DATED 9.3.2004 CLARI FIED THAT THE FUNDS WERE RECEIVED FOR INVESTMENT IN SHARES OF THE COMPANY UNDER THE AUTOMATIC ROUTE OF RBI FOR THE ACTIVITIES COVERED UNDER ANY OTHER SECTOR IN ACCORDANCE WITH FEMA AC T VIDE NOTIFICATION NO. FEMA 20/2000-RB DATED 3.5.2000, AS AMENDED FROM TIME TO TIME. THE ASSESSEE FURNISHED THE NAMES AND ADDRESSES OF THE SHAREHOLDERS (ALLOTTEES) OF THE CO MPANY WHICH ARE DETAILED AS UNDER: 84 SL. NO. NAME OF THE SHAREHOLDER/ ALLOTTES ADDRESS MODE OF PAYMENT TOWARDS SUBSCRIPTION 1 SHRI RAM VILAS VIJAYWARGIYA E - 3/27 A, ARERA COLONY, BHOPAL 462016 (MP) INDIA THROUGH CHEQUE 2 SHRI SURESH NARAYAN VIJAYWARGIYA E - 3/27 A, ARERA COLONY, BHOPAL 462016 (MP) INDIA THROUGH CHEQUE AND ALLOTMENT OF SHARES OTHER THAN CASH 3 SMT. SAVITRI DEVI VIJAYWARGIA E - 3/27 A, ARERA COLONY, BHOPAL 462016 (MP) INDIA THROUGH CHEQUE 4 SMT. URMILA VIJAYWARGIA E - 3/27 A, ARERA COLONY, BHOPAL 462016 (MP) INDIA THROUGH CHEQUE 5 MS. MEGHA VIJAYWARGIA E - 3/27 A, ARERA COLONY, BHOPAL 462016 (MP) INDIA THROUGH CHEQUE 6 MS. NEHA VIJAYWARGIA E - 3/27 A, ARERA COLONY, BHOPAL 462016 (MP) INDIA THROUGH CHEQUE 7 SHRI ISHTIAQ HUSSAIN SIDDIQUI 200/2, SHAKTI NAGAR, HABIBGANJ, BHOPAL 462024 (MP) INDIA THROUGH CHEQUE 8 M/S. ALLIANCE INDUSTRIES LIMITED REGT. OFF.: 117, MAIN STREET, GIBRALTGAR MANAGEMENT HEAD OFF: BLOCK H-3, SAIF ZONE, P.O. BOX 7768, SHARJAH, UAE BY TELEGRAPHIC TRANSFERS THROUGH NORMAL BANKING CHANNEL THE OTHER DETAILS FILED BY THE ASSESSEE BEFORE THE DIRECTORATE OF ENFORCEMENT ARE AS UNDER: A SINCE 18 TH OCTOBER, 2000 TILL 16 TH SEPTEMBER, 2003, [THE DATE WHEN THE OCBS WERE DE- RECOGNIZED AS THE CLASS OF INVESTOR IN INDIA], THE FOREIGN FUNDS WERE RECEIVED UNDER THE AUTOMATIC ROUTE OF RBI FOR THE ACTIVITIES COVERED UNDER ANY OTHER SECTOR IN ACCORDANCE WITH THE FEMA ACT VIDE NOTIFICATION NO. FEMA 20/2000-RB DATED MAY 3, 2000, AS AMENDED FROM TIME TO TIME. HENCE, NO PERMISSION WAS REQUIRED. B AFTER 16 TH SEPTEMBER 2003, THE COMPANY APPLIED TO THE MINISTRY OF FINANCE, DEPARTMENT OF ECONOMIC AFFAIRS, F.I.P.B. UNIT, NEW DELHI FOR WHICH THE PERMISSION WAS RECEIVED IN THE MONTH OF FEBRUAR Y, 2004. COPY OF THE FIPB APPROVAL LETTER IS ENCLOSED HEREWITH AS ANNEXURE-2. THE FIPB APPROVAL WAS GRANTED SUBJECT TO THE CONDITION THAT M/S. ALLIANCE INDUSTRIES LIMITED, GIBRALTAR BEING AN INCORPORATED 85 ENTITY AND NOT ON THE ADVERSE NOTICE LIST OF THE RBI. RBI GAVE ITS CLEARANCE ON 06-03-2004. THE COPY OF THE SAME IS PLACED ON RECORD. C HOWEVER, DURING THE COURSE OF CONTINUANCE OF THIS PERMISSION, THE AUTOMATIC ROUTE OF RBI WAS AGAIN OPENED FOR THE OCBS SUBJECT TO THE APPROVAL O F RESERVE BANK OF INDIA VIDE CIRCULAR NO. A.P (DIR SERIE S) CIRCULAR NO.44 DATED DECEMBER 8, 2003. D AS M/S. PEOPLES GENERAL HOSPITAL LTD. WAS AN UNLISTED COMPANY, HENCE, SEBI PERMISSION WAS NOT REQUIRED. M/S. PEOPLES GENERAL HOSPITAL LTD. HAS BE EN CONVERTED INTO PRIVATE LIMITED COMPANY W.E.F. 22 ND JULY, 2004. E COMPLETE NOTE & ADDRESSES OF THE DIRECTORS OF M/S. ALLIANCE INDUSTRIES LIMITED ARE AS FOLLOWS: SL. NO. NAME OF THE DIRECTOR ADDRESS 1 SHRI SUDHIR CHOPRA BLOCK - H, ROOM 3, INTERNATIONAL FREEZONE, SHARJAH UAE 2 SHRI VIVEK S GULATEE BLOCK - H, ROOM 3, INTERNATIONAL FREEZONE, SHARJAH UAE F THE CERTIFICATE ISSUED BY ONE OF THE DIRECTOR OF M/S. ALLIANCE INDUSTRIES LIMITED CERTIFY ING THE NAME OF DIRECTORS AND SHAREHOLDERS OF THE COMPANY IS PLACED ON RECORD AS ANNEXURE-4. G SINCE, THE FOREIGN FUNDS WERE RECEIVED FOR INVESTMENT IN SHARES OF THE COMPANY, THEREFORE, NO JOINT VENTURE AGREEMENT WAS REQUIRED TO BE EXECUTED. 15. AFTER AFORESAID REPLY OF THE ASSESSEE, NO ACTIO N WAS TAKEN AGAINST THE ASSESSEE. AT THIS STAGE, IT WAS C ONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE PROCEEDIN GS WERE DROPPED, PRESUMABLY ON THE GROUND THAT NO ACTION, T ILL TODAY, WAS TAKEN AGAINST THE ASSESSEE. THE ADDITIONAL GROU NDS RAISED 86 BY THE REVENUE ARE ADMITTED AND ARE DISPOSED OF IN THE FOLLOWING MANNER: 15.1 SO FAR AS THE CONTENTION OF THE LD. CIT DR THAT THE ORDER OF THE LD. CIT(A) IS NOT SUSTAINABLE ON FACTS AND IN LAW AS THE ASSESSING OFFICER WAS NOT GIVEN OPPORTUNITY OF HEARING AS PER THE PROVISIONS OF SEC. 250(2) OF THE ACT IS CON CERNED, WE FIND THAT THE ASSESSING OFFICER WAS HEARD BY THE LD . FIRST APPELLATE AUTHORITY ON 22.4.2007, 19.4.2007 AND 25. 4.2007 AGAINST THE ASSESSMENT ORDER FRAMED U/S 143 ON 28.1 2.2006. THE ASSESSEE IS A LIMITED COMPANY INCORPORATED ON 2 5.5.1999 VIDE REGISTRATION NO. 13543 AND SINCE ITS INCEPTION IS REGULARLY ASSESSED TO TAX. THE ASSESSEE COMPANY OBTAINED NECES SARY PERMISSION FROM RESERVE BANK OF INDIA AND OTHER GOVT . AUTHORITIES WHO LOOK AFTER THE FOREIGN INVESTMENT A ND AFTER RECEIVING THE SHARE CAPITAL AND SHARE PREMIUM FROM THE FOREIGN INVESTOR COMPANY, THE NECESSARY INTIMATION WAS GIVE N TO THE RBI AND OTHER AUTHORITIES. ALL THE MONEY WAS RECEIVED T HROUGH PROPER BANKING CHANNELS AND STATE BANK OF INDIA ALSO ISSUED CERTIFICATE THAT THE ACCOUNT OF THE ASSESSEE WAS CR EDITED BEING THE AMOUNT OF FOREIGN CURRENCY REMITTANCE ORDERED B Y ALLIANCE CO. LTD. A CONFIRMATION TO THIS EFFECT, OBTAINED FR OM ALLIANCE CO. LTD. WAS ALSO SUBMITTED BEFORE THE AUTHORITIES. ALL THESE DOCUMENTS WERE ALSO SUBMITTED BEFORE THE LD. CIT(A). A CERTIFICATE FROM M/S. FARIA & ASSOCIATES, THE CHART ERED ACCOUNTANTS OF LENDER CO., UAE, REGARDING CREDITWOR THINESS OF THE LENDER COMPANY AND DETAILS OF REMITTANCES WHICH ROUTED THROUGH THE ACCOUNT NUMBERS OF THE LENDER COMPANY, ETC. WAS SUBMITTED BEFORE THE ASSESSING OFFICER. IT IS PERTIN ENT TO MENTION HERE THAT FOR ASSESSMENT YEAR 2001-02, THE ASSESSMENT ORDER WAS PASSED U/S 143(3) AFTER MAKING DETAILED I NQUIRY AND INVESTIGATION ACCEPTING THE INVESTMENTS MADE BY THE FOREIGN INVESTORS. LIKEWISE IN THE ASSESSMENT YEAR 2003-04, MONEY RECEIVED FROM THE SAME INVESTOR AND THE CONSEQUENT ADDITION MADE U/S 68 OF THE ACT, THE APPEAL OF THE ASSESSEE WAS ALLOWED BY THE LD. CIT(A) BY DELETING THE ADDITION BY HOLDIN G THAT THE MONEY RECEIVED FROM FOREIGN INVESTOR IS GENUINE AND ALL THE THREE INGREDIENTS I.E. IDENTITY OF THE INVESTOR, GE NUINENESS OF THE TRANSACTION AND CREDITWORTHINESS ARE PROVED AND THE ASSESSMENT ORDER HAS MERGED IN THE APPELLATE ORDER, THEREFORE, AT THIS STAGE, THE CONTENTION OF THE LD. CIT DR THAT THE ASSESSING OFFICER WAS NOT HEARD IS UNJUSTIFIED. 87 15.2 THE NEXT ADDITIONAL GROUND RAISED IS THAT THE O RDER PASSED BY THE LD. CIT(A) WAS PASSED IN UNDUE HASTE R ESULTING INTO MISCARRIAGE OF JUSTICE. WE DO NOT AGREE WITH T HIS ASSERTION OF THE LEARNED CIT DR THE ORDER WAS PASSED ON 27.4.2 007 I.E. WITHIN LESS THAN 20 DAYS OF THE ISSUE OF FIRST HEAR ING NOTICE. ON THE APPLICATION FILED BY THE ASSESSEE ON 9.4.2007, THE NOTICE OF HEARING WAS ISSUED ON 10.4.2007 AND THE APPEAL WAS FIXED FOR HEARING FOR 19.4.2007 AND THEREAFTER IT WAS ADJOURN ED TO 25.4.2007 AND FINALLY THE ORDER WAS PASSED ON 27.4. 2007. WE ARE OF THE VIEW THAT PASSING OF THE ORDER WITHIN 20 DAYS CANNOT BE SAID TO HAVE BEEN PASSED IN UNDUE HASTE. IT DEPE NDS UPON THE EFFICIENCY OF THE ADJUDICATING AUTHORITY TO PAS S AN ORDER AND EVEN IF THE CONTENTION OF THE LEARNED DR IS ACCEPTE D, THEN ONE SHOULD APPRECIATE THE FACT OF PASSING OF THE ORDER WITHIN A SHORT SPAN OF TIME. EARLY DISPOSAL OF THE APPEAL BY THE LEARNED CIT(A) SHOULD BE APPRECIATED IN VIEW OF THE WELL ESTABLISH ED PRINCIPLE JUSTICE DELAYED IS JUSTICE DENIED. IN THIS VIEW OF THE MATTER, THE ADDITIONAL GROUND IS REJECTED. 15.3 THE LAST ADDITIONAL GROUND RAISED BY THE REVEN UE IS THAT RELIEF HAS BEEN GRANTED WITHOUT PASSING A DETA ILED AND WELL REASONED ORDER. AS WE HAVE DISCUSSED IN THE EARLIER PARA THAT PASSING OF AN ORDER DEPENDS ON THE MATERIAL AND THE ARGUMENTS ADVANCED BEFORE A PARTICULAR AUTHORITY. ADMITTEDLY, THE ORDER SHOULD BE REASONED ONE BUT WE DO NOT FIND ANY INFIR MITY IN THE SAME, ANY AGGRIEVED PARTY IS FREE TO FILE AN APPEAL . WE, THEREFORE, DO NOT FIND ANY MERIT IN THIS GROUND WHI CH IS DISMISSED. 16. AS FAR AS THE MERIT OF THE APPEAL IS CONCERNED, WE HAVE FOLLOWED THE EARLIER DECISION OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2003-04 AND ALLOWED THE APPEAL OF T HE ASSESSEE FOR THE ASSESSMENT YEAR 2005-06, THEREFORE, BEING O N THE SAME FACTS, WE FIND NO MERITS IN THE APPEAL OF THE REVEN UE FOR ASSESSMENT YEAR 2004-05. THE ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 2003-04 IS STILL IN EXISTENCE AS NO CONTRARY DECISION FROM HONBLE HIGHER FORUM WAS BROUGHT TO O UR NOTICE BY EITHER SIDE. EVEN THE OPERATION OF THE ORDER FOR ASSESSMENT YEAR 2003-04 HAS NOT BEEN STAYED BY THE HON'BLE HIG H COURT/APEX COURT, THEREFORE, THAT ORDER IS VERY MUCH IN EXISTENCE. AS FAR AS THE CONTENTION OF THE REVENUE T HAT THE 88 DEPARTMENT HAD MADE INQUIRIES ON THE POSSIBILITY OF MONEY LAUNDERING BY THE ASSESSEE, NO EVIDENCE IN ANY MANN ER WAS PRODUCED BEFORE US EVIDENCING THAT THE ASSESSEE WAS INVOLVED IN ANY ALLEGED MONEY LAUNDERING ACTIVITIES. THE LD. CO UNSEL FOR THE ASSESSEE, DURING HEARING, CONTENDED THAT THE ASSESS EE UNDER RIGHT TO INFORMATION ACT HAS FILED AN APPLICATION TO SUPPLY THE EVIDENCE OF MONEY LAUNDERING, IF ANY. IDENTICAL APPL ICATION WAS CLAIMED TO BE FILED BEFORE THE LD. CCIT, BHOPAL. HOW EVER, NO PROOF WAS FILED BY THE DEPARTMENT THAT THE ASSESSEE WAS INVOLVED IN ANY MONEY LAUNDERING. THE LD. COUNSEL F OR THE ASSESSEE CONTENDED THAT THE DIRECTORATE OF ENFORCEM ENT, GOVT. OF INDIA, NEW DELHI RATHER DROPPED THE PROCEEDINGS A GAINST THE ASSESSEE AS NOTHING ILLEGAL WAS FOUND AGAINST THE A SSESSEE. THE ASSESSEE VIDE ITS SUBMISSION INVITED OUR ATTENTION TO THE APPLICATION UNDER RTI TO THE TAX DEPARTMENT AND TAX RE SEARCH, NEW DELHI LETTER DATED 14.12.2010 TO DGIT, BHOPAL, LE TTER DATED 20.12.2010 ETC. [PAPER BOOK OF THE ASSESSEE]. WHAT IT MAY BE, IF ANY CONTENTION OR ALLEGATION IS MADE AGAINST THE AS SESSEE, IT IS THE DUTY OF THE PARTY TO SUBSTANTIATE THE SAME WHO IS CONTENDING OR ALLEGING SO BECAUSE NEGATIVE ONUS CAN NOT BE CASTED UPON THE ASSESSEE. WHILE REVERSING THE FULL BENCH DECISION OF THE HONBLE KERLA HIGH COURT IN ITO VS. K.P. VERGEES (1973) 90 ITR 49, THE HONBLE APEX COURT (131 ITR 597) (SC) HELD AS UNDER: IT IS WELL SETTLED RULE OF LAW THAT THE ONUS OF EST ABLISHING THAT THE CONDITION OF TAXABILITY ARE FULFILLED IS AL WAYS ON THE REVENUE AND THE BURDEN LIES ON THE REVENUE TO SHOW THAT THERE IS UNDERSTATEMENT OF THE CONSIDERATION. MOREO VER, TO THROW THE BURDEN OF SHOWING THAT THERE IS NO UNDERSTATEMENT OF THE CONSIDERATION ON THE ASSESSEE WOULD BE TO CAST AN ALMOST AN IMPOSSIBLE BURDEN UPON HIM TO ESTABLISH NEGATIVE, NAMELY, THAT HE DID NOT RECEIVE ANY CONSIDERATION BEYOND THAT DECLARED BY HIM. 17. IN VIEW OF THE ABOVE, MERE ALLEGATION THAT THE A SSESSEE IS ENGAGED IN MONEY LAUNDERING IS NOT ENOUGH RATHER THE REVENUE IS EXPECTED TO PRODUCE THE CONCRETE EVIDENCE FOR THE SAME. THE ISSUE OF MONEY LAUNDERING OR ANY OTHER IL LEGAL TRANSACTION FROM A FOREIGN TERRITORY WAS INVESTIGAT ED BY THE DIRECTORATE OF ENFORCEMENT AS IS EVIDENT FROM THE N OTICE DATED 20.8.2008 ISSUED UNDER FOREIGN EXCHANGE MANAGEMENT ACT AND 89 PREVENTION OF MONEY LAUNDERING ACT AND NOTHING WAS FOUND AGAINST THE ASSESSEE, THEREFORE, THE ALLEGATION THA T THE ASSESSEE IS INVOLVED IN MONEY LAUNDERING IS UNSUBSTANTIATED. 18. AS FAR AS THE MAIN GROUND OF THE REVENUE CHALLE NGING THE DELETION OF THE ADDITION MADE U/S 68 OF THE ACT ON THE ALLEGED CASH CREDIT IS CONCERNED, IT IS FOUND THAT THE ADDITION OF RS.18,90,11,200/- WAS MADE BY THE ASSESSING OFFICER U/S 68 ON THE GROUND THAT THE ENTIRE AMOUNT WAS REMITTED BY I NVESTOR COMPANY M/S. ALLIANCE INDUSTRIES LTD., A PUBLIC LIMI TED COMPANY, THE AMOUNT WAS INVESTED AS SHARE CAPITAL A FTER GETTING NECESSARY APPROVAL FROM RBI AND OTHER AGENCI ES. THERE IS AN UNCONTROVERTED FINDING IN THE IMPUGNED ORDER THAT ALL THE RELEVANT DOCUMENTS NECESSARY FOR ISSUE OF SHARE CAP ITAL, IDENTITY OF SHAREHOLDERS, GENUINENESS OF TRANSACTIO N AND CAPACITY OF THE INVESTOR IS CLEARLY ESTABLISHED FRO M THE FOLLOWING POINTS: I) CONFIRMATION LETTER ISSUED BY THE INVESTOR COMPANY M/S. ALLIANCE INDUSTRIES LIMITED, SHARJAH, UAE, AN NRI COMPANY, THROUGH ITS DIRECTOR MR. SUDHIR CHOPRA ALONG WITH THE DATE WISE INVESTMENT MADE IN US DOLLAR AND IN RUPEES. II) CERTIFICATE OF INCORPORATION OF INVESTOR COMPAN Y, M/S. ALLIANCE INDUSTRIES LIMITED WHICH IS REGISTERED VIDE REGISTRATION NUMBER 65521 DATED 10.7.1998 WITH REGISTRAR OF COMPANIES, GIBRALTAR. III) CERTIFICATE ISSUED BY M/S. ALLIANCE INDUSTRIES LIMITED STATING THE STATUS OF THE SHAREHOLDERS AND THE COMPANY. IV) COPY OF BRIEF COMPANY PROFILE OF M/S. ALLIANCE INDUSTRIES LIMITED, UAE. V) CERTIFICATE DATED 30.11.1998 ISSUED BY THE NOTARY PUBLIC, GIBRALTAR CERTIFICATION OF DOCUMENTS OF THE COMPANY, M/S ALLIANCE INDUSTRIES LIMITED. VI) CERTIFICATE FROM GOVERNOR AND COMMANDER IN CHIEF OF GIBRALTAR CERTIFYING THAT THE DOCUMENTS SI GNED BY MR. E.C. ELLUR, THE NOTARY PUBLIC ARE CORRECT. VII) PERMISSION DATED 6.2.2004 GRANTED BY GOVT. OF INDIA, MINISTRY OF FINANCE, DEPARTMENT OF ECONOMICS AFFAIRS FIPB UNIT REGARDING APPLICATION FOR FOREIGN COLLABORATION (STA REGD. NO. FCI 503 DATED 1.1.2004 ). 90 VIII) CERTIFICATE ISSUED FROM STATE BANK OF INDIA, INDUSTRIAL BRANCH, BHOPAL REGARDING FOREIGN INWARD REMITTANCE. IX) COPY OF CERTIFICATE FROM STATE BANK OF INDIA CONFIRMING THAT ALL THE REMITTANCES WERE ROUTED THRO UGH THE ACCOUNT NO. 02570196101 OF M/S ALLIANCE INDUSTR IES LIMITED WITH STANDARD CHARTERED BANK, DUBAI. X) COPY OF CERTIFICATE ISSUED BY STANDARD CHARTERED BANK, SHARJAH CONFIRMING THAT THE INVESTOR COMPANY M/S ALLIANCE INDUSTRIES LIMITED HAS CURRENT ACCOUNT NO. 02570196101 WITH THEM. XI) COPY OF CERTIFICATE FROM M/S. FARIA & ASSOCIATE S, 21, HNTON AVENUE, HOUNSLOW, MIDDLESEX TW4 6AP, THE CHARTERED ACCOUNTANTS OF THE LENDER COMPANY M/S. ALLIANCE INDUSTRIES LIMITED, UAE REGARDING CREDITWORTHINESS OF THE LENDER COMPANY. XII) COPY OF FC-GROSS PROFIT RATE SUBMITTED TO RESERVE BANK OF INDIA ON 28.7.2003. XIII) COPY OF FC-GROSS PROFIT RATE SUBMITTED TO RESERVE BANK OF INDIA ON 24.9.2003. XIV) COPY OF FC-GROSS PROFIT RATE SUBMITTED TO RESERVE BANK OF INDIA ON 27.2.2004. XV) COPY OF FC-GROSS PROFIT RATE SUBMITTED TO RESERVE BANK OF INDIA ON 31.3.2004. XVI) COPY OF RESPECTIVE SCHEDULE OF RESERVE BANK OF INDIA REGARDING PURCHASE BY A PERSON RESIDENT OUTSI DE INDIA OF EQUITY SHARES ISSUED BY AN INDIAN COMPANY. XVII) COPY OF SHARE CERTIFICATES ISSUED BY THE ASSE SSEE COMPANY IN THE NAME OF M/S. ALLIANCE INDUSTRIES LIMITED. XVIII) COPY OF RETURN OF ALLOTMENT OF SHARES IN FOR M NO.2 SUBMITTED BY THE ASSESSEE COMPANY TO REGISTRAR OF COMPANIES. 19. IF THE AFORESAID UNCONTROVERTED FACTS ARE KEPT I N JUXTAPOSITION WITH THE ARGUMENTS ADVANCED BY THE LD. RESPECTIVE COUNSEL, THEN IT CAN BE SAID THAT PRESUM PTION CANNOT TAKE THE SHAPE OF EVIDENCE, HOWSOEVER STRONG IT MAY BE UNLESS AND UNTIL CORROBORATED WITH EVIDENCE, THEREFORE, TH E ARGUMENT OF THE LD. CIT DR THAT THE ASSESSEE WAS INVOLVED IN HAWALA TRANSACTION OR OWN MONEY WAS ROUTED THROUGH THE INV ESTOR 91 COMPANY REMAINED UNSUBSTANTIATED. A BARE READING OF SEC. 68 SUGGESTS THAT THERE HAS TO BE CREDITS OF AMOUNTS IN THE BOOKS MAINTAINED BY THE ASSESSEE, THAT SUCH CREDIT HAS TO BE OF A SUM DURING THE PREVIOUS YEAR, AND THAT THE ASSESSEE OFF ERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH CRED IT FOUND IN THE BOOKS OR THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT SATISFACTORY. IT IS ONLY THEN THE SUM SO CREDITED MA Y BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. THE EXPRESSION THE ASSESSEE OFFERS NO EXPLANAT ION MEANS WHERE THE ASSESSEE OFFERS NO PROPER, REASONABLE AND ACCEPTABLE EXPLANATION AS REGARDS THE SUM FOUND CREDITED IN THE BOOKS MAINTAINED BY THE ASSESSEE. IT IS TRUE THAT THE OPIN ION OF THE ASSESSING OFFICER FOR NOT ACCEPTING THE EXPLANATION OFFERED BY THE ASSESSEE AS NOT SATISFACTORY IS REQUIRED TO BE BASED ON PROPER APPRECIATION OF MATERIAL AND OTHER ATTENDING CIRCUMSTANCES AVAILABLE ON RECORD. THE OPINION OF T HE ASSESSING OFFICER IS REQUIRED TO BE FORMED OBJECTIVELY WITH R EFERENCE TO THE MATERIAL AVAILABLE ON THE RECORD. APPLICATION O F MIND IS THE SINE QUA NON FOR FORMING THE OPINION AS WAS HELD BY THE HONBLE APEX COURT IN CIT VS. P. MOHAN KALA (2007) 291 ITR 271 (SC). WHEN AN AMOUNT IS CREDITED IN BUSINESS BOOKS, IT IS NOT AN UNREASONABLE INFERENCE TO DRAW THAT IT IS A RECEIPT OF BUSINESS, IF THE EXPLANATION GIVEN BY THE ASSESSEE AS TO HOW T HE AMOUNTS CAME TO RECEIVE IS REJECTED BY THE INCOME-TAX AUTHOR ITIES AS UNTENABLE. THIS VIEW IS SUPPORTED BY THE DECISION F ROM THE HONBLE APEX COURT IN LAKHMICHAND BAIJNATH VS. CIT (35 ITR 461) (SC). ADMITTEDLY, THE LAW IS WELL-SETTLED THA T THE ONUS OF PROVING THE SOURCE OF A SUM FOUND TO HAVE BEEN RECE IVED BY AN ASSESSEE IS ON HIM. A HARMONIOUS CONSTRUCTION OF SE C. 106 OF EVIDENCE ACT AND SEC. 68 OF THE IT ACT WILL BE THAT THOUGH APART FROM ESTABLISHING THE IDENTITY OF THE CREDITOR, THE ASSESSEE MUST ESTABLISH THE GENUINENESS OF THE TRANSACTION AS WEL L AS THE CREDITWORTHINESS OF ITS CREDITOR BUT IT IS NOT THE BUSINESS OF THE ASSESSEE TO FIND OUT THE SOURCE OF MONEY OF ITS CRE DITOR SINCE THESE MAY NOT BE WITHIN THE SPECIAL KNOWLEDGE OF TH E ASSESSEE. IN THE CASE OF SHARE APPLICATION MONEY EVEN FROM, AL LEGED SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE ASSESSIN G OFFICER, THE HONBLE APEX COURT IN CIT VS. LOVELY EXPORT P. LTD ., 216 CTR (SC) 195 EVEN WENT TO THE EXTENT THAT SUCH SHARE MON EY CANNOT BE REGARDED AS UNDISCLOSED INCOME U/S 68 OF THE ASS ESSEE COMPANY. IDENTICAL RATIO WAS LAID DOWN IN SHRI BARKHA SYNTHETICS VS. ACIT (155 TAXMAN 289) (RAJ), CIT VS. STELLER INVEST MENT LTD. 92 (115 TAXMAN 99) (SC) AND CIT VS. VALUE CAPITAL SERVIC ES P. LTD. (307 ITR 334) (DEL). 20. IT IS NOT THE CASE THAT THE M/S. ALLIANCE INDUSTR IES LIMITED IS A BOGUS COMPANY RATHER WAS DULY INCORPOR ATED AS IS EVIDENT FROM PAGES 1 TO 7 OF THE PAPER BOOK FILED O N 4.11.2008. FOR TRANSACTION OF MONEY, THE STATE BANK OF INDIA HAS DULY ISSUED CERTIFICATE OF FOREIGN INWARD REMITTANCE (RE FERENCE NO.1920333563 DATED 2.4.2003, 1920333563 DATED 2.4. 2003, 1920333564 DATED 4.4.2003 AND OTHER LIKE CERTIFICAT ES AVAILABLE ON PAGES FROM 13 TO 43 OF THE PAPER BOOK) AND FURTH ER CERTIFICATE ISSUED BY STATE BANK OF INDIA (PAGE 44) W HICH IS REPRODUCED HEREUNDER: TO WHOM SO EVER IT MAY CONCERN THIS IS TO CERTIFY THAT STANDARD CHARTERED BANK, DUB AI HAS CONFIRMED THAT ALL THE REMITTANCES SENT IN FAVO UR OF M/S. PEOPLE GENERAL HOSPITAL PVT. LTD. BY M/S. ALLI ANCE INDUSTRIES LIMITED FOR THE PERIOD 1.4.2003 TO 31.3.2 004 ARE ROUTED THROUGH THE ACCOUNT NUMBER 02570196101 O F M/S. ALLIANCE INDUSTRIES LIMITED. YOURS FAITHFULLY, SD/- ASSISTANT GENERAL MANAGER THE STANDARD CHARTERED BANK (PAGE 46 OF THE PAPER BO OK) ALSO ISSUED A CERTIFICATE TO M/S. ALLIANCE INDUSTRIE S LIMITED WHICH IS REPRODUCED HEREUNDER: TO, ALLIANCE INDUSTRIES LTD. P.O. BOX: 7768 SHARJAH UAE DEAR SIR, CURRENT A/C NO: 02-5701961-01 IN THE NAME OF ALLIANCE INDUSTRIES LTD. 93 THIS IS TO CERTIFY THAT ALLIANCE INDUSTRIES LTD. MAI NTAINS THE ABOVE MENTIONED ACCOUNT WITH OUR BRANCH SINCE 14/01/1999 AND THE ACCOUNT IS CONDUCTED TO OUR SATISFACTION AS OF DATE. THIS CERTIFICATE IS ISSUED AT YOUR REQUEST AND WITH OUT ANY RISK OR RESPONSIBILITY ON THE PART OF THE BANK OR ANY OF ITS SINGING OFFICIALS. ASSURING YOU OF OUR BEST SERVICES AT ALL TIMES. YOURS FAITHFULLY, SD/- FOR STANDARD CHARTERED BANK 20.1 THE CORRECTNESS AND THE AUTHENTICITY OF THE AF ORESAID DOCUMENTS HAS NOT BEEN CHALLENGED BY THE REVENUE, T HEREFORE, AT-LEAST THESE LETTERS CLEARLY PROVE THE EXISTENCE O F M/S. ALLIANCE INDUSTRIES LIMITED, SHARJAH, UAE AND ALSO T HAT THE MONEY WAS REMITTED THROUGH BANKING CHANNEL WHICH IS FURTHER FORTIFIED BY THE CERTIFICATE OF FOREIGN INWARD REMI TTANCE (AS DISCUSSED SUPRA). M/S. ALLIANCE INDUSTRIES LIMITED I S ALSO HAVING SHARES IN THE ASSESSEE HOSPITAL AS IS EVIDENT FROM PAGES 61 TO 64 OF THE PAPER BOOK. THE ASSESSEE IS ALSO REGISTERED UNDER THE COMPANIES ACT, 1956 (PAGES 65 TO 71 OF THE PAPER BO OK). THE ASSESSEE, A LIMITED COMPANY, INCORPORATED ON 25.5.9 9, VIDE REGISTRATION NO.13543, SINCE ITS INCEPTION, IS REGU LARLY ASSESSED TO TAX. THE SAID FOREIGN INVESTOR ALSO INVESTED IN E ARLIER YEARS, THE DETAILS OF THE SAME IS AS UNDER: A.Y. SHARE APPLICATION SHARE CAPITAL SHARE PREMIUM TOTAL INVESTMENT ASSESSMENT POSITION 2001 - 02 9318602 6192120 30960600 46471322 U/S 143(3) 2002 - 03 9478180 85303715 94781895 U/S 143(1) 2003 - 04 21275050 191475353 212750403 U/S 143(3) ADDITION FOR RS.21,27,50,403/- WAS MADE AND THE APPEAL WAS ALLOWED IN FULL BY THE CIT(A)-I, BHOPAL 94 20.2 IF THE AFORESAID TABLE IS ANALYSED, IT IS AN AD MITTED FACT THAT FOR ASSESSMENT YEAR 2001-02, THE ASSESSMENT WA S FRAMED U/S 143(3) OF THE ACT AFTER MAKING DETAILED INQUIRY AND INVESTIGATION WHEREIN THE INVESTMENT OF THE FOREIGN INVESTOR I.E. M/S. ALLIANCE INDUSTRIES LIMITED WAS ACCEPTED AND FO R ASSESSMENT YEAR 2003-04, THE ADDITION OF RS.21,27,5 0,403/- MADE U/S 68 OF THE ACT FOR THE MONEY RECEIVED AS SH ARE CAPITAL FROM THE SAME INVESTOR WAS DELETED BY THE LD. CIT(A) VIDE ORDER DATED 9.11.2006 AND THE TRIBUNAL CONFIRMED THE DELE TION OF ADDITION MADE U/S 68 OF I.T. ACT AFTER DELIBERATIONS PROPOSITIONS LAID DOWN IN THE JUDICIAL PRONOUNCEMENTS, AND APPLY ING THE SAME TO THE FACTS AND CIRCUMSTANCES PREVAILING IN T HE INSTANT CASE. THUS THE CASES RELIED UPON BY BOTH SIDES HAVE BEEN DULY CONSIDERED BY THE LD. CIT(A) AND ALSO BY THE TRIBUNA L IN THE RESPECTIVE ORDERS (SUPRA), THEREFORE, WHICH HAVE BE EN REPRODUCED HEREINABOVE. AT THE SAME TIME, THESE CAS ES HAVE BEEN ELABORATELY DISCUSSED AT PAGES 104 TO 112 OF T HE PAPER BOOK [SUBMISSIONS BEFORE THE LD. CIT(A) - A.Y. 2004 -05, ORDER DATED 27.4.2007] AND MAJORITY OF THEM HAVE BEEN FU RTHER CONSIDERED BY THE TRIBUNAL IN ITS ORDER (ITA NO.57/IN D/2007 FOR ASSESSMENT YEAR 2003-04, ORDER DATED 28.9.2007). DU RING HEARING, THE LD. CIT, DR FILED THE COPY OF THE STAT EMENT RECORDED U/S 132(4) OF THE I.T. ACT (PAGES 66 TO 117 OF THE PAPER BOOK OF THE DEPARTMENT) FROM SHRI SUDHIR CHOP RA ON 27.7.2009, FROM WHICH, LD. CIT DR CONTENDED THAT MR. CHOPRA WAS NOT SO FINANCIALLY SOUND BEFORE DEPARTURE TO A FOREIGN COUNTRY AND HIS STATEMENT IS VERY MUCH NECESSARY FO R CONSIDERATION IN REACHING TO A PARTICULAR CONCLUSIO N. HOWEVER, THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CONTENDED THAT FIRSTLY THIS STATEMENT WAS RECORDED ON 27.7.2009, MUCH AFTE R PASSING THE IMPUGNED ORDER DATED 27.4.2007 AND ALSO NOTHING ADVERSE HAS BEEN RECORDED. 21. WE HAVE PERUSED THE STATEMENT TENDERED BY SHRI SUDHIR CHOPRA (PRODUCED BY THE REVENUE IN ITS PAPER BOOK). IT IS SEEN THAT THIS STATEMENT WAS STARTED AT 1:00 PM ON 27.7.2009 AND CONTINUED TO BE RECORDED TILL 12:05 (AM) ON 28. 7.2009 (PAGE 73). AGAIN THE RECORDING WAS STARTED AND AFTER A BR EAK OF 10 TO 15 MINUTES, IT CONTINUED UPTO 5:00 AM (PAGE 84). AG AIN THE STATEMENT CONTINUED TILL 10 AM (PAGE 102). THE STAT EMENT WAS CONCLUDED AT PAGE 117 ON 28.7.2009 BUT NO TIME OF C ONCLUSION HAS BEEN MENTIONED (AT PAGE 117). 95 22. WE HAVE ANALYSED THE STATEMENT AND FOUND THAT M R. CHOPRA IS QUALIFIED CHARTERED ACCOUNTANT. IN REPLY T O QUESTION NO.1, SHRI SUDHIR CHOPRA HAS TENDERED THAT HE IS RE SIDENT OF SHARJAH, UAE ALONG WITH ADDRESS OF DELHI. HE HAS AL SO TOLD THAT RESIDENTIAL TELEPHONE NUMBERS OF SHARJAH, DELHI, BOM BAY, MOBILE NUMBERS OF INDIA AND ABROAD. IN REPLY TO QUEST ION NUMBER 11, IT WAS TENDERED THAT HE WAS IN DELHI TIL L 1995. SHRI CHOPRA WOUND UP HIS CA PRACTICE IN NEW DELHI AND HE JOINED SOME COMPANY IN SHARJAH (PAGE 76) AS THE CA PRACTIC E WAS NOT REMUNERATIVE. MR. CHOPRA WAS ALSO DEALING IN TRADIN G OF PRECIOUS METALS (PAGE 81). IN REPLY TO QUESTION NO. 59 (PAGE 83), REGARDING REGISTRATION OF COMPANY IN GIBRALTAR, HE REPLIED THAT THE COMPANY CAN BE GOT REGISTERED WITH THE HELP OF LAWYERS/ATTORNEYS AND HE SPECIFICALLY MENTIONED ISSA C & VICTORIA (LAWYER FIRM). IN REPLY TO TRADING IN PRECI OUS METAL (QUESTION NO.42 PAGE 84), HE REPLIED THAT THEY WE RE TRADING IN PLATINUM, RHODIUM, GOLD, SILVER AND COPPER ETC. AND EXPLAINED THE COLOURS OF THESE METALS (PAGE 85). IN A SPECIFIC REPLY TO QUESTION NO.47 (PAGE 86), REGARDING INVESTMENT MADE BY HIM IN THE ASSESSEE HOSPITAL, IT WAS REPLIED THAT THE INVE STMENT WAS MADE IN SHARE CAPITAL. IN REPLY TO QUESTION NOS.48 & 49 (PAGE 86) REGARDING SUPPLY OF DETAILS AND SEQUENCE OF EVE NTS, MR. CHOPRA SPECIFICALLY TENDERED THAT THE DETAILS WILL BE SUPPLIED TO THE DEPARTMENT. IN REPLY TO QUESTION NO.50 (PAGE 87) FOR PREPARATION OF ACCOUNTS, IT WAS REPLIED THAT THE AC COUNT FOR 30.6.2009 IS IN THE PROCESS OF COMPLETION AND FOR 3 0.6.2008, IT WAS PREPARED AND FILED WITH THE REGISTRAR OF COMPAN IES, GIBRALTAR. REGARDING SOURCE OF INCOME OF MR. CHOPRA QUESTION NO.51 (PAGE 87), HE SPECIFICALLY TENDERED THAT HE W AS HAVING SALARY INCOME, PROFIT FROM THE COMPANIES, INTEREST INCOME AND THE REMUNERATION WAS TOLD TO BE ABOUT RS.50 LAC (1 LAC US DOLLARS) ALONG WITH HOUSE & CAR. IN REPLY TO QUESTIO N NO.52, REGARDING DISTRIBUTION OF PROFIT BY M/S. ALLIANCE IN DUSTRIES LIMITED (PAGE 88), IT WAS REPLIED THAT THE PROFIT W AS PLOUGHED BACK INTO THE COMPANY. IN REPLY TO QUESTION NO.53, T HE SALARY OF SHRI SURESH GULATI, OTHER DIRECTOR OF THE COMPANY, WAS ALSO TOLD OVER USD 1,00,000. IN A SPECIFIC REPLY TO QUESTION N O.57 (PAGE 89 OF THE PAPER BOOK OF THE DEPARTMENT), IT WAS TEN DERED THAT USD 5,00,000 (ABOUT RS.2,50,00,000/-) WAS MADE IN S HARE CAPITAL OF THE ASSESSEE COMPANY AND REGARDING SOURC E ABOUT 60% OF THIS AMOUNT WAS FROM SAVINGS AND INCOME RECEIVED . IN REPLY 96 TO QUESTION NO.58 (PAGE 90) REGARDING BOARD MEETING OF M/S. ALLIANCE INDUSTRIES LIMITED, IT WAS TOLD THAT THE ME ETINGS ARE HOLDING AT SHARJAH ONCE A MONTH. THE NAMES OF SIX EM PLOYEES WERE ALSO TOLD ALONG WITH ADDRESS OF OFFICE IN SHAR JAH. THE NAMES OF VARIOUS TRADING FIRMS WERE ALSO EXPLAINED V IDE ANSWER TO QUESTION NO.61 (PAGE 91). REGARDING FILING OF IN COME-TAX RETURNS AT SHARJAH, IT WAS REPLIED VIDE ANSWER TO Q UESTION NO.67 (PAGE 93). IN A SPECIFIC REPLY TO QUESTION NO.70 REG ARDING DETAILS OF INVESTMENT IN THE ASSESSEE COMPANY (PAGE 95 OF P APER BOOK), IT WAS EXPLAINED THAT USD 31.5 MILLION IN ASSESSEE H OSPITAL AND 33.5 MILLION IN PEOPLES INTERNATIONAL & SERVICES P. LTD. (TOTAL USD 65 MILLION). IN REPLY TO QUESTION NO.72 & 73 (PA GE 96), IT WAS TENDERED THAT THE MONEY WAS INVESTED AS THE PRO MOTERS OF THE ASSESSEE GROUP WERE KNOWN TO THEM AND GRADUALLY THE INVESTMENT INCREASED OVER THE YEAR. REGARDING TOTAL SHARES IN THE ASSESSEE COMPANY (QUESTION NO.77), IT WAS EXPLAI NED TO BE BETWEEN 47 TO 49% I.E. LESS THAN 50% OF THE TOTAL S HARE CAPITAL OF BOTH THE COMPANIES. REGARDING CONTROL OVER OF TH E MANAGEMENT VIDE REPLY TO QUESTION NO.78 (PAGE 97), IT WAS EXPLAINED THAT THEY HAVE FAITH IN THE MANAGEMENT OF THE ASSESSEE GROUP. THE ACTIVITIES OF THE ASSESSEE GROU P WERE REPLIED VIDE ANSWER TO QUESTION NO.79 (PAGE 98). RE GARDING VISIT, IT WAS EXPLAINED THAT SHRI VIVEK GULATI VISI TED 2/3 TIMES IN THE PAST AND THE TENDER OF THE STATEMENT ONCE. IN R EPLY TO QUESTION NO.84 (PAGE 100), IT WAS SPECIFICALLY DENI ED THAT ANY LOAN WAS GIVEN TO PEOPLE GROUP AND THEIR PROMOTERS. THE COPY OF THE BANK ACCOUNT OF M/S. ALLIANCE INDUSTRIES LIM ITED WAS SHOWN TO THE MR. CHOPRA WHO EXPLAINED THAT NO SHARE S WERE HELD BY KAVITA OBERAI AND THE SAME WERE TRANSFERRED TO SHRI VIVEK GULATI. IN REPLY TO QUESTION NO.104 (PAGE 109) , THE VARIOUS AMOUNTS WERE EXPLAINED AS THE TURNOVER WAS CLAIMED T O INCLUDE ALL THE SALES OF THE METALS MADE TO VARIOUS PARTIES LIKE STANDARD BANK, VALE INCO EUROPE ETC. THE BOOKING OF CERTAIN ADMINISTRATIVE EXPENSES AND OTHER PAYMENTS MADE TO S TAFF, IT WAS EXPLAINED AS PAYMENTS TO STAFF AS SALARY (QUESTI ON NO.105 PAGE 110). REGARDING THE AMOUNTS MENTIONED THROUGH QUESTION NO.106, IT WAS REPLIED THAT USD 1,500,000 WAS RECOV ERED FROM AZI LTD. AND THE LEASE INCOME PAID BY FZC TO AZI LTD. (PAGE 111). IN A SPECIFIC REPLY TO THE CREDITWORTHINESS, I T WAS EXPLAINED THAT THEIR INVESTMENT IS SECURE AND PROFIT ABLE AND IT WAS ASSERTED THAT THEY WERE HAVING ENOUGH MONEY FOR THE INVESTMENT MADE IN THE ASSESSEE COMPANY (PAGE 115). IT IS 97 WORTH MENTIONING HERE THAT THE PAGES MENTIONED BY U S ARE THE PAGES WHICH WERE SPECIFICALLY BROUGHT TO OUR NOTICE BY THE RESPECTIVE LEARNED COUNSEL DURING HEARING. IF THE TO TALITY OF THE FACTS ARE ANALYSED, NOTHING CONTRARY HAS BEEN FOUND SUGGESTING ANY MALA FIDE ON BEHALF OF THE TENDER OF THE STATEM ENT. AS FAR AS THE CONTENTION OF THE LD. CIT DR THAT BEFORE DEPA RTURE, SHRI SUDHIR CHOPRA WAS NOT FINANCIALLY SOUND IS NOT A CO NDITION RATHER MAJORITY OF THE PERSONS ARE GOING ABROAD TO EARN MO NEY AS COMPARATIVELY MORE CHANCES OF EARNING MONEY MAY BE AVAILABLE THERE. FROM THE STATEMENT, ANOTHER FACT IS OOZING O UT THAT SHRI CHOPRA EARNED SUBSTANTIAL AMOUNTS FROM THE TRADING COMPANY DEALING IN VARIOUS METALS AND OTHER KINDS OF TRADIN G ETC. WHAT IT MAY BE, THERE IS NO PROOF/EVIDENCE BROUGHT ON RECOR D BY THE REVENUE EITHER MR. CHOPRA WAS NOT A MAN OF MEANS OR OWN MONEY OF THE ASSESSEE WAS ROUTED THROUGH M/S. ALLIA NCE INDUSTRIES LIMITED, THEREFORE, WE DONT FIND ANY MER IT IN THE APPEAL OF THE REVENUE BECAUSE AFTER SUSTAINED INTER ROGATION, EVEN THE DIRECTOR OF M/S. ALLIANCE INDUSTRIES LIMITE D, THE INVESTOR COMPANY, THERE IS NOTHING TO SUGGEST THAT OWN MONEY OF THE ASSESSEE COMPANY WAS CIRCULATED THROUGH THE INVESTOR COMPANY. EVEN OTHERWISE, NO PROOF WAS BROUGHT TO OU R NOTICE BY THE REVENUE TO SUBSTANTIATE THEIR CLAIM. AS FAR AS THE CONTENTION OF THE LD. CIT DR THAT THE APPEAL MAY BE REMANDED BACK TO THE FILE OF THE LD. ASSESSING OFFICER, WE A RE NOT AGREEING WITH THIS SUGGESTION BECAUSE NEITHER ANY NEW MATERI AL WORTH SENDING FOR FRESH LOOK WAS BROUGHT TO OUR NOTICE NO R ANY FRESH EVIDENCE WAS FILED BEFORE US. AS FAR AS THE STATEME NT OF SHRI CHOPRA IS CONCERNED, IT WAS RECORDED BY THE OFFICER OF THE DEPARTMENT ITSELF AND IT IS NOT THE CASE THAT ANY A DDITIONAL EVIDENCE WAS FILED BY THE ASSESSEE WHICH IS TO BE S CRUTINIZED BY THE ASSESSING OFFICER OTHERWISE THERE WILL BE NO EN D IN REACHING TO THE FINALITY ESPECIALLY WHEN EARLIER ON IDENTICA L FACTS, THE ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT BY THE LD. ASSESSING OFFICER AND TWO APPELLATE AUTHORITIES ALS O EXAMINED THE SAME AND REACHED TO A PARTICULAR CONCLUSION. EV EN OTHERWISE, FROM SUSTAINED INTERROGATION/RECORDING O F STATEMENT BY THE DEPARTMENT (WHILE RECORDING OF STATEMENT OF SHRI SUDHIR CHOPRA), NOTHING CONTRARY WAS TENDERED EVIDENCING T HAT EITHER THE OWN MONEY OF THE ASSESSEE WAS ROUTED THROUGH M/ S. ALLIANCE INDUSTRIES LIMITED OR THE INVESTOR COMPANY WAS HAVING NO MEANS AT ALL. SO FROM ANY ANGLE (AS DISCUSSED AB OVE), THERE IS NO MERIT IN THE APPEAL OF THE REVENUE. 98 23. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED AND THE APPEAL OF THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 31 ST JANUARY, 2011. 3.1 IF THE REASON OF ADDITIONS, MADE BY THE ASSESSIN G OFFICER, ALONG WITH OBSERVATIONS MADE THEREIN, CONCLU SION DRAWN IN THE IMPUGNED ORDERS, DETAILED ORDER PASSED B Y THE TRIBUNAL DATED 31 ST JANUARY, 2011 FOR A.Y. 2005-06 & 2004-05, THE ORDER OF THE HON'BLE HIGH COURT OF MP AND THE ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSELS ARE KEPT IN JUXTAPOSITION, WE NOTE THAT THE ONLY COMMON GROUN D RAISED IN IMPUGNED APPEALS PERTAINS TO DELETING THE ADDITIONS, SO MADE, IN THE RESPECTIVE YEARS, ON ACCOUN T OF UNEXPLAINED CREDIT/SHARE APPLICATION MONEY U/S 68 OF TH E I.T. ACT. BEFORE ADVERTING FURTHER, WE ARE REPRODUCIN G HEREUNDER THE RELEVANT FINDING RECORDED BY THE LD. F IRST APPELLATE AUTHORITY FOR A.Y. 2002-03 AT PAGES 44 & 45 (P ARA 4.8 TO 4.11) OF THE IMPUGNED ORDER: 99 4.8 IT MAY BE NOTED THAT THE FACTS AND ISSUE INVOLVED IN A.Y. 2002-03 UNDER CONSIDERATION ARE IDENTICAL TO FACTS INVOLVED IN A.YS. 2003-04 TO 200 5- 06 RELATED TO INVESTMENT MADE BY M/S. ALLIANCE INDUSTRIES LTD. IN THE SHARE CAPITAL OF THE APPELLA NT COMPANY AND, THEREFORE, THE DECISIONS OF HONBLE ITAT IN THE APPELLANTS OWN CASE IN A.YS. 2003-04, 2004-05 & 2005-06 IN THE CASE OF ORIGINAL ASSESSMENT ORDERS U/S 143(3) ARE BINDING UPON THE CIT(A)UNDER THE PRINCIPLE OF JUDICIAL DISCIPLINE. 4.9 THE JURISDICTIONAL HON'BLE HIGH COURT OF MADHYA PRADESH IN THE CASE OF AGRAWAL WAREHOUSING AND LEASING LTD. VS. CIT (2002) 257 ITR 235 (MP) OBSERVED THAT THE ORDERS PASSED BY THE TRIBUNAL ARE BINDING ON ALL THE REVENUE AUTHORITIES FUNCTIONING UNDER THE JURISDICTION OF THE TRIBUNAL. THE PRINCIPLES OF JUDICIAL DISCIPLINE REQUIRE THAT ORDE RS OF THE HIGHER APPELLATE AUTHORITIES SHOULD BE FOLLOWED UNRESERVEDLY BY THE SUB-ORDINATE AUTHORITIES. THE HON'BLE HIGH COURT, INTER-ALIA, OBSERVED IN THE ORD ER AS UNDER: OBVIOUSLY, THE COMMISSIONER OF INCOME-TAX (APPEALS) NOT ONLY COMMITTED IMPROPRIETY BUT ALSO ERRED IN LAW IN REFUSING TO FOLLOW THE ORDER OF THE APPELLATE TRIBUNAL. EVEN WHERE HE MAY HAVE SOME RESERVATIONS ABOUT THE CORRECTNESS OF THE DECISION OF THE TRIBUNAL, HE HAD TO FOLLOW THE ORDER. HE COULD AND SHOULD HAVE LEFT IT TO THE DEPARTMENT TO TAKE THE MATTER IN FURTHER APPEAL TO THE TRIBUNAL AND GET TH E MISTAKE, IF ANY, RECTIFIED. IN THIS CASE, THE HON'BLE HIGH COURT HELD AS UNDER (HEAD NOTES): HELD, THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) NOT ONLY COMMITTED JUDICIAL IMPROPRIETY B UT ALSO ERRED IN LAW IN REFUSING TO FOLLOW THE ORDER O F THE 100 APPELLATE TRIBUNAL. THE MEMBERS OF THE TRIBUNAL WHO DECIDED THE APPEAL UPHOLDING THE VIEW TAKEN BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ALSO DID NOT OBSERVE DUE PROCEDURE. 4.10 THE HONBLE ITAT, BANGALORE IN THE CASE OF JINDAL ALLUMINIUM LTD. VS. ACIT (2012) 19 ITR (TRIB ) 255 (BANG.) HAS ALSO OBSERVED AS UNDER: THE COMMISSIONER (APPEALS)BEING AN AUTHORITY LOWER IN THE TIER OF AUTHORITIES UNDER THE ACT TO APPELLATE TRIBUNAL, IS BOUND TO FOLLOW THE DECISION OF THE TRIBUNAL. 4.11 AS MENTIONED HEREINABOVE, IN THIS CASE, THE HONBLE ITAT, INDORE BENCH HAD DECIDED THE ABOVE ISSUE IN APPELLANTS OWN CASE FOR A.Y. 2003-04, 2004-05 & 2005-06, IN FAVOUR OF THE APPELLANT. THEREFORE, RESPECTFULLY FOLLOWING THE DECISIONS OF HONBLE ITAT, INDORE BENCH IN ITA NO.57/IND/2007 ORDER DATED 28.9.2007 FOR A.Y. 2003-04 AND IN ITA NO.S427/IND/2007 AND IN ITA NO.195/IND/2009 FOR A.TS. 2004-05 & 2005-06 RESPECTIVELY ORDER DATED 31.1.2011 AS THE FACTS INVOLVED IN A.Y. 2002-03 ARE ALSO THE SAME AS THE INVESTMENT IN SHARE CAPITAL IN THIS YEAR ALSO CAME FROM THE SAME FOREIGN INVESTOR M/S. ALLIANCE INDUSTRIES LTD., GIBRALTAR, AND ALSO THAT THE APPELLANT COMPANY HAD DISCHARGED ITS ONUS TO PROVE IDENTITY AND CREDITWORTHINESS OF THE FOREIGN INVESTOR COMPANY M/S. ALLIANCE INDUSTRIES LTD., GIBRALTAR AND GENUINENESS OF THE TRANSACTIONS, IT I S HELD THAT INVESTMENT MADE BY THE FOREIGN INVESTOR M/S. ALLIANCE INDUSTRIES LTD. IN THE SHARES OF THE APPELLANT COMPANY IN THE PREVIOUS YEARS RELEVANT TO A.Y. 2002-03 WAS GENUINE AND, HENCE, NO ADDITION U/S 68 WAS CALLED FOR IN THIS ASSESSMENT YEAR ON ACCOUNT OF INVESTMENT BY M/S. ALLIANCE INDUSTRIES LIMITED OF RS.9,47,81,895/-. THE ADDITION OF 101 RS.9,47,81,895/- MADE U/S 68 BY THE A.O. IS DELETED. 3.2 DURING HEARING, IT WAS POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE AFORESAID DECISION OF THE TRIBUNAL HAS BEEN AFFIRMED BY THE HONBLE JURISDICTIO NAL HIGH COURT. THIS FACTUAL MATRIX WAS NOT CONTROVERTED B Y THE REVENUE. THE RELEVANT PORTION FROM THE ORDER OF THE HON'BLE HIGH COURT IS REPRODUCED HEREUNDER FOR READY REFERENCE: 13. BY RECORDING AFORESAID FINDINGS, THE COMMISSIONER OF INCOME TAX (APPEALS) REVERSED THE ORDER OF THE ASSESSING OFFICER AND DIRECTED DELETION OF ADDITIONS MADE IN THE MATTER. THE ITAT AFFIRMED THE ORDER OF CIT(A) WITH SIMILAR REASONING. 14. IN THE LIGHT OF THE AFORESAID FACTUAL POSITION, THE LEGAL POSITION MAY BE LOOKED INTO BECAUSE THE AFORESAID FACTUAL POSITION HAS NOT BEEN DISPUTED BY THE PARTIES. 15. IN LOVELY EXPORT (SUPRA) THE APEX COURT CONSIDERING THE QUESTION HELD THUS: 2. CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME UNDER S. 68 OF IT ACT, 1961? WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON 102 THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE A.O., THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT. 16. THE AFORESAID JUDGMENT HAS BEEN FOLLOWED BY ALL THE COURTS AND THE JUDGMENTS RELIED ON BY THE APPELLANTS RELATES TO THE PERIOD PRIOR TO THE JUDGMENT IN LOVELY EXPORTS. AS THE APEX HAS SPECIFICALLY HELD THAT IF THE IDENTITY OF THE PERSON PROVIDING SHARE APPLICATION MONEY IS ESTABLISHED THEN THE BURDEN WAS NOT ON THE ASSESSEE TO PROVE THE CREDITWORTHINESS OF THE SAID PERSON. HOWEVER, THE DEPARTMENT CAN PROCEED AGAINST THE SAID COMPANY IN ACCORDANCE WITH LAW. THE POSITION OF THE PRESENT CASE IS IDENTICAL. IT IS NOT THE CASE OF ANY OF THE PARTIES THAT M/S ALLIANCE INDUSTRIES LIMITED, SHARJAH IS A BOGUS COMPANY OR A NON-EXISTENT COMPANY AND THE AMOUNT WHICH WAS SUBSCRIBED BY THE SAID COMPANY BY WAY OF SHARE SUBSCRIPTION WAS IN FACT THE MONEY OF THE RESPONDENT ASSESSEE. IN THE PRESENT CASE, THE ASSESSEE HAD ESTABLISHED THE IDENTITY OF INVESTOR WHO HAD PROVIDED THE SHARE SUBSCRIPTION AND IT WAS ESTABLISHED THAT THE TRANSACTION WAS GENUINE THOUGH AS PER CONTENTION OF THE RESPONDENT THE CREDITWORTHINESS OF THE CREDITOR WAS ALSO ESTABLISHED. IN THE PRESENT CASE, IN THE LIGHT OF THE JUDGMENT OF LOVELY EXPORTS (P) LTD., WE HAVE TO SEE ONLY IN RESPECT OF THE ESTABLISHMENT OF THE IDENTITY OF THE 103 INVESTOR. THE DELHI HIGH COURT ALSO IN DIVINE LEASING & FINANCE LTD. (SUPRA), CONSIDERING THE SIMILAR QUESTION HELD THAT THE ASSESSEE COMPANY HAVING RECEIVED SUBSCRIPTIONS TO THE PUBLIC/RIGHTS ISSUE THROUGH BANKING CHANNELS AND FURNISHED COMPLETE DETAILS OF THE SHAREHOLDERS, NO ADDITION COULD BE MADE UNDER SECTION 68 IN THE ABSENCE OF ANY POSITIVE MATERIAL OR EVIDENCE TO INDICATE THAT THE SHAREHOLDERS 'WERE BENAMIDARS OR FICTITIOUS PERSONS OR THAT ANY PART OF THE SHARE CAPITAL REPRESENTED COMPANY'S OWN INCOME FROM UNDISCLOSED SOURCES. THE SIMILAR VIEW HAS BEEN TAKEN BY THE OTHER HIGH COURTS. 17. AS THE APEX COURT HAS CONSIDERED THE LAW IN LOVELY EXPORTS (SUPRA) AND IN VIEW OF LAW LAID DOWN BY THE APEX COURT, WE FIND THAT THE SUBSTANTIAL QUESTIONS FRAMED IN THESE APPEALS DO NOT ARISE FOR OUR CONSIDERATION. ACCORDINGLY, ALL THESE APPEALS ARE DISMISSED WITH NO ORDER AS TO COSTS. 3.3 IN THE IMPUGNED ORDER DATED 14.2.2013, THE LD. CIT(A) HAS EXAMINED THE BALANCE-SHEET AND P & L ACCOUNT FOR THE PERIOD ENDING ON 30.6.2001 TO 30.6.2007 OF THE INVESTOR COMPANY I.E. M/S. ALLIANCE INDUSTRIES LTD. WHICH HAS SHOWN THE FOLLOWING TURNOVER AND P & L ACCOUNT ALON G 104 WITH THE INVESTMENT IN THE ASSESSEE COMPANY WHICH IS REPRODUCED HEREUNDER: YEAR ENDED ON 30 TH JUNE TURNOVER (IN US $) PROFIT (IN US $) TOTAL INVESTMENT IN PEOPLES GENERAL HOSPITAL PVT. LTD. AS PER BALANCE-SHEET (IN US $) INVESTMENT DURING THE YEAR ENDED ON 30 TH JUNE (IN US $) 30.6.2001 1,164,637,730 14,732,431 2,000,000 2,000,000 30.6.2002 888,738,794 9,642,762 4,500,000 2,500,000 30.6.200 3 702,559,773 7,232,599 9,000,000 4,500,000 30.6.2004 934,411,746 10,273,015 13,508,174 4,508,174 30.6.2005 1,055,076,212 12,050,834 26,500,000 12,991,826 30.6.2006 1,228,690,883 15,190,187 31,500,000 5,000,000 30.6.2007 1,667,205,803 24,623,554 31,500,000 --- IN THE ORDERS OF THE LD. CIT(A), THERE IS UNCONTROV ERTED CATEGORICAL FINDING THAT FIRSTLY, THE FACTS ARE IDENTICAL AND SECONDLY, THE INVESTMENT IN SHARE CAPITAL, IN THESE YE ARS ALSO, CAME FROM SAME FOREIGN INVESTOR I.E. M/S. ALLIANC E INDUSTRIES LTD., GIBRALTAR AND ALSO THE ASSESSEES HAD DISCHARGED THEIR ONUS OF PROVING THE IDENTITY AND CREDITWORTHINESS OF THE FOREIGN INVESTOR COMPANY ALO NG WITH GENUINENESS OF TRANSACTION. ON THE BASIS OF AFORESAID FIGURES OF INVESTMENT/TURNOVER OF THE INVESTOR COMP ANY, 105 FROM ITS METAL TRADING BUSINESS, THE LD. CIT(A) FOUND THAT THE CREDITWORTHINESS OF M/S. ALLIANCE INDUSTRIES LTD . (INVESTOR COMPANY) IS ESTABLISHED. BEFORE THE LD. CIT (A), A CERTIFICATE DATED 15.3.2010 FROM STANDARD BANK, LONDON WAS ALSO FILED CONFIRMING THAT THE AMOUNTS WERE TRANSFERRED TO THE ASSESSEE. THE SAID LETTER HAS BEEN REPRODUCED AT PAGE 17 OF THE IMPUGNED ORDER DATED 14.2.2013. IN THESE APPEALS, THE ASSESSEES HAVE DULY DISCHARGED THE ONUS CAST UPON THEM BY PROVING THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION, THEREFORE, NO ADDITION IS WARRANTED U/S 68 OF THE I.T. ACT. IN VIEW OF THIS UNCONTROVERTED FINDIN G AND THE DECISION FROM HONBLE JURISDICTIONAL HIGH COURT AFFIR MING THE STAND OF THE TRIBUNAL ON IDENTICAL ISSUE/FACTS, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LD. CIT (A) UNLESS AND UNTIL CONTRARY FACTS ARE BROUGHT ON RECORD B Y THE REVENUE. RESPECTFULLY FOLLOWING THE ORDER OF TH E HON'BLE 106 HIGH COURT, CONFIRMING THE ORDER OF THE TRIBUNAL ON IDENTICAL FACTS, WHICH HAS ALSO BEEN FOLLOWED BY THE L D. CIT(A), WE AFFIRM THE CONCLUSION DRAWN IN THE IMPUGN ED ORDERS. RESULTANTLY, THE APPEALS OF THE REVENUE ARE HAV ING NO MERIT, CONSEQUENTLY, DISMISSED. FINALLY, ALL HE APPEALS OF THE REVENUE ARE DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES AT THE CONCLUSION OF THE HEARING ON 1.1.2014. SD/- SD/- (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27.1.2014 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE !VYS!