ROYAL RICH DEVELOPERS P. LTD, MUMBAI V. DCIT OSD-II RG 7, MUMBAI

ITA 1835/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3165 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 18-03-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K SRIVASTAVACIT; SUNIL KUMAR AGARWAL JC
• Keywords: Unexplained cash credit; Bogus Share capital; Gift; Income from undisclosed sources; Search and seizure; Loose papers; Share purchase agreement; Source of fund; Retrospective amendment; Fair market value; Valuation report; Accommodation entries; Capital receipt; Onus to prove
• Section: 143(3); 92A; 56(2); 133A; 133(6); 147; 131; 68; 69; 148; 56; 263; 132

Judgement Text

D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 1835 /MUM/2014 ( / ASSESSMENT YEAR : 2006-07) ./ I.T.A. NO. 1836 /MUM/2014 ( / ASSESSMENT YEAR : 2007-08) M/S ROYAL RICH DEVELOPERS PVT. LTD., C/O SURESH VELJI FARIA, MAHAVIR GENERAL STORE, 154, BORA BAZAR STREET, FORT, MUMBAI 400001. / V. D.C.I.T. OSD II, CENTRAL RANGE 7, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, CHURCHGATE, MUMBAI. ./ PAN : AADCR 2578 J ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY SHRI KIRIT SHETH REVENUE BY : SHRI A.K. SRIVASTAVA,CIT DR & SHRI SUNIL KUMAR AGARWAL ,JCIT / DATE OF HEARING : 26.05.2016 / DATE OF PRONOUNCEMENT : 24-08-2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THESE TWO APPEALS FILED BY THE ASSESSEE COMPANY FO R THE ASSESSMENT YEARS 2006-07 AND 2007-08 ARE DIRECTED AGAINST TWO SEPARATE APPELLATE ORDERS OF THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS)- 40, MUMBAI (HEREINAFTER CALLED THE CIT(A)) BOTH DATED 24 TH FEBRUARY, 2014, THE APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) ARISING FROM THE TWO SEPARATE ASSESSMENT ORDERS DATED 14.12.2009 AND 18.12.2009 R ESPECTIVELY PASSED BY ITA 1835 & 1836/MUM/2014 2 THE LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO) U/S 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT,1961 (HEREIN AFTER CALLED THE ACT) AND SECTION 143(3) OF THE ACT RESPECTIVELY. 2. THE FOLLOWING COMMON GROUNDS OF APPEAL (ONLY CHA NGE IN THE FIGURES) ARE RAISED BY THE ASSESSEE IN BOTH THESE APPEALS IN THE MEMO OF APPEAL FILED WITH THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI (HER EINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- 1. THE LEARNED C.I.T. (A) HAS ERRED IN UPHOLDING TH E ADDITION OF RS. 1,60,00,000/- (FOR A.Y. 2006-07) AND RS. 3,75,00,00 0/- (FOR A.Y. 2007- 08) ON ACCOUNT OF ALLEGED BOGUS SHARE SUBSCRIPTION, AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE INCOME TAX ACT, 1961. YOUR APPELLANT RESPECTFULLY SUBMITS THAT ON FACTS AND IN LAW THE ADDITION OF RS. 1,60,00,000/- (FOR A.Y. 2006-07) AND RS. 3,75,00,000/- (FOR A.Y. 2007-08) IS UNJUSTIFIED AND SHOULD THEREF ORE BE DELETED. 3. FIRST WE SHALL TAKE UP THE ASSESSEES APPEAL IN ITA NO. 1835/MUM/2014 FOR THE ASSESSMENT YEAR 2006-07. THE BRIEF FACTS IN THIS CASE ARE THAT THE ASSESSEE COMPANY BELONGS TO SHRI VINOD FARIA/MILAN DALAL GROUP OF CASES. A SEARCH AND SEIZURE ACTION U/S 13 2 (1) OF THE ACT WAS CARRIED OUT ON 30 TH MAY, 2008 AT THE OFFICE AND RESIDENTIAL PREMISES O F SHRI VINOD FARIA, DIRECTOR AND THE KEY PERSON OF THE GROUP WE RE COVERED. THE PREMISES OF THE ASSESSEE COMPANY AT MAHAVIR ANNEXE, 345, KAL BADEVI ROAD, MUMBAI WAS ALSO COVERED U/S 133A OF THE ACT ON 30 TH MAY, 2008. DURING THE COURSE OF SURVEY ACTION AT THE OFFICE OF THE ASSESSEE VARI OUS INCRIMINATING DOCUMENTS CONTAINING SHARE APPLICATION FORMS, BLANK TRANSFER FORMS AND BLANK RECEIPTS FOR REPURCHASE OF THE ALLOTTED SHARES , COPIES OF B ANK PASS BOOK OF SHARE SUBSCRIBERS WHERE CASH HAS BEEN DEPOSITED ETC. WERE FOUND AND IMPOUNDED. THE ASSESSEE COMPANY WAS INCORPORATED ON 17 TH MARCH, 2006 AND THE DIRECTORS WERE SHRI VINOD K. FARIA, SHRI SURESH K. FARIA AND SHRI PARAG AMARSHI NISAR. THE ASSESSEE COMPANY HAD ISSUED 4 L ACS EQUITY SHARERS IN ITA 1835 & 1836/MUM/2014 3 FINANCIAL YEAR 2005-06 AND 9,37,500 SHARES IN FINAN CIAL YEAR 2006-07. THE SHARES OF THE FACE VALUE OF RS. 10/- PER SHARE HAD BEEN ISSUED AT A PREMIUM OF RS. 30/- PER SHARE. THUS AN AMOUNT OF RS. 1.60 C RORES WAS CREDITED AS SHARE SUBSCRIPTION IN THE FINANCIAL YEAR 2005-06 AN D RS. 3.75 CRORES IN THE FINANCIAL YEAR 2006-07 .THE DETAILS OF THE INCRIMIN ATING DOCUMENTS FOUND AND IMPOUNDED DURING THE SURVEY ACTION ARE AS UNDER:- ANNEXURE A-1 PAGES 1 TO 216 IMPOUNDED FROM R. NO.4 7. 2ND FLOOR. BHUPEN CHAMBER, DALAL STREET, FORT, MUMBAI - 1. THIS FILE CONTAINS THE DOCUMENTS SUCH AS ACKNOWLEDG EMENT OF THE RETURN FILED, COPY OF THE BANK PASSBOOK, BLANK TRAN SFER FORMS AND BLANK STAMPED RECEIPTS GIVEN BY THE SHARE SUBSCRIBE RS OF THE ASSESSEE COMPANY. THE SHARE SUBSCRIPTION CREDITED I N THE BOOKS OF ACCOUNTS OF THE ASSESSEE IN THE NAMES OF THE VAR IOUS PERSONS IS MERE ACCOMMODATION ENTRIES OBTAINED BY PAYMENT OF T HE EQUIVALENT AMOUNT OF CASH + OTHER CHARGES AND HENCE THE SAME IS BOGUS IN NATURE. THE DOCUMENTARY EVIDENCE IN THIS F ILE CONFIRMS THE FINDINGS. 3. ANNEXURE A-2 CONTAINING PAGES 1 TO 104 THIS FILE CONTAINS THE COPIES OF SHARE APPLICATION FORMS AND UNDATED LETTER FROM THE SHARE SUBSCRIBER OF THE ASS ESSEE IN RESPECT OF SHARE SUBSCRIPTION CREDITED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE DURING THE F.YRS. 2005-06 AND 2006-07. IT WAS OBSERVED THAT ALL THE SHARE APPLICATION FORMS ARE F ILLED IN WITH COMMON HANDWRITING, ALL THE SHARE APPLICANTS HAVE M ERELY SIGNED THE APPLICATION FORM, NO APPLICATION NUMBER IS GIVE N IN ANY OF THE APPLICATIONS, THE ACKNOWLEDGEMENT DUE TO BE ISSUED TO THE SHARE SUBSCRIBERS HAS NOT BEEN ISSUED AT ALL AND THE REQU EST LETTER ADDRESSED TO THE BOARD OF DIRECTORS OF THE ASSESSEE COMPANY HAS ALSO NOT BEEN DATED. THESE FACTS EVIDENCE SHOW THAT THE ACCOMMODATION ENTRIES IN THE GUISE OF SHARE SUBSCRI PTION HAVE BEEN STAGE MANAGED AND THIS FACT HAS ALSO BEEN ADMI TTED BY THE DIRECTOR OF THE ASSESSEE COMPANY, MR VINOD FARIA IN HIS STATEMENT U/S 132(4) DATED 31-05-2008. BESIDES THE ABOVE TWO IMPOUNDED LOOSE ANNEXURES, ANNEXURE A-3 ( PAGES 1 T O 212) ALSO CONTAINS THE SIMILAR NATURE OF INCRIMINATING DOCUME NTS SHOWING ITA 1835 & 1836/MUM/2014 4 THE CLEAR-CUT EVIDENCE THAT THE ASSESSEE COMPANY HA S INTRODUCED BOGUS SHARE SUBSCRIPTION IN THE NAMES OF VARIOUS PA RTIES WHICH ARE NOTHING BUT MERE ACCOMMODATION ENTRIES. THE CASE WAS REOPENED U/S 147 OF THE ACT AS THE RE VENUE HAD REASONS TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT TO T HE TUNE OF RS. 1.60 CRORES. THE REASONS FOR REOPENING OF THE ASSESSMENT WERE RECORDED AND NOTICE U/S 148 OF THE ACT WAS ISSUED ON 4 TH SEPTEMBER, 2009 AND SERVED UPON THE ASSESSEE. THE COPY OF THE REASONS RECORDED WAS PRO VIDED TO THE ASSESSEE.THE ASSESSEE REQUESTED THAT THE ORIGINAL RETURN FILED U /S 139(1) OF ACT BE TREATED AS RETURN OF INCOME FILED IN PURSUANCE OF NOTICE U/ S 148 OF THE ACT. THE COPIES OF THE STATEMENTS RECORDED OF SHRI PARAG A. NISAR, SHRI SURESH V. FARIA AND SHRI VINOD K. FARIA, THE DIRECTORS OF THE ASSES SEE COMPANY WERE ALSO PROVIDED BY THE AO TO THE ASSESSEE COMPANY. THE A. O. ALSO REFERRED TO THE PROCEEDINGS U/S 133A OF THE ACT AND ALSO DURING THE RECORDING OF STATEMENT U/S 131 OF THE ACT WHEREBY THE DIRECTORS OF THE ASS ESSEE WERE CONFRONTED WITH ALL THE IMPOUNDED MATERIAL AND QUESTIONS WERE ASKED BASED UPON THE INCRIMINATING PAPERS. IN THE STATEMENT RECORDED OF SHRI PARAG A. NISAR, DIRECTOR ON 18-06-2008 WHEREBY HE HAS SUBMITTED THA T HE HAS NOT RENDERED ANY SERVICES TO THE ASSESSEE AND HE HAS BEEN PAID S ALARY ONLY FOR SIGNING THE DOCUMENTS OF THE ASSESSEE. HE STATED THAT SHRI VIN OD K. FARIA LOOKED AFTER ALL THE AFFAIRS OF THE ASSESSEE COMPANY AND THE BOOKS O F ACCOUNTS ARE MAINTAINED BY MR VIREN MEHTA AT HIS OFFICE. AS PER THE AO, THE STATEMENT RECORDED OF MR SURESH V. FARIA , THE OTHER DIRECTOR OF THE ASSESSEE RECORDED ON 18-06-2008 ALS O EVIDENCES THAT SH SURESH V. FARIA ALSO DID NOT PARTICIPATED IN THE DA Y TO DAY BUSINESS ACTIVITIES OF THE ASSESSEE COMPANY. THE SAID SURESH V FARIA AL SO CONFESSED IN REPLY TO QUESTION NO. 13 IN THE STATEMENT RECORDED THAT THE SHARE SUBSCRIPTIONS ARE ONLY ACCOMMODATION ENTRIES. ON BEING ASKED ABOUT WH O MANAGED THE CASH FOR OBTAINING THE ACCOMMODATION ENTRIES IN GUISE OF SHARE SUBSCRIPTIONS, SH ITA 1835 & 1836/MUM/2014 5 SURESH V. FARIA REPLIED THAT HE DOES NOT KNOW ANYTH ING AND THAT ALL THE AFFAIRS ARE LOOKED AFTER BY MR. VINOD K FARIA. THE A.O. OBSERVED THAT THE WHOLE AND SOLE KEY PERS ON OF THE BUSINESS ACTIVITIES OF THE ASSESSEE IS SH VINOD K FARIA . TH E STATEMENT OF SHRI VINOD K. FARIA WERE RECORDED U/S 131/132(4) OF THE ACT ON VA RIOUS DATES IN WHICH HE ADMITTED THAT THE SHARE SUBSCRIPTION FOR THE ASSESS EE WAS BOGUS AND THEY WERE MERE ACCOMMODATION ENTRIES AND HIS CONFESSION REGARDING THE ACCOMMODATION ENTRIES OF SHARE SUBSCRIPTION IS CLEA R FROM THE FOLLOWING ANSWER TO THE QUESTION NO. 23 IN HIS STATEMENT RECO RDED ON 31 ST MAY, 2008 U/S. 132(4) OF THE ACT:- Q. 23 I AM DRAWING YOUR ATTENTION TO THE DOCUMENTS NO. A-L TO A- 4 IMPOUNDED DURING THE COURSE OF SURVEY U/S 133A AT ROOM NO. 47, 2ND, FLOOR, BHUPEN CHAMBERS ,FORT, MUMBAI 400 0 01. THESE FILES CONTAIN THE BLANK RECEIPTS OBTAINED FROM THE SHAREHOLDERS OF THIS COMPANY AND BLANK TRANSFER FORMS. THERE IS NO EVIDENCE OF SHARE CERTIFICATES SENT TO ANY OF THEM. THESE FACTS INDICATE THAT THE SHARE SUBSCRIPTION OF RS. 5.50 CRORE IS NOTHING BUT BOOK ENTRIES OBTAINED FROM VARIOUS PERSONS AGAINST CASH PAYMENTS. WHAT DO YOU HAVE TO COMMENT ABOUT THESE OBSERVATION S? ANS. YOUR PRESUMPTION IS CORRECT. I AM UNABLE TO FU RNISH MY FURTHER COMMENTS THEREON. WHILE SHRI VINOD K. FARIA IN REPLY TO QUESTION NO. 32 REPLIED AS UNDER:- ANS. SEARCHES AND SURVEYS HAVE BEEN CARRIED OUT AT OUR GROUP OFFICES AS WELL AS AT THE RESIDENCES OF MYSELF AND MY BROTHER, MR. MAHESH FARIA AND MY ASSOCIATES, MR. MILAN DALAL. DU RING THE COURSE OF SEARCH/SURVEY, I HAVE BEEN GIVEN TO UNDER STAND THAT VARIOUS INCRIMINATING EVIDENCE HAS BEEN FOUND EVIDE NCING THE INVESTMENT IN THE IMMOVABLE AND MOVABLE PROPERTIES BY ME AND OTHER ENTITIES. WE MAY ALSO NOT BE IN A POSITION TO PROVE THE GENUINENESS OF THE SHARE CAPITAL SUBSCRIBED BY M/S ROYAL RICH DEVELOPERS PVT. LTD TO THE SATISFACTION OF THE DEPA RTMENT. ITA 1835 & 1836/MUM/2014 6 CONSIDERING THESE FACTS, I, AS AN AUTHORIZED REPRES ENTATIVE OF ALL THESE ENTITIES, DECLARE AN INCOME OF RS. 10.00 CROR E AS ADDITIONAL INCOME OVER AND ABOVE TO THE REGULAR INCOME RECORDE D IN THE' BOOKS OF ACCOUNTS. DETAILS OF ENTITY AND ASSESSMENT YEAR-WISE BREAKUP OF THE INCOME OFFERED TO TAX WILL BE FURNIS HED SEPARATELY AFTER GOING THROUGH THE SEIZED RECORDS AND OTHER DE TAILS FROM OUR BOOKS OF ACCOUNTS.' THE A.O. ALLOWED FOR INSPECTION OF THE IMPOUNDED LO OSE PAPERS TO THE ASSESSEE AND COPIES OF THE IMPOUNDED MATERIAL WAS ALSO FURNI SHED TO THE ASSESSEE. THE CONTENTION OF THE ASSESSEE WAS THAT LOOSE PAPERS WE RE NOT FOUND IN THE PREMISES OF THE ASSESSEE WAS REJECTED ON THE GROUND THAT THE LOOSE PAPERS WERE FOUND IN THE BUSINESS PREMISES OF THE MAIN GRO UP OF CONCERNS WHERE ALL THE DIRECTORS WERE DOING THEIR BUSINESS ACTIVITIES. THE A.O. OBSERVED THAT TWO DIRECTORS OF THE ASSESS EE IN THEIR STATEMENT RECORDED HAD DENIED HAVING KNOWLEDGE OF THE AFFAIRS OF THE ASSESSEE AND THEY WERE MERELY SIGNING THE DOCUMENTS AS AN WHEN CALLED UPON TO SIGN THE SAME BY SHRI VINOD K FARIA WHO WAS THE MAIN AND KEY DIRE CTOR OF THE ASSESSEE AND WAS IN CHARGE OF ALL THE ACTIVITIES INCLUDING FINAN CIAL AFFAIRS OF THE ASSESSEE. SH VINOD K FARIA HAS ADMITTED IN HIS STATEMENT RECO RDED U/S. 132(4) OF THE ACT ON 30 TH MAY,2008 THAT THE SHARE SUBSCRIPTION WAS BOGUS AND WERE MERE ACCOMMODATION ENTRIES. FURTHER, SHRI SURESH V. FAR IA, ANOTHER DIRECTOR IN HIS STATEMENT RECORDED U/S 131 OF THE ACT IN REPLY TO QUESTION NO. 13 HAS CONFIRMED THAT THE SHARE SUBSCRIPTION WERE BOGUS AN D THEY WERE MERE ACCOMMODATION ENTRIES. ANOTHER DIRECTOR SHRI PARAG A. NISAR IN HIS STATEMENT RECORDED ON 18 TH JUNE, 2008 U/S 131 OF THE ACT ADMITTED THAT ALL THE DAY-TO-DAY BUSINESS ACTIVITIES WERE DONE BY SHR I VINOD K. FARIA AND HE WAS NOT AWARE OF THE NATURE OF THE BUSINESS OF THE ASSESSEE. THE ASSESSEE DID NOT GAVE ANY REPLIES TO THE DOCUMENTS IMPOUNDED ON THE GROUNDS THAT THEY WERE NOT IMPOUNDED FROM THE PREMISES OF THE ASSESSE E. ITA 1835 & 1836/MUM/2014 7 THUS, THE A.O. MADE ADDITION OF RS.1.60 CRORES AS U NEXPLAINED CASH CREDIT U/S 68 OF THE ACT ON THE GROUNDS THAT THE ASSESSEE HAS INTRODUCED BOGUS SHARE SUBSCRIPTION OF RS.1.60 CRORES IN ITS BOOKS O F ACCOUNTS WHICH THE ASSESSEE COULD NOT EXPLAIN EITHER DURING THE SURVEY OR POST SURVEY ENQUIRIES. THE MAIN DIRECTOR OF THE ASSESSEE SH. VINOD K FARIA HAS ULTIMATELY CONFESSED THAT THE SHARE SUBSCRIPTION IS MERE ACCOMMODATION ENTRIES , AND ACCORDINGLY ADDITIONS OF RS.1.60 CRORES WERE MADE BY THE AO TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED CASH CREDIT U/S 68 OF THE A CT, VIDE ASSESSMENT ORDER DATED 14-12-2009 U/S. 143(3) READ WITH SECTION 147 OF THE ACT . 4. AGGRIEVED BY THE ASSESSMENT ORDER DATED 14-12-2 009 PASSED BY THE A.O. U/S. 143(3) READ WITH SECTION 147 OF THE ACT, THE ASSESSEE FILED ITS FIRST APPEAL BEFORE THE LD. CIT(A). 5. BEFORE THE LD. CIT(A) THE ASSESSEE SUBMITTED THA T THE INDEPENDENT ENQUIRY BE MADE WITH EACH SHAREHOLDER TO FIND OUT T HE TRUTH ABOUT THE GENUINENESS OF THE SHARE TRANSACTION. THE ASSESSEE CONTENDED THAT THE ASSESSEE MAY BE GIVEN OPPORTUNITY TO PRODUCE THE SH AREHOLDERS BEFORE THE A.O. IN PERSON, FOR EXAMINATION. THE LD. CIT(A) F ORWARDED THE SUBMISSIONS OF THE ASSESSEE TO THE A.O. FOR HIS REMAND REPORT. IN THE SAID FORWARDING LETTER BY THE LEARNED CIT(A) TO THE AO , IT WAS MENTIONED THA T DURING THE ASSESSMENT PROCEEDINGS SIMILAR REQUEST WAS MADE BY THE ASSESSE E TO THE A.O. FOR CONDUCTING INDEPENDENT ENQUIRIES WITH THE SHAREHOLD ERS TO ASCERTAIN THE GENUINENESS OR OTHERWISE OF THE SHARE SUBSCRIPTION BUT THE A.O. HAS NOT ACCEDED TO THE REQUEST , AND ALSO IT IS CONTENDED B Y THE ASSESSEE THAT THE SUFFICIENT TIME WAS NOT GIVEN BY THE AO TO THE ASSE SSEE TO PRODUCE THE LENDERS. IN THE REMAND REPORT SUBMITTED BY THE A.O. TO LEARNED CIT(A), IT WAS CONTENDED BY THE AO THAT REASONABLE OPPORTUNITY WER E GIVEN TO THE ASSESSEE IN REMAND PROCEEDINGS, WHEREIN SHOW CAUSE NOTICES WERE ISSUED ON 10 TH JULY 2013 AND 11 TH SEPTEMBER, 2013 TO THE ASSESSEE, WHEREIN THE ASSES SEE IN REPLY ITA 1835 & 1836/MUM/2014 8 CONTENDED THAT THE ASSESSEE IS A PRIVATE LIMITED CO MPANY REGISTERED WITH THE REGISTRAR OF COMPANIES ,MAHARASHTRA ON 17-03-2006 A ND THE MAIN OBJECT OF THE COMPANY IS TO CARRY ON THE BUSINESS TO CONSTRUC T, DEVELOP, BUY, SELL , TO ACT AS COMMISSION AGENT AND CONTRACTOR IN LAND, BUI LDING, HOUSE, INDUSTRIAL GALA, SHEDS AND REAL ESTATE. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAS NOT STARTED ITS BUSINESS ACTIVITIES TILL 31 ST MARCH, 2006. IT WAS SUBMITTED THAT IT IS INCONCEIVABLE AS TO HOW THE ASSESSEE COULD HAVE EAR NED SOME UNACCOUNTED INCOME WHEN THE COMPANY CAME INTO EXISTENCE ONLY ON 17 TH MARCH, 2006 AND THE ASSESSEE HAD NOT STARTED ITS BUSINESS. IT WAS SUBMITTED THAT THE ASSESSEE HAS ISSUED SHARES AT PREMIUM OF RS. 30/- PER SHARE AND THE FACE VALUE OF THE SHARES IS RS. 10 /- PER SHARE AND THE RESERVE AND S URPLUS OF RS. 1.20 CRORES IS APPEARING IN THE BALANCE SHEET WHICH IS THE SAID SH ARE PREMIUM. THE ASSESSEE SUBMITTED THAT AS FAR AS THE ASSESSEE IS C ONCERNED, THE SHARE SUBSCRIPTION TRANSACTION IS GENUINE AND THE ASSESSE E IS NOT ABLE TO COMMENT WHETHER MR VINOD K FARIA OR ANYONE ELSE HAD PROVIDE D UNACCOUNTED FUNDS TO THE SHAREHOLDERS FOR THEM TO SUBSCRIBE TO THE SHARE CAPITAL OF THE ASSESSEE COMPANY. THE ASSESSEE RELIED UPON VARIOUS DECISION S OF THE HONBLE COURTS AND TRIBUNAL WHICH ARE LISTED IN THE APPELLATE ORDE R DATED 24-02-2014 OF THE LD. CIT(A) APPEARING IN PAGE 5 & 6 OF HIS APPELLATE ORDER AND CONTENDED THAT IT IS NOT POSSIBLE FOR THE ASSESSEE TO EARN SUCH HUGE AMOUNT WITHIN A SHORT TIME OF 15 DAYS I.E. FROM 17-03-2006(DATE OF INCORPORATI ON) TO 31-03-2006(END OF PREVIOUS YEAR RELEVANT TO THE INSTANT ASSESSMENT YE AR UNDER APPEAL) . IT WAS SUBMITTED BY THE ASSESSEE THAT COMPLETE NAME, ADDRE SS AND PAN OF EACH SUBSCRIBER WHO HAD SUBSCRIBED TO THE EQUITY CAPITAL OF THE COMPANY DURING THE RELEVANT PREVIOUS YEAR WAS FURNISHED AND REQUES TED THE AO THAT INDEPENDENT ENQUIRY MAY BE MADE WITH THE SHAREHOLDE RS IN ORDER TO DETERMINE GENUINENESS OF THE TRANSACTIONS. THE ASS ESSEE SUBMITTED THAT THE ASSESSEE COMPANY WAS INCORPORATED ON 17 TH MARCH, 2006 AND FURNISHED THE BANK STATEMENT FOR THE PERIOD 21 ST MARCH TO 31 ST MARCH 2006 . ITA 1835 & 1836/MUM/2014 9 THE A.O. OBSERVED THAT THE ASSESSEE WAS INCORPORATE D ON 17-03-2006 WHICH MEANS THAT THERE ARE ONLY 15 DAYS IN THE PREVIOUS Y EAR 2005-06 RELEVANT TO ASSESSMENT YEAR 2006-07 WHEREIN THE ASSESSEE COMPAN Y WAS IN EXISTENCE. THE ASSESSEE HAS SUBMITTED ITS BANK STATEMENT FROM 21-03-2006 TO 31-03- 2006 . THERE WERE NO BUSINESS ACTIVITIES CARRIED OU T BY THE ASSESSEE COMPANY DURING THIS PERIOD EXCEPT DEPOSIT OF CHEQUES FROM S HAREHOLDERS. IT WAS OBSERVED BY THE A.O. THAT THE ASSESSEE HAD ISSUED 4 LACS EQUITY SHARES IN FINANCIAL YEAR 2005-06 AND THE FACE VALUE OF THE SH ARES RS. 10/- PER SHARE WHILE THE SHARES HAD BEEN ISSUED AT A PREMIUM OF R S. 30/- PER SHARE AND THE ASSESSEE CREDITED AN AMOUNT OF RS. 1.60 CRORES AS S HARE SUBSCRIPTION. DURING THE REMAND PROCEEDINGS, ASSESSEE WAS ASKED B Y THE AO TO PRODUCE ALL SHAREHOLDERS FOR VERIFICATION OF THE GENUINENESS OF THE TRANSACTION AND SHOW CAUSE NOTICES WERE ISSUED BY THE AO TO THE ASSESSEE ON 10 TH SEPTEMBER, 2013 ASKING ASSESSEE TO PRODUCE SHAREHOLDERS BETWEEN TH E PERIOD OF 18.9.2013 TO 25.9.2013 ALONG WITH ALL RELEVANT DOCUMENTS SUCH AS BANK STATEMENT, COPY OF RETURN OF INCOME, COPIES OF DETAILS OF ALLOTMENT OF SHARE CERTIFICATE WITH ALLOTMENT LETTERS, CAPITAL ACCOUNT AND BALANCE SHEE T. BUT THE ASSESSEE FAILED TO PRODUCE THE SHAREHOLDERS ON THE STIPULATED TIME PERIOD FROM 18-09-2013 TO 25-09-2013 AND SUBMITTED THAT IT WILL TAKE SOME MOR E TIME TO CO-ORDINATE AND PRODUCE THE SHAREHOLDERS BEFORE THE A.O. AS LAR GE NUMBER OF SHAREHOLDERS ARE TO BE CONTACTED. IT WAS FURTHER S UBMITTED THAT THE ASSESSEES CA WAS BUSY WITH TAX AUDIT PREPARATION F OR WHICH THE LAST DATE OF FILING THE TAX-AUDIT REPORT WAS 30-09-2013. AS PER THE REQUEST OF THE ASSESSEE, FURTHER TIME WAS GIVEN BY THE AO TO THE A SSESSEE TO PRODUCE SHAREHOLDERS ON 11 TH OCTOBER, 2013 WHEREBY THIS TIME ALSO THE ASSESSEE COULD NOT PRODUCE THE SHAREHOLDERS EVEN TILL 24-10-2013 , AND ONLY ON 25-10-2013 THE ASSESSEE FILED SOME DETAILS OF THE SHAREHOLDERS IN TAPAL. SINCE THE ASSESSEE FAILED TO PRODUCE THE SHAREHOLDERS WITH TH E RELEVANT DETAILS, ITA 1835 & 1836/MUM/2014 10 SUMMONS U/S 131 OF THE ACT WERE ISSUED BY THE AO TO THE SHAREHOLDERS REQUESTING THEM TO ATTEND PERSONALLY BEFORE THE AO ON 11-11-2013 AND SUBMIT THE FOLLOWING DETAILS : 1. PERSONAL ATTENDANCE IS COMPULSORY. 2. EXPLANATION ON THEIR NATURE OF BUSINESS AND ADDRESS OF BUSINESS PREMISES. 3. SOURCE OF INCOME FOR PURCHASE OF SHARES OF THE ASSE SSEE COMPANY AND DATE OF PURCHASE OF SHARES. 4. THE COPY OF BANK PASSBOOK/STATEMENT WITH MAKING OF PAYMENT MADE FOR PURCHASE OF SHARES. 5. THE COPIES OF BALANCE SHEET FROM THE FINANCIAL YEAR IN WHICH LOAN ADVANCE AND COPY OF BALANCE SHEET FOR THE ASSESSMENT YEAR 2 006-07 AND 2007-08. 6. XEROX COPIES OF SHARE CERTIFICATE ISSUED BY THE ASS ESSEE. 7. COPY OF ACKNOWLEDGMENT OF RETURN OF INCOME FILED WI TH THE COMPUTATION OF INCOME FOR ASSESSMENT YEAR 2006-07 AND 2007-08. 8. THE NOTE EXPLAINING THAT HOW THEY HAVE PURCHASED SH ARES OF NEWLY INCORPORATED COMPANY AT A PREMIUM OF RS. 30 PER SHA RES AS AGAINST THE FACE VALUE OF SHARE OF RS.10 PER SHARE. THE HEARING WHICH WAS FIXED FOR 11 TH NOVEMBER, 2013 SHAREHOLDERS TO ATTEND AND SUBMIT DETAILS , NONE OF THE SHAREHOLDER APPEAR ED BEFORE THE AO AND NO DETAILS WERE FILED. IN THE MONTH OF DECEMBER, 2013 SOME SHAREHOLDERS FILED REPLY , THE DETAILS ARE AS UNDER:- LEDGER FOLIO NO. NAME & ADDRESS NO.OF SHARES REPLY FILE A001 VONOD K. FARIA 3300 YES A002 SURESH V. FARIA AAAPFO535H 3300 NO A003 PARAG A NISAR 3400 NO A004 DIPESH D. MANGE AJT PMO888J 55000 YES A005 DHARMESH G. BHANUSHALI 50000 NO ITA 1835 & 1836/MUM/2014 11 AAACPB6845D A006 DINESH GADA HUF AACHD5643J 2500 NO A007 ANNAPURNA KACHHAWAHA AHCPK1337F 62500 NO A008 LAXMI D.MANGE AHWPM1495N 30000 YES A009 RAMJI M. BHARWAD AACPB1219L 37500 YES A010 DEEPAK D. DANI AACPM1444J 25000 YES A011 KAILASHCHAND J. KACHHAWAHA HUF AADHK3700Q 45000 NO A012 PRADEEP M. MANGE HUF AAIHP0455L 30000 YES A013 JAYESH S. KALOLA AITPK7624B 25000 YES A014 DHARMESH J JOSHI ADHPJ3912C 40000 NO A015 MEENA JOYSAR AEYPJ6107M 37500 YES A016 KANTILAL JOSHI AEYPJ0250R 25000 YES A017 JERAM KAROTRA AIXPX2394J 35000 NO A018 NISHIT MADIAR AEWPM4655F 25000 YES A019 ALKA Y GANDHI 30000 NO A020 ANIL J SHINDE 25000 NO A021 BHARAT PATEL 37500 YES A022 CHHYA V. DAMA AIHPD6019K 30000 YES A023 CHHTALAL T. KALOLA AQUPK7634A 12,500 NO A024 DRUPAD N. BHATT HUF AADHD0055P 37,500 YES A025 GEETESH JADHAV AKRPJI859P 22,500 NO A026 GOPAL P BHANUSHALI AGIPB7609L 26,250 NO A027 HARESH P. BHANUSHALI AACPB6068P 25000 NO A028 JASWANTRAI J GHATALIA HUF AADHJ5530R 25,000 YES A029 KASHAVJI VERSHI BHADRA ALJPB 2370A 31,250 NO A030 MAHENDRA B B HADRA AFZPB4393P 34,375 YES A031 MATHURADAS B BHADRA AIYPB3294K 34,375 YES A032 MAYUR U BHANISHALI AKTPB1741J 12,500 YES A033 MORARJI K BHANUSHALI HUF AAGHM8194P 25,000 YES A034 NANBAI KESHAVJI BHANUSHALI ALJPB2427N 31,250 YES A035 NARAYAN R MANGE AHWPM1303K 7,500 YES A036 PETHA UKA PATEL AAHPP8401D 30,000 NO A037 RACHNA J TAK ACKPT5359F 25,000 NO ITA 1835 & 1836/MUM/2014 12 A038 RAJIBEN M PATEL AFQPP8677R 12,500 YES A039 RATANSHI KANJI BHANUSHALI AGKPB9496M 25,000 NO A040 RAJNIKANT G KARIA HUF AADHK3828H 10,000 YES A041 SANJAY M JOSHI AFZPJ8227N 25,000 YES A042 SHAMURAM LILADHAR BHANUSHALI AIZPK5139P 25,000 NO A043 SHAMJJI K PATEL AESPD2802D 30,000 YES A044 SHUSHANT R JADHAV AGZPJ9813B 22,500 NO A045 VANITA J JOSHI ADHPJ3910A 25,000 YES A046 VESHRAM G CHAD 5000 NO A047 VENILAL PADHARIA ADSPP9972H 2 5,000 YES A048 VIJAY T RAOJADEJA ADXPR1575K 45,000 YES WHEREBY THE ABOVE SHAREHOLDERS ( THE ABOVE LIST ARE SUBSCRIBERS HAVING SUBSCRIBED SHARES IN BOTH THE ASSESSMENT YEAR 2006- 07 AND 2007-08 RESPECTIVELY ) FILED COPY OF ACKNOWLEDGEMENT OF IN COME TAX RETURN, BALANCE SHEET AND COPIES OF BANK STATEMENT/PASS BOOK. THE REASON FOR HIGH PREMIUM PAID FOR PURCHASE OF SHARE, IT WAS SUBMITTED BY THE SHAREHOLDERS THAT THE INVESTMENT CRITERIA WERE PURELY BASED ON GROWTH PRO SPECTS AND PROFITABILITY. THE A.O. OBSERVED THAT THE SHAREHOLDERS HAD FAILED TO EXPLAIN THE SOURCE FOR PURCHASE OF SHARE OF THE ASSESSEE COMPANY. THE NATU RE OF THEIR BUSINESS WAS NOT EXPLAINED BY THE SHAREHOLDERS AND ALSO THEY DID NOT SUBMITTED THE COPY OF SHARE CERTIFICATE ISSUED BY THE ASSESSEE COMPANY , THE TRANSACTION WAS HELD BY THE AO TO BE NOT GENUINE IN REMAND PROCEEDINGS . ACCORDINGLY, THE REMAND REPORT WAS SUBMITTED BY THE AO TO THE LD. C IT(A). THE LD. CIT(A) OBSERVED FROM THE REMAND REPORT THAT DESPITE SEVERAL OPPORTUNITIES BEING PROVIDED TO THE ASSESSEE BY THE AO IN REMAND PROCEEDINGS, THE ASSESSEE FAILED TO PRODUCE THE REL EVANT DETAILS IN RESPECT OF SHARE SUBSCRIBERS AND ALSO FAILED TO PRODUCE SHAREH OLDERS IN PERSON BEFORE THE AO FOR EXAMINATION . THE LEARNED CIT(A) OBSERV ED THAT THE A.O. HAD ITA 1835 & 1836/MUM/2014 13 ISSUED SUMMONS U/S 131 OF THE ACT TO THE SHARE SUBS CRIBERS BUT NONE OF THE SHARE SUBSCRIBER APPEARED BEFORE THE A.O.IN COMPLIA NCE TO THE SUMMONS ISSUED U/S 131 OF THE ACT WHICH PROVED THAT THE ASS ESSEE FAILED TO DISCHARGE ITS ONUS. A COPY OF THE REMAND REPORT WAS FORWARDED TO THE AS SESSEE FOR ITS COMMENTS WHEREBY THE ASSESSEE REPLIED AS UNDER:- SR NO THE LEARNED A.O.S REMARKS/OBSERVATIONS OUR COMMENTS ON A.O.S REMARKS/OBSERVATION 1 AS DETAILS FILED ON RECORD SEEN THAT THE ASSESSEE COMPANY WAS INCORPORATED 17.3.2006 WHICH WAS 15 DAYS BEFORE THE FINANCIAL YEAR 2005- 06 RELEVANT TO A.Y. 2006- 07. THE ASSESSEE HAS SUBMITTED COPY OF BANK STATEMENT FOR THE PERIOD FROM 21.3.2006 TO 31.3.2006. THERE IS BUSINESS NO ACTIVITIES FOUND DURING THIS PERIOD EXCEPT OF CHEQUE DEPOSITS, WHICH WERE RECEIVED FROM THE SHAREHOLDERS. THE LEARNED A.O. HIMSELF HAS RECORDED TWO FINDING NAMELY (I) THE APPELLANT COMPANY WAS INCORPORATED ON 17.3.2006 AND (II)THE APPELLANT COMPANY HAS NOT STARTED ANY BUSINESS ACTIVITIES IN THE 15 DAYS OF EXISTENCE DURING THE FINANCIAL YEAR RELEVANT TO A.Y. 2006-07. THUS, THERE IS NO DISPUTE ABOUT THE ABOVE TWO FACTUAL ASPECTS. 2 A.O.S REMARK ABOUT DOCUMENTS SUBMITTED TO HIM/OBTAINED BY HIM DURING THE COURSE OF REMAND PROCEEDINGS. COPIES OF DOCUMENTS SUBMITTED TO HIM/OBTAINED BY HIM DURING THE COURSE OF REMAND PROCEEDINGS ARE ENCLOSED. THERE ARE CERTAIN ERRORS IN REMAND REPORT WHICH ARE CONTRARY TO THESE DOCUMENTS. WE REQUEST YOUR HONOUR TO CONSIDER THE TABULAR REPRESENTATION OF FACTS ENCLOSED AS PART OF PAPER BOOK FOR CLEARER UNDERSTANDING OF THE FACTS. 3 THE SUBSTANCE OF REMAND REPORT IS THAT THE SOURCE ALL THE SHAREHOLDERS HAVE PAN. SUMMONS ISSUED BY THE A.O. WERE ITA 1835 & 1836/MUM/2014 14 OF INVESTMENT IN SHARES IS NOT PROVED. THE REMAND REPORT NOWHERE SUGGESTS THAT ANY OF THE SHAREHOLDERS IS NON- EXISTENT. SERVED ON EACH OF THEM. MORE THAN 70% OF THE SHAREHOLDERS HAVE FILED THE DOCUMENTS MENTIONED IN THE ENCLOSED CHART. THE EXISTENCE OF EACH SHAREHOLDER ESTABLISHED. EVEN THE A.O. HAS NOT DISPUTED THE FACT OF THEIR EXISTENCE. ADDITION IS MADE ONLY ON THE GROUND THAT THE SHAREHOLDERS HAVE NOT PROVED SOURCE OF THEIR INVESTMENT IN SHARES. 4 THE A.O. HAS NOT DISPUTED THE VERACITY OF THE DOCUMENTS SUBMITTED INCLUDING THE INDIVIDUAL BALANCE SHEET OF SHAREHOLDERS. INDIVIDUAL BALANCE SHEET SUBMITTED IN THE CASE OF ABOUT 70% SHAREHOLDERS REFLECTS INVESTMENT IN SHARES OF THE APPELLANT COMPANY. VERACITY OF ANY OF THESE BALANCE SHEETS IS NOT CALLED IN QUESTION BY THE A.O. ONCE THE GENUINENESS OF THE BALANCE SHEETS IS ACCEPTED THE SOURCE OF ALL INVESTMENTS REFLECTED IN THE BALANCE SHEETS (WHICH INCLUDES INVESTMENT IN SHARES OF THE APPELLANT COMPANY) STANDS ESTABLISHED. 5 (I) THE A.O. IN PARA 7 OF THE ASSESSMENT ORDER, HAS INTERALIA QUOTED PART OF SHRI VINOD FARIAS RECORDED STATEMENT U/S 132(4) AS FOLLOWS: 1. AS AN AUTHORIZED REPRESENTATIVE OF ALL THESE ENTITIES, DECLARE A INCOME OF RS.10.00 CRORE AS ADDITIONAL INCOME CONTRADICTORY ASSERTIONS OF SHRI VINOD FARIA ABOUT THE TRUE OWNERSHIP OF THE SO CALLED UNEXPLAINED SHARE CAPITAL (I) IN STATEMENT RECORDED U/S 132(4) AND (II) IN THE LETTER DATED 7.11.2013 SUBMITTED BY HIM DURING THE COURSE OF REMAND PROCEEDINGS. ITA 1835 & 1836/MUM/2014 15 OVER AND ABOVE TO THE REGULAR INCOME RECORDED IN THE BOOKS OF ACCOUNTS. (II) DURING THE REMAND PROCEEDINGS, SHRI VINOD FARIA IN HIS LETTER DATED 7.11.2013, HAS STATED AS FOLLOWS: SURESH VELJI RUPSHI FARIA AND PARAG AMARSHI MANSHI NISHAR IN TURN CONVERTED HIS TRANSACTION INTO CASH FOR ITS BLOCK MONEY PROFITS. 6 A.OS SILENCE ON COMPARABILITY OF FACTS OF THE PRESENT CASE WITH THAT OF THREE JUDICIAL PRONOUNCEMENTS RELIED ON BY THE APPELLANT. THE LEARNED A.O. HAS NOT PROVED ANY COMMENTS ON THE THREE JUDICIAL PRONOUNCEMENTS MENTIONED IN PARA 4 OF OUR LETTER DATED 8.2.2010. THE A.O. HAS NOT DISPUTED THAT THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS IN THE SAID THREE JUDICIAL PRONOUNCEMENTS. 7 NON-CONSIDERATION BY THE A.O. OF SUBSEQUENT CHANGE IN LAW (EFFECTIVE FROM A.Y. 2013-14) WHICH HAS BEARING ON THE PROPER UNDERSTANDING OF LAW AS IT WAS APPLICABLE THE LAW REQUIRING TO PROVE SOURCE OF SOURCE IN CASE OF SHARE APPLICATION, SHARE CAPITAL AND SHARE PREMIUM IS INTRODUCED FOR THE FIRST TIME W.E.F. 1.4.2013 I.E. A.Y. 2013-14 BY AMENDING SECTION 68 OF THE I.T. ACT, 1961. ITA 1835 & 1836/MUM/2014 16 FOR A.Y. 2006-07 THIS AMENDMENT IS PROSPECTIVE IN APPLICATION AND DOES NOT APPLY RETROSPECTIVELY TO A.Y. 2006-07. THUS FOR ALL ASSESSMENT YEARS PRIOR TO A.Y. 2013-14 THE LAW AS LAID DOWN BY HONBLE SUPREME COURT IN THE CASE OF CIT V. LOVELY EXPORTS P. LTD. (SC) 216 CTR 195 CONTINUES TO APPLY. IT WAS OBSERVED BY THE LD. CIT(A) THAT CERTAIN INCR IMINATING DOCUMENTS WERE FOUND FROM THE PREMISES OF THE ASSESSEE COMPANY DUR ING THE COURSE OF SURVEY FROM THE PREMISES OF THE ASSESSEE, IN THE FORM OF S HARE APPLICATION FORMS, BLANK TRANSFER FORMS, BLANK RECEIPTS FOR REPURCHASE OF ALLOTTED SHARES, COPIES OF BANK PASS BOOKS OF SHARE SUBSCRIBERS, WHEREIN CA SH/CHEQUE WAS DEPOSITED APPARENTLY IMMEDIATELY BEFORE ISSUING SUBSCRIPTION CHEQUE TO THE ASSESSEE COMPANY. IT WAS OBSERVED THAT THOUGH THE COMPANY W AS INCORPORATED ONLY ON 17 TH MARCH, 2006, THESE SUBSCRIBERS CHOSE TO PURCHASE T HESE SHARES AT A PREMIUM OF RS. 30/- WHICH RAISES DOUBTS ABOUT THE G ENUINENESS OF THE TRANSACTION. THE SHARE APPLICATIONS WERE NOT NUMBER ED AND THEY WERE FILLED IN BY THE SAME PERSON RAISING DOUBTS ABOUT THE GENUINE NESS . FURTHER DURING THE COURSE OF SURVEY, STATEMENT ON OATH OF ALL THE DIRECTORS WAS RECORDED AND SHRI PARAG A NISAR, DIRECTOR OF THE ASSESSEE ADMITT ED THAT HE DOES NOT KNOW ANYTHING ABOUT THE BUSINESS ACTIVITIES OF THE ASSES SEE COMPANY AND STATED THAT SH. VINOD K FARIA LOOKED AFTER ALL THE AFFAIRS OF THE ASSESSEE. AS PER THE STATEMENTS OF SHRI SURESH K. FARIA IN REPLY TO QUES TION NO. 13 , HE ADMITTED THAT SHARE SUBSCRIPTION ENTRIES WERE MERELY ACCOMMO DATION ENTRIES . THESE FACTS WERE CONFRONTED TO SH VINOD K FARIA AND IN HI S STATEMENT RECORDED ON 31-05-2008, MR VINOD K FARIA ADMITTED THAT PRESUMPT ION OF THE REVENUE THAT THESE SHARE SUBSCRIPTION ENTRIES OF RS.5.50 CRORES (RECEIVED IN ASSESSMENT YEAR 2006-07 AND 2007-08) WERE NOTHING BUT ACCOMMO DATION ENTRIES. THUS, IT WAS HELD BY THE LD. CIT(A) FROM THE ABOVE STATEM ENT OF THE DIRECTOR THAT THE ITA 1835 & 1836/MUM/2014 17 ENTIRE SHARE SUBSCRIPTION OF RS. 5.50 CRORES (INCLU DING RS. 1.60 CRORERS IN THE CURRENT YEAR) WAS BOGUS AND PURELY ACCOMMODATION EN TRIES. IT WAS OBSERVED BY THE LEARNED CIT(A) THAT SHRI VINOD K FARIA, IN H IS STATEMENT HAD DECLARED RS. 10 CRORES AS ADDITIONAL INCOME OVER AND ABOVE T HE REGULAR INCOME RECORDED IN THE BOOKS. THE A.O. HAS MADE EFFORTS WH EREBY THE ASSESSEE WAS ASKED TO PRODUCE ALL THE SUBSCRIBERS BEFORE HIM FOR EXAMINATION BOTH IN ASSESSMENT PROCEEDINGS AS WELL IN REMAND PROCEEDING S BUT THE ASSESSEE FAILED TO PRODUCE THE SHAREHOLDERS. EVEN SUMMONS U/ S 131 OF THE ACT WERE ISSUED BY THE AO DURING REMAND PROCEEDINGS TO THE S HAREHOLDERS DIRECTING THEM TO APPEAR IN PERSON BEFORE THE AO BUT STILL NO SHAREHOLDER APPEARED BEFORE THE AO. CERTAIN DOCUMENTS LIKE CONFIRMATIONS , INCOME TAX RETURNS ETC. OF THE SHAREHOLDERS WERE PRODUCED BUT THAT DOES NOT CONCLUSIVELY PROVE THE GENUINENESS OF THE TRANSACTIONS. IT WAS OBSERVED BY THE LEARNED CIT(A) THAT IN THE BANK ACCOUNTS OF THE SUBSCRIBERS , EQUIVALENT A MOUNTS HAVE BEEN DEPOSITED EITHER IN CASH OR THROUGH CHEQUES OR THRO UGH DRAFT ETC EITHER ON THE SAME DAY OR A DAY BEFORE THE PAYMENT TO SHARE SUBSC RIPTIONS , WHICH RAISED DOUBTS ABOUT GENUINENESS OF THE TRANSACTIONS. IT WA S OBSERVED BY THE LEARNED CIT(A) THAT IN SOME OF THE ACCOUNTS, THERE WERE SEV ERAL CREDITS RANGING FROM RS. 49,000/- TO RS. 49,500/- WHICH SHOWS THAT BANK DRAFTS OF THESE AMOUNTS MIGHT HAVE BEEN PURCHASED THROUGH DEPOSITS IN CASH. IN-FACT IN MOST OF THE BANK ACCOUNTS OF SHARE SUBSCRIBERS , THERE ARE HARD LY ANY BALANCE BEFORE AND AFTER SUBSCRIPTION IN THE SHARES, INDICATING THAT T HESE PERSONS HARDLY HAVE ANY MEANS. FROM THE ACKNOWLEDGEMENT OF THE INCOME TAX RETURNS, IT WAS FURTHER OBSERVED BY THE LEARNED CIT(A) THAT INCOME OF SUBSCRIBERS IN MOST OF THE CASES WAS LESS THAN RS. 1 LAC. THE LEARNED CIT( A) OBSERVED THAT IT IS NOT UNDERSTANDABLE THAT HOW A PERSON HAVING MEAGER INCO ME OF RS. 80000- 90000, WHICH IS HARDLY SUFFICIENT TO MEET PERSONAL EXPENSES OF HOUSEHOLD EXPENSES IN EXPENSIVE CITY LIKE MUMBAI , COULD MAKE INVESTMENT RUNNING FROM RS. 5 LACS TO RS. 10 LACS IN SHARES WITH THE A SSESSEE COMPANY AND THAT TOO ON PREMIUM. IT WAS OBSERVED BY THE LEARNED CIT( A) THAT ON PERUSAL OF THE ITA 1835 & 1836/MUM/2014 18 BALANCE SHEET OR STATEMENT OF AFFAIRS OF SHARE SUBS CRIBERS OF THE ASSESSEE COMPANY SUBMITTED IN SOME OF THE CASES, THE SAID BA LANCE SHEET/STATEMENT OF AFFAIRS DOES NOT HAVE ANY SIGNIFICANT ASSET OTH ER THAN INVESTMENT IN THE ASSESSEE COMPANY. THE LEARNED CIT(A) REFERRED TO THE AMENDED PROVISIO NS OF SECTION 68 OF THE ACT TO HOLD THAT BURDEN OF PROOF IN THE CASE OF SHARE S UBSCRIPTION IS QUITE STRONG AND THE ASSESSEE HAS TO PROVE NOT ONLY THE SOURCE B UT THE SOURCES SOURCE. THE LEARNED CIT(A) HELD THAT FOR ALL THE ISSUES BEI NG DECIDED POST 01-04-2013, THE AMENDED SECTION 68 OF THE ACT IS APPLICABLE. TH US, THE LD. CIT(A) CONFIRMED THE ADDITIONS BY TREATING THE SAME AS BOG US TRANSACTIONS. THE LD. CIT(A) ALSO RELIED UPON THE PROVISIONS OF SECTION 6 8 OF THE ACT. THE LD. CIT(A) DISTINGUISHED THE CASE LAW IN THE CASE OF CIT V. LO VELY EXPORTS PVT. LTD., 216 CTR 195 (SC) WHEREBY HE HELD THAT VARIOUS INCRIMINA TING DOCUMENTS WERE SEIZED DURING THE COURSE OF SEARCH AND SEIZURE OPER ATION WHICH INDICATES THAT THE SHARE SUBSCRIPTION WAS NOT GENUINE. FURTHER, T HE STATEMENTS OF THE THREE DIRECTORS ON OATH WERE RECORDED DURING THE COURSE O F THE SEARCH WHEREBY ALL THE THREE DIRECTORS ACCEPTED THAT THE ENTIRE SHARE SUBSCRIPTION WAS BOGUS AND WAS IN THE NATURE OF ACCOMMODATION ENTRIES. THE LE ARNED CIT(A) ALSO OBSERVED THAT VARIOUS INCRIMINATING MATERIAL WAS FO UND DURING THE COURSE OF SEARCH/SURVEY , IN THE FORM OF BLANK SIGNED SHARE T RANSFER FORMS INDICATING SHARES ALLOTTED IN THE NAMES OF THESE SO CALLED SUB SCRIBERS WERE ALREADY AGREED TO BE TRANSFERRED BY THEM. FURTHER, IT WAS O BSERVED BY LEARNED CIT(A) THAT IN THE BANK PASSBOOK OF THE SHARE SUBSCRIBERS, THERE IS DEPOSIT IN THE BANK ACCOUNTS OF THE SUBSCRIBERS JUST A FEW DAYS BE FORE THE INVESTMENT IN THE SHARES INDICATING THAT THESE SHAREHOLDERS DO NOT HA VE FINANCIAL CAPACITY TO MAKE THE INVESTMENT. THE SHARE SUBSCRIBERS WERE NOT PRODUCED BEFORE THE AO DESPITE SEVERAL OPPORTUNITIES BEING GRANTED BY THE AO DURING THE COURSE OF ASSESSMENT AND REMAND PROCEEDINGS . THUS, THE LD. CIT(A) HELD THAT THE RATIO OF HONBLE SUPREME COURT DECISION IS DISTINGUISHABL E ON THE FACTS OF THE ITA 1835 & 1836/MUM/2014 19 PRESENT CASE . SIMILARLY , THE LEARNED CIT(A) HELD THAT THE CASE OF CIT V. P K NOORJAHAN 237 ITR 570(SC) AND MITESH ROLLING MILLS PRIVATE LIMITED REPORTED IN 258 ITR 278(GUJ) ARE DISTINGUISHABLE ON FACTS AN D ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THUS, THE LEARNED CIT(A) UPHELD/CONFIRMED THE ASSESSMENT ORDER DATED 14-12-2009 PASSED BY THE AO U/S 143(3)/147 OF THE ACT WHEREIN THE SUBSCRIPTION AMOUNT OF RS. 1.60 CR ORES WAS TREATED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT AND HENCE LEARNED CIT(A) UPHELD / SUSTAINED THE ADDITION MADE BY THE A.O VIDE HIS APP ELLATE ORDERS DATED 24- 02-2014. 6. AGGRIEVED BY THE APPELLATE ORDER DATED 24-02-20 14 PASSED BY THE LD. CIT(A), THE ASSESSEE IS IN FURTHER APPEAL BEFORE TH E TRIBUNAL. 7. THE LD. COUNSEL FOR THE ASSESSEE REITERATED ITS SUBMISSIONS AS WERE MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THA T THE ADDITIONS HAVE BEEN MADE U/S 68 OF THE ACT OF RS. 1.60 CRORES AS U NEXPLAINED CASH CREDIT TO THE INCOME OF THE ASSESSEE FOR THE INSTANT ASSESSM ENT YEAR. THE ASSESSMENTS HAVE BEEN REOPENED U/S 147/148 OF THE ACT WITHIN A PERIOD OF 4 YEARS. THE LD. COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE IS NOT CHALLENGING THE REOPENING OF THE ASSESSMENT U/S 147/148 OF THE ACT. THE ADDITION OF RS. 1.60 CRORES HAS BEEN MADE BASED UPON THE ISSUE OF 4 LACS EQUITY SHARES OF RS.10 EACH AT A PREMIUM OF RS.30 PER SHARE. HE SUB MITTED THAT THE ASSESSEE COMPANY WAS INCORPORATED ONLY ON 17 TH MARCH, 2006 WHEREAS THE PREVIOUS YEAR ENDING ON 31 ST MARCH, 2006. THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE HAS NOT DONE ANY BUSINESS ACTIVITIES FOR T HE ABOVE PERIOD OF 15 DAYS SINCE ITS INCORPORATION ON 17 TH MARCH 2006 TILL THE END OF PREVIOUS YEAR ON 31 ST MARCH, 2006. THE SEARCH U/S. 132(1) OF THE ACT HA D BEEN CONDUCTED BY THE REVENUE ON THE DIRECTORS OF THE ASSESSEE COMPAN Y ON 30-05-2008 AND NOT ON THE ASSESSEE COMPANY . ONLY SURVEY U/S. 133 A OF THE ACT WAS CONDUCTED IN THE CASE OF THE ASSESSEE COMPANY ON 30 -05-2008. THERE WAS NO ITA 1835 & 1836/MUM/2014 20 SEARCH WARRANT AGAINST THE ASSESSEE COMPANY AND THE RE WAS NO PANCHNAMA DRAWN AGAINST THE ASSESSEE COMPANY. THE LD. COUNSE L DREW OUR ATTENTION TO THE STATEMENT RECORDED IN THE CASE OF SHRI VINOD K FARIA U/S 132(4) OF THE ACT ON 31 ST MAY, 2008 AT THE BUSINESS PREMISES OF HIS PROPRIET ARY CONCERN M/S MAYUR PLY N VENEERS WHEREBY A REFERENCE WAS MADE TO QUESTION NO. 35 PLACED AT PAPER BOOK PAGE 14 FILED WITH THE TRIBUNA L. IT WAS SUBMITTED THAT SEARCH HAD TAKEN PLACE AGAINST M/S MAYUR PLY N VE NEERS WHICH IS PROPERIETORY CONCERN OF MR VINOD K FARIA AND NOT AG AINST THE ASSESSEE. THE LD. COUNSEL DREW OUR ATTENTION TO PAPER BOOK PAGE 1 3 AND SUBMITTED THAT CERTAIN LOOSE DOCUMENTS WERE FOUND WHICH CONTAIN BL ANK RECEIPTS OBTAINED FROM THE SHAREHOLDERS WHEREBY IT WAS SUBMITTED THAT THERE IS PRESUMPTION REGARDING THE BOOK ENTRIES, IT WAS NOT STATED THAT EVIDENCE HAVE BEEN FOUND THAT CASH HAVE BEEN PAID AGAINST SHARE SUBSCRIPTION . OUR ATTENTION WAS ALSO INVITED TO QUESTION NO. 18 AT PAPER BOOK PAGE 12 WH EREBY IT WAS STATED THAT FURNITURE WORK WAS IN PROGRESS AT THE PREMISES BEIN G OFFICE AT 2 ND FLOOR , BHUPEN CHAMBERS,DALAL STREET, FORT, MUMBAI-23 FROM WHERE THE INCRIMINATING MATERIAL WAS FOUND . IT WAS SUBMITTE D THAT THE SAID PREMISES IS NOT THE OFFICE OF THE ASSESSEE AS THE OFFICE OF THE ASSESSEE IS AT KALBADEVI AND THE INCRIMINATING MATERIAL WERE NOT SEIZED FROM THE ASSESSEE. THE SAID OFFICE AT 2 ND FLOOR AT BHUPEN CHAMBER IS OF MR VINOD K FARIA AND NOT OF THE ASSESSEE. IT WAS SUBMITTED THAT ASSESSEES PREMISES WERE NOT SEARCHED AND IT CANNOT BE PRESUMED THAT DOCUMENTS BELONGED TO THE A SSESSEE. THERE IS A PRESUMPTION U/S 292C OF THE ACT THAT THE DOCUMENT B ELONGED TO THE PERSON SEARCHED FROM WHOSE POSSESSION THE DOCUMENTS ARE RE COVERED BUT IN THE INSTANT CASE NO DOCUMENT IS FOUND FROM THE POSSESSI ON OF THE ASSESSEE AS THE PREMISES OF THE ASSESSEE WAS NOT SEARCHED. NO BUS INESS ACTIVITY HAS BEEN STARTED BY THE ASSESSEE FOR THE PERIOD OF 15 DAYS S TARTING FROM DATE OF INCORPORATION ON 17-03-2006 TILL THE END OF FINANCI AL YEAR ON 31-3-2006. THE LD. COUNSEL DREW OUR ATTENTION TO THE ASSESSMENT OR DER FRAMED AGAINST THE ASSESSEE FOR ASSESSMENT YEAR 2011-12 WHICH IS PLACE D AT PAPER BOOK PAGE 72 ITA 1835 & 1836/MUM/2014 21 & 73 WHEREIN IT WAS CLEARLY STATED THAT THERE IS NO BUSINESS ACTIVITY CARRIED OUT BY THE ASSESSEE COMPANY AND ASSESSMENT WAS COMP LETED AT NIL INCOME. THE LD. COUNSEL SUBMITTED THAT THE TWO OTHER DIRECT ORS NAMELY MR SURESH V FARIA AND MR PARAG A NISAR ARE SAYING THAT THESE AR E ACCOMMODATION ENTRIES BUT THEY ARE NOT AWARE OF THE AFFAIRS OF THE BUSINE SS OF THE ASSESSEE . IT IS SUBMITTED THAT EVEN IF IT IS CONCLUDED THAT IT IS A N UNDISCLOSED INCOME AND ACCOMMODATION ENTRIES HAVE BEEN TAKEN BY THE ASSESS EE, IT CANNOT BE CONCLUDED THAT THIS IS AN UNDISCLOSED INCOME OF THE ASSESSEE AS THERE IS NO INCOME DURING THE PERIOD AS THE ASSESSEE HAS NOT UN DERTAKEN ANY BUSINESS DURING THE PERIOD OF 15 DAYS FROM 17-03-2006 TO 31- 03-2006. IT IS SUBMITTED THAT IN THE REMAND PROCEEDINGS, COMPLETE DETAILS WE RE FURNISHED ABOUT THE NAME, ADDRESS AND PAN ETC. OF SHARE SUBSCRIBERS ALO NG WITH BALANCE SHEET AND BANK STATEMENTS OF THE SHARE SUBSCRIBERS TO TUN E OF RS.115 LACS W.R.T. 13 SHARE SUBSCRIBERS , WHILE FOR THE REST 4 SHARE SUB SCRIBERS SUBSCRIBING SHARES OF RS.45 LACS NAME, COMPLETE ADDRESS AND PAN OF THE SHARE SUBSCRIBER WERE SUBMITTED. ALL THE DOCUMENTS WERE PLACED IN THE P APER BOOK FILED WITH THE TRIBUNAL.IT IS SUBMITTED THAT IT IS NOT THE CASE OF REVENUE THAT THESE PARTIES WHO SUBSCRIBED SHARES WERE NON-EXISTENT. IT IS SUB MITTED THAT THE STATEMENT OF SHRI VINOD K FARIA RECORDED U/S 132(4) OF THE AC T WHEREBY HE ACCEPTED THAT THESE ARE ACCOMMODATION ENTRIES IS NOT BINDING ON T HE ASSESSEE COMPANY. OUR ATTENTION WAS DRAWN TO THE QUESTION NO 38 OF TH E STATEMENT OF MR VINOD K FARIA WHEREIN HE STATED THAT ALL THE ENTRIES WERE ARRANGED BY CHARTERED ACCOUNTANT WHEREBY EQUIVALENT CASH WAS PAID ALONG W ITH PREMIUM @8% FOR ARRANGING THESE ENTRIES. IT WAS SUBMITTED BEFORE US THAT THE REVENUE HAS NOT RECORDED THE STATEMENT OF CA NOR ANY ACTION HAS BEE N TAKEN AGAINST THE SAID CA. THE LD. COUNSEL RELIED ON THE DECISION OF HONB LE SUPREME COURT IN THE CASE OF CIT V. P K NOORJAHAN 237 ITR 570(SC) , DECI SION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF MITESH ROLLING MI LLS PRIVATE LIMITED REPORTED IN 258 ITR 278(GUJ) , DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF CIT V. BHARAT ENGINEERING AND CONSTRUCTION CO.,(1972) 83 ITR ITA 1835 & 1836/MUM/2014 22 187(SC) ,DECISION OF HONBLE SUPREME COURT IN THE C ASE OF ROSHAN DI HATTI V. CIT (1977)107 ITR 938(SC) AND DECISION OF HONBLE D ELHI HIGH COURT IN THE CASE OF CIT V. FIVE VISION PROMOTERS PRIVATE LIMITE D IN ITA NO 234/2015 VIDE DECISION DATED 27-11-2015 REPORTED IN (2016) 380 IT R 289(DELHI), WHEREBY IT SUBMITTED THAT WHEN THERE IS NO OTHER KNOWN SOURCE OF INCOME AS THE ASSESSEE NEVER DID ANY BUSINESS, THUS IT CANNOT BE BROUGHT TO TAX AS UNDISCLOSED INCOME AS THERE IS NO POSSIBILITY OF HA VING ANY INCOME AS THE ASSESSEE NEVER DID ANY BUSINESS. IT WAS ALSO SUBMIT TED THAT IF THE EXISTENCE OF SHAREHOLDER IS NOT IN DOUBT THEN THE ADDITION IS TO BE MADE IN THE HANDS OF THE SHAREHOLDERS AND NOT IN THE HANDS OF THE ASSESS EE COMPANY RECEIVING THE SHARE SUBSCRIPTION. THE ASSESSEE ALSO RELIED UPON D ECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT V. LOVELY EXPORTS PRIVATE LIMITED 216 CTR 195(SC), DISMISSAL OF SLP BY HONBLE SUPREME COURT IN THE CASE OF CIT V. DIVINE LEASING AND FINANCE LIMITED IN CIVIL APPEAL NO CC 375 OF 2008 VIDE ORDERS DATED 21-01-2008 , DECISION OF HONBLE B OMBAY HIGH COURT IN THE CASE OF CIT V. CREATIVE WORLD TELEFILMS LIMITED (20 11) 333 ITR 100(BOM. HC) AND DECISION OF HONBLE DELHI HIGH COURT IN THE CAS E OF CIT V. VALUE CAPITAL PRIVATE LIMITED IN 307 ITR 334(DEL. HC) 8. THE LD. D.R. SUBMITTED THAT SECTION 68 OF THE AC T HAS BEEN AMENDED BY FINANCE ACT 2012, W.E.F. 01-04-2013 WHEREBY THE ONU S IS ON THE ASSESSEE TO PROVE SOURCE OF SOURCE IN THE CASE OF RECEIPT OF SH ARE SUBSCRIPTION TO THE SATISFACTION OF THE AO. THE LD. D.R. RELIED ON THE DECISION OF ITAT, KOLKATA BENCH IN THE CASE OF SUBHLAKSHMI VANIJYA (P.) LTD. V. CIT, [2015] 60 TAXMANN.COM 60 (KOL. TRIB) WHEREBY AMENDMENT TO SEC TION 68 OF THE ACT BY INSERTION OF PROVISO BY FINANCE ACT, 2012 WAS HELD TO CLARIFICATORY IN THE CASE OF CLOSELY HELD COMPANIES IN WHICH PUBLIC ARE NOT S UBSTANTIALLY INTERESTED AND APPLICABLE WITH RETROSPECTIVE EFFECT. THE LD. D.R. SUBMITTED THAT ALL THE THREE DIRECTORS OF THE COMPANY HAVE ACCEPTED IN THE STATE MENT RECORDED ON OATH THAT THESE ARE BOGUS TRANSACTIONS AND ARE MERELY AC COMMODATION ENTRIES ITA 1835 & 1836/MUM/2014 23 WHEREIN CASH WAS PAID IN LIEU OF CHEQUE OBTAINED TO WARDS SHARE SUBSCRIPTION AMOUNT . THE ASSESSEE WAS ASKED TO PRODUCE THE SHA REHOLDERS BEFORE THE A.O. IN THE ASSESSMENT AS WELL EVEN IN THE REMAND P ROCEEDINGS BUT THE ASSESSEE FAILED TO PRODUCE THEM. THE SUMMONS WERE I SSUED U/S 131 OF THE ACT DIRECTING THE SHAREHOLDERS TO APPEAR BEFORE THE AO BUT NONE APPEARED BEFORE THE AO. IT WAS SUBMITTED THAT THE EXISTENCE OF THESE SHAREHOLDERS IS IN DOUBT. IT IS ALSO SUBMITTED THAT DETAILED FINDING I S GIVEN BY AUTHORITIES BELOW TO COME TO CONCLUSION THAT THESE ARE NON GENUINE TR ANSACTIONS AND THE SHARE SUBSCRIBERS DOES NOT HAVE CAPACITY TO GIVE HUGE SHA RE SUBSCRIPTION TO THE ASSESSEE COMPANY AND THAT TOO AT A HUGE PREMIUM. TH E ASSESSEE COMPANY DOES NOT HAVE ANY BUSINESS ACTIVITY AND WAS ONLY IN CORPORATED ON 17-03-2006 WHEREIN THE SHARE SUBSCRIBERS PAID HUGE PREMIUM OF RS 30 PER SHARE AS AGAINST FACE VALUE OF RS.10 PER SHARE IN A NEWLY IN CORPORATED COMPANY HAVING NO BUSINESS/PROJECT IN HAND. EVEN IN SUBSEQUENT YEA RS THE COMPANY HAS NOT DONE ANY BUSINESS ACTIVITY WHICH IS EVIDENT FROM TH E ASSESSMENT FRAMED U/S 143(3) OF THE ACT BY THE REVENUE FOR THE ASSESSMENT YEAR 2011-12 WHICH IS PLACED IN PAPER BOOK PAGE 72-73. IT WAS SUBMITTED T HAT THE DIRECTORS OF THE ASSESSEE COMPANY WAS SEARCHED ON 30-05-2008 AND IT IS A CLOSELY HELD COMPANY WHO WAS ENGAGED IN ACCEPTING BOGUS ACCOMMOD ATION ENTRIES TO CHANNELIZE ILLEGITIMATE MONEY INTO THE COMPANY. THE LD. D.R. FURTHER RELIED ON THE ORDERS OF AUTHORITIES BELOW. THE LD. DR RELIED UPON THE DECISION OF ITAT , KOLKATTA TRIBUNAL IN SUBHALAKSHMI VANIJYA PRIVATE L IMITED V. CIT REPORTED IN (2015) 60 TAXMANN.COM 60(KOL. TRIB) AND DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF RAJMANDIR ESTATES PRIVATE LIMI TED V PR. CIT REPORTED IN(2016) 70 TAXMANN.COM 124(CAL.HC). 9. IN THE REJOINDER, THE LD. COUNSEL SUBMITTED THAT ALL THE DOCUMENTS AS DESIRED BY THE A.O. WERE FILED BEFORE THE AUTHORITI ES BELOW TO PROVE IDENTITY, GENUINENESS AND CREDITWORTHINESS/CAPACITY OF SHARE SUBSCRIBERS TO SUBSCRIBE TO THE SHARE CAPITAL IN THE ASSESSEE COMPANY . NO BUSINESS ACTIVITY HAVE BEEN ITA 1835 & 1836/MUM/2014 24 CONDUCTED BY THE ASSESSEE AND NO INCOME HAS BEEN EA RNED, HENCE NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE AS IN THE ABSENCE OF POSSIBILITY OF HAVING ANY INCOME FROM WHATEVER SOURCES, NO ADDITIO N CAN BE SUSTAINED. THE LD. COUNSEL SUBMITTED THAT AMENDMENT TO PROVISIONS OF SECTION 68 OF THE ACT BY FINANCE ACT, 2012 IS PROSPECTIVE IN NATURE AS CA N BE SEEN FROM EXPLANATORY MEMORANDUM EXPLAINING RATIONALE BEHIND INTRODUCTION OF THIS PROVISO AND HENCE THE SAME IS APPLICABLE FROM ASSES SMENT YEAR 2013-14 AND ONWARD YEARS. 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND ALSO P ERUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING CASE LAWS RELIED UPON BY THE RIVAL PARTIES. WE HAVE OBSERVED THAT THE ASSESSEE COMPANY WAS INCO RPORATED ON 17 TH MARCH, 2006 WITH THE OBJECTIVE OF UNDERTAKING CONST RUCTION AND DEVELOPMENT OF PROPERTIES AND TO DO BUSINESS IN THE FIELD OF REAL ESTATE . HOWEVER, THE ASSESSEE HAS NOT CARRIED OUT ANY BUSIN ESS ACTIVITY FROM 17TH MARCH 2006(DATE OF INCORPORATION) TO 31 ST MARCH, 2006 ( END OF PREVIOUS YEAR) I.E. FOR THE FIFTEEN DAYS AS IT FALLS IN THIS RELEVANT PREVIOUS YEAR 2005- 06 AS PER THE FACTS EMERGING FROM THE RECORDS. THERE WAS A SURVEY ACTION CARRIED OUT BY THE REVENU E ON 30 TH MAY, 2008 U/S 133A OF THE ACT WHEREBY THE ASSESSEES PREMISES WERE SURVEYED . SEARCH ACTION WAS SIMULTANEOUSLY CONDUCTED BY THE R EVENUE U/S 132(1) OF THE ACT ON THE DIRECTORS AND OTHER ENTITIES ON 30-0 5-2008. CERTAIN DOCUMENTS WERE FOUND DURING THE COURSE OF S URVEY OPERATION AND BASED UPON THE SAID DOCUMENTS, THE CASE WAS REOPENE D AND NOTICES WERE ISSUED U/S 148 OF THE ACT TO THE ASSESSEE BY THE AO TO FRAME ASSESSMENT U/S 147/148 OF THE ACT. THE SAID NOTICE U/S 148 OF THE ACT WAS ISSUED WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YE AR. THE ORIGINAL ASSESSMENT WAS NOT FRAMED U/S 143(3) OF THE ACT. T HE ASSESSEE HAS NOT ITA 1835 & 1836/MUM/2014 25 CHALLENGED THE REOPENING OF THE ASSESSMENT U/S 147/ 148 OF THE ACT , WHILE THE ASSESSEE HAS OBJECTED TO THE ADDITION MADE BY T HE REVENUE. THE DOCUMENTS FOUND DURING THE COURSE OF SURVEY WERE RE GARDING VARIOUS SHARE APPLICATION FORMS FROM SHARE SUBSCRIBERS WHICH WERE NOT HAVING APPLICATION NUMBERS, ALL THE SHARE APPLICATION FORM S WERE FILLED IN THE SAME HANDWRITING AND ACKNOWLEDGMENT WERE NOT GIVEN TO THE SHAREHOLDERS, BLANK SIGNED SHARE TRANSFER FORMS FRO M THE SHARE SUBSCRIBERS AND BLANK RECEIPTS FROM THE SHAREHOLDER S WERE IMPOUNDED DURING THE COURSE OF SURVEY U/S 133A CONDUCTED ON 3 0-05-2008. BASED UPON THIS, IT WAS REVEALED THAT THE ASSESSEE HAS RA ISED SHARE CAPITAL AMOUNT TO THE TUNE OF RS. 1.60 CRORES DURING PREVIO US YEAR RELEVANT TO THE INSTANT ASSESSMENT YEAR, AGAINST WHICH THE ASSESSE E ISSUED 4 LACS SHARES WITH A FACE VALUE OF RS. 10/- PER SHARE WITH PREMIU M OF RS. 30/- PER SHARE. SHRI VINOD K. FARIA, ONE OF THE DIRECTOR AND KEY PE RSON OF THE ASSESSEE COMPANY WHO WAS LOOKING AFTER THE AFFAIRS OF THE AS SESSEE COMPANY STATED ON OATH IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT ON 31 ST MAY, 2008 THAT THESE SHARE SUBSCRIPTION MONEY OF RS. 1.60 CRO RES RECEIVED DURING THE PREVIOUS YEAR RELEVANT TO THE IMPUGNED ASSESSMENT Y EAR IS BOGUS AND WERE MERELY ACCOMMODATION ENTRIES. THE SAID DIRECTOR SH. VINOD K. FARIA WHILE RECORDING STATEMENT ON OATH U/S. 132(4) OF THE ACT ON 31-05-2008 SURRENDERED RS.10 CRORES AND OFFERED THE SAME AS AN ADDITIONAL INCOME OVER AND ABOVE THE REGULAR INCOME RECORDED IN THE B OOKS OF ACCOUNTS . FOR THE SURRENDER OF RS. 10 CRORES , ONE OF THE GROUN DS MENTIONED BY MR. VINOD K. FARIA WAS THAT THEY WILL NOT BE ABLE TO ES TABLISH THE GENUINENESS OF THE SHARE CAPITAL RECEIVED BY THE ASSESSEE. THE OTHER DIRECTOR SH. SURESH V. FARIA ALSO STATED ON OATH IN THE STATEMEN T RECORDED ON 18-06- 2008 U/S 131 OF THE ACT THAT THESE SHARE SUBSCRIPTI ON ARE BOGUS AND MERELY ACCOMMODATION ENTRIES. ITA 1835 & 1836/MUM/2014 26 DURING THE COURSE OF PROCEEDINGS BEFORE THE AO AS W ELL BEFORE THE LEARNED CIT(A), THE ASSESSEE HAS SUBMITTED THAT THESE ARE GENUINE SHARE CAPITAL RAISED BY THE ASSESSEE AND THE ASSESSEE HAS PRODUCE D THE COPIES OF BANK STATEMENT, INCOME TAX RETURNS , CERTAIN CONFIRMATIO NS , BALANCE SHEETS/STATEMENT OF AFFAIRS OF THE SHARE SUBSCRIBER S FROM THE SHARE HOLDERS WITH RESPECT TO SHARE SUBSCRIPTION TO THE T UNE OF RS.115 LACS FROM 13 SHAREHOLDERS, WHILE NAME , ADDRESS AND PAN OF TH E REST 4 SHAREHOLDERS SUBSCRIBING RS. 45 LACS WERE PRODUCED . THE SAME AR E ALSO PRODUCED BEFORE THE TRIBUNAL IN PAPER BOOK FILED BEFORE THE TRIBUNAL AND SIMILAR CONTENTIONS ARE ADVANCED BEFORE THE TRIBUNAL. THE R EVENUE HAS DOUBTED THE GENUINENESS OF THE TRANSACTION ON THE GROUND TH AT ASSESSEE HAVING NO BUSINESS/PROJECT IN HAND AND BEING MERELY PAPER COM PANY HAVE RECEIVED HUGE SHARE CAPITAL MONEY TO THE TUNE OF RS. 1.60 CR ORES ON ISSUE OF 4 LACS EQUITY SHARES AND THAT TOO AT A HUGE PREMIUM OF RS 30 PER SHARES AS AGAINST FACE VALUE OF RS.10 PER SHARE. THE ASSESSEE HAS NOT FILED ANY VALUATION REPORT OR EXPLANATION TO JUSTIFY ISSUANCE OF SHARES OF FACE VALUE OF RS.10 PER SHARE AT A PREMIUM OF RS. 30 PER SHARE. T HE REVENUE HAS ALSO DOUBTED THE CREDITWORTHINESS/CAPACITY OF THE SHARE HOLDERS HAVING MEAGER KNOWN SOURCES OF INCOME AND ASSETS DECLARED TO REVE NUE IN THEIR RETURN OF INCOME TO HAVE INVESTED HUGE AMOUNTS IN THE SHARE C APITAL OF THE ASSESSEE AND THAT TOO AT A HUGE PREMIUM OF RS. 30 PER SHARE AGAINST THE FACE VALUE OF RS. 10 PER SHARE OF THE ASSESSEE COMPANY WHICH I S A NEWLY INCORPORATED COMPANY HAVING NO EXISTING BUSINESS/PROJECT IN HAND AND IS MERELY A PAPER COMPANY. THE AUTHORITIES BELOW HAVE ANALYSED THE DOCUMENTS SUBMITTED BY THE SHAREHOLDERS AND CAME TO CONCLUSIO N THAT THESE SHAREHOLDERS HAVE MEAGER INCOME OF RS.80000-90000 D ECLARED IN THEIR RETURN OF INCOME FILED WITH THE REVENUE, THE BALANC E SHEET/STATEMENT OF AFFAIR HAS INSIGNIFICANT ASSETS APART FROM THIS SHA RE INVESTMENT IN THE ASSESSEE COMPANY. THE ISSUE OF CHEQUE/DRAFT IN FAVO UR OF THE ASSESSEE ITA 1835 & 1836/MUM/2014 27 COMPANY TOWARDS SHARE SUBSCRIPTION BY THESE SHARE S UBSCRIBERS IS PRECEDED BY DEPOSIT OF CHEQUE/CASH IN THEIR BANK AC COUNTS , AND EVEN OTHERWISE BOTH PRIOR TO AS WELL SUBSEQUENT TO THE I SSUE OF THE CHEQUE/DRAFTS TO THE ASSESSEE FROM THEIR BANK ACCO UNTS , THERE IS NO BANK BALANCE AVAILABLE IN THE SAID BANK ACCOUNTS OF THE SHARE SUBSCRIBERS EXCEPT THE AMOUNT DEPOSITED BY CASH/CHEQUE TO CLEAR THE CHEQUE/DEMAND DRAFT IN FAVOUR OF THE ASSESSEE COMPANY TOWARDS TH IS INVESTMENT. THUS, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS /CAPACITY OF THE SHARE SUBSCRIBERS TO MAKE SUBSCRIPTION TOWARDS SHARE CAPI TAL INCLUDING SHARE PREMIUM WAS DOUBTED BY THE REVENUE AND IT WAS HELD THAT THE ASSESSEE HAD FAILED TO DISCHARGE THE BURDEN CAST ON THE ASSE SSEE U/S 68 OF THE ACT AND ACCORDINGLY ADDITIONS WERE MADE TO THE INCOME O F THE ASSESSEE. THE SAID ADDITIONS AS MADE BY THE AO WERE CONFIRMED BY THE LEARNED CIT(A) VIDE HIS APPELLATE ORDER IN THE FIRST APPEAL FILED BY THE ASSESSEE. THE SHARE APPLICATION FORMS WERE NOT PROPERLY FILED UP, ACKNOWLEDGMENT OF RECEIPT OF SHARE APPLICATION WERE NOT ISSUED TO THE SUBSCRIBER, SHARE APPLICATION FORMS WERE NOT SERIALLY NUMBERED AND TH E SHARE APPLICATION FORMS WERE FILLED IN WITH THE SAME HANDWRITING. THE BLANK TRANSFER FORMS AND BLANK RECEIPTS WERE OBTAINED BY THE ASSESSEE IN ADVANCE FROM ALL THESE SHARE SUBSCRIBERS AGREEING TO SELL/TRANSFER THE SHA RES HELD BY THEM . THE ASSESSEE COMPANY DID NOT ISSUE SHARE CERTIFICATES T O THE SHARE SUBSCRIBERS AS NO EVIDENCE OF ISSUANCE OF SHARE CERTIFICATE WAS BROUGHT ON RECORD . THERE IS NO BUSINESS CONDUCTED BY THE ASSESSEE DURI NG THE RELEVANT PREVIOUS YEAR AND ALSO EVEN TILL THE ASSESSMENT YEA R 2011-12 WHICH IS EVIDENT FROM THE ASSESSMENT ORDER PASSED BY THE AO U/S 143(3) OF THE ACT. THESE ABOVE STATED DISCREPANCIES IN THE ISSUANCE OF SHARES BY THE ASSSESSEE COMPANY IN OUR CONSIDERED VIEW DO NOT HAP PEN IN USUAL COURSE OF BUSINESS AND CERTAINLY REQUIRED DEEPER PROBE TO UNRAVEL THE TRUTH BEHIND THE HUGE SHARE SUBSCRIPTION RAISED BY THE AS SESSEE COMPANY TO THE ITA 1835 & 1836/MUM/2014 28 TUNE OF RS.5.50 CRORES IN ASSESSMENT YEAR 2006-07 A ND 2007-08 WITHIN SHORT SPAN OF INCORPORATION OF THE ASSESSEE COMPANY WITH NO WORTHWHILE BUSINESS/PROJECT IN HAND AND THE ASSESSEE COMPANY B EING MERELY A PAPER COMPANY. THE ASSESSEE WAS RIGHTLY ASKED BY THE REV ENUE TO PRODUCE THE SHAREHOLDERS IN THE ASSESSMENT AS WELL REMAND PROCE EDINGS BEFORE THE AO, AS THE ROLE OF THE AO IS BOTH OF INVESTIGATOR AND A DJUDICATOR WHEREBY HE IS DUTY BOUND TO UNRAVEL THE TRUTH BEHIND THE SMOKESCR EEN, BUT THE ASSESSEE COULD NOT PRODUCE THE SHAREHOLDERS DESPITE SUFFICIE NT , ADEQUATE AND PROPER OPPORTUNITY GRANTED BY THE REVENUE IN THE AS SESSMENT AS WELL REMAND PROCEEDINGS. SUMMONS U/S 131 OF THE ACT WER E ISSUED BY THE AO TO THE SHARE SUBSCRIBERS DIRECTLY DIRECTING THE SHA REHOLDERS TO PERSONALLY APPEAR BEFORE THE AO WITH RELEVANT DETAILS AND EVID ENCES , BUT THERE WAS NO COMPLIANCE BY THE SHAREHOLDERS AND NONE OF THE SHAREHOLDERS APPEARED BEFORE THE A.O. . HOWEVER, THE DETAILS WER E FILED BY SOME OF THE SHAREHOLDERS IN TAPAL. NO DOUBT , THE ASSESSEE HAS PRODUCED THE COPIES OF BANK STATEMENT, ACKNOWLEDGMENT OF INCOME TAX RETURN S , CERTAIN CONFIRMATIONS , BALANCE SHEETS/STATEMENT OF AFFAIRS OF THE SHARE HOLDERS WITH RESPECT TO SHARE SUBSCRIPTION TO THE TUNE OF R S.115 LACS FROM 13 SHAREHOLDERS, WHILE NAME , ADDRESS AND PAN OF THE R EST 4 SHAREHOLDERS SUBSCRIBING RS. 45 LACS WERE PRODUCED BUT IN OUR CO NSIDERED VIEW THIS IS NOT SUFFICIENT TO DISCHARGE THE ONUS CAST ON THE AS SESSEE AS CONTEMPLATED U/S. 68 OF THE ACT AS THE REVENUE HAS DOUBTED THE CREDITWORTHINESS/CAPACITY OF THE SHAREHOLDERS HAVIN G MEAGER MEANS AND KNOWN SOURCES OF INCOME TO HAVE INVESTED HUGE AMOUN T OF SHARE SUBSCRIPTION AND THAT TOO AT HUGE PREMIUM AS WELL T HE GENUINENESS OF THE TRANSACTION WAS DOUBTED BY THE REVENUE WHEREIN THE ASSESSEE COMPANY DID NOT HAVE ANY BUSINESS/PROJECT IN HAND AND IS ME RELY A PAPER COMPANY , AS IT IS BROUGHT ON RECORD THAT THESE SHARE SUBSC RIBERS ARE PERSONS OF MEAGER MEANS DECLARING INCOME MOSTLY BELOW RS.1,00, 000/- AND THEIR BALANCE SHEET/STATEMENT OF AFFAIRS REVEALED THAT TH EY HAVE OTHERWISE ITA 1835 & 1836/MUM/2014 29 INSIGNIFICANT ASSETS OTHER THAN INVESTMENT IN THE A SSESSEE COMPANY . SECTION 68 OF THE ACT CAST ONUS ON THE ASSESSEE TO SATISFY THE INGREDIENTS OF SECTION 68 TO ESTABLISH THE IDENTITY AND CREDITWORT HINESS OF THE CREDITORS AND TO ESTABLISH THE GENUINENESS OF THE TRANSACTION S. ONCE ASSESSEE FILED THE BASIC DETAILS SUCH AS NAME AND ADDRESS OF CREDI TOR, PAN, INCOME TAX RETURN, CONFIRMATION AND BANK STATEMENT , THE INITI AL ONUS GETS DISCHARGED. SINCE THE REVENUE HAS DOUBTED THE CREDITWORTHINESS OF THE SHARE SUBSCRIBERS AND GENUINENESS OF THE TRANSACTION AS P ER THE REASONS CITED AND SET OUT ABOVE, THE ONUS SHIFTS BACK TO THE ASSE SSEE COMPANY TO OFFER AN EXPLANATION TO THE SATISFACTION OF THE AO AS CON TEMPLATED U/S 68 OF THE ACT WHICH COULD HAVE BEEN DISCHARGED BY PRODUCING T HE SHAREHOLDERS BEFORE THE AO SO THAT TRUTH BEHIND THE SMOKESCREEN COULD HAVE BEEN UNRAVELED BY THE AO BY INTERROGATING THEM. IN THE A BSENCE OF THE SAME, THE AO HAS THE POWERS TO MAKE ADDITIONS TO THE INCO ME AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT. WE HAVE OBSERVED T HAT THE ASSESSEE IS A NEWLY INCORPORATED COMPANY WHICH IS A CLOSELY HELD COMPANY HAVING RECEIVED HUGE SHARE CAPITAL MONEY INCLUDING HUGE SH ARE PREMIUM OF RS.1.6 CRORES IN THIS RELEVANT PREVIOUS YEAR WITH N O BUSINESS ACTIVITY / PROJECT IN HAND AS PER THE FACTS EMERGING FROM THE RECORDS. THE ASSESSEE HAS RECEIVED HUGE SHARE PREMIUM @ RS. 30/- PER SHAR E AGAINST THE FACE VALUE OF RS.10/- PER SHARE WITHOUT ANY WORTHWHILE B USINESS/PROJECT IN HAND. THE ASSESSEE DID NOT ALSO FILED ANY VALUATION REPORT BEFORE THE AUTHORITIES BELOW AS WELL BEFORE US TO JUSTIFY THE ISSUANCE OF SHARES OF RS.10 PER SHARE AT THE PREMIUM OF RS. 30 PER SHARE WHILE THE ASSESSEE COMPANY WAS A NEWLY INCORPORATED COMPANY HAVING NO BUSINESS/PROJECT IN HAND AND HAVING NO NETWORTH OF ITS OWN BEING MER ELY A PAPER/SHELL COMPANY. IT IS THE CONTENTION OF THE ASSESSEE THAT THE DOCUMENTS WERE NOT IMPOUNDED FROM THE PREMISES OF THE ASSESSEE DURING SURVEY OPERATIONS U/S 133A OF THE ACT BUT FROM THE PREMISES BELONGING TO THE PROMOTER- DIRECTOR OF THE ASSESSEE COMPANY NAMELY MR VINOD K. FARIA AND HENCE NO ITA 1835 & 1836/MUM/2014 30 ADDITIONS CAN BE MADE BY THE REVENUE IN THE HANDS O F THE ASSESSEE. IT IS PERTINENT TO MENTION HERE THAT IN CLOSELY HELD FAMI LY CONCERNS, IT IS NOT NECESSARY THAT ALL THE DOCUMENTS OF THE ASSESSEE CO MPANY ARE KEPT IN THE BUSINESS PREMISES OF THE ASSESSEE AS THEY MAY BE KE PT OR SECRETED AT THE RESIDENTIAL OR OTHER PREMISES OF THE DIRECTORS/PROM OTERS AS ASSESSEE BEING CLOSELY HELD COMPANY HAVING NO BUSINESS IN HAND MAY NOT BE EQUIPPED WITH BATTERY OF PROFESSIONAL STAFF AND PROPER OFFIC E/INFRASTRUCTURE OF ITS OWN TO TAKE CARE OF VARIOUS FUNCTIONS OF THE BUSINE SS AND IT IS VERY MUCH POSSIBLE THAT DIRECTORS OR THEIR NOMINATED PERSON I S DISCHARGING MULTIPLE FUNCTIONS IN THE ABSENCE OF BUSINESS IN HAND OF THE ASSESSEE COMPANY. IT IS ALREADY BROUGHT ON RECORD THAT THE TILL THE ASSE SSMENT YEAR 2011-12, THERE WAS NO BUSINESS CARRIED ON BY THE ASSESSEE CO MPANY.IN ANY CASE THE REVENUE HAS INVOKED SECTION 147/148 OF THE ACT AND THEY HAVE WITH THEM FRESH TANGIBLE INCRIMINATING MATERIAL WHICH HAS COM E INTO THEIR POSSESSION DURING THE COURSE OF SEARCH AND SURVEY OPERATIONS O N 30-05-2008 AND POST ENQUIRIES WHICH THE AO HAS RELIED UPON TO INVO KE PROVISIONS OF SECTION 147/148 OF THE ACT WHEREBY THE RE-OPENING O F THE ASSESSMENT HAS BEEN DONE WITHIN FOUR YEARS FROM THE END OF THE ASS ESSMENT YEAR AND THE ORIGINAL ASSESSMENT HAS NOT BEEN FRAMED U/S 143(3) OF THE ACT. THUS THIS CONTENTION OF THE ASSESSEE IS JETTISONED. THE ASSES SEE COMPANY HAS ALSO CONTENDED THAT IN THE ABSENCE OF ANY BUSINESS AND C ONSEQUENTIALLY NO INCOME DURING PREVIOUS YEAR 2005-06, NO INCOME CAN BE ADDED IN THE HANDS OF THE ASSESSEE U/S 68 OF THE ACT. WE ARE OF THE CONSIDERED VIEW THAT SECTION 68 OF THE ACT CREATES A LEGAL FICTION WHICH CAST OBLIGATION ON THE ASSESSEE TO EXPLAIN TO THE SATISFACTION OF THE AO A BOUT NATURE AND SOURCE OF CREDIT IN CASE ANY AMOUNT IS FOUND CREDITED IN T HE BOOKS OF THE ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR. THIS CREATES A LE GAL FICTION AND IN CASE THE ASSESSEE DID NOT OFFER EXPLANATION TO THE SATIS FACTION OF THE AO AS TO THE NATURE AND SOURCE OF CREDIT OF ANY AMOUNT FOUND CREDITED IN THE BOOKS OF THE ASSESSEE FOR ANY PREVIOUS YEAR BY CUMULATIVE LY SATISFYING THE AO ITA 1835 & 1836/MUM/2014 31 ABOUT THE IDENTITY AND CREDITWORTHINESS OF THE CRED ITOR AND ABOUT THE GENUINENESS OF THE TRANSACTION , THE AMOUNT FOUND C REDITED IN THE BOOKS OF THE ASSESSEE SHALL BE TREATED TO BE THE INCOME OF T HE ASSESSEE AS UNEXPLAINED INCOME UNDER LEGAL FICTION CREATED BY S ECTION 68 OF THE ACT. THE SECTION 68 OF THE ACT CREATED A LEGAL FICTION W HICH DOES NOT REQUIRE THAT THE REVENUE HAS TO SHOW THE SOURCES OF THE INCOME B EFORE BRINGING THE AMOUNT TO TAX SINCE THE AMOUNT IS FOUND TO BE CREDI TED IN THE BOOKS OF THE ASSESSEE IN CASE THE ASSESSEE HAS NOT OFFERED EXPL ANATION TO THE SATISFACTION OF THE AO AND MORE-SO IN THE INSTANT C ASE THE DIRECTORS OF THE ASSESSEE COMPANY HAD ADMITTED THAT THESE SHARE SUBS CRIPTIONS IS BOGUS AND ARE MERELY ACCOMMODATION ENTRIES TAKEN BY THE A SSESSEE WHEREBY EQUIVALENT AMOUNT WAS PAID TO THE INVESTORS . THE D IRECTOR OF THE ASSESSEE MR VINOD K FARIA ALSO SURRENDERED RS. 10 CRORES WHE REBY ONE OF THE GROUND OF THE SURRENDER WAS THAT THE ASSESSEE COMPA NY WILL NOT BE ABLE TO SHOW THE GENUINENESS OF THE SHARE SUBSCRIPTION. TH IS CONTENTION OF THE ASSESSEE IS ALSO REJECTED. SECTION 68 OF THE ACT CAST OBLIGATION ON THE ASSESS EE WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAI NED FOR ANY PREVIOUS YEAR , AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF CREDIT THEREOF OR THE EXPLANATION OFFERED BY THE ASSESSEE IS FOUND NOT SATISFACTORY IN THE OPINION OF THE AO, THE SUM SO C REDITED MAY TREATED AS INCOME AND CHARGED TO INCOME-TAX AS INCOME OF THE A SSESSEE OF THAT PREVIOUS YEAR. THE BURDEN/ONUS IS CAST ON THE ASSES SEE AND THE ASSESSEE IS REQUIRED TO EXPLAIN TO THE SATISFACTION OF THE AO CUMULATIVELY ABOUT THE IDENTITY AND CAPACITY/CREDITWORTHINESS OF THE CREDI TORS ALONG WITH THE GENUINENESS OF THE TRANSACTION TO THE SATISFACTION OF THE AO. ALL THE CONSTITUENTS ARE REQUIRED TO BE CUMULATIVELY SATISF IED. IF ONE OR MORE OF THEM IS ABSENT, THEN THE AO CAN MAKE THE ADDITIONS U/S 68 OF THE ACT AS AN INCOME. ITA 1835 & 1836/MUM/2014 32 THERE ARE COMPANIES WHICH ARE WIDELY HELD COMPANIES IN WHICH PUBLIC ARE SUBSTANTIALLY INTERESTED WHICH COMES OUT WITH AN IN ITIAL PUBLIC OFFERS WHEREIN SHARES ARE LISTED ON STOCK EXCHANGES AND WI DELY TRADED , WHEREIN MEMBERS OF PUBLIC MAKE SUBSCRIPTIONS IN PURSUANCE T O THE PROSPECTUS ISSUED BY THE COMPANY . ISSUE OF SHARES IN THESE CA SES TO GENERAL PUBLIC IN INDIA AS WELL ABROAD ARE APPROVED, REGULATED AND MO NITORED BY VARIOUS AUTHORITIES WHO ARE ENGAGED IN REGULATING AND MANAG ING SECURITIES MARKET SUCH AS SECURITIES AND EXCHANGE BOARD OF INDIA(SEBI ) , STOCK EXCHANGES, GOVERNMENT OF INDIA ETC. . THESE MEMBERS OF PUBLIC WHO MAKE SUBSCRIPTION ARE WIDELY SCATTERED ALL OVER THE COUN TRY OR EVEN OUTSIDE INDIA AS ANY PERSON ENTITLE TO APPLY AS PER THE CONDITION S PRESCRIBED IN THE PROSPECTUS CAN PLACE AN APPLICATION SUBSCRIBING TO THE SHARES OF THE COMPANY BY DEPOSITING DULY FILLED IN APPLICATION AL ONG WITH APPLICATION MONEY WITH THE DESIGNATED AUTHORIZED RECIPIENTS OF THE COMPANY STIPULATED IN THE PROSPECTUS SUCH AS BANKERS, BROKE RS, UNDER-WRITERS, MERCHANT BANKERS, COMPANY OFFICES ETC . THESE SHARE HOLDERS WHO ARE MEMBER OF PUBLIC ARE UN-KNOWN PERSONS TO THE COMPAN Y ISSUING SHARES AND THE COMPANY ISSUING SHARES HAVE NO CONTROL/MECH ANISM TO VERIFY THEIR CREDITWORTHINESS ETC. AND THE BURDEN OF PROOF IN SUCH CASES IS DIFFERENT , BUT THERE IS ANOTHER CLASS OF COMPANIES WHICH ARE CLOSELY HELD COMPANIES IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INT ERESTED WHO ARE MOSTLY FAMILY CONTROLLED CLOSELY HELD COMPANIES AND THEY R AISE THEIR SHARE CAPITAL FROM THEIR FAMILY MEMBERS, RELATIVES AND FRIENDS AN D IN THESE COMPANIES SINCE SHARE CAPITAL IS RECEIVED FROM THE CLOSE KNIT CIRCLES WHO ARE MOSTLY KNOWN TO THE COMPANY/PROMOTERS, THE ONUS AS REQUIR ED U/S 68 OF THE ACT IS VERY HEAVY TO PROVE IDENTITY AND CAPACITY OF THE SHAREHOLDERS AND GENUINENESS OF THE TRANSACTION. THE ONUS OF WIDELY HELD COMPANY COULD BE DISCHARGED ON THE SUBMISSIONS OF ALL THE INFORMATIO N CONTAINED IN THE STATUTORY SHARE APPLICATION DOCUMENTS AND ON NOT BE ING SATISFIED THE AO ITA 1835 & 1836/MUM/2014 33 MAY PROCEED AGAINST THE SHAREHOLDERS U/S 69 OF THE ACT INSTEAD OF PROCEEDING AGAINST THE COMPANY, BUT IN THE CLOSELY HELD COMPANIES AS IN THE INSTANT CASE THE SHARE CAPITAL ARE MOSTLY RAIS ED FROM FAMILY, CLOSE RELATIVES AND FRIENDS AND THE ASSESSEE IS EXPECTED TO KNOW THE SHARE SUBSCRIBERS AND THE BURDEN IS VERY HEAVY ON THE ASS ESSEE TO SATISFY CUMULATIVELY THE INGREDIENTS OF SECTION 68 OF THE A CT AS TO IDENTITY AND ESTABLISH THE CREDIT WORTHINESS OF THE CREDITORS AN D GENUINENESS OF THE TRANSACTION TO THE SATISFACTION OF THE AO , OTHERWI SE THE AO SHALL BE FREE TO PROCEED AGAINST THE ASSESSEE COMPANY AND MAKE ADDIT IONS U/S 68 OF THE ACT AS UNEXPLAINED CASH CREDIT. THE USE OF THE WORD ANY SUM FOUND CREDITED IN THE BOOKS IN SECTION 68 INDICATES THA T IT IS WIDELY WORDED AND THE AO CAN MAKE ENQUIRIES AS TO THE NATURE AND SOUR CE THEREOF . THE AO CAN GO TO ENQUIRE/INVESTIGATE INTO TRUTHFULNESS OF THE ASSERTION OF THE ASSESSEE REGARDING THE NATURE AND THE SOURCE OF THE CREDIT IN ITS BOOKS OF ACCOUNTS AND IN CASE THE AO IS NOT SATISFIED WITH T HE EXPLANATION OF THE ASSESSEE WITH RESPECT TO ESTABLISHING IDENTITY AND CREDIT WORTHINESS OF THE CREDITOR AND THE GENUINENESS OF THE TRANSACTIONS, T HE AO IS EMPOWERED TO MAKE ADDITIONS TO THE INCOME OF THE ASSESSEE U/S 68 OF THE ACT AS AN UNEXPLAINED CREDIT IN THE HANDS OF THE ASSESSEE COM PANY RAISING THE SHARE CAPITAL BECAUSE THE AO IS BOTH AN INVESTIGATOR AND ADJUDICATOR. IN OUR CONSIDERED VIEW, MERELY SUBMISSION OF THE NAME AND ADDRESS OF THE SHARE SUBSCRIBER, INCOME TAX RETURNS, BALANCE SHEET/STATE MENT OF AFFAIRS OF THE SHARE SUBSCRIBER AND BANK STATEMENT OF THE SHARE SU BSCRIBER IS NOT SUFFICIENT AS THE AO IS TO BE SATISFIED AS TO THEIR IDENTITY AND CREDITWORTHINESS AS WELL AS TO THE GENUINENESS OF T HE TRANSACTION ENTERED INTO. THE SHARE HOLDERS IN THIS INSTANT CASE DID NO T APPEAR BEFORE THE AO AT THE INSTANCE OF THE ASSESSEE AS WELL IN PURSUANCE T O THE SUMMONS U/S 131 OF THE ACT ISSUED BY THE AO AND THUS, THE ONUS SHI FTS BACK TO THE ASSESSEE TO PRODUCE THE SHAREHOLDERS BEFORE THE AO AND IF TH E ASSESSEE FALTERS THE ADDITIONS CAN BE MADE U/S 68 OF THE ACT.. THE HONB LE SUPREME COURT ITA 1835 & 1836/MUM/2014 34 DEALT WITH THIS ISSUE IN A. GOVINDARAJULU MUDALIAR V. CIT (1958) 34 ITR 807(SC). IN THE INSTANT CASE, WE HAVE NOTED THAT AT FIRST THE ASSESSEE RAISED THE BOGEY IN APPELLATE PROCEEDINGS BEFORE TH E LEARNED CIT(A) THAT THE AO IN ASSESSMENT PROCEEDINGS HAS NOT GIVEN ADEQUATE AND PROPER OPPORTUNITY TO THE ASSESSEE TO PRODUCE THE SHAREHO LDER BUT WHEN ADEQUATE , PROPER AND SUFFICIENT OPPORTUNITY WAS AF FORDED TO THE ASSESSEE IN REMAND PROCEEDINGS BY THE AO TO PRODUCE THE SHAR EHOLDERS, THE ASSESSEE FAILED TO PRODUCE THEM DESPITE SUFFICIENT , PROPER AND ADEQUATE OPPORTUNITY GRANTED BY THE AO. THE SHAREHOLDER ALSO DID NOT APPEAR BEFORE THE AO EVEN ON BEING SUMMONED BY THE AO DIRECTLY U /S 131 OF THE ACT. SECTION 68 OF THE ACT HAS BEEN AMENDED BY FINANCE A CT, 2012 W.E.F. 01- 04-2013 WHEREBY THE ONUS IS CAST UPON THE ASSESSEE COMPANY TO JUSTIFY THE SOURCES OF SHARE SUBSCRIPTION INCLUDING SHARE P REMIUM RAISED , TO EXPLAIN THE SOURCE OF THE SOURCE OF RAISING THE SH ARE SUBSCRIPTION. THUS, SECTION 68 OF THE ACT HAS BEEN AMENDED BY INSERTION OF PROVISO CASTING THE ONUS ON THE ASSESSEE COMPANY TO EXPLAIN THE SOURCE OF SOURCE OF RAISING SHARE SUBSCRIPTION WHICH HAS BEEN HELD TO BE CLARIF ICATORY IN NATURE AND HENCE RETROSPECTIVE BY THE DECISION OF THE KOLKATA TRIBUNAL IN THE CASE OF SUBHLAKSHMI VANIJYA (P.) LTD. (SUPRA) WHEREIN IT WA S HELD AS UNDER BY THE KOLKATTA TRIBUNAL: 13.U . NOW WE ESPOUSE THE NEXT LEG OF THE ARGUMENTS OF T HE LD. AR THAT THE INSERTION OF PROVISO TO SECTION 68 BY THE FINAN CE ACT, 2012 W.E.F. 1.4.2013 EMPOWERING THE AO TO EXAMINE THE GENUINENE SS OF THE SHARE CAPITAL IN THE CASE OF A COMPANY IN WHICH PUBLIC AR E NOT SUBSTANTIALLY INTERESTED, IS PROSPECTIVE AND, HENCE, THE CIT IN T HE YEAR UNDER CONSIDERATION QUESTION WAS NOT RIGHT IN DIRECTING T HE AO TO EXAMINE THE GENUINENESS OF SHARE CAPITAL WITH PREMIUM. ON THE O THER HAND, THE LD. DR ADVOCATED THE RETROSPECTIVE OPERATION OF THIS AM ENDMENT. 13.V . IN ORDER TO EVALUATE THE RIVAL THE CONTENTIONS ON THIS ISSUE, WE CONSIDER IT APT TO REPRODUCE THE RELEVANT PART OF T HE PROVISO TO SECTION, WHICH READS AS UNDER : ITA 1835 & 1836/MUM/2014 35 'PROVIDED THAT WHERE THE ASSESSEE IS A COMPANY, (NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTER ESTED) AND THE SUM SO CREDITED CONSISTS OF SHARE APPLICATION MONEY , SHARE CAPITAL, SHARE PREMIUM OR ANY SUCH AMOUNT BY WHATEVER NAME C ALLED, ANY EXPLANATION OFFERED BY SUCH ASSESSEE-COMPANY SHALL BE DEEMED TO BE NOT SATISFACTORY, UNLESS (A) THE PERSON, BEING A RESIDENT IN WHOSE NAME SUCH C REDIT IS RECORDED IN THE BOOKS OF SUCH COMPANY ALSO OFFERS AN EXPLANA TION ABOUT THE NATURE AND SOURCE OF SUCH SUM SO CREDITED; AND (B) SUCH EXPLANATION IN THE OPINION OF THE ASSESSING OFFICER AFORESAID HAS BEEN FOUND TO BE SATISFACTORY: PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRST PROVISO SHALL APPLY IF THE PERSON, IN WHOSE NAME THE SUM REFERRED TO THEREIN IS RECORDED, IS A VENTURE CAPITAL FUND OR A VENTURE CA PITAL COMPANY AS REFERRED TO IN CLAUSE (23FB) OF SECTION 10'. 13.W . AS PER THIS PROVISO WHERE ANY SHARE CAPITAL ETC. IS CREDITED IN THE CASE OF CLOSELY HELD COMPANY, THE EXPLANATION GIVEN BY SUCH COMPANY SHALL BE DEEMED TO BE NOT SATISFACTORY, UNLESS THE RESIDENT SHAREHOLDER OFFERS AN EXPLANATION ABOUT THE NATURE AND SOURCE O F SUCH SUM SO CREDITED AND SUCH EXPLANATION IS FOUND TO BE SATISF ACTORY BY THE AO. THE ESSENCE OF THIS AMENDMENT IS THAT A CLOSELY HELD CO MPANY IS REQUIRED TO SATISFY THE AO ABOUT THE SHARE CAPITAL ETC. ISSUED BY IT, IN THE ABSENCE OF WHICH, AN ADDITION U/S 68 CAN BE MADE IN THE HANDS OF THE COMPANY. IF WE ACCEPT THE AMENDMENT TO BE PROSPECTIVE, THEN IT WOULD MEAN PRECLUDING THE AO FROM EXAMINING THE GENUINENESS OF TRANSACTIONS OF RECEIPT OF SHARE CAPITAL WITH PREMIUM UNDER CONSIDE RATION AND HENCE PROHIBITING HIM FROM MAKING ANY ADDITION U/S 68 NOT WITHSTANDING THE SAME BEING NON-GENUINE. IN THE OPPUGNATION, IF THE AMENDMENT IS HELD TO BE PROSPECTIVE, THEN IT WOULD MEAN THAT THE AO WOUL D HAVE ALL THE POWERS TO EXAMINE THE GENUINENESS OF SHARE CAPITAL AND SHARE PREMIUM RECEIVED BY THE ASSESSEE COMPANY ON THE TOUCHSTONE OF SECTION 68. IF THE ASSESSEE FAILS TO SATISFY HIM ON THE IDENTITY AND C APACITY OF THE SUBSCRIBERS AND GENUINENESS OF TRANSACTIONS, THEN A DDITION WILL BE CALLED FOR U/S 68 OF THE ACT. WE, THEREFORE, FIRSTLY NEED TO DECIDE AS TO WHETHER THE AMENDMENT TO SECTION 68 BY WAY OF INSERTION OF PROVISO IS RETROSPECTIVE OR PROSPECTIVE? 13 . X. IT IS SETTLED RULE OF CONSTRUCTION THAT EVERY STAT UTE IS PRIMA FACIE PROSPECTIVE UNLESS IT IS EXPRESSLY OR BY NECESSARY IMPLICATION MADE TO HAVE RETROSPECTIVE OPERATION. ORDINARILY THE COURTS ARE REQUIRED TO GATHER THE INTENTION OF THE LEGISLATURE FROM THE OVERT LAN GUAGE OF THE PROVISION AS TO WHETHER IT HAS BEEN MADE PROSPECTIVE OR RETROSPE CTIVE, AND IF RETROSPECTIVE, THEN FROM WHICH DATE. HOWEVER, SOME TIMES WHAT HAPPENS ITA 1835 & 1836/MUM/2014 36 IS THAT THE SUBSTANTIVE PROVISION, AS ORIGINALLY EN ACTED OR LATER AMENDED, FAILS TO CLARIFY THE INTENTION OF THE LEGISLATURE. IN SUCH A SITUATION IF SUBSEQUENTLY SOME AMENDMENT IS CARRIED OUT TO CLARI FY THE REAL INTENT, SUCH AMENDMENT HAS TO BE CONSIDERED AS RETROSPECTIV E FROM THE DATE WHEN THE EARLIER PROVISION WAS MADE EFFECTIVE. SUCH CLARIFICATORY OR EXPLANATORY AMENDMENT IS DECLARATORY. AS THE LATER AMENDMENT CLARIFIES THE REAL INTENT AND DECLARES THE POSITION AS WAS OR IGINALLY INTENDED, IT TAKES RETROACTIVE EFFECT FROM THE DATE WHEN THE ORI GINAL PROVISION WAS MADE EFFECTIVE. NORMALLY SUCH CLARIFICATORY AMENDME NT IS MADE RETROSPECTIVELY EFFECTIVE FROM THE EARLIER DATE. IT MAY ALSO HAPPEN THAT THE CLARIFICATORY OR EXPLANATORY PROVISION INTRODUCED L ATER TO DEPICT THE REAL INTENTION OF THE LEGISLATURE IS NOT SPECIFICALLY MA DE RETROSPECTIVE BY THE STATUTE. NOTWITHSTANDING THE FACT THAT SUCH AMENDME NT TO THE SUBSTANTIVE PROVISION HAS BEEN GIVEN PROSPECTIVE EF FECT, THE JUDICIAL OR QUASI-JUDICIAL AUTHORITIES, ON A CHALLENGE MADE TO IT, CAN JUSTIFIABLY HOLD SUCH AMENDMENT TO BE RETROSPECTIVE. THE JUSTIFICATI ON BEHIND GIVING RETROSPECTIVE EFFECT TO SUCH AMENDMENT IS TO APPLY THE REAL INTENTION OF THE LEGISLATURE FROM THE DATE SUCH PROVISION WAS IN ITIALLY INTRODUCED. THE INTENTION OF THE LEGISLATURE WHILE INTRODUCING THE PROVISION IS GATHERED, INTER ALIA, FROM THE FINANCE BILL, MEMORANDUM EXPLA INING THE PROVISION OF THE FINANCE BILL ETC. 13.Y . THE FACTS OF CIT V. GOLD COIN HEALTH FOOD (P.) LT D. [2008] 304 ITR 308/172 TAXMAN 386 (SC) ARE THAT THE FINANCE ACT, 2002 AMENDED EXPLANATION 4 TO SECTION 271(1)(C) WITH EFFECT FROM 01.04.2003 PROVIDING THAT THE PENALTY WOULD BE IMPOSED EVEN IF THE RETUR NED INCOME IS LOSS. IN THE CASE OF VIRTUAL SOFT SYSTEMS LTD. V. CIT [2007] 289 ITR 83/159 TAXMAN 155 (SC) (A BENCH COMPRISING OF TWO HON'BLE JUDGES) IT WAS HELD THAT PRIOR TO THE AMENDMENT WITH EFFECT FROM 1ST AP RIL, 2003 PENALTY FOR CONCEALMENT OF INCOME COULD NOT BE LEVIED IN THE AB SENCE OF ANY POSITIVE INCOME. DOUBT WAS EXPRESSED OVER THE CORRECTNESS OF THIS VIEW BY A SUBSEQUENT BENCH. THEREAFTER IN THE CASE OF GOLD CO IN HEALTH FOOD (P.) LTD. (SUPRA), A BENCH OF THREE HON'BLE JUDGES OVERR ULED THE JUDGMENT IN THE CASE OF VIRTUAL SOFT SYSTEMS LTD. (SUPRA) BY HO LDING THAT EXPLANATION 4 TO SECTION 271(1)(C)(III) REGARDING THE IMPOSITIO N OF PENALTY, EVEN IF THERE IS A LOSS, IS CLARIFICATORY AND NOT SUBSTANTIVE. IT WAS HELD TO BE APPLYING EVEN TO THE ASSESSMENT YEARS PRIOR TO 1ST APRIL, 20 03, BEING THE DATE FROM WHICH IT WAS BROUGHT INTO FORCE. THUS, IT CAN BE EA SILY NOTICED THAT THE RETROSPECTIVE EFFECT TO THE AMENDMENT TO EXPLANATIO N 4 BY THE FINANCE ACT, 2002 HAS BEEN GIVEN BY HOLDING THAT THE POSITI ON EVEN ANTERIOR TO SUCH AMENDMENT WAS THE SAME INASMUCH AS THE PENALTY WAS IMPOSABLE EVEN IN THE CASE OF LOSS. THE INTENTION OF THE LEGI SLATURE WAS FOUND TO BE IMPOSING PENALTY IN ALL SUCH CASES EVEN PRIOR TO TH E AMENDMENT AND THAT IS HOW THIS AMENDMENT WAS HELD TO BE CLARIFICATORY AND THEREFORE, RETROSPECTIVE. ITA 1835 & 1836/MUM/2014 37 13.Z . SIMILAR IS THE POSITION IN THE CASE OF CIT V. KAN JI SHIVJI & CO. [2000] 242 ITR 124/108 TAXMAN 531 (SC) . EXPLANATION 2 TO SECTION 40(B) WAS INTRODUCED WITH EFFECT FROM 1ST APRIL, 1985 PROVIDI NG THAT WHERE AN INDIVIDUAL IS A PARTNER IN A FIRM OTHERWISE THAN AS PARTNER IN REPRESENTATIVE CAPACITY, INTEREST PAID BY THE FIRM TO SUCH INDIVIDUAL SHALL NOT BE TAKEN INTO ACCOUNT FOR THE PURPOSES OF CLAUS E (B) TO SECTION 40. THE HON'BLE SUPREME COURT IN THE CASE OF BRIJ MOHAN DAS LAXMAN DAS V. CIT [1997] 223 ITR 825/90 TAXMAN 41 HELD THIS INSERTION TO BE DECLARATORY IN NATURE AND HENCE RETROSPECTIVE. IN THIS CASE IT WAS HELD THAT THE INTEREST PAID BY THE FIRM TO A PARTNER ON HIS INDIVIDUAL DEP OSITS IS NOT HIT BY SECTION 40(B), IF THE PERSON IS A PARTNER NOT IN HI S INDIVIDUAL CAPACITY BUT AS REPRESENTING HUF. THE SAME VIEW WAS TAKEN IN SUW ALAL ANANDILAL JAIN V. CIT [1997] 224 ITR 753/91 TAXMAN 337 (SC) . HOWEVER IN RASHIK LAL & CO. V. CIT [1998] 229 ITR 458/96 TAXMAN 16 (SC) , SOMEWHAT CONTRARY VIEW WAS EXPRESSED. THAT IS HOW THE MATTER CAME UP BEFORE THE LARGER BENCH OF THE HON'BLE SUPREME COURT IN KANJI SHIVJI & CO. (SUPRA). IN THIS CASE EXPLANATION 2 TO SECTION 40(B) HAS BEE N HELD AS DECLARATORY AND HENCE RETROSPECTIVE IN OPERATION BY AFFIRMING T HE JUDGMENTS IN THE CASES OF BRIJ MOHAN DAS LAXMAN DAS (SUPRA) AND SUWA LAL ANANDILAL JAIN (SUPRA). 13 . AA . A SURVEY OF THE ABOVE JUDGMENTS MAKES IT PATENT T HAT ANY AMENDMENT TO THE SUBSTANTIVE PROVISION WHICH IS AIM ED AT CLARIFYING THE EXISTING POSITION OR REMOVING UNINTENDED CONSEQUENC ES TO MAKE THE PROVISION WORKABLE HAS TO BE TREATED AS RETROSPECTI VE NOTWITHSTANDING THE FACT THAT THE AMENDMENT HAS BEEN GIVEN EFFECT PROSP ECTIVELY. IN OUR CONSIDERED OPINION THE BORDER LINE BETWEEN A SUBSTA NTIVE PROVISION HAVING RETROSPECTIVE OR PROSPECTIVE EFFECT, IS QUIT E PROMINENT. ONE NEEDS TO APPRECIATE THE NATURE OF THE ORIGINAL PROVISION IN CONJUNCTION WITH THE AMENDMENT. ONCE A PROVISION HAS BEEN GIVEN RETROSPE CTIVE EFFECT BY THE LEGISLATURE, IT SHALL CONTINUE TO BE RETROSPECTIVE. IF ON THE OTHER HAND, IF THE STATUTE DOES NOT AMEND IT RETROSPECTIVELY, THEN ONE HAS TO DIG OUT THE INTENTION OF THE PARLIAMENT AT THE TIME WHEN THE OR IGINAL PROVISION WAS INCORPORATED AND ALSO THE NEW AMENDMENT. IF THE LAT ER AMENDMENT SIMPLY CLARIFIES THE INTENTION OF THE ORIGINAL PROV ISION, THEN IT WILL ALWAYS BE CONSIDERED AS RETROSPECTIVE. LIKE THE CASE OF GO LD COIN HEALTH FOOD (P.) LTD. (SUPRA) IN WHICH THE HON'BLE SUPREME COUR T HELD THAT THE AMENDMENT TO EXPLANATION 4 TO SECTION 271(1)(C)(III ) SIMPLY CLARIFIED THE POSITION WHICH WAS EXISTING SINCE INCEPTION OF THE PROVISION THAT THE PENALTY IS LEVIABLE ON CONCEALMENT IRRESPECTIVE OF THE FACT WHETHER ULTIMATELY ASSESSED INCOME IS POSITIVE OR NEGATIVE. SIMILARLY IN THE CASE OF KANJI SHIVJI & CO. (SUPRA), THE HON'BLE APEX COU RT HELD THAT THE PURPOSE OF EXPLANATION 2 TO SECTION 40(B) WAS SIMPL Y TO CLARIFY THAT THE INCOME-TAX ACT RECOGNIZES INDIVIDUAL STATUS OF A PE RSON AS DIFFERENT FROM HIS REPRESENTATIVE CAPACITY. THIS EXPLANATION DID N OT BRING IN A NEW ITA 1835 & 1836/MUM/2014 38 PROVISION BUT CLARIFIED THAT THE POSITION WAS SO SI NCE THE INTRODUCTION OF THE PROVISION ITSELF. IN THIS CLASS OF CLARIFICATOR Y OR EXPLANATORY AMENDMENTS TO THE SUBSTANTIVE PROVISIONS, THE OBJEC T IS ALWAYS TO CLARIFY THE INTENTION OF THE LEGISLATURE AS IT WAS THERE AT THE TIME OF INSERTION OF THE ORIGINAL PROVISION. THAT IS THE REASON FOR WHIC H THE CLARIFICATORY AMENDMENTS ARE ALWAYS RETROSPECTIVE IRRESPECTIVE OF THE DATE FROM WHICH EFFECT HAS BEEN GIVEN TO THEM BY THE LEGISLATURE. 13 . AB . ARMED WITH THE ABOVE UNDERSTANDING OF THE RETROSP ECTIVE OR PROSPECTIVE EFFECT, LET US ANALYZE WHETHER OR NOT T HE INSERTION OF PROVISO TO SECTION 68 IS CLARIFICATORY? WE HAVE NOTED ABOVE TH AT FOR RULING OUT THE APPLICATION OF SECTION 68, THE ASSESSEE MUST SATISF Y THE AO AS TO THE IDENTITY AND CAPACITY OF THE CREDITOR IN ADDITION T O THE GENUINENESS OF TRANSACTION. WHEN WE ADVERT TO THE LANGUAGE OF SECT ION 68, IT TRANSPIRES THAT IT REFERS TO 'ANY SUM CREDITED' IN THE BOOKS O F AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR. THE EXPRESSION 'A NY SUM CREDITED' HAS NOT BEEN SPECIFICALLY DEFINED IN THE PROVISION. THU S, IT WOULD EXTEND TO ALL THE AMOUNTS CREDITED IN THE BOOKS OF ACCOUNT. A SUM CAN BE CREDITED IN THE BOOKS OF ACCOUNT, WHICH WOULD INVARIABLY EITHER FIND ITS PLACE EITHER ON THE INCOME SIDE OF THE PROFIT AND LOSS ACCOUNT O R IN THE LIABILITY SIDE OF THE BALANCE SHEET. ITEMS CREDITED TO THE PROFIT AND LOSS ACCOUNT ARE THEMSELVES INCOME AND HENCE THERE CAN BE NO REASON TO MAKE ADDITION ONCE AGAIN FOR THEM. ITEMS APPEARING ON THE LIABILI TY SIDE OF THE BALANCE SHEET CAN BE LOANS OR SHARE CAPITAL ETC. ONCE THERE IS SPECIFIC REFERENCE IN SECTION 68 FOR APPLYING IT TO 'ANY SUM CREDITED', T HERE CAN BE NO REASON TO RESTRICT ITS APPLICATION ONLY TO 'LOANS' AND NOT TO 'SHARE CAPITAL'. THE BURDEN OF PROOF UNDER 68 CAN BE NO DIFFERENT IN RES PECT OF ISSUE OF SHARE CAPITAL BY CLOSELY HELD COMPANIES VIS--VIS LOANS O R GIFTS. THE HON'BLE JURISDICTIONAL HIGH COURT IN MAITHAN INTERNATIONAL (SUPRA), ACTIVE TRADERS (P.) LTD.(SUPRA), MIMEC (INDIA) (P.) LTD. (SUPRA) A ND NIVEDAN VANIJYA NIYOJAN LTD. (SUPRA) HAS SPECIFICALLY HELD THAT THE ABOVE THREE INGREDIENTS ARE REQUIRED TO BE SATISFIED EVEN IN CASE OF ISSUE OF SHARE CAPITAL BY A CLOSELY HELD COMPANY. FIRST TWO OUT OF THE ABOVE FO UR JUDGMENTS HAVE CONSIDERED THE JUDGMENT IN THE CASE OF LOVELY EXPOR TS (P.) LTD. (SUPRA). IT SHOWS THAT THE INTENTION OF THE LEGISLATURE, AS INT ERPRETED BY THE HON'BLE JURISDICTIONAL HIGH COURT, IS ALWAYS TO CAST DUTY O N THE ASSESSEE TO PROVE THE SATISFACTION OF THE THREE INGREDIENTS IN CASE O F TRANSACTION OF ISSUE OF SHARE CAPITAL BY A CLOSELY HELD COMPANY IN THE SAME WAY AS IS IN THE CASE OF TRANSACTION OF LOANS. 13.AC. AT THIS JUNCTURE, IT WOULD BE RELEVANT TO NOTE THE RELEVANT PART OF THE MEMORANDUM EXPLAINING THE PROVISIONS OF THE FIN ANCE BILL, 2012, WHICH IS AS UNDER : - 'SECTION 68 OF THE ACT PROVIDES THAT IF ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE AND SUCH ASSESSEE EITHER ITA 1835 & 1836/MUM/2014 39 (I) DOES NOT OFFER ANY EXPLANATION ABOUT NATURE AND S OURCE OF MONEY ; OR (II) THE EXPLANATION OFFERED BY THE ASSESSEE IS FOUND TO BE NOT SATISFACTORY BY THE ASSESSING OFFICER, THEN, SUCH AMOUNT CAN BE TAXED AS INCOME OF THE ASS ESSEE. THE ONUS OF SATISFACTORILY EXPLAINING SUCH CREDITS REMAINS ON THE PERSON IN WHOSE BOOKS SUCH SUM IS CREDITED. IF SUCH PERSON FA ILS TO OFFER AN EXPLANATION OR THE EXPLANATION IS NOT FOUND TO BE S ATISFACTORY THEN THE SUM IS ADDED TO THE TOTAL INCOME OF THE PERSON. CERTAIN JU DICIAL PRONOUNCEMENTS HAVE CREATED DOUBTS ABOUT THE ONUS OF PROOF AND THE REQUIREMENTS OF THIS SECTION, PARTICULARLY, IN CASES WHERE THE SUM WHICH IS CREDITED AS SHARE CAPITAL, SHARE PREMIUM ETC. JUDICIAL PRONOUNCEMENTS, WHILE RECOGNIZING THAT THE PERNICIOUS PRACTICE OF CONVERSION OF UNACCOUNTED MONEY THROUGH MASQUERADE OF INVESTMENT IN THE SHARE CAPITAL OF A COMPANY NEEDS TO BE PREVENTED, H AVE ADVISED A BALANCE TO BE MAINTAINED REGARDING ONUS OF PROOF TO BE PLACED ON THE COMPANY. THE COURTS HAVE DRAWN A DISTINCTION AND EMPHASIZED THAT IN CASE OF PRIVATE PLACEMENT OF SHARES THE LEGAL REGIME SHOULD BE DIFF ERENT FROM THAT WHICH IS FOLLOWED IN CASE OF A COMPANY SEEKING SHARE CAPITAL FROM THE PUBLIC AT LARGE. IN THE CASE OF CLOSELY HELD COMPANIES, INVESTMENTS ARE MADE BY KNOWN PERSONS. THEREFORE, A HIGHER ONUS IS REQUIRED TO BE PLACED ON SUCH COMPANIES BESIDES THE GENERAL ONUS TO ESTABLISH IDENTITY AND CREDIT WORTHINESS OF CREDITOR AND GENUINENESS OF TRANSACTION. THIS ADDIT IONAL ONUS, NEEDS TO BE PLACED ON SUCH COMPANIES TO ALSO PROVE THE SOURCE O F MONEY IN THE HANDS OF SUCH SHAREHOLDER OR PERSONS MAKING PAYMENT TOWARDS ISSUE OF SHARES BEFORE SUCH SUM IS ACCEPTED AS GENUINE CREDIT. IF THE COMP ANY FAILS TO DISCHARGE THE ADDITIONAL ONUS, THE SUM SHALL BE TREATED AS INCOME OF THE COMPANY AND ADDED TO ITS INCOME. IT IS, THEREFORE, PROPOSED TO AMEND SECTION 68 OF T HE ACT TO PROVIDE THAT THE NATURE AND SOURCE OF ANY SUM CREDITED, AS SHARE CAP ITAL, SHARE PREMIUM, ETC., IN THE BOOKS OF A CLOSELY HELD COMPANY SHALL BE TREATED AS EXPLAINED ONLY IF THE SOURCE OF FUNDS IS ALSO EXPLAINED BY TH E ASSESSEE-COMPANY IN THE HANDS OF THE RESIDENT-SHAREHOLDER. HOWEVER, EVEN IN THE CASE OF CLOSELY HELD COMPANIES, IT IS PROPOSED THAT THIS ADDITIONAL ONUS OF SATISFACTORILY EXPLAINING THE SOURCE IN THE HANDS OF THE SHAREHOLDER, WOULD N OT APPLY IF THE SHAREHOLDER IS A WELL REGULATED ENTITY, I.E., A VEN TURE CAPITAL FUND, VENTURE CAPITAL COMPANY REGISTERED WITH THE SECURITIES AND EXCHANGE BOARD OF INDIA(SEBI). THIS AMENDMENT WILL TAKE EFFECT FROM 1ST APRIL, 201 3 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YEAR 2013-14 AN D SUBSEQUENT YEARS.' ITA 1835 & 1836/MUM/2014 40 13.AD. A CAREFUL PERUSAL OF THE FIRST PARA OF THE MEMORAN DUM BRINGS OUT THAT THE ONUS OF SATISFACTORILY EXPLAINING ISSUE OF SHAR E CAPITAL WITH PREMIUM ETC. BY A CLOSELY HELD COMPANY IS ON THE COMPANY. IN THE NEXT PARA, IT HAS BEEN CLARIFIED THAT : 'CERTAIN JUDICIAL PRONOUNCEMENTS H AVE CREATED DOUBTS ABOUT THE ONUS OF PROOF AND THE REQUIREMENTS OF THIS SECT ION, PARTICULARLY, IN CASES WHERE THE SUM WHICH IS CREDITED AS SHARE CAPITAL, S HARE PREMIUM, ETC'. NEXT PARA RECOGNIZES THAT JUDICIAL PRONOUNCEMENTS, WHILE CONSIDERING THAT THE PERNICIOUS PRACTICE OF CONVERSION OF UNACCOUNTED MO NEY THROUGH MASQUERADE OF INVESTMENT IN THE SHARE CAPITAL OF A COMPANY NEE DS TO BE PREVENTED, HAVE ADVISED A BALANCE TO BE MAINTAINED REGARDING ONUS O F PROOF TO BE PLACED ON THE COMPANY. THE COURTS HAVE DRAWN A DISTINCTION AN D EMPHASIZED THAT IN CASE OF PRIVATE PLACEMENT OF SHARES THE LEGAL REGIM E SHOULD BE DIFFERENT FROM THAT WHICH IS FOLLOWED IN CASE OF A COMPANY SEEKING SHARE CAPITAL FROM THE PUBLIC AT LARGE. AFTER GOING THROUGH THE ABOVE PART S OF THE MEMORANDUM EXPLAINING PROVISIONS OF THE FINANCE BILL, THERE RE MAINS NO DOUBT WHATSOEVER THAT THE ONUS HAS ALWAYS BEEN ON THE CLOSELY HELD C OMPANIES TO PROVE THE ISSUE OF SHARE CAPITAL ETC. BY THE COMPANY IN TERMS OF SECTION 68. AN ANALYSIS OF THE ABOVE DISCUSSED JUDGMENTS, INCLUDING FOUR FR OM THE HON'BLE JURISDICTIONAL HIGH COURT, REVEALS THAT SECTION 68 HAS BEEN UNDERSTOOD AS CASTING OBLIGATION ON THE CLOSELY HELD COMPANIES TO EXPLAIN THE AMOUNT OF SHARE CAPITAL ETC. CREDITED IN ITS BOOKS OF ACCOUNT . WHEN WE READ THE MEMORANDUM EXPLAINING THE PROVISIONS OF THE FINANCE BILL, IT BECOMES VIVID THAT CERTAIN CONTRARY JUDICIAL PRONOUNCEMENTS CREAT ED DOUBTS ABOUT THE ONUS OF PROOF AND THE REQUIREMENTS OF THIS SECTION. THUS , THE AMENDMENT MAKES IT MANIFEST THAT THE INTENTION OF THE LEGISLATURE WAS ALWAYS TO CAST OBLIGATION ON THE CLOSELY HELD COMPANIES TO PROVE RECEIPT OF SHAR E CAPITAL ETC. TO THE SATISFACTION OF THE AO AND IT WAS ONLY WITH THE AIM OF SETTING TO NAUGHT CERTAIN CONTRARY JUDGMENTS WHICH 'CREATED DOUBTS' A BOUT THE ONUS OF PROOF BY HOLDING THAT THERE WAS NO REQUIREMENT ON THE COMPAN Y TO PROVE THE SHARE CAPITAL ETC. AND AS SUCH NO ADDITION COULD BE MADE IN THE HANDS OF COMPANY EVEN IF SUCH SHAREHOLDERS ARE BOGUS. AS THE AMENDME NT AIMS AT CLARIFYING THE POSITION OF LAW WHICH ALWAYS EXISTED, BUT WAS N OT PROPERLY CONSTRUED IN CERTAIN JUDGMENTS, THERE CAN BE NO DOUBT ABOUT THE SAME BEING RETROSPECTIVE IN OPERATION. 13.AE. THE ABOUT DISCUSSED JUDGMENTS FROM THE HON'BLE SUM MIT COURT HOLDING A CLARIFICATORY SUBSTANTIVE PROVISION AS RE TROSPECTIVE, DESPITE THE SAME BEING MADE APPLICABLE FROM A PARTICULAR YEAR, FULLY GOVERN THE POSITION UNDER CONSIDERATION. IT IS INTERESTING TO NOTE THAT THE J UDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN MAITHAN INTERNATIONAL (SUPRA) HOLDING THAT THE BURDEN OF PROVING THE CREDIT OF SHARE CAPITAL ETC. IS ON A CLOSELY HELD COMPANY AND FAILURE TO DO SO ATTRACTS THE RIGOUR OF SECTION 68, HAS BEEN DELIVERED ON 21.1.2015, MUCH AFTER THE AMENDMENT CARRIED OUT BY THE FINANCE ACT, 2012. THIS CASE PERTAINS TO PRE-AMENDMENT ERA AS THE ORDE R OF THE TRIBUNAL ASSAILED IN THIS CASE IS DATED 24.6.2011. IT SHOWS THAT THE HON'BLE HIGH COURT HAS ALSO ITA 1835 & 1836/MUM/2014 41 IMPLIEDLY APPROVED THE PROPOSITION THAT THE POSITIO N ANTERIOR TO THE A.Y. 2013-14 WAS THE SAME INASMUCH AS THE ONUS TO PROVE THE SHAR E CAPITAL BY A CLOSELY HELD COMPANY WAS ON IT. WE, THEREFORE, HOLD THAT TH E AMENDMENT TO SECTION 68 BY INSERTION OF PROVISO IS CLARIFICATORY AND HENCE RETROSPECTIVE. THE CONTRARY ARGUMENTS ADVANCED BY THE LD. AR, BEING DEVOID OF A NY MERIT, ARE HEREBY JETTISONED. 13.AF. AT THIS STAGE, WE CONSIDER IT APPROPRIATE TO DISCU SS THE SUBMISSION OF THE LD. AR THAT A SIMULTANEOUS AMENDMENT TO SECTION 56( 2) CONNECTED WITH THE AMENDMENT TO SECTION 68, HAS ALSO BEEN MADE W.E.F. 1.4.2013 AND HENCE SECTION 68 AMENDMENT IS ALSO RETROSPECTIVE. BEFORE APPRECIATING THIS ARGUMENT, WE SET OUT CLAUSE (VIIB) OF SECTION 56(2) AS UNDER : 'WHERE A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, RECEIVES, IN ANY PREVIOUS YEAR, FROM AN Y PERSON BEING A RESIDENT, ANY CONSIDERATION FOR ISSUE OF SHARES THAT EXCEEDS THE FACE VALUE OF SUCH SHARES, THE AGGREGATE CONSIDERATION RECEIVED FOR SUCH SHARES AS EXCEEDS THE FAIR MARKET VALUE OF THE SHARES:' SHALL BE CONSIDERED AS INCOME FROM OTHER SOURCES. 13.AG. THIS PROVISION MANDATES THAT WHERE A CLOSELY HELD COMPANY RECEIVES ANY CONSIDERATION FOR ISSUE OF SHARES IN ANY PREVIOUS Y EAR FROM ANY RESIDENT AND THE CONSIDERATION RECEIVED FOR ISSUE OF SHARES EXCEEDS THE FACE VALUE OF SUCH SHARES, THEN THE AGGREGATE CONSIDERATION RECEIVED FOR SUCH SHARES, AS EXCEEDS THE FAIR MARKET VALUE OF THE SHARES, SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. A BARE PERUSAL OF THIS PROVISION MAKES IT EXPLICIT THAT A NEW OBLIGATION HAS BEEN PUT ON THE CLOSELY HELD C OMPANIES WHICH ISSUE SHARES FOR A CONSIDERATION GREATER THAN THE FAIR MARKET VA LUE OF ITS SHARES. WHEN THE SHARES ARE SO ISSUED AT A HIGHER PRICE, THEN SUCH E XCESS BECOMES INCOME FROM OTHER SOURCES IN THE HANDS OF THE COMPANY. THIS AME NDMENT IS OBVIOUSLY PROSPECTIVE AS THE POSITION OF LAW BEFORE SUCH AMEN DMENT WAS DIFFERENT. SUCH SHARE PREMIUM WAS ALWAYS CONSIDERED AS A CAPITAL RE CEIPT NOT CHARGEABLE TO TAX. SINCE THIS INSERTION HAS INCREASED THE AMBIT OF INC OME OF SUCH COMPANIES HENCEFORTH FOR THE FIRST TIME, WHICH WAS NOT THE PO SITION HITHERTO, IT CEASES TO BE CLARIFICATORY AND HENCE CANNOT BE CONSTRUED AS RETR OSPECTIVE. 13 . AH . WE FAIL TO FIND OUT ANY PARALLEL BETWEEN THE AMEN DMENTS MADE TO SECTION 68 AND SECTION 56(2)(VIIB) EXCEPT FOR THE FACT THAT THESE PROVISIONS HAVE BEEN ADDED BY THE FINANCE ACT, 2012. A CONJOINT READING OF PROVISO TO SECTION 68 AND SECTION 56(2)(VIIB) DIVULGES THAT WHERE A CLOSELY H ELD COMPANY RECEIVES, INTER ALIA, SOME AMOUNT AS SHARE PREMIUM WHOSE GENUINENESS IS N OT PROVED BY THE ASSESSEE COMPANY OR ITS SOURCE ETC. IS NOT PROVED B Y THE SHAREHOLDER TO THE SATISFACTION OF THE AO, THEN THE ENTIRE AMOUNT INCL UDING THE FAIR MARKET VALUE OF THE SHARES, IS CHARGEABLE TO TAX U/S 68 OF THE ACT. IF HOWEVER, THE GENUINENESS OF THE AMOUNT IS PROVED AND THE SHAREHOLDER ALSO PROVE S HIS SOURCE, THEN THE HURDLE OF SECTION 68 STANDS CROSSED AND THE SHARE PREMIUM, TO THE EXTENT STIPULATED, IS CHARGEABLE TO TAX U/S 56(2)(VIIB) OF THE ACT. IT SH OWS THAT ONLY WHEN SOURCE OF ITA 1835 & 1836/MUM/2014 42 SUCH SHARE PREMIUM IN THE HANDS OF A SHAREHOLDER IS PROPERLY EXPLAINED TO THE SATISFACTION OF THE AO, THAT THE PROVISIONS OF SECT ION 56(2)(VIIB) GETS TRIGGERED. APPROACHING THIS SECTION PRE-SUPPOSES THAT THE ASSE SSEE GENUINELY RECEIVED SHARE PREMIUM FROM THE SHARE-HOLDER HAVING SATISFACTORILY EXPLAINED THE TRANSACTION. THUS IT IS EVIDENT THAT SECTIONS 68 AND 56(2)(VIIB) CAN NEVER SIMULTANEOUSLY OPERATE. THE LATER EXCLUDES THE FORMER AND VICE VER SA. CONSEQUENTLY, WE ARE UNABLE TO ACCEPT THE CONTENTION OF THE LD. AR THAT THE PROVISO TO SECTION 68 ATTACHED A NEW OBLIGATION AND HENCE SHOULD BE DECLA RED AS PROSPECTIVE. IT IS AXIOMATIC THAT PROVING GENUINENESS OF A TRANSACTION OF ANY CREDIT, INCLUDING SHARE CAPITAL, WAS ALWAYS AN ESSENTIAL CONSTITUENT OF SEC TION 68. SINCE SECTION 68 COVERS 'ANY SUM CREDITED' IN THE BOOKS WITHOUT ANY EXCEPTION, WHICH, INTER ALIA, INCLUDES SHARE CAPITAL, IT CANNOT BE HELD THAT THE EXAMINATION OF SHARE CAPITAL WITH PREMIUM ETC. WAS EARLIER OUTSIDE THE AMBIT OF SECTION 68 AND NOW THIS AMENDMENT HAS BROUGHT IT INTO ITS PURVIEW. WE HAVE NOTED IT FROM SEVERAL JUDGMENTS DEALING WITH SHARE CAPITAL IN PRE-AMENDME NT PERIOD AND THE MEMORANDUM EXPLAINING THE PROVISIONS THAT PROVING T HE GENUINENESS OF SHARE CAPITAL ETC. BY A COMPANY HAS ALWAYS BEEN CONSIDERE D A NECESSARY REQUIREMENT TO ESCAPE THE MAGNETIZATION OF SECTION 68. THE AMEN DMENT HAS SIMPLY MADE EXPRESS WHICH WAS EARLIER IMPLIED. WE, THEREFORE, H OLD THAT THOUGH AMENDMENT TO SECTION 56(2)(VIIB) IS PROSPECTIVE, BUT TO SECTION 68 IS PROSPECTIVE. IF THAT IS THE POSITION, THEN THE ASSESSEE IS ALWAYS OBLIGED TO PR OVE THE RECEIPT OF SHARE CAPITAL WITH PREMIUM ETC. TO THE SATISFACTION OF THE AO, FA ILURE OF WHICH CALLS FOR ADDITION U/S 68. 13.AI . THE LD. AR RELIED ON THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN VODAFONE INDIA SERVICES (P.) LTD. V. ADDL. CIT [2014] 368 ITR 1/50 TAXMANN.COM 300/[2015] 228 TAXMAN 25 TO CONTEND THAT SHARE PREMIUM CAN UNDER NO CIRCUMSTANCES BE CONSTRUED AS A REVENUE RECEIPT CHA RGEABLE TO TAX. HE SUBMITTED THAT THE LD. CIT WAS NOT JUSTIFIED IN REVISING THE ASSESSMENT ORDER REQUIRING THE AO TO EXAMINE THE RECEIPT OF SHARE CAPITAL/PREMIUM FROM THE ANGLE OF TAXABILITY. IT WAS ARGUED THAT THE SHARE PREMIUM CAN BE CHARGED TO TAX ONLY IN THE CIRCUMSTANCES GIVEN IN SECTION 56(2)(VIIB) AND THAT TOO FROM THE ASSESSMENT YEAR 2013-14. 13.AJ. WE ARE IN FULL AGREEMENT WITH THE LD. AR THAT THE JUDGMENT IN THE CASE OF VODAFONE INDIA SERVICES (P.) LTD.(SUPRA) IS AN AUTH ORITY FOR THE PROPOSITION THAT SHARE CAPITAL/PREMIUM ARE CAPITAL RECEIPTS AND CANN OT BE CHARGED TO TAX. WE ALSO FULLY ENDORSE THE ARGUMENT ABOUT THE INTRODUCTION O F SECTION 56(2)(VIIB) W.E.F. ASSESSMENT YEAR 2013-14 WHICH PROVIDES FOR CHARGING SHARE PREMIUM TO TAX IN THE CIRCUMSTANCES AND TO THE EXTENT PROVIDED THEREI N. HOWEVER, IT IS SIGNIFICANT TO NOTE THAT WE ARE NOT CONCERNED WITH THE CHARGEABILI TY OF SHARE PREMIUM TO TAX IN THE PRESENT APPEAL. HERE, THE QUESTION IS ABOUT THE TAXABILITY OR OTHERWISE OF SUCH SHARE CAPITAL/PREMIUM IN TERMS OF SECTION 68. IT IS SELF EVIDENT THAT WHEN THE ASSESSEE FAILS TO PROVE THE IDENTITY AND CAPACITY O F SHAREHOLDERS ALONG WITH THE GENUINENESS OF TRANSACTIONS, THE AMOUNT OF SHARE CA PITAL, ETC. IS LIABLE TO BE ITA 1835 & 1836/MUM/2014 43 ADDED U/S 68. IT IS ONLY WHERE SHARE CAPITAL/ PREMI UM ARE GENUINELY RECEIVED AND ALL THE THREE NECESSARY INGREDIENTS STAND PROVE D TO THE SATISFACTION OF THE AO THAT THE SHARE PREMIUM IS NOT CHARGEABLE TO TAX BEF ORE ASSESSMENT YEAR 2013-14 AND, THEREAFTER, CHARGEABLE TO THE EXTENT AND IN TH E CIRCUMSTANCES AS ENSHRINED IN SECTION 56(2)(VIIB). THIS CONTENTION, CONSEQUENTLY, FAILS. 13 . AK . TO SUM UP, WE HOLD THAT THE CONTENTION OF THE LD. AR THAT SINCE THE AO OF THE ASSESSEE-COMPANY IS NOT EMPOWERED TO EXAMINE OR MAKE ANY ADDITION ON ACCOUNT OF RECEIPT OF SHARE CAPITAL WITH OR WITHOUT PREMIUM BEFORE AMENDMENT BY THE FINANCE ACT, 2012 W.E.F. A.Y. 2013-14 AND HENCE THE CIT BY MEANS OF IMPUGNED ORDER U/S 263 COULD NOT HAVE DIRECTED THE AO TO DO SO, IS UNSUSTAINABLE. THUS, IT IS FOR THE ASSESSEE TO EXPLAIN THE CREDITW ORTHINESS OF THE SHARE SUBSCRIBERS AND GENUINENESS OF THE TRANSACTION INCL UDING THE SOURCE OF SOURCE. THE AO WANTED TO EXAMINE THE SHARE SUBSCRIBERS TO G O TO BOTTOM OF THE TRUTH TO FIND OUT THE REAL NATURE OF THE TRANSACTION IN ORDE R TO VERIFY GENUINENESS OF THE TRANSACTION AND TO VERIFY CREDIT WORTHINESS OF THE SHARE SUBSCRIBERS THAT HOW PERSONS WITH MEAGER KNOWN SOURCES OF INCOME AND ASS ETS HAVE INVESTED HUGE AMOUNT OF SHARE MONEY IN THE ASSESSEE COMPANY AND T HAT TOO AT A HUGE PREMIUM. IN THE INSTANT CASE, THE BUSINESS OF THE ASSESSEE IS NON-EXISTENT NOR THERE IS ANY PROJECT INITIATED BY THE ASSESSEE WHIC H COULD WARRANT JUSTIFICATION AND RATIONALE FOR SUCH A HUGE PREMIUM AND CONSEQUEN TIALLY INVESTMENT OF SUCH A MAGNITUDE VIS--VIS REPORTED AND KNOWN SOURCES OF INCOME AND ASSETS OF THE SHARE SUBSCRIBERS. NO RATIONAL PERSON WITH SOUND MI ND WILL INVEST SUCH A HUGE AMOUNT IN THE SHARE SUBSCRIPTION OF A PAPER/SHELL C OMPANY HAVING NO WORTHWHILE BUSINESS/PROJECT IN HAND AT SUCH A HUGE PREMIUM AND IT WAS FOR THE ASSESSEE TO HAVE BROUGHT ON RECORD COGENT MATERIAL TO PROVE THE GENUINENESS OF THE TRANSACTION AS WELL CREDIT WORTHINESS OF THE SH ARE SUBSCRIBERS. THE ASSESSEE SCUTTLED THE INVESTIGATION LAUNCHED BY THE AO WHERE IN NO SHARE SUBSCRIBER APPEARED BEFORE THE AO DURING THE ASSESSMENT AND RE MAND PROCEEDINGS EVEN AT ASSESSEE BEHEST WHEN THE AO CALLED THE ASSESSEE TO PRODUCE THE SHAREHOLDERS , NOR THE SHAREHOLDER APPEARED IN PURSUANCE TO SUMMON S ISSUED BY THE AO U/S 131 OF THE ACT DIRECTLY TO THESE SHAREHOLDERS. THE CONTENTIONS OF THE ASSESSEE ITA 1835 & 1836/MUM/2014 44 THAT THE AO DID NOT GAVE PROPER AND ADEQUATE OPPORT UNITY TO THE ASSESSEE TO PRODUCE SHARE SUBSCRIBERS DURING ASSESSMENT PROCEED INGS ARE MERELY HOLLOW WORDS AND SUCH A PLEA IS NOTHING BUT AN ATTEMPT TO THWART AND DELAY JUSTICE . IN ANY CASE ADEQUATE, PROPER AND SUFFICIENT OPPORTUNIT Y WAS GIVEN TO THE ASSESSEE TO PRODUCE SHARE SUBSCRIBER IN REMAND PROCEEDINGS. THE HEAVY ONUS WAS ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTIO N AND THE REASONS FOR COLLECTING THE PREMIUM AT RS. 30/- PER SHARE AS AGA INST THE FACE VALUE OF THE SHARES OF RS 10 PER SHARE WHEREIN THE ASSESSEE COMP ANY WAS MERELY A PAPER/SHELL COMPANY HAVING NO BUSINESS/KNOWN PROJEC T IN HAND. THE ASSESSEE IS NOT ABLE TO DEMONSTRATE THE REASONS AND JUSTIFIC ATION FOR CHARGING OF RS. 30/- PREMIUM PER SHARE AS AGAINST THE FACE VALUE OF RS. 10 PER SHARE AND DURING THE COURSE OF SEARCH AND SURVEY ACTION ON 30-05-2008 AN D POST ENQUIRIES, THE TWO DIRECTORS NAMELY MR VINOD K FARIA AND SURESH V FARI A OF THE ASSESSEE COMPANY HAVE ADMITTED IN STATEMENT RECORDED ON OATH THAT TH ESE SHARE SUBSCRIPTION ENTRIES ARE ACCOMMODATION ENTRIES AND ARE BOGUS TRA NSACTIONS WHEREBY CASH IS PAID IN LIEU OF SHARE SUBSCRIPTION. IT IS NOT SHOWN AND BROUGHT ON RECORD THAT THESE STATEMENTS RECORDED ON OATH WERE RETRACTED BY THE DIRECTORS OF THE ASSESSEE AT ANY STAGE OF PROCEEDING TILL NOW. THE D IRECTOR OF THE COMPANY MR. VINOD K. FARIA IN STATEMENT RECORDED U/S 132(4) OF THE ACT ON 31-05-2008 SURRENDERED RS. 10 CRORES OVER AND ABOVE REGULAR IN COME RECORDED IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE AND ONE OF T HE GROUNDS FOR THE SURRENDER OF RS. 10 CRORES WAS THAT THE ASSESSEE C OMPANY WILL NOT BE ABLE TO PROVE THE GENUINENESS OF THE SHARE CAPITAL OF RS.5. 5 CRORES ( BOTH IN AY 2006-07 AND 2007-08) RAISED BY THE ASSESSEE COMPANY TO THE SATISFACTION OF THE AO. WE WOULD LIKE TO USEFULLY REFER TO THE FINDINGS OF HON BLE CALCUTTA HIGH COURT IN THE CASE OF RAJMANDIR ESTATES PRIVATE LIMITED(SUPRA) WH ICH ARE REPRODUCED HEREUNDER: 21. AFTER HEARING THE LEARNED ADVOCATES, WE ARE OF THE OPINION THAT THE FOLLOWING QUESTIONS ARISE FOR CONSIDERATION: ITA 1835 & 1836/MUM/2014 45 (A) WHETHER IN THE LIGHT OF THE VIEWS EXPRESSED IN TH E CASE OF LOVELY EXPORTS (SUPRA) & STELLER INVESTMENT (SUPRA ) THE ORDER UNDER SECTION 263 DIRECTING FURTHER INVESTIGATION IS LEGAL? (B) IS THE FINDING OF THE COMMISSIONER OF INCOME TAX TH AT UNACCOUNTED MONEY WAS OR COULD HAVE BEEN LAUNDERED AS CLEAN SHA RE CAPITAL BY CREATING FACADE OF PAPER WORK, ROUTING THE MONEY THROUGH SEVERAL BANK ACCOUNTS AND GETTING IT THE SEAL OF STATUTORY APPRO VAL BY GETTING THE CASE REOPENED UNDER SECTION 147 SUO MOTU PERVERSE? (C) WHETHER THE ORDER PASSED BY THE ASSESSING OFFICER U NDER SECTION 143(3)/147 OF THE I NCOME TAX ACT IS ERRONEOUS AND ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE? (D) WHETHER THE IMPUGNED JUDGEMENT OF THE LEARNED TRI BUNAL IS PERVERSE? 22. WE SHALL CONSIDER THE SECOND QUESTION FIRST. IN A COMMENTARY ON THE PREVENTION OF MONEY LAUNDERI NG ACT, 2002 BY DR. M. C. MEHANATHAN PUBLISHED BY LEXIS NEXIS, 2014, TH E STEPS OF MONEY LAUNDERING ARE DESCRIBED AS FOLLOWS: 'STEPS OF MONEY-LAUNDERING ALTHOUGH MONEY-LAUNDERING OFTEN INVOLVES A COMPLEX SERIES OF TRANSACTIONS, IT GENERALLY INCLUDES THE FOLLOWING THREE BASIC STE PS: 1. PLACEMENT IT INVOLVES INTRODUCTION OF THE PROCEEDS OF CRIME I NTO THE FINANCIAL SYSTEM. THIS IS ACCOMPLISHED BY BREAKING UP LARGE AMOUNTS O F CASH INTO SMALLER SUMS THAT ARE THEN DEPOSITED DIRECTLY INTO A BANK A CCOUNT, OR BY PURCHASING MONETARY INSTRUMENTS, TRANSFERRING THE CASH OVERSEA S FOR DEPOSIT IN BANKING/FINANCIAL INSTITUTIONS, USE FOR PURCHASE OF HIGH VALUE THINGS SUCH AS GOLD, PRECIOUS STONES, ART WORKS ETC. AND RESELL ING THE SAME THROUGH CHEQUES OR BANK TRANSFERS ETC. 2. LAYERING THIS INVOLVES FORMATION OF COMPLEX LAYERS OF FINANC IAL TRANSACTIONS WHICH DISTANCE THE ILLICIT PROCEEDS FROM THEIR SOURCE AND DISGUISE THE AUDIT TRAIL. IN THIS PROCESS A SERIES OF CONVERSIONS OR TRANSACTION S ARE INVOLVED FOR MOVING THE FUNDS TO PLACES SUCH AS OFFSHORE FINANCIAL CENT RES OPERATING IN A LIBERAL REGULATORY REGIME. OFTEN 'FRONT' COMPANIES ARE FORM ED TO ACCOMPLISH THIS TASK. THESE COMPANIES OBSCURE THE REAL OWNERS OF TH E MONEY THROUGH THE BANK SECRECY LAWS AND ATTORNEY-CLIENT PRIVILEGE. TH E TECHNIQUES USED FOR THE PURPOSE ARE TO LEND THE PROCEEDS BACK TO THE OWNER AS LOANS, GIFTS AND ETC., UNDER INVOICING THE ITEMS EXPORTED TO THE REAL OWNE R OR ETC. IN SOME CASES, ITA 1835 & 1836/MUM/2014 46 THE TRANSFERS MAY BE DISGUISED AS PAYMENTS FOR GOOD S OR SERVICES, THUS GIVING THEM A LEGITIMATE APPEARANCE. 3. INTEGRATION THIS INVOLVES INVESTMENT IN THE LEGITIMATE ECONOMY SO THAT THE MONEY GETS THE COLOUR OF LEGITIMACY. THIS IS ACHIEVED BY TECHN IQUES SUCH AS LENDING THE MONEY THROUGH 'FRONT' COMPANIES ETC. THE MONEY MAY BE INVESTED IN REAL ESTATES, BUSINESS AND ETC. THE STAGES AT WHICH MONEY-LAUNDERING COULD BE EASIL Y DETECTED ARE THOSE WHERE CASH ENTERS INTO THE DOMESTIC FINANCIAL SYSTE M, EITHER FORMALLY OR INFORMALLY, WHERE IT IS SENT ABROAD TO BE INTEGRATE D INTO THE FINANCIAL SYSTEMS OF TAX HAVEN COUNTRIES AND WHERE IT IS REPA TRIATED IN THE FORM OF TRANSFERS.' THE ROLE OF THE REVENUE AUTHORITIES IN TACKLING THE MENACE OF LAUNDERING BLACK MONEY WAS COMMENTED BY THE LEARNED AUTHOR AS FOLLOWS: 'IT HAS TO BE KEPT IN VIEW THAT INDIA HAS A PROBLEM OF BLACK ECONOMY, WHICH IS UNACOUNTED AND MANY A TIME THE HOLDERS OF BLACK MONEY ALSO LAUNDER THE BLACK MONEY IN ORDER TO ACQUIRE LEGITIMATE ASSE TS. LEGAL OR ILLEGAL INCOME WHICH EVADES TAX AND ILLEGAL INCOME THAT COM ES WITHIN THE EXEMPTED TAXATION SLAB CONSTITUTE THE UNREPORTED GR OSS DOMESTIC PRODUCT OR BLACK ECONOMY. LAUNDERING THE BLACK MONEY AND LAUND ERING PROCEEDS OF CRIME ARE TWO DIFFERENT ISSUES, ALTHOUGH THERE IS F REQUENT OVERLAP BETWEEN THE TWO. WHILE LAUNDERING BLACK MONEY IS TO BE HAND LED THROUGH TAXATION LAWS OR SIMILAR LAWS, THE LAUNDERING OF PROCEEDS OF CRIME IS TO BE HANDLED THROUGH SPECIAL ANTI-MONEY-LAUNDERING LAWS.' 23. THE FOLLOWING PIECES OF EVIDENCE ARE NOTICEABLE: (A) 39 CORPORATE SUBSCRIBERS PURCHASED 7,92,737 SHARES OF RS.10 EACH AT A PREMIUM OF RS.390/- PER SHARE. IN THE PROCESS THE ASSESSEE COMPANY RAISED A PAID UP SHARE CAPITAL OF RS.79.27 LAKHS WI TH A PREMIUM OF RS.31.7 CRORES. (B) FROM THE INFORMATION MADE AVAILABLE BY THE ASSESS EE, IT APPEARS THAT 19 OUT OF 39 APPLICANTS SECURED FUNDS, FOR THE PURP OSE OF CONTRIBUTING TO THE SHARE CAPITAL OF THE ASSESSEE, ON ACCOUNT OF SHARE APPLICATION MONEY. IN OTHER WORDS, THOSE 19 APPLICANTS COLLECTE D FUNDS ON ACCOUNT OF SHARE APPLICATION MONEY IN THEIR RESP ECTIVE COMPANIES AND THAT MONEY WAS CONTRIBUTED TO THE SHARE CAPITAL OF THE A SSESSEE. 15 OUT OF THE 39 APPLICANTS PROCURED THE REQUISITE FUND BY SE LLING SHARES. THE REST OF THE APPLICANTS OF SHARES, IN THE SHARE CAPI TAL OF THE ASSESSEE COMPANY, DID NOT DIS CLOSE THE NATURE OF RECEIPT AT THEIR END THOUGH THE SOURCE OF FUND WAS IDENTIFIED. WHAT HAS NOT BEEN SP ECIFIED IS, AS TO ON WHAT ACCOUNT WAS THE MONEY RECEIVED. ITA 1835 & 1836/MUM/2014 47 (C) THE FORMS OF SHARE APPLICATION PURPORTING TO HAVE B EEN SIGNED BY THE APPLICANT COMPANIES HAVE ALSO BEEN DISCLOSED FROM WHICH IT APPEARS THAT THE DATE OF ALLOTMENT, NUMBER OF ALLOTMENT, NU MBER OF SHARES ALLOTTED, SHARE LEDGER FOLIO, ALLOTMENT REGISTER FO LIO, APPLICATION NUMBER, HAVE ALL BEEN KEPT BLANK. THESE PARTICULARS, MR. PO DDAR, SUBMITTED SHOULD HAVE BEEN FILLED UP BY THE ASSESSEE, BUT THA T HAS NOT BEEN DONE. (D) ANOTHER SIGNIFICANT FACT ADMITTED BY THE ASSESSEE I N REPLY TO THE NOTICE TO SHOW CAUSE UNDER SECTION 263 IS THAT THE 'SHARES WERE OFFERED TO, AND SUBSCRIBED BY THE CLOSELY HELD COMPANIES OWNED BY THE PROMOTERS/DIRECTORS OR THEIR CLOSE RELATIVES AND FR IENDS'. (E) FROM THE BANK STATEMENTS DISCLOSED IT APPEARS THAT TO HAVE THE CHEQUES ISSUED IN FAVOUR OF THE ASSEESSEE HONOURED, MATCHING AMOUNTS WERE CREDITED TO THE ACCOUNTS OF THE SUBSCRIBERS SHORTLY BEFORE THE CHEQUES ISSUED IN FAVOUR OF THE ASSESSEE WERE P RESENTED FOR COLLECTION. (F) 19 APPLICANTS OF SHARES WITHIN A PERIOD OF LESS THA N SIX MONTHS HAD MONEY CONTRIBUTED TO THEIR SHARE CAPITAL WHICH IN T HEIR TURN THEY CONTRIBUTED TO THE SHARE CAPITAL OF THE ASSESSEE. S O THAT, THE 19 COMPANIES WHICH CONTRIBUTED TO THE SHARE CAPITAL OF THE ASSESSEE IN THE NAME OF ASSETS WERE LEFT MERELY WITH THE SHARE- SCRIPTS OF THE ASSESSEE. THE OTHER LOT OF 15 SUBSCRIBERS IN SUBSTANCE HAD TH E SHARE- SCRIPTS HELD BY THEM SUBSTITUTED BY THE SHARE-SCRIPTS OF THE ASS ESSEE. (G) THOUGH, MR. PODDAR MADE EXTENSIVE SUBMISSIONS SCANN ING THE ORDER UNDER SECTION 263 IN BETWEEN THE LINES, HE DID NOT CRITICIZE THE FINDING OF THE COMMISSIONER THAT 'T HE A.O. DID NOT EXAMINE A SINGLE DIRECTOR OF THE ASSESSEE COMPANY OR OF THE SUBSCRIBING COMPANY' WHICH GOES TO SHOW THAT CORRECTNESS OF THIS ASSERTION IS NOT IN D ISPUTE. 24. FROM THE AFORESAID EVIDENCE THE FOLLOWING, PRIMA F ACIE, INFERENCES CAN SAFELY BE DRAWN: (A) THE PROMOTER/DIRECTORS OF THE ASSESSEE AND THEIR CLOSE RELATIVES AND FRIENDS HAD UNITED WITH THE COMMON OBJECT OF CR EATING AT LEAST 20 (19+1) COMPANIES APPARENTLY HAVING A LARGE CAPITAL BASE, BUT, IN FACT THESE ARE MERE PAPER COMPANIES HAVING NO REAL WORTH. THE TRANSACTION OF SALE AND PURCHASE OF SHARES WAS NOMINAL RATHER THAN REAL. (B) THE ALLEGATION, IN RESPONSE TO THE NOTICE TO SHOW -CAUSE U/S. 263 THAT 'IT BEARS IMPORTANCE TO STATE HERE THAT THE INVESTO R COMPANIES OF SHARES WERE INTERESTED TO SUBSCRIBE SHARES OF THE A SSESSEE COMPANY AS, ACCORDING TO THEM, THE ASSESSEE COMPANY HAD PROSPECT IN FUTURE,' IS A PLAIN LIE. (C) THE BLANK SHARE APPLICATION FORMS ETC. TABULATED ABOVE GO TO SHOW ITA 1835 & 1836/MUM/2014 48 THAT THE ALLEGED APPLICATION FOR SHARES AND THE ALL EGED ALLOTMENT WERE NOT IN THE USUAL COURSE OF THE BUSINESS. (D) IN THE LIGHT OF THE AFORESAID PIECES OF EVIDENCE AND THE PRIMA FACIE FINDING, WE ARE EMBOLDENED TO SAY THAT THE TH REE REQUIREMENTS: (A) IDENTITY OF THE SHARE-HOLDERS; (B) GENUINENESS OF T HE TRANSACTION AND (C) THE CREDITWORTHINESS OF THE SHARE- HOLDERS REPEATEDLY IMPRESSED, BY MR. PODDAR, UPON US, HAVE NOT BEEN SA TISFIED . IDENTITY OF THE ALLEGED SHARE- HOLDERS IS KNOWN BUT THE TRANSACTION WAS NOT A GENUINE TRANSACTION. THE TRANSACTIONWAS NOMINAL RAT HER THAN REAL. THE CREDITWORTHINESS OF THE ALLEGED SHARE HOLDERS I S ALSO NOT ESTABLISHED BECAUSE THEY DID NOT HAVE ANY MONEY O F THEIR OWN. EACH ONE OF THEM RECEIVED FROM SOMEBODY AND THAT SO MEBODY RECEIVED FROM A THIRD PERSON. THEREFORE, PRIMA FACI E, THE SHARE- HOLDERS ARE MERE NAME LENDERS. 25. FOR THE REASONS DISCUSSED IN THE PRECEDING PARAGRA PH, WE ARE SATISFIED THAT THE JUDGEMENT IN THE CASE OF STELLER INVESTMENT (SUPRA) HAS NO MANNER OF APPLICATION TO THE FACTS A ND CIRCUMSTANCES OF THIS CASE. THE QUESTION AS TO WHET HER THERE HAS BEEN A DEVICE ADOPTED FOR MONEY LAUNDERING ALSO DID NOT CROP UP FOR CONSIDERATION IN THAT CASE. THE PREVENTION OF MONEY LAUNDERING ACT, 2002 WAS NO T ALSO THERE ON THE STATUTE AT THAT POINT OF TIME. BEFORE THE AP PEAL IN STELLER INVESTMENT LTD. WAS DISMISSED BY THE APEX COURT, TH E QUESTION HAD CROPPED UP IN THE CASE OF SOPHIA FINANCE LTD. ( SUPRA) WHEREIN A SPECIAL BENCH HELD AS FOLLOWS: 'AS WE READ SECTION 68 IT APPEARS THAT WHENEVER A S UM IS FOUND CREDITED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE TH EN, IRRESPECTIVE OF THE COLOUR OR THE NATURE OF THE SUM RECEIVED WHI CH IS SOUGHT TO BE GIVEN BY THE ASSESSEE, THE INCOME-TAX OFFICER HA S THE JURISDICTION TO ENQUIRE FROM THE ASSESSEE THE NATUR E AND SOURCE OF THE SAID AMOUNT. WHEN AN EXPLANATION IN REGARD THER ETO IS GIVEN BY THE ASSESSEE, THEN IT IS FOR THE INCOME-TAX OFFI CER TO BE SATISFIED WHETHER THE SAID EXPLANATION IS CORRECT OR NOT. IT IS IN THIS REGARD THAT ENQUIRIES ARE USUALLY MADE IN ORDER TO FIND OU T AS TO WHETHER, FIRSTLY, THE PERSONS FROM WHOM MONEY IS ALLEGED TO HAVE BEEN RECEIVED ACTUALLY EXISTED OR NOT. SECONDLY, DEPENDI NG UPON THE FACTS OF EACH CASE, THE INCOME-TAX OFFICER MAY EVEN BE JUSTIFIED IN TRYING TO ASCERTAIN THE SOURCE OF THE DEPOSITOR, AS SUMING HE IS IDENTIFIED, IN ORDER TO DETERMINE WHETHER THAT DEPO SITOR IS A MERE NAME-LENDER OR NOT. BE THAT AS IT MAY, IT IS CLEAR THAT THE INCOME- TAX OFFICER HAS JURISDICTION TO MAKE ENQUIRIES WITH REGARD TO THE ITA 1835 & 1836/MUM/2014 49 NATURE AND SOURCE OF A SUM CREDITED IN THE BOOKS OF ACCOUNT OF AN ASSESSEE AND IT WOULD BE IMMATERIAL AS TO WHETHER T HE AMOUNT SO CREDITED IS GIVEN THE COLOUR OF A LOAN OR A SUM REP RESENTING THE SALE PROCEEDS OR EVEN RECEIPT OF SHARE APPLICATION MONEY . THE USE OF THE WORDS 'ANY SUM FOUND CREDITED IN THE BOOKS' IN SECT ION 68 INDICATES THAT THE SAID SECTION IS VERY WIDELY WORD ED AND AN INCOME-TAX OFFICER IS NOT PRECLUDED FROM MAKING AN ENQUIRY AS TO THE TRUE NATURE AND SOURCE THEREOF EVEN IF THE SAME IS CREDITED AS RECEIPT OF SHARE APPLICATION MONEY.' IN THE CASE OF SUMATI DAYAL (SUPRA). THEIR LORDSHIP S HELD THAT A CAPITAL RECEIPT CAN BECOME TAXABLE IF THE EXPLANATI ON OFFERED BY THE ASSESSEE ABOUT THE NATURE AND SOURCE THEREOF IS NOT SATISFACTORILY EXPLAINED. THE JUDGEMENT IN THE CASE OF LOVELY EXPORTS (P.) LT D. (SUPRA) LENDS NO ASSISTANCE TO THE ASSESSEE BECAUSE IN THAT CASE THE DIVISION BENCH REITERATED THAT OMISSION TO MAKE AN ENQUIRY, WHERE SUCH AN EXERCISE IS PROVOKED, SHALL RENDER THE ORDER OF THE ASSESSING OFFICER BOTH ERRONEOUS AND PREJUDICIAL TO THE REVENUE. THE DIVISION BENCH WENT ON TO HOLD THAT THE REVENUE SHOULD NOT HARASS THE ASSESSEE WHERE 'THE PREPONDERANCE OF EVIDENCE INDICATES ABSE NCE OF CULPABILITY'. IN THE PRESENT CASE THERE EXISTS REAS ONABLE SUSPICION IF NOT PRIMA FACIE EVIDENCE OF CULPABILITY. 26. THE LEARNED TRIBUNAL IN THE IMPUGNED JUDGEMENT IN PARAGRAPHS 3, 4 AND 5 OBSERVED, INTER ALIA AS FOLLO WS:- 'WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E RELEVANT MATERIAL ON RECORD. IT IS RELEVANT TO MENTION THAT WE HAVE DISPOSED OF MORE THAN 500 CASES INVOLVING SAME ISSUE THROUGH CERTAIN ORDERS WITH THE MAIN ORDER HAVING BEEN PASSED IN A GROUP OF CASES LED BY SUBHLAKSHMI VANIJYA PVT. LTD. V. CIT (ITA NO.1104/KOL/2014) DATED 30.07.2015 FOR THE A. Y. 20 09-10. BOTH THE SIDES HAVE FAIRLY ADMITTED THAT FACTS AND CIRCUMSTANCES OF THE CASES UNDER CONSIDERATION ARE MUTATIS MUTANDIS SIMILAR TO THOSE DECIDED EARLIER, EXCEPT FOR CERTAIN ISSUES WH ICH WE WILL ADVERT TO A LITTLE LATER. IN OUR AFORESAID ORDER IN SUBHALAKSHMI VANIJYA PVT. LTD. V. CIT (ITA NO. 1104/KOL/2014 A.Y . 2009-10), WE HAVE DRAWN THE FOLLOWING CONCLUSIONS:- ** ** **' IT IS NOTICED THAT ALL OR SOME OF THE ABOVE CONCLUS IONS ARE APPLICABLE TO THE APPEALS IN THIS BATCH.' ITA 1835 & 1836/MUM/2014 50 THE APPELLANT HAS DISCLOSED A COPY OF THE JUDGEMENT DELIVERED BY THE LEARNED TRIBUNAL IN SUBHALAXMI VANIJYA (P.) LTD . V. CIT. THE LEARNED TRIBUNAL IN PARAGRAPH 17.I. OPINED AS FOLLO WS:- 'ALL THE CASES UNDER CONSIDERATION HAVE THE SAME CO MMON FEATURE OF PASSING ASSESSMENT ORDERS IN UNDUE HASTE. WHEN W E CONSIDER THE ABOVE FACTUAL MATRIX, THERE CAN BE NO ESCAPE FR OM AN AXIOMATIC CONCLUSION THAT IN ALL THESE CASES THE ENQUIRY COND UCTED BY THE AOS IS EXCEEDINGLY INADEQUATE AND HENCE FALL IN THE CATEGORY OF 'NO ENQUIRY' CONDUCTED BY THE AO, WHAT TO TALK OF CHARA CTERING IT AS AN 'INADEQUATE ENQUIRY'. IN OUR CONSIDERED OPINION, TH E HIGHLY INADEQUATE ENQUIRY CONDUCTED BY THE AO RESULTING IN DRAWING INCORRECT ASSUMPTION OF FACTS, MAKES THE ORDERS ERR ONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE.' 27. IN THE CASE OF SMT. TARA DEVI AGGARWAL V. CIT [1973] 88 ITR 323 (SC) THE TRIBUNAL HAD HELD AS FOLLOWS:- 'THE TRIBUNAL FURTHER HELD THAT IF THE ORDERS FOR 1 955-56 TO 1959-60 WERE LEFT OUT AND THE ASSESSMENT ORDER FOR 1960-61 WAS CONSIDERED BY ITSELF, IT COULD NOT BE SAID THAT THE ASSESSMENT ORDER WAS PREJUDICIAL TO THE INTERESTS OF REVENUE. IT WAS ALSO OBSERVED THAT THE FACTUM OF ADVANCE OF INITIAL CAPITAL, REAL IZATION OF AMOUNTS BY SALE OF GOLD ORNAMENTS AND THE CARRYING ON OF TH E MONEY- LENDING AND SPECULATIVE BUSINESS HAD ALREADY BEEN A CCEPTED AND ASSESSED IN THE PREVIOUS YEARS, THAT EVEN IN THE YE AR OF ASSESSMENT IN QUESTION THE INCOME-TAX OFFICER HAD A DDED RS.1,499 TO THE DISCLOSED INCOME FROM SPECULATIVE BUSINESS A ND RS.1,270 TO THE DISCLOSED INCOME FROM INTEREST AND MADE THE ASS ESSMENT ON A TOTAL INCOME OF RS.9,037; AS SUCH IT COULD NOT BE S AID THAT THE ASSESSMENT WAS PREJUDICIAL TO THE INTERESTS OF REVE NUE AND THAT AT THE MOST IT COULD BE SAID THAT THE ASSESSEE COULD N OT HAVE CARRIED ON ANY BUSINESS AT THE ADDRESSES GIVEN BY HER BUT W HERE AN ASSESSMENT HAS BEEN MADE WITHOUT TERRITORIAL JURISD ICTION IT COULD NOT BE SAID TO BE PREJUDICIAL TO THE INTERESTS OF R EVENUE.' THIS COURT SET ASIDE THE ORDER OF THE LEARNED TRIBU NAL. IN AN APPEAL BY THE ASSESSEE BEFORE THE APEX COURT THEIR LORDSHI PS UPHELD THE ORDER OF THIS COURT HOLDING, INTER ALIA AS FOLLOWS: 'THE LEARNED ADVOCATE FOR THE ASSESSEE CONTENDS THA T UNDER SECTION 33B THE COMMISSIONER HAD NO JURISDICTION TO CANCEL THE ASSESSMENT MADE BY THE INCOME-TAX OFFICER INASMUCH AS IT CANNOT BE SAID THAT WHERE AN ASSESSEE HAS BEEN ASSESSED TO TAX IT WAS PREJUDICIAL TO THE INTERESTS OF REVENUE ON THE GROU ND THAT NO ASSESSMENT COULD HAVE BEEN MADE IN RESPECT OF THE I NCOME OF ITA 1835 & 1836/MUM/2014 51 WHICH SHE MADE A VOLUNTARY RETURN. THIS CONTENTION IN OUR VIEW IS UNWARRANTED BY THE LANGUAGE OF SECTION 33B. THE WOR DS OF THE SECTION ENABLE THE COMMISSIONER TO CALL FOR AND EXA MINE THE RECORD OF ANY PROCEEDING UNDER THE ACT AND TO PASS SUCH OR DERS AS HE DEEMS NECESSARY AS THE CIRCUMSTANCES OF THE CASE JU STIFY WHEN HE CONSIDERS THAT THE ORDER PASSED WAS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IT IS NOT, AS SUBMITTED BY THE LEARNED ADVOCATE, PREJUDICIAL TO THE INTERESTS OF THE REVENUE ONLY IF IT IS FOUND THAT THE ASSESSMENT FOR THE YEA R WAS DISCLOSED ON THE BASIS THAT AN INCOME HAD BEEN EARNED WHICH I S ASSESSABLE. EVEN WHERE AN INCOME HAS NOT BEEN EARNED AND IS NOT ASSESSABLE, MERELY BECAUSE THE ASSESSEE WANTS IT TO BE ASSESSED IN HIS OR HER HANDS IN ORDER TO ASSIST SOMEONE ELSE WHO WOULD HAV E BEEN ASSESSED TO A LARGER AMOUNT, AN ASSESSMENT SO MADE CAN CERTAINLY BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF TH E REVENUE. IF SO AND WE THINK IT IS SO THE COMMISSIONER UNDER SECTIO N 33B HAS AMPLE JURISDICTION TO CANCEL THE ASSESSMENT AND MAY INITIATE PROCEEDINGS FOR ASSESSMENT UNDER THE PROVISIONS OF THE ACT AGAINST SOME OTHER ASSESSEE WHO ACCORDING TO THE INCOME- TA X AUTHORITIES IS LIABLE FOR THE INCOME THEREOF.' THE REASONING ADVANCED BY THEIR LORDSHIPS IN RESPEC T OF AN ALLEGED REVENUE RECEIPT IS, ACCORDING TO US, EQUALLY APPLIC ABLE TO AN ALLEGED CAPITAL RECEIPT WHICH, IN FACT, WAS RECEIVED ONLY I N PAPERS. THE ATTEMPT OF THE ASSESSEE, IT WAS APPREHENDED IN THE CASE OF SMT. TARA DEVI AGGARWAL (SUPRA) WAS TO ASSIST SOMEONE EL SE. AN IDENTICAL ATTEMPT IS INVOLVED IN THIS CASE. WHO IS THE PERSON SOUGHT TO BE ASSISTED BY THE ASSESSEE? THIS QUESTION CAN O NLY BE ANSWERED AFTER A THOROUGH ENQUIRY, DIRECTED BY THE CIT, IS HELD. THE ASSESSEE IS INTERESTED IN STALLING THAT INVESTI GATION ON THE PLEA THAT THE ORDER OF THE ASSESSING OFFICER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. 28. WE HAVE INDICATED ABOVE THE PIECES OF EVIDENCE WHI CH GO TO SHOW THAT THE COMMISSIONER HAD REASONS TO ENTERTAIN THE BELIEF THAT THIS WAS OR COULD BE A CASE OF MONEY LAUNDERIN G WHICH WENT UNNOTICED BECAUSE THE ASSESSING OFFICER DID NOT HOL D REQUISITE INVESTIGATION EXCEPT FOR CALLING FOR THE RECORDS. T HE EVIDENCE WHICH WE HAVE TABULATED ABOVE AND THE PRIMA FACIE INFEREN CE DRAWN BY US IS DEDUCIBLE FROM THE DOCUMENTS ALSO SUBMITTED B EFORE THE ASSESSING OFFICER. THE FACT THAT THE ASSESSING OFFI CER DID NOT APPLY HIS MIND TO THOSE PIECES OF EVIDENCE WOULD BE EVIDE NT FROM THE ASSESSMENT ORDER ITSELF WHICH READS AS FOLLOWS: ITA 1835 & 1836/MUM/2014 52 'DURING THE FINANCIAL YEAR THE ASSESSEE COMPANY HAS ISSUED 792737 NO. OF EQUITY SHARE WITH A FACE VALUE OF RS. 10/- ALONG WITH A PREMIUM OF RS.390/-. THEREAFTER, NOTICES U/S. 133(6) OF THE I.T. ACT, 19 61 WERE ALSO ISSUED TO VERIFY THE TRANSACTIONS OF THE ASSESSEE O N TEST CHECK BASIS. THE CASE IS DISCUSSED AND HEARD. ISSUE RELEV ANT FOR DETERMINATION OF TOTAL INCOME OF THE ASSESSEE IS DI SCUSSED AS UNDER:' THE ISSUES RELEVANT ACCORDING TO THE ASSESSING OFFI CER WERE A RECEIPT OF A SUM OF RS.61,000/- ON ACCOUNT OF CONSU LTANCY CHARGES AND THE PRELIMINARY EXPENSES WRITTEN OFF AMOUNTING TO A SUM OF RS.60,000/-. HE, THEREFORE, COMPLETED THE ASSESSMEN T AFTER MAKING ADDITION OF A SUM OF RS.1,21,000/-. WHEN IS AN ORDE R ERRONEOUS IN SO FAR AS THE SAME IS PREJUDICIAL TO THE INTEREST O F THE REVENUE WAS CONSIDERED BY THIS COURT IN THE CASE OF MAITHAN INT ERNATIONAL (SUPRA) TO WHICH ONE OF US (GIRISH CHANDRA GUPTA, J .) WAS A PARTY WHEREIN THE FOLLOWING VIEWS WERE EXPRESSED: 'IT IS NOT THE LAW THAT THE ASSESSING OFFICER OCCUP YING THE POSITION OF AN INVESTIGATOR AND ADJUDICATOR CAN DISCHARGE HI S FUNCTION BY PERFUNCTORY OR INADEQUATE INVESTIGATION. SUCH A COU RSE IS BOUND TO RESULT IN ERRONEOUS AND PREJUDICIAL ORDERS. WHERE T HE RELEVANT ENQUIRY WAS NOT UNDERTAKEN, AS IN THIS CASE, THE OR DER IS ERRONEOUS AND PREJUDICIAL TOO AND, THEREFORE, REVISABLE. INVE STIGATION SHOULD ALWAYS BE FAITHFUL AND FRUITFUL. UNLESS ALL FRUITFU L AREAS OF ENQUIRY ARE PURSUED THE ENQUIRY CANNOT BE SAID TO HAVE BEEN FAITHFULLY CONDUCTED. IN A DIFFERENT CONTEXT THE APEX COURT OB SERVED 'CONTRA VERITATEM LEX NUNQUAM ALIQUID PERMITTIT : IMPLIES A DUTY ON THE COURT TO ACCEPT AND ACCORD ITS APPROVAL ONLY TO A R EPORT WHICH IS THE RESULT OF FAITHFUL AND FRUITFUL INVESTIGATION' (SEE SIDHARTHA VASHISHT ALAIS MANU SHARMA V. STATE (NCT OF DELHI) REPORTED IN [2010] 6 SCC 1 PARAGRAPH 200 AT PAGE 80 )' IN THE CASE OF N.R. PORTFOLIO (P.) LTD. (SUPRA) THE FOLLOWING VIEWS WERE EXPRESSED: 'WHAT WE PERCEIVE AND REGARD AS CORRECT POSITION OF LAW IS THAT THE COURT OR TRIBUNAL SHOULD BE CONVINCED ABOUT THE IDE NTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION . THE ONUS TO PROVE THE THREE FACTUM IS ON THE ASSESSEE AS THE FA CTS ARE WITHIN THE ASSESSEE'S KNOWLEDGE. MERE PRODUCTION OF INCORP ORATION DETAILS, PANS OR THE FACT THAT THIRD PERSONS OR COM PANY HAD FILED INCOME-TAX DETAILS IN CASE OF A PRIVATE LIMITED COM PANY MAY NOT BE SUFFICIENT WHEN SURROUNDING AND ATTENDING FACTS PRE DICATE A COVER ITA 1835 & 1836/MUM/2014 53 UP. THESE FACTS INDICATE AND REFLECT PROPER PAPER W ORK OR DOCUMENTATION BUT GENUINENESS, CREDITWORTHINESS, ID ENTITY ARE DEEPER AND OBTRUSIVE. COMPANIES NO DOUBT ARE ARTIFI CIAL OR JURISTIC PERSONS BUT THEY ARE SOULLESS AND ARE DEPENDENT UPO N THE INDIVIDUALS BEHIND THEM WHO RUN AND MANAGE THE SAID COMPANIES. IT IS THE PERSONS BEHIND THE COMPANY WHO TAKE THE D ECISIONS, CONTROL AND MANAGE THEM.' THE PERSONS BEHIND THE ASSESSEE COMPANY AND THE PER SONS BEHIND THE SUBSCRIBING COMPANIES WERE NOT INTERROGATED WHI CH WAS ESSENTIAL TO UNEARTH THE TRUTH. REFERENCE MAY ALSO BE MADE TO THE JUDGEMENT OF THIS COURT IN THE CASE ACTIVE TRADERS (P.) LTD. (SUPRA). THE QUESTION FOR CONSIDERATION IS WHETHER IN THE PR ESENCE OF MATERIALS DISCUSSED ABOVE THE COMMISSIONER WAS JUST IFIED IN TREATING THE ASSESSMENT ORDER ERRONEOUS AND PREJUDI CIAL TO THE INTEREST OF THE REVENUE. THAT QUESTION IN THE FACTS AND CIRCUMSTANCES HAS TO BE ANSWERED IN THE AFFIRMATIVE . WE FIND NO SUBSTANCE IN THE SUBMISSION THAT THE ORD ER OF THE LEARNED TRIBUNAL IS PERVERSE, AFTER EXAMINING ALL T HE SUBMISSIONS ADVANCED BY MR. PODDAR. 29. WHETHER RECEIPT OF SHARE CAPITAL WAS A TAXABLE EVE NT PRIOR TO 1ST APRIL, 2013 BEFORE INTRODUCTION OF CLAUSE (VII B) TO THE SUB- SECTION 2 OF SECTION 56 OF THE INCOME TAX ACT; WHET HER THE CONCEPT OF ARMS LENGTH PRICING IN A DOMESTIC TRANSACTION BE FORE INTRODUCTION OF SECTION 92A AND 92BA OF THE INCOME TAX ACT WAS T HERE AT THE RELEVANT POINT OF TIME ARE NOT QUESTIONS WHICH ARIS E FOR DETERMINATION IN THIS CASE. THE ASSESSEE WITH AN AU THORISED SHARE CAPITAL OF RS.1.36 CRORES RAISED NEARLY A SUM OF RS .32 CRORES ON ACCOUNT OF PREMIUM AND CHOSE NOT TO GO IN FOR INCRE ASE OF AUTHORISED SHARE CAPITAL MERELY TO AVOID PAYMENT OF STATUTORY FEES IS AN IMPORTANT POINTER NECESSITATING INVESTIGATION . MONEY ALLEGEDLY RECEIVED ON ACCOUNT OF SHARE APPLICATION CAN BE ROP ED IN UNDER SECTION 68 OF THE INCOME TAX ACT IF THE SOURCE OF T HE RECEIPT IS NOT SATISFACTORILY ESTABLISHED BY THE ASSESSEE. REFEREN CE IN THIS REGARD MAY BE MADE TO THE JUDGEMENT IN THE CASE OF SUMATI DAYAL (SUPRA) WHEREIN THEIR LORDSHIPS HELD THAT ANY SUM 'FOUND CR EDITED IN THE BOOKS OF THE ASSESSEE FOR ANY PREVIOUS YEAR, THE SA ME MAY BE CHARGED TO INCOME TAX.'. WE ARE UNABLE TO ACCEPT T HE SUBMISSION THAT ANY FURTHER INVESTIGATION IS FUTILE BECAUSE TH E MONEY WAS RECEIVED ON CAPITAL ACCOUNT. THE SPECIAL BENCH IN T HE CASE OF SOPHIA FINANCE LTD. (SUPRA) OPINED THAT 'THE USE OF THE WORDS 'ANY SUM FOUND CREDITED IN THE BOOKS' IN SECTION 68 INDI CATES THAT THE SAID SECTION IS VERY WIDELY WORDED AND AN INCOME-TA X OFFICER IS NOT ITA 1835 & 1836/MUM/2014 54 PRECLUDED FROM MAKING AN ENQUIRY AS TO THE TRUE NAT URE AND SOURCE THEREOF EVEN IF THE SAME IS CREDITED AS RECEIPT OF SHARE APPLICATION MONEY. MERE FACT THAT THE PAYMENT WAS RECEIVED BY C HEQUE OR THAT THE APPLICANTS WERE COMPANIES, BORNE ON THE FILE OF REGISTRAR OF COMPANIES WERE HELD TO BE NEUTRAL FACTS AND DID NOT PROVE THAT THE TRANSACTION WAS GENUINE AS WAS HELD IN THE CASE OF NOVA PROMOTERS AND FINLEASE (P) LTD. (SUPRA). SIMILAR VI EWS WERE EXPRESSED BY THIS COURT IN THE CASE OF PRECISION FI NANCE (P.) LTD. (SUPRA). WE NEED NOT DECIDE IN THIS CASE AS TO WHET HER THE PROVISO TO SECTION 68 OF THE INCOME TAX ACT IS RETROSPECTIV E IN NATURE. TO THAT EXTENT THE QUESTION IS KEPT OPEN. WE MAY HOWEV ER POINT OUT THAT THE SPECIAL BENCH OF DELHI HIGH COURT IN THE C ASE OF SOPHIA FINANCE LTD. (SUPRA) HELD THAT 'THE ITO MAY EVEN BE JUSTIFIED IN TRYING TO ASCERTAIN THE SOURCE OF DEPOSITOR'. THERE FORE, THE SUBMISSION THAT THE SOURCE OF SOURCE IS NOT A RELEV ANT ENQUIRY DOES NOT APPEAR TO BE CORRECT. WE FIND NO SUBSTANCE IN T HE SUBMISSION THAT THE EXERCISE OF POWER UNDER SECTION 263 BY THE COMMISSIONER WAS AN ACT OF REACTIVATING STALE ISSUES. IN THE CAS E OF GABRIEL INDIA LTD. (SUPRA) THE CIT WAS UNABLE TO POINT OUT ANY ER ROR IN THE EXPLANATION FURNISHED BY THE ASSESSEE. WHEREAS IN T HE PRESENT CASE WE HAVE TABULATED THE EVIDENCE WHICH WAS BEFOR E THE ASSESSING OFFICER WHICH SHOULD HAVE PROVOKED HIM TO MAKE FURTHER INVESTIGATION. THE ASSESSING OFFICER DID NOT ATTACH ANY IMPORTANCE TO THAT ASPECT OF THE MATTER AS DISCUSSED ABOVE BY US. THE JUDGEMENT IN THE CASE OF LEISURE WEAR EXPORTS PVT. LTD. (SUPRA) RELIED UPON BY MR. PODDAR HAS NO APPLICABILITY BECA USE THE EVIDENCE FURNISHED BY THE ASSESSEE IN THIS CASE DOE S SUGGEST A COVER UP. WE ALSO HAVE HELD PRIMA FACIE THAT NEITHE R THE TRANSACTION APPEARS TO BE GENUINE NOR ARE THE APPLI CANTS OF SHARE ARE CREDITWORTHY. THE JUDGEMENT IN THE CASE OF OMAR SALAY MOHAMED SAI T (SUPRA) CITED BY MR. PODDAR HAS NO APPLICATION FOR REASONS ALREADY DISCUSSED. IT IS NOT TRUE THAT THE COMMISSIONER IN THIS CASE HAS MERELY ON THE BASIS OF SUSPICION HELD THAT THIS WAS OR COULD BE A CASE OF MONEY LAUNDERING. WE AS A MATTER OF FACT HA VE DISCUSSED THIS ISSUE IN GREAT DETAIL AND NEED NOT REITERATE T HE SAME. THE ORDER PASSED BY THE COMMISSIONER IS BY NO MEANS AN ACT OF SUBSTITUTING HIS OWN VIEWS TO THAT OF THE ASSESSING OFFICER. IT IS TRUE THAT THE ASSESSING OFFICER HAD REQUISITIONED THE NE CESSARY DETAILS BY HIS NOTICE U/S.142(1) BUT HE THEREAFTER DID NOT APPLY HIS MIND THERETO. THE JUDGEMENT IN THE CASE OF J. L. MORRISO N (INDIA) LTD. HAS NO MANNER OF APPLICATION BECAUSE IN THAT CASE THE Q UESTION ESSENTIALLY WAS WHETHER THE RECEIPT WAS OF A CAPITA L OR REVENUE NATURE. THE FACTS AND CIRCUMSTANCES WERE NOT IN DIS PUTE. MOREOVER ITA 1835 & 1836/MUM/2014 55 THE VIEW TAKEN BY THE ASSESSING OFFICER WAS NOT SHO WN NOR WAS HELD BY THE COURT TO BE AN ERRONEOUS VIEW. WHEREAS IN THIS CASE WE HAVE DEMONSTRATED IN SOME DETAIL AS TO WHY IS TH E ORDER OF THE ASSESSING OFFICER ERRONEOUS AND PREJUDICIAL TO THE REVENUE. THE JUDGEMENT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. (SUPRA) AND MAX INDIA LTD. DO NOT APPLY TO THE FACTS OF THI S CASE FOR REASONS ALREADY DISCUSSED BY US. FROM THE JUDGEMENT OF THE LEARNED TRIBUNAL IN THE CASE OF SUBHOLAXMI, PLACED BEFORE US IN GREAT DETAIL BY MR. PODDAR, WE FIND THAT ALL IMPORT ANT ISSUES PLACED FOR CONSIDERATION BY NO OTHER THAN MR. PODDAR HIMSE LF WERE DULY CONSIDERED BY THE LEARNED TRIBUNAL. 30. FOR REASONS ALREADY DISCUSSED WE ANSWER THE ISSUE NO. (A) AND (C) IN THE AFFIRMATIVE AND THE ISSUE NO. (B) AN D (D) IN THE NEGATIVE. IN THE RESULT THE APPEAL FAILS AND IS DIS MISSED. IT IS CLARIFIED THAT THE VIEWS EXPRESSED HEREIN ARE FOR T HE PURPOSE OF DISPOSAL OF THIS APPEAL AND SHALL NOT PRECLUDE THE STATUTORY AUTHORITY FROM ARRIVING AT ITS OWN CONCLUSION IN AC CORDANCE WITH LAW. WE MAY NOW TURN TO THE CASE LAWS RELIED UPON BY THE ASSESSEE COMPANY . THE ASSESSEE COMPANY RELIED UPON THE FOLLOWING CASE LAWS: 1. CIT V. SMT. P. K. NOORJAHAN (1999) 237 ITR 570(SC)- IN THIS CASE, THE HONBLE SUPREME COURT HAS HELD THAT THE AO IS VESTE D WITH DISCRETIONARY POWERS AS THE WORD USED IN SECTION 69 OF THE ACT IS MAY AND NOT SHALL AND IN CASE THE ASSESSEE OFFERS AN EXPLANATION WHICH IS FOUND NOT TO BE SATISFACTORY BY THE AO , THEN THE A O MAY TREAT THE SAME AS INCOME OF THE ASSESSEE AND DISCRETION IS VESTED WITH THE AO AND IT IS NOT THAT IN EACH AND EVERY CASE THE ADDITION IS TO BE MADE IF THE EXPLANATION IS FOUND TO BE NOT SATISFACTORY BY THE AO. THIS DISCRETION IS TO BE EXERCISED IN A PROPER MANNER BY THE AO KEEPIN G IN VIEW THE CIRCUMSTANCES OF THE CASE. THERE IS NO QUARREL WITH THIS PROPOSITION AS IN THE INSTANT CASE THE AO WAS NOT SATISFIED WITH T HE EXPLANATION OF THE ASSESSEE AS TO THE CREDITWORTHINESS OF THE SHAREHOL DER AS WELL GENUINENESS OF THE TRANSACTION AND THE AO WANTED TO INTERROGATE THE ITA 1835 & 1836/MUM/2014 56 SHAREHOLDER WHICH ATTEMPT OF THE AO WAS THWARTED BY THE ASSESSEE AS THE SHEREHOLDERS WERE NEITHER PRODUCED BY THE ASSES SEE NOR THE SHAREHOLDERS APPEARED IN PURSUANCE TO SUMMONS ISSUE D BY THE AO. 2. MITESH ROLLING MILLS PRIVATE LIMITED V. CIT (2002) 258 ITR 278(GUJ)- IN THE INSTANT CASE, IT WAS HELD BY THE HONBLE COURT THAT IT IS FOR THE ASSESSEE TO OFFER AN EXPLANATION AS TO NATURE AND SOURCE OF CRE DIT AS APPEARING IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND THE AO IF NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE MAY TREAT THE SAME AS I NCOME OF THE ASSESSEE U/S 68 OF THE ACT KEEPING IN VIEW THE OVERALL CIRCU MSTANCES OF THE CASE AND IT IS NOT THAT THE AO SHALL MAKE ADDITION IF THE EX PLANATION OFFERED BY THE ASSESSEE IS NOT SATISFACTORY AND THE MATTER WAS REM ANDED BY THE HONBLE COURT TO TRIBUNAL TO DECIDE THE MATTER IN LIGHT OF DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT V. SMT P. K. NOORJAH AN (1999) 237 ITR 570(SC) , ROSHAN DI HATTI V. CIT (1977) 107 ITR 938 (SC) AND CIT V. BHARAT ENGINEERING AND CONSTRUCTION COMPANY (1972)83 ITR 1 87(SC). 3. THE CASE OF ROSHAN DI HATTI V. CIT (1977) 107 ITR 938(SC) WAS DECIDED UNDER THE INCOME TAX ACT, 1922 WHICH DID NOT HAVE T HE PROVISION EQUIVALENT TO SECTION 68 AND 69 OF THE ACT WHICH CR EATES LEGAL FICTION AS DISCUSSED IN PRECEDING PARAS OF THIS ORDER. THE HU F ASSESSEE IN THAT CASE WAS CARRYING ON BUSINESS IN LAHORE TILL JUNE 1947. IN JUNE 1947, ITS KARTA TRANSFERRED FROM LAHORE CERTAIN SUMS TO BANKS IN NE W DELHI. THE KARTA THEREAFTER LEFT LAHORE FOR INDIA WITH A SEALED TRUN K CONTAINING GOLD ORNAMENTS, JEWELLERY AND CASH WHICH HE DEPOSITED WI TH A BANK AT AMRITSAR. THOUGH INITIALLY THE KARTA HAD GONE TO MU SSOORIE, HE SHIFTED TO DELHI IN OCTOBER 1947 AND STARTED THE GOLD BUSINESS AT DELHI IN FEBRUARY 1948. THE FIRST ENTRY IN THE BOOKS OF ACCOUNT OF TH E ASSESSEE WAS DATED 30- 3-1948 BRINGING IN AN AGGREGATE CAPITAL OF CERTAIN AMOUNTS INCLUDING GOLD ORNAMENTS AND BANK AND CASH BALANCES. WHEN ASKED TO EXPLAIN THE ITA 1835 & 1836/MUM/2014 57 SOURCE OF THE CAPITAL BROUGHT INTO THE BUSINESS, TH E ASSESSEE EXPLAINED THAT THE GOLD ORNAMENTS AND CASH WERE BROUGHT AT TH E TIME OF MIGRATION FROM LAHORE AND THAT FROM JUNE 1947 TILL MARCH 1948 , THE HUF ASSESSEE OR ITS KARTA HAD NO OTHER BUSINESS OR MEANS OF INCO ME FROM WHICH THE ASSETS IN QUESTION COULD BE EARNED. THE ASSESSING O FFICER, THE AAC AS WELL AS THE TRIBUNAL AND ALSO THE HIGH COURT HELD THAT T HERE WAS MATERIAL ON THE BASIS OF WHICH IT WAS POSSIBLE TO CONCLUDE THAT A SUBSTANTIAL AMOUNT IN QUESTION REPRESENTED THE UNDISCLOSED INCOME OF THE ASSESSEE. ON APPEAL, THE SUPREME COURT REVERSED THE FINDING AND HELD THA T THOUGH IT WAS A FINDING OF FACT, THE FINDING GIVEN BY THE TRIBUNAL WAS SUCH THAT NO PERSON ACTING JUDICIALLY OR PROPERLY INSTRUCTED AS TO THE RELEVANT LAW COULD COME TO SUCH A FINDING. THE BUSINESS CARRIED ON BY THE ASSE SSEE AT LAHORE WAS REASONABLY LARGE BUSINESS THOUGH ITS EXTENT COULD N OT BE VERIFIED BY ANY RELIABLE MATERIAL PRODUCED BY THE ASSESSEE. THEREFO RE, UTTER IMPROBABILITY AMOUNTING ALMOST TO IMPOSSIBILITY OF THE ASSESSEE H AVING EARNED SUCH A LARGE AMOUNT AS PROFIT WITHIN A FEW MONTHS IN THE D ISTURBED CONDITIONS WHICH WERE THEN PREVAILING IN INDIA WAS A CIRCUMSTA NCE WHICH OUGHT TO HAVE BEEN TAKEN INTO ACCOUNT BY THE TRIBUNAL. IN TH E SAID DECISION, THE APEX COURT REITERATED THE PRINCIPLE THAT THE ONUS O F PROVING THE SOURCE OF A SUM OF MONEY FOUND TO HAVE BEEN RECEIVED BY AN ASSE SSEE IS ON HIM. IF HE DISPUTES THE LIABILITY FOR TAX, IT IS FOR HIM TO SH OW EITHER THAT THE RECEIPT WAS NOT INCOME OR THAT IF IT WAS, IT WAS EXEMPT FRO M TAXATION UNDER THE PROVISIONS OF THE ACT. IN THE ABSENCE OF SUCH PROOF , THE REVENUE IS ENTITLED TO TREAT IT AS TAXABLE INCOME. TO PUT IT DIFFERENTL Y, WHERE THE NATURE AND SOURCE OF A RECEIPT, WHETHER IT BE OF MONEY OR OF O THER PROPERTY, CANNOT BE SATISFACTORILY EXPLAINED BY THE ASSESSEE, IT IS OPE N TO THE REVENUE TO HOLD THAT IT IS THE INCOME OF THE ASSESSEE AND NO FURTHE R BURDEN LIES ON THE REVENUE TO SHOW THAT THAT INCOME IS FROM ANY PARTIC ULAR SOURCE.AGAIN THIS DECISION IN FACT SUPPORT THE CASE OF REVENUE INSTEA D OF ADVANCING THE CASE OF THE ASSESSEE AS THE ASSESSEE DID NOT DISCHARGED ITS BURDEN AS CAST U/S ITA 1835 & 1836/MUM/2014 58 68 OF THE ACT.IN ANY CASE , SECTION 68 OF THE ACT P LACED IN THE ACT OF 1961 CREATES A LEGAL FICTION WHEREIN IF THE ASSESSEE DID NOT OFFER AN EXPLANATION TO THE SATISFACTION OF THE AO, THEN THE AMOUNT FOUN D CREDITED IN THE BOOKS OF THE ASSESSEE SHALL BE TREATED AS INCOME OF THE A SSESSEE U/S 68 OF THE ACT. IN THE INSTANT CASE UNDER APPEAL , THE DIRECTO RS OF THE ASSESSEE HAVE ADMITTED IN STATEMENT RECORDED ON OATH THAT THESE S HARE SUBSCRIPTION IS BOGUS AND WERE MERELY ACCOMMODATION ENTRIES WHEREIN CASH WAS GIVEN TO OBTAIN CHEQUES FROM THE SHARE SUBSCRIBERS. 4. THE CASE OF CIT V. BHARAT ENGINEERING AND CONSTRUCT ION COMPANY (1972)83 ITR 187(SC) WAS AGAIN DECIDED UNDER THE AC T OF 1922 WHERE THERE WAS NO PROVISION EQUIVALENT TO SECTION 68 AND 69 OF THE ACT. . IN BHARAT ENGG. & CONSTRUCTION CO.S CASE ( SUPRA ), THE ASSESSEE-COMPANY WAS AN ENGINEERING CONSTRUCTION COMPANY WHICH COMMENCED ITS BUSINESS IN MAY 1943, BUT THERE WERE SEVERAL CASH CREDIT ENTRIE S IN THE FIRST YEAR OF ITS BUSINESS AGGREGATING TO RS. 2.50 LAKHS. THE ASSESSI NG OFFICER CALLED UPON THE ASSESSEE TO EXPLAIN THOSE CASH CREDIT ENTRIES. THE EXPLANATION GIVEN BY THE ASSESSEE WAS FOUND TO BE FALSE BY THE ASSESSING OFFICER, THE AAC AND THE TRIBUNAL. BUT, THE TRIBUNAL FELT THAT THOSE CAS H CREDIT ENTRIES COULD NOT REPRESENT THE INCOME OR PROFITS OF THE ASSESSEE AS THEY WERE ALL MADE VERY SOON AFTER THE COMPANY COMMENCED ITS ACTIVITIES. TH E TRIBUNAL WAS OF THE VIEW THAT IN THE VERY NATURE OF THINGS THE ASSESSEE COULD NOT HAVE EARNED SUCH A HUGE AMOUNT AS PROFITS VERY SOON AFTER IT CO MMENCED ITS ACTIVITIES. THE APEX COURT, THEREFORE, INFERRED THAT IT WAS REA SONABLE TO ASSUME THAT THOSE CASH CREDIT ENTRIES WERE CAPITAL RECEIPTS ALT HOUGH FOR ONE REASON OR OTHER THE ASSESSEE HAD NOT COME OUT WITH THE TRUE S TORY AS REGARDS THE PERSON FROM WHOM IT GOT THOSE AMOUNTS. THE APEX COU RT, THEREFORE, DID NOT DISTURB THE FINDING OF THE TRIBUNAL. FIRST OF A LL THIS DECISION WAS RENDERED UNDER THE OLD ACT OF 1922 WHERE THERE WAS NO EQUIVALENT PROVISION SECTION 68 AND 69 AS ARE CONTAINED IN ACT OF 1961 WHICH CREATES ITA 1835 & 1836/MUM/2014 59 LEGAL FICTION AND SECONDLY THERE WAS A FINDING OF F ACT RECORDED BY THE TRIBUNAL ON PECULIAR FACTS OF THE CASE. IN THE INST ANT CASE UNDER APPEAL , THE DIRECTORS OF THE ASSESSEE HAVE ADMITTED IN STAT EMENT RECORDED ON OATH THAT THESE SHARE SUBSCRIPTION IS BOGUS AND WERE MER ELY ACCOMMODATION ENTRIES WHEREIN CASH WAS GIVEN TO OBTAIN CHEQUES FR OM THE SHARE SUBSCRIBERS. 5. CIT V. FIVE VISION PROMOTERS PRIVATE LIMITED (2016) 380 ITR 289(DEL)- IN THIS CASE IT WAS HELD THAT MERE FACTS THAT SHAREHOL DERS HAVE COMMON ADDRESS WAS NOT A VALID BASIS TO DOUBT THEIR IDENTI TY AND GENUINENESS OF THE TRANSACTION. IT WAS HELD THAT UNDER SECTION 68 OF THE ACT, THE ASSESSING OFFICER HAS JURISDICTION TO UNDERTAKE ENQUIRIES WIT H REGARD TO THE AMOUNT CREDITED IN THE BOOKS OF THE ACCOUNT OF AN ASSESSEE . THIS COULD BE ANY SUM WHETHER IN THE FORM OF SALE PROCEEDS OR RECEIPT OF SHARE CAPITAL MONEY. FIRST, THE ASSESSING OFFICER IS TO ENQUIRE WHETHER THE ALLEGED SHAREHOLDERS IN FACT EXIST OR NOT. THE TRUTHFULNESS OF THE ASSER TION BY THE ASSESSEE REGARDING THE NATURE AND THE SOURCE OF THE CREDIT I N ITS BOOKS OF ACCOUNT CAN BE EXAMINED BY THE ASSESSING OFFICER. WHERE THE IDENTITY OF THE SHAREHOLDERS STANDS ESTABLISHED AND IT IS SHOWN THA T THEY HAD IN FACT INVESTED MONEY IN THE PURCHASE OF THE ASSESSEE'S SH ARES, THEN THE AMOUNT RECEIVED WOULD BE REGARDED AS CAPITAL. WHERE THE AS SESSEE OFFERS NO EXPLANATION AT ALL OR THE EXPLANATION OFFERED IS UN SATISFACTORY, THE PROVISION OF SECTION 68 MAY BE INVOKED. THE REVENUE IN THIS C ASE MADE SWEEPING BROAD GENERALIZED ALLEGATION THAT THE ASSESSEE BEIN G DEVELOPER IS ACCEPTING ON-MONEY WHICH IS TAKEN IN CASH WHICH HAS NOT BEE N PRIMA FACIE ESTABLISHED BY THE REVENUE WHILE ALL CASH CREDIT AP PEARING IN THE BOOKS OF THE ASSESSEE WERE ADDED AS INCOME TREATING THE INVE STOR COMPANIES AS PAPER COMPANIES WHILE THE ADDITION WAS DELETED ON T HE GROUNDS THAT THE REVENUE WAS UNABLE TO PRODUCE MATERIAL TO SUBSTANTI ATE ITS CASE THAT THE GENUINENESS AND CREDITWORTHINESS OF THE INVESTORS A ND THE SOURCE OF THE ITA 1835 & 1836/MUM/2014 60 MONEY RECEIVED BY THE ASSESSEE BY WAY OF INVESTMENT S IN THE ASSESSMENT YEAR IN QUESTION WAS NOT SATISFACTORILY EXPLAINED B Y THE ASSESSEE. WHILE IN THE INSTANT YEAR UNDER APPEAL, THE REVENUE HAS CATE GORICALLY HELD BASED ON MATERIAL ON RECORD THAT THE SHARE SUBSCRIBERS AR E PERSONS OF MEAGER MEANS AND SHARES WERE ISSUED AT HUGE PREMIUM DESPIT E THE FACT THAT THERE IS NO BUSINESS/PROJECT IN HAND OF THE ASSESSEE. IN THE INSTANT CASE UNDER APPEAL , THE DIRECTORS OF THE ASSESSEE HAVE ADMITTE D IN STATEMENT RECORDED ON OATH THAT THESE SHARE SUBSCRIPTION IS BOGUS AND WERE MERELY ACCOMMODATION ENTRIES WHEREIN CASH WAS GIVEN TO OBT AIN CHEQUES FROM THE SHARE SUBSCRIBERS. 6. CIT V. LOVELY EXPORTS PRIVATE LIMITED (2008) 216 CT R 195(SC) - IT WAS HELD BY HONBLE CALCUTTA HIGH COURT IN THE C ASE OF RAJMANDIR ESTATES PRIVATE LIMITED(SUPRA) AT PARA 25 THAT THE JUDGEMENT IN THE CASE OF LOVELY EXPORTS (P.) L TD. (SUPRA) LENDS NO ASSISTANCE TO THE ASSESSEE BECAUSE IN THAT CASE THE DIVISION BENCH REITERATED THAT OMISSION TO MAKE AN ENQUIRY, WHERE SUCH AN EXERCISE IS PROVOKED, SHALL RENDER THE ORDER OF THE ASSESSING OFFICER BOTH ERRONEOUS AND PREJUDICIAL TO THE REVENUE. THE DIVISION BENCH WENT ON TO HOLD THAT THE REVENUE SHOULD NOT HARASS THE ASSESSEE WHERE 'THE PREPONDERANCE OF EVIDENCE INDICATES ABSE NCE OF CULPABILITY'. IN THE PRESENT CASE THERE EXISTS REAS ONABLE SUSPICION IF NOT PRIMA FACIE EVIDENCE OF CULPABILITY WHILE IN THE INSTANT CASE , THERE IS ALSO AN ADMISS ION BY THE DIRECTORS OF THE ASSESSEE COMPANY IN THEIR STATEMENT RECORDED ON OATH THAT THESE SHARE SUBSCRIPTION WAS MERELY AN ACCOMMODATION ENTRIES AN D CASH WAS GIVEN IN LIEU OF CHEQUES RECEIVED BY THE ASSESSEE COMPANY. T HE ASSESSEE COMPANY BEING A CLOSELY HELD COMPANY HAS NOT BEEN ABLE TO E STABLISH THE ITA 1835 & 1836/MUM/2014 61 CREDITWORTHINESS OF THE SHARE SUBSCRIBER AS WELL GE NUINENESS OF THE TRANSACTION AS TO HOW HUGE AMOUNTS HAVE BEEN INVEST ED BY PERSONS OF MEAGER MEANS AND THAT TOO AT A HUGE PREMIUM IN A NEWLY INC ORPORATED COMPANY HAVING NO WORTHWHILE BUSINESS / PROJECT IN HAND AND HAVING NO NETWOTH OF ITS OWN. MOREOVER, WE HAVE SEEN THAT SECTION 68 OF THE ACT HAS BEEN AMENDED WHEREIN THE CASE OF SHARE SUBSCRIPTION THE COMPANY WHICH IS A COMPANY IN WHICH PUBLIC IS NOT SUBSTANTIALLY INTERESTED IS REQ UIRED TO EXPLAIN SOURCE OF THE SOURCE OF THE AMOUNT RECEIVED. 7.CIT V. CREATIVE WORLD TELEFILMS LIMITED (2011) 33 3 ITR 100(BOMBAY) THIS CASE WAS DECIDED RELYING ON HONBLE APEX COURT DECI SION IN LOVELY EXPORTS PRIVATE LIMITED(SUPRA) WHICH WE DISCUSSED IN PRECED ING PARA. 8. CIT V. VALUE CAPITAL SERVICES PRIVATE LIMITED (2 008) 307 ITR 334(DEL)- THE HONBLE DELHI HIGH COURT HELD THAT THE BURDEN IS ON THE REVENUE TO PROVE THAT THE MONEY EMANATED FROM THE COFFERS OF THE ASS ESSEE WHICH WENT INTO TO GET THE AMOUNT OF CASH CREDIT IN THE BOOKS OF THE A SSESSEE. THIS CASE IS DISTINGUISHABLE AS IN THE INSTANT CASE THERE IS AN UN-RETRACTED STATEMENT U/S 132(4) OF THE ACT BY DIRECTOR OF THE ASSESSEE THAT THE AMOUNT OF SHARE SUBSCRIPTION WAS BOGUS AND MERELY AN ACCOMMODATION ENTRY. THE ASSESSEE HAS ALSO NOT BEEN ABLE TO ESTABLISH THE CREDITWORTH INESS OF THE SHARE SUBSCRIBERS AND ALSO THE GENUINENESS OF THE TRANSAC TION. WE ARE OF THE CONSIDERED VIEW THAT THE ONUS IS ON T HE ASSESSEE COMPANY TO BRING ON RECORD THE COGENT EVIDENCES TO PROVE THE I DENTITY AND CREDITWORTHINESS OF THE SHARE SUBSCRIBERS AND GENU INENESS OF THE TRANSACTION WHICH IN THE INSTANT CASE THE ASSESSEE IS NOT ABLE TO PROVE THE SAME AS PER THE FACTS EMERGING FROM THE RECORDS AND MATERIAL BE FORE US AS SET OUT ABOVE AND IN OUR CONSIDERED VIEW IN THE INSTANT CASE THE TRANSACTIONS WERE NOMINAL RATHER THAN REAL . THE CREDITWORTHINESS OF THE SHAR EHOLDERS IS NOT PROVED BECAUSE THEY DID NOT HAD THEIR OWN MONEY AS EVERY C HEQUE/DRAFT ISSUED IN ITA 1835 & 1836/MUM/2014 62 FAVOUR OF THE ASSESSEE IS PRECEDED BY DEPOSIT OF CA SH/CHEQUE IN THE BANK ACCOUNT OF THE SHAREHOLDER AND THESE SHARE HOLDERS ARE MERELY NAME LENDERS. THE GENUINENESS OF THE TRANSACTIONS IS ALSO NOT PRO VED AS TO HOW SUCH A HUGE SUM OF MONEY GOT INVESTED BY THE SHARE SUBSCRIBERS AND THAT TOO AT A HUGE PREMIUM WHEN THE COMPANY WAS MERELY A PAPER/SHELL COMPANY HAVING NO BUSINESS/PROJECT WORTH IN ITS HAND. THE SHAREHOLDE RS COULD NOT BE INTERROGATED BY THE AO WHICH WAS ESSENTIAL TO UNEAR TH THE TRUTH AS THE ASSESSEE DID NOT PRODUCED THE SHAREHOLDERS NOR THEY APPEARED BEFORE THE AO IN RESPONSE TO SUMMONS ISSUED U/S 131 OF THE ACT. T HE DIRECTORS NAMELY MR. VINOD K FARIA AND MR SURESH V. FARIA OF THE ASSESSE E COMPANY HAVE ADMITTED IN THEIR STATEMENT RECORDED ON OATH U/S 132(4)/131 OF THE ACT THAT THESE SHARE SUBSCRIPTION WAS BOGUS AND WERE MERELY ACCOMM ODATION ENTRIES. THE BLANK TRANSFER FORMS AND RECEIPTS FROM THE SHAREHOL DERS WERE FOUND DURING SURVEY WITH RESPECT TO TRANSFER OF THESE SHARES FRO M SHAREHOLDERS TO THE PERSONS TO BE NOMINATED BY THE PROMOTERS, ALL THE S HARE APPLICATION FORMS WERE FILLED IN THE SAME HANDWRITING , THERE WAS NO SERIAL NUMBERS IN SHARE APPLICATION FORM , THE ACKNOWLEDGMENT OF RECEIPT OF SHARE APPLICATION FORMS WERE NOT GIVEN TO THE SHARE SUBSCRIBERS BY THE ASSE SSEE AND THESE ARE NOT USUAL CONDUCT OF THE CARRYING ON OF BUSINESS . UNDE R THESE CIRCUMSTANCES KEEPING IN VIEW OF CUMULATIVE REASONS AND SUMMATION OF OUR DISCUSSIONS AS SET OUT ABOVE, WE ARE OF THE CONSIDERED VIEW THAT T HE REVENUE HAS RIGHTLY MADE THE ADDITION OF RS.1.60 CRORES RECEIVED AS SHA RE SUBSCRIPTION AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT WHICH WE SUSTAINED AND WE DONOT FOUND ANY INFIRMITY IN THE ORDERS OF THE LEARNED CI T(A) WHICH WE SUSTAIN/UPHELD. WE ORDER ACCORDINGLY. 11. IN THE RESULT, ASSESSEES APPEAL IN ITA NO. 183 5/MUM/2014 FOR THE ASSESSMENT YEAR IS DISMISSED. ITA 1835 & 1836/MUM/2014 63 12. REGARDING THE ASSESSEES APPEAL IN ITA NO. 1836 /MUM/2014 FOR THE ASSESSMENT YEAR 2007-08, OUR ABOVE DECISION IN ITA NO. 1835/MUM/2014 FOR THE ASSESSMENT YEAR 2006-07 SHALL APPLY MUTATIS MUT ANDIS TO THE ASSESSEES APPEAL IN ITA NO. 1836/MUM/2014 WHEREIN THE FACTS A RE IDENTICAL. 13. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE IN ITA NO. 1835/MUM/2014 FOR THE ASSESSMENT YEAR 2006-07 AND I TA NO. 1836/MUM/2014 FOR THE ASSESSMENT YEAR 2007-08 ARE D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH AUGUST, 2016. # $% &' 24-08-2016 ( ) SD/- SD/- (SAKTIJIT DEY) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 24-08-2016 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI D BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI