ORCHID EMBROIDERIES P.LTD, MUMBAI V. DCIT CEN CIR 22, MUMBAI

ITA 1867/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75473 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 09-01-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 19-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Share purchase agreement; Period of limitation; Reasonable cause; Onus to prove; Condonation of delay
• Section: 133(6); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH, MUMBAI , BEFORE SHRI VIJAY PAL RAO , JM & SHRI RAJENDRA , AM ITA NO. 1867 / MUM/ 20 1 2 ( ASSESSMENT YEAR : 20 0 4 - 20 0 5 ) M/S ORCHID INDUSTRIES PVT. LTD., 818, CRYSTAL PARADISE THE MALL, OFF. VEERA DESAI ROAD, DATTAJI SALVI MARG, ANDHERI (W), MUMBAI - 400 053 VS. DCIT, CC - 22, MUMBAI . PAN/GI R NO. : A AACO 6464 B ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : MR. K. SHIVRAM /REVENUE BY : MR . RAVI PRAKASH DATE OF HEARING : 9 TH JANUARY DATE OF PRONOUNCEMENT : O R D E R PER VIJAY PAL RAO , J M : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 17 - 6 - 2011 OF THE LEARNED CIT(A) - 39 , MUMBAI , FOR THE ASSESSMENT YEAR 20 0 4 - 0 5 . HEARD ON THE QUESTIO N OF CONDONATION OF DELAY . 2 . THE RE IS A DELAY OF 183 DAYS IN FILING THE PRESENT APPEAL BY THE ASSESSEE. THE ASSESSEE HAS FILED AN APPLICATION FOR CONDONATION OF DELAY ALONG WITH AFFIDAVIT OF THE SASSESSEE AS WELL AS THE PERSON CONCERN WORKING IN M/S KAILA SH CHAND JAIN & CO., CHARTERED ACCOUNTANTS. ITA NO. 1867 /1 2 2 2.1 WE HAVE HEARD THE LEARNED COUNSEL FOR THE ASSESSEE AS WELL AS LEARNED DR AND CAREFULLY PERUSED THE APPLICATION AS WELL AS AFFIDAVITS FILED BY THE ASSESSEE FOR CONDONATION OF DELAY. THE LEARNED AR OF THE ASSES SEE HAS SUBMITTED THAT AFTER RECEIVING THE IMPUGNED ORDER OF THE CIT(A) , THE ASSESSEE HANDED OVER THE RELEVANT PAPERS TO ITS CHARTERED ACCOUNTANT M/S KAILASH CHAND JAIN & CO. FOR PREPARATION OF APPEAL. AFTER THE LAPSE OF CONSIDERABLE TIME WHEN THE ASSESSEE ENQUIRED FROM THE OFFICE OF CHARTERED ACCOUNTANT, IT WAS FOUND THAT THE APPEAL WAS NOT PREPARED AND THEREAFTER THE ASSESSEE TOOK THE STEPS TO FILE THE APPEAL IMMEDIATELY WITHOUT ANY FURTHER DELAY. THE ASSESSEE IN THIS RESPECT HAS FILED AN AFFIDAVIT OF ONE MS. MALATHY M. PILLAI, THE CONCERN PERSON HANDLING THE CASE OF THE ASSESSEE IN THE OFFICE OF THE CHARTERED ACCOUNTANT, M/S KAILASH CHAND JAIN & CO. IT HAS BEEN STATED THAT DUE TO SOME INADVERTENT OVERSIGHT, SHE FAILED TO MAKE AN ENTRY IN THE APPEAL REGIST ER MAINTAINED IN THE OFFICE AND, THEREFORE, THE APPEAL COULD NOT BE FILED WITHIN THE PERIOD OF LIMITATION. THE ASSESSEE HAS ALSO CORROBORATED THE REASONS EXPLAINING THE DELAY BY FILING THE AFFIDAVIT OF ITS DIRECTOR, NAMELY, VIJAY SINGH BAID. 2.2 ON THE O THER HAND, LEARNED DR HAS VEHEMENTLY OBJECTED TO THE CONDONATION OF DELAY. 2. 3 HAVING CONSIDERED THE RIVAL SUBMISSIONS AND FACTS OF THE CASE, WE FOUND THAT THE ASSESSEE HAS EXPLAINED A REASONABLE CAUSE FOR NOT FILING THE APPEAL WITHIN THE PERIOD OF LIMITA TION AS THERE WAS AN ITA NO. 1867 /1 2 3 INADVERTENT MISTAKE AT THE OFFICE OF THE CHARTERED ACCOUNTANT OF THE ASSESSEE AS EXPLAINED IN THE AFFIDAVIT. IT IS ALWAYS A QUESTION AS TO WHETHER THE EXPLANATION AND REASON FOR DELAY WAS BONAFIDE OR WAS MERELY A DEVICE TO COVER AN ULT ERIOR PURPOSE OR AN UNDERHAND ATT EMPT TO SAVE THE LIMITATION. WHEN IT IS BROUGHT ON RECORD THAT THE PARTY HAS NOT ACTED IN MALAFIDE BUT THE REASONS EXPLAINED ARE FACTUALLY CORRECT, THEN THE COURT SHOULD BE LIBERAL IN CONSTRUING THE SUFFICIENT CAUSE AND SHO ULD LEAN IN FAVOUR OF SUCH PARTY. WHENEVER SUBSTANTIAL JUSTICE AND TECHNICAL CONSIDERATION ARE OPPOSED TO EACH OTHER , CASE OF SUBSTANTIAL JUSTICE HAS TO BE PREFERRED AND JUSTICE ORIENTED APPROACH HAS TO BE TAKEN WHILE DECIDING THE MATTER ON CODONATION OF D ELAY. HOWEVER, THIS DOES NOT MEAN THAT A LITIGANT GETS FREE LICENCE TO APPROACH THE COURT AT ITS WILL. IN THE CASE IN HAND, WE FIND THAT THE REASONS EXPLAINED BY THE ASSESSEE ARE NOT MALAFIDE OR A DEVICE TO COVER THE ULTERIOR PURPOSE AS THERE IS NOTHING ON RECORD TO INFER THAT BY FILING A BELATED APPEAL THE ASSESSEE COULD HAVE ACHIEVED AN ULTERIOR PURPOSE. ACCORDINGLY, WE ARE SATISFIED WITH THE REASONS EXPLAINED BY THE ASSESSEE THAT THE ASSESSEE WAS HAVING SUFFICIENT CAUSE FOR NOT FILING THE APPEAL WITHIN T HE PERIOD OF LIMITATION. HENCE, WE CONDONE THE DELAY OF 183 DAYS IN FILING THE PRESENT APPEAL. HEARD ON MERIT OF THE APPEAL . 3 . THE ASSESSEE IN ITS APPEAL HAS RAISED THE FOLLOWING GROUNDS : - ' 1. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF ITA NO. 1867 /1 2 4 RS. 95,00,000/ - MADE BY THE LD. A.O. ON ACCOUNT OF ALLEGED UNEXPLAINED CASH CREDIT BY INVOKING THE PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT, 1961. 4. THE CONCISE FACTS GIVING RISE TO THE APP EAL OF THE ASSESSEE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF EMBROIDERY LACES. DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTED THAT IN THE BALANCE SHEET AS ON 31 - 3 - 2004, THE ASSESSEE HAS RECEIVED SHARE CAPITAL TO THE TUNE OF RS. 51,50,000/ - AND RS. 1,21,50,000/ - AS SHARE PREMIUM. THE ASSESSEE WAS ASKED BY THE AO TO PRODUCE THE COMPLETE NAME, FULL ADDRESS OF THE SHAREHOLDERS, THE AMOUNT RECEIVED FROM THEM, PAN AND INCOME TAX PARTICULARS OF THE SHAREHOLDERS AS WELL AS MODE OF SHARE CAPITAL INCLUDING PREMIUM. IN RESPONSE, THE ASSESSEE FILED THE DETAILS VIDE LETTER DATED 13 - 11 - 2006. FROM THE DETAILS FURNISHED BY THE ASSESSEE THE AO NOTED THAT THE MAJORITY OF THE SHAREHOLDERS WERE FROM KOLKATA. ACCORDINGLY, A LE TTER DATED 15 - 11 - 2006 WAS ISSUED TO THE ADIT(INVESTIGATION UNIT) KOLKATA TO CONDUCT AN ENQUIRY WITH REGARD TO THE IDENTITY OF THE CREDITORS, GENUINENESS OF THE TRANSACTIONS AND CREDITWORTHINESS OF THE CREDITORS. THE ADIT(INV.) KOLKATA SUBMITTED ENQUIRY REP ORT, WHEREIN IT HAS BEEN STATED THAT FOR VERIFICATION OF THE CREDITORS, SUMMONS UNDER SECTION 1 31 WERE ISSUED TO THE PARTIES. SINCE THERE WAS NO COMPLIANCE OF SUMMONS AND THE WHEREABOUTS OF THE PARTIES COULD NOT BE LOCATED AS FAR AS FIVE CREDITORS AND, THE REFORE, IT WAS OBSERVED THAT THE EXISTENCE OF THE PARTIES APPEARS TO BE DOUBTFUL. IN CASE OF TWO CREDITORS THE SUMMONS WERE DULY SERVED AND IN RESPONSE THE REPRESENTATIVE OF THE CREDITORS ITA NO. 1867 /1 2 5 WERE APPEARED BEFORE THE ADIT (INVESTIGATION), KOLKATA, HOWEVER, IT WAS OBSERVED IN THE REPORT THAT THESE COMPANIES WERE ONLY PAPER COMPANY AND USED BY THE ASSESSEE TO BRING ITS UNACCOUNTED MONEY BACK IN THE FORM OF SHARE CAPITAL. BASED ON THE REPORT OF THE ADIT(INVESTIGATION) KOLKATA, THE AO MADE AN ADDITION OF RS. 95 LAKH S AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. THIS ADDITION WAS MADE IN RESPECT OF SHARE APPLICATION MONEY WITH PREMIUM CLAIMED TO HAVE BEEN RECEIVED FROM 7 PARTIES , OUT OF TOTAL 13 PARTIES. 5. ON APPEAL, THE CIT(A) HAS CONFIRMED THE ADDITION MADE BY THE AO. 6 . BEFORE US, LEARNED AR OF THE ASSESSEE HAS SUBMITTED THAT THESE 7 PARTIES ARE NOT BOGUS BUT THE COMPANIES ARE DULY IDENTIFIED AND ARE IN EXISTENCE BEYOND ANY DOUBT. THE AUTHORITIES BELOW HAVE RELIED UPON THE GENERAL OBSERVATION MADE BY THE ADIT(INV.) KOLKATA WITHOUT GIVING ANY OPPORTUNITY TO THE ASSESSEE. HE HAS FURTHER SUBMITTED THAT THE SAID REPORT CANNOT BE USED AGAINST THE ASSESSEE UNLESS SUPPORTED BY A CONCLUSIVE EVIDENCE. LEARNED AR HAS HEAVILY RELIED UPON THE DECISION OF THE HON B LE APEX COURT IN THE CASE OF CIT VS. LOVELY EXPORTS (P ) LTD., REPORTED IN 216 CTR 195 AND SUBMITTED THAT THE HONBLE APEX COURT HAD HELD THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAMES ARE GIVEN TO THE AO THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENT IN ACCORDANCE WITH LAW BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY. HE HAS RELIED UPON ITA NO. 1867 /1 2 6 THE DECISION OF THE HON BLE PUNJAB & HARYANA HI GH COURT IN THE CASE OF DCIT VS. G.P. INTERNATIONAL LIMITED, REPORTED IN (2010) 325 ITR 25(P&H) AND SUBMITTED THAT THE HONBLE HIGH COURT HAS HELD THAT MERELY BECAUSE SOME OF THE PERSONS DID NOT RESPONSE TO THE NOTICE ISSUED BY THE AO UNDER SECTION 133(6) OF THE ACT, IT COULD NOT BE TAKEN THAT TRANSACTION IS NOT GENUINE. THEREFORE, THE AMOUNT COULD NOT BE ADDED AS UNEXPLAINED INCOME IN THE HANDS OF THE ASSESSEE. LEARNED AR HAS REFERRED TO THE DETAILS OF THE SHARE APPLICATION RECEIVED FROM THE 7 PARTIES AND SUBMITTED THAT THE ASSESSEE HAS FURNISHED CONFIRMATION FROM ALL THESE PARTIES, BALANCE SHEET AND PROFIT & LOSS ACCOUNT, RETURN OF INCOME, SHARE APPLICATION FORM, ALLOTMENT LETTER, SHARE CERTIFICATE AND COPIES OF BANK STATEMENT OF THESE PARTIES, ETC., TO SH OW THE GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE CREDITORS. LEARNED AR HAS FORCEFULLY CONTENDED THAT BY PRODUCING ALL RELEVANT RECORDS, THE ASSESSEE HAS DISCHARGED ITS ONUS ON IDENTITY OF THE CREDITOR, GENUINENESS OF THE TRANSACTION AND CR EDITWORTHINESS OF THE CREDITORS. LEARNED AR FURTHER SUBMITTED THAT THE SUMMONS ISSUED TO THESE SEVEN PARTIES WERE DULLY SERVED, HOWEVER, ONLY TWO PARTIES HAVE RESPONDED TO THE NOTICE ISSUED BY THE ADIT(INVESTIGATION), KOLKATA AND REMAINING 5 DID NOT RESPON SE TO THE NOTICE. MERELY BECAUSE NO RESPONSE WAS RECEIVED FROM THE CREDITORS, IT CANNOT BE SAID THAT THE TRANSACTION IS NOT GENUINE. HE HAS RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF C IT VS . ORBITAL COMMUNICATION (P) LTD. , REPO RTED IN (2010) 327 ITR 560 AND ITA NO. 1867 /1 2 7 SUBMITTED THAT THE HONBLE HIGH COURT HAS HELD THAT SUBSTANTIAL EVIDENCE WAS PRODUCED BY THE ASSESSEE TO PROVE THE CREDITWORTHINESS OF THE CREDITORS AND GENUINENESS OF THE SHARE APPLICATION. MERE FAILURE TO PRODUCE THE CREDIT OR IS NOT MATERIAL, HENCE, THE MONEY CANNOT BE REGARDED AS AN UNDISCLOSED INCOME. LEARNED AR HAS CONTENDED THAT THE ASSESSEE HAS PRODUCED ALL THE RELEVANT EVIDENCE TO ESTABLISH THE IDENTITY AND CREDITWORTHINESS OF THE CREDITORS AS WELL AS THE GENUINENESS O F THE TRANSACTION. TO DISCHARGE ITS ONUS, THE ASSESSEE HAS PRODUCED PAN OF ALL THE CREDITORS ALONG WITH CONFIRMATION, BANK STATEMENT SHOWING PAYMENT OF SHARE APPLICATION MONEY AND, THEREFORE, THE ASSESSEE HAS PROVED BEYOND ANY DOUBT THE IDENTITY AND CREDIT WORTHINESS OF THE CREDITORS. SINCE THE ASSESSEE HAS PRODUCED ALL THE RELEVANT RECORD REGARDING ISSUES AND ALLOTMENT OF SHARES TO THESE PARTIES BY FILING THE SHARE APPLICATION FORM, ALLOTMENT LETTER, SHARE CERTIFICATE, THEREFORE, THE TRANSACTION CANNOT BE R EGARDED AS NON - GENUINE. LEARNED AR HAS FURTHER SUBMITTED THAT FROM THE BOOKS OF ACCOUNT AND MAINLY THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT, IT WAS BROUGHT TO THE NOTICE OF THE AUTHORITIES BELOW THAT THESE CREDITORS WERE HAVING SUFFICIENT FUNDS FOR IN VESTING IN THE SHARES OF THE ASSESSEE. LEARNED AR HAS REFERRED TO THE ASSESSEES SUBMISSION AND EXPLANATION BEFORE THE CIT(A) AND SUBMITTED THAT FOR EACH AND EVERY 7 CREDITORS, THE ASSESSEE HAS FILED ALL THE DETAILS TO PROVE ITS CLAIM AS GENUINE. THE AUTHO RITIES BELOW HEAVILY RELIED UPON THE REPORT OF THE ADIT (INVESTIGATION) KOLKATA , WHICH HAS DOUBTED THE EXISTENCE OF THESE ITA NO. 1867 /1 2 8 COMPANIES, WHICH IS CONTRARY TO THE EVIDENCE PRODUCED BY THE ASSESSEE. HE HAS RELIED UPON THE DECISION OF THE HO NBLE MADHYA PRADESH HI GH COURT IN THE CASE OF CIT VS. STL EXTRUSION (P) LTD., REPORTED IN (2011) 333 ITR 269 (MPHC) AND SUBMITTED THAT WHEN THE ASSESSEE HAS PROVIDED TO THE ASSESSING AUTHORITY THE NAME, ADDRESS, DATE OF FILING OF THE SHARE APPLICATION AND NUMBER OF SHARES APPLI ED BY EACH SHAREHOLDER, ADDITION UNDER SECTION 68 OF THE ACT, CANNOT BE MADE. HE HAS ALSO RELIED UPON THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF HINDUSTAN INKS & RESINS LTD. VS. DCIT, REPORTED IN (2011) 60 DTR 18 (GUJ. HC) AND SUBMITTED THA T IN THE AFORESAID CASE THE HON BLE HIGH COURT HAS HELD THAT THE ASSESSEE HAVING ESTABLISHED IDENTITY OF SHAREHOLDERS, ADDITION UNDER SECTION 68 COULD NOT BE MADE ON THE GROUND THAT THE ASSESSEE FAILED TO EXPLAIN THE SOURCE OF CREDITOR. THE DEPARTMENT WAS FREE TO PROCEED AGAINST SHAREHOLDERS IN ACCORDANCE WITH LAW. LEARNED AR HAS SUBMITTED THAT THE ASSESSEE HAS PROVED THE SOURCE OF INVESTMENT BY PRODUCING THE CONFIRMATION OF THE PARTIES, THEIR INCOME TAX RETURNS AND BANK DETAILS. ACCORDINGLY, THE ASSESSEE H AS DISCHARGED ITS ONUS OF PROVING THE GENUINENESS OF THE TRANSACTION, CREDITWORTHINESS AND IDENTITY OF THE CREDITORS. HE HAS ALSO RELIED UPON THE FOLLOWING DECISIONS: - I) CIT VS. GANGESHWARI METAL (P) LTD., REPORTED IN (2013) 30 TAXMANN.COM 328(DELHI) ; II) EARTHMETAL ELECTRICAL PVT. LTD., DECIDED IN CIVIL APPEAL NO.618 OF 2010 DTD. 30/07/2010 BY THE HONBLE SUPREME COURT. 7 . ON THE OTHER HAND, LEARNED DR RELIED UPON THE IMPUGNED ORDER OF THE CIT(A) AND SUBMITTED THAT THESE PARTIES ARE HAVING SAME ADDRESS, ITA NO. 1867 /1 2 9 WHICH SHOWS THAT COMPANIES WERE NOT IN EXISTENCE IN REAL SENSE BUT ONLY ON PAPERS. HE HAS FURTHER SUBMITTED THAT ONUS IS ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTION. THE INVESTIGATION CARRIED OUT BY THE ADIT(INVESTIGATION) KOLKATA, GOES TO SHOW THAT ALL THESE 7 CREDITORS ARE USED BY THE ASSESSEE FOR BRINGING ITS UNACCOUNTED MONEY IN THE BOOKS. 8 . IN REBUTTAL, LEARNED AR HAS SUBMITTED THAT THE DECISION RELIED UPON BY THE CIT(A) IN THE CASE OF M/S EARTHMETAL ELECTRICAL PVT. LTD. HAS BEEN REV ERSED BY THE HON BLE SUPREME COURT. HE HAS FILED THE COPY OF THE DECISION OF THE HON BLE SUPREME COURT . 9 . WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE SUBMISSIONS ADVANCED AT THE HANDS OF THE LEARNED AR FOR THE ASSESSEE AS WELL AS LEARNED DR FOR TH E DEPARTMENT AND ALSO CONSIDERED THE RELEVANT MATERIAL PLACED ON RECORD. THE ASSESSEE HAS RECEIVED SHARE CAPITAL AND SHARE PREMIUM FROM 13 PARTIES, OUT OF WHICH 7 PARTIES BELONG TO KOLKATA. THE AO HAS DECIDED TO CONDUCT AN ENQUIRY IN RESPECT OF THE 7 PARTI ES BELONG TO KOLKATA BY WRITING A LETTER DATED 15 - 11 - 2006 TO ADIT(INV.) KOLKATA. THE DETAILS OF 7 PARTIES FROM KOLKATA ARE AS UNDER : - SL. NO. NAME OF THE SHAREHOLDERS SHARE CAPITAL (RS.) SHARE PREMIUM (RS.) 1. M/S CENTURY COMMO TRADE PVT. LTD., 174, RABIN DRA SARANI, KOLKATA - 7 150000 1350000 2. M/S FEDDER TIE UP PVT. LTD., 174 RABINDRA SARANI, KOLKATA - 7 100000 900000 3. M/S NAHAR VINIYOG PVT. LTD., 1, OLD HOUSE CORNER, 2 ND FLOOR, KOLKATA - 7 150000 1350000 4. M/S PRIME CAPITAL MARKET LTD. P27, PRINCESS STR EET, 3 RD FLOOR, KOKATA - 72 100000 900000 5. M/S SIGMA SUPPLIERS PVT. LTD. 27, BRABOURNE ROAD, KOLKATA - 1 150000 1350000 ITA NO. 1867 /1 2 10 6. M/S SUNSHINE SALES PVT. LTD., 27, BRABOURNE ROAD, KOLKATA - 1 100000 900000 7. M/S UNIVERSAL MULTIMEDIA LTD. 27, BRABOURNE ROAD, KOLKA TA - 1 150000 1350000 THE ADIT(INV.) KOLKATA SENT ITS REPORT VIDE LETTER DATED 20 - 12 - 2006, WHICH HAS BEEN REPRODUCED BY THE AO. THE AO BY RELYING UPON THE REPORT OF THE ADIT(INV.) KOLKATA HAS MADE THE ADDITION OF SHARE CAPITAL AND PREMIUM AMOUNT IN RESPEC T OF THESE SEVEN PARTIES UNDER SECTION 68 OF THE ACT. WE WILL ANALYZE PARTYWISE REPORT AND BASIS OF DISALLOWANCE AS WELL AS THE EVIDENCES/MATERIAL PRODUCED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM AS UNDER : - (I) M/S CENTURY COMMO TRADE PVT. LTD. : THE SUMM ONS UNDER SECTION 131 WERE ISSUED BUT THERE WAS NO RESPONSE FROM THE SAID PARTY AS PER THE REPORT OF THE ADIT(INV.) KOLKATA. EVEN THE INSPECTOR WAS UNABLE TO LOCATE THE PARTY. ACCORDINGLY, IT WAS OBSERVED IN THE REPORT THAT THE EXISTENCE OF THE PARTY APPEA RS TO BE DOUBTFUL. ( II) M/S FEDDER TIE UP PVT. LTD. : THE REPORT OF THE ADIT (INV.) KOLKATA IS IDENTICAL IN VERBATIM AS IN THE CASE OF M/S CENTURY COMO TRADE PVT. LTD. ACCORDINGLY, THE EXISTENCE OF THE PARTY WAS DOUBTED. (III) M/S NAHAR VINIYOG PVT. LTD. , (IV) M/S SUNSHINE SALES PVT. LTD. & (V) M/S SIGMA SUPPLIERS PVT. LTD. : THE REPORT OF THE ADIT (INV.) IN RESPECT OF THESE THREE PARTIES ALSO SIMILAR TO ITA NO. 1867 /1 2 11 THAT OF TWO OTHER AS NOTED ABOVE AND THE EXISTENCE OF THESE PARTIES WERE ALSO DOUBTED BY THE ADIT(INV. ) IN ITS REPORT. IT IS PERTINENT TO NOTE THAT THOUGH THIS REPORT IS A GOOD EVIDENCE WITH THE AO TO DOUBT THE EXISTENCE OF THE PARTIES, HOWEVER, WHEN THE ASSESSEE HAS PRODUCED ALL THE RELEVANT EVIDENCE AND MATERIAL, WHICH IS SUFFICIENT TO PROVE THE EXISTEN CE, IDENTITY, CREDITWORTHINESS OF THE PARTIES THEN IT WAS THE DUTY AND BURDEN ON THE AO TO DISPROVE THE EVIDENCE PRODUCED BY THE ASSESSEE. WE FIND FROM THE RECORD THAT IN ALL THESE FIVE PARTIES, THE ASSESSEE HAS PRODUCED PAN, ACKNOWLEDGEMENT OF INCOME TAX RETURN FILED BY THESE PARTIES, CONFIRMATION LETTER FROM THESE PARTIES, WHEREBY IT HAS BEEN CONFIRMED THAT THEY HAVE APPLIED FOR SHARES OF THE ASSESSEE COMPANY AND THE RESPECTIVE PAYMENTS WERE MADE TOWARDS SHARE APPLICATION. THE ASSESSEE HAS ALSO FILED THE BANK ACCOUNT OF THESE PARTIES TO SHOW THE AVAILABILITY OF FUND AND THE PAYMENT FROM THE BANK ACCOUNT. APART FROM THIS, THE ASSESSEE HAS ALSO PRODUCED THE BOOK OF ACCOUNTS OF THESE PARTIES TO SHOW THE FINANCIAL SOUNDNESS OF THE PARTIES AND SUFFICIENT AMOUNT OF RESERVE AND SURPLUS AS WELL AS CAPITAL OF THESE COMPANIES. THUS, IT IS CLEAR FROM THE EVIDENCE PRODUCED BY THE ASSESSEE THAT THE PARTIES WERE VERY MUCH IN EXISTENCE AS THESE PARTIES WERE ASSESSED TO INCOME TAX. THE ASSESSEE HAS PRODUCED RESPECTIVE PAN AND INCOME TAX RETURN ALONG WITH OTHER DETAILS. IT IS MANIFEST FROM THE EVIDENCE PRODUCED BY THE ASSESSEE THAT EXISTENCE/IDENTITY AND CREDITWORTHINESS OF THE PARTIES CANNOT BE DOUBTED . T HUS, IT APPEARS THAT THE REPORT OF THE ADIT(INV.) KOLKATA IN ITA NO. 1867 /1 2 12 RESPECT O F THESE FIVE PARTIES, IS CONTRARY TO THE FACT PROVED BY THE ASSESSEE WITH TANGIBLE AND MATERIAL EVIDENCE BROUGHT ON RECORD. ONCE THE ASSESSEE HAS DISCHARGED ITS BURDEN BY PRODUCING THE RELEVANT EVIDENCE, THEN THE ONUS IS SHIFTED ON THE AO TO DISPROVE THE E VIDENCE PRODUCED BY THE ASSESSEE. IN THE CASE IN H AND, THE AO HAS NOT PROVED THAT THE EVIDENCE PRODUCED BY THE ASSESSEE IS EITHER BOGUS OR FALSE. THE ADDITION HAS BEEN MADE BY THE AO ONLY ON THE BASIS OF DOUBT REGARDING THE EXISTENCE OF THE PARTIES, WHICH IN OUR VIEW, IS ABSOLUTELY CONTRARY TO THE FACTS BROUGHT ON RECORD BY THE ASSESSEE AND IT GOES UNCONTROVERTED AS THE AO HAS NOT BROUGHT ANY CONTRARY RECORD OR FACTS. FURTHER, THE ASSESSEE HAS ALSO PRODUCED ALL THE RELEVANT EVIDENCES AND RECORD OF ALLOTMENT OF SHARES TO THESE PARTIES, SUCH AS THE SHARE APPLICATION FORM, ALLOTMENT LETTER AND THE SHARE CERTIFICATE ISSUED BY THE ASSESSEE TO THESE PARTIES. THE SIMILAR ALLOTMENT MADE BY THE ASSESSEE TO OTHER SIX PARTIES HAS BEEN ACCEPTED BY THE DEPARTMENT AND THE QUESTION HAS BEEN RAISED ONLY AGAINST THESE 7 PARTIES, WHICH ARE FROM KOLKATA. 10 . NOW, WE TURN TO ANALYSE THE FACTS IN RESPECT OF TWO OTHER PARTIES, NAMELY, M/S PRIME CAPITAL MARKET LTD. AND M/S UNIVERSAL MULTIMEDIA LTD. . IN ITS REPORT, THE ADIT(INV.) KOLKATA HAS MENTIONED THAT IN RESPONSE TO NOTICE THE REPRESENTATIVE OF THESE PARTIES APPEARED. COPY OF BANK STATEMENT, COPY OF ALLOTMENT OF SHARES WERE PRODUCED BEFORE THE ADIT, HOWEVER, THE ADIT(INV.) FOUND FROM THE BANK STATEMENT THAT BEFORE ISSUING THE CHEQUES OF THE SHARE APPLICATION MONEY, SUBSTANTIAL ITA NO. 1867 /1 2 13 AMOUNTS WERE DEPOSITED IN RESPECTIVE OF BANK ACCOUNTS THROUGH CHEQUES AND ONLY ON THE BASIS OF THE FACT THAT THE SUBSTANTIAL AMOUNTS WERE DEPOSITED THROUGH CHEQUES PRIOR TO ISSUING THE SHARE APPLICATION M ONEY, THE ADIT(INV.) HAS OBSERVED THAT THE ASSESSEE HAS UTILIZED THESE PARTIES TO BRING ITS UNACCOUNTED MONEY BACK IN THE FORM OF SHARE CAPITAL IN THEIR BOOKS OF ACCOUNTS. IT APPEARS THAT THE INVESTIGATION REPORT OF THE ADIT(INV.) IS INCONCLUSIVE AND IT IS ONLY AN INFERENCE HAS BEEN MADE ON THE BASIS OF THE FACT THAT A SUBSTANTIAL AMOUNT HAS BEEN DEPOSITED IN RESPECTIVE BANK ACCOUNT THROUGH CHEQUES BEFORE THE SHARE APPLICATION MONEY WAS PAID TO THE ASSESSEE. THE OBSERVATION OF THE ADIT(INV.), IN OUR VIEW, I S PURELY BASED ON AN IMAGINATION AND ASSUMPTION AND NOT BASED ON THE CORRECT AND REAL FACTS BECAUSE THERE IS NO OTHER ENQUIRY CONDUCTED BY THE ADIT(INV.) KOLKATA TO FIND OUT AS FROM WHERE THESE CHEQUES WERE DEPOSITED IN THE ACCOUNTS OF THESE TWO PARTIES. M ERELY BECAUSE THE CHEQUES WERE DEPOSITED IN THE RESPECTIVE ACCOUNTS WOULD NOT LEAD TO THE CONCLUSION THAT THESE CHEQUES MONEY WAS THE ASSESSEES OWN MONEY ROUTED THROUGH THESE PARTIES UNTIL AND UNLESS IT IS FOUND IN THE ENQUIRY AND SUBSTANTIATED WITH THE F ACTS AND MATERIAL. THIS IS BUT NATURAL THAT WHENEVER A LARGE PAYMENT IS TO BE MADE, FUNDS ARE TO BE ARRANGED AND, THEREFORE, IF AN AMOUNT THROUGH CHEQUE IS DEPOSITED IN THE BANK ACCOUNT BEFORE MAKING THE PAYMENT OF SHARE APPLICATION MONEY, IN ABSENCE OF AN Y FACT, MATERIAL OR FINDING, IT CANNOT BE SAID THAT THE SAID MONEY IS ASSESSEES OWN MONEY. ITA NO. 1867 /1 2 14 11 . WE FURTHER NOTE THAT THE ASSESSEE PRODUCED THE BALANCE SHEET, PROFIT AND LOSS ACCOUNT, INCOME TAX RETURN, PAN AND CONFIRMATION FROM THESE PARTIES, WHICH CLEARL Y DISCHARGE THE ASSESSEE FROM ITS ONUS TO PROVE ITS CLAIM. WHEN THE ASSESSEE HAS BROUGHT ON RECORD THE RELEVANT EVIDENCE INCLUDING THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT AND RETURN OF INCOME OF THESE PARTIES, THEN IN THE ABSENCE OF PROVING CONTRARY BY THE AO THESE MATERIAL EVIDENCE CANNOT BE BRUSHED ASIDE MERELY ON THE BASIS OF SUSPICIOUS. EVEN OTHERWISE, WHEN THE ASSESSEE HAS PRODUCED THE SHARE APPLICATION FORM, ALLOTMENT LETTER, SHARE CERTIFICATE AS WELL AS BANK ACCOUNT, THEN THE GENUINENESS OF THE T RANSACTION CANNOT BE DOUBTED IN THE ABSENCE OF ANY CONTRARY FINDING. THE EVIDENCE PRODUCED BY THE ASSESSEE IS EVEN OTHERWISE CANNOT BE DOUBTED WHEN THE RETURN OF INCOME IS ALREADY BY THE PARTIES ARE ON THE RECORD OF THE DEPARTMENT. THUS, WE FIND THAT THE D ISALLOWANCE OF THE CLAIM OF THE ASSESSEE AND ADDITION MADE BY THE AO UNDER SECTION 68 IS PURELY BASED ON ASSUMPTION, GUESS WORK WITHOUT SUBSTANTIATED BY ANY EVIDENCE OR MATERIAL. THIS IS NOT A CASE OF BOGUS SHAREHOLDERS AS ALL THESE PARTIES ARE THE COMPANY , WHICH ARE IN EXISTENCE AND SUBJECTED TO INCOME TAX AS THE ASSESSEE HAS PRODUCED THE RELEVANT EVIDENCE . T HEREFORE, WHEN THE ASSESSEE HAS PRODUCED ALL THE RELEVANT EVIDENCES, AND IF THE DEPARTMENT HAS DOUBTED THE SOURCE OF THE SHARE APPLICATION MONEY, THEN IT IS FREE TO TAKE NECESSARY ACTION IN RESPECT OF THESE PARTIES. THE H O N BLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS PVT. LTD. (SUPRA) , HAS HELD THAT IF THE SHARE APPLICATION MONEY ITA NO. 1867 /1 2 15 IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHO LDERS WHOSE NAMES ARE GIVEN TO THE AO THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENT IN ACCORDANCE WITH LAW BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY. THERE IS NOTHING ON RECORD TO SHOW THAT THESE TRANSACTIONS OF ALLOTMENT OF SHARE IS A S H AM TRANSACTION, THEN THE DEPARTMENT CANNOT TREAT THE SAID SHARE CAPITAL MONEY AS UNDISCLOSED INCOME OF THE ASSESSEE. 1 2 . IN VIEW OF THE ABOVE DISCUSSION AS WELL AS FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF T HE CONSIDERED OPINION THAT THE ADDITION MADE BY THE AO UNDER SECTION 68 OF THE ACT IS NOT JUSTIFIED AND THE SAME IS HEREBY DELETED. 1 3 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUN CED IN THE OPEN COURT ON 07/02 / 201 4 . /2014 SD/ - ( ) ( RAJENDRA ) SD/ - ( ) ( VIJAY PAL RAO ) / ACCOUNTANT MEMBER / JUDICIA L MEMBER MUMBAI ; DATED : 07/02 /2014 /PKM , PS ITA NO. 1867 /1 2 16 COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) , MUM BAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//