ITO, New Delhi V. M/s. IME International Pvt. Ltd., New Delhi

ITA 1873/DEL/2012

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2805 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 09-12-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 23-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T VASANTHAN
• Keywords: Unexplained cash credit; Income from undisclosed sources; Share purchase agreement; Source of fund; Tangible material; Accommodation entries; Reason to believe; Reassessment proceedings
• Section: 143(3); 147; 68; 148; 139

Judgement Text

ITA NO. 1873/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER I.T.A. NO. 1873/DEL/2012 A.Y. : 2003 - 04 INCOME TAX OFFICER, WARD 11(3), ROOM NO. 374A, CR BUILDING, NEW DELHI VS. IME INTERNATIONAL PVT. LTD., 211, NEW DELHI HOUSE, 27, BARAKHAMBA ROAD, NEW DELHI 110 001 (PAN: AAAC18126Q) (APPELLANT) (RESPONDENT) DEPARTMENT BY : S H. T. VASANTHAN, SR. DR ASSESSEE BY : SH. KAPIL GOEL, ADV. DATE OF HEARING : 09-12-2015 DATE OF ORDER : 08-01-2016 ORDER PER H.S. SIDHU : JM REVENUE HAS FILED THIS APPEAL AGAINST THE IMPUGNE D ORDER DATED 06.2.2012 PASSED BY THE LD. CIT(A)-XIII, NEW DELHI RELEVANT TO ASSESSMENT YEAR 2003-04 ON THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 46,50,000/- MADE UNDER SECTION 68 OF THE I.T. ACT O N ACCOUNT OF UNEXPLAINED CASH CREDITS BEING SHARE APPLICATION MONEY. ITA NO. 1873/DEL/2012 2 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) HAS ERRED WHILE IGNORING THE FINDINGS OF THE AO IN THE ASSESSMENT ORDER WITH RESPECT TO THE IDENTIT Y, CREDITWORTHINESS OF CREDITORS AND GENUINENESS OF TRANSACTIONS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW LD. CIT(A) HAS ERRED IN IGNORING THE DECISION OF HONBL E DELHI HIGH COURT IN THE CASE OF CIT VS. NOVA PROMOTERS AN D FINLEASE PVT. LTD. IN ITA NO. 342/2011. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND A NY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARIN G. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAS FILED ITS RETURN ON 28.10.2003 DECLARING A LOSS OF RS. 49,95 3/- AND RETURN WAS PROCESSED U/S. 143(1) OF THE I.T. ACT. THEREAFTER, INFORMATION WAS RECEIVED FROM DIRECTOR OF INVESTIGATION, NEW DELHI THAT ASSESSEE HAS RECEIVED ACCOMMODATION ENTRIES OF RS. 46,50,000/- FROM VARIOUS PARTIES. THE AO REOPENED THE CASE OF THE ASSESSEE U/S. 147 OF THE I.T. ACT AFTER TAKING PRIOR APPROVAL OF THE ADDL. CIT VI DE HIS LETTER DATED 16.3.2010 BY ISSUING A NOTICE U/S. 148 OF THE I.T. ACT ON 17.3.2010. IN RESPONSE TO SAID NOTICE ASSESSEE VIDE ITS LETTER DATED 11.6.2010 SUBMITTED THAT RETURN FILED U/S. 139 OF THE I.T. AC T MAY BE TREATED AS FILED IN RESPONSE U/S. 148 OF THE I.T. ACT. IN THE ASSESSMENT ORDER THE AO TREATED THE SAID SHARE APPLICATION MONEY AS ACCO MMODATION ENTRY AND THE AMOUNT OF RS. 46,50,000/- WAS TREATED AS U NEXPLAINED INCOME OF THE ASSESSEE AND THE SAME WAS ADDED U/S. 68 OF THE I.T. ACT VIDE ORDER DATED 29.12.2010 PASSED U/S. 143(3) R.W. S. 147 OF THE I.T. ACT, 1961. 3. AGAINST THE SAID ORDER OF THE LD. AO, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 06.2. 2012 HAS PARTLY ITA NO. 1873/DEL/2012 3 ALLOWED THE APPEAL OF THE ASSESSEE THEREBY DELETING THE ADDITION IN DISPUTE AND UPHOLDING THE REOPENING IN THE CASE OF ASSESSEE. 4. AGGRIEVED WITH THE AFORESAID ORDER OF THE LD . CIT(A), REVENUE IS IN APPEAL BEFORE US THE TRIBUNAL. 5. LD. DR RELIED UPON THE ORDER OF THE AO AND REITE RATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL. HE STA TED THAT THE CASE WAS SELECTED FOR SCRUTINY U/S. 148 ON THE BASIS OF INFORMATION RECEIVED FROM DIT(INVESTIGATION) THAT THE ASSESSEE COMPANY HAS PROVIDED / RECEIVED ACCOMMODATION ENTRIES TO/FROM O THER PARTIES AMOUNTING TO RS. 46,50,000/-. HE FURTHER STATED TH AT MODUS OPERANDI INVOLVED IN BOGUS ACCOMMODATION TRANSACTIONS IS THA T CASH GENERATED OUT OF UNDISCLOSED SOURCES OF INCOME IS GIVEN TO TH E ENTRY OPERATOR WHO IN TURN ISSUES CHEQUES WHICH ARE GIVEN THE COLO UR OF SHARE APPLICATION MONEY / SHARE CAPITAL/ UNSECURED LOANS ETC. IN SUPPORT OF HIS CONTENTION, HE FILED THE COPIES OF THE FOLLO WING ORDERS OF THE VARIOUS COURTS AND STATED THAT THE PRESENT CASE IS SQUARELY COVERED BY THAT DECISIONS AND THEREFORE, THE APPEAL OF THE REV ENUE SHOULD BE ALLOWED. - HONBLE DELHI HIGH COURT JUDGMENT DATED 17.1.200 0 REPORTED IN 2000 IV AD DELHI 145/AIR 2000 DELHI 208 IN THE CASE OF MTNL V TELECOM REGULATORY AUTHORITY OF INDIA. - HONBLE SUPREME COURT OF INDIA JUDGMENT DATED 11.7.2008 IN CIVIL APPEAL NOS. 4327-29 OF 2008 (ARISING OUT OF SLP (C) NOS. 17346-47 OF 2005) IN T HE CASE OF M/S DEEPAK AGRO FOODS VS. STATE OF RAJASTHAN & ORS. ITA NO. 1873/DEL/2012 4 - HONBLE DELHI HIGH COURT DECISION DATED 25.8.201 4 IN ITA NO. 320/2012 IN THE CASE OF CIT VS. M/S NAVODAYA CASTLES PVT. LTD. - HONBLE SUPREME COURT OF INDIA JUDGMENT DATED 16.1.2015 IN SLP(C) NO. 374 OF 2015 IN THE CASE OF NAVODAYA CASTLE (P) LTD. VS. CIT [IN FAVOUR OF REVENUE) - HONBLE HIGH COURT OF DELHI JUDGMENT DATED 11.3.2015 IN ITA NO. 525 OF 2014 IN THE CASE OF CIT VS JANSAMPARK ADVERTISING & MARKETING (P) LTD. 6. ON THE CONTRARY, LD. COUNSEL OF THE ASSESSEE MO VED AN APPLICATION UNDER RULE 27 OF THE ITAT RULES, 1963 AND STATED THAT THE ASSESSEE CAN SUPPORT THE ORDER OF THE LD. CIT(A ), THOUGH IT MAY NOT HAVE APPEALED, AGAINST ON ANY OF THE GROUNDS DE CIDED AGAINST THE ASSESSEE. HE STATED THAT LD. CIT(A) HAS DECIDED TH E LEGAL ISSUE AGAINST THE ASSESSEE AND DELETED THE ADDITION MADE BY THE AO. BUT ASSESSEE HAS NOT FILED THE APPEAL OR CROSS OBJECTIO N AGAINST THE IMPUGNED ORDER PASSED BY THE LD. CIT(A), BUT NOW AS SESSEE IS INVOKING RULE 27 OF THE ITAT RULES, 1963 AND RAISIN G THE LEGAL ISSUE BY CHALLENGING THE ACTION OF THE AO FOR ISSUING THE NO TICE U/S. 148 OF THE I.T. ACT. IN SUPPORT OF HIS CONTENTION RELATING T O INVOKING OF RULE 27 IS CONCERNED, HE REFERRED THE DECISION OF ITAT, DELHI BENCHES I:2, NEW DELHI PASSED IN ITA NO. 1313/DEL/2015 (AY 2011-12) ON 2.12.2015 IN THE CASE OF SIS LIVE VS. ACIT WHEREIN, THE SIMILAR ISSUE WAS DEALT WITH AND REQUEST OF THE DEPARTMENT OF INVOKING THE RULE 27 WAS ACCEPTED. AS REGARDS THE LEGAL ISSUE RELATING T O REOPENING IS CONCERNED, HE STATED THAT THIS ISSUE IS ALSO SQUARE LY COVERED BY THE VARIOUS DECISIONS OF THE HONBLE JURISDICTIONAL HIG H COURT WHICH INCLUDES PR. CIT VS. G&G PHARMA INDIA LTD. IN ITA N O. 545/2015 ITA NO. 1873/DEL/2012 5 DATED 8.102.2015 AND SIGNATURES HOTELS (P) LTD. VS. ITO & ANR. 338 ITR 51 (DEL.). LD. COUNSEL OF THE ASSESSEE ALSO FI LED THE WRITTEN SUBMISSIONS TO SUPPORT HIS ARGUMENT ON THE ISSUE OF RULE 27 OF THE ITAT RULES AS WELL AS ON MERITS. ACCORDINGLY, HE R EQUESTED THAT THE APPEAL OF THE REVENUE MAY BE DISMISSED. 6.1 ON THE CONTRARY, LD. DR OPPOSED THE APPLICATION MADE UNDER RULE 27 OF THE ITAT RULES, 1963 AS WELL AS THE ARGU MENTS ADVANCED BY THE LD. AR ON MERITS ALSO. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS AVAILABLE WITH US ESPECIALLY THE RULE 27 OF THE ITA T RULES, 1963 AND THE IMPUGNED ORDER ALONGWITH THE WRITTEN SUBMISSION S FILED BY THE ASSESSEE ALONGWITH CASE LAWS CITED BY BOTH THE PART IES, WE ARE OF THE VIEW THAT FIRST WE HAVE TO DEAL WITH THE APPLICABIL ITY OF RULE 27 OF THE I.T.A.T. RULES, 1963 RAISED BY THE ASSESSEE. BEFORE DECIDING THE ISSUE IN DISPUTE, WE CAN GAINFULLY REFER HERE THE PROVISI ONS OF RULE 27 OF THE ITAT RULES, 1963 WHICH READS AS UNDER:- THE RESPONDENT, THOUGH HE MAY NOT HAVE APPEALED, MAY SUPPORT THE ORDER APPEALED AGAINST ON ANY OF TH E GROUNDS DECIDED AGAINST HIM. 7.1 A BARE READING OF THE RULE 27 MANIFESTS THAT TH E ASSESSEE, WITHOUT HAVING FILED ANY CROSS APPEAL OR CROSS OBJE CTION CAN SUPPORT THE IMPUGNED ORDER ON ANY OF THE GROUNDS DECIDED AG AINST HIM. TWO ESSENTIAL ELEMENTS OF THE RULE 27 COME TO THE FORE ON ITS BARE READING. FIRST IS THE CONDITION PRECEDENT FOR INVOKING THIS RULE AND THE SECOND IS SCOPE OF INTERFERENCE. INSOFAR AS THE FIRST ELE MENT IS CONCERNED, WE FIND THAT THIS RULE HAS BEEN ENSHRINED WITH A VIEW TO DISPENSE JUSTICE TO A ASSESSEE WHO IS OTHERWISE ENTITLED TO ASSAIL T HE CORRECTNESS OF THE IMPUGNED ORDER BY FILING APPEAL OR CROSS OBJECTION, WHETHER OR NOT ITA NO. 1873/DEL/2012 6 ACTUALLY FILED. THIS IS BORNE OUT FROM THE EXPRESSI ON ` THOUGH HE MAY NOT HAVE APPEALED USED IN THE CONTEXT OF A ASSESSEE. THIS AMPLY INDICATES THE EXISTENCE OF A PRE-RIGHT OF THE RESPO NDENT TO APPEAL, WHICH MAY HAVE REMAINED UN-AVAILED. THIS RULE CAN NOT HELP THE RESPONDENT IN A SITUATION WHERE HE IS OTHERWISE DEB ARRED FROM FILING CROSS APPEAL OR CROSS OBJECTION. IF NO RIGHT TO FI LE A CROSS APPEAL OR CROSS OBJECTION STATUTORILY VESTS IN THE RESPONDENT , THEN IT CANNOT BE INFERRED INDIRECTLY BY TAKING RECOURSE TO RULE 27. WE HAVE FOUND OUT SUPRA THAT, IN THE GIVEN FACTS, THE ASSESSEE HAS A RIGHT TO FILE CROSS APPEAL OR CROSS OBJECTION AGAINST THE ADVERSE DIREC TION GIVEN BY THE LD. CIT(A) AS CONTAINED IN HIS APPELLATE ORDER. THUS, THE FIRST ELEMENT, NAMELY, THE CONDITION PRECEDENT FOR INVOKING RULE 2 7, STANDS SATISFIED. 7.2 THE NEXT ELEMENT IS THE SCOPE OF INTERFERENC E BY THE RESPONDENT. THIS IS CONTAINED IN THE LATER PART OF THE RULE, WH ICH PROVIDES THAT THE RESPONDENT `MAY SUPPORT THE ORDER APPEALED AGAINST ON ANY OF THE GROUNDS DECIDED AGAINST HIM . A CURSORY READING OF THIS PART DIVULGES THAT THE RESPONDENT CAN SUPPORT THE IMPUGNED ORDER ON ANY OF THE GROUNDS WHICH WERE DECIDED AGAINST HIM. IT CAN BE U NDERSTOOD WITH THE HELP OF A SIMPLE EXAMPLE IN WHICH THE AO INITIA TES REASSESSMENT AND MAKES AN ADDITION BY DISALLOWING SOME EXPENSES. THE ASSESSEE CHALLENGES THE ASSESSMENT ORDER BEFORE THE CIT(A) O N BOTH THE COUNTS, THAT IS, THE INITIATION OF REASSESSMENT AND ALSO TH E ADDITION MADE BY AO. THE CIT(A) UPHOLDS THE INITIATION OF REASSESSME NT BUT DELETED THE ADDITION ON MERITS. IN AN APPEAL BY THE REVENUE BEF ORE THE TRIBUNAL AGAINST THE DELETION OF ADDITION. THE ASSESSEE UNDE R RULE 27 ARGUED THAT THE INITIATION OF REASSESSMENT MAY BE DECLARED AS INVALID. THIS IS A SITUATION IN WHICH THE ASSESSEE IS SUPPORTING THE IMPUGNED ORDER (THAT ARE, THE DELETI ON OF ADDITIONS MADE BY AO) UNDER RULE 27 ON THE GROUND ITA NO. 1873/DEL/2012 7 DECIDED AGAINST IT (THAT IS, UPHOLDING OF THE INITI ATION OF REASSESSMENT). CRUX OF THE MATTER IS THAT THE ORDER APPEALED AGAIN ST CAN BE CHALLENGED BY THE ASSESSEE ONLY QUA THE ASPECTS OF THE ISSUE DECIDED AGAINST HIM IN DECIDING SUCH OVERALL ISSUE AGAINST THE APPELLANT, WHICH HAS BEEN ASSAILED IN THE APPEAL. IT MEANS THA T THERE IS AN INHERENT LIMITATION ON THE POWER OF THE ASSESSEE IN NOT CHALLENGING THE ORDER APPEALED AGAINST UNDER RULE 27 DE HORS THE GROUND DECIDED AGAINST THE APPELLANT. THIS SHOWS THAT IF A PARTICU LAR INDEPENDENT ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE IN THE ORDER APPEALED BY THE APPELLANT ON ANOTHER INDEPENDENT ISSUE DECIDED AGAINST HIM, THEN THE ASSESSEE UNDER RULE 27 HAS NO POWER TO CHALLENG E THE CORRECTNESS OF SUCH INDEPENDENT ISSUE DECIDED AGAINST HIM BEFOR E THE TRIBUNAL, WHILE ARGUING FOR UPHOLDING THE ORDER ON THE ISSUE DECIDED AGAINST THE APPELLANT. COMING TO THE FACTS OF THE INSTANT CASE, WE FIND THAT THE LD. COUNSEL FOR THE ASSESSEE HAS INVOKED RULE 27 BY CHALLENGING THE DECISION OF THE LD. CIT(A) ON THE LEGAL ISSUE, AS A FORESAID. 7.3 IN VIEW OF THE ABOVE, THE ASSESSEE CAN INVOKE RULE 27 OF THE ITAT RULES WHICH PERMITS THE RESPONDENT TO SUPPORT THE O RDER APPEALED AGAINST ON THE GROUND DECIDED AGAINST IT. WE HAVE NOTICED ABOVE THAT BOTH THE ESSENTIAL ELEMENTS OF RULE 27, NAMELY, THE CONDITION PRECEDENT FOR INVOKING THIS RULE AND THE SCOPE OF I NTERFERENCE STAND FULFILLED IN THE FACTS AND CIRCUMSTANCES OF THE INS TANT CASE. THEREFORE, THE CONTENTION OF THE LD. DR THAT THE LD. AR MAY NO T BE ALLOWED TO ARGUE, THE LEGAL GROUND OF CHALLENGING THE REASSESS MENT, IS DEVOID OF MERITS AND CONSEQUENTLY REJECTED. OUR AFORESAID V IEW IS SUPPORTED BY THE ITAT, I-2, DELHI BENCHES DECISION DATED 02.12.2 015 PASSED IN ITA NO. 1313/DEL/2015 (AY 2011-12) IN THE CASE OF SIS L IVE VS. ACIT, AS REFERRED BY THE LD. COUNSEL OF THE ASSESSEE. ITA NO. 1873/DEL/2012 8 8. NOW LET US EXAMINE THE LEGAL ISSUE RAISED BY THE LD. COUNSEL FOR THE ASSESSEE CHALLENGING THE ISSUANCE OF NOTICE U/S. 148 OF THE I.T. ACT ISSUED BY THE ASSESSING OFFICER. 9. LD. COUNSEL FOR THE ASSESSEE HAS STATED THAT IN THE REASONS RECORDED IN INSTANT CASE THE AO HAS NOT REFERRED T O ANY SPECIFIC ADVERSARIAL MATERIAL (STATEMENT ETC.) AND ALSO HA S NOT DESCRIBED EXACT NATURE OF TRANSACTION IN THE REASONS AND HAS USED S HARE APPLICATION / SHARE CAPITAL / UNSECURED LOANS ETC. IN THE REASON S AND HAS MISERABLY FAILED TO BRING DURING ENTIRE REOPENING PROCEEDING S ANY SPECIFIC TANGIBLE MATERIAL WHICH ESTABLISHED ASSESSEE IS BEN EFICIARY OF ACCOMMODATION ENTRIES, WHICH ALL ARE SUFFICIENT TO NULLIFY THE EXTANT REOPENING ACTION. EVEN THERE IS NO ANNEXURE/ENCLOS URE TO REASONS TO CORROBORATE THE SAME. NO REFERENCE AND DETAILS OF INVESTIGATION WING INFORMATION IS AVAILABLE. THERE IS NO LIVE NEXUS / RATIONAL CONNECTION BETWEEN INVESTIGATION WING INFORMATION AND BELIEF THAT ASSESSEES CERTAIN INCOME HAS ESCAPED ASSESSMENT. MERE BANKIN G TRANSACTIONS WILL NOT JUSTIFY REOPENING ACTION TO SUSPECT THE TR ANSACTIONS. IN ORDER TO SUPPORT HIS CONTENTION, HE REFERRED THE FOLLOWIN G CASE LAWS:- - HONBLE DELHI HIGH COURT ORDER DATED 8.10.2015 PASSED IN ITA NO. 545/2015 IN THE CASE OF PR. CIT V S. G&G PHARMA INDIA LTD., UPHOLDING THE DECISION OF THE ITAT IN ASSESSEES FAVOUR IN ASSESSEES CASE IN ITA NO. 3149/DEL/2013 (AY 2003-04) DT. 9.1.2015. - HONBLE DELHI HIGH COURT DECISION DATED 4.8.2015 IN THE CASE OF GOVIND KRIPA BUILDERS PVT. LTD. IN ITA NO. 486/2015 - ITAT G DELHI BENCH DECISION DATED 10.9.2015 IN ITA NO. 3475/DEL/2009 (AY 2001-02) ITO VS. M/S SHAKTI ITA NO. 1873/DEL/2012 9 SECURITIES PVT. LTD. & 3129/DEL/2010 (AY 2002-03) M/S SHAKTI SECURITIES PVT. LTD. VS. ITO HAS ALLOWE D THE LEGAL ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOW ING THE HONBLE HIGH COURT DECISION DATED 4.8.2015 IN THE CASE OF GOVIND KRIPA BUILDERS PVT LTD. IN ITA N O. 486/2015 (SUPRA). 10. LD. DR RELIED UPON THE ORDER OF THE LD. CIT(A) ON THE LEGAL ISSUE AND STATED THAT AO HAS RIGHTLY REOPENED THE ASSESSM ENT PROCEEDINGS ON THE BASIS OF MATERIAL WHICH AO HAS MENTIONED I N THE ASSESSMENT ORDER AND LD. CIT(A) HAS RIGHTLY UPHELD THE SAME B Y FOLLOWING VARIOUS DECISIONS RENDERED BY THE HONBLE HIGH COURTS. HE R EQUESTED THAT ON LEGAL ISSUES, THE ORDER OF THE LD. CIT(A) MAY BE UP HELD AND ARGUMENTS OF THE LD. AR BE REJECTED. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEVANT RECORDS AVAILABLE WITH US, ESPECIALLY THE ORDERS OF THE REVENUE AUTHORITIES AND THE CASE LAWS CITED BY THE ASSESSEE S COUNSEL ON THE ISSUE IN DISPUTE. FOR THE SAKE OF CLARITY, WE WO ULD LIKE TO DISCUSS THE REASONS FOR ISSUING NOTICE U/S. 148 IN THE CASE OF THE IME INTERNATIONAL PVT. LTD. AY 2003-04 AS UNDER:- INVESTIGATIONS/ ENQUIRIES WERE CONDUCTED BY THE OF FICE OF THE DIRECTORATE OF INCOME TAX (INVESTIGATION), NEW DELHI UPON THE ENTRY PROVIDERS. THE INVESTIGATIONS/ ENQUIRIES CARRIED OUT AND THE DATA OF SUCH BENEFICIARIES AS COMPILED BY THE DIT(INVESTIGATION) WAS EXAMINED. IT HAS BEEN GATHE RED THAT THE ASSESSEE IS AMONGST THE BENEFICIARIES OF BOGUS ACCOMMODATION ENTRIES. THE ASSESSEE COMPANY HAS REC EIVED BOGUS ACCOMMODATION ENTRIES WORTH OF RS. 46,50,000/ -, DETAILED BELOW:- ITA NO. 1873/DEL/2012 10 BENEFICIARYS BANK NAME BENEFICIARYS BANK BRANCH VALUE OF ENTRY TAKEN INSTRUMENT NO. BY WHICH ENTRY TAKEN DATE ON WHICH ENTRY TAKEN NAME OF ACCOUNT HOLDER OF ENTRY GIVING ACCOUNT BANK FROM WHICH ENTRY GIVEN BRANCH OF ENTRY GIVING BANK A/C NO. ENTRY GIVING ACCOUNT KARUR VYSYA BANK KAROL BAGH NEW DELHI 600000 8488 27.3.03 DIGNITY FINVEST (P) LTD. SBH KAROL BAGH 50042 KARUR VYSYA BANK KAROL BAGH NEW DELHI 400000 TO CLG: 00951823 7.2.03 KR FINCAP P LTD. SBP DG 50072 KARUR VYSYA BANK KAROL BAGH NEW DELHI 400000 TO CLG - 00987545 7.2.03 TECHNOCO M ASSOCIATES PVT LTD. SBP DG 50060 KARUR VYSYA BANK KAROL BAGH NEW DELHI 500000 490660 5.3.02 JAR METAILS INDUSTRIES P LTD. PNB GT ROAD 2538 KARUR VYSYA BANK KAROL BAGH NEW DELHI 250000 5515 19.3.02 LABH- TRONICS OVERSEAS P LTD. RATNAKAR KAROL BAGH 54 KARUR VYSYA BANK POONAM CHAMBER, S. KAROL BAGH NEW DELHI 500000 TO CLG: 00967916 31.3.03 MK DAL MILLING P LTD. SBP DG 7384 KARUR VYSYA BANK POONAM CHAMBER, S. KAROL BAGH NEW DELHI 500000 TO CLG: 00967852 31.3.03 RIZZER EXIM P LTD. SBP DG 7385 KARUR VYSYA BANK KAROL BAGH NEW DELHI 500000 TO CLG: 00968452 25.3.03 VR TRADERS P LTD. SBP DG 7379 KARUR VYSYA BANK KAROL BAGH NEW DELHI 1000000 182406 27.3.03 SHILPA HOLDINGS LTD. UCO BANK MODEL TOWN 10015 46,50,000 THE MODUS OPERANDI INVOLVED IN SUCH BOGUS ACCOMMODA TION TRANSACTIONS IS THAT CASH GENERATED OUT OF UNDISCLO SED SOURCES OF INCOME IS GIVEN TO THE ENTRY OPERATOR WH O IN TURN ISSUES CHEQUES WHICH ARE GIVEN THE COLOUR OF SHARE APPLICATION MONEY/ SHARE CAPITAL/ UNSECURED LOANS E TC. I HAVE THEREFORE, REASON TO BELIEVE THAT THE UNDISCLO SED ITA NO. 1873/DEL/2012 11 INCOME OF THE ASSESSEE DURING THE YEAR UNDER CONSID ERATION TO THE EXTENT OF RS. 46,50,000/- HAS ESCAPED ASSESS MENT. 11.1 ON GOING THROUGH THE ABOVE REASONS RECORDED B Y THE AO, WE ARE OF THE VIEW THAT AO HAS NOT APPLIED HIS MIND SO AS TO COME TO AN INDEPENDENT CONCLUSION THAT HE HAS REASON TO BELIEV E THAT INCOME HAS ESCAPED DURING THE YEAR. IN OUR VIEW THE REASONS AR E VAGUE AND ARE NOT BASED ON ANY TANGIBLE MATERIAL AS WELL AS ARE N OT ACCEPTABLE IN THE EYES OF LAW. THE AO HAS MECHANICALLY ISSUED NOTICE S U/S. 148 OF THE ACT, ON THE BASIS OF INFORMATION ALLEGEDLY RECEIVED BY HIM FROM THE DIRECTORATE OF INCOME TAX (INVESTIGATION), NEW DELH I. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND THE LAW APPLICABLE IN THE CASE OF THE ASSESSEE, WE ARE OF T HE CONSIDERED VIEW THAT THE REOPENING IN THE CASE OF THE ASSESSEE FOR THE ASSTT. YEAR IN DISPUTE IS BAD IN LAW AND DESERVES TO BE QUASHED. OUR VIEW IS SUPPORTED BY THE FOLLOWING JUDGMENTS/DECISIONS:- (A) PR. CIT VS. G&G PHARMA INDIA LTD. IN ITA NO. 545/2015 DATED 8.10.2015 OF THE DELHI HIGH COURT WHEREIN THE HONBLE COURT HAS ADJUDICATED THE ISSUE AS UNDER:- 12. IN THE PRESENT CASE, AFTER SETTING OUT FOUR EN TRIES, STATED TO HAVE BEEN RECEIVED BY THE ASSESSEE ON A SINGLE DATE I.E. 10TH FEBRUARY 2003, FROM FOUR ENTITIES WHICH WERE TERMED AS ACCOMMODATION ENTRIES, WHICH INFORMATION WAS GIVEN TO HIM BY THE DIRECTORATE OF INVESTIGATION, THE AO STATED: 'I HAVE ALSO PERUSED VARIOUS MATERIALS AND REPORT FROM INVESTIGA TION WING AND ON THAT BASIS IT IS EVIDENT THAT THE ASSESSEE C OMPANY HAS INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK AC COUNT BY WAY OF ABOVE ACCOMMODATION ENTRIES.' THE ABOVE CONC LUSION IS UNHELPFUL IN UNDERSTANDING WHETHER THE AO APPLIED H IS MIND TO THE MATERIALS THAT HE TALKS ABOUT PARTICULARLY SINC E HE DID NOT ITA NO. 1873/DEL/2012 12 DESCRIBE WHAT THOSE MATERIALS WERE. ONCE THE DATE O N WHICH THE SO CALLED ACCOMMODATION ENTRIES WERE PROVIDED IS KN OWN, IT WOULD NOT HAVE BEEN DIFFICULT FOR THE AO, IF HE HAD IN FACT UNDERTAKEN THE EXERCISE, TO MAKE A REFERENCE TO THE MANNER IN WHICH THOSE VERY ENTRIES WERE PROVIDED IN THE ACCOU NTS OF THE ASSESSEE, WHICH MUST HAVE BEEN TENDERED ALONG WITH THE RETURN, WHICH WAS FILED ON 14TH NOVEMBER 2004 AND WAS PROCE SSED UNDER SECTION 143(3) OF THE ACT. WITHOUT FORMING A PRIMA FACIE OPINION, ON THE BASIS OF SUCH MATERIAL, IT WAS NOT POSSIBLE FOR THE AO TO HAVE SIMPLY CONCLUDED: 'IT IS EVIDENT THA T THE ASSESSEE COMPANY HAS INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK BY WAY OF ACCOMMODATION ENTRIES'. IN THE CONSI DERED VIEW OF THE COURT, IN LIGHT OF THE LAW EXPLAINED WI TH SUFFICIENT CLARITY BY THE SUPREME COURT IN THE DECISIONS DISCU SSED HEREINBEFORE, THE BASIC REQUIREMENT THAT THE AO MUS T APPLY HIS MIND TO THE MATERIALS IN ORDER TO HAVE REASONS TO B ELIEVE THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT IS MI SSING IN THE PRESENT CASE. 13. MR. SAWHNEY TOOK THE COURT THROUGH THE ORDER OF THE CIT(A) TO SHOW HOW THE CIT (A) DISCUSSED THE MATERIALS PRO DUCED DURING THE HEARING OF THE APPEAL. THE COURT WOULD L IKE TO OBSERVE THAT THIS IS IN THE NATURE OF A POST MORTEM EXERCISE AFTER THE EVENT OF REOPENING OF THE ASSESSMENT HAS TAKEN PLACE. WHILE THE CIT MAY HAVE PROCEEDED ON THE BASIS THAT THE RE OPENING OF THE ASSESSMENT WAS VALID, THIS DOES NOT SATISFY THE REQUIREMENT OF LAW THAT PRIOR TO THE REOPENING OF THE ASSESSMEN T, THE AO HAS TO, APPLYING HIS MIND TO THE MATERIALS, CONCLUDE TH AT HE HAS REASON TO BELIEVE THAT INCOME OF THE ASSESSEE HAS E SCAPED ASSESSMENT. UNLESS THAT BASIC JURISDICTIONAL REQUIR EMENT IS SATISFIED A POST MORTEM EXERCISE OF ANALYSING MATER IALS PRODUCED SUBSEQUENT TO THE REOPENING WILL NOT RESCU E AN INHERENTLY DEFECTIVE REOPENING ORDER FROM INVALIDIT Y . ITA NO. 1873/DEL/2012 13 14. IN THE CIRCUMSTANCES, THE CONCLUSION REACHED BY THE ITAT CANNOT BE SAID TO BE ERRONEOUS. NO SUBSTANTIAL QUES TION OF LAW ARISES. 15. THE APPEAL IS DISMISSED. (B) SIGNATURE HOTELS (P)_ LTD. VS. ITO AND ANOTHER REPORTED IN 338 ITR 51 (DEL) HAS UNDER SIMILAR CIRCUMSTANCES AS FOLLOWS:- FOR THE A.Y. 2003-04, THE RETURN OF INCOME OF THE ASSESSEE COMPANY WAS ACCEPTED U/S.143(1) OF THE INCOME-TAX A CT, 1961 AND WAS NOT SELECTED FOR SCRUTINY. SUBSEQUENTL Y, THE ASSESSING OFFICER ISSUED NOTICE U/S.148 WHICH WAS O BJECTED BY THE ASSESSEE. THE ASSESSING OFFICER REJECTED THE OBJECTIONS. THE ASSESSEE COMPANY FILED WRIT PETITIO N AND CHALLENGED THE NOTICE AND THE ORDER ON OBJECTIONS. THE DELHI HIGH COURT ALLOWED THE WRIT PETITION AND HELD AS UNDER: (I) SECTION 147 OF THE INCOME-TAX ACT, 1961, IS WI DE BUT NOT PLENARY. THE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMEN T. THIS IS MANDATORY AND THE REASON TO BELIEVE ARE REQUIR ED TO BE RECORDED IN WRITING BY THE ASSESSING OFFICER. (II) A NOTICE U/S.148 CAN BE QUASHED IF THE BELIEF IS NOT BONA FIDE, OR ONE BASED ON VAGUE, IRRELEVANT AND NON-SPE CIFIC INFORMATION. THE BASIS OF THE BELIEF SHOULD BE DISC ERNIBLE FROM THE MATERIAL ON RECORD, WHICH WAS AVAILABLE WI TH THE ASSESSING OFFICER, WHEN HE RECORDED THE REASONS. TH ERE SHOULD BE A LINK BETWEEN THE REASONS AND THE EVIDENCE/MATERIAL AVAILABLE WITH THE ASSESSING OFFI CER. ITA NO. 1873/DEL/2012 14 (III) THE REASSESSMENT PROCEEDINGS WERE INITIATED O N THE BASIS OF INFORMATION RECEIVED FROM THE DIRECTOR OF INCOME-TAX (INVESTIGATION) THAT THE PETITIONER HAD INTRODUCED MONEY AMOUNTING TO RS.5 LAKHS DURING F.Y. 2002-03 AS STAT ED IN THE ANNEXURE. ACCORDING TO THE INFORMATION, THE AMO UNT RECEIVED FROM A COMPANY, S, WAS NOTHING BUT AN ACCOMMODATION ENTRY AND THE ASSESSEE WAS THE BENEFI CIARY. THE REASONS DID NOT SATISFY THE REQUIREMENTS OF SEC TION 147 OF THE ACT. THERE WAS NO REFERENCE TO ANY DOCUMENT OR STATEMENT, EXCEPT THE ANNEXURE. THE ANNEXURE COULD NOT BE REGARDED AS A MATERIAL OR EVIDENCE THAT PRIMA FACIE SHOWED OR ESTABLISHED NEXUS OR LINK WHICH DISCLOSED ESCAPE MENT OF INCOME. THE ANNEXURE WAS NOT A POINTER AND DID NOT INDICATE ESCAPEMENT OF INCOME. (IV) FURTHER, THE ASSESSING OFFICER DID NOT APPLY H IS OWN MIND TO THE INFORMATION AND EXAMINE THE BASIS AND M ATERIAL OF THE INFORMATION. THERE WAS NO DISPUTE THAT THE C OMPANY, S, HAD A PAID UP CAPITAL OF RS.90 LAKHS AND WAS INCORPORATED ON JANUARY 4, 1989, AND WAS ALSO ALLOT TED A PERMANENT ACCOUNT NUMBER IN SEPTEMBER 2001. THUS, I T COULD NOT BE HELD TO BE A FICTITIOUS PERSON. THE RE ASSESSMENT PROCEEDINGS WERE NOT VALID AND WERE LIABLE TO THE Q UASHED. 12. IN VIEW OF ABOVE, WE ARE OF THE CONSIDERED VI EW THAT THE ABOVE ISSUE IS EXACTLY THE SIMILAR AND IDENTICAL TO THE ISSUE INVOLVED IN THE PRESENT APPEAL AND IS SQUARELY COVERED BY THE AFORE SAID DECISIONS OF THE HONBLE HIGH COURT OF DELHI. HENCE, RESPECTFU LLY FOLLOWING THE ABOVE PRECEDENTS, WE DECIDE THE LEGAL ISSUE IN DISP UTE IN FAVOR OF THE ASSESSEE AND AGAINST THE REVENUE. ITA NO. 1873/DEL/2012 15 13. NOW WE ARE DEALING WITH THE REVENUES APPEAL ON THE MERITS OF THE CASE RELATING TO DELETION OF ADDITION OF RS. 4 6,50,000/- MADE U/S. 68 OF THE I.T. ACT ON ACCOUNT OF UNEXPLAINED CASH C REDITS BEING SHARE APPLICATION MONEY. AFTER HEARING BOTH THE PARTIES AND PERUSING THE ORDERS PASSED BY THE REVENUE AUTHORITIES, WE FIND T HAT THE LD. CIT(A) HAS ELABORATELY DISCUSSED THE ISSUE IN DISPUTE AS U NDER VIDE PARA NO. 6.3 AT PAGES 19 TO 25 OF HIS IMPUGNED ORDER DATED 6 .2.2012:- I HAVE CONSIDERED THE OBSERVATION OF THE AO AS CO NTAINED IN THE ASSESSMENT ORDER, SUBMISSIONS OF THE APPELLANT AND JUDICIAL PRONOUNCEMENTS ON THE ISSUE. THE APPELLANT COMPANY, DURING THE YEAR UNDER CONSID ERATION HAD RECEIVED SHARE APPLICATION MONEY OF RS. 46,50,000/- FROM FOLLOWING PARTIES. NAME OF COMPANY WHO PROVIDED ENTRY AMOUNT DATE NAME OF BANK & A/C NO. DIGNITY FINVEST (P) LTD. 600000 27.3.03 SBH 50042 KR FINCAP P LTD. 400000 7.2.03 SBP 50072 TECHNOCO M ASSOCIATES PVT LTD. 400000 7.2.03 SBP 50060 JAR METAILS INDUSTRIES P LTD. 500000 5.3.02 PNB 2538 LABH- TRONICS OVERSEAS P LTD. 250000 19.3.02 RATNAKAR 54 MK DAL MILLING P LTD. 500000 31.3.03 SBP 7384 RIZZER EXIM P LTD. 500000 31.3.03 SBP 7385 VR TRADERS P LTD. 500000 25.3.03 SBP 7379 SHILPA HOLDINGS LTD. 1000000 27.3.03 UCO BANK 10015 THE AO HAS MADE AN ADDITION OF THE SAID SHARE CAPIT AL IN THE HANDS OF THE APPELLANT COMPANY BASED ON THE INFORMA TION ITA NO. 1873/DEL/2012 16 RECEIVED AND ON THE BASIS OF STATEMENTS MADE BY THE PROMOTERS OR DIRECTORS OF SUCH COMPANIES BEFORE THE INVESTIGATI ON WING OF THE DEPARTMENT. THE ASSESSING OFFICER ISSUED SUMMONS ON 16.12.2010 ULS 131 OF THE IT ACT TO THE PARTIES WHO HAD GIVEN SHARE APPLICATION MONEY TO THE APPELLANT ON THE ADD RESSES GIVEN IN THE CONFORMATIONS OF SHARE APPLICATIONS FOR PERS ONAL DEPOSITION. HOWEVER NONE OF THE SHARE APPLICANTS ATTENDED BEFOR E THE ASSESSING OFFICER. VIDE ORDER SHEET ENTRY DATED 24. 12.2010 THE AR OF THE APPELLANT COMPANY WAS ASKED TO PRODUCE SH ARE APPLICANTS BEFORE HIM ON 27.12.2010 WHICH REMAIN UN COMPLIED. THE APPELLANT SUBMITTED VARIOUS DOCUMENTARY EVIDENC E LIKE CONFIRMATION, BANK STATEMENTS, COPIES OF ITR, COPIE S OF SHARE APPLICATION, COPIES OF CERTIFICATES OF INCORPORATIO N, COPIES OF SHARE CERTIFICATE ISSUED, COPIES OF BALANCE SHEET AND PRO FIT AND LOSS ACCOUNT AND COPIES OF PAN TO SUBSTANTIATE THE GENUI NENESS OF THE TRANSACTIONS, BUT APPELLANT COULD NOT PRODUCE THE A BOVE MENTIONED PARTIES FOR EXAMINATION. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER HAS RECEIVED VARIOUS DOCUMENTARY EVIDENCE, LIKE CONFIRMATION FROM THE INVESTOR COMPANIES, THEIR ACK NOWLEDGEMENT OF RETURN, PAN, CERTIFICATES OF INCORPORATION, ROC DATA GENERATED FROM THE ROC WEBSITE, WHICH SUPPORTED THE IDENTITY OF THE INVESTOR COMPANIES AND ALSO ESTABLISHED GENUINENESS OF THE S HARE CAPITAL MONEY TRANSACTION. HOWEVER, THE ABOVE EVIDENCES WERE DISREGARDED BY TH E A.O. AND IT WAS HELD THAT IDENTITY AND CREDITWORTHINESS OF T HE SAID PARTIES AND GENUINENESS OF THE TRANSACTIONS WAS NOT PROVED. IN VIEW OF THE ABOVE, THE AMOUNT OF RS.46,50,000/- RECEIVED AS SHARE ITA NO. 1873/DEL/2012 17 APPLICATION MONEY FROM THE ABOVE MENTIONED PARTIES WAS NOT TREATED AS-GENUINE AND IT WAS HELD AS AN ACCOMMODA TION ENTRY. IT IS SEEN THAT SUMMONS ISSUED BY THE AO WERE SERVE D UPON THE INVESTOR COMPANIES HOWEVER THE SAME REMAINED UNCOMP LIED WITH. IT IS ALSO SEEN THAT NO FURTHER ACTION WAS TAKEN BY THE A.O. TO ENFORCE THEIR ATTENDANCE. THE A.O. DID NOT INITIATE ANY ACTION AGAINST THE SAID INVESTOR COMPANIES FOR NON COMPLIA NCE OF THE SUMMONS ISSUED BY HIM. THERE ARE ENOUGH POWERS GIVEN TO THE AOS I INVESTIG ATING OFFICERS TO DEAL WITH SUCH DELINQUENT PERSONS, BUT NOTHING O F THAT SORT HAS BEEN DONE IN THE INSTANT CASE. MOREOVER, IF THE SAI D INVESTOR IS NOT COMPLYING THE SUMMONS OF THE DEPARTMENT, THEN HOW T HE APPELLANT, WHO HAS NO AUTHORITY OR LEGAL POWER TO C OMPEL THE SAID PARTIES, CAN ENFORCE THEIR ATTENDANCE BEFORE THE AS SESSING OFFICER. IN THIS REGARD RELIANCE IS PLACED ON THE DECISION O F THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS ORISSA CORPORAT ION (P) LTD., 159 ITR 78, WHEREIN IT HAS BEEN HELD THAT IN CASE T HE CREDITOR DOES NOT APPEAR IN RESPONSE TO SUMMON ISSUED UNDER SECTION 131, NO ADVERSE INFERENCE CAN BE DRAWN IN THE CASE OF TH E APPELLANT. IT IS OBSERVED THAT SUBSCRIPTION OF SHARE APPLICATI ON' MONEY WAS RECEIVED FROM ABOVE MENTIONED COMPANIES BY THE APPE LLANT, THROUGH A/C PAYEE CHEQUES AND THE SAID COMPANIES AR E DULY REGISTERED WITH ROC AND SAME WERE ACTIVE AS PER THE WEBSITE OF THE MINISTRY OF CORPORATE AFFAIRS. IT HAS ALSO SUBM ITTED BY THE APPELLANT THAT THE SAID COMPANIES ARE HAVING PAN NU MBER AND ARE REGULARLY FILING THEIR RETURN OF INCOME. ITA NO. 1873/DEL/2012 18 WITH REGARD TO THE VARIOUS EVIDENCES SUBMITTED BY T HE APPELLANT, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO DIS REGARDED THE SAID EVIDENCES AND HAS EMPHASIZED THAT IDENTITY AND CREDITWORTHINESS WERE NOT PROVED AND HELD THAT THE AMOUNT OF RS.46,50,000/- RECEIVED AS SHARE APPLICATION MONEY FROM THE ABOVE MENTIONED INVESTOR COMPANIES CANNOT BE TREATE D AS GENUINE AND ARE ONLY ACCOMMODATION ENTRIES. THE AO IN HIS ASSESSMENT ORDER HAS NOT BROUGHT ANY MATERIAL ON RECORDS TO SHOW THAT CONFIRMATION FILED BY THE DIRE CTORS OF THE SAID INVESTOR COMPANIES WERE NOT GENUINE. IT IS ALSO SEE N THAT NO ENQUIRY WAS CONDUCTED TO EXAMINE THE CONTENTS OF TH E CONFIRMATIONS FILED BY THE INVESTOR COMPANIES. DURI NG THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT TOOK SPECIFIC OBJECTION WITH REGARD TO THE FINDINGS OF THE AO AND STATED THAT TH E AO HAS NOT CONSIDERED THE CONFIRMATION FILED BY THE INVESTOR C OMPANIES. FURTHER, THE AO HAS ISSUED SUMMONS TO THE SAID PART IES ON 16.12.2010 WHICH WERE SERVED UPON THE DIRECTORS OF THE SAID COMPANIES AND IT IS STATED BY THE AO THAT NO ONE AT TENDED IN RESPONSE TO THE SAID SUMMONS. THIS SHOWS THAT THE P ARTIES WERE PRESENT. AT THE GIVEN ADDRESSES. IT IS ALSO SEEN TH AT NO ACTION HAS BEEN TAKEN AGAINST THE SAID PARTIES FOR NON-COMPLIA NCE OF SUMMON. IT N BE ALSO MENTION HERE THAT ALONG WITH C ONFORMATION, THE APPELLANT COMPANY HAS FILED COPIES OF THE RETUR N OF INCOME, COPIES OF PAN CARD, CERTIFICATES OF THE INCORPORATI ON OF THE SAID COMPANIES WHICH ARE SUFFICIENT TO TREAT THE CONFORM ATION AS EVIDENCE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD WHICH CAN PROVE THAT THIS MONEY ITA NO. 1873/DEL/2012 19 WAS APPELLANT'S OWN UNDISCLOSED INCOME. HE HAS SIMP LY RELIED UPON THE INFORMATION RECEIVED FROM THE INVESTIGATIO N WING OF THE DEPARTMENT WITHOUT MAKING ANY CONCRETE EFFORT TO VE RIFY THE FACTS STATED THEREIN. IT HAS ALSO BEEN HELD BY THE VARIOU S COURTS THAT AO MUST BRING ON RECORD SOME POSITIVE MATERIAL OR EVID ENCE TO INDICATE THAT THE SHARE HOLDERS WERE BENAMIDARS, FICTITIOUS PERSONS OR THAT ANY PART OF THE SHARE CAPITAL MONEY REPRESENTED THE COMPANY'S OWN INCOME FROM UNDISCLOSED SOURCES. THE APPELLANT HAS RELIED UPON THE JUDGMENT OF HON'B LE APEX COURT IN THE CASE OF STELLER INVESTMENT LTD. (2001) 251 I TR 263 (SC), WHEREIN IT HAS BEEN HELD THAT EVEN IF THE SUBSCRIBE RS TO THE INCREASED SHARE CAPITAL OF ASSESSEE COMPANY WERE NO T GENUINE, THE AMOUNT COULD NOT BE REGARDED AS UNDISCLOSED INC OME OF THE ASSESSEE COMPANY. HON'BLE DELHI HIGH COURT IN CIT V. SOPHIA FINANCE L TD (1994) 205 ITR -0098 - (DEL.) HAS HELD THAT: 'IF THE SHAREHOLD ERS EXIST THEN, POSSIBLY, NO FURTHER ENQUIRY NEED BE MADE. BUT IF T HE INCOME-TAX OFFICER FINDS THAT THE ALLEGED SHAREHOLDERS DO NOT EXIST, THEN IN EFFECT, IT WOULD MEAN THAT THERE IS NO VALID ISSUAN CE OF SHARE CAPITAL. ' IN CIT V. MAKHNI AND TYAGI (P.) LTD. (2004) 267 ITR 433 -(DEL.), THE COURT HELD: 'THIS COURT IS OF THE OPINION THAT WHEN DOCUMENTARY EVIDENCE WAS PLACED ON RECORD TO PROVE THE IDENTITY OF ALL THE S HAREHOLDERS INCLUDING THEIR P AN/GIR NUMBERS AND FILING OF OTHE R DOCUMENTARY EVIDENCE IN THE FORM OF RATION CARD, ETC., WHICH HA D NEITHER BEEN CONTROVERTED NOR DISPROVED BY THE ASSESSING OFFICER , THEN NO INTERFERENCE IS CALLED FOR.' ITA NO. 1873/DEL/2012 20 THE APPELLANT HAS CITED VARIOUS OTHER CASE LAWS ALS O IN ITS SUBMISSIONS WHEREIN IT HAS BEEN HELD THAT THE SHARE CAPITAL ISSUED CANNOT BE TREATED- AS UNDISCLOSED INCOME OF THE APPELLANT AND CANNOT BE ADDED U/S 68 OF THE INCOME TAX ACT. T HE FACTS OF THE CASES CITED BY THE APPELLANT ARE IDENTICAL WITH THAT OF THE INSTANT CASE. FURTHER, THE RELIANCE IS ALSO PLACED ON FOLLOWING DECISIONS OF APEX COURT:- 1 CIT VS. ORISSA CORPORATION 159 ITR 78 9SC); ` 2 DIVINE LEASING AND FINANCE LTD. 299 ITR 268. THE APPELLANT IN ITS SUBMISSION HAS ALSO RELIED UPO N THE LATEST JUDGMENT OF THE APEX COURT IN THE CASE OF CIT VS. L OVELY EXPORT 299 ITR 268 (SC) WHICH HAS CONFIRMED THE ORDER OF T HE DELHI HIGH COURT. IT HAS BEEN HELD BY THE HON'BLE COURT THAT O NCE THE IDENTIFY OF THE SHARE HOLDERS HAVE BEEN ESTABLISHED, EVEN IF THERE IS A CASE OF BOGUS SHARE CAPITAL, IT CANNOT BE ADDED IN THE H ANDS OF THE COMPANY UNLESS ANY ADVERSE EVIDENCE IS NOT ON RECOR D. IN THE INSTANT CASE, THE APPELLANT HAS PROVIDED EVIDENCE I N THE FORM OF PAN, ROC DETAILS, COPIES OF IT RETURN FILED AND COP IES OF CONFIRMATION TO ESTABLISH THE GENUINENESS OF THE TR ANSACTION. THERE ARE PLETHORA OF JUDGMENTS OF VARIOUS JUDICIAL AUTHORITIES, INCLUDING HON'BLE APEX COURT AND ALSO THE JURISDICT IONAL HIGH COURT WHEREIN IT HAS BEEN HELD THAT IN CASE OF MONE Y RECEIVED TOWARDS SHARE CAPITAL, ONLY THE IDENTITY OF THE SHA REHOLDERS NEEDS TO BE PROVED. ONCE IDENTITY OF THE SHAREHOLDERS IS ESTABLISHED AND IT IS PROVED THAT THE MONEY DID IN FACT COME FROM T HEM, IT IS NOT FOR THE ASSESSEE TO PROVE AS TO HOW THE SHAREHOLDERS CA ME TO BE IN POSSESSION OF THE MONEY. ITA NO. 1873/DEL/2012 21 IN A RECENT JUDGMENT DATED 3010112009 HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. GANGOUR INVESTMENT LTD. (ITA NO. 34/2007) HAS HE11 THAT REVENUE CAN MAKE ADDITION UNDER SECTI ON 68 OF THE ACT ONLY IF THE ASSESSEE IS UNABLE TO EXPLAIN THE C REDITS APPEARING IN ITS BOOKS OF ACCOUNTS. IN THE SAID CASE THE APPELLANT HAS DULY EXPLAINED T HE SAID CREDIT ENTRIES IN THE FORM OF VARIOUS DOCUMENTARY EVIDENCE . THE SAID DOCUMENTARY EVIDENCE CONTAINED DETAILS, WHICH SET O UT NOT ONLY THE IDENTITY OF THE SUBSCRIBERS, BUT ALSO GAVE INFO RMATION, WITH RESPECT TO THEIR ADDRESS, AS WELL AS, PAN, ASSESSME NT PARTICULARS ETC. BASED ON THESE FACTS, THE HON'BLE DELHI COURT DISMISSED THE APPEAL OF REVENUE. IN YET ANOTHER DECISION AS TO THE CORRECTNESS OF TR EATING SHARE APPLICATION MONEY ON PAR WITH CASH CREDIT, THE HOU' BLE DELHI HIGH COURT IN CIT VS. VALUE CAPITAL SERVICES P. LTD. (20 08) 307 ITR 334 (DELHI) FOUND AFTER REFERRING TO THE TWO OF THE DEC ISIONS OF THE DELHI HIGH COURT ON THE SUBJECT THAT IN RESPECT OF SHARE CAPITAL AMOUNTS, THEY CANNOT BE ASSESSED IN THE HANDS OF THE COMPANY , UNLESS THE DEPARTMENT IS ABLE TO SHOW THAT THE AMOUNT RECEIVED TOWARDS SHARE CAPITAL ACTUALLY EMANATED FROM THE COFFERS OF THE ASSESSEE COMPANY. HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. PRA DEEP GUPTA 207 CTR 115, WHICH HAS ALSO BEEN RELIED UPON BY THE DEL HI ITA T IN THE RECENT JUDGEMENT IN THE CASE OF BABITA GUPTA IT A NO. 2897/06, WHEREIN IT IS HELD THAT IN THE FACTS OF TH E CASE BEFORE US IT MAY BE SEEN THAT FROM THE VERY BEGINNING LD A.O. HAD SHIFTED ENTIRE BURDEN UPON THE ASSESSEE AND NO MATERIAL WAS BROUGHT BY HIM TO PROVE HIS ALLEGATION THAT THE IMPUGNED AMOUN T REPRESENTED ITA NO. 1873/DEL/2012 22 ASSESSEE COMPANY'S UNDISCLOSED INCOME. THEREFORE, O N THIS GROUND ALONE THE ENTIRE ADDITION DESERVES TO BE DEL ETED AND MAY KINDLY BE HELD SO. THE HON 'BLE DELHI HIGH COURT IN THE CASE OF KAMDHE NU STEEL '& ALLOYS LTD. ITA NO. 972/2009 HAS AGAIN RETREATED TH E SAME POSITION AND HELD THAT ONCE IDENTITY IS PROVED THE SHARE CAPITAL CANNOT BE ADDED IN THE HANDS OF THE RECIPIENT COMPA NY. IN VIEW OF THE FACTUAL POSITION AS WELL AS THE JUDI CIAL PRONOUNCEMENT ON THE SUBJECT, DISCUSSED ABOVE, I AM OF THE CONSIDERED VIEW THAT THE APPELLANT HAS DISCHARGED T HE INITIAL ONUS OF ESTABLISHING THE BONA-FIDES OF THE TRANSACTIONS AND THE AO WAS NOT JUSTIFIED IN IGNORING VARIOUS EVIDENCES PROVIDE D TO HIM BY THE APPELLANT. NOTHING ADVERSE HAS BEEN BROUGHT ON RECO RD BY THE AO TO ESTABLISH THAT THE AMOUNT OF SHARE APPLICATION M ONEY OF RS.46,50,000/- RECEIVED BY THE APPELLANT FROM THE SAID PARTIES REPRESENTS ITS OWN UNDISCLOSED INCOME. IF THERE WAS DOUBT ABOUT THE SOURCE OF INVESTMENT O F THE SAID COMPANIES, THEN ADDITIONS SHOULD HAVE BEEN MADE IN THE CASES OF INVESTOR COMPANIES AND NOT IN THE HANDS OF THE APPE LLANT COMPANY. THE APPELLANT HAS RELIED UPON THE DECISION OF HON'BLE SUPREME COURT IN CIT VS DIVINE LEASING & FINANCE LT D. (CC 375/2008) DATED 2110112008 WHEREIN IT WAS HELD- 'WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION FO R THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEI VED BY THE ASSESSEE-COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, W HOSE NAMES ARE GIVEN TO THE A 0, THEN THE DEPARTMENT, IS FREE TO PROCEED TO RE-OPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. ' ITA NO. 1873/DEL/2012 23 RELIANCE IN THIS REGARD IS ALSO PLACED ON THE DECIS ION OF HONBLE DELHI HIGH COURT IN THE CASE OF CL'T VS. MIS PONDY METAL AND ROLLING MILL PVT LTD, (DELHI) (ITA NO. 788/2006) DA TED 19.02.2007, WHEREIN THE HON'BLE COURT CONCURRED WITH THE FINDIN GS OF THE APPELLATE TRIBUNAL, DELHI BENCH 'F' THAT ONCE THE IDENTITY OF THE INVESTOR HAS BEEN MANIFEST AND IS PROVED, THE INVES TMENT CANNOT BE SAID TO BE THE UNDISCLOSED INCOME OF THE ASSESSE E. AT BEST, THE AMOUNT COULD BE ADDED IN THE HANDS OF THE INVESTOR BUT IT CERTAINLY COULD NOT BE TREATED AS UNDISCLOSED INCOM E OF THE ASSESSEE. THE APPEAL FILED AGAINST THE SAID DECISIO N, WAS DISMISSED BY THE HON'BLE SUPREME COURT IN C.C. 128 60/2007 DATED 08/11/2008. IN THE LIGHT OF THE ABOVE DISCUSSION, I AM INCLINED TO AGREE WITH THE ARGUMENTS AND EVIDENCES PROVIDED BY THE APPELLANT T O SUBSTANTIATE THAT THE TRANSACTION REGARDING SHARE A PPLICATION MONEY RECEIVED BY' THE APPELLANT WERE GENUINE TRANS ACTIONS AND THE SAME WERE NOT ACCOMMODATION ENTRIES. I ALSO DO NOT FIND ANY EVIDENCE COLLECTED BY THE A.O. WHICH COULD PROVE OT HERWISE. ACCORDINGLY, THE AO WAS NOT JUSTIFIED IN TREATING T HE AMOUNT OF SHARE APPLICATION MONEY RECEIVED BY THE APPELLANT A S ITS UNDISCLOSED INCOME. IN VIEW OF THE AFORESAID DISCUSSION, I DELETE THE A DDITION OF 46,50,000/-, MADE BY THE AO U/S 68 OF THE I.T. ACT, 1961. 14. WE ALSO FIND THAT THE CASE LAW AS CITED BY THE LD. DR I.E. CIT VS. NOVA PROMOTERS & FINLEASE (P) LTD. 342 ITR 169 (DEL ) IS DISTINGUISHABLE ON THE FACTS OF THE PRESENT CASE. THERE INQUIRIES WERE MADE BY THE AO ON THE BASIS OF THE INFORMATION SUP PLIED BY THE ASSESSEE WHEREAS IN THE PRESENT CASE NO SUCH ATTEM PT APPEARS TO ITA NO. 1873/DEL/2012 24 HAVE BEEN MADE. SIMILARLY, THE OTHER JUDGMENTS/D ECISIONS CITED BY THE LD. DR ALSO ON DIFFERENT FACTS AND CIRCUMSTANCE S OF THE CASE, HENCE, NOT APPLICABLE IN THE PRESENT CASE. 15. IN THE BACKGROUND OF THE DETAILED DISCUSSIONS, WE ARE IN AGREEMENT WITH THE FINDING OF THE LD. CIT(A) THAT A RGUMENTS AND EVIDENCES PROVIDED BY THE ASSESSEE TO SUBSTANTIATE THAT THE TRANSACTION REGARDING SHARE APPLICATION MONEY RECEI VED BY' THE ASSESSEE WERE GENUINE TRANSACTIONS AND THE SAME WER E NOT ACCOMMODATION ENTRIES. WE ALSO DO NOT FIND ANY EVI DENCE COLLECTED BY THE A.O. WHICH COULD PROVE OTHERWISE. ACCORDINGLY, THE AO WAS NOT JUSTIFIED IN TREATING THE AMOUNT OF SHARE APPLICATI ON MONEY RECEIVED BY THE ASSESSEE AS ITS UNDISCLOSED INCOME. THEREFORE, LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION OF RS. 46,50,000/- MAD E BY THE AO U/S. 68 OF THE I.T. ACT, 1961 AND HAS PASSED A WELL REASONE D ORDER ON THE ISSUE IN DISPUTE. 16. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/01/2016. SD/- SD/- [O.P. KANT] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 08/01/2016 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES