ITO, New Delhi V. M/s. Megha Akash Instruments Pvt. Ltd., New Delhi

ITA 1941/DEL/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58575 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 25-01-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 29-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Assessee Lawyers: R K KAPOOR
• Keywords: Bogus Share capital; Principle of natural justice; Accommodation entries; Procedural lapse; Assessment record; Onus to prove
• Section: 147; 131; 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI K.D. RANJAN ITA NO. 1941/DEL/2010 ASSTT. YR: 2004-05 INCOME-TAX OFFICER, VS. M/S MEGHA AKASH INSTRUMEN TS PVT. LTD. WARD 6(3), NEW DELHI. (NOW KNOWN AS SWASTIC INSTRU MENTS PVT. LTD.), 2659/2, GURUDWARA ROAD, KAROL BAGH, NEW DELHI-110005. PAN/GIR NO. AAACM8440R (APPELLANT) ( RESPONDENT ) APPELLANT BY : SHRI R.S. NEGI SR. DR RESPONDENT BY : SHRI PRADEEP DINODIA ADV. & SHRI R.K. KAPOOR CA O R D E R PER R.P. TOLANI, J.M : THIS IS REVENUES APPEAL AGAINST CIT (A)-IV, NEW D ELHIS ORDER DATED 26-2-2010 RELATING TO A.Y. 2004-05. FOLLOWING GROUNDS ARE RAISED: 1. THE ORDER OF LEARNED CIT(APPEALS) IS ERRONEOUS AND CONTRARY TO FACTS AND LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(APPEALS) HAS ERRED IN DELETIN G THE ADDITION OF RS. 1,05,81,000/- MADE BY THE AO U/S 68 OF THE I.T. ACT BEING BOGUS/ UNEXPLAINED SHARE CAPITAL ROUTED T HROUGH ENTRY OPERATORS. 2.1. THE LEARNED CIT(APPEALS) IGNORED THE FACT THAT THE ASSESSEE DID NOT DISCHARGE THE ONUS OF PROVING THE CREDITWORTHINESS OF THE CREDITORS AND GENUINENESS O F THE TRANSACTIONS. ITA 1941/DEL/10 M/S MEGHA AKASH INSTRUMENTS P. LTD. 2 2.2. THE LD. CIT(APPEALS) ERRED IN NOT APPRECIATING THE FAT THAT THE ASSESSEE IS INVOLVED IN THE RACKET OF OBTA INING ACCOMMODATION ENTRIES AND THE RATIO OF HONBLE APEX COURTS JUDGMENT IN THE CASE OF M/S DIVINE LEASING & FINANC E AND IN THE CASE OF M/S LOVELY EXPORT PVT. LTD. IS NOT APPL ICABLE TO THE CASE OF THE ASSESSEE. 3. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, O R AMEND ANY GROUNDS OF APPEAL RAISED ABOVE AT THE TIME OF HEARI NG. 2. GROUND NOS. 1 & 3 ARE GENERAL IN NATURE AND REQU IRES NO ADJUDICATION. 3. FACTS ABOUT GROUND NOS. 2, 2.1 & 2.2. IN BRIEF, ARE: THE ASSESSEE RECEIVED SHARE APPLICATION MONIES FROM APPLICANTS, WHICH ARE ALL INCORPORATED COMPANIES, AS UNDER: 1. M/S RIGHT CHOICE PVT. LTD. 2. M/S NIKHIL BUILDERS & PROMOTERS 3. M/S SPARROW MARKETING PVT. LTD. 4. M/S SRS VIJAY SALES PVT. LTD. 5. M/S STEERING SECURITIES & FINANCE 6. M/S KR FINCAP P. LTD. 7. M/S SHRI GUPTESHWAR MARKETING PVT. LTD. 8. M/S SWETU STONE PVT. LTD. 9. M/S PERFORMANCE TRADING & INVESTMENT 10. M/S GARG FINVEST PVT. LTD. 11. M/S SHRINIWAS LEASING FINANCE 12. M/S SEKHAWATI FINANCE PVT. LTD. 13. M/S DIVISION TRADING PVT. LTD. 14. M/S TRANSPAN FINANCIAL SERVICES 15. M/S KUBERCO SALES PVT. LTD. AND 16. M/S GANGA INFIN PVT. LTD. 3.1. THE ORIGINAL ASSESSMENT WAS PROCESSED BY THE A O U/S 143(1). THEREAFTER DIT (INV.) INTIMATED ABOUT THE INFORMATI ON THAT THESE COMPANIES HAD GIVEN ACCOMMODATION ENTRIES WHICH SHOULD BE INQ UIRED. AO THEREAFTER ITA 1941/DEL/10 M/S MEGHA AKASH INSTRUMENTS P. LTD. 3 ISSUED NOTICE U/S 147 AND REOPENED THE ASSESSMENT. DURING THE COURSE OF REASSESSMENT, ASSESSEE PLEADED THAT ALL THE SHARE A PPLICANTS WERE REGISTERED COMPANIES; THEY WERE ASSESSED TO INCOME-TAX; ALL TH E AMOUNTS OF SHARE APPLICATION MONEY WERE RECEIVED THROUGH CHEUQES; AS SESSEE PROVIDED THE FOLLOWING DETAILS TO PROVE THE SHARE APPLICATION MO NEY: A) NAME OF SHARE APPLICANTS B) ADDRESS C) AMOUNT OF APPLICATION MONEY RECEIVED D) CHEQUE NUMBER E) BANK PARTICULARS FROM WHERE CHEUQE IS ISSUED F) DATE OF CHEQUE G) PERMANENT ACCOUNT NUMBER H) COPY OF ACKNOWLEDGEMENT OF FILING RETURN OF INCOME I) COPY OF BANK ACCOUNT FROM WHERE PAYMENT IS MADE J) PARTICULAR OF DEPOSITS INTO BANK K) CONFIRMATION IN THE FORM OF AFFIDAVIT. 3.2. AO, HOWEVER, HELD THAT ASSESSEE HAS NOT DISCHA RGED THE BURDEN TO PROVE THE CASH CREDITS AND MADE THE ADDITION BY FOL LOWING OBSERVATIONS: NOW THE LAW IS WELL SETTLED THAT THE BURDEN TO PRO VE THE SOURCE OF DEPOSIT IS ON THE ASSESSEE. THE ONUS OF PROVING THE SOURCE OF A SUM OF MONEY FOUND TO HAVE BEEN RECEIVED BY AN AS SESSEE IS ON HIM, WHERE THE NATURE AND SOURCE OF A RECEIPT, W HETHER IT IS MONEY OR OTHER PROPERTY CANNOT BE SATISFACTORILY EX PLAINED IT IS OPEN TO THE REVENUE TO HOLD THAT IT IS THE INCOME O F THE ASSESSEE AND NO FURTHER BURDEN LIES ON THE REVENUE TO SHOW T HAT THE INCOME IS FROM ANY PARTICULAR SOURCE. (ROSHAN DI HA TTI VS. CIT (1977) 107 ITR 938 (SC) AND KALE KHAN MOHAMMAD HANI F VS. CIT (1963) 50 ITR (SC). THE HONBLE SUPREME COURT FURTHER HELD THAT MERE MENTION OF THE INCOME TAX FILE NUMBER OF THE CREDIT ORS WILL NOT SUFFICE (CIT VS. KORLAY TRADING CO. LTD. (1998) 232 ITR 807 (SC). IT IS ALSO HELD THAT: ITA 1941/DEL/10 M/S MEGHA AKASH INSTRUMENTS P. LTD. 4 IT IS NOT ENOUGH TO ESTABLISH THE IDENTITY OF THE CREDITORS, MERE PRODUCTION OF CONFIRMATION OF LETTERS BEFORE THE ITO WOULD NOT BY ITSELF PROVE THAT THE LOANS HAVE BEEN OBTAINED FROM THESE LOAN CREDITORS, OR THAT THEY HAVE CREDITWORTHINESS (CIT VS. UNITED COMMERCIAL AND INDUSTRIAL CO. PVT. LTD. (1991) 187 ITR 596 (CAL.). 3.3. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL BEF ORE THE CIT(A) WHO DELETED THE ADDITIONS BY FOLLOWING OBSERVATIONS: IT IS STATED THAT ALL THE ABOVE COMPANIES ARE REGI STERED WITH REGISTRAR OF COMPANIES. BY ADDUCING THE AFORESAID E VIDENCE THE APPELLANT AHS DISCHARGED THE ONUS CAST UPON IT TO ESTABLISH THE IDENTITY FOR THE PURPOSE OF SECTION 68 OF THE A CT, THEREFORE, NO ADDITION IS CALLED FOR IN LIGHT OF SETTLED LEGAL POSITION. THE LD. AR HAS CITED THE FOLLOWING DECISION IN SUPPORT OF HIS ARGUMENTS: - CIT VS. DIVINE LEASING & FINANCE LTD. - CIT (KOLKATA) VS. M/S SHIPRA RETAILERS (P) LTD. - CIT VS. M/S LOVELY EXPORTS (P) LTD. - CIT VS. M/S PONDY METAL & ROLLING MILLS (P) LTD. - CIT VS. M/S GENERAL EXPORTS CREDITORS LTD. CIT VS. VALUE CAPITAL SERVICES PVT. LTD. (2009) 221 ITR (DEL) 511. THE DETAILS FILED BY THE APPELLANT BEFORE HAVE ALS O BEEN FILED AT THE APPEAL STAGE BEFORE ME. I HAVE PERUSED THE DETA ILS FILED AND THE DECISIONS CITED BY THE APPELLANT. I HAVE ALSO S EEN THE ASSESSMENT RECORD. I FIND THAT THE DETAILS FILED BE FORE ME HAD ALSO BEEN PLACED BEFORE THE AO. IN VIEW OF THE INFO RMATION SUBMITTED BY THE APPELLANT AND RESPECTFULLY FOLLOWI NG THE DECISIONS OF THE VARIOUS COURTS REGARDING THE ADDIT ION OF SHARE APPLICATION MONEY AS UNDISCLOSED INCOME CITED ABOVE , I HOLD THAT THE APPELLANT COMPANY HAS DISCHARGED THE PRELI MINARY ONUS ON IT TO PROVE THE IDENTITY, CREDIT WORTHINESS AND GENUINENESS OF THE TRANSACTIONS. IT IS NOTICED THAT THE INFORMATION RECEIVED FROM T HE DIT(INVESTIGATION) NEW DELHI WAS REGARDING ACCOMMOD ATION ENTRY TO THE TUNE OF RS. 1,91,72,000/- HOWEVER, WHI LE ITA 1941/DEL/10 M/S MEGHA AKASH INSTRUMENTS P. LTD. 5 COMPUTING THE TOTAL INCOME THE AO HAS MADE AN ADDIT ION OF RS. 1,05,81,000/-. THE AO HAS RECORDED AN OFFICE NOTE T O THE EFFECT THAT AFTER EXCLUDING DUPLICATE ENTRIES THE CORRECT FIGURE WORKS OUT TO RS. 1,05,81,000/-. ACCORDINGLY, THE AO IS DI RECTED TO DELETE THIS AMOUNT FROM THE TOTAL INCOME OF THE APP ELLANT. 3.4. AGGRIEVED, REVENUE IS BEFORE US. 4. LEARNED DR RELIED ON THE ORDER OF AO. 5. LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, CONTENDS THAT THE AO HAS IGNORED THE PLETHORA OF EVIDENCES AND MA DE THE ADDITION U/S BY DRAWING ADVERSE INFERENCE FROM THE FOLLOWING FACTS: (1) THE LETTERS SENT BY AO TO THE SHARE APPLICANTS WERE RECEIVED BACK UNDELIVERED. (2) SUMMONS U/S 131 WERE NOT RESPONDED BY THE SHARE APP LICANTS. (3) DIT(INV.) HAD SENT A REPORT ALLEGING THAT THESE ENT RIES MAY BE EXAMINED AS THEY WERE ACCOMMODATION ENTRIES. (4) THE ONUS TO PROVE THE SOURCE OF THE APPLICANTS WAS ON THE ASSESSEE, WHICH WAS NOT PROPERLY EXPLAINED. (5) MERE MENTION OF INCOME-TAX PAN NUMBERS, WAS NOT SUF FICIENT. (6) THE MERE PRODUCTION OF CONFIRMATION LETTERS WOULD N OT ITSELF PROVE THAT THE SHARE APPLICATION MONEY WAS OBTAINED. 5.1. IN THIS CONTEXT, LEARNED COUNSEL RELIED ON THE CONSOLIDATED ORDER OF HONBLE DELHI HIGH COURT DATED 23-12-2011 PASSED IN GROUP CASES ITA NO. 972/2009 CIT VS. KAMDHENU STEEL & ALLOYS LTD. AND OTHERS. 5.2. HONBLE DELHI HIGH COURT CONSIDERED ALL THE RE LEVANT JUDGMENTS, AVAILABLE ON THE ISSUE OF SHARE APPLICATION MONEYS E.G. - CIT VS. OASIS HOSPITALITIES (2011) 333 ITR 119 (DEL .) ITA 1941/DEL/10 M/S MEGHA AKASH INSTRUMENTS P. LTD. 6 - CIT VS. SOPHIA FINANCE LTD. (1994) 205 ITR 98 (DEL. )(FB) - CIT VS. DOLPHIN CANPACK LTD. (2006) 283 ITR 190 (DE L.) - CIT VS. M/S CREATIVE WORLD TELEFILMS LTD. (ITA NO. 2182 OF 2009 DATED 12-10-2009). - MADHURI INVESTMENTS PVT. LTD. VS. ACIT (ITA NO. 110 OF 2004 DECIDED ON 18-2-2006) - CIT VS. AKJ GRANITES (P) LTD. 301 ITR 298 (RAJ.) - CIT VS. RATHI FINLEASE LTD. 215 ITR 167 (M.P) - CIT VS. KUNDAN INVESTMENT LTD. 263 ITR 626 (CAL.) 5.3. IN ITA NO. 972/2009 I.E. KAMDHENU STEEL & ALLO YS LTD. ( SUPRA), SIMILAR FACTS ABOUT SHARE APPLICATION MONEY; RETURN OF AOS REGISTERED LETTER AND DIT ALLEGATION ABOUT ACCOMMODATION ENTRI ES WERE THERE, WHICH ARE SUMMARIZED BY THE HONBLE COURT IN PARA 28 OF T HE ORDER AS UNDER: 28. IN THE CASE OF THIS ASSESSEE, WE ARE CONCERNED WITH THE ASSESSMENT YEAR 2004-05. WHILE SCRUTINIZING THIS CA SE, THE AO FOUND THAT THE BALANCE-SHEET REVEALED THAT DURING T HE PERIOD RELEVANT TO THE YEAR UNDER ASSESSMENT, THE ASSESSEE HAD RECEIVED SHARE APPLICATION MONEY OF RS. 2.74 CRORES FROM VAR IOUS APPLICANTS. THE ASSESSEE FILED DETAILS OF ALL THE S HARE APPLICANTS AND THE AMOUNTS RECEIVED ALONG WITH THEIR CONFIRMAT ION AND COPIES OF THE BANK ACCOUNTS OF SUCH INVESTORS FROM AS MANY AS 32 SHARE APPLICANTS. ALL THESE APPLICANTS WERE PRIV ATE LIMITED COMPANIES. THE AO WAS OF THE OPINION THAT THE CREDI TORS WERE NOT GENUINE PARTIES AND WERE ONLY ENTRY PROVIDERS. HE REFERRED TO THE REPORT DATED 02-3-2006 OF THE DIRECTORATE OF INCOME TAX (INVESTIGATION), UNIT-V, NEW DELHI IN THIS BEHALF. HE ISSUED DETAILED QUESTIONNAIRE ON 09-11-2006 WHEREIN HE ALS O GAVE SPECIFIC REASONS IN RESPECT OF EACH OF THE APPLICA NT WHICH WAS OF THE FOLLOWING NATURE: (I) IN THE BANK ACCOUNT OF THE VARIOUS SHARE APPLICANTS, THEY HAD DEPOSITED CASH FOR SPECIFIC PURPOSE FOR APPLYING FOR SHARE IN ADDITION TO ITA 1941/DEL/10 M/S MEGHA AKASH INSTRUMENTS P. LTD. 7 PROVIDING ENTRY TO THE ASSESSEE, THE SAME MODUS WAS ADOPTED IN THE OTHER CASES AS WELL. (II) MANY COMPANIES DID NOT EXIST AT THE ADDRESSES FURNISHED. THE REGISTERED LETTERS SENT TO THEM HAD BEEN RECEIVED BACK UNDELIVERED. (III) THERE WERE REPORTS OF THE INSPECTORS (INCOME TAX) THAT MANY PARTIES WERE NOT GENUINE ASSESSEES AND WERE NOT IN EXISTENCE. 5.4. HONBLE HIGH COURT HAS EXPLAINED THE NATURE OF INITIAL BURDEN CAST ON THE ASSESSEE U/S 68 PROVING THE SHARE APPLICATIO N MONEY AND THE SHIFTING OF THE BURDEN ON THE DEPARTMENT TO REBUT THE SAME B Y FOLLOWING OBSERVATIONS: 24. IT IS, THUS, CLEAR THAT INITIAL BURDEN LIES ON THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF THE SHARE APPLICAT ION MONEY RECEIVED BY THE ASSESSEE. IT IS ALSO CLEAR THAT THE ASSESSEE HAS TO SATISFACTORILY ESTABLISH THE IDENTITY OF THE SHAREH OLDERS, THE GENUINENESS OF THE TRANSACTION AND THE CREDITWORTHI NESS OF THE SHAREHOLDERS. THE MANNER IN WHICH SUCH A BURDEN IS TO BE DISCHARGED HAS BEEN EXPLAIN IN VARIOUS JUDGMENTS AN D NOTED BY US ABOVE. AT THE SAME TIME, IT IS ALSO WELL ESTAB LISHED PRINCIPLE OF LAW THAT IN ANY MATTER, THE ONUS BROUGHT IS NOT A STATIC ONE. THOUGH INITIAL BURDEN IS UPON THE ASSESSEE, ONCE HE PROVES THE IDENTITY OF CREDITS/ SHARE APPLICATION BY EITHER FU RNISHING PERMANENT ACCOUNT NUMBERS OR COPIES OF BANK ACCOUNT S AND SHOWS THE GENUINENESS OF THE TRANSACTION BY SHOWING MONEY IN THE BANKS IS BY ACCOUNT PAYEE CHEQUES OR BY DRAFT, ETC., THEN THE ONUS TO PROVE THE SAME WOULD SHIFT TO THE ASSESSEE. THE QUESTION WHICH ASSUMES IMPORTANCE AT THIS STAGE IS TO WHAT THE REVENUE IS SUPPOSED TO DO TO DISLODGE THE INITIAL B URDEN DISCHARGED BY THE ASSESSEE AND TO THROW THE BALL AG AIN IN THE ASSESSEES COUNT DEMANDING THE ASSESSEE TO GIVE SOM E MORE PROOFS, AS THE DOCUMENTS PRODUCED EARLIER BY THE A SSESSEE EITHER BECOME SUSPECT OR ARE RENDERED INSUFFICIENT IN VIEW OF THE MATERIAL PRODUCED BY THE DEPARTMENT REBUTTING THE A SSESSEES DOCUMENTARY EVIDENCE. ITA 1941/DEL/10 M/S MEGHA AKASH INSTRUMENTS P. LTD. 8 5.5. AFTER CONSIDERING ALL THE JUDGMENTS RENDERED B Y VARIOUS COURTS TILL THE DATE OF JUDGMENT, HONBLE HIGH COURT ON THE FAC TS OF THESE CASES WHICH ARE SIMILAR TO ASSESSEE, HELD THAT ASSESSEES HAD DI SCHARGED THEIR INITIAL ONUS; THERE WAS NO PROPER REBUTTAL OF THE EVIDENCES PRODU CED BY THE ASSESSEE; AND AFTER CONSIDERING ALL THE CASE LAWS, FACTS AND CIRC UMSTANCES, DELETED THE ADDITIONS IN ALL THE CASES OF GROUP APPEALS, BY FO LLOWING OBSERVATIONS: 33. WHAT DOES FOLLOW FROM THE AFORESAID? IT IS NOT IN DOUBT THAT THE ASSESSEE HAD GIVEN THE PARTICULARS OF REGISTRAT ION OF THE INVESTING/ APPLICANT COMPANIES; CONFIRMATION FROM T HE SHARE APPLICANTS; BANK ACCOUNTS DETAILS; SHOWN PAYMENTS T HROUGH ACCOUNT PAYEE CHEQUES, ETC. AS STATED BY US IN THE BEGINNING, WITH THESE DOCUMENTS, IT CAN BE SAID THAT THE ASSE SSEE HAS DISCHARGED ITS INITIAL ONUS. WITH THE REGISTRATION OF THE COMPANIES, ITS IDENTITY STANDS ESTABLISHED, THE APP LICANT COMPANIES WERE HAVING BANK ACCOUNTS, IT HAD MADE TH E PAYMENT THROUGH ACCOUNT PAYEE CHEQUES. 34. NO DOUBT, WHAT THE AO OBSERVED MAY MAKE HIM SUSPICIOUS ABOUT SUCH COMPANIES, EITHER THEIR EXIST ENCE, WHICH MAY BE ONLY ON PAPERS AND/ OR GENUINENESS OF THE TR ANSACTIONS. WHEN HE FOUND THAT INVESTIGATING COMPANIES ARE NOT AVAILABLE AT GIVEN ADDRESS OR THAT THE ISSUANCE OF THE CHEQUE RE PRESENTING SHARE APPLICATION MONEY OR PRECEDED BY THE DEPOSIT OF CASH IN THE BANK ACCOUNT OF THESE INVESTMENT COMPANIES. 35. THE IMPORTANT QUESTION WHICH ARISES AT THIS STA GE IS AS TO WHETHER ON THE BASIS OF THESE FACTS, COULD IT BE SA ID THAT IT IS THE ASSESSEE WHICH HAS NOT BEEN ABLE TO EXPLAIN THE SOU RCE AND RECEIPT OF MONEY. ACCORDING TO THE ASSESSEE, HE HAD GIVEN THE REQUIRED INFORMATION TO EXPLAIN THE SOURCE AND WAS NOT OBLIGED TO PROVE SOURCE OF THE MONEY. IT IS THE SUBMISSION OF THE ASSESSEE THAT EVEN IN CASE THERE IS SOME DOUBT ABOU T THE SOURCE OF MONEY IN GIVING INTO COFFERS OF THE SHARE APPLIC ANTS WHICH THEY INVESTED WITH THE ASSESSEE, IT WOULD NOT AUTOM ATICALLY FOLLOW THAT THE SAID MONEY BELONGS TO THE ASSESSEE AND BECOMES UNACCOUNTED MONEY. ACCORDING TO US, THE ASSESSEE AP PEARS TO BE CORRECT ON THIS ASPECT. WE FEEL THAT SOMETHING M ORE WHICH ITA 1941/DEL/10 M/S MEGHA AKASH INSTRUMENTS P. LTD. 9 WAS NECESSARY AND REQUIRED TO BE DONE BY THE AO WAS NOT DONE. THE AO FAILED TO CARRY HIS SUSPICIOUS TO LOGICAL CO NCLUSION BY FURTHER INVESTIGATION. AFTER THE REGISTERED LETTERS SENT TO THE INVESTING COMPANY HAD BEEN RECEIVED BACK UNDELIVERE D, THE AO PRESUMED THAT THESE COMPANIES DID NOT EXIST AT THE GIVEN ADDRESS. NO DOUBT, IF THE COMPANIES ARE NOT EXISTIN G, I.E., THEY HAVE ONLY PAPER EXISTENCE, ONE CAN DRAW THE CONCLUS ION THAT THE ASSESSEE HAD NOT BEEN ABLE TO DISCLOSE THE SOURCE O F AMOUNT RECEIVED AND PRESUMPTION UNDER SECTION 68 OF THE AC T FOR THE PURPOSE OF ADDITION OF AMOUNT AT THE HANDS OF THE A SSESSEE. BUT, IT HAS TO BE CONCLUSIVELY ESTABLISHED THAT THE COMP ANY IS NON- EXISTENCE. 36. THE AO DID NOT BOTHER TO FIND OUT FROM THE OFFI CE OF THE REGISTRAR OF COMPANIES THE ADDRESS OF THOSE COMPANI ES FROM WHERE THE REGISTERED LETTER RECEIVED BACK UNDELIVER ED. IF THE ADDRESS WAS SAME AT WHICH THE LETTER WAS SENT OR TH E INSPECTOR VISITED AND NO CHANGE IN ADDRESS WAS COMMUNICATED, PERHAPS IT MAY HAVE BEEN ONE FACTOR. IN SUPPORT OF THE CONCLUS ION WHICH THE AO WANTED TO ARRIVE AT, THAT BY ITSELF CANNOT B E TREATED AS THE CONCLUSIVE FACTOR. AS POINTED OUT ABOVE, THEE A PPLICANT COMPANIES HAVE PAN AND ASSESSED INCOME TAX. NO EFFO RT WAS MADE TO EXAMINE AS TO WHETHER THESE COMPANIES WERE FILING THE INCOME TAX RETURN AND IF THEY WERE FILING THE SAME, THEN WHAT KIND OF RETURNS THESE COMPANIES WERE FILING. IF THE RE WAS NO RETURN, THIS COULD BE ANOTHER FACTOR LEADING TOWARD S THE SUSPICION NURTURED BY THE AO. FURTHER, IF THE RETUR NS WERE FILED AND SCRUTINY THEREOF REVEALS THAT SUCH RETURNS WERE FOR NAMESAKE, THIS COULD YET ANOTHER BE CONTRIBUTING FA CTOR IN THE DIRECTION AO WANTED TO GO. LIKEWISE, WHEN THE BANK STATEMENTS WERE FILED, THE AO COULD FIND OUT THE ADDRESS GIVEN BY THOSE APPLICANT COMPANIES IN THE BANK, WHO OPENED THE BAN K ACCOUNTS AND ARE THE SIGNATORIES, WHO INTRODUCED THOSE BANK ACCOUNTS AND THE MANNER IN WHICH TRANSACTIONS WERE CARRIED O UT AND THE BANK ACCOUNTS OPERATED. THIS KIND OF INQUIRY WOULD HAVE GIVEN SOME MORE MATERIAL TO THE AO TO FIND OUT AS TO WHET HER THE ASSESSEE CAN BE CONVICTED WITH THE TRANSACTIONS WHI CH WERE ALLEGEDLY BOGUS AND OR COMPANIES WERE ALSO BOGUS AN D WERE TREAT ED FOR NAMESAKE. WE SAY SO WITH MORE EMPHASIS BECAUSE OF THE REASON THAT NORMALLY SUCH KIND OF PRESUMPTIO N AGAINST ITA 1941/DEL/10 M/S MEGHA AKASH INSTRUMENTS P. LTD. 10 THE ASSESSEE CANNOT BE MADE AS PER THE LAW LAID DOW N IN VARIOUS JUDGMENTS NOTED ABOVE. JUST BECAUSE OF THE CREDITOR S/ SHARE APPLICANTS COULD NOT BE FOUND AT THE ADDRESS GIVEN IT WOULD NOT GIVE THE REVENUE A RIGHT TO INVOKE SECTION 68 OF TH E ACT WITHOUT ANY ADDITIONAL MATERIAL TO SUPPORT SUCH A MOVE. WE ARE REMINDING OURSELVES OF THE FOLLOWING REMARKS OF A D IVISION BENCH OF THIS COURT IN ITS DECISION DATED 02-08-210 IN THE CASE OF COMMISSIONER OF INCOME TAX IV VS. M/S DWARKADHJ ISH INVESTMENT (P) LTD. (ITA NO. 911 OF 2010) IN THE FO LLOWING WORDS: JUST BECAUSE THE CREDITORS/ SHARE APPLICANTS COULD NOT BE FOUND AT THE ADDRESS GIVEN, IT WOULD NOT GIV E THE REVENUE THE RIGHT TO INVOKE SECTION 68. ONE MUST NOT LOSE SIGHT OF THE FACT THAT IT IS THE REVE NUE WHICH HAS ALL THE POWER AND WHEREWITHAL TO TRACE ANY PERSON. MOREOVER, IT IS SETTLED LAW THAT THE ASSESSEE NEED NOT TO PROVE THE SOURCE OF SOURCE. 37. WE ARE CONSCIOUS OF THE MALICE OF SUCH KIND OF PERNICIOUS PRACTICE WHICH IS PREVALENT. IN DIVINE L EASING AND FINANCE LTD. (SUPRA), THIS COURT HAD ELOQUENTLY HIG HLIGHTED THE SAME IN THE FOLLOWING MANNER: THERE CANNOT BE TWO OPINIONS ON THE ASPECT THAT TH E PERNICIOUS PRACTICE OF CONVERSION OF UNACCOUNTED MONEY THROUGH THE MASQUERADE OR CHANNEL OF INVESTMENT IN THE SHARE CAPITAL OF A COMPANY MUST BE FIRMLY EXCORIATED BY THE REVENUE. EQUALLY, WHERE THE PREPONDERANCE OF EVIDENCE INDICATES ABSENCE OF CULPABILITY AND COMPLEXITY OF THE ASSESSEE IT SHOUL D NOT BE HARASSED BY THE REVENUES INSISTENCE THAT IT SHOULD PROVE THE NEGATIVE. IN THE CASE OF A PUBLIC ISSUE, THE COMPANY CONCERNED CANNOT BE EXPECTED TO KNOW EVERY DETAIL PERTAINING TO THE IDENTITY AS WEL L AS FINANCIAL WORTH OF EACH OF ITS SUBSCRIBERS. THE COMPANY MUST, HOWEVER, MAINTAIN AND MADE AVAILABLE TO THE ASSESSING OFFICER FOR HIS PERUSAL, ALL THE INFORMATION CONTAINED IN THE STATUTORY SHARE APPLICATION DOCUMENTS. IN THE CASE OF PRIVATE PLACEMENT THE LEGAL REGIME WOULD NOT BE THE SAME. ITA 1941/DEL/10 M/S MEGHA AKASH INSTRUMENTS P. LTD. 11 A DELICATE BALANCE MUST BE MAINTAINED WHILE WALKING THE TIGHTROPE OF SECTIONS 68 AND 69 OF THE INCOME TAX ACT. THE BURDEN OF PROOF CAN SELDOM BE DISCHARGED TO THE HILT BY THE ASSESSEE; IF THE ASSESSING OFFICER HARBOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRIPTION HE IS EMPOWERED, NAY DUTY BOUND. BUT IF THE ASSESSING OFFICER FAILS TO UNEART H ANY WRONG OR ILLEGAL DEALINGS, HE CANNOT OBDURATELY ADHERE TO HIS SUSPICIONS AND TREAT THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANY. 38. EVEN IN THE INSTANT CASE, IT IS PROJECTED BY TH E REVENUE THAT THE DIRECTORATE OF INCOME TAX (INVESTIGATION) HAD PURPORTEDLY FOUND SUCH A RACKET OF FLOATING BOGUS C OMPANIES WITH SOLE PURPOSE OF LANDING ENTRIES. BUT, IT IS UN FORTUNATE THAT ALL THIS EXERCISE IS GOING IN VAIN AS FEW MORE STEP S WHICH SHOULD HAVE BEEN TAKEN BY THE REVENUE IN ORDER TO FIND OUT CASUAL CONNECTION BETWEEN THE CASH DEPOSITED IN THE BANK A CCOUNTS OF THE APPLICANT BANKS AND THE ASSESSEE WERE NOT TAKEN . IT IS NECESSARY TO LINK THE ASSESSEE WITH THE SOURCE WHEN THAT LINK IS MISSING, IT IS DIFFICULT TO FASTEN THE ASSESSEE WIT H SUCH A LIABILITY. 39. WE MAY REPEAT WHAT IS OFTEN SAID, THAT A DELICA TE BALANCE HAS TO BE MAINTAINED WHILE WALKING ON THE TIGHT ROP E OF SECTIONS 68 AND 69 OF THE ACT. ON THE ONE HAND, NO DOUBT, SUCH KIND OF DUBIOUS PRACTICES ARE RAMPANT, ON THE OTHER HAND, MERELY BECAUSE THERE IS AN ACKNOWLEDGMENT OF SUCH P RACTICES WOULD NOT MEAN THAT IN ANY OF SUCH CASES COMING BEF ORE THE COURT, THE COURT HAS TO PRESUME THAT THE ASSESSEE I N QUESTIONS ARE INDULGED IN THAT PRACTICE. TO MAKE THE ASSESSEE RESPONSIBLE, THERE HAS TO BE PROPER EVIDENCE. IT IS EQUALLY IMPO RTANT THAT AN INNOCENT PERSON CANNOT BE FASTENED WITH LIABILITY W ITHOUT COGENT EVIDENCE. ONE HAS TO SEE THE MATTER FROM THE POINT OF VIE OF SUCH COMPANIES (LIKE THE ASSESSEE HEREIN) WHO INVIT E THE SHARE APPLICATION MONEY FROM DIFFERENT SOURCES OR EVEN PU BLIC AT LARGE. IT WOULD BE ASKING FOR A MOON IF SUCH COMPAN IES ARE ASKED TO FIND OUT FROM EACH AND EVERY SHARE APPLICA NT/ SUBSCRIBERS TO FIRST SATISFY THE ASSESSEE COMPANIES ABOUT THE SOURCE OF THEIR FUNDS BEFORE INVESTING. IT IS FOR T HIS REASON THE BALANCE IS STRUCK BY CATENA OF JUDGMENTS IN LAYING DOWN THAT THE DEPARTMENT IS NOT REMEDILESS AND IS FREE TO PROCEED TO REOPEN ITA 1941/DEL/10 M/S MEGHA AKASH INSTRUMENTS P. LTD. 12 THE INDIVIDUAL ASSESSMENT OF SUCH ALLEGED BOGUS SHA REHOLDERS IN ACCORDANCE WITH THE LAW. THAT WAS PRECISELY THE OBS ERVATION OF THE SUPREME COURT IN LOVELY EXPORT (SUPRA) WHICH HO LDS THE FIELD AND IS BINDING. 40. IN CONCLUSION, WE ARE OF THE OPINION THAT ONCE ADEQUATE EVIDENCE/ MATERIAL IS GIVEN, AS STATED BY US ABOVE, WHICH WOULD PRIMA FACIE DISCHARGE THE BURDEN OF THE ASSESSEE IN PROVING THE IDENTITY OF SHAREHOLDERS, GENUINENESS OF THE TRANSA CTION AND CREDITWORTHINESS OF THE SHAREHOLDERS, THEREAFTER IN CASE SUCH EVIDENCE IS TO BE DISCARDED OR IT IS PROVED THAT IT HAS CREATED EVIDENCE, THE REVENUE IS SUPPOSED TO MAKE THOROUGH PROBE OF THE NATURE INDICATED ABOVE BEFORE IT COULD NAIL THE ASSESSEE AND FASTEN THE ASSESSEE WITH SUCH A LIABILITY UNDER SEC TION 68 AND 69 OF THE ACT. 41. DURING THE ARGUMENTS, WE HAD POSED THESE QUERIE S. LEARNED COUNSEL APPEARING FOR THE REVENUE UNDERSTOO D THE LIMITATION OF THEIR CASE. FOR THIS REASON A FERVENT PLEA WAS MADE THAT THIS CASE BE REMITTED BACK TO THE AOS TO ENAB LE HIM TO MAKE FURTHER INVESTIGATION. 42. HOWEVER, IN THE FACTS AND CIRCUMSTANCES OF THES E CASES, IT WOULD BE DIFFICULT TO GIVE SUCH AN OPPORTUNITY TO T HE REVENUE. THERE ARE NUMBER OF REASONS FOR DENYING THIS COURSE OF ACTION WHICH ARE MENTIONED BELOW: (I) IT IS NOT A CASE WHERE SOME PROCEDURAL DEFECT OR IRREGULARITY HAD CREPT IN THE ORDER OF THE AO. HAD THAT BEEN THE SITUATION, AND THE ADDITIONS MADE BY THE AO WERE DELETED BECAUSE OF SUCH INFIRMITY, VIZ., VIOLATION OF PRINCIPLE OF NATURAL JUSTICE, THE COURT COULD HAVE GIVEN A CHANCE TO THE AO TO PROCEED AFRESH CURING SUCH PROCEDURAL IRREGULARITY. ONE EXAMPLE OF SUCH A CASE WOULD BE WHEN STATEMENT OF A WITNESS IS RELIED UPON, BUT OPPORTUNITY TO CROSS-EXAMINE IS NOT AFFORDED TO THE ASSESSEE. (II) ON THE CONTRARY, IT IS A CASE WHERE THE AO(S) DID NOT COLLECT THE REQUIRED EVIDENCE WHICH THEY WERE SUPPOSED TO DO. TO PUT IT OTHERWISE, ONCE ITA 1941/DEL/10 M/S MEGHA AKASH INSTRUMENTS P. LTD. 13 THE ASSESSEE HAD DISCHARGED THEIR ONUS AND THE BURDEN SHIFTED TO THE AO(S), THEY COULD NOT COME OUT WITH ANY COGENT EVIDENCE TO MAKE THE ADDITIONS. NO DOUBT, AS INDICATED BY US ABOVE, THE AO(S) COULD HAVE EMBARK UPON FURTHER INQUIRY. IF THAT IS NOT DONE AND THE AO(S) DID NOT CAR TO DISCHARGE THE ONUS WHICH WAS LAID DOWN, FOR THIS NEGLIGENCE ON THE PART OF THE AO(S), HE CANNOT BE PROVIDED WITH FRESH INNINGS. . 5.6. LEARNED COUNSEL THEREAFTER CONTENDS THAT THE F ACTS AND CIRCUMSTANCES OF THE ASSESSEES CASE AND THE JUDGMENT RENDERED BY HONBLE DELHI HIGH COURT IN THE CASE OF KAMDHENU STEEL & ALLOYS LTD. (SUPRA) ARE IDENTICAL. THE ASSESSEE HAS DISCHARGED ITS INITIAL ONUS; ALL T HE SHARE APPLICANTS ARE INCORPORATE COMPANIES, ASSESSED TO INCOME-TAX; THEI R PAN NUMBERS, INCOME-TAX ORDERS AND BANK STATEMENTS, ROC RECORD H AVING BEEN FURNISHED BEFORE AO, THE ADDITIONS HAVE RIGHTLY BEEN DELETED BY CIT(A). 7. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE EVIDENCE FILED BY THE ASSESSEE BEFORE AO HAS BEEN DETAILED ABOVE. IN OUR VIEW THE AO HAS DER IVED ADVERSE INFERENCE ON THE BASIS OF DIT(INV.) REPORT, WHICH MAY BE A BA SIS FOR REOPENING OF THE ASSESSMENT BUT THIS REPORT WITHOUT ANY CORROBORATIV E MATERIAL CANNOT ASSUME THE EVIDENTIARY VALUE TO CONFIRM THE ADDITIO NS. THE RETURNING OF LETTERS AND SUMMONS SENT BY AO DO NOT TURN ANYTHIN G AGAINST ASSESSEE AS HELD BY HONBLE HIGH COURT. AO HAS ASSUMED SEC. 68 TO CAST AN ABSOLUTE AND INFALLIBLE BURDEN ON THE ASSESSEE NOT ONLY TO P RODUCE EVIDENCE BUT TO PHYSICALLY ENSURE THE PRESENCE OF THE SHARE APPLICA NTS, WHICH IN OUR VIEW IS NOT CONTEMPLATED BY SEC. 68. THE BURDEN IS INITIAL IN NATURE WHICH HAS BEEN AMPLY DESCRIBED BY HONBLE DELHI HIGH COURT. IN OUR CONSIDERED VIEW, THE ASSESSEE HAS DISCHARGED ITS INITIAL ONUS OF THESE G UIDELINES. ITA 1941/DEL/10 M/S MEGHA AKASH INSTRUMENTS P. LTD. 14 7.1. THE AOS OBSERVATION THAT MERE MENTIONING OF P AN NUMBER IS NOT SUFFICIENT, CANNOT BE A BASIS FOR SUCH ADDITIONS AS APART FROM PAN NUMBER, THE ASSESSEE HAS FILED VARIOUS OTHER EVIDENCES, LIK E - ROC RECORD, COPIES OF ASSESSMENT RECORD OF THE SHARE APPLICANTS; BANK REC ORD. AO FROM HIS SIDE HAS DONE NOTHING TO VERIFY THEM EVEN FROM THE RECO RD OF INCOME-TAX DEPARTMENT. THE OBSERVATION OF AO THAT ASSESSEE HAS MERELY PRODUCED CONFIRMATORY LETTER IS UNFOUNDED INASMUCH AS THE A SSESSEE HAS SUBMITTED VARIOUS OTHER DOCUMENTS TO SUBSTANTIATE THE SHARE A PPLICATIONS. IN OUR VIEW, THE INFERENCES AND OBSERVATIONS MADE BY AO TO MAKE THE ADDITION ARE NOT PROPER. RESPECTFULLY FOLLOWING HONBLE DELHI HIGH C OURT IN THE CASE OF KAMDHENU STEEL & ALLOYS LTD. (SUPRA) AND OTHER FACT S AND CIRCUMSTANCES, AS NARRATED ABOVE, WE HOLD THAT THE ASSESSEE HA DIS CHARGED ITS ONUS AS CAST BY SEC. 68 IN PROVING THE SHARE APPLICATIONS. CIT(A )S ORDER DELETING THE ADDITION U/S 68 IS UPHELD. 8. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 03-02-2012. SD/- SD/- ( K.D. RANJAN ) ( R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 03-02-2012. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR ITA 1941/DEL/10 M/S MEGHA AKASH INSTRUMENTS P. LTD. 15