ITO, New Delhi V. P J Logistic Pvt. Ltd., New Delhi

ITA 2008/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3852 (ITAT-DELHI)
• Duration Of Justice: 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 19-03-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 03-05-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR SUDHA KUMARI
• Assessee Lawyers: M L DUJARI
• Keywords: Corroborative evidences; Accommodation entries; Non compliance; Onus to prove; Set aside
• Section: 234B; 133(6); 207; 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F: NEW DELHI) BEFORE SHRI R. P. TOLANI, JUDICIAL MEMBER AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER ITA NO.2008 /DEL/ 2010 (ASSESSMENT YEAR : 2005-06) ITO VS. P J LOGISTIC PVT. LTD WARD-14(1) 258, FUNCTIONAL INDUSTRIAL ESTATE R. NO. 290, C. R. BUILDING PATPAR GANJ NEW DELHI NEW DELHI PAN: (APPELLANT) (RESPONDENT) ASSESSEE BY :SHRI M. L. DUJARI, C.A REVENUE BY : DR. SUDHA KUMARI, CIT. DR ORDER PER T. S. KAPOOR,AM: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-XVII, NEW DELH I DATED 24.02.2010 FOR THE ASSESSMENT YEAR 2005-06. THE GROUNDS OF APP EAL TAKEN BY REVENUE ARE AS UNDER: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) ERRED IN DELETING THE ADDITION OF RS.2,25,00,000/- MADE ON ACCOUNT OF SHARE APPLICATI ON MONEY U/S 68 OF THE INCOME TAX ACT 1961. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD. CIT (A) ERRED IN IGNORING THE FACT THAT THE ITA NO.2008/DEL/2010 2 JUDGMENT OF THE SUPREME COURT IN THE CASE OF LOVELY EXPORTS (P) LTD. 216 CTR 199 (SC) CANNOT BE EXTENDED TO A S ITUATION WHERE A MECHANISM HAS BEEN FORMED TO INTRODUCE UNA CCOUNTED MONEY IN THE BOOKS OF ACCOUNTS WITH THE HELP OF ACCOMMODATION ENTRY PROVIDERS, WHICH HAS BEEN EXPOS ED BY DEEP AND DETAILED INVESTIGATION CARRIED OUT BY THE AO. THE ASSESSEE COMPANY HAS INCREASED ITS SHARE CAPITA L BY ISSUING 1,50,000/- SHARES OF FACE VALUE OF RS.10/- AT A PREMIUM OF RS.140/- PER SHARES. THUS TOTAL CONTRIBUTION FRO M THE FRESH SHARE HOLDERS WERE TO THE TUNE OF RS.2,25,00,000/-. ON BEING ASKED TO PRODUCE THE INVESTORS, THE COMPANY FAILED IN SPITE OF VARIOUS OPPORTUNITIES AFFORDED. NOTICES U/S 133(6) WERE SENT TO THE RESPECTIVE COMPANIES. EXCEPT ONE ALL NOTICES WE RE RECEIVED BACK UNSERVED WHICH FACT WAS CONFRONTED TO THE ASSE SSEE AND WAS ASKED TO PRODUCE THE DIRECTORS OF THESE COMPANI ES. THE DIRECTORS WERE NOT PRODUCED. ON ENQUIRIES IN RESPEC T OF PARTIES HAVING DELHI ADDRESSES IT WAS FOUND THAT NO SUCH CO MPANY EXISTED ON THE ADDRESSES GIVEN BY THE ASSSESSEE. TH EREFORE THE VERY EXISTENCE OF THE PARTIES INVESTING IN THE SHAR E CAPITAL IN THE ASSESSEE COMPANY WAS NOT PROVED. THEREFORE, AS HELD BY THE ITAT IN ITS JUDGMENT DATED 31.12.2009 IN ITA NO. 2860/DEL/2009 IN THE CASE M/S OMEGA BIOTECH LTD. TH E IDENTITY OF THE SHARE APPLICANTS IS NOT PROVED. FILLING OF C ERTAIN DOCUMENTS INDICATING THE MERE PAPER IDENTITY OF THE SHARE APPLICANTS IS MEANINGLESS WHEN THE PHYSICAL EXISTEN CE OF THE SHARE APPLICANTS IS NOT PROVED. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS FAILED TO APPRECIATE THAT THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF M/S LOVELY EXPO RTS (P) LTD. IS NOT APPLICABLE WHERE SHARE APPLICATION MONE Y IS NOT RECEIVED IN A PUBLIC ISSUE. 4. THE APPELLANT CRAVES TO BE ALLOWED TO ADD, DELET E OR AMEND ANY OTHER GROUNDS OF APPEAL. ITA NO.2008/DEL/2010 3 2. THE BRIEF PARTICULARS OF THE CASE ARE THAT THE A SSESSEE FILED ITS RETURN OF INCOME ON 31.03.2006 DECLARING AN INCOME OF RS.4,42 ,792/-. THE CASE WAS SELECTED FOR SCRUTINY. 3. DURING ASSESSMENT PROCEEDINGS, THE AO OBSERVED T HAT ASSESSEE HAD INCREASED ITS SHARE CAPITAL BY ISSUING 150000 EQUIT Y SHARES OF RS.10/- EACH AT A PREMIUM OF RS.140/- PER SHARE AND THUS, HAD RAISE D A FRESH SHARE CAPITAL OF RS.2,25,00,000/-. THE ASSESSEE WAS ASKED TO FURNISH THE NAMES OF THE PERSONS FROM WHOM SHARE CAPITAL WAS RAISED AND IN R ESPONSE TO THAT THE ASSESSEE FILED DETAILS OF SHARE HOLDERS WHICH ARE D ETAILED AT PAGE 1 AND 2 OF THE ASSESSMENT ORDER. THE ASSESSEE ALSO FILED CONFI RMATION FROM THE ABOVE SAID PARTIES. THE AO IN ORDER TO VERIFY THE GENUINE NESS OF THE CONFIRMATION LETTER ISSUED NOTICES U/S 133 (6) CALLING THE PARTI ES FOR PROVIDING INFORMATION. ALL THE NOTICES U/S 133(6) WERE SENT TO THE RESPECT IVE COMPANIES THROUGH REGISTERED POST ON 20.07.2007 AND OUT OF TEN PARTIE S REPLY WAS RECEIVED FROM ONLY ONE PARTY AND NOTICES ISSUED TO OTHER PARTIES WERE RECEIVED BACK WITH REMARKS NO SUCH COMPANY OR LEFT OR NOT KNOWN. ON 14.09.2007, THE COUNSEL OF THE ASSESSEE WAS APPRAISED WITH THESE FA CTS. THE ASSESSEE VIDE NOTE SHEET ENTRY DATED 14.09.2007 WAS ASKED TO PROD UCE THE DIRECTORS OF THE COMPANIES WHO HAD CONTRIBUTED TO THE SHARE CAPITAL AND THE CASE WAS POSTED FOR HEARING ON 27.09.2007. ITA NO.2008/DEL/2010 4 4. MEANWHILE, THE AO CONDUCTED ENQUIRIES AT HIS OWN AND FOUND THAT NO SUCH COMPANY EXISTED ON THE ADDRESSES GIVEN BY THE ASSESSEE. THEREFORE, THE AO HELD THAT EXISTENCE AND IDENTITY OF THE PARTIES INVESTING IN THE SHARE CAPITAL OF THE ASSESSEE COMPANY WERE NOT PROVED AND NON COMPLIANCE TO THE NOTICES U/S 133(6) ALSO PROVE NON GENUINENESS OF TH E TRANSACTIONS AND ALSO HELD THAT CREDITWORTHINESS WAS ALSO NOT PROVED. THE REFORE AO ISSUED A SHOW CAUSE NOTICE TO ASSESSEE VIDE LETTER DATED 03.12.20 07 TO PRODUCE THE DIRECTORS OF THE SAID COMPANIES AND GAVE ONE MORE OPPORTUNITY . IT WAS ALSO STATED IN THE NOTICE, THAT IF THE ABOVE PERSONS ARE NOT PRODU CED ON 10.12.2007, IT SHALL BE PRESUMED THAT THE ASSESSEE IS NOT ABLE TO DISCHA RGE ITS ONUS AND PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT WILL BE APPLIED AND THE ENTIRE AMOUNT RECEIVED FROM SHAREHOLDERS AS SHARE CAPITAL AND SHA RE PREMIUM SHALL BE ADDED IN ITS INCOME AS CASH CREDITS. ON 10.12.2007, THE AR OF THE ASSESSEE APPEARED AND SOUGHT AN ADJOURNMENT FOR ONE WEEK STA TING THAT THESE COMPANIES WERE UNDERSTOOD TO HAVE SHIFTED THEIR OFF ICES. HOWEVER, NO NEW ADDRESSES WERE PROVIDED AND THE CASE WAS FIXED FOR HEARING ON 14.12.2007. THE COUNSEL HAD FURNISHED PHOTO COPIES OF INCOME TA X RETURNS, AUDITED FINANCIAL STATEMENTS WITH ANNEXURES AND AUDIT REPOR TS, COPY OF BANK STATEMENTS AND COPY OF BOARD RESOLUTIONS IN THIS RE GARD. HOWEVER, THE DIRECTORS OF THESE COMPANIES WERE NOT PRODUCED AND IT WAS SUBMITTED THAT ITA NO.2008/DEL/2010 5 SINCE THE OPERATIONS OF ALL THESE COMPANIES EXISTS OUTSIDE DELHI, IT WAS NOT PRACTICABLE FOR DIRECTORS TO PERSONALLY ATTEND THE PROCEEDINGS. 5. FROM THE PERUSAL OF BANK STATEMENT OF THE ABOVE COMPANIES THE AO OBSERVED THAT JUST BEFORE THE DEBIT ENTRY FAVOURING THE ASSESSEE THERE WAS A CREDIT ENTRY OF THE SIMILAR AMOUNT AND THE RETURN O F INCOME ALSO DOES NOT REFLECT THEIR CAPACITY TO INVEST SUCH A HUGE AMOUNT IN THE SHARE CAPITAL OF ASSESSEE COMPANY. IN VIEW OF THE ABOVE, FACTS AND F INDING, THE AO MADE THE ADDITION OF RS.2,25,00,000/- U/S 68 OF THE ACT. 6. DISSATISFIED WITH THE ORDER, THE ASSESSE FILED A PPEAL BEFORE CIT (A) AND SUBMITTED VARIOUS SUBMISSIONS AND RELIED UPON A NUMBER OF CASE LAWS AND IT WAS ARGUED THAT ASSESSEE HAD SUBMITTED ALL R ELEVANT DOCUMENTS AND, THEREFORE, HAD COMPLETED ITS ONUS. THE LD. CIT (A) AFTER GOING THROUGH THE SUBMISSIONS OF ASSESSEE DELETED THE ADDITIONS MADE BY AO BY HOLDING AS UNDER: 5. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND CO NSIDERED THE DETAILED WRITTEN SUBMISSIONS OF THE AR IN THIS REGA RD. MY OBSERVATIONS ON THIS ISSUE ARE AS UNDER: (I) I FIND THAT THE APPELLANT RECEIVED SHARE CAPITA L FROM THE FOLLOWING COMPANIES AND ALLOTTED THE SHARES TO THEM . IN SUPPORT, CERTAIN SUPPORTING EVIDENCES WERE ALSO FURNISHED. T HE DETAIL OF SHARE CAPITAL AND EVIDENCES FURNISHED ARE AS UNDER: S.NO. NAME ADDRESS AMOUNT DISTINCTI VE NO OF SHARES ALLOTTEE EVIDENCES FURNISHED BY THE APPELLANT ITA NO.2008/DEL/2010 6 1 MANGALAM APARTMENT LTD. 7B, DOCTORS LANE GOLE MARKET, NEW DELHI 110001 30,00,000/- 395201 415200 COPIES OF APPLICATION FOR SHARES, I. T. RETURN ACK, AUDITED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT, CHEQUE NO. ISSUED BANK STATEMENT, BOARD RESOLUTION FOR INVESTMENT IN SHARES AND CONFIRMATION LETTER WERE FILED. PAN:AAACM8493N WARD 6(2), NEW DELHI 2 M/S ARTILLEGENCE BIO- INNNOVATION LTD. AMRIT DHAM, SUITE NO.5 & 6 P.O DANESH SEKH LANE NITYANAND NAGAR, BAKULTOLLA HOWRAH- 711109 9,00,000/- 415201 421200 COPIES OF APPELLANT FOR SHARES, I. T. RETURN ACK., P & L A/C, BALANCE SHEET, CHEQUE NO. ISSUED, BOARD RESOLUTION FOR INVESTMENT IN SHARES AND CONFIRMATION LETTER WERE FILED. PAN: AAC17359F, WARD2 (2), KOLKATA. 3 N. E. ELECTRONICS LTD. JAJODIA BHAWAN, TOKOBARI, NEAR RAILWAY GATE NO.3 GAUWAHATI 781001 9,00,000/- 421201 427200 COPIES OF APPELLANT FOR SHARES, I. T. RETURN ACK.,AUDITED BALANCE SHEET AND P & L A/C, CHEQUE NO. ISSUED, BOARD RESOLUTION FOR INVESTMENT IN SHARES AND CONFIRMATION LETTER WERE FILED. PAN: AACN6695B,, WARD;4 (1), GUWAHATI. 4 CHRYSTER ELECTRICAL COMPONENTS PVT. LTD. 7B, DORCTORS LANE, GOLE MARKET, NEW DELHI- 110001 30,00,000/- 427201 447200 COPIES OF APPELLANT FOR SHARES, I. T. RETURN ACK.,AUDITED BALANCE SHEET AND P & L A/C, CHEQUE NO. ISSUED, BOARD RESOLUTION FOR INVESTMENT IN SHARES AND CONFIRMATION LETTER WERE FILED. PAN:AAACC5395D, WARD;3 (3),NEW DELHI. ITA NO.2008/DEL/2010 7 5 VENUS OVERSEAS LTD. C-48, PAMPOSH ENCLAVE, NEW DELHI- 110048 15,00,000/- 447201 457200 COPIES OF APPELLANT FOR SHARES, I. T. RETURN ACK.,AUDITED BALANCE SHEET AND P & L A/C, CHEQUE NO. ISSUED, BOARD RESOLUTION FOR INVESTMENT IN SHARES AND CONFIRMATION LETTER WERE FILED. PAN: AACV0872E, WARD; 17 (1), NEW DELHI. 6 EXXON ELECTRICLAS PVT. LTD. C-48 PAMPOSH ENCLAVE, NEW DELHI- 110048 12,00,000/- 457201 465200 COPIES OF APPELLANT FOR SHARES, I. T. RETURN ACK.,AUDITED BALANCE SHEET AND P & L A/C, CHEQUE NO. ISSUED, BOARD RESOLUTION FOR INVESTMENT IN SHARES AND CONFIRMATION LETTER WERE FILED. PAN:AAACE280F, WARD;11 (2), NEW DELHI. 7 SUTLEJ AGRO PRODICTS LTD. 7B, DOCTORS LANE, GOLE MARKET, NEW DELHI- 110001 30,00,000/- 465201 485200 COPIES OF APPELLANT FOR SHARES, I. T. RETURN ACK.,AUDITED BALANCE SHEET AND P & L A/C, CHEQUE NO. ISSUED, BOARD RESOLUTION FOR INVESTMENT IN SHARES AND CONFIRMATION LETTER WERE FILED. PAN:AAACS4232K, WARD;9 (4), NEW DELHI. 8 JAGADISHWAR PHARMACEUTI CAL WORKS LTD 303, FRUSTOS TRADE CENTRE, S. R. C. B. ROAD GUWAHATI- 781001 30,00,000/- 485201 505200 COPIES OF APPELLANT FOR SHARES, I. T. RETURN ACK., AUDITED BALANCE SHEET AND P & L A/C, CHEQUE NO. ISSUED, BOARD RESOLUTION FOR INVESTMENT IN SHARES AND CONFIRMATION LETTER WERE FILED. PAN:AAABCJ3731H WARD;4 (1), GUWAHATI. 9 EPIC CREATIONS PVT. LTD. 131, VARDHMN PLAZA,4 30,00,000/- 525201 545200 COPIES OF APPELLANT FOR SHARES, I. T. RETURN ACK.,AUDITED BALANCE SHEET ITA NO.2008/DEL/2010 8 KD BLOCK, PITAMPURA DELHI AND P & L A/C, CHEQUE NO. ISSUED, BOARD RESOLUTION FOR INVESTMENT IN SHARES AND CONFIRMATION LETTER WERE FILED. PAN:AAACE8174A, WARD:11, NEW DELHI. COPIES OF APPELLANT FOR SHARES, I. T. RETURN ACK.,AUDITED BALANCE SHEET AND P & L A/C, CHEQUE NO. ISSUED, BOARD RESOLUTION FOR INVESTMENT IN SHARES AND CONFIRMATION LETTER WERE FILED. PAN:AAAGCS0979P, WARD:8 (3), MUMBAI. (II) FURTHER I FIND THAT THE APPELLANT HAS FILED THE FO LLOWING DOCUMENTS DURING THE COURSE OF ASSESSMENT PROCEEDIN GS TO PROVE THE TRANSACTIONS. (I) CONFIRMATIONS FROM ALL THE SHARE SUBSCRIBES, WHICH ALSO CONTAIN THE PERMANENT ACCOUNT NUMBERS OF THE SHARE SUBSCRIBERS. (II) PHOTOCOPIES OF THE ACKNOWLEDGEMENTS OF THE INCOME T AX RETURNS FILED BY THE SHARE SUBSCRIBERS. (III) COPIES OF THE AUDITED FINANCIAL STATEMENT WITH ANNEXURES AND AUDIT REPORT FOR THE RELEVANT PERIOD OF THE SHARE SUBSCRIBERS. (IV) COPIES OF THE BANK STATEMENTS OF SHARE SUBSCRIBERS FOR THE RELEVANT PERIOD EVIDENCING THE INVESTMENTS IN THE SHARES OF THE COMPANY. (V) COPIES OF THE BOARD RESOLUTION PASSED BY THE SUBSCR IBER COMPANIES FOR INVESTMENT IN THE ASSESSEE COMPANY. ITA NO.2008/DEL/2010 9 (VI) COPY OF THE RETURN OF ALLOTMENTS IN FORM NO.2 SUBMITTED TO ROC REGARDING ALLOTMENT OF SHARES. (III) ON GOING THROUGH THE CASE LAWS AS RELIED UPO N BY ID. AR, I FIND THAT THE BURDEN OF PROOF WITH REFERE NCE TO SHARE CAPITAL, PARTICULARLY SHARE ALLOTTED IN FAVOU R OF COMPANIES ARE LESSER THAN THE ORDINARY CASH CREDIT. IN THE CASE OF CIT VS. DIVINE LEASING & FINANCE LTD. 207 C TR 38, THE HON'BLE JURISDICTIONAL HIGH COURT OBSERVED AS U NDER :- 'THERE CANNOT BE TWO OPINIONS ON THE ASPECT THAT TH E PERNICIOUS PRACTICE OF CONVERSION OF UNACCOUNTED MO NEY THROUGH THE MASQUERADE OR CHANNEL OF INVESTMENT IN THE SHARE CAPITAL OF A COMPANY MUST BE FIRMLY EXCORIATE D BY THE REVENUE. EQUALLY, WHERE THE PREPONDERANCE OF EVIDEN CE INDICATES ABSENCE OF CULPABILITY AND COMPLEXITY OF THE ASSESSEE IT SHOULD NOT BE HARASSED BY THE REVENUE'S INSISTENCE THAT IT SHOULD PROVE THE NEGATIVE. IN TH E CASE OF PUBLIC ISSUE, THE COMPANY CONCERNED CANNOT BE EXPEC TED TO KNOW EVERY DETAILS PERTAINING TO THE IDENTITY AS WE LL AS FINANCIAL WORTH OF EACH OF ITS SUBSCRIBERS. THE COM PANY MUST, HOWEVER, MAINTAIN AND MAKE AVAILABLE TO THE ASSESSING OFFICER FOR HIS PERUSAL, ALL THE INFORMAT ION CONTAINED IN THE STATUTORY SHARE APPLICATION DOCUME NTS. IN THE CASE OF PRIVATE PLACEMENT THE LEGAL REGIME WOUL D NOT BE THE SAME. A DELICATE BALANCE MUST BE MAINTAINED WHI LE WALKING THE TIGHTROPE OF SECTION 68 AND 69 OF THE I NCOME TAX ACT. THE BURDEN OF PROOF CAN SELDOM BE DISCHARG ED TO THE HILT BY THE ASSESSEE; IF THE ASSESSING OFFICER HARBOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRIPTION HE IS EMPOWERED, NAY DUTY-BOUND, TO CARRY OUT THOROUGH INVESTIGATIONS. BUT IF THE ASSESSING OFFICER FAILS TO UNEARTH ANY WRONG OR ILLEGAL DEALINGS, HE CANNOT OBDURATELY ADHERE TO HIS SUSPICIONS AND TREAT THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANY.' (IV) I FURTHER FIND THAT WITH REGARD TO THE ISSUE O F SHARE APPLICATION MONEY, WHILE DISMISSING THE SLP FILED B Y THE DEPARTMENT, THE HON'BLE SUPREME COURT IN THE CASE O F CIT VS. LOVELY EXPORTS (P) LTD. (216 CTR 195) EMPHASIZE D THAT ITA NO.2008/DEL/2010 10 THE I.T. DEPARTMENT SHOULD PROCEED TO ASSESS THE IN COME EVEN IN ALLEGED BOGUS SHARE HOLDERS IN THE HANDS OF SHARE APPLICANTS AND NOT IN THE HANDS OF THE COMPANY ALLO TTING THE SHARES. THE RELEVANT PORTION OF HON'BLE SUPREME COU RT'S DECISION IS QUOTED BELOW: CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDIS CLOSED INCOME U/ 68 OF IT ACT, 1961? WE FIND NO MERIT IN T HIS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT I F THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPA NY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN T O THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPE N THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. HENC E, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT. ' (V) I FIND THAT ALL THE SHARE APPLICANTS ARE LIMITE D/ PRIVATE LIMITED COMPANIES, WHICH ARE SEPARATE AND LEGAL ENT ITIES. THEY ARE ASSESSED TO TAX BY DIFFERENT AOS. ALL THE SHARE CAPITAL PASSED THROUGH THE BANKING CHANNELS. THE AP PELLANT HAS PROVIDED THE CONFIRMATION LETTERS WITH SUPPORTI NG EVIDENCE, LIKE COPY OF ACKNOWLEDGMENT OF LT. RETURN , PAN DETAIL, BANK STATEMENT ETC. THE SHARES WERE ALSO AL LOTTED TO SUCH APPLICANT COMPANIES. THUS, THE NECESSARY EVIDE NCES WERE PROVIDED TO THE AO DURING COURSE OF ASSESSMENT PROCEEDING. CONSIDERING THE JUDICIAL PRONOUNCEMENTS QUOTED IN T HIS APPELLATE ORDER, I FIND THAT THE COURTS ARE LIBERAL WITH REFERENCE TO SHARE CAPITAL APPLIED BY THE LIMITED/P RIVATE LIMITED COMPANIES THAN THE ORDINARY CASH CREDITORS. IN THE LIGHT OF JUDICIAL PRONOUNCEMENTS, I FIND THAT THE E VIDENCES FURNISHED BY THE APPELLANT DURING COURSE OF ASSESSM ENT PROCEEDING IS SUFFICIENT TO PROVE THE SHARE CAPITAL PAID BY THE AFORESAID COMPANIES. IT WOULD BE UNJUSTIFIED TO UPH OLD THE ADDITION MERELY ON THE REASON THAT THE ASSESSEE FAI LED TO PRODUCE THE DIRECTORS OF SUCH SHARE APPLICANT COMPA NIES, PARTICULARLY WHEN THERE WAS NEITHER EVIDENCE NOR AL LEGATION THAT SUCH COMPANIES WERE INVOLVED IN PROVIDING ACCOMMODATION ENTRIES. ITA NO.2008/DEL/2010 11 IF AT ALL THERE IS ANY DISCREPANCY IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE INVESTING COMPANIES, THE AO IS FR EE TO TAKE STEPS FOR REOPENING OF THE ASSESSMENT OF THE R ESPECTIVE SHAREHOLDERS/INVESTING COMPANIES. HOWEVER, THE APPE LLANT CANNOT BE PENALIZED FOR THE MISTAKES/FAULTS COMMITT ED BY THE SHARE HOLDERS. AFTER CONSIDERING THE TOTALITY OF AL L THE FACTS AND CIRCUMSTANCES AND THE JUDICIAL PRONOUNCEMENTS M ADE BY JURISDICTION DELHI HIGH COURT AND HON'BLE SUPREME C OURT, I HOLD THAT THE ADDITION OF RS. 2,25,00,000/- MADE BY THE ASSESSING OFFICER IS NOT SUSTAINABLE. HENCE, THE SA ME IS DELETED. THE AO IS DIRECTED TO TAKE THE SUITABLE AC TION ABOUT SHARES SUBSCRIBERS COMPANIES BY INTIMATING THE AOS OF THOSE COMPANIES REGARDING INVESTMENTS MADE IN THE APPELLANT COMPANY. ACCORDINGLY, GROUND NO. 2 TO 4 A RE ALLOWED. 6. GROUND NO. 5 RELATES TO CHARGING OF INTEREST U/S 234B OF THE INCOME TAX ACT, 1961, WHICH IS CONSEQUENTIAL IN NATURE. 7. GROUND NO.1,7 AND 8 ARE GENERAL IN NATURE WHICH REQUIRE NO SPECIFIC FINDINGS. 8. IN THE RESULT, APPEAL IS ALLOWED. 7. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. A T THE OUT SET, THE LD. DR SUBMITTED THAT LD. CIT (A) HAD IGNORED CERTAIN V ITAL POINTS AND IN THIS RESPECT ASSESSMENT ORDER WAS READ AND FACTS WERE BR OUGHT TO THE NOTICE OF THE BENCH AND ORDERS OF CIT(A) WAS ALSO READ IT WAS ARG UED THAT CIT (A) HAS THROWN AWAY FINDINGS OF AO REGARDING INCOME OF INVE STIGATING COMPANIES. THE CASE LAW OF ANAND WOOLLEN MILLS (P.) LTD. REPOR TED IN (2002) 120 TAXMAN 790 (DELHI) AS DECIDED BY DELHI HIGH COURT W AS CITED AND ON THE STRENGTH OF THIS JUDGMENT IT WAS ARGUED THAT SHARE APPLICATION MONEY CAN BE ITA NO.2008/DEL/2010 12 TAXED IN THE HANDS OF COMPANY. TO STRENGTHEN THE AR GUMENTS RELIANCE WAS ALSO PLACED ON THE FOLLOWING CASE LAWS: A) NOVA PROMOTERS AND FINLEASE (P) LTD. REPORTED IN 18 TAXMANN.COM 217 (DELHI) B) DHINGRA GLOBAL CREDENCE P. LTD. VS. ITO REPORTED IN 001 ITR (TRIB) 0529- (ITAT DEL) B C) HOTEL QUEEN ROAD P. LTD. VS. ITO REPORTED IN 14 ITR (TRIB) 124 (ITAT, DEL. C) D) ITO VS. OMEGA BIOTECH LTD. REPORTED IN 04 ITR (T RIB0 72 (ITAT DEL B) 8. IT WAS ARGUED THAT ON THE BASIS OF DOCUMENTS SUBMIT TED BY ASSESSEE THE AO CONDUCTED ENQUIRIES AND FOUND THAT NOBODY EXISTE D AT THE ADDRESSES PROVIDED BY ASSESSEE AND AO FOUND FROM THE BANK STA TEMENTS THAT BEFORE ISSUE OF CHEQUES TO ASSESSEE THERE WAS CREDIT OF SI MILAR AMOUNT. IN VIEW OF THE ABOVE THE LD. DR ARGUED THAT NEITHER IDENTITY N OR GENUINENESS AND NOR CREDITWORTHINESS OF THE SHARE HOLDERS WERE PROVED A ND, THEREFORE, LD. CIT (A) HAS WRONGLY DELETED THE ADDITION. THE LD. AR ON THE OTHER HAND RELIED UPON THE ORDER OF CIT (A). 9. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT AO TOOK EVERY STEP T O VERIFY THE IDENTITY AND GENUINENESS OF THE PARTIES SO AS TO JUDGE THE GENUI NENESS OF TRANSACTIONS. THE ASSESSEE SUBMITTED VARIOUS DOCUMENTS IN SUPPORT OF ITS CONTENTIONS THAT THE PARTIES WERE GENUINE. DESPITE THE FACT THAT THE ASS ESSEE COMPANY RAISED ITA NO.2008/DEL/2010 13 SIGNIFICANT AMOUNTS FROM THESE COMPANIES IT WAS NOT ABLE TO PRODUCE THE DIRECTORS OF THESE COMPANIES FOR EXAMINATION BY AO. THE AO ON THE BASIS OF ANALYSIS OF ENTRIES IN THE BANK STATEMENT OF DEPOSI TORS ALSO HELD THAT DEPOSITORS MIGHT NOT HAVE LEGITIMATE SOURCES FOR MA KING INVESTMENTS IN THE ASSESSEE COMPANY. MOREOVER, AO OBSERVED THAT THE IN COME LEVELS OF THESE INVESTING COMPANIES WERE ALSO MEAGER TO JUSTIFY ITS INVESTMENTS. THE LD. CIT (A) HAS TOTALLY RELIED UPON THE PAPERS FILED BY ASSESSEE WITHOUT APPRECIATING THE FACT THAT DIRECTORS WERE NOT PRODU CED AND AO HAD HELD THAT AT THE ADDRESSES PROVIDED BY ASSESSEE, THERE WAS NO SUCH COMPANY. IT IS STRANGE TO NOTE THAT A PERSON WHO IS ABLE TO PROCUR E SIGNIFICANT AMOUNTS AS SHARE CAPITAL IS NOT ABLE TO PRODUCE THEM BEFORE AO SPECIFICALLY IN VIEW OF THE FACT THAT INVESTING COMPANIES ARE SHAREHOLDERS (PART OWNERS OF ASSESSEE COMPANY ) AND ANY ADDITION IN THE HANDS OF ASSESSEE COMPANY WILL HURT THEM ALSO AS PART OWNERS OF ASSESSEE COMPANY. 9. HONBLE ITAT IN THE CASE OF DHINGRA GLOBAL CREDE NCE P. LTD. VS. ITO REPORTED IN 001 ITR (TRIB) 0529- (ITAT DEL) B H AS HELD AS UNDER: THE ASSESSEE BEING A PRIVATE LIMITED COMPANY AND THE BASIC STRUCTURE OF THE PRIVATE LIMITED COMPANY WAS SUCH T HAT PRIVATE LIMITED COMPANY WAS PROBIBITED FROM MAKING ANY INVI TATION TO PUBLIC TO SUBSCRIBE FOR ANY SHARES IN THE COMPANY. THE PRIMARY DOCUMENT TO HOLD THAT THE AMOUNT WAS RECEIVED BY WA Y OF SHARE APPLICATION ITSELF WAS MISSING I.E. THE APPLICATION FOR ALLOTMENT OF SHARES ITSELF. AS PER THE BALANCE- SHEET OF THE ASSESSEE- COMPANY UNDER ITS PROFIT AND LOSS ACCOUNT FOR THE Y EAR ENDED ITA NO.2008/DEL/2010 14 MARCH 31, 2004 THERE WERE NEITHER ANY BUSINESS NOR ANY INCOME AND ONLY INCURRED ADMINISTRATIVE EXPENSES OF RS.24, 356 AND THE UNABSORBED LOSSES STOOD AT RS.51,512. NEITHER WAS T HERE ANY BUSINESS PLAN NOR ANY INSTANCE WHICH AFFECTED THE P ROFITABILITY OF THE COMPANY TO AN EXTENT THAT IT COULD COMMAND A PREMIUM NINE TIMES ITS FACE VALUE. MERE FILING OF UNDATED C ONFIRMATION LETTERS/ AFFIDAVITS WOULD NOT PROVE THE IDENTITY OF THE SHARE APPLICANTS OR THE GENUINENESS OF THE TRANSACTION. I N SPITE OF ALL THE EFFORTS WHERE THE AO COULD NOT EVEN LOCATE THE RESPECTIVE SO-CALLED APPLICANTS, THE ASSESSEE COULD FILE UNDAT ED CONFIRMATIONS AND AFFIDAVITS. THEREFORE, IT WAS A C ASE WHERE ALL THE PAPERS WERE MANUFACTURED AT THE INSTANCE OF THE ASSESSEE AND NOT THE REAL TRANSACTION. MERELY ON THE BASIS O F SUCH PAPERS THE COURT COULD NOT HOLD THAT THE AMOUNT RECEIVED B Y WAY OF SHARE CAPITAL WAS EXPLAINED WITHIN THE MEANING OF S ECTION 68 OF THE ACT. 10. SIMILAR VIEWS WERE HELD BY THE COURT IN THE CAS E LAWS RELIED UPON BY DR. THE FACTS OF THE PRESENT CASE ALSO SUGGEST THA T ASSESSEE WAS A SMALL COMPANY HAVING TOTAL ASSETS OF RS.41.86 LACS AS ON 31.03.2004 AND WITH NET PROFIT OF ONLY RS.4.46 LACS DURING THE YEAR ENDING 31.03.2005. THE ASSESSEE HAD ALLOTTED SHARES OF RS.10 EACH AT A PREMIUM RS.1 40 PER SHARE WHICH IS 14 TIMES FACE VALUE OF THE ASSESSEE COMPANY AND WHICH IS NOT JUSTIFIED KEEPING IN VIEW THE FINANCE OF THE ASSESSEE. THE ASSESEE AL SO COULD NOT PRODUCE THE DIRECTORS OF THE COMPANY FOR EXAMINATION BY AO. THE REFORE RELYING UPON VARIOUS JUDICIAL PRONOUNCEMENTS THE PRESENT CASE OF THE ASSESSEE CANNOT BE COMPARED WITH THE SUPREME COURTS DECISION IN THE C ASE OF LOVELY EXPORTS (P.) LTD. WHETHER THE ONUS IN A PARTICULAR CASE HAS BEEN DISCHARGED OR NOT HAS BEEN ELABORATELY DEALT IN THE CASE OF ITO VS TE AMASIA MARKETING PVT. ITA NO.2008/DEL/2010 15 LTD., WHERE THE QUESTION UNDER SIMILAR CIRCUMSTANCE S HAS BEEN DEALT AS UNDER: NOW, COMING TO THE QUESTION OF ONUS, THE LAW DOES NOT PRESCRIBE ANY QUANTITATIVE TEST TO FIND OUT WHETHER THE ONUS IN A PARTICULAR CASE HAS BEEN DISCHARGED OR NOT, IT ALL DEPENDS ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. THE ONUS MAY BE HEAVY WHEREAS IN OTHERS, IT MAY BE NORMAL. THERE IS NOTHI NG RIGID ABOUT IT. IN THE WAKE OF FACTS AS ACCOUNTS OF SUCH APPLICANTS SHOW HUGE CASH DEPOSITS, EVEN THE FURTHER ACCOUNTS ALSO CONTINUE WITH THIS TREND THE CREDIT IN THE ACCOUNT OF THE APPLICANT IS LOW ON ANY DAY SUCH PERSONS ARE NOT TR ACEABLE NOR IS THERE ANY EVIDENCE OF ANY BUSINESS BEING CARRIED OUT BY SUCH ENTITIES, THE DIRECTORS OF THE ASSESSEE COMPANY CLA IMS SUCH ENTITIES TO BE KNOWN TO HIM, SUCH PERSONS ARE STILL SHARE HOLDERS OF ASSESSEE COMPANY THE ONUS TILTS MORE IN FAVOUR O F THE ASSESSEE TO JUSTIFY ITS CLAIM BY PRODUCING SUCH PER SONS ALONG WITH THEIR BOOKS OF ACCOUNT. IN THE ABOVE BACKDROP THE ASSESSEE WAS REQUIRED TO PRODUCE THE PERSONS ALONG WITH THEI R BOOKS OF ACCOUNT TO VERIFY ITS CLAIM OF GENUINENESS ESPECIAL LY IN VIEW OF THE FACT THAT THE SAID PARTY IS PART OWNER (SHAREHO LDER) OF THE ASSESSEE COMPANY. THE ASSESSEE FAILED TO DISCHARGE ITS ONUS. IN SUCH SCENARIO IT WOULD NOT BE SUFFICIENT TO BRING, PAN, BANK STATEMENT, COPY OF RETURN AND CONFIRMATION ETC. FRO M THE SAID PARTY. BUT THE SOURCE AND NATURE OF TRANSACTIONS NE ED TO BE PROVED BEYOND DOUBT. 11. IN VIEW OF THE ABOVE DISCUSSIONS, WE SET ASIDE THE ORDER OF LD. CIT (A) AND RESTORE THE FILE TO THE OFFICE OF AO. THE A O SHOULD READJUDICATE BY CALLING INFORMATION FROM THE SHAREHOLDERS AND FROM REGISTRAR OF COMPANIES TO ASCERTAIN AS TO WHETHER THE SHAREHOLDERS STILL R EMAINED SHAREHOLDERS AND IF NOT WHEN THEY SOLD THEIR SHARES AND AT WHAT PRICES. THE AO ON THE BASIS OF ITA NO.2008/DEL/2010 16 ENTIRE FACTS, FIGURES AND CIRCUMSTANCES AND ON THE BASIS OF ENQUIRIES FROM THESE SHAREHOLDERS SHOULD ARRIVE AT THE AMOUNT OF A DDITION IF ANY. IN VIEW OF THE ABOVE APPEAL FILED BY THE REVENUE I S ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 31 ST /05/ 2013 SD/- SD/- (R. P. TOLANI) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 31 ST DAY OF MAY, 2013 S.SINHA COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. CIT(ITAT), NEW DELHI. AR,ITAT NEW DELHI.