M/s. One City Promoters Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 2036/DEL/2015

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8293 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 08-04-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Principle of natural justice; Question of law; Onus to prove
• Section: 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E , NEW DELHI BEFORE SHRI BHAVNESH SAINI , JUDICIAL M EMBER AND SH RI O.P. KANT , ACCOUNTANT MEMBER ITA NO .2036 /DE L/ 2015 ASSESSMENT YEAR : 2010 - 11 M/S. ONE CITY PROMOTERS PVT. LTD., D - 2, KALINDI COLONY, NEW DELHI VS. INCOME TAX OFFICER, WARD - 13(4), NEW DELHI PAN : AAACO0322J (APPELLANT) (RESPONDENT) APPELLANT BY SHRI JITENDER CHAURISA, CO MPANY SECRETARY RESPONDENT BY SMT. RINKU SINGH, SR. DR ORDER PER O.P. KANT, A .M. : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER DATED 27/01/2015 PASSED BY THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) - 7, NEW DELHI [IN SHORT THE LD. CIT(A) ] FOR ASSESSMENT YEAR 2010 - 11 RAISING FOLLOWING GROUNDS: 1. THE CIT(A) HAS GROSSLY ERRED ON FACTS AND IN LAW IN UPHOLDING THE ASSESSMENT ORDER ASSESSING THE INCOME AT RS 1,23,82,730/ - . THE ADDITIONS MADE BY THE AO AND UPHELD BY THE CIT(A) ARE ILLEGAL, UNJUST AND BAD IN LAW. DATE OF HEARING 18.03.2019 DATE OF PRONOUNCEMENT 12.04.2019 2 ITA NO .2036/DEL/2015 2. THE AO & CIT(A) HAS GROSSLY ERRED ON FACTS AND IN LAW IN PASSING THE ORDERS WITHOUT GIVING A SUFFICIENT AND PROPER OPPORTUNITY TO THE ASSESSEE TO BE HEARD. THE ORDERS ARE PASSED IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. 3. THE CIT(A) HAS GROSSLY ERRED ON FACTS AND IN LAW IN UPHOLDING THE ADDITION OF RS 1,15,00,000/ - RECEIVED BY THE APPELLANT ON ACCOUNT OF SHARE APPLICATION MONEY FROM THREE DIFFERENT INVESTOR COMPANIES. 4. THAT THE CIT(A) HAS FAILED TO APPREC IATE THE FACT THAT THE ASSESSEE HAS DISCHARGED ITS BURDEN OF PROOF QUA THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS AND THE AO HAS NOT BEEN ABLE TO PROVE ANYTHING AGAINST THE ASSESSEE AND THE ADDITION IS MERELY ON ASSUMPTIONS. 5. TH AT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW , THE VARIOUS OBSERVATIONS MADE BY THE AO AND C1T(A) ARE FACTUALLY INCORRECT , ILLEGAL , BAD IN LAW AND CONTRARY TO FACTS ON RECORD AND BASED ON MERE GUESSWORK AND SURMISES AND CONJECTURES . 6. THE ADDITIONS MADE AND THE OBSERVATIONS MADE ARE UNJUST, UNLAWFUL AND BASED ON MERE SURMISES AND CONJUNCTURES. THE ADDITIONS MADE CANNOT BE JUSTIFIED BY ANY MATERIAL ON RECORD AND ADDITIONS ARE ALSO EXCESSIVE. 7. THE EXPLANATION GIVEN IN THE EVIDENC E PRODUCED, MATERIAL PLACED THAT HAS BEEN MADE AVAILABLE ON RECORD HAS NOT BEEN PROPERLY CONSIDERED AND JUDICIALLY INTERPRETED AND THE SAME DO NOT JUSTIFY THE ADDITIONS/ ALLOWANCES MADE. 8. THAT THE ASSESSEE RESERVES THE RIGHT TO ADD , AMEND, ALTER THE GR OUNDS OF APPEAL. 2. T HE BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE FILE D RETURN OF INCOME ON 15/10/201 0 DECLARING TOTAL INCOME OF RS.8,80, 730/ - . THE C ASE WAS SELECTED FOR THE SCRUTINY AND NOTI CE UNDER SECTION 143(2) OF THE INCOME - TAX ACT, 1961 (IN SHORT THE A CT ) WAS ISSUED AND COMPLIED WITH. THE ASSESSING OFFICER OBSERVED THAT SHARE APPLICATION MONEY ALONG WITH SHARE PREMIUM OF RS.1, 15,00,000/ - FROM FOLLOWING 3 PARTIES WAS RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION : 3 ITA NO .2036/DEL/2015 A) TAVI SHI HOLDING PVT. LTD., B - 226, TOP FLOOR, GREATER KAILASH - I, NEW DELHI RS.40,00,000/ - B) GOLDEN MERCANTILES LTD., A - 32, SECTOR - 17, NOIDA RS.25,00,000/ - C) ARROW EQUITY PVT. LTD., BA/2D, ASHOK VIHAR, PHASE - I, NEW DELHI RS.50,00,000/ - TOTAL RS.1,15,00,000/ - 2.1 THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE PRINCIPAL OFFICERS OF THE ABOVE SHARE APPLICANT COMPANIES BUT THE ASSESSEE FAILED TO PRODUCE THEM . THE ASSESSING OFFICER ISSUED S UMMON UNDER SECTION 131 OF THE A CT AT THE ADDRESSES PROVIDED ASKING THE PRINCIPAL OFFICERS OF THE COMPANIES TO ATTEND BEFORE HIM. HOWEVER , THE SUMMONS RETURNED UN SERVED IN CASE OF 2 COMPANIES. IN CASE OF M/S ARROW EQUITY PRIVATE LIMITED THOUGH THE SUMMON DID NOT RETURN, HOWEVER NO ONE ATTENDED ON BEHALF OF THE SAID COMPANY. SUBSEQUENT TO THE DATE FOR APPEARING BEFORE THE ASSESSING OFFICER, DOCUMENTS CONTAINING LEDGER A CCOUNTS OF THE ASSESSEE IN THEIR BOOKS, COPY OF BANK STATEMENT OF RELEVANT PERIOD, COPY OF THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT ETC . RELATED TO THESE COMPANIES WERE RECEIVED IN THE OFFICE OF THE ASSESSING OFFICER. IN VIEW OF THE FACTS, THE ASSESSING OFFICER, WAS OF THE OPINION THAT THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS UNDER SECTION 68 OF THE A CT. THE LD. ASSESSING OFFICER RELIE D ON THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. NR P ORTFOLIO PRIVATE LIMITED , (2013) 214 TAXMAN 0408 AND CIT VS. NIPUN B UILDER PRIVATE LIMITED [2013] 350 ITR 407 AND MADE ADDITION . OF RS.1,15,02, 000/ - . ON FURTHER APPEAL, THE LD. C IT(A) OBSERVED AS UNDER: 4 ITA NO .2036/DEL/2015 6.5. BEFORE ME IN APPELLATE PROCEEDINGS, THE APPELLANT STATED THAT THE COMPANIES M/'S GOLDEN EQUITY (P) LTD. AND TAVISHI HOLDINGS (P) LTD. HAD CHANGED THEIR ADDRESS. IT IS IMPORTANT TO NOTE THAT THE APPELLANT AT NO POINT OF TIME HAS STATED THAT THE SHARE APPELLANTS CAN BE PRODUCED. 6.6. THE DOCUMENTS PRODUCED BEFORE THE AO WERE SHOWN TO ME. FROM THE DOCUMENT, I FIND THAT T HE APPELLANT HAS NOT GIVEN COPIES OF ITS BANK ACCOUNT OR GIVEN CHEQUE DETAILS TO SHOW THAT THE SHARE CAPITAL WAS GIVEN OUT OF ITS CORPUS AND THAT ENOUGH FUNDS WERE AVAILABLE IN THE ACCOUNT TO GIVE TOWARDS SHARE CAPITAL. THE CREDITWORTHINESS OF THE SHARE AP PLICANTS IS NOT PROVED NOR THE GENUINENESS OF THE TRANSACTION. I AM QUOTING SEVERAL CASE LAWS BELOW WHICH ARE ALL APPLICABLE ON THE FACTS OF THE CASE AND WHICH SUPPORT MY DECISION. 6.7 I SHALL NOW QUOTE SEC. 68: WHERE ANY SUM IS FOUND CREDITED IN THE B OOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE AO, SATISFACTORY, THE SUM SO CREDITED MAYBE CHARGED TO INCOME T AX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR.' 6.8. THUS FROM THE PLAIN READING OF THE SECTION IT IS SEEN THAT IF THERE IS ANY AMOUNT WHICH IS FOUND CREDITED IN THE BOOKS OF THE APPELLANT AND THE APPELLANT DOES NOT OFFER ANY EXPLANATION ABOUT TH E NATURE AND SOURCE OF THE AMOUNT SO CREDITED OR THE EXPLANATION OFFERED BY THE APPELLANT IS NOT SATISFACTORY IN THE EYES OF THE AO, THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS INCOME FOR THAT YEARS. 6.9. SECTION 68 IS VERY WIDELY WORDED AND THE A O IS NOT PRECLUDED FROM MAKING AN ENQUIRY AS TO THE NATURE AND SOURCE OF A SUM CREDITED IN THE BOOKS OF ACCOUNT OF THE APPELLANT COMPANY EVEN IF THE SAME IS CREDITED AS RECEIPT OF SHARE APPLICATION MONEY. WHERE, THEREFORE, AN APPELLANT COMPANY REPRESENTS T HAT IT HAS ISSUED SHARES ON RECEIPT OF SHARE APPLICATION MONEY, THEN THE AMOUNT SO RECEIVED WOULD BE CREDITED IN THE BOOKS OF ACCOUNT OF THE APPELLANT. IN SUCH A CASE, THE AO WOULD BE ENTITLED TO ENQUIRE, AND IT WOULD INDEED BE HIS DUTY TO DO SO, WHETHER T HE ALLEGED SHAREHOLDERS DO IN FACT EXIST OR NOT. 2.2 THE LD. CIT(A) FURTHER RELIED ON THE FOLLOWING DECISIONS: 5 ITA NO .2036/DEL/2015 1 . CIT VS. O ASIS HOSPITAL PVT. LTD., DATED 31 ST JANUARY, 2011 . 2 . NOVO PROMOTERS & FINANCE PRIVATE L IMITED (DELHI H.C.) . 3 . ITAT, I NDOR B ENCH IN THE CASE OF M/S AGRAWAL COAL CORPORATION PRIVATE LIMITED VS. ADDL. CIT, ITA NO. 368/IND./2010 (AY: 2007 - 08), DATED 01.06.2011 . 4 . HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. NEELKANTH ISPAT U DHYOG P RIVATE L IMITED , ITA NO.427/2012 . 5 . DELHI HIGH COU RT IN THE CASE OF CIT VS. NIPUN B UILDERS & DEVELOPERS PRIVATE L IMITED , 350 ITR 407 . 6 . CIT VS. NR P ORTFOLIO (P) LTD. IN ITA NO. 1018/2011, DATED 22.11.2013. 2.3 IN VIEW OF THE ABOVE JUDGMENTS , THE LD. CIT(A) UNHELD THE ADDITION OBSERVING AS UNDER: 6.17. THE APPELLANT HAD RECEIVED AN AMOUNT OF RS.1,15,00,000/ - IN ITS ACCOUNTS CLEARLY A CREDIT ENTRY. THE APPELLANT HAD NOT PRODUCED THE PERSONS GIVING THE LOANS. THUS, THE IDENTITY OF THE PERSON GIVING THE CREDIT WAS NOT PROVED. 6.18. THE APPELLANT DURING TH E ASSESSMENT PROCEEDINGS AND BEFORE ME ALSO COULD NOT PROVE THE CREDITWORTHINESS OF THE CREDITORS. NO RETURN OF INCOME WAS FURNISHED. NO BANK ACCOUNT WAS PRODUCED TO SHOW THE FINANCIAL STRENGTH OF THE CREDITORS OR THAT THE CREDITORS HAD SUFFICIENT BALANCE TO GIVE SHARE CAPITAL. THE APPELLANT HAS NOT GIVEN DETAILS OF WHAT THE SOURCE OF INCOME OF THE CREDITORS IS. 6.19. THE GENUINENESS OF THE TRANSACTION TOO HAS NOT BEEN PROVED BY THE APPELLANT. THE APPELLANT HAS NOT BEEN ABLE, TO SHOW THAT THE MONEY WAS ACT UALLY RECEIVED BY THE APPELLANT FROM THE SAID CREDITORS AND CAME FROM THE CORPUS OF THE SAID CREDITORS. NO PROOF HAS BEEN GIVEN TO SHOW THAT MONEY WAS RECEIVED THROUGH BANKING CHANNELS. NO COPIES OF CHEQUES OR BANK ACCOUNTS HAVE BEEN FURNISHED. I AM OF THE VIEW THAT THE APPELLANT FAILED TO PROVE THAT THE AMOUNT RECEIVED WAS A GENUINE TRANSACTION. THE AMOUNT RS.1,15,00,000/ - IS THEREFORE CONSIDERED AS UNEXPLAINED CASH CREDIT U/S 68, RS.2,000/ - IS DELETED AS THE SHARE CAPITAL AS SHOWN FROM 6 ITA NO .2036/DEL/2015 THE THREE COMPANIES IS RS.1,15,00,000/ - . THE GROUND OF APPEAL IS PARTLY RULED AGAINST THE APPELLANT. 2.4 BEFORE US, THE COMPANY SECRETARY OF THE ASSESSEE COMPANY APPEARED AND SOUGHT ADJOURNMENT ORALLY ON THE GROUND THAT DIRECTOR OF THE COMPANY DEALING WITH THE TAX MATTER WAS OUT OF INDIA. 2. 5 ON PERUSAL OF THE RECORD, WE FOUND THAT SIMILAR PRAYER I.E. DIRECTOR OF THE COMPANY HANDLI NG TAX MATTER WAS OUT OF INDIA, WAS MADE ON 28/11/2018 AND 10/01/2019 AND THE CASE WAS ADJOURNED TO 16/01/2019 FOR FINAL ADJOURNMENT. ON THE SAID DATE, A PAPER BOOK CONTAINING PAGES 1 TO 180 WAS FILED BY THE LEARNED COUNSEL OF THE ASSESSEE AND CASE WAS FURTHER ADJOURNED TO 18/03/2019. BUT ON THE DATE OF THE HEARING I.E. 18/03/2019 NO COUNSEL WAS PRESENT FOR ARGUING THE CASE. THE ADJOURNMENT SOUGHT ORALLY BY THE COMPANY SECRETARY OF THE ASSESSEE COMPANY WAS REJECTED, AND HE WAS DIRECTED TO ARGUE THE CASE, BUT HE DECLINED. WE WERE OF THE OPINION THAT GRANTING FURTHER ADJUSTMENT WOULD NOT SERVE ANY PURPOSE AS THE ASSESSEE WAS REPEATEDLY AVOIDING ARGUMENTS IN THE CASE . ACCORDINGLY, WE HAVE HEARD THE SUBMISS ION OF THE LEARNED DR AND PROCEEDED TO ADJUDICATE THE ISSUE IN DISPUTE INVOLVED IN THE APPEAL. 2.5 BEFORE US, THE LEARNED DR SUBMITTED THAT THE ASSESSEE HAS FAILED TO PRODUCE THE SHARE APPLICANT PARTIES NOT ONLY BEFORE THE ASSESSING OFFICER, BUT ALSO BEFOR E THE LD. CIT(A). ACCORDING TO HIM THE SHARE APPLICANT PARTIES HAVE SHOWN VERY SMALL AMOUNT OF INCOME, WHICH IS NOT SUFFICIENT TO JUSTIFY THE HUGE INVESTMENT 7 ITA NO .2036/DEL/2015 MADE IN THE SHARES OF THE ASSESSEE COMP ANY. IN SUPPORT OF CONTENTION, SHE RELIED ON THE FOLLOWING DECISIONS: 1 PCIT VS. NRA IRON & STEEL PVT. LTD. (SC) DATED 05.03.2019 WHERE HON BLE APEX COURT HELD THAT THE PRACTICE OF CONVERSION OF UN - ACCOUNTED MONEY THROUGH CLOAK OF SHARE CAPITAL/PREMIUM MUST BE SUBJECTED TO CAREFUL SCRUTINY ESPECIALLY IN PRIVATE PLACEMENT OF SHARES. FILING PRIMARY EVIDENCE IS NOT SUFFICIENT. THE ONUS TO ESTABLISH CREDIT WORTHINESS OF THE INVESTOR COMPANIES IS ON THE ASSESSEE. THE ASSESSEE IS UNDER LEGAL OBLIGATION TO PROVE THE RECEIPT OF SHARE CAPITAL/PREMIUM TO THE SATISFACTION OF THE AO, FAILURE OF WHICH, WOULD JUSTIFY ADDITION OF THE SAID AMOUNT TO THE INCOME OF THE ASSESSEE. 2. HON BLE DELHI HIGH COURT JUDGEMENT DATED 17.01.2019 IN CASE OF NDR PROMOTERS PVT. LTD., ITA N O. 49/2018) WHERE THE ADDITION OF SHARE CAPITAL U/S 68 HAS BEEN UPHELD WHERE THE INVESTORS WERE FOUND TO BE PAPER COMPANIES DURING SEARCH ON OTHER PARTIES. IT WAS HELD BY THE HON BLE COURT THAT A CASE INVOLVING MAKE - BELIEVE PAPER WORK TO CAMOUFLAGE THE BOGUS NATURE O F THE TRANSACTIONS IS TO BE TREATED AS UNEXPLAINED CREDIT U/S 68. 3. PREM CASTINGS (P.) LTD. VS CIT T20171 88 TAXMANN.COM 189 (ALLAHABAD) WHERE HON BLE ALLAHABAD HIGH COURT HELD THAT ADDITIONS U/S 68 WARRANT BEING SUSTAINED WHERE THE IDENTITIES & CREDITWO RTHINESS OF INVESTORS IN THE ASSESSEE COMPANY ARE NOT ESTABLISHED BY THE ASSESSEE & ARE ALSO PROVED INCORRECT BY THE DEPARTMENT'S ASSESSEE INFORMATION SYSTEM. IN SUCH CIRCUMSTANCES, ASSESSEE CANNOT RESIST THE ADDITIONS ON GROUNDS THAT IT DID NOT HAVE OPPOR TUNITY TO CROSS - EXAMINE RELEVANT WITNESSES. AN ASSESSEE COMPANY CANNOT HIDE BEHIND THE SHELL OF A CORPORATE ENTITY TO FEIGN IGNORANCE REGARDING THE IDENTITY OF ANY PERSON WHO INVESTS IN ITS SHARE CAPITAL. PREM CASTINGS (P.) LTD. VS CIT 2018 - TIQL - 274 - SC - IT WHERE HON BLE SUPREME COURT HELD AS FOLLOWS: WE DO NOT FIND ANY MERIT IN THIS PETITION. THE SPECIAL LEAVE PETITION IS ACCORDINGLY DISMISSED. 4. CIT V S NAVODAVA CASTLE PVT LTD [2014] 367 ITR 306 (DEL) WHERE HON BLE DELHI HIGH COURT ACCEPTED THAT SINCE THE ASSESSEE WAS UNABLE TO PRODUCE THE DIRECTORS AND THE PRINCIPAL OFFICERS OF THE SIX SHAREHOLDER COMPANIES AND ALSO THAT AS PER THE INFORMATION AND DETAILS COLLECTED BY THE ASSESSING OFFICER FROM THE CONCERNED BANK, THE ASSESSING OFFICER HAD OBSERVED THA T THERE WERE GENUINE 8 ITA NO .2036/DEL/2015 CONCERNS ABOUT IDENTITY, CREDITWORTHINESS OF SHAREHOLDERS AS WELL AS GENUINENESS OF THE TRANSACTIONS. '20. NOW, WHEN WE GO TO THE ORDER OF THE TRIBUNAL IN THE PRESENT CASE, WE NOTICE THAT THE TRIBUNAL HAS MERELY REPRODUCED THE ORDER O F THE COMMISSIONER OF INCOME - TAX (APPEALS) AND UPHELD THE DELETION OF THE ADDITION. IN FACT, THEY SUBSTANTIALLY RELIED UPON AND QUOTED THE DECISION OF ITS CO - ORDINATE BENCH IN THE CASE OF MAF ACADEMY P. LTD., A DECISION WHICH HAS BEEN OVERTURNED BY THE DEL HI HIGH COURT, VIDE ITS JUDGMENT IN CIT V. MAF ACADEMY P. LTD. [2014] 206 DLT 277 ; [2014] 36/ ITR 258 (DELHI)). IN THE IMPUGNED ORDER IT IS ACCEPTED THAT THE ASSESSEE WAS UNABLE TO PRODUCE DIRECTORS AND PRINCIPAL OFFICERS OF THE SIX SHAREHOLDER COMPANIES AND ALSO THE FACT THAT AS PER THE INFORMATION AND DETAILS COLLECTED BY THE ASSESSING OFFICER FROM THE CONCERNED BANK, THE ASSESSING OFFICER HAS OBSERVED THAT THERE WERE GENUINE CONCERNS ABOUT IDENTITY, CREDITWORTHINESS OF SHAREHOLDERS AS WELL AS GENUINENES S OF THE TRANSACTIONS. 21. IN VIEW OF THE AFORESAID DISCUSSION, WE FEEL THAT THE MATTER REQUIRES AN ORDER OF REMIT TO THE TRIBUNAL FOR FRESH ADJUDICATION KEEPING IN VIEW THE AFORESAID CASE LAW.' NAVODAVA CASTLE PVT LTD VS CIT (2015 - TIQL - 314 - SC - IT) SLP OF ASSESSEE DISMISSED BY HON BLE SUPREME COURT 5. KONARK STRUCTURAL ENGINEERING (P.) LTD. VS DCIT T20181 96 TAXMANN.COM 255 (SC) WHERE ASSESSEE - COMPANY RECEIVED CERTAIN AMOUNT AS SHARE CAPITAL FROM VARIOUS SHAREHOLDERS, IN VIEW OF FACT THAT SUMMONS TO SHARE HOLDERS UNDER SECTION 131 COULD NOT BE SERVED AS ADDRESSES WERE NOT AVAILABLE, AND, MOREOVER, THOSE SHAREHOLDERS WERE FIRST TIME ASSESSEES AND WERE NOT EARNING ENOUGH INCOME TO MAKE DEPOSITS IN QUESTION, ADDITION MADE BY ASSESSING OFFICER UNDER SECTION 68 WAS TO BE CONFIRMED; SLP DISMISSED . KONARK STRUCTURAL ENGINEERING (P.) LTD. VS DCIT [2018] 90 TAXMAM.COM 56 (BOMBAY) WHERE HON BLE BOMBAY HIGH COURT HELD THAT WHERE ASSESSEE - COMPANY RECEIVED CERTAIN AMOUNT AS SHARE CAPITAL FROM VARIOUS SHAREHOLDERS, IN VIEW OF FACT THAT SUMMONS SERVED TO SHAREHOLDERS UNDER SECTION 131 WERE UNSERVED WITH REMARK THAT ADDRESSEES WERE NOT AVAILABLE, AND , MOREOVER, THOSE SHAREHOLDERS WERE FIRST TIME ASSESSEES AND WERE NOT EARNING ENOUGH INCOME TO MAKE DEPOSITS IN QUESTION, IMPUGNED ADDITION MADE BY AO UNDER SEC. 68, WAS TO BE CONFIRMED . 6. DRB EXPORTS (P.) LTD. VS CIT T20181 93 TAXMANN.COM 490 (CALCUTTA) WHERE HON BLE CALCUTTA HIGH COURT HELD THAT WHERE AO MADE ADDITION UNDER SECTION 68 IN RESPECT OF INCREASE IN SHARE CAPITAL OF ASSESSEE - COMPANY, IN VIEW OF FACT THAT ADDRESSES OF MOST 9 ITA NO .2036/DEL/2015 OF PURPORTED SHAREHOLDERS WERE IDENTICAL AND THEY COULD NOT BE TRACED O UT DESPITE NOTICE ISSUED UNDER SECTION 131, TRIBUNAL WAS JUSTIFIED IN CONFIRMING IMPUGNED ADDITION . 7. CIT VS NIPUN BUILDERS & DEVELOPERS (P.) LTD (30 TAXMANN.COM 292, 214 TAXMAN 429, 350 ITR 407, 256 CTR 34) WHERE HON BLE DELHI HIGH COURT HELD THAT WHERE ASSESSEE FAILED TO PROVE IDENTITY AND CAPACITY OF SUBSCRIBER COMPANIES TO PAY SHARE APPLICATION MONEY, AMOUNT SO RECEIVED WAS LIABLE TO BE TAXED UNDER SECTION 68. IT WAS HELD AS FOLLOWS: 12. A PERUSAL OF THE ORDER OF THE TRIBUNAL SHOWS THAT IT HAS GONE ON THE BASIS OF THE DOCUMENTS SUBMITTED BY THE ASSESSEE BEFORE THE AO AND HAS HELD THAT IN THE LIGHT OF THOSE DOCUMENTS, IT CAN BE SAID THAT THE ASSESSEE HAS ESTABLISHED THE IDENTITY OF THE PARTIES. IT HAS FURTHER BEEN OBSERVED THAT THE REPORT OF THE INVES TIGATION WING CANNOT CONCLUSIVELY PROVE THAT THE ASSESSEE'S OWN MONIES WERE BROUGHT BACK IN THE FORM OF SHARE APPLICATION MONEY. AS NOTED IN THE EARLIER PARAGRAPH, IT IS NOT THE BURDEN OF THE AO TO PROVE THAT CONNECTION. THERE HAS BEEN NO EXAMINATION BY TH E TRIBUNAL OF THE ASSESSMENT PROCEEDINGS IN ANY DETAIL IN ORDER TO DEMONSTRATE THAT THE ASSESSEE HAS DISCHARGED ITS ONUS TO PROVE NOT ONLY THE IDENTITY OF THE SHARE APPLICANTS, BUT ALSO THEIR CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTIONS. NO ATT EMPT WAS MADE BY THE TRIBUNAL TO SCRATCH THE SURFACE AND PROBE THE DOCUMENTARY EVIDENCE IN SOME DEPTH, IN THE LIGHT OF THE CONDUCT OF THE ASSESSEE AND OTHER SURROUNDING CIRCUMSTANCES IN ORDER TO SEE WHETHER THE ASSESSEE HAS DISCHARGED ITS ONUS UNDER SECTIO N 68. WITH RESPECT, IT APPEARS TO US THAT THERE HAS ONLY BEEN A MECHANICAL REFERENCE TO THE CASE - LAW ON THE SUBJECT WITHOUT ANY SERIOUS APPRAISAL OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 13. WE, THEREFORE, ANSWER THE SUBSTANTIAL QUESTION OF LAW FRAMED BY US IN THE NEGATIVE, IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. THE APPEAL OF THE REVENUE IS ALLOWED WITH NO ORDER AS TO COSTS. 8. CIT VS NOVA PROMOTERS & FINLEASE (P) LTD (18 TAXMANN.COM 217, 206 TAXMAN 207, 342 ITR 169, 252 CTR 187) WHERE HO N BLE DELHI HIGH COURT HELD THAT AMOUNT RECEIVED BY ASSESSEE FROM ACCOMMODATION ENTRY PROVIDERS IN GARB OF SHARE APPLICATION MONEY, WAS TO BE ADDED TO ITS TAXABLE INCOME UNDER SECTION 68. IT WAS HELD AS FOLLOWS: 41. IN THE CASE BEFORE US, NOT ONLY DID TH E MATERIAL BEFORE THE ASSESSING OFFICER SHOW THE LINK BETWEEN THE ENTRY PROVIDERS AND THE ASSESSEE - COMPANY, BUT THE ASSESSING OFFICER HAD ALSO PROVIDED THE STATEMENTS OF MUKESH GUPTA AND RAJAN JASSAL TO THE ASSESSEE IN COMPLIANCE WITH THE RULES OF NATURAL JUSTICE. OUT 10 ITA NO .2036/DEL/2015 OF THE 22 COMPANIES WHOSE NAMES FIGURED IN THE INFORMATION GIVEN BY THEM TO THE INVESTIGATION WING, 15 COMPANIES HAD PROVIDED THE SO - CALLED 'SHARE SUBSCRIPTION MONIES' TO THE ASSESSEE. THERE WAS THUS SPECIFIC INVOLVEMENT OF THE ASSESSEE - COMPAN Y IN THE MODUS OPERANDI FOLLOWED BY MUKESH GUPTA AND RAJAN JASSAL. THUS, ON CRUCIAL FACTUAL ASPECTS THE PRESENT CASE STANDS ON A COMPLETELY DIFFERENT FOOTING FROM THE CASE OF OASIS HOSPITALITIES (P.) LTD. (SUPRA). 42. IN THE LIGHT OF THE ABOVE DISCUSSION, WE ARE UNABLE TO UPHOLD THE ORDER OF THE TRIBUNAL CONFIRMING THE DELETION OF THE ADDITION OF RS. 1,18,50,000 MADE UNDER SECTION 68 OF THE ACT AS WELL AS THE CONSEQUENTIAL ADDITION OF RS. 2,96,250. WE ACCORDINGLY ANSWER THE SUBSTANTIAL QUESTIONS OF LAW IN THE NEGATIVE AND IN FAVOUR OF THE DEPARTMENT. THE ASSESSEE SHALL PAY COSTS WHICH WE ASSESS AT RS. 30,000/ - . 9. CIT VS ULTRA MODERN EXPORTS (P.) LTD (40 TAXMANN.COM 458, 220 TAXMAN 165) WHERE HON BLE DELHI HIGH COURT HELD THAT WHERE IN ORDER TO ASCERTAIN GENUINENESS OF ASSESSEE'S CLAIM RELATING TO RECEIPT OF SHARE APPLICATION MONEY, ASSESSING OFFICER SENT NOTICES TO SHARE APPLICANTS WHICH RETURNED UNSERVED, HOWEVER, ASSESSEE STILL MANAGED TO SECURE DO CUMENTS SUCH AS THEIR INCOME TAX RETURNS AS WELL AS BANK ACCOUNT PARTICULARS, IN SUCH CIRCUMSTANCES, ASSESSING OFFICER WAS JUSTIFIED IN DRAWING ADVERSE INFERENCE AND ADDING AMOUNT IN QUESTION TO ASSESSEE'S TAXABLE INCOME UNDER SECTION 68. IT WAS HELD AS FO LLOWS: 9. AS NOTICED PREVIOUSLY, THE CIT (A) WAS OF THE OPINION THAT THE ASSESSEE HAD DISCHARGED THE BASIC ONUS WHICH WAS CAST UPON IT AFTER CONSIDERING THE RULING IN LOVELY EXPORTS (P.) LTD.'S CASE (SUPRA). THE MATERIAL AND THE RECORDS IN THIS CASE SHOW THAT NOTICE ISSUED TO THE 5 OF THE SHARE APPLICANTS WERE RETURNED UNSERVED. THE PARTICULARS OF RETURNS MADE AVAILABLE BY THE ASSESSEE AND TAKEN INTO CONSIDERATION IN PARAGRAPH 3.4 BY THE AO IN THIS CASE WOULD SHOW THAT THE SAID PARTIES/APPLICANTS HAD DISC LOSED VERY MEAGER INCOME. THE AO ALSO NOTICED THAT BEFORE ISSUING CHEQUES TO THE ASSESSEE, HUGE AMOUNTS WERE TRANSFERRED IN THE ACCOUNTS OF SAID SHARE APPLICANTS. THIS DISCUSSION ITSELF WOULD REVEAL THAT EVEN THOUGH THE SHARE APPLICANTS COULD NOT BE ACCESS ED THROUGH NOTICES, THE ASSESSEE WAS IN A POSITION TO OBTAIN DOCUMENTS FROM THEM. WHILE THERE CAN BE NO DOUBT THAT IN LOVELY EXPORTS (P.) LTD. (SUPRA), THE COURT INDICATED THE RULE OF 'SHIFTING ONUS' I.E. THE RESPONSIBILITY OF THE REVENUE TO PROVE THAT SEC TION 68 COULD BE INVOKED ONCE THE BASIC BURDEN STOOD DISCHARGED BY FURNISHING RELEVANT AND MATERIAL PARTICULARS, AT THE SAME TIME, THAT JUDGMENT CANNOT BE SAID TO LIMIT THE INFERENCES THAT CAN BE LOGICALLY AND LEGITIMATELY DRAWN BY THE REVENUE IN THE NATUR AL COURSE OF ASSESSMENT PROCEEDINGS. THE INFORMATION THAT ASSESSEE FURNISHES WOULD 11 ITA NO .2036/DEL/2015 HAVE TO BE CREDIBLE AND AT THE SAME TIME VERIFIABLE. IN THIS CASE, 5 SHARE APPLICANTS COULD NOT BE SERVED AS THE NOTICES WERE RETURNED UNSERVED. IN THE BACKDROP OF THIS CIRC UMSTANCE, THE ASSESSEE'S ABILITY TO SECURE DOCUMENTS SUCH AS INCOME TAX RETURNS OF THE SHARE APPLICANTS AS WELL AS BANK ACCOUNT PARTICULARS WOULD ITSELF GIVE RISE TO A CIRCUMSTANCE WHICH THE AO IN THIS CASE PROCEEDED TO DRAW INFERENCES FROM. HAVING REGARD TO THE TOTALITY OF THE FACTS, I.E., THAT THE ASSESSEE COMMENCED ITS BUSINESS AND IMMEDIATELY SOUGHT TO INFUSE SHARE CAPITAL AT A PREMIUM RANGING BETWEEN RS. 90 - 190 PER SHARE AND WAS ABLE TO GARNER A COLOSSAL AMOUNT OF RS. 4.34 CRORES, THIS COURT IS OF THE OPINION THAT THE CIT (APPEALS) AND THE IT AT FELL INTO ERROR IN HOLDING THAT AO COULD NOT HAVE ADDED BACK THE SAID AMOUNT UNDER SECTION 68. THE QUESTION OF LAW CONSEQUENTLY IS ANSWERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. 10.CIT VS FROSTAI R (P.) LTD (26 TAXMANN.COM 11. 210 TAXMAN 221) WHERE HON BLE DELHI HIGH COURT HELD THAT WHERE DETAILS FURNISHED BY ASSESSEE ABOUT SHARE APPLICANTS WERE INCORRECT, ADDITION UNDER SECTION 68 WAS PROPER. IT WAS HELD AS FOLLOWS: 12 THE APPLICATION OF THE RATI O OF EVERY DECISION BY A QUASI - JUDICIAL BODY LIKE THE IT AT HAS TO BE NUANCED, AND CONTEXTUAL. THUS, WHILE THE FINDINGS IN DIVINE LEASING, OASIS INTERNATIONAL OR EVEN LOVELY EXPORTS MIGHT BE PRECEDED BY A GENERAL DISCUSSION OF THE CORRECT APPROACH TO BE AD OPTED BY THE AO, IN A GIVEN CASE WHERE ADDITIONS ARE SOUGHT TO BE MADE ON ACCOUNT OF SHARE APPLICATION MONEYS NOT FOUND TO BE GENUINE, THE BASIC FACTS OF THE CASE CANNOT BE LOST SIGHT OF. ON A PROPER APPLICATION OF THE RATIO IN OASIS - AND SUBSEQUENTLY, TH E DIVISION BENCH RULING IN CIT V. NOVA PROMOTERS & FINLEASE (P) LTD [2012] 206 TAXMAN 207/ 18 TAXMANN.COM 217 (DELHI) IT IS EVIDENT THAT THE AO TOOK INTO ACCOUNT - IF WE MAY SAY SO, IN EXHAUSTIVE DETAIL, AFTER A PAINSTAKING EXAMINATION OF THE RECORDS AFTER TWO OR THREE LAYERS OF SCRUTINY - ALL THE MATERIALS AND HELD THAT THE CLAIM THAT THE AMOUNTS CLAIMED TO BE RECEIVED ON ACCOUNT OF SHARE APPLICATIONS WERE NOT BASED ON GENUINE TRANSACTIONS. THE CIT (A) UPHELD THAT ORDER, AFTER CALLING FOR A REMAND REPORT. I N THESE CIRCUMSTANCES, THE CONCLUSION OF THE TRIBUNAL, THAT THE ASSESSEE HAD DISCHARGED ITS ONUS, APPEARS TO BE BASED ON A SUPERFICIAL UNDERSTANDING OF THE LAW, AND AN UNINFORMED ONE ABOUT THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE. 13. IN VIEW OF THE ABOVE REASONS, THE QUESTIONS OF LAW IN THESE APPEALS ARE ANSWERED IN FAVOUR OF THE REVENUE. THE ORDERS OF THE ASSESSING OFFICER ARE RESTORED. THE APPEALS ARE TO SUCCEED AND ARE THEREFORE ALLOWED. 12 ITA NO .2036/DEL/2015 11.CIT VS N R PORTFOLIO PVT LTD T20 141 4 2 TAXMANN.COM 339 (DELHI)/[2014] 222 TAXMAN 157 (DELHI )(MAG)/[2014] 264 CTR 258 (DELHI) WHERE HON BLE DELHI HIGH COURT HELD THAT IF AO DOUBTS THE DOCUMENTS PRODUCED BY ASSESSEE, THE ONUS SHIFTS ON ASSESSEE TO FURTHER SUBSTANTIATE THE FACTS OR PRODUCE THE S HARE APPLICANT IN PROCEEDING. IT WAS HELD AS FOLLOWS: 30. WHAT WE PERCEIVE AND REGARD AS CORRECT POSITION OF LAW IS THAT THE COURT OR TRIBUNAL SHOULD BE CONVINCED ABOUT THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. THE ONUS TO PROVE THE THREE FACTUM IS ON THE ASSESSEE AS THE FACTS ARE WITHIN THE ASSESSEE'S KNOWLEDGE. MERE PRODUCTION OF INCORPORATION DETAILS, PAN NOS. OR THE FACT THAT THIRD PERSONS OR COMPANY HAD FILED INCOME TAX DETAILS IN CASE OF A PRIVATE LIMITED COMPANY MAY NOT BE SUFFICIENT WHEN SURROUNDING AND ATTENDING FACTS PREDICATE A COVER UP. THESE FACTS INDICATE AND REFLECT PROPER PAPER WORK OR DOCUMENTATION BUT GENUINENESS, CREDITWORTHINESS, IDENTITY ARE DEEPER AND OBTRUSIVE. COMPANIES NO DOUBT ARE ARTIFICIAL OR JURISTIC PE RSONS BUT THEY ARE SOULLESS AND ARE DEPENDENT UPON THE INDIVIDUALS BEHIND THEM WHO RUN AND MANAGE THE SAID COMPANIES. IT IS THE PERSONS BEHIND THE COMPANY WHO TAKE THE DECISIONS, CONTROLS AND MANAGE THEM. 12.CIT VS EMPIRE BUILTECH (P.) LTD (366 ITR 110 ) WHERE HON BLE DELHI HIGH COURT HELD THAT U/S 68 IT IS NOT SUFFICIENT FOR ASSESSEE TO MERELY DISCLOSE ADDRESS AND IDENTITIES OF SHAREHOLDERS; IT HAS TO SHOW GENUINENESS OF SUCH INDIVIDUALS OR ENTITIES. 13. CIT VS FOCUS EXPORTS (P.) LTD (51 TAXMANN.COM 46 (DELHI)/ [2015] 228 TAXMAN 88) WHERE HON BLE DELHI HIGH COURT HEID THAT WHERE IN RESPECT OF SHARE APPLICATION MONEY, ASSESSEE FAILED TO PROVIDE COMPLETE ADDRESS AND PAN OF CERTAIN SHARE APPLICANTS WHEREAS IN CASE OF SOME OF SHARE APPLICANTS, THERE WERE TRA NSACTIONS OF DEPOSITS AND IMMEDIATE WITHDRAWALS OF MONEY FROM BANK, IMPUGNED ADDITION MADE UNDER SECTION 68 WAS TO BE CONFIRMED . 13. PCIT VS BIKRAM SINGH HTA NO.55/20171 (DELHI) WHERE HON BLE DELHI HIGH COURT HELD THAT EVEN IF A TRANSACTION OF LOAN IS MADE THROUGH CHEQUE, IT CANNOT BE PRESUMED TO BE GENUINE IN THE ABSENCE OF ANY AGREEMENT, SECURITY AND INTEREST PAYMENT. MERE SUBMISSION OF PAN CARD OF CREDITOR DOES NOT ESTABLISH THE AUTHENTICIT Y OF A HUGE LOAN TRANSACTION PARTICULARLY WHEN THE ITR DOES NOT INSPIRE SUCH CONFIDENCE. MERE SUBMISSION OF ID PROOF AND THE FACT THAT THE LOAN TRANSACTIONS WERE THROUGH THE BANKING CHANNEL, DOES NOT ESTABLISH THE GENUINENESS OF TRANSACTIONS. LOAN ENTRIES ARE GENERALLY MASKED TO PUMP IN BLACK MONEY INTO BANKING CHANNELS AND SUCH PRACTICES CONTINUE TO PLAGUE INDIAN ECONOMY . 13 ITA NO .2036/DEL/2015 14. RICK LUNSFORD TRADE & INVESTMENT LTD VS CIT T20161 385 ITR 399 (CAL) THE ASSESSEE DID NOT PRODUCE BOOKS OF ACCOUNT OR BANK ACCOUNTS OR SHAREHOLDERS REGISTER. EIGHT OUT OF FIFTY SIX PERSONS FROM SHAREHOLDERS LIST PROVIDED BY ASSESSEE DENIED SUBSCRIPTION. REMAINING NOTICES RETURNED WITH ENDORSEMENT NOT KNOWN . HON BLE CALCUTTA HIGH COURT HELD THAT UNEXPLAINED SHARE APPLICATION MONEY WAS RIGHTLY TREATED AS ASSESSEE S INCOME . 15. RICK LUNSFORD TRADE & INVESTMENT LTD VS CIT R2016 - TIQL - 207 - SC - IT1 (SUPREME COURT) WHERE HON BLE SUPREME COURT DISMISSED SLP UPHOLDING THAT IT IS OPEN TO THE REVENUE DEPARTMENT TO MAKE ADDITION ON ACCOUNT OF A LLEGED SHARE CAPITAL U/S 68, WHERE THE ASSESSEE COMPANY HAS FAILED TO SHOW GENUINENESS OF ITS SHAREHOLDERS. 2.6 WE HAVE HEARD THE SUBMISSION OF THE LEARNED DR AND PERUSED THE RELEVANT MATERIAL ON RECORD INCLUDING THE PAPER BOOK FILED BY THE ASSESSEE. THE FACTS OF THE CASE IN BRIEF HAVE ALREADY BEEN DISCUSSED ABOVE. THE FACT THAT PRINCIPAL OFFICERS OF THE SHARE APPLICANT COMPANY, WERE NOT PRODUCED BY THE ASSESSEE IS UNDISPUTED . IN CASE OF THE 2 SHARE APPLICANT COMPANIES, THE SUMMON ISSUED ALSO RETURNED UN SERVED. THE ONE COMPANY, IN WHICH CASE THOUGH THE SUMMON WAS SERVED, BUT NO ONE ATTENDED BEFORE THE ASSESSING OFFICER IN COMPLIANCE OF THE SUMMON. THE SHARE APPLICANT COMPANIES HA VE FILED CERTAIN DOCUMENTS , INCLUDING BALANCE SHEET AND PROFIT AND LOSS ACCOUNT, BANK STATEMENTS ETC. IN FORM OF PAPER TRAIL. THE COMPANIES HAVE SHOWN SMALL AMOUNT OF INCOME IN THEIR HAND, WHICH IS NOT SUFFICIENT TO DISCHARGE THEIR CREDITWORTHINESS. THE ASSESSEE HAS ALSO NOT JUSTIFIED THE HIGH AMOUNT OF THE SHARE PREMIUM TAKEN. IN VIEW OF THESE PECULIAR FACTS SEEN CUMULATIVELY IN THE LIGHT OF VARIOUS DECISIONS RELIED UPON BY THE LEARNED DR INCLUDING THE DECISION OF THE HON BLE SUPREME COURT IN TH E CASE OF PCIT VS NRA IRON AND 14 ITA NO .2036/DEL/2015 S TEEL S PRIVATE L IMITED (SUPRA), WE UPHOLD THE FINDING OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE. THE GROUND S OF THE APPEAL ARE ACCORDINGLY DISMISSED. 3. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 1 2 T H APRIL , 201 9 . S D / - S D / - [ BHAVNESH SAINI ] [O.P. KANT] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 2 T H APRIL , 2019 . RK / - [D.T.D.S] COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI