Saanika Industries Pvt. Ltd., Surat V. The ACIT, Circle-4, Surat

ITA 207/AHD/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9054 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 21-02-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 29-01-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: WAY OF FURNISHING ALL REQUISITE DOCUMENTS
• Assessee Lawyers: R. N. VEPARI
• Keywords: Reopening of assessment; Unexplained cash credit; Gift; Income from undisclosed sources; Search and seizure; Share purchase agreement; Opportunity of being heard; Retrospective amendment; Question of law; Accommodation entries; Capital receipt; Onus to prove; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 142(1); 133(6); 205; 201; 264; 43; 48; 72; 13; 153; 119; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE SHRI R.P. TOLANI, JM & SHRI MANISH BORAD, AM. ITA NO. 207/AHD/2016 ASST. YEAR: 2011-12 SAANIKA INDUSTRIES PVT. LTD., BLOCK NO.1053, VILLAGE- TADEKESHWAR, NEAR HARIYAL BUT STOP, TAL. MANDVI, DIST. SURAT. VS. ACIT, CIRCLE-4, SURAT. APPELLANT RESPONDENT PAN AAICS 6782P APPELLANT BY SHRI R. N. VEPARI,AR RESPONDENT BY SHRI K. MADHUSUDAN,SR.DR DATE OF HEARING: 21/02/2017 DATE OF PRONOUNCEMENT: 02/03/2017 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL OF ASSESSEE FOR ASST. YEAR 2011-12 IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (A)-II, SURAT, DATED 03/12/2015 VIDE APPEAL NO.CAS/II/104/2014-15 ARISING OUT OF ORDER U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SH ORT THE ACT) FRAMED ON 29.04.2014 BY ACIT-4, SURAT. FOLLOWING GROUNDS H AVE BEEN RAISED BY ASSESSEE :- ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 2 (I) ADDITION OF RS.61,00,000 U/S.68: (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND AS P ER LAW, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFI RMING THE ADDITION OF RS.61,00,000 IN RESPECT OF SHARE CAPITAL OF RS.11,0 0,000 AND SHARE PREMIUM OF RS.50,00,000. (2) THE APPELLANT FURTHER SUBMITS THAT SINCE ALL THE TH REE PARAMETERS U/S.68 VIZ. IDENTITY, GENUINENESS AND CREDITWORTHINESS HAVE BEE N ESTABLISHED, THERE WAS NO JUSTIFICATION FOR MAKING ANY ADDITION. (3) THE APPELLANT SUBMITS THAT IN VIEW OF THE FACT THAT THE APPELLANT HAD FILED CONFIRMATION, P.A. NO., COPY OF AUDITED ACCOUNTS (S HOWING SOURCE OF INVESTMENT IN THE APPELLANT COMPANY AND ALL RELATED EVIDENCE), THERE WAS NO JUSTIFICATION FOR CONFIRMING THE ADDITION BY THE LE ARNED COMMISSIONER OF INCOME-TAX (APPEALS). (4) THE APPELLANT FURTHER SUBMITS THAT IF AT ALL T HE DEPARTMENT FELT THAT THE INVESTING COMPANIES WERE BOGUS COMPANIES, THE PROCEEDINGS SHO ULD HAVE BEEN INITIATED AGAINST THOSE COMPANIES AS HELD BY SUPREME COURT IN CASE OF LOVELY EXPORT PVT. LTD. (216-CTR-195). (5) THE APPELLANT FURTHER SUBMITS THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS APPLIED LAW WHICH CAME INTO EFFECT AS PER AMENDMENT FROM A.Y.2013-14 IN A.Y.2011-12. (6) WITHOUT PREJUDICE TO THE ABOVE, SINCE SHARE CAP ITAL IS CAPITAL RECEIPT, THERE WAS NO JUSTIFICATION FOR MAKING ANY ADDITION. (II) MISCELLANEOUS: THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR VARY AN Y OF THE GROUNDS OF APPEAL. 2. BRIEFLY STATED FACTS AS CULLED OUT FROM THE RECO RDS ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN TH E BUSINESS OF MANUFACTURING TEXTURISED YARN. IT FILED ITS RETURN OF INCOME ON 30.09.2011 DECLARING TOTAL INCOME OF RS.4,60,61,110 /-. CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE U/S 143 (2) OF THE ACT DATED 31.07.2012 FOLLOWED BY NOTICE U/S 142(1) OF T HE ACT ALONG WITH ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 3 QUESTIONNAIRE WAS DULY ISSUED AND SERVED UPON THE A SSESSEE. GROSS TURNOVER OF THE COMPANY FOR THE ASST. YEAR 2011-12 STOOD AT RS.189.98 CRORES. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS LD. ASSESSING OFFICER OBSERVED THAT ASSESSEE HAD RECEIV ED SHARE CAPITAL AND SHARE PREMIUM FROM VARIOUS PERSONS INCLUDING CO RPORATES. LD. ASSESSING OFFICER DID NOT RAISE ANY OBJECTION TOWAR DS THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF SHARE APPLICANT S TOWARDS SHARE APPLICATION MONEY AND PREMIUM PAID EXCEPT FOR THE F OLLOWING THREE COMPANIES WHICH APPARENTLY IN HIS VIEW WERE APPEARI NG TO BE PAPER/SHELL COMPANIES :- SR. NO. NAME & ADDRESS OF SHAREHOLDERS PAN AMOUNT OF SHARE CAPITAL SHARE PREMIUM , 1 NEWJET TREXIM PVT. LTD. 27, 5 TH FLOOR, BRABOURNE ROAD, KOLKATA- 700001. AAACN8738P 300000 1500000 2 CAP VANIJYA PVT. LTD. 14-C, 4 TH FLOOR, MAHARSHI DEVENDRA ROAD, KOLKATA-700007. AABCC3989 30000 150000 3 SADASHUKH DEALERS PVT. LTD. 6-A, RAJA SUBODH MALIK SQUIRE, KOLKATA- 18 AAKCS9420P 500000 200000 3. NOTICES U/S 133(6) OF THE ACT WERE ISSUED TO THE ABOVE THREE PARTIES WHICH WERE DULY SERVED. NECESSARY DETAILS I NCLUDING ADDRESSES, PAN, BANK STATEMENTS, INCOME-TAX RETURN, AUDITED BALANCE SHEETS AND CONFIRMATIONS OF ACCOUNTS WERE P LACED ON RECORD BY THE ASSESSEE. DURING ASSESSMENT PROCEEDINGS LD. ASSESSING OFFICER CAME ACROSS THE STATEMENT U/S 131 OF THE AC T GIVEN BY DIRECTOR OF ONE OF THE ALLEGED COMPANY M/S CAP VANI JYA PVT. LTD. RECORDED BY DDIT(INV) WING, KOLKATA. IN THIS STATEM ENT MR. ANJANI BANKA, DIRECTOR OF CAP VANIJYA PVT. LTD. ACCEPTED T HAT OTHER THAN CAP ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 4 VANIJYA (P) LTD. HE IS DIRECTOR IN OTHER COMPANIES ALSO WHICH ARE UNDER THE CONTROL AND MANAGEMENT OF MR. MANOHAR LAL NANGALIA. FURTHER THE STATEMENT OF MR. MANOHAR LAL NANGALIA H AS ALSO BEEN RECORDED IN WHICH HE HAS ACCEPTED THAT COMPANIES AR E ACTUALLY CONTROLLED BY HIM AND THE COMPANIES ARE PAPER/SHELL COMPANIES. MR. MANOHAR LAL NANGALIA ALSO CATEGORICALLY ACCEPTED TH AT CAP VANIJYA (P) LTD. IS A PAPER/SHELL COMPANY AMONGST OTHERS. L D. ASSESSING OFFICER ON THE BASIS OF THESE STATEMENTS EXAMINED T HE BALANCE SHEETS AND PROFIT AND LOSS ACCOUNTS AND OBSERVED TH AT A COMMON MODUS OPERANDI WAS FOLLOWED BY ALLEGED THREE COMPAN IES WHICH WERE HAVING NO FIXED ASSETS, MEAGER INCOME VIS--VI S THE SHARE CAPITAL AND PREMIUM. IN THE BANK STATEMENTS OF THES E COMPANIES THERE ARE ONLY TRANSFER ENTRIES BUT HAVING NO SIGN OF REGULAR BUSINESS ACTIVITIES AND INVESTMENTS MADE IN SHARE CAPITAL OF VARIOUS COMPANIES ARE NOT FETCHING ANY INCOME. IN VIEW OF T HIS LD. ASSESSING OFFICER OBSERVED THAT ALLEGED THREE COMPANIES WHICH HAVE MADE HUGE INVESTMENTS IN SHARE CAPITAL OF OTHER COMPANIE S BUT THE BANK STATEMENTS ARE CONSPICUOUSLY REPLETE WITH DEPOSITS AND WITHDRAWALS OF THE SAME AMOUNTS IN A SHORT SPAN OF ONE OR TWO D AYS WHICH SHOWS THAT THESE COMPANIES ARE JUST ACTING AS A CONDUIT O F FUNDS WITH NO REAL BUSINESS AND ACCORDINGLY MADE AN ADDITION OF R S.61,00,000/- U/S 68 OF THE ACT TOWARDS UNEXPLAINED CASH CREDIT OF TH E ALLEGED THREE COMPANIES. ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 5 3.1. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE LD. COMMISSIONER OF INCOME TAX(A) BY MAKING SINCERE EFFORTS TO CONVINCE LD. COMMISSIONER OF INCOME TAX(A) THAT ASSESSEE COMPANY IS HAVING A HUGE TURNOVER, REGULAR BUSINESS ACTIVITIES, PREMIUM CHARGED ON SHARE CAPITAL ARE GENUINELY CALCULATED, RECEIVED BY ACCOU NT PAYEE CHEQUES, THE ALLEGED THREE COMPANIES ARE GENUINE INVESTORS A ND ALL POSSIBLE DOCUMENTS WHICH IT COULD PRODUCE HAVE BEEN PUT FORT H INCLUDING INCOME TAX RETURNS, BANK STATEMENT, AUDITED BALANCE SHEET, CONFIRMATION AND RECORDS OF REGISTRAR OF COMPANIES EVIDENCING THE SHARE SUBSCRIPTION AND LIST OF SHAREHOLDERS. HOWEVE R, LD. COMMISSIONER OF INCOME TAX(A) BY WAY OF GIVING A DE TAILED FINDING RELYING ON JUDICIAL PRONOUNCEMENTS CONFIRMED THE AC TION FO LD. ASSESSING OFFICER MAKING ADDITION U/S 68 OF THE ACT AT RS.61,00,000/- BY OBSERVING AS FOLLOWS :- DECISION 6.1.1 I HAVE CONSIDERED THE ASSESSMENT ORDER AS WEL L AS THE SUBMISSIONS OF THE APPELLANT. THE GROUNDS OF APPEAL- GROUND NO. 1 PERTAINS TO THE ASSESSING OFFICER MADE ADDITION OF RS. 61,00,000/- U/S 68 AS HE WAS NOT SATISFIED ABOUT THE EXPLANATION/EVIDENCE FURNISHED. THE AO FOUND THAT THE APPELLANT HAD RECEIVED SHARE CAPITAL AT PREMIUM AMO UNTING TO RS. 61,00,000/- FROM 3 COMPANIES OF KOLKATA. THE AO MAD E INQUIRIES BY ISSUANCE OF NOTICE U/S 133(6) OF THE ACT AND THROUG H ISSUANCE OF COMMISSION U/S 131(1)(D) OF THE ACT TO INVESTIGATIO N UNIT, KOLKATA REGARDING THE IDENTITY, CREDITWORTHINESS AND GENUIN ENESS OF THE TRANSACTION PERTAINING TO SHARE PREMIUM. THE AO FOUND ON THE BA SIS OF THE INQUIRES CONDUCTED THAT THE 3 COMPANIES WHO HAVE MADE INVEST MENTS IN SHARE CAPITAL ARE SHELL COMPANIES/PAPER COMPANIES AND THE REFORE THE INVESTMENT IN FORM OF SHARE CAPITAL AND SHARE PREMIUM OF RS. 6 1',00,000/- WAS CONSIDERED TO BE UNEXPLAINED CASH CREDIT AND ADDED TO THE INCOME OF THE APPELLANT. THE APPELLANT SUBMITTED THAT THESE 3 COM PANIES ARE HAVING PAN, HAVE SHOWN INVESTMENTS IN THE BALANCE SHEETS, HAVE FILED CONFIRMATIONS BEFORE THE AO, ASSESSED TO TAX ETC. WHICH SHOWS THE EXISTENCE OF THESE COMPANIES AND GENUINENESS OF THE TRANSACTIONS . ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 6 6.1,2 DURING THE APPELLATE PROCEEDINGS, THE APPELLA NT WAS ISSUED A QUERY LETTER DATED 20.07.2015 WHICH IS AS UNDER 'ON THE P ERUSAL OF THE DETAILS ON RECORD, FILED DURING THE COURSE OF THE ASSESSMENT A ND APPELLATE PROCEEDINGS, CERTAIN ISSUES NEED FURTHER CLARIFICAT IONS. YOU ARE REQUIRED TO SUBMIT YOUR EXPLANATION/CLARIFICATIONS ON THE QUERI ES RAISED AS FOLLOWING: (I) A PREMIUM OF RS.50,00,000 HAS BEEN RECEIVED FRO M THREE COMPANIES OF KOLKATTA. THE DETAILS OF THE WORKING OF THE VALUATION OF THE SHARES ARE TO BE SUBMITTED. IF SUCH A HIGH FIGURE OF PREMIUM WAS FIXED IN CONSULTATION WITH EXPERTS OR FINANCIAL INSTITUTIONS, DETAILS THEREOF. IN CASE THE DETAILS ARE NOT FURNISHED THEN THE ONLY INFERENCE THAT COULD BE DRAWN WAS THAT NO SUCH CONS ULTATION TOOK PLACE, THE RATE OF PREMIUM WAS FIXED UNILATERALLY BY THE APPELLANT WIT HOUT ANY REFERENCE POINT TO PAST RECORDS, PRESENT EARNINGS OR FUTURE PROSPECTS. (II) THE CENTRAL GOVERNMENT HAD NOTIFIED THE UNLIST ED PUBLIC COMPANIES (PREFERENTIAL ALLOTMENT) RULES, 2003 WHICH APPLY TO ISSUE- OF SHA RES ON PREFERENTIAL BASIS AND/OR THROUGH PRIVATE PLACEMENT BY A COMPANY IN PURSUANCE OF A RESOLUTION PASSED UNDER SUB-SECTION (1A) OF SECTION 81 OF THE COMPANIES ACT , 1956 AND TO THE ISSUE OF SHARES TO PROMOTERS AND THEIR RELATIVES EITHER IN P UBLIC ISSUE OR OTHERWISE; PLEASE FURNISH DETAILS WHETHER, IN COMPLIANCE WITH THE PRO VISIONS OF THE RULES, THE SHARE PREMIUM PRICES WERE DETERMINED? (III) PLEASE PRODUCE THE COPY OF THE MINUTES OF MEE TING OF THE BOARD OF DIRECTORS HELD WHICH REFLECTS THAT THE BOARD HAD DECIDED THE ISSUE OF PRICING. WHEN WAS THE EXECUTION OF THE SHARE APPLICATION FORMS COMPLETED? A. HOW PRICES OF SHARES DETERMINED, HOW AND WHERE NEGOTIATION HAVE BEEN DON E. BASIS OF FIXING SHARE PREMIUM- ALL DOCUMENTS OF MEETING/ADVICE/CONSULTANT ADVICE, B. HOW THE APPELLANT CAME IN CONTACT WITH INVESTOR, WHERE THEY MET, HOW THEY MET, AND HOW WELL THEY KNOW EACH OTHER. IS THERE ANY BUSINESS/PERSONAL REL ATION WITH INVESTING PARTY DIRECTLY OR INDIRECTLY? C. COPIES OF ALL CO MMUNICATIONS ENTERED WITH ALL PROSPECTIVE INVESTORS INCLUDING CALLING FOR INVESTM ENT, APPLICATIONS, INSTALLMENT OF MONEY CALLED, RECEIVED, DECISION OF PREMIUM, ROUND OF NEGOTIATION, DISPATCH OF SHARE CERTIFICATE, CORRESPONDENCE ABOUT DIVIDEND OR ANY O THER MATTER ETC., ALONG WITH MODE OF COMMUNICATION AND PROOF OF DISPATCH ETC. (IV) WHEN WAS THE RESOLUTION AUTHORIZING THE ISSUAN CE OF SHARES UNDER SECTION 81(1 A) OF THE COMPANIES ACT, 1956 PASSED AND WHEN IT WA S INTIMATED TO THE REGISTRAR OF COMPANIES? THE COPY OF THE RESOLUTION IS TO BE PROD UCED. (V) WHEN WERE THE SHARE APPLICATIONS RECEIVED, AND THE SHARES WERE ALLOTTED AND SENT TO THE PARTIES? (VI) WHETHER ANY DIVIDEND WAS DECLARED TO ITS INVESTORS OR NOT? (VII) THE ATTENDANCE REGISTER FOR THE AGM HELD IS T O BE PRODUCED ALONGWITH THE RELEVANT PROXY AUTHORIZATION FORMS AND ANY PROOF OF COMMUNICATION TO THE SHARE HOLDERS IN REGARD TO THE CON VENING OF THE AGM ORE VEN FOR THE DISPATCH OF THE SHARE CERTIFICATES;' ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 7 6.1.3 IN RESPONSE TO THE QUERY LETTER THE APPELLANT SUBMITTED A REPLY DATED 3.08.2015 WHEREIN ITS SUBMITTED AS FOLLOWING MS REGARDS PREMIUM ON SHARE CAPITAL, THIS IS BASED ON THE INTRINSIC WORTH OF THE COMPANY. COPY OF AUDITED ACCOUNTS FOR 31 ST MARCH, 2011 IS ENCLOSED AS ANNEXURE 'B'. THE SIGNIFICANT ASPECTS T HEREIN ARE BROUGHT TO YOUR KIND NOTICE. 31-3-2011 31-3-2010 SHARE CAPITA! (THIS IS BECAUSE OF INFUSION OF TWO L ACS NEW SHARES OFRS. 10 EACH DURING 31 -03-2011.) 1,98,47,500 1,78,47,500 GENERAL RESERVE 4,40,00,000 3,40,00,000 PROFIT & LOSS A/C. BALANCE 3,49,07,684 1,23,15,761 IF YOU CONSIDER THE FIGURES OF RESERVES WHICH INCLU DES BALANCE OF PROFIT AND LOSS ACCOUNT, THE TOTAL OF FREE RESERVES WOULD BE RS.7,8 9,07,684 ON 31-03-2011 AND RS.4,63,15,761 ON 31-03-2010. FURTHER, THE PROFITS HAVE BEEN CONTINUOUSLY RISING AS PROFITS WERE RS. 1,83,07,723 FOR YEAR ENDING 31-03- 2010 AND RS.3,25,91,923 FOR YEAR ENDING 31-03-2011. IN THIS BACKGROUND THE SHARE PRE MIUM OFRS.50 LACS ON SHARES ISSUED TO CAP VANIJYA PVT. LTD., NEWJET TREXIM PVT. LTD., AND SADASUKH DEALERS PVT. LTD. AGAINST ISSUE OF 1,10,000 SHARES WAS EMINENTLY REAS ONABLE. IT WOULD BE PERTINENT TO POINT OUT THAT DURING THIS YEAR, 90,000 SHARES WERE ISSUED TO FAMILY MEMBERS AND ASSOCIATE CONCERNS FROM WHOM ALSO SIMILAR AMOUNT OF SHARE PREMIUM WAS COLLECTED. FROM THE ABOVE YOU WILL FIND THAT DURING THIS YEAR, 2,00,000 SHARES WERE ISSUED OF WHICH 90,000 WERE ISSUED TO FAMILY MEMBERS AND ASSOCIATES AND 1,10,000 SHARES WERE ISSUED TO THE OTHER THREE PARTIES. TOTAL PREMIUM COLLECTED ON ALL THESE SHARES WAS RS.86,40,000. THUS, YOU WIL! FIND THAT SHARE PREMIU M WAS RIGHTLY COLLECTED AS PER THE INTRINSIC WORTH AND THE PROFITABILITY OF THE COMPAN Y. YOU WILL ALSO NOTE THAT PREMIUM AT SAME RATE WAS COLLECTED FROM FAMILY, MEMBERS AND AS SOCIATE CONCERNS. THIS WOULD TAKE CARE OF YOUR QUERY, I MAY FURTHER POINT OUT THAT OU T OF THE THREE COMPANIES, SADASUKH DEALERS PVT. LTD. IS NOW REGISTERED AT AHMEDABAD AN D BOTH ITS DIRECTORS RESIDE AT SURAT AND KNOWN TO THE DIRECTORS SINCE LAST TWO DECADES. AS IT IS DIRECTORS OF THE COMPANY HAD VERY OLD RELATIONSHIP WITH DIRECTORS OF COMPANIES W HO HAVE INVESTED. AS REGARDS MINUTES OF THE MEETING OF THE DIRECTORS TO DECIDE THE ISSUE OF PRICING OF THE SHARES AS MENTIONED EARLIER THIS WAS DETERMINED AS ABOVE, IN THIS REGARD FURTHER INFORMATION SOUGHT IS FURNISHED AS UNDER THIS IS A PRIVATE LIMITED COMPANY. HENCE, SHARE CAP ITA! WAS ISSUED TO RELATIVES, FRIENDS, BUSINESS ASSOCIATES OF DIRECTORS. SHRI OMPRAKASH AG RAWAL, THE MAIN PERSON OF THE COMPANY, HIS SONS SANJAY AND SUMIT AND HIS BROTHERS HAD SETTLED AT TINSUKHIA, ASSAM AND WERE DOING BUSINESS AT TINSUKHIA. THE FAMILY OF SHRI OMPRAKASH AGARWAL AND HIS SONS SHIFTED FROM TINSUKHIA TO SURAT AND HIS YOUNGE R BROTHER SHRI GAJANAND AGRAWAL SHIFTED FROM TINSUKHIA TO KOLKATA AND HAD CONTACTS IN KOIKATA. THE PARTIES AND SHRI GAJANAND AGARWAL KNEW EACH OTHER A ND AFTER NEGOTIATION THE AMOUNT WAS RECEIVED. THE MODE OF COMMUNICATION WITH PERSONS FOR PRIVATE PLACEMENT WAS TELECOMMUNICATION/VERBAL COMMUNICATION. THE PRIVATE PLACEMENT WAS ACCEPTED BY VARIOUS PARTIES AND COMPANY HAD MADE PRIVATE PLACEM ENT TO THESE PERSONS BASED ON ACCEPTANCE OF OFFER OF THE COMPANY. AS REGARDS YOUR REFERENCE TO RESOLUTION U/S.81(1A) OF THE COMPANIES ACT, 1956 AS MENTIONED EARLIER, TH E ABOVE SECTION DOES NOT APPLY TO PRIVATE COMPANIES. ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 8 ON RECEIPT OF SHARE APPLICATIONS ALLOTMENT OF SHARE S WAS MADE AND SHARES WERE SENT TO THE PARTIES. NO DIVIDEND HAS BEEN DECLARED.' 6.1.4 THE APPELLANT WAS AGAIN ISSUED A QUERY LETTER DURING THE APPELLATE PROCEEDINGS DATED 15.09.2015, WHEREIN THE APPELLANT WAS DIRECTED TO F ILE THE FOLLOWING DETAILS 'ON THE PERUSAL OF THE DETAILS ON RECORD, FILED DURING THE COURSE OF THE ASSESSMENT AND APPELLATE PROCEEDINGS, CERTAIN ISSUES NEED FURTHER CLARIFICATIONS. YOU ARE REQUIRED TO SUBMIT YOUR EXP LANATION/CLARIFICATION ON THE QUERIES RAISED AS FOLLOWING: (I) WHEN WAS THE EXECUTION OF THE SHARE APPLICATION FORMS COMPLETED? (II) IS THERE ANY BUSINESS/PERSONAL RELATION WITH I NVESTING PARTY DIRECTLY OR INDIRECTLY? (III) COPIES OF ALL COMMUNICATIONS ENTERED WITH ALL PROSPECTIVE INVESTORS INCLUDING CALLING FOR INVESTMENT, APPLICATIONS, INSTALLMENT O F MONEY CALLED, RECEIVED, DECISION OF PREMIUM, ROUND OF NEGOTIATION, DISPATCH OF SHARE CE RTIFICATE, CORRESPONDENCE ABOUT DIVIDEND OR ANY OTHER MATTER ETC., ALONG WITH MODE OF COMMUNICATION AND PROOF OF DISPATCH ETC. PLEASE EXPLAIN THE MODE OF COMMUNICAT ION/CONTACT WITH SUCH PERSON, CORRESPONDENCE/E-MAIL ETC. GIVE EVIDENCE HOW OFFER WAS CONVEYED, IF THERE WAS ANY INSTRUMENT OF COMMUNICATION WITH DETAILS OF COM PANY PROFILE, VALUATION OF SHARES. PRODUCE THE COPY OF THE SHARE APPLICATION ALONGWITH THE ORIGINAL SHARE APPLICATION (ONE APPLICATION FOR SAMPLE) (IV) WHEN WERE THE SHARE APPLICATIONS RECEIVED, AN D THE SHARES WERE ALLOTTED AND SENT TO THE PARTIES? SHARE APPLICATION - WHEN AND WHERE PRINTED, NO. OF SHARES PRINTED, BILL OF SUCH EXPENSES, WHETHER SUCH CLAIMS WERE PART OF PROFIT A ND LOSS ACCOUNT. (V) DELIVERY OF SHARE CERTIFICATES - MODE, DATE AND EXPENSES CLAIMED. PRODUCE THE COPY OF THE SHARE CERTIFICATE (ONE CERTIFICATE FOR SAMPLE) (VI) PLEASE FURNISH THE RESPONSE OF THE PERSONS TO YOUR OFFER AND MODE AND INSTRUMENT OF EXPRESSION OF INTEREST/ACCEPTANCE OF OFFER. (VII) WHEN WAS THE NAME OF SUCH PERSONS ENTERED IN THE SHARE ALLOTMENT REGISTER? (VIII) THE ATTENDANCE REGISTER FOR THE AGM HELD IS TO BE PRODUCED ALONGWITH THE RELEVANT PROXY AUTHORIZATION FORMS AND ANY PROOF OF COMMUNICATION TO THE SHARE HOLDERS IN REGARD TO THE CONVENING OF THE AGM OR EV EN FOR THE DISPATCH OF THE SHARE CERTIFICATES. (IX) WHAT WAS THE APPLICATION OF THE SHARE APPLICAT ION/PREMIUM MONEY? WHAT PURPOSE WAS THIS AMOUNT SPENT? (X)-PRODUCE THE COPY OF THE BANK STATEMENT IN WHICH THE SHARE APPLICATION MONEY HAS BEEN CREDITED. ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 9 (XI)THE LIST OF DIRECTORS OF THE COMPANY IN AY 2009 -10 TO 2012-13 IS TO BE PROVIDED. WHETHER ANY OF THE DIRECTORS OF THE APPELLANT COMPA NY WERE DIRECTORS OF THE 3 COMPANIES OF KOLKATA FROM WHOM SHARE PREMIUM HAS BE EN TAKEN DURING THE ABOVE PERIOD.' 6.1.5 IN RESPONSE TO THE QUERY LETTER THE APPELLANT FILED A REPLY DATED 01,10,2015 RECEIVED IN THIS OFFICE ON 05.10.2015 WHEREIN THE F OLLOWING DETAILS WERE FURNISHED: 'THE EXECUTION OF THE SHARE APPLICATION FORMS WAS C OMPLETED BY THE SHARE APPLICANTS AND WERE RECEIVED BY THE COMPANY IN SEPTEMBER/OCTOB ER, 2010. AS REGARDS ANY BUSINESS/PERSONA! RELATIONSHIP, I WO ULD INFORM YOU THAT THIS IS PRIVATE LIMITED COMPANY. HENCE, SHARE CAPITAL WAS ISSUED TO RELATIVES, FRIEN DS, BUSINESS ASSOCIATES OF DIRECTORS AS ALSO OF COMPANY. DIRECTORS OF THE INVE STING COMPANY SADASUKH DEALERS PVT. LTD. AND OF THE APPELLANT HAVE BEEN KNOWN TO E ACH OTHER SINCE LAST TWO DECADES SINCE DIRECTORS OF THE INVESTING COMPANY AND THAT O F THE APPELLANT STAY IN SURAT. THE OTHER INVESTING PARTIES VIZ. NEWJET TREXIM PVT. LTD . AND CAP VANIJAYA PVT. LTD. HAVE BEEN KNOWN TO MR.GAJANAND AGARWAL, WHO IS YOUNGER B ROTHER OF DIRECTORS OF THE APPELLANT COMPANY. IN PARA 3, YOU HAVE REQUIRED INFORMATION/DETAILS ON VARIOUS GROUNDS. THEY ARE FURNISHED AS UNDER: (A) AS REGARDS COPIES OF COMMUNICATION ENTERED WITH ALL PROSPECTIVE INVESTORS IS CONCERNED, THIS WAS ALL DONE THROUGH SHRI GAJANAN A GRAWAL AS MENTIONED IN EARLIER PARA. SHARE APPLICATIONS WERE RECEIVED AND COPIES T HEREOF ARE ENCLOSED (PAGE 1- 18). (B) SO FAR AS INSTALLMENT OF MONEY CALLED AND RECEI VED, ENTIRE AMOUNT WAS RECEIVED AT ONE STROKE DURING SEPTEMBER/OCTOBER, 2010 AND IS DULY RECORDED IN THE BANK STATEMENTS (PAGES 19-22). (C) AS REGARDS DECISION OF PREMIUM AND NEGOTIATION, THEREOF THIS WAS BASED ON INTRINSIC WORTH OF THE COMPANY. COPY OF AUDITED ACC OUNTS FOR 37 S ' MARCH, 2011 IS ENCLOSED. THE SIGNIFICANT ASPECTS THEREIN ARE BROUG HT TO YOUR NOTICE. 31 - 3 - 2011 31 - 3 - 2010 SHARE CAPITA! (THIS IS BECAUSE OF INFUSION OF TWO LACS NEW SHARES OFRS. 10 EACH DURING 31-03- 2011.) 1,98,47,500 1,78,47,500 GENERAL RESERVE 4,40,00,000 3,40,00,000 PROFIT & LOSS A/C. BALANCE 3,49,07,684 1,23,15,761 ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 10 IF YOU CONSIDER THE FIGURES OF RESERVES WHICH INCLU DES BALANCE OF PROFIT AND LOSS ACCOUNT, THE TOTAL OF FREE RESERVES WOULD BE RS.7,8 9,07,684 ON 31-03-2011 AND RS.4,63,15,761 ON 31-03-2010. FURTHER, THE PROFITS HAVE BEEN CONTINUOUSLY RISING AS PROFITS WERE RS. 1,83,07,723 FOR YEAR ENDING 31-03- 2010 AND RS.3_,25,91 I 923 FOR YEAR ENDING 31-03-2011. IN THIS BACKGROUND THE SHAR E PREMIUM OFRS.50 LACS ON SHARES ISSUED TO CAP VANIJYA PVT. LTD., NEWJET TREX IM PVT. LTD., AND SADASUKH DEALERS PVT. LTD. AGAINST ISSUE OF 1,10,000 SHARES WAS EMINENTLY REASONABLE. IT WOULD BE PERTINENT TO POINT OUT THAT DURING THIS YE AR, 90,000 SHARES WERE ISSUED TO FAMILY MEMBERS AND ASSOCIATE CONCERNS FROM WHOM ALS O SIMILAR AMOUNT OF SHARE PREMIUM WAS COLLECTED. THIS IS REFLECTED IN THE RET URNS OF ALLOTMENT. (D) SHARE CERTIFICATES WERE PERSONALLY HANDED OVER AND THERE WAS NO CORRESPONDENCE ABOUT DIVIDEND OR ANY OTHER MATTER. (E) AS MENTIONED EARLIER, THE MODE OF COMMUNICATION /CONTACT WITH THE INVESTORS AND EVIDENCE OF HOW OFFER WAS CONVEYED, THIS WAS AS PER PERSONAL DISCUSSION WITH THE INVESTORS. (F) DETAILS OF COMPANY PROFILE VALUATION OF SHARE IS AS UNDER: THE COMPANY IS IN THE BUSINESS OF TEXTILES AND M AINLY EXPORTS THE GOODS ITS TURNOVER IS AROUND RS.300 CRORES IT HAS BEEN DISCLOSING PROFITS OF RS.5 TO RS.6 CRORES DURING VARIOUS YEARS AND PAYING TAX ACCORDINGLY OF AROUND RS. 1.5 CRORES EVE RY YEAR. THE SHARE APPLICATIONS WERE PREPARED FROM COMPUTE R AND THEREFORE, THERE WOULD BE NO BILL FOR SUCH EXPENSES. IN FACT, ONLY THREE SHARE APPLICATIONS CAME FROM OUTSIDERS AND SUCH EXPENSES WOULD BE NOMI NAL. AS REGARDS NUMBER OF SHARES CERTIFICATES PRINTED, 500 SHARES W ERE PRINTED IN 2007 BY RUSHABH TRADERS AND THEIR BILL NO.280 DT.14-05-2007 IS ENCLOSED (PAGE 23- 25). THE PAYMENTS WERE DEBITED IN THAT YEAR AND COP IES OF RELATED ACCOUNTS ARE ALSO ENCLOSED (PAGE 26-28). SHARES WERE DELIVERED PERSONALLY AND ONE CERTIFICAT E FOR SAMPLE IS PRODUCED (PAGE 29-37). YOU HAVE MENTIONED ABOUT THE RESPONSE OF THE P ERSONS TO THE OFFER. THERE WAS NO SUCH OFFER BUT THIS WAS THE RESULT OF NEGOT IATION AND THE RESPONSE WAS POSITIVE AS IS REFLECTED IN THEIR INVESTMENT IN THE COMPANY. THERE WAS NO INSTRUMENT OF EXPRESSION OF INTEREST/ACCEPTANCE OF OFFER. THE NAME OF THESE PERSONS WERE ENTERED IN THE SH ARE ALLOTMENT REGISTER ON 14-09-2010/28-12-2010, COPY OF THE SHARE ALLOTMENT REGISTER IS ENCLOSED (PAGE 38-42). ALTHOUGH YOU HAVE NOT MENTIONED AS TO OF WHICH AGM THE ATTENDANCE REGISTER IS CALLED. HOWEVER, ATTENDANCE REGISTER HELD ON 28- 09-2010 AND 30-09-2011 ARE ENCLOSED (PAGE 43-48). THERE WAS NO QUESTION OF PROXY AUTHORIZATION AS NOBODY HAD GIVEN PROXY. THE SHARE APPLICATION/PREMIUM MONEY WERE INVESTED I N EXPANSION OF THE COMPANY'S BUSINESS. THE COMPANY HAD AVAILED LOAN FR OM BANK OF BARODA AND BANK OF BARODA LAID OUT SEVERAL CONDITIONS INCL UDING BRINGING ADDITIONAL SHARE CAPITAL AND FOR THE EVIDENCE THEREOF THEY REQ UIRED COPIES OF FORM 2 FILED ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 11 WITH ROC AS ALSO CERTIFICATE OF CHARTERED ACCOUNTAN T. IT WAS PURSUANT TO THIS CONDITION THAT THE COMPANY ENHANCED THE SHARE CAPIT AL (PAGE 49-55). COPY OF THE BANK STATEMENT IN WHICH SHARE APPLICATI ON MONEY HAS BEEN CREDITED AND HAS BEEN FILED WITH YOU IN RESPONSE TO YOUR EARLIER QUERY, PLEASE FIND ENCLOSED THE LIST OF DIRECTORS OF T HE COMPANY DURING 2009-10 TO 2012-13 ASSESSMENT YEARS (PAGE 56-61). NONE OF THES E DIRECTORS OF THE APPELLANT COMPANY WAS DIRECTOR OF THE TWO COMPANIES OF KOLKATA AND ONE COMPANY OFSURAT FROM WHICH SHARE PREMIUM HAS BEEN T AKEN DURING THE ABOVE PERIOD.' 6.1.6 ON THE PERUSAL OF THE DETAILS, IT IS OBSERVED THAT THE APPELLANT HAD RECEIVED SHARE CAPITAL OF RS. 11,00,000;- AND SHARE PREMIUM OF RS, 50,00,000;- DURING THE YEAR FROM 3 COMPANIES OF KOL KATA. THE AO ISSUED NOTICES U/S 133(6) OF THE ACT ON THE GIVEN ADDRESSE S OUT OF WHICH THE NOTICE ISSUED TO SADASUKH DEALERS PVT. LTD. WAS RET URNED BACK UNSERVED. THE AO ISSUED COMMISSION U/S 131(1)(D) OF THE ACT T O INVESTIGATION WING, KOLKATA TO VERIFY THE IDENTITY, CREDITWORTHINESS AN D GENUINENESS OF THE TRANSACTION. THE INVESTIGATION WING KOLKATA AFTER I NQUIRY REPORTED VIDE ITS LETTER DATED 31/01/2014 THAT THE ALL THE 3 COMPANIE S COULD NOT BE LOCATED AT THE GIVEN ADDRESSES. IT WAS ALSO INFORMED THAT ONE OF THE DIRECTORS OF M/S CAP VANIJ'YA PVT. LTD. NAMELY SHRI ANJ'ANI BANKA WAS SUMMONED U/S 131 OF THE ACT BY INVESTIGATION WING, KOFKATA AND THE STAT EMENT WAS RECORDED ON 16/01/2014 WHEREIN HE STATED THAT THE COMPANIES IN WHICH HE IS DIRECTOR INCLUDING M/S CAP VANIJYA PVT. LTD. IS CONTROLLED B Y SHRI MANOHAR LAI NANGALIA. SUBSEQUENTLY, THE STATEMENT ON OATH OF SH RI MANOHAR LA! NANGAIIA WAS ALSO RECORDED ON 17/01/2014, WHEREIN HE SUBMITT ED THAT THE COMPANIES ARE ACTUALLY CONTROLLED BY HIM AND THESE COMPANIES ARE PAPER/SHELL COMPANIES. IN THE STATEMENT ON OATH, SHRI MANOHAR L AL NANGALIA IN REPLY TO HIS QUESTION NO. 8 HAD CATEGORICALLY STATED AS UNDE R : '/ AGREE AND CONFIRM THAT THE COMPANIES - CAP VANIJYA INVESTMENT, ANKIT TRACO M PVT. LTD. & SHRI BALJU TRADING & INVESTMENT PVT. LTD. ARE PAPER/SHELL COMP ANIES CONTROLLED AND MANAGED BY ME.' THE AO FOUND THAT THE SHARE CAPITAL/PREMIUM HAD BEE N TAKEN FROM THE 3 COMPANIES WHICH WERE PAPER COMPANI ES AS THEY WERE NOT HAVING ANY REVENUE GENERATION ACTIVITY AND THEREFOR E THE SHARE CAPITAL/PREMIUM GIVEN WAS TREATED AS A COLOURABLE D EVICE TO BRING BACK THE UNACCOUNTED MONEY OF THE APPELLANT IN THE BOOKS. 6.1.7 THE AO FOUND ON THE EXAMINATION OF THE VARIOU S DETAILS FURNISHED BY THE APPELLANT IN EACH OF THE CASE, WHICH ARE BRIEFLY EN UMERATED AS FOLLOWING: SADASUKH DEALERS PVT. LTD. FSDPL) NO FIXED ASSETS AS PER THE BALANCE SHEET THE TOTAL TURNOVER AS PER P&L ACCOUNT FROM CONS ULTANCY IS RS. 28,9451- THE APPELLANT ONLY SOURCE OF INCOME IS FROM CONSULT ANCY OF RS. 841/- IN AY 2011-12 AS PER RETURN OF INCOME FILED ON 26.09.2011 ON WHICH THE APPELLANT ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 12 HAS CLAIMED SALARY/WAGES EXPENSE OF RS. 8.501/-. TH E TOTAL EXPENSES IS OF RS. 34.103A WHICH GIVES THE NET PROFIT IN AY 2011-1 2 OF RS. 841/- ON A TOTAL BUSINESS TURNOVER OF RS. 34,945/- WHICH INCLUDES IN TEREST ONFOANOFRS. 6,000/-, NO RENTAL PAYMENT SHOWS FOR ITS REGISTERED OFFI CE PREMISES OTHER EXPENSES OF PETTY NATURE HAVE BEEN SHOWN. NO REAL SOURCE OF INCOME OR ACTUAL BUSINESS ACT IVITY BUT VARIOUS PERSONS HAVE INVESTED INTO EQUITY SHARES OF THE COMPANY AND THE SAME HAS BEEN TRANSFERRED TO OTHER COMPANIES IN FORM OF INVESTMEN T/LOANS. . THE BANK ACCOUNT STATEMENT SHOWS MEAGER BALANCE S BEING MAINTAINED. ASSESSMENT YEAR FIXED ASSETS AS ON 31 ST MARCH INTEREST INCOME/TURNOVER ACCUMULATED PROFIT SHARE CAPITAL & PREMIUM 2010-11 NIL 9,14,868 2,423 2,42,50,000 2011-12 NIL 13,07,459 3,004 |2,42,50,000 NEWLET TREXIM PVT. LTD. (NTPL) NO DETAILS OF NATURE OF BUSINESS GIVEN NO FIXED ASSETS AS PER THE BALANCE SHEET, . . THE COMPANY WAS INCORPORATED IN THE YEAR 1999 AND H AS SHOWN ACCUMULATED LOSSES OF RS. 1,15,728/- AS ON 31.03,2009, LOSS OF RS. 1,10,918/- AS ON 31.03.2010 AND LOSS OF RS. 1.07.199/-AS ON 31.03.20 11. THE APPELLANT ONLY SOURCE OF INCOME IS FROM INTERES T AND INCOME SHOWN IN ITR IS OF RS.6,729/- IN AY 2011-12 AS PER RETURN OF INCOME FILED ON 27,09.2011. THE APPELLANT ONLY SOURCE OF INCOME IS FROM INTERES T OF RS. 15,20,03S/- ON WHICH THE APPELLANT HAS CLAIMED SALARY/WAGES/STAFF EXPENS E OF RS. 10,27,000/-,BUT IT IS STRANGE TO NOTE THAT THE COMPANY HAS NO ACTIVITY AN D NO SOURCE OF INCOME EXCEPT INTEREST INCOME BUT STILL THE EXPENSES INCURRED TOW ARDS OPERATION AND ADMINISTRATION EXPENSES IS OF RS. 14.99.526/- NO RENTAL PAYMENT SHOWS FOR ITS REGISTERED OFFICE P REMISES THOUGH NO RENTAL PAYMENT HAS BEEN SHOWN BUT THE TOT AL ELECTRICITY EXPENSES CLAIMED IS OF RS. 500/- ONLY FOR THE WHOLE YEAR OUT OF THE TOTAL EXPENSES OF RS. 14,99,526/-.THE ELECTRICITY BILLS N EVER COME IN ROUND FIGURES AND CANNOT BE OF SUCH A MEAGER AMOUNT. ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 13 NO REAL SOURCE OF INCOME OR ACTUAL BUSINESS ACTIVIT Y BUT VARIOUS PERSONS HAVE INVESTED INTO EQUITY SHARES OF THE COMPANY AND THE SAME HAS BEEN TRANSFERRED TO OTHER COMPANIES IN FORM OF INVESTMENT/LOANS. THE BANK ACCOUNT STATEMENT SHOWS MEAGER BALANCES BE ING MAINTAINED ASSESSMENT YEAR FIXED ASSETS AS ON 31 ST MARCH INTEREST INCOME/TURNOVER ACCUMULATED PROFIT SHARE CAPITAL & PREMIUM 2010-11 NIL 17,86,754 (-)110918 32,32,20,000 2011-12 NIL 15,20,035 H107199 32,32,20,000 CAP VANIJYA PVT. LTD. (CVPL) NO FIXED ASSETS AS PER THE BALANCE SHEET, THE COMPANY WAS INCORPORATED IN THE YEAR 2000 AND H AS SHOWN MEAGER ACCUMULATED PROFITS OF RS. 21,367/- IN AY 2010-11 AND RS. 25,1 ML- IN AY2011- 12. THE APPELLANT ONLY SOURCE OF INCOME IS FROM INTERES T AND INCOME SHOWN IN ITR IS OF RS.6.782/- IN AY 2011 -12 AS PER RETURN OF INCOM E FILED ON 27,09.2011. THE APPELLANT ONLY SOURCE OF INCOME IS FROM INTERES T OF RS. 17,00,594/- ON WHICH THE APPELLANT HAS CLAIMED SALARY/WAGES/STAFF EXPENSE OF RS. 10,40,000/-. HOWEVER, IT IS STRANGE TO NOTE THAT TH E COMPANY HAS.NO ACTIVITY AND NO SOURCE OF INCOME EXCEPT INTEREST INCOME BUT STILL THE EXPENSES INCURRED TOWARDS OPERATION AND ADMINISTRATION EXPEN SES IS OF RS. 16,93,812/-. NO REAL SOURCE OF INCOME OR ACTUAL BUSINESS ACTIVIT Y BUT VARIOUS PERSONS HAVE INVESTED INTO EQUITY SHARES OF THE COMPANY AND THE SAME HAS BEEN TRANSFERRED TO OTHER COMPANIES IN FORM OF INVESTMEN T/LOANS. THE BANK ACCOUNT STATEMENT SHOWS MEAGER BALANCES BE ING .MAINTAINED ASSESSMENT YEAR FIXED ASSETS AS ON 31 * MARCH INTEREST INCOME/TURNOVER ACCUMULATED PROFIT SHARE CAPITAL & PREMIUM 2010-11 NIL 19,43,641 21,367 36,86,51,200 2011-12 NIL 17,00,594 25,117 36,86,51,200 ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 14 6.1.8 DURING THE APPELLATE PROCEEDINGS, THE APPELLA NT WAS ASKED TO FURNISH THE DETAILS REGARDING THAT HOW HE CAME INTO CONTACT WIT H THESE 3 COMPANIES, WHERE THEY MET, HOW THEY MET, COPIES OF ALL COMMUNI CATIONS ENTERED WITH ALL PROSPECTIVE INVESTORS INCLUDING CALLING FOR INVESTM ENT, APPLICATIONS, INSTALLMENT OF MONEY CALLED, RECEIVED, DECISION OF PREMIUM, ROU ND OF NEGOTIATIONS. DISPATCH OF SHARE CERTIFICATES, CORRESPONDENCE ABOU T DIVIDEND OR ANY OTHER MATTER ETC., ALONG WITH MODE 'OF COMMUNICATION AND PROOF OF DISPATCH ETC. THE APPELLANT SUBMITTED THAT MR GAJANAND AGARWAL, BROTH ER OF DIRECTORS OF THE APPELLANT COMPANY ARRANGED THE SHARE CAPITAL FROM T HE DIRECTORS OF THESE 3 KOLKATA COMPANIES ON PERSONAL PERSUASION AND CONTAC TS. THE APPELLANT COULD NOT SUBMIT ANY DOCUMENTARY EVIDENCE REGARDING THE C ORRESPONDENCE MADE WITH THE LENDERS FOR THE INVESTMENTS IS SHARE CAPIT AL. NOT A SINGLE PIECE OF PAPER OR EMAIL COULD BE FURNISHED AS A PROOF OF THE DISCUSSIONS FOR SHARE CAPITAL ALONG WITH THE TERMS AND CONDITIONS, PAPER WORK ETC. IT IS IMPORTANT TO POINT OUT THAT THESE 3 COMPANIES HAD NEVER MADE ANY TRANSACTIONS EARLIER WITH THE APPELLANT COMPANY WHICH COULD EXPLAIN THE CONDUCT OF THEM LENDERS IN INVESTMENT IN SHARE CAPITAL. 6.1.9 THE 3 PARTIES WERE NOT FOUND AT THE GIVEN ADD RESSES WHEN ENQUIRES WERE CONDUCTED BY THE INVESTIGATION WING, KOLKATTA. THE ONUS WAS ON THE APPELLANT TO PROVE THE EXISTENCE OF THE SHARE HOLDE RS WHICH COULD NOT BE DISCHARGED AS THE SHARE HOLDERS ARE NON-EXISTENT AN D NON TRACEABLE ON THE GIVEN ADDRESSES. NOW COMING TO ISSUE OF THE CREDITW ORTHINESS AND GENUINENESS OF THE TRANSACTIONS, THE AO NOTICED THA T IN THE BANK ACCOUNTS OF THE SHARE HOLDERS MEAGER BALANCES WERE MAINTAINED I N THE ACCOUNTS AND THE DEPOSITS WERE MADE IMMEDIATELY TWO OR THREE DAYS BE FORE OR ON THE SAME DAY IN THE BANK ACCOUNTS OF THE SHARE HOLDERS AND THAT AMOUNT OF DEPOSIT WAS UTILIZED FOR INVESTMENT IN THE SHARE PREMIUM/SHARE CAPITAL. DURING THE ASSESSMENT PROCEEDINGS, THE AO CARRIED OUT AN ANALY SIS OF THE BANK STATEMENTS DISCUSSED AT R =:A 5.20 PAGE 11 OF ASSESSMENT ORDER, WHICH REVEALED THAT MONEY WAS GETTING CREDITED IN THESE A CCOUNTS AND ON THE SAME DAY OR NEXT DAY THE AMOUNT WAS BEING DEBITED THROUG H TRANSFER/WITHDRAWALS BY CLEARING/RTGS TRANSFERS ETC. THE CASH DEPOSITS H AVE ALSO BEEN MADE IN THESE ACCOUNTS. NO BUSINESS TRANSACTIONS HAVE BEEN CARRIED OUT AND AT NO POINT OF TIME ANY SUBSTANTIVE BALANCE IS SEEN. THE BANK STATEMENTS TRANSACTIONS REVEAL THAT THESE ACCOUNTS ARE NOT BEI NG USED FOR ANY BUSINESS TRANSACTIONS. IT IS NOTICED THAT IN THESE BANK ACCO UNTS OF THE LENDERS MEAGER BALANCES WERE MAINTAINED IN THE ACCOUNTS AND THE DE POSITS WERE MADE IMMEDIATELY TWO OR THREE DAYS BEFORE OR ON THE SAME DAY IN THE BANK ACCOUNTS OF THE LENDERS AND THAT AMOUNT OF DEPOSIT WAS UTILIZED FOR INVESTMENT IN SHARE CAPITAL/LOANS. 6.1.10. THE DETAILS OF THE WORKING OF THE VALUATION OF THE SHARES WERE ASKED TO BE SUBMITTED. THE APPELLANT SUBMITTED IN HIS REPLY DATED 03.08.2015 THAT THERE WAS NO MECHANISM PRESCRIBED FOR CALCULATION O F PREMIUM ON SHARES OF ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 15 PVT. LTD. COMPANIES DURING AY 2011-12. IT WAS ENTIR ELY A MATTER BETWEEN THE COMPANY AND THE SUBSCRIBERS TO SHARE AND PREMIUM HA S BEEN FIXED ON THE BASIS OF THE INTRINSIC WORTH OF THE COMPANY. THE VA LUATION OF THE SHARES SUCH A HIGH FIGURE AND THE CHARGING OF THE PREMIUM HAS BEE N FIXED WITHOUT ANY BASIS, PERFORMANCE- PAST OR PRESENT OR PROFESSIONAL OPINIO N I.E. IN CONSULTATION WITH EXPERTS OR FINANCIAL INSTITUTIONS. IN SUCH A SITUAT ION THE ONLY INFERENCE THAT COULD BE DRAWN THAT THE RATE OF PREMIUM WAS FIXED U NILATERAILY BY THE APPELLANT WITHOUT ANY REFERENCE POINT TO PAST RECORDS, PRESEN T EARNINGS OR FUTURE PROSPECTS. THE OBJECT WAS NOT TO ATTRACT GENUINE IN VESTORS BY PEGGING THE PREMIUM AT A REALISTIC LEVEL BUT TO BRING IN LARGE AMOUNTS OF UNACCOUNTED FUNDS IN THE GUISE OF SHARE PREMIUM. THE NET WORTH AS DISCLOSED BY THE BALANCE SHEET, THE POTENTIAL EARNINGS AS DISCLOSED BY EARNINGS PER SHARE OR EVEN THE VAGUE PROTESTATIONS OF FUTURE PROSPECTS WO ULD NOT JUSTIFY A HIGH PREMIUM. 6.1.11. IT WAS ALSO NOTICED ON THE VERIFICATION OF THE RETURN OF INCOME FILED BY THESE PERSONS/SHARE HOLDERS, THAT THEY ALL HAVE MEA GER MEANS OF INCOME WITH NO CAPACITY TO BE ABLE TO INVEST THE AMOUNTS AS CLA IMED TOWARDS SHARE CAPITAL/SHARE PREMIUM. 6.1.12. WHEN THE ASSESSING OFFICER ASKED THE APPELL ANT TO FURNISH THE DETAILS, THE APPELLANT PRODUCED DETAILS LIKE BANK STATEMENT, COPY OF ACKNOWLEDGMENT OF RETURN, CONFIRMATIONS, ETC. HOWEVER, WHEN THE AS SESSING OFFICER GOT INQUIRY CONDUCTED AT THE STATED ADDRESSES THROUGH THE INVES TIGATION WING, KOLKATTA, THE PARTIES WERE FOUND TO BE NON-EXISTENT, IT WAS A LSO FOUND BY INVESTIGATION WING THAT ONE OF THE DIRECTORS OF M/S CAP VANIJYA P VT. LTD. NAMELY SHRI ANJANI BANKA WAS SUMMONED U/S 131 OF THE ACT BY INVESTIGAT ION WING, KOLKATA AND THE STATEMENT WAS RECORDED WHEREIN HE STATED THAT T HE COMPANIES IN WHICH HE IS DIRECTOR INCLUDING M/S CAP VANIJYA PVT. LTD. IS CONTROLLED BY SHRI MANOHAR LAL NANGALIA. SUBSEQUENTLY, THE STATEMENT ON OATH O F SHRI MANOHAR LAL NANGALIA WAS ALSO RECORDED WHEREIN HE SUBMITTED THA T THE COMPANIES ARE ACTUALLY CONTROLLED BY HIM AND THESE COMPANIES ARE 'PAPER/SHELL COMPANIES'. THEREAFTER, THE APPELLANT EXCEPT PRODUCING THE PAPE RS COULD NOT PROVE EXISTENCE OR AVAILABILITY OF THE SHARE APPLICANTS. WHEN THE IDENTITY OF THE PERSON IS REQUIRED TO BE PROVED SO AS TO EXAMINE WH ETHER IN FACT THEY HAVE .APPLIED FOR ALLOTMENT OF SHARES, THE EXISTENCE ITS ELF IS NOT PROVED. THE EXISTENCE OF A PERSON IS NOT MERELY ON PAPER. PARTI CULARLY WHEN THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO PRODUCE THE SHARE APPLICANTS AND PARTICULARLY WHEN AT THE STATED ADDRESS THE SHARE APPLICANTS ARE NOT FOUND TO BE EXISTING, IT CANNOT BE SAID THAT THE AMOUNT RECEIVED BY THE A SSESSEE IS PROVED TO BE TOWARDS SHARE CAPITAL. THE TRANSACTION CANNOT BE PR OVED MERELY ON PAPER. THEREFORE, WHEN THE IDENTITY OF THE PERSON ITSELF I S NOT PROVED, THE AMOUNT RECEIVED BY THE ASSESSEE CANNOT BE CONSIDERED TO BE GENUINELY RECEIVED. SIMILAR VIEW HAS BEEN EXPRESSED IN THE CASE OF AMTR AC AUTOMOTIVE INDIA (P.) ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 16 LTD. ITRFTRIB.) 649 (DELHI) 2010] AND 1 ITRFTRIB.) 529 (DELHI) DHINGRA GLOBAL CREDENCE (P.) LTD. 6.2.1 BEFORE GOING INTO THE DETAILS ON THE ISSUE OF ACCOMMODATION ENTRIES IN FORM OF SHARE CAPITAL /LOANS THROUGH PAPER/SHELL CO MPANIES, IT IS IMPORTANT TO DELVE BRIEFLY INTO THE WHOLE CONCEPT OF ACCOMMODATI ON ENTRY AND ITS SCENARIO IN THE COUNTRY. WHEN REFERENCE IS MADE TO AN ENTRY OF LOAN TRANSACTION AS 'FAKE LOAN 1 RECEIVED FROM A 'PAPER COMPANY', IT INVARIABLY MEA NS THAT SUCH ENTRY REPRESENTS UNACCOUNTED MONEY OF THE PERSON IN WHOSE BOOKS OF ACCOUNT THE MONEY HAS BEEN CREDITED AS SHARE CAPITA L/ LOAN AND THE LENDER COMPANY IS ONLY A CONDUIT FOR ROUTING THE MONEY BAC K TO THE BOOKS OF ACCOUNT OF THAT PERSON. HOWEVER, DESPITE HAVING KNOWLEDGE O F THIS FACT AND KNOWING THE TECHNIQUES AND METHODS USED BY THE TAXPAYERS FO R THIS PURPOSE, IT REMAINS A HUGE CHALLENGE FOR THE TAX AUTHORITIES TO BRING ALL MATERIAL FACTS AND EVIDENCES ON RECORD SO AS TO PROVE WHICH IN HIS OPI NION IS A FACT, BEYOND DOUBT. IN AN ECONOMY WHERE UNACCOUNTED INCOME IS A BIG MENACE, THERE ARE ALWAYS EFFORTS MADE BY THE TAX EVADERS TO BRING THE IR UNACCOUNTED INCOME BACK TO THEIR BOOKS OF ACCOUNT WITHOUT PAYING ANY T AX ON THE SAME. NUMEROUS METHODS AND TECHNIQUES ARE USED FOR THIS PURPOSE AN D THERE ARE LOTS OF TECHNIQUES THAT AUTHORITIES KNOW ABOUT AND PROBABLY COUNTLESS OTHERS THAT HAVE YET TO BE UNCOVERED. ROUTING THE UNACCOUNTED I NCOME BACK TO THE BOOKS OF ACCOUNT DISGUISED AS LOAN OR SHARE CAPITAL IS ON E OF SUCH METHODS WIDELY USED BY THE TAX EVADERS IN OUR COUNTRY. THE METHOD IS MOST PREVALENT AND PERHAPS ALSO ONE OF THE MOST ORGANIZED ONE TO BRING THE UNACCOUNTED MONEY BACK TO THE BOOKS OF ACCOUNT WITHOUT PAYING ANY TAX ON THE SAME. 6.2.2 THE METHOD OF PROVIDING ACCOMMODATION ENTRY ENTAILS BREAKING UP LARGE AMOUNTS OF MONEY INTO SMALLER, LESS-SUS PICIOUS AMOUNTS. THIS SMALLER AMOUNT HAS TO BE BELOW RS. 50.000/-AS'DEPOS IT OF CASH BELOW THIS AMOUNT DOES NOT REQUIRE PROVIDING PAN OF THE DEPOSI TORS. THE MONEY IS THEN DEPOSITED INTO ONE OR MORE BANK ACCOUNTS EITHER BY MULTIPLE PEOPLE OR BY A SINGLE PERSON OVER AN EXTENDED PERIOD OF TIME. ALSO , EVEN LARGER AMOUNTS ARE DEPOSITED IN THE BANKS WITH PAN NUMBERS OF INDIVIDU ALS WHO ARE MOSTLY ILLITERATE AND WORK FOR THESE ENTRY OPERATORS FOR S MALL SALARY OR COMMISSION. THE MONEY IS THEN ROUTED THROUGH PAPER COMPANIES CO NTROLLED BY THESE OPERATORS. THESE COMPANIES ARE INCORPORATED BY TAKI NG CARE OF ALI FORMALITIES SUCH AS REGISTERING WITH ROC BUT HAVING ONLY POSTAL ADDRESSES WITH NO REAL OFFICE OR EMPLOYEES. THE DIRECTORS OF SUCH COMPANIE S ARE AGAIN INDIVIDUALS WHO ARE MOSTLY ILLITERATE OR SEMILITERATE AND WORK FOR THE ENTRY OPERATORS FOR SMALL SALARIES OR COMMISSION. AT FIRST SIGHT, MOST OF THESE COMPANIES WOULD PASS OF AS FINANCE, INVESTMENT OR TECHNOLOGY COMPAN IES. BUT AS THE ENTRY OPERATORS HAVE ADMITTED IN LARGE NUMBER OF CASES TH AT THESE ARE ONLY PAPER COMPANIES USED TO ROUTE THE UNACCOUNTED INCOME AND, AT THE SAME TIME, CLEAN HOARDS OF UNACCOUNTED INCOME FOR THEIR CLIENT S. THESE COMPANIES USED FOR ROUTING THE UNACCOUNTED MONEY ARE BASICALLY FAK E COMPANIES THAT EXIST FOR ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 17 NO OTHER REASON THAN TO LAYER' THE ENTRIES OR PASS IT ONTO THE BENEFICIARY AS LOAN OR SHARE CAPITA!. THEY TAKE IN UNACCOUNTED MON EY AS 'LOAN OR SHARE CAPITAL' AND PASS IT ON TO EITHER ANOTHER SUCH PAPE R COMPANY FOR LAYERING' OF THE TRANSACTION OR DIRECTLY TO THE BENEFICIARY AS L OAN OR SHARE CAPITAL. THEY SIMPLY CREATE THE APPEARANCE OF LEGITIMATE TRANSACT IONS THROUGH FAKE ENTRIES OF LOANS OR SHARE CAPITAL IN THEIR BOOKS OF ACCOUNT . THIS HAS BEEN EXPOSED FROM TIME TO TIME THROUGH SEARCH AND SEIZURE OPERAT IONS BY THE DEPARTMENT, SUCH ENTRY OPERATORS CONTROLS HUNDREDS OF BANK ACCO UNTS FOR DEPOSITING CASH AND HUNDREDS OF COMPANIES FOR ROUTING THE ENTRIES. LIMITED RESOURCE AND INFRASTRUCTURE OF THE REGISTRAR OF COMPANIES (ROC) PERHAPS MAKES IT EASIER FOR THEM TO INCORPORATE LARGE NUMBER OF SUCH PAPER COMPANIES WITHOUT ANY DIFFICULTY. THE PROCESS, PRIMA FACIE, MAY APPEAR VERY SIMPLE B UT IT IS EXTREMELY DIFFICULT TO EXPOSE THE WHOLE CHAIN OF MONEY DEPOSI TED AND LAYERS' THROUGH WHICH IT IS ROUTED BACK TO THE BENEFICIARY. THE BIG GEST PROBLEM IS THAT THERE IS NO EFFECTIVE DETERRENCE TO CURB THE ACTIVITIES OF T HESE ENTRY OPERATORS. EVEN CONDUCTING SEARCH AND SEIZURE OPERATIONS AGAINST TH EM HAVE NOT REALLY WORKED AS DETERRENCE AND SUCH OPERATIONS OFTEN ENDE D UP IN DISCLOSURE OF 'UNACCOUNTED COMMISSION INCOME' OF THESE ENTRY OPER ATORS WHICH DEFINITELY COULD NOT BE THE PURPOSE OF CONDUCTING SEARCH AND S EIZURE OPERATIONS AGAINST THESE OPERATORS. 6.2:3 AN IMPORTANT QUESTION ARISES-'IW/E DEALING WITH DOUBTFUL CASH CREDITS, IS IT NECESSARY FOR THE ASSESSING OFFICER TO ESTABLISH THAT THE MONEY CAME BACK TO THE BOOKS OF THE ASSESSEE AS 'ENTRY' ACTUALLY EM ANATED FROM THE COFFERS OF THE ASSESSEE?' THIS ISSUE HAS BEEN DECIDED BY THE HON'BLE DELHI HI GH COURT IN A DECISION DATED 20.07.2012 IN THE CASE OF COMMI SSIONER OF INCOME-TAX V/S INDEPENDENT MEDIA (P.) LTD. 210 TAXMANN 14(DELHI)(2 012), WHICH IS SIGNIFICANT AS THE OBSERVATION MADE BY THE HON. COU RT IN THIS DECISION REGARDING THE CASES WHERE 'ENTRIES' HAVE BEEN TAKEN FROM PAPER COMPANIES. IN THIS CASE IT WAS ALLEGED BY THE INVESTIGATION WI NG THAT THE ASSESSEE- COMPANY RECEIVED SHARE CAPITAL FROM THOSE PERSONS W HO HAD GIVEN STATEMENTS BEFORE INVESTIGATION WING THAT THEY WERE ENTRY PROVIDERS GIVING ACCOMMODATION ENTRIES AFTER RECEIVING CASH AND AFTE R CHARGING THEIR COMMISSION. ASSESSEE FURNISHED PAN OF SUBSCRIBER-CO MPANIES, SHARE APPLICATION FORMS, BOARD RESOLUTIONS, COPY OF BANK STATEMENT, PAY ORDERS, CONFIRMATION FROM SUBSCRIBERS, THEIR INCOME-TAX RET URNS, COPIES OF THEIR BALANCE SHEETS, ETC. HOWEVER IT WAS HELD BY THE HON . COURT THAT IF EXPLANATION ADDUCED BY ASSESSEE WITH REGARD TO IDENTITY AND CRE DITWORTHINESS OF SUBSCRIBER-COMPANIES AND GENUINENESS OF TRANSACTION S WAS NOT ACCEPTABLE FOR VALID REASONS, ASSESSING OFFICER COULD MAKE ADD ITION UNDER SECTION 68 ANCT FOR THAT PURPOSE HE WOULD NOT BE UNDER ANY DUT Y TO FURTHER SHOW OR ESTABLISH THAT MONIES EMANATED FROM COFFERS OF ASSE SSEE-COMPANY. THE HON. COURT FURTHER OBSERVED THAT 'WE ARE UNABLE TO UPHOLD THE VIEW OF THE TRIBUNAL THAT IT IS INCUMBENT UPON THE ASSESSING OFFICER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TO ESTABLISH WITH THE HE LP OF MATERIAL ON RECORD THAT ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 18 THE SHARE MONIES HAD COME OR EMANATED FROM THE ASSE SSEES COFFERS. SECTION 68 OF THE ACT CASTS NO SUCH BURDEN UPON THE ASSESSING OFFICER. THIS ASPECT HAS BEEN CONSIDERED MORE THAN 50 YEARS BACK BY THE SUPREME COURT IN THE CASE OF A GOVINDARAJULU MUDALIAR V.CIT [1958 ] 34 !TR 807 WHERE PRECISELY THE SAME ARGUMENT WAS ADVANCED BEFORE THE SUPREME COURT ON BEHALF OF ASSESSEE. THE ARGUMENT WAS REJECTED BY TH E COURT.' 6.2.4 THE HON'BLE COURT FURTHER REFERRED THAT IN TH E ABOVE CASE,(A.GOVINDARAJULU MUDALIAR V.CIT [1958] 34ITR 807) SHRI VENKATARAMA L YER, J. SPEAKING FOR THE COURT OBSERVED AS UNDER: - 'NOW THE CONTENTION OF THE APPELLANT IS THAT ASSUMI NG THAT HE HAD FAILED TO ESTABLISH THE CASE PUT FORWARD BY HIM, IT DOES NOT FOLLOW AS A MATTER OF LAW THAT THE AMOUNTS IN QUESTION WERE INCOME RECEIVED OR ACCRUED DURING THE PREVIOUS YEAR, THAT IT WAS THE DUTY OF THE DEPARTMENT TO ADDUCE EVIDENCE TO SHOW F ROM WHFFT SOURCE THE INCOME WAS DERIVED AND WHY IT SHOULD BE TREATED AS CONCEAL ED INCOME. IN THE ABSENCE OF SUCH EVIDENCE, IT IS ARGUED, THE FINDING IS ERRONEO US. WE ARE UNABLE TO AGREE. WHETHER A RECEIPT IS TO BE TREATED AS INCOME OR NOT , MUST DEPEND VERY LARGELY ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. IN THE PRESEN T CASE THE RECEIPTS ARE SHOWN IN THE ACCOUNT BOOKS OF A FIRM OF WHICH THE APPELLANT AND GOVINDASWAMY MUDALIAR WERE PARTNERS. WHEN HE WAS CALLED UPON TO GIVE EXPL ANATION HE PUT FORWARD TWO EXPLANATIONS, ONE BEING A GIFT OF RS. 80,000/~ AND THE OTHER BEING RECEIPT OF RS. 42,000/~ FROM BUSINESS OF WHICH HE CLAIMED TO BE TH E REAL OWNER. WHEN BOTH THESE EXPLANATIONS WERE REJECTED, AS THEY HAVE BEEN IT WA S CLEARLY UPON TO THE INCOME-TAX OFFICER TO HOLD THAT THE INCOME MUST BE CONCEALED I NCOME. THERE IS AMPLE AUTHORITY FOR THE POSITION THAT WHERE AN ASSESSEE FAILS TO PR OVE SATISFACTORILY THE SOURCE AND NATURE OF CERTAIN AMOUNT OF CASH RECEIVED DURING TH E ACCOUNTING YEAR, THE INCOME- TAX OFFICER IS ENTITLED TO DRAW THE INFERENCE THAT THE RECEIPT ARE OF AN ASSESSABLE NATURE. THE CONCLUSION TO WHICH THE APPELLATE TRIBU NAL CAME APPEARS TO US TO BE AMPLY WARRANTED BY THE FACTS OF THE CASE. THERE IS NO GROUND FOR INTERFERING WITH THAT FINDING, AND THESE APPEALS ARE ACCORDINGLY DISMISSE D WITH COSTS.' 6.2.5. THE IDENTITY, CAPACITY AND GENUINENESS ASPEC TS ARE NOT WATER TIGHT COMPARTMENTS. AN ASSESSEE'S EXPLANATION OF THE NATU RE AND SOURCE OF THE CREDITS CANNOT BE ENTERTAINED AND HELD BY THE ASSES SING OFFICER AS SATISFACTORY UNLESS AND UNTIL THE GROUND REALITY I. E. THE DE-FACTO EXISTENCE OF THE CREDITOR IS FIRST ESTABLISHED PRIMA FACIE PAVIN G THE WAY FOR THE ASSESSING OFFICER TO EXAMINE FURTHER THE CAPACITY A ND GENUINENESS ASPECTS. MERELY BASED ON ARRANGED AFFAIRS AND SUPPO RTING DOCUMENTS, THE IDENTITY CANNOT BE SAID TO BE ESTABLISHED, AND IN M ANY CASE NOT THE CAPACITY AND GENUINENESS OF THE TRANSACTION. IN THIS ASPECT IT W OULD BE NECESSARY TO ADVERT TO TWO DECISIONS OF THE SUPREME COURT, THE FIRST BEING IN COMMISSIONER OF INCOME TAX VS. P. MOHANAKALA AIR 2007 SQ 2116. WHILE CONSI DERING THE SCOPE OF SECTION 68, THE SUPREME COURT OBSERVED AS FOLLOWS: ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 19 '. ,.. WHEN AND IN WHAT CIRCUMSTANCES SECTION 68 OF THE AC T WOULD COME INTO PLAY? THAT A BARE READING OF SECTION 68 SUGGESTS TH AT THERE HAS TO BE CREDIT OF AMOUNTS IN THE BOOKS MAINTAINED BY AN ASSESSEE; SUC H CREDIT HAS TO BE OF A SUM DURING THE PREVIOUS YEAR; AND THE ASSESSEES OFFER N O EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH CREDIT FOUND IN THE BOOKS ; OR THE EXPLANATION OFFERED BY THE ASSESSEES IN THE OPINION OF THE ASSESSING OFFIC ER IS NOT SATISFACTORY. IT IS ONLY THEN THE SUM SO CREDITED MAY BE CHARGED TO INCOME-T AX AS THE INCOME OF THE ASSESSEES OF THAT PREVIOUS YEAR. THE EXPRESSION 'TH E ASSESSEES OFFERS NO EXPLANATION' MEANS WHERE THE ASSESSEES OFFER NO PRO PER, REASONABLE AND ACCEPTABLE EXPLANATION AS REGARDS THE SUMS FOUND CR EDITED IN THE BOOKS MAINTAINED BY THE ASSESSEES. IT IS TRUE THE OPINION OF THE ASSESSING OFFICER FOR NOT ACCEPTING THE EXPLANATION OFFERED BY THE ASSESS EES AS NOT SATISFACTORY IS .REQUIRED TOUE BASED ON PROPER APPRECIATION OF MATERIAL AND OTHER ATTEND ING CIRCUMSTANCES AVAILABLE ON RECORD. THE OPINION OF T HE ASSESSING OFFICER IS REQUIRED TO BE FORMED OBJECTIVELY WITH REFERENCE TO THE MATERIAL AVAILABLE ON RECORD. APPLICATION OF MIND IS THE SINE QUA NON FOR FORMING THE OPINION,' IN THE INSTANT CASE, THE AO HAS ARRIVED AT THE CONCLUSION BASED ON THE MATERIAL AVAILABLE ON RECORD WHICH SHOWED THE LENDERS TO BE PAPER COMPANIES. 6.2.6. THE SUPREME COURT NOTED, FOLLOWING THE EARLI ER DECISION IN COMMISSIONER OF INCOME TAX VS. ORISSA CORPORATION P VT. LTD. [1986] 159ITR78 THAT WHERE THE CONCLUSION OF THE TRIBUNAL WAS NOT UNREASONABLE OR PERVERSE OR BASED ON NO EVIDENCE, NO QUESTION OF LAW AS SUCH WOULD ARISE FOR CONSIDERATION. THE COURT FURTHER OBSERVED THUS:. '...THE DOUBTFUL NATURE OF THE TRANSACTION AND THE MANNER IN WHICH T HE SUMS WERE FOUND CREDITED IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE HAVE BEEN DULY TAKEN INTO CONSIDERATION BY THE AUTHORITIES BE LOW. THE TRANSACTIONS THOUGH APPARENT WERE HELD TO BE NOT REAL ONE. MAY B E THE MONEY CAME BY WAY OF BANK CHEQUES AND PAID THROUGH THE PROCESS OF BANKING TRANSACTION BUT THAT ITSELF IS OF NO CONSEQUENCE,' THE OVERALL CIRCUMSTANCES IS TO BE TAKEN INTO CONSIDERATION AND IN THE PRESENT CASE, M ERE TRANSACTIONS BEING MADE THROUGH BANKING CHANNELS DO NOT MAKE THE TRANS ACTIONS GENUINE AS IN THE INSTANT CASE WHERE THE FRANK ACCOUNTS OF THE LENDERS DO NOT SHOW ANY GENUINE ACTIVITIES AS DISCUSSED IN THE AFORESAI D PARAS. 6.2.7. IN ANOTHER JUDGMENT OF THE SUPREME COURT IN VIJAY KUMAR TALWAR VS. CIT (2011) 1 SCC 673 THE SAME PRINCIPLE WAS APPLIED IN THE FOLLOWING OBSERVATIONS: '. ...ALL THE AUTHORITIES BELOW, IN PARTICULAR THE TRI BUNAL, HAVE OBSERVED IN UNISON THAT THE ASSESSEE DID NOT PRODUC E ANY EVIDENCE TC REBUT THE PRESUMPTION DRAWN AGAINST HIM UNDER SECTION 68 OF THE ACT, BY PRODUCING THE PARTIES IN WHOSE NAME THE AMOUNTS IN QUESTION H AD BEEN CREDITED BY THE ASSESSEE IN HIS BOOKS OF ACCOUNT IN THE ABSENCE OF ANY COGENT EVIDENCE, A BAID EXPLANATION FURNISHED BY THE ASSESSEE ABOUT TH E SOURCE OF THE CREDITS IN QUESTION VIZ., REALISATION FROM THE DEBTORS OF THE ERSTWHILE FIRM, IN THE OPINION OF THE ASSESSING OFFICER, WAS NOT SATISFACTORY. IT IS WELL SETTLED THAT IN VIEW OF ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 20 SECTION 68 OF THE ACT, WHERE ANY SUM IS FOUND CREDI TED IN THE BOOKS OF THE ASSESSEE FOR ANY PREVIOUS YEAR, THE SAME MAY BE CHA RGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR, I F THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATURE AND SOURCE THEREOF IS , IN THE OPINION OF THE ASSESSING OFFICER, NOT.SATISFACTORY.' 6.2.8. THE ONLY REQUIREMENT FOR ESTABLISHING THE CA SH CREDIT TO BE UNDISCLOSED INCOME OF THE TAXPAYER IS THAT PROPER ENQUIRY MUST BE MADE BY A.O BEFORE MAKING ANY ADDITION U/S 68. IN KHANDELWAL CONSTRUCT IONS V. CIT 227 ITR 900 (GAU.) IT HAS BEEN HEID THAT SECTION 68 OF INCOME T AX ACT, 1961, EMPOWERS THE ASSESSING OFFICER TO MAKE ENQUIRY REGARDING CAS H CREDIT, IF HE IS SATISFIED THAT THESE ENTRIES ARE NOT GENUINE HE HAS EVERY RIG HT TO ADD THESE AS INCOME FROM OTHER SOURCES. BUT BEFORE REJECTING THE ASSESS EE'S EXPLANATION A.O. MUST MAKE PROPER ENQUIRIES AND IN THE ABSENCE OF PROPER ENQUIRIES, ADDITION CANNOT BE SUSTAINED. IN THE INSTANT CASE, THE AO HA D MADE PROPER INQUIRIES TO ESTABLISH THAT THE INVESTORS WERE PAPER COMPANIES F OR ACCOMMODATION ENTRIES AS EVIDENT FROM THE FOLLOWING FACTS; NATURE OF BUSINESS NOT KNOWN; NO KNOWN SOURCE OF INCOME; MEAGER INCOME TO JUSTIFY SUCH INVESTMENTS; NO FIXED ASSETS; NO RENTAL PAYMENTS; MINISCULE EXPENSES; VERY LOW BALANCES IN THE BANK ACCOUNTS; THE BANK ACCOUNTS HAVE BEEN USED TO TRANSFER FU NDS FROM ONE ACCOUNT TO OTHER ACCOUNTS; NO PROOF REGARDING HOW THE LENDERS OF KOLKATTA CAME IN CONTACT WITH THE APPELLANT; 6.2.9 IF THE ABOVE PRINCIPLES OF STATUTORY ONUS ON AN ASSESSEE U/S 68 AND OF THE SHIFTING OF SUCH ONUS FROM THE ASSESSEE ON TO THE ASSESSING OFFICER ARE APPLIED TO ANY CASE INCLUDING THE PRESENT APPELLANT 'S CASE, THE FOLLOWING POSITION SHALL EMERGE. PRIMA FACIE PROOF OF THE THR EE INGREDIENTS AND THAT TOO CUMULATIVELY SHALL HAVE TO BE EXAMINED AT THREE DIF FERENT STAGES ONE AFTER THE OTHER BUT IF AN ASSESSEE FAILS TO ESTABLISH AT THE FIRST STAGE, THE IDENTITY OF THE CREDITOR ITSELF, THERE IS NO QUESTION OF AN ASSESSI NG OFFICER EXAMINING THE MATTER AT THE SECOND STAGE OF ENSURING AND SATISFYI NG HIMSELF OF THE CAPACITY OF THE CREDITOR TO ADVANCE THE MONEYS AND NOR THERE FORE, THE ASSESSING OFFICER EXAMINING THE MATTER AT THE SECOND STAGE OF ENSURING AND SATISFYING HIMSELF OF THE CAPACITY OF THE CREDITOR TO ADVANCE THE MONEYS, EVEN THEN THE ONUS LAY ON THE ASSESSEE TO FURTHER ESTABLISH CERTA IN THINGS BECAUSE NON- PRODUCTION OF DOCUMENTARY EVIDENCE OF CORROBORATIVE VALUE INVITES ADVERSE INFERENCE AGAINST THE PERSON WHO OUGHT TO HAVE PROD UCED ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 21 6.2.10 PRIMA FACIE ONUS IS ALWAYS ON THE ASSESSEE T O PROVE THE CASH CREDIT ENTRY FOUND IN THE BOOKS OF ACCOUNT OF THE ASSESSEE . IN LAND MARK CASES LIKE KALE KHAN MOHAMMAD HANIF V C1T[1963] 50 ITR 1 (SC), AND ROSHAN DI HATTI V CIT [1977] 107 !TR (SC), IT HAS BEEN HELD THAT TH E LAW IS WELL SETTLED THAT THE ONUS OF PROVING THE SOURCE OF A SUM OF MONEY FOUND TO HAVE BEEN RECEIVED BY AN ASSESSEE, IS ON HIM, WHERE THE NATURE AND SOURCE THEREOF CANNOT BE EXPLAINED SATISFACTORILY, IT IS OPEN TO THE REVENUE TO HOLD THAT IT IS THE INCOME OF THE ASSESSEE AND NO FURTHER BURDEN IS ON THE REV ENUE TO SHOW THAT THE INCOME IS FROM ANY PARTICULAR SOURCE. IT MAY ALSO B E POINTED OUT THAT THE BURDEN OF PROOF IS FLUID FOR THE PURPOSES OF SEC. 6 8 OF THE ACT. ONCE ASSESSEE HAS SUBMITTED BASIC DOCUMENTS RELATING TO IDENTITY, GENUINENESS OF TRANSACTION AND CREDITWORTHINESS THEN AO MUST DO SO ME INQUIRY TO CALL FOR MORE DETAILS TO INVOKE SECTION 68. AN ASSESSEE CAN DISCHARGE HIS ONUS OF PROOF BY PROVING THREE THINGS: IDENTITY OF THE CRED ITOR CAPACITY OF THE CREDITOR AND THE GENUINENESS OF THE TRANSACTION. ONCE THE AS SESSEE PROVES ALL THREE THINGS HIS ONUS IS DISCHARGED. SECTION 68 OF THE IN COME TAX ACT PROVIDES THAT WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLA NATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HI M IS NOT, ' :HE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITE D MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THAT PR EVIOUS YEAR. THE SUPREME COURT HELD IN SUMATI DAYAL VS. CIT 214ITR 8 01 (SC) IN APPLYING THE TEST OF HUMAN PROBABILITIES AS FOLLOWS; 'FT IS NO DOUBT TRUE THAT IN ALL CASES IN WHICH A RECEI PT IS SOUGHT TO BE TAXED AS INCOME, THE BURDEN LIES ON THE DEPARTMENT TO PROVE THAT IT IS WITHIN THE TAXING PROVISION AND IF A RECEIPT IS IN THE NATURE OF INCO ME, THE BURDEN OF PROVING THAT IT IS NOT TAXABLE BECAUSE IT FALLS WITHIN EXEMPTION PROVIDED BY THE ACT LIES UPON THE ASSESSEE. [SEE ' PAHMISETTI SEETHARAMAMMA [1965 ] 57 ITR 532 AT PAGE 536). BUT, IN VIEW OF SECTION 68 OF THE ACT, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF THE ASSESSEE FOR ANY PREVIOUS YEAR, TH E SAME MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PR EVIOUS YEAR IF THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATUR E AND SOURCE THEREOF IS, IN THE OPINION OF THE ASSESSING OFFICER, NOT SATISFACT ORY. IN SUCH A CASE THERE IS, PRIMA FACIE, EVIDENCE AGAINST THE ASSESSEE, VIZ,, T HE RECEIPT OF MONEY, AND IF HE FAILS TO REBUT IT, THE SAID EVIDENCE BEING UNREB UTTED, CAN BE USED AGAINST HIM BY HOLDING THAT IT WAS A RECEIPT OF AN INCOME N ATURE. WHILE CONSIDERING THE EXPLANATION OF THE'ASSESSEE THE DEPARTMENT CANN OT, HOWEVER, ACT UNREASONABLY.' 6.2.11 THE ONUS, OF ESTABLISHING THE, NATURE OF A C ASH CREDIT IS ON THE ASSESSEE AND, IF HE FAILS TO OFFER A REASONABLE EXP LANATION, THE AO MAY PRESUME THAT IT REPRESENTS AN 'INCOME RECEIPT', SO TOO, THE ONUS OF PROVING THAT SUCH INCOME RECEIPT DID NOT FALL UNDER THE HEA D 'INCOME FROM OTHER SOURCES' WAS ON THE ASSESSEE. IF THE ASSESSEE DID N OT PLACE ANY SATISFACTORY ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 22 MATERIAL BEFORE THE AO TO ENABLE HIM TO ARRIVE AT A CONTRARY CONCLUSION, THE AO MIGHT PRESUME THAT TRIE CASH CREDIT FELL UNDER T HE HEAD 'INCOME FROM OTHER SOURCES'. THE PRESUMPTION THAT AN UNEXPLAINED CASH CREDIT IS AN 'INCOME FROM OTHER SOURCES' ARE PRESUMPTIONS WHICH FLOW NATURALL Y FROM THE CIRCUMSTANCES THAT ALL FACTS WHICH CAN ESTABLISH THE NATURE AND S OURCE OF THE CASH CREDIT ARE PECULIARLY WITHIN THE KNOWLEDGE OF THE ASSESSEE. IT MAY BE THAT THE ONUS OF DISPLACING THE PRESUMPTIONS MAY BE HEAVY IN SOME CA SES AND LIGHT IN OTHERS, DEPENDING ON THE FACTS AND CIRCUMSTANCES OF THE CAS E. BUT, THE PRESUMPTIONS ARE THERE AND THE BURDEN OF REBUTTING THE PRESUMPTI ONS IS ON THE ASSESSEE.{COMMISSIONER OF INCOME-TAX V. DEVI PRASAD VISHWANATH PRASAD [1969] 72 ITR 194,196,197 (SC).} 6.2.12 IN SREELEKHA BANERJEE V. COMMISSIONER OF INC OME-TAX [1969] 49 ITR (SC) 114, 120; [1964] 2 SCR 552 (SC), THE SUPREME C OURT OBSERVED: 'THE VERY WORDS ' AN UNDISCLOSED SOURCE' SHOW THAT WE DI SCLOSURE MUST COME FROM THE ASSESSEE AND NOT FROM THE DEPARTMENT' 6.2.13. SECTION 68 OF THE ACT CLEARLY SHOWS THAT AN Y SUM FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR A PREVIOUS YEAR MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PR EVIOUS YEAR, IF (A ) THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH SUM, OR (B ) THE EXPLANATION OFFERED BY HIM IS, IN THE OPIN ION OF ASSESSING OFFICER, NOT SATISFACTORY. AS A MATTER OF FACT, SECTION 68 IS A STATUTORY RECOGNITION OF WHAT WAS PREVIOUSLY ESTABLISHED BY JUDICIAL DECISIONS TO THE EFFECT THAT WHERE CERTAIN SUMS OF MONEY WERE CLAIMED BY THE ASSESSEE TO HAVE BEEN BORROWED FROM CERTAIN PERSONS, IT WAS FOR THE ASSESSEE TO PR OVE BY COGENT AND PROPER EVIDENCE THAT THERE WERE GENUINE BORROWINGS AS THE FACTS ARE EXCLUSIVELY WITHIN THE ASSESSEE'S KNOWLEDGE. IN DECIDING AN ISS UE OF THIS NATURE, THERE CANNOT BE ONE GENERAI OR UNIVERSAL PROPOSITION OF L AW WHICH COULD BE THE GUIDING YARDSTICK IN THE MATTER. EACH CASE HAS GOT TO BE DECIDED ORFTHE 'FACTS AND CIRCUMSTANCES OF THAT CASE. THE SURROUNDING CIR CUMSTANCES TO BE CONSIDERED MUST, HOWEVER, BE OBJECTIVE FACTS, EVIDE NCE ADDUCED BEFORE THE AUTHORITIES, PRESUMPTION OF FACTS BASED ON COMMON H UMAN EXPERIENCE IN LIFE AND REASONABLE CONCLUSIONS. IN HOLDING A PARTICULAR RECEIPT TO BE INCOME FROM UNDISCLOSED SOURCE, THE FATE OF THE ASSESSEE CANNOT BE DECIDED BY THE AUTHORITIES ON THE BASIS OF SURMISES, SUSPICIONS OR PROBABILITIES. HON'BLE SUPREME COURT'S DECISION IN THE CASE OF CIT V. DURG A PRASAD MORE [1971] 82 ITR 540 WHICH IS AS FOLLOWSAT PAGE 546 OF THE DECI SION; 'SCIENCE HAS NOT YET INVENTED ANY INSTRUMENT TO TES T THE RELIABILITY OF THE EVIDENCE PLACED BEFORE A COURT OR TRIBUNAL. THEREFORE, THE C OURTS AND TRIBUNALS HAVE TO JUDGE THE EVIDENCE BEFORE THEM BY APPLYING THE TEST OF HUMAN PROBABILITIES. HUMAN MINDS MAY DIFFER AS TO THE RELIABILITY OF A P IECE OF EVIDENCE. BUT IN THAT SPHERE THE DECISION OF THE FINAL FACT FINDING AUTHO RITY IS MADE CONCLUSIVE LAW.' ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 23 6.2.14 THE ONUS TO PROVE THE GENUINENESS OF THE TRA NSACTION LIES UPON THE ASSESSEE WHICH HAS UPHELD IN THE FOLLOWING CASES AL SO: CIT V, W.J. WALKER AND CO. [1979] 117 ITR 690, 694 (CAL); SAJAN DASS AND SONS V. CIT [2003] 264 ITR 435 (DEL HI) ; M/S SAANIKA INDUSTRIES PVT. LTD. A.Y. 2011-12 ' SUMATI DAYAL V. CIT [1995] 214 ITR 801 (SC); AND JASPAL SINGH V. CIT [2006] 290 ITR 306 (P & H). DHANALAXMI STEEL RE-ROLLING MILLS 57 ITD 361 (HYD. ) 6.3.1 THE APPELLANT BEING A PRIVATE LIMITED COMPANY , THE BASIC STRUCTURE OF A PRIVATE LIMITED COMPANY IS SUCH THAT A PRIVATE LIMITED COMP ANY CANNOT MAKE AN INVITATION FOR ISSUE OF SHARES TO THE PUBLIC, THE PRIVATE LIMITED COMPANY IS PROHIBITED F ROM MAKING ANY INVITATION TO THE PUBLIC TO SUBSCRIBE FOR ANY S HARES IN THE COMPANY. THIS PROVISION IS CONTAINED IN SECTION 3 OF THE COMPANIE S ACT, 1956. WHEREBY SUB-CLAUSE (III) OF SUB-SECTION (1) OF SECTION 3 DEFINES A 'PRIVATE COMPANY'. SECTI ON 3 OF COMPANIES ACT, 1956, DEFINES 'PRIVATE COMPANY' AS UNDER; (III) 'PRIVATE COMPANY' (MEANS A COMPANY WHICH HAS A MINIMUM PAID UP CAPITAL OF ONE LAKH RUPEES OR SUCH HIGHER PAID UP C APITAL AS MAY BE PRESCRIBED, AND BY IT ARTICLES, -] (A) RESTRICTS THE RIGHT TO ............. (B) LIMITS......... .................... (C) PROHIBITS ANY INVITATION TO THE PUBLIC TO SUBSC RIBE FOR ANY SHARES IN, OR DEBENTURES OF, THE COMPANY: (D) PROHIBITS............] ................... AS A SINGLE MEMBER CLAUSE (C) AS ABOVE, MAKES IT CLEAR THAT THE SUBSCR IBERS TO SHARES OF PRIVATE COMPANY CANNOT BE FROM PUBLIC. IT. THEREFORE, FOLLO WS THAT THE SUBSCRIBERS TO SHARES OF PRIVATE COMPANY CAN BE ONLY PRIVATE PERSONS. SUC H PRIVATE PERSONS MUST INVARIABLY BE PERSONS OF CONFIDENCE AND ACQUAINTANC E OF DIRECTORS OF PRIVATE COMPANY AND THERE SHOULD BE NORMALLY, NO DIFFICULTY IN PRODUCING THEM BEFORE THE AO. AND IN CASE, THEY ARE NOT PRODUCED, THE NATURAL COROLLARY IS THAT THE REAL POSITION IS NOT THE SAME AS EMERGES FROM PAPERS AND DOCUMENT S FURNISHED IN THIS BEHALF. 6.3.2 NOW, IN ORDER TO APPRECIATE THE ABOVE DISCUSS IONS AND ANALYSIS, IT WOULD BE NECESSARY TO CONSIDER THE JUDGMENT OF THE DELHI HIGH COURT IN LOVELY EXPORTS 299 ITR 268 WHICH HAS BEEN HEAVILY R ELIED UPON BY THE APPELLANT. IN THE CASE OF LOVELY EXPORTS, THE ASSES SING OFFICER HAD PROCEEDED TO MAKE AN ADDITION ON THE GROUND THAT TH E SHARE APPLICANTS IN QUESTION DID NOT EXIST. THE ASSESSEE HAD FURNISHED NECESSARY DETAILS SUCH AS THE PAN OF THE SHARE APPLICANTS. THE SHARE MONEY HAD BEEN RECEIVED ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 24 THROUGH BANKING CHANNELS. THE ASSESSING OFFICER MAD E AN ADDITION ONLY ON THE GROUND THAT SOME OF THE SUMMONS WHICH WERE ISSU ED TO THE SHARE APPLICANTS WERE RETURNED UNSERVED, WHEREAS IN THE C ASE OF OTHERS THE SUMMONS THOUGH SERVED, HAD NOT BEEN COMPLIED WITH. NOW IT IS IN THIS BACKGROUND THAT THE DELHI HIGH COURT NOTED THAT THE ASSESSING OFFICER DID NOT CARRY OUT ANY ENQUIRY INTO THE INCOME TAX RECORD OF THE PERSONS WHO HAD FURNISHED THE DETAILS IN ORDER TO ASCERTAIN THE STA TUS OF THE SHARE APPLICANTS. SIGNIFICANTLY, THE JUDGMENT OF THE DELHI HIGH COURT MAKES A DISTINCTION BETWEEN A CASE WHERE SHARES ARE ALLOTTED IN THE COU RSE OF A LARGE SCALE SUBSCRIPTION TO THE SHARES OF A PUBLIC COMPANY ON T HE ONE HAND AND A CASE OF PRIVATE PLACEMENT ON THE OTHER. IN THE CASE OF ALLO TMENT OF SHARES OF A PUBLIC COMPANY, THE COMPANY MAY HAVE NO MATERIAL OTHER THA N THE APPLICATION FORMS AND THE BANK TRANSACTION DETAILS TO FURNISH SOME IN DICATION OF THE IDENTITY OF THE SUBSCRIBERS. THIS DISTINCTION BETWEEN A PUBLIC ISSUE OF SHARE CAPITAL AND PRIVATE PLACEMENT HAS BEEN MADE OUT IN THE FOLLOWIN G OBSERVATIONS OF THE DELHI HIGH COURT: 'THERE CANNOT BE TWO OPINIONS ON THE ASPECT THAT TH E PERNICIOUS PRACTICE OF CONVERSION OF UNACCOUNTED MONEY THROUGH THE MASQUER ADE OR CHANNEL OF INVESTMENT IN THE SHARE CAPITAL OF A COMPANY MUST B E FIRMLY EXCORIATED BY THE REVENUE. EQUALLY, WHERE THE PREPONDERANCE OF EVIDEN CE INDICATES ABSENCE OF CULPABILITY AND COMPLEXITY (SIC) OF THE ASSESSEE IT SHOULD NOT BE HARASSED BY THE REVENUE'S INSISTENCE THAT IT SHOULD PROVE TH E NEGATIVE. IN THE CASE OF A PUBLIC ISSUE, THE COMPANY CONCERNED CANNOT BE EXPEC TED TO KNOW EVERY DETAIL PERTAINING TO THE IDENTITY AS WELL AS FINANC IAL WORTH OF EACH OF ITS SUBSCRIBERS. THE COMPANY MUST, HOWEVER, MAINTAIN AN D MAKE AVAILABLE TO THE ASSESSING OFFICER FOR HIS PERUSAL, ALL THE INFO RMATION CONTAINED IN THE STATUTORY SHARE APPLICATION DOCUMENTS. IN THE CASE OF PRIVATE PLACEMENT THE LEGAL REGIME WOULD NOT BE THE SAME. A DELICATE BALA NCE MUST BE MAINTAINED WHILE WALKING THE TIGHTROPE OF SECTIONS 68 AND 69 O F THE INCOME TAX ACT. THE BURDEN OF PROOF CAN SELDOM BE DISCHARGED TO THE HIL T 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 IN VESTIGATIONS. BUT IF THE ASSESSING OFFICER FAILS TO UNEARTH ANY WRONG OR ILL EGAL DEALINGS, HE CANNOT OBDURATELY ADHERE TO HIS SUSPICIONS AND TREAT THE S UBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANY.'. 6.3.3 IT IS NOT THE CASE WHERE THE AO HAS NOT MADE ANY EFFORTS REGARDING THE EXAMINATION OF THE SOURCE OF INCOME OF THESE SHARE SUBSCRIBERS TO FIND OUT WHETHER THEY WERE CREDITWORTHY OR WERE SUCH WHO COU LD SUBSCRIBE TO SUCH HUGE MONEY TOWARDS SHARE APPLICATION IN THE APPELLA NT-COMPANY. THE FACTS OF THE PRESENT CASE IS NOT A CASE OF PUBLIC ISSUE OF S HARES RATHER IT IS A CASE OF PRIVATE PLACEMENT. THEREFORE IN THE LIGHT OF THE OB SERVATION OF THE HON'BLE COURT IN THE CASE OF LOVELY EXPORTS(SUPRA), THE LEG AL REGIMENT WILL BE DIFFERENT AS COMPARED TO THE PUBLIC ISSUE. WHEREAS IN THE CAS E OF PUBLIC ISSUE, THE ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 25 COMPANY CONCERNED CANNOT BE EXPECTED TO KNOW EVERY DETAIL PERTAINING TO THE IDENTITY AS WELL AS THE FINANCIAL WORTH OF EACH OF ITS SUBSCRIBERS BUT SAME CANNOT BE SAID IN THE CASE OF PRIVATE PLACEMENT. AS PER THE OBSERVATION OF THE HON'BLE HIGH COURT, A VERY STRICT APPROACH TO THE B URDEN HAS TO BE ADOPTED AND THE SAME IS LAID ALMOST ENTIRELY ON THE ASSESSE E WHICH RECEIVES THE SHARE SUBSCRIPTION. IT IS, HIGHLY IMPROBABLE IN THE CASE OF THE APPELLANT THAT IT IS NOT KNOWING THE LATEST ADDRESS OF ALL THESE SHAREHOLDER S AND IS NOT IN TOUCH WITH THEM FROM WHOM SUCH A HUGE AMOUNT HAS BEEN RECEIVED AS SHARE APPLICATION MONEY WITH A HUGE PREMIUM ESPECIALLY WHEN ALL THESE SHAREHOLDERS TAKEN TOGETHER HOLD SUBSTANTIAL PERCENT OF SHARES, IN A C ASE OF PUBLIC ISSUE, IT CAN BE SAID THAT THE APPELLANT HAS DISCHARGED THE ONUS THE MOMENT IT HAS FURNISHED THE PERMANENT ACCOUNT NUMBER OF SHAREHOLDERS, SHARE HOLDER REGISTER, SHARE APPLICATION FORM, SHARE TRANSFER REGISTER, ETC. BUT IN THE CASE OF PRIVATE PLACEMENT TF HAS TO SATISFY THE ASSESSING OFFICER A BOUT THE GENUINENESS OF THE TRANSACTION WHICH IN THE INSTANT CASE IS HIGHLY DOU BTFUL AS ALL THE APPLICANTS ARE NOT TRACEABLE, THUS THE ASSESSING OFFICER HAD R EACHED A DEAD END OF THE ENQUIRY AND THE ONUS HAD SHIFTED ON THE APPELLANT T O PRODUCE THE PERSONS FOR VERIFICATION. 6.3.4 NOW, IT IS THIS DECISION OF THE DELHI HIGH CO URT AGAINST WHICH A SPECIAL LEAVE PETITION BEFORE THE SUPREME COURT CAME TO BE DISMISSED ON 11 JANUARY 2008. IN COMMISSIONER OF INCOME TAX VS. LOV ELY EXPORTS PVT. LTD. (2008) 6 DTR (SC) 308, WHILE DISMISSING THE SPECIAL LEAVE PETITION THE SUPREME COURT OBSERVED THAT IF THE SHARE APPLICATIO N MONEY WAS RECEIVED BY THE ASSESSEE FROM ALLEGEDLY BOGUS SHARE HOLDERS WHO SE NAMES WERE GIVEN TO THE ASSESSING OFFICER, THE DEPARTMENT WAS FREE TO P ROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. ON T HIS GROUND, THE SUPREME COURT WHILE DISMISSING THE SPECIAL LEAVE PETITION F OUND NO INFIRMITY IN THE JUDGMENT OF THE DELHI HIGH COURT. THE OBSERVATION O F THE HON'BLE SUPREME COURT WHILE DECIDING THE SPECIAL LEAVE PETITION IN THE CASE OF LOVELY EXPORTS (P.) LTD. F2Q09I 319 ITR (ST.) 5, CANNOT BE CONSIDE RED TO BE A LAW DECLARED WHICH HAS A BINDING PRECEDENT UNDER ARTICLE 141 OF THE CONSTITUTION OF INDIA. SUCH OBSERVATIONS ARE PURELY ON THE FACTS OF THE RE SPECTIVE CASE AND CANNOT BE APPLIED ACROSS THE BOARD EVEN WHEN THE FACTS IN OTHER CASES ARE ALTOGETHER DIFFERENT. IT IS A SETTLED POSITION THAT THE COURT WHILE DECI DING THE APPEAL WILL NOT PUT BLINKER IN ITS SIGHT AND MERELY BELIEVE WHAT IS WRITTEN ON PAPER BUT ALSO CONSIDER CONCERNING CIRCUMSTANCES AND GROUND REALIT Y AS OBSERVED BY THE HON'BLE SUPREME COURT IN THE CASES OF CIT V. DURGA PRASAD MORE [1971] 82 ITR 540 AND SUMATI DAYAL [1995] 214 ITR 801 -. . ' 6.3.5 THE PRINCIPLE WHICH WAS EMPHASIZED BY THE DEL HI HIGH COURT IN THE CASE OF LOVELY EXPORTS WAS FOLLOWED BY ANOTHER DIVISION BEN CH IN COMMISSIONER OF INCOME TAX VS. OASIS HOSPITALITY PVT. LTD, [2011] 3 33 ITR 119 (DELHI), WHEREIN THE HON, COURT OBSERVED THAT THE INITIAL BURDEN MUS T BE UPON THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF THE SHARE APPLICAT ION MONEY RECEIVED. IN ORDER ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 26 TO DISCHARGE THIS BURDEN, THE ASSESSEE IS REQUIRED TO PROVE; (A) IDENTITY OF SHAREHOLDER; (B) GENUINENESS OF TRANSACTION; AND (C ) CREDIT WORTHINESS OF SHAREHOLDERS. AS FAR AS THE CREDITWORTHINESS OF THE SUBSCRIBER IS CONCERNED, THAT CAN BE PROVED BY PRODUCING A BANK STATEMENT OF THE SUBSCRIBER SHOWING THAT IT HAS SUFFICIENT BALANCE IN ITS ACCOUNT TO ENABLE IT TO SUBSCRIBE TO THE SHARE CAPITAL. THE DELHI HIGH COURT HELD THAT ONCE THE INITIAL BOR DEN HAS BEEN DISCHARGED, THE OBSERVATIONS OF THE SUPREME COURT IN THE CASE OF LO VELY EXPORTS WOULD SUGGEST THAT THE DEPARTMENT IS FREE TO PROCEED TO REOPEN TH E INDIVIDUAL ASSESSMENTS IN THE CASE OF ALLEGED BOGUS SHAREHOLDERS IN ACCORDANC E WITH LAW AND IS NOT REMEDILESS. THIS WOULD BE MORE SO WHEN THE ASSESSEE IS A PUBLIC LIMITED COMPANY AND HAS ISSUED SHARE CAPITAL TO THE PUBLIC AT LARGE AS IN SUCH CASES THE COMPANY CANNOT BE EXPECTED TO KNOW EVERY DETAIL PER TAINING TO THE IDENTITY AND FINANCIAL WORTH OF THE SUBSCRIBER. HOWEVER, THE INI TIAL BURDEN ON THE ASSESSEE WOULD BE SOMEWHAT HEAVY IN CASE THE ASSESSEE IS A P RIVATE LIMITED COMPANY WHERE THE SHAREHOLDERS ARE CLOSELY RELATED BECAUSE IN SUCH A CASE THE ASSESSEE CANNOT FEIGN IGNORANCE ABOUT THE STATUS OF THE PART IES. 6.3.6 THE VARIOUS JUDICIAL PRONOUNCEMENTS, WHILE RE COGNIZING THAT THE PERNICIOUS PRACTICE OF CONVERSION OF UNACCOUNTED MONEY THROUGH MASQUERADE OF INVESTMENT IN THE SHARE CAPITAL OF A COMPANY NEEDS TO BE PREVE NTED, HAVE ADVISED A BALANCE TO BE MAINTAINED REGARDING ONUS OF PROOF TO BE PLAC ED ON THE COMPANY. THE COURTS HAVE DRAWN A DISTINCTION AND EMPHASIZED THAT IN CASE OF PRIVATE PLACEMENT OF SHARES THE LEGAL REGIME SHOULD BE DIFF ERENT FROM THAT WHICH IS FOLLOWED IN CASE OF A COMPANY SEEKING SHARE CAPITAL FROM THE PUBLIC AT LARGE. IN THE CASE OF CLOSELY HELD COMPANIES, INVESTMENTS ARE MADE BY KNOWN PERSONS. THEREFORE, A HIGHER ONUS IS REQUIRED TO BE PLACED O N SUCH COMPANIES BESIDES THE GENERAL ONUS TO ESTABLISH IDENTITY AND CREDITWORTHINESS OF CREDITOR AND GENUINENESS OF TRANSACTION. THIS ADDITIONAL ONUS NE EDS TO BE PLACED ON SUCH COMPANIES TO ALSO PROVE THE SOURCE OF MONEY IN THE HANDS OF SUCH SHAREHOLDER OR PERSONS MAKING PAYMENT TOWARDS ISSUE OF SHARES BEFORE SUCH SUM IS ACCEPTED AS GENUINE CREDIT, IF THE COMPANY F AILS TO DISCHARGE THE ADDITIONAL ONUS, THE SUM SHALL BE TREATED AS INCOME OF THE COMPANY AND ADDED TO ITS INCOME. THUS IN CASE OF PRIVATE LIMITE D COMPANIES HIGHER ONUS IS CAST UPON THEM TO EXPLAIN EVEN SOURCE OF SOURCE OF THE SHARE APPLICATION MONEY/ SHARE PREMIUM ETC. 6.3.7 IN THE PRESENT CASE IN SPITE OF ALL THE EFFOR TS WHERE THE ASSESSING OFFICER COULD NOT EVEN LOCATE THE RESPECTIVE SO-CALLED APPL ICANTS, THE ASSESSEE COULD FILE ONLY CONFIRMATIONS AND ACKNOWLEDGMENT OF ROI. THEREFORE, IT IS A CASE WHERE ALL THE PAPERS ARE MANUFACTURED AT THE INSTAN CE OF THE APPELLANT AND NOT THE REAL TRANSACTION. THEREFORE, MERELY ON THE BASIS OF SUCH PAPERS IT CANNOT BE HELD THAT THE AMOUNT RECEIVED BY WAY OF S HARE, CAPITAL IS EXPLAINED WITHIN THE MEANING OTSECTION 68 OF THE ACT. THE FUL L BENCH OF THE DELHI HIGH COURT IN THE CASE OF SOPHIA FINANCE LTD. [1994] 205 ITR 98 HAVE HELD THAT THE PROVISION OF SECTION 68 SHALL EQUALLY APPLY EVEN IN THE CASE OF AMOUNT STATED TO BE RECEIVED TOWARDS SHARE CAPITAL. SINCE THE APP ELLANT FAILED TO PROVE EVEN ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 27 THE BASIC IDENTITY AS ALSO THE CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTION IN THE FORM OF SHARE PREMIUM, THE ADDIT ION WAS RIGHTLY MADE BY THE ASSESSING OFFICER HAS BEEN RIGHTLY MADE. HENCE, THE ISOLATED EVIDENCE OF THE APPELLANT HAD NO EVIDENTIARY VALUE AT ALL. AS A MAT TER OF FACT, THE LAW OF EVIDENCE MANDATES THAT IF THE BEST EVIDENCE IS NOT PLACED BEFORE THE COURT, AN ADVERSE INFERENCE CAN BE DRAWN AS AGAINST THE PE RSON WHO OUGHT TO HAVE PRODUCED IT. {KRISHNAVENI AMMAL158 ITR 826 (MAD.)} 6.3.8 THE HON. ITAT, KOLAKTTA BENCH IN THE CASE OF [2014 ] 52 TAXMANN.COM 305 (KOLKATA - TRIB.) BISAKHA SALES (P.) LTD, WHILE DECIDING THE RACKET/SCAM OF THE ISSUE OF ACCOMMODATION ENTRIES HELD THAT THE ME THODOLOGY AND ACTS DONE IN SUCH CASES OF CAPITAL FORMATION IS NOT TAX AVOID ANCE, IT IS MORE IN THE NATURE OF TAX EVASION BY MONEY LAUNDERING. THESE TRANSACTI ONS HAVE IN EFFECT THREE LIMBS. THE FIRST LIMB IS THE CREATION OF THE SHELL COMPANIES WITH SUBSTANTIAL SHARE CAPITAL WHICH IS BALANCED WITH INVENTORIES IN THE FORM OF SHARES IN OTHER SHELL COMPANIES. THE SECOND LIMB IS THE TRANSFER OF SUCH SHELL COMPANIES TO PERSONS WHO DESIRE TO USE SUCH SUBSTANTIAL SHARE CA PITAL COMPANIES FOR CONVERTING THEIR UNACCOUNTED MONEY INTO ACCOUNTED F UNDS AND USE SUCH SHELL COMPANIES TO DO LEGITIMATE BUSINESS. THE THIRD LIMB IS WHEN THE SHELL COMPANIES AFTER BEING TAKEN OVER, THE ASSESSEE IN T HE FORM OF INVENTORIES ARE ENCASHED WHEREBY THE UNACCOUNTED MONIES ARE LAUNDER ED AND DROUGHT INTO THE COMPANY FOR CONDUCTING THE LEGITIMATE BUSINESS. ALL THESE THREE LIMBS ARE NOT DONE IN ONE ASSESSMENT YEAR BUT IN DIFFERENT AS SESSMENT YEARS 6.3.9 THE ASSESSING OFFICER HAS BROUGHT CERTAIN FAC TS ON RECORD TO HIGHLIGHT THAT THE LOAN RECEIVED ACTUALLY REPRESENTS AN ACCOM MODATION ENTRY. IT COULD BE PROVED THAT THE COMPANY PROVIDING LOAN EXISTS ON I;Y ON PAPER, FT HAS NO EMPLOYEES, THE ADDRESS GIVEN IS ONLY A POSTAL ADDRE SS AND THE COMPANY DOES NOT HAVE ANY PHYSICAL SET UP AT THE GIVEN ADDRESS, THE SAME ADDRESS IS POSSIBLY BEING USED AS POSTAL ADDRESS FOR MULTIPLE COMPANIES INDULGING IN TO THE SAME ACTIVITY OF PROW DING ACCOMMODATION ENTRIE S THE APPELLANT WAS TRYING TO PRESS INTO SERVICE ONLY THE LEGAL OR DE-J URE IDENTITY OF A CREDITOR AND COULD NOT ADDUCE ANY EVIDENCE OF THE DE-FACTO EXIST ENCE OF THE CREDITOR COMPANY. THE DE-JURE EXISTENCE IS A MERE CONVENIENT FACADE OF THE DE-FACTO EXISTENCE OF THE CREDITOR COMPANY. SUCH DE-JURE EXISTENCE IS SELF SERVING ONE, HAVING BEEN OBTAINED THROUGH APPLICATION AND OTHER FORMS AND FORMALITIES UNILATERALLY FILED BEFORE THE ROC ETC. 6.3.10 THUS, ON OVERALL CONSIDERATION OF FACTS AND CIRCUMSTANCES OF THE CASE AND AS DISCUSSED IN DETAIL ABOVE, THE AMOUNTS CLAIM ED TO BE RECEIVED BY THE APPELLANT DO NOT IN ANY WAY APPEAR TO BE GENUINE LO ANS. THEY ARE NOTHING BUT ARRANGED AFFAIRS BEING PRE-ORDAINED SERIES OF TRANS ACTIONS AND TAX EVASION DEVICE WHERE MONEY LAUNDERING TRANSACTIONS HAVE BEE N CAMOUFLAGED AS LOANS. HENCE NO CREDENCE CAN BE PLACED ON THE COPIE S OF VARIOUS DOCUMENTS ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 28 FILED TO SUPPORT I SUCH CLAIM OF SHARE CAPITAL CONT RIBUTION AID ADDITION OF RS. 61,00,000/- IS HEREBY CONFIRMED AND GROUNDS OF APPE AL IS DISMISSED. 4. AGGRIEVED, ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT WITH REGAR D TO THE ALLEGED THREE COMPANIES NAMELY NEWJET TREXIM (P) LTD., CAP VANIJYA (P) LTD. AND SADASUKH DEALERS (P) LTD. WHICH HAS SUBSCR IBED TO THE EQUITY SHARES OF ASSESSEE COMPANY ALONG WITH SHARE PREMIUM TOTALED AT RS.18,00,000/-, RS.18,00,000/- AND RS.25 ,00,000/- RESPECTIVELY. ASSESSEE HAD SUBMITTED THE INCOME-TAX RECORD WITH COMPUTATION, CONFIRMATION LETTERS OF THE COMPANIES, AUDITED BALANCE SHEET SHOWING INVESTMENTS IN THE ASSESSEE COMPANY A ND BANK STATEMENTS. LD. AUTHORISED REPRESENTATIVE FURTHER S UBMITTED THAT ALL NECESSARY DETAILS WERE AVAILABLE WITH THE REVENUE A UTHORITIES BUT THEY COULD NOT FIND ANY ERROR IN THE DETAILS SUBMIT TED BY THE ASSESSEE WHICH COULD HAVE PROVED THAT THE ALLEGED SHARE CAPI TAL/PREMIUM WAS UNEXPLAINED MONEY OF THE ASSESSEE COMPANY. IT WAS F URTHER SUBMITTED WITH REGARD TO THAT THE ALLEGED STATEMEN T OF MR. ANJANI BANKA, DIRECTOR OF CAP VANIJYA (P) LTD. AND MR. MAN OHAR LAL NANGALIA THAT ASSESSEE HAD SUBMITTED VIDE ITS LETTER DATED 2 8.2.2014 THAT THEY DO NOT KNOW EITHER OF THE TWO PERSONS AND HOW THEY WERE CONNECTED WITH THE ALLEGED COMPANIES. LD. AUTHORISED REPRESEN TATIVE ALSO SUBMITTED THAT WITH ALL THESE DETAILS, WHY THE INSP ECTOR COULD NOT FIND THEIR LOCATIONS AND FURTHER RELIED ON THE JUDGMENT OF THE SUPREME COURT IN CASE OF LOVELY EXPORTS LTD. (216 CTR 195), WHEREIN THE HON. APEX COURT HAS HELD THAT IF THE SHARE APPLICATION M ONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDER WHOSE ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 29 NAMES ARE GIVEN TO THE ASSESSING OFFICER, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS I N ACCORDANCE WITH LAW BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF ASSESSEE COMPANY. IT IS NOT PROPER ON THE PART OF THE DEPARTMENT TO S AY THAT THE COMPANIES COULD NOT BE LOCATED ONCE THEY ARE ON THE RECORD OF THE DEPARTMENT WITH THEIR PA NOS. THEREFORE, THE BETTER COURSE IS TO EXAMINE THEIR INCOME TAX RECORDS BEFORE PROCEEDINGS WITH ANY ADDITION IN THIS CASE. WE WOULD DRAW YOUR KIND ATTE NTION TO THE LATEST JUDGMENT OF GUJARAT HIGH COURT IN THE CASE OF RANCH HOD JIVABHAI NAKHAVA (208 TAXMAN 35). COPY OF THE ABOVE JUDGMENT IS ENCLOSED.(P. 22-27) . DESPITE THE ABOVE CLEAR-CUT J UDGMENT OF SUPREME COURT AND GUJARAT HIGH COURT, BROUGHT 'TO T HE NOTICE IF THE ASSESSING OFFICER, HE CHOOSE NOT ONLY NOT TO FOLLOW THEM WHICH HE WAS BOUND TO ALSO HE HAS NOT EVEN REFERRED THEM IN THE ASSESSMENT ORDER AND PROCEEDS ON HIS OWN ABOUT THE ABOVE COMPANIES B ACKGROUND. THAT IS NOT RELEVANT BECAUSE THESE THREE COMPANIES HAVE INVESTED, HAVE CONFIRMED AND IN THEIR BALANCE SHEETS THEY HAV E SHOWN THE INVESTMENTS IN THE APPELLANT COMPANY. THE APPELLANT VIDE LETTER DATED 28.04.2015 SUBMITTE D THAT AS REGARDS YOUR QUERY ABOUT THE STATEMENT OF THE ASSESSING OFF ICER IN PARA 4.4 OF THE ASSESSMENT ORDER IT IS TRUE THAT COPY OF THE RE PORT DDIT(!NV.) AND STATEMENT RECORDED WERE GIVEN. THE REPORT OF THE DD LT (INV.J, UNIT- 11/3, KOLKATA IS ONE PAGE REPORT IN WHICH HE STATES THAT NONE OF THE THREE CONCERNS COULD BE LOCATED AT THE GIVEN ADDRES S AND THAT THE DIRECTORS HAVE HELD THAT THE CONCERNED COMPANIES WE RE PAPERS/SHELL COMPANIES. IN THE STATEMENT OF SHRI NANGALIA OUT O F THE THREE ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 30 COMPANIES, NAME OF ONLY ONE COMPANY VIZ CAP VANIJYA PVT. LTD. MENTIONED; OTHER NAMES ARE NOT MENTIONED, THEREFORE , APART FROM WHAT IS MENTIONED IN OUR LETTER ON 14 TH APRIL, 2015 AS REGARDS THE STATEMENTS OF MR. NANGALIA AND MR. BANKA, NOTHING A PPLIES TO THE OTHER TWO COMPANIES VIZ. NEWJET'TREXIM PVT. LTD. AN D SADASUKH DEALERS PVT. LTD. BOTH THESE COMPANIES HAVE GIVEN C OMPLETE DETAILS PERTAINING TO THEM TO THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-4, SURAT. COPY OF THE REPORT DATED 31.01.201 4 ALONGWITH THE COPIES OF STATEMENTS OF MR. BANKA AND MR. NANGALIA ARE ENCLOSED. LD. AUTHORISED REPRESENTATIVE ALSO SUBMITTED THAT P ROMOTERS OF THE ASSESSEE COMPANY WERE PREVIOUSLY HAVING BUSINESS IN THE STATE OF ASSAM AND THEREAFTER SHIFTED TO GUJARAT AND WERE HA VING THEIR CONNECTION IN ASSAM AND KOLKATA WITH THE HELP OF WH ICH INVESTMENTS WERE ATTRACTED IN THE SHARE CAPITAL AND SHARE PREMI UM OF THE COMPANY. LD.AUTHORISED REPRESENTATIVE ALSO RELIED ON FOLLOWING JUDGMENTS/ DECISIONS :- 1. PR.CIT VS. N.C. CABLES LTD. (2017) 391 ITR 13 (D ELHI) 2. LAXMIRAJ DISTRIBUTORS PVT. LTD. VS. ACIT (2017) 53 ITR (TRIB) 376 (AHMEDABAD) 3. COMMISSIONER OF INCOME TAX VS. NAVODAYA CASTLES (P) LTD. (2014) 50 TAXMANN.COM 110 (DELHI 4. PR.CIT VS. GOODVIEW TRADING (P) LTD. (2017) TAXM ANN.COM 204 (DELHI) 5. NEELKANTH FINBUILD LTD. (DELHI)(TRIB) 70 SOT 368 6. SHALIMAR BUILDCON PVT. LTD.(JAIPUR) 128 ITD 396 7. KISCO CASTING PVT. LTD. (CHANDIGARH) 685 CHD 201 1 8. ANMOL MARMO GRAINS PVT. LTD. (JODHPUR) 67 SOT 48 0 9. A. I. DEVELOPERS PVT. LTD. (DELHI) 178 TTJ 332 10. VITRAG METAL PVT. LTD. (MUMBAI) 46 ITR (TRIB) 2 01 11. DHANLAXMI EQUIPMENT PVT. LTD. (JAIPUR) 1103 JP 2011 12 LOTUS INTEGRATED TAXPARK LTD.(CHD) 173 TTJ 848 13 DOLPHINS MARBLES PVT. LTD. (JAB) 139 TTJ 126 ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 31 14 TULIP FINANCE LTD. (DELHI) 15 DTR 185 15. AQUATECH INTERNATIONAL LTD. (DEL-A) 13 DTR 382 16 MONNET ISPAT & ENERGY LTD. (DELHI-TRIB) 171 TAXM AN-27 17 SMART CAPITAL SERVICES LTD. (DEL-E) 10 DTR 593 18 A-ONE HOUSING COMPLEX LTD. (DELHI) 110 ITD 361 19 UMA POLYMERS PVT. LTD. (JD) 101 TTJ 124 20 ANTARCTIC INVESTMENT PVT. LTD. (DELHI) 78 TTJ 25 7 21 AMR HOSPITALITY SERVICES LTD.(HYD) 148 ITD 679 22 DR. YOGIRAJ SHARMA, INDORE BENCH 118 DTR 20 23 A.P. REFINERY PVT. LTD. CHANDIGARH HIGH COURT 17 4 TTJ 41 24 SHIV DHOOTI PEARLS & INVESTMENT LTD. DELHI HIGH COURT 237 TAXMAN 104 5. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE TAKING SUPPORT OF VARIOUS JUDGMENTS/DECISIONS ENUMERATED B ELOW SUBMITTED THAT MERE FURNISHING OF PAN, CONFIRMATION, BALANCE SHEET AND COPY OF INCOME-TAX RETURN CANNOT BE HELD TO BE A CORROBORAT IVE EVIDENCE TO PROVE THE GENUINENESS AND CREDITWORTHINESS OF THE S HARE APPLICANTS. IN THE CASE OF ASSESSEE ONE OF THE DIRECTORS OF THE ALLEGED COMPANY HAS HIMSELF ACCEPTED THAT M/S CAP VANIJYA (P) LTD. MERELY PROVIDES ACCOMMODATION ENTRIES AND IS PAPER/SHELL COMPANY; O NE LD. COMMISSIONER OF INCOME TAX(A) HAS RIGHTLY APPRECIAT ED THE FACT THAT THE ALLEGED THREE COMPANIES WITH HEAVY SHARE CAPITA L AND PREMIUM ARE SHOWING MEAGER INCOME AND HAVE NO INVESTMENTS IN FIXED ASSETS AND ENTRIES IN THE BANK STATEMENTS ARE REPEATEDLY I N THE NATURE OF PROVIDING ACCOMMODATION ENTRIES AND IT IS HARD TO B ELIEVE THAT THE ALLEGED THREE COMPANIES ARE CARRYING ON ANY REGULAR BUSINESS ACTIVITIES. LD. DEPARTMENTAL REPRESENTATIVE ALSO RE FERRED AND RELIED ON THE FOLLOWING JUDGMENTS/DECISION:- 1. N. TARIKA PROPERTY INVEST. (P) LTD. VS. COMMISSI ONER OF INCOME TAX (2014) 51 TAXMANN.COM 387 (SC) 2. NAVODAYA CASTLE (P) LTD. VS. COMMISSIONER OF INC OME TAX (2015) 56 TAXMANN.COM 18 (SC) ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 32 3. COMMISSIONER OF INCOME TAX VS. MAITHAN INTERNATI ONAL (2015) 56 TAXMANN.COM 283 (CALCUTTA) 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US AND ALSO GONE THROUGH THE JUDGMENT S/DECISIONS QUOTED BY BOTH THE PARTIES. THOUGH SEVERAL GROUNDS HAVE BEEN RAISED BUT THE ONLY ISSUE INVOLVED IN THIS APPEAL REVOLVES ROUND THE ALLEGED UNEXPLAINED CASH CREDIT OF RS.61 LACS ADDED TO THE INCOME OF THE ASSESSEE U/S 68 OF THE ACT BY LD. ASSESSING OFFICER AND DULY CONFIRMED BY LD. COMMISSIONER OF INCOME TAX(A). WE OBSERVE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS LD. ASS ESSING OFFICER WANTED TO VERIFY THE IDENTITY, GENUINENESS AND CRED ITWORTHINESS OF THE FOLLOWING THREE PARTIES WHICH HAVE SUBSCRIBED TO TH E ASSESSEES SHARE CAPITAL:- SR. NO. NAME & ADDRESS OF SHAREHOLDERS PAN AMOUNT OF SHARE CAPITAL SHARE PREMIUM , 1 NEWJET TREXIM PVT. LTD. 27, 5 TH FLOOR, BRABOURNE ROAD, KOLKATA- 700001. AAACN8738P 300000 1500000 2 CAP VANIJYA PVT. LTD. 14-C, 4 TH FLOOR, MAHARSHI DEVENDRA ROAD, KOLKATA-700007. AABCC3989 30000 150000 3 SADASHUKH DEALERS PVT. LTD. 6-A, RAJA SUBODH MALIK SQUIRE, KOLKATA- 18 AAKCS9420P 500000 200000 WE FURTHER OBSERVE THAT LD. ASSESSING OFFICER TOOK NOTE OF THE STATEMENTS RECORDED BY DDIT (INV) WING OF KOLKATA I N THE CASE OF MR. ANJANI BANKA, DIRECTOR OF CAP VANIJYA (P) LTD. AND MANOHARLAL NANGALIA WHEREIN MR. ANJANI BANKA ADMITTED THAT CAP VANIJYA (P) LTD. AND OTHER COMPANIES ARE UNDER THE CONTROL AND MANAGEMENT OF ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 33 MANOHARLAL NANGALIA WHO HAS FURTHER CONFIRMED THAT CAP VANIJYA (P) LTD. IS A PAPER/SHELL COMPANY ENGAGED IN PROVIDING ACCOMMODATION ENTRIES OF SHARE CAPITAL/PREMIUM. WE FURTHER OBSERV E THAT LD. ASSESSING OFFICER ON EXAMINATION OF THE FINANCIAL S TATEMENT OF ALLEGED THREE COMPANIES PREPARED CHARTS SHOWING FIXED ASSET S, INTEREST INCOME/TURNOVER, ACCUMULATED PROFITS AND SHARE CAPI TAL/PREMIUM WHICH IS SUMMARIZED BELOW :- (1) SADASUKH DEALERS PVT. LTD. ASSESSMENT FIXED INTEREST ACCUMULATED SHARE CAPITAL YEAR ASSETS INCOME/ PROFIT & PREMIUM AS ON TURNOVER 31 ST MARCH 2010-11 NIL 9,14,868 2,423 2,42,50,000 2011-12 NIL 13,07,459 3,004 2,42,50,000 (2) NEWLETTREXIM PVT. LTD. (NTPL) ASSESSMENT FIXED INTEREST ACCUMULATED SHARE CAPITAL YEAR ASSETS INCOME/ PROFIT & PREMIUM AS ON TURNOVER 31 ST MARCH 2010-11 NIL 17,86,754 (-)1,10,918 32,32,20,000 2011-12 NIL 15,20,035 (-)1,07,199 32,32,20,000 ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 34 (3) CAP VANIIVA PVT. LTD. CVPL ASSESSMENT FIXED INTEREST ACCUMULATED SHARE CAPITAL YEAR ASSETS INCOME/ PROFIT & PREMIUM AS ON TURNOVER 31 ST MARCH 2010-11 NIL 19,43,641 21,367 36,86,51,200 2011-12 NIL 17,00,594 25,117 36,86,51,200 LD. ASSESSING OFFICER ON THE BASIS OF ABOVE THREE C HARTS OBSERVED THAT THERE IS A COMMON WORKING STYLE OF THE ALLEGED THREE COMPANIES WHICH WERE HAVING NIL FIXED ASSETS AND MEAGER ACCUM ULATED PROFITS. IT WAS ALSO OBSERVED FROM THE BALANCE SHEETS AND SC HEDULES THERETO THAT HUGE INVESTMENTS HAVE BEEN MADE IN THE SHARE C APITAL OF VARIOUS COMPANIES AND THE BANK STATEMENTS OF THESE COMPANIE S ARE CONSPICUOUSLY REPLETE WITH DEPOSITS AND WITHDRAWALS OF SAME AMOUNTS IN A SHORT SPAN OF ONE OR TWO DAYS WHICH SH OWS THAT THESE COMPANIES ARE JUST ACTING AS A CONDUIT OF FUNDS WIT H NO REAL BUSINESS. 6.1 WE FURTHER OBSERVE THAT LD. AUTHORISED REPRESEN TATIVE HAS REPEATEDLY ASSERTED THE FACT THAT ASSESSEE COMPANY WHICH IS HAVING A HUGE TURNOVER OF RS.189.98 CRORES AS AGAINST RS.1 16.19 CRORES IN THE IMMEDIATELY PRECEDING YEAR AND REGULAR MANUFACT URING ACTIVITIES ARE BEING CARRIED OUT. SHARE CAPITAL/PREMIUM RECEIV ED DURING THE YEAR HAS BEEN UTILIZED FOR THE BUSINESS PURPOSES INCLUDI NG PURCHASE OF MACHINERY. THE SHARE CAPITAL/PREMIUM RECEIVED DURIN G THE YEAR APART FROM THE ALLEGED THREE COMPANIES HAVE ALSO COME FRO M OTHER SHARE ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 35 HOLDERS RELATES TO DIRECTORS AND SOME AMOUNT OF PRE MIUM HAVE BEEN PAID BY THEM AND THIS FACT IS NOT DISPUTED BY THE R EVENUE. LD. AUTHORISED REPRESENTATIVE HAS ALSO SUBMITTED THAT A LL EVIDENCES IN SUPPORT OF IDENTITY, CREDITWORTHINESS AND GENUINENE SS WHICH A PRUDENT BUSINESSMAN CAN COLLECT WITHIN HIS LIMITED POWER WHICH INCLUDES ADDRESSES, PERMANENT ACCOUNT NUMBER, CONFI RMATION LETTERS, BANK STATEMENT AND AUDITED BALANCE SHEET A ND PROFIT AND LOSS ACCOUNT AND NO ERROR HAS BEEN FOUND IN THIS REGARD. FURTHER IT IS NOT POSSIBLE FOR THE ASSESSEE TO KNOW ABOUT THE SOURCE OF SOURCE AND SUCH POWERS ARE WITH THE REVENUE AUTHORITIES TO MAK E THE INVESTIGATION. HOWEVER, WE ALSO OBSERVE THAT LD. AU THORISED REPRESENTATIVE WAS UNABLE TO FILE ANY DOCUMENTARY E VIDENCE TO SHOW THAT THERE WAS A COMMUNICATION BETWEEN THE COMPANY OFFICERS AND THE ALLEGED THREE COMPANIES WHICH CAN PROVE ANY CON NECTION BETWEEN THEM AND ALSO THE INTENTION TO INVEST IN TH E ASSESSEE COMPANY. LD. AUTHORISED REPRESENTATIVE ALSO COULD N OT REPLY THAT WHY COMPANY BASED IN KOLKATA CAN INVEST ALL THE WAY IN A COMPANY IN GUJARAT WITHOUT HAVING ANY PREVIOUS BUSINESS CONNEC TION. 7. WE OBSERVE THAT BOTH THE LD. REPRESENTATIVES HAV E REFERRED AND RELIED ON VARIOUS JUDGMENTS/DECISION DEALING WITH THE ISSUES OF UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT AS WELL AS REOPENING OF ASSESSMENT PR OCEEDINGS U/S 147 OF THE ACT WHICH IN NUTSHELL GIVES THE VIEW THAT MERELY FURNIS HING OF PAN, INCOME-TAX RETURNS AND CONFIRMATION MAY NOT BE SUFFICIENT EVID ENCE TO PROVE THE GENUINENESS AND CREDITWORTHINESS OF THE PERSON AND ONE MORE STEP IS REQUIRED FROM EITHER SIDE TO SUBSTANTIATE THEIR PLEA. AT THI S JUNCTURE WE FIND IT PERTINENT TO OBSERVE THE FINDING GIVEN BY THE CO-ORDINATE BENCH IN THE CASE OF ACIT VS. ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 36 NAKODA FASHION (P) LTD. IN ITA NO.1716/AHD/2012 WHE REIN QUITE SIMILAR ISSUE HAS BEEN ADJUDICATED AND THE CO-ORDINATE BENCH HAS HELD AS FOLLOWS :- 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE US AND GONE THROUGH THE JUDGMENTS, DE CISIONS CITED BY BOTH THE PARTIES. THE SOLITARY GRIEVANCE OF THE REV ENUE IS AGAINST THE ORDER OF LD. CIT(A) DELETING THE ADDITION OF RS.3.5 CRORES MADE U/S 68 OF THE ACT TOWARDS SHARE CAPITAL AND SHARE PREMIUM. WE FIND THAT DURING THE YEAR UNDER APPEAL RS.70 LACS EACH WAS CO NTRIBUTED BY FOLLOWING 5 PARTIES TOTALING TO RS.3.5 CRORES TOWAR DS SHARE CAPITAL AND SHARE PREMIUM BY WAY OF SUBSCRIBING ONE LACS EQUITY SHARES HAVING FACE VALUE OF RS.10/- EACH AND PREMIUM OF RS.60/-:- 1. GREEN STAR FINANCIAL SERVICE PVT. LTD. RS. 7 0,00,000/- 2. ARCHER FINANCIAL SERVICE PVT. LTD. RS . 70,00,000/- 3. SURAJ CORPORATE SERVICE PVT. LTD. RS. 70,00,000/- 4. FLY HIGH EXPORTS PVT. LTD. RS. 70,00,000/- 5. OASIS CINE COMMUNICATIONS LTD. RS. 70 ,00,000/- 8. WE FURTHER OBSERVE THAT TOTAL AMOUNT OF RS.3.5 C RORES WAS RECEIVED THROUGH ACCOUNT PAYEE CHEQUES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ITSELF IN ORDER TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION S, ASSESSEE HAS FILED PAN, COPIES OF INCOME-TAX RETURNS FOR ASST. Y EAR 2009-10, CONFIRMATION REGARDING SHARE PURCHASES ALONG WITH P ROOF OF PAYMENTS THROUGH CHEQUES, COPIES OF BANK ACCOUNTS AND AUDITE D BALANCE SHEETS FOR ASST. YEAR 2009-10. WE FURTHER FIND THAT SUMMON WAS SERVED U/S 131 TO THE FOLLOWING THREE PARTIES BASED AT AHMEDABAD :- (3) GREEN STAR FINANCIAL SERVICE PVT. LTD., AHMEDABAD. (4) ARCHER FINANCIAL SERVICE PVT. LTD., AHMEDABAD. (5) SURAJ CORPORATE SERVICE PVT. LTD., AHMEDABAD. 9. IT WAS ALLEGED BY ASSESSEE THAT SUMMONS U/S 131 WERE NOT RECEIVED BY ARCHER FINANCIAL SERVICE PVT. LTD. AND GREEN STAR FINANCIAL SERVICE PVT. LTD. AS FAR AS PERSONAL ATTE NDANCE OF THE DIRECTOR OF SURAJ CORPORATE SERVICE PVT. LTD., AUTH ORIZED ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 37 REPRESENTATIVE ON BEHALF OF THE COMPANY APPEARED AN D AGAIN FILED DOCUMENTS WHICH WERE ALREADY FILED BY THE ASSESSEE AND SUBMITTED THAT HE TOOK LEAVE ON BEHALF OF THE DIRECTOR FOR AT TENDING IN PERSONAL DUE TO ILLNESS OF DIRECTORS FATHER. WE FURTHER FIN D THAT ASSESSING OFFICER CAME ACROSS THE STATEMENT OF MR. JITENDRA J AIN, ONE OF THE DIRECTORS OF SURAJ CORPORATE SERVICE PVT. LTD., AHM EDABAD RECORDED BY DDIT(INV) ON 21.9.2010, IN CASE OF ANOTHER INVES TIGATION, IN THE CASE OF M/S B. R. METALS AND ALLOY (GUJARAT) LD., W HEREIN IT WAS STATED BY MR. JITENDRA JAIN THAT THE SAID COMPANY, SURAJ CORPORATE SERVICES PVT. LTD. PROVIDES ACCOMMODATION ENTRIES T O THE COMPANIES WHICH GIVES CASH TO THE SAID ENTITIES AND THE SAME WAS ROUTED THROUGH VARIOUS OTHER PAPER ENTRIES AND FINALLY FRO M THE BANK ACCOUNT OF SURAJ CORPORATE SERVICES PVT. LTD. THE SAME WAS INTRODUCED IN THE FORM OF SHARE APPLICATION MONEY. 10. RELEVANT EXTRACT OF STATEMENT RECORDED ON 21.09 .2010- IN THE FORM OF QUESTIONS & ANSWERS IN RESPECT OF SHRI JITENDRA JAI N BY DDIT(INV), AHMEDABAD, ARE AS FOLLOWS :- Q. 22. IN WHICH COMPANIES YOU ARE THE DIRECTOR WITH IN LAST 6 YEARS ? PL. EXPLAIN. ANS:22 I AM THE DIRECTOR WITHIN LAST 6 YEARS IN THE FOLLOWING COMPANIES 1. SURAT CORPORATE SERVICES PVT. LTD. 2. GRIN BPO SERVICES PVT. LTD. 3. SIDDHI VINAYAK FINCAP LTD. 4. SHELJA FINLEASE PVT. LTD. 5. RADHE FINSERVICE PVT. LTD. 6. TIRUPATI SHELTERS LTD. 7. HONEST BUSINESS DEAL PVT. LTD. Q. 24. HOW MUCH TRANSACTIONS OF SURAJ CORPORATE SE RVICES PVT. LTD. AND GRIN BPO SERVICES WITH B. R. METALS AND EXPLAIN THE NATURE OF TRANSACTION ? ANS :24 DURING THE F.Y.2008-09 FROM SURAJ CORPORATE SERVICES PVT. LTD. THE COMPANY INVESTED RS. 1 CRORES WITH B. R. METALS VID E A/C NO.213090 OF PNB AS SHARE CAPITAL AND GRIN BPO PVT. LTD. HAS INVESTED 1 CRORES 85 LACS IN F.Y.2008-09 THROUGH BA NK ACCOUNT NO.213373 OF PNB AS SHARE CAPITAL. Q. 25 WHAT ARE THE SOURCES OF ABOVE INVESTMENT ? ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 38 ANS: 25 THE TRANSACTIONS ARE NEARLY ACCOMMODATION E NTRIES WHEREBY CASH WAS RECEIVED FROM B. R. METALS AND ALLOY (GUJARAT ) LTD. WHICH WAS THEN ROUTED THROUGH A FEW BANK A/CS OF PAPER CONCER NS AND ULTIMATELY THE MONEY WAS INVESTED IN B.R. METALS & ALLOYS (GUJARAT) PVT. LTD. THROUGH PNB BY SURAJ CORPORATE SERVICES P VT. LTD. AND GRIN BPO PVT. LTD. AS SHARE CAPITAL AND HAD RECEIVE D COMMISSION OF 0.25% FOR MAKING THIS ARRANGEMENT. 11. WE FURTHER FIND FROM GOING THROUGH THE BANK STA TEMENT OF ONE OF THE IMPUGNED PARTY FLY HIGH EXPORTS PVT. LTD., KOLK ATA PLACED AT PAGES 21 & 22 OF CIT(A)S ORDER THAT A LARGE VOLUME OF TRANSACTION TOTALING IN CRORES OF RUPEES HAVE PASSED THROUGH TH EIR BANK ACCOUNT DURING THE YEAR BUT WHEN WE TURN TO THE PROFITS AND LOSS ACCOUNT, THERE IS A MEAGER INTEREST INCOME OF RS.9,77,080/- AND SIMILARLY IN CASE OF OASIS CINE COMMUNICATION LTD., KOLKATA AGA INST BANK TRANSACTION IN CRORES OF RUPEES THERE IS SALES TURN OVER OF RS.348500/- AND NET PROFIT BEFORE TAX AT RS.1289.56 WHICH SHOW S THAT THE TRANSACTIONS WHICH HAPPENED THROUGH THE BANK ACCOUN T ARE NOT HAVING ANY IMPACT ON THE PROFIT AND LOSS ACCOUNT. 12. SIMILARLY IN THE CASE OF SURAJ CORPORATE SERVIC ES PVT. LTD. WHEN WE REFER TO THE BANK STATEMENT PLACED ON PAGES 14 & 15 OF CIT(A)S ORDER, WE FIND THAT TRANSACTIONS WORTH CRORES OF RU PEES HAVE MOVED THROUGH BANK BALANCES AT VARIOUS POINTS OF TIME ARE MORE THAN RS.50 LACS WHEREAS A MEAGER AMOUNT OF INTEREST HAS BEEN S HOWN AT RS.18,903/-. SIMILAR TYPE OF FINANCIAL DATAS ARE DE PICTED IN OTHER TWO IMPUGNED PARTIES NAMELY ARCHER FINANCIAL SERVICE PVT. LTD. AND GREEN STAR FINANCIAL SERVICE PVT. LTD. HAVING COMMO N ADDRESS. FROM OBSERVING THESE DOCUMENTS IT SEEMS THAT HUGE VOLUME OF TRANSACTIONS ARE IN THE FORM OF DEBIT AND CREDIT O F CHEQUES AND ARE OF TYPICAL NATURE OF PAPER COMPANIES ENGAGED IN PROVID ING ACCOMMODATION ENTRIES. 13. FURTHER WE OBSERVE THAT CO-ORDINATE BENCH, KOLK ATA IN THE CASE OF SUBHLAKSHMI VANIJYA(P) LTD. VS. CIT (2015) 60 TAXMANN.COM 60 (KOLKATA TRIB) CAME ACROSS ISSUE RELATING TO UNEXP LAINED CASH CREDIT U/S 68 OF THE ACT WHEREIN SHARE CAPITAL WAS RECEIVE D FROM COMPANIES HAVING VERY MEAGER INCOME AND LOW FINANCIAL CAPACIT Y TO INVEST HUGE ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 39 AMOUNTS IN OTHER COMPANIESSHARE CAPITAL WHEREIN TH E CO-ORDINATE BENCH HAS HELD AS UNDER :- HELD WHETHER THE PROVISIONS OF SECTION 68 CAN BE ATTRACT ED IF SHARE CAPITAL WITH PREMIUM IS NOT PROPERLY EXPLAINED BY THE ASSESSEE C OMPANY? AS PER SECTION 68 WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS 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 ASSESSING OFFICER , SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. THIS SECTION HAS RECEIVED THE ATTENT ION OF THE SUPREME COURT AND ALMOST ALL THE HIGH COURTS IN NUMEROUS CASES. IT HA S BEEN ALMOST UNANIMOUSLY HELD THAT THE BURDEN UNDER THIS SECTION IS DISCHARG ED BY THE ASSESSEE ONLY WHEN THE ASSESSEE PROVES THREE THINGS TO THE SATISFACTIO N OF THE ASSESSING OFFICER, VIZ., IDENTITY OF THE CREDITOR, CAPACITY OF THE CREDITOR AND GENUINENESS OF THE TRANSACTIONS. ONUS UNDER SECTION 68 CAN BE SAID TO HAVE BEEN DISCHARGED ONLY WHEN THE ASSESSEE PROVES IDENTITY AND CAPACITY OF T HE CREDITOR ALONG WITH THE GENUINENESS OF TRANSACTION TO THE SATISFACTION OF T HE ASSESSING OFFICER. ALL THE THREE CONSTITUENTS ARE REQUIRED TO BE CUMULATIVELY SATISFIED. IF ONE OR MORE OF THEM IS ABSENT, THEN THE ASSESSING OFFICER CAN LAWF ULLY MAKE ADDITION.[PARA 13.B.] IN CASE OF A CLOSELY HELD COMPANY WHERE THE SHAR ES ARE ISSUED TO THE FAMILY MEMBERS OR CLOSE FRIENDS/RELATIVES, THE BURDEN OF P ROOF RESTS ON THE COMPANY TO PROPERLY EXPLAIN THE IDENTITY AND CAPACITY OF SHAREHOLDERS ALONG WITH THE GENUINENESS OF THE TRANSACTIONS. EX CONSEQUENT THE ARGUMENT OF THE ASSESSEE THAT HE WAS NOT OBLIGED TO EXPLAIN THE GENUINENESS OF SH ARE CAPITAL AFTER HAVING FURNISHED PRELIMINARY DETAILS ABOUT THE SHAREHOLDER S ETC., IS NOT CAPABLE OF ACCEPTANCE AND HENCE REJE ?%D. IN ALL CASES, WHERE THE ASSESSEE FAILS TO CUMULATIVELY PROVE TO THE SATISFACTION OF THE ASSES SING OFFICER, THE IDENTITY AND CAPACITY OF THE SHAREHOLDERS ALONG WITH THE GENUINE NESS OF THE TRANSACTIONS THERE CAN BE NO ESCAPE FROM SECTION 68.[PARA 13.T] WHETHER INSERTION OF PROVISO TO SECTION 68 BY THE F INANCE ACT, 2012 WITH EFFECT FROM 1-4-2013 EMPOWERING THE ASSESSING OFFICER TO E XAMINE THE GENUINENESS OF THE SHARE CAPITAL IN THE CASE OF A COMPANY IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED, IS PROSPECTIVE? AS PER THIS PROVISO WHERE ANY SHARE CAPITAL ETC . IS CREDITED IN THE CASE OF CLOSELY HELD COMPANY, THE EXPLANATION GIVEN BY SUCH COMPANY SHALL BE DEEMED TO BE NOT ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 40 SATISFACTORY, UNLESS THE RESIDENT SHAREHOLDER OFFER S AN EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH SUM SO CREDITED AND SUCH EXPLANA TION IS FOUND TO BE SATISFACTORY BY THE ASSESSING OFFICER. THE ESSENCE OF THIS AMENDMENT IS THAT A CLOSELY HELD COMPANY IS REQUIRED TO SATISFY THE ASS ESSING OFFICER ABOUT THE SHARE CAPITAL ETC. ISSUED BY IT, IN THE ABSENCE OF WHICH, AN ADDITION UNDER SECTION 68 CAN BE MADE IN THE HANDS OF THE COMPANY. IF THE AMENDME NT IS ACCEPTED TO BE PROSPECTIVE, THEN IT WOULD MEAN PRECLUDING THE ASSE SSING OFFICER FROM EXAMINING THE GENUINENESS OF TRANSACTIONS OF RECEIPT OF SHARE CAPITAL WITH PREMIUM UNDER CONSIDERATION AND HENCE PROHIBITING HIM FROM MAKING ANY ADDITION UNDER SECTION 68 NOTWITHSTANDING THE SAME BEING NON-GENUINE. IN T HE OPPUGNATION, IF THE AMENDMENT IS HELD TO BE RETROSPECTIVE, THEN IT WOUL D MEAN THAT THE ASSESSING OFFICER WOULD HAVE ALL THE POWERS TO EXAMINE THE GE NUINENESS OF SHARE CAPITAL AND SHARE PREMIUM RECEIVED BY THE ASSESSEE COMPANY ON T HE TOUCHSTONE OF SECTION 68. IF THE ASSESSEE FAILS TO SATISFY HIM ON THE IDENTIT Y AND CAPACITY OF THE SUBSCRIBERS AND GENUINENESS OF) TRANSACTIONS, THEN ADDITION WIL L BE CALLED FOR UNDER SECTION 68. [PARA 13.W.] IT IS SETTLED RULE OF CONSTRUCTION THAT EVERY S TATUTE IS PRIMA FACIE PROSPECTIVE UNLESS IT IS EXPRESSLY OR BY NECESSARY IMPLICATION MADE TO HAVE RETROSPECTIVE OPERATION ORDINARILY THE COURTS ARE REQUIRED TO GAT HER THE INTENTION OF THE LEGISLATURE FROM THE OVERT LANGUAGE OF THE PROVISIO N AS TO WHETHER IT HAS BEEN MADE PROSPECTIVE OR RETROSPECTIVE, AND IF RETROSPECTIVE, THEN FROM WHICH DATE. HOWEVER, SOME TIMES WHAT HAPPENS IS THAT THE SUBSTANTIVE PRO VISION, AS ORIGINALLY ENACTED OR LATER AMENDED, FAILS TO CLARIFY THE INTENTION OF TH E LEGISLATURE. IN SUCH A SITUATION IF SUBSEQUENTLY SOME AMENDMENT IS CARRIED OUT TO CLARI FY THE REAL INTENT, SUCH AMENDMENT HAS TO BE CONSIDERED AS RETROSPECTIVE FRO M THE DATE WHEN THE EARLIER PROVISION WAS MADE EFFECTIVE. SUCH CLARIFICATORY OR EXPLANATORY AMENDMENT IS DECLARATORY. AS THE LATER AMENDMENT CLARIFIES THE R EAL INTENT AND DECLARES THE POSITION AS WAS ORIGINALLY INTENDED, IT TAKES RETRO ACTIVE EFFECT FROM THE DATE WHEN THE ORIGINAL PROVISION WAS MADE EFFECTIVE. NORMALLY SUCH CLARIFICATORY AMENDMENT IS MADE RETROSPECTIVELY EFFECTIVE FROM THE EARLIER DATE. IT MAY ALSO HAPPEN THAT THE CLARIFICATORY OR EXPLANATORY PROVISION INTRODUCED L ATER TO DEPICT THE REAL INTENTION OF THE LEGISLATURE IS NOT SPECIFICALLY MADE RETROSP ECTIVE BY THE STATUTE. NOTWITHSTANDING THE FEET THAT SUCH AMENDMENT TO THE SUBSTANTIVE PROVISION HAS BEEN GIVEN PROSPECTIVE EFFECT, THE JUDICIAL OR QUAS I-JUDICIAL AUTHORITIES, ON A CHALLENGE MADE TO IT, CAN JUSTIFIABLY HOLD SUCH AME NDMENT TO BE RETROSPECTIVE. THE JUSTIFICATION BEHIND GIVING RETROSPECTIVE EFFECT TO SUCH AMENDMENT IS TO APPLY THE REAL INTENTION OF THE LEGISLATURE FROM THE 1 DATE SUCH PROVISION WAS INITIALLY INTRODUCED. THE INTENTION OF THE LEGISLATURE WHILE INTRODUCING THE PROVISION IS GATHERED, INTER ALIA, FROM THE FINANCE BILL, MEMORANDUM EXPLAINING THE PR OVISION OF THE FINANCE BILL ETC. [PARA 13.X.] ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 41 ANY AMENDMENT TO THE SUBSTANTIVE PROVISION WHIC H IS AIMED AT CLARIFYING THE EXISTING POSITION OR REMOVING UNINTENDED CONSEQUENC ES TO MAKE THE PROVISION WORKABLE HAS TO BE TREATED AS RETROSPECTIVE NOTWITH STANDING THE FEET THAT THE AMENDMENT HAS BEEN GIVEN EFFECT PROSPECTIVELY. THE BORDER LINE BETWEEN A SUBSTANTIVE PROVISION HAVING RETROSPECTIVE OR PROSP ECTIVE EFFECT, IS QUITE PROMINENT. ONE NEEDS TO APPRECIATE THE NATURE OF TH E ORIGINAL PROVISION IN CONJUNCTION WITH THE AMENDMENT. ONCE A PROVISION HA S BEEN GIVEN RETROSPECTIVE EFFECT BY THE LEGISLATURE, IT SHALL CONTINUE TO BE RETROSPECTIVE. IF ON THE OTHER HAND, THE STATUTE DOES NOT AMEND IT RETROSPECTIVELY, THEN ONE HAS TO DIG OUT THE INTENTION OF THE PARLIAMENT AT THE TIME WHEN THE ORIGINAL PRO VISION WAS INCORPORATED AND ALSO THE NEW AMENDMENT. IF THE LATER AMENDMENT SIMP LY CLARIFIES THE INTENTION OF THE ORIGINAL PROVISION, THEN IT WILL ALWAYS BE CONS IDERED AS RETROSPECTIVE. [PARA 13AA] ON ADVERTING TO THE LANGUAGE OF SECTION 68, IT TRAN SPIRES THAT IT REFERS TO 'ANY SUM CREDITED' IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREV IOUS YEAR. THE EXPRESSION 'ANY SUM CREDITED' HAS NOT BEEN SPECIFIC ALLY DEFINED IN THE PROVISION THUS, IT WOULD EXTEND TO ALL THE AMOUNTS CREDITED I N THE BOOKS OF ACCOUNT. A SUM CAN BE CREDITED IN THE BOOKS OF ACCOUNT, WHICH WOUL D INVARIABLY EITHER FIND ITS PLACE EITHER ON THE INCOME SIDE OF THE PROFIT AND L OSS ACCOUNT OR IN THE LIABILITY SIDE OF THE BALANCE SHEET. ITEMS CREDITED TO THE PROFIT AND LOSS ACCOUNT ARE THEMSELVES INCOME AND HENCE THERE CAN BE NO REASON TO MAKE ADD ITION ONCE AGAIN FOR THEM. ITEMS APPEARING ON THE LIABILITY SIDE OF THE BALANC E SHEET CAN BE LOANS OR SHARE CAPITAL ETC. ONCE THERE IS SPECIFIC REFERENCE IN SE CTION 68 FOR APPLYING IT TO 'ANY SUM CREDITED', THERE CAN BE NO REASON TO RESTRICT I TS APPLICATION ONLY TO 'LOANS' AND NOT TO 'SHARE CAPITAL 1 . THE BURDEN OF PROOF UNDER SECTION 68 CAN BE NO DI FFERENT IN RESPECT OF ISSUE OF SHARE CAPITAL BY CLOSELY HELD C OMPANIES VIS-A-VIS LOANS OR GIFTS. THE HIGH COURT IN CIT V. MAITHAN INTERNATIONAL [2015] 375 ITR 123/231 TAXMAN 381/56 TAXMANN.COM 283 (CAL.). CITV. ACTIVE TRADERS (P.) LTD. 19951214 ITR 583/[1993] 69 TAXMAN 281 (CALL MIMEC (INDIA) (P.) LTD, V. DY. C1T[2Q\3] 353 ITR 284/216 TAXMAN 157 (MAG.)/35 TAXMANN.COM 319 (C AL.) AND CIT V. NIVEDAN VANIJYA NIYOJAN LTD. [2003] 263 ITR 623/1 30 TAXMAN 153 (CAL.)A HAS SPECIFICALLY HELD THAT THE THREE INGREDIENTS, VIZ, IDENTITY AND CAPACITY OF CREDITOR AND GENUINENESS OF TRANSACTION ARE REQUIRED TO BE S ATISFIED EVEN IN CASE OF ISSUE OF SHARE CAPITAL BY A CLOSELY HELD COMPANY. IT SHOWS T HAT THE INTENTION OF THE LEGISLATURE, AS INTERPRETED BY THE HIGH COURT, IS A LWAYS TO CAST DUTY ON THE ASSESSEE TO PROVE THE SATISFACTION OF THE THREE INGREDIENTS IN CASE OF TRANSACTION OF ISSUE OF SHARE CAPITAL BY A CLOSELY HELD COMPANY IN THE SAME WAY AS IS IN THE CASE OF TRANSACTION OF LOANS. [PARA 13. AB] A CAREFUL PERUSAL OF THE FIRST PARA OF THE MEMORAND UM BRINGS OUT THAT THE ONUS OF SATISFACTORILY EXPLAINING ISSUE OF SHARE CAPITAL WI TH PREMIUM ETC. BY A CLOSELY HELD COMPANY IS ON THE COMPANY. NEXT PARA RECOGNIZES THA T JUDICIAL PRONOUNCEMENTS, ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 42 WHILE CONSIDERING THAT THE PERNICIOUS PRACTICE OF C ONVERSION OF UNACCOUNTED MONEY THROUGH MASQUERADE OF INVESTMENT IN THE SHARE CAPITAL OF A COMPANY NEEDS TO BE PREVENTED, HAVE ADVISED A BALANCE TO BE MAINT AINED REGARDING ONUS OF PROOF TO BE PLACED ON THE COMPANY. AFTER GOING THROUGH TH E ABOVE PARTS OF THE MEMORANDUM EXPLAINING PROVISIONS OF THE FINANCE BIL L, THERE REMAINS NO DOUBT WHATSOEVER THAT THE ONUS HAS ALWAYS BEEN ON THE CLO SELY HELD COMPANIES TO PROVE THE ISSUE OF SHARE CAPITAL ETC. BY THE COMPANY IN T ERMS OF SECTION 68. THUS, THE AMENDMENT MAKES IT MANIFEST THAT THE INTENTION OF T HE LEGISLATURE WAS ALWAYS TO CAST OBLIGATION ON THE CLOSELY HELD COMPANIES TO PR OVE RECEIPT OF SHARE CAPITAL ETC. TO THE SATISFACTION OF THE ASSESSING OFFICER AND IT WAS ONLY WITH THE AIM OF SETTING TO NAUGHT CERTAIN CONTRARY JUDGMENTS WHICH 'CREATED DOUBTS' ABOUT THE ONUS OF PROOF BY HOLDING THAT THERE WAS NO REQUIREMENT ON T HE COMPANY TO PROVE THE SHARE CAPITAL ETC. AND AS SUCH NO ADDITION COULD BE MADE IN THE HANDS OF COMPANY EVEN IF SUCH SHAREHOLDERS ARE BOGUS. AS THE AMENDMENT AIMS AT CLARIFYING THE POSITION OF LAW WHICH ALWAYS EXISTED, BUT WAS NOT PROPERLY CONS TRUED IN CERTAIN JUDGMENTS, THERE CAN BE NO DOUBT ABOUT THE SAME BEING RETROSPE CTIVE IN OPERATION. [PARA 13. AD.] THEREFORE, THE AMENDMENT TO SECTION 68 BY INSERTION OF PROVISO IS CLARIFICATORY AND HENCE RETROSPECTIVE. THE CONTRARY ARGUMENTS ADVANCE D BY THE ASSESSEE BEING DEVOID OF ANY MERIT, ARE HEREBY JETTISONED. [PARA 1 3. AE.] THUS, THE CONTENTION OF THE ASSESSEE THAT SINCE THE ASSESSING OFFICER OF THE ASSESSEE-COMPANY IS NOT EMPOWERED TO EXAMINE OR MAK E ANY ADDITION ON ACCOUNT OF RECEIPT OF SHARE CAPITAL WITH OR WITHOUT PREMIUM BEFORE AMENDMENT BY THE FINANCE ACT, 2012 WITH EFFECT FROM ASSESSMENT YEAR 2013-14 AND HENCE THE COMMISSIONER BY MEANS OF IMPUGNED ORDER UNDER SECTI ON 263 COULD NOT HAVE DIRECTED THE ASSESSING OFFICER TO DO SO, IS UNSUSTA INABLE. [PARA 13.AK.] 14. WE FURTHER OBSERVE THAT IN THE CASE OF CIT VS. N. TARIKA PROPERTIES INVESTMENT IN ITA NO.2080 OF 2010 HON. DELHI HIGH C OURT VIDE ITS JUDGMENT DATED 28.11.2013 HAS HELD AS UNDER :- 31. WE ARE OF THE CONSIDERED OPINION THAT THE ASSES SEE HAS NOT BEEN ABLE TO DISCHARGE THE INITIAL ONUS AND HAS NOT BEEN ABLE TO ESTABLISH THE IDENTITY, CREDITWORTHINESS OF THE SHARE APPLICANTS AND THE GENUINENESS OF THE TRANSACTION. THE SURROUNDING CIRCUMSTANCES AND INQUIRIES MADE BY THE ASSESSING OFFICER WERE SIGNIF ICANT BUT THE SAID FINDING THOUGH NOT DISTURBED HAVE BEEN IGNORED. FURTHER THE TRIBUNAL H AS FAILED TO TAKE HOLISTIC VIEW AND HAS RELIED UPON NEUTRAL AND GENERAL EVIDENCE WITHOUT NO TICING OTHER EVIDENCE, WHICH ARE :- A) THE RESPONDENT - ASSESSEE IS A PRIVATE LIMITED C OMPANY. B) THE SUBSCRIBERS WERE UNKNOWN PERSONS, NOT RELATE D OR FRIENDS. ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 43 C) THE SUBSCRIBERS BANK ACCOUNT STATEMENTS FURNISHE D WERE FORGED AND FABRICATED. D) THERE WERE CORRESPONDING CASH DEPOSITS IN THE BA NK ACCOUNTS BEFORE ISSUE OF SHARE APPLICATION CHEQUES. E) THE SUBSCRIBER COMPANIES IT HAS BEEN SHOWN WERE CARRYING ON EFFECTIVE AND DAY TO DAY BUSINESS OR WERE ANGLE INVESTORS. F) THE SUBSCRIBERS DID NOT BOTHER AND ENSURE PROTEC TION OF THEIR INVESTMENT. 32. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT T HE ASSESSEE HAS NOT DISCHARGED THE ONUS SATISFACTORILY AND THE ADDITIONS MADE BY THE ASSESS ING OFFICER WAS JUSTIFIED AND SUSTAINABLE AND THE ORDER OF THE TRIBUNAL IGNORING AND NOR DEALING WITH THE FACTUAL FINDINGS RECORDED BY THE ASSESSING OFFICER IS PERVE RSE . 33. THE SUBSTANTIAL QUESTION OF LAW IS THUS ANSWERE D IN FAVOUR OF THE APPELLANT/REVENUE AND AGAINST THE RESPONDENT/ASSESSEE. THE APPEAL IS ACCORDINGLY ALLOWED WITH COSTS THAT ARE ASSESSED AT RS. 2O,000/-. 15. FURTHER WE OBSERVE THAT IN THE CASE OF SUMATI D AYAL VS. CIT 1995 AIR 2109, HON. SUPREME COURT HELD AS UNDER :- 5. IT IS NO DOUBT TRUE THAT IN ALL CASES IN WHICH A RECEIPT IS SOUGHT TO BE TAXED AS INCOME, THE BURDEN LIES ON THE DEPARTMENT TO PROVE THAT IT IS WITHIN THE TAXING PROVI- SION AND IF A RECEIPT IS IN THE NATURE OF IN COME, THE BURDEN OF PROVING THAT IT IS NOT TAXABLE BECAUSE IT FALLS WITHIN EXEMPTION PROVIDED BY THE ACT LIES UPON THE ASSESSEE. [SEE :PARIMISETTI SEETHARAMAMMA (SUPR A) AT P. 5361. BUT, IN VIEW OF SECTION 68 OF THE ACT, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF THE ASSESSEE FOR ANY PREVIOUS YEAR THE SAME MAY BE CHAR GED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR IF THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATURE AND SOURCE THEREOF IS, IN THE OPINION OF THE ASSESSING OFFICER, NOT SATISFACTORY. IN SUCH CASE THERE IS, P RIMA FACIE, EVIDENCE AGAINST THE ASSESSEE, VIZ., THE RECEIPT OF MONEY, AND IF HE FAI LS TO REBUT , THE SAID EVIDENCE BEING UNREBUTTED, CAN BE USED AGAINST HIM BY HOLDIN G THAT IT WAS A RECEIPT OF AN INCOME NATURE. WHILE CONSIDERING THE EXPLANATION OF THE ASSESSEE THE DEPARTMENT CANNOT, HOWEVER, ACT UNREASONABLY. (SEE : SREELEKHA BANERJEE (SUPRA) AT P. 120) 16. FURTHER WE OBSERVE THAT IN THE CASE OF CIT VS. MAITHAN INTERNATIONAL (2015) 56 TAXMANN.COM 283 (CALCUTTA), HON. CALCUTTA HIGH COURT HAS HELD AS UNDER :- HELD WHEN PAYMENT BY CHEQUE DID NOT ESTABLISH THE CREDIT WORTHINESS OF THE LENDER MERE EXAMINATION THE PASS B OOK OR THE BANK STATEMENT OR ME LETTER OF CONFIRMATION OR THE BALANCE SHEET OF THE LENDER WAS NOT ENOUGH. ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 44 THE INSPECTOR APPOINTED BY THE ASSESSING OFFICER DI D NOT GO BEYOND THE AFORESAID DOCUMENTS. THEREFORE, IT CANNOT BE DISPUT ED THAT THE VIEW FORMED BY THE COMMISSIONER THAT IN NONE OF THE REPO RTS, HE HAS COMMENTED UPON THE ISSUE OF CREDITWORTHINESS ;.E. W HETHER THESE PARSES HAD SUFFICIENT MEANS TO ADVANCE SUCH HUGE LOANS, IS NOT WITHOUT BASIS. IT IS WELL ESTABLISHES THAT CREDITS ALLEGEDLY BAS ED ON LOAN FROM PARTIES, WHO ARE. NOT POSSESSED OF SUFFICIENT MEANS CANNOT BE AC CEPTED AS GENUINE. THE ASSESSING OFFICER WAS REQUIRED TO MAKE PROPER I NVESTIGATION TO DETERMINE WHETHER THE MONEY WAS REALLY LENT BY THE THIRD PARTY OR IT HAS COME OUT OF THE RESOURCES OF THE ASSESSEE HIMSELF. THUS THE ASSESSING OFFICER HAS FAILED TO APPLY HIS MIND TO ALL ASPECTS OF THE CASE IS SELF- EVIDENT. SUCH NON-APPLICATION OF MIND CONSTITUTED P ASSING OF AN ERRONEOUS ORDER WHICH IS ALSO PREJUDICIAL TO THE INTEREST OF REVENUE. [PARA 11] I IN THE INSTANT CASE, THE COMMISSIONER HAD REASON S TO HOLD THAT CREDITWORTHINESS OF THE ALLEGED LENDERS WAS NOT ENQ UIRED INTO. MERE EXAMINATION OF THE BANK PASS BOOK, PROFIT AND LOSS ACCOUNT AND BALANCE SHEET OF THE CREDITORS IS NOT ENOUGH. WHEN THE REQU ISITE ENQUIRY WAS NOT MADE, THE ORDER IS BOUND TO BE ERRONEOUS AND PREJUD ICIAL TO THE INTEREST OF THE REVENUE. THE TRIBUNAL PROCEEDED ON THE THEORY T HAT IT WAS NOT A CASE OF NO ENQUIRY; THAT NO DOUBT IS TRUE, BUT THAT IS N OT ENOUGH, IF THE RELEVANT ENQUIRY WAS NOT MADE, IT MAY IN APPROPRIATE CASES A MOUNT TO NO ENQUIRY AND MAY ALSO BE A CASE OF NON-APPLICATION OF MIND. [PARA 12] THE POWER UNDER SECTION 263 CAN BE EXERCISED WHERE THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO T HE INTEREST OF THE REVENUE. WHEN AN ORDER IS ERRONEOUS, THEN THE ORDER IS ALSO DEFICIENT AND IN ORDER TO REMEDY THE SITUATION, POWER UNDER SECTI ON 263 HAS BEEN GIVEN. THEREFORE, THE VIEW THAT THE POWER COULD NOT HAVE B EEN EXERCISED TO ALLOW THE ASSESSING OFFICER TO MAKE UP THE DEFICIENCY IS ALTOGETHER AN INCORRECT IMPRESSION OF THE LAW. [PARA 16] IT IS NOT THE LAW THAT THE ASSESSING OFFICER OCCU PYING THE POSITION OF AN INVESTIGATOR AND ADJUDICATOR CAN DISCHARGE HIS FUNC TION BY PERFUNCTORY OR INADEQUATE INVESTIGATION. SUCH A COURSE IS BOUND TO RESULT IN ERRONEOUS AND PREJUDICIAL, ORDERS. WHERE THE RELEVANT ENQUIRY WAS NOT UNDERTAKEN AS IN THIS CASE, THE ORDER IS ERRONEOUS AND PREJUDICIA L TOO AND THEREFORE REVISABLE. INVESTIGATION SHOULD ALWAYS BE FAITHFUL AND FRUITFUL UNLESS ALL FRUITFUL AREAS OF ENQUIRY ARE PURSUED THE ENQUIRY C ANNOT BE SAID TO HAVE BEEN FAITHFULLY CONDUCTED. .[PARA 19] IN VIEW OF ABOVE, THE ORDER OF THE TRIBUNAL IS SE T ASIDE. ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 45 17. HONBLE APEX COURT IN THE CASE OF NAVODAYA CAST LE (P) LTD VS CIT REPORTED IN (2015) 56 TAXMANN.COM 18 (SC) HAS H ELD THAT MERE FILING OF CERTIFICATE OF INCORPORATION, PAN WERE NO T SUFFICIENT FOR THE PURPOSE OF IDENTIFICATION OF SUBSCRIBER COMPANY ESP ECIALLY WHEN THERE WAS MATERIAL TO SHOW THAT SUBSCRIBER WAS A PAPER CO MPANY AND NOT A GENUINE INVESTOR. 18. EXAMINING THE FACTS IN THE LIGHT OF ABOVE JUDGM ENTS AND DECISIONS WE OBSERVE THAT ASSESSEE IS A PRIVATE LIM ITED COMPANY WHICH IS NOT OPEN TO PUBLIC AND, THEREFORE, IF IT R EQUIRES TO INCREASE ITS CAPITAL BASE OR INVITE INVESTMENT IN THE SHARE CAPI TAL ALONG WITH PREMIUM WHICH IN THIS CASE IS RS.60/- OVER THE FACE VALUE OF RS.10/- THEN IT HAS TO APPROACH WITHIN ITS FRIENDS AND RELA TIVES FOR THE INVESTMENT. IN THE GIVEN CASE RS.70 LACS EACH HAS B EEN GIVEN BY THE IMPUGNED 5 PARTIES TO THE PRIVATE LIMITED COMPANY I .E. THE ASSESSEE. ANY PRUDENT PERSON WHO INTENDS TO INVEST IN A COMPA NY WITH A MOTIVE OF GAINING FROM THE SAID INVESTMENT, LOOKING TO THE QUANTUM OF SHARE CAPITAL AND PREMIUM INVESTED BY THESE 5 PARTIES WHI CH IS OF A SUBSTANTIAL PERCENTAGE OF THE TOTAL SHARE CAPITAL O F THE COMPANY IT IS SURPRISING TO NOTE THAT NONE OF THEM WAS ABLE TO AP PEAR BEFORE THE ASSESSING AUTHORITY NOR THE ASSESSEE WAS ABLE TO BR ING ANY OF THEM IN PERSON TO PROVE THE GENUINENESS OF TRANSACTION A ND CREDITWORTHINESS OF THE INVESTOR TOWARDS SHARE CAPI TAL AND SHARE PREMIUM GIVEN THESE IMPUGNED 5 PARTIES. MORE SO WE FIND THAT OUT OF THE 5 PARTIES THREE PARTIES ARE WITHIN AHMEDABAD AN D SO IS THE ASSESSEE. IT IS NOT SIMPLE TO BELIEVE THAT NONE OF THEM COULD HAVE BEEN MADE TO APPEAR BEFORE THE ASSESSING OFFICER TO PROVE THE TRANSACTION. THIS NON-ATTENDANCE OF THE EQUITY SHAR E HOLDERS MAKES THE SITUATION LITTLE GRIMY WHICH FURTHER GETS SUSPI CIOUS WHEN THE FINANCIAL STATEMENTS ARE GONE THROUGH. IT HAS BEEN UNIFORM SITUATION IN ALL THE 5 PARTIES THAT TRANSACTIONS TOTALING IN CRORES ARE ROUTED THROUGH BANK ACCOUNTS, HUGE RESERVE AND SURPLUS IS APPEARING IN THE BALANCE SHEET ALONG EQUAL AMOUNT OF INVESTMENT; BUT WHEN THE PROFITS AND LOSS ACCOUNT IS LOOKED INTO IT SEEMS COMPLETE D RY AS INTEREST AGAINST INVESTMENT RUNNING IN CRORES THE INCOME SHO WN IS FEW THOUSAND AND SO IS THE TOTAL TURNOVER. ADDING MORE TO THIS IN THE STATEMENT GIVEN BY ONE OF THE DIRECTORS OF SURAJ CO RPORATE SERVICES PVT. LTD. IT HAS BEEN CLEARLY ACCEPTED THAT SURAJ C ORPORATE SERVICES PVT. LTD. IS AN ACCOMMODATION ENTRY PROVIDER AND JU ST A PAPER COMPANY. THIS MODUS OPERANDI OF ACCOMMODATION ENTRY PROVIDER ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 46 CANNOT GET ITSELF COVERED UNDER THE SHADOW OF PAN, INCOME-TAX RETURN, AUDITED FINANCIAL STATEMENT AND PROOF OF TR ANSACTIONS BY ACCOUNT PAYEE CHEQUES. ONE HAS TO GO AHEAD TO RETHI NK WHY SUCH COMPANY IS INCORPORATED. IN NORMAL COURSE A BUSINES S ENTITY IS INCORPORATED TO EARN PROFITS AND CAPITAL IS CONTRIB UTED FOR DOING THE SAME BUT WHEN THE CAPITAL INVESTMENT OR RESERVE AND SURPLUS CREATED IS JUST USED TO INVEST IN OTHER COMPANIES WITHOUT H AVING ANY RETURN AND THE GROSS TURNOVER OF THE COMPANY IS NOT HAVING ANY DIRECT CONNECTION WITH THE VOLUMINOUS BANK TRANSACTION THE N SUCH COMPANIES END UP INTO A PAPER COMPANY. 19. FROM GOING THROUGH ALL THE ABOVE JUDGMENTS AND DECISION, WE FIND THAT ALONG WITH EVIDENCES, SURROUNDING CIRCUMS TANCES, HUMAN PROBABILITY AND INTENTIONAL ACTS ARE ALSO TO BE TAK EN NOTE OFF WHILE ACCEPTING THE IDENTITY, CREDITWORTHINESS AND GENUIN ENESS OF THE CASH CREDITORS WHICH IN THIS CASE IS THE SHARE APPLICANT S. IN THE CASE BEFORE US WE OBSERVE THAT ASSESSEE IS TRYING TO ASSERT AGA IN AND AGAIN UPON THE PAN, IT RETURNS, BANK STATEMENT AND CONFIRMATIO NS OF THE IMPUGNED 5 PARTIES BUT HAS NOWHERE TRIED TO CLARIFY OR DISCLOSE THE FACT WHICH HAS EMBEDDED IN THE FINANCIAL STATEMENT OF THESE 5 PARTIES WHICH SPEAKS IN ITSELF THAT THEY ARE PAPER COMPANIE S. FURTHER IF IT HAS BEEN GENUINE TRANSACTION AND ASSESSEE COMPANY IS A SKED TO PRODUCE THE NEW SHARE HOLDERS WHO HAVE BEEN ALLOTTE D A SUBSTANTIAL PORTION OF EQUITY SHARES, HE WOULD HAVE EASILY CALL ED UPON THE INVESTORS. THE INVESTORS COULD HAVE COME ALONG WITH ALL THE FINANCIAL DOCUMENTS AND COULD HAVE CLARIFIED ABOUT HIS INTENT ION TO MAKE INVESTMENT IN THE EQUITY SHARES OF THE COMPANY BECA USE EVERY INVESTOR WANTS TO EARN INCOME FROM INVESTMENT IN TH E FORM OF DIVIDEND AS WELL AS EXPECTS APPRECIATION IN THE VALUATION OF SHARES WITH THE GROWTH OF BUSINESS. IF THIS HAS BEEN THE SITUATION, THEN THERE WOULD HAVE BEEN NO DOUBT ON THE GENUINENESS OF THE TRANSA CTIONS. ON THE CONTRARY IN THE INSTANT CASE ASSESSEE COMPLETELY FA ILS TO PROVE THE SAME. 20. IT IS WELL SETTLED THAT IN ORDER TO DISCHARGE T HE ONUS THE ASSESSEE MUST PROVE THE FOLLOWING :- I. THE IDENTITY OF THE CASH CREDITOR; ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 47 II. CAPACITY OF THE CASH CREDITOR TO ADVANCE MONEY TOWARDS CAPITAL. III. GENUINENESS OF THE TRANSACTION. IF THE ASSESSEE HAS ADDUCED EVIDENCES TO ESTABLISH THE PRIMA FACIE, THE AFORESAID ONUS SHIFTS TO THE DEPARTMENT. HOWEVE R, MERE FURNISHING OF PARTICULARS OR THE MERE FACT OF PAYME NT BY ACCOUNT PAYEE CHEQUE OR THE MERE SUBMISSION OF CONFIRMATION LETTER BY THE SHARE APPLICANT IS BY ITSELF, NOT ENOUGH TO SHIFT T HE ONUS TO THE DEPARTMENT ALTHOUGH THESE FACTS MAY, ALONG WITH OTH ER FACTS BE RELEVANT IN ESTABLISHING THE GENUINENESS OF THE TRA NSACTION. AS HELD BY HON. SUPREME COURT IN THE CASE OF CIT VS. N. TAR IKA PROPERTIES INVESTMENT (2014) 51 TAXMANN.COM 387(SC) THAT PAN CANNOT BE TREATED AS SUFFICIENT DISCLOSURE OF IDENTITY OF THE PERSON. PANS ARE ALLOWED ON THE BASIS OF APPLICATION WITHOUT ACTUAL DE FACTO CLARIFICATION OF IDENTITY OR ASCERTAINMENT OF ACTIVITIES, NATURE OF BUSINESS ACTIVITY AND ARE JUST AS TO FACILITATE THE REVENUE TO KEEP T RACK OF TRANSACTIONS AND THUS PAN CANNOT BE BLINDLY AND WITHOUT CONSIDER ATION OF SURROUNDING CIRCUMSTANCES TREATED AS SUFFICIENT DIS CLOSING THE IDENTITY OF INDIVIDUAL. 21. WE FURTHER OBSERVE THAT HON. DELHI HIGH COURT I N THE CASE OF CIT V EMPIRE BUILTECH P LTD 361 ITR 258 (DEL), HAS HELD THAT WHEN ASSESSEE DOES NOT PRODUCE EVIDENCE OR TRIES TO AVOI D THE APPEARANCE BEFORE THE ASSESSING AUTHORITY IT NECESSARILY CREAT ES DIFFICULTIES AND PREVENTS ASCERTAINMENT OF THE TRUTH AND CORRECT FAC TS AS THE ASSESSING OFFICER IS DENIED THE ADVANTAGE OF THE AT TENDANCE OR FACTUAL ASSERTION BY THE ASSESSEE BEFORE HIM. IF AN ASSESSEE DELIBERATELY AND INTENTIONALLY FAILS TO PRODUCE EVI DENCE BEFORE THE ASSESSING OFFICER WITH THE DESIRE TO PREVENT ENQUIR Y OR INVESTIGATION AN ADVERSE OPINION SHOULD BE DRAWN. THE ASSESSEE HA D NOT DISCHARGED THE INITIAL ONUS TO ESTABLISH THE IDENTI TY, CREDITWORTHINESS OF THE SHARE APPLICANTS AND THE GENUINENESS OF THE TRANSACTIONS. THE ADDITIONS MADE BY THE ASSESSING OFFICER WERE JUSTIF IED AND SUSTAINABLE. 22. WE ARE, THEREFORE, OF THE VIEW THAT IN THE GIVE N FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWIN G THE JUDGMENTS OF ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 48 HON. SUPREME COURT, HIGH COURT AND THE DECISION OF CO-ORDINATE BENCH AS DISCUSSED ABOVE, WE ARE OF THE CONFIRMED V IEW THAT ASSESSEE HAS BEEN ABLE TO JUST PROVE THE IDENTITY O F THE COMPANY BUT UNABLE TO PROVE THE GENUINENESS & CREDITWORTHINESS OF THE IMPUGNED 5 PARTIES. IN THE RESULT, THE SUM OF RS.3.5 CRORES HAS RIGHTLY BEEN TREATED AS UNEXPLAINED MONEY U/S 68 OF THE ACT BY T HE LD. ASSESSING OFFICER. WE SET ASIDE THE ORDER OF LD. CIT(A) AND R ESTORE THAT OF THE ASSESSING OFFICER. IN THE RESULT GROUND NO.(I) OF R EVENUE IS ALLOWED. 7.1 ON GOING THROUGH THE ABOVE DECISION OF CO-ORDIN ATE BENCH WHICH HAS REFERRED AND RELIED ON VARIOUS JUDGMENTS OF HON. SUPREME COURT, HON. HIGH COURTS AND TRIBUNALS DECISIONS AN D EXAMINING THE FACTS OF THE CASE IN THE LIGHT OF THE ABOVE, WE FIN D THAT ONE COMMON EVENT IS WITH REGARD TO THE REPORT OF INVESTIGATION OF THE DEPARTMENT AND THE STATEMENT ON OATH OF THE DIRECTOR OF ONE OF THE ALLEGED COMPANIES ADMITTING IT TO BE A PAPER COMPANY. IN TH E CASE OF ASSESSEE OUT OF THE ALLEGED THREE COMPANIES M/S CAP VANIJYA (P) LTD. IS ADMITTEDLY A SHELL/PAPER COMPANY AS THE DIR ECTOR AND THE CONTROLLING PERSON HAS ACCEPTED. AS FAR AS OTHER TW O COMPANIES ARE CONCERNED THERE IS NO SUCH REPORT OF THE INVESTIGAT ION WING TO PROVE THEM TO BE PAPER COMPANIES. WE WILL, THEREFORE, PRO CEED FURTHER BY SEGREGATING THE ALLEGED THREE COMPANIES INTO TWO PA RTS WHEREIN IN THE FIRST PART WE WILL DISCUSS ABOUT CAP VANIJYA (P) LT D. AND THE SECOND PART REMAINING NEWJET TREXIM (P) LTD. AND SADASUKH DEALERS (P) LTD. 8. AS REGARDS CAP VANIJYA (P) LTD. WE FIND THAT UND OUBTEDLY ASSESSEE HAS SUBMITTED NECESSARY EVIDENCES AND DETA ILS AT THE PRIMARY STAGE BUT THE REVENUE CAME WITH A COUNTER T O DISPROVE THE EVIDENCES OF ASSESSEE WITH THE HELP OF REPORT OF DY . DIRECTOR OF ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 49 INCOME-TAX (INV), KOLKATA AS WELL AS THE STATEMENT ON OATH U/S 131 OF THE ACT OF THE DIRECTOR OF CAP VANIJYA (P) LTD. AND THE CONTROLLING PERSON MR. MANOHARLAL BANGALIA CLEARLY ACCEPTING TH IS COMPANY AS A PAPER/SHELL COMPANY. REVENUE IS BELIEVED TO PROVE T HAT THE ACTIVITIES UNDERTAKEN BY THE ALLEGED COMPANY ARE NOT MEETING C OMMERCIAL PRUDENCE AND THE WORKING OF THIS COMPANY IS MERELY TO PROVIDE ACCOMMODATION ENTRIES. AGAINST THE COUNTER EVIDENCE OF THE DEPARTMENT PROVING THE COMPANY TO BE A PAPER COMPAN Y, ASSESSEE MISERABLY FAILED TO BRING ANY STRONG EVIDENCE TO JU STIFY ITS PLEA OF GENUINENESS AND CREDITWORTHINESS OF THE ALLEGED CAS H CREDIT OF RS.18,00,000/-. WE ARE, THEREFORE, OF THE FIRM VIEW THAT LD. COMMISSIONER OF INCOME TAX(A) HAS RIGHTLY CONFIRMED THE ADDITION U/S 68 OF THE ACT OF RS.18,00,000/- RECEIVED AS SHA RE CAPITAL AND PREMIUM FROM CAP VANIJYA (P) LTD. WHICH IS A SHELL/ PAPER COMPANY. 9. AS REGARDS REMAINING TWO COMPANIES NAMELY NEWJET TREXIM (P) LTD. AND SADASUKH DEALERS (P) LTD. WE OBSERVE THAT BOTH THESE COMPANIES HAVE REPLIED TO THE NOTICE U/S 133(6) OF THE ACT AND ASSESSEE HAS FURNISHED ALL NECESSARY DETAILS WHICH INCLUDE INCOME- TAX RETURNS, AUDITED BALANCE SHEETS, BANK STATEMENT S AND CONFIRMATIONS OF ACCOUNTS. WE ALSO OBSERVE THAT IN THE CASE OF THESE TWO COMPANIES THERE IS NO NEGATIVE REPORT OF THE IN VESTIGATION WING OF THE INCOME-TAX DEPARTMENT AND ALSO IN THE STATEM ENT OF MANOHAR LAL NANGALIA THERE IS NO REFERENCE OF THESE TWO COM PANIES. HOWEVER, REVENUE HAVE MADE A GUESS WORK ON THE BASIS OF THE FINANCIAL DATAS OF THESE TWO COMPANIES AND COMPARING IT WITH THAT OF CAP VANIJYA (P) ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 50 LTD. AND HAVE TAKEN A SIMILAR VIEW WHICH SEEMS TO B E MERELY A GUESS WORK WITHOUT HAVING A CONCRETE BASE OR EVIDENCE. IT IS WELL ESTABLISHED FACT THAT EACH ASSESSEE IS HAVING ITS D ISTINCT IDENTITY AND ITS OWN COURSE OF WORKING. UNLESS THE COMPANIES ARE WORKING IN THE SAME GROUP OR A UNDER A COMMON DIRECTOR IT MERELY C ANNOT BE INFERRED BY COMPARING THE FINANCE OF THE PAPER COMP ANY THAT THE ALLEGED TWO COMPANIES ARE ALSO PAPER COMPANIES. IN THE GIVEN CASE THE ALLEGED TWO COMPANIES WHICH HAVE RESPONDED TO T HE DEPARTMENTS NOTICES, ALL DETAILS HAVE BEEN FILED T HEN IT WAS ON THE PART OF REVENUE TO FURTHER DEEPLY EXAMINE THE MODUS OPERANDI OF THE COMPANIES WITH THE HELP OF INVESTIGATION. IN THE GI VEN CASE THE REPORT OF INVESTIGATION WING, KOLKATA, HEAVILY RELIED ON B Y THE REVENUE AUTHORITIES IS HAVING NO MENTION OF THE ALLEGED TWO COMPANIES. UNDOUBTEDLY TO A GREAT EXTENT THE PICTURE EVOLVING OUT OF THE FINANCIAL STATEMENTS OF THE ALLEGED TWO COMPANIES GIVES AN IN DICATION ABOUT SOMETHING HAPPENING ABNORMAL IN THEIR WORKING BUT T HAT MERELY CANNOT BE BASIS TO DOUBT THE GENUINENESS AND CREDIT WORTHINESS BECAUSE IN VARIOUS INVESTMENT COMPANIES ALSO ONE CA N FIND THAT THERE ARE NO FIXED ASSETS AND INVESTMENTS ARE REGUL ARLY MADE IN OTHER COMPANIES. DUTY IS HEAVILY CASTED ON THE REVENUE IN SUCH TYPE OF CASES WHERE THE BURDEN OF PROVING HAS BEEN SHIFTED BY THE ASSESSEE TO THE REVENUE BY WAY OF FURNISHING ALL REQUISITE D OCUMENTS AND EVIDENCES. IT IS ON THE REVENUE TO FURTHER DIG OUT SOME MATERIAL INFORMATION INCLUDING THE STATEMENTS OF PERSONS AT HELM OF AFFAIRS OF SUCH COMPANIES. WHEN THE ASSESSING OFFICER WHILE CO NFIRMING THE ADDITION HAS MERELY TAKEN THE INFORMATION OF CAP VA NIJYA (P) LTD. BEING SHELL/PAPER COMPANY AND BY COMPARING THE FINA NCIAL PATTER HAS ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 51 CONFIRMED THE ADDITION BUT NOWHERE ANY FURTHER INVE STIGATION WAS CARRIED OUT EVEN WHEN NECESSARY DETAILS WERE AVAILA BLE WITH HIM. 10. WE. THEREFORE, IN THE GIVEN FACTS AND CIRCUMSTA NCES AND TOTALITY OF FACTS OF THE CASE AND OUR DISCUSSION MADE ABOVE, ARE OF THE VIEW THAT THE ISSUE RELATING TO SHARE CAPITAL/PREMIUM RE CEIVED FROM NETJET TREXIM (P) LTD. AND SADASUKH DEALERS (P) LTD. OF RS .18,00,000/- AND RS.25,00,000/- RESPECTIVELY NEEDS TO BE REMITTED BA CK TO THE FILE OF ASSESSING OFFICER FOR MAKING FURTHER INVESTIGATION WITH THE HELP OF WELL EQUIPPED GOVT. MACHINERY AND THE POWER TO MAKE COMM ISSION TO THE COUNTER PART IN THE CITY WHERE THE ALLEGED COMPANIE S ARE EXISTING SO AS TO SUBSTANTIATE ITS PLEA THAT THE ALLEGED TWO CO MPANIES ARE PAPER COMPANIES AND ALSO TO FIND OUT THE ACTUAL MODUS OPE RANDI OF THESE COMPANIES QUA INVESTMENTS IN SHARE CAPITALS OF OTHE R COMPANIES QUA THEIR BUSINESS OPERATION QUA THE INCOME EARNED DURI NG THE YEAR. NEEDLESS TO MENTION THAT ASSESSEE WILL HAVE A PROPE R OPPORTUNITY OF BEING HEARD FOR PUTTING FORTH ITS ARGUMENTS AND SUB MISSIONS AGAINST THE INFORMATION COLLECTED BY THE REVENUE AUTHORITIE S. WE ACCORDINGLY PARTLY ALLOW ASSESSEES APPEAL FOR STATISTICAL PURP OSES. ITA NO. 207/AHD/2016 ASST. YEAR 2011-12 52 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND MARCH, 2017 SD/- SD/- (R.P. TOLANI) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 02/03/2017 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 01/03/2017 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 01/03/2017 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 2/3/17 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: