ITO, New Delhi V. M/s. Aapki Marketing Private Ltd., New Delhi

ITA 2103/DEL/2011

• Counselvise Citation: 210320114 RSA 2011
• Duration Of Justice: 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 28-02-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 28-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DEV JYOTI DAS
• Keywords: Unexplained cash credit; Unexplained investment; Search and seizure; Principle of natural justice; Source of fund; Additional evidence; Difference of opinion; Accommodation entries
• Section: 133(6); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER & SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER ITA NO. 4693/DEL/2010 ASSESSMENT YEAR: 2006-07 ITO, VS. AAPKI MARKETING P. LTD., WARD 1(1), ROOM NO. 398B, 3522/3, NARANG COLONY, C.R. BUILDING, TRI NAGAR, NEW DELHI. NEW DELHI. AAFCA2458N (APPELLANT) (RESPONDENT) & ITA NO. 2103/DEL/2011 ASSESSMENT YEAR: 2007-08 ITO, VS. AAPKI MARKETING P. LTD., WARD 1(1), ROOM NO. 398B, 3522/3, NARANG COLONY, C.R. BUILDING, TRI NAGAR, NEW DELHI. NEW DELHI. AAFCA2458N (APPELLANT) (RESPONDENT) APPELLANT BY : DEV JYOTI DAS, CIT(DR) RESPONDENT BY : NONE ORDER PER S.V. MEHROTRA, A.M. BOTH THESE APPEALS ARE FILED BY THE REVENUE AND AR E DIRECTED AGAINST TWO SEPARATE ORDERS OF CIT(A) DATED 10/09/2010 & 21 /02/2011 FOR A.YS. 2006-07 AND 2007-08 RESPECTIVELY. 2. THESE APPEALS WERE LISTED FOR HEARING ON 28.12.1 0, 13.04.11, 19.07.11, 25.10.11 & 21.02.12, BUT GOT ADJOURNED ON ONE GROUND OR THE OTHER. ON 21.02.12 THE BENCH PASSED THE FOLLOWING ORDER: ITA NOS. 4693/D/2010 & 2103/D/2011 2 ORDER SHEET ITA NO. 4693/D/10 ITO WARD 1(1), N. DELHI M/S AAPKI MARKETING P. LTD. SHRI SANDEEP KUMAR A.R. PRESENT ON BEHALF OF THE AS SESSEE AND FILE ADJOURNMENT PETITION WHICH IS WITHOUT POWER & ATTOR NEY. HEARING TO 28.02.12. NO FURTHER ADJOURNMENT WILL BE GRANTED . BOTH THE PARTIES INFORMED IN COURT. SD/- SD/- J.M. A.M. DIVA SINGH S.V. MAHROTRA 3. ON THE DATE OF HEARING VIZ. 28.02.2012 AGAIN NON E APPEARED ON BEHALF OF THE ASSESSEE AND, THEREFORE, WE ARE LEFT WITH NO OPTION BUT TO DECIDE THE APPEAL EX-PARTE QUA ASSESSEE AFTER HEARI NG LD. DR. 4. FIRST WE TAKE UP THE APPEAL FOR THE A.Y. 2006-07 VIDE ITA NO. 4673/DEL./2010. THE ASSESSEE, A PRIVATE LIMITED CO MPANY, IN THE RELEVANT ASSESSMENT YEAR, CARRIED ON TRADING/RETAIL BUSINESS . IT HAD FILED RETURN OF INCOME DECLARING INCOME OF RS. 2,680/-. THE ASSESS MENT WAS COMPLETED AT A TOTAL INCOME OF RS. 81,42,680/- AFTER MAKING A N ADDITION OF RS. 81,40,000/- U/S 68 IN RESPECT OF CASH CREDITS APPEA RING IN THE BANK STATEMENT AND INTRODUCED BY THE ASSESSEE IN ITS BOO KS OF ACCOUNT AS SHARE CAPITAL AND PREMIUM. THE ASSESSEE PREFERRED AN APP EAL BEFORE THE LD. CIT(A). THE LD. CIT(A) RELYING ON THE DECISION OF HONBLE SUPREME COURT IN M/S LOVELY EXPORTS PVT. LTD. 216 CTR (2008) (SC) 19 5 DELETED THE ADDITION. 5. BEING AGGRIEVED WITH THE ORDER OF LD. CIT(A) THE DEPARTMENT IS IN APPEAL BEFORE US AND HAS TAKEN THE FOLLOWING GROUND OF APPEAL: - 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW I N DELETING ADDITION OF RS. 81,40,000/- MADE U/S 68 OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF SHARE CAPITAL AND SHARE PREMIUM, IGNORING THAT: A. MERELY PROVIDING OF CONFIRMATION, PAN OF THE PA RTIES IS NOT SUFFICIENT DISCHARGE OF THE ONUS ON THE ASSESSEE WHEREAS THE A CTUAL CONTENTION OF THE ASSESSING OFFICER IS THAT THE SAID PAYMENT RECE IVED BY THE ASSESSEE COMPANY IS AN ACCOMMODATION ENTRY AND NOT A GENUINE RECEIPT OF SHARE CAPITAL. RELIANCE IS PLACED ON THE DECISION IN CIT VS. PRECISION FINANCE LTD. 2008 ITR 465 (CAL.); NIZAM WOOL AGENCY VS. CIT 193 ITR 318 (ALL); CIT VS. KORLAY TRADING CO. LTD. 230 ITR 820 (CAL); ITA NOS. 4693/D/2010 & 2103/D/2011 3 BHARTI P. LTD. VS. CIT 111 ITR 951 (CAL); AND CIT V S. UNITED COMMERCIAL & INDUSTRIAL CO. PVT. LTD. 187 ITR 596 ( CAL) B. WHERE THE SHARES ARE ISSUED BY THE PRIVATE LIMIT ED COMPANY, THE DEGREE OF ONUS ON THE ASSESSEE CONTEMPLATED U/S 68 WOULD BE STRINGENT FOR THE REASON THAT THE PUBLIC ISSUE CANNOT BE MADE BY A PRIVATE LIMITED COMPANY AND THE CAPITAL IS RECEIVED THROUGH PRIVATE PLACEMENT NORMALLY TO KNOWN PERSONS I.E. THE RELATI VES AND FRIENDS OF DIRECTOR. THE ASSESSEE BEING A PRIVATE LIMITED COM PANY SHOULD NOT HAVE HAD A DIFFICULTY TO PRODUCE THE SO-CALLED INVE STORS. C. DESPITE ADEQUATE OPPORTUNITIES ALLOWED, THE ASSE SSEE COMPANY FAILED TO DISCHARGE THE PRIMARY ONUS ON IT TO PROVE THE ID ENTITY AND CREDITWORTHINESS OF THESE ENTITIES AND TO ESTABLISH THE GENUINENESS OF IT TRANSACTIONS UNDER TAKEN BY IT WITH THESE ENTITIES. THE NOTICES ADDRESSED TO THE ALLEGED CONTRIBUTORS OF SHARE CAPI TAL WERE RECEIVED BACK UNDELIVERED. THE ASSESSEE FAILED TO PRODUCE T HESE ENTITIES ALONGWITH ITS BOOKS OF ACCOUNT AND OTHER RELEVANT D OCUMENTS IN SUPPORT OF THE TRANSACTIONS. FIELD ENQUIRIES CONDUC TED DURING THE COURSE OF ASSESSMENT PROCEEDINGS REVEALED NON-EXIST ENCE OF THESE ENTITIES AT THE ADDRESSES GIVEN BY THE ASSESSEE COM PANY. HENCE, IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE S AID TRANSACTIONS COULD NOT BE ESTABLISHED. D. SINCE THE CONTRIBUTORS OF THE SHARE CAPITAL DID NOT EXIST AT THE GIVEN ADDRESS AND THE EVEN THERE EXISTENCE COULD NOT BE E STABLISHED, THERE IS NO QUESTION OF TAKING COGNIZANCE OF SUCH NON-EXISTE NT PERSONS, MEANING THEREBY, THE MONEY ACTUALLY BELONGED TO THE ASSESSEE COMPANY ITSELF AND WAS FRAUDULENTLY ROUTED THROUGH THESE ENTITIES. HONBLE DELHI HIGH COURT HAS IN THE DECISION IN DIV INE LEASING & FINANCE LTD. (299 ITR 268) EXHAUSTIVELY DEALT WITH THE ACTIONS TO BE TAKEN WITH RESPECT TO SUCH AN ISSUE. RELIANCE HERE IS PLACED ON THE DECISIONS IN ACTIVE TRADERS P. LTD. 214 ITR 583 (CA L); RASBIHARI TOBACCO PROCESSORS LTD. VS. DCIT 57 TTJ 120 (AHD); RIDHI SIDHI COMMERCIAL CO. LTD. VS. ACIT 62 TTJ 710 (DEL); SHAN KAR INDUSTRIES VS. CIT 114 ITR 689 (CAL); C. KANT CO. CIT 126 ITR 63 (CAL) E. THE JUDGMENT OF HONBLE SUPREME COURT IN THE CAS E OF LOVELY EXPORTS (P) LTD. (2008) 216 CTR 195 IS NOT APPLICABLE IN TH IS CASE AS THE FACTS HERE ARE DISTINGUISHABLE VIZ. IDENTITY OF THE SO-CA LLED INVESTORS HAS NOT BEEN ESTABLISHED; THE ASSESSEE COMPANY IS ONLY A PR IVATE LIMITED COMPANY. THUS, EFFECTIVELY THE GROUND RAISED BY THE DEPARTME NT IS AGAINST THE DELETION OF ADDITION OF RS. 81,40,000/- ON VARIOUS COUNTS. 6. BRIEF FACTS APROPOS THIS ISSUE ARE THAT DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THERE W AS AN INCREASE IN SHARE CAPITAL OF RS. 81,40,000/-. THE AO REQUIRED THE ASSESSEE TO FILE DETAILS OF INCREASE IN SHARE CAPITAL. THE ASSESSEE FILED DETAILS OF PERSONS ITA NOS. 4693/D/2010 & 2103/D/2011 4 WHO HAD BEEN ALLOTTED SHARES DURING THE YEAR. THE ASSESSEE ALSO FILED AFFIDAVIT OF ALL THESE PERSONS WHO HAD BEEN ALLOTTE D SHARES WITH THEIR CONFIRMATION AND COPY OF THEIR ITR. THE DETAILS AS SUBMITTED BY ASSESSEE WERE AS UNDER: - S.NO. NAME & ADDRESS (ALL IN NEW DELHI) NUMBER OF SHARES AMOUNT IN SHARE (IN RS.) SHARE PREMIUM (RS.) TOTAL 1. NAVEEN KUMAR GARG, L- 119, SHASTRI NAGAR 1,000 10,000/- 1,90,000/- 2,00,000/- 2. SACHIN GARG, L-119, SHASTRI NAGAR 1,000 10,000/- 1,90,000/ 2,00,000/ 3. ASHOK KUMAR GARG, L-132, SHASTRI NAGAR 1,000 10,000/- 1,90,000/ 2,00,000/ 4. SUSHEELA GARG, L-132, SHASTRI NAGAR 700 7,000/- 1,33,000/- 1,40,000/- 5. M/S BEDECK ESTATES & PROPERTIES LTD. A-2/58, LAWRENCE ROAD 10,000 1,00,000/- 19,00,000/- 20,00,000/- 6. M/S DIANA BUILDERS & CONTRACTORS P. LTD. 3522/3, NARANG COLONY 2,500 25,000/- 4,75,000/- 5,00,000/- 7. M/S FERTILE TRADERS & SUPPLIERS P. LTD. L- 119, SHASTRI NAGAR 1,000 10,000/- 1,90,000/- 2,00,000/- 8. M/S NIKKI DRUGS & CHEMICALS P. LTD. L- 119, SHASTRI NAGAR 500 5,000/- 95,000/- 1,00,000/- 9. ONFLOW AGRO P. LTD. B- 1521, SHASTRI NAGAR 4,000 40,000/- 7,60,000/- 8,00,000/- 10. M/S QUALITY SERVICES P. LTD. A- 2/58, B, LAWRENCE ROAD 10,000 1,00,000/- 19,00,000/- 20,00,000/- 11. M/S UNITED HEAD HUNTERS P. LTD. B- 1521, SHASTRI NAGAR 4,000 40,000/- 7,60,000/- 8,00,000/- 12. M/S X- RAY FILMS & 5,000 50,000/- 9,50,000/- 10,00,000/- ITA NOS. 4693/D/2010 & 2103/D/2011 5 ADVERTISING P. LTD. A- 2/58, B, LAWRENCE ROAD, DELHI-35 TOTAL 40,700 4,07,000/- 77,33,000/- 81,40,000/- 7. THE ASSESSEE ALSO STATED THAT THE AMOUNT WAS REC EIVED IN CASH. NO OTHER DETAIL WAS PROVIDED BY THE ASSESSEE. ON 12.1 2.2008 AO ISSUED SUMMONS U/S 131 TO ALL THE ABOVE SHARE APPLICANTS A ND REQUIRED THEM TO FILE/PRODUCE COPY OF THEIR COMPLETE BANK STATEMENT FOR THE FINANCIAL YEAR 2005-06, IN CASE OF INDIVIDUALS AND COPY OF CASH BO OK WITH COPY OF COMPLETE BANK STATEMENT FOR THE FINANCIAL YEAR 2005 -06, IN THE CASE OF CORPORATE SHARE CAPITAL. THE ASSESSEE ONLY FILED T HE DETAILS FILED EARLIER WITHOUT GIVING ANY DETAILS REQUIRED BY THE ASSESSIN G OFFICER. THE AO AGAIN GAVE AN OPPORTUNITY TO PROVE THE GENUINENESS OF THE TRANSACTIONS AND ALSO THE CREDITWORTHINESS OF THEM AS FAR AS SOURCE OF TH EIR INVESTMENT WAS CONCERNED. THE AO AFTER EXAMINING THE DOCUMENTS FI LED BY THE ASSESSEE AND ALSO ON THE BASIS OF INVESTIGATION CARRIED OUT BY HIM MADE AN ADDITION OF RS. 81,40,00/- MAINLY FOR THE FOLLOWING REASONS U/S 68: - I) THE ASSESSEE HAD RECEIVED AMOUNTS IN CASH FOR W HICH NO EXPLANATION HAS BEEN OFFERED; II) THE SHARE APPLICANTS DID NOT FILE THE DOCUMENTS REQUIRED TO BE FILED BY THEM TO ESTABLISH THEIR CREDITWORTHINESS. III) IN RESPONSE TO SUMMONS ISSUED TO THE SHARE APP LICANTS WITH SPECIFIC REQUIREMENTS TO FILE THE DETAILS FROM WHIC H CASH TRANSACTIONS COULD BE ASCERTAINED, WAS NOT FILED. IV) THE REPLIES HAD BEEN FILED ALONGWITH PHOTOCOPI ES OF SUBMISSIONS ALREADY MADE BY THE ASSESSEE, WHICH PROVED NOTHING ABOUT THE GENUINENESS OF THE TRANSACTION. 8. BEFORE THE LD. CIT(A), THE ASSESSEE REQUESTED FO R FILING OF ADDITIONAL EVIDENCE. IT WAS FURTHER SUBMITTED THAT ADEQUATE O PPORTUNITY WAS NOT GIVEN TO THE ASSESSEE BY AO WITHIN THE SHORT PERIOD OF TI ME THE RELEVANT INFORMATION TO JUSTIFY THE IDENTITY AND EXISTENCE O F THE SUBSCRIBERS TO THE SHARE CAPITAL WAS GIVEN. FURTHER IT WAS SUBMITTED THAT ALL PARTIES TO WHOM SUMMONS WERE ISSUED COMPLIED WITH THE SAME AND HAD ALSO SUBMITTED AFFIDAVIT, CONFIRMATION AND COPY OF ACKNOWLEDGEMENT OF RETURN OF INCOME. LD. CIT(A) REFERRED THE MATTER TO AO REGARDING ADMI SSION OF ADDITIONAL ITA NOS. 4693/D/2010 & 2103/D/2011 6 EVIDENCE. THE AO SUBMITTED THE REMAND REPORT WHICH HAS BEEN NOTICED IN PARA 11 OF CIT(A)S ORDER WHICH IS REPRODUCED HEREU NDER: - 11. IN THE REMAND REPORT, IT HAS BEEN SUBMITTED BY THE LD. AO THAT AMPLE OPPORTUNITY HAD BEEN GIVEN TO THE ASSESSEE DU RING THE COURSE OF ASSESSMENT PROCEEDINGS TO FILE THE EVIDENCES. NOTI CE U/S 133(6) AND 131 OF THE INCOME TAX ACT WERE ISSUED TO THE SHARE APPL ICANTS WHOSE REPLY WAS RECEIVED THROUGH SPEED POST CONTAINING THE SAME LANGUAGE AND WORDS. IT WAS ALSO STATED THAT WHILE GOING THROUGH THE AFFIDAVIT AND CONFIRMATION IT WAS FOUND THAT THE DIRECTORS OF THE COMPANY HAD SUBMITTED THE AFFIDAVIT IN DIFFERENT NAMES AND HAD THEIR ADDRESSES AT L- 119, SHASTRI NAGAR, DELHI, A-2/58B, LAWRENCE ROAD, DELHI AND B-521, SHASTRI NAGAR, DELHI. IT WAS FURTHER ARGUED THAT A LL THE CONFIRMATIONS RECEIVED WERE PRODUCTS OF THE SAME COMPUTER. IT WA S ALSO ARGUED THAT THE CASH BOOK AND LEDGER WERE PRODUCED BEFORE THE A O AS PER LETTER DATED 26.12.2008 WHEREAS THE NOTE SHEET DATED 26.12 .2008 REFLECTS THAT NO EXPLANATION WAS GIVEN IN WRITING TO THE QUERIES RAISED VIDE LETTER DATED 19.02.2008. THUS, THE AR HAD NOT SUBMITTED THE CAS H BOOK AND LEDGER AT THE TIME OF ASSESSMENT PROCEEDINGS WHICH IS BEING F ILED BY THE AR BEFORE ME. SERIOUS DIFFERENCE OF OPINION WITH REGARD TO T HE AFFIDAVITS AT PB-76, PB-81 AND PB-86 WERE FILED. 9. LD. CIT(A) PROVIDED THE REMAND REPORT TO THE ASS ESSEE, THE CONTENTS OF WHOSE REPLY ARE CONSIDERED IN PARA 12 OF CIT(A) S ORDER WHICH IS REPRODUCED HEREUNDER: - 12. THE COPY OF REMAND REPORT WAS GIVEN TO THE A SSESSEE. THIS WAS TO FILE THE REJOINDER. VIDE LETTER DATED 23.08.2010, SUBMITTED TO THE OFFICE ON 25.08.2010 IN THE DAK IT HAS BEEN STATED THAT THE L D. AO HAD CONFIRMED IN THE REMAND REPORT THAT THE ASSESSEE HAD SUBMITTED A UDITED BALANCE SHEET AND ALSO ROC FORM FOR SHARES ISSUED AT PREMIUM. SE CONDLY, THE AO HAD CONFIRMED THAT IN RESPONSE TO NOTICES U/S 133(6) AN D 131 TO THE SHARE SUBSCRIBERS REPLIES WERE RECEIVED FROM THEM. THE A PPREHENSION MADE BY THE AO THAT REPLIES WERE RECEIVED BY SPEED POST AND HAVING THE SAME LANGUAGE AND WORDS DID NOT CHANGE THE FACTS THAT AL L PARTIES WERE EXISTING AND IDENTIFIED. THIRDLY, THE APPREHENSION S OF THE AO THAT THE AFFIDAVITS WERE NON-GENUINE WERE WITHOUT ANY CONCRE TE EVIDENCE THAT ANY OF THE AFFIDAVITS WERE INCORRECT. FOURTHLY, INSOFA R, THE DOUBTS RAISED BY THE ASSESSEE WITH REGARD TO THE AFFIDAVITS FILED BY SH. NAVIN GARG, SH. SACHIN GARG AND SH. ASHOK GARK WERE PURCHASED ON 02 .07.2009 AND 03.07.2009 WAS INCORRECT AS ON THAT DATE THE AFFIDA VITS HAVE BEEN AUTHORIZED AND SUBMITTED AS ADDITIONAL EVIDENCES. 10. LD. CIT(A) AFTER CONSIDERING THE DECISION OF DE LHI TRIBUNAL IN ITO VS. M/S MITTAL INTERNATIONAL (I) PVT. LTD. IN 2008-TIOL -474-ITAT-DEL AND ALSO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CAS E OF M/S MOSER BAER ITA NOS. 4693/D/2010 & 2103/D/2011 7 INDIA LTD. & OTHERS VS. ADDL. CIT (DEL) (2009) 17 D TR (DEL) 98 HELD THAT THE ASSESSEE HAD NOT MADE OUT A CASE FOR ADMISSION OF A DDITIONAL EVIDENCE. HE, THEREFORE, REJECTED THE ADDITIONAL EVIDENCE FIL ED BY THE ASSESSEE. ON MERITS, LD. CIT(A) DELETED THE ADDITION FOR THE FOL LOWING REASONS: - I) WHEN THE CONFIRMATION AND THE COPY OF ITR OF AL L THE SHARE SUBSCRIBERS WERE FILED, IT IS CRYSTAL CLEAR THAT TH E LD. AO WAS IN POSSESSION OF THE PERMANENT ACCOUNT NUMBER AND THE DETAILS OF THE JURISDICTION OF THE SHARE SUBSCRIBERS. HE DID NOT TAKE UP THE ISSUE TO GET THE SUBSCRIBER TO BE CONFRONTED. II) ALL THE SUBSCRIBERS WERE EXISTING AND WERE ASSE SSED TO TAX AND, THEREFORE, THEIR IDENTITY COULD NOT BE QUESTIONED. IT ALSO PROVES THE CREDITWORTHINESS OF THE SHARE SUBSCRIBERS. III) AS THE LAW STANDS, THE ASSESSEE HAS TO PROVE O NLY THE IDENTITY OF THE SHARE SUBSCRIBERS AND NOTHING ELSE. IV) IF THE AO WAS DISSATISFIED WITH THE CREDITWORTH INESS OF THE SUBSCRIBERS AND THE GENUINENESS OF THE TRANSACTION, HE WAS FREE TO OPEN THE FILES OF THE BOGUS SHAREHOLDERS EITHER HIM SELF OR THROUGH THE PERSON HOLDING JURISDICTION OVER THE SHARE SUBS CRIBERS, AS THE CASE MAY BE. V) AS HELD BY HONBLE APEX COURT M/S LOVELY EXPORTS P. LTD. (SUPRA), ONCE THE IDENTITY HAS BEEN PROVED OF THE SHARE SUBS CRIBERS THE ADDITION COULD NOT BE MADE. 11. LD. DR SUBMITTED THAT ASSESSEES TOTAL SALE DUR ING THE YEAR WAS RS. 43,560/- AS PER THE LEDGER ACCOUNT CONTAINED AT PAG E 16 OF THE PAPER BOOK. HE SUBMITTED THAT THIS FACT ITSELF MAKES IT CLEAR T HAT THE COMPANY WAS NOT HAVING ANY STRONG FUNDAMENTALS TO BOOST THE WORTH O F ITS SHARES SO AS TO ATTRACT SUCH HEAVY PREMIUM AS HAS ALLEGEDLY BEEN RE CEIVED BY THE ASSESSEE COMPANY. LD. DR POINTED OUT THAT BEFORE A O THE ASSESSEE DID NOT FILE COPY OF COMPLETE BANK STATEMENT IN CASE OF INDIVIDUALS AND COPY OF CASH BOOK IN CASE OF CORPORATE SHARE APPLICANT AS R EQUIRED BY THE AO. 12. WE HAVE CONSIDERED THE SUBMISSIONS OF LD. DR AN D HAVE PERUSED THE RECORDS OF THE CASE. WE FIND CONSIDERABLE FORCE IN THE ARGUMENTS OF LD. DR THAT CONSIDERING THE SALES TURNOVER OF THE ASSESSEE COMPANY, IT WAS WHOLLY IMPROBABLE THAT ANY PERSON WOULD PAY SUCH HEFTY PRE MIUM, AS HAS BEEN ALLEGEDLY PAID IN THE CASE OF THE ASSESSEE COMPANY, FOR ACQUIRING SHARES. INTRINSIC WORTH OF THE SHARES WAS NOT SUCH AS TO WA RRANT SUCH HEAVY PREMIUM. ADMITTEDLY THE SOURCE OF PAYMENT BY SUBSC RIBERS HAS NOT BEEN ITA NOS. 4693/D/2010 & 2103/D/2011 8 ESTABLISHED BY THE ASSESSEE. RECENTLY HONBLE DELH I HIGH COURT IN THE CASE OF CIT VS. NOVA PROMOTERS PVT. LTD., ITA NO. 3 42/2011 CONSIDERED THE IMPORT OF JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS PVT. LTD. AND AFTER CONSIDERING THE FACTS AS OBTAINING IN THE SAID CASE AS OBSERVED IN PARA 38, 39, 40, 41 & 42 A S UNDER: - 38. THE RATIO OF A DECISION IS TO BE UNDERSTOOD AND APPRECIATED IN THE BACKGROUND OF THE FACTS OF THAT CASE. SO UNDERSTOOD , IT WILL BE SEEN THAT WHERE THE COMPLETE PARTICULARS OF THE SHARE AP PLICANTS SUCH AS THEIR NAMES AND ADDRESSES, INCOME TAX FILE NUMBERS, THEIR CREDITWORTHINESS, SHARE APPLICATION FORMS AND SHARE HOLDERS REGISTER, SHARE TRANSFER REGISTER ETC. ARE FURNISHE D TO THE ASSESSING OFFICER AND THE ASSESSING OFFICER HAS NOT CONDUCTED ANY ENQUIRY INTO THE SAME OR HAS NO MATERIAL IN HIS POSSESSION TO SH OW THAT THOSE PARTICULARS ARE FALSE AND CANNOT BE ACTED UPON, THE N NO ADDITION CAN BE MADE IN THE HANDS OF THE COMPANY UNDER SEC.68 AN D THE REMEDY OPEN TO THE REVENUE IS TO GO AFTER THE SHARE APPLIC ANTS IN ACCORDANCE WITH LAW. WE ARE AFRAID THAT WE CANNOT APPLY THE RA TIO TO A CASE, SUCH AS THE PRESENT ONE, WHERE THE ASSESSING OFFICE R IS IN POSSESSION OF MATERIAL THAT DISCREDITS AND IMPEACHES THE PARTI CULARS FURNISHED BY THE ASSESSEE AND ALSO ESTABLISHES THE LINK BETWE EN SELF-CONFESSED ACCOMMODATION ENTRY PROVIDERS, WHOSE BUSINESS IT IS TO HELP ASSESSEES BRING INTO THEIR BOOKS OF ACCOUNT THEIR U NACCOUNTED MONIES THROUGH THE MEDIUM OF SHARE SUBSCRIPTION, AN D THE ASSESSEE. THE RATIO IS INAPPLICABLE TO A CASE, AGAIN SUCH AS THE PRESENT ONE, WHERE THE INVOLVEMENT OF THE ASSESSEE IN SUCH MODUS OPERANDI IS CLEARLY INDICATED BY VALID MATERIAL MADE AVAILABLE TO THE ASSESSING OFFICER AS A RESULT OF INVESTIGATIONS CARRIED OUT B Y THE REVENUE AUTHORITIES INTO THE ACTIVITIES OF SUCH ENTRY PROV IDERS. THE EXISTENCE WITH THE ASSESSING OFFICER OF MATERIAL SH OWING THAT THE SHARE SUBSCRIPTIONS WERE COLLECTED AS PART OF A PRE -MEDITATED PLAN A SMOKESCREEN CONCEIVED AND EXECUTED WITH THE CON NIVANCE OR ITA NO.342-2011 PAGE 43 OF 46 INVOLVEMENT OF THE ASSESSEE EXCLUDES THE APPLICABILITY OF THE RATIO. IN OUR UNDERSTANDING, T HE RATIO IS ATTRACTED TO A CASE WHERE IT IS A SIMPLE QUESTION OF WHETHER THE ASSESSEE HAS DISCHARGED THE BURDEN PLACED UPON HIM UNDER SEC.68 TO PROVE AND ESTABLISH THE IDENTITY AND CREDITWORTHINESS OF THE SHARE APPLICANT AND THE GENUINENESS OF THE TRANSACTION. IN SUCH A CASE, THE ASSESSING OFFICER CANNOT SIT BACK WITH FOLDED HANDS TILL THE ASSESSEE EXHAUSTS ALL THE EVIDENCE OR MATERIAL IN HIS POSSESSION AND THEN COME FORWARD TO MERELY REJECT THE SAME, WITHOUT CARRYING OUT ANY VERIFICATION OR ENQUIRY INTO THE MATERIAL PLACED BEFORE HIM. THE CA SE BEFORE US DOES NOT FALL UNDER THIS CATEGORY AND IT WOULD BE A TRAV ESTY OF TRUTH AND JUSTICE TO EXPRESS A VIEW TO THE CONTRARY. ITA NOS. 4693/D/2010 & 2103/D/2011 9 39. THE CASE OF ORISSA CORPORATION (1986) 159 ITR EXEMPLIFIES THE CATEGORY OF CASES WHERE NO ACTION IS TAKEN BY THE A SSESSING OFFICER TO VERIFY OR CONDUCT AN ENQUIRY INTO THE PARTICULAR S ABOUT THE CREDITORS FURNISHED BY THE ASSESSEE, INCLUDING THEI R INCOME-TAX FILE NUMBERS. IN THE SAME CATEGORY FALL CASES DECIDED BY THIS COURT IN DOLPHIN CANPACK (2006) 283 ITR 190, CIT V MAKHNI AND TYAGI P. LTD. (2004) 267 ITR 433, CIT V ANTARTICA INVESTMENT P. LTD. (2003) 262 ITR 493 AND CIT V ACHAL INVESTMENT LTD. (2004) 268 ITR 211. TO PUT IT SIMPLY, IN THESE CASES THE DECISION WAS B ASED ON THE FUNDAMENTAL RULE OF LAW THAT EVIDENCE OR MATERIAL A DDUCED BY THE ASSESSEE CANNOT BE THROWN OUT WITHOUT ANY ENQUIRY. THE RATIO DOES NOT EXTEND BEYOND THAT. THE BOUNDARIES OF THE RATIO CANNOT BE, AND SHOULD NOT BE, WIDENED TO INCLUDE THEREIN CASES WHE RE ITA NO.342- 2011 PAGE 44 OF 46 THERE EXISTS MATERIAL TO IMPLICATE THE ASSESSEE IN A COLLUSIVE ARRANGEMENT WITH PERSONS WHO ARE SELF-C ONFESSED ACCOMMODATION ENTRY PROVIDERS. 40. REFERENCE WAS ALSO MADE ON BEHALF OF THE ASSESS EE TO THE RECENT JUDGMENT OF A DIVISION BENCH OF THIS COURT IN CIT V. OASIS HOSPITALITIES PRIVATE LIMITED , (2011) 333 ITR 119. WE HAVE GIVEN UTMOST CONSIDERATION TO THE JUDGMENT. IT DISPOSES O F SEVERAL APPEALS IN THE CASE OF DIFFERENT ASSESSEES. EXCEPT THE CASE OF CIT V OASIS HOSPITALITIES P LTD. (ITA NOS.2093 & 2095/2010), THE OTHER CASES FALL UNDER THE CATEGORY OF ORISSA CORPORATION (SUPR A). HOWEVER, IN THE CASE OF OASIS HOSPITALITIES P LTD., THERE IS RE FERENCE TO INFORMATION RECEIVED BY THE ASSESSING OFFICER FROM THE INVESTIGATION WING OF THE REVENUE ON THE BASIS OF WHICH IT WAS FO UND THAT SIX INVESTORS BELONG TO ONE MAHESH GARG GROUP WHO WERE NOT CARRYING ON ANY REAL BUSINESS ACTIVITY AND WERE ENGAGED IN T HE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES. THEY WERE ENTRY OP ERATORS AND THE ASSESSEE IN THAT CASE WAS ALLEGED TO BE A BENEF ICIARY. WHILE DISPOSING OF THESE APPEALS, THIS COURT OBSERVED: - THE ASSESSEES FILED COPIES OF PAN, ACKNOWLEDGEMENT OF FILING INCOME TAX RETURNS OF THE COMPANIES, THEIR BANK ACC OUNT STATEMENTS FOR THE RELEVANT PERIOD, I.E., FOR THE PERIOD WHEN THE CHEQUES WERE CLEARED. HOWEVER, THE PARTIES WERE NOT PRODUCED IN SPITE OF SPECIFIC DIRECTION OF THE AO INSTEAD OF TAKING OPPORTUNITIES IN THIS BEHALF. SINCE THE SO-CALLED DIRECTORS OF THESE COMPANIES WE RE NOT PRODUCED ON THIS GROUND COUPLED WITH THE OUTCOME OF THE DETA ILED INQUIRY MADE BY THE INVESTIGATING WING OF THE DEPARTMENT, T HE AO MADE THE ADDITION. THIS ADDITION COULD NOT BE SUSTAINED AS T HE PRIMARY ONUS WAS DISCHARGED BY THE ASSESSEE BY PRODUCING PAN ITA NO.342-2011 PAGE 45 OF 46 NUMBER, BANK ACCOUNT, COPIES OF INCOME TAX RETURNS OF THE SHARE APPLICANTS, ETC. WE ALSO FIND THAT THE AS SESSING OFFICER WAS INFLUENCED BY THE INFORMATION RECEIVED BY THE INVES TIGATING WING AND ON THAT BASIS GENERALLY MODUS OPERANDI BY SUCH ENTR Y OPERATORS IS DISCUSSED IN DETAIL. HOWEVER, WHETHER SUCH MODUS OP ERANDI EXISTED ITA NOS. 4693/D/2010 & 2103/D/2011 10 IN THE PRESENT CASE OR NOT WAS NOT INVESTIGATED BY THE AO. THE ASSESSEE WAS NOT CONFRONTED WITH THE INVESTIGATION CARRIED OUT BY THE INVESTIGATING WING OR WAS GIVEN AN OPPORTUNITY TO C ROSS-EXAMINE THE PERSONS WHOSE STATEMENTS WERE RECORDED BY THE INVES TIGATING WING. THESE QUOTED OBSERVATIONS CLEARLY DISTINGUISH THE P RESENT CASE FROM CIT V OASIS HOSPITALITIES P LTD. (SUPRA). EXCEPT FO R DISCUSSING THE MODUS OPERANDI OF THE ENTRY OPERATORS GENERALLY, TH E ASSESSING OFFICER IN THAT CASE HAD NOT SHOWN WHETHER ANY LINK BETWEEN THEM AND THE ASSESSEE EXISTED. NO ENQUIRY HAD BEEN MADE IN THIS REGARD. FURTHER, THE ASSESSEE HAD NOT BEEN CONFRONTED WITH THE MATERIAL COLLECTED BY THE INVESTIGATION WING OR WAS GIVEN AN OPPORTUNITY TO CROSS EXAMINE THE PERSONS WHOSE STATEMENTS WERE REC ORDED BY THE INVESTIGATION WING. 41. IN THE CASE BEFORE US, NOT ONLY DID THE MATERIA L BEFORE THE ASSESSING OFFICER SHOW THE LINK BETWEEN THE ENTRY P ROVIDERS AND THE ASSESSEE-COMPANY, BUT THE ASSESSING OFFICER HAD ALS O PROVIDED THE STATEMENTS OF MUKESH GUPTA AND RAJAN JASSAL TO THE ASSESSEE IN COMPLIANCE WITH THE RULES OF NATURAL JUSTICE. OUT O F THE 22 COMPANIES WHOSE NAMES FIGURED IN THE INFORMATION GIVEN BY THE M TO THE INVESTIGATION WING, 15 COMPANIES HAD PROVIDED THE S O-CALLED SHARE SUBSCRIPTION MONIES TO THE ASSESSEE. THERE WAS THU S SPECIFIC INVOLVEMENT OF THE ASSESSEE-COMPANY IN THE ITA NO.3 42-2011 PAGE 46 OF 46 MODUS OPERANDI FOLLOWED BY MUKESH GUPTA AND RAJAN J ASSAL. THUS, ON CRUCIAL FACTUAL ASPECTS THE PRESENT CASE STANDS ON A COMPLETELY DIFFERENT FOOTING FROM THE CASE OF CIT V OASIS HOSPITALITIES P. LTD. (SUPRA). 42. IN THE LIGHT OF THE ABOVE DISCUSSION, WE ARE UN ABLE TO UPHOLD THE ORDER OF THE TRIBUNAL CONFIRMING THE DELETION OF TH E ADDITION OF RS.1,18,50,000 MADE UNDER SECTION 68 OF THE ACT AS WELL AS THE CONSEQUENTIAL ADDITION OF RS.2,96,250. WE ACCORDING LY ANSWER THE SUBSTANTIAL QUESTIONS OF LAW IN THE NEGATIVE AND IN FAVOUR OF THE DEPARTMENT. THE ASSESSEE SHALL PAY COSTS WHICH WE A SSESS AT RS.30,000/-. 13. IN THE PRESENT CASE, WE FIND THAT THE LD. CIT(A ) HAS MERELY DELETED THE ADDITION ON THE GROUND THAT IDENTITY OF THE SUBSCRI BERS TO SHARE CAPITAL HAD BEEN ESTABLISHED. HE FAILED TO APPRECIATE THAT ASS ESSEE DID NOT FURNISH THE REQUIRED DETAILS LIKE BANK ACCOUNT OF INDIVIDUAL SH ARE APPLICANTS AND CASH BOOK IN CASE OF CORPORATE SHARE APPLICANTS. HE FUR THER DID NOT TAKE INTO CONSIDERATIONS THE OBSERVATIONS OF AO IN REMAND PRO CEEDINGS THAT WHILE GOING THROUGH THE AFFIDAVIT AND CONFIRMATION, IT WA S FOUND THAT DIRECTORS OF THE COMPANY HAD SUBMITTED THE AFFIDAVIT IN DIFFEREN T NAMES AND HAD THEIR ITA NOS. 4693/D/2010 & 2103/D/2011 11 ADDRESSES AT L-119, SHASTRI NAGAR, DELHI, A-2/58B, LAWRENCE ROAD, DELHI AND B-521 SHASTRI NAGAR, DELHI. THE ASSESSEE HAD B EEN EVADING FROM PROVIDING THE REQUIRED DETAILS TO AO. THE AFFIDAVI TS ARE NOT SACROSANCT TO PROVE THE GENUINENESS OF TRANSACTION AND CREDITWORT HINESS OF CREDITORS. ALL THE FACTS HAVE TO BE TAKEN INTO CONSIDERATION. HE D ID NOT TAKE INTO CONSIDERATION THAT THERE WERE VARIOUS CIRCUMSTANCES INCLUDING THE AMOUNT BEING RECEIVED IN CASH WHICH DISTINGUISH THE FACTS OF THE PRESENT CASE FROM THAT OF LOVELY EXPORTS PVT. LTD. (SUPRA). THEREFOR E, THE ORDER OF LD. CIT(A) IS NOT SUSTAINABLE. WE, THEREFORE, SET ASIDE THE ORDE R OF LD. CIT(A) AND AFFIRM THAT OF AO. 14. IN THE RESULT, DEPARTMENTS APPEAL IS ALLOWED. 15. A.Y. 2007-08 : BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE H AD FILED ITS RETURN OF INCOME DECLARING INCOME OF RS. 14,144 /-. THE ASSESSMENT WAS COMPLETED AT A TOTAL INCOME OF RS. 3,21,79,144/- AF TER MAKING FOLLOWING ADDITIONS: - I) UNEXPLAINED CREDIT U/S 68 OF RS. 1,08,60,000/- II) UNEXPLAINED INVESTMENT U/S 69 OF RS. 2,13,05,0 00/- THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) WHO DELETED THE ADDITION U/S 68 FOLLOWING THE DECISION OF HONBLE S UPREME COURT IN THE CASE OF LOVELY EXPORTS OBSERVING IN PARA 10 AS UNDER: - 10. FROM THE DETAILS OF CORRESPONDENCE FILED BY T HE ASSESSEE BEFORE THE AO, IT IS CLEAR THAT THE PAN CARD AND THE ITR H AVE BEEN FURNISHED. EVEN SHARE APPLICATION FORMS HAVE BEEN DULY SUBMITT ED. IN SO FAR THE INDIVIDUAL SUBSCRIBERS WERE CONCERNED, PHOTO OF PAN CARD, COPY OF ACKNOWLEDGEMENT OF ITR, DISTINCTIVE NUMBER OF SHARE S AND ASSESSMENT PARTICULARS HAD BEEN SUBMITTED. INDIVIDUAL CONFIRM ATIONS HAD ALSO BEEN FILED, EVEN THOUGH THE PAYMENTS WERE IN CASH. IN RESPECT OF THE CORPORATE SUBSCRIBERS, CONFIRMATIONS HAD BEEN FILED . DETAILS OF DISTINCTIVE NUMBER OF SHARES ISSUED HAD BEEN SUBMIT TED, COPY OF ACKNOWLEDGEMENT RECEIPT OF THE ITR, PHOTOCOPY OF PA N CARD, COPY OF CERTIFICATE OF INCORPORATION AND EXTRACTS OF THE MI NUTES OF THE MEETING, PASSING RESOLUTION FOR MAKING INVESTMENT IN SHARE C APITAL OF THE ASSESSEE COMPANY HAD BEEN FILED. INSPITE OF THE AB OVE, THE ASSESSEE WAS SUBJECTED TO THE ADDITION. IT WAS FOR THE AO T O MAKE FURTHER ENQUIRIES WITH REGARD TO THE STATUS OF THE PARTIES TO BRING ON RECORD ANY ADVERSE FINDINGS WITH REGARD TO THE CREDITWORTHINES S OR THE GENUINENESS ITA NOS. 4693/D/2010 & 2103/D/2011 12 OF THE TRANSACTION. IT IS NOT PERMISSIBLE FOR THE AO TO HAVE JUST DISCREDITED THE DOCUMENTS PRODUCED BY THE ASSESSEE AND HE HAS TO GIVE COGENT REASONS AND MATERIALS AND CANNOT MAKE ADDITI ON INTO THE REALM OF SUSPICION. 16. AS REGARDS THE ADDITION OF RS. 2,13,05,000/- IT WAS SUBMITTED BEFORE CIT(A) AS UNDER: - 13. IT WAS SUBMITTED BY THE LD. AR OF THE ASSESSE E THAT PAYMENTS MADE TO VARIOUS REAL ESTATE COMPANIES WERE THROUGH CHEQUES. EVEN THOUGH, THE AO HAS ALLEGED THAT THE COMPANIES WERE NOT SHOWN IN THE LIST OF INVESTMENTS. AS PER THE LIST PROVIDED TO T HE AO, THE FACTS ARE OTHERWISE. THE PAYMENTS MADE TO THE PARTIES WAS SQ UARED OFF ON OR BEFORE 31/03/2007. A LIST OF COMPLETE INVESTMENTS FROM 1/4/2006 TO 31/3/2007 WAS PLACED AT PAGE NO. 210 OF THE PAPER B OOK. IT WAS STATED THAT THERE WAS NO REASON FOR THE COMPANY TO SHOW TH E INVESTMENTS IN THE LIST FINALIZED ON 31/3/2007. THE SOURCE OF THE FUN DS HAVE BEEN SUITABLY EXPLAINED. 17. LD. CIT(A) DELETED THE ADDITION OBSERVING IN PA RA 14 AS UNDER: - 14. I HAVE GONE THROUGH THE ORDER OF THE LD. AO A ND THE SUBMISSIONS MADE BY THE LD. AR OF THE ASSESSEE. THERE IS NO DO UBT, ON THE FACTS OF THE CASE, THAT THE INVESTMENTS THAT HAVE BEEN SQUAR ED OF DURING THE FINANCIAL YEAR WOULD NOT BE REFLECTED IN THE LIST O F INVESTMENTS ON THE LAST DAY OF FINANCIAL YEAR. IN THE LISTS SUBMITTED BEFORE ME WHICH HAD ALSO BEEN DONE BEFORE THE AO, WHILE THE NAMES OF SU CH COMPANIES DID NOT APPEAR ANY NATURALLY SO, THE SAME HAD BEEN SQUA RED OFF. IN SUCH CIRCUMSTANCE, AN ADDITION COULD NOT HAVE BEEN MADE AS HAS BEEN DONE IN THE CASE. IMPORTANTLY, THE SOURCE OF FUNDS OF M AKING THE INVESTMENTS HAS NOT BEEN A POINT OF DISPUTE IN THE IMPUGNED ORD ER. THUS, I AM NOT IN A POSITION TO UPHOLD THE ADDITION OF RS. 2,13,00 ,000/- IN THE CASE IN HAND. THE ASSESSEE SUCCEEDS IN GROUND OF APPEAL NO . 3. 18. LD. DR POINTED OUT THAT THE FACTS AS REGARDS TH E ADDITION U/S 68 ARE SIMILAR TO THAT AS OBTAINING IN A.Y. 2006-07. 19. WE HAVE CONSIDERED THE SUBMISSIONS OF LD. DR. FOR THE REASONS STATED IN REGARD TO THIS ISSUE FOR A.Y. 2006-07, WE SET ASIDE THE ORDER OF LD. CIT(A) AND AFFIRM THAT OF AO. IN THE RESULT, THIS GROUND IS ALLOWED. 20. AS REGARDS GROUND NO. 2, THE AO WILL VERIFY THE FACT REGARDING SQUARING OF ACCOUNT DURING THE YEAR AND IF THE SAME IS FOUND TO BE CORRECT, NO ADDITION IS CALLED FOR. IN THE RESULT THIS GROU ND IS ALLOWED FOR STATISTICAL PURPOSES. ITA NOS. 4693/D/2010 & 2103/D/2011 13 21. IN THE RESULT, THE APPEAL FOR A.Y. 2006-07 IS A LLOWED AND APPEAL FOR A.Y. 2007-08 IS PARTLY ALLOWED FOR STATISTICAL PURP OSES. ORDER PRONOUNCED IN THE OPEN COURT ON 02.03.2 012 SD/- SD/- (R.P. TOLANI) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 02.03.12 *KAVITA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR