Kunj Alloys Pvt. Ltd., Bhubaneswar V. A.C.I.T., Cir-2, Bhubaneswar, Bhubaneswar

ITA 239/CTK/2007

• Counselvise Citation: 23923514 RSA 2007
• Duration Of Justice: 6 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 15-07-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 27-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUDIPTA GUHA
• Assessee Lawyers: D S DAMLE
• Keywords: Business income; Deemed dividend
• Section: 153A; 133(6); 68

Judgement Text

I.T.A. NO. 239/CTK./2007 ASSESSMENT YEAR: 2004-2005 & I.T.A. NO. 257/CTK/2007 ASSESSMENT YEAR: 2004-2005 PAGE 1 OF 10 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 239/CTK/ 2007 ASSESSMENT YEAR : 2004-2005 KUNJ ALLOYS PVT. LIMITED,.......................... ............................APPELLANT PLOT NO. 9, SECTOR-A, ZONE-B, MANCHESWAR INDUSTRIAL ESTATE, BHUBANESWAR [PAN : AABCK 7394 R] -VS.- ASSISTANT COMMISSIONER OF INCOME TAX,.............. ...............RESPONDENT CIRCLE-2(1), AAYAKAR BHAWAN, RAJASWA VIHAR, BHUBANESWAR & I.T.A. NO. 257/CTK/ 2007 ASSESSMENT YEAR : 2004-2005 ASSISTANT COMMISSIONER OF INCOME TAX,.............. ................APPELLANT CIRCLE-2(1), AAYAKAR BHAWAN, RAJASWA VIHAR, BHUBANESWAR -VS.- KUNJ ALLOYS PVT. LIMITED,.......................... ............................RESPONDENT PLOT NO. 9, SECTOR-A, ZONE-B, MANCHESWAR INDUSTRIAL ESTATE, BHUBANESWAR [PAN : AABCK 7394 R] APPEARANCES BY: SHRI D.S. DAMLE, FCA , FOR THE ASSESSEE SHRI SUDIPTA GUHA, JCIT, SR. D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : NOVEMBER 05, 2015 DATE OF PRONOUNCING THE ORDER : NOVEMBER 27, 2015 O R D E R PER SHRI P.M. JAGTAP :- THESE TWO APPEALS, ONE FILED BY THE ASSESSEE BEING ITA NO. 239/CTK/2007 AND OTHER FILED BY THE REVENUE BEING I TA NO. I.T.A. NO. 239/CTK./2007 ASSESSMENT YEAR: 2004-2005 & I.T.A. NO. 257/CTK/2007 ASSESSMENT YEAR: 2004-2005 PAGE 2 OF 10 257/CTK/2007, ARE CROSS APPEALS, WHICH ARE DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-II, BHUBAN ESWAR DATED 28.05.2007. 2. FIRST WE TAKE UP THE APPEAL OF THE ASSESSEE, WHI CH INVOLVES A SOLITARY ISSUE RELATING TO THE ADDITION OF RS.13,33 ,656/- MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPE ALS) ON ACCOUNT OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE INCOM E TAX ACT, 1961. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF ALUMINIUM/A LLOYS COIL/ROD. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION W AS FILED BY IT ON 30.10.2014 DECLARING A LOSS OF RS.2,84,595/-. DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSES SING OFFICER THAT THE ASSESSEE HAS RECEIVED A SUM OF RS.2,00,00,000/- FRO M ITS SISTER CONCERN M/S. MAA BHUASUNI INDUSTRIES PVT. LTD. TO WHICH THE PROVISIONS OF SECTION 2(22)(E) ARE APPLICABLE. ACCORDINGLY, INVOKING THE SAID PROVISION, HE MADE AN ADDITION OF RS.13,33,656/- TO THE EXTENT OF ACCUMULATED PROFIT OF M/S. MAA BHUASUNI INDUSTRIES PVT. LTD. AS DEEMED DI VIDEND. ON APPEAL, THE LD. CIT(APPEALS) CONFIRMED THE SAID ADDITION MA DE BY THE ASSESSING OFFICER. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, A SEARCH ACTION WAS CONDUCTED IN THE CASE OF THE ASSESSEE- COMPANY AS WELL AS OTHER GROUP COMPANIES AND IN THE ASSESSMENT COMPLETED FOR THE YEAR UNDER CONSIDERATION UNDER SE CTION 153A IN PURSUANCE OF THE SAID ACTION, THE AMOUNT OF RS.13,3 3,656/- WAS ADDED BY THE ASSESSING OFFICER TO THE TOTAL INCOME OF THE AS SESSEE FOR THE YEAR UNDER CONSIDERATION. HE SUBMITTED THAT THE SAID ADD ITION MADE BY THE ASSESSING OFFICER WAS DELETED BY THE LD. CIT(APPEAL S) VIDE HIS ORDER DATED 22.05.2009 AND WHILE DISPOSING OF THE APPEAL FILED BY THE REVENUE AGAINST I.T.A. NO. 239/CTK./2007 ASSESSMENT YEAR: 2004-2005 & I.T.A. NO. 257/CTK/2007 ASSESSMENT YEAR: 2004-2005 PAGE 3 OF 10 THE SAID ORDER OF THE LD. CIT(APPEALS), THE TRIBUNA L VIDE ITS ORDER DATED 20.01.2011 PASSED IN ITA NO. 1350/KOL/2009 HAS ALRE ADY DELETED THE SAID ADDITION. A COPY OF THE SAID ORDER IS PLACED O N RECORD BEFORE US AND A PERUSAL OF THE SAME SHOWS THAT THE IMPUGNED AMOUNT ADDED BY THE ASSESSING OFFICER IN THE ASSESSMENT COMPLETED UNDER SECTION 153A HAS ALREADY BEEN DELETED BY THE TRIBUNAL FOR THE FOLLOW ING REASONS GIVEN IN PARAGRAPHS NO. 8, 8.1 & 8.2 :- 8. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CARE FUL PERUSAL OF THE MATERIALS AVAILABLE ON RECORD, AS RE GARDING GROUND NO. 1, IT IS OBSERVED FROM THE COPIES OF THE AUDITED ACCOUNTS AND THE ANALYTICAL STATEMENT OF REVENUE COMPOSITION FOR FINANCIAL YEARS 2001-02 TO 2005-06, IT WAS FOUND BY THE LD. CIT(A) THAT MBIPL WAS REGULARLY EN GAGED IN GRANTING OF LOANS AND DERIVED SUBSTANTIAL INTEREST THEREON. FROM THE AUDITED ACCOUNTS IT APPEARED THAT MBIPLS MAJOR SOURCES OF REVENUE WERE (I) INTEREST ON LOANS AND ( II) SHARE OF PROFIT RECEIVED FROM PARTNERSHIP FIRM. DURING TH E ACCOUNTING PERIODS 2001-02 TO 2005-06 THE INCOME BY WAY OF INTEREST ON LOANS WAS ALWAYS MORE THAN 50% OF TH E GROSS REVENUE CREDITED IN THE PROFIT & LOSS ACCOUNTS. THE PERCENTAGE OF INTEREST INCOME VIS-A-VIS TOTAL RECEI PTS CREDITED IN THE PROFIT AND LOSS ACCOUNT WAS 66% IN FY 2005- 06. THESE FACTS CONCLUSIVELY PROVED THAT INTEREST R ECEIVED REPRESENTED DOMINANT SOURCE OF REVENUE FOR MBIPL. I T ALSO APPEARED THAT LOANS AND ADVANCES ON WHICH INTEREST WAS EARNED WAS THE DOMINANT INCOME YIELDING ASSET AS PE R THE BALANCE SHEETS OF THE MBIPL DURING THE FYS 2001-02 TO 2005-06. IN THE ASSESSMENT ORDERS OF MBIPL INTEREST RECEIVED ON LOAN WAS ASSESSED AS BUSINESS INCOME WH ICH ESTABLISHED THAT IN THE INCOME TAX ASSESSMENT PROCE EDINGS MBIPL WAS CONSIDERED TO BE ENGAGED IN THE BUSINESS OF GRANTING LOANS. 8.1. SEC. 2(22)(III) PROVIDES THAT DIVIDEND DOES NO T INCLUDE ANY ADVANCE OR LOAN MADE TO A SHAREHOLDER BY A COMP ANY IN THE ORDINARY COURSE OF ITS BUSINESS WHERE LENDING O F MONEY IS A SUBSTANTIAL PART OF THE BUSINESS OF THE COMPAN Y. THE ANALYSIS OF PROFIT & LOSS ACCOUNT OF MBIPL FOR THE PERIOD 2001-02 TO 2005-06 SHOWED THAT GRANTING OF LOAN FOR MED SUBSTANTIAL PART OF ITS BUSINESS AS MORE THAN 50% O F THE REVENUE CREDITED IN THE PROFIT & LOSS ACCOUNT WAS D ERIVED BY WAY OF INTEREST CHARGED ON THE LOAN GRANTED. THE AN ALYSIS OF THE BALANCE SHEETS FOR THE CORRESPONDING PERIOD ALS O SHOWED THAT MORE THAN 50% OF THE GROSS ASSETS APPEARING IN I.T.A. NO. 239/CTK./2007 ASSESSMENT YEAR: 2004-2005 & I.T.A. NO. 257/CTK/2007 ASSESSMENT YEAR: 2004-2005 PAGE 4 OF 10 BALANCE SHEET WERE INTEREST BEARING LOANS. THESE LE AD THE LD. CIT(A) TO CONCLUDE THAT GRANTING OF LOANS FORMED SUBSTANTIAL PART OF MBIPLS BUSINESS. AS PER SEC. 2 (22)(III) THE LOAN GRANTED BY MBIPL DID NOT FALL WITHIN THE D EFINITION OF DIVIDEND AS SUBSTANTIAL PART OF ITS BUSINESS WAS GRANTING OF LOANS. 8.2. KEEPING IN VIEW OF THE ABOVE FACTS AND THE DEC ISION OF THE TRIBUNAL IN THE CASE OF R.D. FAN LTD., WHEREIN THIS TRIBUNAL HAS COME TO THE CONCLUSION THAT WHEN ONCE THE BUSINESS OF THE LENDER COMPANY COVERED BY EXCEPTION (II) TO SECTION 2(22)(E) OF THE INCOME TAX ACT, THEN THE PR OVISIONS OF SECTION 2(22)(E) WILL NOT BE APPLICABLE. SINCE I N THIS CASE, IT IS CLEARLY ESTABLISHED THAT MBIPL WAS CONSIDERED TO BE ENGAGED IN THE BUSINESS OF GRANTING OF LOAN, THE AN ALYSIS OF THE P&L A/C OF THE MBIPL FOR THE PERIOD 2000-01 TO 2005-06 SHOWED THAT GRANTING OF LOAN FORMED SUBSTANTIAL PAR T OF ITS BUSINESS WHICH IS MORE THAN 50% OF THE REVENUE. WE ARE OF THE CONSIDERED VIEW THAT AS PER SECTION 2(22)(III), THE LOANS GRANTED BY MBIPL DID NOT FALL WITHIN THE DEFINITION OF DIVIDEND AND THEREFORE, WE FIND NO INFIRMITY IN THE ORDERS OF THE LD. CIT(A) TO BE INTERFERED WITH. HENCE, WE CON FIRM THE SAME. 5. THE ISSUE INVOLVED IN THE APPEAL OF THE ASSESSEE RELATING TO THE ADDITION UNDER SECTION 2(22)(E) ON ACCOUNT OF DEEME D DIVIDEND THUS IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE O RDER OF THE TRIBUNAL DATED 20.01.2011 (SUPRA) AND THIS POSITION HAS NOT BEEN DISPUTED EVEN BY THE LD. D.R. AT THE TIME OF HEARING BEFORE US. WE, THEREFORE, RESPECTFULLY FOLLOW THE SAID ORDER OF THE TRIBUNAL AND DELETE TH E ADDITION OF RS.13,33,656/- MADE BY THE ASSESSING OFFICER AND CO NFIRMED BY THE LD. CIT(APPEALS) ON ACCOUNT OF DEEMED DIVIDEND UNDER SE CTION 2(22)(E). THE APPEAL OF THE ASSESSEE IS ACCORDINGLY ALLOWED. 6. THE SOLITARY ISSUE INVOLVED IN THE APPEAL OF THE REVENUE RELATES TO THE DELETION BY THE LD. CIT(APPEALS) OF THE ADDITIO N OF RS.1,45,00,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SHARE A PPLICATION MONEY UNDER SECTION 68 TREATING THE SAME AS UNEXPLAINED C ASH CREDITS. I.T.A. NO. 239/CTK./2007 ASSESSMENT YEAR: 2004-2005 & I.T.A. NO. 257/CTK/2007 ASSESSMENT YEAR: 2004-2005 PAGE 5 OF 10 7. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS RECEIVED A TOTAL SUM OF RS.2,00,00,000/- AS SHARE APPLICATION MONEY FROM TW ELVE COMPANIES. IN ORDER TO VERIFY THESE CASH CREDITS, LETTERS UNDER S ECTION 133(6) WERE ISSUED BY THE ASSESSING OFFICER CALLING FOR THE REL EVANT INFORMATION. OUT OF THESE LETTERS, LETTERS ISSUED TO EIGHT COMPANIES RETURNED BACK UNDELIVERED WITH THE POSTAL REMARK THAT THE COMPANI ES WERE NON-EXISTENT AT THE STATED ADDRESSES. ALTHOUGH THE ASSESSEE PROD UCED THE CONFIRMATION OF THESE EIGHT COMPANIES AS WELL AS THEIR SHARE APP LICATION FORMS, THE ASSESSING OFFICER HELD THAT THE SAME WERE NOT SUFFI CIENT TO EXPLAIN THE RELEVANT CASH CREDITS IN TERMS OF SECTION 68. ACCOR DINGLY, THE SHARE APPLICATION MONEY STATED TO BE RECEIVED FROM THE SA ID EIGHT COMPANIES AGGREGATING TO RS.1,35,00,000/- WAS TREATED BY THE ASSESSING OFFICER AS UNEXPLAINED AND THE SAID AMOUNT WAS ADDED BY HIM TO THE TOTAL INCOME OF THE ASSESSEE UNDER SECTION 68 OF THE ACT. 8. THE ADDITION MADE BY THE ASSESSING OFFICER ON AC COUNT OF SHARE APPLICATION MONEY TO THE EXTENT OF RS.1,35,00,000/- UNDER SECTION 68 WAS CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFO RE THE LD. CIT(APPEALS) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE A SSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LD. CIT(APPEALS) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER UNDER SECTION 68 FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO. 5.3 OF HIS IMPUGNED ORDER:- 5.3. I HAVE CAREFULLY LOOKED INTO THE FACTS OF THE CASE AND THE SUBMISSIONS MADE BEFORE ME. IT IS VERY MUCH CLEAR F ROM THE PERUSAL OF MATERIAL AVAILABLE ON RECORD THAT ALL TH E 8 COMPANIES WHO HAD APPLIED FOR ALLOTMENT OF SHARES AND HAD ISS UED CHEQUES TO THE APPELLANT COMPANY, AND IN WHOSE CASES, THE ADDI TION HAS BEEN MADE U/S.68 OF THE ACT, WERE FRAMED IN EXISTENCE IN THE LAST 8 'TO 10 YEARS. THESE COMPANIES ARE ON, THE RECORDS OF TH E INCOME TAX DEPARTMENT AS SIS EVIDENT FROM THE PANS AND THE CON FIRMATIONS FILED DURING THE ASSESSMENT- PROCEEDINGS AND THE AF FIRMATION MADE CONFIRMING THE TRANSACTION, EVEN AS ON DATE. T HE IDENTITY OF THE COMPANIES IN QUESTION IS WELL ESTABLISHED. THE ADDRESSES ARE AVAILABLE ON RECORDS OF THE APPELLANT COMPANY IN TH EIR MEMBERS REGISTER. THE AMOUNT PAID BY WAY OF SHARE APPLICATI ON MONEY THROUGH CHEQUE HAS COME THROUGH THE BANKING CHANNEL S AND IT IS I.T.A. NO. 239/CTK./2007 ASSESSMENT YEAR: 2004-2005 & I.T.A. NO. 257/CTK/2007 ASSESSMENT YEAR: 2004-2005 PAGE 6 OF 10 NOT A CASE WHERE THE SHARE APPLICATION MONEY HAS BE EN PAID IN CASH. THE AO HAD ISSUED NOTICE U/S.133(6) OF THE AC T TO ALL THE 12 SHARE APPLICANTS AND WAS SATISFIED WITH THE COMPLIA NCE IN 4 SUCH CASES. IN THE 8 CASES WHERE THERE WAS NO COMPLIANCE , IT CAME TO LIGHT THAT THE ADDRESSES HAD CHANGED' AND THE APPEL LANT COMPANY HAD FURNISHED THE CHANGED ADDRESS AS APPEARING IN T HEIR MEMBERS REGISTER AFTER HAVING TAKEN NOTE OF THE FACT THE CH ANGED ADDRESS WAS INTIMATED TO THEM BY THE SHARE APPLICANTS. HAVI NG PERUSED THE CONFIRMATIONS AND HAVING TAKEN NOTE OF THE CHAN GED ADDRESSES, THE AO PREFERRED NOT TO MAKE ANY FURTHER ENQUIRIES OR ANY DIRECT VERIFICATION FROM THE SAID SHARE APPLICA NTS. HOWEVER, HE TOOK NOTE OF THE PECULIARITIES IN REGARD TO THE TRANSACTIONS RELATING TO THESE 8 PARTIES AND HIS OBJECTIONS WERE BASICALLY REGARDING THE CHANGED ADDRESSES, THE AVAILABILITY O F THE ACKNOWLEDGEMENT SLIPS ON THE COPIES OF THE SHARE AP PLICATION FORMS, THE DIFFERENCE IN THE SIGNATURES OF THE AUTH ORIZED SIGNATORIES AND THE FACT THAT IN THE CASE OF 3 COMP ANIES, THE SHARE APPLICATIONS WERE OF SEPTEMBER 2004, WHICH HAD BEEN ACCOUNTED FOR BY THE APPELLANT COMPANY IN MARCH .2004. IN REG ARD TO THESE OBJECTIONS, I FIND THAT THE CHANGED ADDRESSES WERE ALREADY NOTIFIED TO THE AO ARE CLEARLY VERIFIABLE FROM THE MEMBERS REGISTER OF THE APPELLANT COMPANY. THE AVAILABILITY OF THE COPIES OF THE ACKNOWLEDGEMENT SLIPS ALONG WITH THE COPY OF THE SHARE APPLICATION FORM WAS DULY EXPLAINED TO THE AO AND T HE APPELLANT'S CASE IS THAT THESE WERE THE PHOTO COPIES OF THE ORI GINAL APPLICATION FORMS ON RECEIPT AND IN FACT THE ACKNOW LEDGEMENTS HAVE BEEN SENT ALONG WITH THE MONEY RECEIPT ON ENCA SHMENT OF THE CHEQUES. AS REGARDS THE DIFFERENCE IN THE SIGNATURE S OF AUTHORIZED SIGNATORY IN SOME OF THE CASE, I AM CONVINCED THAT THIS IS A REGULAR FEATURE AND THE AUTHORIZED SIGNATORY MAY CH ANGE OVER A PERIOD OF TIME AND MAY BE DIFFERENT FROM THE ONE WH O SIGNED THE SHARE APPLICATION. THERE MAY BE DIFFERENT AUTHORIZE D SIGNATORIES FOR DIFFERENT PURPOSES. AS REGARDS THE AO'S OBJECTI ON THAT THE APPLICATIONS AS WELL AS SHARE APPLICATION MONEY FRO M M/S. SINGDHA TREXIM PVT. LTD, M/S. UMANG CREDIT CAPITAL LTD. AND M/S. TARAL VINCOM PVT. LTD WAS RECEIVED IN SEPTEMBER 200 4 WHERE AS THE APPELLANT HAS ACCOUNTED FOR IT ON 31.03.2004, I AM OF THE VIEW THAT NOT MUCH CAN BE MADE OUT OF THIS OBJECTION IN VIEW OF THE FACT THAT THERE WAS NO FLOW OF FUNDS AND IT WAS MERELY A BOOK ENTRY AS PER THE ACCOUNTING PRACTICE CONSIDERED CONVENIENT B Y THE APPELLANT. THERE IS NOTHING WRONG WHEN THE MONEY AL ONG WITH SHARE APPLICATION HAS COME IN SEPTEMBER 2004. BECAU SE THERE WAS NO FLOW OF FUNDS, THE SAID AMOUNT AGGREGATING IN AL L TO RS.30 LAKHS IN ANY CASE DOES NOT REPRESENT A CREDIT OF A SUM IN THE, REAL SENSE OF THE TERM IN THE BOOKS OF THE APPELLANT. IN REALITY, THERE WAS NO CREDIT IN ACCOUNTS OF ANY SUM OF MOTLEY. THE ENTIRE RECEIPTS WERE SHOWN 'AS 'TOWARDS SHARE APPLICATION MONEY' AND THE CHEQUES IN THIS REGARD WERE SHOWN AS CHEQUES IN HAND ON THE ASSET SIDE, WHICH WERE REALIZED AND COLLECTED ONLY IN SEPTEMBER 2004. THUS, ON ALL THE 4 COUNTS IT IS NOTICED THAT THE OBSERVATION OF THE AO WERE ON A WEAK WICKET. THUS, EVEN WHERE T HE SHARE I.T.A. NO. 239/CTK./2007 ASSESSMENT YEAR: 2004-2005 & I.T.A. NO. 257/CTK/2007 ASSESSMENT YEAR: 2004-2005 PAGE 7 OF 10 APPLICATIONS WERE RECEIVED ON 31.03.2004, THE AMOUN T REPRESENTED BY THE SHARE APPLICATION MONEY WAS CREDITED IN THE BANK OF THE APPELLANT COMPANY IN SEPTEMBER 2004, A FACT WHICH I S VERIFIABLE FROM RECORDS. THIS CLEARLY MEANS THAT THE APPELLANT WAS PRIVY TO THOSE FUNDS ONLY IN A.Y. 2005-06 AND NOT IN A.Y.200 4-05. UNDER, THE CIRCUMSTANCES, IN MY VIEW THE ADDITION MADE U/S .68 OF THE ACT IS NOT AT ALL JUSTIFIED. 5.3.1. IN THE CASE OF CIT VS. STELLAR INVESTMENT L TD 192 ITR 387 (DEL), IT HAS BEEN HELD THAT: 'IT IS EVIDENT THAT EVEN IF IT BE ASSUMED THAT THE SUBSCRIBERS TO THE INCREASED SHARE CAPITAL WERE NOT GENUINE, NEVERTHELESS, UNDER NO CIRCUMSTANCES, CAN THE AMOUNT OF SHARE CAPITAL BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE. IT MAY BE THAT THERE ARE SO ME BOGUS. SHAREHOLDERS IN WHOSE NAMES SHARES HAD BEEN ISSUED AND THE MONEY MAY HAVE BEEN PROVIDED BY SOME OTHER PERSONS. IF THE ASSESSMENT OF THE PERSONS WHO ARE ALLEGED TO HAVE REALLY ADVANCED THE MONEY IS SOUGHT TO BE REOPENED, THAT WOULD HAVE MADE SOME SENSE BUT WE FAIL TO UNDERSTAND AS TO HOW THIS AMOUNT OF INCREAS ED SHARE CAPITAL CAN BE ASSESSED IN THE HANDS OF THE COMPANY ITSELF. THE ABOVE DECISION HAS BEEN AFFIRMED BY THE HON'BLE SUPREME COURT AND THE SLP FILED IN THIS CONNECTION STANDS R EJECTED. IN THE CASE OF CIT VS. MAKHANI AND TYAGI (P) LTD 267 ITR 4 33 (DEL), IT WAS HELD AS UNDER:- 'THIS COURT IS OF OPINION THAT WHEN DOCUMENTARY EVIDENCE WAS PLACED ON RECORD TO PROVE THE IDENTITY OF ALL THE SHAREHOLDERS INCLUDING THEIR PAN/GIR NUMBERS AN D FILING OF OTHER DOCUMENTARY EVIDENCE IN THE FORM OF RATION CARD ETC., WHICH HAD NEITHER BEEN CONTROVERT ER NOR DISPROVED BY THE ASSESSING OFFICER, THEN NO INTERFE RENCE IS CALLED FOR. IT MAY BE NOTED THAT AS POINTED OUT BY A FULL BENCH OF THIS COURT IN CIT- VS. SOPHIA FINANCE LTD 205 IF STILL IN THE OPINION OF THE ASSESSING OFFICER IT WA S NECESSARY TO ENQUIRE FURTHER THEN, IT WAS FOR HIM T O ISSUE COERCIVE PROCESS TO SEE THAT THE SHAREHOLDERS ARE B EFORE HIM AND THEY ARE QUESTIONED ABOUT THE INVESTMENT. I N THE CASE OF CIT VS. PRECISION FINANCE (P) LTD. 208 ITR 465, THE HIGH COURT OF CALCUTTA WAS REQUIRED TO EXAMINE THE QUESTION FROM A DIFFERENT ANGLE AS IN THAT CASE THE ENQUIRY OF THE INCOME TAX OFFICER REVEALED THAT EIT HER THE ASSESSEE WAS NOT TRACEABLE OR THERE WAS NO SUCH FILE AND ACCORDINGLY THE FIRST INGREDIENT AS TO THE IDEN TITY OF THE CREDITORS HAD NOT BEEN ESTABLISHED. IN THE INST ANT I.T.A. NO. 239/CTK./2007 ASSESSMENT YEAR: 2004-2005 & I.T.A. NO. 257/CTK/2007 ASSESSMENT YEAR: 2004-2005 PAGE 8 OF 10 CASE, WHEN NECESSARY MATERIALS HAVE BEEN PRODUCED BEFORE THE ASSESSING OFFICER TO ESTABLISH THE IDENT ITY OF THE PERSONS WITH THEIR PAN/GIR NUMBERS AND OTHER DETAILS, IT WAS FOR THE ASSESSING OFFICER TO ENQUIR E FURTHER IF HE FELT THAT IT WAS NECESSARY. INSTEAD OF DOING SO, AFTER ISSUANCE OF SUMMONS WHEN THESE MATERIALS WERE PRODUCED BEFORE HIM, HE THOUGHT THAT HE IS HELPLESS AND HE PASSED THE BURDEN ON THE ASSESSEE TO BRING THE SHAREHOLDER BEFORE HIM.' IN CASE OF CIT VS ANTARTICA INVESTMENT (P) LTD 262 ITR 493 (DEL), THE FACTS WERE THAT THE ASSESSEE HAD RECEIVED RS.1. 345 CRORES AS ADVANCE AGAINST SHARE APPLICATION MONEY FROM 2 PRIV ATE LIMITED COMPANIES ON 31.03.1992. THE ASSESSEE HAD PRODUCED THE CONFIRMATION LETTERS, THE COPIES OF ACCOUNTS IN THE IR BOOKS, THE COPIES OF MEMORANDUM AND ARTICLES OF ASSOCIATION OF BOTH THE COMPANIES, COPIES OF BANK ACCOUNT OF THE COMPANIES FROM WHERE THE CHEQUES WERE ISSUED AND ALSO THE CERTIFIED COPY OF THE ACCOUNTS AND THE AUDITORS REPORT. THE AO BEING NOT SATISFIED WAS OF THE VIEW THAT THE ASSESSEE HAS FAILED TO PROVE T HE GENUINENESS OF THE SHARE SUBSCRIPTION RECORDED IN THE BOOKS AND HE ADDED IT U/S.68 OF THE ACT. THIS WAS DELETED IN BY THE CITCA ) AND THE FINDINGS OF THE CIT(A) WERE UPHELD BY THE HON'BLE I TAT. ON FURTHER APPEAL, THE HON'BLE HIGH COURT UPHELD THE D ELETION AND OBSERVED THAT IT WAS NOT THE CASE OF THE AO THAT AN Y AMOUNT FOUND CREDITED IN THE ACCOUNT OF THE 2 COMPANIES HAD DIRE CT OR INDIRECT NEXUS WITH THE ASSESSEE COMPANY. IT IS FURTHER NOTI CED THAT IN CIT VS. ORISSA CORPORATION LTD 159 ITR 78 (SC), IT HAS BEEN HELD THAT; 'WHERE THE ASSESSEE PRODUCED CONFIRMATION LETTERS A ND DISCHARGES HUNDIS (IN THIS CASE THE COPIES OF CHEQU ES) GIVING THE PARTICULARS OF THE CREDITORS WHO THEMSEL VES WERE INCOME TAX ASSESSEE AND WHOSE INCOME TAX INDEX NUMBERS (IN THIS CASE PAN) WERE AVAILABLE WITH THE REVENUE, FINDING OF TRIBUNAL THAT THE ASSESSEE DISC HARGES ITS INITIAL ONUS IS A FINDING OF FACT WARRANTING NO INTERFERENCE. '. 5.3.2. EVEN IN THE SUBSEQUENT COMMUNICATION OF TH E AO, DTD. 04.04.2007, THERE IS NO MATERIAL TO SHOW THE NON GE NUINENESS OF ANY OF THE SPECIFIC COMPANY OR THE TRANSACTION IN REGARD T O THE SAID COMPANY WITH THE APPELLANT. THE AO HAS HIMSELF ACCEPTED THE SHARE APPLICATION MONEY RECEIPT AS GENUINE FROM 4 PARTIES, WHERE THE 133(6) NOTICE COULD BE SERVED. FOR THE OTHER A CASES, WHERE HE MA DE THE ADDITION, THERE IS A VALID EXPLANATION ABOUT CHANGE OF ADDRES S, WHICH IS VERIFIABLE FROM REGISTER OF MEMBERS AND WHICH WAS I NFORMED TO AO. THE AO HAS NOT DISPUTED THIS POSITION. THUS, WHEN T HE CORRECT ADDRESS WAS KNOWN, IN VIEW OF THE ABOVE DISCUSSION, THERE W AS NO REASON FOR THE AO TO SUSPECT THESE 8 PARTIES AS NON GENUINE. T HERE CAN BE NO ADDITION ON SURMISES AND PRESUMPTIONS. IN SO FAR AS TAXABILITY OF THE I.T.A. NO. 239/CTK./2007 ASSESSMENT YEAR: 2004-2005 & I.T.A. NO. 257/CTK/2007 ASSESSMENT YEAR: 2004-2005 PAGE 9 OF 10 AMOUNT IS CONCERNED, THE POSITION IS CLEAR FROM THE FINDINGS IN THE CASES REFERRED ABOVE. UNDER THE CIRCUMSTANCES, IN V IEW OF THE DECISIONS REFERRED ABOVE, AND ALSO IN VIEW OF THE FACTUAL POS ITION BROUGHT OUT IN THIS ORDER, I AM CONVINCED THAT THERE IS NO CASE FO R MAKING THE ADDITION U/S.68 OF THE ACT BY THE AO IN THE HANDS O F THE APPELLANT. THUS GROUND NO.3 IS DECIDED IN FAVOUR OF THE APPELL ANT. 9. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ALTHOUGH THE LD. D.R. HAS RELIED ON THE ORDER OF THE ASSESSING OFFICER IN SUPPORT OF TH E REVENUES CASE ON THIS ISSUE, THE LD. COUNSEL FOR THE ASSESSEE HAS POINTED OUT THAT THE TOTAL AMOUNT OF RS.19.26 CRORES WAS RAISED TOWARDS SHARES BY THE ASSESSEE- COMPANY AS WELL AS OTHER GROUP COMPANIES INCLUDING THE AMOUNT IN QUESTION DURING THE ASSESSMENT YEARS 2001-02 TO 200 7-08. HE HAS SUBMITTED THAT PURSUANT TO THE SEARCH CONDUCTED IN THE CASE OF ALL THESE GROUP COMPANIES INCLUDING THE ASSESSEE-COMPANY, THE ENTIRE AMOUNT OF SHARE CAPITAL RAISED WAS VERIFIED BY THE ASSESSING OFFICER AND THE SAME WAS ACCEPTED AND NO ADDITION UNDER SECTION 68 WAS M ADE BY HIM AFTER HAVING FOUND THAT THE IDENTITY AND CAPACITY OF THE CONCERNED CREDITORS AS WELL AS GENUINENESS OF THE RELEVANT TRANSACTIONS WA S DULY ESTABLISHED BY GROUP COMPANIES INCLUDING THE ASSESSEE-COMPANY. HE HAS ALSO FILED SUMMARY OF THE RELEVANT EXTRACT OF THE NOTINGS MADE BY THE ASSESSING OFFICER IN THIS REGARD, WHICH SHOWS THAT FRESH NOTI CES ISSUED BY THE ASSESSING OFFICER UNDER SECTION 133(6) OF THE ACT W ERE DULY SERVED ON ALL THE SHARES SUBSCRIBERS AND THE SAME WERE ALSO DULY COMPLIED WITH BY THEM BY FILING THE RELEVANT DETAILS AND DOCUMENTS. IN THE LIGHT OF THE SAID DETAILS AND DOCUMENTS FILED BY THE CONCERNED SHARE SUBSCRIBERS, IT WAS HELD BY THE ASSESSING OFFICER THAT THEIR IDENTITY A ND CAPACITY AS WELL AS THE GENUINENESS OF THE RELEVANT TRANSACTIONS WERE D ULY ESTABLISHED AND NO ADDITION UNDER SECTION 68 WAS CALLED FOR. KEEPIN G IN VIEW THESE SUBMISSIONS MADE BY THE LD. COUNSEL FOR THE ASSESSE E, WHICH HAVE NOT BEEN DISPUTED OR CONTROVERTED BY THE LD. D.R., WE F IND NO JUSTIFIABLE REASON TO INTERFERE WITH THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) DELETING THE ADDITION OF RS.1,35,00,000/- MADE BY T HE ASSESSING OFFICER I.T.A. NO. 239/CTK./2007 ASSESSMENT YEAR: 2004-2005 & I.T.A. NO. 257/CTK/2007 ASSESSMENT YEAR: 2004-2005 PAGE 10 OF 10 UNDER SECTION 68 AND UPHOLDING THE SAME ON THIS ISS UE, WE DISMISS THE APPEAL OF THE REVENUE. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED, WHEREAS THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 27, 2015. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER KOLKATA, THE 27 TH DAY OF NOVEMBER, 2015 COPIES TO : (1) KUNJ ALLOYS PVT. LIMITED, PLOT NO. 9, SECTOR-A, ZONE-B, MANCHESWAR INDUSTRIAL ESTATE, BHUBANESWAR (2) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2(1), AAYAKAR BHAWAN, RAJASWA VIHAR, BHUBANESWAR (3) COMMISSIONER OF INCOME-TAX (APPEALS)- II, BHU BANESWAR (4) COMMISSIONER OF INCOME TAX, KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.