ACIT, CC-XXIV, Kolkata, Kolkata V. M/s. R. S. Ispat Ltd., Kolkata

ITA 246/KOL/2011

• Counselvise Citation: 24623514 RSA 2011
• Duration Of Justice: 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2011
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 02-08-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 14-02-2011
• Court: TRIBUNAL
• Department Lawyers: M BHATTACHARYA; S SINHA
• Assessee Lawyers: D S DAMLE
• Keywords: Unexplained cash credit; Unexplained investment; Principle of natural justice; Opportunity of cross examination; Source of fund; Corroborative evidences; Accommodation entries; Onus to prove; Retraction
• Section: 68; 132; 133(6)

Judgement Text

1 , A , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- A , KO LKATA [ . . . . . .. . , ,, , . .. . ! ! ! !. .. . , , , , '# ] BEFORE SHRI B.R.MITTAL, JUDICIAL MEMBER & SRI C.D. RAO, ACCOUNTANT MEMBER $ $ $ $ / ITA NO. 246 (KOL) OF 2011 %& '( / ASSESSMENT YEAR 2003-04 ASSTT.COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-XXIV, KOLKATA. M/S. R.S. ISPAT LTD., KOLKATA. (PAN-AABCR1890D) (+, / APPELLANT ) - % - - VERSUS - (/0+,/ RESPONDENT ) +, 1 2 '/ FOR THE APPELLANT: / S/SRI S.SINHA & M.BHATTACHARYA /0+, 1 2 ' / FOR THE RESPONDENT: / SRI D.S. DAMLE '3 / ORDER ( . . . . . .. . ), (B.R.MITTAL), JUDICIAL MEMBER : THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSME NT YEAR 2003-04 AGAINST ORDER OF LD. C.I.T.(A), CENTRAL-III, KOLKATA DATED 29/11/ 2010 ON FOLLOWING GROUND :- 1. THAT IN THE FACTS AND CIRCUMSTANCES O F THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.95,00,000/- MA DE U/S. 68 OF THE ACT WITHOUT PROPER APPRECIATION OF THE EVIDENCES BROUGHT ON REC ORD BY THE DEPARTMENT THAT IT WAS ASSESSEES OWN UNACCOUNTED MONEY INTRODUCED AS SUBS CRIPTION OF SHARES IN ASSESSEE COMPANY BY OTHER COMPANIES ARRANGED THROUGH ACCOMMO DATION ENTRIES IN THE BOOKS OF THE COMPANIES FOR WHICH THE DIRECTORS OF THE BUY ER COMPANIES HAD CONFESSED TO THE INCOME TAX AUTHORITIES. 2. THE RELEVANT FACTS GIVING RISE TO THIS APPEAL A RE THAT THERE WAS A SEARCH & SEIZURE OPERATION CONDUCTED U/S. 132 OF THE ACT ON 08/12/20 06 IN THE CASE OF AGARWAL GROUP OF COMPANIES AND THE ASSESSEE HEREIN IS ONE OF THE COM PANIES OF THE SAID GROUP. SIMULTANEOUSLY, THERE WAS A SEARCH IN THE CASE OF S RI ARUN KR. KHEMKA. SRI KHEMKA IN HIS STATEMENT RECORDED U/S. 132(4) OF THE ACT ON 09 /12/2006 STATED THAT HE WAS PROVIDING ACCOMMODATION ENTRIES TO THE ASSESSEE-COMPANY AND O THER GROUP COMPANIES IN LIEU OF CASH RECEIPTS. DURING THE COURSE OF POST-SEARCH IN VESTIGATION AND AT THE TIME OF MAKING THE ASSESSMENT, THE A.O. HAS STATED THAT THE COMPAN IES, WHO APPLIED FOR SHARES OF THE ASSESSEE-COMPANY, SUBMITTED LETTERS DATED 20/12/200 6 GIVING DESCRIPTION OF THE CHEQUES 2 ISSUED TOWARDS SHARE CAPITAL/SHARE APPLICATION BY R ECEIVING CASH AND ISSUING CHEQUES IN LIEU THEREOF. THE A.O. HAS STATED THAT THE TRANSAC TIONS INVOLVED ARE THUS BOGUS. HE HAS GIVEN THE DETAILS OF THE SHARES APPLIED BY THE APPL ICANT-COMPANIES AGGREGATING TO RS.1.27 CRORES AT PAGES-3 & 4 OF THE ASSESSMENT ORD ER AND THE SAME ARE REPRODUCED AS UNDER :- SL.NO. SHARES APPLIED BY DETAILS OF CHEQUE AMOUNT(RS.) 01. SPS COMMODEAL PVT. LTD. CHEQUE NO. 263207 DT. 22-11-2002 5,00,000/- 02. WEX FORD TIE-UP PVT. LTD. CHEQUE NO. 237199 DT. 27-11-2002 5,00,000/- 03. SWISS PARK VANIJYA PVT. LTD. CHEQUE NO. 879473 DT. 22-3-01 7,00,000/- 04. SUMMIT PACKAGING PVT. LTD. CHEQUE NO. 469302 DT. 27-3-01 10,00,000/- 05. LOKESH COMMERCIAL PVT. LTD. CHEQUE NO. 916182 DTD. 15-11-02 CHEQUE NO. 916185 DT. 19-11-02 CHEQUE NO. 916197 DT. 02-12-02 15,00,000/- 06. GLOBE STOCKS & SECURITIES LTD. CHEQUE NO. 00678 7 DT. 23-3-01 CHEQUE NO. 006775 DT. 20-03-01 15,00,000/- 07. BOSKI TRADECOMM PVT. LTD. CHEQUE NO. 236389 DT. 27-11-02 CHEQUE NO. 236390 DT. 29-11-02 CHEQUE NO. 236391 DT. 29-11-02 14,00,000/- 08. KUSHAL FISCAL SERVICES PVT. LTD. CHEQUE NO. 890 771 DTD. 21-11-02 CHEQUE NO. 890776 DT. 28-11-02 CHEQUE NO. 890777 DT. 29-11-02 16,00,000/- 09. KNITWORTH LEASE FINANCE LTD. CHEQUE NO. 102960 DT. 15-11-02 CHEQUE NO. 102962 DT. 20-11-02 10,00,000/- 10. VEEA FISCAL SERVICES PVT. LTD. CHEQUE NO. 23349 7 DT. 18-11-02 5,00,000/- 11. SUNDEEP SALT & BROMINE INDUSTRIES LTD. CHEQUE NO. 234170 DTD. 21-11-02 25,00,000/- 3 CHEQUE NO. 234172 DT. 22-11-02 CHEQUE NO. 234174 DT. 25-11-02 CHEQUE NO. 241853 DT. 03-12-02 CHEQUE NO. 241855 DT. 04-12-02 TOTAL 1,27,00,000 THE A.O. HAS STATED THAT DURING THE ASSESSMENT PROC EEDINGS, THE ASSESSEE WAS AFFORDED AN OPPORTUNITY TO EXAMINE THE STATEMENT OF SRI ARUN KR. KHEMKA AS WELL AS THE LETTERS DATED 20/1/2006 (AT PAGE-3, A.O. HAS MENTIONED LETT ERS DATED 20/12/2006) FILED BY THE SAID SHARE-APPLICANT COMPANIES. THE A.O. HAS STATE D THAT NOTICES U/S. 133(6) OF THE ACT WERE ISSUED TO THE ABOVE-MENTIONED COMPANIES CALLIN G FOR INFORMATION REGARDING DETAILS OF SHARE APPLICATIONS MADE WITH RESPECT TO SHARES O F THE ASSESSEE-COMPANY DURING THE FINANCIAL YEARS 2000-01 TO 2006-07 ALONG WITH COPIE S OF RELEVANT BANK STATEMENTS. THE A.O. HAS FURTHER STATED THAT IN REPLY THERETO, THE SAID COMPANIES FURNISHED DETAILS OF SHARE APPLICATIONS MADE AND ALSO FURNISHED COPIES O F AFFIDAVITS PURPORTEDLY FILED BY THEIR RESPECTIVE DIRECTORS ON 01/3/2007 AND RETRACT ING THE CONTENTS OF THE AFORE- MENTIONED LETTERS DATED 20/12/2006. THE A.O. HAS R EPRODUCED THE CONTENTS OF ONE OF THE AFFIDAVITS AT PAGES 4 & 5 OF THE ASSESSMENT ORDER W HEREIN IT IS, INTER ALIA, STATED THAT D.D.I.T. (INVESTIGATION) HAD PUT UNDUE INFLUENCE AN D PRESSURE AND THREATENED OF DIRE CONSEQUENCES AS A RESULT OF WHICH THE DIRECTOR(S) W AS COMPELLED TO MAKE STATEMENT U/S. 132(4) IN ACCORDANCE WITH THE DIRECTION OF THE SEAR CHING OFFICERS. IT IS FURTHER STATED THAT THE STATEMENTS RECORDED BY THE SEARCHING TEAM DO NO T STATE THE CORRECT STATE OF AFFAIRS AND THE SAID STATEMENTS WERE RECORDED BY USING COER CION AND THREAT. 2.1. THE A.O. DID NOT ACCEPT THE SAID RETRACTION O F THE SHARE-APPLICANT COMPANIES OR SRI ARUN KR. KHEMKA AND RELYING ON THE STATEMENTS R ECORDED AT THE TIME OF SEARCH U/S. 132(4) OF THE ACT, CONSIDERED THE SAID SHARE APPLIC ATION MONEY, INTER ALIA, OF RS.95 LAKHS AS APPEARING IN THE BOOKS OF THE ASSESSEE-COMPANY N OT GENUINE AND ADDED TO THE INCOME OF THE ASSESSEE U/S. 68 OF THE ACT FOR THE ASSESSME NT YEAR UNDER CONSIDERATION. BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE FIR ST APPELLATE AUTHORITY. 4 3. ON BEHALF OF THE ASSESSEE IT WAS CONTENDED THAT ADDITION U/S. 68 OF THE ACT HAD BEEN MADE ILLEGALLY AND WITHOUT BRINGING ON RECORD ANY MATERIAL TO REBUT OR DISPROVE THE EVIDENCE WHICH WERE BROUGHT ON RECORD BY THE SHARE- APPLICANTS IN RESPONSE TO NOTICES U/S. 133(6) OF THE ACT. THE ENTIRE ADDITION MADE B Y THE A.O. IS BASED ON THE ALLEGED STATEMENT RECORDED U/S. 132(4) OF THE ACT EITHER FR OM SRI ARUN KR. KHEMKA DATED 09/12/2006 OR LETTERS DATED 20/12/2006 ALLEGEDLY WR ITTEN BY THE DIRECTORS OF THE SHARE- APPLICANT COMPANIES. IT WAS CONTENDED THAT THE SAI D STATEMENTS OF SRI KHEMKA AND/OR DIRECTORS OF THE SHARE-APPLICANT COMPANIES WERE REC ORDED ALLEGEDLY BY THE OFFICERS OF THE INSPECTING WING OF THE INCOME-TAX DEPARTMENT WI THOUT THE PRESENCE OF EITHER THE ASSESSEE OR ITS DIRECTORS OR REPRESENTATIVES. THE SAID STATEMENTS WERE RECORDED AT THE BACK OF THE ASSESSEE. IT WAS CONTENDED THAT THE AS SESSEE WAS ONLY CONFRONTED WITH THE ALLEGED STATEMENTS OF SRI ARUN KR. KHEMKA AND THE D IRECTORS OF THE SHARE-APPLICANT COMPANIES. IT WAS ALSO CONTENDED THAT COPIES OF TH E SAID STATEMENTS WERE NOT MADE AVAILABLE TO THE ASSESSEE, NOR ANY OPPORTUNITY OF C ROSS-EXAMINATION WAS GRANTED. IT WAS ALSO CONTENDED BEFORE THE LD. C.I.T.(A) THAT IN COU RSE OF ASSESSMENT, THE A.O. ISSUED NOTICES U/S. 133(6) OF THE ACT TO ALL THE SHARE APP LICANTS REQUESTING THEM TO FURNISH EVIDENCE IN SUPPORT OF THE SHARES SUBSCRIBED BY THE M. IN ALL THE CASES, THE NOTICES ISSUED WERE DULY SERVED AT THE ADDRESSES PROVIDED BY THE A SSESSEE. HENCE, IT IS ESTABLISHED THAT THE SHARE APPLICANTS ACTUALLY EXISTED AT THE GIVEN ADDRESSES. THIS PROVES THAT THE ASSESSEE WAS ABLE TO ESTABLISH THE IDENTITY OF EACH OF THE SHARE APPLICANTS. IT WAS ALSO CONTENDED THAT IN RESPONSE TO NOTICES U/S. 133(6) O F THE ACT, EACH OF THE SHARE-APPLICANTS FURNISHED BEFORE THE A.O. THE INFORMATION AND EVIDE NCES AS REQUIRED BY HIM TO ESTABLISH THE TRANSACTIONS OF SUBSCRIBING TO SHARE CAPITAL, I SSUED BY THE ASSESSEE-COMPANY. EACH OF THE APPLICANTS ALSO CONFIRMED THAT THEY WERE REG ULARLY ASSESSED TO TAX AND IN SUPPORT THEREOF, COPIES OF PAN CARD WERE FURNISHED. THAT E ACH OF THE SHARE-APPLICANTS FURNISHED THE DETAILS OF SHARE SUBSCRIPTION MONEY PAID THROUG H THEIR BANK ACCOUNTS AND ALSO FURISHED THE NAMES OF THE BANKS, CHEQUE NOS. AND CO PIES OF BANK STATEMENTS BEFORE THE A.O. IT WAS ALSO CONTENDED THAT THE SHARE APPLICAN TS ALSO EXPLAINED BEFORE THE A.O. THE IMMEDIATE SOURCE OF FUND, OUT OF WHICH THE SHARE AP PLICATION MONEY WAS PAID. EACH OF THE SHARE APPLICANTS ALSO FILED COPIES OF I.T. RETU RNS FILED FOR THE RELEVANT YEAR AND ALSO 5 PRODUCED COPIES OF BALANCE SHEETS FOR THE RELEVANT YEAR IN WHICH THE SHARES ALLOTTED BY THE ASSESSEE-COMPANY WERE REFLECTED. IT WAS CONTEN DED THAT THE BALANCE SHEET OF EACH OF THE SHARE SUBSCRIBERS ALSO ESTABLISHED THAT EACH OF THEM HAD NET OWNED FUNDS WHICH WERE SEVERAL TIMES HIGHER THAN THE INVESTMENTS MADE IN THE SHARES OF THE ASSESSEE- COMPANY. THE BALANCE SHEET ESTABLISHED THAT ONLY FR ACTION OF THE NOF OF THE INVESTEE COMPANIES WAS INVESTED IN THE SHARE CAPITAL OF THE ASSESSEE-COMPANY. IT WAS CONTENDED THAT THE COPIES OF THE BANK STATEMENTS FILED BEFORE THE A.O. ALSO ESTABLISHED THAT THE SAID COMPANIES WERE CARRYING ON SEVERAL HIGH VALUE TRANS ACTIONS AND IT WAS NOT THE CASE THAT THE INVESTEE COMPANIES HAD FINANCIAL TRANSACTIONS O NLY WITH THE ASSESSEE-COMPANY. THE BANK STATEMENT ALSO ESTABLISHED THAT FOR MAKING THE PAYMENT TO THE ASSESSEE-COMPANY, THE INVESTEE COMPANIES HAD RECEIVED BACK THEIR OWN FUNDS WHICH WERE EITHER LENT EARLIER OR OUT OF THE SALE PROCEEDS OF SHARES & SECURITIES WHICH WERE HELD IN OTHER BODIES CORPORATE. THAT THERE WAS NO CASH DEPOSIT PRIOR TO ISSUE OF CHEQUE TO THE ASSESSEE- COMPANY. IT WAS CONTENDED THAT THE ASSESSEE ESTABL ISHED BEFORE THE A.O. WITH THE DOCUMENTARY EVIDENCE THE GENUINENESS OF THE TRANSAC TIONS AS ALSO THE CAPACITY AND CREDITWORTHINESS TO MAKE INVESTMENT BY THE SHARE AP PLICANTS IN SHARE CAPITAL OF THE ASSESSEE-COMPANY. IT WAS ALSO CONTENDED THAT THE S AID SHARE-APPLICANT COMPANIES WHILE FURNISHING THE EVIDENCE TO THE A.O. IN RESPONSE TO NOTICE ISSUED U/S. 133(6) OF THE ACT HAD SUO MOTU FILED COPIES OF THE AFFIDAVITS DATED 01/3/2007 RETRACTING THE STATEMENTS RECORDED FROM THEM EARLIER. IT WAS CONTENDED THAT T HE A.O. WHILE FRAMING THE ASSESSMENT DID NOT MAKE ANY INDEPENDENT ENQUIRY BEF ORE DRAWING ANY INFERENCE EITHER AGAINST OR FOR THE ASSESSEE ON THE BASIS OF THE SEA RCHED MATERIAL AND COMPLETED THE ASSESSMENT ONLY ON THE BASIS OF THE STATEMENTS RECO RDED U/S. 132(4) OF THE ACT. THE ASSESSEE CONTENDED BEFORE THE LD. C.I.T.(A) THAT ME RELY ON THE BASIS OF THE EXTRACTS OF THE STATEMENT OF SRI ARUN KR. KHEMKA THAT HE RECEIV ED CASH FROM THE ASSESSEE WHICH WAS RETURNED BACK IN THE FORM OF CHEQUE, NO EVIDENC E WAS BROUGHT ON RECORD TO SUBSTANTIATE THE SAID STATEMENT AND IGNORED THE REL EVANT AND COGENT MATERIAL BROUGHT BY THE ASSESSEE BEFORE THE A.O. IT WAS CONTENDED THAT WHEN THE A.O. COLLECTED THE DOCUMENTARY EVIDENCE WHICH WERE CONTRARY TO THE STA TEMENTS U/S. 132(4) OF THE ACT, THE A.O. DID NOT DO ANY ACT, DEED OR THING TO DISPROV E THE GENUINENESS OR CORRECTNESS OF 6 THE DOCUMENTARY EVIDENCE. IT WAS ALSO CONTENDED THA T THE A.O. DID NOT PERSONALLY EXAMINE EITHER SRI ARUN KR. KHEMKA OR ANY SHARE-APP LICANT, NOR BROUGHT ON RECORD ANY EVIDENCE OR MATERIAL WHICH IN ANY MANNER ESTABLISHE D THAT THE DOCUMENTARY EVIDENCE PRODUCED BY THE SHARE-APPLICANTS WERE FALSE, BOGUS OR NOT GENUINE. IT WAS ALSO CONTENDED THAT THE A.O. WHILE TAKING FOR CONSIDERAT ION THE STATEMENTS RECORDED U/S. 132(4) PLACED RELIANCE ON THE DECISION OF HONBLE A PEX COURT IN THE CASE OF SURJIT SINGH CHABRA VS. UNION OF INDIA [AIR 1997 (SC) 2560], WHI CH IS FACTUALLY NOT CORRECT. IT WAS CONTENDED THAT IN THE SAID CASE THE ACCUSED HIMSELF HAD COMMITTED THE OFFENCE AT THE TIME OF SEARCH AND, THEREFORE, IT WAS HELD THAT ACC USED COULD NOT BE GIVEN BENEFIT OF RETRACTION UNLIKE THE CASE OF THE ASSESSEE. IT WAS ALSO CONTENDED THAT IN THE SAID CASE THE ACCUSED WAS INTERCEPTED WHILE IN POSSESSION OF CONT RABAND GOODS AND, THEREFORE, HIS OFFENCE WAS PROVED AT THE RELEVANT TIME WITH REQUIS ITE EVIDENCE. THE ASSESSEE CONTENDED BEFORE THE LD. C.I.T.(A) THAT THE A.O. WA S NOT JUSTIFIED TO PLACE RELIANCE ON THE SAID DECISION OF HONBLE APEX COURT AS IN THE C ASE OF THE ASSESSEE THE A.O. HAS USED THE STATEMENT OF A THIRD PERSON, WHO WAS NEITHER EX AMINED IN THE PRESENCE OF THE ASSESSEE NOR EXAMINED PERSONALLY, NOR ALLOWED TO BE CROSS-EXAMINED BY THE DEPARTMENT AT ANY STAGE. THE ASSESSEE ALSO PLACED RELIANCE BE FORE THE LD. C.I.T.(A) ON THE DECISION OF HONBLE GAUHATI HIGH COURT IN THE CASE OF NEMICH AND KOTHARI VS. CIT [264 ITR 254 (GAU)] AND SUBMITTED THAT WHERE AN ASSESSEE RECEIVE S ANY MONEY BY ACCOUNT PAYEE CHEQUE FROM ANOTHER PERSON, THEN U/S. 106 OF THE EV IDENCE ACT THE ASSESSEE CAN BE SAID TO HAVE ESTABLISHED THE GENUINENESS AND CREDITWORTH INESS OF THE PAYER. THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISION OF HONBLE DEL HI HIGH COURT IN THE CASE OF CIT VS. VALUE CAPITAL SERVICES PVT. LTD. [307 ITR 334 (DEL) ], WHEREIN IT WAS HELD THAT THERE WAS ADDITIONAL BURDEN ON THE DEPARTMENT TO SHOW THAT EV EN IF THE SHARE-APPLICANTS DID NOT HAVE MEANS TO MAKE INVESTMENTS, THE INVESTMENTS MAD E BY THEM ACTUALLY EMANATED FROM THE COFFERS OF THE ASSESSEE. 3.1. THE LD. C.I.T.(A) SOUGHT REMAND REPORT FROM T HE A.O. ON THE SUBMISSIONS OF THE ASSESSEE AND THE A.O. IN HIS REMAND REPORT DATED 24 /5/2010 COUNTERED THE ASSESSEES SUBMISSIONS WHICH ARE REPRODUCED BY THE LD. C.I.T.( A) IN PARA-4 OF HIS ORDER AS UNDER :- REGARDING THE ALLEGATION OF VIOLATION OF THE PRINCI PLES OF NATURAL JUSTICE, IT IS TO BE SUBMITTED THAT AS DESCRIBED IN THE ASSESSMENT ORDER ITSELF, THE ASSESSEE WAS AFFORDED AN 7 OPPORTUNITY TO EXAMINE THE CONTENTS OF THE STATEMEN T GIVEN U/S. 132(4) BY SRI ANIL KUMAR KHEMKA ON 09.12.2006 WHEREIN IT WAS STATED TH AT CASH WAS RECEIVED FROM THE ASSESSEE AND CHEQUES WERE ISSUED TOWARDS SHARE CAPI TAL IN LIEU THEREOF ALONG WITH THE CONTENTS OF THE LETTERS DATED 20.12.2006 FILED BY 8 INVESTEE COMPANIES. IT IS ALSO PERTINENT TO POINT OUT THAT AFTER THE AS SESSEE WAS SHOWN AND CONFRONTED WITH THE SAID STATEMENT AND LETTERS, THE ASSESSEE DID NO T ASK FOR FURNISHING COPIES OF THE SAME AT ANY POINT OF TIME. HENCE, THE ASSESSEE CANNOT TA KE THIS GROUND WHEN IT WAS NEVER AGGRIEVED ON THIS ACCOUNT DURING THE COURSE OF ASSE SSMENT PROCEEDINGS. IT MAY ALSO BE REMARKED THAT NO EVIDENCE WAS PUT ON RECORD BEHIND THE BACK OF THE ASSESSEE AT ANY STAGE OF THE ASSESSMENT PROCEEDINGS . THE FACT THAT THE ASSESSEE WAS SHOWN AND CONFRONTED WITH THE SAID STATEMENT AND LE TTERS SATISFIES THE BASIC ESSENCE OF THE PRINCIPLES OF NATURAL JUSTICE. IT IS ALSO RESPECTFULLY SUBMITTED THAT SINCE NO PRO CEEDINGS ARE PENDING BEFORE THE UNDERSIGNED, THE ISSUE OF SUMMONS FOR CROSS-EXAMINA TION AND RE-EXAMINATION OF WITNESSES CANNOT BE DONE AT THIS END. THE SAME, IF DEEMED NECESSARY, MAY BE CARRIED OUT DURING THE COURSE OF APPELLATE PROCEEDINGS. WITHOUT PREJUDICE TO THE ABOVE, IT IS ALSO SUBMITTE D THAT ANY PERCEIVED INADEQUACY REGARDING AFFORDING OF OPPORTUNITY CAN BE CURED DUR ING THE COURSE OF APPELLATE PROCEEDINGS. IN THE SUBMISSION FILED BY THE ASSESSEE, IT IS SEEN THAT THE ASSESSEE HAS NOT FURNISHED ANY NEW OR FRESH EVIDENCE WHATSOEVER REGARDING THE IMPUGNED UNSECURED LOAN TRANSACTIONS. THE ASSESSEE HAS MERELY REITERATED IT S SUBMISSIONS MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHICH HAVE ALREADY BEEN T AKEN ON RECORD AND CONSIDERED BY THE AO . IN THE CIRCUMSTANCES, THE AO WAS ENTIRELY JUSTIFIED IN INFERRING THAT THE GENUINENESS OF THE PURPORTED SHARE APPLICATIONS WAS NOT ESTABLISHE D AND THEREBY, THE CORRESPONDING AMOUNT OF RS.95,00,000/- WAS LIABLE TO BE ADDED BAC K U/S 68. ACCORDINGLY, THE APPEAL OF THE ASSESSEE DESERVES TO BE DISMISSED. 3.2. THE LD. C.I.T.(A) SOUGHT REJOINDER OF THE REM AND REPORT FROM THE ASSESSEE WHICH IS STATED BY HIM IN PARA-5, PAGES 12 TO 19 OF THE I MPUGNED ORDER AND THE CRUX OF THE SAID REJOINDER GIVEN BY THE ASSESSEE IS THAT THE ASSESSE E REITERATED THE SUBMISSIONS WHICH WERE MADE EARLIER AND THE EXTRACT OF WHICH HAS ALRE ADY BEEN STATED HEREINABOVE. BESIDES THE ASSESSEE ALSO PLACED RELIANCE ON THE DE CISION OF HONBLE APEX COURT IN THE CASE OF CIT VS. LOVELY EXPORTS PVT. LTD. [216 CTR 1 95 (SC)] AS ALSO OTHER DECISIONS OF I.T.A.T. THE LD. C.I.T.(A) AFTER CONSIDERING THE S AID SUBMISSIONS OF THE ASSESSEE AS WELL AS THE REMAND REPORT OF THE A.O. HAD DELETED THE AD DITION MADE BY THE A.O. VIDE PARAS 6 TO 19 OF THE IMPUGNED ORDER, WHICH READ AS UNDER :- 8 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS I NOT E THAT THE MATERIAL ISSUE FOR ME TO ADJUDICATE IS WHETHER THE SUM OF RS.95 LACS, APPEAR ING IN THE ASSESSEES BOOKS AS SUBSCRIPTION TO ITS SHARE CAPITAL REPRESENTED INTRO DUCTION OF ASSESSEES UNACCOUNTED MONEY CHARGEABLE U/S 68 OF THE ACT. ACCORDING TO TH E AO THE ADDITION TO THE SHARE CAPITAL WAS NOTHING BUT UNEXPLAINED INCOME OF THE A SSESSEE CHARGEABLE TO TAX IN A.Y. 2003-04. IN SUPPORT OF HIS FINDING THE AO GAVE FOLL OWING REASONS : A) IN THE COURSE OF SEARCH OPERATIONS WHICH WERE SI MULTANEOUSLY CONDUCTED ON 08.12.2006 AT THE OFFICE PREMISES OF THE ASSESSEE A ND ONE SHRI ARUN KUMAR KHEMKA, A STATEMENT U/S 132(4) WAS RECORDED WHEREIN SHRI KHEMKA ADMITTED THAT THE COMPANIES CONTROLLED BY HIM HAD PROVIDED ACCOMM ODATION ENTRIES TO R.S. ISPAT PVT. LTD. WHERE CHEQUES WERE ISSUED IN LIEU OF CASH RECEIVED. B) IN THE STATEMENT U/S 132(4) SHRI KHEMKA SPECIFI CAILY ADMITTED THAT ACCOMMODATION ENTRIES OF RS. 85 LACS WERE GIVEN THROUGH COMPANIES MENTIONED IN HIS STATEMENT AND FOR PROVIDING ACCOMMODATION ENTRIES, HE WAS PAID CO MMISSION @ 1%, IN CASH. C) BEFORE THE ADIT(INV) THE SHARE SUBSCRIBING COMP ANIES FILED LETTERS DATED 20.12.2006 ADMITTING THAT THE CHEQUES WERE ISSUED BY THEM AS S UBSCRIPTION TO SHARE CAPITAL, IN LIEU OF THE CASH RECEIVED AND THE TRANSACTIONS OF S HARE SUBSCRIPTION WERE BOGUS. D) IN RESPONSE TO NOTICES U/S 133(6) THE SHARES SU BSCRIBING COMPANIES FILED COPIES OF AFFIDAVITS IN WHICH STATEMENT CONTAINED IN LETTERS DATED 20.12.2006 WERE RETRACTED. THE RETRACTION AFFIDAVITS WERE MADE MUCH AFTER RECO RDING OF THE ORIGINAL STATEMENTS AND THESE WERE NEVER FILED BEFORE THE ADIT(INV) AND THEREFORE THE RETRACTION AFFIDAVITS COULD NOT BE GIVEN CREDENCE. E) IN THE STATEMENT ON OATH, SRI KHEMKA AND SHARE SUBSCRIBING COMPANIES HAD ADMITTED OF GIVING ACCOMMODATION ENTRIES TO APPELLANT. IN VI EW OF THE JUDGMENT OF SUPREME COURT IN THE CASE OF SURJIT SINGH CHABRA (AIR 1997 SC 2560) THE STATEMENTS RECORDED BEFORE THE REVENUE AUTHORITIES CARRIED GRE ATER EVIDENTIARY VALUE AND RETRACTIONS MADE LATER COULD NOT BE ACCEPTED. 7. AFTER PURSUING THE ASSESSMENT ORDER IT HAD APPE ARED TO ME THAT THE IMPUGNED ADDITION U/S 68 WAS MADE PRINCIPALLY ON THE STATEME NT OF SHRI KHEMKA IN WHICH HE HAD ADMITTED THAT THE APPELLANT WAS PROVIDED ACCOMMODAT ION ENTRIES BY THE COMPANIES CONTROLLED BY HIM. SIMILAR STATEMENTS WERE MADE BY SHARES SUBSCRIBING COMPANIES IN THE LETTERS FILED BEFORE ADIT (INV) DATED 20.12.200 6. NO SPECIFIC DOCUMENT OR MATERIAL WAS DISCUSSED IN THE ASSESSMENT ORDER WHICH ESTABLI SHED THE AOS CONCLUSION. IT ALSO APPEARED FROM ASSESSMENT ORDER THAT ALTHOUGH THE ST ATEMENT OF SHRI KHEMKA WAS RECORDED ON 09.12.2006, ASSESSEE WAS NEVER CONFRONT ED WITH HIS STATEMENT EITHER BY THE ADIT(INV) OR BY THE AO TILL NOVEMBER 2008 WHILE THE ASSESSMENT WAS GETTING BARRED BY LIMITATION IN DECEMBER 2008. IT ALSO APPEARED AT NO STAGE ASSESSEES STATEMENT WAS RECORDED BY THE ADIT(INV) OR BY THE AO WITH REFEREN CE TO STATEMENT OF SHRI KHEMKA. THE APPELLANT WAS ALSO NOT GRANTED OPPORTUNITY OF C ROSS EXAMINING SHRI KHEMKA OR THE DIRECTORS OF THE SHARE SUBSCRIBING COMPANIES. TAKIN G INTO CONSIDERATION THESE OMISSIONS WHICH HAD SIGNIFICANT BEARING ON THE MATTER, IN MY LETTER DATED 20.04. 2008 THE AO WAS SPECIFICALLY REQUIRED TO CLARIFY WHETHER ANY MATERI AL APART FROM THE SWORN STATEMENT OF SHRI KHEMKA WAS GATHERED EITHER DURING THE COURSE O F SEARCH OR ASSESSMENT WHICH 9 SUBSTANTIATED HIS STATEMENT THAT HE HAD RECEIVED CA SH WHICH WAS RETURNED IN THE FORM OF CHEQUES. THE AO WAS FURTHER DIRECTED TO STATE THAT IF HE HAD ANY MATERIAL EVIDENCE TO PROVE THE CHAIN OF TRANSACTION LEADING TO THE ULTIM ATE DESTINATION OF THE LEASH THEN HE MIGHT EXAMINE THE PARTIES AND AFFORD OPPORTUNITY OF CROSS EXAMINATION TO THE ASSESSEE. HOWEVER FOR THE REASONS BEST KNOWN, THE AO CHOSE NO T TO EXAMINE THE PARTIES NOR ALLOWED THE ASSESSEE OPPORTUNITY OF CROSS EXAMINATI ON OF THE WITNESSES WHOSE STATEMENTS WERE ADMITTEDLY OBTAINED IN THE ASSESSSE ES ABSENCE. THE AO ALSO DID NOT BRING TO MY ATTENTION ANY MATERIAL OR EVIDENCE WHIC H PROVED THAT ENQUIRIES WERE CONDUCTED WITH REGARD TO THE CHAIN OF TRANSACTIONS LEADING TO ULTIMATE DESTINATION OF THE ALLEGED CASH. 8. THE PRINCIPLE OF NATURAL JUSTICE DEMANDS THAT B EFORE A MATERIAL GATHERED AT ASSESSEES BACK IS USED AS OR IN EVIDENCE, THE ASSESSEE IS GIV EN EFFECTIVE AND PROPER OPPORTUNITY OF REBUTTING THE MATERIAL. IN THE PRESENT CASE IT APPE ARED THAT IN THE COURSE OF ASSESSMENT THE AO HAD FAILED TO COMPLY WITH THE SAID PRINCIPLE . EVEN IN THE REMAND PROCEEDING THE AO DECLINED TO PERSONALLY EXAMINE SHRI KHEMKA AND T HE DIRECTORS OF THE SHARE SUBSCRIBING COMPANIES ALTHOUGH IN THE AFFIDAVITS SW ORN IN FEBRUARY 2007 THEY HAD RETRACTED THEIR EARLIER STATEMENTS MADE BEFORE THE ADIT (INV). I FIND IT MATERIAL TO MENTION THAT IN THE COURSE OF ASSESSMENT THE AO HAD ISSUED NOTICES U/S 133(6) IN RESPONSE TO WHICH EACH SHARE SUBSCRIBING COMPANY FI LED LETTERS CONFIRMING THEIR TRANSACTIONS AND SUPPORTED THEIR CONFIRMATIONS BY S UBMITTING DOCUMENTS REQUISITIONED IN THE NOTICE. THE INFORMATION AND THE DOCUMENTS GA THERED BY THE AO THROUGH STATUTORY MECHANISM OF SEC 133(6) APPARENTLY CONTRADICTED THE STATEMENTS RECORDED BY THE ADIT (INV) U/S 132(4). IN THIS FACTUAL BACKGROUND IT WAS NECESSARY FOR THE AO TO PERSONALLY EXAMINE THE WITNESSES BEFORE DRAWING ADVERSE INFERE NCE AGAINST THE ASSESSEE, DESPITE GIVING OPPORTUNITY TO OVERCOME THE OBVIOUS OMISSION , THE AO CHOSE NOT TO EXAMINE THE CONCERNED PERSONS WHOSE STATEMENT WAS USED IN EVID ENCE NOR ALLOWED, THE ASSESSEE OPPORTUNITY OF CROSS EXAMINATION EVEN AT THE STAGE OF REMAND. HAVING REGARD TO THESE FACTS THE ONLY CONCLUSION THAT I CAN DRAW IS THAT E XCEPT THE BARE STATEMENT OF SHRI KHEMKA AND THE INVESTING COMPANIES THE AO DID NOT H AVE ANY POSITIVE MATERIAL WITH HIM TO SUBSTANTIATE HIS CONCLUSION THAT SHARE SUBSC RIPTIONS AMOUNTS REPRESENTED ASSESSEES UNDISCLOSED INCOME. 9. THE AOS RELIANCE ON THE DECISION OF THE SUPREME COURT IN THE CASE OF SURJIT SINGH CHABRA (SUPRA) APPEARED TO BE MISPLACED ON THE FACT S OF THE PRESENT CASE. IN THE CASE BEFORE THE SUPREME COURT THE ACCUSED WAS FOUND IN P OSSESSION OF CONTRABAND GOODS AND MADE CONFESSION OF HIS WRONG DOING BEFORE THE CUSTO MS AUTHORITIES. THE CONFESSION WAS RETRACTED AFTER 6 DAYS AND THE ACCUSED DEMANDED CROSS EXAMINATION OF WITNESSES. THE COURT ACCEPTED THAT IN PRINCIPLE THE ACCUSED WA S ENTITLED TO CROSS EXAMINE THE PANCHAS BUT IN ITS OPINION THE CROSS EXAMINATION OF PANCHAS WOULD NOT HAVE MADE MATERIAL DIFFERENCE TO THE CASE BECAUSE THE ACCUSED HIMSELF HAD MADE ADMISSION WHEN CAUGHT WITH CONTRABAND GOODS. THE COURT THEREFORE D ID NOT ACCEPT THE RETRACTION BY THE ACCUSED BUT RELIED ON THE CONFESSION MADE BEFORE TH E CUSTOMS AUTHORITIES IN THE FIRST INSTANCE FOR UPHOLDING THE PENALTY. IN THE PRESENT CASE HOWEVER THE ASSESSEE HIMSELF NEVER ADMITTED OF AVAILING ACCOMMODATION ENTRIES FR OM SHRI KHEMKA NOR DID IT ACCEPT THAT SUBSCRIPTION TO ITS SHARE CAPITAL REPRESENTED ITS UNDISCLOSED INCOME. IN THIS CASE STATEMENT RECORDED FROM THE THIRD PERSON HAS BEEN U SED IN EVIDENCE. THE ASSESSEE WAS NEVER GIVEN OPPORTUNITY OF CROSS EXAMINING THE SAID PERSON. IN FACT TILL NOVEMBER, 2008 THE ASSESSEE WAS NOT EVEN MADE AWARE ABOUT THE STAT EMENTS OF SHRI KHEMKA OR OF THE 10 INVESTING COMPANIES. SINCE THE FACTS IN THE ASSESSE ES CASE ARE ENTIRELY DIFFERENT, DECISION OF THE SUPREME COURT WAS NOT APPLICABLE BE CAUSE IN THAT CASE THE PERSON ACCUSED HIMSELF HAD MADE THE CONFESSION BEFORE THE REVENUE AUTHORITIES AND CONTRABAND GOODS WERE SEIZED FROM THE ACCUSED. 10. THE MOST PERTINENT ASPECT IN THE PRESENT CASE HOWEVER IS THAT THE AO HAD HIMSELF EMBARKED ON CONDUCTING ENQUIRY IN RESPECT OF SHARE SUBSCRIPTION AMOUNTS RECEIVED BY THE ASSESSEE DURING F.YS. 2000-01 TO 2006-07. FOR T HIS PURPOSE THE AO HAD REQUIRED THE ASSESSEE TO FURNISH PARTICULARS OF ALL SHARE SU BSCRIPTION AMOUNTS RECEIVED DURING THESE 7 ASSESSMENT YEARS. AFTER THE ASSESSEE FURNIS HED THE INFORMATION, THE AO ISSUED NOTICES U/S 133(6) TO ALL THE SHARES SUBSCRIBERS RE QUIRING THEM TO FURNISH CONFIRMATIONS AND SUPPORTING DOCUMENTS SET OUT IN THE NOTICE. IT WAS IN RESPONSE TO THE NOTICES U/S 133(6) THE SHARE SUBSCRIBING COMPANIES FILED COPIES OF RETRACTION AFFIDAVITS. THE SHARE SUBSCRIBING COMPANIES NOT ONLY CONFIRMED THAT THEY SUBSCRIBED TO THE SHARES OF THE APPELLANT BUT ALSO FILED COPIES OF THE I T ACKNOWLE DGMENT, BALANCE SHEET FOR THE RELEVANT YEAR AND BANK STATEMENTS IN SUPPORT OF THE IR TRANSACTIONS, FROM PERUSAL OF THE ASSESSMENT ORDER IT APPEARED THAT SAVE AND EXCEPT T HE RETRACTION AFFIDAVITS, THE AO DID NOT EVEN ACKNOWLEDGE THE FACT THAT THE CONFIRMATION S WERE FILED BY THE SUBSCRIBER COMPANIES IN COMPLIANCE TO NOTICES U/S 133(6). THE AO DID NOT DEAL ON MERIT, ANY OF THE DOCUMENTS FILED BY THE COMPANIES AS REQUISITION ED U/S 133(6). THE OMISSION ON THE AOS PART TO EVEN MAKE REFERENCE TO THE INFORMATION GATHERED U/S 133(6) WAS QUITE GLARING, TO SAY THE LEAST. 11. FROM THE INFORMATION WHICH WAS ON AOS RECORD I T APPEARED THAT THE AO HAD CONDUCTED HIS OWN ENQUIRY; INDEPENDENT OF STATEMENT S RECORDED BY THE ADIT (INV). IN RESPONSE TO NOTICES ISSUED U/S 133(6) THE INVESTING COMPANIES HAD CONFIRMED IN WRITING THEIR TRANSACTIONS WITH THE ASSESSEE. THE INVESTOR COMPANIES HAD FUNIISHED RELEVANT DOCUMENTS SUCH AS I T ACKNOWLEDGEMENT, BALANCE SHEE T AND THE BANK STATEMENTS. AFTER RECEIVING THE DOCUMENTS, THE AO CHOSE TO ENTIRELY I GNORE AND OVERLOOK THEM. IN THE IMPUGNED ORDER THE AO DEALT ONLY WITH RETRACTION AF FIDAVITS. THE AOS FAILURE TO EVEN MENTION AND DEAL WITH DOCUMENTS FURNISHED BY THE SH ARE APPLICANT COMPANIES INDICATED THE CONJECTURE ON THE AOS PART. THE DOCUMENTS FURN ISHED BY THE SHARE APPLICANT COMPANIES SHOULD HAVE BEEN DEALT WITH ON THEIR MERI TS BY THE AO BECAUSE THESE DOCUMENTS ESTABLISH THAT EACH COMPANY HAD SUBSCRIBE D TO THE SHARE CAPITAL OF THE APPELLANT. UNLESS THE AO DEALT ON MERIT WITH DOCUME NTS FILED BY EACH COMPANY HE COULD NOT AND SHOULD NOT HAVE COME TO CONCLUSION TH AT THE SUBSCRIPTION AMOUNTS REPRESENTED ASSESSEES UNDISCLOSED INCOME ASSESSABL E U/S 68 OF THE ACT. 12. SEC 68 OF THE I T ACT PROVIDES AS FOLLOWS: WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATI ON ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, I N THE OPINION OF THE (ASSESSING) OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE C HARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. PROVISIONS OF SEC.68 HAVE BEEN JUDICIALLY CONSIDERE D IN MANY JUDGMENTS, INCLUDING CALCUTTA HIGH COURT. AS PER THE JUDICIAL INTERPRETA TION OF SEC.68; AN ADDITION U/S 68 CAN BE MADE WHERE AN ASSESSEE FAILS TO PROVE IDENTITY O F THE CREDITOR; HIS CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. IN THE PRESENT CASE IT WAS NECESSARY FOR AO TO PROVE 11 THAT ON ALL 3 TOUCHSTONES THE ASSESSEE HAD FAILED A ND THEREFORE ADDITION WAS WARRANTED. IT WAS THEREFORE, NECESSARY THAT THE AO PROVED INFIRMI TY IN THE DOCUMENTS, TO WARRANT ADDITION U/S 68. 13. BEFORE THE AO THE ASSESSEE HAD FURNISHED PARTIC ULARS OF THE SHARE SUBSCRIPTION AMOUNTS RECEIVED. AFTER RECEIPT OF THE INFORMATION THE AO ISSUED AND SERVED NOTICES U/S 133(6) AT THE ADDRESSES FURNISHED BY THE ASSESSEE W HICH FACT PROVED THAT THE SHARE SUBSCRIBERS EXISTED AT THE GIVEN ADDRESSES. IN RESP ONSE, THE SUBSCRIBERS CONFIRMED THE TRANSACTIONS WITH THE ASSESSEE. BESIDES THEY FILED COPIES OF I T ACKNOWLEDGMENTS WHICH PROVED THAT THEY WERE REGULARLY ASSESSED TO TAX. CO PIES OF BALANCE SHEETS WERE FILED IN WHICH INVESTMENTS IN THE APPELLANTS SHARE WAS REFL ECTED. EACH OF THE SUBSCRIBERS HAD ACCOUNT WITH SCHEDULED BANK. THE BANKS ALLOW OPERAT ION OF THE ACCOUNTS ONLY AFTER IDENTITY OF THE ACCOUNT HOLDER IS CERTIFIED BY AN I NDEPENDENT PROOF. THE DOCUMENTS PLACED BEFORE THE AO THEREFORE PROVED IDENTITY OF E ACH SHARE SUBSCRIBER. BANK STATEMENTS OF THE SHARE SUBSCRIBERS CONTAINED ENTRI ES OF PAYMENTS MADE TO THE ASSESSEE, THE DOCUMENTS CUMULATIVELY PROVED THE GENUINENESS O F THE TRANSACTION BETWEEN THE ASSESSEE AND THE SHARE SUBSCRIBERS. 14. THE BALANCE SHEETS OF THE SHARE SUBSCRIBERS SHO WED THAT EACH COMPANY HAD SUBSTANTIAL FUNDS IN THE FORM OF SHARE CAPITAL AND RESERVES OUT OF WHICH THE SHARE SUBSCRIPTION AMOUNTS WERE PAID. THE OWN FUNDS OF TH E INVESTORS WERE SUBSTANTIALLY MORE THAN THE AMOUNTS INVESTED IN THE ASSESSEES SH ARES. THE BALANCE SHEETS ALSO INDICATED THAT THESE COMPANIES WERE REGULARLY INVES TING IN EQUITY SHARES OF OTHER BODIES CORPORATE AND HELD SHARES OF SEVERAL OTHER COMPANIE S. IT WAS NOT A CASE WHERE THE SUBSCRIBERS HAD INVESTED ONLY IN THE SHARES OF THE APPELLANT. COPIES OF THE BANK STATEMENTS SHOWED THAT THESE COMPANIES WERE REGULAR LY CONDUCTING HIGH VALUE TRANSACTIONS WITH OTHER PARTIES. FROM THE ENTRIES I N THE BANK STATEMENTS IT ALSO APPEARED THAT BEFORE THE CHEQUES ISSUED IN FAVOUR OF THE APP ELLANT WERE ENCASHED, NO CASH WAS DEPOSITED IN THE BANK ACCOUNTS OF THE SHARE SUBSCRI BERS, THESE DOCUMENTS PROVED CREDIT WORTHINESS OF THE SHARE SUBSCRIBERS. ON THESE FACTS AND MATERIAL WHICH WAS ADMITTEDLY ON RECORD I HAVE NO HESITATION IN HOLDING THAT THE ASSESSEE WAS ABLE TO ESTABLISH IDENTITY OF THE CREDITOR, GENUINENESS OF THE TRANSACTIONS AN D CREDIT WORTHINESS OF THE SHARE SUBSCRIBERS. 15. EVEN THOUGH ALL THE RELEVANT DOCUMENTS WERE AVA ILABLE BEFORE THE AO HE SIMPLY IGNORED THE DOCUMENTS AND CHOSE TO MAKE THE ADDITIO N SOLELY ON THE BASIS OF STATEMENT ORIGINALLY RECORDED FROM SHRI KHEMKA. THE STATEMENT OF SHRI KHEMKA HAS BEEN SELECTIVELY EXTRACTED IN THE ASSESSMENT ORDER. FROM THE DISCUSSION IN THE ASSESSMENT ORDER IT APPEARED THAT ALTHOUGH SHRI KHEMKA ADMITTE D OF PROVIDING ACCOMMODATION ENTRIES; HIS STATEMENT WAS NOT BACKED BY ANY MATERI AL. HE HAD NOT EXPLAINED THE PRECISE ROUTE THROUGH WHICH THE ALLEGED CASH TRAVELED AND H OW IT GOT CONVERTED INTO CHEQUES. HIS STATEMENT DID NOT EXPLAIN HOW THE CASH ALLEGEDL Y RECEIVED FROM THE ASSESSEE FOUND ITS WAY IN THE BANK ACCOUNTS OF THE SHARE SUBSCRIB ING COMPANIES. AS THIS VITAL LINK WAS MISSING THE AO WAS ASKED TO ENQUIRE IN ULTIMATE DES TINATION OF CASH WHICH THE AO FAILED TO DO. MOREOVER WHEN THE SUBSCRIBERS FILED T HE RELEVANT DOCUMENTS WHICH PROVED TRANSACTION IS WITH THE ASSESSEE; THE AO CHOSE TO I GNORE INSTEAD OF DEALING WITH THEM ON MERITS. IN MY OPINION THE COURSE ADOPTED BY AO I.E. COMPLETELY IGNORING THE DOCUMENTARY EVIDENCES; WAS JUDICIALLY AS WELL AS AD MINISTRATIVELY IMPROPER. ONCE THE AO HAD GATHERED THE DOCUMENTS AND INFORMATION BY IS SUING NOTICES U/S 133(6) THEN IT 12 WAS BOTH HIS DUTY AND LEGAL OBLIGATION TO DEAL WITH THE EVIDENCES ON THEIR RESPECTIVE MERIT AND HE COULD NOT IGNORE OR OVERLOOK THE EVIDE NCE. BEFORE DRAWING ADVERSE INFERENCE IT WAS INCUMBENT ON THE AO TO DISPROVE TH E CORRECTNESS AND/OR GENUINENESS OF THE DOCUMENTS OR HE SHOULD HAVE PROVED SPECIFIC INF IRMITY THEREIN. THE AO HOWEVER SIMPLY IGNORED THE DOCUMENTS AND CHOSE TO MAKE ADDI TION U/S 68 ON THE BASIS OF UNSUBSTANTIATED STATEMENT OF SHRI KHEMKA. 16. THE AOS CONCLUSION IS THAT THE ASSESSEE AVAILE D ACCOMMODATION ENTRIES WHERE UNDER ASSESSEES OWN CASH WAS RECEIVED BACK IN FORM OF CHEQUES. NO DOCUMENTARY EVIDENCE IN SUPPORT OF THIS CONCLUSION WAS HOWEVER BROUGHT ON RECORD EITHER IN THE ASSESSMENT OR IN THE REMAND STAGE. THE BANK STATEME NTS OF THE SUBSCRIBERS HOWEVER SHOW THAT NO CASH WAS DEPOSITED IN THE BANK ACCOUNT S OF THE COMPANIES PRIOR TO ENCASHMENT OF CHEQUES BY THE ASSESSEE. IT ALSO APPE ARED FROM THE BANK STATEMENTS THAT CERTAIN AMOUNTS WERE CREDITED THE BANK ACCOUNTS OF THE SUBSCRIBERS BEFORE THE ENCASHMENT OF ASSESSEES CHEQUES BUT THESE AMOUNTS WERE RECEIVED THROUGH BANKING CHANNEL AND NO CASH WAS DEPOSITED IN THE BANK ACCOU NTS OF THE SUBSCRIBERS. THE ENTRIES IN THE BANK STATEMENTS DID NOT SUPPORT AOS CONCLUS ION THAT THE CHEQUES WERE ISSUED BY THE SUBSCRIBERS IN LIEU OF THE CASH BECAUSE CHEQUES WERE NOT ENCASHED AGAINST DEPOSIT OF ANY CASH. HAVING REGARD TO THE ENTRIES IN THE BANK STATEMENTS WHICH WERE AVAILABLE BEFORE THE AO, I FIND THERE WAS NO FACTUAL BASIS FO R THE AOS CONCLUSION THAT ASSESSEE HAD RECEIVED CHEQUES IN LIEU OF THE CASH GIVEN TO S HARE SUBSCRIBERS. VIEWED FROM ANY ANGLE THEREFORE I FIND THAT NONE OF THE 3 CONDITION S WHICH ARE NECESSARY FOR JUSTIFYING AN ADDITION U/S 68 WERE FULFILLED IN THE PRESENT CASE. 17. THE QUESTION AS TO WHETHER SHARE SUBSCRIPTION A MOUNT CAN BE ASSESSED U/S 68 OF THE ACT; HAS ENGAGED ATTENTION OF COURTS FOR THE PAST M ANY YEARS. THE SUPREME COURT IN ITS JUDGMENT IN THE CASE OF CIT VS. LOVELY EXPORTS PVT. LTD (216 CTR 195) HELD AS FOLLOWS: CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDIS CLOSED INCOME U/S 68 OF THE I T ACT 1961? WE FIND NO MERIT IN THIS SPECIAL LEAVE PE TITION FOR THE SIMPLE REASON THAT F SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE FROM THE ALLEGED BOGUS SHARE HOLDERS WHOSE NAMES ARE GIVEN TO THE AO, THEN THE D EPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENT IN ACCORDANCE WI TH LAW. HENCE WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT. 18. THE HONBLE DELHI HIGH COURT IN ITS RECENT DECI SION IN THE CASE OF CIT VS. DWARKADHISH INVESTMENTS (P) LTD (SUPRA), AFTER CONS IDERING CATENA OF THE HIGH COURT JUDGMENTS RENDERED IN THE CONTEXT OF THE ADDITION U /S 68 AND THE AFORESAID DECISION OF THE SUPREME COURT, HELD THAT THOUGH U/S. 68 INITIAL BURDEN LIES ON THE ASSESSEE, YET ONCE HE PROVES THE IDENTITY OF THE SHARE APPLICANTS BY F URNISHING THEIR PANS AND PROVES THE GENUINENESS OF THE TRANSACTION BY SHOWING THAT MONE Y WAS RECEIVED BY ACCOUNT PAYEE CHEQUE OR BY DRAFT OR ANY OTHER MODE THEN THE ONUS OF PROOF SHIFTS TO THE REVENUE AND NO ADDITION U/S 68 IS PERMISSIBLE. 19. IN THE PRESENT CASE I FIND THAT NOT ONLY THE I NITIAL BURDEN WAS DISCHARGED BY THE ASSESSEE BUT THE ASSESSEE AND THE SHARE SUBSCRIBERS HAD FURNISHED BEFORE THE AO ALL RELEVANT DOCUMENTS TO PROVE THE IDENTITY AND THE CR EDIT WORTHINESS OF THE SHARE APPLICANTS. AS AGAINST THE VOLUMINOUS DOCUMENTARY E VIDENCES BROUGHT ON RECORD WHICH REMAINED UNCONTROVERTED; THE AO DID NOT BRING ON RE CORD ANY MATERIAL TO DISPROVE THE 13 GENUINENESS OF THE EVIDENCE FURNISHED BY THE APPELL ANT NOR BROUGHT ON RECORD ANY MATERIAL WHICH PROVED HIS CONCLUSION THAT CASH RECE IVED FROM THE ASSESSEE WAS RETURNED IN THE CHEQUE FORM. SAVE AND EXCEPT THE STATEMENT O F SHRI KHEMKA AND THE SHARE APPLICANTS DATED 20.12.2006, THE AO DID NOT HAVE ON RECORD ANY OTHER MATERIAL TO SUBSTANTIATE THE CHARGE THAT CHEQUES WERE ISSUED BY THE SUBSCRIBER COMPANIES IN LIEU OF THE CASH RECEIVED. STATEMENTS OF SHRI KHEMKA AND TH E SHARES APPLICANT WERE NOT SUPPORTED BY ANY INDEPENDENT DOCUMENTARY EVIDENCE W HEREAS THE CONFIRMATIONS FURNISHED BY THE APPLICANTS IN RESPONSE TO THE NOTI CES U/S 133 (6) WERE BACKED BY COGENT DOCUMENTS WHICH ESTABLISHED IDENTITY AND CREDITWORT HINESS OF THE SHARE APPLICANTS. THESE DOCUMENTS WERE NOT PROVED BY THE AO TO BE FAL SE OR BOGUS AND THEREFORE IN ABSENCE OF CONTRARY MATERIAL I HAVE NO HESITATION I N HOLDING THAT THE AO WAS NOT JUSTIFIED IN TREATING THE AMOUNT RECEIVED WERE UNEX PLAINED CASH CREDIT. FOR THE REASONS SET OUT IN THE FOREGOING THEREFORE I DELETE THE ADD ITION OF RS.95 LACS MADE U/S 68 OF THE ACT. HENCE THE DEPARTMENT IS IN APPEAL BEFORE THE TRIBUN AL. 4. DURING THE COURSE OF HEARING, THE LD. DEPARTMEN TAL REPRESENTATIVE SUPPORTED THE ACTION OF THE A.O. HE SUBMITTED THAT THE LD. C.I.T .(A) HAS DELETED THE ADDITION MADE BY THE A.O. BY CONSIDERING THE SUBSEQUENT RETRACTION M ADE BY SRI ARUN KR. KHEMKA AS WELL AS THE SHARE-APPLICANT COMPANIES. HE SUBMITTE D THAT NO EVIDENCE HAS BEEN BROUGHT ON RECORD THAT THE INVESTIGATION WING RECORDED THE STATEMENT U/S. 132(4) OF THE ACT BY USING COERCION OR THREAT. HE SUBMITTED THAT AS PER EVIDENCE ACT, WHEN A STATEMENT IS RECORDED, IT IS PRIMARY EVIDENCE AND THE SAME SHOUL D NOT BE IGNORED. HE SUBMITTED THAT THE ACTION OF THE A.O. SHOULD BE CONFIRMED. 5. ON THE OTHER HAND, THE LD. A/R SUPPORTED THE OR DER OF LD. C.I.T.(A). HE MADE HIS SUBMISSIONS ON THE LINES OF THE SUBMISSIONS MADE BE FORE THE LD. C.I.T.(A). HE FURTHER SUBMITTED THAT THE A.O. WHILE MAKING THE ASSESSMENT BRUSHED ASIDE THE DOCUMENTARY EVIDENCE AND MADE THE ADDITION MERELY RELYING ON TH E STATEMENT RECORDED AT THE TIME OF INVESTIGATION AND THAT TOO WITHOUT BRINGING ANY COR ROBORATING EVIDENCE ON RECORD. HE FURTHER SUBMITTED THAT THE ASSESSEE WAS NEVER CONFR ONTED WITH THE SAID STATEMENTS ALLEGEDLY RECORDED U/S. 132(4) OF THE ACT TILL OCTO BER, 2008 AND ONLY IN NOVEMBER, 2008 STATEMENTS WERE SHOWN TO THE ASSESSEE. HE SUBMITTE D THAT THE A.O. HIMSELF CALLED FOR DETAILS FROM THE SHARE-APPLICANT COMPANIES BY ISSUI NG NOTICES U/S. 133(6) OF THE ACT AND THE SAID SHARE-APPLICANTS FURNISHED THE REQUISITE D ETAILS BEFORE THE A.O., VIZ., COPIES OF BALANCE SHEETS, BANK STATEMENTS AND ACKNOWLEDGEMENT OF FILING I.T. RETURNS AND ALSO CONFIRMED THAT THEY APPLIED SHARES IN THE ASSESSEE- COMPANY. THE LD. A/R SUBMITTED THAT 14 THE COPIES OF THE RELEVANT DOCUMENTS IN RESPECT OF THE SHARE APPLICATIONS ARE PLACED AT PAGES 2 TO 229 OF THE PAPER BOOK. HE FURTHER SUBMI TTED THAT THE A.O. DID NOT DEAL WITH ANY OF THE EVIDENCE/DOCUMENTS/EXPLANATION FURNISHED BY THE SHARE-APPLICANTS AND MADE THE ADDITION ONLY ON THE BASIS OF STATEMENTS ALLEGE DLY RECORDED U/S. 132(4) OF THE ACT. THE LD. A/R SUBMITTED THAT THE LD. C.I.T.(A) HAS NO T RELIED ONLY THE RETRACTED STATEMENTS WHILE DELETING THE ADDITION MADE BY THE A.O. BUT AL SO CONSIDERED THE COPIES OF THE DOCUMENTS FILED BY THE SHARE-APPLICANTS AND ALSO CO NSIDERING THE REMAND REPORT OF THE A.O. IN RESPECT OF ADMISSIBILITY OF CONFESSIONAL S TATEMENT, THE LD. A/R REFERRED THE DECISION OF HONBLE APEX COURT IN THE CASE OF VINOD SOLANKI VS. UNION OF INDIA & ANOTHER IN CIVIL APPEAL NO. 740 OF 2008 DATED 18/12 /2008 AND IN PARTICULAR PARAS 14, 22 & 34 OF THE SAID JUDGMENT AND SUBMITTED THAT THE ENTIRE BURDEN TO PROVE THAT THE CONFESSION WAS VOLUNTARY IN NATURE IS ON THE DEPART MENT. HE SUBMITTED THAT THE SAID DECISION OF HONBLE APEX COURT WAS FOLLOWED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. UTTAM CHAND JAIN IN INCOME TAX APPEAL NO. 634 OF 2009 AND THE HONBLE BOMBAY HIGH COURT VIDE ITS JUDGMENT DATED 2 /7/2009 HELD THAT THE RETRACTED CONFESSION COULD BE RELIED UPON IF THERE IS INDEPEN DENT AND COGENT EVIDENCE TO CORROBORATE THE SAID STATEMENT. HE SUBMITTED THAT IN THE SAID CASE, THE HONBLE BOMBAY HIGH COURT CONFIRMED THE ORDER OF THE TRIBUNAL, WHE REIN THE TRIBUNAL HAD GIVEN THE FINDING THAT THE STATEMENT OF ONE MR. TRIVEDI TO TH E EFFECT THAT HE WAS NOT DOING ACTUAL BUSINESS OF TRADING AND MANUFACTURE OF DIAMONDS AND THAT THE TRANSACTIONS REFLECTED IN HIS BOOKS OF ACCOUNTS WERE MERELY ACCOMMODATION ENT RIES GIVEN TO VARIOUS VDIS DECLARANTS WAS ONLY A GENERAL STATEMENT AND NOT BAS ED ON ANY INDEPENDENT EVIDENCE GATHERED PRIOR TO OR DURING THE COURSE OF REASSESSM ENT PROCEEDINGS AND, ON THE OTHER HAND, THE ENTRIES FOUND RECORDED IN THE BOOKS WERE CONSIDERED AS GENUINE AND THE TRANSACTION WAS HELD TO BE GENUINE. HE SUBMITTED T HAT THE LD. C.I.T.(A) HAS CATEGORICALLY STATED IN PARA-14 OF THE IMPUGNED ORDER THAT ON PER USAL OF THE BANK STATEMENTS IT WAS FOUND THAT NO CASH WERE DEPOSITED IN THE BANK ACCOU NTS OF THE SHARE APPLICANTS BEFORE ISSUING CHEQUES AND, THEREFORE, THE ALLEGED STATEME NT OF SRI ARUN KR. KHEMKA IS NOT SUBSTANTIATED BY ANY MATERIAL ON RECORD. HE SUBMIT TED THAT THE ASSESSEE HAS ESTABLISHED 15 NOT ONLY THE IDENTITY AND CREDITWORTHINESS OF THE S HARE-APPLICANTS BUT ALSO THE GENUINENESS OF THE TRANSACTION. THEREFORE, THE ORD ER OF LD. C.I.T.(A) BE CONFIRMED. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF TH E PARTIES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE FACTS OF THE CASE HAVE BEEN NARRATED ABOVE. AFTER PERUSING THE ASSESSMENT ORDER, WE OBSERVE THAT THE IMPUGNED ADDITION U/S. 68 OF THE ACT OF RS.95 LAKHS WAS MADE BY THE A.O. MAINLY RELYING ON THE ST ATEMENT OF SHRI KHEMKA RECORDED ON 9/12/2006 U/S. 132(4) OF THE ACT IN WHICH HE HAD CLAIMED TO HAVE ADMITTED THAT THE ASSESSEE-COMPANY WAS PROVIDED ACCOMMODATION ENTRIES BY THE COMPANIES CONTROLLED BY HIM IN LIEU OF CASH RECEIPT. SIMILAR STATEMENTS WER E ALSO CLAIMED TO HAVE BEEN MADE BY THE DIRECTORS OF THE SHARES SUBSCRIBING COMPANIES I N THE LETTERS FILED BEFORE ADIT (INV) DATED 20.12.2006. EXCEPT THESE STATEMENTS OF SRI KH EMKA AND DIRECTORS OF THE SHARE- APPLICANT COMPANIES, NO OTHER CORROBORATIVE OR SPEC IFIC EVIDENCE COULD BE BROUGHT ON RECORD BY THE A.O. TO JUSTIFY THE DEPTH OF AUTHENTI CITY OF SUCH STATEMENTS AND SUBSEQUENT ACTION THEREUPON AS PER LAW, WHICH WERE SUBSEQUENTL Y RETRACTED BY THOSE PERSONS BY FILING LETTER AND/OR AFFIDAVITS STATING THEREIN THA T THE SEARCHING TEAM RECORDED THE STATEMENT OF SRI AURN KR. KHEMKA BY USING COERCION AND THREAT AND FURTHER IT WAS DUE TO UNDUE INFLUENCE, PRESSURE AND THREAT OF DIRE CONSEQ UENCES BY THE DDIT THAT THE DIRECTORS OF THE SHARE-APPLICANT COMPANIES WERE COM PELLED TO MAKE STATEMENTS, WHICH WERE BEYOND THE CORRECT STATE OF AFFAIRS. WE OBSERV E THAT THE LD. C.I.T.(A) NOT ONLY CONSIDERED THE RETRACTED STATEMENT BUT ALSO CONSIDE RED THE EVIDENCES FILED IN SUPPORT OF PAYMENTS MADE TOWARDS SHARE APPLICATION MONEY IN RE SPONSE TO NOTICE U/S. 133(6) OF THE ACT. WE OBSERVE FROM THE ASSESSMENT ORDER THAT THE A.O. DID NOT EXAMINE SRI KHEMKA OR THE DIRECTORS OF THE SHARE-APPLICANT COMPANIES O N THEIR RETRACTION FROM THE EARLIER STATEMENTS TO ESTABLISH THAT THE CASH WAS GIVEN BY THE ASSESSEE BEFORE INTRODUCTION OF THE SAME IN THE SHAPE OF SHARE APPLICATION MONEY FOR TH E SHARES OF THE ASSESSEE-COMPANY. HE HAS ALSO NOT MADE ANY EFFORTS TO LINK THE CASH R ECEIVED AND DEPOSITED BY SRI KHEMKA IN HIS BANK ACCOUNT TO ESTABLISH THAT THE MONEY WAS , IN FACT, CAME FROM THE COFFER OF THE ASSESSEE. THEREFORE, THE SHARE APPLICATION MONEY WA S THE UNDISCLOSED MONEY OF THE ASSESSEE, AS ALLEGED BY THE A.O. IS NOT BASED ON AN Y INDEPENDENT EVIDENCE GATHERED PRIOR TO OR DURING THE COURSE OF ASSESSMENT PROCEED INGS. IT IS ALSO AN ESTABLISHED POSITION 16 IN LAW THAT THE INITIAL BURDEN TO PROVE THAT THE CO NFESSION WAS VOLUNTARY IN NATURE WOULD BE ON THE DEPARTMENT, WHICH, IN OUR OPINION, HAS NO T BEEN DISCHARGED BY THE DEPARTMENT. THE LD. A/R RELIED ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF VINOD SOLANKI VS. UNION OF INDIA (SUPRA) AND DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. UTTAMCHAND JAIN (SUPRA). THE HONBLE BOMBA Y HIGH COURT IN THE CASE OF CIT VS. UTTAMCHAND JAIN (SUPRA) FOLLOWING THE SAID DECI SION OF HONBLE APEX COURT HAS HELD THAT THE RETRACTED CONFESSION OF A PERSON CAN BE RE LIED UPON ONLY IF THERE IS INDEPENDENT AND COGENT EVIDENCE TO CORROBORATE THE STATEMENT OF THAT PERSON MADE EARLIER. IN THE PRESENT CASE, THE DIRECTORS OF THE SHARE-APPLICANT COMPANIES NOT ONLY RETRACTED THEIR STATEMENTS RECORDED EARLIER BY FILING AFFIDAVITS BU T ALSO FILED AUDITED ACCOUNTS, EVIDENCE OF FILING OF I.T. RETURN, BANK STATEMENT, DETAILS O F CHEQUES AND SHARE APPLICATION ETC. IN SUPPORT OF GENUINENESS OF SHARE APPLICATION MONEY. THEREFORE, IN OUR CONSIDERED OPINION, THE LD. C.I.T.(A) ACTED JUDICIOUSLY IN TAK ING INTO CONSIDERATION THE RETRACTED STATEMENTS CORROBORATED BY THE EVIDENCES REFERRED T O ABOVE. 7. NOW LET US EXAMINE WHETHER ADDITION OF RS.95 LA KHS IS WARRANTED IN THE HANDS OF THE ASSESSEE ON THE GIVEN FACTS AND CIRCUMSTANCES O F THE CASE AS ALSO EVIDENCE ON RECORD. PROVISIONS OF SEC.68 OF THE ACT HAVE BEEN JUDICIALL Y CONSIDERED BY SEVERAL COURTS OF LAW, AS PER WHICH AN ADDITION U/S. 68 CAN BE MADE WHERE AN ASSESSEE FAILS TO PROVE IDENTITY OF THE CREDITOR; HIS CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. IN THE PRESENT CASE IT WAS NECESSARY FOR A.O. TO PROVE THAT ON ALL 3 IN GREDIENTS THE ASSESSEE HAD FAILED AND, THEREFORE, ADDITION WAS WARRANTED. IT WAS THEREFORE , NECESSARY THAT THE AO PROVED INFIRMITY IN THE DOCUMENTS TO WARRANT ADDITION U/S. 68 OF THE ACT. IN THIS CASE, THE A.O. HAD ISSUED NOTICES U/S. 133(6) OF THE ACT TO ALL TH E SHARE-APPLICANT COMPANIES, WHICH WERE DULY SERVED AT THE ADDRESSES FURNISHED BY THE ASSESSEE. THIS PROVES THE IDENTITY OF THE SHARE APPLICANTS. FURTHER, IN RESPONSE TO THE S AID NOTICE U/S. 133(6) OF THE ACT, EACH OF THE SHARE-APPLICANTS FURNISHED THEIR REPLIES CON FIRMING THE TRANSACTIONS WITH THE ASSESSEE-COMPANY. THE SHARE-APPLICANT COMPANIES NOT ONLY ADMITTED THE FACT OF MAKING INVESTMENTS IN THE SHARE CAPITAL OF THE ASSESSEE-CO MPANY, BUT ALSO SUBSTANTIATED THEIR CONFIRMATION BY FILING COPIES OF THE AUDITED ACCOUN TS, BANK STATEMENTS, ACKNOWLEDGEMENT OF FILING OF I.T. RETURNS FOR THE A SSESSMENT YEAR UNDER CONSIDERATION, 17 DETAILS OF CHEQUE AND SHARE APPLICATION. IN THE AUD ITED ACCOUNTS OF THE SHARE APPLICANTS AND ALSO IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, T HE IMPUGNED SHARE TRANSACTIONS BY ACCOUNT PAYEE CHEQUES HAVE BEEN DULY REFLECTED. THE SHARE-APPLICANT COMPANIES HAVE ALSO EXPLAINED THE IMMEDIATE SOURCE OUT OF WHICH TH EY HAVE CLAIMED TO HAVE MADE INVESTMENTS IN THE SHARES OF THE ASSESSEE-COMPANY. WE FURTHER OBSERVE FROM THE BANK STATEMENTS OF THE SHARE-APPLICANTS THAT NO CASH WAS DEPOSITED IN THE ACCOUNTS OF THE SHARE-APPLICANTS PRIOR TO ACKNOWLEDGEMENT OF CHEQUE S FOR SHARE APPLICATION MONEY. IT IS PERTINENT TO MENTION HERE THAT THE A.O. OF HIS O WN COLLECTED THE ABOVE INFORMATION/ EVIDENCE DIRECTLY FROM THE SHARE-APPLICANT COMPANIE S U/S. 133(6) OF THE ACT. THESE FACTS WITH SUPPORTING EVIDENCE, THEREFORE, CUMULATI VELY PROVE THE IDENTITY OF THE SHARE APPLICANTS, THEIR CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS. THEREFORE, THE ONUS CAST ON THE ASSESSEE U/S. 68 OF THE ACT, IN OU R CONSIDERED OPINION, WAS DULY DISCHARGED BY IT. ON THE OTHER HAND, THE A.O. NOT ONLY FAILED TO PROVE ANY INFIRMITY OR INACCURACY IN ANY OF THE DOCUMENTS COLLECTED BY HIM BUT ALSO IGNORED SUCH EVIDENCE MERELY ON SURMISE AND CONJECTURE. THEREFORE, WHEN A LL THE INGREDIENTS CONTAINED IN SEC. 68 ARE FULFILLED, THERE IS HARDLY ANY SCOPE TO INVO KE THAT SECTION ALLEGING INTRODUCTION OF UNEXPLAINED FUND BY WAY OF SHARE APPLICATION, MORE SO WHEN NO EVIDENCE COULD BE BROUGHT ON RECORD BY THE DEPARTMENT TO THE CONTRARY . 7.1. THE HONBLE RAJASTHAN HIGH COURT HAS HELD IN THE CASE OF BARKHA SYNTHETICS LTD. VS. ACIT [2005] 197 CTR 432 (RAJ.) THAT THE PRINCIP LE RELATING TO BURDEN OF PROOF CONCERNING ASSESSEE IS THAT WHETHER THE MATTER CONC ERNS THE MONEY RECEIPTS BY WAY OF SHARE APPLICATION FROM INVESTORS, THROUGH BANKING C HANNELS, ASSESSEE HAS TO PROVE EXISTENCE OF PERSONS IN WHOSE NAME THE SHARE APPLIC ATION IS RECEIVED. ONCE THE EXISTENCE OF INVESTOR IS PROVED, IT IS NO FURTHER B URDEN OF THE ASSESSEE TO PROVE WHETHER THAT PERSON ITSELF HAS INVESTED THE SAID MONEY OR S OME PERSON MADE INVESTMENT IN THE NAME OF THAT PERSON. THE BURDEN THEN SHIFTS ON REVE NUE TO ESTABLISH THAT SUCH INVESTMENT HAS COME FROM ASSESSEE-COMPANY ITSELF. IN THE CASE BEFORE US, DEPARTMENT DOUBTS INTRODUCTION OF SHARE CAPITAL BY THE SHARE APPLICAN TS WHEN IT IS STATED BY THE A.O. THAT THE SHARES OF THE ASSESSEE-COMPANY HAVE BEEN SUBSCR IBED BY VARIOUS COMPANIES THROUGH CERTAIN BOGUS TRANSACTIONS IN WHICH CHEQUES WERE IS SUED TO THE ASSESSEE-COMPANY IN LIEU 18 OF CASH GIVEN. HOWEVER, AS STATED ABOVE, NO EVIDENC E IS BROUGHT ON RECORD BY THE DEPARTMENT THAT THE SHARE APPLICATION MONEY HAS BEE N BROUGHT IN THE NAME OF THE SHARE APPLICANTS BY THE ASSESSEE-COMPANY. HONBLE APEX C OURT IN THE CASE OF CIT VS. DAULAT RANT RAWATMULI [87 ITR 349 (SC)] HAS HELD THAT ONUS TO PROVE THAT THE APPARENT IS NOT THE REAL IS ON THE PERSON WHO CLAIMS IT TO BE SO. T HEREFORE, THE ONUS IS ON THE DEPARTMENT TO PROVE THAT THE SHARE APPLICATION MONEY SUBSCRIBE D TO THE SHARE CAPITAL OF THE ASSESSEE- COMPANY BY THE ABOVE NAMED SHARE APPLICANTS IS NOT THE MONEY OF THE SHARE APPLICANTS BUT OF THE ASSESSEE-COMPANY, IS ON THE DEPARTMENT. HOWEVER, THE DEPARTMENT HAS NOT BROUGHT ANY MATERIAL ON RECORD TO ESTABLISH THE SAM E. WE ARE OF THE CONSIDERED VIEW THAT THE A.O. DOUBTED THE GENUINENESS OF THE SHARE APPLI CATION MONEY ON SURMISES AND CONJECTURE AND HAS NOT BROUGHT COGENT MATERIAL ON R ECORD TO ESTABLISH THE BOGUS NATURE OF TRANSACTION. 7.2. WE MAY FURTHER REFER TO THE THIRD MEMBER DECIS ION OF I.T.A.T., JODHPUR BENCH IN THE CASE OF POLYMERS (P) LTD. VS. DCIT [111 TTJ 112] WHEREIN IT WAS HELD THAT IN RESPECT OF SHARE APPLICATION MONEY, ASSESSEE-COMPAN Y HAS TO PROVE EXISTENCE OF PERSONS IN WHOSE NAME SHARE APPLICATION IS RECEIVED. NO BUR DEN IS CAST ON THE ASSESSEE TO PROVE WHETHER THAT PERSON HIMSELF HAS INVESTED OR SOME OT HER PERSON HAS MADE INVESTMENT IN HIS NAME. THE BURDEN TO PROVE THAT THE MONEY DID NO T BELONG TO HIM BUT TO SOME BODY ELSE IS ON THE REVENUE. IT WAS FURTHER HELD THAT IF ANY OF THE SHAREHOLDERS IS FOUND TO HAVE MADE UNEXPLAINED INVESTMENT, THEN ADDITION OF SUCH INVESTMENT IS REQUIRED TO BE MADE IN THE HANDS OF THE SHAREHOLDERS AND NOT IN THE HAN DS OF THE ASSESSEE. ACCORDINGLY, IT WAS HELD THAT THE A.O. WAS NOT JUSTIFIED IN TREATIN G THE INVESTMENT MADE BY THE SEVERAL SHAREHOLDERS IN THE ASSESSEE-COMPANY AS BOGUS AND T O MAKE ADDITION U/S. 68 OF THE ACT. 7.3. THE HONBLE APEX COURT HAS CONSIDERED THE SIM ILAR ISSUE IN THE CASE OF CIT VS. M/S. LOVELY EXPORTS (P) LTD. [216 C.T.R. 195 (SC)] AND HELD AS UNDER :- CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISC LOSED INCOME UNDER S. 68 OF I.T. ACT, 1961? WE FIND NO MERIT IN THIS SPECIAL L EAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEI VED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GI VEN TO THE A.O., THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIV IDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. HENCE, WE FIND NO INFIRMITY WITH THE IMP UGNED JUDGMENT. 19 IN THE CASE UNDER CONSIDERATION BEFORE US, AS STATE D ABOVE, THE ASSESSEE HAS FURNISHED THE DETAILS OF SHAREHOLDERS WITH COMPLETE ADDRESS, PAN DETAILS, BANK STATEMENTS, DETAILS OF I.T. RETURNS ETC. THE TRANSACTIONS ARE ADMITTEDLY R ECORDED IN THE AUDITED BOOKS OF ACCOUNTS OF BOTH THE ASSESSEE-COMPANY AS WELL AS SH ARE-APPLICANT COMPANIES, WHO PURCHASED SHARES OF THE ASSESSEE-COMPANY. THEREFORE , NO ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDIT IS WARRANTED IN THE CASE OF THE ASSESSEE ON THE GIVEN FACTS AND CIRCUMSTANCES AS DISCUSSED ABOVE. IN VIEW OF THE AB OVE, IN OUR OPINION, THE ACTION OF THE A.O. IS CONTRARY TO THE DECISION OF HONBLE APEX CO URT IN THE CASE OF CIT VS. M/S. LOVELY EXPORTS (P) LTD. (SUPRA). 7.4. IN VIEW OF ABOVE FACTS AND THE DECISIONS CITE D SUPRA, WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO INFIRMITY IN THE ORDER OF THE LD. C.I.T.(A) IN DELETING THE ADDITION RS. 95 LAKHS MADE BY THE A.O. U/S. 68 OF THE ACT. HENCE, WE UPHOLD HIS ORDER AND REJECT THE GROUND OF APPEAL TAKEN BY THE DEPARTMENT. 8. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED. 4 '3 #5' 6 5% 7 48 THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON 05 TH SEPT. 2011 SD/- SD/- ( . .. . ! ! ! !. .. . ) '# ( . . . . . .. . ) (C.D.RAO) , ACCOUNTANT MEMBER (B.R.MITTAL) , JUDICIAL MEMBER ( (( (!# !# !# !#) )) ) DATE: 05 TH SEPT.,2011 '3 1 /9 :'9';- COPY OF THE ORDER FORWARDED TO : 1. +, / THE APPELLANT : A.C.I.T., CENTRAL CIRCLE-XXIV, KOLKATA. 2 /0+, / THE RESPONDENT : M/S. R.S. ISPAT LTD., B-401, CITY CENTRE, SALT LAKE , KOLKATA-700 064. 3. 3% () : THE C.I.T.(A), CENTRAL-III, KOLKATA. 4. 3% : THE C.I.T., CENTRAL-III, KOLKATA. 5. ?7 /% / DR, ITAT, KOLKATA BENCHES, KOLKATA 6 . GUARD FILE . 09 // TRUE COPY, '3%5/ BY ORDER, (DKP) @ A / DY/ASSTT. REGISTRAR .