M/s. Prabhatam Investment Pvt. Ltd., Delhi V. ACIT, New Delhi

ITA 2525/DEL/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3501 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 28-03-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 30-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Keywords: Unexplained cash credit; Bogus Share capital; Unexplained investment; Income from undisclosed sources; Share purchase agreement; Question of law; Accommodation entries; Assessment record; Onus to prove
• Section: 143(3); 153A; 133(6); 68; 132

Judgement Text

I.T.A .NO.-2523 TO 2525/DEL/2015 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE SH. BHAVNESH SAINI, JUD ICIAL MEMBER AND SH.L.P.SAHU, ACCOUNTANT MEMBER I.T.A .NO.-2525/DEL/2015 (ASSESSMENT YEAR-2011-12) PRABHATAM INVESTMENT PVT. LTD., RASTRIYA TOWER, 38, RANI JHANSI ROAD, JHANDEWALAN, DELHI. PAN-AAECP1021H ( APPELLANT) VS ACIT, CENTRAL CIRCLE-15, NEW DELHI. (RESPONDENT) I.T.A .NO.-2523/DEL/2015 (ASSESSMENT YEAR-2011-12) PRABHATAM BUILDTECH LTD., RASTRIYA TOWER, 38, RANI JHANSI ROAD, JHANDEWALAN, DELHI-110055. PAN-AADCP9211E ( APPELLANT) VS ACIT, CENTRAL CIRCLE-15, NEW DELHI. (RESPONDENT) I.T.A .NO.-2524/DEL/2015 (ASSESSMENT YEAR-2011-12) PRABHATAM BUILDWELL LTD., RASTRIYA TOWER, 38, RANI JHANSI ROAD, JHANDEWALAN, DELHI. PAN-AADCP7475N ( APPELLANT) VS ACIT, CENTRAL CIRCLE-15, NEW DELHI. (RESPONDENT) ASSESSEE BY SH. GAUTAM JAIN, ADV. REVENUE BY SH.S.S.RANA, CIT DR DATE OF HEARING 28.03.2017 DATE OF PRONOUNCEMENT 17.04.2017 ORDER PER BHAVNESH SAINI, JUDICIAL MEMBER THIS APPEAL SHALL DISPOSED OFF ALL THE ABOVE APPEA LS FILED BY DIFFERENT ASSESSEES AGAINST DIFFERENT ORDERS OF CIT(A)-XXVI, NEW DELHI DATED 27.03.2015 AND 30.03.2015 FOR AY. 2011-12. 2. SINCE IDENTICAL ISSUES ARE INVOLVED IN ALL THE G ROUP APPEALS, THEREFORE, LD. REPRESENTATIVES OF BOTH THE PARTIES MAINLY ARGUED I N ITA NO.2525/DEL/2015 PAGE 2 OF 23 I.T.A .NO.-2523 TO 2525/DEL/2015 (M/S. PRABHATAM INVESTMENT PVT.LTD.) AND SUBMITTED THAT ISSUES ARE IDENTICAL IN THE REMAINING APPEALS AND ORDER IN ITA NO.2525/D EL/2015 MAY BE FOLLOWED IN OTHER APPEALS. 3. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PA RTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FOR THE PURPOSE OF D ISPOSAL OF ALL THE APPEALS, WE FIRST DECIDE THE APPEAL IN ITA NO.2525/DEL/2015 AS UNDER:- ITA NO.2525/DEL/2015 (PRABHATAM INVESTMENT PVT.LTD. ) 4. IN THE PRESENT APPEAL, THE ASSESSEE CHALLENGED T HE ORDER OF LD. CIT(A) IN UPHOLDING THE INITIATION OF PROCEEDINGS U/S 153A OF THE I.T.ACT, 1961 (IN SHORT ACT) AND FRAMING OF ASSESSMENT U/S 153A/143(3) SI NCE NO INCRIMINATING MATERIAL WAS FOUND AS A RESULT OF SEARCH CONDUCTED IN THE CASE OF THE ASSESSEE AND HAS ALSO CHALLENGED THE UPHOLDING OF THE ADDIT ION OF RS.5.75 CRORES ON ACCOUNT OF UNEXPLAINED SHARE APPLICATION MONEY. 5. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ORIGI NAL RETURN WAS FILED ON 30.03.2012 DECLARING LOSS AT RS.3,54,378/-. ACTION U/S 132 OF THE ACT WAS CARRIED OUT BY THE DEPARTMENT ON 19.03.2012 IN PRAB HATAM GROUP OF CASES AT THEIR BUSINESS AND RESIDENTIAL PREMISES OF THE DIRE CTORS. DURING THE COURSE OF SEARCH VARIOUS BOOKS OF ACCOUNTS AND DOCUMENTS ETC. WERE FOUND AND SEIZED. NOTICE U/S 153A OF THE ACT WAS ISSUED ON 08.05.2013 AND THE ASSESSEE IN RESPONSE FILED LETTER STATING THAT IT HAD ALREADY F ILED RETURN OF INCOME U/S 139(1) OF THE ACT AND SAME MAY BE TREATED AS FILED IN RESPONSE TO NOTICE U/S 153A OF THE ACT. THE AO ISSUED QUESTIONNAIRE TIME TO TIME AND ASKED THE ASSESSEE TO FILE THE REQUIRED DETAILS. THE ASSESSE E ATTENDED THE PROCEEDINGS BEFORE AO AND FILED THE REQUIRED DETAILS. THE ASSE SSEE COMPANY IS ENGAGED IN THE BUSINESS OF INVESTMENT. IN THE ASSESSMENT YEAR UNDER APPEAL, THE PAGE 3 OF 23 I.T.A .NO.-2523 TO 2525/DEL/2015 ASSESSEE HAS RAISED SHARE APPLICATION MONEY TO THE TUNE OF RS.5.75 CRORES FROM KOLKATA/HOWRAH BASED COMPANY NAMELY M/S PUNEET OILS & CHEMICALS PVT. LTD. (RS.3.25 CRORES) AND M/S TANISH TRADECOM P.LTD. (RS.2.50 CRORES). THE ASSESSEE WAS ASKED TO FILE DETAILS OF SHARE APP LICATION MONEY, TRANSFER OF SHARE IF ANY, NAME AND ADDRESS OF THE SHAREHOLDERS, DETAILS OF SHARE APPLICATION MONEY RECEIVED AND TO PROVE IDENTITY, C REDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS. THE ASSESSEE FILE D DETAILS OF SHARE APPLICANTS FROM WHOM SHARE APPLICATION MONEY WAS RECEIVED. 6. DURING THE SEARCH, PRE-SEARCH AND POST-SEARCH PR OCEEDINGS ON THE KJS GROUP GROUP, IT WAS FOUND THAT COMPANIES OF KJS REC EIVED HUGE AMOUNT OF SHARE CAPITAL/APPLICATION MONEY WITH PREMIUM FROM V ARIOUS ENTITIES INCLUDING ENTITIES OF KOLKATA. THESE COMPANIES WERE INCLUSIV E OF THE ABOVE TWO COMPANIES AND M/S PANKAJ INFOTECH PVT. LTD. WHEN IN QUIRED ABOUT THE HISTORY OF THESE COMPANIES, IT WAS GATHERED THAT THESE THRE E COMPANIES WERE INCORPORATED IN FY 2007-08. DURING THE FIRST YEAR OF INCORPORATION OF THE THREE ENTITIES ALLOTTED SHARES AT UNWARRANTED AND UNJUSTI FIABLE PREMIUM AGAINST THE COMMON BUSINESS SENSE OF INVESTOR. THE ORIGINAL SH AREHOLDERS REMAINED UNCHANGED FOR MORE THAN ONE AND HALF YEAR AND LATER ON OTHER SHAREHOLDERS HAVE TAKEN THE SHARES FROM THE ORIGINAL SHAREHOLDER S AT FACE VALUE WITHOUT PAYING PREMIUM. THE AO, THEREFORE, NOTICED THAT AL L THE SHAREHOLDERS OF THE AFORESAID THREE COMPANIES WHICH WERE ALLOTTED SHARE S INITIALLY OR HELD THE SAME THROUGH TRANSFERS TILL THE EMERGENCE OF KJS GROUP W ERE CLOSE ASSOCIATES/AFFILIATES OF MR. SURESH KUMAR JAIN OF K OLKATA. HE CREATED A WEB OF COMPANIES WHEREIN COMMON SET OF SHAREHOLDERS AND DI RECTORS EXISTED. NONE OF THE COMPANIES CARRIED OUT ANY BUSINESS EXCEPT RECE IPT OF SHARE SUBSCRIPTION PAGE 4 OF 23 I.T.A .NO.-2523 TO 2525/DEL/2015 AT PREMIUM AND INVESTING THEREOF IN ANOTHER GROUP C OMPANIES WHICH WERE ALL MANAGED AND CONTROLLED BY MR. SURESH KUMAR JAIN. T HE AO, THEREFORE, NOTED THAT THE MOTIVE WAS TO TRANSFER THE ENTIRE/SUBSTAN TIAL SHAREHOLDING IN FAVOUR OF KJS GROUP OF MINIMAL OR NEGLIGIBLE VALUE. THE A CCOMMODATION ENTRIES WERE PROVIDED BY MR.SURESH KUMAR JAIN. 7. THE AO ALSO NOTED THAT SEARCH ACTION WAS ALSO CO NDUCTED AT THE RESIDENCE OF MR. SURESH KUMAR JAIN, KOLKATA AND DUR ING HIS SEARCH ACTION, HIS STATEMENT WAS RECORDED ON OATH WHEREIN HE CATEGORIC ALLY ADMITTED THAT HE HAD PROVIDED ACCOMMODATION ENTRIES TO KJS GROUP THROUGH THE ABOVE SAID THREE KOLKATA COMPANIES. THE MODUS OPERANDI OF RECEIVING CASH THROUGH MR. AMIT GOYAL AND IN TURN ISSUANCE OF CHEQUES/RTGS TO VARIO US ENTITIES OF KJS GROUP AND THEIR AFFILIATES/JOINT VENTURE PARTNERS IN THE FORM OF SHARE CAPITAL AND LOANS ETC. HE HAS AGREED THAT ACCOMMODATION ENTRIE S WERE PROVIDED BY HIM TO KJS GROUP DURING THE F.YS. 2010-11 & 2011-12. THE RELEVANT EXTRACT OF STATEMENT OF MR. SURESH KUMAR JAIN IS REPRODUCED IN THE ASSESSMENT ORDER IN WHICH HE HAS EXPLAINED THAT HE IS RELATED TO KJS GR OUP OF COMPANIES AND THE DIRECTORS OF THE LENDER AND THE OTHER COMPANIES AND HOW THE TRANSACTION HAD TAKEN PLACE HAVE BEEN EXPLAINED. HE HAS EXPLAINED THAT ALL THE ACCOMMODATION ENTRIES WERE PROVIDED TO KJS GROUP OF COMPANIES THROUGH MR.AMIT GOYAL THROUGH CHEQUES/RTGS. THE AO NOTED T HAT THESE THREE COMPANIES INCLUDING M/S PUNEET OILS & CHEMICALS PVT . LTD. & M/S TANISH TALE TRADECOM PVT. LTD. ARE THE PAPER COMPANIES WHI CH HAVE BEEN FORMED WITH INTENT TO PROVIDE ACCOMMODATION ENTRIES ONLY. 8. DURING SEARCH PROCEEDINGS, THE STATEMENT OF MR. DINESH GUPTA, DIRECTOR OF THE ASSESSEE COMPANY WAS ALSO RECORDED WHEREIN H E HAS ADMITTED THAT PAGE 5 OF 23 I.T.A .NO.-2523 TO 2525/DEL/2015 MONEY HAS BEEN RECEIVED IN THESE GROUP COMPANIES FR OM THREE KOLKATA BASED COMPANIES. HE HAS EXPLAINED THAT SH.K.J.AHLUWALIA AND HIS COMPANIES ARE/WERE SHAREHOLDERS OF THESE COMPANIES I.E. M/S P RABHATAM BUILDWELL PVT. LTD. AND M/S PRABHATAM INFRASTRUCTURE LTD. TILL 201 0. HIS COMPANIES HAVE MADE THE INVESTMENTS AS ARE REFLECTED IN THE BOOKS OF ACCOUNTS. THE DETAILS WERE NOT READILY AVAILABLE AS NUMBER OF ENTITIES O F KJS GROUP HAVE INVESTED IN NO. OF COMPANIES. SHARE CERTIFICATES WERE NOT ISSU ED BECAUSE IT WAS AGREED THAT INVESTMENT MADE BY THEM SHALL BE RETURNED BY PAYING MINIMUM 24% PER ANNUM OF THE INVESTMENT MADE BY THEM. HE HAS EXPL AINED HOW MANY INVESTMENT MADE BY KJS GROUP COMPANIES AND EXPLAINE D THE ENTITIES FROM WHICH INVESTMENTS HAVE BEEN RECEIVED IN ANSWER TO Q UESTION NO.23 OF HIS STATEMENT. THE AO, THEREFORE, NOTED THAT THE ASSES SEE COMPANY HAS RAISED SHARE APPLICATION MONEY FROM ALL THESE THREE COMPAN IES OF KOLKATA. THE STATEMENT OF SH.K.J.AHLUWALIA IN SEARCH WAS ALSO RE CORDED IN WHICH HE HAS EXPLAINED HIS RELATIONSHIP WITH M/S PRABHATAM GROUP OF COMPANIES. HE ADMITTED TO HAVE INVESTED VARIOUS FUNDS IN THE M/S PRABHATAM GROUP OF COMPANIES FROM HIS OWN COMPANIES INCLUDING THREE CO MPANIES OF KOLKATA. THE AO NOTED THAT IT INDICATES TOWARDS THE CREATION OF WEB OF COMPANIES TO PROVIDE ACCOMMODATION ENTRIES. 9. THE AO IN ORDER TO EXAMINE THE GENUINENESS OF TH E SHARE APPLICATION MONEY RECEIVED, ISSUED NOTICE U/S 133(6) TO BOTH TH E COMPANIES NAMELY M/S PUNEET OIL & CHEMICALS PVT. LTD. AND M/S TANISH TE LE TRADECON PVT. LTD. WHICH HAVE BEEN RECEIVED UNSERVED. THE AO ALSO ASK ED THE ASSESSEE TO PRODUCE THESE PARTIES ALONGWITH REQUIRED INFORMATIO N VIDE LETTERS DATED 10.03.2014 BY 19.03.2014. THE ASSESSEE OBJECTED TO THE OBSERVATION OF THE PAGE 6 OF 23 I.T.A .NO.-2523 TO 2525/DEL/2015 AO. THE ASSESSEE ALSO SUBMITTED THAT STATEMENT OF MR. SURESH KUMAR JAIN HAS NO EVIDENTIARY VALUE AND CANNOT BE ACTED UPON U NTIL AND UNLESS IT IS CORROBORATED BY FURTHER EVIDENCES. THE AO FURTHER NOTED THAT THE NET INCOME OF BOTH THE ABOVE SHARE APPLICATION COMPANIES ARE N OMINAL AROUND RS.48,000/-, THEREFORE, THEY CANNOT ADVANCE ANY MON EY TO THE ASSESSEE. THE AO RELIED UPON THE DECISION OF DELHI HIGH COURT IN THE CASE OF N.R. PORTFOLIO PVT. LTD. AND NOTED THAT THE INVESTOR HAD NO INCOME AT ALL TO MAKE INVESTMENT IN ASSESSEE COMPANY. THE ASSESSEE FAILED TO PRODUCE THE MAIN DIRECTOR OF THESE COMPANIES. THEREFORE, THE AMOUNT OF RS.5.75 CRORES WAS TREATED AS UNEXPLAINED CASH CREDIT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND ADDITION WAS MADE U/S 68 OF THE ACT. 10. THE ASSESSEE CHALLENGED THE ADDITION BEFORE THE LD.CIT(A). THE ASSESSEE PRODUCED COPIES OF THE ASSESSMENT ORDERS U/S 143(3) IN THE CASES OF BOTH THE SHARE APPLICANT COMPANIES M/S PUNEET OIL & CHEMICAL S PVT.LTD. AND M/S TANISH TALE TRADECON PVT. LTD. FOR A.Y. 2012-13 WIT H COPIES OF ACKNOWLEDGEMENT OF THEIR INCOME FOR A.YS. 2011-12, 2012-13 & 2013-14. IT WAS ALSO SUBMITTED THAT NO INCRIMINATING MATERIAL W AS FOUND DURING THE COURSE OF SEARCH AND NO ASSESSMENT WAS PENDING, THE REFORE, IT DID NOT ABATE AND AS SUCH THE ADDITION IS WHOLLY UNJUSTIFIED. TH E LD. CIT(A) HOWEVER, NOTED THAT DURING THE COURSE OF SEARCH, NUMBER OF INCRIMI NATING MATERIALS AND UNACCOUNTED INCOME WERE FOUND WHICH HAVE BEEN ADMIT TED IN STATEMENTS U/S 132(4) OF THE ACT, THEREFORE, LEGAL GROUND WAS DISM ISSED. 11. THE ASSESSEE ON MERIT SUBMITTED THAT THE ASSESS EE FILED SUFFICIENT DOCUMENTARY EVIDENCES OF INVESTOR COMPANIES BEFORE THE AO WHICH ARE ADDRESSES OF THESE COMPANIES, CIN NO., INCORPORATIO N DATE, PAN, AUTHORIZED PAGE 7 OF 23 I.T.A .NO.-2523 TO 2525/DEL/2015 CAPITAL, PAID UP CAPITAL, NAMES OF DIRECTORS, STATU S IN ROC, BANKS NAME, NET WORTH OF THE COMPANY, CONFIRMATIONS OF ACCOUNTS, B ANK STATEMENTS AND ACKNOWLEDGEMENT OF FILING OF RETURN BY THEM WITH AF FIDAVITS OF THE DIRECTORS TO PROVE THE INGREDIENTS U/S 68 OF THE ACT. THE COPY OF STATEMENT OF MR. SURESH KUMAR JAIN HAS NOT BEEN PROVIDED TO THE ASSESSEE, T HEREFORE, IT COULD NOT BE RELIED UPON TO MAKE THE ADDITION. HE HAS ALSO RETR ACTED FROM HIS EARLIER STATEMENT, THEREFORE, HIS STATEMENT HAD NO EVIDENTI ARY VALUE. DURING THE COURSE OF SEARCH, NO INCRIMINATING MATERIAL WAS FOU ND OR DETECTED IN THE SHAPE OF UNEXPLAINED CASH OR INVESTMENT OR DOCUMENT IN THE CASE OF THE ASSESSEE. THE INVESTORS COMPANY HAVE CONFIRMED GIV ING SHARE APPLICATION MONEY TO THE ASSESSEE. THE EVIDENCES AND MATERIAL HAVE BEEN REPRODUCED TO SHOW NET WORTH OF M/S PUNEET OIL & CHEMICALS PVT.LT D. AT RS.99 CRORES AND M/S TANISH TALE TRADECON PVT. LTD. AT RS.135.82 CRO RES WHICH ARE SUFFICIENT TO EXPLAIN THE INVESTMENT IN ASSESSEE COMPANY THAT THE INVESTORS ARE CORPORATE ENTITIES DULY ASSESSED TO TAX AND MADE INVESTMENT I N ASSESSEE COMPANY THROUGH BANKING CHANNEL FROM THEIR OWN SOURCES WHIC H HAVE NOT BEEN REBUTTED BY THE AO THROUGH ANY MATERIAL OR EVIDENC E ON RECORD. MERELY BECAUSE THE INVESTORS HAD NOT REPLIED TO THE NOTICE U/S 133(6), NO ADVERSE INFERENCE SHOULD BE DRAWN AGAINST THE ASSESSEE. TH E ASSESSEE RELIED UPON THE DECISION OF THE APEX COURT IN THE CASE OF CIT VS LOVELY EXPORTS PVT. LTD.[2008] 319 ITR 5 (SC) AND OTHER DECISIONS. IT WAS FURTHER SUBMITTED THAT KJS GROUP HAD MADE INVESTMENT OF RS.44.70 CRORES IN THE ASSES SEE COMPANY AS SHARE APPLICATION MONEY FROM VARIOUS ENTITIES IN DIFFEREN T YEARS AND SUFFICIENT AMOUNT IS REFUNDED TO KJS GROUP, THEREFORE, NO ADD ITION SHOULD BE MADE PAGE 8 OF 23 I.T.A .NO.-2523 TO 2525/DEL/2015 AGAINST THE ASSESSEE, THEREFORE, FINDINGS OF AO ARE INCORRECT THAT UNEXPLAINED INVESTMENT IS MADE BY TWO COMPANIES AT BEHEST OF KJ S GROUP OF COMPANIES.. 12. THE CIT(A) HOWEVER, DID NOT ACCEPT THE CONTENTI ON OF THE ASSESSEE AND ON THE SAME REASONING AS HAS BEEN GIVEN BY THE AO, CON FIRMED THE ADDITION AND DISMISSED THIS GROUND OF APPEAL OF THE ASSESSEE. T HE APPEAL WAS DISMISSED. 13. LD. COUNSEL OF THE ASSESSEE REITERATED THE SUBM ISSIONS MADE BEFORE THE AUTHORITIES BELOW. HE HAS SUBMITTED THAT NO INCRIM INATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH THAT THE ASSESSEE RECEI VED ACCOMMODATION ENTRIES ON ACCOUNT OF SHARE APPLICATION, THEREFORE, ASSESSM ENT U/S 153A OF THE ACT IS BAD IN LAW. NO ADDITION IS BASED ON ANY MATERIAL F OUND DURING THE COURSE OF SEARCH. THE ADDITION IS MADE ON THE ACCOUNT OF SHA RE APPLICATION MONEY RECEIVED WHICH IS RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, THEREFORE, ASSESSMENT U/S 153A IS ILLEGAL AND UNJUSTIFIED. NO ASSESSMENT PROCEEDINGS WERE PENDING BEFORE SEARCH. HE HAS RELIED UPON THE DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS KABUL CHAWLA (DEL) 380 ITR 573. HE HAS FURTHER SUBMITTED THAT THE ASSESSEE PRODUCED SUFFICIENT EVI DENCES BEFORE THE AO TO PROVE IDENTITY OF THE INVESTOR, THEIR CREDITWORTHIN ESS AND GENUINENESS OF THE TRANSACTION IN THE MATTER. THE INVESTORS HAD ADMIT TED TO MAKE INVESTMENT IN THE ASSESSEE COMPANY IN THE SHAPE OF SHARE APPLICAT ION MONEY. THE ASSESSEE FILED COMPLETE DETAILS TO SHOW NET WORTH O F THE LENDER COMPANY WITH THEIR SOURCE TO PROVE THEIR CREDITWORTHINESS. THE COPIES OF THEIR ASSESSMENT ORDERS U/S 143(3) HAVE ALSO BEEN FILED TO SHOW THAT THEY ARE ASSESSED BY THE INCOME TAX DEPARTMENT. THEREFORE, THE SHARE APPLIC ANT COMPANIES CANNOT BE NON-EXISTENT. HE HAS REFERRED TO THE LETTER FILED BEFORE THE AO DATED 24.03.2014 (PAPER BOOK PAGE 157) IN WHICH ON PAGE 1 61, THE ASSESSEE HAS PAGE 9 OF 23 I.T.A .NO.-2523 TO 2525/DEL/2015 GIVEN THE LATEST ADDRESS OF BOTH THE COMPANIES, HOW EVER, THE AO DID NOT ISSUE ANY NOTICE AT THEIR FRESH ADDRESS. THE STATEMENT O F MR. SURESH KUMAR JAIN WAS NOT PROVIDED TO THE ASSESSEE AND THE ASSESSEE H AS NOT BEEN ALLOWED CROSS- EXAMINATION OF HIS STATEMENT AT ASSESSMENT STAGE, T HEREFORE, HIS STATEMENT CANNOT BE READ IN EVIDENCE. MR. SURESH KUMAR JAIN ALSO RETRACTED FROM HIS STATEMENT, THEREFORE, HIS STATEMENT IS NOT WORTH RE LIANCE. THE AUTHORITIES BELOW RELIED UPON THE STATEMENT OF MR. SURESH KUMAR JAIN BUT NO ADDITION IS MADE ON HIS STATEMENT. HIS STATEMENT WAS NOT RECOR DED IN THE CASE OF THE ASSESSEE. THE STATEMENT OF SH. DINESH GUTPA, DIREC TOR OF THE ASSESSEE WAS RECORDED IN WHICH HE HAS CONFIRMED TAKING GENUINE S HARE APPLICATION MONEY FROM BOTH THE ABOVE COMPANIES. NO ADDITION HAS BEE N MADE ON THE STATEMENT OF SH. DINESH GUPTA. BOTH SHAREHOLDERS ARE ASSESSE D TO TAX AND HAVE ALSO BEEN SEARCHED, THEREFORE, THEY ARE EXISTING PARTIES . ALL THE PROCEEDINGS HAVE BEEN CONDUCTED BY THE AO AT THE FAG END OF THE ASSE SSMENT. SINCE NO PROCEEDINGS WERE PENDING AGAINST THE ASSESSEE, THER EFORE, THERE IS NO ABATEMENT OF ANY PROCEEDINGS SO AS TO MAKE ASSESSME NT U/S 153A OF THE ACT. THOUGH, ORIGINAL RETURN WAS FILED LATE ON 30.03.20 12 BUT NO NOTICE U/S 143(2) HAVE BEEN ISSUED. AS SUCH THERE IS NO ABATEMENT IN THE CASE OF THE ASSESSEE. LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE FOLLOW ING DECISIONS:- (I) DECISION OF SUPREME COURT IN THE CASE OF CIT VS LOV ELY EXPORTS P.LTD. [2008] 216 CTR 0195 IN WHICH IT WAS HELD IF THE SH ARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BO GUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMEN T IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANC E WITH LAW, BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF ASSESSE E COMPANY. (II) DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS KAMDHENU STEEL & ALLOYS LTD. & ORS. 361 ITR 0220 (DELHI) IN WHICH IT WAS HELD ONCE PAGE 10 OF 23 I.T.A .NO.-2523 TO 2525/DEL/2015 ADEQUATE EVIDENCE/MATERIAL IS GIVEN, WHICH WOULD PR IMA FACIE DISCHARGE THE BURDEN OF THE ASSESSEE IN PROVING THE IDENTITY OF SHAREHOLDERS, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE SHAREHOLDERS, THEREAFTER IN CASE SUCH EVIDENCE IS TO BE DISCARDED OR IT IS PROVED THAT IT HAS CREATED EVIDENCE, THE REVENUE IS SUPPOSED TO MAKE THOROUGH PROBE BEFORE IT COULD NAIL THE ASSESSEE AND FASTEN THE AS SESSEE WITH SUCH A LIABILITY UNDER S.68; AO FAILED TO CARRY HIS SUSPIC ION TO LOGICAL CONCLUSION BY FURTHER INVESTIGATION AND THEREFORE ADDITION UNDER S.68 WAS NOT SUSTAINABLE. (III) DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS WELLWOTH CONSTRUCTION UDYOG LTD. [2015] 92 CCH 0081 IN WHICH IT WAS HELD ONCE THE INITIAL ONUS IS DISCHARGED, THE REVENUE IS NOT ABSOLVED OF ITS DUTY TO COLLECT FURTHER MATERIAL WHICH SHOULD ASSIST IT IN COMING TO THE CORRECT CONCLUSION. (IV) DECISION OF DELHI HIGH COURT IN THE CASE OF PRINCI PAL CIT VS M/S GOODVIEW TRADING PVT.LTD. IN ITA NO.377/2016 DATED 21.11.2016 IN WHICH THE CIT(A) NOTICED THE DETAILS OF SHARE APPLI CANTS SUCH AS THEIR INCOME TAX RETURNS AS WELL AS NET WORTH AVAILABLE O N THE FILE OF ASSESSMENT RECORD AND CIT(A) DELETED THE ADDITION BY HOLDING S HARE APPLICANTS HAD SUFFICIENT NET WORTH AND FINANCE TO INVEST IN ASSES SEE. HONBLE HIGH COURT DISMISS THE APPEAL OF THE REVENUE BY FOLLOWING JUDG EMENT IN THE CASE OF CIT VS LOVELY EXPORTS PVT. LTD. (SUPRA). (V) THE JUDGEMENT OF DELHI HIGH COURT IN THE CASE OF CI T VS VRINDAVAN FARMS P.LTD. ETC. IN ITA NO.71/2015 DATED 12.08.20 15 (DELHI) IN WHICH THE SOLE BASIS FOR THE REVENUE TO DOUBT THEIR CREDI TWORTHINESS WAS THE LOW INCOME AS REFLECTED IN THEIR RETURN OF INCOME. IT WAS OBSERVED BY THE ITAT THAT THE AO HAD NOT UNDERTAKEN ANY INVESTIGATION OF THE VERACITY OF THE DOCUMENTS SUBMITTED BY THE ASSESSEE, THE DEPARTMENT AL APPEAL WAS DISMISSED BY THE HONBLE HIGH COURT. LD. COUNSEL F OR THE ASSESSEE, THEREFORE, SUBMITTED THAT ENTIRE ADDITION IS WHOLLY JUSTIFIED. 14. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER S OF THE AUTHORITIES BELOW AND SUBMITTED THAT STATEMENTS OF MR. SURESH K UMAR JAIN AND MR. PAGE 11 OF 23 I.T.A .NO.-2523 TO 2525/DEL/2015 DINESH GUPTA, DIRECTOR OF THE ASSESSEE, WERE RECORD ED ON OATH U/S 132(4) AND ALSO FILED DETAILS OF SEIZED PAPERS RECOVERED DURIN G THE COURSE OF SEARCH AS HAS BEEN HIGHLIGHTED BY THE CIT(A) TO SHOW THAT INCRIMI NATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH, THEREFORE, ASSESSMENT U/S 153A IS VALID. LD. DR RELIED UPON THE DECISION OF THE KERALA HIGH COURT I N THE CASE OF E.N. GOPAKUMAR VS CIT [2016] 75 TAXMANN.COM 215 (KERALA HIGH COURT); DECISION IN THE CASE OF SMT. DAYAWANTI VS CIT 75 TAXMANN.COM 308 (DELHI HIG H COURT); DECISION OF ALLAHABAD HIGH COURT IN THE CASE OF CIT VS RAJ KUMAR ARORA [2014] 367 ITR 517 AND CIT VS KESARWANI ZARDA BHANDAR SAHSON ALLD IN ITA N O.270 OF 2014. LD. DR ALSO SUBMITTED THAT SINCE THE ASSESSEE DID NOT FILE RETURN OF INCOME PRIOR TO SEARCH, THEREFORE, NO ASSESSMENT IS COMPLETED, THEREFORE, DECISION IN THE CASE OF CIT VS KABUL CHAWLA (SUPRA) WOULD NOT APPLY. LD. DR FURTHER SUBMITTED THAT THE INVESTORS HAD NOT RESPON DED TO THE NOTICE U/S 133(6) AS WELL AS DID NOT APPEAR BEFORE THE AO. TH EY WERE HAVING LOW INCOME, THEREFORE, ADDITIONS ON MERIT HAVE BEEN CORRECTLY M ADE. LD. DR RELIED UPON THE DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS NIPUN BUILDERS & DEVELOPERS P.LTD. 350 ITR 407; CIT VS NOVA PROMOTER S & FINLEASES P.LTD. 342 ITR 169; CIT VS ULTRA MODERN EXPORTS PVT.LTD. 40 TA XMANN.COM 458; CIT VS N.R. PORTFOLIO PVT.LTD. 29 TAXMANN.COM 291 ; AND CIT VS EMPIRE BUILTECH P.LTD. 366 ITR 110. LD. DR, THEREFORE, SUBMITTED THAT THE APPEAL OF T HE ASSESSEE HAS NO MERIT, THE SAME DISMISSED. 15. THE COUNSEL OF THE ASSESSEE IN THE RE-JOINDER A LSO RELIED UPON DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS LAXMAN INDUSTRIAL RESOURCES PVT.LTD. IN ITA NO.169 OF 2017 DATED 14.03.2017 IN WHICH THE CIT(A) TOOK NOTE OF THE MATERIAL FILED BY THE ASSESSEE AND PROVIDED OPPORTU NITY TO THE AO IN REMAND PAGE 12 OF 23 I.T.A .NO.-2523 TO 2525/DEL/2015 PROCEEDINGS. THE AO MERELY OBJECTED TO THE MATERIAL FURNISHED BUT DID NOT UNDERTAKE ANY VERIFICATION. THE CIT(A) DELETED THE ADDITION BY RELYING UPON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF LOVELY EXPORTS PVT.LTD. (SUPRA) AND JUDGEMENT OF DELHI HIGH COURT IN THE CASE OF CIT VS DIVINE LEASING & FINANCE LTD. [2008] 299 ITR 268 . THE ITAT CONFIRMED THE OPINION OF THE LD.CIT(A). HONBLE HIGH COURT IN VIEW OF THE ABOVE FINDINGS NOTED THAT THE ASSESSEE HAD PROVIDED SEVERAL DOCUMENTS THAT COULD HAVE SHOWED LIGHT INTO WHETHER TRULY THE TRANSACTIONS WERE GENUINE. THE A SSESSEE PROVIDED DETAILS OF SHARE APPLICANTS I.E. COPY OF THE PAN, ASSESSMENT P ARTICULARS, MODE OF AMOUNT INVESTED THROUGH BANKING CHANNEL, COPY OF RESOLUTIO N AND COPIES OF THE BALANCE SHEET. THE AO FAILED TO CONDUCT ANY SCRUTI NY OF THE DOCUMENT, THE DEPARTMENTAL APPEAL WAS ACCORDINGLY DISMISSED. 16. THE LD. COUNSEL FOR THE ASSESSEE ALSO RELIED UP ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF EARTHMETAL ELECTRICAL PVT.LTD. VS CIT DATED 30.07.2010 IN SLP NO.21073/99 IN WHICH HONBL E APEX COURT HELD WE HAVE EXAMINED THE POSITION, WE FIND THAT THE SHAREH OLDERS ARE GENUINE PARTIES. THEY ARE NOT BOGUS AND FICTITIOUS THEREFORE, THE IM PUGNED ORDER IS SET ASIDE. LD. COUNSEL FOR THE ASSESSEE FILED COPY OF THE JUDG EMENT OF THE BOMBAY HIGH COURT AND THE ORDER OF THE ITAT, MUMBAI BENCH WHICH WAS SUBJECT MATTER IN SLP BEFORE THE HONBLE SUPREME COURT IN WHICH THE A SSESSEE FAILED TO PRODUCE ANY EVIDENCE REGARDING CONFIRMATIONS OF THE AMOUNT SUPPOSED TO HAVE BEEN RECEIVED AS SHARE CAPITAL FROM THIRD PARTY. LD. CO UNSEL FOR THE ASSESSEE, THEREFORE, SUBMITTED THAT THE CASE OF THE ASSESSEE IS ON BETTER FOOTING, THEREFORE, ADDITION ON MERIT MAY BE DELETED. PAGE 13 OF 23 I.T.A .NO.-2523 TO 2525/DEL/2015 17. WE HAVE CONSIDERED RIVAL SUBMISSIONS. THE ASSE SSEE COMPANY IS ENGAGED IN THE BUSINESS OF INVESTMENT AND IT HAD RE CEIVED SHARE APPLICATION MONEY TO THE TUNE OF RS.5.75 CRORES FROM PUNEET & O IL CHEMICALS PVT. LTD. AND M/S TANISH TALE TRADECOM P.LTD. THE AO ASKED THE A SSESSEE TO FILE CONFIRMATION AND OTHER DOCUMENTS OF THE SHARE APPLI CANTS IN ORDER TO PROVE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE T RANSACTION. THE ASSESSEE ADMITTEDLY PRODUCED SEVERAL DOCUMENTARY EVIDENCE BE FORE THE AO IN ORDER TO PROVE THE ABOVE INGREDIENTS OF SECTION 68 OF THE AC T I.E. THE ASSESSEE FURNISHED ADDRESS OF THE SHARE APPLICANTS, CIN NO., INCORPORA TION DATE OF COMPANY, PAN, AUTHORIZED CAPITAL, PAID UP CAPITAL, NAMES OF DIREC TORS, CERTIFICATE ISSUED BY REGISTRAR OF COMPANIES AND RETURN FILED BEFORE ROC, NET WORTH OF BOTH THE COMPANIES, CONFIRMATION OF ACCOUNTS, COPY OF BANK S TATEMENT WITH RECONCILIATION STATEMENT, COPY OF ACKNOWLEDGEMENT O F FILING OF INCOME TAX RETURN FOR AY UNDER APPEAL 2011-12 WITH AUDITED ACC OUNTS, AFFIDAVITS OF DIRECTORS AND COPIES OF ASSESSMENT ORDERS U/S 143(3 ) FOR BOTH THE INVESTORS COMPANIES FOR AYS 2011-12 TO 2013-14. THE AO DID NOT VERIFY ANY OF THESE DOCUMENTARY EVIDENCES IN ORDER TO FIND OUT THE TRUT H IN THE MATTER. THUS, THE AO FAILED TO MAKE ANY INQUIRY ON THESE DOCUMENTARY EVIDENCES WHICH ARE PART OF REVENUE RECORD AS WELL. THE SEARCH IS ALSO COND UCTED IN THE CASE OF MR. SURESH KUMAR JAIN & KJS GROUP OF CASES WITH WHOM TH E AO ALLEGED THAT THE INVESTOR COMPANIES HAVE RELATIONS. THEREFORE, THES E DOCUMENTARY EVIDENCES CLEARLY PROVED THAT BOTH THE INVESTOR COMPANIES ARE EXISTING AND GENUINE COMPANIES REGISTERED WITH REGISTRAR OF COMPANIES AS WELL AS ASSESSED TO INCOME TAX. NO MATERIAL IS PRODUCED ON RECORD THAT DURING COURSE OF SEARCH IN THE CASE OF THE ASSESSEE OR OTHER PARTIES AS REFERR ED TO ABOVE, ANY MATERIAL WAS PAGE 14 OF 23 I.T.A .NO.-2523 TO 2525/DEL/2015 FOUND TO PROVE THAT THE ASSESSEE RECEIVED ANY ACCOM MODATION ENTRIES FROM THESE INVESTORS COMPANIES. THEREFORE, THE AO DID N OT OBJECT TO THE MATERIAL EVIDENCE FURNISHED AND DID NOT UNDERTAKE ANY VERIFI CATION. THE AO ALSO FAILED TO CONDUCT ANY SCRUTINY OF THE DOCUMENTS AND MERELY RELIED UPON THE STATEMENT OF MR. SURESH KUMAR JAIN AND OTHERS FOR T HE PURPOSE OF MAKING THE ADDITION. THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF PR.CIT VS LAXMAN INDUSTRIAL RESOURCES LTD. (SUPRA) CLEARLY APPLY TO THE FACTS OF THE CASE OF THE ASSESSEE THAT THE ASSESSEE RECEIVED GENUINE SHARE APPLICATION MONEY FROM BOTH THE INVESTOR COMPANIES. THE ASSESSEE ON THE BASIS OF THESE DOCUMENTARY EVIDENCES HAVE BEEN ABLE TO ESTABLISH T HAT BOTH THE SHAREHOLDERS ARE GENUINE PARTIES AND THEY ARE NOT BOGUS AND FICT ITIOUS. THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF M/S. EARTHMETAL ELECTRICAL P.LTD. (SUPRA) CLEARLY SUPPORT THE CASE OF THE ASSESSEE. IT MAY A LSO BE NOTED THAT THE FACTS CONSIDERED IN THIS CASE BY ITAT, MUMBAI BENCH AND H ONBLE BOMBAY HIGH COURT (COPIES OF THE JUDGEMENT ARE PLACED ON RECORD ) ARE NOT ON BETTER FOOTING AS BROUGHT ON RECORD IN THE CASE OF THE ASSESSEE. THE FACTS OF THE CASE OF THE ASSESSEE AND MATERIAL EVIDENCE BROUGHT ON RECORD A RE ON BETTER FOOTING AS COMPARED TO THE FACTS CONSIDERED IN THE CASE OF M/S EARTHMETAL ELECTRICAL P.LTD. (SUPRA). THE ASSESSEE SPECIFICALLY PLEADED BEFORE THE CIT(A) AND FILED THE DETAILS SUPPORTED BY EVIDENCE THAT NET WORTH OF BOT H THE INVESTOR COMPANIES ARE VERY SUBSTANTIAL SO AS TO MAKE INVESTMENT IN AS SESSEE COMPANY. THEY WERE HAVING SUFFICIENT FUNDS WITH THEM TO MAKE INVE STMENT IN ASSESSEE COMPANY. THE MATERIAL PRODUCED BY THE ASSESSEE HAV E NOT BEEN DOUBTED AND REBUTTED BY THE AUTHORITIES BELOW. PAGE 15 OF 23 I.T.A .NO.-2523 TO 2525/DEL/2015 17.1. THE AUTHORITIES BELOW HEAVILY RELIED UPON TH E STATEMENT OF MR. SURESH KUMAR JAIN WHO IS STATED TO BE ASSOCIATE OF KJS GRO UP OF CASES WHEREAS THE ASSESSEE COMPANY WAS DISTINCT FROM THE KJS GROUP. THE STATEMENT OF MR. SURESH KUMAR JAIN RECORDED U/S 132(4) REFERRED TO A CCOMMODATION ENTRY PROVIDED TO THE KJS GROUP. THE STATEMENT OF MR. SU RESH KUMAR JAIN WAS NOT RECORDED DURING THE COURSE OF SEARCH IN THE CASE OF THE ASSESSEE. THE STATEMENT OF MR. SURESH KUMAR JAIN HAVE NOT BEEN CO NFRONTED TO THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. HE WAS NOT PROD UCED AT ASSESSMENT STAGE TO ALLOW CROSS-EXAMINATION BY THE ASSESSEE. NO RIG HT TO CROSS-EXAMINATION HAVE BEEN GIVEN TO ASSESSEE TO CROSS-EXAMINE THE ST ATEMENT OF MR.SURESH KUMAR JAIN, THEREFORE, HIS STATEMENT CANNOT BE READ ANY EVIDENCE AGAINST THE ASSESSEE. WE RELY UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF KISHANCHAND CHELLARAM VS CIT 125 ITR 713 (SC) IN WHICH IT WAS HELD THAT ANY MATERIAL COLLECTED AT THE BACK OF THE ASSESSEE AND NOT CONFRONTED AND NO OPPORTUNITY GIVEN TO CROSS-EXAMINE, SUCH MATERIAL C ANNOT BE RELIED UPON AGAINST THE ASSESSEE. IT MAY ALSO NOTED HERE THAT MR. SURESH KUMAR JAIN HAS LATER ON RETRACTED FROM THE STATEMENT ON WHICH NO A DVERSE FINDING HAS BEEN GIVEN. THE SEARCH WAS ALSO CONDUCTED IN THE CASE O F KJS GROUP OF CASES AND STATEMENT OF SH.K.J.AHLUWALIA WAS ALSO RECORDED DUR ING SEARCH WHEREIN HE HAS EXPLAINED AND CONFIRMED/ADMITTED TO HAVE INVEST ED IN ASSESSEE COMPANY. NO ADDITION HAS BEEN MADE AGAINST THE ASSESSEE ON T HE BASIS OF STATEMENT OF SH.K.J.AHLUWALIA. THE STATEMENT OF SH.DINESH GUPTA , DIRECTOR OF THE ASSESSEE COMPANY WAS ALSO RECORDED IN WHICH HE HAS CONFIRMED THAT KJS GROUP OF COMPANIES MADE INVESTMENT IN ASSESSEE COMPANY AS RE FLECTED IN THE BOOKS OF ACCOUNTS BUT NO SHARE CERTIFICATES HAVE BEEN ISSUED BECAUSE IT WAS MUTUALLY PAGE 16 OF 23 I.T.A .NO.-2523 TO 2525/DEL/2015 AGREED THAT INVESTMENT MADE BY THEM SHALL BE REFUND ED BY PAYING MINIMUM 24% P.A. OF SUCH INVESTMENT. THE AUTHORITIES BELOW DID NOT MAKE THE ABOVE ADDITION ON THE BASIS OF STATEMENT OF SH. DINESH GU PTA. THE AUTHORITIES BELOW HOWEVER, INFERRED FROM THESE STATEMENTS THAT ACCOMM ODATION ENTRIES WOULD HAVE BEEN RECEIVED BY THE ASSESSEE COMPANY DESPITE SH.DINESH GUPTA AND SH.K.J.AHLUWALIA CONFIRMED THE GENUINENESS OF THE T RANSACTION IN THE MATTER. AS NOTED ABOVE, THE STATEMENT OF SH.K.J.AHLUWALIA C ANNOT BE READ IN EVIDENCE AGAINST THE ASSESSEE. THEREFORE, THERE WAS NO OTHE R MATERIAL AVAILABLE ON RECORD TO PROVE THAT THE INVESTORS HAVE NO CREDITWO RTHINESS OR THEY HAVE NOT GENUINELY MADE INVESTMENT IN ASSESSEE COMPANY. 18. THE AO DOUBTED THE GENUINENESS OF THE TRANSACTI ON BECAUSE NOTICE U/S 133(6) COULD NOT BE SERVED UPON THE INVESTORS AND T HAT THE ASSESSEE WAS DIRECTED TO PRODUCE BOTH THE PARTIES BY 19.03.2014. THE LD. COUNSEL FOR THE ASSESSEE HOWEVER, REFERRED TO PAPER BOOK PAGE 157 W HICH IS THE REPLY BEFORE THE AO DATED 24.03.2014 IN WHICH THE ASSESSEE HAS P ROVIDED CORRECT AND UPDATED ADDRESS OF THE ENTITY AS PER MCA WEBSITE. THE AO INSTEAD OF ISSUING FRESH NOTICE U/S 133(6) AT THE CORRECT ADDRESS OF T HE INVESTOR COMPANIES MERELY RELIED UPON THE FACT THAT THE EARLIER LETTER UNDER THE ABOVE PROVISION HAS RETURNED UNSERVED. SINCE THE AO DID NOT ISSUE FRES H NOTICE AT THE CORRECT ADDRESS PROVIDED BY THE ASSESSEE AND NO COERCIVE AC TION HAS BEEN TAKEN FOR THE PRODUCTION OF INVESTORS, THEREFORE, NO ADVERSE INFERENCE COULD BE DRAWN AGAINST THE ASSESSEE. WE RELY UPON THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF CIT VS DIVINE LEASING & FINANCE LTD. 299 ITR 268 IN WHICH IT WAS HELD THAT NO ADVERSE INFERENCE SHOULD BE DRAWN IF SHAREHOLDE RS FAILED TO RESPOND TO THE NOTICE BY AO. THE DUTY OF THE AO TO INVESTIGATE CREDITWORTHINES S OF PAGE 17 OF 23 I.T.A .NO.-2523 TO 2525/DEL/2015 SHAREHOLDERS. IT WAS FURTHER HELD IN THE CASE OF CIT VS PEOPLES GENERAL HOSPITAL LTD. [2013] 356 ITR 65 (M.P. HIGH COURT) THAT DISMISSING THE APPEALS, THAT IF THE ASSESSEE HAD RECEIVED SUBSCRIPTIONS TO THE PUBLIC OR RIGHTS ISSUE THROUGH BANKING CHANNELS AND FURNISHED COMPLETE DET AILS OF THE SHAREHOLDERS, NO ADDITION COULD BE MADE UNDER SECTION 68 OF THE I NCOME-TAX ACT, 1961, IN THE ABSENCE OF ANY POSITIVE MATERIAL OR EVIDENCE TO IND ICATE THAT THE SHAREHOLDERS WERE BENAMIDARS OR FICTITIOUS PERSONS OR THAT ANY P ART OF THE SHARE CAPITAL REPRESENTED THE COMPANY'S OWN INCOME FROM UNDISCLOS ED SOURCES. IT WAS NOBODY'S CASE THAT THE NON-RESIDENT INDIAN COMPANY WAS A BOGUS OR NON- EXISTENT COMPANY OR THAT THE AMOUNT SUBSCRIBED BY T HE COMPANY BY WAY OF SHARE SUBSCRIPTION WAS IN FACT THE MONEY OF THE ASS ESSEE. THE ASSESSEE HAD ESTABLISHED THE IDENTITY OF THE INVESTOR WHO HAD PR OVIDED THE SHARE SUBSCRIPTION AND THAT THE TRANSACTION WAS GENUINE. THOUGH THE AS SESSEE'S CONTENTION WAS THAT THE CREDITWORTHINESS OF THE CREDITOR WAS ALSO ESTABLISHED, IN THIS CASE, THE ESTABLISHMENT OF THE IDENTITY OF THE INVESTOR ALONE WAS TO BE SEEN. THUS, THE ADDITION WAS RIGHTLY DELETED. CIT V. LOVELY EXPORTS P. LTD. [2009] 319ITR (ST.) 5 (SC) APPLIED. 18.1. HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS (I) DWARKADHISH INVESTMENT P. LTD. (ITA NO.911 OF 2010) & (II) DWAR KADHISH CAPTIAL P.LTD. (ITA NO.913 OF 2010) [2011] 330 ITR 298 (DELHI HIGH COUR T) HELD IN ANY MATTER, THE ONUS OF PROOF IS NOT A STATIC ONE. THOUGH IN SECTI ON 68 OF THE INCOME TAX ACT, 1961, THE INITIAL BURDEN OF PROOF LIES ON THE ASSES SES YET ONCE HE PROVES THE IDENTITY OF THE CREDITORS/SHARE APPLICANTS BY EITHE R FURNISHING THEIR PAN NUMBER OR INCOME-TAX ASSESSMENT NUMBER AND SHOWS THE GENUI NENESS OF TRANSACTION BY SHOWING MONEY IN HIS BOOKS EITHER BY ACCOUNT PAYEE CHEQUE OR BY DRAFT OR BY PAGE 18 OF 23 I.T.A .NO.-2523 TO 2525/DEL/2015 ANY OTHER MODE, THEN THE ONUS OF PROOF WOULD SHIFT TO THE REVENUE. JUST BECAUSE THE CREDITORS/SHARE APPLICANTS COULD NOT BE FOUND A T THE ADDRESS GIVEN, IT WOULD NOT GIVE THE REVENUE THE RIGHT TO INVOKE SECTION 68 . ONE MUST NOT LOSE SIGHT OF THE FACT THAT IT IS THE REVENUE WHICH HAS ALL THE P OWER AND WHEREWITHAL TO TRACE ANY PERSON. MOREOVER, IT IS SETTLED LAW THAT THE AS SESSEE NEED NOT TO PROVE THE 'SOURCE OF SOURCE'. THE ASSESSEE-COMPANY WAS ENGAGE D IN THE BUSINESS OF FINANCING AND TRADING OF SHARES. FOR THE ASSESSMENT YEAR 2001-02 ON SCRUTINY OF ACCOUNTS, THE ASSESSING OFFICER FOUND AN ADDITION O F RS.71,75,000 IN THE SHARE CAPITAL OF THE ASSESSEE. THE ASSESSING OFFICER SOUG HT AN EXPLANATION OF THE ASSESSEE ABOUT THIS ADDITION IN THE SHARE CAPITAL. THE ASSESSEE OFFERED A DETAILED EXPLANATION. HOWEVER, ACCORDING TO THE ASS ESSING OFFICER, THE ASSESSEE FAILED TO EXPLAIN THE ADDITION OF SHARE APPLICATION MONEY FROM FIVE OF ITS SUBSCRIBERS. ACCORDINGLY, THE ASSESSING OFFICER MA DE AN ADDITION OF RS.35,50,000/- WITH THE AID OF SECTION 68 OF THE AC T, 1961 ON ACCOUNT OF UNEXPLAINED CASH CREDITS APPEARING IN THE BOOKS OF THE ASSESSEE. HOWEVER, IN APPEAL, THE COMMISSIONER OF INCOME-TAX (APPEALS) DE LETED THE ADDITION ON THE GROUND THAT THE ASSESSEE HAD PROVED THE EXISTENCE O F THE SHAREHOLDERS AND THE GENUINENESS OF THE TRANSACTION. THE INCOME-TAX APPE LLATE TRIBUNAL CONFIRMED THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) A S IT WAS ALSO OF THE OPINION THAT THE ASSESSEE HAD BEEN ABLE TO PROVE THE IDENTI TY OF THE SHARE APPLICANTS AND THE SHARE APPLICATION MONEY HAD BEEN RECEIVED B Y WAY OF ACCOUNT PAYEE CHEQUES. ON APPEAL TO THE HIGH COURT: HELD, DISMISS ING THE APPEALS, THAT THE DELETION OF ADDITION WAS JUSTIFIED. 18.2. HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS WINSTRAL PETROCHEMICALS P. LTD. 330 ITR 603 (DEL.) HELD THAT DISMISSING THE APPEAL, THAT IT HAD NOT BEEN PAGE 19 OF 23 I.T.A .NO.-2523 TO 2525/DEL/2015 DISPUTED THAT THE SHARE APPLICATION MONEY WAS RECEI VED BY THE ASSESSEE- COMPANY BY WAY OF ACCOUNT PAYEE CHEQUES, THROUGH NO RMAL BANKING CHANNELS. ADMITTEDLY, COPIES OF APPLICATION FOR ALLOTMENT OF SHARES WERE ALSO PROVIDED TO THE ASSESSING OFFICER. SINCE THE APPLICANT COMPANI ES WERE DULY INCORPORATED, WERE ISSUED PAN CARDS AND HAD BANK ACCOUNTS FROM WH ICH MONEY WAS TRANSFERRED TO THE ASSESSEE BY WAY OF ACCOUNT PAYEE CHEQUES, THEY COULD NOT BE SAID TO BE NON-EXISTENT, EVEN IF THEY, AFTER SUBMIT TING THE SHARE APPLICATIONS HAD CHANGED THEIR ADDRESSES OR HAD STOPPED FUNCTIONING. THEREFORE, THE COMMISSIONER (APPEALS) AND THE TRIBUNAL WERE JUSTIF IED IN HOLDING THAT THE GENUINENESS OF THE TRANSACTIONS HAD BEEN DULY ESTAB LISHED BY THE ASSESSEE. 18.3. IT MAY ALSO BE NOTED HERE THAT THE AO AT THE FAG END OF ASSESSMENT DIRECTED THE ASSESSEE TO PRODUCE THE INVESTOR COMPA NIES BY 19.03.2014. HOWEVER, THE AO PASSED AN ASSESSMENT ORDER ON 29.03 .2014 WITHOUT GIVING SUFFICIENT TIME TO THE ASSESSEE OR TO ISSUE NOTICE OR SUMMON AT THE CORRECT ADDRESS OF THE INVESTORS. THEREFORE, SUCH CIRCUMST ANCES WOULD CLEARLY PROVE THAT THE ASSESSEE GENUINELY RECEIVED SHARE APPLICAT ION MONEY AND INVESTORS WERE HAVING SUFFICIENT FUND TO MAKE INVESTMENT IN A SSESSEE COMPANY. 18.4. THE AUTHORITIES BELOW HAVE ALSO CONSIDERED LO W INCOME OF THE INVESTOR AND THAT THEY ARE NOT EXISTING PARTIES. AS NOTED A BOVE, THE KJS GROUP OF CASES AND MR. SURESH KUMAR JAIN WERE SUBJECTED TO SEARCH, THEREFORE, THE INVESTOR COMPANIES WERE EXISTING COMPANIES. THEY ARE ALSO A SSESSED TO TAX U/S 143(3). COPIES OF THE ASSESSMENT ORDERS IN THEIR CASES ARE FILED ON RECORD. THEY HAVE ALSO NET WORTH TO MAKE INVESTMENT IN ASSESSEE COMP ANY, THEREFORE, LOW INCOME EARNED BY INVESTORS COMPANY BY ITSELF IS NO GROUND TO TREAT THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE AS NOT G ENUINE. THE DECISION OF PAGE 20 OF 23 I.T.A .NO.-2523 TO 2525/DEL/2015 THE DELHI HIGH COURT IN THE CASE OF CIT VS VRINDAWAN FARMS PVT.LTD. (SUPRA) SQUARELY APPLY TO THE FACTS OF THE CASE. THE AUTHO RITIES BELOW, THEREFORE, SHOULD NOT HAVE DRAWN ADVERSE INFERENCE AGAINST THE ASSESSEE. THE AUTHORITIES BELOW HAVE ALSO DID NOT PRODUCE ANY MAT ERIAL ON RECORD THAT SUCH INVESTMENTS MADE IN THE ASSESSEE COMPANY WAS MADE F ROM COFFERS OF THE ASSESSEE. WE RELY UPON THE DECISION OF THE DELHI H IGH COURT IN THE CASE OF CIT VS VALUE CAPITAL SERVICES P.LTD. [2008] 307 ITR 334 (DELHI HIGH COURT) IN WHICH IT WAS HELD THAT DISMISSING THE APPEAL, THAT THE ADDITIONAL BURDEN WAS ON THE DEPARTMENT TO SHOW THAT EVEN IF THE SHARE APPLICANT S DID NOT HAVE THE MEANS TO MAKE THE INVESTMENT, THE INVESTMENT MADE BY THEM AC TUALLY EMANATED FROM THE COFFERS OF THE ASSESSEE SO AS TO ENABLE IT TO BE TR EATED AS THE UNDISCLOSED INCOME OF THE ASSESSEE. NO SUBSTANTIAL QUESTION OF LAW A ROSE. 18.5. IT MAY BE NOTED AGAIN THAT THE INVESTOR COMPA NIES HAVE CONFIRMED MAKING INVESTMENT IN ASSESSEE COMPANY WHO WERE HAVI NG SUFFICIENT NET WORTH TO MAKE INVESTMENT IN ASSESSEE COMPANY. THEREFORE, THE ASSESSEE HAS BEEN ABLE TO PROVE IDENTITY OF THE SHARE APPLICANTS, TH EIR CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION IN THE MATTER. THE DECISIONS CITED BY THE LD. COUNSEL FOR THE ASSESSEE CLEARLY SUPPORT OUR FINDIN GS. 18.6. LD. DR HOWEVER, RELIED UPON SEVERAL DECISIONS OF DELHI HIGH COURT REFERRED TO ABOVE. IN THESE CASES, THE GIST OF THE FINDINGS ARE THAT THE ASSESSEE FAILED TO PROVE IDENTITY AND CAPACITY OF THE SUBSCR IBER COMPANIES TO PAY SHARE APPLICATION MONEY OR THAT AMOUNT WAS RECEIVED AS AC COMMODATION ENTRIES OR THAT WHEN ASSESSEE MANAGED TO SECURED DOCUMENTS LIK E INCOME TAX RETURN AND BANK ACCOUNT OF THE SUBSCRIBERS IN SUCH CIRCUMSTANC ES, THE AO WAS JUSTIFIED IN DRAWING ADVERSE INFERENCE AGAINST THE ASSESSEE A ND THAT THE AO HAS DOUBT PAGE 21 OF 23 I.T.A .NO.-2523 TO 2525/DEL/2015 ON THE DOCUMENTS PRODUCED BY THE ASSESSEE. THE FAC TS OF THESE DECISIONS ARE CLEARLY DISTINGUISHABLE FROM THE FACTS OF THE CASE BECAUSE IN THE PRESENT CASE, THE ASSESSEE HAS BEEN ABLE TO PROVE IDENTITY OF THE INVESTORS, THEIR CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION IN THE MATTER. THEREFORE, THE AUTHORITIES BELOW SHOULD NOT HAVE MADE OR CONFI RMED THE ADDITION OF RS.5.75 CRORES IN THE HANDS OF THE ASSESSEE. IN VI EW OF THE ABOVE DISCUSSION, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AN D DELETE THE ADDITION OF RS.5.75 CRORES. THIS GROUND OF APPEAL OF THE ASSES SEE IS ALLOWED. 19. IN VIEW OF THE ABOVE FINDINGS, WHEREBY WE HAVE DELETED THE ADDITION ON MERIT, THERE IS NO NEED TO CONSIDER THE ISSUE OF IN ITIATION OF PROCEEDINGS U/S 153A OF THE ACT. HOWEVER, WE MAY BRIEFLY NOTE THAT THE ASSESSEES SOLE RELIANCE WAS ON THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF CIT VS KABUL CHAWLA (SUPRA) IN WHICH IT WAS HELD THAT ON THE DATE OF SEARCH THE SAID ASSESSMENT ALREADY STOOD COMPLETED. SINCE NO INCRIMINATING MA TERIAL WAS UNEARTHED DURING THE SEARCH, NO ADDITION COULD BE MADE TO SUCH INCO ME ALREADY ASSESSED. 20. LD. DR HOWEVER IN HIS WRITTEN SUBMISSIONS REFER RED TO SEVERAL DOCUMENTS WHICH HAVE BEEN REFERRED TO CIT(A) IN THE IMPUGNED ORDER TO SHOW VARIOUS DOCUMENTS WERE FOUND DURING THE COURSE OF SEARCH IN THE CASE OF THE ASSESSEE. THEREFORE, IT IS NOT A CASE WHERE NO INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH. MAY BE, THIS MAY NOT BE RELEVANT TO THE ULTIMATE ADDITION MADE ON ACCOUNT OF UNEXPLAINED SHARE APPLICATION MO NEY RECEIVED OF RS.5.75 CRORES. FURTHER, THE SEARCH IS CONDUCTED IN THE CA SE OF THE ASSESSEE ON 19.03.2012 AND ORIGINAL RETURN OF INCOME HAS BEEN F ILED BY THE ASSESSEE AFTER SEARCH ON 30.03.2012. THEREFORE, THERE IS NO QUEST ION OF ASSESSMENT ALREADY STOOD COMPLETED ON THE DATE OF SEARCH. SIMILARLY, IN THE REMAINING CASES I.E. PAGE 22 OF 23 I.T.A .NO.-2523 TO 2525/DEL/2015 ITA NO.2523/DEL/2015, THE ORIGINAL RETURN WAS FILED ON 23.09.2011 AND IN ITA NO.2524/DEL/2015 THE ORIGINAL RETURN WAS FILED ON 3 0.09.2011. IN THESE CASES, EVEN IF THE RETURN WAS FILED PRIOR TO SEARCH BUT NO ASSESSMENT WAS COMPLETED AND NO MATERIAL HAVE BEEN PROVIDED BY THE ASSESSEE TO PROVE THAT THE ASSESSMENTS WERE COMPLETED IN THEIR CASES PRIOR TO THE SEARCH. IN THESE CASES ALSO, MATERIAL WAS RECOVERED DURING THE COURS E OF SEARCH. THEREFORE, THE DECISION IN THE CASE OF CIT VS KABUL CHAWLA (SUPRA) WOULD NOT APPLY TO THE FACTS OF THE CASE. IN VIEW OF THE ABOVE SOLE RELIA NCE OF THE ASSESSEE ON THE DECISION DELHI HIGH COURT IN THE CASE OF CIT VS KABUL CHAWLA (SUPRA) IS CLEARLY MISPLACED. THIS GROUND OF APPEAL OF THE ASSESSEE H AS NO MERIT, THE SAME IS ACCORDINGLY DISMISSED. 21. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ITA NO.2523/DEL/2015 (PRABHATAM BUILDTECH LTD.) & ITA NO.2524/DEL/2015 (PRABHATAM BUILDWELL LTD.) 22. IN BOTH THE CASES, THE ASSESSEES HAVE CHALLENGE D THE INITIATION OF PROCEEDINGS U/S 153A OF THE ACT, SINCE NO INCRIMIN ATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH. FURTHER, IN BOTH THE APPEALS OF THE ASSESSEE HAVE CHALLENGED THE UPHOLDING OF THE ADDITION OF RS.3 CR ORES AND RS.10.09 CRORES U/S 68 OF THE ACT ON ACCOUNT OF UNEXPLAINED SHARE A PPLICATION MONEY RECEIVED. BOTH PARTIES SUBMITTED THAT THE ISSUES ARE SAME AS HAVE BEEN CONSIDERED IN THE CASE OF PRABHATAM INVESTMENT PVT.LTD. IN ITA NO .2525/DEL/2015. WE, THEREFORE, FOLLOWING THE REASONS FOR DECISIONS IN T HE CASE OF PRABHATAM INVESTMENT PVT.LTD. (SUPRA), SET ASIDE THE AUTHORIT IES BELOW AND DELETE THE ADDITIONS OF RS.3 CRORES AND RS.10.90 CRORES. THES E GROUNDS OF APPEAL OF THE ASSESSEE ARE ALLOWED. HOWEVER, THE LEGAL ISSUE REG ARDING ASSESSMENT FRAMED PAGE 23 OF 23 I.T.A .NO.-2523 TO 2525/DEL/2015 U/S 153A HAS ALREADY BEEN DECIDED AGAINST THESE ASS ESSEES, THEREFORE, THESE GROUNDS OF THE ASSESSEE ARE DISMISSED. IN THE RESU LT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. 23. IN THE RESULT, ALL THE APPEALS OF THE THREE DIF FERENT ASSESSEES ARE PARTLY ALLOWED AS INDICATED ABOVE. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 17 TH OF APRIL, 2017. SD/- SD/- (L.P.SAHU) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE:-17 TH APRIL, 2017 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSIST ANT REGISTRAR ITAT NEW DELHI