ITO, New Delhi V. M/s MRG Developers P. Ltd., New Delhi

ITA 2712/DEL/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3997 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 05-04-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 03-06-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K H L DIHANA
• Assessee Lawyers: P K MISHRA CAS
• Keywords: Gift; Opportunity of being heard; Principle of natural justice; Accommodation entries; Assessment record
• Section: 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI SHAMIM YAHYA ITA NO. 1642/DEL/2009 ASSTT. YR: 2004-05 MRG DEVELOPERS (P) LTD., VS. INCOME-TAX OFFICER, SAGAR COMPLEX, PLOT NO. 5, WARD 5(4), NEW DELHI. IST FLOOR, L.S.C. NEW RAJDHANI ENCLAVE, MAIN VIKAS MARG, NEW DELHI. PAN/GIR NO. AADCM4743Q AND ITA NO. 2712/DEL/2009 ASSTT. YR: 2004-05 INCOME-TAX OFFICER, VS. MRG DEVELOPERS (P) LTD., WARD 5(4), NEW DELHI. SAGAR COMPLEX, PLOT NO. 5, IST FLOOR, L.S.C. NEW RAJDHANI ENCLAVE, MAIN VIKAS MARG, NEW DELHI. (APPELLANT ) ( RESPONDENT ) ASSESSEE BY : S/SHRI NIRAJ JAIN & P.K. MISHRA CA S REVENUE BY : SHRI K. H.L. DIHANA CIT DR O R D E R PER R.P. TOLANI, J.M : THESE ARE CROSS APPEALS, ONE BY ASSESSEE AND THE OT HER BY REVENUE, AGAINST THE ORDER OF CIT(A) DATED 20-3-2009 RELATIN G TO A.Y. 2004-05. BOTH THE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPO SED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. RESPECTIVE GROUN DS ARE AS UNDER: ITA 1642 & 2712/D/09 MRG DEVELOPERS (P) LTD. 2 ITA NO. 1642/DEL/09 (ASSESSEES APPEAL) : IN THIS APPEAL, THE ONLY EFFECTIVE GROUND RAISED IS AS UNDER: THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APPEA LS) ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN SUSTAIN ING THE ADDITION OF RS. 66,00,000/- ON ACCOUNT OF ALLEGED L OAN RECEIVED FROM SMT. INDIRA MAHARAJ BY TREATING THE SAME AS UN EXPLAINED CASH CREDIT U/S 68 OF THE INCOME-TAX ACT, 1961. ITA NO. 2712/DEL/09 ( REVENUES APPEAL) : IN ITS APPEAL THE REVENUE HAS RAISED VARIOUS GROUN DS, HOWEVER, THE ONLY EFFECTIVE GROUND IS AS UNDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD . CIT(A) HAS ERRED IN DELETING ADDITION OF RS. 2,86,00,000/- MAD E BY THE AO U/S 68 OF THE I.T. ACT, 1961. 2. BRIEF FACTS ARE: DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO FOUND THAT A COMMERCIAL PLOT OF LAND MEASURING 269 1 SQ. MTS. FOR THE PURPOSE OF CONSTRUCTION OF A MALL WITH MULTIPLEX WA S AUCTIONED BY DDA, WHICH WAS ALLOTTED TO ASSESSEE ON 5-3-03. DURING TH E YEAR UNDER CONSIDERATION THE ASSESSEE PAID A SUM OF RS. 9,50,0 0,050/- TO DDA AND THE LAND WAS REGISTERED IN ITS NAME. NO OTHER BUSINESS ACTIVITY WAS CARRIED OUT DURING THE YEAR. HOWEVER, TO MEET THE COST OF LAND, ASSESSEE CLAIMED TO HAVE RECEIVED SHARE APPLICATION MONEY AMOUNTING TO RS. 4 ,30,38,000/-. ACCORDING TO AO, MOST OF THE SHARE APPLICATION MONEY WAS GENE RATED FROM THE BRIEF CASE COMPANIES OPERATED BY ENTRY OPERATORS SYNDICA TE WHICH INCLUDED THE NAMES OF SHRI SURINDER PAL SINGH; SH. RAJAN JASSAL; SH. MUKESH GUPTA; SH. ANIL KUMAR SHARMA; SH. MAHESH GARG; AND SH. BALRAJ JAIN ETC. ETC.; THESE AND OTHER NAMES ARE MENTIONED IN THE ASSESSMENT ORD ER. ACCORDING TO AO, ITA 1642 & 2712/D/09 MRG DEVELOPERS (P) LTD. 3 THE MODUS OPERANDI INVOLVED IN THESE ENTRY ACCOMMOD ATION ARRANGEMENTS FOLLOWED A PARTICULAR PATTERN. THE BENEFICIARY HAND ED OVER THE REQUISITE CASH ALONG WITH COMMISSION TO THE ENTRY OPERATOR. THE SA ME WAS DEPOSITED BY THE ENTRY OPERATOR IN A BANK ACCOUNT IN THE NAME OF HI S BRIEF CASE COMPANY OR FRONT ENTITY LIKE - RELATIVE, FRIENDS OR OTHER PERS ONS, UTILIZED FOR THE PURPOSE OF THIS SYNDICATE. THE MONEY WAS THUS TRANSFERRED BY WAY OF CLEARING INTO ONE OR MORE STAGES. THE BENEFICIARY THEN DEPOSITS C ASH/ DD/PAY ORDER IN HIS BANK ACCOUNT AND THE SAME WAS REALIZED IN ITS BANK ACCOUNT IN THE FORM OF GIFT/SHARE APPLICATION MONEY/ LOAN ETC. CLANDESTINE FACADE WAS CREATED TO PROVE THAT THE FUNDS CAME THROUGH BANKING CHANNELS TO ENABLE THE BENEFICIARY TO CLAIM THE AUTHENTICITY OF TRANSACTIO NS. THE FRONT ENTITIES ARE MAINTAINED BY OPERATORS BY MANAGING THEIR AUDITED A CCOUNTS, ASSESSMENT PARTICULARS, CONFIRMATIONS ETC. IN THIS CASE AO WAS OF THE VIEW THAT THE ASSESSEE HAS RAISED THE SHARE APPLICATION AMOUNTS B Y SUCH DUBIOUS MEANS FROM FOLLOWING ENTITIES: SR. NO. NAME AMOUNT 1. MARUTI MARKETING P. LTD. 2500000 2. SHUBHLAGAN SECURITIES P. LTD. 2100000 3. KUMAR FINCAP P. LTD. 3000000 4. MARUTI SOFTWARE P. LTD. 2000000 5. SUN STAR COMMERCIALS LTD. 2500000 6. MARATHAN SYSTEMS P. LTD. 2500000 7. DIRECT SALES P. LTD. 2500000 8. MINIMAX FINVEST P. LTD. 2500000 9. S.N.G. FINCAP P. LTD. 8000000 10. VIJAY FOILS P. LTD. 1000000 11. MS. INDIRA MAHARAJ 6600000 TOTAL 3,52,00,000 ITA 1642 & 2712/D/09 MRG DEVELOPERS (P) LTD. 4 2.1. AO THUS CALLED UPON THE ASSESSEE TO ESTABLISH THE IDENTITY, GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF SHARE APPLIC ANTS. ASSESSEE FILED THE CONFIRMATIONS, PAN NOS. WITH EXPLANATIONS. REJECTIN G THE EXPLANATION FURNISHED BY THE ASSESSEE, THE AO HELD THAT THE ING REDIENTS OF SEC. 68 WERE NOT COMPLIED AND ADDED THE AFORESAID SUM OF RS. 3,5 2,00,000/-AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE I. T ACT. 2.2. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL BEF ORE THE CIT(A), WHO BY ORDER DATED 16-3-2007 U/S 250(4) DIRECTED THE AO T O GIVE AN OPPORTUNITY OF CROSS-EXAMINATION AS REQUESTED BY ASSESSEE IN RESPE CT OF PERSONS WHO WERE ALLEGED TO BE ENTRY OPERATORS AND WHOSE STATEMENTS WERE PURPORTED TO BE RECORDED BY THE ADIT. THE AO FILED A REPORT DATED 1 6-10-2007, RELEVANT PART OF WHICH READS AS UNDER: NONE APPEARED ON THE GIVEN DATE BEFORE MY PREDECES SOR SH. OM PRAKASH, THE THEN ITO WARD 5(4). ON THE DIRECTIO N OF THE ADDL. CIT, RANGE-5 AGAIN, I GAVE FURTHER OPPORTUNIT Y AND SENT SUMMONS U/S 131 TO ALL THE PERSONS. 1. SH. BAL RAJ JAIN SPEED POST. 2. SH. NARENDER KUMAR GUPTA SPEED POST 3. SH. MAHESH GARG SPEED POST 4. SH. DEEPAK CHHANGIA SPEED POST 5. SH. ANIL KUMAR SHARMA SPEED POST 6. SH. VINOD GARG THROUGH NOTICE SERVER 7. SH. SURINDER PAL SINGH THROUGH NOTICE SERVER 8. SH. MUKESH GUPTA THROUGH NOTICE SERVER 9. SH. RAJAN JASSAL THROUGH NOTICE SERVER ON THE GIVEN DATE, ONE SH. VINOD GARG ATTENDED IN R ESPONSE TO SUMMONS U/S 131 AND NONE OTHER ATTENDED FOR CROSS EXAMINATION. THE STATEMENT OF SH. VINOD GARG WAS RE CORDED IN THE PRESENCE OF THE AUTHORIZED REPRESENTATIVE OF TH E ASSESSEE COMPANY. THE ADDRESS OF SH. VINOD GARG WAS OBTAINE D FROM THE PAN DIRECTOR OF THE DEPARTMENT AND WHO DECLINED TO HAVE ITA 1642 & 2712/D/09 MRG DEVELOPERS (P) LTD. 5 ANY KNOWLEDGE ABOUT THE SAID TRANSACTION OR OF THE COMPANY. HIS NAME AS WELL AS HIS FATHERS NAME WAS SAME OF T HE ONE WHOSE STATEMENT WAS RECORDED BY THE INVESTIGATION W ING. THEREFORE, AGAIN, THE INSPECTOR OF THIS WARD WAS DE PUTED ON THE ADDRESSES PROVIDED BY THE INVESTIGATION WING OF SH. VINOD GARG. THE INSPECTOR IN HIS REPORT DATED 6.10.07 HAS MENTIONED THAT AT THE GIVEN ADDRESS I.E. B-1155, SHASTRI NAGA R, EMPLOYEE WHO LEFT THE SERVICE TWO YEARS AGO. FURTHER, HE ALS O VISITED G- 8/94, SECTOR 15, ROHINI, THE SAID JANTA FLAT PREMIS ES IS NOW OCCUPIED BY ONE MRS. KAVITA TYAGI. SHE ALSO FAILED TO PROVIDED ANY INFORMATION ABOUT SH. VINOD GARG. IN THIS CONNE CTION NONE ATTENDED IN RESPONSE TO SUMMONS U/S 131 AND THE CRO SS EXAMINATION OPPORTUNITY COULD NOT BE PROVIDED. 2.3. THEREAFTER, CIT(A) AGAIN MADE SOME INQUIRIES, AO SUBMITTED A FINAL REPORT DATED 5-2-09, WHICH IS CONSIDERED BY CIT(A) AND IS REPRODUCED AS UNDER: 4.3.1 INTERIM REPORT DATED 20.10.2008: IN THIS REP ORT, THE AO INFORMED THAT FOR THE COMPANIES MENTIO9NED AT S. NO . 1 TO 7 ABOVE IN PARA 4.2, THERE ARE COMMON PERSONS BEHIND THESE CONCERNS IN THE CAPACITY OF DIRECTORS/ PROPRIETORS/ PARTNERS NAMELY SHRI DILIP JHA, SHRI K.N. JHA AND SHRI KUMUD RANJAN JHA. REGARDING THESE PERSONS, IT IS SUBMITTED THAT: 7. HOWEVER IN THE AVAILABLE RECORD, PRESENTLY I COULD NOT FIND ANY STATEMENT OF SH. DILIP JHA, SH. K.N. JHA AND SH. KUMUD RANJAN JHA WHEREIN THE ABOVE REFERRED PERSONS HAVE ADMITTED THAT THEY ARE IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES. I SHALL BE NEEDING ASSISTANCE OF MY PREDECESSORS, TO ASCERTAIN IF ANY SUCH STATEMENT WAS RECORDED BY THEM DURING THE COURSE OF ASSESSMENT OR SUBSEQUENTLY, AS THE SUMMONS ARE FOUND TO HAVE BEEN ISSUED IN THE NAMES OF THE ABOVE PERSONS DURING THE COURSE OF ASSESSMENT PROCEEDINGS. ITA 1642 & 2712/D/09 MRG DEVELOPERS (P) LTD. 6 4.3.2. FINAL REPORT DATED 5.2.2009: IN THIS REPORT, THE AO HAS NOT MADE COMMENTS ON THE FACTS MENTIONED BY THE APPELLA NT COMPANY STATING IT TO REPETITION OF FACTS AND FINDI NGS OF THE CASE. THE CONTENTS OF THE REPORT DATED 16.10.2007 O N THE ASPECT OF PRINCIPAL OF NATURAL JUSTICE HAVE BEEN REPRODUCE D. IN THIS BACKDROP, ON MERITS THE AO HAS SUBMITTED AS UNDER: IN THE BACK DROP OF THE ABOVE, THE FOLLOWING IS FU RTHER SUBMITTED: (A) THE AO HAS FRAMED ASSESSMENT ORDER OF M/S MRG DEVELOPERS PVT. LTD. STRICTLY ON THE BASIS OF INFORMATION PROVIDED BY THE ADDL. DIT INVESTIGATION WING, UNIT-I, NEW DELHI. (B) THE STATEMENT OF THE ABOVE MENTIONED NINE PERSONS WERE DULY RECORDED ON OATH BY THE INVESTIGATION WIN G IN WHICH THEY HAVE ADMITTED TO HAVE PROVIDED ENTRIE S TO DIFFERENT PARTIES FOR CERTAIN CONSIDERATION AND A COPY OF SUCH STATEMENT HAS ALREADY BEEN PROVIDED TO THE ASSESSEE FOR HIS RECORD. (C) THE COMPANY FROM WHOSE ACCOUNTS THE CREDIT CONTRIBUTION WERE BROUGHT TO THE ACCOUNT OF THE ASSESSEE COMPANY, WAS ACTUALLY NOT CARRYING OUT ANY BUSINESS AND THE MAIN BUSINESS WAS ONLY PROVIDING SUCH BOGUS ENTRIES. (D) SUCH BOGUS ENTRIES HAVE BEEN ACQUIRED BY CERTAIN OTHER COMPANIES IN WHICH EITHER THE INDIVIDUALS HAV E OPERATED AS DIRECTORS OR SHARE HOLDERS. THESE COMPANIES HAVE BEEN MAINLY FLOATED BY CERTAIN INDIVIDUALS FOR THE PURPOSE OF CARRYING ON BOGUS ENTRIES ACTIVITIES. (E) THE COMPANY M/S MRG DEVELOPERS PVT. LTD. TOOK CREDIT ENTRIES FROM SUCH BOGUS COMPANIES AND ULTIMATELY THE ASSESSEE COMPANY BECAME THE BENEFICIARY OF SUCH ENTRIES. IN ORDER TO MAKE IT AP PEAR THAT THE SAID ENTRIES WERE GENUINE, THE ASSESSEE COMPANY SHOWED THEM AS SHARE APPLICATION MONEY (I) AS HAS BEEN MENTIONED EARLIER, SINCE THESE INDIVIDUALS HAD ALREADY ACCEPTED BEFORE THE ITA 1642 & 2712/D/09 MRG DEVELOPERS (P) LTD. 7 INVESTIGATION AUTHORITY THAT THEY WERE MEN OF NO MEANS AND WHATEVER ENTRY HAS BEEN PROVIDED BY THEM IS PURELY AN ENTRY OF FACILITATION FOR CERTAIN MEAGER COMMISSION. THUS THESE PEOPLE, HAD BEEN ONLY SMALL PAWNS IN THE ENTIRE RACKET OF PLOUGHING INTO THE SYSTEM, UNACCOUNTED FUNDS. (II) IN THIS CONTEXT AND ON THE BASIS OF RECORD, I AM OF THE HUMBLE OPINION THAT SINCE THE STATEMENTS OF THE ABOVE INDIVIDUALS ALREADY STANDS RECORDED ON OATH, BY INVESTIGATION WING OF THE DEPARTMENT, AND THE INDIVIDUAL AS WELL AS THE ENTRY PROVIDERS & BENEFICIARIES HAVE UNDERSTOOD THE IMPLICATION OF THE REPORT OF THE INVESTIGATION WING BY THIS TIME, DESPITE SERVICE OF SUMMONS ON THEM, THEY HAVE SIMPLY NOT APPEARED BEFORE THE AO DURING THE REMAND PROCEEDINGS. IN THE LIGHT OF THE ABOVE SUBMISSIONS, IT IS REQUES TED THAT THE LD. CIT(A) MAY KINDLY CONSIDER THE FOLLOWING CORE ISSUE S BEFORE DECIDING THE APPEAL: (I) THE REPORT OF THE INVESTIGATION WING IN RESPECT OF THE ENTRY OPERATORS AND THEIR BENEFICIARIES IS AN UNCONTROVERSIAL DOCUMENT ON WHICH THE AO HAS BASED HIS FINDINGS IN THE ASSESSMENT ORDER. (II) THE REQUEST OF THE ASSESSEE COMPANY THAT THESE INDIVIDUALS BE ALLOWED TO BE CROSS EXAMINED BY THEM IS ALSO A VERY CLEAR PLOY, SINCE THEY WERE, AS ULTIMATE BENEFICIARIES, HAVE NOT ONLY MANAGED THESE INDIVIDUALS AND MUST HAVE ALSO ENSURED THAT THEY DO NOT APPEAR BEFORE THE AO. THEY WERE VERY SURE THAT THE DEPARTMENT WOULD NOT BE ABLE LEAD ANY EVIDENCE IN THIS REGARD, DURING THE COURSE OF ASSESSMENT OR ANY OTHER SUBSEQUENT PROCEEDING. (III) IT IS PERTINENT TO MENTION HERE, THAT THOUGH ONE OF THE INDIVIDUALS, SH. VINOD GARG HAS ATTENDED THE SUMMONS PROCEEDINGS AND HAS DENIED HAVING INVESTED IN ANY OF THE COMPANIES, AND THE AR OF THE ASSESSEE WHO WAS GIVEN AN OPPORTUNITY FOR CROSS FURTHER TO EXAMINE HIM. ITA 1642 & 2712/D/09 MRG DEVELOPERS (P) LTD. 8 (IV) AS FAR AS THE CASE LAWS CITED BY THE ASSESSEE, THE LD. CIT(A) MAY KINDLY CONSIDER THE SAME IN THE LIGHT OF THE FACTUAL MATRIX OF THE CASE. IN RESPECT OF THIS OFFICE LETTER NO.: CIT(A)-VIII/2 008-09/148 DATED 4.11.2008, THE AO HAS SUBMITTED FACTUAL INFOR MATION ABOUT THE DETAILS SUBMITTED BEFORE THE AO DURING AS SESSMENT PROCEEDINGS. HOWEVER, IN RESPECT OF THIS OFFICE LET TER DATED 15.9.2008), NO FURTHER INFORMATION OR PARTICULARS H AVE BEEN SUBMITTED. 2.4. ASSESSEE VIDE LETTER DATED 19-2-2009 FILED COU NTER COMMENTS ON AOS REPORT, PARTICULARLY, ON THE FOLLOWING ISSUES: (I) THE ABOVE NINE PERSONS WERE DEPARTMENTAL WITNESSES WHOSE STATEMENTS WERE RELIED ON BY THE DEPARTMENT. DESPIT E DIRECTIONS, THEY WERE NOT PRODUCED BY AO TO CROSS-EXAMINE THEM. IN THEIR STATEMENTS BEFORE ADIT, THEY HAVE NOT DIRECTLY NAME D THE SHARE APPLICANTS AS MENTIONED IN ASSESSEES CASE, THEREFO RE, DEPARTMENT HAS NOT BEEN ABLE TO PROVE THE FOUNDATION OF THE CA SE. (II) AO HAS NOT APPLIED INDEPENDENT MIND AND MERELY FOLL OWED THE REPORT OF INVESTIGATION WING. (III) THE ORDER IS CONTRARY TO PRINCIPLE OF NATURAL JUSTI CE. NO OPPORTUNITY OF CROSS-EXAMINATION OF SHRI VINOD GARG, WHO APPEAR ED BEFORE AO WAS GIVEN. ASSESSEE HAS PRODUCED SHARE APPLICATION REGISTER, ALLOTMENT REGISTER, SHARE APPLICANTS PAN NOS.; CON FIRMATORY LETTERS. RELIANCE WAS PLACED ON HONBLE SUPREME COU RT JUDGMENT IN THE CASE OF DIVINE LEASING & FINANCE LTD. 216 C TR 195(SC); AND DELHI HIGH COURT JUDGMENT IN THE CASE OF VALUE CAPITAL SERVICES PVT. LTD. 307 ITR 334 (DEL.). 2.5. CIT(A) DELETED THE ADDITIONS IN RESPECT OF FIR ST TEN CREDITORS/ SHARE APPLICANTS, EXCEPT SMT. INDIRA MAHARAJ, WHOSE SHARE APPLICATION WAS CONFIRMED BY FOLLOWING OBSERVATIONS: ITA 1642 & 2712/D/09 MRG DEVELOPERS (P) LTD. 9 5.9.2 IN THIS BACKDROP, IT IS TO BE CONSIDERED IF THE ABOVE CAN SWAY THE FINDINGS IN EITHER WAY OR NOT? AS IS NOTICEABLE THAT THE FINDINGS OF THE AO TABULA TED ABOVE DOES NOT ESTABLISH THAT THE UNDISCLOSED INCOM E OF THE APPELLANT COMPANY HAS BEEN RECEIVED THROUGH THE ALL EGED ACCOMMODATION ENTRIES. THE CASE OF THE AO HAS BEEN PRIMARILY THAT THE MONEY IS PAID BY THE APPELLANT IN CASH TO THE SO CALLED ENTRY OPERATORS/ PROVIDERS BUT IT REMAINS UNSUBST ANTIATED AND UNPROVED BY ANY MANNER WHATSOEVER. THE ABOVE DECISI ONS OF THE DELHI HIGH COURT AND ITAT, DELHI BENCHES DO LAY DOWN A RATIO THAT THE ADDITIONAL BURDEN OR ONUS WAS ON THE REVENUE TO SHOW THAT SHARE APPLICANT DID NOT HAVE THE MEANS TO MAKE SUCH INVESTMENTS AND THE AMOUNT EMANATED FROM THE COFFER S OF THE ASSESSEE. HOWEVER, IN THE INSTANT CASE THE AO HAS N OT SHIFTED THE ONUS. SINCE, THERE IS NO SPECIFIC EVIDENCE TO E STABLISH OR EVEN CIRCUMSTANTIAL EVIDENCE TO INDICATE THAT THE A PPELLANT WAS HAVING ANY FINANCIAL IRREGULARITIES IN HIS ACCOUNTS OR BANK STATEMENTS, THE CONCLUSION OF THE AO MERELY ON SUSP ICION AND WITHOUT MAKING ANY DEEPER INVESTIGATION, DOES NOT A PPEAR TO BE JUSTIFIED. SINCE, THE AO HAD DATA AND INFORMATION REGARDING TH E AOS OF THE VARIOUS COMPANIES FROM WHOM THE SHARE C APITAL HAD BEEN RECEIVED BY THE APPELLANT, FURTHER INVESTI GATIONS COULD HAVE BEEN CONDUCTED FOR VERIFICATION BEFORE ARRIVIN G AT AN ADVERSE INFERENCE. HOWEVER, NO SUCH FACTS OR ADVERS E DOCUMENTS HAVE ACTUALLY BEEN BROUGHT ON RECORD BY T HE AO. THE APPELLANT HAD DISCHARGED ITS INITIAL ONUS OF ES TABLISHING THE IDENTITY OF THE PARTIES AND ALSO SUBMITTED DOCUMENT S WHICH PRIMA FACIE PROVE THE IDENTITY OF THE PARTIES AND A LSO SUBMITTED DOCUMENTS WHICH PRIMA FACIE PROVE THE CREDITWORTHIN ESS AND GENUINENESS OF THE TRANSACTIONS. THE AO CANNOT SUMM ARILY REJECT ALL THE DOCUMENTS WITHOUT MAKING DEEPER INVE STIGATIONS AND BRINGING ON RECORD SPECIFIC FINDINGS WHICH PROV E THAT AMOUNTS WERE NOT GENUINE DEPOSITS RECEIVED TOWARDS SHARE CAPITAL. IN THIS CONTEXT, IT IS RELEVANT TO QUOTE F ROM THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORT PVT. LTD. 216 CTR 95 IN WHICH HONBLE SUPREME COURT HELD THAT: ITA 1642 & 2712/D/09 MRG DEVELOPERS (P) LTD. 10 WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION FO R THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHARE HOLDERS, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO RE-OPEN THE INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. 5.10. IN VIEW OF THE FACTUAL ASPECTS OF THE CASE AS ALSO THE APPLICATION OF THE DECISIONS DISCUSSED ABOVE SYSTEM ATICALLY, I HOLD THAT THE APPELLANT PERFORMED ITS DUTY OF ESTAB LISHING THE IDENTITY AND CREDITWORTHINESS OF ALL THE TEN SHARE- SUBSCRIBER COMPANIES AND THE GENUINENESS OF THE TRANSACTION AN D THEREFORE, AO WAS NOT JUSTIFIED IN APPLYING THE PROVISIONS OF SECTION 68 IN THIS CASE THEREBY ADDING A SUM OF RS. 2,86,00,000/- TO THE TOTAL INCOME. THE AO IS DIRECTED TO GIVE RELIEF TO THE AP PELLANT ON THIS ACCOUNT. IN THE LIGHT OF DISCUSSION MADE IN PA RA 5.9 ABOVE, THE AO IS DIRECTED TO TAKE THE SUITABLE ACTION ABOU T SUCH SHARE SUBSCRIBER COMPANIES AND INTIMATE THEIR AOS OF THE AID INVESTMENT MADE BY THEM, IF HE STILL CONSIDERS THE SHARE SUBSCRIPTION MADE BY THESE COMPANIES AS MADE FROM UNEXPLAINED SOURCES. 6.1. NOW, I AM DISCUSSING THE CASE OF ADDITION ABOU T THE CREDIT OF SHARE APPLICATION MONEY IN THE NAME OF MS . INDIRA MAHARAJ. THE UNDISPUTED FACTS OF THE CASE AS ARE EV IDENT FROM THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APP ELLANT COMPANY ARE THAT: - SMT. INDIRA MAHARAJ IS A NON-RESIDENT INDIAN HOLDING PASSPORT ISSUED BY WEST INDIES. - SHE APPLIED FOR THE EQUITY SHARES OF THE APPELLANT COMPANY AND PAID SHARE APPLICATION MONEY OF RS. 66,00,000/- BUT SHARES WERE NOT ALLOTTED TO HER AND THE SHARE APPLICATION MONEY WAS REFUNDED TO HER IN THE NEXT YEAR I.E. IN ASSESSMENT YEAR 2005-06. - THE AMOUNT IS PAID OUT OF THE NRO ACCOUNT WITH UTI BASNK LTD., RAJOURI GARDEN, NEW DELHI. ITA 1642 & 2712/D/09 MRG DEVELOPERS (P) LTD. 11 - THE SHARE APPLICATION FORM OF MS. INDIRA MAHARAJ INDICATES THAT SHE IS APPLYING FOR THE SHARES AFTER READING THE PROSPECTUS OF THE APPELLANT COMPANY. IN THE SAID SHARE APPLICATION FORM, HER STATUS IS SHOWN AS RESIDENT RATHER THAN NON-RESIDENT. - SHE IS NEITHER ASSESSED TO TAX IN INDIA NOR HOLDS PAN. IN THE LIGHT OF THESE FACTS, IT IS TO BE DECIDED IF THE SAID CREDIT CAN BE ACCEPTED AS EXPLAINED OR NOT? 6.5. THE APPELLANT HAS ALSO FAILED TO EXPLAIN HOW S HE GOT CONVINCED TO APPLY HUGE SUM OF RS. 66 LACS IN THE A PPELLANT COMPANY, WHICH WAS YET TO START BUSINESS CONTEMPLAT ED BY IT. IT IS BEYOND COMPREHENSION WHY A NON-RESIDENT WOULD IN VEST SUCH LARGE AMOUNT IN A PRIVATE LIMITED COMPANY WHICH HAS NO CREDENTIALS TO BOAST OF, NO PAST HISTORY OR ANTECED ENTS OF FINANCIAL STRENGTH ETC., RATHER THAN IN A WELL ESTA BLISHED COMPANY WITH A TRACK RECORD OF BUSINESS AND WHICH M AY BE LISTED ON THE STOCK EXCHANGE. IN THE CASE OF LARGE INVESTMENTS IN UNQUOTED COMPANIES, USUALLY A NON-RESIDENT INVESTOR CALLS FOR DUE-DILIGENCE REPORT AND CREDIT RATING FROM THE RAT ING AGENCIES OF REPUTE, WHICH IS ALSO ABSENT IN THE CASE. THUS, THE ELEMENT OF TRANSPARENCY IS CLEARLY ABSENT IN THE SAID TRANSACT ION FROM THE PERSPECTIVE OF A PRUDENT INVESTOR WHO IS STATIONED THOUSANDS OF KILOMETERS AWAY FROM THE COMPANY IN WHICH SHE IS MA KING INVESTMENT. THESE FACTS ARE NOT ONLY BEYOND THE COMPREHENSION OF HUMAN PROBABILITY BUT ALSO DO NOT GET WELL WITH THE SURROUNDING CIRCUMSTANCES. THESE ASPECTS A RE OF RELEVANT IN THE LIGHT OF THE SUPREME COURT DECISION IN THE CASE OF SUMATI DAYAL REPORTED IN 214 ITR 801. IN THE INSTANT CASE ALSO, THOUGH THE APPELLANT COMP ANY HAS PROVED THE IDENTITY OF MS. INDIRA MAHARAJ THROU GH HER PASSPORT, BUT THE SUBMISSION OF COPY OF BANK PASS B OOK (EVIDENCING THE TRANSPORT OF MONEY THROUGH BANKING CHANNELS) OR COPY OF TAX RETURN OF A YEAR FILED ABROAD (WHICH DOES NOT SPECIFY HER PROFILE & ANTECEDENTS ABOUT MAKING OF S UCH ITA 1642 & 2712/D/09 MRG DEVELOPERS (P) LTD. 12 INVESTMENTS/ DEPOSITS, THE TRUE EXTENT OF HER CAPIT AL, EXTENT OF INCOME EARNED REGULARLY AND HER SAVINGS ETC.) IS NO T SUFFICIENT TO PROVE HER CREDIT-WORTHINESS. THE APPELLANT COMPANY HAS NOT SUBMITTED SUITABLE DOCUMENTARY EVIDENCE WHICH CAN E STABLISH BEYOND DOUBT THAT MS. INDIRA MAHARAJ HAD ENOUGH FU NDS TO INVEST HUGE SUM OF RS. 66 LACS, IN THE APPELLANT CO MPANY. AGGRIEVED, BOTH THE PARTIES ARE IN APPEAL ON THEIR RESPECTIVE GROUNDS. 3. LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT: (I) CIT(A) CALLED THREE REMAND REPORTS FROM THE AO AND DIRECTED HIM TO GIVE OPPORTUNITY OF CROSS-EXAMINATION OF THE PER SONS WHOSE STATEMENTS WERE BEING RELIED. THE STATEMENTS ALSO W ERE NOT RECORDED BY AO HIMSELF ONLY ADIT REPORTS WERE REL IED UPON. THUS, THE AO INSTEAD OF APPLYING INDEPENDENT MIND, RELIED ON ADIT REPORTS THAT TOO WITHOUT CARING TO EXAMINE THE EVIDENCE HIMSELF. (II) IN THE REMAND PROCEEDINGS ALSO NO OPPORTUNITY OF CR OSS- EXAMINATION WAS GIVEN BY AO. THE STATEMENT OF ONE S HRI VINOD GARG, THOUGH WAS TAKEN IN THE PRESENCE OF ASSESSEE REPRESENTATIVE, NO OPPORTUNITY OF CROSS-EXAMINATION WAS GIVEN. (III) DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESS EE FIELD ALL RELEVANT DOCUMENTS I.E. SHARE APPLICATION/ ALLOTMEN T REGISTER; CONFIRMATIONS OF COPIES OF BANK A/C; PAN NOS. OF SH ARE APPLICANTS; THEIR ADDRESSES. ASSESSEE SINCE DISCHARGED ITS PREL IMINARY BURDEN CAST BY SEC. 68 IN RESPECT OF IDENTITY OF SHARE APP LICANTS THROUGH THEIR CONFIRMATIONS, PAN NOS., GENUINENESS OF TRANS ACTION BY BANKING CHANNELS AND CREDITWORTHINESS AS AO HIMSELF HAS MENTIONED THE CREDITS/ SOURCES IN THE BOOKS OF SHAR E APPLICANTS, NO ITA 1642 & 2712/D/09 MRG DEVELOPERS (P) LTD. 13 ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE B UT THE SAME IS TO BE EXAMINED IN THE HANDS OF SHARE APPLICANTS AS DIR ECTED BY CIT(A) AND AS HELD BY HONBLE SUPREME COURT IN THE CASE OF DIVINE LEASING & FINANCE LTD. (SUPRA) AND HONBLE DELHI HI GH COURT IN THE CASE OF VALUE CAPITAL SERVICES PVT. LTD. (SUPR A). 3.1. APROPOS SMT. INDIRA MAHARAJ, IT IS CONTENDED T HAT A COPY OF PASSPORT OF MS. INDIRA MAHARAJ WAS FURNISHED, WHICH PROVES H ER IDENTITY AND ADDRESS. THE PHOTOCOPY OF THE PASSPORT ITSELF SHOWS THAT SHE IS CITIZEN OF REPUBLIC OF TRINIDAD & TOBAGO AND MAINTAINING BANK ACCOUNT WIT H UTI BANK LTD. BEARING NO. 066010100083933 MENTIONING HER TRINIDAD ADDRESS. A COPY OF WHICH HAS BEEN FURNISHED BEFORE AO. THE IMMEDIATE S OURCE OF FUNDS RECEIVED BY THE ASSESSEE COMPANY IS A DEPOSIT OF US $ 143288.25 ON 18.07.2003 CONVERTED IN INDIA CURRENCY IS RS. 66,14 ,186/- OUT OF WHICH RS. 66,00,000/- HAVE BEEN RECEIVED BY THE ASSESSEE COMP ANY. THE BANKS ARE AGENTS OF RBI IN RESPECT OF FOREIGN EXCHANGE TRANSA CTIONS AND FOLLOW THE PROCEDURES LAID DOWN BY THE RBI. THE HANDWRITTEN IT EMS IN THE BANK PASSBOOK ARE NOT RELEVANT FOR THE PURPOSES OF THE C ASE OF THE ASSESSEE COMPANY. THE ASSESSEE COMPANY HAS NO CONTROL OVER T HE OTHER TRANSACTIONS MENTIONED IN BANK ACCOUNTS OF MS. INDIRA MAHARAJ. D UE TO COMPUTERIZATION THE BANK ACCOUNT NUMBER ARE EXCLUSIVE AND NOT BRANC H DEPENDENT. 3.2. LEARNED COUNSEL FURTHER CONTENDS THAT IN RESPE CT OF MS. INDIRA MAHARAJ ALSO ASSESSEE HAS DISCHARGED ITS ONUS. THE AMOUNT HAVING BEEN RECEIVED FROM NRI ACCOUNT, THE SAME CANNOT BE ADDED IN THE ASSESSEES CASE. 4. LEARNED DR, ON THE BOTHER HAND, VEHEMENTLY CONTE NDS: ITA 1642 & 2712/D/09 MRG DEVELOPERS (P) LTD. 14 (I) THAT THE ASSESSEES CASE INVOLVES UNCANNY NUMBER OF CO-INCIDENTS AND PREPONDERANCES. THE ASSESSEE COMPANY HAD NO BU SINESS WHAT- SO-EVER, BY AN AUCTION IT RECEIVED A COMMERCIAL PLO T FROM DDA AND ATTRACTED A SURPRISING SHARE CAPITAL WITHOUT AN Y MARKET REPUTATION. NO. OF COMPANIES, WHOSE ADDRESSES ARE IDENTICAL, LIKE, EXPRESS TOWER, AZADPUR COMMERCIAL COMPLEX AND RAVI NDER PLAZA, KAROL BAGH ETC., ADVANCED HUGE AMOUNTS BY W AY OF SHARE APPLICATION TO ASSESSEE COMPANY ALONG WITH APPLICAT ION ITSELF. (II) THE PATTERN IS UNUSUAL INASMUCH THE ALLEGED SHARE A PPLICANTS WITHIN A DAY OR TWO PRIOR TO ENCASHING OF CHEQUES BY THE ASSESSEE, RECEIVED HUGE DEPOSITS FROM SOME OTHER ENTITIES. (III) THE ASSESSEES BUSINESS CREDENTIALS IN COMMERCIAL CIRCLES TO COLLECT SO MUCH OF SHARE APPLICATION MONEY IS NO WH ERE MENTIONED. IN SHARE APPLICATION FORM PLACED AT PAPER BOOK PAGE 6, THERE IS A REFERENCE TO PUBLICATION OF COMPANYS PROSPECTUS, B UT COPY OF SUCH PROSPECTUS IS NOT SEEN THE LIGHT OF THE DAY. IF AS SESSEE HAD ISSUED A PROSPECTUS, COPY OF THAT OUGHT TO HAVE BEEN GIVEN T O AO. (IV) IN CASE OF MS. INDIRA MAHARAJ, AN APPLICATION FOR S HARE ALLOTMENT IS GIVEN ON 29-8-03 AND THE SAME DAY THE AMOUNT IS CRE DITED IN ASSESSEES BANK ACCOUNT. (V) IN RESPECT OF OTHER SHARE APPLICANTS, COPY OF SHARE APPLICATIONS ARE NOT ON RECORD AND THERE ARE NO PARTICULARS AS TO HO W THE APPLICATION WAS MADE, WHETHER IT WAS CONSIDERED BY THE BOARD OF DIRECTORS, ITA 1642 & 2712/D/09 MRG DEVELOPERS (P) LTD. 15 THE ENTIRE SHARE APPLICATION MONEY WAS GIVEN IN ADV ANCE OR IT WAS GIVEN IN INSTALMENTS. (VI) WHATEVER NAMES OF SHARE APPLICANTS WERE GIVEN BY TH E ASSESSEE, THEY WERE ALL FOUND TO BE NON-EXISTENT ON THE ADDRE SS AND SHRI VINOD GARG, ONLY PERSON WHO APPEARED BEFORE AO, DEN IED HAVING MADE ANY INVESTMENT IN THE ASSESSEE COMPANY. BESID ES, WHILE RECORDING HIS STATEMENT, ASSESSEES REPRESENTATIVE WAS PRESENT AND NO EFFORT WAS MADE TO ASK FOR CROSS-EXAMINATION. IF THE PERSONS WHO ARE FOUND TO BE KING PINS IN THE ENTRY ARRANGEM ENTS OPERATING LARGE NUMBER OF ENTRIES DO NOT APPEAR AND THE ONE A PPEARING REFUSED TO ACKNOWLEDGE THE TRANSACTION, NECESSARY I NFERENCE ON THE BASIS OF PREPONDERANCE AND PROBABILITIES IS TO BE D RAWN. LEARNED CIT(A) HIMSELF HAS REFERRED TO HONBLE SUPREME COUR T JUDGMENT IN THE CASE OF SUMATI DAYAL TO POINT OUT INCONSISTE NCIES AND IMPROBABILITIES IN THE CASE OF SMT. INDIRA MAHARAJ, BUT SIMILAR SURROUNDING CIRCUMSTANCES HUMAN PROBABILITIES HAVE NOT BEEN CONSIDERED IN THE CASES OF OTHER SHARE APPLICANTS F OR WHICH RELIEF IS GIVEN. (VII) SO FAR NONE OF THE SHARE APPLICANTS HAS EVER APPEAR ED BEFORE AO OR ANY OTHER AUTHORITY; EXCEPT CONFIRMATIONS AND SOME OTHER DOCUMENTS WHICH ARE MAINTAINED TO CREATE A FAADE F OR THE FRONT COMPANIES NO WORTHWHILE APPEARANCE HAS BEEN DEMONST RATED. (VIII) IN THE CASE OF SMT. INDIRA MAHARAJ, CIT(A) HAS CATE GORICALLY HELD THAT SHE BEING NRI, UNUSUALLY SUBSCRIBED TO AN UNLI STED COMPANY. THE SAME APPLIES TO OTHER SHARE APPLICANTS ALSO . W ITHOUT HAVING ITA 1642 & 2712/D/09 MRG DEVELOPERS (P) LTD. 16 ANY COMMERCIAL CREDENTIALS IN FAVOUR OF THE COMPANY OR ANY PROSPECTUS HOW THESE APPLICANT COMPANIES WHO DID NO T HAVE THEIR OWN FUNDS AND PLACE OF BUSINESS, WILL BUY THE SHARE OF AN UNLISTED COMPANY WHO DID NOT HAVE ANY BUSINESS OPERATIONS A ND THE DIRECTORS DID NOT HAVE ANY MARKET RECOGNITION. 4.1. LEARNED DR CONTENDS THAT AO WAS BEING ASKED TO PERFORM AN IMPOSSIBLE FUNCTION INASMUCH AS THE SHARE APPLICATI ONS ARE NOT APPEARING. THERE ARE TOO MANY NOTORIOUS FACTS ON RECORD INDICA TING SYSTEMATIC ENTRY OPERATION OF DUBIOUS CHARACTER RESULTING IN CREATIN G BOGUS CAPITAL. IT WAS PLEADED THAT HONBLE SUPREME COURT IN THE CASE OF S UMATI DAYAL (SUPRA) HAS EMPHASIZED THE IMPORTANCE OF TAKING INTO CONSIDERAT ION VITAL ASPECTS ABOUT THE HUMAN CONDUCT, SURROUNDING CIRCUMSTANCES AND PR EPONDERANCE OF PROBABILITIES. IN THE GIVEN FACTS AND CIRCUMSTANCES NO GENUINE PERSON WILL NORMALLY INVEST IN SUCH AN UNLISTED COMPANY WHOSE C REDENTIALS ARE NOT KNOWN. IN RESPECT OF WHICH, THE MARKET CREDENTIALS AND GOOD REPUTATION OF OPERATORS AND DIRECTORS IS UNKNOWN. THERE SEEMS TO BE A CURIOUS HURRY IN COLLECTING MONEY WHICH POINTS OUT TOWARDS AN EVENTU ALITY TO GET THE DDA PLOT DOCUMENTS REGISTERED AND MANAGING CAPITAL REQ UIREMENTS ON PAPER. INVESTORS DID NOT HAVE THEIR OWN FUNDS AND IN TURN WITHIN A DAY OR TWO SOME OTHER ENTITY PROVIDES TRANSFERS WHO ALSO HAVE COMMO N ADDRESS AND WHOSE SOURCES ARE UNKNOWN. 4.2. IT IS VEHEMENTLY ARGUED THAT IN CASE OF ENTRY ACCOMMODATION RACKET A PAPER TRAIL IS ALWAYS CREATED TO BYPRODUCING SOME IDENTITY PAPERS. WHAT SECTION 68 REQUIRES IS, TO ESTABLISH THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE DEPOSITORS IN A SATISFACTOR Y MANNER. IN THIS CASE THE ITA 1642 & 2712/D/09 MRG DEVELOPERS (P) LTD. 17 CREDITWORTHINESS HAS NOT BEEN EXPLAINED IN A SATISF ACTORY MANNER BUT ADDITIONS HAVE BEEN DELETED ON THE BASIS THAT AO FA ILED TO BRING ANY ADVERSE MATERIAL ON RECORD. IN VIEW OF SUPREME COURT JUDGME NT IN THE CASE OF SUMATI DAYAL, THE ASSESSEE HAS TO ESTABLISH THE BON A FIDES OF SUCH TRANSACTIONS AND COLLECTION OF MONEY ON THE BASIS OF REASONABLE HUMAN CONDUCT. 4.3. A QUERY WAS RAISED BY THE BENCH ABOUT THE ASSE SSMENTS OF PERSONS (KING PINS) WHO HAVE BEEN SEARCHED BY THE I.T. DEP ARTMENT. DR CONTENDS THAT SINCE THE SIMULTANEOUS PROCEEDINGS WERE GOING ON, THEY MAY NOT HAVE BEEN FINALIZED BY THE TIME OF THIS ASSESSMENT AND T HEREFORE THERE IS NO REFERENCE AVAILABLE IN THIS RESPECT IN ASSESSMENT ORDER OR CIT(A)S ORDER. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND HAVE GONE TH ROUGH THE ENTIRE MATERIAL AVAILABLE ON RECORD. AS THE FACTS EMERGE T HE TRANSACTIONS AND MANNER OF COLLECTION OF HUGE SHARE APPLICATION MONE Y, BY THE ASSESSEE RAISES SERIOUS QUESTIONS AND SURROUNDING CIRCUMSTAN CES DO NOT APPEAR TO BE NORMAL. THE ASSESSEE COMPANY HAD NO MARKET CREDENTI AL; COPY OF PROSPECTUS HAS NOT BEEN SUPPLIED WHICH IS MENTIONED IN THE SH ARE APPLICATION OF SMT. INDIRA MAHARAJ. THE PROSPECTUS WILL GIVE COMPANY AN D DIRECTORS PROFILE, ITS OBJECTIVES, POTENTIAL WHICH MIGHT BE REQUIRED BY TH E COMPANY LAW PROVISIONS TO APPRISE THE INVESTORS ABOUT THE HEALTH AND STATU S OF THE COMPANY THEY INTEND TO INVEST IN. SIMILARLY, CONFIRMATIONS FROM ALL SHARE APPLICANTS HAVE ALSO NOT BEEN FILED IN THE PAPER BOOK. DETAILS ABOU T THE DATES OF SHARE APPLICATIONS, THE DEPOSIT IN THE BANK ACCOUNT IS N OT BEFORE US. GENERALLY THE SHARE APPLICATION WILL ENCLOSE A CHEQUE AND THE SAM E WILL BE ENCASHED ITA 1642 & 2712/D/09 MRG DEVELOPERS (P) LTD. 18 WITHIN 2-3 DAYS, FROM THE DATE OF APPLICATION. BESI DES, THE BOARD RESOLUTION ACCEPTING SHARE APPLICATIONS ON DIFFERENT DATES HA VE NOT BEEN FILED. 5.1. MOST IMPORTANT INFORMATION WILL COME FROM THE ASSESSMENT RECORDS OF ALLEGED KING PINS OF ENTRY OPERATORS WHOSE NAMES HA VE BEEN MENTIONED IN ASSESSMENT ORDER AND ADI REPORTS. THERE IS NO REFER ENCE TO ANY ACTION TAKEN ON RECORD. SINCE SEARCH & SURVEY OPERATIONS WERE MA DE AND SYSTEMATIC OPERATIONS WERE GOING ON, DEPARTMENT MUST HAVE PROC EEDED AGAINST ALL OF THEM AND FRAMED ASSESSMENTS. IT IS ALLEGED BY THE D EPARTMENT ITSELF THAT THEY WERE OPERATING WITH NETWORK OF FICTITIOUS AND BRIEF CASE COMPANIES WHOSE EXISTENCE ON PAPER WAS THERE BUT PHYSICAL OPERATIO NS WERE MANAGED AND THE CAPITAL WAS CREATED BY TRANSFER OF MONEY FROM ONE A CCOUNT TO OTHER. PROPER ASCERTAINMENTS OF FACTS CANNOT BE MADE IN SUCH TYPE OF CASES UNLESS THE ACTION TAKEN IN PARALLEL KING PIN CASES IS REFERRE D TO. WE ARE CONSCIOUS OF THE FACT THAT CIT(A) HAD DIRECTED THE AO TO AFFORD T HEIR CROSS-EXAMINATION, AT THE SAME TIME WE UNDERSTAND THE AOS HANDICAP WHEN NONE OF THEM RESPONDED TO THE NOTICE OR SUMMONS AND IS FOUND TO BE NON-EXISTENT. IN OUR VIEW, AO AND CIT(A) OUGHT TO HAVE VERIFIED THE RECO RD OF PARALLEL PROCEEDINGS/ SEARCH PROCEEDINGS IN THE CASE OF KING PINS OF ENTRY OPERATORS AND THEIR NETWORK ENTITIES, WHICH HAS NOT BEEN REFE RRED TO BEFORE US. THE ITAT BEING A FINAL FACT FINDING AUTHORITY, HAS TO E NSURE THAT A PROPER ASSESSMENT IS MADE BASED ON ALL MATERIAL FACTS. 5.2. WE ARE OF CONSIDERED OPINION THAT THERE ARE MA NY MISSING LINKS WHICH ARE IMPORTANT TO DECIDE CASE OF SUCH A MAGNITUDE AN D CONNECTED CASES WILL FORM AN IMPORTANT ASPECT OF INVESTIGATION AND CORRO BORATION OF FACTS. IN VIEW OF THE FORE-GOINGS, WE ARE INCLINED TO SET ASIDE TH E ISSUES RAISED IN ASSESSEES ITA 1642 & 2712/D/09 MRG DEVELOPERS (P) LTD. 19 AND REVENUES APPEALS BOTH TO THE FILE OF AO TO DEC IDE THE SAME AFRESH IN THE LIGHT OF OUR ABOVE OBSERVATIONS AFTER GIVING THE AS SESSEE REASONABLE OPPORTUNITY OF BEING HEARD AND REFERRING TO RECORD PARALLEL ASSESSMENTS IN CONNECTED CASES. 6. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASS ESSEE AS WELL AS THE REVENUE STAND ALLOWED FOR STATISTICAL PURPOSES ONLY . ORDER PRONOUNCED IN OPEN COURT ON 20-05-2011. ( SHAMIM YAHYA ) ( R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 20-05-2011. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR