DYNAMIC MINECHEM PVT. LTD., MUMBAI V. DCIT- CIRCLE - 5(1), MUMBAI

ITA 2843/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7651 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 04-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H N SINGH
• Assessee Lawyers: HEMAKATARIA
• Keywords: Unexplained cash credit; Income from undisclosed sources; Search and seizure; Document seized; Share purchase agreement; Principle of natural justice; Earning of tax free income; Retrospective amendment; Question of law; Fair market value; Valuation report; Accommodation entries; Onus to prove; Documents seized; Rule 8D
• Section: 143(3); 56(2); 153A; 14A; 133(6); 195; 251; 113; 43; 72; 13; 22; 68; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENCH MU MBAI BEFORE SHRI G. MANJUNATHA, ACCOUNTANT MEMBER & SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO.2568/MUM/2018 ( ASSESSMENT YEAR: 2010-11 ) METRO WOVEN SACKS PRIVATE LIMITED EXPRESS ZONE, A WING 8 TH FLOOR WESTERN EXPRESS HIGHWAY GOREGAON (EAST) MUMBAI-400 63 VS. DCIT,CC-5(1) 19 TH FLOOR AIR INDIA BUILDING NARIMAN POINT MUMBAI-400 021 PAN/GIR NO.AAACM4059J (APPELLANT ) .. RESPONDENT ) & ITA NO.2561/MUM/2018 ( ASSESSMENT YEAR: 2010-11 ) RUKMANI MERCANTILE PRIVATE LIMITED EXPRESS ZONE, A WING 8 TH FLOOR WESTERN EXPRESS HIGHWAY GOREGAON (EAST) MUMBAI-400 63 VS. DCIT,CC - 5(1) 19 TH FLOOR AIR INDIA BUILDING NARIMAN POINT MUMBAI-400 021 PAN/GIR NO.AA ACR4999N (APPELLANT ) .. RESPONDENT ) & ITA NO.2843/MUM/2018 ( ASSESSMENT YEAR: 2010-11 ) DYNAMIC MINECHEM PRIVATE LIMITED 4 TH FLOOR, SILVER METROPOLIS, JAICOACH COMPOUND, OPPOSITE BIMBISAR NAGAR, WESTERN EXPRESS HIGHWAY, GOREGAON (E) MUMBAI-400 063 VS. DCIT,CC-5(1) 19 TH FLOOR AIR INDIA BUILDING NARIMAN POINT MUMBAI-400 021 PAN/GIR NO.AACCS2552E (APPELLANT ) .. RESPONDENT ) METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 2 ASSESSEE BY MS. HEMA KATARIA, AR REVENUE BY H.N. SINGH , CIT, DR DATE OF HEARING 12/12/2019 DATE OF PRONOUNCEMENT 29 / 01 / 20 20 / O R D E R PER G. MANJUNATHA (A.M) : THESE APPEALS FILED BY THREE DIFFERENT ASSESSEES ARE DIRECTED AGAINST SEPARATE, BUT IDENTICAL ORDERS OF THE COMMI SSIONER OF INCOME TAX (APPEAL)53, MUMBAI, ALL DATED 07/03/201 8 AND THEY PERTAINS TO ASSESSMENT YEARS (AY) 2010-11. SINCE, THE FACTS ARE IDENTICAL AND ISSUES ARE COMMON, FOR THE SAKE OF CO NVENIENCE, THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED-OFF, B Y THIS CONSOLIDATED ORDER. ITA.N.2568/MUM/2018 2. THE ASSESSEES HAVE MORE OR LESS RAISED COMMON G ROUNDS OF APPEAL IN THEIR RESPECTIVE APPEAL. THEREFORE, FOR T HE SAKE OF BREVITY, GROUNDS OF APPEAL TAKEN IN ITA NO. 2568/MUM/2018 F OR AY 2010-11 ARE REPRODUCED AS UNDER:- 1. THE LEARNED CIT (A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ADDITIONS MADE BY THE ASSESSING OFFICER U/S. 143(3) R.W.S. 153A OF THE INCOME-TAX ACT, 1961 WHICH IS INVALID AND BAD IN LA W. 2. THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE ADDITION OF RS. 80,00,000/- MADE BY THE ASSESSING OFFICER U/S.68 OF THE ACT. METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 3 3. THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE ADDITION OF RS.60,000/- MADE BY THE ASSESSING OFFICER, BEING ALLEGED UNEXPL AINED EXPENDITURE @ 0.75% ON AFORESAID ALLEGED CAPITAL INTRODUCED OF RS ,80,00,000/-. 4. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON F ACTS IN UPHOLDING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S. 14A OF THE ACT READ WITH RULE 8D OF I.T. RULES, 1962. 5. THE ORDER PASSED BY THE LEARNED CIT(A) IS IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE AND BAD IN LAW. 6. THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND, A LTER OR DELETE ALL OR ANY OF THE FOREGOING GROUNDS OF APPEAL, 3. THE BRIEF FACTS OF THE CASE EXTRACTED FROM ITA NO.2568/MUM/2018 FOR AY 2010-11 ARE THAT A SEARCH AND SEIZURE ACTION U/S 132(1) OF THE I.T.ACT, 1961 WAS CONDUCTE D IN THE ANAND RATHI GROUP ALONG WITH THEIR GROUP CONCERNS ON 24/ 09/2013. DURING THE COURSE OF SEARCH PROCEEDINGS, IT WAS NOTICED TH AT THE ASSESSEE HAD RAISED PREFERENCE SHARE CAPITAL OF RS. 24 LACS , IN THE FORM OF 2,40,000/-, 6% NON CUMULATIVE REDEEMABLE PREFERENCE SHARES BEARING FACE VALUE OF RS. 10/- EACH, ON WHICH, THE ASSESSEE HAS SHOWN TO HAVE RECEIVED SHARE PREMIUM OF RS. 96 LA CS, AS ON 31/03/2010. THE ASSESSEE COMPANY HAS ALLOTTED PREFE RENCE SHARES TO M/S UNICON COMMDEAL PVT.LTD., M/S. BENCHMARK BUI LDCON PVT.LTD. (BBPL), M/S TOPSTAR DEALERS PVT.LTD. FURTHER, IT W AS NOTICED THAT 14 COMPANIES, INCLUDING THE ASSESSEE COMPANY OF A NAND RATHI GROUP HAD RAISED CAPITAL OF RS. 13,67,25,000/-. THE SE COMPANIES METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 4 HAD ISSUED PREFERENCE SHARES AT PREMIUM VARYING FRO M RS. 30/- PER SHARE TO RS. 75/- PER SHARE. THESE 14 COMPANIES WER E CONTROLLED DIRECTLY OR THROUGH, THE EMPLOYEES OF ANAND RATHI G ROUP. THE PATTERN OF INVESTMENTS IN ALL THESE COMPANIES WAS T HE SAME. THE PROCESS OF RAISING SHARE CAPITAL STARTED SOMETIME I N THE MONTH OF JULY, 2009 AND THE PREFERENCE SHARES WERE ALLOTTED IN THE MONTH OF MARCH, 2010. IMMEDIATELY, AFTER THE ALLOTMENT OF SH ARES IN THESE 14 COMPANIES, THE SHARES WERE TRANSFERRED WITHIN TWO M ONTHS AT FACE VALUE TO ENTITIES/PERSONS RELATED TO ANAND RATHI GR OUP IN THE LAST WEEK OF MAY 2010. IN THE COURSE OF SEARCH PROCEEDI NGS, CERTAIN PAPERS WERE FOUND AND SEIZED IN RELATION TO SHARE C APITAL SHOWN TO HAVE RECEIVED BY VARIOUS GROUP COMPANIES OF ANAND R ATHI GROUP FROM VARIOUS ENTITIES, INCLUDING SHARE APPLICATION ADDRESSED TO THE BOARD OF DIRECTORS OF M/S METRO WOVEN SACKS PVT LTD FOR ALLOTMENT OF PREFERENCE SHARES AGAINST PAYMENT OF MONEY. FURTHER , CERTAIN OTHER PAPERS, INCLUDING MINUTES OF THE BOARD OF DIRECTOR S MEETING OF THE INVESTORS COMPANY, BLANK PROFORMA BEARING THE HEADI NG DELIVERY, CHALLAN, DECLARATION, RECEIPT AND SALE BILL IN THE LETTER HEAD OF THE BBPL AND SUCH BLANK PROFORMAS WERE DULY SIGNED BY SHRI SAWAN JAJOO, DIRECTOR OF BBPL. SIMILARLY, SHARE TRA NSFER FORMS ISSUED BY REGISTRAR OF COMPANIES, MAHARASHTRA , MUM BAI CONTAINING THE SEAL OF REGISTRAR OF COMPANIES, MAHARASHTRA, MUMBAI, SHOWING METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 5 THE PRESENTATION OF THE SAID FORM AS ON 28/01/2010 IN THE O/O THE REGISTRAR OF COMPANIES WERE ALSO FOUND. DURING THE COURSE OF SEARCH PROCEEDINGS, ON BEING QUESTIONED, SHRI SHAIL ENDRA SINGHAI, REGIONAL MANAGER OF M/S. ANAND RATHI, SHARES AND ST OCK BROKERS LTD. MERELY STATED THAT HE DOES NOT KNOW WHY SUCH B LANK FORMS WERE KEPT WITH HIM. FURTHER, STATEMENT OF SHRI ANAND RAT HI, CHAIRMAN AND DIRECTOR OF ANAND RATHI GROUP WAS ALSO RECORDED ON 17/07/2014, IN THE POST SEARCH INVESTIGATION PROCEEDINGS, FOR WHIC H HE DID NOT PROVIDE ANY SATISFACTORY EXPLANATION TO EXPLAIN VAR IOUS DOCUMENTS AND TO PROVE, THE GENUINENESS OF THE SOURCE OF SHAR E CAPITAL, SO RECEIVED FROM THE SUBSCRIBERS. 4. CONSEQUENT TO SEARCH PROCEEDINGS, THE CASE HAS B EEN SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS RECEIVED HUGE SUM OF SHARES CAPITAL FROM VARIOUS COMPANIES. THEREFORE, HE CALLE D UPON THE ASSESEE TO FURNISH NECESSARY EVIDENCES, INCLUDING N AME AND ADDRESS OF THE PERSON FROM WHOM SHARE CAPITAL IS RE CEIVED, COPY OF BLANK STATEMENT HIGHLIGHTING RELEVANT ENTRIES, ITR ACKNOWLEDGMENT WITH ANNEXURE, NAME OF THE BANK AND BRANCH FROM WHE RE AMOUNT HAS BEEN RECEIVED, AMOUNT OF PREMIUM CHARGED ON ISS UE OF SHARES, COPIES OF CORRESPONDENCE WITH THE SHARE SUBSCRIBER AND OTHER METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 6 DETAILS. IN RESPONSE, THE ASSESSEE VIDE LETTER DATE D 30/11/2015 FILED COMPLETE DETAILS OF NAME AND ADDRESS, INCLUDING PAN OF THE SUBSCRIBERS, COPY OF BANK STATEMENT, ITR WITH ANNEX URE, PROFIT AND LOSS ACCOUNT, BALANCE SHEET ETC., JUSTIFICATION NOT E ON ISSUE OF SHARES AT PREMIUM, COPY OF AUDITED FINANCIAL, DETAILS OF S HARE HOLDING PATTERN AND OTHER RELEVANT DETAILS. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, IN ORDER TO VERIFY CORRECTNESS OF DETA ILS FILED BY THE ASSESSEE, THE AO ISSUED 133(6) NOTICES TO ALL SHARE HOLDERS AND ASKED THEM TO FURNISH NECESSARY DETAILS. IN RESPONS E TO 133(6) NOTICES, NONE OF COMPANIES HAVE RESPONDED. THEREAFT ER, THE AO CALLED UPON THE ASSESEE TO FILE NECESSARY EVIDENCES IN THE BACKDROP OF NOTICES ISSUED U/S 133(6) NOTICES WERE RETURNED UN-SERVED, IN CASE OF ONE SHAREHOLDER AND ACCORDINGLY, REQUESTED THE ASSESSEE TO ENSURE COMPLIANCE OF STATUTORY NOTICES ISSUED TO IT S SHAREHOLDERS. IN RESPONSE, THE ASSESSE FILED DETAILED WRITTEN SUBMIS SIONS AND EXPLAINED WHY PROVISIONS OF SECTION 68 CANNOT BE IN VOKED. 5. THE LD. AO AFTER CONSIDERING RELEVANT SUBMISSION S OF THE ASSESSEE AND ALSO TAKEN NOTE OF VARIOUS EVIDENCES F ILED, DURING THE COURSE OF SEARCH, INCLUDING BLANK FORMS FOUND IN TH E NAME OF ASSESSEE, WHICH HAS BEEN SCANNED IN ASSESSMENT ORDE R AT PARA 5.6 ON PAGES 19, CAME TO THE CONCLUSION THAT THE ASSESE E HAS FAILED TO METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 7 PROVE THREE INGREDIENTS PROVIDED U/S 68 OF THE I.T. ACT, 1961, IN ORDER TO COME OUT OF SAID PROVISION, IN RESPECT OF SHARE CAPITAL, INCLUDING PREMIUM RECEIVED FROM CERTAIN SUBSCRIBERS. THE LD. AO, FURTHER OBSERVED THAT ALTHOUGH, THE ASSESSEE HAS FILED ALL EVIDENCES, INCLUDING CONFIRMATION FROM THE PARTIES, BUT WHEN T HE DEPARTMENT HAS TAKEN UP INDEPENDENT ENQUIRY, IN LIGHT OF VARIO US INCRIMINATING MATERIAL FOUND, DURING THE COURSE OF SEARCH TO ASCE RTAIN GENUINENESS OF TRANSACTIONS, NONE OF SUBSCRIBERS HAVE RESPONDED AND IN FACT, NOTICE ISSUED U/S 133(6) OF THE I.T.ACT, 1961 WAS R ETURNED UN-SERVED. FURTHER, THE MOOT QUESTION ARISES AS TO WHY THE INV ESTORS ARE NOT ANSWERING ALL THE QUERIES ALONG WITH DOCUMENTS TO E STABLISH THEIR IDENTITY AND CREDITWORTHINESS AND ALSO GENUINENESS OF THE TRANSACTIONS. THE LD. AO, FURTHER ANALYSING, THE PR OVISION OF SECTION 68 OF THE ACT, AND ALSO TAKEN SUPPORT FROM VARIOUS JUDICIAL PRECEDENTS, INCLUDING THE DECISION OF HONBLE SUPRE ME COURT IN THE CASE OF CIT VS P.MOHANAKALA (2007) 291 ITR 278 (SC) HELD THAT FROM THE DETAILS COLLECTED, DURING THE COURSE OF SE ARCH AND POST SEARCH INVESTIGATION AND ALSO, THE INVESTIGATION CA RRIED OUT,DURING THE COURSE OF ASSESSMENT PROCEEDINGS, CLEARLY PROVES TH AT THE IDENTITY, GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF THE SHAREHOLDERS ARE NOT PROVED. THE ENTIRE GAMUT OF T RANSACTIONS SHOWS THAT THE FUNDS, IN FORM OF SHARE CAPITAL HAS BEEN BROUGHT IN METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 8 BY WAY OF CAPITAL IN THE NAME OF THE VARIOUS COMPAN IES, WHOSE VERY EXISTENCE COULD NOT BE ESTABLISHED BY THE ASSESSES COMPANY, NOR THE SOURCE OF THESE FUNDS. THEREFORE, HE OPINED TH AT THE ASSESSEE HAS FAILED TO PROVE CREDIT FOUND IN FORM OF SHARE C APITAL AS GENUINE TRANSACTIONS AND ACCORDINGLY, MADE ADDITIONS OF RS. 80,00,000/- TOWARDS SHARE CAPITAL U/S 68 OF THE I.T.ACT, 1961. SIMILARLY, THE AO HAS MADE ADDITIONS TOWARDS PROBABLE COMMISSION PAID BY THE ASSESSEE TO HAWALA DEALERS FOR OBTAINING ACCOMMODAT ION ENTRY AND BY TAKING NOTE OF INDUSTRIAL PRACTICE ESTIMATED 0. 75% COMMISSION ON TOTAL SHARE CAPITAL RECEIVED BY THE ASSESEE AND MAD E ADDITIONS OF RS. 60,000/-. LIKEWISE, THE AO HAS MADE ADDITIONS T OWARDS DISALLOWANCES OF EXPENDITURE INCURRED IN RELATION T O EXEMPT INCOME U/S 14A R.W.RULE 8D AMOUNTING TO RS. 38,882/-. 6. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A), THE ASSESSEE HAS REITERATED ITS SUBMISSIONS MADE BEFORE THE AO T O ARGUE THAT IT HAS DISCHARGED INITIAL ONUS BY FILING ENORMOUS DE TAILS, INCLUDING NAME, ADDRESS, PAN, INCORPORATION CERTIFICATE OF TH E INVESTORS. THE ASSESSEE, FURTHER, SUBMITTED THAT IT HAS FILED CONF IRMATION LETTERS ALONG WITH INCOME TAX RETURNS ACKNOWLEDGMENTS, COPY OF AUDITED BALANCE SHEETS, BOARD RESOLUTION, DETAILS OF CHEQUE NUMBER/RTGS METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 9 FOR MOVEMENT OF FUNDS THROUGH PROPER BANK CHANNELS. THE ASSESSEE FURTHER CLAIMED THAT IN FACT, WHEN 133(6) WERE ISSU ED, EXCEPT ONE INVESTOR REMAINING ALL INVESTORS HAVE RESPONDED TO 133(6) NOTICES AND ANSWERED ALL QUESTIONS OF THE AO WITH NECESSARY EVIDENCES. THE ASSESSEE, FURTHER SUBMITTED THAT ONCE, ASSESSEE HAS DISCHARGED INITIAL ONUS BY FILING NECESSARY EVIDENC ES THEN, THE ONUS SHIFTS TO THE AO TO PROVE OTHERWISE. IN THIS CASE, THE AO WITHOUT ASCERTAINING, THE TRUE NATURE OF TRANSACTIONS, IN L IGHT OF VARIOUS EVIDENCES FILED BY THE ASSESSEE, CAME TO THE WRONG CONCLUSION THAT THE TRANSACTIONS BETWEEN THE PARTIES ARE NOT GENUIN E, ONLY FOR THE REASON THAT THE INVESTORS DID NOT RESPOND TO 133(6) NOTICES. THE FACT OF THE MATTER IS THAT THE ASSESSEE COULD DO WHATEVE R IT CAN DO WITHIN ITS POWERS. IN THIS CASE, THE ASSESEE HAS FILED COM PLETE SET OF DOCUMENTS, IN ORDER TO PROVE SHARE CAPITAL RECEIVED FROM SUBSCRIBERS AND ALSO, THE SUBSCRIBERS PERSONALLY RESPONDED TO 1 33(6) NOTICES. THEREFORE, IT IS INCORRECT ON THE PART OF AO TO COM E TO THE CONCLUSION THAT THE TRANSACTIONS BETWEEN THE PARTIES ARE NON-G ENUINE. 7. THE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMIS SIONS OF THE ASSESSEE AND ALSO RELIED UPON VARIOUS JUDICIAL PREC EDENTS HELD THAT THE ASSESEE HAS NOT BEEN ABLE GIVE ANY VERIFIABLE C ONTEMPORANEOUS EVIDENCE OF HOW, THE INVESTORS WERE ROPED IN, THE P ERSONS CONTACTED, METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 10 THE NEGOTIATIONS FOR RAISING SUCH LARGE AMOUNTS AT HUGE PREMIUM, AT THE TIME OF SEARCH, POST SEARCH INVESTIGATION, ASSE SSMENT PROCEEDINGS AND EVEN, IN APPELLATE PROCEEDINGS. THE ASSESEE HAS ALSO FAILED TO EXPLAIN, WHY ALL THESE INVESTORS ALM OST IN UNISON DECIDED TO TRANSFER, THE SHARES AT PAR TO ANAND RAT HI GROUP COMPANIES AT HUGE LOSSES. ALTHOUGH, THE ASSESSEE H AS FILED VARIOUS EVIDENCES, BUT FAILED TO FURNISH UPDATED ADDRESS OF THE INVESTORS, WHICH IS EVIDENT FROM THE FACT THAT, WHEN 133(6) NO TICES WERE SERVED ON THEM, THE NOTICES WERE RETURNED UN-SERVED THEREF ORE, HE OPINED THAT MERE FURNISHING CERTAIN DOCUMENTS TO PROVE IDE NTITY IS NOT SUFFICIENT ENOUGH AND WHAT IS TO BE SEEN IS WHETHER , THREE INGREDIENTS HAVE BEEN COLLECTIVELY DISCHARGED OR NO T, IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE. ACCORDINGLY, B Y TAKING NOTE OF VARIOUS FACTS BROUGHT OUT BY THE AO AND ALSO BY REL IED UPON VARIOUS JUDICIAL PRECEDENTS, INCLUDING THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS GOSALIA SHIPPING P VT.LTD. 1978 113 ITR 307 HELD THAT THE ASSESSEE HAS FAILED TO PROVE, THE TRUE IDENTITY, GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF THE PARTIES, MORE PARTICULARLY, IN THE BACKDROP OF CLEAR FINDING S, DURING SEARCH PROCEEDINGS AND POST SEARCH INVESTIGATION CARRIED, DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ACCORDINGLY, OPINED T HAT THERE IS NO ERROR IN THE FINDINGS OF THE AO IN MAKING ADDITIONS TOWARDS SHARE METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 11 CAPITAL U/S 68 OF THE I.T.ACT, 1961. SIMILARLY, THE LD.CIT(A) UPHELD ADDITIONS MADE BY THE AO TOWARDS PROBABLE COMMISSIO N PAYMENT ON ACCOMMODATION ENTRIES OBTAINED FROM HAWALA DEALE RS. LIKEWISE, THE LD.CIT(A) HAS ALSO UPHELD ADDITIONS MADE BY THE AO TOWARDS DISALLOWANCES OF EXPENDITURE INCURRED, IN RELATION TO EXEMPT INCOME U/S 14A BY INVOKING RULE 8D(2)(III) OF THE I.T.RULE S, 1962 @ 0.5% AVERAGE VALUE OF INVESTMENTS. AGGRIEVED BY THE LD.C IT(A) ORDER, THE ASSESEE IS IN APPEAL BEFORE US. 8. THE LEARNED AR FOR THE ASSESSEE, AT THE TIME OF HEARING SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF TH E ASSESSEE BY THE DECISION OF ITAT IN ASSESSEES OWN GROUP COMPANY CA SE IN ITA NO.2563/MUM/2018 AND OTHER ORDER DATED 29/08/2019, WHERE UNDER IDENTICAL SET OF FACTS AND ALSO ON THE BASIS OF FIN DINGS OF THE DEPARTMENT IN SEARCH CONDUCTED IN ANAND RATHI GROUP HELD THAT THE ASSESSEE HAS PROVED IDENTITY, GENUINENESS OF TRANSA CTIONA AND CREDIT WORTHINESS OF PARTIES. THE LD. AR FURTHER SU BMITTED THAT THE LD. CIT(A) WAS ERRED IN CONFIRMING THE ADDITIONS MADE B Y THE ASSESSING OFFICER TOWARDS SHARE APPLICATION MONEY RECEIVED FR OM SUBSCRIBERS AMOUNTING TO ` 80,00,000/- U/S. 68 OF THE I.T.ACT, 1961 WITHOUT APPRECIATING FACT THAT THE ASSESSING OFFICER NEVER DISPUTED IDENTITY OF THE SUBSCRIBERS AND GENUINENESS OF THE TRANSACTIONS . THE AR FURTHER METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 12 SUBMITTED THAT ALTHOUGH THE ASSESSING OFFICER HAS A CCEPTED IDENTITY OF THE SUBSCRIBERS, HE DISPUTED CREDIT WORTHINESS O F THE SUBSCRIBERS ON THE BASIS OF FINANCIAL STATEMENTS TO ASCERTAIN T RUE NATURE OF TRANSACTIONS BETWEEN THE PARTIES. ON THE OTHER HAN D, THE ASSESSEE HAS DISCHARGED ITS INITIAL ONUS BY FILING ENORMOUS DOCUMENTS, INCLUDING CONFIRMATION FROM THE PARTIES WHERE THEY HAVE CATEGORICALLY STATED THAT INVESTMENTS IN ASSESSEE COMPANY IS GENU INE TRANSACTION AND HAS BEEN ROUTED THROUGH BANKING CHANNELS. THE ASSESSEE HAS ALSO FILED COMPLETE DETAILS ABOUT IDENTITY OF THE S UBSCRIBERS INCLUDING THEIR PAN, ADDRESS ETC. THE ASSESSEE HAS ALSO FILE D INCOME TAX ACKNOWLEDGMENT OF THE SUBSCRIBERS ALONG WITH FINANC IAL STATEMENT AND BANK STATEMENTS. THE ASSESSING OFFICER NEVER D ISPUTED THE FACT THAT THE ASSESSEE HAS FILED NECESSARY DOCUMENTS IN ORDER TO PROVE IDENTITY OF THE SUBSCRIBERS AND GENUINENESS OF THE TRANSACTIONS. ONCE, THE ASSESSEE DISCHARGES INITIAL BURDEN PLACED UPON HIM, THEN THE ONUS SHIFTS TO THE SHOULDER OF THE ASSESSING OF FICER TO PROVE OTHERWISE. IN THIS CASE, THE ASSESSING OFFICER NEI THER CARRIED OUT ANY FURTHER ENQUIRIES, NOR CALLED UPON THE ASSESSEE TO EXPLAIN THE CREDIT WITH FURTHER EVIDENCES. BUT, HE CAME TO THE CONCLUS ION THAT THE TRANSACTION BETWEEN THE PARTIES ARE NOT GENUINE MER ELY ON THE BASIS OF FINANCIAL STATEMENTS OF THE ASSESSEE, MORE PARTI CULARLY ON BASIS OF INCOME DECLARED FOR THE YEAR UNDER CONSIDERATION WI THOUT METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 13 APPRECIATING THE CORRECT LEGAL POSITION OF LAW THAT IN ORDER TO BRING ANY CREDIT WITHIN THE AMBIT OF SECTION 68 OF THE AC T, THE ASSESSING OFFICER SHOULD PROVE THAT THE CREDIT IS, IN FACT, T HE INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES. IN THIS CASE, N OTHING HAS BEEN POINTED OUT BY THE ASSESSING OFFICER. THE LEARNED A R FURTHER REFERRING TO VARIOUS JUDICIAL PRECEDENTS INCLUDING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. CR EATIVE WORLD TELEFILMS LTD. (333 ITR 100) SUBMITTED THAT ONCE TH E ASSESSEE HAS DISCHARGED INITIAL ONUS OF PROVING IDENTITY, GENUIN ENESS OF TRANSACTION AND CREDIT WORTHINESS OF THE PARTIES, T HEN THE ASSESSING OFFICER CAN PROCEED TO RE-OPEN THE ASSESSMENT OF TH E CREDITORS, BUT SUM SO RECEIVED FROM THE CREDITORS CANNOT BE REGARD ED AS UNDISCLOSED INCOME OF THE ASSESSEE. THE ASSESSEE H AS FURTHER RELIED ON THE FOLLOWING JUDICIAL PRECEDENTS: A) CIT VS. GREEN INFRA LTD (2017) 292 CTR 233(BOMBA Y) B) CIT VS. GAGANDEEP INFRASTRUCTURE PVT LTD.(2017) 394 ITR 680(BOMBAY) C) CIT VS. GOA SPONGE AND POWER LTD TAX APPEAL NO. 16 OF 2012 (BOMBAY HIGH COURT) D) CIT VS. CREATIVE WORLD TELEFILMS LTD 333 ITR 100 (BOM- HIGH COURT) E) CIT VS. LOVELY EXPORTS (P) LTD 216 CTR 195 (SC) F) CIT VS. STELLER INVESTMENT LTD 251ITR 263 (SC) G) SDB ESTATE PVT LTD VS. ITO ITA NO.584/M/2015 METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 14 H) CIT VS. EXPO GLOBE INDIA LTD 361 ITR ( 0147 (DEL-HIGH COURT) I) CIT VS. VICTORY SPINNING MILLS LTD (2014) 90 CC H 55 (MAD -HIGH COURT) J) CIT VS. DWARKADHISH INVESTMENT (P) LTD (2011) 3 30 ITR 298 (DEL-HIGH COURT) K) CIT VS. NISHAN INDO COMMERCE LTD 101 DTR 0413 (C AL - HIGH COURT) L) CIT V. VACMET PACKAGING (INDIA) PVT LTD (2014) 8 8 CCH 065 (ALL-HC) M) CIT VS. GANGESHWARI METAL PVT LTD (2014) 361 IT R 10 (DEL-HIGH COURT) N) ACIT VS. VENKATESHWAR ISPAT PVT LTD (2010) 319 I TR 393 (CHHATISGARH-HIGH COURT) O) CIT VS. NAV BHARAT DUPLEX LTD (2013) 35 TAXMANN. COM 289 (ALL-HIGH COURT) P) CIT VS. SAMIR BIO-TECH PVT LTD (2010) 325 ITR 29 4 (DEL- HIGH COURT) Q) MOD CREATIONS PVT LTD VS. ITO (2011) 354 ITR 282 (DEL- HIGH COURT) R) CIT VS. JAY DEE SECURITIES & FINANCE LTD 32 TAXMANN.COM 91 (ALL-HIGH COURT) S) JAYA SECURITIES LTD VS. CIT (2008) 166 TAXMAN 7 (ALL- HIGH COURT) (SLP FILED BY DEPT DISMISSED). 9. THE LD. DR, ON THE OTHER HAND, STRONGLY SUPPORT ING ORDER OF THE LD.CIT(A) SUBMITTED THAT THE AO AS WELL AS, THE LD.CIT(A) HAS BROUGHT OUT CLEAR FACTS, IN LIGHT OF VARIOUS INCRI MINATING MATERIAL METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 15 FOUND, DURING THE COURSE OF SEARCH THAT TRANSACTION S BETWEEN THE PARTIES ARE NOT GENUINE, WHICH ARE USED TO CONVERT ASSESSEE OWN UNACCOUNTED INCOME IN FORM OF SHARE CAPITAL, WHICH IS EVIDENT FROM THE FACT THAT THE ASSESSEE HAS ISSUED SHARE AT A PR EMIUM AND WITHIN A SHORT PERIOD OF LESS THAN TWO MONTHS, THE SAME SH ARES HAVE BEEN PURCHASED BACK BY ANAND RATHI GROUP AT FAR VALUE. T HE LD. DR, FURTHER, SUBMITTED THAT IT IS A FACT THAT IN ALL SH ELL COMPANIES/HAWALA OPERATORS CASES, PAPER DOCUMENTS HAVE BEEN KEPT SO METICULOUSLY THAT THERE SHOULD NOT BE ANY DOUBT, REGARDING TRANS ACTIONS BETWEEN THE PARTIES. BUT, WHEN YOU GO THROUGH THE SUBSTANCE OF THE TRANSACTIONS, IT IS VERY CLEAR THAT ALL THE SHELL C OMPANIES HAVE MAINTAINED PROPER DOCUMENTATION, IN RESPECT OF TRAN SACTIONS OF SHARE CAPITAL AND PREMIUM, BUT WHEN IT COMES TO VERIFICAT ION CARRIED OUT BY THE DEPARTMENT, NONE OF THE PARTIES WERE RESPONDED TO 133(6) NOTICES AND IN FACT 131 SUMMONS WERE ALSO ISSUED, B UT NO RESPONSE 10. THE LD. DR, FURTHER SUBMITTED THAT THE AO HAS B ROUGHT OUT CLEAR FACTS TO PROVE THAT TRANSACTIONS BETWEEN THE PARTIES ARE NOT GENUINE, IN LIGHT OF SEIZED DOCUMENTS, INCLUDING BL ANK AND SIGNED SHARE TRANSFER FORMS AND OTHER EVIDENCES, DURING TH E COURSE OF SEARCH. FURTHER, WHEN THESE MATERIALS WERE CONFRONT ED TO THE DIRECTOR OF ANAND RATHI COMPANY GROUP, HE WAS NOT A BLE EXPLAIN, THE METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 16 SAID DOCUMENTS, BUT ONLY REITERATED THAT SAID BLANK DOCUMENTS HAVE BEEN KEPT TO HAVE RIGHT OF FIRST REFUSAL FOR PURCHA SE OF SHARES FROM THE INVESTORS. THE LD. DR SUBMITTED THAT IN ORDER T O PROVE GENUINENESS OF TRANSACTIONS, THE ASSESSEE HAS TO PR OVE BEYOND DOUBT WITH CREDIBLE EVIDENCES, ESPECIALLY WHEN, THE SHADOW CAST ON GENUINENESS OF TRANSACTIONS THTA TRANACTIONS ARE GE NUINE. IN THIS CASE ALTHOUGH, ASSESEE HAS FILED VARIOUS EVIDENCES, INCLUDING CONFIRMATION FROM THE PARTIES, BUT WHEN THE AO AS W ELL AS, THE LD.CIT(A) CARRIED OUT INVESTIGATIONS BY ISSUING 133 (6) AND 131 NOTICES, NONE OF THE INVESTORS HAVE RESPONDED WITH DETAILS SOUGHT FOR BY THE AUTHORITIES. 11. THE LD. DR FURTHER SUBMITTED THAT FILING OF CON FIRMATION LETTER AND EVIDENCES TO PROVE IDENTITY IS NOT SUFFICIENT E NOUGH AND WHAT IS TO BE SEEN IS WHETHER, THE TRANSACTIONS BETWEEN THE PARTIES ARE GENUINE IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE. IN THIS CASE, ON PERUSAL OF FACTS IT IS ABUNDANTLY CLEAR TH AT ALL DOCUMENTS INCLUDING CONFIRMATION HAVE BEEN FILED BY THE ASSES EE, BUT WHEN THE DEPARTMENT HAS CONDUCTED INDEPENDENT ENQUIRY NONE O F THE PARTIES HAVE RESPONDED TO NOTICE ISSUED U/S 133(6). INSOFAR AS CREDITWORTHINESS OF THE PARTIES, ON PERUSAL OF FINA NCIAL STATEMENTS FILED BY THE ASSESSEE, IN RESPECT OF ALL SHAREHOLDE RS, IT IS NOTICED THAT METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 17 THOSE COMPANIES ARE CARRYING HUGE RESERVES AND SURP LUS, BUT WHEN IT COMES BUSINESS AND PROFITABILITY, THEY HAVE DEC LARE MEGERE NET PROFIT OR LOSSES. IF, YOU GO THROUGH, THE AMOUNT OF RESERVES AND SURPLUS CARRIED IN BALANCE SHEET AND AMOUNT OF NET PROFIT DECLARED FROM THE DATE OF INCORPORATION, THERE IS A HUGE MIS MATCH. THEREFORE, IT CANNOT BE SAID THAT THOSE COMPANIES ARE HAVING C APACITY TO EXPLAIN SOURCE OF INVESTMENTS IN ASSESSEES COMPANY . THE LD. DR EXPLAINING THE METHOD OF TRANSFER OF FUNDS THROUGH RTGS SUBMITTED THAT MERE PAYMENT OF MONEY THROUGH RTGS IS NOT SUFF ICIENT ENOUGH TO PROVE GENUINENESS OF TRANSACTIONS, BECAUSE IN RT GS MODE OF PAYMENT, EXCEPT BASIC INFORMATION ABOUT TRANSFEROR OF FUNDS NO OTHER INFORMATION IS CALLED FOR. THEREFORE, MERELY MAKING PAYMENT THROUGH RTGS WOULD NOT OBSOLVE THE ASSESSEE OF ITS RESPONSI BILITY TO PROVE GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF THE PARTIES. IN THIS REGARD, HE RELIED UPON PLETHORA JUDICIAL PRECE DENTS, INCLUDING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF PR .CIT VS NRA IRON & STEEL PVT.LTD. ( 2019) 103 TAXMANN.COM 48. T HE LIST OF CASE RELIED UPON BY THE ASSESEE ARE EXTRACTED BELOW:- 1. PR. CIT (C) -1 V/S NRA IRON AND STEEL (P) LTD 2. A.AGARWAL COAL CORP. (P) LTD V/S. ADDL. CIT (201 2) 135 ITD 270 (INDORE) B. OTHER CASES 3. CIT V/S ULTRA MODERN EXPORTS (P) LTD (2014) 220 TAXMAN 165 (DEL)(MAG) 4. KOSTUB INV. LTD VS/ ACIT (2013) 36CCH 762 (DEL)( ITAT) 5. CIT V/S NOVA PROMOTERS & FINLEASE (P) LTD. (201 2) 342 ITR 169 (DEL) METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 18 6. CIT V/S N.R. PORTFOLIO PVT. LTD (2013) 263 CTR 456 (DEL) 7. CIT V/S N.R. PORTFOLIO (PJ LTD (2013) 96 DTR 281 DELL 8. CIT V/S MAF ACADEMY P. LTD (2014) 361 ITR 258 ( DEL) 9. ITO V/S JANAK U. BHATT (2006) 8 SOT 353 (MUM) 10. EVIDENCE -RULES, CASE LAWS 11 THE BEST EVIDENCE RULE 12 HERSH WIN CHADHA VS DDIT (2011) 43 SOT 544 (DEL ) 13 COLLECTOR OF CUSTOM VS, D. BHOORMUL 1974 AIR 85 9 (SC) 14 CIT V/S GOLCHA PROPERTIES (P) (LTD) (IN LIQ.) (1997) 227 ITR 391 (RAJ) 15 DOCTRINE OF NOTORIOUS FACTS 16 SOURCE OF SOURCE:LEADING AUTHORITIES 17 ON PRESUMED COMMISSION: RAJRANI GUPTA (2000) 72 ITD 155 (MUM) 12. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. WE FIND THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL IS SQ UARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT IN A SSESSEES OWN GROUP COMPANY CASE IN ITA NO.2563/MUM/2018 AND OTHE R ORDER DATED 29/08/2019, WHERE UNDER IDENTICAL SET OF FACT S, THE TRIBUNAL HAS DELETED ADDITIONS MADE BY THE LD. AO TOWARDS SH ARE CAPITAL AND SHARE PREMIUM U/S 68 OF THE I.T.ACT, 1961. WE FURTH ER NOTED THAT THE TRIBUNAL HAS ALSO DELETED ADDITIONS MADE BY THE LD. AO TOWARDS PROBABLE COMMISSION PAID ON SAID SHARE CAPITAL, ON THE GROUND THAT ONCE, ADDITIONS U/S 68 OF THE ACT HAS BEEN DELETED, THEN CONSEQUENT ADDITIONS TOWARDS COMMISSION ALSO NEEDS TO BE DELET ED. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE AS UNDER:- 12. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. T HE LD. AO HAS MADE ADDITIONS TOWARDS SHARE CAPITAL AND SHARE PREMIUM, ON THE GROUND THAT ALTHOUGH, THE ASSESEE HAS FILED VARIOUS DETAILS TO PROVE IDENTITY, GENUINENESS OF METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 19 TRANSACTIONS AND CREDITWORTHINESS OF THE PARTIES BU T, ON PERUSAL OF DETAILS FILED BY THE ASSESSEE, IT WAS NOTICED THAT THE ASSESSEE HAS FAILED TO ESTABLISH TRANSACTIONS BETWEEN THE PARTIES ARE GENUINE IN NAT URE AND ALSO THE SUBSCRIBER TO THE SHARE CAPITAL ARE HAVING CAPACITY TO EXPLAIN HUGE INVESTMENTS IN ASSESSEE COMPANY. ACCORDING TO THE AO, MERE FURNISHING CONFI RMATION LETTERS FROM THE PARTIES ALONG WITH THEIR PAN NUMBER AND ITR ACKNOWL EDGEMENT IS NOT SUFFICIENT ENOUGH TO DISCHARGE ,THE ONUS CAST UPON U/S 68 OF T HE I.T.ACT, 1961 AND WHAT IS RELEVANT IS TO DISCHARGE THE TRUE IDENTITY OF THE I NVESTORS. ALTHOUGH, THE ASSESSEE HAS FILED CERTAIN DOCUMENTS, INCLUDING PAN NUMBER A ND ITR ACKNOWLEDGEMENT AND FINANCIAL STATEMENTS ALONG WITH BANK STATEMENT OF SUBSCRIBERS, BUT WHEN, IT COMES TO GENUINENESS OF TRANSACTIONS AND CREDITWORT HINESS OF THE PARTIES, EXCEPT FILING FINANCIAL STATEMENTS, NO OTHER EVIDEN CES HAS BEEN FILED TO PROVE THAT SHARE CAPITAL RECEIVED FROM SUBSCRIBERS IS GEN UINE IN NATURE, WHICH IS SUPPORTED BY NECESSARY EVIDENCES. THE AO HAS ALSO T AKEN SUPPORT FROM THE FINDINGS RECORDED, DURING THE COURSE OF SURVEY AND STATEMENT RECORDED FROM CERTAIN PERSONS, INCLUDING DIRECTOR AND KEY EMPLOYE E OF ANAND RATHI GROUP TO COME TO THE CONCLUSION THAT THE ASSESSEE HAS ENTERE D INTO AN ARRANGED TRANSACTIONS WITH CERTAIN COMPANIES, IN ORDER TO CO NVERT ITS OWN UNACCOUNTED INCOME IN THE FORM OF SHARE CAPITAL, WHICH IS EVIDE NT FROM THE FACT THAT THE ASSESSEE HAS ISSUED SHARE CAPITAL WITH A HUGE PREMI UM OF RS. 30 TO RS. 72 PER SHARE, EVEN THOUGH, THE FINANCIAL OF THOSE COMPANIE S IS NOT SUPPORTING SUCH A HUGE VALUATION. FURTHER, THE AO HAS TAKEN SUPPORT FROM THE STATEMENT OF DIRECTOR, DURING THE COURSE OF SEARCH WHERE, HE HAD NOT EXPLAINED SHARE CAPITAL, INCLUDING PREMIUM RECEIVED FOR THE YEAR UNDER CONSI DERATION. 13. THE PROVISION OF SECTION 68 OF THE INCOME TAX A CT, 1961 DEALS WITH A CASES, WHERE ANY SUM FOUND CREDITED IN THE BOOKS OF ACCOUNTS OF AN ASSESEE, IN ANY PREVIOUS YEAR, FOR WHICH THE ASSESEE OFFERED NO EXPLANATION ABOUT THE NATURE AND SOURCE, THEREOF OR THE EXPLANATIONS OFFE RED BY THE ASSESSEE, IN THE OPINION OF THE AO IS NOT SATISFACTORY, THEN SUM SO FOUND CREDITED MAY BE CHARGED TO INCOME TAX, AS INCOME OF THE ASSESSE OF THAT PREVIOUS YEAR. IN ORDER TO FIX ANY CREDIT WITHIN THE AMBIT OF SECTION 68 OF THE I.T ACT, 1961, THE AO HAS TO EXAMINE THREE INGREDIENTS I.E., IDENTITY, GENUINENE SS OF TRANSACTIONS AND CREDITWORTHINESS OF THE PARTIES. IN THIS FACTUAL A ND LEGAL BACKGROUND, IF YOU EXAMINE, THE PRESENT CASE IN THE LIGHT OF VARIOUS E VIDENCES FILED BY THE ASSESSEE, IN ORDER TO PROVE CREDIT FOUND IN THE F ORM OF SHARE CAPITAL AND SHARE PREMIUM, ONE HAS TO SEE, WHETHER THE ASSESSEE HAS D ISCHARGED ITS INITIAL ONUS CAST UPON U/S 68 OF THE I.T.ACT, 1961 OR NOT. IN TH IS CASE, THE ASSESEE HAS FILED VARIOUS DETAILS, INCLUDING SHARE APPLICATION FORM, COPY OF DECLARATION, BOARD RESOLUTION, BANK STATEMENT OF INVESTOR COMPANY, PAN CARD, ACKNOWLEDGMENT OF RETURN OF INCOME, FINANCIAL STATEMENT OF INVESTOR C OMPANY, FORM NO. 2 FOR ALLOTMENT OF EQUITY SHARES AND BANK STATEMENT REFLE CTING, THE AMOUNT RECEIVED THROUGH BANKING CHANNELS. ONCE, THE ASSESSEE HAS D ISCHARGED ITS INITIAL ONUS BY FILING VARIOUS DETAILS, THEN THE ONUS SHIFT TO T HE AO TO CARRY OUT FURTHER VERIFICATION, IN THE LIGHT OF EVIDENCES FILED BY TH E ASSESSEE TO ASCERTAIN TRUE NATURE OF TRANSACTIONS BETWEEN THE PARTIES BEFORE, HE COME TO THE CONCLUSION THAT THE TRANSACTIONS BETWEEN THE PARTIES ARE GENUI NE OR NOT. IN THIS CASE ALTHOUGH, THE AO HAS ISSUED 133(6) NOTICES TO THE P ARTIES, NO FURTHER ENQUIRY HAS BEEN CONDUCTED, INCLUDING ISSUE OF SUMMONS U/S 131. NO DOUBT, NONE OF THE METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 20 INVESTORS COMPANIES HAVE RESPONDED TO 133(6) NOTICE S ISSUED BY THE AO, BUT FACT OF THE MATTER IS WHEN, ASSESSEE HAS FILED COMP LETE SET OF DOCUMENTS, INCLUDING NAME AND ADDRESS OF THE PARTIES, IT IS FO R THE AO TO CARRY OUT FURTHER INVESTIGATION BY EXERCISING ALL POSSIBLE OPTIONS A VAILABLE TO HIM, BUT NON ATTENDANCE OF PARTIES IN RESPONSE TO 133(6) CANNOT BE ATTRIBUTED TO THE ASSESSEE, BECAUSE DUE TO TIME LAG CERTAIN PERSONS M IGHT HAVE LEFT THE PLACE AND FOR THIS NO RESPONSIBILITY CAN BE FASTENED UPON THE ASSESSEE. IN THIS CASE, THE ASSESSEE DONE WHAT BEST IT COULD DO AND FILED, WHATEVER INFORMATION AVAILABLE WITH IT, IN ORDER TO SATISFY THE AO. IN C ASE, THE AO IS NOT SATISFIED WITH DOCUMENTS FURNISHED BY THE ASSESSEE, THEN HE IS FRE E TO CARRY OUT HIS OWN INVESTIGATIONS BY EXERCISING POWERS CONFERRED U/S 1 31 OR U/S 133(6) OF THE I.T.ACT, 1961. IN THIS CASE, THE AO, EXCEPT ISSUE OF 133(6) NOTICES NOTHING HAS BEEN DONE TO FIND OUT, THE NATURE OF TRANSACTIONS B ETWEEN THE PARTIES. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT WHEN, ASSESSEE H AS FILED COMPLETE DETAILS TO PROVE IDENTITY, GENUINENESS OF TRANSACTIONS AND CRE DITWORTHINESS OF THE PARTIES, THEN THERE IS NO REASON FOR THE AO TO CAME TO THE C ONCLUSION THAT SHARE CAPITAL AND SHARE PREMIUM IS UNEXPLAINED ONLY FOR THE REASO N THAT DURING THE SEARCH PROCEEDINGS, THE DIRECTOR OF THE COMPANY HAD ADMITT ED THAT HE CANNOT EXPLAIN REASONS WHY BLANK FORMS ARE KEPT IN HIS POSSESSION, IGNORING THE FACT THAT SUCH ADMISSION HAS BEEN RETRACTED BY FILING AFFIDAVIT AL ONG WITH LETTER EXPLAINING REASONS FRO SUCH ADMISSION DURING SEARCH PROCEEDING S. FURTHER, ADDITIONS MADE BY THE AO CANNOT BE SUSTAINED EVEN ON THIS COUNT BE CAUSE, THE AO HAS RELIED UPON STATEMENT OF THIRD PARYIES TO MAKE ADDITIONS T OWARDS SHARE CAPITAL, BUT WHEN THE PRESENT DIRECTOR OF THE ASSESSEE COMPANY A SKED FOR COPIES OF STATEMENT OF THIRD PARTY AND ALSO OPPORTUNITY FOR C ROSS EXAMINATION OF PERSON WHO GAVE SUCH STATEMENT, THE AO HAS DENIED, THE OPP ORTUNITY OF CROSS EXAMINATION AND ALSO NOT FURNISHED COPIES OF STATEM ENT. IT IS A SETTLED POSITION OF LAW THAT ONCE, ANY THIRD PARTY INFORMATION/STATEMEN TS IS RELIED UPON TO MAKE ADDITIONS, IT IS THE OBLIGATION OF THE AO TO PROVID E COPIES OF SUCH STATEMENTS/INFORMATION AND ALSO TO PROVIDE AN OPPOR TUNITY OF CROSS EXAMINATION OF THE PERSON, WHO GAVE THE STATEMENT, WHEN SUCH OP PORTUNITY HAS BEEN AVAILED BY THE PERSON AGAINST WHOM, SUCH STATEMENTS ARE USE D. THIS LEGAL PROPOSITION IS SUPPORTED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF KISHANCHAND CHELLARAM VS CIT 1980 125 ITR 713 (SC), WHERE IT WA S HELD THAT WHEN, THIRD PARTY INFORMATION IS RELIED UPON TO DRAW AN ADVERSE INFERENCE AGAINST THE ASSESSEE, THE SAME NEEDS TO BE PROVIDED AND ALSO OP PORTUNITY OF CROSS EXAMINATION SHALL BE GIVEN, IF SUCH OPPORTUNITY IS AVAILED BY THE ASSESSEE. THE HONBLE SUPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES LTD VS CCE, KOLKATA II IN APPEAL NO 4228 OF 2006 HAS VIDE ORDER DATED 02.09.2015 HAD ALSO UPHELD A SIMILAR LEGAL POSITION AND HELD THAT NOT A LLOWING THE ASSESSEE TO CROSS- EXAMINE THE WITNESSES BY THE ADJUDICATING THE AUTHO RITY, THOUGH THE STATEMENTS AND THOSE WITNESSES WERE MADE THE BASIS OF THE IMPU GNED ORDER IS A SERIOUS FLAW, WHICH MAKES THE ORDER NULLITY IN, AS MUCH AS, IT AMOUNT TO VIOLATION OF PRINCIPLE OF NATURAL JUSTICE, BECAUSE OF WHICH, THE ASSESSEE WAS ADVERSELY AFFECTED. THEREFORE, ON THIS COUNT ALSO THE ADDITIO NS MADE BY THE AO CANNOT BE SUSTAINED. 14. COMING TO THE OTHER ASPECT OF THE ISSUE, THE AO HAS INVOKED THE PROVISIONS OF SECTION 56(2)(VIIB) OF THE I.T. ACT, 1961. WE FIND THAT THE SAID METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 21 PROVISION HAS BEEN INSERTED BY FINANCE ACT, 2012 W. E.F 10.04.2013, WHERE IT PROVIDES THAT WHERE A CLOSELY HELD COMPANY ISSUES I TS SHARES AT A PRICE WHICH IS MORE THAN ITS FAIR MARKET VALUE, THEN AMOUNT RECEIV ED IN EXCESS OF FAIR MARKET VALUE WILL BE CHARGED TO TAX IN THE HANDS OF THE CO MPANY AS INCOME FROM OTHER SOURCES. WE, FURTHER NOTED THAT THE PROVISIONS OF SECTION 56(2)(VIIB) WAS INSERTED BY FINANCE ACT,2012 W.E.F. 1.04.2013 IS AP PLICABLE FROM A.Y. 2013-14 ONWARDS. IN FACT, A SIMILAR AMENDMENT HAS BEEN MAD E IN SECTION 68 BY INSERTION OF A PROVISO BY THE FINANCE AT 2012 W.E.F . 01.04.2013 AS PER WHICH THE ASSESSEE COMPANY (NOT BEING A COMPANY IN WHICH PUBL IC ARE SUBSTANTIALLY INTERESTED) AND SUMS SO CREDITED CONSISTS OF SHARE APPLICATION MONEY, SHARE CAPITAL , SHARE PREMIUM OR ANY SUCH AMOUNT BY WHATE VER NAME CALLED, ANY EXPLANATION OFFERED BY SUCH ASSESSEE COMPANY SHALL BE DEEMED TO BE NOT SATISFACTORY, UNLESS THE PERSON BEING, A RESIDENT I N WHOSE NAME SUCH CREDIT IS RECORDED IN THE BOOKS OF SUCH COMPANY ALSO OFFERS A N EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH SUM SO CREDITED AND SUCH EXPLANATION IN THE OPINION OF THE AO AFORESAID HAS BEEN FOUND TO BE SATISFACTO RY. ON PERUSAL OF AMENDMENTS BROUGHT OUT BY FINANCE ACT 2012, W.E.F. 01.04.2013 TO THE PROVISIONS OF SECTION 56(2)(VIIB) AND SECTION 68 OF THE ACT, IT IS VERY CLEAR THAT WHERE THE ASSESSEE HAS ISSUED SHARES AT PREMIUM AND ALSO RECEIVED SHARE CAPITAL AND IF SUCH COMPANY DO NOT OFFER ANY EXPLA NATION ABOUT THE NATURE AND SOURCE, THEN SUM SO RECEIVED MAY BE REGARDED AS INC OME OF THE ASSESSEE FROM UNDISCLOSED SOURCES. IN OTHER WORDS, THE PURPOSE O F INSERTION OF PROVISO IS TO EXAMINE THE SOURCE OF INVESTMENT BY SUBSCRIBER TO T HE SHARE CAPITAL. THIS AMENDMENT HAS BEEN EXAMINED BY THE HONBLE BOMBAY H IGH COURT IN THE CASE OF CIT VS. GAGANDEEP INFRASTRUCTURE (P) LTD. (2017) 394 ITR 680, WHERE THE COURT OBSERVED THAT PROVISO INSERTED TO SECTION 68 W.E.F. 01.04.2013 IS CONSIDERED TO BE PROSPECTIVE IN NATURE AND IS APPLI CABLE FROM A.Y. 2013-14 ONWARDS. FROM THE ABOVE, IT IS VERY CLEAR THAT SIMI LAR AMENDMENT HAS BEEN MADE TO PROVISIONS OF SECTION 56(2) BY INSERTION OF CLAUSE (VIIB) SO AS TO BRING SHARE PREMIUM WITHIN THE AMBIT OF SECTION 56(2) OF THE I.T ACT, 1961. SINCE, THE PROVISO INSERTED TO SECTION 68 IS CONSIDERED TO BE PROSPECTIVE IN NATURE, OBVIOUSLY SUB CLAUSE (VIIB) INSERTED TO SECTION 56( 2) IS ALSO CONSIDERED TO BE PROSPECTIVE AND CANNOT BE APPLIED TO THE ASSESSMENT YEAR IN QUESTION. EVEN OTHERWISE, ASSUMING FOR A MOMENT ABOVE PROVISIONS A RE APPLICABLE FOR THE YEAR UNDER CONSIDERATION, IN ORDER TO APPLY SAID AMENDED PROVISIONS, THE AO HAS TO PROVE THAT THE ASSESSEE HAS NOT PROVED CAPACITY OF THE INVESTORS AND ALSO NOT OFFERED ANY JUSTIFICATION FOR ISSUE OF SHARES AT PR EMIUM. IN THIS CASE, FROM THE FACTS ON RECORD, IT IS CLEAR THAT THE ASSESSEE HAS PROVED IDENTITY AND GENUINENESS OF THE TRANSACTIONS BY FILING NECESSARY EVIDENCES. THE ASSESSEE HAS FILED VALUATION REPORT FROM REGISTERED VALUER A S PER WHICH THE SHARE PRICE OF THE COMPANY IS OVER AND ABOVE PREMIUM CHARGED BY TH E ASSESSEE. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT PROVISIONS OF SE CTION 56(2)(VIIB) HAS NO APPLICATION. 15. COMING TO THE CASE LAWS RELIED UPON BY THE ASSE SSEE. THE ASSESSEE HAS RELIED UPON PLETHORA OF JUDGEMENTS, INCLUDING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS LOVELY EXPORTS PVT LTD (2008) 216 CTR 195 (SC). IN THE CASE LAWS RELIED UPON BY THE AS SESSEE, THE ISSUE HAS BEEN DEALT AS UNDER:- METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 22 CIT VS. GOA SPONGE AND POWER LTD (13/02/2012) TAX A PPEAL NO. 16 OF 2012 (HIGH COURT-BOMBAY) 'ONCE THE AUTHORITIES HAVE GOT ALL THE DETAI LS, INCLUDING THE NAME AND ADDRESSES OF THE SHAREHOLDERS, THEIR PAN /GIR NUMBER, SO ALSO THE NAME OF THE BANK FROM WHICH THE ALLEGED INVESTORS RECEIVED MONEY AS SHARE APPLICATION, THEN, IT CANNOT BE TERMED AS 'BOGUS'. THE CONTROVERSY IS COVERED BY TH E JUDGEMENTS RENDERED B Y THE HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS PVT LTD, VS. CIT, (2008) 216 CTR (SC) 195, AS ALSO BY THIS COURT IN CIT VS. CREATIVE WORLD TELE FILMS LTD, (20 11) 333 ITR 100 (BOM). IN SUCH CIRCUMSTANCES, WE ARE OF THE VIEW TH AT THE TRIBUNAL'S FINDING THAT THERE IS NO JUSTIFICATION IN TH E ADDITION MADE UNDER SECTION 68 OF THE INCOME TAX ACT,, 1961 NEI THER SUFFERS FROM ANY PERVERSITY NOR GIVES RISE TO ANY SUBSTAN TIAL QUESTION OF LAW.' CIT VS. CREATIVE WORLD TELE FILMS LTD (2011) 333 IT R 100 (BORN- HIGH COURT) 'THE QUESTION SOUGHT TO BE RAISED IN THE AP PEAL WAS ALSO RAISED BEFORE THE TRIBUNAL AND THE TRIBUNAL W AS PLEASED TO FOLLOW THE JUDGMENT OF THE APEX COURT IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD. (2008) 216 CTR (SC) 195. WH EREIN THE APEX COURT OBSERVED THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE-COMPANY FROM ALLEGED BOGUS SHA REHOLDERS, W HOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT CAN ALWAYS PROCEED AGAINST THEM AND IF NECESSARY REOPEN THEIR INDIVIDUAL ASSESSMENTS. IN THE CASE IN HAND, IT IS NOT DISPUTED THAT THE ASSESSEE HAD GIVEN THE DETAILS OF NAME AND ADDRESS OF THE SHAREHOLDER, THEIR PAN/GIR NUMBER AND HAD ALS O GIVEN THE CHEQUE NUMBER, NAME OF THE BANK. IT WAS EXPECTED ON THE PART OF THE AO TO MAKE PROPER INVESTIGATION AND REACH THE SHAREHOLDERS. THE AO DID NOTHING EXCEPT ISSUING SU MMONS WHICH WERE ULTIMATELY RETURNED BACK WITH AN ENDORSEME NT 'NOT TRACEABLE IN OUR CONSIDERED VIEW, THE AO OUGHT TO HAVE FOUND OUT THEIR DETAILS THROUGH PAN CARDS, BANK ACCOUNT DETAILS OR FROM THEIR BANKERS SO AS TO REACH THE SHAREHOLDERS SINCE ALL THE RELEVANT MATERIAL DETAILS AND PARTICULARS WERE GIV EN BY THE ASSESSEE TO THE AO. IN THE ABOVE CIRCUMSTANCES, THE VIEW TAKEN BY THE TRIBUNAL CANNOT BE FAULTED.' CIT VS. LOVELY EXPORTS (P) LTD (2008) 216 CTR 195 ( SC) 'IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAME S ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PRO CEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW, BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF ASSE SSEE COMPANY.' CIT VS. STELLER INVESTMENT LTD (2001) 251 ITR 263 ( SC) (CIVIL APPEAL) 'THAT THE INCREASE IN SUBSCRIBED CAPITAL OF THE RESPONDENT COMPANY COULD NOT BE A DEVICE OF CONVERTING BLACK M ONEY INTO WHITE WITH THE HELP OF FORMATION OF AN INVESTMENT COMPANY, ON THE ROUND THAT, EVEN IF IT BE ASSUMED THAT THE SUBSCRIB ERS TO THE METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 23 INCREASED CAPITAL WERE NOT GENUINE, TINDER NO CIRCUMSTANCES COULD THE AMOUNT OF SHARE CAPITAL BE REGARDE D AS UN DISCLOSED INCOME, AN APPEAL WAS TAKEN BY THE DEPARTMEN T TO TH E SUPREME COURT. THE SUPREME COURT DISMISSED TH E APPEAL HOLDING THAT THE TRIBUNAL HAD COME TO A CONC LUSION ON FACTS AND NO INTERFERENCE WAS CALLED FOR.' CIT VS. NAV BHARAT DUOLEX LTD (2013) 35 TAXMANN.COM 289 (ALL- HIGH COURT) 'WE HAVE CONSIDERED THE ARGUMENTS OF THE COUNSEL FO R THE PARTIES. CIT(A) FOUND THAT FIVE COMPANIES SUBSCRIBING THE EQUITY SHARES AMOUNTING TO RS. 25,00.000/- WERE IDENTIFIED AND THEY HAD SUBMITTED THEIR BANK STATEMENTS, CASH EXTRACTS AND RETURNS FILING RECEIPTS. AS SUCH IDENTITY OF THE SHARE APPL ICANT COMPANIES AND PURCHASE OF SHARE HAD BEEN PROVED BY THE AS SESSEE. SUPREME COURT IN THE CASES OF CIT V. STELLER INVEST MENTS LTD. [2001] 251 ITR 263 AND LOVELY EXPORTS CASE (SUPRA), HAS HELD T HAT THE IDENTITY OF THE SHAREHOLDER ALONE IS REQUIRED TO BE P ROVED, IN CASE OF THE CAPITAL CONTRIBUTED BY THE SHAREHOLDERS. A CCORDINGLY CIT(A) AND THE TRIBUNAL HAS NOT COMMITTED ANY ILLEGA LITY IN ALLOWING THE APPEAL OF THE ASSESSEE. WE DO NOT FIND ANY ILLEGAL ITY IN THE JUDGMENT OF THE CIT(A) AND THE TRIBUNAL.' CIT VS. JAYDEE SECURITIES & FINANCE LTD (2013) 32 TAXMANN.COM91 (ALL-HIGH COURT) 'THE TRIBUNAL RECORDED FINDINGS THAT THE ASSE SSEE HAD PRODUCED THE RETURN OF INCOME FILED BY THE RELEVANT SHAREHOLDERS WHO HAD PAID SHARE APPLICATION MONEY. THE ASSES SEE HAD ALSO PRODUCED THE CONFIRMATION OF SHARE HOLDERS IND ICATING THE DETAILS OF ADDRESSES, PAN AND PARTICULARS OF CHEQUES THROUGH WHICH THE AMOUNT WAS PAID TOWARDS THE SHARE APPLICA TION MONEY. THE TRIBUNAL THEREAFTER RELIED UPON THE JUDGMENT OF THE SUPREME COURT IN CIT V. LOVELY EXPORTS (P.) LTD WHEREIN IT WAS HELD THAT IF THE ASSESSEE PRODUCES THE NAMES, ADDRESSES, PAN DETAILS OF THE SHARE HOLDERS THEN THE ONUS ON THE ASSESSEE TO PRO VE THE SOURCE O F SHARE APPLICATION MONEY STANDS DISCHARGED. IF THE ASSESSING AUTHORITY WAS NOT SATISFIED WITH THE CREDITWO RTHINESS OF THE SHAREHOLDERS, IT WAS OPEN TO THE ASSESSING A UTHORITY TO VERIFY THE SAME IN THE HANDS OF THE SHAREHOLDERS CONCERNED , THE TRIBUNAL HAS RELIED UPON AN ORDER OF THE SUPREME COUR T IN CASE O F CIT V. DIVINE LEASING & FINANCE LTD. IN VIEW OF THE DECISION 'OF THE SUPREME COURT, WE DISMISS THE APPEALS WITH OBSERVATIONS THAT THE DEPARTMENT IS FREE TO PROCEED TO REO PEN THEIR INDIVIDUAL ASSESSMENTS OF THE SHAREHOLDERS WHOSE NAMES A ND DETAILS WERE GIVEN TO THE ASSESSING OFFICER.' ACIT VS. VENKATESHWARLSPAT PVT LTD (2009) 319 ITR 3 93 (CHHATISGARH-HIGH COURT) 'IF THE SHARE APPLICATIONS ARE RECEIVED BY THE ASSE SSEE FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AS SESSING OFFICER, THEN THE DEPARTMENT IS FREE TO PROCE ED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW, BUT IT CANNOT BE REGARDED AS THE UNDISCLOSED INCOME OF THE ASSESSEE. ' METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 24 MOD CREATIONS PVT LTD VS. ITO (2013) 354 ITR 282 (D EL-HIGH COURT) 'HELD, ALLOWING THE APPEAL, (I) THAT THE ASS ESSEE HAD DISCHARGED THE INITIAL ONUS PLACED ON IT. IN THE EV ENT THE REVENUE STILL HAD A DOUBT WITH REGARD TO THE GENUINENESS OF THE TRANSACTIONS IN ISSUE OR AS REGARDS THE CREDI TWORTHINESS OF THE CREDITORS, IT WOULD HAVE HAD TO DISCHARGE THE ONUS WHICH HAD SHIFTED ON TO IT. A BALD ASSERTION BY THE ASSESSING OF FICER THAT THE CREDITS WERE A CIRCULAR ROUTE ADOPTED BY THE ASSESSEE TO PLOUGH BACK ITS OWN UNDISCLOSED INCOME INTO I TS ACCOUNTS, COULD BE OF N O AVAIL. THE REVENUE WAS REQUIRE D TO PROVE THIS ALLEGATION. AN ALLEGATION BY ITSELF WHICH IS BASED ON ASSUMPTION WILL NOT PASS MUSTER IN LAW. THE REVENUE WOULD BE RE QUIRED TO BRIDGE THE GAP BETWEEN THE SUSPICIONS AND PROOF IN ORDER TO BRING HOME THIS ALLEGATION. THE TRIBUNAL WITHOUT ADVERTIN G TO THE PRINCIPLE LAID STRESS ON THE FACT THAT DESPITE OPPORTUNITIE S, THE ASSESSEE AND/OR THE CREDITORS HAD NOT PROVED THE GENUI NENESS OF THE TRANSACTION. BASED ON THIS IT CONSTRUED THE IN TENTIONS OF THE ASSESSEE AS BEING MALA FIDE. THE TRIBUNAL OUGHT TO HAVE ANALYSED THE MATERIAL RATHER THAN BE BURDENED B Y THE FACT THAT SOME OF THE CREDITORS HAD CHOSEN NOT TO MAKE A PERS ONAL APPEARANCE BEFORE THE ASSESSING OFFICER. IF THE ASS ESSING OFFICER HAD ANY DOUBT ABOUT THE MATERIAL PLACED ON R ECORD, WHICH WAS LARGELY BANK STATEMENTS OF THE CREDITORS AND THEIR INCOME-TAX RETURNS, IT COULD GATHER THE NECESSARY INFORMA TION FROM THE SOURCES TO WHICH THE INFORMATION WAS ATTRIBUTA BLE......IF IT HAD ANY DOUBTS WITH REGARD TO THEIR CREDITWORTHINE SS, THE REVENUE COULD ALWAYS BRING THE SUM IN QUESTION TO TAX IN THE HANDS OF THE CREDITORS OR SUB- CREDITORS.' CIT VS. AL ANAM AGRO FOODS (P.) LTD (2013) 38 TAXMA NN.CORN 375 (ALL-HIGH COURT) TRIBUNAL, HOWEVER, HELD THAT SINCE IDENTITY OF SHA RE HOLDERS STOOD PROVED ON RECORD, AMOUNT OF SHARE APPLICATION MO NEY COULD NOT BE ADDED TO INCOME OF ASSESSEE. ACCORDING TO TRIBUNAL, IN SUCH A CASE AMOUNT COULD BE TAXED IN HANDS OF PERSONS WHO HAD I NVESTED' CIT VS. DWARKADHISH INVESTMENT (P) LTD (2011) 330 I TR 298 (DEL- HIGH COURT) 'JUST BECAUSE THE CREDITORS/SHARE APPLICANTS C OULD NOT BE FOUND AT THE ADDRESS GIVEN, IT WOULD NOT GIVE THE REVENUE THE RIGHT TO INVOKE S. 68 REVENUE HAS ALL THE POWER AND WHEREWITHAL TO TRACE ANY PERSONMOREOVER, IT IS SETTLED LAW THAT THE ASSESSEE NEED NOT TO PROVE THE 'SOURCE OF SOURCE' IN THE INSTANT CASE, THE TRIBUNAL HAS CONFIRMED THE ORDER O F THE CIT(A) DELETING THE IMPUGNED ADDITION HOLDING THAT T HE ASSESSEE HAS BEEN ABLE TO PROVE THE IDENTITY OF THE SHAR E APPLICANTS AND THE SHARE APPLICATION MONEY HAS BEEN RECEIVED BY WAY OF ACCOUNT PAYEE CHEQUES.' CIT VS. NAMASTEY CHEMICALS PVT LTD (2013) 33 TAXMANN.COM271 (GUJ-HIGH COURT) METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 25 'IN THE PRESENT CASE ALSO, THE RESPONDENT AS SESSEE HAS RECEIVED SHARE APPLICATION MONEY FROM DIFFERENT S UB SCRIBERS. IT WAS FOUND THAT LARGE NUMBER OF SUBSCRIBERS HAD RES PONDED TO THE LETTERS ISSUED BY THE ASSESSING OFFICER OR S UMMONS ISSUED BY HIM AND SUBMITTED THEIR AFFIDAVITS. IN SOME CASES SUCH REPLIES WERE NOT RECEIVED THROUGH POSTS. RS. 9 LACS REPRESENTED THOSE ASSESSEES WHO DENIED HAVING MADE ANY INVESTMEN T ALTOGETHER. THE ISSUE THUS WOULD FALL SQ UARELY WITHIN THE AMBIT OF THE JUDGMENT OF THE SUPREME COURT IN THE CASE NF LOVELY EXPORTS (SUPRA). NO ERROR OF LAW CAN BE STATED TO HAVE BE EN COMMITTED BY THE TRIBUNAL. TAX APPEAL IS THEREFORE DISMISSE D.' CIT VS. PEOPLES GENERAL HOSPITAL LTD (2013) 356 ITR 65 (MP- HIGH COURT) ' HELD , DISMISSING THE APPEALS , THAT IT THE ASSESSEE HAD RECEIVED SUBSCRIPTIONS TO THE PUBLIC OR RIGHT S ISSUE THROUGH BANKING CHANNELS AND FURNISHED COMPLETE DETAILS OF THE SHAREHOLDERS, NO ADDITION COULD BE MADE TINDER SEC TION 68 OF THE INCOME-TAX ACT, 1961, IN THE ABSENCE OF ANY POSITIVE MATERIAL OR EVIDENCE TO INDICATE THAT THE SHAREHOLDERS WERE BENAMIDARS OR FICTITIOUS PERSONS OR THAT ANY PART O F THE SHARE CAPITAL REPRESENTED THE COMPANY'S OWN INCOME FROM UNDI SCLOSED SOURCES. IT WAS NOBODY'S CASE THAT THE NON R ESIDENT INDIAN COMPANY WAS A BOGUS OR NON-EXISTENT COMPANY O R THAT THE AMOUNT SUBSCRIBED BY THE COMPANY BY WAY OF S HARE SUBSCRIPTION WAS IN FACT THE MONEY OF THE AS SESSEE. THE ASSESSEE HAD ESTABLISHED THE IDENTITY OF THE I NVESTOR WHO HAD PROVIDED THE SHARE SUBSCRIPTION AN D THAT THE TRANS ACTION WAS GENUINE. THOUGH THE ASSESSEE'S CONTENTION WAS THAT THE CREDITWORTHINESS OF THE CREDITOR WAS ALSO ESTA BLISHED, IN THIS CASE, THE ESTABLISHMENT OF THE IDENTITY OF THE INVESTOR A LONE WAS TO BE SEEN. THUS, THE ADDITION WAS RIGHTLY DELETED.' CIT VS. SHREE RAMA MULTI TECH LTD (2013) 34 TAXMANN .COM177 (GUJ-HC) 'IT IS NOTED THAT COMMISSIONER (APPEALS) AS WELL AS THE TRIBUNAL HAVE DULY CONSIDERED ISSUE AND HAVIN G FOUND COMPLETE DETAILS OF THE RECEIPTS OF SHARE APPLICATI ON MONEY, ALONG WITH THE FORM NAMES AND ADDRESSES, PAN AND OTH ER REQUISITE DETAILS, THEY FOUND COMPLETE ABSENCE OF THE GROUND S NOTED FOR INVOKING THE PROVISION OF SECTION 68. MOREOVER , BOTH RIGHTLY HAD APPLIED THE DECISION OF CIT VS. LOVELY EXPORTS (P) LTD TO THE CASE OF THE ASSESSEE. THEREFORE, NO REASON WAS FOUND IN A BSENCE OF ANY ILLEGALITY MUCH LESS ANY PERVERSITY TOO TO IN TERFERE WITH THE ORDER OF THE BOTH THESE AUTHORITIES, WHO HAD CONCURRENTLY HELD THE DUE DETAILS HAVING BEEN PROVED. THE ASSESSEE CO MPANY HAD PRESENTED THE NECESSARY WORTH PROOF BEF ORE BO TH THE AUTHORITIES AND IT WAS NOT EXPECTED BY THE ASSESSEECOMPAN Y TO FURTHER PROVE THE SOURCE OF THE DECEASED.' CIT VS. NIKUNJ EXIMP ENTERPRISES (P.) LTD (2013) 35 TAXMANN.COM384 (BOM) METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 26 'WHETHER MERELY BECAUSE SUPPLIERS HAD NOT APP EARED BEFORE ASSESSING OFFICER OR COMMISSIONER (APPEALS), I T COULD NOT BE CONCLUDED THAT PURCHASES WERE NOT MADE BY AS SESSEE - HELD, YES.... FURTHER, THERE WERE CONFIRMATION LETTE RS FILED BY THE SUPPLIERS, COPIES OF INVOICES FOR PURCHASES A S WELL AS COPIES OF BANK STATEMENT ALL OF WHICH WOULD INDICATE THAT THE PURCHASES WERE IN FACT MADE. IN OUR VIEW, ME RELY BECAUSE THE SUPPLIERS HAVE NOT APPEARED BEFORE THE ASSESSI NG OFFICER OR THE CIT(A), ONE CANNOT CONCLUDE THAT THE PURC HASES WERE NOT MADE BY THE RESPONDENT- ASSESSEE' CIT VS. SAMIR BIO- TECH PVT LTD (2010) 325 ITR 294 (DEL-HIGH COURT) 'IDENTITIES OF THE SUBSCRIBERS ARE NOT IN DO UBT. THE TRANSACTIONS HAVE ALSO BEEN UNDERTAKEN THROUGH BANKING CHANNE LS INASMUCH AS THE APPLICATION MONEY FOR THE SHARES WAS GIVEN T HROUGH ACCOUNT PAYEE CHEQUES. THE CREDITWORTHINESS HAS ALSO BEEN E STABLISHED, AS INDICATED BY THE TRIBUNAL. THE SUBSCRIBERS HA VE GIVEN THEIR COMPLETE DETAILS WITH REGARD TO THEIR TAX RETURNS A ND ASSESSMENTS. IN THESE CIRCUMSTANCES, THE DEPARTMENT COULD NOT DRAW AN ADVERSE INFERENCE AGAINST THE ASSESSEE ONLY BECAUSE T HE SUB SCRIBERS DID NOT INITIALLY RESPOND TO THE SUMMONS. TH E SUBSCRIBERS, HOWEVER, SUBSEQUENTLY GAVE THEIR CONFIRMATION LETTERS AS WOULD BE APPARENT FROM THE IMPUGNED ORDER. THE IDENTITY O F THE SUBSCRIBERS STANDS ESTABLISHED AND IT IS ALSO A FAC T THAT THEY HAVE SHOWN THE SAID AMOUNTS IN THEIR AUDITED BALANCE SHEETS AND HAVE ALSO FILED RETURNS BEFORE THE IT AUTHORI TIES. THE DECISION OF THE TRIBUNAL DELETING THE ADDITION CANNOT BEFAULTE D. 16. COMING TO THE CASE LAWS RELIED UPON BY THE LEAR NED DR. ALTHOGH, THE LD. DR PLACED HIS RELIANCE ON PLETHORA OF JUDGMENTS, BU T HE HAD HEAVILY RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF DCIT VS. NRA IRON & STEEL PVT. LTD. (SUPRA). INSOFAR AS MOST OF CASE LA WS RELIED UPON BY THE LD. DR WE, NOTICED THAT THE ISSUE INVOLVED IS FACTUAL AND HAS TO BE EXAMINED RATIOS OF CASE LAWS IN LIGHT OF FACTS OF PRESENT CASE. WHEN W E HAD EXAMINED CASE LAWS RELIED UPON BY THE LD. DR IN LIGHT OF FACTS OF PRES ENT CASE, WE FIND THAT THE COORDINATE BENCHES HAVE CONSIDERED ALL THOSE CASE L AWS AND HELD THAT MOST OF CASES ARE NOT APPLICABLE TO FACTS OF PRESENT CASE. THEREFORE, WE DO NOT WISH TO DISCUSS THOSE CASE LAWS. BUT WHEN IT COMES TO HONB LE SUPREME COURT DECISION IN CASE OF PCIT VS. NRA IRON & STEEL PVT LTD, WE FI ND THAT CO-ORDINATE BENCH OF ITAT VIDE ITS ORDER DATED 03.05.2019 IN TH E CASE OF SHREE LAXMI ESTATE PVT. LTD. IN ITA NO. 6557/MUM2017 FOR A.Y. 2 013-14 HAD CONSIDERED THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF NR A IRON & STEEL P. LTD. AND HELD THAT THE FACTS OF THE CASE BEFORE THE HONBLE SUPREME COURT ARE ENTIRELY DIFFERENT, WHERE ON THE BASIS OF FACTS OF THAT CASE HONBLE SUPREME COURT CAME TO THE CONCLUSION THAT MERE FURNISHING OF CERTAIN D OCUMENTS IS NOT SUFFICIENT ENOUGH AND WHAT IS RELEVANT IS ALL THREE INGREDIENT S, I.E. IDENTITY, GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF THE PARTIES SH OULD BE PROVED BEYOND DOUBT. WE FIND THAT IN THE CASE BEFORE THE HONBLE SUPREME COURT THE PARTIES NEVER RESPONDED TO 133(6) NOTICES. THE AO HAS CARRIED OU T INQUIRIES BY ISSUING NOTICES U/S. 133(6), FOR WHICH NONE OF THE COMPANIE S HAVE REPLIED. NONE OF THE METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 27 COMPANIES PRODUCED BANK STATEMENTS TO ESTABLISH SOU RCE OF FUNDS FOR MAKING SUCH HUGE INVESTMENTS IN SHARES, EVEN THOUGH THEY W ERE DECLARING A VERY MEAGRE INCOME IN THE RETURN. NONE OF THE INVESTORS APPEARED BEFORE THE AO, BUT MERELY SENT RESPONSE THROUGH DAK. IN THIS CASE, FRO M THE FACTS ON RECORD, IT IS CLEAR THAT THE ASSESSEE HAS FILED COMPLETE SET OF D OCUMENTS, BUT THE AO NEITHER CARRIED OUT ANY INVESTIGATION NOR ISSUED NOTICES U/ S. 133(6) OR SUMMONS U/S. 131(1) TO EXAMINE THE VERACITY OF DOCUMENTS FURNISH ED BY THE ASSESSEE. UNLESS, THE AO CARRIED OUT FURTHER INVESTIGATIONS T O ASCERTAIN TRUE NATURE OF TRANSACTIONS, HE CANNOT COME TO THE CONCLUSION MERE LY ON THE BASIS OF DOCUMENTS SUBMITTED BY THE ASSESSEE. THEREFORE, AFT ER CONSIDERING RELEVANT FACTS, THE CO-ORDINATE BENCH CAME TO THE CONCLUSION THAT DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF NRA IRON & STE EL PVT. LTD. (SUPRA) HAS NO APPLICATION, WHERE THE AO HAS NOT CARRIED OUT ANY I NQUIRIES. THE RELEVANT FINDINGS OF THE TRIBUNAL RE AS UNDER: 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAD BORROWED LOANS FROM THE AFORESAID LOAN CREDITOR S AND HAD DULY REPAID THE SAME IN SUBSEQUENT YEARS BY ACCOUNT PAYE E CHEQUES, FOR WHICH EVIDENCES ARE ALREADY ON RECORD BEFORE US. I T IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAD PAID INTEREST ON THE AFORESAID LOANS WHICH HAD BEEN ALLOWED AS A DEDUCTION BY THE LOWER AUTHORITIES. WE ARE UNABLE TO PERSUADE OURSELVES AS TO HOW THE INTE REST PORTION ON LOAN ALONE COULD BE TREATED AS GENUINE TRANSACTIONS AFTER TREATING THE PRINCIPAL PORTION OF LOAN AS INGENUINE. WE ALSO FI ND THAT THE INTEREST PAID ON SUCH UNSECURED LOANS TO AFORESAID LOAN CRED ITORS HAVE BEEN DULY SUBJECTED TO DEDUCTION OF TAX AT SOURCE. NOTI CE ISSUED U/S 133(6) OF THE ACT BY THE LD AO HAD BEEN DULY REPLIED BY TH E CONCERNED LOAN CREDITORS DIRECTLY BEFORE THE LD AO AND NO DEFICIEN CIES WERE NOTICED BY THE LD AO THEREON. AFTER THIS, THE LD AO DID NO T PROCEED TO MAKE FURTHER ENQUIRY ON THE SUBJECT MENTIONED LOAN CREDI TORS. IT IS NOT IN DISPUTE THAT THE ASSESSEE AND THE CONCERNED LOAN CR EDITORS HAD DULY FILED THEIR RESPECTIVE BANK STATEMENTS TO PROVE THE IMMEDIATE SOURCE OF CREDIT FOR ADVANCING LOANS TO THE ASSESSEE COMPA NY, CONFIRMATION OF HAVING GIVEN LOANS TO THE ASSESSEE COMPANY, TOGE THER WITH THEIR INCOME TAX RETURN ACKNOWLEDGEMENTS AND OTHER REQUIS ITE DETAILS CALLED FOR BY THE LD AO IN THE NOTICE U/S 133(6) OF THE ACT. IN CASE IF THE LD AO HAD ANY DOUBT ON THE VERACITY OF THE DOCU MENTS SUBMITTED BY THE LOAN CREDITORS, THE SAME COULD HAVE BEEN CON FRONTED ON THE SAID LOAN CREDITORS BY ISSUING SUMMONS U/S 131 OF T HE ACT AND EXAMINE THEM ON OATH OR CORRESPONDINGLY VERIFY THE SAME THROUGH THE ASSESSING OFFFICERS OF THE CONCERNED LOAN CREDITORS THROUGH THE INTERNAL SOURCE OF THE DEPARTMENT. THE LD AO DID N OT DO EITHER OF THESE IN THE INSTANT CASE AND MERELY DISREGARDED TH E EVIDENCES SUBMITTED ON RECORD BEFORE HIM BOTH BY THE ASSESSEE AS WELL AS BY THE LOAN CREDITORS DIRECTLY TO HIM. THE WRITTEN S UBMISSIONS FILED BY THE LD DR IN THIS REGARD IS REPETITION OF VARIOUS C ONTENTIONS ALREADY AVAILABLE ON RECORD BY THE LOWER AUTHORITIES, APART FROM PLACING RELIANCE ON CERTAIN DECISIONS. WE FIND THAT BOTH T HE AFORESAID LOAN ADDITIONS WERE CONFIRMED BY THE LD CITA BY PLACING RELIANCE ON THE DECISION TAKEN BY HIS PREDECESSOR IN ASST YEAR 2012 -13. WE FIND THAT METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 28 THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASST Y EAR 2012-13 IN ITA NO. 5954/MUM/2016 DATED 29.12.2017 IN RESPECT OF LO AN TRANSACTIONS OF ENTITIES CONTROLLED BY SHRI PRAVIN KUMAR JAIN AN D OTHERS HAD ELABORATELY DEALT THIS ISSUE AND HELD AS UNDER:- 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE AO MADE ADDITION TOWARDS UNS ECURED LOANS RECEIVED FROM JOSH TRADING COMPANY PVT LTD AN D VIRAJ MERCANTILE PVT LTD ON THE BASIS OF INFORMATION RECE IVED FROM INVESTIGATION WING WHICH REVEALED THAT THE ASSESSEE IS THE BENEFICIARY OF BOGUS ACCOMMODATION ENTRIES PROVIDED BY SHRI PRAVEENKUMAR JAIN THROUGH HIS BOGUS COMPANIES. THE AO HAS MADE ADDITIONS U/S 68 OF THE INCOME-TAX ACT, 19 61 ON THE GROUND THAT THOUGH THE ASSESSEE HAS FURNISHED NECESSARY EVIDENCES TO PROVE IDENTITY OF THE PARTIE S, BUT FAILED TO ESTABLISH GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF PARTIES IN THE BACKDROP OF CLEA R FINDINGS OF INVESTIGATION WING THAT THOSE COMPANIES ARE HAWALA COMPANIES INVOLVED IN PROVIDING M/S SHREE LAXMI DEVELOPERS ACCOMMODATION ENTRIES. THE AO HAS BROUGH T OUT FACTS IN THE LIGHT OF STATEMENT OF SHRI PRAVINKUMAR JAIN DEPOSED BEFORE THE INVESTIGATION WING TO MAKE ADDIT ION. EXCEPT THIS, THERE IS NO CONTRARY EVIDENCE IN THE P OSSESSION OF THE AO TO DISPROVE THE LOAN TRANSACTIONS FROM JO SH TRADING COMPANY PVT LTD AND VIRAJ MERCANTILE PVT LT D. ON THE OTHER HAND, THE ASSESSEE HAS FURISHED VARIOUS D ETAILS INCLUDING CONFIRMATION LETTERS FROM THE PARTIES, TH EIR BANK STATEMENTS ALONGWITH THEIR FINANCIAL STATEMENTS TO PROVE IDENTITY, GENUINENESS OF TRANSACTIONS AND CREDITWOR THINESS OF THE PARTIES. THE ASSESSEE ALSO FURNISHED EVIDENCES TO PROVE THAT THE PARTIES HAVE RESPONDED TO THE NOTICES ISSU ED U/S 133(6) BY AO BY FILING VARIOUS DETAILS. THE ASSESSE E ALSO FILED BANK STATEMENTS TO PROVE THAT THE SAID UNSECU RED LOANS HAVE BEEN REPAID IN THE SUBSEQUENT FINANCIAL YEARS. THEREFORE, WE ARE OF THE VIEW THAT THERE IS NO REAS ON FOR THE AO TO DOUBT THE GENUINENESS OF TRANSACTIONS DESPITE FURNISHING NECESSARY EVIDENCES INCLUDING THEIR FINA NCIAL STATEMENTS, BANK STATEMENTS AND IT RETURNS. 6. THE AO HAS MADE ADDITION U/S 68 OF THE ACT, ON T HE GROUND THAT THE UNSECURED LOANS ARE BOGUS ACCOMMODA TION ENTRIES PROVIDED BY SHRI PRAVINKUMAR JAIN THROUGH H IS HAWALA COMPANIES. THE PROVISIONS OF SECTION 68 DEAL WITH C ASES WHERE ANY SUM FOUND CREDITED IN THE BOOKS OF ACCOUN T OF THE ASSESSEE IN ANY FINANCIAL YEAR AND THE ASSESSEE OFF ERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION O F THE AO, SATISFACTORY, THEN SUM SO CREDITED MAY BE CHARGED T O INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PR EVIOUS YEAR. A PLAIN READING M/S SHREE LAXMI DEVELOPERS OF SECTION METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 29 68 MAKES IT CLEAR THAT THE INITIAL BURDEN OF PROOF LIES ON THE ASSESSEE. IT IS WELL SETTLED LEGAL POSITION THAT TH E ASSESSEE HAS TO DISCHARGE 3 MAIN INGREDIENTS IN ORDER TO DIS CHARGE THE INITIAL BURDEN OF PROOF, I.E. THE IDENTITY OF THE C REDITOR, THE GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF THE CREDITORS. ONCE THE ASSESSEE DISCHARGES INITIAL BUR DEN PLACED UPON HIM, THEN THE BURDEN TODIS PROVE THE SA ID CLAIM SHIFTS UPON THE AO. IN THIS CASE, THE ASSESSEE HAS DISCHARGED HIS ONUS CAST U/S 68 BY FILING IDENTITY OF THE CREDITORS, GENUINENESS OF TRANSACTIONS AND CREDITWO RTHINESS OF THE PARTIES WHICH IS EVIDENT FROM THE FACT THAT THE ASSESSEE HAS FURNISHED FINANCIAL STATEMENTS OF THE CREDITORS WHEREIN THE SAID TRANSACTION HAS BEEN DISCLOSED IN THE RELE VANT FINANCIAL YEARS. WE FURTHER NOTICE THAT THE ASSESSE E ALSO FILED FINANCIAL STATEMENTS OF THE CREDITORS WHICH ARE ENC LOSED IN PAPER BOOK FILED. ON PERUSAL OF THE FINANCIAL STATE MENTS FILED BY THE ASSESSEE, WE FIND THAT BOTH THE COMPANIES AR E ACTIVE IN THE WEBSITE OF MINISTRY OF CORPORATE AFFAIRS. TH IS FACT HAS BEEN FURTHER SUPPORTED BY THE LETTER OF AO WHEREIN THE AO HAS ACCEPTED THAT BOTH COMPANIES, VIZ. JOSH TRADING COMPANY PVT LTD AND VIRAJ MERCANTILE PVT LTD ARE AC TIVE IN MCA WEBSITE. WE FURTHER NOTICE THAT BOTH THE COMPAN IES HAVE FILED FINANCIAL STATEMENTS FOR THE YEAR ENDING 31-03- 2006. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE HAS DISCHARGED ITS INITIAL BURDEN CAST U/S 68 BY FILING IDENTITY, GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF THE PARTIES. ONCE, THE ASSESSEE HAS DISCHARGED ITS INITIAL BURDEN, THE BURDEN SHIFTS TO THE AO TO PROVE OTHERWISE. IN THIS CASE, THE AO MADE ADDITION ONLY ON THE BASIS M/S SHREE LAXMI DEVELOPERS OF INFORMATION RECEIVED FROM INVESTIGATION WING, BUT NOT BASED ON ANY EVIDENCE TO DISPROVE THE LOAN TRANSACTION FROM ABOV E COMPANIES ARE INGENUINE. THEREFORE, WE ARE OF THE V IEW THAT THERE IS NO REASON FOR THE AO TO TREAT LOANS FROM A BOVE 2 COMPANIES AS UNEXPLAINED CREDITS U/S 68 OF THE ACT. 7. COMING TO THE CASE LAWS RELIED UPON BY THE ASSES SEE, THE ASSESSEE HAS RELIED UPON THE DECISION OF HON'BLE BO MBAY HIGH COURT IN THE CASE OF CIT VS GAGANDEEP INFRASTR UCTURE PVT LTD (2017) 394 ITR 680 (BOM). WE HAVE GONE THRO UGH THE CASE LAWS RELIED UPON BY THE ASSESSEE IN THE LI GHT OF THE FACTS OF THE PRESENT CASE AND FIND THAT THE HON'BLE HIGH COURT CATEGORICALLY OBSERVED THAT THE PROVISO TO SECTION 68 HAS BEEN INSERTED BY THE FINANCE ACT, 2012 WEF 01-04- 2 013 IS APPLICABLE FROM AY 2013-14 ONWARDS. THE COURT FURTH ER OBSERVED THAT THE PARLIAMENT DID NOT INTRODUCE THE PROVISO TO SECTION 68WITH RETROSPECTIVE EFFECT NOR DOES THE PROVISO INTRODUCED STATES THAT IT WAS INTRODUCED FOR REMOVA L OF DOUBTS. THEREFORE, IT IS NOT OPEN TO GIVE RETROSPEC TIVE EFFECT. METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 30 THE RELEVANT PORTION OF THE ORDER OF HIGH COURT IS EXTRACTED BELOW:- 'THE PROVISO TO SECTION 68 HAS BEEN INTRODUCED BY THE FINANCE ACT, 2012 WITH EFFECT FROM 1-4-2013. TH US, IT WOULD BE EFFECTIVE ONLY FROM THE ASSESSMENT YEAR 20 13-14 ONWARDS AND NOT FOR THE SUBJECT ASSESSMENT YEAR. IN FACT, BEFORE THE TRIBUNAL, IT WAS NOT EVEN THE CASE OF TH E REVENUE THAT SECTION 68 AS IN FORCE DURING THE SUBJECT YEAR S HAS TO BE READ/UNDERSTOOD AS THOUGH THE PROVISO ADDED SUBSEQU ENTLY EFFECTIVE ONLY FROM 1-42013 WAS ITS NORMAL MEANING. THE PARLIAMENT DID NOT INTRODUCED TO PROVISO OF SECTION 68, WITH RETROSPECTIVE EFFECT NOR DOES THE PROVISO TO INTROD UCED STATES THAT IT WAS INTRODUCED 'FOR REMOVAL OF DOUBTS' OR T HAT IT IS 'DECLARATORY'. THEREFORE, IT IS NOT OPEN TO GIVE IT RETROSPECTIVE EFFECT, BY PROCEEDING THE BASIS THAT THE ADDITION O F THE PROVISO TO SECTION 68IS M/S SHREE LAXMI DEVELOPERS IMMATERIAL AND DOES NOT CHANGE THE INTERPRETATION O F SECTION 68 BOTH BEFORE AND AFTER THE ADDING OF THE PROVISO. IN VIEW OF THE MATTER THE THREE ESSENTIAL TESTS WHI LE CONFIRMING THE SECTION 68 LAID DOWN BY THE COURT NA MELY THE GENUINENESS OF THE TRANSACTION, IDENTITY AND THE CA PACITY OF THE INVESTOR HAVE ALL BEEN EXAMINED BY THE IMPUGNED ORDER OF THE TRIBUNAL AND ON FACT IT WAS FOUND SATISFIED. FURTHER IT WAS A SUBMISSION ON BEHALF OF THE REVENUE THAT SUCH LARGE AMOUNT OF SHARE PREMIUM GIVES RISE TO SUSPICION ON THE GENUINENESS (IDENTITY) OF THE SHAREHOLDERS, I.E., T HEY ARE BOGUS. THE APEX COURT IN A CASE IN THIS CONTEXT TO THE PRE- AMENDED SECTION 68 HAS HELD THAT WHERE THE REVENUE URGES THAT THE AMOUNT OF SHARE APPLICATION MONEY HAS BEEN RECEIVED FROM BOGUS SHAREHOLDERS THEN IT IS FOR THE INCOME- TAX OFFICER TO PROCEED BY REOPENING THE ASSESSMENT OF SUCH SHAREHOLDER AND ASSESSING THEM TO TAX IN ACCORDANCE WITH LAW. IT DOES NOT ENTITLE THE REVENUE TO ADD THE SAM E TO THE ASSESSEE'S INCOME AS UNEXPLAINED CASH CREDIT.' [PAR A 3] 8. THE ASSESSEE HAS ALSO RELIED UPON THE DECISION O F HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS ARCHID INDU STRIES PVT LTD IN ITA NO1433/MUM/2014 DATED 5TH JULY, 2017 . THE HON'BLE BOMBAY HIGH COURT, AFTER CONSIDERING RELEVA NT FACTS AND ALSO BY FOLLOWING JUDGEMENT IN THE CASE OF CIT VS GAGANDEEP INFRASTRUCTURE PVT LTD (SUPRA) HELD AS UN DER:_ 6] THE TRIBUNAL HAS CONSIDERED THAT THE ASSESSEE HAS PRODUCED ON RECORD THE DOCUMENTS TO ESTABLISH THE GENUINENESS OF THE PARTY SUCH AS PAN OF ALL THE CRE DITORS ALONG WITH THE CONFIRMATION, THEIR BANK STATEMENTS SHOWING PAYMENT OF SHARE APPLICATION MONEY. IT WAS ALSO OBS ERVED BY THE TRIBUNAL THAT THE ASSESSEE HAS ALSO PRODUCED TH E ENTIRE RECORD REGARDING ISSUANCE OF SHARE I.E. ALLOTMENT O F SHARES TO METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 31 THESE PARTIES, THEIR SHARE APPLICATION FORMS, ALLOT MENT LETTERS AND SHARE CERTIFICATES, SO ALSO THE BOOKS OF ACCOUN T. THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT OF THESE PERSONS DISCLOSES THAT THESE PERSONS HAD SUFFICIENT FUNDS I N THEIR ACCOUNTS FOR INVESTING IN THE SHARES OF THE ASSESSE E. IN VIEW OF THESE VOLUMINOUS DOCUMENTARY EVIDENCE, ONLY BECA USE THOSE PERSONS HAD NOT APPEARED BEFORE THE ASSESSING OFFICER WOULD NOT NEGATE THE CASE OF THE ASSESSEE. THE JUDGMENT IN CASE OF GAGANDEEP INFRASTRUCTURE (P) LT D (SUPRA) WOULD M/S SHREE LAXMI DEVELOPERS BE APPLICABLE IN T HE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE.' 9. THE ASSESSEE HAS ALSO RELIED UPO THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS LOVELY EXPORTS PVT LTD (2008) 216 CTR 195 (SC). THE HON'BLE APEX COURT WHILE DELETING THE ADDITION MADE U/S 68 OBSERVED THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPA NY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAMES ARE GIV EN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO R EOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW , BUT THIS AMOUNT OF SHARE APPLICATION MONEY CANNOT BE REGARDE D AS UNDISCLOSED INCOME U/S 68 OF THE INCOME-TAX ACT, 19 61. 10. COMING TO THE CASE LAWS RELIED UPON BY THE LD.D R. THE LD.DR RELIED UPON THE DECISION OF HON'BLE DELHI HIG H COURT IN THE CASE OF PRINCIPAL CIT VS BIKRAM SINGH IN ITA NO.55/DEL/2017 DATED 25-03-2017. WE HAVE GONE THROU GH THE CASE LAW RELIED BY THE LD.DR IN THE LIGHT OF FA CTS OF THE PRESENT CASE AND FIND THAT THE FACTS OF CASE BEFORE HON'BLE DELHI HIGH COURT ARE ENTIRELY DIFFERENT FROM FACTS OF THE PRESENT CASE. THE HON'BLE DELHI HIGH COURT, HAS CON SIDERED THE FACT THAT THE INDIVIDUALS, WHO ADVANCED LOANS H AD NO FINANCIAL STRENGTH TO LEND SUCH HUGE SUM OF MONEY T O THE ASSESSEE, THAT TOO, WITHOUT ANY COLLATERAL SECURITY WITHOUT INTEREST AND WITHOUT A LENDER AGREEMENT. UNDER THES E FACTS, THE HON'BLE COURT HELD THAT MERE ESTABLISHING OF TH EIR IDENTITY AND THE FACT THAT THE AMOUNTS HAVE BEEN TRANSFERRED THROUGH CHEQUE PAYMENT DOES NOT BY ITSELF MEAN THAT THE TRANSACTIONS ARE GENUINE. IN THIS CASE, THE ASSESSE E HAS FURNISHED ALL EVIDENCES AND ALSO THE PARTIES PERSON ALLY RESPONDED TO THE NOTICES M/S SHREE LAXMI DEVELOPERS ISSUED BY THE AO U/S 133(6) BY FILING VARIOUS DETAI LS, THEREFORE, CASE LAW RELIED UPON BY THE LD.DR CANNOT BE APPLICABLE TO THE FACTS OF THE PRESENT CASE. 11. IN THIS VIEW OF THE MATTER AND CONSIDERING THE RATIO OF THE CASE LAWS DISCUSSED ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE HAS DISCHARGED IDENTITY, GENUINEN ESS OF TRANSACTIONS AND CREDITWORTHINESS OF THE PARTIES. T HEREFORE, THERE IS NO REASON FOR THE AO TO MAKE ADDITION TOWA RDS LOAN METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 32 U/S 68 OF THE ACT. HENCE, WE DIRECT THE AO TO DELET E ADDITION MADE TOWARDS LOANS ALONGWITH INTEREST U/S 68 OF THE ACT. 8.1. WE FIND THAT THE LD DR VEHEMENTLY PLACED RELI ANCE ON THE RECENT DECISION OF HONBLE SUPREME COURT IN THE CAS E OF PCIT VS NRA IRON & STEEL PVT LTD ARISING OUT OF SLP(CIVIL) NO. 29855 OF 2018 DATED 5.3.2019 IN SUPPORT OF CONTENTIONS OF THE REV ENUE ON THE IMPUGNED ISSUE. IN THIS REGARD, WE FIND THAT THE F ACTS BEFORE THE HONBLE SUPREME COURT ARE CLEARLY DISTINGUISHABLE O N THE FOLLOWING GROUNDS:- A) IN PARA 3.6. OF THE SAID JUDGEMENT OF HONBLE SU PREME COURT, IT WAS MENTIONED THAT THE ENTIRE SHARE CAPITAL HAD BEE N RECEIVED BY THE ASSESSEE THROUGH NORMAL BANKING CHANNELS BY ACCOUNT PAYEE CHEQUES / DEMAND DRAFTS, AND PRODUCED DOCUMENTS SUC H AS INCOME TAX RETURN ACKNOWLEDGEMENTS TO ESTABLISH IDENTITY A ND GENUINENESS OF THE TRANSACTION. IT WAS SUBMITTED THAT, THERE WAS NO CAUSE TO TAKE RECOURSE TO SECTION 68 OF THE ACT, AND THAT THE ONU S ON THE ASSESSEE COMPANY STOOD FULLY DISCHARGED. B) IN PARA 3.7. OF THE SAID JUDGEMENT OF HONBLE SU PREME COURT, IT WAS MENTIONED THAT THE AO HAD ISSUED SUMMONS TO THE REPRESENTATIVES OF THE INVESTOR COMPANIES. DESPITE THE SUMMONS HAVING BEEN SERVED, NOBODY APPEARED ON BEHALF OF AN Y OF THE INVESTOR COMPANIES. THE DEPARTMENT ONLY RECEIVED S UBMISSIONS THROUGH DAK, WHICH CREATED A DOUBT ABOUT THE IDENTI TY OF THE INVESTOR COMPANIES. C) IN PARA 3.8. OF THE SAID JUDGEMENT OF HONBLE SU PREME COURT, IT WAS MENTIONED THAT THE AO INDEPENDENTLY GOT FIELD E NQUIRIES CONDUCTED WITH RESPECT TO THE IDENTITY AND CREDIT-W ORTHINESS OF THE INVESTOR COMPANIES, AND TO EXAMINE THE GENUINENESS OF THE TRANSACTION. ENQUIRIES WERE MADE AT MUMBAI, KOLKAT A AND GUWAHATI WHERE THESE COMPANIES WERE STATED TO BE SITUATED. IN THE AFORESAID CASE BEFORE THE HONBLE SUPREME CO URT, THE RESULT OF THE ENQUIRY BY THE AO REVEALED THE FOLLOWING:- A) NOTICE WERE DULY SERVED ON CERTAIN INVESTOR COMP ANIES, BUT NO REPLY WAS RECEIVED FROM THEM ; B) SOME OF THE INVESTOR COMPANIES WERE FOUND TO BE CLOSED AT THEIR CORRECT ADDRESS ; C) NOTICE COULD NOT BE SERVED ON SOME OF THE INVEST OR COMPANIES ; D) SOME OF THE INVESTOR COMPANIES REPLIED TO NOTICE U/S 133(6) OF THE ACT WHEREIN THEY HAD CONFIRMED HAVING MADE INVESTME NT IN SHARE APPLICATION MONEY IN NRA IRON & STEEL PVT LTD BUT H AD LIMITED INCOME AS PER THEIR INCOME TAX RETURNS WHICH IN TURN RESUL TED IN DOUBTING OF CREDITWORTHINESS ; E) MOST OF THE INVESTOR COMPANIES THOUGH CONFIRMED THE FACT OF HAVING MADE INVESTMENT IN SHARE APPLICATION MONEY IN NRA I RON & STEEL PVT LTD , BUT HAD NOT FILED THEIR BANK STATEMENTS TO PR OVE THE IMMEDIATE SOURCE OF CREDIT AVAILABLE TO THEM FOR MAKING THE S AID INVESTMENT. METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 33 8.1.1. IN THE INSTANT CASE BEFORE US, THE LD AO DID NOT ISSUE ANY SUMMONS U/S 131 OF THE ACT OR MAKE FURTHER ENQUIRIE S TO EXAMINE THE VERACITY OF THE EVIDENCES FILED ON RECORD BEFORE HI M BY THE ASSESSEE AS WELL AS BY THE LOAN CREDITORS IN RESPONSE TO NOT ICE U/S 133(6) OF THE ACT. MOREOVER, ALL THE LOAN CREDITORS HAD DULY FUR NISHED THEIR RESPECTIVE BANK STATEMENTS PROVING THE IMMEDIATE SO URCE OF CREDIT FOR THEM TO JUSTIFY THAT THEY HAD SUFFICIENT CREDITWORT HINESS TO ADVANCE LOAN TO THE ASSESSEE COMPANY. FROM THE PERUSAL OF THE BALANCE SHEET OF ALL INVESTOR COMPANIES, ALL THE LOAN CREDI TORS HAD SUFFICIENT OWN FUNDS IN THEIR KITTY WHICH PROVE THEIR CREDITWO RTHINESS TO ADVANCE LOAN TO THE ASSESSEE COMPANY. AS HAS BEEN STATED HE REINABOVE, THE MOST EXCRUCIATING POINT OF DIFFERENCE IN FACTS VIS A VIS THE FACTS OF THE CASE BEFORE THE HONBLE SUPREME COURT SUPRA THAT TH E INVESTOR COMPANIES HAD NOT EVEN FURNISHED THEIR BANK STATEME NTS TO PROVE THEIR IMMEDIATE SOURCE OF CREDIT FOR MAKING INVESTM ENT IN SHARE APPLICATION MONIES OF NRA IRON & STEEL PVT LTD. FRO M THE BANK STATEMENTS FURNISHED BY THE LOAN CREDITORS IN THE C ASE OF THE ASSESSEE HEREIN, WE FIND THAT THERE WERE NO CASH DE POSITS IN THE BANK ACCOUNTS OF THE LENDERS PRIOR TO ISSUANCE OF L OAN TO THE ASSESSEE COMPANY. IN THE CASE BEFORE THE HONBLE SUPREME COURT, THE AO IN THAT CASE HAD MADE FIELD ENQUIRIES AT MUM BAI, KOLKATA AND GUWAHATI WHERE THOSE INVESTOR COMPANIES WERE STATED TO BE SITUATED TO EXAMINE THEIR IDENTITY AND CREDENTIALS AND THE R ESULT OF SUCH ENQUIRY HAD BEEN SUMMARIZED HEREINABOVE. WHEREAS I N THE INSTANT CASE BEFORE US, NO SUCH ENQUIRIES WERE CONDUCTED BY THE LD AO TO DOUBT THE VERACITY OF THE DETAILS AND EVIDENCES FIL ED BY THE LOAN CREDITORS IN RESPONSE TO NOTICE U/S 133(6) OF THE A CT DIRECTLY BEFORE HIM. IN THE INSTANT CASE BEFORE US, ALL THE NOTICE S U/S 133(6) OF THE ACT WERE DULY SERVED ON ALL THE AFORESAID LOAN CRED ITORS AND ALL OF THEM HAD INDEPENDENTLY FILED THEIR REPLIES DIRECTLY BEFORE THE LD AO. THE BANK STATEMENTS WERE ALSO DULY FURNISHED BY THE LOAN CREDITORS TO PROVE THAT THEY HAD SUFFICIENT CREDITWORTHINESS TO ADVANCE LOAN TO THE ASSESSEE COMPANY AND SINCE ALL THE TRANSACTIONS WER E ROUTED THROUGH REGULAR BANKING CHANNELS BY ACCOUNT PAYEE C HEQUES AND IN VIEW OF THE FACT THAT THERE WERE NO CASH DEPOSITS P RIOR TO ISSUANCE OF LOAN TO THE ASSESSEE COMPANY, THE GENUINENESS OF TR ANSACTIONS ALSO STAND CLEARLY ESTABLISHED. THIS GOES TO PROVE THEIR IDENTITY, CREDITWORTHINESS AND GENUINENESS OF TRANSACTIONS OF ALL THE LOAN CREDITORS. IN THIS SCENARIO, IT COULD BE SAFELY PRE SUMED THAT THE LD AO WAS APPARENTLY SATISFIED WITH THE REPLIES GIVEN THE REON BY THE LOAN CREDITORS DIRECTLY BEFORE HIM IN RESPONSE TO NOTICE U/S 133(6) OF THE ACT AND HENCE THERE IS NO NEED TO MAKE ANY EXAMINAT ION FURTHER. 8.2. IN VIEW OF THE AFORESAID DISTINGUISHING FEATU RES ON FACTS OF THE ASSESSEE COMPANY VIS A VIS THE FACTS BEFORE THE HON BLE SUPREME COURT, WE HOLD THAT THE RELIANCE PLACED BY THE LD D R ON THE DECISION OF HONBLE SUPREME COURT SUPRA DOES NOT COME TO THE RESCUE OF THE REVENUE. 8.3. AT THE COST OF REPETITION, WE WOULD LIKE TO S TATE THAT THE LD CIT(A) HAD MERELY PLACED RELIANCE ON THE DECISION T AKEN BY HIS PREDECESSOR IN ASST YEAR 2012-13 IN ASSESSEES OWN CASE IN SIMILAR METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 34 SET OF FACTS. WE FIND THAT THIS DECISION FOR ASST YEAR 2012-13 IN ASSESSEES OWN CASE HAS BEEN REVERSED BY THIS TRIBU NAL VIDE ITS ORDER DATED 29.12.2017 REFERRED TO SUPRA. IN VIEW OF OUR AFORESAID FINDINGS IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND RESP ECTFULLY FOLLOWING THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CAS E FOR ASST YEAR 2012-13, WE HOLD THAT THE ASSESSEE COMPANY HAD DULY PROVED THE NATURE AND SOURCE OF CREDIT IN THE FORM OF UNSECURE D LOAN AND HAD DULY SATISFIED THE THREE NECESSARY INGREDIENTS OF S ECTION 68 OF THE ACT VIZ, THE IDENTITY OF THE LOAN CREDITORS , CREDITWOR THINESS OF LOAN CREDITORS AND GENUINENESS OF LOAN TRANSACTIONS. HE NCE WE DIRECT THE LD AO TO DELETE THE ADDITION MADE IN THE SUMS OF RS 50 LACS AND RS 25 LACS TOWARDS UNSECURED LOAN U/S 68 OF THE ACT. A CCORDINGLY, THE GROUNDS 1 TO 6 RAISED BY THE ASSESSEE ARE ALLOWED. 17. IN THE CASE OF PCIT VS. HI-TECH RESIDENCY PVT. LTD. (2018) 257 TAXMAN 335, HONBLE SUPREME COURT HAS CONSIDERED IDENTICAL ISSUE AND HELD THAT WHERE AN ASSESSEE COMPANY HAD DISCHARGED THE ONUS OF ESTA BLISHING IDENTITY, GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF INVESTORS, NO ADDITIONS COULD BE MADE U/S. 68 OF THE I.T. ACT, 1961. WE, FURTHER , NOTED THAT ALTHOUGH THE APEX COURT HAS NOT EXPRESSED ANY OPINION, BECAUSE OF DIS MISSAL OF SLP FILED BY THE ASSESSEE, THE FACT OF THE MATTER IS THAT THIS ISSUE HAS BEEN CONSIDERED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD (SUPRA), WHERE THE ISSUE HAS BEEN THOROUGHLY EXAMINED IN THE LIGHT OF PROVISIONS OF SECTION 68 OF THE ACT, AND HELD THAT IF THE SHARE A PPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHARE HOLDE RS, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PRO CEED TO REOPEN THEIR ASSESSMENT IN ACCORDANCE WITH LAW, BUT SUM RECEIVED FROM SHARE HOLDERS CANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASS ESSEE. 18. IN THIS VIEW OF THE MATTER AND CONSIDERING THE FACTS AND CIRCUMSTANCES OF THIS CASE AND ALSO TAKING INTO CONSIDERATION VARIOU S CASE LAWS AS DISCUSSED HEREINABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE HAS DISCHARGED ITS INITIAL ONUS TO PROVE IDENTITY, GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF THE PARTIES BY FILING VARIOUS D OCUMENTS. THE AO, WITHOUT CARRYING OUT FURTHER INQUIRIES IN ORDER TO ASCERTAI N THE CLAIM OF THE ASSESSEE, JUMPED INTO CONCLUSION ON THE BASIS OF FINANCIAL ST ATEMENTS OF THE SUBSCRIBERS THAT NONE OF THEM HAD ENOUGH SOURCE OF INCOME TO ES TABLISH CREDITWORTHINESS. THEREFORE, WE ARE OF THE VIEW THAT THE AO WAS ERRED IN MAKING ADDITIONS TOWARDS SHARE CAPITAL U/S 68 OF THE INCOME TAX ACT, 1961. T HE LEARNED CIT(A) WITHOUT APPRECIATING RELEVANT FACTS HAS CONFIRMED ADDITIONS MADE BY THE AO TOWARDS SHARE CAPITAL U/S 68 OF THE INCOME TAX ACT, 1961. H ENCE, WE REVERSE FINDINGS OF LD. CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION S MADE TOWARDS SHARE CAPITAL U/S. 68 OF THE INCOME TAX ACT, 1961. 19. INSOFAR AS, ADDITIONS TOWARDS PROBABLE COMMISSI ON PAYMENT TO ENTRY PROVIDES, WE FIND THAT SINCE, WE HAVE DELETED ADDIT IONS MADE BY THE AO TOWARDS SHARE CAPITAL, CONSEQUENT ADDITIONS MADE TOWARDS P ROBABLE COMMISSION @ 0.75%, ON TOTAL TRANSACTIONS IS ALSO INCORRECT AND ACCORDINGLY, DIRECT THE AO TO DELETE ADDITIONS MADE TOWARDS COMMISSION ESTIMATION . METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 35 13. IN THIS VIEW OF THE MATTER AND BY RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH IN ASSESEE GROUP COMP ANY CASE, WE ARE OF THE CONSIDERED VIEW THAT THE IDENTITY, GENUI NENESS OF TRANSACTION AND CREDITWORTHINESS OF SUBSCRIBERS HAS BEEN PROVED AS REQUIRED U/S 68 OF THE ACT. WE, THEREFORE, DIRECT T HE LD. AO TO DELETE ADDITIONS MADE TOWARDS SHARE CAPITAL AND CONSEQUENT COMMISSION U/S 68 OF THE I.T.ACT, 1961. 14. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERAT ION FROM GROUND NO.4 OF ASSESSEES APPEAL IS DISALLOWANCES OF EXPEN DITURE INCURRED IN RELATION TO EXEMPT INCOME U/S 14A OF THE ACT R.W .RULE 8D OF THE I.T.RULES, 1962. WE FIND THAT AN IDENTICAL ISSUE HA S BEEN CONSIDERED BY US IN ITA NO. 2563/MUM/2018, IN THE CASE OF M/S ASHA LEASING AND FINANCE PVT.LTD., WHERE UNDER IDENTICAL SET OF FACTS, THE TRIBUNAL HAS DELETED ADDITIONS MADE BY THE LD. AO U/S 14A R. W.S.RULE 8D OF I.T.RULES, 1962, ON THE GROUND THAT IN ABSENCE OF I NCRIMINATING MATERIAL FOUND AS A RESULT OF SEARCH NO ADDITIONS C OULD BE MADE IN THE ASSESSMENTS FRAMED U/S 143(3) R.W.153A OF THE A CT, 1961. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE AS UNDER:- 20. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDER ATION FROM GROUND NO.4 OF ASSESSEES APPEAL IS ADDITIONS TOWARDS DISA LLOWANCES OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME. WE FIND THAT THE AO HAS MADE ADDITIONS TOWARDS DISALLOWANCES OF EXPENDI TURE IN THE ASSESSMENT FRAMED U/S 143(3) R.W.S. 153A OF THE I.T .ACT, 1961, WITHOUT METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 36 REFERENCE TO ANY INCRIMINATING MATERIAL FOUND AS A RESULT OF SEARCH. IT IS SETTLED POSITION OF LAW THAT IN ORDER TO MAKE ANY A DDITIONS IN THE ASSESSMENTS, WHICH ARE FRAMED U/S 153A, THE ADDITIO NS QUA INCRIMINATING MATERIAL IS A MUST. UNLESS, THE AO HAS INCRIMINATIN G MATERIAL IN HIS POSSESSION TO PROVE THAT ANY ITEM OF ADDITION IS SU PPORTED BY INCRIMINATING MATERIAL FOUND, AS A RESULT OF SEARCH , NO ADDITIONS COULD BE MADE IN THE ASSESSMENTS FRAMED U/S 153A, IF SUCH AS SESSMENT HAS BEEN COMPLETED /UNABATED AS ON THE DATE OF SEARCH. IN TH IS CASE, THE FACTS WITH REGARD TO NO REFERENCE TO INCRIMINATING MATERIAL, I N RESPECT OF ADDITIONS TOWARDS DISALLOWANCES OF EXPENDITURE U/S 14A R.W.RU LE 8D IS NOT DISPUTED BY THE REVENUE. WHEN, THE BENCH HAS SPECIFICALLY AS KED THE LD. DR ABOUT INCRIMINATING MATERIAL, THE LD. DR FAILED TO PROVE THAT THE ADDITIONS MADE BY THE AO TOWARDS DISALLOWANCES OF EXPENDITURE IS S UPPORTED BY ANY INCRIMINATING MATERIAL. THEREFORE, WE ARE OF THE CO NSIDERED VIEW THAT IN ABSENCE OF ANY INCRIMINATING MATERIAL FOUND AS A RE SULT OF SEARCH, NO ADDITIONS COULD BE MADE IN THE ASSESSMENT FRAMED U/ S 153A OF THE I.T.ACT, 1961. THIS LEGAL PROPOSITION IS SUPPORTED BY THE DECISION OF HONBLE JURISDICTIONAL BOMBAY HIGH COURT IN THE CA SE OF CIT VS CONTINENTAL WAREHOUSING CORPORATION (NHAVA SHEVA L TD. (2015) 374 ITR 645, WHERE THE HONBLE HIGH COURT CLEARLY HELD THAT IN ABSENCE OF INCRIMINATING MATERIAL NO ADDITIONS COULD BE MADE, IN RESPECT OF ASSESSMENT WHICH BECOME FINAL AND NO PROCEEDINGS I S PENDING, AS ON THE DATE OF SEARCH. THEREFORE, WE ARE OF THE CONSID ERED VIEW THAT THE AO WAS ERRED IN MAKING ADDITIONS TOWARDS DISALLOWANCES OF EXPENDITURE, IN RELATION TO EXEMPT INCOME U/S 14A R.W.RULE 8D(2), I N ABSENCE OF SEIZED MATERIALS. THE LD. CIT(A) WITHOUT APPRECIATING THE FACTS SIMPLY UPHELD THE ADDITIONS MADE BY THE AO. THEREFORE, WE REVERSE THE FINDINGS OF LD.CIT(A) AND DELETE ADDITIONS MADE BY THE AO TOWAR DS DISALLOWANCE OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME U /S 14A OF THE I.T.ACT, 1961. 15. IN THE RESULT, APPEAL FILED BY THE ASSESEE IS A LLOWED. ITA NOS 2561, 2843/MUM/2018:- 16. THE FACTS AND ISSUES INVOLVED IN THESE TWO APPE ALS ARE IDENTICAL TO THE FACTS AND ISSUES, WHICH WE HAD ALR EADY CONSIDERED IN ITA NO. 2568/MUM/2018. THE REASONS GIVEN BY US IN P RECEDING PARAGRAPHS IN ITA.NO. 2568/MUM/2018 SHALL MUTATIS MUTANDIS APPLY TO THESE APPEALS AS WELL. THEREFORE, FOR SIMILAR RE ASONS, WE DIRECT METRO WOVEN SACKS PVT.LTD. RUKMANI MERCANTILE PVT.LTD. DYNAMIC MINECHEM PVT.LTD. 37 THE LD.AO TO DELETE ADDITIONS MADE TOWARDS SHARE CA PITAL AND CONSEQUENT COMMISSION U/S 68 OF THE I.T.ACT, 1961. SIMILARLY, WE DIRECT THE LD. AO TO DELETE ADDITIONS MADE TOWARDS DISALLOWANCES OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME U /S 14A OF THE ACT R.W.RULE 8D OF I.T.RULES, 1962. ACCORDINGLY, THE AP PEALS FILED BY THE ASSESSEES ARE ALLOWED. 17. AS A RESULT, ALL APPEALS FILED BY THE ASSESSEE S ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 /01/2 020 SD/ - (RAVISH SOOD) SD/ - (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED 29 /01//2020 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//