ITO 4(3)(4), MUMBAI V. SUCHITRA FABTEX P.LTD, MUMBAI

ITA 2979/MUM/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0101 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 03-07-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 25-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Keywords: Unexplained investment; Share purchase agreement; Accommodation entries; Capital receipt; Onus to prove; Retraction; Reason to believe
• Section: 69C; 133(6); 37(1); 131; 68

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) I.T.A. NO. 2979/MUM/2017 (ASSESSMENT YEAR 2008 - 09) I.T.A. NO. 2980 /MUM/ 2017 (ASSESSMENT YEAR 20 11 - 12 ) ITO 4(3)(4) ROOM NO. 637 6 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. VS. M/S. SUCHITRA FABTEX PVT. LTD. 222/C, KEWAL X 10 TH LANE DR. WEGAS STREET KALBADEVI ROAD MUMBAI - 400 002. ( APPELLANT ) ( RESPONDENT ) PAN NO . AAICS0709H ASSESSEE BY SHRI J.P. BAIRAGRA DEPARTMENT BY MS. N. HEMALATHA DATE OF HEARING 2 2 . 8 . 201 7 DATE OF PRONOUNCEMENT 31 . 8 . 201 7 O R D E R BOTH THE APPEALS HAVE BEEN FILED BY THE REVENUE CHALLENGING THE ORDERS PASSED BY LD CIT(A) - 9, MUMBAI AND THEY RELATE TO THE ASSESSMENT YEARS 2008 - 09 AND 2011 - 12. BOTH THE APPEALS WE RE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF SAREES. DURING THE YEAR RELEVANT TO AY 2008 - 09, THE ASSESSEE HAS RECEIVED MONEY FROM THE GROUP CONCERNS OF SHRI PRAVEEN KUMAR JAIN TO THE TUNE OF RS.40.00 LAKHS, CONSISTING OF UNSECURED LOAN OF RS.20.00 LAKHS AND SHARE APPLICATION MONEY OF RS.20.00 LAKHS. SIMILARLY IN THE YEAR RELEVANT TO AY 2011 - 12, THE ASSESSEE HAS RECEIVED UNSECURED LO ANS TO THE TUNE OF RS.40.00 LAKHS FROM FOUR PERSONS. IN THE SEARCH PROCEEDINGS UNDERTAKEN IN THE HANDS OF SHRI PRAVEEN KUMAR JAIN HAD ADMITTED THAT HE AND HIS GROUP CONCERNS ARE ENGAGED IN PROVIDING ONLY ACCOMMODATION ENTRIES BY WAY OF UNSECURED LOANS AND SHARE APPLICATION MONEY. HENCE THE AO REOPENED THE ASSESSMENTS OF BOTH THE YEARS AND ASSESSED THE ABOVE SAID AMOUNTS OF RS.40.00 LAKHS IN BOTH THE YEARS UNDER SECTION 68 OF THE 4 ACT. THE LD CIT(A) DELETED THE ADDITIONS IN BOTH THE YEARS AND HENCE THE REV ENUE HAS FILED THESE APPEALS BEFORE THE TRIBUNAL. 3. THE LD D.R PLACED STRONG RELIANCE ON THE ORDER PASSED BY THE ASSESSING OFFICER IN BOTH THE YEARS. HOWEVER, THE LD A.R CONTENDED THAT THE LD CIT(A) HAS DELETED THE ADDITIONS BY MAKING DETAILED EXAM INATION OF FACTS AND BY APPLYING RELEVANT LAWS LAID DOWN BY THE COURTS. 4. I HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. I NOTICE THAT THE LD CIT(A) HAS THOROUGHLY EXAMINED THE FACTS AND ALSO CONSIDERED VARIOUS CASE LAWS AND ACCORDINGLY ARR IVED AT THE CONCLUSION THAT THE ADDITIONS MADE BY THE AO IN BOTH THE YEARS ARE NOT SUSTAINABLE. FOR THE SAKE OF CONVENIENCE, I EXTRACT BELOW THE OPERATIVE PORTION OF THE ORDER PASSED BY LD CIT(A) IN BOTH THE YEARS UNDER CONSIDERATION : - (A) ITA NO.2979/M UM/2017 - ASSESSMENT YEAR 2008 - 09: - 6.3.1 I HAVE CONSIDERED THE FACTS OF THE CASE AS WELL AS ASSESSMENT ORDER PASSED BY THE AO AND THE SUBMISSIONS MADE BY THE APPELLANT. AN ANALYSIS OF THE JUDICIAL PRECEDENTS ON THIS ISSUE YIELDS THE FOLLOWING PROPOSITI ONS OF LAW IN THE CONTEXT OF S. 68 OF THE IT ACT. THE ASSESSEE HAS TO PRIMA FACIE PROVE (1) THE IDENTITY OF THE CREDITOR/SUBSCRIBER; (2) THE GENUINENESS OF THE TRANSACTION, NAMELY, WHETHER IT HAS BEEN TRANSMITTED THROUGH BANKING OR OTHER INDISPUTABLE CHANN ELS; (3) THE CREDITWORTHINESS OR FINANCIAL STRENGTH OF THE CREDITOR/SUBSCRIBER; (4) IF RELEVANT DETAILS OF CONFIRMATION, BANK STATEMENT, COPY OF RETURN OF INCOME FILED, PAN CARD, AUDITED STATEMENT OF ACCOUNTS ALONG WITH COPIES OF SHARE APPLICATION FORMS, E TC., IT WOULD CONSTITUTE ACCEPTABLE PROOF OR ACCEPTABLE EXPLANATION BY THE ASSESSEE; IT HAS BEEN JUDICIAL POSITION THAT WHERE ASSESSEE BROUGHT EVIDENCE ON RECORD ESTABLISHING THAT SHARE APP1ICWER'NOT FICTITIOUS PERSONS AND, MOREOVER, THEY PAID MONEY BY CHE QUES, NO ADDITION COULD BE MADE TO ASSESSEE'S INCOME IN RESPECT OF SHARE APPLICATION MONEY. 6.3.2 THE AO IN THIS CASE HAS PRIMARILY PLACED RELIANCE ON THE SEARCH CONDUCTED BY THE DDIT(INV) - III(2) MUMBAI IN THE CASE OF SHRI PRAVEEN KUMAR JAIN. LID AO HAS M ADE THE ADDITION U/S 68 TOWARDS LOAN TAKEN BY THE APPELLANT FROM 4 PARTIES AND SHARE APPLICATION MONEY MERELY ON THE BASIS OF THIS INFORMATION RECEIVED FROM 4 INVESTIGATION WING FROM SEARCH CONDUCTED IN THE CASE OF THIRD PARTY. HOWEVER AO HAS NOT MADE ANY FU RTHER ENQUIRY TO CORROBORATE HIS FINDINGS. A PERUSAL OF THE DOCUMENTARY EVIDENCES BROUGHT ON RECORD BY THE APPELLANT SHOW THAT THE ONUS OF PROVING THE GENUINENESS OF TRANSACTION, IDENTITY AND CAPACITY OF THE LENDERS AND SHARE APPLICANTS HAS BEEN DISCHARGE D BY THE APPELLANT. THE SAME IS EVIDENT FROM THE LIST OF DOCUMENTS SUBMITTED BY THE APPELLANT VIDE LETTER DATED 7.12.2015 WITH RESPECT TO BOTH THE LENDERS OF THE UNSECURED LOANS AS WELL AS SHARE APPLICANTS. APPELLANT HAS PLACE ON THE RECORD OF THE AO COPIE S OF ANNUAL AUDITED REPORTS, DIRECTORS REPORT, PAN, SHARE CERTIFICATES ISSUED, FORM 16A DEMONSTRATING TDS DEDUCTED ON INTEREST PAYMENTS MADE TO LENDERS, BANK STATEMENTS SHOWING PAYMENTS RECEIVED AND REPAYMENT OF LOAN MADE BY THE APPELLANT , LOAN CONFIRMATI ONS ETC. FROM THE DETAILS SUBMITTED IT CAN BE SEEN THAT THE PARTIES IE SHARE APPLICANTS AS WELL AS LENDERS HAVE PAYMENTS FROM THEIR BANK ACCOUNTS THROUGH ACCOUNT PAYEE CHEQUES, THEREFORE THESE TRANSACTIONS CANNOT BE TREATED AS BOGUS. THE AO HAS NOT BEEN AB LE BRING ON RECORD ANY VALID MATERIAL OR EVIDENCE TO DISCREDIT THE EVIDENCES AND EXPLANATION GIVEN BY THE APPELLANT OTHER THAN MERELY RELYING ON A BALD STATEMENT BY ALLEGED SHRI PRAVIN KUMAR JAIN AS RECORDED BY INVESTIGATION DEPARTMENT WITHOUT HIMSELF MAKI NG ANY EFFORTS TO BRING ON RECORD ANY VALID OR CORROBORATIVE EVIDENCE AGAINST THE PARTIES. THE AO HAS BEEN UNABLE TO DEMONSTRATE ANY RELATIONSHIP BETWEEN PKJ AND THE APPELLANT. THE OTHER REASONS ADDUCED BY THE AO SUCH AS JOINTLY PLANNED RETRACTIONS BY SIX INDIVIDUALS, ALLEGED CONTROL OVER THE THIRTY - THREE COMPANIES LISTED BY THE AO ETC HAVE NO REAL CONNECTION WITH THE ADDITION UNDER SECTION 68 OF THE ACT MADE IN CASE OF THE APPELLANT. THE AO HAS BEEN UNABLE TO REFUTE THE CLEAR CUT AND COGENT EVIDENCE SU BMITTED BY THE APPELLANT AND AVAILABLE ON THE AO'S RECORD, TESTIFYING TO THE GENUINENESS OF THE LOANS. THE SOURCE OF THE SAID LOANS THUS STANDS PROVEN. AS HAS BEEN HELD IN SEVERAL DECISIONS OF SUPERIOR JUDICIAL AUTHORITIES [MURLIDHAR LAHORIMAL V CIT [280 I TR 312 (GUJ)] , LABHCHANDBOHRA V ITO [ 219 ITR 571 (RAJ)] AND CIT V DWARKADHISH INVESTMENT PRIVATE LIMITED [299 'TR 268 (DEL)], THE ASSESSEE CANNOT BE CALLED UPON TO PROVE THE SOURCE OF THE SOURCE OF HIS LOANS. DETAILS OF LOANS TAKEN DURING THE YEAR 1 ANS H MERCHANDISE PVT .LTD. (EARLIER KNOWN AS NEW PLANET TRADING CO. PVT. LTD.) 4 DETAILS OF SHARE CAPITAL AND RESERVE & SURPLUS OF THE PARTY AS PER THEIR BALANCE SHEET 8 THUS, AFTER CAREFUL CONSIDERATIONS OF THE ENTIRE MATERIAL ON RECORD, WHICH MAY ALSO BE EVIDENT FROM THE ABOVE GIVEN CHART, IT IS FOUND THAT THE APPELLANT HAS INDEED PROVEN THE GENUINENESS OF THE LOANS TAKEN FROM ALL THE FOUR COMPANIES VIZ DUKE, CASPER/ATHARV AND ANSH. ACCORDINGLY THE ADDITION MADE BY THE AO UNDER SECTION 68 OF THE A CT ON THAT COUNT TO THE TUNE OF RS 20,00,000/ - CANNOT BE SUSTAINED. CONSEQUENTLY, THE ADDITION OF RS 27,559/ - MADE UNDER SECTION 37(1) OF THE ACT ON ACCOUNT OF DISALLOWANCE OF INTEREST ON THE SAID AMOUNT OF RS 20,00,000 ALSO CANNOT BE SUSTAINED. IN GROUND NO. 4, THE ASSESSEE HAD CHALLENGED THE ADDITION OF ` 20 LAKHS U/S. 68 ON ACCOUNT OF SHARE APPLICATION MONEY RECEIVED FROM THE FOUR PARTIES. AS REITERATED, THE ASSESSEE ALSO HAD PLACED ON RECORD THE EVIDENCE AS WELL AS COPY OF INCOME - TAX RETURNS OF THE S HARE APPLICANTS, SHARE CERTIFICATES, RETURN OF ALLOTMENT OF SHARES, ROC FILINGS, BOARD RESOLUTIONS OF INVESTOR COMPANIES, BANK STATEMENT OF INVESTORS FROM WHERE SHARE APPLICATION MONEY WAS RECEIVED BY APPELLANT COMPANY ETC. APPELLANT HAS ALSO FILED COPY OF THE REPORT OF 8 VALUATION ON EQUITY SHARES OF THE ASSESSEE COMPANY AS ON 1ST JUNE, 2008 PREPARED BY SARA & ASSOCIATES, CHARTERED ACCOUNTANTS ACCORDING TO WHICH ESTIMATED VALUE PER SHARE IS RS. 89.88/ - JUSTIFYING THE VALUE AT WHICH SHARES WERE ISSUED. DETAI LS OF SHARE APPLICATION MONEY 2. TRIANGULAR INFOCOM LTD. (EARLIER KNOWN AS LEXUS INFOTECT LTD.) DETAILS OF SHARE APPLICATION DURING THE YEAR 8 8 KEEPING IN VIEW ALL THESE EVIDENCE IT CANNOT BE HELD THAT THE ASSESSEE DID NOT ESTABLISH THE IDENTITY O F THE SHARE APPLICANTS. IF IT IS SO, THEN THE LAW AS PRONOUNCED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT V. LOVELY EXPORTS P. LTD. J20091 319 ITR (ST.) IS CLEAR THAT IF THE SHARE APPLICATION MONEY - IS RECEIVED BY THE ASSESSEE - COMPANY FROM ALLEGED BOGU S SHAREHOLDERS WHOSE NAMES ARE GIVEN TO THE ASSESSING OFFICER, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENT IN ACCORD ANCE WITH LAW, BUT THE SAME CANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE. REVENUE HAS ALL THE P OWER AND WEREWITHAL TO TRACE THE PERSON. AO OUGHT TO HAVE ISSUED NOTICE U/S 133(6) OR SUMMONS U/S 131 TO SHARE APPLICANT COMPANIES TO SUBSTANTIATE HIS FINDINGS IN RESPECT OF BANK ACCOUNT DISCREPANCY AT THIRD AND FOURTH LEVEL BEFORE DRAWING CONCLUSIONS. MER ELY BECAUSE THE AO HAS NOT FULFILLED HIS DUTY TO SHOW HOW THE COMPANIES ARE BOGUS OR THEIR R ELATIONSHIP WITH SHRI PRAVIN KUMAR JAM, ADDITION U/S 68 CANNOT BE JUSTIFIED IN HANDS OF THE APPELLANT. FURTHER THE APPELLANT HAS ALSO INVITED ATTENTION TO THE RULIN G OF HON'BLE MUMBAI TRIBUNAL IN THE CASE OF ACIT VS M/S CAGANDEEP INFRASTRUCTURE PVT LTD (2014 - TIOL - 656 ITAT - MUM) WHEREIN IT HAS BEEN HELD THAT NO ADDITION CAN BE MADE U/S 68 FOR HUGE SHARE PREMIUM RECEIVED BY THE ASSESSEE AS IT IS A PREROGATIVE OF THE BOA RD OF DIRECTORS OF THE COMPANY TO DECIDE THE PREMIUM AMOUNT AND IT IS THE WISDOM OF THE SHAREHOLDERS WHETHER THEY WANT TO SUBSCRIBE TO 8 SUCH A HEAVY PREMIUM AND THE REVENUE AUTHORITIES CANNOT QUESTION THE CHARGING OF SUCH HUGE PREMIUM AND THE REVENUE CANNOT QUESTION THE CHARGING OF SUCH HUGE PREMIUM WITHOUT ANY BAR FROM ANY LEGISLATED LAW OF LAND. FURTHER ONCE THE INITIAL BURDEN OF PROOF HAS BEEN SUCCESSFULLY DISCHARGED BY THE ASSESSEE EVEN IF IT IS HELD THAT EXCESS PREMIUM HAS BEEN CHARGED IT DOES NOT BECOM E INCOME AS IT IS A CAPITAL RECEIPT. IN VIEW OF THE ABOVE AND BASED ON THE FACTS IN THE CASE ON HAND, I FIND THAT THE APPELLANT HAS INDEED PROVEN THE GENUINENESS OF THE SHARE APPLICATION MONEY RECEIVED FROM ALL THE FOUR COMPANIES VIZ KUSH, LEXUS, VANGUARD &YASH. ACCORDINGLY THE ADDITION MADE BY THE AO UNDER SECTION 68 OF THE ACT ON THAT COUNT TO THE RUNE OF RS 20,00,000/ - CANNOT BE SUSTAINED. 6.3.3 AS REGARDS JUSTIFIABILITY OF ABOVE ADDITIONS FROM LEGAL POINT OF VIEW, IT MAY BE WORTHWHILE TO CONSIDER VARI OUS JUDICIAL PRONOUNCEMENTS. A. 1 LEGAL POSITION AS TO WHETHER AO CAN MAKE ANY ADDITION MERELY ON THE BASIS OF INFORMATION RECEIVED FROM THE DGIT(INV) . IN THIS REGARD, THERE ARE VARIOUS JUDICIAL PRONOUNCEMENTS WHICH LAYS DOWN THE RATI O AS TO WHETHER THE PUR CHASES ARE IN FACT REAL OR NOT AND WHETHER THEY ARE BOGUS OR NOT IS A QUESTION OF FACT AND MUST BE DECIDED ACCORDINGLY AND NOT MERELY ON THE BASIS OF ASSUMPTIONS AND PRESUMPTIONS. (I) IN THE CASE OF SHEO NATH SINGH V. APPELLATE ASSTT. CIT [19711 82 ITR 147 IT H AS BEEN HELD THAT THE WORDS REASON TO BELIEVE' SUGGEST THAT THE BELIEF MUST BE THAT OF AN HONEST AND REASONABLE PERSON BASED UPON REASONABLE GROUNDS AND THE ITO MAY ACT ON DIRECT OR CIRCUMSTANTIAL EVIDENCE BUT NOT ON MERE SUSPICION, GOSSIP OR RUMOUR. THE I TO WOULD BE ACTING WITHOUT ACTING WITHOUT JURISDICTION IF THE REASON FOR HIS BELIEF THAT THE CONDITIONS ARE SATISFIED DOES NOT EXIST OR IS NOT MATERIAL OR RELEVANT TO THE BELIEF REQUIRED BY THE SECTION. THE COURT CAN ALWAYS EXAMINE THIS ASPECT THOUGH THE D ECLARATION OR SUFFICIENCY OF THE REASONS FOR THE BELIEF CANNOT BE INVESTIGATED BY THE COURT. (II) IN THE CASE OF BABULAL C. BORANA V. ITO (2006) 282 ITR 251 (BOM)(HC) IT HAS BEEN HELD THAT THE ASSESSEE HAS RECORDED THE TRANSACTION RELATING TO 50 M.TS. OF HDPE I N THE REGULARLY MAINTAINED BOOKS OF ACCOUNT AND THE ASSESSEE HAS OFFERED EXPLANATION REGARDING THE NATURE AND SOURCE OF INVESTMENT BUT THE SAME WAS NOT ACCEPTED. HOWEVER, BOOKS OF ACCOUNT WERE NOT REJECTED. IDENTITY OF VENDOR WAS DISCLOSED, SOURCE OF INVES TMENT WAS EXPLAINED. HELD, AMOUNTS COULD NOT BE ADDED AS UNEXPLAINED INVESTMENT ONLY BECAUSE THE VENDOR DENIED THE TRANSACTION. THE COURT HELD THAT THOUGH THE ASSESSEE'S CONTENTION THAT HE HAD NO BANK ACCOUNT WAS FOUND TO BE FALSE, THE 8 DISALLOWANCE WAS NOT JUSTIFIED. AND THE FACT THAT SALES TAX WAS NOT PAID BY THE PARTY WHO SOLD THE GOODS DOES NOT AFFECT THE GENUINENESS OF TRANSACTION. (III) IN THE CASE OF ACIT V. KISHANLAL JEWELS (P.) LTD. (2012) 147 TTJ 308 (DEL.) (TRIB.) IT HAS BEEN HELD THAT THE ASSESSEE WHI LE FURNISHING NECESSARY INFORMATION REGARDING THE TRANSACTIONS AND THE AFORESAID PARTIES LIKE PURCHASE BILLS ISSUED AGAINST GOODS PURCHASED, SALES - TAX REGISTRATION NUMBERS OF THE PARTIES, PANS, THEIR CONFIRMATIONS AND BANK STATEMENTS SHOWING THE DEBIT OF T HE AMOUNT PAID THROUGH ACCOUNT PAYEE CHEQUES TO THEM IN THE ACCOUNT OF THE ASSESSEE AND CREDITED IN THE BANK ACCOUNT OF SELLERS, HAD DISCHARGED ITS PRIMARY ONUS, THEREAFTER THE ONUS SHIFTED ON THE DEPARTMENT TO REBUT THE SAME .ADDITION UNDER SECTION 69C WAS HELD TO BE NOT JUSTIFIED. (IV) IN THE CASE OF G. G. DIAMOND INTERNATIONAL V DY. CIT (2006) 104 TTJ 809 (MUM.) (TRIB.) IT HAS BEEN HELD THAT IT IS NOT CASE OF THE REVENUE THAT THE ASSESSEE IS NOT MAINTAINING BOOKS OF ACCOUNT. THE PURCHASES ARE RECORDED IN T HE BOOKS OF ACCOUNT. PAYMENTS ARE MADE BY CHEQUE TO THE IMMEDIATE PURCHASERS. THEY ACCEPTED AND CONFIRMED THE SALE. TO HOLD OTHERWISE, THERE SHOULD BE SOME EVIDENCE IN THE POSSESSION OF THE REVENUE. SUSPICION, HOWEVER STRONG, CANNOT TAKE THE PLACE OF EVIDE NCE AND THAT ALONE CANNOT BE THE CRITERIA FOR DECIDING THE MATTER. (V) IN THE CASE OF DY.CIT V. KIRTILAL K ALIDAS JEWELLERS (P.) LTD. (2012) 54 SOT 529(CHENNAI)(TRIB.) IT HAS BEEN HELD THAT DURING ASSESSMENT PROCEEDINGS, ASSESSING OFFICER FOUND THAT FOR SOME O F PURCHASES EFFECTED BY ASSESSEE, NO DETAILS OR ADDRESS OF VENDORS WERE AVAILABLE IN PURCHASE VOUCHERS. HE, THEREFORE, CONSIDERED SUCH PURCHASES TO BE NON - GENUINE AND AN ADDITION WAS MADE ON THAT ACCOUNT. SINCE PURCHASES WERE RECORDED IN BOOKS OF ACCOUNT O F ASSESSEE AND WERE ALSO SHOWN IN ITS STOCK, IN SUCH CIRCUMSTANCES MERELY BECAUSE THOSE PURCHASES DID NOT CARRY FULL ADDRESSES OF VENDORS, COULD NOT BE A REASON TO TREAT THE SAID PURCHASES AS UNEXPLAINED. THEREFORE, IMPUGNED ADDITION MADE BY ASSESSING OFFI CER WAS TO BE DELETED. A.2. MERE SUSPICION, NO MATTER HOWSOEVER STRONG, IS NOT SUFFICIENT TREAT THE PURCHASES AS BOGUS. RELIANCE IS PLACED ON THE FOLLOWING JUDGMENTS: (I) DY. CIT V. ADINATH INDUSTRIES [2001] 252 ITR 476/ [20021 120 TAXMAN 822 (GUJ.) IN THIS CASE IT WAS HELD THAT ASSESSING OFFICER OBSERVED THAT PURCHASES MADE BY ASSESSEE FROM 'CI' WERE FAKE AND LATTER WAS ONLY A BILLING AGENT, ITS S.T. REGISTRATION HAD BEEN CANCELLED AND PAYMENTS MADE BY BEARER CHEQUES TO PARTY WERE WITHDRAWN ON 8 SAME DAY ASS ESSEE HOWEVER, SUBMITTED ALL DETAILS LIKE BILLS, GATE PASS, RECEIPT NOTE, WEIGHT NOTE, LABORATORY REPORT, SAMPLE REPORT, TRUCK NUMBER, ETC. ASSESSING OFFICER HAD HIMSELF ACCEPTED EXISTENCE OF 'GI' IN ANOTHER CASE FOR ASSESSMENT YEAR 1985 - 86 - WHETHER SIN CE ASSESSEE HAD PRODUCED ALL RELEVANT MATERIALS TO SHOW PURCHASE OF MATERIALS AND THEIR USE IN PRODUCTION, TRIBUNAL WAS JUSTIFIED IN DELETING ADDITION MADE - HELD, YES (II) IN THE CASE OF BABULAL C. BORANA V. ITO (2006) 282 ITR 231 (BOM)(HC), IT WAS HELD THAT WHERE THE ASSESSEE HAS RECORDED THE TRANSACTION RELATING TO 50 M.TS. OF HDPE IN THE REGULARLY MAINTAINED BOOKS OF ACCOUNT AND THE ASSESSEE HAS OFFERED EXPLANATION REGARDING THE NATURE AND SOURCE OF INVESTMENT BUT THE SAME WAS NOT ACCEPTED. HOWEVER, BOOKS OF ACCOUNT WERE NOT REJECTED. IDENTITY OF VENDOR WAS DISCLOSED, SOURCE OF INVESTMENT WAS EXPLAINED. HELD, AMOUNTS COULD NOT BE ADDED AS UNEXPLAINED INVESTMENT ONLY BECAUSE THE VENDOR DENIED THE TRANSACTION. THE COURT HELD THAT THOUGH THE ASSESSEE'S CONTENT ION THAT HE HAD NO BANK ACCOUNT WAS FOUND TO BE FALSE, THE DISALLOWANCE WAS NOT JUSTIFIED. AND THE FACT THAT SALES TAX WAS NOT PAID BY THE PARTY WHO SOLD THE GOODS DOES NOT AFFECT THE GENUINENESS OF TRANSACTION. (III) IN THE CASE OF ACI T V S . KISHAN L AL JEWELS (P. ) LTD. (2012) 147 TTJ 308 (DEL.) (TRIB.), IT WAS HELD THAT WHERE THE ASSESSEE WHILE FURNISHING NECESSARY INFORMATION REGARDING THE TRANSACTIONS AND THE AFORESAID PARTIES LIKE PURCHASE BILLS ISSUED AGAINST GOODS PURCHASED, SALES - TAX REGISTRATION NUMBERS OF THE PARTIES, PANS, THEIR CONFIRMATIONS AND BANK STATEMENTS SHOWING THE DEBIT OF THE AMOUNT PAID THROUGH ACCOUNT PAYEE CHEQUES TO THEM IN THE ACCOUNT OF ASSESSEE AND CREDITED IN THE BANK ACCOUNT OF SELLERS, HAD DISCHARGED ITS PRIMARY ONUS, THEREAFTER THE O NUS SHIFTED ON THE DEPARTMENT TO REBUT THE SAME .ADDITION UNDER SECTION 69C WAS HELD TO BE NOT JUSTIFIED. (IV) IN THE CASE OF G. G. DIAMOND INTERNATIONAL V DY. CIT (2006) 104 TTJ 809 (MUM.) (TRIB.) IT WAS HELD THAT IT IS NOT CASE OF THE REVENUE THAT THE ASSESSE E IS NOT MAINTAINING BOOKS OF ACCOUNT. THE PURCHASES ARE RECORDED IN THE BOOKS OF ACCOUNT. PAYMENTS ARE MADE BY CHEQUE TO THE IMMEDIATE PURCHASERS. THEY ACCEPTED AND CONFIRMED THE SALE. TO HOLD OTHERWISE, THERE SHOULD BE SOME EVIDENCE IN THE POSSESSION OF THE REVENUE. SUSPICION, HOWEVER STRONG, CANNOT TAKE THE PLACE OF EVIDENCE AND THAT ALONE CANNOT BE THE CRITERIA FOR DECIDING THE MATTER. (V) IN THE CASE OF DY.CIT V. KIRTILAL KALIDAS JEWELLERS (P.) LTD. (2012) 54 SOT 529(CHENNAI)(TRIB.), IT WAS HELD THAT WHERE DURING ASSESSMENT PROCEEDINGS, ASSESSING OFFICER FOUND THAT FOR SOME OF PURCHASES EFFECTED BY ASSESSEE, NO DETAILS OR ADDRESS OF VENDORS WERE AVAILABLE IN 8 PURCHASE VOUCHERS. HE, THEREFORE, CONSIDERED SUCH PURCHASES TO BE NON - GENUINE AND AN ADDITION W AS MADE ON THAT ACCOUNT. SINCE PURCHASES WERE RECORDED IN BOOKS OF ACCOUNT OF ASSESSEE AND WERE ALSO SHOWN IN ITS STOCK, IN SUCH CIRCUMSTANCES MERELY BECAUSE THOSE PURCHASES DID NOT CARRY FULL ADDRESSES OF VENDORS, COULD NOT BE A REASON TO TREAT THE SAID P URCHASES AS UNEXPLAINED. THEREFORE, IMPUGNED ADDITION MADE BV ASSESSING OFFICER WAS TO BE DELETED. A.3. FURTHER REFERENCE IS MADE TO VARIOUS JUDICIAL PRONOUNCEMENTS AND THERE OBSERVATIONS/ DECISIONS : - (I) IT HAS BEEN HELD BY VARIOUS COURTS THAT SUSPICIOU S CANNOT TAKE PLACE THE EVIDENCE FOR WHICH REFERENCE IS MADE TO THE UNDER MENTIONED JUDICIAL PRONOUNCEMENTS A. DCIT V. SHRI RAJEEV G. KALATHIL, (MUM) (TRIB) (ITA NO. 6727/M/2012 DT.20/8/2014 B. K.P. VARGHESE V. ITO, (1981) 131 ITR 579 (SC); C. CIT V. RO M AN & - CO. , (1968) : 67 ITR 11 (SC); D. CIT V. CALCUTTA DISCOUNT CO. LTD.', (1973) 91 ITR 8 (SC); E. UMACHARAN SHAW & BROS V. CIT', (1959) 37 ITR 271 (SC) (VI) VARIOUS COURTS HAVE HELD THAT OBSERVATION OF THIRD PARTY CANNOT BE BASIS OF ADDITION. SATISFACTION OF AO IS MUST F OR WHICH REFERENCE IS MADE TO THE FOLLOWING CASES : A. ITO V/S PERMANAND [2008 , 25 SOT 11] B. ITO V. VINOD KUMAR, PROP. VINOD BROTHERS. C. SRIGANGANAGAR, [ITA NO. 623/JODH. OF 2005 D. I TO V/S ARORA ALLOYS LTD. [2012] [12 ITR (TRIB) 263] (VII) WHERE AO RELIED ON THIRD PARTY INFORMATION WITHOUT CROSS - EXAMINATION, NO ADDITION CAN BE MADE ON THE BASIS OF SAME AS HELD IN THE FOLLOWING CASES : A. KISHAN CHAND CHELLA RAM V. CIT [1980] 125 ITR 713 (SC) B. MARNEEDI SATYAM V/S MASIMUKKULA C. VENKATASWAMI[ AIR 1949 MAD 689] D. ITO V / S PERMANAND [2008 25 SOT 11] B. LEG A L POSITION - FURTHER, IT MAY BE MENTIONED THAT UNDER THE 8 INCOME TAX ACT, IF AN AMOUNT IS CREDITED INTO THE BOOKS OF ACCOUNT HELD BY THE ASSESSEE AND NO EXPLANATION IS GIVEN OR WHERE SUCH EXPLANATION GIVEN BY THE ASSESSE E FOR THE AMOUNT CREDITED IS NOT ACCEPTABLE OR SATISFACTORY IN THE OPINION OF THE ASSESSING OFFICER, THE AMOUNT IS DEEMED TO BE AN UNDISCLOSED INCOME WHICH WOULD FORM PART OF THE TOTAL INCOME CHARGEABLE UNDER THE INCOME TAX ACT. APPLICABILITY OF SECTION 6 8 OF THE ACT CAN BE MADE APPLICABLE IN THE FOLLOWING CASES: - A) WHEN THE ASSESSEE FAILS TO PROVE THE GENUINENESS OF THE TRANSACTION THAT HAS ENTERED INTO HIS BOOK OF ACCOUNTS. B) WHEN THERE IS NO SATISFACTORY EXPLANATION PROVIDED ON THE PART OF THE ASSESSEE TO T HE ASSESSING OFFICER WITH RESPECT TO THE AMOUNT CREDITED INTO THE ACCOUNTS. C) WHEN THERE ARE DOCUMENTARY EVIDENCES REQUIRED TO SUPPORT THE VALIDITY OF THE AMOUNT CREDITED BUT THERE ARE NO SUCH DOCUMENTS FURNISHED BY THE ASSESSEE. EXPLANATION AS TO NATURE AND SOURCE OF TRANSACTION. WHERE ANY SUM IS FOUND CREDITED IN THE BOOK OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF T HE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME - TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR (I) IN THE CASE OF THE UNSECURED LOANS OBTAINED BY THE ASSESSEE FROM THE MONEY LENDERS IT IS THE DUTY OF THE ASSESSEE TO P ROVE THE IDENTITY, CAPACITY AND THE GENUINENESS OF THE TRANSACTION DONE. IT IS ALSO HIS DUTY TO FILE CONFIRMATION WITH THE PAN WHEN THE LENDER IS ASSESSED TO TAX. THIS WAS HELD IN CIT V. ORISSA CORPORATION PRIVATE LIMITED (159 ITR 78) (SC). THE ASSESSEE MA Y NOT PROVE THE SOURCE FOR THE SOURCE OF INCOME ACQUIRED. THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS ORISSA CORPORATION (P) LTD. 159 ITR 78 (SC) HELD AS FOLLOWS: '13. IN THIS CASE, THE ASSESSEE HAD GIVEN THE NAMES AND ADDRESSES OF THE ALLEGED CREDITOR S. IT WAS IN THE KNOWLEDGE OF THE REVENUE THAT THE SAID CREDITORS WERE INCOME TAX ASSESSEES. THEIR INDEX NUMBERS WERE IN THE FILE OF THE REVENUE. THE REVENUE, APART FROM ISSUING NOTICES UNDER S. 131 AT THE INSTANCE OF THE ASSESSEE, DID NOT PURSUE THE MATTE R FURTHER. THE REVENUE DID NOT EXAMINE THE SOURCE OF INCOME OF THE SAID ALLEGED CREDITORS TO FIND OUT WHETHER THEY WERE CREDITWORTHY OR WERE SUCH WHO COULD ADVANCE THE ALLEGED LOANS. THERE WAS NO EFFORT MADE TO PURSUE THE SO - CALLED ALLEGED CREDITORS. IN TH OSE CIRCUMSTANCES, THE ASSESSEE COULD NOT DO ANYTHING FURTHER.' 8 (II) IT HAS BECOME FAIRLY SETTLED LAW THAT ASSESSEE IS NOT REQUIRED TO SATISFY THE ASSESSING AUTHORITY OF THE SOURCE OF SOURCE. IT HAS BEEN HELD BY THE HON'BLE COURTS WHERE THE TRANSACTIONS HAVE BE EN ROUTED THROUGH BANK ACCOUNT, ASKING SOURCE OF SUCH DEPOSITS WILL AMOUNT TO ASKING SOURCE OF THE SOURCE WHICH IS NOT PERMITTED UNDER THE LAW AS HELD BY THE HON'BLE HIGH COURT OF PATNA IN THE CASE OF SAROGI CREDIT CORPN. VS. CIT 1975 CTR (PAT) 1: (1976) 1 03 ITR 344 (PAT) AND THE DECISION OF AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF ROHINI BUIILDERS VS. DCIT (2002) 76 TTJ (AHD) 521 : (2001) 117 TAXMAN 25 (AHD)(MAG). ONCE IT IS ESTABLISHED THAT THE AMOUNT HAS BEEN INVESTED BY A PARTICULAR PERSON, BE HE IS A FAMILY MEMBER OR CLOSE RELATIVE THEN THE RESPONSIBILITY OF THE ASSESSEE IS OVER. THE ASSESSEE CANNOT ASK THAT PERSON, WHO ADVANCED THE LOAN, WHETHER MONEY ADVANCED IS PROPERLY TAXED OR NOT. (III) CAPACITY OF CREDITORS TO ADVANCE MONEY: TO MAKE ADDITIO N OF ANY LOAN AMOUNT, THE CAPACITY OR THE CREDITWORTHINESS OF THE CREDITOR IS TO BE SEEN AND ONCE THE CREDITWORTHINESS OF THE CREDITOR IS SUBSTANTIATED BY THE APPELLANT, NO ADDITION CAN BE MADE UNLESS THERE IS ANY CONCRETE MATERIAL TO COUNTER THE SAME. A. IT HAS BEEN HELD BY THE HON'BLE HIGH COURT OF MADHYA PRADESH IN THE CASE OF CIT VS. VAIBHAV COTTON (P) LTD. AS REPORTED IN [2013] 36 TAXMANN.COM 429 (MADHYA PRADESH) WHERE ALL THE FULL PARTICULARS, INCLUSIVE OF CONFIRMATION W ITH NAME, ADDRESS AND PAN NUMBER, COPY OF INCOME TAX RETURNS, BALANCE SHEET, PROFIT AND LOSS ACCOUNT AND COMPUTATION OF TOTAL INCOME IN RESPECT OF ALL CREDITORS/LENDERS WERE FURNISHED AND WHEN IT HAD BEEN FOUND THAT LOANS WERE FURNISHED THROUGH CHEQUES AND LOAN ACCOUNT WERE DULY REFLECTED IN BALANCE SHEET, THE HON'BLE COURT HELD THAT ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITION. B. THE HON'BLE HIGH COURT OF RAJASTHAN, IN THE CASE OF CIT VSJAIKUMARBAKLIWAL AS REPORTED IN [2014] 45 TAXMANN.COM 203 (RAJASTHAN) HAS HELD THAT WHERE 'UNSECURED LOAN RAISED BY ASSESSEE FROM RELATIVES WAS ADDED IN INCOME OF ASSESSEE ON GROUND THAT NONE OF CREDITORS WERE ABLE TO PROVE SOURCE OF AMOUNT ADVANCED TO ASSESSEE AND IMMEDIATELY BEFOR E GRANT OF LOAN BY THEM CASH WAS DEPOSITED IN THEIR ACCOUNTS - HOWEVER, IT WAS ADMITTED BY ASSESSEE OFFICER THAT ALL CREDITORS WERE ASSESSED TO INCOME TAX AND THEY HAD PROVIDED CONFIRMATION AS WELL AS PAN - MOREOVER, ALL PAYMENTS WERE THROUGH ACCOUNT PAYEE CHEQUES AND MOST OF CASH CREDITORS APPEARED BEFORE ASSESSING OFFICER AND WERE EXAMINED ON OATH - WHETHER SINCE THERE WAS NO CLINCHING EVIDENCE NOR ASSESSING OFFICER HAD BEEN ABLE TO PROVE THAT MONEY ACTUALLY BELONGED TO NONE BUT TO ASSESSEE 8 HIMSELF, ACTION OF ASSESSING OFFICER APPEARED TO BE BASED ON MERE SUSPICION AND, THUS, ADDITION REQUIRED TO BE DELETED - HELD, YES' C. IT HAS BEEN HELD BY THE ITAT LUCKNOW BENCH IN THE CASE OF VISHNU JAISWAL VS CIT(A) AS REPORTED IN (2012] 23 TAXMANN.COM 374 (LUCK.) :SECTION 68 OF THE INCOME - TAX ACT, 1961 - CASH CREDITS - ASSESSMENT YEAR 2006 - 07 - ASSESSEE RECEIVED UNSECURED LOANS FROM THREE PARTIES THROUGH ACCOUNT PAYEE CHEQUES - ASSESSEE PROVED IDENTITY, GENUINENESS OF TRANSACTIONS AND ALSO CREDITWORTHINESS OF CREDITORS BY PRODUCING THEIR RESPECTIVE BANK ACCOUNTS - ASSESSING OFFICER DID NOT EXAMINE CREDITORS AND MADE ADDITION ON ASSUMPTION THAT THEY WOULD NOT HAVE SAVED ANY MONEY TO ADVANCE LOANS - WHETHER IT WAS NOT A FIT CASE TO MAKE ADDITION UNDER SECTION 68 - FIELD, YES D. I T HAS BEEN HELD BY THE ITAT MUMBAI BENCH 'E' IN THE CASE OF ASSISTANT COMMISSIONER OF INCOME - TAX V. SANJAY M. JHAVERI* AS REPORTED IN 2015] 61 TAXMANN.COM 28 (MUMBAI - TRIB.) WHER E ASSESSEE HAD TAKEN UNSECURED LOAN AND DULY FILED CONFIRMATION LETTERS OF CREDITORS, COPIES OF THEIR BANK ACCOUNTS AND ACKNOWLEDGEMENTS OF RETURNS OF INCOME FILED BY THEM, SAME COULD NOT BE TREATED AS UNDISCLOSED INCOME OF ASSESSEE E. IN THE CASE OF CIT VS SHALIMAR 13UILDWELLPVT LTD IT HAS BEEN HELD BY THE HON'BLE HIGH COURT OF ALLAHABAD [2013] 40 TAXMANN.COM 283 (ALLAHABAD) THAT WHERE ASSESSEE HAD SHOWN CERTAIN UNSECURED LOAN FROM 'L HUF - ASSESSING OFFICER MADE ADDITION OF THAT AMOUNT IN HANDS OF ASSESSEE - WHETHER SINCE IN INSTANT CASE MONEY HAD COME AT ALL LEVEL THROUGH BANKING CHANNEL AND CREDITWORTHINESS AND IDENTITY OF D ONORS/CREDITORS HAD BEEN PROVED, NO ADDITION COULD BE MADE IN HANDS OF ASSESSEE. F. ANOTHER AS PECT TO BE SEEN HERE IS THAT S H RI PRAVIN JAIN HAS MADE GENERAL STATEMENT WITH REGARD TO PROVIDING ENTRY THROUGH HIS CONCERNS AND NOWHERE IN HIS STATEMENT MADE ANY SPECIFIC ALLEGATION THAT HE HAD PROVIDED ANY ENTRY TO THE APPELLANT COMPANY EITHER IN FORM OF LOAN OR SHARE APPLICATION MONEY. IN THE PRESENT CASE THE APPELLANT HAD PRODUCED BEFORE AO ALL THE RELEVANT DETAILS TO JUSTIFY THAT SHARE CAPITAL AS WELL AS LOAN WERE RECEIVED FROM THE EXISTING IDENTIFIABLE PARTIES, THE TRANSACTIONS WERE DONE THROUGH BANKI NG CHANNEL AND THE RELEVANT PARTY HAD OWN SUFFICIENT FUNDS TO GIVE LOAN OR SHARE APPLICATION MONEY TO THE APPELLANT WHICH WAS NOT CONTROVERTED BY THE AO BY RELIABLE EVIDENCES. 6.3.4. THUS, IT HAS TO BE SAID THAT THE APPELLANT HAD DONE EVERYTHING IN ITS PO WER TO PROVE THE 3 INGREDIENTS REQUIRED TO PROVE THE 8 SATISFACTORY NATURE OF THE LOAN TRANSACTIONS. IN THESE CIRCUMSTANCES, THE ONUS HAD SHIFTED TO THE AO. IF THE AO WAS STILL NOT SATISFIED, HE HAD THE OPTION OF MAKING INQUIRIES FROM THE ALLEGED LENDERS BY SUMMONING THEM. HOWEVER, AS SEEN FROM THE ASSESSMENT ORDER, HE DID NOT ANY SUCH THING. FURTHER, IF THE AO WAS NOT SATISFIED WITH WHAT HAD BEEN GIVEN TO HIM BY THE APPELLANT, HE WAS DUTY BOUND TO SPECIFY WHAT MORE MATERIAL HE WANTED THE APPELLANT TO FURNISH . THE AO NEVER ASKED FOR ANY FURTHER MATERIAL, THOUGH TIME AND AGAIN THE APPELLANT ASKED IN THEIR SUBMISSIONS. THIS LEADS TO THE INESCAPABLE CONCLUSION THAT THE AO COULD NOT THINK OF ANY FURTHER MATERIAL TO ASK FOR AND PROCEEDED TO REJECT THE APPELLANT'S C LAIMS, RELYING UPON THE INFORMATION/MATERIAL, WHICH HE NEVER EVEN BROUGHT TO THE NOTICE OF THE APPELLANT FOR ANY REBUTTAL. THE UNEQUIVOCAL CONCLUSION IS THAT ALL THE 3 INGREDIENTS HAVING BEEN SATISFIED, THE IMPUGNED LOANS HAVE TO BE TREATED AS EXPLAINED SA TISFACTORILY AND THE AO WAS NOT JUSTIFIED IN HAVING DISREGARDED OVERWHELMINGLY SUPPORTIVE EVIDENCE. NO COGENT MATERIAL WAS ADDUCED BY HIM TO SHOW THAT LOANS WERE UNEXPLAINED. THEREFORE, THE IMPUGNED ADDITIONS, MADE IN THE ASSESSMENT ORDER HAS TO FAIL ON SE VERAL COUNTS - (1) RELIANCE ON EVIDENCE THAT IS TOTALLY INADEQUATE (2) FAILURE TO MAKE AVAILABLE ANY INCRIMINATING MATERIAL (REPORTS, STATEMENTS ETC.) F O R MIN G B AS IS F O R ACTION BY THE AO; (3) FAILURE TO GIVE DUE OPPORTUNITY TO THE APPELLANT TO CROSS EXAMI NE WITNESSES, WHOSE STATEMENT MIGHT HAVE BEEN RELIEF UPON; AND (4) FAILURE TO RECOGNIZE THE SATISFACTORY NATURE OF THE EXPLANATION /EVIDENCE TENDERED BY THE APPELLANT TO EXPLAIN IDENTITY OF CREDITORS, CREDITWORTHINESS OF THE CREDITORS AND THE GENUINENESS OF THE LOAN TRANSACTIONS. ACCORDINGLY, THE ADDITION OF RS 20,00,000/ - AS SHARE APPLICATION MONEY IS DIRECTED TO BE DELETED. SIMILARLY ANOTHER ADDITION OF RS 20,00,000/ - WITH REGARD TO THE LOAN IS ALSO DIRECTED TO BE DELETED BY THE AO. FURTHER, THE CONSEQUEN TIAL DISALLOWANCE OF INTEREST OF RS 27,559/ - ON THE SAID LOAN IS ALSO DIRECTED TO BE DELETED. (B) ITA NO. 2980/MUM/2017 ASSESSMENT YEAR 2011 - 12: - 6.3.1 I HAVE CONSIDERED THE FACTS OF THE CASE AS WELL AS ASSESSMENT ORDER PASSED BY THE AND THE SUBMISSION S MADE BY THE APPELLANT. AN ANALYSIS OF THE JUDICIAL PRECEDENTS ON THIS ISSUE YIELDS THE FOLLOWING PROPOSITIONS OF LAW IN THE CONTEXT OF S. 68 OF THE IT ACT. THE ASSESSEE HAS TO PRIMA FACIE PROVE (1) THE IDENTITY OF THE CREDITOR/ SUBSCRIBER; (2) THE GENUIN ENESS OF THE TRANSACTION, NAMELY, WHETHER IT HAS BEEN TRANSMITTED THROUGH BANKING OR OTHER INDISPUTABLE CHANNELS; (3) THE CREDITWORTHINESS OR FINANCIAL STRENGTH OF THE CREDITOR/ SUBSCRIBER; (4) IF RELEVANT DETAILS OF CONFIRMATION, BANK 8 STATEMENT, COPY OF R ETURN OF INCOME FILED, PAN CARD, AUDITED STATEMENT OF ACCOUNTS ALONG WITH COPIES OF SHARE APPLICATION FORMS, ETC., IT WOULD CONSTITUTE ACCEPTABLE PROOF OR ACCEPTABLE EXPLANATION BY THE ASSESSEE; IT HAS BEEN JUDICIAL POSITION THAT WHERE ASSESSEE BROUGHT EVI DENCE ON RECORD ESTABLISHING THAT SHARE APPLICANTS WERE NOT FICTITIOUS PERSONS AND, MOREOVER; THEY PAID MONEY BY CHEQUES, NO ADDITION COULD BE MADE TO ASSESSEES INCOME IN RESPECT OF SHARE APPLICATION MONEY. THE AO IN THIS CASE HAS PRIMARILY PLACED RELIANCE ON THE SEARCH CONDUCTED BY THE DDIT(INV) - 111(2) MUMBAI IN THE CASE OF SHRI PRAVEEN KUMAR JAM. LD AO HAS MADE THE ADDITION U/S 68 TOWARDS LOAN TAKEN BY THE APPELLANT FROM 4 PARTIES OF RS 40 LAKHS ON THE BASIS OF THIS INFORMATION RECEIVED FROM INVESTIGATION WING FROM SEARCH CONDUCTED IN THE CASE OF THIRD PARTY. HOWEVER AO HAS NOT MADE ANY FURTHER ENQUIRY TO CORROBORATE HIS FINDINGS. A PERUSAL OF THE DOCUMENTARY EVIDENCES BROUGHT ON RECORD BY THE APPELLANT SHOW THAT THE ONUS OF PROVING THE GENUINENESS OF TRA NSACTION, IDENTITY AND CAPACITY OF THE LENDERS HAS BEEN DISCHARGED BY THE APPELLANT. THE SAME IS EVIDENT FROM THE LIST OF DOCUMENTS SUBMITTED BY THE APPELLANT LE TTER DATED 7.12.2015 WITH RESPECT TO THE LENDERS OF THE UNSECURED LOANS. APPELLANT HAS PLACED O N THE RECORD OF THE AO COPIES OF ANNUAL AUDITED REPORTS, DIRECTORS REPORT PAN FORM 16A DEMONSTRATING FDS DEDUCTED ON INTEREST PAYMENTS MADE TO LENDERS, BANK STATEMENTS SHOWING PAYMENTS RECEIVED AND REPAYMENT OF LOAN MADE BY THE APPELLANT, LOAN CONFIRMATION S ETC. FROM THE DETAILS SUBMITTED IT CAN BE SEEN THAT THE PARTIES IE LENDERS HAVE MADE PAYMENTS FROM THEIR BANK ACCOUNTS THROUGH ACCOUNT PAYEE CHEQUES, THEREFORE THESE TRANSACTIONS CANNOT BE TREATED AS BOGUS. THE AO HAS NOT BEEN ABLE BRING ON RECORD ANY VA LID MATERIAL OR EVIDENCE TO DISCREDIT THE EVIDENCES AND EXPLANATION GIVEN BY THE APPELLANT OTHER THAN MERELY RELYING ON A BALD STATEMENT BY ALLEGED SHRIPRAVIN KUMAR JAIN AS RECORDED BY INVESTIGATION DEPARTMENT WITHOUT HIMSELF MAKING ANY EFFORTS TO BRING ON RECORD ANY VALID OR CORROBORATIVE EVIDENCE AGAINST THE PARTIES. THE AO HAS BEEN UNABLE TO DEMONSTRATE ANY RELATIONSHIP BETWEEN PKJ AND THE LENDERS. THE AO HAS BEEN UNABLE TO REFUTE THE CLEAR CUT AND COGENT EVIDENCE SUBMITTED BY THE APPELLANT AND AVAILABL E ON THE AO'S RECORD, TESTIFYING TO THE GENUINENESS OF THE LOANS. THE SOURCE OF THE SAID LOANS THUS STANDS PROVEN. AS HAS BEEN HELD IN SEVERAL DECISIONS OF SUPERIOR JUDICIAL AUTHORITIES (MURLIDHARLAHORIMAL V CIT [280 ITR 512 (GUJ)] , LABHCHANDBOHRA V ITO [ 219 ITR 571 (RAJ)] AND CIT V DWARKADHISH INVESTMENT PRIVATE LIMITED [299 ITR 268 (DEL)], THE 8 ASSESSEE CANNOT BE CALLED UPON TO PROVE THE SOURCE OF THE SOURCE OF HIS LOANS. 1 ANSH MERCHANDISE PVT .LTD. (EARLIER KNOWN AS NEW PLANET TRADING CO. PVT. LTD.) 8 8 THUS, AFTER CAREFUL CONSIDERATIONS OF THE ENTIRE MATERIAL ON RECORD, WHICH MAY ALSO BE EVIDENT FROM THE ABOVE GIVEN CHART, IT IS FOUND THAT THE APPELLANT HAS INDEED PROVEN THE GENUINENESS OF THE LOANS TAKEN FROM ALL THE PARTIES REFERRED ABOVE. ACCOR DINGLY THE ADDITION MADE BY THE AO UNDER SECTION 68 OF THE ACT ON THAT COUNT TO THE TUNE OF RS 40,00,000/ - UNDER THE HEADING LOAN AS CASH CREDIT CANNOT BE SUSTAINED. CONSEQUENTLY, THE ADDITION OF RS. 1,51,694/ - MADE UNDER SECTION 37(1) OF THE ACT ON ACCOUNT OF DISALLOWANCE OF INTEREST ON THE SAID AMOUNT ALSO CANNOT BE SUSTAINED. AS REITERATED, THE ASSESSEE ALSO HAD PLACED ON RECORD THE EVIDENCE AS WELL AS COPY OF INCOME - TAX RETURNS OF THE LOAN CREDITOR, ROC FILINGS, BOARDS RESOLUTIONS OF INVESTOR COMPANIES, BANK STATEMENT OF INVESTORS FROM WHERE LOAN MONEY WAS RECEIVED BY APPELLANT COMPANY ETC. REVENUE HAS ALL THE POWER AND ABILITY TO TRACE THE PERSON. AO OUGHT TO HAVE ISSUED NOTICE U/S 133(6) OR SUMMONS U/S 131 TO SHARE APPLICANT COMPANIES TO SUBSTANTIATE H IS FINDINGS IN RESPECT OF BANK ACCOUNT DISCREPANCY AT THIRD AND FOURTH LEVEL BEFORE DRAWING CONCLUSIONS. MERELY BECAUSE THE AO HAS NOT FULFILLED HIS DUTY TO SHOW HOW THE COMPANIES ARE BOGUS OR THEIR RELATIONSHIP WITH SHRIPRAVIN KUMAR JAM, ADDITION U/S 68 C ANNOT BE JUSTIFIED IN HANDS OF THE APPELLANT. 8 IN VIEW OF THE ABOVE AND BASED ON THE FACTS IN THE CASE ON HAND, I FIND THAT THE APPELLANT HAS INDEED PROVEN THE GENUINENESS OF THE LOAN CREDITORS. ACCORDINGLY THE ADDITION MADE BY THE AO UNDER SECTION 68 OF TH E ACT ON THAT COUNT TO THE TUNE OF RS 40,00,000/ - CANNOT BE SUSTAINED. SIMILARLY THE CONSEQUENTIAL DISALLOWANCE OF RS. 1,51,694/ - ALSO CANNOT BE SUSTAINED. 5. I NOTICE THAT THE LD CIT(A) HAS PASSED A DETAILED ORDER BY EXAMINING THE FACTS RELATING TO TH E ISSUES UNDER CONSIDERATION AND ALSO APPLYING THE LAW SETTLED BY HONBLE COURTS IN THIS REGARD. I NOTICE THAT THE REVENUE COULD NOT FURNISH ANY MATERIAL ON RECORD TO REBUT THE REASONING GIVEN BY LD CIT(A). UNDER THESE SET OF FACTS, I AM OF THE VIEW THAT THE ORDERS PASSED BY LD CIT(A) DO NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY I UPHOLD THE SAME IN BOTH THE YEARS UNDER CONSIDERATION. 6. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 31 . 8 . 2 01 7. SD/ - (B.R.BASKARAN) ACCOUNTANT MEMBER MUMBAI ; DATED : 31 / 8 / 20 1 7 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDE NT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) PS ITAT, MUMBAI