ITO, New Delhi V. M/s. Azeem Investment Pvt. Ltd, New Delhi

ITA 2992/DEL/2009

• Counselvise Citation: 299220114 RSA 2009
• Duration Of Justice: 2 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-07-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 26-06-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANUSHA KHURANA
• Assessee Lawyers: S C VASUDEVA; SACHIN VA SUDEVA CAS
• Keywords: Unexplained cash credit; Income from undisclosed sources; Opportunity of being heard; Question of law; Tax effect; Onus to prove
• Section: 131; 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A NEW DELHI) BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI B.K. HALDAR, ACCOUNTANT MEMBER I.T.A. NO.2991,2992,2993 & 2994/DEL/2009 ASSESSMENT YEAR : 2002-03,03-04,04-05 & 05-06 ITO, M/S AZEEM INVESTMENT PVT. LTD. WARD-2 (3), 4/100, SANT NIRANKARI COLONY, NEW DELHI. V. NEW DELHI. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AAACA AAACA AAACA AAACA- -- -1383 1383 1383 1383- -- -P PP P APPELLANT BY : SMT.ANUSHA KHURANA, SR. DR RESPONDENT BY : SHRI S.C. VASUDEVA & SHRI SACHIN VASUDEVA, C.AS. ORDER PER BENCH: THESE ARE FOUR APPEALS FILED BY THE REVENUE AGAINST THE COMB INED ORDER OF LD CIT(A) V, NEW DELHI FOR ASSESSMENT YEARS 2002-03, 03-04 , 04-05 & 05-06 RESPECTIVELY. FOR THE SAKE OF CONVENIENCE, ALL THESE APPEA LS HAVE BEEN DISPOSED OFF BY THIS COMMON ORDER. I.T.A. NO.2991/DEL/2009 ( I.T.A. NO.2991/DEL/2009 ( I.T.A. NO.2991/DEL/2009 ( I.T.A. NO.2991/DEL/2009 (A AA ASSESSMENT YEAR 2002 SSESSMENT YEAR 2002 SSESSMENT YEAR 2002 SSESSMENT YEAR 2002- -- -03): 03): 03): 03): 2. THE ORIGINAL RETURN OF INCOME FOR ASSESSMENT YEAR 2002 -03 DISCLOSING TOTAL INCOME OF `.89,750/- WAS FILED BY THE ASSESSEE ON 31.10. 2002. SUBSEQUENTLY, ON ITA NO22991 TO 2994/DEL/09 2 THE BASIS OF THE REPORT OF DIRECTOR OF INCOME TAX (INV.) , THE CASE WAS REOPENED AND NOTICE U/S 148 WAS ISSUED AFTER RECORDING THE REASONS IN WRITING. THE SAID NOTICE U/S 148 DATED 3.11.2006 WAS ISSUED AND SENT THROUGH SPEED POS T. IN RESPONSE TO THE ABOVE, THE ASSESSEE VIDE ITS LETTER DATED 6.1.2006 STATED THA T THE RETURN FILED ON 31.10.2002 MAY BE TAKEN AS THE RETURN FILED IN RESPONSE TO THE ABOVE NOTICE U/S 148 OF THE ACT. 3. THE INFORMATION WHICH WAS RECEIVED FROM THE INVESTIGAT ION WING RELATED TO CERTAIN ENTRY OPERATORS AND THE ASSESSING OFFICER SCRUTI NIZED THE BANK ACCOUNTS OF SUCH ENTRY PROVIDER TO ASCERTAIN THE AMOUNTS, IF ANY, T HAT THE ASSESSEE RECEIVED FROM SUCH ENTRY OPERATORS DURING THE RELEVANT PREVIOUS YEAR. T HE ASSESSING OFFICER NOTED THAT THE FOLLOWING ENTREES RELATED TO THE ASSESSEE :- - BANK BRANCH OF THE BANK INSTRUMENT NO. AMOUNT DATE CREDIT ENTRY COMING FROM THE ACCOUNT OF OBC KINGSWAY CAMP S798994 250000 17.09.2001 FAIR N SQUARE EXPORTS P. LTD. OBC KIN GSWAY CAMP S805120 250000 17.09,2001 SATWANT SINGH SODHI CONST. P. LTD. OBC KINGSWAY CAMP 802665 250000 20.09.2001 ETHNIC CREATIONS P. LTD. OBC KINGSWAY CAMP 868525 250000 20.09.2001 MV MARKETING P. LTD. OBC KINGSWAY CAMP 25023 200000 06.10.2001 BALDEV HARISH ELECTRICALS P. LTD. OBC KINGSWAY CAMP 274592 200000 06.10.2001 MAESTRO MARKETING &ADVERTISING. ITA NO22991 TO 2994/DEL/09 3 OBC KINGSWAY CAMP 798907 100000 08.10.2001 POLO LEASING & FINANCE P. LTD. 4. IT WAS ALSO NOTED BY THE ASSESSING OFFICER THAT DURI NG THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE RECEIVED SHARE APPLICATION M ONEY AMOUNTING TO `.20 LAKHS. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO F URNISH DETAILS WITH REFERENCE TO SUCH SHARE APPLICATION MONEY. AS PER THE DETAI LS FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER NOTED THAT BESIDES THE COMPAN IES MENTIONED EARLIER, TWO MORE COMPANIES, NAMELY ,M/S BP BUILDTECH P. LTD. AND M/S SUNITA OVERSEAS PVT. LTD. HAD ALSO ADVANCED SUMS OF `.2,50,00 0/- AND `.1,00,000/- RESPECTIVELY AS SHARE APPLICATION MONEY. THE ASSESSING O FFICER, THEREFORE, VIDE NOTE SHEET ENTRY DATED 26.6.2007 DIRECTED THE ASSESSEE TO PRODUCE A LL THE PARTIES WHO ALLEGEDLY ADVANCED SHARE APPLICATION MONEY TO THE ASSESS EE DURING THE YEAR UNDER CONSIDERATION. ALSO AS PER THE ORDER SHEET ENTRY DATED 10 .7.2007, THE ASSESSEE COMPANY WAS REQUIRED TO PROVE CREDITWORTHINESS OF THESE PA RTIES AND THE GENUINENESS OF THE TRANSACTIONS. IN ITS REPLY, THE ASSESSEE COMPANY STATED THAT IT HAD FILED THE CONFIRMATIONS FROM THE PARTIES TOGETHER WITH T HEIR PAN NUMBERS WHICH WAS SUFFICIENT TO PROVE THE IDENTITY OF THE PARTIES AND GENUIN ENESS OF THE TRANSACTIONS. SUBSEQUENTLY, ON 13.11.2007, THE ASSESSEE FURNISHED BANK ST ATEMENTS OF SEVEN PARTIES AND COPIES OF INCOME TAX RETURNS OF ALL THE COMP ANIES. THE ASSESSING OFFICER ALSO ISSUED SUMMONS TO NINE COMPANIES, WHO HAD ALLEGEDLY ADVANCED SHARE APPLICATION MONEY TO THE ASSESSEE COMPANY, ON 27.6.2007 . SIX OF THE SUMMONS WERE RECEIVED BACK FROM THE POSTAL AUTHORITIES WITH THE REMA RKS NO SUCH PERSON OR LEFT. THE REMAINING THREE SUMMON WERE NEITHER RECEIVED BACK NOR REPLIED TO. THE DETAIL OF THESE SUMMONS ARE AS UNDER:- SL.NO. NAME OF THE COMPANY/PERSON REMARKS OF THE POST AL AUTHORITY ITA NO22991 TO 2994/DEL/09 4 1. M/S BALDEV HARISH ELECTRICAL P.LTD. NO SUCH P ERSON 2. M/S BP BUILDTECH P. LTD. LEFT 3. M/S FAIR N SQUARE EXPORTS P.LTD. LEFT 4. M/S ETHNIC CREATIONS P. LTD. LEFT 5. M/S MV MARKETING P.LTD. LEFT 6. M/S SATWANT SINGH SODHI CONST.P. LTD. LEFT 7. M/S SUNITA OVERSEAS P. LTD. NEITHER RECEIVED BACK 8. M/S POLO LEASING & FINANCE P. LTD. NEITHER RECEIVED B ACK 9. M/S MAESTRO MARKETING & ADVERTISING P. NEITHER RECEIVED BACK. 5. THE ASSESSEE WAS CONFRONTED WITH THE ABOVE DETAILS. IT WAS ALSO POINTED OUT THAT TWO OUT OF THE NINE BOGUS COMPANIES, NAMELY, M/S B ALDEV HARISH ELECTRICALS P. LTD. AND M/S BP BULDTECH P. LTD. WERE ASSESSED WITH THE A SSESSING OFFICER OF THE ASSESSEE. M/S BALDEV HARISH ELECTRICALS P. LTD. STOPPED F ILING ITS RETURN OF INCOME FOR PAST MANY YEARS AND DESPITE MANY EFFORTS THE COMPANY OR ITS DIRECTOR REMAINED UNTRACEABLE AND THEIR PRESENT WHEREABOUTS WERE NOT KNOWN. TH E ASSESSEE WAS, THEREFORE, ASKED TO PRODUCE ALL THESE PARTIES OR TO GIVE THEI R CURRENT ADDRESSES SINCE THEY WERE ALLEGEDLY THE SHARE APPLICANTS OF THE ASSESSEE COMP ANY. THE ASSESSEE VIDE ITS REPLY DATED 27.11.2007 STATED IT SEEMS THAT TH EY HAVE SHIFTED THEIR OFFICE ELSEWHERE. WITH REFERENCE TO THE COMPANIES, THOSE WERE ASSESSED WITH THE ASSESSING OFFICER, IT WAS STATED NO SPECIFIC QUERY HAS BEEN RAISED TO REPLY IN THIS REGARD. 6. IN THE ABOVE FACTS AND CIRCUMSTANCES AND ESPECIALLY T AKING INTO ACCOUNT THE FINDINGS OF THE INVESTIGATION WING THAT SUCH BOGUS CO MPANIES WERE FLOATED BY CERTAIN KEY PERSONS WHO RECEIVED CASH FROM THE ASSESSEE COMP ANY, DEPOSITED THE SAME IN ONE SUCH BOGUS COMPANYS ACCOUNT AND ROUTED TH E SAME THROUGH A FEW ITA NO22991 TO 2994/DEL/09 5 OTHER BANK ACCOUNTS AND FINALLY GAVE ENTRY TO THE BENEFIC IARY I.E. THE ASSESSEE COMPANY, THE ASSESSING OFFICER SOUGHT TO LIFT THE CORPO RATE VEIL IN ORDER TO ASCERTAIN THE TRUTH BEHIND THE SCENE. 7. THE ASSESSING OFFICER WENT THROUGH THE COPIES OF INCOM E TAX RETURNS AS WELL AS BANK ACCOUNTS IN SOME OF THESE CASES. IT WAS NOTED BY HIM THAT THE BANK STATEMENTS SHOWED MEAGER BALANCE AND USUALLY THERE WERE CREDI T ENTRY FOLLOWED IMMEDIATELY BY A DEBIT ENTRY OF ALMOST THE SAME AMOUNT. T HIS WOULD SHOW THAT SUCH COMPANIES DID NOT HAVE CREDITWORTHINESS. THE INCOME TAX RETURNS OF M/S SUNITA OVERSEAS P. LTD. AND M/S POLO LEASING & FINANCE P. LTD. DISCLOSED PROFITS OF `.8149/- AND `.5193/-, WHEREAS NONE OF THE OTHER SEVEN SH ARE APPLICANTS HAD ANY PROFIT. AS SUCH THEY INCURRED LOSSES DURING THE YEAR UN DER CONSIDERATION. 8. IN THE ABOVE FACTS AND CIRCUMSTANCES AND TAKING NOT E OF THE FACT THAT THOUGH VARIOUS OPPORTUNITIES WERE ALLOWED TO THE ASSESSEE TO DISC HARGE THE ONUS CAST ON IT TO PROVE THE IDENTITY AND CREDITWORTHINESS OF THE PARTIES AND GENUINITY OF THE TRANSACTIONS, WHICH IT FAILED TO DO, THE ASSESSING OFF ICER HELD THAT THE IMPUGNED AMOUNT OF `.20 LAKHS BEING SHOWN AS SHARE APPLICATION MONEY WAS NOTHING BUT THE ASSESSEE COMPANYS UNACCOUNTED INCOME WHICH HAS BEEN ROUTED BACK TO ITS BOOKS. HE ASSESSED THE IMPUGNED AMOUNT AS INCOME OF THE ASSESSEE U/S 68 OF THE ACT. WHILE DOING SO, THE ASSESSING OFFICER HELD THAT IN THE PR ESENT CASE EVEN THE IDENTITY AND THE EXISTENCE OF THE PERSONS HAD NOT BEEN ESTABLISHED. HE ALSO ADDED `.20,000/- ON ACCOUNT OF COMMISSION PAID TO THE ENTREE GIVERS BY THE ASSESSEE OUTSIDE BOOKS OF ACCOUNTS. AGGRIEVED, THE ASSESSEE FILED AP PEAL BEFORE THE LD CIT(A). ITA NO22991 TO 2994/DEL/09 6 9. BEFORE THE LD CIT(A), IT WAS SUBMITTED BY THE ASSESSEE T HAT THE IMPUGNED ADDITION UNDER SEC.68 WAS MADE MAINLY ON ACCOUNT OF TH E FACT THAT THE PARTIES WHO HAD APPLIED FOR THE SHARES DID NOT COME FORWARD IN RESP ONSE TO THE SUMMONS ISSUED TO THEM U/S 131 OF THE ACT AND THEY COULD NEITHER BE PR ODUCED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER. IT WAS SUBMITTED THAT THIS ACTION OF THE ASSESSING OFFICER WAS UNJUSTIFIED AS PER THE RATIO LAID DOWN BY T HE DECIDED CASE LAWS ON THIS SUBJECT WHICH HAD HELD THAT THE CONFIRMATIONS FURNISHED WITH PAN NUMBERS WERE SUFFICIENT TO PROVE THE IDENTITY AND CREDITWORTHINESS OF THE PARTIES AS WELL AS THE GENUINENESS OF THE TRANSACTIONS. IN THE PRESENT CASE, THE A SSESSEE HAD FURNISHED SUCH CONFIRMATIONS. IT HAD ALSO FURNISHED BANK STAT EMENTS AND INCOME TAX RETURNS OF SEVEN APPLICANTS. RELYING ON THE JUDGMENT OF HON'BLE SUP REME COURT IN THE CASE OF CIT V., ORISSA CORPORATION PVT. LTD. REPORTED IN 159 ITR 78 IT WAS CONTENDED THAT THE ASSESSEE HAD DISCHARGED ITS ONUS AND IT WAS FOR THE DEPAR TMENT TO PURSUE THE MATTER FURTHER TO ENSURE PRESENCE OF THE CREDITORS AND EXAMIN E THEIR CREDITWORTHINESS AND SOURCE. IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO SHOW THAT UN-ACCOUNTED INCOME OF THE APPELLANT WAS ROUTED BACK TO ITS BOOKS THROUGH BOGUS ENTITIES. IN R ESPECT OF M/S BP BUILDTECH PVT. LTD. AND M/S SUNITA OVERSEAS P. LTD. IT WAS SUBMITTED T HAT THE NAMES OF THE PARTIES DID NOT APPEAR IN THE REPORT OF THE INVESTIGATION WING A ND THE REASONS RECORDED BY THE ASSESSING OFFICER. EVEN THEN, THE ASSESSEE FURNISHED CONF IRMATIONS AND BANK STATEMENTS OF THESE COMPANIES. 10. IT WAS FURTHER SUBMITTED THAT THE HON'BLE SUPREME COU RT IN THE CASE OF CIT V. DIVINE LEASING & FINANCE LTD, AND GENERAL EXPORT AND CRED IT LTD. AND LOVELY EXPORTS PVT. LTD. UPHELD THE DECISION OF THE JURISDICTI ONAL HIGH COURT REFERRING TO THE CASE OF CIT V. MAKHNI & TYAGI PVT. LTD. REPORTED IN 26 7 ITR 433 (DEL.). IN THE SAID JUDGMENT, IT WAS HELD THAT WHEN THE DOCUMENTARY EVIDENCE WA S PLACED ON RECORD, ITA NO22991 TO 2994/DEL/09 7 TO PROVE THE IDENTITY OF ALL THE SHAREHOLDERS INCLUDING THEIR PAN/GIR NUMBERS AND OTHER DOCUMENTARY EVIDENCE IN THE FORM OF RATION CARD ETC. WAS ALSO FILED WHICH WERE NEITHER CONTROVERTED NOR DISPUTED BY THE ASSESSING O FFICER ,NO INTERFERENCE WAS CALLED FOR AND THE TRIBUNAL WAS JUSTIFIED IN DELETIN G SUCH ADDITIONS. FROM THE SAID JUDGMENT, FOLLOWING PORTION WAS QUOTED:- IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHARE HOLDERS WHOSE NAMES ARE GIVEN TO THE A SSESSING OFFICER, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN TH EIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW, BUT IT CANNOT BE RE GARDED AS UNDISCLOSED INCOME OF THE APPELLANT COMPANY. 11. THE ASSESSEE FURNISHED COPIES OF FORM NO.2 FILED BEFORE THE ROC REGARDING ALLOTMENT OF SHARES TO THESE APPLICANTS AND ALSO FRESH C ONFIRMATIONS FROM THESE PARTIES. THESE WERE FORWARDED TO THE ASSESSING OFFICER FOR EXAMINATION AND REPORT. AS PER ASSESSING OFFICERS REPORT DATED 17.2.2009 SUMMON S ISSUED TO M/S BALDEV HARISH ELECTRICALS P. LTD. AND M/S FAIR N SQUARE EXP ORTS PVT. LTD., M/S ETHNIC CREATIONS PVT. LTD., AND M/S MB MARKETING PVT. LTD. W ERE RECEIVED BACK WITH THE REMARKS NO SUCH PERSON IN THIS ADDRESS. IN RESPECT OF M/S MAESTRO MARKETING & ADVERTISING PVT. LTD., AND M/S SATWANT SINGH SODHI CON STRUCTION PVT. LTD. NO RESPONSE WAS RECEIVED. WHEN CONFRONTED WITH THE ABOVE, THE A SSESSEE SUBSEQUENTLY CONTACTED THE SHARE APPLICANTS, WHO WROTE T O THE ASSESSING OFFICER, AND THE COPIES WERE MARKED TO APPELLANT AND THE LD CIT(A ), TO THE EFFECT THAT THESE WERE SMALL COMPANIES HAVING THEIR REGISTERED OFFICES IN RESI DENTIAL AREA AND DUE TO THE OBJECTIONS BY THE RESIDENTS, THEY DID NOT HAVE ANY SI GN BOARDS FIXED AT THE PREMISES. THE COMPANY ALSO SUBMITTED THEIR CONFIRMATION S. AFTER RECEIVING THE ABOVE FURTHER A REMAND REPORT WAS FURNISHED BY THE ASSESS ING OFFICER ON ITA NO22991 TO 2994/DEL/09 8 24.3.2009. IN THIS REPORT, THE ASSESSING OFFICER AFTER N ARRATING THE EFFORTS MADE BY HER TO SUMMON THE PARTIES AS WELL AS THE DIRECTORS OF THE APPELLANT COMPANY HAS ACKNOWLEDGED THE RECEIPT OF LETTERS FROM THE SHARE APPLICANT COMPANY DIRECTLY, HAD STATED THAT THE COPIES OF CONFIRMATIONS ALONG WITH RELEV ANT DOCUMENTS HAD BEEN FORWARDED TO THE ASSESSING OFFICERS OF THE NINE SHARE APPL ICANT COMPANIES FOR NECESSARY ACTION AT THEIR END TO COMPLY WITH THE JUDGMEN T OF THE HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS PVT. LTD. 12. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) DELETED THE IMPUGNED ADDITIONS WITH THE FOLLOWING OBSERVATIONS IN PARA 13 OF HIS ORDER:- PARA 13 REGARDING THE MERITS OF THE ADDITION MADE, THE ASSESSING OFFICER HIMSELF HAS MENTIONED IN HIS ASSESSMENT ORDER THAT THE ASSESSEE HAD FURN ISHED CONFIRMATIONS OF ALL THE SHARE APPLICANT COMPANIES WHI CH CONTAINED THEIR PAN NOS., AMOUNTS INVESTED BY THEM, CHEQUE NOS. AND BANK DETAILS. TWO OF THESE SHARE APPLICANT COMPANIES ARE ADMITTEDLY UNDER TH E JURISDICTION OF THE ASSESSING OFFICER HIMSELF. FOR THE RETURNING OF THE SU MMONS ISSUED IN THE CASE OF SOME OF THESE SHARE APPLICANT COMPANIES BY THE POS TAL AUTHORITIES, THESE COMPANIES HAVE GIVEN SUFFICIENT REASONS IN THEIR COM MUNICATION TO THE ASSESSING OFFICER DIRECTLY. HAVING REGARD TO THE JUDGM ENT DELIVERED BY THE HON'BLE APEX COURT IN THE CASE OF M/S LOVELY EXPORTS (P) LTD. THE ASSESSING OFFICER HAS RIGHTLY REPORTED THAT THE COPIES OF CONFIRMA TIONS ALONG WITH THE RELEVANT DOCUMENTS FURNISHED BY THE SHARE APPLICANT COMPA NIES WERE FORWARDED TO THE ASSESSING OFFICER HAVING JURISDICTION OVER THESE COMPANIES FOR TAKING NECESSARY ACTION AT THEIR END IN COMPLIANCE W ITH THE JUDGMENT OF THE HON'BLE APEX COURT. IN VIEW OF THE EVIDENCES FURNISHED A ND THE REMAND ITA NO22991 TO 2994/DEL/09 9 REPORT OF THE ASSESSING OFFICER, THE ADDITION OF `.20 LA KHS MADE BY THE ASSESSING OFFICER TOWARDS SHARE APPLICATION MONEY RECEIV ED FROM THE NINE SHARE APPLICANT COMPANIES AND ALSO THE ADDITION OF `.2 0,000/- MADE TOWARDS ALLEGED COMMISSION PAID TO THESE COMPANIES CANNO T BE SUSTAINED. ACCORDINGLY, THE ASSESSING OFFICER IS A DIRECTED TO DELET E BOTH THESE ADDITIONS. 13. AGGRIEVED, THE REVENUE HAS FILED APPEAL BEFORE THE TRIB UNAL. 14. BEFORE US THE LD DR HAS RELIED ON THE ORDER OF THE AS SESSING OFFICER. IT WAS FURTHER SUBMITTED BY HER THAT THE LD CIT(A) HAD DELETED TH E IMPUGNED ADDITIONS EVEN WHEN THE ASSESSEE FAILED TO PRODUCE THE PARTIES BEFORE THE ASS ESSING OFFICER THOUGH VARIOUS OPPORTUNITIES WERE ALLOWED TO IT. 15. THE LD AR FOR THE ASSESSEE, ON THE OTHER HAND, RELIED ON THE ORDER OF THE LD CIT(A). THE DETAILS FURNISHED BEFORE THE ASSESSING OFFICER AND THE LD CIT(A), AS NARRATED BY THEM IN THEIR RESPECTIVE ORDERS, WERE ALSO REFERRED TO BY HIM. IT WAS SUBMITTED THAT SUCH EVIDENCES WERE AVAILABLE IN THE PAPER B OOK FILED BEFORE THE TRIBUNAL. IT WAS, THEREFORE, CONTENDED BY HIM THAT THE ORDER OF THE LD CIT(A) BE CONFIRMED ON THE ISSUES DISPUTED BY THE REVENUE. 16. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. WE HAV E ALSO GONE THROUGH THE CASE LAWS CITED BY THE PARTIES. 17. THE ASSESSEE IS A PRIVATE LIMITED COMPANY. SHARE APPLIC ATION MONEY WAS RECEIVED BY IT NOT ON ACCOUNT OF PUBLIC ISSUE OF SHARES BUT ON ACCOUNT OF PRIVATE PLACEMENT. THE CONTENTION OF THE REVENUE IS THAT THE EVIDENC E ON RECORD WOULD ITA NO22991 TO 2994/DEL/09 10 STRONGLY SUGGEST THAT THE PARTIES FROM WHOME SUCH ALLEGED SHARE APPLICATION MONEY WAS RECEIVED BY THE ASSESSEE WERE MERE PAPER ENTITY WHO DID NOT HAVE CREDITWORTHINESS TO ADVANCE SUCH AMOUNTS AS SHARE APPLI CATION MONEY TO THE ASSESSEE. THE ASSESSEES CONTENTION, ON THE OTHER HAND, IS T HAT THE EVIDENCE ON RECORD WOULD SHOW THAT THE ASSESSEE HAD DISCHARGED THE ON US CAST ON IT IN TERMS OF SECTION 68 OF THE ACT AND THUS THE ONUS TO PROVE THE CO NTRARY WAS ON THE REVENUE. IN SUPPORT OF THE ABOVE CONTENTION, THE ASSESSEE HAS PLACED REL IANCE ON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS PVT . LTD. (SUPRA). 18. ON THE ISSUE OF RESTING OF ONUS, THE CONTENTION OF R EVENUE IS THAT THE RATIO LAID DOWN BY THE HON'BLE APEX COURT IN THE CASE OF LOVELY EXP ORTS PVT. LTD. (SUPRA) IS NOT APPLICABLE IN THE FACTS OF THE PRESENT CASE AND, THEREFOR E, AT THE END OF THE PROCEEDINGS BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE T HE LD. CIT(A), THE ONUS LAY ON THE ASSESSEE AND NOT ON THE REVENUE. 19. WE, THEREFORE, HAVE TO FIRST DECIDE AS TO WHETHER IN T HE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS PVT. LTD. (SUPRA) IS APPLICABLE OR NOT. SPECIAL LEAVE PETITION BEFORE THE HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS PVT. LTD. (SUPRA) AROSE OUT OF THE JUDGMENT AND ORDER DATED 1 6.11.2006 OF HON'BLE DELHI HIGH COURT IN I.T..A. NO. 953 OF 2006. THE SAID JUDG MENT OF THE HON'BLE DELHI HIGH COURT HAS BEEN REPORTED AS CIT V. DIVINE LEASING & FINA NCE LTD, 299 ITR 268. IT COULD BE SEEN FROM THE SAID JUDGMENT THAT THE ASSESSEE COMPA NY NAMELY M/S DIVINE LEASING & FINANCE LTD. WAS A PUBLIC LIMITED COMP ANY. THE SAID COMPANY RECEIVED SUBSCRIPTION FROM PUBLIC ISSUE THROUGH BANKING CHANNEL AND THE SHARES WERE ALLOTTED INCONSONANCE WITH THE PROVISIONS OF SECURITI ES CONTRACT (REGULATION) ACT, 1953. WITH REFERENCE TO SUCH SHARE APPLICATION MONE Y COMPLETE DETAILS WERE ITA NO22991 TO 2994/DEL/09 11 FURNISHED. IT WAS ALSO FOUND BY THE TRIBUNAL THAT THE ASSESSING OFFICER DID NOT BRING ANY POSITIVE MATERIAL OR EVIDENCE WHICH WOULD INDICATE TH AT THE SHARE HOLDERS WERE BENAMIDAR OR FICTITIOUS PERSONS OR THAT ANY PART OF T HE SHARE CAPITAL REPRESENTED COMPANYS OWN INCOME FROM UNDISCLOSED SOURCES. THERE W ERE FIVE SIKKIMESE COMPANIES WHO SUBSCRIBED TO RIGHTS SHARES. SUCH COMPAN IES WERE DULY INCORPORATED UNDER THE SIKKIMESE COMPANY ACT AND WERE ASSESS ED UNDER THE SIKKIMESE TAXATION MANUAL. IN THE ABOVE FACTS, THE TRIBU NAL DELETED ADDITION MADE ON ACCOUNT OF SHARE CAPITAL BY THE ASSESSING OFFICER A ND SUCH ACTION OF THE TRIBUNAL WAS UPHELD BY THE HON'BLE HIGH COURT BY HOLDING THAT NO QUESTION OF LAW AROSE. THE HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS PV T. LTD. (SUPRA) HAS UPHELD THE ABOVE JUDGMENT OF THE HON'BLE DELHI HIGH COURT. 20. IN THE PRESENT CASE, HOWEVER, THE ASSESSEE IS A PRIVATE LI MITED COMPANY. THE SHARE APPLICATION MONEY WAS RECEIVED THROUGH PRIVATE PLA CEMENT. THE ASSESSING OFFICER HAS BROUGHT ON RECORD EVIDENCE IN THE SHAPE OF IN COME TAX RETURNS AND BANK STATEMENTS OF THE SHARE APPLICANTS TO SHOW THAT THESE CO MPANIES HAD VERY MEAGER INCOME OR WERE RUNNING IN LOSSES. IT HAS ALSO BEEN BROU GHT ON RECORD THAT IN MOST OF THE CASES, THE AMOUNTS WERE DEPOSITED IN THE ACCOUNT EITHER ON THE SAME DAY OR A DAY BEFORE THE ISSUE OF CHEQUES TO THE ASSESSEE. ALL THE SHA RE APPLICANTS HAD ADDRESS IN DELHI. THOUGH THE ASSESSEE COULD OBTAIN THEIR CONFIRMATION IN THE MONTH OF JANUARY, 2009, REASONS BEST KNOWN TO THE ASSESSEE, TH E PARTIES COULD NOT BE PRODUCED BEFORE THE ASSESSING OFFICER EITHER DURING THE ASSES SMENT PROCEEDING OR REMAND PROCEEDING. THE SUMMONS ISSUED BY THE ASSESSING OF FICER COULD NOT BE SERVED IN THE ADDRESS OF SUCH SHARE APPLICANTS BY THE POS TAL AUTHORITIES AS NONE OF THEM WAS FOUND IN THE SAID ADDRESS. THUS, IT CANNOT B E SAID THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO SHOW THAT THERE WERE STRONG INDICATION THAT THE SO-CALLED SHARE APPLICANTS WERE MERE P APER ENTITIES AND DID NOT ITA NO22991 TO 2994/DEL/09 12 HAVE THE REQUISITE CAPACITY TO ADVANCE THE IMPUGNED AMOUNT S, IT IS ALSO TO BE NOTED THAT SHARES WERE NOT ALLOTTED TO THESE PARTIES IN THE IMMED IATE FUTURE. IN THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSI DERED OPINION THAT THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF LOVEL Y EXPORTS PVT. LTD. (SUPRA) IS NOT APPLICABLE IN THE PRESENT CASE. 21. FROM THE FACTS NARRATED BY US IN THE EARLIER PORTI ON OF THIS ORDER, IT IS QUITE CLEAR THAT WHEN THE ASSESSING OFFICER FAILED TO SERVE SUMM ONS ON THE SHARE APPLICANTS, THE ASSESSEE WAS REQUIRED BY THE ASSESSING OFF ICER TO PRODUCE THESE PARTIES,. EVEN DURING REMAND PROCEEDINGS, THE ASSESSING O FFICER HAS REQUIRED THE ASSESSEE TO PRODUCE THE PARTIES. THOUGH THE ASSESSEE COULD O BTAIN CONFIRMATIONS FROM THESE PARTIES, SURPRISINGLY IT COULD NOT PRODUCE T HEM BEFORE THE ASSESSING OFFICER. FROM THE ABOVE, IT IS AMPLY CLEAR THAT AT THE END OF PROCEEDING, BOTH IN ASSESSMENT AND IN REMAND, THE ONUS FINALLY LAY ON THE AS SESSEE. 22. BE THAT AS IT MAY, IT HAS BEEN NOTED BY US THAT ALL THE SHARE APPLICANTS HAVE PAN NUMBERS AND AT LEAST WERE ASSESSED TO TAX IN SOME YEAR OR OTHER. WHAT IS THE POSITION OF ASSESSMENTS OF THESE COMPANIES FOR THE RELEVANT ASSESSMENT YEAR HAS NOT BEEN BROUGHT TO OUR NOTICE BY EITHER OF THE PARTIES. IF T HE IMPUGNED AMOUNTS WERE ASSESSED IN THE HANDS OF THE SHARE APPLICANTS, THE SAME C OULD NOT BE ASSESSED IN THE HANDS OF THE ASSESSEE AND VICE VERSA. 23. TAKING ALL THE ABOVE FACTS AND CIRCUMSTANCES INTO CONSIDERATION, WE ARE OF THE CONSIDERED OPINION THAT THE ORDERS OF THE AUTHORITIES BELOW ARE REQUIRED TO BE SET ASIDE ON THE IMPUGNED ISSUES AND THE MATTER REMITTED BAC K TO THE FILE OF THE ASSESSING OFFICER FOR RE-ADJUDICATING THE SAME IN THE LI GHT OF THE DISCUSSION MADE ITA NO22991 TO 2994/DEL/09 13 HEREIN ABOVE. THE ASSESSING OFFICER SHOULD PASS A FRESH O RDER AS PER LAW AFTER GIVING THE ASSESSEE ADEQUATE OPPORTUNITY OF BEING HEARD. 24. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NO.2992/DEL/2009: (ASSESSMENT YEAR 2003 I.T.A. NO.2992/DEL/2009: (ASSESSMENT YEAR 2003 I.T.A. NO.2992/DEL/2009: (ASSESSMENT YEAR 2003 I.T.A. NO.2992/DEL/2009: (ASSESSMENT YEAR 2003- -- -04) 04) 04) 04) 25. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF APPEALS :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT( A) HAS ERRED IN DELETING ADDITION OF `.11,50,000/- MADE BY THE ASSESSING OFFICER U/S 68 OF THE ACT ON ACCOUNT OF ADDITION TO SHARE APPLICATION M ONEY AS UNEXPLAINED CASH CREDITS AND `.11,500/- ON ACCOUNT OF COMMISSION PAID FROM UNDISCLOSED SOURCES IGNORING THE FACT THAT: A) THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS BAS ED ON INFORMATION RECEIVED FROM THE INVESTIGATION WING OF DEPAR TMENT THAT THE ASSESSEE COMPANY HAS RECEIVED BOGUS ENTRIES AMOUNTING TO `.11,50,000/- FROM DIFFERENT ENTRY OPERATORS. B) THE ASSESSING OFFICER BASED THE ASSESSMENT BY RELYING UPON THE REPORT OF THE INVESTIGATION WING WHICH CONTAINED SPECIF IC DETAILS ABOUT THE ENTRY OPERATORS AND MODUS OPERANDI OF RECEIVING CASH OF AND EQUIVALENT AMOUNT PLUS COMMISSION AND ISSUING CHEQ UES IN THE FORM OF SHARE APPLICATION MONEY ETC. TO THE BENEFICIARI ES. C) THE ASSESSEE FAILED TO PRODUCE THE ALLEGED CREDITORS BEFORE TH E ASSESSING OFFICER ALTHOUGH FILED REQUISITE DETAILS/CONFIR MATIONS FROM THESE CREDITORS. THE PHYSICAL APPEARANCE OF DOUBTED PARTI ES IS A MUST A PARAMETER OF IDENTITY. ITA NO22991 TO 2994/DEL/09 14 2. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIGHT TO A MEND, MODIFY ALTER ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFO RE OR DURING THE HEARING OF THIS APPEAL. 26. THE FACTS AND CIRCUMSTANCES OF THE CASE ARE SIMILAR TO THOSE OF ASSESSMENT YEAR 2002-03. BOTH THE LD. DR AS WELL AS LD. AR FOR T HE ASSESSEE HAS RELIED ON THE ARGUMENTS MADE IN APPEAL FOR ASSESSMENT YEAR 2002-03. 27. IN VIEW OF THE ABOVE, FOR THE REASONS MENTIONED IN TH E APPEAL FOR ASSESSMENT YEAR 2002-03, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BEL OW ON THE IMPUGNED ISSUES AND REMIT THE MATTER BACK TO THE FILE OF THE ASSESS ING OFFICER FOR PASSING A FRESH ORDER AS PER LAW. THIS APPEAL OF THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSES. 28. IN THE RESULT, THE APPEAL IN I.T.A. NO.2992/DEL/09 F OR ASSESSMENT YEAR 2003-04 IS ALLOWED FOR STATISTICAL PURPOSE. I.T.A. NO.2993/DEL/2009: (ASSESSMENT YEAR 2004 I.T.A. NO.2993/DEL/2009: (ASSESSMENT YEAR 2004 I.T.A. NO.2993/DEL/2009: (ASSESSMENT YEAR 2004 I.T.A. NO.2993/DEL/2009: (ASSESSMENT YEAR 2004- -- -05): 05): 05): 05): 29. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF APPEALS :- 1.ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT (A) HAS ERRED IN DELETING ADDITION OF `.5,00,000/- MADE BY THE ASSESSING OFFICER U/S 68 OF THE ACT ON ACCOUNT OF ADDITION TO SHARE APPLICATION MONEY AS UN EXPLAINED CASH CREDITS AND `.5,000/- ON ACCOUNT OF COMMISSION PAID FROM UNDISC LOSED SOURCES IGNORING THE FACT THAT: ITA NO22991 TO 2994/DEL/09 15 A)THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS B ASED ON INFORMATION RECEIVED FROM THE INVESTIGATION WING OF DEPARTMENT THAT TH E ASSESSEE COMPANY HAS RECEIVED BOGUS ENTRIES AMOUNTING TO `.5,00,000/- FR OM DIFFERENT ENTRY OPERATORS. B) THE ASSESSING OFFICER BASED THE ASSESSMENT BY RELYING UPON THE REPORT OF THE INVESTIGATION WING WHICH CONTAINED SPECIFIC DETAILS AB OUT THE ENTRY OPERATORS AND MODUS OPERANDI OF RECEIVING CASH OF AND EQUIVALENT AMOUNT PLUS COMMISSION AND ISSUING CHEQUES IN THE FORM OF SHARE APP LICATION MONEY ETC. TO THE BENEFICIARIES. C) THE ASSESSEE FAILED TO PRODUCE THE ALLEGED CREDITORS BEFORE THE ASSESSING OFFICER ALTHOUGH FILED REQUISITE DETAILS/CONFIRMATIONS F ROM THESE CREDITORS. THE PHYSICAL APPEARANCE OF DOUBTED PARTIES IS A MUST A PARA METER OF IDENTITY. 2. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIGHT TO AMEND, MODIFY ALTER ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 30. THE FACTS AND CIRCUMSTANCES OF THE CASE ARE SIMILAR TO THOSE OF ASSESSMENT YEAR 2002-03. BOTH THE LD. DR AS WELL AS LD. AR FOR TH E ASSESSEE HAS RELIED ON THE ARGUMENTS MADE IN APPEAL FOR ASSESSMENT YEAR 2002-03. 31. IN VIEW OF THE ABOVE, FOR THE REASONS MENTIONED IN TH E APPEAL FOR ASSESSMENT YEAR 2002-03, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BEL OW ON THE IMPUGNED ISSUES AND REMIT THE MATTER BACK TO THE FILE OF THE ASSESS ING OFFICER FOR PASSING A FRESH ORDER AS PER LAW. THIS APPEAL OF THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSES. ITA NO22991 TO 2994/DEL/09 16 32. IN THE RESULT, THE APPEAL IN I.T.A. NO.2993/DEL/09 F OR ASSESSMENT YEAR 2004-05 IS ALLOWED FOR STATISTICAL PURPOSE. I.T.A. NO.2994/DEL/2009: (ASSESSMENT YEAR: 2005 I.T.A. NO.2994/DEL/2009: (ASSESSMENT YEAR: 2005 I.T.A. NO.2994/DEL/2009: (ASSESSMENT YEAR: 2005 I.T.A. NO.2994/DEL/2009: (ASSESSMENT YEAR: 2005- -- -06): 06): 06): 06): 33. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEA LS:- 1.ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT (A) HAS ERRED IN DELETING ADDITION OF `.4,00,000/- MADE BY THE ASSESSING OFFICER U/S 68 OF THE ACT ON ACCOUNT OF ADDITION TO SHARE APPLICATION M ONEY AS UNEXPLAINED CASH CREDITS AND `.4,000/- ON ACCOUNT OF COMMISSION PAID FROM UNDISCLOSED SOURCES IGNORING THE FACT THAT: A) THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS BASED ON INFORMATION RECEIVED FROM THE INVESTIGATION WING OF DEPAR TMENT THAT THE ASSESSEE COMPANY HAS RECEIVED BOGUS ENTRIES AMOUNTING TO `.5,00,000/- FROM DIFFERENT ENTRY OPERATORS. B) THE ASSESSING OFFICER BASED THE ASSESSMENT BY RELYING U PON THE REPORT OF THE INVESTIGATION WING WHICH CONTAINED SPECIFIC DETAI LS ABOUT THE ENTRY OPERATORS AND MODUS OPERANDI OF RECEIVING CASH OF AND EQUIVALENT AMOUNT PLUS COMMISSION AND ISSUING CHEQUES IN THE FORM OF SHA RE APPLICATION MONEY ETC. TO THE BENEFICIARIES. C) THE ASSESSEE FAILED TO PRODUCE THE ALLEGED CREDITORS BEFORE THE ASSESSING OFFICER ALTHOUGH FILED REQUISITE DETAILS/CONFIR MATIONS FROM THESE CREDITORS. THE PHYSICAL APPEARANCE OF DOUBTED PARTIES IS A MUST A PARAMETER OF IDENTITY. 2. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIGHT TO A MEND, MODIFY ALTER ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFO RE OR DURING THE HEARING OF THIS APPEAL. ITA NO22991 TO 2994/DEL/09 17 34. WE FIND THAT THE TAX EFFECT OF THE APPEAL FILED BY T HE REVENUE IS LESS THAN `.2 LAKHS. IN VIEW OF THE ABOVE, WE HOLD THAT THE REVENUE WAS NOT JUSTIFIED IN FILING THE IMPUGNED APPEAL, AS THE SAME WAS IN VIOLATION OF THE RELEV ANT CIRCULAR ISSUED BY THE CBDT. WE, THEREFORE, DISMISS THIS APPEAL OF THE REVENUE IN LIMINE . 35. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IN I.T .A. NO.2994/DEL/2009 FOR ASSESSMENT YEAR 2005-06 IS DISMISSED. 36. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IN I.T. A. NO. 2991,2992 & 2993/DEL/2009 ARE ALLOWED FOR STATISTICAL PURPOSES AND APPEAL IN I.T.A. NO.,2994/DEL/2009 FOR ASSESSMENT YEAR 2005-06 IS DISMIS SED. 37. ORDER PRONOUNCED IN THE OPEN COURT ON THE 26 TH DAY OF AUGUST,2011. SD/- SD/- (R.P. TOLANI) (B.K. HAL DAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT.26.8.2011. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY. (ITAT, NEW DELHI). DAT E OF HEARING DATE OF DICTATION ITA NO22991 TO 2994/DEL/09 18 DATE OF ORDER SIGNED BY THE HON'BLE MEMBER. DATE OF ORDER SENT TO THE CONCERN ED BENCH