ITO 13(3)(4), MUMBAI V. TRISHUL TRADERS P.LTD, MUMBAI

ITA 3060/MUM/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8860 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 28-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S ABI RAMA KARTHIKEYAN
• Keywords: Unexplained cash credit; Share purchase agreement; Principle of natural justice; Opportunity of cross examination; Source of fund; Deemed to accrue or arise in india; Accommodation entries; Capital receipt; Onus to prove; Retraction
• Section: 143(3); 14A; 133(6); 131; 68; 69

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE HONBLE SH. SHAMIM YAHYA , AM & HONBLE SH. SANDEEP GOSAIN, JM ./ I.T.A. NO . 3060 /MUM/201 7 ( / ASSESSMENT YEAR: 2012 - 13 ) ITO - 13(3 ) (4 ) R. NO. 216B , AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400020 / VS. M/S TRISHUL TRADERS PVT. LTD. 805, CORPORATE AVENUE, SONAWALA ROAD, GOREGAON EAST, MUMBAI - 4000 63 ./ ./ PAN NO. AA ACT1787A ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI S. ABI RAMA KARTHIKEYAN , DR / RESPONDENTBY : SHRI NEEL KHANDELWAL, AR / DATE OF HEARING : 13.12 .2018 / DATE OF PRONOUNCEMENT : 20.12.2018 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE P RESENT APPE AL FILED BY THE REVENUE IS AGAINST THE ORDER OF LD. CIT (APPEAL) 21, MUMBAI DATED 17.02.17 F OR AY 20 12 - 13 ON THE GROUNDS MENTIONED HEREIN BELOW: - 2 I.T.A. NO. 3060 /MUM/201 7 M/S TRISHUL TRADERS PVT. LTD. 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) ERRED IN DELETING THE ADDITION MADE OF RS.5,75,00,000/ - , WHEN THE ASSESSEE HAD FAILED TO DISCHARGE ITS ONUS OF ESTABLISHING IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE INVESTORS, IGNORING THE RATIO OF DECISION IN THE FOLLOWING CASES : (I) CIT VS N.R.PORTFOLIO(P) LTD. (II) CIT VS UL TRA MODERN EXPORTS P. LTD. (III) AGRAWAL COAL CORPORATION P. LTD VS. ADDL.CIT, RANGE 5 (IV) CIT VS YOUTH CONSTRUCTION P. LTD. (V) NOVA PROMOTERS & FINLEASE P. LTD. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) FAILED TO APPRECIATE THE FACT THAT THE STATEMENT OF WITNESS RECORDED WAS NOT CONCLUDED DUE TO NON - COOPERATION OF THE DEPONENT, AND HENCE, NO ADVERSE INFERENCE COULD BE DRAWN OUT OF IT. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) ERRE D IN CONCLUDING THAT NO OPPORTUNITY HAS BEEN PROVIDED TO THE ASSESSEE FOR CROSS EXAMINATION OF WITNESS, WHILE HE HAS ALSO CONCLUDED THAT OPPORTUNITY FOR CROSS EXAMINATION DID NOT ADVANCE THE CASE OF THE AO. 3 I.T.A. NO. 3060 /MUM/201 7 M/S TRISHUL TRADERS PVT. LTD. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ALL OR ANY OF THE GROUNDS OF APPEAL WHICH MAY BE NECESSARY. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESS EE IS ENGAGED IN THE BUSINESS AS GENERAL MERCHANTS AND TRADER IN GOODS AND COMMODITIES ON READY OR FORWARD BASIS, COMMISSION AGENTS, BUYING AND SELLING AGENTS, ETC. DURING THE YEAR, THE ASSESSEE HAS SHOWN INCOME FROM HOUSE PROPERTY AND INCOME FROM BUSINESS AND THE RETU RN OF INCOME FOR THE YEAR UND ER CONSIDERATION WAS FILED ON 28.09.12 DECLARING TOTAL INCOME OF RS 4,00,323/ - . SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY AND AFTER SERVING STATUTORY NOTICES AND PROVIDING OPPORTUNITY OF HEARING, ASSESSMENT ORDER U/S 143( 3) OF THE I.T. ACT WAS PASSED ASSESSING INCOME OF RS. 5,76,48,940/ - THEREBY MAKING ADDITIONS ON ACCOUNT OF UNACCOUNTED CASH CREDIT AND DISALLOWANCE MADE U/S 14A OF THE I.T ACT. 4 I.T.A. NO. 3060 /MUM/201 7 M/S TRISHUL TRADERS PVT. LTD. AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PARTIES, PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. NOW BEFORE US, THE REVENUE HAS PREFERRED THE PRESENT APPEAL BY RAISING THE ABOVE GROUNDS. GROUND NO. 1 TO 3 3. THESE GROUND S RAISED BY THE REVENUE ARE INTER CONNECTED AND INTER RELATED AND RELATES TO CHALLENGING THE ORDER OF LD. CIT(A) IN DELETING THE ADDITION MADE BY AO, WHEN THE ASSESSEE HAD FAILED TO DISCHARGE ITS ONUS, THEREFORE WE THOUGHT IT FIT TO DISPOSE OF THE SAME BY THIS COMMON ORDER. 4. WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD, JUDGMENT CITED BY THE PARTIES AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUA TE THE ORDERS PASSED BY LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROUNDS RAISED BY THE ASSES S EE IN PARA NO.4 5 I.T.A. NO. 3060 /MUM/201 7 M/S TRISHUL TRADERS PVT. LTD. OF ITS ORDER. THE OPERATIVE PORTI ON IS CONTAINED IN PARA NO. 4.8 TO 4.16 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - 4.8. I HAVE CO NSIDERED THE FACTS ON RECORD, THE ASSESSMENT ORDER, THE REMAND REPORT AND RIVAL CONTENTIONS CAREFULLY. THE APPELLANT IS AN EXISTING IS AN EXISTING PROFIT MAKING COMPANY ENGAGED IN TRADING IN SHARES AND SECURITIES. THERE HAS BEEN INCREASE IN SHARE CAPITAL I N THE CURRENT YEAR. THE ASSESSING OFFICER HAS OBSERVED THAT SHARES WERE ALLOTTED TO SISTER CONCERNS, THOUGH ALSO AT PREMIUM, BUT AT LOWER PREMIUM THAN THAT AT WHICH IT IS ALLOTTED TO OTHER THIRD PARTY COMPANIES. THIS HAS BEEN VIEWED ADVERSELY BY THE ASSESS ING OFFICER. THE APPELLANT HAS EXPLAINED THAT THIS IS ON ACCOUNT AMALGAMATION OF THREE COMPANIES AND SHARES WERE ISSUED TO THE SHAREHOLDERS OF THE AMALGAMATING COMPANIES AT BOOK VALUE. THOUGH THIS WAS EXPLAINED IN THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS IGNORED THE EXPLANATION. THE ASSESSING OFFICER HAS NOT ADDRESSED THE CONTENTION OF THE APPELLANT THAT THE INVESTOR COMPANIES ARE NOT PRAVEEN JAIN COMPANIES BY BRINGING ON RECORD ANY EVIDENCE TO LINK THE INVESTOR COMPANIES TO SHRI PRAVEEN JA IN. 4.9. I DO NOT FIND ANY MERIT IN THE CONTENTION OF THE APPELLANT THAT THE INVESTMENT BEING A SHARE CAPITAL IS A 6 I.T.A. NO. 3060 /MUM/201 7 M/S TRISHUL TRADERS PVT. LTD. CAPITAL RECEIPT AND THEREFORE CANNOT BE CONSIDERED AS INCOME IN THE HANDS OF THE APPELLANT. THE CREDITS FALL WITHIN THE SCOPE OF SECTION 68 WHICH IS A DEEMING PROVISION. SEVERAL CASE LAWS INCLUDING THOSE OF THE APEX COURT AND HIGH COURT HAVE CONSIDERED CREDITS MADE TO CAPITAL ACCOUNT OF THE ASSESSEE'S TO BE COVERED UNDER THE PROVISIONS OF SECTION 68 AND THEREFORE DEEMED INCOME. THE RULE FOR APPLICA TION OF SECTION 68 IS THAT THE IDENTITY AND CREDIT WORTHINESS OF THE INVESTOR/LENDER /CREDITOR HAS TO BE ESTABLISHED AND THE GENUINENESS OF THE TRANSACTION HAS TO BE ESTABLISHED. 4.10. THE APEX COURT UPHELD THE ADDITION U/S 68 IN THE CASE OF CREDITS AS SHA RE CAPITAL IN THE CASE OF N. TARIKA PROPERTY INVEST. (P.) LTD. V. COMMISSIONER OF INCOME - TAX*[2014] 51 TAXMANN.CO M 387 (SC) BY DISMISSING THE SL P FILED BY THE APPELLANT. 4.11. IN THE REMAND REPORT CALLED THE ASSESSING OFFICER WAS CLEARLY GIVEN A FREE HAND TO BRING IN ANY EVIDENCE THAT SPECIFICALLY LINKED THE APPELLANT COMPANY RECEIVING SHARE CAPITAL MONEY IN LIEU OF CASH. NO SPECIFIC PERSON WAS SPECIFIED AND IT WAS STATED AS A GENERAL PROPOSITION THAT FOR ANY STATEMENT TO BE USED AGAINST THE APPELLANT, AN O PPORTUNITY OF CROSS EXAMINATION MUST BE PROVIDED. THE ASSESSING OFFICER HAS MADE EFFORTS TO BRING IN SHRI PRAVEEN JAM, BUT HAS NOT OBTAINED ANY STATEMENT INCRIMINATING THE APPELLANT. 7 I.T.A. NO. 3060 /MUM/201 7 M/S TRISHUL TRADERS PVT. LTD. THE STATEMENT RECORDED OF SHRI PRAVEEN JAIN ON 9.1.2017 DOES APPEAR TO BE MEANDERING AND TOO SHORT FOR THE THREE HOURS FOR WHICH SHRI JAIN ATTENDED. NOT A SINGLE QUESTION RELATING TO THE INVESTORS IN THIS CASE WAS ASKED. IT IS ALSO NOTED THAT THERE IS NOTHING ASKED NOR CONFIRMED TO LINK THE INVESTOR COMPANIES IN THIS CASE TO SH RI PRAVEEN JAM, MUCH, LESS LINK IT TO THE APPELLANT COMPANY. 4.12. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THOUGH THE CONCLUSIONS OF THE INVESTIGATION WING HAS BEEN REFERRED TO IN THE ASSESSMENT ORDER, THERE ARE NO SPECIFIC REFERENCE TO THE APPELLANT COMPANY. THERE ARE NO EVIDENCES TO SHOW THAT THERE IS ANY CASH TRAIL IN RESPECT OF THE AMOUNTS RECEIVED BY THE APPELLANT COMPANY FROM THE INVESTORS. THOUGH THE AO WAS SPECIFICALLY ASKED TO FURNISH SPECIFIC INCRIMINATING EVIDENCES, IT IS NOTED THAT THE AO H AS NOT BEEN ABLE TO PIN POINT THE SPECIFIC EVIDENCES WHICH WOULD CLEARLY SHOW THAT THE SHARE APPLICATION MONEY HAS BEEN RECEIVED IN LIEU OF CASH. THE FACT REMAINS THAT THE INVESTOR COMPANIES ARE ASSESSED TO TAX AND HAVE FILED THEIR RETURNS OF INCOME. NOTIC ES U/S 133(6) WERE SERVED ON THE INVESTORS EXCEPT IN 2 CASES AND EVEN THEN REPLIES WERE FILED BY ALL OF THEM LATER, AND THEREFORE IT CANNOT BE SAID THAT THE 8 I.T.A. NO. 3060 /MUM/201 7 M/S TRISHUL TRADERS PVT. LTD. PARTIES DID NOT EXIST AT THEIR ADDRESSES. COPY OF BANK STATEMENT, LEDGER ACCOUNT, SHARE APPLICATION FORM, BOARD RESOLUTION AUTHORIZING INVESTMENTS, INCOME TAX RETURN AND AUDITED ACCOUNTS OF THE INVESTOR COMPANIES HAVE BEEN FILED BEFORE THE ASSESSING OFFICER AND ALSO IN THE APPELLATE PROCEEDINGS. 4.13. THE INVESTMENT AND THE CORRESPONDING SOURCE OF FUNDS OF INVESTOR AS SEEN FROM THE COPY OF THEIR AUDITED ACCOUNTS FOR FY 2006 - 07 IS TABULATED BELOW. SR.N O. NAME OF THE SHAREHOLDER TOTAL AMOUNT INVESTED SHARE CAPITAL AND RESERVES PROFIT AS P & L ACCOUNT 1 M/S. KAVYA SHARE 86 SECURITIES PVT. LTD. 30,00,000 2,24,81,101 3,86,824 2 M/S.DEV SHARE TRADING PVT. LTD. 30,00,000 2,46,10,675 5,00,568 3 M/S. PRAJAN TRADING PVT. LTD. 30,00,000 3,03,55,461 5,20,299 4 M/S. ARAWALLI STOCK BROKING PVT LTD 30,00,000 1,63,90,103 4,87,875 5 M/S. COLOURUNION INTERNATIONAL PVT. LTD. 50,00,000 2,30,51,700 3,43,358 6 M/S.RAMDEV SHARES & SECURITIES PVT. LTD. NOW KNOWN AS KOINA TRADING P. LTD 1,00,00,00 0 2,97,72,514 21,69,240 7 M/S. JASOL MAA SHARE TRADING 1,00,00,00 0 4,11,30,413 5,32,200 9 I.T.A. NO. 3060 /MUM/201 7 M/S TRISHUL TRADERS PVT. LTD. 8 YASHITA TRADING PVT. LTD. 95,00,000 41,58,066 PLUS SHARE APPLICATION MONEY 40,00,000 ( - ) 42177 9 ASHRITA TRADING CO. PVT. LTD. 85,00,000 50,83,061 PLUS SHARE APPLICATION MONEY 50,00,000 ( - ) 40,851 10 ACCURATE MULTITRADE PVT. LTD. 25,00,000 42,28,354 PLUS SHARE APPLICATION MONEY 4 0,00,000 ( - ) 2,460/ - TOTAL 5,75,00,00 0 IN THE CASE OF KOINA TRADING PVT. LTD., COPY OF ASSESSMENT ORDER U/S 143(3) FOR AY 12 - 13 PASSED BY ITO 14(2)(2) WAS ALSO FILED. 4.14. IT CAN BE SEEN FROM THE OBSERVATION OF THE ASSESSING OFFICER THAT HE HAS ONLY REFERRED TO THE INFORMATION RELATED TO THE OUTCOME OF SEARCH IN THE CASE OF SHRI PRAVIN KUMAR JAIN GROUP WHO WERE PROVIDING ACCOMMODATION ENTRIES BUT THE LD.ASSESSING OFFIC ER HAS FAILED TO DEMONSTRATE ANY SUCH EVIDENCE THAT THE APPELLANT HAS IN REALITY OBTAINED ANY ACCOMMODATION ENTRIES. THERE IS NO DIRECT SPECIFIC MENTION OF THE APPELLANT BY THE DIRECTOR OR KEY PERSONS OF THE INVESTOR COMPANY. THERE IS NO EVIDENCE OF CASH 10 I.T.A. NO. 3060 /MUM/201 7 M/S TRISHUL TRADERS PVT. LTD. D EPOSITS LINKED TO THE INVESTORS. THE ASSESSING OFFICER DID NOT BRING SPECIFIC INCRIMINATING EVIDENCE LINKING THE INVESTOR TO THE APPELLANT. THE ONLY LINK IS THAT THE INVESTORS HAVE INVESTED IN APPELLANT COMPANY. THAT THE APPELLANT HAS GIVEN CASH TO THE INV ESTORS IN LIEU OF ENTRY IS MERELY ALLEGED BUT NOT DEMONSTRATED. OP PORTUNITY FOR CROSS EXAMINATION WAS PR OVIDED TO THE APPELLANT IN THE REMAND PROCEEDING S BUT SHRI PRAVEEN JAIN DID NOT CONFIRM THAT ANY ACCOMMODATION ENTRIES WERE PROVIDED. PAPERS/EVIDENCE FO UND IN THE SEARCH ACTION RAISES PRESUMPTION BUT THE SAME IS AVAILABLE IN THE CASE OF PERSON, SEARCHED BUT NOT IN THE CASE OF THIRD PARTIES UNLESS PROVED AND CORROBORATED. SIMILARLY, RETRACTION MAY BE REJECTED AS MOTIVATED, BUT THE SAME CAN BE CONSIDERED ON LY AGAINST THE PERSON WHO HAS RETRACTED IN HIS ASSESSMENT. SUCH STATEMENT IN THE CASE OF ANOTHER PERSON LOSES ITS SANCTITY UNLESS OPPORTUNITY OF CROSS EXAMINATION IS GRANTED AND /OR IS CORROBORATED WITH OTHER EVIDENCES. IN THE PRESENT CASE EVEN THE BASIC P REMISE THAT THE INVESTOR COMPANIES BELONG TO PRAVEEN JAIN IS NOT SHOWN. WHEN THE INVESTOR COMPANY IS FILING REGULAR RETURN OF INCOME AND THERE IS A TRANSACTION THROUGH BANKING CHANNEL, NO ADDITION CAN BE MADE WITHOUT HAVING ANY CONTRARY OR COGENT EVIDENCES IN POSSESSION. OVER SUCH ISSUE THERE ARE PLETHORA OF JUDGEMENTS TO SUPPORT THE APPELLANT. SOME OF THEM ARE DISCUSSED HERE BELOW: - 11 I.T.A. NO. 3060 /MUM/201 7 M/S TRISHUL TRADERS PVT. LTD. (I) THE HON'BLE SUPREME COURT IN THE CASE OF CIT V/S LOVELY EXPORTS 6 DTR 308 HAS HELD AS UNDER: IF THE SHARE APPLICATION MON EY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHARE HOLDERSWHO'S NAME ARE GIVEN TO THE ASSESSING OFFICER THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW BUT IT CANNOT BE REGARDED AS UNDISCLOS ED INCOME OF ASSESSEE COMPANY'. (II) THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V/S CREATIVE WORLD TELEFLIMS LTD 333 ITR 100 HAS HELD AS UNDER: 'IF THE SHARE APPLICATION MONEY IS - RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHARE HOLDERS WHO'S NAME ARE GIVEN TO THE ASSESSING OFFICER THEN THE DEPARTMENT CAN ALWAYS PROCEED AGAINST THEM AND IF NECESSARY REOPEN THEIR INDIVIDUAL ASSESSMENTS. HELD, DISMISSING THE APPEAL, THAT THERE WAS NO DISPUTE THAT THE ASSESSEE HAD GIVEN THE DETAILS OF NAMES AND ADDRESSES OF THE SHAREHOLDERS, THEIR PAN/ GIR NUMBERS AND HAD ALSO GIVEN THE CHEQUE NUMBERS, NAME OF THE BANKERS. THE ASSESSING OFFICER OUGHT TO HAVE FOUND OUT THEIR DETAILS THROUGH PAN CARDS, BANK REHOLDERS. THUS, THE VIEW TAKEN BY THE TRIBUNAL COULD NOT BE FAULTED. 12 I.T.A. NO. 3060 /MUM/201 7 M/S TRISHUL TRADERS PVT. LTD. (III) THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. ORISSA CORPORATION REPORTED IN 159 ITR 78 (SC) HAS HELD AS UNDER: 'THAT IN THIS CASE THE RESPONDENT HAD GIVEN THE NAMES AND ADDRESSES OF THE ALLEGED CREDITORS. IT WAS IN THE KN OWLEDGE OF THE REVENUE THAT THE SAID CREDITORS WERE INCOME - TAX ASSESSEE'S. THEIR INDEX NUMBERS WERE IN THE FILE OF THE REVENUE. THE REVENUE, APART FROM ISSUING NOTICE UNDER SECTION 131 AT THE INSTANCE OF THE RESPONDENT, DID NOT PURSUE THE MATTER FURTHER. T HE REVENUE DID NOT EXAMINE THE SOURCE OF INCOME OF THE SAID ALLEGED CREDITORS TO FIND OUT WHETHER THEY ARE CREDITWORTHY. THERE WAS NO EFFORT MADE TO PURSUE THE SO - CALLED ALLEGED CREDITORS. IN THOSE CIRCUMSTANCES, THE RESPONDENT COULD NOT DO ANYTHING FURTHE YN THE PREMISES, IF THE TRIBUNAL CAME TO THE CONCLUSION THAT TH.NE RESPONDENT HAD DISCHARGED THE BURDEN THAT LAY ON IT, THEN, IT COULD NOT BE SAID THAT SUCH A CONCLUSION WAS UNREASONABLE OR PERVERSE OR BASED ON NO EVIDENCE'. RELIANCE IS ALSO PLACED ON THE FOLLOWING DECISIONS: I. HON'BLE DELHI HIGH COURT IN CASE OF COMMISSIONER OF INCOME TAX V/S. VALUE CAPITAL SERVICES P.LTD. (2008) 307 ITR 334 (DELHI). 13 I.T.A. NO. 3060 /MUM/201 7 M/S TRISHUL TRADERS PVT. LTD. II. HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX V/S. GP INTERNATIONAL LTD. (2010) 325 ITR 25 (P&H). III. HON'BLE MADRAS HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX V/S. ELECTRO POLYCHEM LTD (2007)294 ITR 661 (MAD). IV. HON'BLE RAJASTHAN HIGH COURT IN CASE OF COMMISSIONER OF INCOME TAX V/S. AKJ GRANITES P.LT4. (2008) 301 ITR 298 (RAJ.) V. HON'BLE DELHI HIGH COURT IN CASE OF COMMISSIONER OF INCOME TAX V/S. OASIS HOSPITALITIES PVT.) LTD. (2011) 51 DTR 74 (DELHI). SEC. 69 PLACES THE BURDEN OF PROOF ON THE TAX PAYER TO EXPLAIN THE NATURE AND SOURCE OF ANY CREDIT FOUND IN T HE BOOKS. BUT, WHEN ASSESSEE PROVES OR SUBMIT THE BASIC INFORMATION LIKE IDENTIFICATION, GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF THE CREDITORS, ONUS IS DISCHARGED BY HIM AND IF ASSESSING OFFICER DISBELIEVE THE GENUINENESS OF THE SAME, HE HAS TO PROVE OTHERWISE, MERELY, DOUBTING OR POINTING OUT SOME DISCREPANCY IS NOT THE FOUNDATION FOR DISCARDING THE GENUINENESS OF THE DEPOSIT OR SHARE MONEY OR SUBSTANCE OF THE MATTER, HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. GUJARAT - HEAVY CHEMICA LS LTD. (2002)256 ITR 795 (SC). 14 I.T.A. NO. 3060 /MUM/201 7 M/S TRISHUL TRADERS PVT. LTD. IN VIEW OF THE ABOVE THE QUESTION OF MAKING ANY ADDITION U/S. 68 OF THE ACT DOES NOT ARISE.' 4.15.FURTHER, HON'BLE JURISDICTIONAL ITAT IN THE CASE OF ITO - 10(2)(3) VS. M/S J.J. MULTITRADEPVT.LTD. ITA NO.2158 & 2159/MUM/2014 O RDER DATED 11.03.2015 HAS DELETED ADDITIONS ON SIMILAR FACTS. FURTHER, THT: HO'BLE JURISDICTIONAL ITAT IN THE CASE OF M/S S.D.B. ESTATE PVT.L D. VS ITO - 5(3)(2) ITA NO.584/M/2015 HAS DELETED SIMILAR ADDITION MADE U/S 68 OF THE I.T. ACT. THE HON'BLE ITAT (JA IPUR BENCH)IN THE CASE OF BHARTI SYNTEX LTD. VS. DCIT ITA NOS. 172 & 173/JP/2010 HAS HELD IN PARA 24.4 AS UNDER: - '24.4 IN THIS CASE ALSO NO CROSS EXAMINATION WAS ALLOWED TO THE ASSESSEE. THEREFORE, ADVERSE INFERENCE CANNOT BE DRAWN ONLY ON THE STATEMENT O F SHRI MUKESHCHOKSI. WE FURTHER NOTED THAT ALL OTHER NECESSARY DETAILS HAVE BEEN FILED BEFORE AG. AMOUNTS WERE RECEIVED THROUGH ACCOUNT PAYEE CHEQUE. BOTH THE COMPANIES ARE ASSESSED TO TAX IN MUMBAI. CONFIRMATION ALONG WITH COPIES OF SHARE CERTIFICATE, BAN K STATEMENT, MEMORANDUM OF ARTICLES, COPY OF SHARE APPLICATION MONEY, AUDITED BALANCE SHEET AND P&L A/C OF THESE PARTIES WERE FILED. THESE ARE SIMILAR DETAILS AS WERE FILED IN CASE OF THREE OTHER COMPANIES FOR ASST. YR. 2005 - 06. WE HAVE ALREADY DISPOSED OF THE APPEAL FOR 15 I.T.A. NO. 3060 /MUM/201 7 M/S TRISHUL TRADERS PVT. LTD. ASST. YR. 2005 - 06 WHEREBY WE HAVE HELD THAT THE ASSESSEE HAS DISCHARGED ITS ONUS BY FILING NECESSARY DETAILS AND FURTHER HAVE RELIED ON THE DECISIONS OF HON'BLE SUPREME COURT AND HON'BLE DELHI HIGH COURT ALONGWITH VARIOUS OTHER DECISIONS OF TRIBUNAL AND HAVE HELD THAT ADDITION CANNOT BE MADE UNDER S. 68 IN THE HANDS OF THE ASSESSEE COMPANY. THEREFORE, IN VIEW OF THE SAME REASONING, WE CANCEL THE ENTIRE ADDITION MADE AND CONFIRMED BY THE LOWER AUTHORITIES HERE ALSO. THE ABOVE DECISION OF I TAT ALSO RELATED TO MR.MUKESHCHOKSI'S CASE OF INVESTMENT IN SHARE APPLICATION MONEY. ON PERUSAL OF ABOVE CASE IT IS CLEAR THAT IF A BOGUS SHAREHOLDER HAS INVESTED THE MONEY AND IF APPELLANT RECEIVES SUCH MONEY AS SHARE APPLICATION MONEY AND APPELLANT DURING A SSESSMENT PROCEEDINGS PROVIDES THE DETAILS LIKE NAME &ADDRESS OF THE CORPORATE ENTITY, PAN NO., ROC NO., THEN ITAT HELD THAT THIS MAY BE REFERRED TO THE CONCERNED A. 0. OR PROCEEDING AGAINST SUCH BOGUS SHAREHOLDERS INSTEAD OF ADDING - ,AMOUNT U/S 68 OF THE IT ACT IN THE NAME OF THE COMPANY' THE APPELLANT HAS REFERRED TO THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF M/S GREEN INFRA LTD. ITA 1162 OF 2014. I HOWEVER FIND THAT THE FACTS IN THAT CASE WERE SOMEWHAT DIFFERENT, THOUGH THE 16 I.T.A. NO. 3060 /MUM/201 7 M/S TRISHUL TRADERS PVT. LTD. QUESTION REG ARDING HIGH PREMIUM AT WHICH SHARES WERE ISSUED WAS RAISED BY THE DEPARTMENT. 4.16. IT IS NOTED THAT NO SPECIFIC INCRIMINATING MATERIAL LINKING INVESTOR TO THE APPELLANT OR SHOWING THE INVESTMENT TO BE BOGUS IS PROVIDED. ALSO OPPORTUNITY FOR CROSS EXAMINATION DID NOT ADVANCE THE CASE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER H AS NOT BEEN ABLE TO BRING ON RECORD ANY DIRECT OR CORROBORATIVE EVIDENCE THAT THE SHARE APPLICATION MONEY RECEIVED IS UNEXPLAINED AS COVERED U/S 68 EVEN AFTER OPPORTUNITY WAS GIVEN IN THE REMAND PROCEEDINGS. NO STATEMENT OF SHRI PRAVEEN JAIN NAMES THE APPE LLANT SPECIFICALLY. IN ANY CASE, IT IS CARDINAL PRINCIPLE OF NATURAL JUSTICE, THAT BEFORE CONCLUSIONS ARE DRAWN AGAINST A PERSON BASED ON STATEMENT OF A THIRD PARTY, HE MUST BE ALLOWED AN OPPORTUNITY FOR CROSS EXAMINATION. - THIS HAS NOT BEEN PROVIDED. IN THIS FACT MATRIX, AND THE JUDICIAL DECISIONS COVERING THE SCOPE OF SECTION 68, THE ADDITION MADE OF RS 575,00,000 LAKHS U/S 68 IN THE CASE OF THE APPELLANT IS DELETED. THE GROUNDS OF APPEAL IS ALLOWED. 5 . AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE AS WELL AS ORDERS PASSED BY THE REVENUE AUTHORITIES, WE FIND THAT LD. CIT(A) AFTER APPRECIATING THE FACTS OF THE PRESENT CASE HAD 17 I.T.A. NO. 3060 /MUM/201 7 M/S TRISHUL TRADERS PVT. LTD. NOTICED FROM THE RECORDS THAT ASSESSEE WAS AN EXISTING PROFIT MAKING C OMPANY ENGAGED IN THE BUSINESS OF TRADING IN SHARES AND SECURITIES. SINCE THERE WAS AN INCREASE IN SHARE CAPITAL, THEREFORE THE AO OBSERVED THAT SHARES WERE ALLOTTED TO SISTER CONCERNS, THOUGH AT A PREMIUM, BUT AT LOWER PREMIUM THAN THAT AT WHICH IT WAS AL LOTTED TO OTHER THIRD PARTY COMPANIES. AFTER SEEKING EXPLANATION FROM THE ASSESSEE, MADE THE ADDITIONS U/S 68 OF THE ACT. THE LD. CIT(A) DURING THE APPELLATE PROCEEDINGS AFTER APPRECIATING THE FACTS HAD SOUGHT REMAND REPORT FROM THE AO WITH A VIEW TO GIVE FREE HAND TO THE AO FOR BRINGING IN ANY EVIDENCE THAT SPECIFICALLY LINKED THE ASSESSEE COMPANY RECEIVING SHARE CAPITAL MONEY IN LIEU OF CASH. ALTHOUGH, THE AO HAD RELIED UPON THE STATEMENT OF SHRI PRAVEEN JAIN, BUT COULD NOT POINT OUT ANY PORTION OF THE ST ATEMENT OF THE SAID PRAVEEN JAIN TO LINK THE INVESTOR COMPANIES. APART FROM THIS, EVEN NO EVIDENCE HAS BEEN BROUGHT ON RECORD TO LINK THE ASSESSEE COMPANY WITH THE SAID PRAVEEN JAIN. MORE SO, THERE WAS NO EVIDENCES TO SHOW THAT THERE WAS ANY CASH TRAIL IN RESPECT OF THE A MOUNTS RECEIVED BY THE ASSESSEE COMPANY FROM THE INVESTORS. WE NOTICED THAT T HOUGH THE AO WAS SPECIFICALLY ASKED TO FURNISH SPECIFIC INCRIMINATING 18 I.T.A. NO. 3060 /MUM/201 7 M/S TRISHUL TRADERS PVT. LTD. EVIDENCES, BUT THE AO WAS UNABLE TO PIN POINT THE SPECIFIC EVIDENCES WHICH C OULD CLEARLY SHOW THAT THE SHARE APPLICATION MONEY WAS RECEIVED IN LIEU OF CASH. IT IS AN ADMITTED FACT THAT THE INVESTOR COMPANIES WERE ASSESSED TO TAX AND HAD FILED THEIR RETURNS OF INCOME. THE N OTICES U/S 133(6) WERE COMPLIED WITH BY THE PARTIES AND COPY OF BANK STATEME NT, LEDGER ACCOUNT, SHARE APPLICATION FORM, BOARD RESOLUTION AUTHORIZING INVESTMENTS, INCOME TAX RETURN AND AUDITED ACCOUNTS OF THE INVESTOR COMPANIES WERE FILED BEFORE THE ASSESSING OFFICER AND LD. CIT(A). WE ALSO CONSIDERED T HE INVESTMENT AND THE CORRESP ONDING SOURCE OF FUNDS OF INVESTOR AS SEEN FROM THE COPY OF THEIR AU DITED ACCOUNTS FOR FY 2006 - 07, WHICH ARE TABULATED IN PARA NO. 4.13 OF LD. CIT(A) AND THE SAME IS REPRODUCED BELOW. SR.N O. NAME OF THE SHAREHOLDER TOTAL AMOUNT INVESTED SHARE CAPITAL AND RESERVES PROFIT AS P & L ACCOUNT 1 M/S. KAVYA SHARE 86 SECURITIES PVT. LTD. 30,00,000 2,24,81,101 3,86,824 2 M/S.DEV SHARE TRADING PVT. LTD. 30,00,000 2,46,10,675 5,00,568 3 M/S. PRAJAN TRADING PVT. LTD. 30,00,000 3,03,55,461 5,20,299 4 M/S. ARAWALLI STOCK BROKING PVT LTD 30,00,000 1,63,90,103 4,87,875 19 I.T.A. NO. 3060 /MUM/201 7 M/S TRISHUL TRADERS PVT. LTD. 5 M/S. COLOURUNION INTERNATIONAL PVT. LTD. 50,00,000 2,30,51,700 3,43,358 6 M/S.RAMDEV SHARES & SECURITIES PVT. LTD. NOW KNOWN AS KOINA TRADING P. LTD 1,00,00,00 0 2,97,72,514 21,69,240 7 M/S. JASOL MAA SHARE TRADING 1,00,00,00 0 4,11,30,413 5,32,200 8 YASHITA TRADING PVT. LTD. 95,00,000 41,58,066 PLUS SHARE APPLICATION MONEY 40,00,000 ( - ) 42177 9 ASHRITA TRADING CO. PVT. LTD. 85,00,000 50,83,061 PLUS SHARE APPLICATION MONEY 50,00,000 ( - ) 40,851 10 ACCURATE MULTITRADE PVT. LTD. 25,00,000 42,28,354 PLUS SHARE APPLICATION MONEY 40,00,000 ( - ) 2,460/ - TOTAL 5,75,00,00 0 6. WE ALSO NOTICED THAT THE AO RECORDED HIS FINDINGS BY ONLY REFERRING TO THE INFORMATION RELATED TO THE OUTCOME OF SEARCH IN THE CASE OF SHRI PRAVIN KUMAR JAIN GROUP WHO WERE PROVIDING ACCOMMODATION ENTRIES . HOWEVER, THE AO FAILED TO LINK THE ASSESSEE IN OBTAINING ANY ACCOMMODATION ENTRIES. WE HAVE SEEN 20 I.T.A. NO. 3060 /MUM/201 7 M/S TRISHUL TRADERS PVT. LTD. NO EVIDENCE ON RECORD FROM W HICH IT CAN BE SHOWN THAT ANY CASH WAS DEPOSITED BY THE ASSESSEE IN THE ACCOUNTS OF THE INVESTORS. APART FROM ABOVE, NO INCRIMINATING EVIDENCE LINK ING THE INVESTOR TO THE ASSESSEE . 7. THE LD. CIT(A) HAD ALSO APPRECIATED THE FACT THAT THOUGH OPPORTUNITY OF CROSS EXAMINATION WAS PR OVIDED TO THE ASSESSEE IN THE REMAND PROCEEDINGS BUT SHRI PRAVEEN JAIN DID NOT CONFIRM THAT ANY ACCOMMODATION ENTRIES WERE PROVIDED. EVEN THE BASIC PREMISE THAT THE INVESTOR COMPANIES BELONG TO PRAVEEN JAIN WAS ALSO NOT PROVED. IT IS ALSO AN ADMITTED FACT THAT THE TRANSACTIONS IN THE PRESENT CASE WERE THROUGH BANKING CHANNEL AND THUS, IN SUCH CIRCUMSTANCES, AS PER THE SETTLED PROPOSITION OF LAW AS MENTIONED IN THE ORDERS OF LD. CIT(A) IN PARA NO. 4.14, NO ADDITIONS COULD BE MADE WIT HOUT ANY CONTRARY OR COGENT EVIDENCE. WE HAVE CONSIDERED THE JUDGMENT PASSED BY HONBLE SUPREME COURT IN THE CASE OF CIT V/S LOVELY EXPORTS 6 DTR 308 , WHEREIN IT WAS HELD AS UNDER: IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHARE HOLDERSWHO'S NAME ARE GIVEN TO THE ASSESSING OFFICER 21 I.T.A. NO. 3060 /MUM/201 7 M/S TRISHUL TRADERS PVT. LTD. THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF ASSESSEE COMPANY'. 8. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V/S CREATIVE WORLD TELEFLIMS LTD 333 ITR 100 HAS HELD AS UNDER: 'IF THE SHARE APPLICATION MONEY IS - RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED B OGUS SHARE HOLDERS WHO'S NAME ARE GIVEN TO THE ASSESSING OFFICER THEN THE DEPARTMENT CAN ALWAYS PROCEED AGAINST THEM AND IF NECESSARY REOPEN THEIR INDIVIDUAL ASSESSMENTS. HELD, DISMISSING THE APPEAL, THAT THERE WAS NO DISPUTE THAT THE ASSESSEE HAD GIVEN TH E DETAILS OF NAMES AND ADDRESSES OF THE SHAREHOLDERS, THEIR PAN/ GIR NUMBERS AND HAD ALSO GIVEN THE CHEQUE NUMBERS, NAME OF THE BANKERS. THE ASSESSING OFFICER OUGHT TO HAVE FOUND OUT THEIR DETAILS THROUGH PAN CARDS, BANK REHOLDERS. THUS, THE VIEW TAKEN BY THE TRIBUNAL COULD NOT BE FAULTED. 9. THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. ORISSA CORPORATION REPORTED IN 159 ITR 78 (SC) HAS HELD AS UNDER: 22 I.T.A. NO. 3060 /MUM/201 7 M/S TRISHUL TRADERS PVT. LTD. 'THAT IN THIS CASE THE RESPONDENT HAD GIVEN THE NAMES AND ADDRESSES OF THE ALLEGED CREDITORS. IT WAS IN THE KNOWLEDGE OF THE REVENUE THAT THE SAID CREDITORS WERE INCOME - TAX ASSESSEE'S. THEIR INDEX NUMBERS WERE IN THE FILE OF THE REVENUE. THE REVENUE, APART FROM ISSUING NOTICE UNDER SECTION 131 AT THE INSTANCE OF THE RESPONDENT, DID NOT PURSUE THE M ATTER FURTHER. THE REVENUE DID NOT EXAMINE THE SOURCE OF INCOME OF THE SAID ALLEGED CREDITORS TO FIND OUT WHETHER THEY ARE CREDITWORTHY. THERE WAS NO EFFORT MADE TO PURSUE THE SO - CALLED ALLEGED CREDITORS. IN THOSE CIRCUMSTANCES, THE RESPONDENT COULD NOT DO ANYTHING FURTHEYN THE PREMISES, IF THE TRIBUNAL CAME TO THE CONCLUSION THAT TH.NE RESPONDENT HAD DISCHARGED THE BURDEN THAT LAY ON IT, THEN, IT COULD NOT BE SAID THAT SUCH A CONCLUSION WAS UNREASONABLE OR PERVERSE OR BASED ON NO EVIDENCE'. 10. RELIANCE WA S ALSO PLACED ON THE FOLLOWING DECISIONS: I. HON'BLE DELHI HIGH COURT IN CASE OF COMMISSIONER OF INCOME TAX V/S. VALUE CAPITAL SERVICES P.LTD. (2008) 307 ITR 334 (DELHI). II. HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX V/S. GP INTERNATIONAL LTD. (2010) 325 ITR 25 (P&H). 23 I.T.A. NO. 3060 /MUM/201 7 M/S TRISHUL TRADERS PVT. LTD. III. HON'BLE MADRAS HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX V/S. ELECTRO POLYCHEM LTD (2007)294 ITR 661 (MAD). IV. HON'BLE RAJASTHAN HIGH COURT IN CASE OF COMMISSIONER OF INCOME TAX V/S. AKJ GRANITES P.LT4. (2008)301 ITR 298 (RAJ.) V. HON'BLE DELHI HIGH COURT IN CASE OF COMMISSIONER OF INCOME TAX V/S. OASIS HOSPITALITIES PVT.) LTD. (2011) 51 DTR 74 (DELHI). SEC. 69 PLACES THE BURDEN OF PROOF ON THE TAX PAYER TO EXPLAIN THE NATURE AND SOURCE OF ANY CREDIT FOUND IN THE BOOKS. BUT, WHEN ASSESSEE PROVES OR SUBMIT THE BASIC INFORMATION LIKE IDENTIFICATION, GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF THE CREDITORS, ONUS IS DISCHARGED BY HIM AND IF ASSESSING OFFICER DISBELIEVE THE GENUINENESS OF THE SAME, HE HAS TO PROVE OTHERWISE, MERELY, DOUBTING OR POINTING OUT SOME DISCREPANCY IS NOT THE FOUNDATION FOR DISCARDING THE GENUINENESS OF THE DEPOSIT OR SHARE MONEY OR SUBSTANCE OF THE MATTER, HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. GUJARAT - HEAVY CHEMICALS LTD. (2002)256 ITR 795 (SC). IN VIEW OF THE ABOVE THE QUESTION OF MAKING ANY ADDITION U/S. 68 OF THE ACT DOES NOT ARISE.' 24 I.T.A. NO. 3060 /MUM/201 7 M/S TRISHUL TRADERS PVT. LTD. 11. APART FROM ABOVE, THE LD. AR HAD ALSO RELIED UPON OTHER DECISIONS OF THE COORDINATE BENCHES, BUT WHEN WE HAVE ALREADY RELIED UPON THE JUDGMENTS OF HONBLE SUPREME COURT AND JURISDICTIONAL HIGH COURT, THEREFORE THERE IS NO NEED TO RELY ON THE ORDERS OF THE COORDINATE BENCHES ON THE SAME POINT. 12. MOREOVER, N O NEW FACTS O R CONTRARY JUDGMENTS HAVE B EEN BROUGHT ON RECORD I N ORDER TO CONTROVERT OR REBUT THE FINDINGS SO RECORDED BY LD. CIT(A). THEREFORE, THERE ARE NO REASON S FOR US TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS SO RECORDED BY THE LD.CIT(A). HENCE , WE ARE OF THE CONSIDERED VIEW THAT THE FIND INGS SO RECORDED BY THE LD. CIT (A) ARE JUDICIOUS AND ARE WE LL REASONED. RESULTANTLY, THESE GROUND S RAISED BY THE REVENUE STANDS DISMISSED . GROUND NO. 4 & 5 . 13 . THESE GROUNDS RAISED BY THE REVENUE ARE GENERAL IN NATURE, THUS REQUIRES NO SPECIFIC ADJUDICATION. 25 I.T.A. NO. 3060 /MUM/201 7 M/S TRISHUL TRADERS PVT. LTD. 14 . IN THE NET RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED WITH NO ORDER AS TO COST. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH DEC , 2018 . SD/ - SD/ - ( SHAMIM YAHYA ) (SANDEEP GOSAIN) / A COUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 20 . 12 .201 8 SR.PS . DHANANJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI