M/S EVERFINE CONSTRUCTIONS PVT. LTD., MUMBAI V. DCIT CC-7(3), MUMBAI

ITA 3129/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4420 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 10-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Unexplained investment; Income from undisclosed sources; Loose papers; Share purchase agreement; Principle of natural justice; Opportunity of cross examination; Tangible material; Third party statement; Valuation report; Accommodation entries; Onus to prove; Retraction; Bogus loan; Reason to believe; Reassessment proceedings; Borrowed satisfaction
• Section: 143(3); 133A; 143(1); 69B; 43; 48; 13; 22; 131; 69; 148; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT) E BENCH, MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER ITA.NO. 3129 /MUM/201 9 (A.Y: 20 11 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., SHOP NO. 8, BOTAWALA BUILDING 82/86 RAGHAVJI ROAD, GOWALIA TANK MUMBAI - 400036 PAN: AACCE3674P V. DY. CIT CENTRAL CIRCLE - 7(3) AAYAKAR BHAVAN MUMBAI - 400020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RUSHABH MEHTA DEPARTMENT BY : SHRI SANJEEV KASHYAP DATE OF HEARING : 18 .06.2021 DATE OF PRONOUNCEMENT : 16 .09.2021 O R D E R PER C.N. PRASAD (JM) 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 49, MUMBAI [HEREINAFTER IN SHORT LD.CIT(A)] DATED 16.03.2019 FOR THE ASSESSMENT YEAR 2011 - 12. 2. ASSESSEE HAS RAISED FOLLOWING GROUNDS IN ITS APPEAL: - 2 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., 1. THE ORDER PASSED U/S. 143(3) R.W.S. 147 BY THE LD. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 7(3), MUMBAI ('THE LD . ASSESSING OFFICER') IS WITHOUT JURISDICTION, INVALID AND BAD IN LAW AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 2. (A) THE L D. COMMI SSIONER OF INCOME TAX (APPEALS) - 49, MUMBAI ('THE L D. C IT(A)') ERRED IN FACTS AND LAW I N CONFIRMING THE ACTION OF THE L D. ASSESSING OFFICER I N SUSTAINING AN ADDITION OF RS. 42,80,19.650/ - U/S. 68, MADE ON SUBSTANTIVE BASIS, AS UNEXPLAINED INVESTMENT BEING MADE IN THE SHARES OF M/S. GULMOHAR TOWERS PVT. LTD SOLE LY ON HIS OWN SUSPICION, SURMISES AND CONJECTURES DEVOID OF ANY ADVERSE MATERIAL AND WITHOUT APPRECIATING THE EXPLANATIONS PROVIDED AND THE EVIDENCES PLACED ON RECORD. (B) THE L D. CIT(A) ERRED IN FACTS AND LAW IN NOT APPRECIATING THAT THERE IS NO POSSIBILI TY THAT THE APPELLANT COMPANY COULD HAVE GENERATED UNACCOUNTED INCOME IN THE YEAR UNDER CONSIDERATION AS IT WAS JUST INCORPORATED ON 13 - 04 - 2010 AND HAD NOT EVEN COMMENCED ITS BUSINESS OPERATIONS. (C) THE L D. CIT(A) / ASSESSING OFFICER ERRED IN FACTS AND LAW IN RELYING UPON UNCONFRONTED STATEMENTS OF THIRD PARTIES AND NOT EVEN PROVIDING ANY OPPORTUNITY OF CROSS EXAMINATION OF SUCH PARTIES. 3. THE FIRST ISSUE IN THE APPEAL OF THE ASSESSEE IS THAT THE VALIDITY O F THE ASSESSMENT ORDER PASSED U/S.143(3) R.W.S. 147 OF THE ACT IS CHALLENGED ON THE GROUNDS OF NO JURISDICTION, INVALID, BAD IN LAW AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY WAS INCORPORATED ON 13.04.2010. A SEARCH AND SURVEY ACTION WAS CARRIED OUT ON 09.10.2014 AT THE OFFICES OF LOTUS/KAMDHENU/GREEN VALLEY GROUP /PATEL - PATNI GROUP AND THEIR ASSOCIATES AND AT THE RESIDENCES OF 3 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., THEIR DIRECTORS . EVEN SURVEY U/S. 133A WAS CONDUCTED AT CERTAIN PREMISES. T HE CASE OF THE ASSESSEE COMPANY WAS REOPENED U/S.147 OF THE ACT VIDE NOTICE U/S.148 OF THE ACT DATED 10.01.2017 FOR THE YEAR UNDER CONSIDERATION . THE REASONS FOR REOPENING WERE PROVIDED BY THE ASSESSING OFFICER WHEREIN REFERENCE WAS MADE TO STAT EMENT OF SHRI KHIMJI KARAMSHI PATEL WHICH WAS RECORDED DURING THE COURSE OF SURVEY U/S.133A OF THE ACT ON 11.10.2014 CONDUCTED AT 3 RD FLOOR, DEVAL CHAMBERS, NANABHAI LANE, FORT, MUMBAI . IT WAS STATED BY HIM THAT INVESTMENT OF .42,80,19,650/ - IN M/S.GULMOH AR TOWERS PVT. LTD. WAS NOT REFLECTED IN THE REGULAR BOOKS OF ACCOUNT OF THE ASSESSEE COMPANY AND HAD ADMITTED DISCLOSING THE SAME AS UNDISCLOSED INVESTMENT OF ASSESSEE COMPANY FOR THE YEARS STARTING FROM F.Y. 2010 - 11 TO F.Y. 2013 - 14. IN THE ASSESSMENT PROCEEDINGS, THE ASSESSEE OBJECTED TO THE REOPENING AND SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION, IT HAD PURCHASED MAJORITY STAKE IN M/S.GULMOHAR TOWERS PVT. LTD. BY PURCHASING 22,62,835 EQUITY SHARES FOR A TOTAL CONSIDERATION OF .2,26,28,350. A TTENTION WAS ALSO DRAWN TO THE FACT THAT RELIANCE WAS PLACED BY THE AO SOLELY ON THE STATEMENT OF SHRI KHIMJI KARAMSHI PATEL WHO WAS NEITHER THE DIRECTOR NOR SHAREHOLDER OF ASSESSEE COMPANY OR M/S.GULMOHAR TOWERS PVT. LTD. AND THUS HAD NO 4 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., LOCUS STANDI TO GIVE ANY STATEMENT ON BEHALF OF THE COMPANY. IT WAS ALSO POINTED OUT THAT THE STATEMENT WAS SUBSEQUENTLY RETRACTED WHEREIN IT WAS STATED THAT SHRI KHIMJI KARAMSHI PATEL HAD GIVEN THE STATEMENT UNDER PRESSURE AND DURESS ON THE PREMISE THAT THE SURVEY PROCEE DINGS WOULD CONTINUE UNLESS HE MADE SUCH A DECLARATION OF INCOME. IN SUPPORT OF THE INVESTMENT TRANSACTION OF . 2,26,28,350/ - , THE ASSESSEE HAD FURNISHED A COMPLETE BACKGROUND OF THE INVESTMENT PROPOSAL AND OTHER RELEVANT DOCUMENTARY EVIDENCES VIZ. DUE DILIGENCE REPORT, MEMORANDUM OF UNDERSTANDING (MOU) DATED 14 - 05 - 2010, SHARE CERTIFICATES, ETC. THE ASSESSEE ALSO AS SERTED THAT THE INVESTMENT TRANSACTION WAS DULY RECORDED IN ITS BOOKS OF ACCOUNT WHICH WAS ALSO AUDITED WITH NO ADVERSE REMARKS AND THAT NO CASH PAYMENT AS ALLEGED WAS MADE FOR INVESTMENT IN SHARES OF M/S. GULMOHAR TOWERS PVT. LTD. IT WAS FURTHER POINTED OUT THAT THE REASONS FOR REOPENING MENTIONED AT PARA 3 THAT THE GROUP HAS DISCLOSED AN AMOUNT OF .42,80,19,650/ - FOR RESPECTIVE YEARS STARTING FROM F . Y . 2010 - 11 TO FY 2013 - 14 AND ACCORDINGLY, THE CASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION COUL D NOT BE REOPENED. THE REASSESSMENT PROCEEDINGS INITIATED U/S.147 OF THE ACT WAS MERELY ON SUSPICION THAT CERTAIN INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT IN ABSENCE OF 5 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., ANY INDEPENDENT INQUIRY OR TANGIBLE MATERIAL TO ESTABLISH THE SAME. THE CONTENTIONS OF THE ASSESSEE WERE REJECTED BY THE ASSESSING OFFICER VIDE LETTER DATED 25.10.2017 . 5. ON APPEAL, THE L D. CIT(A) UPHELD THE VALIDITY OF THE REASSESSMENT PROCEEDINGS AND OBSERVED THAT SECTION 147 OF THE ACT MERELY STATES THAT THE ASSESSING OF FICER HAS TO HAVE REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND THAT REASON TO BELIEVE CAN BE ON THE BASIS OF ANY INFORMATION WHICH COMES TO HIS KNOWLEDGE OR POSSESSION WHICH IS MORE THAN ENOUGH FOR ANY REASONABLE PERSON TO FORM A BELIEF. SHE FURTHER OBSERVED THAT THE INFORMATION RECEIVED BY THE ASSESSING OFFICER WAS NOT ANY ANONYMOUS BUT AUTHENTICATED INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE SAME DEPARTMENT. COMING TO THE SATISFACTION OF THE ASSESSING OFFICER , THE LD . CIT(A) OBSERVED THAT THE VERY FACT THAT REASONS WERE RECORDED AND NOTICE U/S. 148 WAS ISSUED GOES TO SHOW THAT THE ASSESSING OFFICER HA D APPLIED HIS MIND AND HAD SATISFIED HIMSELF ABOUT THE REOPENING OF THE CASE. THE REASONS RECORDED WERE NOT VAG UE AND SCANTY BUT PRECISE AND CONCRETE. SHE OBSERVED THAT I N TH IS CASE, THE INFORMATION HA D COME FROM THE INVESTIGATION WING OF THE SAME 6 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., DEPARTMENT WITH SUPPORTING STATEMENTS AND MODUS OPERANDI AND THAT T HERE WAS NO REASON OR OCCASION TO DISBELIEVE TH E INF ORMATION. ASSESSING OFFICER SHOULD ONLY HAVE A REASON TO BELIEVE TO REOPEN A CASE WHEREIN H E NEED NOT ESTABLISH BEYOND DOUBT THAT THERE IS ESCAPEMENT BEFORE ISSUING THE NOTICE AND THE SAME CAN BE DONE AT THE TIME OF ASSESSMENT BUT NOT AT THE TIME OF ISSUE OF NOTICE. ACCORDINGLY, THE PLEA OF THE ASSESSEE CHALLENGING THE VALIDITY OF REASSESSMENT PROCEEDINGS WAS DISMISSED. 6. THE LD . COUNSEL FOR THE ASSESSEE SUBMITS THAT THE REOPENING OF ASSESSMENT IS DONE MERELY BASED ON THE STATEMENT RECORDED OF A THIRD PARTY PURSUANT TO SURVEY U/S.133A OF THE ACT AND DREW ATTENTION TO THE RELEVANT EXTRACT OF THE STATEMENT SHRI KHIMJI KARAMSHI PATEL RECORDED ON 11.10.2014 FORMING PART OF THE REASONS RECORDED. THE REASONS RECORDED ARE REPRODUCED BELOW FOR THE SAKE OF CONVENIENCE : - REASONS FOR REOPENING THE CASE OF M/S EVERFINE CONSTRUCTIONS P LTD FOR AY 2011 - 12 1. FOR AY 2010 - 11, THE ASSESSEE FILED RETURN OF INCOME ON 26 - 09 - 2011 DECLARING THE TOTAL INCOME AT NIL FOR AY 2011 - 12. THE RETURN WAS PROCESSED U/S 143(1) ON 21.01.2012. 2. ON PERUSAL OF APPRAISAL REPORT IT IS SEEN THAT DURING THE COURSE OF SEARCH PROCEEDINGS THE PATEL GROUP WAS FOUND TO HAVE RECEIVED APPROX. RS. 100 CRORES FROM VARIOUS KOLKATA BASED BOGUS COMPANIES IN FORM OF SHARE APPLICATION MONEY/ UNSECURED LOAN. OUT OF THI S, THEY DISCLOSED AROUND RS. 42 CRORES AS THEIR 7 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., UNDISCLOSED INCOME. THE RELEVANT PORTION OF THE STATEMENT OF SHRI KHIMJI KARAMSHI PATEL RECORDED U/S 131 ON 11.10.2014 IS REPRODUCED HEREUNDER: - Q. 13 PLEASE REFER TO THE BALANCE SHEET OF M/S GULMOHAR TOWERS PRIVATE LIMITED, REFERRED ABOVE. ON PERUSAL OF BALANCE SHEET OF M/S GULMOHAR TOWERS PRIVATE LIMITED, IT IS FOUND THAT THIS COMPANY HAS SHARE PREMIUM OF RS. 42,80,19,650/ - APART FROM SHARE CAPITAL OF RS. 2,26,30,000/ - . IT IS IMPOSSIBLE THAT A COMPANY HAVI NG SHARE PREMIUM OF RS. 42,80,19,650/ - CAN BE ACQUIRED AT FACE VALUE. PLEASE FURNISH THE VALUATION REPORT OF THE M/S GULMOHAR TOWERS PRIVATE LIMITED, ON THE BASIS OF WHICH THE ABOVE VALUATION OF SHARE AT THE RS. 10/ - HAS BEEN ARRIVED AT. ANS. SIR, NO VALUA TION TO ARRIVE AT THE SHARE PRICE WAS CARRIED OUT AT THE TIME OF THE ACQUISITION OF THE COMPANY. AS PER THE UNDERSTANDING WITH THE PROMOTER S OF THE COMPANY THE VALUE OF THE COMPANY ON PAPER WAS SHOWN AT RS.10/ - PER SHARE AND THE SECURITY PREMIUM AMOUNT AS ABOVE WAS PAID IN CASH TO THE PROMOTER OF THE COMPANY. THIS MONEY AMOUNTING TO RS. 42,80,19,650/ - WAS BROUGHT BACK TO THE GROUP BY WAY OF LOANS FROM M/S GULMOHAR TOWERS PRIVATE LIMITED TO OUR DIFFERENT GROUP CONCERNS OVER A PERIOD OF TIME IN THE FOLLOWING MANNER: - SR. AMOUNT 1 N.S ENTERPRISES 60,00,000 25 - 02 - 11 2 VILJI MALA PATEL 10,00,000 22 - 11 - 10 10,00,000 13 - 12 - 10 13,00,000 18 - 04 - 11 3 LALJI MALA PATEL 10,00,000 28 - 04 - 11 4 NOVELTY STATIONERY 20,00,000 22 - 11 - 10 4,00,000 18 - 04 - 11 5 TRISHUL REALTY INFRA INFRA P LTD 11,85,00,000 27/05/2010 TO 27/07/2010 18,64,00,000 27/08/2010 TO 31/03/2011 1,83,00,000 01/04/2011 TO 08/07/2011 1,80,00,000 01/08/2013 TO 05/02/2014 TOTAL 35,39,00,000 8 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., THE BALANCE OF RS.7,41,19,650/ - HAS BEEN GIVEN BY WAY OF LOANS FROM M/S GULMOHAR TOWERS PRIVATE LIMITED TO SHRI BHAGWANJI MANJI PATEL( APPROX. RS.4 CR.), SHRI VALJI MANJI PATEL( APPROX. RS.50 LAC), M/S. PITASHREE ENTERPRISES PRIVATE LIMITED ( APPROX. RS.50 LAC) .THE DETA ILS OF THE BALANCE AMOUNT GIVEN IS NOT READILY AVAILABLE. I UNDERTAKE TO SUBMIT THE DETAILS ON MONDAY (13 - 10 - 2014). THE ABOVE CASH PAYMENT OF RS.42,80,19,650/ - IS NOT REFLECTED IN REGULAR BOOKS OF ACCOUNT OF M/S EVERFINE CONSTRUCTION PRIVATE LIMITED AND IN VIEW OF WHAT IS STATED ABOVE I AM WILLING TO DISCLOSE THE SAME AS UNDISCLOSED INVESTMENT OF THE COMPANY M/S. EVERFINE CONSTRUCTION PRIVATE LIMITED IN M/S GULMOHAR TOWERS PRIVATE LIMITED THE RESPECTIVE YEARS STARTING FROM F.Y. 2010 - 11 TO F.Y. 2013 - 14. THE SAME IS ROUTED THROUGH M/S GULMOHAR TOWERS PRIVATE LIMITED AS LOAN TO THE ABOVE MENTIONED CONCERN. 3. THE GROUP DISCLOSED AN AMOUNT OF RS.42,80,19,650/ - AS UNDISCLOSED INVESTMENT OF THE COMPANY M/S.EVERFINE CONSTRUCTIONS P LTD IN M/S GULMOHAR TOWERS P LTD THE RESPECTIVE YEARS STARTING FROM FY 2010 - 11 TO FY 2013 - 14 ON CONSIDERATION OF THE ABOVE FACTS, THERE IS REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX AS BEING THE DISCLOSED AN AMOUNT OF RS.42,80,19,650/ - AS UNDISCLOSED INVESTMENT OF THE COMPANY M/S. EVERFINE CONSTRUCTIONS P LTD IN M/S. GULMOHAR TOWERS P LTD THE RESPECTIVE, HAS ESCAPED ASSESSMENT FOR AY 2011 - 12 WITHIN THE MEANING OF SEC.147 OF THE IT ACT, 1961 AND THERE IS A FAILURE ON THE PART OF THE ASSESS E E TO DISCLOSE TRUE AND FULL PARTICULAR S OF INCOME FOR THE AY 2011 - 12 IN ITS RETURN. IT IS ALSO SEEN FROM THAT NO SCRUTINY ASSESSMENTS U/S 143(3) HAS BEEN DONE FOR THE ASST YEAR 2011 - 12 EARLIER. HENCE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT DUE TO FAILURE ON THE PART OF THE ASSESSES TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT FOR A.Y 2011 - 12. FURTHER THE INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AMOUNTS TO OR LIKELY TO AMOUNT TO RS.1,00,000/ - OR MORE. 4. THUS, I HAVE REASON TO BELIEVE THAT INCOME TO THE TUNE OF RS.42,80,19,650/ - HAS ESCAPED ASSESSMENT AND THIS IS A FIT CASE FOR RE - OPENING UNDER SECTION 147 OF THE INCOME TAX ACT,1961. 9 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., 6 .1 THE L D. COUNSEL SUBMITS THAT BASED ON THE ABOVE STATEMENT, THE ASSESSING OFFICER DIRECTLY JUMPS TO THE CONCLUSION THAT THE GROUP HAD DISCLOSED AN AMOUNT OF .42,80,19,650/ - AS UNDISCLOSED INVESTMENT OF THE ASSESSEE COMPANY IN M/S.GULMOHAR TOWERS PVT. LTD. AND ACCORDINGLY HE FORMED A REASON TO BELIEVE THAT THE INCOME OF THE ASSESSEE COM PANY HAS ESCAPED ASSESSMENT ON ACCOUNT OF THE ALLEGED UNDISCLOSED INVESTMENT. IT I S SUBMITTED THAT SHRI KHIMJI KARAMSHI PATEL WAS NEITHER A SHAREHOLDER NOR DIRECTOR OF THE ASSESSEE COMPANY DURING THE YEAR UNDER REFERENCE AND THEREFORE DID NOT HAVE ANY LOCU S STANDI TO RECORD ANY STATEMENT ON BEHALF OF THE COMPANY. IN THIS REGARD, ATTENTION WAS INVITED TO Q. NO. 6 AND REPLY THERETO IN HIS STATEMENT WHEREIN HE HAD MENTIONED ABOUT HIS DIRECTORSHIP/ PARTNERSHIP IN VARIOUS CONCERNS AND HIS PROPRIETORSHIP CONCERN WHICH DID NOT INCLUDE THE ASSESSEE COMPANY. ACCORDINGLY, IT I S SUBMITTED THAT MERE ADMISSION OF A THIRD PARTY HAVING NO LOCUS STANDI IN THE ASSESSEE COMPANY THAT CERTAIN INCOME SHOULD BE OFFERED IN THE HANDS OF THE ASSESSEE CANNOT BE DEEMED TO BE A TANGIBLE MATERIAL IN ORDER TO FORM A REASON TO BELIEVE THAT CERTAIN INCOME HAS ESCAPED ASSESSMENT. 10 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., 6 .2 THE LD . COUNSEL FOR THE ASSESSEE ARGUED THAT THE ASSESSING OFFICER FAILED TO APPLY HIS OWN MIND IN RE - OPENING THE CASE AND BRING ON RECORD EVEN A PRIMA FACIE EVIDENCE TO ESTABLISH THAT INCOME OF THE ASSESSEE COMPANY HAS ESCAPED ASSESSMENT AND THAT I T IS A CLEAR CASE OF BORROWED SATISFACTION BY SIMPLY RELYING UPON A THIRD PARTY STATEMENT WHO ITSELF IS NOT CONSPICUOUS IN FACTS. IT I S SUBMITTED THAT THE ASS ESSING OFFICER HAS PROCEEDED ON VAGUE FACTS THAT THE GROUP HAD DISCLOSED AROUND .42 CRORES AS THEIR UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE COMPANY . THE REASON TO BELIEVE FORMED BY THE ASSESSING OFFICER HAS NOT BEEN CORROBORATED WITH THE INDEPEND ENT FINDINGS OF THE ASSESSING OFFICER WHICH WOULD ESTABLISH THAT THE SAID UNDISCLOSED INCOME REPRESENTS THE INCOME OF THE ASSESSEE COMPANY FOR THE YEAR UNDER CONSIDERATION . 6.3 THE LD . COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE AO HAS FAILED TO BRING ON RECORD/ REFER ANY CORROBORATIVE EVIDENCE TO ESTABLISH THAT THE ALLEGED CASH PAYMENT OF .42,80,19,650/ - HAS BEEN DONE BY THE ASSESSEE COMPANY WITH ANY DATE OF CASH PAYMENT, NAME OF PROMOTERS/ COUNTER PARTY BEL ONGING TO M/S. GULMOHAR TOWERS PVT. LTD., MODE OF CASH PAYMENT, DETAILS OF PARTY RESPONSIBLE FOR MAKING SUCH PAYMENT FOR THE 11 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., GROUP OR ANY INCRIMINATING MATERIAL FOUND IN THE COURSE OF SEARCH/ SURVEY IN SUPPORT OF STATEMENT RELIED UPON. IT IS SUBMITTED THA T T HE STATEMENT RELIED UPON BY THE ASSESSING OFFICER DOES NOT REVEAL AS TO WHO HAD PAID THE ALLEGED CASH TO THE PROMOTER OF M/S.GULMOHAR TOWERS PVT. LTD. ACCORDING TO THE LD . COUNSEL FOR THE ASSESSEE , THE ASSESSING OFFICER OUGHT TO HAVE ENQUIRED FURTHER ON THIS ASPECT AND ACCORDINGLY SHOULD HAVE ESTABLISHED A LIVE NEXUS WITH A REASON TO BELIEVE THAT THE SAME WOULD HAVE BEEN PAID BY THE ASSESSEE COMPANY IN THE YEAR UNDER CONSIDERATION . IT IS SUBMITTED THAT T HE STATEMENT IS ITSELF INCOMPLETE IN FACTS REGARDIN G WHO HAS MADE THE ALLEGED CASH PAYMENT TO ARRIVE AT A CORRECT CONCLUSION. THEREFORE, AS PER THE LD. COUNSEL FOR THE ASSESSEE , SUCH REOPENING IS DEVOID OF ANY TANGIBLE MATERIAL TO FORM A BELIEF THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT, AND IS BAS ED MERELY ON THE SOLE STATEMENT OF A THIRD PARTY MERELY DUE TO THE FACT THAT THE NAME OF THE ASSESSEE COMPANY HAS BEEN CROPPED UP. LD. COUNSEL RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF PR. CIT V. MEENAKSHI OVERSEAS PVT. LTD. [2017] 82 TAXMANN.COM 300 (DELHI) WHEREIN IT WAS HELD THAT THERE SHOULD BE A LIVE LINK BETWEEN THE 12 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., TANGIBLE MATERIAL AND THE FORMATION OF THE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT WHICH IS ABSENT IN THE PRESENT CASE. 6 .4 WITH RESPECT TO THE YEAR OF REOPENING, IT WAS POINTED OUT THAT SHRI KHIMJI KARAMSHI PATEL HAD ARBITRARILY ADMITTED DISCLOSING THE UNDISCLOSED INVESTMENT FROM F.Y.2010 - 11 TO F.Y.2013 - 14 WHEREAS THE ASSESSING OFFICER HAS REOPENED A.Y.2011 - 12 ONLY AS IF IT WAS THE UNDISCLOSED INVESTMENT FOR THE YEAR UNDER CONSIDERATION I.E. A.Y.2011 - 12. THEREFORE, LD. CO U NSEL SUBMITTED THAT THE REOPENING OF THE CASE BY THE ASSESSING OFFICER IS BASED ON VAGUE STATEMENTS MADE BY A THIRD PARTY AND THE REASONS TO BELI EVE ARE FORMED WITHOUT APPLICATION OF MIND. IT IS SUBMITTED THAT T HE ASSESSING OFFICER HAS NOT GONE BEYOND IN DETERMINING THE SPECIFIC YEAR AND AMOUNT OF ALLEGED UNDISCLOSED INVESTMENT ADMITTED BY THE PARTY AND HAS MERELY RELIED UPON THE STATEMENT AND THE AMOUNT STATED THEREIN BY A THIRD PARTY AND TAXING IN ANY YEAR WHATSOEVER AS PER HIS WHIMS AND FANCIES. THE LD . COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE REOPENING DONE IN THE CASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION IS INVALID AND BAD IN LAW. IT IS SUBMITTED THAT I N HIS STATEMENT, SHRI KHIMJI KARAMSHI PATEL HAD DISCLOSED THE AMOUNT OF 13 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., . 42,80,19,650 / - AS UN DISCLOSED INVESTMENT OF THE ASSESSEE COMPANY IN M/S. GULMOHAR TOWERS PVT. LTD. FOR THE YEARS STARTING FROM F.Y. 2010 - 11 TO F.Y. 2013 - 14. IN THIS REGARD, THE LD . COUNSEL FOR THE ASSESSEE ARGUED THAT FIRSTLY, SHRI KHIMJI KARAMSHI PATEL HAS NO LOCUS STANDI IN THE ASSESSEE COMPANY AS HE HOLDS NO POSITION AS A DIRECTOR OR A S A SHAREHOLDER IN THE COMPANY. FURTHER, HIS STATEMENT IS RECORDED ON 11.10.2014 DURING SURVEY WHICH DOES NOT HAVE ANY EVIDENTIARY VALUE. ALSO, THE SAID STATEMENT HAS BEEN RETRACTED LATER VIDE AFFIDAVIT DATED 18.10.2014 ON THE REASONS OF PRESSURE AND UNDUE INFLUENCE. IT HAS ALSO BEEN EMPHASIZED BEFORE US THAT THE SAID STATEMENT OF SHRI KHIMJI KARAMSHI PATEL WAS GIVEN BY HIM IN THE CAPACITY OF PROPRIETOR/PARTNER/DIRECTOR OF HIS RELEVANT CONCERNS WHICH DOES NOT FIND PLACE OF THE ASSESSEE COMPANY ANYWHERE. ACCORDINGLY, THE LD . COUNSEL FOR THE ASSESSEE STRONGLY SUBMITTED THAT THE STATEMENT OF SHRI KHIMJI KARAMSHI PATEL IS NOT IN THE CAPACITY OF A CHAIRMAN OF THE GROUP BUT IN FACT, HE HAS NOTHING TO INTERFERE AND COMMENT ON THE AFFAIRS OF THE ASSESSEE COMPANY. THE LD . COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESSING OFFICER HAS FAILED TO CORROBORATE HIS REASONS WITH A NY SORT OF MATERIAL/EVIDENCE AT ALL APART FROM HIS SOLE RELIANCE ON THE STATEMENT. THE LD. COUNSEL FURTHER RELIED UP ON THE DECISION OF HONBLE MADRAS HIGH 14 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., COURT IN THE CASE OF M/S. A. THANGAVEL NADAR STORES V. ITO (W.P. NO. 21919 TO 21921 OF 2018) WHEREIN THE HONBLE HIGH C OURT QUASHED THE REASSESSMENT PROCEEDINGS BEING SOLELY BASED ON A STATEMENT RECORDED IN THE COURSE OF SURVEY U/S. 133A OF THE ACT WITHOUT ANY SHRED OF MATERIAL THAT FORMED THE BASIS FOR REOPENING THE REASSESSMENT. 6.5 . THE LD . COUNSEL FUR THER ARGUED THAT THE STATEMENT OF SHRI KHIMJI KARAMSHI PATEL WAS RETRACTED ON 18.10.2014 AND THE AO WAS ALREADY MADE AWARE ABOUT SUCH RETRACTION DURING THE ASSESSMENT PROCEEDINGS IN THE CASE OF OTHER GROUP ENTITY NAMELY M/S. TRISHUL REALTY INFRA PVT. LTD. WHICH WAS COMPLETED IN DECEMBER 2016 WITH A PROTECTIVE ADDITION MADE ON THIS ISSUE IN THAT CONCERN , WHICH IS BEFORE RECORDING THE REASONS FOR REOPENING THIS CASE . THEREFORE, IT IS THE CONTENTION OF THE LD. COUNSEL THAT THE ASSESSING OFFICER KNEW ABOUT THE RETRACTION OF STATEMENT OF SHRI KHIMJI KARAMSHI PATEL MUCH PRIOR TO THE ISSUE OF THE IMPUGNED NOTICE U/S. 148 ON 10.01.2017. IN THIS REGARD, LD. COUNSEL SOUGHT TO RELY ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. DR . N. THIPPASETTY (2010) 230 CTR 265 WHEREIN IT WAS HELD THAT , WHERE STATEMENTS MADE BY THE ASSESSEE WERE RETRACTED NOT ONCE BUT TWICE, 1 5 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., REASSESSMENT NOTICE ISSUED SOLELY ON BASIS OF STATEMENT IS WITHOUT JURISDICTION. 6.6 . FINALLY, THE LD . COUNSEL FOR THE AS SESSEE ALSO ARGUED THAT IT IS A CLEAR CASE OF BORROWED SATISFACTION WITHOUT ANY CONDUCT OF ENQUIRY PRIOR TO REOPENING BUT BEING MADE SIMPLY BY RELYING UPON A STATEMENT OF THIRD PARTY DURING SURVEY , WHICH IN ANY CASE IS VAGUE AND THAT TOO FOR VARIOUS YEARS FROM F.Y. 2010 - 2011 TO F.Y. 2013 - 14 WHEREAS THE ASSESSING OFFICER SOUGHT TO REOPEN ONLY A.Y. 2011 - 12 FOR THE WHOLE OF THE AMOUNT WITHOUT ANY TANGIBLE MATERIAL . 7. ON CONTRARY, THE LD . DR SUBMITTED THAT SHRI KHIMJI KARAMSHI PATEL HAS GIVEN HIS STATEMENT IN THE CAPACITY OF CHAIRMAN OF THE GROUP, AND HE IS AWARE OF THE WHOLE MODUS OPERANDI OF THE TRANSACTIONS UNDERTAKEN BY EACH OF THE ENTITIES IN THE GROUP INCLUDING THE ASSESSEE COMPANY. LD. DR ARGUED THAT THE ASSESSING OFFICER HAS TO HAVE REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT BASED ON ANY INFORMATION WHICH COMES TO HIS POSSESSION OR KNOWLEDGE. THE INFORMATION BY VIRTUE OF STATEMENT OF SHRI KHIMJI KARAMSHI PATEL REFERRED IN THE REASONS RECORDED IS MORE THAN ENOUGH FOR ANY REASONABLE PERSON TO FORM A REASON TO BELIEVE THAT 16 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., INCOME HAS ESCAPED ASSESSMENT. LD.DR FURTHER SUBMITTED THAT THE INFORMATION IS NOT ANONYMOUS BUT IT IS AN AUTHENTICATED INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE SAME DEPARTMENT. T HE LD . DR STRONGLY RELIED ON THE ORDER OF THE LD . CIT(A). 8. COMING TO GROUND NO . 2 RAISED IN APPEAL THAT THE LD . CIT(A) ERRED IN SUSTAINING THE ADDITION OF .42,80,19,650/ - U/S. 68 OF THE ACT MADE ON SUBSTANTIVE BASIS AS UNEXPLAINED INVESTMENT OF THE ASSESSEE COMPANY BEING MADE IN M/S. GULMOHAR TOWERS PVT. LTD. , I N THE IMPUGNED ASSESSMENT ORDER, T HE AO HIGHLIGHTED THE BACKGROUND OF SEARCH ACTION CARRIED OUT I N THE PATEL/ PATNI GROUP ON 09.10.2014. THE FACTS THAT EMANATE FROM THE SEARCH ACTION AS RECOUNTED BY THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER ARE THAT THE PATNI GROUP HAD BOUGHT A COMPANY NAMELY M/S.GULMOHAR TOWERS PVT. LTD. THROUGH THEIR GROUP ENTITY NAMELY M/S. EVERFINE CONSTRUCTIONS PVT. LTD. AT VERY NOMINAL PRICE. I T IS THE CONTENTION OF THE ASSESSING OFFICER IN THE IMPUGNED ASSESSMENT ORDER THAT DURING THE COURSE OF SEARCH, IT WAS UNEARTHED THAT THE GROUPS ARE SELLING FLATS/ UNITS FROM THEIR REAL ESTATE PROJECTS AND OUT OF WHICH FULL CONSIDERATION IS NOT RECORDED IN T HE BOOKS. THIS UNACCOUNTED INCOME 17 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., GENERATED THROUGH ON MONEY AND OUT OF BOOK SALES HAVE BEEN ROUTED THROUGH THESE SHELL COMPANY BASED IN KOLKATA AND BROUGHT INTO REGULAR BOOKS BY WAY OF UNSECURED LOAN OR ADVANCE AGAINST BOOKING. IT WAS OBSERVED THAT THE TOTAL NETWORTH OF M/S. GULMOHAR TOWERS PVT. LTD. WAS .45,06,49,650/ - (INCLUDING SHARE PREMIUM OF .42,80,19,650/ - ) WHICH WAS RAISED IN F.Y.2007 - 08 WHICH WAS LATER ON PURCHASED BY PATNI GROUP AT .2,26,30,000/ - . IN ORDER TO VERIFY THE GENUINENESS OF THE TR ANSACTIONS ENTERED BY THE GROUP WITH M/S. GULMOHAR TOWERS PVT. LTD., STATEMENT OF SHRI KHIMJI KARAMSHI PATEL (CHAIRMAN OF GROUP) WAS RECORDED DURING THE COURSE OF SURVEY PROCEEDINGS U/S. 133A ON 11.10.2014 WHEREIN HE WAS ASKED TO FURNISH THE VALUATION REPORT OF M/S. GULMOHAR TOWERS PVT. LTD., ON THE BASIS OF WHICH THE VALUATION OF SHARE AT RS.10/ - HAD BEEN ARRIVED AT, AS IT WAS IMPOSSIBLE THAT A COMPANY HAVING SHARE PREMIUM OF .42,80,19,650/ - COULD BE ACQUIRED AT FAC E VALUE. IN HIS REPLY, HE HAD STATED THAT NO VALUATION OF SHARES WAS DONE AT THE TIME OF ACQUISITION OF SHARES AND HAD ACCEPTED THAT .42.80 CRORES W AS PAID IN CASH TO THE PROMOTERS OF THE COMPANY WHICH WAS BROUGHT BACK TO THE GROUP BY WAY OF LOANS OVER A PERIOD OF TIME. IN VIEW OF THE SAID FACTS, SHRI KHIMJI KARAMSHI PATEL HAD DISCLOSED THE SAME AS UNDISCLOSED INVESTMENT OF THE 18 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., ASSESSEE COMPANY IN M/S. GULMOHAR TOWERS PVT. LTD. FOR THE PERIOD STARTING FROM F.Y.2010 - 11 TO F.Y.2013 - 14. THE ASSESSING OFFICER ALSO PLACED RELIANCE O N STATEMENTS OF SHRI ANAND SHARMA RECORDED U/S.133A DATED 02.07.2013 WHO IS AN ALLEGED ENTRY OPERATOR WHEREIN HE HAD EXPLAINED THE COMPLETE MODUS OPERANDI OF CREATING SHELL COMPANIES. CONSIDERING THE STATEMENT OF SHRI ANAND SHARMA, TH E ASSESSING OFFICER IN THE IMPUGNED ASSESSMENT ORDER HAS STATED THAT THE SAME MODUS OPERANDI HAD BEEN EXACTLY FOLLOWED BY THE PATNI GROUP TO INTRODUCE UNACCOUNTED FUNDS IN THE FORM OF ACCOMMODATION ENTRIES. THE ASSESSING OFFICER ALSO MADE REFERENCE TO STAT EMENT OF SHRI VIVEK AGARWAL RECORDED U/S.131 DATED 10.10.2014 WHEREIN HE HAD ACCEPTED THAT THE LOANS RECEIVED FROM M/S.GULMOHAR TOWERS PVT. LTD. BY HIS WIFE WERE MERE ACCOMMODATION ENTRY RECEIVED IN LIEU OF CASH. ASSESSING OFFICER TOOK THE VIEW THAT THE COMPANY WAS ACQUIRED ONLY AS A DEVICE TO TAKE ACCOMMODATION ENTRY AND THAT THE SAID COMPANY WAS ONLY A SHELL/ PAPER COMPANY WHICH HAD BEEN CREATED TO ROUTE UNACCOUNTED FUNDS. HE ALSO STATED THAT M/S.GULMOHAR TOWERS PVT. LTD. GOT INCORPORATED FOR THE PURPOS ES OF BUSINESS WHICH IT NEVER CARRIED AND THAT IF THERE WAS NO BUSINESS IN THE COMPANY, THEN WHY ANY PRUDENT BUSINESSMAN MADE 19 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., INVESTMENT IN THE COMPANY , OR COULD IT BE CONCLUDED THAT THE COMPANY HAD BEEN FORMED WITH THE REAL INTENTION OF INFUSING UNACCOUNT ED MONEY BY CREATING VARIOUS LAYERS. ACCORDINGLY, ON FACTS AND IN THE LIGHT OF CIRCUMSTANTIAL EVIDENCE, THE ASSESSING OFFICER ALLEGED THAT THE ASSESSEE HAS INTRODUCED ITS OWN UNACCOUNTED MONEY UNDER THE GARB OF INVESTMENT AND BASED ON THE DECLARATION OF UN DISCLOSED INCOME BY SHRI KHIMJI KARAMSHI PATEL , THE INVESTMENT MADE IN M/S. GULMOHAR TOWERS PVT. LTD. OF .42,80,19,650/ - WAS ASSESSED IN THE HANDS OF THE ASSESSEE COMPANY ON SUBSTANTIVE BASIS AS UNEXPLAINED INVESTMENT AND INVOKED SECTION 68 OF THE ACT . 9. ON APPEAL, THE LD . CIT(A) SUSTAINED THE ADDITION OF .42,80,19,650/ - U/S.68 OF THE ACT BY REITERATING ALL THE OBSERVATIONS MADE BY THE ASSESSING OFFICER WITH RESPECT TO THE MODUS OPERANDI/ FINDINGS IN THE SEARCH. FURTHER, SHE MADE REFERENCE TO THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF PULLANGODE RUBBER PRODUCE CO. LTD. V. STATE OF KERALA [ 91 ITR 18 (SC) ] WHEREIN IT WAS HELD THAT AN ADMISSION IS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE, BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE AND THAT IT IS UPON THE PERSON WHO MADE THE ADMISSION TO 20 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., SHOW THAT IT IS INCORRECT. THE LD . CIT(A) OBSERVED THAT IN THE PRESENT CASE, SHRI KHIMJI KARAMSHI PATEL HAD STATE D THAT CASH WAS PAID TO M/S. GULMOHAR TOWE RS PVT. LTD. ON ACCOUNT OF THE VALUE OF SHARE PREMIUM. IF HE HAS RETRACTED SUBSEQUENTLY, THE ONUS IS ON HIM TO SHOW THAT THE SHARE PREMIUM AMOUNT HAS NOT BEEN PAID IN CASH. NO SUCH EVIDENCE HAS BEEN PRODUCED BY HIM. LD.CIT(A) IS OF THE VIEW THAT IT IS VER Y HARD TO BELIEVE AND ACCEPT THAT A COMPANY HAVING A SHARE PREMIUM WORTH OF .42,80,19,650/ - IS SOLD ONLY AT FACE VALUE. THEREFORE, THE ASSESSEE'S SUBSEQUENT CHANGE IN STAND THAT NO CASH IS PAID IS NOT ACCEPTABLE. TO FORTIFY HER DECISION, THE LD. CIT(A) RE LIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT I N THE CASE OF NOVA PROMOTERS & FINLEASE PVT. LTD. 2012 [ 342 ITR 169 ] . ACCORDINGLY, THE ADDITION OF .42,80,19,650/ - U/S.68 OF THE ACT WAS SUSTAINED BY OBSERVING THAT ASSESSEE HAS INTRODUCED ITS OWN UNACCOUNTED MONEY UNDER THE GARB OF UNSECURED LOAN AND ADVANCE AGAINST LAND . 10. THE LD . COUNSEL FOR THE ASSESSEE ADDRESSED US WITH A BRIEF BACKGROUND OF FACTS OF THE CASE AND THE CHRONOLOGY OF EVENTS THAT TOOK PLACE AS ENUMERATED HEREIN UNDER: - 21 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., (I). ASSESSEE COMPANY GOT INCORPORATED ON 13.04.2010 (II). DUE DILIGENCE REPORT FOR ACQUISITION OF M/S. GULMOHAR TOWERS PVT. LTD. WAS OBTAINED ON 28.04.2010 (III). MOU WAS ENTERED WITH M/S. GULMOHAR TOWERS PVT. LTD. ON 14.05.2010 (IV). SHARE S WERE TRANSFERRED TO THE ASSESSEE COMPANY ON 22.05.2010 (V). SEARCH / SURVEY CONDUCTED IN CASE OF PATEL/PATNI GROUP ON 09.10.2014 (VI). STATEMENT OF SHRI KHIMJI KARAMSHI PATEL WAS RECORDED DURING SURVEY U/S. 133A ON 11.10.2014 (VII). AFFIDAVIT RETRACTING THE AFORESAID STATEM ENT IS DATED 18.10.2014 10 .1 THE LD . COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF BUILDERS & DEVELOPERS AND HAD INCORPORATED ON 13.04.2010. DURING THE YEAR, AFTER CARRYING OUT DUE DILIGENCE AND OBTAINING SUCH REPORT DATED 28.04.2010 FROM THE CHARTERED ACCOUNTANT, THE ASSESSEE COMPANY DECIDED TO ACQUIRE THE SHARES OF THE COMPANY AT . 2,26,30,000/ - CONSIDERING THE VARIOUS ADVERSE FINDINGS AGAINST M/S. GULMOHAR TOWERS PVT. LTD. BASED ON WHICH THE SHAREHOLDERS OF T HEIR COMPANY HAD ALSO DECIDED TO LIQUIDATE THEIR STAKE IN THE COMPANY. ACCORDINGLY, TO BUY THE ENTIRE STAKE IN M/S. GULMOHAR TOWERS PVT. LTD., THE ASSESSEE COMPANY ENTERED INTO A MEMORANDUM OF UNDERSTANDING (MOU) DATED 14.05.2010 WITH THEIR DIRECTORS IN OR DER TO SET OUT THE TERMS & CONDITIONS, RIGHTS AND OBLIGATIONS OF THE PARTIES. AS 22 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., THE FINANCIAL POSITION OF M/S. GULMOHAR TOWERS PVT. LTD. WAS NOT STRONG, THE APPELLANT COMPANY ACQUIRED THE SHARES OF THE COMPANY AT RS. 10 PER SHARE AND ACCORDINGLY, THE INVE STMENT IN SHARES OF M/S. GULMOHAR TOWERS PVT. LTD. WERE DULY RECORDED IN BOOKS OF THE APPELLANT COMPANY . FURTHER, IT IS SUBMITTED THAT IN SUPPORT OF THE SUBSTANTIATION OF THE SAID TRANSACTION, THE ASSESSEE HAD FURNISHED THE FOLLOWING DOCUMENTS BEFORE THE L OWER AUTHORITIES: - (I). COPY OF PAN OF M/S. GULMOHAR TOWERS PVT. LTD. (II). MEMORANDUM AND ARTICLE OF ASSOCIATION OF M/S. GULMOHAR TOWERS PVT. LTD. (III). SHARE CERTIFICATES OF THE ORIGINAL SHAREHOLDERS REFLECTING THE TRANSFER DETAILS AND DULY EXECUTED SHARE TRANSFER FORMS (IV). DUE DILIGENCE REPORT DATED 28.04.2010 OF M/S. GULMOHAR TOWERS PVT. LTD . (V). COPY OF MOU BETWEEN ASSESSEE COMPANY AND M/S. GULMOHAR TOWERS PVT. LTD. DATED 14.05.2010 (VI). ITR ACKNOWLEDGEMENT AND FINANCIALS OF M/S. GULMOHAR TOWERS PVT. LTD. THE LD . COUNSEL FOR THE ASSESSEE SUBMITS THAT NOTHING ADVERSE HAS BEEN FOUND IN ANY OF THE ABOVE DOCUMENTARY EVIDENCES/EXPLANATION FURNISHED BY THE ASSESSING OFFICER / LD. CIT(A) AND THAT THE ASSESSEE COMPANY HA S DULY DISCHARGED ITS ONUS OF SUBSTANTIATING THE INVES TMENT TRANSACTION OF RS. 2,26,30,000 RECORDED IN THEIR BOOKS . 23 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., 10 .2 THE LD . COUNSEL FOR THE ASSESSEE FURTHER POINTED OUT CERTAIN FACTS ARISING OUT OF THE RETRACTED STATEMENT OF SHRI KHIMJI KARAMSHI PATEL IN HIS AFFIDAVIT DATED 18.10.2014 THAT THE SURVEY PROCEEDINGS HAD COMMENCED ON 09.10.2014 AND CONCLUDED ON 12.10.2014 (EARLY MORNING) WITHOUT ANY BREAK WHICH SERIOUSLY AFFECTED THE BUSINESS AND IMPACTED HIM MENTALLY AS IF HE W AS UNDER ARREST. OUT OF THE 3 NIGHTS, HE WAS ALLOWED TO GO HOME FOR 2 NIGHTS AND WAS NOT PERMITTED TO EVEN REST IN THE 3 RD NIGHT. THERE WERE 3 STATEMENTS RECORDED AT DIFFERENT BUSINESS PREMISES WITH THE SURVEY PARTY CONSISTING OF 5 MEMBERS WHEN EVEN NO UNDISCLOSED ASSETS OR CASH WAS FOUND. BEFORE RECORDING THE 3 RD STATEMENT ON 11.10.2014, HE WAS TOLD THAT SURVEY ACTION WILL NOT CONCLUDE TILL THE TIME HE MAKES A DECLARATION OF INCOME IN RELATION TO THE TRANSACTIONS OF GULMOHAR TOWERS PVT. LTD. ACCORDINGLY, HE STATED UNDER DURESS AND PRESSURE THAT THE CASH COMPONENT OF SHARE P REMIUM WAS PAID BY THE ASSESSEE COMPANY AND THAT THE SAME WERE B R OUGHT BACK TO THE GROUP BY WAY OF LOANS FROM M/S.GULMOHAR TOWERS PVT. LTD AND THEREBY MADE A DISCLOSURE OF UNDISCLOSED INVESTMENT OF .42 CRORES. SHRI KHIMJI KARAMSHI PATEL ALSO AFFIRMED THAT HE WAS NEITHER A DIRECTOR NOR A SHAREHOLDER IN EITHER THE ASSESSEE COMPANY OR M/S.GULMOHAR TOWERS PVT. LTD. IT WAS 24 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., SUBMITTED SPECIFICALLY THAT THE SAID DISCLOSURE WAS NOT A CORRECT STATEMENT AND THE SAME WAS MADE UNDER PRESSURE AND U NDUE INFLUENCE WHICH W AS CLEARLY EVIDENT FROM THE BEHAVIOR OF SURVEY PARTY WHEN 3 STATEMENTS WERE RECORDED UNNECESSARILY WHEN NOTHING INCRIMINATING WAS FOUND AT ALL . HE WAS ALSO MADE TO UNDERSTAND THAT THE SURVEY ACTION WOULD NOT BE CONCLUDED TILL THE TIME SUCH A DISCLOSURE STA TEMENT WAS GIVEN. THE LD. COUNSEL ALSO REFERRED TO THE AFFIDAVIT OF SHRI GAURAV PATEL DATED 18.10.2014 WHEREIN HE HAD STATED THAT HE WAS CALLED UPON BY THE SURVEY PARTY AROUND 10.30 P . M . TO SIGN THE STATEMENT GIVEN BY HIM WITHOUT CONFRONTING HIM THE CONTENTS OF THE STATEMENT AND THAT HE HAD BLINDLY AFFIRMED TO THE STATEMENT OF HIS FATHER UNDER PRESSURE AND UNDUE INFLUENCE OF THE SURVEY PARTY. IT WAS ALSO STATED BY HIM THAT THE ALLEGED TRA NSACTION TOOK PLACE ON 22 ND MAY, 2010 AND HE WAS APPOINTED AS A DIRECTOR ON 01.04.2013 AND WAS NOT A PARTY TO THE ALLEGED TRANSACTION OF TAKEOVER OF M/S.GULMOHAR TOWERS PVT. LTD. T HE LD . COUNSEL FOR THE ASSESSEE ONCE AGAIN HIGHLIGHTED THAT SHRI KHIMJI KARA MSHI PATEL WAS NEITHER A SHAREHOLDER NOR DIRECTOR OF THE ASSESSEE COMPANY DURING THE YEAR UNDER REFERENCE AND THEREFORE , DID NOT HAVE ANY LOCUS STANDI TO RECORD ANY STATEMENT ON BEHALF OF THE COMPANY. LD. COUNSEL FOR THE 25 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., ASSESSEE ALSO ONCE AGAIN DREW OUR ATTENTION TO Q. NO. 6 AND ITS REPLY TO ARGUE THAT SHRI KHIMJI KARAMSHI PATEL HAD JUST MADE HIS STATEMENT IN THE CAPACITY OF PROPRIETOR/ PARTNER OF CONCERNS AND NOT IN THE CAPACITY OF CHAIRMAN OF THE GROUP AND IT WAS ALSO AFFIRMED BY HIM IN HIS RETRACTION AF FIDAVIT THAT HE WAS NOT IN ANY WAY ASSOCIATED TO THE ASSESSEE COMPANY. THE LD . COUNSEL ALSO POINTED OUT THAT IT WAS EVIDENT THAT IT WAS OUT OF MENTAL DURESS AND PRESSURE FROM THE SURVEY PARTY THAT SHRI KHIMJI KARAMSHI PATEL WAS COMPELLED TO MAKE SUCH DISCLOSURES TO CONCLUDE THE PROCEEDINGS. MOREOVER, NOTHING IN THE FORM OF ANY UNDISCLOSED INCOME, ASSETS OR CASH WAS FOUND DURING THE COURSE OF THE SURVEY. ALSO, SHRI GAURAV PATEL WHO WAS NEITHER A DIRECTOR NOR SHAREHOLDER IN TH E YEAR UNDER CONSIDERATION AND WAS NOT EVEN PRESENT DURING THE STATEMENT BEING RECORDED AND WAS IN THE BARE AGE OF 20 YEARS WHO HAD JUST ENTERED IN THE BUSINESS OF THE COMPANY. THE LD . COUNSEL THEREFORE SUBMITS THAT SUCH STATEMENTS MADE TO BE RECORDED TO O BTAIN CONFESSION OF ANY UNDISCLOSED INCOME IN ABSENCE OF ANY INCRIMINATING MATERIAL FOUND IN THE COURSE OF SURVEY DO NOT CARRY ANY LEGAL SANCTITY AND CANNOT HAVE ANY EVIDENTIARY VALUE IN THE EYES OF LAW . IN THIS REGARD, ATTENTION WAS INVITED TO THE CBDT IN STRUCTION F.NO. 286/2/2003 - IT (INV. II) DATED 10 TH MARCH, 26 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., 2003 AND ITS FURTHER INSTRUCTIONS F.NO. 286/98/2013 - IT(INV.II) DATED 09 TH JANUARY, 2014 AND F.NO. 286/98/2013 - IT (INV.II) DATED 18 TH DECEMBER, 2014. AS REGARDS STATEMENT RECORDED OF SHRI ANAND SHARMA U/S. 133A, THE LD . COUNSEL SUBMITS THAT THE SAME IS TAKEN DURING THE COURSE OF SURVEY AND HAS NO EVIDENTIARY VALUE AT ALL IN LIGHT OF THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT V. S. KHADER KHAN SON [2012] 25 TAXMANN.COM 413 (S C) . EVEN NO COPY OF THE SAID STATEMENT WAS EITHER PROVIDED DESPITE SPECIFIC REQUEST MADE TO THE ASSESSING OFFICER . ALSO, NO CROSS EXAMINATION OF SAID PARTY WAS GRANTED. AS REGARDS THE STATEMENT OF SHRI VIVEK AGARWAL, LD . COUNSEL SUBMITS T HAT THE SAME IN RELATION TO MS. EKTA AGARWAL AND M/S. GULMOHAR TOWERS PVT. LTD. , LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THESE STATEMENTS HA VE NO RELEVANCE IN SO FAR AS THE TRANSACTION OF ASSESSEE COMPANY IS CONCERNED. ALSO, SHRI ANAND SHARMA AND SHRI VIVEK AGARWAL ARE N EITHER SHAREHOLDERS NOR DIRECTORS OF THE ASSESSEE COMPANY OR M/S.GULMOHAR TOWERS PVT. LTD. THEREBY HAVING NO LOCUS STANDI TO COMMENT ON THE TRANSACTION WITH M/S.GULMOHAR TOWERS PVT. LTD. AND RELIED UPON THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. PARADISE INLAND SHIPPING PVT LTD (TA NO. 66 OF 2016) (BOM HC) ; THE SLP FILED AGAINST THE SAID ORDER OF THE HIGH COURT 27 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., WHICH IS ALSO DISMISSED BY THE HONBLE APEX COURT IN [2018] 93 TAXMANN.COM 84 (SC) . 10 . 3 FURTHER, LD. COUNSEL FOR THE ASSESSEE ARGUED THAT AT PARA 7.2 OF THE ASSESSMENT ORDER, ASSESSING OFFICER HAS STATED THAT DURING THE SEARCH ACTION, IT WAS UNEARTHED THAT THESE GROUPS ARE SELLING FLATS/UNITS FROM THEIR REAL ESTATE PROJECTS AND OUT OF WHICH FULL CONSIDERATION IS NOT RECORDED IN THE BOOKS AND THAT SUCH UNACCOUNTED INCOME GENERATED THROUGH OUT OF BOOKS SALES WERE ROUTED THROUGH SHELL COMPANIES AND BROUGHT INTO REGULAR B OOKS THROUGH LOANS. REBUTTING TO SAID ALLEGATION, THE LD . COUNSEL ARGUED THAT ASSESSING OFFICER HAS MERELY RECITED THE ALLEGED MODUS OPERANDI AND NOT BROUGHT ON RECORD EVEN AN IOTA OF EVIDENCE OUT OF THE SEARCH TO ESTABLISH WHETHER THE GROUP OR ANY PARTICULAR CONCERN OF THE GROUP IN REALITY HAS ACTUALLY EVER GENERATED ANY UNACCOUNTED INCOME OUT OF ON MONEY OR OUT OF BOOKS SALES . HE SUBMITTED THAT IN FACT, NONE OF THE REAL ESTATE PROJECTS OF GROUP HAD YET COMMENCED IN A.Y. 2011 - 12. MOREOVER, THE LOANS HAVE BEEN ADVANCED TO NOT ONLY TO CONCERNS OF THE PATNI GROUP BUT ALSO TO UNRELATED PARTIES AND THEREF ORE, VAGUE ASSERTIONS HAVE BEEN MADE BY THE ASSESSING OFFICER . IT IS 28 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., SUBMITTED THAT A T PARA 7.3 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS MENTIONED ABOUT FINDINGS/EVIDENCES COLLECTED DURING THE COURSE OF SEARCH IN PATNI GROUP BUT NOTHING INCRIMINA TING IN THE FORM OF MATERIAL, LOOSE PAPERS, UNDISCLOSED ASSETS OR CASH OR INVESTMENT HAS BEEN DISCOVERED REGARDING THE ALLEGED TRANSACTION OF INVESTMENT MADE BY THE ASSESSEE COMPANY IN M/S. GULMOHAR TOWERS PVT. LTD. LD. COUNSEL STRONGLY ARGUED THAT NO EVID ENCE AT ALL WAS BROUGHT ON RECORD EVEN THOUGH IT HAD ENTERED THE PR EMISES OF THE GROUP BY WAY OF SEARCH/SURVEY ACTION. IT IS SUBMITTED THAT AT VARIOUS PARTS OF THE ASSESSMENT ORDER, THE AO HAS REFERRED TO THE PATNI GROUP AS AN ENTIRETY IN RELATION TO THE ALLEGATION OF ACQUIRING COMPANY AT A NOMINAL PRICE AND PAYING CASH OVER AND ABOVE THE INVESTMENT SHOWN IN BOOKS OF ACCOUNT. LD. COUNSEL REFERRED TO PARA 7.2 OF THE ASSESSMENT ORDER WHEREIN IT HAS BEEN STATED THAT M/S GULM OHAR TOWERS PVT. LTD. WAS PURCHASED BY THE PATNI GROUP AT A PRICE OF RS. 2,26,30,000 / - . IT IS SUBMITTED THAT E VEN AT PARA 7.3, THE AO HAS CONCLUDED THAT IT IS EVIDENT THAT M/S. GULMOHAR TOWERS PVT. LTD. IS MERELY A SHELL/PAPER COMPANY WHICH WAS SUBSEQUENT LY PURCHASED BY PATNI GROUP TO INFUSE UNACCOUNTED MONEY INTO PATNI GROUP CONCERNS. THE LD . COUNSEL IN THIS REGARD SUBMITS THAT THE ASSESSING OFFICER HIMSELF IS 29 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., CLEAR THAT THE ALLEGED INVESTMENT HAS BEEN DONE BY THE GROUP AND THERE IS NO SPECIFIC MENTION OF THE ASSESSEE COMPANY. THERE IS EVEN NOTHING CONSPICUOUS BROUGHT ON RECORD REGARDING WHICH CONCERN OF THE GROUP HAD ACTUALLY BEEN ENGAGED IN THE ALLEGED SCHEME OF THINGS. THUS, WITHOUT PREJUDICE, THE LD . COUNSEL SUBMITS THAT THE ASSESSEE COMPANY HAS BEEN B LINDLY MADE THE SCAPEGOAT SINCE ITS NAME HAD CROPPED UP IN A STATEMENT OF SHRI KHIMJI KARAMSHI PATEL WHO IS ALSO NEITHER A DIRECTOR NOR A SHAREHOLDER IN THE ASSESSEE COMPANY . 1 0 .4 THE LD. COUNSEL FURTHER SUBMITS THAT NO ENQUIRY WAS CONDUCTED BY THE AO ON THE PROMOTERS/ SHAREHOLDERS /DIRECTORS OF M/S. GULMOHAR TOWERS PVT. LTD. TO CORROBORATE THE STATEMENTS/INFORMATION RECEIVED IN RELATION TO THE ALLEGED UNDISCLOSED INVESTMENT. NO SPECIFIC EVIDENCE IN THE FORM OF DATE OF CASH PAYMENT, ITS MODE, ANY OTHER INCRI MINATING MATERIAL/ INFORMATION HAD BEEN FOUND FROM M/S. GULMOHAR TOWERS PVT. LTD. IN ORDER TO ESTABLISH THAT THE SAID COMPANY IS BOGUS OR A SHELL COMPANY. DURING THE COURSE OF HEARING, THE LD . COUNSEL ALSO SUBMITTED THE COPY OF THE ASSESSMENT ORDER U/S. 1 43(3) R.W.S. 147 OF 30 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., M/S. GULMOHAR TOWERS PVT. LTD. FOR A.Y. 2008 - 09 DATED 22.04.2010 TO PROVE THAT THE SAID PARTY IS NOT A SHELL OR BOGUS COMPANY. 10 . 5 THE LD . COUNSEL ALSO EMPHASIZED ON THE FACT THAT THE ASSESSEE COMPANY WAS INCORPORATED ON 13.04.2010 AND THAT THE YEAR UNDER CONSIDERATION WAS ITS FIRST YEAR AND BUSINESS OPERATIONS WERE ALSO NOT COMMENCED AND HENCE, BY ANY STRETCH OF IMAGINATION, THERE IS NO POSSIBILITY FOR THE ASSESSEE TO GENERATE UN AC COUNTED INCOME. IN SUPPORT OF THIS PROPOSITION, HE R ELIED ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT V. BHARAT ENGINEERING & CONSTRUCTION CO. [1972] 83 ITR 187 (SC) AND THAT FOLLOWED IN THE CASE OF SURENDRA PRASAD MISRA V. ITO [2006] 7 SOT 457 BY THE HONBLE LUCKNOW ITAT. 10 . 6 THE LD . COUNSEL FURTHER SUBMITS THAT THE WHOLE ADDITION HAS BEEN MADE ON SURMISES AND CONJECTURES IN ABSENCE OF ANY ADVERSE MATERIAL FOUND DURING THE COURSE OF SEARCH / SURVEY TO ESTABLISH THAT THE ALLEGED INVESTMENT HAS BEEN DONE IN CASH. FURTHER, NO RELATED DETA ILS IN THE FORM OF DATE OF CASH PAYMENT, NAME OF RECIPIENT OF THE CASH PAYMENT, MODE/PURPOSE ETC. HAS BEEN UNEARTHED BY THE ASSESSING OFFICER . HE EMPHASISED THAT THE CONTENTIONS OF THE ASSESSING OFFICER ARE 31 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., THEMSELVES CONTRADICTORY AS IT HAS BEEN REITERATE D AT VARIOUS PARTS OF THE ASSESSMENT ORDER THAT IT IS THE GROUP WHICH HAS MADE THE INVESTMENT WITHOUT REFERRING TO THE ACTUAL ENTITY INVOLVED. THEREFORE, CONCLUSIONS DRAWN AGAINST THE ASSESSEE COMPANY MERELY ON SURMISES AND SUSPICION CANNOT TAKE PLACE OF PROOF IN SUCH MATTERS. IN THIS REGARD, HE RELIED ON THE CASE OF UMACHARAN SHAW & BROS. V . CIT [1959] 37 ITR 271 (SC) . RELIANCE IS ALSO PLACED ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. DEVESH AGARWAL [2017] 81 TAXMANN.COM 257 (BOM.) WHO HELD IN FAVOUR OF THE ASSESSEE IN SIMILAR CONTEXT OF ALLEGATION OF UNEXPLAINED INVESTMENT IN SHARES IN EXCESS OF WHAT IS SHOWN IN THE REGULAR BOOKS WHERE NO POSITIVE EVIDENCE WAS BROUGHT ON RECORD BY THE REVENUE. 11. THE LD . COUNSE L FOR THE ASSESSEE ALSO MADE CERTAIN ARGUMENTS WITHOUT PREJUDICE AND WITHOUT ACCEPTING ANY ALLEGATIONS RAISED BY THE ASSESSING OFFICER . 11.1 FIRSTLY , HE SUBMITTED THAT THE VERSION OF THE ASSESSING OFFICER FROM THE ASSESSMENT ORDER IS THAT THE GROUP HA D EARNED UNACCOUNTED CASH WHICH HAS BEEN PAID FOR THE ACQUISITION OF SHARES OF M/S. GULMOHAR 32 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., TOWERS PVT. LTD. AND THE ASSESSEE COMPANY IS A CONDUIT IN THE TRANSACTION. ACCORDINGLY, THE ASSESSEE COMPANY CANNOT BE HELD AS A BENEFICIARY TO THE ALLEGED SCHEME AN D THAT THE EXISTENCE OF ANY UNDISCLOSED INCOME OF THE ASS ESSEE COMPANY ITSELF RULES OUT. 11.2 SECONDLY , THE LD. COUNSEL SUBMITTED THAT IT IS A TRITE LAW THAT ONLY THE RIGHT PERSON SHOULD BE TAXED. HE SUBMITS THAT IT IS THE DUTY OF THE ASSESSING OFFICER TO TAX THE RIGHT PERSON WHO WAS LIABLE TO PAY TAX ON A PARTICULAR INCOME AND MERELY SINCE THE NAME OF THE ASSESSEE COMPANY HAD CROPPED UP IN A STATEMENT OF A PERSON NOT CONNECTED TO THE ASSESSEE, ASSESSING OFFICER COULD NOT HAVE PROCEEDED TO MAKE THE ADDITIO NS IN THE HANDS OF THE ASSESSEE IN ABSENCE OF ANY CORROBORATIVE EVIDENCE. THE ASSESSING OFFICER MENTIONS IN THE ORDER THAT THE ON - MONEY SALES HAVE BEEN USED FOR PAYMENT IN CASH WHEREAS THE ASSESSEE IS INCORPORATED IN THIS YEAR ITSELF AND HAS NOT EVEN COMME NCED ANY REAL ESTATE ACTIVITIES. THIS CLEARLY PROVES THAT THE ASSESSEE COMPANY IS NOT THE RIGHT PERSON TO BE TAXED IN ANY CIRCUMSTANCE EITHER. IN THIS REGARD, RELIANCE IS PLACED ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF ITO V. ATCHAIAH [1996] 84 TAXMAN 630 (SC) . 33 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., 11.3 THIRDLY, HE SUBMITS THAT THE PROVISIONS OF SECTION 68 INVOKED ITSELF ARE NOT APPLICABLE IN ANY CASE. HE SUBMITTED THAT ALTHOUGH IN THE IMPUGNED ORDER, THE ASSESSING OFFICER HAS MADE THE ADDITION AS UNEXPLAINED INVESTMENT AS CAN BE SEEN IN PARA 8 OF THE IMPUGNED ASSESSMENT ORDER , THE LD . COUNSEL DREW OUR ATTENTION TO PARA 7.4 RELATING TO THE SHOW CAUSE RAISED AS TO WHY THE FUNDS ORIGINATED FROM M/S. GULMOHAR TOWERS PVT. LTD. SHOULD NOT BE TREATED AS INCOME U/S. 68 OF THE ACT. EVEN THE TABLE OF DETERMINATION OF TOTAL INCOME ON THE LAST PAGE OF THE ASSESSMENT ORDER REFERS TO SECTION 68 BEING APPLIED FOR THE ADDITION MADE OF . 42,80,19,650/ - . FURTHER, THE CIT(A) HAS A LSO SUSTAINED THE ADDITION U/S. 68 ITSELF. IN THIS CIRCUMSTANCE, THE LD . COUNSEL ARGUED THAT ONCE THE LD. CIT(A) HAS PASSED THE ORDER, AS PER THE DOCTRINE OF MERGER, THE ASSESSMENT ORDER MERGES WITH LD. CIT(A)S ORDER AND SINCE NO APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAINST THE LD. CIT(A)S ORDER, THE SAME STANDS FINAL. ACC ORDINGLY, THE LD. COUNSEL SUBMITS THAT THE PROVISIONS OF SECTION 68 IS NOT AT ALL APPLICABLE AS THE ACTUAL ALLEGATION HERE IS THAT OF INVESTMENT IN CASH OVER AND ABOVE THAT RECORDED IN BOOKS. HE FURTHER ALSO SUBMITS THAT EVEN THE ADDITION AS UNEXPLAINED IN VESTMENT ALTHOUGH REFERRED IN PARA 8 OF THE ASSESSMENT ORDER CANNOT BE SUSTAINED 34 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., AS SECTION 69 APPLIES WHERE INVESTMENTS ARE UNDISCLOSED AND NOT RECORDED IN THE BOOKS OF ACCOUNT. HENCE, THE LD . COUNSEL SUBMITS THAT IN ANY CASE, IN THE PRESENT FACTS OF THE CASE, SINCE TH E INVESTMENTS IN SHARES OF M/S. GULMOHAR TOWERS PVT. LTD. WERE DUL Y RECORDED TO THE EXTENT OF . 2,26,30,000/ - AND THE ALLEGATION WAS ONLY REGARDING THE AMOUNT OF CASH PAID OVER AND ABOVE SAID AMOUNT, THE RELEVANT SECTION WHICH OUGHT TO HAVE BE EN APPLIED WAS SECTION 69B OF THE ACT WHICH RELATES TO AMOUNT OF INVESTMENTS, ETC. NOT FULLY DISCLOSED IN BOOKS OF ACCOUNT. HOWEVER, NO SUCH SECTION 69B HAS BEEN INVOKED BY ASSESSING OFFICER OR CIT(A) EITHER AND HENCE, WHOLE ADDITION IS INVALID ON THIS COU NT TOO. 12. ON CONTRARY, THE LD . DR FOR THE REVENUE SOUGHT TO RELY ON THE ORDER OF THE LOWER AUTHORITIES. HE STRONGLY ARGUED THAT THE FINDING S IN THE DUE DILIGENCE REPORT OF M/S. GULMOHAR TOWERS PVT. LTD. ITSELF SHOWS THAT THE COMPANY IS A KOLKATA BASED COMPA NY AND HAS ALL THE INGREDIENTS OF A BOGUS/SHELL COMPANY. FURTHER, THE STATEMENT RECORDED OF SHRI KHIMJI KARAMSHI PATEL WHO IS THE CHAIRMAN OF THE PATNI GROUP HAS CLEARLY ADMITTED ABOUT THE CASH PAYMENT OF . 42,80,19,650/ - . ALSO, SINCE THE INVESTMENTS ARE RECORDED IN THE BOOKS OF THE ASSESSEE COMPANY, THE 35 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., ASSESSEE IS REQUIRED TO SUBSTANTIATE THE CORRECTNESS OF THE INVESTMENTS BEING RECORDED IN THE BOOKS AND THAT NOTHING HAS BEEN PAID OVER AND ABOVE IN CASH BEY OND THE AMOUNT RECORDED IN THE BOOKS OF ACCOUNT MORE SO WHEN OVERWHELMING EVIDENCES HAVE ALREADY BEEN GATHERED BY THE DEPARTMENT BASED ON THE ANALYSIS OF THE FINANCIALS OF M/S. GULMOHAR TOWERS PVT. LTD. WHO HAVE ACTUAL NETWORTH OF . 45, 06,67,467/ - AS ON 31. 03.2011, STATEMENT OF SHRI ANAND SHARMA AND SHRI VIVEK AGARWAL APART FROM THE ADMISSION OF SHRI KHIMJI KARMASHI PATEL. FURTHER, THERE IS NO PROOF OF COERCION OR PRESSURE OR DURESS ON PART OF SHRI KHIMJI KARAMSHI PATEL ON MAKING THE DISCLOSURE OF UNEXPLAINE D INVESTMENT OF . 42,80,19,650/ - IN THE HANDS OF THE ASSESSEE COMPANY. HENCE, THE LD. DR OF THE REVENUE RELIED ON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THERE ARE ENOUGH CIRCUMSTANTIAL EVIDENCE S TO UPHOLD THE ADDITION OF UNEXPLAINED INVESTM ENT MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A). 13. WE HAVE GONE THROUGH THE RIVAL SUBMISSIONS, ORDERS OF THE AUTHORITIES BELOW , MATERIAL PLACED ON RECORD AND THE RELEVANT CASE LAWS RELIED UPON. CONSIDERING THE SPECIFIC PLEA OF THE LD. COUNSEL FOR THE 36 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., ASSE SSEE IN THE COURSE OF HEARING TO DECIDE THE CASE ON MERITS AS THE QUANTUM OF ADDITION INVOLVED IN THE MATTER IS SUBSTANTIAL, WE ARE NOW DEALING FIRSTLY WITH GROUND NO. 2. THE CASE OF THE REVENUE IS THAT THE ASSESSEE HAS ACQUIRED A KOLKATA BASED COMPANY NAMED M/S. GULMOHAR TOWERS PVT. LTD. FOR A TOTAL CONSIDERATION OF .2,26,30,000/ - WHEREAS THE NETWORTH OF THE COMPANY WAS RS. 45,06,49,650/ - AND THAT SHRI KHIMJI KARAMSHI PATEL, CHAIRMAN OF THE GROUP OF ASSESSEE (PATEL / PATNI GROUP) HAD EVEN ADMIT TED TO HAVE PAID DIFFERENTIAL AMOUNT OF CASH OF . 42,80,19,650/ - AS UNDISCLOSED INVESTMENT OF THE ASSESSEE COMPANY AND THAT NO VALUATION WAS DONE PRIOR TO THE ACQUISITION. THE LD . DR ALSO DREW OUR ATTENTION TO THE KEY FINDINGS IN THE DUE DILIGENCE REPORT P LACED ON RECORD BY THE APPELLANT PRIOR TO THE ACQUISITION . T HE OBSERVATIONS THEREIN THE COMPANY M/S.GULMOHAR TOWERS PVT. LTD. ARE SUCH THAT THE COMPANY M/S. GULMOHAR TOWERS PVT. LTD. DO NOT HAVE INTERNAL CONTROLS AND NO STANDARD OPERATING PROCEDURES ARE FOLLOWED FOR INVESTMENT IN PRIVATE LIMITED COMPANIES, THERE IS NO SECURITY FOR ADVANCES GIVEN, THERE IS NO EARNING CAPACITY DESPITE HUGE CAPITAL RESERVES , ETC. AND THAT THE MAIN OBJECT OF THE BUSINESS OF REAL ESTATE IS NOT MET DUE TO POOR MANAGEMENT AND L ACK OF EXPERIENCE OF THE MANAGEMENT/DIRECTORS . THE FUNDAMENTALS 37 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., OF M/S.GULMOHAR TOWERS PVT. LTD. WERE ALSO REFERRED AND HE MADE HIS VARIOUS OBSERVATIONS TO TH E EFFECT THAT - (I). THE COMPANY IS NOT DOING ANY BUSINESS ACTIVITY OTHER THAN ROTATION OF FUNDS. (II). IT ONLY PROVIDES FINANCIAL ASSISTANCE TO PATNI GROUP EITHER THROUGH UNSECURED LOANS OR ADVANCES AGAINST PROPERTY. (III). THE STAFF STRENGTH OF THE COMPANY WAS UNKNOWN & NO SALARY HAD BEEN PAID. (IV). THE ONLY SOURCE OF INVESTMENT WAS RESERVES AND SURPLUS (SECURITIES P REMIUM) WHICH HAD BEEN CREATED FROM PAST PROFITS NOR MONEY HAD BEEN BORROWED AND IT WAS PRACTICALLY NOT POSSIBLE TO ACQUIRE A COMPANY WITH HUGE RESERVES AND SURPLUS AT SUBSTANTIALLY LOWER PRICE WITH SUCH HUGE DIFFERENCE BETWEEN THE PRICE PAID AND ACTUAL PR ICE OF THE COMPANY. THE LD . DR FOR THE REVENUE SUBMITTED THAT A LL THESE FACTS ITSELF CLEARLY INDICATE S THAT THE COMPANY M/S. GULMOHAR TOWERS PVT. LTD. IS A SHELL COMPANY USED FOR ACCOMMODATION ENTRIES BY THE ASSESSEE AND THEREFORE THE ADDITION MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A) IS JUSTIFIED AND UPHELD. IN REBUTTAL TO THIS, THE LD . COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT IS FOR THE REASONS LAID DOWN IN THE KEY FINDINGS OF THE DUE DILIGENCE REPORT THAT SAID COMPANY WAS NOT PAID THE WHOLE OF THE NETWORTH AS APPEARING IN ITS BOOKS DUE TO LACK OF EXPERTISE OF MANAGEMENT AND MATERIAL MISMANAGEMENT OF FUNDS. THE LD . COUNSEL 38 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., DREW OUR ATTENTION TO THE MEMORANDUM OF UNDERSTANDING (MOU) DATED 10.05.2010 BETW EEN THE DIRECTORS OF THE COMPANY AND THE ASSESSEE COMPANY TO STATE THAT ON GOING THROUGH THE FINDINGS OF THE DUE DILIGENCE REPORT, SHAREHOLDERS OF THE COMPANY HAD SHOWN THEIR WILLINGNESS TO LIQUIDATE THEIR STAKE IN THE COMPANY AND HAD AUTHORIZED DIRECTORS TO SELL THEIR SHARES AND LOOK FOR PROSPECTIVE BUYERS AND ACCORDINGLY, THE CONSIDERATION ALONG WITH THE TERMS AND CONDITIONS FOR ACQUISITION WERE REACHED AND SET OUT IN THE MOU. FURTHER, THE LD . COUNSEL ALSO RELIED UPON THE ASSESSMENT ORDER U/S. 143 R.W.S. 147 OF THE SAID COMPANY FOR A.Y. 20 08 - 09 WHEREIN THE SHARE CAP ITAL (INCLUDING PREMIUM) OF . 43,05,47,000/ - WAS THOROUGHLY EXAMINED AND THAT NO ADVERSITIES HA D BEEN FOUND BY THE THEN ASSESSING OFFICER WHO ASSESSED ITS CASE AND HENCE HE STRONGLY ARGUED THAT S UCH A COMPANY CANNOT BE HELD AS A SHELL COMPANY AND THAT THE ASSESSMENT ORDER IN ITS CASE CANNOT BE IGNORED ALTOGETHER. 14. IN THE ABOVE BACKGROUND, WE FIND THAT THERE IS N EITHER ANY INCRIMINATING MATERIAL OF ANY CASH PAYMENT OF . 42,80,19,650/ - UNEARTHED BY THE DEPARTMENT DURING THE COURSE OF SURVEY/SEARCH CONDUCTED ON THE 39 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., PATNI GROUP NOR IN THIS REGARD, ANY EVIDENCE HAS BEEN BROUGHT ON RECORD EVEN IN THE COURSE OF ASSESSMENT PROCEEDINGS . EVEN THE RELIANCE PLACED ON STATEMENT OF SHRI KHIMJI KARAMSHI PATEL REC ORDED U/S. 131 DURING THE COURSE OF SURVEY U/S. 133A IN THE CASE OF M/S. TRISHUL DEVELOPERS, M/S. N.S. ENTERPRISES, M/S. NOVELTY STATIONERY, M/S. TRISHUL INFRA PVT. LTD., M/S. PATEL & ASSOCIATES, M/S. REAL TRADE CORPORATION AND M/S. OM TRILOK REALTY & INFRA STRUCTURES ON 11.10.2014 CANNOT HAVE ANY EVIDENTIARY VALUE IN EYES OF LAW AS WELL SETTLED BY THE HONBLE APEX COURT IN THE CASE OF CIT V. S. KHADER KHAN SON [2012] 25 TAXMANN.COM 413 (SC) . THE CBDT HAS TIME AND AGAIN VIDE ITS INSTRUCTION F. NO. 286/2/2003 - IT (INV. II) DATED 10.03.2003, F. NO. 286/98/2013 - IT (INV. II) DATED 09.01.2014 AND F. NO. DATED 286/98/2013 - IT (INV. II) DATED 18.12.2014 HAS DIRECTED THE FIELD OFFICERS ON SEARCH TO GATHER EVIDENCES AND INCRIMINATING MATERIAL IN THE COURSE OF SEARCH RATHER THAN MERELY RECORDING STATEMENTS AND OBTAINING CONFESSIONS . THE SAID INSTRUCTIONS OF CBDT REVEAL THAT EVEN BOARD IS AWARE OF LACONIC DISCLOSURES AND EXPECTS ITS OFFICERS TO RELY ON INCRIMINATING EVIDENCE. FURTHER, SHRI KHIMJI KARAMSHI PATEL ALSO IMM EDIATELY RETRACTED HIS STATEMENT ON 18.10.2014 I.E. WITHIN A SPAN OF 7 DAYS , EARLIER BEING GIVEN UNDER PRESSURE AND UNDUE INFLUENCE . EVEN 40 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., SHRI GAURAV PATEL, DIRECTOR OF THE ASSESSEE COMPANY IN HIS AFFIDAVIT DATED 18.10.2014 HAVE STATED THAT UNDER THE PRE SSURE OF SURVEY PARTY, HE WAS MADE TO BLINDLY SIGN AND AFFIRM THE STATEMENT GIVEN BY HIS FATHER ON 11.10.2014 IN THE NIGHT AT ABOUT 10 PM AND AFFIRMED THAT THERE IS NO ELEMENT OF CASH INVOLVED IN THE SAID TAKEOVER AND ALSO SUBMITTED THE COPIES OF THE DUE D ILIGENCE REPORT DATED 28.04.2010 AND THE MOU DATED 14.05.2010 WITH REGARD TO THE ACQUISITION OF THE COMPANY . IN HIS AFFIDAVIT OF RETRACTION DATED 18.10.2014 , SHRI KHIMJI KARAMSHI PATEL HAS ALSO EXPLAINED THE PRESSURE AND DURESS FACED BY HIM, RELEVANT EXTRACT OF WHICH IS REPRODUCED HEREIN BELOW: - 3. THAT SURVEY PROCEEDINGS COMMENCED ON 09.10.2014 AND WAS CONCLUDED ON 12.10.2014 (EARLY MORNING) WITHOUT ANY BREAK 4. THAT I RESIDE AT 602, PETIT TOWERS CHS LT D. AUGUST KRANTI MARG, KEMPS CORNER, MUMBAI 400036 AND WAS CALLED AT BELAPUR OFFICE AT SERIAL NO.2 ABOVE ON 09.10.2014 AND MY STATEMENT WAS RECORDED AT THE SAID LOCATION 5. THAT FROM BELAPUR, ON 09.10.2014, I TRAVELLED TO OFFICE AT CHIRA BAZAAR OFFICE AT S ERIAL NO. 3 ABOVE ALONGWITH THE OFFICERS OF INCOME TAX DEPARTMENT AND MY STATEMENT WAS RECORDED EVEN AT CHIRA BAZAAR OFFICE 6. THAT I WAS PERMITTED TO GO TO MY RESIDENCE AT NIGHT FOR REST ON 09.10.2014 7. THAT MY STATEMENT CONTINUED AT CHIRA BAZAAR ON 10. 10.2014 AND WAS CONCLUDED ON 11.10.2014. THAT I AM NOT AWARE AS TO WHY THE SURVEY PARTY CONSISTING OF 5 MEMBERS SPENT 3 DAYS WHERE, EVEN NO UNDISCLOSED ASSETS OR CASH WAS FOUND IN THE SAID PREMISE. 41 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., 8. THAT IN THE NIGHT ON 10.10.2014, I WAS PERMITTED TO GO HOME FOR REST 9. THAT ON 11.10.2014, AFTER CONCLUSION OF MY STATEMENT AT CHIRA BAZAAR OFFICE, I TRAVELLED TO OFFICE AT FORT AT SERIAL NO. 4 ABOVE AND MY THIRD STATEMENT WAS RECORDED WHICH CONCLUDED ON EARLY MORNING OF 12.10.2014 DESPITE THE FACT THAT NO UNDISCLOSED ASSETS OR CASH WAS FOUND IN THE SAID PREMISE. 10. IT WILL BE APPRECIATED THAT FOR 3 CONTINUOUS DAYS, THE SURVEY PARTY CONTINUED THEIR ACTIONS SERIOUSLY AFFECTING MY BUSINESS AND ALSO IMPACTED ME MENTALLY AS IF I WAS UNDER ARREST 11. THOUGH ON 2 NIGHTS, I WAS ALLOWED TO GO HOME IN NIGHT FOR REST, THE PRESSURE OF PRESENCE OF INCOME TAX OFFICERS AT OFFICE WAS CONTINUOUSLY ON MIND AND ON 3 RD NIGHT, I WAS EVEN NOT ALLOWED ANY REST IN THE NIGHT. 12. THAT BEFORE RECORDING MY STATEMENT AT FORT OFFICE A T SERIAL NO. 4 ABOVE ON 11.10.2014, I WAS TOLD THAT SURVEY ACTION WILL NOT CONCLUDE TILL THE TIME I MADE A DECLARATION OF INCOME IN RELATION TO THE TRANSACTIONS OF GULMOHAR TOWERS PVT. LTD . 15. THUS, IN THE CIRCUMSTANCE AND THE FACT THAT THE RETRACTION OF SHRI KHIMJI KARAMSHI PATEL AND SHRI GAURAV PATEL IS IMMEDIATE AND BACKED WITH CORROBORATIVE EVIDENCE S , THE SAME CANNOT BE REJECTED. FURTHER, IT IS ALSO NOTED THA T SHRI KHIMJI KARAMSHI PATEL HAD NO LOCUS STANDI IN THE ASSESSEE COMPANY AT ALL TO DISCLOSE ANY UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE COMPANY . HE IS NEITHER A DIRECTOR NOR A SHAREHOLDER OF THE ASSESSEE COMPANY AND EVEN HIS STATEMENT RECORDED IN THE SURVEY OF M/S. TRISHUL DEVELO PERS, M/S. N.S. ENTERPRISES, M/S. NOVELTY STATIONERY, M/S. TRISHUL INFRA PVT. LTD., M/S. PATEL & ASSOCIATES, M/S. REAL TRADE 42 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., CORPORATION AND M/S. OM TRILOK REALTY & INFRASTRUCTURES AND RELIED UPON BY THE REVENUE AS CHAIRMAN OF THE PATEL/PATNI GROUP IS NOT CORRECT AS HIS REPLY TO Q. NO. 2 AND Q. NO. 6 CLEARLY SHOWS THAT HE HAS GIVEN HIS STATEMENT IN THE CAPACITY OF PROPRIETOR/DIRECTOR/ PARTNER FOR THE RELEVANT ENTITIES WHEREIN THERE IS NO REFERENCE TO THE APPELLANT COMPANY AT ALL. REPLIES TO Q. NO.2 AND Q. N O. 6 ARE REPRODUCED HEREIN BELOW: - Q.2 PLEASE STATE YOUR EDUCATIONAL QUALIFICATION AND EXPLAIN AS TO IN WHICH CAPACITY YOU ARE GIVING THE STATEMENT. ANS. I HAVE COMPLETED MY EDUCATION TILL 9TH STANDARD. I AM GIVING THE STATEMENT IN THE CAPACITY OF PROPRIETOR/PARTNER/DIRECTOR IN VARIOUS ENTITIES/FIRMS/COMPANIES AS ABOVE Q.6 PLEASE MENTION THE CONCERN IN WHICH YOU ARE EITHER DIRECTOR OR PARTNER (% OF PARTNERSHIP) AND WHAT ARE THE NAMES OF YOUR PROPRIETARY CONCERNS? ANS. I AM PROPRIETOR OF 1) M/S. TRIS HUL DEVELOPERS I AM PARTNER OF 1) M/S. PATEL & ASSOCIATES (60%) 2) M/S. N. S. ENTERPRISES (20%) 3) M/S. REAL TRADE CORPORATION (25%) I AM DIRECTOR IN M/S. TRISHUL REALTY INFRA PRIVATE LIMITED & NISHRIN TRADING & INVESTMENT PRIVATE LIMITED . THE LD . DR FOR THE REVENUE HAS ALSO NOT BEEN ABLE TO SHOW US AS TO HOW SHRI KHIMJI PATEL IS CONSIDERED AS A CHAIRMAN OF THE GROUP AND HOW HIS STATEMENT OF DISCLOSURE OF INCOME IN HANDS OF THE APPELLANT 43 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., COMPANY CAN BE APPLIED AGAINST THE APPELLANT COMPANY IF HE HAS NO CAPACITY OR ROLE IN THE ASSESSEE COMPANY . 16. FURTHER, THE ASSESSING OFFICER HAS REFERRED TO THE STATEMENT OF SHRI ANAND SHARMA RECO R DED U/S. 133A DATED 02.07.2013 WHEREIN HE HAS ACCEPTED THAT HE HAS CREAT ED 50 0 COMPANIES WHICH INCLUDES M/S. GULMOHAR TOWERS PVT. LTD. TO PROVIDE ACCOMMODATION ENTRIES AND HAVE EXTRACTED IN THE IMPUGNED ASSESSMENT ORDER THE RELEVANT MODUS OPERANDI ADOPTED BY HIM. FURTHER, ANOTHER STATEMENT RECORDED U/S. 131 ON 08.02.2014 IS ALS O REFERRED WHEREIN SHRI ANAND SHARMA HAVE STATED THAT BOGUS LOANS WERE GIVEN TO BHAGWANJI M. PATEL, EKTA AGARWAL, KHIMJI PATEL, MANJI KARAN SAI PATEL, PITASHREE ENTERPRISE PVT. LTD., TRISHUL REALTY INFRA PVT. LTD. AND VALJI MANJI GOTHI BY M/S. GULMOHAR TOW ERS PVT. LTD. IT IS NOTED THAT THIS STATEMENT OF SHRI ANAND SHARMA IS A GENERAL STATEMENT AND DOES NOT INCRIMINATE THE APPELLANT COMPANY. THE ASSESSING OFFICER HAS NOT EVEN PROVIDED A COPY OF THESE STATEMENTS TO THE ASSESSEE AND THAT NEITHER CROSS EXAMINAT ION OF SAID PARTY WAS GRANTED TO THE ASSESSEE DESPITE SOUGHT BY THE ASSESSEE . HENCE, THE STATEMENT OF THIRD PARTY IN ABSENCE OF ANY CREDIBLE EVIDENCE IS NOT JUSTIFIED AS EVEN HELD BY THE 44 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V . PARADISE INLA ND SHIPPING PVT. LTD. [ I TA NO. 66 OF 2016 (BOM. HC) ] WHICH IS FURTHER AFFIRMED BY THE HONBLE APEX COURT IN [2018] 93 TAXMANN.COM 84 (SC) . ANOTHER STATEMENT OF SHRI VIVEK AGARWAL REFERRED BY THE ASSESSING OFFICER IN HIS ORDER IS IN CONTEXT OF TRANSACTION D ONE BY SMT. EKTA AGARWAL WITH M/S. GULMOHAR TOWERS PVT. LTD. AND HAS NO RELEVANCE IN THE PRESENT FACTS OF THE CASE. 17. APART FROM THE SAID STATEMENT, THE ST AND OF THE REVENUE IS THAT M/S. GULMOHAR TOWERS PVT. LTD. IS A KOLKATA BASED COMPANY AND IS A SHELL COMPANY. IN THIS REGARD, THE ARGUMENTS MADE BY THE LD . DR OF THE REVENUE HAVE A PERSUASIVE VALUE BUT THE SAME CAN AT THE MOST LEAD TO SUSPICION AND CANNOT TAKE THE CASE OF THE REVENUE FURT HER DEVOID OF ANY MATERIAL OR EVIDENCE AT ALL AND THE VITAL FACT THAT THE SAID COMPANY IS ALSO ASSESSED BY THE DEPARTMENT IN APRIL, 2010 JUST PRIOR TO THE ACQUISITION OF THE COMPANY BY THE ASSESSEE IN MAY, 2010. CERTAINLY, THE ASSESSMENT ORDER PASSED BY TH E ASSESSING OFFICER IN THE CASE OF M/S. GULMOHAR TOWERS PVT. LTD. CANNOT BE IGNORED AS A DUMB DOCUMENT . HENCE, IN THESE CIRCUMSTANCES, THE RATIO OF THE DECISION OF HONBLE APEX COURT IN THE CASE 45 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., OF UMA CHARAN SHAW & BROS. V. CIT [1959] 37 ITR 271 (SC) , WHER EIN IT IS CLEARLY HELD THAT SUSPICION HOW SO FAR MAY BE STRONG CANNOT TAKE THE PLACE OF EVIDENCE SQUARELY APPLIES . THERE IS NO POSITIVE AND CREDIBLE EVIDENCE BROUGHT ON RECORD BY THE REVENUE TO ESTABLISH THE ALLEGATION OF CASH PAYMENT OVER AND ABOVE THE IN VESTMENT RECORDED IN THE BOOKS. NEITHER THE SEARCH PARTY HAS FOUND ANY INCRIMINATING MATERIAL IN THE COURSE OF SEARCH ON PATEL/PATNI GROUP NOR THE ASSESSING OFFICER HAS BROUGHT ANY MATERIAL/EVIDENCE ON RECORD IN THE COURSE OF ASSESSMENT PROCEEDINGS. EVEN NO ADVERSITIES OR DEFECTS HAVE BEEN FOUND IN THE EVIDENCES IN THE FORM OF DUE DILIGNENCE REPORT, MOU, SHARE TRANSFER FORMS, SHARE CERTIFICATES, ETC. FURNISHED BY THE APPELLANT HAS BEEN POINTED OUT. THERE IS NO FINDING AS TO WHO PAID THE ALLEGED CASH TO WHOM EITHER PROMOTER/DIRECTOR/SHAREHOLDERS OF M/S. GULMOHAR TOWERS PVT. LTD. THE AO HAS NOT EVEN EXAMINED THE PROMOTERS/ DIRECTORS OF M/S. GULMOHAR TOWERS PVT. LTD. NONE OF THE SHAREHOLDERS OF M/S. GULMOHAR TOWERS PVT. LTD. HAVE BEEN EXAMINED. NOWHERE THE NAME OF THE APPELLANT COMPANY HAS BEEN FOUND TO BE PURPORTED IN ANY OF THE STATEMENTS OF SHRI ANAND SHARMA AND SHRI VIVEK AGARWAL TO SAY THAT THE APPELLANT COMPANY HAD PA ID CASH TO M/S. GULMOHAR TOWERS PVT. LTD. OVER AND ABOVE THE 46 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., INVESTMENT RECORDED IN ITS BOOKS. ON THE CONTRARY, THE ASSESSMENT MADE BY THE DEPARTMENT ON 22.04.2010 IN THE CASE OF M/S. GULMOHAR TOWERS PVT. LTD. DOES NOT REFER TO ANY ADVERSITIES BUT IN FACT G OES TO SUGGEST THAT THE SAID COMPANY IS NOT A SHELL OR BOGUS COMPANY. THE REVENUE HAS FAILED TO DISCHARGE ITS BURDEN TO PROVE AND CONCLUSIVELY ESTABLISH BY MATERIAL THE ALLEGATION MADE ON THE ASSESSEE. IN THE LIGHT OF THE ABOVE, WE CANNOT UPHOLD THE ADDITI ON MERELY ON SURMISES AND SUSPICION IN ABSENCE OF ANY CREDIBLE AND CORROBORATIVE EVIDENCE BROUGHT ON RECORD. REFERENCE IN THIS REGARD IS ALSO MADE TO THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V . DEVESH AGARWAL [2017] 81 TAXMANN.COM 257 (BOM) IN SIMILAR FACTS , WHERE IT WAS HELD AS UNDER: - . . . WE NOTE THAT THE CIT (A) HAD, WHILE REVERSING THE VIEW OF THE ASSESSING OFFICER HAD INTER ALIA, PLACED RELIANCE UPON THE DECISION OF THE TRIBUNAL IN RUPEE FINANCE & MANAGEMENT (P.) LT D. V. ASSTT. CIT [2008] 120 ITD 539 (MUM.). MR. MOHANTY THE LEARNED COUNSEL FOR REVENUE VERY FAIRLY POINTS OUT THAT THE REVENUE HAD FILED AN APPEAL AGAINST THE ORDER OF THE TRIBUNAL IN RUPEE FINANCE AND MANAGEMENT (P.) LTD. (SUPRA) TO THIS COURT BEING INCO ME TAX APPEAL NO. 1208 OF 2008. (CIT V. RUPEE FINANCE & MANAGEMENT (P.) LTD.). THIS COURT BY AN ORDER DATED 20TH OCTOBER, 2008 HAD DISMISSED THE REVENUE'S ABOVE APPEAL, INTER ALIA, ON THE ISSUE OF ADDITION ON ACCOUNT OF UNDISCLOSED INVESTMENTS UNDER SECTIO N 69 OF THE ACT FOR PURCHASE OF SHARES AT A PRICE LESSER THAN ITS MARKET VALUE. NO DISTINGUISHING FEATURES IN THE PRESENT CASE HAS BEEN SHOWN TO US WHICH WOULD WARRANT TAKING A DIFFERENT VIEW. MOREOVER, IN THE ABSENCE OF ANY CORROBORATIVE EVIDENCE ESTABLIS HING RECEIPTS AND PAYMENTS OUTSIDE THE 47 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., REGULAR BOOKS OF ACCOUNT, IT CANNOT BE ALLEGED THAT INVESTMENTS HAVE BEEN MADE WHICH ARE NOT RECORDED. FURTHER THE REVENUE HAS IN THIS CASE PROCEEDED TO HOLD THAT THERE IS INVESTMENT IN SHARES IN EXCESS OF WHAT IS SHO WN ON THE BASIS OF PURE SUSPICION I.E. THE SHARES PURCHASED AT A PRICE LESS THAN ITS ACTUAL VALUATION. THEREFORE UNLESS IT IS FIRST ESTABLISHED BEYOND DOUBT THAT THERE IS AN INVESTMENT WHICH IS NOT RECORDED BY THE ASSESSEE IN ITS BOOKS, NO OCCASION TO EXPL AIN ABOUT THE NATURE AND SOURCE OF THE INVESTMENT CAN ARISE. THE INVOCATION OF SECTION 69 OF THE ACT BEFORE ESTABLISHING INVESTMENT NOT RECORDED IN ITS BOOKS OF ACCOUNT, IS NOT JUSTIFIED. 18. THERE IS ALSO ONE MORE ASPECT IN THIS CASE WHICH HAS BEEN ARGUED BY THE LD . COUNSEL FOR THE ASSESSEE WHICH IS WITHOUT PREJUDICE TO THE MAIN SUBMISSION THAT THE APPELLANT COMPANY HAS NOT PAID ANY CASH OVER AND ABOVE THE INVESTMENT RECORDED IN BOOKS AND HENCE, NO ADDITION IS WARRANTED ON SU CH GUESS WORK AND ASSUMPTIONS. THE LD . COUNSEL SUBMITTED THAT AT PARA 7.3 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS MENTIONED ABOUT FINDINGS/EVIDENCES COLLECTED DURING THE COURSE OF SEARCH , HOWEVER, THERE I S NO INCRIMINATING MATERIAL FOUND IN THE SEARCH AT ALL AND THAT IN THE CONCLUSION OF SAID PARA 7.3, THE ASSESSING OFFICER HAS CONCLUDED THAT FROM THE STATEMENTS OF SHRI KHIMJI PATEL, SHRI VIVEK AGARWAL AND SHRI ANAND SHARMA, IT IS EVIDENT THAT M/S. GULMOHAR TOWERS PVT. LTD. IS MERELY A SHELL/PAPER COMPANY WHICH WAS SUBSEQUENTLY PURCHASED BY PATNI GROUP TO INFUSE UNACCOUNTED M ONEY INTO PATNI GROUP 48 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., CONCERNS. THE LD. COUNSEL ALSO REFERRED TO PARA 7.2 OF THE ASSESSMENT ORDER WHEREIN IT HAS BEEN STATED THAT M/S. GULMOHAR TOWERS PVT. LTD. WAS PURCHASED BY PATNI GROUP AT A PRICE OF . 2,26,30,000/ - . ACCORDINGLY, HE ARGUED THAT AT VARI OUS PARTS OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS REFERRED TO THE PATNI GROUP AS AN ENTIRETY IN RELATION TO THE ALLEGED MODUS OPERANDI OF ACQUIRING COMPANIES AT A VERY NOMINAL PRICE. IN THIS REGARD, THE LD . COUNSEL ARGUES THAT IF SUCH A VERSIO N OF THE ASSESSING OFFICER IS CONSIDERED THEN WITHOUT PREJUDICE TO THE ALLEGATION ON THE ASSESSEE COMPANY, IT IS THE GROUP WHICH HAVE PAID CASH OVER AND ABOVE THE INVESTMENT RECORDED IN BOOKS AND THE ASSESSING OFFICER HAS FAILED TO BRING ON RECORD AS TO WH ICH CONCERN OF THE GROUP HAD ACTUALLY BEEN ENGAGED IN THE ALLEGED SCHEME OF THINGS. WE FIND FORCE IN THIS ARGUMENT AS THE ASSESSING OFFICER HIMSELF HA S STATED THAT DURING THE COURSE OF SEARCH ACTION, IT WAS UNEARTHED THAT THE SAID GROUP ARE SELLING FLATS/ UNITS FROM THEIR REAL ESTATE PROJECTS AND OUT OF WHICH FULL CONSIDERATION IS NOT RECORDED IN BOOKS AND SUCH CASH GENERATED OUT OF ON MONEY SALES ARE THEN ROUTED THROUGH THE SHELL COMPANIES. HOWEVER, IT IS AN UNDISPUTED FACT THAT NO SUCH EVIDENCE/FINDING OF ON MONEY SALES GENERATED IN CASH HAS BEEN FOUND IN THE COURSE OF SEARCH AND ALSO THAT 49 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., NO SUCH ADDITION HAS BEEN MADE IN ANY OF THE GROUP CONCERNS. ALSO, THE ASS ESSING OFFICER HAS ALLEGED THE GROUP AS A WHOLE BUT HAS NOT CARRIED HIS INVESTIGATION FURTHER TO IDENTIFY WHICH OF THE ENTITIES/CONCERNS WERE INDULGED EITHER IN ON MONEY SALES OR ROUTING OF INVESTMENTS IN SHELL COMPANIES AND BROUGHT INTO THE REGULAR BOOKS BY WAY OF UNSECURED LOAN OR ADVANCE AGAINST BOOKING. IF THE VERSION OF THE ASSESSING OFFICER IS ALSO TAKEN TO BE CORRECT, THEN THE ALLEGATION WHICH IS DRAWN ON THE ASSESSEE COMPANY IS THAT IT IS A MERE CONDUIT TO THE ROTATION OF FUNDS WHICH WERE ULTIMATEL Y PASSED ON TO THE GROUP. THUS, IT IS CLEAR THAT THE ASSESSEE COMPANY IS NOT THE BENEFICIARY OF THE ALLEGED UNEXPLAINED INVESTMENTS. FURTHER, THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT THE ASSESSEE COMPANY WAS INCORPORATED ON 13.04.2010 I.E. THE YEAR UN DER CONSIDERATION WAS THE 1 ST YEAR OF THE COMPANY AND ITS BUSINESS OPERATIONS HAD NOT YET COMMENCED. THIS IS ALSO AN IMPORTANT FACET TO THIS CASE AS BEING THE 1 ST YEAR OF INCORPORATION AND THAT BUSINESS HAS NOT BEEN COMMENCED BY THE ASSESSEE, THERE DOES NOT ARISE ANY GENERATION OF CASH SALES THROUGH ON MONEY FROM ANY OF THE REAL ESTATE PROJECTS. IN FACT, THE LD . COUNSEL HAS ARGUED THAT NONE OF THE REAL ESTATE PROJECTS HAD COMMENCED IN THE GROUP AT THE TIME WHEN THE COMPANY WAS ACQUIRED. 50 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., THEREFO RE, APPLYING THE RATIO OF HONBLE APEX COURT IN THE CASE OF CIT V. BHARAT ENGINEERING & CONSTRUCTION CO. [1972] 83 ITR 187 (SC) ; ASSESSEE CANNOT BE TAXED AS THERE IS NO POSSIBILITY OF GENERATING UNDISCLOSED CASH BY THE ASSESSEE IN THE YEAR UNDER CONSIDERA TION . IT IS A TRITE LAW THAT ONLY THE RIGHT PERSON CAN BE TAXED UNDER THE LAW AND THE ASSESSING OFFICER CANNOT PICK ONE PERSON MERELY BECAUSE SOME THIRD PARTY HAS MADE DISCLOSURE IN THE HANDS OF THE APPELLANT COMPANY. AS REGARDS TAXING THE RIGHT PERSON, THE HONBLE APEX COURT IN THE CASE OF ITO V. CH. ATCHAIAH [1996] 84 TAXMAN 630 (SC) HAVE OBSERVED THE FOLLOWING PRINCIPLE: 7.. WE ARE OF THE OPINION THAT UNDER THE PRESENT ACT, THE ITO HAS NO OPTION LIKE THE ONE HE HAD UNDER THE 1922 ACT. HE CAN, AND HE MUST, TAX THE RIGHT PERSON AND THE RIGHT PERSON ALONE. BY RIGHT PERSON, WE MEAN THE PERSON WHO IS LIABLE TO BE TAXED, ACCORDING TO LAW, WITH RESPECT TO A PARTICULAR INCOME. THE SAID PRINCIPLE IS ALSO FOLLO WED IN THE CA SE OF ACIT V. M/S. KARTIKYA CONSTRUCTION (ITA NO. 51/MUM/2006) AND BHUSHAN STEEL LTD. V. ACIT (ITA NO. 1646/DEL/2014). EVEN THE ARTICLE 265 OF THE CONSTITUTION OF INDIA PROVIDES THAT NO TAX SHALL BE LEVIED OR COLLECTED EXCEPT BY AUTHORITY OF LAW. 51 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., 19. HENCE, EVEN ON THESE PREMISES TOO, THE ADDITION OF UNEXPLAINED INVESTMENT CANNOT BE MADE IN THE HANDS OF THE ASSESSEE COMPANY . 20. INTERESTINGLY, WE ALSO FIND THAT THE ADDITION OF UNEXPLAINED INVESTMENT OF CASH PAYMENT OVER AND ABOVE THAT RECORDED IN BOOKS OF THE AS SESSEE COMPANY IS MADE U/S. 68 OF THE ACT WHICH IS ALSO CONFIRMED BY THE LD. CIT(A) UNDER THE SAME SECTION 68. NOW, THE ISSUE HERE IS THAT THE APPELLANT HAS RECORDED INVESTMENT IN BOOKS IN RESPECT OF ACQUISITION OF SHARES OF M/S. GULMOHAR TOWERS PVT. LTD. AT . 2.26 CRORES WHEREAS THE REVENUE IS OF THE VIEW THAT THE INVESTMENT OUGHT TO HAVE BEEN RECORDED AT . 45 .06 CRORES BUT NOT BEEN RECORDED AT THAT VALUE AS THE DIFFERENTIAL AMOUNT OF . 42.80 CRORES IS PAID IN CASH. HENCE, AS PER THE SAID ALLEGATION, THE L D . COUNSEL IN HIS WITHOUT PREJUDICE ARGUMENTS STRONGLY ARGUED THAT THIS IS NOT THE CASE OF INVOKING PROVISIONS OF SECTION 68 OF THE ACT AS THERE IS NO CASH CREDIT INVOLVED NOR IT IS A CASE OF APPLYING SECTION 69 AS INVESTMENTS ARE ALREADY RECORDED IN BOOKS WHICH IS AN UNDISPUTED FACT. WE HAVE TO ACCEPT THIS PROPOSITION AS THE RELEVANT SECTION UNDER THE FACTUAL MATRIX OUGHT TO HAVE BEEN INVOKED IS SECTION 69B OF THE ACT WHICH 52 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., REFERS TO INVESTMENT NOT FULLY DISCLOSED IN BOOKS OF ACCOUNT AND READS AS UNDER: WHERE IN ANY FINANCIAL YEAR THE ASSESSEE HAS MADE INVESTMENTS OR IS FOUND TO BE THE OWNER OF ANY BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE, AND THE ASSESSING OFFICER FINDS THAT THE AMOUNT EXPENDED ON MAKING SUCH INVESTMENTS OR IN ACQUIRING SUCH BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE EXCEEDS THE AMOUNT RECORDED IN THIS BEHALF IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE FOR ANY SOURCE OF INCOME, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT SUCH EXCESS AMOUNT OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE EXCESS AMOUNT MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR. HOWEVER, NO SUCH SECTION 69B HAS EITHER BEEN INVOKED BY THE ASSESSING OFFICER OR LD. CIT(A) IN C ONFIRMING THE ALLEGED ADDITION. HENCE, EVEN ON THIS COUNT, THE ADDITION MADE U/S. 68 IS NOT TENABLE AS PER LAW. 21. ACCORDINGLY, THE GROUND NO . 2 RAI SED AGAINST THE ADDITION OF . 42,80,19,650 U/S. 68 OF THE ACT AS UNEXPLAINED INVESTMENT IS ALLOWED. 22. AS WE HAVE DECIDED THE ISSUE ON MERITS IN FAVOUR OF THE ASSESSEE WE ARE NOT INCLINED TO INTO GROUND NO.1 RAISED AGITATING THE JURISDICTION, VALIDITY OF THE ASSESSMENT ORDER PASSED BY THE DY. COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE - 7(3), MUMBAI, PASSED U/S. 143(3) R.W.S. 147 53 ITA.NO. 3129/MUM/2019 (A.Y: 2011 - 12) M/S. EVERFINE CONSTRUCTIONS PVT. LTD., OF THE ACT AS IT WOULD ONLY BE AN ACADEMIC EXERCISE. HENCE THIS GROUND IS LEFT OPEN. 23. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 16 .09 .2021 AS PER RULE 34(4) OF ITAT RULES BY PLACING THE PRONOUNCEMENT LIST IN THE NOTICE BOARD SD/ - SD/ - (S. RIFAUR RAHMAN) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 16 / 09 / 2021 GIRIDHAR, SR.PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM