D. J. Stock Broking Private Limited, Ahmedabad V. The Income tax Officer, Ward-1(1)(4), Ahmedabad

ITA 313/AHD/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3884 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 24-02-2020
• Assessment Year: 2012-2013
• Appeal Filed On: 06-02-2017
• Court: TRIBUNAL

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, VICE-PRESIDENT AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER ITA.NO.313/AHD/2017 / ASSTT.YEAR : 2012-13 D.J. STOCK BROKING PVT.LTD. C/O. MEHTA LODHA & CO. CHARTERED ACCOUNTANTS 105, SAKAR-I, ASHRAM ROAD AHMEDABAD 380 009 PAN : AACCD 7429 B VS ITO, WARD - 1(1)(4) AHMEDABAD. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI P.D. SHAH, AR REVENUE BY : SHRI VINOD TANWANI, SR.DR / DATE OF HEARING : 24/02/2020 / DATE OF PRONOUNCEMENT: 03/03/2020 !'/ O R D E R PER RAJPAL YADAV, VICE-PRESIDENT ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST O RDER OF THE LD.CIT(A)-1, AHMEDABAD DATED 30.11.2016 PASSED FOR THE ASSTT.YEAR 2012- 13. 2. ASSESSEE HAS TAKEN TWO GROUNDS OF APPEAL VIZ. (A ) THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.2,29,28,000/ - WHICH WAS ADDED BY THE AO WITH AID OF SECTION 68 OF THE ACT BY TREATING TH E SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE AS UNEXPLAINED CREDIT, AND (B) THE LD.CIT(A) HAS ITA NO.313/AHD/2017 2 ERRED IN CONFIRMING THE DISALLOWANCE OF RS.30,887/- UNDER SECTION 14A OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED ITS RETURN OF INCOME ON 30.9.2012 DECLARING TOTAL INCOME AT NIL. THE CA SE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT, AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE. ON SCRUTI NY OF THE ACCOUNTS, IT REVEALED TO THE AO THAT THE ASSESSEE HAS RECEIVED S HARE APPLICATION MONEY OF RS.3,87,72,000/-. THE LD.AO HAS CALLED THE ASSESSE E TO SUBMIT IDENTITY OF THE CREDITORS, CAPACITY OF CREDITORS TO ADVANCE MONEY, AND SHOW GENUINENESS OF THE TRANSACTION. ACCORDING TO THE AO, THE ASSESSEE HAS SUBMITTED PARTIAL INFORMATION. THEREAFTER, THE LD.AO HAS MADE REFERE NCE TO LARGE NUMBER OF DECISIONS VIZ. RAJSHREE SYNTHETICS P.LTD. VS. CIT, 176 CTR 300 (RAJ), ITO VS. DIZA HOLDINGS P.LTD., 173 CTR 45 (KER), CIT VS. N.R. PORTFOLIO P.LTD., 263 CTR 456 (DEL), AND ULTIMATELY MADE ADDITION OF RS.3,87,72,000/-. 4. DISSATISFIED WITH THE ADDITION THE ASSESSEE CARR IED THE MATTER IN APPEAL BEFORE THE LD.CIT(A). IT HAS FILED AN APPLICATION FOR ADDITIONAL EVIDENCE, WHICH WAS ALLOWED BY THE LD.CIT(A). IN PARAGRAPH-2 .3 ON PAGE NO.13 OF THE IMPUGNED ORDER, THE LD.CIT(A) HAS OBSERVED THAT THE ASSESSEE WAS PREVENTED BY SUFFICIENT REASONS, AND THEREFORE, IN THE INTERE ST OF JUSTICE, ADDITIONAL EVIDENCE WAS ADMITTED. HE SENT THOSE EVIDENCES TO THE FILE OF THE AO FOR VERIFICATION AND NECESSARY INQUIRY RELATED TO THE A SSESSEE. THE LD.CIT(A) HAS OBSERVED IN PARA 2.4 THAT THE LD.AO HAS SUBMITTED H IS REMAND REPORT VIDE LETTER NO.DJSBPL/2016-17 DATED 3.5.2016. THE LD.CI T(A) HAS REPRODUCED THE REMAND REPORT ON PAGE NOS.13 TO 15 OF THE IMPUG NED ORDER. THE LD.CIT(A) WAS NOT SATISFIED WITH THE REMAND REPORT SUBMITTED BY THE AO. HE APPRAISED THE AO THAT IT APPEARS THAT YOU HAVE COLL ECTED THE ACCOUNTS AND BANK STATEMENTS OF THE ABOVE SHARE APPLICANTS FOR V ERIFYING THE PAYMENTS ITA NO.313/AHD/2017 3 MADE BY THEM TOWARDS SHARE APPLICATION MONEY. BUT YOU HAVE NOT GIVEN FINDING WHETHER THE ABOVE DETAILS ARE SUFFICIENT TO PROVE THE GENUINENESS, CAPACITY OF THE ABOVE PARTIES FOR SUBSCRIBING SHARE S. THE FINDING RECORDED WAS GIVEN ON PAGE NO.18, WHICH READS AS UNDER: 2. FROM THE ABOVE, IT IS SEEN THAT ALL THE ACCOUN TS AND BANK STATEMENTS OF THE ABOVE PARTIES HAVE BEEN COLLECTED TO VERIFY THE PAYMENTS MADE BY THEM TOWARDS SHARE APPLICATION MON EY. BUT YOU HAVE NOT GIVEN YOUR FINDING WHETHER THE ABOVE DETAI LS ARE SUFFICIENT TO PROVE THE GENUINENESS, CAPACITY OF THE ABOVE PAR TIES FOR SUBSCRIBING SHARE APPLICATION MONEY IN THE APPELLAN T CASE. YOU ARE REQUESTED TO GO THROUGH THE SAME ONCE AGAIN AND AFT ER VERIFICATION AND ENQUIRY, SUBMIT YOUR COMMENTS ABOUT THE VERACIT Y AFTER THE ABOVE SHARE APPLICATION MONEY REGARDING THE ABOVE P ARTIES. 5. IN RESPONSE TO THE ABOVE LETTER, THE LD.AO HAS S UBMITTED A FRESH REMAND REPORT WHICH HAS BEEN REPRODUCED BY THE LD.CIT(A) O N PAGE NOS.18 AND 19. THE LD.CIT(A) THEREAFTER RECORDED A FINDING THAT ON LY A SUM OF RS.2,29,28,000/- HAS BEEN RECEIVED DURING THE YEAR, AND REST IS THE OPENING BALANCE, WHICH COULD NOT BE ADDED IN THIS ASSESSMEN T YEAR. ACCORDINGLY, THE ADDITION TO THE EXTENT OF RS.2,29,28,000/- HAS BEEN CONFIRMED. 6. WHILE IMPUGNING ORDERS OF THE REVENUE AUTHORITIE S, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS FILED CONFIRMATION, BANK STATEMENTS, COPY OF INCOME TAX RETURNS QUA TWO SHARE APPLICANTS, I.E. MAARS SOFTWARE INTERNATIONAL LTD., SHRI ANILKUMAR CHAMPAL AL JAIN, ALL THREE SHARE APPLICANTS HAVE RESPONDED TO THE QUERY RAISED BY TH E AO UNDER SECTION 133(6) OF THE INCOME TAX ACT. THUS, ACCORDING TO THE ASSE SSEE, IT HAS DISCHARGED ONUS PUT UPON IT BY VIRTUE OF SECTION 68 OF THE INC OME TAX ACT, 1961. IT IS THE AO WHO FAILED TO CONDUCT ANY INVESTIGATION. HE POI NTED OUT THAT ONLY CIRCUMSTANCES NARRATED BY THE AO IN THE REMAND REPO RT REPRODUCED BY THE LD.CIT(A) ON PAGE NO.18 AND 19 OF THE IMPUGNED ORDE RS THAT THESE SHARE ITA NO.313/AHD/2017 4 APPLICANTS HAVE SHOWN MEAGER INCOME, AND THEREFORE, THEIR CREDIT-WORTHINESS IS DOUBTFUL. ACCORDING TO THE LD.COUNSEL FOR THE A SSESSEE, THE RETURN OF INCOME SHOWN BY A PARTY CANNOT BE A CRITERION TO JUDGE HIS CREDIT-WORTHINESS. EVEN IN THE CASE OF LOSS MAKING COMPANY, THERE COULD BE ASS ETS AND THE LIABILITIES, WHICH COULD AUTHORISE SUCH PARTICULAR COMPANY TO AP PLY FOR SHARE OF ANOTHER COMPANY. THE AO HAS NOT CONSIDERED ANY SUCH CIRCUM STANCES. HE HAS JUST DRAWN AN INFERENCE FROM THE INCOME-TAX RETURNS, AND HELD THAT THESE SHARE APPLICANTS WERE NOT HAVING CAPACITY TO SUBSCRIBE SH ARES OF THE ASSESSEES COMPANY. HE FURTHER CONTENDED THAT AS FAR AS SHRI ANILKUMAR CHAMPALAL JAIN IS CONCERNED, HE IS PROPRIETOR OF M/S.ANIL ENTERPRI SE, AND HE IS BROTHER OF ONE OF THE DIRECTORS HENCE, HIS IDENTITY IS NEVER IN DI SPUTE. FOR BUTTRESSING HIS CONTENTION, HE MADE REFERENCE TO THE DECISION OF HO NBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. RANCHHOD JIVABHAI NAKHAVA, 2 08 TAXMAN 35. HE ALSO RELIED UPON JUDGMENT OF HONBLE GUJARAT HIGH C OURT IN THE CASE OF ASSOCIATED TRANSRAIL STRUCTURE LTD. VS. ACIT, 397 I TR 573 (GUJ) AS WELL AS JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CI T VS. ORISSA CORPORATION LTD., 159 ITR 78. HE FILED WRITTEN SUB MISSIONS, AND IN HIS WRITTEN SUBMISSIONS HE FURTHER RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GAGANDEEP INFRASTRUCTU RE P.LTD., 394 ITR 680 (BOM), AND SHRI SHREE GIRIRAJ FERROMET P.LTD. VS. I TO (ITA NO.3697/MUM/2017) DATED 12.10.2018 (ITAT, MUM. ). HE FURTHER SUBMITTED THAT RECENTLY, HONBLE BOMBAY HIGH COURT WHILE DEAL ING IN THE CASE OF PR.CIT VS. M/S.AMI INDUSTRIES (INDIA) P.LTD., HAS CONSIDER ED DECISION OF HONBLE SUPREME COURT IN THE CASE OF PR.CIT VS. NRA IRON & STEEL P.LTD., REPORTED IN INCOME TAX APPEAL NO.1231 OF 2017. 7. ON THE OTHER HAND, THE LD.DR RELIED UPON FINDING OF THE LD.CIT(A) WHEREIN THE LD.CIT(A) HAS REPRODUCED THE REMAND REP ORT OF THE AO ON PAGE NOS.18 AND 19 OF THE IMPUGNED ORDER. HE FURTHER CO NTENDED THAT THIS TYPE OF ITA NO.313/AHD/2017 5 ISSUE WAS CONSIDERED BY SMC BENCH OF ITAT IN THE CASE OF PAVANKUMAR M. SANGHVI VS. ITO VIDE ITA NO.2447/AHD/2016 ORDER DAT ED 17.5.2017. THE TRIBUNAL HAS EXPOUNDED AS TO HOW ONE HAS TO FIND OU T GENUINENESS OF A SHARE APPLICANTS AS WELL AS GENUINENESS OF ITS TRANSACTIO N. HE RELIED UPON THIS ORDER, AND SUBMITTED THAT IT HAS BEEN UPHELD EVEN BY THE H ONBLE HIGH COURT. 8. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GO NE THROUGH THE RECORD CAREFULLY. BEFORE WE EMBARK UPON AN INQUIRY ON THE FACTS OF THE PRESENT APPEAL, IN ORDER TO FIND OUT WHETHER THE SHARE CAPI TAL AND SHARE PREMIUM MONEY RECEIVED BY THE ASSESSEE DURING THE YEAR IS R EQUIRED TO BE TREATED AS ITS UNEXPLAINED CREDIT AND DESERVES TO BE ADDED UNDER S ECTION 68 OF THE INCOME TAX ACT, 1961. WE DEEM IT APPROPRIATE TO BEAR IN MI ND CERTAIN BASIC PRINCIPLES/TESTS PROPOUNDED IN VARIOUS AUTHORITATIV E PRONOUNCEMENTS OF THE HONBLE HIGH COURTS AND HONBLE SUPREME COURT. IT IS ALSO PERTINENT TO OBSERVE THAT BOTH THE SIDES HAVE MADE REFERENCE TO A LARGE NUMBER OF DECISIONS. WE DO NOT DEEM IT NECESSARY TO RECITE A ND RECAPITULATE THEM BECAUSE THAT WOULD MAKE THIS ORDER REPETITIVE AND B ULKY. WE TAKE COGNIZANCE OF SOME OF THEM. IT IS PERTINENT TO OBSERVE THAT I N SO FAR AS COMPANIES INCORPORATED UNDER INDIAN COMPANIES ACT ARE CONCERN ED, WHETHER PRIVATE LIMITED OR PUBLIC LIMITED COMPANIES, THEY RAISE THE IR SHARE CAPITAL, THROUGH SHARES THOUGH MANNER OF RAISING SHARE CAPITAL IN PR IVATE LIMITED COMPANY ON ONE HAND AND PUBLIC LIMITED COMPANY ON OTHER HAND, WOULD BE DIFFERENT. THE SHARE CAPITAL AND SHARE PREMIUM ARE BASICALLY IRREV ERSIBLE RECEIPTS OR CREDITS IN THE HANDS OF THE COMPANIES. SHARE CAPITAL IS CO NSIDERED TO BE COST OF SHARES ON EQUIVALENT AMOUNT ISSUED AND PREMIUM IS CONSIDER ED AS EXTRA AMOUNT CHARGED BY THE COMPANY FOR ISSUE OF THAT CAPITAL. IN THE CASE OF PRIVATE LIMITED COMPANY, NORMALLY SHARES ARE SUBSCRIBED BY FAMILY MEMBERS OR PERSONS KNOWN/CLOSE TO THE PROMOTERS. PUBLIC LIMIT ED COMPANY, ON THE OTHER HAND, GENERALLY RAISED BY PUBLIC ISSUE INVITING GEN ERAL PUBLIC AT LARGE FOR ITA NO.313/AHD/2017 6 SUBSCRIPTION OF THESE SHARES. YET, IT IS ALSO POSS IBLE THAT IN THE CASE OF PUBLIC LIMITED COMPANY, THE SHARE CAPITAL IS ISSUED IN CLO SE-CIRCUIT. WHEN COMPANIES INCORPORATED UNDER THE COMPANIES ACT RAISE THEIR CA PITAL THROUGH SHARES, VARIOUS PERSONS WOULD APPLY FOR SHARES AND THEN GIV E SHARE APPLICATION MONEY. THIS AMOUNT RECEIVED FROM SUCH SHARE HOLDE R WOULD NATURALLY BE CREDITED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. ONCE THE ALLEGED SHARE CAPITAL IS CREDITED TO THE ACCOUNTS OF THE ASSESSEE , THEN ROLE OF SECTION 68 WOULD COME. IT IS PERTINENT TO TAKE NOTE OF THIS S ECTION. IT READS AS UNDER: WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATI ON ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, I N THE OPINION OF THE OFFICER, SATISFACTORY THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. 9. A PERUSAL OF THE SECTION WOULD INDICATE THAT BAS ICALLY THIS SECTION CONTEMPLATES THREE CONDITIONS REQUIRED TO BE FULFIL LED BY AN ASSESSEE. IN OTHER WORDS, THE ASSESSEE IS REQUIRED TO GIVE EXPLANATION WHICH WILL EXHIBIT NATURE OF TRANSACTION AND ALSO EXPLAIN THE SOURCE OF SUCH CREDIT. THE EXPLANATION SHOULD BE TO THE SATISFACTION OF THE AO. IN ORDER TO GIVE SUCH TYPE OF EXPLANATION WHICH COULD SATISFY THE AO, THE ASSESSE E SHOULD FULFILL THREE INGREDIENTS VIZ. (A) IDENTITY OF THE SHARE APPLICAN TS, (B) GENUINENESS OF THE TRANSACTION, AND (C) CREDIT-WORTHINESS OF SHARE APP LICANTS. AS FAR AS CONSTRUCTION OF SECTION 68 AND TO UNDERSTAND ITS ME ANING IS CONCERNED, THERE IS NO MUCH DIFFICULTY. DIFFICULTY ARISES WHEN WE APPL Y THE CONDITIONS FORMULATED IN THIS SECTION ON THE GIVEN FACTS AND C IRCUMSTANCES. IN OTHER WORDS, IT HAS BEEN PROPOUNDED IN VARIOUS DECISIONS THAT SECTION 68 CONTEMPLATES THAT THERE SHOULD BE A CREDIT OF AMOUN TS IN THE BOOKS OF AN ASSESSEE MAINTAINED BY THE ASSESSEE, (B) SUCH AMOUN T HAS TO BE A SUM RECEIVED DURING THE PREVIOUS YEAR, (C) THE ASSESSEE OFFERS N O EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH CREDIT FOUND IN THE BOOKS , OR (D) THE EXPLANATION ITA NO.313/AHD/2017 7 OFFERED BY THE ASSESSEE IS NOT, IN THE OPINION OF T HE ASSESSING OFFICER, SATISFACTORY. THE HONBLE DELHI HIGH COURT IN THE C ASE OF CIT V. NOVADAYA CASTLES (P.) LTD. 367 ITR 306 HAS CONSIDERED A LARG E NUMBER OF DECISIONS INCLUDING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. DURGA PRASAD [1971] 82 ITR 540 (SC). ACCORDING TO THE HONBLE DELHI HIGH COURT BASICALLY THERE ARE TWO SETS OF JUDGMENTS. IN ONE SET OF CASE, THE ASSESSEE PRODUCED NECESSARY DOCUMENTS/EVIDENCE TO S HOW AND ESTABLISH IDENTITY OF THE SHARE-HOLDER AND BANK ACCOUNT FROM WHICH PAYMENT WAS MADE. THE FACT THAT PAYMENT WAS RECEIVED THROUGH BANK CHA NNELS, FILED NECESSARY AFFIDAVIT OF THE SHAREHOLDERS OR CONFIRMATIONS OF T HE DIRECTORS OF THE SHAREHOLDER COMPANY. BUT THEREAFTER NO FURTHER INQ UIRY WAS MADE BY THE AO. THE SECOND SET OF CASES ARE THOSE WHERE THERE WAS E VIDENCE AND MATERIAL TO SHOW THAT THE SHAREHOLDER COMPANY WAS ONLY A PAPER COMPANY HAVING NO SOURCE OF INCOME, BUT HAD MADE SUBSTANTIAL AND HUGE INVESTMENTS IN THE FORM OF SHARE APPLICATION MONEY. THE ASSESSING OFFICER H AS REFERRED TO THE BANK STATEMENT, FINANCIAL POSITION OF THE RECIPIENT AND BENEFICIARY ASSESSEE AND SURROUNDING CIRCUMSTANCES. 10. LET US TAKE INTO CONSIDERATION OBSERVATIONS MAD E BY THE HONBLE DELHI HIGH COURT IN THE CASE OF SOFTLINE CREATIONS P.LTD. (SUPRA) WHILE TAKING NOTE OF JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. FAIR FINVEST LTD., 357 ITR 146 (DELHI). HONBLE DELHI HIGH COU RT MADE FOLLOWING OBSERVATIONS: .. THIS COURT HAS CONSIDERED THE CONCURRENT ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AS WELL AS THE INCOME-TAX APPELLATE TRIBUNAL. BOTH THESE AUTHORITIES PRIMARIL Y WENT BY THE FACT THAT THE ASSESSEE HAD PROVIDED SUFFICIENT INDICATIO N BY WAY OF PERMANENT ACCOUNT NUMBERS, TO HIGHLIGHT THE IDENTIT Y OF THE SHARE APPLICANTS, AS WELL AS PRODUCED THE AFFIDAVITS OF T HE DIRECTORS. FURTHERMORE, THE BANK DETAILS OF THE SHARE APPLICAN TS TOO HAD BEEN ITA NO.313/AHD/2017 8 PROVIDED. IN THE CIRCUMSTANCES, IT WAS HELD THAT TH E ASSESSEE HAD ESTABLISHED THE IDENTITY OF THE SHARE APPLICANTS, T HE GENUINENESS OF TRANSACTIONS AND THEIR CREDITWORTHINESS; THE ASSESS ING OFFICER CHOSE TO PROCEED NO FURTHER BUT MERELY ADDED THE AMOUNTS BEC AUSE OF THE ABSENCE OF THE DIRECTORS TO PHYSICALLY PRESENT THEM SELVES BEFORE HIM. THE INCOME-TAX APPELLATE TRIBUNAL HAS RELIED UPON A DECISION OF THIS COURT IN CIT V. FAIR FINVEST LTD. [2013] 357 I TR 146 (DELHI), WHERE IN SOMEWHAT SIMILAR CIRCUMSTANCES, IT WAS STATED AS FOLLOWS (PAGE 152) : 'THIS COURT HAS CONSIDERED THE SUBMISSIONS OF THE P ARTIES. IN THIS CASE THE DISCUSSION BY THE COMMISSIONER OF INCOME-T AX (APPEALS) WOULD REVEAL THAT THE ASSESSEE HAS FILED DOCUMENTS INCLUDING CERTIFIED COPIES ISSUED BY THE REGISTRAR OF COMPANIES IN RELATION TO THE SHARE APPLICATION, AFFIDAVITS OF THE DIRECTORS, FORM 2 FILED WITH THE REGISTRAR OF COMPANIES BY SUC H APPLICANTS CONFIRMATIONS BY THE APPLICANT FOR COMPANY'S SHARES , CERTIFICATES BY AUDITORS ETC. UNFORTUNATELY, THE ASSESSING OFFIC ER CHOSE TO BASE HIMSELF MERELY ON THE GENERAL INFERENCE TO BE DRAWN FROM THE READING OF THE INVESTIGATION REPORT AND THE STA TEMENT OF MR. MAHESH GARG. TO ELEVATE THE INFERENCE WHICH CAN BE DRAWN ON THE BASIS OF READING OF SUCH MATERIAL INTO JUDICIAL CONCLUSIONS WOULD BE IMPROPER, MORE SO WHEN THE ASSESSEE PRODUC ED MATE- RIAL. THE LEAST THAT THE ASSESSING OFFICER OUGHT TO HAVE DONE WAS TO ENQUIRE INTO THE MATTER BY, IF NECESSARY, INVOKI NG HIS POWERS UNDER SECTION 131 SUMMONING THE SHARE APPLICANTS OR DIRECTORS. NO EFFORT WAS MADE IN THAT REGARD. IN THE ABSENCE O F ANY SUCH FINDING THAT THE MATERIAL DISCLOSED WAS UNTRUSTWORT HY OR LACKED CREDIBILITY THE ASSESSING OFFICER MERELY CONCLUDED ON THE BASIS OF ENQUIRY REPORT, WHICH COLLECTED CERTAIN FACTS AND T HE STATEMENTS OF MR. MAHESH GARG THAT THE INCOME SOUGHT TO BE ADD ED FELL WITHIN THE DESCRIPTION OF SECTION 68. HAVING REGARD TO THE ENTIRETY OF FACTS AND CIRCUMST ANCES, THE COURT IS SATISFIED THAT THE FINDING OF THE TRIBUNAL IN THIS CASE ACCORDS WITH THE RATIO OF THE DECISION OF THE SUPREME COURT IN LOVEL Y EXPORTS (SUPRA) 11. WE ALSO DEEM IT APPROPRIATE TO TAKE NOTE OF SOM E OF OBSERVATIONS OF THE HONBLE DELHI HIGH COURT FROM THE DECISION OF FAIR FINVEST LTD. (SUPRA). THE HONBLE COURT HAS NOTICED PROPOSITION LAID DOWN BY THE HONBLE DELHI HIGH ITA NO.313/AHD/2017 9 COURT IN THE CASE OF CIT VS. VICTOR ELECTRODES LTD. , 329 ITR 271 (DELHI) REGARDING NON-PRODUCTION OF SHARE APPLICANTS BEFORE THE AO. THE FOLLOWING OBSERVATIONS ARE WORTH TO NOTE: IN THIS CONNECTION THE OBSERVATION OF THE JURISDIC TIONAL HIGH COURT IN CASE OF DWARKADHISH INVESTMENT (SUPRA) ARE QUITE RE LEVANT WHERE THE COURT HAS OBSERVED THAT IT IS THE REVENUE WHICH HAS ALL THE POWER AND WHEREWITHAL TO TRACE ANY PERSON. FURTHER IN THE CAS E OF CIT VS. VICTOR ELECTRODES LTD. 329 ITR 271 IT HAS BEEN HELD THAT T HERE IS NO LEGAL OBLIGATION ON THE ASSESSEE TO PRODUCE SOME DIRECTOR OR OTHER REPRESENTATIVE OF THE DIRECTOR OR OTHER REPRESENTAT IVE OF THE APPLICANT COMPANIES BEFORE THE A.O. THEREFORE FAILURE ON PART OF THE ASSESSEE TO PRODUCE THE DIRECTORS OF THE SHARE APPLICANT COMPAN IES COULD NOT BY ITSELF HAVE JUSTIFIED THE ADDITIONS MADE BY THE AO PARTICULARLY WHEN THE SEVEN SHARE APPLICANT COMPANIES THROUGH THEIR PRESE NT DIRECTORS HAVE NOW AGAIN FILED FRESH AFFIDAVITS CONFIRMING THE APP LICATION AND ALLOTMENT OF SHARES WITH RESPECT TO THE TOTAL AMOUN T OF RS.45 LACS. IT IS OBSERVED THAT NO ATTEMPT WAS MADE BY THE AO TO SUMM ON THE DIRECTORS OF THE SHARE APPLICANT COMPANIES. MOREOVER, IT IS S ETTLED LAW THAT THE ASSESSEE NEED NOT PROVE THE 'SOURCE OF SOURCE'. ACC ORDINGLY IT WAS INCUMBENT UPON THE DEPARTMENT TO HAVE ENFORCED ATTE NDANCE OF SHRI MAHESH GARG OR THE ERSTWHILE DIRECTORS OF THE SHARE APPLICANT COMPANIES AND CONFRONTED THEM WITH THE EVIDENCES & AFFIDAVITS RELIED UPON BY THE APPELLANT AND THEREUPON GIVEN OPPORTUNI TY TO THE ASSESSEE TO CROSS EXAMINE THESE APPLICANTS. 12. AT THIS STAGE, WE DEEM IT APPROPRIATE TO TAKE N OTE OF FINDING OF THE ITAT, SMC BENCH IN THE CASE OF PAVANKUMAR M. SANG HVI (SUPRA). THE RELEVANT DISCUSSION IS AVAILABLE AT PARA-8 OF THAT ORDER, IT READS AS UNDER: 8. AS I PROCEED TO DEAL WITH GENUINENESS ASPECT, I T IS IMPORTANT TO BEAR IN MIND THE FACT THAT WHAT IS GENUINE AND WHAT IS N OT GENUINE IS A MATTER OF PERCEPTION BASED ON FACTS OF THE CASE VIS --VIS THE GROUND REALITIES. THE FACTS OF THE CASE CANNOT BE CONSIDER ED IN ISOLATION WITH THE GROUND REALTIES. IT WILL, THEREFORE, BE USEFUL TO UNDERSTAND AS TO HOW THE SHELL ENTITIES, WHICH THE LOAN CREDITORS ARE AL LEGED TO BE, TYPICALLY FUNCTION, AND THEN COMPARE THESE CHARACTERISTICS WI TH THE FACTS OF THE CASE AND IN THE LIGHT OF WELL SETTLED LEGAL PRINCIP LES. A SHELL ENTITY IS GENERALLY AN ENTITY WITHOUT ANY SIGNIFICANT TRADING , MANUFACTURING OR ITA NO.313/AHD/2017 10 SERVICE ACTIVITY, OR WITH HIGH VOLUME LOW MARGIN TR ANSACTIONS- TO GIVE IT COLOUR OF A NORMAL BUSINESS ENTITY, USED AS A VEHIC LE FOR VARIOUS FINANCIAL MANOEUVRES. A SHELL ENTITY, BY ITSELF, IS NOT AN ILLEGAL ENTITY BUT IT IS THEIR ACT OF ABATEMENT OF, AND BEING PART OF, FINANCIAL MANOEUVRING TO LEGITIMISE ILLICIT MONIES AND EVADE TAXES, THAT TAKES IT ACTIONS BEYOND WHAT IS LEGALLY PERMISSIBLE. THESE ENTITIES HAVE EV ERY SEMBLANCE OF A GENUINE BUSINESS- ITS LEGAL OWNERSHIP BY PERSONS IN EXISTENCE, STATUTORY DOCUMENTATION AS NECESSARY FOR A LEGITIMATE BUSINES S AND A DOCUMENTATION TRAIL AS A LEGITIMATE TRANSACTION WOU LD NORMALLY FOLLOW. THE ONLY THING WHICH SETS IT APART FROM A GENUINE B USINESS ENTITY IS LACK OF GENUINENESS IN ITS ACTUAL OPERATIONS. THE OPERAT IONS CARRIED OUT BY THESE ENTITIES, ARE ONLY TO FACILITATE FINANCIAL MA NOEUVRING FOR THE BENEFIT OF ITS CLIENTS, OR, WITH THAT PREDOMINANT U NDERLYING OBJECTIVE, TO GIVE THE COLOUR OF GENUINENESS TO THESE ENTITIES. T HESE SHELL ENTITIES, WHICH ARE ROUTINELY USED TO LAUNDER UNACCOUNTED MON IES, ARE A FACT OF LIFE, AND AS MUCH A PART OF THE UNDERBELLY OF THE I .T.A. NO.2447/AHD/2016 ASSESSMENT YEARS: 2007-08 FINANCIA L WORLD, AS MANY OTHER EVILS. EVEN A LAYMAN, MUCH LESS A MEMBER OF THIS SPECIALIZED TRIBUNAL, CANNOT BE OBLIVIOUS OF THESE GROUND REALITIES. 13. IN ORDER TO COMPLETE THE METHOD REQUIRES TO BE ADOPTED OR THE APPROACH REQUIRES TO BE TAKEN BY AN ADJUDICATOR IN SUCH TYPE OF LITIGATION, WE ARE ALSO DEEM IT APPROPRIATE TO TAKE NOTE OF THE DECISION OF HONBLE BOMBAY HIGH COURT RENDERED IN ITA NO.1231 OF 2017 IN THE CASE O F PR.CIT VS. AMI INDUSTRIES (INDIA) LTD. IN THIS CASE, THERE WERE T HREE SHARE APPLICANTS, WHO ARE KOLKATTA BASED COMPANIES, AND HAD PAID RS.34 CRORES AS SHARE APPLICATION MONEY. THE AO HAS DIRECTED THE INVESTIGATION WING OF KOLKATTA TO MAKE AN INQUIRY ABOUT THESE COMPANIES. IT IS NOTICED FROM THE PARAGRAPH 20 OF THE JUDGMENT THAT INVESTIGATION WING REPORTED ABOUT THE EXISTENCE OF THOSE COMPANIES. THE LD.AO DID NOT GIVE MUCH CREDENCE TO THE REPORT, BUT RECORDED A FINDING THAT THESE COMPANIES HAVE DISCLOSED VERY MEAGER INCOME IN THEIR RETURNS OF INCOME, AND THEREFORE DOUBTED THEIR CRED IT-WORTHINESS. THE AO ACCORDINGLY TREATED THE ALLEGED SHARE APPLICATION M ONEY AS BOGUS, AND MADE ADDITION. MATTER WENT TO THE LD.CIT(A) WHO DELETE D THE ADDITION, AND THEREAFTER THE SAID ORDER MET APPROVAL OF THE TRIBU NAL. DISSATISFIED WITH THE ITA NO.313/AHD/2017 11 ORDER OF THE TRIBUNAL, DEPARTMENT WENT TO THE HONB LE HIGH COURT, AND RELIED UPON THE JUDGMENT OF HONBLE SUPREME COURT IN THE C ASE OF PR.CIT VS. NRA IRON & STEEL P.LTD. (SUPRA). HONBLE HIGH COURT WH ILE TAKING COGNIZANCE OF THIS JUDGMENT HAS PROPOUNDED THE FOLLOWING PRINCIPL ES CULLED FROM THIS JUDGMENT. IT READS AS UNDER: 11. THE PRINCIPLES WHICH EMERGE WHERE SUMS OF MONE Y ARE CREDITED AS SHARE CAPITAL/PREMIUM ARE : I. THE ASSESSEE IS UNDER A LEGAL OBLIGATION TO PROV E THE GENUINENESS OF THE TRANSACTION, THE IDENTITY OF THE CREDITORS, AND CREDIT-WORTHINESS OF THE INVESTORS WHO SHOULD HAVE THE FINANCIAL CAPACITY TO MAKE THE INVESTMENT IN QUESTION, TO THE SATISFACTION OF THE AO, SO AS TO DISCHARGE THE PRIMARY ONUS. II. THE ASSESSING OFFICER IS DUTY BOUND TO INVESTIG ATE THE CREDIT- WORTHINESS OF THE CREDITOR /SUBSCRIBER, VERIFY THE IDENTITY OF THE SUBSCRIBERS, AND ASCERTAIN WHETHER THE TRANSACTION IS GENUINE, OR THESE ARE BOGUS ENTRIES OF NAME-LENDERS. III. IF THE INQUIRIES AND INVESTIGATIONS REVEAL THA T THE IDENTITY OF THE CREDITORS TO BE DUBIOUS OR DOUBTFUL, OR LACK CR EDIT- WORTHINESS, THEN THE GENUINENESS OF THE TRANSACTION WOULD NOT BE ESTABLISHED. IN SUCH A CASE, THE ASSESSEE WOULD NOT HAVE DISCHAR GED THE PRIMARY ONUS CONTEMPLATED BY SECTION 68 OF THE ACT. 14. THEREAFTER, HONBLE HIGH COURT HAS OBSERVED THA T THE ASSESSEE HAS PRODUCED FOUR DOCUMENTS VIZ; A) PAN NUMBER OF THE COMPANIES; B) COPIES OF INCOME TAX RETURN FILED BY THESE THREE COMPANIES FOR ASSESSMENT YEAR 2010-11; C) CONFIRMATION LETTER IN RESPECT OF SHARE APPLICAT ION MONEY PAID BY THEM; AND D) COPY OF BANK STATEMENT THROUGH WHICH CHEQUES WER E ISSUED ITA NO.313/AHD/2017 12 15. HONBLE HIGH COURT ULTIMATELY UPHELD ORDER OF T HE TRIBUNAL BY OBSERVING AS UNDER: 21. FROM THE ABOVE, IT IS SEEN THAT IDENTITY OF TH E CREDITORS WERE NOT IN DOUBT. ASSESSEE HAD FURNISHED PAN, COPIES OF THE IN COME TAX RETURNS OF THE CREDITORS AS WELL AS COPY OF BANK ACCOUNTS OF T HE THREE CREDITORS IN WHICH THE SHARE APPLICATION MONEY WAS DEPOSITED IN ORDER TO PROVE GENUINENESS OF THE TRANSACTIONS. IN SO FAR CREDIT W ORTHINESS OF THE CREDITORS WERE CONCERNED, TRIBUNAL RECORDED THAT BA NK ACCOUNTS OF THE CREDITORS SHOWED THAT THE CREDITORS HAD FUNDS TO MA KE PAYMENTS FOR SHARE APPLICATION MONEY AND IN THIS REGARD, RESOLUT IONS WERE ALSO PASSED BY THE BOARD OF DIRECTORS OF THE THREE CREDI TORS. THOUGH, ASSESSEE WAS NOT REQUIRED TO PROVE SOURCE OF THE SO URCE, NONETHELESS, TRIBUNAL TOOK THE VIEW THAT ASSESSING OFFICER HAD M ADE INQUIRIES THROUGH THE INVESTIGATION WING OF THE DEPARTMENT AT KOLKATA AND COLLECTED ALL THE MATERIALS WHICH PROVED SOURCE OF THE SOURCE. 22. IN NRA IRON & STEEL (P) LTD (SUPRA), THE ASSESS ING OFFICER HAD MADE INDEPENDENT AND DETAILED INQUIRY INCLUDING SUR VEY OF THE INVESTOR COMPANIES. THE FIELD REPORT REVEALED THAT THE SHARE HOLDERS WERE EITHER NON-EXISTENT OR LACKED CREDIT-WORTHINESS. IT IS IN THESE CIRCUMSTANCES, SUPREME COURT HELD THAT THE ONUS TO ESTABLISH IDENT ITY OF THE INVESTOR COMPANIES WAS NOT DISCHARGED BY THE ASSESSEE. THE A FORESAID DECISION IS, THEREFORE, CLEARLY DISTINGUISHABLE ON FACTS OF THE PRESENT CASE. 21. THEREFORE, ON A THOROUGH CONSIDERATION OF THE M ATTER, WE ARE OF THE VIEW THAT THE FIRST APPELLATE AUTHORITY HAD RETURNE D A CLEAR FINDING OF FACT THAT ASSESSEE HAD DISCHARGED ITS ONUS OF PROVI NG IDENTITY OF THE CREDITORS, GENUINENESS OF THE TRANSACTIONS AND CRED IT-WORTHINESS OF THE CREDITORS WHICH FINDING OF FACT STOOD AFFIRMED BY T HE TRIBUNAL. THERE IS, THUS, CONCURRENT FINDINGS OF FACT BY THE TWO LOWER APPELLATE AUTHORITIES. APPELLANT HAS NOT BEEN ABLE TO SHOW ANY PERVERSITY IN THE AFORESAID FINDINGS OF FACT BY THE AUTHORITIES BELOW. 22. UNDER THESE CIRCUMSTANCES, WE FIND NO ERROR OR INFIRMITY IN THE VIEW TAKEN BY THE TRIBUNAL. NO QUESTION OF LAW, MUCH LES S ANY SUBSTANTIAL QUESTION OF LAW, ARISES FROM THE ORDER OF THE TRIBU NAL. CONSEQUENTLY, THE APPEAL IS DISMISSED. HOWEVER, THERE SHALL BE NO ORDER AS TO COST. ITA NO.313/AHD/2017 13 16. HONBLE COURT WAS OF THE VIEW THAT IN THE CASE OF PR.CIT VS. NRA IRON & STEEL P.LTD. (SUPRA) THE AO HAS MADE INVESTIGATIO N AND DETAILED INQUIRY INCLUDING SURVEY OF INVESTOR COMPANY. ON THE BASIS OF FIELD REPORT, IT REVEALED TO HIM THAT SHAREHOLDERS WERE EITHER NON-EXISTENT O R LACKED CREDIT-WORTHINESS. IN OTHER WORDS, ON ONE HAND CASES WHERE THE AO HAS CONDUCTED AN INQUIRY AND DISPROVED WHATEVER SUBMITTED BY THE ASSESSEE, A ND IN OTHER CASE, THE AO SIMPLY ASSUMED EXISTENCE OF SUCH FACTS. ALL HONB LE HIGH COURTS ARE UNANIMOUS IN THEIR APPROACH THAT WHERE AO REMAINED SILENT, DID NOT CONDUCT ANY INQUIRY, AND MERELY ON THE BASIS OF CERTAIN DET AILS SUBMITTED BY THE ASSESSEE DRAW AN INFERENCE IN SUCH CASES, HE CANNOT SIMPLY DOUBT THE STAND OF THE ASSESSEE. 17. IN THE LIGHT OF THE ABOVE, LET US EXAMINE THE F ACTS OF THE PRESENT CASE. THE FACTS ARE BEING CONTAINED IN THE SECOND REMAND REPORT SUBMITTED BY THE AO VIDE LETTER DATED 10.10.2016. THIS REPORT HAS B EEN REPRODUCED BY THE LD.CIT(A) ON PAGE NO.18 AND 19 OF THE IMPUGNED ORDE R. IT READS AS UNDER: 2.7. THE A.O. HAS SUBMITTED THE REMAND REPORT VIDE HIS LETTER NO. WD- 1(1)(4)/REMAND REPORT/DJ STOCK/2016-17 DATED 10/10/ 2016 BEFORE CIT(A)-1, WHICH IS REPRODUCED AS UNDER: A) IN THIS CONNECTION, IT IS HEREBY SUBMITTED THAT THE DATE OF NOTICE U/S 133(6) OF THE ACT IS 15.03.201. FURTHER, I SUBMIT MY COMME NTS IN RESPECT OF EACH PERSON WHO HAVE MADE PAYMENT AGAINST SHARE APPLICAT ION MONEY REGARDING CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION :- (I) SKI HIGH FINANCIAL SERVICES LTD. MUMBAI THE ABOVE PARTY HAS FILED CONFIRMATION IN RESPECT O F PAYMENT MADE OF RS.1,10,00,000/- AND ALSO CONFIRMED VIDE LETTER DAT ED 25/03/2016 THAT THE PAYMENTS WERE MADE TOWARDS THE SHARE APPLICATION MO NEY FOR THE ALLOTMENT OF SHARES OF M/S D. J STOCK BROKING PVT. LTD. COPY OF SHARE APPLICATION FORMS AND DETAILS ALLOTMENT ETC. HAVE BEEN FURNISHE D. HOWEVER, THE COPY OF INCOME TAX RETURN HAS NOT BEEN FURNISHED. FURTHER B ANK STATEMENT FURNISHED REFLECTS ONLY THREE ENTRIES FROM THE 13/07/2011 TO 14/07/2011 IN WHICH ITA NO.313/AHD/2017 14 PAYMENTS WITHDRAWN ARE REFLECTED. SINCE THE APPLICA NT HAS NOT FURNISHED THE COPY OF INCOME TAX RETURN AND COMPLETE BANK ACCOUNT S, THE CREDIT WORTHINESS OF THE APPLICANT ARE NOT PROVED. (III) MAARS SOFTWARE INTERNATIONAL LTD CHENNAI . THE ABOVE PARTY HAS FILED CONFIRMATION IN RESPECT OF PAYMENT MADE OF RS. 2,05 ,70,000/- AND ALSO CONFIRMED VIDE LETTER DATED 24/03/2016 THAT THE PAY MENTS WERE MADE TOWARDS THE SHARE APPLICATION MONEY FOR THE ALLOTMENT OF SH ARES OF M/S D. J STOCK BROKING PVT. LTD. COPY OF SHARE APPLICATION FORMS A ND DETAILS ALLOTMENT ETC. HAVE BEEN FURNISHED. IT IS ALSO STATED THAT OUT OF ABOVE SHARE APPLICATION MONEY RS. 70 LAKHS WERE PAID BY M/S ANIL ENTERPRISE TO M/S D J STOCK BROKING PVT. LTD AS PER THE ITS INSTRUCTION. THE CO PY OF INSTRUCTION LETTER HAS ALSO BEEN ATTACHED. THE COPY OF INCOME TAX RETURN A LONG WITH BALANCE SHEET HAS BEEN FURNISHED. HOWEVER, ON VERIFICATION OF RET URN OF INCOME IT IS SEEN THAT THERE WAS LOSSJ OF RS. 7,36,567/-. FURTHER COP Y OF BANK STATEMENT REFLECTING THE TRANSACTIONS HAVE NOT BEEN FURNISHED . THEREFORE, THE CREDIT WORTHINESS OF THE APPLICANT IS NOT PROVED. (III) SHRI ANIL KUMAR JAIN.(PROP OF M/S ANIL EN TERPRISE) THE ABOVE PARTY HAS FILED CONFIRMATION IN RESPECT O F PAYMENT MADE OF RS.70,00,000/- ON BEHALF OF MAARS SOFTWARE INTERNAT IONAL LTD AND ALSO SUBMITTED ALLOTTED SHARE WHERE NOT ALLOTTED BY THE COMPANY AND SHARE APPLICATION MONEY WERE RETURNED BACK TO HIM DURING THE ACCOUNTING YEAR 2012-13.THE COPY OF BANK STATEMENT AND COPY OF ACKN OWLEDGEMENT OF RETURNS OF INCOME HAVE BEEN FILED. HOWEVER, ON VERIFICATION OF RETURN OF INCOME IT IS SEEN THAT INCOME OF RS. 1,84,617/- HAS BEEN SHOWN O NLY. FURTHER, CREDIT ENTRIES REFLECTED IN THE BANK STATEMENT PRIOR TO MA KE PAYMENT TO M/S D J STOCK BROKING PVT. LTD ARE NOT VERIFIABLE. THEREFOR E, THE CREDIT WORTHINESS OF THE APPLICANT IS NOT PROVED. B) IN VIEW OF THE ABOVE, THE CREDIT WORTHINESS OF T HE ABOVE PERSONS WHO HAVE MADE INVESTMENT TOWARDS THE SHARE APPLICATION MONEY IN RESPECT OF SHARES OF D.J. STOCK BROKING PVT. LTD IS NOT PROVED. IT IS TH EREFORE, REQUESTED TO KINDLY SUSTAIN THE ADDITION MADE TO THE EXTENT OF RS.2,29, 28,000/- OUT OF THE TOTAL ADDITION OF RS.3,87,72,000/-CONSIDERING THE OPENING BALANCE AND AMOUNT REPAID DURING THE YEAR AS MENTIONED IN PARA 6.1. OF REMAND REPORT SUBMITTED ON 03/05/2016. 18. THE STAND OF THE AO IS THAT, COMPLETE BANK STAT EMENT WAS NOT SUBMITTED IN THE CASE OF SKI HIGH FINANCIAL SERVICES LTD. SI MILARLY, WITH REGARD TO MAARS SOFTWARES ALL DETAILS WERE SUBMITTED, BUT COP Y OF BANK STATEMENT REFLECTING THIS TRANSACTION HAS NOT BEEN SUBMITTED. WITH REGARD TO SHRI ANIL ITA NO.313/AHD/2017 15 KUMAR COPY OF ACKNOWLEDGMENT OF RETURN, AND BANK ST ATEMENTS WERE SUBMITTED, BUT HE HAS SHOWN ONLY INCOME OF RS.1,84, 617/-. THUS, ACCORDING TO HIM, THEIR CREDIT-WORTHINESS IS DOUBTFUL. TO OU R MIND, THESE ARE NOT EVIDENCE BASED ON WHICH HE CAN DRAW SUCH INFERENCE. AS PER SECTION 68 OF THE ACT, IDENTITY OF THE SHARE APPLICANTS HAS BEEN DEMONSTRATED BY THE ASSESSEE. ALL THE APPLICANTS HAVE RESPONDED TO THE QUESTIONNAIRE OF THE LD.AO, AND SUBMITTED DETAILS. THE AO THEREAFTER DID NOT C ONDUCT FURTHER INQUIRY. IT IS PERTINENT TO NOTE THAT OUT OF TOTAL ADDITION OF RS.2,28,19,000/-, RS.70,00,000/- REPRESENTING QUA M/S.MAARS SOFTWARE INTERNATIONAL, AND RS.48,19,000/- QUA ANILKUMAR CHAMPALAL JAIN. A PERUSAL OF THE REMAND REPORT WOULD INDICATE THAT AS FAR AS MAARS SOFTWARE INTERNATIONAL LTD. IS CONCERNED, THE AO HAS OBSERVED THAT THIS COMPANY HA S MADE A PAYMENT OF RS.2,05,70,000/-. OUT OF THAT, RS.70.00 LAKHS WAS PAID BY M/S.ANIL ENTERPRISE, WHICH IS A PROPRIETORSHIP CONCERN OF SH RI ANILKUMAR CHAMPALAL JAIN. SHRI ANILKUMAR HAS FILED CONFIRMATION IN RES PECT OF PAYMENT OF RS.70 LAKHS ON BEHALF OF MAARS SOFTWARE, AND THEREAFTER S UBMITTED THAT FOR THIS AMOUNT, SHARES WERE NOT ALLOTTED, BUT MONEY WAS RET URNED DURING THE ACCOUNTING YEAR 2012-13. NOW, THE LD.COUNSEL SUBMI TTED THAT THIS ANILKUMAR IS BROTHER OF ONE OF THE DIRECTORS, THOUGH THIS FAC T WAS NOT UNEARTHED BY THE AO IN HIS REMAND REPORT. THE AO NOWHERE DISCUSSED A BOUT THE GENUINENESS OF THE BALANCE PAYMENT OF MAARS SOFTWARE I.E. RS.2, 05,70,000/- MINUS RS.70,00,000/-. IT MIGHT HAVE BEEN RECEIVED IN EAR LIER YEARS, AND COULD BE PART OF THE TOTAL PAYMENT CONSIDERED BY THE AO. IT SUGG ESTS THAT HE HAS NOT CONDUCTED ANY INQUIRY ABOUT BOTH THESE CONCERNS. W HEN THE ASSESSEE HAS BEEN ALLEGING THAT RS.70.00 LAKHS RECEIVED DURING T HIS PERIOD FROM MAARS SOFTWARE HAS BEEN RETURNED TO THE CONTRIBUTOR I.E. ANIL ENTERPRISES, WHO HAD PAID IT ON BEHALF OF THE MAARS SOFTWARE, HE SIMPLY DOUBTED IT, THE AO SHOULD HAVE CONDUCTED MORE INQUIRIES. ITA NO.313/AHD/2017 16 19. AS FAR AS PAYMENT RECEIVED FROM SKI HIGH FINANC IAL SERVICES IS CONCERNED, THOUGH ACCORDING TO THE AO, THE ASSESSEE DID NOT FILE COPY OF RETURN, AND COMPLETE BANK STATEMENT, BUT ASSESSEE H AS DISCLOSED PAN OF THIS CONCERN. IN THE PAPER BOOK, THE ASSESSEE HAS FILED COPY OF THE RETURN ALSO, UNDER A CERTIFICATE THAT IT IS NOT SURE, WHETHER TH IS COPY WAS FILED BEFORE THE AO OR NOT, BUT IT HAS BEEN ALLEGED THAT THIS DOCUME NT HAS BEEN OBTAINED FROM THE INCOME TAX DEPARTMENT. GRIEVANCE OF THE AO IS THAT THIS CONCERN HAS SHOWN A MEAGER INCOME, AND DID NOT SUBMIT COMPLETE BANK STATEMENT. THE BANK STATEMENT SUBMITTED BY THE ASSESSEE IS FOR A L IMITED PERIOD SHOWING TRANSACTION RECEIVED BY IT. THE DOCUMENT WAS SUBMI TTED BY THE ASSESSEE IN ORDER TO DEMONSTRATE THAT IT HAS RECEIVED MONEY THR OUGH ACCOUNT PAYEE CHEQUES. PAN DETAILS WERE SUBMITTED IN ORDER TO DE MONSTRATE THAT THIS ASSESSEE IS ASSESSABLE TO TAX, AND IT PROVES ITS ID ENTITY. THAT CONCERN, RESPONDED TO THE NOTICE RECEIVED UNDER SECTION 133( 6) OF THE ACT. THE AO, THEREAFTER DID NOT CONDUCT ANY INQUIRY. WE DEEM IT APPROPRIATE TO MENTION THAT INVESTIGATION WING OF THE DEPARTMENT IS ABLE T O UNEARTH DETAILS OF VARIOUS ACCOMMODATION ENTRY PROVIDERS MAINLY KOLKATTA BASED COMPANIES, BUT THE AO NOWHERE OBSERVED THAT THESE CONCERNS WERE EVER E NGAGED IN PROVIDING ACCOMMODATION ENTRIES, AND THIS FACT CAME TO NOTICE OF THE DEPARTMENT THROUGH ITS INVESTIGATION WING. THUS, IF HE HAS AN Y DOUBT, HE SHOULD HAVE CALLED FOR FURTHER INFORMATION FROM THE SHARE APPLI CANTS. HE SHOULD HAVE ASKED THE ASSESSEE TO PRODUCE DIRECTORS OF SHARE AP PLICANT COMPANIES OR SHRI ANIL KUMAR WHO IS BROTHER OF ONE OF THE DIRECTORS. THE AO COULD HAVE ISSUED SUMMONS UNDER SECTION 131 OF THE INCOME TAX ACT. BUT INSTEAD OF CONDUCTING ANY INQUIRY, HE JUST DRAW CERTAIN INFERE NCE FOR DISBELIEVING THE DOCUMENTS PRODUCED BY THE ASSESSEE OR RECEIVED BY H IM IN RESPONSE TO HIS NOTICE UNDER SECTION 133(6) OF THE ACT. IT IS ALSO PERTINENT TO OBSERVE THAT ITA NO.313/AHD/2017 17 QUANTUM OF INCOME MENTIONED IN THE RETURN OF INCOME CANNOT BE CRITERIA TO JUDGE CREDIT-WORTHINESS OF SHARE APPLICANTS. IN THE CASE OF M/S.AMI INDUSTRIES (INDIA) P.LTD.(SUPRA), HONBLE BOMBAY HIGH COURT HA S ALSO CONSIDERED THIS ASPECT. IN THAT CASE ALSO, EXISTENCE OF SHARE APPL ICANTS WAS NOT IN DOUBT. ONLY DOUBT RAISED BY THE AO WAS THAT THEY HAVE DECLARED VERY MEAGER INCOME IN THEIR RETURNS OF INCOME. THEREFORE, HE DOUBTED THE IR CREDIT-WORTHINESS. THIS CONCLUSION DID NOT MEET APPROVAL OF THE LD.CIT(A), ITAT OR THE HONBLE HIGH COURT. THEREFORE, IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT SINCE THE AO FAILED TO CONDUCT INQUIRY EVEN ON THE SECOND REMAND REPORT CALLED FOR BY THE LD.CIT(A), HIS CONCLUSION ARE WIT HOUT ANY SUPPORTING EVIDENCE. IN VIEW OF THE ABOVE DISCUSSION, WE ALLO W THIS GROUND OF APPEAL, AND DELETE THE IMPUGNED ADDITION. 20. AS FAR AS DISALLOWANCE UNDER SECTION 14A OF THE ACT IS CONCERNED, THE LD.COUNSEL FOR THE ASSESSEE DID NOT PRESS THIS GROU ND OF APPEAL ON ACCOUNT OF SMALLNESS OF THE AMOUNT INVOLVED IN IT. HE WAS OF THE VIEW THAT DISALLOWANCE OF RS.30,887/- WAS MADE ON ACCOUNT OF ADMINISTRATI VE EXPENSES FOR EARNING TAX FREE INCOME. SINCE IT IS A SMALL ADMINISTRATIV E EXPENSES CONSIDERED BY THE REVENUE AUTHORITIES, THEREFORE, THE ASSESSEE DID NO T WISH TO PRESS THIS GROUND OF APPEAL. IT IS DISMISSED. 21. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 3 RD MARCH, 2020 AT AHMEDABAD. SD/- SD/- ( T.S. KAPOOR ) ACCOUNTANT MEMBER (RAJPAL YADAV) VICE-PRESIDENT AHMEDABAD; DATED 03/03/2020