Shivank Udyog Ltd., New Delhi V. ITO, New Delhi

ITA 3144/DEL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52835 (ITAT-DELHI)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 18-08-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 13-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S MOHANTHY
• Assessee Lawyers: ASHOK KANDE LWAL
• Keywords: Question of law; Accommodation entries; Reason to believe; Reassessment proceedings
• Section: 143(3); 131; 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE VI CE PRESIDENT AND SHRI I.P. BANSAL, JUDICIAL MEMBER ITA NO. 3144/DEL/2011 ASSESSMENT YEAR: 2003-04 SHIVANK UDYOG LTD., VS. ITO, A-37/2, MAYAPURI, INDL. AREA, WARD 8(2), PHASE-1, NEW DELHI. C.R. BLDG., AAACS1692M NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : ASHOK KANDE LWAL, CA RESPONDENT BY : S. MOHANTHY, D R ORDER ORDER ORDER ORDER PER I.P. BANSAL, J.M. PER I.P. BANSAL, J.M. PER I.P. BANSAL, J.M. PER I.P. BANSAL, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS D IRECTED AGAINST THE ORDER PASSED BY LD. CIT(A) DATED 24 TH MAY, 2011, FOR THE A.Y. 2003-04. GROUNDS OF APPEAL READ AS UNDER: - 1) ACTION OF THE CIT(A) IN CONFIRMING THE ACTION O F THE AO IN REOPENING THE ASSESSMENT U/S 147/148 OF INCOME TAX ACT, 1961 IS UNJUST, ILLEGAL, ARBITRARY AND AGAINST THE FACTS AN D CIRCUMSTANCES OF THE CASE. 2) ACTION OF THE CIT(A) IN CONFIRMING THE ACTION OF TH E AO IN MAKING AN ADDITION OF RS. 3450000/- ON ACCOUNT OF S HARE APPLICATION MONEY FOR ALLOTMENT OF SHARES U/S 68 OF THE INCOME TAX ACT, 1961 IS UNJUST, ILLEGAL, ARBITRARY AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE ASSESSEE COMPANY IS A LIMITED COMPANY INCORP ORATED ON 18.11.1993 AND IS ENGAGED IN THE BUSINESS OF EXPORT OF GARMENT. IT FILED ITS RETURN OF INCOME ON 28 TH OCTOBER, 2003 DECLARING TOTAL INCOME AT NIL. THE RETURN WAS PROCESSED U/S 143(1). ON T HE BASIS OF SPECIFIC INFORMATION RECEIVED BY THE AO OF THE ASSESSEE, REA SSESSMENT PROCEEDINGS HAVE BEEN STARTED VIDE NOTICE DATED 19 TH MARCH, 2010 2 ITA NO.3144/DEL/2011 ISSUED U/S 148 OF THE ACT. COPY OF SUCH NOTICE IS PLACED AT PAGE 235 OF THE PAPER BOOK. COPY OF REASONS AS RECORDED BY THE AO IS PLACED AT PAGE 2 OF THE PAPER BOOK AND THE SAME READ AS UNDER : - REASONS FOR ISSUANCE OF NOTICE U/S 148 IN THE CASE OF M/S SHIVANK UDYOG LTD. A 37/2, MAYA PURI INDL. AREA, NEW DELHI. AS PER OFFICE RECORD THE ASSESSEE HAS FILED ITS RET URN OF INCOME ON 28 TH OCTOBER, 2003 FOR THE A.Y. 2003-04 DECLARING AN IN COME OF RS. NIL. INFORMATION HAS BEEN RECEIVED FROM DIT(INV.) THAT T HE ABOVE SAID ASSESSEE HAS BEEN BENEFICIARY OF ACCOMMODATION ENTR IES BEING PROVIDED BY CERTAIN ENTRY OPERATORS. ON THE BASIS OF THE INFORMATION CHART FORWARDED BY DIT(INV.), NEW DELHI IT IS SEEN THAT THE ASSESSEE HAS BOGUS TRANSACTIONS TO THE TUNE OF RS. 34,50,000/- DURING F.Y. 2002-03 RELEVANT TO A.Y. 2003-04. IN VIEW OF ABOVE, I HAVE REASONS TO BELIEVE THAT AN AMOUNT OF RS. 34,50,000/- HAS ESCAPED ASSESSMENT WITHIN THE MEANI NG OF SEC. 147(C) OF THE I.T. ACT, 1961 FOR THE A.Y. 2003-04. SINCE FOUR YEARS HAVE BEEN ELAPSED, YOUR APPROVAL I S HEREBY SOUGHT AS PER SEC. 151 OF THE I.T. ACT, 1961 FOR IS SUANCE OF NOTICE U/S 148 OF THE I.T. ACT, 1961. SD/- (J.S. CHAWLA) INCOME TAX OFFICER WARD 8(2), NEW DELHI. THE JT.CIT, RANGE 8, N. DELHI. 3. THE ASSESSEE HAVING FOUND THAT NO DETAILS REGARD ING THE SUM OF RS. 34,50,000/- WAS FURNISHED TO IT HAD ASKED THE A O TO FURNISH THE DETAILS WHICH WERE SUPPLIED TO THE ASSESSEE BY THE AO VIDE LETTER DATED 6 TH SEPTEMBER, 2010 THE CONTENTS OF WHICH ARE AS UNDER : - DATED 6.9.2010 TO, M/S SHIVANK UDYOG LIMITED, A 37/2, MAYAPURI INDL. AREA PHASE,1 NEW DELHI SIR, SUB: PROCEEDINGS U/S 148 FOR THE A.Y. 2003-04 PAN AAACS1692M REGARDING KINDLY REFER TO YOUR LETTER DATED 6.9.2010 ON THE ABOVE SUBJECT. IN THIS CONNECTION, IT IS STATED THAT COP Y OF REASONS RECORDED FOR ISSUANCE OF NOTICE U/S 148 HAS ALREADY BEEN GIVEN TO YOU. THE INVESTIGATION WING OF THE DEPARTMENT, DUR ING THE COURSE 3 ITA NO.3144/DEL/2011 OF SEARCH PROCEEDINGS IN THE CASES OF VARIOUS ENTRI ES OPERATORS HAVE FURNISHED A LIST OF SUCH PERSONS/PARTIES TO WH OM THEY HAVE PROVIDED ACCOMMODATION ENTRIES AND YOU WERE ONE OF THE PARTY WHO HAVE TAKEN ENTRIES OR BENEFICIARIES FOR SUCH EN TRIES. AS PER INFORMATION RECEIVED, THE DETAILS OF ENTRIE S YOU HAVE TAKEN ARE AS UNDER: - NAME OF PARTY AMOUNT DATE INSTRUMENT NO. UMESH SECURITIES P. LTD. 4,50,000 9.7.2002 105925 ONYX EXIM & SALES LTD. 4,50,000 9.7.2002 106954 SHIMMER MARKETING P. LTD. 4,00,000 9.7.2002 106981 MAA SHAKUBARI STONE CRUST LTD. 4,50,000 9.7.2002 943743 IBEX INFOTECH PVT. LTD. 3,00,000 24.7.2002 934665 BABIK EXPORTS P. LTD. 10,00,000 23.8.2002 18219 KOHINOOR OIL MILLS LTD. 4,00,000 9.7.2002 184324 TOTAL 34,50,000 4. THE ASSESSEE OBJECTED TO THE PROPOSED ADDITION O F THE SAID AMOUNT TO ITS INCOME VIDE VARIOUS LETTERS FILED BY IT BEFORE AO WHICH ARE DATED 18 TH OCTOBER, 2010, 12 TH NOVEMBER, 2010 & 18 TH NOVEMBER, 2010, COPIES OF WHICH ARE PLACED AT PAGES 5 TO 187, 187A TO 210 & 211 TO 228 RESPECTIVELY IN THE PAPER BOOK. THE ASSESSEE DENIE D TO HAVE RECEIVED ANY ACCOMMODATION ENTRIES FROM THESE PARTIES AND RE QUESTED THE AO TO CALL THESE PARTIES U/S 131 AT THE COST AND EXPENSES OF THE ASSESSEE AND IT WAS POINTED OUT THAT ANY GENERAL STATEMENT MADE BY ANY PERSON WOULD NOT BE ENOUGH UNLESS IT IS SPECIFICALLY MENTI ONED THAT THE ASSESSEE COMPANY HAD RECEIVED ACCOMMODATION ENTRIES FROM THEM. IT WAS REQUESTED THAT ALL SUCH TYPE OF STATEMENTS, ON THE BASIS OF WHICH THE DEPARTMENT IS INFERRING THAT THESE ARE ACCOMMOD ATION ENTRIES, SHOULD BE SUPPLIED TO THE ASSESSEE. IT WAS POINTED OUT THAT APPLICATION MONEY FOR ALLOTMENT OF SHARES WAS RECEIVED BY CHEQU ES FROM THESE PARTIES AND THEY ARE BEING ASSESSED TO INCOME TAX U NDER THE PAN MENTIONED THEREIN. THE DETAIL WAS FURNISHED IN THE SHAPE OF CHART, WHICH IS DESCRIBED IN SUBMISSION IN AFOREMENTIONED LETTER DATED 18 TH OCTOBER, 2010 THE CHART IS REPRODUCED AS UNDER: - 4 ITA NO.3144/DEL/2011 5. ALONG WITH THE AFOREMENTIONED CHART THE ASSESSEE HAD SUBMITTED FOLLOWING DOCUMENTS TO SUPPORT ITS CONTENTION: (I ) COPY OF SHARE APPLICATION RECEIVED FOR ALLOT MENT OF SHARES; (II) COPY OF RESOLUTION PASSED BY THE BOARD OF DIRE CTORS FOR INVESTMENT IN SHARES OF THE ASSESSEE COMPANY; (III) COPY OF ACKNOWLEDGMENT FOR FILING THE INCOME TAX RETURN SHOWING PAN; (IV) COPY OF BALANCE SHEET AND PROFIT AND LOSS ACCO UNT; (V) COPY OF BANK STATEMENT; (VI) CERTIFICATE OF INCORPORATION; (VII) COPY OF MEMORANDUM AND ARTICLE ASSOCIATION; (VIII) COPY OF ASSESSEES BANK STATEMENT SHOWING EN CASHMENT OF CHEQUES RECEIVED FROM AFOREMENTIONED COMPANIES; (IX) CERTIFICATE FROM COMPANY SECRETARY FROM ALLOTM ENT OF SHARES; NAME ADDRESS AMOUNT CHEQUE DATE CHEQUE NO. BANK, BRANCH PAN DOC. PAGE NO. UMESH SECURITIES P. LTD. NO MONEY WAS RECEIVED FROM UMESH SECURITIES P. LTD. 450000 9.7.02 105925 ONYX EXIM & SALES LTD. 2842, CLASSIC APARTMENTS, STREET MOTI MAHAL, DARYA GANJ, N. DELHI- 110002 450000 8.7.02 106954 KSBL, ARYA SAMAJ ROAD, DEV NAGAR, N. DELHI AAACI1979R 617 & 142- 143 SHIMMER MARKETING P. LD. 2842, CLASSIC APPARTMENTS, STREET MOTI MAHAL, DARYA GANJ, N. DELHI- 110002 400000 5.7.02 106981 KSBL, ARYA SAMAJ ROAD, DEV NAGAR, N. DELHI AAFCS1881B 18- 24 & 142- 143 MAA SHAKUBHARI STONE CRUSHERS P. LTD. 216-A/12, GAUTAM NAGAR, N. DELHI-110049 450000 9.7.02 943743 THE FEDERAL BANK LTD., KAROL BAGH, N. DELHI. THE NAME OF THE COMPANY WAS CHANGED TO SPARKLE BREWARIES P. LTD. 31- 32, 34- 111 & 146- 147 IBEX INFOTECH P. LTD. 5810/4, IIND FLOOR, DEV NAGAR, N. DELHI- 110005 300000 22.7.02 934665 THE FEDERAL BANK LTD., KAROL BAGH, N. DELHI AAAC16942E 25- 30 & 144- 145 RABIK EXPORTS P. LTD. RZ-41A, MOHAN NAGAR, PANKHA ROAD, N. DELHI- 110046 1000000 20.8.02 18119 THE RATNAKAR BANK LTD., KAROL BAGH, N. DELHI AABCR8845A 113- 133 KOHINOOR OIL MILLS LTD. JG-2/641, VIKAS PURI, N. DELHI-18 400000 8.7.02 184324 KARUR VYSYA BANK LTD., KAROL BAGH, N. DELHI. AABCK6763G 134- 141 & 5 ITA NO.3144/DEL/2011 (X) FORM NO. 2 FOR ALLOTMENT OF SHARES WAS DULY FIL ED U/S 75(1) OF THE COMPANIES ACT, 1956 ON 21.02.2003. 6. AT THE END OF THE LETTER AS UMESH SNEH SECURITIE S PVT. LTD., IT WAS POINTED OUT THAT THE NAME WAS WRONGLY MENTIONED IN THE INFORMATION AS UMESH SECURITIES PVT. LTD.. THE SAID NAME IS ACT UALLY UMESNEH SECURITIES P. LTD. AND THE PARTICULARS REGARDING TH AT WERE GIVEN AS UNDER: NAME ADDRESS AMOUNT CHEQUE DATE CHEQUE NO. BANK, BRANCH PAN DOC. PAGE NO. UMESNEH SECURITIES PVT. LTD. A-35, JAIN NAGAR EXT., KANJHAWALA ROAD, DELHI-81 450000 9.7.02 105925 KSBL, ARYA SAMAJ ROAD, DEV NAGAR, N.D. AAACU0451G 142-143 & 148- 182 7. ALONG WITH THE AFOREMENTIONED LETTER, ALL AFOREM ENTIONED DOCUMENTS WERE FURNISHED, THE COPY OF WHICH HAS ALS O BEEN FILED IN THE PAPER BOOK FILED BY THE ASSESSEE. THE AO ISSUED SU MMON TO THESE PARTIES AND AFTER ISSUING SUCH SUMMONS THE POSITION HAS BEEN SUMMARIZED BY THE AO IN THE ASSESSMENT ORDER AS UND ER: - S.NO. NAME OF PARTY WRITTEN BACK BY POSTAL AUTHORITIES WITH FOLLOWING REMARKS 1. ONYX EXIM & SALES LTD. NO SUCH FIRM 2. GRASSROOTS MARKETING PVT. LTD. (NEW NAME) SHIMMER MARKETING PVT. LTD. OLD NAME NO SUCH FIRM IN THIS ADDRESS 3. SPARKLE BREWERIES PVT. LTD. (NEW NAME) OLD NAME WAS MAA SHAKUBARI STONE CRUST LTD. NOTICE HAS NOT COME BACK 4. IBEX INFOTECH PVT. LTD. NO SUCH FIRM AT THIS ADD RESS 5. RABIK EXPORTS PVT. LTD. NO SUCH OFFICE ON SUCH ADDRESS 6. KOHINOOR OIL MILLS LTD. 8. THE AO ALSO NOTED THAT ASSESSEE DID NOT SUPPLY N EW ADDRESSES FOR UMESH SNEH SECURITIES P. LTD. AND KOHINOOR OIL MILL S LTD., THEREFORE, THE SUMMONS WERE NOT ISSUED AGAIN. IN RESPECT OF MAA S HAKUBHARI STONE CRUSHERS LTD. (OLD NAME) & M/S SPARKLE BREWARIES P. LTD. (NEW NAME) 6 ITA NO.3144/DEL/2011 THE SUMMONS WERE ISSUED TWICE, BUT THERE WAS NO COM PLIANCE. IN RESPECT OF M/S RABIK EXPORT P. LTD., THE AO DISCARD ED THE APPEARANCE OF ONE SHRI KULDEEP THAKUR WHO CLAIMED TO BE AN ACCOUN TANT OF THE SAID COMPANY CONFIRMING THE TRANSACTION VIDE LETTER DATE D 14 TH DECEMBER, 2010, ON THE GROUND THAT ONLY ACCOUNTANT HAS APPEAR ED IN PLACE OF REQUIRED PERSONAL DEPOSITION OF PRINCIPAL OFFICER A ND SAID SHRI KULDEEP THAKUR WAS NOT ABLE TO EXPLAIN AS TO WHY THE SUMMON S WERE RETURNED BACK BY THE POSTAL AUTHORITIES. THEREFORE, HE REFU SED TO TAKE COGNIZANCE OF THE EVIDENCE PRODUCED BY THE ASSESSEE IN RESPECT OF M/S RABIK EXPORT LTD. AND IN THIS MANNER, THE AO HAS MA DE THE ADDITION TO THE INCOME OF THE ASSESSEE FOR A SUM OF RS. 34,50,0 00/-. 9. BEFORE CIT(A), THE ASSESSEE CHALLENGED THE VALID ITY OF REASSESSMENT PROCEEDINGS AS WELL AS CHALLENGED THE ADDITION MADE ON MERITS. LD. CIT(A) HAS REJECTED THE CONTENTIONS OF THE ASSESSEE REGARDING INVALIDITY OF REASSESSMENT PROCEEDINGS AN D HAS ALSO CONFIRMED THE ADDITION ON MERITS. DISSATISFIED WIT H THE ORDER PASSED BY LD. CIT(A) THE ASSESSEE HAS FILED AFOREMENTIONED AP PEAL. 10. FOR CONTESTING THE VALIDITY OF REASSESSMENT PRO CEEDING, AFTER NARRATING THE FACTS, IT WAS PLEADED BY LD. AR THAT INITIATION OF REASSESSMENT PROCEEDINGS IN THE PRESENT CASE IS ILL EGAL. REFERRING TO THE REASONS RECORDED BY THE AO, IT IS THE SUBMISSIO N OF LD. AR THAT AS PER THE LAW EXPLAINED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SARTHAK SECURITIES CO. P. LTD. VS. ITO IN W RIT PETITION (CIVIL NO. 6087/2010) VIDE JUDGMENT PRONOUNCED ON 18 TH OCTOBER, 2010 VALID INITIATION OF REASSESSMENT REQUIRES INDEPENDENT APP LICATION OF MIND BY THE ASSESSING OFFICER. HE SUBMITTED THAT COPY OF T HIS DECISION IS PLACED IN THE PAPER BOOK FROM PAGES 311 TO 325, WHEREIN TH EIR LORDSHIPS REFERRING TO THE PROVISIONS OF SEC. 147 AND VARIOUS JUDICIAL PRONOUNCEMENTS HAVE COME TO THE CONCLUSION THAT APA RT FROM REASONS THERE SHOULD BE INDEPENDENT APPLICATION OF MIND BY THE AO. HE SUBMITTED THAT AS PER DECISION OF BOMBAY HIGH COURT IN THE CASE OF IAC VS. IBM WORD TRADE CORPORATION 216 ITR 811 (BOM.) O NLY THE REASONS SO 7 ITA NO.3144/DEL/2011 RECORDED CAN BE LOOKED AT FOR SUSTAINING OR SETTING ASIDE A NOTICE ISSUED U/S 148 AND ANY OTHER MATERIAL CANNOT BE RELIED UPO N. AS PER DECISION OF BOMBAY HIGH COURT IN THE CASE OF HINDUSTAN LIVER LTD. VS. R.V. WADKAR 268 ITR 332, THE REASONS ARE REQUIRED TO BE READ AS THEY WERE RECORDED BY THE AO. NO SUBSTITUTION OR DELETION IS PERMISSIBLE. NO ADDITION CAN BE MADE TO THOSE REASONS. NO INFERENC E CAN BE ALLOWED TO BE DRAWN BASED ON REASONS NOT RECORDED. IT IS FOR THE AO TO DISCLOSE AND OPEN HIS MIND THROUGH REASONS RECORDED BY HIM. THE REASONS RECORDED BY THE AO CANNOT BE SUPPLEMENTED BY FILING AN AFFIDAVIT OR MAKING AN ORAL SUBMISSION, OTHERWISE, THE REASONS W HICH ARE LACKING IN THE MATERIAL PARTICULARS WOULD GET SUPPLEMENTED, BY THE TIME THE MATTER REACHES TO THE COURT, ON THE STRENGTH OF AFF IDAVIT OR ORAL SUBMISSIONS ADVANCED. THE REASONS RECORDED MUST BE BASED ON EVIDENCE. ACCORDING TO DECISION OF HONBLE SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAWERI STOCK BROKERS P. LTD. 291 I TR 500 (SC) THE WORD REASON IN THE PHRASE REASON TO BELIEVE WOULD ME AN CAUSE OR JUSTIFICATION. IF THE AO HAS CAUSE OR JUSTIFICATIO N TO KNOW OR SUPPOSE THAT INCOME HAD ESCAPED ASSESSMENT, IT CAN BE SAID TO HAVE REASON TO BELIEVE THAT AN INCOME HAD ESCAPED ASSESSMENT. AT THE STAGE OF ISSUE OF NOTICE, THE ONLY QUESTION IS WHETHER THERE WAS R ELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED A REQUI SITE BELIEF. WHETHER THE MATERIAL WOULD CONCLUSIVELY PROVE THE S TATEMENT IS NOT THE CONCERN AT THAT STAGE. HE SUBMITTED THAT REFERRING TO ALL THESE DECISIONS, IT WAS OBSERVED BY THE HONBLE DELHI HIG H COURT THAT THERE SHOULD BE AN INDEPENDENT APPLICATION OF MIND BY THE AO. HE DREW OUR ATTENTION TOWARDS FOLLOWING OBSERVATIONS OF THEIR L ORDSHIPS FROM THE SAID DECISION: - 23. THE OBTAINING FACTUAL MATRIX HAS TO BE TESTED ON THE ANVIL OF THE AFORESAID PRONOUNCEMENT OF LAW. IN THE CASE AT HAND, AS IS EVINCIBLE, THE AO WAS AWARE OF THE EXISTENCE OF FOU R COMPANIES WITH WHOM THE ASSESSEE HAD ENTERED INTO TRANSACTION . BOTH THE ORDERS CLEARLY EXPOSIT THAT THE AO WAS MADE AWARE O F THE SITUATION BY THE INVESTIGATION WING AND THERE IS NO MENTION T HAT THESE COMPANIES ARE FICTITIOUS COMPANIES. NEITHER THE RE ASONS IN THE INITIAL NOTICE NOR THE COMMUNICATION PROVIDING REAS ONS REMOTELY INDICATE INDEPENDENT APPLICATION OF MIND. TRUE IT IS, AT THAT STAGE, 8 ITA NO.3144/DEL/2011 IT IS NOT NECESSARY TO HAVE THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME BUT WHAT IS NECESSARY IS THAT THERE IS RELEV ANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED THE REQ UISITE BELIEF. TO ELABORATE, THE CONCLUSIVE PROOF IS NOT GERMANE A T THIS STAGE BUT THE FORMATION OF BELIEF MUST BE ON THE BASE OR FOUN DATION OR PLATFORM OF PRUDENCE WHICH A REASONABLE PERSON IS R EQUIRED TO APPLY. AS IS MANIFEST FROM THE PERUSAL OF THE SUPP LY OF REASONS AND THE ORDER OF REJECTION OF OBJECTIONS, THE NAMES OF THE COMPANIES WERE AVAILABLE WITH THE AUTHORITY. THEIR EXISTENCE IS NOT DISPUTED. WHAT IS MENTIONED IS THAT THESE COMP ANIES WERE USED AS CONDUITS. IN THAT VIEW OF THE MATTER, THE PRINCIPLE LAID DOWN IN LOVELY EXPORTS (P) LTD. LOVELY EXPORTS (P) LTD. LOVELY EXPORTS (P) LTD. LOVELY EXPORTS (P) LTD. (SUPRA) GETS SQUARELY ATTRA CTED. THE SAME HAS NOT BEEN REFERRED TO WHILE PASSING THE ORDER OF REJECTION. THE ASSESSEE IN HIS OBJECTIONS HAD CLEA RLY STATED THAT THE COMPANIES HAD BANK ACCOUNTS AND PAYMENTS WERE M ADE TO THE ASSESSEE COMPANY THROUGH BANKING CHANNEL. THE IDEN TITY OF THE COMPANIES WAS NOT DISPUTED. UNDER THESE CIRCUMSTAN CES, IT WOULD NOT BE APPROPRIATE TO REQUIRE THE ASSESSEE TO GO TH ROUGH THE ENTIRE GAMUT OF PROCEEDINGS. IT IS TOTALLY UNWARRANTED. 24. RESULTANTLY, THE INITIATION OF PROCEEDINGS U/S 147 AND ISSUANCE OF NOTICE U/S 148 OF THE ACT ARE HEREBY QUASHED. I N THE FACTS AND CIRCUMSTANCES OF THE CASE, THERE SHALL BE NO ORDER AS TO COSTS. 11. ON MERITS, IT WAS CONTENDED BY LD. AR THAT IN V IEW OF THE EVIDENCE SUBMITTED BY THE ASSESSEE, THE INITIAL BURDEN WAS D ISCHARGED. THE AO COULD NOT BRING ANY MATERIAL TO SUGGEST THAT THE EV IDENCE FILED BY THE ASSESSEE WAS NOT CORRECT OR WAS FALSE AND FOR THIS PURPOSE, HE RELIED UPON THE FOLLOWING DECISIONS: - I) CIT VS. ALTRATECH FINANCE INVESTMENT LTD., DECISION DATED 12 TH AUGUST, 2010 IN ITA NO. 1122/2010 AND COPY OF THE DECISION IS PLACED AT PAGES 251 TO 254 OF THE PAPER BOOK. II) CIT VS. M/S CREATIVE WORD TELEFILMS LTD., DECIS ION DATED 12 TH OCTOBER, 2009 (BOMBAY HIGH COURT) IN ITA(L) NO. 218 2/2009, COPIES PLACED AT PAGE 255 TO 256 OF THE PAPER BOOK. III) CIT VS. PRYAG HOSPITALS & RESEARCH, DECISION D ATED 22 ND JULY, 2010 IN ITA NO. 917/2010, COPY PLACED AT PAGES 257 TO 260 OF THE PAPER BOOK. IV) CIT VS. DWARKA DHISH INVESTMENT P. LTD., DECISI ON DATED 2 ND AUGUST, 2010 IN ITA NO. 911/2010, COPY OF DECISION IS PLACED AT PAGES 261 TO 269 [(2010) 6 TAXMAN.COM 84 (DEL.)]. 9 ITA NO.3144/DEL/2011 V) CIT VS. OASIS HOSPITALITY & OTHERS P. LTD., DECI SION DATED 31 ST JANUARY, 2011 IN ITA NO. 2093/2010, COPIES PLACED AT PAGES 276 TO 302 OF THE PAPER BOOK. 12. IN THIS MANNER, THE LD. AR CONTENDED THAT ADDIT ION HAS WRONGLY BEEN SUSTAINED BY THE LD. CIT(A) AND THE SAME SHOUL D BE DELETED. 13. ON THE OTHER HAND, IT WAS SUBMITTED BY LD. DR T HAT LD. CIT(A) HAS RIGHTLY UPHELD THE VALIDITY OF REASSESSMENT PROCEED INGS. SHE SUBMITTED THAT EARLIER THE ASSESSMENT DID NOT TAKE PLACE U/S 143(3) OF THE ACT. THE AO HAD RECEIVED SPECIFIC INFORMATION FROM INVES TIGATION WING ON THE BASIS OF WHICH IT WAS FOUND THAT ASSESSEE HAD R ECEIVED THE BENEFIT OF ACCOMMODATION ENTRIES IN RESPECT OF AFOREMENTION ED PARTIES. THEREFORE, THE AO WAS RIGHT IN INITIATING REASSESSM ENT PROCEEDINGS. SHE SUBMITTED THAT SUFFICIENCY OF REASON IS NOT REQUIRE D FOR VALID INITIATION OF REASSESSMENT PROCEEDINGS. THERE SHOULD BE SOME MAT ERIAL IN THE POSSESSION OF THE AO UPON WHICH AN INFERENCE CAN BE DRAWN THAT INCOME HAS ESCAPED ASSESSMENT IN THE HANDS OF THE A SSESSEE. SHE SUBMITTED THAT IN ABSENCE OF ASSESSMENT U/S 143(3), THE AO COULD VALIDLY INITIATE REASSESSMENT PROCEEDINGS ON THE BA SIS OF INFORMATION RECEIVED BY HIM FROM THE INVESTIGATION WING. THUS, SHE SUBMITTED THAT REASSESSMENT PROCEEDINGS HAVE VALIDLY BEEN INITIATE D AND THIS GROUND OF THE ASSESSEE SHOULD BE DISMISSED. 14. COMING TO THE MERITS OF THE ADDITION, IT WAS SU BMITTED BY HER THAT ASSESSEE REMAINED UNABLE TO FULFILL THE REQUIREMENT S OF LAW TO PROVE THE GENUINENESS OF THE MONEY RECEIVED AS SHARE APPLICAT ION. SHE SUBMITTED THAT ASSESSEE HAD FAILED TO PROVE THE IDE NTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION . THEREFORE, SHE PLEADED THAT ADDITION HAS RIGHTLY BEEN SUSTAINED BY LD. CIT(A). REFERRING TO THE ORDER PASSED BY LD. CIT(A), SHE SU BMITTED THAT HE HAS DRAWN FOLLOWING CONCLUSION AFTER GOING THROUGH THE FACTS OF THE CASE AS POINTED OUT IN PARA 5.10 OF THE ORDER OF CIT(A): - 10 ITA NO.3144/DEL/2011 I) IT IS A FACT THAT THE APPELLANT HAS RECEIVED HU GE AMOUNT OF FUND IN THE RELEVANT ASSTT. YEAR FROM OUT SIDE PARTIES? II) IT IS FURTHER A FACT THAT SUCH COMPANY HAS NOT RECEIVED ANY DIVIDEND OR INTEREST WHATSOEVER FROM THE APPELL ANT COMPANY IN THE PAST SO MANY YEARS. III) IT IS ALSO A FACT THAT REPEATED OPPORTUNITIES WERE ISSUED BY THE AO TO THE INVESTING COMPANIES. IV) IT IS A FACT THAT IN SPITE OF REPEATED OPPORTUN ITIES, THE PRINCIPAL OFFICERS OF THE INVESTING COMPANIES NEITH ER APPEARED NOR COULD BE PRODUCED BY THE APPELLANT WHO HAD POSITIVE INFORMATION AND KNOWLEDGE REGARDING TH E WHEREABOUTS OF THE INVESTING COMPANIES. V) ANY SUCH PERSON (INCLUDING COMPANIES) WOULD NEVE R SIMPLY ADVANCE FUND AND WOULD VANISH FROM THE SCENE . VI) IT IS A FACT THAT THE APPELLANT HAS NO LIABILIT Y FOR ANY REPAYMENT OF ANY AMOUNT TO THE INVESTING COMPANIES. VII) IT IS A FACT THAT SHARES WERE NOT ALLOTTED TO THE INVESTING COMPANIES AND IT WAS NEVER SENT THROUGH POSTAL MODE AND NO SUCH EVIDENCE WAS EVER PRODUCED EITHER BEFOR E THE LD. AO OR BEFORE ME. 15. SHE ALSO PLEADED THAT THE ASSESSEE HAS CHARGED HEAVY PREMIUM OF RS.90 ON THE SHARES HAVING FACE VALUE OF RS.10/- . SHE SUBMITTED THAT THE ASSESSEE HAS SUBMITTED NO JUSTIFICATION OF CHAR GING SUCH A HIGH PREMIUM. THE BALANCE SHEET OF THE ASSESSEE ALSO DO ES NOT SUPPORT CHARGING SUCH HIGH PREMIUM. THE ASSESSEE HAS ALSO NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE SHARE ALLOTTED ON SUCH A HUGE PREMIUM WERE NOT BROUGHT BACK AT A LOWER PRICE BY T HE PERSONS INTERESTED IN THE ASSESSEE COMPANY. 16. IN VIEW OF ABOVE ARGUMENTS, SHE PLEADED THAT OR DER OF CIT(A) SHOULD BE UPHELD AND THE APPEAL FILED BY THE ASSESS EE SHOULD BE DISMISSED. 16. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. IT IS A CASE WHERE ORIGINAL ASSESSMENT 11 ITA NO.3144/DEL/2011 HAS NOT BEEN FRAMED U/S 143 (3) OF THE ACT AND RE-A SSESSMENT PROCEEDINGS HAVE BEEN INITIATED VIDE NOTICE DATED 1 9 TH MARCH, 2010. THE REASON FOR INITIATING RE-ASSESSMENT PROCEEDINGS HAVE ALREADY BEEN REPRODUCED IN THE ABOVE PART OF THIS ORDER. ACCORD ING TO THE INFORMATION RECEIVED BY THE ASSESSING OFFICER FROM DIT (INV.) THE ASSESSEE HAD RECEIVED ACCOMMODATION ENTRIES PROVIDE D TO IT BY CERTAIN ENTRY OPERATORS AND IT WAS INFORMED THAT THE ASSESS EE HAD BOGUS TRANSACTIONS TO THE TUNE OF ` 34,50,000/- DURING TH E YEAR UNDER CONSIDERATION. IT IS FOR THAT REASON THE ASSESSING OFFICER HAD REASONS TO BELIEVE THAT AN AMOUNT OF ` 34,50,000/- HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 (C) OF THE ACT. THE NEC ESSARY APPROVAL HAS ALSO BEEN OBTAINED BY THE ASSESSING OFFICER FROM CO MPETENT AUTHORITY AS PER SECTION 151 OF THE ACT. THE DETAILS WERE FU RTHER PROVIDED TO THE ASSESSEE VIDE LETTER DATED 6 TH SEPTEMBER, 2010 WHICH HAS ALSO BEEN REPRODUCED IN THE ABOVE PART OF THIS ORDER. THE AS SESSEE HAS CONTESTED THE VALIDITY OF INITIATION OF RE-ASSESSMENT PROCEED INGS ON THE GROUND THAT REASONS TO BELIEVE REQUIRES INDEPENDENT APPL ICATION OF MIND AND THE ABSENCE OF SUCH INDEPENDENT APPLICATION OF MIND BY THE ASSESSING OFFICER WILL RENDER RE-ASSESSMENT PROCEEDINGS INVAL ID AND, FOR THAT PURPOSE, RELIANCE HAS BEEN PLACED ON THE DECISION O F HONBLE DELHI HIGH COURT IN THE CASE OF SARTHAK SECURITIES CO. PVT. LT D. (SUPRA). TO EXAMINE SUCH CONTENTION IT HAS TO BE SEEN THAT WHET HER OR NOT THE ASSESSING OFFICER HAS INDEPENDENT APPLICATION OF MI ND. THE INFORMATION RECEIVED BY THE ASSESSING OFFICER IS SPECIFIC AND T HE ASSESSEE HAS BEEN FOUND TO HAVE RECEIVED SHARE APPLICATION FROM THE S PECIFIC ENTITIES TO THE EXTENT OF ` 34,50,000/-, THE PARTICULARS OF WHI CH WERE SENT BY THE INVESTIGATION WING TO THE ASSESSING OFFICER. THE A SSESSING OFFICER HAS MENTIONED IN THE REASONS IT IS SEEN THAT THE ASSES SEE HAS BOGUS TRANSACTIONS TO THE TUNE OF ` 34,50,000/- DURING FI NANCIAL YEAR 2002-03 RELEVANT TO ASSESSMENT YEAR 2003-04. THE ASSESSIN G OFFICER FURTHER OBSERVED IN VIEW OF ABOVE I HAVE REASONS TO BELIEV E THAT AN AMOUNT OF ` 34,50,000/- HAS ESCAPED ASSESSMENT WITHIN THE MEA NING OF SECTION 147 (C) OF THE INCOME-TAX ACT, 1961 FOR THE ASSESSM ENT YEAR 2003-04. 12 ITA NO.3144/DEL/2011 THEREFORE, IT CANNOT BE SAID THAT THE ASSESSING OFF ICER HAD NOT APPLIED HIS MIND AND HAS SIMPLY WORKED UPON THE REPORT OF D IT (INV.). MOREOVER, IN THE LATER DECISION, HONBLE DELHI HIGH COURT IN THE CASE OF AGR INVESTMENT LTD. VS. ADDL. CIT 330 ITR 146 (DEL) HAD OCCASION TO CONSIDER THIS ASPECT IN WHICH THE AFOREMENTIONED DE CISION IN THE CASE OF SARTHAK SECURITIES CO. PVT. LTD. (SUPRA) WAS ALSO C ONSIDERED. THE REASONS IN THAT CASE ARE FOUND IN PARA 6 OF THE ORD ER AND THE REASONS ARE ALMOST SAME AND THEIR LORDSHIPS AFTER CONSIDERI NG THE VARIOUS JUDICIAL PRONOUNCEMENTS INCLUDING THE DECISION IN T HE CASE OF SARTHAK SECURITIES CO. PVT. LTD. (SUPRA) HAVE UPHELD THE IN ITIATION OF RE- ASSESSMENT PROCEEDINGS. THEIR LORDSHIPS OBSERVED T HAT IT IS ALSO NOTICEABLE THAT THERE WAS SPECIFIC INFO RMATION RECEIVED FROM THE OFFICE OF DIT (INV.V) AS REGARDS THE TRANS ACTIONS ENTERED INTO BY THE ASSESSEE COMPANY WITH THE NUMBER OF CON CERNS WHICH HAD MADE ACCOMMODATION ENTRIES AND THEY WERE NOT GE NUINE TRANSACTIONS. AS WE PERCEIVE, IT IS NEITHER A CHAN GE OF OPINION NOR DOES IT CONVEY A PARTICULAR INTERPRETATION OF A SPE CIFIC PROVISION WHICH WAS DONE IN A PARTICULAR MANNER IN THE ORIGIN AL ASSESSMENT AND SOUGHT TO BE DONE IN A DIFFERENT MANNER IN THE PROCEEDING UNDER SECTION 147 OF THE ACT. THE REASON TO BELIEV E HAS BEEN APPROPRIATELY UNDERSTOOD BY THE ASSESSING OFFICER A ND THERE IS MATERIAL ON THE BASIS OF WHICH THE NOTICE WAS ISSUE D. AS HAS BEEN HELD IN PHOOL CHAND BAJRANG LAL (SUPRA), BOMBAY PHA RMA PRODUCTS (SUPRA) AND ANANT KUMAR SAHARIA (SUPRA), THE COURT, IN EXERCISE OF JURISDICTION UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PERTAINING TO SUFFICIENCY OF REASONS FOR FORMATION OF THE BELI EF, CANNOT INTERFERE. THE SAME IS NOT TO BE JUDGED AT THAT ST AGE. 16.1 FURTHER, THEIR LORDSHIPS HAVE DISTINGUISHED TH E DECISION OF SARTHAK SECURITIES CO. PVT. LTD. (SUPRA) BY THE FOLLOWING O BSERVATIONS:- IN THE CASE OF SARTHAK SECURITIES CO. PVT. LTD. (S UPRA), THE DIVISION BENCH HAD NOTICED THAT CERTAIN COMPANIES WERE USED AS CONDUITS BUT THE ASSESSEE HAD, AT THE STAGE OF ORIGINAL ASSE SSMENT, FURNISHED THE NAMES OF THE COMPANIES WITH WHICH IT HAD ENTERED INTO TRANSACTIONS AND THE ASSESSING OFFICER WAS MAD E AWARE OF THE SITUATION AND FURTHER THE REASON RECORDED DOES NOT INDICATE APPLICATION OF MIND. 17. IT CAN BE SEEN FROM THE AFOREMENTIONED OBSERVAT IONS THAT IN THAT CASE THE ASSESSEE AT THE STAGE OF ORIGINAL ASSESSME NT HAD FURNISHED THE NAMES OF THE COMPANIES WITH WHICH IT HAD ENTERED IN TO TRANSACTIONS AND 13 ITA NO.3144/DEL/2011 THE ASSESSING OFFICER WAS MADE AWARE OF THE SITUATI ON AND FURTHER THE REASONS RECORDED DOES NOT INDICATE APPLICATION OF M IND. THEREFORE, THE SAID CASE IS DISTINGUISHABLE ON FACTS AND APPLYING THE DECISION IN THE CASE OF SARTHAK SECURITIES CO. PVT. LTD. (SUPRA), I T CANNOT BE HELD THAT INITIATION OF RE-ASSESSMENT PROCEEDINGS IS INVALID. 18. MOREOVER, AS IT HAS BEEN POINTED OUT EARLIER, I N THE PRESENT CASE, NO ASSESSMENT WAS ORIGINALLY FRAMED U/S 143 (3). T HE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ACIT VS. RAJES H JHAVERI (SUPRA) HAS A BEARING ON THE FACTS OF THE PRESENT CASE WHER EIN WHILE EXAMINING THE QUESTION OF VALIDITY OF RE-ASSESSMENT PROCEEDIN GS IN A CASE WHERE ORIGINALLY NO ASSESSMENT U/S 143 (3) WAS FRAMED, IT WAS HELD UNDER SECTION 147, AS SUBSTITUTED W.E.F. 1 ST APRIL, 1989 THAT IF THE ASSESSING OFFICER, FOR WHATEVER REASON, HAS REASONS TO BELIEV E THAT INCOME HAS ESCAPED ASSESSMENT WHICH CONFERS JURISDICTION TO RE -OPEN THE ASSESSMENT WHERE THE CASE IS NOT COVERED BY PROVISO TO SECTION 147. IT WAS OBSERVED THAT THE SCOPE OF EFFECT OF SECTION 14 7, AS AMENDED W.E.F. 1 ST APRIL, 1989, AS ALSO SECTIONS 148 TO 152 ARE SUBST ANTIALLY DIFFERENT FROM THE PROVISIONS AS THEY STOOD PRIOR TO SUBSTITU TION. UNDER THE OLD PROVISIONS OF SECTION 147, SEPARATE CLAUSES (A) AND (B) LAID DOWN THE CIRCUMSTANCES UNDER WHICH INCOME ESCAPING ASSESSMEN T FOR THE PAST ASSESSMENT YEARS COULD BE ASSESSED OR RE-ASSESSED. TO CONFER JURISDICTION UNDER SECTION 147 (A), TWO CONDITIONS WERE REQUIRED TO BE SATISFIED; FIRSTLY, THE ASSESSING OFFICER MUST HAVE REASONS TO BELIEVE THAT INCOME, PROFITS OR GAINS CHARGEABLE TO INCOME-TAX H AS ESCAPED ASSESSMENT; AND, SECONDLY, HE MUST ALSO HAVE REASON TO BELIEVE THAT SUCH ASSESSMENT HAS OCCURRED BY REASON OF EITHER (I ) OMISSION OR (II) FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT OF THAT YEAR. B OTH THESE CONDITIONS WERE CONDITIONS PRECEDENT TO BE SATISFIED BEFORE TH E ASSESSING OFFICER COULD HAVE JURISDICTION TO ISSUE NOTICE U/S 148 REA D WITH SECTION 147 (A). BUT, UNDER THE SUBSTITUTED SECTION 147, EXISTENCE O F ONLY THE FIRST CONDITION SUFFICES. IN OTHER WORDS, IF THE ASSESSI NG OFFICER FOR WHATEVER 14 ITA NO.3144/DEL/2011 REASONS HAS REASON TO BELIEVE THAT INCOME HAS ESCAP ED ASSESSMENT, IT CONFERS JURISDICTION TO REOPEN THE ASSESSMENT. IT IS, HOWEVER, TO BE NOTED THAT BOTH THE CONDITIONS MUST BE FULFILLED IF THE CASE FALLS WITHIN THE AMBIT OF THE PROVISO TO SECTION 147. IT CANNOT BE EVEN THE CASE OF THE ASSESSEE THAT ITS CASE IS COVERED BY THE PROVIS O U/S 147 AS FOR APPLICATION OF PROVISO IT IS A CONDITION PRECEDENT THAT ASSESSMENT EARLIER SHOULD HAVE BEEN FRAMED UNDER SECTION 143 ( 3). THEREFORE, WE FIND NO FORCE IN THE CONTENTION OF THE ASSESSEE THA T ASSESSMENT SHOULD BE QUASHED SIMPLY FOR THE REASON THAT INITIATION OF RE-ASSESSMENT PROCEEDINGS WAS INVALID. WE REJECT SUCH GROUND OF THE ASSESSEE. THEREFORE, GROUND NO.1 IS DISMISSED. 19. BEFORE PARTING WITH THIS GROUND, WE MAY MENTION THAT OTHER DECISIONS RELIED UPON BY THE LEARNED AR TO CHALLENG E THE VALIDITY OF RE- ASSESSMENT PROCEEDINGS ARE EITHER NOT RELEVANT OR A RE COVERED BY THE AFOREMENTIONED ADJUDICATION. 20. NOW, COMING TO THE MERITS OF THE ADDITION, IT I S SEEN THAT IN ALL THE CASES, THE ASSESSEE HAS SUBMITTED CONFIRMATION AND COPY OF BANK ACCOUNT FOR THE RELEVANT PERIOD FROM WHERE THE MONE Y HAS BEEN PAID BY THE SHARE APPLICANTS TO THE ASSESSEE AND THE MONEY HAS DULY BEEN DEBITED IN THE SAID BANK ACCOUNT. THE COPY OF ACKN OWLEDGEMENT OF RETURN, BALANCE SHEET AND PROFIT & LOSS ACCOUNT, CO PY OF PERMANENT ACCOUNT NO., COPY OF MEMORANDUM AND ARTICLES OF ASS OCIATION, COPY OF CERTIFICATE OF INCORPORATION, COPY OF APPLICATION F OR ALLOTMENT OF SHARES, COPY OF RESOLUTION PASSED BY THE COMPANY OF THE SHA RE APPLICANTS WERE ALSO SUBMITTED. ALL THESE EVIDENCES HAVE BEEN IGNO RED BY THE ASSESSING OFFICER FOR THE REASON THAT SUMMONS WERE ISSUED TO THESE PARTIES AND THEY HAVE BEEN RECEIVED BACK. THEREFOR E, THESE PARTIES ARE NON-EXISTENT. THIS CONTENTION OF THE ASSESSING OFF ICER CANNOT BE ACCEPTED FOR THE REASON THAT IN ALL THE CASES THE A SSESSEE NOT ONLY HAS GIVEN THE PERMANENT ACCOUNT NOS. OF THOSE PARTIES, BUT ALSO HAS PLACED ON RECORD COPY OF THEIR BANK ACCOUNTS. THE ASSESSI NG OFFICER HAS NOT MADE ANY INQUIRY WITH REGARD TO THESE DOCUMENTS. TH ESE DOCUMENTS 15 ITA NO.3144/DEL/2011 HAVE CERTAINLY ESTABLISHED THE IDENTITY OF THE SHAR E APPLICANTS AND IN THE ABSENCE OF ANY MATERIAL TO THE CONTRARY, THE EV IDENCE SUBMITTED BY THEM HAS TO BE ACCEPTED AND THE SAID EVIDENCE CANNO T BE REJECTED MERELY FOR THE REASON THAT SUMMONS SENT TO THOSE PA RTIES HAVE COME BACK. MERE FACT THAT THE SUMMONS COULD NOT BE SERV ED CANNOT BE A GROUND TO MAKE THE ADDITION AND THIS POSITION HAS B EEN ACCEPTED BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. OASIS HOSPITALITIES PVT. LTD. (SUPRA) AND THIS IS CLEAR FROM THE FOLLOWING OBSERVATIONS OF THEIR LORDSHIPS FROM THE SAID DECIS ION:- 15. AT THIS STAGE, WE WOULD LIKE TO REFER TO THE J UDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. M/S CREATI VE WORLD TELEFILMS LTD. (IN ITA NO.2182 OF 2009 DECIDED ON 1 2.10.2009). THE RELEVANT PORTION OF THIS ORDER IS REPRODUCED BE LOW: IN THE CASE IN HAND, IT IS NOT DISPUTED THAT THE A SSESSEE HAD GIVEN THE DETAILS OF NAME AND ADDRESS OF THE SHAREH OLDER, THEIR PAN/GIR NUMBER AND HAD ALSO GIVEN THE CHEQUE NUMBER, NAME OF THE BANK. IT WAS EXPECTED ON THE P ART OF THE ASSESSING OFFICER TO MAKE PROPER INVESTIGATION AND REACH THE SHAREHOLDERS. THE ASSESSI THE ASSESSI THE ASSESSI THE ASSESSING OFFICER DID NOTHING NG OFFICER DID NOTHING NG OFFICER DID NOTHING NG OFFICER DID NOTHING EXCEPT ISSUING SUMMONS WHICH WERE ULTIMATELY RETURN ED BACK EXCEPT ISSUING SUMMONS WHICH WERE ULTIMATELY RETURN ED BACK EXCEPT ISSUING SUMMONS WHICH WERE ULTIMATELY RETURN ED BACK EXCEPT ISSUING SUMMONS WHICH WERE ULTIMATELY RETURN ED BACK WITH AN ENDORSEMENT NOT TRACEABLE. IN OUR CONSID ERED VIEW, WITH AN ENDORSEMENT NOT TRACEABLE. IN OUR CONSID ERED VIEW, WITH AN ENDORSEMENT NOT TRACEABLE. IN OUR CONSID ERED VIEW, WITH AN ENDORSEMENT NOT TRACEABLE. IN OUR CONSID ERED VIEW, THE ASSESSING OFFICER OUGHT TO HAVE FOUND OUT THEIR DETAILS THE ASSESSING OFFICER OUGHT TO HAVE FOUND OUT THEIR DETAILS THE ASSESSING OFFICER OUGHT TO HAVE FOUND OUT THEIR DETAILS THE ASSESSING OFFICER OUGHT TO HAVE FOUND OUT THEIR DETAILS THROUGH PAN CARDS, BANK ACCOUNT DETAILS OR FROM THE I THROUGH PAN CARDS, BANK ACCOUNT DETAILS OR FROM THE I THROUGH PAN CARDS, BANK ACCOUNT DETAILS OR FROM THE I THROUGH PAN CARDS, BANK ACCOUNT DETAILS OR FROM THE IR R R R BANKERS SO AS TO REACH THE SHAREHOLDERS SINCE ALL T HE RELEVANT BANKERS SO AS TO REACH THE SHAREHOLDERS SINCE ALL T HE RELEVANT BANKERS SO AS TO REACH THE SHAREHOLDERS SINCE ALL T HE RELEVANT BANKERS SO AS TO REACH THE SHAREHOLDERS SINCE ALL T HE RELEVANT MATERIAL DETAILS AND PARTICULARS WERE GIVEN BY THE ASSESSEE MATERIAL DETAILS AND PARTICULARS WERE GIVEN BY THE ASSESSEE MATERIAL DETAILS AND PARTICULARS WERE GIVEN BY THE ASSESSEE MATERIAL DETAILS AND PARTICULARS WERE GIVEN BY THE ASSESSEE TO THE ASSESSING OFFICER. TO THE ASSESSING OFFICER. TO THE ASSESSING OFFICER. TO THE ASSESSING OFFICER. IN THE ABOVE CIRCUMSTANC ES, THE VIEW TAKEN BY THE TRIBUNAL CANNOT BE FAULTED. NO SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN THE APPE AL. IN THE RESULT, THE APPEAL IS DISMISSED IN LIMINE WI TH NO ORDER AS TO COSTS. (EMPHASIS SUPPLIED.) 16. THE COURT THUS CLEARLY HELD THAT ONCE DOCUME NTS LIKE PAN CARD BANK ACCOUNT DETAILS OR DETAILS FROM THE BANKE RS WERE GIVEN BY THE ASSESSEE, ONUS SHIFTS UPON THE ASSESSING OFF ICER AND IT IS ON HIM TO REACH THE SHAREHOLDERS AND THE ASSESSING OFF ICER CANNOT BURDEN THE ASSESSEE MERELY ON THE GROUND THAT SUMMO NS ISSUES TO THE INVESTORS WERE RETURNED BACK WITH THE ENDORSEME NT NOT TRACEABLE. SAME VIEW IS TAKEN BY THE KARNATAKA HIG H COURT IN MADHURI INVESTMENTS PVT. LTD. VS. ACIT (IN ITA NO.1 10 OF 2004, DECIDED ON 18.02.2006). IN THIS CASE ALSO, SOME OF SHARE APPLICANTS DID NOT APPEAR AND NOTICES SENT TO THEM WERE RETURNED WITH REMARKS WITH NO SUCH PERSON. ADDITION WAS M ADE ON THAT BASIS WHICH WAS TURNED DOWN BY THE HIGH COURT IN TH E FOLLOWING WORDS: 16 ITA NO.3144/DEL/2011 6. HAVING HEARD THE LEARNED COUNSEL FOR THE PARTI ES, WE NOTICE THAT WHENEVER A COMPANY INVITES APPLICATI ONS FOR ALLOTMENT OF SHARES FROM DIFFERENT APPLICANTS, THER E IS NO PROCEDURE CONTEMPLATED TO FIND OUT THE GENUINENESS OF THE ADDRESS OR THE GENUINETY OF THE APPLICANTS BEFORE A LLOTTING THE SHARES. IF FOR ANY REASON THE ADDRESS GIVEN IN THE APPLICATION WERE TO BE INCORRECT OR FOR ANY REASON IF THE SAID APPLICANTS HAVE CHANGES THEIR RESIDENCE OR THE NOTI CES SENT BY THE ASSESSING OFFICER HAS NOT BEEN RECEIVED BY S UCH APPLICANTS, THE ASSESSEE COMPANY CANNOT BE BLAMED. THEREFORE, WE ARE OF THE VIEW THAT THE TRIBUNAL WAS NOT JUSTIFIED IN ALLOWING THE APPEAL OF THE REVENUE ONL Y RELYING UPON THE STATEMENT OF SHRI ANIL RAJ MEHTA, A CHARTE RED ACCOUNTANT. 21. IT WAS FURTHER OBSERVED BY THEIR LORDSHIPS THAT ACCORDING TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF LO VELY EXPORTS (SUPRA), THE DEPARTMENT IS FREE TO PROCEED TO REOPE N THE INDIVIDUAL ASSESSMENT IN THE CASE OF ALLEGED BOGUS SHAREHOLDER S IN ACCORDANCE WITH THE LAW AND, THUS, NOT REMEDILESS. IT IS, THU S, FOR THE ASSESSING OFFICER TO MAKE FURTHER INQUIRIES WITH REGARD TO TH E STATUS OF THESE PARTIES TO BRING ON RECORD ANY ADVERSE FINDINGS REG ARDING THEIR CREDIT WORTHINESS. FURTHER REFERENCE CAN BE MADE TO THE FO LLOWING OBSERVATIONS OF THEIR LORDSHIPS WITH REGARD TO OASI S HOSPITALITIES PVT. LTD. (ITA NO.2093 OF 2010 AND ITA NO.2095 OF 2010 ) WHICH WERE THE APPEALS FILED BY THE REVENUE:- 28. THE ASSESSEES FILED COPIES OF PAN, ACKNOWLED GEMENT INCOME TAX RETURNS OF THE COMPANIES, THEIR BANK ACCOUNT ST ATEMENTS FOR THE RELEVANT PERIOD, I.E., FOR THE PERIOD WHEN THE CHEQUES WERE CLEARED. HOWEVER, THE PARTIES WERE NOT PRODUCED IN SPITE OF SPECIFIC DIRECTION OF THE AO INSTEAD OF TAKING OPPO RTUNITIES IN THIS BEHALF. SINCE THE SO-CALLED DIRECTORS OF THESE COMP ANIES WERE NOT PRODUCED ON THIS GROUND COUPLED WITH THE OUTCOME OF THE DETAILED INQUIRY MADE BY THE INVESTIGATING WING OF THE DEPAR TMENT, THE AO MADE THE ADDITION. THIS ADDITION COULD NOT BE SUSTA INED AS THE PRIMARY ONUS WAS DISCHARGED BY THE ASSESSEE BY PROD UCING PAN NUMBER, BANK ACCOUNT, COPIES OF INCOME TAX RETURNS OF THE SHARE APPLICANTS, ETC. WE ALSO FIND THAT THE ASSESSING OF FICER WAS INFLUENCED BY THE INFORMATION RECEIVED BY THE INVES TIGATING WING AND ON THAT BASIS GENERALLY MODUS OPERANDI BY SUCH ENTRY OPERATORS IS DISCUSSED IN DETAIL. HOWEVER, WHETHER SUCH MODUS OPERANDI EXISTED IN THE PRESENT CASE OR NOT WAS NOT INVESTIGATED BY THE A.O. THE ASSESSEE WAS NOT CONFRONTED WITH T HE INVESTIGATION CARRIED OUT BY THE INVESTIGATION WIN G OR WAS GIVEN 17 ITA NO.3144/DEL/2011 AN OPPORTUNITY TO CROSS-EXAMINE THE PERSONS WHOSE S TATEMENTS WERE RECORDED BY THE INVESTIGATING WING. 29. AS REGARDS DISCREPANCIES FOUND BY THE AO IN THE BANK STATEMENT SUFFICE IS TO MENTION THAT THE BANK STATE MENTS THAT WERE FILED BY THE ASSESSEE WERE PROVIDED BY THE SHA REHOLDERS AND WERE COMPUTER PRINTED ON THE BANK STATIONERY. THE SAME WERE FILED BY THE ASSESSEE DURING THE ASSESSMENT PROCEED INGS WITHOUT ANY SUSPICION OF THEIR BEING INCORRECT. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS NEVER CONFRONTED BY T HE AO THAT THERE ARE DISCREPANCIES BETWEEN THE BANK STATEMENTS FILED AND THE STATEMENTS DIRECTLY CALLED BY THE A.O. HOWEVER, EV EN AFTER CONSIDERING THE ALLEGED DISCREPANCIES, IT DOES NOT FOLLOW THAT THE AMOUNT OF SHARE CAPITAL WAS THE UNDISCLOSED INCOME OF THE ASSESSEE. EVEN THE CORRECT BANK STATEMENTS AS CLAI MED BY THE A.O. REVEAL THAT THE ASSESSEE HAS RECEIVED CHEQUES FROM THE SHAREHOLDERS. IN THIS BACKDROP, THE FOLLOWING OBSER VATIONS OF THIS COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. K.C. FIBERS LTD. (2010) 187 TAXMAN 53 (DEL.) ARE REPRODUCED: 'IT IS STRANGE THAT WHEN THE ASSESSING OFFICER IS QUESTIONING THE BONA FIDES OF M/S DIAMOND PROTEIN L TD. FOR COLLECTING MONEY TO SUBSCRIBE TO THE SHARE TO T HE CAPITAL OF THE ASSESSEE, BUT IT IS THE ASSESSEE WHO IS FASTENED WITH THE LIABILITY. THE ASSESSING OFFICER DID NOT QUESTION M/S DIAMOND PROTEIN LTD. IN THIS BEHALF. INS0FAR AS ASSESSING COMPANY IS CONCERNED, IT IS NO T DISPUTED THAT MONEY WAS PAID TOWARDS THE AFORESAID SHARE APPLICATION MONEY BY MEANS OF CHEQUES. IT IS NOT FOR THE ASSESSEE COMPANY TO PROBE AS TO THE SOURCE FROM WHERE M/S DIAMOND PROTEIN LTD. COLLECTED THE AFORESAID MONEY. IT WAS FOR THE ASSESSING OFFICER, IN THESE CIRCUMSTANCES TO INQUIRE INTO THE AFFAIRS OF M/S DIAMOND PROTEIN LTD. WHICH IS AN INDEPENDENT COMPAN Y INASMUCH AS NO FINDING IS ARRIVED AT BY THE ASSESSI NG OFFICER THAT THE TWO COMPANIES ARE UMBRELLA COMPANI ES OR HAVE ANY RELATIONSHIP WITH EACH OTHER. 30. WE ARE, THEREFORE, OF THE OPINION THAT THERE IS NO MERIT IN THESE TWO APPEALS, WHICH ARE ACCORDINGLY DISMISSED AT THE ADMISSION STAGE ITSELF. 22. IF THE AFOREMENTIONED OBSERVATIONS OF THEIR LOR DSHIPS ARE CONSIDERED IN THE FACTUAL MATRIX OF THE PRESENT CAS E, THEN, THE SAME WILL BE SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THE PRESENT CASE, THE ASSESSEE FILED COPIES OF PAN, ACKNOWLEDGE MENT OF FILING INCOME-TAX RETURNS OF THE COMPANIES, THEIR BANK ACC OUNT, STATEMENTS FOR THE RELEVANT PERIOD I.E., FOR THE PERIOD WHEN T HE CHEQUES WERE CLEARED AND THE PARTIES WERE NOT PRODUCED IN SPITE OF SPECIFIC DIRECTIONS 18 ITA NO.3144/DEL/2011 OF THE ASSESSING OFFICER INSTEAD OF TAKING OPPORTUN ITIES IN THIS BEHALF. KEEPING IN VIEW THE FACT FOR NON-PRODUCTION OF THES E PARTIES COUPLED WITH THE OUTCOME OF INQUIRY MADE BY THE INVESTIGATI ON WING, THE ASSESSING OFFICER HAS MADE THE ADDITION. THE AMOUN T PAID TO THE ASSESSEE BY THE SHARE APPLICANTS HAS BEEN SHOWN TO BE DEBITED IN THE RESPECTIVE BANK ACCOUNTS OF THE SHARE APPLICANTS AN D IF ALL THESE FACTS ARE SEEN, THEN, IT WILL BE A CASE WHERE ADDITION UP HELD BY THE CIT (A) CANNOT BE HELD TO BE JUSTIFIED. THEREFORE, KEEPING IN VIEW THE EVIDENCE PLACED ON RECORD BY THE ASSESSEE, WE ARE OF THE OPI NION THAT THE ADDITION UPHELD BY CIT (A) WAS NOT JUSTIFIED AND TH E SAME REQUIRES DELETION. WE ACCORDINGLY, DELETE THE ADDITION AND ALLOW GROUND NO.2. 23. SO AS IT RELATES TO THE CONTENTION OF THE LEARN ED DR THAT THE ASSESSEE HAS CHARGED HIGH PREMIUM ON THE SHARES FOR WHICH NO JUSTIFICATION HAS BEEN RENDERED, IT MAY BE MENTIONE D THAT THE ASSESSEE HAS AUTHORIZED SHARE CAPITAL OF ` 3 CRORES AS AGAIN ST THE PREVIOUS YEAR AUTHORIZED CAPITAL OF ` 1 CRORE. DURING THE YEAR UN DER CONSIDERATION, THE ASSESSEE HAS ISSUED 2,50,000 SHARES OF FACE VALUE O F ` 10 AT A PREMIUM OF ` 90 BY WAY OF PRIVATE PLACEMENT. THE LIST OF TH ESE PARTIES IS FURNISHED AT PAGES 249 AND 250. TO BE PRECISE, SHA RES HAVE BEEN ISSUED TO 19 PARTIES. THE ASSESSING OFFICER HAS DO UBTED THE GENUINENESS OF SHARE APPLICATION MONEY WITH RESPECT TO AFOREMENTIONED 7 PARTIES I.E., IN RESPECT OF 34,50 0 SHARES ALLOTTED TO THOSE PARTIES AND, THUS, IN RESPECT OF BALANCE 12 P ARTIES, SHARE APPLICANTS OF 2,15,500 SHARES, THE ASSESSING OFFICE R HAS ACCEPTED THE GENUINENESS OF THE SHARE APPLICATION. THEREFORE, I T IS NOT EVEN THE CASE OF THE ASSESSING OFFICER THAT THE SHARE APPLICATION MONEY RENDERED BY THE AFOREMENTIONED SEVEN PARTIES WAS NOT GENUINE ON THE GROUND THAT IT CONSISTED OF HUGE PREMIUM OF ` 90 ON THE FACE VALUE OF ` 10/-. THUS, THERE IS NO FORCE IN THE CONTENTION OF THE LEARNED DR THAT ON ACCOUNT OF CHARGING OF HEAVY PREMIUM THE SHARE APPLICATION SHO ULD BE CONSIDERED NON-GENUINE. 19 ITA NO.3144/DEL/2011 24. SIMILAR IS THE CASE WITH REGARD TO BUY BACK OF THOSE SHARES. IT IS NOT EVEN THE CASE OF ASSESSING OFFICER THAT THE ASS ESSEE OR PERSONS INTERESTED IN IT HAVE BROUGHT BACK THESE SHARES AT LOWER PRICE. THEREFORE, SUCH CONTENTION OF THE LEARNED DR CANNOT BE GONE INTO WHILE DECIDING THE PRESENT APPEAL. 25. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON 14.10.2011. SD/- SD/- (G.E. VEERABHADRAPPA) (G.E. VEERABHADRAPPA) (G.E. VEERABHADRAPPA) (G.E. VEERABHADRAPPA) (I.P. BANSAL) (I.P. BANSAL) (I.P. BANSAL) (I.P. BANSAL) VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER DATED: 14.10.2011. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR