The Income Tax Officer, Ward-3(1), Jamnagar V. M/s. Paras Buildcon P. Ltd., Jamnagar

ITA 315/RJT/2017

AI Insights

The case involves appeals by the revenue against the orders of the Learned Commissioner of Income Tax (Appeals), Jamnagar, which had deleted certain additions made by the Assessing Officer in the assessment orders for the year 2012-13. The main issues pertained to the deletion of an addition of Rs. 12,92,615 under section 40A(3) concerning cash payments exceeding Rs. 20,000, and an addition of Rs. 1,85,00,000 under section 68 regarding unexplained cash credit in the form of share application money. The Tribunal examined the submissions and evidence presented, including the nature of the transactions and the compliance with procedural requirements, and upheld the CIT(A)'s decisions.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135849 (ITAT-RAJKOT)
• Duration Of Justice: 5 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 18-07-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 04-10-2017
• Other Referred Cases: CIT vs. Tulip Finance Ltd, Hindustan Inks & Resins Ltd vs. CIT, CIT vs. Apex Term Packaging (P) Ltd, CIT vs. Expo Globe India Ltd, CIT vs. Kansal FinCap Ltd, CIT vs. Samir BioTech (Pvt) Ltd, CIT vs. Lovely Exports, CIT vs. Muthoot M. George Bankers
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: FORTHEASSESSEEVIZAVIZTHESHARES; SHRIB.D.GUPTA
• Assessee Lawyers: SHRIMEHULRANPURA

Judgement Text

आयकरअपीलीयअधिकरण , अहमदाबादनायपीप INTHEINCOMETAXAPPELLATETRIBUNAL, (ConductedthroughE-Court,Rajkot) BEFORESHRIWASEEMAHMED,ACCOUNTANTMEMBER And SHRIT.RSENTHILKUMAR,JUDICIALMEMBER Sr. No. ITA.No. Asstt. Year Nameof Appellant NameofRespondent 1. ITA No.315/Rjt/2017 2012-13 IncomeTaxOfficer, Ward-3(1), Jamnagar. M/s.ParasBuildconPvt. Ltd.,7,Siddharth ShoppingCentre,Opp. JollyBunglow, Jamnagar. PAN:AACCP1687K 2. ITA No.316/Rjt/2017 2012-13 IncomeTaxOfficer, Ward-3(1), Jamnagar. M/s.H.PChemicalsPvt. Ltd., 7,SiddharthShopping Centre,Opp.Jolly Bunglow,Jamnagar. PAN:AAACH5369Q 3. ITA No.317/Rjt/2017 2012-13 IncomeTaxOfficer, Ward-3(1), Jamnagar. M/s.F.C. PharmaceuticalsPvt. Ltd., 7,SiddharthShopping Centre,Opp.Jolly Bunglow,Jamnagar. PAN:AABCF1336J (Applicant)(Respondent) Revenueby:ShriB.D.Gupta,Sr.D.R Assesseeby:ShriMehulRanpura,A.R सुनवाईकीतारीख/DateofHearing:19/07/2023 घोषणाकीतारीख/DateofPronouncement:13/09/2023 आदेश/ORDER PERWASEEMAHMEDACCOUNTANTMEMBER: ITAnos.315-317/Rjt/2017 Asstt.Year2012-13 2 Thecaptionedappealhasbeenfiledattheinstanceofthedifferent AssesseeagainsttheseparateordersoftheLearnedCommissionerofIncomeTax (Appeals),Jamnagar,(inshort“Ld.CIT(A)”)arisinginthematterofassessment orderpassedunders.143(3)oftheIncomeTaxAct1961(here-in-afterreferred toas"theAct")relevanttotheAssessmentYear2012-13. 2.TheRevenuehasraisedthefollowinggroundsofappeal: 1.TheLd.CIT(A)erredonfactsandinlawindeletingtheadditionofRs.12,92,615/-asper theprovisionu/s.40A(3)oftheAct.TheLd.CIT(A),hasfailedtoappreciatethefactthatthe assesseefurnisheditswrittensubmissionon30/03/2015intheofficeoftheAddl./Jt.CIT insteadintheofficeoftheAOandhencetheAOhadnochancetorebutthewritten submissionoftheassesseeastheorderhadtobepassedby31/03/2015. 2.TheLd.CIT(A),erredonfactsandinlawindeletingtheadditionofRs.1,85,00,000/-on accountofcashcreditinformofcapitalu/s.68oftheAct. 3.Onthebasisofthefactsandcircumstancesofthecase,thelearnedCIT(A)oughttohave upheldtheorderoftheAssessingOfficer. 4.Thattherevenuecravesleavestoadd,amend,alterorwithdrawanygroundofappeal. 5.ItisthereforeprayedthattheorderoftheCIT(A),jamnagarmaykindlybesetasideand thatoftheAssessingOfficerberestored. 3.ThefirstissueraisedbytheRevenueisthatthelearnedCIT(A)erredin deletingtheadditionofRs.12,92,615/-madebytheAOonaccountofcash paymentoverthelimitspecifiedundersection40A(3)oftheAct. 4.Thefactsinbriefarethattheassesseeisaprivatecompanyandengaged inthetradingbusinessofVATfreegoodsandsubcontracting.TheAOfoundthat theassesseeduringtheyearhasmadecashpurchasesofgarlicamountingtoRs. 12,92,615/-havinginvoicevaluemorethantheprescribedlimitofRs.20,000/- undersection40A(3)oftheAct.Thepartywiseandinvoicewisepurchasesare detailedasunder: Party Name DateQuantityRateTotal Nanda Rajesh 02.04.201111,260232,58,980 ITAnos.315-317/Rjt/2017 Asstt.Year2012-13 3 Steel Nanda Rajesh Steel 07.04.201196,2026.752,57,335 Nanda Rajesh Steel 15.04.201112,630283,53,640 Nanda Rajesh Steel 05.05.20116,440271,73,880 Nanda Rajesh Steel 10.05.20116,44031.52,02,860 Brahmi Fabricators 18.05.20111,4353245,920 14,31512,92,615/- 5.TheAOfurtherfoundthatabovementionedsuppliersareneitherin agriculturalactivitynorworkingasagentsforagriculturalproducers.Assuchboth i.e.theassesseeandthesupplierhaveclaimedtobeengagedinthetrading business.TheAOalsomadeanenquirywithAPMCJamnagarandfoundthatthe assesseedoesnothaveAPMClicense.Therefore,theassesseecannottradeinthe AMPCyard,whichmeansthattheimpugnedpurchaseofgarlicincashwasmade outsidetheAPMCyard.Accordingly,theAOwasopinionthatthecashpayment madebytheassesseeinviolationoftheprovisionofsection40A(3)oftheActand thesameisalsonotcoveredbytheexceptionprovidedunderrule6DDsub-rule(e) or(k)ofIncomeTaxRule1962whereincashpaymentforpurchaseofagricultural produceorcashpaymenttoagentovertheprescribedlimithasbeenallowed. Thus,theAOvideshowcausenoticedated20-03-2015proposestodisallowthe impugnedcashpurchasesofRs.12,92,615/-undersection40A(3)oftheActand requiringtheassesseetomakereply/explanationby26 th March2015asthe assessmentwasgettingtimebarredon31 st March2015. 5.1However,thereplyoftheassesseewasreceivedon30 th March2015 whereinitwascontendedthatthoughinvoiceamountisinexcessofprescribed amountspecifiedundersection40A(3)oftheActbuttheactualpaymentagainst suchinvoicesarelessthanprescribedlimit.Hencetheprovisionofsection40A(3) oftheActcannotbeattracted.Theassesseeinsupportofitscontentionfurnished ITAnos.315-317/Rjt/2017 Asstt.Year2012-13 4 theledgercopiesofpartiesshowingcashpaymentinadayforlessthanRs. 20,000/-only. 5.2However,theAOheldthatpaymentshownundertheledgeraccountis afterthoughtandalteringthejournalentriesintallytoshowthepaymentless thanthelimitprescribedwhereasactualbillamountsarefarmorethanthelimit. Hence,theAOdisallowedtheimpugnedcashpurchasesofRs.12,92,615/-under section40A(3)oftheActandaddedtothetotalincomeoftheassessee. 6.OnappealbytheassesseethelearnedCIT(A)deletedthe disallowances/additionmadebytheAObyobservingasunder: a)Ihaveperusedtheassessmentorderandthepaperbookwhichinteraliaincludesthe writtensubmissionfieldbytheLd.A.Randdocumentaryevidencesinsupportofhis arguments.SofarasthedisallowanceofRs.12,92,615/-madeu/s.40A(3)isconcerned,it isseenthat,duringtheyearunderconsiderationtheappellanthadmadepurchasesfrom differentparties.Inthecourseofassessmentproceedingstheappellantinresponseto noticeu/s142(1),hadmadecompliancevideletterdated30.03.2015whereindetailsof vouchers/billsofpurchaseandsaleswerefurnished.Infactthepurchasesareoncredit andpaymentsaremadeinpiecemealasevidentfromtheedgeraccountsoftheseller furnishedintheassessmentproceedingsaswellinthepresentproceedings.Theledger accountsclearlyshowsthepaymentdidnotexceedRs.20,000/-andassuchprovisions ofsection40A(3)isnotattracted.Aspersection40A(3),violationcanbesaidtohave takenplaceonlyiftheassessesincursanyexpenditureinrespectofwhichapaymentor aggregateofpaymentsmadetoapersoninaday,otherwisethanbyanaccountpayee chequedrawnonabankoraccountpayeebankdraft,exceedstwentythousandrupees. Hereinthepresentcase,thepaymentswerenotmadeinexcessoftwentythousand rupeesandtheAOneverestablishedthatpaymentswereindeedmade.TheAOwasnot justifiedintheabsenceofanydocumentaryevidenceorinquiriesduringassessment proceedings.Hence,thereisnoviolationoftheprovisionsofsection40A(3)andhence, thedisallowanceofRs.12,92,615/-isthereforedirectedtobedeleted.Thisgroundof appealisallowed. 7.BeingaggrievedbytheorderofthelearnedCIT(A)theRevenueisin appealbeforeus. 8.ThelearnedDRbeforeusreiteratedthefindingscontainedinthe assessmentorder. 9.Ontheotherhand,thelearnedARbeforeusvehementlysupportedthe orderoftheld.CIT-A. ITAnos.315-317/Rjt/2017 Asstt.Year2012-13 5 10.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Fromtheorderofauthoritiesbelowandonperusal ofmaterialsavailableonrecord,wenotethattherespondentassesseeinthe monthofApriltoMay2011madepurchasesofgarlicforRs.12,46,695/-and 45,920/-fromM/sNandaRajeshSteelandBrahmiFabricatorrespectively.The invoicevaluesofthepurchasesrangebetweenRs.45,920toRs.2,58,980/-only. Thepaymentagainsttheimpugnedpurchaseswasmadeincash.Theassessee contendedthepurchasesweremadeoncreditandthesamewerepaidin piecemealincashwhichwasnotexceedingRs.20,000/-inadayforasingleparty. However,theAOheldthatthepaymentsweremadeasperbillbutintallythe samebrokenoverthenumberofdayswhichisquitepossibletodointallyincase ofcashtransactionsanddisallowedthesame.Butthesamewasdeletedbythe learnedCIT(A)forthereasonsdiscussedabove. 10.1Admittedly,itishardtobelievethattheassesseewillmakethepaymentfor thepurchaseoveraperiodinpiecemealamountingtoRs.18,000to20,000inthe givenfactsandcircumstances.However,theonusliesupontherevenuetojustify thatthepaymentwasmadebytheassesseeoverandaboveRs.20,000/-by conductingnecessaryenquiriesfromtheconcernedparties.Butnosuchenquiry hasbeenconductedbytherevenueauthorities.Accordingly,wearenotconvinced withthefindingoftheAO.Hence,thegroundofappealoftheRevenueishereby dismissed. 11.ThesecondissueraisedbytheRevenueisthatthelearnedCIT(A)erred indeletingtheadditionofRs.1.85CroresmadebytheAOonaccountofcreditof shareapplicationmoneyundersection68oftheAct. 12.Theassesseeintheyearunderconsiderationhasissued92,500sharesat Rs.200pershare,comprisingofpremiumatRs.190andfacevalueofRs.10per shareto17personsbeingHUF.Theassesseeinsupportofsuchsharecapitalhas finishedthecopiesofPan,addressandoriginalproofofthesharesubscribersto ITAnos.315-317/Rjt/2017 Asstt.Year2012-13 6 justifytheidentityofthepersonwhohavemadeinvestmentinthecompany.The assesseehasalsofiledthecopyofITRofthesharesubscribertojustifythe creditworthiness.Itwasalsosubmittedbytheassesseethatthetransactionswere carriedoutthroughthebankingchannelandthereforegenuinenessofthe transactionisalsonotdoubted.Besidestheabove,theassesseehasalsofiledthe detailsforincreaseinsharecapitalandallotmentofshareswiththeROCalong withtheresolution,memorandumofassociation,anarticleofassociationofthe company.Thus,itwascontendedthatonuscastu/s68oftheAct,wasduly dischargedbyfurnishingnecessarydetailsasdiscussedabove.Accordingly,the assesseesubmittedthatthereisnoquestionofmakinganyadditiononaccountof sharecapitalundertheprovisionsofsection68oftheAct. 13.However,theAOissuedsummonsu/s131(1)oftheActforthepersonal appearanceofthesharesubscribersbutnoneofthemappearedexceptfilingthe confirmationletter.Thus,theAOwasoftheviewthatidentityofthepersonunder theprovisionofsection68oftheAct,hasnotbeencompliedwithbeforetheAO. Withrespecttothecreditworthinessofthesharesubscribers,theAOobserved certaindefectsasdetailedbelow: I.Allthesharesubscribersfiledthereturnofincomeu/s44AD oftheAct,justbelowthethresholdlimitoftaxablelimitinthelast twoyears. II.Allthesharesubscribersclaimedtobeinthebusinessof generalmerchant.Theincomeshownbythesharesubscribersin someofthecaseswerethesame. 13.1TheemailIDintheIncometaxreturnofthesharesubscriberswereofthe [e-mail]theCAfirmwas theDirectorintheassessee’scompany. ITAnos.315-317/Rjt/2017 Asstt.Year2012-13 7 13.2Allthe17HUFsbeingsharessubscribersmadeinvestmentsinthegroup companiesoftheassesseeandtheaggregateinvestmentmadebytheshare subscriberswasinthemultipleof10to20timesoftheirincome. 13.3OnquestiontofurnishthebooksofaccountsbytheAO,itwasrepliedby thesharesubscriberthattheydidnotmaintainanybooksofaccountbecausethey declaredincomeundertheprovisionofsection44ADoftheAct.Inviewofthe above,theAOopinedthatthereturnofincomehasbeenfiledbytheshare subscriberstodeviate/hidethefactstojustifytheinvestmentmadebytheminthe differentcompaniesoftheassessee.Assuch,consideringtheincomeoftheshare subscribers,theinvestmentmadebysharesubscribersinthedifferentcompanies oftheassesseecannotbejustified.Likewise,theassesseedidnotfurnishthe bankstatementofthesharesubscriberwhichwerearrangedbytheAObyissuing anoticetothebank.Onperusalofthebankstatements,itwasdiscoveredthatall thebankaccountwereopenedinsamebranchofthebank“Indianoverseas”, ManekCentre,Jamnagarintheyear2011.Therewasonlysingleintroducer namelyShriShanshankHetalDoshipartneroftheCAfirmDoshiMaruand AssociateswhowasalsotheDirectorintheassesseecompany.Thecontact numberinthebankaccountwasmentionedoftheCAoffice.Furthermore,theCA officewasinthesamebuildingwherethebranchofthebankwasoperating.In viewoftheabove,theAOconcludedthatcreditworthinessoftheshare subscribershasnotbeenjustifiedbasedonthedocumentaryevidence. 13.4TheAOaboutgenuinenessofthetransactionobservedthattherewasno transferofmoneyfromthebankaccountofthesharesubscriber.Assuchthe moneywastransferredtothebankaccountoftheassesseefromthebank accountofM/sMagnumlimitedinwhichShriShashankH.DoshiisDirector.The bankaccountofMagnumlimitedwascreditedfromthebankaccountof7parties whowereoperatingtheiraccountfromthesamebanknamelyVardhmanCo- operativeBank,ChandiBazar,Jamnagar.Allthebankaccountsofthe7parties exceptM/sAdarshSalesCorporationwereopenedinthemonthofJanuary2011 ITAnos.315-317/Rjt/2017 Asstt.Year2012-13 8 whereasthebankaccountofM/sAdarshSalesCorporationinJune2012.There wassingleintroducernamelyShiVijayK.Ghalia.Likewise,thephonenumberin thebankaccountofallthe7partiesbelongedtotheCAfirmShashankHetal Doshi.Therewerecashdepositsinthebankaccountof7partiesimmediately afteropeningaggregatingtoRs.2to5lacswhichwasimmediatelytransferredto MagnumLimited.Afterverificationofthecashdepositslip,itwasfoundoutthat thecashwasdepositedinthebankaccountof7partiesbythesinglepersonas evidentfromthedepositslip.Onverificationofthe7parties,itwasfoundthat5 personsoutof7personsonlyhavefiledthereturnofincomebelowthetaxable limit.Thenoticeswereissuedtoallthe7personsu/s131oftheAct,butnone appearedexceptShriVijayKeshavjiGalayaproprietorofM/sAdarshSales Corporationwhodeniedhavinggivenanymoneytotheassessee.Eventhe assesseedidnotavailopportunityofcrossverification.Inviewoftheabove,the AOwasofviewthatthegenuinenessofthesharesubscriberscannotbeverified. Inviewoftheabove,afinalshowcausenoticewasissuedbytheAOdated 28/03/2015proposingtomaketheadditionofthesharecapitalreceivedbyitu/s 68oftheAct,withthedirectiontomakeareplydated26/03/2015.Theassessee madereplyinresponsetosuchnoticedated31/03/2015butwithoutfurnishing anynewdetails.Itwassubmittedbytheassesseethatithasfurnishednecessary documentssuchasPAN,confirmationofITRinsupportofthetransaction.Thus, theonus-imposedu/s68wasdischarged.However,theAOwasnotsatisfiedwith thesubmissionmadebytheassesseeandobservedthattheassesseewasgiven enoughopportunitiestomakethenecessaryreply,buthefailedtodoso.TheAO alsoobservedthatintheabsenceofnecessarydetailsandexplanationbythe assesseeandinthelightofthefactstatedabove,treatedsharecapitalamounting toRs.1,85,00,000/-unexplainedcashcreditu/s68oftheActandaddedtothe totalincomeoftheassessee. 14.AggrievedassesseepreferredanappealtotheLd.CIT(A). ITAnos.315-317/Rjt/2017 Asstt.Year2012-13 9 15.TheassesseebeforetheLd.CIT(A),submittedthatthesharesubscribers wereintroducedtoitbytheinvestorwhohavemadetheirinvestmentconsidering theprofileoftheassessee.TheopportunityofcrossexaminationofShriVijayK. Ghaliawasnotavailedastherewasnotransactionbetweenassesseeandsuch party.Theassesseealsosubmittedthatinmostofthecasestherewere assessmentsmadeu/s147oftheAct,whereinthegenuinenessofinvestmentby suchsubscriberswereacceptedasgenuine. 16.OnappealLd.CIT(A),afterconsideringthesubmissionoftheassessee deletedtheadditionmadebytheAObyobservingasunder: 6.3Thusfromtheaboveitcanbeseenthat,allthesubscribersofthesharesarein existence,residinginthetown,andhaveconfirmedthetransactionsdulysupportedby supportingdocumentswhichincludestheiridentityproof,returnofincomeandbanking details.Thus,theprimeconditionslaiddowninsection68standdischarged.Asregards thedepositingthecashinrespectivebankaccountandthenimmediatelytransferringthe sametotheappellant'saccount,theonusliesonthesubscribertosatisfactorilyexplainthe same.Thisisparticularlysobecause,theAOhimselfhadproceededtoreopensomeofthe cases.TheAOisalsonotclearastowhetherthecashbelongedtotheDirectorofthe companyortheinvestors.TheAOalsoconfirmsthatalltheshareholdersareassessedtax andthetransactionsarethroughbankingchannel.Hon'bleDelhihighCourtinCITvs. TulipFinanceLtd[2009]178TAX182whiledeletingtheadditionmadeu/s68inrespectof sharecapitalreceived,hadheldthattheassesseehasdischargedtheonuswhichlayupon it,ofestablishingidentityofshareholdersaswellasgenuinenessoftransactions.TheAO didraisesomedoubtsandsuspicionsontheintroductionofsharecapital,buthehasnot beenabletotakesuchdoubtandsuspiciontofurtherstagebyanycorroborativefinding. ThejurisdictionalHighCourtinthecaseofcloselyheldcompany,HindustanInks&Resins Ltd,60DTR18hasheldthatoncetheidentityofthesubscriberisproved,noadditioncan bemadeinthehandsiftherecipientcompany.Thusdecisionisbindingprecedent. 6.4TheHon.GujaratHighCourthadheldinanothercasethat,whenfullparticulars, inclusiveoftheConfirmationwithName,addressand,PANNumber,CopyofIncomeTax Return,BalanceSheet,ProfitandLossAccountsandComputationofTotalIncomeIn respectofalltheCreditors/Lenderswerefurnishedandwhenithasbeenfoundthatthe loanswerereceivedthoughcheques/BankingChannelsandtheloanaccountswereduly reflectedinthebalanceSheet,TheAOwasnotjustifiedinmakingadditiononaccountof CashCreditu/s68oftheIncomeTaxAct,1961(A.Y.2007-08).CITVa.ApexTerm Packaging(P)Ltd.(2014)222Taxman125(Mag).TheHon.DelhiHighCourtintheCase ofCIT.ExpoGlobeIndiaLtd.(2014)361ITR147(DelhiHighCourt)hadheldthatwhere theassesseehadfurnishedmaterialwhichincludeIncomeTaxReturns,BalanceSheet, RegistrarofCompaniesParticulars,BankAccountsStatements,onthebasisofthesethe Commissioner(Appeals)heldthattheshareapplicationmoneyorthesourceoftheShare Applicationmoneyhadbeen)satisfactorilyexplained.TheTribunalwasoftheOpinionthat noInterferencewaswarrantedhavingregardtothefactsoftheCase.Thiswasapure findingoftheFactofSec.68wasnotapplicable.TheHon.DelhiHighCourtintheCaseof CITVs.KansalFinCapLtd.(2014)221Taxman151(Mag.)(DelhiHighCourt)heldthat, ITAnos.315-317/Rjt/2017 Asstt.Year2012-13 10 noadditionshallbemadeinthehandsoftheassesseeweretransactionsrelatedtothe receiptofshareapplicationmoneyaregenuineandarefullrecordedbytheShare Applicants.TheAssesseehadreceivedshareapplicationsmoneyfrom11different, companies.TheA.O.madeadditiononthegroundthattheassesseecouldnotdischarge theonusandprovethegenuinenessoftheReceipt.TheFirstappellateauthorityobserved thattheassesseehadproducedvariousdocumentsinsupportoftheshareapplication moneyreceived.TheTribunalrestoredthemattertotheA.O.TheHighCourtupheld Tribunal'sOrderclarifyingthattheAOshouldobjectivelyexaminethewholeissueandin casehefoundthatthetransactionsweregenuineandfullyrecordedbytheshare applicants,noadditionwouldbemadeinthehandsoftherespondentassessee.Inother words,twoconditionshastobesatisfied,Firstthetransactionsshouldbegenuine,true andnotacamouflaged,andsecondlythetransactionsshouldbedulyrecordedinthe BooksoftheShareApplicants.TheHon.AllahabadHighCourtintheCaseofCITVs.Som TobaccoIndiaLtd(2014)222Taxman58(Mag.)hadheldthat,whereassesseeproduced names,addressesandPANOfdepositorswhichweresufficienttoprovetheiridentityand creditworthinessitwasnotjustifiedinmakingadditiona/68inrespectofamountin question.TheA.O.foundthattheAssesseehadreflectedamountinthebalancesheet underthehead"ShareApplicationMoneyPendingAllotment"ason31.03.2005.During theAssessmentproceedingstheassesseecouldnotfileconfirmationsofshareapplications andthereforeadditionoftheentireamountwasmadeinthehandsoftheassessee.The CIT(A)dismissedtheappealconfirmingthefindingsoftheA.O.shareapplicationsmoney haddepositedthecashintheirrespectivebankaccountschequebeforechequesInthe nameoftheassesseeforshareallotment.TheHighCourtobservedthattheA.O.made theadditionforthereasonthattheassesseedidnotfileconfirmationfromtheshare applicants.However,hedidnotdoubteithertheidentityorthecreditworthinessofthe shareapplicantsbecausenosuchdiscussionhasbeenmadeintheassessmentOrder.The explanationoftheassesseeasregardtotheInabilityinfillingtheconfirmationbeforethe assessingofficerwasthatsufficienttimewasnotprovided.ItIsnoticedthattheLd.CIT(A) confirmedtheadditionforthereasonthatthecreditworthinesswasnotproved.HighCourt heldthat,theassesseehaddischargedtheonusbyfurnishingthename,addressand PermanenteAccountNumberoftheShareApplicantsandiftheAOwashavinganydoubt hecouldhaveIssuedtheSummonstothepersonswhowereclaimedtobeassessedto IncometaxandwerehavingPermanentAccountNumber,"Hon'bleSupremeCourtinthe CaseofSaroglCreditCorporationV.CIT(1976)103ITR34(SC)heldthatifthereiscredit entryinthebooksoftheassesseeanditisnotinthenameoftheclosefamilymembersor relationbutinthenameofanyIndependentparty,theassesseeisonlyrequiredtogive theIdentityofthatparttotheAO.Oncetheidentityofathirdpartisestablishedand thereisotherevidencetoshowthatentryisnotfictitious,theinitialburdenlyingonthe assesseeshallbedeemedtobedischarged.Similarly,theHon'bleRajasthanHighCourtin theCaseofShreeBarkhaSyntheticsLtd,Va.ACIT(2006)15Taxman289(Raj.)heldthat oncetheassesseehasdischargeditsburdenregardingtheIdentityofthepersons, genuinenessoftheTransactionandcapacityofthepersoninvestinginthesharecapitalby furnishingconfirmationofaccounts,shareapplicationsmadebytheInvestors,bank statementsofsuchInvestors,CopyofReturnofIncomeforthesaidAssessmentyearand theauditedaccountsofsuchInvestorsreflectingtheInvestmentInassesseecompany duringthecourseofassessmentProceedings.Itwasfurthersubmittedthattheamounts werereceivedasshareapplicationfromInvestorsthoughbakingchannels,andthe assesseewasrequiredtoproveexistenceoftheperson,inwhosename,theshare applicationwasreceived.OncetheexistenceoftheInvestorisproved,itisnotfurtherthe burdenoftheassesseetoprovewhetherthatpersonitselfhasInvestedthesaidmoneyor someotherpersonshasmadeInvestmentinthenameofthatperson.TheBurdenthen shiftsontotheRevenuetoestablishthatsuchInvestmenthascomefromtheassessee- companyitself.Oncethereceiptoftheconfirmationletterfromthecreditorisprovedand theIdentityandtheexistenceoftheInvestorhasnotbeendisputed,noadditionon accountofshareapplicationmoneyinthenameofsuchInvestorcanbemadeinthe ITAnos.315-317/Rjt/2017 Asstt.Year2012-13 11 assesseehand.Needlesstosay,theSpecialleavepetitionoftheDepartmentinthecaseof LovelyExportshasbeendismissedbytheSupremeCourt319ITR(St.)5observingthat, "CantheamountofsharemoneyberegardedasundisclosedIncomeundersection68of theIncomeTaxAct,19617Wefindnomeritinthisspecialleavepetitionforthesimple. reasonsthatiftheshareapplicationmoneyreceivedbytheassesseecompanyfromallege bogusshareholders,whosenamesaregiventotheAssessingOfficer,thenthedepartment isfreetoproceedtoreopentheirIndividualassessmentInaccordancewithlaw.Hencewe findnoinfirmitywiththeImpugnedJudgment".TheHonourableHighCourtofDelhiInCIT vs.SamirBioTech(Pvt)Ltd.InITA415/2008heldthatwhenIdentitiesofthesubscribers arenotindoubtandcreditworthinesshasbeenestablishedspeciallysubscribersgivetheir confirmationsabouttheInvestmentsofcapitalinthecompany.theDepartmentcouldnot drawanadverseInferenceagainsttheassesseeonlybecausethesubscribersdidnot Initiallyrespondtosummons.TheSubscribers,however,subsequentlygavetheir confirmationsoflettersaswouldbeapparentfromassessmentorder.Itisinthese circumstancesfollowingthedecisionofthiscourtinDivineLeasingandFinanceLtd, deletedtheadditionmadebytheAuthorities. 6.5Inthelightoftheabovefacts,Ifindthattheappellanthassufficientlydischarged theonustoexplainthesharecapitalreceivedbyit,andthecaseoftheappellantis squarelycoveredbythedecisionoftheHon'bleSupremeCourtinthecaseofLovely ExportsPvt.Ltd.Inviewoftheabove,itisheldthatnoadditiononaccountofshare capitalwithinthemeaningofsection68canbemadeinthehandsoftheappellant.The additionofRs.1,85,00,000/-isthereforedirectedtobedeleted.Theappealonthisground isthereforeallowed. 17.BeingaggrievedbytheorderoftheLd.CIT(A),theRevenueisinappeal beforeus. 18.TheLd.DRbeforeusreiteratedthecontentionsmadebytheAOinhis order.OnthecontrarytheLd.ARbeforeusfiledapaperbookrunningfrompages 1to118andsubmittedthatthesharesubscribersarestillholdingsharesinthe assessee’scompany.AccordingtotheLd.AR,hadthisbeingabogustransaction thenthepartywhohaveacquiredthesharesmusthaveexitedfromthecompany aftermakingsaleofshares. 19.TheLd.ARalsosubmittedthattherevenueinthecasesofothercompanies namelyCCSInvestmentandShahMaruConstructionPvt.Ltd.acceptedidentical transactionsonsharecapitalreceivedfromthesocalled17personsasgenuine whichevidencecontradictorystandoftherevenue.Accordingly,noadditionis warrantedonthiscountalone.TheLd.ARalsosubmittedthatnecessarydetails withrespecttosharesubscribershasfurnishedduringtheassessment ITAnos.315-317/Rjt/2017 Asstt.Year2012-13 12 proceedingswhichareavailableonpages34to114ofthepaperbook.TheLd.AR alsosubmittedinmostofthecasesofsharesubscribersthegenuinenessofthe transactionwasadmittedintheproceedingsu/s147oftheAct.Accordingly,no additioncanbemade. 20.BoththeLd.ARandtheLd.DRvehementlysupportedtheorderofthe authoritiesbelowasfavourabletothem. 21.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.TheAOinthepresentcasehastreatedtheshare applicationmoneyalongwiththepremiumreceivedbytheassesseeas unexplainedcashcreditundersection68oftheAct.TheAOinholdingsohas pointedoutnumerousinfirmitieswithrespecttothesharessubscriberswhich havebeendetailedintheprecedingparagraphandthesameisveryglaring. KeepingasidetheglaringmistakeshighlightedbytheAO,whatcrucialfacts requirestobehighlightedarethattheAOinhisorderhasclearlyobservedthat thesharessubscribershavemadeinvestmentsin5companiesasdetailedbelow: 1.ParasBuidlconPvtLtd.(presentassessee) 2.HPChemicalsPvtLtd. 3.FCPharmaceuticalsPvtLtd. 4.CCSInvestment 5.ShahMaruConstructionPvtLtd. 21.1However,whatwefindthattherewerenoproceedingsinitiatedbythe revenueagainstthecompaniesnamelyCCSInvestment(noassessmentfromA.Y. 2008-09to2022-23)andM/sShahMaruConstructionPvtLtd.despitehaving knownaboutthefactthatthetransactionsinvolvedinthecaseofthesetwo companiesareidenticaltothepresentcaseoftheassessee.Thus,itappearsthat therevenuehasacceptedthetransactionasgenuineinthecaseofthecompanies namelyCCSInvestmentandShahMaruConstructionPvtLtd.whereasthe revenuehastreatedtheidenticaltransactionwiththeassesseeonhandas ITAnos.315-317/Rjt/2017 Asstt.Year2012-13 13 unexplainedcashcreditundersection68oftheAct.Toourknowledge,the revenuehastakenthecontrarystanddespitehavingthefullknowledgeaboutthe factsofthecaseasdiscussedabove.Accordingtoourunderstanding,itisnot expectedfromtherevenuetotakedifferentstandinthehandsofdifferent assesseeinvolvingidenticalfactsandcircumstanceswhichwerenotprivytothe Department. 21.2TheHon’bleDelhiHighCourtinthecaseofCITVs.MuthootM.George Bankersreportedin159taxman22hasobservedasunder: 7.ThisCourthastimeandagaintakentheviewthattheremustbesomeconsistencyin thestandoftherevenueandtheycannotpickandchoosecasesinwhichtofileanappeal inrespectofsomeassesseeandnottofileanappealinrespectofidenticalordersin respectofanotherassessee.ThisviewhasalsobeenexpressedbytheSupremeCourton severaloccasionsanddespitethatwefindthattherevenueinsistsupontakingsuch arbitrarydecisionsforwhichthereisnoiotaofjustification.Iftherevenueputsforward somereasonforitsdifferentialtreatment,thatwill,ofcourse,beconsideredonmeritsbut inthisparticularcasethereisnosuchreasonexcepttosaythereisnores judicataorestoppel.Theruleofconsistencymustbefollowedbytherevenue,whichthey havefailedtodointhisparticularcase. 21.3Thefactsofthecaseintheabovejudgementaredifferentfromthefactsof thecaseonhandbutasfarastheprinciplesareconcerned,theyaresamei.e. Departmentshouldnottakethecontrarystandincaseofdifferentassessee involvingidenticaltransaction. 21.4Inadditiontotheabove,wenotethatthedepartmentinmanyofthecases ofthesharessubscriberswhichweretakenunderscrutinyundersection147of theActhasacceptedthemasgenuineinvestors.Insimplewords,noadditionof whatsoeverwasmadeevenonprotective/substantivebasisinthehandsofthem knowingfullywellthatthosesharessubscribersfailedtodischargeonusinthe caseoftheassessee.Fromthisobservation,itagainappearsthattherewasa contrarystandtakenbytheRevenuefortheassesseevizaviztheshares subscribers. ITAnos.315-317/Rjt/2017 Asstt.Year2012-13 14 21.5Atthisjuncture,itisimportanttonotethattheappealrelatestothe assessmentyear2012-13whereastheamendmentunderprovisionsofsection68 oftheActbyaddingtheprovisotosection68oftheAct,requiringtheassesseeto justifythesourceofsourceinthecaseofcreditofshareapplicationmoneyin privatelimitedcompanieswasbroughtbutthesameisapplicableeffectivefrom theassessmentyear20013-14asheldbytheHon’bleBombayHighCourtinthe caseofCITvs.GagandeepInfrastructurePvtLtd.Reportedin80taxmann.com 272.Accordingly,theamendedprovisionscannotbemadeapplicabletotheyear indispute. 21.6Thus,inviewoftheaboveandafterconsideringthefactsintotality,wedo notfindreasontointerfereinthefindingofthelearnedCIT(A).Hencetheground ofappealraisedbytheRevenueisherebydismissed. ComingtoITANos.316-317/Rjt/2017,A.Y.2012-13anappealbythe revenueinthecaseofM/s.H.PChemicalsPvt.Ltd.AndM/s.F.C Pharmaceuticals,Jamngar 22.Attheoutset,wenotethatissuesraisedbytherevenueinitsgroundsof appealaresimilartothegroundsraisedbytherevenueinthecaseofM/sParas BuildconPvt.LtdinITANo.315/Rjt/2017forAY2012-13.Therefore,the findingsgiveninITANo.351/Rjt/2017forA.Y.2012-13shallalsobeapplicableto thepresenttwoappealsbearingITANos.316-317/Rjt/2017forA.Y.2012-13.The appealoftherevenuebearingITANo.315/Rjt/2017forA.Y.2012-13inthecase ofM/sParasBuildconP.LtdhasbeendecidedbyusvideparagraphNos.10and 21ofthisorderinfavouroftheassesseeandagainstrevenue.ThelearnedAR andtheDRalsoagreedthatwhateverwillbethefindingsforissuesraisedinITA No.315/Rjt/2017forA.Y.2012-13shallalsobeappliedtotheothertwoappeals mentioned.Hence,thegroundsofappealfiledbytherevenuearedismissed. ITAnos.315-317/Rjt/2017 Asstt.Year2012-13 15 23.Intheresult,theappealsoftherevenuearedismissed. 24.Intheresult,allthethreeappealsfiledbytherevenuearedismissed. OrderpronouncedintheCourton13/09/2023atAhmedabad. Sd/-Sd/- (T.RSENTHILKUMAR)(WASEEMAHMED) JUDICIALMEMBERACCOUNTANTMEMBER (TrueCopy) Ahmedabad;Dated 13/09/2023 Manish