AI Insights
The case involves the Income Tax Officer, Ward-13(4), New Delhi as the appellant and M/s Om Shiva Traders Pvt. Ltd. as the respondent. The primary issue revolves around the addition of Rs.3,00,00,000 made under Section 68 of the Income Tax Act, 1961, concerning undisclosed income introduced as share capital/share premium from certain companies identified as entry operators. The Assessing Officer (AO) was not satisfied with the documents provided by the assessee to prove the identity, genuineness, and creditworthiness of the shareholders, leading to the addition. The CIT(A) deleted this addition, which was contested by the Revenue in the Tribunal.
Appeal Details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 131801 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
11 year(s) 8 month(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
28-02-2023
Appeal Filed By
Department
Order Result
Allowed
Bench Allotted
E
Next Hearing Date
04-12-2022
Assessment Year
2008-2009
Appeal Filed On
28-06-2011
Judgement Text
THE INCOME TAX APPELLATE TRIBUNAL DELHIBENCH ‘E’, NEW DELHI Before Dr. B. R. R. Kumar, Accountant Member Sh. Yogesh Kumar US, Judicial Member ITA No. 3374/Del/2011 : Asstt. Year : 2008-09 Income Tax Officer, Ward-13(4), New Delhi Vs M/s Om Shiva Traders Pvt. Ltd., G-10, Thaper Chamber-II, Maharani Bagh, Ring Road, New Delhi-14 Communication Address: Through Sh. Hari Shankar Agarwal (Director), 10-Nehru Nagar, Agra-282002 (APPELLANT) (RESPONDENT) PAN No. AAACO8748C Assessee by : Dr. Rakesh Gupta, Adv. Revenue by : Ms. Sarita Kumari, CIT DR Date of Hearing: 05.12.2022 Date of Pronouncement: 01.03.2023 ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeal has been filed by the Revenue against the order of ld. CIT(A)-XVI, New Delhi dated 31.03.2011. 2. Following grounds have been raised by the Revenue: “1. On the facts and circumstances of the case and in law the Ld. CIT(A) erred in deleting the addition of Rs.3,00,00,000/- made by the A.O. u/s 68 of the I.T. Act, 1961 on account of undisclosed income which has been introduced in the garb of share capital/share premium from M/s Bhavani Portfolio Pvt. Ltd. and M/s Thar Steels P. Ltd., entry operator companies, being operated by Shri Tarun Goyal, an entry operator identified by the Investigation Wing of the Department. Ld. CIT(A) has not appreciated the fact ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 2 that the assessee has failed to establish the physical identity and creditworthiness of concerned parties and genuineness of transactions in terms of section 68 of the Income-tax Act, 1961. 2. That on the facts and circumstances of the case and in law the Ld. CIT(A) erred in ignoring the fact that the judgment of the Hon’ble Supreme Court in the case of Lovely Exports (P) Ltd. 216 CTR 199 (SC) cannot be extended to a situation where a mechanism has been formed to introduce unaccounted money in the books of accounts with the help of accommodation entry providers which has been exposed by deep and detailed investigation carried out by the Investigation Wing of the Department. Moreover, the facts in the present case are distinguishable from the above cited case in so far as that the assessee could not produce any of the principal officers/directors of companies for examination whereas in the case cited above the A.O. never asked the assessee company to produce any of the share applicants for cross examination. 3. That on the facts and circumstances of the case and in law the Ld. CIT(A) erred in ignoring the fact that the directors of the share applicant companies were the employees of Sh. Tarun Goyal, who worked in his office as peons, receptionists etc. These facts were revealed during the search proceedings made on 15.09.2008, which was also admitted by Sh. Tarun Goyal that he provided accommodation entries and his various companies were used for this purpose.” Facts taken from the order of the ld. CIT(A) 3. The assessee filed return of income on 16.09.2008 declaring income of Rs.11,540/-. The case was selected for scrutiny after getting the approval of CCIT, Delhi-V and first notice u/s 143(2) of the Income Tax Act, 1961 dated 25.09.2009 was issued and duly served upon the assessee. ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 3 Undisclosed Income: 4. The assessee during the year received share capital and share application money from the following companies: Name Amount M/s Bhavani Portfolio Pvt. Ltd. 2,00,00,000 Thar Steels Pvt. Ltd. 1,00,00,000 Total 3,00,00,000 5. During the course of assessment proceedings, the AO asked the assessee to prove identity, genuineness and creditworthiness of the above said companies. In response, the assessee filed confirmations with the copies of the bank statements of all entities. 6. The assessing officer was not satisfied as in his opinion the aforesaid details were not enough to discharge the onus on the assessee. As per the assessing officer, the addresses of the alleged shareholders were same as the address where a search operation under section 132 of the Income Tax Act conducted by the Investigation Wing of the Income Tax Department. 7. In view of this the transaction was prima facie under doubt and accordingly the A.O. felt that it was the duty of the appellant to discharge its onus more convincingly so that genuineness of the transaction claimed could be proved without any doubt. Accordingly, the Assessing Officer asked the appellant to file further information which was submitted by the appellant vide its letter dated 23.12.2010. The Assessing Officer was not satisfied and accordingly asked the assessee company to produce the directors of the shareholder companies. On ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 4 failure of the appellant to produce the directors of the shareholder companies the Assessing Officer held that the appellant had failed to prove all the three ingredients of Section 68 i.e. identity, creditworthiness and genuineness and made addition of Rs.3,00,00,000/-. 8. The authorized representative filed a detailed submission before the ld. CIT(A) which is as under: “During the year under consideration the appellant received an amount of Rs.3,00,00,000/- on account of Share Application Money. Out of the same an amount of Rs. 50,00,000/- was received on account of share capital and Rs. 2,50,00,000/- on account of share premium. The Id. AO had some doubts with respect to the genuineness of the said transactions of the appellant with M/s Bhawani Portfolio Pvt. Ltd. & M/s Thar Steels Pvt. Ltd. In order to satisfy the Id. AO and in order to prove the genuineness of the said transactions the appellant produced share application forms, confirmations, affidavits, balance sheets, PAN details etc. related to various parties, before him. The Id. AO disbelieving the explanations filed by the appellant with respect to the said parties added the amount received from them to the gross total income of the appellant by invoking the provisions of section 68 of the Act by stating that the appellant could not establish the genuineness of the transactions. The addition has been made by the AO on account of following parties:- ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 5 Name Amount M/s Bhavani Portfolio Pvt. Ltd. 2,00,00,000 Thar Steels Pvt. Ltd. 1,00,00,000 Total 3,00,00,000 In order to prove the genuineness of the transaction and to establish the identity and creditworthiness of the parties from whom the appellant had received share capital/application money the appellant produced various details before the Id. AO vide its various letters. Now the question before your honour is that whether on the basis of material produced before the Id. A.O., which has also been placed on record in the form of paper book before you, the appellant was able to discharge its onus to prove the transactions to be genuine. Your honour will appreciate that the appellant had produced the following details with regard to every transaction related to the receipt of share capital/application money. i. The copy of ledger account of share application in the books of assessee. ii. The copy of bank statement of the account in which the money was received. iii. Copy of ledger account of share capital i.e. in which the money was transferred after allotment. iv. Copy of Balance Sheet and Profit & Loss A/c depicting the same. v. Copy of complete list of share holders i.e. old as well as new. vi. Share application forms received from all parties. ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 6 vii. Copy of Form No. 2 i.e. return of allotment filed before the Registrar of Companies. viii. Copy of Annual Return filed before the Registrar Of Companies. The assessee has also obtained the following documents from the concerned parties to prove their identity and genuineness of the transactions which was submitted before the Id. AO. a. Acknowledgements of Returns of Income. b. Balance sheets & Profit and Loss A/cs c. Affidavits from the Directors along with confirmations d. PAN Details e. Copy of Board Resolutions passed at their Board Meetings f. Copy of PAN cards g. Confirmations from the parties h. Copies of share application forms i. Copies of bank statements of the said parties j. Confirmation of receipt of shares k. Copies of Memorandum and Articles of Association l. CIN details Copies of all these documents assessee wise are enclosed in the paper book for your kind perusal. Your honour it is important to state here that the Id. AO in his order has also agreed to the submission of above stated documents. He in his order has stated as under: “Vide letter dated 23-12-2010 he filed the following documents:- ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 7 a. Photocopy of PAN of assessee company b. Copy of the Memorandum and Article of Association of the assessee company c. Copy of return of the assessee company for the A Y 2008-2009 d. Copy of Share capital account in assessee’s books e. Copy of Form 2 dated 1-2-2008 and 31-3-2008 f. Copy of Annual return of the assessee company as per Company Act g. List of shareholders of the assessee company as on 31- 3-2008 h. Details of increase in capital claimed to have been increased during the year i. Copy of bank statement of the assessee company j. In respect of Bhavani Portfolio P Ltd:- Copy of ack. Of AY 2009-10 return, copy of annual return 2008, Auditors report as on 31-3-2007, copy of undated and unsigned share application form, Photo-copy of undated confirmation, affidavit, resolution signed by Ritu Saxena who admitted that she is only signing the papers etc. on the direction of Tarun Goyal, an entry operator and copy of bank statement and copy of cheques k. In respect of Thar Steels P Ltd.:- copy of PAN, certificate of incorporation, M/A and A/A, Annual report 2008, Auditors report as on 31-3-2007, Photo-copy of undated confirmation, affidavit, resolution, bank statement and cheque. Besides the aforesaid details the assessee company has taken the plea on the following case laws:- ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 8 I. CIT V/s Stellar Investment Ltd. (2001) 251ITR 263 (SC) II. CIT V/s Sophia Finance Ltd. (1993) 205 ITR 98 (Del) (FB) III. CIT V/s Achal Investments Ltd. (2004) 268 ITR 211 (Del) IV. CIT V/s Lovely Exports P Ltd. (2008) 216 ITR 195 (SC) V. CIT V/s Value Capital Services P Ltd. 207 ITR 334 VI. CIT V/s Dwarkadhish Investment P Ltd. ITA 911/2010 and ITA 913/2010” Thus your honour the Id. AO by writing as stated above has confirmed the filing of the documents as stated by the appellant. Your honour after having got the above mentioned details, the Id. AO was still not satisfied. It is beyond the imagination of the appellant, what more could have satisfied the Id. AO if not, the details already produced before him. Your honour will endorse that to prove the genuineness of any transaction to detach it from the scope of section 68 of the Act it is necessary to prove the identity & creditworthiness of creditor and the genuineness of the transaction. Considering various developments in recent past with regard to share application/ capital money received it has been specifically held by the Hon’ble Supreme Court that if any assessee has been able to prove the identity of the contributor it shall be deemed to have discharged its onus to detach the transaction from the purview of section 68 of the Act. In this regard your honours attention is drawn to the decision in the case of CIT vs. Lovely Exports Pvt. Ltd. [2008] 216 CTR 195 (SC) where it has been specifically stated: “Can the amount of share money be regarded as undisclosed income under s. 68 of ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 9 IT Act, 1961 ? We find no merit in this Special Leave Petition for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment.” Your honour it is essential to state here that the assessee filed following details to establish the identity of its share applicants: a. Acknowledgements of Returns of Income. b. Balance sheets & Profit and Loss A/cs c. Affidavits from the Directors along with confirmation d. PAN Details e. Copies of Board Resolutions passed at their Board Meetings f. Copies of PAN cards g. Confirmations from the parties h. Copies of share application forms i. Copies of bank statements of the said parties j. Confirmations of receipt of shares k. Copies of Memorandum and Articles of Association l. CIN details Your honour will also endorse that by filing confirmations, bank statements & proof of filling income tax return, the appellant has duly discharged his onus of proving the identity, genuineness and credit worthiness of the share applicants. The case of the appellant is also squarely covered by the judgement of the Apex Court in the case of Commissioner of Income Tax ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 10 vs. Steller Investment Ltd. (2001) 251 ITR 263 (SC), where it was held that: “Even if the subscribers to the increased share capital of assessee company were not genuine, the amount could not be regarded as undisclosed income of the assessee company; Tribunal having cancelled CTT’s order under section 263 whereby the assessment was set aside on the ground that A. O had accepted the genuineness of share capital without making enquiries, no question of law arises.” This judgement was delivered affirming the earlier judgement of Delhi High Court in the case of Commissioner of Income Tax vs. Sophia Finance Ltd. (1993) 205 ITR 98 (Del)(FB), which was referred in the case of Steller Investments (supra) as follows: “Attention is invited to the Full Bench decision of the Delhi High Court in Commissioner of Income Tax vs. Sophia Finance Ltd. vs. (1993) 113 CTR (Del)(FB) 472 : (1994) 205 ITR 98 (Del)(FB) to which matter had been referred doubting the decision in Steller Investments case and the Full Bench observed: “What is clear, however, is that section 68 clearly permits an ITO to make enquires with regard to the nature and sources of any or all the sums credited in the books of account of the company irrespective of the nomenclature of the source indicated by the assessee. In other words, the truthfulness of the assertion of the assessee regarding the nature and the source of the credit in its books of account can be gone into by the ITO. In the case of Steller Investment Ltd. the ITO had ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 11 accepted the increased subscribed share capital. Section 68 of the Act was not referred to and the observations in the said judgement cannot mean that the ITO cannot or should not go into the question as to whether the alleged shareholders are identified and it is established that they have invested money in the purchase of shares then the amount received by the company would be regarded as capital receipt and to that extent the observations in the case of Steller Investment are correct but if, on the other hand, the assessee offers no explanation at all or the explanation offered is not a satisfactory explanation, section 68 empowers the ITO to treat such a sum as income of the assessee which is liable to be taxed in the previous year in which the entry is made in the books of account of the assessee.” Relying on the above judgement of the Apex Court a recent judgement of the jurisdictional Delhi Court in the case of CIT vs Achal Investments Ltd. (204) 268 ITR 211 (Del) has passed an order which stales as under: “We are not required to examine the matter in detail as we are of the opinion that the Tribunal has allowed the appeal of the assessee following its judgement delivered in Steller Investment Ltd. (1991) 99 CTR (Del) 40 : (1991) (192 ITR 287(Del) decided on 16th April, 1991. In that case, the subscribed capital of the respondent company had been increased and the ITO accepted the increase and assessed the company. The CIT, in revision, set aside the order of assessment, being of the view that there had been a device of converting black money into white by issuing shares with the help of formation of an investment company, and that the A.O. did not make any enquires with ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 12 regard to the genuineness of the subscribers to the share capital. While confirming the decision of the Tribunal, the Division Bench held as under: ‘It is evident that even if it be assumed that the subscribers to the increased share capital were not genuine, nevertheless, under no circumstances, can the amount of share capital be regarded as undisclosed income of the assessee. It may be that there are some bogus shareholders in whose names shares had been issued and the money may have been provided by some other persons. If the assessment of the persons who are alleged to have really advanced the money is sought to be reopened, that would have made some sense but we fail to understand as to how this amount of increased share capital can be assessed in the hands of the company itself.’ The ratio of all the above judgments is that even if the A.O. could not verify the identity, credit worthiness & genuineness of the above applicants, no addition in the hands of the company could be made. However, in the present case as the assessee has discharged its primary onus of proving the identity, genuineness & credit worthiness of the share applicants, no addition can be made on the basis of material collected at the back of the assessee. Your honour will endorse that in the present case the assessee has discharged its liability by producing all material which it could do to discharge its onus. Now the Id. AO without appreciating the material produced by the assessee and on the basis of his whims and fancies reached a conclusion that the money received from M/s Bhawani Portfolio Pvt. Ltd. & M/s Thar ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 13 Steels Pvt. Ltd. was assessee’s own money. The appellant is unable to understand that how can an addition be made in its hand without there being any evidence against it. Your honour it is surprising to see that the Id. AO has formed his belief without even realizing that he did not have a single fact against the assessee. Had that been the same it would have formed part of the order passed by him. He has not stated what special information did he receive, what was the investigation made by the investigation wing, on what basis the investigation wing included the name of the appellant in its report (if any), what was the allegation against the assessee, what was the source of information based on which an inquiry was made, if there was any statement recorded who was that person, why was his statement recorded, why was he trusted, was he the director of the company on who’s behalf he passed a statement, whether he took the name of the assessee company and claimed that he had done some business with it, whether any opportunity was given to the assessee to cross examine that person, what was the source which led to a conclusion that the money deposited in accounts of some other entities emanated from the coffers of the appellant. All these questions remain unanswered and thus invalidate the allegations of the assessing officer and thus make the addition void ab-initio. Your honour the Id. AO has written a long story stating that there was one person Mr. Tarun Goyal who was running various companies from his premises and indulged in providing accommodation entries. The assessing officer has written a long story and each and every whereabouts of that person. At one stage these findings of the Id. AG clearly establish the identity ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 14 of the said person whereas on the other hand he states that the assessee has not been able to prove the identity of the share applicant. Further the AO has not been able to prove that the money which came to the assessee emanated from its own coffers. Your honour all the material used by the assessing officer has been collected at the back of the assessee and the assessee has never been confronted with the same. Your honour the Id. AO during the course of assessment proceedings had raised various queries regarding the genuineness of transaction done by the assessee. He has also challenged the quantum of premium received. In this respect at first it is to mention that the amount of premium is the sole discretion of the investor. A company which issues shares at a premium does so based on its future potential. It is important to mention here that M/s Reliance Power brought its public issue few years back at a premium of Rs.990/- whereas its share is in a real bad shape and has not yet started any business activity. Thus charging and paying of premium is best blown to the investor and assessing officer as an outside authority cannot comment on the genuineness of the same. Further to prove the genuineness of the transaction the appellant produced following documents before the Id. AO: i. The copy of ledger account of share application in the books of assessee. ii. The copy of bank statement of the account in which the money was received. iii. Copy of ledger account of share capital i.e. in which the money was transferred after allotment. ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 15 iv. Copy of Balance Sheets and Profit & Loss A/cs depicting the same. v. Copy of complete list of share holders i.e. old as well as new. vi. Share application forms received from all parties. vii. Copy of Form No. 2 i.e. return of allotment filed before the Registrar of Companies viii. viii Copy of Annual Return filed before the Registrar Of Companies Your honour will endorse that in order to make any addition under the provisions of section 68 of the Act if the assessee has discharged its preliminary onus of proving any transaction being genuine the onus shifts upon the revenue to prove that the particulars with regard to any transaction which he doubts are not duly furnished or precisely the exact finding what made him believe which forced him to take an adverse action against the assessee. With regard to share capital/ application money received if the assessee has disclosed all particulars like identity, creditworthiness and genuineness of the transaction it is the duty of the Id. AO to support his disbelief against various claims made by the assessee by giving some finding against it. The Id. AO has to conduct some inquiry to support his claim with regard to a transaction being ingenuine if names/'addresses/PAN details/income tax returns of various creditors have been produced before him. In case the assessee is not able to produce any of the creditors it becomes duty for Id. AO to issue notices u/s 131 of the Act and call the ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 16 concerned parties for examination before taking any adverse inference against the assessee. In the appellant’s case, the Id. AO did not bother to conduct any inquiry. He has not done inquiry with regard to the share application money received by the appellant. He has not bothered to enquire from any party about the genuineness of the transaction in spite of having every detail including PAN and other income tax details with him. Your honour in various judgments delivered by number of High Courts it has been held that after having received all details from the assessee if the assessing officer has not gone beyond issuing notices u/s 131 of the Act to the concerned parties (i.e. he has not conducted any inquiry except issuing the notices) he cannot reach a conclusion that the credits appearing in the books of the assessee are fake. In the case of the appellant the AO has though issued notices under section 131 of the Act (which were duly served) to all five share applicants but has not gone beyond that inspite of having all powers vested in him given by the Income Tax Act, 1961. In the case of CIT vs. Divine Leasing & Finance Ltd. 299 ITR 268 (Del) it has been held: “Thus, the question is whether in the present case, the AO had material to conclude that the share applicants in questions did not exist. It is seen that the assessee company has furnished the necessary details such as PAN No./Income- tax Ward No./ration card of the share applicants and some of them are assessed to tax. The share application money has been received ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 17 through banking channel. In some cases, the confirmations/affidavits of share applicants containing the above details were also filed. It is seen that the AO did not carry out any inquiry into the income tax record of the persons who have given the PAN No./Ward No. in order to ascertain the non-existence of the share applicants in question. The AO has neither controverted nor disproved the material filed by the assessee. In the case of CIT Vs. Makhni and Tyagi (P) Ltd. reported in 267 ITR 433(Del), the jurisdictional High Court has held that when the documentary evidence was placed on record to prove the identity of all the shareholders including their PAN/GIR numbers and filing of other documentary evidence in the form of ration cards etc. which had neither been controverted nor disapproved by the AO, no interference was called for. The Tribunal was justified in deleting the addition. The AO proceeded to make the impugned addition on the ground that in some cases some summons issued were returned unserved and in some case summons though served but there was no compliance. In this connection, it may be mentioned that in the case of CIT Vs. Orissa Corpn., 159 ITR 78, the Hon’ble Court has held that when the assessee borrows the loan and if an assessee gives names and address of the creditors, who are assessed to tax and full particulars is furnished then the assessee has discharged the duty. If the Revenue merely issues summons u/s 131 and does not pursue the matter further, the assessee does not become responsible for the same even if the creditors do not appear. Addition cannot be made u/s 68.” ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 18 Your honour, in the decision of the Supreme Court in C.I. T. vs. Orissa Corporation Pvt. Ltd., [1986] 159 ITR 78 (SC), it was held “In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do anything further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises.” In the case of Sumati Dayal v. CIT-Bangalore [1995J 214 ITR 801 (SC) a succinct yet complete précis on the essentials of income-tax liability can be discerned from these words, "In all cases in which a receipt is sought to be taxed as income, the burden lies on the Department to prove that it is within the taxing provision and if the receipt is in the nature of income, the burden of proving that it is not taxable because it falls within the exemption provided by the Act lies upon the ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 19 assessee. This decision is adequate authority for the proposition that by virtue of Section 68 of the IT Act the assessee is obliged to establish that amounts credited in the accounts do not represent its income; in that case the assessee's version that she had won them through betting on horse racing in two consecutive years did not attract credibility. The Apex Court had followed its earlier decision, namely, Orissa Corporation wherein it had held that since the assessee had given the names and addresses of the creditors, all of whom were income-tax assesses, the failure of the creditors to respond to the Department's notices would not justify an adverse inference being drawn against the assesses. The Court also kept in perspective the fact that the documentation had also been produced by the assessee. It is obvious that the Supreme Court considered that in these circumstances the onus of proof had been discharged by the assessee. It is also palpable that the Supreme Court was of the further opinion that the Department had not discharged the burden of proof that had shifted to it, since it did nothing more than issue notices under Section 131 of the IT Act. Therefore, the Department ought to have made efforts to pursue these notices/creditors to determine their creditworthiness. These observations sound the death-knell for the contentions raised on behalf of the Department in the present batch of Appeals.” Also your honour will appreciate that the Id. AO has given all findings just to make his case but he has no where been able to find out a single hint on the basis of which it could be proved that the money which has come to the assessee was his own ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 20 money or in legal merely the origin and source of cash credit but the origin of the origin and source of the source as well. Your honour the legally settled position is well known to everyone, which clearly states that to what extent an assessee is liable to prove the genuineness of the credits appearing in its books of accounts. It is abundantly clear that the onus upon any assessee is to prove the source of any transaction and he cannot be compelled to prove the source of the source. In the appellant’s case the appellant has proved the genuineness of the transaction by producing every document related to the source of the credits, rather it has also to a great extent proved the source of the source by enclosing various details of the parties. Your honour here is a case where the appellant has not only discharged its primary onus but has also discharged its onus beyond any doubt. As per the provision of Section 68 of the Act,, the appellant is required to offer explanation about the nature and source of the share application money to the satisfaction of the AO. The satisfaction of the AO has to be not arbitrary but on the basis of prudence. The appellant has taken share application money from M/s Bhawani Portfolio Pvt. Ltd. & M/s Thar Steels Pvt. Ltd. The said companies are existing entities and are being duly assessed to income tax (as confirmed by AO himself). It is not a case of vanishing company where the identity is in doubt and, as such, the identity of the creditor is well established. As regards creditworthiness, the fact that these companies are carrying on business is not in doubt. They are maintaining regular books of account as well as bank accounts. The money has come to the appellant from ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 21 regular bank accounts of the said companies. All these transactions are part of the regular business activity of the said companies. Both the companies have shown the name of the assessee company in the schedule of investments. The AO has got no basis to take an adverse inference. Your honour will appreciate that this adverse inference cannot be drawn by the AO from any logic. Thus the action of Id. AO in this case is void and liable to be quashed. Your honour as regards the adverse inference drawn by the AO that the assessee has failed to produce the creditor, it is submitted that the AO probably is not aware of the settled position of law on this issue. The Supreme Court in the case of CIT vs Orissa Corporation (P) Ltd., 159 ITR 78 has clearly held that in case the creditor does not appear in response to summon issued under Section 131, no adverse inference can be drawn. The AO did not do anything to call the concerned person. He shifted the burden on the assessee by asking the assessee to produce the Principal Officers. He has not issued any notice u/s 131 or 133(6). The action of the AO in not pursuing the matter when the AR appeared before him and gave all particulars of the said party clearly shows that he accepted the explanation given by the AR. Not only that, the assessee made all efforts to produce the Principal Officers and also made a request to the AO to enforce the attendance of such persons but drew adverse inference against the appellant company. In this case the AO has given a go by to all the settled principles of law and has made the addition in an arbitrary manner without there being any material even to doubt the transaction. ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 22 Your honour will endorse that it is very surprising to note that what else could the appellant have produced before the Id. A.O. to satisfy him with the genuineness of the transaction undertaken by it. It is also essential to mention here the judgment delivered by Honorable Delhi High Court in the case of CIT vs. Value Capital Services Pvt. Ltd. 307 ITR 334 wherein it was specifically held as under in the form of a very short order: “The Assessee had received an amount of Rs. 51 lakhs as share application money from 33 persons. The Assessing Officer required the Assessee to produce all these persons. It appears that some of them did appear. The Assessing Officer accepted the explanation and the statement given by three of these persons but found that the response from the others was either not available or was inadequate. On this basis, the Assessing Officer added an amount of Rs.46 lakhs pertaining to 30 of the persons to the income to the Assessee. In appeal, the Commissioner of Income Tax (Appeals) [CIT(A)j upheld the view taken by the Assessing Officer. In further appeal, the Tribunal noted that the CIT(A) had noted the fact that the Assessee had produced the income tax returns, share application forms, confirmations, PAN letters, ration cards and/or bank statements in respect of all the share applicants. The CIT (A) had accepted the existence of the applicants but did not accept the genuineness of the transaction, subject matter of the inquiry. While setting aside the order of the CIT(A), the Tribunal relied upon two decisions of this Court, namely, Commissioner of Income Tax v. Stellar Investment Ltd., [1991] 192 ITR 287 and a Full Bench decision in Commissioner of Income Tax v. Sophia ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 23 Finance Ltd., [1994] 205 ITR 98. Several other decisions have been rendered by this Court following the above two decisions. The principle that has been laid down by the various decisions rendered by this Court from time to time is that if the existence of the applicant is proved, normally no further inquiry> is necessary. Learned counsel for the Revenue submits that the creditworthiness of the applicants can nevertheless be examined by the Assessing Officer. It is quite obvious that is very difficult for the Assessee to show the creditworthiness of strangers. If the Revenue has any doubt with regard to their ability to make the investment, their returns may be re-opened by the department. In any case, what is clinching is the additional burden on the Revenue. It must show that even if the applicant does not have the means to make the investment, the investment made by the applicant actually emanated from the coffers of the Assessee so as to enable it to be treated as the undisclosed income of the Assessee. This has not been shown insofar as the present case is concerned and that has been noted by the Tribunal also. Under the circumstances, we are of the view that the Tribunal has not committed any error in deleting the addition.” Also your honour in the case of CIT vs. Divine Leasing and Finance Ltd. 299 ITR 268 it was specifically held: “the department would not be justified in drawing adverse inference only because the creditor/subscriber fails or neglects to respond to its notices.” ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 24 Also there is a direct judgment of the Hyderabad Tribunal delivered in the case of Bhagwan Das Sharda vs CIT 82 TTJ 982 where on similar facts it has been held that the lender an income tax assessee confirmed the loan but could not be produced. The addition based on non-production of lender will be unjustified because cash was deposited in the bank prior to the issue of cheque to the assessee. Your honour the Id AO has cited various judicial pronouncements in his favor. He has quoted certain observations made by various courts in those judgments. But he has failed to realize that what he has quoted has not actually been held by the courts at many places, but has been written to reach conclusion, or the same has been quoted somewhere in the judgments as mere reference. Outcomes of almost all judgments are in consonance with the facts of the case of the assessee. Your honour in this regard it is also to mention that the appellant has fully cooperated with the department. The appellant provided all details with regard to parties from whom it had accepted share application/ capital money. Your honour only issue which disturbs the assessee is that every time the Id. AO has made some finding that has been done by him on some estimates based on his own whims and fancies. The Id. AO has not been able to give a single concrete finding which could be held against the assessee in disallowing various claims made by it. Your honour will endorse that here it is not the case that the appellant did not cooperate with the department in providing various details to prove the genuineness of the transaction. The ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 25 appellant produced all possible documents before him. Having filed all the details the assessee discharged its onus of proving the transaction being genuine. Now it was the duty of the revenue to prove with some evidence that the genuineness of the transaction was not established by the assessee. But surprisingly the Id. AO did not discharge his onus properly as the same can be made out by reading the relevant portion of the assessment order hand-in-hand with the recent decision given by the Delhi High Court which clearly says that it is the duty of revenue to prove that the money deposited in the account of some other party emanated from the coffers of the assessee. Thus it is very clear that the Id. AO has failed to discharge his liability and in order to just make an addition he has ignored the provisions of law and various judicial pronouncements in this regard and made the addition with closed eyes which is untenable in the eyes of law and t hus liable to be deleted. Your honour it is interesting to see that the Id. AO has very easily drawn a conclusion that the money received by the assessee from the share applicants was its own money. He has grossly neglected the fact that the books of the appellant company were duly audited by a Chartered Accountant who did not give any adverse finding with regard to the genuineness of its claim. Also there is no proof which comes out from the books of the assessee which shows that money received by it from its share applicants emanated from its own coffers. The most important thing to be seen here is that the transaction took nothing out of the Company's coffers, and put nothing into the shareholders' pockets and thus on what basis the Id. AO ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 26 doubted the genuineness of the transaction is beyond the imagination of the assessee. Your honour a very recent judgment of Honorable Delhi High Court delivered in the case of CIT vs. Dwarkadhish Investment (P) Ltd. ITA 911/2010 and IT A 913/2010 (Copy enclosed) has specifically held that the appellant having produced details to establish identity of the share applicants, no addition can be made on account of share capital. Your honour further in a recent case of Sarthak Securities Co. (P) Ltd. vs ITO 329 ITR 110 (Delhi) the issuance of notice u/s 148 for making addition u/s 68 was held bad in law stating as under: “In the case at hand, as is evincible, the assessing officer was aware of the existence of four companies with whom the assessee had entered into transaction. Both the orders clearly exposit that the assessing officer was made aware of the situation by the investigation wing and there is no mention that these companies are fictitious companies. Neither the reasons in the initial notice nor the communication providing reasons remotely indicate independent application of mind. True it is, at that stage, it is not necessary to have the established fact of escapement of income but what is necessary is that there is relevant material on which a reasonable person could have formed the requisite belief. To elaborate, the conclusive proof is not germane at this stage but the formation of belief must be on the base or foundation or platform of prudence which a reasonable person is required to apply. As is manifest from the perusal of the supply of reasons and the order of rejection of ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 27 objections, the names of the companies were available with the authority. Their existence is not disputed. What is mentioned is that these companies were used as conduits. In that view of the matter, the principle laid down in Lovely Exports (P) Ltd. (supra) gets squarely attracted. The same has not been referred to while passing the order of rejection. The assessee in his objections had clearly stated that the companies had bank accounts and payments were made to the assessee company through banking channel. The identity of the companies was not disputed. Under these circumstances, it would not be appropriate to require the assessee to go through the entire gamut of proceedings. It is totally unwarranted.” 9. The ld. DR submitted his arguments which are as under: “Sub: Writt en Su bm issi on in th e ab ov e ca se- reg. In th e ab ov e case, i t is humb ly su bmit t ed that th e foll ow in g d ecisions ma y kindl y b e con sid ered w ith rega rd t o ad diti on ma d e u/ s 68 of I.T. A ct : 1. PCI T V s. NRA I ron & S t eel Pvt . Ltd . ( S C) d at ed 0 5.03 .20 1 9: Wh ere Hon ’bl e A p ex C ou rt hel d that th e p ra ctice of conv ersi on of un-a ccount ed mon ey th rough cl oak of Sha re Capi t al/Premium must be subj ect ed t o ca reful scrut iny esp ecia lly in p riva t e pl acem ent of sha res. Filing p rim a ry evid en ce i s n ot suffi ci ent . Th e onu s t o est abli sh cred it w orthin ess of th e inv est or comp ani es is on th e assessee. Th e Assessee is und er l egal obl igati on t o p rov e the receipt of sha re cap ital /p remiu m t o the sat isfa ct ion of th e A O, fail ure of whi ch, w ou ld ju stify a ddit ion of th e said am oun t t o the in com e of th e A ssessee. 2. Hon’bl e D elhi Hi gh C ou rt Judg em ent dat ed 17 .01 .2 019 i n case of NDR Prom ot ers Pvt . Lt d., I TA No. 49/ 2018 wh ere th e ad diti on of sha re cap ital u/ s 68 ha s b een u ph eld wh ere t he i nv est ors w ere found t o b e pap er comp ani es du ri ng sea rch on oth er p a rti es. It wa s h eld by t he Hon ’bl e C ou rt ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 28 that a ca se in v ol vi ng ma k e-b eli ev e pa per w ork t o cam ou flag e th e b ogus natu re of th e t ran sa cti on s is t o b e t reat ed a s un explai n ed credi t u/ s 68 . 3. ITO( Exempt ions) vs. M/ s Syn erg y Finl ea se Pv t. Ltd ., I TA n o. 4778/ D el/2 013 , ord er dat ed 08 .0 3.201 9, wh ere Hon ’ble I TA T, D elhi ha s hel d that sha re ca pital/ p remiu m int roduced th roug h pap er compa ni es is liabl e for a dditi on u /s 68 of th e A ct . 4. Prem Ca st ing s (P.) Ltd . V s CI T [ 2017] 88 t axmann .com 18 9 (Allah aba d) wh ere Hon ’bl e Al laha bad High C ou rt h eld th at additi on s u/ s 6 8 wa rrant b eing su stain ed wh ere th e id entiti es & creditw orthi ness of inv est ors in th e a ssessee com pan y a re not estab li shed b y the a ssessee & are al so prov ed i ncorrect b y th e D ep a rtm ent 's A ssessee Informati on Sy st em . In su ch ci rcum sta nces, a ssessee cann ot resist t he addi ti on s on ground s that it di d not hav e opp ortunity t o cross- examin e rel ev ant witn esses. An assessee comp any ca nnot hid e b ehin d the sh ell of a corp orat e enti ty t o feign ign oran ce regarding th e id ent it y of an y p erson wh o in v est s in i ts share cap ital . Prem Ca sting s ( P.) Lt d. Vs CI T 20 18- TI QL-27 4-S C-1 T wh ere Hon ’bl e Sup rem e C ou rt h eld a s foll ow s: “We do n ot find an y m erit in th is p eti tion . Th e Sp ecia l Lea v e Petiti on i s according ly di sm issed .” 5. CIT Vs Nav od ay a Ca stl e Pv t. Lt d. (20 14) 3 67 ITR 30 6 ( Del ) wh ere Hon ’bl e D elh i High Court a ccept ed th at sin ce th e a ssessee wa s unab l e t o produ ce th e di rect ors an d th e princi pal offi cers of th e si x sha reh ol d er comp ani es and al so that a s per th e in formati on an d detail s coll ect ed b y th e Assessin g Offi cer from th e con cern ed bank , th e A ssessi ng Officer h ad ob serv ed tha t t here w ere g enu ine con cern s a bout id enti ty, credit w orthin ess of sha reh ol d ers a s well a s g enuin en ess of the tra nsacti on s. "20 . Now , wh en w e go to th e ord er of t he Trib unal in th e p resent ca se, w e noti ce that th e Tribu nal h a s m erel y rep rodu ced th e ord er of th e Comm issi on er of I ncom e- ta x (Ap p eal s) a nd uph el d th e del eti on of th e additi on . In fa ct , th ey sub st anti all y reli ed up on and qu ot ed the d eci si on of its co- ordina t e B en ch in the ca se of MA F Aca d em y P. Ltd ., a deci si on w hich ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 29 has b een ov ertu rn ed b y th e D elhi High C ou rt , vid e it s jud gm ent in C I T v. MAF Acad em y P. Lt d. [ 201 4] 2 06 DLT 277 ; [2 014] 36 1 I TR 258 (D elhi) ). In th e im pugn ed ord er it is accep t ed that th e a ssessee wa s unab l e t o produ ce di rect ors a nd p rin cip al offi cers of th e si x sha reh old er compa ni es and al so th e fa ct th at a s p er th e in formati on and det ail s coll ect ed b y th e Assessin g Offi cer from th e con cern ed bank , th e A ssessi ng Officer h as ob serv ed tha t t here w ere g enu ine con cern s a bout id enti ty, credit w orthin ess of sha reh ol d ers a s well a s g enuin en ess of the tra nsacti on s. 21. In vi ew of th e a foresaid discu ssi on , w e feel that th e ma tter requi res an ord er of rem it t o t he Tribuna l for fresh adjudi cat ion k eep ing in vi ew th e aforesaid ca se la w." Na v oda va Ca stl e Pv t. Ltd. Vs CI T (20 1 5-TI QL- 314 -SC -I T) SLP of a ssessee dismi ssed b y Hon’bl e Sup rem e C ou rt 6. Kona rk St ru ctu ra l En gin eering (P.) Lt d. V s D CI T [ 2018] 96 taxmann .com 25 5 ( SC) wh ere assessee-com pan y recei v ed certain am ount as sha re capit al from va ri ous sh a reh ol ders, in vi ew of fa ct that sum m on s to sha reh old ers und er secti on 1 31 coul d not b e served a s add resses w ere not a va ila bl e, and , moreov er, th ose sh areh ol d ers w ere fi rst tim e a ssessees and w ere n ot ea rning en ou gh in come to mak e d ep osit s in qu esti on , additi on ma d e by A ssessing Offi cer und er secti on 68 wa s t o b e con fi rm ed ; SLP dismi ssed . Kona rk St ructural Engineering (P.) Lt d. Vs DCI T [201 8] 9 0 taxmann .com 56 (B om ba y) wh ere Hon’bl e B om ba y Hi gh Cou rt held that wh ere assessee- comp any recei v ed certain am ount as sha re ca pit al from va ri ou s sha reh ol d ers, in vi ew of fa ct th at su m mon s serv ed to sh a reh old ers und er secti on 13 1 w ere unserv ed with rem a rk tha t add ressees w ere n ot ava ilab l e, and, m oreov er, th ose sh a reh old ers w ere fi rst ti m e a ssessees an d w ere n ot ea rn ing enough in com e t o m ak e d ep osit s in qu esti on , impu gn ed additi on mad e b y A O und er sec. 68 , wa s to b e confirm ed , 7. DR B Exp ort s (P.) Lt d. V s CI T [20 18] 93 ta xm ann.com 490 ( Cal cutt a) wh ere Hon ’bl e Cal cu tta High C ou rt h eld that wh ere AO m ad e additi on un d er secti on 68 i n resp ect of i ncrease in sh are capit al of assessee- comp any, in ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 30 vi ew of fa ct tha t add resses of m ost of pu rp ort ed shareh old ers w ere identi cal a nd th ey could n ot b e t raced out d esp it e n oti ce i ssu ed und er secti on 131 , Tribun al wa s justifi ed in con fi rmin g impugn ed ad diti on 8. CIT V s Nipun Build ers & D ev el op ers ( P.) Ltd (30 ta xman n.com 2 92 , 214 Taxman 42 9, 3 50 ITR 4 07 . 256 C TR 34) wh ere Hon ’b l e Delhi High Court held tha t wh ere a ssessee fail ed to p rov e i d entit y and capa cit y of sub scrib er com pani es to p ay sh a re app licati on m on ey, am ount so receiv ed wa s liab l e t o b e ta xed und er sect i on 68 . It wa s h eld a s fol l ow s: “12 . A p eru sa l of t he ord er of th e Tri bunal sh ow s th at it has g on e on t he basis of th e d ocu m ent s su bmitt ed b y t he a ssessee b efore the A O and h a s hel d that in th e ligh t of th ose d ocum ent s, it can be sai d th at the assessee has est abl ish ed th e id entit y of t he pa rties. It h as fu rth er b een ob serv ed that th e rep ort of th e in v estig ati on w ing cann ot con clu si v el y prov e tha t th e assessee’s own m on ies w ere b rought ba ck in th e form of sh are app li cati on mon ey . /4s n ot ed i n the ea rli er pa ra graph, it i s not the b urd en of th e A O to p rov e that conn ecti on . Th ere ha s b een n o examin ati on by th e Tri bunal of the assessm ent proceeding s in an y det ail in ord er t o d em on st rat e that the a ssessee ha s di scha rg ed it s onus t o p rov e n ot on ly th e id enti ty of th e sha re appl icant s, b ut al so th ei r credit worthin ess and t h e genu in en ess of the tran sa cti on s. No a tt emp t w as ma de by t h e Tri bunal to scrat ch th e su rface a nd p rob e the d ocum ent a ry evi den ce in som e dept h, in the lig ht of the condu ct of th e assessee and oth er su rrounding circu mstances in ord er to see wh eth er th e assessee ha s di scharg ed it s onu s un der S ecti on 6 8. With respect , it a p pea rs t o u s th at t here h as onl y b een a mech ani cal referen ce t o th e ca se-l aw on th e su bj ect with out any seri ou s app ra isal of the fa ct s and circu m stan ces of th e case. 13. We, th erefore, answ er th e sub st an tial gu esti on of l aw fra med b y u s in the n ega tiv e, in fa vour of th e rev enu e and a gain st th e assessee. Th e app eal of t h e rev en ue i s all ow ed with n o ord er as to cost s.” 9. CI T V s Nova Prom oters & Fi nS ea se ( P) Ltd (18 ta xm ann.com 217 , 206 Ta xm an 20 7, 3 42 I TR 1 69 . 25 2 C TR 1 87) wh ere Hon’bl e D elhi High Court hel d that a m ount receiv ed b y a ssessee from a ccomm oda ti on en t ry ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 31 provid ers in ga rb of sha re appl icati on m on ey, wa s to be add ed t o its taxabl e in com e und er secti on 6 8. I t wa s h eld a s foll ows: “41 . In t he ca se b efore u s, n ot on ly di d th e mat erial b efore th e A ssessi ng Offi cer sh ow th e l ink b et w een th e entry p rovid ers an d the a ssessee- comp any, but th e Assessin g Officer h ad al so provid ed th e stat em ent s of Muk esh Gu pta a nd Rajan J assa l to th e assessee in compl iance with th e rul es of natu ral ju stice. Out of th e 22 comp ani es whose n am es figu red in the i nform ati on gi v en by th em t o th e in v est igat ion win g, 15 comp ani es had provid ed t h e so- ca ll ed "sha re sub scri pti on m on i es" t o th e a ssessee. Th ere wa s thu s sp ecific inv ol v em ent of th e assessee-compan y in th e m odu s op era ndi foll ow ed by Mu k esh Gu pta and Raj an Ja ssal . Thu s, on crucial fa ctua l asp ects th e present case stan d s on a comp l et el y different footin g from th e case of Oa si s Hospi tali ti es ( P.) Ltd. ( supra). 42. In th e ligh t of t he a b ov e di scu ssi on , w e a re unabl e t o uphold th e ord er of the Tribuna l confirming th e del eti on of the ad diti on of R s. 1 ,1 8,5 0,000 mad e u nd er secti on 68 of th e A ct as w ell a s th e consequ ential addi ti on of Rs. 2 ,96 ,25 0. We a ccordingl y an sw er t he sub stan tial q u estion s of la w in the n eg ati v e and in fa v our of th e d ep a rt men t. Th e assessee shal l pa y cost s whi ch w e a ssess at Rs. 30 ,00 0/- .” 10. C I T Vs Ul tra Mod ern Exp ort s (P.) Ltd (40 t axmann .com 458 , 22 0 Ta xm an 1 65) wh ere Hon ’b le D elhi High C ou rt h eld th at wh ere i n ord er t o ascerta in g enu in en ess of a ssessee's cla im relatin g t o receipt of sha re appli ca ti on m on ey, Assessin g Offi cer sent not ices to sha re appli ca nts whi ch retu rn ed un serv ed , how ev er, a ssessee stil l man ag ed t o secu re d ocum ent s su ch a s th eir in come ta x retu rn s a s w ell a s bank a ccou nt pa rti cul a rs, in su ch ci rcum st ances, Assessing Officer wa s ju sti fi ed in d ra wing ad v erse inferen ce an d a ddi ng am oun t in qu estion t o a ssessee's taxabl e incom e under secti on 68 . It w as h eld a s foll ow s: “9 . A s n oti ced p revi ou sl y, th e CI T ( A) w as of th e opi ni on th at th e a ssessee had di sch a rg ed th e basic onu s whi ch w a s ca st up on it a ft er consid ering th e rulin g in Lov ely Export s ( P.) Ltd .'s ca se ( sup ra ). Th e m at erial and th e records in thi s ca se sh ow that noti ce issu ed t o th e 5 of th e sha re appli ca nts w ere return ed unserv ed . Th e p arti cula rs of retu rn s mad e ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 32 ava ilab l e by th e a ssessee and ta k en int o con si d erati on in p arag raph 3.4 by the A O i n thi s ca se w ould sh ow th at th e said pa rt i es/a ppli can ts ha d discl osed v ery m ea ger in com e. Th e A O al so not iced that before i ssuing ch equ es t o th e assessee, hug e am ou n ts w ere t ran sferred in the a ccoun ts of said sha re a ppli cant s. Th is di scu ssion i tsel f would rev eal th at ev en though th e sha re a ppli cant s cou ld not be accessed th rou gh noti ces, th e assessee wa s in a p ositi on t o obta in d ocum ent s from th em . Whil e th ere can be n o d oubt th at in Lov el y Exp ort s ( P.) Ltd . (su p ra) , th e Court indi cat ed the rul e of "shi ft ing onu s" i.e. th e resp on sibi lit y of th e R ev enu e t o p rov e that S ecti on 6 8 cou ld b e inv ok ed on ce the b a si c bu rd en st ood d ischa rged by fu rni shing rel ev ant an d mat eri al p art icu la rs, at th e sam e t im e, th at judgm ent cann ot b e sa id t o lim it th e i nferences that can be l ogi cal ly and leg itim at el y d ra wn by th e R ev enu e in the natu ral cou rse of a ssessm ent proceeding s. Th e i nforma ti on that assessee fu rni sh es w ould h av e t o be credib l e and a t th e sam e t im e v erifi ab le. In thi s ca se, 5 sha re a ppli can ts could n ot b e serv ed a s th e n oti ces were retu rn ed u nserv ed. In th e backd rop of thi s ci rcum st ance, th e assessee's abil ity t o secu re d ocu m ent s su ch as in com e ta x retu rn s of th e sha re appli cant s a s w ell as ban k account pa rti cula rs wou ld it sel f giv e rise t o a ci rcum sta nce whi ch the A O in thi s ca se p roceed ed t o draw in feren ces from. Ha ving reg ard t o th e t ot alit y of the fa ct s, i .e., tha t the assessee comm en ced it s busin ess and im m edi at el y sought t o infu se sh are ca pita l at a p remium ra nging b etw een R s. 90 -19 0 per sha re and w as abl e t o ga rn er a colossal a m ount of R s. 4 .3 4 C rores, this C ou rt i s of t h e opin i on that th e C I T (Ap p eal s) a nd th e IT A T fell int o error in h oldi ng tha t AO could n ot ha v e add ed b ack th e sai d am ount un d er Secti on 68 . Th e qu esti on of la w con seq uent ly i s answ ered in fa v ou r of th e Rev enu e and ag ain st th e a ssessee.” 11. C IT V s F rosta ir (P.) Ltd (26 ta xm an n.com 1 1, 210 Ta xman 221) wh ere Hon ’bl e D elhi High Cou rt h el d that w here d eta il s furni sh ed b y a ssessee ab out sha re a ppli cants w ere in correct, a dditi on u nder secti on 6 8 w as prop er. It w as h el d as foll ow s: 12 Th e ap pli cat ion of the ra ti o of ev ery deci si on by a qua si-jud icial b od y lik e th e I TA T ha s t o b e nuan ced , an d cont extual . Thus, w hile t h e fin ding s in Divin e Lea sing , Oa si s Int ern ati ona l or ev en Lov ely Exp ort s might b e preced ed by a g en eral di scu ssi on of th e correct approa ch to b e ad opt ed by ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 33 the A O, in a giv en case wh ere add iti on s a re sought t o b e m ad e on a ccoun t of sha re a ppli ca ti on mon eys n ot found t o b e g enuin e, th e basi c fa cts of th e ca se cann ot b e lost sight of. On a p rop er ap pli cat ion of th e rat i o in Oa si s - and sub seq uentl y, t he Di vi si on B en ch ruling in CI T v . Nov a Promot ers & Finl ea se ( P) Ltd [ 20 12] 20 6 Ta xman 20 7/ 18 t axmann .com 217 (D el hi) it is evid ent that th e A O t ook int o a ccount - if w e ma y say so, in exhau sti v e det ail , a ft er a pain sta king examin ati on of th e records aft er tw o or th ree lay ers of scrutin y- all th e m at eria ls and h eld th at th e cla im th at th e am ount s cla im ed to be recei v ed on a ccount of sha re appl icati on s w ere n ot based on g enuin e t ransacti ons. The CI T (A) uphel d that ord er, aft er call ing for a rem and rep ort . In these circumst an ces, th e conclu si on of th e Tribun al, th at th e a ssessee had di scha rged it s onu s, ap p ea rs to b e ba sed on a su p erfi ci al un dersta nding of th e law , an d an un inform ed on e ab ou t the ov erall facts an d ci rcum stan ces of t he ca se. 13. In vi ew of th e ab ov e rea son s, th e qu estion s of la w in th ese a pp ea ls are answ ered in fa v ou r of th e rev enu e. Th e ord ers of th e A ssessing Offi cer are rest ored. Th e a ppeal s a re to su cceed an d a re therefore all ow ed .” 12. CIT V s N.R. Port foli o Pv t. Ltd. [2 014[ 42 ta xmann.com 339 (Delhi)/ r2 014 1 222 Ta xm an 157 (D elhi) (MA G)/[ 201 4] 26 4 CTR 258 ( D elhi) wh ere Hon’b l e D elh i Hi gh C ou rt held that i f A O d ou bt s the docu m ent s produ ced by a ssessee, th e onu s shi ft s on assessee to fu rt her sub st antia t e the fa ct s or p rodu ce th e sh are appli cant in proceeding. It wa s h eld a s foll ow s: “30 . What w e p ercei v e and reg ard a s correct p osit i on of law i s that t h e cou rt or t ribun al sh ould b e con vin ced a bout th e id ent ity, credi tw orthin ess and g enu in en ess of the t ran sa cti on . Th e on us t o prov e th e three factum is on th e a ssessee a s the facts a re w ith in th e a ssessee's k nowl edg e. M ere produ ct ion of in corp orat ion d et ail s, PAN Nos. or the fa ct th at thi rd p ersons or comp any had fi led in com e t ax d etail s in ca se of a priva t e li mit ed comp any m ay n ot be su ffi ci ent wh en surroun ding and atten ding fa cts pred icat e a cov er u p. Th ese fa ct s ind icat e an d reflect p rop er p ap er w ork or docum en tati on but genui n en ess, credit worthin ess, identit y a re d eep er and obt ru si v e. C omp ani es no doubt a re a rtifi ci al or ju ri sti c p ersons bu t th ey are soul l ess and are d ep end ent u p on t he in di vidua ls b ehin d th em wh o run ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 34 and man ag e th e sai d comp ani es. It i s t he p erson s b ehind t he comp any wh o tak e th e d eci si on s, cont rol s and ma nag e th em .” 13. C IT V s Empi re Bu ilt ech (P.) Ltd (36 6 ITR 1 10) wh ere Hon ’bl e D elh i High C ou rt h eld t hat u/s 68 it i s not suffi ci ent for assessee t o m erel y discl ose add ress an d iden titi es of sh a reh old ers; it ha s to show g enuin en ess of su ch ind ivi dual s or ent iti es. 14. CI T V s F ocus Exports ( P.) Ltd (5 1 ta xmann .com 46 (D elh i)/r201 51 228 Ta xman 881 wh ere Hon’bl e D elhi Hi gh C ou rt h eld th at wh ere in resp ect of sh a re ap pli cat ion mon ey, a ssessee fail ed t o p rovid e com pl et e a dd ress and PA N of certain sha re app li cant s wh erea s in ca se of som e of sha re appli ca nts, th ere w ere t ran sa cti on s of dep osi ts an d imm ed iat e with d raw al s of m on ey from ban k, im pugn ed ad diti on mad e und er secti on 68 wa s t o b e confirm ed . 13. PCI T V s Bik ram Sin gh FI TA No.55 /201 7 ] (D elhi) wh ere Hon ’bl e D elhi High C ou rt h eld tha t ev en i f a t ran sa ct i on of l oan i s m ad e t hrough ch equ e, it cann ot b e presu med t o b e g en uin e in th e ab sen ce of any ag reem ent , security and int erest p ay m ent . M ere submi ssi on of PA N Ca rd of credit or does n ot establ ish t he aut h enti cit y of a huge l oan t ran sa ct ion p a rti cula rl y wh en th e I TR d oes not in spi re su ch confid en ce. M ere submi ssi on of ID proof and th e fa ct that th e l oan t ran sa cti on s w ere th rough the b ankin g chann el, d oes not esta bli sh th e g enuin en ess of t ransa cti ons. Loan ent ri es are g en erall y ma sk ed t o pu mp in bl a ck m on ey int o ban ki ng ch ann el s and su ch pra cti ces conti nue t o plag u e India n econ omy . 14. Rick Lun sford Trad e & Inv est m ent Ltd Vs CI T F201 61 38 5 I TR 3 99 (Cat) Th e assessee did not p rodu ce b ook s of a ccount or bank account s or sha reh ol d ers’ regi st er. Eight out of fi fty six p erson s from shareh old ers’ li st provid ed b y assessee d eni ed sub scripti on. R ema ining n oti ces retu rn ed with end orsem en t ’’n ot known”. Hon ’bl e Cal cutt a High C ourt h eld that unexpl ain ed sh are appli ca ti on m on ey wa s right ly treat ed as a ssessee’s incom e. ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 35 15. Rick Lun sford Tra d e & In v estm ent Ltd Vs C I T f20 16- TI OL-2Q7-S C- ITI ( Sup rem e C ou rt ) wh ere Hon ’bl e Sup rem e C ou rt di sm issed SLP uph old ing th at it i s op en t o the R ev enu e D epa rtm ent t o mak e add ition on a ccount of all eg ed sh a re cap ital u/ s 6 8, wh ere t h e assessee comp any ha s failed t o sh ow genui n en ess of it s shareh old ers.” S d/- (Rinku Singh ) Addl . C om missi on er of in com e Ta x(S r. D R) E- B ench, I TA T, New D elhi 10. The ld. CIT(A) adjudicated as under: “3 .1 I ha v e con sid ered th e sub mi ssi on s mad e by th e app ellant , th e assessm ent order a nd p eru sed th e evi den ces fil ed b y th e app el lant ’s A R. Th e issu e in thi s ca se is th e sha re capi tal of R s.3,00 ,00 ,0 0 0/- recei v ed b y the app ellant comp any during th e y ear. Ad mitt edly thi s sh are capit al h as been recei v ed from tw o compa ni es. Th e a pp ell ant in t hi s rega rd ha s fil ed confirmat i ons, copi es of ban k sta t em ents and M em oran da & Art icl es an d oth er d et ail s to p rov e the exi st en ce of these com pani es. Ba sed on these docum en ts and evi den ces it is est ab lish ed that b oth t he sha reh ol d er comp ani es a re in exi st en ce. On goin g through th e a ssessm ent ord er I noti ce th at th e assessing offi cer i s relying on t h e th ree pa ram et ers of Secti on 68 i .e. i dent ity, cred itw ort hiness and g enui nen ess of th e tra nsacti on s. Th e i ssu e of sh a re capit al has b een settl ed i n va ri ou s judi ci al pron oun cem en ts. I n my opini on t h e lat est judgm ent of the D elh i High Court in th e ca se of C IT v s. Oasis Hospit alit ies Pvt. Ltd . d at ed 3 1st Janua ry, 201 1 ha s dealt with th e i ssu e at l ength and aft er exa mining th e va ri ou s judgm en ts has settl ed certa in pa ram et ers t o d eci de an i ssu e lik e this. A ft er ana lyz ing the p rovi si on s of th e C ompan ies Act an d Sect i on 68 of the I T Act , th e jud gm ent s deliv ered in the cases of C IT vs. Divin e Lea sing & Fi nan ce Ltd . 29 9 ITR 268 (D ei) , CI T vs. S ophia Finan ce Ltd . (1 994 ) 20 5 ITR 98 (D el) (F B), CI T v s. D olphi n C anpa ck Lt d. 28 3 I TR 19 0, C IT v s. Lov el y Exp ort s Pvt. Lt d. 216 C TR 19 5 th e Hon ’bl e C ou rt held th at th e initial bu rd en is up on an a ssessee t o expl ain t h e natu re and sou rce of ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 36 sha re appli cati on m on ey recei v ed by it . Th e C ou rt fu rth er ob serv ed that in ca se th e inv est or/ sh areh ol d er i s a n ind i vidua l som e docu m ents will ha v e t o be fil ed or th e sa id sha reh old er wil l hav e t o b e p rodu ced b efore th e assessing offi cer t o p rov e hi s i d entit y. If th e credit or/ sub scrib er i s a comp any th en th e d et ail s in th e form of resolut ion or PA N i dent ity, etc can be fu rn ish ed. A s regards th e g enuin en ess of the t ran sacti on , it has b een hel d that wh en th e mon ey i s receiv ed b y ch equ e and is tra nsa ct ed th rough banking or oth er u n disp utab l e chann el , the g enuin eness of the t ran sa cti on would b e p rov ed . Oth er d ocu m ent s sh ow ing th e g en uinen ess of th e tra nsacti on could b e copi es of th e sha rehold ers’ regi st er, sh are app licati on form s, sha re t ran sfer regi st er, et c. As fa r a s credi tw orthin ess or th e finan ci al st reng th of th e credit or or subscrib er is concerned tha t can b e prov ed b y p roducin g bank stat em ent of th e credi t or / sub scrib er sh owi ng that i t ha d su ffi ci en t bal an ce in it s account t o enabl e it to subscrib e t o th e sha re capit al. On ce th ese d ocum ent s are p rodu ced the assessee w oul d hav e sati sfact orily discha rg ed th e onu s p la ced up on hi m . Th erea ft er it is for th e a ssessi ng offi cer t o scrutin iz e the sam e and in case h e ha s any dou bt ab out th e v eraci ty of th ese d ocu men ts, t o p rob e th e matt er fu rth er. How ev er, t o di scredit th e d ocum ent s produ ced b y th e a ssessee on th e aforesaid a sp ect , t here h as t o b e som e rea son an d mat eria l for th e assessing offi cer a nd h e cann ot g o i nto th e real m of su spi ci on . A ft er anal yzing th e a b ov e fa cts, th e C ou rt referred t o the judg m ent of th e D elhi High C ou rt in th e case of C IT v s. C rea tiv e World Tel efil m s Ltd . and h eld that on ce d ocu m ent s l ik e PA N or b ank account d etai ls w ere g iv en by th e assessee th e onus shi ft s up on th e assessing offi cer an d i t is up t o him t o rea ch th e sh a reh olders and th e a ssessing offi cer can not bu rd en th e assessee m erel y on the g round tha t su mm on s issu ed to th e inv est ors w ere retu rn ed . Th ereaft er th e C ou rt referred to th e jud gm ent of D elhi High Court in the ca se of CI T v s Valu e C api tal S ervi ces (P) Ltd . 307 I TR 33 4 (Delhi) wh ereb y it was ob serv ed th at addi ti onal bu rd en w as on th e dep a rtm en t t o sh ow that ev en i f th e ap plicant s di d n ot h av e th e m ean s t o mak e th e inv est m ent, th e inv est m ent mad e by th em actuall y em anat ed from th e coffers of th e assessee t o en abl e it t o b e trea t ed a s th e undiscl osed i ncom e of th e a ssessee. A ft er la ying d ow n th e a bov e prin ci pl es, th e C ou rt dismi ssed th e ap p ea l fi l ed b y th e R ev enu e wh ere th e appli ca nts w ere compani es d espit e th e fa ct that th e a ssessing officer had ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 37 receiv ed inform ati on from th e In v est igati on Wing that these in v est or comp ani es w ere n ot ca rrying on an y real bu sin ess a ctivit y and w ere eng ag ed in th e busi ness of p rovid ing a ccom modati on ent ri es. Now app lyin g th e ab ov e judgm en t t o th e fa ct s of this case, i t i s an admit t ed fa ct t hat all th e sh a reh old ers a re compa nies. Th e app ell ant h a s fil ed su ffi ci ent d ocuments e.g . copi es of PAN C a rd s, ba nk st at em ents, CI Ns, et c. t o establ ish th ei r id entit y . I t is n ot th e case of th e a ssessi ng offi cer that th ese compani es hav e n ot b een incorp orat ed . The cop i es of th e bank sta t em ent s of the sh a re sub scri bers wh erein the t ran sa ct i ons a re refl ect ed as w ell as th ei r bal ance sheet s sh owing inv estm en t in th e app ell ant compan y on th ei r a ssets’ sid es est abli sh th e creditw orthi ness of the pa rti es whil e th e g enu in en ess of th e t ransa cti on s a re b orn e out by th e fa ct th at th e t ran sa cti on s w ere t hrough bankin g ch an nel s. On g oing through th e a ssessmen t ord er, it i s seen th at th e assessin g officer ha s n ot been a bl e t o rebu t or fin d any di screpa ncy a b out the d ocu men ts sub mitt ed by th e a pp ell ant . I f that b e th e ca se the assessing offi cer cann ot mak e additi on und er S ection 68 in th e h an ds of th e app ellant compan y . Th e app ell ant com pan y has b een abl e to prov e i ts case and in ca se th e app ell ant h as fail ed t o p rodu ce th e sha reh old ers a s hel d b y th e juri sdi ct ional High Court in th e case cit ed a bov e, th e a ssessing offi cer cann ot shi ft th e bu rden on th e ap p ellan t com pan y. It i s a ca se w h ere th e app ell ant ha s b een abl e t o m eet th e requirem ent s t o justi fy its ca se. Th e app ell at e, b y p rov id ing th e d etail s as n arrat ed in th e sub m issi on s fil ed by it and a s ann exed i n the pap er b ook a ttach ed w ith th e su bmi ssi ons, ha s cl ea rl y est abli sh ed the id enti ty and credi tw orthin ess of t he sh arehold ers and th e g enuin en ess of th e t ransa cti on s. A ccord ingly, I h ereb y di rect th e assessing offi cer to del et e th e addi ti on of Rs. 3 ,00 ,0 0,000/ . Th ese g round s of app ea l a re all ow ed a ccordingl y .” 11. Having heard arguments of both the parties and after going through the entire contents of the paper book and after perusing the facts on record, we do not find any strength in the ratio given by the ld. CIT(A), hence, owing to the absence of the pertinent facts, we deem it proper to remand the matter to ITA No. 3374/Del/2011 Om Shiva Traders P. Ltd. 38 the file of the Assessing Officer to inquire into the issue afresh and pass a speaking order after affording due opportunity to the assessee. 12. In the result, the appeal of the assessee is Revenue for statistical purpose. Order Pronounced in the Open Court on 01/03/2023. Sd/- Sd/- (Yogesh Kumar US) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 01/03/2023 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR
Other Referred Cases
Lovely Exports (P) Ltd. vs. CIT, Stellar Investment Ltd. vs. CIT, Sophia Finance Ltd. vs. CIT, Achal Investments Ltd. vs. CIT, Value Capital Services P Ltd. vs. CIT, Dwarkadhish Investment P Ltd. vs. CIT, Divine Leasing & Finance Ltd. vs. CIT, Makhni and Tyagi (P) Ltd. vs. CIT, Orissa Corporation Pvt. Ltd. vs. CIT, Sarthak Securities Co. (P) Ltd. vs. ITO, Kona rk Structural Engineering (P.) Ltd. vs. DCI T, Ultra Modern Exports (P.) Ltd. vs. CIT, Nipun Builders & Developers (P.) Ltd. vs. CIT, Rick Lunsford Trade & Investment Ltd. vs. CIT
Laws Referred To
Income Tax Act, 1961
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