ACIT, Muzaffarnagar V. M/s Prem Castings (P) Ltd., Muzaffarnagar

ITA 3401/DEL/2011

• Counselvise Citation: 340120114 RSA 2011
• Duration Of Justice: 4 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 16-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 01-07-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY SENIOR
• Assessee Lawyers: V K TULSIAN
• Keywords: Share purchase agreement; Principle of natural justice; Opportunity of cross examination; Source of fund; Question of law; Onus to prove
• Section: 68; 69; 143(3); 142(1); 115JB; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F : NEW DELHI) BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER ITA NO.3401/DEL./2011 (ASSESSMENT YEAR : 2007-08) ACIT, CIRCLE 1, VS. M/S. PREM CASTINGS (P) LTD., P MUZAFFARNAGAR. MEERUT ROAD, MUZAFFARNAGAR. (PAN : AACCP3753E) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V.K. TULSIAN, FCA REVENUE BY : SHRI VIKRAM SAHAY, SENIOR DR DATE OF HEARING : 16.06.2015 DATE OF PRONOUNCEMENT : 11.09.2015 O R D E R PER A.T. VARKEY, JUDICIAL MEMBER : THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), MUZAFFARNAGAR DATED 17.03.201 1 FOR THE ASSESSMENT YEAR 2007-08. 2. THE GROUNDS OF APPEAL TAKEN BY THE REVENUE READ AS UNDER :- 1. ON THE FACTS IN THE CIRCUMSTANCES OF THE CASE T HE CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.3,46,00,000/ - MADE BY THE ASSESSING OFFICER UNDER SECTION 68 OF I.T. ACT, 1961 AS UNEX PLAINED SHARE APPLICATION MONEY, CREDITED IN THE BOOKS OF ACCOUNT WITHOUT APPRECIATING FULL FACT OF THE CASE AND WRONGLY RELYING UPON THE DECISION OF VARIOUS 2 ITA NO.3401/DEL/2011 COURTS, ONE OF THEM BEING M/S LOVELY EXPORTS (P) LT D REPORTED IN 216 CTR 195, WHILE IN THE PRESENT CASE IDENTITY OF THE SHARE APPLICANTS HAS BEEN AMPLY DISPROVED BY THE ASSESSING OFFICER THROU GH INSPECTOR'S REPORT THAT NO SHARE APPLICANT EVER EXISTED AT THE GIVEN A DDRESSES BY ASSESSEE, ADVERSE REPORT OF HANDWRITING EXPERT, NON AIS VERIF ICATION, INFORMATION FROM BANK THAT NO BANK ACCOUNTS OF SHARE APPLICANTS EXISTED IN THEIR BRANCHES ETC AND AS SUCH THE ORDERS IN CASE OF M/S LOVELY EXPORTS (P) LTD, REPORTED IN 216 CTR 195 AND OTHERS ARE NOT APPLICAB LE IN THIS CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT (A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.3,46,00 ,000/- MADE BY THE ASSESSING OFFICER UNDER SECTION 68 OF I.T. ACT, 19 61 AS UNEXPLAINED SHARE APPLICATION MONEY, CREDITED IN THE BOOKS OF ACCOUNT IGNORING THE DECISION OF HON'BLE APEX COURT IN THE CASE SUMATI DAYAL VS C IT (214 ITR-801) AND HON'BLE HIGH COURT OF CHHATTISGARH IN THE CASE OF KUSHAL PRASED MANHAR VS CIT, {(2010) 236-CIT -192)}, WITHOUT APPR ECIATING THE FULL FACTS OF THE CASE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT (A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.3,46,00 ,000/- MADE BY THE ASSESSING OFFICER UNDER SECTION 68 OF I.T. ACT, 196 1 AS UNEXPLAINED SHARE APPLICATION MONEY, CREDITED IN THE BOOKS OF ACCOUNT WITHOUT APPRECIATING THE FULL FACTS OF THE CASE AND BY IGNORING THE JUDI CIAL PRONOUNCEMENTS REPORTED IN THE FOLLOWING CASES:- A. SHREE LEKHA BANARJEE VS. CIT, 49 ITR 112 (SC) B. RAM LAL AGARWAL VS CIT, 280 ITR 547 (ALLD) C. ITO VS. RAI CHAND KOTHARI (HUF) 39 TTJ(TRIBUNAL ) D. SHANKER INDS. VS. CIT, 114 ITR 689 (CAL) E. PRAKASH TEXTILES AGENCY VS. CIT, 121 ITR 89 F. C. KANT & CO. VS CIT, 126 ITR 63 (CAL) 4. THE ORDER OF THE CIT (A) BE SET ASIDE AND THAT O F AO BE RESTORED. 3. THE ASSESSEE IS A PRIVATE LIMITED COMPANY DERIVI NG INCOME FROM MANUFACTURE AND SALE OF IRON AND STEEL PRODUCTS. T HE RETURN OF INCOME WAS FILED ON 31.10.2007 DECLARING NIL INCOME. HOWEVER, THE COMP ANY HAD PAID TAXES AS PER PROVISIONS OF SECTION 115JB OF THE INCOME-TAX ACT, 1961 (HEREINAFTER THE ACT) ON BOOK PROFIT SHOWN AT RS.21,77,195/-. THE ASSESSEES CASE WAS INITIALLY SELECTED FOR 3 ITA NO.3401/DEL/2011 SCRUTINY UNDER THE JURISDICTION OF ACIT, CIRCLE-2, MEERUT. BUT THE ASSESSEE REQUESTED VIDE LETTER DATED 23.09.2008 TO TRANSFER THE SCRUTINY PROCEEDINGS FOR THE RELEVANT YEAR TO ACIT, CIRCLE-1, MUZAFFARNAGAR AND THE CASE WAS TRANSFERRED TO ACIT, CIRCLE-1, MUZAFFARNAGAR ON 22.07.2009 AS THE JURISDICTION OF THE CASE WAS WITH HIM. SUBSEQUENTLY NOTICES U/S 143(2) & 115WE( 2) AND 142 (1) OF THE ACT WERE ISSUED ON 04.08.2009 ALONG WITH A QUESTIONNAIR E WHEREIN THE ASSESSEE WAS ASKED FOR CERTAIN DETAILS, WHICH WERE DULY SERVED O N THE ASSESSEE ON 07.08.2009. IN RESPONSE TO THESE NOTICES, THE ASSESSING OFFICER OB SERVES THAT ASSESSEE FILED CERTAIN DETAILS/ INFORMATION AND THAT TOO IN BITS & PIECES. THE LAST REPLY IN RESPECT OF THE ABOVE MENTIONED 142 (1) NOTICE WAS SUBMITTED BY THE ASSESSEE ON 16.11.2009 AND THIS REPLY WAS PERTAINING TO QUERY NUMBER-31 WHICH WAS ABOUT SHARE CAPITAL INTRODUCED BY THE ASSESSEE. THE QUERY NUMBER-31 REA DS AS UNDER :- 'PLEASE FURNISH COMPLETE NAMES & ADDRESSES OF THE S HARE CAPITAL SUBSCRIBERS WITH THEIR ASSESSMENT PARTICULAR SHOWIN G SOURCES OF INCOME, MODE OF PAYMENT OF SHARE APPLICATION MONEY, COPIES OF SHARE CERTIFICATES ETC. ALSO PROVE GENUINENESS, CREDITWORTHINESS AND I DENTITY.' 4. THE ASSESSEE FILED THE REPLY BY STATING THAT THE ASSESSEE COMPANY HAD SUBSCRIBED SHARE CAPITAL OF RS.3,92.00,000/- DURING THE A.Y. 2007-08 OUT OF WHICH RS.46,00,000/- WERE RECEIVED AS SHARE APPLICATION I N EARLIER YEAR AND PRODUCED THE LIST OF PERSONS TO WHOM THE SHARE CAPITAL WAS ALLOT TED ALONG WITH AMOUNT OF SHARE APPLICATION MONEY AND DATE OF TRANSACTION. 5. THE ASSESSING OFFICER HAS TAKEN NOTE OF THE FACT THAT THE ASSESSEE HAD BEEN DELAYING FILING OF REPLY TO THE QUERIES FOR DETAILS OF SHARE CAPITAL AND ANSWER WAS GIVEN ONLY AFTER A GAP OF THREE (3) MONTHS AND NINE (9) DAYS KNOWING VERY WELL THAT THE INSTANT CASE WAS GETTING TIME BARRED ON 31-12-2 009; AND THAT THERE WAS ONLY 31 WORKING DAYS REMAINING WITH HIM FOR COMPLETING THE INVESTIGATION. SO, WITHIN 31 4 ITA NO.3401/DEL/2011 WORKING DAYS, THE AO, HAD TO CROSS-CHECK THE DETAIL S FURNISHED BY THE ASSESSEE, AND CONFRONT THE ASSESSEE, IF NEED BE, WITH THE RESULTS OF THE INVESTIGATION AND THUS FACILITATE COMPLETION OF THE ASSESSMENT BY FOLLOWIN G THE PROCESS OF NATURAL JUSTICE AND PROVISIONS OF LAW. TO DEMONSTRATE THE CONDUCT O F THE ASSESSEE AFTER ISSUANCE OF NOTICE ON 04.08.2009, THE ASSESSING OFFICER HAD GIV EN ALL THE DETAILS ABOUT THE NUMBER OF OPPORTUNITIES GRANTED BY HIM TO THE ASSES SEE TO COMPLY WITH THE QUERIES POSED TO IT; AND TO DEMONSTRATE THE DELAYING TACTIC S ADOPTED BY THE ASSESSEE IN TABLE-1 AT PAGE 2 OF HIS ORDER, FROM WHICH IT IS DI SCERNIBLE THAT ASSESSING OFFICER AFTER RECEIVING THE DOCUMENTS PERTAINING TO THIS CA SE ON 03.08.2009, ON NEXT DAY I.E. 04.08.2009 ISSUED STATUTORY NOTICES AND GAVE A S MUCH AS EIGHT (8) OPPORTUNITIES WITHIN AN INTERVAL OF THREE MONTHS AND NINE DAYS TO PRODUCE THE DETAILS AND SUPPORTING DOCUMENTS AS CALLED FOR BY THE ASSESSING OFFICER TO COMPLETE THE ASSESSMENT U/S 143 (3) OF THE ACT. AFTER GOING THR OUGH THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE IN WHICH THE NAMES OF THE ALL EGED INVESTORS, THEIR ADDRESSES, PAN, DATE OF TRANSACTIONS INVOLVING SHARE APPLICATI ON MONEY AND AMOUNT OF SHARE APPLICATION MONEY IN EACH CASE, THE ASSESSING OFFIC ER MADE THE INVESTIGATION INITIALLY WITHIN THE LIMITED TIME I.E. 31 WORKING D AYS AS UNDER : (I) THE INSPECTOR OF THE DEPARTMENT WAS SENT TO DELHI T O SERVE NOTICE U/S 133 (6) AT 9 OF THE RANDOMLY SELECTED ADDRESSES OF THE INVESTORS OUT OF TOTAL 39. MOREOVER 9 NOTICES U/S 133 (6) WER E SENT TO THE CLAIMED INVESTORS AT THE GIVEN ADDRESSES. (II) AN INDEPENDENT HANDWRITING EXPERT WAS GIVEN ASSIGNM ENTS OF GOING THROUGH THE SIGNATURES OF THE ALLEGED INVESTO RS ON THE DOCUMENTS SUPPLIED BY THE ASSESSEE. (III) ALL THE PANS OF THE ALLEGED INVESTORS, AS PRO VIDED BY THE ASSESSEE, WERE CHECKED IN ASSESSEE INFORMATION SYSTEM (AIS), AN EXHAUSTIVE DATABASE OF ALL ASSESSES WITH THE INCOME TAX DEPART MENT. 5 ITA NO.3401/DEL/2011 6. AFTER GOING THROUGH THE RESULTS OF INVESTIGATION S ON THE ABOVE MENTIONED LINES, THE ASSESSING OFFICER OBSERVED THAT THE SAME ARE AGAINST THE GENUINENESS OF SHARE APPLICATION MONEY TRANSACTIONS AND CREATED VE RY SERIOUS DOUBTS ABOUT THE IDENTITY AND CREDITWORTHINESS OF THE SHARE APPLICAT ION MONEY. THE ASSESSING OFFICER HAS DISCUSSED THE RESULTS OF THESE INVESTIG ATIONS, IN BRIEF, AT PAGES 3 TO 14 OF HIS ORDER, WHICH INCLUDES SCANNED COPIES OF THE INS PECTOR REPORTS WHO WAS ENTRUSTED TO SERVE NOTICE ON NINE (9) SHAREHOLDERS IN THE RESPECTIVE ADDRESSES FURNISHED BY THE ASSESSEE WHICH STATES THAT THERE I S NO SUCH SHARE APPLICANTS/INVESTORS HAD BEEN EVER RESIDED OR FUNCT IONAL FROM THAT ADDRESSES. AFTER TAKING NOTE OF THE HAND-WRITING EXPERTS OPINION THA T SIGNATURE ON AFFIDAVITS AND ITRS DONT MATCH AND THE SEARCH IN AIS DATA BASE OF PAN YIELDING NEGATIVE RESULTS, IT IS SEEN THEREAFTER THAT THE ASSESSING O FFICER SUBSEQUENTLY ENHANCED THE SCOPE OF THE INVESTIGATION TO FIND THE IDENTITY AND CREDITWORTHINESS OF THE ALLEGED INVESTORS AND GENUINENESS OF TRANSACTIONS INVOLVING SHARE APPLICATION MONEY. THE ASSESSING OFFICER ISSUED A SHOW CAUSE NOTICE U/S 14 2(1) ON 04.12.2009 ASKING THE ASSESSEE TO PRODUCE THE INVESTORS/SHAREHOLDERS AS C LAIMED BY IT FOR EXAMINATION BEFORE HIM; AND THE ASSESSING OFFICER CAUTIONED THE ASSESSEE THAT IF IT FAILED TO PRODUCE THESE INVESTORS FOR EXAMINATION, THE AMOUNT OF SHARE APPLICATION MONEY RECEIVED BY IT WILL BE ADDED TO THE INCOME OF THE A SSESSEE. THE ASSESSING OFFICER ISSUED ANOTHER NOTICE DATED 10.12.2009 WHEREIN, THE ASSESSEE WAS FURTHER SUPPLIED WITH HANDWRITING EXPERTS OPINION, THE COPIES OF TH E REPORT OF INSPECTOR AND REASONS WERE SPELT OUT AS TO WHY THE IDENTITY, CRED ITWORTHINESS AND GENUINENESS OF THE SHARE HOLDERS WAS UNDER SERIOUS DOUBT AND THE A SSESSEE WAS ASKED TO SUBMIT ORIGINAL AFFIDAVITS OF THE SHAREHOLDER, SINCE THE A SSESSEE DID NOT PRODUCE THE ORIGINAL AFFIDAVIT OF THE SHAREHOLDERS AND HAD FILE D BEFORE HIM ONLY THE PHOTO- COPIES OF THE SAME. MEANWHILE AO, CROSS CHECKED WIT H FEW BANKS, THE VERACITY OF THE BANK STATEMENTS SUBMITTED BY THE ASSESSEE IN OR DER TO PROVE THE CREDIT- 6 ITA NO.3401/DEL/2011 WORTHINESS OF THE INVESTORS, WHICH ALSO TURNED OUT TO BE BOGUS. THE ASSESSING OFFICER, TAKING INTO CONSIDERATION THE REPORT OF IT O, UNSERVED NOTICES, HAND WRITING EXPERT OPINION AND THE BANK REPORT WHICH STATED THA T THE SHARE APPLICANTS/HOLDERS DID NOT HAD ANY BANK ACCOUNT IN THEIR BRANCHES, CON CLUDED THAT THE ASSESSEE COMPANY FAILED TO COMPLY WITH THE REQUIREMENTS OF T HE NOTICES ISSUED U/S 142(1) AND ALSO TOOK NOTE OF THE FACT THAT ASSESSEE FAILED TO PRODUCE A SINGLE INVESTOR TO PROVE THE IDENTITY, CREDIT WORTHINESS AND GENUINENE SS OF THE TRANSACTIONS OF THE CLAIMED INVESTORS, MADE THUS AN ADDITION OF RS.3,46 ,00,000/- U/S 68 OF THE ACT. ACCORDINGLY, THE ASSESSING OFFICER COMPLETED THE AS SESSMENT U/S 143(3) OF THE ACT AT A TOTAL INCOME OF RS.13,53,39,820/-. 7. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE T HE FIRST APPELLATE AUTHORITY WHO, AFTER GOING THROUGH THE MATERIAL AVAILABLE ON RECORD, WRITTEN SUBMISSIONS FILED BY THE ASSESSEE, AND THE REMAND REPORT OF AO, DELET ED THE ADDITION OF RS.3.46 CRORES AND ALLOWED THE APPEAL OF THE ASSESSEE BY AD DRESSING THE CONTENTIONS RAISED BY THE ASSESSEE AS UNDER :- (A) THE LD. CIT (A), WHILE PASSING THE IMPUGNED ORD ER, TOOK NOTE OF THE FACT THAT THE AO MADE THE ASSESSMENT ON THE BASIS O F HIS INVESTIGATIONS ON THE FOLLOWING THREE LINES:- (I) ENQUIRIES CONDUCTED THROUGH THE I.T.I. OF THE OFFICE; (II) ASSIGNMENT GIVEN TO HANDWRITING EXPERT FOR VER IFICATION OF SIGNATURES ON THE DOCUMENTS FURNISHED BY THE ASSESS EE; AND (III) CHECKING OF PANS OF SHARE APPLICANTS ON ASSESSEE IN FORMATION SYSTEM. 7 ITA NO.3401/DEL/2011 (B) THE LD. CIT (A) DISCUSSED THE ABOVE SAID LINES OF INVESTIGATION OF AO AND FOUND FAULT IN THE SAME AS UNDER :- (I) ENQUIRIES CONDUCTED THROUGH THE I.T.I. OF THE OFFIC E. LD. CIT (A) OBSERVED THAT THE AO ISSUED NOTICES U/S 133(6) OF THE ACT AT THE ADDRESSES PROVIDED BY THE ASSESSEE AND FOUND THAT I.T.I. HAD MADE ENQUIRIES IN RESPECT OF NINE SHARE APPLICANTS (MENT IONED AT PAGE 26 OF THE CIT(A)S ORDER) AND REPORTED THAT SEVEN SHARE APPLI CANTS WERE NON-EXISTENT AT THE GIVEN ADDRESS AND THE OTHER TWO COMPANIES WE RE CLOSED DOWN AFTER MARCH, 2006. LD. CIT (A) ALSO OBSERVED THAT AO FUR THER CONDUCTED ENQUIRIES OF TWELVE MORE SHARE APPLICANTS THROUGH I .T.I. THE LD. CIT (A), AFTER GOING THROUGH THE SUBMISSIONS MADE BY THE LD. COUNSEL FOR THE ASSESSEE (REPRODUCED AT PAGES 26 TO 30 OF HIS ORDER), HAD OB SERVED AS UNDER :- (I) THAT THE APPELLANT HAS FURNISHED COPY OF RATIO N CARD AND/OR PAN CARD IN THE CASE OF INDIVIDUAL, INCORPOR ATION CERTIFICATE ISSUED BY THE REGISTRAR OF COMPANIES AN D COPY OF ACTIVE STATUS OF THE COMPANY FROM MINISTRY OF COMPA NY AFFAIRS, GOVERNMENT OF INDIA SITES WHEREIN THE ADDR ESSES OF THE COMPANIES ARE GIVEN. (II) AS PER THE APPELLANT THE I.T.I.S REPORT DATED 07.12.2009 WAS MADE PART OF SHOW CAUSE NOTICE ISSUE U/S 142(1) DATED 04.12.2009. FURTHER IT HAS ALSO BEEN CONTENDED THA T I.T.I'S REPORT DATED 18.12.2009 HAS BEEN MADE PART OF SHOW CAUSE NOTICE ISSUED U/S 142(1) DATED 17.12.2009. IN THE I .T.I'S REPORT DATED 18.12.2009 IT HAS BEEN SPECIFICALLY REPORTED THAT ON THE DIRECTIONS ISSUED BY THE A.O., ON 18.12.2009, THE I .T.I. HAD MADE SPOT ENQUIRIES. THUS IT IS NOT UNDERSTOOD HOW THE ENQUIRIES CONDUCTED BY THE I.T.I. ON 18.12.2009 WER E KNOWN TO THE A.O. BEFORE HAND ON 17.12.2009. FURTHERMORE, IT IS ALSO GATHERED FROM I.T.I'S REPORTS DATED 08.12.2009 THAT INTERESTINGLY 8 ITA NO.3401/DEL/2011 HE HAS MADE ENQUIRIES IN DELHI FROM TEA VENDORS, FR UIT VENDORS AND PASSER-BY IN ORDER TO ASCERTAIN THE ADDRESSES O F SHARE APPLICANTS WHEREAS THE FACT IS THAT IN CITY LIKE DE LHI EVEN THE NEIGHBOURS DO NOT KNOW EACH OTHER WHAT TO TALK OF F RUIT VENDORS, TEA VENDORS AND PASSER-BY. THUS THE ENQUIR ES MADE FROM THE AFORESAID SETS OF PERSONS IS RIDICULOUS AN D IS BRUSHED ASIDE. FURTHER, THE I.T.I'S REPORT IS NOT BASED ON SPECIFIC RESULTS OF ENQUIRIES CONDUCTED BY HIM. FURTHERMORE, THE STATEMENT RECORDED IN RESPECT OF SARDAR SURENDER PAL SINGH SH OULD NOT BE GIVEN MUCH CREDENCE IN AS MUCH AS THE APPELLANT HAS FURNISHED COPIES OF ITRS, AUDITED BALANCE-SHEETS AND ACTIVE S TATUS OF THE TWO COMPANIES TO ESTABLISH THAT THE AFORESAID COMPA NIES WERE AT PRESENT IN EXISTENCE AND NOT CLOSED DOWN AS STAR TED BY AFORESAID PERSON. THUS IT IS HELD THAT MUCH CREDENC E CANNOT BE GIVEN IN RELYING ON THE REPORTS OF THE I.T.I.S AND ALSO ON THE STATEMENT RECORDED IN RESPECT OF SARDAR SURENDER PA L SINGH. (II) REPORT OF HANDWRITING EXPERT LD. CIT (A) OBSERVED THAT THE AO DISCUSSED IN DETAI L ABOUT THE REPORT OF THE HANDWRITING EXPERTS AND HAD POINTED OUT CERTAIN DIS CREPANCIES IN THE SIGNATURES IN THE DOCUMENTS FURNISHED BY THE ASSESS EE IN RESPECT OF SHARE APPLICANTS. LD. CIT (A), WHILE OBSERVING THE WRITT EN SUBMISSIONS FILED BY THE ASSESSEE DURING THE APPELLATE PROCEEDINGS (REPR ODUCED AT PAGES 32 & 33 OF HIS ORDER), OBSERVED AS UNDER :- IT IS OBSERVED THAT THE OPINION OF THE HANDWRITING EXPERT CAN BE TAKEN ONLY WHEN THERE IS ONE FIXED BASE COMPRISING OF SPECIMEN OF HANDWRITING AND THERE ARE OTHER DISPUTABLE DOCUM ENTS WHICH HAVE TO BE COMPARED WITH THE INDISPUTABLE DOCUMENT TO VERIFY WHETHER THE HANDWRITING TALLIES OR NOT. HOWEVER, IN THE CASE UNDER CONSIDERATION, THE HANDWRITING EXPERT HAS BAS ED HIS REPORT ON SIGNATURES GIVEN IN PHOTOCOPIES OF DOCUMENTS AS FURNISHED 9 ITA NO.3401/DEL/2011 BY THE APPELLANT. FURTHER, THE AO CANNOT DRAW ADVERSE INFERENCE SOLELY ON THE REPORT OF THE HANDWRITING EXPERTS ESP ECIALLY WHEN THE APPELLANT HAS OBJECTED TO SUCH HANDWRITING EXPE RT'S REPORT. FURTHERMORE, IN SOME CASES THE HANDWRITING EXPERT H AS EVEN ACCEPTED THE SIGNATURES MADE ON THE DOCUMENTS FURNI SHED IN RESPECT OF SHARE APPLICANTS AS GENUINE. EVEN OTHERW ISE, THE REPORT OF THE HANDWRITING EXPERT IS NOT LEGALLY TEN ABLE AS HE IS NOT AUTHORIZED BY THE ACT WHICH COULD BE TAKEN COGN IZANCE OF. ON THE OTHER HAND, THE APPELLANT HAS CONTENDED THAT THE OPINION OF A HANDWRITING EXPERT IS SIMPLY AN OPINION WHICH IS NOT PROVIDED UNDER THE ACT JUST LIKE THE DEPARTMENTAL V ALUATION OFFICER (D.V.O.) U/S 142A OR 55A OF THE ACT. IT HA S ALSO BEEN CONTENDED THAT SUCH ACTION OF THE AO WAS UNILATERAL AND NO OPPORTUNITY OF CROSS EXAMINING THE HANDWRITING EXPE RT WAS GRANTED BY THE AO. THUS, IN VIEW OF THE ABOVE FACT S, THE RELIANCE PLACED BY THE AO ON THE REPORT OF HANDWRIT ING EXPERT CANNOT BE GIVEN MUCH WEIGHTAGE. (III) CHECKING OF PANS ON ASSESSEE INFORMATION SYST EM (AIS). LD. CIT (A) OBSERVED THAT ACCORDING TO THE AO, THE ADDRESSES OF THE CLAIMED INVESTORS WERE CHECKED IN THE AIS DATABASE BUT IN A LMOST ALL CASES EITHER THE ADDRESS WAS DIFFERENT OR THE PAN WAS SIMPLY INVALID . AFTER GOING THROUGH THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE ON TH IS ISSUE BEFORE THE LD. CIT (A) (REPRODUCED AT PAGES 34 & 35 OF HIS ORDER), LD. CIT (A) OBSERVED AS UNDER :- THE A.O. IN THE ASSESSMENT ORDER HAS MENTIONED THA T WHILE CHECKING ON ASSESSEE INFORMATION SYSTEM EITHER THE ADDRESSES FURNISHED BY THE APPELLANT IN RESPECT OF SHARE APPL ICANTS WERE DIFFERENT FROM THOSE ON THE AIS OR THE PANS WERE SI MPLY INVALID. IT IS OBSERVED THAT THE AO WHILE HOLDING T HAT PANS WERE INVALID HAS NOT MADE ANY SPECIFIC REFERENCE OF SUCH DEFECTIVE PAN . THE APPELLANT HAS CONTENDED THAT IN THE CASE OF 10 ITA NO.3401/DEL/2011 M/S RIA MARKETING COMPANY HAD CHANGED ITS NAME TO M /S SIMARJEET ELECTRONICS (P) LTD AND HAS ALSO FURNISHE D COPY OF R.O.C. FOR APPROVAL OF NAME CHANGE. WHEREAS IN THE CASE OF SMT. SARASWATI DEVI GOEL, THE APPELLANT HAS SUBMITT ED PHOTOCOPY OF THE PAN CARD OF THE SHARE APPLICANT. F URTHER IN TWO CASES NAMELY, M/S SALWANT DEVELOPERS & PROMOTER S PVT. LTD AND M/S SAHGAL FLUDLINE EQUIPMENT PVT. LTD. THE RE WAS INADVERTENT ERROR IN QUOTING OF PANS AND HAS SUBMITTED COPY OF PAN DETAILS FROM NSDL BEFORE THE A.O. AT THE TIME O F ASSESSMENT PROCEEDINGS. REGARDING DIFFERENCE IN ADD RESSES OF THE SHARE APPLICANTS AS FURNISHED BY THE APPELLANT AND AS GIVEN ON THE A.I.S., IT HAS BEEN CONTENDED BY THE APPELLA NT THAT ADDRESS ON AIS IS BASED ON, DETAILS AS FURNISHED IN FORM NO.49A AT THE TIME OF APPLYING OF PAN. HOWEVER, DUE TO CHANGE OF LOCATION OF ASSESSEE'S BUSINESS/ PROFESSI ON / RESIDENCE, THE ADDRESS GIVEN ON PAN (AIS) MAY NOT B E THE SAME AS MENTIONED IN THE ITRS OF THE ASSESSES . EVEN OTHERWISE, THE APPELLANT HAS PROVIDED PHOTOCOPIES OF PANS/ITR S AND DETAILS OF PANS FROM NSDL SITES AND AS SUCH, THE RE LIANCE PLACED B THE A.O. ON ASSESSEE INFORMATION SYSTEM IS HELD AS HALF COOKED AND NOT BROUGHT TO A CONCLUSIVE END . IN ADDITION TO THE ABOVE LINES OF INVESTIGATION, TH E LD. CIT (A) DISCUSSED AOS ORDER ON THE FOLLOWING TWO MORE LINES OF INVES TIGATION :- (I) INFORMATION COLLECTED FROM BANKS LD. CIT (A), RELYING ON THE JUDGMENT OF HONBLE DEL HI HIGH COURT IN THE CASE OF CIT VS. K.C. FIBERS LTD. (2010) 187 TAXMAN 53 (DEL.), FURTHER OBSERVED THAT IF THE BANK ACCOUNTS OF THE SHARE APP LICANTS ARE NON-EXISTENT, THE ASSESSEE CANNOT BE FASTENED WITH THE LIABILITY . HE FURTHER OBSERVED THAT THE SHARE APPLICATION MONEY HAD BEEN RECEIVED THROU GH UNDISPUTED BANKING CHANNELS AND THE APPLICANTS HAD FURNISHED COPIES OF BANK STATEMENTS TO 11 ITA NO.3401/DEL/2011 ESTABLISH THE GENUINENESS OF TRANSACTION AND ACCORD INGLY, HELD THAT THE ADVERSE INFERENCE DRAWN BY THE AO IS UNTENABLE AND THEREFORE REJECTED . (II) IDENTITY, CREDITWORTHINESS OF THE SHARE APPLICANTS AND GENUINENESS OF TRANSACTION THE LD. CIT (A) HAD DISCUSSED ABOUT 23 CORPORATE SH ARE APPLICANTS AND 14 INDIVIDUAL SHARE APPLICANTS WITH REGARD TO THEIR ID ENTITY & CREDITWORTHINESS OF THE SHARE APPLICANTS AND GENUINENESS OF TRANSACT ION INDIVIDUALLY FROM PAGES 37 TO 63 OF HIS ORDER. THE LD. CIT (A) HAS D ISCUSSED THE AOS CONTENTION ABOUT ALL THE SHARE APPLICANTS INDIVIDUA LLY IN HIS ORDER WHICH WE WILL DISCUSS LATER IN THIS ORDER. BEFORE THE LD CIT (A), THE ASSESSEE HAD FILED COPY OF PAN FROM SITE NSDL, COPY OF INCORPORATION C ERTIFICATE, COPY OF INCOME-TAX RETURNS, COPY OF AUDITED BALANCE SHEET, COPY OF BANK DETAILS, COPY OF ADDRESS PROOF ETC. TO PROVE THE IDENTITY & CREDITWORTHINESS OF THE SHARE APPLICANTS AND GENUINENESS OF TRANSACTION, WH ICH THE LD. CIT (A) HAD DISCUSSED IN THE AFORESAID PAGES OF HIS ORDER. AFT ER DISCUSSING THE AOS CONTENTION AND THE SUBMISSIONS OF THE ASSESSEE ABOU T EACH AND EVERY SHARE APPLICANTS INDIVIDUALLY, THE LD. CIT (A) DELETED TH E ADDITION AS UNDER :- IT IS OBSERVED THAT THE SHARE SUBSCRIBERS ARE IDEN TIFIABLE AND ARE ASSESSED TO TAX. THE TRANSACTIONS ARE GENUINE AS TH E SHARE APPLICATION MONEY HAS BEEN RECEIVED THROUGH UNDISPUTED BANKING CHANNEL. THE APPELLANT HAS FURNISHED COPIES OF ITRS, PAN CARDS, COPY OF DRIVING LICENCE, VOTER CARD, INCORPORATION CERTIFICATE FROM R.O.C., ACTIVE STATUS OF THE COMPANY FROM MINISTRY OF COMPANY AFFAIRS SIT ES. FURTHER, THE A.O. IN THE ASSESSMENT ORDER HAS MENTIONED THAT AS PER RETURNS OF INCOME OF THE SHARE APPLICATIONS FOR A.YS.2004-05 A ND 2005-06, THE INCOME DECLARED BY THEM IS NOT COMMENSURATE WITH TH E AMOUNT OF INVESTMENT MADE IN SHARE CAPITAL. REGARDING CREDITW ORTHINESS IN RETURNED INCOME SHOWN IN THE ITR OR THE CAPITAL OF THE COMPANY CANNOT BE THE SOLE DETERMINANTS. IT IS OBSERVED THA T THE CAPACITY TO INVEST FUND BY AN INVESTOR DEPENDS UPON THE AVAILAB ILITY OF FUNDS WITH 12 ITA NO.3401/DEL/2011 THE INVESTORS AND NOT ON THE TAX PAID/ANNUAL INCOME OF THE INVESTOR. THE APPELLANT HAS FURNISHED LATEST BALANCE SHEETS O F THE SHARE APPLICANT COMPANIES WHICH REVEAL THAT THE INVESTOR COMPANIES HAVE SUFFICIENT FUNDS TO INVEST THE MONEY IN SHARE APPLICATION. FUR THERMORE, A SET OF APPELLANT SUBMISSIONS ALONG WITH DOCUMENTARY EVIDEN CE WERE FORWARDED TO THE A.O. FOR REMAND REPORT. HOWEVER, IN THE REMAND REPORT DATED 28.10.2011 THE A.O. HAS NOT BEEN ABLE TO CONTROVERT THE DOCUMENTARY EVIDENCES FURNISHED BY THE APPELLANT AN D RATHER HAS REPORTED THAT NOTICES U/S 133(6) OF THE ACT WERE IS SUED TO SHARE APPLICANTS IN 15 CASES OUT OF WHICH 6 ENVELOPS WERE RECEIVED BACK UNSERVED AND IN 6 CASES COMPLIANCE FROM SHARE APPLI CANTS HAVE BEEN MADE. THUS IT CAN BE SAID THAT IN 9 CASES, NOTICES ISSUED U/S 133(6) OF THE ACT WERE SERVED AT THE ADDRESS FURNISHED APPELL ANT. IN THE ASSESSMENT ORDER AS WELL AS IN THE REMAND REPORT, T HE A.O. HAS EMPHASIZED THAT THE SHARE APPLICANTS WERE NOT FOUND AT THE ADDRESSES FURNISHED BY THE APPELLANT, IT IS OBSERVED THAT THE HON'BLE DELHI HIGH COURT IN THE LATEST JUDGEMENT VIDE COMBINED ORDERS IN THE CASE OASIS HOSPITALITIES PVT. LTD (ITA NO.2093 OF 2010) AND CI T VS. U.P. BONE MILLS INDIA LTD.(ITA N0.2094 OF 2010) AND CIT VS. V IJAY POWER GENERATORS LTD. (ITA NO.539 OF 2008) WHILE DISCUSSI NG SECTION 68 OF THE ACT HAS ALSO CITED DECISIONS OF THE HONBLE SUP REME COURT AND HON'BLE HIGH COURTS IN THE FOLLOWING CASES:- (I) CIT VS. DIVINE LEASING & FINANCE LTD. 299 IT R 268(SC) (II) CIT VS. SOPHIA FINANCE LTD. (1994) 205 ITR 98 (SC) (III) CIT VS. DOLPHINE CANPACK LTD.(2006) 283 ITR 1 90 (IV) CIT VS. LOVELY EXPORTS PVT. LTD. 216 CTR 195 (SC) (V) CIT VS. CREATIVE WORLD TELEFILM LTD. (ITA NO.21 82 OF 2009 DECIDED ON 12-10-2009) (VI) MADHURI INVESTMENTS PVT. LTD. VS. ACIT (ITA N O.110 OF 2004 DECIDED ON 18-02-2006) (VII) CIT VS. ARUNANANDA TEXTILES PVT. LTD. (ITA N O.1515 OF 2005 DECIDED ON 02-03-2010) (VIII) CIT VS. AKJ GRANITES PVT. LTD. 301 ITR 298 (IX) CIT VS. STELLER INVESTMENT LTD. (2000) 164 CTR (SC) 287 13 ITA NO.3401/DEL/2011 X) CIT VS. VALUE CAPITAL SERVICES PVT. LTD. (2008) 307 ITR 334 (DELHI) THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS . M/S. CREATIVE WORLD TELEFILMS LTD. (ITANO.2182 OF 2009 D ECIDED ON 12.10.2009) ON THE IMPUGNED ISSUE HELD AS UNDER :- .... IN THE CASE IN HAND, IT IS NOT DISPUTED THAT THE ASSESSEE HAD GIVEN THE DETAILS OF NAME AND ADDRESS OF THE SHAREH OLDER, THEIR PAN/GIR NUMBER AND HAD ALSO GIVEN THE CHEQUE NUMBER , NAME OF THE BANK. IT WAS EXPECTED ON THE PART OF THE ASS ESSING OFFICER TO MAKE PROPER INVESTIGATION NOTHING EXCEPT ISSUING SUMMONS WHICH WERE ULTIMATELY RETURNED BACK WITH AN ENDORS EMENT NOT TRACEABLE. IN OUR CONSIDERED VIEW, THE ASSESSING OFFICER OUGHT TO HAVE FOUND OUT THEIR DETAILS THROUGH PAN CARDS, BANK ACCOUNT DETAILS OR FROM THEIR BANKERS SO AS TO REAC H THE SHAREHOLDERS SINCE ALL THE RELEVANT MATERIAL DETAIL S AND PARTICULARS WERE GIVEN BY THE ASSESSEE TO THE ASSES SING OFFICER, IN THE ABOVE CIRCUMSTANCES, THE VIEW TAKEN BY THE T RIBUNAL CANNOT BE FAULTED. NO SUBSTANTIAL QUESTION OF LAW I S INVOLVED IN THE APPEAL .... ' THE COURT THUS CLEARLY HELD THAT ONCE DOCUMENTS LIK E PAN CARD, BANK ACCOUNT DETAILS OR DETAILS FROM THE BANK ERS WERE GIVEN BY THE ASSESSEE, ONUS SHIFTS UPON THE ASSESSING OFFICE R AND IT IS ON HIM TO REACH THE SHAREHOLDERS AND THE ASSESSING OFFICER CA NNOT BURDEN THE ASSESSEE MERELY ON THE GROUND THAT NOTICES ISSUED U /S 133(6) TO THE INVESTORS WERE RETURNED BACK WITH THE ENDORSEMENT ' NOT TRACEABLE'. SAME VIEW IS TAKEN BY THE HON 'BLE KARNATAKA HIGH C OURT IN MADHURI INVESTMENTS PVT. LTD. VS. ACIT (IN ITA NO.110 OF 20 04, DECIDED ON 18.02.2006). IN THIS CASE ALSO, SOME OF SHARE APPLI CANTS DID NOT APPEAR AND NOTICES SENT TO THEM WERE RETURNED WITH REMARKS 'WITH NO SUCH PERSON'. ADDITION WAS MADE ON THAT BASIS WHICH WAS TURNED DOWN BY THE HON'BLE HIGH COURT IN THE FOLLOWING WORDS :- 6. HAVING HEARD THE LEARNED COUNSEL FOR THE PARTIE S, WE NOTICE THAT WHENEVER A COMPANY INVITES APPLICATIONS FOR ALLOTMENT OF SHARES FROM DIFFERENT APPLICANTS, THER E IS NO PROCEDURE CONTEMPLATED TO FIND OUT THE GENUINENESS OF THE ADDRESS OR THE GENUINETY OF THE APPLICANTS BEFORE A LLOTTING THE 14 ITA NO.3401/DEL/2011 SHARES. IF FOR ANY REASON THE ADDRESS GIVEN IN THE APPLICATION WERE TO BE INCORRECT OR FOR ANY REASON IF THE SAID APPLICANTS HAVE CHANGED THEIR RESIDENCE OR THE NOTICES SENT BY THE ASSESSING OFFICER HAVE NOT BEEN RECEIVED BY SUCH APPLICANTS; THE ASSESSEE COMPANY CANNOT BE BLAMED.... ' THUS THE INTENTION OF LAW IS THAT UNACCOUNTED MONEY SHOULD BE BROUGHT TO TAX. AS PER PROVISIONS OF SECTION 68 OF THE ACT ONUS IS ON THE PERSON IN WHOSE BOOKS OF ACCOUNT SUCH MONEY IS SURFACED. IF AN AMOUNT IS SURFACED IN THE BOOKS OF AN ASSESSEE EITH ER IN THE SHAPE OF SHARE APPLICATION MONEY OR A DEPOSIT/LOAN; IT SHOUL D BE ACCEPTED THAT SUCH MONEY BELONGS TO THE PERSON IN WHOSE NAME IT H AS BEEN SHOWN. HOWEVER, AS PER PROVISIONS OF SECTION 68 OF THE ACT , DEEMING PROVISIONS POSTULATE THAT IT IS POSSIBLE THAT THE A SSESSEE MAY CIRCULATE ITS OWN UNACCOUNTED MONEY IN THE SHAPE OF BOGUS PER SONS AND THEREFORE LEGAL ONUS HAS BEEN CREATED. AT THE SAME TIME, IT IS ALSO POSSIBLE THAT SOME INTERESTED PERSON MAKE DEPOSITS (ADVANCES LOAN OR APPLIES FOR SHARE CAPITAL) IN THE NAMES OF BOGUS/NO N-GENUINENESS OR BENAMI PERSONS FOR INVESTING ITS OWN UNACCOUNTED MO NEY. FOR DISCHARGING THAT LEGAL ONUS, THE IDENTITY GENUINENE SS OF TRANSACTION AND CREDITWORTHINESS OF THE PERSONS IS TO BE ESTABL ISHED BY THE ASSESSEE. THERE ARE SEVERAL DECISIONS IN RESPECT OF SUFFICIENCY OF DISCHARGE OF ONUS BY THE ASSESSEE. THE HONBLE APEX COURT IN THE CASE OF MS. LOVELY EXPORTS PVT. LTD. & OTHERS 216 C TR 195 (SC) HAS GIVEN THE GUIDELINES IN RESPECT OF ONUS TO BE DISCH ARGED BY THE ASSESSEE IN RESPECT OF SHARE APPLICANTS. FOLLOWING THE DECISION OF HON'BLE APEX COURT AS PER SEVERAL OTHER HON'BLE COU RTS RULINGS, THE ONUS OF THE PERSON RECEIVING MONEY HAS BEEN RESTRIC TED TO PROVE GENUINENESS OF THE TRANSACTION AND TO PROVIDE COPIE S OF ITRS, PANS, DETAILS OF BANK ACCOUNTS. FURTHER, THE HON'BLE DELH I HIGH COURT IN THE CASE OF CIT VS. HLT FINANCE (P) LTD (ITA 1133/2010) WHILE DECIDING THE ISSUE IN RESPECT OF ADDITION U/S 68, HAS CITED THE OBSERVATION OF THE HON'BLE ITAT AS UNDER IN THE IMPUGNED ORDER WHEREIN ADDITION MADE U/S 68 WAS DELETED. .....IT WAS ARGUED BY THE LEARNED A.R. THAT ALL TH E PRIMARY INFORMATION WITH REGARD TO SHAREHOLDERS WAS FURNISH ED BEFORE THE LOWER AUTHORITIES. OUR ATTENTION WAS DRAWN TO A NNEXURE-I WHEREIN WITH RESPECT TO EACH AND EVERY SHAREHOLDER THE ASSESSEE HAS FURNISHED STATUS OF PERSON, RELATIONSHIP WITH T HE COMPANY AND THE DOCUMENTS FILED BEFORE THE LOWER AUTHORITIE S. FROM THIS 15 ITA NO.3401/DEL/2011 STATEMENT, WE FOUND THAT ASSESSEE HAS FILED CONFIRM ATION IN RESPECT OF SHRI N.R. SURI AND MRS. HARVINDER KAUR. IN RESPECT OF SH. M.P. KHANNA AND SHRI JP. KHANNA, THE ASSESSE E HAS FILED CAPITAL ACCOUNT IN THE FIRM FROM WHERE WITHDRAWAL F OR THIS INVESTMENT WAS MADE AND THESE TWO ARE THE DIRECTORS OF THE ASSESSEE COMPANY. THE ASSESSEE HAS ALSO FILED COPIE S OF LEDGER ACCOUNT. IN RESPECT OF THREE PRIVATE LIMITED COMPAN IES, THE ASSESSEE HAS FILED COPY OF LEDGER ACCOUNT AND IN CA SE OF HALLMARK HEALTHCARE LIMITED, THE ASSESSEE HAS ALSO FILED AFFIDAVIT FOR ADVANCING THE MONEY ON ACCOUNT OF SHA RE CAPITAL. IN RESPECT OF ALL THESE THREE COMPANIES, THE A.O. H AS DIRECTLY OBTAINED THE BANK STATEMENT FROM WHERE RELEVANT CHE QUES ON ACCOUNT OF SHARE CAPITAL WERE ISSUED. ON THE BASIS OF THESE CERTIFICATES AS NARRATED BY THE A.O. AND CIT(A) WE CAN SAFELY CONCLUDE THAT IDENTITY OF THE SHAREHOLDERS WAS ESTA BLISHED AND THE ONLY GRIEVANCE OF THE CIT(A) WAS WITH REGARD TO CREDITWORTHINESS OF THESE SHAREHOLDERS AND GENUINEN ESS OF TRANSACTION. HON'BLE SUPREME COURT IN THE CASE OF D IVINE LEASING AND FINANCE LIMITED DISMISSED THE SLP FILED BY THE REVENUE AGAINST THE ORDER OF HON'BLE JURISDICTIONAL HIGH COURT, WITH SPEAKING ORDER. IN CASE OF MALWA CAPITAL SERVI CE (P) LTD. IN ITA NO.348/08, VIDE ORDER DATED 25.04.2008, HON BLE DELHI HIGH COURT HELD THAT IT IS VERY DIFFICULT FOR THE A SSESSEE TO SHOW THE CREDITWORTHINESS OF STRANGERS AND IF THE REVENU E HAD ANY DOUBT WITH REGARD TO ABILITY TO MAKE THE INVESTMENT THEIR RETURNS MAY BE REOPENED BY THE DEPARTMENT. HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS WHILE REJECTING THE DEPA RTMENT'S SLP NO.1993/07 DATED 11.1.2008, HELD THAT WHEN THE SHAR E APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPA NY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN TH EIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. SIMILAR WAS THE FINDING OF HON'BLE SUPREME COURT IN THE CASE OF SHIPRA RETAILE RS (P) LTD IN SLP NO 45/08 DATED 21.1.2008 AS ALSO IN THE CASE OF DIVINE LEASING & FINANCE LTD. IN SLP NO.375/08 DATED 21-1- 2008. 4. THE VARIOUS JUDGMENTS RELIED ON BY THE LEARNED A R AND PLACED ON RECORD CLEARLY LAY DOWN, THE RATIO TO THE EFFECT THAT IN RESPECT OF MONEY INTRODUCED BY WAY OF SHARE CAPITAL , AND THE ASSESSEE COMPANY FURNISHED THE NAMES AND PARTICULAR S OF 16 ITA NO.3401/DEL/2011 SHAREHOLDERS FOR ESTABLISHING THEIR IDENTITY, THE D EPARTMENT MAY PROCEED TO REOPEN THE ASSESSMENTS OF ALL SUCH ALLEG ED BOGUS SHAREHOLDERS WHOSE INVESTMENTS IN THE SHARE CAPITAL IS FOUND TO BE EXPLAINED 5. IN VIEW OF THE ABOVE, WE ALLOW THE APPEAL OF THE ASSESSEE WITH THE SIMILAR DIRECTION TO THE EFFECT THAT DEPAR TMENT IS AT LIBERTY TO REOPEN THE INDIVIDUAL ASSESSMENT AS ALLE GED SHAREHOLDERS, AS PER PROVISIONS OF LAW. THE HON'BLE COURT HAS FURTHER OPINED THAT THE APPRO ACH ADOPTED BY CIT(A) AND ITAT IS IN CONSONANCE WITH THE DECISI ON OF SUPREME COURT IN COMMISSIONER OF INCOME TAX VS. LOVELY EXPO RTS (P) LTD., 216 CTR 195 (SC) WHEREIN IT HAS BEEN HELD AS UNDER :- 2. CAN THE AMOUNT OF SHARE MONEY BE REGARDED, AS UNDISCLOSED INCOME UNDER S. 68 OF I.T.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 ASSE SSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAME S ARE GIVEN TO THE A.O. THEN THE DEPARTMENT IS FREE TO PR OCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE W ITH LAW. HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGM ENT ..... ' APPLYING THESE YARDSTICKS IN THE APPELLANT'S CASE I T IS OBSERVED THAT THE APPELLANT COMPANY HAS DISCHARGED ITS ONUS CAST UPON IT BY THE STATUTE. THE APPELLANT HAS AMPLY PROVED AND DISCHAR GED ITS BURDEN BY FILING THE NECESSARY RELEVANT DOCUMENTARY EVIDENCES IN SUPPORT OF SHARE CAPITAL INTRODUCED. EVEN IF THERE IS ANY DOUB T ON THE SOURCE OF FUND; THE SAME BE BASED ON INQUIRY IN THE HANDS OF THE SHARE APPLICANTS. THUS THE JURISDICTIONAL A.O.S OF THE S HARE APPLICANTS ARE GIVEN SPECIFIC DIRECTIONS U/S 150 READ WITH SECTION 153 OF THE ACT TO REOPEN THEIR ASSESSMENTS FOR THE RELEVANT TIME PERI OD. THE AO IS DIRECTED TO INFORM THE JURISDICTIONAL AOS OF THE AF ORESAID DEPOSITORS. IN VIEW OF THE FOREGOING DISCUSSION AND RESPECTFULL Y FOLLOWING THE ABOVE QUOTED DECISIONS OF HONBLE COURTS, AND A LSO ON THE BASIS OF ABOVE DIRECTIONS ISSUE TO THE A.O., ADDITION U/S 68 MADE BY THE AO AT RS.3,46,00,000/- IS HELD NOT JUSTIFIED. THE SAME IS DIRECTED TO BE DELETED. GROUNDS NOS.1 TO 5 ARE ALLOWED. 17 ITA NO.3401/DEL/2011 8. AGGRIEVED BY THE SAID DECISION OF THE LD. CIT (A ) TO DELETE THE ADDITION, THE REVENUE IS BEFORE US. 9. LD. DR RELIED ON THE ORDER OF THE AO AND BROUGHT TO OUR NOTICE THAT 31 WORKING DAYS WERE ONLY THERE LEFT WITH THE AO TO CO MPLETE THE SCRUTINY ASSESSMENT. HE TOOK OUR ATTENTION TO PAGE 2 TO DEM ONSTRATE THAT HOW THE ASSESSEE TRIED TO DELAY THE PROCEEDINGS BY NOT PROVIDING WIT H THE INFORMATION IN RESPECT TO THE SHARE APPLICATION/CAPITAL MONEY WHICH IT HAS RE CEIVED IN THE RELEVANT ASSESSMENT YEAR. IN THE SAID PAGE, AO STATES THAT HE HAS GIVEN AUDIENCE TO THE ASSESSEE FROM DATE 03.08.2009 TO 16.11.2009, I.E. O N 10 VARIOUS DATES, THE CASE WAS LISTED WHEREIN THE LD. AR OF THE ASSESSEE DILLY DAL LIED WITH THE INFORMATION SOUGHT BY THE AO ON THIS ISSUE. THEN HE TOOK OUR ATTENTIO N TO PAGE 3 WHEREIN THE AO HAS TAKEN NOTE THAT ON 16.11.2009, THE LD. AR PROVIDED THE NAMES OF THE ALLEGED INVESTORS AND THEIR ADDRESSES, PHOTO COPY OF AFFIDA VITS, COPY OF ITRS BANK- STATEMENTS ETC. AND STATED THAT THE AO IMMEDIATELY SENT THE INSPECTOR (ITI) TO 9 RANDOMLY SELECTED ADDRESSES OF THE CLAIMED INVESTOR S; AND SIMULTANEOUSLY HAS SENT THE DOCUMENTS LIKE PHOTOCOPIES OF AFFIDAVITS AND IT R COPIES OF THE SHARE APPLICANTS TO THE HANDWRITING EXPERT FOR HIS EXPERT OPINION; A ND ALSO THE AO SEARCHED IN THE DATA OF ASSESSEE INFORMATION SYSTEM (AIS) WITH THE DEPARTMENT IN RESPECT TO PAN DETAILS. FURTHER, THE LD DR CONTENTED THAT THE INSP ECTOR WHO HAD GONE TO SERVE THE NOTICES U/S 133(6) REPORTED BACK TO THE AO THAT THE ADDRESSES WERE NOT CORRECT, AND NOBODY BY THE NAMES GIVEN WERE FOUND TO BE EVER RES IDING OR FUNCTIONING AT THE SAID ADDRESSES AND HE TOOK OUR ATTENTION TO PAGES 4 TO 13 WHEREIN THE COPIES OF THE INSPECTOR REPORT OF THESE 9 ALLEGED INVESTORS ARE S CANNED AND MADE PART OF THE ASSESSMENT ORDER. HE ALSO POINTED OUT THAT OUT OF THESE 9 INVESTORS, THERE WAS COMMON ADDRESS FOR TWO CONCERNS AND THE INSPECTOR W AS ABLE TO LOCATE THE DIRECTOR OF THESE COMPANIES WHO STATED THAT BOTH THESE COMPA NIES HAVE STOPPED FUNCTIONING 18 ITA NO.3401/DEL/2011 WAY BACK IN MARCH 2006. LD. DR ALSO TOOK OUR ATTEN TION TO PAGE 14 WHERE THE AO HAS DISCUSSED THE REPORT OF THE HANDWRITING EXPERT, WHEREIN THE AO HAD TAKEN NOTE OF THE FACT THAT THE SAID EXPERT HAD PREPARED A TOT AL 32 SETS OF SPECIMEN SIGNATURE AND HAD DISPUTED SIGNATURES ON THE BASIS OF THE NAM ES OF THE PERSONS WHO HAVE SIGNED THE DOCUMENTS. THE LD DR POINTED OUT THAT TH E HANDWRITING EXPERT WAS OF THE OPINION THAT OUT OF THE 32 SETS OF SIGNATURE, 2 0 SETS WERE NOT MATCHING AND TWO WERE FORGED SIGNATURES. LD. DR CONTENDED THAT THE A SSESSEE WAS ISSUED A SHOW- CAUSE NOTICE ON 14.12.2009 STATING THAT THE RESULTS OF THE INVESTIGATION CREATED SERIOUS DOUBTS ABOUT THE IDENTITY, CREDITWORTHINESS OF ITS CLAIMED INVESTORS AND GENUINENESS OF THE TRANSACTIONS OF SHARE APPLICATIO N MONEY AND IT WAS DIRECTED TO PRODUCE THE INVESTORS; AND IN ADDITION TO THAT THE LD. AR OF THE ASSESSEE, WAS ALSO DIRECTED TO PRODUCE THE ORIGINAL AFFIDAVITS OF THE INVESTORS ALSO. THE LD. DR ALSO TOOK OUR ATTENTION TO PAGE 15 OF THE AOS ORDER WHE RE THE AO HAS DISCUSSED THE REPLY OF THE ASSESSEE DATED 15.12.2009 WHEREIN THE ASSESSEE HAS CLAIMED THAT THE ALLEGED INVESTORS WERE ITS FRIENDS AND BUSINESS ASS OCIATES. HOWEVER, THE ASSESSEE DECLINED TO PRODUCE THE ALLEGED INVESTORS AND THE R EASON GIVEN BY THE ASSESSEE FOR NOT PRODUCING THE INVESTORS WAS THAT SINCE THE ASSE SSEE COMPANY IS RUNNING ON LOSS, IT IS NOT IN A POSITION TO GIVE ANY DIVIDEND TO THE M; AND SO THE INVESTORS WILL NOT COOPERATE WITH THE ASSESSEE AT THIS STAGE. LD. DR TOOK OUR ATTENTION TO PAGE 16 WHERE THE AO HAD EXTENDED HIS INVESTIGATION BY SEEK ING INFORMATION FROM THE BANKS WHERE THE INVESTORS HAD ACCOUNTS AS PER THE A SSESSEE. THE LD. DR BROUGHT TO OUR NOTICE THAT OUT OF THE 18 TRANSACTIONS INVOLVIN G 9 OF THE INVESTORS WERE SOUGHT BY THE AO FROM THE RESPECTIVE BRANCHES OF THE BANK WHO REPORTED TO AO THAT THERE WERE NO SUCH BANK ACCOUNTS OF THE SAID PERSONS/ INV ESTORS. 10. LD. DR ALSO STATED THAT SINCE THE AR OF THE ASS ESSEE CONTESTED THE ADDRESSES OF THE ALLEGED INVESTORS FROM THE AIS DATA WHICH TH E AO HAD PROCURED IN THE FIRST 19 ITA NO.3401/DEL/2011 ROUND OF INVESTIGATION, IN ALL FAIRNESS, THE AO AGA IN TOOK 5 ADDRESSES GIVEN IN THE AIS DATA AND DEPUTED THE INSPECTOR AGAIN TO VERIFY FROM THESES ADDRESSES WHETHER THE SHARE APPLICANTS / INVESTORS IS ABLE TO PROVE T HEIR IDENTITY. HOWEVER, THE INSPECTOR REPORTED THAT IN ALL THESE 5 ADDRESSES, N EITHER ANY SUCH PERSON EXISTED NOR EVER EXISTED. COPY OF THE SAID REPORT HAS BEEN REP RODUCED FROM PAGES 17 TO 21 OF THE AOS ORDER. LIKEWISE, THE LD. DR BROUGHT OUR N OTICE THAT THE AO HAS INVESTIGATED AND ELABORATELY EXPLAINED THE RESULTS OF HIS INVESTIGATION WHEREIN HE FOUND THAT THE IDENTITY, CREDITWORTHINESS AND GENUI NENESS OF THE TRANSACTIONS COULD NOT BE PROVED BY THE ASSESSEE. LD. DR TOOK OUR ATT ENTION TO PAGES 37 TO 44 WHEREIN THE AO WITH THE AID OF A CHART HAS EXPLAINE D HOW THE TRANSACTIONS WERE NOT GENUINE. THUS, ACCORDING TO THE LD. DR, THE ASSESS EE FAILED TO DISCHARGE ITS BURDEN OF PROOF IN SUPPORT OF SHARE APPLICANT/HOLDERS IDE NTITY, CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTION IN RESPECT TO THE SH ARE CAPITAL WHICH IT HAS RECEIVED DURING THE RELEVANT ASSESSMENT YEAR. THEREFORE, LD . DR CONTENDED THAT AFTER MAKING EXTENSIVE INVESTIGATION WITHIN THE LIMITED P ERIOD LEFT WITH HIM, THE AO HAD RIGHTLY MADE THE ADDITION UNDER SECTION 68 OF THE A CT AND THE LD CIT(A) HAS ERRED IN DELETING THE SAME BY RELYING ON IRRELEVANT EVIDE NCES BROUGHT BY THE ASSESSEE BEFORE HIM AND THEREFORE, THE IMPUGNED ORDER OF TH E LD CIT(A) BE SET-ASIDE AND THE AO ORDER MAY BE UPHELD. 11. ON THE OTHER HAND, LD. AR HAS SUBMITTED A WRITT EN SUBMISSION AND ALSO CONTENDED THAT THERE WERE 37 INVESTORS IN THE FINAN CIAL YEAR OUT OF WHICH 23 INVESTORS ARE CORPORATE COMPANIES DULY REGISTERED W ITH THE REGISTRAR OF COMPANIES, MINISTRY OF CORPORATE AFFAIRS, GOVT. OF INDIA; AND REMAINING ARE THE INDIVIDUAL PERSONS AND HE SUBMITTED THAT THIS AMOUNT OF RS.3.4 6 CRORES WAS THE FRESH SHARE CAPITAL RECEIVED BY THE ASSESSEE COMPANY DURING THE RELEVANT YEAR. THIS SHARE CAPITAL OF RS.3.46 CRORES WAS RECEIVED BY THE ASSES SEE COMPANY THROUGH ACCOUNT 20 ITA NO.3401/DEL/2011 PAYEE CHEQUES DURING THE RELEVANT YEAR AND THE ENTI RE AMOUNT OF SHARE CAPITAL HAS BEEN DULY ALLOTTED DURING THE RELEVANT YEAR ITSELF, FOR WHICH NECESSARY STATUTORY DECLARATION IN FORM NO.2 HAS ALREADY BEEN FILED BEF ORE THE ROC ON 20.10.2006 AS APPEARING ON PB NO. 305 I.E. MUCH BEFORE THE ASSESS MENT PROCEEDINGS STARTED. THE DETAILS OF THE AMOUNT OF RS.3.46 CRORES RECEIVED AS SHARE CAPITAL DURING THE RELEVANT YEAR WAS SUMMARIZED AS UNDER :- SHARE CAPITAL RECEIVED FROM 23 COMPANIES DULY REGISTERED WITH REGISTRAR OF COMPANIES 2,70, 00,000/- AMOUNT RECEIVED FROM 14 INDIVIDUAL SHAREHOLDERS 76,00,000/- TOTAL : 3,46,00,000/- LD. AR SUBMITTED THAT AT THE TIME OF PROCEEDINGS, A LL OF THEM WERE THE INVESTORS AND NOT THE SHARE APPLICANTS; AND THEIR ENFORCEMENT FOR APPEARANCE BEFORE THE AO WAS NOT IN THE HAND OF THE COMPANY, WHEREAS THE AO WAS REQUESTED TO CALL THEM BY USING HIS POWERS AS PER LAW. THE LD. AR CONTENTED T HAT AO HAS NOT EXERCISED HIS POWER TO ENFORCE THEIR APPEARANCE. LD. AR SUBMITTED THAT ADMITTEDLY, THE AO HAS ACCEPTED AS IN HIS LETTER (PAGE 535 PB) THAT HE HAS ISSUED LETTERS U/S 133(6) TO 15 SHARE APPLICANTS BUT OUT OF WHICH 9 PERSONS HAS BEE N SERVED AND OUT OF WHICH 6 HAS ALREADY COMPLIED WITH THE REQUIREMENT OF LAW BEFORE THE AO. THE LD AR BROUGHT TO NOTICE THAT THE ASSESSEE HAD FILED ITS REPLY BEF ORE THE AO DURING THE REMAND PROCEEDING AND CIT(A) AS UNDER :- 1. RABIK EXPORTS 2. RIA MARKETING P. LTD. 3. SALWAN DEVELOPERS AND PROMOTERS - DIRECTOR SHRI SARDAR SURENDER PAL SINGH ADDRESS HAVE BEEN FOUND AND AFTER SERVING THE NOTICE INSPECTOR HAS RECORDED THE STATEMENT WHERE HE HAS STATED HE W AS THE DIRECTOR OF TWO COMPANIES AND THE ANOTHER COMPANY SATWANT SINGH SOD HI CONSTRUCTIONS P. LTD. AND HE HAD ALSO GIVEN HIS PAN NO. IN RECORDING THE STATEMENT AS 21 ITA NO.3401/DEL/2011 APPEARED ON PB NO. 220 & 221 REVEALS THAT THE QUEST ION AND ANSWER IS IN THE HANDS OF THE INSPECTOR ITSELF AND THERE ARE TYP OGRAPHICAL MISTAKE THAT HE WAS A DIRECTOR TILL 31ST MARCH, 2006. THEREFORE THE ASSESSEE HAS REQUESTED FOR CROSS EXAMINATION OF THE INSPECTOR BUT NO OPPOR TUNITY WAS GIVEN. 4. MLF CLASSIC 5. MV MARKETING P. LTD. 6. UP ELECTRICALS LTD. 7. PARTICULAR MANAGE FINLEASE THE THREE PARTIES WHO HAVE NOT REPLIED OUT OF WHICH ONE ARE SALWAN DEVELOPERS AND PROMOTERS WHOSE STATEMENT HAS ALREAD Y BEEN TAKEN BY I.T.I. AS STATED IN THE ORDER. THE OTHER INVESTOR COULD NOT BEEN SERVED BECAUSE OF THE CHANGE OF THE ADDRESS AND THE COMPANY HAS TRIED TO GET IN TOUCH B UT COULD NOT GET THE POSITIVE RESULT AND TIME WAS VERY LITTLE. THE LD AR SUBMITTED THAT DURING THE ASSESSMENT PROC EEDING, THE AO HAS STRAIGHTWAY FORMED AN ADVERSE OPINION AGAINST THE A SSESSEE AFTER GOING THROUGH THE INSPECTORS REPORT WITHOUT APPRECIATING THE FACT TH AT INSPECTOR HAD GONE FROM MUZAFFARNAGAR TO DELHI ON 08.12.2009 AND ON THE SAM E DATE, HE HAS GIVEN HIS REPORT; AND HE POINTED OUT THAT THE TRAVELLING DIST ANCE BETWEEN THE MUZAFFARNAGAR TO DELHI WILL TAKE AROUND AT LEAST 6 HOURS JOURNEY DUE TO VARIOUS REASONS LIKE TRAFFIC JAM, CONGESTED ROAD AND WONDERED AS TO HOW THE INSPECTOR COULD HAVE COVERED THE SAID DISTANCE AND WENT TO EACH ADDRESSE S AT DELHI ON THE SAME DAY. HE FURTHER ELABORATED THAT FROM A PERUSAL OF THE COPY OF THE ITI REPORT AS APPEARED IN THE ASSESSMENT ORDER FROM PAGE NOS.8 TO 13 SUGGESTS THAT THE ADDRESSES OF THESE 6 PERSONS WAS NOT IN ONE PLACE BUT IN A DIFFERENT LOC ATION AND ACCORDING TO HIM, IT IS NOT POSSIBLE TO INQUIRE WITHIN SUCH A SHORT TIME TO LOCATE THE INDEPENDENT ADDRESSES OF ALL THESE SHAREHOLDERS ON A SINGLE DAY. HE CONTE NDED THAT AS PER REPORT, IT IS NOWHERE MENTIONED THAT HE WAS ACCOMPANIED BY ANY I NDEPENDENT WITNESS AND WHERE HE HAS PREPARED THE REPORT AND THE SAME HAS B EEN RELIED AS SUCH BLINDLY BY 22 ITA NO.3401/DEL/2011 THE AO, WHICH, ACCORDING TO LD AR, CLEARLY ESTABLIS HES THAT THESE HAVE BEEN PREPARED IN THE OFFICE ITSELF BECAUSE, ACCORDING TO HIM, IF A GOVERNMENT OFFICER VISITS FOR INQUIRY THEN HIS VISIT HAS TO BE RECORDE D, PROPERLY, I.E. MODE OF TRANSPORTATION, SUBMISSION OF BILLS, ESCORTS OF THE PERSONS, AT WHAT TIME HE HAS COME BACK, ETC., HOWEVER FROM A PERUSAL OF THE REPORT DO ES NOT REVEAL THESE DETAILS. ON THE VERY SAME REASONS, ACCORDING TO LD. AR, SIMILAR REPORTS DATED 17.12.2009 AS APPEARED IN AO'S ORDER FROM PAGE NOS. 17 TO 22 AND PAGE 48 ARE NOT ADMISSIBLE AND NEED TO BE REJECTED AND THE LD CIT(A) HAS RIGHTLY D ONE SO. HE SUBMITTED THAT THE AO HAS CALLED AN OPINION OF THE HANDWRITING EXPERTS ALTHOUGH THESE ARE NOT RELEVANT AND NOT ACCEPTABLE. HOWEVER HE POINTED OUT THAT IN THE FOLLOWING CASES, THE HANDWRITING EXPERT DID NOT FIND ANY MISMATCH IN THE SIGNATURES OF INVESTORS AS UNDER : 1. MUNISHA GRANITE AS APPEARED ON PB NO. 248 2. UP ELECTRICALS AS APPEARED ON PB NO. 248 3. PARTICULAR MANAGE FINLEASE AS APPEARED ON PB NO. 252 4. CHANDRA KANTA AS APPEARED ON PB NO. 238 5. RAHUL BARMAN AS APPEARED ON PB NO. 240 6. SARASWATI DEVI GOYAL AS APPEARED ON PB NO. 241 7. SAROJ AGARWAL AS APPEARED ON PB NO. 242 8. SUSHAM GOYAL AS APPEARED ON PB NO. 242 9. YOGENDRA KUMAR AS APPEARED ON PB NO. 242 10. MONIKA GOYAL AS APPEARED ON PB NO. 245 11. INDIRA DEVI AS APPEARED ON PB NO. 253 THE LD AR ARGUED THAT THEREFORE, THE AOS ALLEGATIO NS CANNOT BE ACCEPTED AND FOR THE OTHERS THERE ARE SO MANY REASONS WHICH MAKE ITS ADMISSION ILLEGAL. AS REGARDS M/S. RIA MARKETING, LD. AR SUBMITTED THAT THE DEPAR TMENT COULD NOT TRACE OUT THE 23 ITA NO.3401/DEL/2011 PAN DETAILS BECAUSE OF CHANGE IN THE NAME OF THE CO MPANY AS M/S. SIMARJEET ELECTRONICS P. LTD. ALTHOUGH THESE INVESTORS HAVE F ILED REPLY IN COMPLIANCE TO THE NOTICE U/S 133(6). HE CONTENDED THAT THE AO RELIED UPON THE ADVERSE CONFIRMATION FROM ONLY 3 BANK BRANCHES FROM WHERE 9 INVESTORS HA D MADE/INVESTED RS.51 LACS AND NO ADVERSE REPORT HAD BEEN OBTAINED FROM THE RE MAINING INVESTORS. HE FURTHER CONTENDED THAT THE ADVERSE REPORT OF 3 BANKS WHICH ARE ALSO NOT ACCEPTABLE BECAUSE FIRST OF ALL THE AO HAS NOT FOUND ANY FAULT IN THE BANK ACCOUNT OF THE OTHERS AND ADMITTEDLY THERE IS NO DISPUTE BY ACCEPTING THE ENT IRE INCLUSIVE OF ABOVE RS.51 LACS THAT THE AMOUNT HAS BEEN CREDITED CHEQUE/DD/PO SO H IS RELIANCE SOLELY ON THE BANK LETTER AS APPEARED ON PAGE 51 53 OF HIS ORDER WHI CH, ACCORDING TO HIM, IS THIRD PARTY INFORMATION AND CANNOT BE GIVEN ANY WEIGHTAGE ; SECONDLY HE HAS NOT CROSS CHECKED WITH THE BANK OFFICIAL, NOT EXAMINED THEM A ND NOT PROVIDED THE OPPORTUNITY FOR CROSS-EXAMINATION TO THE ASSESSEE. HE SUBMITTED THAT IT IS SETTLED LAW BY THE HON'BLE APEX COURT THAT THIRD PARTY STAT EMENT/REPORT/INFORMATION CANNOT BE RELIED UPON UNLESS THE AGGRIEVED PARTY HAS BEEN PROVIDED AN OPPORTUNITY FOR CROSS-EXAMINATION. IN THIS REGARD, HE RELIED ON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF SMC SHARE BROKERS 288 ITR 34 5 WHEREIN, AFTER CONSIDERING THE HONBLE BOMBAY HIGH COURT IN THE CASE OF M/S. O NE-UP SHARES AND STOCK BROKERS 266 ITR 275, WHEREIN THE HON'BLE HIGH COU RT HAS HELD THAT THERE IS NO DOUBT THAT THE STATEMENT OF SH. MANOJ AGARWAL HAS E VIDENTIARY VALUE BUT WEIGHT COULD NOT BE GIVEN TO IT WITHOUT IT BEING TESTED IN CROSS-EXAMINATION. THEREFORE, THE LD AR ARGUED THAT IN THE ABSENCE OF THE BANK OFFICI ALS BEING TESTED BY CROSS- EXAMINATION BY THE ASSESSEE, IT CANNOT BE SAID THAT IT SHOULD BE BELIEVED COMPLETELY TO THE PREJUDICE OF THE ASSESSEE. HE FURTHER SUBMI TTED THAT AGAINST THE HONBLE DELHI HIGH COURT JUDGMENT IN SMC SHARE BROKER (SUPR A), THE DEPARTMENT FILED AN APPEAL BEING SLP (C) 20015/2009 BEFORE THE APEX COU RT WHICH HAS BEEN DISMISSED. HE SUBMITTED THAT THE AO HAS STATED THAT THE INVESTORS IDENTITY HAVE NOT 24 ITA NO.3401/DEL/2011 BEEN PROVED WHICH IS FACTUALLY INCORRECT BECAUSE BY FILING THE PAN DETAILS ETC. ARE SUFFICIENT FOR ESTABLISHING THE IDENTITY AND FILING OF THE SHARE APPLICATION FORMS, BANK ACCOUNT, AFFIDAVIT ETC. PROVED THE GENUINENESS AND THOUGH THE FINANCIAL STATEMENTS OF THE COMPANIES PROVIDED ARE OF THE NEX T YEAR BUT IT INCLUDES PREVIOUS YEAR FIGURES ALSO, WHICH SHOWS THE CREDITWORTHINESS OF THE COMPANY. HE SUBMITTED THAT MOREOVER, ONCE THE AO HAS ALL THE DETAILS OF P AN OF THE COMPANIES/ INDIVIDUALS, HE COULD ALSO CROSS VERIFY FROM THEIR JURISDICTIONAL AOS RECORD ALL THESE DETAILS BUT NOTHING HAS BEEN DONE BY HIM. ACC ORDING TO LD AR, AS THE ASSESSEE HAS PROVIDED BEFORE THE AO THE DETAILS WHA TEVER IT HAS AND FURTHER ENTIRE DETAILS OF THE INVESTORS BY WAY OF THEIR PAN AS WEL L AS OTHER DETAILS AS APPEARING IN PB NO. 480 & 481 BEFORE THE CIT (A) ALSO WHICH COPY WAS PROVIDED TO THE AO TO GIVE HIS REMAND REPORT. ACCORDING TO LD AR, THE AO HAS NOT FORMED ANY ADVERSE VIEW IN THE REMAND REPORT ON THESE INVESTORS AS EST ABLISHED FROM THE REPRODUCTION OF THE SAME IN THE CIT (A) ORDER PAGE NO.20 PARA NO .7.1 & 7.2; AND LD AR POINTED OUT THAT AFTER ALLOTTING THE SHARES TO THESE INVEST ORS, IT HAS NO CONTROL OVER THEM; DESPITE THAT EFFORTS HAVE BEEN MADE TO PRODUCE THEM BEFORE THE AO. HOWEVER, THE AO HAS FORMED AN ADVERSE OPINION ON THE BASIS OF TH E RETURNED INCOME OF THESE SHAREHOLDERS WHICH, ACCORDING TO HIM, IS NOT CORREC T AND SUBMITTED THAT INVESTMENT IS MADE NOT ON THE BASIS OF THE RETURNED INCOME BUT ON THE BASIS OF THE FUND WHICH IS AVAILABLE TO IT AND SINCE THERE IS NO DISPUTE AB OUT THE STATUS OF THE INVESTORS THAT ALL ARE GENUINE INCOME TAX PAYERS, NO ADVERSE INFER ENCE WAS CALLED FOR. IT WAS FURTHER SUBMITTED BY THE LD AR THAT THE ASSESSEE HA S PROVIDED ALL THE DETAILS AS APPEARING IN PB NO. 316-320 INCLUSIVE OF ALL THE DE TAILS OF THE SHAREHOLDERS TO JUSTIFY IDENTITY, GENUINENESS, CREDITWORTHINESS; AN D FURTHER VIDE LETTER DATED 16.11.2009 AS APPEARING IN P.B.NO.13-16 THE ASSESSE E HAS PROVIDED ALL THE DETAILS OF INVESTORS WHO HAS BEEN ALREADY ALLOTTED THE SHAR ES ALONG WITH PAN / CHEQUE NO/ DD NO/ AMOUNT AS WELL AS THE REMAINING DOCUMENTS LI KE SHARE APPLICATIONS FORMS, 25 ITA NO.3401/DEL/2011 BANKS DETAILS ETC BUT NOWHERE THESE HAVE BEEN VERIF IED FROM THE CONCERNED JURISDICTIONAL AO OF THE INVESTORS . HE FURTHER SU BMITTED THAT THE AO HAS FINALLY HELD THAT SINCE THE INVESTOR'S CREDITWORTHINESS IS NOT ACCEPTABLE AND MOREOVER BECAUSE OF NON PRODUCTION OF ANY INVESTORS HE HAS D ISALLOWED THE ENTIRE SHARE CAPITAL OF RS 3.46 CRORES. 12. LD. AR FURTHER SUBMITTED WHILE JUSTIFYING THE O RDER OF THE LD CIT(A) THAT THE LD. CIT (A) HAS GIVEN HIS FINDING OF THE SHAREH OLDING COMPANIES BASED ON PAN, FINANCIAL STATEMENTS, ITR ETC; AND AS REGARDS THE INDIVIDUAL INVESTOR HE HAS EXAMINED THE DETAILS OF THE PAN, VOTER ID CARD TOWA RDS THE GENUINENESS EXAMINED THE SHARE APPLICATION FORM, AFFIDAVIT AND BANK ACCO UNT FOR CREDITWORTHINESS. ACCORDING TO HIM, ONCE THESE DOCUMENTS ARE ON THE R ECORD THE BURDEN SHIFTS UPON THE AO AND THE LD CIT(A) HAS PASSED AN ORDER / DIRE CTION AS APPEARING IN THE LAST PARA 67 & 68 WHEREIN ENQUIRY HAS BEEN ORDERED AGAIN ST THE INVESTORS. ACCORDING TO HIM, THE ASSESSEE IS NOT REQUIRED TO PROVE THE SOUR CE OF SOURCE AS HELD BY HONBLE COURTS REPORTED IN 256 ITR 360 AND 280 ITR 516 AS W ELL AS BY HONBLE DELHI HIGH COURT IN THE CASE OF DIAMOND PRODUCTS WHEREIN IT HA S BEEN HELD THAT EXAMINING OF SOURCE OF SOURCE IS NOT REQUIRED FOR SECTION 68 AS REPORTED IN 21 DTR 206 (2009) / 177 TAXMAN 331. HE ASSAILED THE REPORT OF THE ITI A ND SUBMITTED THAT REPORT OF THE INSPECTOR WAS ON A LATER DATE AND SHOW CAUSE NO TICE WAS PRE-DATED AND BY THIS PROCESS THE AO HAS NOT PROPERLY EXAMINED THE REPORT WHICH IS ALSO DOUBTFUL; AND THE AO BLINDLY FOLLOWING THE REPORT OF THE ITI IS N OT LEGALLY TENABLE IN THE EYES OF LAW. HE SUBMITTED THAT THE HONBLE DELHI HIGH COURT IN THE CASE VICTOR ELECTRODES WHEREIN, IT WAS HELD THAT NON PRODUCTION OF PARTIES COULD NOT BE A GROUND FOR MAKING ADDITIONS AS DONE BY AO AS APPEARING IN LAST PARA OF ORDER. HE FURTHER RELIED ON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF DWARKADEESH INVESTMENTS IN 330 ITR 298 WHEREIN IT HAS BEEN HELD THAT IF THE COMPANY ESTABLISH 26 ITA NO.3401/DEL/2011 THE IDENTITY OF THE SUBSCRIBER, THE BURDEN SHIFTS T O THE DEPARTMENT AND UNLESS AND UNTIL ANY EVIDENCE TO SHOW THAT FUNDING WAS DONE BY THE COMPANY ITSELF, THE ADDITION U/S 68 OF THE ACT IS UNTENABLE HE FURTHER RELIED ON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF WINSTRAL PE TROCHEMICALS 330 ITR 603 AND ALSO RELIED ON THE JUDGMENT OF HONBLE DELHI HIGH C OURT IN THE CASE OF ROCK FORT METAL & MINERALS LTD. REPORTED IN (2011) 198 TAXMAN 497 WHEREIN THE HONBLE HIGH COURT HELD THAT WHERE THE ASSESSEE COMPANY SUB MITTED LIST OF ALL THE SHAREHOLDERS GIVING FULL NAME, ADDRESSES, DETAILS O F PAYMENT MADE BY CHEQUE (CHEQUE NO. AND NAME OF BANK ALSO), CONFIRMATIONS FROM ALL THE SHAREHOLDERS GIVING COMPLETE PARTICULARS IN THE FORM OF ADDRESS, CHEQUE NUMBERS AND THE NAME OF BANK, PAN AND PLACE OF ASSESSMENT, COPIES OF BAN K STATEMENTS SHOWING DEPOSIT OF ALL THESE RECEIPTS, ADDITION U/S 68 IS NOT WARRA NTED. HE SUBMITTED THAT THE ASSESSEE HAD DISCHARGED ITS PRIMARY ONUS AS PER LAW OF PROVING THE IDENTITY OF ALL THE SHAREHOLDERS AND IT WAS FOR THE AO TO PUT FORTH SOME ADVERSE MATERIAL IN CASE HE WAS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE . HE SUBMITTED THAT THE AO SHOULD HAVE BROUGHT SUCH MATERIAL ON THE TOP OF THE TABLE WITH AN OPPORTUNITY OF REBUTTAL AND / OR CROSS EXAMINATION TO THE OPPOSITE PARTY. IN THIS REGARD, HE RELIED ON THE RULING OF HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS CASE. HE SUBMITTED THAT IN THE CASE OF ORISSA CORPORATION 15 9 ITR 78, THE HONBLE COURT EXEMPLIFIES THE CATEGORY OF CASES WHERE NO ACTION W AS TAKEN BY AO TO VERIFY OR AN ENQUIRY INTO THE PARTICULARS PROVIDED BY THE ASSESS EE I.E THEIR PAN ETC. HE FURTHER POINTED OUT THAT OPPORTUNITY OF CROSS EXAMINATION I F THERE IS ANY DISPUTE ON THE FACT WAS ESSENTIAL AND RELIED ON 125 ITR 713 (SC), 288 I TR 345 (DEL.) AND 262 ITR 275 (BOM.) AND SUBMITTED THAT IN THE PRESENT CASE, NO OPPORTUNITY WAS PROVIDED TO CROSS EXAMINE THE ITI, HANDWRITING EXPERT, 3 BANK O FFICIALS DESPITE A CLEAR DEMAND MADE BY THE ASSESSEE. THE LD AR ALSO SUBMIT TED THAT THESE ARE SETTLED LAWS THAT IN THE CASE OF NON SERVICE OF NOTICE U/S 133(6), NO ADVERSE VIEW CAN BE 27 ITA NO.3401/DEL/2011 TAKEN. AND THUS LD. AR DOES NOT WANT US TO INTERFE RE IN THE IMPUGNED ORDER OF THE LD CIT (A). 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS. THE CASE IN NUTSHELL AS PER THE ASSESSEE IS THAT IN THE RELEVANT ASSESSM ENT YEAR, CERTAIN FRIENDS AND BUSINESS ASSOCIATES HAVE INVESTED TO THE TUNE OF RS .3.46 CRORES IN THE ASSESSEE COMPANY AND THEY HAVE BEEN DULY ALLOTTED SHARES ALO NG WITH SHARE CERTIFICATES. HOWEVER, ACCORDING TO THE AO, THE ASSESSEE COULD NO T DISCHARGE THE BURDEN OF PROOF REGARDING THE SHARE INVESTORS IDENTITY, CRED ITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS, SO HE MADE AN ADDITION OF RS.3.46 CRORES U/S 68 OF THE ACT. ON APPEAL, THE LD. CIT (A) WAS PLEASED TO DELETE THE S AID ADDITION. AGGRIEVED BY THE IMPUGNED ORDER OF THE LD. CIT (A), THE REVENUE IS B EFORE US. 14. BEFORE PROCEEDING FURTHER, LET US REFRESH OURSE LVES AS TO THE PRINCIPLES OF BURDEN OF PROOF AND WHOM IT LIES IN THE CASE OF SHA RE CAPITAL WHICH HAS BEEN INTRODUCED INTO THE TILL OF THE ASSESSEE BY INVESTO RS AS CLAIMED BY THE ASSESSEE. WE WOULD LIKE TO LOOK AT THE CONCEPT OF BURDEN OF PROO F. THOUGH THE INCOME-TAX OFFICER IS NOT FETTERED BY THE TECHNICAL RULES OF E VIDENCE AS KNOWN TO THE CIVIL AND CRIMINAL LAW, ANY ISSUE HAS TO BE DETERMINED ON THE BASIS OF PROOF OF FACTS AND PRODUCTION OF EVIDENCE. WHEN THERE ARE TWO PARTIES TO A DISPUTE EITHER THE COURT OR LEGISLATURE HAS LAID DOWN, TO WHOM THE BURDEN OF PR OOF SO THAT EACH OF THE PARTIES SHOULD BE AWARE ABOUT WHO HAS THE ROLE ASSIGNED TO IT TO PROVE A PARTICULAR FACT THAT IS THE DISCHARGE OF THE BURDEN IN ORDER TO PROVE HI S POINT OR TO DEFEND IT ITSELF. THE BURDEN OF PROOF IN ANY ORDINARY PARLANCE MEANS THE DUTY OF PROVING A FACT AFFIRMATIVE OF ANY ISSUE. BURDEN OF PROOF UNDER TH E INDIAN EVIDENCE ACT, 1872 (HEREINAFTER THE EVIDENCE ACT,) CAN BE SEEN FROM A PERUSAL OF SECTIONS 101 TO 110 OF THE EVIDENCE ACT, 1872. THE SAID SECTIONS BRO ADLY GIVE THE DRIFT OF THE RULES WHICH ARE EMPLOYED UNDER THE ACT WHILE SETTLING THE DISPUTES BETWEEN THE PARTIES. 28 ITA NO.3401/DEL/2011 (I.E. IN THE INCOME-TAX CASES, THE ASSESSEE AND TH E DEPARTMENT). SECTION 101 OF THE EVIDENCE ACT STATES THAT WHOEVER DESIRES ANY COURT TO GIVE JUDGEMENT AS TO ANY LEGAL RIGHTS OR LIABILITY DEPENDING UPON THE EXISTE NCE OF FACTS WHICH HE ASSERTS, MUST PROVE THAT THOSE FACTS EXIST. IN OTHER WORDS, WHEN A PERSON IS BOUND TO PROVE THE EXISTENCE OF A FACT, THE BURDEN OF PROVING IT L IES ON THAT PERSON. ONE WHO ASSERTS AFFIRMATIVE OF THE ISSUE IS BURDENED WITH T HE DUTY OF PROVING IT. SECTION 102 OF THE EVIDENCE ACT SAYS THAT BURDEN OF PROOF IN A SUIT OR PROCEEDING LIES ON THAT PERSON WHO WOULD FAIL IF NO EVIDENCE AT ALL WERE GI VEN BY EITHER SIDE. SECTION 103 OF THE EVIDENCE ACT STATES THAT THE BURDEN OF PROOF AS TO ANY PARTICULAR FACT LIES ON THAT PERSON WHO WANTS THE COURT TO BELIEVE IN ITS E XISTENCE. ACCORDING TO SECTION 104, IF A PERSON WISHES TO PROVE A DYING DECLARATIO N BY ANOTHER, HE MUST PROVE THE DEATH OF THAT OTHER PERSON. ACCORDING TO SECTION 1 06 OF THE EVIDENCE ACT, WHEN ANY FACT IS ESPECIALLY WITHIN THE KNOWLEDGE OF ANY PERSON, THE BURDEN OF PROVING THAT FACT IS UPON HIM. SECTION 110 OF THE EVIDENCE ACT STATES THAT WHEN THE QUESTION IS WHETHER ANY PERSON IS THE OWNER OF ANYT HING OF WHICH HE HAS SHOWN TO BE IN POSSESSION, THE BURDEN OF PROVING THAT HE IS NOT THE OWNER IS ON THE PERSON WHO AFFIRMS THAT HE IS NOT THE OWNER. IN OTHER WOR DS, IF INCOME-TAX OFFICER FINDS THAT THE ASSESSEE IS IN POSSESSION OF VALUABLE ITEM S LIKE BULLION, JEWELLERY, ETC., HE MUST DRAW A REBUTTABLE PRESUMPTION THAT THE ASSESSE E IS THE OWNER THEREOF UNLESS THE BURDEN OF PROVING THAT HE IS NOT THE OWNER THER EOF IS DISCHARGED BY THE ASSESSEE. WHETHER CERTAIN SUMS OF MONEY WERE CLAIME D BY THE ASSESSEE TO HAVE BEEN RECEIVED FROM CERTAIN PERSONS, IT WAS FOR THE ASSESSEE TO PROVE BY COGENT AND PROPER EVIDENCE THAT THESE WERE GENUINE TRANSACTION S AS THESE FACTS WERE WITHIN THE EXCLUSIVE KNOWLEDGE OF THE ASSESSEE AND IT SHOULD B E KEPT IN MIND THAT THE ASSESSEE CANNOT DISCHARGE THIS BURDEN OF MERELY PROVING THE IDENTITY OF THE SHARE APPLICANT/SHAREHOLDER, HE HAS TO PROVE ALL ABOUT TH E TRANSACTION, NAMELY, IDENTITY, CAPACITY OF THE SHAREHOLDER TO INVEST MONEY AND GEN UINENESS OF THE TRANSACTION. 29 ITA NO.3401/DEL/2011 15. WHAT IS BURDEN OF PROOF ? AS POINTED OUT BY SAR KAR IN HIS BOOK INDIAN EVIDENCE ACT, THE PHRASE BURDEN OF PROOF HAS TWO DISTINCT AND FREQUENTLY CONFUSED MEANINGS. AS A MATTER OF LAW AND PLEADING , THE BURDEN OF PROOF IS IN THE NATURE OF ESTABLISHING A CASE. THIS BURDEN RES TS UPON THE PARTY, WHETHER PLAINTIFF OR DEFENDANT, WHO SUBSTANTIALLY ASSERTS T HE AFFIRMATIVE OF THE ISSUE. IT IS FIXED AT THE BEGINNING OF THE TRIAL AND REMAINS UNC HANGED AND, IN THIS RESPECT, REFERENCE MAY BE MADE TO SECTION 101 OF THE INDIAN EVIDENCE ACT (EMPHASIS GIVEN BY US). IN THE SECOND SENSE, THE BURDEN OF PROOF RELATE S TO THE REGION OF PRODUCTION OF EVIDENCE. IN THIS SENSE, THE BURDEN OF PROOF IS AMBULATORY AND SHIFTING THROUGHOUT THE TRIAL AND THE SCALE OF EVID ENCE MAY GO UP AND DOWN WITH DIFFERENT AND CONFLICTING ITEMS OF EVIDENCE PRESSED INTO SERVICE. HOWEVER, THOUGH THE DISTINCTION BETWEEN THE TWO SENSES IS SUBTLE, I T IS REAL. THE SECOND SENSE, WHICH IS OF A SHIFTING AND AMBULATORY NATURE, MAY BE CALL ED ONUS OF PROOF WHILE THE BURDEN OF PROOF AS IT IS UNDERSTOOD IN THE FIRST SENSE MAY BE CALLED AS SUCH. THOUGH THE WORDS BURDEN AND ONUS HAVE TO BE UND ERSTOOD AND HAVE BEEN INTERPRETED AS DISCUSSED ABOVE, THEY ARE OFTEN LOOS ELY USED AS INTER-CHANGEABLE WORDS. BUT THEN, THE BURDEN OF PROOF, AS EXPLAINED EARLIER, REMAINS UNCHANGED UNDER ALL CIRCUMSTANCES (EMPHASIS GIVEN BY US) . ON THE OTHER HAND, THE ONUS OF PROOF OR ONUS PROBANDI IS SHIFTING AND AMBULATORY. BURDEN OF PROOF IS FIX ED BY STATUTE OR CONTRACT OR AGREEMENT OR PLEADINGS. ONUS PROBANDI IS CONCERNED WITH THE WEIGHT OF EVIDENCE ON EACH SIDE AND PERTAINS TO THE REGION OF PRODUCTION OF EVIDENCE. IN THE CASE OF SUMATI DAYAL VS. CIT, 214 ITR 801 (SC), THE HONBLE APEX COURT HAS HELD THAT, IT IS NOT DOUBT TRUE THAT IN ALL CASES IN WHICH A RECEIPT IS SOUGHT TO BE TAXED AS INCOME, THE BURDEN LIES UPON THE DEPARTMENT TO PROVE THAT IT IS WITHIN THE TAXING PROVISION AND IF A RECEIPT IS IN THE NATURE OF INCOME, THE BURDEN OF PROOF THAT IT IS NOT TAXABLE BECAUSE IT FALLS WI THIN THE EXEMPTION PROVIDED BY THE ACT LIES UPON THE ASSESSEE (SEE PARIMISETTI SEETHAR AMAMMA [1965] 57 ITR 532 AT 30 ITA NO.3401/DEL/2011 PAGE 536) . BUT SECTIONS 68 AND 69 RELATING TO CASH CREDITS THROW THE BURDEN OF PROOF ON THE ASSESSEE BECAUSE IN SUCH A CASE, THERE IS PRIMA FACIE EVIDENCE AGAINST THE ASSESSEE AS TO THE RECEIPT OF MONEY IN THE BOOK S OF THE ASSESSEE. THE BURDEN OF PROVING THAT THE CASH CREDIT IS GENUINE OR THAT REC EIPT IS GENUINE IS ON THE ASSESSEE. 16. THOUGH IT MAY BE KEPT IN MIND THAT THE INITIAL BURDEN IS ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTION, BUT WHEN THE ASSESSEE FURNISHED THE DETAILS OF THE SHAREHOLDERS, ADDRESSES, ETC., THIS BURDEN IS TO BE TAKEN AS DISCHARGED, AND THEN THE ONUS WILL GET SHIFTED TO THE DEPARTMEN T. BUT ONCE THE MATERIALS ARE SCRUTINIZED AND IT IS FOUND BY THE AO THAT DOCUMENT S FURNISHED CAST SERIOUS DOUBT ABOUT THE VERACITY OF THE SAME, THEN THE MATERIALS OF THE SCRUTINY ARE TO BE COMMUNICATED TO THE ASSESSEE, THEREAFTER THE ONUS S HIFTS FROM THE REVENUE TO THE ASSESSEE. THEN, THE ASSESSEE HAS TO TAKE APPROPRIA TE STEPS FOR PROVING HIS CASE. UNLESS, THERE ARE SUFFICIENT MATERIALS AFTER SUCH C OMMUNICATION, PRODUCED BY THE ASSESSEE, THE INCOME-TAX OFFICER CAN DO NO FURTHER. IT SHOULD BE KEPT IN MIND THAT THE TRANSACTIONS WHICH HAD OCCURRED ARE THINGS OF W HICH ASSESSEE IS AWARE OF AND IT HAS TO COME CLEAN BEFORE THE AO. 17. DEALING WITH SHARE CAPITAL THEIR LORDSHIP OF T HE APEX COURT HAS HELD THAT THERE CANNOT BE TWO OPINIONS ON THE ASPECT THAT THE PERNICIOUS PRACTICE OF CONVERSION OF UNACCOUNTED MONEY THROUGH THE MASQUER ADE OR CHANNEL OF INVESTMENT IN THE SHARE CAPITAL OF A COMPANY MUST B E FIRMLY EXCORIATED BY THE REVENUE. EQUALLY, WHERE THE PREPONDERANCE OF EVIDEN CE INDICATES ABSENCE OF CULPABILITY AND COMPLEXITY OF THE ASSESSEE IT SHOUL D NOT BE HARASSED BY THE REVENUE'S INSISTENCE THAT IT SHOULD PROVE THE NEGAT IVE. IN THE CASE OF A PUBLIC ISSUE, THE COMPANY CONCERNED CANNOT BE EXPECTED TO KNOW EV ERY DETAIL PERTAINING TO THE IDENTITY AS WELL AS FINANCIAL WORTH OF EACH OF ITS SUBSCRIBERS. THE COMPANY MUST, HOWEVER, MAINTAIN AND MAKE AVAILABLE TO THE ASSESSI NG OFFICER FOR HIS PERUSAL, ALL 31 ITA NO.3401/DEL/2011 THE INFORMATION CONTAINED IN THE STATUTORY SHARE AP PLICATION DOCUMENTS. IN THE CASE OF PRIVATE PLACEMENT THE LEGAL REGIME WOULD NOT BE THE SAME. A DELICATE BALANCE MUST BE MAINTAINED WHILE WALKING THE TIGHTROPE OF S ECTIONS 68 AND 69 OF THE INCOME-TAX ACT. THE BURDEN OF PROOF CAN SELDOM BE D ISCHARGED TO THE HILT BY THE ASSESSEE ; IF THE ASSESSING OFFICER HARBOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRIPTION HE IS EMPOWERED, NAY DUTY BOUND, TO CA RRY OUT THOROUGH INVESTIGATIONS. BUT IF THE ASSESSING OFFICER FAILS TO UNEARTH ANY WRONG OR ILLEGAL DEALINGS, HE CANNOT OBDURATELY ADHERE TO HIS SUSPIC IONS AND TREAT THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANY. 18. KEEPING THE AFORESAID DICTUM OF LAW, GOVERNING THE ISSUE AT HAND, LET US EXAMINE THE CASE BEFORE US. WE FIND THAT THE ASSES SEE FILED ITS RETURN ON 31.10.2007 AND SHOWED A BOOK PROFIT U/S 115JB AT RS .21,77,195/-. WE FIND THAT INITIALLY, THE CASE WAS SELECTED FOR SCRUTINY UNDER THE JURISDICTION OF ACIT, CIRCLE 2, MEERUT. HOWEVER, TAKING INTO CONSIDERATION THE LET TER OF THE ASSESSEE DATED 23.09.2008, THE SCRUTINY ASSESSMENT WAS TRANSFERRED TO ACIT, CIRCLE 1, MUZAFFARNAGAR. WE FIND THAT THE CASE WAS THUS TRAN SFERRED ON THE REQUEST OF THE ASSESSEE TO ACIT, CIRCLE 1, MUZAFFARNAGAR ON 22.07. 2009. THESE DATES ARE STATED ONLY TO SHOW THAT THE SCRUTINY PROCEEDINGS HAS IN F ACT STARTED BEFORE 23.09.2008 AND THE ASSESSEE WAS PUT ON NOTICE ABOUT THE IMPEND ING SCRUTINY ASSESSMENT AS EARLY AS THAT OF 23.09.2008 AND THE ASSESSMENT WAS COMPLETED ON 29.12.2009 (I.E. MORE THAN 1 YEAR & 2 MONTHS). SO IT CAN BE SAFELY INFERRED THAT THE ASSESSEE WAS AWARE THAT DURING SCRUTINY PROCEEDINGS, HE HAD TO E XPLAIN ABOUT THE SHARE APPLICATION MONEY/CAPITAL WHICH IT HAS RECEIVED DUR ING THE RELEVANT ASSESSMENT YEAR. 19. WE FIND THAT THE ASSESSING OFFICER GOT THE CAS E RECORDS FROM MEERUT AFTER THE TRANSFER OF THE CASE ON 03.08.2009 AND WE FIND THAT ON THE NEXT DATE ITSELF, THE ASSESSING OFFICER HAD ISSUED NOTICE ON 04.08.2009 U /S 142 (1) ALONG WITH 35 POINT 32 ITA NO.3401/DEL/2011 QUESTIONNAIRE. THEREAFTER, WE FIND THAT THE ASSESS EE GAVE DETAILS BIT BY BIT AND WE FIND THAT EIGHT OPPORTUNITIES WITHIN A PERIOD OF TH REE MONTHS AND NINE DAYS WERE GRANTED TO THE ASSESSEE TO GIVE ANSWERS AND PRODUCE DOCUMENTS IN ITS SUPPORT. HOWEVER, WE FIND THAT ONLY ON 16.11.2009, AFTER THR EE MONTHS AND NINE DAYS, THE ASSESSEE ANSWERED THE QUERY NO.31 IN RESPECT TO THE DETAILS OF INVESTORS IN THE SHARE CAPITAL OF THE COMPANY. IN ORDER TO DISCHARGE THE B URDEN OF PROOF CASTED ON IT, WE FIND THAT THE ASSESSEE SUBMITTED A LIST OF THE SHAR EHOLDERS, THEIR ADDRESS AND AFFIDAVITS TO PROVE THE IDENTITY, TO PROVE THE GENU INENESS THE ASSESSEE FILED PAN DETAILS, DETAILS OF THE CHEQUES/DRAFT NUMBERS AND T HE DATE OF TRANSACTION FROM THE BANKING CHANNEL AND TO PROVE THE CREDITWORTHINESS, THE ASSESSEE FILED THE BANK STATEMENT OF THE INVESTORS AND ITRS. SINCE 31.12.20 09 WAS THE LAST DAY FOR COMPLETION OF ASSESSMENT THE ASSESSING OFFICER HAD ONLY 31 WORKING DAYS TO COMPLETE THE ASSESSMENT. 20. BY PROVIDING THESE DOCUMENTS BEFORE THE AO, WE FIND THAT THE ONUS SHIFTED FROM THE ASSESSEE TO THE AO. HERE IT SHOULD BE REME MBERED THAT AFTER SUBMISSION OF THESE DOCUMENTS, IF THE AO HAD DONE NOTHING BUT TO EXHORT TO THE ASSESSEE TO PRODUCE THE INVESTORS, THEN ASSESSEE NOT COULD HAVE BEEN SAID TO HAVE FAILED TO DISCHARGE ITS BURDEN OF PROOF. 21. IN ORDER TO ASCERTAIN THE IDENTITY OF THE SHARE HOLDERS AS CLAIMED BY THE ASSESSEE, DUE TO PAUCITY OF TIME, THE ASSESSING OFF ICER DEPUTED AN ITO TO SERVE NOTICES U/S 133(6) TO NINE OUT OF THIRTY SEVEN SHAR EHOLDERS WHICH WERE RANDOMLY SELECTED AND ALSO SENT THE NOTICES SIMULTANEOUSLY B Y POST. HE ALSO SENT THE COPY OF THE ITRS OF THE SHAREHOLDERS ALONG WITH AFFIDAVITS TO HANDWRITING EXPERT TO GET HIS OPINION AND ALSO SIMULTANEOUSLY, HE CHECKED FROM TH E ASSESSEE INFORMATION SYSTEM (AIS) THE VERACITY OF THE PAN DETAILS. 22. THE ITI REPORTED BACK TO AO THAT IN 7 OF THESE ADDRESSES, THE SAID INVESTORS WERE NOT EVER RESIDING/ FUNCTIONING IN THE GIVEN AD DRESSES AND THE ADDRESSES OF THE 33 ITA NO.3401/DEL/2011 TWO CONCERNS WERE THE SAME (I.E. COMMON ADDRESS) WH EREIN THE DIRECTOR OF THE SAID COMPANY (SARDAR SURENDER PAL SINGH) HAD GIVEN A STA TEMENT TO THE ITI THAT THE SAID TWO CONCERNS HAD CEASED TO FUNCTION FROM MARC H 2006. THE REPORT OF THE INSPECTION DONE BY THE INSPECTOR IN THIS RESPECT HA S BEEN SCANNED AND MADE PART OF THE ASSESSMENT ORDER FROM PAGES 4 TO 13 OF THE AOS ORDER. 23. THE HANDWRITING EXPERT HAD FOUND MISMATCHES IN THE SIGNATURES AND WAS OF THE OPINION THAT FEW OF THE DOCUMENTS WERE HAVING FORGE D SIGNATURES. WE WOULD LIKE TO STATE HERE THAT WE ARE NOT GOING TO TAKE INTO AC COUNT THE HANDWRITING EXPERTS OPINION TO BASE OUR ADJUDICATION BECAUSE WE FIND TH AT THE ASSESSEES PRAYER TO CROSS EXAMINE THE HANDWRITING EXPERT HAD NOT MATERIALISED . THOUGH WE TAKE NOTE THAT THE COPY OF THE HANDWRITING EXPERTS REPORT WAS IN FACT FURNISHED TO THE ASSESSEE FOR THEIR COMMENTS, WHICH THEY HAVE INDEED OBJECTED TO EXHAUSTIVELY AND EXTENSIVELY BEFORE THE AO AND CIT (A). HOWEVER, AS SAID BEFORE , WE ARE NOT LOOKING INTO THE HANDWRITING EXPERTS OPINION TO ADJUDICATE THIS ISS UE; THEREFORE, WE ARE NOT GOING INTO MERITS OF THE HANDWRITING EXPERTS OPINION. H OWEVER, WE WOULD LIKE TO POINT OUT THAT THE EVIDENCE ACT, HAVE EMPOWERED THE JUDGE TO COMPARE THE HANDWRITING IN CERTAIN CIRCUMSTANCE BEFORE HIM AND THE AO IS A QUASI-JUDICIAL AUTHORITY WHILE HE IS EXERCISING HIS AUTHORITY AS AN ASSESSING OFFI CER, SO SEEKING HANDWRITING EXPERTS OPINION TO FIND OUT THE AUTHENTICITY OF THE SIGNATURE ON THE AFFIDAVITS & ITR DURING INVESTIGATION CANNOT BE FAULTED AS SUCH, BUT THE OPINION OF EXPERT IS NOT NECESSARY TO ADJUDICATE THE ISSUE BEFORE US. SINCE WE ARE NOT TAKING INTO CONSIDERATION THE OPINION OF HANDWRITING EXPERT, WE ARE NOT GOING TO GO INTO THE OBJECTION OF ASSESSEE ON THIS ASPECT. THEREAFTER, WE FIND THAT THE AO FOUND FROM SEARCHI NG THE DATABASE OF ASSESSEE INFORMATION SYSTEM (AIS) THAT EITHER THE ADDRESSES GIVEN BY THE ASSESSEE WERE DIFFERENT OR THE PANS WERE INVALID. THE FOLLOWING RESULTS EMERGED FROM THE FIRST 34 ITA NO.3401/DEL/2011 ROUND OF INVESTIGATION (AS STATED BEFORE WE ARE NOT INCLUDING THE HANDWRITING EXPERTS OPINION) :- ITO REPORT 7 OF THESE ADDRESSES WERE WRONG AND AT T HE COMMON ADDRESS OF THE OTHER TWO CONCERNS, WHO HAVE ALLEGEDLY INVESTED MONEY IN THE ASSESSEE COMPANY, ONE PERSON SHRI SARDAR SURENDER PAL SINGH WAS FOUND WHO CLAIMED TO BE THE DIRECTOR OF THESE TWO CONCERNS TILL MARCH-2006 ONLY; AND ALSO MENTIONED THAT AFTER MARCH- 2006 BOTH THESE COMPANIES WERE CLOSED DOWN. HE MENTIONED THESE FACTS IN A STATEMENT GIVEN BY HIM. AIS (PAN) THE ADDRESSES OF THE 'CLAIMED' INVESTORS WERE CHECKED IN THE ASSESSEE. INFORMATION SYSTEM (AIS) DATA BASE, BUT IN ALMOST ALL CASES EITHER THE ADDRESS WAS DIFFERENT OR THE PAN WAS SIMPLY INVALID 24. TAKING NOTE OF THE AFORESAID OUTCOME OF THE PRE LIMINARY ENQUIRY, THE ASSESSING OFFICER ISSUED NOTICE U/S 142 (1) ON 04.1 2.2009 TO PRODUCE THE SHAREHOLDERS AS CLAIMED BY THE ASSESSEE AND CAUTION ED THE ASSESSEE THAT SERIOUS DOUBTS HAVE BEEN FORMED IN HIS MIND BECAUSE OF THE AFORESAID INITIAL ENQUIRY. SO, THE ASSESSEE WAS PUT ON NOTICE TO COME OUT CLEAN WI TH THE EVIDENCES TO PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE S HAREHOLDERS. ON 15.12.2009, THE AO TAKES NOTE THAT ASSESSEE DID NOT PRODUCE EVEN A SINGLE SHAREHOLDER AND DENIED HAVING ANY OBLIGATION TO PRODUCE THEM. HOWEVER, IN THE SAID LETTER INTERESTINGLY, THE ASSESSEE CLAIMED THAT THESE SHAREHOLDERS WERE H IS CLOSE FRIENDS AND BUSINESS ASSOCIATES. SINCE THE AR CONTESTED THE ADDRESS TO WHICH THE NOTICES WERE SENT BY HAND AS WELL AS BY POST AND CONTENTED THAT ADDRESSE S SHOULD HAVE BEEN TAKEN AS REFLECTED IN THE PAN DATA BASE OF THE DEPARTMENT, W E FIND THAT THE ASSESSING 35 ITA NO.3401/DEL/2011 OFFICER THOUGHT OF GIVING ANOTHER SHOT AND SELECTED AGAIN FIVE PERSONS FROM PAN DETAILS AND AGAIN SENT THE ITO TO SERVE NOTICES. T HE SCANNED COPY OF THE REPORT OF ITO CAN BE SEEN FROM PAGES 17 TO 21 OF THE ASSESSME NT ORDER, WHEREIN HE HAS CATEGORICALLY STATED THAT IN ALL THESE FIVE ADDRESS ES, NO SUCH PERSON WAS EXISTING OR EVER EXISTED. IN THE AFORESAID SCENARIO, WE FIND T HAT THE ASSESSING OFFICER REQUESTED THE BANKS I.E. PUNJAB NATIONAL BANK, HDF C, CHANDNI CHOWK BRANCH, DELHI AND HDFC, KASHMIRI GATE BRANCH, DELHI ABOUT T HE VERACITY OF THE BANK STATEMENTS OF 9 SHAREHOLDERS FILED BY THE ASSESSEE BEFORE HIM. PUNJAB NATIONAL BANK VIDE LETTER DATED 17.12.2009, THE HDFC, CHANDN I CHOWK BRANCH VIDE LETTER DATED 15.12.2009 AND HDFC, KASHMIRI GATE BRANCH INF ORMED THE ASSESSING OFFICER THAT NO BANK ACCOUNT IN THE NAME OF SUCH PE RSONS IS BEING OPERATED FORM THEIR BRANCH SINCE THE INCEPTION OF THEIR OPERATION . WE FIND THAT THE ASSESSING OFFICER, WHILE GOING THROUGH THE COPY OF THE ITRS O F THE ALLEGED SHAREHOLDERS, STUMBLED ACROSS THREE CONCERNS WHO WERE UNDER HIS J URISDICTION (I.E. PRAKARTIK HOTELS PRIVATE LIMITED, MLF CLASSIC FINANCE LIMITED AND LIFE LINE HOUSING DEVELOPMENT FINANCE COMPANY LIMITED) WHOSE ITRS FO R ASSESSMENT YEAR 2005- 06 WAS FILED BEFORE HIM AND NOTED THAT THESE CONCER NS HAVE GIVEN COMMON ADDRESS OF 1 ST FLOOR, CITY CENTRE MARKET, MUZAFFARNAGAR. THE ASS ESSING OFFICER DEPUTED THE ITO TO FIND DETAILS ABOUT THE SAID SHAREHOLDERS AND TO HIS DISMAY, HE GOT THE INFORMATION THAT NO RETURN OF INCOME WAS FILED BY T HESE THREE COMPANIES AFTER ASSESSMENT YEAR 2005-06, AS WELL AS THERE WAS NO SU CH CONCERN EVER EXISTED AT THAT ADDRESS. A COPY OF THE REPORT IS SCANNED AND COPIE D AT PAGE 22 OF THE ASSESSMENT ORDER. 25. WE FIND THE FOLLOWING FACTS EMERGED FROM PAGES 30 & 31 OF THE ASSESSMENT ORDER TO DISLODGE THE ONUS OF PROOF FROM THE ASSESS ING OFFICER AND THE BURDEN IS SEEN SHIFTED BACK TO THE SHOULDER OF THE ASSESSEE TO PROVE THE IDENTITY, GENUINENESS 36 ITA NO.3401/DEL/2011 OF TRANSACTION AND CREDITWORTHINESS OF THE SHAREHOL DERS WHICH THE AO HAS SUMMARIZED AS UNDER IN HIS SHOW-CAUSE NOTICE DATED 15.12.2009 WHEREIN HE SPELT OUT THE SAME AS UNDER :- (I) REPORT OF THE INSPECTOR WHICH FOUND OUT THAT T HE ADDRESSES OF SEVEN ALLEGED INVESTORS IN DELHI ARE WRONG AND IN R EALITY SUCH INVESTORS NEVER EXISTED AT THOSE ADDRESSES. (II) LATER ON 6 MORE ADDRESSES IN DELHI WERE VERIFI ED BY THE INSPECTOR BUT HERE ALSO ALL WERE FOUND TO BE WRONG. (III) STATEMENT OF SH. SARDAR SURENDER PAL SINGH, W HO STATES THAT HE WAS NOT DIRECTOR IN TWO COMPANIES M/S. SALWAN DEVEL OPERS AND PROMOTER PVT. LTD. AND SATWANT SINGH SODHI CONSTRUC TION PVT. LTD. AFTER MARCH, 2006 AND MOREOVER THESE COMPANIES CLOS ED DOWN AFTER MARCH, 2006. THE STATEMENT OF SH. SARDAR SURENDER P AL SINGH IS STRENGTHENED BY THE FACT THAT THE COMPANY MASTER DE TAILS FOR M/S SALWAN DEVELOPERS AND PROMOTER PVT. LTD. AND SATWAN T SINGH SODH'I CONSTRUCTION PVT. LTD, HAVE LAST BALANCE SHEET DATE S AS 31-03-2006 AND 31-03-2005 RESPECTIVELY FOR THESE TWO COMPANIES . (IV) FIVE LETTERS U/S 133(6), SENT THROUGH REGISTER ED POST, RETURNED UNSERVED WHEN SENT TO THE ADDRESSES PROVIDED BY THE ASSESSEE. (V) IN AIS DATA BASE OF THE DEPARTMENT EITHER THE P ANS OF THE ALLEGED INVESTORS WERE INVALID OR DIFFERENT ADDRESS ES WERE GIVEN. OUT OF THESE AIS ADDRESSES FIVE WERE RANDOMLY SELECTED AND ON VERIFICATION- OF THESE THE INSPECTOR OF THE DEPARTM ENT FOUND THEM BOGUS IN ALL FIVE CASES, (VI) THE REPORT OF HAND WRITING EXPERT IS AGAINST THE CLAIM OF ASSESSEE COMPANY AS .DISCUSSED ABOVE. (VII) 19 TRANSACTIONS INVOLVING TRANSFER OF SHA RE APPLICATION MONEY TO THE ASSESSEE COMPANY THROUGH BANKS WERE SELECTED BUT ON VERIFICATION IT WAS FOUND AND COMMUNICATED BY RESPE CTIVE BRANCHES OF THE BANKS THAT NO SUCH ACCOUNTS EVER EXISTED IN THOSE BANKS. THE LETTERS OF THE BANK IN REPLY TO 133(6) NOTICES ARE ON RECORD. THE COPIES OF LETTERS FROM THE BANK ARE PAN OF THIS ORD ER. 37 ITA NO.3401/DEL/2011 (VIII) 3 OF THE ALLEGED INVESTING COMPANIES M/S ML F CLASSIC FINANCE LIMITED. M/S LIFE LINE HOUSING DEVELOPERS FINANCE C OMPANY LTD. AND PRAKARTIK HOTEL PVT, LTD. HAVE TILED THE RETURN OF INCOME AT AAYAKAR BHAWAN, MUZAFFARNAGAR FOR ASSTT. YEAR 2005- 06. AND HAVE GIVEN COMMON ADDRESS OF 1 ST FLOOR. CITY CENTER, MUZAFFARNAGAR. ON VERIFICATION, IT WAS FOUND OUT THAT NONE OF THESE C OMPANIES FILED INCOME TAX RETURNS AFTER ASSESSMENT YEAR 2005-06 AN D THE ADDRESS OF THESE COMPANIES AT MUZARFARNAGGAR WAS FOUND TO B E WRONG AND THESE COMPANIES NEVER EXISTED AT THOSE ADDRESSES. (IX) THE COPY OF AFFIDAVITS SUBMITTED BY THE ASSESSEE COMPANY WERE OF NO EVIDENCE VALUE AS IT WAS COPY OF ONLY-ON E SIDE OF AFFIDAVIT AND WITHOUT GIVING ANY DATE. MOREOVER, TH E ASSESSEE COMPANY DID NOT SUBMIT THE ORIGINAL AFFIDAVITS EVEN WHEN THIS REQUIREMENT WAS CLEARLY EXPRESSED IN 142(1) NOTICE DATED 10-12- 2009. (X) NONE OF THESE ALLEGED INVESTORS HAD CREDITWORTHINES S TO INVEST SUCH HUGE AMOUNTS. THIS FACT BECOMES CLEAR AFTER PE RUSAL OF THEIR ITRS FILED FOR ASSESSMENT YEAR 2005-06 OR ASSESSMEN T YEAR 2004-05 (AS THE COPIES OF THESE ITRS WERE PROVIDED BY THE A .R. OF THE ASSESSEE COMPANY). A CHART COMPARING AMOUNT OF SHAR E, APPLICATION MONEY ALLEGEDLY INVESTED AND GROSS, TOTAL INCOME (B EFORE ANY DEDUCTION) OF THESE CLAIMED INVESTORS WAS GIVEN IN SHOW CAUSE NOTICE DATED 17-12-2009. THEREAFTER A SHOW-CAUSE NOTICE DATED 17.12.2009 WAS ISSUED DIRECTING THE ASSESSEE TO PRODUCE ANY 25 OF THESE CLAIMED INVESTORS, SINCE THE ASSESSEE HAD CLAIMED THE SAME TO BE HIS CLOSE FRIENDS AND BUSINESS ASSOCIATE S. WE FIND THAT THE ASSESSEE HAS MADE A SUBMISSION ON 23.12.2009 THAT INVESTORS COUL D NOT BE APPROACHED BY THE ASSESSEE COMPANY AS IT DID NOT PAY ANY DIVIDEND TO THEM. ALONG WITH THE WRITTEN SUBMISSIONS DATED 23.12.2009, WE FIND THAT THE AR O F THE ASSESSEE HAD PROVIDED CERTAIN DOCUMENTS LIKE COMPANYS CERTIFICATES OF IN CORPORATION AND COMPANY MASTER DETAILS. 38 ITA NO.3401/DEL/2011 26. HOWEVER, ON SCRUTINY OF THE SAID DOCUMENTS BY T HE AO, IT REVEALED THAT THE SAID CERTIFICATION OF INCORPORATION WAS NOT SIGNED BY THE ASSISTANT REGISTRAR OF COMPANIES, THE SIGNING AUTHORITY AND AO OBSERVED TH AT IN MOST OF THE CASES, THE COMPANY MASTER DETAILS DID NOT REFLECT THE DATE OF LAST BALANCE SHEET SUBMITTED WITH THE ROC OR THAT IT WAS FILED BEFORE FY 2006-07 (THE YEAR IN WHICH THE SHARE APPLICANT COMPANY WAS ALLEGEDLY INVESTED IN THE ASS ESSEES COMPANY). THE AO HAD GIVEN TABLE NO.2 AT PAGE 32 OF HIS ORDER, DEPIC TING THE NAME OF 19 COMPANIES OUT OF WHICH 13 COMPANIES DID NOT GIVE THE LAST DAT E OF BALANCE SHEET, THE OTHER 5 COMPANIES HAD GIVEN LAST DATE OF BALANCE SHEET AS 3 1.03.2006 AND THE REMAINING 1 COMPANY DID NOT FILE COMPANY MASTER DETAILS. THUS, THE AO CAME TO THE CONCLUSION THAT THE SAID 19 COMPANIES ARE DEFUNCT COMPANIES IN THE FINANCIAL YEAR 2006-07 WHICH IS THE RELEVANT ASSESSMENT YEAR UNDER CONSIDE RATION. AT PAGES 37 TO 44 OF HIS ORDER, THE AO HAS DEPICTED BY A CHART AS TABLE NO.3 DESCRIBING THE NAMES OF ALLEGED INVESTORS AND THE AMOUNT OF SHARE APPLICATI ON MONEY WHICH WAS PURPORTEDLY INVESTED BY IT AND THE REASON WHY, ACCO RDING TO HIM, GENUINENESS OF THE TRANSACTION OF SHARE APPLICANT MONEY CANNOT BE ACCEPTED HAS BEEN GIVEN IN DETAIL OF THE 39 COMPANIES/INDIVIDUALS, THOUGH IN R ESPECT OF THE FIRST TWO COMPANIES I.E. PROLON MARKETING PVT. LTD. AND JA GANG PLASTIC (INDIA) PVT. LTD. THE AMOUNT OF RS.31 LAKHS AND RS.15 LAKHS HAS NOT BEEN TRANSACTED IN THE YEAR UNDER CONSIDERATION AND HAS NOT BEEN ADDED BY THE AO AS A DDITION AND SO THERE IS NO DISPUTE ABOUT THIS. THEREAFTER, WE FIND THAT IN RES PECT TO THE 37 INVESTORS, THE AOS VIEW OF THE ALLEGED INVESTORS IN RESPECT TO THEIR I DENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION IS AS GIVEN BELOW :- 1. ANIL KUMAR GOEL THE ASSESSING OFFICER OBSERVED THAT THE AMOUNT INVE STED BY THIS ALLEGED INVESTOR WAS RS.7,98,000/-. THE ASSESSING OFFICER FOUND THAT SIGNATURE ON 39 ITA NO.3401/DEL/2011 ITR DID NOT MATCH WITH SIGNATURES ON SHARE APPLICAT ION FORM ACCORDING TO THE REPORT OF THE HAND WRITING EXPERT. HE ALSO FOUND TH AT THE ACCOUNT NUMBER OF HDFC BANK, KASHMIR GATE BRACH (DELHI) THROUGH WHICH THE SHARE APPLICATION MONEY WAS ALLEGEDLY INVESTED IN THE ASS ESSEE COMPANY WAS NEVER IN EXISTENCE AND THIS FACT WAS CONFIRMED IN WRITING BY THE BRANCH OF THE BANK THROUGH A LETTER WHICH IS REPRODUCE DIN THE ASSESSM ENT ORDER. IT IS ALSO OBSERVED THAT DIFFERENT ADDRESS WAS GIVEN IN AIS DA TA BASE. HE ALSO OBSERVED THAT HE DID NOT HAVE CREDITWORTHINESS TO INVEST SUC H AMOUNT AS FOR ASSESSMENT YEAR 2005-06 HIS TOTAL GROSS INCOME WAS FILED AT RS .94,200. 2. CHANDRA KANTA THE AMOUNT INVESTED BY THIS ALLEGED INVESTOR WAS RS .7,50,000/-. THE ASSESSING OFFICER FOUND THAT THE INVESTOR HAD GIVEN BOGUS ADDRESS OF DELHI AS VERIFIED BY INSPECTOR. HE ALSO OBSERVED THAT THE ACCOUNT NUMBER OF HDFC BANK, CHANDANI CHOWK BRANCH (DELHI) THROUGH WHICH T HE SHARE APPLICATION MONEY WAS ALLEGEDLY INVESTED IN THE ASSESSEE COMPAN Y WAS NEVER IN EXISTENCE AND THIS FACT WAS CONFIRMED IN WRITING BY THE BRANCH OF THE BANK THROUGH A LETTER WHICH IS REPRODUCE DIN THE ASSESSM ENT ORDER. IT WAS ALSO OBSERVED THAT THE DIFFERENT ADDRESS WAS GIVEN IN AI S DATA BASE AND EVEN THIS ADDRESS WAS FOUND TO BE BOGUS WHEN THE INSPECTOR WE NT FOR PHYSICAL VERIFICATION. HE FOUND THAT SHE DID NOT HAVE CREDIT WORTHINESS TO INVEST SUCH A HUGE AMOUNT AS SHE HAD FILED TOTAL GROSS INCOME AT RS.1,05,064/- FOR ASSESSMENT YEAR 2005-06. 3. MANOHAR LAL GUPTA RS.7,50,000/- WAS INVESTED BY THIS ALLEGED INVESTOR . THE ASSESSING OFFICER FOUND THAT THE SIGNATURE ON ITR DID NOT MATCH WITH SIGNATURES ON SHARE APPLICATION FORM ACCORDING TO THE REPORT OF THE HAN D WRITING EXPERT. HE ALSO OBSERVED THAT THE ACCOUNT NUMBER OF HDFC BANK, CHAN DANI CHOWK BRACH 40 ITA NO.3401/DEL/2011 (DELHI) THROUGH WHICH THE SHARE APPLICATION MONEY W AS ALLEGEDLY INVESTED IN THE ASSESSEE COMPANY WAS NEVER IN EXISTENCE SINCE T HE OPENING OF THIS BRANCH WAS JULY 2004 AND THIS FACT WAS CONFIRMED IN WRITING BY THE BRANCH OF THE BANK THROUGH A LETTER. HE FOUND THAT DIFFER ENT ADDRESS WAS GIVEN IN AIS DATA BASE. THE ASSESSING OFFICER ALSO OBSERVED THAT HE DID NOT HAVE CREDITWORTHINESS TO INVEST SUCH A HUGE AMOUNT AS HE HAD ONLY SHOWN GROSS TOTAL INCOME OF RS.1,00,045/- FOR ASSESSMENT YEAR 2 005-06. 4. RAHUL VERMA THE AMOUNT INVESTED BY THIS ALLEGED INVESTOR WAS RS .5,52,000/-. THE ASSESSING OFFICER FOUND THAT THE INVESTOR HAD GIVEN BOGUS ADDRESS OF DELHI AS VERIFIED BY INSPECTOR. HE ALSO OBSERVED THAT TH E ACCOUNT NUMBER OF HDFC BANK, KASHMERI GALE BRACH (DELHI) THROUGH WHICH THE SHARE APPLICATION MONEY WAS ALLEGEDLY INVESTED IN THE ASSESSEE COMPAN Y WAS NEVER IN EXISTENCE AND THIS FACT WAS CONFIRMED IN WRITING BY THE BRANCH OF THE BANK THROUGH A LETTER WHICH IS REPRODUCE DIN THE ASSESSM ENT ORDER. HE ALSO OBSERVED THAT THE DIFFERENT ADDRESS WAS GIVEN IN AI S DATA BASE. THE AO ALSO OBSERVED THAT HE DID NOT HAVE CREDITWORTHINESS TO I NVEST SUCH A HUGE AMOUNT AS FOR THE ASSESSMENT YEAR 2005-06, THE GROSS TOTAL INCOME WAS SHOWN AT RS.1,00,900/-. 5. SARASWATI DEVI GOEL RS.5,52,000/- WAS INVESTED BY THIS ALLEGED INVESTOR . THE ASSESSING OFFICER OBSERVED THAT THE INVESTOR HAD GIVEN THE BOGUS ADDR ESS OF DELHI WHICH WAS VERIFIED BY INSPECTOR. HE ALSO OBSERVED THAT THE A CCOUNT NUMBER OF HDFC BANK, CHANDANI CHOWK BRANCH (DELHI) THROUGH WHICH T HE SHARE APPLICATION MONEY WAS ALLEGEDLY INVESTED IN THE ASSESSEE COMPAN Y WAS NEVER IN EXISTENCE AND THIS FACT WAS CONFIRMED IN WRITING BY THE BRANCH OF THE BANK THROUGH A LETTER WHICH IS REPRODUCE DIN THE ASSESSM ENT ORDER. THE ASSESSING 41 ITA NO.3401/DEL/2011 OFFICER ALSO OBSERVED THAT IT DID NOT HAVE CREDITWO RTHINESS TO INVEST SUCH A HUGE AMOUNT AS IN THE ASSESSMENT YEAR 2005-06, THE INVESTOR HAD SHOWN RS.1,05,118/- AS GROSS TOTAL INCOME. HE ALSO OBSER VED THAT THE ALLEGED INVESTOR HAS GIVEN INVALID PAN INVALID ACCORDING TO AIS. 6. SAROJ AGGARWAL THE AMOUNT INVESTED BY THIS ALLEGED INVESTOR WAS RS .5,50,000/-. THE ASSESSING OFFICER FOUND THAT THE INVESTOR HAD GIVEN THE BOGUS ADDRESS OF DELHI AS VERIFIED BY INSPECTOR. HE ALSO OBSERVED TH AT THE ACCOUNT NUMBER OF HDFC BANK, CHANDANI CHOWK BRACH (DELHI) THROUGH WHI CH THE SHARE APPLICATION MONEY WAS ALLEGEDLY INVESTED IN THE ASS ESSEE COMPANY WAS NEVER IN EXISTENCE SINCE THE OPENING OF THIS BRANCH AND T HIS FACT WAS CONFIRMED IN WRITING BY THE BRANCH OF THE BANK THROUGH A LETTER. IT WAS ALSO FOUND THAT THE ALLEGED INVESTOR DID NOT HAVE CREDITWORTHINESS TO I NVEST SUCH A HUGE AMOUNT AS THE INVESTOR HAD SHOWN GROSS TOTAL INCOME OF RS. 1,00,128./- IN ASSESSMENT YEAR 2005-06. 7. SUSHMA GOEL THE ASSESSING OFFICER OBSERVED THAT THE AMOUNT INVE STED BY THIS ALLEGED INVESTOR WAS RS.5,50,000/-. THE ASSESSING OFFICER FOUND THAT THE ALLEGED INVESTOR HAD GIVEN THE BOGUS ADDRESS OF DELHI WHICH WAS VERIFIED BY INSPECTOR. HE ALSO OBSERVED THAT THE ACCOUNT NUMBER OF PUNJAB NATIONAL BANK, KHARI BAOLI BRANCH, DELHI, THROUGH WHICH THE SHARE APPLICATION MONEY WAS ALLEGEDLY INVESTED IN THE ASSESSEE COMPANY WAS NOT IN EXISTENCE AT LEAST SINCE 01.04.2006 AND THIS FACT WAS CONFIRMED IN WRI TING BY THE BRANCH OF THE BANK THROUGH A LETTER. THE ASSESSING OFFICER FOUN D THAT THE DIFFERENT ADDRESS WAS GIVEN IN AIS DATA BASE. HE OBSERVED THAT SHE DI D NOT HAVE CREDITWORTHINESS TO INVEST SUCH A HUGE AMOUNT AS SH E HAD SHOWN GROSS TOTAL INCOME OF RS.1,05,054/- IN A.Y. 2005-06. 42 ITA NO.3401/DEL/2011 8. VIVEK KUMAR JAIN THE ALLEGED INVESTOR HAD INVESTED A SUM OF RS.6,00, 000/-. THE ASSESSING OFFICER OBSERVED THAT THE SIGNATURE ON ITR DID NOT MATCH WITH SIGNATURE ON SHARE APPLICATION FORM ACCORDING TO THE REPORT OF T HE HAND WRITING EXPERT. HE ALSO FOUND THAT THE ACCOUNT NUMBER OF PUNJAB NAT IONAL BANK, KHARI BAOLI BRANCH, DELHI, THROUGH WHICH THE SHARE APPLICATION MONEY WAS ALLEGEDLY INVESTED IN THE ASSESSEE COMPANY WAS NOT IN EXISTEN CE AT LEAST SINCE 01.04.2006 AND THIS FACT WAS CONFIRMED BY THE BANK THROUGH A LETTER. IT IS ALSO OBSERVED THAT THE INVESTOR DID NOT HAVE CREDITWORTH INESS TO INVEST SUCH A HUGE AMOUNT AS RS.1,34,546/- WAS SHOWN AS GROSS TOTAL I NCOME IN THE ASSESSMENT YEAR 2005-06 BY THE ALLEGED INVESTOR. THE ASSESSIN G OFFICER ALSO OBSERVED THAT THE GIVEN PAN WAS INVALID ACCORDING TO AIS. 9. YOGENDRA KUMAR THE ASSESSING OFFICER OBSERVED THAT THE AMOUNT INVE STED BY THIS ALLEGED INVESTOR WAS RS.3,00,000/-. HE FOUND THAT DIFFEREN T ADDRESS WAS GIVEN IN AIS DATA BASE AND EVEN THIS ADDRESS WAS FOUND TO BE BOG US WHEN THE INSPECTOR WENT FOR PHYSICAL VERIFICATION. THE ASSESSING OFFIC ER OBSERVED THAT THE ACCOUNT NUMBER OF PUNJAB NATIONAL BANK, KHAN BAOLI BRANCH. DELHI, THROUGH WHICH THE SHARE APPLICATION MONEY WAS ALLEG EDLY INVESTED IN THE ASSESSEE COMPANY WAS NOT IN EXISTENCE AT LEAST SINC E 01.04.2006 AND THIS FACT WAS CONFIRMED IN WRITING BY THE BRANCH OF THE BANK THROUGH A LETTER. HE FOUND THAT THE INVESTOR DID NOT HAVE CREDITWORTHINE SS TO INVEST SUCH A HUGE AMOUNT AS THE GROSS TOTAL INCOME WAS SHOWN BY THE I NVESTOR AT RS.1,00,784/- IN ASSESSMENT YEAR 2005-06. 10. MONIKA GOEL THE ASSESSING OFFICER OBSERVED THAT THE AMOUNT INVE STED BY THIS ALLEGED INVESTOR WAS RS.3,00,000/-. HE FOUND THAT THE ALLE GED INVESTOR HAD GIVEN 43 ITA NO.3401/DEL/2011 BOGUS ADDRESS OF DELHI AS VERIFIED BY INSPECTOR. TH E ASSESSING OFFICER ALSO OBSERVED THAT SHE DID NOT HAVE CREDITWORTHINESS TO INVEST SUCH A HUGE AMOUNT AS SHE HAD SHOWN GROSS TOTAL INCOME OF RS.1,05,105/ - FOR ASSESSMENT YEAR 2005-06. 11. RAKESH KUMAR AGGARWAL RS.2,00,000/- WAS INVESTED BY THIS ALLEGED INVESTOR . THE ASSESSING OFFICER FOUND THAT THE SIGNATURE ON ITR DID NOT MATCH WITH SIGNATURES ON SHARE APPLICATION FORM ACCORDING TO THE REPORT OF THE HAN D WRITING EXPERT. IT IS ALSO OBSERVED THAT DIFFERENT ADDRESS WAS GIVEN IN A IS DATA BASE. THE ASSESSING OFFICER FOUND THAT THE ALLEGED INVESTOR D ID NOT HAVE CREDITWORTHINESS TO INVEST SUCH A HUGE AMOUNT AS HE HAD SHOWN GROSS TOTAL INCOME AT RS.78,600/- IN ASSESSMENT YEAR 2005-06. 12. SMT. INDIRA DEVI RS.6,00,000/- WAS INVESTED BY THIS INVESTOR. THE A SSESSING OFFICER OBSERVED THAT THE INVESTOR HAD GIVEN BOGUS ADDRESS OF DELHI WHICH WAS VERIFIED BY INSPECTOR. IT WAS ALSO OBSERVED BY THE ASSESSING O FFICER THAT SHE DID NOT HAVE CREDITWORTHINESS TO INVEST SUCH A HUGE AMOUNT AS THE TOTAL GROSS INCOME WAS SHOWN AT RS.1,05,130/- IN THE ASSESSMENT YEAR 2 005-06. 13. SMT. REKHA BANSAL THE ALLEGED INVESTOR HAD INVESTED RS.15,00,000/-. THE ASSESSING OFFICER OBSERVED THAT THE SIGNATURE ON ITR DID NOT MATCH WITH SIGNATURE O N SHARE APPLICATION FORM ACCORDING TO THE REPORT OF T HE HAND WRITING EXPERT. HE OBSERVED THAT THE SHE HAD GIVEN THE BOGUS ADDRES S OF DELHI AS VERIFIED BY INSPECTOR. IT WAS ALSO OBSERVED THAT IT DID NOT HA VE CREDITWORTHINESS TO INVEST SUCH A HUGE AMOUNT AS RS.1,03,225/- WAS SHOWN AS TOTAL GROSS INCOME IN THE ASSESSMENT YEAR 2005-06. 44 ITA NO.3401/DEL/2011 14. GANESH KUMAR THE AMOUNT INVESTED BY THIS ALLEGED INVESTOR WAS RS .,8,00,000/-. THE ASSESSING OFFICER OBSERVED THAT THE SIGNATURE ON IT R DID NOT MATCH WITH SIGNATURES ON SHARE APPLICATION FORM ACCORDING TO T HE REPORT OF THE HAND WRITING EXPERT. IT IS ALSO FOUND THAT DIFFERENT AD DRESS WAS GIVEN IN AIS DATA BASE AND EVEN THIS ADDRESS WAS FOUND TO BE BOGUS WH EN THE INSPECTOR WENT FOR PHYSICAL VERIFICATION. THE ASSESSING OFFICER ALSO FOUND THAT HE DID NOT HAVE CREDITWORTHINESS TO INVEST SUCH A HUGE AMOUNT AS HE HAD SHOWN GROSS TOTAL INCOME OF RS. 99,235/- IN A.Y. 2005-06. 15. LIFE LINE HOUSING DEVELOPMENT FINANCE CO. LTD THE ASSESSING OFFICER OBSERVED THAT THE AMOUNT INVE STED BY THIS ALLEGED INVESTOR WAS RS.5,00,000/-. HE FOUND THAT FOR ASSE SSMENT YEAR 2005-06, THE COMPANY FILED ITS RETURN OF INCOME AT MUZAFFARNAGAR BUT IT DID NOT FILE ANY RETURN OF INCOME FOR SUBSEQUENT ASSESSMENT YEARS AN D THE INQUIRY OF THE INSPECTOR AT THE ADDRESS GIVEN, ON ITR, PROVED THAT THE COMPANY NEVER EXISTED AT THAT ADDRESS. HE ALSO FOUND THAT DIFFERE NT ADDRESS WAS GIVEN IN AIS DATA BASE AND EVEN THIS ADDRESS WAS FOUND TO BE BOG US, WHEN THE INSPECTOR WENT FOR PHYSICAL VERIFICATION. HE OBSERVED THAT I T DID NOT HAVE CREDITWORTHINESS TO INVEST SUCH A HUGE AMOUNT AS F OR ASSESSMENT YEAR 2005-06, IT WAS HAVING GROSS INCOME AT RS.13,339/-. 16. RABIK EXPORTS LTD. THE AMOUNT INVESTED BY THIS ALLEGED INVESTOR WAS RS .5,00,000/-. THE ASSESSING OFFICER FOUND THAT DIFFERENT ADDRESS WAS GIVEN IN AIS DATA BASE. THE ASSESSING OFFICER ALSO OBSERVED THAT IT DID NOT HAVE THE CREDITWORTHINESS TO INVEST SUCH A HUGE AMOUNT AS TOTAL GROSS INCOME AT RS.38,315/- WAS SHOWN FOR ASSESSMENT YEAR 2004-05 AND IT DID NOT SUBMIT I TR FOR A.YS. 2005-06 OR 2006-07. HE ALSO FOUND THAT ACCORDING TO COMPANY M ASTER DETAILS (FROM 45 ITA NO.3401/DEL/2011 REGISTRAR OF COMPANIES), THIS COMPANY FILED ITS LAS T BALANCE SHEET ON 31-03- 2006. 17. RIA MARKETING SERVICES PVT. LTD. THE ASSESSING OFFICER OBSERVED THAT THE AMOUNT INVE STED BY THIS ALLEGED INVESTOR WAS RS.5,00,000/-. HE FOUND THAT BOGUS AD DRESS OF DELHI WAS GIVEN WHICH WAS VERIFIED BY INSPECTOR. HE ALSO OBSERVED THAT IT DID NOT HAVE THE CREDITWORTHINESS TO INVEST SUCH A HUGE AMOUNT AS FO R ASSESSMENT YEAR 2005- 06 IT HAD GROSS INCOME AT RS. 34,080/- ONLY. THE PA N GIVEN WAS ALSO NOT OF THIS COMPANY BUT THAT OF SIMARJEET ELECTRONICS PVT. LTD. (KAROL BAGH), DELHI. 18. SAL WAN DEVELOPERS & PROMOTERS PVT. LTD THE AMOUNT INVESTED BY THIS ALLEGED INVESTOR WAS RS .10,00,000/-. THE ASSESSING OFFICER FOUND THAT THE DIRECTOR OF THE CO NCERN, SHRI SURENDER PAL SINGH STATED THAT THIS COMPANY WAS CLOSED DOWN IN M ARCH, 2006. HE ALSO OBSERVED THAT IT DID NOT HAVE THE CREDITWORTHINESS TO INVEST SUCH A HUGE AMOUNT AS THE GROSS TOTAL INCOME OF RS.18,191/- FOR ASSESSMENT YEAR 2005- 06. HE ALSO FOUND THAT ACCORDING TO COMPANY MASTER DETAILS (FROM REGISTRAR OF COMPANIES), THIS COMPANY FILED ITS LAST BALANCE SHEET ON 31-03-2006. HE ALSO FOUND THAT THE GIVEN PAN WAS INVALID ACCORDING TO AIS. 19. YOGSON IMPEX PVT. LTD. THE ASSESSING OFFICER OBSERVED THAT THE AMOUNT INVE STED BY THIS ALLEGED INVESTOR WAS RS.5,00,000/-. THE ASSESSING OFFICER OBSERVED THAT THE COMPANY HAS GIVEN BOGUS ADDRESS OF DELHI AS VERIFIE D BY INSPECTOR. HE FOUND THAT DIFFERENT ADDRESS WAS GIVEN IN AIS DATA BASE AND EVEN THIS ADDRESS WAS FOUND TO BE BOGUS WHEN THE INSPECTOR WENT FOR P HYSICAL VERIFICATION. HE ALSO OBSERVED THAT THE SIGNATURES ON DOCUMENTS WERE FORGED ACCORDING TO THE REPORT OF HAND WRITING EXPERT. HE ALSO OBSERVED THA T IT DID NOT HAVE 46 ITA NO.3401/DEL/2011 CREDITWORTHINESS TO INVEST SUCH A HUGE AMOUNT AS CO PY OF ITR WAS NOT SUBMITTED. 20. SINGHAL FLUIDLINE EQUIPMENT PVT. LTD. THE AMOUNT INVESTED BY THIS ALLEGED INVESTOR WAS RS .5,00,000/-. THE ASSESSING OFFICER FOUND THAT SIGNATURE ON ITR DID N OT MATCH WITH SIGNATURE ON SHARE APPLICATION FORM ACCORDING TO THE REPORT O F THE HAND WRITING EXPERT AND THE SAME DIRECTOR, SHRI RAJAN JASSAL S/O SH. S. K. JASSAL HAD SIGNED ON ALL THE DOCUMENTS REFERRED TO THE HAND WRITING EXPERT. HE ALSO OBSERVED THAT THE INVESTOR DID NOT HAVE CREDITWORTHINESS TO INVES T SUCH A HUGE AMOUNT AS THE INVESTOR HAD SHOWN RS.RS.2046/- ONLY AS GROSS T OTAL INCOME FOR ASSESSMENT YEAR 2004-05. IT IS ALSO FOUND THAT HE D ID NOT SUBMIT ITR FOR ASSESSMENT YEARS 2005-06 OR 2006-07. THE ASSESSIN G OFFICER OBSERVED THAT THE COMPANY HAD NOT FILED ITS BALANCE SHEET WITH RE GISTRAR OF COMPANIES FOR MANY YEARS AS THE LAST BALANCE SHEET DATE WAS NOT G IVEN IN COMPANY MASTER DETAILS (FROM REGISTRAR OF COMPANIES). HE ALSO FOU ND THAT THE COMPANY WAS IN DEFAULT OF FILING OF FORM DIN3/FORM 32. THE ASS ESSING OFFICER OBSERVED THAT THIS PAN WAS NOT OF THE COMPANY BUT THAT OF SE HAJ FINANCIAL SERVICES PVT. LTD., DARYAGANJ, NEW DELHI. 21. B-FIN LEASE (I) PRIVATE LIMITED THE AMOUNT INVESTED BY THIS ALLEGED INVESTOR WAS RS .10,00,000/-. THE ASSESSING OFFICER FOUND THAT THE COMPANY HAD NOT FI LED ITS BALANCE SHEET WITH REGISTRAR OF COMPANIES FOR MANY YEARS AS THE L AST BALANCE SHEET DATE IS NOT GIVEN IN COMPANY MASTER DETAILS (FROM REGISTRAR OF COMPANIES). THE ASSESSING OFFICER OBSERVED THAT DIFFERENT ADDRESS W AS GIVEN IN AIS DATA BASE. THE ASSESSING OFFICER FOUND THAT THE COMPANY DID NO T HAVE CREDITWORTHINESS TO INVEST SUCH A HUGE AS THE TOTAL GROSS INCOME SH OWN WAS RS. 1667/- IN 47 ITA NO.3401/DEL/2011 ASSESSMENT YEAR 2004-05 AND ALSO DID NOT SUBMIT ITR FOR ASSESSMENT YEARS 2005-06 OR 2006-07. 22. SHATARCHI FINANCE & LEASING LIMITED RS.15,00,000/- WAS INVESTED BY THIS COMPANY. THE A SSESSING OFFICER OBSERVED THAT THE SIGNATURE ON ITR DID NOT MATCH WI TH SIGNATURES ON SHARE APPLICATION FORM ACCORDING TO THE REPORT OF THE HAN D WRITING EXPORT AND THE SAME DIRECTOR, MS RANI SHARMA HAD SIGNED ON ALL THE DOCUMENTS REFERRED TO THE HAND WRITING EXPERT. IT WAS ALSO OBSERVED THAT THE COMPANY HAD NOT FILED ITS BALANCE SHEET WITH REGISTRAR OF COMPANIES FOR MANY YEARS AS THE LAST BALANCE SHEET DATE WAS NOT GIVEN IN COMPANY MA STER DETAILS (FROM REGISTRAR OF COMPANIES). THE ASSESSING OFFICER ALS O OBSERVED THAT THE COMPANY WAS IN DEFAULT OF FILING OF FORM DIN3/FORM 32 AND DIFFERENT ADDRESS WAS GIVEN IN AIS DATA BASE. THE ASSESSING OFFICER OBSERVED THAT IT DID NOT HAVE CREDITWORTHINESS TO INVEST SUCH A HUGE AMOUNT AS THE GROSS TOTAL INCOME IN ASSESSMENT YEAR 2005-06 WAS SHOWN AT RS.3 096/-. 23. VPS VALVES & TUBES PRIVATE LIMITED THE ASSESSING OFFICER OBSERVED THAT THE AMOUNT INVE STED BY THIS ALLEGED INVESTOR WAS RS.10,00,000/-. THE ASSESSING OFFICER OBSERVED THAT THE COMPANY HAD NOT FILED ITS BALANCE SHEET WITH REGIST RAR OF COMPANIES FOR MANY YEARS AS THE LAST BALANCE SHEET DATE WAS NOT G IVEN IN COMPANY MASTER DETAILS (FROM REGISTRAR OF COMPANIES) AND ALSO THE DIFFERENT ADDRESS WAS GIVEN IN AIS DATA BASE. THE ASSESSING OFFICER OBSE RVED THAT IT DID NOT HAVE CREDITWORTHINESS TO INVEST SUCH A HUGE AMOUNT AS CO PY OF ITRS WERE NOT SUBMITTED. 48 ITA NO.3401/DEL/2011 24. MLF CLASSIC FINANCE LIMITED THE AMOUNT INVESTED BY THIS ALLEGED INVESTOR WAS RS .10,00,000/-. THE ASSESSING OFFICER OBSERVED THAT THE SIGNATURE ON IT R DID NOT MATCH WITH SIGNATURE ON SHARE APPLICATION FORM ACCORDING TO TH E REPORT OF THE HAND WRITING EXPERT AND THE SAME DIRECTOR SH. PRASHAM MI SHRA S/O SH. PANCHANAND MISHRA HAD SIGNED ON ALL THE DOCUMENTS R EFERRED TO THE HAND WRITING EXPERT. HE ALSO OBSERVED THAT FOR ASSESSME NT YEAR 2005-06, THIS COMPANY FILED ITS RETURN OF INCOME AT MUZAFFARNAGAR BUT IT DID NOT FILE ANY RETURN OF INCOME FOR SUBSEQUENT. ASSESSMENT YEAR AN D THE INQUIRY OF THE INSPECTOR AT THE ADDRESS GIVEN ON ITR PROVED THAT T HE COMPANY NEVER EXISTED AT THAT ADDRESS. THE ASSESSING OFFICER ALSO OBSERV ED THAT IT DID NOT HAVE CREDITWORTHINESS TO INVEST SUCH A HUGE AMOUNT AS IT HAD SHOWN NIL INCOME IN ASSESSMENT YEAR 2005-06 AND HE ALSO FOUND THAT T HE GIVEN PAN WAS INVALID ACCORDING TO AIS. 25. MONISHA GRANITE LIMITED RS.20,00,000/- WAS INVESTED BY THIS COMPANY. THE A SSESSING OFFICER OBSERVED THAT THE INQUIRY LETTER U/S 133(6), SENT A T THE DELHI ADDRESS OF THE COMPANY THROUGH REGISTERED POST, RETURNED UNSERVED. HE FOUND THAT DIFFERENT ADDRESS WAS GIVER IN AIS DATA BASE. THE ASSESSING OFFICER ALSO OBSERVED THAT IT DID NOT HAVE CREDITWORTHINESS TO INVEST SUC H A HUGE AMOUNT AS THE GROSS TOTAL INCOME WAS SHOWN AT RS. 15,110/- IN THE ASSESSMENT YEAR 2005- 06. 26. MV MARKETING PRIVATE LIMITED THE ASSESSING OFFICER OBSERVED THAT THE AMOUNT INVE STED BY THIS ALLEGED INVESTOR WAS RS.10,00,000/-. THE ASSESSING OFFICER FOUND THAT THE COMPANY HAD NOT FILED ITS BALANCE SHEET WITH REGISTRAR OF C OMPANIES FOR MANY YEARS AS THE LAST BALANCE SHEET DATE WAS NOT GIVEN IN COM PANY MASTER DETAILS 49 ITA NO.3401/DEL/2011 (FROM REGISTRAR OF COMPANIES). IT IS ALSO OBSERVED THAT DIFFERENT ADDRESS WAS GIVEN IN AIS DATA BASE. THE ASSESSING OFFICER ALSO OBSERVED THAT IT DID NOT HAVE CREDITWORTHINESS TO INVEST SUCH A HUGE AMOUNT AS RS.2,08,881/- WAS SHOWN AS GROSS TOTAL INCOME IN ASSESSMENT YEAR 2004 -05 BUT IT DID NOT SUBMIT ITR FOR ASSESSMENT YEARS 2005-06 OR 2006-07. 27. PRAKARTIK HOTELS PRIVATE LIMITED RS.20,00,000/- WAS INVESTED BY THIS COMPANY. THE A SSESSING OFFICER OBSERVED THAT THE SIGNATURE ON ITR DID NOT MATCH WI TH SIGNATURES ON SHARE APPLICATION FORM ACCORDING TO THE REPORT OF THE HAN D WRITING EXPERT AND THE SAME DIRECTOR, SHRI KAMAL SHARMA HAD SIGNED ON ALL THE DOCUMENTS REFERRED TO THE HAND WRITING EXPERT. HE FOUND THAT FOR ASSE SSMENT YEAR 2005-06, THIS COMPANY FILED ITS RETURN OF INCOME AT MUZAFFARNAGAR BUT IT DID NOT FILE ANY RETURN OF INCOME FOR SUBSEQUENT ASSESSMENT YEAR AND THE INQUIRY OF THE INSPECTOR AT THE ADDRESS GIVEN ON ITR PROVED THAT T HE COMPANY NEVER EXISTED AT THAT ADDRESS. HE OBSERVED THAT THE INQUIRY LETTE R U/S 133(6), SENT THROUGH REGISTERED POST AT THE DELHI ADDRESS OF THE COMPANY , RETURNED UNSERVED. HE ALSO FOUND THAT DIFFERENT ADDRESS WAS GIVEN IN AIS DATA BASE. THE ASSESSING OFFICER OBSERVED THAT IT DID NOT HAVE CREDITWORTHIN ESS TO INVEST SUCH A HUGE AMOUNT AS NIL INCOME WAS SHOWN IN THE ASSESSMENT Y EAR 2005-06. 28. SGC PUBLISHING PRIVATE LIMITED THE ASSESSING OFFICER OBSERVED THAT THE AMOUNT INVE STED BY THIS ALLEGED INVESTOR WAS RS.10,00,000/-. THE ASSESSING OFFICER OBSERVED THAT THE SIGNATURE ON ITR DID NOT MATCH WITH SIGNATURES ON S HARE APPLICATION FORM ACCORDING TO THE REPORT OF THE HAND WRITING EXPERT AND THE SAME DIRECTOR, SHRI PRAMOD KUMAR S/O SH. PRAKASH CHAND HAD SIGNED ON ALL THE DOCUMENTS REFERRED TO THE HAND WRITING EXPERT. HE ALSO FOUND THAT BOGUS ADDRESS OF DELHI WAS GIVEN WHICH WAS VERIFIED BY INSPECTOR. H E ALSO FOUND THAT IT DID 50 ITA NO.3401/DEL/2011 NOT HAVE CREDITWORTHINESS TO INVEST SUCH A HUGE AMO UNT AS RS. 4110/- WAS ONLY SHOWN AS GROSS TOTAL INCOME IN ASSESSMENT YEAR 2004-05 AND THE COMPANY DID NOT ALSO SUBMIT ITR FOR ASSESSMENT YEAR S 2005-06 OR 2006-07. IT WAS ALSO FOUND THAT THE COMPANY HAD NOT FILED IT S BALANCE SHEET WITH REGISTRAR OF COMPANIES FOR MANY YEARS AS THE LAST B ALANCE SHEET DATE WAS NOT GIVEN IN COMPANY MASTER DETAILS (FROM REGISTRAR OF COMPANIES). 29. UP ELECTRICALS LIMITED THE ALLEGED INVESTOR HAD INVESTED RS.20,00,000/-. THE ASSESSING OFFICER FOUND THAT THE INQUIRY LETTER U/S 133(6), SENT AT T HE DELHI ADDRESS OF THE COMPANY THROUGH REGISTERED POST, RETURNED UNSERVED. THE ASSESSING OFFICER OBSERVED THAT DIFFERENT ADDRESS WAS GIVEN IN AIS DA TA BASE. HE ALSO OBSERVED THAT THE COMPANY DID NOT HAVE CREDITWORTHINESS TO I NVEST SUCH A HUGE AMOUNT AS THE GROSS TOTAL INCOME WAS SHOWN AT RS.1788/- FO R THE ASSESSMENT YEAR 2005-06. 30. CV METAL POWDERS (HARYANA) LIMITED THE ASSESSING OFFICER OBSERVED THAT THE AMOUNT INVE STED BY THIS ALLEGED INVESTOR WAS RS.8,00,000/-. THE ASSESSING OFFICER FUND THAT DIFFERENT ADDRESS WAS GIVEN IN AIS DATA BASE. HE ALSO OBSERV ED THAT IT DID NOT HAVE CREDITWORTHINESS TO INVEST SUCH A HUGE AMOUNT AS TH E GROSS TOTAL INCOME WAS SHOWN AT RS.9,360/ IN THE ASSESSMENT YEAR 2005-06. THE ASSESSING OFFICER FOUND THAT ACCORDING TO COMPANY MASTER DETAILS (FRO M REGISTRAR OF COMPANIES), THIS COMPANY FILED ITS LAST BALANCE SHE ET ON 31.03.2005. 31. DIGNITY FINVEST PRIVATE LIMITED RS.8,00,000/- WAS INVESTED BY THIS COMPANY. THE ASS ESSING OFFICER FOUND THAT ACCORDING TO COMPANY MASTER DETAILS (FROM REGI STRAR OF COMPANIES), THIS COMPANY FILED ITS LAST BALANCE SHEET ON 31.03. 2005. HE OBSERVED THAT 51 ITA NO.3401/DEL/2011 DIFFERENT ADDRESS WAS GIVEN IN AIS DATA BASE. THE ASSESSING OFFICER ALSO OBSERVED THAT IT DID NOT HAVE CREDITWORTHINESS TO I NVEST SUCH A HUGE AMOUNT AS RS.3,867/- WAS SHOWN AS GROSS TOTAL INCOME IN TH E ASSESSMENT YEAR 2005- 06. 32. ETHNIC CREATION PRIVATE LIMITED THE ALLEGED INVESTOR HAD INVESTED RS.11,00,000/-. THE ASSESSING OFFICER FOUND THAT THE COMPANY HAD NOT FILED ITS BALANCE SH EET WITH REGISTRAR OF COMPANIES FOR MANY YEARS AS THE LAST BALANCE SHEET DATE WAS NOT GIVEN IN COMPANY MASTER DETAILS (FROM REGISTRAR OF COMPANIES ). HE ALSO FOUND THAT THE COMPANY WAS IN DEFAULT OF FILING OF FORM D1N3/F ORM 32. HE ALSO OBSERVED THAT DIFFERENT ADDRESS WAS GIVEN IN AIS DA TA BASE. THE ASSESSING OFFICER FOUND THAT THE COMPANY DID NOT HAVE CREDITW ORTHINESS TO INVEST SUCH A HUGE AMOUNT AS GROSS TOTAL INCOME AT RS. 20,068/- WAS SHOWN IN ASSESSMENT YEAR 2004-05 BUT IT DID NOT SUBMIT ITR F OR ASSESSMENT YEARS 2005-06 OR 2006-07. 33. UNIQUE INSULATION & THERMO PACKAGING PRIVATE LI MITED THE ASSESSING OFFICER OBSERVED THAT THE AMOUNT INVE STED BY THIS ALLEGED INVESTOR WAS RS.7,00,000/-. THE ASSESSING OFFICER OBSERVED THAT THE SIGNATURE ON ITR DID NOT MATCH WITH SIGNATURES ON S HARE APPLICATION FORM ACCORDING TO THE REPORT OF THE HAND WRITING EXPERT AND THE SAME DIRECTOR, SHRI GHANSHYAM SHARMA, S/O SH. J.P. SHARMA HAD SIGN ED ON ALL THE DOCUMENTS REFERRED TO THE HAND WRITING EXPERT. THE ASSESSING OFFICER ALSO FOUND THAT THE COMPANY HAD NOT FILED ITS BALANCE SH EET WITH REGISTRAR OF COMPANIES FOR MANY YEARS AS THE LAST BALANCE SHEET DATE WAS NOT GIVEN IN COMPANY MASTER DETAILS (FROM REGISTRAR OF COMPANIES ). IT IS ALSO OBSERVED THAT DIFFERENT ADDRESS WAS GIVEN IN AIS DATA BASE. HE OBSERVED THAT IT DID NOT HAVE CREDITWORTHINESS TO INVEST SUCH A HUGE AMOUNT AS RS.4,581/- WAS SHOWN 52 ITA NO.3401/DEL/2011 AS GROSS TOTAL INCOME IN ASSESSMENT YEAR 2004-05 AN D IT DID NOT SUBMIT ITR FOR ASSESSMENT YEARS 2005-06 OR 2006-07. 34. KESHRI INDUSTRIAL LAB PRIVATE LIMITED THE ALLEGED INVESTOR HAD INVESTED RS.30,00,000/-. THE ASSESSING OFFICER FOUND THAT THE SIGNATURE ON ITR DID NOT MATCH WITH SIGNATURES ON SHARE APPLICATION FORM ACCORDING TO THE REPORT OF THE HAN D WRITING EXPERT AND THE SAME DIRECTOR, SHRI SANJAY MITTAL HAD SIGNED ON ALL THE DOCUMENTS REFERRED TO THE HAND WRITING EXPERT. THE ASSESSING OFFICER OBS ERVED THAT INQUIRY LETTER U/S 133(6), SENT AT THE DELHI ADDRESS OF THE COMPAN Y THROUGH REGISTERED POST, RETURNED UNSERVED. THE ASSESSING OFFICER ALSO OBSE RVED THAT THE COMPANY HAD NOT FILED ITS BALANCE SHEET WITH REGISTRAR OF C OMPANIES FOR MANY YEARS AS THE LAST BALANCE SHEET DATE WAS NOT GIVEN IN COM PANY MASTER DETAILS (FROM REGISTRAR OF COMPANIES). THE ASSESSING OFFIC ER OBSERVED THAT DIFFERENT ADDRESS WAS GIVEN IN AIS DATA BASE. HE AL SO OBSERVED THAT IT DID NOT HAVE CREDITWORTHINESS TO INVEST SUCH A HUGE AMOUNT AS IT HAD SHOWN NIL INCOME IN THE ASSESSMENT YEAR 2005-06. 35. PARTICULAR MANAGE FIN LEASE (INDIA PRIVATE LIMI TED THE ASSESSING OFFICER OBSERVED THAT THE AMOUNT INVE STED BY THIS ALLEGED INVESTOR WAS RS.15,00,000/-. THE ASSESSING OFFICER FOUND THAT THE SIGNATURE ON ITR DID NOT MATCH WITH SIGNATURES ON SHARE APPLI CATION FORM ACCORDING TO THE REPORT OF THE HAND WRITING EXPERT AND THE SAME DIRECTOR, SHRI RAJIV AGGARWAL, S/O SH. RADHEY SHYAM AGGARWAL HAD SIGNED ON ALL THE DOCUMENTS REFERRED TO THE HAND WRITING EXPERT. THE ASSESSING OFFICER OBSERVED THAT INQUIRY LETTER U/S 133(6), SENT THROUGH REGISTERED POST AT THE DELHI ADDRESS OF THE COMPANY, RETURNED UNSERVED. HE ALSO OBSERVED T HAT THE COMPANY HAD NOT FILED ITS BALANCE SHEET WITH REGISTRAR OF COMPANIES FOR MANY YEARS AS THE LAST BALANCE SHEET DATE WAS NOT GIVEN IN COMPANY MA STER DETAILS (FROM 53 ITA NO.3401/DEL/2011 REGISTRAR OF COMPANIES). THE ASSESSING OFFICER OBS ERVED THAT THE COMPANY WAS IN DEFAULT OF FILING OF FORM DIN3/FORM 32. IT IS OBSERVED BY THE ASSESSING OFFICER THAT DIFFERENT ADDRESS WAS GIVEN IN AIS DATA BASE. THE ASSESSING OFFICER FOUND THAT IT DID NOT HAVE CREDIT WORTHINESS TO INVEST SUCH A HUGE AMOUNT AS THE GROSS TOTAL INCOME FOR THE ASSES SMENT YEAR 2004-05 WAS SHOWN AT RS.1,590/- AND ALSO THE COMPANY HAD NOT SU BMITTED ITR FOR ASSESSMENT YEARS2005-06 OR 2006-07. 36. RIZZER EXIM PRIVATE LIMITED THE ALLEGED INVESTOR HAD INVESTED RS.15,00,000/-. THE ASSESSING OFFICER OBSERVED THAT THE COMPANY HAD GIVEN BOGUS ADDRESS O F DELHI WHICH WAS VERIFIED BY INSPECTOR. HE ALSO OBSERVED THAT THE CO MPANY HAD NOT FILED ITS BALANCE SHEET WITH REGISTRAR OF COMPANIES FOR MANY YEARS AS THE LAST BALANCE SHEET DATE WAS NOT GIVEN IN COMPANY MASTER DETAILS (FROM REGISTRAR OF COMPANIES) AND THE COMPANY WAS IN DEFA ULT OF FILING OF FORM DIN3/FORM 32. HE OBSERVED THAT DIFFERENT ADDRESS W AS GIVEN IN AIS DATA BASE. THE ASSESSING OFFICER OBSERVED THAT THE COMP ANY DID NOT HAVE CREDITWORTHINESS TO INVEST SUCH A HUGE AMOUNT AS RS .38,207/- WAS SHOWN AS GROSS TOTAL INCOME IN ASSESSMENT YEAR 2005-06. 37. SATWANT SINGH SODHI CONSTRUCTION PRIVATE LIMITE D THE ASSESSING OFFICER OBSERVED THAT THE AMOUNT INVE STED BY THIS ALLEGED INVESTOR WAS RS.16,00,000/-. THE ASSESSING OFFICER OBSERVED THAT THE DIRECTOR OF THE CONCERN, SHRI SURENDER PAL SINGH ST ATED THAT THIS COMPANY CLOSED DOWN IN MARCH, 2006. THE ASSESSING OFFICER FOUND THAT THE COMPANY HAD GIVEN BOGUS ADDRESS OF DELHI WHICH WAS VERIFIED BY INSPECTOR. HE ALSO OBSERVED THAT IT DID NOT HAVE CREDITWORTHINESS TO I NVEST SUCH A HUGE AMOUNT AS THE NIL INCOME WAS FILED FOR THE ASSESSMENT YEAR 2005-6. IT WAS ALSO FOUND BY THE ASSESSING OFFICER THAT ACCORDING TO CO MPANY MASTER DETAILS 54 ITA NO.3401/DEL/2011 (FROM REGISTRAR OF COMPANIES), THIS COMPANY FILED I TS LAST BALANCE SHEET ON 31-03-2005 AND THE COMPANY WAS IN DEFAULT OF FILING OF FORM DIN3/FORM 32. 27. THE AO CAME TO THE CONCLUSION BASED ON HIS IN VESTIGATION AS AFORESAID THAT THE ASSESSEE COULD NOT DISCHARGE THE BURDEN OF PROO F CASTED UPON IT TO PROVE THE SHARE APPLICANTS/INVESTORS IDENTITY, CREDITWORTHI NESS AND GENUINENESS OF THE TRANSACTION; AND THE SAID AMOUNT TO THE TUNE OF RS. 3.46 CRORES WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 28. WE FIND THAT ON APPEAL, THE FIRST APPELLATE AUT HORITY HAD CALLED UPON THE AO TO FURNISH THE REMAND REPORT WHICH WAS SUBMITTED VI DE LETTER DATED 28.01.2011 WHICH IS PART OF THE IMPUGNED ORDER FROM PAGES 20 T O 22, WHEREIN THE AO HAD AGAIN ISSUED NOTICES TO THE ASSESSEE WITH A DIRECTI ON TO IT TO PRODUCE 7 INVESTORS AND ALSO TO FURNISH THE ITR FOR AY 2008-09, 2009-10 AND 2010-11. ON THE DATE FIXED FOR COMPLIANCE I.E. 13.01.2011, THE ASSESSEE COULD NOT PRODUCE ANY OF THE 7 INVESTORS AS STATED AT PAGE 21 OF THE IMPUGNED ORDE R. ON 08.01.2011, THE AO ISSUED SECTION 133 (6) NOTICE TO 15 SHARE APPLICANT S/HOLDERS AND OUT OF WHICH, 6 WERE RETURNED BACK UNSERVED, 6 PERSONS REPLIED BACK AND 3 UN-REPLIED TILL THE DATE OF REMAND REPORT. (FOR CLARITY, IT IS NOTED THAT T HE SIX SHARE HOLDERS WHO REPLIED TO AO DURING REMAND PROCEEDINGS WERE PRIVATE LIMITED C OMPANIES, WHOSE SUBSEQUENT YEAR ITRS AND BALANCE SHEETS WERE FILED BEFORE THE CIT (A).) THE ASSESSEE WAS CONFRONTED BY THE AO DURING REMAND PROCEEDINGS TO P RODUCE THE SHARE APPLICANTS BUT ASSESSEE FAILED TO BRING EVEN A SINGLE SHARE AP PLICANT / HOLDER BEFORE THE AO. THEREFORE, THE AO AGAIN CONCLUDED THAT THE ASSESSEE COULD NOT DISCHARGE THE BURDEN OF PROOF WHICH WAS CASTED UPON IT. WE FIND THAT THE ASSESSEE HAD FILED A REJOINDER TO THE REMAND REPORT WHICH IS REPRODUCED FROM PAGES 22 TO 25 OF THE 55 ITA NO.3401/DEL/2011 IMPUGNED ORDER, WHEREIN THE ASSESSEE HAD RELIED UPO N THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS REPORTE D IN 216 CTR 295 TO CONTEND THAT THE AO WAS UNJUSTIFIED IN DRAWING ADVERSE INFE RENCE AGAINST THE ASSESSEE COMPANY WHEN IT IS INDISPUTABLY A CASE OF SHARE CAP ITAL RECEIPTS BY THE ASSESSEE COMPANY AND THE ASSESSEE COMPANY HAS DULY DISCHARGE D THE ONUS IN PROVING THE IDENTITY AND CREDIT WORTHINESS OF THESE SHAREHOLDER S AND HAS ALSO PROVED THE GENUINENESS OF THE TRANSACTIONS BY SHOWING THAT THE AMOUNT HAS BEEN ISSUED AS SHARE CAPITAL AND SHARE CERTIFICATES HAVE ALSO BEEN ISSUED TO ALL THESE SHAREHOLDERS. WE FIND THAT THE LD. CIT (A), AFTER CONSIDERING THE REMAND REPORT, REJOINDER AND SUBMISSIONS OF AR, OBSERVED HOW THE AO DEALT WITH T HE LINE OF INVESTIGATION AND RECOUNTS THAT IT WAS MAINLY ON 3 WAYS I.E. (I) ENQU IRIES CONDUCTED THROUGH THE ITI, (II) ASSIGNMENT GIVEN TO HANDWRITING EXPERT FOR VER IFICATION OF SIGNATURES ON THE DOCUMENTS FURNISHED BY THE ASSESSEE, AND (III) CHEC KING OF PANS OF SHARE APPLICANTS ON THE DATABASE OF ASSESSEE INFORMATION SYSTEM. THE CIT (A), DEALING WITH THE ENQUIRIES CONDUCTED THROUGH THE ITI, HAS D EALT WITH THE SAME FROM PAGES 25 TO 31 OF THE IMPUGNED ORDER. ITI REPORT 29. THE LD. CIT (A) HAS OBSERVED AT PAGE 26 OF THE IMPUGNED ORDER THAT THE ITI MADE ENQUIRES IN RESPECT OF NINE SHARE APPLICANTS I N THE FIRST ROUND AND LATER ON, THE AO CONDUCTED INQUIRIES FROM ITI AGAINST ANOTHER TWE LVE, THUS, THE PHYSICAL VERIFICATION SO DONE AGAINST TWENTY ONE SHARE APPLI CANTS/INVESTORS (NAMES OF 21 INVESTORS OUT OF 37 ARE AT PAGE 28 OF CIT (A) ORDER ). THE ASSESSEES ARGUMENT AGAINST THE ITI REPORT MAINLY HINGES ON THE GROUND THAT NOTICES OF THE AO DATED 04.12.2009 AND 17.12.2009 CONTAINED REPORTS OF THE ITI DATED 07.12.2009 AND 18.12.2009 RESPECTIVELY AND WONDERED AS TO HOW AO, COULD KNOW WHAT ITI COULD REPORT ON LATER DATES, THUS QUESTIONS THE RELIABILI TY OF THE SHOW-CAUSE ISSUED BY THE 56 ITA NO.3401/DEL/2011 AO. HERE WE WOULD LIKE TO POINT OUT THAT THE ITI R EPORT IS THE OUTCOME OF AN ORDER PASSED BY THE AO TO THE ITI TO VERIFY THE ADDRESSES GIVEN BY THE ASSESSEE TO PROVE THE IDENTITY OF THE SHAREHOLDERS/INVESTORS. A PERU SAL OF PAGE 4 OF THE AOS ORDER SHOWS THAT THE ITI RECORDED THE STATEMENT OF SHRI S URENDRA PAL SINGH ON 04.12.2009 ON BEHALF OF TWO FIRMS I.E. M/S. SATWANT SINGH SODHI CONSTRUCTION PVT. LTD. AND M/S. SALWAN DEVELOPERS & PROMOTERS PVT. LT D. IN WHICH HE WAS THE DIRECTOR. HE SAID THAT THE SAID FIRMS HAVE CEASED T O FUNCTION ON 31.03.2006. A PERUSAL OF PAGES 6 & 7 OF THE AOS ORDER WHICH IS T HE REPORT DATED 07.12.2009 OF THE ITI CLEARLY MENTIONS, AS PER YOUR DIRECTION I WENT TO DELHI ON 04.12.2009 TO SERVE THE NOTICES U/S 133 (6).. AND SO THE SAID STATEMENT CLEARLY REPELS THE ALLEGATION OF THE ASSESSEE THAT THE ITI HAS NOT GON E TO THE LOCATIONS SITUATED AT DELHI ON 04.12.2009 AND INSTEAD, HAD MADE THE REPORTS FRO M HIS OFFICE ONLY. SECONDLY, IN THIS MODERN AGE, TAKING INTO CONSIDERATION, THE ADV ANCEMENT IN COMMUNICATION AND TECHNOLOGY, NOTHING PREVENTED THE ITI TO HAVE SPOKE N TO THE AO THE RESULT OF HIS INVESTIGATION ON 04.12.2009 ITSELF AND THE REPORT B EING SUBMITTED ON LATER DATE I.E. ON 07.12.2009. WE DO NOT FIND ANYTHING MORE TO REA D IN RESPECT TO THE NOTICE DATED 04.12.2009 OF THE AO MENTIONING ABOUT THE ITIS INF ORMATION REGARDING HIS INVESTIGATION DONE ON 04.12.2009. THE FATE OF THE ARGUMENT OF THE ASSESSEE FAILS ON THE SAME REASON IN WHICH IT HAD RAISED SIMILAR ALLE GATION IN RESPECT TO AOS SHOW- CAUSE NOTICE DATED 17.12.2009 WHEREIN HE MENTIONED ABOUT THE ITI REPORT DATED 18.12.2009. MOREOVER, WE FIND THAT SEVERAL OTHER R EPORTS ALSO OF THE ITI DATED 8.12.2009 (FROM PAGES 8 TO 13 OF THE AOS ORDER) AN OTHER REPORT OF ITI DATED 17.12.2009 (PAGE 17 TO 21) ALSO ON RECORD. SO IT CA NNOT BE SAID THAT AO COULD HAVE MENTIONED POST-DATED FACTS ONLY WHEN THE FACT REMAI NS HE HAD OTHER REPORTS OF ITI BEFORE HIM. SO, THEREFORE, REPORTS OF THE ITI CAN NOT BE DISCREDITED SIMPLY BECAUSE AO IS PRIVY TO THE FACTUAL ASPECT IN RESPECT TO THE INVESTIGATION CONDUCTED BY THE ITI WHICH WAS REPORTED IN WRITING ON A LATER DATE. THEREFORE, MERELY BECAUSE THE 57 ITA NO.3401/DEL/2011 REPORT OF THE INVESTIGATION HAS BEEN SUBMITTED ON A LATER DATE DOES NOT IN ANY MANNER CALLS FOR DRAWING ANY ADVERSE INFERENCE AGAI NST THE SAID REPORT. AS PER SECTION 114(E) OF THE EVIDENCE ACT, A PRESUMPTION I N FAVOUR OF THE OFFICIAL ACTS IN DISCHARGE OF DUTY HAS TO BE INFERRED IN ABSENCE OF ANY REBUTTABLE EVIDENCE TO CONTRADICT THE SAID PRESUMPTION. NOTHING MORE CAN B E READ INTO IT TO DISCREDIT THE SAME. AS PER SECTION 114, THE COURT MAY PRESUME TH E EXISTENCE OF ANY FACT WHICH IT THINKS LIKELY TO HAVE HAPPENED, REGARD HAD TO TH E COMMON COURSE OF NATURAL EVENTS, HUMAN CONDUCT, AND PUBLIC AND PRIVATE BUSIN ESS, IN THEIR RELATION TO THE FACTS OF THE PRESENT CASE. ILLUSTRATIONS : THE COU RT MAY PRESUME (A) .. (B) .. (C) .. (D) .. (E) THAT JUDICIAL AND OFFICIAL ACTS HAVE BEEN REGUL ARLY PERFORMED. THE RULE EMBODIES IN THE ILLUSTRATION FLOWS FROM TH E MAXIM OMNIA PRAESUMUNTUR RITE ET SOLEMNITER ESSE ACTA , I.E., ALL ACTS ARE PRESUMED TO HAVE BEEN RIGHTLY AND REGULARLY DONE. THE TRUE PRINCIPLE INTENDED TO BE CONVEYED BY THE RULE, OMNIA PRAESUMUNTUR RITE ET SOLEMNITER ESSE ACTA,. THE COURT CITED THE FOLLOWING PASSAGE FROM HERBERT BROOMS A SELECTION OF LEGAL MAXIMS : IN THESE CASES THE ORDINARY RULE IS THAT EVERYTHING IS PRESUMED TO BE DULY AND RIGHTLY PERFORMED UNTIL THE CONTRARY IS SHOWN. THE FOLLOWING MAY BE MENTIO NED AS GENERAL PRESUMPTIONS OF LAW ILLUSTRATING THIS MAXIM : THAT A MAN, IN FAC T ACTING IN A PUBLIC CAPACITY, WAS PROPERLY APPOINTED AND IS DULY AUTHORIZED SO TO ACT ; THAT IN THE ABSENCE OF PROOF TO THE CONTRARY, CREDIT SHOULD BE GIVEN TO PUBLIC OFFI CERS WHO HAVE ACTED PRIMA FACIE WITHIN THE LIMITS OF THEIR AUTHORITY, FOR HAVING DO NE SO WITH HONESTY AND DISCRETION. 58 ITA NO.3401/DEL/2011 30. ADMITTEDLY THE ASSESSEE WAS IN RECEIPT OF THE I TI REPORT FROM AO, HOWEVER THE ASSESSEE HAS NOT LED ANY OTHER EVIDENCES TO PRO VE THAT ITI REPORT WAS FACTUALLY WRONG, WITHOUT ADDRESSING THE SAID FACTUAL ASPECT, THE ASSESSEE IS SEEN RAISING ALLEGATIONS THAT CERTAIN LETTERS OF AO, MENTIONS AB OUT POST-DATED REPORTS OF ITI, WHICH ACCORDING TO US HAS NO SUBSTANCE OR MERIT AND SO IT HAS TO BE REJECTED FOR THE REASONS AS AFORESTATED. LIKEWISE, THE CIT (A) HAS CRITICISED THE MANNER OF ENQUIRY CONDUCTED BY THE ITI ON 08.12.2009 WHEREIN HE TAKES NOTE THAT THE ITI HAS ENQUIRED FROM THE TEA VENDORS, FRUIT VENDORS AND PASSER-BY I N ORDER TO ASCERTAIN THE ADDRESSES OF THE SHARE APPLICANTS AND HAS TRIED TO WATER-DOWN THE ENQUIRY WHICH, ACCORDING TO US, IS NOT THE RIGHT MANNER OF LOOKING INTO THE MATTER WHERE THE ITI IS THE BEST PERSON ON THE GROUND TO FIND OUT ABOUT A F ACT WHICH HE HAS BEEN ASKED TO INVESTIGATE OR ENQUIRE. THE ITI HAS GONE TO THE AD DRESSES GIVEN BY THE ASSESSEE OF THE SHAREHOLDERS AND HAS FOUND AFTER VERIFYING FROM THE ADDRESSES THAT THE SHAREHOLDERS ARE NOT RESIDING OR NOT FUNCTIONING FR OM THE SAID ADDRESSES. IT IS NATURAL THAT IN ORDER TO LOCATE THE PERSONS AT A PA RTICULAR ADDRESS OR FIND OUT MORE ABOUT THE SAID PERSONS IN THIS CASE HE MIGHT HAVE MADE CERTAIN ENQUIRIES FROM THE SHOPKEEPERS WHO ARE FUNCTIONING IN THE CONCERNED AR EAS / PREMISES IN NO MANNER AFFECTS THE CREDIBILITY OF THE PHYSICAL VERIFICATIO N DONE BY THE ITI ; AND MOREOVER IT IS A DIRECT EVIDENCE GIVEN BY A PUBLIC OFFICIAL ABO UT A QUESTION OF FACT WHICH HE WAS ENTRUSTED BY HIS SUPERIOR OFFICER TO VERIFY I.E., W HETHER THE PURPORTED SHARE HOLDER IS EXISTING OR NOT AS CLAIMED BY THE ASSESSEE. RATHER CRITICISING THE INVESTIGATION DONE BY THE ITI, THE ASSESSEE SHOULD HAVE GIVEN THE CORR ECT ADDRESSES OF THE SHARE APPLICANTS, IF ANY, OR SHOULD HAVE MADE AN ENDEAVOU R TO BRING THE SHAREHOLDERS BEFORE THE AO, SINCE THE ONUS OF PROVING THE IDENTI TY ITSELF HAVE SHIFTED FROM THE AO TO ASSESSEE AFTER THE FIRST ROUND OF INVESTIGATI ON DONE BY THE AO. LIKEWISE, THE LD. CIT (A) HAS MADE AN OBSERVATION THAT MUCH CREDE NCE NEED NOT BE GIVEN TO SHRI 59 ITA NO.3401/DEL/2011 SARDAR SURENDER PAL SINGH STATEMENT THAT THE TWO CO MPANIES, IN WHICH HE WAS THE DIRECTOR, HAVE CEASED TO FUNCTION FROM MARCH 2006, SINCE THE ASSESSEE DURING THE APPELLATE PROCEEDINGS BEFORE HIM HAD FILED THE AUDI TED BALANCE SHEETS OF THE SAID COMPANIES TO PROVE THAT THE SAID COMPANIES ARE STIL L IN EXISTENCE. HERE, WE WOULD LIKE TO POINT OUT THAT IN NO MANNER, THE STATEMENT OF SHRI SARDAR SURENDER PAL SINGH CAN BE SHOT DOWN BECAUSE AUDITED BALANCE SHEET OF T HE COMPANY WERE FILED BEFORE THE LD. CIT (A) FOR THE SIMPLE REASON THAT BEFORE T HE ASSESSMENT WAS COMPLETED, THE ASSESSEE WAS AWARE OF THE SAID STATEMENT OF SHRI SA RDAR SURENDER PAL SINGH AND DID NOT DO ANYTHING TO DISPROVE THE SAID STATEMENT OF S HRI SARDAR SURENDER PAL SINGH THAT THE SAID TWO COMPANIES HAVE CEASED TO FUNCTIO N FROM MARCH 2006 AND MOREOVER THE DOCUMENT FILED BEFORE CIT(A) WAS THAT OF SUBSEQUENT ASSESSMENT YEARS I.E. FY 2007-08 I.E. AY 2008-09 AND NOT THAT OF THE RELEVANT ASSESSMENT YEAR. NOT ONLY THAT IF AUDITED BALANCE SHEETS ARE FILED A FTER THE STATEMENT WAS RECORDED ON 04.12.2009 CAN BE TERMED AS AN AFTERTHOUGHT AND IN NO MANNER, WILL AFFECT THE CREDIBILITY OF THE STATEMENT GIVEN BY SHRI SARDAR S URENDER PAL SINGH ON 04.12.2009. SO, WE ARE OF THE OPINION THAT THE LD. CIT (A) ERRED IN GIVING SUCH A FINDING BASED ON IRRELEVANT MATERIAL LIKE DOCUMENT PERTAINING TO SUBSEQUENT ASSESSMENT YEARS, WHICH IS NOT LEGALLY TENABLE AND ON THE FACTS AND CIRCUMSTANCES WE CANNOT DISCARD THE STATEMENT OF SHRI SARDAR SURE NDER PAL SINGH GIVEN ON 04.12.2009 TO THE ITI. 31. THE LD. CIT (A) DEALT WITH THE REPORT OF THE HA NDWRITING EXPERT AT PAGE NO.33 OF HIS ORDER THAT THE RELIANCE PLACED BY THE AO ON THE REPORT OF THE HANDWRITING EXPERT CANNOT BE GIVEN MUCH WEIGHTAGE. WE ARE ALSO OF THE OPINION THAT THE SAID REPORT OF THE HANDWRITING EXPERT NEED NOT BE LOOKED INTO WHILE ADJUDICATING THE ISSUE BEFORE US. THEREFORE, WE DO NOT WISH TO DWEL L INTO THE OPINION RENDERED BY THE HANDWRITING EXPERT IN THIS MATTER. 60 ITA NO.3401/DEL/2011 32. COMING TO THE AOS INVESTIGATION OF THE PAN ON ASSESSEE INFORMATION SYSTEM (AIS), WE FIND THAT THE CIT (A) HAS HELD THA T SINCE THE ASSESSEE HAS PROVIDED PHOTOCOPIES OF THE PANS/ITRS AND DETAILS O F THE PAN FROM NSDL SITES, RELIANCE PLACED BY THE AO ON AIS DATA-BASE IS HALF- COOKED AND NOT CONCLUSIVE. HERE WE WOULD LIKE TO POINT OUT THAT THE AO HAS SEA RCHED INTO THE AIS DATABASE AND HAS HELD THAT WHILE CROSS CHECKING PAN DETAILS OF THE ALLEGED INVESTORS, HE FOUND THAT THE ADDRESSES FURNISHED BY THE ASSESSEE IN RESPECT TO THE SHARE APPLICANTS WERE DIFFERENT FROM THOSE ON THE AIS OR THE PANS WE RE SIMPLY INVALID, THAT IS ALL HE HAS SAID. HERE IT SHOULD BE REMEMBERED THAT ASS ESSEE BY FURNISHING THE COPY OF PAN/ITRS TO THE AO HAS DISCHARGED ITS INITIAL BURDE N OF PROOF IN ORDER TO PROVE THE IDENTITY OF THE INVESTORS, IN THAT SCENARIO, WHAT T HE AO HAS DONE IS TO ENQUIRE ABOUT THE VERACITY OF THE DETAILS FURNISHED BY THE ASSESS EE WHICH THE AO IS DUTY BOUND TO DO AND WHICH IN THIS CASE WAS DONE BY THE AO. THE AO HAD ONLY 31 WORKING DAYS IN HIS COMMAND TO FIND OUT THE TRUTH/BONAFIDE OF TH E ASSESSEES CONTENTION. HERE, WE FIND THAT THE AO HAD LOOKED INTO AIS DATABASE TO FIND OUT WHETHER THE PAN/ADDRESSES GIVEN BY THE ASSESSEE MATCH WITH THAT OF THE AIS SYSTEM. HERE WE FIND THAT THE ADDRESSES WERE EITHER INCORRECT OR DI FFERENT OR THE PANS WERE SIMPLY INVALID. THIS FINDING OF THE AO CANNOT BE DISTURBE D UNLESS THE ASSESSEE IS ABLE TO SHOW THAT THE PANS/ITRS DETAILS GIVEN BY THE ASSESS EE WERE CORRECT AND THE REPORT OF THE AO IS FACTUALLY WRONG. THEREFORE, IN THE FA CTS AND CIRCUMSTANCE OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THE FINDING O F THE AO IN RESPECT TO PAN DETAILS FROM THE AIS DATA BASE CANNOT BE BRUSHED AS IDE. 33. NOW, LET US SEE HOW THE CIT (A) DEALT WITH THE INFORMATION COLLECTED FROM THE BANKS. 61 ITA NO.3401/DEL/2011 LETTERS FROM THE BANK 34. WE FIND THAT THE AO HAD ENQUIRED FROM THREE BAN KS ABOUT NINE SHARE APPLICANTS/INVESTORS ABOUT THEIR BANK ACCOUNTS WHIC H THEY HAD STATED TO HAVE ACCOUNTS AND HAD SUBMITTED THE BANK STATEMENTS TO E STABLISH THEIR CREDITWORTHINESS. THE BANKS HAVE REPORTED BACK (PAGES 51 TO 53 OF THE AOS ORDER) THAT THERE ARE NO SUCH ACCOUNTS IN THESE BANKS BY THESE SHARE HOLDERS / INVESTORS. THE SAID REPORT OF BANKS WERE HANDED OVER TO THE ASSESSEE BY AO. HOWE VER, THE LD. CIT (A) AFTER RELYING ON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN CIT VS. K.C. FIBRES LTD. (2010) 187 TAXMAN 53 (DEL.), HAS MADE THE SAID FIND ING THUS IF THE BANK ACCOUNTS OF THE AFORESAID SHARE APPLICANTS ARE NON-EXISTENT, THE APPELLANT CANNOT BE FASTENED WITH THE LIABILITY. THE SHARE APPLICATION MONEY HA S BEEN RECEIVED THROUGH UNDISPUTED BANKING CHANNELS AND THE APPELLANT HAS F URNISHED COPIES OF BANK STATEMENTS TO ESTABLISH THE GENUINENESS OF TRANSACT ION. WE DO NOT AGREE TO THE SAID ERRONEOUS FINDING OF THE LD. CIT (A). FIRST O F ALL, THE LD. CIT (A) WRONGLY APPLIED THE CASE LAW OF THE DECISION OF HONBLE HIG H COURT TO COME TO THE AFORESAID FINDING. CIT(A) HAS REPRODUCED THE FOLLOW ING EXTRACTION FROM THE SAID ORDER OF HONBLE HIGH COURT :- IT IS STRANGE THAT WHEN THE ASSESSING OFFICER IS Q UESTIONING THE BONA FIDES OF M/S. DIAMOND PROTEIN LTD. FOR COLLECTING M ONEY TO SUBSCRIBE TO THE SHARE TO THE CAPITAL OF THE ASSESSEE, BUT IT IS THE ASSESSEE WHO IS FASTENED WITH THE LIABILITY. THE ASSESSING OFFICER DID NOT QUESTION M/S. DIAMOND PROTEIN LTD. IN THIS BEHALF. INSOFAR AS ASS ESSING COMPANY IS CONCERNED, IT IS NOT DISPUTED THAT MONEY WAS PAID T O IT TOWARDS THE AFORESAID SHARE APPLICATION MONEY, BY MEANS OF CHEQ UES. IT IS NOT FOR THE ASSESSING COMPANY TO PROBE AS TO THE SOURCE FROM WH ERE M/S. DIAMOND PROTEIN LTD. COLLECTED THE AFORESAID MONEY. IT WAS FOR THE ASSESSING OFFICER, IN THESE CIRCUMSTANCES TO INQUIRE INTO THE AFFAIRS OF M/S. DIAMOND PROTEIN LTD. WHICH IS AN INDEPENDENT COMPAN Y INASMUCH AS NO FINDING IS ARRIVED AT BY THE ASSESSING OFFICER THAT THE TWO COMPANIES ARE UMBRELLA COMPANIES OR HAVE ANY RELATIONSHIP WITH EA CH OTHER.. 62 ITA NO.3401/DEL/2011 A PERUSAL OF THE AFORESAID ORDER CLEARLY SHOWS THAT THE LD. CIT (A) ERRED IN APPRECIATING THE FACTS AND RATIO OF THE SAID CASE DECIDED BY THE HONBLE HIGH COURT.THE FACTS AND CIRCUMSTANCES OF THAT CASE WAS TOTALLY DIFFERENT AND THAT WAS A CASE IN WHICH THE SHARE APPLICANT, M/S. DIAMOND PRO TEIN LTD. HAD ISSUED CHEQUE THROUGH BANK AND THE ASSESSEE (M/S. K.C. FIBRES LTD ) WAS FASTENED WITH THE LIABILITY SIMPLY BECAUSE ASSESSEE COULD NOT PROVE T HE SOURCE OF SOURCE (I.E. SOURCE OF FUND OF M/S. DIAMOND PROTEIN LTD. SHARE-APPLICAN T) WHICH IS NOT THE CASE BEFORE US. HERE, THE AO HAS NOT CONFRONTED THE ASSESSEE T O PRODUCE SOURCE OF SOURCE OF THE SHAREHOLDERS WHO SUBSCRIBED/ INVESTED FOR THE S HARES OF THE ASSESSEE. HERE IN THIS CASE, THE AO HAS SIMPLY ASKED FROM THE BANKS F ROM WHICH THE ASSESSEE HAD CLAIMED THAT THE SHARE APPLICANTS HAD BANK ACCOUN TS TO PROVE THEIR CREDITWORTHINESS, WHETHER IT IS TRUE OR NOT. THE AO HAS SIMPLY VERIFIED ABOUT THE VERACITY OF THE SAME AS TO WHETHER THEY HAVE BANK A CCOUNTS AND BANK STATEMENTS SUBMITTED BY THEM ARE CORRECT. PURSUANT TO THE SAI D QUERY FROM THE AO, THE BANKS HAD INFORMED HIM THAT THESE SHARE APPLICANTS DO NOT HAVE AN ACCOUNT IN THEIR RESPECTIVE BANKS. COPY OF THE SAME IS ALSO A PART OF THE ASSESSMENT ORDER. THE LD. CIT (A) ERRED IN RELYING ON AN OBSERVATION OF THE HONBLE HIGH COURT, WITHOUT APPRECIATING THE FACTS AND CONTEXT OF THAT CASE. MO REOVER, THE SAID CASE-LAW HAS NO BEARING IN THE CASE IN HAND TO BRUSH ASIDE THE INF ORMATION GIVEN BY THE BANKS, SO THE FINDING OF CIT(A) IN THIS REGARD CANNOT BE COUN TENANCED AND, THEREFORE, WE HOLD THAT THE INFORMATION GIVEN BY THE BANKS ARE CR EDIBLE EVIDENCES TO DISPROVE THE CREDITWORTHINESS OF THE SO CALLED INVESTORS SINCE T HE DOCUMENTS FURNISHED BY THE ASSESSEE TURNED OUT TO BE BOGUS. 36. COMING TO THE NEXT ASPECT WHICH IS THE AOS FIN DING THAT ASSESSEE FAILED TO PROVE THE IDENTITY, CREDITWORTHINESS OF THE SHARE A PPLICANTS AND GENUINENESS OF THE TRANSACTION, WE FIND THE LD. CIT (A) HAS TAKEN EACH COMPANIES AND NOTED THE AOS OBSERVATIONS AND THE ASSESSEES CONTENTIONS FROM PA GE NOS.37 TO 63 OF HIS ORDER 63 ITA NO.3401/DEL/2011 WHICH IS SUMMARISED BELOW IN A CHART TO HAVE A BIRD S EYE VIEW AND HOW THE CIT (A) HAS DEALT WITH THE OBSERVATIONS OF THE AO :- SL.NO. NAME OF THE ALLEGED INVESTORS AND THE AMOUNT OF SHARE APPLICATION MONEY EVIDENCES FOR CONSIDERING (I) GENUINENESS OF THE TRANSACTION, (II) IDENTITY AND (III) CREDITWORTHINE SS OF THE SHARE APPLICANTS. [HERE PLEASE NOTE, WE HAVE N OT CONSIDERED THE OPINION OF HANDWRITING EXPERT.] RELIANCE ON THE DOCUMENTS BY THE AO FOR NOT ACCEPTING THE AFORESAID THREE POINTS RELIANCE ON THE DOCUMENTS BY THE CIT (A) FOR ACCEPTING THE AFORESAID THREE POINTS 1. ANIL KUMAR GOEL RS.4,98,000/- THE ACCOUNT NUMBER OF HDFC BANK KASHMIRI GATE BRANCH (DELHI) THROUGH WHICH THE SHARE APPLICATION MONEY WAS ALLEGEDLY INVESTED WAS NEVER IN EXISTENCE SINCE THE OPENING OF THAT BRANCH (JULY 2004) WHICH WAS CONFIRMED BY THE BRANCH OF THE BANK THROUGH A LETTER (PAGE 53 OF AO). DIFFERENT ADDRESS IS GIVEN IN AIS DATA BASE. GROSS TOTAL INCOME OF RS.94,200/- FOR AY 2005- 06. SHARE APPLICATION MONEY RECEIVED BY CHEQUE/PAY ORDER NO.002591 DATED 08.08.2006 OF RS.248,000 & 002625 DATED 23.08.2006 OF RS.2,50,000/-. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR, PAN AND DRIVING LICENCE 2. CHANDRA KANTA RS.7,50,000 BOGUS ADDRESS OF DELHI AS VERIFIED BY THE INSPECTOR. THE ACCOUNT NUMBER OF HDFC BANK CHANDANI CHOWK BRANCH (DELHI) THROUGH WHICH THE SHARE APPLICATION MONEY WAS ALLEGEDLY INVESTED WAS NEVER IN EXISTENCE SINCE THE OPENING OF THIS BRANCH WHICH WAS CONFIRMED BY THE SHARE APPLICATION MONEY RECEIVED BY CHEQUE/PAY ORDER NO.00805 DATED 14.08.2006 OF RS.350,000 & 000817 DATED 19.08.2006 OF RS.4,00,000/-. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, 64 ITA NO.3401/DEL/2011 BRANCH OF THE BANK THROUGH A LETTER (PAGE 52 OF AO). DIFFERENT ADDRESS IN AIS DATA BASE AND EVEN THE ADDRESS GIVEN WAS FOUND BOGUS ON PHYSICAL VERIFICATION GROSS TOTAL INCOME OF RS.1,05,064/- FOR AY 2005- 06. ITR, PAN AND RATION CARD 3. MANOHAR LAL GUPTA RS.7,50,000/- THE ACCOUNT NUMBER OF HDFC BANK CHANDNI CHOWK BRANCH (DELHI) THROUGH WHICH THE SHARE APPLICATION MONEY WAS ALLEGEDLY INVESTED WAS NEVER IN EXISTENCE SINCE THE OPENING OF THIS BRANCH WHICH WAS CONFIRMED BY THE BRANCH OF THE BANK THROUGH A LETTER (PAGE 52 OF AO). DIFFERENT ADDRESS IS GIVEN IN AIS DATA BASE. GROSS TOTAL INCOME OF RS.1,00,045/- FOR AY 2005- 06. SHARE APPLICATION MONEY RECEIVED BY CHEQUE/PAY ORDER NO.00806 DATED 14.08.2006 OF RS.350,000 & 000818 DATED 19.08.2009 OF RS.4,00,000/-. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR, PAN AND RATION CARD. 4. RAHUL BURMAN RS.5,52,000/- BOGUS ADDRESS OF DELHI AS VERIFIED BY THE INSPECTOR. THE ACCOUNT NUMBER OF HDFC BANK, KASHMIRI GATE BRANCH (DELHI) THROUGH WHICH THE SHARE APPLICATION MONEY WAS ALLEGEDLY INVESTED WAS NEVER IN EXISTENCE SINCE THE OPENING OF THIS BRANCH (JULY 2004) WHICH WAS CONFIRMED BY THE BRANCH OF THE BANK THROUGH A LETTER (PAGE 53 OF AO). DIFFERENT ADDRESS IS GIVEN IN SHARE APPLICATION MONEY RECEIVED BY CHEQUE/PAY ORDER NO.002592 DATED 14.08.2006 OF RS.252,000 & 002627 DATED 23.08.2006 OF RS.3,00,000/-. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR, PAN AND VOTER IDENTITY CARD. 65 ITA NO.3401/DEL/2011 AIS DATA BASE. GROSS TOTAL INCOME OF RS.1,00,900/- FOR AY 2005- 06. 5. SARASWATI DEVI GOEL - RS.5,52,000/- BOGUS ADDRESS OF DELHI AS VERIFIED BY THE INSPECTOR. THE ACCOUNT NUMBER OF HDFC BANK, CHANDNI CHOWK BRANCH (DELHI) THROUGH WHICH THE SHARE APPLICATION MONEY WAS ALLEGEDLY INVESTED WAS NEVER IN EXISTENCE SINCE THE OPENING OF THIS BRANCH WHICH WAS CONFIRMED BY THE BRANCH OF THE BANK THROUGH A LETTER (PAGE 52 OF AO). GROSS TOTAL INCOME OF RS.1,05,118/- FOR AY 2005- 06. THE GIVEN PAN IS INVALID ACCORDING TO AIS. SHARE APPLICATION MONEY RECEIVED BY CHEQUE/PAY ORDER NO.00803 DATED 14.08.2006 OF RS.300,000 & 002624 DATED 23.08.2006 OF RS.2,50,000/-. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR, PAN AND RATION CARD. 6. SAROJ AGGARWAL RS.5,50,000/- BOGUS ADDRESS OF DELHI AS VERIFIED BY THE INSPECTOR. THE ACCOUNT NUMBER OF HDFC BANK, CHANDNI CHOWK BRANCH (DELHI) THROUGH WHICH THE SHARE APPLICATION MONEY WAS ALLEGEDLY INVESTED WAS NEVER IN EXISTENCE SINCE THE OPENING OF THIS BRANCH WHICH WAS CONFIRMED BY THE BRANCH OF THE BANK THROUGH A LETTER (PAGE 52 OF AO). GROSS TOTAL INCOME OF RS.1,00,128/- FOR AY 2005- 06. SHARE APPLICATION MONEY RECEIVED BY CHEQUE/PAY ORDER NO.00804 DATED 14.08.2006 OF RS.250,000 & 002626 DATED 23.08.2006 OF RS.3,00,000/-. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR, PAN AND RATION CARD. 7. SUSHMA GOEL RS.5,50,000/- BOGUS ADDRESS OF DELHI AS VERIFIED BY THE INSPECTOR. SHARE APPLICATION MONEY RECEIVED BY CHEQUE/PAY 66 ITA NO.3401/DEL/2011 THE ACCOUNT NUMBER OF PUNJAB NATIONAL BANK, KHARI BAOLI BRANCH, DELHI) THROUGH WHICH THE SHARE APPLICATION MONEY WAS ALLEGEDLY INVESTED WAS NOT IN EXISTENCE AT LEAST SINCE 01.04.2006 WHICH WAS CONFIRMED BY THE BRANCH OF THE BANK THROUGH A LETTER (PAGE 51 OF AO). DIFFERENT ADDRESS IS GIVEN IN AIS DATA BASE. GROSS TOTAL INCOME OF RS.1,05,054/- FOR AY 2005- 06. ORDER NO.970989 DATED 14.08.2006 OF RS.250,000 & 971065 DATED 25.08.2006 OF RS.3,00,000/-. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR, PAN AND RATION CARD. 8. VIVEK KUMAR JAIN RS.6 LAKHS THE ACCOUNT NUMBER OF PUNJAB NATIONAL BANK, KHARI BAOLI BRANCH, DELHI) THROUGH WHICH THE SHARE APPLICATION MONEY WAS ALLEGEDLY INVESTED WAS NOT IN EXISTENCE AT LEAST SINCE 01.04.2006 WHICH WAS CONFIRMED BY THE BRANCH OF THE BANK THROUGH A LETTER (PAGE 51 OF AO). GROSS TOTAL INCOME OF RS.1,34,546/- FOR AY 2005- 06. THE GIVEN PAN IS INVALID ACCORDING TO AIS. SHARE APPLICATION MONEY RECEIVED BY CHEQUE/PAY ORDER NO.970988 DATED 14.08.2006 OF RS.200,000 & 971064 DATED 25.08.2006 OF RS.4,00,000/-. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR, PAN AND VOTER IDENTITY CARD. 9. YOGENDRA KUMAR RS.3 LAKSH DIFFERENT ADDRESS IN AIS DATA BASE AND EVEN THE ADDRESS GIVEN WAS FOUND BOGUS ON PHYSICAL VERIFICATION THE ACCOUNT NUMBER OF PUNJAB NATIONAL BANK, KHARI BAOLI BRANCH, DELHI) SHARE APPLICATION MONEY RECEIVED BY CHEQUE/PAY ORDER NO.970987 DATED 14.08.2006 OF RS.3,00,000. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, 67 ITA NO.3401/DEL/2011 THROUGH WHICH THE SHARE APPLICATION MONEY WAS ALLEGEDLY INVESTED WAS NOT IN EXISTENCE AT LEAST SINCE 01.04.2006 WHICH WAS CONFIRMED BY THE BRANCH OF THE BANK THROUGH A LETTER (PAGE 51 OF AO). GROSS TOTAL INCOME OF RS.1,00,784/- FOR AY 2005- 06. AFFIDAVIT, BANK ACCOUNT, ITR, PAN AND VOTER IDENTITY CARD. 10. MONIKA GOEL RS. 3 LAKHS BOGUS ADDRESS OF DELH I AS VERIFIED BY THE INSPECTOR. GROSS TOTAL INCOME OF RS.1,05,105/- FOR AY 2005- 06. SHARE APPLICATION MONEY RECEIVED BY CHEQUE/PAY ORDER NO.776975 DATED 14.08.2006 OF RS.300,000. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR, PAN AND RATION CARD. 11. RAKESH KUMAR AGGARWAL RS.2 LAKHS DIFFERENT ADDRESS IS GIVEN IN AIS DATA BASE. GROSS TOTAL INCOME OF RS.78,600/- FOR AY 2005- 06. SHARE APPLICATION MONEY RECEIVED BY CHEQUE/PAY ORDER NO.776974 DATED 14.08.2006 OF RS.200,000. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR, PAN AND RATION CARD. 12. SMT. INDIRA DEVI RS.6 LAKHS BOGUS ADDRESS OF DELHI AS VERIFIED BY INSPECTOR. GROSS TOTAL INCOME OF RS.1,05,130/- FOR AY 2005- 06 SHARE APPLICATION MONEY RECEIVED BY CHEQUE/PAY ORDER NO.114524 DATED 25.08.2006 OF RS.600,000. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR, PAN AND RATION CARD 68 ITA NO.3401/DEL/2011 13. SMT. REKHA BANSAL RS.6 LAKHS BOGUS ADDRESS OF DELHI AS VERIFIED BY INSPECTOR. GROSS TOTAL INCOME OF RS.1,03,225/- FOR AY 2005- 06 SHARE APPLICATION MONEY RECEIVED BY CHEQUE/PAY ORDER NO.151817 DATED 25.08.2006 OF RS.600000. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR, PAN AND RATION CARD. 14. GANESH KUMAR RS.8 LAKHS DIFFERENT ADDRESS IN AIS DATA BASE AND EVEN THE ADDRESS GIVEN WAS FOUND BOGUS ON PHYSICAL VERIFICATION OF ITI. GROSS TOTAL INCOME OF RS.99,235/- FOR AY 2005-06 SHARE APPLICATION MONEY RECEIVED BY CHEQUE/PAY ORDER NO.296901 DATED 11.08.2006. DOCUMENTS SUBMITTED BEFORE AO WERE COPY OF APPLICATION FORM, COPY OF AFFIDAVIT, COPY OF BANK ACCOUNT, COPY OF ITR AND COPY OF PAN. 15. LIFE LINE HOUSING DEVELOPMENT FINANCE CO. LTD. RS.5 LAKHS FOR AY 2005-06, FILED RETURN OF INCOME AT MUZAFFARNAGAR BUT DID NOT FILE ANY RETURN OF INCOME FOR SUBSEQUENT ASSESSMENT YEAR. DIFFERENT ADDRESS IN AIS DATA BASE AND EVEN THE ADDRESS GIVEN WAS FOUND BOGUS ON PHYSICAL VERIFICATION BY ITI. GROSS TOTAL INCOME OF RS.13,339/- FOR AY 2005-06 SHARE APPLICATION MONEY RECEIVED BY CHEQUE NO.404396 DATED 11.08.2006. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR FOR AY 2009-10, AUDITED BALANCE SHEET FOR FY 2007-08 I.E. AY 2008-09, INVESTABLE FUND WITH THE APPLICANT COMPANY WERE MORE THAN RS.30 LAKHS BY WAY OF PAID-UP CAPITAL, PAN, ACTIVE STATUS OF THE COMPANY FROM MCA SITE, INCORPORATION CERTIFICATE 16. RABIK EXPORTS LTD. RS.5 LAKHS DIFFERENT ADDRESS IN AIS DATA BASE AND EVEN THE ADDRESS GIVEN WAS FOUND BOGUS ON PHYSICAL SHARE APPLICATION MONEY RECEIVED BY CHEQUE NO.931620 DATED 10.08.2006. 69 ITA NO.3401/DEL/2011 VERIFICATION. GROSS TOTAL INCOME OF RS.38,315/- FOR AY 2004- 05. ACCORDING TO COMPANY MASTER DETAILS (FROM REGISTRAR OF COMPANIES) THE COMPANY FILED ITS LAST BALANCE SHEET ON 31.03.2006. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR FOR AY 2009-10, AUDITED BALANCE SHEET FOR FY 2007-08 I.E. AY 2008-09, NET INVESTABLE FUND OF RS.730.00 LAKHS, PAN, ACTIVE STATUS OF THE COMPANY FROM MCA SITE, INCORPORATION CERTIFICATE 17. RIA MARKETING SERVICES PVT. LTD. RS.15 LAKHS DIFFERENT ADDRESS IN AIS DATA BASE. GROSS TOTAL INCOME OF RS.34,080/- FOR AY 2005-06 THE GIVEN PAN IS NOT OF THE SAID COMPANY BUT THAT OF SIMARJEET ELECTRONICS PVT. LTD. (KAROL BAGH), DELHI. SHARE APPLICATION MONEY RECEIVED BY CHEQUE NO.131834 DATED 12.08.2006. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR FOR AY 2009-10, AUDITED BALANCE SHEET AS ON 31.03.2005 FOR FY 2004-05, INVESTABLE FUNDS OF RS.55.72 LAKHS, PAN, ACTIVE STATUS OF THE COMPANY FROM MCA SITE, CERTIFICATE OF NAME CHANGED BY THE SHARE APPLICANT COMPANY 18. SALWAN DEVELOPERS & PROMOTERS PVT. LTD. RS. 10 LAKHS THE DIRECTOR OF THE CONCERN, SHRI SURENDER PAL SINGH STATED THAT THE COMPANY WAS CLOSED DOWN IN MARCH 2006. GROSS TOTAL INCOME OF RS.18,191/- FOR AY 2005- 06. ACCORDING TO COMPANY MASTER DETAILS (FROM REGISTRAR OF COMPANIES) THE SHARE APPLICATION MONEY RECEIVED BY CHEQUE NO.751436 DATED 11.08.2006. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR, ITR FOR AY 2009- 09, AUDITED BALANCE SHEET FOR FY 2007-08 I.E. AY 70 ITA NO.3401/DEL/2011 COMPANY FILED ITS LAST BALANCE SHEET ON 31.03.2006. THE GIVEN PAN IS INVALID ACCORDING TO AIS. 2008-09, INVESTABLE FUNDS OF RS.187.99 LAKHS AS PER AUDITED BALANCE SHEET AS ON 31.03.2008, PAN, ACTIVE STATUS OF THE COMPANY FROM MCA SITE, INCORPORATION CERTIFICATE, PAN. 19. YOGSON IMPEX PVT. LTD. RS.5 LAKHS BOGUS ADDRESS OF DELHI AS VERIFIED BY INSPECTOR. DIFFERENT ADDRESS IN AIS DATA BASE AND EVEN THE ADDRESS GIVEN WAS FOUND BOGUS ON PHYSICAL VERIFICATION. COPY OF ITR NOT SUBMITTED. SHARE APPLICATION MONEY RECEIVED BY CHEQUE NO.126649 DATED 12.08.2006. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR, ITR FOR AY 2009- 10, AUDITED BALANCE SHEET FOR FY 2007-08 I.E. AY 2008-09, THE SHARE APPLICANT COMPANY HAS PAID-UP SHARE CAPITAL + RESERVE OF RS.55 LAKHS, PAN, ACTIVE STATUS OF THE COMPANY FROM MCA SITE, PAN. 20. SAHGAL FLUIDLINE EQUIPMENT PVT. LTD. RS. 5 LAKHS GROSS TOTAL INCOME OF RS.2,046/- FOR AY 2004-05 AND NOT SUBMITTED ITR FOR AY 2005-06 OR 2006-07. THE COMPANY HAD NOT FILED ITS BALANCE SHEET WITH REGISTRAR OF COMPANIES FOR MANY YEARS AS THE LAST BALANCE SHEET DATE IS NOT GIVEN IN COMPANY MASTER DETAILS (FROM REGISTRAR OF COMPANIES). COMPANY WAS IN DEFAULT OF FILING OF FORM DIN3/FORM 32. PAN IS NOT IN THE SAID SHARE APPLICATION MONEY RECEIVED BY CHEQUE NO.934639 DATED 12.08.2009 OF RS.5,00,000. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR FOR AY 2009-10, AS PER AUDITED BALANCE SHEET FOR FY 2007-08 I.E. AY 2008-09, THE APPLICANT COMPANY HAS PAID-UP SHARE CAPITAL + RESERVE OF RS.83.50 LAKHS, PAN, ACTIVE STATUS OF THE COMPANY FROM MCA SITE, 71 ITA NO.3401/DEL/2011 COMPANYS NAME AND WAS IN THE NAME OF SEHAJ FINANCIAL SERVICES PVT. LTD. (DARYAGANJ) NEW DELHI. INCORPORATION CERTIFICATE. 21. B-FIN LEASE (I) PRIVATE LTD. RS.10 LAKHS THE COMPANY HAD NOT FILED ITS BALANCE SHEET WITH REGISTRAR OF COMPANIES FOR MANY YEARS AS THE LAST BALANCE SHEET DATE IS NOT GIVEN IN COMPANY MASTER DETAILS (FROM REGISTRAR OF COMPANIES). DIFFERENT ADDRESS IS GIVEN IN AIS DATA BASE. GROSS TOTAL INCOME OF RS.1,667/- FOR AY 2004-05 AND DID NOT SUBMIT ITR FOR AY 2005-06 OR 2006-07. SHARE APPLICATION MONEY RECEIVED BY CHEQUE NO.767613 DATED 17.08.2006 OF RS.5,00,000. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR, AS PER AUDITED BALANCE SHEET FOR AY 2008-09, THE APPLICANT COMPANY HAS PAID UP SHARE CAPITAL + RESERVE RS.152.00 LAKHS, PAN, ACTIVE STATUS OF THE COMPANY FROM MCA SITE, INCORPORATION CERTIFICATE. 22. SHATARCHI FINANCE & LEASING LTD. RS.15 LAKHS THE COMPANY HAD NOT FILED ITS BALANCE SHEET WITH REGISTRAR OF COMPANIES FOR MANY YEARS AS THE LAST BALANCE SHEET DATE IS NOT GIVEN IN COMPANY MASTER DETAILS (FROM REGISTRAR OF COMPANIES). COMPANY WAS IN DEFAULT OF FILING OF FORM DIN3/FORM 32. DIFFERENT ADDRESS IS GIVEN IN AIS DATA BASE. GROSS TOTAL INCOME OF RS.3,096/- FOR AY 2005-06. SHARE APPLICATION MONEY RECEIVED BY CHEQUE NO.932775 DATED 10.08.2006 OF RS.5,00,000 AND 934565 DATED 17.08.2006 OF RS.10,00,000/-. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR, ITR FOR AY 2008- 09, AS PER AUDITED BALANCE SHEET FOR FY 2007-08 I.E. AY 2008-09, THE APPLICANT COMPANY HAS PAID UP SHARE CAPITAL + RESERVE OF RS.88.35 LAKHS, PAN, ACTIVE STATUS OF THE COMPANY FROM MCA SITE, INCORPORATION CERTIFICATE. 23. VPS VALVES & TUBES PRIVATE THE COMPANY HAD NOT FILED SHARE APPLICATION MONEY 72 ITA NO.3401/DEL/2011 LIMITED RS.10 LAKHS ITS BALANCE SHEET WITH REGISTRAR OF COMPANIES FOR MANY YEARS AS THE LAST BALANCE SHEET DATE IS NOT GIVEN IN COMPANY MASTER DETAILS (FROM REGISTRAR OF COMPANIES). DIFFERENT ADDRESS IS GIVEN IN AIS DATA BASE. COPY OF ITR NOT SUBMITTED BY THE COMPANY. RECEIVED BY CHEQUE NO.934509 DATED 17.08.2006 OF RS.10,00,000. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR FOR AY 2008-09, AS PER AUDITED BALANCE SHEET FOR FY 2007-08 I.E. AY 2008-09, THE APPLICANT COMPANY HAS PAID UP SHARE CAPITAL + RESERVE OF RS.209.70 LAKHS, PAN, ACTIVE STATUS OF THE COMPANY FROM MCA SITE, INCORPORATION CERTIFICATE. 24. MLF CLASSIC FINANCE LIMITED RS.10 LAKHS FOR AY 2005-06, FILED RETURN OF INCOME AT MUZAFFARNAGAR BUT DID NOT FILE ANY RETURN OF INCOME FOR SUBSEQUENT ASSESSMENT YEAR. GROSS TOTAL INCOME NIL FOR AY 2005-06. THE GIVEN PAN IS INVALID ACCORDING TO AIS. SHARE APPLICATION MONEY RECEIVED BY CHEQUE NO.180844 DATED 19.08.2006 OF RS.10,00,000. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR FOR AY 2008-09, AS PER AUDITED BALANCE SHEET AS ON 31.03.2008 I.E. AY 2008-09, THE APPLICANT COMPANY HAS PAID UP SHARE CAPITAL + RESERVE RS.49.45 LAKHS, PAN, ACTIVE STATUS OF THE COMPANY FROM MCA SITE, INCORPORATION CERTIFICATE. 25. MONISHA GRANITE LIMITED RS.20 LAKHS INQUIRY LETTER U/S 133 (6) SENT THROUGH REGISTERED POST, RETURNED UNSERVED WHEN POSTED TO THE DELHI ADDRESS OF THE COMPANY. DIFFERENT ADDRESS IS GIVEN IN SHARE APPLICATION MONEY RECEIVED BY CHEQUE NO.572267 DATED 18.08.2006 OF RS.1000000, 572266 DATED 18.08.2006 OF RS.500000 AND 572265 73 ITA NO.3401/DEL/2011 AIS DATA BASE. GROSS TOTAL INCOME OF RS.15,110/- FOR AY 2005- 06. DATED 18.08.2006 OF RS.500000. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR FOR AY 2009-10, AS PER AUDITED BALANCE SHEET AS ON 31.03.2008 I.E. AY 2008-09, THE APPLICANT COMPANY HAS PAID UP SHARE CAPITAL + RESERVE RS.451.40 LAKHS, PAN, ACTIVE STATUS OF THE COMPANY FROM MCA SITE, INCORPORATION CERTIFICATE. 26. M.V. MARKETING PRIVATE LIMITED RS.10 LAKHS THE COMPANY HAD NOT FILED ITS BALANCE SHEET WITH REGISTRAR OF COMPANIES FOR MANY YEARS AS THE LAST BALANCE SHEET DATE IS NOT GIVEN IN COMPANY MASTER DETAILS (FROM REGISTRAR OF COMPANIES). DIFFERENT ADDRESS IS GIVEN IN AIS DATA BASE. GROSS TOTAL INCOME OF RS.2,08,881/- FOR AY 2004- 05. THE COMPANY DID NOT SUBMIT ITR FOR AY 2005-06 OR 2006-07. SHARE APPLICATION MONEY RECEIVED BY CHEQUE NO.940185 DATED 22.08.2006 OF RS.10,00,000/-. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR FOR AY 2009-10, AS PER AUDITED BALANCE SHEET AS ON 31.03.2008 I.E. AY 2008-09, THE APPLICANT COMPANY HAS PAID UP SHARE CAPITAL + RESERVE OF RS.152.00 LAKHS, PAN, ACTIVE STATUS OF THE COMPANY FROM MCA SITE, INCORPORATION CERTIFICATE 27. PRAKARTIK HOTELS PRIVATE LIMITED RS.10 LAKHS FOR AY 2005-06, FILED RETURN OF INCOME AT MUZAFFARNAGAR BUT DID NOT FILE ANY RETURN OF INCOME FOR SUBSEQUENT ASSESSMENT YEAR AND THE INQUIRY OF THE INSPECTOR AT THE ADDRESS GIVEN ON ITR PROVED THAT THE COMPANY NEVER EXISTED SHARE APPLICATION MONEY RECEIVED BY CHEQUE NO.148470 DATED 22.08.2006 OF RS.10,00,000/-. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, 74 ITA NO.3401/DEL/2011 AT THAT ADDRESS. INQUIRY LETTER U/S 133 (6) SENT THROUGH REGISTERED POST, RETURNED UNSERVED WHEN POSTED TO THE DELHI ADDRESS OF THE COMPANY. DIFFERENT ADDRESS IS GIVEN IN AIS DATA BASE. GROSS TOTAL INCOME NIL FOR AY 2005-06. AFFIDAVIT, BANK ACCOUNT, ITR FOR AY 2009-10, PAN, ACTIVE STATUS OF THE COMPANY FROM MCA SITE, INCORPORATION CERTIFICATE 28. SGC PUBLISHING PRIVATE LIMITED RS.10 LAKHS BOGUS ADDRESS OF DELHI AS VERIFIED BY INSPECTOR. GROSS TOTAL INCOME OF RS.4,110/- FOR AY 2004-05 AND DID NOT SUBMIT ITR FOR AY 2005-06 OR 2006-07. THE COMPANY HAD NOT FILED ITS BALANCE SHEET WITH REGISTRAR OF COMPANIES FOR MANY YEARS AS THE LAST BALANCE SHEET DATE IS NOT GIVEN IN COMPANY MASTER DETAILS (FROM REGISTRAR OF COMPANIES). SHARE APPLICATION MONEY RECEIVED BY CHEQUE NO.235376 DATED 18.08.2006 OF RS.10,00,000/-. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR FOR AY 2008-09, AS PER AUDITED BALANCE SHEET FOR 2007-08 I.E. AY 2008-09, THE APPLICANT COMPANY HAS PAID UP SHARE CAPITAL + RESERVE OF RS.84.50 LAKHS, PAN, ACTIVE STATUS OF THE COMPANY FROM MCA SITE, INCORPORATION CERTIFICATE 29. UP ELECTRICALS LIMITED RS.20 LAKHS INQUIRY LETTER U/S 133 (6) SENT THROUGH REGISTERED POST, RETURNED UNSERVED WHEN POSTED TO THE DELHI ADDRESS OF THE COMPANY. DIFFERENT ADDRESS IS GIVEN IN AIS DATA BASE. GROSS TOTAL INCOME OF RS.1,788/- FOR AY 2005-06. SHARE APPLICATION MONEY RECEIVED BY CHEQUE NO.581859 DATED 19.08.2006 OF RS.5,00,000/-, 581854 DATED 18.08.2006 OF RS.10,00,000/- AND 581855 DATED 18.08.2006 OF RS.5,00,000/-. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, 75 ITA NO.3401/DEL/2011 AFFIDAVIT, BANK ACCOUNT, ITR, ITR FOR AY 2008- 09, AS PER AUDITED BALANCE SHEET FOR 2007-08, THE APPLICANT COMPANY HAS PAID UP SHARE CAPITAL + RESERVE OF RS.434.40 LAKHS, PAN, ACTIVE STATUS OF THE COMPANY FROM MCA SITE, INCORPORATION CERTIFICATE 30. CV METAL POWDERS (HARYANA) LIMITED RS.8 LAKHS DIFFERENT ADDRESS IS GIVEN IN AIS DATA BASE. GROSS TOTAL INCOME OF RS.9,360/- FOR AY 2005-06. ACCORDING TO COMPANY MASTER DETAILS (FROM REGISTRAR OF COMPANIES) THIS COMPANY FILED ITS LAST BALANCE SHEET ON 31.03.2005. SHARE APPLICATION MONEY RECEIVED BY CHEQUE NO.930920 DATED 22.08.2006 OF RS.8,00,000/-. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR FOR AY 2008-09, AS PER AUDITED BALANCE SHEET FOR FY 2007-08 I.E. AY 2008-09, THE APPLICANT COMPANY HAS PAID UP SHARE CAPITAL + RESERVE RS.210.33 LAKHS, PAN, ACTIVE STATUS OF THE COMPANY FROM MCA SITE, INCORPORATION CERTIFICATE 31. DIGNITY FINVEST PRIVATE LIMITED RS.8 LAKHS ACCORDING TO COMPANY MASTER DETAILS (FROM REGISTRAR OF COMPANIES) THIS COMPANY FILED ITS LAST BALANCE SHEET ON 31.03.2005. DIFFERENT ADDRESS IS GIVEN IN AIS DATA BASE. GROSS TOTAL INCOME OF RS.3,867/- FOR AY 2005-06. SHARE APPLICATION MONEY RECEIVED BY CHEQUE NO.260826 DATED 22.08.2006 OF RS.8,00,000/-. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR FOR AY 2008-09, AS PER AUDITED BALANCE SHEET FOR 2008-09, THE APPLICANT COMPANY HAS PAID UP SHARE CAPITAL + RESERVE OF 76 ITA NO.3401/DEL/2011 RS.100.02 LAKHS, PAN, ACTIVE STATUS OF THE COMPANY FROM MCA SITE, INCORPORATION CERTIFICATE 32. ETHNIC CREATION PRIVATE LIMITED RS.11 LAKHS THE COMPANY HAD NOT FILED ITS BALANCE SHEET WITH REGISTRAR OF COMPANIES FOR MANY YEARS AS THE LAST BALANCE SHEET DATE IS NOT GIVEN IN COMPANY MASTER DETAILS (FROM REGISTRAR OF COMPANIES). COMPANY WAS IN DEFAULT OF FILING OF FORM DIN3/FORM 32. DIFFERENT ADDRESS IS GIVEN IN AIS DATA BASE. GROSS TOTAL INCOME OF RS.20,068/- FOR AY 2004-05 AND DID NOT SUBMIT ITR FOR AY 2005-06 OR 2006-07. SHARE APPLICATION MONEY RECEIVED BY CHEQUE NO.021991 DATED 22.08.2006 OF RS.11,00,000/-. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR, ITR FOR AY 2008- 09, AS PER AUDITED BALANCE SHEET FOR 2007-08 I.E. AY 2008-09, THE APPLICANT COMPANY HAS PAID UP SHARE CAPITAL + RESERVE OF RS.90.00 LAKHS, PAN, ACTIVE STATUS OF THE COMPANY FROM MCA SITE, INCORPORATION CERTIFICATE 33. UNIQUE INSULATION & THERMO PACKAGING PRIVATE LIMITED RS.7 LAKHS THE COMPANY HAD NOT FILED ITS BALANCE SHEET WITH REGISTRAR OF COMPANIES FOR MANY YEARS AS THE LAST BALANCE SHEET DATE IS NOT GIVEN IN COMPANY MASTER DETAILS (FROM REGISTRAR OF COMPANIES). DIFFERENT ADDRESS IS GIVEN IN AIS DATA BASE. GROSS TOTAL INCOME OF RS.4,581/- FOR AY 2004-05 AND DID NOT SUBMIT ITR FOR AY 2005-06 OR 2006-07. SHARE APPLICATION MONEY RECEIVED BY CHEQUE NO.935306 DATED 22.08.2006 OF RS.7,00,000/-. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR, ITR FOR AY 2008- 09, AS PER AUDITED BALANCE SHEET FOR 2007-08 I.E. AY 2008-09, THE APPLICANT COMPANY HAS PAID UP SHARE CAPITAL + RESERVE RS.125.46 LAKHS, PAN, ACTIVE STATUS OF THE COMPANY FROM MCA SITE, INCORPORATION CERTIFICATE 34. KESHRI INDUSTRIAL LAB PRIVATE LIMITED RS.30 LAKHS INQUIRY LETTER U/S 133 (6) SENT THROUGH REGISTERED POST, SHARE APPLICATION MONEY RECEIVED BY CHEQUE 77 ITA NO.3401/DEL/2011 RETURNED UNSERVED WHEN POSTED TO THE DELHI ADDRESS OF THE COMPANY. THE COMPANY HAD NOT FILED ITS BALANCE SHEET WITH REGISTRAR OF COMPANIES FOR MANY YEARS AS THE LAST BALANCE SHEET DATE IS NOT GIVEN IN COMPANY MASTER DETAILS (FROM REGISTRAR OF COMPANIES). DIFFERENT ADDRESS IS GIVEN IN AIS DATA BASE. GROSS TOTAL INCOME NIL FOR AY 2005-06. NO.000278 DATED 19.08.2006 OF RS.15,00,000/- AND 000279 DATED 19.08.2006 OF RS.15,00,000/-. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR FOR AY 2008-09, AS PER AUDITED BALANCE SHEET FOR 2008-09 PAN, THE APPLICANT COMPANY HAS PAID UP SHARE CAPITAL + RESERVE RS.60.00 LAKHS, ACTIVE STATUS OF THE COMPANY FROM MCA SITE, INCORPORATION CERTIFICATE 35. PARTICULAR MANAGE FINLEASE (INDIA) PRIVATE LIMITED RS.15 LAKHS INQUIRY LETTER U/S 133 (6) SENT THROUGH REGISTERED POST, RETURNED UNSERVED WHEN POSTED TO THE DELHI ADDRESS OF THE COMPANY. THE COMPANY HAD NOT FILED ITS BALANCE SHEET WITH REGISTRAR OF COMPANIES FOR MANY YEARS AS THE LAST BALANCE SHEET DATE IS NOT GIVEN IN COMPANY MASTER DETAILS (FROM REGISTRAR OF COMPANIES). COMPANY WAS IN DEFAULT OF FILING OF FORM DIN3/FORM 32. DIFFERENT ADDRESS IS GIVEN IN AIS DATA BASE. GROSS TOTAL INCOME OF RS.1,590/- FOR AY 2004-05 AND DID NOT SUBMIT ITR FOR AY 2005-06 OR 2006-07. SHARE APPLICATION MONEY RECEIVED BY CHEQUE NO.266056 DATED 24.08.2006 OF RS.8,00,000/- AND 266057 DATED 24.08.2006 OF RS.7,00,000/-. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR FOR AY 2007-08, PAN, ACTIVE STATUS OF THE COMPANY FROM MCA SITE, INCORPORATION CERTIFICATE. [REGARDING CREDITWORTHINESS, THE CIT (A) SAYS IT WAS CONTENDED THAT AUDITED BALANCE SHEET AS ON 31.03.2004. COMPANY HAD A SHARE CAPITAL + RESERVE OF RS.45 LAKHS.] 36. RIZZER EXIM PRIVATE LIMITED BOGUS ADDRESS OF DE LHI AS SHARE APPLICATION MONEY 78 ITA NO.3401/DEL/2011 RS.15 LAKHS VERIFIED BY INSPECTOR. THE COMPANY HAD NOT FILED ITS BALANCE SHEET WITH REGISTRAR OF COMPANIES FOR MANY YEARS AS THE LAST BALANCE SHEET DATE IS NOT GIVEN IN COMPANY MASTER DETAILS (FROM REGISTRAR OF COMPANIES). COMPANY WAS IN DEFAULT OF FILING OF FORM DIN3/FORM 32. DIFFERENT ADDRESS IS GIVEN IN AIS DATA BASE. GROSS TOTAL INCOME OF RS.3,820/- FOR AY 2005-06. RECEIVED BY CHEQUE NO.030026 DATED 24.08.2006 OF RS.7,00,000/- AND 030027 DATED 24.08.2006 OF RS.8,00,000/-. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR FOR AY 2008-09, AUDITED BALANCE SHEET FOR 2008-09, PAN, ACTIVE STATUS OF THE COMPANY FROM MCA SITE, INCORPORATION CERTIFICATE 37. SATWANT SINGH SODHI CONSTRUCTION PVT. LTD. RS.16 LAKHS THE DIRECTOR OF THE CONCERN, SHRI SURENDER PAL SINGH STATED THAT THE COMPANY WAS CLOSED DOWN IN MARCH 2006. BOGUS ADDRESS OF DELHI AS VERIFIED BY INSPECTOR. GROSS TOTAL INCOME OF NIL FOR AY 2005-06. ACCORDING TO COMPANY MASTER DETAILS (FROM REGISTRAR OF COMPANIES) THIS COMPANY FILED ITS LAST BALANCE SHEET ON 31.03.2005. COMPANY WAS IN DEFAULT OF FILING OF FORM DIN3/FORM 32. SHARE APPLICATION MONEY RECEIVED BY CHEQUE NO.571983 DATED 25.08.2006 OF RS.10,00,000/- AND 571982 DATED 22.08.2006 OF RS.6,00,000/-. DOCUMENTS SUBMITTED BEFORE AO WERE COPIES OF APPLICATION FORM, AFFIDAVIT, BANK ACCOUNT, ITR FOR AY 2008-09, AS PER AUDITED BALANCE SHEET FOR FY 2007-08 I.E. AY 2008-09, THE APPLICANT COMPANY HAS PAID UP SHARE CAPITAL + RESERVE RS.100.00 LAKHS, PAN, ACTIVE STATUS OF THE COMPANY FROM MCA SITE, INCORPORATION CERTIFICATE 79 ITA NO.3401/DEL/2011 37. WE FIND A COMMON THREAD IN EACH OF THE ALLEGED SHARE APPLICANTS WHO ARE JURISTIC PERSONALITIES I.E. INCORPORATED PRIVATE LI MITED COMPANIES WHEN THE MATTER CAME BEFORE THE CIT(A). THE AO NOTED THAT THESE CO MPANIES WERE NOT EXISTING IN FY 2006-07 RELEVANT TO AY 2007-08 UNDER CONSIDERATI ON BECAUSE THE BALANCE SHEETS WERE NOT FILED AFTER AY 2005-06 OR RETURN OF INCOME WERE NOT FILED OR THE ITI COULD NOT FIND THE PURPORTED SHARE HOLDERS / IN VESTORS IN THE ADDRESSES GIVEN BY THE ASSESSEE, THEREFORE, IT WAS HELD THAT THEY WERE NOT EXISTING IN THE FY UNDER CONSIDERATION. HERE, WE FIND THAT THE LD. CIT (A) HAS RELIED ON THE AUDITED BALANCE SHEET FOR THE FY 2007-08 I.E. AY 2008-09 AND THE CO PY OF THE ITR OF AY 2009-10 TO UPHOLD THAT THE SHARE APPLICANT / INVESTOR COMPA NIES ARE EXISTING COMPANIES AND THE AUDITED BALANCE SHEET SHOW THAT THE SHARE APPLI CANTS COMPANIES HAD ENOUGH PAID UP CAPITALS AND RESERVES TO SUBSCRIBE FOR THE SHARES FROM THE ASSESSEES COMPANY. THOUGH WE FIND THAT CHEQUE NUMBERS WHICH ARE DATED BETWEEN 10.08.2006 TO 25.08.2006 HAVE BEEN MENTIONED BY THE LD. CIT (A) TO UPHOLD THE GENUINENESS OF THE TRANSACTION, HOWEVER, WE ARE UNA BLE TO ACCEPT THE SAID REASONING AND FINDING OF LD. CIT (A) BECAUSE THE ASSESSEE FAI LED TO PROVE THE IDENTITY OF THE SHARE APPLICANTS BY ADDUCING EVIDENCES OF THEIR EXI STENCE AT THE ADDRESSES OR BY COGENT MATERIALS BEFORE THE AO. THE PAN DETAILS WE RE WRONG. THE TRANSACTIONS FROM THE BANK WHICH WERE CLAIMED TO HAVE TRANSACTED THE SHARE APPLICATION MONEY HAS BEEN FOUND TO BE BOGUS AND EVEN DURING THE REMA ND PROCEEDINGS, THE ASSESSEE FAILED TO PRODUCE EVEN A SINGLE SHARE APPLICANT BEF ORE THE AO. IN THE SAID SCENARIO, THE LD. CIT (A) ACCEPTING THE AUDITED BALANCE SHEET FOR FY 2007-08 I.E. AY 2008- 09 WHICH IS SUBSEQUENT ASSESSMENT YEAR IS NOT ACCEP TABLE. THE ASSESSEE CANNOT SAY THAT IT DID NOT HAD SUFFICIENT TIME TO DISCHARGE IT S BURDEN IN RESPECT TO THE SHARE CAPITAL MONEY WHICH HAS COME TO ITS ACCOUNT. WE FI ND THAT THE AO HAD INVESTIGATED THE MATTER FAIRLY AND HAD GIVEN ENOUGH OPPORTUNITIES TO THE ASSESSEE TO COME CLEAN WITH THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. 80 ITA NO.3401/DEL/2011 WE FIND THAT THE AO HAD GIVEN SUFFICIENT NOTICE AND FURNISHED THE ENQUIRY REPORTS TO THE ASSESSEE AT VARIOUS STAGES TO SHOW THAT HE W AS NOT SATISFIED WITH THE DOCUMENTS FILED BY THE ASSESSEE BEFORE THE AO. THE AO HAS DISPROVED THE EVIDENCES BROUGHT BY THE ASSESSEE TO DISCHARGE ITS BURDEN OF PROOF, WHICH SHOW THAT THE ASSESSEE FAILED TO DISCHARGE ITS BURDEN OF PROOF IN RESPECT TO SHARE APPLICATION MONEY WHICH HAS COME INTO ITS ACCOUNT. THE CIT (A) ERRED IN TAKING THE AUDITED BALANCE SHEET OF SUBSEQUENT ASSESSMENT YEAR AND DOCUMENTS TO PROVE THE CREDITWORTHINESS WHICH WAS FILED BEFORE HIM TO PROVE THE EXISTENCE OF THE SAID COMPANIES AND INDIVIDUALS. 38. ANOTHER ARGUMENT BASED ON CASE-LAWS WAS EMPHASI ZED BY THE LD. AR THAT THE AO ERRED IN NOT APPRECIATING THE FACT THAT THE BOOK ENTRY IN THE ASSESSEES ACCOUNT IS ON ACCOUNT OF SHARE CAPITAL AND THE LAW IS VERY CLEAR THAT IN CASE OF ANY DOUBT WITH REGARD TO THE GENUINENESS OF THE SAID AMOUNT T HEN IT SHOULD BE TAXED IN THE HANDS OF THE INVESTOR/SHAREHOLDER AND NOT THAT OF T HE ASSESSEE COMPANY AND THE CIT (A) HAS IN FACT GIVEN SUCH DIRECTIONS, SO CIT (A) O RDER IS VALID IN THE EYES OF LAW. WE DO NOT SUBSCRIBE TO THE SAID CONTENTION OF THE L D AR BECAUSE THE CASE-LAWS CITED ARE THOSE CASES IN WHICH THE PUBLIC ISSUE OF SHARES ARE DONE AND PUBLIC AT LARGE SUBSCRIBE TO THE SHARES, THEN THERE IS A DISA BILITY FOR THE PUBLIC LIMITED COMPANY TO VERIFY EACH AND EVERY SUBSCRIBER BUT THA T IS NOT HOW A PRIVATE LIMITED COMPANY SHARES ARE ALLOTTED AND ITS SHARES ARE CLOS ELY HELD. THE PRIVATE LIMITED COMPANY GENERALLY ALLOWS THE SHAREHOLDING ONLY TO P ERSONS WHO ARE CLOSELY KNOWN TO THEM. SO, THEREFORE, THE CONTENTION OF THE LD. AR CANNOT BE COUNTENANCED BECAUSE ASSESSEE IN THIS CASE IS A PRIVATE LIMITED COMPANY AND HAS ADMITTED IN ITS CORRESPONDENCE WITH THE AO THAT THE INVESTORS WERE CLOSE FRIENDS AND BUSINESS ASSOCIATES. THE CASE LAWS RELIED UPON BY THE LD. A R AS AFORESTATED PERTAINS TO CASES WHERE PUBLIC ISSUE OF SHARES ARE INVOLVED AND THE C ASE LAWS REGARDING SHARE 81 ITA NO.3401/DEL/2011 SUBSCRIPTION OF PUBLIC LIMITED COMPANY STANDS ON A DIFFERENT FOOTING THAN THE SHARE APPLICATION MONEY IN THE CONTEXT OF PRIVATE L IMITED COMPANY AND, THEREFORE, THE CASE LAWS RELIED ON BY THE LD. AR DOES NOT APPL Y TO THE CASE IN HAND. 39. COMING TO THE CONTENTION OF THE LD. AR THAT THE NON-ADHERENCE TO THE REQUEST OF THE ASSESSEE TO CROSS EXAMINE THE INCOME-TAX INS PECTOR WHOSE REPORTS IN RESPECT TO HIS VISIT AT THE ADDRESSES FURNISHED BY THE ASSE SSEE HAS BEEN TAKEN BY THE AO TO DISBELIEVE THE IDENTITY OF THE SHAREHOLDERS HAS VIT IATED THE ITI REPORT AND SHOULD NOT HAVE BEEN TAKEN INTO CONSIDERATION BY THE AO TO DIS CREDIT THE IDENTITY OF THE SHAREHOLDERS. LIKEWISE, THE LACK OF CROSS EXAMINAT ION OF THE HANDWRITING EXPERT AND THE BANK MANAGERS OF PUNJAB NATIONAL BANK AND H DFC BANK HAVE VITIATED THEIR RESPECTIVE LETTERS/REPORTS BASED ON WHICH THE AO HAS DISBELIEVED THE DOCUMENTS FURNISHED BY THE ASSESSEE AND MADE THE IM PUGNED ADDITIONS. HERE, WE WOULD LIKE TO POINT OUT THAT THE CROSS EXAMINATION OF THE ITI HAS IN NO WAY VITIATED THE FINDING REPORTED BY THE ITI BECAUSE THE ITI HAS ONLY VISITED THE PREMISES/ ADDRESSES GIVEN BY THE ASSESSEE TO CROSS CHECK THE VERACITY OF THE CLAIM OF THE ASSESSEE. WE FIND THAT THE AO, AFTER RECEIVING THE REPORT OF THE ITI, HAS GIVEN A COPY OF THE SAID REPORT TO THE ASSESSEE TO CONTROVE RT/REBUT THE FINDING, IF ANY, BY OTHER EVIDENCES (DIRECT OR INDIRECT) TO DISPROVE TH E SAID REPORT OF THE ITI OR TO GIVE CORRECT ADDRESSES OR THE LATEST ADDRESSES OF THE SH AREHOLDERS IF THERE IS A CHANGE IN ADDRESS. THUS, IT CANNOT BE TAKEN AS THE AO HAD TAK EN THE ITI REPORT AT THE BACK OF THE ASSESSEE FOR MAKING THE IMPUGNED ADDITION. HER E, IT SHOULD BE REMEMBERED THAT THE ITI WHO WAS DISCHARGING THE OFFICIAL DUTY AND HAD ONLY VERIFIED THE QUESTION OF FACT AS TO WHETHER THE PURPORTED SHAREH OLDERS WERE RESIDING/FUNCTIONING FROM THE SAID PREMISES/ADDRESSES IN ORDER TO PROVE THE IDENTITY OF THE SAID SHAREHOLDERS AS CLAIMED BY THE ASSESSEE. THE ASSES SEE HAD AMPLE OPPORTUNITY TO DISPROVE THE REPORT OF THE ITI BY ADDUCING EVIDENCE S TO EITHER CONTROVERT THE FINDING OF THE ITI IN THIS RESPECT OR TO BRING THE EVIDENCES TO THE EFFECT THAT 82 ITA NO.3401/DEL/2011 SHAREHOLDERS WERE IN FACT RESIDING/FUNCTIONING AT T HAT ADDRESS FURNISHED BY IT, HOWEVER HAS NOW SHIFTED TO A DIFFERENT ADDRESS. IT SHOULD BE KEPT IN MIND THAT AFTER THE ITI REPORT ONUS SHIFTED BACK TO THE SHOULDER OF ASSESSEE. WITHOUT DISCHARGING THE ONUS UPON IT, WE FIND THAT THE ASSESSEE WAS TRY ING TO FIND FAULT WITH THE MANNER OF INVESTIGATION CONDUCTED BY THE ITI BY SAYING THA T HE HAD ASKED FROM THE SHOPKEEPERS, STREET VENDORS, ETC. ETC. ON THE ABOV E SAID FACTUAL SCENARIO, WE FIND THAT THE CROSS EXAMINATION OF ITI WAS NOT NECESSARY BECAUSE BURDEN OF PROOF WAS CASTED UPON THE ASSESSEE TO PROVE THE IDENTITY OF T HE SHAREHOLDERS FOR THAT THE ASSESSEE HAD FURNISHED ADDRESSES WHICH WERE VERIFIE D BY THE ITI WHO HAD FOUND IT TO BE WRONG AND PRESUMPTION IN FAVOUR OF THE ITI RE PORT AS PER SECTION 114 (E) OF THE EVIDENCE ACT NEEDS TO BE DRAWN, UNLESS IT HAS B EEN REBUTTED BY THE ASSESSEE, WHO HAD AMPLE TIME TO DISPROVE IT, WHICH THE ASSESS EE FAILED TO HAVE DONE, SO THE BURDEN WAS STILL ON ASSESSEE AS PER LAW WE HAVE DIS CUSSED EARLIER IN THE ORDER. IT SHOULD BE NOTED THAT WHY WE HAVE OBSERVED THAT CROS S EXAMINATION DOES NOT VITIATE THE IMPUGNED ADDITION BECAUSE, WHAT THE AO DID WAS ONLY CROSS-CHECK THE INFORMATION ADDUCED BY THE ASSESSEE IN RESPECT TO T HE IDENTITY OF THE SHARE-HOLDERS, WHICH WHEN ENQUIRED BY THE ITI WAS FOUND TO BE FALS E. SO, NO NEW EVIDENCE HAS BEEN BROUGHT IN BY THE AO, TO MULCT THE IMPUGNED AD DITIONS. 40. COMING TO THE SIMILAR ATTACK ON THE OPINION OF THE HANDWRITING EXPERT TO HAVE BEEN VITIATED FOR LACK OF CROSS EXAMINATION, S INCE WE HAVE NOT CONSIDERED THE REPORT OF THE HANDWRITING EXPERT TO ADJUDICATE THIS ISSUE SO WE ARE NOT GOING INTO THE SAID CONTENTION OF THE LD. AR. HERE ALSO, WE W OULD LIKE TO POINT OUT THAT THE HANDWRITING EXPERTS VIEW IS BASICALLY BASED ON THE SIGNATURES GIVEN IN THE PHOTOCOPY OF THE AFFIDAVITS AND HE HAD COMPARED IT WITH THE INCOME-TAX RETURNS OF THE PURPORTED SHAREHOLDERS. NOTHING PREVENTED THE ASSESSEE TO HAVE PRODUCED THE ORIGINAL OF THE AFFIDAVITS AND ALSO TO PRODUCE THE PERSONS WHO HAD SIGNED THE AFFIDAVITS BEFORE THE AO AND COULD HAVE PROVED THE AUTHENTICITY OF THE AFFIDAVITS AS 83 ITA NO.3401/DEL/2011 PER SECTION 73 OF THE INDIAN EVIDENCE ACT. RATHER THAN DOING SO, THE ASSESSEE HAD BEEN POINTING OUT THE OBJECTIONS IN RESPECT TO THE HANDWRITING EXPERTS OPINION. SINCE WE ARE NOT TAKING INTO CONSIDERATION THE OPIN ION OF THE HAND-WRITING EXPERT, WE ARE NOT GOING TO LOOK IN TO THE SAID OBJECTION A GAINST IT. 41. SIMILARLY, WE FIND THAT THE BANK MANAGERS LETT ERS TO AO HAVE BEEN CHALLENGED FOR NON-CROSS EXAMINATION OF THE OFFICER S OF THE PUNJAB NATIONAL BANK AND HDFC BANK. HERE ALSO, WE FIND THAT THE ASSESSE E IN ORDER TO PROVE THE CREDITWORTHINESS OF THE SHAREHOLDERS HAD PROVIDED T HE BANK ACCOUNT NUMBERS AND BANK STATEMENTS OF THE SHAREHOLDERS (RANDOMLY SELEC TED 9 NOS.) WHICH AO HAD SENT TO THE RESPECTIVE BANKS WHICH HAD BEEN FOUND TO BE FALSE AND BOGUS; AND THE COPY OF THE SAID REPORTS WERE HANDED OVER TO THE ASSESSE E FOR ITS EXPLANATION & FURTHER ACTION. IN CASE, THE ASSESSEE FELT THAT THE BANK M ANAGERS LETTERS WERE FACTUALLY WRONG, RATHER THAN CRYING FOUL, THE ASSESSEE THEN C OULD HAVE PROTESTED ABOUT IT AND PRODUCED THE DOCUMENTS TO PROVE THAT THE SHAREHOLDE RS IN FACT HAD BANK ACCOUNTS IN THE SAID BANKS. WITHOUT DOING SO, WHEN THE ONUS GO T SHIFTED ON THE SHOULDER OF THE ASSESSEE, IT HAD TO DISCHARGE THE SAME. MOREOVER E VEN BEFORE THE CIT(A), THE ASSESSEE HAS NOT BEEN ABLE TO BRING ANYTHING ON REC ORD TO STATE THAT THE BANKS LETTERS STATING THAT THE ALLEGED SHARE HOLDERS / IN VESTORS HAD NO ACCOUNT, IS FACTUALLY WRONG. IN THE ABSENCE OF THE SAME, THE BURDEN OF PR OOF HAS NOT BEEN DISCHARGED BY THE ASSESSEE, TO PROVE THE CREDITWORTHINESS OF THE SHARE HOLDERS. IT MAY BE NOTED HERE ALSO THAT THE AO HAS NOT BROUGHT ANY FRESH EVI DENCE TO DISCREDIT THE SHARE- HOLDERS, HE ONLY CROSS-VERIFIED THE DOCUMENT I.E. B ANK STATEMENT SUBMITTED BY THE ASSESSEE TO PROVE THE CREDITWORTHINESS OF THE SHARE -HOLDERS, SO WITHOUT ADDUCING EVIDENCE TO PROVE THAT THE SAID SHARE-HOLDER HAD BA NK ACCOUNT IN THE SAID BANK BRANCHES, THE INFERENCE DRAWN U/S 114(E) IS IN FAVO UR OF THE SAID LETTERS WROTE BY THE BANK MANAGERS AND WITHOUT THE FACTUAL REBUTTAL OF THE CONTENTS OF THE LETTERS, THE 84 ITA NO.3401/DEL/2011 LACK OF CROSS-EXAMINATION IN NO MANNER AFFECTS THE VERACITY OF THE SAID LETTERS OF THE BANK OFFICER. 42. THE LD. AR ALSO BROUGHT TO OUR NOTICE THAT DURI NG REMAND PROCEEDINGS, SIX SHAREHOLDERS HAVE REPLIED TO THE AO AS NOTED BY THE AO IN HIS REMAND REPORT, SO THE IDENTITY WAS IN FACT PROVED OF THESE SIX SHAREH OLDERS AND THREE LETTERS HAVE NOT RETURNED BACK, MEANING THEY WERE RECEIVED BY THE SH AREHOLDERS. IN THE SAID BACKGROUND, ADDITION OF THE ENTIRE AMOUNT U/S 68 OF THE ACT IS NOT LEGALLY TENABLE. WE HAVE GONE INTO THE SAID CONTENTION OF THE LD. AR , HOWEVER, NOTHING TURNS AROUND AS TO THE SAID CONTENTION BECAUSE 6 INVESTOR S HAD REPLIED TO THE AO DURING REMAND PROCEEDING AS SEEN FROM THE LETTER DATED 20. 01.2011 (PAGE 533 PB), BECAUSE ALL THOSE SIX ALLEGED INVESTORS WERE PRIVAT E LIMITED COMPANIES, WHO HAD BEEN FOUND TO BE DEFUNCT COMPANIES BY THE AO AFTER EXAMINING THE DOCUMENTS (MASTER DATA ETC.). IT IS SEEN THAT WHEN THE ASSESS EE HAS FAILED AT THE HANDS OF AOS INVESTIGATION, THESE PRIVATE LIMITED COMPANIES HAVE BEEN BROUGHT BACK TO LIFE AFTER THE IMPUGNED ASSESSMENT ORDER BY FILING STAT UTORY COMPLIANCES AND IS CLAIMED LATER DURING APPELLATE PROCEEDINGS (I.E. BE FORE THE CIT (A)) AS A RUNNING CONCERN IS CLEARLY AN AFTERTHOUGHT AND CANNOT BE GI VEN ANY CREDENCE. 43. LASTLY, WE WOULD LIKE TO DEAL WITH THE PLEA OF THE LD. AR THAT IN CASE OF ANY DOUBT REGARDING THE IMPUGNED ORDER, THE MATTER MAY BE REMANDED, IF NECESSARY, BACK TO THE AO THEN THE AO CAN SATISFY HIMSELF ABOU T THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION AS FOUND BY THE LD. CIT (A). THIS PRAYER CANNOT BE GRANTED FOR THE SIMPLE REASON THAT LOT OF WATER HAS FLOWN THE GANGES AFTER THE IMPUGNED ASSESSMENT ORDER. LOT OF DEVELOPMENTS HAV E TAKEN PLACE AFTER THE ADDITION OF RS.3.46 CRORES U/S 68 OF THE ACT. WE F IND THAT THE DEFUNCT COMPANIES AT THE TIME OF ASSESSMENT, AS POINTED OUT BY THE AO, H AVE RESURRECTED BACK TO LIFE AFTER STATUTORY COMPLIANCES WERE FULFILLED; AND THE SAID DOCUMENTS WERE FURNISHED BEFORE THE LD. CIT (A) WHO HAS ERRED IN RELYING UPO N IT TO DELETE THE ADDITION. SO, 85 ITA NO.3401/DEL/2011 THEREFORE, WE CANNOT ALLOW SUCH A PRAYER OF THE ASS ESSEE FOR THE SIMPLE REASON THAT THE AO HAD DEMOLISHED THE CASE OF THE ASSESSEE TO P ROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE ALLEGED SHA REHOLDERS. SO WE ARE NOT INCLINED TO SEND THE CASE BACK TO THE AO AGAIN FOR FRESH ADJUDICATION. 44. IN THE LIGHT OF THE AFORESAID FACTS AND CIRCUMS TANCES OF THE CASE, WE FIND THAT AO HAS GIVEN REASONED ORDER WHICH WE ARE INCLINED T O UPHOLD AND THEREBY WE REVERSE THE ORDER OF THE LD CIT (A) AND UPHOLD THE ORDER OF THE LD AO. 45. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 11 TH DAY OF SEPTEMBER, 2015. SD/- SD/- (R.S. SYAL) (A.T. VARKE Y ACCOUTNANT MEMBER JUDICIAL MEMBER DATED THE 11 TH DAY OF SEPTEMBER, 2015 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), MUZAFFARNAGAR. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.