M/s Credence Health Care Ltd., Indore V. The ITO Ward 2(2), Indore

ITA 349/IND/2012

• Counselvise Citation: 34922714 RSA 2012
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 11-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: S C JAIN; S K JAIN S
• Keywords: Business income; Business expenditure; Income from undisclosed sources; Share purchase agreement; Source of fund; Question of law; Assessment record; Onus to prove
• Section: 131; 68; 69; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARMA, A.M. PAN NO. : AACCC6998C I.T.A.NO. 349/IND/2012. A.Y. : 2005 - 06 M / S . CREDENCE HEALTH CARE LIMITED, ITO, WARD 2(2), 2/1, SOUTH TUKOGANJ, VS INDORE. NATH MANDIR, INDORE APPELLANT RESPONDENT APPELLANT BY : SHRI S.C.JAIN AND SHRI S.K.JAIN, ADVOCATES RESPONDENT BY : SHRI R. A. VERMA, SR. DR DATE OF HEARING : 26 . 1 1 .2012 DATE O F PRONOUNCEMENT : 29 . 1 1 .201 2 -: 2: - 2 O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 20.03.2012 FOR THE ASSESSMENT YEAR 2005-06. 2. IN THE GROUNDS OF APPEAL, THE ASSESSEE IS AGGRIEVED FOR ADDITION OF RS. 43,90,000/- MADE BY THE ASSESSING O FFICER U/S 68 OF INCOME-TAX ACT, 1961. THE ASSESSEE IS ALSO AG GRIEVED FOR CONFIRMING DISALLOWANCE OF RS. 2,50,574/- OUT OF RO UTINE BUSINESS EXPENSES OF THE ASSESSEE COMPANY. 3. THE ASSESSEE HAS ALSO TAKEN ADDITIONAL GROUND CHALLENGING THE JURISDICTION OF THE ASSESSING OFFIC ER TO FRAME ASSESSMENT WHERE THE RETURN OF INCOME OR LOSS WAS A BOVE RS. 1 LAKH. 4. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. DURING THE COURSE OF ASSESSMENT, THE ASSES SING OFFICER FOUND THAT ASSESSEE HAS SHOWN SHAREHOLDERS FUND AMOUNTING TO RS. 45,40,000/- IN THE BALANCE SHEET. THE -: 3: - 3 ASSESSING OFFICER FURTHER OBSERVED THAT TO PROVE TH E GENUINENESS OF THE SHARE MONEY STATEMENTS U/S 131 W ERE RECORDED OF THE SHAREHOLDERS, WHO ARE MAINLY VILLAG ERS. FROM THE STATEMENT RECORDED IT IS FOUND THAT THE BANK SL IPS HAVE NOT BEEN PREPARED B Y THEM AND THEY HAVE ALSO NOT ANY B ANK A/CS. THEY HAVE PREPARED THE DDS IN FAVOUR OF THE C OMPANY BY PAYING CASH. SOME OF THE VILLAGERS HAVE STATED THAT THEY HAVE NOT RECEIVED THE SHARE CERTIFICATE TILL TODAY NOR A NY INTEREST/DIVIDEND HAS BEEN PAID RECEIVED BY THEM TI LL DATE. OTHER INQUIRIES HAVE ALSO BEEN MADE FROM THE BANKS THAT THE DDS HAVE BEEN PREPARED BY ONE OF THE PERSONS WHO MA Y BE RELATED WITH THE COMPANY. IN THIS REGARD ASSESSEE C OMPANY HAS STATED THAT THE MOSTLY SHAREHOLDERS BELONG TO VILLAGE AND THEY ARE FARMERS, HENCE, WAY BY POSSIBLE TO PREPARE D THEIR BANK CHEQUES AFTER OBTAINING THE HELP OF BANK PEOPL E OR ANY EDUCATED PERSON AS BEING THEIR GENUINE INVESTMENT P LEASE BE ACCEPTED AND IGNORE THE CIRCUMSTANCES BEING REGARDI NG BANKING TRANSACTIONS BECAUSE NON EDUCATIONAL PEOPLE CAN TAKE HELP FROM ANY PERSON TO PURCHASE THE BANK DD. FURTHER ASSESSEE COMPANY IS NOT BOTHERED REGARDING WHO THEY PROCURE -: 4: - 4 THEIR DD FOR INVESTMENT IN SHARES EXCEPT LEGAL REQU IREMENT HENCE, PLEASE BE CONSIDERED THE GENUINE INVESTMENT AND ACCEPTED TO TOTO AFTER LOOKING THEIR STATEMENT, CON FIRMATION AND SOURCE FILED DURING ASSESSMENT PROCEEDINGS. 5. THE ASSESSING OFFICER FURTHER OBSERVED THAT MAJORIT Y OF SHAREHOLDERS HAVE ADMITTED IN THEIR STATEMENT THAT THEY HAVE NOT RECEIVED SHARE CERTIFICATES NOR ANY INTEREST ON DIVIDEND OF THESE SHARES. THE ASSESSING OFFICER ALSO STATED THA T ON VERIFICATION, IT WAS FOUND THAT PAY IN SLIP FOR ISS UE OF DD WAS FILLED BY COMMON PERSON AND NOT BY THE SHAREHOLDERS INDIVIDUALLY, WHEREAS SHAREHOLDERS IN THEIR STATEME NTS HAVE ADMITTED THAT THEY GONE AND GOT PREPARED DRAFTS. IN VIEW OF THESE OBSERVATIONS, THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE HAS FAILED TO PROVE THE IDENTITY, GENUINEN ESS AND CREDITWORTHINESS OF THE SHAREHOLDERS, HENCE THESE A MOUNTS WERE ADDED BACK TO THE INCOME OF THE ASSESSEE. 6. THE ASSESSING OFFICER ALSO OBSERVED THAT ON SCRUTIN Y OF THE CASE RECORD IT IS SEEN THAT THE ASSESSEE HAS CL AIMED MANUFACTURING AND OTHER ADMINISTRATIVE EXPENSES TO THE TUNE OF RS. 2,50,574/- ON THE TOTAL SALES OF RS. 25,100/ -. ON INQUIRY -: 5: - 5 REGARDING HEAVY EXPENSES SHOWN IN P & L A/C THE ASS ESSEE HAS STATED THAT OUR COMPANY IS LOAN LICENSE HOLDER BU T PRODUCTION HAS BEEN DONE FROM OUTSIDE PARTIES ON JO B BASIS HENCE, WE HAVE SHOWN THE RAW MATERIAL AND PACKING M ATERIAL DUE TO INVOLVE IN MANUFACTURING ACTIVITIES UNDER TH IS ACTIVITIES WE MANUFACTURED THE MEDICINE FROM OUTSIDE PARTY AFT ER GIVING RAW MATERIAL AND PACKING MATERIAL. HENCE, WE ACCORD INGLY SHOWED THE RAW MATERIAL AND PACKING MATERIAL BEING LOAN LICENSE HOLDER. FOR THIS PURCHASE, WE ARE ALSO ENCL OSING HEREWITH THE COPY OF LOAN LICENSES CERTIFICATE FOR YOUR KIND VERIFICATION. 7. THE ASSESSING OFFICER STATED THAT THE ASSESSEE HAS NOT PAID ANY JOB CHARGES TO VISHAL PHARMACEUTICALS, THE REFORE, DISALLOWED THE MANUFACTURING EXPENSES OF RS. 2,50,5 74/-. 8. IN AN APPEAL FILED BEFORE THE CIT(A), ADDITION MADE U/S 68 WAS CONFIRMED BY HIM AFTER HAVING THE FOLLOWING OBSERVATIONS :- 4. 2 NOW BEFORE EXAMINING THE CONTENTIONS OF THE APPELLANT BOTH FACTUAL AND LEGAL, IT IS CONSIDERED NECESSARY TO TAKE NOTICE OF LIST OF -: 6: - 6 SHARE HOLDERS INCLUDED IN COMPILATION FROM PAGE 50. TO 60 THEREOF. SUCH LIST IN WHICH THE MODE OF PAYMENT, DATE OF PAYMENT, AMOUNT INVOLVED AND SHARE CERTIFICATES NUMBERS ARE GIVEN IS ENCLOSED WITH APPEAL ORDER AS PER 'ANNEXURE -D'. ON EXAMINATION OF SUCH LIST IT IS SEEN THAT FIRST SEVE N SHARE HOLDERS ARE CLAIMED TO BE PROMOTERS FROM WHOM BROADLY IDENTICAL AMOUNT OF RS. 15,OOO/- HAS BEEN CLAIMED TO BE RECEIVED ON FIVE DIFFERENT DATES ON 8.10.2004 TO 14.10.2004 AND EXCEPT FIRST SHARE HOLDER AT S.NO. 1, TO ALL OTHER SIX SHARE HOLDERS 7000 EACH HAVE BEEN ALLOTTED. THEIR NAMES APPEAR IN THE MEMORANDUM OF ASSOCIATION FILED INCLUDED IN COMPILATION ON PAGE 35 OF MEMORANDUM OF ASSOCIATION, TWO OF THE SHARE HOLDERS NAMELY SMT. MANGLA KABRA AND PREMILA SODANI ARE STATED TOBE HOUSE WIVES AND NO SOURCE OF EARNING OF INCOME INDICATED IN RESPECT OF THEM. FURTHER, IN RESPECT OF TWO SHARE HOLDERS VIZ. SHRI RAJESH TIWARI AND NAVDEEP KABRA, THE SOURCE OF -: 7: - 7 EARNING IS STATED AS SERVICE AND FOR REST OF THREE SHARE HOLDERS THE SOURCE OF EARNING IS STATED TO BE AS BUSINESS. REST OF OTHER SHARE HOLDERS FROM S.NO.S TO 52 ARE BROADLY FORMERS MAINLY FROM VILLAGE BACCHANPUR DISTT. DHAR AND ANOTHER VILLAGE PITHLIYA BISTHAN AGAINST DISTT. DHAR. FROM MOST OF SUCH PERSONS DEMAND DRAFTS HAVE BEEN OBTAINED FROM EITHER UNITED WESTERN BANK OR CORPORATION BANK AND SUCH SHARE APPLICATION MONEY IS RECEIVED ON COMMON DATE IN THE MONTH OF OCTOBER OR NOVEMBER, 2004, AND DEMAND DRAFTS HAVE BEEN PURCHASED IN MOSTLY IDENTICAL AMOUNT OF RS. 45,000/- ON DIFFERENT DATES SO THAT DDS ARE TO BE PURCHASED BY TENDERING CASH AMOUNT AS DEMAND DRAFT FOR VALUE EXCEEDING RS.50,OOO/- WERE REQUIRED TO BE PURCHASED BY PAYMENT THROUGH CHEQUE AND OR FURNISHING OF PAN DETAILS. THIS VERY FACT APART FROM THE FACTS. NOTICED BY AO ABOUT THERE BEING COMMON HAND WRITING ON PAY-IN-SLIP FOR PURCHASING OF SUCH DRAFTS CLEARLY ESTABLISH THAT -: 8: - 8 THESE WERE NOT GENUINE, SHARE APPLICATIONS AMOUNT PROCURED BY THE COMPANY. HAD SUCH SHARE HOLDERS BEING GENUINE THERE WAS NO REASON OF ARTIFICIALLY BREADING OF SHARE APPLICATION MONEY IN AMOUNT BELOW RS. 50,000/- FOR PURCHASE OF DD. THE STATEMENTS RECORDED ABOUT THE SOURCES OF INCOME BEING AGRICULTURAL INCOME AND THERE BEING NO BANK A/C, IT IS DIFFICULT TO ACCEPT THAT SUCH PERSONS, WOULD HAVE INVESTED THEIR HARD EARNED MONEY BY TOILING OF LAND IN A NEWLY START UP COMPANY WHOSE FINANCIAL AND CREDENTIAL WERE NOT ESTABLISHED AND THERE WERE NO CERTAINTY AND GUARANTEE OF EARN OF ANY INCOME ON SUCH INVESTMENT AND EVEN THERE WAS APPARENT RISK OF LOOSING THE ENTIRE INVESTMENT WHICH HAVE FINALLY COMES ISSUE ON ACCOUNT OF RECURRING LOSSES IN LATER YEAR. THUS THE COMMON FACTS NOTICES HIGH LIGHTED AS ABOVE FROM THESE VILLAGES AT S.NO. 8 TO 52, CLEARLY SUPPORT THE CONCLUSION DRAWN BY AO THAT THESE PERSONS, WERE MERELY NAME LENDERS AND -: 9: - 9 NO INVESTMENT WAS MADE BY ANY OF THEM AND THEY WERE NOT CAPABLE OF INVESTING THE AMOUNT AS CREDITED IN THEIR NAMES AS NO RELIABLE AND VERIFIABLE. 32. SINCE STRONG RELIANCE WAS PLACED BY THE ASSESSEE ON THE ORDER OF THE SUPREME COURT IN THE CASE OF CIT V. LOVELY EXPORTS P. LTD. [2008] 216 CTR ( S.C.) 195, IT WOULD BE NECESSARY TO EXAMINE THE FACTS OF THAT CASE AND THE RATIO LAID DOWN THEREIN IN ORDER TO DECIDE THE APPLICABILITY OF THAT CASE TO THE ONE BEFORE US. IT WOULD ALSO BE NECESSARY TO EXAMINE THE STRING OF DECISIONS OF THIS COURT ON THE QUESTION OF APPLICABILITY OF SECTION 68 OF THE ACT TO MONIES RECEIVED AS SHARE CAPITAL. 33. THE FACTS OF CIT V. LOVELY EXPORTS (F) LTD. (SUPRA) HAVE BEEN SET OUT IN THE JUDGMENT OF THIS COURT IN THAT CASE, REPORTED AS CIT V. (1) DIVINE LEASING & FINANCE LTD. -: 10: - 10 (2) GENERAL EXPORTS AND CREDITS L~6. AND (3) LOVELY EXPORTS P. LTD: IN [2008] 29 9 ITR 268. IN THAT CASE, THE SHARE CAPITAL SUBSCRIPTION WAS RECEIVED THROUGH BANKING CHANNELS AND COMPLETE RECORDS WERE MAINTAINED BY DIVINE LEASING & FINANCE LTD. THE ASSESSING OFFICER ISSUED SUMMONS XI]. 131 AND THEREAFTER IMPOUNDED THE SHAREHOLDERS' REGISTER, SHARE APPLICATION FORMS AND SHARE TRANSFER REGISTER. IT WAS CONTENDED BY THE ASSESSEE IN THAT CASE THAT BECAUSE OF THE ACTION OF THE ASSESSING OFFICER, IT WAS NOT ABLE TO FURNISH ANY DETAILS ABOUT THE SHARE SUBSCRIBERS. THE TRIBUNAL FOUND THAT THE ALLOTMENT OF SHARES WAS MADE AS PER THE RELEVANT RULES OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 AS WELL AS THOSE OF THE DELHI STOCK EXCHANGE. NO EVIDENCE HAD BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER TO INDICATE -: 11: - 11 THAT THE SHAREHOLDERS WERE EITHER BENAMIDARS OF THE ASSESSEE-COMPANY OR FICTITIOUS OR THAT THE SHARE APPLICATION MONIES WERE THE UNACCOUNTED INCOME OF THE ASSESSEE COMPANY. THE TRIBUNAL ACCORDINGLY HELD THAT THE ONUS THAT LAY ON THE ASSESSEE UNDER SEC. 68 STOOD DISCHARGED. 34. IN RESPECT OF THE OTHER ASSESSEE, NAMELY, GENERAL EXPORTS & CREDITS LTD., THE MONIES WERE RECEIVED BY THE SAID COMPANY ON ISSUE OF RIGHTS SHARES TO FIVE COMPANIES PURSUANT TO THE RENUNCIATION OF RIGHTS BY SEVERAL INDIVIDUAL SHAREHOLDERS. A SEARCH HAD BEEN CONDUCTED ON THE PREMISES OF THE ASSESSEE, BUT THOSE RENUNCIATION FORMS WERE NOT FOUND WITH THE ASSESSEE, AS IN THE CASE OF DIVINE LEASING & FINANCE LIMITED, THE FIVE COMPANIES WERE REGISTERED IN SIKKIM AT THE SAME ADDRESS. THEY ALL FILED -: 12: - 12 REPLIES TO THE DEPARTMENT ASKING FOR FURTHER TIME TO PROVIDE THE DETAILS OF THEIR INVESTMENTS. THEY HAD ALSO FILED RETURNS OF INCOME UNDER THE SIKKIM TAXATION MANUAL AND HAD SUBSCRIBED TO THE SHARES THROUGH BANKING CHANNELS. MOREOVER, THE INVESTIGATIONS CARRIED OUT INTO THOSE COMPANIES BY THE INCOME-TAX DEPARTMENT AT CALCUTTA AND THE ADVERSE FINDINGS THEREIN HAD BEEN STRUCK DOWN AS BEING WITHOUT JURISDICTION IN APPEALS FILED BY THOSE COMPANIES AND THEREFORE THE ASSESSING OFFICER HAVING JURISDICTION OVER GENERAL EXPORTS AND CREDITS LTD. IN BULANDSHAHAR COULD NOT RELY UPON THEM. IN THESE CIRCUMSTANCES, THE TRIBUNAL HAD DELETED THE ADDITION MADE U/S. 68 ON THE GROUND THAT THE IDENTITY OF THE SHAREHOLDERS HAD BEEN PROVED. THIS COURT DID NOT APPROVE OF THE GROUND ON WHICH THE TRIBUNAL HAD CANCELLED -: 13: - 13 THE ADDITION AND OBSERVED THAT THE JUDGMENT OF THE FULL BENCH OF THIS COURT IN SOPHIA FINANCE [1994J 205 ITR 98 (DELHI) COULD NOT BE UNDERSTOOD TO HAVE ENUNCIATED THAT ONCE THE IDENTITY OF THE SHAREHOLDERS IS PROVED THERE CAN BE NO ADDITION IN THE HANDS OF THE COMPANY WHICH RECEIVED THE SHARE MONIES. THE COURT HOWEVER REFUSED TO ATTACH ANY IMPORTANCE TO THE VIOLATION OF THE PROVISIONS OF THE COMPANIES ACT, 1956 IN THE MATTER OF RENUNCIATION OF THE RIGHT TO SUBSCRIBE TO THE SHARES AND HELD THAT IT WAS A MATTER OF CONCERN ONLY OF THE APPROPRIATE AUTHORITY UNDER THAT ACT. ACCORDINGLY, THE ULTIMATE DECISION OF THE TRIBUNAL CANCELLING THE ADDITION WAS UPHELD. 35. THE FACTS OF LOVELY EXPORTS P. LTD., AS NOTED BY THIS COURT, ARE THESE. THE ASSESSEE -: 14: - 14 COMPANY IN THAT CASE HAD FURNISHED THE NECESSARY DETAILS SUCH AS PAN NO INCOME TAX WARD NO./RATION CARD OF THE SHARE APPLICANTS AND SOME OF THEM WERE ASSESSED TO TAX. THE MONIES WERE RECEIVED THR OUGH BANKING CHANNELS . IN BANKING CHANNELS. IN SOME CASE, AFFIDAVITS/CONFIRMATIONS OF THE SHARE APPLICANTS CONTAINING THE ABOVE INFORMATION WERE FILED. THE ASSESSING OFFICER DID NOT CARRY OUT ANY INQUIRY INTO THE INCOME TAX: RECORDS OF THE PERSONS WHO HAD GIVEN THEIR FILE NUMBERS IN ORDER TO UNCERTAIN, WHETHER THEY WERE EXISTENT OR NOT. LIE NEITHER CONTROVERTED NOR DISAPPROVED THE MATERIAL FILED BY THE ASSESSEE. IT WAS FURTHER, THE ASSESSEE HAD SPECIFICALLY INVITED THE ASSESSING OFFICER TO CARRY OUT AN ENQUIRY AND EXAMINE THE ASSESSMENT RECORDS OF THE SHARE APPLICANTS WHOSE INCOME TAX: FILE NUMBERS WERE GIVEN. -: 15: - 15 THOUGH THE ASSESSING OFFICER HAD SUFFICIENT TIME TO CARRY OUT THE EXAMINATION, HE DID NOT DO SO, BUT PUT FORTH AN EXCUSE THAT THE ASSESSEE WAS TAKING SEVERAL ADJOURNMENTS. THIS COURT OBSERVED THAT IT IS FOR THE ASSESSING OFFICER TO MANAGE HIS SCHEDULE AND HE SHOULD HAVE ENSURED THAT BECAUSE OF THE ADJOURNMENTS HE DID NOT RUN OUT OF TIME FOR DISCHARGING THE DUTIES CAST ON HIM BY LAW. IT WAS HELD THAT WHEN DETAILS WERE FURNISHED BY THE ASSESSEE, THE BURDEN SHIFTED TO THE ASSESSING OFFICER TO INVESTIGATE INTO THE CREDITWORTHINESS OF THE SHARE APPLICANTS WHICH HE WAS UNABLE TO DISCHARGE. THUS, THE ORDER OF THE TRIBUNAL DELETING THE ADDITION WAS HELD NOT GIVING RISE TO ANY QUESTION OF LAW, MUCH LESS ANY SUBSTANTIAL QUESTION OF LAW. 36. IT IS NOT ONLY RELEVANT TO NOTE THE -: 16: - 16 ABOVE FACTS, WHICH DISTINGUISH THOSE THREE CASES (SUPRA) FROM THE CASE BEFORE US, BUT IT IS ALSO RELEVANT TO NOTE THE FOLLOWING OBSERVATIONS MADE BY THIS COURT IN THE ABOVE THREE CASES: 'THERE CANNOT BE TWO OPINIONS ON THE ASPECT THAT THE PERNICIOUS PRACTICE OF CONVERSION OF UNACCOUNTED MONEY THROUGH THE MASQUERADE OR CHANNEL OF INVESTMENT IN THE SHARE CAPITAL OF A COMPANY MUST BE FIRMLY EXCORIATED BY THE REVENUE. EQUALLY, WHERE THE PREPONDERANCE OF EVIDENCE INDICATES ABSENCE OF CULPABILITY AND COMPLEXITY OF THE ASSESSED IT SHOULD NOT BE HARASSED BY THE REVENUES INSISTENCE THAT IT SHOULD PROVE THE -: 17: - 17 NEGATIVE. IN THE CASE OF A PUBLIC ISSUE, THE COMPANY CONCERNED CANNOT BE EXPECTED TO KNOW EVERY 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 AO FOR HIS PERUSAL, ALL THE INFORMATION CONTAINED IN THE STATUTORY SHARE APPLICATION 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 SECTIONS 68 AND 69 OF THE IT ACT. THE BURDEN OF PROOF CAN SELDOM BE DISCHARGED TO THE HILT BY THE ASSESSED; IF THE AO HARBOURS DOUBTS OF THE LEGITIMACY -: 18: - 18 OF ANY SUBSCRIPTION HE IS EMPOWERED, NAY DUTY BOUND, TO CARRYOUT THOROUGH INVESTIGATIONS. BUT IF THE AO FAILS TO UNEARTH ANY WRONG OR ILLEGAL DEALINGS, HE CANNOT OBDURATELY ADHERE TO HIS SUSPICIONS AND TREAT THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANY.' WE MAY ALSO NOTE THAT A REFERENCE WAS MADE BY THIS COURT TO SEVERAL AUTHORITIES, INCLUDING AT LEAST SEVEN JUDGMENTS OF THIS ,COURT ON THE QUESTION OF APPLICABILITY OF SECTION 68 TO SHARE APPLICATION MONIES AND THE POSITION WAS PITHILY SUMMED UP AS FOLLOWS AT PAGE 282 (OF 299 ITR): IN THIS ANALYSIS, A DISTILLATION OF -: 19: - 19 THE PRECEDENTS YIELDS THE FOLLOWING PROPOSITIONS OF LAW IN THE CONTEXT OF SECTION 68 OF THE IT ACT. THE ASSESSED HAS TO PRIMA FACIE PROVE (1) THE IDENTITY OF THE CREDITOR/SUBSCRIBER; (2) THE GENUINENESS OF THE TRANSACTION, NAMELY, WHETHER IT HAS BEEN TRANSMITTED THROUGH' BANKING OR OTHER INDISPUTABLE CHANNELS; (3) THE CREDITWORTHINESS OR FINANCIAL STRENGTH OF THE CREDITOR/SUBSCRIBER. (4) IF RELEVANT DETAILS OF THE ADDRESS OR PAN IDENTITY OF THE CREDITOR/SUBSCRIBER ARE FURNISHED TO THE DEPARTMENT ALONG WITH COPIES OF THE SHAREHOLDERS REGISTER, SHARE APPLICATION FORMS ,SHARE TRANSFER REGISTER ETC. IT WOULD CONSTITUTE ACCEPTABLE PROOF -: 20: - 20 OR ACCEPTABLE EXPLANATION BY THE ASSESSED. (5) THE DEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWING AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCRIBER FAILS OR NEGLECTS TO RESPOND TO ITS NOTICES; (6) THE ONUS WOULD NOT STAND DISCHARGED IF THE CREDITOR/SUBSCRIBER DENIES OR REJIUDIAT.ES THE TRANSACTION SET UP BY THE 'ASSESSED NOR SHOULD THE AO TAKE SUCH REPUDIATION AT FACE VALUE AND CONSTRUE IT WITHOUT MORE, AGAINST; THE ASSESSED. (7) THE ASSESSING OFFICER IS DUTY BOUND TO INVESTIGATE' THE CREDITWORTHINESS OF THE CREDITOR/SUBSCRIBER THE GENUINENESS OF THE TRANSACTION AND THE VERACITY OF THE REPUDIATION. -: 21: - 21 9. THE GROUND OF DISALLOWANCE OF EXPENDITURE WAS ALSO CONFIRMED BY THE LD.CIT(A). AGAINST THE ABOVE ORDER OF CIT(A), THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 10. DURING THE COURSE OF HEARING BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE , SHRI S.K.JAIN, CONTENDE D THAT ASSESSMENT FRAMED BY THE ASSESSING OFFICER WAS WITH OUT JURISDICTION IN SO FAR AS ASSESSEE IN THE RETURN O F INCOME DECLARED LOSS OF RS. 2,47,310/- AND THE JURISDICTIO N FOR ASSESSMENT OF THE SAME WAS CONFERRED BY CIT U/S 120 OF THE INCOME-TAX ACT, 1961, THE DY. CIT(A)/LD. CIT. THE L D. AUTHORIZED REPRESENTATIVE FURTHER SUBMITTED THAT A DDITIONAL GROUND PURELY RELATES TO QUESTION OF LAW, WHICH DES ERVES TO BE ADMITTED EVEN THOUGH NOT FILED IN ORIGINAL APPEAL M EMO. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FOUND FROM RECORD THAT ASSESSEE HAS CALLED FOR AN INFORMA TION FROM DEPARTMENT UNDER RIGHT TO INFORMATION ACT, 2005, AN D IN REPLY, THE DEPARTMENT VIDE LETTER DATED 18.9.2012 H AD STATED IN WHICH COPY OF CORRIGENDUM TO NOTIFICATION NO. 4/ CIT-I/01- 02 DATED 13.11.2001 WAS ENCLOSED AND IT WAS STATED THAT JURISDICTION OF ALL ASSESSING OFFICER OF RANGE II W HICH DEFINED -: 22: - 22 INCOME LIMITS AND THIS JURISDICTION WAS ENFORCED UP TO 15.8.2005. HOWEVER, IN THE CASE BEFORE US THAT THE RETURN OF INCOME WAS FILED ON 30.10.2005 AND ASSESSMENT WAS F RAMED ON 28.12.2007. THUS, BOTH THE DATES OF FILING OF RE TURN AS WELL AS DATE OF FRAMING ASSESSMENT FALLS BEYOND THE DATE UP TO WHICH THE SAID NOTIFICATION WITH RESPECT TO DENYING JURISDICTION OF ASSESSING OFFICER WAS EFFECTIVE I.E. 15.8.2005. THE RIGHT OF ASSESSEE TO OBJECT THE JURISDICTION OF THE ASSESSIN G OFFICER TO FRAME ASSESSMENT HAS BEEN PROVIDED U/S 124. AS PER CLAUSE (A) OF SUB SECTION (III) OF SECTION 124, THE ASSESS EE CAN TAKE OBJECTION FOR ISSUANCE OF NOTICE U/S 132 REGARDING JURISDICTION OF THE ASSESSING OFFICER BEFORE EXPIRY OF PERIOD OF ONE MONTH FROM THE SERVICE OF NOTICE U/S 143(2). IN THIS CASE , NOTICES WERE SERVED ON THE ASSESSEE ON 27.10.2006, 15.1.2007 AND 15.2.2007. EVEN AFTER HAVING SO MANY OPPORTUNITY, T HE ASSESSEE NEVER RAISED OBJECTION REGARDING JURISDICT ION. SINCE THE ASSESSEE HAS NOT RAISED ANY OBJECTION WITHIN TH E TIME PRESCRIBED U/S 124, THE PLEA TAKEN BY THE ASSESSEE TO THE EFFECT THAT THE ASSESSING OFFICER FRAMING THE ASSES SMENT WAS NOT COMPETENT IN SO FAR AS RETURN OF INCOME WAS ABO VE RS. 1 -: 23: - 23 LAKH, HAS NO MERIT. THE LD. CIT(A) HAS ALSO DEALT WITH THIS ISSUE AND HELD THAT JURISDICTION OF ASSESSING OFFIC ER WAS NOT CHALLENGED BEFORE THE ASSESSING OFFICER WITHIN 30 D AYS OF ISSUE OF NOTICE AS PER REQUIREMENT OF SECTION 123(3) OF T HE INCOME- TAX ACT, 1961. 12. IN VIEW OF THE ABOVE DISCUSSION, ADDITIONAL GROUND RAISED BY THE ASSESSEE WITH REGARD TO JURISDICTION OF ASSESSING OFFICER TO FRAME ASSESSMENT IS DISMISSED. 13. WITH REGARD TO THE ADDITION MADE U/S 68, THE ASSESSING OFFICER HAS RECORDED FINDING TO THE EFFEC T THAT IDENTITY, GENUINENESS AND CREDITWORTHINESS OF SHARE HOLDERS WHO WERE AGRICULTURISTS WERE NOT ESTABLISHED. HOWEV ER, FROM THE RECORD, WE FOUND THAT IN RESPECT OF MOST OF THE SHAREHOLDERS, THE ASSESSING OFFICER HAS CALLED THEM AND RECORDED THEIR STATEMENTS, WHEREIN THEY HAVE CONFIR MED THE INVESTMENT OF MONEY IN THE SHARES OF THE COMPANY. M ERELY BECAUSE THE SHAREHOLDERS WERE VILLAGERS AND PAY IN SLIP FOR ISSUE OF DRAFT WAS PREPARED BY A COMMON PERSON, THE ASSESSING OFFICER CONCLUDED THAT IT WAS NOT A GENUI NE TRANSACTION. FURTHER, THE STATEMENT OF VILLAGERS TO THE EFFECT -: 24: - 24 THAT THEY HAVE NOT RECEIVED SHARE CERTIFICATES TILL TO DAY INFLUENCED THE ASSESSING OFFICER TO CONCLUDE THAT T RANSACTION OF SHARE WAS NOT GENUINE. AS PER OUR CONSIDERED VIE W, THE FINDING RECORDED BY THE ASSESSING OFFICER WITH REGA RD TO IDENTITY OF THE SHAREHOLDERS AND GENUINENESS OF TRA NSACTION ARE NOT AS PER MATERIAL ON RECORD, IN SO FAR AS MAN Y SHAREHOLDERS APPEARED BEFORE THE ASSESSING OFFICER WHOSE STATEMENT WAS RECORDED U/S 131. IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE SET ASIDE THE ORDERS OF LOWER AUTHORI TIES AND RESTORE THIS GROUND BACK TO THE FILE OF ASSESSING O FFICER FOR DECIDING AFRESH. IT IS PERTINENT TO MENTION HERE TH AT SINCE IT IS A CLOSELY HELD COMPANY, ONLY THE PERSONS WHO ARE CL OSELY ASSOCIATED WITH THE ASSESSEE USED TO INVEST THEIR M ONEY IN THE CAPITAL OF COMPANY, THEREFORE, ONUS HEAVILY LIES ON THE ASSESSEE TO PROVE THE IDENTITY AND GENUINENESS OF T RANSACTION. THE ASSESSEE IS AT LIBERTY TO PLACE BEFORE THE ASSE SSING OFFICER ANY DOCUMENT IN SUPPORT OF ITS CLAIM OF GENUINE SHA RE APPLICATION BY THE SHAREHOLDERS. THE ASSESSING OFFI CER IS TO DECIDE THE ISSUE AFRESH AFTER TAKING INTO ACCOUNT A LL THESE EVIDENCES. WE DIRECT ACCORDINGLY. SIMILARLY GROUND RAISED WITH -: 25: - 25 REGARD TO DISALLOWANCE OF EXPENDITURE IS ALSO RESTO RED BACK FOR DECIDING AFRESH AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D IN PART FOR STATISTICAL PURPOSES. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 29 TH NOVEMBER, 2012. SD/ - SD/ - (JOGINDER SINGH) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 29 TH NOVEMBER, 2012. CPU* 2711