M/s. Deem Roll-Tech Ld., Ahmedabad V. The ACIT, (OSD), Range-1, Now Dy. CIT, Circle-1(1)(2), Ahmedabad

ITA 3619/AHD/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6019 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 28-12-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: PF JAIN
• Keywords: Unexplained cash credit; Accommodation entries
• Section: 142(1); 131; 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA.NO.3619/AHD/2015 / ASSTT.YEAR : 2011-12 M/S.DEEM ROLL TECH LTD. C/O. VINIT MOONDRA CA 201, SARAP OPP: NAVJIVAN PRESS ASHRAM ROAD AHMEDABAD 380 014. PAN: AABCD 9176 A VS DCIT, CIR.1(1)(2) AHMEDABAD. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI P.F. JAIN, AR REVENUE BY : SHRI RAJDEEP SINGH, SR.DR / DATE OF HEARING : 08/01/2018 / DATE OF PRONOUNCEMENT: 01/03/2018 !'/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST O RDER OF LD.CIT(A)-6 AHMEDABAD DATED 23.10.2015 PASSED FOR THE ASSTT.YEA R 2011-12. 2. IN THE FIRST GROUND OF APPEAL, GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING ADDITION OF RS.35 .00 LAKHS. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-CO MPANY IS ENGAGED IN MANUFACTURING OF IRON AND STEEL ROLL. IT HAS FILED ITS RETURN OF INCOME ON 30.9.2011 ELECTRONICALLY DECLARING TOTAL INCOME AT RS.3,46,00,080/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMEN T AND NOTICE UNDER SECTION ITA NO.3619/AHD/2015 2 143(2) OF THE ACT WAS ISSUED ON 28.9.2012 WHICH WAS DULY SERVED UPON THE ASSESSEE. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THAT THE ASSESSEE HAS INTRODUCED NEW SHARE CAPITAL OF RS.50 LAKHS. H E DIRECTED THE ASSESSEE TO FURNISH IDENTITY, CONFIRMATION, CREDIT-WORTHINESS O F THE SHARE APPLICANTS. IT IS ALSO PERTINENT TO OBSERVE THAT SHARES WERE OFFERED AT A PREMIUM OF RS.190/-. THE ASSESSEE HAS FILED COMPLETE DETAILS. THE LD.AO HAS CARVED OUT DETAILS OF SIX APPLICANTS VIZ. ALPESH C. GAJJAR, VISHNUBHAI G. PATEL, HARESH ISHWARBHAI PATEL, JIGAR PATEL, HEENA PAEL AND SHANABHAI RATHOD . THE ASSESSEE HAS TAKEN SHARE APPLICATION MONEY OF RS.8,00,000/-, RS.8,00,0 00/-, RS.3,60,000/-, RS.5,00,000/-, RS.5,00,000/- AND RS.5,40,000/- RESP ECTIVELY FROM THESE INDIVIDUALS. INVESTMENTS WERE MADE IN BETWEEN JULY TO SEPTEMBER, 2010. THESE AMOUNTS WERE TAKEN THROUGH ACCOUNT PAYEE CHEQ UES. IN ORDER TO FULFILL QUERY OF THE AO, THE ASSESSEE HAS FILED CONFIRMATIO N FROM THE APPLICANTS, BANK STATEMENTS, THEIR PANS WITH THE INCOME TAX DEPARTME NT, COPIES OF THEIR RETURNS. THE AO THEREAFTER DIRECTED THE ASSESSEE T O PRODUCE THESE APPLICANTS BEFORE HIM ON 13.2.2014. THE ASSESSEE FAILED TO PR ODUCE THEM, AND THE LD.AO HAS MADE ADDITION OF RS.35 LAKHS OUT OF RS.50.00 LA KHS SHARE CAPITAL INTRODUCED BY THE ASSESSEE AFRESH DURING THE YEAR. 4. ON APPEAL, THE ASSESSEE HAS CONTENDED THAT IT HA S FULFILLED ALL INGREDIENTS OF SECTION 68 OF THE ACT. IT SUBMITTED ALL NECESSARY DETAILS. IT HAS MADE REFERENCE OF VARIOUS CASE LAWS OF HONBLE GUJA RAT HIGH COURT AS WELL AS DECISION OF HONBLE SUPREME COURT IN ITS SUBMISSION S. THE LD.CIT(A) HAS CONSIDERED CONTENTIONS OF THE ASSESSEE AND MADE REF ERENCE TO A LARGE NUMBER OF DECISIONS, AND THEREAFTER CONFIRMED THE ADDITION BY OBSERVING AS UNDER: 7.1 IN VIEW OF THE ABOVE DISCUSSION, I AM OF THE C ONSIDERED VIEW THAT THE APPELLANT HA FAILED TO PROVE THE IDENTITY, GENU INENESS AND CREDITWORTHINESS OF THE INVESTOR THEREFORE THE AO I S JUSTIFIED IN TREATING ITA NO.3619/AHD/2015 3 THE SHARE PREMIUM AS UNEXPLAINED CASH CREDIT. THE ADDITION MADE BY THE AO OF RS.35,00,000/- IS CONFIRMED. THE GROUND IS DISMISSED. 5. THE LD.COUNSEL FOR THE ASSESSEE WHILE IMPUGNING ORDERS OF THE REVENUE AUTHORITIES CONTENDED THAT IN ORDER TO FULFILL INGR EDIENTS OF SECTION 68 THE ASSESSEE HAS FILED CONFIRMATION FROM THE SHARE APPL ICANTS, COPIES OF BANK STATEMENTS, COPIES OF THEIR INCOME TAX RETURNS, COP IES OF THEIR PAN WITH INCOME-TAX DEPARTMENT. THUS, THE ASSESSEE HAS PROV ED IDENTITY, THEIR CREDIT- WORTHINESS AS WELL AS GENUINENESS OF TRANSACTION. MERELY ON THE GROUND OF FAILURE OF THE ASSESSEE TO PRODUCE SHARE APPLICANTS , WHO ARE INDIVIDUALS, ADDITIONS CANNOT BE MADE IN THE HANDS OF THE ASSESS EE. IN SUPPORT OF HIS CONTENTIONS, HE RELIED UPON LARGE NUMBER OF DECISIO NS: I) CIT VS. OASIS HOSPITALITIES P.LTD. AND OTHERS, 333 ITR 119 (DELHI) II) CIT VS. STL EXTRUSION P.LTD., 333 ITR 269 (MP) III) CIT VS. CREATIVE WORLD TELEFILS LTD., 333 ITR 100 ( MUM) IV) CIT VS. ASK BROTHERS LTD., 333 ITR 111 (KAR) 6. HE FURTHER RELIED UPON DECISION OF THE HONBLE D ELHI HIGH COURT IN THE CASE OF PR.COMMISSIONER OF INCOME TAX VS. SOFTLINE CREATIONS P.LTD., 387 ITR 636. HE ALSO MADE REFERENCE TO DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. KAMDHENU STEEL & ALLOY S LTD, 248 CTR 33 = 206 TAXMAN.COM 254. THE LD.DR ON THE OTHER HAND RE LIED UPON ORDER OF THE REVENUE AUTHORITIES BELOW. 7. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GO NE THROUGH THE RECORD CAREFULLY. BEFORE WE EMBARK UPON AN INQUIRY ON THE FACTS OF THE PRESENT APPEAL, IN ORDER TO FIND OUT WHETHER THE SHARE CAPI TAL AND SHARE PREMIUM MONEY RECEIVED BY THE ASSESSEE DURING THE YEAR IS R EQUIRED TO BE TREATED AS ITS ITA NO.3619/AHD/2015 4 UNEXPLAINED CREDIT AND DESERVES TO BE ADDED UNDER S ECTION 68 OF THE INCOME TAX ACT, 1961. WE DEEM IT APPROPRIATE TO BEAR IN MI ND CERTAIN BASIC PRINCIPLES/TESTS PROPOUNDED IN VARIOUS AUTHORITATIV E PRONOUNCEMENTS OF THE HONBLE HIGH COURTS AND HONBLE SUPREME COURT. IT IS ALSO PERTINENT TO OBSERVE THAT BOTH THE SIDES HAVE MADE REFERENCE TO A LARGE NUMBER OF DECISIONS. WE DO NOT DEEM IT NECESSARY TO RECITE A ND RECAPITULATE THEM BECAUSE THAT WOULD MAKE THIS ORDER REPETITIVE AND B ULKY. WE TAKE COGNIZANCE OF SOME OF THEM. IT IS PERTINENT TO OBSERVE THAT I N SO FAR AS COMPANIES INCORPORATED UNDER INDIAN COMPANIES ACT ARE CONCERN ED, WHETHER PRIVATE LIMITED OR PUBLIC LIMITED COMPANIES, THEY RAISE THE IR SHARE CAPITAL, THROUGH SHARES THOUGH MANNER OF RAISING SHARE CAPITAL IN PR IVATE LIMITED COMPANY ON ONE HAND AND PUBLIC LIMITED COMPANY ON OTHER HAND, WOULD BE DIFFERENT. THE SHARE CAPITAL AND SHARE PREMIUM ARE BASICALLY IRREV ERSIBLE RECEIPTS OR CREDITS IN THE HANDS OF THE COMPANIES. SHARE CAPITAL IS CO NSIDERED TO BE COST OF SHARES ON EQUIVALENT AMOUNT ISSUED AND PREMIUM IS CONSIDER ED AS EXTRA AMOUNT CHARGED BY THE COMPANY FOR ISSUE OF THAT CAPITAL. IN THE CASE OF PRIVATE LIMITED COMPANY, NORMALLY SHARES ARE SUBSCRIBED BY FAMILY MEMBERS OR PERSONS KNOWN/CLOSE TO THE PROMOTERS. PUBLIC LIMIT ED COMPANY, ON THE OTHER HAND, GENERALLY RAISED BY PUBLIC ISSUE INVITING GEN ERAL PUBLIC AT LARGE FOR SUBSCRIPTION OF THESE SHARES. YET, IT IS ALSO POSS IBLE THAT IN THE CASE OF PUBLIC LIMITED COMPANY, THE SHARE CAPITAL IS ISSUED IN CLO SE-CIRCUIT. WHEN COMPANIES INCORPORATED UNDER THE COMPANIES ACT RAISE THEIR CA PITAL THROUGH SHARES, VARIOUS PERSONS WOULD APPLY FOR SHARES AND THEN GIV E SHARE APPLICATION MONEY. THIS AMOUNT RECEIVED FROM SUCH SHARE HOLDE R WOULD NATURALLY BE CREDITED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. ONCE THE ALLEGED SHARE CAPITAL IS CREDITED TO THE ACCOUNTS OF THE ASSESSEE , THEN ROLE OF SECTION 68 WOULD COME. IT IS PERTINENT TO TAKE NOTE OF THIS S ECTION. IT READS AS UNDER: ITA NO.3619/AHD/2015 5 WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATI ON ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, I N THE OPINION OF THE OFFICER, SATISFACTORY THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. 8. A PERUSAL OF THE SECTION WOULD INDICATE THAT BAS ICALLY THIS SECTION CONTEMPLATES THREE CONDITIONS REQUIRED TO BE FULFIL LED BY AN ASSESSEE. IN OTHER WORDS, THE ASSESSEE IS REQUIRED TO GIVE EXPLANATION WHICH WILL EXHIBIT NATURE OF TRANSACTION AND ALSO EXPLAIN THE SOURCE OF SUCH CREDIT. THE EXPLANATION SHOULD BE TO THE SATISFACTION OF THE AO. IN ORDER TO GIVE SUCH TYPE OF EXPLANATION WHICH COULD SATISFY THE AO, THE ASSESSE E SHOULD FULFILL THREE INGREDIENTS VIZ. (A) IDENTITY OF THE SHARE APPLICAN TS, (B) GENUINENESS OF THE TRANSACTION, AND (C) CREDIT-WORTHINESS OF SHARE APP LICANTS. AS FAR AS CONSTRUCTION OF SECTION 68 AND TO UNDERSTAND ITS ME ANING IS CONCERNED, THERE IS NO MUCH DIFFICULTY. DIFFICULTY ARISES WHEN WE APPL Y THE CONDITIONS FORMULATED IN THIS SECTION ON THE GIVEN FACTS AND C IRCUMSTANCES. IN OTHER WORDS, IT HAS BEEN PROPOUNDED IN VARIOUS DECISIONS THAT SECTION 68 CONTEMPLATES THAT THERE SHOULD BE A CREDIT OF AMOUN TS IN THE BOOKS OF AN ASSESSEE MAINTAINED BY THE ASSESSEE, (B) SUCH AMOUN T HAS TO BE A SUM RECEIVED DURING THE PREVIOUS YEAR, (C) THE ASSESSEE OFFERS N O EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH CREDIT FOUND IN THE BOOKS , OR (D) THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT, IN THE OPINION OF T HE ASSESSING OFFICER, SATISFACTORY. THE HONBLE DELHI HIGH COURT IN THE C ASE OF CIT V. NOVADAYA CASTLES (P.) LTD. 367 ITR 306 HAS CONSIDERED A LARG E NUMBER OF DECISIONS INCLUDING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. DURGA PRASAD [1971] 82 ITR 540 (SC). ACCORDING TO THE HONBLE DELHI HIGH COURT BASICALLY THERE ARE TWO SETS OF JUDGMENTS. IN ONE SET OF CASE, THE ASSESSEE PRODUCED NECESSARY DOCUMENTS/EVIDENCE TO S HOW AND ESTABLISH IDENTITY OF THE SHARE-HOLDER AND BANK ACCOUNT FROM WHICH PAYMENT WAS MADE. THE FACT THAT PAYMENT WAS RECEIVED THROUGH BANK CHA NNELS, FILED NECESSARY ITA NO.3619/AHD/2015 6 AFFIDAVIT OF THE SHAREHOLDERS OR CONFIRMATIONS OF T HE DIRECTORS OF THE SHAREHOLDER COMPANY. BUT THEREAFTER NO FURTHER INQ UIRY WAS MADE BY THE AO. THE SECOND SET OF CASES ARE THOSE WHERE THERE WAS E VIDENCE AND MATERIAL TO SHOW THAT THE SHAREHOLDER COMPANY WAS ONLY A PAPER COMPANY HAVING NO SOURCE OF INCOME, BUT HAD MADE SUBSTANTIAL AND HUGE INVESTMENTS IN THE FORM OF SHARE APPLICATION MONEY. THE ASSESSING OFFICER H AS REFERRED TO THE BANK STATEMENT, FINANCIAL POSITION OF THE RECIPIENT AND BENEFICIARY ASSESSEE AND SURROUNDING CIRCUMSTANCES. 9. LET US TAKE INTO CONSIDERATION OBSERVATIONS MADE BY THE HONBLE DELHI HIGH COURT IN THE CASE OF SOFTLINE CREATIONS P.LTD. (SUPRA) WHILE TAKING NOTE OF JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. FAIR FINVEST LTD., 357 ITR 146 (DELHI). HONBLE DELHI HIGH COU RT MADE FOLLOWING OBSERVATIONS: .. THIS COURT HAS CONSIDERED THE CONCURRENT ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AS WELL AS THE INCOME-TAX APPELLATE TRIBUNAL. BOTH THESE AUTHORITIES PRIMARIL Y WENT BY THE FACT THAT THE ASSESSEE HAD PROVIDED SUFFICIENT INDICATIO N BY WAY OF PERMANENT ACCOUNT NUMBERS, TO HIGHLIGHT THE IDENTIT Y OF THE SHARE APPLICANTS, AS WELL AS PRODUCED THE AFFIDAVITS OF T HE DIRECTORS. FURTHERMORE, THE BANK DETAILS OF THE SHARE APPLICAN TS TOO HAD BEEN PROVIDED. IN THE CIRCUMSTANCES, IT WAS HELD THAT TH E ASSESSEE HAD ESTABLISHED THE IDENTITY OF THE SHARE APPLICANTS, T HE GENUINENESS OF TRANSACTIONS AND THEIR CREDITWORTHINESS; THE ASSESS ING OFFICER CHOSE TO PROCEED NO FURTHER BUT MERELY ADDED THE AMOUNTS BEC AUSE OF THE ABSENCE OF THE DIRECTORS TO PHYSICALLY PRESENT THEM SELVES BEFORE HIM. THE INCOME-TAX APPELLATE TRIBUNAL HAS RELIED UPON A DECISION OF THIS COURT IN CIT V. FAIR FINVEST LTD. [2013] 357 I TR 146 (DELHI), WHERE IN SOMEWHAT SIMILAR CIRCUMSTANCES, IT WAS STATED AS FOLLOWS (PAGE 152) : 'THIS COURT HAS CONSIDERED THE SUBMISSIONS OF THE P ARTIES. IN THIS CASE THE DISCUSSION BY THE COMMISSIONER OF INCOME-T AX ITA NO.3619/AHD/2015 7 (APPEALS) WOULD REVEAL THAT THE ASSESSEE HAS FILED DOCUMENTS INCLUDING CERTIFIED COPIES ISSUED BY THE REGISTRAR OF COMPANIES IN RELATION TO THE SHARE APPLICATION, AFFIDAVITS OF THE DIRECTORS, FORM 2 FILED WITH THE REGISTRAR OF COMPANIES BY SUC H APPLICANTS CONFIRMATIONS BY THE APPLICANT FOR COMPANY'S SHARES , CERTIFICATES BY AUDITORS ETC. UNFORTUNATELY, THE ASSESSING OFFIC ER CHOSE TO BASE HIMSELF MERELY ON THE GENERAL INFERENCE TO BE DRAWN FROM THE READING OF THE INVESTIGATION REPORT AND THE STA TEMENT OF MR. MAHESH GARG. TO ELEVATE THE INFERENCE WHICH CAN BE DRAWN ON THE BASIS OF READING OF SUCH MATERIAL INTO JUDICIAL CONCLUSIONS WOULD BE IMPROPER, MORE SO WHEN THE ASSESSEE PRODUC ED MATE- RIAL. THE LEAST THAT THE ASSESSING OFFICER OUGHT TO HAVE DONE WAS TO ENQUIRE INTO THE MATTER BY, IF NECESSARY, INVOKI NG HIS POWERS UNDER SECTION 131 SUMMONING THE SHARE APPLICANTS OR DIRECTORS. NO EFFORT WAS MADE IN THAT REGARD. IN THE ABSENCE O F ANY SUCH FINDING THAT THE MATERIAL DISCLOSED WAS UNTRUSTWORT HY OR LACKED CREDIBILITY THE ASSESSING OFFICER MERELY CONCLUDED ON THE BASIS OF ENQUIRY REPORT, WHICH COLLECTED CERTAIN FACTS AND T HE STATEMENTS OF MR. MAHESH GARG THAT THE INCOME SOUGHT TO BE ADD ED FELL WITHIN THE DESCRIPTION OF SECTION 68. HAVING REGARD TO THE ENTIRETY OF FACTS AND CIRCUMST ANCES, THE COURT IS SATISFIED THAT THE FINDING OF THE TRIBUNAL IN THIS CASE ACCORDS WITH THE RATIO OF THE DECISION OF THE SUPREME COURT IN LOVEL Y EXPORTS (SUPRA) 10. WE ALSO DEEM IT APPROPRIATE TO TAKE NOTE OF SOM E OF OBSERVATIONS OF THE HONBLE DELHI HIGH COURT FROM THE DECISION OF FAIR FINVEST LTD. (SUPRA). THE HONBLE COURT HAS NOTICED PROPOSITION LAID DOWN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. VICTOR ELECTRODES LTD. , 329 ITR 271 (DELHI) REGARDING NON-PRODUCTION OF SHARE APPLICANTS BEFORE THE AO. THE FOLLOWING OBSERVATIONS ARE WORTH TO NOTE: IN THIS CONNECTION THE OBSERVATION OF THE JURISDIC TIONAL HIGH COURT IN CASE OF DWARKADHISH INVESTMENT (SUPRA) ARE QUITE RE LEVANT WHERE THE COURT HAS OBSERVED THAT IT IS THE REVENUE WHICH HAS ALL THE POWER AND WHEREWITHAL TO TRACE ANY PERSON. FURTHER IN THE CAS E OF CIT VS. VICTOR ELECTRODES LTD. 329 ITR 271 IT HAS BEEN HELD THAT T HERE IS NO LEGAL OBLIGATION ON THE ASSESSEE TO PRODUCE SOME DIRECTOR OR OTHER REPRESENTATIVE OF THE DIRECTOR OR OTHER REPRESENTAT IVE OF THE APPLICANT ITA NO.3619/AHD/2015 8 COMPANIES BEFORE THE A.O. THEREFORE FAILURE ON PART OF THE ASSESSEE TO PRODUCE THE DIRECTORS OF THE SHARE APPLICANT COMPAN IES COULD NOT BY ITSELF HAVE JUSTIFIED THE ADDITIONS MADE BY THE AO PARTICULARLY WHEN THE SEVEN SHARE APPLICANT COMPANIES THROUGH THEIR PRESE NT DIRECTORS HAVE NOW AGAIN FILED FRESH AFFIDAVITS CONFIRMING THE APP LICATION AND ALLOTMENT OF SHARES WITH RESPECT TO THE TOTAL AMOUN T OF RS.45 LACS. IT IS OBSERVED THAT NO ATTEMPT WAS MADE BY THE AO TO SUMM ON THE DIRECTORS OF THE SHARE APPLICANT COMPANIES. MOREOVER, IT IS S ETTLED LAW THAT THE ASSESSEE NEED NOT PROVE THE 'SOURCE OF SOURCE'. ACC ORDINGLY IT WAS INCUMBENT UPON THE DEPARTMENT TO HAVE ENFORCED ATTE NDANCE OF SHRI MAHESH GARG OR THE ERSTWHILE DIRECTORS OF THE SHARE APPLICANT COMPANIES AND CONFRONTED THEM WITH THE EVIDENCES & AFFIDAVITS RELIED UPON BY THE APPELLANT AND THEREUPON GIVEN OPPORTUNI TY TO THE ASSESSEE TO CROSS EXAMINE THESE APPLICANTS. 11. IN THE LIGHT OF THE ABOVE, LET US EXAMINE THE F ACTS OF THE PRESENT CASE. A NOTICE UNDER SECTION 143(2) PROVIDING AN OPPORTUNIT Y TO MAKE SUBMISSION IN SUPPORT OF RETURN OF INCOME WAS SERVED UPON THE ASS ESSEE ON 28.9.2012. THEREAFTER QUESTIONNAIRE UNDER SECTION 142(1) WAS I SSUED ON 26.12.2012. THE AO HAS PASSED ASSESSMENT ORDER ON 21.2.104. HE EXP ECTED THE ASSESSEE TO PRODUCE DEPOSITORS ON 14.2.2014 JUST IN A FEW DAYS BEFORE FINALIZATION OF THE ASSESSMENT ORDER. THE HONBLE DELHI HIGH COURT IN ALL THESE CASES HAVE PROPOUNDED THAT IF THE ASSESSEE HAS DISCHARGED PRIM ARY ONUS BY SUBMITTING CONFIRMATION, BANK STATEMENTS, COPIES OF INCOME-TAX RETURNS, PAN DATA THEN IT WOULD BE CONSTRUED THAT THE ASSESSEE HAS DISCHARGED PRIMARY ONUS PUT UPON IT BY VIRTUE OF SECTION 68. IT IS THE AO WHO HAS TO C ARRY OUT INVESTIGATION AND DEMONSTRATE THAT THESE MATERIALS ARE NOT SUFFICIENT FOR DISCHARGING THE ONUS CAST UPON ASSESSEE BY SECTION 68. NO SUCH STEPS HA VE BEEN TAKEN BY THE AO. HE SIMPLY ASSUMED THAT SINCE THE ASSESSEE WAS DIREC TED TO PRODUCE APPLICANTS AND IT FAILED TO PRODUCE, THEREFORE, EVERYTHING IS TO BE CONSTRUED AS MANIPULATED. THE HONBLE DELHI HIGH COURT DID NOT APPROVE SUCH STEPS AT END OF THE ASSESSEE. WE ALSO MAKE REFERENCE TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. GOEL SONS G OLDEN ESTATE PVT. ITA NO.3619/AHD/2015 9 LTD., RENDERED IN TAX APPEAL NO.212 OF 2012 DATED 1 1.4.2012. IT IS ALSO PERTINENT TO OBSERVE THAT SHARE APPLICANTS IN THE P RESENT CASE ARE INDIVIDUALS FROM SURROUNDING AREAS. THEY ARE NOT SHELL-COMPANI ES FROM KOLKATTA, WHO ARE INDULGED IN PROVIDING ACCOMMODATION ENTRIES. T AKING INTO CONSIDERATION ALL THESE FACTS, WE ARE OF THE VIEW THAT THE AO FAI LED TO CARRY OUT ANY INQUIRY FOR FALSIFYING EVIDENCE SUBMITTED BY THE ASSESSEE I N SUPPORT OF ITS EXPLANATION. THEREFORE, WE ALLOW THIS GROUND OF APPEAL AND DELET E THE ADDITION OF RS.35,00,000/-. 12. IN THE NEXT GROUND OF APPEAL, GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF R S.1,51,697/- . THE ASSESSEE HAS AVAILED LOAN OF RS.12,64,144/-. THE L D.AO FOUND THAT THE ASSESSEE GIVEN INTEREST FREE ADVANCES. HE DISALLOW ED INTEREST AT THE RATE OF 12% AND MADE ADDITION OF RS.1,51,697/-. BEFORE THE LD.CIT(A) THE ASSESSEE FILED WRITTEN SUBMISSIONS WHEREIN IT HAS GIVEN DETA ILS OF AMOUNTS GIVEN TO VARIOUS CONCERNS. ACCORDING TO THE ASSESSEE, THESE ARE TRADE ADVANCES AND NO INTEREST OUGHT TO BE DISALLOWED. THE LD.CIT(A) CONS IDERED SUBMISSIONS OF THE ASSESSEE AND HELD THAT INTEREST ON LOANS OF RS.9,79 ,300/- PAID TO SHRI RUCHIR JOSHI, DIPAK PATEL AND SHANJUKTA SEN OUGHT TO BE CA LCULATED FOR DISALLOWANCE. FINDING RECORDED BY THE LD.CIT(A) READS AS UNDER: 11. I HAVE CAREFULLY CONSIDERED THE ASS ESSMENT ORDER AND THE SUBMISSION OF THE APPELLANT. THE APPELLANT ADMITTED THAT DURING THE YEAR ADVANCES TO RUCHIR JOSHI OF RS. 3,00,000/- DIP AK PATEL OF RS.3,00,000/- AND SHANJUKTA SEN OF RS. 3,79,300/- W ERE GIVEN OUT OF THE INTEREST BEARING FUNDS, IT IS SEEN THAT OTHER DEBTO RS REPRESENT TDS AND OTHER LEGAL RECEIPT WHICH CANNOT BE TREATED AS DIVE RSION OF THE BUSINESS FUND. THEREFORE THE ADDITION ON ACCOUNT OF INTEREST DISALLOWANCE OF LOAN GIVEN TO RUCHIR JOSHI, DIPAK PATEL AND SHAKUNTALA S EN TOTALING TO RS.9,79,000/- IS SUSTAINED, THE A.O. IS DIRECTED TO DELETE THE INTEREST DISALLOWANCE ON OTHER DEBTORS. THUS, THE GROUND IS PARTLY ALLOWED. ITA NO.3619/AHD/2015 10 13. AFTER GOING THROUGH THE ABOVE FINDING, WE ARE O F THE VIEW THAT THE ASSESSEE FAILED TO GIVE JUSTIFICATION AS TO HOW THE SE ADVANCES WERE GIVEN FOR THE PURPOSE OF BUSINESS. THE LD.CIT(A) HAS RIGHTLY CONFIRMED THE DISALLOWANCE. THIS GROUND OF APPEAL IS REJECTED. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 1 ST MARCH, 2018 AT AHMEDABAD. SD/- SD/- ( AMARJIT SINGH ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 01/03/2018