ACIT, New Delhi V. M/s. Ottoman Steel Tubes (P) Ltd., New Delhi

ITA 3810/DEL/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7209 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 30-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 11-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJNA
• Keywords: Unexplained cash credit; Unexplained investment; Accommodation entries; Assessment record; Onus to prove
• Section: 133(6); 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E , NEW DELHI BEFORE SH. N. K. SAINI, AM AND SMT. BEENA PILLAI , JM IT A NO. 3810/DEL/2011 : ASSTT. YEAR : 2008 - 09 ASSTT. COMMISSIONER OF INCO ME TAX, CIRCLE - 13(1) , NEW DELHI VS M/S OTTOMAN STEEL TUBES (P) LTD. 297, AZAD MARKET, DELHI (APPELLANT) (RESPONDENT) PAN NO. A A ACV0559L ASSESSEE BY : SH. ALOK KUMAR GUPTA , CA REVENUE BY : SH. P. DAM KANUNJNA , SR. DR DATE OF HEARI NG : 30.05 .201 6 DATE OF PRONOUNCE MENT : 21 .06 .201 6 ORDER PER N. K. SAINI, AM : THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE ORDER DATED 24.03.2011 OF LD. CIT(A) - XVI , NEW DELHI. 2. THE ONLY EFFECTIVE GROUND RAISED IN THIS APPE AL READS AS UNDER : 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,00,000/ - MADE BY THE AO U/S 68 AS THE ASSESSEE COULD NOT DISCHARGE ITS ONUS OF PROVIDING GENUINENESS OF TRANSACTION AND THE CREDITWORTHINESS AND IDENTITY OF THE SUBSCRIBERS. ITA NO . 3810 /DE L/201 1 OTTOMAN STEEL TUBES (P) LTD. 2 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE E - FILED THE RETURN OF INCOME ON 11.09.2008 DECLARING NIL INCOME AFTER ADJUSTING BROUGHT FORWARD LOSSES OF RS.51,57,563/ - . THE SAID RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE ACT VIDE INTIMATION DATED 02.02.2010. LATER ON, THE CASE WAS SELECTED FOR SCRUTINY. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE HAD RECEIVED SHARE APPLICATION MONEY AS PER FOLLOWING DET AILS: NAME/ADDRESS OF THE PARTIES AMOUNT OF SHARES ISSUED SHARE PREMIUM TOTAL AMOUNT 1. BHAVANI PORTFOLIO PVT. LTD. 400000 46,00,000 50,00,000 2. THAR STEELS PVT. LTD. 400000 46,00,000 50,00,000 3. VIDHYUT MKT. & FOODS (I) LTD. 1100000 1,26,50,000 1,3 7,50,000 19,00,000 2,18,50,000 2,37,50,000 HE FURTHER OBSERVED THAT A SPECIFIC INFORMATION HAD BEEN RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT, NEW DELHI THAT T HE ASSESSEE HAD RECEIVED ACCOMMODATION ENTRY OF RS.50,00,000/ - EACH FROM M/S BHA VANI PORTFOLIO PVT. LTD. AND M/S THAR STEELS PVT. LTD. WHICH WERE MANAGED BY SH. TARUN GOYAL, WHO WAS AN ENTRY OPERATOR AND INDULGED IN GIVING ACCOMMODATION ENTRIES. HE ASKED THE ASSESSEE TO FURNISH VARIOUS DETAILS LIKE COPY OF BANK ACCOUNT ALONGWITH COPY OF CONFIRMATION AND TO PROVE THE ITA NO . 3810 /DE L/201 1 OTTOMAN STEEL TUBES (P) LTD. 3 IDENTITY/GENUINENESS/CREDITWORTHINESS OF THE PERSONS FROM WHOM SHARE APPLICATION MONEY WAS TAKEN. THE ASSESSEE FILED THE CONFIRMATION AND COPY OF THE ACKNOWLEDGEMENT, INCOME TAX RETURNS AND BANK STATEMENTS OF THE SAID COMPA NIES. THE AO OBSERVED THAT BANK STATEMENTS OF M/S BHAVANI PORTFOLIO PVT. LTD. AND M/S THAR STEELS PVT. LTD. REVEALED A LOT OF TRANSACTION IN THE NATURE OF FUND TRANSFER. HE ASKED THE ASSESSEE TO JUSTIFY THE AMOUNT CREDITED IN THE ACCOUNTS OF THE SHARE APPL ICANTS PRIOR TO GIVING MONEY TO THE ASSESSEE. ACCORDING TO THE AO THE ASSESSEE DID NOT FILE ANY WRITTEN SUBMISSION IN THIS REGARD BUT ARGUED THAT THE INQUIRY WITH REGARD TO SOURCE OF SHARE APPLICANTS COULD NOT BE MADE FROM THE ASSESSEE. THE AO DID NOT FIND MERIT IN THE SUBMISSION OF THE ASSESSEE BY OBSERVING THAT THE ONUS OF PROVING THE GENUINENESS, CREDITWORTHINESS AND IDENTITY OF THE DEPOSITOR LIES SQUARELY ON THE ASSESSEE, WHO COULD NOT JUST WALK AWAY WITH A ORAL SUBMISSION THAT ENQUIRIES WITH REGARD TO SOURCE OF SHARE APPLICANTS COULD NOT BE MADE FROM IT. THE AO POINTED OUT THAT ENTRY OPERATOR, SH. TARUN GOYAL IN HIS STATEMENT GIVEN BEFORE THE INVESTIGATION WING HAD ADMITTED THAT M/S BHAVANI PORTFOLIO PVT. LTD. AND M/S THAR STEELS PVT. LTD. HAD PROVID ED ACCOMMODATION ENTRY AND SINC E THE ASSESSEE COMPANY HAD RECEIVED AN AMOUNT OF RS.50,00,000/ - EACH FROM THE SAID TWO COMPANIES, WHOSE ITA NO . 3810 /DE L/201 1 OTTOMAN STEEL TUBES (P) LTD. 4 CREDENTIALS WERE SHADY, THEREFORE, THERE WAS ALL THE MORE REASON TO PROVE THE CREDITWORTHINESS, IDENTITY AND CAPACITY RELAT ING TO THE SHARE CAPITAL AND SHARE PREMIUM OF RS.50,00,000/ - EACH FROM THE SAID TWO COMPANIES. THE AO WAS OF THE VIEW THAT THE PATTERN AND FREQUENCY OF DEPOSITS AND WITHDRAWALS AT SHORT INTERVALS OF THE SAID ENTITIES LENDS FURTHER CREDENCE TO THE FACT THAT ACCOUNT HAD BEEN USED ONLY FOR THE PURPOSE OF PROVIDING ACCOMMODATION ENTRIES AND THAT THE ASSESSEE HAD ROUTED ITS UNACCOUNTED MONEY IN THE BOOKS OF ACCOUNT WITH THE HELP OF ENTRY OPERATOR AND THERE WAS A SYSTEMATIC PLAN FOLLOWED BY THE ASSESSEE IN WHICH CASH WAS GIVEN TO THE ENTRY PROVIDER WHO IN TURN ISSUED CHEQUE OF EQUAL AMOUNT AND THAT THE ASSESSEE HAD NOT COME FORWARD TO PROVE THE CREDITWORTHINESS OF THOSE PARTIES ON ACCOUNT OF FAILURE TO PRODUCE THE PARTIES FOR VERIFICATION OF THE TRANSACTION AND AS SUCH THE ONUS HAD NOT BEEN DISCHARGED BY THE ASSESSEE. THE AO TREATED THE AMOUNT OF RS.1,00,00,000/ - AS UNEXPLAINED CREDIT UNDER THE PROVISIONS OF SECTION 68 OF THE ACT AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 5 . BEING AGGRIEVED THE ASSESSEE C ARRIED THE MATTER TO THE LD. CIT(A) AND FURNISHED THE WRITTEN SUBMISSION WHICH HAS BEEN INCORPORATED BY THE LD. CIT(A) AT PARA 2.1 OF THE IMPUGNED ORDER WHICH READ AS UNDER: ITA NO . 3810 /DE L/201 1 OTTOMAN STEEL TUBES (P) LTD. 5 'THE APPELLANT DURING THE PREVIOUS YEAR RELEVANT TO THE A.Y.2008 - 09 RECEIVED THE S HARE APPLICATION MONEY FROM CERTAIN CORPORATE INVESTORS THROUGH ACCOUNT PAYEE CHEQUES AS PER DETAILS BELOW: - NAME OF THE INVESTOR COMPANY SHARE APPLICATION MONEY RECEIVED SHARE CAPITAL SHARE PREMIUM M/S BHAWANI PORTFOLIO PVT . LTD 50 ,00,000/ - 4,00,000/ - 46,00,000/ - M/S THAR STEEL PVT. LTD. 50,00,000/ - 4,00,000/ - 46,00,000/ - M/S VIDYUT MARKETING & FOODS (I) LTD. 1,37,50,000/ - 11,00,000/ - 1 ,26,50,000/ - TOTAL 2,37,50,000 / - 19 , 00 , 000/ - 2,1 8,50,000/ - WHILE FRAMING TH E ASSESSMENT THE ID A.O. ADMITTED THE SHARE APPLICATION MONEY RECEIVED FROM M/S VIDYUT MARKETING & FOODS (I) LTD. BUT DID NOT ACCEPT THE SHARE APPLICATION MONEY RECEIVED FROM M/S BHAWANI PORTFOLIO PVT. LTD. & M/S THAR STEELS PVT. LTD. IN WHOSE CASE THE FOL LOWING DOCUMENTS WERE FILED IN SUPPORT OF THE GENUINENESS OF THE SHARE APPLICATION MONEY RECEIVED: - PARTICULARS BHAWANI PORTFOLIO PVT. LTD. PAGE NO. THAR STEEL PVT. LTD. PAGE NO. AUDITED COPY OF BALANCE SHEET, PAL A/C FOR T HE YEAR ENDED 3 1.03.2008 1 - 12 17 - 28 CONFIRMATION FOR THE INVESTMENT IN SHARES 13 29 COPY OF BANK A/C 14 - 15 30 COPY OF I TR 16 31 COPY OF FORM - 2 FILED WITH THE REGISTRAR OF C OMPANIES DELHI & HARYANA IN PROOF OF SHARES ALLOTTED WAS ALSO FILED BEFORE THE ID. A.O. DURING THE ASSES SMENT PROCEEDINGS (COPY ENCLOSED VIDE ITA NO . 3810 /DE L/201 1 OTTOMAN STEEL TUBES (P) LTD. 6 PAGE NO.32 - 36). THE ID. A.O. DID NOT ACCEPT THE SHARE APPLICATION MONEY AS GENUINE BECAUSE OF THE FOLLOWING REASONS: - A) AS MENTIONED IN PARA 4 OF THE ASSESSMENT ORDER THERE WAS A SPECIFIC INFORMATION FROM THE INVESTI GATION WING OF THE DEPARTMENT, NEW DELHI, THAT THE ASSESSEE COMPANY RECEIVED ACCOMMODATION ENTRY OF RS.50 LACS EACH FROM M/S BHAWANI PORTFOLIO PVT. LTD, AND M/S THAR STEELS PVT. LTD., AND THESE TWO COMPANIES ARE MANAGED BY SHRI TARUN GOYAL WHO IS AN ENTRY OPERATOR AND INDULGED IN GIVING ACCOMMODATION ENTRIES. B) IN PARA 5 OF THE ASSESSMENT ORDER THE OBSERVATIONS HAVE BEEN MADE AS UNDER BY THE ID. A.O.: - I) BANK ACCOUNTS OF M/S BHAWANI PORTFOLIO PVT. LTD. AND M/S THAR STEELS PVT. LTD. SHOW LOT OF TRANSACTI ONS IN NATURE OF FUNDS TRANSFER. THE ASSESSEE WAS REQUIRED TO JUSTIFY THE AMOUNTS CREDITED IN THE BANKS ACCOUNTS OF SHARE APPLICANTS. THE ASSESSEE DID NOT FILE ANY WRITTEN SUBMISSION IN THIS REGARD BUT ARGUED THAT THE ENQUIRY WITH REGARD TO SOU RCE OF THE S HARE APPLICANTS CAN NOT BE MADE FROM THE ASSESSEE. II) ASSESSEE DID NOT DISCHARGE ITS ONUS OF PROVING THE GENUINENESS, CREDIT WORTHINESS AND IDENTITY OF THE SHARE APPLICANTS TO PROVE THE GENUINENESS OF THE TRANSACTIONS. II I) THE ENTRY OPERATOR SHRI TARUN GOYAL IN HIS STATEMENT GIVEN BEFORE THE INVESTIGATION WING HAS ITA NO . 3810 /DE L/201 1 OTTOMAN STEEL TUBES (P) LTD. 7 ADMITTED THAT M/S BHAWANI PORTFOLIO PVT. LTD. AND M/S THAR STEELS PVT. LTD. HAVE PROVIDED ACCOMMODATION ENTRIES. SINCE THE ASSESSEE COMPANY HAS RECEIVED AN AMOUNT OF RS.50 LACS EACH FROM THE SA ID TWO COMPANIES WHOSE CREDENTIALS ARE SHODDY, THERE IS ALL THE MORE REASON TO PROVE THE CREDIT WORTHINESS, IDENTITY AND CAPACITY OF THE ENTIRE TRANSACTION. C) IN PARA 6 OF THE ASSESSMENT ORDER THE ID. A.O. HAS OBSERVED THAT THE ASSESSEE HAS ROUTED HIS UN ACCOUNTED MONEY IN HIS BOOKS WITH THE HELP OF ENTRY OPERATOR BY FOLLOWING A SYSTEMATIC PLAN IN WHICH CASH IS GIVEN TO THE ENTRY PROVIDER WHO IN TURN PROVIDES CHEQUES OF EQUAL AMOUNT. D) IN PARA 7 OF THE ASSESSMENT ORDER THE ID. A.O. HAS OBSERVED THAT AS P ER THE INVESTIGATION CONDUCTED BY THE INVESTIGATION WING, M/S BHAWANI PORTFOLIO PVT. LTD. AND M/S THAR STEELS PVT. LTD. ARE THE ENTRY PROVIDERS. THE ASSESSEE HAS NOT PROVED CREDIT WORTHINESS OF THESE PARTIES ON ACCOUNT OF FAILURE TO PRODUCE THEM FOR VERIFI CATION OF TRANSACTIONS. HENCE THE ONUS HAS NOT BEEN DISCHARGED BY THE ASSESSEE. BEFORE THE ABOVEMENTIONED REASONS FOR DISALLOWANCE OF SHARE APPLICATION MONEY OF RS.100 LACS ARE REBUTTED , THE APPELLANT BRINGS TO YOUR KIND NOTICE THE FOLLOWING FACTS: - THE ID. A.O. CONDUCTED AN ENQUIRY U/S 133(6) OF THE INCOME TAX ACT, 1961 WITH ALL THE SHARE APPLICANTS DURING THE ASSESSMENT PROCEEDINGS. THE NOTICES WERE DULY SERVED TO M/S BHAWANI PORTFOLIO PVT. ITA NO . 3810 /DE L/201 1 OTTOMAN STEEL TUBES (P) LTD. 8 LTD. AND M/S THAR STEELS PVT. LTD. AND THEY REPLIED TO THE ID. A.O. HAVING ACCEPTED INVESTING IN SHARES OF THE APPELLANT COMPANY. THEY ALSO FILED RELEVANT EVIDENCES IN SUPPORT OF THEIR STATEMENT. HOWEVER THE ID. A.O. HAS NOT MENTIONED THIS FACT IN THE ASSESSMENT ORDER AND SIMPLY SKIPPED IT CONVENIENTLY. HE OUGHT TO HA VE CONSIDERED THE OUTCOME OF THIS ENQUIRY CONDUCTED WHILE FRAMING THE ASSESSMENT. DURING THE ASSESSMENT PROCEEDINGS THE ID. A.O. DEPUTED HIS INSPECTOR TO THE OFFICE OF DCIT/ACIT CENTRAL CIRCLE 4, NEW DELHI. THE ENQUIRY DID NOT YIELD ANY NEGATIVE REPORT RE GARDING THE SHARE APPLICATION MONEY. FURTHER THE BALANCE SHEETS OF M/S BHAWANI PORTFOLIO PVT. LTD. AND M/S THAR STEELS PVT. LTD. FETCHED FROM THE CENTRAL CIRCLE 4 ONLY CONFIRMED THE INVESTMENT BY THESE TWO COMPANIES IN THE APPELLANT COMPANY. THE ID. A.O. I GNORED THIS VERY IMPORTANT PIECE OF EVIDENCE. HE DID NOT CONSIDER IT WHILE FRAMING THE ASSESSMENT. THE RESULT OF SUCH ENQUIRY WAS NOT GIVEN ANY COGNITION WHILE FRAMING THE ASSESSMENT. THE APPELLANT INSPECTED THE ASSESSMENT RECORD AND GOT THE COPY OF ORDER SHEET ENCLOSED VIDE PAGE NO.37 - 40. FROM THE 'REASONS FOR WHICH CASE IS REQUIRED TO BE SELECTED IN SCRUTINY' APPEARING ON PAGE NO.37 IT MAY BE NOTED THAT M/S THAR STEELS PVT. LTD. SHOULD NOT BE CONSIDERED TO BE INDULGED IN PROVIDING ACCOMMODATION ENTRIES A S IN THE LIST OF SUCH COMPANIES ITS NAME DOES NOT APPEAR. HENCE, IT IS A FACTUAL MISTAKE IN THE ASSESSMENT ORDER TO CONSIDER M/S THAR STEELS PVT. LTD. AS ENTRY PROVIDER AND TREATING IT ACCORDINGLY FOR DRAWING ITA NO . 3810 /DE L/201 1 OTTOMAN STEEL TUBES (P) LTD. 9 NEGATIVE INFERENCE. THE APPELLANT BELIEVES THAT THE INTIMATION FROM INVESTIGATION WING AND THE STATEMENT OF SHRI TARUN GOYAL IS NOT IN THE ASSESSMENT RECORD. THE FACT MAY BE CHECKED UP. FURTHER REGARDING SHARE APPLICATION MONEY THE PROVISION OF LAW AND LEGAL - PRONOUNC EMENTS ARE DISCUSSED AS UNDER: - IN THE CASE OF CIT VS. SOPHIA FINANCE LTD. 205 ITR 98 (FB) (DEL) IT HAS BEEN HELD THAT IF THE SHAREHOLDERS ARE IDENTIFIED AND IT IS ESTABLISHED THAT THEY HAVE INVESTED IN MONEY FOR PURCHASE OF SHARES, THEN THE AMOUNT RECEIVED BY THE ASSESSEE COMPANY - WOULD BE REGARDED AS CAPITAL RECEIVED. IT MAY KINDLY BE NOTED THAT FROM ALL MATERIAL PLACED ON RECORD BY THE ASSESSEE THERE IS NO DOUBT THAT THE ASSESSEE HAS FULFILLED ITS ONUS OF ESTABLISHING THE SOURCE OF SHARE CAPITAL, GENUINENESS OF TRANSACTIONS AND CREDIT WORTHINESS OF THE SHAREHOLDERS OF THE COMPANY. IN THE CASE OF M/ S UMA POLYMERS PVT. LTD. VS. DCIT THE HON'BLE IT AT, JODHPUR BENCH (III MEMBER) (2006) 100 ITD 1 HAS HELD THAT 'THE BANK STATEMENT OF THE CREDITORS OBTAINED BY THE A.O. CLEARLY SHOWED THAT AP ART FROM MAKING INVESTMENT IN THE ASSESSEE COMPANY, THOSE CREDITORS MADE OTHER DEPOSITS IN THEIR BANK ACCOUNTS AND THOSE ACCOUNTS ARE REGULARLY MAINTAINED. THE CREDITORS WERE ALSO ASSESSED OF TAX. THUS NOT ONLY IDENTITY OF CREDITOR BUT EVEN THEIR CAPACITY TO ADVANCE FUNDS HAS BEEN PROVED ON RECORD. ' ITA NO . 3810 /DE L/201 1 OTTOMAN STEEL TUBES (P) LTD. 10 THE RELEVANT PORTION FROM THE JUDGMENT IN THE CASE OF M/S UMA POLYMERS IS REPRODUCED AS UNDER: - 'IN RESPECT OF SHARE APPLICATION MONEY RECEIVED FROM INVESTORS, THE ASSESSEE COMPANY HAS TO PROVE ONLY EXISTENCE OF PERSON IN WHOSE NAME APPLICATION IS RECEIVED. NO FU RTHER BURDEN IS CAST ON THE ASSESSEE TO PROVE WHETHER THAT PERSON HIMSELF HAS INVESTED THE SAID MONEY OR SOME OTHER PERSON HAS MADE THE INVESTMENT IN HIS NAME. IF THE ASSESSEE HAS SUBMITTED THE RETURN AND GIVEN DETAILED PARTICULARS OF HIS INVESTMENT LIKE GIR NO. ETC. THE SAME WAS ENTITLED TO PROPER WEIGHT. HAVING REGARD TO INFORMATION COLLECTED BY THE A.O. FROM THE BANK OF THE CREDITORS, IDENTITY OF THE CREDITORS WAS FULLY ESTABLISHED. THE CREDITORS WE RE ALSO FOUND TO BE ASSESSED TO TAX. THUS, FURTHER INVESTIGATION OF THE MATTER, IN INSTANT CASE, WAS NOT NECESSARY. IF ANY SHAREHOLDER WAS FOUND TO HAVE UNEXPLAINED INVESTMENT, THEN ADDITION OF SUCH INVESTMENT WAS REQUIRED TO BE MADE IN THE HANDS OF SHAREH OLDERS AND NOT IN THE ACCOUNT OF THE ASSESSEE. MONEY ADVANCED BY THE CREDITOR DID NOT BELONG TO HIM BUT TO SOMEBODY ELSE, ONUS IS ON THE REVENUE THAT HAS TO FIND THE REAL INVESTOR AS PER THE PRINCIPLE LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF BARKHA SYNTHETICS LTD. VS. ASST. CIT (2005) 197 CTR(RAJ)432' THEREFORE THE ASSUMPTION BY THE ID. A.O. THAT 'ONLY ENTRY HAS BEEN RECEIVED BY THE ASSESSEE COMPANY' ITA NO . 3810 /DE L/201 1 OTTOMAN STEEL TUBES (P) LTD. 11 IN THE ASSESSMENT ORDER IS NOT ALL JUSTIFIED, AND SUFFERS FROM SURMISES AND CONJECTURES. THE HON'BLE DELHI HIGH COURT IN THE CASE OF STELLAR INVESTMENT [1991] 192 ITR 287 HAD HELD THAT THE SHARE C APITAL OF A LIMITED COMPANY CAN NOT BE BROUGHT TO TAX AS UNEXPLAINED CASH CREDIT ON THE SAME FOOTING AS SPURIOUS LOAN CAN POSSIBLY BE ASSESSED. THE O BSERVATIONS OF THE HON'BLE HIGH COURT ARE '..... IF THE ASSESSMENTS OF THE PERSONS WHO ARE ALLEGED TO HAVE REALLY ADVANCED THE MONEY ARE SOUGHT TO BE REOPENED THAT WOULD HAVE MADE SOME SENSE BUT WE FAIL TO UNDERSTAND AS TO HOW THIS AMOUNT OF INCREASED SHAR E CAPITAL BE ASSESSED IN THE HANDS OF THE COMPANY ITSELF. THE DEPARTMENT FILED SPECIAL LEAV E PETITION (SLP) BEFORE THE HON 'BLE SUPREME COURT AGAINST THIS ORDER OF DELHI HIGH COURT AND THE SLP WAS DISMISSED VIDE ORDER DATED 20 TH , JULY 2000 [CIT VS. STELLA R INVESTMENT [1991] 192 ITR 287. THE ABOVE OBSERVATIONS HAVE BEEN FOLLOWED IN CIT VS. KWICK TRAVELS 199 ITR (ST) 85 - 86 SC CIT VS. PRATEEK FINANCE 215 ITR 272 (DEL) IN THE CASE OF LOVELY EXPORTS PVT. LTD.216 CTR (SC) 195, IT HAS BEEN HELD THAT IF SHARE A PPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY F ROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAMES ARE GIVEN TO THE A.O. THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN THE LAW BUT CAN NOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY. ITA NO . 3810 /DE L/201 1 OTTOMAN STEEL TUBES (P) LTD. 12 THE LOVELY CASE HAS BEEN FOLLOWED IN T HE FOLLOWING JURISDICTIONAL HON'BLE DELHI HIGH COURT JUDGMENTS: - CIT VS. VICTOR ELECTRODES LTD. 41 - 46 CIT VS. VRM GLOBAL INFRASTRUCTURE PVT. LTD. 47 - 50 CIT VS. ULTRA TECH FIN ANCE INVESTMENT LTD. 51 - 54 CIT VS. TARUNA AUTO PVT. LTD. 55 - 57 CIT VS. MERITON TOWERS PVT. LTD. 58 - 60 THE COPY OF ORDER IN ITO WARD 4(2), NEW DELHI VS. JAY IRON & STEEL LTD., A CLASSIC CAS E PASSED BY THE JURISDICTIONAL H ON'BLE ITAT NEW DELHI WHICH DEAL S WITH ALL THE ASPECTS OF ADMISSIBILITY OF SHARE APPLICATION MONEY IS ENCLOSED VIDE P.NO.6L - 71. ON GOING THROUGH ALL THE ABOVE CASE S IT MAY BE SUMMARIZED AS UNDER: - - THE ONUS ON THE ASSESSEE IS LIMITED TO IDENTIFICATION OF THE SUBSCRIBER OF THE SHARES. - I F A.O. IS IN POSSESSION OF ANY INFORMATION WHICH CREATES DOUBTS ON THE GENUINENESS OF THE TRANSACTION RELATING TO SHARE APPLICATION MONEY AND THE SHARES ALLOTTED, ONUS IS ON THE A.O. TO PROVE IT. AS THE APPELLANT VIDE P.NO. 1 - 36 HAS DISCHARGED ITS ONUS RE GARDING GENUINENESS, IDENTITY AND CREDIT WORTHINESS OF THE SUBSCRIBERS OF THE SHARES, THE ONUS WAS SHIFTED TO ID. A.O. THESE DOCUMENTS FILED CONFIRMED THE CORRECTNESS, GENUINENESS AND ITA NO . 3810 /DE L/201 1 OTTOMAN STEEL TUBES (P) LTD. 13 TRUTHFULNESS OF THE TRANSACTION APPELLANT HAD WITH THE SUBSCRIBERS TO TH E SHARE CAPITAL AND VINDICATED ITS STAND; ALL THE INQUIRIES CONDUCTED BY THE ID. A.O. ONLY FURTHER CONFIRMED IT. NO NEGATIVE EVIDENCE WAS COLLECTED BY THE ID. A.O. TO SUPPORT THE INFORMATION HE ALLEGED TO HAVE OBTAINED FROM THE INVESTIGATION WING, NEW DELH I. UNDER THESE CIRCUMSTANCES THE ID. A.O. SHOULD HAVE ACCEPTED THE SUM OF RS.100 LACS RECEIVED AS SHARE APPLICATION MONEY FROM M/S BHAWANI PORTFOLIO PVT .LTD. AND M/S THAR STEELS PVT. LTD. AND ITS DISALLOWANCE WAS NEEDLESS, UNNECESSARY AND CONTRARY TO THE LAW AND FACTS OF THE CASE. NOW EACH AND EVERY OBSERVATION OF THE ID. A.O. AS MENTIONED A BOVE IS REBUTTED AS UNDER: - A. ON INSPECTION OF THE ASSESSMENT IT HAS BEEN NOTED THAT THERE IS NO LETTER/MEMO OR INFORMATION FROM THE INVESTIGATION WING OF THE D EPARTMENT NEW DELHI THAT SHRI TARUN GOYAL IS AN ENTRY OPERATOR DEALING THROUGH M/S BHAWANI PORTFOLIO PVT. LTD. AND THAR STEELS PVT. LTD. IS IN THE ASSESSMENT FILE. FURTHER NO STATEMENT OF SHRI TARUN GOYAL AS MENTIONED BY THE LD. A.O. IN THE ASSESSMENT ORDE R IS IN THE ASSESSMENT FILE. AS SUCH THE OBSERVATIONS NOTED BY THE ID. A.O. HAS NO LEGS. THE INFORMATION/STATEMENT USED BY THE LD. A.O. HAS NOT BEEN PROVED BY HIM TO EVEN EXIST WHAT TO SAY IT WAS APPLICABLE ON THE APPELLANT. B. (I) MANY TRANSACTIONS IN TH E BANK ACCOUNTS OF M/S BHAWANI PORTFOLIO PVT. LTD. AND THAR STEELS PVT. LTD. SHOW THAT THESE COMPANIES ARE OPERATING ITA NO . 3810 /DE L/201 1 OTTOMAN STEEL TUBES (P) LTD. 14 AND ENGAGED IN BUSINESS. AS DISCUSSED ABOVE, THE APPELLANT HAD THE ONUS TO PROVE THE IDENTITY OF THE SHARE APPLICANTS, WHICH IS PROVED ITSE LF SINCE THE TRANSACTIONS WERE THROUGH BANKING CHANNELS AND THROUGH CHEQUES. HOWEVER THE APPELLANT FURTHER PROVED THE GENUINENESS OF THE TRANSACTION AND CREDIT WORTHINESS OF THE SHARE APPLICANTS. THERE WAS NO ONUS ON THE APPELLANT TO PROVE THE SOURCE OF SO URCE OF THE TRANSACTION; AS THE ID. A.O. MENTIONED IN THE ASSESSMENT ORDER THAT THE APPELLANT FAILED TO PROVE IT, AND THIS POSITION OF LAW HAS BEEN MADE CLEAR IN JAY IRON & STEEL LTD. CASE BY THE HON'BLE IT AT, NEW DELHI WHILE QUOTING THE CASE OF CIT VS. D WARKADHESE DECIDED BY THE HONORABLE DELHI HIGH COURT IN IT A NO.911/DEL/10 (KINDLY REFER P.NO.69 OF THE PAPER BOOK) THAT THE APPELLANT HAD NO ONUS TO PROVE THE SOURCE OF THE SHARE APPLICATION MONEY RECEIVED. (II) THE APPELLANT VIDE P.N O. 1 - 36 PROVED GENUIN ENESS, IDENTITY AND CREDIT WORTHINESS OF THE TRANSACTION/SHARE APPLICANTS. (II I) THE ID. A.O. DID NOT PROVE THAT SHRI TARUN GOYAL WAS AN ENTRY OPERATOR AND THE ACCOMMODATION ENTRIES WERE GIVEN THROUGH M/S BHAWANI PORTFOLIO PVT. LTD. AND THAR STEELS PVT. L TD. AND THE ALLEGED INFORMATION FROM INVESTIGATION WING AND STATEMENT OF SHRI TARUN GOYAL APPLIED ON THE APPELLANT. EVEN THESE INVESTIGATION WING INFORMATION AND SHRI TARUN GOYAL STATEMENT ARE NOT IN ASSESSMENT FILE. ALL THE INQUIRIES CONDUCTED BY THE ID. A.O. ONLY PROVED THE GENUINENESS OF THE SHARE APPLICATION MONEY RECEIVED BY THE APPELLANT. ITA NO . 3810 /DE L/201 1 OTTOMAN STEEL TUBES (P) LTD. 15 C. THE OBSERVATION THAT THE ASSESSEE ROUTED HIS UNACCOUNTED MONEY IN BOOKS THROUGH SHARE APPLICATION MONEY IS WITHOUT ANY FINDING. ON THE CONTRARY ALL THE INQUIRIES CONDUCTED BY THE ID. A.O. ONLY PROVED THE GENUINENESS OF THE SHARE APPLICATION MONEY RECEIVED BY THE APPELLANT. D. THE OBSERVATION OF THE ID. A.O. THAT THE APPELLANT HAS NOT PROVED CREDIT WORTHINESS OF M/S BHAWANI PORTFOLIO PVT. LTD. AND THAR STEELS PVT. LTD. AS APPELLANT DID NOT PRODUCE THEM FOR VERIFICATION IS AGAIN INCORRECT AS AT FIRST PLACE THE APPELLANT WAS NEVER ASKED TO PRODUCE THESE SHARE APPLICANTS AS IT IS APPARENT FROM THE COPY OF THE ORDER SHEET FINDING PLACE IN THE PAPER BOOK. SECONDLY, APPE LLANT HAD NO ONUS TO PRODUCE THE PARTIES AS HELD BY VARIOUS COURTS AS DISCUSSED ABOVE. THIRDLY, THE INQUIRIES CONDUCTED BY THE ID. A.O. DID NOT SUPPORT THE ACCOMMODATION ENTRY THEORY; RATHER IT PROVED THE GENUINENESS OF THE SHARE APPLICATION MONEY AND TRUT HFULNESS OF THE DOCUMENTS FILED BY THE APPELLANT IN ITS SUPPORT. KEEPING IN VIEW THE ABOVE DISCUSSION, IT IS REQUESTED THAT THE ADDITION OF RS.100 LACS MADE ON ACCOUNT OF UNEXPLAINED SHARE APPLICATION MONEY MAY KINDLY BE DELETED AS IT IS BASELESS, ONLY SU PPOSITION AND CONJECTURE, WITHOUT ANY FINDING, ILLEGAL AND FIT TO BE DELETED.' 6 . THE ASSESSEE ALSO SUBMITTED TO THE LD. CIT(A) AS UNDER: WH ILE DISALLOWING THE SHARE APPLICATION MONEY AMOUNTING TO RS.100 LACS, THE ID. A.O. HAS RELIED ON CIT VS. PRECISIO N FINANCE PVT. LTD. (1994) 208 ITA NO . 3810 /DE L/201 1 OTTOMAN STEEL TUBES (P) LTD. 16 ITR 467 (CAL) CASE. IN THIS MATTER IT IS SUBMITTED THAT THE JUDGMENT PASSED IN THE INSTANT CASE DOES NOT APPLY TO THE APPELLANT DUE TO THE FOLLOWING REASONS: - 1. IN THE PRECISION FINANCE CASE THE COMPANY ACCEPTED THE UNSECUR ED LOANS FROM VARIOUS PERSONS, IN THE BACKGROUND OF WHICH THE ORDER WAS PASSED. HOWEVER, IN THE APPELLANT'S CASE THE ISSUE IS MONEY RECEIVED ON ACCOUNT OF SHARE APPLICATION MON EY AND THESE TWO SITUATIONS CAN NOT BE EQUATED BECAUSE PROVISIONS OF COMPANIES AC T 1956 LAY DOWN THE SPECIFIC PROCEDURE FOR ALLOTMENT OF SHARES WHICH THE APPELLANT COMPANY HAS FOLLOWED. THE ONUS ON ASSESSEE IS DIFFERENT IN THE CASE OF A CCEPTANCE OF UNSECURED LOAN VIZ - A - VIZ. SHARE APPLICATION MONEY. FURTHER THE INQUIRIES CONDUCTED BY TH E ID. A.O. CONFIRMED THAT THE SHAREHOLDERS EXISTED AND THEY REALLY INVESTED IN THE SHARES OF THE APPELLANT COMPANY, WHEREAS IN PRECISION CASE ON INVESTIGATION, THE A.O. FOUND MANY DISCREPANCIES. HENCE THE APPELLANT'S CASE IS FULLY DISTINGUISHABLE FROM PREC ISION FINANCE CASE. THE PRECISION CASE WAS CONSIDERED BY THE HON 'BLE DELHI HIGH COURT IN CIT VS. DIVINE LEASING AND FINANCE LTD 299 ITR 268 AND HAS OBSERVED AS MENTIONED IN THE SYNOPSIS ON PG NO.268 - 269 AS UNDER: - IN THE CASE OF A COMPANY THE FOLLOWING AR E THE PROPOSITIONS OF LAW U/S 68. THE ASSESSEE 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 UNDISPUTABLE CHANNELS, (3) THE CRE DITWORTHINESS OR FINANCIAL ITA NO . 3810 /DE L/201 1 OTTOMAN STEEL TUBES (P) LTD. 17 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 OR ACCEPTABLE EXPLANATION BY THE ASSESSEE, (5) THE DEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWING 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 REPUDIATES THE TRANSACTION SET UP BY THE ASSESSEE NOR SHOULD THE A.O. TAKE SUCH REPUDIATION AT FACE VALUE AND CONSTRUE IT, WITHOUT MORE, AGAINST THE ASSESSEE AND (7) THE A.O. IS DUTY BOUND TO INVESTIGATE THE CREDITWORTHINESS OF THE CREDITOR/SUBSCRIBER, THE GENUINENESS OF THE TRANSACTION AND THE VERACITY OF THE REPUDIATION. IN THE CASE OF A PUBLIC ISSUE, THE CONCERNED CAN NOT BE EXPECTED TO KNOW EVERY DETAIL PERTAINING TO THE IDENTI TY AS WELL AS FINANCIAL WORTH OF EACH OF ITS SUBSCRIBERS. THE COMPANY MUST, HOWEVER, MAINTAIN AND MAKE AVAILABLE TO THE A.O. FOR HIS PERUSAL, ALL THE INFORMATION CONTAINED IN THE STATUTORY SHARE APPLICATION DOCUMENTS. A DELICATE BALANCE MUST BE MAINTAINED WHILE WALKING THE TIGHT ROPE OF SECTIONS 68 & 69 OF THE INCOME TAX ACT. THE BURDEN OF PROOF CAN SELDOM BE DISCHARGED TO THE HILT BY THE ASSESSEE. IF THE A.O. HARBORS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRIPTION, HE IS EMPOWERED, TO CARRY OUT THOROUGH INVES TIGATIONS. BUT IF THE A.O. FAILS TO UNEARTH ANY WR ONG OR ILLEGAL DEALINGS, HE CAN NOT ADHERE TO HIS SUSPICIONS AND TREAT THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANY. ITA NO . 3810 /DE L/201 1 OTTOMAN STEEL TUBES (P) LTD. 18 NOW LET US SEE HOW THE CONDITIONS LAID DOWN IN DIVINE LEASING CASE ARE MET BY THE APPELLANT COMPANY: - A. DUE TO TRANSACTIONS THROUGH BANKING CHANNELS I.E. CHEQUE THE IDENTITY OF THE CREDITOR AND GENUINENESS OF THE TRANSACTIONS HAS BEEN PROVED. B. THE COPY OF BANK ACCOUNTS PROVES THE CREDITWORTHINESS OF THE SUBSCRIBER. THE C OPY OF THE PROFIT & LOSS ACCOUNT AND THE BALANCE SHEET OF THE SUBSCRIBER AVAILABLE ON THE ASSESSMENT RECORD PROVES THE GENUINENESS, I DENTITY AND CREDITWORTHINESS OF THE SUBSCRIBER AS THE INVESTMENT MADE BY THEM IN THE APPELLANT COMPANIES ARE DULY REF LECTED IN THESE FINANCIAL STATEMENTS AND CONFIRM THE APPELLANT'S CLAIM. C. THE DETAILS OF ADDRESS AND PAN OF THE SUBSCRIBERS AND FROM NO. 2 REGARDING THE ISSUANCE OF THE SHARES WERE FILED DURING THE ASSESSMENT PROCEEDINGS, CONFIRMING THE ALLOTMENT OF SHAR ES. D. THE SUBSCRIBERS RESPONDED TO THE DEPARTMENTS' NOTICES. E. THE ID. A. O. CONDUCTED THE ENQUIRIES AND SUCH ENQUIRIES DID NOT UNEARTH ANY WRONG OR ILLEGAL DEALING. AS SUCH THE ID. A.O. COULD NOT ADHERE TO THE SUSPICION AND TREAT THE SUBSCRIBED CAPIT AL AS THE UNDISCLOSED INCOME OF THE ASSESSEE. FURTHER THE LARGE NUMBER OF CASES DISCUSSED IN GROUND NO.2 APPLIED IN THE APPELLANT'S CASE. ALL THE CASES CITED ITA NO . 3810 /DE L/201 1 OTTOMAN STEEL TUBES (P) LTD. 19 ARE JUDGMENTS PASSED BY THE JURISDICTIONAL DELHI HC, ITAT NEW DELHI AND THE APEX COURT. AS SUCH T HE ID. A.O. MISGUIDED HIMSELF IN BELIEVING THAT THE SHARE APPLICATION MONEY AMOUNTING TO RS. 100 LACS RECEIVED FROM BHAWANI PORTFOLIO PVT. LTD. & THAR STEELS PVT. LTD. WERE ACCOMMODATION ENTRIES. ON THE STRENGTH OF THE EVIDENCE FILED BY THE APPELLANT AND TH E RESULT OF THE INVESTIGATION CARRIED BY THE A.O. HE OUGHT TO HAVE ACCEPTED THE GENUINENESS OF THE SHARE APPLICATION MONEY. THE ADDITION IS BASED ON SURMISES, CONJECTURES, SUPPOSITIONS AND WITHOUT ANY FINDING AGAINST THE APPELLANT BEING ILLEGAL IN NATURE, HENCE THE ADDITION OF RS. 100 LACS MAY KINDLY BE DELETED. ' 7 . THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THERE WERE NUMBER OF JUDGMENTS OF THE HON BLE APEX COURT AND THE HON BLE JURISDICTIONAL HIGH COURT THAT ONCE A COM PANY ESTABLISHED THE IDENTITY OF ITS SHARE SUBSCRIBERS AND THEY CONFIRMED THAT THEY HAD INVESTED IN THE SHARE CAPITAL OF THE COMPANY, NO ADDITION U/S 68 OF THE ACT COULD BE MADE AND THE REVENUE WAS FREE TO REOPEN THE ASSESSMENT OF THE SHAREHOLDERS IF THEIR CREDITWORTHINESS WAS IN DOUBT. HE FURTHER OBSERVED THAT IN THE ASSESSEE S CASE THE CONFIRMATION OF THE TWO PARTIES M/S BHAVANI PORTFOLIO PVT. LTD. AND M/S THAR STEELS PVT. LTD. AND THE FACT THAT THEY REPLIED ALONGWITH COPIES OF THEIR INCOME TAX RETURNS AN D BANK STATEMENTS IN RESPONSE TO THE NOTICES ISSUED U/S ITA NO . 3810 /DE L/201 1 OTTOMAN STEEL TUBES (P) LTD. 20 133(6) OF THE ACT ISSUED BY THE AO WHICH ESTABLISHED THE IDENTITY OF THESE TWO COMPANIES. HE FURTHER OBSERVED THAT THE PERUSAL OF THE ASSESSMENT RECORDS REVEALED THAT THE AO HAD DEPUTED INSPECTOR TO C ENTRAL CIRCLE - IV TO OBTAIN BALANCE SHEETS ALONGWITH SCHEDULES OF THE AFORESAID TWO COMPANIES WHICH WAS COMPLIED WITH BY THE INCOME TAX I NSPECTOR ON 08.12.2010 AND THE B ALANCE SHEET SO OBTAINED REFLECTED THE INVESTMENTS MADE BY THOSE COMPANIES IN THE SHARES OF THE ASSESSEE COMPANY, BUT THE AFORESAID FACT HAD NOT BEEN DISCUSSED BY THE AO IN HIS ASSESSMENT ORDER. THE LD. CIT(A) CATEGORICALLY STATED THAT THE AFORESAID TWO COMPANIES WERE FILING THEIR INCOME TAX RETURNS AND THE INVESTMENTS MADE BY THEM IN THE ASS ESSEE COMPANY WERE REFLECTED IN THEIR BALANCE SHEETS WHICH PROVED THEIR CREDITWORTHINESS WHILE THE GENUINENESS OF THE TRANSACTION WAS PROVED BY THE FACT THAT THE TRANSACTIONS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES. THEREFORE, THE ASSES SEE HAD BEEN ABLE TO ESTABLISH ALL THE THREE INGREDIENTS OF SECTION 68 OF THE ACT I.E. THE IDENTITY AND CAPACITY OF THE SHARE APPLICANTS AND THE GENUINENESS OF THE TRANSACTIONS. SHE FURTHER OBSERVED THAT THE AO WHILE MAKING THE ADDITION U/S 68 OF THE ACT HAD RELIED UPON INFOR MATION RECEIVED FROM INVESTIGATION WING OF THE DEPARTMENT THAT THOSE TWO COMPANIES WERE CONTROLLED BY ONE SH. TARUN GOYAL WHO WAS ITA NO . 3810 /DE L/201 1 OTTOMAN STEEL TUBES (P) LTD. 21 ENGAGED IN PROVIDING ACCOMMODATION ENTRIES AND ON THE FACT THAT THOSE TWO PARTIES WERE NOT PRODUCED BY THE ASSESSEE. THE LD. C IT(A) REFERRED TO THE JUDGMENT OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS OASIS HOSPITALITIES PVT. LTD. DATED 31.01.2011 WHEREIN AFTER ANALYZING THE PROVISIONS OF THE COMPANIES ACT, SECTION 68 OF THE I.T ACT AND THE JUDGMENTS DELIVERED IN THE CASES OF CIT VS DIVINE LEASING & FINANCE LTD. 299 ITR 268 (DEL), CIT VS SOPHIA FINANCE LTD. (1994) 205 ITR 98 (DEL) (FB), CIT VS DOLPHIN CANPACK LTD. 283 ITR 190 AND CIT VS LOVELY EXPORTS PVT. LTD. 216 CTR 195 (SC), HELD THAT IN CASE THE INVESTOR/SH AREHOLDER WAS AN INDIVIDUAL, SOME DOCUMENTS WILL HAVE TO BE FILED OR THE SAID SHAREHOLDER WILL HAVE TO BE PRODUCED BEFORE THE ASSESSING OFFICER TO PROVE HIS IDENTITY AND IF THE CREDITOR/SUBSCRIBER IS A COMPANY THEN DETAILS IN THE FORM OF RESOLUTION OR PAN ETC. CAN BE FURNISHED. SHE FURTHER OBSERVED THAT AS REGARDS TO THE GENUINENESS OF THE TRANSACTION, THE HON BLE HIGH COURT HELD THAT BY SHOWING THAT THE ASSESSEE HAD IN FACT RECEIVED MONEY FROM THE SHAREHOLDER AND THE MONEY CAME FROM THE CORPUS FROM THAT VE RY SHAREHOLDER, THE GENUINENESS WAS DULY ESTABLISHED AND WHEN THE MONEY WAS RECEIVED BY CHEQUE AND WAS TRANSACTED THROUGH BAKING OR UNDISPUTABLE CHANNEL, THE GENUINENESS OF THE TRANSACTION WOULD PROVED AND AS FAR ITA NO . 3810 /DE L/201 1 OTTOMAN STEEL TUBES (P) LTD. 22 AS THE CREDITWORTHINESS OR THE FINANCIAL ST RENGTH OF THE CREDITOR OR SUBSCRIBER WAS CONCERNED THAT CAN BE PROVED BY PRODUCING BANK STATEMENT OF THE CREDITOR/SUBSCRIBER SHOWING THAT IT HAD SUFFICIENT BALANCE IN ITS ACCOUNT TO ENABLE IT TO SUBSCRIBE TO THE SHARE CAPITAL AND ONCE THOSE DOCUMENTS WERE PRODUCED, THE ASSESSEE WOULD HAVE SATISFACTORILY DISCHARGED THE ONUS PLACED UPON HIM AND THEREAFTER IT WAS FOR THE AO TO SCRUTINIZE THE SAME AND IN CASE HE HAD ANY DOUBT ABOUT THE VERACITY OF THOSE DOCUMENTS TO PROVE THE MATTER FURTHER. HOWEVER, TO DISCRE DIT THE DOCUMENTS PRODUCED BY THE ASSESSEE ON THE AFORESAID ASPECT, THERE HAS TO BE SOME REASON AND MATERIAL FOR THE AO AND HE CANNOT GO INTO THE REALM OF SUSPICION. THE LD. CIT(A) OBSERVED THAT THE ASSESSEE PROVIDED THE REQUISITE DOCUMENTS TO PROVE THE ID ENTITY AND CAPACITY OF THE SHARE SUBSCRIBER AND THE GENUINENESS OF THE TRANSACTION BUT THE AO , OTHER THAN RELYING ON THE INFORMATION RECEIVED FROM THE INVESTIGATION DIRECTORATE HAD NOT BROUGHT ON RECORD ANY MATERIAL TO ESTABLISH THAT THERE WAS ANY DISCREPA NCY IN THE DETAILS FILED BY THE ASSESSEE OR THAT THE SHARE APPLICATION MONEY RECEIVED FROM M/S BHAVANI PORTFOLIO PVT. LTD. AND M/S THAR STEELS PVT. LTD. WAS ACTUALLY THE ASSESSEE S UNDISCLOSED INCOME. THE LD. CIT(A) DELETED THE ADDITION ITA NO . 3810 /DE L/201 1 OTTOMAN STEEL TUBES (P) LTD. 23 MADE BY THE AO U/S 68 OF THE ACT. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: CIT VS CREATIVE WORLD TELEFILMS LTD. (DEL) CIT VS VALUE CAPITAL SERVICES (P) LTD. 307 ITR 334 (DEL) 8. NOW THE DEPARTMENT IS IN APPEAL. THE LD. DR STRONGLY SUPPORTED THE ORDER OF THE AO A ND REITERATED THE OBSERVATIONS MADE BY THE AO. IT WAS FURTHER SUBMITTED THAT MERE FILING OF THE INCOME TAX RETURNS IS NOT SUFFICIENT TO PROVE THE CREDITWORTHINESS AND THAT THE AO NOT ONLY ACTED UPON THE INFORMATION RECEIVED FROM THE INVESTIGATION DIRECTORA TE BUT ALSO DISCUSSED THE CASE IN DETAIL AND MADE THE ADDITION U/S 68 OF THE ACT AND THAT THE ONUS CAST UPON THE ASSESSEE WAS NOT DISCHARGED. THE RELIANCE WAS PLACED ON THE JUDGMENT OF THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS NAVODAYA CASTLES (P. ) LTD. 367 ITR 306 (DEL) . 9. IN HIS RIVAL SUBMISSIONS THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE ASSESSEE FURNISHED ALL THE DOCUMENTS AS AN EVIDENCE IN SUPPORT OF SHARE APP LICATION MONEY RECEIVED FROM M/S BHAVANI PORTFOLIO PVT. LTD. IN THE FORM OF COPY OF AUDITED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED ON ITA NO . 3810 /DE L/201 1 OTTOMAN STEEL TUBES (P) LTD. 24 31.03.2008, CONFIRMATION LETTER FOR INVEST MENT , COPY OF BANK ACCOUNT OF THE INVESTOR AND COPY OF INC OME TAX RETURNS FOR THE ASSESSME NT YEAR 2008 - 09 OF THE INVESTOR, OUR ATTENTION WAS DRAWN TOWARDS PAGE NOS. 1 TO 16 OF THE ASSESSEE S PAPER BOOK. IT WAS FURTHER SUBMITTED THAT THE SIMILAR DOCUMENTS RELATING TO M/S THAR STEELS PVT. LTD. WERE FURNISHED BEFORE THE AO, THE ATTENTION WAS DRAWN TOWARDS PAGE NOS. 17 TO 36 OF THE ASSESSEE S PAPER BOOK. IT WAS CONTENDED THAT THE ASSESSEE FURNISHED THE DETAILS RELATING TO SHARE APPLICATION MONEY TO THE REGISTRAR OF COMPANY ON 27.02.2008 IN FORM NO. 2, COPY OF WHICH IS PLACED AT PAGE NOS. 32 TO 36 OF THE ASSESSEE S PAPER BOOK WHEREIN IT WAS INFORMED THAT THE SHARES WERE ALLOTTED TO M/S BHAVANI PORTFOLIO PVT. LTD. AND M/S THAR STEELS PVT. LTD. ON 31.01.2008. IT WAS FURTHER STATED THAT THE AO ISSUED THE NOTICE U/S 133(6) OF THE ACT TO THE CONCERNED PARTIES WHO CONFIRMED THE VERACITY OF THE TRANSACTIONS AND EVEN AN INSPECTOR OF THE DEPARTMENT WAS DEPUTED BY THE AO WHO MADE THE INQUIRY ON 08.12.2010 AND OBTAINED THE RELEVANT DOCUMENTS RELATING TO THE SAID COMPANIES FROM THE CENTRAL CIRCLE - IV WHICH REFLECTED THE INVESTIGATION MADE BY THOSE COMPANIES IN THE SHARES OF THE ASSESSEE. THEREFORE, THE ONUS CAST UPON THE ASSESSEE WAS DISCHARGED AND THE ARBITRARY ITA NO . 3810 /DE L/201 1 OTTOMAN STEEL TUBES (P) LTD. 25 ADDITION MADE BY THE AO WAS RIGHTLY DELETED BY THE LD. CIT(A). 10. WE HA VE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT M/S BHAVANI PORTFOLIO PVT. LTD. AND M/S THAR STEELS PVT. LTD. INVESTED IN THE SHARE CAPITAL OF THE ASSESSEE AND SHARES WERE ALLOTTED TO THEM . THIS FACT IS EVIDENT FROM THE DETAILS FURNISHED IN FORM NO. 2 TO THE REGISTRAR OF COMPANY VIDE RECEIPT DATED 27.02.2008 , COPY OF WHICH IS PLACED AT PAGE NOS. 32 TO 36 OF THE ASSESSEE S PAPER BOOK . THE ASSES SEE RECEIVED THE SHARE APPLICATION MONEY FROM THE SAID COMPANIES WHO DISCLOSED THIS FACT IN THEIR RESPECTIVE BALANCE SHEET WHICH IS CLEAR FROM PAGE NO. 8 OF THE ASSESSEE S PAPER BOOK WHEREIN THE SAID INVEST MENT HAS BEEN MENTIONED IN THE BALANCE SHEET OF M/ S BHAVANI PORTFOLIO PVT. LTD. AND PAGE NO. 24 OF THE ASSESSEE S PAPER BOOK WHEREIN THE SIMILAR INVEST MENT HAS BEEN DISCLOSED IN THE CASE M/S THAR STEELS PVT. LTD. THE INVESTOR S ALSO FURNI SHED THE COPIES OF THEIR CONFIRMATION LETTER S WHICH ARE PLACED AT PA GE NOS . 13 & 29 OF THE ASSESSEE S PAP ER BOOK, BOTH THE PARTIES ARE REGULARLY ASSESSED TO I NCOME TAX AND FURNISHED THE COPIES OF THE ACKNOWLEDGMENT OF FILING THEIR INCOME ITA NO . 3810 /DE L/201 1 OTTOMAN STEEL TUBES (P) LTD. 26 TAX R ETURN S FOR THE RELEVANT ASSESSMENT YEAR WHICH ARE PLACED AT PAGE NOS. 16 & 31 OF THE ASSESSEE S PAPER BOOK. BOTH THE INVESTORS MADE THE INVESTMENT THROUGH CHEQUE WHICH IS EVIDENT FROM THE STATEMENT S OF ACCOUNT IN THEIR RESP ECTIVE BANK, COPIES OF WHICH ARE PLACED AT PAGE NOS. 14 & 15 IN THE CASE OF M/S BHAVANI PORTFOLIO PVT. LTD. AND AT PAGE NOS. 30 & 31 IN THE CASE M/S THAR STEELS PVT. LTD. WHEREIN THE AMOUNTS HAVE BEEN DEBITED IN THEIR RESPECTIVE BANK ACCOUNTS FOR THE INVESTMENT IN M/S OTTOMAN STEEL TUBES I.E. THE ASSESSEE. THEREFORE, IT IS CLEAR THAT THE ASSESSEE DISCHARGE D THE ONUS C AST UPON IT BY FURNISHING THE COPIES OF BALANCE SHEET S OF THE INVESTOR S WHEREIN THEY HAVE DISCLOSED THE INVESTMENT IN THE SHARES OF THE ASSESSEE, COPIES OF THEIR BANK ACCOUNT S DISCLOSING THIS FACT THAT THE INVESTMENT S WERE MADE THROUGH CHEQUES WHICH PROVE D THEIR CREDITWORTHINESS, SINCE THE SUFFICIENT BALANCE WAS AVAILABLE IN THEIR BANK ACCOUNTS BEFORE ISSUING THE CHEQUES FOR INVESTMENT IN THE SHARES OF THE ASSESSEE AND THE GENUINENESS OF THE TRANSACTIONS WAS ALSO PROVED SINCE IT TOOK PLACE THROUGH BANKING C HANNEL. IN THE PRESENT CASE, B OTH THE INVESTORS WERE ASSESSED TO TAX AND FURNISHED COPIES OF ACKNOWLEDGMENT OF FILING THEIR RESPECT IVE INCOME TAX RETURNS. THE AO ALSO DEPUTED ONE INSPECTOR OF THE DEPARTMENT WHO DID NOT REPORT THAT THE INVESTOR S WERE NOT IN EX ISTENCE AT THE ITA NO . 3810 /DE L/201 1 OTTOMAN STEEL TUBES (P) LTD. 27 ADDRESS ES MENTIONED IN THEIR CONFIRMATION. THE AO MERELY ON THE BASIS OF THE REPORT OF THE INVESTIGATION WING PRESUMED THAT THE INVESTORS WERE THE ENTRY OPERATOR. ON THE CONTRARY, THE ASSESSEE FURNISHED ALL THE EVIDENCES TO PROVE THE IDENTIT Y OF THE INVESTOR S THEIR CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTIONS. IT WAS ALSO NOTICED THAT THE AO RECEIVED THE INFORMATION IN RESPECT OF THREE COMPANIES I.E. M/S BHAVANI PORTFOLIO PVT. LTD., M/S TEJASVI INVESTMENTS PVT. LTD. AND M/S THAR S TEELS PVT. LTD. HOWEVER, HE DOUBTED ONLY TWO COMPANIES AND ACCEPTED THE INVESTMENT BY M/S TEJASVI INVESTMENTS PVT. LTD. I N THE PRESENT CASE, THE LD. CIT(A) CATEGORICALLY STATED THAT THE ASSESSMENT RECORDS REVEALED THAT THE AO HAD DEPUTED HIS INSPECTOR TO O BTAIN THE BALANCE SHEET S AND THE SCHEDULES ANNEXED TO BALANCE SHEETS OF M/S BHAVANI PORTFOLIO PVT. LTD. AND M/S THAR STEELS PVT. LTD. FROM CENTRAL CIRCLE - IV AND THE INSPECTOR OBTAINED THE SAME ON 18.12.2010, WHICH REVEALED THAT THE INVESTMENT WAS MADE BY THOSE COMPANIES IN THE SHARES OF THE ASSESSEE COMPANY BUT THIS FACT HAD NOT BEEN DISCUSSED BY THE AO IN THE ASSESSMENT ORDER. THE SAID OBSERVATIONS OF THE LD. CIT(A) WAS NOT REBUTTED. IN THE PRESENT CASE, THE AO WHILE MAKING THE IMPUGNED ADDITION HAD RELIE D UPON THE INFORMATION RECEIVED FROM THE INVESTIGA TION WING OF THE DEPARTMENT THAT THE AFORESAID TWO ITA NO . 3810 /DE L/201 1 OTTOMAN STEEL TUBES (P) LTD. 28 COMPANIES WERE CONTROLLED BY ONE SH. TARUN GOYAL WHO DISCLOSED IN HIS STATEMENT THAT THE SAID COMPANIES WERE ENGAGED IN PROVIDING ACCOMMODATION ENTRIES , HO WEVER, THE ASSESSEE WAS NOT CONFRONTED WITH THAT STATEMENT, IF ANY. IT WAS ALSO CLAIMED BY THE ASSESSEE THAT ON INSPECTION OF THE ASSESSMENT RECORD NO SUCH STATEMENT WAS FOUND . IN OUR OPINION, THE SAID OBSERVATION OF THE AO IS NOT SUFFICIENT TO PRESUME THA T THE SAID COMPANIES WERE ENGAGED IN PROVIDING THE ACCOMMODATION ENTRIES. IT IS WELL SETTLED THAT THE COMPANIES ARE JURISTIC PERSON AND SEPARATE FROM THE INDIVIDUAL, THEREFORE, ON THIS BASIS THAT EVEN IF SH. TARUN GOYAL WAS ENGAGED IN PROVIDING ACCOMMODATI ON ENTRY , IT WAS NOT SUFFICIENT TO HOLD THAT M/S BHAVANI PORTFOLIO PVT. LTD. AND M/S THAR STEELS PVT. LTD. WERE ALSO ENGAGED IN PROVIDING ACCOMMODATION ENTRIES, PARTICULARLY WHEN NO EVIDENCE WAS BROUGHT ON RECORD IN SUPPORT OF THE SAID PRESUMPTION. IN THE PRESENT CASE, AS WE HAVE ALREADY NOTED THAT THE ASSESSEE DISCHARGED THE ONUS CAST UPON IT TO PROVE THE IDENTITY OF THE SHARE APPLICANTS , THEIR CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. THEREFORE, THE ADDITION MADE BY THE AO U/S 68 OF THE ACT WA S RIGHTLY DELETED BY THE LD. CIT(A). IN THAT VIEW OF THE MATTER WE DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. ITA NO . 3810 /DE L/201 1 OTTOMAN STEEL TUBES (P) LTD. 29 11 . IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISSED. ( ORDER PRON OUNCED IN THE COURT ON 21 /06 / 2016 ) SD/ - SD/ - ( BEENA PILLAI ) ( N. K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 21 /06 /2016 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR