Appeal Details
Counselvise Citation
[2017] 127 COUNSELVISE.COM (IT) 1931 (ITAT-JAIPUR)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
5 month(s) 20 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
06-11-2017
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
B
Assessment Year
2012-2013
Appeal Filed On
17-05-2017
Judgement Text
VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES , JAIPUR JH HKKXPUN] YS[KK LNL; ,O JH DQY HKKJR] U;KF;D L NL; DS LE{K BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHAR AT, JM VK;DJ VIHY LA-@ ITA NO. 390/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR: 2012-13 M/S. SHIVANSH BUILDCON PVT. LTD A-26, KRISHSNA NAGAR, LAL KOTHI JAIPUR CUKE VS. THE ACIT CENTRAL CIRCLE-2 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAJCS 6958 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 490/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR: 2012-13 THE ACIT CENTRAL CIRCLE-2 JAIPUR CUKE VS. M/S. SHIVANSH BUILDCON PVT. LTD A-26, KRISHSNA NAGAR, LAL KOTHI JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAJCS 6958 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI VIJAY GOYAL, CA AND SHRI GULSHAN AGARWAL, CA JKTLO DH VKSJ LS@ REVENUE BY:SMT. ROLEE AGARWAL, CIT - DR SHRI PRAVEEN KUMAR MITTAL, DCIT SHRI KAMLESH KUMAR MEENA, DCIT LQUOKBZ DH RKJH[K@ DATE OF HEARING : 11/10/2017 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 06 /11/2017 VKNS'K@ ORDER PER BENCH BOTH THESE APPEALS ARE THE CROSS APPEALS FILED AGAI NST THE ORDER OF THE LD. CIT(A)4-, JAIPUR DATED 31-03-2017 FOR THE A .Y. 2012-13. ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 2 2.1 THE REVENUE IN ITA NO.490/JP/2017 FOR THE A.Y. 2012-13 HAS RAISED THE SOLITARY GROUND AS UNDER:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS RIGHT IN DELETING THE ADDITION OF RS .86,50,000/- OUT OF TOTAL ADDITION OF RS. 90,00,000/- MADE U/S 56(1) O F THE ACT IGNORING THE FACT THAT ASSETS OF THE ASSESSEE COMPANY DONT COMMENSURATE TO PREMIUM CHARGED AND FURTHER IGNORING THE FACT THAT NEITHER ANY BUSINESS ACTIVITY WAS PERFORMED NOR ANY BUSINESS IN COME HAS BEEN SHOWN BY THE ASSESSEE. 2.2 APROPOS SOLITARY GROUND OF THE REVENUE, THE AO MADE THE ADDITION OF RS.90,00,000- U/S 56(1) OF THE ACT IN THE HANDS OF THE ASSESSEE COMPANY BY OBSERVING AS UNDER:- 24. HAVING DEALT WITH EACH OF THE CONTENTION OF T HE ASSESSEE AND HAVING FOUND THE SAME TO BE UNTENABLE IT IS IMP ORTANT TO PLACE ON RECORD CERTAIN ASPECTS WHICH HAVE A BEARING ON THE ISSUE AT HAND. IT IS TRUE THAT THE APPARENT MUST BE CONSIDERED REAL UNTI L IT IS SHOWN THAT THERE ARE REASONS TO BELIEVE THAT THE APPARENT IS N OT THE REAL. IN A CASE OF THE PRESENT KIND A PARTY WHO RELIES ON A RECITAL IN A DEED HAS TO ESTABLISH THE TRUTH OF THOSE RECITALS, OTHERWISE IT WILL BE VERY EASY TO MAKE SELF-SERVING STATEMENTS IN DOCUMENTS EITHER EX ECUTED OR TAKEN BY A PARTY AND RELY ON THOSE RECITALS. IF ALL THAT AN ASSESSEE WHO WANTS TO EVADE TAX IS TO HAVE SOME RECITALS MADE IN A DOCUM ENT EITHER EXECUTED BY HIM OR EXECUTED IN HIS FAVOUR THEN THE DOOR WILL BE LEFT WIDE OPEN TO EVADE TAX. A LITTLE PROBING WAS SUFFICIENT IN THE P RESENT CASE TO SHOW THAT THE APPARENT WAS NOT THE REAL. THE TAXING AUTH ORITIES WERE NOT REQUIRED TO PUT ON BLINKERS WHILE LOOKING AT THE DO CUMENTS PRODUCED BEFORE THEM. THEY WERE NOT ENTITLED TO LOOK INTO TH E SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY OF THE RECITA LS MADE IN THOSE DOCUMENTS. 25. IN THE ABOVE BACK GROUND OF THE FACTS AND CIRCU MSTANCES SURROUNDING THIS CASE, IT IS HEREBY HELD THAT THE R ECEIPT OF SHARE CAPITAL AND SHARE PREMIUM FROM M/S. EVERSHINE SUPPLIERS PVT . LTD WAS PART OF A COLOURFUL TRANSACTION BY WAY OF WHICH A SUM OF RS . 90,00,000/- WAS ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 3 INTRODUCED INTO THE BOOKS OF THE ASSESSEE COMPANY I N THE FORM OF SHARE PREMIUM ATTACHED TO THE SHARE CAPITAL. AS DISCUSSIO N ABOVE THE PREMIUM OF RS.10/- PER SHARE WAS NOT JUSTIFIED AT ALL ON THE BASIS OF ABSOLUTELY NO ASSETS COMMENSURATE TO PREMIUM CHARGE D, NO BUSINESS ACTIVITY, NO INCOME, NO NET WORTH NOR ANY PROMISE F OR CREATION OF THIS MUCH ASSETS, BUSINESS ACTIVITY, INCOME OR NET WOR TH IN THE FUTURE. ACCORDINGLY, THE CHARGING AND RECEIPT OF SHARE PREM IUM/ SHARE CAPITAL TO THE TUNE OF RS. 90,00,000/- IS HELD TO BE INCOME OF THE ASSESSEE COMPANY IN THE NATURE OF INCOME ENVISAGED U/S 56(1) OF THE INCOME TAX ACT, 1961. THE SAME IS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 2.3 IN FIRST APPEAL, THE LD. CIT(A) HAS DELETED THE ADDITION OF RS. 86,50,000 /- OUT OF ADDITION OF RS. 90,00,000/- MADE BY THE AO AND SUSTAINED THE ADDITION OF RS. 3,50,000 /- BY OBSERVING AT PAGES 57 TO 106 OF HIS ORDER AS UNDER:- 3.1.2 I HAVE DULY CONSIDERED ASSESSEE'S SUBMISSION AND CA REFULLY GONE THROUGH ASSESSMENT ORDER. I HAVE ALSO TAKEN A NOTE OF FACTUAL MATRIX OF THE CASE AS WELL AS APPLICABLE CASE LAWS RELIED UPON. FACTS OF THE CASE ARE THAT NO SCRUTINY ASSESSMENT U /S 143(3) OF THE ACT WAS DONE IN ASSESSEES CASE FOR AY 2012-13 AND THE ORIGINAL RETURN FILED ON 28.09.2012 DECLARING RS. 1,49,010/= TOTAL INCOME WAS ONLY PROCESSED U/S 143(1) OF THE ACT. VARIOUS COURTS HAVE HELD THAT PROCESSING OF RETURNS U/S 143(1) OF THE ACT IS NO ASSESSMENT. IT IS OBVIOUS THAT IF NO INCRIMINATING MATERIAL IS FOUND DURING SEARCH, THEN ADDITIONS, IF ANY, HAVE TO BE MADE IN THE INCOME SH OWN IN THE RETURN OF INCOME ( IN THE CASE OF PENDING ASSESSMENTS WHICH ABATE ) AND TO THE COMPUTED INCOME (IN CASE OF ASSESSMENTS WERE COMPLETED ) . THUS EFFECTIVELY, WHAT WAS SAID IN THE CASE OF KA BUL CHAWLA WAS THAT MAKING ANY ADDITION IN THE RETURNED INCOME OR INCOME EARLIER ASSESSED WAS NOT ALLOWED IF NO MATERIAL WAS FOUND I N THE SEARCH WHICH COULD LEAD TO AN ADDITION ON THE BASIS OF THE SAID MATERIAL. NOW IN THIS REGARD, I WOULD LIKE TO DISCUSS THE ISSUE PERTAINING TO ASSESSMENT COMPLETE D U/S 153A R.W.S 143(3) OF THE ACT WHEN NO INCRIMINATING DOCUMENTS WERE FOUND FROM THE ASSESSEES PREMISES. BEFORE COMING TO THE FACTS OF THE PRESENT CASE IT WOULD BE APPROPRIATE TO MENTION SEC. 153A OF THE ACT, THE RELEVANT PART OF WHICH READS A S UNDER: ' 153A. (1) NOTWITHSTANDING ANYTHING CONTAINED IN SEC TION 139, SECTION 147, SECTION 148, SECTION 149, SECTION 151 AND SECTION 153, IN THE CA SE OF A PERSON WHERE A SEARCH IS INITIATED ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 4 UNDER SECTION 132 OR BOOKS OF ACCOUNT, OTHER DOCUME NTS OR ANY ASSETS ARE REQUISITIONED UNDER SECTION 132A AFTER THE 31ST DAY OF MAY, 2003, THE ASSESSING OFFICER SHALL (A) ISSUE NOTICE TO SUCH PERSON REQUIRING HIM TO F URNISH WITHIN SUCH PERIOD, AS MAY BE SPECIFIED IN THE NOTICE, THE RETURN OF INCOME IN RE SPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS REFERRED TO IN CLAUSE ( B), IN THE PRESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MANNER AND SETTING FORTH SUCH OTHER PARTICULARS AS MAY BE PRESCRIBED AND THE PROVISIONS OF THIS ACT SHALL, SO FAR AS MAY BE, APPLY ACCORDINGLY AS IF SUCH RETURN WERE A RETURN REQUIRED TO BE FURNISH ED UNDER SECTION 139; (B) ASSESS OR REASSESS THE TOTAL INCOME OF SIX A SSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUISITION IS MADE : PROVIDED THAT THE ASSESSING OFFICER SHALL ASSESS OR REASSESS THE TOTAL INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SUC H SIX ASSESSMENT YEARS: PROVIDED FURTHER THAT ASSESSMENT OR REASSESSMENT, I F ANY, RELATING TO ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF SIX ASSESSMENT YE ARS REFERRED TO IN THIS SUB-SECTION PENDING ON THE DATE OF INITIATION OF THE SEARCH UNDER SECTI ON 132 OR MAKING OF REQUISITION UNDER SECTION 132A, AS THE CASE MAY BE, SHALL ABATE . AS PER THE PROVISIONS OF THIS SECTION WHERE A SEARC H IS INITIATED U/S 132 OF THE ACT, THE A.O SHALL ISSUE A NOTICE REQUIRING THE PER SON SEARCHED TO FURNISH HIS RETURN OF INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING W ITHIN SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUISITION IS MADE. ON CE SUCH RETURNS ARE FILED, THE AO HAS TO ASSESS OR REASSESS THE TOTAL INCOME OF SUCH SIX ASSESSMENT YEARS. (EMPHASIS SUPPLIED BY ME). (THE DECISIVE WORDS USED IN THE PR OVISIONS ARE TO 'ASSESSEE OR REASSESS THE TOTAL INCOME' ). THE A.O. IS THUS DUTY BOUND TO DETERMINE THE 'TO TAL INCOME' OF THE ASSESSEE FOR SUCH SIX ASSESSMENT YEARS AND I T IS OBVIOUS THAT 'TOTAL INCOME' REFERS TO THE SUM TOTAL OF INCOME IN RESPECT OF WHICH A PE RSON IS ASSESSABLE. THE TOTAL INCOME THEREFORE WILL COVER NOT ONLY THE INCOME EMANATING FROM DECLARED SOURCES OR ANY MATERIAL PLACED BEFORE THE ASSESSING OFFICER BUT FR OM ALL SOURCES INCLUDING THE UNDISCLOSED ONES, OR BASED ON THE UNPLACED MATERIAL BEFORE THE AO. SOME RELATED JUDGMENTS A) CIT VS. KABUL CHAWLA (DELHI HIGH COURT) : COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE AO WHILE MAKING THE ASSESSMENT UNDER SE CTION 153 A ONLY ON THE BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE CO URSE OF SEARCH OR REQUISITION OF DOCUMENTS OR UNDISCLOSED INCOME OR PROPERTY DISCOVE RED IN THE COURSE OF SEARCH WHICH WERE NOT B) GURINDER SINGH BAWA VS. DCIT (ITAT MUMBAI) : IN ALL CARGO GLOBAL LOGISTICS 137 ITD 287 (MUM)(SB), THE SPECIAL BENCH HELD THAT IN A CAS E WHERE THE ASSESSMENT HAS ABATED THE AO CAN MAKE ADDITIONS IN THE ASSESSMENT, EVEN I F NO INCRIMINATING MATERIAL HAS BEEN FOUND. HOWEVER, IN A CASE WHERE THE ASSESSMENT HAS NOT ABATED, . [ C) ANIL KUMAR BHATIA VS. ACIT (ITAT DELHI) : S. 153A DOES NOT AUTHORIZE THE MAKING OF A DE NOVO ASSESSMENT. WHILE UNDER THE 1ST PROVISO, THE A O IS EMPOWERED TO FRAME ASSESSMENT ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 5 FOR SIX YEARS, UNDER THE 2ND PROVISO, ONLY THE ASSE SSMENTS WHICH ARE PENDING ON THE DATE OF INITIATION OF SEARCH ABATE. D) SANJAY AGGARWAL VS. DCIT (ITAT DELHI) : S. 153A: ADDITION IN A SEARCH ASSESSMENT FOR A AY WHICH IS NOT PENDING CAN BE MADE ONLY IF INCRIMI NATING MATERIAL IS FOUND DURING SEARCH (I) THE LANGUAGE OF S. 153A HAS BEEN STRUCTURED IN SUCH A WAY SO AS NOT TO PERMIT THE MAKING OF ADDITION FOR THE ASSESSMENT E) TRISHUL HI-TECH INDUSTRIES VS. DCIT (ITAT KOLKATA) : IT HAS BEEN HELD BY THE ITAT, KOLKATA BENCH IN THE CASE OF LMJ INTERNATIONAL LIMI TED VS. DCIT 119 TTJ (KOL) 214 WHERE NOTHING INCRIMINATING IS FOUND IN THE COURSE OF SEARCH RELATING TO ANY ASSESSMENT YEARS, THE ASSESSMENTS FOR. F) IT HAS BEEN HELD BY THE ITAT, KOLKATA BENCH IN THE CASE OF LMJ INTERNATIONAL LIMITED VS. DCIT 119 TTJ (KOL) 214 WHERE NOTHING INCRIMINATING IS FOUND IN THE COURSE OF SEARCH RELATING TO ANY ASSESSMENT YEARS, THE ASSESSMENTS F OR SUCH ASSESSMENT YEARS CANNOT BE DISTURBED U/S 153C OF THE ACT. THUS IT IS CLEAR THA T THE PROVISIONS OF SECTION 153C OF THE ACT CANNOT BE INVOKED AUTOMATICALLY IN RESPECT OF A NY ASSESSMENT YEAR UNLESS THERE EXISTS INCRIMINATING DOCUMENTS FOR THAT PREVIOUS YEAR. THE PROVISION OF SECTION 153C OF THE ACT CANNOT BE INVOKED ON ROUTINE INFORMATION OR ON INCO ME ALREADY ACCOUNTED/DISCLOSED IN THE ORIGINAL RETURN, THE ASSESSMENT OF WHICH IS COM PLETE. IN THIS REGARD WE MAY GAINFULLY REFER TO THE DECISION OF THE MUMBAI SPECIAL BENCH O F THE ITAT IN THE CASE OF AL CARGO GLOBAL LOGISTICS LTD VS. DCIT. APART FROM ABOVE, THERE ARE SEVERAL DECISIONS OF V ARIOUS JUDICIAL AUTHORITIES WHERE IT HAS BEEN HELD THAT IN THE ABSE NCE OF ANY INCRIMINATING MATERIAL FOUND DURING SEARCH, ADDITIONS MADE ON THE ASSESSED INCOME ARE UNSUSTAINABLE IN LAW. SOME OF THESE DECISIONS ARE D ISCUSSED IN THE FOLLOWING PARAGRAPHS: (I) IN THE CASE OF CIT VS. KABUL CHAWLA REPORTED IN 281 CTR 45, DELHI IT HAS BEEN HELD BY THE HON'BLE DELHI HIGH COURT THAT: 37. ON A CONSPECTUS OF SECTION 153A(1) OF THE ACT, READ WITH THE PROVISOS THERETO, AND IN THE LIGHT OF THE LAW EXPLAINED IN T HE AFOREMENTIONED DECISIONS, THE LEGAL POSITION THAT EMERGES IS AS UNDER: I. ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF THE ACT, NOTICE UNDER SECTION 153 A(L) WILL HAVE TO BE MANDATORILY ISSUED TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS FOR S IX AYS IMMEDIATELY PRECEDING THE PREVIOUS YEAR RELEVANT TO THE AY IN WHICH THE SEARCH TAKES PLACE. II. ASSESSMENTS AND REASSESSMENTS PENDING ON THE DATE O F THE SEARCH SHALL ABATE.THE TOTAL INCOME FOR SUCH AYS WILL HAVE TO BE COMPUTED BY THE AOS AS A FRESH EXERCISE. ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 6 III. THE AO WILL EXERCISE NORMAL ASSESSMENT POWERS IN RE SPECT OF THE SIX YEARS PREVIOUS TO THE RELEVANT AY IN WHICH THE SEARCH TAKES PLACE. THE AO HAS THE POWER TO ASSESS AND REASSESS THE 'TOTAL INCOME' OF THE AFOREMENTIONED SIX YEARS IN SEPARATE ASSESSMENT ORDERS FOR EACH OF THE SIX YEARS. IN OTHER WORDS TH ERE WILL BE ONLY ONE ASSESSMENT ORDER IN RESPECT OF EACH OF THE SIX AYS 'IN WHICH BOTH THE DISCLOSED AND THE UNDISCLOSED INCOME WOULD BE BROUGHT TO TAX'. IV. ALTHOUGH SECTION 153 A DOES NOT SAY THAT ADDITIONS SHOULD BE STRICTLY MADE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE OF THE SEARCH, OR OTHER POST-SEARCH MATERIAL OR INFORMATIO N AVAILABLE WITH THE AO WHICH CAN BE RELATED TO THE EVIDENCE FOUND, IT DOES NOT MEAN THAT THE ASSESSMENT 'CAN BE ARBITRARY OR MADEWITHOU T ANY RELEVANCE OR NEXUS WITH THE SEIZED MATERIAL. OBVIOUSLY AN ASS ESSMENT HAS TO BE MADE UNDER THIS SECTION ONLY ON THE BASIS OF SEI ZED MATERIAL.' V. IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE CO MPLETED ASSESSMENT CANBE REITERATED AND THE ABATED ASSESSMENT OR REASS ESSMENT CAN BE MADE. THE WORD 'ASSESS' IN SECTION 153 A IS RELATABLE TO ABATED PROCEEDINGS (I.E. THOSE PENDING ON THE DATE OF SEAR CH) AND THE WORD 'REASSESS' TO COMPLETED ASSESSMENT PROCEEDINGS. VI. INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED , THE JURISDICTION TO MAKE THE ORIGINAL ASSESSMENT AND THE ASSESSMENT UNDER SECTIO N 153A MERGES INTO ONE. ONLY ONE ASSESSMENT SHALL BE MADE SEPARATELY F OR EACH AY ON THE BASIS OF THE FINDINGS OF THE SEARCH AND ANY OTHER M ATERIAL EXISTING OR BROUGHT ON THE RECORD OF THE AO. VII. COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153 A ONLY ON THE BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH OR R EQUISITION OF DOCUMENTS OR UNDISCLOSED INCOME OR PROPERLY DISCOVERED IN THE COURSE OF SEARCH WHICH WERE NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. (II) IN THE CASE OF ACIT VS. PACL INDIA LTD. NEW DELHI, THE HON'BLE ITAT, F. BENCH, DELHI HAS CONSIDERED THE VARIOUS DECISIONS O F DIFFERENT JUDICIAL AUTHORITIES AND IN PARA 10 OF THE ORDER HAS HELD THAT: 'THEREFORE, THE QUESTION ARISES WHETHER AO CAN MAKE ANY ADDITION IN THE REASSESSMENT PROCEEDINGS U/S 153(A) AFTER MAKING IN QUIRIES WHICH ARE NOT SUGGESTED BY ANY D DOCUMENTS OR ASSET SEIZED DURING THE SEARCH. IT DEPENDS ON THE NATURE OF ADDITION. THE FACTS AND CIRCUMSTANCES OF THE ASSESSEE CLEARLY SHOW THAT NO INCRIMINATING DOCUMENT FOUND RELATING TO THE LAND DEVELOPMENT EXPENSES DEBITED IN THE BOOKS OF ACCOUNTS. NO MATER IAL WAS ON THE RECORD ON THAT BASIS WHICH INCOME OF ASSESSEE COULD BE FURTHE R ASSESSED BY ASSESSING OFFICER. THEREFORE, THE ASSESSING OFFICER HAS NO JU RISDICTION TO MAKE OR TO RESORT TO ROVING AND FISHING INQUIRIES TO FIND OUT WHETHER ANY INCOME HAS ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 7 ESCAPED ASSESSMENT DURING THESE REASSESSMENT PROCEE DINGS. PARTICULARLY, WHEN THERE IS NO INCRIMINATING MATERIAL FOUND AND S EIZED DURING THE COURSE OF SEARCH U/S 132(1) OF THE ACT AND NOTHING IS AVAILAB LE IN RECORD TO REASSESS THE INCOME OF ASSESSEE. IN VIEW OF THE ABOVE, THIS IS N OT A FIT CASE FOR MAKING THE ADDITION IN THE YEAR UNDER CONSIDERATION, THE SAME ARE DELETED.' (III) IN THE CASE OF M/S IDEAL APPLIANCE COMPANY PVT. LTD . VS. DCIT, CENTRAL CIRCLE-44, MUMBAI, THE FOLLOWING LEGAL ISSUES WERE RAISED BEFO RE THE HON'BLE ITAT'1' BENCH, MUMBAI: '1. THE LD CIT (A) FAILED TO APPRECIATE THE FACT TH AT NO INCRIMINATING DOCUMENTS /EVIDENCES WERE FOUND DURING THE COURSE O F SEARCH OF THIRD PARTY, AND HENCE, RE-COMPUTING THE INCOME U/S I53A IS BAD IN LAW AND LIABLE TO BE QUASHED. 2. THE LD CIT (A) FAILED TO APPRECIATE THE FACT TH AT ORIGINAL ASSESSMENT WAS MADE U/S 143(3) VIDE ORDER 31ST AUGUST 2007 AFT ER CONSIDERING ALL THE DOCUMENTS AND MATERIALS ON RECORD AND DUE APPLICATION FF MIND AND HENCE RE-COMPUTING THE INCOME BY MERELY CHANGING HE AD OF INCOME FOR THE SAID YEAR UNDER THE GRAB OF SECTION 153A BASED ON SAME D OCUMENTS AND MATERIALS, IS BAD IN LAW AND ORDER IS LIABLE TO BE QUASHED, 3. THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF TH E AO REASSESSING THE INCOME U/S 143(3) R.W.S I53A, WITHOUT APPRECIATING THE FAC T THAT ONLY PENDING ASSESSMENT ABET AND NOT THE COMPLETED ASSESSMENTS A ND HENCE THE ORDER U/S 143(3) R.W.S I53A IS BAD IN LAW AND LIABLE TO BE QU ASHED. 4. THE LD CIT (A) ERRED IN NOT ALLOWING THE DECISION O F JURISDICTIONAL HIGH COURT WHEREIN IT WAS HELD THAT NO ADDITION CAN BE MADE U/ S I53A IF NO INCRIMINATING MATERIAL / DOCUMENTS ARE FOUND DURING SEARCH. THERE FORE, THE ORDER OF THE CIT (A) IS BAD IN LAW.' (IV) ON THESE ISSUES, IT WAS HELD BY THE HON'BLE ITAT TH AT: '9. FROM THE ABOVE SETTLED LEGAL POSITION OF THE I SSUE THAT IN THE ABSENCE OF ANY INCRIMINATING MATER IAL FOUND DURING SEARCH, ADDITIONS MADE ON THE ASSESSED INCOME ARE UNSUSTAINABLE IN LAW, WE ARE OF THE CONSIDERED OPINION THAT THE ADDITIONS MADE IN T HE INSTANT CASE ARE NOT SUSTAINABLE AND ACCORDINGLY, WE DELETE THE SAME. CONSIDERING OUR DE CISION ON THE LEGAL ISSUE IN FAVOUR OF THE ASSESSEE, THE OTHER GROUNDS DEMAND NO SPECIFIC ADJU DICATION. THUS, ON THE LEGAL GROUND THE ASSESSEE SUCCEEDS AND REST OF THE GROUNDS ARE DISMI SSED AS ACADEMIC. 9.1. FURTHER, REGARDING THE NON-ABATED NATURE OF T HE ASSESSMENTS RELATING TO THE AYS 2007-2008, 2008- 2009 AND 2009-2010, IT IS A DECIDED ISSUED THAT THE TIME LIMIT FOR THE ISSUE OF NOTICE U/S 143(2) IN THE SAID AYS SINCE EXPIRED ON 30.9.2008 AND THEY CO NSTITUTE NON-ABATED ASSESSMENTS AND THEREFORE, THE ASSESSMENTS FOR THOSE AYS HAVE TO BE REASSESSED UNDER THE SPECIAL PROVISIONS IN THE LIGHT OF THE INCRIMINATING MATERIAL SEIZED DURING T HE SEARCH. THE ABOVE SAID RATIO WAS ALSO FOLLOWED BY THE TRIBUNAL IN THE CASE OF GURINDER SI NGH BAWA VS. CIT (SUPRA) WHEREIN IT WAS HELD THAT WHERE THE ASSESSMENT HAD BEEN COMPLETED U NDER SUMMARY SCHEME UNDER SECTION 143(1) AND TIME LIMIT FOR ISSUE OF NOTICE UNDER SEC TION 143(2) HAD EXPIRED ON THE DATE OF SEARCH ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 8 ..THERE WAS NO ASSESSMENT PENDING IN SUCH A C ASE THERE WAS NO QUESTION OF ABATEMENT. THEREFORE, ADDITION COULD BE MADE ONLY O N THE BASIS OF INCRIMINATING MATERIAL FOUND DURING SEARCH.' (V) THE RELEVANT ISSUES AS ARISING OUT OF THE DECISION IN THE CASE OF KABUL CHAWLA AS UNDER: 1) WHEN THERE IS NO CONDITION IN SECTION 153A OF T HE ACT THAT ADDITIONS CANNOT BE MADE WITHOUT RELEVANCE TO OR WITHOUT NEXUS TO SEIZED MATERIAL, T HEN IS IT FOR THE COURTS TO READ THAT CONDITION INTO THE PROVISIONS OF SECTION 153A OF THE ACT? THE ANSWER IS NO FOR THE REASON THAT THE APPLICATION OF SECTION 148 OF THE ACT HAS BEEN OUST ED BY THE NON-OBSTANTE CLAUSE WITH WHICH SECTION 153A STARTS. THEREFORE, EVEN IF NO INCRIMIN ATING MATERIAL IS FOUND DURING SEARCH, IF ANY UNDISCLOSED INCOME HAS TO BE ASSESSED FOR THE RELEV ANT 6 YEARS, IT HAS TO BE IN THE PROCEEDINGS UNDER SECTION 153A OF THE ACT. A) NOW THERE ARE TWO SITUATIONS - EITHER THE ASSESS MENT WAS COMPLETE BEFORE THE SEARCH OR PENDING AT THAT TIME. IF THE ASSESSMENT WAS COMPLE TE, AND IF ANY INCOME WHICH HAD ESCAPED ASSESSMENT IN THE REGULAR ASSESSMENT IS FOU ND DURING PROCEEDINGS U/S 153A, WHAT IS THE AO SUPPOSED TO DO? HE HAS NO POWER TO ACT U/ S 147/148 BECAUSE OF THE NON-OBSTANTE CLAUSE. HE IS NOW PRECLUDED FROM INVOKING PROVISIO NS OF SECTION 148 BECAUSE OF THE CONCLUSION DRAWN IN KABUL CHAWLA. B) THE SITUATION IS EVEN MORE SERIOUS IF A PENDING ASSESSMENT OR REASSESSMENT ABATES. WHAT IF A SHOW-CAUSE NOTICE HAD BEEN ISSUED ON AN UNDISCLOS ED INCOME PRIOR TO SEARCH? ACCORDING TO KABUL CHAWLA IF NO INCRIMINATING MATERIAL IS FOU ND DURING SEARCH, THEN NO ACTION CAN BE TAKEN IN SUCH CASES ALSO. NO INTERPRETATION OF A PROVISION OF AN ACT CAN BE SUCH THAT IT LEADS TO RESULTS WHICH WERE NEVER INTENDED. BY DRAWING A CONCLUSION THAT THE PRESENCE OF INCRIMINATING MATERIAL, AND ADDITION THEREON IS NECESSARY FOR MAKING AN ADD ITION WHICH IS NOT BASED ON MATERIAL FOUND DURING SEARCH, KABUL CHAWLA HAS DONE EXACTLY THAT, AND SO IT HAS TO BE HELD THAT THE CONCLUSION SO DRAWN IS PER INCURIAM. IN THIS REGARD I DRAW SOLACE FROM THE DECISION OF THE ALLAHABAD HIGH COURT IN THE CASE OF CIT V. RAJ KUMAR ARORA [2014] 367 ITR 517(A LL.) AND THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF FILATEX INDIA LTD. V. CIT [2014] 49 TAXMANN.COM 465(DELHI) BOTH OF WHICH PRECEDE THE DECISION IN THE CASE OF KABUL CHAWLA. 2) THERE IS ANOTHER SITUATION WHICH HAS NOT BEEN AN TICIPATED IN KABUL CHAWLA. IN THAT CASE THE HONBLE HIGH COURT PROCEEDED ON THE GROUNDS THAT PR OCESSING OF A CASE U/S 143(1) WAS ALSO ASSESSMENT. IT ACCORDINGLY HELD THAT EVEN IF THE R ETURNS HAVE BEEN PROCESSED U/S 143(1) IT WILL BE TREATED AS IF THE ASSESSMENTS ARE COMPLETE. NOW AFTER THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF DEPUTY COMMISSIONER OF INCOME-TAX V. ZUARI ESTATE DEVELOPM ENT & INVESTMENT CO. LTD. [2015] 373 ITR 661 (SC) AND ASSISTANT COMMISSIONER OF INCOME-T AX V. RAJESH JHAVERI STOCK BROKERS P. LTD. [2007] 291 ITR 500(SC) IT IS CLEAR THAT PROCES SING OF A CASE U/S 143(1) IS NOT AN ASSESSMENT, WHICH FACT HAS BEEN ADMITTED BY THE DEL HI HIGH COURT IN THE CASE OF INDU LATA RANGWALA V. DEPUTY COMMISSIONER OF INCOME-TAX, WP(C ) 1393/2002 IN THEIR DECISION DATED 18.05.2016. ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 9 3) HENCE, THERE NOW OCCURS A THIRD CATEGORY OF CA SES WHICH HAVE NEITHER BEEN COMPLETED NOR ARE PENDING ON THE DATE OF SEARCH. KABUL CHAWLA IS SILE NT ON THIS SITUATION, PERHAPS BECAUSE IT WAS NOT ENVISAGED AT THAT TIME. IN VIEW OF THESE FACTS AND LEGAL POSITION THAT THE PREMISE DEVELOPED IN KABUL CHAWLA, THAT ADDITIONS CAN BE MADE IN THE COMPLETED OR ABATED ASSESSMENTS ONLY IF THERE IS INCRIMINATING MATERIAL IN A PROCEEDING U/S 153A, CANNOT AND WILL NOT APPLY TO SUCH A SITUATION. 4) NOW WE COME TO THE QUESTION OF WHETHER IT IS NECESSARY TO HAVE INCRIMINATING MATERIAL IN ALL THE 6 YEARS FOR AN ADDITION TO ME MADE ON ISSUES NOT CO VERED BY SEARCH. THOUGH THERE IS AN ATTEMPT TO INTERPRET KABUL CHAWLA IN A WAY THAT INCRIMINATI NG MATERIAL IS REQUIRED IN ALL THE 6 YEARS, THIS INTERPRETATION IS INCORRECT BECAUSE: A) THIS PROPOSITION HAS NOT BEEN SPECIFICAL LY SPELT OUT IN THE KABUL CHAWLA CASE; B) THE DELHI HIGH COURT IN THE CASE OF CIT V. CHET AN DAS LACHMAN DAS [2012] 211 TAXMAN 61 (DEL.)/[2012] 254 CTR 392 (DEL.) HAS SPEC IFICALLY RAISED AND THEN ANSWERED THE QUESTION IN FAVOUR OF THE REVENUE. IT HAS STAT ED THAT ADDITIONS ON NON-SEARCH ISSUES CAN BE MADE EVEN IF THERE IS INCRIMINATING MATERIAL IN EVEN ONE YEAR. THIS CASE IS EXTREMELY IMPORTANT FOR THE REVENUE. SIMILAR SENTIMENTS HAVE BEEN EXPRESSED IN THE CASE OF CIT V. ANIL KUMAR BHATIA [2013] 352 ITR 493 (DEL) WHERE ONLY ONE UNSIGNED DOCUMENT DATED 10.02.2003 SHOWING A LOAN OF RS. 1,50,000/- WAS FOUND DURING SEARCH CONDUCTED ON 13.12.2005. THE HONBLE HIGH COURT HELD THAT THIS MATERIAL WAS ENOUGH TO JUSTIFY ADDITIONS IN ALL THE 6 YEARS. C) RECENTLY, THE KERALA HIGH COURT IN SUNNY JACO B JEWELLERS AND WEDDING CENTRE V. DEPUTY COMMISSIONER OF INCOME-TAX [2014] 362 ITR 664 (KER) HAS ALSO VERY CATEGORICALLY STATED THAT INCRIMINATING MATERIAL FOUND DURING SEA RCH IS NOT NECESSARY IN ALL THE 6 YEARS FOR ADDITIONS TO BE MADE ON OTHER ISSUES. WHILE GIVING THESE DECISIONS, THE HON'BLE ITAT, MUM BAI AS WELL AS THE HON'BLE ITAT, DELHI BENCH HAS REFERRED TO THE DECISION OF THE HON 'BLE MUMBAI HIGH COURT IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LIMITED VS. DCIT, CENTRA L CIRCLE-44, MUMBAI AND THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWLA IN ITA NO. 707/2014 DATED 22.8.2015. HERE IT IS PERTINENT TO MENTION TH AT THE DEPARTMENT HAS NOT ACCEPTED THE DECISIONS OF HON'BLE MUMBAI HIGH COURT IN THE CASE OF M/S ALL CARGO GLOBAL LOGISTICS AS WELL AS CONTINENTAL WAREHOUSING (NHAVA SHEVA) LTD., AND SLP HAS BEEN FILED BEFORE THE HON'BLE SUPREME COURT. THE HON'BLE SUPREME COURT HA S GRANTED LEAVE VIDE ORDER DATED 12.10.2015 AS REPORTED IN 64 TAXMANN.COM 34 (S.C.). SIMILARLY, IN THE CASE OF KABUL CHAWLA SLP HAS ALSO BEEN FILED. NOW AFTER THE DECISION OF THE HONBLE SUPREME C OURT IN THE CASE OF DEPUTY COMMISSIONER OF INCOME-TAX V. ZUARI ESTATE DEVELOPM ENT & INVESTMENT CO. LTD. [2015] 373 ITR 661 (SC) AND ASSISTANT COMMISSIONER OF INCOME-TAX V. RAJESH JHAVERI STOCK BROKERS P. LTD. [2007] 291 ITR 500(SC ) IT IS CLEAR THAT PROCESSING OF A CASE U/S 143(1) IS NOT AN ASSESSMENT, WHICH FACT HA S BEEN ADMITTED BY THE DELHI HIGH COURT IN THE CASE OF INDU LATA RANGWALA V. DEPUTY C OMMISSIONER OF INCOME-TAX, WP(C) 1393/2002 IN THEIR DECISION DATED 18.05.2016. HENCE, THERE NOW OCCURS A THIRD CATEGORY OF CASES WHICH HAVE NEITHER BEEN COMPLET ED NOR ARE PENDING ON THE DATE OF SEARCH. KABUL CHAWLA IS SILENT ON THIS SITUATION, P ERHAPS BECAUSE IT WAS NOT ENVISAGED AT THAT TIME. IT IS MY CONTENTION THAT THE PREMISE DEVELOPED IN KABUL CHAWLA, THAT ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 10 ADDITIONS CAN BE MADE IN THE COMPLETED OR ABATED AS SESSMENTS ONLY IF THERE IS INCRIMINATING MATERIAL IN A PROCEEDING U/S 153A, CA NNOT AND WILL NOT APPLY TO SUCH A SITUATION. NOW WE COME TO THE QUESTION OF WHETHER IT IS NECESS ARY TO HAVE INCRIMINATING MATERIAL IN ALL THE 6 YEARS FOR AN ADDITION TO ME M ADE ON ISSUES NOT COVERED BY SEARCH. THOUGH THERE IS AN ATTEMPT TO INTERPRET KABUL CHAWL A IN A WAY THAT INCRIMINATING MATERIAL IS REQUIRED IN ALL THE 6 YEARS, THIS INTER PRETATION IS INCORRECT BECAUSE : A) THIS PROPOSITION HAS NOT BEEN SPECIFICALLY SPELT OU T IN THE KABUL CHAWLA CASE; B) THE DELHI HIGH COURT IN THE CASE OF CIT V. CHETA N DAS LACHMAN DAS [2012] 211 TAXMAN 61 (DEL.)/[2012] 254 CTR 392 (DEL.) HAS SPECIFICALLY RAISED AND THEN ANSWERED THE QUESTION IN FAVOUR OF THE REVENUE . IT HAS STATED THAT ADDITIONS ON NON-SEARCH ISSUES CAN BE MADE EVEN IF THERE IS INCRIMINATING MATERIAL IN EVEN ONE YEAR. THIS CASE IS EXTREMELY IMPORTANT FOR US. SIMILAR SENTIMENTS HAVE BEEN EXPRESSED IN THE CASE OF CIT V. ANIL KUMAR BHATIA [2013] 352 ITR 493 (DEL) WHERE ONLY ONE UNSI GNED DOCUMENT DATED 10.02.2003 SHOWING A LOAN OF RS. 1,50,000/- WAS FOU ND DURING SEARCH CONDUCTED ON 13.12.2005. THE HONBLE HIGH COURT HEL D THAT THIS MATERIAL WAS ENOUGH TO JUSTIFY ADDITIONS IN ALL THE 6 YEARS. C) RECENTLY, THE KERALA HIGH COURT IN SUNNY JACOB J EWELLERS AND WEDDING CENTRE V. DEPUTY COMMISSIONER OF INCOME-TAX [2014] 362 ITR 664 (KER) HAS ALSO VERY CATEGORICALLY STATED THAT INCRIMINATI NG MATERIAL FOUND DURING SEARCH IS NOT NECESSARY IN ALL THE 6 YEARS FOR ADDI TIONS TO BE MADE ON OTHER ISSUES. THEREFORE, IN VIEW OF ABOVE DISCUSSION WITH RE GARD TO THE PROVISIONS OF SEC 153A OF THE ACT, IT IS SEEN THAT FROM 01.06.2003 ONWARDS THE NUMBER OF YEARS FROM WHICH ASSESSMENTS COULD BE FRAMED AFTER SEARCH WERE REDUC ED FROM 10 TO SIX. SECTION 153A OF THE ACT HAS MANDATED THAT THERE HAVE TO BE 6 SEP ARATE ASSESSMENTS INSTEAD OF A BLOCK ASSESSMENT. IT ALSO STARTED WITH A NON-OBSTAN TE CLAUSE WHICH STATED THAT THE OPERATION OF SECTIONS 139, 147,148,149,151,AND 153 WAS OUSTED. IN OTHER WORDS WHEN AN ASSESSMENT WAS BEING COMPLETED U/S 153A, THE SEC TIONS MENTIONED ABOVE COULD NOT BE INVOKED. THE SECTION DID NOT, REPEATS, AND DID N OT MENTION THAT FOR MAKING AN ASSESSMENT U/S 153A OF THE ACT, IT WAS NECESSARY TO HAVE SOME INCRIMINATING MATERIAL FOUND DURING SEARCH. IN THE CASE OF KABUL CHAWLA, I T WAS STATED THAT ASSESSMENTS HAD TO BE COMPLETED U/S 153A OF THE ACT THE MOMENT A SE ARCH HAS TAKEN PLACE. THIS IS A COMMON GROUND IN ALL JUDICIAL PRONOUNCEMENTS, AND N OBODY HAS ANY OBJECTION TO THE SAID CONCLUSION. IT WAS ALSO STATED IN THE ABOVE CA SE THAT, THOUGH NOT PRESCRIBED IN THE ACT, BUT ADDITIONS HAD TO BE MADE ON THE BASIS OF I NCRIMINATING MATERIAL FOUND DURING SEARCH. THE ADDITIONS COULD NOT BE ARBITRARY. THI S CONCLUSION, AND OTHERS ARRIVED AT IN ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 11 PARA 37 OF THE JUDGMENT STARTED THE PRESENT CONTROV ERSY. IT IS OBVIOUS THAT IF NO INCRIMINATING MATERIAL IS FOUND DURING SEARCH, THEN ADDITIONS, IF ANY, HAVE TO BE MADE IN THE INCOME SHOWN IN THE RETURN OF INCOME ( IN THE CASE OF PENDING ASSESSMENTS WHICH ABATE ) AND TO THE COMPUTED INCOME (IN CASE OF ASSESSMENT S WERE COMPLETED). THUS EFFECTIVELY, WHAT WAS SAID IN THE CASE OF KABUL CHAWLA WAS THAT MAKING ANY ADDITION IN THE RETURNED INCOME OR INCOME EARLIER A SSESSED WAS NOT ALLOWED IF NO MATERIAL WAS FOUND IN THE SEARCH WHICH COULD LEAD T O AN ADDITION ON THE BASIS OF THE SAID MATERIAL. THEREFORE, FACTS OF CASE LAWS RELIED UPON BY THE ASSESSEE ARE QUITE DISTINGUISHABLE WITH THAT OF THE PRESENT CASE. IN V IEW OF THESE FACTS, ASSESSEES CONTENTION IS NOT CORRECT THAT AO WAS NOT JUSTIFIED IN REASSESSING THE COMPLE TED ASSESSMENT. ASSESSEES APPEAL FAILS IN GR NO 1. 3.2 GROUND NO 2 AND 3: - REGARDING ADDITION OF RS. 90,00,000/- MADE BY APPL YING THE PROVISIONS OF SECTION 56(1) OF INCOME TAX ACT, 1961 TREATING T HE SHARE CAPITAL AND PREMIUM THEREON RECEIVED FROM COMPANY M/S EVERSHINE SUPPLIERS PVT. LTD AS INCOME OF THE ASSESSEE. 3.2.1 SUBMISSION MADE : RELEVANT EXTRACTS OF WHICH AR OF THE ASSESSEE ARE REPRODUCED HERE AS UNDER: .. .. 1) DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE ALLOTTED 9,50,900 EQUITY SHARES OF RS. 10 EACH TO VARIOUS PERSONS/COMPANIES AT A PREMIUM OF RS. 10 ON VARIOUS DATES DETAIL OF WHICH IS AS UNDER: - S. N. NAME NO. OF SHARES ALLOTED/ APPLIED DURING THE YEAR AMOUNT ADJUSTED AGAINST SHARE CAPITAL RATE PER SHARE AMOUNT ADJUSTED AGAINST SHARE PREMIUM RATE OF PREMIUM PER SHARE ISSUE PRICE OF THE SHARE TOTAL CONSIDERATION RECEIVED 1. SANJAY CHHABRA 2,50,450 25,04,500 10 25,04,500 1 0 20 50,09,000 2. SANDEEP CHHABRA 2,50,450 25,04,500 10 25,04,500 10 20 50,09,000 3. EVERSHINE SUPPLIERS PVT. LTD 4,50,000 45,00,000 10 45,00,000 10 20 90,00,000 TOTAL 9,50,900 95,09,000 95,09,000 1,90,18,000 2) INITIALLY VIDE SHOW CAUSE NOTICE DATED 06.02.201 5 (COPY AT PB PAGE 99 TO 102) THE LD. AO OPINED THAT ENTIRE SHARE CAPITAL/SHARE PREMIUM OF R S. 1,90,18,000/- SHOULD BE ADDED IN TOTAL INCOME OF THE ASSESSEE BUT AFTER CONSIDERING THE SU BMISSION AND DETAILS OF THE ASSESSEE THE SHARE CAPITAL/SHARE PREMIUM OF RS. 1,00,18,000/- RECEIVED FROM SHRI SANJAY CHHABRA AND SHRI SANDEEP CHHABRA WAS TREATED AS EXPLAINED/JUSTIFIED AND THE AMOUNT OF RS. 90,00,000/- RECEIVED FROM EVERSHINE SUPPLIERS PVT. LTD WAS ADDED AS INCO ME OF THE ASSESSEE. DURING THE COURSE OF ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 12 ASSESSMENT PROCEEDINGS THE ASSESSEE SUBMITTED THE F OLLOWING DOCUMENTS TO PROVE THE IDENTITY OF SHAREHOLDERS, CREDITWORTHINESS OF SHAREHOLDERS AND GENUINENESS OF TRANSACTION WITH INVESTOR COMPANY WHICH WAS ADDED BY LD. AO AS INCOME OF THE ASSESSEE: - NAME OF SHAREHOLDER PARTICULARS OF DOCUMENTS SUBMITTED COPY AT PB PAGE EVERSHINE SUPPLIERS PVT. LTD 1. SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY, DETAIL OF PAYMENT RECEIVED ETC. 2. COPY OF BOARD RESOLUTION. 3. COPY OF PAN CARD OF PARTY. 4. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. 5. DECLARATION OF SOURCE OF FUNDS WITH PARTY. 6. COPY OF ACK. OF ITR AND COMPUTATION OF AY 12-13. 7. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.12. 8. COPY OF REGISTRATION CERTIFICATE ISSUED BY ROC 107 108 109 110-111 112-113 114-115 116-126 127 3. ALL THE SHARE CAPITAL/SHARE APPLICATION WAS RECE IVED THROUGH A/C PAYEE CHEQUES AND VERIFIABLE FROM BANK STATEMENT OF ASSESSEE AS WELL AS BANK STA TEMENT OF THE PARTY. THE ONUS U/S 68 OF THE ASSESSEE IS TO PROVE THE IDENTITY, CAPACITY AND GEN UINENESS OF THE TRANSACTIONS HAS BEEN DISCHARGED WHICH MAY BE SEEN FROM THE FOLLOWINGS:- I) IDENTITY:- THE ASSESSEE PROVED THE IDENTITY OF THE COMPANY B Y FILING THE SHARE APPLICATION RECEIVED FROM THE PARTY AND THE PARTY IS DULY IN EXISTENCE AND TH E EXISTENCE OF THE PARTY CAN BE VERIFIED FROM THE OFFICIAL WEBSITE OF MCA. THE LD. AO ALSO NOT DO UBTED THE IDENTITY OF THE ABOVE NAMED COMPANY. FURTHER THE ASSESSMENT OF AY 2009-10 (COPY AT PB PAGE 140 TO 141) AND AY 2013-14 OF THIS COMPANY WAS ALSO COMPLETED AT RETURNED INCO ME. THE ASSESSMENT OF AY 2013-14 WAS COMPLETED BY THE SAME AO WHO COMPLETED THE ASSESSME NT OF THE ASSESSEE IN THE SAME MONTH. THE COPY OF ASSESSMENT ORDER IS AT PB PG 155 TO 157 . IT IS FURTHER RELEVANT TO MENTION HERE THAT THE DEPARTMENT ALSO CARRIED OUT THE SURVEY OPERATIO NS OVER THIS COMPANY WHICH ALSO PROVES THE EXISTENCE OF THE PARTY. II) CREDITWORTHINESS THE COMPANY IS INCOME TAX ASSESSEE AND DULY FILI NG THE INCOME TAX RETURN AND BALANCE SHEETS. THERE IS SUFFICIENT SOURCE OF FUNDS WITH TH E COMPANY TO INVESTMENT SHARE CAPITAL/SHARE APPLICATION IN THE ASSESSEE COMPANY. THE ASSESSEE S UBMITTED THE COPIES OF BANK ACCOUNT/DECLARATION OF SOURCE OF FUNDS WITH THE INV ESTOR COMPANY. THE BANK STATEMENT SHOWS THE HUGE TRANSACTION OF HIGH VALUE IN THE ACCOUNTS OF T HE COMPANY. THE CHART SHOWING THE AMOUNT INVESTED BY THE ABOVE NAMED COMPANY IN ASSESSEE COM PANY VIZ A VIZ OWN FUNDS WITH THE INVESTOR COMPANY ARE AS UNDER: - NAME OF THE INVESTOR COMPANY AMOUNT INVESTED IN ASSESSEE COMPANY SHARE CAPITAL AND RESERVE & SURPLUS WITH INVESTOR COMPANIES AS ON 31.03.2012 SHARE CAPITAL AND RESERVE & SURPLUS WITH INVESTOR COMPANIES AS ON 31.03.2011 SHARE CAPITAL AND RESERVE & SURPLUS WITH INVESTOR COMPANIES AS ON 31.03.2009 EVERSHINE SUPPLIERS PVT. LTD 90,00,000 10,41,99,989 10,42,52,807 10,42,50,971 FROM THE ABOVE CHART IT IS CLEAR THAT THE INVESTOR COMPANY WAS HAVING ITS OWN SHARE CAPITAL AND RESERVE & SURPLUS WHICH WERE MORE THAN TO THE AMOUN T INVESTED IN THE ASSESSEE COMPANY. THE ABOVE CHART SHOWS THAT THE INVESTOR COMPANY WAS HAV ING ITS OWN INDEPENDENT FUNDS AND HAVING ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 13 ITS INDEPENDENT SOURCE TO INVEST IN THE SHARES OF T HE ASSESSEE COMPANY. APART FROM THE INVESTMENT MADE IN THE SHARES OF ASSESSEE GROUP, TH E INVESTOR COMPANY WAS ALSO HAVING INVESTMENTS IN SHARES OF OTHER COMPANIES OR LOANS & ADVANCES TO OTHER PARTIES, THEREFORE FROM THE BANK STATEMENT AS WELL AS FINANCIALS STATEMENTS OF THE INVESTOR COMPANY ITS CREDITWORTHINESS IS DULY PROVED. FURTHER ASSESSMENT OF ABOVE NAMED C OMPANY FOR AY 2009-10 WAS COMPLETED BY THE DEPARTMENT WHEREIN THE SOURCE OF FUNDS WITH THI S COMPANY WHEREBY THE NET WORTH OF THIS COMPANY WAS CREATED WAS ACCEPTED BY THE DEPARTMENT. THIS SHOWS THAT THE INVESTOR COMPANY WAS HAVING ITS OWN INDEPENDENT FUND TO INVEST. III) GENUINENESS THE ASSESSEE SUBMITTED THE SHARE APPLICATION FORMS RECEIVED FROM ABOVE COMPANY AGAINST THE SHARE APPLICATION RECEIVED FROM THE COMPANY. THE SH ARE APPLICATION IS SUPPORTED BY BOARD RESOLUTION PASSED IN THE INVESTOR COMPANY. THE ASSE SSEE COMPANY HAS ALLOTTED THE SHARES TO THE INVESTOR COMPANY. THE PROPER RETURNS WERE FILED BEF ORE THE ROC AGAINST ALLOTMENT OF THE SHARES TO THIS COMPANY. FURTHERMORE, THE DEPARTMENT HAS C ARRIED OUT INTENSIVE SEARCH OPERATIONS OVER THE ASSESSEE AND NO ANY INCRIMINATING MATERIAL WAS FOUND TO SHOW THAT THE MONEY AGAINST THE SHARE ALLOTMENT WAS OWN MONEY OF THE COMPANY. SHARE S CERTIFICATES WERE ISSUED AGAINST THE ALLOTMENT OF THE SHARES TO THIS COMPANY WERE NOT FO UND FROM THE POSSESSION OF THE ASSESSEE COMPANY OR ITS DIRECTOR OR EMPLOYEES. THIS FACT SHO WS THAT AFTER ALLOTMENT OF SHARES BY THE APPELLANT COMPANY SHARE CERTIFICATES WERE DISPATCHE D TO THE SUBSCRIBER COMPANY. NO ANY ENTRY IN BOOKS OF ACCOUNT OR DOCUMENT WAS FOUND SHOWING P AYMENT OF CASH TO THE INVESTOR COMPANY AGAINST RECEIPT OF CHEQUES FROM THIS COMPANY AGAINS T ALLOTMENT OF SHARES. THEREFORE THE GENUINENESS OF THE TRANSACTIONS CANNOT BE DOUBTED. THE DEPARTMENT ALSO CARRIED OUT SURVEY OVER THE INVESTOR COMPANY AND DURING THE COURSE OF SURVE Y NO MATERIAL WAS FOUND TO PRESUME THAT THE INVESTMENT MADE BY THEM IS NOT GENUINE. 4. THE LD. AO HAS ALSO NOT DOUBTED THE IDENTITY OF THE SHAREHOLDERS AND HE ONLY DOUBTED THE CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION S ON THE BASIS OF CERTAIN INQUIRIES CARRIED OUT BY INVESTIGATION WING MODUS OPERANDI OF WHICH H AS BEEN DISCUSSED BY LD. AO IN PARA 10 TO 16 OF ASSESSMENT ORDER AT PAGE 5 TO 14 OF ASSESSMEN T ORDER. FROM EXAMINATION OF FINDING OF LD. AO YOUR HONOR WILL FIND THAT THE ENTIRE DISCUSSION IS BASED ON THE INVESTIGATION MADE BY INVESTIGATION WING AND NO INDEPENDENT INQUIRIES WER E MADE BY LD. AO AT HIS OWN. FURTHER WHATEVER MATERIAL/INQUIRIES WHICH IS BEING DISCUSS BY LD. AO AND ON WHICH THE LD. AO IS RELYING WERE COLLECTED BEHIND THE BACK OF THE ASSESSEE AND THE SAME WAS NEVER BROUGHT IN KNOWLEDGE OF THE ASSESSEE AND OPPORTUNITY TO CONFRONT THE MATERI AL WAS NOT PROVIDED TO THE ASSESSEE. THE FINDING OF LD. AO ON SUCH MODUS OPERANDI AND SUBMIS SION OF THE ASSESSEE ON SUCH IS AS UNDER: - A) FINDING OF LD. AO (PARA 10): - ON EXAMINATION BY THE INVESTIGATION WING IT IS CLEA RLY FOUND THAT SYSTEMATIC TRANSFER OF FUNDS ACROSS SEVERAL ACCOUNTS, AT TIME AS MANY AS SIX ACCOUNTS, IN A SINGLE DAY (OR AT THE MOST TWO TO THREE DAYS). MAJOR EXERCISE HAS BEEN DONE IN TWO OF THE S IX COMPANIES ALLIANCE TRADECOM PVT. LTD AND EVERSHINE SUPPLIERS PVT. LTD. SUBMISSION OF ASSESSEE: - FROM THIS FINDING NO WHERE IT PROVES THAT THE FUNDS WERE INTRODUCED IN SUCH COMPANY BY THE ASSESSEE COMPANY. WHATEVER AMOUNT RECEIVED BY THE ASSESSEE W AS RECEIVED THROUGH A/C PAYEE CHEQUES AND SOURCE WITH THE INVESTOR COMPANY WAS ALSO PROVE D. THE INVESTOR COMPANY HAS ALSO CONFIRMED THE INVESTMENT IN SHARES OF THE ASSESSEE COMPANY MADE BY IT. IT IS RELEVANT TO MENTION ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 14 HERE THAT IF SOMEONE IS INVESTING THE MONEY IN THE ASSESSEE COMPANY HE MUST BE HAVING THE INFLOW OF MONEY FROM SOME SOURCE. WHAT IS THE SOURC E OF INFLOW WITH THE INVESTOR COMPANY AND HOW IT IS MANAGING ITS AFFAIRS IS NOT CONCERN OF TH E ASSESSEE. IN THE CASE OF THE ASSESSEE, IT HAS FULL FILLED ITS LEGAL OBLIGATION. THE ASSESSEE HAS PROVED THE SOURCE OF MONEY WITH THE INVESTOR COMPANIES. THUS IN THE CASE OF THE ASSESSEE THE SOU RCE OF MONEY IS WELL PROVED. FURTHER THE TRANSFER OF FUNDS FROM SEVERAL ACCOUNTS IN SAME DAY OR WITHIN COUPLE OF DAYS DOES NOT AUTOMATICALLY LEAD TO THE CONCLUSION OF THAT THE SA ME WERE MANAGED AFFAIRS OF THE ASSESSEE GROUP. IT IS RELEVANT TO MENTION HERE THAT IF SOMEO NE IS GIVING MONEY TO OTHER ONE THERE IS NO COMPULSION THAT SUCH FUNDS SHOULD REMAIN IN HIS A/C FOR SOME PERIOD AND NO PRUDENT BUSINESS MAN WILL KEEP IDEAL THE FUNDS IN ITS BANK A/C. THE TRANSFER OF FUNDS ACROSS SEVERAL ACCOUNTS IN A SINGLE DAY OR WITHIN FEW DAYS WAS BECAUSE OF THE RE ASON THAT BEFORE INFLOW OF FUNDS WITH THE CONCERNING PARTY THE OUTFLOW OF FUND WAS PREDETERMI NED BUT THE SAME DOES NOT LEAD TO CONCLUDE THAT THE SAME WERE OWN MANAGED FUNDS OF THE ASSESSE E. FURTHER, IF THE SOURCE OF INVESTMENT IN THE HANDS OF INVESTOR COMPANY IS DOUBTFUL THAN THE ADDITION CAN BE MADE IN THE HANDS OF INVESTOR COMPANY NOT IN THE HANDS OF THE ASSESSEE. THE ASSESSEE HAS NO ONUS TO PROVE SOURCE OF SOURCE. RELIANCE IS PLACED ON THE FOLLOWING DECISIO NS. I) CIT VS JAI KUMAR BAKLIWAL (2014) 101 DTR (RAJ) 377 : (2014) 267 CTR (RAJ) 396. HEAD NOTES OF THE CASE IS AS UNDER:- INCOME FROM UNDISCLOSED SOURCES CASH CREDIT GENUINENESS AND CREDITWORTHINESS OF TRANSACTION ADDITION VALIDITY ASSESSEE WAS CARRYING ON BUSINESS OF FINANCE AND E ARNING INCOME BY WAY OF INTEREST DURING COURSE OF WORK OF FINANCING AND MONEY LENDIN G, HAD RAISED LOANS FROM CERTAIN PARTIES AS PER AO MOST OF PARTIES WERE RELATIVES OF ASSESSE E AND THEY WERE SAID TO BE UNSECURED LOANS IT HAD BEEN CLAIMED BY AO THAT IN MOST OF CASES, TH OUGH AMOUNT WAS RECEIVED BY ACCOUNT PAYEE CHEQUE AND MOST OF CR EDITORS WERE ASSESSED TO INCOME TAX ACT AND HAD EVEN PROVIDED THEIR PERMANENT ACCOUNT NUMBE R BUT ON DESIRE OF AO OF PRODUCING SAID PARTIES, NONE OF PARTIES WERE ABLE TO PROVE SOURCE OF AMOUNT ADVANCED TO ASSESSEE THUS, AO MADE ADDITION U/S 68 AS INCOME FROM UNDISCLOSED SOU RCES CIT(A) DELETED ADDITION HOLDING THAT SOURCE OF CASH CREDITORS WAS NOT REQUIRED TO BE PRO VED BY ASSESSEE ONCE IDENTITY, CAPACITY AND GENUINENESS STANDS PROVED ITAT DISMISSED REVENUES APPEAL HELD, ALL CASH CREDITORS HAD AFFIRMED IN THEIR EXAMINATION THAT THEY HAD ADVANCE D MONEY TO ASSESSEE FROM THEIR OWN RESPECTIVE BANK ACCOUNTS THEREFORE, WHEN THERE WAS CATEGORICAL FINDING EVEN BY AO THAT MONEY CAME FROM RESPECTIVE BANK ACCOUNTS OF CREDITO RS, WHICH DID NOT FLOW IN SHAPE OF MONEY, THEN, SUCH ADDITION COULD NOT BE SUSTAINED AND HAD BEEN RIGHTLY DELETED BY BOTH TWO APPELLATE AUTHORITIES THERE WAS NO CLINCHING EVIDENCE IN PRESENT CASE NOR AO HAD BEEN ABLE TO PROVE THAT MONEY ACTUALLY BELONGED TO NONE BUT ASSESSEE H IMSELF ACTION OF AO WAS BASED ON MERE SUSPICION ACCORDINGLY, ITAT, AFTER APPRECIATION OF EVIDENCE H AD RIGHTLY DISMISSED REVENUES APPEAL IT WAS PURE FINDING OF FACT REVENUES APPEAL DISMISSED HELD: ALL CASH CREDITORS HAD AFFIRMED IN THEIR EXAMINATI ON THAT THEY HAD ADVANCED MONEY TO ASSESSEE FROM THEIR OWN RESPECTIVE BANK ACCOUNTS. THEREFORE, WHEN THERE WAS CATEGORICAL FINDING EVEN BY AO THAT MONEY CAME FROM RESPECTIVE BANK ACCOUNTS OF CREDITORS, WHICH DID NOT FLOW IN SHAPE OF MONEY, THEN, SUCH ADDITION COULD NOT BE SUSTAINED A ND HAD BEEN RIGHTLY DELETED BY BOTH TWO APPELLATE AUTHORITIES. THERE WAS NO CLINCHING EVIDE NCE IN PRESENT CASE NOR HAD AO BEEN ABLE TO PROVE THAT MONEY ACTUALLY BELONGED TO NONE BUT ASSE SSEE HIMSELF. ACTION OF AO WAS BASED ON MERE SUSPICION. ACCORDINGLY, ITAT, AFTER APPRECIATI ON OF EVIDENCE HAD RIGHTLY DISMISSED REVENUES APPEAL. WHEN THERE WAS APPRECIATION OF EV IDENCE, THEN IT WAS PURELY FINDING OF FACT AND NO QUESTION MUCH LESS SUBSTANTIAL QUESTION OF L AW COULD BE SAID TO EMERGE OUT OF SAID ORDER ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 15 OF THE TRIBUNAL. THERE WAS NOT ANY INFIRMITY OR PER VERSITY IN THE ORDER OF THE ITAT SO AS TO CALL FOR ANY INTERFERENCE. REVENUES APPEAL DISMISSED. II) CIT VS ORISSA CORPORATION (P) LTD (1986) 159 IT R 79 (SC) THE ASSESSEE HAD GIVEN NAMED AND ADDRESSES OF THE CASH CREDITORS, WHO WERE INCOME TAX ASSESSEES. REVENUE APART FROM ISSUING SUMMON U/S 13 1NOTICES TO CREDITORS, DID NOT PURSUE THE MATTER FURTHER- IT DID NOT EXAMINE CREDITWORTHINES S OF THE CREDITORS- ASSESSEE COULD NOT, UNDER THE CIRCUMSTANCES DO ANYTHING FURTHER. HELD THAT TH E ADDITIONS WERE RIGHTLY DELETED. III) ARAVALI TRADING CO VS INCOME TAX OFFICER (2008 ) 8 DTR (RAJ) 199. ONCE THE EXISTENCE OF THE CREDITORS IS PROVED AND SUCH PERSONS OWN THE CREDITS, THE ASSESSEES ONUS STANDS DISCHARGED AND THE ASSESSEE IS NOT REQU IRED TO PROVE THE SOURCE FROM WHICH THE CREDITORS COULD HAVE ACQUIRED THE MONEY DEPOSITED W ITH HIM. HELD THAT MERELY BECAUSE THE DEPOSITORS EXPLANATION ABOUT THE SOURCES OF MONEY WAS NOT ACCEPTABLE TO THE AO, IT CANNOT BE PRESUMED THAT THE DEPOSITS MADE BY THE CREDITORS IS MONEY BELONGING TO THE ASSESSEE ITSELF. IV) CIT VS HEERA LAL CHAGAN LAL TANK (2002) 157 ITR 281 (RAJ) BURDEN OF THE ASSESSEE STANDS DISCHARGED WHEN THE IDENTITY OF THE CREDITORS IS ESTABLISHED AND HE CONFIRMS THE LOANS. B) FINDING OF LD. AO (PARA 11): - IT CAN BE EASILY SEEN THAT THERE ARE CROSS-HOLDINGS AMONGST SIX COMPANIES, BUT MAJOR SHAREHOLDING IS O F A 7TH COMPANY, I.E., MAYUKH VINTRADE PVT. LTD. THUS , THIS LATTER COMPANY IS THE HOLDING COMPANY OF 6 COMPANIES, NAMED EARLIER. SURPRISINGLY OR INCI DENTALLY, THE HOLDING COMPANY IS ENTIRELY OWNED BY INDIVIDUALS OR HUFS OF CHHABRA FAMILIES. I T IS ALL CLEAR THAT THE WEBS OF COMPANIES THROUGH WHICH TRANSACTIONS HAVE BEEN ROUTED TO CREA TE A CORPORATE VEIL SUBMISSION OF ASSESSEE: - ADMITTEDLY THE ASSESSEE GROUP WERE ENTIRELY OWNING THE SHARES OF THE COMPANY NAMING M/S MAYUKH VINTRADE PVT. LTD AND THIS COMPANY IS MAJOR SHAREHO LDER IN OTHER COMPANIES WHEREFROM THE SUBSTANTIAL AMOUNT OF SHARE CAPITAL WAS RECEIVED TO THE ASSESSEE GROUP. BUT THIS SHAREHOLDING PATTERN IS NOT OF THE YEAR UNDER CONSIDERATION AND THE SAME WAS ALSO AS ON 31.03.2011 TOO. RATHER THIS PROVES THE GENUINENESS AND CREDITWORTHI NESS OF THE TRANSACTION. HERE THE MOOT QUESTION IS FROM WHERE THE INFLOW OF THE FUNDS WAS- WHETHER IT WAS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY OR FROM THE INDEPENDENT FUNDS OF T HE INVESTOR COMPANIES. FURTHER HOLDING OF SHARE CAPITAL BY DIRECTOR OR THEIR FAMILY MEMBERS O F THE ASSESSEE COMPANY IN ONE OF THE COMPANY WHO IS HOLDING THE SHARES IN INVESTOR COMPA NIES DOES NOT MEAN THAT THE FUNDS IN SUCH INVESTOR COMPANY WERE GIVEN BY THE ASSESSEE COMPANY MORE SO WHEN THE FUNDS FROM SUCH COMPANY IS AVAILABLE WITH IT FROM 31.03.2009 I.E. M UCH PRIOR TO THE INVESTMENT MADE IN THE ASSESSEE COMPANY AND ASSESSMENT OF AY 2009-10 OF TH IS COMPANY MADE BY THE DEPARTMENT WHEREIN SUCH FUNDS AND ASSETS/INVESTMENTS AGAINST S UCH FUNDS WAS TREATED AS GENUINE. FURTHER M/S MAYUKH VINTRADE PVT. LTD IS NOT HOLDING COMPANY OF THE OTHER COMPANIES AS ITS HOLDING IN SUCH COMPANIES IS BELOW TO 50%. C) FINDING OF LD. AO (PARA 12): - TO PEEP INTO REALITY OF EACH AND EVERY BANK TRANSAC TION OF MOTISONS GROUP WHICH EMANATED FROM THESE SIX COMPANIES AN ATTEMPT TO LIFT THE CURTAIN OVER T HE SUSPICIOUS TRANSACTIONS. THE ASSESSEE HAD MADE SEVERAL TRANSACTIONS TO HIDE THE ACTUAL PICTUR E AND A SERIES OF TRANSACTIONS WAS MADE TO ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 16 COLOUR ILLEGAL TRANSACTIONS. THE LD AO REPRODUCED T HE SHARE HOLDING PATTERN OF THE VARIOUS COMPANIES AS ON 19/02/2013. SUBMISSION OF ASSESSEE: - FROM THE CHART OF SHARE HOLDING PRODUCED AT PAGE 7 TO 8 OF ASSESSMENT ORDER, IT CAN BE SEEN THE SHAREHOLDING PATTERN OF THE INVESTOR COMPANIES BUT THIS CHART DO NOT HAVE ANY MATERIAL TO SHOW THAT THE INFLOW OF FUNDS WAS FROM THE ASSESSEE COMP ANY. ALL THE COMPANIES ARE INDEPENDENT COMPANY SEPARATELY ASSESSED BY THE SAME AO. THE CHA RT OF SHAREHOLDING PRODUCED BY THE AO IS TOTALLY IRRELEVANT TO ESTABLISH THAT THE UNDISCLOSE D INCOME OF THE ASSESSEE COMPANY WAS INTRODUCED UNDER THE GARB OF SHARE CAPITAL. ALSO THERE IS NO INTRODUCTION OF ANY SUSPICIOUS FU NDS IN THE COMPANIES WHO SUBSCRIBED THE SHARE CAPITAL OF THE ASSESSEE GROUP. THE FINDING OF LD. A O THAT SERIES OF TRANSACTIONS HAS BEEN MADE TO COLOR ILLEGAL TRANSACTION IS NOT BACKED WITH ANY SU PPORTING DOCUMENTS AND THE SAME IS ONLY ON THE BASIS OF PRESUMPTION AND ASSUMPTIONS. THE LD. A O AS A RESULT TO SEARCH OR AS A RESULT OF LONG INQUIRIES FAILED TO PROVE THAT ANY SHORT OF SUSPICI OUS FUNDS HAS BEEN TRANSFERRED TO THE ASSESSEE AND THE FULL PROOF EVIDENCES SUBMITTED BY THE ASSES SEE HAS BEEN DISBELIEVE BY LD. AO MERELY ON SURMISES AND CONJECTURES. D) FINDING OF LD. AO (PARA 13): - IT CAN BE NOTICED FROM THE ABOVE TABLES THAT THE FI RST RECEIPTS IN THE MOTISONS GROUP ENTITIES ARE EVIDENCED ON 12.7.2011. SUBSEQUENTLY, THERE HAVE BE EN RECEIPTS FROM VARIOUS COMPANIES AND UP TO 8.12.2011, THEY HAVE NECESSARILY GONE TO MOTISON S GROUP ENTITIES. IT CAN EASILY BE NOTICED THAT THE PAYMENTS TO SANDEEP CHHABRA AND SANJAY CHH ABRA HAVE BEEN REFLECTED AS LOANS BY THESE COMPANIES. WHILE THE PAYMENTS TO MOTISONS GRO UP COMPANIES HAVE BEEN REFLECTED AS SHARE APPLICATION MONEY BY RECIPIENT COMPANIES. IT IS THUS CLEAR THAT THE TWO DIFFERENTLY REFLECTED TYPE OF TRANSACTIONS IS THE SAME SET OF COMPANIES I NDICATES USE OF COLOURABLE DEVICE. THIS ISSUE HAS BEEN EXAMINED DURING THE SEARCH OPER ATION AND ALL THESE SIX COMPANIES SITUATED AT KOLKATA WERE COVERED THROUGH SURVEY U/S 133A. IT WA S FOUND THAT THESE COMPANIES HAD OPENED BANK ACCOUNTS IN HDFC BANK, ASHOK MARG, JAIPUR IN N OVEMBER, 2011. IN POST-SEARCH PROCEEDINGS, THE STATEMENT OF ACCOUNTS OF THESE SIX COMPANIES IN IDBI, GIRISH PARK, KOLKATA AND HDFC BANK, JAIPUR WERE OBTAINED. THESE STATEMENTS W ERE JUXTAPOSED WITH BANK BOOKS OF TALLY ACCOUNTS OF EACH COMPANY, AND EFFORTS WERE MA DE TO TRACE BACKWARDS EACH AND EVERY TRANSACTION FOR SOURCE, BEGINNING WITH THE BENEFICI ARY MOTISONS GROUP ENTITIES. THE CHARTS AVAILABLE WITH THIS OFFICE, NUMBERED (1) TO (6) SUP RA IN PARA 12, ONE FOR EACH OF THE SIX SHELL COMPANIES, CLEARLY INDICATE SYSTEMATIC TRANSFER OF FUNDS ACROSS SEVERAL ACCOUNTS, AT TIME AS MANY AS SIX ACCOUNTS, IN A SINGLE DAY (OR AT THE MO ST TWO TO THREE DAYS). MAJOR EXERCISE HAS BEEN DONE IN TWO OF THE SIX COMPANIES ALLIANCE TRADECO M PVT. LTD AND EVERSHINE SUPPLIERS PVT. LTD. HOWEVER, IT WOULD BE NOTICED THAT IN OTHER FOU R CASES ALSO, THE PATTERN OF TRANSACTIONS HAS BEEN FOUND TO BE IDENTICAL, WHERE THE SAME SET OF C OMPANIES BANK ACCOUNTS HAVE BEEN USED FOR LAYERING THE TRANSFER OF FUNDS. AT THE REGISTERED OFFICE OF THE KOLKATA BASED COMPA NIES PHYSICALLY IT WAS FOUND THAT THE OFFICE WAS MERELY A ROOM WHERE COPIES OF ITR AND BANK STATEMEN TS OF ALL THE COMPANIES WERE KEPT. ONE EMPLOYEE PRESENT THERE WAS ASKED TO PRODUCE BOOKS O F ACCOUNTS OF THESE COMPANIES. HE INFORMED THAT NO BOOKS OF ACCOUNTS WERE KEPT AT THI S OFFICE AND THAT ONE BANWARI YOGI OF JAIPUR USED TO SEND THE FINAL ACCOUNTS TO HIM FROM JAIPUR, ON THE BASIS OF WHICH THE ITR AND AUDIT ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 17 REPORTS WERE PREPARED BY HIM. HE FURTHER ADMITTED T HAT THE BANK ACCOUNTS OF THESE COMPANIES HAVE BEEN OPENED IN THE HDFC BANK AT JAIPUR. DURING THE COURSE OF SEARCH AT RESIDENCE OF CHHABRA FAMILY THE TALLY ACCOUNTS, MCA COMPLIANCE D ATA AND IMPORTANTLY COMPLETE TALLY ACCOUNTS OF SIX KOLKATA SHELL COMPANIES WAS FOUND I N A PEN DRIVE BELONGING TO SHRI BANWARI LAL YOGI. SUBMISSION OF ASSESSEE: - I) IN THE CHART OF SHAREHOLDING OF INVESTOR COMPANIES GIVEN IN PARA 12 OF THE ASSESSMENT ORDER THE SHAREHOLDING IS GIVEN AS ON TO 19.02.2013 I.E. RELE VANT TO AY 2013-14. IT IS NOT UNDERSTANDABLE THAT SHAREHOLDING OF SOME DATE OF AY 2013-14 IS HOW RELEVANT TO UNDERSTAND THE TRANSACTIONS MADE DURING THE YEAR UNDER CONSIDERATION. HOWEVER I T IS RELEVANT TO MENTION HERE THAT THE SHAREHOLDING MENTION IN THIS PARA WAS SAME IN AY 20 11-12 AND AY 2012-13 (EXCEPT IN THE CASE OF MAYUKH VINTRADE PVT. LTD). IN THE CASE OF M/S MA YUKH VINTRADE PVT. LTD THE MAJOR SHAREHOLDING WAS SAME AS IN AY 2011-12 AND ONLY FUR THER FEW SHARES WERE ISSUED TO EXISTING SHAREHOLDERS IN AY 2012-13. II) ADMITTEDLY DURING THE YEAR UNDER CONSIDERATION THE SHARE APPLICATION FROM INVESTOR COMPANY WAS RECEIVED ON 06.08.2011 BUT THE FUNDS WHICH WERE INV ESTED BY THE INVESTOR COMPANY IN THE ASSESSEE COMPANY WERE BEING OWNED BY IT MUCH PRIOR TO THE INVESTMENT MADE IN THE ASSESSEE COMPANY AND THE INVESTMENT WAS MADE BY IT BY REALIZ ING THE FUNDS PREVIOUSLY INVESTED BY IT AT SOME OTHER PLACE. THIS IS NOT A CASE WHERE SOURCE O F THE FUNDS WAS FROM THE ASSESSEE COMPANY. THE INVESTOR COMPANY WAS OWNING ITS FUNDS MUCH PRIO R TO INVESTMENT MADE IN THE ASSESSEE COMPANY AND THE SAME WAS ASSESSED AND ACCEPTED BY T HE INCOME TAX DEPARTMENT ALSO. ONCE THE SOURCE OF FUNDS WITH THE INVESTOR COMPANY HAS BEEN ACCEPTED BY DEPARTMENT AS GENUINE WHICH WAS OWING BY THEM MUCH PRIOR TO INVESTMENT MADE IN THE ASSESSEE COMPANY THAN HOW THE SAME CAN BE ADDED AS INCOME OF THE ASSESSEE TREATING THE SAME AS NON GENUINE. III) THE AMOUNT GIVEN BY THE INVESTOR COMPANIES TO SHRI SANDEEEP CHHABRA AND SHRI SANJAY CHHABRA WAS LOAN TO THESE PERSONS AND THE AMOUNT GI VEN TO ASSESSEE WAS SHARE APPLICATION MONEY. THE LOAN GIVEN BY THIS COMPANY TO SHRI SANDEEEP CHH ABRA AND SHRI SANJAY CHHABRA WAS ACCEPTED GENUINE BY THE LD. AO HIMSELF AND ONLY THE SHARE AP PLICATION MONEY GIVEN TO THE ASSESSEE COMPANY IS BEING TREATED AS NON GENUINE. FURTHER TH E ALLEGATION OF LD. AO THAT TWO DIFFERENT REFLECTED TYPE OF TRANSACTIONS INDICATES USE OF COL ORABLE DEVICE, THIS IS TO SUBMIT THAT THE TRANSACTIONS HAS BEEN REFLECTED AS PER THEIR TRUE N ATURE. THE AMOUNT GIVEN TO SHRI SANDEEEP CHHABRA AND SHRI SANJAY CHHABRA WAS ACTUALLY LOAN B Y THIS COMPANY AND THE SAME WAS LATER ON REPAID BY THESE PERSONS AND THE SAME WAS ACCEPTE D AS GENUINE BY LD. AO. THE AMOUNT GIVEN BY INVESTOR COMPANY TO THE ASSESSEE COMPANY WAS ACT UALLY SHARE APPLICATION MONEY AND THE SAME WAS DULY SUPPORTED BY SHARE APPLICATION SUBMIT TED BY THIS COMPANY. FURTHER IT IS NOT UNDERSTANDABLE THAT THE LOAN BY THIS COMPANY TO SHR I SANDEEEP CHHABRA AND SHRI SANJAY CHHABRA AND SHARE APPLICATION MONEY TO ASSESSEE COM PANY HOW CAN BE THE COLORABLE DEVICE. IV) AS HIMSELF MENTIONED BY LD. AO IN THIS PARA THAT TH E SURVEY U/S 133A OF INCOME TAX ACT, 1961 WAS CARRIED OUT BY THE INCOME TAX DEPARTMENT OVER T HIS COMPANY AND FROM THE ASSESSMENT ORDER IT IS WELL PROVED THAT DURING THE COURSE OF S URVEY NO EVIDENCE WAS FOUND TO SHOW THAT THE INFLOW OF FUNDS IN THE INVESTOR COMPANY WAS FROM TH E ASSESSEE COMPANY. WHEN THE DEPARTMENT CARRIED OUT INTENSIVE SEARCH OVER THE ASSESSEE GROU P AND SURVEY OVER THE INVESTOR COMPANY AND DURING THE COURSE OF BOTH OPERATIONS NOT A SINGLE E VIDENCE WAS FOUND TO SHOW THAT THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE WAS MANA GED AFFAIRS TO MANAGE ITS UNACCOUNTED FUNDS THAN HOW IT CAN BE PRESUMED THAT THE SHARE AP PLICATION RECEIVED BY THE ASSESSEE IS NON GENUINE. ADMITTEDLY THIS COMPANY OPENED THE BANK AC COUNTS IN HDFC, JAIPUR BUT THE SAME ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 18 WERE BECAUSE OF THE REASON THAT IT PLANNED TO MADE THE INVESTMENT IN THE ASSESSEE GROUP AND ITS DIRECTORS WERE ALSO RESIDING IN JAIPUR, THEREFORE I N ORDER TO BETTER & SMOOTH MANAGEMENT TO FUNDS, THE BANK ACCOUNTS WERE OPENED IN JAIPUR BRAN CH. FURTHER FOR CONSIDERING A TRANSACTION AS GENUINE THE GENUINENESS OF SOURCE OF FUNDS IS TO BE EXAMINED WHICH IS WELL PROVED AS GENUINE IN THIS CASE. THE MAINTAINING BANK A/C BY THIS COMP ANY IN JAIPUR CANNOT BE A BASIS FOR TREATING THE TRANSACTION AS NON GENUINE. V) THE ASSESSEE GROUP WAS NOT MAINTAINING THE BOOKS OF ACCOUNTS OF THE INVESTOR COMPANY AND THE SAME IS EVIDENT FROM THE SEARCH ACTION CARRIED OUT BY TH E DEPARTMENT AS DURING THE COURSE OF WHICH NO PHYSICAL RECORD I.E. BOOKS OF ACCOUNTS, BANK STATEM ENTS ETC. FOUND FROM THE PREMISES OF THE ASSESSEE GROUP AND THE SAME WERE FOUND AT KOLKATTA OFFICE OF THIS COMPANY. ADMITTEDLY SOME SOFT COPIES OF BOOKS OF ACCOUNTS AND MCA COMPLIANCE DATA WERE FOUND IN A PEN DRIVE OF SHRI BANWARI YOGI BUT THE SAME WAS RECEIVED FROM DIRECTO RS OF THIS COMPANY BECAUSE AFTER BEING INVESTED HUGE SHARE CAPITAL BY THIS COMPANY IN THE ASSESSEE GROUP, THE DIRECTORS OF THE ASSESSEE GROUP HAD A MEETING WITH THE DIRECTORS OF THE INVES TOR COMPANY TO CHECK WHETHER THE PROPER RECORDS ARE BEING MAINTAINED BY THIS COMPANY OR PRO PER LEGAL COMPLIANCE HAS BEEN BEING DONE BY THIS COMPANY BECAUSE THE ASSESSEE GROUP RECEIVED SUBSTANTIAL SHARE CAPITAL FROM THIS COMPANY AND ANY KIND OF DEFAULT MADE BY THIS COMPAN Y MAY LEAD TO DIFFICULTY TO THE ASSESSEE GROUP ALSO. THE DATA RELATING TO THIS COMPANY FOUND IN PEN DRIVE OF ACCOUNTANT OF THE ASSESSEE GROUP WAS GIVEN BY DIRECTOR OF INVESTOR COMPANY DUR ING THEIR MEET WITH DIRECTORS OF ASSESSEE COMPANY. THE MOST IMPORTANT THING WHICH THE LD AO I GNORED THAT NO ANY ENTRY WAS FOUND FROM THE PEN DRIVE DATA TO SHOW THE INFLOW OF UNDISCLOSE D MONEY OR CASH FROM THE ASSESSEE COMPANY OR ASSESSEE GROUP TO THIS INVESTOR COMPANY. THEREFO RE, FROM THE IRRELEVANT MATERIAL IT CANNOT BE HELD THAT THE SHARE CAPITAL OF THE ASSESSEE COMPANY WAS NOT GENUINE. E) FINDING OF LD. AO (PARA 14): - IT WAS NOTICED THAT THE MOTISONS GROUP COMPANIES HA VE ALLOTTED SHARES TO KOLKATA BASED COMPANIES IN THE DIFFERENT FINANCIAL YEARS. HOWEVER, UPTO FY 201 0-11 THE ALLOTMENT OF SHARES TO KOLKATA BASED COMPANIES WAS NOT MUCH. THE ALLOTMENT WAS INC REASED MANIFOLD DURING THE FY 2011-12, WHEREIN NEARLY 32 CRORES WORTH OF SUCH SHARES WERE ALLOTTED. IT MAY BE POINTED OUT AT THIS STAGE THAT MOTISONS GROUP COMPANIES ALLOTTED SHARES AT A VERY HIGH PREMIUM TO KOLKATA BASED COMPANIES. ON THE OTHER HAND, THE VERY SAME SHARES IN THE VERY SAME YEAR HAS BEEN ALLOTTED AT VERY NOMINAL PRICES TO THE FAMILY MEMBERS AND OTHER GROUP RELATED CONCERNS. A PERSON WITH PRUDENT MIND CAN EASILY THINK OF THIS FRAUDULENCE. IT IS CLEAR THAT THE KOLKATA BASED COMPANIES PRACTICALLY HAVING NO BUSINESS HAVE ACQUIRED THE SH ARES OF MOTISONS GROUP COMPANIES AT VERY HIGH RATES FOR THE REASONS BEST KNOWN TO THEM. IN C ONNECTION WITH THIS THE DETAILS WERE EXPLORED IN RESPECT OF THE WHEREABOUTS OF THESE COMPANIES. F ROM DETAILED ANALYSIS IT COULD EASILY BE INFERRED THAT ALL OF THE COMPANIES ARE OWNED BY THE EMPLOYEES OF MOTISONS GROUP. SUBMISSION OF ASSESSEE: - I) THE LD. AO IS WRONG IN HOLDING THAT THE MOTISONS GR OUP COMPANIES ALLOTTED THE SHARES TO THE KOLKATTA BASED COMPANIES AT VERY PREMIUM AND THE SA ME SHARES IN THE VERY SAME YEARS WERE ALLOTTED AT VERY NOMINAL PRICES TO THE FAMILY MEMBE RS AND OTHER GROUP RELATED CONCERNS. FROM THE EXAMINATION OF DETAILS OF SHARES ALLOTTED DURIN G THE YEAR BY ALL THE GROUP COMPANIES OF THE ASSESSEE YOUR HONOR WILL FIND THAT DURING THE YEAR UNDER CONSIDERATION NO SHARE WAS ALLOTTED BY THE OTHER COMPANIES OF THE ASSESSEE GROUP TO OTHER GROUP CONCERNS OR FAMILY MEMBERS OF DIRECTORS. ONLY THE ASSESSEE ALLOTTED THE SHARES TO M/S EVERSHINE SUPPLIERS PVT. LTD AS WELL AS TO SHRI SANJAY CHHABRA AND SHRI SANDEEP CHHABRA AND TH E SAME WAS ALLOTTED AT THE SAME RATE. THE SHARES TO EVERSHINE SUPPLIERS PVT. LTD WERE ALL OTTED @ 20 PER SHARES AND SHARES TO SHRI SANJAY CHHABRA AND SHRI SANDEEP CHHABRA WERE ALSO A LLOTTED @ 20 PER SHARES. THUS THIS ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 19 FINDING OF LD. AO IS WRONG, PERVERSE WITH SOLE MOTI VE TO INFLUENCE THE APPELLATE AUTHORITIES BY MENTIONING THE WRONG FACTS. FURTHER THE ALLOTMENT O F SHARES OF THE DIRECTORS OF THE ASSESSEE GROUP AND TO THE INVESTOR COMPANY AT SAME RATE PROV ES THAT THE TRANSACTION IS GENUINE. THE SAME RATE IS BEING TREATED AS GENUINE IN THE CASE O F ALLOTMENT MADE TO SHRI SANJAY CHHABRA AND SHRI SANDEEP CHHABRA AND THE SAME IS BEING TREATED AS UNJUSTIFIED IN THE CASE OF ALLOTMENT MADE TO INVESTOR COMPANY. THE LD AO IS BLOWING HOT AND C OLD IN SAME STREAM. II) THE INVESTOR COMPANY ACQUIRED THE SHARES OF THE ASS ESSEE COMPANY AT HIGH PREMIUM BUT THE SAME FOR THE REASONS AS DESCRIBE IN COMING PARAS AND THE SAM E WAS THEIR INDIVIDUAL COMMERCIAL DECISION. ITAT, MUMBAI BENCH IN THE CASE OF ACIT V/S GAGANDEE P INFRASTRUCTURE PVT. LTD. 2014-T10L- 656-ITAT-MUM OBSERVED THAT ISSUE OF SHARES AT PREMI UM IS ALWAYS A COMMERCIAL DECISION WHICH DOES NOT REQUIRE ANY JUSTIFICATION. FURTHER T HE RATE ON WHICH SHARES ALLOTTED TO THE OUTSIDER INVESTOR COMPANY AND THE DIRECTORS OF THE ASSESSEE COMPANY IS SAME, THEREFORE THE GENUINENESS OF THE RATE ON WHICH THE SHARES WERE IS SUED CANNOT BE DOUBTED. III) THE LD. AO HELD THAT ALL THE INVESTOR COMPANY IS OW NED BY THE EMPLOYEES OF THE MOTISONS GROUP IS AGAIN A FACT WHICH IS CONTRA TO THE MATERIAL AVA ILABLE ON THE RECORD. THE COMPANY IS ALWAYS OWNED BY THE SHAREHOLDERS AND FROM SHAREHOLDING OF THE INVESTOR COMPANIES YOUR HONOR WILL FIND THAT NONE OF THE EMPLOYEE OF THE MOTISONS GROU P IS SHAREHOLDER IN THE INVESTOR COMPANY. IF NONE OF THE EMPLOYEE OF THE MOTISONS GROUP IS OWING THE SHARES OF THE INVESTOR COMPANY THAN HOW THEY CAN BE THE OWNER OF SUCH COMPANY. THUS THI S FINDING OF LD. AO IS ALSO WRONG, PERVERSE WITH SOLE MOTIVE TO INFLUENCE THE APPELLATE AUTHORI TIES BY MENTIONING THE WRONG FACTS. F) FINDING OF LD. AO (PARA 15): - IT IS CLEAR THAT THESE COMPANIES ARE MERELY PAPER C OMPANIES HAVING NO BUSINESS ACTIVITY AND IT IS MERELY NAME LENDING CONCERN PROVIDING ACCOMMODATION ENTRIES TO THE MOTISONS GROUP. WHOLE STATEMENT OF AFFAIRS HAS BEEN DESIGNED TO INTRODUCE MONEY THROUGH BANKING CHANNELS BY THE GROUP IN THE FORM OF SHARE CAPITAL/SHARE PREMIUM. SUBMISSION OF ASSESSEE: - I) THE FINDING OF LD AO PERVERSE. FROM THE DOCUM ENTS SUBMITTED TO THE LD. AO NO WHERE IT PROVES THAT THE INVESTOR COMPANY IS SIM PLY PAPER COMPANY AND PROVIDING ONLY ACCOMMODATION ENTRIES AND THE INVESTMENT MADE BY IT IN THE ASSESSEE COMPANY IS NOT GENUINE. THE FINDING OF THE LD. AO IS BASED ON THE ASSUMPTIO N AND PRESUMPTION. THE ASSESSMENT OF THIS COMPANY WAS MADE BY THE SAME AO FOR AY 2013-14. II) THE RATE OF SHARE WAS DECIDED AFTER DISCUSSI ON OF THE ASSESSEE COMPANY AND INVESTOR COMPANY. THE SHARES WERE ISSUED TO THE INV ESTOR COMPANY AT PREMIUM BECAUSE OF THE REASONS MENTIONED IN COMING PARAS. III) DURING THE COURSE OF SEARCH OVER MOTISONS G ROUP NO DOCUMENTS/EVIDENCE WAS FOUND TO SHOW THAT THIS COMPANY WHO MADE INVEST MENT IN SHARES OF THE ASSESSEE COMPANY WERE FUNDED BY MOTISONS GROUP. THUS, IF THE LD AO I S NOT IN POSSESSION OF ANY POSITIVE MATERIAL AGAINST THE ASSESSEE OR ITS INVESTOR COMPANY TO PRO VE HIS CONTENTION THAN THE ADDITION CANNOT BE MADE MERELY ON GUESS, PRESUMPTION AND ASSUMPTION. FURTHER THERE IS NOTHING POSITIVE IN THE INQUIRIES TO ALLEGE THAT THE ASSESSEE HAS INTRODUCE D ITS OWN UNEXPLAINED MONEY UNDER THE GARB OF SHARE CAPITAL AND SHARE PREMIUM. IV) THE ALLEGATION OF LD. AO THAT THE STATEMENT OF AFFA IRS HAS BEEN DESIGNED TO INTRODUCE MONEY THROUGH BANKING CHANNELS BY THE GROUP IN THE FORM O F SHARE CAPITAL/SHARE PREMIUM IS COMPLETELY WRONG, PERVERSE AND CONTRARY TO THE FACTS AVAILABLE ON RECORD. IN FORGOING PARAS WE HAVE ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 20 SUBMITTED THE DETAIL OF NET WORTH OF THE INVESTOR C OMPANY AND FROM EXAMINATION OF SUCH NET WORTH OF THE INVESTOR COMPANY YOUR HONOR WILL FIND THAT SUCH COMPANY OWING ITS NET WORTH MUCH PRIOR TO INVESTMENT MADE IN THE ASSESSEE COMPANY WH ICH HAS ALSO BEEN ASSESSED AND ACCEPTED BY THE DEPARTMENT IN ITS ASSESSMENT PROCEEDINGS. FU RTHER THE NET WORTH OF THIS COMPANY WAS BEING OWNED FROM THE YEAR WHENIT WAS NO WAY RELATED /CONCERNED FROM ASSESSEE GROUP. THEREAFTER, THERE IS NO CHANGE IN THE NET WORTH OF INVESTOR COMPANY EXCEPT ACCUMULATED PROFIT OF THE YEAR TO YEAR ADDED IN NET WORTH. WHEN THE INVES TOR COMPANY OWING THE NET WORTH PRIOR TO ITS RELATIONSHIP WITH THE ASSESSEE COMPANY THAN HOW IT CAN BE PRESUMED THAT THE ASSESSEE GROUP MANAGED THE FUNDS OF SUCH COMPANY AND DESIGNED ITS STATEMENTS OF AFFAIRS AS PER ITS SWEET WILL. G) FINDING OF LD. AO (PARA 16): - THE FINDING OF LD. AO REGARDING SYSTEMATIC TRANSFER OF FUNDS ACROSS SEVERAL ACCOUNTS BASED ON THE FOLLOWING : - (I) SYSTEMATIC TRANSFER OF FUNDS ACROSS SEVERAL ACC OUNTS, AT TIMES AS MANY AS SIX ACCOUNTS, IN A SINGLE DAY (OR AT THE MOST TWO TO THREE DAYS). THUS , IN MOST OF THE CASES, MONEY WAS TRANSFERRED FROM ONE BANK ACCOUNT TO ANOTHER THROUGH RTGS, FINA LLY REACHING THE BENEFICIARY (MOTISONS GROUP COMPANY) ON THE SAME DAY. (II) THE RESPECTIVE DATE-BANDS HAVE BEEN COLOUR-COD ED ON THE EXCEL SHEETS (1) TO (6) AVAILABLE WITH THIS OFFICE TO HIGHLIGHT THE ABOVE CONCLUSION. (III) INITIALLY, THE SIX COMPANIES HAVE RECEIVED MO NEY FROM DIVERSE SOURCES. BUT GOING BACKWARDS, IT IS OBSERVED THAT MONEY WAS BEING TRANSFERRED FROM T HE ACCOUNTS OF ONLY A FEW COMPANIES FASTNER VINIMAY PVT LTD, WISE MERCHANTS PVT LTD, AL BATROSS DEALERS PVT LTD, SWATI VANIJYA PVT LTD, DOVER DISTRIBUTORS PVT. LTD, OLYMPIC VYAPAAR P VT LTD. (IV) THE MONEY COMING INTO THE ACCOUNTS OF THESE CO MPANIES IS FOUND TO BE COMING MAINLY FROM THREE MAJOR SOURCES (1) FOUR KOLKATA-BASED PROPRI ETORSHIP CONCERNS, (2) BANK ACCOUNTS OF NIBU NAGI /KEVILHULIE SENOTSU, DIMAPUR, AND (3) THR OUGH INSTRUMENTS OF BANKS IN BHUTAN. (V) THE FOUR FIRMS REFERRED-TO ABOVE ARE (A) DURGA ENTERPRISES (B) SHYAM FASHIONS (PROP. RAJESH KR. SINGH) (PROP. AJIT SHARMA) (C) GLOBAL SECURITIES (D) SWASTIK TRADERS (PROP. ASHOK KR. RAI) (PROP. RAJ KR. OSWAL) THE DETAIL DISCUSSION ON ABOVE ISSUE HAS BEEN MADE BY LD. AO AT PAGE 11 TO 14 OF THE ASSESSMENT ORDER. SUBMISSION OF ASSESSEE: - I) IT HAS BEEN HELD THAT SYSTEMATIC TRANSFER OF FUNDS ACROSS SEVERAL ACCOUNTS AT TIMES AS MANY AS SIX ACCOUNTS IN A SINGLE DAY (OR AT THE MOST TWO TO THR EE DAYS) THIS IS TO SUBMIT THAT FROM THIS FINDING NO WHERE IT PROVES THAT THE FUNDS WERE INTRODUCED I N SUCH COMPANIES BY THE ASSESSEE GROUP. WHATEVER AMOUNT RECEIVED BY THE ASSESSEE WAS RECEIV ED THROUGH A/C PAYEE CHEQUES AND SOURCE WITH THE INVESTOR COMPANY WAS ALSO PROVED. IT IS RE LEVANT TO MENTION HERE THAT IF SOMEONE IS INVESTING THE MONEY IN THE ASSESSEE COMPANY HE MUST BE HAVING THE INFLOW OF MONEY FROM SOME SOURCE. WHAT IS THE SOURCE OF INFLOW WITH THE INVES TOR COMPANY AND HOW IT IS MANAGING ITS AFFAIRS IS NOT CONCERN OF THE ASSESSEE. THE TRANSFE R OF FUNDS ACROSS SEVERAL ACCOUNTS IN A SINGLE DAY OR WITHIN FEW DAYS WAS BECAUSE OF THE REASON TH AT THE BEFORE INFLOW OF FUNDS WITH THE CONCERNING PARTY THE OUTFLOW OF FUND WAS PREDETERMI NED BUT THE SAME DOES NOT LEAD TO CONCLUDE ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 21 THAT THE SAME WERE FUNDS OF THE ASSESSEE. NONE OF T HE ABOVE COMPANY IS OWNED BY THE ASSESSEE COMPANY OR GROUP. II) THE EXCEL SHEET WHICH IS BEING DISCUSS BY LD. AO IS NOT IN KNOWLEDGE OF THE ASSESSEE AND THE SAME IS ALSO NOT APPEARING IN ASSESSMENT ORDER TOO. III) THE SIX INVESTOR COMPANIES WHO MADE INVESTMENT IN T HE ASSESSEE GROUP HAVE NOT RECEIVED THE MONIES FROM HIDDEN SOURCES. INITIALLY THESE COMPANI ES RECEIVED THE MONEY FROM SALES OF THEIR OWN SHARES WHICH THEY INVESTED IN PREVIOUS YEARS AN D THEY INVESTED IN THE ASSESSEE COMPANY BY REALIZING THEIR OLD INVESTMENT. THEREFORE THE SOURC E IN THE HANDS OF THE INVESTOR COMPANY WAS NOT HIDDEN. THE LD. AO HELD THAT THE MONEY IN THE S IX COMPANIES WERE TRANSFERRED FROM THE COMPANIES NAMING FASTER VINIMAY PVT LTD, WISE MERCH ANTS PVT LTD, ALBATROSS DEALERS PVT. LTD, SWATI VANIJYA PVT. LTD, DOVER DISTRIBUTORS PVT. LTD AND OLYMPIC VYAPAAR PVT. LTD, THIS IS CONTRARY TO THE FACTS AVAILABLE IN RECORD. FROM THE EXAMINATION OF DECLARATION OF SOURCE OF FUNDS AVAILABLE WITH INVESTOR COMPANY TO INVEST THE SAME IN THE ASSESSEE COMPANY YOUR HONOR WILL FIND THAT NOT A SINGLE AMOUNT WAS RECEIVED BY THE INVEST OR COMPANY FROM THE COMPANIES NAMED BY LD. AO. THE INVESTOR COMPANY RECEIVED THE FUNDS FROM OT HER COMPANIES/PARTIES WHICH ARE NOT IN THE LIST NAMED BY THE LD. AO AND SUCH COMPANIES/PERSONS WERE NOT SUSPECTED BY LD. AO. FURTHER APART FROM THE INVESTMENT MADE BY INVESTOR COMPANY IN THE ASSESSEE GROUP THEY ALSO HAVING OTHER INVESTMENTS/ASSETS WHICH HAS BEEN TREATED AS GENUINE BY THE DEPARTMENT THEN HOW THE INVESTMENT MADE IN THE ASSESSEE GROUP CAN ONLY BE T REATED AS NON GENUINE. EVEN OTHERWISE ALSO, THE ASSESSEE COMPANY HAS NO CONCERN FOR THE SOURCE IN THE HANDS OF THE INVESTOR COMPANY. FURTHER, THE ASSESSEE COMPANY AND MOTISONS GROUP HA S NO CONCERN WITH M/S FASTER VINIMAY PVT LTD, WISE MERCHANTS PVT LTD, ALBATROSS DEALERS PVT. LTD, SWATI VANIJYA PVT. LTD, DOVER DISTRIBUTORS PVT. LTD AND OLYMPIC VYAPAAR PVT. LTD. IV) THE LD. AO MENTIONED THAT MONEY IN THE COMPANIES NA MING FASTER VINIMAY PVT LTD, WISE MERCHANTS PVT LTD, ALBATROSS DEALERS PVT. LTD, SWAT I VANIJYA PVT. LTD, DOVER DISTRIBUTORS PVT. LTD AND OLYMPIC VYAPAAR PVT. LTD COMING FROM SOME P ROPRIETORSHIP CONCERNS, BANK A/C OF NIBHU NEGI/KEVILHULIE, DIMPUR AND THROUGH INSTRUMEN TS AT BANK OF BHUTAN AND IN SUCH ACCOUNTS SOME SUSPECTED FUNDS WERE DEPOSITED. IN THIS REGARD WE MAY SUBMIT AS UNDER: - 1) FIRST OF ALL AS STATED EARLIER THE ASSESSEE GROU P OR ITS INVESTOR COMPANIES NOT RECEIVED ANY AMOUNT FROM ABOVE NAMED COMPANIES, THEREFORE IT IS NOT UND ERSTANDABLE THAT HOW THE ALLEGED SUSPICIOUS FUNDS DEPLOYED IN ABOVE NAMED COMPANIES IS BEING TR EATED AS MANAGED BY THE ASSESSEE AND HOW THE ASSESSEE IS BENEFICIARY OF SUCH FUNDS. IF THE A BOVE NAMED COMPANIED NAMING FASTER VINIMAY PVT LTD, WISE MERCHANTS PVT LTD, ALBATROSS DEALERS PVT. LTD, SWATI VANIJYA PVT. LTD, DOVER DISTRIBUTORS PVT. LTD AND OLYMPIC VYAPAAR PVT. LTD HAVING INFLOW OF SOME SUSPICIOUS FUNDS AND THEN THE SAME IS BEING UTILIZING BY THEM THEN INVES TIGATION OF SUCH FUNDS SHOULD HAVE BEEN MADE IN THE CASE OF SUCH COMPANIES AND THE NECESSARY ACT ION REGARDING TO SUCH SHOULD HAVE BEEN TAKEN AGAINST SUCH COMPANIES AS THESE COMPANIES ARE INDEPENDENT ASSESSEE. THERE IS NO WHISPER IN THE ASSESSMENT ORDER THAT ANY SHORT OF INQUIRIES WERE MADE FROM THESE COMPANIES IN THIS REGARD. THE LD. AO DO NOT HAS POSITIVE MATERIAL AGA INST THE ASSESSEE TO ESTABLISH THAT ALLEGED SUSPICIOUS FUNDS WERE BELONGING TO ASSESSES GROUP. THERE IS NO FINDING AND EVIDENCE AS A RESULT OF SEARCH OR AS A RESULT OF INVESTIGATION THAT ALL CHANNEL SOURCE WERE BEING MANAGED BY THE ASSESSEE GROUP. IF IN SOME INTERMEDIATE CHANNEL SOU RCE, SOME SUSPICIOUS FUNDS HAS BEEN DEPLOYED THAN THE ACTION SHOULD HAVE BEEN TAKEN IN THEIR HANDS. THE ASSESSEE CANNOT BE HELD RESPONSIBLE FOR THE DEFAULT OF THIRD OR FOURTH CHAN NEL. THE ONUS UNDER THE LAW IS TO PROVE SOURCE AND NOT SOURCE OF SOURCE. HERE THE LD AO IS PUTTING THE RESPONSIBILITY OF THE ASSESSEE TO PROVE SOURCE OF ALL SOURCES. ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 22 2) THE LD. AO HELD THAT MONEYS IN THE A/C OF COMPAN IES NAMING FASTER VINIMAY PVT LTD, WISE MERCHANTS PVT LTD, ALBATROSS DEALERS PVT. LTD, SWAT I VANIJYA PVT. LTD, DOVER DISTRIBUTORS PVT. LTD AND OLYMPIC VYAPAAR PVT. LTD WERE DEPOSITED FRO M FOUR PROPRIETORSHIP CONCERNS AND IN BANK A/C OF SUCH CONCERNS THE CASH WAS DEPOSITED. A S MENTIONED EARLIER THE ASSESSEE COMPANY OR ITS INVESTOR COMPANY DID NOT RECEIVE ANY AMOUNT FROM THESE NAMED COMPANIES, THEREFORE THEY ARE NOT RESPONSIBLE FOR THEIR SOURCE OF FUNDS AND T HE NECESSARY ACTION SHOULD HAVE BEEN TAKEN IN THEIR HANDS. THERE IS NO WHISPER IN THE ASSESSMENT ORDER THAT ANY SHORT OF INQUIRIES/ACTION WERE TAKEN ON SUCH COMPANIES TO PROVE THAT THE FUNDS IN SUCH COMPANIES WERE MANAGED FOR THE BENEFIT OF THE ASSESSEE GROUP BY THE ASSESSEE GROUP . IN THE CASE OF THE ASSESSEE THE DEPARTMENT CAN EXAMINE THE SOURCE OF SOURCE IN THE CASE OF ASS ESSEE BUT FURTHER SOURCE OF SUCH SOURCE TILL FOURTH OR FIVE CHANNEL CANNOT BE EXAMINED TO TAKE A CTION AGAINST THE ASSESSEE. IF ON INQUIRY OF SOURCE OF SOURCE, SOMETHING IS FOUND WRONG, THE NEC ESSARY ACTION IN THIS REGARD SHOULD HAVE BEEN TAKEN AGAINST SUCH PERSON IN WHOSE A/C SUCH FU NDS WERE INTRODUCED BUT NOT IN THE CASE OF ASSESSEE AS THERE IS NO CONTRARY EVIDENCE AGAINST T HE ASSESSEE. 3) AS REGARD TO CASH DEPOSITED BY SUCH CONCERNS IN THEIR BANK A/C, LOW ITR/NON FILING OF ITR BY THEIR PROPRIETOR OR SOME THE PROPRIETORSHIP CONCERN BEING MANAGED BY OTHER PERSON THIS IS TO SUBMIT THAT FROM ALL THESE IT CAN BE PRESUMED THAT SOME UN ACCOUNTED/UNEXPLAINED FUNDS HAVE BEEN INTRODUCED IN BANK A/C OF SUCH CONCERNS BUT FROM TH IS HOW IT CAN BE PRESUME/PROVED THAT SUCH FUNDS WERE BELONGING OF THE ASSESSEE AND THE SAME W ERE MANAGED BY THE ASSESSEE. THE NECESSARY ACTION OF SUCH UNEXPLAINED/UNACCOUNTED FU NDS SHOULD HAVE BEEN TAKEN AGAINST THE PERSONS IN WHOSE BANK A/C IT WAS DEPOSITED OR AGAIN ST THE PERSON WHO ADMITTED TO MANAGE SUCH BANK A/C AND BY STRETCH OF NO IMAGINATION THE ACTIO N CANNOT BE TAKEN AGAINST THE ASSESSEE. IF THIS POSITION/PRESUMPTION OF THE DEPARTMENT IS PRESUME T O BE CORRECT THAT IN EACH AND EVERY CASE WHERE A PERSON DEPOSIT THE CASH IN BANK A/C AND THE N AFTER THE SAME UTILIZED FOR ITS OWN VARIOUS PURPOSES THAN THE TAX SHOULD HAVE BEEN COLLECTED FR OM THE PERSONS IN WHOSE HANDS THE FUNDS WERE FINALLY REACHED AND NOT FROM THE PERSON IN WHO SE BANK A/C THE CASH WAS DEPOSITED. BUT AS PER ESTABLISH AND ADMITTED LEGAL POSITION ALWAYS TH E SOURCE OF SUCH CASH DEPOSIT IS BEING ASKED FROM THE PERSON WHO IN OWING THE BANK A/C AND ACTIO N IS BEING TAKEN AGAINST SUCH PERSON AND NOT AGAINST OTHER PERSON TO WHOM SUCH FUNDS WERE GI VEN. IN THESE TYPE OF CASES THE ACTION AGAINST ANOTHER PERSON CAN ONLY BE TAKEN IF ANY POS ITIVE MATERIAL/EVIDENCE AGAINST SUCH PERSON IS FOUND TO SHOW THAT SUCH FUNDS BELONG TO HIM. IN THE CASE OF THE ASSESSEE THERE IS NO EVIDENCE TO PROVE THAT THE CASH DEPOSIT IN BANK A/C OF FOURT H/FIFTH CHANNEL BELONG TO THE ASSESSEE. IF THIS KIND OF PRACTICE IS APPROVED THAN THE OWNER OF THE BANK A/C WILL ENJOY BY DEPOSITING THE UNACCOUNTED/UNEXPLAINED CASH IN BANK A/C FREELY AND ON BEING CAUGHT BY DEPARTMENT TO AVOID THE TAX IMPLICATION, PENALTIES ETC. THEY WILL SHIFT THEIR BURDEN ON SOME OTHER ONE. 4) AS REGARD TO THE STATEMENT OF SHRI SANTOSH CHOU BEY THIS IS TO SUBMIT THAT AS APPARENT FROM THE ASSESSMENT ORDER THIS PERSON ADMITTED TO DEPOSIT TH E CASH IN BANK A/C OF SOME OF THE CONCERNS BUT HE NOWHERE ADMITTED THAT HE DEPOSITED THE UNACC OUNTED CASH IN THE BANK A/C. THERE IS NO FINDING IN BANK A/C IN THIS REGARD. THERE MAY BE PO SSIBILITY THAT HE MAY DEPOSIT THE CASH FROM DISCLOSE SOURCE BUT IT APPEARS THAT NO INVESTIGATIO N HAS BEEN MADE IN THIS REGARD. FURTHER THIS IS TO SUBMIT THAT THE ASSESSEE GROUP OR ITS INVESTOR C OMPANIES HAVE NO CONCERN WITH THE CONCERNS MANAGED BY PERSON NAMING SAMTOSH CHOUBEY. FURTHER I F SANTOSH CHOUBEY IS ADMITTING THAT HE HAS DEPOSITED THE CASH IN BANK A/C OF SUCH CONCERNS THAN PRIMARY ONUS IS ON HIM TO PROVE THE SOURCE OF SUCH CASH AND IF HE IS NOT ABLE TO EXPLAI N THE SOURCE, THE ACTION IN THIS REGARD SHOULD HAVE BEEN TAKEN IN HIS CASE AND NOT IN THE CASE OF THE ASSESSEE. THERE IS NO WHISPER IN THE ASSESSMENT ORDER THAT WHY THOSE CASH DEPOSITS ARE B EING TREATED AS BELONGING TO THE ASSESSEE GROUP AND WHY NO ACTION HAD BEEN TAKEN AGAINST SHRI SANTOSH CHOUBEY. THE ASSESSEE GROUP OR ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 23 ITS INVESTOR COMPANIES DOES NOT KNOW TO ANY SANTOSH CHOUBEY AND HAVE NO CONCERN FROM THIS PERSON. 5) SIMILARLY AS REGARD TO CASH DEPOSITED IN BANK A /C OF NIBHU NAGI/KEVIHULIE SENTOSHU AND NON FILING OF ITR BY THESE PERSONS DOES NOT AUTOMATICAL LY LEAD TO THE CONCLUSION THAT THE SAME MONEY BELONGS TO THE ASSESSEE GROUP. NO INQUIRIES IN THIS REGARD WERE MADE FROM THESE TWO PERSONS AND THE BURDEN WAS SHIFTED OVER THE ASSESSEE SIMPLY ON THE GROUND THAT THESE PERSONS ARE NOT FILING THEIR ITR. THE FINDINGS OF LD AO THAT THEIR NAME AND IDENTITIES ARE BEING USED BY THE ASSESSEE FOR OPERATING BANK A/C WHERE HUGE CASH TRA NSACTIONS ARE BEING UNDERTAKEN IS WITHOUT ANY BASIS OR MATERIAL. THE ONUS WAS ON THE DEPARTME NT TO PROVE THAT THE APPARENT IS NOT REAL AND THE SAID ONUS WAS NOT DISCHARGED. THE PRIMARY O NUS TO PROVE THE SOURCE OF CASH DEPOSITED IN BANK A/C IS ON THESE PERSONS AND NO INQUIRIES WE RE MADE BY DEPARTMENT FROM THESE TWO PERSONS OR IMMEDIATE BENEFICIARY OF FUNDS OF SUCH B ANK A/C. IF STILL IT IS PRESUMED THAT THERE BANK A/C WERE BEING MANAGED BY SOME OTHER ONE THAN WHO W AS THAT PERSON AND WHY HE WAS DOING SO. FOR FINDING OUT THIS TRUTH THE DETAIL INQUIRIES SHO ULD HAD BEEN MADE BY THE DEPARTMENT BUT SINCE THE DEPARTMENT CARRIED OUT THE SEARCH OVER THE ASSE SSEE GROUP AND THE SEARCH PARTY HAD PRE SET MIND THAT THE SHARE CAPITAL OF THE ASSESSEE GROUP W AS BOGUS THEREFORE THEY TWISTED THE FACTS AND INQUIRES. FURTHER FROM THE FINDING OF THE ASSESSMEN T ORDER NO WHERE IT PROVES THAT THE CASH DEPOSITED IN THESE BANK A/C WAS FROM UNDISCLOSED SO URCE. THERE MAY BE POSSIBILITY THAT THE CASH MAY HAVE BEEN DEPOSITED OUT OF DISCLOSED SOURCES. B UT THE DEPARTMENT HAS NOT MADE ANY INQUIRIES IN THIS REGARD FROM HOLDERS OF THESE BANK A/CS. 6) REGARDING FUNDS TRANSFERRED IN A/C OF COMPANIES NAMING FASTER VINIMAY PVT LTD, WISE MERCHANTS PVT LTD, ALBATROSS DEALERS PVT. LTD, SWAT I VANIJYA PVT. LTD, DOVER DISTRIBUTORS PVT. LTD AND OLYMPIC VYAPAAR PVT. LTD THROUGH DEMAND DRA FTS OF BHUTAN NATIONAL BANK AND DRUNK PNB BANK LTD IT IS NOT CLEAR FROM THE ASSESSMENT OR DER THAT WHY THE SAME ARE BEING TREATED AS NON GENUINE. THERE IS NO FINDING IN THE ASSESSMENT ORDER THAT SOME SUSPICIOUS FUNDS WERE INTRODUCED TO OBTAIN SUCH DEMAND DRAFTS AND IF IT I S PRESUMED TO BE SO THAN STILL THERE NO CONTRARY MATERIAL TO SHOW THAT THE SAME WAS BELONGI NG TO THE ASSESSEE. THERE IS NO INQUIRY THAT HOW SUCH DEMAND DRAFTS WERE ORIGINATED AND WHO MANA GED SUCH AFFAIRS. WHAT WAS THE SOURCE OF FUNDS TO OBTAIN THE BANK DRAFTS. THIS ALSO PROVES T HAT THE INQUIRIES ON WHICH THE DEPARTMENT IS RELYING ARE TOTALLY IRRELEVANT FOR THE DETERMINATIO N OF THE SHARE CAPITAL RECEIVED BY THE ASSESSEE IS OWN FUND OF THE ASSESSEE GROUP. H) IT IS AGAIN RELEVANT TO MENTION HERE WHATEVER FINDING/INQUIRIES DISCUSSED ABOVE WAS NEVER BOUGHT IN THE KNOWLEDGE OF THE ASSESSEE AND T HE SAME WAS NEVER CONFRONTED FROM THE ASSESSES. NOW IT IS SETTLED LAW THAT EVIDENCES FILE D BY ASSESSEE ARE TO BE EVALUATED AND BE ACCEPTED AND THE EXCEPTION IS WHEN A.O. COLLECTS MA TERIAL IN SUPPORT OF HIS FINDING, CONFRONTS IT TO THE ASSESSEE, GIVES HIM REASONABLE OPPORTUNITY O F REBUTTING SUCH MATERIAL AND AFTER CONSIDERING REPLY OF ASSESSEE PASSES A SPEAKING ORD ER. THE A.O. WAS REQUIRED TO CONFRONT THE ASSESSEE WITH ANY MATERIAL COLLECTED AT THE BACK OF THE ASSESSEE AND IN CASE OF STATEMENT OF THIRD PARTY RECORDED AT THE BACK OF THE ASSESSEE, OPPORTU NITY OF CROSS EXAMINATION HAS TO BE OFFERED TO THE ASSESSEE FAILING WHICH THE SAID MATERIAL STATEM ENT ETC WILL BE RENDERED UNRELIABLE AND ADDITION MADE ON SUCH MATERIAL/STATEMENT WILL BE IL LEGAL AS HELD IN : - ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 24 A) R.B. MITTAL V CIT 246 ITR 283 (AP) B) KHANDELWAL CONSTRUCTIONS V CIT 227 ITR 900 (GUJ ) C) CIT V ORISSA CORPORATION PVT. LTD. 158 ITR 78(S C) D) CIT V INDER KUMAR 2014-TIOL-791-HC-RAJ-IT IT IS A FUNDAMENTAL PRINCIPLE OF NATURAL JUSTICE TH AT NO MATERIAL SHOULD BE RELIED UPON AGAINST A PART Y WITHOUT GIVING HIM AN OPPORTUNITY OF EXPLAINING THE SAME. THE RIGHT TO KNOW THE MATERIALS ON WHICH A.O. IS GOING TO TAKE A DECISION IS A PART OF THE RIGHT TO DEFEND ON SELF. THE A.O. IS OBLIGED TO PROVIDE A REASONABLE OPPORTUNITY OF BEING HEARD. REASONABLE OPPORTUNITY DOES NOT MERELY MEAN AN OPPORTUNITY GIVEN BUT OPPORTUNITY MUST BE R EASONABLE. THERE SHOULD BE ADEQUATE NOTICE. DUTY OF ACT FAIRLY IS PART OF THE PROCEDURE . FAIR HEARING MEANS THAT THE PARTY MUST BE AWARE OF THE CASE AGAINST HIM AND HE MUST ALSO KNOW WHAT EVIDENCE IS BEING CONSIDERED TO DRAW A PRESUMPTION AFFECTING HIM. I) IN THIS REGARD WE FURTHER PLACE RELIANCE ON FOLLOWI NG DECISIONS: - I) THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF BARKHA SYNTHETICS LTD V ACIT 155 TAXMAN 289, HAS HELD THAT ONUS ON ASSESSEE IS TO PROVE THE EXISTENCE OF THE PARTY AND IN CASE THE MONEY IS RECEIVED THROUGH BANKING CHANNEL THEN IT IS NOT THE BURDEN ON THE ASSESSEE TO PROVE THAT SUCH PARTY HAS INVESTED HIS OWN MONEY OR SOME OTHER PERS ON MADE INVESTMENT IN THE NAME OF THAT PERSON. BURDEN ON ASSESSEE IS TO ESTABLISH THE TRAN SACTION BETWEEN ASSESSEE AND CREDITOR. IF THE REVENUE FEELS THAT MONEY INVESTED BELONGS TO ASSESS EE THAN ONUS SHIFTS ON IT. ONUS IS TO BE DISCHARGED BY COLLECTING EVIDENCES. MENTIONING OF M ODUS OPERANDI IS NOT SUFFICIENT AND IT WILL NOT TAKE THE PLACE OF EVIDENCE. II) THE HONBLE JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT V/S JAI KUMAR BAKLIWAL 366 ITR 217 HAS REFERRED TO THE DEPOSIT OF CASH IN THE ACCOUNT OF THE CREDITOR AND OBSERVED AS UNDER: - CERTAINLY, DEPOSIT OF CASH AND IMMEDIATE TRANSFER OF CHEQUE OR CLEARANCE OF THE CHEQUE WITHIN A DAY OR TWO CASTS A DOUBT AS THE TRANSACTION APPEARS TO BE SOME WHAT DOUBTFUL BUT SUSPICION HOWSOEVER STRONG IT MAY BE IS NOT SUFFICIENT ITSELF . IN THE CASE OF THE ASSESSEE, THE ASSESSEE HAS PROVI DED ALL DETAILS AND COMPANIES, WHICH APPLIED FOR SHARES ARE FILING I. TAX RETURN AND INVESTMENT IS R EFLECTED IN THEIR BALANCE SHEET. THE HONBLE RAJ HIGH COURT IN THE CASE OF JAI KUMAR BAKLIWAL (S UPRA) HAS HELD THAT ASSESSEE IS NOT REQUIRED TO PROVE THE SOURCE OF SOURCE. THE HONBLE JURISDIC TIONAL HIGH COURT IN THE CASE OF JAI KUMAR BAKLIWAL (SUPRA) HAS REFERRED TO SOME OBSERVATIONS FROM SOME DECISIONS AND THESE ARE REPRODUCED AS UNDER: HONBLE APEX COURT IN THE CASE OF CIT V DAULAT RAM RAWATMUL [1973] 87 ITR 349 HELD AS UNDER: THE ONUS TO PROVE THAT THE APPARENT IS NOT THE REA L IS ON THE PARTY WHO CLAIMS IT TO BE SO. AS IT WAS THE DEPARTMENT WHICH CLAIMED THAT THE AMOUNT OF FIXED D EPOSIT RECEIPT BELONGED TO THE RESPONDENT FIRM EVEN THOUGH THE RECEIPT HAD BEEN ISSUED IN THE NAME OF BISWANATH, THE BURDEN LAY ON THE DEPARTMENT TO PROVE THAT THE RESPONDENT WAS THE OWN ER OF THE AMOUNT DESPITE THE FACT THAT THE RECEIPT WAS IN THE NAME OF BISWANATH. A SIMPLE WAY OF DISCHARGING THE ONUS AND RESOLVING THE CONTROVERSY WAS TO TRACE THE SOURCE AND ORIGIN OF T HE AMOUNT AND FIND OUT ITS ULTIMATE DESTINATION. SO FAR AS THE SOURCE IS CONCERNED, THE RE IS NOT MATERIAL ON THE RECORD TO SHOW THAT THE AMOUNT COME FROM THE COFFERS OF THE RESPONDENT- FIRM OR THAT IT WAS TENDERED IN BURRABAZAR CALCUTTA BRANCH OF THE CENTRAL BANK, ON NOVEMBER 15 , 1944, ON BEHALF OF THE RESPONDENT. AS REGARDS THE DESTINATION OF THE AMOUNT, IT HAS ALREA DY BEEN MENTIONED THAT THERE IS NOTHING TO SHOW THAT IT WENT TO THE COFFERS OF THE RESPONDENT. ON THE CONTRARY, THERE IS POSITIVE EVIDENCE THAT THE AMOUNT WAS RECEIVED BY BISWANATH ON JANUARY 22, 1946. IT WOULD THUS FOLLOW THAT BOTH AS ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 25 REGARDS THE SOURCE AS WELL AS THE DESTINATION OF TH E AMOUNT, THE MATERIAL ON THE RECORD GIVES NO SUPPORT TO THE CLAIM OF THE DEPARTMENT. THE GAUHATI HIGH COURT, IN THE CASE OF NEMI CHAND V . CIT [2003] 264 ITR 254/[2004] 136 TAXMAN 213 HELD THAT IT IS NOT THE BUSINESS OF THE ASSESSE E TO FIND OUT THE SOURCE OR SOURCES FROM WHERE THE CREDITOR HAD ACCUMULATED THE AMOUNT WHICH HE HA D ADVANCED IN THE FORM OF LOAN TO THE ASSESSEE AND SECTION 68 CANNOT BE READ TO SHOW THAT IN THE CASE OF FAILURE OF SUB-CREDITORS TO PROVE THEIR CREDITWORTHINESS THE AMOUNT ADVANCED AS LOAN TO THE ASSESSEE BY THE CREDITOR SHALL HAVE TO BE READ AS COROLLARY AS THE INCOME FROM UND ISCLOSED SOURCE OF THE ASSESSEE HIMSELF. THIS COURT, IN THE CASE OF KANHAILAL JANGID V. ASST T. CIT [IT APPEAL NO.85 OF 2001, DATED 2.1.2007] HELD THAT THE BURDEN DOES NOT GO BEYOND TO PUT THE ASSESSEE UNDER AN OBLIGATION TO FURTHER PROVE THAT WHERE FROM THE CREDITOR HAS GOT OR PROCURED TH E MONEY TO BE DEPOSITED OR ADVANCED TO THE ASSESSEE. THE FACT THAT THE EXPLANATION FURNISHED B Y THE CREDITOR ABOUT THE SOURCE FROM WHERE HE PROCURED THE MONEY TO BE DEPOSITED OR ADVANCED TO T HE ASSESSEE IS NOT RELEVANT FOR THE PURPOSES OF REJECTING THE EXPLANATION FURNISHED BY THE ASSES SEE AND MAKE ADDITIONS OF SUCH DEPOSITS AS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES BY INVOKING SEC.68 UNLESS IT CAN BE SHOWN BY THE DEPARTMENT THAT SOURCE OF SUCH MONEY COMES FROM THE ASSESSEE HIMSELF OR SUCH SOURCE COULD BE TRACED TO THE ASSESSEE ITSELF. THIS COURT, IN THE CASE OF ARAVALI TRADING CO. V IT O [2010] 187 TAXMAN 338 (RAJ.) HAS GONE TO THE EXTENT OF OBSERVING THE FACT THAT THE EXPLANATION F URNISHED BY THE FOUR CREDITORS ABOUT THE SOURCES WHERE FROM THEY ACQUIRED THE MONEY WAS NOT ACCEPTABLE BY THE REVENUE COULD NOT PROVIDE NECESSARY NEXUS FOR DRAWING INFERENCE THAT THE AMOUNT ADMITTED TO BE DEPOSITED BY THESE FOUR PERSONS BELONGED TO THE ASSESSEE. THE AS SESSEE HAVING DISCHARGED HIS BURDEN BY PROVING THE EXISTENCE OF THE DEPOSITORS AND THE DEP OSITORS OWING THEIR DEPOSITS, HE WAS NOT FURTHER REQUIRED TO PROVE SOURCE OF SOURCE. AS OBSERVED HEREIN ABOVE, THOUGH U/S 68, AO IS FREE TO SHOW WITH THE HELP OF THE ENQUIRY CONDUCTED BY HIM INTO THE TRANSACTION WHICH HAS TAKEN PLACE BETW EEN THE CREDITOR AND THE SUB-CREDITOR THAT THE TRANSACTION BETWEEN TWO WERE NOT GENUINE AND TH AT THE SUB-CREDITOR HAD NO CREDITWORTHINESS, IT WILL NOT NECESSARILY MEAN THAT LOAN ADVANCED BY THE SUB-CREDITOR TO THE CREDITORS WAS INCOME OF THE ASSESSEE FROM UNDISCLOS ED SOURCES UNLESS THERE IS EVIDENCE DIRECT OR CIRCUMSTANTIAL, TO SHOW THAT THE AMOUNT WHICH HAD B EEN ADVANCED BY THE SUB-CREDITOR TO THE CREDITOR HAD ACTUALLY BEEN RECEIVED BY THE SUB-CRED ITOR FROM THE ASSESSEE. THE LOGICAL INTERPRETATION WILL BE THAT WHILE THE A SSESSEE HAS TO PROVE AS SPECIAL KNOWLEDGE I.E. FROM WHERE HE HAS RECEIVED THE CREDIT AND ONCE HE DISCLO SED THE SOURCE FROM WHICH HE HAS RECEIVED MONEY, HE MUST ALSO ESTABLISH THAT SO FAR AS HIS TR ANSACTION WITH HIS CREDITOR IS CONCERNED, THE SAME IS GENUINE AND HIS CREDITOR HAD THE CREDITWORT HINESS TO ADVANCE THE LOAN WHICH THE ASSESSEE HAD RECEIVED. WHEN THE ASSESSEE DISCHARGES THE BURDEN SO PLACED ON HIM, ONUS THEN SHIFTS TO THE AO, IF THE AO ASSESSES THE SAID LOAN AS THE INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCE HE HAS TO PROVE EITHER BY DIRECT EVIDENCE OR INDIRECT/CIRCUMSTANTIAL EVIDENCE THAT THE MONEY WHICH THE ASSESSEE RECEIVED FROM THE CREDITOR ACTUALLY BELONG TO AND WAS OWNED BY THE ASSESSEE HIMSELF. IF THERE IS DIRECT EVIDENCE TO SHOW THAT THE LOAN R ECEIVED BY THE ASSESSEE ACTUALLY BELONG TO THE ASSE SSEE, THERE WILL BE NO DIFFICULTY IN ASSESSING SUCH AMOUN T AS THE INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCE BUT IF THERE IS NO DIRECT EVIDEN CE IN THIS REGARD, THEN THE INDIRECT OR CIRCUMSTANTIAL EVIDENCE HAS TO BE CONCLUSIVE IN NAT URE AND SHOULD POINT TO THE ASSESSEE AS THE ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 26 PERSON FROM WHOM THE MONEY HAS ACTUALLY FLOWN TO TH E HANDS OF THE CREDITOR AND THEN FROM THE HANDS OF THE CREDITOR TO THE HANDS OF THE CREDITOR. III) THE LD. DELHI BENCH OF INCOME TAX TRIBUNAL IN THE CASE OF ITO V M/S. RELIANCE MARKETTING PVT. LTD. 2015-TIOL-319-TAT-DEL AT PARA 16 OBSERVED AS U NDER: WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PART IES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE IT IS AN ADMITTED FACT THAT THE ASSESSEE FURNISHED THE EVIDENCES TO PROVE THE IDENTITY OF THE CREDITORS/SH ARE APPLICANTS BY FURNISHING THEIR PAN NUMBER AND COPY OF ACKNOWLEDGMENT OF INCOME-TAX RETURN. TH E AMOUNT ON ACCOUNT OF SHARE APPLICATION WAS RECEIVED THROUGH BANKING CHANNEL, COPIES OF THE CONFIRMATION ALONGWITH AFFIDAVIT OF THE PARTIES WERE FURNISHED. THE ASSESSEE ALSO FURNISHED THE COPY OF SHARE APPLICATION FORMS, COPY OF FORM NO.2 FILED WITH REGISTER OF COMPANIES (ROC), S HOWING ALLOTMENT OF SHARES TO THE APPLICANTS. THEREFORE, THE ASSESSEE DISCHARGED THE ONUS CAST UPON IT, AS SUCH THE LD. CIT (A) WAS FULLY JUSTIFIED IN DELETING THE IMPUGNED ADDITION M ADE BY THE AO. FURTHER MORE THE LD. CIT (A) WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE RELIED UPON THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS DWA RKADSHISH INVESTMENT PVT. LTD. (SUPRA) AND THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CA SE OF CIT VS LOVELY EXPORTS (P) LTD. (SUPRA), THEREFORE, WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE LD. CIT (A) AND ACCORDINGLY DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. IV). THE HONBLE APEX COURT IN THE CASE OF LALCHAND BHAGAT AMBICA RAM V CIT 37 ITR 288 HAS HELD THAT NO ADDITION CAN BE MADE ON THE BASIS OF S URMISES AND CONJECTURES. IN THIS CASE THE A.O. MADE ADDITION ON THE BASIS OF SURROUNDING CIRCUMSTA NCES AND ENTERTAINED A SUSPICION THAT ASSESSEE WAS INDULGING IN SMUGGLING OF FOOD GRAINS TO BENGAL AS WAS THE NOTORIETY OF GRAIN MERCHANTS. THE ASSESSEE COULD NOT BE SAID TO BE IND ULGING IN SMUGGLING WITHOUT AN IOTA OF EVIDENCE. THE ADDITION COULD NOT BE MADE AS THE FIN DING THAT SUM OF HIGH DENOMINATION NOTES WAS SECRETED PROFITS WAS BASED ON SURMISES, SUSPICI OUS AND CONJECTURES. V). THE HONBLE JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT V AKJ GRANITES P. LTD 301 ITR 298 OBSERVED THAT SHARE APPLICATION MONEY GIVEN BY VARI OUS PERSONS CANNOT BE PRESUMED THAT SAME BELONGS TO ASSESSEE AND CANNOT BE ASSESSED IN HIS H ANDS AS UNDISCLOSED SOURCES UNLESS SOME NEXUS IS ESTABLISHED THAT SHARE APPLICATION MONEY F OR AUGMENTING THE INVESTMENT IN BUSINESS HAS FLOWED FROM THE ASSESSEES OWN MONEY. VI). THE HONBLE DELHI HIGH COURT IN THE CASE OF CI T V VALUE CAPITAL SERVICES P LTD. 307 ITR 334 (DELHI) HELD THAT THERE IS ADDITIONAL BURDEN ON THE DEPARTMENT TO SHOW THAT EVEN IF SHARE APPLICANTS DID NOT HAVE THE MEANS TO MAKE INVESTMEN T, THE INVESTMENT MADE BY THEM ACTUALLY EMANATED FROM THE COFFERS OF THE ASSESSEE SO AS TO ENABLE IT TO BE TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE. VII) THE HONBLE DELHI HIGH COURT IN THE CASE OF DI VINE LEASING AND FINANCE LTD. 299 ITR 268 MENTIONED THAT THERE IS PRACTICE OF CONVERSION OF U NACCOUNTED MONEY THROUGH THE CHANNEL OF INVESTMENT IN SHARE CAPITAL. BUT THE ASSESSEE SHOUL D NOT BE HARASSED TO PROVE THE NEGATIVE. IF THE A.O. HARBOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSC RIPTION HE IS EMPOWERED TO CARRY OUT THROUGH INVESTIGATION BUT IF THE A.O. FAILS TO UNEA RTH ANY WRONG OR ILLEGAL DEALINGS, HE CAN NOT OBDURATELY ADHERE TO HIS SUSPICIONS AND TREAT THE S UBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE ASSESSEE. VIII) THE HONBLE DELHI HIGH COURT AFTER CONSIDERIN G VARIOUS JUDGMENTS IN THE CASE OF CIT V KAMDHENU STEEL AND ALLOYS LTD. 361 ITR 220 HELD THA T IF ADEQUATE EVIDENCE/MATERIALS GIVEN BY ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 27 ASSESEE PRIMA FACIE DISCHARGE THE BURDEN AND IF SUC H EVIDENCE IS NOT DISCARDED OR POURED THAT EVIDENCE HAS BEEN CREATED THEN NO ADDITION SHOULD B E MADE. THE MATTER IS NOT TO BE SET ASIDE AS THERE IS NO PROCEDURAL DEFECT OR IRREGULARITY AND N O FRESH INNINGS TO A.O. FOR HIS NEGLIGENCE IF HE FAILS TO COLLECT INFORMATION. IX) SHARES WERE ISSUED ON PREMIUM TO EMPLOYEES HAVI NG MEAGER TAXABLE INCOME THOUGH COMPANY DID NOT HAVE FIXED ASSETS BUT OF IDENTITY OF SHARE HOLDERS PROVED THEN ONUS ON REVENUE TO ESTABLISH N BRING MATERIAL TO PROVE THAT DOCUMENTS FILED BY ASSESSEE BE NOT ACCEPTED. REF. CHARTERED MOTORS PVT LTD. V ACIT (ITAT AHM) 2014-TI OL-610-ITAT-AHM. X) THE LD. JAIPUR TRIBUNAL IN THE CASE OF DCIT V M/ S KAMDHENU STEEL AND ALLOYS LTD. 2014-TIOL- 709-ITAT-JAIPUR HAD AN OCCASION TO CONSIDER A CASE WHERE SEARCH OPERATIONS WERE CONDUCTED AND THE COMPANY HAS ISSUED SHARES ON PREMIUM. THE L D. JAIPUR TRIBUNAL IN PARA 6 & 7 HAS MENTIONED AS UNDER: AT THE OUTSET, THE LEARNED A.R. FOR THE ASSESSEE AR GUED THAT IN ASSESSEES OWN CASE IN ITA NO.972/2009 CIT VS. KAMDHENU STEEL AND OTHER COMPANY FOR A.Y. 2 004-05 = 2012-TIOL-236-HC-DEL-IT HELD THAT THE ASSESSEE HAD SUBMITTED THE PARTICULAR S OF REGISTRATION OF THE APPLICANT COMPANY, THE CONFIRMATION FROM THE SHARE APPLICANTS, BANK AC COUNT DETAILS FROM WHICH PAYMENT THROUGH ACCOUNT PAYEE CHEQUES, IT HAS BEEN HELD BY THE HON BLE DELHI HIGH COURT THAT THE ASSESSEE HAD DISCHARGED ITS INITIALLY ONUS. WITH THE REGISTRATIO N OF THE COMPANY, THE IDENTITY HAS BEEN ESTABLISHED, THE APPLICANT COMPANY WAS HAVING BANK ACCOUNT, IT HAD MADE THE PAYMENTS THROUGH ACCOUNT PAYEE CHEQUES. IT IS FURTHER HELD THAT IT W OULD NOT AUTOMATICALLY FOLLOW THAT THE SAID MONEY BELONGS TO THE ASSESSEE AND BECOME UNACCOUNTE D MONEY. ACCORDING THE HONBLE HIGH COURT, THE ASSESSEE APPEARS TO BE CORRECT ON THIS A SPECT. THE HONBLE COURT FELT THAT SOMETHING MORE, WHICH WAS NECESSARY AND REQUIRED TO BE DONE B Y THE ASSESSING OFFICER, WAS NOT DONE. THE ASSESSING OFFICER FAILED TO CARRY HIS SUSPICION TO LOGICAL CONCLUSION BY FURTHER INVESTIGATION. THE LEARNED A.R. FURTHER DRAWN OUR ATTENTION ON THE FIN DINGS GIVEN BY THE HONBLE COURT THAT JUST BECAUSE OF THE CREDITOR/SHARE APPLICANT COULD NOT B E FOUND AT THE ADDRESSES GIVEN, IT WOULD NOT GIVE THE REVENUE A RIGHT TO INVOKE SECTION 68 OF TH E IT ACT WITHOUT ANY ADDITIONAL MATERIAL TO SUPPORT SUCH A MOVE. THE HONBLE DELHI HIGH COURT A LSO NOT ALLOWED TO REMIT BACK THE ISSUE TO THE ASSESSING OFFICER TO MAKE FURTHER INQUIRY ON AD DITION MADE U/S 68 OF THE ACT ON THE GROUND THAT THERE IS NO REASON TO SEND BACK TO THE ASSESSI NG OFFICER, ONLYH SUBSTANTIAL QUESTION OF LAW CAN BE DECIDED AND SECOND INNING CANNOT BE ALLOWED TO THE REVENUE. THE LEARNED AR FURTHER SUBMITTED THAT DURING THE COURSE OF SEARCH, NO INDI SCRIMINATING DOCUMENTS WERE FOUND AT THE BUSINESS PREMISES OF THE ASSESSEE. THE ASSESSING OF FICER ISSUED NOTICE U/S 133(6) OF THE ACT TO THE SHARE SUBSCRIBERS, WHICH HAS BEEN SERVED BY THE POSTAL AUTHORITIES. THE LEARNED ASSESSING OFFICER MADE INQUIRY FROM THE FIELD OFFICE AT ITS B ACK WITHOUT INFORMING THEM AND USED THE INFORMATION AGAINST THE ASSESSEE BUT THE LEARNED CI T (A) HAD PROVIDED OPPORTUNITY ON IT. THUS, THE APPELLANT HAD DISCHARGED HIS ONUS AND PROVED TH E IDENTITY OF THE PERSONS BY FOLLOWING COMPANY MASTER DETAILS OF ROC, COPY OF PAN NO. CONF IRMATION. THE APPELLANT HAD RECEIVED THESE SUBSCRIPTIONS THROUGH BANKING CHANNELS, THERE FORE, THESE TRANSACTIONS ARE GENUINE. COPY OF RETURN FILED SHOWS THAT SUBSCRIBERS HAVE SUFFICI ENT FUND TO APPLY THE SHARE SUBSCRIPTION. IT CAN BE PROVED FROM THE BANK ACCOUNT OF THE SUBSCRIBERS ON WHICH JAWAHAR MARKET HAD BEEN MENTIONED. THEREFORE, HE PRAYED TO CONFIRM THE ORDE R OF THE LEARNED CIT(A). WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT IS UNDISPUTED THAT DURING THE COURSE OF SEARCH, RELEVANT TO A.Y. 2009-10, NO INCRIMINATING DOCUMENTS WERE FOUND IN KAMDHENU GROU P CASES. THE APPELLANT FILED CONFIRMATION OF PAN NO. ADDRESSES OF THE SUBSCRIBER S & COMPANY MASTER DETAIL OF ROC. THE SHARE CAPITAL WAS RECEIVED THROUGH PROPER BANKING C HANNELS. THE ASSESSING OFFICER COLLECTED ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 28 INFORMATION U/S 133(6) OF THE ACT, WHICH WAS SERVED ON ALL THE SUBSCRIBERS; THEREFORE, THESE ARE THE SUFFICIENT PROOF OF IDENTITY, GENUINENESS AND C REDITWORTHINESS OF THE SUBSCRIBERS. THE LEARNED ASSESSING OFFICER HEAVILY RELIED UPON THE INSPECTOR S REPORT, WHICH WAS AGAINST THE NATURAL JUSTICE AS THE COPY WAS PROVIDED ON 06.06.2011 TO T HE APPELLANT WHEREAS ASSESSMENT ORDER WAS COMPLETED BY THE LEARNED ASSESSING OFFICER ON 26.12 .2010. JAWAHAR MARKET IS EVIDENT FROM THE COPY OF BANK ACCOUNT OF SUBSCRIBER, ON WHICH THIS A DDRESS HAD BEEN MENTIONED AS WELL AS ON MASTER DETAIL OF ROC. THE SHARE CAPITAL WAS SUBSCRI BED IN F.Y. 2005-06 AND INQUIRIES WERE MADE IN F.Y. 2010-11. THERE IS A TIME GAP OF NEAR A BOUT 5 YEARS, THE SHARE APPLICANT MIGHT HAVE CHANGED THEIR ADDRESSES, WHICH COULD BE VERIFIED FR OM THE ROC BY THE ASSESSING OFFICER TO SUBSTANTIATE HIS FINDINGS, WHICH HAS NOT BEEN DONE BY HIM. THE LEARNED CIT (A) HAS CALLED FOR REMAND REPORT FROM THE ASSESSING OFFICER ON FURNISH ING OF COPY OF BANK ACCOUNT OF M/S MEGATRONICS SYSTEMS PVT. LTD. AT THE TIME OF APPELL ATE PROCEEDINGS. FURTHER THE HONBLE DELHI HIGH COURT HAS DECIDED ASSESSEES OWN CASE ON SIMIL AR FACTS IN ITS FAVOUR IN A.Y. 2006-07. THE LEARNED CIT D.R. HAS NOT CONTROVERTED THE FINDINGS GIVEN BY THE LEARNED CIT (A). THEREFORE, WE UPHELD THE ORDER OF THE LEARNED CIT (A). J) THUS IN VIEW OF ABOVE SUBMISSION THIS IS TO SU BMIT THAT THERE IS NO COGENT REASON WITH LD. AO EITHER AS A RESULT OF SEARCH OVER THE ASSESS EE AS WELL AS ON INQUIRIES CARRIED OUT BY THE DEPARTMENT TO PRESUME THAT THE ASSESSEE INTRODUCED ITS UNACCOUNTED MONEY IN BOOKS OF ACCOUNTS IN THE FORM OF SHARE CAPITAL/SHARE PREMIUM. THE INT ERMEDIATE COMPANIES/PERSONS ARE SEPARATE INCOME TAX ASSESSEE AND HAVING THEIR OWN NET WORTH, OWN SOURCE OF FUNDS MUCH PRIOR TO THE INVESTMENT MADE IN THE ASSESSEE COMPANY AND IF SOME SUSPICIOUS FUNDS HAD BEEN INTRODUCED IN ACCOUNTS OF SUCH COMPANIES THEN THE EXPLANATION OF SUCH FUNDS SHOULD HAVE BEEN CALLED FROM CONCERNING PERSON/COMPANY AND IN CASE OF FAILURE TO DO SO THE ACTION SHOULD HAVE BEEN TAKEN IN THE CASE OF CONCERNING PERSON. INSTEAD OF DOING SO THE DEPARTMENT ADOPTED A SHORT CUT METHOD OF TREATING SUCH SUSPICIOUS MONEY AS UNEXPLAINED MONEY OF THE ASSESSEE AND ADDED THE SAME INCOME OF THE ASSESSEE WITHOUT CARRYING NECESSARY I NQUIRIES OR TAKING NECESSARY ACTION AGAINST SUCH PERSONS BY JUSTIFYING ITS ACTION ON THE BASIS OF SOME IRRELEVANT INQUIRIES. THERE IS NO CASE OR EVIDENCE WITH THE DEPARTMENT TO PRESUME THAT THE ASSESSEE HAS INTRODUCED ITS EXPLAINED MONEY IN ACCOUNTS OF SUCH INVESTOR COMPANY. K) IN THIS REGARD WE WILL LIKE TO DRAW YOUR KIND ATTENTION TOWARDS THE ORDER PASSED BY DCIT-CC-2, JAIPUR IN THE CASE OF M/S MAYUKH VINIMAY PVT. LTD FOR AY 2009-10 WHEREIN THE ADDITION OF RS. 10,54,95,000/- WAS BY LD. AO IN RET URN INCOME OF THE ASSESSEE BY PASSING AN ORDER U/S 143(3) READ WITH SECTION 263 OF INCOME TA X ACT TREATING THE SHARE PREMIUM AS BOGUS AND ADDED THE SAME TOTAL INCOME OF THAT ASSESSEE. T HE SHARE PREMIUM WAS ADDED AS INCOME OF THE THAT ASSESSEE BUT CONSEQUENTLY THE INVESTMENTS & OTHER ASSETS PURCHASED BY UTILIZING SUCH SHARE PREMIUM WERE TREATED GENUINE. FOLLOWING THE SAME ANALOGY IN THE CASE OF THE AS SESSES COMPANY IF THE SOURCE OF FUNDS WITH THE INVESTOR COMPANIES IS BEING TREATED AS NON GENUINE THAN THE ADDITIONS OF THE SAME SHOULD HAVE BEEN MADE IN THE HANDS OF SUCH COM PANIES IN THE INITIAL YEAR WHEREIN THE SOURCE OF FUNDS WERE GENERATED AND NOT IN THE HANDS OF THE ASSESSEE COMPANY. IN THE CASE OF THE ASSESSEE THE SOURCE OF FUNDS WITH INVESTOR COMPANY HAS BEEN WELL PROVED AND THE SAME IS OUT OF REALIZATION FROM PREVIOUS INVESTMENTS/ASSETS WHICH HAS BEEN CONSIDERED AS EXPLAINED BY THE DEPARTMENT ITSELF IN THE ASSESSMENT ORDER OF SUCH C OMPANY. ONCE THE DEPARTMENT ITSELF TREATED INVESTMENTS/ASSETS OF A COMPANY AS GENUINE AND IF S UCH COMPANY IS REINVESTING THE FUNDS REALIZED FROM SUCH INVESTMENTS/ASSETS THAN HOW THE SAME CAN BE TREATED AS NON GENUINE. ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 29 5. AFTER BEING DOUBTED THE CREDITWORTHINESS AND GE NUINENESS OF THE TRANSACTIONS ON THE BASIS OF REASONS/INQUIRIES/ANALYSIS DISCUSS IN PARA 4 ABOVE THE LD. AO FURTHER DOUBTED THE CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION S FOR THE FOLLOWING REASONS AS GIVEN IN PARA 17 (A TO C) AND PARA 18 OF THE ASSESSMENT ORDER: - I) THE ASSESSEE COMPANY WAS INCORPORATED ON 07.11 .2005 WITH THE SUBSCRIBE CAPITAL OF RS. 1,00,000/- ONLY. THE ASSESSEE COMPANY RECEIVED THE HUGE SHARE PREMIUM JUST AFTER FEW YEAR OF ITS INCORPORATION. II) AS PER THE AUDITED P&L ACCOUNT AND BALANCE SH EET THE ASSESSEE COMPANY DID NOT HAVE ANY BUSINESS WHAT SO EVER. III) PERUSAL OF THE BALANCE SHEET OF THE ASSESSEE COMPANY REVEALED THAT THERE WERE NO PHYSICAL ASSETS/ASSETS ARE NOT IN COMMENSURATE TO V ALUE OF SHARE WITH THE COMPANY WITHER IN THE FORM OF FIXED ASSETS, PLANT & MACHINERY ETC. IN THE ABOVE BACKGROUND THE RECEIPT OF SHARE CAPITA L RS. 45,00,000/- AND PREMIUM TO THE TUNE OF RS. 45,00,000/- DURING THE YEAR UNDER CONSIDERATION WAS NOT ONLY ABNORMAL BUT ALSO APPEARED TO BE A PART OF A WELL PLANNED EXERCISE OF TAX EVASION AS DISCUSSED EARLIER. REGARDING THESE FINDINGS/OBSERVATIONS OF LD. AO W E MAY SUBMIT AS UNDER: - I) ADMITTEDLY THE ASSESSEE COMPANY RECEIVED HUGE SHARE PREMIUM JUST AFTER FEW YEARS OF ITS INCORPORATION BUT THE SAME DOES NOT AUTOMATICALLY M AKE THE SHARE PREMIUM AS NON GENUINE AND TAXABLE IN THE HANDS OF THE ASSESSEE. THE INVESTMEN T BY THE INVESTEE COMPANIES WAS MADE AFTER BEING CONVINCED WITH THE FUTURE BUSINESS PLANNING O F THE ASSESSEE COMPANY. THE ASSESSEE COMPANY WAS OWING A VALUABLE LAND IN THE HEART OF C ITY AT SEEWAD AREA, BAPU NAGAR, JAIPUR AND PLANNING A COMMERCIAL PROJECT THEREON. THE ASSE SSEE COMPANY WAS EXPECTING GOOD REVENUE IN NEAR FUTURE FROM THIS COMMERCIAL PROJECT AND THE INVESTOR COMPANY WAS CONVINCED TO BE PARTNER OF SUCH PROJECT, THEREFORE IT INVESTED THE FUNDS IN THE ASSESSEE COMPANY. THUS THE INVESTMENT MADE BY THE INVESTEE COMPANY IN SHARES O F THE ASSESSEE COMPANY ON THE BASIS OF FUTURE BUSINESS EXPANSION PLANS OF THE ASSESSEE COM PANY AND OUTCOME THERE FROM. II) ADMITTEDLY WHEN THE SHARE PREMIUM WAS RECEIVED, THE RE WAS NO BUSINESS IN THE ASSESSEE COMPANY IN COMMENSURATE TO SHARE PREMIUM BUT AS STA TED EARLIER THE INVESTMENT WAS MADE BY THE INVESTEE COMPANY IN SHARES OF THE ASSESSEE COMP ANY ON THE BASIS OF FUTURE BUSINESS EXPANSION PLANS OF THE ASSESSEE COMPANY AND OUTCOME THEREFROM. FURTHER THE ASSESSEE COMPANY IS ONE OF THE GROUP COMPANY OF MOTISONS GROUP. THE MOTISONS GROUP IS VERY PRESTIGIOUS AND WELL KNOW GROUP OF THE NORTHERN PART OF INDIA, THER EFORE THE INVESTOR COMPANY INVESTED THE FUNDS IN THE ASSESSEE COMPANY ON THE GOODWILL OF THE MOTI SONS GROUP AFTER KNOWING THEIR FUTURE PLANS AND FUTURE EARNINGS. THEREFORE THE SHARE CAPITAL/SH ARE PREMIUM INVESTED BY INVESTOR COMPANY WAS NOT ON THE BASIS OF CURRENT AFFAIRS OF THE ASSE SSEE COMPANY BUT THE SAME WAS RESULT OF FUTURE BUSINESS EXPANSION PLANS COUPLED WITH GOODWILL OF M OTISONS GROUP. III) ADMITTEDLY WHEN THE SHARE WERE ISSUED THE BOOK VALU E OF THE ASSETS OF THE ASSESSEE COMPANY WAS NOT IN COMMENSURATE TO THE VALUE OF THE SHARES BUT WHILE MAKING THE INVESTMENTS THE CURRENT MARKET VALUE OF THE ASSETS AND FUTURE POTENTIALITY & PROFITABILITY OF THE PROJECT/ASSETS ARE ALSO ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 30 TAKEN INTO CONSIDERATION AND THEN THE INVESTMENTS A RE MADE. THERE ARE LOTS OF COMPANIES WHICH ISSUE THE SHARES IN MARKET THROUGH IPO AND THE SHAR ES OF SUCH COMPANIES ARE SUBSCRIBED ON THE BASIS OF THEIR DECLARATION REGARDING THEIR FUTURE B USINESS PLANNING FOR WHICH THE FUNDS RAISED IN IPO. THUS THE EXISTING FIXED ASSETS OF THE COMPANY ALWAYS NOT TO BE THE CRITERIA FOR DECIDING THE INVESTMENT IN SHARES BY INVESTOR COMPANIES. FURTHER APART FROM THE SHARES ISSUED TO THE INVESTOR COMPANY THE SHARES TO SHRI SANJAY CHHABRA AND SHRI SANDEEP CHHABRA WERE ALSO ALLOTTED DURING THE SAME YEAR AT THE SAME RATE WHICH WAS TRE ATED BY LD. AO AT FAIR VALUE AND JUSTIFIED THAN THERE SHOULD BE NO REASON TO TREAT THE ALLOTME NT MADE AT SAME RATE TO THE INVESTOR COMPANY AS NOT JUSTIFIED. THE ASSESSEE COMPANY IS ALSO IN BUSINESS OF REAL ES TATE AND IT IS AN ADMITTED FACT THAT MARKET VALUE O F IMMOVABLE ASSETS INCREASE AND BOOK VALUE DOES NOT R EPRESENT THE REAL VALUE. SHARES OF REAL ESTATE COMPANIES COMMAND PREMIUM. THE REASONABLENES S OF SHARE PREMIUM IS JUSTIFIABLE FROM THE FOLLOWING DETAILS :- REAL ESTATE COMPANY FACE VALUE HIGH 2010 HIGH 2011 5 YEAR PERIOD HIGH LOW DLF 2 322 270 392 104 INDIA BULLS REAL 2 207 137 212 42 UNITECH 2 87.8 66.9 97 8 SOBHA DEVLOPERS 10 367 272 558 189 HDIL 10 290 183 296.3 26.9 GODREJ ENTERPRISES 5 361 372 378 155 BRIGADE ENTERPRISES 10 148 94 173 40.9 IV) REGARDING OBSERVATION OF LD. AO THAT SHARE CAPITAL AND PREMIUM APPEARED TO BE A PART OF A WELL PLANNED EXERCISE OF TAX EVASION AS DISCUSSED EARLIE R THIS IS TO SUBMIT THAT TAXING EVENT AROSE WHEN THE INCOME IS EARNED AND THE TAX EVASION IS AR OSE WHEN THE UNDISCLOSED INCOME IS GENERATED. IN THE FORGOING PARAS THE LD. AO HIMSELF DOUBTED THE SHARE PREMIUM ON THE GROUND THAT THE ASSESSEE COMPANY DID NOT HAVE ANY BUSINESS SO EVER IN COMMENSURATE TO THE SHARE PREMIUM. WHEN THE ASSESSEE COMPANY IS NOT HAVING AN Y SUCH BUSINESS WHEREFROM THIS MUCH OF INCOME COULD BE EARNED THAN QUESTION OF TAX EVASION THEREON DOES NOT ARISE. THE HONBLE APEX COURT IN THE CASE OF CIT V SATI OI L UDYOG LTD 372 ITR 746 AT PAGE 761 OBSERVED: THE BURDEN OF PROVING THAT THE ASSESSEE HAS ATTEMPT ED TO EVADE TAX ON THE REVENUE BY ESTABLISHING FACT S AND CIRCUMSTANCES FROM WHICH A REASONABLE INFERENCE CAN BE DRAWN THAT THE ASSESSEE HAS, IN FACT, ATTEMPTED TO EVADE TAX LAWFULLY PAID BY IT. THEREFORE IN VIEW OF FINDING GIVEN IN THESE PARAS BY THE LD. AO IT HAD TO BE PROVED FIRST BY THE DEPARTMENT THAT THE ASSESSEE WAS HAVING SOME INCOME ON WHICH IT HAS NOT PAID THE TAX AND THE SAME BROUGHT IN BOOKS OF ACCOUNTS IN THE FORM OF SH ARE CAPITAL & PREMIUM THEREON. BUT IN THE INSTANT CASE THE DEPARTMENT COULD NOT PROVE ANY KIN D OF UNDISCLOSED SOURCE OF INCOME OF THE ASSESSEE AS A RESULT OF SEARCH OVER ASSESSEE AS WEL L AS DURING THE COURSE OF ASSESSMENT PROCEEDINGS. AS A RESULT OF SO CALLED LONG INQUIRIE S/ANALYSIS THE DEPARTMENT COULD NOT EVIDENTIARY PROVED THAT THE ASSESSEE COMPANY MANAGE D ITS FUNDS WITH INVESTOR COMPANY TO BROUGHT THE SAME IN BOOKS OF ACCOUNTS IN THE FORM O F SHARE CAPITAL & PREMIUM THEREON MORE SO WHEN THE INVESTOR COMPANY HAVING ITS OWN SUFFICIENT FUNDS TO INVEST IN THE ASSESSEE COMPANY MUCH PRIOR TO INVESTMENT MADE IN THE ASSESSEE COMPA NY AND APART FROM INVESTMENT MADE IN ASSESSEE GROUP HAVING OTHER INVESTMENTS/ASSETS WHIC H WERE TREATED AS GENUINE BY THE ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 31 DEPARTMENT. FURTHER IN THE ASSESSMENT OF SUCH INVES TOR COMPANIES THE SOURCE OF FUNDS AND APPLICATION OF FUNDS IS BEING TREATED AS GENUINE BY THE DEPARTMENT THAN HOW THE SAME CAN BE TREATED AS NON GENUINE IN THE CASE OF ASSESSEE COMP ANY. RELIANCE IS PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF COMMISSIONER O F INCOME TAX VS SMT. P. K. NOORJAHAN 237 ITR 570 (SC) AND CIT VS BHARAT ENGINEERING AND CONSTRUCTION CO. (1972) 83 ITR 187 (SC) 6. THE LD. AO BY DOUBTING THE CREDITWORTHINESS AND GENUINENESS OF THE SHARE CAPITAL/SHARE PREMIUM IN ABOVE PARAS ISSUED A SHOW CAUSE NOTICE D ATED 06.02.2015 (COPY AT PB PAGE 99 TO 102) TO THE ASSESSEE FOR TREATING THE SHARE CAPITAL /PREMIUM AS INCOME OF THE ASSESSEE ON THE FOLLOWING GROUNDS: - A) SHARE PREMIUM/SHARE CAPITAL PAID BY INVESTOR COM PANIES IS NOT JUSTIFIED ON ANY ACCOUNT AND IT IS CLEAR THAT ENTIRE MONEY HAS BEEN INTRODUCED IN T HE ASSESSEE COMPANY IN THE GARB OF SHARE PREMIUM. THE PURPOSE AND JUSTIFICATION OF CHARGING THE SHARE PREMIUM IN EXCESS OF THE JUSTIFIABLE AMOUNT, WHICH IN THIS CASE CANNOT BE MO RE THAN RS.10/- PER SHARE, IS ABSENT FROM THE ABOVE EXERCISE OF ISSUE AND SUBSCRIPTION OF SHARES AT A PREMIUM OF RS. 10 PER SHARE. B) THE DETAILED ENQUIRIES REVEALED THAT MOST OF THE COMPANIES ARE KOLKATTA BASED. DIRECTORS OF THESE COMPANIES ARE THE EMPLOYEES OF MOTI SONS GROU P OR THE FAMILY MEMBERS OF CHHABRA FAMILY. DETAILED ANALYSIS SHOWED THE FOLLOWING FACT S: (I) ALL THE DIRECTORS WERE RESIDENTS OF JAIPUR (II) INTERNET SEARCH SHOWED THAT DIRECTORS OF THES E KOLKATTA BASED COMPANIES ARE RELATED TO MOTISONS GROUP COMPANIES THROUGH EMPLOYMENT OR OTHE RWISE (III) ITDMS AND ITD SEARCH ON PAN OF THESE DIRECTO RS CORROBORATED THE GIVEN ADDRESSES TO A LARGE EXTENT (IV) RESIDENTIAL ADDRESS OF RAJEEV JAIN WAS THE SA ME AS THAT OF MOTISONS SHARES PVT. LTD., MENTIONED ON THE VISITING CARD OF HARIDWAR OFFICE AS BRANCH H EAD. (V) ALL THESE DIRECTORS APPOINTED BETWEEN 12TH AND 17TH OCTOBER 2011 WHICH WAS MORE THAN A COINCIDENCE (THE PREVIOUSLY EXISTING DIRECTORS RESI GNED IN FEBRUARY 2012) (VI) THE EMAIL ID GIVEN ON MCA WEBSITE FOR ALL THE COMPANIES IS COMMON AND THE SAME IS FOR MOTISONS GROUP COMPANIES. THE COMPLIANCE OFFICER MS . NEHA JAIN, COMPANY SECRETARY IS COMMON BETWEEN THESE AND MOTISONS GROUP COMPANIES, INDICATING ABSOLUTE CONTROL OF MOTISONS GROUP UPON THESE KOLKATA BASED COMPANIES. (VII) REGISTERED ADDRESS OF ALL THE COMPANIES IS T HE SAME, WHICH HAS BEEN CHANGED ON 01.03.2012. (VIII) TWO OF THE SAID COMPANIES INFORMATION ON MC A WEBSITE WERE EXAMINED IN DETAIL. M/S. ALLIANCE TRADECOM & M/S. EVERSHINE SUPPLIERS PVT. LTD WERE I NCORPORATED ON 25.11.2008 AND 05.01.2009 RESPECTIVELY. THE INFLOW OF CAPITAL UPON INCORPORATION WAS THROUGH SHARE SOLD AT A VERY HIGH PREMIUM AND THEREAFTER THE SAID CAPITAL W AS CLAIMED TO BE INVESTED IN UNQUOTED SHARES WORTH RS.11.06 CRORES AND RS.10.39 CRORES RE SPECTIVELY. (IX) ALL ABOVE FACTORS INDICATE SYSTEMATIC AND DE LIBERATE CREATION OF A COLURABLE DEVICE TO INTRODUCE SHARE CAPITAL INTO MOTISONS GROUP COMPANI ES. ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 32 7. IN RESPONSE TO SHOW CAUSE NOTICE THE ASSESSEE FI LED ITS REPLY VIDE LETTER DATED 13.02.2015 (COPY AT PB PAGE 103 TO 105). THE SUBMISSION OF THE ASSES SEE ON THE OBSERVATIONS OF LD. AO AS MENTIONED ABOVE IN PARA 6 ABOVE IS AS UNDER: - A) THE SHARE PREMIUM WAS DECIDED BY THE COMPANY AND INVESTOR MUTUALLY AND SHARE APPLICANT COMPANY HAVE AGREED TO PAY THIS SHARE PREMIUM. THER E WAS NO BAR TO ISSUE SHARES ON PREMIUM UNDER COMPANIES ACT AND INCOME TAX ACT FOR THE PERI OD UNDER RELEVANT. FURTHER THE LD. AO HELD THAT THE ------IT IS CLEAR THAT ENTIRE MONEY HAS B EEN INTRODUCED IN THE ASSESSEE COMPANY IN THE GARB OF SHARE PREMIUM---- BUT THE LD. AO DID NOT C LEAR THAT WHAT WAS THE SOURCE OF SUCH MONEY WITH THE ASSESSEE WHICH IT INTRODUCED IN THE GARB O F SHARE PREMIUM. THE SHOW CAUSE NOTICE AS WELL AS ASSESSMENT ORDER IS COMPLETELY SILENT ON TH IS ISSUE. WITHOUT HAVING SOME MONEY IT CANNOT BE INTRODUCE IN BOOKS OF ACCOUNTS AND FOR HAVING TH E MONEY THERE SHOULD BE SOME UNEXPLAINED SOURCE OF INCOME. IN THE CASE OF ASSESSEE THE DEPAR TMENT AS A RESULT OF SEARCH AS WELL AS DURING ASSESSMENT PROCEEDINGS OR AS A RESULT OF INVESTIGAT ION COULD NOT PROVE THE SOURCE OF INCOME OF THE ASSESSEE WHEREFROM THIS MUCH OF MONEY WAS EARNE D, THEREFORE THE FINDING OF LD. AO ON THIS ISSUE IS TOTALLY INCORRECT AND DOES NOT MAINTAINABL E IN THE EYE OF LAW. THE ALLEGATION OF LD. AO IS PATENTLY WRONG, WITHO UT ANY BASIS AND MERELY ON SURMISES AND CONJECTURES. HONBLE JUSTICE HIDAYATULLAH OF THE SU PREME COURT IN THE CASE OF SREELEKHA BANERJEE VS CIT [1963] 49 ITR 112 (SC); 120 OBSERVE D THAT THE INCOME TAX DEPARTMENT CANNOT BY MERELY REJECTING UNREASONABLY A GOOD EXPLANATION , CONVERT GOOD PROOF INTO NO PROOF HONBLE SUPREME COURT IN THE CASE OF UMA CHARAN SHA W & BROS CO VS CIT 37 ITR 271 HAS HELD THAT THE SURMISES AND CONJECTURES, AND THE CON CLUSION IS THE RESULT OF SUSPICION WHICH CANNOT TAKE THE PLACE OF PROOF. HONBLE PUNJAB & H ARYANA HIGH COURT IN THE CASE OF CIT VS ANUPAM KAPOOR (2008) 299 ITR 179 (P & H) ALSO HELD THAT SUSPICION, HOWSOEVER STRONG CANNOT TAKE THE PLACE OF LEGAL PROOF. B) REGARDING THE INQUIRIES WHICH ARE BEING DISCUSS IN THE SHOW CAUSE NOTICE THIS IS TO SUBMIT THAT WHATEVER INQUIRED BEING DISCUSS BY LD. AO WAS NOT I N KNOWLEDGE OF THE ASSESSEE THAT WHAT SORT OF INQUIRIES HAS BEEN MADE BY THE DEPARTMENT AND WH AT ARE THE OUTCOMES OF SUCH INQUIRIES. THEREFORE THE ASSESSEE REQUESTED FROM THE LD. AO TO PROVIDE THE DETAILS OF INQUIRIES CONDUCED IN THIS REGARD ALONG WITH SUPPORTING DOCUMENTS BUT THE SAME NOT PROVIDED TO THE ASSESSEE. HOWEVER ON THE ISSUE RAISED BY THE LD. AO ON THE BA SIS OF SO CALLED INQUIRIES WE SUBMIT AS UNDER: - I) THE ABOVE FINDING OF THE LD AO IS NOT RELEVANT AT A LL IN DECIDING THE ISSUE OF CREDITWORTHINESS OF THE INVESTOR COMPANY AND GENUINENESS OF THE TRANSAC TIONS. EVEN, IF IT IS PRESUMED THAT THE INVESTOR COMPANY IS UNDER THE CONTROL OF THE DIRECT ORS OF THE ASSESSEE, THEN ALSO THE TRANSACTION CANNOT BE TREATED AS NOT GENUINE AS THE MAIN ISSUE IS AVAILABILITY OF FUNDS IN THE HANDS OF THE INVESTOR COMPANY AND IF THAT IS EXPLAINABLE THEN NO QUESTION IS ARISE FOR TREATING THE SHARE CAPITAL AS NOT GENUINE. (II) THE LOW CREDITABILITY OF DIRECTORS OF ALLOTTEE COMPANY, THEIR RELATIONSHIP WITH MOTISONS GROUP ETC. HAVE NO RELEVANCE FOR EXAMINING THE GENUINENES S OF SHARE CAPITAL AND CREDITWORTHINESS OF THE INVESTOR COMPANY AS IN THE CASE OF ASSESSEE IT IS WELL PROVED BY DOCUMENTARY EVIDENCE THAT THE AMOUNT AGAINST SHARE APPLICATION MONEY WAS RECE IVED THROUGH GENUINE SOURCE OF FUNDS WITH INVESTOR COMPANY AND THE AMOUNT WAS ADJUSTED AGAINS T ALLOTMENT OF SHARES. THE SOURCE OF FUNDS WITH THE INVESTOR COMPANY WHICH IT INVESTED IN THE ASSESSEE COMPANY WAS ALSO WELL EXPLAINED GENUINELY. IF DEPARTMENT HAVE SOME DOUBT REGARDING GENUINENESS OF FUNDS WITH INVESTOR COMPANY THE NECESSARY INVESTIGATION OF SUCH FUNDS S HOULD HAD BEEN MADE IN THE CASE OF INVESTOR COMPANY AND THE NECESSARY ACTION SHOULD HAD BEEN TA KEN IN ITS CASE. IT IS RELEVANT TO MENTION ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 33 HERE THAT APART FROM THE INVESTMENT MADE IN THE ASS ESSEE GROUP THE INVESTOR COMPANY WAS HAVING OTHER ASSETS/INVESTMENT WHICH WERE ALSO MANA GED BY THIS COMPANY AT ITS OWN. IT IS ALSO RELEVANT TO NOTICE HERE THAT WHY ONLY THE INVESTMEN T MADE BY THIS THOSE INVESTMENT COMPANIES IN THE ASSESSEE GROUP IS BEING TREATED AS NON GENUINE AND OTHER INVESTMENT/ASSETS OF THOSE COMPANY IS BEING TREATED AS GENUINE. THIS SHOWS THA T THE ASSESSMENT ORDER WAS PASSED BY LD. AO WITH SETTLED MINDSET THAT THE AMOUNT IS TO BE AD DED AS INCOME OF THE ASSESSEE. (III) FURTHER WHATEVER INQUIRIES/ANALYSIS DISCUSS B Y LD. AO IN HIS SHOW CAUSE NOTICE HAVE NO RELEVANCE IN THE CASE OF THE ASSESSEE BECAUSE FROM SUCH DISCUSSION ONLY IT CAN BE PROVED (NOT CONCLUSIVELY) THAT THE EMPLOYEES OF ASSESSEE GROUP WAS MANAGING AFFAIRS OF SOME OF THE COMPANIES WHO MADE THE INVESTMENT IN SOME YEARS IN THE ASSESSEE/COMPANIES OF ASSESSEE GROUP BUT SUCH INQUIRIES NOWHERE PROVES THAT THE FUNDS WI TH SUCH COMPANIES WAS NOT FROM THEIR OWN INDEPENDENT SOURCES AND THE SAME WAS INTRODUCED BY THE ASSESSEE GROUP. IN THE INSTANT CASE FOR ADDING THE SHARE CAPITAL/PREMIUM AS INCOME OF THE A SSESSEE THE DEPARTMENT HAS TO PROVE THAT THE AMOUNT SO RECEIVED WAS REVENUE RECEIPT OF THE ASSES SEE AND IN THE INSTANT CASE THE DEPARTMENT COULD NOT PROVE THE SAME AS A RESULT OF SEARCH PROC EEDINGS OVER THE ASSESSEE GROUP OR DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR AS A RESULT OF INVESTIGATION/ANALYSIS. WITHOUT PROVING THE SOURCE OF INCOME OR WITHOUT PROVING THAT AMOUNT SO RECEIVED IS INCOME OF THE ASSESSEE THE SAME CANNOT BE TREATED AS INCOME OF THE ASSESSEE ME RELY ON PRESUMPTION, ASSUMPTION AND SUSPICIOUS. C) THE LD. AO OPINED THAT THE ANALYSIS/INQUIRIES IN DICATE THE SYSTEMATIC AND DELIBERATE CREATION OF A COLORABLE DEVICE TO INTRODUCE SHARE CAPITAL IN MO TISONS GROUP COMPANIES. THE INVESTMENT IN SHARE CAPITAL OF ASSESSEE COMPANY BY THE INVESTOR C OMPANY WAS INDEPENDENT DECISION/JUDGMENT OF THE INVESTORS. THE ASSESSEE HAS FILED COPY OF TH E BOARD RESOLUTION OF THE INVESTOR COMPANY. THE INCOME TAX DEPARTMENT CARRIED OUT INTENSIVE SEA RCH OVER MOTISONS GROUP AND DURING THE COURSE OF SEARCH NO DOCUMENTS/EVIDENCE WAS FOUND TO SHOW THAT THE COMPANY WHO MADE INVESTMENT IN SHARES OF ASSESSEE COMPANY IN THE YEA R UNDER CONSIDERATION WERE FUNDED OR UNDISCLOSED CASH WAS GIVEN BY MOTISONS GROUP. IF TH ESE INVESTOR COMPANY HAVE ITS OWN INDEPENDENT FUNDS, THE SAME CAN BE INVESTED ANYWHER E. IT IS ADMITTED FACTS THAT DURING THE YEAR UNDER CO NSIDERATION AS WELL AS IN PREVIOUS YEARS THE ASSESSEE COMPANY IS NOT HAVING ANY SUCH BUSINESS AC TIVITIES WHEREFROM THIS MUCH UNDISCLOSED INCOME COULD BE EARNED THAN HOW THE SAME CAN BE MAN AGED TO BROUGHT IN BOOKS OF ACCOUNTS IN FORM OF SHARE CAPITAL. IN THIS CASE THE DEPARTMENT COULD NOT PROVE ANY KIND OF UNDISCLOSED SOURCE OF INCOME OF THE ASSESSEE AS A RESULT OF SEA RCH OVER ASSESSEE AS WELL AS DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR AS A RESULT OF INQUIRI ES. AS A RESULT OF SO CALLED LONG INQUIRIES THE DEPARTMENT COULD NOT EVIDENTIARY PROVED THAT THE AS SESSEE COMPANY MANAGED ITS FUNDS WITH INVESTOR COMPANY TO BROUGHT THE SAME IN BOOKS OF AC COUNTS IN THE FORM OF SHARE CAPITAL MORE SO WHEN THE INVESTOR COMPANY HAVING ITS OWN SUFFICIENT FUNDS TO INVEST IN THE ASSESSEE COMPANY MUCH PRIOR TO INVESTMENT MADE IN THE ASSESSEE COMPA NY. THUS, FROM THE ABOVE SUBMISSION AND RECORD IT IS WE LL PROVED THAT THE AMOUNT SO RECEIVED BY THE ASSESSEE COMPANY FROM ABOVE NAMED COMPANY WAS RECEI VED AGAINST SHARE CAPITAL AND THE INVESTMENT WAS MADE BY THEM BY ITS OWN DISCLOSED SO URCE, THEREFORE NO ADDITION IN ANY WAY CAN BE MADE IN THE HANDS OF THE ASSESSEE. 8. AFTER CONSIDERING THE REPLY OF THE ASSESSEE ON S HOW CAUSE NOTICE ISSUED BY LD. AO HE POINTED CERTAIN ISSUES IN THE REPLY OF THE ASSESSEE WHICH H AVE BEEN DISCUSS ON PAGE 22 TO 30 (PARA 21 TO 25) OF ASSESSMENT. THE FINDING OF LD. AO AND SUBMIS SION OF ASSESSEE ON SUCH FINDINGS IS AS UNDER: - ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 34 (A) FINDING OF AO: - IDENTITY, CREDIT WORTHINESS AN D GENUINENESS OF THE TRANSACTIONS HAVE BEEN PROVED BY FILING CERTAIN DOCUMENTS. THE ASSESSEE CO MPANY HAS ATTEMPTED TO LIMIT THE SCOPE WITHIN WHICH REVENUE AUTHORITIES CAN OPERATE ONLY W ITH A SELF SERVING INTEREST TO MAKE IT APPEAR THAT THE TRANSACTIONS ENTERED INTO GET JUSTIFIED. T HE THREE ASPECTS CERTAINLY ARE SOME OF THOSE ANGLES, BUT TO SAY THAT THE REVENUE CANNOT GO BEYON D, IS NOT APPARENTLY VESTED WITH SELF SERVING INTEREST BUT ALSO WITH IGNORANCE OF LAW. CERTAINLY, SIMPLY BECAUSE SOME FORM OF IDENTIFICA TION ON PAPER HAS BEEN PROVIDED DOES NOT MEAN THAT THE TRANSACTION STANDS EXPLAINED FROM THE VIEWPOINT OF THE CREDIT WORTHINESS AND GENUINENESS. SUBMISSION OF ASSESSEE: - I) THE ASSESSEE SUBMITTED AMPLE DOCUMENTS IN SUPPOR TED TO SHARE APPLICATION MONEY RECEIVED TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENES S OF TRANSACTIONS AND FROM EXAMINATION OF THOSE DOCUMENTS ITS PROVES THAT THE INVESTING COMPA NY WAS HAVING SUFFICIENT FUNDS TO MAKE INVESTMENT IN SHARE CAPITAL OF THE ASSESSEE COMPANY . THERE WAS NO CASH DEPOSIT IN BANK A/C OF THE INVESTOR COMPANY FOR SUBSCRIBING THE SHARE CAPI TAL OF ASSESSEE COMPANY. THE LD. AO REJECTED THESE EVIDENCES ON SURMISES AND CONJECTURE S. HONBLE JUSTICE HIDAYATULLAH OF THE SUPREME COURT IN THE CASE OF SREELEKHA BANERJEE VS CIT [1963] 49 ITR 112 (SC); 120 OBSERVED THAT THE INCOME TAX DEPARTMENT CANNOT BY MERELY REJ ECTING UNREASONABLY A GOOD EXPLANATION, CONVERT GOOD PROOF INTO NO PROOF HONBLE SUPREME COURT IN THE CASE OF UMA CHARAN SHAW & BROS CO VS CIT 37 ITR 271 HAS HELD THAT THE SURMI SES AND CONJECTURES, AND THE CONCLUSION IS THE RESULT OF SUSPICION WHICH CANNOT TAKE THE PLACE OF PROOF. HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS ANUPAM KAPOOR (2008) 29 9 ITR 179 (P & H) ALSO HELD THAT SUSPICION, HOWSOEVER STRONG CANNOT TAKE THE PLACE O F LEGAL PROOF. II) FROM EXAMINATION OF FINANCIAL STATEMENTS OF INV ESTOR COMPANY YOUR HONOR WILL FIND THAT THE INVESTOR COMPANY HAD HUGE SHARE CAPITAL AND RESERVE S. APART FROM THE INVESTMENT MADE IN THE ASSESSEE GROUP IT HAVING OTHER INVESTMENTS/ADVANCES . AS PER DECLARATION OF SOURCE OF FUNDS SUBMITTED IT REALIZED MONEY FROM THEIR OLD INVESTME NTS/ADVANCES AND MADE THE SAME MONEY WAS UTILIZED FOR MAKING THE INVESTMENT IN ASSESSEE COMP ANY. THE COMPANY IS ASSESSEE OF INCOME TAX DEPARTMENT AND ITS ASSESSMENT FOR AY 2009-10 AND AY 2013-14 WAS MADE BY THE DEPARTMENT WHEREIN THE SOURCE AND APPLICATION OF FUNDS WERE AD MITTED AS GENUINE. IN CASE OF ANY DOUBT, NECESSARY ACTION COULD BE TAKEN IN THE HANDS OF THE INVESTOR COMPANY AND IF THE INVESTOR COMPANY FAILED TO EXPLAIN THE SOURCE OF INVESTMENT, NECESSARY ADDITION CAN BE MADE IN THE HANDS OF THIS COMPANY BY APPLYING THE PROVISIONS OF SECTION 69 OF INCOME TAX ACT. HOWEVER THE LD. AO MADE THE ADDITION IN THE HANDS OF ASSESSEE C OMPANY UNDER THE COMPLETE DISREGARD OF PROVISIONS OF INCOME TAX ACT AND MERELY ON SURMISES AND CONJECTURES. THE HONBLE APEX COURT IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD. 216 CTR 0195/ 6 DTR 308 (SC) HELD THAT IF THE SHARE CAPITAL MONEY IS RECEIVED BY THE ASSESSEE COM PANY FROM ALLEGED BOGUS SHAREHOLDERS THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THE IND IVIDUAL ASSESSMENTS OF SUCH SHAREHOLDERS IN ACCORDANCE WITH LAW. SUCH SHARE APPLICATION MONEY C ANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY (III) AS ALLEGED BY LD. AO THE ASSESSEE IS NOT ATTE MPTED TO LIMIT THE SCOPE WITHIN WHICH REVENUE AUTHORITIES CAN OPERATE AND THE ASSESSEE ALSO ACCEP T THAT THE REVENUE AUTHORITIES CAN EXAMINE THE TRANSACTIONS FROM ALL POSSIBLE ANGLES. IN THE L AW IN THE CASE OF CREDIT ENTRY (SUCH AS LOAN, SHARE CAPITAL ETC.) THE IDENTITY, GENUINENESS AND C REDITWORTHINESS OF THE CREDIT ENTRIES HAS TO BE ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 35 EXAMINE AND IN THE INSTANT CASE THE ASSESSEE HAS PR OVED ALL THESE THREE INGREDIENTS AND THE LD. AO DID NOT FIND ANY INFIRMITY IN SUCH DETAILS. IF T HE LD. AO IS HAVING DOUBT REGARDING THE DETAIL AND SUBMISSION FILED BY THE ASSESSEE THAN HE COULD SURELY GO BEYOND FOR FURTHER INQUIRIES BUT THE INQUIRIES SHOULD HAVE BEEN WITH THE ANGEL TO UNEART H THE TRUTH OF THE TRANSACTIONS AND IN THE INSTANT CASE THE INQUIRIES SHOULD HAVE BEEN MADE WI TH THE ANGEL TO FIND OUT THE FOLLOWING: - THE HUGE AMOUNT RECEIVED IN THE FORM OF SHARE CAPIT AL/SHARE PREMIUM. WHETHER THE MONEY SO RECEIVED IS ACTUALLY CAPITAL RECEIPT IN THE HANDS O F THE ASSESSEE? WHETHER MONEY RECEIVED IN THE HANDS OF THE ASSESSEE COMPANY WAS FROM GENUINE SOURCE OR THE SAME WAS OWN FUNDS OF THE ASSESSEE? IF THE MONEY WHICH FLOW IN THE HANDS OF THE ASSESS ES WAS MANAGED AFFAIRS OF THE ASSESSEE THAN WHAT WAS THE SOURCE OF INFLOW OF SUCH MONEY? IV) THE LD. AO HAS NOT CARRIED OUT ANY SHORT OF INQ UIRIES IN THIS REGARD IN THE CASE OF THE ASSESSEE. NO INQUIRIES FROM THE SHAREHOLDER, ITS BANKERS HAVE BEEN MADE TO PROVE THE CONTENTION OF THE ASSESSEE TO BE WRONG. THERE IS NO EVIDENCE THAT THE MONEY RECEIVED IS A/C OF THE ASSESSEES OWN UNDISCLOSED INCOME. THE ASSESSEE FILED SUFFICIENT D OCUMENTS TO PROVE THAT THE AMOUNT SO RECEIVED WAS CAPITAL RECEIPT AND THE SAME WAS RECEI VED AGAINST SHARE CAPITAL/SHARE PREMIUM. THE SOURCE OF THE FUNDS FROM THE INVESTOR COMPANY W AS ALSO PROVED AND THERE IS NO POSITIVE MATERIAL TO SHOW THAT THE INVESTOR COMPANY WAS NOT HAVING SUFFICIENT SOURCE TO INVEST THE MONEY IN THE ASSESSEE COMPANY. IF THE LD. AO IS HAVING DO UBT REGARDING GENUINENESS OF SOURCE OF FUNDS WITH THE INVESTOR COMPANY HE COULD HAVE MAKE THE IN QUIRED IN THE CASE OF SUCH COMPANY AND IF SOMETHING FOUND ADVERSE THAN THE NECESSARY ADDITION S COULD HAVE BEEN MADE IN THE HANDS OF SUCH INVESTOR COMPANY ONLY AND IN THE INQUIRY IF SO METHING POSITIVE REVEALS THAT THE SOURCE OF FUNDS WITH SUCH INVESTOR COMPANY WAS FUNDED BY THE ASSESSEE COMPANY THAN ONLY THE ADDITION COULD BE MADE IN THE HANDS OF THE ASSESSEE COMPANY. IT IS ADMITTED FACTS THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY WAS NOT HA VING ANY SUCH SOURCE OF INCOME FROM WHICH THIS MUCH OF INCOME COULD BE EARNED AND THE L D. AO IS COMPLETELY SILENT ON THIS ISSUE THAT WHERE FROM THIS MUCH OF MONEY WAS EARNED BY THE ASS ESSEE COMPANY. FURTHER AS A RESULT OF SO CALLED LONG INQUIRES BY INVESTIGATION WING IT COULD NOT BE PROVED EVIDENTIARY THAT THE ASSESSEE MANAGED THE FUNDS IN INTERMEDIATE COMPANIES TO BROU GHT THE SAME IN BOOKS OF ACCOUNTS IN THE SHAPE OF SHARE CAPITAL/SHARE PREMIUM. V) THE FINDING OF LD. AO THAT SIMPLY BECAUSE SOME F ORM OF IDENTIFICATION ON PAPER HAS BEEN PROVIDED DOES NOT MEAN THAT THE TRANSACTION STANDS EXPLAINED FROM THE VIEWPOINT OF THE CREDIT WORTHINESS AND GENUINENESS THIS IS TO SUBMIT THAT B Y FILING THE SUFFICIENT DOCUMENTS THE ASSESSEE DISCHARGE ITS ONUS CAST ON IT BY THE LAW AND NOW ON US IN ON THE DEPARTMENT TO DISPROVE THE SUBMISSION AND DOCUMENTS OF THE ASSESSEE BY POSITIV E EVIDENCE. THE DEPARTMENT HAS NOT DISCHARGED ITS ONUS AND NO INQUIRED WERE CARRIED OU T AND NO EVIDENCE IS IN POSSESSION WITH THE DEPARTMENT TO DISPROVE THE CLAIM OF THE ASSESSEE. O N THE ONE HAND THE LD. AO IS CLAIMING THAT THE REVENUE AUTHORITIES CAN EXAMINE THE TRANSACTION FROM ALL POSSIBLE ANGLES AND ON THE OTHER HANDS THE TRANSACTIONS ARE BEING DOUBTED AND ADDED MERELY ON SURMISES, CONJECTURES AND ON THE BASIS OF SOME INQUIRIES CARRIED OUT BY INVESTIGATIO N WING WHICH NOT PROVES ANYTHING CONTRA AGAINST THE ASSESSEE. IT IS FURTHER SUBMITTED THAT IF THE DOCUMENTS SUBMITTED BY THE ASSESSEE WAS NOT FELT SUFFICIENT TO ACCEPT THE TRANSACTION THAN THE LD. AO COULD ASK FROM ASSESSEE TO SUBMIT THE ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 36 FURTHER DETAILS/DOCUMENTS WHICH IS FELT NECESSARY F OR DECIDING THE MATTER IN JUSTICE & FAIR MANNER BUT THE SAME WAS NOT DONE BY LD. AO. B) FINDING OF AO: - REGARDING NO BAR OF ISSUING OF SHARES AT PREMIUM, THE ASSESSEE COMPANY HAS ATTEMPTED TO TAKE AN ADVANTAGE OUT OF THE ABSENCE O F A SPECIFIC PROVISION WHICH BARS THE ACCEPTANCE OF SHARE PREMIUM WHICH DOES NOT MATCH TH E NET WORTH OF THE ISSUING COMPANY. IN THIS REGARD, IT NEEDS TO BE POINTED OUT THAT MERE ABSENC E OF A SPECIFIC PROVISION DOES NOT BY ITSELF MEAN THAT A PARTICULAR COLORABLE DEVICE OR A SHAM T RANSACTION, ACQUIRES LEGAL SANCTITY, THERE ARE NUMEROUS PROVISIONS RELATED TO GIFT, SALE CONSIDERA TION ON SALE OF ASSETS WHICH CAME INTO BEING AT A LATER STAGE, BUT THE ILLEGAL AND TAX CONTRAVE NING TRANSACTIONS WERE STILL TAKEN UP AND TAXED BY REVENUE AUTHORITY OF COURSE, AFTER THE SPECIFIC INCLUSION OF GOVERNING STATUTES, THE MATTER REQUIRES TO BE DEALT WITHIN THE FRAMEWORK OF THE SP ECIFIC PROVISION. BUT, TILL SUCH TIME IT CANNOT BE SAID ABOUT A TRANSACTION, WHICH IS PATENTLY BEYO ND THE REALMS OF ACCEPTABILITY AND WHICH ALSO ARE EMBEDDED WITH IN HERE TAX IMPLICATIONS, THAT TH EY NEED TO BE LEFT ALONE ONLY BECAUSE THERE WAS NO SPECIFIC BAR. SECTION 56 OF THE IT ACT HAS ALREADY BEEN EXISTENCE SINCE LONG AND SUBSECTION (1) OF SECTION 56 ADEQUATELY COVERED TRANSACTIONS LIKE THE ONE BEING DEALT WITH AT PRESENT. ONLY BECAUSE, SUB- SECTION (1) WAS A BROAD MANIFESTATION OF THE INTENT OF REVENUE, SUB SECTION (2) WHICH WAS MORE SPECIFIC IN CONTENT WAS INTRODUCED TO TAKE CASE OF THE MISINTERPRETATION & CONFUSION WHICH WAS BEING DERIVED OUT OF SUB SECTION (4). IT MUST BE AP PRECIATED THAT INTRODUCTION OF SUB SECTION (2) OF SECTION 56 OF THE ACT WAS ONLY A SPECIFIC EXPRES SION OF THE MANNER IN WHICH A SPECIFIC TRANSACTION REQUIRES TO BE DEALT WITH THE INTENT OF LEGISLATURE AND THE CONTENT THEREOF ALREADY EXISTED WITHIN THE SAME ACT AND WITHIN THE SAME SEC TION AND IN THE PRECEDING SUB-SECTION NO NEW IDEA WHICH WAS CONCEPTUALLY DISTRICT FROM SECTION 5 6(1) OF THE ACT WAS BROUGHT INTO BEING. HENCE, THE ASSESSEE COMPANY CANNOT BE ALLOWED TO ES CAPE THE PROVISION OF LAW, SIMPLY BECAUSE IT CONTAINED A BROADER & WIDER MANIFESTATION OF ITS TR UE INTENT WHICH WAS ENUNCIATED ONLY AFTER THE TRANSACTION TOOK PLACE. THE CONTENTION OF THE ASSES SEE IS A PERVERT ARGUMENT & DESERVES TO BE REJECTED. SUBMISSION OF ASSESSEE: - I) SHARE PREMIUM IS CAPITAL RECEIPT: IF SHARES ARE ISSUED AT PREMIUM THEN CAPITAL RECEIP T AGGREGATE AMOUNT OF PREMIUM IS TO BE TRANSFERRED TO AN ACCOUNT CALLED THE SHARE PREMIUM ACCOUNT. THI S SHARE PREMIUM ACCOUNT IS NOT DISTRIBUTABLE AS INCOME JUST LIKE AS ANY OTHER CAPI TAL ASSETS. ON WINDING UP, THE SURPLUS MONIES IN THE SHARE PREMIUM ACCOUNT IS TO BE RETURNED TO T HE SHARE HOLDERS AS CAPITAL. SO LONG AS THE COMPANY IS A GOING CONCERN, THE MONIES IN SHARE PRE MIUM ACCOUNT CAN NEVER BE RETURNED TO THE SHAREHOLDERS EXCEPT THROUGH THE MEDIUM OF A REDUCTI ON PETITION, OR, IN OTHER WORDS, EXCEPT UNDER EXACTLY THE SAME CONDITIONS AS THOSE UNDER WH ICH ANY OTHER CAPITAL ASSET CAN REACH THE SHAREHOLDERS HANDS. DISTRIBUTION OF SHARE PREMIUM A MOUNT IS NOT PERMITTED THROUGH DIVIDEND. IT IS TAKEN OUT OF THE CATEGORY OF DIVISIBLE PROFITS. THE PROVISIONS IN RESPECT OF ISSUE OF SHARES AT PREMIUM ARE THE SAME IN THE OLD COMPANY ACT AS WELL AS IN THE NEW COMPANY ACT. HENCE COMPANIES ACT CLEARLY MENTIONS THAT AMOUNT RECEIVED AS PREMIUM IS CAPITAL RECEIPT AND NOT A REVENUE RECEIPT. THE SHARE PREMIUM IS ALSO VERIFIAB LE FROM RETURNS OF ALLOTMENT SUBMITTED IN ROC. AS PER DEPARTMENTAL CIRCULAR (MCA) NO. 3/77 DA TED 15.04.1977 THE MONIES IN THE SHARE PREMIUM ACCOUNT CANNOT BE TREATED AS FREE RESERVES, AS THEY ARE IN THE NATURE OF CAPITAL RESERVES. ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 37 II) ON THE ISSUE OF SHARES AT PREMIUM, THE LD. ITAT, MU MBAI BENCH IN THE CASE OF ACIT V/S GAGANDEEP INFRASTRUCTURE PVT. LTD. 2014-T10L-656-IT AT-MUM OBSERVED THAT ISSUE OF SHARES AT PREMIUM IS ALWAYS A COMMERCIAL DECISION WHICH DOES NOT REQUIRE ANY JUSTIFICATION. FURTHER THE PREMIUM IS A CAPITAL RECEIPT WHICH HAS TO BE DEALT WITH IN ACCORDANCE WITH SECTION 78 OF COMPANIES ACT 1956. FURTHER THE COMPANY IS NOT REQU IRED TO PROVE THE GENUINENESS, PURPOSE OR JUSTIFICATION FOR CHARGING PREMIUM OF SHARES, SHARE PREMIUM BY ITS VERY NATURE IS A CAPITAL RECEIPTS AND IS NOT INCOME FOR ITS ORDINARY SENSE. IN THE CASE BEFORE MUMBAI BENCH HAS TO CONSIDER A CASE WHERE PREMIUM OF RS.190 PER SHARE W AS CHARGED. THE TRIBUNAL OBSERVED AS UNDER: NO DOUBT A NON-EST COMPANY OR A ZERO BALANCE SHEET COMPANY ASKING FOR RS.190 PER SHARE DEFIES ALL COMMERCIAL PRUDENCE BUT AT THE SAME TIME WE CANNOT IGNORE THE FACT THAT IT IS A PREROGATIVE OF THE BOARD OF DIRECTORS OF THE COMPANY TO DECIDE THE PREMIUM AMOUNT AND IT IS THE WISDOM OF THE SHAREHOLDERS WHETHER THEY WANT TO SUBSCRIBE TO SUCH A HEAVY PREMIUM. THE REVENUE AUTHORITIES CANNOT QUESTION THE CHARGING OF SUCH HUGE PREMIUM W ITHOUT ANY BAR FROM ANY LEGISLATED LAW OF THE LAND. THE AMENDMENT HAS BEEN BROUGHT IN THE INC OME TAX ACT UNDER THE HEAD INCOME FROM OTHER SOURCES BY INSERTING CLAUSE.(VII B) TO SECT ION 56 OF THE ACT WHEREIN IT HAS BEEN PROVIDED THAT ANY CONSIDERATION FOR ISSUE OF SHARES , THAT EXCEEDS THE FAIR VALUE OF SUCH SHARES, THE AGGREGATE CONSIDERATION RECEIVED FOR SUCH SHARE S AS EXCEEDS THE FAIR MARKET VALUE OF THE SHARES SHALL BE TREATED AS THE INCOME OF THE ASSESS EE BUT THE LEGISLATURE IN ITS, WISDOM HAS MADE. THE PROVISION APPLICABLE W.E.F. 1.4.2013 I.E. ON AN D FROM A.Y. 2013-14. III) THE LD. AO TAXED THE SHARE CAPITAL/SHARE PREMIUM BY HOLDING THAT MERE ABSENCE OF A SPECIFIC PROVISION DOES NOT BY ITSELF MEAN THAT A PARTICULAR COLORABLE DEVICE OR A SHAM TRANSACTION, ACQUIRES LEGAL SANCTITY AND A TRANSACTION, WHICH IS PATENTLY BEYOND THE REALMS OF ACCEPTABILITY AND WHICH ALSO ARE EMBEDDED WITHIN HERE TAX IMPLICA TIONS, THAT THEY NEED TO BE LEFT ALONE ONLY BECAUSE THERE WAS NO SPECIFIC BAR THIS IS TO SUBMIT THAT FOR BRINGING A TRANSACTION INTO A INCOME TAX TERRITORY FIRST IT IS TO PROVED BY THE REVENUE AUTHORITIES THAT THE TRANSACTION IS COLORABLE DEVICE OR A SHAM TRANSACTION. IN THE CASE OF THE AS SESSEE THE INVESTOR COMPANY IS CONFIRMING THAT IT HAVE GAVE THE AMOUNT TO THE ASSESSEE COMPANY AS SHARE PREMIUM AND THE ASSESSEE COMPANY IS ENTERING SUCH AMOUNT IN ITS BOOKS OF ACCOUNTS AS A SHARE PREMIUM. THERE IS NO EVIDENCE ON RECORD TO PROVE THAT THE TRANSACTION IS SHAM TRANSA CTIONS OR NOT REAL TRANSACTION. THE ONUS IS ON DEPARTMENT TO PROVE THAT THE TRANSACTION IS SHAM OR NOT REAL. THE ALLEGATION SHOULD BE BASED ON THE EVIDENCES. THE LD. AO IS DUTY BOUND TO PROVE A TRANSACTION NOT REAL AND NOT ACCEPTABLE WITH EVIDENCES WHICH IS ABSENT IN THE INSTANT CASE. ADMI TTEDLY THERE ARE NUMEROUS DEEMING PROVISIONS RELATED TO GIFT, SALE CONSIDERATION ON S ALE OF ASSETS UNDER WHICH THE DEEMED INCOME ARE TAXED BUT THE DEEMING FICTION CAN ONLY STRICTLY APPLIED ON THE TRANSACTIONS FOR WHICH IT WAS MADE APPLICABLE. THE SAME CANNOT BE EXTENDED FURTHE R FOR OTHER TRANSACTIONS UNTIL AND UNLESS SUCH TRANSACTION IS COVERED IN THE DEFINITION OF IN COME OR DEEMED INCOME AS PER INCOME TAX LAW. IF SOME SPECIFIC TRANSACTION IS NOT INCOME OR DEEMED INCOME IN THE INCOME TAX LAW THAN THE SAME CANNOT BE PRESUMED AS INCOME BY THE REVENU E AUTHORITIES AT THEIR OWN WITHOUT HAVING ANY POSITIVE MATERIAL TO PRESUME THAT THE SAME IS A CTUALLY INCOME OF THE ASSESSEE. THESE TYPE OF TRANSACTION CAN ONLY BE DEALT WITHIN THE FRAMEWORK OF THE SPECIFIC PROVISION AFTER THE SPECIFIC INCLUSION OF GOVERNING STATUTES. IN THE INCOME TAX ACT THE CHARGING OF CERTAIN AMOUNTS SHARE ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 38 PREMIUM DEEMED TO BE INCOME OF THE RECIPIENT COMPAN IES W.E.F. 1.4.2013 I.E. ON AND FROM A.Y. 2013-14 AND THE SAME CANNOT BE MADE APPLICABLE RETR OSPECTIVELY. IV) ADMITTEDLY THE SECTION 56 OF THE IT ACT HAS ALR EADY BEEN EXISTENCE SINCE LONG AND BUT SUB- SECTION (1) OF SECTION 56 ONLY COVERS THE TAXING TH E REVENUE TRANSACTIONS WHICH NOT COVERED UNDER OTHER HEAD OF INCOME BUT THE SAME ARE INCLUDE D IN THE DEFINITION OF INCOME. THE SECTION 56(1) DOES NOT COVER THE TAXING THE DEEMING CAPITAL RECEIPTS AND SUCH RECEIPTS CAN ONLY TAXED UNDER SUB SECTION 56 (2) OF INCOME TAX ACT, 1961 IF CONSISTING SPECIFIC EXPRESSION OF THE MANNER IN WHICH A SPECIFIC TRANSACTION REQUIRES TO BE DEAL T WITH THE INTENT OF LEGISLATURE. IN THE INCOME TAX ACT THE CHARGING OF CERTAIN AMOUNTS OF SHARE PR EMIUM DEEMED TO BE INCOME OF THE RECIPIENT COMPANIES W.E.F. 1.4.2013 I.E. ON AND FROM A.Y. 201 3-14, THEREFORE THE SHARE PREMIUM RECEIVED PRIOR TO THAT PERIOD CANNOT BE TAXED AS INCOME OF T HE ASSESSEE. C) FINDING OF LD. AO: - IT IS WHOLLY INCORRECT TO S AY THAT THE ALLEGATION IS BASED ON SURMISES AND CONJECTURES. THE FACTS CLEARLY PROVE THAT THE ASSES SEE HAD ENTERED INTO SHAM TRANSACTIONS AS PART OF A WELL PLANNED EXERCISE OF INTRODUCING UNEXPLAIN ED MONEY IN THE FORM OF SHARE CAPITAL AND SHARE PREMIUM WITHOUT ANY JUSTIFICATION OF THE VALU E HAVING BEEN PROVIDED EITHER BY THE ISSUING COMPANY OR THE SUBSCRIBING COMPANY. THE MONEY SO RE CEIVED WAS THEN IMMEDIATELY INVESTED IN THE SUBSCRIPTION OF SHARE CAPITAL AT HIGH PREMIUM W ITH OTHER COMPANIES, WHO IN TURN CONTINUED THE EXERCISE IN THE SAME FORM. THE ASSESSEE COMPANY WAS THUS PART OF THIS CIRCULAR RING WHEREBY UNJUSTIFIED AND UNSUBSTANTIATED SHARE PREMIUM WAS B EING INTRODUCED. SUBMISSION OF ASSESSEE: - I) THE FINDING OF LD AO IS PATENTLY WRONG, PERVERSE AND NOT BACKED WITH ANY SUPPORTING EVIDENCE. FIRST OF ALL REGARDING ALLEGATION THAT THE ASSESSEE INTRODUCED ITS OWN UNEXPLAINED MONEY IN THE SHARE CAPITAL AND SHARE PREMIUM THIS IS TO SUBMIT T HAT THE DEPARTMENT CARRIED OUT INTENSIVE SEARCH OVER THE ASSESSEE AND DURING THE COURSE OF S EARCH NOT A SINGLE DOCUMENT/EVIDENCE WAS FOUND TO SHOW THAT THE ASSESSEE WAS HAVING SOME UND ISCLOSED INCOME OR HAVING SOME UNEXPLAINED MONEY. AS A RESULT OF INQUIRIES CARRIED OUT BY THE INVESTIGATION WING THEY ALSO COULD NOT GATHERED ANY POSITIVE EVIDENCE TO SHOW THAT THE ASSESSEE WAS HAVING ANY UNDISCLOSED INCOME OR UNEXPLAINED MONEY. IF THERE IS NO PROOF WITH THE DEPARTMENT TO PROVE THAT THE ASSESSEE WAS HAVING SOME UNEXPLAINED MONEY THAN HOW IT CAN BE AL LEGED THAT THE ASSESSEE HAS INTRODUCED ITS UNEXPLAINED MONEY IN THE FORM OF SHARE CAPITAL AND SHARE PREMIUM. THIS IS COMPLETELY ON THE BASIS OF SURMISES AND CONJECTURES. II) AS REGARD TO NOT PROVIDING THE JUSTIFICATION OF THE VALUE OF SHARES THIS IS TO SUBMIT THAT THE SHA RES ISSUED AT HIGH RATES DOES NOT MAKE THE TRANSACTIONS ITSELF SHAME OR COLOURFUL DEVICE TO EVADE THE TAX. FROM THE RECORD IT IS WELL PROVED THAT THE AMO UNT WAS RECEIVED FROM THE INVESTOR COMPANY AGAINST SHARE CAPITAL & SHARE PREMIUM, THEREFORE TH E TRANSACTION ARE BEING GENUINE. AS STATED IN EARLIER PARAS, THE HONBLE ITAT, MUMBAI BENCH IN THE CASE OF ACIT V/S GAGANDEEP INFRASTRUCTURE PVT. LTD. 2014-T10L-656-ITAT-MUM OBS ERVED THAT ISSUE OF SHARES AT PREMIUM IS ALWAYS A COMMERCIAL DECISION WHICH DOES NOT REQUIRE ANY JUSTIFICATION. FURTHER THE COMPANY IS NOT REQUIRE TO PROVE THE GENUINENESS, PURPOSE OR JU STIFICATION FOR CHARGING PREMIUM OF SHARES, SHARE PREMIUM BY ITS VERY NATURE IS A CAPITAL RECEI PTS AND IS NOT INCOME FOR ITS ORDINARY SENSE. III) THE ALLEGATION OF LD. AO IS THAT THE MONEY SO RECEIVED WAS THEN IMMEDIATELY INVESTED IN THE SUBSCRIPTION OF SHARE CAPITAL AT HIGH PREMIUM WITH OTHER COMPANIES, WHO IN TURN CONTINUED THE EXERCISE IN THE SAME FORM AND THE ASSESSEE COMPANY WAS THUS PART OF THIS CIRCULAR RING WHEREBY UNJUSTIFIED AND UNSUBSTANTIATED SHARE PREMIUM WAS B EING INTRODUCED. IN THIS REGARD THIS IS TO SUBMIT THAT IF SOMEONE IS INVESTING THE MONEY IN TH E ASSESSEE COMPANY HE MUST BE HAVING THE INFLOW OF MONEY FROM SOME SOURCE. WHAT IS THE SOURC E OF INFLOW WITH THE INVESTOR COMPANY AND ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 39 HOW IT IS MANAGING ITS AFFAIRS IS NOT CONCERN OF TH E ASSESSEE. IN THE CASE OF THE ASSESSEE, IT HAS FULL FILLED ITS LEGAL OBLIGATION. THE ASSESSEE HAS PROVED THE SOURCE OF MONEY WITH THE INVESTOR COMPANIES. THUS IN THE CASE OF THE ASSESSEE THE SOU RCE OF MONEY IS WELL PROVED. IF THE INVESTOR COMPANY IS NOT HAVING PROPER SOURCE OF FUNDS WITH I T THAN THE ACTION SHOULD HAVE BEEN TAKEN IN ITS HANDS AND THE SAME CANNOT BE ADDED AS INCOME OF THE ASSESSEE MERELY BY HOLDING THAT THE ASSESSEE PLANNED THE FUNDS OF THE INVESTOR COMPANY. THERE IS NO ONUS TO PROVE SOURCE OF SOURCE. IN THIS REGARD, THE ASSESSEE RELIES ON THE FOLLOWIN G DECISIONS:- (I) HONBLE RAJASTHAN HIGH COURT IN THE CASE OF ARA VALI TRADING CO VS INCOME TAX OFFICER (2008) 8 DTR (RAJ) 199 HAS HELD THAT ONCE THE EXISTENCE OF THE CREDITORS IS PROVED AND SUCH PERSONS OWN THE CREDITS, THE ASSESSEES ONUS STANDS DISCHAR GED AND THE ASSESSEE IS NOT REQUIRED TO PROVE THE SOURCE FROM WHICH THE CREDITORS COULD HAVE ACQU IRED THE MONEY DEPOSITED WITH HIM. HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT MERELY BECA USE THE DEPOSITORS EXPLANATION ABOUT THE SOURCES OF MONEY WAS NOT ACCEPTABLE TO THE AO, IT C ANNOT BE PRESUMED THAT THE DEPOSIT MADE BY THE CREDITORS IS MONEY BELONGING TO THE ASSESSEE IT SELF. (II) CIT VS ORISSA CORPORATION (P) LTD (1986) 159 ITR 79 (SC) THE ASSESSEE HAD GIVEN NAMED AND ADDRESSES OF THE CASH CREDITORS, WHO WERE INCOME TAX ASSESSEES. REVENUE APART FROM ISSUING SUMMON U/S 13 1 NOTICES TO CREDITORS, DID NOT PURSUE THE MATTER FURTHER- IT DID NOT EXAMINE CREDITWORTHINES S OF THE CREDITORS- ASSESSEE COULD NOT, UNDER THE CIRCUMSTANCES DO ANYTHING FURTHER. HELD THAT TH E ADDITIONS WERE RIGHTLY DELETED. (III) CIT VS HEERA LAL CHAGAN LAL TANK (2002) 157 ITR 281 (RAJ) BURDEN OF THE ASSESSEE STANDS DISCHARGED WHEN THE IDENTITY OF THE CREDITORS IS ESTABLISHED AND HE CONFIRMS THE LOANS. IT IS FURTHER SUBMITTED THAT THE INVESTOR COMPANY W AS HAVING SUFFICIENT ACCUMULATED FUNDS IN THE FORM OF SHARE CAPITAL AND RESERVES & SURPLUS MUCH PRIOR TO THE INVESTMENT MADE IN THE ASSESSEE COMPANY AND THE SAME ARE MORE THAN TO INVESTMENT MA DE IN THE SHARES OF ASSESSEE GROUP COMPANY. THE SAME FUNDS WERE BEING MANAGED BY SUCH COMPANY AT ITS OWN AND HAVING INVESTMENT IN SHARES OF OTHER COMPANIES/LOANS & ADV ANCES TO VARIOUS PARTIES. THE OTHER INVESTMENTS/ASSETS OF INVESTOR COMPANIES ARE BEING TREATED AS GENUINE THAN HOW THE INVESTMENT MADE IN THE ASSESSEE GROUP CAN ONLY BE NON GENUINE. FURTHER IF THE ALLEGATION OF THE DEPARTMENT IS THAT THE ASSESSEE MANAGED ITS UNEXPLAINED FUNDS IN SUCH COMPANY THAN THERE SHOULD BE INFLOW OF NEW CAPITAL IN SUCH COMPANY FOR MAKING THE PAYME NT TO THE ASSESSEE COMPANY WHICH HAS NOT BEEN DONE IN THE INSTANT CASE. THE INVESTMENT WAS M ADE IN THE ASSESSEE COMPANY OUT OF FUNDS REALIZED FROM PREVIOUS INVESTMENTS/ADVANCES. IF THE PAYMENT WAS MADE BY REALIZING THE FUNDS ALREADY INVESTED BY SUCH COMPANY HOW SUCH FUNDS CAN BE TREATED AS UNEXPLAINED MONEY OF THE ASSESSEE. D) FINDING OF LD. AO: - THE CONTENTION OF THE ASSES SEE COMPANY IS ONLY BASED ON ACCOUNTING JUGGLERY BY WAY OF WHICH THE TRANSACTION HAS BEEN R ECORDED IN THE BOOKS OF ACCOUNTS OF ALL SUCH PERSONS INCLUDING THE ASSESSEE COMPANY, WHO HAVE PA RTICIPATED IN THIS EXERCISE. IT NEEDS TO BE UNDERSTOOD THAT MERELY BECAUSE THE ASSESSEE COMPANY ADJUSTED THE MONEY RECEIVED, AS SHARE CAPITAL/SHARE PREMIUM IN ITS BOOKS OF ACCOUNT, THE TRANSACTION CANNOT BE SHOWED WITH THE CHARACTER OF A CAPITAL RECEIPT. IT MUST BE SAID THA T THE FACE VALUE OF A SHARE IS INTRINSICALLY CAPITAL IN NATURE BECAUSE IT IMPARTS TO THE SUBSCRI BER A RIGHT OF PARTICIPATION AND OWNERSHIP IN THE ISSUING COMPANY. HOWEVER, THE SHARE PREMIUM ATT ACHED TO EACH SUCH SHARE DOES NOT ENTITLE THE SUBSCRIBED OF ANYTHING ELSE OTHER THAN WHAT THE FACE VALUE BY ITSELF HAS ACHIEVED FOR HIM. THIS PARTICIPATION AND OWNERSHIP IN THE ISSUING COM PANY REMAINS THE SAME. IT IS IN FACT A COST WHICH THE SUBSCRIBER BEARS FOR ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 40 1) THE VALUE OR WORTH OF ASSETS & PROFITS WHICH THE ISSUER COMPANY ALREADY POSSESSES OR DERIVER, OR 2) THE VALUE OR WORTH OF SUCH ASSETS OR PROFITS WH ICH THE ISSUES COMPANY MAY CREATE IN THE FURTHER OR MAY DERIVE, FOR THE PROPORTIONATE BENEFIT OF THE SUBSCRIBER. IN THE INSTANT CASE, BOTH OF ABOVE ARE ABSENT. NEIT HER DOES THE ISSUING COMPANY POSSESS ANY ASSET WORT H ITS NAME NOR DOES IT DERIVE ANY PROFIT. NEITHER DOES THE ASSESSEE COMPANY HOLD ANY PROMISE FOR THE CREATION OF ASSETS OR WEALTH IN THE FUTURE NOR IS THERE ANY FORESEEABLE POSSIBILITY OF ANY PRO FIT BEING DERIVED IN THE FUTURE. THE QUESTION WHICH THUS ARISES IS THAT WHAT IS IT T HAT THE SUBSCRIBER COMPANY PAID FOR IN FORM OF THE SHARE HAVING FACE VALUE OF RS. 10. THE ASSESSEE COM PANY HAS FAILED TO ANSWER THIS QUESTION EVEN WHEN A SPECIFIC QUERY IN THIS REGARD HAD BEEN RAISE D THUS THE SAME CREATES DOUBTS REGARDING GENUINENESS OF SHARE CAPITAL AND PREMIUM THEREON CR EDITED IN BOOKS OF ACCOUNTS SUBMISSION OF ASSESSEE: - I) THE TRANSFER OF SHARE APPLICATION INTO SHARE CAP ITAL & SHARE PREMIUM IS NOT ONLY BASED ON ACCOUNTING ENTRIES BUT THEY ARE SUPPORTED BY DOCUME NTARY EVIDENCE. IT IS NOT A CASE WHERE THE CERTAIN RECEIPTS HAS BEEN ACCOUNTED FOR BY ASSESSEE COMPANY AS PER ITS OWN SWEET WILL. THE INVESTOR COMPANY FILED THE SHARE APPLICATION FORMS TO SUBSCRIBE THE SHARES OF THE ASSESSES COMPANY AND IN THE SHARE APPLICATION FORM THE DETAI L OF SHARE PREMIUM IS ALSO MENTIONED. THUS THIS IS NOT A CASE WHERE THE CLAIM OF THE ASSESSEE IS BASED ON ACCOUNTING ENTRIES. THERE IS NO CONTRA MATERIAL WITH THE DEPARTMENT TO PROVE THAT T HE ADJUSTMENT MADE IN BOOKS OF ACCOUNTS BY THE ASSESSEE IS NOT CORRECT OR NOT BASED ON DOCUMEN TS. II) THE LD. AO HIMSELF ADMITTED THAT THE FACE VALUE OF A SHARE IS INTRINSICALLY CAPITAL IN NATURE BECAUSE IT IMPARTS TO THE SUBSCRIBER A RIGHT OF PAR TICIPATION AND OWNERSHIP IN THE ISSUING COMPANY AND STILL WHILE MAKING THE ADDITION HE MADE THE ADDITION OF THE SHARE CAPITAL AS WELL AS SHARE PREMIUM. FURTHER IF THE SHARES ARE ISSUED AT PREMIUM THEN CAPITAL RECEIPT AGGREGATE AMOUNT OF PREMIUM IS TO BE TRANSFERRED TO AN ACCOUN T CALLED THE SHARE PREMIUM ACCOUNT. THE BOOK VALUE OF THE SHARE IS INCREASED BY THE AMOUNT CREDITED IN SHARE PREMIUM ACCOUNT. THIS SHARE PREMIUM ACCOUNT IS NOT DISTRIBUTABLE AS INCOM E JUST LIKE AS ANY OTHER CAPITAL ASSETS. ON WINDING UP, THE SURPLUS MONIES IN THE SHARE PREMIUM ACCOUNT IS TO BE RETURNED TO THE SHARE HOLDERS AS CAPITAL. SO LONG AS THE COMPANY IS A GOI NG CONCERN, THE MONIES IN SHARE PREMIUM ACCOUNT CAN NEVER BE RETURNED TO THE SHAREHOLDERS E XCEPT THROUGH THE MEDIUM OF A REDUCTION PETITION, OR, IN OTHER WORDS, EXCEPT UNDER EXACTLY THE SAME CONDITIONS AS THOSE UNDER WHICH ANY OTHER CAPITAL ASSET CAN REACH THE SHAREHOLDERS HAND S. DISTRIBUTION OF SHARE PREMIUM AMOUNT IS NOT PERMITTED THROUGH DIVIDEND. THE COMPANIES ACT C LEARLY MENTIONS THAT AMOUNT RECEIVED AS PREMIUM IS CAPITAL RECEIPT AND NOT A REVENUE RECEIP T. III) AS HIMSELF ADMITTED BY LD. AO ONE OF THE DECID ING FACTOR FOR SHARE PREMIUM IS THE VALUE OR WORTH OF SUCH ASSETS OR PROFITS WHICH THE ISSUES COMPANY MAY CREATE IN THE FURTHER OR MAY DERIVE, FOR THE PROPORTIONATE BENEFIT OF THE SUBSCRIBER. IN FOR GOING PARAS WE HAVE DESCRIBED THE FUTURE PLANNING OF THE ASSESSEE BY USING THE FUNDS RECEIVE D FROM SHAREHOLDERS WHICH ALSO JUSTIFIED THE SHARE PREMIUM RECEIVED FROM THE INVESTOR COMPANIES. FURTHER APART FROM THE SHARES ISSUED TO THE INVESTOR COMPANY THE SHARES TO SHRI SANJAY CHHA BRA AND SHRI SANDEEP CHHABRA WERE ALSO ALLOTTED DURING THE SAME YEAR AT THE SAME RATE WHIC H WAS TREATED BY LD. AO AS JUSTIFIED THAN ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 41 THERE SHOULD BE NO REASON TO TREAT THE ALLOTMENT MA DE AT SAME RATE TO THE INVESTOR COMPANY AS NOT JUSTIFIED. THEREFORE THE LD. AO IS WRONG IN HOLDING THAT IN TH E INSTANT CASE NEITHER DOES THE ASSESSEE COMPANY HOLD ANY PROMISE FOR THE CREATION OF ASSETS OR WEAL TH IN THE FUTURE NOR IS THERE ANY FORESEEABLE POSSIBILITY OF ANY PROFIT BEING DERIVED IN THE FUTU RE. FROM THE FINANCIALS OF THE ASSESSEE COMPANY THE JUSTIFICATION GIVEN BY THE ASSESSEE IN FORGOING PARA REGARDING ACQUISITION OF ASSETS AND FUTURE PLANNING FOR EARNING OF PROFIT CAN BE DULY V ERIFY. FURTHER AS STATED IN FORGOING PARAS THE SHARES AT PREMIUM IS ALWAYS A COMMERCIAL DECISION B ETWEEN INVESTOR AND INVESTEE COMPANIES WHICH DOES NOT REQUIRE ANY JUSTIFICATION. E) FINDING OF LD. AO: - THE INQUIRIES WHICH ARE B EING DISCUSSED IN SHOW CAUSE NOTICE ARE IN RELATION TO ALLOTTEE COMPANIES AND AS HELD I N EARLIER PARAS THAT THERE ARE CROSS-HOLDINGS AMONGST SIX COMPANIES NAMING ALLIANCE TRADECOM PVT. LTD, EVERSHINE SUPPLIERS PVT. LTD, REGENT BARTER PVT. LTD, REGENT DEALERS PVT. LTD, RO SE SUPPLIERS PVT. LTD AND MAYUKH VINIMAYA PVT. LTD, BUT MAJOR SHAREHOLDING IS OF A 7TH COMPAN Y, I.E., MAYUKH VINTRADE PVT. LTD. THUS, THIS LATTER COMPANY IS THE HOLDING COMPANY OF 6 COMPANIE S, NAMED EARLIER. THE HOLDING COMPANY IS ENTIRELY OWNED BY INDIVIDUALS OR HUFS OF CHHABRA FA MILIES. IT IS ALL CLEAR THAT THE WEB OF COMPANIES THROUGH WHICH TRANSACTIONS HAVE BEEN ROUT ED TO CREATE A CORPORATE VEIL. IT CAN EASILY BE NOTICED THAT THE PAYMENTS TO SANDEEP CHHA BRA AND SANJAY CHHABRA HAVE BEEN REFLECTED AS LOANS BY THESE COMPANIES. WHILE THE PA YMENTS TO MOTISONS GROUP COMPANIES HAVE BEEN REFLECTED AS SHARE APPLICATION MONEY BY RECIPI ENT COMPANIES. ON FURTHER EXAMINATION BY INVESTIGATION WING IT CLEARLY INDICATE SYSTEMATIC T RANSFER OF FUNDS ACROSS SEVERAL ACCOUNTS, AT TIME AS MANY AS SIX ACCOUNTS, IN A SINGLE DAY (OR A T THE MOST TWO TO THREE DAYS). MAJOR EXERCISE HAS BEEN DONE IN TWO OF THE SIX COMPANIES ALLIANC E TRADECOM PVT. LTD AND EVERSHINE SUPPLIERS PVT. LTD. SUBMISSION OF ASSESSEE: - I) THE DETAIL SUBMISSION ON THIS ISSUE HAS ALREADY BEE N SUBMITTED IN PARA 4 ABOVE OF OUR SUBMISSION. FURTHER APART FROM THE SHARES ISSUED TO THE INVESTO R COMPANY THE SHARES TO SHRI SANJAY CHHABRA AND SHRI SANDEEP CHHABRA WERE ALSO ALLOTTED DURING THE SAME YEAR AT THE SAME RATE WHICH WAS TREATED BY LD. AO AS JUSTIFIED THAN THERE SHOULD BE NO REASON TO TREAT THE ALLOTMENT MADE AT SAME RATE TO THE INVESTOR COMPANY AS NOT JUSTIFIED. II) IN ADDITION TO ABOVE THIS IS TO FURTHER SUBMIT THAT THERE IS NO EVIDENCE WITH THE DEPARTMENT TO PROVE THAT THE COMPANY TO WHOM SHARES WERE ISSUED DURING THE YEAR WERE BEING FUNDED BY THE ASSESSEE COMPANY. THE INVESTOR COMPANY IS HAVING ITS OWN IND EPENDENT FUNDS TO INVEST AT THEIR OWN WISDOM. IT IS FURTHER RELEVANT TO MENTION HERE THAT WHATEVER FUNDS PAID BY THE INVESTOR COMPANY TO THE ASSESSEE COMPANY WERE TRANSFERRED FROM ITS O WN SOURCE OF FUNDS WHICH IT WAS POSSESSING MUCH PRIOR TO INVESTMENT MADE IN THE ASSESSEE COMPA NY AND BY NO STRETCH OF IMAGINATION IT CAN BE PRESUMED THAT THOSE FUNDS WERE INTRODUCED BY THE ASSESSEE COMPANY IN THE INVESTOR COMPANIES. III) FURTHER FROM THE SHOW CAUSE INQUIRIES ON TH E BASIS OF WHICH THE MODUS OPERANDI OF ISSUE OF SHARES ON SHARE PREMIUM IS BEI NG JUSTIFY BY THE LD. AO NO WHERE IT PROVES THAT THE FUNDS WERE INTRODUCED IN SUCH COMPANIES BY THE ASSESSEE GROUP. THERE IS NO COGENT REASON TO HAVE SUCH PRESUMPTION EITHER AS A RESULT OF SEARCH OVER THE ASSESSEE AS WELL AS ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 42 INQUIRIES CARRIED OUT BY THE DEPARTMENT. IF WE BELI EVE ON THE INQUIRIES CARRIED OUT BY THE DEPARTMENT THAN THERE MAY BE INTRODUCTION OF SOME S USPICIOUS FUNDS IN THE INTERMEDIATE COMPANIES WHERE FROM THE FLOW OF FUNDS STARTED FROM ONE COMPANY/PERSON TO OTHER COMPANY/PERSON AND PART OF SUCH WAS RECEIVED TO THE ASSESSEE COMPANY BUT STILL A QUESTION AROSE THAT HOW ITS PROVE THAT THE SAME WAS UNEXPLAI NED MONEY OF THE ASSESSEE COMPANY. THE COMPANIES/PERSONS FROM WHOM THE ASSESSEE COMPANY RE CEIVED THE SHARE APPLICATION MONEY AND THE PERSONS/COMPANIES FROM WHOM THE INVESTOR COMPAN IES OF THE ASSESSEE RECEIVED THE FUNDS ARE SEPARATE INCOME TAX ASSESSEE AND HAVING THEIR OWN N ET WORTH, OWN SOURCE OF FUNDS MUCH PRIOR TO THE INVESTMENT MADE IN THE ASSESSEE COMPANY AND IF SOME SUSPICIOUS FUNDS HAD BEEN INTRODUCED IN ACCOUNTS OF SUCH COMPANIES THEN THE E XPLANATION OF SUCH FUNDS SHOULD HAVE BEEN CALLED FROM CONCERNING PERSON/COMPANY AND IN CASE O F FAILURE TO DO SO THE ACTION SHOULD HAVE BEEN TAKEN IN THE CASE OF CONCERNING PERSON. INSTEA D OF DOING SO THE DEPARTMENT ADOPTED A SHORT CUT METHOD OF TREATING SUCH SUSPICIOUS MONEY AS UNE XPLAINED MONEY OF THE ASSESSEE AND ADDED THE SAME INCOME OF THE ASSESSEE WITHOUT CARRYING NE CESSARY INQUIRIES OR TAKING NECESSARY ACTION AGAINST SUCH PERSONS BY JUSTIFYING ITS ACTION ON TH E BASIS OF SOME IRRELEVANT INQUIRIES. THERE IS NO CASE OR EVIDENCE WITH THE DEPARTMENT TO PRESUME THAT THE ASSESSEE HAS INTRODUCED ITS EXPLAINED MONEY IN ACCOUNTS OF SUCH INVESTOR COMPAN IES. F) FINDING OF LD. AO: - ADMITTEDLY DURING THE COU RSE OF SEARCH OVER MOTISONS GROUP NO DOCUMENTS/EVIDENCE WAS FOUND TO SHOW THAT SHARE CAP ITAL AND PREMIUM THEREON WAS NOT GENUINE OR UNACCOUNTED INCOME WAS INTRODUCED IN THE GARB OF SHARE PREMIUM BUT FROM THE INQUIRIES AND MODUS OPERANDI ITS REVEALS THAT THE ALLOTEE COMPANI ES ARE MERELY PAPER COMPANIES AND PROVIDING ACCOMMODATION ENTRIES. THEREFORE THE INDI RECT EVIDENCE/INQUIRIES CONDUCTED GIVE CLEAR SIGN OF INTRODUCTION OF LARGE MONEY IN THE CO MPANY IN THE FORM OF SHARE CAPITAL/SHARE PREMIUM MORE SO WHEN THE JUSTIFICATION OF CHARGING SUCH HIGHER RATE NOT GENUINELY PROVED. SUBMISSION OF AO: - I) IN THIS PARA THE LD. AO HIMSELF ADMITTED THAT DURING THE COURSE OF SEARCH OVER MOTISONS GROUP NO DOCUMENTS/EVIDENCE WAS FOUND TO SHOW THAT SHARE CAPITAL AND PREMIUM THEREON WAS NOT GENUINE OR UNACCOUNTED INCOME WAS I NTRODUCED IN THE GARB OF SHARE PREMIUM. THUS IF THE DEPARTMENT IS NOT IN POSSESSION OF ANY POSITIVE MATERIAL AGAINST THE ASSESSEE OR ITS INVESTOR COMPANY THAN HOW THE SHARE CAPITAL AND PRE MIUM RECEIVED THEREON CAN BE TREATED AS NON GENUINE OR BOGUS. FURTHER FROM THE SHOW CAUSE I NDIRECT EVIDENCES/INQUIRIES CONDUCTED DURING WE HAVE GIVEN OUR SUBMISSION IN DETAIL ON SU CH INQUIRIES AND THERE IS NO POSITIVE/DIRECT EVIDENCE AGAINST THE ASSESSEE TO ALLEGED THAT THE A SSESSEE HAS INTRODUCED ITS OWN UNEXPLAINED MONEY UNDER THE GARB OF SHARE CAPITAL AND SHARE PRE MIUM. II) THE RATE OF SHARE WAS DECIDED AFTER DISCUSSI ON OF ASSESSEE COMPANY AND INVESTOR COMPANY. THE SHARES WERE ISSUED TO THE INV ESTOR COMPANIES AT PREMIUM BECAUSE OF THE REASONS MENTIONED IN FORGOING PARAS. FURTHER THE SH ARES WERE ISSUED AT THE SAME RATE TO SHRI SANJAY CHHABRA AND SHRI SANDEEP CHHABRA. FROM THE D OCUMENTS SUBMITTED TO THE AO NO WHERE IT PROVES THAT ALL THE COMPANIES ARE SIMPLY PAPER C OMPANIES AND PROVIDING ONLY ACCOMMODATION ENTRIES AND THE INVESTMENT MADE BY THEM IN THE ASSE SSEE COMPANY IS NOT GENUINE. THE FINDING OF THE LD. AO IS BASED ON THE ASSUMPTION AND PRESUMPTI ON. G) FINDING OF LD. AO: - IT IS CLEAR THAT WHAT IS APPARENT IS NOT REAL AND THE ASSESSEE'S CLAIM OF HAVING RECEIVED INVESTMENT IS NOT GENUINE. AS LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS SUMATI DAYAL (1995) 80 TAXMAN 89 (SC), APPARENT MUST BE CONSIDERED REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO LO OK INTO THE SURROUNDING CIRCUMSTANCES TO FIND ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 43 OUT THE REALITY AND THE MATTER HAS TO BE CONSIDERED BY APPLYING THE TEST OF HUMAN PROBABILITIES. THE EVIDENCES HAVE TO BE JUDGED BY APPLYING THE TES T OF HUMAN PROBABILITIES. IMPORTING THE RATIO OF THE HON'BLE SUPREME COURT OF INDIA AS PROPOUNDED IN THE CASE OF SUMATI DAYAL (SUPRA), THERE IS NO DISPUTE THAT THE AMOUNT HAS BEEN RECEIVED BY THE APPELLANT FROM VARIOUS COMPANIES, SOME OF WHICH ARE LISTED COMPANIES, AND THE FUNDS HAVE B EEN RECEIVED AGAINST THE ISSUE OF SHARES AND THAT THE FUNDS HAVE BEEN RECEIVED THROUGH BANKING C HANNELS. WHAT IS DISPUTED IS WHETHER THE FUNDS RECEIVED BY THE ASSESSEE IS ACTUALLY GENUINE INVESTMENT OR THE UNACCOUNTED INCOME INTRODUCED IN THE GARB OF INVESTMENT. THIS RAISES T HE QUESTION WHETHER THE APPARENT COULD BE CONSIDERED AS REAL. IN THE PRESENT CASE THE CLAIM O F THE ASSESSEE HAVING RECEIVED GENUINE INVESTMENT IS INCORRECT. SUBMISSION OF ASSESSEE: - I) AS LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CA SE OF CIT V/S SUMATI DAYAL (1995) 80 TAXMAN 89 (SC), (ALSO RELIED BY LD. AO) APPARENT MU ST BE CONSIDERED REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO LOOK INTO THE SURROUNDING CIRC UMSTANCES TO FIND OUT THE REALITY AND THE MATTER HAS TO BE CONSIDERED BY APPLYING THE TEST OF HUMAN PROBABILITIES. THE EVIDENCES HAVE TO BE JUDGED BY APPLYING THE TEST OF HUMAN PROBABILITI ES. II) THE LD. AO IS ALSO ADMITTING IN THIS PARA THAT THE AMOUNT HAS BEEN RECEIVED BY THE APPELLANT FROM INVESTOR COMPANY AND THE FUNDS HAVE BEEN RECEI VED AGAINST THE ISSUE OF SHARES AND THAT THE FUNDS HAVE BEEN RECEIVED THROUGH BANKING CHANNELS. THE DISPUTE IS WHETHER THE FUNDS RECEIVED BY THE A SSESSEE ARE ACTUALLY GENUINE CAPITAL APPLICATION OR THE UNACCOUNTED INCOME INTRODUCED IN THE FORM OF SHARE APPLICATION. IN THIS REGARD THIS IS TO SUBMIT THAT THERE IS NO REASON WITH THE DEPARTMENT TO PRESUME THAT THE AMOUNT RECEIVED FROM THE ABOVE MENTIONED COMPANIES IS ACCOMMODATION ENTRIES TO BROUGHT THE UNACCOUNTED MONEY OF THE ASSESSEE IN BOOKS OF ACCOU NTS. FURTHER DURING THE COURSE OF SEARCH THE DEPARTMENT HAS NOT FOUND ANY UNDISCLOSED SOURCE OF INCOME OF ASSESSEE FOR THE YEAR UNDER CONSIDERATION BY WHICH THIS MUCH OF INCOME COULD BE EARNED WHICH ALSO PROVES THAT THE SHARE CAPITAL RECEIVED BY THE ASSESSEE IS GENUINE. CIT VS BHARAT ENGINEERING AND CONSTRUCTION CO. (1972) 83 ITR 187 (SC) IN THIS CASE TRIBUNAL CAME T O THE CONCLUSION THAT UNEXPLAINED CASH CREDIT ENTRIES IN THE FIRST YEAR OF BUSINESS OF ENG INEERING CONSTRUCTION COMPANY COULD NOT BE INCOME OF ASSESSEE. THE HIGH COURT AFTER CAREFUL EX AMINATION OF THE VARIOUS FINDINGS REACHED BY THE TRIBUNAL HAS COME TO THE CONCLUSION THAT THE TR IBUNAL'S FINDINGS ARE FINDINGS OF FACT. HONBLE APEX COURT CONFIRMED THAT CONCLUSION. THIS GIVES THE ANSWER IN FAVOR OF THE ASSESSEE THA T IN THIS CASE THE APPARENT SHOULD BE CONSIDERED AS REAL AS THE ASSESSEE COMPANY IS NOT H AVING ANY SOURCE OF INCOME FROM WHICH THIS MUCH OF INCOME COULD BE EARNED THAN RECEIVED OF NON GENUINE SHARE CAPITAL TO BROUGHT ITS UNACCOUNTED INCOME IN ITS BOOKS OF ACCOUNTS DOES NO T ARISE. III) THE ASSESSING OFFICER MERELY DISBELIEVED THE EXPLAN ATION/STATEMENTS GIVEN BY THE ASSESSEE AND HAS CONVERTED GOOD PROOF INTO NO PROOF. HONBLE JUS TICE HIDAYATULLAH OF THE SUPREME COURT IN THE CASE OF SREELEKHA BANERJEE VS CIT [1963] 49 ITR 112 (SC); 120 OBSERVED THAT THE INCOME TAX DEPARTMENT CANNOT BY MERELY REJECTING UNREASONA BLY A GOOD EXPLANATION, CONVERT GOOD PROOF INTO NO PROOF HONBLE SUPREME COURT IN THE CASE OF UMA CHARAN SHA W & BROS CO VS CIT 37 ITR 271 HAS HELD THAT THE SURMISES AND CONJECTURES, AND THE CONCLUSION IS THE RESULT OF SUSPICION WHICH CANNOT TAKE THE PLACE OF PROOF. ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 44 HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS ANUPAM KAPOOR (2008) 299 ITR 179 (P & H) ALSO HELD THAT SUSPICION, HOWSOEVER STRONG CAN NOT TAKE THE PLACE OF LEGAL PROOF. 9. BY GIVING THE ABOVE FINDINGS THE LD. MADE ADDI TION OF RS. 90,00,000/- IN TOTAL INCOME OF THE ASSESSEE U/S 56(1) OF INCOME TAX ACT, 1961. REGARDI NG THE APPLYING THE PROVISIONS OF SECTION 56(1) OF INCOME TAX ACT, 1961 WE MAY SUBMIT AS UNDE R: - A) AS PER PROVISIONS OF SECTION 56(1) OF INCOME TAX ACT, 1961 INCOME OF EVERY KIND WHICH IS NOT TO BE EXCLUDED FROM THE TOTAL INCOME UNDER THIS ACT SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD 'INCOME FROM OTHER SOURCES', IF IT IS NOT CHAR GEABLE TO INCOME-TAX UNDER ANY OF THE HEADS SPECIFIED IN SECTION 14 , ITEMS A TO E. IN THE CASE OF THE ASSESSEE COMPANY, THE AMOUNT WAS RECEIVED FROM INVESTOR COMPANY WAS AGAINST SHARE APPLICATION AND THE SAME IS CAPITAL RECEIPT W HICH WAS ADJUSTED AGAINST SHARE CAPITAL AND SHARE PREMIUM. THE MONEY SO RECEIVED TO ASSESSEE CO MPANY WAS CAPITAL RECEIPT AND WAS NOT REVENUE RECEIPT, THEREFORE THE SAME CANNOT BE TAXED IN THE HANDS OF ASSESSEE COMPANY UNDER SECTION 56(1) OF INCOME TAX ACT, 1961 BECAUSE THIS SECTION DEAL WITH INCOME AND NOT WITH CAPITAL RECEIPTS. THE INVESTOR WHO SUBSCRIBED THE S HARE CAPITAL OF ASSESSEE COMPANY IS ALSO SHOWING THE AMOUNT PAID TO ASSESSEE AS ITS INVESTME NT IN SHARES OF ASSESSEE COMPANY AND NECESSARY DOCUMENTS IN THIS REGARD WAS SUBMITTED TO LD. AO. THEREFORE THE ASSESSEE HAS PROVED WITH DOCUMENTARY EVIDENCES THAT THE AMOUNT WAS RECE IVED AGAINST SHARE APPLICATION I.E. CAPITAL RECEIPT, THEREFORE THE SAME CANNOT BE TREATED AS IN COME OF THE ASSESSEE. FURTHER FOR TREATING THE SHARE CAPITAL/SHARE PREMIUM AS INCOME OF THE ASSESS EE COMPANY NO COGENT REASON HAS BEEN GIVEN BY LD. AO. FURTHER APART FROM THE SHARES ISSU ED TO THE INVESTOR COMPANY THE SHARES TO SHRI SANJAY CHHABRA AND SHRI SANDEEP CHHABRA WERE ALSO A LLOTTED DURING THE SAME YEAR AT THE SAME RATE WHICH WAS TREATED BY LD. AO AS JUSTIFIED THAN THERE SHOULD BE NO REASON TO TREAT THE ALLOTMENT MADE AT SAME RATE TO THE INVESTOR COMPANY AS NOT JUSTIFIED. B) THERE IS NO DEEMING FICTION HAS BEEN GIVEN IN SE CTION 56(1) OF INCOME TAX ACT, 1961 WHEREIN THE INCOME CAN BE TAXED UNDER DEEMING PROVISION. CERTAI N DEEMING INCOME HAS BEEN CHARGED AS INCOME TAX ACT WHICH HAS BEEN PROVIDED IN SECTION 5 6(2) OF INCOME TAX ACT, 1961 AND AS PER PROVISION OF SECTION 56(2) OF INCOME TAX ACT, 1961 THE SHARE PREMIUM RECEIVED PRIOR TO AY 2013-14 WERE NOT TAXABLE IN ANY CIRCUMSTANCES IF TH E ASSESSEE HAS PROVED THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION S. C) THE INCOME FOR THE PURPOSE OF THE INCOME TAX ACT HAS A WELL UNDERSTOOD MEANING AS DEFINED IN SECTION 2(24) OF THE INCOME TAX ACT 1961. IT IS TRU E THAT SECTION 2(24) OF THE INCOME ACT 1961 CONTAINS INCLUSIVE DEFINITION BUT IT CANNOT BE DISP UTED THAT INCOME SHOULD HAVE BEEN LOOK INTO ITS NORMAL MEANING. THE INCOME WILL NOT INCLUDE CAPITAL RECEIPTS UNLESS IT IS SPECIFIED IN INCOME TAX ACT. THIS ARGUMENT CLARIFIES AFTER THE AMENDMEN T MADE BY FINANCE ACT 2012 W.E.F. 1.4.2013 IN SECTION 56(VIIB) OF INCOME TAX ACT, 1961 WHEREIN CERTAIN SHARE PREMIUMS WERE MADE TAXABLE W.E.F. 01.04.2013. IF THE SAME WERE ALREADY TAXABLE U/S 56(1) O INCOME TAX ACT, 1961 AND THE SAME WAS ALREADY INCLUDED IN THE DEFINITION OF INCO ME THAN WHY THIS AMENDMENT WAS MADE. THEREFORE THE LD. AO IS WRONG IN MAKING THE ADDITIO N U/S 56(1) OF INCOME TAX ACT, 1961. D) CHARGE OF TAX IS ON INCOME AS UNDERSTOOD IN THE I. TAX ACT AND MEASURE OF INCOME AS PER THE COMPUTATION PROVISION. IN CASE THERE IS NO CHARGING PROVISION FOR SPECIFIC RECEIPT, THEN IT CANNOT BE TAXED. THE FIVE MEMBER BENCH OF THE APEX COURT I N CIT V VATIKA TOWNSHIP P LTD 367 ITR 466 OBSERVED AT PAGE 494. ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 45 TAX LAWS ARE CLEARLY IN DEROGATION OF PERSONAL RIG HTS AND PROPERTY INTERESTS AND ARE, THEREFORE, SUBJECT TO STRICT CONSTRUCTION AND ANY AMBIGUITY MU ST BE RESOLVED AGAINST IMPOSITION OF THE TAX. IN BILLINGS V U.S 232 U.S.261 AT PAGE 265, 34 S.CT 421 (1914), THE SUPREME COURT CLEARLY ACKNOWLEDGED THIS BASIC AND LONG STANDING RULE OF S TATUTORY CONSTRUCTION. TAX STATUTES SHOULD BE STRICTLY CONSTRUED, AND, IF ANY AMBIGUITY BE FOUND TO EXIST, IT MUST BE RESOLVE D IN FAVOUR OF CITIZEN. IF A PERSON SOUGHT TO BE TAXED COMES WITHIN THE LE TTER OF THE LAW HE MUST BE TAXED, HOWEVER GREAT THE HARDSHIP MAY APPEAR TO THE JUDICIAL MIND TO BE. ON THE OTHER HAND, IF THE CROWN SEEKING TO RECOVER THE TAX, CANNOT BRING THE SUBJECT WITHIN TH E LETTER OF THE LAW, THE SUBJECT IS FREE, HOWEVER APPARENTLY WITHIN THE SPRIT OF THE LAW THE CASE MIG HT OTHERWISE APPEAR TO BE AS OBSERVED IN PARTINGTON V ATTOMEY GENERAL LR4HL100. SINCE FOR THE YEAR UNDER CONSIDERATION THERE WAS NO PROVISIONS IN INCOME TAX ACT, 1961 WHEREIN THE FAIR VALUE OF SHARE COULD BE COMPUTED AND THE EXCES S SHARE PREMIUM COULD BE TAXED, THEREFORE IN ABSENCE OF COMPUTATION PROVISION THE SAME CANNOT BE TAXED. THE RELIANCE IS PLACED IN FOLLOWING CASES: - I) THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CAD ELL WVG. MILLS CO.(P) LTD. V CIT 249 ITR 265 HAD AN OCCASION TO CONSIDER THE TAXABILITY OF A SUM RECEIVED IN RESPECT OF CONSIDERATION OF TENANCY RIGHT. IT WAS ACCEPTED BOTH BY REVENUE AND THE ASSESSEE THAT TENANCY RIGHT IS A CAPITAL RECEIPT. INCOME AS DEFINED IN SECTION 2(24)(VI) IS THE INCOME CHARGEABLE U/S 45. HENCE CAPITAL GAIN CHARGEABLE U/S 45 OR NOT WILL BE TAXABLE IN CA SE THE ARGUMENT OF THE REVENUE IS ACCEPTED. LEGISLATURE HAS NOT STOPPED WITH THE WORD CAPITAL G AIN BUT HAS MENTIONED THAT CAPITAL GAIN CHARGEABLE U/S 45. BEFORE THE BOMBAY HIGH COURT, IT WAS ARGUED THAT IN CASE SURRENDER OF TENANCY RIGHTS IS NOT TAXABLE U/S 45 THEN IT SHOULD FALL U/S 56 OF I.T. ACT. IF THE CAPITAL ASSET HAS NO COST THEN ENTIRE RECEIPT IS CAPITAL RECEIPT. BEF ORE THE HONBLE HIGH COURT, THE REVENUE CONTENDED THAT SECTION 14, IT IS MENTIONED AS CAPIT AL GAIN AND NOT CAPITAL GAIN CHARGEABLE U/S 45. THIS CONTENTION WAS NOT ACCEPTED BY THE HIGH CO URT. IF THE COMPUTATION PROVISION DO NOT APPLY TO A CASE THEN SUCH A CASE WILL NOT BE COVERE D UNDER CHARGING SECTION. AT LATER STAGE, A REFERENCE WILL BE MADE TO 56 (VII B) INSERTED BY FI NANCE ACT 2012 W.E.F. 1.4.2013 AS THE SAME WILL BE A COMPUTATION PROVISION. FOR THE A.Y. 2011- 12, COMPUTATION PROVISION WERE NOT THERE. IN ABSENCE OF COMPUTATION PROVISION, ENTIRE VALUE OF S HARE PREMIUM CAN NOT BE TAXED U/S 56. AS FOR TENANCY RIGHT, THE FULL CONSIDERATION CAN NOT BE TA XED U/S 56, SIMILARLY ENTIRE SHARE PREMIUM IS NOT TAXABLE U/S 56(1). II) THE HONBLE APEX COURT IN THE CASE OF CIT V D.P . SANDU BROS. CHEMBUR (P) LTD 273 ITR 1 ALSO HOLD THAT AS PER 2(24)(VI) ONLY INCOME WHICH IS CHA RGEABLE U/S 45 IS TO BE INCLUDED IN INCOME AND IF COMPUTATION PROVISION U/S 45 FAILS THEN CHAR GING PROVISIONS WILL FAIL. REF. TO CIT V B.C. SRINIVASA SETTY 128 ITR 294. IV) THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT V GOTAN LIME STONE KHANIJ UDYOG 269 ITR 399 ALSO HELD THAT IN CASE COMPUTATION PROVISIO N U/S 48 COULD NOT BE APPLIED FOR WANT OF ASCERTAINABLE COST OF ACQUISITION, THEN CAPITAL GAI N DOES NOT ARISE TO BE INCLUDED IN TOTAL INCOME ON ACCOUNT OF FAILURE OF APPLICABILITY OF COMPUTATI ON PROVISION. THE HONBLE HIGH COURT REFERRED TO DECISION OF BOMBAY HIGH COURT IN THE CA SE OF CADELL WVG. MILLS CO (P) LTD. (SUPRA). V) THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF S. ZORASTER AND CO. V/S CIT 322 ITR 35 HAD ON OCCASION TO CONSIDER THE TAXABILITY OF RECEIPT O F RS.20,000 RECEIVED BY VENDEE ON DEFAULT OF THE PURCHASER AS PER AGREEMENT FOR SELL OF PREM PRA KASH TALKIES. THE HONBLE HIGH COURT AFTER REFERRING TO THE DECISION OF APEX COURT IN THE CASE OF TRAVANCORE RUBBER AND TEA CO LTD. V CIT ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 46 243 ITR 158 HELD THAT SUCH RECEIPT IS CAPITAL RECEI PT. SUCH CAPITAL RECEIPT IS NOT TAXABLE IN VIEW OF JUDGMENT OF APEX COURT IN D.P. SANDU BROS. CHEMB UR (P) LTD (SUPRA). HENCE CAPITAL RECEIPT IS NOT TAXABLE UNLESS THERE IS CHARGING PROVISION F OR A CAPITAL RECEIPT AND COMPUTATION PROVISIONS ARE ALSO APPLICABLE. E) THE HONBLE BOMBAY HIGH COURT IN THE CASE OF VOD AFONE INDIA SERVICES P. LTD. V UOI 368 ITR 1 HAD AN OCCASION TO CONSIDER THE DIFFERENCE BETWEE N THE SHARE PREMIUM DETERMINED BY REVENUE AND THE SHARE PREMIUM CHARGED AS DEEMED LOAN AND TA XING OF NATIONAL INTEREST ON DEEMED LOAN. THE HONBLE BOMBAY HIGH COURT HAS REFERRED TO THE D ECISION OF APEX COURT IN THE CASE OF MATHURAM AGGARWAL V/S STATE OF MP (1999) 8 SCC 667 FOR THE TEST TO INTERPRET A TAXING STATUE WHICH READS AS UNDER: THE INTENTION OF THE LEGISLATURE IS A TAXATION ST ATUTE IS TO BE GATHERED FROM THE LANGUAGE OF THE PROVISIONS PARTICULARLY WHERE THE LANGUAGE IS PLAIN AND UNAMBIGUOUS. IN A TAXING ACT IT IS NOT POSSIBLE TO ASSUME ANY INTENTION OR GOVERNING PURPO SE OF THE STATUTE MORE THAN WHAT IS STATED IN THE PLAIN LANGUAGE. IT IS NOT THE ECONOMIC RESULTS SOUGHT TO BE OBTAINED BY MAKING THE PROVISION WHICH IS RELEVANT IN INTERPRETING A FISCAL STATUTE. EQUALLY IMPERMISSIBLE IS AN INTERPRETATION WHICH DOES NOT FLOW FROM THE PLAIN, UNAMBIGUOUS LAN GUAGE OF THE STATUTE. WORDS CANNOT BE ADDED TO OR SUBSTITUTED SO AS TO GIVE A MEANING TO THE STATUTE WHICH WILL SERVE THE SPENT AND INTENTION OF THE LEGISLATURE. THE STATUTE SHOULD CL EARLY AND UNAMBIGUOUSLY CONVEY THE THREE COMPONENTS OF THE TAX LAW I.E. SUBJECT OF THE TAX, THE PERSON WHO IS LIABLE TO PAY THE TAX AND THE RATE AT WHICH THE TAX IS TO BE PAID. IF THERE IS AN Y AMBIGUITY REGARDING ANY OF THESE INGREDIENTS IN A TAXATION STATUTE THEN THERE IS NO TAX IN LAW. THE N IT IS FOR THE LEGISLATURE TO DO THE NEEDFUL IN TH E MATTER. HONBLE BOMBAY HIGH COURT IN THIS CASE (VODAFONE CA SE) OBSERVED THAT ISSUE OF SHARES AT A PREMIUM IS ON CAPITAL ACCOUNT AND GIVES RISE TO NO INCOME. 56( 1) PROVIDES THE INCOME OF EVERY KIND WHICH IS NOT EXCLUDED FROM THE TOTAL INCOME IS CHARGEABLE UN DER THE HEAD INCOME FROM OTHER SOURCES. HOWEVER BEFORE SECTION 56 OF THE ACT CAN BE APPLIED THERE MUST BE INCOME WHICH ARISES. IF THE RECEIPT IS CAPITAL THEN IT IS NOT INCOME. HENCE SHA RE PREMIUM IS NOT AN INCOME. F) THE CBDT VIDE CIRCULAR/INSTRUCTION NO.2 DATED 29 .01.2015 HAS STATED AS UNDER [371 ITR 6(ST)]. IN REFERENCE TO THE ABOVE CITED SUBJECT, I AM DIREC TED TO DRAW YOUR ATTENTION TO DECISION OF THE HIGH COURT OF BOMBAY IN THE CASE OF VODAFONE INDIA SERVI CES PVT. LTD V UOI FOR THE ASSESSMENT YEAR 2009-10 (WP NO.871 OF 2014) WHEREIN THE COURT HAS H ELD INTERALIA, THAT THE PREMIUM ON SHARE ISSUE WAS ON ACCOUNT OF A CAPITAL ACCOUNT TRANSACTI ON AND DOES NOT GIVE RISE TO INCOME AND HENCE, NOT LIABLE TO TRANSFER PRICING ADJUSTMENT. IT IS HEREBY INFORMED THAT THE BOARD HAS ACCEPTED T HE DECISION OF THE HIGH COURT OF BOMBAY IN THE ABOVE MENTIONED WRIT PETITION. IN VIEW OF THE ACCEP TANCE OF THE ABOVE JUDGMENT, IT IS DIRECTED THAT THE RATIO DECIDENDI OF THE JUDGMENT MUST BE AD HERED TO BY THE FIELD OFFICERS IN ALL CASES WHERE THE ISSUE IS INVOLVED. THIS MAY ALSO BE BROUG HT TO THE NOTICE OF THE ITAT, DRPS AND CIT (APPEALS). IN VIEW OF ABOVE INSTRUCTION, IT IS CLEAR THAT RATI O DECIDING OF TREATING OF SHARE PREMIUM AS CAPITAL RECEIPT IS BINDING ON REVENUE AUTHORITIES. G) BY FINANCE ACT 2012 A NEW CLAUSE (VIIB) WAS INSE RTED IN 56(2). MEMORANDUM EXPLAINING THE PROVISIONS IN FINANCE BILL 2012 STATED AS UNDER:- SHARE PREMIUM IN EXCESS OF THE FAIR MARKET VALUE IS TO BE TREATED AS INCOME. ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 47 SECTION 56(2) PROVIDES FOR THE SPECIFIC CATEGORY O F INCOMES THAT SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. IT IS P ROPOSED TO INSERT A NEW CLAUSE IN 56(2). THE NEW CLAUSE WILL APPLY WHERE, ACCOMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, RECEIVES, IN ANY PREVIOUS YEAR, FROM ANY PERSON BEING A RESIDENT, ANY CONSIDERATION FOR ISSUE OF SHARES. IN SUCH A CASE I F THE CONSIDERATION RECEIVED FOR ISSUE OF SHARES EXCEEDS THE FACE VALUE OF SHARES, THE AGGREGATE CON SIDERATION RECEIVED FOR SUCH SHARES AS EXCEEDS THE FAIR MARKET VALUE OF THE SHARES SHALL B E CHARGEABLE TO INCOME TAX, UNDER THE HEAD INCOME FROM OTHER SOURCES. THIS AMENDMENT EFFECTIVE FROM 1ST APRIL 2013 AND WI LL ACCORDINGLY APPLY IN RELATION TO ASSESSMENT YEAR 2013-14 AND SUBSEQUENT ASSESSMENT YEARS. IN THE MEM ORANDUM IT IS MENTIONED THAT PREMIUM IN EXCESS OF FAIR MARKET VALUE IS TO BE TREATED AS INC OME. THIS SUGGESTS THAT PREMIUM IN EXCESS OF FAIR MARKET VALUE WAS NOT AN INCOME BUT IS TO BE TR EATED AS INCOME DUE TO AMENDED PROVISION. BEFORE THE AMENDMENT, CONSIDERATION RECEIVED AS PRE MIUM WAS NOT INCOME. THE LEGISLATURE IN ITS WISDOM REQUIRED THE SHARE PREMIUM IN EXCESS OF FAIR MARKET VALUE TO BE INCOME FROM ASSESSMENT YEAR 2013-14 AND NOT THE ENTIRE PREMIUM TO BE TREATED AS INCOME. CBDT VIDE CIRCULAR NO.3 OF 2012 DATED 12.06.2012 HAS ALSO MEN TIONED THAT PROVISIONS OF 56(2)(VII B) WILL BE APPLICABLE FOR ASSESSMENT YEAR 2013-14 ONWARD. H) SECTION 56 IS NOT A CHARGING SECTION. THIS SECTI ON STARTS WITH THE FOLLOWING SENTENCE. INCOME OF EVERY KIND WHICH IS NOT TO BE EXCLUDED F ROM THE TOTAL INCOME UNDER THE ACT SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD. INCOME FR OM OTHER SOURCES IF IT IS NOT CHARGEABLE TO INCOME TAX. UNDER ANY OF THE HEADS SPECIFIED IN SEC TION 14, ITEMS A TO E. FOR AN INCOME TO BE TAXED U/S 56, IT HAS TO SATI SFY THREE CONDITIONS. (A) IT SHALL BE CLASSIFIABLE AS INCOME AS PER THE C HARGING SECTION OF THE ACT. (B) IT SHALL NOT BE EXCLUDED FROM THE TOTAL INCOME (E.G. SECTION10). (C) IT IS NOT CHARGEABLE TO TAX UNDER ANY OF THE SP ECIFIED HEADS IN SECTION 14, ITEMS A TO E. THE FINANCE BILL 2012 AS PRESENTED ON 16TH MARCH 20 12 INCLUDED A NEW CLAUSE (VIIB) U/S 56(2) OF I.T. ACT [342 ITR1(ST)]. NO PROPOSAL IN THE ORIGINAL BIL L TO INSERT A NEW CLAUSE U/S 2(24). SUBSEQUENTLY NOTICE OF AMENDMENTS TO FINANCE BILL W AS GIVEN [SEE 343 ITR 37(ST)] AND AMENDMENTS ALSO INCLUDED THE IN SECTION OF CLAUSE ( XVI) IN 2(24) OF I.T. ACT AND SUCH CLAUSE IS AS UNDER: (XVI) ANY CONSIDERATION RECEIVED FOR ISSUE OF SHARE S AS EXCEEDS THE FAIR MARKET VALUE OF THE SHARES REFERRED TO IN CLAUSE (VIIB) OF SUBSECTION (2) OF 5 6. THE AMENDMENT INTRODUCED IN 2(24) SIGNIFIES THAT SE CTION 56 IS NOT A CHARGING SECTION. UNLESS THE INCOME WHICH IS TO BE TAXED U/S 56(2)(VII B) IS INC LUDED IN THE DEFINITION OF INCOME, THEN IT CAN BE TAXED AND BE PART OF TOTAL INCOME. NATURE OF INCOME AS MENTIONED IN SECTION 28(IIIA), (IIIB), (IIIC),(IIID) AND (IIIE) ARE ALSO INCLUDED IN DEFIN ITION OF INCOME. I) THIS AMENDMENT IF SECTION 56(2)(VIIB) OF INCOME TAX ACT, 1961 EFFECTIVE FROM 1ST APRIL 2013 AND WILL ACCORDINGLY APPLY IN RELATION TO ASSESSMENT YE AR 2013-14 AND SUBSEQUENT ASSESSMENT YEARS ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 48 AND THE PROVISIONS OF THIS SECTION CANNOT BE MADE A PPLY IN PREVIOUS YEARS. IN THIS REGARD THE RATIO HAS BEEN LAID DOWN IN FOLLOWING JUDGMENTS: - A) BY FINANCE ACT 1994, SECTION 55(2) WAS AMENDED T O PROVIDE THAT COST OF ACQUISITION OF A TENANCY RIGHT WILL BE TAKEN AS NIL. THE HONBLE APEX COURT IN THE CASE OF D.P. SANDU BROS. CHEMBUR (P) LTD (SUPRA), HELD THAT AMENDMENT TOOK EFFECT FROM 1 ST APRIL, 1995 AND THEREFORE WILL NOT BE APPLICABLE FOR A.Y. 1987-88. SIMILAR FINDING HAS BE EN RECORDED BY HONBLE RAJ, HIGH COURT IN THE CASE OF GOTAN LIME STONE KHANIJ UDHYOG. THE RATIO OF LAW IN RESPECT OF AMENDMENT IN 55(2) B EING HELD AS PROSPECTIVE IS APPLICABLE FOR 56(2)(VIBE) AND HENCE SHARE PREMIUM IN EXCESS OF FA IR MARKET VALUE CANNOT BE HELD TAXABLE FOR A.Y. 2011-12. B) RECENTLY THE HONBLE APEX COURT IN THE CASE OF M .G. PICTURES (MADRAS) LTD V/S ACIT 373 ITR 39 HELD THAT AMENDMENT IN SECTION 40A(3) W.E.F. FRO M 1.4.1996 IS PROSPECTIVE AND CANNOT BE APPLIED TO PREVIOUS YEARS OF BLOCK PERIOD PRIOR TO F.Y. 1995-96. C) THE FIGURE OF 10,000 WAS CHANGED TO 20,000 U/S 4 0A(3) OF INCOME TAX ACT, 1961 AND 269SS OF INCOME TAX ACT, 1961 BY DIRECT TAX LAWS (AMENDMENT) ACT 1987 W.E.F. 1.4.1989. THE CBDT VIDE CIRCULAR NO.522 DATED 18.08.1988 STATED THAT A MENDMENT IN SECTION 40A(3) IS APPLICABLE FOR A.Y. 1989-90 AS IT IS A SUBSTANTIVE PROVISION A ND SINCE 269SS IS A PROCEDURAL PROVISION, THE EFFECTIVE DATE WILL BE 1.4.89 I.E. PREVIOUS YEAR RE LEVANT TO A.Y. 89-90. D) THE FIVE JUDGE CONSTITUTION BENCH IN THE CASE OF CIT V VATIKA TOWNSHIP (P) LTD. 367 ITR 466 HAD AN OCCASION TO CONSIDER AS TO WHETHER PROVISO A DDED TO SECTION 113 OF THE I.T. ACT, IS PROSPECTIVE OR RETROSPECTIVE. THE HONBLE APEX COUR T WHILE CONSIDERING THE VARIOUS DECISIONS HELD (AS PER PAGE 469 OF ITR 367). THAT SURCHARGE LEVIED BY ASSESSING OFFICER FOR THE BLOCK ASSESSMENT PERTAINING TO THE PERIOD FROM JUNE 1, 2002 WAS LIABLE TO BE DELETED. AN AMENDMENT MADE TO A TAXING STATUTE CAN BE SAID T O BE INTENDED TO REMOVE HARDSHIPS ONLY OF THE ASSESSEE, NOT OF THE DEPARTMENT. IMPOSING A RETROSP ECTIVE LEVY ON THE ASSESSEE WOULD HAVE CAUSED UNDUE HARDSHIP AND FOR THAT REASON PARLIAMEN T SPECIFICALLY CHOSE TO MAKE THE PROVISO EFFECTIVE FROM JUNE 1, 2002. WHERE A BENEFIT IS CONFERRED BY A LEGISLATION, THE RULE AGAINST A RETROSPECTIVE CONSTRUCTION IS DIFFER ENT. IN A LEGISLATION CONFERS A BENEFIT ON SOME PERSONS BUT WITHOUT INFLICTING A CORRESPONDING DETRIMENT ON SOME OTHER PERSON OR ON THE PUBLIC GEN ERALLY, AND WHERE TO CONFER SUCH BENEFIT APPEARS TO HAVE BEEN THE LEGISLATORS OBJECTS, THEN PRESUMPTION WOULD BE THAT SUCH A LEGISLATION, GIVING IT A PURPOSIVE CONSTRUCTION, WOULD WARRANT I T TO BE GIVEN A RETROSPECTIVE EFFECT. THIS EXACTLY IS THE JUSTIFICATION TO TREAT PROCEDURAL PR OVISION AS RETROSPECTIVE. WHERE A LAW IS ENACTED FOR THE BENEFIT OF COMMUNITY AS A WHOLE, EVEN IN TH E ABSENCE OF A PROVISION THE STATUTE MAY BE HELD TO BE RETROSPECTIVE IN NATURE. THE HONBLE APEX COURT FURTHER NOTICED THAT CBDT CI RCULAR MENTIONED THAT PROVISO IS APPLICABLE FROM 1.6.2002. IN RESPECT OF 56(2)(VII B), CBDT VIDE CIR CULAR NO.3 OF 2012 DATED 12.06.2012 HAS ALSO MENTIONED THAT PROVISIONS OF 56(2)(VII B) WILL BE A PPLICABLE FOR ASSESSMENT YEAR 2013-14 ONWARD. HENCE SHARE PREMIUM EVEN IF IN EXCESS OF FA IR MARKET VALUE IS NOT TAXABLE U/S 56(1) FOR THE A.Y. 2011-12. ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 49 9. IN VIEW OF THE ABOVE SUBMISSIONS, IT IS CLEAR TH AT SHARE PREMIUM RECEIVED IS A CAPITAL RECEIPT AND CONSIDERATION RECEIVED CANNOT BE CONSIDERED AS INCO ME FOR THE YEAR UNDER CONSIDERATION. WITHOUT PREJUDICE TO OUR SUBMISSION IN THIS REGARD THIS IS TO SUBMIT IN THE IN THE SHOW CAUSE NOTICE THE LD. AO MENTIONED THAT SHARE PREMIUM/SHAR E CAPITAL SHOULD BE TAXABLE IN THE HANDS OF ASSESSEE COMPANY U/S 56(1) OF INCOME TAX ACT, 1961 ON A/C OF SHARE PREMIUM/SHARE CAPITAL ALLEGED TO BE NOT IN ACCORDANCE WITH THE VALUE OF T HE SHARES. IN THIS REGARD WITHOUT PREJUDICE TO OUR SUBMISSION ON THIS ISSUE THIS IS TO SUBMIT THAT IN CASE THE SHARE PREMIUM IS MADE TAXABLE AS INCOME OF THE ASSESSEE ON THE GROUND THAT THE SAME IS NOT AS PER FAIR MARKET VALUE AND HELD AS TAXABLE THAN STILL THE AMOUNT RECEIVED AGAINST SHAR E CAPITAL AMOUNTING TO RS. 45,00,000/- CANNOT BE TREATED AS INCOME OF THE ASSESSEE. 10. IN ADDITION OF ABOVE SUBMISSION IT IS FURTHER S UBMITTED THAT THE ASSESSEE SUBMITTED SUFFICIENT DOCUMENTS TO PROVE IDENTITY, CREDITWORTHINESS AND G ENUINENESS OF SHARE CAPITAL. TO SUPPORT THAT SHAREHOLDERS WERE GENUINE AND CREDITWORTHINESS IS P ROVED, THE ASSESSEE ENCLOSED NECESSARY DETAILS, IN RESPECT OF INCORPORATION OF SUCH COMPAN IES AND DETAILS OF CHEQUES VIDE WHICH AMOUNTS WERE RECEIVED. THE CAPACITY OF SHAREHOLDERS IS VERIFIABLE FROM THE COPY OF THE BALANCE SHEET OF THE SHAREHOLDERS. THE SHAREHOLDERS HAVE FU NDS ON A PRIOR DATE FROM THE ALLOTMENT OF SHARES GIVEN BY THE ASSESSEE COMPANY AND SUCH FUNDS WERE MORE THAN THE AMOUNT OF SHARE APPLICATION. THEREFORE, THE ADDITION ON SHARE APPLI CATION RECEIVED TO THE ASSESSEE NEITHER CAN BE MADE U/S 56(1) OF INCOME TAX ACT, 1961 NOR CAN BE M ADE U/S 68 OF INCOME TAX ACT, 1961. THE VARIOUS JUDGMENTS AND ARGUMENTS REGARDING ADDITION MADE U/S 56(1) OF INCOME TAX ACT, 1961 HAS BEEN SUBMITTED IN FORGOING PARAS. THE RELIANCE REGARDING ADDITION CANNOT BE MADE U/S 68 OF INCOME TAX CAT, 1961 IS PLACED ON THE FOLLOWING DEC ISIONS: - I) SHALIMAR BUILDCON (P) LTD. VS ITO (2011) 128 ITD 0396 (JAIPUR) IN THIS CASE HONBLE ITAT JAIPUR BENCH HAS RELIED O N ITS OLD DECISION IN THE CASE OF HOTEL GAUDAVAN ITA NO. 1162 AND 1137/JP/2008 AND ADDITION ON ACCOU NT OF SHARE CAPITAL WAS DELETED. 28.5 ON IDENTICAL ISSUE, THE TRIBUNAL, JAIPUR BENCH IN THE CASE OF HOTEL GAUDAVAN (P) LTD. (SUPRA) HAS HELD AS UNDER : '6. AS REGARDS THE ISSUE ON MERIT IN THE DEPARTMENT AL APPEAL, WE CONCUR WITH THE VIEWS OF THE LEARNED CIT(A) THAT THE AO HAS NOT CONSIDERED THE EXPLANATI ON OF THE ASSESSEE. THE AMOUNT UNDER CONSIDERATION OF RS. 1.89 CRORE HAS BEEN RECEIVED B Y THE ASSESSEE AS SHARE APPLICATION MONEY FROM M/S JALKANTA TECHNICAL & FINANCIAL SERVICE (P) LTD. (JTFSPL) AFTER A PROPER RESOLUTION PASSED BY THE BOARD OF DIRECTORS OF THE AFORESAID C OMPANY THROUGH BANKING CHANNEL. M/S JTFSPL IS HAVING PERMANENT ACCOUNT AND FILING ITS R ETURN OF INCOME REGULARLY. THE AO HAS NOWHERE MENTIONED THAT MONEY BELONGS TO THE ASSESSE E COMPANY AND THEREFORE, PROVISIONS OF S. 68 CANNOT BE INVOKED. THE LEARNED CIT(A) HAS RIGHTL Y RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. STELLER INVESTMEN T LTD. (2000) 164 CTR (SC) 287 WHICH HAS BEEN CONFIRMED BY THE HONBLE SUPREME COURT OF INDI A. THE LEARNED CIT(A) HAS ALSO RELIED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH CO URT IN THE CASE OF BARKHA SYNTHETICS LTD. VS. ASSTT. CIT (2005) 197 CTR (RAJ) 432 AND ALSO THE DE CISION OF TRIBUNAL, JODHPUR BENCH IN THE CASE OF UMA POLYMERS (P) LTD. VS. DY. CIT (DT. 27TH FEB., 2006) [REPORTED AT (2006) 101 TTJ (JD)(TM) 124ED.] WHERE IT HAS BEEN HELD THAT THE A SSESSEE HAS TO PROVE THE EXISTENCE OF THE SHAREHOLDERS WHICH IN THE PRESENT CASE IS NOT UNDER DISPUTE. THEREFORE, THE ASSESSEE HAS DISCHARGED THE BURDEN AND THEREFORE THE AO WAS NOT JUSTIFIED IN MAKING ANY ADDITION UNDER S. 68 OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE HAS REFERRED TO THE DECISION OF HONBLE SUPREME COURT OF INDIA IN THE CASE OF DIVINE LEASIN G & FINANCE LTD. DT. 21ST JAN., 2008, THE COPY OF WHICH IS PLACED ON RECORD WHERE IT HAS BEEN OBSERVED BY THE SUPREME COURT AS UNDER : ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 50 CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDIS CLOSED INCOME UNDER S. 68 OF IT ACT, 1961 ? WE FIND NO MERIT IN THIS SLP FOR THE SIMPLE REASON THA T IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDER S, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR I NDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER O F THE LEARNED CIT(A), WITH THE IMPUGNED JUDGMENT. THE SAID DECISION OF HONBLE SUPREME COURT OF INDIA HAS BEEN FOLLOWED BY THE TRIBUNAL, DELHI BENCH IN THE CASE OF ITO VS. BHOR MAL DHANSI RAM LTD. IN ITA NO. 4670/DEL/2007, DT. 3RD MARCH, 2006. THE COPY OF THE SAID DECISION OF TRIBUNAL, DE LHI BENCH IS PLACED ON RECORD. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI H.M. SINGHVI, CHARTER ED ACCOUNTANT HAS ALSO RELIED UPON THE DECISION OF HONBLE SUPREME COURT OF INDIA ON THE S AID ISSUE IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD. (2008) 216 CTR (SC) 195 : (2008) 6 DTR (SC) 308 WHEREIN IT HAS BEEN HELD THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE W ITH LAW, BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF ASSESSEE COMPANY.' 28.6 THE HONBLE DELHI HIGH COURT IN THE CASE OF CI T VS. DIVINE LEASING & FINANCE LTD. (SUPRA) HAD AN OCCASION TO CONSIDER THE ADDITION ON ACCOUNT OF SHARE APPLICATION MONEY. WE ARE REPRODUCING THE HELD PORTION FROM THE DECISION OF H ONBLE DELHI HIGH COURT AS MENTIONED IN (2007) 207 CTR (DEL) 38 (SUPRA). 'INCOMECASH CREDITSHARE APPLICATION MONEYBURDEN OF PROOF CAN SELDOM BE DISCHARGED TO THE HILT BY THE ASSESSEEIF THE AO HARBOURS DOUBTS OF T HE LEGITIMACY OF ANY SUBSCRIPTION HE IS EMPOWERED, NAY DUTY-BOUND, TO CARRY OUT THOROUGH IN VESTIGATIONSBUT IF THE AO FAILS TO UNEARTH ANY WRONG OR ILLEGAL DEALINGS, HE CANNOT OB DURATELY ADHERE TO HIS SUSPICIONS AND TREAT THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANYIF RELEVANT DETAILS OF ADDRESS AND IDENTITY OF THE SUBSCRIBERS ARE FURNISHED TO TH E DEPARTMENT ALONG WITH COPIES OF THE SHAREHOLDERS REGISTERS, SHARE APPLICATION FORMS, SH ARE TRANSFER REGISTER ETC. IT WOULD CONSTITUTE ACCEPTABLE PROOF OR EXPLANATION BY THE ASSESSEEDEP ARTMENT WOULD NOT BE JUSTIFIED IN DRAWING AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBS CRIBER FAILS OR NEGLECTS TO RESPOND TO ITS NOTICESTRIBUNAL HAS NOTED THAT THE ASSESSEE COMPAN Y IS A PUBLIC LIMITED COMPANY WHICH HAD RECEIVED SUBSCRIPTIONS TO THE PUBLIC ISSUE THROUGH BANKING CHANNELS AND THE SHARES WERE ALLOTTED IN CONSONANCE WITH THE PROVISIONS OF SECURITIES CON TRACT (REGULATION) ACT, 1956, AS ALSO THE RULES AND REGULATIONS OF DELHI STOCK EXCHANGECOMPL ETE DETAILS WERE FURNISHEDTRIBUNAL HAS FURTHER FOUND THAT THE AO HAS NOT BROUGHT ANY POSIT IVE MATERIAL OR EVIDENCE WHICH WOULD INDICATE THAT THE SHAREHOLDERS WERE BENAMIDARS OR F ICTITIOUS PERSONS OR THAT ANY PART OF THE SHARE CAPITAL REPRESENTED COMPANYS OWN INCOME FROM UNDISCLOSED SOURCES.' 28.7 THE HONBLE APEX COURT IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD. (SUPRA) HELD THAT IF THE SHARE CAPITAL MONEY IS RECEIVED BY THE ASSESSEE COM PANY FROM ALLEGED BOGUS SHAREHOLDERS THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THE IND IVIDUAL ASSESSMENTS OF SUCH SHAREHOLDERS IN ACCORDANCE WITH LAW. SUCH SHARE APPLICATION MONEY C ANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY. 28.8 THE HONBLE HIGH COURT IN THE CASE OF FIRST PO INT FINANCE LTD. (SUPRA) HELD THAT BURDEN OF PROOF ON THE ASSESSEE COMPANY LIES TO THE EXTENT OF MAKIN G OUT A CASE THAT INVESTOR EXISTS AND THEREAFTER IT IS NOT FOR THE ASSESSEE TO FURTHER PR OVE WHERE THEY HAVE BROUGHT MONEY FROM TO INVEST WITH IT. ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 51 28.9 THE HONBLE DELHI HIGH COURT IN THE CASE OF CI T VS. UNITED BIO-TECH (P) LTD. 2010 TIOL-533-HC- DEL HELD THAT IN CASE THE IDENTITY OF THE SHARE APP LICANTS HAS BEEN ESTABLISHED AND IT IS FOUND THAT THE SAID APPLICANTS ARE CORPORATE ASSESSEES WHO ARE ASSESSED TO TAX WITH IT DEPARTMENT THEN THERE IS NO CASE OF ANY SUBSTANTIAL QUESTION OF LAW . IN THE INSTANT CASE, THE SHARE APPLICANTS ARE CORPORATE ASSESSEES. 28.10 THE HONBLE DELHI HIGH COURT IN THE CASE OF C IT VS. SAMIR BIO-TECH (P) LTD. (SUPRA) HELD THAT IF INVESTMENTS HAVE BEEN SHOWN BY THE SHARE APPLICANTS IN THEIR AUDITED BALANCE SHEET THEN THE ADDITION CANNOT BE MADE UNDER S. 68 OF THE ACT. 28.11 IN VIEW OF THE LEGAL POSITION AS DISCUSSED AB OVE, THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITIO N OF RS. 1.10 CRORE WITHOUT BRINGING ON RECORD ANY MA TERIAL FOR THE ADDITION. SIMPLY ON THE BASIS OF INFORMATION WHICH IS NOT SUBSTANTIATED IN THE CO URSE OF ASSESSMENT PROCEEDINGS AGAINST THE ASSESSEE, THE AO COULD NOT HAVE ADDED THE AMOUNT. (II) THE HONBLE ITAT, JAIPUR BENCH, JAIPUR IN ITS RECENT JUDGMENT THE CASE OF M/S JADAU JEWELLERS & MANUFACTURERS PVT. LTD., B-1, TRIMUTRI CIRCLE, GO VIND MARG, JAIPUR IN ITA NO. 686/JP/2014 DATED 14.12.2015 GAVE THE FOLLOWING FINDINGS:- .6.1 ON FACTS ALSO, THE ASSESSEE HAS PRODUCED BE FORE THE ASSESSING OFFICER COPY OF SHARE APPLICATION, CONFIRMATION OF THE CASH CREDITORS, CO PY OF PAN, COPY OF BOARD RESOLUTION, COPY OF DIRECTORS REPORT, AUDITORS REPORT, COPY OF BALANC E SHEET, COPY OF P&L ACCOUNT, COPY OF BANK ACCOUNT IN ALL THE CASES TO PROVE THE IDENTITY, GEN UINENESS AND CREDITWORTHINESS OF THE CASH CREDITORS. THE LD ASSESSING OFFICER MADE ADDITION O N THE BASIS OF INVESTIGATION CONDUCTED BY THE ITO, INVESTIGATION WING, KOLKATA BUT THE LD ASSESSI NG OFFICER OF THE ASSESSEE HAS NOT CLARIFIED WHAT INQUIRY HAD BEEN CONDUCTED AND WHAT EVIDENCES COLLECTED WHICH GOES AGAINST THE ASSESSEE. THE NOTICE U/S 131 ISSUED BY THE ITO, INVESTIGATION WING, KOLKATA WERE SERVED IN CASE OF VIDYA AGENCIES PVT. LTD. AND SHIVARPAN MERCANTILES PVT. L TD., BUT COMPLIANCE COULD NOT BE MADE ON THE GIVEN DATE BECAUSE CONCERNED OFFICER WAS ON LEA VE. IN CASE OF MIDDLETON GOODS PVT. LTD. AND LACTRODRYER MARKETING PVT. LTD., NOTICES WERE S ERVED ON THE ASSESSEE AND IN COMPLIANCE TO THE NOTICE, THE PARTY SUBMITTED ALL THE DOCUMENTS I N THE IT OFFICE. THE CASE LAW REFERRED BY THE LD CIT(A) I.E. DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF NIPUN BUILDERS AND DEVELOPERS PVT. LTD. VS. CIT AND VIJAY POWER GENERATOR LTD. VS CIT (SUPRA) ARE NOT SQUARELY APPLICABLE ON THE FACTS OF THE CASE AS THERE WAS SHORT TIME AVAIL ABLE WITH THE ASSESSING OFFICER AS WELL AS INVESTIGATION WING OF KOLKATA. THE COPY OF INQUIRY HAS NOT BEEN PROVIDED BY THE ASSESSING OFFICER TO THE ASSESSEE. AS PER FINDINGS OF THE HON 'BLE DELHI HIGH COURT IN THE CASE NIPUN BUILDERS AND DEVELOPERS PVT. LTD. VS. CIT (SUPRA), THE INVESTIGATION OFFICER AT KOLKATA HAD NOT DEPUTED INSPECTOR TO ENQUIRE THE WHEREABOUTS OF THE COMPANY. THE CASE LAWS REFERRED BY THE ASSESSEE ARE SQUARELY APPLICABLE ON THE FACTS AND C IRCUMSTANCES OF THE APPELLANTS CASE, THEREFORE, WE REVERSE THE ORDER OF THE LD CIT(A) ON TECHNICAL GROUND AS WELL AS ON MERIT ALSO. (III) CIT V/S. SHREE BARKHA SYNTHETICS LTD. (2003) 182 CTR (RAJ) 175 APPEAL(HIGH COURT) SUBSTANTIAL QUESTION OF LAWCASH CREDIT VIS-A-VIS S HARE APPLICATION MONEYTRIBUNAL FOUND THAT 6 OUT OF 7 COMPANIES FROM WHICH THE SHARE APPL ICATION MONEY HAD BEEN RECEIVED WERE GENUINELY EXISTING AND NO ENQUIRY WAS CONDUCTED IN RESPECT OF THE SOURCE OF SHARE APPLICATION MONEY AT THE TIME OF MAKING THE INVESTMENT IN THE A SSESSEE-COMPANY AND THUS THE ASSESSEE HAS DISCHARGED ITS INITIAL BURDEN EXCEPT IN ONE CASEAS REGARDS INDIVIDUAL INVESTORS, THE TRIBUNAL FOUND THAT IDENTITY OF 9 OUT OF 10 INVESTORS HAS BE EN ESTABLISHED AND THEY HAVE CONFIRMED THE FACT ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 52 OF MAKING INVESTMENT IN THE SHARES OF THE ASSESSEE- COMPANY AND NO FURTHER ENQUIRY WAS DIRECTED BY THE AOTHUS, ADDITIONS WERE SUSTAINED ONLY IN RE SPECT OF INVESTMENTS SAID TO HAVE BEEN MADE BY U, AN INDIVIDUAL INVESTOR AND BY W LTD., FO R THE REASON THAT SUCH INVESTMENTS WERE NOT PROVEDFINDING OF THE TRIBUNAL IS ESSENTIALLY A FIN DING OF FACT WHICH IS NOT VITIATED IN LAWNO SUBSTANTIAL QUESTION OF LAW ARISE FOR CONSIDERATION IV) CIT VS. FIRST POINT FINANCE LTD. (2006) 206 CT R (RAJ) 626 : (2006) 286 ITR 77 (RAJ) INCOME CASH CREDITSHARE APPLICATION MONEYTRIBUNAL FOUND THAT THE INVESTORS ARE GENUINELY EXISTING PERSONS AND THEY HAVE FILED CONFIRMATIONS IN RESPEC T OF INVESTMENTS MADE BY THEM AND THEIR STATEMENTS WERE ALSO RECORDEDAMOUNT OF SHARE CAPIT AL/SHARE APPLICATION MONEY COULD NOT BE TREATED AS UNEXPLAINED CASH CREDITS AND NO ADDITION COULD BE MADE UNDER S. 68NO SUBSTANTIAL QUESTION OF LAW ARISES. (V) 2014 (8) TMI 605 - MADRAS HIGH COURT THE COMMIS SIONER OF INCOME TAX VERSUS PRANAV FOUNDATIONS LTD. T. C. (A). NO. 262 OF 2014 DATED - 12 AUGUST 2014 ADDITION U/S 68 SHARE APPLICATION AND SHARE PREM IUM AMOUNT CREDITED BUT NOT PROVED - WHETHER THE TRIBUNAL WAS RIGHT IN UPHOLDING THE ORD ER OF THE CIT(A) WHO DELETED THE ADDITION MADE U/S 68, BEING THE SHARE APPLICATION MONEY AND SHARE PREMIUM AMOUNT CREDITED BY THE ASSESSEE WHICH WAS NOT PROVED HELD THAT:- FOLLOWI NG THE DECISION IN CIT V. LOVELY EXPORTS (P) LTD. [2008 (1) TMI 575 - SUPREME COURT OF INDIA ] - ALL THE FOUR PARTIES, WHO ARE SUBSCRIBERS OF THE SHARES, ARE LIMITED COMPANIES AN D ENQUIRIES WERE MADE AND RECEIVED FROM THE FOUR COMPANIES AND ALL THE COMPANIES ACCEPTED THEIR INVESTMENT - THE ASSESSEE HAS CATEGORICALLY ESTABLISHED THE NATURE AND SOURCE OF THE SUM AND DI SCHARGED THE ONUS THAT LIES ON IT IN TERMS OF SECTION 68 OF THE ACT - WHEN THE NATURE AND SOURCE OF THE AMOUNT SO INVESTED IS KNOWN, IT CANNOT BE SAID TO BE UNDISCLOSED INCOME - THE ADDITION OF SUCH SUBSCRIPTIONS AS UNEXPLAINED CREDIT UNDER SECTION 68 OF THE ACT IS UNWARRANTED DECIDE D AGAINST REVENUE. (VI) INCOME TAX OFFICER VS. MS. SUPERLINE CONSTRUCT ION P. LTD. ITAT, BOMBAY TRIBUNAL (A) ITA NO. 3644 TO 3648, 3650, 3651MUM/2 014 30TH NOVEMBER, 2015 (2015) 45 CCH 0281 MUMTRIB ADDITIONADDITION ON ACCOUNT OF BOGUS SHARE APPLIC ATION MONEYASSESSEE WAS IN BUSINESS OF BUILDER AND DEVELOPERASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 147RE-ASSESSMENT PROCEEDINGS WERE INITIATED ON BASIS OF INFORMATION RECEIVED FROM DIRECTORATE OF INCOME-TAX (INVESTIGATION) WITHOUT RECORDING AOS OWN SATISFAC TION AND INFORMATION WAS ACCEPTED IN MECHANICAL MANNERAFTER REOPENING OF ASSESSMENT U/S 147, AO MADE ADDITION OF RS.40 LAKHS RECEIVED BY ASSESSEE FROM VARIOUS CORPORATE ENTITIE SADDITION WAS MADE BY AO ON ACCOUNT OF BOGUS SHARE APPLICATION MONEY UNDER PROVISIONS OF S 68CIT(A) DELETED ADDITION MADE BY AOHELD, IN CASE OF CIT VS. M/S. LOVELY EXPORTS (PV T) LTD, REPORTED IN [2008] 216 CTR 195 (SC), IT WAS HELD THAT IF SHARE APPLICATION MONEY W AS RECEIVED BY ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAME WERE GIVEN TO AO THEN DEPARTMENT WAS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANC E WITH LAW BUT IT COULD NOT BE REGARDED AS UNDISCLOSED INCOME OF ASSESSEE COMPANYIT WAS SUBMI TTED BY ASSESSEE THAT AO HAD FAILED TO APPRECIATE STATEMENTS OF ANY PERSON RECORDED U/S 14 3(3) R.W.S. 147THAT ASSESSEE-COMPANY HAD FULLY DISCHARGED BURDEN OF PROOF, ONUS OF PROOF AND EXPLAINED SOURCE OF SHARE CAPITAL AND ADVANCES RECEIVED BY ESTABLISHED IDENTITY, CREDITWO RTHINESS AND GENUINENESS OF TRANSACTION BY BANKING INSTRUMENTS WITH DOCUMENTARY EVIDENCESASSE SSEE COMPANY SUBSTANTIATED DETAILS WITH DOCUMENTARY EVIDENCES AS EXTRACTED FROM WEBSITE OF MINISTRY OF CORPORATE AFFAIRS, GOVERNMENT OF INDIA BEFORE AOTHESE FACTS HAD NOT BEEN REBUTTE D ON BEHALF OF REVENUEITAT WAS NOT INCLINED TO INTERFERE WITH FINDINGS OF CIT(A) WHO T HUS RIGHTLY DELETED ENTIRE IMPUGNED ADDITIONS OF RS.40 LAKHS MADE BY AO U/S 68 ON ACCOUNT OF SHAR E CAPITAL SUBSCRIPTION RECEIVED BY ASSESSEE- COMPANY ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 53 HELD: IT WAS POINTED OUT IN THE CASE OF CIT VS. M/S. LOV ELY EXPORTS (PVT) LTD, REPORTED IN [2008] 216 CTR 195 (SC) THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAME ARE GIVEN TO THE AO THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN A CCORDANCE WITH LAW BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF ASSESSEE COMPANY. (PARA 2.3) IN THIS BACKGROUND, IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE ASSESSING OFFICER FAILED TO APPRECIATE THAT THERE WAS NO DOCUMENTARY EVIDENC E AGAINST THE ASSESSEE-COMPANY TO SUPPORT SUCH IMPUGNED ADDITIONS. IT WAS FURTHER SUBMITTED B Y THE ASSESSEE THAT THE ASSESSING OFFICER FAILED TO APPRECIATE THAT THE STATEMENTS OF ANY PER SON RECORDED U/S 143(3) R.W.S. 147. THE ASSESSEE-COMPANY HAD FULLY DISCHARGED THE BURDEN OF PROOF, ONUS OF PROOF AND EXPLAINED THE SOURCE OF SHARE CAPITAL AND ADVANCES RECEIVED BY ES TABLISHED THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF TRANSACTION BY BANKING INSTRUMENTS W ITH DOCUMENTARY EVIDENCES. THE FURTHER STAND OF THE ASSESSEE HAD BEEN THAT THE ASSESSEE-CO MPANY SUBSTANTIATED THE DETAILS WITH THE DOCUMENTARY EVIDENCES AS EXTRACTED FROM THE WEBSITE OF MINISTRY OF CORPORATE AFFAIRS, GOVERNMENT OF INDIA BEFORE THE ASSESSING OFFICER. T HESE FACTS HAD NOT BEEN REBUTTED ON BEHALF OF THE REVENUE. (PARA 2.4) IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE PRES ENT CASE AS WELL AS CONSIDERING THE DECISIONS AS DISCUSSED ABOVE ON THE SIMILAR ISSUE, ITAT WAS NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE CIT(A) WHO HAD RIGHTLY DELETED THE ENTIRE IMPUGNED ADDITIONS OF RS.40 LAKHS MADE BY THE ASSESSING OFFICER U/S 68 OF THE ACT ON ACCOUNT OF S HARE CAPITAL SUBSCRIPTION RECEIVED BY THE ASSESSEE-COMPANY. (PARA 2.5) CONCLUSION: WHEN ASSESSEE-COMPANY HAD SUBSTANTIATED DETAILS WI TH DOCUMENTARY EVIDENCES AS EXTRACTED FROM WEBSITE OF MINISTRY OF CORPORATE AFFAIRS, GOVE RNMENT OF INDIA BEFORE AO, THEN ADDITIONS MADE BY AO U/S 68 ON ACCOUNT OF SHARE CAPITAL SUBSC RIPTION RECEIVED BY ASSESSEE-COMPANY WAS RIGHTLY DELETED. VII) CIT VS. ILLAC INVESTMENT (P) LTD. (2007) 207 C TR (DEL) 687; ASSESSEE-COMPANY HAS SATISFACTORILY ESTABLISHED THE IDENTITY OF THE SHAR E SUBSCRIBERS AND DELETED THE ADDITION UNDER S. 68, NO SUBSTANTIAL QUESTION OF LAW ARISES FOR CONSI DERATION. VIII) CIT VS. DIVINE LEASING & FINANCE LTD. (2007) 207 CTR (DEL) 38; INCOMECASH CREDITSHARE APPLICATION MONEYBURDEN OF PROOF CAN SELDOM BE DIS CHARGED TO THE HILT BY THE ASSESSEEIF THE AO HARBOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRI PTION HE IS EMPOWERED, NAY DUTYBOUND, TO CARRYOUT THOROUGH INVESTIGATIONSBUT IF THE AO FAIL S TO UNEARTH ANY WRONG OR ILLEGAL DEALINGS, HE CANNOT OBDURATELY ADHERE TO HIS SUSPICIONS AND T REAT THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANYIF RELEVANT DETAI LS OF ADDRESS AND IDENTITY OF THE SUBSCRIBERS ARE FURNISHED TO THE DEPARTMENT ALONG W ITH COPIES OF THE SHAREHOLDERS REGISTER, SHARE APPLICATION FORMS, SHARE TRANSFER REGISTER, E TC. IT WOULD CONSTITUTE ACCEPTABLE PROOF OR EXPLANATION BY THE ASSESSEEDEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWING AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCRIBER FAIL S OR NEGLECTS TO RESPOND TO ITS NOTICES TRIBUNAL HAS NOTED THAT THE ASSESSEE-COMPANY IS A P UBLIC LIMITED COMPANY WHICH HAD RECEIVED SUBSCRIPTIONS TO THE PUBLIC ISSUE THROUGH BANKING C HANNELS AND THE SHARES WERE ALLOTTED IN CONSONANCE WITH THE PROVISIONS OF SECURITIES CONTRA CT (REGULATION) ACT, 1956, AS ALSO THE RULES AND REGULATIONS OF DELHI STOCK EXCHANGECOMPLETE DE TAILS WERE FURNISHEDTRIBUNAL HAS FURTHER FOUND THAT THE AO HAS NOT BROUGHT ANY POSIT IVE MATERIAL OR EVIDENCE WHICH WOULD ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 54 INDICATE THAT THE SHAREHOLDERS WERE BENAMIDARS OR F ICTITIOUS PERSONS OR THAT ANY PART OF THE SHARE CAPITAL REPRESENTED COMPANYS OWN INCOME FROM UNDISCLOSED SOURCESAS REGARDS RECEIPT OF SHARE CAPITAL ON ISSUE OF RIGHTS SHARES TO FIVE COMPANIES, THESE COMPANIES WERE DULY INCORPORATED UNDER THE SIKKIMESE COMPANIES ACT AND WERE ASSESSED UNDER THE SIKKIMESE TAXATION MANUALTHEIR SHARE SUBSCRIPTIONS WERE ALSO RECEIVED THROUGH BANKING CHANNELS AND FOUND TO BE VALID BY THE JURISDICTIONAL AOTHEREFOR E, NO ADDITION COULD BE MADE UNDER S. 68 IX) BHAV SHAKTI STEEL MINES (P) LTD. VS. CIT (2009) 18 DTR (DEL) 194 INCOMECASH CREDIT GENUINENESSCIT(A) NOT ONLY FOUND THAT THE IDENTITY OF EACH OF THE SHAREHOLDERS STOOD ESTABLISHED, BUT ALSO EXAMINED THE FACT THAT EACH O F THEM WERE INCOME-TAX ASSESSEES AND HAD DISCLOSED THE SHARE APPLICATION MONEY IN THEIR ACCO UNTS WHICH WERE DULY REFLECTED IN THEIR IT RETURNS AS WELL AS IN THEIR BALANCE SHEETSTRIBUNAL WAS NOT THEREFORE JUSTIFIED IN COMING TO THE CONCLUSION THAT THE CIT(A) HAD NOT CONSIDERED THE M ATTER IN THE RIGHT PERSPECTIVEORDER PASSED BY TRIBUNAL REMANDING THE MATTER FOR EXAMINING THE SHARE APPLICANTS SET ASIDE AND THAT OF CIT(A) RESTORED X) MEERA ENGINEERING & COMMERCIAL CO. (P) LTD. VS. ASSTT. CIT (1997) 58 TTJ (JAB) 527 INCOMECASH CREDITSGENUINENESS OF SHARE CAPITAL OF COMPANYALL THE 51 SHAREHOLDERS FILED THEIR AFFIDAVITS AND CONFIRMATORY LETTERS AND 24 OF THEM FILED THEIR REPLIES ALSO TO NOTICE UNDER S. 133(6)NAMES OF PARTIES PURCHASING THE SHARES WITH AMOUNT SUBSCRIBED WERE FURNISHED BEFORE AOALL DOCUMENTS CLEARLY SHOW THAT SHAREHOLDERS DO EXIST ASSESSEE-COMPANY HAD DISCHARGED ITS ONUS OF EXPLAINING THE CASH CREDITS AS REQUIRED UNDER LAWIF THE COMPANY IS ABLE TO ESTABLISH THAT SHAREHOLDERS EXISTED AND THEY HAV E INVESTED MONEY FOR PURCHASE OF SHARES BURDEN OF COMPANY TO PROVE THE CREDIT IS DISCHARGED IDENTITY OF SHAREHOLDERS NOT IN DISPUTE ASSESSEE IS NOT REQUIRED TO PROVE CREDIT-WORTHINESS OF SHAREHOLDERSADDITION DELETED XI) ALLEN BRADLEY INDIA LTD. VS. DY. CIT (2002) 74 TTJ (DEL) 604 : (2002) 80 ITD 43 (DEL); INCOMECASH CREDITSUBSCRIPTION TO SHARE CAPITAL AN D LOANIN CASE OF LIMITED COMPANIES JURISDICTION OF AO WOULD BE LIMITED ONLY TO SEE WHE THER IDENTITY OF SHAREHOLDERS IS ESTABLISHED AND WHETHER THEY EXIST OR NOTONCE IDENTITY IS ESTA BLISHED, THEN, POSSIBLY NO FURTHER ENQUIRIES NEED TO BE MADESINCE THE SHAREHOLDERS OF ASSESSEE- COMPANY WERE IN EXISTENCE, THEY WERE ASSESSED TO TAX, COMPLETE DETAILS WERE AVAILABLE, S HARE CAPITAL MONEY AS WELL AS LOAN WERE RECEIVED THROUGH ACCOUNT PAYEE CHEQUES AND THEY WER E CLEARED THROUGH PROPER BANKING CHANNELS, AO WAS NOT JUSTIFIED IN DISBELIEVING THE CAPITAL INVESTED BY THE SHAREHOLDER COMPANIESSIMILARLY, AO WAS NOT JUSTIFIED IN DISBEL IEVING THE LOAN TAKEN FROM DTL AS THE CHEQUES WERE CLEARED THROUGH BANK CHANNELS AND CONF IRMATION AND SUPPORTING EVIDENCE WAS FILEDCIT(A) WAS JUSTIFIED IN DELETING THE ADDITION S. XII) CIT VS STL EXTRUSION (P) LTD. 333 ITR 269 (MP) INCOMECASH CREDITSHARE APPLICATION MONEYASSESSEE HAS DULY ESTABLISHED THE IDENTITY AN D SOURCE OF CREDITSASSESSEE HAVING DULY FURNISHED THE NAME, AGE, ADDRESS, DATE OF FILING TH E APPLICATION OF SHARES, NUMBER OF SHARES OF EACH SUBSCRIBER THERE WAS NO JUSTIFICATION FOR THE AO FOR MAKING THE IMPUGNED ADDITIONONCE THE EXISTENCE OF THE INVESTORS/SHARE SUBSCRIBERS IS PROVED, ONUS SHIFTS ON THE REVENUE TO ESTABLISH THAT EITHER THE SHARE APPLICANTS ARE BOGUS OR THE I MPUGNED MONEY BELONGS TO THE ASSESSEE ITSELFADDITIONS NOT SUSTAINABLE. XIII) CIT VS ARUNANDA TEXTILES (P) LTD. , 333 ITR 1 16 (KARNATAKA) INCOMECASH CREDITSHARE APPLICATION MONEYASSESSEE ABLE TO IDENTIFY THE SHA REHOLDERSIT IS NOT FOR THE ASSESSEE- COMPANY TO ESTABLISH BUT IT IS FOR THE DEPARTMENT T O ENQUIRE WITH THE INVESTORS ABOUT THE CAPACITY TO INVEST THE AMOUNT IN THE SHARES ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 55 XIV) UMA POLYMER (P) LTD. , 101 TTJ 124, JODHPUR IN COMECASH CREDITSHARE APPLICATION MONEYIN RESPECT OF SHARE CAPITAL MONEY, THE ASSESS EE-COMPANY HAS TO PROVE ONLY THE EXISTENCE OF THE PERSON IN WHOSE NAME SHARE APPLICATION IS RE CEIVEDNO FURTHER BURDEN IS CAST ON THE ASSESSEE TO PROVE WHETHER THAT PERSON HIMSELF HAS I NVESTED THE MONEY OR SOME OTHER PERSON HAS MADE THE INVESTMENT IN HIS NAMEBURDEN TO PROVE THA T THE MONEY DID NOT BELONG TO HIM BUT TO SOMEBODY ELSE IS ON THE REVENUEDISTINCTION BETWEEN A PUBLIC COMPANY AND A PRIVATE COMPANY IS NOT VERY MATERIAL FOR THIS PURPOSEAO TREATED TH E INVESTMENTS MADE BY TEN SHAREHOLDERS IN THE ASSESSEE-COMPANY AS BOGUS AND MADE ADDITION UND ER S. 68 NOT JUSTIFIEDIN ALL THE CASES EXCEPT THAT OF V, AO HAD OBTAINED THE BANK STATEMEN TS OF THE SHAREHOLDERS WHICH CLEARLY SHOW THAT THE ACCOUNTS WERE REGULARLY MAINTAINED AND THE SHAREHOLDERS HAD MADE DEPOSITSFURTHER, THE SHAREHOLDERS ARE ALSO ASSESSED TO TAXSIMPLY BE CAUSE SCRUTINY ASSESSMENTS WERE NOT MADE IN THE CASE OF SHAREHOLDERS, SUCH ASSESSMENTS COULD NOT BE MADE IN THE COURSE OF ASSESSMENT OF THE ASSESSEEHAVING REGARD TO THE INFORMATION COLLE CTED BY THE AO FROM THE BANKS, IDENTITY OF THE SHAREHOLDERS WAS FULLY ESTABLISHEDIF ANY SHARE HOLDER IS FOUND TO HAVE MADE UNEXPLAINED INVESTMENT, THEN ADDITION OF SUCH INVESTMENT IS REQ UIRED TO BE MADE IN THE HANDS OF THE SHAREHOLDER AND NOT IN THE ACCOUNT OF THE ASSESSEE U HAD INVESTED IN THE SHARE CAPITAL THROUGH CHEQUE EXCEPT FOR A SMALL SUM WHICH WAS RETURNED TO HERHER BANK ACCOUNT SHOWS SEVERAL ENTRIES, BOTH CREDIT AND DEBIT, WHICH HAVE NO RELAT ION WITH THE AMOUNT INVESTED WITH THE ASSESSEE-COMPANYMERELY BECAUSE SHE HAS NOT SUBMITT ED HER RETURNS AFTER THE ASST. YR. 1984- 85, IT CANNOT BE SAID THAT SHE WAS NOT ASSESSED TO TAXTHOUGH V HAS NOT BEEN SHOWN TO BE ASSESSED TO TAX, HE HAD MADE MAJOR PART OF INVESTME NTS TOWARDS SHARE CAPITAL THROUGH CHEQUES AND HIS IDENTITY IS NOT DOUBTEDACCORDINGLY, SHARE CAPITAL ADVANCED BY U AND V IS ALSO TO BE ACCEPTED AS GENUINETHEREFORE, NO ADDITION OF SHARE CAPITAL MONEY COULD BE MADE IN THE HANDS OF THE ASSESSEE-COMPANY. 11. WITHOUT PREJUDICE TO ABOVE THIS IS TO SUBMIT TH AT THE SHARE APPLICATION MONEY CANNOT BE TREATED AS INCOME OF THE ASSESSEE. RELIANCE IS PLACED IN FO LLOWING DECISIONS: - I) CIT VS. LOVELY EXPORTS (P) LTD. (2008) 216 CTR (SC) 195 INCOMECASH CREDITSHARE APPLICATION MONEYIF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN T O THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN A CCORDANCE WITH LAW, BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF ASSESSEE COMPANY II) CIT VS. STELLER INVESTMENT LTD. (200) 251 ITR 263 (SC) EVEN IF THE SUBSCRIBERS TO THE INCREASED SHARE CAPITAL OF ASSESSEE-COMPANY WERE NOT GENUINE, THE AMOUNT COULD NOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE-COMPANY. III) COMMISSIONER OF INCOME TAX VS. BHAVAL SYNTHETI CS (RAJ HC) (2013) 84 DTR 0449 (RAJ) HELD THAT EVEN IN CASE OF DOUBT ABOUT SUBSCRIBERS TO INCREASE D SHARE CAPITAL, AMOUNT OF SHARE CAPITAL COULD NOT BE REGARDED AS UNDISCLOSED INCOME OF COMP ANYAMOUNT REFERABLE TO SHARE APPLICATION COULD NOT BE ATTRIBUTED TO ASSESSEE AND COULD NOT BE ASSESSED IN ITS HANDSAPPEAL DISMISSED IV) COMMISSIONER OF INCOME TAX VS. AKJ GRANITES (P) LTD. (RAJ HC) (2008) 301 ITR 0298 HELD THAT IN RESPECT OF SHARE APPLICATIONS RECEIVED FROM DIFF ERENT PLACES ACCOMPANIED WITH SHARE APPLICATION MONEY, NO PRESUMPTION CAN BE DRAWN THAT SAME BELONG TO THE ASSESSEE AND CANNOT BE ASSESSED IN HIS HANDS AS HIS UNDISCLOSED INCOME UNLESS SOME NEXUS IS ESTABLISHED THAT SHARE APPLICATION MONEY FOR AUGMENTING THE INVESTMENT IN BUSINESS HAS FLOWN FROM ASSESSEES OWN MONEYNO SUBSTANTIAL QUESTION OF LAW ARISESBARKHA SYNTHETICS LTD. VS. ASSTT. CIT (2005) 197 CTR (RAJ) 432 FOLLOWED. ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 56 IN VIEW OF THE ABOVE SUBMISSION THIS IS TO SUBMIT T HAT THE ADDITION MADE BY LD. AO IS UNJUSTIFIED AND DESERVE TO BE DELETED. 3.2.2 I HAVE DULY CONSIDERED ASSESSEE'S SUBM ISSION AND CAREFULLY GONE THROUGH ASSESSMENT ORDER. I HAVE ALSO TAKEN A NOTE OF FACTUAL MATRIX O F THE CASE AS WELL AS APPLICABLE CASE LAWS RELIED U PON. I HAVE ALREADY GIVEN A DETAILED FINDINGS IN PARA 2. 1.4.7 WHEREIN TOTAL OF RS. 8,71,97,727/= HAS BEEN SUSTAINED IN THE HANDS OF M/S MOTISONS GLOBAL PVT L TD, M/S MOTISONS ENTERTAINMENT PVT LTD, M/S MOTISONS BUILDTECH PVT LTD AND M/S SHIVANSH BUILDCO N PVT LTD, DETAILS OF WHICH ARE AS UNDER: NAME OF APPELLANT COMPANY ITA NO AY ADDITION MADE BY AO ADDITION SUSTAINED ADDITION DELETED/ RELIEF GIVEN MOTISONS GLOBAL PVT. LTD 753/14-15 2009-10 2,75,00 ,000 ------------- 2,75,00,000 MOTISONS GLOBAL PVT. LTD 754/14-15 2011-12 6,96,50 ,000 --------------- 6,96,50,000 MOTISONS GLOBAL PVT. LTD 767/14-15 2012-13 42,07,2 9,600 5,94,47,727 36,12,81,873 MOTISONS GLOBAL PVT. LTD 755/14-15 2013-14 4,41,00 ,000 50,50,000 3,90,50,000 MOTISONS ENTERTAINMENT (I) PVT. LTD 760/14-15 2009-10 3,40,00,000 --------------- 3,40,00,000 MOTISONS ENTERTAINMENT (I) PVT. LTD 766/14-15 2011-12 1,95,00,000 --------------- - 1,95,00,000 MOTISONS ENTERTAINMENT (I) PVT. LTD 756/14-15 2012-13 7,78,00,000 1,41,50,000 6,36,50, 000 MOTISONS BUILDTECH PVT. LTD 758/14-15 2009-10 3,03 ,00,000 --------------- 3,03,00,000 MOTISONS BUILDTECH PVT. LTD 759/14-15 2012-13 3,68 ,27,500 82,00,000 2,86,27,500 GODAWARI ESTATES PVT. LTD 769/14-15 2010-11 2,00,0 0,000 -------------- 2,00,00,000 GODAWARI ESTATES PVT. LTD 768/14-15 2012-13 10,30, 00,000 -------------- 10,30,00,000 BHOLENATH REAL ESTATES PVT LTD 770/14-15 2009-10 2 ,90,00,000 --------------- 2,90,00,000 RAINBOW BUILDCON PVT. LTD 757/14-15 2009-10 2,00,0 0,000 --------------- 2,00,00,000 SHIVANSH BUILDCON PVT. LTD 771/14-15 2012-13 90,00,000 3,50,000 86,50,000 TOTAL ADDITIONS 94,14,07,100 8,71,97,727 85,42,09,373 IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES OF THE CAS E AS DISCUSSED ABOVE ADDITION OF RS. 86,50,000/= MADE ON A/C OF BOGUS SHARE CAPITAL IN T HE HANDS OF ASSESSEE M/S SHIVANSH BUILDCON PVT LTD IS HEREBY DELETED. ASSESSEE GET RELIEF IN GR NO . 2 & 3. ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 57 PARA 2.1.4.7 READS OF LD. CIT(A)S ORDER AS UNDER:- 2.1.4.7 IN VIEW OF THE ABOVE FINDINGS, IT IS ALSO SEEN THAT THIS CASH /DD WAS DEPOSITED AT 4 TH CHANNEL OF SOURCE/ STAGE. THIS MONEY CAME TO THE HANDS OF SOME OF APPELLANT COMPANIES THROUGH TH E SIX COMPANIES ASSESSED IN JAIPUR. HOWEVER, ON PERUSAL OF WRITTEN SUBMISSIO NS AND COMPLIANCE TO SHOW CAUSE LETTER, IT IS ALSO SEEN THAT THE ASSESSEE HAS NOT CONTROVERTED THE FACTS NARRATED BY SHRI SANTOSH CHOUBE, SHRI RAJESH KR SIN GH AND SHRI AJIT SHARMA AND ALSO COULD NOT SATISFACTORILY EXPLAIN THE REASO NS OF CASH DEPOSITS MADE TO THOSE ACCOUNTS. THEREFORE, DULY CONSIDERING THOSE FACTS AS EVIDENCES (BOTH DOCUMENTARY & ORAL) GATHERED DURING SEARCH AND & PO ST-SEARCH OPERATION, ADDITION TO THE EXTENT OF RS. 8,71,97,727/- IS SUST AINED AND BALANCE IS DELETED, DETAILS GIVEN AS UNDER:- NAME OF APPELLANT COMPANY ITA NO. A.Y. ADDITION MADE BY AO ADDITION SUSTAINED ADDITION DELETED/RELIEF GIVEN MOTISONS GLOBAL PVT LTD 753/14-15 2009-10 2,75,00,000 - 2,75,00,000 MOTISONS GLOBAL PVT LTD 754/14-15 2011-12 6,96,50,000 - 6,96,50,000 MOTISONS GLOBAL PVT LTD 767/14-15 2012-13 42,07,29,600 5,94,47,727 36,12,81 ,873 MOTISONS GLOBAL PVT LTD 755/14-15 2013-14 4,41,00,000 50,50,000 3,90 ,50,000 MOTISONS ENTERTAINMENT (I) PVT. LTD 760/14-15 2009-10 3,40,00,000 - 3,40,00,000 MOTISONS ENTERTAINMENT (I) PVT. LTD 766/14-15 2011-12 1,95,00,000 - 1,95,00,000 MOTISONS ENTERTAINMENT (I) PVT. LTD 756/14-15 2012-13 7,78,00,000 1,41,50,000 6,36 ,50,000 MOTISONS BUILDTECH PVT. LTD 758/14-15 2009-10 3,03,00,000 - 3,03,00,000 MOTISONS BUILDTECH PVT. LTD 759/14-15 2012-13 3,68,27,500 82,00,000 2,8 6,27,500 GODAWARI ESTATES PVT. LTD 769/14-15 2010-11 2,00,00,000 - 2,00,00,000 GODAWARI ESTATES PVT. LTD 768/14-15 2012-13 10,30,00,000 - 10,30,00,000 BHOLENATH 770/14-15 2009-10 2,90,00,000 - 2,90, 00,000 ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 58 REAL ESTATES PVT. LTD. RAINBOW BUILDCON PVT. LTD 757/14-15 2009-10 2,00,00,000 - 2,00,00,000 SHIVANSH BUILDCON PVT. LTD 771/14-15 2012-13 90,00,000 3,50,000 86,50,000 94,14,07,100 8,71,97,727 85,42,09,373 IT IS PERTINENT TO MENTION HERE THAT M/S. MAYUKH V INIMAY PVT.LTD RECEIVED SHARE APPLICATION OF RS. 10,54,95,000/- IN AY 2009-10 WHI CH WAS ADDED AS INCOME OF M/S.MAYUKH VINIMAY PVT. LTD IN A.Y. 2009-10. THEREA FTER IN SUBSEQUENT YEARS THE PART OF THE FUNDS OWNED BY THIS COMPANY WAS INVESTE D IN THE COMPANIES UNDER APPEAL AS UNDER:- S.N. NAME OF COMPANY (UNDER YOUR APPEAL) ASSESSMENT YEAR AMOUNT 1. MOTISONS GLOBAL PVT. LTD 2012-13 6,93,49,800 2. MOTISONS GLOBAL PVT. LTD 2013-14 2,24,50,000 3. MOTISONS ENTERTAINMENT (INDIA)PVT LTD. 2012-13 1,55,00,000 TOTAL 10,72,29,800 FURTHER IT IS ALSO SUBMITTED THAT ADDITION MADE BY THE AO TANTAMOUNT TO DOUBLE ADDITION. IT IS ALSO MENTIONED HERE THAT AS PER LD. ARS REQUEST, APPELLATE PROCEEDINGS IN CASE OF M/S. MAYUKHVINIMAY PVT. LTD HAVE BEEN KE PT IN ABEYANCE TILL THE DISPOSTAL OF APPEAL BY HON'BLE ITAT. IN VIEW OF AFOREMENTIONED FINDINGS, NOW ADDITIONS M ADE BY THE AO ARE BEING DISCUSSED WITH RESPECT TO GROUNDS OF APPEAL RAISED BY THE RESPECTIVE ASSESSEE IN PARA BELOW. 2.4 DURING THE COURSE OF HEARING, THE LD. DR SUPPOR TED THE ORDER OF THE AO AND SUBMITTED THAT THE ORDER OF THE LD. CIT(A) M AY BE SET ASIDE. ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 59 2.5 TO THIS EFFECT, THE LD.AR OF THE ASSESSEE FILE D THE FOLLOWING WRITTEN SUBMISSION PRAYING THEREIN TO DISMISS THE APPEAL OF THE DEPARTMENT. 2.01.2 SUBMISSION OF ASSESSEE:- A) DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE ALLOTTED 9,50,900 EQUITY SHARES OF RS. 10 EACH TO VARIOUS PERSONS/COM PANIES AT A PREMIUM OF RS. 10 ON VARIOUS DATES DETAIL OF WHICH IS AS UNDER: - S.N. NAME NO. OF SHARES ALLOTED/ APPLIED DURING THE YEAR AMOUNT ADJUSTED AGAINST SHARE CAPITAL RATE PER SHARE AMOUNT ADJUSTED AGAINST SHARE PREMIUM RATE OF PREMIUM PER SHARE ISSUE PRICE OF THE SHARE TOTAL CONSIDERATION RECEIVED 1. SANJAY CHHABRA 2,50,450 25,04,500 10 25,04,500 10 20 50,09,000 2. SANDEEP CHHABRA 2,50,450 25,04,500 10 25,04,500 10 20 50,09,000 3. EVERSHINE SUPPLIERS PVT. LTD 4,50,000 45,00,000 10 45,00,000 10 20 90,00,000 TOTAL 9,50,900 95,09,000 95,09,000 1,90,18,000 B). THE LD. AO HAS NOT MADE THE ADDITION UNDER THE DEEMING PROVISIONS OF SECTION 68 OF INCOME TAX ACT. THE LD AO MADE THE AD DITION OF RS. 90,00,000/- ON ACCOUNT OF SHARE MONEY RECEIVED FROM M/S EVERSHINE SUPPLIERS PVT LTD BY APPLYING THE PROVISIONS OF SEC TION 56(1) OF INCOME TAX ACT ON THE GROUND THAT THE ASSETS OF THE ASSESSEE COMPANY DONT COMMENSURATE TO PREMIUM CHARGED AND ANY BUSIN ESS ACTIVITY WAS NOT PERFORMED OR ANY BUSINESS INCOME HAS NOT BEEN S HOWN BY THE ASSESSEE. IT IS VERY INTERESTING TO NOTE THAT THE S HARES WERE ISSUED AT PREMIUM OF RS. 20/- PER SHARE TO SHRI SANJAY CHHABR A, SHRI SANDEEP CHHABRA. AT THE SAME PREMIUM THE SHARES WERE ISSUED TO EVERSHINE SUPPLIERS PVT LTD. THE LD AO IS BLOWING HOT AND COL D IN SAME STREAM. HE IS ACCEPTING THE SHARE PREMIUM GIVEN BY SANJAY C HHABRA AND SHRI SANDEEP CHHABRA AND AT THE SAME TIME HE IS HOLDING THAT SHARE PREMIUM OF RS. 20/- PER SHARE GIVEN BY M/S EVERSHIN E SUPPLIERS PVT LTD IS EXCESSIVE. ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 60 C) THE LD CIT(A) HAS NOT CONFIRMED THE ADDITION MA DE BY LD AO BY APPLYING THE PROVISIONS OF SECTION 56(1) OF INCOME TAX ACT, ON THE BASIS OF HIS DETAILED FINDINGS AT PAGE 38-41 OF HIS ORDER. THE ASSESSEE RELIES ON THE FINDINGS OF LD CIT(A). D ) JUSTIFICATION OF CHARGING SHARE PREMIUM THE ASSESSEE HAS SUBMITTED THE JUSTIFICATION FOR CH ARGING THE SHARE PREMIUM WHICH IS SUMMARIZED AS UNDER: - NAME OF COMPANY REASON FOR CHARGING SHARE PREMIUM SHIVANSH BUILDCON PVT. LTD 1. OWNING A VALUABLE LAND IN THE HEART OF CITY AT SEEWAD AREA , BAPU NAGAR, JAIPUR AND PLANNING A COMMERCIAL PROJECT THE REON. 2. GOODWILL OF MOTISONS GROUP. E) SHARE PREMIUM/CAPITAL IS CAPITAL RECEIPT: IF SHARES ARE ISSUED AT PREMIUM THEN CAPITAL RECEIP T AGGREGATE AMOUNT OF PREMIUM IS TO BE TRANSFERRED TO AN ACCOUNT CALLE D THE SHARE PREMIUM ACCOUNT. THIS SHARE PREMIUM ACCOUNT IS NOT DISTRIBU TABLE AS INCOME JUST LIKE AS ANY OTHER CAPITAL ASSETS. ON WINDING UP, TH E SURPLUS MONIES IN THE SHARE PREMIUM ACCOUNT IS TO BE RETURNED TO THE SHARE HOLDERS AS CAPITAL. SO LONG AS THE COMPANY IS A GOING CONCERN, THE MONIES IN SHARE PREMIUM ACCOUNT CAN NEVER BE RETURNED TO THE SHAREH OLDERS EXCEPT THROUGH THE MEDIUM OF A REDUCTION PETITION, OR, IN OTHER WORDS, EXCEPT UNDER EXACTLY THE SAME CONDITIONS AS THOSE UNDER WH ICH ANY OTHER CAPITAL ASSET CAN REACH THE SHAREHOLDERS HANDS. DIS TRIBUTION OF SHARE PREMIUM AMOUNT IS NOT PERMITTED THROUGH DIVIDEND. I T IS TAKEN OUT OF THE CATEGORY OF DIVISIBLE PROFITS. THE PROVISIONS I N RESPECT OF ISSUE OF SHARES AT PREMIUM ARE THE SAME IN THE OLD COMPANY A CT AS WELL AS IN THE NEW COMPANY ACT. HENCE COMPANIES ACT CLEARLY ME NTIONS THAT AMOUNT RECEIVED AS PREMIUM IS CAPITAL RECEIPT AND N OT A REVENUE RECEIPT. THE SHARE PREMIUM IS ALSO VERIFIABLE FROM RETURNS OF ALLOTMENT SUBMITTED IN ROC. AS PER DEPARTMENTAL CIRCULAR (MCA ) NO. 3/77 DATED 15.04.1977 THE MONIES IN THE SHARE PREMIUM ACCOUNT CANNOT BE TREATED AS FREE RESERVES, AS THEY ARE IN THE NATURE OF CAPI TAL RESERVES. F) ON THE ISSUE OF SHARES AT PREMIUM, THE LD. ITAT, MUMBAI BENCH IN THE CASE OF ACIT V/S GAGANDEEP INFRASTRUCTURE PVT. LTD. 2014-T1 0L- 656-ITAT-MUM (PB PG 354-359 OF CASE LAWS) OBSERVED THAT ISSUE OF ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 61 SHARES AT PREMIUM IS ALWAYS A COMMERCIAL DECISION W HICH DOES NOT REQUIRE ANY JUSTIFICATION . THE FINDING OF THE ITAT WAS CONFIRMED BY MUMBAI HIGH COURT IN ITS DECISION DATED 20.03.2017 IN APPEAL NO. 1613 OF 2014. PB PAGE 306-366 /CASE LAWS) FURTHER THE PREMIUM IS A CAPITAL RECEIPT WHICH HAS TO BE DEALT WITH IN ACC ORDANCE WITH SECTION 78 OF COMPANIES ACT 1956. FURTHER THE COMPANY IS NO T REQUIRED TO PROVE THE GENUINENESS, PURPOSE OR JUSTIFICATION FOR CHARG ING PREMIUM OF SHARES, SHARE PREMIUM BY ITS VERY NATURE IS A CAPIT AL RECEIPTS AND IS NOT INCOME FOR ITS ORDINARY SENSE . IN THE CASE BEFORE MUMBAI BENCH HAS TO CONSIDER A CASE WHERE PREMIUM OF RS.190 PER SHARE W AS CHARGED. THE TRIBUNAL OBSERVED AS UNDER ( PG 358 TO 359/CASE LAWS) : 11. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LO WER AUTHORITIES. IN OUR CONSIDERED VIEW, THE ISSUE OF SHARES AT PREMIUM IS ALWAYS A COMMERCIAL DECISION WHICH DOES NOT REQUIRE ANY JUST IFICATION. FURTHER THE PREMIUM IS A CAPITAL RECEIPT WHICH HAS TO BE DEALT WITH IN ACCORDANCE WITH SEC. 78 OF THE COMPANIES ACT, 1956. FURTHER, THE COMPANY IS NOT REQUIRED TO PROVE THE GENUINENESS, P URPOSE OR JUSTIFICATION FOR CHARGING PREMIUM OF SHARES, SHARE PREMIUM BY ITS VERY NATURE IN A CAPITAL RECEIPTS AND IS NOT INCOME FOR ITS ORDINARY SENSE. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAD F ILED ALL THE REQUISITE DETAILS/DOCUMENTS WHICH ARE REQUIRED TO EXPLAIN CRE DITS IN THE BOOKS OF ACCOUNTS BY THE PROVISIONS OF SEC. 68 OF THE ACT . THE ASSESSEE HAS SUCCESSFULLY ESTABLISHED THE IDENTITY OF THE COMPAN IES WHO HAVE PURCHASED SHARES AT A PREMIUM. THE ASSESSEE HAS ALS O FILED BANK DETAILS TO EXPLAIN THE SOURCE OF THE SHARE HOLDERS AND THE GENUINENESS OF THE TRANSACTION WAS ALSO ESTABLISHED BY FILING C OPIES OF SHARE APPLICATION FORMS AND FORM NO. 2 FILED WITH THE REG ISTRAR OF COMPANIES. THE ENTIRE DISPUTE REVOLVES AROUND THE F ACT THAT THE ASSESSEE HAS CHARGED A PREMIUM OF 190/- PER SHARE. NO DOUBT A NON-EST COMPANY OR A ZERO BALANCE SHEET COMPANY ASK ING FOR 190/- PER SHARE DEFIES ALL COMMERCIAL PRUDENCE BUT AT THE SAME TIME WE CANNOT IGNORE THE FACT THAT IT IS A PREROGATIVE OF THE BOARD OF DIRECTORS OF THE COMPANY TO DECIDE THE PREMIUM AMOU NT AND IT IS THE WISDOM OF THE SHARE HOLDERS WHETHER THEY WANT TO SU BSCRIBE TO SUCH A HEAVY PREMIUM. THE REVENUE AUTHORITIES CANNOT QUEST ION THE CHARGING OF SUCH HUGE PREMIUM WITHOUT ANY BAR FROM ANY LEGISLATED LAW OF THE LAND. THE AMENDMENT HAS BEEN BROUGHT IN THE INCOME TAX ACT UNDER THE HEAD 'INCOME FROM OTHER SOURCES' BY I NSERTING CLAUSE (VIIB) TO SEC. 56 OF THE ACT WHEREIN IT HAS BEEN PR OVIDED THAT ANY CONSIDERATION FOR ISSUE OF SHARES, THAT EXCEEDS THE FAIR VALUE OF SUCH SHARES, THE AGGREGATE CONSIDERATION RECEIVED FOR SU CH SHARES AS EXCEEDS THE FAIR MARKET VALUE OF THE SHARES SHALL B E TREATED AS THE INCOME OF THE ASSESSEE BUT THE LEGISLATURE IN ITS W ISDOM HAS MADE THIS ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 62 PROVISION APPLICABLE W.E.F 1.4.2013 I.E. ON AND FRO M A.Y. 2013-14. IN SO FAR AS THE YEAR UNDER CONSIDERATION IS CONCERNED , THE TRANSACTION HAS TO BE CONSIDERED IN THE LIGHT OF THE PROVISIONS OF SEC. 68 OF THE ACT. THERE IS NO DISPUTE THAT THE ASSESSEE HAS GIVE N DETAILS OF NAMES AND ADDRESSES OF THE SHARE HOLDERS, THEIR PAN NOS, THE BANK DETAILS AND THE CONFIRMATORY LETTERS. 11.1. CONSIDERING ALL THESE UNDISPUTED FACTS, IT CA N BE SAFELY CONCLUDED THAT THE INITIAL BURDEN OF PROOF AS RESTE D UPON THE ASSESSEE HAS BEEN SUCCESSFULLY DISCHARGED BY THE ASSESSEE . EVEN IF IT IS HELD THAT EXCESS PREMIUM HAS BEEN CHARGED, IT DOES NOT B ECOME INCOME AS IT IS A CAPITAL RECEIPT. THE RECEIPT IS NOT IN THE REVENUE FIELD. WHAT IS TO BE PROBED BY THE AO IS WHETHER THE IDENTITY OF T HE ASSESSEE IS PROVED OR NOT. IN THE CASE OF SHARE CAPITAL, IF THE IDENTITY IS PROVED, NO ADDITION CAN BE MADE U/S. 68 OF THE ACT. WE DRAW SUPPORT FROM THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F LOEVELY EXPORTS PVT. LTD. 317 ITR 218. WE, THEREFORE DO NOT FIND AN Y ERROR OR INFIRMITY IN THE FINDINGS OF THE LD. CIT(A). GROUND NO. 1 IS ACCORDINGLY DISMISSED. G) AS PER PROVISIONS OF SECTION 56(1) OF INCOME TAX ACT, 1961 INCOME OF EVERY KIND WHICH IS NOT TO BE EXCLUDED FROM THE TOT AL INCOME UNDER THIS ACT SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEA D 'INCOME FROM OTHER SOURCES', IF IT IS NOT CHARGEABLE TO INCOME-T AX UNDER ANY OF THE HEADS SPECIFIED IN SECTION 14 , ITEMS A TO E. IN THE CASE OF THE ASSESSEE COMPANY, THE AMOUNT WAS RECEIVED FROM INVESTORS WER E AGAINST SHARE APPLICATION AND THE SAME IS CAPITAL RECEIPT WHICH W AS ADJUSTED AGAINST SHARE CAPITAL AND SHARE PREMIUM. THE MONEY SO RECEI VED TO ASSESSEE COMPANY WAS CAPITAL RECEIPT AND WAS NOT REVENUE REC EIPT, THEREFORE THE SAME CANNOT BE TAXED IN THE HANDS OF ASSESSEE COMPA NY UNDER SECTION 56(1) OF INCOME TAX ACT, 1961 BECAUSE THIS SECTION DEAL WITH INCOME AND NOT WITH CAPITAL RECEIPTS. THE INVESTORS WHO SU BSCRIBED THE SHARE CAPITAL OF ASSESSEE COMPANY IS ALSO SHOWING THE AMO UNT PAID TO ASSESSEE AS THEIR INVESTMENT IN SHARES OF ASSESSEE COMPANY A ND NECESSARY DOCUMENTS IN THIS REGARD WAS SUBMITTED TO LD. AO. T HEREFORE THE ASSESSEE HAS PROVED WITH DOCUMENTARY EVIDENCES THAT THE AMOUNT WAS RECEIVED AGAINST SHARE APPLICATION I.E. CAPITAL REC EIPT, THEREFORE THE SAME CANNOT BE TREATED AS INCOME OF THE ASSESSEE. FURTHE R FOR TREATING THE SHARE CAPITAL/SHARE PREMIUM AS INCOME OF THE ASSESS EE COMPANY NO COGENT REASON HAS BEEN GIVEN BY LD. AO. FURTHER, TH ERE IS NO DEEMING FICTION HAS BEEN GIVEN IN SECTION 56(1) OF INCOME T AX ACT, 1961 WHEREIN THE INCOME CAN BE TAXED UNDER DEEMING PROVI SION. ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 63 H) BY FINANCE ACT 2012 A NEW CLAUSE (VIIB) WAS INSERTED IN 56(2). MEMORANDUM EXPLAINING THE PROVISIONS IN FINANCE BIL L 2012 STATED AS UNDER:- SHARE PREMIUM IN EXCESS OF THE FAIR MARKET VALUE IS TO BE TREATED AS INCOME. SECTION 56(2) PROVIDES FOR THE SPECIFIC CATEGORY O F INCOMES THAT SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. IT IS PROPOSED TO INSERT A NEW CLAUSE IN 56(2). THE NEW CLAUSE WILL APPLY WHERE, ACCOMPANY, NOT BEING A COM PANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, RECEIVES, IN A NY PREVIOUS YEAR, FROM ANY PERSON BEING A RESIDENT, ANY CONSIDERATION FOR ISSUE OF SHARES. IN SUCH A CASE IF THE CONSIDERATION RECEIVED FOR ISSUE OF SHARES EXCEEDS THE FACE VALUE OF SHARES, THE AGGREGATE CONSIDERATI ON RECEIVED FOR SUCH SHARES AS EXCEEDS THE FAIR MARKET VALUE OF THE SHAR ES SHALL BE CHARGEABLE TO INCOME TAX, UNDER THE HEAD INCOME FR OM OTHER SOURCES. THIS AMENDMENT EFFECTIVE FROM 1 ST APRIL 2013 AND WILL ACCORDINGLY APPLY IN RELATION TO ASSESSMENT YEAR 2013-14 AND SU BSEQUENT ASSESSMENT YEARS. IN THE MEMORANDUM IT IS MENTIONED THAT PREMIUM IN EXCESS OF FAIR MARKET VALUE IS TO BE TREATED AS INC OME. THIS SUGGESTS THAT PREMIUM IN EXCESS OF FAIR MARKET VALUE WAS NOT AN INCOME BUT IS TO BE TREATED AS INCOME DUE TO AMENDED PROVISION. BEFO RE THE AMENDMENT, CONSIDERATION RECEIVED AS PREMIUM WAS NO T INCOME. THE LEGISLATURE IN ITS WISDOM REQUIRED THE SHARE PREMIU M IN EXCESS OF FAIR MARKET VALUE TO BE INCOME FROM ASSESSMENT YEAR 2013 -14 AND NOT THE ENTIRE PREMIUM TO BE TREATED AS INCOME. CBDT VIDE CIRCULAR NO.3 OF 2012 DATED 12.06.2012 HAS ALSO MENTIONED THAT PROVI SIONS OF 56(2)(VII B) WILL BE APPLICABLE FOR ASSESSMENT YEAR 2013-14 ONWARD . THEREFORE, AMENDMENT IN SECTION 56(2)(VIIB) OF INCO ME TAX ACT, 1961 EFFECTIVE FROM 1 ST APRIL 2013 AND WILL ACCORDINGLY APPLY IN RELATION TO ASSESSMENT YEAR 2013-14 AND SUBSEQUENT ASSESSMENT Y EARS AND THE PROVISIONS OF THIS SECTION CANNOT BE MADE APPLICABL E IN PREVIOUS YEARS. IN THIS REGARD THE RATIO HAS BEEN LAID DOWN IN FOLL OWING JUDGMENTS: - A) BY FINANCE ACT 1994, SECTION 55(2) WAS AMENDED TO PROVIDE THAT COST OF ACQUISITION OF A TENANCY RIGHT WILL BE TAKEN AS NIL. THE HONBLE APEX COURT IN THE CASE OF D.P. SANDU BROS. CHEMBUR (P) LTD (SUPRA), HELD THAT AMENDMENT TOOK EFFECT FROM 1 ST APRIL, 1995 AND THEREFORE WILL NOT BE APPLICABLE FOR A.Y. 1987-88. SIMILAR FINDING HAS BEEN RECORDED BY ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 64 HONBLE RAJ, HIGH COURT IN THE CASE OF GOTAN LIME S TONE KHANIJ UDHYOG. THE RATIO OF LAW IN RESPECT OF AMENDMENT IN 55(2) BEING HELD AS PROSPECTIVE IS APPLICABLE FOR 56(2)(VIBE) AND HENCE SHARE PREMIUM IN EXCESS OF FA IR MARKET VALUE CAN NOT BE HELD TAXABLE FOR A.Y. 2011- 12. B) RECENTLY THE HONBLE APEX COURT IN THE CASE OF M.G. PICTURES (MADRAS) LTD V/S ACIT 373 ITR 39 HELD THAT AMENDMENT IN SECTION 40A(3) W.E.F. FROM 1.4.19 96 IS PROSPECTIVE AND CANNOT BE APPLIED TO PREVIOUS YE ARS OF BLOCK PERIOD PRIOR TO F.Y. 1995-96. C) THE FIGURE OF 10,000 WAS CHANGED TO 20,000 U/S 4 0A(3) OF INCOME TAX ACT, 1961 AND 269SS OF INCOME TAX ACT, 1961 BY DIRECT TAX LAWS (AMENDMENT) ACT 1987 W.E.F. 1.4.1989. THE CBDT VIDE CIRCULAR NO.522 DATED 18.08.1988 STATED THAT AMENDMENT IN SECTION 40A(3) IS APPLICABLE FOR A.Y. 1989-90 AS IT IS A SUBSTANTI VE PROVISION AND SINCE 269SS IS A PROCEDURAL PROVISION , THE EFFECTIVE DATE WILL BE 1.4.89 I.E. PREVIOUS YEAR RE LEVANT TO A.Y. 89-90. D) THE FIVE JUDGE CONSTITUTION BENCH IN THE CASE OF CIT V VATIKA TOWNSHIP (P) LTD. 367 ITR 466 HAD AN OCCASION TO CONSIDER AS TO WHETHER PROVISO ADDED TO SECTION 113 OF THE I.T. ACT, IS PROSPECTIVE OR RETROSPECTIVE. THE HONBLE APEX COURT WHILE CONSIDERING THE VARIOUS DECISIONS HELD (AS PER PAGE 469 OF ITR 367). THAT SURCHARGE LEVIED BY ASSESSING OFFICER FOR THE BLOCK ASSESSMENT PERTAINING TO THE PERIOD FROM JUNE 1, 2002 WAS LIABLE TO BE DELETED. AN AMENDMENT MADE TO A TAXING STATUTE CAN BE SAID TO BE INTENDED TO REMOVE HARDSHIPS ONLY OF THE ASSESSEE, NOT OF THE DEPARTMENT. IMPOSING A RETROSPECTIVE LEVY ON THE ASSESSEE WOULD HAVE CAUSE D UNDUE HARDSHIP AND FOR THAT REASON PARLIAMENT SPECIFICALLY CHOSE TO MAKE THE PROVISO EFFECTIVE FR OM JUNE 1, 2002. ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 65 WHERE A BENEFIT IS CONFERRED BY A LEGISLATION, THE RULE AGAINST A RETROSPECTIVE CONSTRUCTION IS DIFFER ENT. IN A LEGISLATION CONFERS A BENEFIT ON SOME PERSONS BUT WITHOUT INFLICTING A CORRESPONDING DETRIMENT ON SOM E OTHER PERSON OR ON THE PUBLIC GENERALLY, AND WHERE TO CONFER SUCH BENEFIT APPEARS TO HAVE BEEN THE LEGISL ATORS OBJECTS, THEN PRESUMPTION WOULD BE THAT SUCH A LEGISLATION, GIVING IT A PURPOSIVE CONSTRUCTION, WO ULD WARRANT IT TO BE GIVEN A RETROSPECTIVE EFFECT. THIS EXACTLY IS THE JUSTIFICATION TO TREAT PROCEDURAL PROVISION AS RETROSPECTIVE. WHERE A LAW IS ENACTED FOR THE BENEF IT OF COMMUNITY AS A WHOLE, EVEN IN THE ABSENCE OF A PROVISION THE STATUTE MAY BE HELD TO BE RETROSPECTI VE IN NATURE. THE HONBLE APEX COURT FURTHER NOTICED THAT CBDT CIRCULAR MENTIONED THAT PROVISO IS APPLICABLE FROM 1.6.2002. IN RESPECT OF 56(2)(VII B), CBDT VIDE CIRCULAR NO.3 OF 2012 DATED 12.06.2012 HAS ALSO MENTIONED THAT PROVISIONS OF 56(2)(VII B) WILL BE APPLICABLE FOR ASSESSMENT YEAR 2013-14 ONWARD. HENCE SHARE PREMIUM EVEN IF IN EXCESS OF FAIR MARKE T VALUE IS NOT TAXABLE U/S 56(1) FOR THE A.Y. 2011-12 . I) SECTION 56 IS NOT A CHARGING SECTION . THIS SECTION STARTS WITH THE FOLLOWING SENTENCE. INCOME OF EVERY KIND WHICH IS NOT TO BE EXCLUDED F ROM THE TOTAL INCOME UNDER THE ACT SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD. INCOME FROM OTHER SOURCES IF IT IS NOT CHARG EABLE TO INCOME TAX. UNDER ANY OF THE HEADS SPECIFIED IN SECTION 14, ITE MS A TO E. FOR AN INCOME TO BE TAXED U/S 56, IT HAS TO SATISFY THREE CONDITIONS. (A) IT SHALL BE CLASSIFIABLE AS INCOME AS PER THE C HARGING SECTION OF THE ACT. (B) IT SHALL NOT BE EXCLUDED FROM THE TOTAL INCOME (E.G. SECTION10). ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 66 (C) IT IS NOT CHARGEABLE TO TAX UNDER ANY OF THE SP ECIFIED HEADS IN SECTION 14, ITEMS A TO E. THE FINANCE BILL 2012 AS PRESENTED ON 16 TH MARCH 2012 INCLUDED A NEW CLAUSE (VIIB) U/S 56(2) OF I.T. ACT [342 ITR1(ST)]. NO PROPOSAL IN THE ORIGINAL BILL TO INSERT A NEW CLAUSE U/S 2(24). SUB SEQUENTLY NOTICE OF AMENDMENTS TO FINANCE BILL WAS GIVEN [SEE 343 ITR 3 7(ST)] AND AMENDMENTS ALSO MADE IN CHARGING SECTION 2(24) IN INSERTING CLAUSE (XVI) IN 2(24) OF I.T. ACT W.E. F. 1.4.2013 READS AS UNDER: (XVI) ANY CONSIDERATION RECEIVED FOR ISSUE OF SHARE S AS EXCEEDS THE FAIR MARKET VALUE OF THE SHARES REFERRED TO IN CLAU SE (VIIB) OF SUBSECTION (2) OF 56. THE AMENDMENT MADE IN 2(24) IS ALSO APPLICABLE W.E. F. 01.04.2013 AND IT CANNOT BE APPLIED EARLIER TO 01-0 4-2013. J) THE INCOME FOR THE PURPOSE OF THE INCOME TAX ACT IS DEFINED IN SECTION 2(24) OF THE INCOME TAX ACT 1961. SECTION 2(24) OF THE INCOME ACT 1961 GIVES INCLUSIVE DEFINITION OF INCOME BUT THE I NCOME SHOULD BE LOOK INTO ITS NORMAL MEANING. THE INCOME WILL NOT INCLUD E CAPITAL RECEIPTS UNLESS IT IS SPECIFIED IN INCOME TAX ACT. THIS ARGU MENT FINDS SUPPORTS FROM THE AMENDMENT MADE BY FINANCE ACT 2012 W.E.F. 1.4.2013 IN SECTION 56(VIIB) AND CLAUSE (XVI) OF SECTION 2(24) OF INCOME TAX ACT, 1961 WHEREIN CERTAIN SHARE PREMIUMS WERE MADE TAXAB LE W.E.F. 01.04.2013. IF THE SAME WERE ALREADY TAXABLE U/S 56 (1)/ 2(24) OF INCOME TAX ACT, 1961 THEN THERE WAS NO NEED TO MAKE THESE AMENDMENTS IN THE ACT. IN CASE THERE IS NO CHARGING PROVISION FOR SPECIFIC RECEIPT, THEN IT CANNOT BE TAXED. THE FIVE MEMBER BENCH OF THE APEX COURT IN CIT V VATIKA TOWNSHIP P LTD 367 ITR 4 66 (PB PG 19/CASE LAWS) . TAX LAWS ARE CLEARLY IN DEROGATION OF PERSONAL RIG HTS AND PROPERTY INTERESTS AND ARE, THEREFORE, SUBJECT TO S TRICT CONSTRUCTION AND ANY AMBIGUITY MUST BE RESOLVED AGA INST IMPOSITION OF THE TAX. IN BILLINGS V U.S 232 U.S.26 1 AT PAGE 265, 34 S.CT 421 (1914), THE SUPREME COURT CLEARLY ACKNOWLEDGED THIS BASIC AND LONG STANDING RULE OF S TATUTORY CONSTRUCTION. TAX STATUTES SHOULD BE STRICTLY CONSTRUED, AND, IF ANY AMBIGUITY BE FOUND TO EXIST, IT MUST BE RESOLVED IN FAVOUR OF CITIZEN... ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 67 IF A PERSON SOUGHT TO BE TAXED COMES WITHIN THE LETTER OF THE LAW HE MUST BE TAXED, HOWEVER GREAT T HE HARDSHIP MAY APPEAR TO THE JUDICIAL MIND TO BE. ON THE OTHER HAND, IF THE CROWN SEEKING TO RECOVER THE TAX, CANNOT BRING THE SUBJECT WITHIN THE LETTER OF THE LAW, THE SUBJECT IS FREE, HOWEVER APPARENTLY WITHIN THE SPRIT OF THE LAW THE CASE MIG HT OTHERWISE APPEAR TO BE AS OBSERVED IN PARTINGTON V ATTOMEY G ENERAL LR4HL100. SINCE FOR THE YEAR UNDER CONSIDERATION THERE WAS NO PROVISION IN INCOME TAX ACT, 1961 WHEREIN THE FAIR VALUE OF SHAR E COULD BE COMPUTED AND THE EXCESS SHARE PREMIUM COULD BE TAXE D, THEREFORE IN ABSENCE OF COMPUTATION PROVISION THE S AME CANNOT BE TAXED. THE RELIANCE IS ALSO PLACED ON FOLLOWING CASES: - I) THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CADELL WVG. MILLS CO.(P) LTD. V CIT 249 ITR 265 (PB 22- 41/CASE LAWS) HAD AN OCCASION TO CONSIDER THE TAXABILITY OF A SUM RECEIVED IN RESPECT OF CONSIDER ATION OF TENANCY RIGHT. HONBLE HIGH COURT HELD THAT SURRENDER OF TENANCY RIGHT WHICH WAS NOT CHARGABLE TO TAX AS CAPITAL GAIN UNDER SECTION 45 COULD NOT BE T AXED AS CASUAL AND NON RECURRING RECEIPT UNDER SECTION 1 0(3) R.W. S. 56 UNDER THE HEAD INCOME FROM OTHER SOURCE S. II) THE HONBLE APEX COURT IN THE CASE OF CIT V D.P. SANDU BROS. CHEMBUR (P) LTD 273 ITR 1 (PB 42- 49/CASE LAWS) ALSO HOLD THAT AS PER 2(24)(VI) ONLY INCOME WHICH IS CHARGEABLE U/S 45 IS TO BE INCLUDED IN INCOME AND IF COMPUTATION PROVISION U/S 45 FAILS TH EN CHARGING PROVISIONS WILL FAIL. REF. TO CIT V B.C. SRINIVASA SETTY 128 ITR 294. III) THE HONBLE RAJASTHAN HIGH COURT IN THE CASE O F CIT V GOTAN LIME STONE KHANIJ UDYOG 269 ITR 399 (PB 56-65/CASE LAWS) ALSO HELD THAT IN CASE COMPUTATION PROVISION U/S 48 COULD NOT BE APPLIED F OR WANT OF ASCERTAINABLE COST OF ACQUISITION, THEN CAP ITAL GAIN DOES NOT ARISE TO BE INCLUDED IN TOTAL INCOME ON ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 68 ACCOUNT OF FAILURE OF APPLICABILITY OF COMPUTATION PROVISION. THE HONBLE HIGH COURT REFERRED TO DECIS ION OF BOMBAY HIGH COURT IN THE CASE OF CADELL WVG. MIL LS CO (P) LTD. (SUPRA). IV) THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF S. ZORASTER AND CO. V/S CIT 322 ITR 35 (PB 66- 68/CASE LAWS) HAD ON OCCASION TO CONSIDER THE TAXABILITY OF RECEIPT OF RS.20,000 RECEIVED BY VEND EE ON DEFAULT OF THE PURCHASER AS PER AGREEMENT FOR SELL OF PREM PRAKASH TALKIES. THE HONBLE HIGH COURT AFTER REFERRING TO THE DECISION OF APEX COURT IN THE CASE OF TRAVANCORE RUBBER AND TEA CO LTD. V CIT 243 ITR 158 HELD THAT SUCH RECEIPT IS CAPITAL RECEIPT. SUCH CAPITAL RECEIPT IS NOT TAXABLE IN VIEW OF JUDGMENT OF APEX COURT IN D.P. SANDU BROS. CHEMBUR (P) LTD (SUPRA). HENCE CAPITAL RECEIPT IS NOT TAXABLE UNLES S THERE IS CHARGING PROVISION FOR A CAPITAL RECEIPT AND COMPUTATION PROVISIONS ARE ALSO APPLICABLE. V) THE HONBLE BOMBAY HIGH COURT IN THE CASE OF VODAFONE INDIA SERVICES P. LTD. V/S UOI 368 ITR 1 (PB 76-107/CASE LAWS) HAD AN OCCASION TO CONSIDER THE DIFFERENCE BETWEEN THE SHARE PREMIUM DETERMINED BY REVENUE AND THE SHARE PREMIUM CHARGED AS DEEMED LOAN AND TAXING OF NATIONAL INTEREST ON DEEMED LOAN . THE HONBLE BOMBAY HIGH COURT HAS REFERRED TO THE DECISION OF APEX COURT IN THE CASE OF MATHURAM AGGARWAL V/S STATE OF MP (1999) 8 SCC 667 FOR THE TEST TO INTERPRET A TAXING STATUE WHICH READS AS UN DER: THE INTENTION OF THE LEGISLATURE IS A TAXATION ST ATUTE IS TO BE GATHERED FROM THE LANGUAGE OF THE PROVISIONS PARTICULARLY WHERE THE LANGUAGE IS PLAIN AND UNAMBIGUOUS. IN A TAXING ACT IT IS NOT POSSIBLE TO ASSUME ANY INTENTION OR GOVERNING PURPOSE OF THE STATUTE MORE THAN WHAT IS STATED IN THE PLAIN LANGU AGE. IT IS NOT THE ECONOMIC RESULTS SOUGHT TO BE OBTAINED B Y ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 69 MAKING THE PROVISION WHICH IS RELEVANT IN INTERPRET ING A FISCAL STATUTE. EQUALLY IMPERMISSIBLE IS AN INTERPR ETATION WHICH DOES NOT FLOW FROM THE PLAIN, UNAMBIGUOUS LANGUAGE OF THE STATUTE. WORDS CANNOT BE ADDED TO O R SUBSTITUTED SO AS TO GIVE A MEANING TO THE STATUTE WHICH WILL SERVE THE SPENT AND INTENTION OF THE LEGISLATU RE. THE STATUTE SHOULD CLEARLY AND UNAMBIGUOUSLY CONVEY THE THREE COMPONENTS OF THE TAX LAW I.E. SUBJECT OF THE TAX, THE PERSON WHO IS LIABLE TO PAY THE TAX AND THE RAT E AT WHICH THE TAX IS TO BE PAID. IF THERE IS ANY AMBIGU ITY REGARDING ANY OF THESE INGREDIENTS IN A TAXATION ST ATUTE THEN THERE IS NO TAX IN LAW. THEN IT IS FOR THE LEG ISLATURE TO DO THE NEEDFUL IN THE MATTER. HONBLE BOMBAY HIGH COURT IN THIS CASE (VODAFONE CASE) OBSERVED THAT ISSUE OF SHARES AT A PREMIUM IS ON CAPITAL ACCOUNT AND GIVES RISE TO NO INCOME. 56(1) PROVIDES THE INCOME OF EVERY KIND WHICH IS NOT EXCLUDED FROM THE TOTAL INCOME IS CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. HOWEVER BEFORE SECTION 56 OF THE ACT CAN BE APPLIED THERE MUST BE INCOME WHICH ARISES. IF THE RECEIPT IS CAPITAL THEN IT IS NOT INCOME. HENCE SHARE PREMIUM IS NOT AN INCOME. I) THE CBDT VIDE CIRCULAR/INSTRUCTION NO.2 DATED 29.01 .2015 HAS STATED AS UNDER [371 ITR 6(ST)]. IN REFERENCE TO THE ABOVE CITED SUBJECT, I AM DIRE CTED TO DRAW YOUR ATTENTION TO DECISION OF THE HIGH COURT OF BOM BAY IN THE CASE OF VODAFONE INDIA SERVICES PVT. LTD V UOI FOR THE ASSESSMENT YEAR 2009-10 (WP NO.871 OF 2014) WHEREIN THE COURT HAS HELD INTERALIA, THAT THE PREMIUM ON SHARE ISSUE WAS ON ACCOUNT OF A CAPITAL ACCOUNT TRANSACTION AND DOE S NOT GIVE RISE TO INCOME AND HENCE, NOT LIABLE TO TRANSFER PR ICING ADJUSTMENT. IT IS HEREBY INFORMED THAT THE BOARD HAS ACCEPTED T HE DECISION OF THE HIGH COURT OF BOMBAY IN THE ABOVE M ENTIONED WRIT PETITION. IN VIEW OF THE ACCEPTANCE OF THE ABO VE JUDGMENT, IT IS DIRECTED THAT THE RATIO DECIDENDI OF THE JUDG MENT MUST BE ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 70 ADHERED TO BY THE FIELD OFFICERS IN ALL CASES WHERE THE ISSUE IS INVOLVED. THIS MAY ALSO BE BROUGHT TO THE NOTICE OF THE ITAT, DRPS AND CIT (APPEALS). IN VIEW OF ABOVE INSTRUCTION, IT IS CLEAR THAT RATI O DECIDING OF TREATING OF SHARE PREMIUM AS CAPITAL RECEIPT IS BIN DING ON REVENUE AUTHORITIES. J. IN VIEW OF THE ABOVE SUBMISSIONS, IT IS CLEAR TH AT SHARE PREMIUM RECEIVED IS A CAPITAL RECEIPT AND CONSIDERATION REC EIVED CANNOT BE CONSIDERED AS INCOME FOR THE YEAR UNDER CONSIDERATI ON BY APPLYING THE PROVISIONS OF SECTION 56(1) OF INCOME TAX ACT. 2.6 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS PERTINENT TO MENTION THA T THE SIMILAR ISSUE HAS BEEN DEALT WITH AND DECIDED BY THIS BENCH OF ITAT V IDE ITS ORDER DATED 30-10-2017 IN THE CASE OF ACIT, CENTRAL CIRCLE-2, J AIPUR VS MOTISONS BUILDTECH PVT. LTD IN ITA NO. 481/JP/2017 (REVENUE S APPEAL) FOR THE ASSESSMENT YEAR 2009-10. SINCE THE ISSUE RAISED BY THE REVENUE IN THE PRESENT APPEAL IS SAME AS DECIDED IN THE APPEAL OF THE REVENUE IN ITA NO.481/JP/2017FOR THE ASSESSMENT YEAR 2009-10 IN TH E CASE OF ACIT, CENTRAL CIRCLE-2, JAIPUR VS MOTISONS BUILDTECH PVT. LTD JAIPUR (SUPRA) WHICH SHALL APPLY MUTATIS MUTANDIS IN THE PRESENT A PPEAL OF REVENUE ALSO. THUS SOLITARY GROUND OF ITA NO.490/JP/2017 FOR THE A.Y. 2012-13 OF ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 71 REVENUES APPEAL IS DISMISSED. IN THE RESULT, THE A PPEAL OF THE REVENUE IN ITA NO.490/JP/2017 IS DISMISSED. 3.1 THE ASSESSEE IN ITA NO. 390/JP/2017 FOR THE ASS ESSMENT YEAR 2012-13 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT (A) ERRED IN: - (A) CONFIRMING THE ADDITION OF RS. 3,50,000/- OUT O F TOTAL ADDITION OF RS. 90,00,000/- MADE BY LD. AO TREATING THE SHARE CAPI TAL AND PREMIUM FROM M/S. EVERSINE SUPLIERS PVT. LTD AS INCOME OF THE ASSESSEE. (B)CONFIRMING THE ADDITION OF RS. 3,50,000/- BY H OLDING THAT THE ASSESSEE COULD NOT EXPLAIN THE DEPOSIT OF CASH/DD IN THE ACCOUN TS OF OTHER PARTIES/PERSONS AT 4 TH CHANNEL OF SOURCE/STAGE AND FURTHER ERRED IN NOT P ROVIDING OPPORTUNITY OF CROSS EXAMINATION OF SHRI SANTOSH CHOUBE, SHRI AJIT SHARM A AND SH RAJESH KUMAR SINGH; AND (C)CONFIRMING THE ADDITION OF RS. 3,50,000/- MORE S O WHEN HE HAS CATEGORICALLY HELD THAT THE ADDITION MADE BY LD. AO U/S 56(1) OF INCOME TAX ACT, 1961 IS NOT SUSTAINABLE AND THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF TRANSACTION OF THE TRANSACTION CANNOT BE HELD AS DOUBTFUL AND THE ADDI TION BY APPLYING THE PROVISIONS OF SECTION 68 OF I.TAX ACT CANNOT BE UPHELD. 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.3,01,960/- MADE BY TH E AO BY DISALLOWING PAYMENT OF ROC FEES. 4.1 AS REGARDS GROUND NO. 2 OF THE ASSESSEE REGARDI NG CONFIRMING THE PAYMENT OF RS.3,01,960/- TOWARDS ROC FEES BY THE LD . CIT(A), THE LD.AR OF THE ASSESSEE HAS NOT PRESSED THIS GROUND OF APPE AL DURING THE COURSE OF HEARING. THUS GROUND NO. 2 OF THE ASSESSEE IS DISMI SSED BEING NOT PRESSED. ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 72 5.1 IN GROUND NO. 1 (ITA NO. 390/JP/2017), THE ASSE SSEE IS AGGRIEVED THAT THE LD. CIT(A) HAS CONFIRMED THE ADDITION OF R S. 3,50,000/- IN THE HANDS OF THE ASSESSEE. THE RELEVANT OBSERVATION OF THE LD. CIT(A) AT PAGE 50 TO 53 OF HIS ORDER IS AS UNDER:- 2.1.4.6 THEREFORE, IN VIEW OF THE FINDINGS OF HONBLE JURI SDICTIONAL HIGH COURT, THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF TRANSACTION OF THESE COMPANIES CANNOT BE HELD AS DOUBTFUL AND ADDI TION BY APPLYING THE PROVISIONS OF SECTION 68 OF THE ACT CA NNOT BE UPHELD. HOWEVER, IT IS ALSO TO BE SEEN THAT THE INVESTIGATION DIRECTORATE HAS CARRIED OUT INVESTIGATION FOR DEPOS IT OF CASH/DD AT FOURTH STAGE OF CHANNEL SOURCE IN SOME CASES. THE CHART SHOWING CASH DEPOSIT/DD DEPOSIT AT 4TH CHANNE L AS PER INQUIRIES MADE BY INVESTIGATION WING IS AS UNDER: COMPANY A.Y. AMOUNT FROM COMPANY CASH DEPOSIT /DEMAND DRAFT AT 4TH CHANNEL AS PER INQUIRY BY INVESTIGATION WING MOTISONS BUILDTECH P LTD 2012-2013 15,00,000 EVERSH INE SUPPLIERS P LTD SWASTIK TRADERS MOTISONS BUILDTECH P LTD 2012-2013 20,00,000 ALLIA NCE TRADECOM P LTD SWASTIK TRADERS AND GLOBAL SECUR ITIES MOTISONS BUILDTECH P LTD 2012-2013 17,00,000 ALLIAN CE TRADECOM P LTD SWASTIK TRADERS MOTISONS BUILDTECH P LTD 2012-2013 30,00,000 ALLIAN CE TRADECOM P LTD SWASTIK TRADERS TOTAL 82,00,000 MOTISONS ENTERTAINMENT P LTD 2012-2013 18,00,000 RO SE SUPPLIERS P LTD SHYAM FASHION AND DURGA ENTERPRI SES MOTISONS ENTERTAINMENT P LTD 2012-2013 46,00,000 RE GENT BARTER P LTD DURGA ENTERPRISES AND SHYAM FASHI ON MOTISONS ENTERTAINMENT P LTD 2012-2013 4,50,000 MAY UKH VINIMAY P LTD SHYAM FASHION AND DURGA ENTERPRIS ES MOTISONS ENTERTAINMENT P LTD 2012-2013 10,00,000 M AYUKH VINIMAY P LTD SHYAM FASHION AND DURGA ENTERPR ISES MOTISONS ENTERTAINMENT P LTD 2012-2013 16,00,000 RE GENT DEALERS P LTD SHYAM FASHION MOTISONS ENTERTAINMENT P LTD 2012-2013 10,00,000 RE GENT DEALERS P LTD DURGA ENTERPRISES MOTISONS ENTERTAINMENT P LTD 2012-2013 8,00,000 REG ENT DEALERS P LTD DURGA ENTERPRISES AND SHYAM FASHI ON MOTISONS ENTERTAINMENT P LTD 2012-2013 29,00,000 A LLIANCE TRADECOM P LTD SWASTIK TRADERS AND GLOBAL S ECURITIES TOTAL 1,41,50,000 MOTISONS GLOBAL P LTD 2012-2013 17,00,000 ROSE SUP PLIERS P LTD DURGA ENTERPRISES AND SHYAM FASHION MOTISONS GLOBAL P LTD 2012-2013 18,00,000 ROSE SUPP LIERS P LTD NIBU NAGI MOTISONS GLOBAL P LTD 2012-2013 19,00,000 ROSE SUPP LIERS P LTD NIBU NAGI AND DURGA ENTERPRISES ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 73 COMPANY A.Y. AMOUNT FROM COMPANY CASH DEPOSIT /DEMAND DRAFT AT 4TH CHANNEL AS PER INQUIRY BY INVESTIGATION WING MOTISONS GLOBAL P LTD 2012-2013 3,50,000 ROSE SUPPL IERS P LTD DURGA ENTERPRISES MOTISONS GLOBAL P LTD 2012-2013 14,00,000 ROSE SUPP LIERS P LTD SHYAM FASHION MOTISONS GLOBAL P LTD 2012-2013 18,50,000 ROSE SUPP LIERS P LTD DURGA ENTERPRISES MOTISONS GLOBAL P LTD 2012-2013 18,00,000 REGENT BA RTER P LTD NIBU NAGI MOTISONS GLOBAL P LTD 2012-2013 18,00,000 MAYUKH VI NIMAY P LTD NIBU NAGI AND KEVILHULIE SUNOTSU MOTISONS GLOBAL P LTD 2012-2013 35,00,000 MAYUKH VI NIMAY P LTD SHYAM FASHION AND DURGA ENTERPRISES MOTISONS GLOBAL P LTD 2012-2013 16,00,000 MAYUKH VI NIMAY P LTD DURGA ENTERPRISES MOTISONS GLOBAL P LTD 2012-2013 15,00,000 MAYUKH VI NIMAY P LTD SHYAM FASHION AND DURGA ENTERPRISES MOTISONS GLOBAL P LTD 2012-2013 41,00,000 MAYUKH VI NIMAY P LTD SHYAM FASHION AND DURGA ENTERPRISES MOTISONS GLOBAL P LTD 2012-2013 16,47,727 EVERSHINE SUPPLIERS P LTD PNB, AXIS BANK, SILIGURI MOTISONS GLOBAL P LTD 2012-2013 36,00,000 EVERSHINE SUPPLIERS P LTD DURGA ENTERPRISES AND SHYAM FASHIO N MOTISONS GLOBAL P LTD 2012-2013 18,00,000 EVERSHINE P LTD DURGA ENTERPRISES MOTISONS GLOBAL P LTD 2012-2013 9,00,000 REGENT DEA LERS P LTD NIBU NAGI MOTISONS GLOBAL P LTD 2012-2013 18,00,000 REGENT DE ALERS P LTD DURGA ENTERPRISES MOTISONS GLOBAL P LTD 2012-2013 9,00,000 REGENT DEA LERS P LTD KEVIHULIE SINOTSU MOTISONS GLOBAL PRIVATE LIMITED 2012-2013 28,50,000 REGENT DEALERS P LTD DURGA ENTERPRISES AND SHYAM F ASHION MOTISONS GLOBAL PRIVATE LIMITED 2012-2013 18,50,000 REGENT DEALERS P LTD SHYAM FASHION MOTISONS GLOBAL PRIVATE LIMITED 2012-2013 22,00,000 ALLIANCE TRADECOM P LTD PNB, AXIS BANK SILIGURI, SWASTIK TRADERS AND GLOBAL SECURITIES MOTISONS GLOBAL PRIVATE LIMITED 2012-2013 10,00,000 ALLIANCE TRADECOM P LTD SWASTIK TRADERS MOTISONS GLOBAL PRIVATE LIMITED 2012-2013 35,00,000 ALLIANCE TRADECOM P LTD M/S SWASTIK TRADERS , GLOBAL SECURITIES AXIS BANK SILIGURI, MOTISONS GLOBAL PRIVATE LIMITED 2012-2013 20,00,000 ALLIANCE TRADECOM P LTD SWASTIK TRADERS AND GLOBAL SECURITIES MOTISONS GLOBAL PRIVATE LIMITED 2012-2013 20,00,000 ALLIANCE TRADECOM P LTD SWASTIK TRADERS AND GLOBAL SECURITIES MOTISONS GLOBAL PRIVATE LIMITED 2012-2013 16,00,000 ALLIANCE TRADECOM P LTD DURGA ENTERPRISES MOTISONS GLOBAL PRIVATE LIMITED 2012-2013 9,50,000 ALLIANCE TRADECOM P LTD SHYAM FASHION MOTISONS GLOBAL PRIVATE LIMITED 2012-2013 10,00,000 ALLIANCE TRADECOM P LTD SHYAM FASHION AND DURGA EN TERPRISES ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 74 COMPANY A.Y. AMOUNT FROM COMPANY CASH DEPOSIT /DEMAND DRAFT AT 4TH CHANNEL AS PER INQUIRY BY INVESTIGATION WING MOTISONS GLOBAL PRIVATE LIMITED 2012-2013 3000000 A LLIANCE P LTD SHYAM FASHION AND DURGA ENTERPRISES MOTISONS GLOBAL PRIVATE LIMITED 2012-2013 16,00,000 ALLIANCE P LTD P LTD NIBU NAGI MOTISONS GLOBAL PRIVATE LIMITED 2012-2013 19,50,000 ALLIANCE TRADECOM P LTD DURGA ENTERPRISES MOTISONS GLOBAL PRIVATE LIMITED 2013-2014 5050000 A LLIANCE TRADECOM P LTD SHYAM FASHION AND DURGA ENTE RPRISES TOTAL 6,44,97,727 SHIVANSH BUILDCON P LTD 2012-2013 3,50,000 EVERSHIN E SUPPLIERS P LTD DURGA ENTERPRISES, SWASTIK AND SHYAM FASHION TOTAL 3,50,000 GRAND TOTAL 8,71,97,727 2.1.4.7 IN VIEW OF ABOVE FINDINGS, IT IS ALSO SEEN THAT THIS CASH/DD WAS DEPOSITED AT 4 TH CHANNEL OF SOURCE/STAGE . THIS MONEY CAME TO THE HANDS OF SOME OF APPELLANT COMPANIES THROUGH THE SIX COMPANIES ASSESSED IN JAIPUR. HOWEVER, ON PERUSAL OF WRITTEN SUBMISSIO NS AND COMPLIANCE TO SHOW CAUSE LETTER , IT IS ALSO SEEN THAT ASSESSEE HAS NOT CONTROVERTED THE FACTS NARRATED BY SH SANTOSH CHOUBE, SH RAJESH KR SINGH AND SH AJIT SHARMA AND ALSO COULD NOT SATISFACTORILY EXPLAIN TH E REASONS OF CASH DEPOSITS MADE TO THOSE ACCOUNTS. THEREFORE, DULY CONSIDERING THOSE FACTS AND EVIDENC ES( BOTH DOCUMENTARY & ORAL) GATHERED DURING SEARCH & POST-SEARCH OPERATION , ADDITION TO THE EXTENT OF R S. 8,71,97,727/= IS SUSTAINED AND BALANCE IS DELET ED, DETAILS GIVEN AS UNDER: NAME OF APPELLANT COMPANY ITA NO AY ADDITION MADE BY AO ADDITION SUSTAINED ADDITION DELETED/ RELIEF GIVEN MOTISONS GLOBAL PVT. LTD 753/14-15 2009-10 2,75,00 ,000 ------------- 2,75,00,000 MOTISONS GLOBAL PVT. LTD 754/14-15 2011-12 6,96,50 ,000 --------------- 6,96,50,000 MOTISONS GLOBAL PVT. LTD 767/14-15 2012-13 42,07,2 9,600 5,94,47,727 36,12,81,873 MOTISONS GLOBAL PVT. LTD 755/14-15 2013-14 4,41,00 ,000 50,50,000 3,90,50,000 MOTISONS ENTERTAINMENT (I) PVT. LTD 760/14-15 200 9-10 3,40,00,000 --------------- 3,40,00,000 MOTISONS ENTERTAINMENT (I) PVT. LTD 766/14-15 201 1-12 1,95,00,000 ---------------- 1,95,00,000 MOTISONS ENTERTAINMENT (I) PVT. LTD 756/14-15 201 2-13 7,78,00,000 1,41,50,000 6,36,50,000 MOTISONS BUILDTECH PVT. LTD 758/14-15 2009-10 3,03 ,00,000 --------------- 3,03,00,000 MOTISONS BUILDTECH PVT. LTD 759/14-15 2012-13 3,68 ,27,500 82,00,000 2,86,27,500 GODAWARI ESTATES PVT. LTD 769/14-15 2010-11 2,00,0 0,000 -------------- 2,00,00,000 GODAWARI ESTATES PVT. LTD 768/14-15 2012-13 10,30, 00,000 -------------- 10,30,00,000 BHOLENATH REAL ESTATES PVT LTD 770/14-15 2009-10 2 ,90,00,000 --------------- 2,90,00,000 RAINBOW BUILDCON PVT. LTD 757/14-15 2009-10 2,00,0 0,000 --------------- 2,00,00,000 SHIVANSH BUILDCON PVT. LTD 771/14-15 2012-13 90,00 ,000 3,50,000 86,50,000 TOTAL ADDITIONS 94,14,07,100 8,71,97,727 85,42,09,373 IT IS PERTINENT TO MENTION HERE THAT M/S MAYUKH VIN IMAY PVT LTD RECEIVED SHARE APPLICATION OF RS. 10,54,95,000/- IN AY 2009-10 WHICH WAS ADDED AS INCOME OF M/S MAYUKH VINIMAY PVT LTD IN AY 2009-10. THEREAFTER IN SUBSEQUENT YEARS THE PART OF THE FUND S OWNED BY THIS COMPANY WAS INVESTED IN THE COMPANI ES UNDER APPEAL AS UNDER: ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 75 S.NO NAME OF COMPANY (UNDER YOUR APPEAL) ASSESSMENT YEAR AMOUNT 1 MOTISONS GLOBAL PVT LTD 2012-13 6,93,49,800 2. MOTISONS GLOBAL PVT LTD 2013-14 2,24,50,000 3 MOTISONS ENTERTAINMENT (INDIA) PVT LTD 2012-13 1, 55,00,000 TOTAL 10,72,99,800 FURTHER, IT IS ALSO SUBMITTED THAT ADDITION MADE BY THE AO TANTAMOUNT TO DOUBLE ADDITION. IT IS ALSO MENTIONED HERE THAT AS PER LD ARS REQUEST, AP PELLATE PROCEEDINGS IN CASE OF M/S MAYUKH VINIMAY P VT LTD HAVE BEEN KEPT IN ABEYANCE TILL THE DISPOSAL OF APPEAL BY HONBLE ITAT. IN VIEW OF AFOREMENTIONED FINDINGS, NOW ADDITIONS M ADE BY THE AO ARE BEING DISCUSSED WITH RESPECT TO GROUNDS OF APPEAL RAISED BY THE RESPECTIVE ASSES SEE IN PARA BELOW. THUS THE LD. CIT(A) CONFIRMED THE ADDITION OF RS. 3 ,50,000 IN THE HANDS OF THE ASSESSEE. 5.2 DURING THE COURSE OF HEARING, THE LD.AR OF THE ASSESSEE PRAYED FOR DELETION OF ADDITION CONFIRMED BY THE LD. CIT(A) AM OUNTING TO RS. 3,50,000/- FOR WHICH THE LD.AR OF THE ASSESSEE FILED THE FOLLOWING WRITTEN SUBMISSION. 2.02.01 SUBMISSION OF ASSESSEE (I) THE LD CIT(A) ISSUED SHOW CAUSE NOTICE TO ASSES SEE TO TAX THE SHARE CAPITAL UNDER SECTION 68 OF ITAX ACT AS AGAINST 56( 1) APPLIED BY LD AO BUT HE SUSTAINED ADDITION OF RS. 3,50,000/- U/S 68 OF INCOME TAX ACT EVEN AFTER SATISFIED ABOUT THE INGREDIENTS OF SECTION 68 OF I.TAX ACT. (II) THE LD AO ISSUED SEVERAL NOTICES TO ASSESSEE T O EXPLAIN THE SHARE CAPITAL. THE ASSESSEE SUBMITTED DETAILED REPLY AND DOCUMENTS FROM TIME TO TIME AS UNDER:- S.NO PARTICULARS COPY AT PB PG NO 1 COPY OF QUERY LETTER OF AO DATED 05.01.2015. 94-9 5 2 COPY OF REPLY OF ASSESSEE DATED 13.01.2015 96-98 3 COPY OF SHOW CAUSE NOTICE OF AO DATED 06.02.2015. 99-102 4 COPY OF REPLY OF ASSESSEE DATED 13.02.2015 FILED IN RESPONSE TO SHOW CAUSE NOTICE DATED 06.02.2015. 103-105 ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 76 5 COPIES OF DOCUMENTS FILED BEFORE AO ALONG WITH VARIOUS SUBMISSION IN RESPECT OF IDENTITY, CREDITWORTHINESS OF SHAREHOLDER AND GENUINENESS OF TRANSACTIONS 106-157 THE ASSESSEE HAS SUBMITTED SUFFICIENT DOCUMENTS BE FORE THE LD AO TO PROVE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF SHARE CAPITAL AND LD AO SATISFIED THAT ADDITION UNDER SECTION 68 CANN OT BE MADE, SO HE APPLIED SECTION 56(1) OF ITAX ACT TO MAKE THE ADDIT ION. THE ASSESSEE SUBMITTED DETAILED REPLY BEFORE LD C IT(A) VIDE LETTER DATED 16/08/2016 (COPY AT PB PG 158-229). LD CIT(A) WHEN SATISFIED THAT THE ADDITION U/S 56(1) CANT BE MADE , HE TRIED TO SUSTAIN THE ADDITION BY APPLYING THE PROVISIONS OF SECTION 68 OF INCOME TAX ACT. HE ISSUED A SHOW CAUSE NOTICE VIDE LETTER DATE D 09/03/2017 (COPY AT PB PG 230-276). THE ASSESSEE SUBMITTED DETAILED REPLY ON THE SHOW CAUSE NOTICE OF LD CIT(A) VIDE LETTER DATED 24-03-2 017 & 28/03/2017 ALONGWITH DOCUMENTS (COPY AT PB PG 277-353) . TO SUPPORT THAT SHAREHOLDERS WERE GENUINE AND CREDITWORTHINESS IS P ROVED, THE ASSESSEE HAS FILED ALL DETAILS, IN RESPECT OF INCORPORATION/ EXISTENCE OF INVESTORS AND DETAILS OF CHEQUES VIDE WHICH AMOUNTS WERE RECE IVED. THE CAPACITY OF SHAREHOLDERS IS VERIFIABLE FROM THE COPY OF THE BALANCE SHEET OF THE SHAREHOLDERS. THE SHAREHOLDERS HAVE FUNDS ON A PRIO R DATE FROM THE ALLOTMENT OF SHARES GIVEN BY THE ASSESSEE COMPANY A ND SUCH FUNDS WERE MORE THAN THE AMOUNT OF SHARE APPLICATION. III) DURING THE COURSE OF ASSESSMENT PROCEEDINGS TH E ASSESSEE SUBMITTED THE FOLLOWING DOCUMENTS TO PROVE THEIR IDENTITY OF SHAREHOLDERS, CREDITWORTHINESS OF SHAREHOLDERS AND GENUINENESS OF TRANSACTION WITH THEM: - ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 77 NAME OF SHAREHOLDER PARTICULARS OF DOCUMENTS SUBMITTED COPY AT PB PAGE EVERSHINE SUPPLIERS PVT. LTD 9. SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY, DETAIL OF PAYMENT RECEIVED ETC. 10. COPY OF BOARD RESOLUTION. 11. COPY OF PAN CARD OF PARTY. 12. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. 13. DECLARATION OF SOURCE OF FUNDS WITH PARTY. 14. COPY OF ACK. OF ITR AND COMPUTATION OF AY 12- 13. 15. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALONG WITH ANNEXURE OF 31.03.12. 16. COPY OF REGISTRATION CERTIFICATE ISSUED BY ROC 107 108 109 110-111 112-113 114-115 116-126 127 COPY OF ITR, BALANCE SHEET AND ASSESSMENT ORDER PAS SED U/S 143(3) OF INCOME TAX ACT, 1961 OF AY 2009-10 OF EVERSHINE SUPPLIERS PVT. LTD 128 TO 141 COPY OF ITR, BALANCE SHEET AND ASSESSMENT ORDER PAS SED U/S 143(3) OF INCOME TAX ACT, 1961 OF AY 2013-14 OF EVERSHINE SUPPLIERS PVT. LTD 142 TO 157 IV) ALL THE SHARE CAPITAL/SHARE APPLICATION WAS RE CEIVED THROUGH A/C PAYEE CHEQUES AND VERIFIABLE FROM BANK STATEMENT OF ASSES SEE AS WELL AS BANK STATEMENT OF THE PARTY. THE ONUS U/S 68 OF THE ASSE SSEE IS TO PROVE THE IDENTITY, CAPACITY AND GENUINENESS OF THE TRANSACTI ONS HAS BEEN DISCHARGED WHICH MAY BE SEEN FROM THE FOLLOWINGS:- I) IDENTITY:- THE ASSESSEE PROVED THE IDENTITY OF ALL THE COMPA NIES BY FILING THE SHARE APPLICATION RECEIVED FROM THE PARTIES AND THE PARTIES ARE DULY IN EXISTENCE AND THE EXISTENCE OF THE PART IES CAN BE VERIFIED FROM THE OFFICIAL WEBSITE OF MCA. THE LD. AO ALSO NOT DOUBTED THE IDENTITY OF THE ABOVE NAMED COMPANIES. FURTHER THE ASSESSMENT FOR AY 2009-10 (COPY AT PB PAGE 128-141 ) AND FOR AY 2013-14 OF THE SHAREHOLDER COMPANY WERE ALS O COMPLETED AT RETURNED INCOME. THE ASSESSMENT OF AY 2013-14 WAS COMPLETED BY THE SAME AO OF ALL THE ABOVE COMPA NIES WHO COMPLETED THE ASSESSMENT OF THE ASSESSEE IN THE SAME MONTH. THE COPY OF ASSESSMENT ORDER AND RELEVANT DO CUMENTS FOR AY 2013-14 IS AT PB PG 142-157. II) CREDITWORTHINESS ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 78 ALL THE COMPANIES ARE INCOME TAX ASSESSEE AND DU LY FILING THE INCOME TAX RETURN AND BALANCE SHEETS. THERE IS SUFF ICIENT SOURCE OF FUNDS WITH ALL THE COMPANIES TO INVESTMEN T SHARE CAPITAL/SHARE APPLICATION IN THE ASSESSEE COMPANY. THE ASSESSEE SUBMITTED THE COPIES OF BANK ACCOUNT/DECLARATION OF SOURCE OF FUNDS WITH THEM OF INVESTOR COMPANIES. THE BANK STA TEMENT SHOWS THE HUGE TRANSACTION OF HIGH VALUE IN THE ACC OUNTS OF THE COMPANIES. THE CHART SHOWING THE AMOUNT INVESTED BY THE ABOVE NAMED COMPANIES IN ASSESSEE COMPANY VIZ A VIZ OWN FUNDS WITH THE INVESTOR COMPANY ARE AS UNDER: - NAME OF THE INVESTOR COMPANY AMOUNT INVESTED IN ASSESSEE COMPANY SHARE CAPITAL AND RESERVE & SURPLUS WITH INVESTOR COMPANIES AS ON 31.03.2012 SHARE CAPITAL AND RESERVE & SURPLUS WITH INVESTOR COMPANIES AS ON 31.03.2011 SHARE CAPITAL AND RESERVE & SURPLUS WITH INVESTOR COMPANIES AS ON 31.03.2009 EVERSHINE SUPPLIERS PVT. LTD 90,00,000 10,41,99,989 10,42,52,807 10,42,50,971 FROM THE ABOVE CHART IT IS CLEAR THAT ALL THE INVE STOR COMPANIES WERE HAVING THEIR OWN SHARE CAPITAL AND RESERVE & S URPLUS WHICH WERE MUCH MORE THAN TO THE AMOUNT INVESTED IN THE ASSESSEE COMPANY. FROM THE AUDITED P & L ACCOUNT OF THESE COMPANIES IT IS APPARENT THAT THESE COMPANIES HAD T RADING ACTIVITIES OF LARGE AMOUNT. THE ABOVE CHART SHOWS T HAT THE INVESTOR COMPANIES WERE HAVING THEIR OWN INDEPENDEN T FUNDS AND HAVING THEIR INDEPENDENT SOURCE TO INVEST IN TH E SHARES OF THE ASSESSEE COMPANY. APART FROM THE INVESTMENT MAD E IN THE SHARES OF ASSESSEE COMPANIES, THE INVESTOR COMPANIE S WERE ALSO HAVING INVESTMENTS IN SHARES OF OTHER COMPANIES OR LOANS & ADVANCES TO PARTIES WHICH IS MUCH MORE THAN TO THE AMOUNT INVESTED IN THE ASSESSEE COMPANY, THEREFORE FROM TH E BANK STATEMENT AS WELL AS FINANCIALS STATEMENTS OF THE I NVESTOR COMPANIES THEIR CREDITWORTHINESS IS DULY PROVED. III) GENUINENESS THE ASSESSEE SUBMITTED THE SHARE APPLICATION FORM RECEIVED FROM ABOVE COMPANIES AGAINST THE SHARE APPLICATION RECEIVED FROM THE COMPANIES. THE SHARE APPLICATION IS SUPPOR TED BY BOARD RESOLUTION PASSED IN THE INVESTOR COMPANIES. THE ASSESSEE COMPANY HAS ALLOTTED THE SHARES TO THE INV ESTOR COMPANIES. THE PROPER RETURNS WERE FILED BEFORE THE ROC ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 79 AGAINST ALLOTMENT OF THE SHARES TO THESE COMPANIES. FURTHERMORE, THE DEPARTMENT HAS CARRIED OUT INTENSI VE SEARCH OPERATIONS OVER THE ASSESSEE AND NO ANY INCRIMINATI NG MATERIAL WAS FOUND TO SHOW THAT THE MONEY AGAINST THE SHARE ALLOTMENT WAS OWN MONEY OF THE COMPANY. SHARES CERTIFICATES W ERE ISSUED AGAINST THE ALLOTMENT OF THE SHARES TO THESE COMPANIES WERE NOT FOUND FROM THE POSSESSION OF THE ASSESSEE COMPANY OR ITS DIRECTOR OR EMPLOYEES. THIS FACT SHOWS THAT AFT ER ALLOTMENT OF SHARES BY THE APPELLANT COMPANY SHARE CERTIFICATES WERE DISPATCHED TO THE SUBSCRIBER COMPANIES. NO ANY ENTR Y IN BOOKS OF ACCOUNT OR DOCUMENT WAS FOUND SHOWING PAYMENT OF CASH TO THESE INVESTOR COMPANIES AGAINST RECEIPT OF CHEQUES FROM THESE COMPANIES AGAINST ALLOTMENT OF SHARES. THEREFORE TH E GENUINENESS OF THE TRANSACTIONS CANNOT BE DOUBTED. V) ONUS TO PROVE SOURCE OF SOURCE FROM THE SHOW CAUSE NOTICE GIVEN BY LD CIT(A) AND EXCEL SHEET PROVIDED TO THE ASSESSEE SHOWING CHAIN OF SOURCE IT IS APPARENT THAT EVEN THERE IS NO CASH DEPOSIT TILL 3 RD STAGE OF CHANNEL SOURCE (COPY AT PB PG 354 TO 383) . IF THERE IS ANY CASH DEPOSITED AT 4 TH CHANNEL OR BEYOND TO THAT STAGE THEN THE INQUIRY SHOULD HAVE BEEN MADE FROM THE CONCERNS IN WHOSE BANK A/C SUCH FUNDS FLOATED AND N ECESSARY ACTION SHOULD HAVE BEEN TAKEN IN THE CASES OF SUCH CONCERN BUT THE ASSESSEE CANNOT BE HOLD RESPONSIBLE FOR CASH DEPOSIT IN SOME ACCOUNT AT 4 TH CHANNEL. UNDER SECTION 68 OF INCOME TAX ACT, 1961 THE ONUS O F THE ASSESSEE IS TO PROVE THE SOURCE OF CREDIT ENTRY AND THERE IS NO ONUS OF ASSESSEE TO PROVE THE SOURCE OF SOURCE OR SOURCE OF ALL CHANNEL SOURCES. THE AMENDMENT IN SECTION 68 OF I. TAX WAS MADE BY INSERTING THE FOLLOWING PROVISO TO SECTION 68 W.E.F . 01/04/2013 WHICH REQUIRE TO PROVE SOURCE OF FINDS IN THE HANDS OF SH AREHOLDER COMPANY. THOUGH NOT REQUIRED BY LAW BUT STILL THE ASSESSEE H AS PROVED SOURCE OF FINDS IN THE HANDS OF SHAREHOLDER COMPANY . THE AMENDED SECTION EVEN DOES NOT REQUIRE TO PROVE SOURCE OF FU NDS IN THE HANDS OF 3 RD OR 4 TH STAGE. FURTHER THE AMENDMENT IN SECTION 68 OF I.TAX WAS MADE BY INSERTING THE FOLLOWING PROVISO TO SECTION 68 W.E.F. 01/04/2013 ' PROVIDED THAT WHERE THE ASSESSEE IS A COMPANY, (NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED) A ND THE SUM SO CREDITED CONSISTS OF SHARE APPLICATION MONEY, SHARE CAPITAL, SHARE PREMIUM OR ANY SUCH AMOUNT BY WHATEVER NAME CALLED, ANY ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 80 EXPLANATION OFFERED BY SUCH ASSESSEE-COMPANY SHALL BE DEEMED TO BE NOT SATISFACTORY, UNLESS (A) THE PERSON, BEING A RESIDENT IN WHOSE NAME SUC H CREDIT IS RECORDED IN THE BOOKS OF SUCH COMPANY ALSO OFFERS A N EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH SUM SO CREDITED; AND (B) SUCH EXPLANATION IN THE OPINION OF THE ASSESSI NG OFFICER AFORESAID HAS BEEN FOUND TO BE SATISFACTORY: THE ABOVE PROVISO WAS INSERTED WITH EFFECT FROM THE 1ST DAY OF APRIL, 2013 SO IT CANNOT BE APPLIED RETROSPECTIVELY. THEREFORE AS PER LAW THE ASSESSEE HAS NO ONUS TO PROVE SOURCE OF SOURCE. HO NBLE MUMBAI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX 1 VS M/S. GAGANDEEP INFRASTRUCTURE PVT.LTD HELD AS UNDER:- (E) WE FIND THAT THE PROVISO TO SECTION 68 OF THE ACT HAS BEEN INTRODUCED BY THE FINANCE ACT 2012 WITH EFFECT FROM 1ST APRIL, 2013. THUS IT WOULD BE EFFECTIVE ONLY FROM THE ASSESSMENT YEAR 201314 ONWARDS AND NOT FOR THE SUBJECT ASSESSMENT YEAR. IN FACT, BEFORE THE TRIBUNAL, IT WAS NOT EVEN THE CASE OF THE REVENUE T HAT SECTION 68 OF THE ACT AS IN FORCE DURING THE SUBJECT YEARS HAS TO BE READ/UNDERSTOOD AS THOUGH THE PROVISO ADDED SUBSEQUENTLY EFFECTIVE ONLY FROM 1ST APRIL, 2013 WAS ITS NORMAL MEANING. THE PARLIAMENT DID NOT INTRODUCE TO PROVISO TO SECTION 68 OF THE ACT WITH RETROSPECTIVE EFFECT NOR DOES THE PROVISO SO INTRODUCED STATES THAT IT W AS INTRODUCED FOR REMOVAL OF DOUBTS OR THAT IT IS DECLARATORY. THE REFORE IT IS NOT OPEN TO GIVE IT RETROSPECTIVE EFFECT, BY PROCEEDING ON THE BASIS THAT THE ADDITION OF THE PROVISO TO SECTION 68 OF THE AC T IS IMMATERIAL AND DOES NOT CHANGE THE INTERPRETATION OF SECTION 68 OF THE ACT BOTH BEFORE AND AFTER THE ADDING OF THE PROVISO. IN ANY VIEW OF THE MATTER THE THREE ESSENTIAL TESTS WHILE CONFIRMING THE PRE PROVISO SECTION 68 OF THE ACT LAID DOWN BY THE COURTS NAMELY THE GENUI NENESS OF THE TRANSACTION, IDENTITY AND THE CAPACITY OF THE INVES TOR HAVE ALL BEEN EXAMINED BY THE IMPUGNED ORDER OF THE TRIBUNAL AND ON FACTS IT WAS FOUND SATISFIED. FURTHER IT WAS A SUBMISSION ON BEH ALF OF THE REVENUE THAT SUCH LARGE AMOUNT OF SHARE PREMIUM GIVES RISE TO SUSPICION ON THE GENUINENESS (IDENTITY) OF THE SHAREHOLDERS I.E. THEY ARE BOGUS. THE APEX COURT IN LOVELY EXPORTS (P) LTD. (SUPRA) IN TH E CONTEXT TO THE PRE AMENDED SECTION 68 OF THE ACT HAS HELD THAT WHE RE THE REVENUE URGES THAT THE AMOUNT OF SHARE APPLICATION MONEY HA S BEEN RECEIVED FROM BOGUS SHAREHOLDERS THEN IT IS FOR THE INCOME T AX OFFICER TO PROCEED BY REOPENING THE ASSESSMENT OF SUCH SHAREHO LDERS AND ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 81 ASSESSING THEM TO TAX IN ACCORDANCE WITH LAW. IT DO ES NOT ENTITLE THE REVENUE TO ADD THE SAME TO THE ASSESSEE'S INCOME AS UNEXPLAINED CASH CREDIT. (F) IN THE ABOVE CIRCUMSTANCES AND PARTICULARLY IN VIEW OF THE CONCURRENT FINDING OF FACT ARRIVED AT BY THE CIT(A ) AND THE TRIBUNAL, THE PROPOSED QUESTION OF LAW DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. THUS NOT ENTERTAINED. BUT IN THE CASE OF THE ASSESSEE THE FACT REMAINS TH AT THE ASSESSEE HAS ALSO PROVED SOURCE OF SOURCE BY SUBMITTING THE COPY OF BANK STATEMENT OF THE SHARE APPLICANT COMPANY WHEREIN NO CASH DEPOSIT WAS MADE AGAINST THE SHARE APPLICATION MONEY. VI) REGARDING APPLICATION OF 68 OF ITAX ACT, 1961 BY CIT(A) I) SECTION 68 WAS NOT APPLIED BY AO, THEREFORE, THE CIT(A) CANNOT APPLY IT. II) IT IS RELEVANT TO MENTION HERE THAT AS PER SEC TION 251 (1)(A) OF INCOME TAX ACT, 1961 THE CIT (A) SHALL HAVE THE POW ER IN AN APPEAL AGAINST AN ORDER OF ASSESSMENT HE MAY CONFIR M, REDUCE, ENHANCE OR ANNUAL THE ASSESSMENT. AS REGARD APPLICABILITY OF SECTION 68 OF I.TAX ACT BY CIT(A) WE SUBMIT THAT TH E ASSESSEE HAS MADE DETAILED SUBMISSION BEFORE THE LD AO AND S ATISFIED THE LD AO THAT IT HAS DISCHARGED ITS ONUS LAID DOWN UNDER SECTION 68 OF INCOME TAX ACT. THE LD AO BEING SATIS FIED WITH THE SUBMISSION OF ASSESSEE ON SECTION 68, HAS NOT A PPLIED SECTION 68 OF INCOME TAX ACT FOR THE ADDITION. THE PROVISIONS OF SECTION 68 SPECIFY THE AUTHORITY MENTIONED AS ASSESSING OFFICER . FOR THE SAKE OF CLARITY WE ARE REPRODUCING THE PRO VISIONS OF SECTION 68 OF I.TAX ACT AS STOOD FOR AY 2012-13 AS UNDER:- WHERE ANY SUM IS FOUND CREDITED IN THE BOOK OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION O F THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITE D MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. THEREFORE, ADDITION UNDER SECTION 68 OF ITAX ACT CA N BE MADE ONLY HE THE EXPLANATION OF THE ASSESSEE IS NOT SATISFACTORY IN THE OPINION OF ASSESSING OFFICER. ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 82 THE ASSESSING OFFICER HAS BEEN DEFINED U/S 2(7A) O F INCOME TAX ACT AS UNDER:- (7A) ASSESSING OFFICER' MEANS THE ASSISTANT COMMISSIONER 31 [OR DEPUTY COMMISSIONER] 32 [OR ASSISTANT DIRECTOR] 31 [OR DEPUTY DIRECTOR] OR THE INCOME-TAX OFFICER WHO IS VESTED WITH THE RELEVANT JURISDICTION BY VIRTUE OF DIRECTIONS OR ORDERS ISSU ED UNDER SUB-SECTION (1) OR SUB-SECTION (2) OF SECTION 120 OR ANY OTHER PROVISION OF THIS ACT, AND THE 33 [ADDITIONAL COMMISSIONER OR] 34 [ADDITIONAL DIRECTOR OR] 35 [JOINT COMMISSIONER OR JOINT DIRECTOR] WHO IS DIRECTED UND ER CLAUSE (B) OF SUB-SECTION (4) OF THAT SECTION TO EX ERCISE OR PERFORM ALL OR ANY OF THE POWERS AND FUNCTIONS CONFERRED ON, OR ASSIGNED TO, AN ASSESSING OFFICER UNDER THIS ACT ;] THEREFORE, CIT(A) IS NOT ASSESSING OFFICER SO HE C ANNOT INVOKE THE PROVISIONS OF SECTION 68 FOR MAKING THE ADDITIO N PARTICULARLY WHEN THE ASSESSING OFFICER HAS SATISFIED ABOUT THE INGREDIENTS OF SECTION 68 OF INCOME TAX ACT. IN THE CASE OF THE ASSESSEE THE LD. AO HAS NOT FRAMED AN OPINION THAT THE EXPLANATI ON GIVEN BY THE ASSESSEE WAS NOT SATISFACTORY BUT HE FRAMED AN OPINION AFTER EXAMINING THE FACTS, DOCUMENTS AND EXPLANATION THAT THE ADDITIONS OF SHARE CAPITAL CANNOT BE MADE U/S 68 BU T IT SHOULD HAVE BEEN MADE U/S 56(1) OF INCOME TAX ACT, 1961 TH EN THE JURISDICTION OF CIT (A) IN LIMITED TO DECIDING THE MATTER WHETHER THE ADDITION UNDER THIS SECTION IS CORRECT OR NOT. IN THE APPELLATE PROCEEDING THE ADDITION CANNOT BE CONFIRM ED BY APPLYING ALL TOGETHER DIFFERENT SECTION BY INVOKING A SECTION FOR WHICH SATISFACTION IS REQUIRED TO BE BY ASSESSING OFFICER AND THE ASSESSING OFFICER AFTER CONSIDERING THE DETAILE D REPLY AND DOCUMENTS WAS SATISFIED ABOUT THE INGREDIENTS OF SE CTION 68. VII) AS REGARD TO THE STATEMENT OF SHRI SANTOSH CHOUBE, SHRI AJIT SHARMA AND SHRI RAJESH KUMAR SINGH, AS MENTIONED IN SHOW CAUSE NOTICE OF LD CIT(A) PB PG 403-408, THE ASSESSEE HAS SUBMITTED BEFORE LD CIT(A) THAT:- I) AS REGARD TO THE STATEMENT OF SHRI SANTOSH CHOUBEY FIRST OF ALL THIS IS TO SUBMIT THE ASSESSEE GROUP OR ITS SHAREHO LDER (INVESTOR) COMPANIES HAVE NO CONCERN WITH THIS PERSON OR CONCE RNS MANAGED BY SHRI SANTOSH CHOUBEY. THE ASSESSEE GROUP DO NOT ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 83 KNOW TO ANY PERSON NAMING SHRI SANTOSH CHOUBEY. REG ARDING THE STATEMENT OF SHRI SANTOSH CHOUBEY AND ITS RELIA NCE FOR TAKING THE ADVERSE ACTION AGAINST THE ASSESSEE WE S UBMIT AS UNDER: - A) THIS PERSON ADMITTED TO MAINTAIN THE BANK A/C OF SHRI AJIT SHARMA AND RAJESH KUMAR SINGH AND USED FOR ITS OWN PURPOSE THEREFORE ONUS TO PROVE THE SOURCE OF AMOUNT DEPOSITED IN THEIR BANK ACCOUNTS PRIMARILY L AY ON THIS PERSON PB 407 . B) AT Q. NO. 12 OF STATEMENT OF THIS PERSON HE SAID THAT THE MOTISONS JEWELLERS GROUP OF JAIPUR WAS THE BENEFICIARY OF ACCOMMODATION ENTRIES ARRANGED BY ME THROUGH THE BANK ACCOUNTS OF THE ABOVE PROP. CONCER NS. THE CASH WAS RECEIVED BY ME FROM MOTISONS JEWELLERS GROUP FROM TIME TO TIME AND WAS DEPOSITED INTO A NUMBER OF BANK ACCOUNTS INCLUDING THE TWO BANK ACCOUNTS OF M/S SHYAM FASHION (PROP. AJIT SHARMA) AND M/S DURGA ENTERPRISES (PROP. RAJESH KR SINGH) I N IDBI, GIRISH PARK BRANCH, KOLKATA. IN THIS REGARD IT IS QUITE INTERESTING TO NOTE THA T A PERSON STATING THAT MOTISONS JEWELLERS GROUP WAS THE BENEFICIARY OF THE ACCOMMODATION ENTRIES ARRANGED B Y HIM AND HE IS ALSO ADMITTING THAT CASH WAS RECEIVED BY HIM FROM MOTISONS JEWELLERS GROUP TO DEPOSIT THE SAME IS BANK ACCOUNTS MAINTAINING BY HIM BUT NO FURTHER QUESTIONS WERE MADE FROM HIM TO CONTROVERT THAT WHATEVER HE IS STATING IS TRUE OR NOT. THE IMPORTAN T THING IS THAT MOTISONS JEWELLERS GROUP IS NOT A HUMAN BEI NG THEREFORE IT WAS NECESSARY AND FOR THE INTEREST OF EQUITIES, FAIRNESS, AND JUSTICE TO ASK QUESTIONS TH AT : - WHAT IS THE IDENTITY OF THE M/S MOTISONS JEWELLERS. IN JAIPUR WHERE THE MOTISONS GROUP EXISTS? WHO ARE THE OWNERS OF THIS GROUP? WHO WAS THE PERSON WHO WAS CONTACTING TO HIM REGARDING CASH DEALING? HOW THE CASH REACHED TO HIM? ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 84 FROM WHOM HE WAS COMMUNICATING AND HOW HE WAS COMMUNICATING? WHAT ARE HIS TELEPHONE NUMBER. WHETHER HE EVER VISITED THE OFFICE OF MOTISONS GROUP, OR EVER MEET TO OWNERS OR THEIR EMPLOYEES OF MOTISONS GROUP? WHO WERE THE BROKERS OF KOLKATTA THROUGH WHOM HE KNOW THE MOTISONS GROUP? AS THIS PERSON HAD ADMITTED THAT HE RECEIVED THE C ASH FROM MOTISONS JEWELLERS GROUP THEN HE SHOULD KNOW THE ANSWERS OF ALL THE ABOVE QUESTIONS. THE FACT IS THAT HE HAS MADE WRONG STATEMENTS AND THESE WORDS WERE P UT IN HIS MOUTH BY THE PERSON WHO RECORDED HIS STATEME NT. FURTHER EVEN IF HIS STATEMENTS ARE CONSIDERED AS TR UE THEN ALSO ADDITIONS CANNOT BE MADE IN THE HANDS OF ASSESSEE COMPANY AND IN SUCH SITUATION (WITHOUT CONSENTING ) AT THE WORST, THE ADDITION COULD BE MADE IN THE HANDS OF MOTISONS JEWELLERS GROUP. FURTHER IN HIS STATEMENT THIS PERSON ALSO ADMITTED THAT MONEY WAS FINALLY TRANSFERRED TO THE A/C OF MOTISONS JEWELLER S GROUP BUT NO QUESTION WERE ASKED FROM THIS PERSON T HAT WHAT IS THE DETAIL OF SUCH ACCOUNTS IN WHICH THE MO NEY WERE TRANSFERRED. IT IS MOST IMPORTANTLY RELEVANT T O NOTICE THAT M/S MOTISONS JEWELLERS DID NOT RECEIVE ANY SHARE APPLICATION FROM THE SIX COMPANIES THAN HOW T HIS PERSON CHOOSE TO TAKE THE NAME OF MOTISONS JEWELLER S AND HOW HE KNOW THE NAME OF MOTISONS JEWELLERS AND HOW HE COME TO KNOW THAT THE ASSESSEE GROUP IS ENGAGED IN THE JEWELLERY BUSINESS TOO. THIS SHOWS T HAT THE NAME OF MOTISONS JEWELLERS GROUP WAS PUT INTO THE MOUTH OF THIS PERSON BY THE SEARCH PARTY WITH A MOTIVE TO MAKE THEIR CASE STRONG. THE AO AND INVESTIGATION TEAM NEITHER FOLLOWED THE PRINCIPLE OF LAW NOR PRINCIPLE OF EVIDENCE RATHER APPEARED TO BE BENT UPON MAKING HUGE ADDITIONS WITHOUT ANY BASIS. THE AO HAS NOT MADE INDEPENDENT INQUIRY ON THIS ISSUE. A) IT IS SETTLED LAW THAT THE AO IS QUASI-JUDICIAL AUTHORITY AND SHOULD BE GOVERNED IN HIS FUNCTION BY JUDICIAL CONSIDERATION AND MUST CONFORM TO THE RULES OF NATU RAL ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 85 JUSTICE AND MUST PROCEED WITHOUT BIAS- TIN BOX CO. VS CIT 249 ITR 216 (SC). B) IT IS ALSO SETTLED LAW THAT THE AO MUST ACT HONE STLY ON THE MATERIAL BEFORE HIM AND NOT VINDICTIVELY, CAPRICIOUSLY, OR ARBITRARILY- GURUMUKH SINGH VS CIT 12 ITR 393, 427 (FB), DAKESHWARI COTTON MILLS LTD VS CIT 26 ITR 775, C) IT IS ALSO SETTLED LAW THAT THE AO IS NOT ENTITL ED TO MAKE A PURE GUESS WITHOUT ANY EVIDENCE OR MATERIAL AT AL L - DAKESHWARI COTTON MILLS LTD VS CIT 26 ITR 775, BUT IN THE CASE OF ASSESSEE, THE LD AO AND THE INV ESTIGATING TEAM HAS BRUSHED ASIDE ALL THE PRINCIPLES OF LAW A ND UTILIZING A STATEMENT WHICH IS TOTALLY IRRELEVANT, UNACCEPTABLE TO FRAME A HIGH-PITCHED ASSESSMENT PURELY ON SURMISES, CONJECT URES AND SUSPICION. C) IN VIEW OF ABOVE MENTIONED THE STATEMENTS OF THI S PERSON HAVE NO LEGAL SANCTITY AND CANNOT BE RELIED UPON. FROM T HE READING STATEMENT OF THIS PERSON ITS APPEARS THAT THE INVES TIGATING PARTY RECORDED THE STATEMENT BY PUTTING WORDS IN HIS MOUT H WITH SOLE MOTIVE TO USE THE SAME AGAINST THE ASSESSEE GROUP T O MAKE A STRONG CASE AGAINST THE ASSESSEE. THEREFORE WE SUB MIT THAT THE STATEMENT OF THIS PERSON IS COMPLETELY FALSE, INCOR RECT AND NOT ACCEPTABLE AND THEREFORE CANNOT BE RELIED UPON UNLE SS THE OPPORTUNITY OF CROSS EXAMINATION IS NOT GIVEN TO TH E ASSESSEE. D) IN THE LIGHT OF ABOVE MENTIONED SERIOUS DEFECTS IN THE STATEMENT OF THIS PERSON THE CROSS EXAMINATION OF THIS PERSON IS WARRANTED TO DECIDED THE MATTER IN FAIR AND JUST MA NNER . IT IS FURTHER RELEVANT TO MENTION HERE THAT IT IS SETT LE LEGAL POSITION THAT BEFORE USING SOME MATERIAL AND STATEMENTS AGAI NST THE ASSESSEE THE OPPORTUNITY OF CROSS EXAMINATION AND C ONFRONTATION SHOULD HAVE BEEN PROVIDED TO THE ASSESSEE. THEREFOR E THE CIRCUMSTANCES STRONGLY WARRANTED IN THIS CASE FOR C ROSS EXAMINATION OF STATEMENT OF THIS PERSON. IN THIS RE GARD WE WOULD LIKE TO REFER THE RECENT JUDGMENT OF JAIPUR B ENCH OF ITAT PASSED IN THE CASE OF SHRI PRATEEK KOTHARI IN APPEAL NO. 159/JP/16 WHEREIN IT WAS HELD AS UNDER: - 2.8 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE MATERIAL AVAILABLE ON RECORD. THE TRANSACTION UNDER QUESTION RELATES TO UNSECURED LOANS TAKEN BY THE ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 86 ASSESSEE AMOUNTING TO RS 1 CRORES FROM M/S MEHUL GEMS PVT LTD DURING THE IMPUNGED ASSESSMENT YEAR AN D NOT ACCEPTING THE SAID LOAN TRANSACTION AS A GENUIN E TRANSACTION BY THE ASSESSING OFFICER AND THE RESULT ANT ADDITION MADE UNDER SECTION 68 OF THE ACT. UNDISPUTEDLY, THE PRIMARY ONUS TO ESTABLISH GENUINE NESS OF THE LOAN TRANSACTION IS ON THE ASSESSEE. IN THE INSTANT CASE, THE ASSESSEE HAS PROVIDED THE NECESSARY EXPLANATION, FURNISHED DOCUMENTARY EVIDENCE IN TERM S OF TAX FILINGS, AFFIDAVITS AND CONFIRMATION OF THE DIRECTORS, BANK STATEMENTS OF THE LENDER, BALANCE S HEET OF THE LENDER COMPANY, AND AN INDEPENDENT CONFIRMATION HAS ALSO BEEN OBTAINED BY THE ASSESSIN G OFFICER TO SATISFY THE CARDINAL TEST OF IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE LOAN TRANSACTION. HOWEVER, THE ASSESSING OFFICER HAS NOT GIVEN ANY FINDING IN RESPECT OF SUCH EXPLANATION, DOCUMENTARY EVIDENCE AS WELL AS INDEPENDENT CONFIRMATION. APPARENTLY, THE REASON FOR NOT ACCEPT ING THE SAME IS THAT THE ASSESSING OFFICER WAS IN RECEI PT OF CERTAIN INFORMATION FROM THE INVESTIGATION WING OF THE TAX DEPARTMENT AS PER WHICH THE TRANSACTION UNDER CONSIDERATION IS A BOGUS LOAN TRANSACTION. THE SAID INFORMATION RECEIVED FROM THE INVESTIGATION WING TH US OVERWEIGHED THE MIND OF THE ASSESSING OFFICER. THE ASSESSING OFFICER STATED THAT THE PRIMARY ONUS IS O N THE ASSESSEE TO ESTABLISH THE GENUINENESS OF THE TRANSA CTION CLAIMED BY IT AND IF THE INVESTIGATION DONE BY THE DEPARTMENT LEADS TO DOUBT REGARDING THE GENUINENESS OF THE TRANSACTIONS, IT IS INCUMBENT ON THE ASSESSEE T O PRODUCE THE PARTIES ALONGWITH NECESSARY DOCUMENTS T O ESTABLISH THE GENUINENESS OF THE TRANSACTION. IN RESPONSE, THE ASSESSEE SUBMITTED THAT SHRI BHANWARL AL JAIN IS NOT KNOWN TO HIM AND REGARDING VARIOUS INCRIMINATING DOCUMENTARY EVIDENCES SEIZED DURING T HE COURSE OF SEARCH AND STATEMENTS RECORDED OF SHRI BHANWARLAL JAIN AND OTHER PERSONS, HE SPECIFICALLY REQUESTED THE AO TO PROVIDE COPIES OF SUCH INCRIMINATING DOCUMENTS AND STATEMENT OF ALL VARIOU S PERSONS RECORDED IN THIS REGARD AND PROVIDE AN OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE SUCH PERSONS. HOWEVER, THE AO DIDNT PROVIDE TO THE ASSE SSEE COPIES OF SUCH INCRIMINATING DOCUMENTS AND STATEMEN TS ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 87 OF VARIOUS PERSONS RECORDED AND ALLOW THE CROSS- EXAMINATION OF ANY OF THESE PERSONS. WHILE DOING SO , THE AO STATED THAT IN HIS STATEMENTS, BHANWARLAL JAIN HAD DESCRIBED THAT THEY ARE INDULGED IN PROVIDING ACCOMMODATION ENTRIES OF BOGUS UNSECURED LOANS AND ADVANCES THROUGH VARIOUS BENAMI CONCERNS (70) OPERATED AND MANAGED BY THEM. THIS ADMISSION AUTOMATICALLY MAKES ALL THE TRANSACTIONS DONE BY TH EM AS MERE PAPER TRANSACTIONS AND IN THESE CIRCUMSTANC ES, FURTHER AS PER THE INFORMATION NAME AND ADDRESS OF ASSESSEE AND THE BENAMI CONCERN THROUGH WHICH ACCOMMODATION ENTRY OF UNSECURED LOANS WAS PROVIDED IS APPEARING IN THE LIST OF BENEFICIARIES TO WHOM T HE SAID GROUP HAS PROVIDED. THIS ADMISSION IS SUFFICIENT TO REJECT THE CONTENTIONS OF THE ASSEESSE. FURTHER, REGARDING CROSS EXAMINATION, THE AO STATED THAT TH E RIGHT OF CROSS EXAMINATION IS NOT AN ABSOLUTE RIGHT AND IT DEPENDS UPON THE CIRCUMSTANCES OF EACH CASE AND ALS O ON THE STATUTE CONCERNED. IN THE PRESENT CASE, NO S UCH CIRCUMSTANCES ARE WARRANTED AS IN THE LIST OF BENEFICIARIES TO WHOM ACCOMMODATION ENTRIES WERE PROVIDED BY THE SAID GROUP CATEGORICALLY CONTAINS T HE NAME AND ADDRESS OF THE ASSESSEE. FURTHER THE GROUP HAS CATEGORICALLY ADMITTED TO PROVIDING OF ACCOMMODATION ENTRIES OF UNSECURED LOANS THROUGH VARIOUS BENAMI CONCERNS. THE AO FURTHER RELIED UPO N THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F C. VASANTLAL & CO. VS. CIT 45 ITR 206(SC) AND HONBLE RAJASTHAN HIGH COURT IN CASE OF RAMESHWARLAL MALI V S. CIT 256 ITR 536(RAJ.) AMONG OTHERS. IN THIS REGARD, IT WAS SUBMITTED BY THE ASSESSEE THAT IF THE ENTRIES A ND MATERIAL ARE GATHERED BEHIND THE BACK OF THE ASSESS EE AND IF THE AO PROPOSES TO ACT ON SUCH MATERIAL AS H E MIGHT HAVE GATHERED AS A RESULT OF HIS PRIVATE ENQU IRIES, HE MUST DISCLOSE ALL SUCH MATERIAL TO THE ASSESSEE AND ALSO ALLOW THE CROSS EXAMINATION AND IF THIS IS NOT DONE, THE PRINCIPLES OF NATURAL JUSTICE STAND VIOLATED. 2.9 IN LIGHT OF ABOVE DISCUSSIONS, IN OUR VIEW, TH E CRUX OF THE ISSUE AT HAND IS THAT WHETHER THE PRINCIPLE OF NATU RAL JUSTICE STAND VIOLATED IN THE INSTANT CASE. IN OTHE R WORDS, WHERE THE AO DOESNT WANT TO ACCEPT THE EXPLANATION OF THE ASSESSEE AND THE DOCUMENTATION FURNISHED REGARD ING ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 88 THE GENUINENESS OF THE LOAN TRANSACTION AND INSTEAD WANTS TO RELY UPON THE INFORMATION INDEPENDENTLY RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTM ENT IN RESPECT OF INVESTIGATION CARRIED OUT AT A THIRD PARTY, CAN THE SAID INFORMATION BE USED AGAINST THE ASSESS EE WITHOUT SHARING SUCH INFORMATION WITH THE ASSESSEE AND ALLOWING AN OPPORTUNITY TO THE ASSESSEE TO EXAMINE SUCH INFORMATION AND EXPLAIN ITS POSITION ESPECIALLY WHE N THE ASSESSEE HAS REQUESTED THE SAME TO THE ASSESSING OFFICER. 2.10 IN THIS REGARD, THE HONBLE SUPREME COURT IN THE CASE OF DHAKESWARI COTTON MILLS LTD. V. CIT (1954) 26 ITR 7 75 (SC) HAS HELD THAT THE RULE OF LAW ON THIS SUBJECT HAS BEEN FAIRLY AND RIGHTLY STATED BY THE LAHORE HIGH C OURT IN THE CASE OF SETH GURMUKH SINQH WHERE IT WAS STAT ED THAT WHILE PROCEEDING UNDER SUB-SECTION (3) OF SECT ION 23, THE INCOME-TAX OFFICER, THOUGH NOT BOUND TO REL Y ON EVIDENCE PRODUCED BY THE ASSESSEE AS HE CONSIDERS T O BE FALSE, YET IF HE PROPOSES TO MAKE AN ESTIMATE IN DISREGARD OF THAT EVIDENCE, HE SHOULD IN FAIRNESS DISCLOSE TO THE ASSESSEE THE MATERIAL ON WHICH HE I S GOING TO FIND THAT ESTIMATE; AND THAT IN CASE HE PR OPOSES TO USE AGAINST THE ASSESSEE THE RESULT OF ANY PRIVA TE INQUIRIES MADE BY HIM, HE MUST COMMUNICATE TO THE ASSESSEE THE SUBSTANCE OF THE INFORMATION SO PROPOS ED TO BE UTILIZED TO SUCH AN EXTENT AS TO PUT THE ASSE SSEE IN POSSESSION OF FULL PARTICULARS OF THE CASE HE IS EX PECTED TO MEET AND THAT HE SHOULD FURTHER GIVE HIM AMPLE OPPORTUNITY TO MEET IT. IT WAS HELD IN THAT CASE T HAT IN THIS CASE WE ARE OF THE OPINION THAT THE TRIBUNAL VIOLATED CERTAIN FUNDAMENTAL RULES OF JUSTICE IN RE ACHING ITS CONCLUSIONS. FIRSTLY, IT DID NOT DISCLOSE TO TH E ASSESSEE WHAT INFORMATION HAD BEEN SUPPLIED TO IT B Y THE DEPARTMENTAL REPRESENTATIVE. NEXT, IT DID NOT GIVE ANY OPPORTUNITY TO THE COMPANY TO REBUT THE MATERIAL FURNISHED TO IT BY HIM, AND LASTLY, IT DECLINED TO TAKE ALL THE MATERIAL THAT THE ASSESSEE WANTED TO PRODUCE IN SUPPORT OF ITS CASE. THE RESULT IS THAT THE ASSESSE E HAD NOT HAD A FAIR HEARING. THE HONBLE SUPREME COURT IN CASE OF C. VASANTLAL & CO. VS. CIT 45 ITR 206 (SC) HAS HELD THAT THE ITO IS ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 89 NOT BOUND BY ANY TECHNICAL RULES OF THE LAW OF EVID ENCE. IT IS OPEN TO HIM TO COLLECT MATERIAL TO FACILITATE ASSESSMENT EVEN BY PRIVATE ENQUIRY. BUT, IF HE DESI RES TO USE THE MATERIAL SO COLLECTED, THE ASSESSEE MUST BE INFORMED ABOUT THE MATERIAL AND GIVEN ADEQUATE OPPORTUNITY TO EXPLAIN IT. THE STATEMENTS MADE BY PRAVEEN JAIN AND GROUP WERE MATERIAL ON WHICH THE I T AUTHORITIES COULD ACT PROVIDED THE MATERIAL WAS DISCLOSED AND THE ASSESSEE HAD AN OPPORTUNITY TO RE NDER THEIR EXPLANATION IN THAT REGARD. THE HONBLE SUPREME COURT IN CASE OF KISHINCHAND CHELLARAM V. CIT (1980) 125 ITR 713 (SC) HAS HELD THAT WHETHER THERE WAS ANY MATERIAL EVIDENCE TO JU STIFY THE FINDINGS OF THE TRIBUNAL THAT THE AMOUNT OF RS. 1,07,350 SAID TO HAVE BEEN REMITTED BY TILOKCHAND F ROM MADRAS REPRESENTED THE UNDISCLOSED INCOME OF THE ASSESSEE. THE ONLY EVIDENCE ON WHICH THE TRIBUNAL COULD RELY FOR THE PURPOSE OF ARRIVING AT THIS FIND ING WAS THE LETTER, DATED 18-2-1955 SAID TO HAVE BEEN ADDRE SSED BY THE MANAGER OF THE BANK TO THE ITO. NOW IT IS DIFFICULT TO SEE HOW THIS LETTER COULD AT ALL BE RE LIED UPON BY THE TRIBUNAL AS A MATERIAL PIECE OF EVIDENCE SUPPORTIVE OF ITS FINDING. IN THE FIRST PLACE, THIS LETTER WAS NOT DISCLOSED TO THE ASSESSEE BY THE ITO AND EV EN THOUGH THE AAC REPRODUCED AN EXTRACT FROM IT IN HIS ORDER, HE DID NOT CARE TO PRODUCE IT BEFORE THE ASS ESSEE OR GIVE A COPY OF IT TO THE ASSESSEE. THE SAME POSI TION OBTAINED ALSO BEFORE THE TRIBUNAL AND THE HIGH COUR T AND IT WAS ONLY WHEN A SUPPLEMENTAL STATEMENT OF TH E CASE WAS CALLED FOR BY THIS COURT BY ITS ORDER, DAT ED 16- 8-1979 THAT, ACCORDING TO THE ITO, THIS LETTER WAS TRACED BY HIM AND EVEN THEN IT WAS NOT SHOWN BY HIM TO THE ASSESSEE BUT IT WAS FORWARDED TO THE TRIBUNAL AND I T WAS FOR THE FIRST TIME AT THE HEARING BEFORE THE TRIBUN AL IN REGARD TO THE PREPARATION OF THE SUPPLEMENTAL STATE MENT OF THE CASE THAT THIS LETTER WAS SHOWN TO THE ASSES SEE. IT WILL, THEREFORE, BE SEEN THAT, EVEN IF WE ASSUME TH AT THIS LETTER WAS IN FACT ADDRESSED BY THE MANAGER OF THE BANK TO THE ITO, NO RELIANCE COULD BE PLACED UPON IT, SI NCE IT WAS NOT SHOWN TO THE ASSESSEE UNTIL AT THE STAGE OF PREPARATION OF THE SUPPLEMENTAL STATEMENT OF THE CA SE AND NO OPPORTUNITY TO CROSS EXAMINE THE MANAGER OF THE ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 90 BANK COULD IN THE CIRCUMSTANCES BE SOUGHT OR AVAILE D OF BY THE ASSESSEE. IT IS TRUE THAT THE PROCEEDINGS UN DER THE INCOME-TAX LAW ARE NOT GOVERNED BY THE STRICT RULES OF EVIDENCE AND, THEREFORE, IT MIGHT BE SAID THAT EVEN WITHOUT CALLING THE MANAGER OF THE BANK IN EVIDENCE TO PROVE THIS LETTER, IT COULD BE TAKEN INTO ACCOUNT A S EVIDENCE. BUT BEFORE THE INCOME-TAX AUTHORITIES COU LD RELY UPON IT, THEY WERE BOUND TO PRODUCE IT BEFORE THE ASSESSEE SO THAT THE ASSESSEE COULD CONTROVERT THE STATEMENTS CONTAINED IN IT BY ASKING FOR AN OPPORTU NITY TO CROSS EXAMINE THE MANAGER OF THE BANK WITH REFERENCE TO THE STATEMENTS MADE BY HIM. 2.10 IN LIGHT OF ABOVE PROPOSITION IN LAW AND ESPE CIALLY TAKING INTO CONSIDERATION THE DECISION OF THE HONB LE SUPREME COURT IN CASE OF C. VASANTLAL & CO. (SUPRA) RELIED UPON BY THE REVENUE AND WHICH ACTUALLY SUPPO RTS THE CASE OF THE ASSESSEE, IN THE INSTANT CASE, THE ASSESSMENT WAS COMPLETED BY THE AO RELYING SOLELY O N THE INFORMATION RECEIVED FROM THE INVESTIGATION WIN G, STATEMENT RECORDED U/S 132(4) OF SHRI BHANWARLAL JA IN AND OTHERS, AND VARIOUS INCRIMINATING DOCUMENTARY EVIDENCE FOUND FROM THE SEARCH AND SEIZURE CARRIED OUT BY INVESTIGATION WING, MUMBAI ON THE SHRI BHANWARLA L JAIN GROUP ON 03.10.2013. IT REMAINS UNDISPUTED THA T THE ASSESSEE WAS NEVER PROVIDED COPIES OF SUCH INCRIMINATING DOCUMENTS AND STATEMENTS OF SHRI BHANWARLAL JAIN AND VARIOUS PERSONS AND AN OPPORTUNITY TO CROSS EXAMINE SUCH PERSONS THOUGH HE SPECIFICALLY ASKED FOR SUCH DOCUMENTS AND CROSS EXAMINATION. ON THE OTHER HAND, THE BURDEN WAS SOUG HT TO BE SHIFTED ON THE ITA NO. 159/JP/16 THE ACIT, CENTRAL -2, JAIPUR VS. M/S PRATEEK KOTHARI, JAIPUR 21 ASSESSEE BY THE A.O. IT IS CLEAR CASE WHERE THE PRI NCIPLE OF NATURAL JUSTICE STAND VIOLATED AND THE ADDITIONS MADE UNDER SECTION 68 THEREFORE ARE UNSUSTAINABLE IN THE EYE OF LAW AND WE HEREBY DELETE THE SAME. THE ORDER OF THE LD CIT(A) IS ACCORDINGLY CONFIRMED AND THE GROUND O F THE REVENUE IS DISMISSED. II) IT IS RELEVANT TO MENTION HERE THAT STATEMENTS OF S HRI AJIT SHARMA AND SHRI RAJESH KUMAR SINGH ARE NO RELEVANCE IN THE CASE OF THE ASSESSEE BECAUSE IN THEIR STATEM ENT THESE PERSONS HAVE NOT ADMITTED THAT THEY WERE ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 91 MAINTAINING THE BANK ACCOUNT FOR THE BENEFIT OF ASS ESSEE GROUP. THEY ADMIT TO MAINTAIN THEIR BANK ACCOUNT BY SOME SHRI SANTOSH CHOUBEY. THEREFORE, THE ADDITION ON SHARE APPLICATION RECEI VED BY THE ASSESSEE CAN NEITHER BE MADE U/S 56(1) OF INCOME TAX ACT, 1 961 NOR U/S 68 OF INCOME TAX ACT, 1961. THE VARIOUS JUDGMENTS AND ARG UMENTS REGARDING ADDITION MADE U/S 56(1) OF INCOME TAX ACT , 1961 HAS BEEN SUBMITTED IN FORGOING PARAS. VIII) THE RELIANCE REGARDING ADDITION CANNOT BE MAD E U/S 68 OF INCOME TAX CAT, 1961 IS PLACED ON THE FOLLOWING DECISIONS: - A) RAJASTHAN HIGH COURT: - (I) CIT-1, JAIPUR V/S M/S. ARL INFRATECH LTD, (PB P G 130 TO 143/CASE LAWS) WHEREIN HONBLE RAJASTHAN HIGH COURT HAS RECENTLY CONFIRMED THE FINDINGS OF HONBLE ITAT BY DECIDING THE APPEAL OF REVENUE IN D B ITA NO 24/2014 VIDE ORDER DATED 28/09/2016 REGARDIN G DELETION OF ADDITION OF SHARE CAPITAL MADE BY APPL YING THE PROVISIONS OF 68 OF INCOME TAX ACT, 1961. (II) COMMISSIONER OF INCOME-TAX, JAIPUR II VERSUS MORANI AUTOMOTIVES (P.) LTD. NO.- D.B. IT APPEAL NO. 619 OF 2011 DATED.- OCTOBER 23, 2013 (RAJASTHAN HIGH COURT) (PB PG 144 TO 149/CASE LAWS). THE FINDINGS OF HONBLE RAJASTHAN HIGH COURT WAS AS UNDER:- 10. THE POINTS AS SOUGHT TO BE RAISED BY THE APPELL ANT- REVENUE IN THE PRESENT CASE ARE ALL THE MATTERS REL ATING TO APPRECIATION OF EVIDENCE. THE RELEVANT FACTORS H AVE BEEN TAKEN INTO ACCOUNT AND CONSIDERED BY THE APPEL LATE AUTHORITIES BEFORE RETURNING THE FINDINGS IN FAVOUR OF THE ASSESSEE. EVEN AS REGARDS THE THREE REFERRED SHARE CAPITAL CONTRIBUTORS, IT IS NOTICED THAT THEY ARE E XISTING ASSESSEES HAVING PA NUMBERS; AND ARE BEING REGULARL Y ASSESSED TO TAX. THE APPELLATE AUTHORITIES CANNOT B E SAID ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 92 TO HAVE ERRED IN DELETING THE ADDITIONS IN THEIR RE GARD TOO AT THE HANDS OF ASSESSEE-COMPANY. 11. ULTIMATELY, THE QUESTION AS TO WHETHER THE SOURCE OF INVESTMENT OR OF CREDIT HAS BEEN SATISFACTORILY EXPLAINED OR NOT REMAINS WITHIN THE REALM OF APPRECIATION OF EVIDENCE; AND THE COURTS H AVE CONSISTENTLY HELD THAT SUCH A MATTER DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. IN THE CASE OF CIT V. ORISSA CORPN. (P.) LTD. [1986) 159 ITR 78 (SC), THE HON'BLE SUPREME COURT HELD AS UNDER:- '13. IN THIS CASE, THE ASSESSEE HAD GIVEN THE NAMES AND ADDRESSES OF THE ALLEGED CREDITORS. IT WA S IN THE KNOWLEDGE OF THE REVENUE THAT THE SAID CREDITOR S WERE INCOME-TAX ASSESSEES. THEIR INDEX NUMBERS WERE IN THE FILE OF THE REVENUE. THE REVENUE, APART FROM ISSUING NOTICES UNDER S. 131 AT THE INSTANCE OF THE ASSESSEE, DID NOT PURSUE THE MATTER FURTHER. THE REVENUE DID NOT EXAMINE THE SOURCE OF INCOME OF THE SAID ALLEGED CREDITORS TO FIND OUT WHETHER THEY WER E CREDIT-WORTHY OR WERE SUCH WHO COULD ADVANCE THE ALLEGED LOANS. THERE WAS NO EFFORT MADE TO PURSUE T HE SO-CALLED ALLEGED CREDITORS. IN THOSE CIRCUMSTANCES , THE ASSESSEE COULD NOT DO ANY THING FURTHER. IN THE PRE MISES, IF THE TRIBUNAL CAME TO THE CONCLUSION THAT THE ASS ESSEE HAS DISCHARGED THE BURDEN THAT LAY ON HIM, THEN IT COULD NOT BE SAID THAT SUCH A CONCLUSION WAS UNREASONABLE OR PERVERSE OR BASED ON NO EVIDENCE. IF THE CONCLUSION IS BASED ON SOME EVIDENCE ON WHICH A CONCLUSION COULD BE ARRIVED AT, NO QUESTION OF LAW AS SUCH ARISES.' 12. IN THE CASE OF CIT V. CHANDRA PRAKASH RANA [200 1] 48 DTR 271 (RAJ.), THIS COURT NOTICED SIMILAR NATUR E GROUNDS URGED ON BEHALF OF THE REVENUE AND FOUND TH E SAME NOT LEADING TO ANY SUBSTANTIAL QUESTION OF LAW . THIS COURT NOTICED, OBSERVED, AND HELD AS UNDER:- '7. LEARNED COUNSEL FOR THE APPELLANT (REVENUE) CONTENDED THAT FIRSTLY TRIBUNAL ERRED IN ACCEPTING THE EXPLANATION OFFERED BY ASSESSEE IN RELATION TO SOURCE OF INCOME. HIS SECOND SUBMISSION WAS THAT WHAT WAS OFFERED BY ASSESSEE WAS NO EXPLANATION AND ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 93 HENCE SHOULD NOT HAVE BEEN ACCEPTED AND LASTLY LEAR NED COUNSEL MADE SINCERE ATTEMPT ON HIS PART AFTER TAKI NG US THROUGH FACTUAL SCENARIO OF THE EXPLANATION AND CONTENDED THAT IT CAN NEVER BE TAKEN AS SATISFACTOR Y EXPLANATION FOR DELETING THE ADDITION MADE BY AO. W E DO NOT AGREE TO THIS SUBMISSION FOR MORE THAN ONE REASON. 8. IN THE FIRST PLACE, IT IS A PURE QUESTION OF FAC T, WHAT TO SAY QUESTION OF LAW, MUCH LESS SUBSTANTIAL QUESTION OF LAW. SECONDLY, THIS COURT CANNOT AGAIN IN THIS APPEAL UNDERTAKE THE EXAMINATION OF FACTUAL IS SUES NOR CAN DRAW FACTUAL INFERENCES ON THE BASIS OF EXPLANATION OFFERED BY ASSESSEE. THIRDLY, ONCE THE EXPLANATION IS ACCEPTED BY THE TWO APPELLATE CO URTS I.E. CIT(A) AND TRIBUNAL IN THIS CASE, THEN IN SUCH EVENT, A CONCURRENT FINDING RECORDED ON SUCH EXPLANATION B Y TWO APPELLATE COURTS IS BINDING ON THE HIGH COURT. 9. PERUSAL OF IMPUGNED FINDING QUOTED SUPRA WOULD GO TO SHOW THAT TRIBUNAL DID EXAMINE THE EXPLANATION OFFERED BY ASSESSEE IN DETAIL AND THEN RECORDED A FINDING FOR ITS ACCEPTANCE. SUCH FINDING WHEN CHALLENGED DOES NOT CONSTITUTE A SUBSTANTIAL QUESTION OF LAW WITHIN THE MEANING OF S. 260A IBID IN AN APPEAL ARISING OUT OF SUCH ORDER. 10. IN OUR OPINION, THEREFORE, ONCE THE CIT(A) AND TRIBUNAL ACCEPTED THE EXPLANATION OF ASSESSEE A ND ACCORDINGLY, DELETED CERTAIN ADDITIONS MADE BY AO HOLDING THE TRANSACTION OF SHARES TO BE GENUINE, TH EN IT WOULD NOT INVOLVE ANY SUBSTANTIAL ISSUE OF LAW AS S UCH. IN OTHER WORDS, THIS COURT IN ITS APPELLATE JURISDI CTION UNDER S. 260A IBID, WOULD NOT AGAIN DE NOVO HOLD YE T ANOTHER FACTUAL INQUIRY WITH A VIEW TO FIND OUT AS TO WHETHER EXPLANATION OFFERED BY ASSESSEE AND WHICH FOUND ACCEPTANCE TO THE CIT(A) AND TRIBUNAL IS GOOD OR BAD, OR WHETHER IT WAS RIGHTLY ACCEPTED, OR NOT. IT IS ONLY WHEN THE FACTUAL FINDING RECORDED HAD BEEN ENTIRELY DE HORS THE SUBJECT, OR THAT IT HAD BEEN BASED ON NO REASONING, OR BASED ON ABSURD REASONING TO THE EXTE NT THAT NO PRUDENT MAN OF AVERAGE JUDICIAL CAPACITY CO ULD EVER REACH TO SUCH CONCLUSION, OR THAT IT HAD BEEN FOUND ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 94 AGAINST ANY PROVISION OF LAW, THEN A CASE FOR FORMULATION OF SUBSTANTIAL QUESTION OF LAW ON SUCH FINDING CAN BE SAID TO HAVE BEEN MADE OUT. 11. IN OUR VIEW, NO SUCH ERROR COULD BE NOTICED BY US IN THE IMPUGNED ORDER BECAUSE AS OBSERVED SUP RA, THE TRIBUNAL DID GO INTO THE DETAILS OF EXPLANATION OFFERED BY ASSESSEE AND THEN ACCEPTED THE EXPLANATI ON BY PLACING RELIANCE ON THE DOCUMENTS FILED BY ASSES SEE. AS A CONSEQUENCE THEREOF, THE ADDITIONS MADE BY AO CAME TO BE DELETED.' 13. IN CIT V. SHREE BARKHA SYNTHETICS LTD. [2004] 2 70 ITR 477 (RAJ.), IN A SIMILAR NATURE MATTER, THIS CO URT OBSERVED THAT THE TRIBUNAL HAVING FOUND THAT THE COMPANIES FROM WHICH THE SHARE APPLICATION MONEY HA D BEEN RECEIVED BY THE ASSESSEE-COMPANY WERE GENUINEL Y EXISTING AND THE IDENTITY OF THE INDIVIDUAL INVESTO RS WERE ALSO ESTABLISHED AND THEY HAD CONFIRMED THE FACT OF MAKING INVESTMENT, THE FINDING THAT ASSESSE E HAD DISCHARGED INITIAL BURDEN AND ADDITION UNDER SECTIO N 68 COULD NOT BE SUSTAINED, WAS ESSENTIALLY A FINDING O F FACT. THIS COURT SAID,- '19. A PERUSAL OF THE AFORESAID FINDING GOES TO SHOW THAT DELETION HAS BEEN MADE ON APPRECIATION OFEVIDENCE, WHICH WAS ON RECORD FINDIN G THAT THERE WAS EXISTENCE OF INVESTORS AND THEIR CONFIRMATION HAS BEEN OBTAINED, WERE FOUND TO BE SATISFACTORY. ALL THESE CONCLUSIONS ARE CONCLUSIONS OF FACT BASED ON MATERIAL ON RECORD AND , THEREFORE, CANNOT BE SAID TO BE PERVERSE SO AS TO G IVE RISE TO QUESTION OF LAW, WHICH MAY BE REQUIRED TO B E CONSIDERED IN THIS APPEAL UNDER S.260A OF THE IT AC T.' 14. THE RATIO OF THE DECISIONS AFORESAID DIRECTLY A PPLIES TO THE PRESENT CASE TOO. HEREIN, AS NOTICED, THE AP PELLATE AUTHORITIES HAVE RETURNED THE FINDINGS OF FACT IN FAVOUR OF THE ASSESSEE AFTER DUE APPRECIATION OF TH E EVIDENCE ON RECORD, ON RELEVANT CONSIDERATIONS, AND ON SOUND REASONINGS. THESE FINDINGS HAVE NEITHER BEEN SHOWN SUFFERING FROM ANY PERVERSITY NOR APPEAR ABSU RD NOR ARE OF SUCH NATURE THAT CANNOT BE REACHED AT AL L. ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 95 THUS, NO CASE FOR INTERFERENCE IN THE FINDINGS OF T HE APPELLATE AUTHORITIES IS MADE OUT. IN THE RESULT, THE APPEAL FAILS AND IS, THEREFORE, DISMISSED. (III) BARKHA SYNTHETICS LTD. VS. ASSTT. CIT (005) 197 CTR (RAJ) 432. (PB PG 150 TO 156/CASE LAWS) SUBSTANTIAL QUESTION OF LAWCASH CREDIT VIS-A-VIS S HARE APPLICATION MONEYTRIBUNAL FOUND THAT 6 OUT OF 7 COMPANIES FROM WHICH THE SHARE APPLICATION MONEY HA D BEEN RECEIVED WERE GENUINELY EXISTING AND NO ENQUIR Y WAS CONDUCTED IN RESPECT OF THE SOURCE OF SHARE APPLICATION MONEY AT THE TIME OF MAKING THE INVESTM ENT IN THE ASSESSEE-COMPANY AND THUS THE ASSESSEE HAS DISCHARGED ITS INITIAL BURDEN EXCEPT IN ONE CASEAS REGARDS INDIVIDUAL INVESTORS, THE TRIBUNAL FOUND TH AT IDENTITY OF 9 OUT OF 10 INVESTORS HAS BEEN ESTABLIS HED AND THEY HAVE CONFIRMED THE FACT OF MAKING INVESTME NT IN THE SHARES OF THE ASSESSEE-COMPANY AND NO FURTHE R ENQUIRY WAS DIRECTED BY THE AOTHUS, ADDITIONS WERE SUSTAINED ONLY IN RESPECT OF INVESTMENTS SAID TO HA VE BEEN MADE BY U, AN INDIVIDUAL INVESTOR AND BY W LTD ., FOR THE REASON THAT SUCH INVESTMENTS WERE NOT PROVE D FINDING OF THE TRIBUNAL IS ESSENTIALLY A FINDING OF FACT WHICH IS NOT VITIATED IN LAWNO SUBSTANTIAL QUESTIO N OF LAW ARISE FOR CONSIDERATION. (IV) CIT VS. FIRST POINT FINANCE LTD. (2006) 206 CT R (RAJ) 626 : (2006) 286 ITR 477 (RAJ HC). (PB PG 157 TO 162/CASE LAWS) INCOMECASH CREDITSHARE APPLICATION MONEY TRIBUNAL FOUND THAT THE INVESTORS ARE GENUINELY EXI STING PERSONS AND THEY HAVE FILED CONFIRMATIONS IN RESPEC T OF INVESTMENTS MADE BY THEM AND THEIR STATEMENTS WERE ALSO RECORDEDAMOUNT OF SHARE CAPITAL/SHARE APPLICATION MONEY COULD NOT BE TREATED AS UNEXPLAIN ED CASH CREDITS AND NO ADDITION COULD BE MADE UNDER S. 68NO SUBSTANTIAL QUESTION OF LAW ARISES. (V) COMMISSIONER OF INCOME TAX VS. BHAVAL SYNTHETICS ( RAJ HC) (2013) 84 DTR 0449 (RAJ) (PB PG 163 TO ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 96 165/CASE LAWS) HELD THAT EVEN IN CASE OF DOUBT ABOUT SUBSCRIBERS TO INCREASED SHARE CAPITAL, AMOUNT OF S HARE CAPITAL COULD NOT BE REGARDED AS UNDISCLOSED INCOME OF COMPANYAMOUNT REFERABLE TO SHARE APPLICATION COULD NOT BE ATTRIBUTED TO ASSESSEE AND COULD NOT BE ASSE SSED IN ITS HANDSAPPEAL DISMISSED (VI) COMMISSIONER OF INCOME TAX VS. AKJ GRANITES (P ) LTD. ( RAJ HC) (2008) 301 ITR 0298 (PB PG 166 TO 168/CASE LAWS) HELD THAT IN RESPECT OF SHARE APPLICATIONS RECEIVED FROM DIFFERENT PLACES ACCOMPA NIED WITH SHARE APPLICATION MONEY, NO PRESUMPTION CAN BE DRAWN THAT SAME BELONG TO THE ASSESSEE AND CANNOT B E ASSESSED IN HIS HANDS AS HIS UNDISCLOSED INCOME UNL ESS SOME NEXUS IS ESTABLISHED THAT SHARE APPLICATION MO NEY FOR AUGMENTING THE INVESTMENT IN BUSINESS HAS FLOWN FROM ASSESSEES OWN MONEYNO SUBSTANTIAL QUESTION OF LAW ARISESBARKHA SYNTHETICS LTD. VS. ASSTT. CIT (2005) 197 CTR (RAJ) 432 FOLLOWED. (VII) COMMISSIONER OF INCOME-TAX, CENTRAL, JAIPUR VERSUS SUPERTECH DIAMOND TOOLS (PVT) LTD. (RAJ HC) D. B. IT APPEAL NO. 74 OF 2012 DATED: - 12 DECEMBER 2013. (PB PG 169 TO 174/CASE LAWS) (VIII) COMMISSIONER OF INCOME-TAX - I, JAIPUR VERSU S AL LALPURIA CONSTRUCTION (P.) LTD (RAJ HC) D.B. IT APPEAL NOS. 256 OF 2010 AND 26 & 39 OF 2011 DATED: - 25 FEBRUARY 2013. (PB PG 175 TO 176/CASE LAWS) (IX) COMMISSIONER OF INCOME-TAX, AJMER VERSUS HS. BUILDERS (P.) LTD. D.B. INCOME TAX (RAJ HC) APPEAL NO. 48 OF 2006 DATED: - 03 MARCH 2012. (PB PG 177 TO 185/CASE LAWS) (X) CIT VS JAI KUMAR BAKLIWAL (2014) 101 DTR (RAJ) 377 : (2014) 267 CTR (RAJ) 396 (PB PG 186 TO 192/CASE LAWS). NO LIABILITY TO PROVE SOURCE OF SOURCE. (XI) ARAVALI TRADING CO VS INCOME TAX OFFICER (2008 ) 8 DTR (RAJ) 199. (PB PG 193 TO 200/CASE LAWS) ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 97 BURDEN OF THE ASSESSEE STANDS DISCHARGED WHEN THE IDENTITY OF THE CREDITORS IS ESTABLISHED AND HE CON FIRMS THE LOANS. (XII) CIT VS HEERA LAL CHAGAN LAL TANK (2002) 157 I TR 281 (RAJ) (PB PG 201 TO 202/CASE LAWS) BURDEN OF THE ASSESSEE STANDS DISCHARGED WHEN THE IDENTITY OF THE CREDITORS IS ESTABLISHED AND HE CONFIRMS THE LOANS. B) ITAT JAIPUR/JODHPUR I) SHALIMAR BUILDCON (P) LTD. VS ITO (2011) 128 ITD 0396 (JAIPUR) (PB PG 214 TO 238/CASE LAWS) IN THIS CASE HONBLE ITAT JAIPUR BENCH HAS RELIED ON ITS OLD DECISION IN THE CASE OF HOTEL GAUDAVAN ITA NO. 1162 AND 1137/JP/2008 AND ADDITION ON ACCOUNT O F SHARE CAPITAL WAS DELETED. 28.5 ON IDENTICAL ISSUE, THE TRIBUNAL, JAIPUR BENCH IN THE CASE OF HOTEL GAUDAVAN (P) LTD. (SUPRA) HAS HEL D AS UNDER : '6. AS REGARDS THE ISSUE ON MERIT IN THE DEPARTMENT AL APPEAL, WE CONCUR WITH THE VIEWS OF THE LEARNED CIT (A) THAT THE AO HAS NOT CONSIDERED THE EXPLANATION OF T HE ASSESSEE. THE AMOUNT UNDER CONSIDERATION OF RS. 1.8 9 CRORE HAS BEEN RECEIVED BY THE ASSESSEE AS SHARE APPLICATION MONEY FROM M/S JALKANTA TECHNICAL & FINANCIAL SERVICE (P) LTD. (JTFSPL) AFTER A PROPER RESOLUTION PASSED BY THE BOARD OF DIRECTORS OF THE AFORESAID COMPANY THROUGH BANKING CHANNEL. M/S JTFSPL IS HAVING PERMANENT ACCOUNT AND FILING ITS RETURN OF INCOME REGULARLY. THE AO HAS NOWHERE MENTIONED THAT MONEY BELONGS TO THE ASSESSEE COMPAN Y AND THEREFORE, PROVISIONS OF S. 68 CANNOT BE INVOKE D. THE LEARNED CIT(A) HAS RIGHTLY RELIED UPON THE DECI SION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. STELLER INVESTMENT LTD. (2000) 164 CTR (SC) 287 WHI CH HAS BEEN CONFIRMED BY THE HONBLE SUPREME COURT OF INDIA. THE LEARNED CIT(A) HAS ALSO RELIED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF BARKHA SYNTHETICS LTD. VS. ASSTT. CIT (2005 ) 197 ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 98 CTR (RAJ) 432 AND ALSO THE DECISION OF TRIBUNAL, JODHPUR BENCH IN THE CASE OF UMA POLYMERS (P) LTD. VS. DY. CIT (DT. 27TH FEB., 2006) [REPORTED AT (2006) 1 01 TTJ (JD)(TM) 124ED.] WHERE IT HAS BEEN HELD THAT T HE ASSESSEE HAS TO PROVE THE EXISTENCE OF THE SHAREHOL DERS WHICH IN THE PRESENT CASE IS NOT UNDER DISPUTE. THEREFORE, THE ASSESSEE HAS DISCHARGED THE BURDEN A ND THEREFORE THE AO WAS NOT JUSTIFIED IN MAKING ANY ADDITION UNDER S. 68 OF THE ACT. THE LEARNED COUNSE L FOR THE ASSESSEE HAS REFERRED TO THE DECISION OF HONBL E SUPREME COURT OF INDIA IN THE CASE OF DIVINE LEASIN G & FINANCE LTD. DT. 21ST JAN., 2008, THE COPY OF WHICH IS PLACED ON RECORD WHERE IT HAS BEEN OBSERVED BY THE SUPREME COURT AS UNDER : CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME UNDER S. 68 OF IT ACT, 1961 ? WE FIND NO MERIT IN THIS SLP FOR THE SIMPLE REASON THA T IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS F REE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS I N ACCORDANCE WITH LAW. THEREFORE, WE FIND NO INFIRMIT Y IN THE ORDER OF THE LEARNED CIT(A), WITH THE IMPUGNED JUDGMENT. THE SAID DECISION OF HONBLE SUPREME COURT OF INDIA HAS BEEN FOLLOWED BY THE TRIBUNAL, DELHI BENCH IN T HE CASE OF ITO VS. BHOR MAL DHANSI RAM LTD. IN ITA NO. 4670/DEL/2007, DT. 3RD MARCH, 2006. THE COPY OF THE SAID DECISION OF TRIBUNAL, DELHI BENCH IS PLACED ON RECORD. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI H .M. SINGHVI, CHARTERED ACCOUNTANT HAS ALSO RELIED UPON THE DECISION OF HONBLE SUPREME COURT OF INDIA ON THE S AID ISSUE IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD . (2008) 216 CTR (SC) 195 : (2008) 6 DTR (SC) 308 WHEREIN IT HAS BEEN HELD THAT IF THE SHARE APPLICAT ION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN T O THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE W ITH LAW, BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOM E OF ASSESSEE COMPANY.' ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 99 28.6 THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. DIVINE LEASING & FINANCE LTD. (SUPRA) HAD AN OCCASION TO CONSIDER THE ADDITION ON ACCOUNT OF SHA RE APPLICATION MONEY. WE ARE REPRODUCING THE HELD PORT ION FROM THE DECISION OF HONBLE DELHI HIGH COURT AS MENTIONED IN (2007) 207 CTR (DEL) 38 (SUPRA). 'INCOMECASH CREDITSHARE APPLICATION MONEY BURDEN OF PROOF CAN SELDOM BE DISCHARGED TO THE HIL T BY THE ASSESSEEIF THE AO HARBOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRIPTION HE IS EMPOWERED, NAY DUTY-BOUND, TO CARRY OUT THOROUGH INVESTIGATIONSBU T IF THE AO FAILS TO UNEARTH ANY WRONG OR ILLEGAL DEALIN GS, HE CANNOT OBDURATELY ADHERE TO HIS SUSPICIONS AND T REAT THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANYIF RELEVANT DETAILS OF ADDRESS AND IDENTITY OF THE SUBSCRIBERS ARE FURNISHED TO THE DEPARTMENT ALO NG WITH COPIES OF THE SHAREHOLDERS REGISTERS, SHARE APPLICATION FORMS, SHARE TRANSFER REGISTER ETC. IT WOULD CONSTITUTE ACCEPTABLE PROOF OR EXPLANATION BY THE ASSESSEEDEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWI NG AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCRIBER FAILS OR NEGLECTS TO RESPOND TO ITS NOTICESTRIBUNAL HAS NOTED THAT THE ASSESSEE COMPAN Y IS A PUBLIC LIMITED COMPANY WHICH HAD RECEIVED SUBSCRIPTIONS TO THE PUBLIC ISSUE THROUGH BANKING CHANNELS AND THE SHARES WERE ALLOTTED IN CONSONANCE WITH THE PROVISIONS OF SECURITIES CONTRACT (REGULAT ION) ACT, 1956, AS ALSO THE RULES AND REGULATIONS OF DEL HI STOCK EXCHANGECOMPLETE DETAILS WERE FURNISHED TRIBUNAL HAS FURTHER FOUND THAT THE AO HAS NOT BROU GHT ANY POSITIVE MATERIAL OR EVIDENCE WHICH WOULD INDIC ATE THAT THE SHAREHOLDERS WERE BENAMIDARS OR FICTITIOUS PERSONS OR THAT ANY PART OF THE SHARE CAPITAL REPRE SENTED COMPANYS OWN INCOME FROM UNDISCLOSED SOURCES.' 28.7 THE HONBLE APEX COURT IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD. (SUPRA) HELD THAT IF THE SH ARE CAPITAL MONEY IS RECEIVED BY THE ASSESSEE COMPANY F ROM ALLEGED BOGUS SHAREHOLDERS THEN THE DEPARTMENT IS F REE TO PROCEED TO REOPEN THE INDIVIDUAL ASSESSMENTS OF SUCH SHAREHOLDERS IN ACCORDANCE WITH LAW. SUCH SHARE ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 100 APPLICATION MONEY CANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY. 28.8 THE HONBLE HIGH COURT IN THE CASE OF FIRST POINT FINANCE LTD. (SUPRA) HELD THAT BURDEN OF PROOF ON T HE ASSESSEE COMPANY LIES TO THE EXTENT OF MAKING OUT A CASE THAT INVESTOR EXISTS AND THEREAFTER IT IS NOT FOR T HE ASSESSEE TO FURTHER PROVE WHERE THEY HAVE BROUGHT MONEY FROM TO INVEST WITH IT. 28.9 THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. UNITED BIO-TECH (P) LTD. 2010 TIOL-533-HC-DEL HELD THAT IN CASE THE IDENTITY OF THE SHARE APPLICA NTS HAS BEEN ESTABLISHED AND IT IS FOUND THAT THE SAID APPL ICANTS ARE CORPORATE ASSESSEES WHO ARE ASSESSED TO TAX WIT H IT DEPARTMENT THEN THERE IS NO CASE OF ANY SUBSTANTIAL QUESTION OF LAW. IN THE INSTANT CASE, THE SHARE APP LICANTS ARE CORPORATE ASSESSEES. 28.10 THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SAMIR BIO-TECH (P) LTD. (SUPRA) HELD THAT IF INVESTMENTS HAVE BEEN SHOWN BY THE SHARE APPLICANTS IN THEIR AUDITED BALANCE SHEET THEN THE ADDITION CANNO T BE MADE UNDER S. 68 OF THE ACT. 28.11 IN VIEW OF THE LEGAL POSITION AS DISCUSSED ABOVE, THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION OF RS. 1.10 CRORE WITHOUT BRINGING ON RECORD ANY MATERIAL FOR THE ADDITION. SIMPLY ON THE BASIS OF INFORMATION WH ICH IS NOT SUBSTANTIATED IN THE COURSE OF ASSESSMENT PROCEEDINGS AGAINST THE ASSESSEE, THE AO COULD NOT HAVE ADDED THE AMOUNT. (II) THE HONBLE ITAT, JAIPUR BENCH, JAIPUR IN ITS JUDGMENT THE CASE OF M/S JADAU JEWELLERS & MANUFACTURERS PVT. LTD., B-1, TRIMUTRI CIRCLE, GOVIND MARG, JAIPUR IN ITA NO. 686/JP/2014 DATED 14.12.2015 (PB PG 239 TO 267/CASE LAWS) GAVE THE FOLLOWING FINDINGS:- .6.1 ON FACTS ALSO, THE ASSESSEE HAS PRODUCED BEF ORE THE ASSESSING OFFICER COPY OF SHARE APPLICATION, CONFIRMATION OF THE CASH CREDITORS, COPY OF PAN, CO PY OF BOARD RESOLUTION, COPY OF DIRECTORS REPORT, AUDITO RS ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 101 REPORT, COPY OF BALANCE SHEET, COPY OF P&L ACCOUNT, COPY OF BANK ACCOUNT IN ALL THE CASES TO PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE C ASH CREDITORS. THE LD ASSESSING OFFICER MADE ADDITION O N THE BASIS OF INVESTIGATION CONDUCTED BY THE ITO, INVESTIGATION WING, KOLKATA BUT THE LD ASSESSING OF FICER OF THE ASSESSEE HAS NOT CLARIFIED WHAT INQUIRY HAD BEEN CONDUCTED AND WHAT EVIDENCES COLLECTED WHICH GOES AGAINST THE ASSESSEE. THE NOTICE U/S 131 ISSUED BY THE ITO, INVESTIGATION WING, KOLKATA WERE SERVED IN CAS E OF VIDYA AGENCIES PVT. LTD. AND SHIVARPAN MERCANTILES PVT. LTD., BUT COMPLIANCE COULD NOT BE MADE ON THE GIVEN DATE BECAUSE CONCERNED OFFICER WAS ON LEAVE. IN CASE OF MIDDLETON GOODS PVT. LTD. AND LACTRODRYER MARKETING PVT. LTD., NOTICES WERE SERVED ON THE ASS ESSEE AND IN COMPLIANCE TO THE NOTICE, THE PARTY SUBMITTE D ALL THE DOCUMENTS IN THE IT OFFICE. THE CASE LAW REFERR ED BY THE LD CIT(A) I.E. DECISION OF HONBLE DELHI HIGH C OURT IN THE CASE OF NIPUN BUILDERS AND DEVELOPERS PVT. L TD. VS. CIT AND VIJAY POWER GENERATOR LTD. VS CIT (SUPR A) ARE NOT SQUARELY APPLICABLE ON THE FACTS OF THE CAS E AS THERE WAS SHORT TIME AVAILABLE WITH THE ASSESSING OFFICER AS WELL AS INVESTIGATION WING OF KOLKATA. T HE COPY OF INQUIRY HAS NOT BEEN PROVIDED BY THE ASSESS ING OFFICER TO THE ASSESSEE. AS PER FINDINGS OF THE HON 'BLE DELHI HIGH COURT IN THE CASE NIPUN BUILDERS AND DEVELOPERS PVT. LTD. VS. CIT (SUPRA), THE INVESTIGA TION OFFICER AT KOLKATA HAD NOT DEPUTED INSPECTOR TO ENQ UIRE THE WHEREABOUTS OF THE COMPANY. THE CASE LAWS REFER RED BY THE ASSESSEE ARE SQUARELY APPLICABLE ON THE FACT S AND CIRCUMSTANCES OF THE APPELLANTS CASE, THEREFORE, W E REVERSE THE ORDER OF THE LD CIT(A) ON TECHNICAL GRO UND AS WELL AS ON MERIT ALSO. (III) UMA POLYMER (P) LTD. , 101 TTJ 124, JODHPUR (PB PG 282 TO 318/CASE LAWS) INCOMECASH CREDIT SHARE APPLICATION MONEYIN RESPECT OF SHARE CAPITAL MONEY, THE ASSESSEE-COMPANY HAS TO PROVE ONLY THE EXISTENCE OF THE PERSON IN WHOSE NAME SHARE APPLICA TION IS RECEIVEDNO FURTHER BURDEN IS CAST ON THE ASSESS EE TO PROVE WHETHER THAT PERSON HIMSELF HAS INVESTED THE MONEY OR SOME OTHER PERSON HAS MADE THE INVESTMENT IN HIS NAMEBURDEN TO PROVE THAT THE MONEY DID NOT ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 102 BELONG TO HIM BUT TO SOMEBODY ELSE IS ON THE REVENUEDISTINCTION BETWEEN A PUBLIC COMPANY AND A PRIVATE COMPANY IS NOT VERY MATERIAL FOR THIS PURPO SE AO TREATED THE INVESTMENTS MADE BY TEN SHAREHOLDERS IN THE ASSESSEE-COMPANY AS BOGUS AND MADE ADDITION UNDER S. 68 NOT JUSTIFIEDIN ALL THE CASES EXCEPT THAT OF V, AO HAD OBTAINED THE BANK STATEMENTS OF THE SHAREHOLDERS WHICH CLEARLY SHOW THAT THE ACCOUNTS W ERE REGULARLY MAINTAINED AND THE SHAREHOLDERS HAD MADE DEPOSITSFURTHER, THE SHAREHOLDERS ARE ALSO ASSESSE D TO TAXSIMPLY BECAUSE SCRUTINY ASSESSMENTS WERE NOT MADE IN THE CASE OF SHAREHOLDERS, SUCH ASSESSMENTS COULD NOT BE MADE IN THE COURSE OF ASSESSMENT OF TH E ASSESSEEHAVING REGARD TO THE INFORMATION COLLECTED BY THE AO FROM THE BANKS, IDENTITY OF THE SHAREHOLD ERS WAS FULLY ESTABLISHEDIF ANY SHAREHOLDER IS FOUND T O HAVE MADE UNEXPLAINED INVESTMENT, THEN ADDITION OF SUCH INVESTMENT IS REQUIRED TO BE MADE IN THE HANDS OF THE SHAREHOLDER AND NOT IN THE ACCOUNT OF THE ASSES SEE U HAD INVESTED IN THE SHARE CAPITAL THROUGH CHEQUE EXCEPT FOR A SMALL SUM WHICH WAS RETURNED TO HERHE R BANK ACCOUNT SHOWS SEVERAL ENTRIES, BOTH CREDIT AND DEBIT, WHICH HAVE NO RELATION WITH THE AMOUNT INVES TED WITH THE ASSESSEE-COMPANYMERELY BECAUSE SHE HAS NOT SUBMITTED HER RETURNS AFTER THE ASST. YR. 1984- 85, IT CANNOT BE SAID THAT SHE WAS NOT ASSESSED TO TAXTHO UGH V HAS NOT BEEN SHOWN TO BE ASSESSED TO TAX, HE HAD MADE MAJOR PART OF INVESTMENTS TOWARDS SHARE CAPITA L THROUGH CHEQUES AND HIS IDENTITY IS NOT DOUBTED ACCORDINGLY, SHARE CAPITAL ADVANCED BY U AND V IS A LSO TO BE ACCEPTED AS GENUINETHEREFORE, NO ADDITION OF SHARE CAPITAL MONEY COULD BE MADE IN THE HANDS OF T HE ASSESSEE-COMPANY. (IV) THE LD. JAIPUR TRIBUNAL IN THE CASE OF DCIT V M/S KAMDHENU STEEL AND ALLOYS LTD. 2014-TIOL-709- ITAT - (PB PG 203 TO 213/CASE LAWS) CASE RELATES TO SEARCH AND ISSUE OF SHARES ON PREMIUM. HELD THAT T HE ASSESSEE HAD SUBMITTED THE PARTICULARS OF REGISTRAT ION OF THE APPLICANT COMPANY, THE CONFIRMATION FROM THE SH ARE APPLICANTS, BANK ACCOUNT DETAILS FROM WHICH PAYMENT THROUGH ACCOUNT PAYEE CHEQUES, SO THE ASSESSEE HAD DISCHARGED ITS INITIALLY ONUS. ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 103 (V) M/S. ARL INFRATECH LTD. VS. THE ACIT ITA NO. 619/JP/2013 (PB PG 268 TO 281/CASE LAWS) ITAT JAIPUR. THE FINDINGS OF HONBLE ITAT WAS AS UNDER:- BEFORE, WE PROCEED TO DECIDE THE ISSUE ON MERITS, W E WOULD LIKE TO DISCUSS THE SCHEME OF THE ACT AND PRE CEDENTS ON THE ISSUE INVOLVED IN THIS APPEAL AS UNDER:- IN CASES WHERE SHARE APPLICATION MONEY IS FOUND R ECORDED IN THE BOOKS OF AN ASSESSEE WHICH MAY REPRESENT CRE DIT IN THE BOOKS AND THE SHARE APPLICANT IS IDENTIFIED, THAT A MOUNT CANNOT BE ADDED IN THE ASSESSEE'S HANDS U/S 68 OF T HE ACT. THE HON'BLE RAJASTHAN HIGH COURT HAS REPEATEDLY REI TERATED THE ABOVE LEGAL POSITION. THESE CASES ARE: (I) CIT VS. SHREE BARKHA SYNTHETICS LTD. 182 CTR 17 5 (RAJ.) (II) BARKHA SYNTHETICS LTD. VS. ACIT (2005), 197 CT R 432 (RAJ).13 IN COMING TO THE ABOVE CONCLUSION, THE HON'BLE JURISDICTIONAL HIGH COURT HAS CONSIDERED AT LENGTH THE RELEVANT DECISIONS ON THE ISSUE LIKE CIT VS. STELLE R INVESTMENT LTD. (2000) 164 CTR (SC) 287 = 251 ITR 263 (SC) WHI CH HAS CONFIRMED THE DECISION OF HON'BLE DELHI HIGH COURT REPORTED IN (1992) 192 ITR 287. THE HON'BLE COURT HAS GONE T O THE EXTENT OF STATING THAT EVEN IF IT BE ASSUMED THAT T HE SUBSCRIBER TO THE SHARE CAPITAL ARE NOT GENUINE, NEVERTHELESS, UNDER NO CIRCUMSTANCES CAN THE AMOUNT OF SHARE CAPITAL BE RE GARDED AS UNDISCLOSED INCOME OF THE ASSESSEE. IN THIS CASE , THE SHARE SUBSCRIBER IS IDENTIFIED. THERE CAN BE NO DISPUTE R EGARDING THE ABOVE STATED LEGAL POSITION. THE FOLLOWING DECI SIONS ALSO LAY DOWN THE SAME RATIO:- (I) CIT VS. LOVELY EXPORTS (P) LTD. (2008) 6 DTR 30 8 (SC) (II) CIT VS. DOLPHIN CONPACK LTD. (2006) 283 ITR 19 0 (DEL.) (III) CIT VS. GUJARAT HEAVY CHEMICALS LTD. (202) 25 6 ITR 795(SC) (IV) CIT VS. KWICK TRAVELS (1992) 199 ITR (ST.) 85 (SC) THIS ISSUE HAS BEEN DEALT AT LENGTH BY THE THIRD ME MBER IN THE CASE OF UMA POLYMERS (P) LTD. VS. DCIT, (2006) 101 TTJ (JD.) T.M. 126 = (2006) 284 ITR (AT) 1 JODHPUR. 2.6 ADVERTING, THE FACTS OF THE GIVEN CASE, WE ARE OF THE CONSIDERED OPINION THAT ALL THE SHARE APPLICANTS ST AND IDENTIFIED. THE ASSESSEE HAS PROVIDED PANS OF THE S HARE APPLICANTS. THE MODE OF PAYMENT HAS ALSO BEEN MADE EXPLAINED. THERE IS NO DIRECT OR INDIRECT RELATION BETWEEN THE ASSESSEE COMPANY AND THE SHARE APPLICANTS. THE STAT EMENTS RECORDED DURING SURVEY HAS GOT NO EVIDENTIARY VALUE AND THE ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 104 LAW IS VERY MUCH SETTLED ON THIS ISSUE. IN ANY CASE , EVEN UNDER THE PROVISIONS OF SECTION 68 OF THE ACT, THE ASSESSEE CANNOT BE FORCED TO PROVE THE SOURCE OF THE SOURCE. THE LAW ON THIS SUBJECT IS ALSO SETTLED BY NUMEROUS DECISIO NS. THE ALLEGED REPORT OF THE INSPECTOR OF THE DEPARTMENT W HO IS STATED TO HAVE VISITED AT THE GIVEN ADDRESSES OF TH E SHARE APPLICANTS WAS NEVER PUT OR CONFRONTED TO THE ASSES SEE. THE CUMULATIVE EFFECTS OF THESE REASONS IS THAT THE IMP UGNED ADDITION CANNOT BE ADDED IN THE HANDS OF THE ASSESS EE COMPANY. ACCORDINGLY, WE ORDER TO DELETE THE ENTIRE ADDITIONS AND ALLOW THE APPEAL OF THE ASSESSEE. 3.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE STAND S ALLOWED. THE DEPARTMENT FILED APPEAL BEFORE HONBLE RAJASTHAN HIGH COURT. HONBLE RAJASTHAN HIGH COURT CONFIRMED THE FINDINGS OF HONBLE ITAT BY DECIDING THE APPEAL OF REVENUE IN DB ITA NO 24/2014 VIDE ORDER DATED 28/09/2016 (C) OTHER HIGH COURTS (I) 2014 (8) TMI 605 - MADRAS HIGH COURT THE COMMISSIONER OF INCOME TAX VERSUS PRANAV FOUNDATIONS LTD. T. C. (A). NO. 262 OF 2014 DATED - 12 AUGUST 2014 (PB PG 343 TO 346/CASE LAWS) ADDITION U/S 68 SHARE APPLICATION AND SHARE PREMI UM AMOUNT CREDITED BUT NOT PROVED - WHETHER THE TRIBUN AL WAS RIGHT IN UPHOLDING THE ORDER OF THE CIT(A) WHO DELETED THE ADDITION MADE U/S 68, BEING THE SHARE APPLICATION MONEY AND SHARE PREMIUM AMOUNT CREDITED BY THE ASSESSEE WHICH WAS NOT PROVED HELD THAT:- FOLLOWING THE DECISION IN CIT V. LOVELY EXPORTS (P) LTD. [2008 (1) TMI 575 - SUPREME COURT OF INDIA] - ALL THE FOUR PARTIES, WHO ARE SUBSCRIBERS OF THE SHARES, ARE LIMITED COMPANIES AND ENQUIRIES WERE MA DE AND RECEIVED FROM THE FOUR COMPANIES AND ALL THE COMPANIES ACCEPTED THEIR INVESTMENT - THE ASSESSEE HAS CATEGORICALLY ESTABLISHED THE NATURE AND SOURCE OF THE SUM AND DISCHARGED THE ONUS THAT LIES ON IT IN TERM S OF SECTION 68 OF THE ACT - WHEN THE NATURE AND SOURCE OF THE AMOUNT SO INVESTED IS KNOWN, IT CANNOT BE SAID TO BE UNDISCLOSED INCOME - THE ADDITION OF SUCH SUBSCRIPT IONS AS UNEXPLAINED CREDIT UNDER SECTION 68 OF THE ACT I S UNWARRANTED DECIDED AGAINST REVENUE. ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 105 (II) CIT VS. ILLAC INVESTMENT (P) LTD. (2007) 207 C TR (DEL) 687; (PB PG 341 TO 342/CASE LAWS) ASSESSEE- COMPANY HAS SATISFACTORILY ESTABLISHED THE IDENTITY OF THE SHARE SUBSCRIBERS AND DELETED THE ADDITION UNDE R S. 68, NO SUBSTANTIAL QUESTION OF LAW ARISES FOR CONSIDERATION. (III) CIT VS. DIVINE LEASING & FINANCE LTD. (2007) 207 CTR (DEL) 38; (PB PG 321 TO 340/CASE LAWS) INCOMECASH CREDITSHARE APPLICATION MONEY BURDEN OF PROOF CAN SELDOM BE DISCHARGED TO THE HIL T BY THE ASSESSEEIF THE AO HARBOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRIPTION HE IS EMPOWERED, NAY DUTYBOUND, TO CARRYOUT THOROUGH INVESTIGATIONSBUT IF THE AO FAILS TO UNEARTH ANY WRONG OR ILLEGAL DEALIN GS, HE CANNOT OBDURATELY ADHERE TO HIS SUSPICIONS AND TREA T THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANYIF RELEVANT DETAILS OF ADDRESS AND IDENTITY OF THE SUBSCRIBERS ARE FURNISHED TO THE DEPARTMENT ALO NG WITH COPIES OF THE SHAREHOLDERS REGISTER, SHARE APPLICATION FORMS, SHARE TRANSFER REGISTER, ETC. IT WOULD CONSTITUTE ACCEPTABLE PROOF OR EXPLANATION BY THE ASSESSEEDEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWI NG AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCRIBER FAILS OR NEGLECTS TO RESPOND TO ITS NOTICESTRIBUNAL HAS NOTED THAT THE ASSESSEE-COMPAN Y IS A PUBLIC LIMITED COMPANY WHICH HAD RECEIVED SUBSCRIPTIONS TO THE PUBLIC ISSUE THROUGH BANKING CHANNELS AND THE SHARES WERE ALLOTTED IN CONSONANCE WITH THE PROVISIONS OF SECURITIES CONTRACT (REGULAT ION) ACT, 1956, AS ALSO THE RULES AND REGULATIONS OF DEL HI STOCK EXCHANGECOMPLETE DETAILS WERE FURNISHED TRIBUNAL HAS FURTHER FOUND THAT THE AO HAS NOT BROU GHT ANY POSITIVE MATERIAL OR EVIDENCE WHICH WOULD INDIC ATE THAT THE SHAREHOLDERS WERE BENAMIDARS OR FICTITIOUS PERSONS OR THAT ANY PART OF THE SHARE CAPITAL REPRE SENTED COMPANYS OWN INCOME FROM UNDISCLOSED SOURCESAS REGARDS RECEIPT OF SHARE CAPITAL ON ISSUE OF RIGHTS SHARES TO FIVE COMPANIES, THESE COMPANIES WERE DULY INCORPORATED UNDER THE SIKKIMESE COMPANIES ACT AND WERE ASSESSED UNDER THE SIKKIMESE TAXATION MANUAL THEIR SHARE SUBSCRIPTIONS WERE ALSO RECEIVED THROUG H ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 106 BANKING CHANNELS AND FOUND TO BE VALID BY THE JURISDICTIONAL AOTHEREFORE, NO ADDITION COULD BE MADE UNDER S. 68 (IV) CIT V/S VALUE CAPITAL SERVICES P LTD. 307 ITR 334 (DELHI) (PB PG 319-3202/CASE LAWS) HELD THAT THERE IS ADDITIONAL BURDEN ON THE DEPARTMENT TO SHOW THAT EV EN IF SHARE APPLICANTS DID NOT HAVE THE MEANS TO MAKE INVESTMENT, THE INVESTMENT MADE BY THEM ACTUALLY EMANATED FROM THE COFFERS OF THE ASSESSEE SO AS TO ENABLE IT TO BE TREATED AS UNDISCLOSED INCOME OF TH E ASSESSEE. (V) CIT V/S STL EXTRUSION (P) LTD. 333 ITR 269 (MP) (PB PG 347 TO 350/CASE LAWS) INCOMECASH CREDIT SHARE APPLICATION MONEYASSESSEE HAS DULY ESTABLISHED THE IDENTITY AND SOURCE OF CREDITS ADDITIONS NOT SUSTAINABLE. (VI) CIT V/S ARUNANDA TEXTILES (P) LTD. , 333 ITR 116 (KARNATAKA) (PB PG 351 TO 353/CASE LAWS) SHARE APPLICATION MONEYASSESSEE ABLE TO IDENTIFY THE SHAREHOLDERSIT IS NOT FOR THE ASSESSEE-COMPANY TO ESTABLISH BUT IT IS FOR THE DEPARTMENT TO ENQUIRE W ITH THE INVESTORS ABOUT THE CAPACITY TO INVEST THE AMOUNT I N THE SHARES. (VII) BHAV SHAKTI STEEL MINES (P) LTD. VS. CIT (200 9) 18 DTR (DEL) 194 INCOMECASH CREDITGENUINENESS CIT(A) NOT ONLY FOUND THAT THE IDENTITY OF EACH OF THE SHAREHOLDERS STOOD ESTABLISHED, BUT ALSO EXAMINED T HE FACT THAT EACH OF THEM WERE INCOME-TAX ASSESSEES AN D HAD DISCLOSED THE SHARE APPLICATION MONEY IN THEIR ACCOUNTS WHICH WERE DULY REFLECTED IN THEIR IT RETU RNS AS WELL AS IN THEIR BALANCE SHEETSTRIBUNAL WAS NOT THEREFORE JUSTIFIED IN COMING TO THE CONCLUSION THA T THE CIT(A) HAD NOT CONSIDERED THE MATTER IN THE RIGHT PERSPECTIVEORDER PASSED BY TRIBUNAL REMANDING THE MATTER FOR EXAMINING THE SHARE APPLICANTS SET ASIDE AND THAT OF CIT(A) RESTORED (D) OTHER BENCHES OF ITAT ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 107 (I) ITO V M/S. RELIANCE MARKETING PVT. LTD. 2015- TIOL-319-TAT-DEL (PB PG 367 TO 375/CASE LAWS) IDENTITY OF THE CREDITORS/SHARE APPLICANTS BY FURNI SHING THEIR PAN NUMBER AND COPY OF ACKNOWLEDGMENT OF INCOME-TAX RETURN. THE AMOUNT ON ACCOUNT OF SHARE APPLICATION WAS RECEIVED THROUGH BANKING CHANNEL, COPIES OF THE CONFIRMATION ALONGWITH AFFIDAVIT OF T HE PARTIES WERE FURNISHED. THE ASSESSEE ALSO FURNISHED THE COPY OF SHARE APPLICATION FORMS, COPY OF FORM NO.2 FILED WITH REGISTER OF COMPANIES (ROC), SHOWING ALLOTMENT OF SHARES TO THE APPLICANTS. THEREFORE, T HE ASSESSEE DISCHARGED THE ONUS CAST UPON IT, (II) INCOME TAX OFFICER VS. MS. SUPERLINE CONSTRUCTION P. LTD. ITAT, BOMBAY TRIBUNAL (A) ITA NO. 3644 TO 3648, 3650, 3651MUM/2014 30TH NOVEMBER, 2015 (2015) 45 CCH 0281 MUM TRIB. (PB PG 376 TO 392/CASE LAWS) ADDITIONADDITION ON ACCOUNT OF BOGUS SHARE APPLICATION MONEYASSESSEE WAS IN BUSINESS OF BUILDER AND DEVELOPERASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 147RE-ASSESSMENT PROCEEDINGS WERE INITIATED ON BASIS OF INFORMATION RECEIVED FROM DIRECTORATE OF INCOME-TAX (INVESTIGATION) WITHOUT RECORDING AOS OWN SATISFACTION AND INFORMATION WAS ACCEPTED IN MECHANICAL MANNERAFTER REOPENING OF ASSESSMENT U/S 147, AO MADE ADDITION OF RS.40 LAKHS RECEIVED BY ASSESSEE FROM VARIOUS CORPORATE ENTITIE S ADDITION WAS MADE BY AO ON ACCOUNT OF BOGUS SHARE APPLICATION MONEY UNDER PROVISIONS OF S 68CIT(A) DELETED ADDITION MADE BY AOHELD, IN CASE OF CIT VS . M/S. LOVELY EXPORTS (PVT) LTD, REPORTED IN [2008] 2 16 CTR 195 (SC), IT WAS HELD THAT IF SHARE APPLICATION MONEY WAS RECEIVED BY ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAME WERE GIVEN TO AO THEN DEPARTMENT WAS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW BUT I T COULD NOT BE REGARDED AS UNDISCLOSED INCOME OF ASSE SSEE COMPANYIT WAS SUBMITTED BY ASSESSEE THAT AO HAD FAILED TO APPRECIATE STATEMENTS OF ANY PERSON RECOR DED U/S 143(3) R.W.S. 147THAT ASSESSEE-COMPANY HAD FUL LY DISCHARGED BURDEN OF PROOF, ONUS OF PROOF AND EXPLA INED SOURCE OF SHARE CAPITAL AND ADVANCES RECEIVED BY ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 108 ESTABLISHED IDENTITY, CREDITWORTHINESS AND GENUINEN ESS OF TRANSACTION BY BANKING INSTRUMENTS WITH DOCUMENT ARY EVIDENCESASSESSEE COMPANY SUBSTANTIATED DETAILS WITH DOCUMENTARY EVIDENCES AS EXTRACTED FROM WEBSIT E OF MINISTRY OF CORPORATE AFFAIRS, GOVERNMENT OF IND IA BEFORE AOTHESE FACTS HAD NOT BEEN REBUTTED ON BEHALF OF REVENUEITAT WAS NOT INCLINED TO INTERFER E WITH FINDINGS OF CIT(A) WHO THUS RIGHTLY DELETED EN TIRE IMPUGNED ADDITIONS OF RS.40 LAKHS MADE BY AO U/S 68 ON ACCOUNT OF SHARE CAPITAL SUBSCRIPTION RECEIVED B Y ASSESSEE-COMPANY HELD: IT WAS POINTED OUT IN THE CASE OF CIT VS. M/S. LOV ELY EXPORTS (PVT) LTD, REPORTED IN [2008] 216 CTR 195 ( SC) THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAME ARE GIVEN TO THE AO THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSME NTS IN ACCORDANCE WITH LAW BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF ASSESSEE COMPANY. (PARA 2.3) IN THIS BACKGROUND, IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE ASSESSING OFFICER FAILED TO APPRE CIATE THAT THERE WAS NO DOCUMENTARY EVIDENCE AGAINST THE ASSESSEE-COMPANY TO SUPPORT SUCH IMPUGNED ADDITIONS . IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT THE ASSESSING OFFICER FAILED TO APPRECIATE THAT THE STATEMENTS OF ANY PERSON RECORDED U/S 143(3) R.W.S. 147. THE ASSESSEE-COMPANY HAD FULLY DISCHARGED THE BURDE N OF PROOF, ONUS OF PROOF AND EXPLAINED THE SOURCE OF SHARE CAPITAL AND ADVANCES RECEIVED BY ESTABLISHED THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF TRANSACTION BY BANKING INSTRUMENTS WITH DOCUMENTARY EVIDENCES. THE FURTHER STAND OF THE ASSESSEE HAD BE EN THAT THE ASSESSEE-COMPANY SUBSTANTIATED THE DETAILS WITH THE DOCUMENTARY EVIDENCES AS EXTRACTED FROM THE WEBSITE OF MINISTRY OF CORPORATE AFFAIRS, GOVERNMEN T OF INDIA BEFORE THE ASSESSING OFFICER. THESE FACTS HAD NOT BEEN REBUTTED ON BEHALF OF THE REVENUE. (PARA 2.4) IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AS WELL AS CONSIDERING THE DECISIONS A S ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 109 DISCUSSED ABOVE ON THE SIMILAR ISSUE, ITAT WAS NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE CIT( A) WHO HAD RIGHTLY DELETED THE ENTIRE IMPUGNED ADDITIO NS OF RS.40 LAKHS MADE BY THE ASSESSING OFFICER U/S 68 OF THE ACT ON ACCOUNT OF SHARE CAPITAL SUBSCRIPTION RECEIVED BY THE ASSESSEE-COMPANY. (PARA 2.5) CONCLUSION: WHEN ASSESSEE-COMPANY HAD SUBSTANTIATED DETAILS WITH DOCUMENTARY EVIDENCES AS EXTRACTED FRO M WEBSITE OF MINISTRY OF CORPORATE AFFAIRS, GOVERNMEN T OF INDIA BEFORE AO, THEN ADDITIONS MADE BY AO U/S 6 8 ON ACCOUNT OF SHARE CAPITAL SUBSCRIPTION RECEIVED B Y ASSESSEE-COMPANY WAS RIGHTLY DELETED. (III) MEERA ENGINEERING & COMMERCIAL CO. (P) LTD. V S. ASSTT. CIT (1997) 58 TTJ (JAB) 527 (PB PG 393 TO 399/CASE LAWS) INCOMECASH CREDITSGENUINENESS OF SHARE CAPITAL OF COMPANYALL THE 51 SHAREHOLDERS FILED THEIR AFFIDAVITS AND CONFIRMATORY LETTERS AND 24 OF THEM FILED THEIR REPLIES ALSO TO NOTICE UNDER S. 13 3(6) NAMES OF PARTIES PURCHASING THE SHARES WITH AMOUNT SUBSCRIBED WERE FURNISHED BEFORE AOALL DOCUMENTS CLEARLY SHOW THAT SHAREHOLDERS DO EXIST ASSESSEE- COMPANY HAD DISCHARGED ITS ONUS OF EXPLAINING THE C ASH CREDITS AS REQUIRED UNDER LAWIF THE COMPANY IS ABL E TO ESTABLISH THAT SHAREHOLDERS EXISTED AND THEY HAVE INVESTED MONEY FOR PURCHASE OF SHARES BURDEN OF COMPANY TO PROVE THE CREDIT IS DISCHARGEDIDENTITY OF SHAREHOLDERS NOT IN DISPUTEASSESSEE IS NOT REQUIRE D TO PROVE CREDIT-WORTHINESS OF SHAREHOLDERSADDITION DELETED (IV) ALLEN BRADLEY INDIA LTD. VS. DY. CIT (2002) 74 TTJ (DEL) 604 : (2002) 80 ITD 43 (DEL); INCOMECASH CREDITSUBSCRIPTION TO SHARE CAPITAL AND LOANIN CA SE OF LIMITED COMPANIES JURISDICTION OF AO WOULD BE LIMITED ONLY TO SEE WHETHER IDENTITY OF SHAREHOLDER S IS ESTABLISHED AND WHETHER THEY EXIST OR NOTONCE IDENTITY IS ESTABLISHED, THEN, POSSIBLY NO FURTHER ENQUIRIES NEED TO BE MADESINCE THE SHAREHOLDERS OF ASSESSEE-COMPANY WERE IN EXISTENCE, THEY WERE ASSES SED TO TAX, COMPLETE DETAILS WERE AVAILABLE, SHARE CAPI TAL ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 110 MONEY AS WELL AS LOAN WERE RECEIVED THROUGH ACCOUNT PAYEE CHEQUES AND THEY WERE CLEARED THROUGH PROPER BANKING CHANNELS, AO WAS NOT JUSTIFIED IN DISBELIEV ING THE CAPITAL INVESTED BY THE SHAREHOLDER COMPANIES SIMILARLY, AO WAS NOT JUSTIFIED IN DISBELIEVING THE LOAN TAKEN FROM DTL AS THE CHEQUES WERE CLEARED THROUGH BANK CHANNELS AND CONFIRMATION AND SUPPORTING EVIDENCE WAS FILEDCIT(A) WAS JUSTIFIED IN DELETING THE ADDITIONS. (V) 2017 (3) TMI 1047-ITAT AHMEDABAD INCOME TAX OFFICER, WARD 8 (1), AHMEDABAD VERSUS SEVEN STAR AVIATION SERVICES PVT. LTD (PB PG 400 TO 404/CASE LAWS) ADDITION U/S 68 - SHARE APPLICATION MONEY AND UNSECURED LOAN RECEIVED. HELD THAT: - WHE N THE DEPOSITORS ARE REGULAR TAX PAYERS AND THE ADVAN CES MADE BY SUCH DEPOSITORS AS ALSO SHARE APPLICATION MONIES PAID BY SUCH SHAREHOLDERS ARE DULY ACCEPTED IN THEIR PERSONAL ASSESSMENTS, THERE CANNOT BE ANY OCC ASION TO HOLD THAT THESE AMOUNTS ARE UNEXPLAINED IN THE H ANDS OF THE COMPANY. THE CREDIT WORTHINESS OR IDENTITY CANNOT BE AN ISSUE IN SUCH A SITUATION. (VI) 2016 (10) TMI 920 - ITAT HYDERABAD M/S. HARIOM CONCAST AND STEEL PVT. LTD. VERSUS INCOME TAX OFFICER, WARD-2 (2) , HYDERABD (PB PG 405 TO 411/CASE LAWS) ADDITION FOR SHARES ISSUED ON PREMIUM. HELD THAT: - SHARE PREMIUM CANNOT BE BROUG HT TO TAX INVOKING THE PROVISIONS OF SECTION 68, UNLES S THERE IS A LINK WITH EITHER QUID PRO QUO TRANSACTIO N OR INVESTING BY ASSESSEE-COMPANY IN THEIR ACCOUNTS SO AS TO RECEIVE IT BACK AS SHARE CAPITAL. NO SUCH EVIDENCE WAS BROUGHT ON RECORD. (E) SUPREME COURT I) CIT VS. LOVELY EXPORTS (P) LTD. (2008) 216 CTR (SC) 195 INCOMECASH CREDITSHARE APPLICATION MONEYIF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDER S, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMEN T IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSES SMENTS ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 111 IN ACCORDANCE WITH LAW, BUT IT CANNOT BE REGARDED A S UNDISCLOSED INCOME OF ASSESSEE COMPANY. II) CIT VS. STELLER INVESTMENT LTD. (200) 251 ITR 263 (SC) EVEN IF THE SUBSCRIBERS TO THE INCREASED SHARE CAPITAL OF ASSESSEE-COMPANY WERE NOT GENUINE, THE AMOUNT COULD NOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE-COMPANY. (III) CIT VS ORISSA CORPORATION (P) LTD (1986) 159 ITR 79 (SC) D) RATIO LAID DOWN IN FOLLOWING CASES NOT APPLICABL E TO THE FACTS OF THE CASE OF ASSESSEE:- A) NOVA PROMOTERS & FINLEASE PVT. LTD (2012) 342 IT R 169 (DELHI HIGH COURT): - SUMMONS SENT TO THE COMPANIES RECEIV ED BACK UNSERVED AND OTHER SUMMONS REMAINED UNCOMPLIED WITH WHEREAS, IN THE CASE OF THIS ASSESSEE COMPANY, NOTI CE U/S 133(6) WAS SENT TO INVESTOR COMPANIES, ALL OF WHICH WERE SERVE D AND SOME OF THEM WERE COMPLIED WITH. B) CIT V/S N. R. PORTFOLIO PVT. LTD 206 (2014) DLT (DB) (DEL)/ 264 CTR 0258 (DEL) ASSESSED U/S 144 OF ITAX ACT. IN THIS CASE THE AO ISSUED SEVERAL NOTICES AND SHOW CAUSE NOTICE WHICH WAS NOT SERVED/COMPLIED AND ASSESSMENT WAS FRAMED U/S 144 O F INCOME TAX ACT. IN OUR CASE ALL THE COMPLIANCES WERE MADE AND EVIDENCES SUBMITTED. C) N TARIKS PROPERTIES PVT. LTD 227 TAXMANN.COM 373 (WITH REFERENCE TO DECISION OF DELHI HIGH COURT IN 264 CT R 472) AO NOTICED THAT EXTRACTS OF BANK ACCOUNT HAD BEEN FABR ICATED AND AO FOUND THAT IMMEDIATELY BEFORE ISSUANCE OF CHEQUES FOR THE PURPOSE OF MAKING PAY ORDER OR DEMAND DRAFT THERE WAS DEPOS IT OF CASH. IN OUR CASE NO CASH DEPOSIT IN THE BANK ACCOUNT OF SHA REHOLDER COMPANY. D) CIT V/S NAVODAYA CASTLE PVT. LTD 367 ITR 306 (DE LHI HIGH COURT) AO FOUND THAT IMMEDIATELY BEFORE ISSUANCE OF CHEQU ES FOR THE PURPOSE OF MAKING PAY ORDER OR DEMAND DRAFT THE RE WAS DEPOSIT OF CASH. IN OUR CASE NO CASH DEPOSIT IN THE BANK ACCOUNT OF SHAREHOLDER COMPANY. ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 112 E) CIT V/S MAF ACADEMY PVT. LTD 206 (2014) DLT 277 (DB)(DEL)/ 361 ITR 0285 (DEL) AO FOUND THAT IMMEDIATELY BEFORE ISSUANCE OF CHEQUES FOR THE PURPOSE OF MAKING PAY ORDER OR DEMA ND DRAFT THERE WAS DEPOSIT OF CASH. IN OUR CASE NO CASH DEPOSIT IN THE BANK ACCOUNT OF SHAREHOLDER COMPANY. FURTHER, THE SUMMONS U/S SE CTION 131 OF I.TAX ACT WERE SENT TO THE SHAREHOLDERS WHICH WERE RECEIVED BACK UN- SERVED. IN VIEW OF THE ABOVE SUBMISSION, THE HUMBLE ASSESS EE PRAYS YOUR HONOR KINDLY TO DELETE THE ADDITION OF RS. 3,50,000/- CON FIRMED BY LD CIT(A) 5.3 ON THE OTHER HAND, THE LD. DR RELIED ON THE OREDER OF THE AO. 5.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS PERTINENT TO MENTION THA T THE SIMILAR ISSUE HAS BEEN DEALT WITH AND DECIED BY THIS BENCH OF ITAT IN THE CASE OF MOTISONS BUILDTECH PVT. LTD VS ACIT, CENTRAL CIRCLE-2,JAIPUR VIDE ITS ORDER DATED 30-10-2017 IN ITA NO.385/JP/2017 (ASSESSEE'S APPEAL )FOR THE ASSESSMENT YEAR 2012-13 BY OBSERVING AS UNDER:- 8.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE MATERIALS AVAILABLE ON RECORD. IN THIS GROUND, IT IS NOTED THAT THE AO MADE THE ADDITION OF RS.3,68,27,500/- OUT OF WHICH THE LD CIT(A) DELETED THE ADDITION OF RS. 2,86,27,5 00/- AND SUSTAINED THE ADDITION OF RS.82.00 LACS AS MENTIONE D AT PARA 3.2.2. AND 2.1.4.6 & 2.1.4.7 OF THE LD. CIT(A)S ORDER (SUPRA). THE QUESTION ARISES AS TO WHETHER THE LD C IT(A) CAN MAKE THE ADDITION U/S 68 OF THE ACT OR NOT. FOR THI S PURPOSE, THE DEFINITION OF SECTION 68 OF THE ACT IS AS UNDER :- ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 113 WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE [ASSES SING] OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. FROM THE ABOVE DEFINITION, IT IS NOTED THAT SECTION 68 OF THE ACT DOES NOT EMPOWER THE LD. CIT(A) TO MAKE ADDITION UNDER THIS ACT. THUS THE ADDITION U/S 68 CAN ONLY BE MADE BY THE ASSESSING O FFICER. THE DEFINITION OF THE ASSESSING OFFICER HAS BEEN PROVID ED IN SECTION 2(7A) OF THE ACT WHICH READS AS UNDER:- [( 7A ) ASSESSING OFFICER MEANS THE ASSISTANT COMMISSIO NER [OR DEPUTY COMMISSIONER] [OR ASSISTANT DIRECTOR] [OR DE PUTY DIRECTOR] OR THE INCOME-TAX OFFICER WHO IS VESTED WITH THE RELEVANT JURISDICTION BY VIRTUE OF DIRECTIONS OR ORDERS ISSUED UNDER SUB-SECTION (1) O R SUB-SECTION (2) OF SECTION 120 OR ANY OTHER PROVISION OF THIS ACT, AND THE [ADDIT IONAL COMMISSIONER OR] [ADDITIONAL DIRECTOR OR] [JOINT CO MMISSIONER OR JOINT DIRECTOR] WHO IS DIRECTED UNDER CLAUSE ( B ) OF SUB-SECTION (4) OF THAT SECTION TO EXERCISE OR PERFORM ALL OR ANY OF THE POWERS AND FUNCTIONS CONFERRED ON, OR ASSIGNED TO, AN ASSESSING OFFICER UNDER THIS ACT ;] THUS THE LD. CIT(A) IS NOT THE ASSESSING OFFICER AS PER INCOME-TAX ACT. THEREFORE, THE LD. CIT(A) DOES NOT HAVE ANY LEGAL S ANCTION TO MAKE THE ADDITION U/S 68 OF THE ACT. LD. CIT(A) IN HIS ORDER AT PARA 2.1.4.6 HAD CLEARLY HELD THAT THE IDENTITY, CREDITWORTHINESS AND GENUIN ENESS OF TRANSACTIONS OF THESE COMPANIES CANNOT BE HELD DOUBTFUL AND ADDITIO N BY APPLYING THE PROVISION OF SEC 68 OF THE ACT CANNOT BE UPHELD. TH E LD. CIT(A) HAS SUSTAINED THE ADDITION OF RS. 82.00 LACS WITHOUT SPECIFYING A NY PROVISION OF INCOME TAX ACT. NO SUCH ADDITION CAN BE SUSTAINED WITHOUT INVO KING THE RELEVANT PROVISIONS OF THE ACT. MOREOVER, THE ADDITION HAS B EEN SUSTAINED IN THE HANDS OF THAT ASSESSEE WHERE CASH /DD WAS DEPOSITED AT 4 TH CHANNEL. HON'BLE RAJASTHAN HIGH COURT AND OTHER HON'BLE COURTS HELD THAT ASSESSEE CANNOT BE ASKED TO EXPLAIN THE SOURCE OF THE SOURCE. THE REL EVANT PORTIONS OF THE VERDICTS GIVEN BY HON'BLE HIGH COURTS IN THE FOLLOW ING CASES ARE AS UNDER:- (I) IN THE CASE OF CIT VS JAI KUMAR BAKLIWAL (2014 ) 366 ITR 217 (RAJ):- HELD, DISMISSING THE APPEAL, THAT ALL THE CASH CREDITORS WERE ASSESSED TO INCOME-TAX AND THEY PROVIDED A CONFIRMATION AS WELL AS THEIR PERMANENT ACCOUNT NUMBER. THEY HAD THEIR OWN RESPECTIVE BANK ACCOUNTS WHICH THEY HAD BEEN OPERATING AND IT WAS NOT THE CLAIM OF THE ASSE SSING OFFICER THAT THE ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 114 ASSESSEE WAS OPERATING THEIR BANK ACCOUNTS. MOST OF THE CASH CREDITORS APPEARED BEFORE THE ASSESSING OFFICER AND THEIR STA TEMENTS UNDER SECTION 131 OF THE INCOME-TAX ACT, 1961, WERE ALSO RECORDED ON OATH. THERE WAS NO CLINCHING EVIDENCE NOR HAD THE ASSESSING OFFICER BE EN ABLE TO PROVE THAT THE MONEY ACTUALLY BELONGED TO NONE BUT THE ASSESSEE. T HE ADDITION OF RS. 17,27,250 UNDER SECTION 68 WAS NOT JUSTIFIED. (II) IN THE CASE OF NEMI CHAND KOTHARI VS CIT (20 03) 264 ITR 254 (GAU): HELD THAT IT IS NOT THE BUSINESS OF THE ASSESSEE TO FIND OUT THE SOURCE OR SOURCES FROM WHERE THE CREDITOR HAD ACCUMULATED THE AMOUNT WHICH HE HAD ADVANCED IN THE FORM OF LOAN TO THE ASSESSEE AND SE CTION 68 CANNOT BE READ TO SHOW THAT IN THE CASE OF FAILURE OF SUB-CREDITORS T O PROVE THEIR CREDITWORTHINESS THE AMOUNT ADVANCED AS LOAN TO THE ASSESSEE BY THE CREDITOR SHALL HAVE TO BE READ AS COROLLARY AS THE INCOME FROM UNDISCLOSED SO URCE OF THE ASSESSEE HIMSELF . (III) IN THE CASE OF SHANKAR INDUSTRIES VS CIT (19 78) 114 ITR 689 (CAL.): OBSERVED THAT THAT MERE ESTABLISHING IDENTITY OF TH E CREDITOR AND NOTHING MORE IS NOT SUFFICIENT AND SOMETHING MORE IS TO BE PROVE D BY THE ASSESSEE AND IN THE AFORESAID CASE, THE ASSESSEE WAS UNABLE TO PROVE BE YOND IDENTITY AND, THEREFORE, THE CALCUTTA HIGH COURT UPHELD THE FINDI NGS OF THE TRIBUNAL. HOWEVER, IN THE PRESENT CASE, WE NOTICE THAT NOT ON LY THE IDENTITY OF THE CREDITOR HAS BEEN PROVED BUT FROM THE FACTS WHICH H AVE BEEN CULLED OUT, THE ASSESSEE HAS BEEN ABLE TO PROVE THE GENUINENESS ALS O. (IV) IN THE CASE OF KANHAILAL JANGID VS ACIT (2008) 217 CTR 354 (RAJ): HELD THAT THE BURDEN DOES NOT GO BEYOND TO PUT THE ASSESSEE UNDER AN OBLIGATION TO FURTHER PROVE THAT WHERE FROM THE CRE DITOR HAS GOT OR PROCURED THE MONEY TO BE DEPOSITED OR ADVANCED TO THE ASSESSEE. THE FACT THAT THE EXPLANATION FURNISHED BY THE CREDITOR ABOUT THE SOU RCE FROM WHERE HE PROCURED THE MONEY TO BE DEPOSITED OR ADVANCED TO THE ASSESS EE IS NOT RELEVANT FOR THE PURPOSES OF REJECTING THE EXPLANATION FURNISHED BY THE ASSESSEE AND MAKE ADDITIONS OF SUCH DEPOSITS AS INCOME OF THE ASSESSE E FROM UNDISCLOSED SOURCES BY INVOKING SECTION 68 UNLESS IT CAN BE SHOWN BY TH E DEPARTMENT THAT SOURCE OF SUCH MONEY COMES FROM THE ASSESSEE HIMSELF OR SU CH SOURCE COULD BE TRACED TO THE ASSESSEE ITSELF. (V) IN THE CASE OF ARAVALI TRADING CO. VS ITO (2008 ) 220 CTR (RAJ): OBSERVED THAT THE FACT THAT THE EXPLANATION FURNIS HED BY THE FOUR CREDITORS ABOUT THE SOURCES WHERE FROM THEY ACQUIRED THE MONE Y WAS NOT ACCEPTABLE BY THE REVENUE COULD NOT PROVIDE NECESSARY NEXUS FOR D RAWING INFERENCE THAT THE ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 115 AMOUNT ADMITTED TO BE DEPOSITED BY THESE FOUR PERSO NS BELONGED TO THE ASSESSEE. THE ASSESSEE HAVING DISCHARGED HIS BURDEN BY PROVING THE EXISTENCE OF THE DEPOSITORS AND THE DEPOSITORS OWING THEIR DE POSITS, HE WAS NOT FURTHER REQUIRED TO PROVE SOURCE OF SOURCE . TAKING INTO CONSIDERATION THE FACTS AND CIRCUMSTANC ES OF THE CASE AND CASE LAWS RELIED ON (SUPRA), THE LD. CIT(A) IS NOT JUSTI FIED IN CONFIRMING THE ADDITION OF RS. 82.00 LACS WHICH IS DIRECTED TO BE DELETED. IT IS ALSO NOTED THAT DURING THE COURSE OF HEARING OF APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE HAD REQUESTED FOR CROSS EXAMINATION OF SHRI SANBTOSH CHOUBEY SHRI AJIT SHARMA, SHRI RAJESHKUMAR SINGH AND OTHER PERSONS WHICH WAS DENIE D BY THE LD. CIT(A). THE ITAT COORDINATE BENCH IN THE CASE OF PRATEEK K OTHARI (SUPRA) HAS GIVEN VERDICT THAT WITHOUT PROVIDING OPPORTUNITY OF CROSS EXAMINATION OF THE MATERIALS GATHERED AND STATEMENT RECORDED BEHIND TH E ASSESSEE CANNOT BE USED. HOWEVER, WE HOLD THAT REVENUE IS FREE TO INITIATE P ROCEEDINGS IN THE HANDS OF THESE CONCERNS WHO HAVE RECEIVED THE AMOUNT AFTER D EPOSIT IN CASH/DD IN RESPECTIVE BANK A/CS. THUS GROUND NO. 1 OF THE ASSE SSEE IS ALLOWED. IT MAY BE FURTHER NOTED THAT THE ISSUE RAISED BY TH E ASSESSEE IN GROUND NO.1 OF THE PRESENT APPEAL IS SAME AND THE DECISION TAKEN IN THE APPEAL OF THE ASSESSEE IN ITA NO. 385/JP/2017 FOR THE ASSESSM ENT YEAR 2012-13 IN THE CASE OF MOTISONS BUILDTECH VS ACIT, CENTRAL CIR CLE-2, JAIPUR (SUPRA) SHALL APPLY MUTATIS MUTANDIS IN THE PRESENT GROUND OF APPEAL NO. 1 OF THE ASSESSEE. THUS GROUND NO. 1 OF THE ASSESSEES APPEA L IN ITA NO. 390/JP/2017 IS ALLOWED. ITA NO. 390/JP/2017 M/S. SHIVANSH BUILDCON PVT.LTD. JAIPUR VS A CIT, CENTRAL CIRCLE-2, JAIPUR 116 6.0 IN THE RESULT, THE APPEALS FILED BY THE ASSESS EE IN ITA NO. 390/JP/2017 IS PARTLY ALLOWED AND THAT OF THE REVE NUE IN ITA NO. 490/JP/2017 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 06 -11-2 017. SD/- SD/- DQY HKKJR HKKXPUN (KUL BHARAT) ( BHAGCHAND) U;KF;D LNL; / JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 06 /11/ 2017 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. SHIVANSH BUILDCON PVT. LTD., J AIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ACIT, CENTRAL CIRCLE-2 JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 390/JP/2017) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ @ ASSISTANT. REGISTRAR
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