ITO, New Delhi V. M/s. Team Plus Securities Ltd, New Delhi

ITA 3901/DEL/2009

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3113 (ITAT-DELHI)
• Duration Of Justice: 10 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 27-07-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 16-09-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NAINA SOIN KAPIL
• Keywords: Unexplained cash credit; Income from undisclosed sources; Tangible material; Accommodation entries; Reason to believe; Set aside
• Section: 147; 131; 68; 148

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D: NEW DELHI BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER AND SHRI K.N.CHARY, JUDICIAL MEMBER ITA NO. 3901/DEL/2009, 2708/DEL/2008 (ASSESSMENT YEAR: 2004-05, 2005-06) INCOME TAX OFFICER, WARD-16(2), NEW DELHI VS. M/S. TEAM PLUS SECURITIES LTD, 1 ST FLOOR, THAKUR HOUSE, CENTRAL WINGH, JANPATH, NEW DELHI (APPELLANT) (RESPONDENT) ITA NO. 3506/DEL/2008, (ASSESSMENT YEAR: 2004-05) M/S. TEAM PLUS SECURITIES LTD, 1 ST FLOOR, THAKUR HOUSE, CENTRAL WINGH, JANPATH, NEW DELHI VS. INCOME TAX OFFICER, WARD-16(2), NEW DELHI (APPELLANT) (RESPONDENT) REVENUE BY : SMT NAINA SOIN KAPIL, SR. DR ASSESSEE BY: NONE DATE OF HEARING 28/08/2019 DATE OF PRONOUNCEMENT 25/11/2019 O R D E R PER PRASHANT MAHARISHI, A. M. 1. FOR ASSESSMENT YEAR 2004 05, THE ASSESSEE HAS PRE FERRED AN APPEAL IN ITA NUMBER 3506/DEL/2009 AGAINST THE ORDER OF THE LEARN ED COMMISSIONER OF INCOME TAX (APPEALS) NEW DELHI DATED 10/7/2009 AND REVENUE HAS FILED APPEAL IN ITA NUMBER 3901/DEL/2009. FOR AY 2005-06 REVENUE HAS FILED APPEAL. ALL THESE THREE APPEALS ARE ON THE ISSUE OF TAXABILITY OF LOAN TAXED AS CASH CREDIT U/S 68 OF THE ACT OF LOANS AND TAXAB ILITY U/S 68 OF THE ACT OF ZERO COUPON BONDS TO VARIOUS COMPANIES. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN ITA NO. 3901/DEL/2009 FOR ASSESSMENT YEAR 2004-05:- PAGE | 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, ID CIT(A) HAS ERRED IN DELETING ADDITION OF RS 8,00,00,000/- BY HOLDING TH AT THE ASSESSEE COMPANY HAS DISCHARGED ITS ONUS, IGNORING THE FACT THAT MERE FILLING OF PAPER CONFIRMATIONS CANNOT BE HELD TO BE DISCHARGE OF ONUS CAST UPON THE ASSESSEE COMPANY U/S 68 OF INCOME TAX ACT,1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E. ID CIT(A) HAS FURTHER ERRED IN HOLDING THAT IF THERE WAS ANY DISCREPANCY IN THE BOOKS OF THE INVESTING COMPANIES, THERE IS A CASE FOR REOPENING THE CASE OF THE RESPECTIVE COMPANIES IGNORING THE FACT THE ASSESSEE COMPANY BEING THE RECIPIENT/ BENEFICIARY OF THE ACCOMMODATION ENTRIES , WAS LIABLE TO TAX IN RESPECT OF THE SAID UNEXPLAINED CASH CREDITS. 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL IN ITA NO. 3506/DEL/2009 FOR THE ASSESSMENT YEAR 2004-05:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW, IN UPHOLDING THE ILLEGAL ACTION WITHOUT JURISDICTION OF THE ITO TO ISSUE NOTICE AND REOPEN ASSESSMENT OF THE APPELLANT UNDUE SECTION 147 AND THE PERVERSE ORDER PASSED BY THE. ITO OUGHT TO HAVE BEEN VACATED AND FAILURE TO DO SO HAS VITIATED THE IMPUGNED ORDER AS THE ENTIRE ACTION, ORDER AND NOTI CE FOR REASSESSMENT ARE ILLEGAL, WITHOUT JURISDICTION, UNSUSTAINABLE AN D HENCE LIABLE TO BE VACATED AS BEING NON EST IN LAW. 2. THE CIT (A) HAS ERRED IN NOT BEING GUIDED BY COR RECT FACTUAL AND LEGAL POSITION, RECORDS, AND BINDING PRECEDENTS PLACED BE FORE HIM AND HAS PASSED THE IMPUGNED ORDER ERRONEOUSLY WHICH IS THER EFORE LIABLE TO SET ASIDE AND QUASHED. 3. THE CIT (A) HAS ALSO ERRED IN UPHOLDING THE ILLE GAL ADDITION OF RS. 2 CRORES PERVERSELY MADE BY THE ITO AND IMPUGNED ORDE R ARE THEREFORE LIABLE TO BE QUASHED AND THE ADDITIONS SO ILLEGALLY MADE AND CONFIRMED OUGHT TO BE DELETED. 4. CIT(A) HAS ALSO ERRED IN TREATING THE SALE PROCE EDS OF RS. 37.50 LACS OF THE ASSESSEES OWN SHARES AS UNEXPLAINED MONEYS AND HAD WRONGLY UPHELD THE ADDITION THEREOF BY THE ITO MONEYS AND H AD WRONGLY UPHELD THE ADDITION THEREOF BY THE ITO AS UNEXPLAINED CASH CREDIT WHICH IS WHOLLY UNSUSTAINABLE IN ALL RESPECTS. 5. THE CIT (A) HAS ALSO ERRED IN UPHOLDING THE ILL EGAL DEMANDS OF TAX AS WELL AS INTEREST ERRONEOUSLY RAISED BY THE ITO TO T HE EXTENT OF ADDITIONS UPHELD BY HIM AND THE ENTIRE ILLEGAL DEMANDS OF TAX AS WELL AS INTEREST MUST BE SET ASIDE AND QUASHED AS UNSUSTAINABLE BOTH ON FACTS AND IN LAW. 6. THE CIT (A) OUGHT TO HAVE DEALT WITH ALL THE SUB MISSIONS AND OBJECTIONS OF THE APPELLANT AND OUGHT TO HAVE FOLLOWED THE BIN DING DECISIONS OF THE COURTS AND TRIBUNALS PLACED BEFORE HIM BUT HAS UNFO RTUNATELY NOT DONE SO AND HAS THUS PASSED THE IMPUGNED ORDER ERRONEOUS LY WHICH IS LIABLE TO BE VACATED IN THIS APPEAL. PAGE | 3 4. FOR ASSESSMENT YEAR 2004 05 REVENUE IS IN APPEAL AGAINST THE ADDITION DELETED BY THE LEARNED COMMISSIONER OF INCOME TAX A PPEALS OF INR 80,000,000 MADE ON ACCOUNT OF UNEXPLAINED CASH CRED IT U/S 68 OF THE INCOME TAX ACT ON ACCOUNT OF FAILURE OF THE ASSESSE E TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE ISSUE OF UN SECURED 0% FULLY CONVERTIBLE BONDS. ASSESSEE IS IN APPEAL FOR THAT YEAR AGAINST THE REOPENING OF THE ASSESSMENT AS WELL AS CONFIRMATION OF INR 1 3750000/ OF CERTAIN AMOUNT RECEIVED DURING THE YEAR AND CONFIRMATION OF THE ADDITION OF RS. ONE CRORE ON ACCOUNT OF UNSECURED 0 COUPON FULLY CO NVERTIBLE BONDS OUT OF INR 90,000,000 RECEIVED DURING THE YEAR. 5. FOR ASSESSMENT YEAR 2005 06, REVENUE IS IN APPEAL AGAINST THE ADDITION DELETED BY THE LEARNED CIT A OF INR 75,000,000 MA DE ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 OF THE INCOME TAX AC T 1961 MADE BY THE LEARNED ASSESSING OFFICER ON ACCOUNT OF FAILURE OF THE ASSESSEE TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE I SSUE OF UNSECURED 0% FULLY CONVERTIBLE BONDS. 6. WE STATE THE ASSESSMENT FACTS FOR AY 2004-05. BRIEF FACTS OF THE CASE SHOWS THAT ASSESSEE IS A COMPANY WHO FILED ITS RETURN OF INCOME DECLARING NIL INCOME ON 4/2/2005. THE RETURN WAS NOT ASSESSED U/ S 143 (3) BUT WAS PROCESSED U/S 143 (1) OF THE INCOME TAX ACT. SUBSE QUENTLY THE INFORMATION WAS RECEIVED FROM THE DIT (INVESTIGATION) THAT THE ASSESSEE HAS TAKEN ACCOMMODATION ENTRIES AND INTRODUCED AMOUNT BY WAY OF PAYING CASH FROM MKM SECURITIES PRIVATE LIMITED AND CV METAL POWDERS (HARYANA) LTD. THE LEARNED AO RECORDED THE AMOUNT OF CHEQUE RECEIVED, DATE ON WHICH THEY RECEIVED, RESPECTIVE INSTRUMENT NUMBER AND BRANCH O F THE BANK FROM WHICH IT IS RECEIVED. THE DETAILS OF THE ENTRIES WERE PR OVIDED AND BASED ON THE SAME; CASE OF THE ASSESSEE WAS REOPENED. AT THE TI ME OF ISSUANCE OF NOTICE U/S 148 THE REASONS ALSO INCLUDES THAT THE AMOUNTS OF INR 100,000,000/- IS RECEIVED FROM DIFFERENT CONCERNS BECAUSE OF UNSE CURED ZERO COUPON BONDS WHICH PRIME FACIE PROVED THAT ABOVE MENTIONE D ENTRIES WERE NOT GENUINE. 7. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSEE SUBMITTED THE CONFIRMATION OF THE PARTIES FROM WHOM AMOUNT AS MEN TIONED IN ZERO COUPON BONDS WAS RECEIVED DURING THE YEAR. HOWEVER , THE LEARNED ASSESSING PAGE | 4 OFFICER ISSUED NOTICES U/S 133 (6) TO THE VARIOUS P ARTIES ON 10/12/2008. IN RESPONSE TO THAT, NONE OF THE PARTIES RESPONDED. A SSESSEE WAS ASKED TO PRODUCE THOSE PARTIES BUT ASSESSEE FAILED TO PRODUC E EVEN ONE OF THEM. THEREFORE, THE LEARNED ASSESSING OFFICER NOTED THAT IT IS QUITE STRANGE THAT WHEN ASSESSEE WAS IN TOUCH WITH THEM FOR OBTAINING CONFIRMATION BUT WHEN CALLED FOR U/S 133 (6) NONE OF THEM RESPONDED EXCEP T ONE PARTY. ASSESSEE IS ALSO NOT PRODUCING THE FOR EXAMINATION BY LD AO. TH EREAFTER THE LEARNED ASSESSING OFFICER CARRIED OUT DETAILED INVESTIGATIO N AND FOUND THE ULTIMATE SOURCE OF SUCH MONEY ROUTED FROM THE BANK ACCOUNT O F OTHER PARTIES WHERE CASH IS DEPOSITED. WITH RESPECT TO EACH OF THE AMO UNT BORROWED BY THE ASSESSEE THE LEARNED ASSESSING OFFICER ON EXAMINATI ON OF THE BANK ACCOUNT TRACED THE SOURCE OF THOSE FUNDS. IN MOST OF THE A CCOUNTS, HE FOUND THAT THERE IS AN IDENTICAL CASH DEPOSIT IN BANK ACCOUNT NUMBER 52199 AND 52764 AS WELL AS FROM OTHER ACCOUNTS. THEREAFTER L EARNED AO ALSO LOOKED AT THE BANK ACCOUNTS OF THOSE DEPOSITORS, WHICH ARE PL ACED AT PAGE NUMBER 4 TO 7 OF THE ASSESSMENT ORDER. DIRECTOR OF ONE OF T HE DEPOSITOR COMPANY WAS EXAMINED ON OATH AND HE ADMITTED THAT THESE CO MPANIES ARE INVOLVED IN GIVING ACCOMMODATION ENTRY FOR PURCHASE AND SALE OF SHARES AND NO REAL BUSINESS HAS TAKEN PLACE EXCEPT ACCOMMODATION ENTRY BUSINESS IN THAT COMPANY AND ASSOCIATE CONCERNS. STATEMENT OF OTHE R PARTIES WERE ALSO RECORDED WHEREIN THEY ALSO CONFIRMED THAT THESE ARE THE ACCOMMODATION ENTRIES AND NONE OF THE COMPANIES WERE PAYING EVEN A SINGLE PENNY AS TAX. THEREFORE THE ASSESSEE WAS ASKED TO SHOW CAUSE WHY ADDITION U/S 68 SHOULD NOT BE MADE. ASSESSEE WAS ALSO ASKED TO PRO DUCE THE DIRECTOR AND CONCERNED PERSONS FROM WHOM THE ABOVE SUM HAS BEEN RECEIVED. IN RESPONSE TO THE ABOVE QUERY ASSESSEE REPLIED RELYIN G UPON THE SEVERAL JUDICIAL PRECEDENTS THAT THE AMOUNT CANNOT BE ADDE D IN THE HANDS OF THE ASSESSEE AS ASSESSEE HAS PRODUCED ENOUGH EVIDENCE A ND FURTHER NOTHING ELSE CAN BE DONE BY THE ASSESSEE. HOWEVER, THERE WA S NO WHISPER ABOUT PRODUCING THE DIRECTORS OF THOSE COMPANIES WHO INVE STED MONEY IN THE ASSESSEE COMPANY. THEREFORE LEARNED AO NOTED THAT ASSESSEE IS A PRIVATE LTD COMPANY AND THE PERSONS WHO HAVE INVESTED SHOUL D BE IN THE CLOSE AND PROXIMATE RELATIONSHIP BETWEEN THE COMPANIES AND TH E DIRECTORS OF THE APPELLANT ASSESSEE. THEREFORE THE ASSESSEE SHOULD BE ABLE TO PRODUCE THEM PAGE | 5 HOWEVER THE ASSESSEE HAS FAILED TO PRODUCE THEM WHI CH ITSELF PROVES THAT THESE PARTIES ARE NOT GENUINE , THEY ARE NOT CREDIT WORTHY AND THE AMOUNT CREDITED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IS UNACCOUNTED INCOME OF THE ASSESSEE. AS THE ASSESSEE COULD NOT PRODUCE TH E DIRECTORS OF THE COMPANIES WHO INVESTED IN THE ASSESSEE COMPANY, THE LEARNED ASSESSING OFFICER MADE AN ADDITION OF INR 13750000/ U/S 68 O F THE INCOME TAX ACT. FURTHER, WITH RESPECT TO ZERO COUPON BONDS OF INR 100,000,000 RECEIVED THROUGH FROM 12 PARTIES IT WAS FOUND THAT THOSE PAR TIES ARE NOT CREDITWORTHY OF THE SUM DEPOSITED. NONE OF THEM COMPLIED WITH T HE NOTICES ISSUED U/S 133 (6) OF THE ACT, NONE OF THE DIRECTORS OF THOSE COMPANIES WAS PRODUCED. SUMMONS U/S 131 OF THE INCOME TAX ACT IN ASSESSMENT YEAR 2005 06 WERE ISSUED TO THESE PARTIES WHERE NONE OF THE PARTIES C AME FORWARD TO VERIFY THE AMOUNT OF DEPOSITS MADE WITH THE ASSESSEE COMPANY. THEREFORE, THE LEARNED ASSESSING OFFICER WAS OF THE VIEW THAT ABOVE AMOUNT IS REQUIRED TO BE ADDED IN THE HANDS OF THE ASSESSEE AS ASSESSEE HAS FAIL ED TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION U/S 68 OF THE INCOME TAX ACT. AS SUM OF INR 90,000,000 RECEIVED ON ACCO UNT OF UNSECURED 0 COUPON BONDS FROM THE ABOVE PARTIES DURING THE YEAR , IT WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. CONSEQUENTLY, THE TO TAL TAXABLE INCOME OF THE ASSESSEE WAS DETERMINED AT INR 103750000/ AGAINST THE NIL RETURN OF INCOME. 8. THE ASSESSEE CHALLENGED THE ORDER OF THE LEARNED AS SESSING OFFICER BEFORE THE LEARNED CIT A. THE LEARNED CIT A PASSED AN ORD ER ON 10/7/2009. THE ISSUE OF NOTICE U/S 148 OF THE INCOME TAX ACT WAS A LSO CHALLENGED BEFORE HIM THE LEARNED CIT A RELYING UPON THE DECISION OF TH E HONOURABLE SUPREME COURT IN CASE OF ACIT VS RAJESH JHAVERI STOCKBROKE RS PRIVATE LIMITED 291 ITR 500, RAYMOND WOOLLEN MILLS LTD VS ITO 236 ITR 3 4 CONFIRMED THE ACTION OF THE LEARNED ASSESSING OFFICER. 9. WITH RESPECT TO THE AMOUNT OF INR 37,50,000 RECEIVE D FROM M/S MKM FINANCE PVT LTD HE NOTED THAT THE ASSESSEE COMPAN Y HAS SOLD SHARES OF VARIOUS COMPANIES THROUGH THE ABOVE COMPANY DURING THE FINANCIAL YEAR 2003 04. THE ASSESSEE ALSO FURNISHED BEFORE HIM THE DETAILS OF SHARES SOLD. ONE SHRI MAHESH BATRA WHO WAS THE DIRECTOR O F MKM FINSEC PRIVATE LIMITED RECORDED HIS STATEMENT ON OATH BY THE ADDIT IONAL DIRECTOR OF INCOME PAGE | 6 TAX ON 23/1/2000 FOR WHEREIN HE ADMITTED THAT HIS A SSOCIATE CONCERN WAS INVOLVED IN GIVING ACCOMMODATION ENTRIES FOR PURCHA SE AND SALE OF SHARES AND NO REAL BUSINESS HAS TAKEN PLACE. AS THE DIREC TOR OF THAT COMPANY HAS CATEGORICALLY STATED THAT THE ABOVE COMPANY AND ASS OCIATE CONCERNS WERE INVOLVED IN PROVIDING BOGUS ACCOMMODATION ENTRIES, WHICH FACTS ARE NOT, CONTROVERTED BY THE LEARNED ASSESSING OFFICER THERE FORE THE HE CONFIRMED THE ABOVE ADDITION. 10. HE FURTHER CONFIRMED SUM OF RUPEES ONE CRORE RECEIV ED THROUGH FOR DIFFERENT INSTRUMENTS FROM CV METAL POWDERS (HARYANA) LTD AS STATEMENT OF SRI SURENDER PAL SINGH WAS RECORDED ON OATH ON 24/12/20 03 AND 30/12/2003 BY THE ADDITIONAL DIRECTOR OF INCOME TAX IN WHICH H E ADMITTED THAT THE CONCERNS IN WHICH HE IS DIRECTOR OR OTHER CONCERN I S CONTROLLED BY HIM WERE NOT ENGAGED IN DOING ANY ACTUAL BUSINESS EXCEPT PRO VIDING ACCOMMODATION ENTRIES. HE SUBMITTED THAT HE IS DIRECTOR IN CV ME TAL POWDERS (HARYANA LTD AND HE CONTROLLED AND OPERATED OTHER CONCERNS. IN THESE, ALL COMPANIES NAMED BY HIM THAT, TRAIL OF CASH DEPOSIT WAS FOUND WHICH ULTIMATELY FOUND ITS WAY TO THE BOOKS OF THE ASSESSEE COMPANY. THER EFORE, THE LEARNED CIT A CONFIRMED THE TRANSACTION OF RUPEES ONE CRORE ON SALE OF SHARES THROUGH CV METAL POWDERS HARYANA LTD. 11. OUT OF SUM OF INR 90,000,000 RECEIVED DURING THE YE AR ON ACCOUNT OF UNSECURED 0 COUPON FULLY CONVERTED BONDS HE HELD TH AT SIMILAR ISSUE AROSE IN ASSESSMENT YEAR 2005 06 WHEREIN THE LEARNED AS SESSING OFFICER MADE AN ADDITION OF INR 75,000,000 IN RESPECT OF AMOUNT REC EIVED ON ACCOUNT OF THESE BONDS FROM 7 DIFFERENT COMPANIES. THE LEARNE D CIT A DELETED THE ABOVE ADDITION FOR ASSESSMENT YEAR 2005 06 THEREF ORE AS THERE WAS NO EVIDENCE AVAILABLE THAT THESE COMPANIES ARE INVOLVE D IN PROVIDING ACCOMMODATION ENTRIES HE DELETED THE ADDITION OF IN R 80,000,000 PERTAINING TO 10 DIFFERENT PARTIES SUBSCRIBING TO THE ABOVE BO NDS. 12. OUT OF SUM OF INR 90,000,000 RECEIVED ON ACCOUNT OF UNSECURED 0% COUPON FULLY CONVERTIBLE BONDS, THE LEARNED CIT A CONFIR MED THE ADDITION U/S 68 OF THE INCOME TAX ACT WITH RESPECT TO B - FIN LEASE PR IVATE LIMITED OF RS. ONE CRORE STATEMENT OF SRI SURENDER PAL SINGH WAS RECOR DED ON OATH ON 24/12/2003 AND 30/12/2003 BY THE ADDITIONAL DIRECTO R OF INCOME TAX IN WHICH HE ADMITTED THAT THE CONCERNS IN WHICH HE IS DIRECTOR OR OTHER PAGE | 7 CONCERN IS CONTROLLED BY HIM WERE NOT ENGAGED IN DO ING ANY ACTUAL BUSINESS EXCEPT PROVIDING ACCOMMODATION ENTRIES. HE SUBMITT ED THAT HE IS DIRECTOR IN B FINLEASE PRIVATE LIMITED AND HE CONTROLLED AND OPERATED OTHER CONCERNS. IN THESE, ALL COMPANIES NAMED BY HIM THAT, TRAIL OF CASH DEPOSIT WAS FOUND WHICH ULTIMATELY FOUND ITS WAY TO THE BOOKS OF THE ASSESSEE COMPANY. THEREFORE, THE LEARNED CIT A CONFIRMED THE TRANSA CTION OF RUPEES ONE CRORE. 13. THUS HE CONFIRMED THE ADDITION OF INR 1,37,50,000/O N SALE OF SHARES AND RS 1,00,00,000/- ON ACCOUNT OF AMOUNT RECEIVED ON ISSUE OF 0% CONVERTIBLE BONDS BUT DELETED THE ADDITION OF INR 80,000,000/- . THUS, BOTH THE PARTIES ARE IN APPEAL BEFORE US. 14. DESPITE NOTICE TO THE ASSESSEE, NONE APPEARED ON IT S BEHALF. FURTHER, THESE APPEALS ARE FILED IN 2008 2009 AND AT ONE PRETEXT OR ANOTHER ASSESSEE IS SEEKING ADJOURNMENT. DESPITE HEARING FIXED ON MANY OCCASIONS, THE ASSESSEE HAS NOT FILED ANY PAPER BOOK OR EVIDENCES TO SUPPORT ITS CASE. FOR THE LAST MANY HEARINGS, ASSESSEE REMAINS UNDERREPRE SENTED EXCEPT ON ONE OCCASION. AS THESE ARE VERY OLD OUTSTANDING APPEAL S THE ISSUES ARE DECIDED ON THE MERITS OF THE CASE AS PER INFORMATION AVAILA BLE ON RECORD. 15. THE LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED ASSESSING OFFICER AND STATED THAT THE L EARNED CIT CAPITAL HAS DELETED THE ADDITION WITH RESPECT TO THE ZERO COUPO N BOND INVESTORS MERELY BECAUSE OF THE REASON THAT THEY WERE NOT INVOLVED I N ACCOMMODATION ENTRY. SHE SUBMITTED THAT IT IS NOT A CRITERION FOR DELETI NG OR MAKING AN ADDITION. SHE SUBMITTED THAT THE TEST HAS TO BE MADE IN ACCOR DANCE WITH THE PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT. SH E FURTHER SUBMITTED THAT THE ASSESSEE HAS FAILED TO PRODUCE THE DIRECTORS OF THOSE COMPANIES. SHE FURTHER STATED THAT ENQUIRY LETTERS SENT U/S 133 (6 ) OF THE ACT ISSUED TO THOSE PARTIES REMAINED UNSERVED. SUMMONS ISSUED U/S 131 OF THE INCOME TAX ACT ALSO REMAINS UNKEMPT. SHE REFERRED TO THE ORDER OF THE LEARNED ASSESSING OFFICER AND STATED THAT ASSESSEE HAS MISERABLY FAIL ED TO DISCHARGE ITS INITIAL ONUS. 16. WITH RESPECT TO THE REOPENING OF THE CASE IT WAS SU BMITTED THAT THE LEARNED CIT A HAS CORRECTLY DEALT WITH THE ISSUE AS INFOR MATION WAS RECEIVED FROM THE INVESTIGATION WING AND CASE OF THE ASSESSEE WAS NEVER SCRUTINIZED UNDER PAGE | 8 SECTION 143 (3) OF THE INCOME TAX ACT FOR THIS YEAR . IT WAS FURTHER SUBMITTED THAT THE ASSESSMENT U/S 13 (3) OF THE INCOME TAX AC T FOR ASSESSMENT YEAR 2005 06 WAS PASSED BY THE LEARNED ASSESSING OFFIC ER ON 31/12/2007 WHEREIN IT WAS FOUND THAT ISSUE OF 0% UNSECURED COU PON FULLY CONVERTIBLE BONDS ISSUED BY THE ASSESSEE TO VARIOUS COMPANIES A RE NOT IDENTIFIED, THEIR CREDITWORTHINESS DOUBTFUL AND THERE IS NO GENUINENE SS IN THE ISSUE OF THOSE SHARES/BONDS. PART OF SUCH BOND ALSO RELATED TO AS SESSMENT YEAR 2004 05 AND THEREFORE THE LEARNED ASSESSING OFFICER HAS REA SON TO BELIEVE THAT SUM RECEIVED IN ASSESSMENT YEAR 2004 05 IS ALSO NOT G ENUINE. FOR JUSTIFYING THE REOPENING OF THE ASSESSMENT FOR ASSESSMENT YEAR 2004 05, SHE EXTENSIVELY REFERRED TO THE ASSESSMENT ORDER FOR AS SESSMENT YEAR 2005 06 WHERE THE COMPLETE STATUS OF THE ISSUE OF ZERO COUP ON UNSECURED FULLY CONVERTIBLE BONDS ISSUED BY THE COMPANY TO THESE NO N-DESCRIPT COMPANIES IS AVAILABLE. IT IS FURTHER STATED THAT OUT OF THE SE, THERE ARE ALLOTMENTS TO SOME OF THE COMPANIES WHO ARE PROVED ACCOMMODATION ENTRY PROVIDERS. SHE THEREFORE STATED THAT ISSUE IS SQUARELY COVERED AGA INST THE ASSESSEE BY THE DECISION OF THE HONOURABLE SUPREME COURT APPLIED BY THE LEARNED CIT A. SHE FURTHER STATED THAT THERE IS A TANGIBLE MATERIA L COMING INTO THE POSSESSION OF THE ASSESSING OFFICER AND THEREFORE H E HAS A REASON TO BELIEVE THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. THEREFORE, SHE SUBMITTED THAT NO FAULT COULD BE FOUND WITH THE ASS ESSING OFFICER IN REOPENING OF THE ASSESSMENT. SHE FURTHER STATED TH AT ISSUE IS SQUARELY COVERED IN FAVOUR OF THE REVENUE BY THE DECISION OF THE HONOURABLE SUPREME COURT IN CASE OF NRA IRON & STEEL CO LTD AND OF HONOURABLE DELHI HIGH COURT IN CASE OF NDR PROMOTERS LTD. 17. WE HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF THE LEARNED DEPARTMENTAL REPRESENTATIVE AS WELL AS THE ORDERS OF THE LOWER A UTHORITIES. 18. FIRST WE COME TO THE APPEAL OF THE ASSESSEE WHEREIN THERE IS A CHALLENGE TO THE ACTION OF THE REOPENING OF THE ASSESSMENT CONFI RMED BY THE LEARNED CIT A AS PER GROUND NUMBER 1 OF THE APPEAL. ADMITTED LY IN THE PRESENT CASE THE ASSESSEE HAS FILED THE RETURN OF INCOME BUT IT WAS NOT SELECTED FOR SCRUTINY BUT WAS ACCEPTED U/S 143 (1) OF THE INCOME TAX ACT. THE FIRST CHALLENGE IS WITH RESPECT TO THAT THERE IS NO MATER IAL BASED ON THE BELIEF COULD BE FORMED AND THERE IS AN ESCAPEMENT OF INCOM E. IN THE PRESENT CASE PAGE | 9 THE LEARNED ASSESSING OFFICER REOPENED THE CASE OF THE ASSESSEE HAS A SPECIFIC INFORMATION FROM THE INVESTIGATION WING WAS RECEIVE D THAT ASSESSEE HAS TAKEN A COMMON ACCOMMODATION ENTRIES AND INTRODUCE THE AMOUNT BY WAY OF PAYING CASH. WITH RESPECT TO THE ISSUE OF UNSEC URED 0% FULLY CONVERTIBLE BONDS ISSUED BY THE ASSESSEE, IT WAS THOROUGHLY EXA MINED BY THE LEARNED ASSESSING OFFICER FOR ASSESSMENT YEAR 2005 06 WHI LE PASSING AN ORDER U/S 143 (3) ON 31/12/2007 WHEREIN IT WAS FOUND THAT IDE NTITY OF THE DEPOSITOR AND THEIR CREDITWORTHINESS IS FULL OF DOUBT AND THE TRANSACTION IS NOT GENUINE. THEREFORE IN THE FORM OF INFORMATION RECE IVED BY THE ASSESSING OFFICER WHILE MAKING AN ASSESSMENT OF THE ASSESSEE FOR ASSESSMENT YEAR 2005 06, HE RECEIVED A TANGIBLE INFORMATION WITH RESPECT TO ESCAPEMENT OF INCOME FOR ASSESSMENT YEAR 2004 05, THEREFORE, RE OPENING FOR ASSESSMENT YEAR 2004 05 CANNOT BE SAID TO BE WITHOUT ANY MAT ERIAL. THE LEARNED ASSESSING OFFICER THEREFORE HAS REASON TO BELIEVE A BOUT THE ESCAPEMENT OF ASSESSMENT. THEREFORE, THERE IS A TANGIBLE MATERIA L IN POSSESSION OF THE ASSESSEE. IT HAS ALSO LIVE LINK WITH THE INFORMATI ON AND THE FORMATION OF THE BELIEF. THE REASONS RECORDED BY THE LEARNED ASSESS ING OFFICER ALSO A SPECIFIC, DEFINITE, AND RELEVANT TO THE MATTER UNDER DISPUTE. THE LEARNED CIT A HAS DEALT WITH THIS ISSUE IN PARAGRAPH NUMBER 7-16 OF H IS ORDER. FURTHER, THE REASONS RECORDED BY THE ASSESSING OFFICER WERE GIVE N TO THE ASSESSEE. THE ASSESSEE ALSO RAISED AN OBJECTION, WHICH WAS ALSO D EALT WITH BY THE AO. THE LEARNED CIT A RELYING ON DECISION OF THE HONOURAB LE SUPREME COURT IN CASE OF ASSISTANT COMMISSIONER OF INCOME TAX VS RAJESH J AVARI STOCK BROKERS PRIVATE LIMITED 291 ITR 500, RAYMOND WOLLEN MILLS L IMITED V ITO 236 ITR 34 HELD THAT ISSUE OF NOTICE U/S 148 IN THE PRESENT CASE IS JUSTIFIED. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT A WITH RESPECT TO THE REOPENING OF THE ASSESSMENT AS TANGIBLE MATERIAL WA S RECEIVED FROM THE INVESTIGATION WING. IN VIEW OF THIS GROUND NUMBER ONE OF THE APPEAL OF THE ASSESSEE IS DISMISSED. 19. GROUND NUMBER 2, 5 AND 6 ARE GENERAL IN NATURE AN D THEREFORE SAME ARE DISMISSED. 20. GROUND NUMBER 3 IS WITH RESPECT TO THE CONFIRMATION OF ADDITION OF INR 20,000,000, GROUND NUMBER 4 IS WITH RESPECT TO THE ADDITION OF INR 3,750,000 ON ACCOUNT OF SALE OF SHARES. PAGE | 10 21. WITH RESPECT TO THE ADDITION OF INR 3 750000/ ON A CCOUNT OF SALE OF SHARES THROUGH MKM FINSEC PRIVATE LIMITED, THE DIRECTOR OF THE SAID COMPANY MAHESH BERTHA HAS CATEGORICALLY STATED BEFORE THE A DDITIONAL DIRECTOR OF INCOME TAX IN HIS STATEMENT THAT THE ABOVE COMPANY IS ENGAGED IN PROVIDING ACCOMMODATION ENTRIES ONLY AND HAS NOT CARRIED ON A NY BUSINESS OF PURCHASE AND SALE OF SHARES. THE ASSESSEE COULD NO T PROVE ABOVE STATEMENT INCORRECT. THE ASSESSEE NEITHER PRODUCED ANY OF TH E DIRECTORS OF THE ABOVE COMPANY AS WELL AS JUSTIFIED THE TRANSACTIONS OF SA LE OF SHARES THROUGH ABOVE COMPANY. IT MERELY PRODUCED THE PAPER DOCUME NTS, WHICH WERE NOT AT ALL RELEVANT AS THE INQUIRIES CONCLUSIVELY SHOWE D THAT COMPLETE TRANSACTION IS AN ACCOMMODATION ENTRY. IN VIEW OF THIS WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT A IN CO NFIRMING THE ABOVE ADDITION U/S 68 OF THE INCOME TAX ACT. ACCORDINGLY, GROUND NUMBER 4 OF THE APPEAL OF ASSESSEE IS DISMISSED. 22. WITH RESPECT TO AN ADDITION OF RUPEES ONE CRORE ON ACCOUNT OF SALE OF SHARES THROUGH CV METAL (HARYANA) LTD AND ISSUE OF RUPEES ONE CRORE OF 0% FULLY CONVERTIBLE BONDS TO B FINLEASE PRIVATE LIMITED , THE LEARNED CIT A CONFIRMED THE ABOVE ADDITION AS MR. SURINDER PAL SI NGH, DIRECTOR OF ABOVE COMPANIES STATED ON OATH BEFORE THE ADDITIONAL DIRE CTOR OF INCOME TAX ON 24/12/2003 AND 30/12/2003 THAT HE IS DIRECTOR OF TH ESE COMPANY AND THESE COMPANIES ARE NOT ENGAGED IN DOING ANY ACTUAL BUSINESS EXCEPT PROVIDING THE ACCOMMODATION ENTRIES. HE NAMED BOTH THE ABOVE COMPANIES AS COMPANIES OWNED BY HIM. THESE ARE ALL THOSE COM PANIES FROM WHERE THE TRAIL OF CASH DEPOSIT IS FOUND WHICH AFTER ROOTING THROUGH ONE OR TWO INTO MAJOR CONCERNS FOUND ITS WAY BACK TO THE BOOKS OF T HE ASSESSEE COMPANY. TO REPUDIATE THE STATEMENT MADE BY MR. SURINDER PAL SINGH, ASSESSEE NEVER PRODUCED THIS GENTLEMAN BEFORE THE ASSESSING OFFICE R. SUMMONS ISSUED U/S 131 OF THE INCOME TAX ACT WERE NEVER COMPLIED WITH. THE PAPERWORK PRODUCED WAS MERELY EYEWASH. THE AO ALSO CONCLUSIV ELY PROVED THE FINANCIAL TRAIL OF DEPOSIT OF CASH RESULTING INTO C REDIT IN THE BOOKS OF ACCOUNTS. WITH RESPECT TO THE GENUINENESS OF THE T RANSACTION OF 0% FULLY CONVERTIBLE BONDS IN THE ASSESSEE, COMPANY WAS NOT AT ALL PROVED BY THE ASSESSEE. IF THE FINANCIAL OF THE ASSESSEE FOR ASS ESSMENT YEAR 2004 05 ARE NOTED IT WILL SHOW THAT IT HAS FILED RETURN OF INCO ME AT RUPEES NIL. IT HAS A PAGE | 11 GROSS TOTAL INCOME OF INR 1 03212 IN THIS YEAR AND INR 1 1124 IN EARLIER YEARS. IT DOES NOT OWN A SINGLE RUPEE IN FIXED ASS ETS. IT HAS SHARE CAPITAL OF ONLY INR 3,832,000/ ITS RESERVES AND SURPLUS IS A MEAGER SUM OF INR 1 13488/ DURING THE FINANCIAL YEAR ENDED ON 31 ST OF MARCH 2004, IT HAS RAISED UNSECURED LOAN OF INR 29.10 CRORES. OUT OF THE ABOVE SUM, ASSESSEE HAS MADE SHARE APPLICATION MONEY, WHICH IS PENDING FOR ALLOTMENT OF INR 19.10 CRORES IN OTHER COMPANIES, THE LIST OF SUCH C OMPANIES WAS NOT AT ALL SUBMITTED BY THE ASSESSEE. INR 100,000,000 WAS GIV EN TO LOAN TO JCT ELECTRONICS LTD. THE ABOVE COMPANY IN THE EARLIER YEAR MADE INVESTMENT IN PRIVATE LIMITED COMPANIES OF A SUM OF INR 5 0.50 LA KHS, ON WHICH NEITHER THERE IS ANY DIVIDEND INCOME. SURPRISINGLY ALTHOUG H SHARES HAVE BEEN SOLD DURING THE YEAR BUT THERE IS NO CAPITAL GAIN OR LOS S ARISING TO THE ASSESSEE. LOOKING AT THE SUBSTANCE OF THE ASSESSEE COMPANY IT HAS ONLY INCURRED EXPENDITURE OF INR 6000 AS FILING FEES, INR 1220/- AS BANK CHARGES AND INR 11 020 AS AUDIT FEES. IT DOES NOT HAVE ANY EMPLOYE E, AS THERE IS NO SALARY EXPENDITURE INCURRED BY THE ASSESSEE. IT DOES NOT HAVE ANY TELEPHONE FACILITY; IT DOES NOT HAVE ANY INVESTMENT CONSULTAN CY EXPENDITURE THAT HOW THIS COMPANY HAS GENERATED 29,10,00,000 TOWARDS 0% FULLY CONVERTIBLE UNSECURED BONDS. IT IS RATHER UNUSUAL THAT SOMEBOD Y WILL INVEST IN SUCH A COMPANY WHERE THERE IS NO SECURITY OF INVESTMENT, N O INTEREST IN RETURN OF INVESTMENT AND CONVERTIBLE BONDS (NOT EXPLAINED WHA T ARE THE TERMS AND CONDITIONS OF CONVERSION OF SUCH BONDS AND INTO EQU ITY SHARES AFTER 15 YEARS FROM THE DATE OF ALLOTMENT AT THE PRICE DETERMINED BY THE COMPANY). NO DOCUMENTS WITH RESPECT TO ISSUE OF 0% FULLY CONVERT IBLE UNSECURED DEBENTURE BONDS WERE PRODUCED BEFORE ANY OF THE AUT HORITIES. NO INTIMATION/APPROVAL/REGISTRATION OF THE RESERVE BAN K OF INDIA FOR ISSUE OF SUCH A KIND OF SECURITY WAS ALSO SHOWN. THERE IS A LSO A CHANGE IN THE BOARD OF DIRECTORS OF THE COMPANY WHERE THREE DIRECTORS R ETIRE AND THREE DIRECTORS WERE INDUCTED. THUS, IT CLEARLY SHOWS THAT BY THE CHANGE OF THE DIRECTORS THE CONTROL AND MANAGEMENT OF THE WHOLE FUND GOES W HERE UNDER WHOSE CONTROL. THE NOTE NUMBER IV OF SCHEDULE 8, READS A S UNDER :- THE COMPANY HAS BEEN ASSIGNED THE RIGHT OF INR 19. 10 CRORES (GIVEN AS SHARE APPLICATION MONEY TO JCT ELE CTRONICS LTD) BY APJ FINANCIAL SERVICES PRIVATE LIMITED AND IN PAGE | 12 CONSIDERATION THEREOF 0 COUPON BOND AGGREGATING TO INR 19.10 CRORES HAVE BEEN ISSUED TO APJ FINANCIAL SERV ICES PRIVATE LIMITED. SHARES ARE YET TO BE ALLOTTED BY JCT ELECTRONICS LTD AGAINST THIS ADVANCE. IT IS FURTHER TO BE NOTED THAT IN ASSESSMENT YEAR 2 005 06, THE TOTAL UNSECURED 0 COUPON FULLY CONVERTIBLE BONDS ISSUED B Y THE COMPANY REACHED AT THE HEIGHT OF RUPEES 44.10 CRORES. THUS, IT IS APPARENT THAT FINANCIALS OF THESE ASSESSEE COMPANIES, THE BUSINESS MODEL OF THE ASSESSEE COMPANY, THE CHANGE IN THE DIRECTORS OF THE ASSESSEE COMPANY, AL LEGATION OF ACCOMMODATION ENTRY PROVIDERS WITH RESPECT TO SOME OF THE SUBSCRIBERS OF THESE BONDS CLEARLY MAKES THE ABOVE TRANSACTION AS NONGENUINE. THIS FACT ITSELF MAKES THE WHOLE TRANSACTION SHROUDED BY INGE NUITY. SUBSTANTIALLY, THE ASSESSEE HAS FAILED TO SHOW THE CREDITWORTHINES S OF THE DEPOSITORS AND GENUINENESS OF THE TRANSACTION. IN VIEW OF THIS GR OUND NUMBER 3 OF THE APPEAL CHALLENGING THE CONFIRMATION OF THE ADDITION OF INR 20,000,000 BY THE LEARNED CIT A ON ACCOUNT OF SALE OF SHARES OF RS 1 CRORE THROUGH CV METALS (HARYANA) LTD AND FUNDS RECEIVED FROM B FINLEASE PRIVATE LIMITED OF ALLOTMENT OF 0% UNSECURED FULLY CONVERTIBLE BOND S IS DISMISSED. 23. CONNECTED TO THIS IS THE SOLITARY GROUND OF APPEAL OF THE LEARNED ASSESSING OFFICER AGAINST THE DELETION OF THE ADDITION OF INR 80,000,000. THE FACT SHOWS THAT THE LEARNED ASSESSING OFFICER HAS MADE A N ADDITION OF INR 90,000,000 ON ACCOUNT OF UNSECURED 0 % COUPON CON VERTIBLE BONDS U/S 68 OF THE INCOME TAX ACT. MAIN REASON FOR MAKING SU CH ADDITION IS THAT THERE WAS NO RESPONSE RECEIVED OF NOTICES ISSUED U/S 133 (6) EXCEPT IN 1 OF THE CASES, DIRECTORS OF THE SAID COMPANIES WERE NOT PRO DUCED FOR VERIFICATION, HUGE CASH DEPOSITS WERE THERE IN THE BANK ACCOUNTS OF THE COMPANIES WHICH CONTRIBUTED MONEY TO THE ASSESSEE THROUGH THE LAYE RS , TRANSFER OF FUNDS AND ARRANGED THE FAIR, ABNORMAL FEATURES NOTICED I N THE BANK ACCOUNTS OF THE INVESTING COMPANIES, THE COMPANIES ARE INVOLVED IN PROVIDING ACCOMMODATION ENTRIES AND THEREFORE THE TRANSACTION S ARE NOT GENUINE. OVER AND ABOVE THE BURDEN CAST ON THE ASSESSEE WAS NOT DISCHARGED AS PROVIDED U/S 68 OF THE INCOME TAX ACT. ACCORDING T O THE ASSESSING OFFICER FURNISHING OF THE PERMANENT ACCOUNT NUMBER AS WELL AS THE ASSESSMENT PARTICULARS WERE NOT SUFFICIENT. THE LEARNED CIT A HAS DELETED THE ADDITION PAGE | 13 OF INR 80,000,000 FOR SIMPLE REASON THAT THE COMPAN IES WHO INVESTED IN THE ZERO COUPON BONDS WERE NOT INVOLVED IN PROVIDING AC COMMODATION ENTRIES. FURTHER, THE ASSESSEE HAS PRODUCED THE INCOME TAX R ETURN ACKNOWLEDGEMENT, BOARD RESOLUTION, BALANCE SHEET AN D PROFIT AND LOSS ACCOUNT, BANK STATEMENT, AFFIDAVIT AND CONFIRMATION LETTER OF THOSE COMPANIES. ADMITTEDLY NOTICE ISSUED UNDER SECTION 133 (6) TO THESE PARTIES WERE NOT RESPONDED EXCEPT ONE PARTY. FOR ASSESSMEN T YEAR 2004 05, THE LEARNED CIT A SIMPLY RELIED UPON THE DECISION FOR ASSESSMENT YEAR 2005 06 IN CASE OF THE ASSESSEE. FURTHER, THAT YEAR IT IS APPARENT THAT IN PARA NUMBER 6 THE LEARNED AO HAS NOTED THAT INCOME PLANS OF SUMMONS U/S 131 ONLY ONE PARTY APJ FINANCIAL SERVICES PRIVATE LIMIT ED RESPONDENT. NO PARTIES RESPONDED AT ALL. IT WAS ALSO NOTED THAT PARTIES W ERE NOT AVAILABLE AT THE ADDRESS GIVEN IN THEREFORE THE SUMMONS REMAINS UNCE RTAIN. IN PARA, NUMBER 7 OF THE ORDER FOR ASSESSMENT YEAR 2005 06 THE ASSESSING OFFICER HAS GIVEN THE DETAILED STATUS OF THE SUMMONS ISSUED TO ALL THOSE PARTIES. EXCEPT PARTY AT SERIAL NUMBER 1 ALL THE 7 PARTIES REPORT OF THE INSPECTOR SHOWS THAT, NO SUCH PARTY WAS EXISTING AT THE GIVEN ADDRESS. THE ASSESSEE WAS ASKED FOR WHEN THE NEW ADDRESSES WERE FURNISHED THE AO ON 7/12/2007 AT ISSUED SUMMONS TO ALL THESE PARTIES. THE AO NOTED THAT FIVE PARTIES WERE NOT AT ALL AVAILABLE AT THE GIVEN ADDR ESS AND ALL THE NOTICES U/S 131 WAS SERVED UPON AT THE ADDRESS OF RABIK EXPORTS LTD (THIS IS THE SAME PARTY, WHICH HAS BEEN NAMED BY MR. SURRENDER PAL SI NGH ARRORA STATING THAT HE IS ENGAGED IN THE BUSINESS OF PROVIDING ONL Y ACCOMMODATION ENTRIES). THE SUMMONSES WERE ALSO SOLD ONLY ON ONE -PERSON SURRENDER PAL SINGH ARORA. IN ONE OF THE PARTY, THE NOTICES WERE SERVED BY A FIXTURE. THE PERSONAL DEPOSITION OF THESE PARTIES ASKED, ALL THE PARTIES FILED A REPLY WITHOUT ANY PERSONAL DISPOSITION. THE RABIK EXPORT S LTD INVESTED RUPEES ONE CRORE. THIS PARTY HAS SHOWN A LOSS OF RUPEES T O 8815/ FOR ASSESSMENT YEAR 2005 06 AND HAVING A TOTAL TURNOVER OF ONLY INR 3 25647/. THE ASSESSING OFFICER FURTHER ASKED FOR THE BANK STATEM ENT, SOURCE OF INVESTMENT AND DETAILS OF INVESTMENT ALONG WITH THE COMPLETE B OOKS OF ACCOUNTS AS WELL AS THE PRODUCTION OF PRINCIPAL OFFICER OF THAT COMP ANY. NO COMPLIANCE WAS MADE. THE BANK STATEMENT WAS CALLED FOR BY ISSUING SUMMONS U/S 131 TO THE BANK ARE. ON THE BANK STATEMENT VERIFICATION, HE NOTED THAT THERE IS A PAGE | 14 HUGE INFLUENCE OF PROVINCE ON DAILY BASES, WHICH DO ES NOT COINCIDE WITH THE INCOME AS WELL AS TURNOVER OF THE COMPANY. SIMILAR IS THE FATE WITH THE OTHER COMPANY. IN 1 OF THE COMPANY POLO LEASING FI NANCE LTD SAME STATE OF AFFAIRS WERE FOUND NO DETAILS WERE FURNISHED INCLUD ING THE DIRECTORS WERE ALSO NOT PRODUCED. EVEN THEN SUMMONS ISSUED TO THE BANK ARE ALSO SHOWED THE UNUSUAL TRANSACTIONS OF CHEQUE THAT WERE ISSUED PRIOR TO THE OPENING OF THE BANK ACCOUNT. EVEN THE COMPANY WAS NOT FOUND F IRST H FINANCE LTD AT THE GIVEN ADDRESS. THE BANK ACCOUNT SHOWED OVER AN D ABOVE THE OTHER DETAIL ONLY THE TRANSFER ENTRIES FROM THE OTHER PAR TIES. IN SURYA UDYOG, LIMITED SAME FACTS PREVAIL. IN CASE OF ARUN INVEST MENT LTD, DIGNITY FINVEST LTD, UP ELECTRICAL LTD, NO PERSON WAS FOUND AT THE GIVEN ADDRESS. THEREFORE, THE LEARNED ASSESSING OFFICER CLEARLY HELD THAT IDE NTITIES, CREDITWORTHINESS OF THESE COMPANIES WERE NOT ESTABLISHED. NATURALLY, W HEN THESE TWO INGREDIENTS ARE NOT SATISFYING THE ISSUE OF GENUINE NESS DOES NOT ARISE AT ALL. WHILE DEALING WITH THE WHOLE ISSUE THE LEARNED CIT A IN PAGE NUMBER 19 OF HIS ORDER FOR ASSESSMENT YEAR 2005 06 HAS HELD TH AT IN CASE OF ARUN FINVEST LTD WHO HAS INVESTED INR 5,000,000/ HAS HE LD THAT THAT COMPANY HAS PAID UP CAPITAL OF INR 6,000,000 AND RESERVES A ND SURPLUS OF INR 4,000,000 THEREFORE THE COMPANY IS AGGREGATE STRONG POSITION OF FUNDS OF RUPEES ONE CRORE. THE LEARNED CIT A ALSO NOTED T HAT THERE IS NO DEPOSIT OF CASH IN THE BANK ACCOUNT OF THAT COMPANY. THEREFOR E, IT WAS HELD THAT CAPACITY AND CREDITWORTHINESS OF THE PARTY WAS ESTA BLISHED. WITH RESPECT TO THE OTHER PARTIES, THE SIMILAR OBSERVATIONS ARE GIV EN BY CIT APPEAL. IT IS INTERESTING TO NOTE THAT IN OF THE CASE THE GENUINE NESS OF THE ABOVE INVESTMENT MADE BY THIS COMPANY IN THE ASSESSEE COM PANY WAS TALKED ABOUT BY THE CIT APPEAL. THERE IS NO WHISPER THAT THE COMPANIES WERE HAVING THE SMALL MEANS HAVE INVESTED IN A FINANCIAL ASSET OF A COMPANY WHICH DOES NOT JUSTIFY SUCH A HUGE INVESTMENT. FUR THER, BY AN UNKNOWN PERSON WHO INVESTS IN THE COMPANY LIKE ASSESSEE COM PANY AT A 0% RATE OF RETURN, THERE IS NO SECURITY OF THE INVESTMENT AS T HESE ARE THE UNSECURED FINANCIAL ASSET. THERE IS NO CERTAINTY AT WHAT RAT E THEY WOULD BE CONVERTED INTO THE EQUITY SHARES. THERE IS NO REFERENCE THAT WHY A PERSON WOULD INVEST FOR 15 YEARS TO GET A SHARE OF A NON-DESCRIPT COMPA NY LIKE ASSESSEE. HE DID NOT TAKE INTO CONSIDERATION THAT THERE IS A CHANGE OF DIRECTOR. HE ALSO DID PAGE | 15 NOT LOOK AT THAT HOW THE ASSESSEE GOT HOLD OF ALL T HESE COMPANIES AND GARNERED SUCH A HUGE FUND WHEN ASSESSEE ITSELF IS A NON-DESCRIPT COMPANY. THE LEARNED CIT A ALSO CONVENIENTLY IGNORED THAT RABIK EXPORT LTD WAS NAMED AS ACCOMMODATION ENTRY PROVIDER BY MR. SURREN DER PAL SINGH ARORA. DESPITE THIS, HE DID NOT CONFIRM THE ADDITION OF IN VESTMENT MADE BY THIS COMPANY. THE LEARNED CIT APPEAL DID NOT WHISPER AB OUT THE RECEIPT OF SUMMONS ISSUED TO ALL THESE COMPANY RECEIVED BY MR. SURRENDER PAL SINGH ARORA. FURTHER, THE LEARNED CIT A DID NOT BEAT W ITH THE FINDING OF THE LEARNED CIT A NONE OF THE PARTIES WAS PRODUCED BE FORE THE ASSESSING OFFICER FOR EXAMINATION. EVEN THE CIT APPEAL DID N OT EXAMINE ANY OF THE PARTIES BEFORE DELETING THE ADDITION. NO EXPLANATI ON IS FORTHCOMING FROM THE SIDE OF THE ASSESSEE EVEN BEFORE THE CIT APPEAL THA T HOW THE PARTIES DID NOT RESPOND TO THE SUMMONS ISSUED BY THE LEARNED ASSESS ING OFFICER WHEN THEY HAVE INVESTED SUCH UNITS WITH THE ASSESSEE WITHOUT HAVING ANY RETURN. THE LEARNED CIT A CLOSED HER EYES TO THE STARTLING FA CTS NARRATED BY THE ASSESSING OFFICER AND SUPERFLUOUSLY RELIED UPON THE SEVERAL DECISIONS WITHOUT LOOKING INTO THE FACTS AND IN THOSE CASES A ND THE FACTS OF THE ASSESSEES CASE. THE CLAIM OF THE ASSESSEE THAT I T HAD PRODUCED EVIDENCE BEFORE THE ASSESSING OFFICER DURING THE SCRUTINY AS SESSMENT PROCEEDING THAT THE SAID AMOUNT HAD BEEN RECEIVED AS SHARE APPLICAT ION MONEY FROM THOSE COMPANIES AND THEY HAD CONFIRMED HAVING INVESTED IN THE ASSESSEE COMPANY FOR ALLOTMENT OF SHARES/ BONDS, IS NEITHER HERE, NOR THERE. THIS IS FOR THE REASON THAT ONE PART OF ANY SUCH TRANSACTIO N WOULD INVARIABLY BE CONDUCTED THROUGH BANKING CHANNELS AND WOULD BE DUL Y RECORDED , REAL TEST IS WHETHER THE SAME IS GENUINE OR NOT. THAT IS HOW MONEY WOULD BE LAUNDERED. THUS, THE FACT THAT THE MONETARY TRANSA CTION HAS BEEN CONDUCTED THROUGH A BANKING CHANNEL, AND IS ACKNOWL EDGED, DOES NOT RENDER ANY EVIDENCE WITH RESPECT TO CREDITWORTHIN ESS AND GENUINENESS OF THE TRANSACTION IN CASES WHERE THE TRANSACTION ITSE LF IS SHROUDED WITH INGENUITY OF A FINANCIAL INSTRUMENT FOR WHICH THE M ONEY IS DEPOSITED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE COMPANY. THE TRA NSACTIONS SHOWS THAT THE MONEY DEPOSITED BY THESE PARTIES WOULD NEVER BE RETURNED IN ANY FORM WITH ANY REWARD TO ALL THESE COMPANIES. THE MONEY HAS GONE DIRECTLY INTO THE POCKET OF THIS ASSESSEE COMPANY AND THE CONTROL HAS RESTED WITH THE PAGE | 16 NEW DIRECTORS WHO HAVE BEEN APPOINTED. THE HONOURA BLE DELHI HIGH COURT HAD AN OCCASION TO CONSIDER THE ISSUE OF TAXABILITY U/S 68 OF THE INCOME TAX ACT IN 102 TAXMANN.COM 182 IN PRINCIPAL COMMISSIONE R OF INCOME TAX VS NDR PROMOTERS PRIVATE LIMITED IN THE PRESENT CASE T HE SUMMONS WERE RECEIVED BY 1 OF THE ACCOMMODATION ENTRY PROVIDER M R. SURRENDER PAL SINGH ARORA WHO CONFIRMED THAT THE PARTIES ARE OPERATED B Y HIM. INCIDENTALLY, HE ALSO HAS RECEIVED THE SUMMONS ON BEHALF OF ALL THES E COMPANIES. THUS, THE FACTS OF THE CASE BEFORE US IS SIMILARLY PLACED THE N THE ISSUE DECIDED BY THE HONOURABLE DELHI HIGH COURT. HONOURABLE SUPREME CO URT HAD ALSO DECIDED THE IDENTICAL ISSUE IN PRINCIPAL COMMISSIONER OF IN COME TAX VS NRA IRON AND STEEL PRIVATE LIMITED IN 103 TAXMANN.COM 48 WHERE T HE ASSESSEE FAILED TO ESTABLISH THE CREDITWORTHINESS OF THE INVESTORS, TH E ADDITION U/S 68 WITH RESPECT TO THE SHARE CAPITAL AT A PREMIUM WAS CONFI RMED. THE FACTS IN THIS CASE BEFORE US ALSO SHOW THAT SOME OF THE COMPANIES WERE NON-EXISTENT, THE GENUINENESS OF THE TRANSACTION WAS COMPLETELY FOUND DOUBTFUL. THE INVESTORS COMPANIES HAVE FILED THE NEGLIGIBLE TAXAB LE INCOME RETURN AND THEY DO NOT HAVE FINANCIAL STRENGTH TO INVEST FOR SUCH A LONG TIME, IN AN UNSECURED FINANCIAL ASSET, WITHOUT HAVING ANY SIGHT OF RETURN AT ALL. IN VIEW OF THIS, WE ALLOW GROUND NUMBER 1 AND 2 OF THE APPE AL OF THE LEARNED ASSESSING OFFICER WHERE THE LEARNED CIT A HAS DEL ETED THE ADDITION OF INR 80,000,000. ACCORDINGLY, I TO #901/DEL/2009 FILED BY THE LEARNED ASSESSING OFFICER IS ALLOWED. 24. IN THE RESULT FOR AY 2004-05, ITA NUMBER 03/05/2 006/DEL/2009 FILED BY THE ASSESSEE IS DISMISSED AND ITA NUMBER 03/09/2001 /DEL/2009 FILED BY THE LEARNED ASSESSING OFFICER IS ALLOWED. 25. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL IN ITA NO. 2708/DEL/2008 FOR ASSESSMENT YEAR 2005-06:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 7,50,00,0 00/- MADE ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 OF THE IT ACT, 19 61 MADE BY THE AO. 26. AS WE HAVE EXTENSIVELY DEALT WITH THE ORDER OF THE LEARNED CIT A FOR ASSESSMENT YEAR 2005 06 WHILE DECIDING THE APPEAL OF THE LEARNED ASSESSING OFFICER AND ASSESSEE ON THE ISSUE OF TAXA BILITY OF THE SUMS RECEIVED U/S 68 OF THE INCOME TAX ACT ON ACCOUNT OF 0% UNSEC URED CONVERTIBLE BONDS, PAGE | 17 FOR SIMILAR REASONS, WE ALLOW THE SOLITARY GROUND O F APPEAL OF THE ASSESSING OFFICER FOR ASSESSMENT YEAR 2005 06 IN ITA NUMBER 2708/DEL/2008. 27. IN THE RESULT ITA NUMBER 2708/DEL/2008 OF THE LEARN ED ASSESSING OFFICER IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25/11/2019. SD/- SD/- (K.N.CHARY) (PRASHANT MAHARISHI) JUDICIAL MEMBER AC COUNTANT MEMBER DATED: 25/11/2019 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI PAGE | 18 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P S/ PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT 02.12.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER