SAIMANGAL INVESTRADE LTD, MUMBAI V. DCIT CEN CIR-40, MUMBAI

ITA 3924/MUM/2009

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5125 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 24-10-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 18-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR DENIAL
• Keywords: Gift; Principle of natural justice; Opportunity of cross examination; Source of fund; Additional evidence; Question of law; Speculation loss; Difference of opinion
• Section: 68; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI . .. . . . . . , ,, , !'# !'# !'# !'# $ $ $ $ %&. ! !! !. .. .' '' '. .. . . . . . $( $( $( $(, ,, , ) !'# ) !'# ) !'# ) !'# !* !* !* !* BEFORE SHRI P.M. JAGTAP, AM AND DR. S.T.M. PAVALAN, JM !./ I.T.A. NO. 3924/MUM/2009 ( )( , $-, )( , $-, )( , $-, )( , $-, / / / / ASSESSMENT YEAR : 2006-07) M/S SAIMANGAL INVESTRADE LTD. RADHA BHAVAN, 1 ST FLOOR, 121, NAGINDAS MASTER ROAD, MUMBAI-400023 ( ( ( ( / VS. DY. COMMISIONER OF INCOME TAX, CENTRAL CIRCLE-40, MUMBAI #. ! ./ PAN : AABCS4255R ( ./ / // / ASSESSEE ) .. ( 01./ / RESPONDENT ) ASSESSEE BY : SHRI RAJIV KHANDELWAL, AND NEEL KHANDELWAL, 01./ 7 8 ! / RESPONDENT BY : SHRI DR. DENIAL ! ($ 7 / // / DATE OF HEARING : 30.10.2013 9:- 7 / DATE OF PRONOUNCEMENT : 20.12.2013 '; / O R D E R PER P.M.JAGTAP, AM :- . .. . . .. . , ,, , !'# !'# !'# !'# THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A), CENTRAL CIRCLE-7, MUMBAI, DATED 18. 05.2009. 2. THE ISSUE RAISED IN GROUND NO.1 OF THIS APPEAL R ELATES TO THE ADDITION OF RS.10.17 CRORES MADE BY THE AO AND CONF IRMED BY THE LD. CIT(A) ON ACCOUNT OF AMOUNT RECEIVED BY THE ASSESSE E ON ALLOTMENT OF PREFERENCE SHARE CAPITAL TREATING THE SAME AS UNEXP LAINED/UNPROVED. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF TRADING IN SHARES AND SECURITIES . THE RETURN OF 2 ITA NO.3924/MUM/2009 M/S SAIMANGAL INVESTRADE LTD. INCOME FROM THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 25.11.2006 DECLARING TOTAL INCOME AT RS. NIL. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE AO THAT THE ASSE SSEE HAS REPAID THE LOAN TO THE TUNE OF RS.10.17 CRORES TAKEN FROM M/S MADHAVPURA MERCANTILE CO-OPERATIVE BANK LTD. FROM THE AMOUNT R ECEIVED ON ALLOTMENT OF 20,340 CUMULATIVE REDEEMABLE PREFERENC E SHARES OF RS.1000/- EACH AT A PREMIUM OF RS.4,000/- PER SHARE . THIS SOURCE OF FUNDS UTILIZED BY THE ASSESSEE FOR REPAYMENT OF LOA N OF MADHAVPURA MERCANTILE CO-OPERATIVE BANK LTD. WAS INVESTIGATED BY THE DEPARTMENT IN THE CASE OF THE ASSESSEE AS WELL AS IN THE CASE OF OTHER GROUP COMPANIES INVOLVING THE SIMILAR ISSUE. DURING THE COURSE OF SUCH INVESTIGATION, THE DIRECTORS OF 28 COMPANIES WHO HA D SUBSCRIBED TO THE PREFERENCE SHARES WERE SUMMONED AND THEIR STATEMENT S WERE RECORDED. IN THE SAID STATEMENTS, THEY STATED OF HAVING RECEI VED CASH OF EQUAL AMOUNT FROM THE ASSESSEE-COMPANY AGAINST THE AMOUNT PAID FOR SUBSCRIBING TO THE PREFERENCE SHARES. STATEMENT OF ONE SHRI KISHAN KUMAR VERMA WAS ALSO RECORDED, WHO ADMITTED OF HAVI NG MADE AVAILABLE HIS INDIVIDUAL BANK ACCOUNT AS WELL AS TH E BANK ACCOUNTS OF HIS PROPRIETY CONCERN TO DEPOSIT CASH IN LIEU OF SI GNED BLANK ACCOUNT PAYEE CHEQUES TO SHRI PAWAN KUMAR AGARWAL AND SHRI D.K. NAHATA. STATEMENT OF SHRI PAWAN KUMAR AGARWAL WAS ALSO RECO RDED WHEREIN HE ADMITTED THAT THE CHEQUES RECEIVED FROM SHRI KISHAN KUMAR VERMA WERE UTLISED BY HIM TO INVEST IN THE SHARE APPLICAT ION MONEY OF M/S CHAT COMPUTERS PVT. LTD. ANOTHER GROUP CONCERNS. H E HOWEVER DENIED HIS INVOLVEMENT IN ANY CASH TRANSACTIONS. SINCE THE MODUS OPERANDI FOLLOWED IN THE CASE OF ASSESSEE WAS SIMILAR TO M/S CHAT COMPUTERS PVT. LTD, THE AO HELD RELYING ON THE ASSESSMENT MAD E IN THE CASE OF CHAT COMPUTER PVT. LTD. THAT THERE WAS MOBILIZATION OF CASH CREDITS BY VARIOUS LAYERS OF TRANSACTIONS OF WHICH THE ASSESSE E WAS ULTIMATE BENEFICIARY. HE NOTED THAT SIMILAR TRANSACTIONS HA VE BEEN DONE BY THE OTHER GROUP CONCERNS OF THE ASSESSEE WHERE IT WAS C LEARLY ESTABLISH THAT CASH WAS DEPOSITED IN ONE ACCOUNT AND AFTER PASSING THROUGH VARIOUS 3 ITA NO.3924/MUM/2009 M/S SAIMANGAL INVESTRADE LTD. LEVELS, IT HAD REACHED TO THE ASSESSEE COMPANY. IN HIS STATEMENT, MR. KAUSHIK CHHOTA LAL SHAH, DIRECTOR OF THE ASSESSEE C OMPANY HOWEVER DENIED TO HAVE PAID ANY CASH TO THE CONCERNED COMPA NIES AND SOUGHT TO CROSS EXAMINE THE DIRECTORS OF THE SAID COMPANIE S TO PROVE HIS STAND. SUCH CROSS EXAMINATION HOWEVER COULD NOT TAKE PLACE FOR WHICH THE AO HELD THE ASSESSEE RESPONSIBLE. THE AO ALSO REFUSED TO GIVE ANY CREDENCE TO THE DOCUMENTARY EVIDENCE FILED BY THE A SSESSEE IN SUPPORT OF ITS CASE IN THE FORM OF COPIES OF SHARE APPLICAT IONS, ACKNOWLEDGEMENT SLIP, CERTIFICATE OF INCORPORATION ETC HOLDING THAT THE SAME WAS NOT SUFFICIENT TO EXPLAIN SATISFACTORY RELEVANT CASH CR EDITS REPRESENTING AMOUNT CLAIMED TO BE RECEIVED ON ALLOTMENT OF PREFE RENCE SHARES. ACCORDINGLY, HE TREATED THE SAID AMOUNT AS UNEXPLAI NED CASH CREDIT AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE U/S 68. 4. THE ADDITION MADE BY THE AO U/S 68 TREATING THE AMOUNT RECEIVED ON ALLOTMENT OF PREFERENCE SHARES AS UNEXPLAINED CA SH CREDIT WAS CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFO RE THE LD. CIT(A). IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE BEFORE THE LD. CIT(A) THAT IT HAD FURNISHED ALL THE RELEVANT DETAILS WITH REGARD TO S HARE APPLICATION MONEY RECEIVED FROM THE CONCERNED APPLICANTS WHICH WERE SUFFICIENT TO ESTABLISH THEIR IDENTITY AND CREDITWORTHINESS AS WE LL AS GENUINENESS OF THE RELEVANT TRANSACTIONS. IT WAS SUBMITTED THAT T HE AO HOWEVER IGNORED THIS EVIDENCE AND MADE THE ADDITION U/S 68 TREATING THE AMOUNT OF PREFERENCE SHARE CAPITAL AS UNEXPLAINED C ASH CREDIT RELYING ON THE STATEMENT OF THE DIRECTORS OF THE INVESTING COMPANIES WITHOUT GIVING COPIES OF THE SAID STATEMENT TO THE ASSESSEE . IT WAS ALSO SUBMITTED THAT THE SAID STATEMENTS EVEN OTHERWISE C OULD NOT BE RELIED UPON AS THERE WAS HUGE SIMILARITY THEREIN DESPITE T HE FACT THAT DIFFERENT DIRECTORS WERE EXAMINED AT DIFFERENT TIMES. IT WAS CONTENDED THAT THIS FACT ALONE WAS SUFFICIENT TO ESTABLISH THAT THE SAI D STATEMENTS WERE KEPT READY BY THE DEPARTMENT AND ONLY THE SIGNATURES OF THE CONCERNED DIRECTORS WERE OBTAINED. IT WAS ALSO SUBMITTED TH AT NO INDEPENDENTLY 4 ITA NO.3924/MUM/2009 M/S SAIMANGAL INVESTRADE LTD. ENQUIRY WAS MADE BY THE AO AND ADDITION U/S 68 WAS MADE SOLELY RELYING ON THE REPORT OF THE ADIT, KOLKATA. IT WAS CONTENDED THAT EVEN THE OPPORTUNITY OF CROSS EXAMINATION OF THE SHARE A PPLICANTS WAS NOT AFFORDED TO THE ASSESSEE. THE LD. CIT(A) DID NOT F IND MERIT IN THESE SUBMISSIONS MADE BY THE ASSESSEE AND CONFIRMED THE ADDITION MADE BY THE AO U/S 68 MAINLY FOLLOWING HIS APPELLATE ORDER PASSED IN THE CASE M/S CHAT COMPUTER PVT. LTD, ANOTHER GROUP CONCERN W HEREIN A SIMILAR ISSUE WAS DECIDED BY HIM AGAINST THE ASSESSEE INVOL VING IDENTICAL FACTS AND CIRCUMSTANCES . AGGRIEVED BY THE ORDER OF THE LD. CIT(A) CONFIRMING THE ADDITION MADE BY THE AO U/S 68, THE ASSESSEE HA S RAISED THIS ISSUE IN THE PRESENT APPEAL. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED TH AT THE ADDITION MADE BY THE AO U/S 68 WAS CONFIRMED BY THE LD.CIT(A) REL YING ON HIS APPELLATE ORDER PASSED IN THE CASE OF M/S CHAT COMP UTERS PVT. LTD. INVOLVING A SIMILAR ISSUE. AS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, THE ORDER PASSED BY THE LD. CIT(A) IN THE CASE OF CHAT COMPUTERS PVT. LTD. WAS ALSO THE SUBJECT MATTER OF APPEAL BEFORE THE TRIBUNAL AND THE TRIBUNAL VIDE ITS ORDER DATED 22/0 7/2011PASSED IN ITA NO.3859/MUM2009 HAS REVERSED THE SAME AND DELET ED THE SIMILAR ADDITION MADE BY THE AO U/S 68 AND CONFIRMED BY THE LD.CIT(A). A COPY OF THE SAID ORDER IS PLACED ON RECORD BEFORE US AND PERUSAL OF SAME SHOWS THAT A SIMILAR ISSUE INVOLVING IDENTICAL FACT S AND CIRCUMSTANCES HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE A SSESSEE VIDE PARAGRAPH NO. 6 TO 15 OF ITS ORDER WHICH ARE REPROD UCED HERE UNDER:- 6. IT IS EVIDENT FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER HAS NOT CONDUCTED ANY INDEPENDENT ENQUIRY DURING THE ASSESSMENT PROCE EDINGS; BUT SIMPLY RELIED UPON THE REPORT OF THE ADIT(INV), UNIT 1, KOLKATA AS WELL AS THE STATEMENTS OF THE DIRECTORS OF VARIOUS KOLKATA BASED COMPANIES, WHO HAVE PAID THE APPLICATION MONEY. THE SAID INVESTIGATION BY THE ADIT(INV) UNIT 1, KOLKATA WAS NOT CARRIED OUT DURING THE ASSESSMENT PROCEEDINGS; THEREFORE, THE SAID INVESTI GATION WAS NEITHER THE INQUIRY CARRIED OUT DURING THE ASSESSMENT PROCEEDINGS NOR PART OF T HE ASSESSMENT PROCEEDINGS. IT IS CLEAR THAT THE SCRUTINY ASSESSMENT COMMENCED AFTER ABOUT ONE YEAR FROM THE ALLEGED INVESTIGATION WAS OVER. THE ASSESSING OFFICER HAS H EAVILY RELIED UPON THE INVESTIGATION REPORT AND PROCEEDINGS AND SPECIFICALLY ON THE POIN T THAT THE ASSESSEE WAS GIVEN 5 ITA NO.3924/MUM/2009 M/S SAIMANGAL INVESTRADE LTD. OPPORTUNITY TO CROSS EXAMINE THE DIRECTORS OF THE I NVESTING COMPANIES, WHO PAID THE APPLICATION MONEY AND FURTHER, THE ASSESSEE WAS ALS O ASKED BY THE ASSESSING OFFICER TO PRODUCE THE DIRECTORS, WHOSE STATEMENTS WERE RECORD ED BY THE INVESTIGATION UNIT 1, KOLKATA FOR CROSS EXAMINATION OF THEM. 6.1 IN PARA 4.5 AND 4.6, THE ASSESSING OFFICER HAS RECORDED THE REASONS FOR FORMING THE VIEW THAT THE ASSESSEE WAS GIVEN SEVERAL OPPORTUNIT IES TO CROSS EXAMINE THE DIRECTORS OF THE INVESTING COMPANIES AS UNDER: 4.5 AS PER THE STATEMENTS OF THE DIRECTORS OF VARI OUS KOLKATA BASED COMPANIES AND THE OTHER PERSONS, IT IS CLEAR THAT THE ASSESSEE HAD GI VEN CASH TO SO CALLED COMPANIES WHICH IN TURN ISSUED BACK TO ASSESSEE CHEQUES/DEMAND DRAFT OF EQUIVALENT AMOUNT. THIS FAC T WAS STATED ON OATH BY THE DIRECTORS OF THE SAID COMPANIES. HOWEVER, DIRECTOR OF THE ASSESSEE SHRI KIRITI KUMAR N PAREKH DENIED TO HAVE PAID ANY CASH TO THESE PARTIE S IN HIS STATEMENT BEFORE ADIT(INV) UNIT IX(2), MUMBAI. IN HIS STATEMENT HE STATED HIS INTENTION TO CROSS EXAMINE THE AFORESAID DIRECTORS TO PROVE HIS STAND. DDIT(INV) U NIT 1(2) KOLKATA HAS GIVEN SEVERAL OPPORTUNITIES TO THE ASSESSEE TO CROSS EXAMINE THE AFORESAID DIRECTORS AT ITS KOLKATA OFFICE. IN SPITE OF REPEATED OPPORTUNITIES GIVEN TO THE ASSESSEE, THE SAID CROSS EXAMINATION COULD NOT TAKE PLACE AS THE ASSESSEE SO UGHT ADJOURNMENT EVERY TIME. THEREAFTER, THE ASSESSEE STATED THAT HE WOULD EXER CISE HIS RIGHT OF CROSS EXAMINE AT THE TIME OF ASSESSMENT. 4.6 A LETTER DATED 16.9.2008 WAS ISSUED BY THIS OFF ICE TO THE MANAGING DIRECTOR OF THE COMPANY GIVING HIM OPPORTUNITY TO CROSS EXAMINE THE SHARE4 APPLICANTS AND WAS ASKED TO FILE CONFIRMATION OF THE SAID SHARE APPLICANTS O N 30TH SEPT, 2008. HOWEVER, NO ONE APPEARED ON 30TH SEPT 200. IT IS PERTINENT TO MENTI ON HERE THAT ASSESSEE WAS GIVEN SEVERAL OPPORTUNITIES BY THE DDIT(INV) UNIT I(2) KO LKATA TO CROSS EXAMINE THE SAID DIRECTORS OF KOLKATA BASED COMPANIES TO PROVE THE G ENUINENESS OF HIS STAND WHICH HE HAS RECORDED TO THE ADIT(INV), UNIT IX(2) MUMBAI. B UT, INSTEAD, ASSESSEE HAS SOUGHT ADJOURNMENT EVERY TIME AND THEREAFTER, STATED THAT HE WILL EXERCISE HIS RIGHT OF CROSS EXAMINATION AT THE TIME OF ASSESSMENT. THIS CLEARLY SHOWS THE INTENTION OF THE ASSESSEE TO STALL THE TIME. MOREOVER, THE ONUS OF PROVING GE NUINENESS OF THE TRANSACTION LIES ON THE ASSESSEE, WHICH THE ASSESSEE HAS TRIED TO SHIFT ON THE ASSESSING OFFICERS SHOULDER. 6.2 SINCE THE INVESTIGATION PROCEEDINGS WERE NOT PA RT OF THE ASSESSMENT PROCEEDINGS IN THE CASE OF THE ASSESSEE AND EVEN THE INVESTIGATION WAS NOT EITHER U/S 132 OR U/S 133 OF THE I T ACT. IT SEEMS THAT INVESTIGATION BY THE ADI T(INV) UNIT 1, KOLKATA IS PRELIMINARY INVESTIGATION ONLY TO VERIFY THE SUSPICION OF ANY C ONCEALMENT OF INCOME. THE ASSESSING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDING S ASKED THE ASSESSEE TO PRODUCE THE SAID DIRECTORS FOR CROSS EXAMINATION. IT IS EVIDENT FROM THE LETTER OF THE ASSESSING OFFICER DATED 01.10.2008 AS WELL AS DATED 16.9.2008 THAT THE ASSESSING OFFICER DID NOT SUMMON THESE DIRECTORS TO BE PRESENT IN THE OFFICE OF THE ASSESSING OFFICER FOR THE PURPOSE OF CROSS EXAMINATION BY THE ASSESSEE; BUT O N THE CONTRARY, THE ASSESSEE WAS ASKED TO PRODUCE THESE DIRECTORS FOR CROSS EXAMINAT ION PURPOSE. THIS IS A GROSS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE WHEN THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE THE DIRECTORS FOR AVAILING OPPORTUNITY OF C ROSS EXAMINATION. THE ASSESSING OFFICER RELIED UPON THE STATEMENT OF THE DIRECTORS OF THE INVESTING COMPANY RECORDED DURING THE INVESTIGATION PROCEEDINGS BY THE ADIT(IN V) UNIT 1, KOLKATA. INSTEAD OF ENSURING THE PRESENCE OF THESE PERSONS FOR GIVING O PPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE, THE ASSESSING OFFICER ASKED THE ASSESSEE T O PRODUCE THEM, WHICH IN OUR CONSIDERED OPINION IS AN ABSOLUTE UNJUST AND OPPOSI TE TO THE RULE OF LAW AND WHAT PROCEDURE DEMANDS. THEREFORE, THERE IS A TOTAL DENI AL OF OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE THE PERSONS, WHOSE STATEMENTS ARE USE D AGAINST THE ASSESSEE. 6.3 FURTHER, WHEN THE DIRECTOR OF THE ASSESSEE CATE GORICALLY DENIED, DURING THE INVESTIGATION, THE ALLEGATION OF GIVING CASH TO THO SE INVESTING COMPANIES THEN THE ONUS IS ON THE REVENUE TO PROVE THAT THE APPLICATION MON EY RECEIVED BY THE ASSESSEE IS ASSESSES OWN MONEY ROUTED THROUGH THOSE APPLICANTS COMPANIES. THERE IS NO EVIDENCE 6 ITA NO.3924/MUM/2009 M/S SAIMANGAL INVESTRADE LTD. OR MATERIAL BROUGHT ON RECORD BY THE ASSESSING OFFI CER, EXCEPT THE UN-CROSS EXAMINED STATEMENTS OF THE THIRD PARTY, TO SHOW ANY MOVEMENT OF CASH ROUTED BACK TO THE ASSESSEE IN FORM OF APPLICATION MONEY IN THE ALLEGED ALLOTME NT OF CUMULATIVE PREFERENTIAL SHARES. RATHER, IT IS UNDISPUTED FACT THAT THE APPLICATION MONEY WAS RECEIVED THROUGH ACCOUNT PAYEE CHEQUE/BANK DRAFT GIVEN BY THE INVESTING COMP ANIES FROM THEIR RESPECTIVE BANK ACCOUNT. IT IS ALSO AN ACCEPTED FACT THAT SOURCE OF THE APPLICATION MONEY WAS FOUND IN THE BANK ACCOUNT OF THE INVESTING COMPANIES DEPOSIT ED THROUGH ACCOUNT PAYEE CHEQUES; THEREFORE, NO CASH TRANSACTION WAS FOUND BY THE ASS ESSING OFFICER IN THE BANK ACCOUNT OF THE INVESTING COMPANIES. 6.4 THE ASSESSING OFFICER DOUBTED THE MOVEMENT OF C ASH FROM THE ASSESSEE AS BEING PASSING THROUGH VARIOUS LEVELS AND REACHED TO THE A SSESSEE COMPANY. HOWEVER, NO FINDING HAS BEEN GIVEN TO THE EFFECT AS TO HOW THE ALLEGED CASH/MONEY OF THE ASSESSEE COMPANY ROUTED THROUGH VARIOUS LEVELS FINALLY REACH ED TO THE ASSESSEE. NOT AN IOTA OF EVIDENCE OR MATERIA L HAS BEEN BROUGHT ON RECORD TO SHOW EVEN, PRIMA FACIE THAT THE SAID AMOUNT REPRESENTING APPLICATION MONEY MOVED FROM THE ASSESSEE AND REACHED TO THE ASSESSEE. RATHER, DOCUM ENTARY EVIDENCE ON RECORD EXHIBITS DIFFERENT FACTS I.E. AS PER BOOKS OF ACCOUNT OF THE ASSESSEE AS WELL AS THOSE OF INVESTING COMPANIES TOGETHER WITH THE RETURN OF INCOME, BOARD RESOLUTION GO TO PROVE THAT THE SAID APPLICATION MONEY WAS PAID BY THE INVESTING COMPANY TO THE ASSESSEE AGAINST ALLOTMENTS OF THE PREFERENTIAL SHARES. THE INVESTIN G COMPANIES HAVE SHOWN THE SAID AMOUNT AS INVESTMENT IN THEIR BOOKS OF ACCOUNT. THE MONEY ROUTED THROUGH BANKING CHANNELS AND THROUGH ACCOUNT PAYEE CHEQUES/BANK DRA FT, UNDISPUTED GIVEN BY THE PARTIES. EVEN, THE SOURCE OF THE APPLICATION MONEY WAS FOUND IN THE BANK ACCOUNT OF THE INVESTING COMPANIES NOT BY ANY CASH DEPOSIT; BUT TH ROUGH ACCOUNT PAYEE CHEQUES. THEREFORE, WHEN ALL THE DOCUMENTARY EVIDENCE CONTRA DICTS THE STATEMENTS OF THE DIRECTORS RECORDED BY THE INVESTIGATION UNIT OF THE DEPARTMENT THEN SUCH STATEMENTS ALONE CANNOT BE TAKEN AS THE BASIS MUCH LESS A GOOD OR PROPER BASIS FOR ANY ADDITION. 6.5 IT IS SETTLED PROPOSITION OF LAW THAT THE STATE MENT RECORDED DURING THE COURSE OF INVESTIGATION WITHOUT CORROBORATIVE EVIDENCE HAS NO EVIDENTIARY VALUE. IT IS PERTINENT TO MENTION THAT THE STATEMENTS RECORDED IN THIS CASE A RE NOT UNDER SEARCH OR SURVEY OR ASSESSMENT PROCEEDINGS THEREFORE THE SAME CANNOT BE USED AGAINST THE ASSESSE WITHOUT FOLLOWING THE DUE PROCESS OF CORROBORATION AND CROS S EXAMINATION. EVEN OTHERWISE, THE STATEMENT WITHOUT CROSS EXAMINATION AND CORROBORATI VE EVIDENCE CANNOT BE USED AGAINST THE ASSESSEE. 6.6 AS POINTED OUT BY THE LD AR OF THE ASSESSEE THE CREDIBILITY OF THE STATEMENTS IS ALSO NOT FREE FROM DOUBT AS IT APPEARS THAT ALL THE STAT EMENTS ARE PREPARED BY THE DEPARTMENT IN AN IDENTICAL FASHION AND MANNER BEFORE THOSE WER E GOT SIGNED ON DIFFERENT DATES. IT IS APPARENT THAT CERTAIN IDENTICAL MISTAKES ARE APPEAR ING IN THOSE STATEMENTS ALLEGEDLY RECORDED ON DIFFERENT DATES. FOR EXAMPLE QUESTIONNO.4:- DOES YOU COMPANY HAS TRANSACTION WIT H THE FOLLOWING COMPANIES? IF SO, GIVE DETAILS AND NATURE OF SUCH TRANSACTION: THIS MISTAKE DOES YOU IS APPEARING IN QUESTION NO . 4, OF ALL THE STATEMENTS, WHICH SHOWS THAT QUESTIONNAIRE WAS ALREADY PREPARED AND A NSWERS WERE ALREADY WRITTEN IN THE SAME MANNER AS IT IS EVIDENT FROM THE ANSWER TO QUE STION NO.6 AS UNDER: QUESTION NO. 6 DO YOU HAVE TO SAY ANYTHING ELSE? ANS: I HAVE GONE THROUGH THE ABOVE STATEMENT AND TH E SAME HAS BEEN RECORDED CORRECTLY AND WITHOUT ANY FABRICATION. THE ABOVE STATEMENT GA S BEEN GIVEN BY ME WITHOUT THE USE OF ANY FORCE, COERCION OR THREAT. THE MISTAKE IN THE ANSWER NO. 6 IS ALSO IDENTICAL I N ALL THE STATEMENTS RECORDED ON DIFFERENT DATES. SINCE THE STATEMENTS WERE RECORDED BY THE INVESTIGATION TEAM OF ADIT(INV) UNIT 1, KOLKATA AND NOT DURING THE PROCEE DINGS BEFORE ANY COURT OF LAW; 7 ITA NO.3924/MUM/2009 M/S SAIMANGAL INVESTRADE LTD. THEREFORE, ALL THESE FACTS SUGGEST AND INDICATE TO BELIEVE THAT THE SAME ARE NOT RECORDED AS A VERBATIM OF WHAT THE CONCERNED PERSON STATED; BUT OBTAINED BY THE DEPARTMENT IN A MECHANICAL MANNER. HOWEVER, WITHOUT GOING INTO VALI DITY OF THE STATEMENTS WHEN ALL OTHER RECORDS, MATERIAL AND DOCUMENTARY EVIDENCES C ONTRADICT AND NULLIFY THE STATEMENTS THEN THE RELIANCE PLACED BY THE ASSESSING OFFICER O N SUCH STATEMENT IS HIGHLY UNJUSTIFIED AND IMPROPER. 7 EVEN OTHERWISE, IN THE CASE OF THE ASHWANI GUPTA (SUPRA), THE HONBLE DELHI HIGH COURT HAS TAKEN A NOTE OF THE FINDING OF THE TRIBUN AL IN PARA 2 AS UNDER: 2. THE TRIBUNAL HAS CONFIRMED THE ORDER PASSED BY THE CIT(A) WHICH HELD THE ENTIRE ADDITION MADE BY THE ASSESSING OFFICER TO BE INVALI D AND HAD DELETED THE SAME. THE CIT(A) HAD CLEARLY HELD THAT THE ASSESSING OFFICER HAD PASSED THE ASSESSMENT ORDER IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE IN A S MUCH AS HE HAD NEITHER PROVIDED COPIES OF THE SEIZED MATERIAL TO THE ASSESSEE NOR H AD HE ALLOWED THE ASSESSEE TO CROSS- EXAMINE ONE MR. MANOJ AGGARWAL ON THE BASIS OF WHOS E STATEMENT THE SAID ADDITION WAS MADE. THE CIT(A) ALSO HELD THAT THE ENTIRE ADDI TION DESERVED TO BE DELETED, PARTICULARLY SO, BECAUSE THE TRANSACTIONS ALSO STOO D DULY REFLECTED IN HIS REGULAR RETURNS. 7.1 THE HONBLE HIGH COURT HAS HELD THAT ONCE THERE IS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BY NOT PROVIDING SEIZED MATERIAL TO THE ASS ESSEE AS WELL AS CROSS EXAMINATION OF THE PERSONS ON WHOSE STATEMENTS, THE ASSESSING OFFI CER RELIED UPON, AMOUNTS TO DENIAL OF OPPORTUNITY AND WOULD BE FATAL TO THE PROCEEDING S. THE HONBLE DELHI HIGH COURT HAS OBSERVED IN PARA 7 AS UNDER: 7. IN VIEW OF THE FOREGOING CIRCUMSTANCES, WE FEEL THAT NO INTERFERENCE WITH THE IMPUGNED ORDER IS CALLED FOR. THE TRIBUNAL HAS CORR ECTLY UNDERSTOOD THE LAW AND APPLIED IT TO THE FACTS OF THE CASE. ONCE THERE IS A VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE IN AS MUCH AS SEIZED MATERIAL IS NOT PROVID ED TO AN ASSESSEE NOR IS CROSS- EXAMINATION OF THE PERSON ON WHOSE STATEMENT THE AS SESSING OFFICER RELIES UPON, GRANTED, THEN, SUCH DEFICIENCIES WOULD AMOUNT TO A DENIAL OF OPPORTUNITY AND, CONSEQUENTLY, WOULD BE FATAL TO THE PROCEEDINGS. FO LLOWING THE APPROACH ADOPTED BY US IN SMC SHARE BROKERS LTD. (SUPRA), WE SEE NO REASON TO INTERFERE WITH THE IMPUGNED ORDER. NO SUBSTANTIAL QUESTION OF LAW ARISES FOR OU R CONSIDERATION. 8 SIMILARLY, IN THE LATEST DECISION, THE HONBLE DE LHI HIGH COURT IN THE CASE OF OASIS HOSPITALITIES P LTD (SUPRA), AFTER CONSIDERING ALL THE RELEVANT DECISIONS ON THE ISSUE INCLUDING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS P LTD (SUPRA), DECISION OF THE FULL BENCH OF THE HON BLE DELHI HIGH COURT IN THE CASE OF SOPHIA FINANCE LTD REPORTED IN 205 ITR 98 (DEL)(FB) AND THE DECISION IN THE CASE OF DIVINE LEASING & FINANCE LTD (SUPRA) HAS OBSERVED I N PARAS 11 TO 16 AS UNDER: IT IS CLEAR FROM THE ABOVE THAT THE INITIAL BURDE N IS UPON THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF THE SHARE APPLICATION MONEY RE CEIVED BY THE ASSESSEE. IN ORDER TO DISCHARGE THIS BURDEN, THE ASSESSEE IS REQUIRED TO PROVE : (A) THE IDENTITY OF SHAREHOLDER ; (B) THE GENUINENESS OF TRANSACTION ; AND (C) THE CREDITWORTHINESS OF SHAREHOLDERS. 12. IN CASE THE INVESTOR/SHAREHOLDER IS AN INDIVIDU AL, SOME DOCUMENTS WILL HAVE TO BE FILED OR THE SAID SHAREHOLDER WILL HAVE TO BE PRODU CED BEFORE THE ASSESSING OFFICER TO PROVE HIS IDENTITY. IF THE CREDITOR/SUBSCRIBER IS A COMPANY, THEN THE DETAILS IN THE FORM OF REGISTERED ADDRESS OR PAN IDENTITY, ETC., CAN BE FURNISHED. 8 ITA NO.3924/MUM/2009 M/S SAIMANGAL INVESTRADE LTD. 13. THE GENUINENESS OF THE TRANSACTION IS TO BE DE MONSTRATED BY SHOWING THAT THE ASSESSEE HAD, IN FACT, RECEIVED MONEY FROM THE SAID SHAREHOLDER AND IT CAME FROM THE COFFERS OF THAT VERY SHAREHOLDER. THE DIVISION BENC H HELD THAT WHEN THE MONEY IS RECEIVED BY CHEQUE AND IS TRANSMITTED THROUGH BANKI NG OR OTHER INDISPUTABLE CHANNELS, THE GENUINENESS OF TRANSACTION WOULD BE PROVED. OTH ER DOCUMENTS SHOWING THE GENUINENESS OF TRANSACTION COULD BE COPIES OF THE S HAREHOLDERS REGISTER, SHARE APPLICATION FORMS, SHARE TRANSFER REGISTER, ETC. 14 AS FAR AS CREDITWORTHINESS OR FINANCIAL STRENGTH OF THE CREDITOR/SUBSCRIBER IS CONCERNED, THAT CAN BE PROVED BY PRODUCING THE BANK STATEMENT OF THE CREDITOR/SUBSCRIBER SHOWING THAT IT HAD SUFFICIENT BALANCE IN ITS ACCOUNTS TO ENABLE IT TO SUBSCRIBE TO THE SHARE CAPITAL. THIS JUDGMENT FURTH ER HOLDS THAT ONCE THESE DOCUMENTS ARE PRODUCED, THE ASSESSEE WOULD HAVE SATISFACTORIL Y DISCHARGED THE ONUS CAST UPON HIM. THEREAFTER, IT IS FOR THE ASSESSING OFFICER TO SCRU TINIZE THE SAME AND IN CASE HE NURTURES ANY DOUBT ABOUT THE VERACITY OF THESE DOCUMENTS TO PROBE THE MATTER FURTHER. HOWEVER, TO DISCREDIT THE DOCUMENTS PRODUCED BY THE ASSESSEE ON THE AFORESAID ASPECTS, THERE HAVE TO BE SOME COGENT REASONS AND MATERIALS FOR THE ASS ESSING OFFICER AND HE CANNOT GO INTO THE REALM OF SUSPICION. 15. AT THIS STAGE, WE WOULD LIKE TO REFER TO THE JU DGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF CIT V. CREATIVE WORLD TELEFILMS LTD. (I N I. T. A. NO. 2182 OF 2009 DECIDED ON OCTOBER 12, 2009) [2011] 333 ITR 100. THE RELEVA NT PORTION OF THIS ORDER IS REPRODUCED BELOW: 'IN THE CASE IN HAND, IT IS NOT DISPUTED THAT THE A SSESSEE HAD GIVEN THE DETAILS OF NAME AND ADDRESS OF THE SHAREHOLDER, THEIR PA/GIR NUMBER AND HAD ALSO GIVEN THE CHEQUE NUMBER, NAME OF THE BANK. IT WAS EXPECTED ON THE PA RT OF THE ASSESSING OFFICER TO MAKE PROPER INVESTIGATION AND REACH THE SHAREHOLDERS. TH E ASSESSING OFFICER DID NOTHING EXCEPT ISSUING SUMMONS WHICH WERE ULTIMATELY RETURN ED BACK WITH AN ENDORSEMENT `NOT TRACEABLE'. IN OUR CONSIDERED VIEW, THE ASSESSING O FFICER OUGHT TO HAVE FOUND OUT THEIR DETAILS THROUGH PAN CARDS, BANK ACCOUNT DETAILS OR FROM THEIR BANKERS SO AS TO REACH THE SHAREHOLDERS SINCE ALL THE RELEVANT MATERIAL DE TAILS AND PARTICULARS WERE GIVEN BY THE ASSESSEE TO THE ASSESSING OFFICER. IN THE ABOVE CIRCUMSTANCES, THE VIEW TAKEN BY THE TRIBUNAL CANNOT BE FAULTED. NO SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN THE APPEAL. IN THE RESULT, THE APPEAL IS DISMISSED IN LIMINE WITH NO ORDER AS TO COSTS.' ( EMPHASIS SUPPLIED) 16. THE COURT THUS CLEARLY HELD THAT ONCE DOCUMENT S LIKE PAN CARD, BANK ACCOUNT DETAILS OR DETAILS FROM THE BANKERS WERE GIVEN BY T HE ASSESSEE, ONUS SHIFTS UPON THE ASSESSING OFFICER AND IT IS ON HIM TO REACH THE SHA REHOLDERS AND THE ASSESSING OFFICER CANNOT BURDEN THE ASSESSEE MERELY ON THE GROUND THA T SUMMONS ISSUES TO THE INVESTORS WERE RETURNED BACK WITH THE ENDORSEMENT 'NOT TRACEA BLE'. THE SAME VIEW IS TAKEN BY THE KARNATAKA HIGH COURT IN MADHURI INVESTMENTS PVT . LTD. V. ASST. CIT (IN I. T. A. NO. 110 OF 2004, DECIDED ON FEBRUARY 18, 2006). IN THIS CASE ALSO, SOME OF THE SHARE APPLICANTS DID NOT APPEAR AND NOTICES SENT TO THEM WERE RETURNED WITH REMARKS 'WITH NO SUCH PERSON'. ADDITION WAS MADE ON THAT BASIS WH ICH WAS TURNED DOWN BY THE HIGH COURT IN THE FOLLOWING WORDS : ' 6. HAVING HEARD THE LEARNED COUNSEL FOR THE PARTI ES, WE NOTICE THAT WHENEVER A COMPANY INVITES APPLICATIONS FOR ALLOTMENT OF SHARE S FROM DIFFERENT APPLICANTS, THERE IS NO PROCEDURE CONTEMPLATED TO FIND OUT THE GENUINENE SS OF THE ADDRESS OR THE GENUINENESS OF THE APPLICANTS BEFORE ALLOTTING THE SHARES. IF FOR ANY REASON THE ADDRESS GIVEN IN THE APPLICATION WER E TO BE INCORRECT OR FOR ANY REASON IF THE SAID APPLICANTS HAVE CHANGED THEIR RESIDENCE OR THE NOTICES SENT BY THE ASSESSING OFFICER HAVE NOT BEEN RECEIVED BY SUCH APPLICANTS, THE ASSESSEE-COMPANY CANNOT BE BLAMED. THEREFORE, WE ARE OF THE VIEW THAT THE TRIB UNAL WAS NOT JUSTIFIED IN ALLOWING THE APPEAL OF THE REVENUE ONLY RELYING UPON THE STA TEMENT OF SRI ANIL RAJ MEHTA, A CHARTERED ACCOUNTANT.' 8.1 THE HONBL HIGH COURT FURTHER DISCUSSED THE ISS UE IN PARAS 20 TO 24 AS UNDER: 9 ITA NO.3924/MUM/2009 M/S SAIMANGAL INVESTRADE LTD. 20 THE OBSERVATIONS OF THE SUPREME COURT IN THE C ASE OF LOVELY EXPORTS P. LTD. [2009] 319 ITR (ST.) 5 (SC) GO TO SUGGEST THAT THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THE INDIVIDUAL ASSESSMENTS IN THE CASE OF AL LEGED BOGUS SHAREHOLDERS IN ACCORDANCE WITH LAW AND, THUS, NOT REMEDILESS. IT I S, THUS, FOR THE ASSESSING OFFICER TO MAKE FURTHER INQUIRIES WITH REGARD TO THE STATUS OF THESE PARTIES TO BRING ON RECORD ANY ADVERSE FINDINGS REGARDING THEIR CREDITWORTHINESS. THIS WOULD BE MORE SO WHERE THE ASSESSEE IS A PUBLIC LIMITED COMPANY AND HAS ISSUED THE SHARE CAPITAL TO THE PUBLIC AT LARGE, AS IN SUCH CASES THE COMPANY CANNOT BE EXPEC TED TO KNOW EVERY DETAIL PERTAINING TO THE IDENTITY AND THE FINANCIAL WORTH OF THE SUBS CRIBERS. FURTHER THE INITIAL BURDEN ON THE ASSESSEE WOULD BE SOMEWHAT HEAVY IN CASE THE AS SESSEE IS A PRIVATE LIMITED COMPANY WHERE THE SHAREHOLDERS ARE FAMILY FRIENDS/C LOSE ACQUAINTANCES, ETC. IT IS BECAUSE OF THE REASON THAT IN SUCH CIRCUMSTANCE, TH E ASSESSEE CANNOT FEIGN IGNORANCE ABOUT THE STATUS OF THESE PARTIES. 21. WE MAY ALSO USEFULLY REFER TO THE JUDGMENT OF T HE SUPREME COURT IN THE CASE OF CIT V. P. MOHANAKALA [2007] 291 ITR 278. IN THAT CASE, THE ASSESSEE HAD RECEIVED FOREIGN GIFTS FROM ONE COMMON DONOR. THE PAYMENTS WERE MADE TO THEM BY INSTRUMENTS ISSUED BY FOREIGN BANKS AND CREDITED TO THE RESPECTIVE ACC OUNTS OF THE ASSESSEES BY NEGOTIATIONS THROUGH BANK IN INDIA. THE EVIDENCE IN DICATED THAT THE DONOR WAS TO RECEIVE SUITABLE COMPENSATION FROM THE ASSESSEES. T HE ASSESSING OFFICER HELD THAT THE GIFTS THOUGH APPARENT WERE NOT REAL AND ACCORDINGLY TREATED ALL THOSE AMOUNTS WHICH WERE CREDITED IN THE BOOKS OF ACCOUNT OF THE ASSESS EE, AS THEIR INCOME APPLYING SECTION 68 OF THE ACT. THE ASSESSEE DID NOT CONTEND THAT EV EN IF THEIR EXPLANATION WAS NOT SATISFACTORY THE AMOUNTS WERE NOT OF THE NATURE OF INCOME. THE COMMISSIONER OF INCOME-TAX (APPEALS) CONFIRMED THE ASSESSMENT. ON F URTHER APPEAL, THERE WAS A DIFFERENCE OF OPINION BETWEEN THE TWO MEMBERS OF TH E APPELLATE TRIBUNAL AND THE MATTER WAS REFERRED TO THE VICE PRESIDENT WHO CONCU RRED WITH THE FINDINGS AND CONCLUSIONS OF THE ASSESSING OFFICER AND THE COMMIS SIONER OF INCOME-TAX (APPEALS). ON APPEAL, THE HIGH COURT RE-APPRECIATED THE EVIDEN CE AND SUBSTITUTED ITS OWN FINDINGS AND CAME TO THE CONCLUSION THAT THE REASONS ASSIGNE D BY THE TRIBUNAL WERE IN THE REALM OF SURMISES, CONJECTURE AND SUSPICION. ON APPEAL TO THE SUPREME COURT, THE COURT WHILE REVERSING THE DECISION OF THE HIGH COURT HELD THAT THE FINDINGS OF THE ASSESSING OFFICER, COMMISSIONER OF INCOME-TAX (APPEALS) AND THE TRIBUN AL WERE BASED ON THE MATERIAL ON RECORD AND NOT ON ANY CONJECTURES AND SURMISES. THA T THE MONEY CAME BY WAY OF BANK CHEQUES AND WAS PAID THROUGH THE PROCESS OF BANKING TRANSACTION AS NOT BY ITSELF OF ANY CONSEQUENCE. THE HIGH COURT MISDIRECTED ITSELF AND ERRED IN DISTURBING THE CONCURRENT FINDINGS OF FACT. WHILE DOING SO, THE LEGAL POSITIO N CONTAINED IN SECTION 68 OF THE ACT WAS EXPLAINED BY THE SUPREME COURT BY ASSESSING THA T A BARE READING OF SECTION 68 OF THE ACT SUGGESTS THAT (I) THERE HAS TO BE CREDIT OF AMOUNTS IN THE BOOKS MAINTAINED BY THE ASSESSEE ; (II) SUCH CREDIT HAS TO BE A SUM OF MONEY DURING THE PREVIOUS YEAR ; AND (III) EITHER (A) THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH CREDITS FOUND IN THE BOOKS, OR (B) THE EXPLANATION OFFERED BY THE ASSESSEE, IN THE OPINION OF THE ASSESSING OFFICER, IS NOT SATISFACTORY. IT I S ONLY THEN THAT THE SUM SO CREDITED MAY BE CHARGED TOINCOME-TAX AS THE INCOME OF THE ASSESS EE OF THAT PREVIOUS YEAR. THE EXPRESSION 'THE ASSESSEE OFFERS NO EXPLANATION' MEA NS THE ASSESSEE OFFERS NO PROPER, REASONABLE AND ACCEPTABLE EXPLANATION AS REGARDS TH E SUMS FOUND CREDITED IN THE BOOKS MAINTAINED BY THE ASSESSEE. THE OPINION OF THE ASSE SSING OFFICER FOR NOT ACCEPTING THE EXPLANATION OFFERED BY THE ASSESSEE AS NOT SATISFAC TORY IS REQUIRED TO BE BASED ON PROPER APPRECIATION OF MATERIAL AND OTHER ATTENDING CIRCUMSTANCES AVAILABLE ON THE RECORD. THE OPINION OF THE ASSESSING OFFICER IS REQ UIRED TO BE FORMED OBJECTIVELY WITH REFERENCE TO THE MATERIAL ON RECORD. APPLICATION OF MIND IS THE SINE QUA NON FOR FORMING THE OPINION. IN CASES WHERE THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATURE AND SOURCE OF THE SUMS FOUND CREDITED IN THE BOOKS IS NOT SATISFACTORY THERE IS, PRIMA FACIE, EVIDENCE AGAINST THE ASSESSEE, VIZ., THE REC EIPT OF MONEY. THE BURDEN IS ON THE ASSESSEE TO REBUT THE SAME, AND, IF HE FAILS TO REB UT IT, IT CAN BE HELD AGAINST THE ASSESSEE THAT IT WAS A RECEIPT OF AN INCOME NATURE. THE BURD EN IS ON THE ASSESSEE TO TAKE THE PLEA THAT EVEN IF THE EXPLANATION IS NOT ACCEPTABLE, THE MATERIAL AND ATTENDING CIRCUMSTANCES AVAILABLE ON RECORD DO NOT JUSTIFY THE SUM FOUND CR EDITED IN THE BOOKS BEING TREATED AS A RECEIPT OF INCOME NATURE. 10 ITA NO.3924/MUM/2009 M/S SAIMANGAL INVESTRADE LTD. 22. WE WOULD LIKE TO REFER TO ANOTHER JUDGMENT OF T HE DIVISION BENCH OF THIS COURT IN THE CASE OF CIT V. VALUE CAPITAL SERVICES P. LTD. [2008 ] 307 ITR 334. THE COURT IN THAT CASE HELD THAT THE ADDITIONAL BURDEN WAS ON THE DEP ARTMENT 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 THE UNDISCLOSED INCOME OF THE ASSESSEE. IN THE ABSENCE OF SUCH FINDINGS, ADDITION COULD NOT BE MADE IN THE INCOME OF THE ASSESSEE UNDER SECTION 68 OF THE ACT. 23. IT IS ALSO OF RELEVANCE TO POINT OUT THAT IN CI T V. STELLAR INVESTMENT LTD. [1991] 192 ITR 287 (DELHI) WHERE THE INCREASE IN SUBSCRIBED CA PITAL OF THE RESPONDENT-COMPANY ACCEPTED BY THE INCOME-TAX OFFICER AND REJECTED BY THE COMMISSIONER OF INCOME-TAX ON THE GROUND THAT A DETAILED INVESTIGATION WAS REQUIR ED REGARDING THE GENUINENESS OF SUBSCRIBERS TO SHARE CAPITAL, AS THERE WAS A DEVICE OF CONVERTING BLACK MONEY BY ISSUING SHARES WITH THE HELP OF FORMATION OF AN INV ESTMENT WHICH WAS REVERSED BY THE TRIBUNAL, THIS COURT HELD THAT EVEN IF IT BE ASSUME D THAT THE SUBSCRIBERS TO THE INCREASED SHARE CAPITAL WERE NOT GENUINE, UNDER NO CIRCUMSTAN CES THE AMOUNT OF SHARE CAPITAL COULD BE REGARDED AS UNDISCLOSED INCOME OF THE COMP ANY. THIS VIEW WAS CONFIRMED BY THE APEX COURT IN CIT V. STELLER INVESTMENT LTD. [2 001] 251 ITR 263. 24. HAVING TAKEN NOTE OF THE LEGAL POSITION IN DETA IL, WE NOW PROCEED TO DECIDE EACH APPEAL ON THE APPLICATION OF THE AFORESAID PRINCIPL ES. I. T. A. NO. 2093 OF 2010 AND I. T. A. NO. 2095 OF 2010 9 IT IS CLEAR FROM THE DECISION OF THE HONBLE DELH I HIGH COURT IN THE CASE OF OASIS HOSPITALITIES P LTD (SUPRA) THAT ONCE THE ASSESSEE FILED COPY OF PAN, ACKNOWLEDGEMENT COY OF THE RETURN OF INCOME OF THE INVESTING COMPAN IES, THEIR BANK ACCOUNTS STATEMENTS FOR THE RELEVANT PERIOD; THEN EVEN THE PARTIES WERE NOT PRODUCED IN SPITE OF THE SPECIFIC DIRECTIONS OF THE ASSESSING OFFICER, THE ADDITION C OULD NOT BE SUSTAINED AS THE PRIMARY ONUS WAS DISCHARGED BY THE ASSESSEE BY PRODUCING TH E PAN, BALANCE SHEET, COPY OF THE ACKNOWLEDGEMENT COPY OF RETURN OF THE APPLICANTS ET C. 10 IN THE CASE IN HAND, THERE IS NO DISPUTE ABOUT THE IDENTITY OF THE APPLICANT COMPANIES, WHO HAD PAID THE APPLICATION MONEY AND T HE SOURCE OF THE APPLICATION MONEY WAS ALSO FOUND IN THE RESPECTIVE BANK ACCOUNT S OF THE INVESTING COMPANIES AND THERE WAS NO TRACE OF CASH DEPOSIT IN THE BANK ACCO UNTS OF THE INVESTING COMPANIES, THEN, THE ACTION OF THE ASSESSING OFFICER UNDER INF LUENCED OF THE REPORT OF THE INVESTIGATION WING WITHOUT GIVING OPPORTUNITY TO TH E ASSESSEE FOR CROSS EXAMINATION OF THE PERSONS, IS NOT SUSTAINABLE. 11 THE ASSESSING OFFICER HAS RAISED SOME DOUBTS AND SUSPICION ABOUT THE MOVEMENT OF THE MONEY THROUGH VARIOUS LEVELS BUT COULD NOT ESTA BLISH ANY DIRECT OR INDIRECT LINK OF THE SAID OUTWARD MOVEMENT FROM THE ASSESSEE AND THE N AGAIN RECEIVED BY THE ASSESSEE IN THE FORM OF APPLICATION MONEY. EVEN THE REVENUE HAS FAILED TO BRING ANYTHING ON RECORD TO SHOW MOVEMENT OF THE ALLEGED CASH FROM TH E ASSESSEE. 12 THE HONBLE DELHI HIGH COURT, IN THE CASE OF OAS IS HOSPITALITIES P LTD (SUPRA) IN PARA 33 AND 34 HAS OBSERVED AS UNDER: 33 THE TRIBUNAL WHILE CONFIRMING THE AFORESAID VIEW OF THE COMMISSIONER OF INCOME- TAX (APPEALS) HAS SUMMARIZED THE DISCUSSION AS UNDE R: '9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. THE NECESSARY DETAILS WERE FILED BY THE ASSESSEE WITH THE ASSESSING OFFICER TO SHOW THE IDENTITY OF THE PERSON WHO HAD APPLIED FOR THE SHARES. THE SHARES ALSO BEEN ALLOTTED TO RESPECTIVE PERSONS IN RESPECT OF WHICH INTIMATION WAS GIVEN TO THE REGISTRAR OF COMPANIES AND NECESSARY EVIDENCE HAS A LSO BEEN PLACED ON RECORD IN THE PAPER BOOK WHICH FOUND PLACE AT PAGES 23 AND 24 OF THE PAPER BOOK. THE ASSESSEE ALSO HAD PLACED ON RECORD THE EVIDENCE AS WELL AS COPY O F INCOME-TAX RETURNS OF THE SHARE APPLICANTS. KEEPING IN VIEW ALL THESE EVIDENCE IT C ANNOT BE HELD THAT THE ASSESSEE DID NOT ESTABLISH THE IDENTITY OF THE SHARE APPLICANTS. IF IT IS SO, THEN THE LAW AS PRONOUNCED 11 ITA NO.3924/MUM/2009 M/S SAIMANGAL INVESTRADE LTD. BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. LOVELY EXPORTS P. LTD. [2009] 319 ITR (ST.) 5 IS CLEAR THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAMES ARE GIVEN TO THE ASSESSING OFFICER, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW, BUT THE SAME CANNOT BE REGA RDED AS UNDISCLOSED INCOME OF THE ASSESSEE. IN THIS VIEW OF THE SITUATION, WE FIND N O INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) VIDE WHICH ADD ITION MADE ON ACCOUNT OF SHARE APPLICATION MONEY HAS BEEN DELETED. 34. HAVING REGARD TO THE DECISIONS NOTED ABOVE, WE ARE OF THE VIEW THAT THE ADDITION WAS RIGHTLY DELETED BY THE COMMISSIONER OF INCOME-T AX (APPEALS) AND THE TRIBUNAL. REQUISITE DOCUMENTS WERE FURNISHED SHOWING THE EXIS TENCE OF THE SHAREHOLDERS FROM BANK ACCOUNTS AND EVEN THEIR INCOME-TAX DETAILS. F ROM BANK ACCOUNTS OF THESE SHAREHOLDER, IT WAS FOUND THAT THEY HAD DEPOSED CE RTAIN CASH AND SOURCE THEREOF WAS QUESTIONABLE. THE ASSESSING OFFICER SHOULD HAVE MA DE FURTHER PROBE WHICH HE FAILED TO DO. MOREOVER, THE REMEDY OF THE DEPARTMENT LIES IN REOPENING THE CASE OF THESE INVESTORS AND THE ADDITION CANNOT BE MADE IN THE HA NDS OF THE ASSESSEE. THUS IN VIEW OF THE ABOVE OBSERVATION OF HONBLE HI GH COURT WHEN REQUITE DOCUMENT WERE PRODUCED AND AVAILABLE WITH THE AO TO ESTABLIS H THAT NO CASH WAS DEPOSITED IN THE BANK ACCOUNTS OF THE INVESTING COMPANIES THEN WITHO UT FURTHER PROBE TO PROVE CONTRARY THE ADDITION IN THE HAND OF THE ASSESSEE CANNOT BE MADE. 13 THERE IS NO QUARREL ON THE ASPECT THAT SO FAR AS IT IS POSSIBLE THE CONSISTENCY OF THE VIEW HAS TO BE MAINTAINED; HOWEVER, IN THE CASE OF THE ASSESSEE, THE TRIBUNAL, FOR THE AY 2005-06 HAS NOT FORMED ANY OPINION OR GIVEN ANY FINDING ON THIS ISSUE; BUT REMANDED THE SAME TO THE FILE OF THE ASSESSING OFFI CER FOR FRESH ADJUDICATION. 13.1 BEFORE US, THE LD AR OF THE ASSESSEE HAS FORCI BLY URGED THAT IN VIEW OF THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF OASI S HOSPITALITIES P LTD (SUPRA) AS WELL AS THE DECISION OF THE HONBLE GUJARAT HIGH COURT I N THE CASE OF RAJEH BABUBHAI DAMANIA (SUPRA), THE ISSUE MAY BE DECIDED ON MERITS ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD. 14. IT IS TO BE NOTED THAT IT IS NOT THE CASE OF AN Y ADDITIONAL EVIDENCE OR FRESH MATERIAL PRODUCED BY ANY OF THE PARTIES BEFORE US WHICH REQU IRES EXAMINATION OR INVESTIGATION TO VERIFY THE CORRECTNESS OF THE NEW FACTS FIRST TIME BROUGHT BEFORE US. THE CASE OF THE REVENUE IS THAT THE CASH MOVED FROM THE ASSESSEE RO UTED THOUGH VARIOUS LEVELAND THEN REACHED TO THE ASSESSEE IN THE FORM OF SHARE APPLIC ATION MONEY. THE STAND OF THE REVENUE IS NOT IN CONSONANCE WITH THE STATEMENTS OF THE DIRECTORS OF THE INVESTING COMPANIES WHICH IS THE BASIS OF THE INVESTIGATION R EPORT AS WELL AS ADDITION BY THE AO. IN THEIR STATEMENTS THE DIRECTORS STATED TO HAVE RE CEIVED CASH FROM ASSESSEE FOR INVESTING IN THE PREFERENTIAL SHARE OF THE ASSESSEE COMPANY, WHEREAS, THIS FACT WAS NOT FOUND TO BE CORRECT FROM THE RECORD AND THE REVENUE ALSO TOOK A STAND THAT THE CASH WAS NOT DIRECTLY GIVEN TO THE INVESTING COMPANIES BUT ROUTED THROUGH VARIOUS LEVELS. WHEN IT WAS FOUND BY THE INVESTIGATING UNIT AS WELL AS RECORDED BY TH E AO THAT THE FUND IN THE BANK ACCOUNT OF THE INVESTING COMPANIES WAS DEPOSITED TH ROUGH A/C PAYEE CHEQUES THAN IT IS APPARENT THAT THE STATEMENTS OF THE DIRECTORS ARE I N TOTAL CONTRADICTION OF THE FACTS EMERGED FROM THE RECORD AS WELL AS STAND OF THE REV ENUE. HENCE THE SAID STATEMENTS DO NOT SUPPORT THE CASE OF THE REVENUE AND THE RELIANC E PLACE BY THE AO ON SUCH STATEMENTS IS HIGHLY MISPLACED AND IMPROPER. WHEN THE STAND OF THE REVENUE IS IN TOTAL CONTRACTION OF THE MATERIAL ON RECORD THEN THEN IN VIEW OF THE LATEST DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF OASIS HOSPITALITIES P LTD (SUPRA), WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE CAN BE DECIDED ON MERIT AND NEED NOT TO BE REMAND TO THE RECORD OF THE AO BECAUSE AT THE TIME OF THE ORDER FOR THE AY 2005-06, THE COORDINATE BENCH OF THE TRIBUNAL WAS NOT HAVING THE BENEFIT OF THE DECI SION OF THE HONBLE DELHI HIGH COURT IN THE CASE CITED SUPRA. FURTHER IN VIEW OF THE DEC ISION OF HONBLE GUJRAT HIGH COURT IN CASE OF RAJEH BABUBHAI DAMANIA (SUPRA), WE SEE NO R EASON FOR GIVING THE A.O. ANY 12 ITA NO.3924/MUM/2009 M/S SAIMANGAL INVESTRADE LTD. FURTHER INNINGS TO FILL UP THE LACUNAS OR LAPSES IN THE ASSESSMENT WHICH WOULD CAUSE A GREAT INJUSTICE TO THE ASSESSEE. 15. IN VIEW OF THE ABOVE DISCUSSION AND THE FACTS A ND CIRCUMSTANCES OF THE CASE, THE SHARE APPLICATION MONEY CANNOT BE TREATED AS INCOME OF THE ASSESSEE COMPANY UNTIL AND UNLESS IT IS PROVED BEYOND DOUBT THAT THE ASSESSEE S OWN MONEY HAS COME BACK THROUGH SOME CLOSELY RELATED APPLICANT. ONCE THE IDENTITY O F THE APPLICANT IS DISCLOSED AND FOUND AS CORRECT THEN, EVEN IF THE SAID TRANSACTION IS SU SPECTED BY THE REVENUE AUTHORITIES, THE SAME CANNOT BE TREATED AS INCOME OF THE ASSESSEE CO MPANY WHICH IS A PUBLIC LIMITED COMPANY. ACCORDINGLY, WE DELETE THE ADDITION MADE B Y THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A) ON THIS ACCOUNT. HOWEVER, W E MAY CLARIFY THAT OUR FINDINGS ON THE ISSUE ARE BASED ON PARTICULAR FACTS OF THIS ASS ESSMENT YEAR AND THEREFORE, WOULD NOT AFFECT THE RESPECTIVE RIGHTS OF THE PARTIES FOR THE OTHER ASSESSMENT YEARS. 6. AS THE ISSUE INVOLVED IN THE PRESENT CASE AS WELL A S ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THAT OF CHAT COMPUTERS PVT. LTD. (SUPRA), WE RESPECTFULLY FOLLOW THE ORDER OF THE TRIBUNAL PASSED IN THAT CASE AND DELETE THE ADDITION MADE BY THE AO AND CONFIRMED BY THE LD.CIT(A) ON ACCOUNT OF AMOUNT RECEIVED ON ALLO TMENT OF PREFERENCE SHARE U/S 68. GROUND NO.1 OF THE ASSESSEES APPEAL IS ACCORDINGLY ALLOWED. 7. GROUND NO.2 RELATING TO THE DISALLOWANCE OF ASSE SSEES CLAIM FOR BUSINESS LOSS TREATING THE SAME SPECULATION LOSS AN D GROUND NO.3 INVOLVING THE ISSUE OF CHARGING OF INTEREST U/S 234 B ARE NOT PRESSED BY THE LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEA RING BEFORE US. THE SAME ARE ACCORDINGLY DISMISSED AS NOT PRESSED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 /12/ 2013 SD/- SD/ - ( DR. S.T.M. PAVALAN ) ( P.M. JAGTAP ) ) !'# / JUDICIAL MEMBER !'# / ACCOUNTANT MEMBER MUMBAI; <'( DATED.- 20 /12/2013 F{X~{T? P.S/. )(.!. 13 ITA NO.3924/MUM/2009 M/S SAIMANGAL INVESTRADE LTD. '; 7 0)=> ?>- '; 7 0)=> ?>- '; 7 0)=> ?>- '; 7 0)=> ?>-/ COPY OF THE ORDER FORWARDED TO : 1. ./ / THE APPELLANT 2. 01./ / THE RESPONDENT. 3. @ ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. @ / CIT CONCERNED, MUMBAI 5. >$C 0))( , , / DR, ITAT, MUMBAI E BENCH 6. %, D / GUARD FILE. ';( ! ';( ! ';( ! ';( ! / BY ORDER, !1> 0) //TRUE COPY// E EE E/ // /!F !F !F !F (DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI