LUMINANT INVESTMENTS P. LTD, MUMBAI V. DCIT CEN CIR-40, MUMBAI

ITA 3925/MUM/2009

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71553 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-07-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 18-06-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SURINDER JIT SINGH
• Assessee Lawyers: VISHAL PANCHOLI
• Keywords: Gift; Question of law; Speculation loss; Accommodation entries; Onus to prove
• Section: 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI , BEFORE SHRI D. MANMOHAN, VP AND SHRI SANJAY ARORA, AM I.T.A. NO. 3925/MUM/2009 ( ASSESSMENT YEAR: 2006-07) LUMINANT INVESTMENTS PVT. LTD. RADHA BHAVAN, 1 ST FLOOR, 121, NAGINDAS MASTER ROAD, MUMBAI-400 023 VS. DY. CIT, CENTRAL CIRCLE 40, AAYAKAR BHAVAN, M. K. MARG, MUMBAI-400 020 ! ' ./PAN/GIR NO. ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) !#& / APPELLANT BY : SHRI VISHAL PANCHOLI $%!#'& / RESPONDENT BY : SHRI SURINDER JIT SINGH ( )*'+, DATE OF HEARING : 07.08.2013 -./'+, / DATE OF PRONOUNCEMENT : 06.11.2013 0 O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS), CENTRAL VII, MUMBAI (CIT( A) FOR SHORT) DATED 20.05.2009, DISMISSING THE ASSESSEES APPEAL CONTESTING ITS ASS ESSMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMEN T YEAR (A.Y.) 2006-07 VIDE ORDER DATED 07.11.2008. 2 ITA NO. 3925/MUM/209 (A.Y. 2006-07) LUMINANT INVESTMENT P. LTD. VS. DY. CIT 1.1 THE APPEAL WAS PRESENTED BY THE ASSESSEE ON 18. 06.20009. THE FIRST DATE OF HEARING WAS FIXED FOR 23.04.2010 . THE SAME IS BEING CONTINUOUSLY ADJOURNED AT THE REQUEST OF THE ASSESSEES COUNSEL, ON ONE PRETEXT O R THE OTHER, EVER SINCE, I.E., UPTO 25.04.2013 WHEREAT IT WAS KEPT AS PART HEARD, FIXING THE NEXT DATE OF HEARING FOR 07.05.2013. THIS WAS, AS EXPLAINED IN THE COURSE OF HEARING, THAT THERE WAS NO SUBSTANCE IN THE ASSESSEES PLEA FOR ADJOURNMENT, AND IN ANY CASE, THE HEARING HAS NOT BEEN CONCLUDED, SO THAT PROPER OPPORTUNITY IS BEING AFFO RDED. THERE HAS BEEN NO REPRESENTATION BY THE ASSESSEE IN THE MATTER EVER SINCE, I.E. ON T HE TWO OCCASIONS WHEN THE BENCH FUNCTIONED, BEING 06.06.2013 AND 07.08.2013, ON WHI CH DATE THE ASSESSEE CAME UP WITH ANOTHER SPECIOUS PLEA OF BEING ALLOWED TIME FOR CHA NGE OF COUNSEL. 1.2 ADJOURNMENT IS NOT A MATTER OF RIGHT. RATHER, W E INFER INSOLENCE AND A COMPLETE DISREGARD FOR THE PROCESS OF LAW BY THE ASSESSEE IN THE MATTER. IT WAS UNDER THESE CIRCUMSTANCES THAT THE HEARING WAS PROCEEDED WITH EX PARTE , AND CONCLUDED ON THAT DATE (07.08.2013). 2. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE ( DR) STRONGLY RELIED ON THE ORDERS OF THE AUTHORITIES BELOW, CLAIMING THAT PROPER OPPO RTUNITY HAD BEEN GRANTED TO THE ASSESSEE TO STATE ITS CASE. 3. WE HAVE HEARD THE PARTIES BEFORE US, AS WELL AS PERUSED THE MATERIAL ON RECORD. 3.1 THE PRINCIPAL ISSUE ARISING IN THE INSTANT CASE , AGITATED BY THE ASSESSEE PER ITS GROUND NO.1 IS THE MAINTAINABILITY IN LAW OF THE AS SESSMENT OF SHARE APPLICATION MONEY IN THE SUM OF RS.2778.50 LACS AS UNEXPLAINED INCOME U/ S.68 OF THE ACT. IN OTHER WORDS, WHETHER THE ASSESSEE HAS BEEN ABLE TO PROVE THE SAI D CREDIT IN TERMS OF THE SAID PROVISION OF THE ACT? 3.2 IT WOULD BE RELEVANT TO REPRODUCE THE BACKGROUN D FACTS OF THE CASE, WHICH ARE NOT DISPUTED. THE ASSESSEE FILED ITS RETURN OF INCOME O N 25.11.2006, DISCLOSING LOSS AT RS.8.34 3 ITA NO. 3925/MUM/209 (A.Y. 2006-07) LUMINANT INVESTMENT P. LTD. VS. DY. CIT LACS. THIS WAS FOLLOWED BY FILING OF THE FINANCIAL STATEMENTS ON 05.10.2007. THE RETURN, SUBSEQUENT TO ITS PROCESSING U/S.143(1), WAS SUBJEC T TO THE VERIFICATION PROCEDURE BY THE ISSUE OF NOTICE U/S.143(2). IT WAS OBSERVED BY THE ASSESSING OFFICER (A.O.) IN THE ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HAD FACTUA L REPAYMENT OF LOAN TO THE TUNE OF RS.25.61 CRORES TO THE BANK. THE SAME WAS DONE BY R AISING SHARE ALLOTMENT MONEY IN THE SUM OF RS.2778.5 CRORES. THE SAME WAS FOUND TO HAVE BEEN RECEIVED BY WAY OF SHARE APPLICATION MONEY TOWARD 555.7 LACS SHARES OF THE F ACE VALUE OF RS.10/- EACH A PREMIUM OF RS.40/- EACH. THE NAMES OF THE SHARE APPLICANTS, BEING 41 IN NUMBER, AND THE CORRESPONDING AMOUNTS RECEIVED BY WAY OF APPLICATIO N MONEY, ARE LISTED AT PGS.2 TO 4 OF THE ASSESSMENT ORDER. THE SAME, WITH AN EXCEPTION O F AN ODD OR TWO, ARE FROM PRIVATE LIMITED COMPANIES. THE SAID TRANSACTION HAD IN FACT BEEN A SUBJECT MATTER OF DETAILED INVESTIGATION BY THE INVESTIGATION WING OF THE DEPA RTMENT, A SPECIAL TEAM HAVING BEEN CONSTITUTED FOR THE PURPOSE BY THE CBDT. THE REPORT S IN THE MATTER WERE RECEIVED BY THE A.O. FROM ADDL. DIT (INVESTIGATION UNIT 1), KOLKATA ON 04.12.2006, 29.12.2006, 23.03.2007 AND 24.04.2007, I.E., DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. IN FINE, THE REVENUE HAD FOLLOWED THE MONEY TRAIL UP TO FOUR TH LAYER, I.E., WHEREAT THE CASH WAS FOUND DEPOSITED IN THE BANK ACCOUNTS OF PERSONS WIT H NO CREDIBILITY. THE AMOUNT WAS ACCORDINGLY ASSESSED AS INCOME U/S. 68, AND CONFIRM ED ON THE SAME BASIS; THE ASSESSEE ONLY PRODUCING DOCUMENTS IN RELATION TO THE AMOUNTS BEING RECEIVED THROUGH THE BANKING CHANNEL AND TOWARD SHARE ALLOTMENT. 3.3 THE FURNISHING OF A SATISFACTORY EXPLANATION AS TO THE NATURE AND SOURCE OF A CREDIT APPEARING IN THE BOOKS OF THE ASSESSEE, WHICH IS TO BE ON THE PARAMETERS OF IDENTITY AND CAPACITY (OF THE CREDITOR) AND THE GENUINENESS (OF THE CREDIT TRANSACTION), IS ESSENTIALLY A MATTER OF FACT. WE MAY, HOWEVER, BEFORE DELINEATING AND EXAMINING THE FACTS OF THE CASE, ADVERT TO THE LEGAL POSITION OBTAINING IN THE MATTE R AS CLARIFIED BY THE HONBLE COURTS. SECTION 68 OF THE ACT IS A RULE OF EVIDENCE CASTING AN OBLIGATION ON THE ASSESSEE TO SATISFACTORILY EXPLAIN A CREDIT IN ITS BOOKS OF ACC OUNT. THE ADMITTED FACT OF THE RECEIPT OF THE SUM IS AN EVIDENCE AGAINST THE ASSESSEE, AND IN THE ABSENCE OF IT BEING SATISFACTORILY EXPLAINED AS TO ITS NATURE AND SOURCE, THE SAME IS LIABLE TO DEEMED AS THE INCOME OF THE 4 ITA NO. 3925/MUM/209 (A.Y. 2006-07) LUMINANT INVESTMENT P. LTD. VS. DY. CIT ASSESSEE FOR THE RELEVANT YEAR, I.E., THE YEAR IN W HICH THE SAID SUM IS FOUND SO CREDITED. THIS CAPSULES THE TRITE LAW, EQUALLY APPLICABLE TO THE SHARE APPLICATION MONEY OR SHARE CAPITAL, EXPOUNDED AND ELUCIDATED BY THE APEX COURT IN AND OVER A NUMBER OF DECISIONS, WHICH ARE CONSIDERED AS LOCUS CLASSICUS ON THE SUBJECT, VIZ. GOVINDARAJULU MUDALIAR VS. CIT [1958] 34 ITR 807 (SC); KALE KHAN MOHAMMAD HANIF VS. CIT [1963) 50 ITR 1 (SC), SREELEKHA BANERJEE & ORS. VS. CIT [1963] 49 ITR 112 (SC), ROSHAN DI HATTI VS. CIT [1977] 107 ITR 938 (SC); AND CIT VS. P MOHANAKALA & ORS. [2007] 291 ITR 278 (SC), MOST OF WHICH HAVE BEEN RELIED UPON BY THE RE VENUE. THE REVENUE IS UNDER NO OBLIGATION TO SHOW FROM WHAT SOURCE THE INCOME WAS DERIVED BY THE ASSESSEE AND WHY IT SHOULD BE TREATED AS ITS CONCEALED INCOME. AS STATE D IN GOVINDARAJALU MUDALIAR (SUPRA) (AT PG.810) THE SAME IS AS UNDER: NOW THE CONTENTION OF THE APPELLANT IS THAT ASSUMI NG THAT HE HAD FAILED TO ESTABLISH THE CASE PUT FORWARD BY HIM, IT DOES NOT FOLLOW AS A MATTER OF LAW THAT THE AMOUNTS IN QUESTION WERE INC OME RECEIVED OR ACCRUED DURING THE PREVIOUS YEAR, THAT IT WAS THE DUTY OF T HE DEPARTMENT TO ADDUCE EVIDENCE TO SHOW FROM WHAT SOURCE THE INCOME WAS DE RIVED AND WHY IT SHOULD BE TREATED AS CONCEALED INCOME. IN THE ABSEN CE OF SUCH EVIDENCE, IT IS ARGUED, THE FINDING IS ERRONEOUS. WE ARE UNABLE TO AGREE. WHETHER A RECEIPT IS TO BE TREATED AS INCOME OR NOT, MUST DEP END VERY LARGELY ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. IN THE PRESEN T CASE THE RECEIPTS ARE SHOWN IN THE ACCOUNT BOOKS OF A FIRM OF WHICH THE A PPELLANT AND GOVINDASWAMY MUDALIAR WERE PARTNERS. WHEN HE WAS CA LLED UPON TO GIVE EXPLANATION HE PUT FORWARD TWO EXPLANATIONS, ONE BE ING A GIFT OF RS. 80,000 AND THE OTHER BEING RECEIPT OF RS. 42,000 FROM BUSI NESS OF WHICH HE CLAIMED TO BE THE REAL OWNER. WHEN BOTH THESE EXPLA NATIONS WERE REJECTED, AS THEY HAVE BEEN, IT WAS CLEARLY UPON TO THE INCOM E-TAX OFFICER TO HOLD THAT THE INCOME MUST BE CONCEALED INCOME. THERE IS AMPLE AUTHORITY FOR THE POSITION THAT WHERE AN ASSESSEE FAILS TO PROVE SATI SFACTORILY THE SOURCE AND NATURE OF CERTAIN AMOUNT OF CASH RECEIVED DURING TH E ACCOUNTING YEAR, THE INCOME-TAX OFFICER IS ENTITLED TO DRAW THE INFERENC E THAT THE RECEIPT ARE OF AN ASSESSABLE NATURE. THE CONCLUSION TO WHICH THE A PPELLATE TRIBUNAL CAME APPEARS TO US TO BE AMPLY WARRANTED BY THE FACTS OF THE CASE. THERE IS NO GROUND FOR INTERFERING WITH THAT FINDING, AND THESE APPEALS ARE ACCORDINGLY DISMISSED WITH COSTS. 5 ITA NO. 3925/MUM/209 (A.Y. 2006-07) LUMINANT INVESTMENT P. LTD. VS. DY. CIT REFERENCE IN THIS REGARD MAY ALSO BE MADE TO THE DE CISION IN THE CASE OF CIT V. DEVI PRASAD VISHWANATH PRASAD [1969] 72 ITR 194 (SC) AND CIT VS. BIJU PATNAIK [1986] 160 ITR 674. 3.4 OVER THE RECENT YEARS THERE HAS BEEN SOME DOUBT WITH REGARD TO THE NATURE OF THE DUTY CAST ON THE REVENUE IN THE FACE OF INADEQUATE EVIDENCE OR INCOMPLETE INFORMATION, I.E., QUA THE PARAMETERS OF IDENTITY, CAPACITY AND GENUINENE SS BEING BROUGHT FORTH BY THE ASSESSEE, WHERE THE CREDIT IS IN RESPECT OF SHARE C APITAL/SHARE APPLICATION MONEY FOLLOWING THE DECISION BY THE DELHI HIGH COURT IN THE DECISIO N REPORTED AT CIT VS. DIVINE LEASING & FINANCE LTD. [2008] 299 ITR 268 (DEL), DISMISSING THE REVENUES APPEALS, WHICH IS IN RESPECT OF THREE APPEALS, I.E., IN THE CASE OF CIT VS. (1) DIVINE LEASING AND FINANCE LIMITED (2) GENERAL EXPORTS AND CREDITS LTD. AND (3 ) LOVELY EXPORTS P. LTD. [2008] 299 ITR 268 (DEL). THE COURT AFTER EXAMINING THE LEGAL POSITION, WHICH IT CLARIFIED TO REMAIN UNCHANGED, I.E., WITH REGARD TO THE LEGAL PRINCIPLE S AND POSITIONS INVOLVED, TO BE ESSENTIALLY A MATTER OF FACT, SO THAT NO QUESTION O F LAW, MUCH LESS SUBSTANTIAL QUESTION OF LAW AROSE FOR CONSIDERATION. WITH REGARD TO THE ISS UE OF DISCHARGE OR OTHERWISE OF THE ONUS CAST ON THE ASSESSEE IT WILL BE RELEVANT TO REPRODU CE THE RELEVANT OBSERVATION OF THE COURT, WHICH IS AS UNDER: 'THERE CANNOT BE TWO OPINIONS ON THE ASPECT THAT TH E PERNICIOUS PRACTICE OF CONVERSION OF UNACCOUNTED MONEY THROUGH THE MAS- QUERADE OR CHANNEL OF INVESTMENT IN THE SHARE CAPIT AL OF A COMPANY MUST BE FIRMLY EXCORIATED BY THE REVENUE. EQUALLY, WHERE THE PREPONDERANCE OF EVIDENCE INDICATES ABSENCE OF CULP ABILITY AND COMPLEXITY (COMPLICITY) OF THE ASSESSED IT SHOULD N OT BE HARASSED BY THE REVENUE'S INSISTENCE THAT IT SHOULD PROVE THE NEGAT IVE. IN THE CASE OF A PUBLIC ISSUE, THE COMPANY CONCERNED CANNOT BE EXPEC TED TO KNOW EVERY DETAIL PERTAINING TO THE IDENTITY AS WELL AS FINANC IAL WORTH OF EACH OF ITS SUBSCRIBERS. THE COMPANY MUST, HOWEVER, MAINTAIN AN D MAKE AVAILABLE TO THE ASSESSING OFFICER FOR HIS PERUSAL, ALL THE INFORMATION CONTAINED IN THE STATUTORY SHARE APPLICATION DOCUME NTS. IN THE CASE OF PRIVATE PLACEMENT THE LEGAL REGIME WOULD NOT BE THE SAME. A DELICATE BALANCE MUST BE MAINTAINED WHILE WALKING THE TIGHTR OPE OF SECTIONS 68 AND 69 OF THE INCOME-TAX ACT. THE BURDEN OF PROO F CAN SELDOM BE DISCHARGED TO THE HILT BY THE ASSESSEE; IF THE ASSE SSING OFFICER HARBOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRIPTI ON HE IS EMPOW- 6 ITA NO. 3925/MUM/209 (A.Y. 2006-07) LUMINANT INVESTMENT P. LTD. VS. DY. CIT ERED, NAY DUTY BOUND, TO CARRYOUT THOROUGH INVESTIG ATIONS. BUT IF THE ASSESSING OFFICER FAILS TO UNEARTH ANY WRONG OR ILL EGAL DEALINGS, HE CANNOT OBDURATELY ADHERE TO HIS SUSPICIONS AND TREA T THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANY.' WE MAY HERE EMPHASIS THAT THE SHARE APPLICATION MON EY IS GENERALLY RECEIVED THROUGH THE PUBLIC OFFER ROUTE BY PUBLIC COMPANY, M AKING IT DIFFICULT FOR DISCHARGING THE BURDEN OF PROOF ON THE ASSESSEE-RECIPIENT COMPANY I N TERMS OF SECTION 68 TO THE HILT, AS OBSERVED BY THE HONBLE COURT. THE ASSESSEE IN THE INSTANT CASE IS, HOWEVER A PRIVATE LIMITED COMPANY, IN WHICH THE PUBLIC IS NOT SUBSTAN TIALLY INTERESTED AND WHICH CAN HAVE A MAXIMUM OF 50% SHAREHOLDERS. PERSONS INCLUDING COMP ANIES, INVESTING THEREIN WOULD UNARGUABLY BY KNOWN PERSONS (OR COMPANYS CONTROL B Y SUCH PERSONS) AS NOBODY WOULD OTHERWISE RISK ITS CAPITAL WHICH IS LARGELY ILLIQ UID - WITH AN UNKNOWN ENTITY AND, FURTHER, MADE ON ASSESSMENT OF THE BUSINESS POTENTIAL AND PR OSPECTS. THE ONUS, THEREFORE, ON THE ASSESSEE-DEBTOR, WHICH WOULD ONLY BE WITH REFERENCE TO ITS FACTS AND CIRCUMSTANCES OF THE CASE, IS WITHOUT MUCH MORE. FURTHER, THAT THE SHARE S HAVE BEEN ISSUED IN THE INSTANT CASE AT A PREMIUM OF 400% OF THE FACE VALUE FURTHER CORR OBORATES THE INFERENCE OF A COMPLETE AND INTIMATE KNOWLEDGE OF THE AFFAIRS OF THE ASSESS EE-COMPANY. FURTHER ON, THE MATTER HAS BEEN EXAMINED IN DEPTH BY THE HONBLE COURT IN CIT VS. NOVA PROMOTERS & FINLEASE (P.) LTD. [2012] 342 ITR 169 (DEL), REVIVING THE CASE LAW IN THE MATTER, AND PLACING THE EARLIER DECISIONS IN PR OPER PROSPECTIVE, THE SAME IS IN RESPECT OF A PRIVATE LIMITED COMPANY AND BRINGS OUT THE FUL L SCOPE OF THE NATURE AND DUTY CAST BOTH ON THE ASSESSEE AND THE REVENUE IN THE MATTER. THIS IN FACT IS FOLLOWED BY A SERIES OF A DECISION BY THE SAID COURT, AS IN CIT VS. TITAN SECURITIES LTD. [2013] 357 ITR 184 (DEL) AND CIT VS. YOUTH CONSTRUCTION P. LTD. [2013] 357 ITR 197 (DEL). WE MAY REPRODUCE FOR THE SAKE OF CLARITY THE OBSERVATIONS BY THE HONBLE COURT IN THE LATER CASE : SECTION 68 OF THE INCOME-TAX ACT, 1961, APPLIES EQU ALLY TO SHARE APPLICATION MONIES RECEIVED BY AN ASSESSEE AND, THE REFORE, THE BURDEN IS ON THE ASSESSEE TO PROVE THE NATURE AND SOURCE THEREOF , TO THE SATISFACTION OF THE ASSESSING OFFICER. IT INVOLVES THERE INGREDIENT S, NAMELY, THE PROOF REGARDING IDENTITY OF THE SHARE APPLICANTS, THEIR C REDITWORTHINESS TO PURCHASE THE SHARES AND THE GENUINENESS OF THE TRAN SACTION AS A WHOLE. 7 ITA NO. 3925/MUM/209 (A.Y. 2006-07) LUMINANT INVESTMENT P. LTD. VS. DY. CIT HELD, THAT THERE WAS ENOUGH MATERIAL IN THE POSSESS ION O THE ASSESSING OFFICER WHICH WARRANTED EXPLANATION FROM THE ASSESS EE REGARDING THE NATURE AND SOURCE OF THE SHARE APPLICATION MONIES. THE ASSESSEE HAD DONE LITTLE TO DISCHARGE ITS BURDEN UNDER THE SECTION. T HE TRIBUNAL HAD FAILED TO KEEP IN VIEW THE BROADER PICTURE AND HAD TAKEN A RA THER SIMPLISTIC VIEW OF THE MATTER, IGNORING THE FACTUAL ASPECTS AND SURROU NDING CIRCUMSTANCES PRESENT IN THE CASE. IT SHOULD HAVE DEALT WITH THE CASE IN A HOLISTIC MANNER DEALING WITH THE ENTIRE EVIDENCE RELIED UPON AND HA VING REGARD TO THE REPORT OF THE INVESTIGATION WING, THE MANNER IN WHI CH ENTRIES WERE MADE IN THE BANK ACCOUNTS OF THE THREE COMPANIES, THE STATE MENT OF PKJ AND DENIAL THEREOF BY AKK, AS ALSO THE OTHER SURROUNDING CIRCU MSTANCES OF THE CASE. 3.5 COMING TO THE FACTS OF THE INSTANT CASE, WE FIN D THE FIRST OBSERVATION OVER THE ASSESSEE AS EVEN, AS MUCH AS NOT FURNISHED CONFIRMA TION LETTERS FROM THE CREDITORS. THE REVENUE HAS SUFFICIENT MATERIAL THAT IT IMPUGNING T HE TRANSACTION AS BEING IN FACT A RESULT OF A DELIBERATED AND ORCASTED SCHEME OF ROUTING OF CASH, TRACKING THE MONEY TRAIL, SINCE UNEARTH BY THE EFFORTS OF THE INVESTIGATION WING OF THE DEPARTMENT (ALSO REFER PARAS 3.2 & 3.4 ). THE MONEY HAS BEEN FOLLOWED UPTO THE POINT WHERE THE CASH HAS BEEN DEPOSITED AND WHICH EXTENDS TO THE FORTH TIER, AS DETAIL TRANSACT ION-WISE BY THE REVENUE PER THE REPORTS OF ITS INVESTIGATION WING, AND WHICH FORMS PART OF THE ASSESSMENT ORDER AS ANNEXURE 1 THERETO. THIS IS COUPLED WITH THE STATEMENT OF THE PERSONS PROVIDING ACCESS TO THEIR BANK ACCOUNTS OR THE DEPOSIT OF THEIR CASH, AS WELL AS B Y THE DIRECTORS OF THE INVESTORS COMPANIES, ADMITTING TO THE TRANSACTION BEIGN BOGUS INASMUCH AS THEY ARE ONLY PROVIDING ACCOMMODATION ENTRIES FOR A COMMISSION, THE RATE OF WHICH HAS ALSO BEEN STATED. FURTHER, THERE HAS BEEN NO REBUT OF THOSE STATEMENTS. THE RE VENUE IS, THEREFORE, FULLY ENTITLE TO RELY ON THEM AND IN FACT, ENTITLED SERIOUS DOUBT WITH RE GARD TO THE GENUINENESS OF THE SAID CREDITS WHICH IN FACT REVEAL THE PERNICIOUS SCHEME, AS HELD BY THE HONBLE COURT IN THE CASE OF DIVINE LEASING & FINANCE LTD. (SUPRA) OF CONVERSION OF UNACCOUNTED MONEY, BY MASQUERADING HIS SHARE CAPITAL OF A COMPANY. THE ASSESSEE HAS DONE LITTLE EXCPECT RAISING A LEGA L PLEA OF NON PRODUCTION OF THE SAID DIRECTORS OR DEPONENTS FOR CROSS EXAMINATION. THE SAME HAS BEEN DISREGARDED BY THE REVENUE ON THE GROUND THAT SUFFICIENT OPPORTUNITY I S TOWARD THE SAME WERE GRANTED 8 ITA NO. 3925/MUM/209 (A.Y. 2006-07) LUMINANT INVESTMENT P. LTD. VS. DY. CIT DURING THE COURSE OF THE PROCEEDINGS BEFORE THE INV ESTIGATION WING AND WHICH HAD DELIBERATELY EVADED BY THE ASSESSEE ON PRETEXT OR T HE OTHER. THIS CONDUCT NEEDS TO BE SERIOUSLY DEPRECIATED INASMUCH AS THE INVESTIGATION WING BEING FULLY IN POSITION OF THE FACT AND RATHER IN A MUCH BETTER POSITION TO INVEST IGATE THE FACTS, BOTH IN TERMS OF THE INFORMATION IN THEIR POSITION AS WELL AS IN TERMS O F TIME, AS INFORMATION TENDS TO BE DISSIPATED WITH THE LAPSE OF TIME. FURTHER, HOW, WE WONDER COULD THE ASSESSEE THIS LEGAL PLEA INASMUCH AS THE CONFIRMATIONS AS AFORE-NOTED F ROM THE CREDITORS HAVE NOT BEEN FILLED BY IT. TRUE, THE A.O. HAS NOT CREATED ANY FURTHER I NVESTIGATION IN THE MATTER RELYING SOLELY ON THE FINDINGS BY THE INVESTIGATION WING. HOWEVER, FIRSTLY, AS AFORE-STATED HE IS FULLY ENTITLED TO DO SO, AND SECONDLY, THE QUESTION OF TH E SAME WOULD ONLY WHERE THE ASSESSEE FURNISHES ANY MATERIAL CONTROVERTING THE SAID INCRI MINATING INFORMATION IN THE POSITION OF THE REVENUE. THE FURNISHING OF THE DOCUMENTARY EVID ENCES, VIZ. THE SHARE APPLICATION MONEY, BALANCE-SHEET OF THE CREDITOR COMPANIES IS O F LITTLE EVIDENTIAL VALUE IN THE FACTS OF UNEARTH AND LATE BEAR BY THE REVENUE. RATHER, IT NE EDS TO BE APPRECIATED THAT IF THE EVIDENCE BY WAY OF BOOK ENTRIES WERE TO BE ITSELF S UFFICIENT TO PROVE CASH CREDITS, SECTION 68 WOULD ITSELF TO BE MISCONCEIVED AND REDUNDANT IN ASMUCH AS IT IS ONLY BASED ON THE CREDIT APPEARING IN THE BOOKS OF ACCOUNT. AS CLARIF IED EARLIER, IT IS A RULE OF EVIDENCE CASTIG THE BURDEN O PROOF TO EXHIBIT THAT THE SAID CREDIT IN ACT REPRESENTS A GENUINE CREDIT TRANSACTION. 3.6 AT THE SAME TIME, HOWEVER, WE ALSO FIND THAT, R ATHER STRANGELY THE MATTER IN THE POSITION OF THE A.O. HAS NOT BEEN PROVIDED TO THE A SSESSEE. THE ASSESSEE HAS RAISED A SPECIFIC PLEA IN THIS REGARD BEFORE THE LD. CIT(A) (VIDE ITS GROUND NO.2). THIS IS MATERIAL AND DEFINITELY AMOUNTS TO A DENIAL O OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE. THOUGH, IN OUR VIEW, THE ASSESSEE OUGHT TO HAVE ASK ED FOR THE SAME; THE PRIMARY ONUS BEING ON IT, AND WITH IT HAVING NOT EVEN FURNISHED THE CONFIRMATIONS. HOWEVER, THE REVENUE RELYING ON THE FINDINGS OF ITS INVESTIGATIO N WING WHICH THOUGH NO DOUBT ARE RELEVANT AND IT IS FULLY ENTITLED TO DO SO. IT WAS INCUMBENT IN THE FAIRNESS OF PROCEDURE AND PRINCIPLE OF JUSTICE TO CONFRONT THOSE MATERIALS TO THE ASSESSEE. THE LD. CIT(A) HAS NOT DEALT WITH THIS ASPECT OF THE MATTER. WE DECIDE ACC ORDINGLY. 9 ITA NO. 3925/MUM/209 (A.Y. 2006-07) LUMINANT INVESTMENT P. LTD. VS. DY. CIT 4. THE SECOND GROUND OF THE ASSESSEES APPEAL IS IN RESPECT OF TREATING THE ASSESSEES LOSS AS A SPECULATION LOSS IN VIEW OF THE PROVISION S OF EXPLANATION TO SECTION 73 O THE ACT. THE ASSESSEES PRINCIPLE BUSINESS BEING TRADING IN SHARES AND SECURITIES, THE A.O. HAS INVOKED THE SAID PROVISION AND WHICH HAS FOUND CONF IRMATION BY THE LD. CIT(A) ON THE SAME GROUND. WE FIND THE ASSESSEES CASE TO BE SANS ANY MERIT. FURTHER, THE FACT THAT THERE HAS BEEN NO BUSINESS ACTIVITY DURING THE YEAR AND T HE IMPUGNED LOSS IS ON ACCOUNT OF VALUATION OF THE INVENTORIES, WOULD MAKE NO DIFFERE NCE IN THE VALUE OF OF STOCK IS AN INTEGRAL PART O THE PROCESS OF DETERMINATION OF BUS INESS INCOME. REFERENCE IN THIS REGARD MAY BE MADE TO THE DECISIONS BY THE HONBLE HIGH CO URT IN THE CASE OF CIT VS. LOKMAT NEWSPAPERS PVT. LTD. [2010] 322 ITR 43 (BOM) AND PRASAD AGENTS (P.) LTD. V. ITO [2009] 333 ITR 275 (BOM), AMPLY CLARIFYING AND SETT LING THE LAW IN THE MATTER, WHICH RATHER PRESENTS TRITE LAW. THE ASSESSEES SECOND GR OUND IS DISMISSED. 5. VIDE ITS THIRD AND THE FINAL GROUND, THE ASSESSE E LEVY THE INTEREST U/S.234(B) OF THE ACT, CLAIMING IT TO BE NOT IN ACCORDANCE WITH THE L AW AS WELL AS ALSO ON THE GROUND OF DENIAL OF OPPORTUNITY TO CONTEST THE SAME. NO CASE TOWARDS THE WORKING O THE INTEREST BEEN NOT IN ACCORDANCE WITH THE LAW HAS BEEN FURNIS HED AT ANY STAGE. THE LEVY OF INTEREST AS EXPLAINED BY THE CONSTITUTIONAL BENCH OF THE APE X COURT IN THE CASE OF CIT VS. ANJUM M.H. GHASWALA [2001] 252 ITR 1 (SC) BEING COMPENSATORY, IS MANDA TORY IN CHARACTER. IN FACT, THE BOARD HAS LAID DOWN RULES WHEREON AN A PPLICATION MADE TO THE CHIEF COMMISSIONER ON SUFFICIENT GROUND, WAIVER OF THE IN TEREST UNDER GENUINE HARDSHIP, COULD BE MADE. NO SUCH CASE HAS BEEN MADE OUT BY THE ASSE SSEE BEFORE ANY AUTHORITY. THE LEVY OF THE INTEREST U/S.234(B) CONSEQUENTIALLY IS, THE REFORE, UPHELD, DISMISSING THE ASSESSEES THIRD GROUND. WE DECIDE ACCORDINGLY. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 6 TH , 2013 SD/- SD/- (D. MANMOHAN) (SANJAY ARORA) / VICE PRESIDENT / ACCOUNTANT MEMBER 10 ITA NO. 3925/MUM/209 (A.Y. 2006-07) LUMINANT INVESTMENT P. LTD. VS. DY. CIT ( 1* MUMBAI; 2 DATED : 06.11.2013 ) . 3 . ./ROSHANI , SR. PS ! ' #$%& '&$ / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. ( 4+ ( ) / THE CIT(A) 4. ( 4+ / CIT - CONCERNED 5. 5)67 $3+389 , , 89/ , ( 1* / DR, ITAT, MUMBAI 6. 7: ;* / GUARD FILE ! ( / BY ORDER, ) / (* + (DY./ASSTT. REGISTRAR) , ( 1* / ITAT, MUMBAI