ACIT, New Delhi V. M/s. Montage Enterprises Pvt. Ltd., New Delhi

ITA 4014/DEL/2011

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7321 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 03-05-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 05-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PARAMITA M BISWAS
• Keywords: Unexplained cash credit; Opportunity of being heard; Additional evidence; Question of law; Valuation report; Capital receipt
• Section: 80IB; 195; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH E EE E : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI G.D. AGRAWAL, G.D. AGRAWAL, G.D. AGRAWAL, G.D. AGRAWAL, VICE VICE VICE VICE PRESIDENT PRESIDENT PRESIDENT PRESIDENT AND AND AND AND SHRI K. NARASIMHA CHARY SHRI K. NARASIMHA CHARY SHRI K. NARASIMHA CHARY SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA ITAITA ITA NO. NO. NO. NO. 4014/DEL/2011 4014/DEL/2011 4014/DEL/2011 4014/DEL/2011 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2007 2007 2007 2007 - -- - 08 0808 08 ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CENTRAL CIRC CENTRAL CIRC CENTRAL CIRC CENTRAL CIRCLE LELE LE- -- -18, 18, 18, 18, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. M/S MONTAGE ENTERPRISES PVT.LTD., M/S MONTAGE ENTERPRISES PVT.LTD., M/S MONTAGE ENTERPRISES PVT.LTD., M/S MONTAGE ENTERPRISES PVT.LTD., C CC C- -- -5, SHASHI GARDEN, 5, SHASHI GARDEN, 5, SHASHI GARDEN, 5, SHASHI GARDEN, NEAR POCKET NEAR POCKET NEAR POCKET NEAR POCKET- -- -5, GURUDWARA, 5, GURUDWARA, 5, GURUDWARA, 5, GURUDWARA, MAYUR VIHAR, PHASE MAYUR VIHAR, PHASE MAYUR VIHAR, PHASE MAYUR VIHAR, PHASE- -- -1, 1,1, 1, DELHI DELHI DELHI DELHI 110 091. 110 091. 110 091. 110 091. PAN : PAN : PAN : PAN : AACCM8173H. AACCM8173H. AACCM8173H. AACCM8173H. (APPELLANT) (RESPONDENT) APPELLANT BY : MS. P A RAMITA M. BISWAS, CIT - DR. RESPOND ENT BY : SHRI M.P. RASTOGI, ADVOCATE. DATE OF HEARING : 17.12.2018 17.12.2018 17.12.2018 17.12.2018 DATE OF PRONOUNCEMENT : 14.01.2019 14.01.2019 14.01.2019 14.01.2019 ORDER ORDER ORDER ORDER PER G.D. AGRAWAL, PER G.D. AGRAWAL, PER G.D. AGRAWAL, PER G.D. AGRAWAL, VICE VICE VICE VICE PRESIDENT PRESIDENT PRESIDENT PRESIDENT : :: :- -- - THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A)-III, NEW DELHI DATED 30.06.2011 FOR THE ASSESSME NT YEAR 2007- 08. 2. GROUND NO. 1 OF THE REVENUES APPEAL READ AS UNDER :- 1. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 18,00,00,000/- MADE BY WAY OF DISALLOWANCE OF EXCESSIVE LICENCE FEE PAID TO M/S UFLEX LTD. 3. AT THE TIME OF HEARING BEFORE US IT WAS POINTED OU T BY THE LEARNED COUNSEL THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF ITAT IN ASSESSEES OWN CASE IN THE ITA-4014/DEL/2011 2 IMMEDIATELY PRECEDING YEAR I.E. ASSESSMENT YEAR 2006-07 VIDE ORDER DATED 31 ST MAY, 2016. HE STATED IN THE PRECEDING YEAR THAT THE ITAT ACCEPTED THE PAYMENT OF LICENSE FEE OF `2 CRORE PER MONTH FROM 1 ST FEBRUARY, 2006. THE ABOVE ORDER OF ITAT IS APPROVED BY THE HONBLE JURISDICTIONAL HIGH COURT VIDE ORDER DATED 6.11.2017 AND ALSO BY THE HONBLE APEX COURT. HE STATED THAT WHEN IN THE IMMED IATELY PRECEDING YEAR PAYMENT OF LICENCE FEE OF @ `2 CRORE PER MONTH IS ACCEPTED BY THE ITAT WHICH IS APPROVED BY THE HONBLE HIGH COURT AND SUPREME COURT. THERE IS NO JUSTIFICATION FOR ALLOWING OF LICE NSE FEE @ 50 LAC PER MONTH. 4. THE LEARNED DR ON THE OTHER HAND RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND SHE STATED THAT THE ASSESSEE HAS NOT EVE N PRODUCED THE COPY OF LEASE AGREEMENT BETWEEN THE ASSESSE E AND M/S FLEX INDUSTRIES LIMITED. WHEN THE ASSESSEE HAD NOT EVEN PRODUCED THE PRIMARY DOCUMENT, THE AO WAS FULLY JUSTIFIED IN DISALL OWING THE INCREASE IN THE LICENSE FEE FROM `50 LAC PER MONTH TO `2 CRORE PER MONTH. SHE, THEREFORE, STATED THAT THE ORDER OF THE AO MAY BE SUSTAINED AND THE ORDER OF THE CIT(A) SHOULD BE REVERSE D. 5. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BOTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. THE FACTS O F THE CASE ARE THAT THE ASSESSEE IS A MANUFACTURING COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF FLEXIBLE PACK AGING MATERIAL IN ROLL AND POUCH FORM. THE ASSESSEE HAD THREE UNITS AT MAL ANPUR, JAMMU AND NOIDA. THE MALANPUR UNIT WAS TAKEN ON LEASE AND L ICENSE BASIS FROM M/S FLEX INDUSTRIES LIMITED (FIL) WHOSE NAME IS SUB SEQUENTLY CHANGED TO M/S UFLEX LIMITED. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE PAID THE LICENSE FEE OF `24 CRORE @ `2 CRORE P ER MONTH. IN THE IMMEDIATELY PRECEDING YEAR I.E. ASSESSMENT YEAR 20 06-07, THE AO ITA-4014/DEL/2011 3 HAD FOUND THAT THE ASSESSEE HAD PAID THE LICENSE FEE @ ` 50 LAC PER MONTH FOR THE PERIOD FROM APRIL, 2005 TO SEPTEMBER, 2005 AND @ 2 CRORE PER MONTH FOR THE PERIOD OCTOBER, 2005 TO MAR CH, 2006. WHILE PASSING THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2006-07, THE AO DID NOT AGREE WITH THE INCREASE OF LICENSE FEE FROM `50 L AC PER MONTH TO `2 CRORE PER MONTH. ACCORDINGLY HE ALLOWED THE LICENSE FEE @ `50 LAC PER MONTH RESULTING IN THE ADDITION OF `9 CRORES. THE SAME WAS DELETED BY THE CIT(A). HOWEVER, THE ITAT AFTER CONSIDERING THE FACTS OF THE CASE AND THE SUBMISSION OF BOTH THE SIDES FOUND THAT THERE WA S NO JUSTIFICATION FOR INCREASE OF THE LICENSE TO `2 CRORE PER MONTH FROM 1 ST OCTOBER, 2005 BUT IT FOUND IT APPROPRIATE TO ACCEPT THE LICENSE FEE OF `2 CRORE PER MONTH FROM 1 ST FEBRUARY, 2006. THE CONCLUSION OF THE ITAT IN PARA 17 OF ITS ORDER DATED 31 ST MAY, 2016 IN ITA NO. 2106/DEL/2010 READS AS UNDER:- IT IS THEREFORE JUST AND PROPER TO CONSIDER THE LICENSE FEE FOR THE PERIOD FROM 01.03.2005 TO 31.01.2006 AT RS. 50 LACS PER MONTH AND RS. 2 CRORES FOR THE REMAINING MONT HS FROM 01.02.2006 TO 31.03.2006. TO MEET THE ENDS OF JUSTICE WE THEREFORE CONFIRM THE ADDITION TO AN EXTE NT OF RS. 6 CRORE. ACCORDINGLY GROUND NO. 3 RAISED BY THE REVENUE IN ASSESSMENT YEAR 2006-07 STANDS PARTLY ALLOWED. 6. THE ASSESSEE ACCEPTED THE ORDER OF ITAT WHILE THE RE VENUE AGGRIEVED WITH THE ORDER OF THE ITAT FILED APPEAL B EFORE THE HONBLE HIGH COURT. THE HIGH COURT VIDE ORDER DATED 6.11.20 17 IN ITA NO. 892/2016 UPHELD THE ORDER OF THE ITAT. THE RELEVANT FINDING OF THE JURISDICTIONAL HIGH COURT READS AS UNDER:- 7. AS FAR AS THE SECOND ISSUE, I.E. THE ENHANCEMENT OF LICENCE FEE IS CONCERNED, THE FACTS ARE THAT THE ASSESSE E WAS ORIGINALLY PAYING RS. 50 LAKHS PER MONTHS LICENCE F EE TO M/S FLEX GROUP OF COMPANIES. DURING THE ASSESSMENT YEARS IN QUESTION, THE FEE WAS REVISED MID-TERM TO RS. 2 CRORES PER MONTH. THE AO ADD RS. 9 CRORES, UPON AN ITA-4014/DEL/2011 4 UNDERSTANDING THAT THE LICENCE FEE INCREASED WAS ARBIT RARY. THE CIT(APPEALS), HOWEVER, DELETED THIS ENTIRE AMOUNT . THE REVENUES APPEAL SUCCEEDED SUBSTANTIALLY TO THE EXTENT OF RS. 6 CRORES. 8. HAVING REGARD TO THESE CIRCUMSTANCES, THE COURT F INDS NO JUSTIFICATION TO INTERFERE WITH THE ITATS FINDING S, WHICH ARE ALSO FACTUAL AS FAR AS THIS ISSUE GOES. 7. THE REVENUE FILED THE SLP BEFORE THE HONBLE APE X COURT WHICH WAS DISMISSED BY THEIR LORDSHIPS VIDE ORDER DATED 26.10.2 018. THUS THE ISSUE OF INCREASE OF THE LICENSE FEE FROM `50 LAC PER MONTH TO `2 CRORE PER MONTH WAS EXAMINED BY THE ITAT IN THE IMME DIATELY PRECEDING YEAR. THE ITAT AFTER CONSIDERING THE FACTS AND SUBMISSIONS OF BOTH THE PARTIES DEEM IT APPROPRIATE TO ALLOW THE INCREASE OF LICENSE FEE FROM 1 ST FEBRUARY, 2006. THE ORDER OF ITAT IS APPROVED BY HO NBLE HIGH COURT AND SUPREME COURT. THEREFORE, FROM 1.4.2 006 SOME LICENCE FEE I.E. @ `2 CRORE PER ANNUM IS TO BE ALLOWED. SO F AR AS THE CONTENTION OF THE LEARNED DR WITH REGARD TO FURNISHING OF LEASE AGREEMENT IS CONCERNED, IT WOULD BE RELEVANT TO THE PRECEDING YE AR AND NOT TO THE YEAR UNDER CONSIDERATION BECAUSE THE LICENSE FEE WAS IN CREASED BY THE LEASE AGREEMENT IN THE PRECEDING YEAR. AFTER CONSIDER ING THE AGREEMENT AND ENTIRE MATERIAL, THE ISSUE OF INCREASIN G THE LICENSE FEE IS CONSIDERED BY ALL THE AUTHORITIES IN THE PRECEDING YEARS THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF ITAT (WHICH IS APPROVED BY HONBLE HIGH COURT AND SUPREME COURT) IN THE IMMEDI ATELY PRECEDING YEAR, WE HOLD THAT THE CIT(A) WAS FULLY JUSTIFIED IN ALLOWING THE LICENSE FEE @ `2 CRORE PER MONTH IN THE YEAR UNDER CONSIDERA TION. THE GROUND NO. 1 OF THE REVENUE APPEAL IS ACCORDINGLY REJECTED. 8. GROUND NOS. 2 AND 3 OF THE REVENUES APPEAL READS A S UNDER:- ITA-4014/DEL/2011 5 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 2,00,67,589/- MADE BY THE ASSESSING OFFICER U/S 68 OF THE INCOME TAX ACT, 1961 ON ACCOUN T OF UNVERIFIABLE AND UNCONFIRMED ADVANCES RECEIVED BY THE ASSESSEE FROM CUSTOMERS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A)HAS ERRED IN LAW AND ON FACTS IN ADMITTING ADDITIONAL EVIDENCES WITHOUT GIVING OPPORTUNITY TO THE AO AS PROVIDED UNDER RULE 46A OF THE INCOME TAX RULE, 1962. 9. AT THE TIME OF HEARING BEFORE US THE LEARNED COU NSEL FOR THE ASSESSEE STATED THAT THIS ISSUE IS ALSO SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE ITAT IN ITS OWN CASE IN TH E IMMEDIATELY PRECEDING YEAR. THE ABOVE ORDER OF THE ITAT IS ACCEP TED BY THE REVENUE AS NO SUBSTANTIAL QUESTION OF LAW WAS RAISED BEF ORE THE HONBLE JURISDICTIONAL HIGH COURT IN THIS REGARD. THE LEARNED DR ON THE OTHER HAND STATED THAT FROM PAGE 12 PARA 10 OF THE A SSESSMENT ORDER, IT IS EVIDENT THAT THE ASSESSEE HAD RECEIVED THE ADVANCE OF MORE THAN 14 CRORE FROM CUSTOMERS WHICH WAS OUTSTANDING AS ON 31 ST MARCH, 2007. THE ASSESSING OFFICER HAS ADDED THE ADVANCE RECEIV ED FROM THREE PARTIES ONLY BECAUSE IN THEIR CASES, THE ADVANCE WAS RECEIVED IN CASH. THE ASSESSING OFFICER HAS ALSO OBSERVED THAT THE ASSESSEE WAS ASKED TO PRODUCE THESE PARTIES FOR VERIFICATION AND EX AMINATION WHICH WAS NOT DONE BY THE ASSESSEE. SHE FURTHER STATED THAT BEF ORE THE CIT(A) THE ASSESSEE HAS PRODUCED THE COPY OF ACCOUNT OF ABOVE THREE PARTIES FOR SUBSEQUENT YEAR ON THE BASIS OF WHICH THE CI T(A) ALLOWED THE RELIEF. SHE STATED THAT COPY OF ACCOUNT OF SUBSEQ UENT YEAR WERE NEVER PRODUCED BEFORE THE AO THEREFORE, THE SAME WAS ADDITIONAL EVIDENCE AND IF THE CIT(A) HAD ADMITTED ADDITIONAL EVIDENCE, HE SHOULD HAVE ALLOWED AN OPPORTUNITY TO THE AO TO EXAMINE TH E SAME. SHE THEREFORE STATED THAT THE ADMISSION OF ADDITIONAL EVID ENCE AND RELIANCE THEREON BY THE CIT(A) WITHOUT ALLOWING ANY OPPORTUN ITY TO THE ITA-4014/DEL/2011 6 ASSESSING OFFICER IS IN VIOLATION OF RULE 46A. SHE ACCOR DINGLY SUBMITTED THAT THE ORDER OF THE CIT(A) ON THIS POINT MAY BE RE VERSED AND THAT OF AO MAY BE RESTORED. 10. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHER HA ND STATED THAT THIS ISSUE IS ALSO SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 20 06-07. HE ALSO STATED THAT THE COPY OF THE ACCOUNT OF THE CU STOMER FROM THE ASSESSEES BOOKS OF ACCOUNT OF SUBSEQUENT YEAR CANNOT BE SAI D TO BE ADDITIONAL EVIDENCE AND THEREFORE, THERE WAS NO VIOL ATION OF RULE 46A. 11. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES. WE FIND THAT THE ITAT HAS CONSIDERED THIS ISSUE IN THE I MMEDIATELY PRECEDING YEAR. THE RELEVANT PORTION OF THE ITAT OR DER IS REPRODUCED BELOW FOR READY REFERENCE:- 18 1818 18 . .. . GROUND NO. 5 GROUND NO. 5 GROUND NO. 5 GROUND NO. 5 RAISED BY THE REVENUE FOR ASSESSMENT YEAR 2006 2006 2006 2006- -- -07 07 07 07 PERTAINS TO DELETING THE ADDITION OF RS. 2,32,13,640/-MADE UNDER SECTION 68 OF THE ACT ON ACCOUNT OF UNVERIFIABLE AND UNCONFIRMED ADVANCES FRO M CUSTOMERS. 18.1. THE LD.AO OBSERVED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD RECEIVED RS. 3,85,32,962/- HE OBSERVED THAT THE ASSESSEE HAD CLAIMED CASH SALES OF RS. 2,658.86 LACS DURING THE YEAR UNDER CONSIDERATION ON ACCOUNT OF ADVANCES FROM CUSTOMERS. THE SALES ARE IN THE FORM OF ON SALES OR ACROSS THE COUNTER SALES. THE LD.AO HAD ASKED THE ASSESSEE TO FURNISH CONFIRMATION IN RESPECT OF THE PARTIES FROM WH OM THE ASSESSEE HAS CLAIMED TO HAVE RECEIVED ADVANCES. AS THE PARTIES WERE NOT VERIFIABLE THE AO MADE THE ADDI TION OF RS. 2,32,13,640/- 19. AGGRIEVED BY THE ORDER OF THE LD.AO THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT (A). ITA-4014/DEL/2011 7 19.1. THE LD.CIT (A), AFTER NOTICING ALL THE EVIDENCES GAV E A CATEGORICAL FINDING IN PARAGRAPH 10.3 OF HIS ORDER T O LD.CIT (A) HAS OBSERVED THAT ALL THE PARTIES ARE REGULAR CUST OMERS PURCHASING GOODS FROM LAST MANY YEARS FROM THE ASSESSEE. IN RESPECT OF THE ADVANCES RECEIVED, THE ASSESSEE COMPANY HAS APPLIED GOODS TO THESE PARTIES. THE LD.CIT (A) HAS ALSO TAKEN NOTE OF THE AVAILABLE CONFIRMATIONS 5. THE LD.CIT (A) HAS ALSO TAKEN NOTE OF THE REMAND REPORT OF THE LD.AO PLACED AT PAGE 576 OF TH E PAPER BOOK FILED BY THE REVENUE. THE LD.CIT (A) HAS OBSERVED THAT AS THE AO IN THE REMAND REPORT HAS NOT MADE ANY ADVERSE OBSERVATIONS/REMARKS, THE LD.CIT (A) DELETED THE ADDITION. 20. AGGRIEVED BY THE ORDER OF LD.CIT (A), THE REVEN UE IS IN APPEAL BEFORE US NOW. 20.1 WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES BE LOW AND THE RELEVANT PAGES OF THE PAPER BOOK PREFERRED B Y LD.CIT (A). IT IS OBSERVED FROM THE REMAND REPORT AN D THE ASSESSMENT ORDER THAT THE ASSESSEE HAS FILED LEDGER ACCOUNTS OF THE CONCERNED PARTIES BEFORE THE AO. THE TRADE CUSTOMERS AS APPEARING IN THE LIST ARE THE REGU LAR CUSTOMERS MAKING PURCHASES FROM THE ASSESSEE FROM PAST MANY YEARS IT IS EVIDENT FROM THE LEDGER ACCOUNT FOR THE CURRENT AS WELL A SUBSEQUENT YEARS SHOWS THAT THE ASSESSEE HAS BEEN SUPPLYING GOODS TO THESE PARTIES IN THE NORMAL COURSE OF THE BUSINESS AND THEREFORE THE REALISATION OF PROCEEDS THEREOF IS AN ONGOING PROCESS DURING THE COURSE OF THE BUSINESS ACTIVITY. THE ONLY FI NDING OF THE AO THAT THE ASSESSEE HAS NOT BEEN ABLE TO PRODUCE CONFIRMATIONS FROM FEW OF THE PARTIES CANNOT BE THE B ASIS TO ARRIVE AT A CONCLUSION THAT THESE ARE UNVERIFIABLE AND UNCONFIRMED. 20.2 IN VIEW OF THE ABOVE FINDINGS AND OBSERVATIONS WE ARE OF THE CONSIDERED OPINION TO UPHOLD THE FINDINGS OF THE LD. CIT(A). ACCORDINGLY GROUND NO. 5 RAISED BY THE R EVENUE FOR ASSESSMENT YEAR 2006-07 STANDS DISMISSED. 12. FROM THE PERUSAL OF THE ABOVE ORDER OF THE ITAT, IT IS EVIDENT THAT IN THE PRECEDING YEAR, THE CIT(A) HAD ALLOWED THE O PPORTUNITY TO THE AO AND HAS DECIDED THE ISSUE ONLY AFTER TAKING INTO CONSID ERATION THE REMAND REPORT SUBMITTED BY THE ASSESSING OFFICER. HOWEV ER, IN THE ITA-4014/DEL/2011 8 YEAR UNDER CONSIDERATION, THE CIT(A) HAS ALLOWED NO O PPORTUNITY TO THE AO TO EXAMINE THE COPY OF ACCOUNT OF THE CUSTOMER IN SUBSEQUENT YEARS AND NO REMAND REPORT IS CALLED FOR. IN VIEW OF THE ABOVE, WE DEEM IT APPROPRIATE TO SET ASIDE THE ORDER OF THE CIT (A) ON THIS POINT AND RESTORE THE MATTER BACK TO THE FILE OF THE AO. W E DIRECT THE ASSESSEE TO PRODUCE THE COPY OF ACCOUNT OF ABOVE THREE CUSTOMERS FOR SUBSEQUENT YEARS BEFORE THE AO THEREAFTER THE AO WILL EXAMINE WHETHER THE ABOVE THREE PARTIES ARE THE REGULAR CUSTO MERS AND THE ASSESSEE HAS SUPPLIED THE GOODS TO THOSE PARTIES IN THE NORM AL COURSE OF BUSINESS AND WHETHER THESE ADVANCES HAVE BEEN ADJUSTE D AGAINST SUCH SUPPLY OF GOODS. IF IT IS SO THAN THE OBSERVATION O F ITAT IN PARA 20.1 OF THE ABOVE ORDER WOULD BE SQUARELY APPLICABL E AND NO ADDITION WOULD BE MADE FOR TRADE ADVANCES RECEIVED BY THE ASSESS EE. NEEDLESS TO MENTION THAT AO WILL ALLOW ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WITH THESE OBSERVATIONS, GROUND NOS. 2 AND 3 OF THE REVENUES APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES. 13. GROUND NOS.4 & 5 OF THE REVENUES APPEAL READ AS U NDER :- 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.20,00,00,000/- MADE BY THE ASSESSING OFFICER U/S 68 OF THE INCOME TAX ACT, 1961 ON ACCOUN T OF BOGUS SHARE CAPITAL. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN PLACING R ELIANCE ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF M/S LOVELY EXPORTS (P) LTD. WITHOUT APPRECIATING THA T THE FACTS OF THIS CASE ARE DIFFERENT FROM THE FACTS IN THE CASE OF M/S LOVELY EXPORTS (P) LTD. ITA-4014/DEL/2011 9 14. THE FACTS RELATING TO THESE GROUNDS OF APPEAL ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FOUN D THAT THE ASSESSEE HAS RECEIVED THE SUM OF `20,00,00,000/- FROM M/S ADHYAY EQUI PREF PVT.LTD. (IN SHORT AEPP) AGAINST THE ALLOTM ENT OF 10,00,000 EQUITY SHARES OF `10/- EACH AT A PREMIUM OF `190/- PE R SHARE. THE ASSESSING OFFICER TREATED THIS AS UNEXPLAINED CASH CREDIT FOR THE FOLLOWING REASONS :- I HAVE CAREFULLY CONSIDERED THE WHOLE ISSUE AND THE EXPLANATION PUT FORTH ON BEHALF OF THE ASSESSEE. HOWEV ER, THE FOLLOWING PECULIARITIES HAVE BEEN NOTICED IN THI S MATTER : I. THE AMOUNT OF PREMIUM CHARGED PER SHARE IN THIS CASE IS RS.190/-. THE AMOUNT OF PREMIUM CHARGED IS MUC H HIGHER THAN THE GENERAL MARKET TREND OF THAT TIME. II. THE ASSESSEE COMPANY HAS NOT ISSUED SHARES TO ANY OTHER PERSON OR COMPANY DURING THE YEAR AND THEREFOR E, THE PREMIUM CHARGED IS NOT COMPARABLE WITH ANY INSTAN CE SO AS TO JUSTIFY THE ASSESSEES CLAIM. III. THE BENEFITS ACCRUING TO M/S ADHYAY EQUI PREF PVT.LTD. BY ACQUIRING SHARES OF THE ASSESSEE COMPANY AT SUCH A HIGH PREMIUM HAVE NOT BEEN SATISFACTORILY EXPLAINED. IV. THE REASONS WHY M/S ADHYAY EQUI PREF PVT.LTD. CHOSE TO INVEST A HEAVY AMOUNT OF RS.20,00,00,000/- AT A SUC H A HIGH PREMIUM IN THE ASSESSEE COMPANY HAVE NOT BEEN PROPERLY EXPLAINED. V. THE AMOUNT OF RS.20,00,00,000/- HAS BEEN PAID BY M/S ADHYAY EQUI PREF PVT.LTD. THROUGH CHEQUES BETWEEN THE PERIOD FROM 20.2.2007 TO 13.3.2007. FROM A PER USAL OF THE CONCERNED BANK ACCOUNT OF THIS COMPANY, IT IS NOT ICED THAT AS ON 19.2.2007, THE CREDIT BALANCE WAS NIL. ON ITA-4014/DEL/2011 10 21.2.2007, THERE ARE CREDITS OF RS.3,00,00,000/- BY W AY OF TWO CHEQUES BUT FULL DESCRIPTION OF THE SOURCE IS NOT THERE. IT IS AFTER THIS PERIOD THAT THE FUNDS HAVE STARTED FL OWING INTO THE BANK ACCOUNT OF M/S ADHYAY EQUI PREF PVT.LT D. AND OUT OF THOSE FUNDS, THE PAYMENTS HAVE BEEN MADE TO THE ASSESSEE COMPANY. IN MANY CASES OF CREDIT ENTRIES, ONLY CHEQUE NUMBERS HAVE BEEN MENTIONED AND THE EXACT NATURE OF SOURCE OF THESE FUNDS IS NOT CLEAR. UNDER TH ESE CIRCUMSTANCES, THE FINANCIAL WORTHINESS OF M/S ADHYAY E QUI PREF PVT.LTD. IS NOT SATISFACTORILY ESTABLISHED AND RE SULTANTLY GENUINENESS OF TRANSACTIONS MADE WITH THE ASSESSEE COMPANY IS ALSO NOT SATISFACTORILY ESTABLISHED. VI. IT IS ALSO NOTICED FROM THE PERUSAL OF THE BANK ACCOUNT OF M/S ADHYAY EQUI PREF PVT.LTD. THAT THE CR EDIT BALANCE IN THE BANK ACCOUNT AFTER PAYMENT TO THE ASSE SSEE COMPANY REMAINED AT MUCH LOWER LEVELS. AS ON 14.3.2 007, THERE WAS CREDIT BALANCE OF ONLY RS.7,200/-, AS ON 26.3.2007 IT WAS ONLY RS.82,200/- AND EVEN ON 31.3.20 07 IT WAS JUST RS.6,82,200/-. VII. IT IS ALSO NOTICED THAT M/S ADHYAY EQUI PREF PVT. LTD. IS A KOLKATA BASED COMPANY. THERE ARE MANY OTHER COMPANIES OF KOLKATA FROM WHICH MANY CLOSELY RELATED COMPANIES OF THE ASSESSEE PERTAINING TO M/S FLEX/UFLEX GROUP HAD DECLARED TO HAVE RECEIVED SHARE CAPITAL DU RING THE PAST SOME YEARS, ESPECIALLY DURING A.Y. 2006-07. ALL THESE SHARES WERE ISSUED AT HEAVY PREMIUM AND WHILE COMPLETING THE ASSESSMENT PROCEEDINGS IN THE CASES OF SUCH CLOSELY RELATED COMPANIES OF THE ASSESSEE, IT WAS HELD AFTER DETAILED INQUIRIES THAT THE COMPANIES (FROM WHI CH SHARE CAPITAL WAS RECEIVED) WERE USED BY THE FLEX GROU P FOR CHANNELING BACK ITS OWN FUNDS IN THE FORM OF SHARE CAPITAL OF THE ASSESSEE COMPANIES. UNDER THESE CIRCUMSTANCES AND IN VIEW OF THE DISCUSSION SUPRA IT IS EVIDENT THAT THE ASSESSEES TRANSACTIONS WITH M/S ADHYAY EQUI PREF PVT.LTD. DURING THE YEAR UNDER CONSIDERATI ON ARE NOT GENUINE. 15. THE ASSESSEE GAVE EXPLANATION WITH REGARD TO EACH A ND EVERY POINT BEFORE THE LEARNED CIT(A), WHICH IS REPRODUCED FROM PAGES 14 TO ITA-4014/DEL/2011 11 18 OF THE ORDER OF LEARNED CIT(A) AND THE SAME IS ALSO REPRODUCED HEREUNDER FOR READY REFERENCE :- 1. THE FIRST OBJECTION OF THE LD.AO IS THAT THE SHARE S HAS BEEN ALLOTTED TO THE IMPUGNED COMPANIES AT A HIGH PREMIUM FROM RS.190/-. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS ALLOTTED 10,00,000 EQUITY SHARES TO M/S ADHYAY EQUI PR EF PVT.LTD. AND A DETAILED LETTER DATED 23.12.2010 TO PREMIUM HAS BEEN SUBMITTED BY APPELLANT BEFORE LD.AO. COPY ATTACHED AT PAGE NO.167 TO 188 OF PAPER BOOK. THAT REGARDING THE ALLEGED HIGH RATE OF PREMIUM @ RS.190/-, IT IS CONTENDED THAT THE PREMIUM CHARGE IS N OT VERY HIGH. THE VALUATION OF SHARE OF APPELLANT COMP ANY WAS DONE BY AN INDEPENDENT CHARTERED ACCOUNTANT AND ACCORDINGLY THE VALUE OF SHARE, ON THE BASIS OF NET ASSE T VALUE (NAV) LINKED TO BOOK VALUE MULTIPLE, COMES TO RS.200.52 PER SHARE. THAT THE VALUE PER SHARE BASED ON THE PRICE RATIO EAR NING PER SHARE COMES TO RS.364/- AND ON THE BASIS OF THE DISCOUNTED CASH FLOW METHOD COMES TO RS.310.77 PER SHARE. THE VALUE OF SHARES WAS DECIDED AFTER A LONG DELIBERAT IONS WITH THE INVESTOR, AND ULTIMATELY, VALUE BASED ON NAV LINKED TO BOOK VALUE MULTIPLY METHOD WAS CHOSEN, WHIC H COMES TO RS.200.52 PER SHARE AND ACCORDINGLY, THE SHARE S WERE ISSUED AT A PREMIUM OF RS.190/- PER SHARE. 2. THE SECOND OBSERVATION OF THE AO IS THAT THE ASSESSEE HAS NOT ISSUED SHARES TO ANY OTHER PERSON DURING THE YEAR UNDER CONSIDERATION, SO THAT GET A COMPARAB LE INSTANCE TO JUSTIFY THE ASSESSEES CLAIM. ITA-4014/DEL/2011 12 THAT IN THIS REGARD IT HAS BEEN SUBMITTED BEFORE THE A O AS WELL THAT THE ASSESSEE HAD ALSO RECEIVED AN AMOUNT OF RS.5,00,00,000/- AS SHARE APPLICATION MONEY FROM M/S D. J. INFOTECH PVT.LTD. AGAINST ALLOTMENT OF 3,12,500 SHARE S OF RS.10/- PER SHARE AND A PREMIUM OF @ RS.150/- PER SHARE . SINCE, THE VALUE OF SHARES OF THE APPELLANT COMPANY W AS DETERMINED TO BE RS.200/- PER SHARE AND ACCORDINGLY T HE SAME WERE ALLOTTED AT A PREMIUM OF RS.190/- TO M/S ADH YAY EQUI PREF PVT.LTD., THE ASSESSEE DIDNT ACCEPT THE SHARE APPLICATION MONEY FROM M/S D.J. INFOTECH AND HAD SUBSEQUENTLY REFUNDED THE SAME, THE DETAILS WHEREOF HAV E PROVIDED TO THE AO AS ALSO ATTACHED AT PAGE NO.194 TO 195 OF PAPER BOOK. 3. THE THIRD OBSERVATION OF THE AO IS THAT BENEFITS ACCRUED TO M/S ADHYAY EQUI PREF PVT.LTD. BY ACQUIRIN G THE SHARES OF THE ASSESSEE, AT SUCH A HIGH PREMIUM HAVE NOT BEEN SATISFACTORILY EXPLAINED. THAT IT WAS EXPLAINED TO AO VIDE LETTER DATED 23.12. 2009 (COPY ATTACHED AT PAGE NO.172 TO 174) THAT THE PRIC E OF THE SHARES ON THE SELECTED METHOD AS ON DECEMBER 2009 (THE MONTH IN WHICH ASSESSMENT WAS COMPLETED) COMES TO RS.450/- PER SHARE, WHICH MEANS THAT THE SHARES ACQUIRE D @ RS.200/- PER SHARE APPRECIATED FURTHER BY RS.250/- W ITHIN A SPAN OF JUST 2-3 YEARS. THE FACT HAS ALSO BEEN NOTED BY AO IN THE ORDER IN PARA-13 ITSELF. (FIGURE OF RS.250 /- WRONGLY MENTIONED AND IS TO BE READ AS RS.450/-). 4. REGARDING 4 TH OBJECTION OF AO, AS TO WHY M/S ADHYAY EQUI PREF PVT.LTD. CHOSE TO INVEST HEAVY AMOUNT OF RS. 20 CRORES AT SUCH A HIGH PREMIUM, IT IS SUBMITTED THAT THE SAID DECISION WAS TAKEN BY ITS MANAGEMENT AS IS EVIDENT FROM THE BOARD RESOLUTION PASSED TO THIS EFFECT. FURTHER, THE ASSESSEE REITERATES ITS CONTENTION THAT THE PREMIUM CHARGED IS NOT VERY HIGH. AS A MATTER OF FA CT, OUT OF THE THREE VALUATIONS, THE INVESTOR COMPANY WAS OFF ERED THE LOWEST RATE. ITA-4014/DEL/2011 13 SO FAR AS THE REASONS FOR INVESTMENT @ RS.200/- PER SHARE IS CONCERNED IT IS SUBMITTED THAT THE PRICE OF SHARE A S PER THREE DIFFERENT METHOD, GENERALLY ADOPTED AS MENTION ED IN THE VALUATION REPORT, RANGES BETWEEN RS.200/- TO RS.36 0/- PER SHARES. THE INVESTMENT IS MADE BY THE INVESTOR COMPANY AT RS.200/- (I.E. AT THE LOWEST VALUATION). APART FROM THIS AS ALREADY EXPLAINED ABOVE THE VALUE OF SHAR E ON THE BASIS OF SELECTED METHOD AS ON DEC. 2009 COMES TO RS.450/- PER SHARE. HENCE, THERE ARE JUSTIFIABLE REASO NS WITH THE INVESTOR COMPANY TO INVEST IN THE EQUITY SHAR E OF THE APPELLANT COMPANY. WITHOUT PREJUDICE TO THE ABOVE, EVEN IF IT IS ASSUMED THAT THE PREMIUM CHARGED IS VERY HIGH, IT IS HUMBLY SUBMITT ED THAT THIS IS THE DISCRETION OF THE INVESTOR COMPANY. A S FAR AS THE ASSESSEE IS CONCERNED, NEITHER IT HAS ANY CONTROL OR INFLUENCE OVER THE INVESTOR COMPANY NOR IT IS CONCERN ED ABOUT THAT. 5. THE 5 TH OBSERVATION OF AO IS THAT THE AMOUNT OF RS.20.00 CRORES HAS BEEN PAID TO M/S ADHYAY EQUI PREF PVT.LTD. THROUGH CHEQUES BETWEEN THE PERIOD FROM 20.02.2007 TO 13.03.2007. FURTHER, THE AO OBSERVED THAT AS ON 19.02.2007, THE CREDIT BALANCE WAS NIL. ON 21.02.2007, THERE ARE CREDIT OF RS.3.00 CRORES BY WAY OF TWO CHEQUES BUT FULL DESCRIPTION OF THE SOURCE IS NOT T HERE. FURTHER, IT WAS OBSERVED BY THE AO AFTER THIS PERIOD, THE FUND STARTED FLOWING IN THE BANK ACCOUNT OF INVESTOR COMPANY AND OUT OF THESE FUND, THE PAYMENT HAVE BEEN MADE TO THE ASSESSEE COMPANY. THAT IN MANY CASES OF CREDIT ENTRIES ONLY CHEQUE NOS. HAVE BEEN MENTIONED A ND EXACT NATURE OF SOURCE OF THESE FUNDS IS NOT CLEAR. THAT FIRST OF ALL, THE ASSESSEE IS NOT SUPPOSED TO ESTABLI SH THE SOURCE OF SOURCE. (PLEASE REFER TO JUDGMENT OF GUWAHATI HIGH COURT IN THE CASE OF NEMICHAND KOTHARI 264 ITR 254). THE ASSESSEE HAS RECEIVED PAYMENT TOWARDS SHARE APPLICATION MONEY FROM M/S ADHYAY EQUI PREF PVT.LTD. BY WAY OF ACCOUNT PAYEE CHEQUE AND ISSUED TH E EQUITY SHARES AGAINST THE SAME. ACCORDINGLY, AS PER THE REQUIREMENT OF SECTION 68, THE ASSESSEE HAS FULFILL ITS O NUS AS TO THE NATURE AND SOURCE OF CREDIT IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. ITA-4014/DEL/2011 14 SECONDLY, THE ASSESSEE HAS SUBMITTED COMPLETE BANK STATEMENT OF THE SHAREHOLDER COMPANY FROM FEBRUARY, 2007 TO MARCH 31, 2007. ON 5 TH FEBRUARY, THERE IS AN OPENING CREDIT BALANCE OF RS.2 LACS, THERE ARE ALMOST 23 CREDIT ENTRIES AND MORE THAN 20 DEBIT ENTRIES BEFORE 19 TH FEBRUARY, 2007. ALL AMOUNTS HAVE BEEN RECEIVED FROM A/C PAYEE CHEQUES ONLY. INCIDENTALLY ON 19 TH FEBRUARY, 2007, THERE IS NIL BALANCE, SO, TO SAY THAT THERE WAS NO TRANSACTION IN THE BANK ACCOUNT PRIOR TO THE RELEASE OF CHEQUE TO THE APPELLANT COMPANY IS NOT CORRECT AT AL L. IN ADDITION TO THIS, IN THE BANK STATEMENT ITSELF, THERE ARE HAND WRITTEN NARRATION BY THE SHAREHOLDER COMPANY. SO FAR AS, THE CREDIT ENTRIES ARE CONCERNED, THE NARRATION C ONTAINS THE NAME OF THE PARTY AS WELL AS NATURE OF PAYMENT RECEIVED BY SHAREHOLDER COMPANY. THAT IT IS ALSO ON RECORD THAT THE STATEMENT OF DIRECT ORS OF THE INVESTOR COMPANY WERE RECORDED AND IT HAS ALSO BEE N INFORMED BY THE INVESTOR COMPANY THAT IN ADDITION TO THE STATEMENT RECORDED BY THE DIRECTOR OF INVESTOR COMPAN Y, THE DETAILS AS REQUIRED BY LD.AO HAD ALSO BEEN SUBMITTE D VIDE LETTER DATED 24.12.2009. THE COPY OF THE SAME HAS BEEN COLLECTED BY THE ASSESSEE COMPANY AND THE COPY THEREOF IS ATTACHED HEREWITH. REGARDING THE MONEY RECEIVED BY INVESTOR COMPANY IN PEACEMEAL AND PAID TO THE ASSESSEE COMPANY, IT IS SUBMITTED THAT NATURALLY, THE INVESTOR AS SOON AS REALIZ ED MONEY BY SELLING THEIR INVESTMENT AND RECOVERED FROM DEBTORS ETC., KEPT ON DEPOSITING IN ITS BANK ACCOUNT AND SUBSEQUENTLY PAID SHARE APPLICATION MONEY TO THE ASSESSEE. THAT IT MAY KINDLY BE NOTED THAT THERE IS NO CASH DEP OSIT IN THE BANK ACCOUNT OF THE INVESTOR. AS ALREADY EXPLAIN ED, THE INVESTOR HAS PAID SHARE APPLICATION MONEY OUT OF SA LE OF ITS EXISTING INVESTMENTS OR REALIZATION OF SUNDRY DEBTORS/LOANS AND ADVANCES. IT IS THUS CLEAR THAT THE INVESTING COMPANIES HAD ITS OWN SOURCES OF MONIES TO SUBSCRIBE TO THE EQUITY CAPITAL OF ASSESSEE COMPANY. ITA-4014/DEL/2011 15 6. REGARDING THE OBJECTION OF AO THAT THE CREDIT BA LANCE IN THE BANK ACCOUNT OF M/S ADHYAY EQUI PREF PVT.LTD. , AFTER PAYMENT TO THE ASSESSEE COMPANY, REMAINED AT MUCH LOWER LEVEL, IT IS SUBMITTED THAT THE FACT THAT MAINT AINING CREDIT BALANCE IS THE SOLE PREROGATIVE OF THE INVESTOR COMPANY AND IS NOT WITHIN THE DOMAIN OF ASSESSEE COMPANY. WITH DUE RESPECT, IT IS FURTHER SUBMITTED THAT BY VIRT UE OF THIS FACT, IT CAN NOT BE SAID THAT THE FUNDS SO DEPOSITE D IN THE INVESTORS BANK ACCOUNT IN ANY WAY BELONG TO THE ASSESSEE COMPANY AND THE GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE INVESTOR CAN BE DOUBTED. 7. IN PARA (VII), THE AO HAD OBSERVED SOME TRANSACTIONS OF FLEX/UFLEX GROUP AND KOLKATA BASED COMPANIES FROM WHOM FLEX/UFLEX GROUP HAD RECEIVED SHARE CAPITAL IN THE ASST. YEAR 2006-07. THE AO HAD STATED THAT M/S ADHYAY EQUI PREF PVT.LTD. IS ALSO A KOLKATA BASED COMPANY AND THE APPELLANT AND UF LEX GROUP ARE CLOSELY RELATED. THAT THE AO HAD NOT STATED THAT IS AMONGST THE OTHER KOLKATA BASED COMPANIES FROM WHERE UFLEX GROUP RECEIV ED SHARE CAPITAL. IN FACT FROM THE PERUSAL OF ADHYAY EQ UI PREF PVT.LTD., IT MAY KINDLY BE OBSERVED THAT THIS INVESTOR COMPANY HAD NEVER INVESTED IN UFLEX GROUP COMPANIES. IT IS ALSO SUBMITTED THAT THE APPELLANT IS ENTIRELY A DIFFERENT COMPANY AND DOES NOT HAVE ANY KIND OF RELATION EITH ER OWNERSHIP OR OTHERWISE WITH FLEX/UFLEX GROUP. THAT T HERE IS NO BASIS FOR THIS APPREHENSION OF AO. IT IS BEYOND THE UNDERSTANDING OF ASSESSEE AS TO HOW FLEX GROUP IS RELATED TO THE ASSESSEE. FLEX GROUP IS ENTIREL Y DIFFERENT TO ASSESSEE AND NONE OF LIVE OR NON LIVE ENTI TY OF FLEX GROUP IS SHAREHOLDER OR DIRECTOR OR IN ANY MANNE R EXERCISE CONTROL ON THE APPELLANT. WHAT FLEX GROUP IS DOING IS ENTIRELY THEIR AFFAIRS AND BUSINESS AND HAS NOTH ING TO DO WITH THE ASSESSEE COMPANY. SIMILARLY, WHAT ASSESSE E ITA-4014/DEL/2011 16 DOES IS NOTHING TO DO BY FLEX GROUP. WE ARE UNABLE T O UNDERSTAND HOW FLEX GROUP OR ITS COMPANIES ARE RELATE D TO THE APPELLANT. 16. LEARNED CIT(A), AFTER CONSIDERING THE ABOVE EXPL ANATION AND THE EVIDENCES FURNISHED BY THE ASSESSEE BEFORE THE ASSESSING OFFI CER AND ALSO THE LEGAL POSITION CAME TO THE CONCLUSION THAT TH E ASSESSEE HAS DISCHARGED THE ONUS WHICH LAY UPON IT TO EXPLAIN THE CASH CREDIT IN THE FORM OF SHARE CAPITAL. ACCORDINGLY, LEARNED CIT(A) DELETED THE ADDITION OF `20,00,00,000/- MADE BY THE ASSESSING OFFICER. THE REVENUE, AGGRIEVED WITH THE ORDER OF LEARNED CIT(A), IS IN AP PEAL BEFORE US. 17. AT THE TIME OF HEARING BEFORE US, LEARNED CIT-DR STRESSED UPON THE POINTS RAISED BY THE ASSESSING OFFICER WHICH ARE ALSO REPRODUCED ABOVE IN PARAGRAPH 14. SHE FURTHER STRESSED THAT THE SHARES WERE ISSUED AT A HIGH PREMIUM OF `190/- PER SHARE FOR WHICH SUITABLE JUSTIFICATION WAS NOT GIVEN AND THAT THE BALANCE IN T HE BANK ACCOUNT OF THE ALLEGED SHAREHOLDER WAS NEGLIGIBLE AND THERE WAS C REDIT OF THE MONEY IN THE BANK ACCOUNT IMMEDIATELY BEFORE ISSUE OF CHEQUES TO THE ASSESSEE FOR ALLOTMENT OF SHARES. IN VIEW OF THESE FACTS, THE ASSESSING OFFICER WAS FULLY JUSTIFIED IN ARRIVING AT THE CONCL USION THAT THE ASSESSEE HAS NOT BEEN ABLE TO DISCHARGE THE ONUS OF PROVING THE CASH CREDIT OF `20,00,00,000/- IN ITS ACCOUNT. SHE, THEREFORE, SUBM ITTED THAT THE ORDER OF LEARNED CIT(A) SHOULD BE REVERSED AND THAT O F THE ASSESSING OFFICER MAY BE RESTORED. IN SUPPORT OF HER CONTENTIO N, SHE RELIED UPON THE FOLLOWING DECISIONS :- (I) SUMAN GUPTA VS. CIT (2013-LL-0122-69)(SUPREME COURT). (II) PCIT VS. BIKRAM SINGH ITA NO.55/2017 (DELHI). ITA-4014/DEL/2011 17 (III) BLESSING CONSTRUCTION VS. ITO (2013) 32 TAXMANN .COM 366 (GUJARAT)/(2013) 214 TAXMAN 645 (GUJARAT). (IV) TOBY CONSULTANTS (P) LTD. VS. CIT (2010) 324 I TR 338 (DELHI). (V) SANRAJ ENGINEERING PVT.LTD. VS. CIT ITA NO.79/ 2016 (DELHI). (VI) NARESH CHANDRA JAIN VS. CIT ITA NO.335 OF 2009 (ALLAHABAD). (VII) CIT VS. PRECISION FINANCE (P) LTD. (1995) 82 TAXMAN 31 (CALCUTTA)/(1994) 208 ITR 465 (CALCUTTA)/(1994) 121 CTR 20 (CALCUTTA). 18. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, RELIED UPON THE ORDER OF LEARNED CIT(A). HE STATED THAT BE FORE THE LEARNED CIT(A), THE ASSESSEE HAS EXPLAINED EACH AND EVERY ALLEGA TION LEVELLED AGAINST THE ASSESSEE BY THE ASSESSING OFFICER. HE STATED TH AT THE SHARES OF `10/- EACH WERE ISSUED FOR `200/- EACH I.E., AT A PREMIUM OF `190/- PER SHARE. THAT THE VALUATION OF SHARES OF TH E ASSESSEE COMPANY WAS GOT DONE THROUGH THE EXPERT VIZ., CHATU RVEDI & PARTNERS, CHARTERED ACCOUNTANTS. THAT THE SAID EXPERT HAD VALU ED THE SHARES BY ADOPTING THREE DIFFERENT METHODS VIZ., NET ASSET VALUE (NAV), EARNINGS PER SHARE (EPS) AND DISCOUNTED CASH FLOW (DCF) METHO D. THAT AS PER NAV METHOD, THE VALUE OF THE SHARES WAS DETERMINED AT `200.52 PER SHARE. AS PER EPS METHOD, THE VALUE OF THE SHARES WAS D ETERMINED AT `363.60 PER SHARE AND AS PER DCF METHOD, THE VALUE OF THE SHARES WAS DETERMINED AT `310.77 PER SHARE. COPY OF SUCH VALUAT ION REPORT WAS FURNISHED BEFORE THE ASSESSING OFFICER AND HE HAS NOT PO INTED OUT ANY DEFECT THEREIN. HE ALSO STATED THAT THE SAID VALUATIO N REPORT IS PRODUCED BEFORE THE ITAT IN THE ASSESSEES PAPER BOOK FR OM PAGES 194 TO 213. WITH REGARD TO LOW CASH BALANCE IN THE ASSESSE ES BANK ACCOUNT, HE STATED THAT THE AEPP IS AN INVESTMENT COMP ANY AND IT GETS ITS MONEY EITHER INVESTED IN THE SHARES OF OTHER COMPAN IES OR AS LOANS ITA-4014/DEL/2011 18 IN THE OTHER COMPANIES. BEFORE INVESTING IN THE ASSESSE ES COMPANY, AEPP HAS LIQUIDATED ITS INVESTMENT WITH THE OTHER COM PANY AND DETAILS OF EACH AND EVERY CHEQUE CREDIT IN THEIR BANK ACCOU NT BEFORE ISSUE OF CHEQUE TO THE ASSESSEE HAS BEEN EXPLAINED BY AEPP AND CO PY OF SUCH EXPLANATION WAS FURNISHED BEFORE THE ASSESSING OFFICER AN D IS ALSO GIVEN AT PAGES 156 TO 159 OF THE ASSESSEES PAPER BOOK. HE FURTHER STATED THAT THE DIRECTOR OF AEPP APPEARED BEFORE THE ASSESSING OFFICER AND HIS STATEMENT WAS RECORDED BY THE ASSESSING OFFICER ON 23 RD DECEMBER, 2009. ADMITTEDLY, AEPP IS ASSESSED TO INCOME TAX ON REGULAR BASIS. IF THE ASSESSING OFFICER HAD ANY DOUBT A BOUT THE CREDIT IN THEIR BANK ACCOUNT, HE SHOULD HAVE ASKED THE EXPLA NATION FROM THE DIRECTOR OF AEPP WHO APPEARED BEFORE THE ASSESSING OFFI CER RATHER THAN DOUBTING THE GENUINENESS OF THE INVESTMENT MADE BY THE M WITH THE ASSESSEE COMPANY. HE REFERRED TO THE STATEMENT OF THE D IRECTOR OF AEPP AND POINTED OUT THAT THE DIRECTOR OF AEPP HAS A DMITTED HAVING APPLIED FOR 10 LAKHS EQUITY SHARES AT A PREMIUM OF `19 0/- PER SHARE. HE HAS ALSO EXPLAINED WHY HIS COMPANY CHOSE TO PURCHASE THE SHARES AT SUCH A HIGH PREMIUM. HE ALSO AFFIRMED THAT HIS COM PANY AEPP IS ASSESSED TO TAX AND THE BOARD OF DIRECTORS OF THEIR COMP ANY HAVE APPROVED THE PURCHASE OF SHARES FROM THE ASSESSEE COMPANY. THAT THE DIRECTOR OF AEPP STATED BEFORE THE ASSESSING OFFICER THAT THE SHARES ALLOTTED BY MEPL I.E., THE ASSESSEE COMPANY HAD NOT BEE N SOLD BY THEM BUT THEY ARE STILL HOLDING THE SHARES. THE LEARN ED COUNSEL FURTHER STATED THAT THE ASSESSEE HAS PRODUCED THE FOLLOWING EVID ENCES FOR DISCHARGING THE ONUS WHICH LAY UPON IT FOR EXPLAINING THE CREDIT :- (I) CONFIRMATION CERTIFICATION FROM ADHYAY EQUIPRE F PVT.LTD. (II) COPY OF FORM NO.18 FILLED WITH ROC FOR ADDRESS P ROOF. (III) COPY OF PAN CARD NUMBER ALLOTTED. ITA-4014/DEL/2011 19 (IV) COPY OF AUDITED ANNUAL ACCOUNTS WITH ANNEXURE AS ON 31.03.2007. (V) CERTIFICATE OF SOURCES OF FUNDS IN THE HANDS OF SH ARE APPLICANT COMPANY. (VI) COPY OF UTI BANK STATEMENT OF SHAREHOLDER. (VII) MEMORANDUM OF ARTICLES OF ASSOCIATION TOGETHER W ITH CERTIFICATE OF INCORPORATION OF APPLICANT COMPANY. (VIII) COPY OF EXTRACT OF BOARD MEETING FOR INVESTME NT OF MONEY IN MEPL. (IX) COPY OF APPLICATION FOR ALLOTMENT OF SHARES. (X) COPY OF FORM 2 FOR ALLOTMENT OF SHARES. (XI) COPY OF ALLOTMENT REGISTER WITH CERTIFICATE & DISTINCTIVE NO. OF SHARES. (XII) CERTIFICATE TRUE COPY OF RESOLUTION PASSED BY BOARD OF DIRECTORS FOR ALLOTMENT OF SHARES TO ADHYAY EQUI PREF PVT.LTD. 19. THAT HON'BLE JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT VS. OASIS HOSPITALITIES P.LTD. [2011] 333 ITR 119 (DELHI) HAS LAID DOWN THE GUIDELINES FOR EXAMINING THE CASH CREDIT IN ANY ASSESSEE S BOOKS OF ACCOUNT. THEY HAVE LAID DOWN THAT THE BURDEN IS UPO N THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF SHARE APPLICATION MO NEY AND, TO DISCHARGE SUCH BURDEN, THE ASSESSEE HAS TO PROVE THE IDENT ITY OF THE SHAREHOLDER, GENUINENESS OF THE TRANSACTION AND CREDITW ORTHINESS OF THE SHAREHOLDER. THEY HAVE ALSO LAID DOWN THAT WHAT EVIDENCE IS TO BE PRODUCED BY THE ASSESSEE TO PROVE THE IDENTITY OF THE SH AREHOLDER, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF T HE SHAREHOLDER. THAT THE EVIDENCES FURNISHED BY THE ASSESSEE CLEARLY ESTABLISH THAT THE ASSESSEE HAS DULY DISCHARGED THE ONUS WHI CH LAY UPON IT. SIMILAR VIEW IS REITERATED BY HON'BLE DELH I HIGH COURT IN THE CASE OF CIT (CENTRAL)-III VS. ANSHIKA CONSULTANTS PVT.LT D. IN ITA NO.467/2014, JUDGEMENT DATED 16 TH APRIL, 2015. ITA-4014/DEL/2011 20 20. HE STATED THAT THE FACTS OF ASSESSEES CASE ARE IDENTI CAL TO THE FACTS BEFORE THE HON'BLE DELHI HIGH COURT IN THE ABO VE THE CASE. THAT IN THE CASE OF THE ASSESSEE ALSO, THE ASSESSEE HAS FURNISHED AL L NECESSARY DETAILS TO PROVE THE IDENTITY, GENUINENESS AN D CREDITWORTHINESS OF THE SHARE APPLICANT BUT THE ASSESSING OFFICER DID NOT CARE TO CONSIDER THE SAME. THE SHARE APPLICANT IS ASSESSED TO INCOME TAX AND ITS PAN DETAILS, BALANCE SHEET ETC. WE RE FURNISHED BEFORE THE ASSESSING OFFICER. IF THE ASSESSING OFFICER WAS NOT SATISFIED ABOUT THE DETAILS FURNISHED BY THE ASSESSEE, HE COULD HAV E MADE FURTHER ENQUIRY SPECIALLY WHEN THE SHARE APPLICANT I S ASSESSED TO INCOME TAX AND THE DIRECTOR OF THE SAID COMPANY HAD APPEARED BEFORE THE ASSESSING OFFICER. HOWEVER, THE ASSESSING OFFICER IGNO RED ALL THE EVIDENCES FURNISHED BY THE ASSESSEE AND DID NOT MAKE ANY ENQUIRY ON HIS PART AND MERELY ON THE BASIS OF PRESUMPTION AND SUSP ICION MADE HUGE ADDITION OF `20 CRORES WHICH HAS RIGHTLY BEEN DE LETED BY THE LEARNED CIT(A). HENCE, THE ORDER OF LEARNED CIT(A) SHOULD BE SUSTAINED ON THIS POINT. 21. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BOT H THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. WE HAVE A LSO GONE THROUGH THE DECISIONS RELIED UPON BY BOTH THE SIDES. W E FIND THAT HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF OASIS HOSPITALITIES P.LTD. (SUPRA) HAS LAID DOWN THE GUIDELINES FOR EXAMINING THE CASH CREDIT. THE RELEVANT PORTION OF THEIR LORDSHIPS DECISION READS AS UNDER :- 11. IT IS CLEAR FROM THE ABOVE THAT THE INITIAL BUR DEN IS UPON THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF TH E SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE. IN ORDER TO DISCHARGE THIS BURDEN, THE ASSESSEE IS REQUIRED TO PROVE : ITA-4014/DEL/2011 21 (A) THE IDENTITY OF SHAREHOLDER; (B) THE GENUINENESS OF TRANSACTION; AND (C) THE CREDITWORTHINESS OF SHAREHOLDERS. 12. IN CASE THE INVESTOR/SHAREHOLDER IS AN INDIVIDUAL, SOME DOCUMENTS WILL HAVE TO BE FILED OR THE SAID SHAREHOLDER WILL HAVE TO BE PRODUCED BEFORE THE ASSESSIN G OFFICER TO PROVE HIS IDENTITY. IF THE CREDITOR/SUBSCR IBER IS A COMPANY, THEN THE DETAILS IN THE FORM OF REGISTERED A DDRESS OR PAN IDENTITY, ETC., CAN BE FURNISHED. THE GENUINENESS OF THE TRANSACTION IS TO BE DEMONSTRATE D BY SHOWING THAT THE ASSESSEE HAD, IN FACT, RECEIVED MONE Y FROM THE SAID SHAREHOLDER AND IT CAME FROM THE COFFE RS OF THAT VERY SHAREHOLDER. THE DIVISION BENCH HELD THAT WHEN THE MONEY IS RECEIVED BY CHEQUE AND IS TRANSMITTED THROUGH BANKING OR OTHER INDISPUTABLE CHANNELS, THE GENUINENESS OF TRANSACTION WOULD BE PROVED. OTHER DOCUMENTS SHOWING THE GENUINENESS OF TRANSACTION COULD BE COPIES OF THE SHAREHOLDERS REGISTER, SHARE APPLICATI ON FORMS, SHARE TRANSFER REGISTER, ETC. AS FAR AS CREDITWORTHINESS OR FINANCIAL STRENGTH OF THE CREDITOR/SUBSCRIBER IS CONCERNED, THAT CAN BE PROVED B Y PRODUCING THE BANK STATEMENT OF THE CREDITOR/SUBSCRIBE R SHOWING THAT IT HAD SUFFICIENT BALANCE IN ITS ACCOUNTS TO ENABLE IT TO SUBSCRIBE TO THE SHARE CAPITAL. THIS JUDG MENT FURTHER HOLDS THAT ONCE THESE DOCUMENTS ARE PRODUCED, THE ASSESSEE WOULD HAVE SATISFACTORILY DISCHARGED THE ONUS CAST UPON HIM. THEREAFTER, IT IS FOR THE ASSESSING OFFIC ER TO SCRUTINIZE THE SAME AND IN CASE HE NURTURES ANY DOUBT ABOUT THE VERACITY OF THESE DOCUMENTS TO PROBE THE M ATTER FURTHER. HOWEVER, TO DISCREDIT THE DOCUMENTS PRODUCE D BY THE ASSESSEE ON THE AFORESAID ASPECTS, THERE HAVE TO BE SOME COGENT REASONS AND MATERIALS FOR THE ASSESSING OFFICER AND HE CANNOT GO INTO THE REALM OF SUSPICION. 22. FROM THE ABOVE, IT IS EVIDENT THAT THE INITIAL B URDEN IS UPON THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF SHARE APPLIC ATION MONEY RECEIVED BY HIM. IN ORDER TO DISCHARGE THIS BURDEN, THE ASSESSEE IS ITA-4014/DEL/2011 22 REQUIRED TO PROVE (A) THE IDENTITY OF THE SHAREHOL DER, (B) GENUINENESS OF THE TRANSACTION AND (C) CREDITWORTHINESS OF THE SHAR EHOLDER. THEIR LORDSHIPS HAVE ALSO LAID DOWN HOW THE IDENTITY OF THE SHAREHOLDER IS TO BE PROVED, HOW THE GENUINENESS OF THE TRANSACTION IS TO BE PROVED AND HOW THE CREDITWORTHINESS OF THE SHAREHOLDER IS TO BE JU DGED. 23. THEIR LORDSHIPS OF HON'BLE JURISDICTIONAL HIGH CO URT IN THE CASE OF ANSHIKA CONSULTANTS PVT.LTD. (SUPRA) REITERATED THE ABO VE POSITION AND HELD AS UNDER :- 6. THE ONUS CAST UPON THE ASSESSEE UNDER SECTION 68 OF THE ACT TO SATISFY THE DEPARTMENT ABOUT THE TRUE IDEN TITY OF AN INVESTOR, ITS CREDITWORTHINESS AND GENUINENESS OF A TRANSACTION WAS EXPLAINED BY THE SUPREME COURT IN CIT VS. LOVELY EXPORTS (P) LTD., 216 CTR 295,. WHILST, THE A O ACTED LEGITIMATELY IN ENQUIRING INTO THE MATTER, THE INFE RENCES DRAWN BY HIM WERE NOT JUSTIFIED AT ALL IN THE CIRCU MSTANCES OF THE CASE. WHETHER THE ASSESSEE COMPANY CHARGED A HIGHER PREMIUM OR NOT, SHOULD NOT HAVE BEEN THE SUBJE CT MATTER OF THE ENQUIRY IN THE FIRST INSTANCE. INSTEAD, THE ISSUE WAS WHETHER THE AMOUNT INVESTED BY THE SHARE APPLICANTS WERE FROM LEGITIMATE SOURCES. THE OBJECTIVE OF SECTION 68 IS TO AVOID INCLUSION OF AMOUNT WHICH ARE SUSPECT. THEREFORE, THE EMPHASIS ON GENUINENESS OF ALL TH E THREE ASPECTS, IDENTITY, CREDITWORTHINESS AND THE TRANSACTION. WHAT IS DISQUIETING IN THE PRESENT CASE IS WHEN THE ASSESSMENT WAS COMPLETED ON 31.12.2007, THE INVESTIGATION REPORT WHICH WAS SPECIFICALLY CALLED FR OM THE CONCERNED DEPARTMENT IN KOLKATA WAS AVAILABLE BUT N OT DISCUSSED BY THE AO. HAD HE CARED TO DO SO, THE IDENTIT Y OF THE INVESTORS, THE GENUINENESS OF THE TRANSACTION AND TH E CREDITWORTHINESS OF THE SHARE APPLICANTS WOULD HAVE BEE N APPARENT. EVEN OTHERWISE, THE SHARE APPLICANTS' PARTIC ULARS WERE AVAILABLE WITH THE AO IN THE FORM OF BALANCE SH EETS INCOME TAX RETURNS, PAN DETAILS ETC. WHILE ARRIVING A T THE CONCLUSION THAT HE DID, THE AO DID NOT CONSIDER IT WORTHWHILE TO MAKE ANY FURTHER ENQUIRY BUT BASED HIS ORDER ON THE HIGH NATURE OF THE PREMIUM AND CERTAIN FEATURES WHICH APPEARED TO BE SUSPECT, TO DETERMINE TH AT THE AMOUNT HAD BEEN ROUTED FROM THE ASSESSEE'S ACCOUNT TO THE SHARE APPLICANTS' ACCOUNT. AS HELD CONCURRENTLY BY ITA-4014/DEL/2011 23 THE CIT (APPEALS) AND THE ITAT, THESE CONCLUSIONS WERE CLEARLY BASELESS AND FALSE. THIS COURT IS CONSTRAINED TO OBSERVE THAT THE AO UTTERLY FAILED TO COMPLY WITH HI S DUTY CONSIDERS ALL THE MATERIALS ON RECORD, IGNORING SPECIFI CALLY THE MOST CRUCIAL DOCUMENTS. WE PLACE THESE OBSERVATIONS ON THE RECORD AND DIRECT A COPY OF THE JUDGMENT TO BE FURNISHED TO THE CONCERNED INCOME TAX AUTHORITIES FOR APPROPRIATE ACTION TOWARDS REFLECTING THESE OBSERVATIO NS SUITABLY IN SERVICE RECORD OF THE CONCERNED AO TO AVO ID SUCH INSTANCES IN THE FUTURE. 24. SO FAR AS THIS LEGAL ISSUE IS CONCERNED THAT THE INI TIAL BURDEN IS UPON THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF T HE CREDIT IN THE ASSESSEES BOOKS OF ACCOUNT AND WHAT ASSESSEE HAS TO DO IN ORD ER TO DISCHARGE SUCH BURDEN, THERE IS NO DISPUTE. THEREFORE, NOW IN EACH CASE, THE FACTS ARE TO BE EXAMINED SO AS TO ARRIVE AT T HE CONCLUSION WHETHER THE ASSESSEE HAS BEEN ABLE TO DISCHARGE THE INITI AL BURDEN OF CREDIT IN HIS BOOKS OF ACCOUNT. IN THE LIGHT OF ABO VE GUIDELINES OF HON'BLE JURISDICTIONAL HIGH COURT, WE PROCEED TO EXA MINE THE FACTS OF THE ASSESSEES CASE. A. A.A. A. IDENTITY OF THE SHAREHOLDER IDENTITY OF THE SHAREHOLDER IDENTITY OF THE SHAREHOLDER IDENTITY OF THE SHAREHOLDER 25. AS PER HON'BLE JURISDICTIONAL HIGH COURT IN THE C ASE OF OASIS HOSPITALITIES P.LTD. (SUPRA), TO PROVE THE IDENTITY OF THE SHAREHOLDER, IF THE SHAREHOLDER IS A COMPANY, THEN THE DETAILS IN THE FORM OF REGISTERED ADDRESS OR PAN IDENTITY ETC. CAN BE FURNISHE D. WE FIND THAT IN THE CASE UNDER APPEAL BEFORE US, THE ASSESSEE HAS FURNI SHED THE COPY OF PAN DETAILS OF THE SHARE APPLICANT I.E. AEPP, CERTIFICATE OF INCORPORATION OF AEPP ALONG WITH MEMORANDUM AND ART ICLES OF THE SAID COMPANY. SHRI PALASH GHOSH, DIRECTOR OF AEPP ALSO AP PEARED BEFORE THE ASSESSING OFFICER. IN VIEW OF THE ABOVE, WE HAVE N O HESITATION TO HOLD THAT THE ASSESSEE HAS PROVED THE IDENTITY OF THE SH ARE APPLICANT. ITA-4014/DEL/2011 24 B. B.B. B. GENUINENES GENUINENES GENUINENES GENUINENESS OF THE TRANSACTION S OF THE TRANSACTION S OF THE TRANSACTION S OF THE TRANSACTION 26. HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF OASIS HOSPITALITIES P.LTD. (SUPRA) HELD THAT WHEN THE MONEY IS RECEIVED B Y CHEQUE AND IS TRANSMITTED THROUGH BANKING CHANNELS OR OTHER INDIS PUTABLE CHANNELS, THE GENUINENESS OF THE TRANSACTION WOULD BE PROVED. OTHER DOCUMENTS SHOWING THE GENUINENESS OF THE TRANSACTION COULD BE COP IES OF SHAREHOLDERS REGISTER, SHARE APPLICATION FORM, SHARE TR ANSFER REGISTER ETC. IN THE CASE UNDER APPEAL BEFORE US, WE FIND THA T THE ENTIRE SUM OF `20 CRORES HAS BEEN RECEIVED BY THE ASSESSEE BY WAY OF C HEQUES. THE ASSESSEE HAS ALSO FURNISHED THE SHARE APPLICATION FORM, COP Y OF FORM NO.2 FOR ALLOTMENT OF SHARES TO AEPP, COPY OF ALLOTME NT REGISTER WITH CERTIFICATE AND DISTINCTIVE NUMBER OF SHARES. THUS, A S PER THE ABOVE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT, THE ASSE SSEE HAS DULY DISCHARGED THE ONUS OF ESTABLISHING THE GENUINENESS OF T HE TRANSACTION. THE ASSESSING OFFICER HAS DOUBTED THE GENUINENESS OF THE T RANSACTION ON THE GROUND THAT THE SHARE PREMIUM IS VERY HIGH I.E ., THE SHARE OF THE FACE VALUE OF `10/- PER SHARE HAS BEEN ISSUED AT `200/- PER SHARE I.E., AT A PREMIUM OF `190/- PER SHARE. WE FIND THAT BEFO RE THE ASSESSING OFFICER, THE ASSESSEE HAS FILED THE VALUATION OF ITS SHARE S FROM A FIRM OF CHARTERED ACCOUNTANTS. THE CHARTERED ACCOUNTANTS HAV E VALUED THE VALUE OF THE ASSESSEE COMPANY SHARES BY THREE DIFFERENT METHODS (I) AS PER NET ASSET VALUE (NAV) METHOD - `200.5 2 PER SHARE (II) AS PER EARNINGS PER SHARE (EPS) METHOD - ` 363.60 PER SHARE (III) AS PER DISCOUNTED CASH FLOW (DCF) METHOD - `3 10.77 PER SHARE 27. THIS VALUATION REPORT IS FILED BEFORE THE ASSESSING O FFICER AND HE HAS NOT GIVEN ANY ADVERSE COMMENTS ON THE SAME. THUS, T HE ASSESSEE HAS DULY FURNISHED THE JUSTIFICATION FOR THE ISSUE OF SH ARES AT A HIGH ITA-4014/DEL/2011 25 PREMIUM. WE FURTHER FIND THAT HON'BLE JURISDICTIONA L HIGH COURT IN THE CASE OF ANSHIKA CONSULTANTS PVT.LTD. (SUPRA) HAS CONSIDE RED THE ISSUE OF HIGH PREMIUM AND OBSERVED AS UNDER :- WHETHER THE ASSESSEE COMPANY CHARGED A HIGHER PREMIUM OR NOT, SHOULD NOT HAVE BEEN THE SUBJECT MATT ER OF THE ENQUIRY IN THE FIRST INSTANCE. INSTEAD, THE ISSUE WAS WHETHER THE AMOUNT INVESTED BY THE SHARE APPLICANTS WE RE FROM LEGITIMATE SOURCES. THE OBJECTIVE OF SECTION 68 IS TO AVOID INCLUSION OF AMOUNT WHICH ARE SUSPECT. THEREFORE , THE EMPHASIS ON GENUINENESS OF ALL THE THREE ASPECTS, IDENTITY, CREDITWORTHINESS AND THE TRANSACTION. WHAT I S DISQUIETING IN THE PRESENT CASE IS WHEN THE ASSESSMENT WAS COMPLETED ON 31.12.2007, THE INVESTIGATION REPORT WHICH WAS SPECIFICALLY CALLED FROM THE CONCERNED DEPARTMENT IN KOLKATA WAS AVAILABLE BUT NOT DISCUSSED BY THE AO. HAD HE CARED TO DO SO, THE IDENTITY OF THE I NVESTORS, THE GENUINENESS OF THE TRANSACTION AND THE CREDITWORTHINESS OF THE SHARE APPLICANTS WOULD HAVE BEE N APPARENT. EVEN OTHERWISE, THE SHARE APPLICANTS' PARTIC ULARS WERE AVAILABLE WITH THE AO IN THE FORM OF BALANCE SH EETS INCOME TAX RETURNS, PAN DETAILS ETC. WHILE ARRIVING A T THE CONCLUSION THAT HE DID, THE AO DID NOT CONSIDER IT WORTHWHILE TO MAKE ANY FURTHER ENQUIRY BUT BASED HIS ORDER ON THE HIGH NATURE OF THE PREMIUM AND CERTAIN FEATURES WHICH APPEARED TO BE SUSPECT, TO DETERMINE TH AT THE AMOUNT HAD BEEN ROUTED FROM THE ASSESSEE'S ACCOUNT TO THE SHARE APPLICANTS' ACCOUNT. AS HELD CONCURRENTLY BY THE CIT (APPEALS) AND THE ITAT, THESE CONCLUSIONS WERE CLEARLY BASELESS AND FALSE. 28. IN THIS CASE ALSO, THE ASSESSING OFFICER BASED HIS CONCL USION SIMPLY ON THE BASIS OF HIGH PREMIUM AND THAT ON FEW DA TES, THERE WAS VERY LESS BALANCE IN THE BANK ACCOUNT OF THE SHARE APP LICANT. HE ALTOGETHER IGNORED THE REPORT FROM THE CHARTERED AC COUNTANTS FIRM GIVING THE VALUATION OF THE SHARE OF THE ASSESSEE COMPAN Y WHICH IS CLEARLY JUSTIFYING THE HIGH PREMIUM. THE ASSESSEE FURNI SHED THE DETAILS OF CREDIT IN SHARE APPLICANTS BANK ACCOUNT WHICH ARE PLACED IN THE ASSESSEES PAPER BOOK FURNISHED BEFORE US ALSO FROM PAGES 1 56 TO 159 ITA-4014/DEL/2011 26 AND WE FIND THAT DETAILS OF EACH AND EVERY CHEQUE CR EDITED IN AEPPS BANK ACCOUNT BEFORE ISSUING CHEQUES TO THE ASSESSEE IS FUR NISHED. THE AEPP IS ASSESSED TO TAX, ITS ANNUAL ACCOUNTS ARE FURNISHED BEFORE THE ASSESSING OFFICER, THE EXTRACT OF BOARDS RESOLUTION BY A EPP FOR INVESTMENT IN THE ASSESSEE COMPANY IS FURNISHED, THE DIRE CTOR OF AEPP APPEARED BEFORE THE ASSESSING OFFICER WHOSE STATEMENT WAS RECORDED. HOWEVER, THE ASSESSING OFFICER IGNORED ALL THESE EVIDENC ES, DID NOT MAKE ANY FURTHER ENQUIRY HAD HE ANY DOUBT INTO THE GENUINENESS OF THE TRANSACTION AND SIMPLY ON THE BASIS OF PRESUMPTION A ND SUSPICION MADE THE ADDITION OF `20 CRORES. IN OUR OPINION, ON THE FACTS OF THE ASSESSEES CASE, THE DECISION OF HON'BLE JURISDICTIONAL HIG H COURT IN THE CASE OF OASIS HOSPITALITIES P.LTD. (SUPRA) AS WELL AS ANSHI KA CONSULTANTS PVT.LTD. (SUPRA) ARE SQUARELY APPLICABLE AND, RESPECTF ULLY FOLLOWING THE SAME, WE HOLD THAT THE ASSESSEE HAS PROVED THE GENUINENESS OF THE TRANSACTION. C. C.C. C. CREDITWORTHINESS CREDITWORTHINESS CREDITWORTHINESS CREDITWORTHINESS 29. AS PER HON'BLE JURISDICTIONAL HIGH COURT IN THE C ASE OF OASIS HOSPITALITIES P.LTD. (SUPRA), THE CREDITWORTHINESS WOULD BE PROVED BY PRODUCING THE BANK STATEMENT OF THE SHARE APPLICANT SH OWING THAT IT HAS SUFFICIENT BALANCE IN ITS ACCOUNT TO ENABLE IT TO SUBSCRIBE TO THE SHARE CAPITAL. IN THE CASE UNDER CONSIDERATION BEFORE US, THE ASSESSEE HAS PRODUCED THE BANK ACCOUNT OF AEPP. THOUGH THERE WERE CREDITS IN THE SAID BANK ACCOUNT BEFORE ISSUING CHEQUES TO THE ASSESSE E, HOWEVER, AEPP HAS FURNISHED THE DETAILS OF EACH AND E VERY CHEQUE RECEIVED BY IT AND CREDITED IN ITS BANK ACCOUNT. SU CH DETAILS WERE FURNISHED BEFORE THE ASSESSING OFFICER AND COPY OF THE SA ME IS ALSO PRODUCED BEFORE US AT PAGES 156 TO 159 OF THE PAPER B OOK. MOREOVER, AEPP IS ASSESSED TO INCOME TAX, ITS PAN DETAILS WERE FURNI SHED BEFORE THE ASSESSING OFFICER. THE DIRECTOR OF AEPP APPEARED B EFORE THE ITA-4014/DEL/2011 27 ASSESSING OFFICER AND THE ASSESSING OFFICER ASKED QUESTIONS RE LATING TO CREDITWORTHINESS OF THE COMPANY. QUESTION NO.12 AND R EPLY THERETO WOULD BE RELEVANT. WE REPRODUCE THE SAME HEREIN BEL OW :- Q12. WHAT IS THE NET WORTH OF YOUR COMPANY? WAS ANY CASH DEPOSITED IN THE BANK ACCOUNT BEFORE DEPOSIT ING THE SHARE APPLICATION MONEY TO M/S MONTAGE ENTERPRISES PVT.LTD.? ANS. THE NET WORTH OF OUR COMPANY IS MORE THAN RS.100.00 CRORES. NO, THERE IS NO CASH DEPOSIT IN THE BANK ACCOUNT BEFO RE MAKING THE PAYMENT FOR SHARE APPLICATION MONEY TO M /S MONTAGE ENTERPRISES PVT.LTD. 30. THUS, THE DIRECTOR OF AEPP STATED THAT THE NET W ORTH OF AEPP IS MORE THAN `100 CRORES AND THERE IS NO CASH DEPOSIT IN T HE BANK ACCOUNT OF AEPP BEFORE MAKING THE PAYMENT FOR SHARE APPLICATION MONEY TO MEPL I.E., THE ASSESSEE. THE ASSESSEE HAS FURNISHED THE COPY OF AUDITED BALANCE SHEET OF AEPP, FROM WHICH, W E FIND THAT THE SHARE CAPITAL OF AEPP INCLUDING RESERVES AND SURPLUS IS ` 103.64 CRORES AND THE INVESTMENT IN SHARES OF VARIOUS COMPANIES BY AEP P IS `95.32 CRORES. IN OUR OPINION, THESE FACTS CLEARLY ESTABLISH T HE CREDITWORTHINESS OF AEPP. 31. IN VIEW OF THE ABOVE, WE, RESPECTFULLY APPLYING THE ABOVE TWO DECISIONS OF HON'BLE JURISDICTIONAL HIGH COURT TO THE FACTS OF THE ASSESSEES CASE, HOLD THAT THE ASSESSEE HAS BEEN ABLE TO DISCHA RGE THE BURDEN OF PROVING THE SHARE APPLICATION MONEY RECEIV ED BY IT FROM AEPP AND THEREFORE, LEARNED CIT(A) RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. WE UPHOLD THE ORDER OF LEARN ED CIT(A) ON THIS POINT AND REJECT GROUND NOS.4 AND 5 OF THE REVENUES APPEAL. 32. GROUND NO.6 OF THE REVENUES APPEAL READS AS UNDER :- ITA-4014/DEL/2011 28 ON THE FACES AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF CLAIM FOR DEDUCTION OF RS.2,71,73,987 /- U/S 80-IB ON ACCOUNT OF SELF CENVAT CREDIT AVAILMENT. 33. AT THE TIME OF HEARING BEFORE US, IT IS STATED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT IN ASSESSEES OWN CASE F OR ASSESSMENT YEAR 2006-07. LEARNED DR, ON THE OTHER HAND , RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 34. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATER IAL PLACED BEFORE US. THE FACTS OF THE CASE ARE THAT THE ASSESSING O FFICER DURING THE COURSE OF SCRUTINY HAS NOTICED THAT IN THE PROFIT & LOSS ACCOUNT, THE ASSESSEE HAS CREDITED A SUM OF `2,71,73,987/- ON ACCOUNT OF SELF CENVAT CREDIT AVAILMENT. THE ASSESSING OFFICER WAS OF T HE OPINION THAT SUCH CREDIT CANNOT BE CONSIDERED TO BE INCOME FROM IN DUSTRIAL UNDERTAKING AND THEREFORE, HE EXCLUDED THE SAME WHIL E ALLOWING DEDUCTION U/S 80IB TO THE ASSESSEE IN RESPECT OF ITS MANU FACTURING UNIT AT JAMMU. ON APPEAL, LEARNED CIT(A) ALLOWED THE SAM E. AGGRIEVED WITH THE SAME, THE REVENUE IS IN APPEAL BEFORE US. 35. WE FIND THAT THE IDENTICAL ISSUE HAS BEEN CONSIDERE D BY THE ITAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07 VIDE ITA NO.2106/DEL/2010 AND SIMILAR DISALLOWANCE MADE IN THE LAST YEAR WAS DELETED BY THE ITAT. WE FURTHER FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HON'BLE JU RISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. DHARAM PAL PREM CHAND LT D. [2009] 317 ITR 353 (DELHI), WHEREIN THEIR LORDSHIPS HELD AS UNDER :- ITA-4014/DEL/2011 29 HELD, (I) THAT THE AUTHORITIES BELOW FOUND THAT THE REFUND OF EXCISE DUTY WAS PIVOTED ON THE MANUFACTURING ACTIV ITY CARRIED ON BY THE ASSESSEE. THE CONCURRENT FINDING OF THE AUTHORITIES WAS THAT THE ASSESSEE HAD ADOPTED AN INCORREC T ACCOUNTING METHODOLOGY. THE ASSESSEE HAD ON THE PAYMENT OF EXCISE DUTY DEBITED THE PROFIT AND LOSS ACC OUNT AND UPON RECEIPT OF REFUND CREDITED THE PROFIT AND LOSS ACCOUNT. THE NET EFFECT ON THE PROFIT AND LOSS WAS N IL ON ACCOUNT OF THE METHODOLOGY FOLLOWED BY THE ASSESSEE. THEREFORE, THERE WAS NO REASON TO EXCLUDE THE AMOUNT OF REFUND OF EXCISE DUTY IN ARRIVING AT PROFIT DERIVED FOR THE PURPOSE OF CLAIMING DEDUCTION UNDER SECTION 80-IB. 36. NO CONTRARY DECISION OR HON'BLE JURISDICTIONAL HI GH COURT OR HONBLE APEX COURT IS BROUGHT TO OUR KNOWLEDGE. WE, THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT AS WELL AS OF ITAT IN ASSESSEES OWN CASE, UPHOLD THE ORDER OF LEARNED CIT(A) ON THIS ISSUE AND REJECT GROUND NO.6 OF THE REVENUES APPEAL. 37. GROUND NO.7 OF THE REVENUES APPEAL READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THE EXCISE DUTY REFUND IS A CAPITAL RECEIPT IN NATURE AND NOT L IABLE TO TAX. 38. AT THE TIME OF HEARING BEFORE US, IT IS STATED BY THE LEARNED COUNSEL THAT THIS GROUND IS ONLY AN ALTERNATIVE GROUND BY WHICH THE ASSESSEE HAS CLAIMED THE REFUND OF CENVAT AS A CAPITAL RE CEIPT. HE, HOWEVER, STATED THAT IF THE FINDING OF LEARNED CIT(A ) FOR CONSIDERING THIS AS INCOME ELIGIBLE UNDER SECTION 80IB IS ACCEPTED, TH EN THIS GROUND WOULD BECOME ACADEMIC. WE FIND THAT THE ASSESSEE IN TH E YEAR UNDER CONSIDERATION HAS TREATED THE REFUND OF CENVAT AS REV ENUE RECEIPT AND HAS CLAIMED THE SAME TO BE ENTITLED FOR DEDUCTION U/S 80IB. THIS CLAIM HAS BEEN ACCEPTED BY THE LEARNED CIT(A) AND ALSO UPHE LD BY US WHILE ITA-4014/DEL/2011 30 REJECTING GROUND NO.6 OF THE REVENUES APPEAL. THAT BEFORE THE LEARNED CIT(A), THE ASSESSEE HAD RAISED AN ALTERNATIVE G ROUND CLAIMING THE EXCISE DUTY REFUND AS A CAPITAL RECEIPT. LEARNED CIT(A), FOLLOWING THE DECISION OF HONBLE HIGH COURT IN THE CASE OF SHR EE BALAJI ALLOYS & ORS. VS. CIT [2011] 239 CTR (J&K) 70, ACCEPTED THE ASSESSEES CLAIM AND HELD THAT EXCISE DUTY REFUND IS CAPITAL IN NATURE . AT THE TIME OF HEARING BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE H AS POINTED OUT THAT THIS CLAIM OF THE ASSESSEE HAS ALSO BEEN ACCEPTE D BY THE ITAT IN OTHER YEARS IN ASSESSEES OWN CASE. HOWEVER, IN OUR OPINION, IN THE YEAR UNDER CONSIDERATION, THE RECEIPT CAN EITHER BE REVENUE RECEIPT OR CAPITAL RECEIPT. IT CANNOT BE BOTH. THE ASSESSEE, IN ITS ACCOUNT, HAS CLAIMED THE REFUND OF EXCISE DUTY AS REVENUE RECEIPT AND CONSIDERED THE SAME WHILE COMPUTING ITS INCOME FROM INDUSTRIAL UN DERTAKING AND CLAIMED THE DEDUCTION U/S 80-IB ON THE SAME. THE CLA IM WAS DISALLOWED BY THE ASSESSING OFFICER. HOWEVER, BEFORE LE ARNED CIT(A), THE ASSESSEE CONTENDED THAT THE SAME SHOULD BE PART OF IN COME. MEANING THEREBY, THE ASSESSEE REITERATED ITS CLAIM BEFOR E THE APPELLATE AUTHORITIES I.E., BEFORE THE CIT(A) AS WELL AS BEFORE US THAT IT IS A REVENUE RECEIPT AND PART OF INCOME FROM ELIGIBLE IN DUSTRIAL UNDERTAKING SO AS TO BE ELIGIBLE FOR DEDUCTION U/S 80-IB. THIS CLA IM OF THE ASSESSEE HAS BEEN ACCEPTED BY THE LEARNED CIT(A) AND THE ORDE R OF LEARNED CIT(A) HAS BEEN UPHELD BY US BY REJECTING GROUND NO .6 OF THE REVENUES APPEAL. THUS, THE ASSESSEES CLAIM THAT IT IS RE VENUE RECEIPT IS APPROVED BY THE LEARNED CIT(A) AS WELL AS BY US. TH EREFORE, IN OUR OPINION, LEARNED CIT(A) WAS NOT JUSTIFIED IN HOLDING THIS SAME INCOME TO BE CAPITAL RECEIPT IN THE YEAR UNDER CONSIDERATION. IN VIEW OF THE ABOVE, WE REVERSE THE FINDING OF THE LEARNED CIT(A) ON THIS POINT AND ALLOW GROUND NO.7 OF THE REVENUES APPEAL. 39. HOWEVER, BEFORE WE PART WITH THE MATTER, WE MAY CLARIFY THAT WE HAVE NOT EXPRESSED ANY OPINION ON MERITS, WHETHER THE REFUND OF ITA-4014/DEL/2011 31 EXCISE DUTY IS A REVENUE RECEIPT OR CAPITAL RECEIPT. WE HAVE DECIDED THIS ISSUE ON THE LIMITED GROUND THAT WHEN THE ASSESSEE HA S CLAIMED IT TO BE A REVENUE RECEIPT AND THIS CLAIM HAS BEEN ACCEP TED BY THE APPELLATE AUTHORITY, THEN SIMULTANEOUSLY, THE SAME CAN NOT BE HELD TO BE A CAPITAL RECEIPT. HOWEVER, IF IN ANY SUBSEQUENT YEAR, THE ASSESSEE CLAIMS IT TO BE A CAPITAL RECEIPT AND THE SAME IS DISPU TED BY THE REVENUE, THEN THE APPELLATE AUTHORITY WOULD DECIDE THE SAME ON MERITS. WITH THIS OBSERVATION, GROUND NO.7 OF THE REV ENUES APPEAL IS ALLOWED. 40. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTL Y ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 14.01.2019. SD/- SD/- (K. NARASIMHA CHARY (K. NARASIMHA CHARY (K. NARASIMHA CHARY (K. NARASIMHA CHARY ) )) ) ( (( ( G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL ) )) ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER VICE VICE VICE VICE PRESIDENT PRESIDENT PRESIDENT PRESIDENT SH/VK. COPY FORWARDED TO: - 1. APPELLANT : ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE CENTRAL CIRCLE CENTRAL CIRCLE CENTRAL CIRCLE- -- -18, NEW DELH 18, NEW DELH 18, NEW DELH 18, NEW DELHI. I.I. I. 2. RESPONDENT : M/S MONTAGE ENTERPRISES PVT.LTD., M/S MONTAGE ENTERPRISES PVT.LTD., M/S MONTAGE ENTERPRISES PVT.LTD., M/S MONTAGE ENTERPRISES PVT.LTD., C CC C- -- -5, SHASHI GARDEN, NEAR POCKET 5, SHASHI GARDEN, NEAR POCKET 5, SHASHI GARDEN, NEAR POCKET 5, SHASHI GARDEN, NEAR POCKET- -- -5, GURUDWARA, 5, GURUDWARA, 5, GURUDWARA, 5, GURUDWARA, MAYUR VIHAR, PHASE MAYUR VIHAR, PHASE MAYUR VIHAR, PHASE MAYUR VIHAR, PHASE- -- -1, DELHI 1, DELHI 1, DELHI 1, DELHI 110 091. 110 091. 110 091. 110 091. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR