DCIT, Ludhiana V. M/s Forex Fastners (P) Ltd., Ludhiana

ITA 405/CHANDI/2011

• Counselvise Citation: 40521514 RSA 2011
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 30-08-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 19-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Assessee Lawyers: SUDHIR SEHGAL
• Keywords: Gross profit estimation; Income from undisclosed sources; Opportunity of being heard; Principle of natural justice; Question of law; Assessment record; Onus to prove
• Section: 68; 143(3); 260A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE MS SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 405/CHD/2011 ASSESSMENT YEAR: 2005-06 DY.CIT, C-IV, V M/S FOREX FASTNERS (P) LTD. , LUDHIANA. 1859, KALSIAN ST.NO. 3 SEWAK PURA, GILL ROAD, LUDHIANA. PAN: AAACF-5215D DEPARTMENT BY: SMT. JAISHREE SHARMA ASSESSEE BY: SHRI SUDHIR SEHGAL DATE OF HEARING : 30.08.2011 DATE OF PRONOUNCEMENT : 19.09.2011 ORDER PER MEHAR SINGH, AM THE REVENUE FILED APPEAL AGAINST THE ORDER OF THE L D. CIT(A) DATED 18.02.2011 PASSED U/S 250(6) OF THE IN COME-TAX ACT, 1961 ( IN SHORT THE ACT) WHEREIN THE ADDITIO N OF RS.5,68,000/- MADE BY THE ASSESSING OFFICER VIDE AS SESSMENT ORDER DATED 31.03.2005 U/S 143(3) OF THE ACT WAS DE LETED. THE LD. CIT(A) ALSO DELETED THE ADDITION OF RS.5,08,821 /- MADE BY THE AO ON ACCOUNT OF LOW GROSS PROFIT. 2. AGGRIEVED BY THE IMPUGNED ORDER OF THE CIT(A), T HE REVENUE RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A) II HAS ERRED IN LAW AND ON FACTS IN DELETING ADDITION OF RS.5,68,000/- MADE BY THE AO ON ACCOUNT OF UNDISCLOSED INCOME OF THE ASSESSEE UNDER SECTION 68 OF THE INCOME-TAX ACT,1961. 2 2. THAT THE LD. CIT(A) II HAS ERRED IN LAW AND ON F ACTS IN DELETING ADDITION OF RS.5,08,821/- MADE BY THE AO ON ACCOUNT OF LOW GROSS PROFIT. 3. THAT THE ORDER OF THE CIT(A)-II BE SET ASIDE AND THAT OF THE AO BE RESTORED. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUND OF APPEAL BEFORE IT IS FINALLY DISPOSED. 3. IN GROUND NO.1, THE REVENUE CONTENDED THAT THE L D. CIT(A), ERRED IN LAW AND ON FACTS, IN DELETING THE ADDITION OF RS.5,68,000/-, MADE BY THE AO, ON ACCOUNT OF UNDISC LOSED INCOME OF THE ASSESSEE U/S 68 OF THE ACT. THE AO A FTER AFFORDING 13 OPPORTUNITIES, TO THE ASSESSEE, MADE A N ADDITION OF RS.5,68,000/-, REPRESENTING INTRODUCTION OF SHAR E CAPITAL, IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, IN THE NAM E OF CERTAIN PERSONS. IT WAS CATEGORICALLY OBSERVED BY THE AO T HAT THE ASSESSEE REMAINED NON-COOPERATIVE IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE AO INVOKED THE PROVISIO NS OF SECTION 68 OF THE ACT AND MADE THE IMPUGNED ADDITIO N. THE AO FURTHER OBSERVED THAT THE ASSESSEE FILED PART OF CONFIRMATIONS AS IS EVIDENT FROM A CAREFUL PERUSAL OF PARA 2.3 OF THE IMPUGNED ASSESSMENT ORDER. IT IS PERTINENT T O REPRODUCE THE TEXT OF THE FINDINGS RECORDED BY THE AO, ON THE ISSUE IN QUESTION : 2.3 ADDITION OF RS.5,68,000/- AS INCOME FROM UNDISCLOSED SOURCES :- IT WAS FOUND THAT THE FOLLOWING AMOUNT OF SHARE APPLICATION MONEY WAS TAKEN IN CASH DURING THE YEAR UNDER CONSIDERATION BUT NO DOCUMENTARY EVIDENCE WAS PRODUCED FROM THE 3 FOLLOWING PERSONS: NAME AMOUNT SMT. BACHINT KAUR 15,000/- SMT. RAVINDER KAUR 18,000/- SMT.MANPREET KAUR 40,000/- SMT.RAJINDER KAUR 78,000/- SHRI JAGDISH SINGH 55,000/- SHRI RAVINDER SINGH 40,000/- SMT.SATWINDER KAUR 1,04,000/- SMT.SATWANT KAUR 1,19,000/- SMT.SURINDER KAUR 40,000/- SMT.NIRMAL KAUR 20,000/- SHRI MANJIT SINGH 39,000/- TOTAL 5,68,000/- IN ORDER TO VERIFY THE GENUINENESS OF SHARE APPLICA TION MONEY, THE ASSESSEE VIDE THIS OFFICE QUESTIONNAIRE DATED 19.2.2007 AT SR.NO.15 WAS ASKED TO FURNISH THE FOLL OWING INFORMATION: FURNISH DETAILS OF SHARE APPLICATION MONEY INTRODUCED DURING THE YEAR UNDER CONSIDERATION ALONGWITH SOURCES AND DOCUMENTARY DOCUMENTS THEREOF IN SUPPORT OF YOUR CLAIM. IN COMPLIANCE THERETO THE ASSESSEE HAS ONLY SUPPLI ED THE LIST OF PERSONS FROM WHOM SHARE APPLICATION WAS RECEIVED BUT NO DOCUMENTARY EVIDENCE AND OTHER INFORMATION WAS FURNISHED INSPITE OF THE FACT THAT THE ASSESSEE'S CASE WAS ADJOURNED/FIXED TIME AND AGAIN ON THE FOLLOWING DATES :- DATE OF ISSUE OF FIXED DATE REMARKS QUESTIONNAIRE /NOTICE 19.2.2007 8.3.2007 ADJ.APPLICATION FILED, AD J TO TO 19.3.07 19.3.2007 -- ADJ.APPLICATION FILED, ADJ TO 9.4.07 09.4.2007 -- NOT ATTENDED, NO INFORMATION FILED 4 25.9.2007 4.10.2007 NO INFORMATION/BOOKS PR ODUCED CASE ADJ TO 8.10.2007 08.10.2007 -- NO INFORMATION. ADJ TO 1 5.10.07 15.10.2007 RAJESH SHARMA CA ATTENDED,NO BOOKS PRODUCED, ONLY PART INFOR- MATION FILED.ADJ TO 24.10.2007. 24.10.2007 12.11.2007 RAJESH SHARMA ATTENDED, NO INFORMATION FILED, CASE ADJ.TO 2.11.2007 2.11.2007 -- NOBODY ATTENDED, NOR INFOR- MATION FILED 3.11.2007 15.11.2007 -DO- 15.11.2007 -- NOBODY ATTENDED, PENALTY U/S 271(1)(B) 7.12.2007 13.12.2007 -DO- 17.12.2007 24.12.2007 FINAL SHOW CAUSE NOTICE ISS UED 24.12.2007 -- PART CONFIRMATION FILED, BOOKS PRODUCED. NO REMAINING CONFIR- MATION ETC.FILED. CASE DISCUSSED FROM THE ABOVE REASONS IT IS CLEAR BEYOND DOUBT THAT THE ASSESSEE HAS PRODUCED THE BOOKS OF ACCOUNT ONLY ON THE LAST DATE OF HEARING THAT TOO I N RESPONSE TO FINAL SHOW CAUSE NOTICE AND THE UNDERSIGNED HAS NO ALTERNATIVE EXCEPT TO TREAT THE FOLLOWING SHARE APPLICATION MONEY WHICH WAS RECEIVE D IN CASH AS INCOME OF THE ASSESSEE FROM THE UNDISCLO SED SOURCES U/S 68 OF THE ACT WHICH PROVIDES AS UNDER : WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR AND TH E ASSESSEE OFFERS NO EXPLANATIONS ABOUT THE NATURE SO URCE THERE OF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE AO, SATISFACTORY, THE SUM SO CREDITE D MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSES SEE OF THAT PREVIOUS YEAR. FROM THE FACTS IT IS ABSOLUTELY CLEAR THAT THE ASSESSEE HAS INTENTIONALLY NOT FILED THE REQUISITE INFORMATION FOR THE REASON BEST KNOWN TO HIM ALTHOUGH HE WAS AFFORDED AMPLE OPPORTUNITIES AS DISCUSSED ABOVE THEREFORE, I HAVE LEFT WITH NO 5 ALTERNATIVE EXCEPT TO TREAT SHARE APPLICATION MONEY OF RS.5,68,000/- INTRODUCED DURING THE YEAR AS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES, ACCORDINGLY, AN ADDITION OF RS.5,68,000/- IS MADE TO THE RETURN INC OME OF THE ASSESSEE. 4. LD. CIT(A), DELETED THE IMPUGNED ADDITION ON THE FOUNDATION OF SUBMISSIONS MADE BY THE ASSESSEE WHER EIN THE ASSESSEE PLACED RELIANCE ON THE DECISIONS, SUCH AS CIT V LOVELY EXPORTS (P) LTD. 216 CTR 195 (S.C), CIT V ST ELLER INVESTMENT LTD. 251 ITR 263 (S.C), CIT V VALUE CAPI TAL SERVICES (P) LTD. 307 ITR 334 (DEL), CIT V ELECTRO POLYCHEM LTD. 294 ITR 661 (MAD), CIT V AKJ GRANITES (P) LTD. 301 ITR 298 (RAJ), CIT V GLOCOM IMPEX (P) LTD. 299 ITR 571 (DEL), CIT V ILLAC INVESTMENT (P) LTD. 287 ITR 135 (DEL), GYAN GANGA LTD. V DCIT (2010) 3 ITR (TRIB) 372 (PATNA) AND A-ONE HO USING COMPLEX LTD. V ITO 110 ITD 361 (DEL). 4(1). THE LD. CIT(A), ALSO REFERRED TO THE REMAND R EPORT FILED BY THE AO. PARA 4(D) OF THE IMPUGNED APPELLATE ORD ER IS RELEVANT, AS IT HIGHLIGHTS THE FINDINGS OF THE LD. CIT(A) AND THE NATURE OF MATERIAL ON WHICH SUCH FINDINGS ARE FOUND ED. FOR THE PURPOSE OF READY REFERENCE AND APPRECIATION OF THE SAME, THE SAID PARA IS REPRODUCED HEREUNDER : D) I HAVE GONE THROUGH THE DETAILED ARGUMENTS OF T HE ASSESSEE ALONGWITH CONFIRMATIONS FROM THE PERSONS W HO HAVE CONTRIBUTED TOWARDS THE SHARE CAPITAL OF THE COMPANY AND THE FOLLOWING IS THE DETAIL OF THE CONFIRMATION AND OTHER PROOFS AS SUBMITTED BY THE ASSESSEE AND COPY OF WHICH IS ALSO FORWARDED TO THE AO. THE DETAIL OF SHAREHOLDERS WHO HAVE CONTRIBUTED TO WARDS 6 THE SHARE CAPITAL OF THE COMPANY IS AS UNDER :- NAME OF THE PERSON AMOUNT PROOF FURNISHED SMT. BACHINT KAUR 15,000/- CONFIRMATION FILED AND P LACED AT PAGE 49 OF THE PAPER BOOK. SHE IS ASSESSED TO INCOME TAX. SMT.RAVINDER KAUR 18,000/- CONFIRMATION FILED AND P LACED AT PAGE 48 OF THE PAPER BOOK. SMT.MANPREET KAUR 40,000/- CONFIRMATION FILED AND P LACED AT PAGE 46 OF THE PAPER BOOK. SHE IS ASSESSED TO INCOME TAX. SMT.RAJINDER KAUR 78,000/- CONFIRMATION FILED AND P LACED AT PAGE 44 OF THE PAPER BOOK AND PHOTO COPY OF THE PAN IS AT PAGE 45 OF THE PAPER BOOK. SHE IS AASESSED TO INCOME TAX. SHRI JAGDISH SINGH 55,000/- CONFIRMATION FILED AND PLACED AT PAGE 32 OF THE PAPER BOOK AND PHOTO COPY OF THE PAN IS AT PAGE 33 OF THE PAPER BOOK. HE IS ASSESSED TO INCOME TAX. SHRI RAVINDER SINGH 40,000/- CONFIRMATION FILED AND PLACED AT PAGE 40 OF THE PAPER BOOK AND PHOTO COPY OF THE PAN IS AT PAGE 41 OF THE PAPER BOOK. HE IS ASSESSED TO INCOME TAX. SMT.SATWINDER KAUR 1,04,000/- CONFIRMATION FILED AN D PLACED AT PAGE 42 OF THE PAPER BOOK AND PHOTO COPY OF THE PAN IS AT PAGE 43 OF THE PAPER BOOK. SHE IS ASSESSED TO INCOME TAX. SMT.SATWANT KAUR 1,19,000/- CONFIRMATION FILED AND PLACED AT PAGE 38 OF THE PAPER BOOK AND PHOTO COPY OF THE PAN IS AT PAGE 39 OF THE PAPER BOOK. SHE IS ASSESSED TO INCOME TAX. SMT.SURINDER KAUR 40,000/- CONFIRMATION FILED AND P LACED AT PAGE 36 AND PHOTO COPY OF THE RATION CARD IS AT PAGE 37 OF THE PAPER BOOK. SHE IS ASSESSED TO INCOME TAX. E) THOUGH IT IS THE CLAIM OF THE ASSESSEE THAT HE HAD FILED THE CONFIRMATION BEFORE THE AO AND THE AO HAS MENTIONED THAT NO CONFIRMATION WAS FILED, BUT THE CONFIRMATION WITH THE IDENTITY PROOF WHICH WAS BEFO RE ME WERE FORWARDED TO THE AO FOR VERIFICATION AND IN TH E COMMENTS AND NOT DOUBTED THE IDENTITY OF PERSONS AN D OTHER EVIDENCE, THE AO HAS AGAIN RELIED UPON IN THE FINDINGS GIVEN IN THE ASSESSMENT ORDER. A BARE LOOK AT THE CHART AS REPRODUCED ABOVE PROVES THAT ALL THE EVIDENCES WERE PRODUCED BY THE ASSESSEE, WHICH PROV ES THE CONTRIBUTION OF SHARE APPLICATION MONEY BY VARI OUS PERSONS AND ALSO EVIDENCE AS FILED WITH THE REGISTR AR OF COMPANIES THAT THE SHARES HAD ALREADY BEEN ALLOTTED TO 7 ALL SUCH PERSONS AND THE RELIANCE BY THE ASSESSEE O N VARIOUS JUDGMENTS AS QUOTED IN THE WRITTEN SUBMISSI ON IS QUITE APT INCLUDING THE JUDGEMENT OF THE HON'BLE SU PREME COURT IN THE CASE OF M/S LOVELY EXPORTS AND THE OTH ER JUDGMENTS OF VARIOUS HIGH COURTS AND ITAT AS MENTIO NED SUPRA AND, THEREFORE BY RELYING UPON THE ABOVESAID JUDGEMENTS AND FACTUAL POSITION I.E. CONFIRMATION, IDENTITY PROOF AND ALLOTMENT OF SHARES IN THE NAMES OF SUCH PERSONS, THE ADDITION OF RS.5,68,000/- AS MADE BY THE AO IS HEREBY ORDERED TO BE DELETED. 5. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, LD. DR REFERRED TO THE PROVISIONS OF SECTION 68 OF THE ACT TERSELY HIGHLIGHTING THAT THE PROVISIONS OF SECTION 68 OF T HE ACT ARE WIDE IN AMBIT AND COVERS ALL KINDS OF RECEIPTS INTR ODUCED BY THE ASSESSEE, IN ITS BOOKS OF ACCOUNT. LD. DR, R EFERRED TO PAGE 5 OF THE IMPUGNED APPELLATE ORDER WHEREIN THE LD. CIT(A) HAS RECORDED IN TABULAR FORM THE NAMES OF THE PARTI ES, AMOUNT AND PROOF FURNISHED BY THE ASSESSEE. THE LD. DR BR ILLIANTLY ANALYZED AND HIGHLIGHTED THE INFIRMITIES IN THE CON FIRMATIONS FILED BY THE ASSESSEE IN THE PAPER BOOK FROM PAGE 1 TO 20. THE LD. DR SUBMITTED THAT THE SHARE CAPITAL CONTR IBUTION WAS MADE BY ALL THE PARTIES IN CASH AND NOT THROUGH BANKING CHANNELS. IT WAS ALSO VEHEMENTLY CONTENDED THAT IN A NUMBER OF CONFIRMATIONS, THE APPLICANT HAD FURNISHED THE A DDRESS OF THE ASSESSEE ITSELF, FOR THE REASON BEST KNOWN TO T HEM. IT WAS ALSO CLEARLY POINTED OUT BY THE LD. DR THAT THE ASS ESSEE HAS FURNISHED MERELY PAN NUMBER, IN RESPECT OF SUCH PAR TIES AND NONE OF THE PARTIES FILED A PHOTO COPY OR ANY EVIDE NCE IN RESPECT OF THE RETURN OF INCOME FILED BY THEM. THEREFORE, IT WAS ARGUED BY THE LD. DR THAT NONE OF THE APPLICA NTS IS ASSESSED TO TAX. IT WAS, FURTHER, REITERATED BY THE LD. DR THAT 8 IN ALL THE CONFIRMATION LETTERS, A BARE ASSERTION O F BEING ASSESSED AT RANGE HAS BEEN MADE BY THE PARTIES BUT NONE OF THEM HAD FILED ANY CORROBORATIVE EVIDENCE, IN THE F ORM OF PHOTO COPY OF THE RETURN OF INCOME FILED BY THEM OR ANY ASSESSMENT MADE ON THEM. LD. DR PLEADED THAT THE GENUINENESS OF SUCH TRANSACTIONS ARE NOT ESTABLISHE D AND THE SAME ARE IN DEEP-DOUBT. IN THE FINAL ANALYSIS, THE LD. DR PLACED RELIANCE, ON THE DECISION OF THE JURISDICTIO NAL HIGH COURT IN THE CASE OF M/S POWER DRUGS LTD. V CIT & A NOTHER IN ITA NO. 194 OF 2011 DATED, 14.07.2011. LD. DR DEMONSTRATED BEFORE THE BENCH THAT THE HON'BLE JURISDICTIONAL HIGH COURT, IN THE SAID DECISION AFT ER CONSIDERING THE RATIO OF THE DECISIONS OF THE HON'B LE SUPREME COURT, IN THE CASE OF CIT V STELLER INVESTM ENT LTD., 251 ITR 263, CIT V LOVELY EXPORTS (P) LTD., 2 16 CTR (S.C) 195 ADJUDICATED THE ISSUE IN FAVOUR OF THE RE VENUE. LD. DR WAS OF THE OPINION THAT THE ISSUE IN THE P RESENT APPEAL IS SQUARELY COVERED BY THE SAID DECISIONS . 6. LD. AR, ON THE OTHER HAND, MENTIONED THAT THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CAS E OF M/S POWER DRUGS LTD. (SUPRA) IS NOT APPLICABLE TO THE F ACTS OF THE PRESENT CASE. LD. AR STATED THAT THE REQUISITE DET AILS OF IDENTITY AND PAN NUMBER ALONGWITH THE CONFIRMATION HAD BEEN FILED. LD. AR PLEADED THAT THE ISSUE IS COVERED BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPO RTS P.LTD. (SUPRA), CIT V ELECTRO POLYCHEM LTD. 294 ITR 661 (M AD) AND THE DECISION IN THE CASE OF M/S OBSERVER COMPOUNDS PVT.LTD. 9 IN ITA NO. 139/CHD/2004 DATED 29.04.2011 OF THE ITA T CHANDIGARH BENCH A. 7. WE HAVE CAREFULLY PERUSED AND CONSIDERED TH E FACT-SITUATION OF THE CASE, RIVAL SUBMISSIONS, INCL UDING THE CASE LAWS CITED THEREIN, THE PAPER BOOK FILED BY TH E ASSESSEE AND THE ORDERS OF THE LOWER AUTHORITIES. THE AR P LACED RELIANCE ON THE DECISIONS IN THE CASE OF CIT V LOVE LY EXPORTS (P) LTD. 216 CTR 195 (S.C), CIT V STELLER INDUSTRIE S LTD. 251 ITR 263 (S.C), CIT V LECTOR POLYCHEM 294 ITR 661 (M AD) AND M/S OBSERVER COMPOUNDS PVT. LTD., ITA NO. 139/CHD/2 004 OF ITAT, CHANDIGARH BENCH, WHICH ARE FOUND ON CONSIDER ATION, MATERIALLY AND FACTUALLY DIFFERENT AND DISTINGUISHE D, PARTICULARLY IN THE CONTEXT OF THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT RELIED UPON BY THE LD. D R, AS IS EVIDENT FROM THE ENSUING DISCUSSION. 8. THE INTERPRETATION PLACED ON THE PROVISIONS OF SECTION 68 OF THE ACT, BY THE HON'BLE FULL BENCH OF DELHI HIGH COURT, IN THE CASE OF CIT V SOPHIA FINANCE LTD. (19 94) 205 ITR 98 (DEL)(FB) ARE SELF-EVIDENT. IN THIS DECISION , THE EXTENT OF APPLICABILITY OF THE DECISION OF CIT V STELLER I NVESTMENT LTD. (1991) 192 ITR 287 (DEL) AND THE STATUTORY JURISDIC TION OF THE AO U/S 68 OF THE ACT HAS BEEN JUDICIALLY SPELLED OU T. THE RELEVANT AND OPERATIVE PART OF THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF SOPHIA FINANCE LTD. (SUPRA) IS REPRODUCED HEREUNDER FOR THE PURPOSES OF PROPER APPRECIATION O F THE SAME : CASH CREDITS COMPANY-CAPITAL-AMOUNT CREDITED IN BOOKS OF ACCOUNT AS RECEIPT OF SHARE APPLICATION MO NEY- 10 ENQUIRY WHETHER SHAREHOLDERS DID EXIST CAN BE DONE- IF EXPLANATION NOT SATISFACTORY OPEN TO INCOME TAX OFF ICER TO TREAT THE CASH CREDITS AS COMPANYS INCOME-INCOM E-TAX ACT,1961,S. 68. REFERENCE-QUESTION OF LAW-COMPANY-CLAIM THAT CREDITS REPRESENTED AMOUNTS PAID BY SHAREHOLDERS FO R SHARES-ASSESSMENT PASSED WITHOUT MAKING APPROPRIATE ENQUIRIES REGARDING WHETHER SHAREHOLDERS EXISTED OR NOT- COMMISSIONER SETTING ASIDE IN REVISION-TRIBUNAL HOL DING THAT SUCH ENQUIRY AS WAS POSSIBLE WAS MADE-QUESTION OF LAW ARISES-INCOME-TAX ACT,1961, SS.68,256,263. 9. THE HON'BLE HIGH COURT IN THE CASE OF LOVELY EX PORTS (P) LTD. 299 ITR 268 HELD THAT IN STELLER INVESTMEN T LTD. (SUPRA) REFERENCE TO SECTION 68 OF THE ACT IS CONSP ICUOUS BY ITS ABSENCE. HENCE, ITS RATIO CANNOT BE STRETCHED T O THE EXTENT THAT IT PERTAINS AS A REFLECTION ON SECTION 68 OF T HE ACT WHEN THE ENQUIRY PERTAINED ONLY TO SECTION 263 OF THE AC T. ACCORDINGLY, IT WAS OBSERVED BY THE HON'BLE HIGH CO URT THAT THE RATIO DECIDENDI OF A CASE IS DETERMINED BY TAKI NG INTO ACCOUNT THE FACTS TREATED BY THE JUDGE DECIDING THE CASE AS BEING MATERIAL, AND THAT HIS DECISION IS BASED THER EON. THE COURT FURTHER OBSERVED THAT IN STELLER INVESTMENT L TD. CASE, THE ISSUE WHICH THE REVENUE PROPOSED TO RAISE, RELA TED TO THE ISSUE OF PROPRIETY OF THE TRIBUNAL TAKING RESORT TO SECTION 263, IN THE CASE, BY IGNORING THE MATERIAL FACT THAT THE AO FAILED TO DISCHARGE HIS DUTY REGARDING THE INVESTIGATION WITH REGARD TO GENUINENESS AND CREDIT-WORTHINESS OF THE SHARE HOLD ERS, MANY OF WHOM WERE FOUND STUDENTS AND HOUSE-WIVES. REJEC TION OF APPEAL U/S 260A IS SIMILAR TO DISMISSAL IN-LIMINE B Y THE SUPREME COURT OF SLP. CONSEQUENTLY, THE RATIO LAID DOWN IN 11 THE CASE OF STELLER INVESTMENT LTD. (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN VIEW OF THE ABOV E, THAT THE DIVISION BENCHES CANNOT CHOOSE TO NAVIGATE THROUGH WATERS WHICH HAVE ALREADY BEEN VOYAGED, MAPPED AND CHANNEL ED BY LARGER BENCHES. 10. IN THE INSTANT CASE, THE ASSESSEE HAS RECORDED IN ITS BOOKS OF ACCOUNT THE RECEIPT OF SHARE CAPITAL CONTR IBUTION, IN THE NAME OF CERTAIN PERSONS. CONSEQUENTLY, PRIMARY ONUS LIES ON THE ASSESSEE, TO PROVE AND ESTABLISH THAT THE RE CEIPT IS NOT ITS INCOME. THE GENERAL RULE IS THAT ONUS OF PROOF IS ALWAYS ON THE PARTY WHO ASSERTS A PROPOSITION OR FACT WHICH I S NOT SELF- EVIDENT. THE BURDEN OF PROOF HAS TWO SHADES OF MEA NING. IN ITS PRIMARY SENSE, IT MEANS, THE BURDEN OF ESTABLIS HING THE CASE. THE SECOND MEANING OF, BURDEN OF PROOF IS ON THE PRINCIPLE OF EVIDENCE. IN THE SECOND SENSE, THE BU RDEN OF PROOF WOULD BE SHIFTED FROM ONE PARTY TO ANOTHER AS AND WHEN BY ADEQUATE EVIDENCE, TO DISCHARGE THE BURDEN THAT LAY ON A PARTY, IS PRODUCED BY THAT PARTY. IN THE PRESENT CA SE, THE ASSESSEE ASSERTS THAT THE RECEIPT OF SHARE CAPITAL CONTRIBUTIONS FROM SUCH PARTIES DOES NOT REPRESENT INCOME OF THE ASSESSEE. CONSEQUENTIALLY, THE ONUS SQUARELY LI ES ON THE ASSESSEE, TO ESTABLISH ITS CASE, IN THE CONTEXT OF THE PROVISIONS OF SECTION 68 OF THE ACT. 11. IN THE CONTEXT OF SECTION 68 OF THE ACT, IT IS A WELL SETTLED LEGAL PROPOSITION BY VARIOUS DECISIONS OF T HE APEX COURT THAT THE ONUS OF PROVING A SUM OF MONEY FOUND TO HAVE BEEN RECEIVED BY THE ASSESSEE IS ON HIM. IF HE DIS PUTES THE LIABILITY FOR TAX, IT IS FOR HIM TO SHOW EITHER THA T THE RECEIPT 12 WAS NOT INCOME OR THAT IF IT WAS, EXEMPT FROM TAXAT ION UNDER THE PROVISIONS OF THE ACT. IN THE ABSENCE OF SUCH PROOF, THE AO IS ENTITLED TO TREAT IT AS TAXABLE INCOME WHERE THE AO HAS FAILED TO PROVE SATISFACTORILY THE SOURCE AND N ATURE OF CREDIT ENTRY APPEARING IN ITS BOOKS OF ACCOUNT AND IT IS HELD THAT THE RELEVANT AMOUNT IS INCOME OF THE ASSE SSEE, IT IS NOT NECESSARY FOR THE DEPARTMENT TO LOCATE ITS E XACT SOURCE. 12. IN THE PRESENT CASE, THE ASSESSEE WAS AFFORDED EFFECTIVE, REASONABLE AND MORE THAN ADEQUATE OPPORT UNITIES, TO PRESENT ITS CASE. HOWEVER, THE ASSESSEE CHOSE NOT TO AVAIL OF SUCH OPPORTUNITIES AND REMAINED NON-COOPERATIVE THR OUGH-OUT THE ASSESSMENT PROCEEDINGS. HE ALSO OPTED NOT TO FI LE REQUISITE DETAIL AS CALLED FOR BY THE AO. IT WAS STATUTORILY INCUMBENT UPON THE ASSESSEE, TO PROVE THE GENUINENESS OF SUCH TRANSACTIONS. THE PRINCIPLE OF NATURAL JUSTICE EMB ODIED IN THE LATIN MAXIM AUDI ALTERAM PARTEM SIMPLY MEANS THAT A PERSON HAS A RIGHT TO BE GRANTED AN OPPORTUNITY OF BEING HEARD, SHOULD BE PROPER AND REASONABLE SO AS TO EN ABLE THE PERSON AFFECTED, TO MEET THE CASE AGAINST HIM. IT IMPLIES THAT ONLY ADEQUATE AND PROPER OPPORTUNITY IS REQUIRED TO BE PROVIDED TO THE PERSON AND IT DOES NOT MEAN TO PROV IDE INFINITE OPPORTUNITIES TO SUCH PERSON. IT IS INHERENT IN TH E CONCEPT OF NATURAL JUSTICE THAT IT CANNOT BE STRETCHED BY A PE DANTIC APPROACH, TO AN ABSURD LIMIT, PARTICULARLY IN RESPE CT OF SUCH PERSON WHO IS NOT WILLING TO AVAIL OF SUCH OPPORTUN ITIES. THE CONCEPT OF NATURAL JUSTICE IS TO BE SEEN IN THE LIG HT OF FAIRNESS AND REASONABLENESS AND FURTHER, THE SAME SHOULD BE GUIDED 13 AND GOADED BY A RATIONAL, PRAGMATIC AND COMMON SENS E APPROACH. IN THE PRESENT CASE, FACTUAL MATRIX OF TH E CASE REVEALS THAT THE ASSESSEE REMAINED UNWILLING TO AVA IL OF SUCH OPPORTUNITIES. THEREFORE, IT IS IMPOSSIBLE TO ENDL ESSLY MOTIVATE SUCH AN ASSESSEE, TO AVAIL OF THE OPPORTUN ITIES, AFFORDED TO IT, TO MEET THE ENDS OF JUSTICE. IN A NUT-SHELL, IN THE NAME OF NATURAL JUSTICE, UNBRIDLED LATITUDE CAN NOT BE ALLOWED TO A RECALCITRANT ASSESSEE AND THE REVENUE CANNOT BE MADE TO SUFFER PREJUDICE, BY AN ACT OF FAILURE, ON THE PART OF THE ASSESSEE. THE CONCEPT OF NATURAL JUSTICE IS AP PLICABLE TO THE REVENUE AS WELL. 13. THE ASSESSEE HAS PLACED RELIANCE ON A NUMBE R OF JUDICIAL PRECEDENTS BEFORE THE CIT(APPEALS). HOWEV ER, THE ASSESSEE FAILED TO DEMONSTRATE AS TO HOW, THE F ACTUAL SITUATION OF ITS CASE FITS IN THE FACT-SITUATION OF THE JUDICIAL VERDICTS, ON WHICH IT PLACED RELIANCE. THESE OBSER VATIONS OF THE COURT MUST BE READ IN THE CONTEXT, IN WHICH THEY APPEAR TO HAVE BEEN MADE. FURTHER, THE RATIO OF A NY DECISION IS DETERMINED BY TAKING INTO ACCOUNT THE FACTS TREA TED BY THE JUDGE DECIDING THE CASE AS BEING MATERIAL AND HIS DECISION IS BASED THEREON. THE ASSESSEE OR TH E REVENUE IS NOT JUSTIFIED IN PICKING OF A FEW SENTENCES OF ANY DECISION, OUT OF CONTEXT AND THEN TREATING THE SAM E, AS THE TRUE RATIO OF THE SAID DECISION. IN THE PRESENT CASE , THE ASSESSEE MERELY PLACED RELIANCE ON THE VARIO US DECISIONS, 14 WITHOUT DEMONSTRATING THE APPLICABILITY THEREOF TO THE FACT SITUATION OF THE PRESENT CASE. 14. IN VIEW OF THE ABOVE DISCUSSION, THE RELIANCE PLACED BY THE ASSESSEE, ON VARIOUS DECISIONS IS MISPLACED, AN D HENCE, THE CASE OF THE ASSESSEE PATENTLY FALLS BEYOND THE VERDICT OF SUCH DECISIONS. 15. THE LATEST DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN M/S POWER DRUGS LTD. V CIT & ANOTHER (ITA 194 OF 2011) SQUARELY COVERS THE FACT SITUATION OF THE INSTANT CASE AND THE RELEVANT PART OF THE SAME IS REPRODUCED HER EUNDER 3. WE HAVE HEARD LD. COUNSEL FOR THE APPELLANT. 4. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE TRIBUNAL HAD ERRED IN TREATING THE INCOME ON ACCOU NT OF SHARE APPLICATION MONEY TO BE UNDISCLOSED INCOME OF THE ASSESSEE. ACCORDING TO HIM, THE DEPARTMENT COULD HA VE PROCEEDED AGAINST THE INDIVIDUALS IN WHOSE NAME THE SHARE APPLICATION MONEY WAS DEPOSITED. HE RELIED U PON THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN CIT V LOVELY EXPORTS P.LTD. (2008) 216 CTR (S.C) 195 AN D THE JUDGMENT OF THE DELHI HIGH COURT IN ITA NO.1469 OF 2010, CIT V NEW AGE INFOSYS PVT.LTD. DECIDED ON 27.9.2010. LD. COUNSEL ALSO URGED THAT THE DISALLOWANCE OF RS.6,00,000/- ON ACCOUNT OF INTERES T RELATABLE TO ADVANCES TO MR.ASHOK ANAND AND MRS. RA J RANI ANAND UNDER SECTION 36(1)(III) OF THE ACT WAS UNSUSTAINABLE. 5. WE DO NOT FIND ANY SUBSTANCE IN THE SUBMISSION M ADE BY LD. COUNSEL FOR THE ASSESSEE. THE TRIBUNAL WHILE UPHOLDING THAT THE AMOUNT OF RS.42,78,756/- RECEIVE D BY THE ASSESSEE AS SHARE APPLICATION MONEY WAS INFA CT UNDISCLOSED INCOME OF THE ASSESSEE HAD ADJUDICATED THE 15 SAID ISSUE AGAINST THE ASSESSEE WITH THE FOLLOWING OBSERVATIONS : 7 THE ASSESSEE IS A UNLISTED COMPANY AND HAD NOT MADE ANY PUBLIC ISSUE. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD RECEIVED RS. 42,7 8,756 AS SHARE APPLICATION MONEY THROUGH PRIVATE PLACING. THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS THEREOF. IN REPLY THE ASSESSEE FURNISHED THE NAMES OF PERSONS AS PER ANNEXURE II WHERE MOSTLY THE AMOUNTS WERE SHOWN TO HAVE BEEN RECEIVED FROM SOME NAMES OF VILLAGE AND P.O. A LEWA, JIND, HARYANA AS NOTED BY THE ASSESSING OFFICER. T HE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAD FAILED TO DISCHARGE PRIMARY ONUS TO ESTABLISH THE IDENTITY, CREDIT WORTHINESS AND GENUINENESS OF THE TRANSACTI ONS. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HA D NOT DISCHARGED THE PRIMARY ONUS AND ON PERUSAL OF THE INFORMATION NOTED AS UNDER:- I NAMES ONLY II INCOMPLETE ADDRESS IN VIEW ONLY VILLAGE AND POS T OFFICE ALEWA III SHARE APPLICATION FORMS WHICH DO NOT BEAR PHOTOGRAPHS OF THESE PERSONS IV SOME OF APPLICATIONS JUST BEAR THUMB IMPRESSIO N V NONE OF THEM IS AN INCOME TAX ASSESSEE AND DO NOT EVEN HAVE PAN EXCEPT MS. REKHA GOAL WHO HAS ALLEGED LY ADVANCED AN AMOUNT OF RS. 2.00 LAKHS IN CASH. THE MOST IMPORTANT FACT TO BE NOTED IS THAT HUGE AMOUNTS IN LAKHS OF RUPEES HAVE BEEN DEPOSITED IN CASH BY NON ASSESSEES HAVING NO PAN, WITHOUT ANY PHOTOGRAPHS AND WITHOUT ANY EVIDENCE REGARDING THEIR CREDIT WORTHINESS TO ADVAN CE SUCH LARGE AMOUNT IN CASH. 8. THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 68 OF IT ACT AND MADE THE ADDITION OF RS. 42,78,756/-. 9. BEFORE THE CIT(A) THE STAND OF THE ASSESSEE WAS THAT UNDER THE COMPANYS ACT THE ASSESSEE CAN RECEIVE SH ARE APPLICATION MONEY EITHER IN CASH OR CHEQUE. IT WAS FURTHER SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE BEFOR E THE 16 CIT(A) THAT THE APPLICANTS DID NOT POSSESS ANY PAN AND THE COPIES OF SHARE APPLICATION FORMS WERE FURNISHE D BEFORE THE ASSESSING OFFICER, WHICH HAD REQUISITE D ETAILS OF THE SAID PERSON. IT WAS FURTHER POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE THAT IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN CIT V. LOVELY EXPORT PVT LTD [(2008) 216 CTR (S.C) 195] EVEN THOU GH THE SHARE APPLICATION MONEY WAS RECEIVED FROM ALLEG ED BOGUS SHARE HOLDERS WHOSE NAMES WERE GIVEN, NO ADDI TION CAN BE MADE IN THE HANDS OF THE ASSESSEE COMPANY AN D ACTION, IF ANY, IS TO BE TAKEN ONLY IN THE CASE OF THE SHARE APPLICANTS. THE CIT(A) HELD THAT THE ASSESSEE HAD NOT DISCHARGED HIS PRIMARY ONUS OF ESTABLISHING IDENTIT Y, CREDIT WORTHINESS AND GENUINENESS OF TRANSACTION U /S 68 OF IT ACT MOREOVER ENTIRE SUM WAS RECEIVED IN CASH WHE RE GENUINENESS OF TRANSACTION IS ALWAYS IN DOUBT. TH E CIT(A) FURTHER HELD THAT THE ASSESSEE HAD FAILED TO FILE THE CONFIRMATION FROM THE CREDITORS AND ONUS NOT BEING DISCHARGED, THE ADDITION MERITS TO BE UPHELD. THE LD. A.R. FOR THE ASSESSEE DREW OUR ATTENTION TO THE SHARE APPLICATION FORMS RECEIVED FROM 28 PERSONS PLACED A T PAGES 7 TO 34 OF THE PAPER BOOK IN WHICH THE REQUIS ITE DETAILS OF EACH PERSONS WAS GIVEN. THE LD. D.R. FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF CIT(A) AND POINTED OUT THAT THE AMOUNTS IN QUESTION WERE RECEI VED IN CASH AND THE IDENTITY OF THE SHARE HOLDERS NOT HAVI NG BEEN ESTABLISHED, THE ADDITION MERITS TO BE UPHELD. 10 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. THE ASSESSEE COMPANY DURING THE YEAR UN DER CONSIDERATION HAD RAISED SHARE APPLICATION MONEY OF RS. 42,78,756. THE ENTIRE SHARE APPLICATION MONEY WAS RECEIVED IN CASH AND AS PER THE CLAIM OF THE ASSESS EE THE SUM WAS RECEIVED FROM 28 PERSONS. THE ASSESSEE HAD FURNISHED ON RECORD THE COPIES OF SHARE APPLICATION FORMS SUBMITTED FOR ALLOCATION OF SHARES, COPIES OF WHICH ARE PLACED AT PAGES 7 TO 34 OF THE PAPER BOOK. THE PER USAL OF SAID SHARE APPLICATION FORMS REVEALED THE ASSESSEE TO HAVE FURNISHED THE NAMES, FATHERS NAME AND ADDRESSES OF THE PARTIES WHICH WERE FOUND TO BE INCOMPLETE BY THE 17 ASSESSING OFFICER/CIT(A). IN SOME CASES EVEN THE ADDRESS WERE FOUND TO BE INCOMPLETE. 11. THE ISSUE INVOLVED IN THE PRESENT GROUND CAME U P FOR CONSIDERATION BEFORE THE HON'BLE APEX COURT IN CIT VS. LOVELY EXPORTS (P) LTD (SUPRA). THE HIGH COUR T WHILE DECIDING THE ISSUE AS REPORTED IN LOVELY EXPORTS (P ) LTD VS CIT 299 ITR 268 WAS OF THE VIEW THAT IN THE CONTEXT OF SECTION 68 OF THE INCOME TAX ACT, THE ASSESSING OFF ICER HAS TO PRIMA-FACIE ESTABLISH (I) THE IDENTITY OF TH E CREDITOR II) THE GENUINENESS OF THE TRANSACTIONS, WHETHER TRANSMITTED THROUGH BANKING INDISPUTABLE CHANNELS III) THE CREDITWORTHINESS OR FINANCIAL STRENGTH OF THE C REDITOR. THE COURT FURTHER OBSERVED THAT IF THE RELEVANT DET AILS OF THE ADDRESS OR PAN IDENTITY OF THE CREDITOR / SUBSC RIBER WERE FURNISHED ALONG WITH OTHER DETAILS I.E. SHARE HOLDER REGISTER, SHARE APPLICATION FORM, SHARE TRANSFER RE GISTER ETC. IT WOULD CONSTITUTE ACCEPTABLE PROOF OR ACCEPT ABLE EXPLANATION BY THE ASSESSEE. THE ONUS OF THE ASSES SEE THEREIN WAS HELD TO STAND DISCHARGED WHERE THE IDEN TITY OF THE CREDITOR / SUBSCRIBER WAS PROVED AND IT WAS FUR THER HELD THAT THE ASSESSING OFFICER WAS DUTY BOUND TO INVESTIGATE THE CREDITWORTHINESS OF THE CREDITOR / SUBSCRIBER AND THE GENUINENESS OF THE TRANSACTIONS AND THE VERACITY OF THE REPUDIATION OF THE CREDITOR / SUBSC RIBER. THE SPECIAL LEAVE PETITION FILED BY THE REVENUE AGA INST THE SAID DECISION OF THE COURT WAS DISMISSED BY THE SUPREME COURT VIDE ITS DECISION REPORTED IN (2008) 216 CTR SC 195, WHICH READS AS UNDER:- CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME UNDER SECTION 68 OF THE INCOME TAX ACT? WE FIND NO IN SPECIAL LEAVE PETITION FOR THE SIMPLE REASON 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 18 ACCORDANCE WITH LAW. HENCE, NO INFIRMITY IS FOUND WITH THE IMPUGNED JUDGMENT. 12. THE HON'BLE DELHI HIGH COURT IN CIT V WINSTRAL PETRO CHEMICALS PVT LTD (ITA NO. 592/2010 DATE OF JUDGMENT 12.5.2010 AFTER RELYING ON THE RATIO LAID DOWN BY THE APEX COURT IN LOVELY EXPORTS (P) LTD (SUPRA) OB SERVED THAT WHERE THE IDENTITY OF THE SUBSCRIBER HAS BEEN ESTABLISHED BY WAY OF DIFFERENT PROOFS FILED IN THI S REGARD AND IF THE ASSESSING OFFICER ENTERTAINS ANY DOUBT A BOUT THE GENUINENESS OF THE DOCUMENTS, THE SAME COULD HAVE B EEN VERIFIED BY HIM FROM THE RECORDS AVAILABLE WITH THE AUTHORITIES. FROM THE ABOVE SAID, IT TRANSPIRES T HAT THE ONUS IS UPON THE ASSESSEE TO ESTABLISH THE IDENTITY OF THE SUBSCRIBER IN RELATION TO THE SHARE APPLICATION MON EY RECEIVED. WHERE THE ASSESSEE FAILS TO ESTABLISH T HE IDENTITY OF THE SUBSCRIBER, THE ONUS CAST UPON THE ASSESSEE TO PROVE THAT THE CREDITS ARE GENUINE DOES NOT STAND DISCHAR GED. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSME NT PROCEEDINGS, ON THE PERUSAL OF THE INFORMATION FURN ISHED BY THE ASSESSEE FOUND THE ASSESSEE TO HAVE ONLY DISCLO SED THE NAMES OF THE PERSONS AND INCOMPLETE ADDRESSES WERE FURNISHED BY THE ASSESSEE AND SOME OF THE SHARE APPLICATIONS WERE BEARING ONLY THUMB IMPRESSION. THE TOTAL SHARE APPLICATION MONEY WAS RECEIVED IN CASH AND NOT THROUGH BANKING CHANNELS AND NONE OF THE SAID PERSO NS WERE INCOME TAX ASSESSEES NOR HAD ANY PAN NUMBERS. I N THE FACTS OF THE PRESENT CASE THE ASSESSEE HAS FAILED TO PROVE THE IDENTITY OF THE SUBSCRIBER AND APPLYING THE RAT IO LAID DOWN IN THE CASE OF LOVELY EXPORTS (P) LTD (SUPRA), WE ARE IN CONFORMITY WITH THE ORDER OF CIT(A) AND UPHOLD T HE ADDITION OF RS. 42,78,756/-. 6. THE ASSESSEE WAS UNABLE TO ESTABLISH THE IDENTITY, CREDIT WORTHINESS AND THE GENUINENESS OF THE TRANSACTION SO AS TO ESCAPE FROM THE PROVISIONS OF SECTION 68 OF THE ACT. WHETHER AN ADDITION IS TO B E MADE IN THE HANDS OF THE COMPANY OR INDIVIDUAL 19 ASSESSEE IN SUCH CIRCUMSTANCES DEPENDS UPON THE FAC TS OF EACH CASE. THE PRIMARY ONUS LIES UPON THE ASSESS EE TO ESTABLISH THAT THE ASSESSEE IS NOT LIABLE FOR AD DITION UNDER SECTION 68 OF THE ACT AS THE AMOUNT IN FACT BELONGS TO THE PERSONS WHO HAD APPLIED AND SUBMITTE D SHARE APPLICATION MONEY. THE ASSESSEE HAVING FAILE D TO DISCHARGE SUCH ONUS IN THE PRESENT CASE, THE TRIBUNAL HAD RIGHTLY UPHELD THE ADDITIONS IN THE HA NDS OF THE COMPANY. 16. ON THE FACTS OF THE CASE, THE HON'BLE HIGH COUR T OBSERVED THAT THE ONUS IS ON THE ASSESSEE TO ESTABL ISH THE IDENTITY OF THE SUBSCRIBER IN RELATION TO THE SHARE APPLICATION MONEY. IN THAT CASE, SHARE APPLICATION WAS RECEIVED IN CA SH AND NONE OF THE PERSONS WERE ASSESSED TO TAX. IN TH E PRESENT CASE ALSO, SHARE APPLICATION WAS RECEIVED IN CASH A ND NONE OF THE APPLICANT IS ASSESSED TO TAX. THE APPLICANTS AL SO FURNISHED ADDRESS OF THE ASSESSEE COMPANY AS THEIR ADDRESSES. FURTHER, IN THE PRESENT CASE, NO SOURCE OF INCOME HAS BEEN F URNISHED IN THE CONFIRMATORY LETTERS. THEREFORE, UNDER SUCH FACT SITUATION, THE FINDINGS OF THE HON'BLE HIGH COURT T HAT WHETHER AN ADDITION IS TO BE MADE IN THE HANDS OF THE COMPANY OR INDIVIDUAL ASSESSEE IN SUCH CIRCUMSTANCE S DEPENDS UPON THE FACTS OF EACH CASE, IS APPLICABLE TO THE PRESENT CASE. THE PRIMARY ONUS LIES UPON THE ASSES SEE TO ESTABLISH THAT THE ASSESSEE IS NOT LIABLE FOR ADDIT ION UNDER SECTION 68 OF THE ACT, AS THE AMOUNT INFACT BELONGS TO THE PERSONS WHO HAD APPLIED AND SUBMITTED SHARE APPLICA TION MONEY. THE ASSESSEE FAILED TO DISCHARGE SUCH ONUS IN THE PRESENT CASE. THE DECISION OF THE JURISDICTIONAL H IGH COURT IS APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE J URISDICTIONAL 20 HIGH COURT HAS ALSO APPRECIATED THE RATIO OF THE LO VELY EXPORTS (P) LTD. AND THE DECISION OF DELHI HIGH COU RT IN THE CASE OF CIT V NEW AGE INFOSYS P.LTD. 17. THE HON'BLE DELHI HIGH COURT IN I.T. APPEAL NO .953 OF 2006 IN THE CASE OF CIT V LOVELY EXPORTS (P) LTD., 299 ITR 268 (DELHI) HELD THAT NO SUBSTANTIAL QUESTION OF LAW AR ISES IN THE CASE. A BARE PERUSAL OF THE DECISION REVEALS THAT I N THE CASE OF LOVELY EXPORT (P) LTD. (SUPRA), THE FOLLOWING EVIDE NCES WERE FILED TO SUPPORT THE CONTENTION OF THE ASSESSEE, IN RESPECT OF SHARE APPLICATION MONEY : I) PAN OF THE APPLICANTS II) INCOME TAX WARD, WHERE THE APPLICANT ASSESSED TO TAX III) SHARE APPLICATION MONEY RECEIVED THROUGH BANKING CHANNELS IV) CONFIRMATIONS/AFFIDAVITS PLACED ON RECORD. 18. THE HON'BLE HIGH COURT, ADJUDICATED THE ISSUE IN FAVOUR OF THIS ASSESSEE ON THE BASIS OF ABOVE EVIDE NCE AS ALSO KEEPING IN VIEW THAT THE AO FAILED TO REFER TO THE ASSESSMENT RECORDS OF THE APPLICANT TO CONTROVERT THE DOCUMENT ARY EVIDENCE FILED. THE HON'BLE SUPREME COURT DISMISSED THE SLP OF THE REVENUE. IN THE PRESENT CASE, THE SHARE APPLICATION MONEY WAS NOT RECEIVED THROUGH BANKING CHANNELS BUT IN CASH. THE ASSESSEE FAILED TO FILE EVIDENCE INDICATING THAT THE APPLICANTS ARE ASSESSED TO TAX. MERE FILING OF PAN IS NOT SUFFICIENT AND SACROSCENT EVID ENCE TO ESTABLISH THE CREDIT WORTHINESS AND GENUINENESS OF THE TRANSACTION. ALL THE APPLICANTS, EXCEPT TWO, ARE HOUSEWIVES AND ONE OF THEM IS MINOR AND FURNISHED COMPANYS ADDRE SS IN 21 THE CONFIRMATORY LETTER AS THEIR ADDRESSES. THEREFO RE, HAVING REGARD TO THE PECULIAR FACT SITUATION OF THE PRESEN T CASE, IT IS RESPECTFULLY SUBMITTED THAT THE DECISION OF THE HON 'BLE SUPREME COURT IN THE CASE OF CIT V LOVELY EXPORT P. LTD., 216 CTR (S.C) 195 IS NOT APPLICATION TO THE FACTS OF TH E PRESENT CASE. HOWEVER, THE PRESENT CASE IS FULLY COVERED B Y THE DECISION OF JURISDICTIONAL HIGH COURT, IN THE CASE OF M/S POWER DRUGS LTD. (SUPRA). 19. THE CIT(A), IN THE IMPUGNED APPELLATE ORDER, RE CORDED UNDER THE COL. PROOF FURNISHED AS SHE IS ASSESSED TO INCOME TAX AGAINST ALL THE APPLICANTS EXCEPT AGAINST SMT.RAVINDER KAUR. THE CIT(A), PROCEEDED TO ADJUDI CATE THE ISSUE IN QUESTION IN FAVOUR OF THE ASSESSEE-APP ELLANT, ON THE BASIS OF FACTUALLY INCORRECT EVIDENCE. NO SUCH CONTENTION WAS RAISED EVEN BY THE APPELLANT BEFORE THE AO, CIT(A) AND THE BENCH. THE ASSESSEE MERELY FILED PA N, IN RESPECT OF CERTAIN PARTIES AND AT NO STAGE, ANY DOC UMENTARY EVIDENCE ESTABLISHING THE FACTUM THAT SUCH PARTIES WERE ASSESSED TO INCOME TAX, WAS FILED. THE ISSUANCE OF PAN IS NOT THE SAME THING AS FILING IF RETURN OF INCOME BY SUC H PARTIES. IT IS PERTINENT TO ADD HERE THAT EVEN THE APPELLANT NE VER MADE SUCH ASSERTION THAT THE PARTIES ARE ASSESSED TO INC OME-TAX. THUS, THE FINDINGS OF THE CIT(A) ARE FOUNDED PURELY ON SURMISES, CONJECTURES AND NON-EXISTENT EVIDENCE. 20. IT IS STRANGE CO-INCIDENCE THAT CERTAIN PARTIES PREFERRED TO FURNISH THE ADDRESS OF THE ASSESSEE CO M PANY M/S FOREX FASTNERS LTD. THE ASSESSEE FAILED TO FILE THE REAL ADDRESS OF SUCH PERSONS. IT IS ALSO INTERESTING TO NOTE THAT 22 EXCEPT ONE OR TWO, ALL THE SUBSCRIBERS HAD FURNISHE D ADDRESSES OF THE ASSESSEE COMPANY. FURTHER, SUCH P ERSONS ARE RESIDENTS OF LUDHIANA TOWN (PUNJAB) AND NONE OF THEM BELONG TO ANY DIFFERENT PLACE OR STATE. FURTHER, IN VESTMENT IN THE PURCHASE OF SHARES OF THE APPELLANT WAS MADE IN CASH BY ALL THE PARTIES. NO STATEMENT OF BANK ACCO UNT IN RESPECT OF SUCH PERSONS WAS FILED. IN THE CONFIRMAT ION LETTERS, NO SOURCE OF INCOME HAS BEEN INDICATED. THEREFORE, NON-MENTIONING OF SOURCE OF INCOME COUPL ED WITH NON-FILING OF INCOME-TAX RETURNS BY SUCH PARTI ES CANNOT JUDICIALLY ESTABLISH THEIR CREDIT-WORTHINESS AND GENUINENESS OF TRANSACTIONS . THE PRESENT ASSESSEE- APPELLANT IS UNLISTED COMPANY AND NOT MADE ANY PUBL IC ISSUE. IN VIEW OF THE ABOVE, IT IS EVIDENT THAT THE ASSESSEE FAILED TO FILE REASONABLE, PROPER AND PLAUSIBLE EXP LANATION REGARDING NATURE AND SOURCE OF SUCH RECEIPTS AND TH IS KIND OF EXPLANATION IS CONSTRUED AS NO EXPLANATION BY THE HON'BLE SUPREME COURT IN THE CONTEXT OF SECTION 68 IN THE CASE OF CIT V P.MOHANAKALA 291 ITR 278 (S.C). 21. IN VIEW OF THE ABOVE LEGAL AND FACTUAL DISCUSSI ONS AND RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S POWER DRUGS LTD.(SUPR A), THIS GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE REVENU E AND AGAINST THE ASSESSEE. 22. IN GROUND NO.2, THE REVENUE CONTENDED THAT THE CIT(A), ERRED IN LAW AND ON FACTS IN DELETING THE A DDITION OF RS.5,08,822/- MADE BY THE AO ON ACCOUNT OF LOW GP. THE 23 ADDITION ON ACCOUNT OF LOW GP MADE BY THE AO WAS DE LETED BY THE CIT(A). 23. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS, FACTS OF THE CASE AND THE IMPUGNED ORDERS OF THE LO WER AUTHORITIES. LD. AO MADE THE IMPUGNED ADDITION WITH OUT REJECTING THE BOOKS OF ACCOUNT AS CONTEMPLATED U/S 145(3) OF THE ACT, AS IS EVIDENT FROM THE FINDINGS, AS CONTAI NED IN PARA 2.7 OF THE IMPUGNED ASSESSMENT ORDER : FROM THE DETAILS OF TRADING RESULTS OF THE ASSESSE E IT WAS NOTICED THAT THE GROSS PROFIT RATE HAS BEEN DECREASED FROM 17.13% TO 13.63% ACCORDINGLY THE ASSESSEE VIDE THIS OFFICE NOTING SHEET ENTRY DATE ON WHICH SHRI RAJESH SHARMA CA HAS ATTENDED WAS ASKED AS UNDER : REASONS FOR STEEP FALL IN GROSS PROFIT/NET PROFI T RATE MAY PLEASE BE JUSTIFIED. IN RESPONSE TO THE ABOVESAID QUERY, THE ASSESSEE HAS NOT FURNISHED ANY EXPLANATION ALTHOUGH HE WAS AFFORDED A NUMBER OF OPPORTUNITIES AS PER DETAILS OF SEQUENCE OF EVENTS GIVEN IN PARA 5 OF THIS ORDER AND ALSO NON-PRODUCTION QUANTITATIVE DETAILS AS CALLED FOR AT SR.NO.1 AND 3 OF THE QUESTIONNAIRE DATED 19.2.2007, THEREFORE I HAVE LEFT WITH NO ALTERNATIVE EXCEPT TO WORK OUT THE PROFIT BY APPLYING THE GP RATE OF 17.13% AS DECLARED IN THE IMMEDIATE PRECEDING YEAR AS UNDER : GROSS PROFIT WORKED OUT @ 17.13% COMES TO RS.27,35, 033/- LESS : GROSS PROFIT DECLARED BY ASSESSEE RS.21,76 ,212/- DIFFERENCE RS.5,58,821/- ACCORDINGLY AN ADDITION OF RS.5,58,821/- IS MADE TO THE RETURNED INCOME OF THE ASSESSEE ON ACCOUNT OF LOW GROSS PROFIT RATE. 24 24. LD. CIT(A) DELETED THE IMPUGNED ADDITION BY PAS SING A WELL-REASONED AND SPEAKING ORDER. THE RELEVANT FIND INGS OF THE LD. CIT(A) ARE REPRODUCED HEREUNDER : I HAVE PERUSED THE RIVAL SUBMISSIONS AND ACCORDING LY FIND THAT THE ASSESSEE HAS FILED THE REPORT ON THE BASIS OF AUDITED ACCOUNTS AND THE SALES OF THE ASSESSEE HAVE INCREASED SUBSTANTIALLY DURING THE YEAR UNDER CONSIDERATION AND ALL THE SALES AND PURCHASES ARE D ULY VOUCHED. LAST YEAR, THE SALES WERE TO THE TUNE OF RS.76,51,900/- AND THIS YEAR, THE SALES HAVE ALMOST DOUBTED AND THEY ARE TO THE TUNE OF RS.1,65,79,474/ - MEANING THEREBY THERE HAS BEEN INCREASE IN THE SALE TO THE TUNE OF RS.89,27,574/-. THE ASSESSEE HAS ALSO FILED BEFORE ME THE CHART SHOWING THE DECREASE IN THE SALE RATES OF THE MAJOR ITEMS AS COMPARED TO THE PREVIOUS YEAR AND ALSO A CHART H AS ALREADY BEEN FILED THAT THE PURCHASE RATE OF RAW MA TERIAL HAVE INCREASED AS COMPARED TO EARLIER YEAR AND WHIC H HAS RESULTED INTO THE LOW GROSS PROFIT. BESIDES THA T I FIND THAT THERE HAS BEEN VERY SUBSTANTIAL INCREASE IN TH E SALES WHICH COULD NOT HAVE BEEN ACHIEVED WITHOUT SE LLING THE GOODS AT A COMPETITIVE RATE. THE AO IN HER REMA ND REPORT HAS NOT BEEN ABLE TO REBUT SUCH EVIDENCE AS FORWARDED TO HER FOR VERIFICATION/COMMENT. BESIDES THAT FOR ASSESSMENT YEAR 2006-07 ON THE BASIS OF SAME FACTS AND CIRCUMSTANCES, THE GROSS PR OFIT RATE OF 10.70% HAS BEEN ACCEPTED BY THE DEPARTMENT U/S 154(3) AND COPY OF THE SAME HAS BEEN PLACED BEFORE ME AND THE ASSESSEE IS CARRYING ON THE SAME BUSINESS A S IN THE EARLIER YEAR AND, THEREFORE, TAKING INTO CONSID ERATION ALL THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE CASE LAWS AS RELIED UPON BY THE ASSESSEE'S REPRESENTATIV E, I HEREBY CONFIRM THE ADDITION OF RS.50,000/- TO COVER ANY LEAKAGE OF PROFIT AND WHICH ACCORDING TO ME WOULD M EET 25 THE ENDS OF JUSTICE AND THE SAME BALANCE ADDITION O F RS.5,08,821/- IS DELETED. 25. THE AO SUBSTITUTED HIS OWN VERSION IN PLACE OF BOOK VERSION DISCLOSED BY THE ASSESSEE, WITHOUT REJECTIO N OF BOOKS OF ACCOUNT. THE AO FAILED TO BRING ANY CREDIBLE MATER IAL ON RECORD TO JUSTIFY SUCH ADDITION MADE BY HIM. ON TH E OTHER HAND, THE FINDINGS OF THE CIT(A) ARE WELL-REASONED AND BASED ON THE PROPER APPRECIATION OF THE LEGAL AND FACTUAL POSITION, IN THE MATTER. IN VIEW OF THIS, WE DONT FIND ANY INF IRMITY IN THE FINDINGS OF THE CIT(A). HENCE, THE SAME ARE UPHELD . THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 26. GROUND NOS. 3 & 4 ARE GENERAL IN NATURE AND NEED NO SEPARATE ADJUDICATION. 27. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 9 TH SEPT.,2011. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 19 TH SEPT.,2011 POONAM COPY TO: 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE CIT(A), 4. THE CIT 5. THE D.R, INCOME-TAX DEPARTMENT, CHANDIGARH ASSISTANT REGISTRAR, ITAT, CHANDIGARH