ITO 13(3)(1), MUMBAI V. RAJLAXMI BUILDTECH PVT. LTD., MUMBAI

ITA 4117/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5902 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 05-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Assessee Lawyers: MONI JAIN
• Keywords: Unexplained cash credit; Unexplained expenditure; Share purchase agreement; Principle of natural justice; Source of fund; Deemed to accrue or arise in india; Retrospective amendment; Accommodation entries; Capital receipt; Onus to prove; Retraction
• Section: 69C; 133(6); 195; 131; 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.4117/M/2017 ASSESSMENT YEAR: 2012-13 ITO-13(3)(1), ROOM NO.227, 2 ND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 20 VS. M/S. RAJLAXMI BUILDTECH PVT. LTD., B-801/802, UPPER GOVIND NAGAR, MILLENNIUM GARDEN MALAD(E), MUMBAI 400 097 PAN: AAFCR7723K (APPELLANT) (RE SPONDENT) ITA NO.4123/M/2017 ASSESSMENT YEAR: 2012-13 ITO-13(3)(1), ROOM NO.227, 2 ND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 20 VS. M/S. RAJLAXMI TRADING INDIA PVT. LTD., B-801/802, UPPER GOVIND NAGAR, MILLENNIUM GARDEN MALAD(E), MUMBAI 400 097 PAN: AAFCR5649Q (APPELLANT) (RE SPONDENT) ITA NO.4118/M/2017 ASSESSMENT YEAR: 2012-13 ITO-13(3)(1), ROOM NO.227, 2 ND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 20 VS. M/S. RAJLAXMI GILTEDGE INDIA PVT. LTD., B-801/802, UPPER GOVIND NAGAR, MILLENNIUM GARDEN MALAD(E), MUMBAI 400 097 PAN: AAFCR7291A (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : MS. MONI JAIN, A.R. REVENUE BY : SHRI CHAITANYA ANJARIA, D.R. ITA NO.4117/M/2017 & ORS. M/S. RAJLAXMI BUILDTECH PVT. LTD. & ORS. 2 DATE OF HEARING : 15.11.2018 DATE OF PRONOUNCEMENT : 15.01.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE ABOVE TITLED THREE APPEALS HAVE BEEN PREFERRED BY THE REVENUE AGAINST THE COMMON ORDER DATED 20.03.2017 O F THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER R EFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 2012-13. ITA NO.4123/M/2017 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1. THE ID. CIT (A) HAS ERRED IN DELETING THE ADDIT ION OF RS.2,00,00,000/- ON ACCOUNT OF SHARE PREMIUM/SHARE APPLICATION MONEY /UNEXPLAIN ED CASH CREDIT U/S 68 OF INCOME-TAX ACT, 1961 AND ADDITION OF RS.10,00,000/- BEING 5% OF THE UNEXPLAINED CASH CREDIT VALUE, AS UNEXPLAINED OF EXPENDITURE U/ S 69C OF THE L.T. ACT. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE ID.CIT (A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ALL OR ANY OF THE GROUNDS OF APPEAL WHICH MAY BE NECESSARY. 3. THE FACTS IN BRIEF ARE THAT A SEARCH/SURVEY ACTI ON UNDER SECTION 132/133A OF THE ACT WAS CONDUCTED AT THE RE SIDENTIAL AND BUSINESS PREMISES OF SHRI PRAVIN KUMAR JAIN ON 01.10.2013 BY THE INVESTIGATION WING. DURING THE C OURSE OF SEARCH AND POST INVESTIGATION IT WAS FOUND THAT SHR I PRAVIN KUMAR JAIN ALONG WITH VARIOUS GROUP COMPANIES WAS E NGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES THR OUGH CHEQUES AGAINST THE CASH FROM THE SAID ENTITIES. T HE ASSESSEE WAS ALSO FOUND TO HAVE INDULGED AND AVAILED THE SA ID BOGUS ENTRIES BY WAY OF SUBSCRIPTION OF SHARE CAPITAL ON PREMIUM FROM TWO ENTITIES NAMELY M/S. DUKE BUSINESS PVT. LTD. AN D M/S. ITA NO.4117/M/2017 & ORS. M/S. RAJLAXMI BUILDTECH PVT. LTD. & ORS. 3 VANGUARD JEWELS LTD. OF RS.1,00,00,000/- EACH. THU S THE INVESTIGATION WING PASSED ON THE SAID INFORMATION T O THE AO AND IT IS IN THIS BACKGROUND THE RE-ASSESSMENT PROCEEDI NGS WERE INITIATED AND INQUIRIES WERE CONDUCTED. DURING THE RE- ASSESSMENT PROCEEDINGS THE AO ISSUED NOTICE UNDER S ECTION 133(6) OF THE ACT TO THE SAID ENTITIES IN ORDER TO VERIFY THE SUBSCRIPTION OF SHARE CAPITAL. AFTER INVESTIGATION THE AO FOUND THAT BOTH THESE COMPANIES WERE NOT HAVING ANY NET W ORTH AND HAVE SUFFERED HUGE LOSSES RUNNING INTO CRORES OF RU PEES AND ACCORDINGLY A SHOW CAUSE NOTICE WAS ISSUED TO THE A SSESSEE WHICH WAS RESPONDED BY THE ASSESSEE VIDE LETTER DA TED 09.03.2015 AS REPRODUCED BY THE AO ON PAGE NO.4 OF THE ASSESSMENT ORDER. THEREAFTER, THE AO DISBELIEVED T HE REPLY OF THE ASSESSEE BY GIVING A VERY DETAILED FINDINGS IN PARA 4.5 OF THE ASSESSMENT ORDER RELYING ON VARIOUS CASE LAWS AND F INALLY ADDED THE SAID CAPITAL PLUS SHARE PREMIUM UNDER SECTION 68 OF THE ACT TO THE INCOME OF THE ASSESSEE. BESIDES, THE AO ALS O ADDED COMMISSION PAID TO THE ENTRY PROVIDER AT THE RATE O F 5% WHICH COMES TO RS.10 LAKHS AS UNEXPLAINED EXPENDITURE UND ER SECTION 69C OF THE ACT. 4. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) ALL OWED THE APPEAL OF THE ASSESSEE AFTER CONSIDERING THE REPLY OF THE ASSESSEE FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS B Y OBSERVING AND HOLDING AS UNDER: 16. I HAVE EXAMINED THE CONTENTIONS OF THE APPELLA NT AS WELL AS THE ASSESSMENT ORDER AND THE REMAND REPORT CAREFULLY. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THOUGH THE CONCLUSIONS OF THE INVESTIGATION WI NG HAS BEEN REFERRED TO IN THE ASSESSMENT ORDER, THERE ARE NO SPECIFIC REFERENCE T O THE APPELLANT COMPANY. THERE ARE NO EVIDENCES BROUGHT ON RECORD TO SHOW THAT THE RE IS ANY CASH TRAIL IN RESPECT OF THE AMOUNTS RECEIVED BY THE APPELLANT COMPANY FROM THE INVESTORS. THOUGH THE AO WAS SPECIFICALLY ASKED TO FURNISH SPECIFIC INCRIMIN ATING EVIDENCES, IT IS NOTED THAT THE AO HAS NOT BEEN ABLE TO PIN POINT THE SPECIFIC EVID ENCES RELATING TO APPELLANT ITA NO.4117/M/2017 & ORS. M/S. RAJLAXMI BUILDTECH PVT. LTD. & ORS. 4 COMPANY WHICH WOULD CLEARLY SHOW THAT THE SHARE APP LICATION MONEY HAS BEEN RECEIVED IN LIEU OF CASH. IN THE ASSESSMENT ORDER T HE ASSESSING OFFICER HAS REFERRED TO THE STATEMENT OF SHRI PRAVIN JAIN RECORDED AT TH E TIME OF SEARCH BUT HAS NOT CONSIDERED THE RETRACTION THEREAFTER IN WHICH IT WA S STATED THAT STATEMENT RECORDED AT THE TIME OF SEARCH WAS UNDER UNDUE PRESSURE AND THAT SUCH STATEMENTS HAD BEEN RETRACTED. 17. FROM THE DETAILS FILED AT THE TIME OF ASSESSMEN T PROCEEDINGS, IT IS NOTED THAT FINANCIALS IN RESPECT OF INVESTORS FOR FY 2011-12 H AVE BEEN FILED AND ALSO EXPLAINED BY THE APPELLANT. 18. THE FACT REMAINS THAT THE INVESTOR COMPANIES AR E ASSESSED TO TAX AND HAVE FILED THEIR RETURNS OF INCOME. THE PARTIES HAVE RESPONDED TO THE NOTICES U/S 133(6). THE APPELLANT HAS EXPLAINED THAT IN CASE OF M/S DUKE BU SINESS PVT. LTD. AND VANGUARD JEWELS LTD. , THE LOSS IS ON ACCOUNT OF FOREIGN EXC HANGE LOSSES INCURRED DURING THE YEAR. THE APPELLANT HAS FILED DETAILED EXPLANATION OF SOURCE OF FUNDS OF INVESTOR AND CONTENDED THAT THEY HAVE GENUINE BUSINESS ACTIVITY. THE APPELLANT HAS SUBMITTED THAT NOTICES WERE SERVED ON THE INVESTORS IN ALL CA SES, THEREFORE IT CANNOT BE SAID THAT THE PARTIES DID NOT EXIST AT THEIR ADDRESSES. DOCUMENTARY-EVIDENCES WERE ALREADY FILED BY THE APPELLANT EARLIER IN THE ASSES SMENT PROCEEDINGS. CONFIRMATION LETTERS WITH PAN AND ADDRESS, BANK STATEMENTS OF AP PLICANTS, INCOME TAX RETURN ACKNOWLEDGEMENT, AUDITED ACCOUNTS BALANCE SHEET AND P & L ACCOUNT AND COPY OF SHARE APPLICATION FORM OF THE INVESTOR COMPANIES HA VE BEEN FILED BEFORE THE ASSESSING OFFICER AND ALSO IN THE APPELLATE PROCEED INGS. 19. I DO NOT FIND ANY MERIT IN THE CONTENTION OF TH E APPELLANT THAT THE INVESTMENT BEING A SHARE CAPITAL IS A CAPITAL RECEIPT AND THER EFORE CANNOT BE CONSIDERED AS INCOME IN THE HANDS OF THE APPELLANT. THE CREDITS F ALL WITHIN THE SCOPE OF SECTION 68 WHICH IS A DEEMING PROVISION. SEVERAL CASE LAWS INC LUDING THOSE OF THE APEX COURT AND HIGH COURT HAVE CONSIDERED CREDITS MADE TO CAPI TAL ACCOUNT OF THE ASSESSEE'S TO BE COVERED UNDER THE PROVISIONS OF SECTION 68 AND T HEREFORE DEEMED INCOME. THE RULE FOR APPLICATION OF SECTION 68 IS THAT THE IDEN TITY AND CREDIT WORTHINESS OF THE INVESTOR/LENDER /CREDITOR HAS TO BE ESTABLISHED AND THE GENUINENESS OF THE TRANSACTION HAS TO BE ESTABLISHED. I ALSO DO NOT FI ND MERIT IN THE ARGUMENT THAT MERELY BECAUSE THERE IS A SPECIFIC AMENDMENT TO SEC TION 68 IN RESPECT OF CREDIT IN THE FORM OF SHARE CAPITAL OR SHARE APPLICATION MONE Y IN THE CASE OF PRIVATE COMPANY, REQUIRING THE PERSON IN WHOSE NAME SUCH CR EDIT IS THERE TO EXPLAIN THE NATURE AND SOURCE OF SUCH SUM, WHICH IS BROUGHT ON STATUTE W.E.F. 1.4.2013, HENCE NO SUCH ADDITION U/S 68 CAN BE MADE IN EARLIER YEAR S. THE AMENDMENT ONLY MAKES THE ONUS MORE SEVERE IN SUCH CASES BUT IT IS INCORR ECT TO READ IT AS IF NO SUCH ADDITIONS COULD BE MADE U/S 68 IN RESPECT OF SHARE APPLICATION MONEY IN THE EARLIER ASSESSMENT YEARS. 20. THE APEX COURT UPHELD THE ADDITION U/S 68 IN TH E CASE OF CREDITS AS SHARE CAPITAL IN THE CASE OF N. TARIKA PROPERTY INVEST. (P.) LTD. V. COMMISSIONER OF INCOME- TAX*[2014] 51 TAXMANN.COM 387 (SC) BY DISMISSING TH E SLP FILED BY THE APPELLANT. 21. SECTION 68 CASTS THE INITIAL BURDEN OF PROOF ON THE ASSESSE TO SHOW PRIMA FACIE AND TO EXPLAIN THE NATURE AND SOURCE OF CREDIT FOUN D IN ITS BOOKS. WHEN THE STATUTE ITA NO.4117/M/2017 & ORS. M/S. RAJLAXMI BUILDTECH PVT. LTD. & ORS. 5 PLACES THE BURDEN OF PROOF IN INCOME TAX CASES ON T HE TAX PAYER, IT IS UNDERSTOOD TO BE ONLY THE INITIAL BURDEN. WHEN THE TAX PAYER EXPL AINS THE CREDIT BY PROVIDING EVIDENCE OF IDENTITY, CONFIRMATION AND CREDIT WORTH INESS, THE BURDEN SHIFTS ON THE REVENUE TO SHOW THAT THE EXPLANATION IS NOT SATISFA CTORY OR INCORRECT. IN THE CASE OF CREDIT AS SHARE CAPITAL BY CORPORATE ENTITY, WHOSE EXISTENCE IS SHOWN BY ITS REGISTRATION WITH REGISTRAR OF COMPANIES AND ITS FI LING OF TAX RETURNS, ADVERSE CONCLUSION IS NOT JUSTIFIED MERELY BECAUSE ITS DIRE CTORS ARE NOT PRODUCED PERSONALLY BEFORE THE ASSESSING OFFICER BY THE TAX PAYER. 22. IN THE REMAND PROCEEDINGS ONLY THE LEGAL REQUIR EMENT WAS INDICATED THAT IF ANY STATEMENTS OF THIRD PARTIES ARE TO BE RELIED UPON, OPPORTUNITY FOR CROSS EXAMINATION MUST BE PROVIDED. FURTHER, INSTEAD OF AND OTHER THA N GENERALITIES, THE ASSESSING OFFICER WAS GIVEN AN OPPORTUNITY TO PUT TOGETHER AP PELLANT SPECIFIC EVIDENCE JUSTIFYING THE ADDITION. 23. IT CAN BE SEEN FROM THE OBSERVATION OF THE ASSE SSING OFFICER THAT HE HAS ONLY REFERRED TO THE INFORMATION RELATED TO THE OUTCOME OF SEARCH IN THE CASE OF SHRI PRAVIN KUMAR JAIN GROUP WHO WERE ALLEGEDLY PROVIDIN G ACCOMMODATION ENTRIES BUT THE LD. ASSESSING OFFICER HAS FAILED TO DEMONSTRATE ANY SUCH SPECIFIC EVIDENCE THAT THE APPELLANT HAS IN REALITY OBTAINED ANY ACCOMMODA TION ENTRIES. THERE IS NO DIRECT SPECIFIC MENTION OF THE APPELLANT BY THE DIRECTOR O R KEY PERSONS OF THE INVESTOR COMPANIES. THERE IS NO EVIDENCE OF CASH DEPOSITS LI NKED TO THE INVESTORS. THE ASSESSING OFFICER DID NOT BRING SPECIFIC INCRIMINAT ING EVIDENCE LINKING THE INVESTOR TO THE APPELLANT. THE ONLY LINK IS THAT THE INVESTORS HAVE INVESTED IN APPELLANT COMPANY. THAT THE APPELLANT HAS GIVEN CASH TO THE I NVESTORS IN LIEU OF ENTRY IS MERELY ALLEGED BUT NOT DEMONSTRATED. OPPORTUNITY FO R CROSS EXAMINATION IS NOT PROVIDED TO THE APPELLANT. PAPERS/EVIDENCE FOUND IN THE SEARCH ACTION RAISES PRESUMPTION BUT THE SAME IS AVAILABLE IN THE CASE O F PERSON SEARCHED BUT NOT IN THE CASE OF THIRD PARTIES UNLESS PROVED AND CORROBORATE D. SIMILARLY, RETRACTION MAY BE REJECTED AS MOTIVATED, BUT THE SAME CAN BE CONSIDER ED ONLY AGAINST THE PERSON WHO HAS RETRACTED IN HIS ASSESSMENT. SUCH STATEMENT IN THE CASE OF ANOTHER PERSON LOSES ITS SANCTITY UNLESS OPPORTUNITY OF CROSS EXAMINATIO N IS GRANTED AND /OR IS CORROBORATED WITH OTHER EVIDENCES. WHEN THE INVESTO R COMPANY IS FILING REGULAR RETURN OF INCOME AND THERE IS A TRANSACTION THROUGH BANKING CHANNEL, NO ADDITION CAN BE MADE WITHOUT HAVING ANY CONTRARY OR COGENT E VIDENCES IN POSSESSION. OVER SUCH ISSUE THERE ARE PLETHORA OF JUDGEMENTS TO SUPP ORT THE APPELLANT. SOME OF THEM ARE DISCUSSED HERE BELOW:- '(I) THE HON'BLE SUPREME COURT IN THE CASE OF C IT V/S LOVELY EXPORTS 6 DTK 308 HAS HELD AS UNDER: 'IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHARE HOLDERS WHO'S NAME ARE GIVEN TO THE ASS ESSING OFFICER THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIV IDUAL ASSESSMENTS IN ACCORDANCE WITH LAW BUT IT CANNOT BE REGARDED AS UNDISCLOSED I NCOME OF ASSESSEE COMPANY'. (II) THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V/S CREATIVE WORLD TELEFILMS LTD 333 ITR 100 HAS HELD AS UNDER: ITA NO.4117/M/2017 & ORS. M/S. RAJLAXMI BUILDTECH PVT. LTD. & ORS. 6 'IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHARE HOLDERS WHO'S NAME ARE GIVEN TO THE ASSESSING OFFICER THEN THE DEPARTMENT CAN ALWAYS PROCEED AGAINST THEM AND IF N ECESSARY REOPEN THEIR INDIVIDUAL ASSESSMENTS. HELD, DISMISSING THE APPEAL THAT THERE WAS NO DISPU TE THAT THE ASSESSEE HAD GIVEN THE DETAILS OF NAMES AND ADDRESSES OF THE SHAREHOLD ERS, THEIR PAN/ GIR NUMBERS AND HAD ALSO GIVEN THE CHEQUE NUMBERS, NAME OF THE BANKERS. THE ASSESSING OFFICER OUGHT TO HAVE FOUND OUT THEIR DETAILS THROUGH PAN C ARDS, BANK STATEMENTS. THUS, THE VIEW TAKEN BY THE TRIBUNAL COULD NOT BE FAULTED . (III) THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF CJT VS. ORISSA CORPORATION REPORTED IN 159 JTR 78 (SC) HAS HELD AS UNDER; 'THAT IN THIS CASE THE RESPONDENT HAD GIVEN THE NAM ES AND ADDRESSES OF THE ALLEGED CREDITORS. IT WAS IN THE KNOWLEDGE OF THE REVENUE T HAT THE SAID CREDITORS WERE INCOME-TAX ASSESSEE'S. THEIR INDEX NUMBERS WERE IN THE FILE OF THE REVENUE. THE REVENUE, APART FROM ISSUING NOTICE UNDER SECTION 13 1 AT THE INSTANCE OF THE RESPONDENT, DID NOT PURSUE THE MATTER FURTHER. THE REVENUE DID NOT EXAMINE THE SOURCE OF INCOME OF THE SAID ALLEGED CREDITORS TO F IND OUT WHETHER THEY ARE CREDITWORTHY. THERE WAS NO EFFORT MADE TO PURSUE TH E SO-CALLED ALLEGED CREDITORS. IN THOSE CIRCUMSTANCES, THE RESPONDENT COULD NOT DO AN YTHING FURTHER. IN THE PREMISES, IF THE TRIBUNAL CAME TO THE CONCLUSION THAT THE RES PONDENT HAD DISCHARGED THE BURDEN THAT LAY ON IT, THEN IT COULD NOT BE SAID TH AT SUCH A CONCLUSION WAS UNREASONABLE OR PERVERSE OR BASED ON NO EVIDENCE'. RELIANCE IS ALSO PLACED ON THE FOLLOWING DECISIONS: I. HON'BLE DELHI HIGH COURT IN CASE OF COMMISSIONER OF INCOME TAX V/S. VALUE CAPITAL SERVICES P.LTD. (2008) 307 ITR 334 (DELHI). II. HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE O F COMMISSIONER OF INCOME TAX V/S. GP INTERNATIONAL LTD. (2010) 325 IT R 25 (P&H). III. HON'BLE MADRAS HIGH COURT IN THE CASE OF COMMISSION ER OF INCOME TAX V/S. ELECTRO POLYCHEM LTD (2007) 294 ITR 661 (MAD). IV. HON'BLE RAJASTHAN HIGH COURT IN CASE OF COMMISSIONE R OF INCOME TAX V/S. AKJ GRANITES P.LTD. (2008) 301 ITR 298 (RAJ.) V. HON'BLE DELHI HIGH COURT IN CASE OF COM MISSIONER OF INCOME TAX V/S. OASIS HOSPITALITIES (PVT.) LTD. (2011) 51 DTR 74 (DELHI). SEC. 69 PLACES THE BURDEN OF PROOF ON THE TAX PAYER TO EXPLAIN THE NATURE AND SOURCE OF ANY CREDIT FOUND IN THE BOOKS. BUT, WHEN ASSESSEE PROVES OR SUBMIT THE BASIC INFORMATION LIKE IDENTIFICATION, GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF THE CREDITORS, ONUS IS DISCHARG ED BY HIM AND IF ASSESSING OFFICER DISBELIEVE THE GENUINENESS OF THE SAME, HE HAS TO P ROVE OTHERWISE, MERELY, DOUBTING OR POINTING OUT SOME DISCREPANCY IS NOT THE FOUNDAT ION FOR DISCARDING THE GENUINENESS OF THE DEPOSIT OR SHARE MONEY OR SUBSTA NCE OF THE MATTER, HELD BY THE ITA NO.4117/M/2017 & ORS. M/S. RAJLAXMI BUILDTECH PVT. LTD. & ORS. 7 HON'BLE SUPREME COURT IN THE CASE OF CIT V. GUJARAT HEAVY CHEMICALS LTD. (2002) 256 ITR 795 (SC). IN VIEW OF THE ABOVE THE QUESTION OF MAKING ANY ADD ITION U/S. 68 OF THE ACT DOES NOT ARISE.' 24. FURTHER, HON'BLE JURISDICTIONAL ITAT IN THE CAS E OF ITO-10(2)(3) VS. M/S J.J. MUITITRADEPVT.LTD. ITA NO.2158 & 2159/MUM/2014 ORDE R DATED 11.03.2015 HAS DELETED ADDITIONS ON SIMILAR FACTS. FURTHER, THE HO N'BLE JURISDICTIONAL ITAT IN THE CASE OF M/S S.D.B. ESTATE PVT. LTD. VS ITO-5(3)(2) ITA NO.584/M/2015 HAS DELETED SIMILAR ADDITION MADE U/S 68 OF THE I.T. ACT. THE H ON'BLE ITAT (JAIPUR BENCH) IN THE CASE OF BHARTI SYNTEX LTD. VS. DCIT ITA NOS.172 & 1 73/JP/2010 HAS HELD IN PARA 24.4 AS UNDER:- 24.4 IN THIS CASE ALSO NO CROSS EXAMINATION WAS ALLOWED TO THE ASSESS EE. THEREFORE, ADVERSE INFERENCE CANNOT BE DRAWN ONLY O N THE STATEMENT OF SHRI MUKESH CHOKSI. WE FURTHER NOTED THAT ALL OTHER NECESSARY D ETAILS HAVE BEEN FILED BEFORE AO. AMOUNTS WERE RECEIVED THROUGH ACCOUNT PAYEE CHEQUE. BOTH THE COMPANIES ARE ASSESSED TO TAX IN MUMBAI. CONFIRMATION ALONG WITH COPIES OF SHARE CERTIFICATE, BANK STATEMENT, MEMORANDUM OF ARTICLES, COPY OF SHARE AP PLICATION MONEY, AUDITED BALANCE SHEET AND P&L A/C OF THESE PARTIES WERE FIL ED. THESE ARE SIMILAR DETAILS AS WERE FILED IN CASE OF THREE OTHER COMPANIES FOR ASS T. YR. 2005-06. WE HAVE ALREADY DISPOSED OF THE APPEAL FOR ASST. YR. 2005-06 WHEREB Y WE HAVE HELD THAT THE ASSESSEE HAS DISCHARGED ITS ONUS BY FILING NECESSARY DETAILS AND FURTHER HAVE RELIED ON THE DECISIONS OF HON'BLE SUPREME COURT AND HON'BLE DELH I HIGH COURT ALONG WITH VARIOUS OTHER DECISIONS OF TRIBUNAL AND HAVE HELD THAT ADDI TION CANNOT BE MADE UNDER S.68 IN THE HANDS OF THE ASSESSEE COMPANY. THEREFORE, IN VIEW OF THE SAME REASONING, WE CANCEL THE ENTIRE ADDITION MADE AND CONFIRMED BY TH E LOWER AUTHORITIES HERE ALSO. THE ABOVE DECISION OF JTAT ALSO RELATED TO MR.MUKES H CHOKSI'S CASE OF INVESTMENT IN SHARE APPLICATION MONEY. ON PERUSAL O F ABOVE CASE IT IS CLEAR THAT IF A BOGUS SHAREHOLDER HAS INVESTED THE MONEY AND IF APP ELLANT RECEIVES SUCH MONEY AS SHARE APPLICATION MONEY AND APPELLANT DURING ASSESS MENT PROCEEDINGS PROVIDES THE DETAILS LIKE NAME ADDRESS OF THE CORPORATE ENTITY, PAN NO., ROC NO., THEN JTAT HELD THAT THIS MAY BE REFERRED TO THE CONCERNED A. O. FO R PROCEEDING AGAINST SUCH BOGUS SHAREHOLDERS INSTEAD OF ADDING THE AMOUNT U/S. 68 OF THE I.T. ACT IN THE NAME OF THE COMPANY.' 25. IT IS NOTED THAT NO SPECIFIC INCRIMINATING MATE RIAL LINKING INVESTOR TO THE APPELLANT OR SHOWING THE INVESTMENT TO BE BOGUS IS PROVIDED. ALSO OPPORTUNITY FOR CROSS EXAMINATION ALSO WAS NOT PROVIDED TO THE APPE LLANT. THE ASSESSING OFFICER HAS NOT BEEN ABLE TO BRING ON RECORD ANY DIRECT OR CORR OBORATIVE EVIDENCE THAT THE SHARE APPLICATION MONEY RECEIVED IS UNEXPLAINED AS COVERED U/S 68 EVEN AFTER OPPORTUNITY WAS GIVEN IN THE REMAND PROCEEDINGS. TH E ORIGINAL STATEMENT OF SHRI PRAVEEN JAIN DOES NOT NAME THE APPELLANT SPECIFICAL LY. HE HAS SUBSEQUENTLY RETRACTED EVEN THAT ORIGINAL STATEMENT. IN ANY CASE , IT IS CARDINAL PRINCIPLE OF NATURAL JUSTICE, THAT BEFORE CONCLUSIONS ARE DRAWN AGAINST A PERSON BASED ON STATEMENT OF A THIRD PARTY HE MUST BE ALLOWED AN OPPORTUNITY FOR C ROSS EXAMINATION. THIS HAS NOT BEEN PROVIDED. THERE IS A LIMIT TO THE CAPACITY OR RESPONSIBILITY EXPECTED OF AN ASSESSEE TO PROVE FACTS. THE ASSESSING OFFICER HAS NOT INQUIRED INTO OR REPORTED ON ITA NO.4117/M/2017 & ORS. M/S. RAJLAXMI BUILDTECH PVT. LTD. & ORS. 8 ASSESSMENT IN THE CASE OF THE INVESTOR COMPANIES. I F THE STATEMENTS RECORDED OF SHRI PRAVIN JAIN AND OTHERS (WHICH WERE RETRACTED) ARE IGNORED, THERE IS NO SPECIFIC EVIDENCE CITED BY THE ASSESSING OFFICER IN RESPECT OF THE INVESTOR COMPANIES AND THE APPELLANT WHICH WOULD SHIFT THE BURDEN BACK ON THE APPELLANT U/S 68. THE ASSESSING OFFICER HAS STATED THAT THE APPELLANT HAS NOT DISPR OVED THE FINDINGS OF THE DEPARTMENT. NOW THE QUESTION IS WHAT ARE THE APPELL ANT SPECIFIC FINDINGS THAT HAS TO BE DISPROVED IS NOT SPELT OUT. IN THIS FACT MATRIX, AND THE JUDICIAL DECISIONS COVERING THE SCOPE OF SECTION 68, THE ADDITION MADE OF RS 2,00,00,000/- U/S 68 IN THE CASE OF THE APPELLANT IS DELETED. THE GROUNDS O F APPEAL IN THIS REGARD ARE ALLOWED AS ABOVE. SINCE THERE IS NO EVIDENCE OF MAKING ANY COMMISSION PAYMENTS AND AS A COROLLARY TO THE DECISION IN RESPECT OF AD DITION U/S 68, GROUNDS OF APPEAL IN RESPECT OF ADDITION U/S 69C OF RS 10,00,000/- IS AL SO DELETED. 26. IN THE RESULT, APPEAL IS ALLOWED. 5. THE LD. A.R., AT THE OUTSET, SUBMITTED THAT THE ISSUE OF PROVIDING SO CALLED BOGUS/ACCOMMODATION ENTRIES BY SHRI PRAVIN KUMAR JAIN AND GROUP COMPANIES WAS CONSIDERED BY TH E CO- ORDINATE BENCH OF THE TRIBUNAL IN ITA NO.5954/M/201 6 & ORS. AND THE BENCH HAS TAKEN A VIEW DECIDING THAT ADDITI ON MADE UNDER SECTION 68 OF THE ACT IS WRONG AND THUS DECID ED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE LD. A.R. SUBMITTED THAT IN THE CASE OF THE ASSESSEE ALSO THE ADDITION WAS MADE ON THE BASIS OF SAME INFORMATION AND ALSO RELATED TO THE SAME SEARC H CONDUCTED ON SHRI PRAVIN KUMAR JAIN AND HIS ASSOCIATES AND TH E FACTS ARE QUITE IDENTICAL TO THE FACTS OF THE ABOVE CASE AS D ECIDED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL, THEREFORE, THE S AME SHOULD BE FOLLOWED IN THE CASE OF THE ASSESSEE AND THE APPEAL OF THE REVENUE SHOULD BE DISMISSED. THE LD. A.R. FURTHER SUBMITTED THAT THE LD. CIT(A) WHILE PASSING THE ORDER HAS GON E INTO THE FACTS IN DETAIL AND AFTER ONLY CONSIDERING ALL THE FACTS ON RECORD AND FURNISHING THE EVIDENCES ADDUCED BEFORE THE LD. CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 6. THE LD. D.R., ON THE OTHER HAND, RELIED HEAVILY ON THE ORDER OF AO AND PRAYED BEFORE THE BENCH THAT THOUGH THE I SSUE HAS ITA NO.4117/M/2017 & ORS. M/S. RAJLAXMI BUILDTECH PVT. LTD. & ORS. 9 BEEN DECIDED BY THE CO-ORDINATE BENCH OF THE TRIBUN AL WITH IDENTICAL FACTS IN FAVOUR OF THE ASSESSEE IN ITA NO .5954/M/2016 & ORS. BUT THE FACTS REMAIN THAT SHRI PRAVIN KUMAR JAIN AND HIS ASSOCIATE CONCERNS WERE ENGAGED IN PROVIDING ACCOMM ODATION ENTRIES BY ACCEPTING CASH FROM THE BENEFICIARIES AN D PROVIDING CHEQUE ENTRIES IN RETURN ON COMMISSION BASIS AND T HEREFORE THE ORDER OF LD. CIT(A) SHOULD BE REVERSED AND THAT OF THE AO SHOULD BE RESTORED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD INCLUDING THE IM PUGNED ORDER AND DECISION CITED BY THE LD. A.R. THE FACTS IN BRIEF ARE THAT THE ASSESSEE HAS RAISED SHARE CAPITAL AT A PRE MIUM FROM TWO COMPANIES NAMELY M/S. DUKE BUSINESS PVT. LTD. A ND M/S. VANGUARD JEWELS LTD. OF RS.1 CRORE EACH WHICH WAS AD DED BY THE AO UNDER SECTION 68 OF THE ACT BY TREATING THE ASSE SSEE AS BENEFICIARY OF BOGUS ACCOMMODATION ENTRIES ON THE B ASIS OF INFORMATION RECEIVED FROM DGIT (INV.) MUMBAI. AFTER ISSUING SHOW CAUSE NOTICE TO THE ASSESSEE AND CONSIDERING T HE REPLY FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE A O TREATED THE SAME AS UNEXPLAINED CASH CREDIT UNDER SECTION 6 8 OF THE ACT. THE LD. CIT(A) IN THE APPELLATE PROCEEDINGS HAS PAS SED A VERY DETAILED AND REASONED ORDER ANALYZING THE FACTS ON RECORD PARTY- WISE AND CAME TO CONCLUSION THAT THE SAID INVESTMEN T BY TWO COMPANIES WERE GENUINE AND THE SAID PARTIES HAVE CA PACITY AND CREDITWORTHINESS TO MAKE SUCH INVESTMENTS. WE HAVE PERUSED THE DECISION REFERRED TO BY THE LD. A.R. IN THE CAS E OF SHREE LAXMI ESTATE PVT. LTD. VS. ITO IN ITA NO.5954/M/201 6 A.Y. 2012-13 & ORS. WHEREIN THE CO-ORDINATE BENCH OF THE TRIBUNAL HAS UNDER IDENTICAL FACTS HELD THAT THE ASSESSEE HA S DISCHARGED ITA NO.4117/M/2017 & ORS. M/S. RAJLAXMI BUILDTECH PVT. LTD. & ORS. 10 THE ONUS OF PROVING IDENTITY, GENUINENESS OF THE TR ANSACTION AND CREDITWORTHINESS OF THE PARTIES AND ACCORDINGLY DEL ETED THE ADDITION MADE UNDER SECTION 68 OF THE ACT. THE REL EVANT OPERATIVE PART OF THE DECISION IS REPRODUCED AS UND ER: 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE A O MADE ADDITION TOWARDS UNSECURED LOANS RECEIVED FROM JOSH TRADING COMPANY PVT LTD AND VIRAJ MERCANTILE PVT LTD ON THE BASIS OF INFORMATION RECEIVED FROM I NVESTIGATION WING WHICH REVEALED THAT THE ASSESSEE IS THE BENEFICIARY OF BO GUS ACCOMMODATION ENTRIES PROVIDED BY SHRI PRAVEENKUMAR JAIN THROUGH HIS BOGU S COMPANIES. THE AO HAS MADE ADDITIONS U/S 68 OF THE INCOME-TAX ACT , 1961 ON THE GROUND THAT THOUGH THE ASSESSEE HAS FURNISHED NECESSARY EVIDENCES TO PROVE IDENTITY OF THE PARTIES, BUT FAILED TO ESTABLISH GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF PARTIES IN THE BACKDROP OF CLEAR FINDINGS OF INVESTIGATION WIN G THAT THOSE COMPANIES ARE HAWALA COMPANIES INVOLVED IN PROVIDING ACCOMMODATIO N ENTRIES. THE AO HAS BROUGHT OUT FACTS IN THE LIGHT OF STATEMENT OF SHRI PRAVINKUMAR JAIN DEPOSED BEFORE THE INVESTIGATION WING TO MAKE ADDITION. EXCEPT THI S, THERE IS NO CONTRARY EVIDENCE IN THE POSSESSION OF THE AO TO DISPROVE THE LOAN TR ANSACTIONS FROM JOSH TRADING COMPANY PVT LTD AND VIRAJ MERCANTILE PVT LTD. ON TH E OTHER HAND, THE ASSESSEE HAS FURISHED VARIOUS DETAILS INCLUDING CONFIRMATION LET TERS FROM THE PARTIES, THEIR BANK STATEMENTS ALONGWITH THEIR FINANCIAL STATEMENTS TO PROVE IDENTITY, GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF THE PARTIES. T HE ASSESSEE ALSO FURNISHED EVIDENCES TO PROVE THAT THE PARTIES HAVE RESPONDED TO THE NOTICES ISSUED U/S 133(6) BY AO BY FILING VARIOUS DETAILS. THE ASSESSEE ALSO FILED BANK STATEMENTS TO PROVE THAT THE SAID UNSECURED LOANS HAVE BEEN REPAID IN T HE SUBSEQUENT FINANCIAL YEARS. THEREFORE, WE ARE OF THE VIEW THAT THERE IS NO REAS ON FOR THE AO TO DOUBT THE GENUINENESS OF TRANSACTIONS DESPITE FURNISHING NECE SSARY EVIDENCES INCLUDING THEIR FINANCIAL STATEMENTS, BANK STATEMENTS AND IT RETURN S. 6. THE AO HAS MADE ADDITION U/S 68 OF THE ACT, ON T HE GROUND THAT THE UNSECURED LOANS ARE BOGUS ACCOMMODATION ENTRIES PROVIDED BY S HRI PRAVINKUMAR JAIN THROUGH HIS HAWALA COMPANIES. THE PROVISIONS OF SECTION 68 DEAL WITH CASES WHERE ANY SUM FOUND CREDITED IN THE BOOKS OF ACCOUNT OF THE ASSES SEE IN ANY FINANCIAL YEAR AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION O F THE AO, SATISFACTORY, THEN SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INC OME OF THE ASSESSEE OF THAT PREVIOUS YEAR. A PLAIN READING OF SECTION 68 MAKES IT CLEAR THAT THE INITIAL BURDEN OF PROOF LIES ON THE ASSESSEE. IT IS WELL SETTLED LEGA L POSITION THAT THE ASSESSEE HAS TO DISCHARGE 3 MAIN INGREDIENTS IN ORDER TO DISCHARGE THE INITIAL BURDEN OF PROOF, I.E. THE IDENTITY OF THE CREDITOR, THE GENUINENESS OF TR ANSACTION AND CREDITWORTHINESS OF THE CREDITORS. ONCE THE ASSESSEE DISCHARGES INITIAL BURDEN PLACED UPON HIM, THEN THE BURDEN TO DISPROVE THE SAID CLAIM SHIFTS UPON T HE AO. IN THIS CASE, THE ASSESSEE HAS DISCHARGED HIS ONUS CAST U/S 68 BY FILING IDENT ITY OF THE CREDITORS, GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF THE PARTIES WH ICH IS EVIDENT FROM THE FACT THAT THE ASSESSEE HAS FURNISHED FINANCIAL STATEMENTS OF THE CREDITORS WHEREIN THE SAID TRANSACTION HAS BEEN DISCLOSED IN THE RELEVANT FINA NCIAL YEARS. WE FURTHER NOTICE ITA NO.4117/M/2017 & ORS. M/S. RAJLAXMI BUILDTECH PVT. LTD. & ORS. 11 THAT THE ASSESSEE ALSO FILED FINANCIAL STATEMENTS O F THE CREDITORS WHICH ARE ENCLOSED IN PAPER BOOK FILED. ON PERUSAL OF THE FINANCIAL ST ATEMENTS FILED BY THE ASSESSEE, WE FIND THAT BOTH THE COMPANIES ARE ACTIVE IN THE WEBS ITE OF MINISTRY OF CORPORATE AFFAIRS. THIS FACT HAS BEEN FURTHER SUPPORTED BY TH E LETTER OF AO WHEREIN THE AO HAS ACCEPTED THAT BOTH COMPANIES, VIZ. JOSH TRADING COM PANY PVT LTD AND VIRAJ MERCANTILE PVT LTD ARE ACTIVE IN MCA WEBSITE. WE FU RTHER NOTICE THAT BOTH THE COMPANIES HAVE FILED FINANCIAL STATEMENTS FOR THE Y EAR ENDING 31-03-2006. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE A SSESSEE HAS DISCHARGED ITS INITIAL BURDEN CAST U/S 68 BY FILING IDENTITY, GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF THE PARTIES. ONCE, THE ASSESSEE HAS DISCHARGED ITS INITIAL BURDEN, THE BURDEN SHIFTS TO THE AO TO PROVE OTHERWISE. IN THIS CASE, THE AO MADE ADDITION ONLY ON THE BASIS OF INFORMATION RECEIVED FROM INVE STIGATION WING, BUT NOT BASED ON ANY EVIDENCE TO DISPROVE THE LOAN TRANSACTION FROM ABOVE COMPANIES ARE INGENUINE. THEREFORE, WE ARE OF THE VIEW THAT THERE IS NO REASON FOR THE AO TO TREAT LOANS FROM ABOVE 2 COMPANIES AS UNEXPLAINED CREDITS U/S 68 OF THE ACT. 7. COMING TO THE CASE LAWS RELIED UPON BY THE ASSES SEE, THE ASSESSEE HAS RELIED UPON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN T HE CASE OF CIT VS GAGANDEEP INFRASTRUCTURE PVT LTD (2017) 394 ITR 680 (BOM). WE HAVE GONE THROUGH THE CASE LAWS RELIED UPON BY THE ASSESSEE IN THE LIGHT OF TH E FACTS OF THE PRESENT CASE AND FIND THAT THE HON'BLE HIGH COURT CATEGORICALLY OBSE RVED THAT THE PROVISO TO SECTION 68 HAS BEEN INSERTED BY THE FINANCE ACT , 2012 WEF 01-04- 2013 IS APPLICABLE FROM AY 2013-14 ONWARDS. THE COURT FURTHER OBSERVED THAT THE PARLIAMENT DID NOT INTRODUCE THE PROVISO TO SECTION 68 WITH RETROSPECTIVE EFFECT NOR DOES THE PROVISO INTRODUCED STATES THAT IT WAS INTRODUCED FOR REMOVA L OF DOUBTS. THEREFORE, IT IS NOT OPEN TO GIVE RETROSPECTIVE EFFECT. THE RELEVANT POR TION OF THE ORDER OF HIGH COURT IS EXTRACTED BELOW:- 'THE PROVISO TO SECTION 68 HAS BEEN INTRODUCED BY T HE FINANCE ACT , 2012 WITH EFFECT FROM 1-4-2013. THUS, IT WOULD BE EFFECT IVE ONLY FROM THE ASSESSMENT YEAR 2013-14 ONWARDS AND NOT FOR THE SUB JECT ASSESSMENT YEAR. IN FACT, BEFORE THE TRIBUNAL, IT WAS NOT EVEN THE C ASE OF THE REVENUE THAT SECTION 68 AS IN FORCE DURING THE SUBJECT YEARS HAS TO BE REA D/UNDERSTOOD AS THOUGH THE PROVISO ADDED SUBSEQUENTLY EFFECTIVE ONL Y FROM 1-42013 WAS ITS NORMAL MEANING. THE PARLIAMENT DID NOT INTRODUCED T O PROVISO OF SECTION 68 , WITH RETROSPECTIVE EFFECT NOR DOES THE PROVISO TO INTRODUCED STATES THAT IT WAS INTRODUCED 'FOR REMOVAL OF DOUBTS' OR THAT I T IS 'DECLARATORY'. THEREFORE, IT IS NOT OPEN TO GIVE IT RETROSPECTIVE EFFECT, BY PROCEEDING THE BASIS THAT THE ADDITION OF THE PROVISO TO SECTION 6 8 IS IMMATERIAL AND DOES NOT CHANGE THE INTERPRETATION OF SECTION 68 BOTH BEFORE AND AFTER THE ADDING OF THE PROVISO. IN VIEW OF THE MATTER THE THREE ESSENTIAL TESTS WHI LE CONFIRMING THE SECTION 68 LAID DOWN BY THE COURT NAMELY THE GENUINENESS OF T HE TRANSACTION, IDENTITY AND THE CAPACITY OF THE INVESTOR HAVE ALL BEEN EXAMINED BY THE IMPUGNED ORDER OF THE TRIBUNAL AND ON FACT IT WAS F OUND SATISFIED. FURTHER IT WAS A SUBMISSION ON BEHALF OF THE REVENUE THAT SUCH LARGE AMOUNT OF SHARE PREMIUM GIVES RISE TO SUSPICION ON THE GENUINENESS (IDENTITY) OF THE SHAREHOLDERS, I.E., THEY ARE BOGUS. THE APEX COURT IN A CASE IN THIS CONTEXT TO THE PRE- AMENDED SECTION 68 HAS HELD THAT WHERE THE REVENUE URGES THAT ITA NO.4117/M/2017 & ORS. M/S. RAJLAXMI BUILDTECH PVT. LTD. & ORS. 12 THE AMOUNT OF SHARE APPLICATION MONEY HAS BEEN RECE IVED FROM BOGUS SHAREHOLDERS THEN IT IS FOR THE INCOME-TAX OFFICER TO PROCEED BY REOPENING THE ASSESSMENT OF SUCH SHAREHOLDER AND ASSESSING TH EM TO TAX IN ACCORDANCE WITH LAW. IT DOES NOT ENTITLE THE REVENUE TO ADD TH E SAME TO THE ASSESSEE'S INCOME AS UNEXPLAINED CASH CREDIT.' [PARA 3] 8. THE ASSESSEE HAS ALSO RELIED UPON THE DECISION O F HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS ARCHID INDUSTRIES PVT LTD IN ITA NO1433/MUM/2014 DATED 5TH JULY, 2017. THE HON'BLE BOMBAY HIGH COURT, AFTER CO NSIDERING RELEVANT FACTS AND ALSO BY FOLLOWING JUDGEMENT IN THE CASE OF CIT VS GAGANDEEP INFRASTRUCTURE PVT LTD (SUPRA) HELD AS UNDER:_ 6] THE TRIBUNAL HAS CONSIDERED THAT THE ASSESSEE HA S PRODUCED ON RECORD THE DOCUMENTS TO ESTABLISH THE GENUINENESS OF THE P ARTY SUCH AS PAN OF ALL THE CREDITORS ALONG WITH THE CONFIRMATION, THEIR BA NK STATEMENTS SHOWING PAYMENT OF SHARE APPLICATION MONEY. IT WAS ALSO OBS ERVED BY THE TRIBUNAL THAT THE ASSESSEE HAS ALSO PRODUCED THE ENTIRE RECO RD REGARDING ISSUANCE OF SHARE I.E. ALLOTMENT OF SHARES TO THESE PARTIES, TH EIR SHARE APPLICATION FORMS, ALLOTMENT LETTERS AND SHARE CERTIFICATES, SO ALSO T HE BOOKS OF ACCOUNT. THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT OF THESE PERSONS DISCLOSES THAT THESE PERSONS HAD SUFFICIENT FUNDS IN THEIR ACCOUNT S FOR INVESTING IN THE SHARES OF THE ASSESSEE. IN VIEW OF THESE VOLUMINOUS DOCUMENTARY EVIDENCE, ONLY BECAUSE THOSE PERSONS HAD NOT APPEARED BEFORE THE ASSESSING OFFICER WOULD NOT NEGATE THE CASE OF THE ASSESSEE. THE JUDG MENT IN CASE OF GAGANDEEP INFRASTRUCTURE (P) LTD (SUPRA) WOULD BE A PPLICABLE IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE.' 9. THE ASSESSEE HAS ALSO RELIED UPO THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS LOVELY EXPORTS PVT LTD (2008) 216 CTR 195 (SC). THE HON'BLE APEX COURT WHILE DELETING THE ADDITION MADE U/S 68 OBSER VED THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPA NY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN A CCORDANCE WITH LAW, BUT THIS AMOUNT OF SHARE APPLICATION MONEY CANNOT BE REGARDE D AS UNDISCLOSED INCOME U/S 68 OF THE INCOME-TAX ACT , 1961. 10. COMING TO THE CASE LAWS RELIED UPON BY THE LD.D R. THE LD.DR RELIED UPON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF PRINCIPAL CIT VS BIKRAM SINGH IN ITA NO.55/DEL/2017 DATED 25-03-2017. WE HAVE GONE T HROUGH THE CASE LAW RELIED BY THE LD.DR IN THE LIGHT OF FACTS OF THE PRESENT C ASE AND FIND THAT THE FACTS OF CASE BEFORE HON'BLE DELHI HIGH COURT ARE ENTIRELY DIFFER ENT FROM FACTS OF THE PRESENT CASE. THE HON'BLE DELHI HIGH COURT, HAS CONSIDERED THE FACT THAT THE INDIVIDUALS, WHO ADVANCED LOANS HAD NO FINANCIAL STRENGTH TO LEN D SUCH HUGE SUM OF MONEY TO THE ASSESSEE, THAT TOO, WITHOUT ANY COLLATERAL SECU RITY WITHOUT INTEREST AND WITHOUT A LENDER AGREEMENT. UNDER THESE FACTS, THE HON'BLE COURT HELD THAT MERE ESTABLISHING OF THEIR IDENTITY AND THE FACT THAT TH E AMOUNTS HAVE BEEN TRANSFERRED THROUGH CHEQUE PAYMENT DOES NOT BY ITSELF MEAN THAT THE TRANSACTIONS ARE GENUINE. IN THIS CASE, THE ASSESSEE HAS FURNISHED ALL EVIDEN CES AND ALSO THE PARTIES PERSONALLY RESPONDED TO THE NOTICES ISSUED BY THE AO U/S 133(6 ) BY FILING VARIOUS DETAILS, ITA NO.4117/M/2017 & ORS. M/S. RAJLAXMI BUILDTECH PVT. LTD. & ORS. 13 THEREFORE, CASE LAW RELIED UPON BY THE LD.DR CANNOT BE APPLICABLE TO THE FACTS OF THE PRESENT CASE. 11. IN THIS VIEW OF THE MATTER AND CONSIDERING THE RATIO OF THE CASE LAWS DISCUSSED ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSES SEE HAS DISCHARGED IDENTITY, GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF THE PARTIES. THEREFORE, THERE IS NO REASON FOR THE AO TO MAKE ADDITION TOWARDS LOAN U/S 68 OF THE ACT. HENCE, WE DIRECT THE AO TO DELETE ADDITION MADE TOWARDS LOANS ALONGWITH INTEREST U/S 68 OF THE ACT. 8. SINCE IN THE PRESENT CASE ALSO THE ASSESSEE HAS PROVED ALL THE THREE CONDITIONS/INGREDIENTS WHICH ARE REQUIRED TO BE FULFILLED SUCH AS GENUINENESS, CREDITWORTHINESS AND IDENTITY OF THE INVESTORS AND THEREFORE THE ADDITION AS MADE UN DER SECTION 68 BY THE AO IS NOT CORRECT. WE ARE FULLY IN AGREE MENT WITH THE CONCLUSION DRAWN BY THE LD. CIT(A) REVERSING THE OR DER OF AO BY HOLDING THAT ALL THE THREE INGREDIENTS WERE DULY SP ECIFIED. THEREFORE, WE DO NOT FIND ANY REASON TO DEVIATE FRO M THE FINDING AS GIVEN BY THE LD. CIT(A) ACCORDINGLY WE UPHOLD TH E ORDER OF LD. CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 9. SINCE WE HAVE UPHELD THE ORDER OF LD. CIT(A) ON THE ISSUE OF DELETION OF ADDITION MADE UNDER SECTION 68 OF THE A CT THE OTHER GROUND RAISED BY THE DEPARTMENT AGAINST THE DELETIO N OF RS.10 LAKHS BY LD. CIT(A) BEING 5% OF UNEXPLAINED CASH CR EDIT AS MADE BY THE AO UNDER SECTION 69C AS UNEXPLAINED EXPENDIT URE IS ALSO ORDERED TO BE DELETED AS THE SAME DOES NOT SURVIVE AT ALL. ITA NO.4117 & 4118/M/2010 9. THE ISSUE RAISED IN THESE APPEALS ARE IDENTICAL AS DECIDED BY US IN ITA NO.4123/M/2017 A.Y. 2012-13 WHEREIN WE HAVE DISMISSED THE APPEAL OF THE REVENUE BY UPHOLDING TH E ORDER OF LD. CIT(A). THEREFORE, OUR DECISION IN ITA NO.4123 /M/2017 ITA NO.4117/M/2017 & ORS. M/S. RAJLAXMI BUILDTECH PVT. LTD. & ORS. 14 WOULD, MUTATIS MUTANDIS, APPLY TO THESE APPEALS AS WELL. ACCORDINGLY, THE APPEALS OF THE REVENUE ARE DISMISS ED. 10. IN THE RESULT, ALL THE THREE APPEALS OF THE REV ENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15.1.2019. SD/- SD/- (MAHAVIR SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 15.1.2019. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.