M/S Balaji Coal Private Limited, Indore V. THE DCIT-1(1), Indore

ITA 418/IND/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5733 (ITAT-INDORE)
• Duration Of Justice: 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 07-09-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 26-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K G GOYAL
• Keywords: Bogus Share capital; Source of fund; Question of law; Accommodation entries; Onus to prove
• Section: 143(3); 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE .., .., % BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER BALAJI COAL PRIVATE LIMITED, PLOT NO. 69, RATNALOK COLONY, SCHEME NO. 53, BEHIND MPEB POWER HOUSE, INDORE. .. ./ PAN: AACCB8991N VS. DCIT, 1(1), INDORE. / APPELLANT / RESPONDENT / APPELLANT BY SHRI PANKAJ SHAH, CA / RESPONDENT BY SHRI K. G. GOYAL, DR DATE OF HEARING 07.09.2016 DATE OF PRONOUNCEMENT 21.09.2016 .. . / I.T.A. NO. 418/IND/2016 #% % / ASSESSMENT YEAR:2007-08 ITA NO.418/IND/16 BALAJI COAL PVT.LTD. A.Y.2007-08 PAGE 2 OF 23 / O R D E R PER O.P. MEENA, ACCOUTANT MEMEBR. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-I, INDORE [HEREINAFTER REFERRED TO AS THE CIT(A)] DATED 11.02.2016 AND PER TAINS TO ASSESSMENT YEAR 2007-08 AS AGAINST APPEAL DECIDED I N ORDER DATED 29.11.2013 PASSED U/S 271(1)(C) OF DY. CIT, 1 (1), INDORE, 2. THE ONLY GROUND OF APPEAL TAKEN BY THE ASSESSEE RELATES TO CONFIRMATION OF PENALTY U/S 271(1)(C) BY THE LD. CIT(A). 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAS FILED HIS RETURN OF INCOME DECLARING T OTAL INCOME AT RS. 2,54,470/- ON 30.10.2007, WHICH WAS ASSESSED U /S 143(3) ON 21.12.2009 AT RS. 27,54,470/-. THE ENHANC EMENT OF RETURN OF INCOME WAS ON ACCOUNT OF ADDITION FOR RS. 25 LAKHS U/S 68 OF THE ACT. THE AO ALSO INITIATED PENALTY PR OCEEDINGS U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS CLAIMED TO HAVE RECEIVED RS. 25 LAKHS FOR ALLOT MENT OF ITA NO.418/IND/16 BALAJI COAL PVT.LTD. A.Y.2007-08 PAGE 3 OF 23 SHARES FROM M/S. STANDARD DEALERS PRIVATE LIMITED, KOLKATA. TO ASCERTAIN THE GENUINENESS OF THE TRANSACTION, RE FERENCE WAS MADE TO DIRECTOR OF INCOME-TAX, INVESTIGATION KOLKA TA. THE DDIT INVESTIGATION UNIT-(4), KOLKATA, VIDE HIS REPO RT DATED 10.12.2009, HAS INTIMATED THAT THE DIRECTORS OF THE COMPANY OMAX MANAGEMENT SHRI MANOHARLAL NANGALIA IS AN ENTRY OPERATOR. IN A RECENT SEARCH ON 16.09.2009, HIS SON SHRI ARUN NANGALIA AND SHRI MUKESH BANKA HAD GIVEN THEIR STATEMENT THAT THIS COMPANY IS BEING MANAGED BY THEM AND THEY ARE PROVIDING ACCOMMODATION ENTRY THROUGH THESE COMPANIES. ABOVE REPORT WAS FORWARDED TO THE ASSESSEE TO FURNISH ITS COMMENTS. IN RESPONSE, A WRITTEN SUBMISSION HAS BEEN, MADE STATING THAT : THAT THE SHARE APPLICANT OF THE COMPANY AS MENTIONED AT SL.NO. 3 STANDARD DEALERS PRIVATE LIMITED HAS INVESTED RS. 25 LACS TOWARDS SHARE APPLICATION WHEREIN THE REPORT HAS CONFIRMED THE ITA NO.418/IND/16 BALAJI COAL PVT.LTD. A.Y.2007-08 PAGE 4 OF 23 IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE SHARE APPLICANT. THE AMOUNT, RECEIVED FROM THE SAID COMPANY IS THROUGH NORMAL BANKING CHANNEL AND THE TRANSACTION/ENTRY RELATED TO THE APPLICATION MONEY IS ALSO APPEARING IN THE BALANCE SHEET OF THE SAID APPLICANT. THE SOURCE OF THE SHARE APPLICANT IS EXPLAINED AS THE SAME ) HAS BEEN RECEIVED THROUGH BANK, IDENTITY OF THE COMPANY IS ESTABLISHED AND AMOUNT INVESTED FOR SHARE APPLICATIONS ALSO APPEARING IN THE BANK STATEMENT AS WELL AS BOOKS OF ACCOUNT OF THE OF THE COMPANY. IN THE CIRCUMSTANCES THE ONUS TO PROVE THE IDENTITY, GENUINENESS OF THE TRANSACTION AND THEIR WORTHINESS IS ESTABLISHED FROM OUR END. HERE WE DESERVE TO MENTIONED THAT WE HAVE NEITHER BUSINESS RELATION/ TRANSACTION WITH THE SAID COMPANY IS EARLIER YEARS NOR ANY DIRECTOR OF THE ASSESSEE COMPANY HAS ANY BUSINESS INTEREST WITH THE ABOVE COMPANY AND THE SHARE ITA NO.418/IND/16 BALAJI COAL PVT.LTD. A.Y.2007-08 PAGE 5 OF 23 APPLICATION RECEIVED IS IN GENERAL COURSE OF BUSINESS AND THE AMOUNT INVESTED IN OUR COMPANY FOR SHARE APPLICATION HAS ALSO BEEN ACCEPTED BY THE MID COMPANY WHICH IS STANDARD DEALERS PRIVATE LIMITED. ABOVE SUBMISSION IS NOT ACCEPTABLE, THE DEPUTY DIRECTOR OF INCOME TAX (INVESTIGATION) UNIT- 1 (4), KOLKATA HAS REPORTED THAT M/S. STANDARD DEALERS PVT. LTD., KOLKATA, HAS CLAIMED THE RECEIPT OF FUNDS FROM OMAX MANAGEMENT PVT. LTD. WHICH HAS TIMED OUT TO BE -A COMPANY PROVIDING ACCOMMODATION ENTRIES. OBVIOUSLY, THE FUNDS HAVE BEEN CLAIMED AS RECEIVED FROM A COMPANY WHO HAS ., PASSED ON THE ENTRY ONLY AND NOT REAL MONEY, EVEN OTHERWISE ALSO, THE FINANCIAL STATEMENTS OF M/ S STANDARD DEALERS PVT. LTD., KOLKATA ALSO DEPICT TRUE STORY, ITS TOTAL RECEIPT DURING THE SUBJECT PERIOD IS A MEAGER SUM OF RS.3,51,449/ - OUT OF WHICH SALES AMOUNT TO RS.2,250/ - ONLY. VIRTUALLY, NO BUSINESS HAS BEEN ITA NO.418/IND/16 BALAJI COAL PVT.LTD. A.Y.2007-08 PAGE 6 OF 23 CARRIED OUT BY THE COMPANY. THE EXPENSES BOOKED BY THIS COMPANY COMPRISE OF ADMINISTRATIVE EXPENSES ONLY RESULTING INTO BOOK PROFIT OF RS.25,311/ - ONLY. IT CAN BE WELL UNDERSTOOD THAT A COMPANY WHICH DOES NOT EARN INCOME OF A RESPECTFUL FIGURE CAN NOT THINK TO DIVERT ITS FUND TO OTHERS UNLESS IT IS ONLY TO PASS ON THE ENTRY. THIS COMPANY'S BALANCE SHEET ALSO' DEPICTS A PECULIAR PICTURE. ITS FUNDS HAVE BEEN SHOWN AS PARKED IN THE INVESTMENT OF SHARES MAINLY FROM WHICH THERE IS HARDLY ANY INCOME. NOW, WE NEED TO ANALYZE THE ASSESSES CLAIM OF INVESTMENT BY THE ABOVE COMPANY. THE ASSESSEE IS NEW ENTRANT IN THE BUSINESS. IT HAS NO BACKGROUND OF PROSPEROUS BUSINESS IN THE FIELD OF OPERATION. THE INTRODUCTION OF CAPITAL BY THE PROMOTERS OF THE COMPANY IS MEAGER, IT HAS CLAIMED THAT M/S. STANDARD DEALERS PVT. LTD.. KOLKATA HAS CONTRIBUTED TO THE CAPITAL AT A PREMIUM OF NINE TIMES OF THE FACE VALUE OF ITS ITA NO.418/IND/16 BALAJI COAL PVT.LTD. A.Y.2007-08 PAGE 7 OF 23 SHARE, WHICH IS NOT BELIEVABLE. NO PRUDENT PERSON WOULD INVEST AT A HIGH PREMIUM OF THE ABOVE MAGNITUDE UNLESS, THERE IS EARNING POTENTIAL TO A VERY-VERY HIGH FIGURE, WHICH IS A MIRAGE, IN THE PRESENT SCENARIO. CONSIDERING THE PROFIT OF THE ASSESSEE COMPANY, THERE IS HARDLY ANY HOPE OF DISTRIBUTION OF DIVIDEND OF THE RATE OF EVEN SAVING BANK INTEREST. THUS HUMAN APPROACH OF PROBABILITY DOES NOT PERMIT ANYBODY TO BELIEVE THAT SUCH INVEST COULD BE GENUINE. AS REGARDS ASSESSEE'S ARGUMENT THAT THE FUNDS, HAVE BEEN RECEIVED THROUGH NORMAL BANKING CHANNEL, IS CONCERNED, IT IS NOT THE DECIDING FACTOR TO FIND OUT THE GENUINENESS. IT HAS BEEN FURTHER ARGUED THAT THE INVESTMENT APPEAR IN THE BALANCE SHEET OF THE INVESTOR. THIS ARGUMENT IS ALSO OF NO USE TO THE ASSESSEE. IT CAN BE PERCEIVED THAT M/ S STANDARD DEALERS PVT. LTD., KOLKATA HAS CLAIMED RECEIPT OF FUNDS FROM OMAX MANAGEMENT WHICH IS NOTHING BUT AN ITA NO.418/IND/16 BALAJI COAL PVT.LTD. A.Y.2007-08 PAGE 8 OF 23 ENTRY OPERATOR. THUS THE VERY SOURCE OF FUNDS IS FOUND TO BE NOT GENUINE, THEREFORE ENTRIES IN THE BOOKS OF ACCOUNT CAN NOT BE ACCEPTED AS THE BASE FOR ACCEPTING THE EXPLANATION, IN VIEW OF THE DISCUSSION MADE IN THE FOREGOING PARAS, THE SHARE APPLICATION MONEY AMOUNTING TO RS.25,00,000/-, IS ASSESSED U/S 68 OF THE INCOME-TAX ACT. PENALTY U/S 271 (1)(C) IS SIMULTANEOUSLY INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME TO THE ABOVE EXTENT. 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A ), WHO HAS ALSO UPHELD THE FINDINGS OF THE AO. 5. DISSATISFIED WITH THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS FILED THE APPEAL BEFORE THIS TRIBUNAL. THE TRIBUNAL VIDE I.T.A.NO. 366/IND/2012 DATED 30.04.20 13 ALSO UPHELD THE FINDINGS OF LOWER AUTHORITIES. IN VIEW OF THESE FACTS, THE AO REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY PE NALTY U/S 271(1)(C) OF THE ACT SHOULD NOT BE LEVIED. IN RESPO NSE TO WHICH ITA NO.418/IND/16 BALAJI COAL PVT.LTD. A.Y.2007-08 PAGE 9 OF 23 THE ASSESSEE REPLIED THAT THE ASSESSEE HAS FILED AN APPEAL WITH THE HON'BLE HIGH COURT, INDORE, INDORE BENCH, AGAIN ST THE ORDER U/S 143(3) OF THE ACT AND THE SAME HAS BEEN A CCEPTED BY THE HON'BLE HIGH COURT. SINCE THE ADDITION HAS BEE N MADE ON ACCOUNT OF DEBATABLE ISSUE REGARDING SHARE APPLICAT ION MONEY, THEREFORE, IT WAS REQUESTED TO DEFER THE PENALTY PRO CEEDINGS U/S 271(1)(C) OF THE ACT. HOWEVER, THE AO WAS OF TH E VIEW THAT THE CONTENTION OF THE ASSESSEE THAT I.T.A.T., INDOR E BENCH HAD ACCEPTED THE ASSESSEES APPEAL, IT WOULD SUFFICE TO SAY THAT HON'BLE HIGH COURT HAS MERELY ADMITTED THE ASSESSEE S APPEAL. FROM THIS IT FOLLOWS THAT IT WOULD RATHER BE INCORREC T ON THE PART OF THE ASSESSEE TO ASSERT THAT HON'BLE HIGH CO URT OF MADHYA PRADESH HAS DECIDED THE ISSUE IN HIS FAVOUR. THEREFORE, THE AO DID NOT FIND ANY MERIT IN THE ASS ESSEES ARGUMENTS. 6. WITH REGARD TO THE SECOND ARGUMENT OF THE ASSESSEE THAT THE ASSESSEE HAS NOT CONCEALED THE INCOME, THE AO OBSERVED THAT IN VIEW OF THE FACTS DISCUSSED AT LENG TH IN PARA 2.1.1 WITH REGARD TO THE NON-GENUINENESS OF THE SHAR E CAPITAL OF RS. 25 LAKHS AND SUBSEQUENTLY UPHELD BY THE LD. CIT(A), IT IS ITA NO.418/IND/16 BALAJI COAL PVT.LTD. A.Y.2007-08 PAGE 10 OF 23 APPARENT THAT THE ASSESSEE DID FURNISH INACCURATE P ARTICULARS OF ITS INCOME TO THE EXTENT OF RS. 25 LAKHS AND THE REBY CONCEALED THE CORRECT PARTICULARS OF INCOME. WITH R EGARD TO THE CONTENTION OF THE ASSESSEE THAT THE PENALTY PROCEED INGS BE KEPT IN ABEYANCE, THE AO NOTED THAT THERE IS NO PRO VISION IN THE INCOME-TAX ACT, 1961, WHEREBY THE PENALTY PROCEE DINGS, CAN BE KEPT IN ABEYANCE TILL THE DECISION OF THE HO N'BLE HIGH COURT. THEREFORE, THE AO HAS HELD THAT THE ASSESSEE HAS COMMITTED A DEFAULT WITHIN THE MEANING OF PROVISIONS OF SECTION 271(1)(C) OF THE ACT AND, THEREFORE, LIABLE FOR PENALTY IN RESPECT OF CONCEALING THE INCOME AND FURNISHING INA CCURATE PARTICULARS OF HIS INCOME TO THE EXTENT OF RS. 25 L AKHS. ACCORDINGLY, THE AO LEVIED MINIMUM PENALTY OF RS. 1 0 LAKHS. 7. AGGRIEVED WITH THE ORDER, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS ALSO UPHE LD THE LEVY OF PENALTY VIDE PARA 4.2.6, WHICH IS REPRODUCED AS UNDE R :- 4.2.6 IN VIEW OF THE FACTS AS DISCUSSED IN PARA 4.2.2 TO 4.2.4 ABOVE AS REGARDS TO ALL OF THE TEN APPEALS, I FIND THAT THE CONCERNED ITA NO.418/IND/16 BALAJI COAL PVT.LTD. A.Y.2007-08 PAGE 11 OF 23 ASSESSEES HAD BROUGHT IN THEIR OWN UNACCOUNTED MONEY IN THE GARB OF SHARE APPLICATION MONEY THROUGH THE VARIOUS ENTRY PROVIDERS. THE MODUS OPERANDI ADOPTED FOR THE PURPOSE IS VERY COMMON. THE COMPANIES INVOLVED IN THIS MODUS OPERANDI AS ENTRY PROVIDERS EXIST ONLY FOR THE PURPOSE OF PROVIDING ACCOMMODATION ENTRIES TO SUCH ASSESSEES AND FOR THAT THEY CHARGE NORMAL COMMISSIONS. THEY ARE DULY REGISTERED WITH ROC AND ME THE RETURNS OF INCOME ALSO. THE BENEFICIARY ASSESSEES WOULD SUPPORT THEIR CLAIM BASED ON SUCH PAPER DOCUMENTATIONS. THIS IS WHAT HAS BEEN DONE BY THE ASSESSEES IN ALL THESE TEN APPEALS. INSPITE OF THE SHOW CAUSE NOTICES AND SUFFICIENT OPPORTUNITIES, THESE ASSESSEES HAVE PREFERRED NOT TO PRODUCE THE DIRECTORS OF SUCH ENTRY GIVER COMPANIES. THE AVOIDANCE HAS BEEN MADE WITH A SOLE PURPOSE TO ITA NO.418/IND/16 BALAJI COAL PVT.LTD. A.Y.2007-08 PAGE 12 OF 23 PREVENT ME TO CARRY OUT THE DETAILED INQUIRIES IN THE MANNER WHICH I HAD DONE IN THE CONTEXT OF HINDUSTAN CONTINENTAL LTD AND AGRAWAL ROAD CARRIERS LTD WHEREBY I COULD FIND VARIOUS PERSONS WHOM SIMILAR ENTRIES WERE GIVEN AND THE REMEDIAL ACTION COULD BE INITIATED BY THE CONCERNED ASSESSING, OFFICERS. IN THE FACTS OF THE AFORESAID TEN APPEALS, THE RATIO' OF THE DECISION OF HON'BLE SUPREME COURT AS GIVEN IN THE CASE OF LOVELY EXPORTS P LTD DOES NOT APPLY. FOR THIS RELIANCE IS PLACED ONTO THE DECISION OF HON'BLE DELHI HIGH COURT (IN THE CASE OF NOVA PROMOTERS & FINLEASE PVT LTD (SUPRA) ). THE OTHER CASE LAWS RELIED UPON BY THE ASSESSEES ARE ALSO NOT APPLICABLE TO THE FACTS OF THEIR CASES, MORE SO IN VIEW OF THE RATIO' / PRINCIPLE LAID DOWN BY THE HON'BLE DELHI HIGH COURT IN THE SAID CASE [NOVA PROMOTERS & FINLEASE PVT LTD). IN THE FACTS & ITA NO.418/IND/16 BALAJI COAL PVT.LTD. A.Y.2007-08 PAGE 13 OF 23 CIRCUMSTANCES OF THESE CASES, I HAVE APPLIED THE TEST OF 'HUMAN PROBABILITIES'. IT IS NOTED THAT HON'BLE SUPREME COURT IN THE CELEBRATED DECISION IN THE CASE OF CIT VS. DURGA PRASAD MORE. 82 ITR 540(SC), ON PAGE 545 HAS CATEGORICALLY HELD THAT GENUINENESS OF TRANSACTIONS CANNOT BE DECIDED MERELY ON THE BASIS OF RECITALS IN DOCUMENTS AND SAME HAS TO BE EXAMINED IN THE LIGHT OF 'SURROUNDING CIRCUMSTANCES'. THE SAME ANALOGY WAS APPLIED LATER BY HON'BLE SUPREME COURT IN THE CASE OF SUMATI DAYAL VS. CIT 214 ITR 801 (SC) AS ELABORATED ON PAGE 808-809 OF THE REPORT THAT TEST OF' HUMAN PROBABILITIES' HAVE TO BE APPLIED TO JUDGE THE TRUE NATURE OF ANY TRANSACTION. THE SAME VIEW WAS AGAIN REITERATED BY HON'BLE SUPREME COURT, TAKING NOTICE OF THE AFORESAID TWO DECISION, IN THE CASE OF P. MOHAN KALA 291 ITR . 278(SC) ON PAGES 288-289 OF THE REPORT. FURTHER, THERE ITA NO.418/IND/16 BALAJI COAL PVT.LTD. A.Y.2007-08 PAGE 14 OF 23 ARE TWO WELL KNOWN SAYINGS OR PROVERBS WHICH HAVE EVOLVED FROM THE EXAMINATION OF HUMAN NATURE AND CONDUCT OVER A PERIOD OF CENTURIES AND ARE THUS RECOGNIZED AS 'CONVENTIONAL WISDOM' OF UNIVERSAL APPLICATION. SIMILAR PROVERBS EXIST IN MANY' INDIAN LANGUAGES AND EVEN FOREIGN LANGUAGES. THE PROVERBS ARE ' A MAN IS KNOWN BY THE COMPANY HE KEEPS AND BIRDS OF SAME FEATHER FLOCK TOGETHER. IN HINDI , THE NEAR EQUIVALENT IS 'ADDAMI KI PEHCHAN SANGAT SE HOTI HAI'. IF THE TEST OF 'HUMAN PROBABILITIES' IS APPLIED IN THE LIGHT OF THE TWO PROVERB AND FURTHER TEST OF 'SURROUNDING CIRCUMSTANCES' IS APPLIED, THE ONLY LOGICAL CONCLUSION WHICH EMERGES IS THAT SHARE APPLICATION MONEY BROUGHT IN BY ALL THESE ASSESSEES HAS BEEN THEIR OWN UNACCOUNTED MONEY AND THE SAME HAS RIGHTLY BEEN TAXED BY THE AOS U/S.68. IN THIS VIEW OF ITA NO.418/IND/16 BALAJI COAL PVT.LTD. A.Y.2007-08 PAGE 15 OF 23 THE MATTER, IN THE CASE OF THE PRESENT ASSESSEE (I.E. BALAJI COALS P LTD 316/09-10 AY 2007-08), I UPHOLD THE ADDITION OF RS.25,00,000/- ON ACCOUNT OF UNEXPLAINED SHARE CAPITAL / SHARE APPLICATION MONEY. 8. AGGRIEVED WITH THE ABOVE ORDER, THE ASSESSEE HAS FIL ED THIS APPEAL BEFORE US. 9. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADDITION OF RS. 25 LAKHS MADE U/S 68 ON ACCOUNT OF SHARE APPLICATION MONEY RECEIVED FROM THE M/S. STANDARD D EALERS PRIVATE LIMITED IS UNJUSTIFIED AND IS CHALLENGED BE FORE THE JURISDICTIONAL HIGH COURT WHEREIN THE SAME HAS BEEN ADMITTED. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT THE ADDITION IS NOT TENABLE ON THE FOLLOWING RE ASONS AS IDENTITY OF THE INVESTOR COMPANY HAS BEEN PROVED DU E TO FOLLOWING EVIDENCES FURNISHED BY THE ASSESSEE :- (I) AUDITED FINANCIALS OF INVESTORS. (II) PERMANENT ACCOUNT NUMBER DETAILS OF INVESTOR. ITA NO.418/IND/16 BALAJI COAL PVT.LTD. A.Y.2007-08 PAGE 16 OF 23 (III) NBFC REGISTRATION CERTIFICATE OF INVESTOR ISSUED BY RBI. (IV) MASTER DETAILS AS PER ROC (V) COPY OF BANK ACCOUNT OF INVESTOR FROM WHICH INVESTMENT IS MADE. (VI) COPY OF SHARE APPLICATION AND ALLOTMENT FORMS. 10. IT WAS FURTHER ARGUED THAT THE GENUINENESS AND COMMERCIAL RATIONALE OF INVESTMENT IS ESTABLISHED B Y THE FACT THAT THE INVESTOR ACQUIRED THE SHARES OF RS. 10/- A T A PREMIUM OF RS. 90/- PER SHARE AND LATER IN SUBSEQUENT YEAR SOLD THE SHARES AT RS. 120/- EARNING CAPITAL GAINS ON THE TR ANSACTION. THE ONLY BASIS OF ADDITION IS THAT THE SOURCE OF SO URCE OF THE INVESTMENT WAS TAINTED. THE INVESTOR M/S. STANDARD D EALERS PRIVATE LIMITED HAD ENTERED INTO A TRANSACTION WITH M/S. OMAX MANAGEMENT, WHICH WAS STATED TO BE INVOLVED IN ILLEGA L TRANSACTIONS. HOWEVER, TO NO STRETCH OF IMAGINATION , THE ASSESSEE CAN BE MADE TO SUFFER FOR THE CONDUCT OF S OURCE OF SOURCE OF INVESTORS. THE LD. AUTHORIZED REPRESENTA TIVE OF THE ASSESSEE FURTHER SUBMITTED THAT IT IS A SETTLED POS ITION THAT A ITA NO.418/IND/16 BALAJI COAL PVT.LTD. A.Y.2007-08 PAGE 17 OF 23 PERSON CANNOT BE FORCED TO PROVE SOURCE OF SOURCE A S HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. D AULAT RAM RAWATMULL, 87 ITR 349 (S.C.), ANIL RICE MILLS VS. CI T, (2006) 282 ITR 236, DCIT VS. ROHINI BUILDERS, 256 ITR 360, LABH CHAND BOHRA VS. ITO, (2010) 189 TAXMAN 141. 11. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE VEHEMENTLY ARGUED THAT THE QUANTUM APPEAL ON THE IS SUE IS ADMITTED BY THE JURISDICTIONAL HIGH COURT AS SUBSTA NTIAL QUESTION OF LAW. THEREFORE, THE ISSUE AUTOMATICALLY BECOMES DEBATABLE AND IT IS SETTLED LAW THAT NO PENALTY CAN BE LEVIED ON A DEBATABLE ISSUE. IN SUPPORT OF THIS PROPOSITION, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE PLACED RE LIANCE IN THE CASE OF SANTOSH HAZARI, 3 SCC 179 (S.C.), WHEREI N THE HON'BLE SUPREME COURT HAS DEFINED SUBSTANTIAL QUEST ION OF LAW A POINT OF LAW WHICH ADMITS OF NO TWO OPINIONS MAY BE A PROPOSITION OF LAW BUT CANNOT BE A SUBSTANTIAL QUES TION OF LAW. TO BE SUBSTANTIAL, A QUESTION OF LAW MUST BE DEBATAB LE. 12. THE QUANTUM ADDITION HAS BEEN MADE ON PROBABILITIES AND PRESUMPTIONS. INDEED ADDITIONS CAN BE MADE ON PROBABILITIES, BUT IT IS EQUALLY SETTLED THAT NO PE NALTY CAN BE ITA NO.418/IND/16 BALAJI COAL PVT.LTD. A.Y.2007-08 PAGE 18 OF 23 LEVIED ON PREPONDERANCE OF PROBABILITIES. FURTHER R ELIANCE IS PLACED ON FOLLOWING DECISIONS :- A. SHRI JAGJIT SINGH VS. ITO (I.T.A.NO. 536/CHD/2014) B. JAYENDRA G. SONI VS. ITO, (2011) (16 TAXMANN.COM 87). C. DISHMAN PHARMACEUTICALS & CHEMCIALS LIMITED, I.T.A.NO. 1138/AHD/2011. 13. THE PENALTY WAS INITIATED ON THE CHARGE OF FURNISH ING INACCURATE PARTICULARS OF INCOME IN ASSESSMENT ORD ER, HOWEVER, THE SAME IS LEVIED IN PENALTY ORDER ON A C HARGE OF CONCEALING THE INCOME AND FURNISHING INACCURATE PA RTICULARS OF INCOME. IT IS SETTLED LAW THAT BOTH ARE DIFFEREN T CHARGES AND IT IS INCUMBENT ON AO TO CLEARLY SPECIFY THE CHARGE , HOWEVER, IT IS SEEN THAT THE LEVY OF PENALTY IS WITHOUT PROPER A PPLICATION OF MIND WHICH CANNOT SURVIVE IN LAW. RELIANCE IS PLACED ON DECISION OF INDORE BENCH IN THE CASE OF DCIT VS. NE PA LIMITED, (2015) 58 TAXMNN.COM 137, WHICH HAS BEEN APPROVED BY MPHC. ITA NO.418/IND/16 BALAJI COAL PVT.LTD. A.Y.2007-08 PAGE 19 OF 23 14. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUPPORTED THE ORDER OF ITO AND CIT(A). 15. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIALS AVAILABLE ON RECORD AS WELL AS THE ORDERS OF THE LOWER AUTHORITIES. WE FIND THAT THE ASSESSEE HAS CLAIMED TO HAVE RECEIVED SHARE APPLICATION MONEY OF RS. 25 LAKHS. T HE AO DID NOT ACCEPT THE SHARE APPLICATION MONEY AS CLAIMED T O HAVE BEEN RECEIVED FROM M/S. STANDARD DEALERS PRIVATE LI MITED, KOLKATA, ON THE GROUND THAT THE SAID COMPANY WAS ENG AGED IN PROVIDING ACCOMMODATION ENTRIES TO THE BENEFICIARIE S. AS THE DIRECTORS OF OMAX MANAGEMENT COMPANY HAVE ACCEPTED IN THEIR STATEMENT RECORDED DURING THE COURSE OF SEARC H ON 16.09.2009 IN THEIR CASE THAT THEIR COMPANY IS BEIN G MANAGED BY THEM AND THEY ARE PROVIDING ACCOMMODATION ENTRIE S THROUGH THESE COMPANIES. IT IS SEEN THAT M/S. STAND ARD DEALERS PRIVATE LIMITED, KOLKATA HAS CLAIMED RECEIP T OF FUND FROM M/S. OMAX MANAGEMENT, WHICH WAS AN ENTRY PROVIDE R ENTITY. THE ADDITIONS SO MADE BY THE AO WERE CAME TO BE CONFIRMED BY THE LD. CIT(A) AS WELL AS TRIBUNAL. W E FIND THAT HON'BLE M.P. HIGH COURT IN THE CASE OF THE ASSESSEE HAS ITA NO.418/IND/16 BALAJI COAL PVT.LTD. A.Y.2007-08 PAGE 20 OF 23 ADMITTED THE APPEAL OF ASSESSEE VIDE I.T.A.NO. 52 O F 2013 DATED 26.09.2013, ON THE FOLLOWING QUESTIONS OF LAW : - 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE INCOME TAX APPELLATE TRIBUNAL IS RIGHT IN CONFIRMING THE ADDITION OF RS. 25 LACS IN RESPECT OF THE SHARE APPLICATION MONEY RECEIVED FROM M/S. STANDARD DEALERS PRIVATE LIMITED, KOLKATA ? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE ADDITION U/S 68 COULD BE MADE/SUSTAINED IN THE HANDS OF APPELLANT COMPANY IN RESPECT OF THE RECEIPT OF SHARE APPLICATION MONE Y FROM ANOTHER COMPANY ON THE GROUND OF NON- EXISTENCE OF THE INVESTOR COMPANY IN VIEW OF THE PRINCIPLES LAID DOWN BY THE APEX COURT IN THE CASES STELLER INVESTMENTS AND LOVELY EXPORTS PVT.LTD. (SUPRA) ? 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE ANY ADDITION U/S 68 OF THE INCOME-TAX ACT, 1961, COULD BE MADE/SUSTAINED ON ACCOUNT OF ITA NO.418/IND/16 BALAJI COAL PVT.LTD. A.Y.2007-08 PAGE 21 OF 23 LIABILITY OF THE INVESTOR COMPANY TO ESTABLISH/PROV E THE SOURCE OF ITS INVESTMENT IN THE APPELLANT COMPANY AND WHETHER THE APPELLANT CAN BE REQUIRED TO PROVE THE SOURCE OF SOURCE OF THE INVESTMENT IN QUESTION ? 16. WE ALSO FIND THAT THE LD. AUTHORIZED REPRESENTA TIVE OF THE ASSESSEE HAS PLACED RELIANCE IN THE CASE OF SHRI AJAY ENGICON (P) LIMITED VS. ACIT, I.T.A.NO. 93/RAN/201 3 (A.Y. 2004-05) DATED 27.10.2015 AND SINGHAI VIKAS KUMAR J AIN VS. ITO, I.T.A.NO. 231/JAB/2013 (A.Y. 2003-04) DATED 07.04.2016, WHEREIN RELYING IN THE CASE OF SHREE NIR MAL COMMERCIAL LIMITED VS. CIT, 2008-TIOL-426-HIGH COUR T- MUM-IT, WHEREIN IT WAS HELD THAT NO PENALTY U/S 271(1 ) OF THE ACT CAN BE LEVIED WHERE THE INCOME IS ASSESSED U /S 68 OF THE INCOME-TAX ACT, 1961. WE ALSO FIND THAT HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. GULBARGA AND OTHE RS VS. M/S. MANJUNATHA COTTON AND GINNING FACTORY, BELLARY, 201 3-TIOL- 536-HC-KAR-IT, HELD THAT IF THE EXPLANATION OFFERED BY THE ASSESSEE, EVEN THOUGH NOT SUBSTANTIATED, BUT IS FOU ND TO BE ITA NO.418/IND/16 BALAJI COAL PVT.LTD. A.Y.2007-08 PAGE 22 OF 23 BONA FIDE AND ALL FACTS RELATING TO THE SAME AND MA TERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, NO PENALTY COULD BE IMPOSED. SIMILARLY, THE HON'BL E DELHI HIGH COURT IN THE CASE OF CIT VS. LIQUID INVESTMENT LIMITED VIDE ITS ORDER DATED 5.10.2010 IN I.T.A.NO. 240/09 HAS HELD THAT WHERE THE HIGH COURT HAS ACCEPTED THE SUBSTANTI AL QUESTION OF LAW U/S 260A, THIS ITSELF SHOWS THAT THE ISSUE IS DEBATABLE. SIMILARLY, IN THE CASE OF CIT VS. M/S. N AYAN BUILDERS AND DEVELOPERS IN I.T.A.NO. 415/2012 VIDE ORDER DATED 08.07.2014 IT WAS HELD THAT WHEN THE HIGH COURT ADMITS SUBSTANTIAL QUESTION OF LAW ON AN ADDITION, IT BECOM ES APPARENT THAT THE ADDITION IS CERTAINLY DEBATABLE. IN SUCH CIRCUMSTANCES, THE PENALTY CANNOT BE LEVIED U/S 271 (1)(C) OF THE INCOME-TAX ACT, 1961. IN THE LIGHT OF FOREGOING REASONS, WE SET-ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND D ELETE THE PENALTY OF RS. 10 LAKHS AND ALLOW THE GROUND OF APPE AL. ITA NO.418/IND/16 BALAJI COAL PVT.LTD. A.Y.2007-08 PAGE 23 OF 23 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. THE ORDER HAS BEEN PRONOUNCED IN OPEN COURT ON THE 21 ST SEPTEMBER, 2016. SD/- (..) (D.T.GARASIA) JUDICIAL MEMBER SD/- (..) (O.P.MEENA) ACCOUNTANT MEMBER * / DATED : 21 ST SEPTEMBER, 2016. CPU* COPY OF THE ORDER FORWARDED TO : THE ASSESSEE/ PCIT- INDORE/ CIT(A)-I, INDORE, AO/ D R- INDORE BENCH/ GUARD FILE BY ORDER ASSISTANT REGISTRAR OF ITAT, INDORE BENCH