ITO, New Delhi V. LC Fashion Pvt. Ltd, Delhi

ITA 4450/DEL/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6808 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 02-08-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 07-07-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ADESH KR JAIN
• Assessee Lawyers: ANIMA BA RANWAL
• Keywords: Additional evidence; Accommodation entries
• Section: 133(6); 131; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC-II NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER I.T.A .NO.-4 450/DEL/2015 (ASSESSMENT YEAR-2009-10) ITO, WARD-15(1), NEW DELHI. (APPELLANT) VS LC FASHION PVT.LTD., 742/2A, ASHOK GALI, GANDHI NAGAR, DELHI-110035. PAN-AABCL2132Q (RESPONDENT) ASSESSEE BY MS. ANIMA BARANWAL, SR.DR REVENUE BY SH. ADESH KR. JAIN, ADV. ORDER THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AS SAILING THE CORRECTNESS OF THE ORDER DATED 28.04.2015 OF CIT(A)-V, NEW DELHI P ERTAINING TO 2009-10 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. C1T(A) HAS ERRED IN DELETING THE ADDITION OF RS.40, 80,000/- MADE U/S 68 OF THE ACT, AS THE ASSESSEE COMPANY FAILED TO PROVE TH E CREDITWORTHINESS AND GENUINENESS OF THE PARTIES FROM WHOM IT HAS RECEIVE D SHARE APPLICATION MONEY. 2. THAT THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AN D IS NOT TENABLE ON FACTS AND IN LAW. THAT THE GROUNDS OL APPEAL ARE WI THOUT PREJUDICE TO EACH OTHER. 3. THAT THE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO EACH OTHER. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, A MEND OR FOREGO ANY GROUNDS OF APPEAL RAISED ABOVE AT THE TIME OF THE H EARING. 2. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSE SSEE RETURNED AN INCOME OF RS.30,290/-. IT WAS PROCESSED U/S 143(1) AND WAS S UBSEQUENTLY RE-OPENED ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATIO N WING OF THE INCOME TAX DEPARTMENT, NEW DELHI AFTER ISSUANCE OF NOTICE U/S 148 OF THE INCOME TAX ACT, 1961. DATE OF HEARING 02.08.2016 DATE OF PRONOUNCEMENT 01 . 11 .2016 I.T.A .NO.-4450/DEL/2015 PAGE 2 OF 11 THE AO REQUIRED THE ASSESSEE TO EXPLAIN THE RECEIPT OF ACCOMMODATION ENTRIES AMOUNTING TO RS.40,00,000/- FROM THE FOLLOWING PART IES:- CHEQUE DATE FROM COMPANY BANK CHEQUE NO. CHEQUE DAT E AMOUNT 21.04.2008 LOTUS REALCON PVT. LTD. AXIS 120422 21.0 4.2008 5,00,000 21.04.2008 HUMTUM MARKETING P. LTD. AXIS 120202 21 .04.2008 5,00,000 21.04.2008 EAGLE INFRATECH PVT.LTD. AXIS 094043 21 .04.2008 5,00,000 21.04.2008 VICTORY SOFTWARE PVT.LTD. AXIS 094043 21 .04.2008 5,00,000 26.04.2008 AD FIN CAPITAL SERVICES PVT.LTD. AXIS 23 0842 26.04.2008 5,00,000 26.04.2008 MANI MALA DELHI PRO. PVT. LTD. AXIS 0982 97 26.04.2008 5,00,000 26.04.2008 VIRGIN CAPITAL SERVICES PVT.LTD. AXIS 10 2489 26.04.2008 5,00,000 26.04.2008 EURO ASIA MERCANTILE P. LTD. AXIS 22982 5 26.04.2008 5,00,000 2.1. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, T HE AO REQUIRED THE ASSESSEE TO PROVIDE THE DETAILS AND ALSO DIRECTLY SENT NOTICE U /S 133(6) TO THESE PARTIES TO FILE THEIR CONFIRMATION ALONGWITH ITR, BALANCE SHEETS, P&L ACC OUNTS AND BANK STATEMENT IN RESPECT OF TRANSACTIONS AMOUNTING TO RS.40,00,000/- . IN RESPONSE TO THE NOTICE U/S 133(6) CONFIRMATION ALONGWITH BANK STATEMENT, ITR & BALANCE SHEET WERE FILED BY THESE PARTIES. THEREAFTER, THE AO ISSUED SUMMONS U/S 131 REQUIRING THAT THE DIRECTORS BE PRODUCED FOR THEIR PERSONAL DEPOSITION AND ALSO TO FURNISH THE FOLLOWING INFORMATION:- 1. CONFIRMATION ALONGWITH CONFIRMATION ALONGWITH NATU RE AND SOURCE OF TRANSACTION WITH THE ABOVE COMPANY. 2. COPY OF YOUR I.T.RETURN ALONGIWTH COMPUTATION OF IN COME, BALANCE SHEET AND P&L A/C FOR THE AY 2009-10. 3. COPY OF BANK STATEMENT FOR THE PERIOD 01.04.2008 TO 31.03.2009. 4. PERSONAL DEPOSITION ALONGWITH PROOF OF IDENTITY. 2.2. HOWEVER, ON THE SAID DATE, NO ONE APPEARED AND THE ASSESSEE INSTEAD FILED CONFIRMATION FROM THE SAID PARTIES. IN ORDER TO FA CILITATE COMPLIANCE WITH THE REQUIREMENT OF PRODUCING THE DIRECTORS OF THE ABOVE COMPANIES THE AO PROVIDED 5 OPPORTUNITIES. SINCE THESE WERE NOT PRODUCED, THE AO CONCLUDED THAT THE ASSESSEE FAILED TO SUBSTANTIATE ITS CLAIM IN REGARD TO GENU INENESS AND CREDITWORTHINESS OF THE SAID COMPANIES. AS A RESULT THEREOF ADDITION WAS MA DE IN THE HANDS OF THE ASSESSEE. I.T.A .NO.-4450/DEL/2015 PAGE 3 OF 11 3. THE ISSUE TRAVELLED IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE CIT(A) CONSIDERING THE SUBMISSIONS DELETED THE ADDITION. 4. AGGRIEVED BY WHICH, THE REVENUE IS IN APPEAL BEF ORE THE ITAT. 5. THE LD. SR. DR, MS. ANIMA BARANWAL INVITING ATT ENTION TO THE IMPUGNED ORDER SUBMITTED THAT THE FINDING OF THE CIT(A) SUFFERS FR OM VARIOUS LEGAL INFIRMITIES AS HE HAS NOT CARED TO CONSIDER THE EVIDENCES WHICH DEMONSTRA TED THAT THESE WERE DUMMY COMPANIES. FOR THIS SPECIFIC REASON, IT WAS SUBMIT TED THE DEPARTMENT HAD REOPENED THE CASE ON THE BASIS OF INFORMATION FROM THE INVESTIGA TION WING. BY MERELY FILING CONFIRMATIONS FROM THE PARTIES AND ENSURING THAT RE PLIES TO QUERY U/S 133 (6) FROM THE SAID 8 COMPANIES ARE SENT GENUINENESS OF THE TRANSA CTION CANNOT BE SAID TO BE ESTABLISHED NOR CREDITWORTHINESS IS PROVED. THE AR GUMENTS AND SUBMISSIONS ACCEPTED BY THE CIT(A) IT WAS SUBMITTED DO NOT HAVE ANY RELE VANCE AS THE REPEATED DIRECTION TO PRODUCE THE DIRECTORS AND MAKE THEM AVAILABLE FOR P ERSONAL DEPOSITION WAS NOT COMPLIED WITH. ON RECORD IT WAS EMPHASIZED THE ASSE SSING OFFICER HAS ISSUED SUMMONS TO THESE 8 PARTIES ON 24.01.2014 AND THEREAFTER PRO VIDED THE ASSESSEE 4 OR 5 OPPORTUNITIES TO PRODUCE THE DIRECTORS. THE DIRECT ION TO DO SO WAS BASED ON THE REASONING TO VERIFY THE GENUINENESS OF THE TRANSACT IONS WHICH AS PER RECORD EVIDENTLY CONSISTED OF A MERE PAPER TRAIL. DESPITE THIS FACT AND CONCLUSION DRAWN BY THE AO AVAILABLE ON RECORD, THE ASSESSEE DID NOT CHOSE TO PRODUCE THEM CONSCIOUSLY AND MERELY SOUGHT ADJOURNMENTS. IT WAS SUBMITTED THAT IT WAS NEVER STATED THAT THESE PARTIES COULD NOT BE PRODUCED BY THE ASSESSEE AND T HE CIT(A) ON THE OTHER HAND ACCEPTING THE PAPER TRAIL CREATED BY THE ASSESSEE A S GENUINE AND CORRECT GRANTED RELIEF. THE FALLACY OF THE CONCLUSION IT WAS SUBMITTED IS I TSELF SHATTERED BY THE CIT(A) WHO I.T.A .NO.-4450/DEL/2015 PAGE 4 OF 11 ACKNOWLEDGING THE REALITIES THAT MONEY IS TRANSFERR ED FROM BALANCE SHEET TO BALANCE SHEET WITHOUT PAYING ANY TAXES IN THE FORM OF LOAN ON EQUITY REQUIRES THE AOS IN THE CASES OF THESE COMPANIES TO EXAMINE. THE ISSUE IT W AS SUBMITTED HAS BEEN CONSIDERED SUPERFICIALLY BY THE CIT(A) FAILING TO NOTICE THE M ONEY LAUNDERING INDULGED INTO AND BRINGING BLACK MONEY TO BOOKS OF ACCOUNTS BY CLANDE STINE AND DUBIOUS METHODS. THE CIT(A) IT WAS ARGUED HAS NOT CARED TO ADDRESS THE E VIDENCE AND BLINDLY ACCEPTED THE WRITTEN SUBMISSIONS WHICH IS CONTRARY TO THE SETTLE D LEGAL POSITION AS CONSIDERED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS NR PORTFOLIO PVT.LTD. 2014 2 ITOL 68 (DELHI) . READING FROM THE SAID DECISION, IT WAS HER SUBMI SSION THAT WHEN AN ASSESSEE DOES NOT PRODUCE EVIDENCE IT CAN BE PRESUM ED THAT THE ASSESSEE IS TRYING TO AVOID APPEARANCE BEFORE THE ASSESSING OFFICER. IT WAS SUBMITTED IT NECESSARILY CREATES DIFFICULTIES AND PREVENTS ASCERTAINMENT OF TRUE AND CORRECT FACTS AS HAS BEEN HELD BY THE HONBLE HIGH COURT IN PARA 14. INVITING ATTENTION T O THE PARAS 17, 18 AND 19 OF THE SAID DECISION, IT WAS SUBMITTED THAT THE ASSESSEE WAS A PRIVATE LIMITED COMPANY. IN THE FACTS OF THE PRESENT CASE AS CONSIDERED BY THE JUR ISDICTIONAL HIGH COURT IN THE CASE OF NR PORTFOLIO PRIVATE LIMITED ALSO BEING A CLOSELY H ELD COMPANY THE HONBLE COURT HAD EXPRESSED THE VIEW THAT THERE NECESSARILY WOULD BE A PROXIMATE RELATIONSHIP BETWEEN THE PROMOTER DIRECTORS AND THE SHAREHOLDERS AS CLOS ELY HELD COMPANIES USUALLY RECEIVE SHARE CAPITAL SUBSCRIPTIONS FROM FRIENDS AND RELATI VES AND NOT FROM UNRELATED/UNKNOWN THIRD PARTIES/GENERAL PUBLIC. THUS IN ORDER TO ESTA BLISH THE GENUINENESS THE DEPOSITIONS TO ADDRESS THE COMPLETE DETAILS IN REGARD TO ACTUAL BUSINESS UNDERTAKEN AND ENGAGED IN BY THESE COMPANIES AND EXPLAIN HOW AND WHY THESE UN RELATED AND UNCONNECTED THIRD PARTIES DECIDED TO BECOME INVESTORS IN THE ABSENCE OF PUBLIC ISSUE OR ADVERTISEMENT THE I.T.A .NO.-4450/DEL/2015 PAGE 5 OF 11 SPECIFIC PRESENCE OF THEIR DIRECTORS WAS REQUIRED. IN THE SAID BACKGROUND, SPECIFIC RELIANCE WAS PLACED UPON PARAS 18 AND 19 BY THE LD. SR.DR TO SHOW THAT IDENTITY DOES NOT MEAN, MERE MENTIONING OF PAN NUMBER OR ASSESSME NT PARTICULARS AS THE PAN DOES NOT ESTABLISH THE TRUE IDENTITY AS THESE ARE MERE N UMBERS ALLOTTED ON THE BASIS OF APPLICATIONS WITHOUT ACTUAL DE-FACTO VERIFICATION O F THE IDENTITY OR ASCERTAINING ACTIVE NATURE OF BUSINESS ACTIVITY. THUS IN ORDER TO ASCE RTAIN THE IDENTITY AND THE ACTUAL BUSINESS, IT WAS SUBMITTED IT IS NECESSARY THAT EVI DENCES IN SUPPORT OF THE CLAIM BE PLACED ON RECORD. IN THE FACTS OF THE PRESENT CASE, IT WAS HER SUBMISSION THAT REPEATEDLY OPPORTUNITIES HAVE BEEN PROVIDED WHICH HAVE NOT BEE N AVAILED OF AND THE CIT(A) HAS ACCEPTED THE ARGUMENTS WITHOUT ANY ENQUIRY OR CONSI DERING THE FINDINGS ON RECORD. RELIANCE WAS ALSO PLACED UPON THE DECISION OF THE A PEX COURT IN THE CASE OF NAVODAYA CASTLE PRIVATE LTD VS CIT(A) (2015) 56 TAXMANN.COM 18 (SC) WHEREIN UPHOLDING THE FINDING OF THE HONBLE HIGH COURT THE SLP OF THE ASSESSEE HAD BEEN DISMISSED. THE FINDING OF THE HONBLE HIGH COURT T HAT CERTIFICATE OF INCORPORATION, PAN ETC WERE NOT SUFFICIENT FOR THE PURPOSES OF IDENTIF ICATION OF SUBSCRIBER COMPANY WHEN THERE WAS MATERIAL TO SHOW THAT SUBSCRIBER WAS A PA PER COMPANY AND NOT A GENUINE INVESTOR WAS THEREBY UPHELD. ACCORDINGLY IT WAS HER PRAYER THAT THE IMPUGNED ORDER BE SET ASIDE AND THE ADDITION MADE BY THE ASSESSING OF FICER BE UPHELD. 6. THE LD. AR ON THE OTHER HAND, INVITING ATTENTION TO THE IMPUGNED ORDER SUBMITTED THAT ALL THE EVIDENCES WERE AVAILABLE BEF ORE THE AO. DESPITE THE SAME, THE ASSESSING OFFICER INSISTED THE DIRECTORS BE PRODUCE D. IT WAS QUESTIONED BY HIM THAT WHAT CAN THE ASSESSING OFFICER ASK FROM THE DIRECTO RS WHICH WAS NOT AVAILABLE ON RECORD. THE LD. AR WAS REQUIRED TO ADDRESS WHAT IS THE NATURE OF THE ASSESSEES I.T.A .NO.-4450/DEL/2015 PAGE 6 OF 11 BUSINESS. THE LD.AR SUBMITTED THAT THE ASSESSEE IS IN THE FASHION BUSINESS AND IN GARMENTS. THE NATURE OF BUSINESS CONDUCTED BY THE C OMPANIES WHO HAVE APPLIED FOR SHARES, HE WAS UNABLE TO STATE. HE WAS ALSO NOT AB LE TO REFER TO ANY FACT OR REASON IN ORDER TO EXPLAIN WHY THESE COMPANIES CHOSE TO BECOM E SHAREHOLDERS OF THE ASSESSEE. HOWEVER, ON QUERY, IT WAS HIS SUBMISSION THAT THE A SSESSEE MAY NOT BEEN IN A POSITION TO PRODUCE THE DIRECTORS AND THE RELIANCE WAS PLACE D UPON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT & ORS. VS OASIS HOSPITALITIES PVT. LTD. IN ITA NO. 514 OF 2007 AND 2093 OF 2010 DATED 31/01 /2011. RELYING ON THE SAID DECISION, IT WAS HIS SUBMISSION THAT THE ASSES SEE BY PROVIDING IDENTIFICATION AND THE CONFIRMATIONS ALONG WITH THE NECESSARY DETAILS HAS PROVED IDENTITY, GENUINENESS OF THE TRANSACTION, CREDITWORTHINESS WHICH ARE THE INGREDI ENTS OF THE SECTION. APART FROM THAT RELIANCE WAS ALSO PLACED UPON THE DECISION OF THE H ONBLE ALLAHABAD HIGH COURT DATED 11.02.2014 IN THE CASE OF CIT(CENTRAL) VS VACMET PA CKAGING INDIA PRIVATE LIMITED. RELIANCE WAS ALSO PLACED UPON ORDER DATED 07/08/201 5 IN ITA NO. 333/DEL/2015 IN THE CASE OF MODINAGAR ROLLS LTD. VS CIT. ACCORDINGLY IT WAS HIS PRAYER THAT THE IMPUGNED ORDER MAY BE UPHELD. 7. THE LD. SR.DR SUBMITTED THAT DECISIONS RELIED UP ON BY THE LD. AR HAVE NO RELEVANCE. THE RELEVANCE OF RELIANCE PLACED UPON CIT & ORS. VS OASIS HOSPITALITIES PVT. LTD. (CITED SUPRA) IN THE FACTS OF THE PRESENT CASE WAS QUESTIONED IN VIEW OF THE FOLLOWING FINDINGS OF THE HONBLE HIGH COURT:- 45. ORDER OF THE CIT (A) CLEARLY DEMONSTRATES THAT THIS REMAND REPORT WAS SENT TO THE ASSESSEE WHO HAD SUBMITTED HIS REPLY DA TED 10.02.2004, WHICH IS EVEN REPRODUCED IN THE ORDER AND THEREAFTER THE CIT (A) DISCUSSED THE SAME IN THE LIGHT OF CERTAIN DECISION CITED BEFORE HIM A ND CAME TO THE CONCLUSION THAT THE ASSESSEE HAD NOT GIVEN SATISFACTORY EVIDEN CE TO DISCHARGE THE ONUS. I.T.A .NO.-4450/DEL/2015 PAGE 7 OF 11 IT HAD MERELY GIVEN NAMES OF THE PARTIES WITHOUT AN YTHING MORE. THAT WOULD NOT BE SUFFICIENT COMPLIANCE. EVEN THE BANK STATEME NT OF THE ASSESSEE WHICH WAS SUBMITTED HAS NOT. BEEN PROVED. 46. FOR ALL THESE REASONS, WE ARE OF THE VIEW THAT THE ASSESSEE HAD NOT BEEN ABLE TO DISCHARGE THE ONUS PTOMAINE AND ADDITION WA S RIGHTLY MADE. WE, THEREFORE, ANSWER THE QUESTION IN THE NEGATIVE AND DISMISS THIS APPEAL OF THE ASSESSEE. 8. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL AVAILABLE ON RECORD. BEFORE ARRIVING AT A CONCLUSION, IT IS DEEMED APPRO PRIATE TO SET OUT THE FINDING OF THE CIT(A) UNDER CHALLENGE IN THE PRESENT PROCEEDINGS. A PERUSAL OF THE IMPUGNED 5 PAGED ORDER SHOWS THAT IN THE FIRST THREE AND A HALF PAGE S THE WRITTEN SUBMISSIONS OF THE ASSESSEE ARE REPRODUCED CONSIDERING WHICH THE CIT(A ) DELETED THE ADDITION ON THE FOLLOWING REASONING:- MY FINDINGS: I HAVE PERUSED THE ASSESSMENT ORDER, WRITTEN SUBMI SSION AND PAPER BOOK EVIDENCES PRODUCED BY THE AR AND DISCUSSED THE MATT ER WITH HER VERY CAREFULLY. THE AR ARGUED THAT THE ADDITION MADE BY THE AO ON GENUINE SHARE APPLICATION MONEY RECEIVED FROM EIGHT COMPANIES THR OUGH BANKING CHANNEL OF RS 5 LAKHS EACH TREATED AS BOGUS ACCOMMODATION ENTR Y IS NOT PROPER AND JUSTIFIED BY THE ASSESSING OFFICER. THE ASSESSING O FFICER MADE THE ADDITION ON THE GROUND THAT NO INFORMATION WAS RECEIVED FROM TH ESE COMPANIES NOR THEIR DIRECTORS APPEARED FOR PERSONAL DEPOSITION. THE AO PASSED THE ORDER ON 13.03.2014 BUT THE SHARE APPLICANT COMPANIES AND TH EIR DIRECTORS HAVE GIVEN THEIR INFORMATION TO THE AO IN WRITING BEFORE THIS DATE. THE A.O VIDE PARA- 3/PAGE-2 OF HIS ORDER ADMITS THAT APPELLANT COMPANY AND HIS SHARE APPLICANTS, PROVIDED CONFIRMATION, BANK STATEMENT. ITR AND BALA NCE SHEET OF ALL 8 SHARE APPLICANTS. ON FURTHER QUERY ABOUT SOURCES OF INVES TMENT BY THESE SHARE APPLICANTS, THE AR PROVIDED THE FOLLOWING TABLE OF SHARE APPLICANTS BELOW:- IN CONTINUATION OF OUR SUBMISSION AND IN RESPONSE TO THE FURTHER QUERY RAISED REGARDING CREDITWORTHINESS OF THE SUBSCRIBER COMPAN IES BY YOUR HONOR IN PREVIOUS HEARING. I HAVE TO STATE AS UNDER:- THAT ALL THE SUBSCRIBER COMPANIES HAVE VERY GOOD FI NANCIALS AND WERE HAVING VERY IMPRESSIVE MONETARY STATUS AS ON 31/3/2008 PRI OR TO THE SUBSCRIPTION MADE IN, THE APPELLANT COMPANY IN APRIL 2008. I HER EBY PRESENT THE FINANCIAL PICTURE OF THE COMPANIES IN A VERY ILLUSTRATED CHAR T AS ON 31/3/2008 S.N. SUBSCRIBER'S NAME PAID UP CAPITAL R ESERVE& SURPLUS TOTAL WORTH 1. HUMTUM MARKETING P.LTD. 1,94,60,000/- 17, 42,40,000/- 19,37,00,000/- 2. LOTUS REALCON P. LTD. 1,72,40,000/- 15,42,60,000/- 17,15,00,000/- I.T.A .NO.-4450/DEL/2015 PAGE 8 OF 11 3. VICTORY SOFT WARE. P. LTD. 1,92,30,000/- 17,21,88,619/- 19,14,18,619/- 4. EAGLE INFRATECH P.LTD. 1,65,00,000/- 14,76,09,587/- 16,41,09,587/- 5. ADFIN CAPITAL SERVICEP.LTD. 9,48,95,000/- 84,80,70.000/- 94,29,65,000/- 6. EURO ASIA MERCANTILE P.LTD, 4,82,00,000/- 43,29,20,675/- 48,11,20,675/- 7. MANIMALA DELHI PROP,P.LTD 1,89,00,000/- 16,92,00,000/- 18,81,00,000/- 8. VIRGIN CAPITAL SERVICE P.LTD. 1,97,88 ,120/- 16,05,60,000/- 18,03,48,12 0/- ALL THESE SUBSCRIBER COMPANIES WERE HAVING GOOD BAL ANCES IN THEIR RESPECTIVE BANKS AS ON 31/3/2008. THIS SHOULD BE SUFFICIENT TO ESTABLISH THE CREDITWORTHINESS OF THE COMPANIES VERY WELL.' THESE SHARE APPLICANTS HAVE RECEIVED MONEY FROM MA NY MORE COMPANIES IN THEIR BALANCE SHEET AND TRANSFERRED MONEY TO APPLIC ANT INTO HIS BALANCE SHEET AS SHARE APPLICATION MONEY. THUS SOURCES OF INVESTM ENT STANDS EXPLAINED. HENCE THE ADDITION MADE BY A.O U/S 68 AS BOGUS SHAR E APPLICATION MONEY DOES NOT HOLD GOOD. HENCE THE ADDITION OF RS. 40.00 ,000 IN ITS HAND AS BOGUS CASH CREDIT STANDS DELETED. THIS GROUND OF APPEAL I S ALLOWED. THE A.O IS DIRECTED TO SEND THE INFORMATION OR THIS ORDER TO ASSESSING OFFICER OF THESE SHARE APPLICANT COMPANIES FOR FURTHER INVE STIGATION OF THOSE CASES. EVERY RECEIPT OF MONEY CANNOT BE INCOME. MONEY IS T RANSFERRED FROM BALANCE SHEETS TO BALANCE SHEETS WITHOUT PAYING ANY TAXES, IN THE FORM OF LOAN OR EQUITY. THE AOS MAY ENQUIRE INTO ALL THESE POSSIBIL ITIES. THE INFORMATION COLLECTED BY CIT(A) AT HIS LEVEL AR E NOT ADDITIONAL EVIDENCES, IF NOT ENQUIRED BY A.O. SINCE MY FINDINGS ARE BASED O N INFORMATIONS COLLECTED BY ME, THE SOURCES STAND ' SATISFACTORILY EXPLAINED . 9. ON A READING OF THE ABOVE, IT IS SEEN THAT THE L D.CIT(A) HAS NOT CARED TO ADDRESS THE REPEATED OPPORTUNITIES GIVEN TO THE ASSESSEE TO PRODUCE THE DIRECTORS OF THE 8 COMPANIES FOR THEIR DEPOSITION. THIS PATENT AND OB VIOUS SHORTCOMING IN THE FACE OF THE DEPARTMENTAL CASE THAT THESE WERE MERE PAPER COMPAN IES AND THE PAPER TRAIL AVAILABLE TO THE AO BY ITSELF WAS NOT SUFFICIENT AND IN ORDER TO VERIFY GENUINENESS A FURTHER ENQUIRY WAS REQUIRED. OPPORTUNITY WAS PROVIDED TO THE ASSESSEE. NO EFFORT WAS MADE AS PER RECORD BY THE CIT(A) HIMSELF TO EXAMINE THE FACT WHETHER THESE COMPANIES WERE ENGAGED IN GENUINE BUSINESS OR WERE THESE CREATED S OLELY TO LAUNDER BLACK MONEY. THERE IS NO REFERENCE IN ITS ORDER ON THE BUSINESS CONDUCTED BY THESE COMPANIES. DISCUSSION ON FACTS MERELY REFERRING TO PAPER TRAIL CREATED DOES NOT ADDRESS THE ISSUE OF GENUINENESS.THE FACTS/REASONS LEADING THESE PRIVATE LIMITED ALLEGEDLY DUMMY COMPANIES TO INVEST IN THE ASSESSEE WOULD BE THE CR UCIAL ASPECTS FOR DETERMINING THE I.T.A .NO.-4450/DEL/2015 PAGE 9 OF 11 GENUINENESS OF THE TRANSACTIONS. THERE IS NO DISCU SSION ON THE SAID ASPECT BY THE CIT(A) TO SATISFACTORILY CONCLUDE THAT THESE WERE G ENUINE TRANSACTIONS BY THE PRIVATE LIMITED COMPANIES AND NOT A MERE PAPER TRAIL. THE CIT(A) HIMSELF NOTES THAT MONEY IS TRANSFERRED FROM BALANCE SHEETS TO BALANCE SHEETS WITHOUT PAYING ANY TAXES IN THE FORM OF LOAN OR EQUITY AND DIRECTS THAT THE AO MAY ENQU IRE INTO THESE POSSIBILITIES HOWEVER HIMSELF IGNORES THE BENEFIT OF THE ADVISE GIVEN TO THE UNSPECIFIED AOS WHILE DECIDING THE ISSUE BEFORE HIM. NOTWITHSTANDING THE FACT THAT THE DIRECTION GIVEN BY THE COMMISSIONER(APPEALS) TO THE AOS WAS BEYOND HIS JU RISDICTION AND NOT RELEVANT EVEN OTHERWISE FOR DECIDING THE SAME EVEN THEN THE WISDO M OF THE ADVISE GIVEN IS FOUND TO BE NOT FOLLOWED BY HIM. BE THAT AS IT MAY AS FAR A S THE ISSUE FOR CONSIDERATION IN THE PRESENT DEPARTMENTAL APPEAL IS CONCERNED. I AM OF THE VIEW THAT THE IMPUGNED ORDER CANNOT BE UPHELD AS THE FINDING OF THE CIT(A) SUFFE RS FROM FUNDAMENTAL FLAWS OF IGNORING THE FACTS AND EVIDENCES AND THE CONCLUSION IS ARRIVED AT WITHOUT ADDRESSING THE FACTS. THE GENUINENESS OF THE TRANSACTION WITHOUT ADDRESSING THE BUSINESS ALLEGEDLY ENGAGED IN BY THE 8 SHAREHOLDERS COMPANIES AND THE FACTS AND REASONS WHICH LEAD THEN TO INVEST IN THE ASSESSEES BUSINESS CAN NOT BE SAI D TO HAVE BEEN ADDRESSED FOR WHICH PURPOSES THE DIRECTORS WERE REQUIRED TO BE PRODUCED . THESE CRUCIAL AREAS HAVE BEEN LEFT UNADDRESSED. REFERENCE MAY BE MADE TO THE DEC ISIONS OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF NR PORTFOLIO PRIVATE LIMI TED AND THE DECISION OF THE APEX COURT WHEREIN SLP BY THE ASSESSEE AGAINST THE DECIS ION OF THE HONBLE DELHI HIGH COURT IN CIT VS NAVODAYA CASTLES [2014] 367 ITR 306 WAS D ISMISSED IN NAVODAYA CASTLE P.LTD. VS CIT [2015] 56 TAXMANN.COM 18 (SC) UPHOLDI NG THE RULING OF THE HONBLE DELHI HIGH COURT THAT CERTIFICATE OF INCORPORATION PAN ET C. ARE NOT SUFFICIENT FOR THE PURPOSE I.T.A .NO.-4450/DEL/2015 PAGE 10 OF 11 OF IDENTIFICATION OF SUBSCRIBER COMPANY WHEN THERE WAS MATERIAL TO SHOW THAT THE SUBSCRIBER WAS A PAPER COMPANY AND NOT A GENUINE IN VESTOR. IN THE FACTS OF THE PRESENT CASE, I AM OF THE VIEW THAT THE IMPUGNED OR DER CANNOT BE UPHELD. THE DECISIONS RELIED UPON BY THE PARTIES AT THIS STAGE WOULD BE OF NO RELEVANCE AS FIRST THE FACTS NEED TO BE ADDRESSED. NO DOUBT THE INITIAL O NUS PLACED UPON THE ASSESSEE CAN BE SAID TO HAVE BEEN DISCHARGED BY PROVIDING CONFIRMAT IONS, ITRS, BALANCE SHEETS ETC OF THE SAID COMPANIES. HOWEVER IT SHIFTS BACK TO THE ASSESSEE WHEN THE ASSESSEE HAS BEEN REQUIRED TO PRODUCE THE DIRECTORS OF THESE 8 C LOSELY HELD COMPANIES KEEPING IN MIND THE FACT THAT THE ASSESSEE IS A PRIVATE LIMITE D COMPANY WHOSE NATURE OF ACTIVITY NECESSARILY WOULD BE KNOWN TO ONLY ITS CLOSE KNIT C IRCLE OF FRIENDS, RELATIVES AND ASSOCIATES THUS WHAT WERE THE FACTS WHICH PERSUADED THESE 8 SHAREHOLDERS TO MAKE AN INVESTMENT IN SHARES OF THE SAID COMPANY TO THE EXT ENT OF RS.5 LAKH EACH ARE NECESSARY FACTS WHICH ARE REQUIRED TO BE TAKEN INTO CONSIDERA TION AND THE BURDEN WHICH SHIFTS BACK TO THE ASSESSEE IN THE FACTS OF THE PRESENT CA SE IS NOT BE DISCHARGED. WHILE SO HOLDING, IT MAY NOT BE OUT OF PLACE TO NOTE YET AGA IN THAT THE ASSESSEE COMPANY IS A PRIVATE LIMITED COMPANY, THE SHAREHOLDERS ARE ALSO CLAIMED TO BE PRIVATE LIMITED COMPANIES AND THE LD.AR HAS STATED THAT THE ASSESSE E MAY NOT BE IN A POSITION TO PRODUCE THE DIRECTORS OF THE 8 PRIVATE LIMITED COMP ANIES. THE WISDOM OF THE SAID SUBMISSION IS LEFT OPEN TO THE ASSESSEE WHO IS REQU IRED TO PROVE GENUINENESS OF THE TRANSACTIONS. 9.1. ACCORDINGLY, FOR THE REASON GIVEN HEREINABOVE THE IMPUGNED ORDER IS SET ASIDE AND THE ISSUE IS SET ASIDE BACK TO THE FILE OF THE CIT(A) WITH A DIRECTION TO DECIDE THE SAME BY WAY OF A SPEAKING ORDER IN ACCORDANCE WITH LAW ADDRESSING THE FACTS ON I.T.A .NO.-4450/DEL/2015 PAGE 11 OF 11 RECORD. NEEDLESS TO SAY THAT A REASONABLE OPPORTUN ITY OF BEING HEARD SHALL BE GRANTED TO THE ASSESSEE. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALL OWED FOR STATISTICAL PURPOSES THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 01 ST OF NOVEMBER, 2016. SD/- (DIVA SINGH) JUD ICIAL MEMBER *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI