ITO 10(3)(3), MUMBAI V. SAFARI FOODS P. LTD, MUMBAI

ITA 4454/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62290 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2003-2004
• Appeal Filed On: 02-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANSIH KANOJIA
• Keywords: Additional evidence; Capital receipt; Onus to prove
• Section: 143(3); 131; 68; 69; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI P.M.JAGTAP (A.M) & SHRI N.V.VASUDEVAN( J.M) ITA NO. 4454/MUM/11(A.Y.2003-04) THE ACIT 10(3), 451, AAYKAR BHAVAN, 4 TH FLOOR, MK MARG, MUMBAI 400 020. (APPELLANT) VS. M/S. SAFARI FOODS PVT. LTD., 511, MARATHON MAX. , LBS MARG, LINK ROAD, JUNCTION, MULUND (W), MUMBAI - 400 080. PAN: AACCS 7667Q (RESPONDENT) APPELLANT BY : SHRI MANSIH KANOJIA RESPONDENT BY : NONE DATE OF HEARING : 09/04/2012 DATE OF PRONOUNCEMENT : 1 3/04/2012 ORDER PER N.V.VASUDEVAN, J.M THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDE R DATED 1/3/2011 OF CIT(A)-22, MUMBAI RELATING TO ASSESSMENT YEAR 2003- 04. GROUND NO.1 RAISED BY THE ASSESSEE READS AS FOLLOWS: 1. (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO OF AN AMOUNT OF RS. 14,67,066/- U/S. 41(1) BEING THE DIFF ERENCE BETWEEN SALES TAX LIABILITY AND THE NET VALUE PAID UNDER A SCHEME OF GOVERNMENT OF MAHARASHTRA. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE AMOUNT OF RS. 14,67,066/- SHOULD HAVE BEEN TAXED U/ S. 28(IV) OF THE IT ACT. 2. THE FACTS OF CASE ARE THAT THE ASSESSEE COMPANY HAD FILED ITS RETURN OF INCOME ON 28/11/2003 DECLARING TOTAL INCOME AT RS. 12,31,370/-. THE RETURN WAS PROCESSED U/S. 143(1) AND THEREAFTER THE ASSESSMENT HAS BEEN ITA NO. 4454/MUM/11(A.Y.2003-04) 2 COMPLETED U/S. 143(3) R.W.S. 147 ON 26/12/2007 DETE RMINING TAXABLE INCOME AT RS. 51,98,430/-. DURING THE YEAR THE ASS ESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF MANUFACTURING OF SNACK F OODS. IN THIS CASE THE AO OBSERVED THAT ASSESSEE WAS ALLOWED DEDUCTION AMO UNTING TO RS. 14,67,066/- OUT OF RS. 21,14,470/- REPRESENTING SAL ES TAX DEFERRED LOAN SCHEME OF GOVERNMENT OF MAHARASHTRA BY PRE-PAYMENT OF RS. 6,47,404/- AS ITS NET VALUE AND THE DIFFERENCE OF RS. 14,67,066/- I.E. (21,14,470 - 6,67,404) HAS BEEN TREATED BY THE ASSESSEE AS CAPIT AL RESERVE IN THE BALANCE SHEET. THE AO FURTHER NOTED THAT SINCE THE AMOUNT OF RS. 14,67,066/- REPRESENTS CESSATION OF LIABILITY U/S. 41(1)(A), TH E SAME WAS REQUIRED TO BE TREATED AS INCOME OF THE ASSESSEE AND TAXED ACCORDI NGLY. THE AO FURTHER NOTED THAT THIS WAS AN INCOME ESCAPING ASSESSMENT, AND HENCE AO RECORDED REASONS AND REOPENED ASSESSMENT U/S. 147 AND ISSUED NOTICE U/S. 148. FOR ELABORATE REASONS GIVEN IN THE ORDER OF ASSESSMENT THE AO TREATED A SUM OF RS. 14,69,066/- AS INCOME OF THE ASSESSEE UNDER SEC TION 41(1) OF THE ACT AND TAXED IT ACCORDINGLY. 3. BEFORE CIT(A) THE ASSESSEE RELIED ON THE JUDGEM ENT OF HONBLE ITAT SPL. BENCH IN CASE OF SULZER INDIA LTD. VS. JCIT, 1 34 TTJ 385 WHEREIN ON SIMILAR FACTS HONBLE ITAT HAVE HELD THAT WHERE SAL ES TAX WAS PAYABLE BY THE ASSESSEE UNDER DEFERRED SCHEME IN THREE INSTALLMENT S A LIABILITY PAYABLE IN FUTURE BUT LATER ON STATE GOVT. CAME WITH A SCHEME BY WHICH IT WAS PROVIDED THAT IF THE DEALER OPTS THEN THEY COULD P AY THE FUTURE LIABILITY AT A DISCOUNTED VALUE OR AT NET PRESENT VALUE IMMEDIATEL Y, AND IN THIS SITUATION IT CANNOT BE CONSTRUED AS REMISSION OF LIABILITY BECAU SE THE STATE GOVT. HAS NOT WAIVED ANY OF THE LIABILITY. ACCORDINGLY, IT WAS H ELD THAT DEFERRED SALES TAX LIABILITY BEING THE DIFFERENCE BETWEEN PAYMENT OF N ET PRESENT VALUE AGAINST THE FUTURE LIABILITY CREDITED BY ASSESSEE UNDER THE CAPITAL RESERVE ACCOUNT IN ITS BOOKS IS A CAPITAL RECEIPT AND CANNOT BE TERMED AS REMISSION/CESSATION OF LIABILITY AND CONSEQUENTLY NO BENEFIT ARISES TO AS SESSEE IN TERMS OF SECTION 41(1). THE CIT(A) WAS OF THE VIEW THAT THE RATIO OF THE JUDGEMENT OF HONBLE ITA NO. 4454/MUM/11(A.Y.2003-04) 3 ITAT SPL. BENCH AS ABOVE SQUARELY APPLIES TO THE CA SE OF THE APPELLANT. FOLLOWING THE SAME, A.O. WAS DIRECTED TO DELETE ADD ITION OF RS. 14,67.066/-. AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENUE HA S RAISED GROUND NO.1 BEFORE THE TRIBUNAL. 4. BEFORE US BOTH THE PARTIES AGREED THAT THE RATI O LAID DOWN BY THE SPECIAL BENCH OF ITAT IN THE CASE OF SULZER INDIA LTD. (SUP RA) WOULD SQUARELY APPLY TO THE FACTS OF THE PRESENT CASE. IN VIEW OF THE A BOVE, WE DO NOT FIND ANY GROUNDS TO INTERFERE WITH THE ORDER OF THE CIT(A). CONSEQUENTLY, GR.NO.1 RAISED BY THE ASSESSEE IS DISMISSED. 5. GROUND. 2 RAISED BY THE REVENUE READS AS FOLLOW S: 2. (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN ADMITTING THE ADDITIONAL EV IDENCES SUBMITTED BY THE ASSESSEE. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION MADE U/S.68 OF THE ACT WITHOUT APPRECIATING THAT THE CREDITWORTHINESS OF THE INVESTORS WAS NOT PROVED BY THE ASSESSEE. 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A.O. OBSERVED THAT ASSESSEE HAS RECEIVED RS.20.00 LAKHS ON ACCOUNT OF SHARE PREMIUM AND RS.5.00 LAKHS ON ACCOUNT OF SHARE CAPITAL ISSUED. T HE ASSESSEE HAD ISSUED 50,000 SHARES OF RS.10/- EACH AT A PREMIUM OF RS.50 /- PER SHARE. THE SHARES WERE ISSUED TO THE FOLLOWING THREE PERSONS: 1. M/S.JATIPURA INVESTMENTS & FINANCE PVT. LTD. 20 ,000 SHARES. 2. M/S.TIPU INVESTMENTS & TRADES PVT.LTD. 20,000 S HARES 3. M/S.CANDLE TRADE & INVESTMENTS PVT.LTD. 10,000 SHARES. THE AO CALLED FOR DETAILS SUCH AS PARTY WISE DET AILS, COPY OF RETURN OF INCOME, BALANCE SHEET, TAX AUDIT REPORT, BANK STATE MENT ETC. OF THE PERSONS FROM WHOM SUCH AMOUNT RECEIVED, BUT THE ASSESSEE FU RNISHED ONLY THE NAME & ADDRESS OF THE PARTIES AND AMOUNT WAS RECEIVED. THE AO FURTHER NOTED THAT ONUS WAS ON THE ASSESSEE TO PROVE THE IDENTITY OF THE CREDITORS, ITA NO. 4454/MUM/11(A.Y.2003-04) 4 CREDITWORTHINESS OF THE CREDITORS AND GENUINENESS O F THE TRANSACTION. THE AO ALSO NOTED THAT SUMMONS U/S. 131 OF THE ACT WERE IS SUED TO THE CREDITORS TO ATTEND WITH ALL THE DETAILS LIKE COPY OF RETURN OF INCOME, BALANCE SHEET, TAX AUDIT REPORT, BANK STATEMENT ETC., IN RESPONSE TO W HICH THE A.R OF THE CREDITORS ATTENDED, FILED COPY OF RETURN OF INCOME, BALANCE SHEET OF ALL CREDITORS BUT COULD NOT FURNISH THE COPIES OF THE B ANK STATEMENT OF ALL THE THREE CREDITORS. HOWEVER, LETTER WAS FILED REQUESTI NG AO TO CALL FOR BANK STATEMENT FROM BANK DIRECTLY AS MATTER BEING OLD, S AME WERE NOT AVAILABLE. NAME OF BANK ACCOUNT NO. ETC. WAS INTIMATED TO A.O . IN VIEW OF THESE FACTS AO NOTED THAT ASSESSEE FAILED TO PROVE THE GENUINEN ESS AND CREDITWORTHINESS OF THE TRANSACTIONS. ACCORDINGLY A.O MADE AN ADDI TION OF RS. 25.00 LACS TO THE TOTAL INCOME BY INVOKING THE PROVISIONS OF SEC. 68 OF THE ACT. 7. BEFORE CIT(A) THE ASSESSEE EXPLAINED THE CIRCUMS TANCES UNDER WHICH THE ASSESSEE COULD NOT PRODUCE THE REQUIRED DOCUME NTS ASKED BY THE AO VIZ., OLD RECORDS COULD NOT BE TRACED BY THE CONCER NED PARTIES. THE ASSESSEE FILED THE FOLLOWING DOCUMENTS AS ADDITIONAL EVIDENC E BEFORE THE CIT(A). THE COPIES OF THE FOLLOWING BANK STATEMENT WITH KARNATA KA BANK A/C. IN RESPECT OF ALL THE THREE COMPANIES / SHAREHOLDERS, WERE FU RNISHED BEFORE CIT(A). (I) M/S. JATIPURA INVESTMENTS & BANK A/C.N O.0792000100216401 FOR FINANCE P. LTD. T HE PERIOD 01/02/2003 TO 30/04/2003 (II) M/S. TIPU INVESTMENTS & BANK A/C . NO.079200010021501 FOR THE P. LTD. PERIOD 01/01/2003 TO 30/06/2003. (III) CANDLE TRADE & INVESTMENT BANK A/C. NO.CA N 12779 FOR THE PERIOD P. LTD. 01/01/2003 TO 31/03/2003. IT WAS SUBMITTED THAT THE SAME WERE NOT SUBMITTED D URING THE ASSESSMENT PROCEEDINGS AS THE SAME WERE NOT AVAILABLE WITH US AND IT BEING DOCUMENT OF A THIRD PARTY IT WAS BEYOND THE ASSESSEES CAPACITY TO HAVE PRODUCED IT ITA NO. 4454/MUM/11(A.Y.2003-04) 5 EARLIER. THE ASSESSEE REQUESTED THAT THE SAME MAY NOW BE ADMITTED UNDER RULE 46A OF THE INCOME TAX RULES, 1962 AS ADDITIONA L EVIDENCE. 8. THE AO CALLED FOR A REMAND REPORT FROM THE AO R EGARDING ADMISSIBILITY OF ADDITIONAL EVIDENCE AND ALSO THE VERACITY OF THE AD DITIONAL EVIDENCE FILED BY THE ASSESSEE. THE AO AFTER A LAPSE OF THREE YEARS FILED HIS REMAND REPORT. IN HIS REMAND REPORT HE OPPOSED THE REQUEST FOR ADMISS ION OF ADDITIONAL EVIDENCE. WITHOUT PREJUDICE TO THE ABOVE, IT WAS S UBMITTED THAT THE BANK STATEMENT OF THE SHARE APPLICANTS FURNISHED BY THE ASSESSEE SHOWED THAT THE FUNDS FOR THE SHARE APPLICATIONS PAID TO THE ASSESS EE COMPANY WERE RECEIVED BY THE SAID APPLICANTS EITHER ON THE SAME DAY OR ON E/TWO DAYS PRIOR TO MAKING THE SAID TRANSFERS TO THE ASSESSEE COMPANY. HE ALSO WAS OF THE VIEW THAT THE FUNDS OF RS. 10.00 LACS AND RS. 5.00 LACS WERE CREDITED IN THE BANK ACCOUNTS OF M/S. JATIPURA INVESTMENTS & FINANCE P. LTD. AND M/S. TIPU INVESTMENT AND TRADING P. LTD. FROM THE SAME ACCOUN T VIZ. CA 1920. THE SOURCE OF THE SAID FUNDS AND THE IDENTITY OF THE SA ID FUNDS PROVIDER WAS NOT DISCLOSED BY THE ASSESSEE. IN THE CASE OF CANDLE T RADE & INVESTMENT P. LTD. ALSO, THE FUNDS OF RS. 9.00 LAKHS WERE RECEIVED A D AY BEFORE MAKING THE TRANSFER TO THE ASSESSEE COMPANY. THE AO SUBMITTED THAT IT WAS BECAUSE OF THESE FACTS THAT THE ASSESSEE AND THE SHARE APPLICA NTS WERE DILLY-DALLYING THE PRODUCTION OF THE SAID BANK STATEMENTS DURING THE C OURSE OF ASSESSMENT PROCEEDINGS. THE AO SUBMITTED THAT THE SAID DETAIL S ARE FURNISHED IN THE APPELLATE PROCEEDINGS ONLY WHEN THERE REMAINED NO O THER OPTION BEFORE THE ASSESSEE. THE AO THUS SUBMITTED THAT THE FACTS SHO W THAT THE INCREASE IN SHARE CAPITAL IS NOT A STRAIGHT TRANSACTION AS WAS CLAIMED BY THE ASSESSEE BUT WAS AN ARRANGEMENT FOR INTRODUCTION OF TAINTED FUNDS, WHOSE COMPLETE FACTS ARE NOT BEING DISCLOSED BY THE ASSESSEE. ITA NO. 4454/MUM/11(A.Y.2003-04) 6 9. THE CIT(A) ON A CONSIDERATION OF THE ORDER OF A O, THE ADDITIONAL EVIDENCE SOUGHT TO BE FILED BY THE ASSESSEE AND THE REMAND R EPORT OF THE AO, WAS OF THE VIEW THAT THE ASSESSEE HAD RECEIVED RS.20.00 L AKHS ON ACCOUNT OF SHARE PREMIUM AND RS.5.00 LAKHS ON ACCOUNT OF SHARE CAPIT AL ISSUE DURING THE YEAR. IN RESPONSE TO SUMMONS U/S. 131 ISSUED TO TH E INVESTORS THE COPY OF RETURN OF INCOME BALANCE SHEET OF THE THREE CREDIT ORS WERE FILED ALONGWITH CREDITORS CONFIRMATORY LETTER DATED 10.1 2.2007. T HE A.O. WANTED COPY OF BANK ACCOUNT OF ALL THREE CREDITORS TO BE PRODUCED. SINCE THE SAME WAS NOT PRODUCED HE WAS OF THE VIEW THAT THE GENUINENESS OF TRANSACTION AND CREDITWORTHINESS WAS NOT PROVED. THE CIT(A) NOTICED THAT THE ASSESSEE HAD BEFORE THE AO GIVEN THE NAME OF THE BANK IN WHICH THE SHARE APPLICANTS/INVESTORS HAD CURRENT ACCOUNT AS WELL TH E A/C.NO.. HE ALSO FOUND THAT THE STAND TAKEN BY THE CREDITOR WAS THAT IT WAS AN OLD TRANSACTION AND THE DETAILS COULD NOT BE TRACED IMMEDIATELY AND REQUESTED THE A.O. TO ISSUE SUMMONS TO RESPECTIVE BANK TO CALL FOR BANK S TATEMENT OF THE THREE CREDITORS. THE CIT(A) FOUND THAT THE A.O DID NOT A CCEPT THE EXPLANATION AND MADE ADDITION OF RS.25 LAKHS STATING THAT CREDITWO RTHINESS AND GENUINENESS OF THE TRANSACTION WAS NOT PROVED FOR WANT OF BANK STATEMENT OF THESE CREDITORS. THE CIT(A) WAS OF THE VIEW THAT IT WAS AN ADMITTED POSITION THAT THE ASSESSEE MADE A REQUEST TO THE AO TO ISSUE SUMM ONS TO THE BANK IN ORDER TO GET THE COPY OF BANK STATEMENT OF CREDITOR S SINCE THE SAME WAS NOT AVAILABLE WITH THE INVESTORS. IT WAS OPEN TO THE A O TO GET THE INFORMATION FROM BANK. THE CIT(A) WAS OF THE VIEW THAT THE ASS ESSEE WAS PREVENTED BY SUFFICIENT CAUSE IN FURNISHING THE BANK STATEMENT D URING THE ORIGINAL ASSESSMENT PROCEEDINGS SINCE THE BANK STATEMENT REL ATED TO OLD PERIOD AND REQUEST TO THE AO TO CALL FOR THESE DETAILS FROM BA NK WAS ALSO MADE BY THE ASSESSEE. RELYING ON THE DECISION OF THE HONBLE OR ISSA HIGH COURT IN THE CASE OF B L CHOWDHARY, 105 ITR 371(ORR) WHEREIN IT WAS HELD PRIMA FACIE WHEN THE INFORMATION WAS NECESSARY TO DECIDE THE CO NTROVERSY IN REGARD TO GENUINENESS OF LOAN, THE ASSESSEE SHOULD BE ALLOWE D TO PRODUCE THE ITA NO. 4454/MUM/11(A.Y.2003-04) 7 ADDITIONAL EVIDENCE, THE CIT(A) PERMITTED THE ASSES SEE TO RELY ON THE ADDITIONAL EVIDENCE. 10. ON MERITS, THE CIT(A) WAS OF THE VIEW THAT THE ASSESSEE HAS NOT ONLY FLIED ITS OWN BANK STATEMENT, BALANCE SHEET, P&L A/C. BUT IT HAS ALSO FILED CONFIRMATIONS, PAN, THE BANK STATEMENT OF THE INVES TORS, THEIR COPY OF RETURNS AND BALANCE SHEET. HE RELIED ON THE DECISIO N OF THE HONBLE DELHI HIGH COURT IN CIT VS. OASIS HOSPITALITY PVT. LTD. V IDE ORDER DATED 31.01.2010 IN ITA NO.2093 OF 2010 WHEREIN IT WAS HELD THAT BY HONBLE COURT THAT WHERE REGISTERED ADDRESS, PAN OF SHAREHOLDERS IS FURNISHE D, THE IDENTITY IS PROVED, WHERE MONEY IS RECEIVED BY CHEQUE AND TRANSMITTED T HROUGH BANKING OR OTHER UNDISPUTED CHANNELS, GENUINENESS OF THE TRA NSACTIONS IS PROVED AND WHERE THE CREDITOR/ SUBSCRIBERS BANK STATEMENT SHO WS THAT IT HAD SUFFICIENT BALANCE IN ITS ACCOUNT, THE CREDITWORTHINESS IS AL SO PROVED. THE CIT(A) WAS OF THE VIEW THAT IN THE CASE OF THE ASSESSEE IT HAD PRODUCED ALL DOCUMENTS AND HENCE THE ASSESSEE HAD DISCHARGED ITS ONUS. IN SUCH A SITUATION, THE CIT(A) WAS OF THE VIEW THAT THE ONUS SHIFTED TO AO WHO WAS FREE TO MAKE INQUIRIES AND PROVE THAT SHAREHOLDERS DID NOT HAV E THE MEANS TO MAKE INVESTMENT AND THEREAFTER HE COULD HAVE REOPENED TH EIR INDIVIDUAL ASSESSMENTS. THE CIT(A) FOUND THAT THE AO DID NOT MAKE SUCH ENQUIRIES EVEN DURING REMAND PROCEEDINGS DESPITE THE FACT THA T HE HAD TAKEN THREE YEARS TO FILE THE REMAND REPORT. IN VIEW OF THE FACTS AND LEGAL POSITION AS DISCUSSED ABOVE, THE CIT(A) HELD THAT NO ADDITION U /S. 68 WAS REQUIRED TO BE MADE. ACCORDINGLY, THE ADDITION OF RS. 25 LAKHS M ADE U/S. 68 OF I.T.ACT BY THE A.O. WAS DIRECTED TO BE DELETED 11. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVE NUE HAS RAISED GR.NO.2 BEFORE THE TRIBUNAL. WE HAVE GIVEN A CAREFUL CONSI DERATION TO THE SUBMISSIONS OF THE LEARNED DR WHO RELIED ON THE REM AND REPORT FILED BY THE AO BEFORE CIT(A). AT THE OUTSET IT WILL BE USEFUL TO TAKE A LOOK AT THE LAW WHEN THERE ARE CASH CREDITS IN THE BOOKS OF A COMPA NY BY WAY OF INCREASED ITA NO. 4454/MUM/11(A.Y.2003-04) 8 SHARE CAPITAL. THE APPLICABLE PROVISION OF LAW IN THIS REGARD IS SEC.68 OF THE ACT, WHICH PROVIDES THAT WHERE ANY SUM IS FOUND CRE DITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE INCOME-TAX OFF ICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INC OME OF THE ASSESSEE OF THAT PREVIOUS YEAR. IN A VERY RECENT DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. OASIS HOSPITALITIES PVT.LTD. 333 ITR 119 (DELHI), THE HONBLE DELHI HIGH COURT AFTER CONSIDERING SEVERAL DECISIONS REFERRED TO BY THE LEARNED D.R. IN HIS ARGUMENTS BEFORE US, SUMMED UP THE APPROACH IN CASES WHERE CASH CREDITS IN THE BOOKS OF COMPANY BY WAY OF INCREASE IN SHARE CAPITAL IS FOUND: THE INITIAL BURDEN IS UPON THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF THE SHARE APPLICATION MONEY RECEIVED BY T HE ASSESSEE. IN ORDER TO DISCHARGE THIS BURDEN, THE ASSESSEE IS REQ UIRED TO PROVE (I) THE IDENTITY OF THE SHARE-HOLDER, (II) THE GENUINENESS OF THE TRANSACTION, AND (C) THE CREDITWORTHINESS OF THE SHAREHOLDERS. I N CASE THE INVESTOR/SHAREHOLDER IS AN INDIVIDUAL, SOME DOCUMEN TS WILL HAVE TO BE FILED OR THE SHAREHOLDER WILL HAVE TO BE PRODUCED B EFORE THE ASSESSING OFFICER TO PROVE HIS IDENTITY. IF THE CREDITOR/SUBS CRIBER IS A COMPANY, THEN THE DETAILS IN THE FORM OF REGISTERED ADDRESS OR PAN IDENTITY, ETC., CAN BE FURNISHED. WHEN THE MONEY IS RECEIVED BY CHE QUE AND IS TRANSMITTED THROUGH BANKING OR OTHER INDISPUTABLE C HANNELS, THE GENUINENESS OF THE TRANSACTION WOULD BE PROVED. OTH ER DOCUMENTS SHOWING THE GENUINENESS OF THE TRANSACTION COULD BE COPIES OF THE SHAREHOLDERS REGISTER, SHARE APPLICATION FORMS, SHA RE TRANSFER REGISTER, ETC. AS FAR AS THE CREDITWORTHINESS OR FINANCIAL ST RENGTH OF THE CREDITOR/SUBSCRIBER IS CONCERNED, THAT CAN BE PROVE D BY PRODUCING THE BANK STATEMENT OF THE CREDITORS/SUBSCRIBERS SHOWING THAT IT HAD SUFFICIENT BALANCE IN ITS ACCOUNTS TO ENABLE IT TO SUBSCRIBE TO THE SHARE CAPITAL. ONCE THESE DOCUMENTS ARE PRODUCED, THE ASS ESSEE WOULD HAVE SATISFACTORILY DISCHARGED THE ONUS CAST UPON HIM. T HEREAFTER, IT IS FOR THE ASSESSING OFFICER TO SCRUTINISE THE SAME AND IN CASE HE NURTURES ANY DOUBT ABOUT THE VERACITY OF THESE DOCUMENTS, TO PROBE THE MATTER FURTHER. HOWEVER, TO DISCREDIT THE DOCUMENTS PRODUC ED BY THE ASSESSEE ON THE ASPECTS, THERE HAVE TO BE SOME COGENT REASON S AND MATERIALS FOR THE ASSESSING OFFICER AND HE CANNOT GO INTO THE REA LM OF SUSPICION. ITA NO. 4454/MUM/11(A.Y.2003-04) 9 12. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF C IT VS. CREATIVE WORLD TELEFILMS LTD. 333 ITR 100 (BOM) OBSERVED THAT IF T HE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE-COMPANY FROM ALLE GED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE ASSESSIN G OFFICER, THEN THE DEPARTMENT CAN ALWAYS PROCEED AGAINST THEM AND IF N ECESSARY REOPEN THEIR INDIVIDUAL ASSESSMENTS. THE HONBLE COURT FURTHER OBSERVED THAT IF THE ASSESSEE HAD GIVEN THE DETAILS OF NAMES AND ADDRESS ES OF THE SHAREHOLDERS, THEIR PAN/GIR NUMBERS AND HAD ALSO GIVEN THE CHEQUE NUMBERS, NAME OF THE BANKERS. THE ASSESSING OFFICER OUGHT TO HAVE FO UND OUT THEIR DETAILS THROUGH PAN CARDS, BANK ACCOUNT DETAILS OR FROM THE IR BANKERS SO AS TO REACH THE SHARE-HOLDERS. THE HONBLE COURT FOLLOWED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. LOVELY EXPORTS P. LTD. [2009] 319 ITR (ST.) 5 (SC). 13. IN THE CASE OF LOVELY EXPORTS (SUPRA), THE HON BLE SUPREME COURT DISMISSED SLP AGAINST THE DECISION OF THE HONBLE D ELHI HIGH COURT BY THE REVENUE AGAINST THE JUDGMENT OF THE HONBLE DELHI H IGH COURT IN THE CASE OF CIT VS. DIVINE LEASING & FINANCE LTD. 299 ITR 268(D EL) BY OBSERVING AS FOLLOWS: CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDIS CLOSED INCOME UNDER S.68 OF IT ACT, 1961? WE FIND NO MERIT IN TH IS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE AP PLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMEN T IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN A CCORDANCE WITH LAW. HENCE, WE FIND NO INFIRMITY WITH THE IMPUGED JUDGMENT. SUBJECT TO THE ABOVE, SPECIAL LEAVE PETITION IS DI SMISSED. 14. IN THE CASE OF DIVINE LEASING (SUPRA), THE HON BLE DELHI HIGH COURT SUMMED UP THE APPROACH IN CASES WHERE CASH CREDITS IN THE BOOKS OF COMPANY BY WAY OF INCREASE IN SHARE CAPITAL IS FOUN D AS FOLLOWS: IN THE CASE OF A COMPANY THE FOLLOWING ARE THE PRO POSITIONS OF LAW UNDER SECTION 68. THE ASSESSEE HAS TO PRIMA FACIE P ROVE (1) THE IDENTITY OF THE CREDITOR/SUBSCRIBER ; (2) THE GENUINENESS OF THE TRANSACTION, ITA NO. 4454/MUM/11(A.Y.2003-04) 10 NAMELY, WHETHER IT HAS BEEN TRANSMITTED THROUGH BAN KING OR OTHER INDISPUTABLE CHANNELS ; (3) THE CREDITWORTHINESS OR FINANCIAL STRENGTH OF THE CREDITOR/SUBSCRIBER ; (4) IF RELEVANT DETAIL S OF THE ADDRESS OR PAN IDENTITY OF THE CREDITOR/SUBSCRIBER ARE FURNISHED T O THE DEPARTMENT ALONG WITH COPIES OF THE SHAREHOLDERS REGISTER, SH ARE APPLICATION FORMS, SHARE TRANSFER REGISTER, ETC., IT WOULD CONS TITUTE ACCEPTABLE PROOF OR ACCEPTABLE EXPLANATION BY THE ASSESSEE ; (5) THE DEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWING AN ADVERSE INFERENCE ON LY BECAUSE THE CREDITOR/SUBSCRIBER FAILS OR NEGLECTS TO RESPOND TO ITS NOTICES ; (6) THE ONUS WOULD NOT STAND DISCHARGED IF THE CREDITOR/SUB SCRIBER DENIES OR REPUDIATES THE TRANSACTION SET UP BY THE ASSESSEE N OR SHOULD THE ASSESSING OFFICER TAKE SUCH REPUDIATION AT FACE VAL UE AND CONSTRUE IT, WITHOUT MORE, AGAINST THE ASSESSEE ; AND (7) THE ASSESSING OFFICER IS DUTY BOUND TO INVESTIGATE THE CREDITWORTHINESS OF T HE CREDITOR/SUBSCRIBER THE GENUINENESS OF THE TRANSACT ION AND THE VERACITY OF THE REPUDIATION. IN THE CASE OF A PUBLI C ISSUE, THE COMPANY CONCERNED CANNOT BE EXPECTED TO KNOW EVERY DETAIL P ERTAINING TO THE IDENTITY AS WELL AS FINANCIAL WORTH OF EACH OF ITS SUBSCRIBERS. THE COMPANY MUST, HOWEVER, MAINTAIN AND MAKE AVAILABLE TO THE ASSESSING OFFICER FOR HIS PERUSAL, ALL THE INFORMAT ION CONTAINED IN THE STATUTORY SHARE APPLICATION DOCUMENTS. A DELICATE B ALANCE MUST BE MAINTAINED WHILE WALKING THE TIGHTROPE OF SECTIONS 68 AND 69 OF THE INCOME-TAX ACT. THE BURDEN OF PROOF CAN SELDOM BE D ISCHARGED TO THE HILT BY THE ASSESSEE ; IF THE ASSESSING OFFICER HAR BOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRIPTION, HE IS EMPOWERED, TO CARRY OUT THOROUGH INVESTIGATIONS. BUT IF THE ASSESSING OFFICER FAILS TO UNEARTH ANY WRONG OR ILLEGAL DEALINGS, HE CANNOT ADHERE TO HIS SUSPIC IONS AND TREAT THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANY. 15. IN THE LIGHT OF THE LAW LAID DOWN AS ABOVE, LE T US EXAMINE THE EVIDENCE ON RECORD. THE ASSESSEE HAS NOT ONLY FLIED ITS OWN BANK STATEMENT, BALANCE SHEET, P&L A/C. BUT IT HAS ALSO FILED CONFIRMATIONS , PAN, THE BANK STATEMENT OF THE INVESTORS, THEIR COPY OF RETURNS AND BALANCE SHEET. THE AO WANTED COPY OF THE BANK STATEMENT OF THE INVESTORS. THE S AME COULD NOT BE FURNISHED BY THE ASSESSEE BUT THE ASSESSEE GAVE THE DETAILS OF THE BANK ACCOUNT AND ASKED THE AO TO ISSUE SUMMONS TO THE BA NK AND OBTAIN THE SAME. WE ARE OF THE VIEW THAT THE CIT(A) WAS RIGHT IN ADMITTING THE ADDITIONAL EVIDENCE FILED BEFORE HIM FOR THE REASON S GIVEN IN HIS ORDER. THE AO DID NOT CHOOSE TO ISSUE SUMMONS TO THE BANK INST EAD MADE ADDITION DRAWING ADVERSE INFERENCE AGAINST THE ASSESSEE. TH E ADDITIONAL EVIDENCE IS ITA NO. 4454/MUM/11(A.Y.2003-04) 11 NECESSARY FOR DECIDING THE ISSUE IN APPEAL AND IN T ERMS OF RULE 46A(4) THE CIT(A) HAD POWERS TO CONSIDER SUCH ADDITIONAL EVIDE NCE. THE ADDITIONAL EVIDENCE WAS DULY CONFRONTED TO THE AO AND THE AO W AS AFFORDED OPPORTUNITY OF REBUTTING THE ADDITIONAL EVIDENCE FILED BY THE A SSESSEE. EVEN IN THE REMAND PROCEEDINGS IN THE COURSE OF APPEAL BEFORE T HE CIT(A) THE AO HAS NOT CARRIED OUT ANY INVESTIGATION BUT HAS MERELY EXPRES SED DOUBTS ABOUT THE DEPOSITS IN THE BANK ACCOUNT. IN OUR VIEW THE ASSE SSEE HAS SUFFICIENTLY DISCHARGED ITS ONUS U/S.68 OF THE ACT AS LAID DOWN IN THE DECISIONS REFERRED TO ABOVE. THE CIT(A) IN OUR VIEW HAD RIGHTLY DELET ED THE ADDITION MADE BY THE AO. WE FIND NO GROUNDS TO INTERFERE WITH THE O RDER OF THE CIT(A). CONSEQUENTLY, GR.NO.2 RAISED BY THE REVENUE IS ALSO DISMISSED. 16. IN THE RESULT, THE APPEAL BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 13 TH DAY OF APRIL 2012 SD/- SD/- (P.M.JAGTAP ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 13 TH APRIL 2012 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RC BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. ITA NO. 4454/MUM/11(A.Y.2003-04) 12 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 09/04/2012 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 10/04/2012 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. A PPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER