ACIT, New Delhi V. M/s. Garg Tubes Ltd., New Delhi

ITA 5011/DEL/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7485 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 05-01-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 12-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SALIL MISHRA
• Keywords: Unexplained investment; Share purchase agreement; Question of law; Onus to prove
• Section: 133(6); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI C BENC H BEFORE SHRI R.P. TOLANI, JM & SHRI A.N. PAHUJA, AM ITA NO.5011/DEL/2010 ASSESSMENT YEAR:2006-07 ACIT CIRCLE-12(1), NEW DELHI V/S . M/S GARG TUBES LTD., 5006, 3 RD FLOOR, JAISAV PALACE, NEW DELHI [PAN NO.AAACG 2992 G ] (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI C.S. ANAND, AR REVENUE BY SHRI SALIL MISHRA, DR DATE OF HEARING 05-01-2012 DATE OF PRONOUNCEMENT 20-01-2012 O R D E R A.N.PAHUJA:- THIS APPEAL FILED ON 12.11.2010 BY THE REVENUE AGA INST AN ORDER DATED 13.08.2010 OF THE LD. CIT(A)-XV, NEW DELHI, FOR THE AY 2006-07, RAISES THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE ORDER OF THE CIT(A) IS ERRONEOUS, PERVERSE, ILL EGAL AND AGAINST THE PROVISIONS OF LAW WHICH IS LIABLE TO BE SET ASIDE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE ORDER OF THE CIT(A) HAS ERRED IN DELETING THE A DDITION OF ` ` `23,20,000/- MADE BY THE ASSESSING OFFICER ON ACCOU NT OF UNEXPLAINED SHARE APPLICATION MONEY U/S 68 OF THE I NCOME-TAX ACT. 3. THE APPELLANT CRAVES LEAVE, TO ADD, ALTER OR AM END ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. 2. ADVERTING TO GROUND NOS.1 & 2 IN THE APPEAL, F ACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF ` ` ` 52,71,342/- FILED ON 24.11.2006 BY THE ASSESSEE, MANUFACTURING M.S. PIP ES AND GS PIPES, WAS SELECTED FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) ISSUED ON 3 RD OCTOBER, 2007. DURING THE ITA NO.5011/DEL./2010 2 COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER (A.O. IN SHORT) NOTICED THAT THE ASSESSEE RECEIVED AN AMOUNT OF ` ` `26,20,000/- BY WAY OF SHARE APPLICATION MONEY FROM THE 23 PERSONS MENTIONED IN PARA 3 OF THE ASSESSMENT ORDER. TO A QUERY BY THE AO, SEEKING DETAILS OF GEN UINENESS OF THE SHARE APPLICATION MONEY, THE ASSESSEE DID NOT RESPOND. E VEN WHEN NOTICE U/S 133(6) OF THE ACT WERE ISSUED TO THE AFORESAID PERSONS, MO ST OF THE NOTICES WERE RETURNED UNSERVED BY THE POSTAL AUTHORITIES. TO A FURTHER QUERY BY THE AO, ASKING THE ASSESSEE TO PRODUCE 23 PERSONS, THE ASSESSEE SU BMITTED ONLY THEIR AFFIDAVITS ALONG WITH COPY OF THE BANK ACCOUNTS. SINCE THESE AFFIDAVITS WERE NOT NOTARIZED WHILE THE BANK ACCOUNT REVEALED DEPOSITS IN CASH ON THE DATE OF GIVING THE MONEY OR A DAY BEFORE AND THERE BEING NO OTHER TRANSACTIO N IN THEIR BANK ACCOUNTS, THE AO CONCLUDED THAT THE ASSESSEE FAILED TO ESTABLISH THE IDENTITY OF THE AFORESAID PERSONS AND GENUINENESS OF THE TRANSACTIONS. HOWEV ER, THE AO ADDED THE AMOUNT OF ` ``23,20,000/- U/S 68 OF THE ACT. AND NOT THE ENTIR E AMOUNT OF ` 26,20,000/- 3. ON APPEAL, THE LEARNED CIT(A) DELETED THE ADDIT ION IN THE FOLLOWING TERMS:- I HAVE CONSIDERED THE FACTS OF THE CASE, SUBMISSIO NS OF THE APPELLANT AND THE FINDINGS OF THE ASSESSING OFFICER . IN THE CASE UNDER APPEAL IT IS SEEN THAT THE APPELLANT HAD FURN ISHED VARIOUS DOCUMENTS IN SUPPORT OF SHARE CAPITAL BEFORE THE AS SESSING OFFICER AND ALSO DURING THE APPELLATE PROCEEDINGS AS UNDER: I) COMPLETE NAME AND ADDRESS OF SHARE APPLICANT & P AN DETAILS II) CONFIRMATION OF SHARE APPLICANT. III) COPY OF INCOME TAX RETURN OF SHARE APPLICANT IV) COPY OF BANK STATEMENT OF SHARE APPLICANT FROM WHICH IT HAD MADE THE INVESTMENT IN THE SHARES OF COMPANY. V) COPY OF CERTIFICATE ISSUED TO APPLICANTS. ITA NO.5011/DEL./2010 3 THE ONUS OF PROVING CASH CREDIT IN THE BOOKS IS REB UTTABLE. THE ASSESSEE HAS TO DISCHARGE THE INITIAL ONUS BY P ROVING THE IDENTITY OF THE CREDITOR BY FILING THE CONFIRMATORY LETTER AND OTHER RELEVANT DETAILS. THE PRESUMPTION IS REBUTTABLE AND THE DEPARTMENT IS ALSO REQUIRED TO BRING EVIDENCE ON RECORD IF WAN TS TO REJECT THE EXPLANATION OF THE ASSESSEE. IT IS NOW SETTLED LAW THAT THERE ARE THREE BASIC REQUIREMENTS IN CASE OF A CASH CREDIT: 1. THE IDENTITY OF THE CREDITOR. 2. THE CREDITWORTHINESS OF THE CREDITOR, AND 3. THE GENUINENESS OF THE TRANSACTION THE FIRST ISSUE IS THE IDENTITY OF THE CREDITORS. T HE APPELLANT FILED THE FOLLOWING DETAILS IN REGARD TO THE CREDIT ORS: A) ACKNOWLEDGMENT OF RETURN OF INCOME B) COPY OF AUDITED BALANCE SHEET C) CONFIRMATORY LETTER OF SHARE APPLICANT D) PAN DETAILS E) COMPLETE NAME AND ADDRESS OF THE SHARE HOLDER THESE FACTS WERE SUBMITTED BY THE APPELLANT BEFORE THE AO. IT IS ALSO SEEN THAT SHARE APPLICATION MONEY OF RS. 11.00 LAKHS WAS RECEIVED FROM 3 DIRECTORS OF THE APPELLANT AND THE DIRECTORS HAD DULY REPLIED TO THE NOTICE ISSUED U/S 133(6) BY THE AO. THE AO HAD RECORDED THE STATEMENT OF ONE OF THE SHA RE APPLICANTS SH. SUNIL GUPTA WHO HAD CATEGORICALLY STATED BEFORE THE AO THAT HE HAD APPLIED FOR SHARES. IN THE REMAINING CASES ALSO DETAILS LIKE CONFIRMATION LETTER, COPY OF ITR, PANS AND COPIES O F BANK STATEMENT WERE FILED BY THE SHARE APPLICANTS. THIS SHOWS THAT THE IDENTITY OF THE SHARE APPLICANT HAS BETWEEN ESTABLI SHED BEYOND DOUBT BY THE APPELLANT. THE AO DID NOT CONSIDER THE IDENTITY PROVED ON ACCO UNT OF NON PRODUCTION OF THE PARTY. IN THIS REGARD IT IS NOTIC ED THAT IN CASE OF P.K. SETHI VS CIT (2006) 286 ITR 318 (GAU.), IT WAS HELD BY THE HONBLE HIGH COURT THAT THE IDENTITY OF THE CREDITOR IS PROVED WHEN A CREDITOR IS SHOWN TO BE AN INCOME TAX ASSESSEE. FUR THER THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS PRA THAM PROJECTS ITA NO.5011/DEL./2010 4 AND FINLEASE LTD. VIDE ITA NO. 628/2010 IN ITS ORDE R DATED 11.05.2010 HAS HELD AS UNDER: 'WE FIND THAT THE COMMISSIONER OF INCOME TAX AS WEL L AS THE INCOME TAX APPELLATE TRIBUNAL HAD CONSIDERED THE QUESTION ON F ACTS AND HAD ACCEPTED THE SUBMISSIONS OF THE ASSESSEE THAT THE SAID AMOUN T WAS RECEIVED FROM VARIOUS COMPANIES AS AND BY WAY OF SHARE APPLICATIO N MONEY. SINCE THE CONFIRMATION LETTERS, COPIES OF INCOME-TAX RETURNS, PAN NUMBER AND CERTIFICATE OF THE INCORPORATION OF THE COMPANIES W ERE PLACED ON RECORD BY THE ASSESSEE, THE IDENTITIES OF THE SHARE APPLICANT S HAD BEEN ESTABLISHED. MOREOVER, THE PAYMENTS HAD BEEN RECEIVED THROUGH NO RMAL BANKING CHANNELS AND THERE WAS NOTHING TO DOUBT THE CREDITW ORTHINESS OF THE SAID APPLICANTS. THUS, ON FACTS, BOTH THE COMMISSIONER O F INCOME-TAX(APPEALS) AND THE INCOME TAX APPELLATE TRIBUNAL HAVE HELD THE SAID AMOUNT TO BE IN THE NATURE OF THE SHARE APPLICATION MONEY. NO SUBST ANTIAL QUESTION OF LAW ARISES FOR OUR CONSIDERATION.' THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS VINTAGE CREDIT & LEASING PVT. LTD. VIDE ITA NO. 569/2010 IN ITS OR DER DATED 10.05.2010 HAS HELD AS UNDER: 'THE INCOME TAX APPELLATE TRIBUNAL FOUND THAT THE I DENTITIES OF THE THREE SHARE APPLICANTS WERE BORNE OUT BY THE FACT THAT AL L THE THREE APPLICANTS WERE PRIVATE LIMITED COMPANIES AND WERE REGULAR INC OME-TAX ASSESSES. THEY HAD SUBMITTED AFFIDAVITS OF THEIR DIRECTORS, C ERTIFICATES OF CONFIRMATION, THEIR BANK STATEMENTS, COPIES OF THEI R BALANCE SHEETS AS WELL AS COPIES OF INCOME-TAX RETURNS FOR THE ASSESS MENT YEAR 2000-2001. OTHER DETAILS SUCH AS PAN NUMBER ETC. WERE ALSO CLE ARLY INDICATED. IN VIEW OF THE SAID INFORMATION AND PARTICULARS WHICH WERE AVAILABLE ON RECORD, THE INCOME TAX APPELLATE TRIBUNAL APPLIED THE DECIS ION, OF THE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS PVT. LT D: 216 CTR 195 AND THEREAFTER DELETED THE SAID ADDITION. IN DOING SO, IT UPHELD THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS). NO INFIRMITY IN THE SAID DECISION HAS BEEN POINTED OUT BY THE COUNSEL F OR THE APPELLANT.' IN VIEW OF THE DETAILS SUBMITTED BY THE APPELLANT O N RECORD AND IN VIEW OF THE DECISIONS CITED ABOVE THE IDENTITY OF T HE SHARE APPLICANT IS CONSIDERED PROVED. THE GENUINENESS OF THE TRANSA CTION IS ESTABLISHED AS THE TRANSACTION IS ROUTED THOUGHT BA NKING CHANNELS. IT IS SEEN THAT THE SHARE APPLICATION MONEY WAS REC EIVED THROUGH A/C PAYEE CHEQUE. COPY OF BANK ACCOUNTS OF THE SHAR E APPLICANTS HAS BEEN FILED. THUS WHERE THE RETURN OF INCOME IS FILED BY THE CREDITORS OF THE ASSESSEE AND IS ACCEPTED BY THE DE PARTMENT, AND ITA NO.5011/DEL./2010 5 THE PAYMENTS IS THROUGH A/C PAYEE CHEQUE THE GENUIN ENESS OF THE TRANSACTION CAN NOT BE DOUBTED. THE MATTER OF CREDI TS BY WAY OF SHARE APPLICATION MONEY WAS DEALT WITH HON'BLE DELH I HIGH COURT IN THE CASE OF CIT VS M/S STELLAR INVESTMENT LTD. (119 ) 192 ITR 287. IN THAT CASE SHARE CAPITAL WAS INCREASED BY ACCEPTI NG MONIES FROM VARIOUS PARTIES. THE FOLLOWING OBSERVATIONS OF THE TRIBUNAL WAS CONFIRMED BY THE HIGH COURT : 'IT IS EVIDENT THAT EVEN IF IT BE ASSUMED THAT THE SUBSCRIBERS TO THE INCREASED SHARE CAPITAL WERE NOT GENUINE, NEVERTHEL ESS, UNDER NO CIRCUMSTANCES, CAN THE AMOUNT OF SHARE CAPITAL BE R EGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE. IT MAY BE THAT THERE ARE SOME BOGUS SHAREHOLDERS IN WHOSE NAMES SHARES HAD BEEN ISSUED AND THE MONEY IS SOUGHT TO BE REOPENED, THAT WOULD HAVE MADE SOME SE NSE BUT WE FAIL TO UNDERSTAND AS TO HOW THIS AMOUNT OF INCREASED SHARE CAPITAL CAN BE ASSESSED IN THE HANDS OF THE COMPANY ITSELF.' IN THE CASE OF M/S MONNET ISPAT AND ENERGY LTD. VS DCIT (2008) 171 TAXMAN 27 (DELHI) IT WAS FOUND THAT THE SHARE A PPLICATION MONEY WAS RECEIVED BY BANKING CHANNEL AND THAT THE ASSESSEE HAD PRODUCED CONFIRMATORY LETTERS THE CREDITOR WAS ASSESSED TO TAX AND THE PAN HAD BEEN GIVEN IN THE CERTIFICATE FILED . IT WAS HELD BY THE HON'BLE DELHI HIGH COURT THAT THE ASSESSEE HAD- COMPLETELY DISCHARGED THE IDENTITY OF THE CREDITOR, CREDITWORT HINESS AND GENUINENESS OF THE TRANSACTION. IN THE CASE OF CIT VS DIAMOND PRODUCTS LTD. (2009) THE HON'BLE DELHI HIGH COURT H ELD THAT THE AO IS NOT PERMITTED TO EXAMINE THE SOURCE OF SOURCE, O NCE THE ASSESSEE HAS ESTABLISH THAT THE CREDITOR IS GENUINE AND CREDITOR'S IDENTITY AND GENUINENESS HAS BEEN ESTABLISHED. AFTER CONSIDERING THE TOTALITY OF ALL THE FACTS AND CIRCUMSTANCES AND THE LATEST JUDICIAL PRONOUNCEMENTS MADE BY THE JURI SDICTIONAL DELHI HIGH COURT AND HON'BLE SUPREME COURT, IT CAN BE CON CLUDED THAT THE APPELLANT COMPANY HAS UNDOUBTEDLY PROVED AND ES TABLISHED THE IDENTITY OF THE SHARE APPLICANT. ONCE THE IDENTITY OF THIS SHARE APPLICANT IS PROVED, NO ADDITION CAN BE MADE IN THE HAND OF THE APPELLANT COMPANY EVEN IF THE SHARE APPLICANTS HAVE BEEN FOUND PERSONS OF NO MEANS UNTIL AND UNLESS OTHERWISE IT I S PROVED BY THE REVENUE. THE REVENUE COULD NOT PROVE THAT THE MONEY RECEIVED BY THE APPELLANT IN THE FORM OF THE SHARE APPLICATION HAS COME FROM ITS OWN SOURCES. NO EVIDENCES REGARDING THIS HAVE BEEN BROUGHT ON RECORD BY THE AD. ITA NO.5011/DEL./2010 6 IN THE CASE OF CIT VS DIVINE LEASING & FINANCE LTD. (2007 158 TAXMAN 440) IT HAS BEEN HELD THAT IF THE RELEVANT D ETAILS OF THE ADDRESS OR PAN IDENTITY OF THE CREDITOR ARE FURNISH ED TO THE DEPARTMENT IT WOULD CONSTITUTE ACCEPTABLE PROOF OR ACCEPTABLE EXPLANATION BY THE ASSESSEE. IN THIS CASE THE CREDI TORS EXISTENCE IS RECOGNIZED AS THE COMPANY IS IN THE RECORDS OF THE IT DEPARTMENT, SINCE THE APPELLANT HAS SUBMITTED THEIR PAN AND ALS O COPIES OF IT. RETURN. THE HON'BLE SUPREME COURT IN THE CASE OF CI T VS LOVELY EXPORT PVT. LTD. 116 CTR 185 IN ITS ORDER DATED 11. 01.2008 HAS HELD AS UNDER: 'CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDIS CLOSED INCOME U/S 68 OF THE I.T. ACT, 1961? WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MON EY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHARE HOLDERS W HOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PRO CEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. HENC E, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT.' THE APEX COURT IN THE CASE OF CIT VS STELLAR INVEST MENT LTD. (2001) 251 ITR 263 (SC), WHERE IT WAS HELD THAT: 'EVEN IF THE SUBSCRIBERS TO THE INCREASED SHARE CAP ITAL OF ASSESSEE COMPANY WERE NOT GENUINE, THE AMOUNT COULD NOT BE R EGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY; TRIBUNA L HAVING CANCELED CIT'S ORDER U/S 263 WHEREBY THE ASSESSMENT WAS SET ASIDE ON THE GROUND THAT AO HAD ACCEPTED THE GENUINENESS OF SHARE CAPIT AL WITHOUT MAKING ENQUIRIES, NO QUESTION OF LAW ARISES'. IN THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT ORISSA VS ORISSA CORP. PVT. LTD. [1986] 159 ITR 78 (SQ, IT WAS HELD THAT: 'IN THIS CASE, THE ASSESSEE HAD GIVEN THE NAMES AND ADDRESSES OF THE ALLEGED CREDITORS. IT WAS IN THE KNOWLEDGE OF THE R EVENUE THAT THE SAID CREDITORS WERE INCOME TAX ASSESSEE. THEIR INDEX NUM BERS WERE IN THE FILE OF THE REVENUE. THE REVENUE, APART FROM ISSUING NOT ICES UNDER SECTION 131 AT THE INSTANCE OF THE ASSESSEE, DID NOT PURSUE THE MATTER FURTHER. THE REVENUE DID NOT EXAMINE THE SOURCE OF INCOME OF THE SAID ALLEGED CREDITORS TO FIND OUT WHETHER THEY WERE CREDITWORTH Y OR WERE SUCH WHO COULD ADVANCE THE ALLEGED LOANS. THERE WAS NO EFFOR T MADE TO PURSUE THE SO-CALLED ALLEGED CREDITORS. IN THOSE CIRCUMSTANCES , THE ASSESSEE COULD NOT DO ANYTHING FURTHER. IN THE PREMISES, IF THE TRIBUN AL CAME TO THE ITA NO.5011/DEL./2010 7 CONCLUSION THAT THE ASSESSEE HAS DISCHARGED THE BUR DEN THAT LAY ON HIM, THEN IT COULD NOT BE SAID THAT SUCH A CONCLUSION WA S UNREASONABLE OR PRESERVE OR BASED ON NO EVIDENCE. IF THE CONCLUSION IS BASED ON SOME EVIDENCE ON WHICH A CONCLUSION COULD BE ARRIVED AT, NO QUESTION OF LAW AS SUCH ARISES.' THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS VALUE CAPITAL SERVICES PVT. LTD. 307 ITR 334 HAS HELD THAT: 'EVEN IF THE SHARE APPLICANT DID NOT HAVE THE SOURC ES TO MAKE THE INVESTMENT THE ONUS IS ON THE REVENUE TO SHOW THAT SUCH INVESTMENT IS EMANATED FROM THE COFFERS OF THE ASSESSEE SO AS TO ENABLE IT TO BE TREATED AS THE UNDISCLOSED INCOME OF THE ASSESSEE.' THE HON'BLE DELHI HIGH COURT VIDE ITA NO. 463/2010 IN THE CASE OF CIT VS SUNTECH VISION LTD. HAS HELD THAT: 'THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE INCOME- TAX APPELLATE TRIBUNAL DATED 15.12.2008 IN RELATION TO THE AY. 04-05 ARISING OUT OF ITA NO. 3511/DEL/2007. THE POINT IN ISSUE IS WITH REGARD TO INVESTMENTS OF ABOUT RS. 49.00 LAKHS MADE BY FOUR C OMPANIES IN THE ASSESSEE COMPANY. THE SAID AMOUNT OF RS. 49.00 LAKH S WAS RECEIVED BY WAY OF SHARE APPLICATION MONEY. THE AO HELD THE SAM E TO BE UNEXPLAINED INCOME OF THE ASSESSEE UNDER SECTION 68 OF THE INCO ME-TAX ACT, 1961. HOWEVER, IN APPEAL, THE CIT(A) HELD IN FAVOR OF THE ASSESSEE AND ALLOWED THE ASSESSEE'S APPEAL BY HOLDING THAT THE ASSESSEE HAD PRODUCED THE PAN NUMBERS, CONFIRMATORY LETTERS, RETURNS OF INCOME, E TC. IN RESPECT OF THE PARTIES WHO HAD MADE THE SAID INVESTMENTS. THEREFOR E, THE COMMISSIONER OF INCOME-TAX (A) HAD COME TO THE CONCLUSION THAT T HE PRELIMINARY ONUS, WHICH WAS UPON THE ASSESSEE, HAD BEEN DISCHARGED BY HIM. CONSEQUENTLY, THE ADDITION MADE BY THE ASSESSING OFFICER STOOD DE LETED. THE INCOME TAX APPELLATE TRIBUNAL, IN THE APPEAL PREFERRED BY THE REVENUE, CONFIRMED THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX(A) A ND FOUND THAT THE SAID SHARE APPLICATION MONEY WAS SUBSTANTIATED BY T HE ASSESSEE BY PROVIDING ALL THE NECESSARY DETAILS AS INDICATED AB OVE. . THE TWO AUTHORITIES BELOW, ON FINDINGS OF FACT, HELD THAT T HE ASSESSEE WAS NOT LIABLE TOT ANY ADDITION ON ACCOUNT OF THE SAID SHAR E APPLICATION MONEY. WE SEE NO REASON TO INTERFERE WITH THE SAID FINDING S'. IN THE CASE OF CIT VS DWARKASHIS FINANCIAL SERVICES PVT. LTD. VIDE ITA NO. 439/2010 HAS HELD THAT: ITA NO.5011/DEL./2010 8 'THIS IS AN APPEAL AGAINST THE ORDER DATED 12.09.20 08 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL IN ITA NO. 82/0/06 FO R THE ASSESSMENT YEAR 2001-02. THE ASSESSING OFFICER HAD MADE THE ADDITIO N OF RS. 45 LAKHS AS UNEXPLAINED INVESTMENT ON ACCOUNT OF SHARE APPLICAT ION MONEY RECEIVED BY THE ASSESSEE. THE COMMISSIONER OF INCOME TAX (AP PEALS) AS WELL AS THE INCOME TAX APPELLATE TRIBUNAL, AFTER EXAMINING THE CASE ON FACTS AS WELL AS ON LAW, DELETED THE SAID ADDITION. THE INCOME TA X APPELLATE TRIBUNAL HAS SPECIFICALLY NOTED AMONGST OTHER THINGS THAT TH E APPELLANT HAS PRODUCED CONFIRMATION LETTERS FROM THE SHARE APPLIC ANTS, THE PAYMENTS HAD BEEN RECEIVED THOUGHT ACCOUNT PAYEE CHEQUES AND , THAT TOO, FROM THE APPLICANT'S ACCOUNTS. THE APPLICANTS WERE ALL REGIS TERED COMPANIES AND THEIR IDENTITIES WERE CLEARLY ESTABLISHED. IT IS AN THESE CIRCUMSTANCES THAT THE COMMISSIONER OF INCOME TAX (APPEALS) AS WELL AS THE INCOME TAX APPELLATE TRIBUNAL DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. CONSEQUENTLY, WE SEE NO REASON TO INTERFERE WITH TH E FINDINGS RECORDED BY THE TRIBUNAL' TO THE INSTANT CASE NO EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE AO TO PROVE THAT THE SHARE APPLICATION MONEY EMANAT ED FROM THE COFFERS OF THE APPLICANT. THE AO HAS NOT MADE ANY E NQUIRIES FROM THE CONCERNED PARTIES NOR DID HE EXAMINE THE ASSESS MENT RECORDS OF THE SHARE APPLICANT. RELYING ON THE VARIOUS DOCUMENTS PLACED ON RECORD A ND THE PRINCIPLE LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF M/S LOVELY EXPORT PVT. LTD. WHICH IS DIRECTLY ON TH E ISSUE OF SHARE CAPITAL AND IN VIEW OF THE DECISIONS CITED ABOVE TH E ADDITION ON ACCOUNT OF SHARE CAPITAL CANNOT BE SUSTAINED. THE A O HAS NO WHERE PROVED THAT DOCUMENTS IN SUPPORT OF THE IDENT ITY OF THE PARTY HAVE NOT BEEN PLACED ON RECORD OR THEY WERE FORGED DOCUMENTS. THE AO ALSO HAS NOT BROUGHT ANY EVIDENCE ON RECORD REGARDING THE FACTS THAT THE SHARE APPLICATIONS WERE NOT CREDITWO RTHY OR GENUINE, DESPITE THE FACT THAT THEIR PAN AND COPIES OF 1.1. RETURN WERE SUBMITTED BY THE APPELLANT. IN VIEW OF THE DISCUSSI ON MADE ABOVE THE ADDITION OF RS. 23.20 LAKHS IS DELETED. 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF LEARNED CIT(A). THE LD. DR SUPPORTED TH E ORDER OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE RELIED ON THE FIND INGS IN THE IMPUGNED ORDER. INTER ALIA, THE LEARNED AR SUBMITTED THAT ALL THE S HARE APPLICANTS WERE ALLOTTED SHARE CERTIFICATES WHILE EVEN AMOUNTS BROUGHT IN BY THE DIRECTORS OF THE COMPANY S/SHRI GANESH AGARWAL, MANISH GOEL, AND RAHUL AGARW AL, WHO ARE EXISTING ITA NO.5011/DEL./2010 9 ASSESSEES, WERE ALSO ADDED BY THE AO. SINCE ALL TH E TRANSACTIONS WERE THROUGH ACCOUNT PAYEE CHEQUES AND ALL OF THEM CONFIRMED THE TRANSACTIONS BY FILING CONFIRMATORY CERTIFICATES, RELYING UPON DECISIONS I N A.C.I.T. VS. BAHRI BROS. (P) LTD., 154 ITR 244 (PATNA); CIT VS. ORISSA CORPORATI ON (P) LTD., 159 ITR 78 (SC.); CIT VS. STELLER INVESTMENT LTD. 192 ITR 287 (DEL.); CIT VS. MAKHNI AND TYAGI (P) LTD. 267 ITR 433 (DELHI); CIT VS. DOLPHIN CANPACK L TD. 283 ITR 190 (DEL); CIT VS. LOVELY EXPORTS PVT. LTD. 299 ITR 268 (DEL); CIT VS. VALUE CAPITAL SERVICES (P) LTD. 307 ITR 334 (DEL) AND CIT VS. U.P. BONE MI LLS INDIA LTD. ORDER DATED 31.01.2011 IN I.T.A. NO.2094 OF 2010, THE LD. AR CO NTENDED THAT THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE AFORESAID DECISIONS. AS IS APPARENT FROM T HE FACTS OF THE CASE, THE ASSESSEE, RECEIVED AN AMOUNT OF 26.40 LACS TOWARDS SHARE APPLICATION MONEY INCLUDING ` `11.00 LAKHS FROM THREE DIRECTORS OF THE COMPANY S /SHRI GANESH AGARWAL, MANISH GOEL, AND RAHUL AGARWAL, WHO CONFIR MED CONTRIBUTION TOWARDS SHARE APPLICATION MONEY IN RESPONSE TO A NOTICE U/S 133(6) OF THE ACT. THE LD. CIT(A) FOUND THAT THE ASSESSEE SUBMITTED COMPLETE NAME AND ADDRESS OF SHARE APPLICANTS, THEIR PAN DETAILS BESIDES THEIR CONFIRM ATIONS AND COPIES OF INCOME TAX RETURNS AS ALSO COPIES OF BANK STATEMENTS. MERE LY BECAUSE THE ASSESSEE DID NOT PRODUCE THESE PARTIES, THERE IS NO JUSTIFICAT ION TO DRAW AN ADVERSE INFERENCE. IN THIS CASE, THE ASSESSEE HAD GIVEN THE NAMES, ADD RESSES AND PAN OF THE AFORESAID INVESTORS. ONE OF THE SHARE APPLICANTS SH . SUNIL GUPTA CATEGORICALLY STATED BEFORE THE AO THAT HE HAD APPLIED FOR SHARES .THE AO, APART FROM ISSUING NOTICES UNDER SECTION 133(6) OF THE ACT, DID NOT PU RSUE THE MATTER FURTHER. THERE WAS NO EFFORT MADE TO PURSUE THE OTHER INVESTORS. I N THOSE CIRCUMSTANCES, THE ASSESSEE COULD NOT DO ANYTHING FURTHER. IN THE PREM ISES, IT CANNOT BE SAID THAT THE ASSESSEE DID NOT DISCHARGE THE BURDEN THAT LAY ON THEM[CIT VS. ORISSA CORPORATION LTD.,159 ITR 78(SC)] 5.1 IN THIS REGARD, WE MAY REFER TO THE DECISION OF THE HONBLE APEX COURT DELIVERED IN THE CASE OF CIT VS. LOVELY EXPORTS 21 6 CTR 195. IN THIS CASE IT WAS ITA NO.5011/DEL./2010 10 HELD THAT IF THE SHARE APPLICATION MONEY IS RECEIVE D BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GI VEN TO THE ASSESSING OFFICER, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW, BUT IT CANNOT B E REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE. 5.2 FOLLOWING THE AFORESAID DECISION, WHILE ADJU DICATING AN IDENTICAL ISSUE,HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF C.I.T. VS. DWARKADHISH INVESTMENT P LTD. IN ITA NO. 911/2010 VIDE ORDER D ATED 02.8.2010 HELD AS UNDER: - 6. IN OUR OPINION, AS SECTION 68 OF THE ACT, 1961 HAS BEEN INTERPRETED AS RECENTLY AS 2008 BY A DIVISION BENCH OF THIS COU RT IN DIVINE LEASING AND FINANCE LTD. (SUPRA) AFTER CONSIDERING ALL THE RELE VANT JUDGEMENTS, WE DO NOT HAVE TO RECONSIDER ALL THE JUDGEMENTS REFERRED TO BY MR. SAHNI WHICH ARE PRIOR IN DATE AND TIME TO THE AFORESAID JUDGEM ENT. IN FACT, A SPECIAL LEAVE PETITION FILED AGAINST THE SAID DIVISION BENC H JUDGEMENT WAS DISMISSED BY THE SUPREME COURT BY WAY OF SPEAKING O RDER IN C.I.T. VS. LOVELY EXPORTS (P) LTD. 216 CTR 195 (SC). THE SUPR EME COURT IN LOVELY EXPORTS PVT. LTD. (SUPRA) HAS HELD AS UNDER:- CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME UNDER SECTION 68 OF THE INCOME TAX ACT, 1961. WE FIND NO MERIT IN THIS SPECIAL LEAVE PET ITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MO NEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE ASSESSING OFFICER, THEN THE DEPARTMENT IS FREE TO PROCEED TO RE OPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGEMENT. 7. CONSEQUENTLY, THE DOCTRINE OF MERGER WOULD APPLY AND THE JUDGMENT OF THE SUPREME COURT IN LOVELY EXPORTS (P) LTD. (SUPRA) WOULD COVER THE FIELD WITH REGARD TO INTERPRETATION OF SE CTION 68 OF THE ACT. 8. IN ANY MANNER, THE ONUS OF PROOF IS NO T A STATIC ONE. THOUGH IN SECTION 68 PROCEEDINGS, THE INITIAL BURDEN OF PROOF LIES ON THE ASSESSEE YET ONCE HE PROVES THE IDENTITY OF THE CREDITORS/ SHARE APPLICANTS BY EITHER FURNISHING THEIR PAN NUMBER OR INCOME TAX ASSESSME NT NUMBER AND SHOWS THE GENUINENESS OF TRANSACTION BY SHOWING MO NEY / HIS BOOKS ITA NO.5011/DEL./2010 11 EITHER BY ACCOUNT PAYEE CHEQUE OR BY DRAFT OR BY A NY OTHER MODE, THEN THE ONUS OF PROOF WOULD SHIFT TO THE REVENUE. JUS T BECAUSE THE CREDITORS /SHARE APPLICANTS COULD NOT BE FOUND AT THE ADDRESS GIVEN, IT WOULD NOT GIVE THE REVENUE THE RIGHT TO INVOKE SECTION 68. ONE MUST NOT LOSE SIGHT OF THE FACT THAT IT IS THE REVENUE, WHICH HAS ALL T HE POWER AND WHEREWITHAL TO TRACE ANY PERSON. MOREOVER, IT IS SETTLED LAW THAT THE ASSESSEE NEED NOT TO PROVE THE SOURCE OF SOURCE. 5.3 HONBLE JURISDICTIONAL HIGH COURT IN THEIR AN OTHER DECISION IN C.I.T. VS. OASIS HOSPITALITIES P LTD. ,333 ITR 119 CONCLUDED A S UNDER:- 28. THE APPELLANT FILED COPIES OF PAN, ACKNOWLED GEMENT OF FILING OF INCOME TAX RETURNS OF THE COMPANIES, THEIR BANK ACC OUNT STATEMENTS FOR THE RELEVANT PERIOD, I.E. FOR THE PERIOD WHEN THE C HEQUES WERE CLEARED. HOWEVER, THE PARTIES WERE NOT PRODUCED IN SPITE OF SPECIFIC DIRECTION OF THE ASSESSING OFFICER INSTEAD OF TAKING OPPORTUNIT IES IN THIS BEHALF. SINCE THE SO CALLED DIRECTORS OF THESE COMPANIES WERE NOT PRODUCED ON THIS GROUND COUPLED WITH THE OUTCOME OF THE DETAILED INQ UIRY MADE BY THE INVESTIGATION WING OF THE DEPARTMENT, THE ASSESSING OFFICER MADE THE ADDITION. THIS ADDITION COULD NOT BE SUSTAINED AS THE PRIMARY ONUS WAS DISCHARGED BY THE APPELLANT BY PRODUCING PAN NUMBER , BANK ACCOUNT, COPIES OF INCOME TAX RETURNS OF THE SHARE APPLICANT S, ETC. WE ALSO FIND THAT THE ASSESSING OFFICER WAS INFLUENCED BY THE I NFORMATION RECEIVED BY THE INVESTIGATING WING AND ON THAT BASIS GENERALLY MODUS OPERANDI BY SUCH ENTRY OPERATORS IS DISCUSSED IN DETAIL. HOWEV ER, WHETHER SUCH MODUS OPERANDI EXISTED IN THE PRESENT CASE OR NOT WAS NOT INVESTIGATED BY THE ASSESSING OFFICER. THE APPELLANT WAS NOT CONFRONTED WITH THE INVESTIGATION CARRIED OUT BY THE INVESTIGATION WING OR WAS GIVEN AN OPPORTUNITY TO CROSS EXAMINE THE PERSONS WHOSE STATEMENTS WERE RECORDED BY THE INVESTIGATION WING. 29. AS REGARDS DISCREPANCIES FOUND BY THE ASSESSING OFFICER IN THE BANK STATEMENT, SUFFICE IT TO MENTION THAT THE BAN K STATEMENTS THAT WERE FILED BY THE APPELLANT WERE PROVIDED BY THE S HARE HOLDERS AND WERE COMPUTER PRINTED ON THE BANK STATIONERY. THE SAME WERE FILED BY THE APPELLANT DURING THE ASSESSMENT PROCEEDING WITHOUT ANY SUSPICION OF THEIR BEING INCORRECT. DURING THE ASSESSMENT PROC EEDINGS, THE APPELLANT WAS NEVER CONFRONTED BY THE ASSESSING OFFICER THAT THERE ARE DISCREPANCIES BETWEEN THE BANK STATEMENTS FILED AN D THE STATEMENTS DIRECTLY CALLED BY THE ASSESSING OFFICER . HOWEVER , EVEN AFTER CONSIDERING THE ALLEGED DISCREPANCIES, IT DOES NOT FOLLOW THAT THE AMOUNT OF SHARE CAPITAL WAS THE UNDISCLOSED INCOME OF THE APPELLANT . EVEN THE CORRECT BANK STATEMENTS AS CLAIMED BY THE ASSESSING OFFICER REVEAL THAT THE APPELLANT HAS RECEIVED CHEQUES FROM THE SHAREHOLDER S. IN THIS BACKDROP, ITA NO.5011/DEL./2010 12 THE FOLLOWING OBSERVATIONS OF THE COURT IN THE CASE OF C.I.T. VS. K.C. FIBRES LTD. (2010) 187 TAXMAN 53 (DEL) ARE REPRODUCED: IT IS STRANGE THAT WHEN THE ASSESSING OFFICER IS QUESTIONING THE BONA FIDES OF M/S DIAMOND PROTEIN LTD . FOR COLLECTING MONEY TO SUBSCRIBE TO THE SHARE TO THE CAPITAL OF THE APPELLANT, BUT IT IS THE APPELLANT WH O IS FASTENED WITH THE LIABILITY. THE ASSESSING OFFICER DID NOT QUESTION M/S DIAMOND PROTEIN LTD. IN THIS BEHALF. INSOFAR AS ASSESSING OFFICER IS CONCERNED, IT IS NOT DISPUTED THAT MONEY WAS PAID TO IT TOWARDS THE AFORESAID SHARE APPLICATION MONEY, BY MEANS OF CHEQUES. IT IS NOT FO R THE ASSESSING OFFICER TO PROBE AS TO THE SOURCE FROM WHERE M/S DIAMOND PROTEIN LTD. COLLECTED THE AFORESAID MONEY . IT WAS FOR THE ASSESSING OFFICER, IN THESE CIRCUMSTANCES TO INQUIRE INTO THE AFFAIRS OF M/S DIAMOND PROTEIN LTD. WHICH IS AN INDEPENDENT COMPANY INASMUCH AS NO FINDING IS ARRIVED AT BY THE ASSESSING OFFICER THAT THE TWO COMPAN IES ARE UMBRELLA COMPANIES OR HAVE ANY RELATIONSHIP WITH EACH OTHER. 30. WE ARE, THEREFORE, OF THE OPINION, THAT THERE IS NO MERIT IN THESE TWO APPEALS, WHICH ARE ACCORDINGLY DISMISSED AT THE ADMISSION STAGE ITSELF. 5.4 IN THE LIGHT OF VIEW TAKEN IN THE AFORES AID DECISIONS ,ESPECIALLY WHEN THE EXISTENCE OF AFORESAID SHARE APPLICANTS IS NOT IN D OUBT, WE HAVE NO HESITATION IN UPHOLDING THE FINDINGS OF THE LD. CIT(A), DELETING THE AFORESAID ADDITION ON ACCOUNT OF SHARE CAPITAL . CONSEQUENTLY, GROUND NOS . 1 & 2 IN THE APPEAL ARE DISMISSED.. 6. NO ADDITIONAL GROUND HAVING BEEN RAISED BEFORE US IN TERMS OF THE RESIDUARY GROUND NO. 3 IN THE APPEAL, ACCORDINGLY, THIS GROUN D IS DISMISSED 7. NO OTHER SUBMISSION OR ARGUMENT WAS MADE BEFOR E US ITA NO.5011/DEL./2010 13 8. IN THE RESULT APPEAL IS DISMISSED. SD/- SD/- (R.P. TOLANI) (A.N. PAHUJA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NS COPY OF THE ORDER FORWARDED TO :- 1. ACIT,CIRCLE-12(1), NEW DELHI. 2. M/S GARG TUBES LTD., 5006, 3 RD FLOOR, JAISAV PALACE, NEW DELHI. 3. CIT(A)-XV, NEW DELHI. 4. CIT CONCERNED. 5. DR, ITAT,C BENCH, NEW DELHI 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, DELHI ORDER PRONOUNCED IN OPEN COURT