The ITO, Ward-4(4), Ahmedabad V. Miracle Foils (P) td., Ahmedabad

ITA 506/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6094 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-05-2010
• Assessment Year: 1991-1992
• Appeal Filed On: 11-02-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH
• Keywords: Bogus Share capital; Opportunity of being heard; Set aside
• Section: 143(3); 142(1); 205; 195; 250; 251; 192; 147; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND N. S. SAINI, AM) ITA NO.506/AHD/2008 A. Y.: 1991-92 THE INCOME TAX OFFICER, WARD 4(4), 1 ST FLOOR, NAVJIVANI TRUST BUILDING, ASHRAM ROAD, AHMEDABAD VS MIRACLE FOILS (P) LTD., NEPTUNE TOWER, GROUND FLOOR, ASHRAM ROAD, AHMEDABAD PA NO. AABCN 0532B (APPELLANT) (RESPONDENT) APPELLANT BY SMT. NEETA SHAH, DR RESPONDENT BY NONE O R D E R PER BHAVNESH SAINI, JM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-VI II, AHMEDABAD DATED 22-11-2007 FOR ASSESSMENT YEAR 1991-92 ON THE FOLLO WING GROUND: 1. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE ADDITION OF RS.6,75,000/- TOWARDS UNEXPLAINED SHARE CAPITAL. 2. WE HAVE HEARD THE LEARNED DR AND PERUSED THE FIN DINGS OF THE AUTHORITIES BELOW. HOWEVER, NONE APPEARED ON BEHALF OF THE ASSESSEE AT THE TIME OF HEARING OF THE APPEAL. REQUEST FOR ADJO URNMENT IS REJECTED. 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASS ESSEE CHALLENGED THE ADDITION OF RS.7,00,000/- TOWARDS UNEXPLAINED SHARE CAPITAL BEFORE THE LEARNED CIT(A). THE ORIGINAL ASSESSMENT ORDER WAS P ASSED IN THIS CASE ON 30-03-1994. THEREAFTER, THE ASSESSMENT WAS REOPENED U/S 147 OF THE IT ACT AND FRESH ASSESSMENT ORDER U/S 143(3)/147 OF TH E IT ACT WAS PASSED ON 27-03-1998. IN THE FIRST APPEAL, THE LEARNED CIT (A) PARTLY ALLOWED THE APPEAL. THEN, THERE WAS APPEAL TO THE TRIBUNAL BY T HE DEPARTMENT AND THE TRIBUNAL RESTORED THE ISSUE OF UNEXPLAINED SHAR E CAPITAL TO THE AO ITA NO.506/AHD/2008 ITO VS MIRACLE FOILS (P) LTD. 2 FOR FRESH ADJUDICATION. THE AO THEREAFTER PASSED TH E ASSESSMENT ORDER U/S 143(3) READ WITH SECTION 253 OF THE IT ACT DATE D 26-12-2006, PURSUANT TO THE ORDER OF THE TRIBUNAL DATED 30-03-2 005. THE TRIBUNAL BRIEFLY NOTED IN THE ORDER THAT THE AFFIDAVITS FILE D BY THE ASSESSEE IS SIMPLY REJECTED BY THE AO FOR THE REASON THAT THE S TAMPS WERE PURCHASED FROM SAME STAMP VENDOR WITHOUT CROSS VERI FYING THE FACTS. NOTICE U/S 131 OF THE IT ACT WAS ISSUED AND SERVED AFTER THE DATE WHICH WAS FIXED FOR PERSONAL ATTENDANCE. THE INFORMATION FROM THE BANK ACCOUNTS OF SHAREHOLDERS WERE ALSO CALLED MUCH LATE R DURING THE ASSESSMENT PROCEEDINGS WHEN IT WAS ABOUT TO CONCLUD E. THE TRIBUNAL, THEREFORE, NOTED THAT THE AO AND THE LEARNED CIT(A) HAVE FAILED TO EXAMINE THE CASE PROPERLY. THEREFORE, MATTER WAS RE MANDED TO THE AO TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW, AFT ER EXAMINING AND RECORDING THE RELEVANT FACTS BY SPEAKING ORDER. THE AO TOOK UP THE ASSESSMENT AFRESH AND ISSUED NOTICE TO THE ASSESSEE TO PRODUCE EVIDENCES IN JUNE, 2005. THE ASSESSEE APPEARED BEFO RE THE AO AND FURNISHED CERTAIN DETAILS WHICH WERE KEPT ON RECORD . THE AO THEREAFTER ISSUED NOTICE DATED 11-12-2006 DIRECTING THE ASSESS EE TO PRODUCE THE SHAREHOLDERS ALONG WITH THEIR BANK ACCOUNTS EXPLAIN ING THE SOURCES OF INVESTMENTS AND THEIR IDENTITY PROOF LIKE ID CARD, DRIVING LICENCE ETC. THE ASSESSEE WAS REQUIRED TO FURNISH THE DETAILS OF IDE NTITY AND TO PRODUCE THE SHAREHOLDERS BEFORE THE AO ON 15-12-2006. THE A SSESSEE FILED REPLY ON 15-12-2006 SUBMITTING BEFORE THE AO THAT THE ASS ESSEE HAS BEEN GIVEN ONLY 2/3 DAYS TIME TO COMPLY WITH THE ABOVE D IRECTION WHICH IS INADEQUATE. IT WAS ALSO EXPLAINED THAT FOR THE ASSE SSEE IT WOULD BE PRACTICALLY IMPOSSIBLE TO PRODUCE THE SHAREHOLDERS DURING THE SHORT SPAN OF PERIOD BECAUSE MOST OF THE SHAREHOLDERS ARE FROM DIFFERENT PLACES NAMELY PALI (IN RAJASTHAN) WHICH IS BEYOND 250 KMS FROM AHMEDABAD. THE AO WAS REQUESTED TO ISSUE COMMISSION/SUMMONS U/ S 131 OF THE IT ACT TO THE CONCERNED AO FOR THEIR EXAMINATION. THE ASSESSEE ALSO EXPLAINED TO CO-OPERATE IN THE MATTER AND REQUESTED FOR ADEQUATE AND ITA NO.506/AHD/2008 ITO VS MIRACLE FOILS (P) LTD. 3 REASONABLE TIME IN THIS REGARD. THE AO AGAIN FIXED HEARING FOR 22-12-2006 AND THE ASSESSEE AGAIN EXPLAINED THE SAM E FACTS AND FURNISHED LIST OF SHAREHOLDERS AND STATED THAT ALL THE SHAREHOLDERS ARE OF PIPALI KALA, DISTRICT PALI (IN RAJASTHAN) WHICH IS DISTANT PLACE; THEREFORE, COMMISSION MAY BE ISSUED AGAINST THEM FOR VERIFYING THE FACTS AND GENUINENESS OF THE TRANSACTIONS. THE ASSESSEE CLAIM ED THAT CONFIRMATIONS APPEAR TO HAVE ALREADY BEEN AVAILABLE ON RECORD OF THESE SHAREHOLDERS. THE ASSESSEE RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASES OF CIT VS STELLER INVEST MENTS LTD. 192 ITR 287 CONFIRMING THE DECISION IN THE CASE OF CIT VS STELLER INVESTMENT LTD. 251 ITR 263 (SC) AND IN THE CASE OF SOFIA INVESTMEN TS CO. LTD. 205 ITR 98. THE AO HOWEVER, REJECTED THE EXPLANATION OF THE ASSESSEE AND NOTED THAT THE ASSESSEE HAS FAILED TO PROVE THE IDENTITY, CAPACITY AND GENUINENESS OF THE SHAREHOLDERS WHO HAVE CONTRIBUTE D RS.7,00,000/- AS SHARE CAPITAL AND ACCORDINGLY MADE ADDITION AGAIN. IT WAS EXPLAINED BEFORE THE LEARNED CIT(A) THAT THE ISSUE PERTAINS T O SHARE CAPITAL CONTRIBUTION BY 29 SHAREHOLDERS AND THE ASSESSEE E XPLAINED THAT 16 YEARS HAVE PASSED AND IT WAS NOT POSSIBLE TO COMPLY WITH THE DIRECTION OF THE AO WITHIN 10 DAYS. THE ASSESSEE FURNISHED LIST OF SHAREHOLDERS AND COMPLETE DETAILS AND REQUESTED THE AO TO ISSUE COMM ISSION/SUMMONS U/S 131 OF THE IT ACT FOR VERIFYING THE GENUINENESS OF THE TRANSACTIONS. IT WAS SUBMITTED THAT THE TRIBUNAL SET ASIDE THE EARLI ER ORDERS OF THE AUTHORITIES BELOW AND REMANDED THE MATTER TO THE AO FOR DECIDING THE MATTER AFRESH IN ACCORDANCE WITH LAW AFTER EXAMININ G AND RECORDING RELEVANT FACTS BY SPEAKING ORDER AFTER PROVIDING RE ASONABLE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. HOWEVER , THE AO HAS FAILED TO PROVIDE ANY REASONABLE SUFFICIENT OPPORTUNITY IN THE MATTER AND HAS ALSO NOT ISSUED SUMMONS/COMMISSION DESPITE REQUEST. THE AO DID NOT TAKE NOTE OF THE REQUEST OF THE ASSESSEE FOR ISSUE OF COMMISSION/SUMMONS DESPITE ALL THE CONFIRMATIONS AN D AFFIDAVITS OF THE SHAREHOLDERS WERE FILED ON RECORD. FULL ADDRESS AND PARTICULARS OF THE ITA NO.506/AHD/2008 ITO VS MIRACLE FOILS (P) LTD. 4 SHAREHOLDERS AND ALL INFORMATION WAS ALREADY ON REC ORD AND THE INFORMATION INCLUDED VARIOUS AFFIDAVITS AND IN EARL IER INSTANCE, 5 SHAREHOLDERS WERE PERSONALLY PRODUCED BEFORE THE AO FOR EXAMINING U/S 131 OF THE IT ACT. THE AO DID NOT MENTION ALL THE R ELEVANT FACTS AGAIN IN THE ASSESSMENT ORDER AND REPEATED THE ADDITION. IT WAS SUBMITTED THAT ENTIRE EVIDENCES AVAILABLE ON RECORD OF THE AO AND THE AO FAILED TO ISSUE SUMMONS/COMMISSION FOR VERIFYING THE FACTS AND GENU INENESS OF THE TRANSACTIONS IN THE MATTER. THE ASSESSEE ALSO EXPLA INED THAT IT IS A 16 YEARS OLD MATTER; THEREFORE, THE ASSESSEE CANNOT BE DIRECTED TO DO THE IMPOSSIBLE ACTS. IT WAS ALSO EXPLAINED THAT THE REM AINING SHAREHOLDERS WERE ACCEPTED BY THE AO AND NO ADDITION HAS BEEN MA DE IN THE FIRST INSTANCE. THE AO PASSED THE ORDER ON 26-12-2006 WIT HIN A SPAN OF 10 DAYS FROM THE DATE OF THE SHOW CAUSE NOTICE. THEREF ORE, ULTIMATELY THE AO HAS TRIED TO FIND FAULT WITH THE ASSESSEE AND AD DITION HAS BEEN MADE BY NON-SPEAKING ORDER. THE ASSESSEE AGAIN RELIED UP ON THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASES OF STELLER I NVESTMENTS LTD. AND SOFIA INVESTMENT CO. LTD. (SUPRA). THE ASSESSEE ALS O RELIED UPON OTHER DECISIONS WHICH HAVE BEEN QUOTED BY THE LEARNED CIT (A) IN THE IMPUGNED ORDER TO SHOW THAT NO ADDITION COULD BE MADE, ONCE IDENTITY OF THE SHAREHOLDERS HAVE BEEN PROVED. THE ASSESSEE ALSO RE LIED UPON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CA SE OF S. HASTIMAL VS CIT 49 ITR 273 IN WHICH IT WAS HELD THAT AFTER THE LAPSE OF A DECADE, AN ASSESSEE SHOULD NOT BE PLACED UPON THE RACK AND CALLED UPON TO EXPLAIN NOT MERELY THE ORIGIN AND SOURCE OF A CAPIT AL CONTRIBUTION BUT THE ORIGIN AND SOURCE OF SOURCE AS WELL. THE DI FFICULTY ON THE PART OF ANY ASSESSEE TO EXPLAIN A TRANSACTION WHICH TOOK PLACE BEFORE A DECADE HAS TO BE BORNE IN MIND BY THE DEPA RTMENT AND SHOULD, UNDER NO CIRCUMSTANCES, BE UNDERESTIMATED O R TAKEN ADVANTAGE OF BY THEM. IT WAS ACCORDINGLY SUBMITTED THAT THE ASSESSEE FURNISHED THE DETAILS OF THE SHAREHOLDERS, COPIES O F THEIR BANK ACCOUNT ETC. CONFIRMATIONS AND AFFIDAVITS OF THE SHAREHOLDE RS WERE FILED WHICH ITA NO.506/AHD/2008 ITO VS MIRACLE FOILS (P) LTD. 5 HAVE NOT BEEN DISCUSSED EVEN IN THE ASSESSMENT ORDE R. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION OF THE ASSESSEE, EVIDENCES AND MATERIAL ON RECORD DELETED THE ENTIRE ADDITION. HIS FINDINGS IN PARA 6 ARE REPRODUCED AS UNDER: 6. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MAD E AND THE DECISIONS CITED BY THE LD. AUTHORISED REPRESENT ATIVE. I FIND THAT THE APPELLANT HAD FILED CONFIRMATION LETTERS F ROM 9 SHAREHOLDERS AND FILED AFFIDAVITS FROM 18 SHAREHOLD ERS. IN CASE OF TWO SHAREHOLDERS I.E. SMT. LILY SEN FOR RS. 25,000/- AND SHRI ABHAY P. SHAH OF RS.1,000/- NO CONFIRMATIO N OR AFFIDAVIT HAS BEEN FILED. IT HAS BEEN STATED BY THE LD. A. R. THAT SHRI ABHAY SHAH IS A DIRECTOR AND IS ASSESSED TO TA X. AS THE INVESTMENT IS SMALL AND HE IS A DIRECTOR, IN MY VIE W NO ADDITION SHOULD BE MADE FOR THE INVESTMENT OF RS.1, 000/-. THE A.O. IN THE REASSESSMENT ORDER DATED 27.03.1998 HAS OBSERVED THAT IN THE CASE OF TWO OR THREE SHAREHOLD ERS WHO ARE APPARENTLY ASSESSED TO TAX, THE CONTRIBUTION TO SHARE CAPITAL WAS OUT OF VARIOUS LOANS TAKEN BY THEM. THE RE IS NO BAR FOR THE SHARE HOLDERS TO BORROW AND CONTRIBUTE TO SHARE CAPITAL, SO THIS CAN NOT BE A REASON TO MAKE ADDITI ON. IT IS ALSO THE CONTENTION OF THE LD. A. R. THAT THE A. O. HAD RECORDED STATEMENTS OF 5 SHARE HOLDERS IN MARCH 1998, BUT TH E SAME HAS NOT BEEN DISCUSSED BY THE A. O. IN THE REASSESS MENT ORDER. FROM THE PAPER BOOK FILED BY THE LD. A.R. AT PAGES 1 TO 40 IT IS NOTICED THAT THE SHARE HOLDERS HAVE GIVEN CONFIRMATIONS AND AFFIDAVITS EXPLAINING THE SOURCE OF THEIR INVESTMENT IN SHARE CAPITAL EXCEPT THE SHARE CAPITA L OF SMT. LILY SEN FOR RS.25,000/-. IT IS TRUE THAT THE INVES TMENTS RELATE TO YEAR 1990 AND 16 YEARS HAVE LAPSED, SO THE APPEL LANT CAN NOT BE MADE TO SUFFER IN VIEW OF THE DECISIONS OF S . HASTIMAL CITED BY THE LD. A. R. IT IS ALSO TRUE THAT THE A.O . HAS NOT ISSUED COMMISSION TO THE LOCAL A. O. TO INQUIRE THE IDENTI TY OF THE SHAREHOLDERS AND TO INQUIRE ABOUT THE GENUINENESS O F INVESTMENT. AS FOR E. G. THE SHAREHOLDER SMT. MANJU P. SHAH HAS INVESTED RS.25,000/- BY CHEQUES AND SHE HAS ENC LOSED COPY OF BANK PASS BOOK SHOWING THE SAID INVESTMENT. SIMILARLY FOR OTHER SHAREHOLDERS THE DETAILS HAVE B EEN FILED. AS HELD IN THE CASE OF BARKHA SYNTHETICS LTD. VS ACIT - 283 ITR 377 (RAJASTHAN), WHERE THE SHARE APPLICATION MONEY IS RECEIVED THROUGH BANKING CHANNEL, THE ASSESSEE HAS ONLY TO PROVE THE EXISTENCE OF THE PERSON IN WHOSE NAME SHA RE APPLICATION IS RECEIVED. ONCE THE EXISTENCE OF THE INVESTOR IS PROVED, THERE IS NO FURTHER BURDEN ON THE ASSESSEE TO PROVE WHETHER THAT PERSON ITSELF HAS INVESTED THE SAID MO NEY OR ITA NO.506/AHD/2008 ITO VS MIRACLE FOILS (P) LTD. 6 SOME OTHER PERSON HAS MADE INVESTMENT IN THE NAME O F THAT PERSON. THUS MAJORITY OF THE COURTS ARE OF THE VIEW THAT ONCE THE SHAREHOLDERS ARE IDENTIFIED, NO ADDITION CAN BE MADE FOR UNEXPLAINED SHARE CAPITAL. THE APPELLANT HAS DISCHA RGED THE ONUS OF PROVING THE IDENTITY OF THE SHAREHOLDERS AN D ALSO CREDITWORTHINESS OF THE SHAREHOLDERS BY FURNISHING CONFIRMATIONS AND AFFIDAVITS. AFTER THAT IT WAS THE DUTY OF THE A. O. TO DISPROVE THE SAME BY MAKING INQUIRIES, BUT THE A. O. HAS NOT MADE FURTHER INQUIRIES. IN VIEW OF THE ABOV E FACTS, AFTER EXAMINING THE DETAILS FILED BY THE SHAREHOLDE RS AS APPEARING AT PAGES 1 TO 40 OF THE PAPER BOOK, I COM E TO THE CONCLUSION THAT ALL THE SHAREHOLDERS EXCEPT SMT.. L ILY SEN FOR RS.25,000/- HAVE BEEN IDENTIFIED AND THEY HAVE ALSO EXPLAINED THEIR SOURCE OF INVESTMENT IN SHARE CAPIT AL. IT IS ALSO FOUND THAT THE SHAREHOLDERS S. C. PAGARIA, BABITA M ATHUR, S. K. SAXENA, I. C. PANWAR, S. K. PAREKH, P. N. MEWARA , OMPRAKASH MANDOT, T. R. MEHTA AND KAMAL GUPTA HAVE BEEN WORKING WITH THE SISTER CONCERN OF THE APPELLANT I. E. P. G. FOILS LTD. AND EITHER THEY HAVE RECEIVED SALARY ADVANCE O R SERVICE AWARD FROM P. G. FOILS LTD. THUS THEIR IDENTITY IS CLEARLY8 ESTABLISHED. IN VIEW OF THE ABOVE FACTS, THE ADDITI ON MADE BY THE A. O. IS DELETED EXCEPT THE AMOUNT OF RS.25,000 ./- RELATING TO SMT. LILY SEN. 5. THE LEARNED DR RELIED UPON THE ORDER OF THE AO A ND SUBMITTED THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE TRANSACTIONS AND CREDITWORTHINESS OF THE SHAREHOLDERS. THE LEARNED D R SUBMITTED THAT THE ASSESSEE WAS AWARE OF THE FACT THAT ONUS IS UPON IT TO PROVE THE GENUINENESS OF THE TRANSACTIONS IN THE MATTER BUT T HE ASSESSEE FAILED TO DISCHARGE THE ONUS UPON IT, THEREFORE, ADDITION WAS RIGHTLY MADE BY THE AO. THE LEARNED DR SUBMITTED THAT THE ASSESSEE HAD BEEN IN LITIGATION BEFORE THE TRIBUNAL AS WELL AS BEFORE THE HIGH COUR T AND DUE TO LITIGATION IN THE HIGH COURT, 16 YEARS HAVE LAPSED FOR WHICH N O FAULT CAN BE FOUND WITH THE AO. THE LEARNED DR SUBMITTED THAT THE LEAR NED CIT(A) HAS NOT CONSIDERED THE ISSUE PROPERLY AND WITHOUT ANY JUST REASON DELETED THE ADDITION. THE LEARNED DR SUBMITTED THAT SINCE THE A SSESSEE FAILED TO PRODUCE THE SHAREHOLDERS BEFORE THE AO AS PER DIREC TION ISSUED ON 11-12-2006 IN THE NOTICE U/S 142(1) OF THE IT ACT, THEREFORE, LEARNED CIT(A) SHOULD NOT HAVE DELETED THE ADDITION. THE LE ARNED DR SUBMITTED ITA NO.506/AHD/2008 ITO VS MIRACLE FOILS (P) LTD. 7 THAT THE ASSESSEE MADE SUBMISSION ON ISSUE OF COMMI SSION/SUMMONS AT THE FAG END OF THE ASSESSMENT. THEREFORE, NO SIGNIF ICANCE COULD BE ATTACHED TO SUCH A REQUEST. THE LEARNED DR SUBMITTE D THAT THE ASSESSEE SHALL HAVE TO PROVE THE IDENTITY OF THE SHAREHOLDER S, GENUINENESS OF THE TRANSACTIONS IN THE MATTER AND CREDITWORTHINESS OF THE SHAREHOLDERS WHICH THE ASSESSEE HAS FAILED TO PROVE IN THE MATTE R. THE LEARNED DR SUBMITTED THAT THE ASSESSEE FAILED TO COMPLY WITH E VEN DIRECTION OF THE TRIBUNAL; THEREFORE, THERE WAS NO JUSTIFICATION TO DELETE THE ADDITION IN THE MATTER. THE LEARNED DR FILED COPY OF THE EARLIE R ORDER OF THE TRIBUNAL, ASSESSMENT ORDER AND ANNEXURE TO SCRUTINY REPORT BY JCIT (ASSTT.), SPECIAL RANGE- 2, AHMEDABAD. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNE D DR, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE FILED CONFIRMAT IONS AND AFFIDAVITS OF THE SHARE APPLICANTS BEFORE THE AO IN RESPECT OF 27 SHAREHOLDERS FOR WHICH THE LEARNED CIT(A) DELETED THE ADDITION. IT I S ALSO NOT IN DISPUTE THAT THE ASSESSEE FILED LIST OF SHAREHOLDERS WITH T HEIR COMPLETE ADDRESSES AND ALSO EXPLAINED THAT THE SHAREHOLDERS ARE OF PIP ALIAN KALAN, DISTRICT PALI (RAJASTHAN). THE SCRUTINY REPORT BY THE JCIT ( ASSTT.), SPECIAL RANGE- 2, AHMEDABAD IS FILED ON RECORD BY THE LEARNED DR. IN THIS SCRUTINY REPORT IT IS NOTED THAT DURING THE COURSE OF EARLIE R ASSESSMENT, THE AO REQUESTED TO STATE BANK OF BIKANER AND JAIPUR, PIPA LIAN KALAN TO SEND ACCOUNT COPY OF ALL THE 30 PARTIES VIDE HIS LETTER DATED 12-03-1994 BUT THE BANKER EXPLAINED THAT THERE IS NO PHOTOCOPY FAC ILITY AVAILABLE WITH THEM AND REQUESTED FOR 15 DAYS TIME. IT WOULD SHOW THAT THE AO WAS SATISFIED WITH ALL THE TRANSACTIONS BETWEEN THE ASS ESSEE COMPANY AND THE SHARE APPLICANTS WERE ROUTED THROUGH BANKING CHANNE L. IN THE SCRUTINY REPORT ALSO IT IS MENTIONED THAT AT THE FAG END OF THE YEAR I.E. ON 24-03-1998, THE ASSESSEE HAS PRODUCED 2 INVESTORS W HOSE STATEMENT WERE RECORDED AND THAT BOTH OF THEM WERE WORKING IN THE GROUP CONCERN ITA NO.506/AHD/2008 ITO VS MIRACLE FOILS (P) LTD. 8 OF THE ASSESSEE. IT WAS ALSO NOTED IN THE SCRUTINY REPORT THAT IT IS EVIDENT FROM THE APPELLATE ORDER THAT THE ASSESSEE HAS FILE D FRESH DETAILED DISCUSSION OF EACH AND EVERY SHAREHOLDER SHOWING TH EIR SOURCE OF INVESTMENTS IN EACH CASE. THE DETAILS MENTIONED IN THE SCRUTINY REPORT WOULD CLEARLY REVEAL THAT THE AO IN THE FIRST INSTA NT TRIED TO GET COPY OF THE BANK ACCOUNT AND THEIR STATEMENT OF ALL THE SHA RE APPLICANTS FROM STATE BANK OF BIKANER AND JAIPUR. THE ASSESSEE ALSO PRODUCED 2 OF THE PERSONS WHOSE STATEMENT HAS BEEN RECORDED BY THE AO WHO WERE WORKING WITH THE SISTER CONCERN OF THE ASSESSEE. IT IS ALSO A FACT THAT THE ASSESSEE FILED DETAILS AT THE APPELLATE STAGE DISCUSSING EAC H AND EVERY SHAREHOLDER SHOWING THEIR SOURCES OF INVESTMENT IN EACH CASE. T HE DETAILS MENTIONED IN THE SCRUTINY REPORT WOULD, THEREFORE, CLEARLY RE VEAL THAT NOT ONLY THE ASSESSEE FILED CONFIRMATION OF THE SHAREHOLDERS BEF ORE THE AO BUT 2 PERSONS WERE PRODUCED BEFORE THE AO WHO WERE EXAMIN ED AND COMPLETE DETAILS WERE FILED IN RESPECT OF THE SHAREHOLDERS A LONG WITH SOURCE OF THEIR INVESTMENTS. THE DETAILS CALLED FROM THE BANK ALSO SHOW THAT ALL THE TRANSACTIONS BETWEEN THE ASSESSEE AND THE SHAREHOLD ERS WERE ROUTED THROUGH BANKING CHANNEL. THE TRIBUNAL WHILE RESTORI NG THE MATTER TO THE AO VIDE ORDER DATED 30-03-2005 (SUPRA) ALSO OBSERVE D IN THE FINDING THAT THE AFFIDAVITS FILED BY THE ASSESSEE HAVE BEEN REJE CTED WITHOUT CROSS VERIFYING THE FACTS. SUMMONS ISSUED TO THE SHAREHOL DERS WERE SERVED AFTER THE DATE OF HEARING AND THAT INFORMATION CALL ED FROM THE BANK ACCOUNTS OF THE SHAREHOLDERS WERE ALSO CALLED MUCH LATER WHEN THE PROCEEDING WAS ABOUT TO BE CONCLUDED. THE TRIBUNAL, THEREFORE, NOTED THAT THE AO AND THE LEARNED CIT(A) HAVE NOT PROPERL Y EXAMINED THE ISSUE. THE AO WAS, THEREFORE, DIRECTED TO PASS A SPEAKING ORDER AFTER EXAMINING AND RECORDING RELEVANT FACTS. THE LEARNED CIT(A) AT PAGE 2 OF THE IMPUGNED ORDER REPRODUCED THE OPERATIVE PORTION OF THE ORDER OF THE TRIBUNAL. THE AO IN VIEW OF THE ABOVE DIRECTIONS OF THE TRIBUNAL TOOK UP THE ASSESSMENT AFRESH; HOWEVER, HE HAS NOT MENTIONE D ABOUT 2 PERSONS WHO WERE EXAMINED BY THE AO U/S 131 OF THE IT ACT. THE DETAILS FILED ON ITA NO.506/AHD/2008 ITO VS MIRACLE FOILS (P) LTD. 9 RECORD ABOUT THE SHAREHOLDERS, THEIR COMPLETE ADDRE SS AND TRANSACTIONS CONFIRMED BY THE SHAREHOLDERS IN THEIR CONFIRMATION AND AFFIDAVITS HAVE ALSO NOT BEEN DISCUSSED IN THE IMPUGNED ASSESSMENT ORDER. THE AO HAS ALSO NOT DISCUSSED THE DETAILS CALLED FROM THE BANK OF THE SHAREHOLDERS IN THE ASSESSMENT ORDER. THUS, THE AO HAS NOT COMPLIED WITH THE DIRECTION OF THE TRIBUNAL DATED 30-03-2005. IT MAY ALSO BE NO TED THAT THE AO ISSUED NOTICE U/S 142(1) OF THE IT ACT ON 11-12-200 6 DIRECTING THE ASSESSEE TO PRODUCE ALL THE SHAREHOLDERS WITH THEIR IDENTITY PROOF ON 15-12-2006 I.E. WITHIN 3 TO 4 DAYS OF THE ISSUE OF THE NOTICE. THE ASSESSEE EXPLAINED IN ITS REPLY THAT ALL THE SHAREHOLDERS AR E FROM DISTRICT PALI (RAJASTHAN) AND AS SUCH THEY CANNOT BE PRODUCED WIT HIN 3 DAYS BEFORE THE AO FOR EXAMINATION. THEREFORE, REQUEST WAS MADE TO ISSUE COMMISSION/SUMMONS AGAINST THEM FOR EXAMINING BY TH E CONCERN AO. THE AO HOWEVER, HAS FAILED TO ISSUE ANY COMMISSION/ SUMMONS ON THE REQUEST OF THE ASSESSEE. THE AO DIRECTED THE ASSESS EE TO DO THE IMPOSSIBLE ACT WITHIN 3 TO 4 DAYS AND HAS ALSO FAIL ED TO ISSUE SUMMONS/COMMISSION ON THE REQUEST OF THE ASSESSEE. IT WOULD, THEREFORE, SHOW THAT THE AO NEVER WANTED TO EXAMINE THE ISSUE PROPERLY WHICH IS ALSO OBSERVED BY THE TRIBUNAL IN THE ORDER DATED 30-03-2005. THE AO PASSED THE ORDER WITHIN 10 DAYS FROM THE DAT E OF REPLY OF THE ASSESSEE WITHOUT GOING THROUGH ANYTHING IN THE MATT ER AND WITHOUT EXAMINING ANY DETAILS ALREADY AVAILABLE ON RECORD. THEREFORE, THE AO AGAIN VIOLATED THE DIRECTION OF THE TRIBUNAL TO PRO VIDE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN THE M ATTER. THE HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT VS RAM ESH CHANDRA SUKLA (MAIT NO.71/2003 DECIDED ON 01-04-2005) REPOR TED IN 10 ITJ 286 HELD THAT IT IS NOW WELL SETTLED THAT WHERE THE ASSESSEE REQ UESTS THE ASSESSING OFFICER TO ISSUE SUMMONS TO ENFORCE A TTENDANCE OF THE CREDITORS TO ESTABLISH THE GENUINENESS AND CAPA CITY OF THE CREDITORS, IT IS DUTY OF THE ASSESSING OFFICER TO E NFORCE ATTENDANCE OF CREDITORS BY ISSUING SUMMONS. IF THE ASSESSING O FFICER DOES NOT ITA NO.506/AHD/2008 ITO VS MIRACLE FOILS (P) LTD. 10 CHOSE TO ISSUE SUMMONS AND EXAMINE CREDITORS, HE CA NNOT SUBSEQUENTLY TREAT THE LOANS STANDING IN THE NAME O F SUCH CREDITORS AS NON-GENUINE NOR ADD THE AMOUNT THEREO F TO THE ASSESSEES INCOME. CONSIDERING THE FACTS OF THE CASE AS NOTED ABOVE AND THE FACT THAT THE AO DID NOT ISSUE SUMMONS TO T HE SHARE APPLICANTS AND THE CONCERN AO NEVER EXAMINED WOULD SHOW THAT T HE AO DID NOT WANT TO ISSUE SUMMONS AND EXAMINE THE CREDITORS ABO UT THE TRANSACTIONS MADE WITH THE ASSESSEE. THEREFORE, THE AO SUBSEQUENTLY CANNOT TREAT THE SHARE APPLICATION MONEY AS NON-GEN UINE AND INCOME OF THE ASSESSEE. THE HONBLE DELHI HIGH COURT IN THE C ASE OF CIT VS (1) DEVINE LEASING AND FINANCE LTD., (2) GENERAL EXPORT S AND CREDITS LTD. AND (3) LOVELY EXPORTS P. LTD. 299 ITR 268 HELD THA T NO ADVERSE INFERENCE IS TO BE DRAWN IF THE SHAREHOLDERS FAILED TO RESPOND TO THE NOTICE OF THE AO. DUTY OF THE AO TO INVESTIGATE CREDITWORTHINESS OF THE SHAREHOLDERS. IT WAS FURTHER HELD - HELD, DISMISSING THE APPEALS, THAT THE TRIBUNAL HAD CATEGORICALLY HELD T HAT THE ASSESSEE HAS DISCHARGED ITS ONUS OF PROVING THE IDENTITY OF THE SHARE SUBSCRIBERS. HAD ANY SUSPICION STILL REMAINED IN T HE MIND OF THE ASSESSING OFFICER HE COULD HAVE INITIATED COERCIVE PROCESS BUT THIS COURSE OF ACTION HAD NOT BEEN ADOPTED. THE DEL ETION OF THE ADDITIONS WAS JUSTIFIED. IT IS ADMITTED FACT THAT THE ASSESSEE FILED ALL THE CONFIRMATION AND AFFIDAVIT OF THE SHARE APPLICA NTS AND THEIR COMPLETE DETAILS AND SOURCES OF THEIR INVESTMENTS IN THE SHA RE. THEREFORE, ISSUE WOULD NOW BE COVERED BY THE RECENT DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS LOVELY EXPORTS (P) LTD. 216 CTR 195 IN WHICH IT WAS HELD AS UNDER: CONCLUSION: IF THE SHARE APPLICATION MONEY IS RECE IVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW, BUT IT ITA NO.506/AHD/2008 ITO VS MIRACLE FOILS (P) LTD. 11 CANNOT BE REGARDED AS UNDISCLOSED INCOME OF ASSESSE E COMPANY. 7. CONSIDERING THE ABOVE DISCUSSION IT IS CLEAR THA T THE ASSESSEE FILED COMPLETE DETAILS OF THE SHAREHOLDERS BEFORE THE AO. THEIR CONFIRMATION AND AFFIDAVITS ARE ALSO FILED. THE AO FAILED TO ISS UE SUMMONS/COMMISSION FOR EXAMINING THE SHARE APPLICAN TS AS PER REQUEST OF THE ASSESSEE. NO REASONABLE OPPORTUNITY IS GIVEN TO THE ASSESSEE IN THIS REGARD BECAUSE ASSESSMENT IS FRAMED WITHIN 10 DAYS FROM THE DATE OF THE NOTICE. THE AO HAS ALSO FAILED TO EXAMINE TH E BANK ACCOUNTS OF THE SHARE APPLICANTS DESPITE SPECIFICALLY MENTIONED THE SAME FACTS IN THE SCRUTINY REPORT AS NOTED ABOVE. THEREFORE, WE DO NO T FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) IN DELETING THE ADD ITION. WE ACCORDINGLY CONFIRM THE FINDINGS OF THE LEARNED CIT(A) AND DISM ISS THE APPEAL OF THE REVENUE. 8. AS A RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 04-06-2010 SD/- SD/- (N. S. SAINI) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 04-06-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD