IDHASOFT LTD., MUMBAI V. DCIT - 15(2)(1), MUMBAI

ITA 5139/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6871 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2007-2008
• Appeal Filed On: 11-08-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B SRINIVAS
• Keywords: Reopening of assessment; Bogus purchase; Unexplained cash credit; Bogus Share capital; Gift; Business income; Depreciation; Transfer pricing; Income from undisclosed sources; Search and seizure; Opportunity of being heard; International transaction; Period of limitation; Source of fund; Question of law; Cost of acquisition; Difference of opinion; Accommodation entries; Competent authority; Onus to prove; Reason to believe; Documents seized; Change of opinion; Reassessment proceedings
• Section: 44AD; 143(3); 133A; 147; 131; 68; 69; 148; 6; 139

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J, MUMBAI , . . , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO.5139/MUM/2016 ASSESSMENT YEAR: 2007-08 M/S IDHASOFT LTD. 3, NARAYAN BUILDING, 23 L. N. ROAD, DADAR EAST, MUMBAI-400014 / VS. DCIT - 15(2)(1), ROOM NO.357, 3 RD FLOOR AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400020 ( !' # /ASSESSEE) ( $ / REVENUE) P.A. NO. AABCI6090G ITA NO.5338/MUM/2016 ASSESSMENT YEAR: 2007-08 DCIT - 15(2)(1), ROOM NO.357, 3 RD FLOOR AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400020 / VS. M/S IDHASOFT LTD. 3, NARAYAN BUILDING, 23 L. N. ROAD, DADAR EAST, MUMBAI-400014 ( $ / REVENUE) ( !' # /ASSESSEE) P.A. NO. AABCI6090G 5139 & 5338/MUM/2016 IDHASOFT LTD. 2 !' # / ASSESSEE BY SHRI VIJAY MEHTA $ / REVENUE BY SHRI B.SRINIVAS CIT-DR % $& ' # ( / DATE OF HEARING : 06/06/2018 ' # ( / DATE OF ORDER: 13/07/2018 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE AS WELL AS THE REVENUE IS IN CROSS AP PEAL AGAINST THE IMPUGNED ORDER DATED 06/06/2016 OF THE FIRST APPELLATE AUTHORITY, MUMBAI. IN THE APPEAL OF THE ASSESSEE, CONFIRMATION OF REOPENING OF ASSESSMENT UNDER SECTI ON 147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) HAS BEEN CHALLENGED, WHEREAS, IN THE APPEAL OF THE REVENUE, THE ADDITION MADE UNDER SECTION 68 OF THE ACT, DELETED BY THE LD. FIRST APPELLATE AUTHORITY HAS BEEN CHALLENGED. 2. FIRST, WE SHALL TAKE UP THE APPEAL OF THE ASSES SEE (ITA NO.5139/MUM/2016), WHEREIN, THE GROUND RAISED IS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEAL) ERRED IN HOLDIN G THAT THE REOPENING OF ASSESSMENT UNDER SECTION 147 IS VALID AND THE LD. ASSESSING OFFICER HAD VALID REASONS TO INITIATE THE REASSESSMENT PROCEEDINGS. THE REOPENING OF ASSESSMENT IS BAD IN LAW AND NEEDS TO BE QUASHED. 5139 & 5338/MUM/2016 IDHASOFT LTD. 3 2.1. DURING HEARING, SHRI VIJAY MEHTA, LD. COUNSEL FOR THE ASSESSEE, CHALLENGED THE REOPENING OF ASSESSMEN T, BEYOND FOUR YEARS, BY CONTENDING THAT THE ASSESSEE FILED THE RETURN ON 28/10/2007 AND THEREAFTER NOTICE UNDER SECTION 142( 1) OF THE ACT WAS ISSUED ON 29/09/2009 AND ASSESSMENT ORDER W AS PASSED UNDER SECTION 143(3) OF THE ACT ON 15/12/200 9. IT WAS EXPLAINED THAT NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED ON 31/03/2014 AFTER FOUR YEARS FROM END OF THE FINA NCIAL YEAR. OUR ATTENTION WAS ALSO INVITED TO THE REASONS RECORDED, WHICH HAS BEEN REPRODUCED AT PAGE-4 (PARA 2.05 OF T HE IMPUGNED ORDER). THE LD. COUNSEL EMPATHETICALLY EXP LAINED THAT M/S PRISUM INFORMATICS LTD. MAY NOT BE IN A PO SITION TO EXPLAIN THE SOURCE OF THE FUNDS AND THE ASSESSEE IS NOT A PARTY BEFORE FIBP AND THUS THERE IS NO FAILURE ON THE PAR T OF THE ASSESSEE TO DISCLOSE THE MATERIAL FACTS, CONSEQUENT LY, HOW ASSESSMENT CAN BE REOPENED IN THE CASE OF THE PRESE NT ASSESSEE THAT TOO AFTER A PERIOD OF FOUR YEARS. IT WAS PLEADED THAT EVEN OTHERWISE, THE ASSESSEE IS NOT EXPECTED T O PROVE THE SOURCE OF SOURCE AND THUS THERE IS NO FAILURE ON TH E PART OF THE ASSESSEE. IT WAS CONTENDED THAT MERELY STATING THE WORD 5139 & 5338/MUM/2016 IDHASOFT LTD. 4 FAILURE IN THE REASONS IS NOT SUFFICIENT RATHER IT HAS TO BE ESTABLISHED BY THE LD. ASSESSING OFFICER BECAUSE TH E REASONS CANNOT BE ENLARGED OR CURTAILED BY SUBSEQUENT HAPPE NINGS. 2.2. ON THE OTHER HAND, THE LD. CIT-DR, SHRI B. SRINIVAS, ALSO INVITED OUR ATTENTION TO PARA 2.05 ( PAGE-4 OF THE IMPUGNED ORDER) AND READ OVER THE REASONS RECORDED BY THE LD. ASSESSING OFFICER AND REPRODUCED IN THE AFORESA ID PARA. THE LD. CIT-DR CONTENDED THAT THE REOPENING WAS VAL IDLY DONE AS NEW MATERIAL CAME TO THE KNOWLEDGE OF THE LD. AS SESSING OFFICER, SUBSEQUENTLY AND IT WAS THE DUTY OF THE ASS ESSEE TO DISCLOSE THE MATERIAL FACTS, WHILE FILING THE RETUR N. THE LD. CIT- DR RELIED UPON THE DECISION IN ARADHANA ESTATE P. L TD. VS DCIT (2018) 91 TAXMANN.COM 119(GUJARAT), BRIGHT STA T SYTEX (P.) LTD. VS INCOME TAX OFFICER (2016) 71 TAXMANN.C OM 64 (BOM.), JAYANT SECURITY & FINANCE LTD. VS ACIT (201 8) 91 TAXMANN.COM 181 (GUJARAT), PARAMOUNT INTERCONTINENT AL PVT. LTD. VS INCOME TAX OFFICER (2017) 88 TAXMANN.COM 59 5 (DEL.) AND SUBHLAKSHMI VANIJYA PVT. LTD. VS ACIT (2015) 60 TAXMANN.COM 60 (KOLKATA) (TRIB.). 5139 & 5338/MUM/2016 IDHASOFT LTD. 5 2.3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE AD VERTING FURTHER, IT IS OUR BOUNDED DUTY TO ANALYZE THE REAS ONS RECORDED BY THE LD. ASSESSING OFFICER, WHICH ARE RE PRODUCED HEREUNDER:- AN INFORMATION WAS RECEIVED FROM FT & TR-V VIDE LE TTER NO. F.N.159/FC/2013(FIPB) DATED 12.03.2014 WHEREIN THE FIPB PROPOSAL FILED BY M/S PRISM INFORMATICS LIMITED HAS BEEN EXAMINED. ON PERUSAL OF THE SAME IT IS NOTICED THAT PROPOSAL WAS REJECTED SINCE THE SOURCE OF INITIAL INVESTMENT OF USD 7.5 MILLION MADE BY M/S ANTLEG CYPRUS IN IDHASOFT LIMIT ED (ASSESSED TO TAX IN THIS CHARGE) COULD NOT BE PROVE D. FURTHER ON PERUSAL OF CONTENTS OF THE ABOVE REFERRE D LETTER ACCORDING TO DOR, IT IS FURTHER NOTICED THAT THE 4 CRORES SHARES OF IDHASOFT WAS TRANSFERRED BY M/S ANTLEG CY PRUS LIMITED TO M/S ISOTECHNOLOGY VENTRURES LIMITED, MAU RITIUS ON 24.05.2010 FOR AN AMOUNT OF USD 1 WHEREAS ABOUT 18 CRORES SHARES OF IDHASOFT ARE PROPOSED TO BE TRANSFERRED F OR A VALUE OF USD 2 MILLION AS PER THE PROPOSAL AND M/S ANTLEG CY PRUS LIMITED COULD NOT GIVE SATISFACTORY EXPLANATION TO SUBSTANTIATE THIS HUGE DIFFERENCE IN THE PRICING OF SHARES OF ID HASOFT. SINCE M/S ANTLEG CYPURS LIMITED COULD NOT FILE DETA ILS ABOUT ACTUAL SOURCES OF FUNDS INVESTED BY THE FOREIGN INV ESTORS AT THE TIME OF ORIGINAL INVESTMENT IN M/S IDHASOFT LIM ITED AND THERE IS LACK OF CLARITY REGARDING THE ULTIMATE BEN EFICIARIES OF M/S. ANTLEG CYPURS LIMITED, THE BOARD REJECTED THE PROPOSAL OR FIPB. IN VIEW OF THE ABOVE ADDITIONAL INFORMATION AVAILAB LE ON RECORD I HAVE REASON TO BELIEVE THAT THE SOURCE OF INVESTM ENT MADE BY M/S ANTLEG CYPURS LIMITED OF USD 7.5 MILLION IN M/S IDHASOFT LIMITED HAS ESCAPED ASSESSMENT. THE ASSESSEE COMPAN Y HAS FAILED TO DISCLOSE FULLY AND TRULY AND MATERIAL ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT. 5139 & 5338/MUM/2016 IDHASOFT LTD. 6 2.4. SO FAR AS, THE AFORESAID REASONS ARE CONCERNE D, THE LD. ASSESSING OFFICER MENTIONS A LETTER DATED 12/03 /2014, WHEREIN, M/S PRISUM INFORMATICS LTD. FILED FIPB PRO POSAL, WHICH WAS EXAMINED AND THE SAME WAS REJECTED. IT HA S BEEN MENTIONED THAT SINCE, M/S ANTLEG CYPRUS LTD. COULD NOT FILE THE DETAILS ABOUT THE SOURCES OF FUNDS INVESTED BY FORE IGN INVESTORS, THEREFORE, THERE WAS A LACK OF CLARITY W ITH RESPECT TO THE BENEFICIARY AND THEREFORE INCOME CHARGEABLE TO TAX ESCAPED ASSESSMENT. THE CRUX OF THE REASONS RECORDED BY THE LD. ASSESSING OFFICER IS THAT SINCE M/S ANTLEG CYPRUS L TD. COULD NOT EXPLAIN THE SOURCE OF INVESTMENT MADE IN M/S ID HASOFT LTD., THEREFORE, THE ASSESSEE COMPANY (M/S ACL) COU LD NOT DISCLOSE FULLY AND TRULY THE MATERIAL FACTS, WHICH WERE NECESSARY FOR ASSESSMENT. 2.5. SO FAR AS, RE-OPENING OF ASSESSMENT U/S 147/ 148 OF THE ACT ON THE PLEA THAT THE LD. ASSESSING OFFICER IGNORED THE FACT THAT THERE WAS NO REASON TO BELIEVE THAT INCOM E HAS ESCAPED ASSESSMENT AS THERE WAS NO TANGIBLE MATERIA L WITH THE ASSESSING OFFICER AND INDEPENDENT APPLICATION OF MI ND IS CONCERNED, WE FIND THAT THERE WAS INFORMATION WITH THE 5139 & 5338/MUM/2016 IDHASOFT LTD. 7 ASSESSING OFFICER THAT ASSESSEE MADE BOGUS PURCHASE S FROM THE HAWALA PARTIES AND THE NOTICES SENT U/S.133(6) WERE RETURNED BACK UNSERVED BY THE POSTAL DEPARTMENT, IN THIS BACKGROUND, WE SHALL ANALYZE WHETHER THE LD. ASSESS ING OFFICER WAS RIGHT IN RE-OPENING THE ASSESSMENT U/S .147 OF THE ACT. 2.6. IN THE LIGHT OF THE FOREGOING DISCUSSIONS, IT IS OU R BOUNDED DUTY TO EXAMINE THE VALIDITY OF REOPENING U /S 147 R.W.S 148 OF THE ACT, THEREFORE, BEFORE ADVERTING FURTHER WE ARE REPRODUCING HEREUNDER THE RELEVANT PROVISION OF SEC TION 147 OF THE ACT FOR READY REFERENCE AND ANALYSIS:- . IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THA T ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY AS SESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 1 53, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SU BSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, OR RE COMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN THI S SECTION AND IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR) : PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLES S ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH A SSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE T O MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FU LLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR TH AT ASSESSMENT YEAR: 5139 & 5338/MUM/2016 IDHASOFT LTD. 8 PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRST PROVISO SHALL APPLY IN A CASE WHERE ANY INCOME IN RELATION TO ANY ASSET (INCLUDING FINANCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE I NDIA, CHARGEABLE TO TAX, HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR : PROVIDED ALSO THAT THE ASSESSING OFFICER MAY ASSESS OR REASSESS SUCH INCOME, OTHER THAN THE INCOME INVOLVING MATTERS WHI CH ARE THE SUBJECT MATTERS OF ANY APPEAL, REFERENCE OR REVISION, WHICH IS CHARGEABLE TO TAX AND HAS ESCAPED ASSESSMENT. EXPLANATION 1.PRODUCTION BEFORE THE ASSESSING OFFI CER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENC E COULD WITH DUE DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFF ICER WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROVISO. EXPLANATION 2.FOR THE PURPOSES OF THIS SECTION, TH E FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, NAMELY : (A) WHERE NO RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INCOME OF ANY OTHER P ERSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DURING THE PR EVIOUS YEAR EXCEEDED THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME-TAX ; (B) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY THE A SSESSING OFFICER THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN ; (BA) WHERE THE ASSESSEE HAS FAILED TO FURNISH A REP ORT IN RESPECT OF ANY INTERNATIONAL TRANSACTION WHICH HE WAS SO REQUIRED UNDER SECTION 92E; (C) WHERE AN ASSESSMENT HAS BEEN MADE, BUT (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDERASSESS ED ; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RA TE ; OR (III) SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCE SSIVE RELIEF UNDER THIS ACT ; OR (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR AN Y OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED; (D) WHERE A PERSON IS FOUND TO HAVE ANY ASSET (INC LUDING FINANCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE INDIA. EXPLANATION 3.FOR THE PURPOSE OF ASSESSMENT OR REA SSESSMENT UNDER THIS SECTION, THE ASSESSING OFFICER MAY ASSESS OR R EASSESS THE INCOME IN RESPECT OF ANY ISSUE, WHICH HAS ESCAPED ASSESSMENT, AND SUCH ISSUE COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF T HE PROCEEDINGS 5139 & 5338/MUM/2016 IDHASOFT LTD. 9 UNDER THIS SECTION, NOTWITHSTANDING THAT THE REASON S FOR SUCH ISSUE HAVE NOT BEEN INCLUDED IN THE REASONS RECORDED UNDE R SUB-SECTION (2) OF SECTION 148. EXPLANATION 4.FOR THE REMOVAL OF DOUBTS, IT IS HER EBY CLARIFIED THAT THE PROVISIONS OF THIS SECTION, AS AMENDED BY THE F INANCE ACT, 2012, SHALL ALSO BE APPLICABLE FOR ANY ASSESSMENT YEAR BE GINNING ON OR BEFORE THE 1ST DAY OF APRIL, 2012. 2.7. IF THE AFORESAID PROVISION OF THE ACT IS ANAL YZED, WE FIND THAT AFTER INSERTION OF EXPLANATION -3 TO SECT ION 147 OF THE ACT BY THE FINANCE (NO.2) ACT OF 2009 WITH EFFECT F ROM 01/04/1989 SECTION 147 HAS AN EFFECT THAT ASSESSING OFFICER HAS TO ASSESS OR REASSESS INCOME (SUCH INCOME) WHIC H HAS ESCAPED ASSESSMENT AND WHICH WAS BASIS OF FORMATION OF BELIEF AND, IF HE DOES SO, HE CAN ALSO ASSESS OR REASSESS ANY OTHER INCOME WHICH HAS ESCAPED ASSESSMENT AND WHICH CAME TO THE NOTICE DURING THE COURSE OF PROCEEDINGS. IDENTICAL RATIO WAS LAID DOWN BY HONBLE JURISDICTIONAL HIGH COURT IN C IT VS JET AIRWAYS INDIA PVT. LTD. (2010) 195 TAXMAN 117 (MUM. ) AND THE FULL BENCH DECISION FROM HONBLE KERALA HIGH COURT IN CIT VS BEST WOOD INDUSTRIES AND SAW MILLS (2011) 11 TAXMAN .COM 278 (KERALA)(FB). A PLAIN READING OF EXPLANATION-3 TO SECTION 147 CLEARLY DEPICTS THAT THE ASSESSING OFFICER HAS POWER TO MAKE ADDITION, WHERE HE ARRIVED TO A CONCLUSION THA T INCOME 5139 & 5338/MUM/2016 IDHASOFT LTD. 10 HAS ESCAPED ASSESSMENT WHICH CAME TO HIS NOTICE DUR ING THE COURSE OF PROCEEDINGS OF REASSESSMENT U/S 148. OUR VIEW IS FORTIFIED BY THE DECISION IN MAJINDER SINGH KANG VS CIT (2012) 25 TAXMAN.COM 124/344 ITR 358 (P & H) AND JAY BHARA T MARUTI LTD. VS CIT (2010) TAX LR 476 (DEL.) AND V. LAKSHMI REDDY VS ITO (2011) 196 TAXMAN 78 (MAD.). THE PROV ISION OF THE ACT IS VERY MUCH CLEAR AS WITH EFFECT FROM 01/0 4/1989, THE ASSESSING OFFICER HAS WIDE POWERS TO INITIATE PROCE EDINGS OF REOPENING. THE HONBLE KERALA HIGH COURT IN CIT VS ABDUL KHADAR AHMAD (2006) 156 TAXMAN 206 (KERALA) EVEN WE NT TO THE EXTENT SO LONG AS THE AO HAS INDEPENDENTLY APPL IED HIS MIND TO ALL THE RELEVANT ASPECT AND HAS ARRIVED TO A BELIEF THE REOPENING CANNOT BE SAID TO BE INVALID. 2.8. WE ARE AWARE THAT MERE CHANGE OF OPINION CA NNOT FORM THE BASIS OF REOPENING WHEN THE NECESSARY FACT S WERE FULLY AND TRULY DISCLOSED BY THE ASSESSEE IN THAT S ITUATION, THE ITO IS NOT ENTITLED TO REOPEN THE ASSESSMENT MERELY ON THE BASIS OF CHANGE OF OPINION. HOWEVER, POWERS UNDER AMENDED PROVISION ARE WIDE ENOUGH WHERE THERE IS A REASONAB LE BELIEF WITH THE ASSESSING OFFICER, THAT INCOME HAS ESCAPED 5139 & 5338/MUM/2016 IDHASOFT LTD. 11 ASSESSMENT, BECAUSE THE POWERS WITH EFFECT FROM 01/ 04/1989 ARE CONTEXTUALLY DIFFERENT AND THE CUMULATIVE CONDI TIONS SPELT OUT IN CLAUSES (A) AND (B) OF SECTION 147, PRIOR TO ITS AMENDMENT ARE NOT PRESENT IN THE AMENDED PROVISION. THE ONLY CONDITION FOR ACTION IS THAT THE ASSESSING OFF ICER SHOULD HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO T AX HAS ESCAPED ASSESSMENT. SUCH BELIEF CAN BE REACHED IN ANY MANNER AND IS NOT QUALIFIED BY A PRE-CONDITION OF F AITH AND TRUE DISCLOSURE OF MATERIAL FACTS BY AN ASSESSEE AS CONTEMPLATED IN PRE-AMENDED SECTION 147. VIEWED IN THAT ANGLE, POWER TO REOPEN ASSESSMENT IS MUCH WIDER UND ER THE AMENDED PROVISION. OUR VIEW IS FORTIFIED BY THE DE CISION FROM HONBLE DELHI HIGH COURT IN BAWA ABHAI SINGH VS DCI T (2001) 117 TAXMAN 12 AND RAKESH AGARWAL VS ACIT (1996) 87 TAXMAN 306 (DEL.). THE HONBLE APEX COURT IN CIT V S SUN ENGINEERING WORKS PVT. LTD. 198 ITR 297 (SC) CLEARL Y HELD THAT PROCEEDINGS U/S 147 ARE FOR THE BENEFIT FOR THE REV ENUE, WHICH ARE AIMED AT GATHERING THE ESCAPED INCOME. AT TH E SAME TIME, WE ARE AWARE THAT POWERS U/S 147 AND 148 OF T HE ACT ARE NOT UNBRIDLED ONE AS IT IS HEDGED WITH SEVERAL SAFEGUARDS 5139 & 5338/MUM/2016 IDHASOFT LTD. 12 CONCEIVED IN THE INTEREST OF ELIMINATING ROOM FOR A BUSE OF THIS POWER BY THE AO. HOWEVER, THE MATERIAL AVAILABLE O N RECORD, CLEARLY INDICATES THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT, THEREFORE, THE LD. ASSESSING OFFICER W AS WITHIN HIS JURISDICTION TO REOPEN THE ASSESSMENT. THE HON BLE APEX COURT IN ESS ESS KAY ENGINEERING CO. PVT. LTD. (20 01) 247 ITR 818 (SC) HELD THAT MERELY BECAUSE THE CASE OF T HE ASSESSEE WAS CORRECT IN ORIGINAL ASSESSMENT FOR THE RELEVANT ASSESSMENT YEAR, IT DOES NOT PRECLUDE THE ITO TO REOPEN THE AS SESSMENT OF AN EARLIER YEAR ON THE BASIS OF FINDING OF HIS FACT THAT FRESH MATERIAL CAME TO HIS KNOWLEDGE. 2.9. UNDER SECTION 147, AS SUBSTITUTED WITH EFFECT FROM 01/04/1989, THE SCOPE OF REASSESSMENT HAS BEEN WIDE NED. AFTER SUCH SUBSTITUTION, THE ONLY RESTRICTION, PUT IN THAT SECTION IS THAT REASON TO BELIEVE. THAT REASON HA S TO BE A REASON OF A PRUDENT PERSON WHICH SHOULD BE FAIR AND NOT NECESSARILY DUE TO FAILURE OF THE ASSESSEE TO DISCL OSE FULLY AND PARTIALLY SOME MATERIAL FACTS RELEVANT FOR ASSESSME NT (DR. AMINS PATHOLOGY LABORATORY VS JCIT (2001) 252 ITR 673, 682 (BOM.) IDENTICAL RATIO WAS LAID DOWN BY HONBLE DE LHI HIGH 5139 & 5338/MUM/2016 IDHASOFT LTD. 13 COURT IN UNITED ELECTRICAL COMPANY PVT. LTD. VS CIT (2002) 258 ITR 317, 322 (DEL.) AND PRAFULL CHUNNILAL PATEL VS ACIT 236 ITR 832, 838 (GUJ.). THE ESSENTIAL REQUIREMENT FOR INITIATING REASSESSMENT PROCEEDING U/S 147 R.W.S 148 OF THE AC T IS THAT THE LD. ASSESSING OFFICER MUST HAVE REASON TO BELIE VE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR. THE HONBLE GUJARAT HIGH COURT IN PRAFULL CHUNNILAL PATEL VS ACIT (SUPRA) EVEN WENT TO THE EX TENT THAT AT THE INITIATION STAGE FORMATION OF REASONABLE BELIEF IS NEEDED AND NOT A CONCLUSIVE FINDING OF FACTS. IDENTICAL RA TIO WAS LAID DOWN IN BRIJMOHAN AGRAWAL VS ACIT (2004) 268 ITR 4 00, 405 (ALL.) AND RATNACHUDAMANI S. UTNAL VS ITO (2004) 26 9 ITR 272, 277 (KARNATAKA) APPLYING SOWDAGAR AHMED KHAN V S ITO (1968) 70 ITR 79(SC). 2.10. SO FAR AS, THE MEANING OF EXPRESSION, REASO N TO BELIEVE IS CONCERNED, IT REFERS TO BELIEF WHICH PR OMPTS THE ASSESSING OFFICER TO APPLY SECTION 147 TO A PARTICU LAR CASE. IT DEPEND UPON THE FACTS OF EACH CASE. THE BELIEF MUST BE OF AN HONEST AND REASONABLE PERSON BASED ON REASONABLE GR OUNDS. THE ASSESSING OFFICER IS REQUIRED TO ACT, NOT ON ME RE 5139 & 5338/MUM/2016 IDHASOFT LTD. 14 SUSPICION, BUT ON DIRECT OR CIRCUMSTANTIAL EVIDENCE . OUR VIEW FIND SUPPORT FROM THE RATIO LAID DOWN IN FOLLOWING CASES:- I. EPICA LABORATORIES LTD. VS DCIT 251 ITR 420, 425-426 (BOM.), II. VISHNU BOREWELL VS ITO (2002) 257 ITR 512 (ORISSA), III. CENTRAL INDIA ELECTRIC SUPPLY COMPANY LTD. VS ITO (201 1) 333 ITR 237 (DEL.), IV. V.J. SERVICES COMPANY MIDDLE EAST LTD. VS DCIT (2011) 339 ITR 169 (UTTRAKHAND), V. CIT VS ABHYUDAYA BUILDERS (P. ) LTD. (2012) 340 ITR 310 (ALL.), VI. CIT VS DR. DEVENDRA GUPTA (2011) 336 ITR 59 (RAJ.), VII. EMIRATES SHIPPING LINE FZE VS ASST. DIT (2012) 349 I TR 493 (DEL.). VIII. REFERENCE MAY ALSO MADE TO FOLLOWING JUDICIAL DECISI ONS:- IX. SAFETAG INTERNATIONAL INDIA P. LTD. (2011) 332 ITR 622 (DEL.), X. CIT VS ORIENT CRAFT LTD. (2013) 354 ITR 536 (DEL.) XI. ACORUS UNITECH WIRELSS PVT. LTD. VS ACIT (2014) 362 IT R 417 (DEL.). XII. PRAFUL CHUNILAL PATEL: VASANT CHUNILAL PATEL VS ASST. CIT (1999) 832, 843-44, 844-45 (GUJ.), XIII. VENUS INDUSTRIAL CORPORATION VS ASST. CIT (1999) 236 I TR 742, 746 (PUNJ.), XIV. SRICHAND LALCHAND TALREJA VS ASST. CIT (1998) 98 TAXM AN 14, 19 (BOM.), XV. USHA BELTRON LTD. VS JCIT (1999) 240 ITR 728, 736-37, 739 (PAT.) XVI. KAPOOR BROTHERS VS UNION OF INDIA (2001) 247 ITR 32 4, 331, 332-33 XVII. VIPPY PROCESSORS PVT. LTD. VS CIT (2001) 249 ITR 7, 8 (MP) 5139 & 5338/MUM/2016 IDHASOFT LTD. 15 2.11. IN DILIP S. DAHANUKAR VS ASST. CIT (2001 ) 248 ITR 147, 150-51 (BOM.). THE HONBLE JURISDICTIONAL HIGH COURT HELD AS UNDER:- HELD, THAT THERE WAS MATERIAL ON RECORD ON THE BASIS OF SURVEY AND STATEMENT OF PERSON TO SHOW THAT THE ASSESSEE HAD WRONGFULLY CLAIM DEDUCTION U/S 80IA. THEREFORE, THE ASSESSING OFFICER HAD REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT FOR ASSESSMENT YEAR 1994-95. IDENTICALLY IN THE CASE OF SRICHAND LALCHAND TALREJ A V. ASST. CIT, (1998) 98 TAXMAN 14, 19 (BOM), WHERE THE INFORMATION REGARDING ACQUISITION OF THE ASSET WAS NOT AVAILABLE WITH THE ASSESSING OFFICER DURING THE REL EVANT ASSESSMENT YEAR 1992-93 AND SUCH INFORMATION WAS DISCLOSED IN THE RETURN FOR THE ASSESSMENT YEAR 199 5-96, THE HONBLE JURISDICTIONAL HIGH COURT HELD THAT THE ASSESSING OFFICER CAN FORM A BONA FIDE BELIEF THAT THERE WAS ESCAPEMENT OF INCOME IN RELATION TO ASSESSMENT YEAR 1992-93 . 2.12. THE HONBLE JURISDICTIONAL HIGH COURT IN EX PORT CREDIT GUARANTEE CORPORATION OF INDIA LTD. V. ADDL. CIT, (2013) 5139 & 5338/MUM/2016 IDHASOFT LTD. 16 350 ITR 651 (BOM), WHERE THERE HAD BEEN NO APPLICAT ION OF MIND TO THE RELEVANT FACTS DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS BY THE ASSESSING OFFICER, THE REOPENING OF THE ASSESSMENT WAS HELD TO BE VALID. 2.12. THE HONBLE JURISDICTIONAL HIGH COURT IN GIRILAL & CO. V. S.L. MEENA, ITO, (2008) 300 ITR 432 (BOM), HELD THAT IN ORDER TO INVOKE THE EXTRAORDINARY JURISDICT ION OF THE COURT THE PETITIONER MUST ALSO MAKE OUT A CASE THAT NO PART OF THE RELEVANT MATERIAL HAD BEEN KEPT OUT FRO M THE ASSESSING OFFICER). THE INFORMATION WAS IN THE ANNE XURES AND CONSEQUENTLY EXPLANATION 2(C)(IV) OF SECTION 14 7 WOULD APPLY. THE REASSESSMENT PROCEEDINGS AFTER FOUR YEAR S WERE VALID. 2.14. IN THE CASE OF DEPUTY CIT V. GOPAL RAMNARAYA N KASAT, (2010) 328 ITR 556 (BOM), IT WAS NOT THE CAS E OF THE ASSESSEE THAT THE NOTICE ISSUED WAS AFTER THE EXPIR Y OF THE TIME LIMIT PROVIDED IN SECTION 153(2). THE REASSESSMENT PROCEEDINGS WERE HELD TO BE VALID. IN INDIAN HUME PIPE CO. LTD . V. ASST. CIT, (2012) 348 ITR 439 (BOM), BOTH IN THE COMPUTAT ION OF 5139 & 5338/MUM/2016 IDHASOFT LTD. 17 TAXABLE LONG-TERM CAPITAL GAINS IN THE ORIGINAL RET URN OF INCOME AND IN THE COMPUTATION THAT WAS SUBMITTED IN RESPON SE TO THE QUERY OF THE ASSESSING OFFICER THERE WAS A COMPLETE SILENCE IN REGARD TO THE DATES ON WHICH THE AMOUNTS WERE INVES TED, AS SUCH THERE BEING A FAILURE TO DISCLOSE FULLY AND TR ULY MATERIAL FACTS NECESSARY FOR ASSESSMENT. THE REASSESSMENT PR OCEEDINGS WERE HELD TO BE VALID. THIS VIEW WAS ALSO CONFIRMED IN FOLLOWING CASES:- A. DALMIA P. LTD. V. CIT, (2012) 348 ITR 469 (DEL); B. CIT V. K. MOHAN & CO. (EXPORTS), (2012) 349 ITR 653 (BOM); C. REMFRY & SAGAR V. CIT, (2013) 351 ITR 75 (DEL); D. OPG METALS & FINSEC LTD. V. CIT, (2013) 358 ITR 144 ( DEL). 2.15. IN THE CASE OF VENUS INDUSTRIAL CORPORATION V. ASST. CIT, (1999) 236 ITR 742, 746 (P & H) [WHERE INITIAT ION WAS STARTED WITHIN FOUR YEARS FOR RE-EXAMINING THE DEDU CTION UNDER SECTION 80HHC, WAS HELD TO BE WRONGLY ALLOWED IN TH E ORIGINAL ASSESSMENT. IDENTICALLY, IN THE CASE OF HAPPY FOR GING LTD. V. CIT, (2002) 253 ITR 413,416-17 (P & H), WHERE EXCIS E DUTY PAID IN ADVANCE WAS SHOWN AS AN ASSET IN THE BALANC E SHEET AND WAS ALLOWED AS A DEDUCTION, REASSESSMENT NOTICE ON THE 5139 & 5338/MUM/2016 IDHASOFT LTD. 18 GROUND THAT EXCISE DUTY WAS SHOWN AS AN ASSET IN TH E BALANCE SHEET AND WAS NOT ROUTED THROUGH THE PROFIT AND LOS S ACCOUNT. THE REOPENING AT THIS STAGE WAS HELD TO BE VALID. IN THE CASE OF VIPAN KHANNA V. CIT, (2002) 255 ITR 220, 23 0 (P & H), WHERE FROM THE FACTS IT WAS CLEAR THAT THE ASSESSEE HAD CLAIMED DEPRECIATION IN THE RETURN AT THE RATE OF 5 0 PER CENT AND HE HAD NOWHERE DISPUTED THE FACT THAT THE ADMIS SIBLE RATE OF DEPRECIATION TO HIM WAS 40 PER CENT., SUCH FACT ALONE WAS SUFFICIENT TO INITIATE REASSESSMENT PROCEEDINGS UND ER SECTION 147 AND, THEREFORE, SUCH INITIATION WAS SUSTAINED. THE HONBLE PUNJAB & HARYANA HIGH COURT IN MRS. RAMA SINHA V. C IT, (2002) 256 ITR 481, 483, 486, WHERE THE REASSESSMEN T NOTICE HAS BEEN ISSUED ON THE BASIS OF DEFINITE INFORMATIO N FROM CBI REGARDING INVESTMENTS BY THE ASSESSEE WHICH HAD NOT BEEN DISCLOSED DURING THE ORIGINAL ASSESSMENT PROCEEDING S, SUCH INITIATION HAS BEEN UPHELD. 2.16. IN THE CASE OF PAL JAIN V. ITO, (2004) 267 I TR 540, 544-45, 548, 549 (P & H), APPLYING PHOOL CHAND BAJR ANG LAL V. ITO, (1993) 203 ITR 456 (SC), ALTHOUGH THE TRANSACT ION OF SALE OF SHARES WAS DISCLOSED AND ACCEPTED IN THE ORIGINA L 5139 & 5338/MUM/2016 IDHASOFT LTD. 19 ASSESSMENT, BUT THE SUBSEQUENT DISCOVERY BY THE DDI (INVESTIGATION) REVEALED THAT THE TRANSACTION WAS N OT GENUINE, A REASSESSMENT NOTICE AFTER FOUR YEARS HAS BEEN HELD TO BE VALID BECAUSE THERE WAS NO TRUE DISCLOSURE OF THE MATERIA L FACTS. IN THIS REGARD, THE PETITIONER-ASSESSEE CANNOT DRAW AN Y SUPPORT FROM THE STATEMENT FOR CHALLENGING THE VALIDITY OF THE NOTICE FOR REASSESSMENT. IT GOES WITHOUT SAYING THAT FOR THE P URPOSE OF MAKING THE ASSESSMENT, THE ASSESSING OFFICER SHALL HAVE TO CONFRONT THE PETITIONER WITH THE ENTIRE MATERIAL IN HIS POSSESSION ON THE BASIS OF WHICH HE PROPOSES TO MAK E THE ADDITIONS. IN PUNJAB LEASING PVT. LTD. V. ASST. CIT , (2004) 267 ITR 779, 781-82 (P & H), WHERE DEPRECIATION WAS ALL OWED TO THE ASSESSEE, WHO WAS ENGAGED IN THE BUSINESS OF FI NANCING OF VEHICLES AND CONSUMER DURABLES ON 'HIRE-PURCHASE BA SIS' AS WELL AS ON 'LEASE/RENT BASIS', A REASSESSMENT NOTIC E ISSUED AFTER FOUR YEARS HAS BEEN HELD NOT TO SUFFER FROM A NY ILLEGALITY AS THE SAME WAS BASED ON THE BONA FIDE ACTION OF TH E COMPETENT AUTHORITY TO DETERMINE WHETHER OR NOT THE VEHICLES IN RESPECT OF WHICH THE PETITIONER HAD BEEN CLAIMIN G DEPRECIATION, WERE ACTUALLY OWNED BY IT. 5139 & 5338/MUM/2016 IDHASOFT LTD. 20 2.17. IN JAWAND SONS V. CIT(A), (2010) 326 ITR 39 (P & H), IN THE INITIAL ASSESSMENT, THE BENEFIT OF DEDUC TION OF THE DUTY DRAWBACK AND DEPB UNDER SECTION 80-IB WAS WRON GLY GRANTED TO THE ASSESSEE, FOR WHICH IT WAS NOT ENTIT LED. THEREFORE, REASSESSMENT PROCEEDINGS TO WITHDRAW THE DEDUCTION WERE HELD TO BE VALID. LIKEWISE, IN CIT V. HINDUSTAN TOOLS & FORGINGS P. LTD., (2008) 306 ITR 209 (P & H ), WHERE, THE ASSESSEE IN THE REGULAR ASSESSMENT HAD BEEN ALL OWED DEDUCTION MORE THAN ACTUALLY ALLOWABLE UNDER SECTIO N 80HHC. THEREFORE, THE ACTION INITIATED BY THE AO FOR REASS ESSMENT UNDER SECTION 147(B) COULD NOT BE HELD TO BE INVALI D. 2.18. IN THE CASE OF MARKANDA VANASPATI MILLS LTD. V. CIT, (2006) 280 ITR 503 (P & H), WHEREIN, THE INFORMATIO N FURNISHED BY THE ASSESSEE GAVE NO CLUE TO THE PAYME NT OF LIABILITY IN REGARD OF THE SALES TAX COLLECTED IN E XCESS. THE ASSESSING OFFICER WAS HELD TO BE VALIDLY INITIATED THE REASSESSMENT PROCEEDINGS UNDER SECTION 147 FOR BOTH THE YEARS UNDER CONSIDERATION. IN THE CASE OF SAT NAR AIN V. CIT, (2010) 320 ITR 448 (P & H), THE DOCUMENT DID NOT FO RM THE SOLE BASIS FOR THE ASSESSING OFFICER TO INITIATE R EASSESSMENT 5139 & 5338/MUM/2016 IDHASOFT LTD. 21 PROCEEDING BUT HE ALSO TOOK INTO CONSIDERATION THE LETTER WRITTEN BY THE ASSISTANT COMMISSIONER AS WELL AS TH E FACT THAT NO RETURN HAD BEEN FILED BY THE ASSESSEE FOR ASSESS MENT YEAR 1995-96. THUS, IT WAS HELD THAT THE ASSESSING OFFIC ER HAD RIGHTLY INVOKED THE JURISDICTION TO INITIATE THE RE ASSESSMENT PROCEEDINGS UNDER SECTION 147. IN THE CASE OF CIT V. HUKAM SINGH, (2005) 276 ITR 347 (P & H), IT WAS HEL D THAT THE RESPONDENTS DID NOT HAVE THE LOCUS STANDI TO QUESTI ON THE ORDERS OF REASSESSMENT ON THE GROUND OF LACK OF NOT ICE. NON- ISSUANCE OF NOTICE TO SOME OF THE LEGAL HEIRS OF TH E LATE P WAS MERELY AN IRREGULARITY AND THE SAME DID NOT AFFECT THE VALIDITY OF THE REASSESSMENT ORDERS. LIKEWISE, IN TILAK RAJ BEDI V. JOINT CIT, (2009) 319 ITR 385 (P & H), WHEREIN, FAC TS COMING TO LIGHT IN A SUBSEQUENT ASSESSMENT YEAR COULD VALI DLY FORM THE BASIS FOR INITIATING REASSESSMENT PROCEEDINGS, IN VIEW OF EXPLANATION 2 TO SECTION 147. THE ACTION OF THE INC OME TAX AUTHORITIES IN REOPENING THE ASSESSMENT OF THE ASSE SSEE AND RESTRICTING THE DEDUCTION UNDER SECTION 80-IB WAS H ELD TO BE VALID. 5139 & 5338/MUM/2016 IDHASOFT LTD. 22 2.19. IN THE CASE OF SMT. USHA RANI V. CIT, (2008) 301 ITR 121 (P & H), THERE WAS NOTHING ON RECORD TO SHOW TH E RELATIONSHIP BETWEEN THE DONOR AND THE DONEE, CAPAC ITY OF THE DONOR TO MAKE GIFTS AND THE OCCASION THEREFORE. THE ASSESSEE HAD FAILED TO DISCHARGE THE ONUS TO PROVE THE GIFTS . THE REASSESSMENT PROCEEDINGS WERE HELD TO BE VALID. IN THE CASE OF USHA BELTRON LTD. V. JOINT CIT, (1999) 240 ITR 728, 736-37, 739 (PAT), WHERE THE INVESTIGATION REPORT INDICATED THAT THE OFFICER HAD REASON TO BELIEVE THAT ON ACCOUNT OF FA ILURE ON THE PART OF THE PETITIONER-ASSESSEE TO DISCLOSE TRUE AN D FULL FACTS, INCOME HAD BEEN GROSSLY UNDER ASSESSED, REASSESSMEN T PROCEEDINGS WERE HELD VALIDLY INITIATED. 2.20. IN THE CASE OF KAPOOR BROTHERS V. UNION OF I NDIA, (2001) 247 ITR 324, 331, 332-33 (PAT), WHERE THE MA TERIAL EVIDENCE FOR THE PURPOSE OF REOPENING OF THE ASSESS MENT ALREADY COMPLETED HAS BEEN BROUGHT TO THE NOTICE OF THE AUTHORITY DURING THE COURSE OF ENQUIRY. THE NOTICE WAS HELD TO BE VALID BY THE HONBLE HIGH COURT. IN THE CASE OF VIPPY PROCESSORS PVT. LTD. V. CIT, (2001) 249 ITR 7, 8 (M P), WHERE THE NEED TO ISSUE NOTICE AROSE DUE TO NOTICING OF VAST DIFFERENCE IN 5139 & 5338/MUM/2016 IDHASOFT LTD. 23 VALUE OF PROPERTIES DISCLOSED BY THE ASSESSEE AND T HAT OF THE REPORT OF THE VALUATION OFFICER AND THE REASONS THA T LED TO THE ISSUE OF THE NOTICE WERE DULY RECORDED AND THE SAME WERE ALSO ADEQUATE AND BASED ON RELEVANT FACTS AND MATERIAL, INITIATION WAS UPHELD. IN TRIPLE A TRADING & INVESTMENT PVT. LTD. V. ASST. CIT, (2001) 249 ITR 109, 110-11 (MP), WHERE T HE NOTICE WAS ISSUED AFTER RECORDING REASONS IN THAT REGARD, INITIATION WAS UPHELD. 2.21. LIKEWISE, HONBLE GUJARAT HIGH COURT IN GARD EN FINANCE LTD. V. ADD/. CIT, (2002) 257 ITR 481, 489, 494-95, SPECIAL LEAVE PETITION DISMISSED BY THE SUPREME COU RT: (2002) 255 ITR (ST.) 7-8 (SC), WHERE THE ASSESSEE WAS HOLD ING SHARES IN AN AMALGAMATING COMPANY AND HE WAS ALLOTTED SHAR ES IN THE AMALGAMATED COMPANY AND SUCH SHARES WERE SOLD B Y HIM AND HE HAS DISCLOSED THE MARKET PRICE OF SUCH SHARE S AS ON THE DATE OF AMALGAMATION AS THE COST OF ACQUISITION OF SUCH SHARES AND HAS NOT DISCLOSED THE COST OF ACQUISITIO N OF SHARES IN THE AMALGAMATING COMPANY IN ACCORDANCE WITH SECT ION 49(2) READ WITH SECTION 47(VII), INITIATION OF REAS SESSMENT PROCEEDINGS AFTER FOUR YEARS HAS BEEN SUSTAINED BEC AUSE THERE 5139 & 5338/MUM/2016 IDHASOFT LTD. 24 WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE MATERIAL FACTS NECESSARY FOR ASSESSMENT. LIKEWISE, IN SUMAN STEELS V. UNION OF INDIA, (2004) 269 ITR 412,418-19 (RAJ), WHERE THE RETURN OF THE ASSESSEE FOR ASSESSMENT YEAR 1995-96 WAS PROCESSED UNDER SECTION 143(1)(A) ACCEPTING THE NET PROFIT RATE DECLARED BY THE ASSESSEE, WHO CARRIED ON CON- TRACT BUSINESS, INITIATION OF REASSESSMENT PROCEEDINGS BY ISSUING A NOTICE DATED 15-5-2001 PROPOSING TO REASSESS PETITIONER-AS SESSEE AT HIGHER RATE IN VIEW OF THE PRESUMPTIVE RATE PRESCRI BED UNDER SECTION 44AD HAS BEEN SUSTAINED. IN THE CASE OF D R. SAHIB RAM GIRI V. ITO, (2008) 301 ITR 294 (RAJ), THE REAS SESSMENT PROCEEDINGS WERE INITIATED AFTER RECORDING REASONS IN WRITING BY THE AO. THE NON-AVAILABILITY OF A FEW DOCUMENTS DEM ANDED BY THE ASSESSEE WOULD NOT MAKE THE REASSESSMENT PROCEE DINGS INITIATED FOR THE REASONS RECORDED IN DETAIL ILLEGA L. 2.22. IN THE CASE OF DESH RAJ UDYOG : CHAMAN UDYOG V. ITO, (2009) 318 ITR 6 (ALL), IN THE ASSESSMENT YEAR S IN QUESTION, THE MATTER WAS STILL TO BE DECIDED FINALL Y BY THE ASSESSING AUTHORITY WHETHER THE INCOME SHOULD BE TR EATED UNDER THE HEAD 'BUSINESS INCOME' OR 'PROPERTY INCOM E'. THE 5139 & 5338/MUM/2016 IDHASOFT LTD. 25 ASSESSEE WOULD GET OPPORTUNITY TO SHOW SUFFICIENT C AUSE TO THE ASSESSING AUTHORITY DURING THE COURSE OF ASSESSMENT . THUS, IT COULD NOT BE SAID THAT THERE WAS NO RELEVANT MATERI AL TO INITIATE PROCEEDINGS UNDER SECTION 147. IN THE CAS E OF KARTIKEYA INTERNATIONAL V. CIT, (2010) 329 ITR 539 (ALL), IN VIEW OF THE MATTER, THE PETITIONER WAS NOT ENTITLED FOR THE DEDUCTION ON THE DUTY DRAWBACK AMOUNT UNDER SECTION 80-IB AND SINCE IT HAD BEEN ALLOWED IN THE ASSESSMENT ORDER PASSED UNDER SECTION 143(1), IT HAD ESCAPED ASSESSMENT. ON THESE FACTS THE INITIATION OF THE PROCEEDINGS UNDER SECTION 147 REA D WITH SECTION 148 FOR ASSESSMENT YEARS 2005-06 AND 2006-0 7 WAS LEGAL AND IN ACCORDANCE WITH LAW. 2.23. LIKEWISE, IN THE CASE OF SUNIL KUMAR LAIN: S URESH CHANDRA LAIN V. ITO, (2006) 284 ITR 626 (ALL), NOTW ITHSTANDING THE FACT THAT THE AMOUNT HAD BEEN ASSESSED TO TAX I N THE HANDS OF P, HE HAD TAKEN A STAND THAT THE AMOUNT DI D NOT BELONG TO HIM AND INSTEAD BELONGED TO S. THUS, IT W AS NOT CLEAR AS TO IN WHOSE HANDS THE AMOUNT IN QUESTION H AD TO BE ASSESSED. THE ITO WAS JUSTIFIED IN TAKING PROCEEDIN GS UNDER SECTION 147 FOR ASSESSING THE AMOUNTS IN THE HANDS OF THE 5139 & 5338/MUM/2016 IDHASOFT LTD. 26 PETITIONERS ACCORDING TO THE CLAIM MADE BY THE PETI TIONERS. LIKEWISE, HONBLE KERALA HIGH COURT IN CIT V. DR. S ADIQUE UMMER, (2010) 322 ITR 602 (KER), WHERE, THE ASSESSI NG OFFICER COLLECTED FURTHER INFORMATION TO COMPLETE THE REASS ESSMENTS WHICH WAS ALSO PERMISSIBLE UNDER THE ACT. THE FINDI NG OF THE FIRST APPELLATE AUTHORITY AS WELL AS THE TRIBUNAL, THAT THE ASSESSING OFFICER HAD NO MATERIAL TO BELIEVE THAT T HE INCOME HAD ESCAPED ASSESSMENT WAS WRONG AND CONTRARY TO FA CTS. THE ASSESSEE HAD NOT MAINTAINED ANY BOOKS OF ACCOUNT. T HEREFORE, THE REOPENING OF ASSESSMENTS WAS HELD TO BE VALID A ND WITHIN TIME. IN THE CASE OF CIT V. UTTAM CHAND NAHAR, (2 007) 295 ITR 403 (RAJ), THE NOTICE REQUIRING THE ASSESSEE TO FILE THE RETURN WITHIN 30 DAYS WAS IN ACCORDANCE WITH SECTIO N 148 AS IT MUST BE DEEMED TO BE IN FORCE WITH EFFECT FROM 1-4- 1989, AND IN FORCE AS ON THE DATE NOTICE WAS ISSUED. THERE WA S NO VIOLATION OF SECTION 148 IN RESPECT OF THE SPECIFIE D PERIOD WITHIN WHICH THE RETURN IS TO BE SUBMITTED. THE REASSESSME NT PROCEEDINGS WERE HELD TO BE VALID. IN THE CASE OF CIT V. C. V. LAYACHANDRAN, (2010) 322 ITR 520 (KER), WHERE, THE ASSESSEE DID NOT CONCEDE THE INCOME 5139 & 5338/MUM/2016 IDHASOFT LTD. 27 ON CAPITAL GAIN EITHER UNDER THE UN-AMENDED PROVISI ON OR UN-DER THE AMENDED PROVISION, THE RECOURSE OPEN TO THE DEPARTMENT WAS TO BRING TO TAX INCOME ESCAPING ASSE SSMENT UNDER SECTION 147 WHICH WAS NOT TIME BARRED OR OTHE RWISE INVALID. LIKEWISE, IN ATUL TRADERS V. ITO, (2006) 282 ITR 536 (ALL), THE ACCOUNT BOOKS OR RECORD AND OTHER MATERI AL WERE ALL COMMON WHICH WERE BEING CONSIDERED BY THE CIT(A) IN THE PROCEEDINGS RELATING TO THREE APPEALS. THE PETITION ER HAD NOTICE AND OPPORTUNITY OF BEING HEARD. THE REASSESS MENT PROCEEDINGS WERE HELD TO BE VALIDLY INITIATED. IN THE CASE OF INDUCTOTHERM (INDIA) P. LTD. V. LAMES KURIAN, ASST. CIT, (2007) 294 ITR 341 (GUJ), THE ASSESSING OFFICER HAD FOUND THAT THERE WERE ERRORS IN THE COMPUTATION OF ALLOWANCES. THE REASSESSMENT PROCEEDINGS WERE HELD TO BE VALID. IN THE CASE OF PAPAYA FARMS PVT. LTD. VS. DCIT, (2010) 323 ITR 60 (MAD), WHERE THE ASSESSEE HAD FURNISHED INCORRECT PARTICUL ARS AND THEREFORE, THE REOPENING OF THE ASSESSMENT WAS HELD TO BE JUSTIFIED. 2.24. IN THE CASE OF CIT V. KERALA STATE CASHEW DEVELOPMENT CORPORATION LTD., (2006) 286 ITR 553 (K ER), 5139 & 5338/MUM/2016 IDHASOFT LTD. 28 WHEREIN, THE ASSESSEE WAS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING SHOULD NOT HAVE CLAIMED DEDUCTION OF PEN AL INTEREST WHICH HAD ACCRUED NOT IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR BUT IN EARLIER YEARS. THIS THE ASSESSEE HAD NOT DISCLOSED. THE REASSESSMENT WAS HELD TO BE VALID. LIKEWISE, IN KUSUM INDUSTRIES P. LTD. V. CIT, (200 8) 296 ITR 242 (ALL), AS THE AWARD HAD BECOME FINAL IT WOULD B E TAKEN THAT THE DIRECTORS OF THE ASSESSEE HAD ACCEPTED THE FACT UM OF EARNING OF SECRET PROFIT NOT REFLECTED IN THE BOOKS OF ACCOUNT, WHICH WAS ALSO BINDING ON THE COMPANY. THE NON-APPE ARANCE OF ONE OF THE ARBITRATORS AND ONE OF THE DIRECTORS IN RESPECT OF THE SUMMON ISSUED UNDER SECTION 131 WOULD NOT MAKE THE REASSESSMENT INVALID. THE HONBLE KERALA HIGH COURT IN CIT V. INDO MARINE AGENCIES (KERALA) P. LTD., (2005) 279 I TR 372 (KER), HELD THAT THE ENTRY WOULD AMOUNT TO AN ORDER UNDER SECTION 144. THE MERE FACT THAT IT WAS NOT COMMUNIC ATED TO THE ASSESSEE WOULD NOT MAKE SUCH AN ASSESSMENT RECO RDED IN THE ORDER SHEET ILLEGAL AND THAT WOULD NOT BAR FURT HER PROCEEDINGS UNDER SECTION 147. THUS, THE ASSESSMENT WAS HELD TO BE VALIDLY REOPENED UNDER EXPLANATION 2(C) TO SECTION 5139 & 5338/MUM/2016 IDHASOFT LTD. 29 147. LIKEWISE, IN CIT V. N. JAYAPRAKASH, (2006) 28 5 ITR 369 (KER), WHERE, THE ASSESSEE COULD NOT, AFTER HAVING PERSUADED THE ASSESSING AUTHORITY TO WITHDRAW THE NOTICE DATE D 1-10- 1993, POINTING OUT THAT IT WAS NOT IN CONFORMITY WI TH LAW, BE ALLOWED TO CONTEND THAT THE NOTICE WAS VALID DUE TO THE OMISSION OF THE TIME-LIMIT BY THE FINANCE (NO.2) AC T, 1996, WITH EFFECT FROM 1-4-1989. IN THE ABSENCE OF SPECIF IC PROVISION IN THE FINANCE (NO. 2) ACT, 1996, INVALIDATING PROC EEDINGS INITIATED BY THE INCOME-TAX OFFICER, THE ACTION TAK EN BY HIM APPLYING THE THEN EXISTING LAW COULD NOT BE SAID TO BE INVALID. 2.25. LIKEWISE, IN CIT V. S.R. TALWAR, (2008) 305 ITR 286 (ALL), THE FACTUM OF TAKING ADVANCES OR LOAN FROM T AND K, IN WHICH THE ASSESSEE WAS ONE OF THE DIRECTORS HAD NOT BEEN DISCLOSED NOR A COPY OF THE LEDGER ACCOUNT OF THE A SSESSEE MAINTAINED BY THE COMPANY FILED. IN VIEW OF THE ABS ENCE OF THESE DETAILS, THE ASSESSING OFFICER COULD NOT EXA MINE THE TAXABILITY OF ADVANCES OR LOAN RAISED BY THE ASSESS EE. THERE WAS FAILURE TO DISCLOSE MATERIAL FACTS NECESSARY FO R ASSESSMENT. THE REASSESSMENT PROCEEDINGS WERE HELD TO BE VALID. IN ANOTHER CASE, THE HONBLE ALLAHABAD HIGH COURT IN C HANDRA 5139 & 5338/MUM/2016 IDHASOFT LTD. 30 PRAKASH AGRAWAL V. ASST. CIT, (2006) 287 ITR 172 (A LL), WHEREIN, THE INCOME-TAX DEPARTMENT HAD SENT A REQUI SITION ON 27-3-2002, UNDER SECTION 132A REQUISITIONING THE BO OKS OF ACCOUNT AND OTHER DOCUMENTS SEIZED BY THE CENTRAL E XCISE DEPARTMENT. THE RECORD OF THE PROCEEDING DATED 18-4 -2002, SHOWED THAT THE REQUISITION WAS NOT FULLY EXECUTED AS ALL THE BOOKS OF ACCOUNT AND OTHER DOCUMENTS HAD NOT BEEN D ELIVERED TO THE REQUISITIONING AUTHORITY. THE PROCEEDINGS IN ITIATED UNDER SECTION 147 WAS HELD TO BE VALID. 2.26. IN RAMILABEN RATILAL SHAH V. CIT, (2006) 282 ITR 176 (GUJ), HELD THAT THE NOTING IN THE DIARY CONSTI TUTED SUFFICIENT INFORMATION FOR THE ESCAPEMENT OF INCOME BY EITHER NON-DECLARATION OF CORRECT SALE CONSIDERATIO N OR FURNISHING OF INACCURATE PARTICULARS AS REGARDS SAL E CONSIDERATION. THUS, THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE HAD FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT OF THE RELEVANT ASSESSMENT YEAR. THE REASSESSMENT PROCEEDINGS HAD B EEN VALIDLY INITIATED. 5139 & 5338/MUM/2016 IDHASOFT LTD. 31 2.27. LIKEWISE, IN CIT V. ABDUL KHADER AHAMED, (2 006) 285 ITR 57 (KER), IT WAS CLEAR FROM THE REASONS REC ORDED BY THE DEPUTY CIT THAT HE PRIMA FACIE HAD REASON TO BELIEV E THAT THE ASSESSEE HAD OMITTED TO DISCLOSE FULLY AND TRULY TH E MATERIAL FACTS AND THAT AS A CONSEQUENCE INCOME HAD ESCAPED ASSESSMENT. THE REASSESSMENT WAS HELD TO BE VALID. IN THE CASE OF U.P. STATE BRASSWARE CORPORATION LTD. V. CI T, (2005) 277 ITR 40 (ALL), THE PRINCIPLES LAID DOWN BY THE C ALCUTTA HIGH COURT IN CIT V. NEW CENTRAL JUTE MILLS CO. LTD. : ( 1979) 118 ITR 1005 (CAL) DID CONSTITUTE INFORMATION ON A POIN T OF LAW WHICH SHOULD BE TAKEN INTO CONSIDERATION BY THE ITO IN FORMING HIS BELIEF THAT THE INCOME TO THAT EXTENT H AD ESCAPED ASSESSMENT TO TAX AND, THE REASSESSMENT WAS HELD TO BE VALID. IN SUNDER CARPET INDUSTRIES V. ITO, (2010) 324 ITR 417 (ALL), HELD THAT THE DEPARTMENTAL VALUER'S REPORT CONSTITU TED MATERIAL FOR ENTERTAINING A BELIEF OF ESCAPED INCOM E IN THE YEARS UNDER CONSIDERATION. THE REASSESSMENT PROCEED ING WAS HELD TO BE VALID. 2.28. IN AUROBINDO SANITARY STORES V. CIT, (2005) 276 ITR 549 (ORI), THERE BEING A SUBSTANTIAL DIFFERENCE BET WEEN THE 5139 & 5338/MUM/2016 IDHASOFT LTD. 32 FIGURES OF LIABILITIES TOWARDS SUNDRY CREDITORS IN THE PARTY LEDGERS OF THE ASSESSEE-FIRM AND THE FIGURES OF LIA BILITIES TOWARDS SUNDRY CREDITORS IN THE BALANCE-SHEET OF TH E ASSESSEE- FIRM FOR THE PREVIOUS YEAR RELEVANT TO THE ASSESSME NT YEAR 1989-90. THESE MATERIALS HAD A DIRECT LINK AND NEXU S FOR FORMATION OF A BELIEF BY THE ASSESSING OFFICER THAT INCOME OF THE ASSESSEE-FIRM HAD ESCAPED ASSESSMENT BECAUSE OF FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MAT ERIAL FACTS NECESSARY FOR THE ASSESSMENT. IN THE CASE OF CIT V . BEST WOOD INDUSTRIES & SAW MILLS, (2011) 331 ITR 63 (KER), TH E ASSESSEE CHALLENGED THE VALIDITY OF THE REASSESSMENT ON THE GROUND THAT THE AO HAD EXCEEDED HIS JURISDICTION UNDER SECTION 147 AND BOTH THE FIRST APPELLATE AUTHORITY AS WELL AS THE T RIBUNAL ACCEPTED THE CONTENTION OF THE ASSESSEE HOLDING THA T SO FAR AS THE REASSESSMENTS RELATED TO ASSESSMENT OF UNEXPLAI NED TRADE CREDITS, THEY WERE INVALID. ON APPEAL, IT HAS BEEN HELD THAT THE REASSESSMENTS WERE TO BE VALID. IN HONDA SIEL POWE R PRODUCTS LTD. V. DEPUTY CIT, (2012) 340 ITR 53 (DEL), THERE BEING OMISSION AND FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE 5139 & 5338/MUM/2016 IDHASOFT LTD. 33 FULLY AND TRULY MATERIAL FACTS THUS REASSESSMENT PR OCEEDINGS WERE HELD TO BE VALID. IN ATMA RAM PROPERTIES PRIVATE LTD. V. DEPUTY CIT, (2012) 343 ITR 141 (DEL), AS THE BOOKS OF ACCOUNT A ND OTHER MATERIAL WERE NOT PRODUCED AND NO LETTER WAS FILED, THE ORDER PASSED BY THE COMMISSIONER (APPEALS) IN THE ASSESSM ENT YEAR 2001-02 WOULD CONSTITUTE 'INFORMATION' OR MATERIAL FROM ANY EXTERNAL SOURCE AND, AS SUCH, THE REASSESSMENT PROC EEDINGS FOR THE ASSESSMENT YEAR 2000-01 WERE HELD TO BE VAL ID. LIKEWISE, IN THE CASE OF CIT V. SMT. R. SUNANDA BA I, (2012) 344 ITR 271 (KER), THE REASSESSMENT IN QUESTION WER E HELD TO BE VALID ON THE FACT THAT THE ASSESSEE CLAIMED AND WAS GIVEN RELIEF UNDER SECTION 80HHA FOR THE THREE PRECEDING YEAR WHICH DISENTITLED HER FOR DEDUCTION UNDER SECTION 80HH FO R THE ASSESSMENT YEARS 1992-93 AND 1993-94. 2.29. IN THE CASE OF AQUAGEL CHEMICALS P. LTD. V. ASST. CIT, (2013) 353 ITR 131 (GUJ), SINCE THERE BEING SU FFICIENT MATERIAL ON RECORD FOR THE ASSESSING OFFICER TO FOR M A BELIEF AS REGARDS THE ESCAPEMENT OF INCOME IN RELATION TO THE CLAIM OF 5139 & 5338/MUM/2016 IDHASOFT LTD. 34 DEPRECIATION IN RESPECT OF THE BUILDING OF COAL FIR E BOILER, THE REASSESSMENT WAS HELD TO BE VALID. IN THE CASE OF CONVERGYS CUSTOMER MANAGEMENT V. ASST. DIT, (2013) 357 ITR 17 7 (DEL), WHERE THERE BEING PRIMA FACIE MATERIAL IN THE POSSE SSION OF THE ASSESSING OFFICER TO FORM A TENTATIVE BELIEF THAT S ECTION 9(1)(I) HELD ATTRACTED, SAID REASON BY ITSELF CONSTITUTED A RELEVANT GROUND TO REOPEN THE ASSESSMENT OF THE ASSESSEE. REFERENCE MAY ALSO BE MADE TO I. AJAI VERMA V. CIT [(2008) 304 ITR 30 (ALL)]; II. ASHOK ARORA V. CIT [(2010) 321 ITR 171 (DEL)]; III. CIT V. CHANDRASEKHAR BALAGOPAL [(2010) 328 ITR 619 (KER)]; IV. JAYARAM PAPER MILLS LTD. V. CIT [(2010) 321 ITR 56 ( MAD)]; V. KERALA FINANCIAL CORPORATION V. JOINT CIT [(2009) 30 8 ITR 434 (KER)]; VI. MAVIS SATCOM LTD. V. DEPUTY CIT [(2010) 325 ITR 428 ( MAD)]; VII. CIT V. MADHYA BHARAT ENERGY CORPORATION LTD. [(2011) 3 37 ITR 389 (DEL)]; VIII. KONE ELEVATOR INDIA P. LTD. V. ITO [(2012) 340 ITR 45 4 (MAD)]; IX. VIJAY KUMAR SABOO V. ASST. CIT [(2012) 340 ITR 382 ( KARN)]; X. SIEMENS INFORMATION SYSTEMS LTD. V. ASST. CIT [(2012) 3 43 ITR 188 (BOM)]; XI. I.P. PATEL & CO. V. DEPUTY CIT [(2012) 346 ITR 207 (GUJ)]; XII. DISHMAN PHARMACEUTICALS & CHEMICALS LTD. V. DEPUTY CI T [(2012) 346 ITR 228 (GUJ)]; XIII. VIDEO ELECTRONICS LTD. V. JOINT CIT [(2013) 353 ITR 73 (DEL)]; 5139 & 5338/MUM/2016 IDHASOFT LTD. 35 XIV. A G GROUP CORPORATION V. HARSH PRAKASH [(2013) 353 I TR 158 (GUJ)]; XV. INDUCTOTHERM (INDIA) P. LTD. V. M. GOPALAN, DEPUTY CIT [(2013) 356 ITR 481 (GUJ)]; CIT V. DHANALEKSHMI BAN K LTD. [(2013) 357 ITR 448 (KER)]; XVI. SITARA DIAMOND PVT. LTD. V. ITO [(2013) 358 ITR 424 (B OM)]; XVII. RAYALA CORPORATION P. LTD. V. ASST. CIT [(2014) 363 I TR 630 (MAD)]. 2.30. SO FAR AS, THE DECISION IN THE CASE OF CIT V S KELVINATOR OF INDIA LTD. (2010) 320 ITR 561 (SC) IS CONCERNED, THE HONBLE APEX COURT, WHILE COMING TO A PARTICULA R CONCLUSION, ONLY IN A SITUATION, WHEN NOT A SINGLE PIECE OF PAPER OR DOCUMENT WAS RECOVERED, THEREFORE, THE HON BLE COURT HELD THAT SINCE THERE WAS NO TANGIBLE MATERIA L FOUND AND THE ADDITION WAS MERELY ON THE BASIS OF STATEME NT ONLY THEN REOPENING OF ASSESSMENT U/S 147 OF THE ACT WAS NOT PERMISSIBLE. LIKEWISE, IN THE CASE OF CIT VS S. KH ADER KHAN SON (2012) 254 CTR 228 (SC), AFFIRMING THE DECISION OF MADRAS HIGH COURT IN (2008) 300 ITR 157 (MAD.), THE WHOLE ADDITION WAS MADE SOLELY ON THE BASIS OF STATEMENT U/S 133A AND NO OTHER MATERIAL WAS FOUND, IN THAT SITUATION, IT WAS HELD THAT THE SUCH STATEMENT HAS NO EVIDENTIARY VALUE. 5139 & 5338/MUM/2016 IDHASOFT LTD. 36 2 . 31. IN THE CASE OF ARADHNA ESTATE PVT. LTD. VS DCI T (2018) 91 TAXMANN.COM 119 (GUJARAT), THE HON'BLE HI GH COURT OBSERVED/HELD AS UNDER:- IN REASONS RECORDED BY THE ASSESSING OFFICER FOR R EOPENING THE ASSESSMENT. HE POINTED OUT THAT THE INFORMATION WAS RECEIVED FR OM THE INVESTIGATION WING OF THE DEPARTMENT AT CALCUTTA REGARDING SHELL COMPA NIES WHICH HAD GIVEN ACCOMMODATION ENTRIES FOR SHARE PREMIUM TO SURAT BA SED COMPANIES. A LIST OF 114 CALCUTTA BASED COMPANIES WAS PROVIDED WHICH HAD GIVEN ACCOMMODATION ENTRIES TO SUCH SURAT BASED COMPANIES . STATEMENTS OF MANY ENTRY OPERATORS AND DUMMY DIRECTORS RECORDED DURING VARIOUS SEARCH AND SEIZURE OPERATION, SURVEY OPERATION AND INVESTIGATI ON WERE CHECKED. THE ASSESSING OFFICER THEREUPON PROCEEDED TO RECORD THA T 'ON PERUSAL OF DATA SO PROVIDED BY THE DEPUTY DIRECTOR (INVESTIGATION), IT IS NOTICED THAT DURING THE PERIOD UNDER CONSIDERATION, THE ASSESSEE COMPANY HA S ACCEPTED SHARE CAPITAL/SHARE PREMIUM FROM THE FOLLOWING ENTRIES/PA RTIES WHICH HAVE BEEN PROVED TO BE SHELL COMPANIES BASED ON THE INVESTIGA TION CONDUCTED BY THE DEPUTY DIRECTOR (INVESTIGATION). UNDERNEATH, HE PRO VIDED A LIST OF 17 COMPANIES WHO HAD TRANSACTED WITH THE ASSESSEE COMP ANY DURING THE YEAR UNDER CONSIDERATION AND WERE ALLOTED EQUITY SHARES BY PURPORTED INVESTMENT OF SIZEABLE SHARE CAPITAL AND SHARE PREMIUM AMOUNTS . ON VERIFICATION OF SUCH MATERIALS, THE ASSESSING OFFICER NOTED THAT THE ASS ESSEE HAD RECEIVED SHARE CAPITAL/SHARE PREMIUM AMOUNT, SINCE THE INVESTOR CO MPANIES WERE FOUND TO BE SHELL COMPANIES INDULGING IN PROVIDING ACCOMMODATIO N ENTRIES, THE ASSESSING OFFICER WAS OF THE OPINION THAT THE SHARE CAPITAL/S HARE PREMIUM CLAIMED TO HAVE BEEN RECEIVED FROM THE COMPANY BY THE ASSESSEE WAS NOT GENUINE. AMOUNT IS NOTHING BUT ASSESSEE'S OWN MONEY INTRODUC ED IN THE GARB OF SHARE CAPITAL/SHARE PREMIUM FROM THE SHELL COMPANIES AND THEREFORE, SUCH AMOUNT IS LIABLE TO BE TAXED UNDER SECTION 68. HE THEREFOR E, RECORDED HIS SATISFACTION THAT THE INCOME HAD ESCAPED ASSESSMENT AND THAT THI S WAS DUE TO THE ASSESSEE HAVING FAILED TO DISCLOSE TRULY AND FULLY ALL FACTS . [PARA 7] SECTION 147 PROVIDES INTER ALIA THAT IF THE ASSESSING OFFICER HAS THE REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAP ED ASSESSMENT, HE MAY SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, A SSESS OR REASSESS SUCH INCOME. PROVISO TO SECTION 147 OF COURSE REQUIRES T HAT WHERE THE ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THI S SECTION AFTER THE EXPIRY OF THE FOUR YEARS FROM THE END OF THE RELEVANT ASSESSM ENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF THE FAILURE ON PART OF THE ASSESSEE TO MAKE RETURN UNDER SECTION 1 39 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSE SSMENT FOR THAT ASSESSMENT YEAR. IN THIS CONTEXT, IT IS WELL SETTLED THAT THE REQUIREMENT OF FULL AND TRUE 5139 & 5338/MUM/2016 IDHASOFT LTD. 37 DISCLOSURE ON PART OF THE ASSESSEE IS NOT CONFINED TO FILING OF RETURN ALONE BUT WOULD CONTINUE ALL THROUGHOUT DURING THE ASSESSMENT PROCEEDINGS ALSO. IN THIS CONTEXT, THE MATERIALS ON RECORD WOULD SUGGEST THAT THE ASSESSING OFFICER HAD RECEIVED FRESH INFORMATION AFTER THE ASSESSMENT WAS OVER PRIMA FACIE SUGGESTING THAT SIZEABLE AMOUNT OF INCOME CHARGEAB LE TO TAX IN CASE OF THE ASSESSEE HAD ESCAPED ASSESSMENT AND THAT SUCH E SCAPEMENT WAS ON ACCOUNT OF FAILURE ON PART OF THE ASSESSEE TO DISCL OSE TRULY AND FULLY ALL MATERIAL FACTS. THE ASSESSING OFFICER FORMED SUCH A BELIEF ON THE BASIS OF SUCH MATERIALS PLACED BEFORE HIM AND UPON PERUSAL OF SUC H MATERIAL. THIS IS NOT A CASE WHERE THE ASSESSING OFFICER WAS REEXAMINING TH E MATERIALS AND THE DOCUMENTS ALREADY ON RECORD FILED BY THE ASSESSEE A LONG WITH THE RETURN OR SUBSEQUENTLY, BROUGHT ON RECORD DURING THE ASSESSME NT PROCEEDINGS. IT WAS A CASE WHERE ENTIRELY NEW SET OF DOCUMENTS AND MATERI ALS WAS PLACED FOR HIS CONSIDERATION COMPILED IN THE FORM OF REPORT RECEIV ED FROM THE INVESTIGATION WING. SUCH MATERIAL WAS PERUSED BY THE ASSESSING OF FICER AND UPON EXAMINATION THEREOF, HE FORMED A BELIEF THAT THE AS SESSEE COMPANY HAD RECEIVED SHARE APPLICATION AND SHARE PREMIUM MONEY FROM AS MANY AS 20 DIFFERENT INVESTOR COMPANIES WHO WERE FOUND TO BE S HELL COMPANIES AND INDULGING IN GIVING ACCOMMODATION ENTRIES. FROM THI S VIEW POINT, SINCE THE ASSESSING OFFICER HAD SUFFICIENT MATERIAL AT HIS CO MMAND TO FORM SUCH A BELIEF. SUCH MATERIALS DID NOT FORM PART OF THE ORI GINAL ASSESSMENT PROCEEDINGS AND WAS PLACED BEFORE THE ASSESSING OFF ICER ONLY AFTER THE ASSESSMENT WAS COMPLETED. SINCE ON THE BASIS OF SUC H MATERIALS, ASSESSING OFFICER, CAME TO A REASONABLE BELIEF THAT INCOME CH ARGEABLE TO TAX HAD ESCAPED ASSESSMENT, MERELY BECAUSE THESE TRANSACTIO NS WERE SCRUTINISED BY THE ASSESSING OFFICER DURING THE ORIGINAL ASSESSMEN T ALSO WOULD NOT PRECLUDE HIM FROM REOPENING THE ASSESSMENT. HIS SCRUTINY DUR ING THE ASSESSMENT WILL NECESSARILY BE ON THE BASIS OF THE DISCLOSURES MADE BY THE ASSESSEE. [PARA 8] THE CONTENTION THAT THERE WAS NO FAILURE ON PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY FACTS CANNOT BE ACCEPTED. THE ASSES SING OFFICER, AS NOTED, RECEIVED FRESH MATERIAL AFTER THE ASSESSMENT WAS OV ER, PRIMA FACIE , SUGGESTING THAT THE ASSESSEE COMPANY HAD RECEIVED BOGUS SHARE APPLICATION/PREMIUM MONEY FROM NUMBER OF SHELL COMPANIES. [PARA 10] MERELY BECAUSE THE TRANSACTIONS IN QUESTION WERE EX AMINED BY THE ASSESSING OFFICER DURING THE ORIGINAL ASSESSMENT WOULD NOT MA KE ANY DIFFERENCE. THE SCRUTINY WAS ON THE BASIS OF DISCLOSURES MADE AND M ATERIALS SUPPLIED BY THE ASSESSEE. SUCH MATERIAL IS FOUND TO BE PRIMA FACIE UNTRUE AND DISCLOSURES NOT TRUTHFUL. EARLIER SCRUTINY OR EXAMINATION ON THE BA SIS OF SUCH DISCLOSURES OR MATERIALS WOULD NOT DEBAR A FRESH ASSESSMENT. EACH INDIVIDUAL CASE OF THIS NATURE IS BOUND TO HAVE SLIGHT DIFFERENCE IN FACTS. [PARA 11] THE NEXT CONTENTION THAT THE ASSESSING OFFICER DID NOT DEMONSTRATE ANY MATERIAL ENABLING HIM TO FORM A BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT IS FALLACIOUS. THE ASSESSING OFF ICER RECORDED DETAILED REASONS POINTING OUT THE MATERIAL AVAILABLE WHICH H AD A LIVE LINK WITH FORMATION OF BELIEF THAT THE INCOME CHARGEABLE TO T AX HAD ESCAPED ASSESSMENT. 5139 & 5338/MUM/2016 IDHASOFT LTD. 38 AT THIS STAGE, AS IS OFTEN REPEATED, ONE WOULD NOT GO INTO SUFFICIENCY OF SUCH REASONS. [PARA 13] SECTION 68 AS IS WELL KNOWN, PROVIDES THAT WHERE AN Y SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOU S YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE T HEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESS ING OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. THAT THE SHARE APPLICATION M ONEY RECEIVED BY THE ASSESSEE FROM ABOVE-NOTED COMPANIES WAS ONLY BY NAT URE OF ACCOMMODATION ENTRIES AND IN REALITY, IT WAS THE FUNDS OF THE ASS ESSEE WHICH WAS BEING RE- ROUTED. UNDOUBTEDLY. SECTION 68 WOULD HAVE APPLICAB ILITY. PROVISO ADDED BY THE FINANCE ACT, 2012 WITH EFFECT FROM 1-4-2013, DO ES NOT CHANGE THIS POSITION. [PARA 14] AS PER THIS PROVISO, WHERE THE ASSESSEE IS A COMPAN Y AND THE SUM SO CREDITED CONSISTS OF SHARE APPLICATION MONEY, SHARE CAPITAL, SHARE PREMIUM OR ANY SUCH AMOUNT BY WHATEVER NAME CALLED, EXPLANATION OF FERED BY THE ASSESSEE COMPANY SHALL BE DEEMED TO BE NOT SATISFACTORY, UNL ESS THE PERSON IN WHOSE NAME SUCH CREDIT IS RECORDED IN THE BOOKS OF THE CO MPANY ALSO OFFERS AN EXPLANATION ABOUT THE NATURE AND SOURCE OF SUM SO C REDITED AND SUCH EXPLANATION IN THE OPINION OF THE ASSESSING OFFICER HAS BEEN FOUND TO BE SATISFACTORY. ESSENTIALLY, THIS PROVISO EASES THE B URDEN OF PROOF ON THE REVENUE WHILE MAKING ADDITION UNDER SECTION 168 WITH RESPEC T TO NON GENUINE SHARE APPLICATION MONEY OF THE COMPANIES. EVEN IN ABSENCE OF SUCH PROVISO AS WAS THE CASE GOVERNING THE PERIODS WITH WHICH WE ARE CO NCERNED IN THE PRESENT CASE, IF FACTS NOTED BY THE ASSESSING OFFICER AND R ECORDED IN REASONS ARE ULTIMATELY ESTABLISHED, INVOCATION OF SECTION 68 WO ULD BE CALLED FOR. [PARA 15] THE CONTENTION THAT THE ASSESSING OFFICER HAD MEREL Y AND MECHANICALLY ACTED ON THE REPORT OF THE INVESTIGATION WING ALSO CANNOT BE ACCEPTED. ONE HAS REPRODUCED THE REASONS RECORDED BY THE ASSESSING OF FICER AND NOTED THE GIST OF HIS REASONS FOR RESORTING TO REOPENING OF THE AS SESSMENT. THE ASSESSING OFFICER HAD PERUSED THE MATERIALS PLACED FOR HIS CO NSIDERATION AND THEREUPON, UPON EXAMINATION OF SUCH MATERIALS FORMED A BELIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. [PARA 16] IN THE RESULT, PETITION IS DISMISSED. [PARA 17] 2.32. THE HON'BLE GUJARAT HIGH COURT WHILE VALIDAT ING THE REOPENING OF ASSESSMENT UNDER SECTION 147/148 OF TH E ACT IN A LATER ORDER (AFORESAID) DATED 20/02/2018 ON THE ISS UE OF CASH CREDIT (SHARE APPLICATION MONEY) DULY CONSIDERED TH E 5139 & 5338/MUM/2016 IDHASOFT LTD. 39 ARGUMENTS OF BOTH SIDES AND FOLLOWED THE FOLLOWING THE DECISIONS I. JAYANT SECURITY AND FINANCE LTD. V. ASSTT. CIT [SPECIAL CIVIL APPLICATION NO. 18921 OF 2017, DATED 12-2-2018] (PAR A 12); II. RAYMOND WOOLEN MILLS LTD. V. ITO [1999] 236 ITR 34 (SC) (PARA 13); III. CIT V. RAJESH JHAVERI STOCK BROKERS (P.) LTD. [2007] 291 ITR 500/161 TAXMAN 316 (SC) (PARA 13) IV. PR. CIT V. GOKUL CERAMICS [2016] 241 TAXMAN 1/71 TAXMANN.COM 341 (GUJ.) (PARA 16) AND DISTINGUISHED THE FOLLOWING DECISIONS I. ALLIED STRIPS LTD. V. ASSTT. CIT [2016] 384 ITR 424/69 TAXMANN.COM 444 (DELHI) (PARA 11) AND II. YOGENDRAKUMAR GUPTA V. ITO [2014] 366 ITR 186/46 TAXMANN.COM 56 (GUJ.) (PARA 11) THE HON'BLE HIGH COURT WHILE UPHOLDING THE VALIDITY OF REOPENING ALSO CONSIDERED FOLLOWING DECISION, WHICH WERE REFERRED BY BOTH SIDES- I. ALLIED STRIPS LTD. V. ASSTT. CIT [2016] 384 ITR 424/69 TAXMANN.COM 444 (DELHI) (PARA 5), II. HARIKRISHAN SUNDERLAL VIRMANI V. DY. CIT [2017] 394 ITR 146 (GUJ.) (PARA 5), III. RAYMOND WOOLEN MILLS LTD.V. ITO [1999] 236 ITR 34 (SC) (PARA 6), IV. YOGENDRAKUMAR GUPTA V. ITO [2014] 366 ITR 186/46 TAXMANN.COM 56 (GUJ.) (PARA 6), 5139 & 5338/MUM/2016 IDHASOFT LTD. 40 V. AASPAS MULTIMEDIA LTD. V. DY. CIT [2017] 83 TAXMANN.COM 82/249 TAXMAN 568 (GUJ.) (PARA 6), VI. JAYANT SECURITY & FINANCE LTD. V. ASSTT. CIT [SP. CIVIL APPLICATION NO. 18921 OF 2017, DATED 12-2-2018] (PA RA 12), VII. ASSTT. CIT V. RAJESH JHAVERI STOCK BROKERS (P.) LTD. [2007] 291 ITR 500/161 TAXMAN 316 (SC) (PARA 13 ) AND VIII. PR. CIT V. GOKUL CERAMICS [2016] 241 TAXMAN 1/71 TAXMANN.COM 341 (GUJ.) (PARA 16). 2.33. THE SUM AND SUBSTANCE OF THE AFORESAID DECIS ION WAS THAT SINCE THE ASSESSING OFFICER WAS HAVING SUF FICIENT MATERIAL AT HIS COMMAND TO FORM A REASONABLE BELIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT, ME RELY BECAUSE THIS TRANSACTIONS WERE SCRUTINIZE BY THE AS SESSING OFFICER DURING THE ORIGINAL ASSESSMENT, WOULD NOT P RECLUDE HIM FROM REOPENING ASSESSMENT. THUS, THE ASSESSMENT NOTICE WAS HELD TO BE JUSTIFIED. IN THE APPEAL BEFORE US, THE LD. ASSESSING OFFICER RECEIVED INFORMATION DATED 12/03/ 2014, THEREFORE, THE LD. ASSESSING OFFICER WAS UNDER A RE ASONABLE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED AS SESSMENT AS THE LD. ASSESSING OFFICER HAD NOT FORMED ANY OPI NION AND THIS INFORMATION WAS RECEIVED AT THE LATER STAGE, W HICH IN OUR OPINION WAS SUFFICIENT TO INITIATE REASSESSMENT PRO CEEDINGS. EXPLANATION-1 TO SECTION 147 OF THE ACT SUPPORTS OU R VIEW. 5139 & 5338/MUM/2016 IDHASOFT LTD. 41 REFERRING TO THE SAID EXPLANATION IN CONSOLIDATED P HOTO & FINVEST LTD. (2006) 281 ITR 394 (DEL.), HON'BLE HIG H COURT OBSERVED AS UNDER:- 8. IT IS CLEAR FROM THE ABOVE THAT THE TWO CRITICAL A SPECTS WHICH NEED TO BE ADDRESSED IN ANY ACTION UNDER SECTION 147 ARE WHETH ER THE ASSESSING OFFICER HAS 'REASON TO BELIEVE' THAT ANY INCOME CHA RGEABLE TO TAX HAS ESCAPED ASSESSMENT AND WHETHER THE PROPOSED REASSES SMENT IS WITHIN THE PERIOD OF LIMITATION PRESCRIBED UNDER THE PROVISO T O SECTION 147. EXPLANATION (1 ) TO THE SAID PROVISION MAKES I T CLEAR THAT PRODUCTION OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH THE ASSE SSING OFFICER COULD WITH DUE DILIGENCE DISCOVER MATERIAL EVIDENCE WOULD NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE PROV ISO THAT STIPULATES AN EXTENDED PERIOD OF LIMITATION FOR ACTION IN CASES W HERE THE ESCAPEMENT ARISES OUT OF THE FAILURE ON THE PART OF THE ASSESS EE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. 2.34. THE FORMATION OF OPINION BY THE ASSESSING OF FICER HAS TO BE CONSIDERED ON THE TOUCH STONE WHETHER THE RE WAS REASONABLE BELIEF THAT INCOME HAS ESCAPED ASSESSMEN T AND FOR THAT PURPOSE, THE HON'BLE APEX COURT IN RAYMOND WOO LEN MILLS LTD. VS INCOME TAX OFFICER THROWS LIGHT ON TH E ISSUE AND FURTHER BY HON'BLE JURISDICTIONAL HIGH COURT IN M/S GIRILAL & COMPANY VS INCOME TAX OFFICER 300 ITR 432 (BOM.). I T IS ALSO NOTED THAT FRESH INFORMATION WAS RECEIVED BY THE AS SESSING OFFICER, WHICH IN OUR VIEW, ENTITLE THE ASSESSING O FFICER TO HAVE PRIMA FACIE TO REASON TO BELIEVE THAT INCOME HAS ES CAPED ASSESSMENT. THE RATIO LAID DOWN BY HON'BLE APEX COU RT IN CLAGGETT BRACHI COMPANY LTD. VS CIT 177 ITR 409 (SU PREME 5139 & 5338/MUM/2016 IDHASOFT LTD. 42 COURT), HON'BLE BOMBAY HIGH COURT IN ANUSANDHAN INVESTMENT LTD. VS DCIT 287 ITR 482 AND PIAGGIO VHI CLES PVT. LTD. VS DCIT 290 ITR 377 (BOM.) HELD THAT IN A CASE OF REOPENING AFTER FOUR YEARS SUBSEQUENT TO SCRUTINY A SSESSMENT, CONTRADICTION WAS RECOVERED BY BETWEEN TAX AUDIT RE PORT AND RETURN OF INCOME, IT WAS A CASE OF OMISSIONS AND/OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRUL Y ALL FACTS FOR COMPUTATION OF INCOME, THEREFORE, RESPECTFULLY FOLL OWING THE AFORESAID DECISIONS AND THE FACTUAL MATRIX NARRATED BEFORE US, WE FIND NO INFIRMITY IN THE CONCLUSION OF THE LD. C OMMISSIONER OF INCOME TAX (APPEAL), THEREFORE, THE ON THE IMPUG NED ISSUE OF VALIDITY OF REOPENING, WE UPHELD THE SAME, RESUL TING IN TO, DISMISSAL OF APPEAL OF THE ASSESSEE. 3. NOW, WE SHALL TAKE UP THE APPEAL OF THE REVENUE (ITA NO.5338/MUM/2016), WHEREIN, DELETING THE ADDIT ION MADE UNDER SECTION 68 OF THE ACT, BY THE LD. ASSESS ING OFFICER HAS BEEN CHALLENGED IGNORING THE FINDING OF FIBP. 3.1. DURING HEARING, SHRI B. SRINIVAS, LD. CIT-DR READ OVER THE ORDER OF THE FIRST APPELLATE AUTHORITY IN DETAIL BY INVITING OUR ATTENTION TO THE VARIOUS PARAS OF THE IMPUGNED 5139 & 5338/MUM/2016 IDHASOFT LTD. 43 ORDER. THE CRUX OF THE ARGUMENT ADVANCED ON BEHALF OF THE REVENUE IS THAT THE SOURCE OF FUNDS WAS NOT EXPLAIN ED BEFORE FIBP OR BEFORE THE LD. ASSESSING OFFICER AND THUS T HE LD. COMMISSIONER OF INCOME TAX (APPEAL) GRANTED RELIEF TO THE ASSESSEE WITHOUT GOING INTO THE ROOT OF THE ISSUE A S GENUINENESS OF THE TRANSACTION WAS NOT PROVED BY TH E ASSESSEE AS BASIC INFORMATION WAS AVAILABLE WITH THE LD. COM MISSIONER OF INCOME TAX (APPEAL). IT WAS ALSO SUBMITTED THAT THE BASIC INGREDIENTS OF SECTION 68 OF THE ACT WERE NOT PROVE D BY THE ASSESSEE. RELIANCE WAS PLACED UPON THE DECISION IN SUBHLAKSHMI VANIJYA PVT. LTD. VS CIT (2015) 60 TAXM AN.COM 60 (KOLKATA)(TRIB.), ORDER DATED 30/07/2015. 3.2. ON THE OTHER HAND, SHRI VIJAY MEHTA, LD. COUN SEL FOR THE ASSESSEE, STRONGLY DEFENDED THE IMPUGNED ORDER BY INVITING OUR ATTENTION TO THE ASSESSMENT ORDER AS W ELL AS THE FACTUAL FINDING RECORDED BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL). THE CRUX OF THE ARGUMENT IS THAT THE MONEY IS RECEIVED FROM M/S ANTLEG CYPRUS LTD. AND THE ASSESS EE HAS GIVEN INWARD REMITTANCE CERTIFICATE. IT WAS CONTEND ED THAT THE ASSESSEE IS NOT EXPECTED TO PROVE THE SOURCE OF SOU RCE. SO FAR 5139 & 5338/MUM/2016 IDHASOFT LTD. 44 AS, THE DECISION RELIED UPON BY THE LD. CIT-DR IN T HE CASE OF SUBHLAKSHMI VANIKYA PVT. LTD. ((SUPRA)) IS CONCERNE D, THE LD. COUNSEL EXPLAINED THAT THE ISSUE BEFORE THE KOLKATA BENCH WAS WHETHER THE AMENDMENT IS PROSPECTIVE IN NATURE WHIC H HAS BEEN REPLIED BY HON'BLE BOMBAY HIGH COURT IN CIT VS GAGANDEEP INFRASTRUCTURE PVT. LTD. (2017) 394 ITR 6 80(BOM.). THE LD. COUNSEL RELIED UPON THE DECISION OF THE MUM BAI TRIBUNAL IN THE CASE OF ARCELI REALITY LTD. VS INCO ME TAX OFFICER (ITA NO.6492/MUM/2016), ORDER DATED 21/04/2 017. IT WAS CONTENDED THAT THE LD. ASSESSING OFFICER MERELY MADE THE ADDITION ON THE BASIS OF REJECTION OF AN APPLICATIO N BY FIPB UNIT MADE BY M/S PRISM INFORMATICS LTD. FOR ISSUANC E OF SHARE CAPITAL TO M/S ANTLEG CYPRUS LTD. OUR ATTENTION WAS INVITED TO THE FACTUAL FINDING RECORDED IN PARA 2.4.23 ONWARDS OF THE IMPUGNED ORDER ALONG WITH THE PROVISION OF SECTION 68 OF THE ACT. 3.3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IF THE OB SERVATION MADE IN THE ASSESSMENT ORDER, LEADING TO ADDITION M ADE TO THE TOTAL INCOME, CONCLUSION DRAWN IN THE IMPUGNED ORDE R, 5139 & 5338/MUM/2016 IDHASOFT LTD. 45 MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY TH E LD. RESPECTIVE COUNSEL, IF KEPT IN JUXTAPOSITION AND AN ALYZED, BEFORE ADVERTING FURTHER, IT IS OUR BOUNDED DUTY TO EXAMINE THE PROVISION OF SECTION 68 OF THE ACT, WHICH IS REPROD UCED HEREUNDER FOR READY REFERENCE AND ANALYSIS:- 68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE T HEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINI ON OF THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITE D MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR : PROVIDED THAT WHERE THE ASSESSEE IS A COMPANY (NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTER ESTED), AND THE SUM SO CREDITED CONSISTS OF SHARE APPLICATI ON MONEY, SHARE CAPITAL, SHARE PREMIUM OR ANY SUCH AMOUNT BY WHATEVER NAME CALLED, ANY EXPLANATION OFFERED BY SU CH ASSESSEE-COMPANY SHALL BE DEEMED TO BE NOT SATISFAC TORY, UNLESS (A) THE PERSON, BEING A RESIDENT IN WHOSE NAME SUCH CREDIT IS RECORDED IN THE BOOKS OF SUCH COMPANY ALSO OFFERS A N EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH SUM SO CREDITED; AND (B) SUCH EXPLANATION IN THE OPINION OF THE ASSESSIN G OFFICER AFORESAID HAS BEEN FOUND TO BE SATISFACTORY: PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRST PROVISO SHALL APPLY IF THE PERSON, IN WHOSE NAME THE SUM RE FERRED TO THEREIN IS RECORDED, IS A VENTURE CAPITAL FUND OR A VENTURE CAPITAL COMPANY AS REFERRED TO IN CLAUSE (23FB)OF S ECTION 10. 5139 & 5338/MUM/2016 IDHASOFT LTD. 46 3.4. AS PER SECTION 68 OF THE ACT, ONUS IS UPON TH E ASSESSEE TO DISCHARGE THE BURDEN SO CAST UPON. FIRS T BURDEN IS UPON THE ASSESSEE TO SATISFACTORILY EXPLAIN THE CRE DIT ENTRY CONTAINED IN HIS BOOKS OF ACCOUNTS. THE BURDEN HAS TO BE DISCHARGED WITH POSITIVE MATERIAL (OCEANIC PRODUCTS EXPORTING COMPANY VS CIT 241 ITR 497 (KERALA.). THE LEGISLATU RE HAD LAID DOWN THAT IN THE ABSENCE OF SATISFACTORY EXPLA NATION, THE UNEXPLAINED CASH CREDIT MAY BE CHARGED U/S 68 OF TH E ACT. OUR VIEW IS FORTIFIED BY THE RATIO LAID DOWN IN HON BLE APEX COURT IN P. MOHANKALA (2007)(291 ITR 278)(SC). A CL OSE READING OF SECTION 68 AND 69 OF THE ACT MAKES IT CL EAR THAT IN THE CASE OF SECTION 68, THERE SHOULD BE CREDIT ENTR Y IN THE BOOKS OF ACCOUNT WHEREAS IN THE CASE OF 69 THERE MA Y NOT BE AN ENTRY IN SUCH BOOKS OF ACCOUNT. THE LAW IS WELL SETTLED, THE ONUS OF PROVING THE SOURCE OF A SUM, FOUND TO BE RECEIVED/TRANSACTED BY THE ASSESSEE, IS ON HIM AND WHERE IT IS NOT SATISFACTORILY EXPLAINED, IT IS OPEN TO THE REV ENUE TO HOLD THAT IT IS INCOME OF THE ASSESSEE AND NO FURTHER BU RDEN LIES ON THE REVENUE TO SHOW THAT INCOME IS FROM ANY OTHER P ARTICULAR SOURCE. WHERE THE ASSESSEE FAILED TO PROVE SATISFAC TORILY THE 5139 & 5338/MUM/2016 IDHASOFT LTD. 47 SOURCE AND NATURE OF SUCH CREDIT, THE REVENUE IS FR EE TO MAKE THE ADDITION. THE PRINCIPLE LAID DOWN IN GANPATI M UDALIAR (1964) 53 ITR 623/A. GOVINDA RAJULU MUDALIAR (34 IT R 807)(SC) AND ALSO CIT VS DURGA PRASAD MORE (72 ITR 807)(SC) ARE THE LANDMARK DECISIONS. THE RATIO LAID DOWN THE REIN ARE THAT IF THE EXPLANATION OF THE ASSESSEE IS UNSATISF ACTORY, THE AMOUNT CAN BE TREATED AS INCOME OF THE ASSESSEE. T HE RATIO LAID DOWN IN DAULAT RAM RAWATMAL 87 ITR 349 (SC) FU RTHER SUPPORTS THE CASE OF THE ASSESSEE. IN THE CASE OF A CASH ENTRY, IT IS NECESSARY FOR THE ASSESSEE TO PROVE NOT ONLY THE IDENTITY OF THE CREDITOR BUT ALSO THE CAPACITY OF THE CREDITOR AND GENUINENESS OF THE TRANSACTIONS. THE ONUS LIES ON THE ASSESSEE, UNDER THE FACTS AVAILABLE ON RECORD. A H ARMONIOUS CONSTRUCTION OF SECTION 106 OF THE EVIDENCE ACT AND SECTION 68 OF THE INCOME TAX ACT WILL BE THAT APART FROM ESTAB LISHING THE IDENTITY OF THE CREDITOR, THE ASSESSEE MUST ESTABLI SH THE GENUINENESS OF THE TRANSACTION AS WELL AS THE CREDI TWORTHINESS OF THE CREDITORS. IN CIT VS KORLAY TRADING COMPANY LTD. 232 ITR 820 (CAL.), IT WAS HELD THAT MERE MENTION OF FI LE NUMBER OF CREDITOR WILL NOT SUFFICE AND EACH ENTRY HAS TO BE EXPLAINED 5139 & 5338/MUM/2016 IDHASOFT LTD. 48 SEPARATELY BY THE ASSESSEE (CIT VS R.S. RATHAORE) 2 12 ITR 390 (RAJ.). THE HONBLE GUWAHATI HIGH COURT IN NEMI CH ANDRA KOTHARI VS CIT (264 ITR 254)(GAU) HELD THAT TRANSAC TION BY CHEQUES MAY NOT BE ALWAYS SACROSANCT. IN THE PRESE NT APPEAL, THE ASSESSEE DULY FULFILLED THE CONDITIONS ENSHRINE D U/S 68 OF THE ACT AND PRODUCED NECESSARY EVIDENCE FOR ITS CLA IM. 3.5. THE RATIO LAID DOWN IN ACIT VS RAJEEV TANDON 294 ITR (AT) 219 (DEL.), WHICH WAS CONFIRMED BY HONBLE HIGH COURT , IN 294 ITR 488, SUPPORTS THE CASE OF THE RE VENUE. IDENTICAL RATIO WAS LAID DOWN IN CIT VS ANIL KUMAR 392 ITR 552 (DEL.), WHEREIN IT WAS HELD THAT MERE IDENTIFIC ATION OF THE DONOR AND MOVEMENT OF GIFT THROUGH BANKING CHANNEL IS NOT SUFFICIENT TO PROVE THE GENUINENESS OF GIFT. NOW, IN THE LIGHT OF THE FOREGOING DISCUSSION, WE SHALL EXAMINE THE FACT S OF THE PRESENT APPEAL. BEFORE GOING INTO THE FACTS OF THE PRESENT APPEAL, WE ARE EXPECTED TO ANALYZE THE BACKGROUND O F THE CASE. IT IS NOTED THAT ONE M/S PRISM INFORMATICS LTD. (HE REINAFTER IN SHORT PRISM) MADE AN APPLICATION BEFORE FIPB WITH R ESPECT TO SHARES OF M/S ANTLEG CYPRUS LTD. AND THE SAME WAS R EJECTED ON THE GROUND THAT M/S ANTLEG CYPURS LTD. COULD NOT EXPLAIN 5139 & 5338/MUM/2016 IDHASOFT LTD. 49 SATISFACTORILY THE DIFFERENCE IN THE PRICING AND SI NCE M/S ANTLEG CYPRUS LTD. COULD NOT FILE THE DETAILS ABOUT THE SOURCES OF FUNDS INVESTED BY FOREIGN INVESTOR, THE ASSESSEE COMPANY FAIL TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT. A SHARE SWAP AGREEMENT DATED 23/04/ 2013 WAS ENTERED INTO BETWEEN M/S ANTLEG CYPRUS LTD. AND M/S PRISM, WHEREIN, PRISM WAS ACQUIRED 18M15,49,522 EQU ITY SHARES OF ASSESSEE COMPANY FROM M/S ANTLEG CYPRUS L TD. WHICH COMPRISED OF 17.25% OF SHARE HOLDING. THE CONSIDERATION WAS TO BE PAID BY WAY OF ALLOTTING UP TO 40 LAKH EQUITY SHARE OF RS.1 EACH OF PRISM AT THE ISSUE PRI CE OF RS.35/- , THUS, M/S PRISM FILED APPLICATION TO FIPB FOR APP ROVAL OF ISSUE OF 40 LAKH EQUITY SHARES TO M/S ANTLEG CYPRUS LTD., THIS PROPOSAL WAS REJECTED BY FIPB FOR THE REASON THAT N O DETAILS OF ACTUAL SOURCE OF ORIGINAL INVESTMENT IN APPELLANT C OMPANY WAS FILED BY ANTLEG CYPRUS LTD. AND THUS ADDITION WAS M ADE UNDER SECTION 68 OF THE ACT BY THE LD. ASSESSING OFFICER. 3.6. ON APPEAL BEFORE THE FIRST APPELLATE AUTHORIT Y, THE ADDITION SO MADE WAS DELETED WHICH IS UNDER CHALLEN GE BY THE REVENUE, BEFORE THIS TRIBUNAL. BEFORE ADVERTING FUR THER, THE 5139 & 5338/MUM/2016 IDHASOFT LTD. 50 RELEVANT FINDING OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL) IS REPRODUCED HEREUNDER:- 2.4.22 GROUND NO. 2 IS IN RESPECT OF THE MERITS O F THE ADDITION OF UNEXPLAINED CASH CREDIT OF RS.27.10 CRO RE. LD. AO MADE THE ADDITION BY HOLDING THAT THE NATURE AND SO URCE OF INVESTMENTS MADE BY M/S ANTLEG CYPRUS LTD. WERE NOT FOUND TO BE GENUINE BY FIPB WHILE EXAMINING THE PROPOSAL OF M/S PRISM INFORMATICS LTD. FOR ISSUANCE OF SHARE CAPITAL TO M /S ANTLEG CYPRUS LTD. HE FURTHER HELD THAT AS THE PRIMARY PRE -CONDITION LAID DOWN BY THE INCOME TAX ACT WAS NOT SATISFIED, THE S ECOND CONDITION REGARDING SATISFACTION OF THE AO WITH THE EXPLANATION PROVIDED BY THE ASSESSEE WAS AUTOMATICALLY NOT SATI SFIED. ACCORDINGLY, HE PROCEEDED TO ADD BACK THE INVESTMEN T IN THE APPELLANT COMPANY EQUIVALENT TO US$ 7.5 MILLION BUT RESTRICTED IT TO THE BALANCE SHEET FIGURE OF THE SHARE CAPITAL (I NCLUDING SHARE APPLICATION MONEY) AT RS.27.10 CRORE. 2.4.23 PER CONTRA, THE APPELLANT HAS VEHEMENTLY AR GUED THAT LD. AO HAD COMPLETELY IGNORED THE FACTS ON REC ORD AND HAD MERELY PROCEEDED TO MAKE THE ADDITION ON THE BASIS OF THE REJECTION DONE BY THE FIPB UNIT. IN THIS REGARD, IT HAS BEEN SUBMITTED THAT THE TOTAL SHARE CAPITAL OF THE APPEL LANT COMPANY WAS RS.27.10 CRORE OUT OF WHICH ISSUED, SUBSCRIBED AND PAID-UP- CAPITAL WAS RS.22.71 CRORE AND SHARE APPLICATION MO NEY WAS RS.4.39 CRORE. IT HAS ALSO BEEN STATED THAT LD. AO HAS COMPLETELY IGNORED THE FACT THAT INVESTMENT MADE BY M/S ANTLEG CYPRUS LTD. IN A.Y. 2007-08 WAS ONLY US$ 10,50,000 AND THAT EVE N THIS PAYMENT WAS MADE BY M/S ANTLEG LTD. ON BEHALF OF M/ S ANTLEG CYPRUS LTD. TO THE EXTENT OF US$ 10,50,000 EQUIVALE NT TO RS.4.61 CRORE AS PER THE CERTIFICATE FOR FOREIGN INWARD REM ITTANCE ISSUED BY THE CITIBANK AND THE CONFIRMATION OF M/S ANTLEG LTD. AS WELL AS M/S ANTLEG CYPRUS LTD. FILED BEFORE THE LD. AO (PAG E NOS. 30,31 AND 32 RESPECTIVELY OF THE PAPER BOOK FILED ON 20TH APRIL, 2016 DURING THE APPELLATE PROCEEDINGS). IT HAS FURTHER B EEN MENTIONED THAT M/S ANTLEG LTD. HAD MADE AN INVESTMENT OF US$ 10,00,000 EQUIVALENT TO RS.4,42,40,000/- AS PER CERTIFICATE O F FOREIGN INWARD REMITTANCE DATED 11.01.2007 AND A FURTHER SU M OF US$ 30,00,000 EQUIVALENT TO RS.13,23,60,000/- AS PER CE RTIFICATE OF FOREIGN INWARD REMITTANCE DATED 10.01.2007 OF CITIB ANK (THESE 5139 & 5338/MUM/2016 IDHASOFT LTD. 51 DOCUMENTS WERE FILED BEFORE THE LD. AO AS WELL). TH E APPELLANT HAS ALSO STATED THAT ALL THESE FACTS WERE FILED IN FORM FCGPR BEFORE THE RESERVE BANK OF INDIA AND HENCE, IT COUL D NOT BE SAID THAT THE APPELLANT WAS HIDING CERTAIN INFORMATION O R THAT THE MONEY WHICH WAS BROUGHT IN WAS THROUGH ANY SUSPICIO US MANNER. AS REGARDS THE BALANCE, IT HAS BEEN STATED THAT THE INVESTMENTS WERE MADE BY CERTAIN INDIVIDUAL SHAREHOLDERS AS REP ORTED TO THE RBI AND M/S ANTLEG CYPRUS LTD. WAS NOWHERE IN QUEST ION. 2.4.24 UPON PERUSAL OF THE FACTS BROUGHT BEFORE ME, I FIND THAT THE ACTUAL INVESTMENT MADE BY M/S ANTLEG LTD. ON ITS OW N AND ON BEHALF OF M/S ANTLEG CYPRUS LTD. IN A.Y.2007-08 WAS AS UNDER: XXXXXXXXXXXXXXXXXXXXXXXXXX 2.4.25 TO UNDERSTAND THE IMPACT OF ABOVE ENTRIES, I T WILL BE USEFUL TO UNDERSTAND THE PROVISIONS OF SECTION 68 I N RIGHT PERSPECTIVE. WHILE DEALING WITH THE TAXATION LAWS, COURTS HAVE R EGULARLY INVOKED SECTION 106 OF THE EVIDENCE ACT, 1872. SECTION 68 I S THE STATUTORY RECOGNITION OF THE SAID SECTION ACCORDING TO WHICH A PERSON IS IN THE BEST POSITION TO KNOW THE RELEVANT FACTS RELATED TO HIM. TREATING THE CASH CREDITS AS INCOME OF THE ASSESSEE IS NOT A NEW CONCEPT INTRODUCED BY THE ACT. THE EFFECT OF SECTION 68 IS THAT A SUM FOUND CREDITED IN THE BOOKS OF THE ASSESSEE CAN BE CHARGE D TO INCOME-TAX AS HIS INCOME. OVER THE YEARS LAW REGARDING CASH CR EDITS HAS EVOLVED AND HAS TAKEN A DEFINITE SHAPE. A FEW IMPORTANT ASP ECTS OF THE LAW WITH REGARD TO SECTION 68 CAN BE ENUMERATED HERE - (I) SECTION 68 CAN BE INVOKED WHEN FOLLOWING THREE CONDITIONS ARE SATISFIED - (A) WHEN THERE IS CREDIT OF AMOUNTS IN THE BOOKS MAINTAINED BY THE ASSESSEE (B) SUCH CREDIT HAS TO BE A SUM OF MONEY DURING THE PREVIOUS YEAR (C) EITHER THE ASSESSEE OFFERS NO EXP LANATION ABOUT THE NATURE AND SOURCE OF SUCH CREDITS FOUND IN THE BOOK S OR THE EXPLANATION OFFERED BY THE ASSESSEE, IN THE OPINION OF THE ASSE SSING OFFICER, IS NOT SATISFACTORY. IT IS ONLY THEN THAT THE SUM SO CREDI TED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PR EVIOUS YEAR (II) THE EXPRESSION THE ASSESSEE OFFERS NO EXPLANATION MEANS THE ASSESSEE PROPER, REASONABLE AND ACCEPTABLE EXPL ANATION AS REGARDS THE SUMS FOUND CREDITED IN THE BOOKS MAINTA INED BY THE ASSESSEE. THE OPINION OF THE ASSESSING OFFICER FOR NOT ACCEPTING THE 5139 & 5338/MUM/2016 IDHASOFT LTD. 52 EXPLANATION OFFERED BY THE ASSESSEE AS NOT SATISFAC TORY IS REQUIRED TO BE BASED ON PROPER APPRECIATION OF MATERIAL AND OTH ER ATTENDING CIRCUMSTANCES AVAILABLE ON THE RECORD. THE OPINION OF THE ASSESSING OFFICER IS REQUIRED TO BE FORMED OBJECTIVELY WITH REFERENCE TO THE MATERIAL ON RECORD ONCE THE EXPLANATION OF THE ASSE SSEE IS FOUND UNBELIEVABLE OR FALSE, THE ASSESSING OFFICER IS NOT REQUIRED TO BRING POSITIVE EVIDENCE ON RECORD TO TREAT AMOUNT IN QUES TION AS INCOME OF THE ASSESSEE. HOWEVER, WHILE CONSIDERING THE EXPLAN ATION OF THE ASSESSEE, THE ASSESSING OFFICER HAS TO ACT REASONAB LY - APPLICATION OF MIND IS THE SINE QUA NON FOR FORMING THE OPINION. (III) PHRASE APPEARING IN THE SECTION - 'NATURE AND SOURC ES OF SUCH CREDITS' - SHOULD BE UNDERSTOOD IN RIGHT PERSPECTIV E, SO THAT GENUINENESS OF THE TRANSACTION CAN BE DECIDED ON ME RITS AND NOT ON PREJUDICES. COURTS ARE OF THE FIRM VIEW THAT THE EV IDENCE PRODUCED BY THE ASSESSEE CANNOT BE BRUSHED ASIDE IN A CASUAL MA NNER. ASSESSEE CANNOT BE ASKED TO PROVE THE IMPOSSIBLE. EXPLANATIO N ABOUT 'SOURCE OF SOURCE' OR 'ORIGINS OF THE ORIGIN' CANNO T AND SHOULD NOT BE CA/LED FOR WHILE MAKING INQUIRY UNDER THIS SECTION. (IV) IN THE MATTERS RELATED TO SECTION 68, BURDEN O F PROOF CANNOT BE DISCHARGED TO THE HILT - SUCH MATTERS ARE DECIDED O N THE PARTICULAR FACTS OF THE CASE AS WELL AS ON THE BASIS OF PREPON DERANCE OF PROBABILITIES. CREDIBILITY OF THE EXPLANATION, NOT THE MATERIALITY OF EVIDENCES, IS THE BASIS FOR DECIDING THE CASES FALL ING UNDER SECTION 68. (V) THOUGH CONFIRMATORY LETTERS OR ACCOUNT PAYEE CH EQUES DO NOT PROVE THAT THE AMOUNT IN QUESTION IS PROPERLY E XPLAINED FOR THE PURPOSE OF SECTION 68 AND ASSESSEE HAS TO ESTABLISH IDENTITY AND CREDITWORTHINESS OF THE CREDITOR AS WELL AS THE GEN UINENESS OF THE TRANSACTION, IT/S ALSO TRUE THAT MONEY RECEIVED THROUGH FOREIGN REMITTANCE WITH RBI APPROVAL IS A STRONG INDICATOR OF BONA FIDE OF THE CASH CREDIT THAT HAS TO BE DISAPPROVED ONLY WITH PO SITIVE EVIDENCE. (VI) IN MATTERS REGARDING CASH CREDIT, THE ONUS OF PROOF IS NOT A STATIC ONE. AS PER THE PROVISIONS OF THE SECTION, THE INIT IAL BURDEN OF PROOF LIES ON THE ASSESSEE. AMOUNT APPEARING IN THE BOOKS OF A CCOUNT OF THE ASSESSEE IS CONSIDERED A PROOF AGAINST HIM. HE CAN PROVE THE IDENTITY OF THE CREDITORS BY EITHER FURNISHING THEI R PANS OR ASSESSMENT ORDERS OR SUCH OTHER DOCUMENTS. SIMILARL Y, GENUINENESS OF THE TRANSACTION CAN BE PROVED BY SHOWING THAT THE M ONEY WAS RECEIVED BY AN ACCOUNT PAYEE CHEQUE OR BY DRAFT. CREDITWORTH INESS OF THE 5139 & 5338/MUM/2016 IDHASOFT LTD. 53 LENDER CAN BE ESTABLISHED BY ATTENDING CIRCUMSTANCE S. ONCE THE ASSESSEE PRODUCES EVIDENCES ABOUT IDENTITY, GENUINE NESS AND CREDITWORTHINESS OF THE LENDER, ONUS OF PROOF SHIFT S TO THE REVENUE. XXXXXXXXXXXXXXXXXXXXXXXXX 2.4.27 IF ABOVE REFERRED PRINCIPLES ARE APPLIED TO THE FACTS AND CIRCUMSTANCES OF THE CASE UNDER CONSIDERATION, IT B ECOMES ABSOLUTELY CLEAR THAT THE APPELLANT HAD DISCHARGED ITS ONUS AN D BURDEN OF PROOF. NOT ONLY HAD IT FURNISHED THE TRAIL OF BANKING TRAN SACTIONS, IT HAD ALSO PRODUCED COPIES OF FORM-FCGPR SUBMITTED TO THE RBI EVIDENCING RECEIPT OF FUNDS FROM THE FOREIGN ENTITY. FURTHER, CONFIRMATION OF THE SAID ENTITY WAS ALSO FURNISHED BEFORE THE ID AO WHI CH HAS NOT BEEN NEGATED BY HIM. THUS, THE IDENTITY OF THE CREDITOR, ITS CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION STANDS EXPLAINED AND IF THE ID. AO STILL HARBOURED ANY DOU BTS ABOUT THE CREDITWORTHINESS OR IDENTITY OF THE CREDITOR, HE HAD ALL THE RIGHT UNDER THE ACT TO HOLD FURTHER INQUIRY AND CON FRONT THE APPELLANT WITH SUCH INQUIRY. TO THE CONTRARY, ID AO DID NOT M AKE ANY ATTEMPT TO DISCHARGE HIS BURDEN TO REBUT THE EVIDENCES PRODUCE D BY THE APPELLANT MADE THE ADDITION MERELY ON THE BASIS OF INFORMATION RECEIVED FROM FT & TR DIVISION OF CBDT EVEN THOUGH ALL THE ISSUES RAISED IN THE SAID COMMUNICATION STOOD CLARIFIED DU RING THE RE- ASSESSMENT PROCEEDINGS. IT IS TRITE LAW THAT THE AO CANNOT BRUSH ASIDE THE EVIDENCES SUBMITTED DURING ASSESSMENT PROCEEDIN GS AND MAKE ADDITIONS ON MERE WHIMS AND FANCIES. EVEN THE HON'BLE SUPREME COURT IN THE CASE OF STATE OF KERALA V. C. VELUKUTTY CO. [1966] 60 ITR 239 HAS HELD THAT THE JUDGMENT IS A FACULTY TO DECIDE THE MATTERS WITH WISDOM TRULY AND LEGALLY AND NOT T O DEPEND ON THE ARBITRARY CAPRICE OF A JUDGE, BUT ON SETTLED AND IN VARIABLE PRINCIPLES OF JUSTICE. 2.4.28 FURTHER, HON'BLE SUPREME COURT IN THE CASE OF MAHABIR PRASAD SANTOSH KUMAR V. STATE OF LIP. AIR 1970 SC 1302 HAS OBSERVED AS UNDER: 'RECORDING OF REASONS IN SUPPORT OF A DECISION ON A DISPUTED CLAIM BY A QUASI- JUDICIAL AUTHORITY ENSURES THAT THE DECISION IS REACHED ACCORDING TO LAW AND IS NOT THE RESULT OF C APRICE, WHIM OR FANCY OR REACHED ON GROUNDS OF POLICY OR EXPEDIENCY. A PA RTY TO THE DISPUTE IS ORDINARILY ENTITLED TO KNOW THE GROU NDS ON WHICH THE AUTHORITY HAS REJECTED HIS CLAIM. IF THE ORDER IS S UBJECT TO APPEAL, THE NECESSITY TO RECORD REASONS IS GREATER, FOR WIT HOUT RECORDED 5139 & 5338/MUM/2016 IDHASOFT LTD. 54 REASONS THE APPELLATE AUTHORITY HAS NO MATERIAL ON WHICH IT MAY DETERMINE WHETHER THE FACTS WERE PROPERLY ASCERTAINED, THE RELEVANT LAW WAS CORRECTLY APPLIED AND THE DECISION WAS JUST.' 2.4.29 ON WEIGHING THE PROS AND CONS, I AM OF THE CONSIDERED VIEW THAT LD. AO HAS GIVEN A GO BY TO TH E KNOWN CANONS OF JURISPRUDENCE BY COMPLETELY IGNORING THE EVIDENC E PRODUCED BY THE APPELLANT. HE HAS NOT EVEN ADVERTED TO THE FACT THA T RBI HAD TAKEN COGNIZANCE OF THE FORM-FCGPR FOR INITIAL ALLOTMENT OF 17,66,00,000 EQUITY SHARES OF RE.1 EACH AT PAR TO M/S ANTLEG LTD . AND NOT M/S ANTLEG CYPRUS LTD. WHICH CLEARLY SHOWED THAT RS.17,66 CRORE WAS RECEIVED FROM THE FORMER. HE ALSO MISDIRECTED HIMSE LF IN IGNORING THE FIRC ISSUED BY CITI BANK FOR INWARD REMITTANCE OF U S$ 5,50,000 DATED 03.02.2007 AND OF US$ 5,00,000 DATED 14.03.2007 AS PER WHICH THE ABOVE SUMS WERE RECEIVED FROM M/S ANTLEG LTD. AND IN DOING SO, HE ALSO IGNORED THE CONFIRMATION TO THE ABOVE EFFECT FILED BY M/S ANTLEG LTD. I FIND THAT, THOUGH NOT REQUIRED , THE APPELLANT HAS, IN FACT, GIVEN THE SOURCE OF SOURCE AND HENCE, THE ADD ITION MADE BY THE LD. AO CANNOT STAND THE TEST OF LEGAL SCRUTINY. I A M ALSO FORTIFIED IN MY ABOVE VIEW BY THE DECISION OF THE HON'BLE BOMBAY HI GH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX V. TANIA INVESTMENTS (P.) LTD 322 ITR 394 (BORN) AND THE HON'BLE MUMBAI BENCH OF ITAT IN THE CASE OF INCOME-TAX OFFICER 9(1)-1 V. ANANT SHELTERS (P.) LTD. [2012] 20 TAXMANN.COM 153(MUM.) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 2.4.33 IT IS SEEN THAT VIDE PARA 2(B) OF THE GROUND S OF APPEAL, THE APPELLANT HAS RAISED A WITHOUT PREJUDICE GROUND STA TING THAT IN ANY CASE, THE TOTAL INVESTMENT MADE BY M/S ANTLEG CYPRU S LTD. WAS ONLY RS.4.61 CRORE (RS.21.92 LAC + RS.2.19 CRORE + RS.2.20 CRORE) AND THE BALANCE WAS ACCOUNTED FOR BY M/S ANTLEG LTD. AND OT HERS AND HENCE, LD. AO COULD NOT HAVE MADE THE ADDITION OF SUM OF R S.27.10 CRORE BY MAKING AN ALLEGATION REGARDING M/S ANTLEG CYPRUS LT D. WHICH WAS SHAREHOLDER ONLY TO THE EXTENT OF RS.4.61 CRORE. 2.4.34 AS MENTIONED IN RESPECT OF GROUND NO. 2(A), IT IS 5139 & 5338/MUM/2016 IDHASOFT LTD. 55 APPARENT THAT MIS ANTLEG CYPRUS LTD. WOULD AT BEST BE RESPONSIBLE FOR INVESTMENT OF RS.4.61 CRORE AND EVEN THAT AMOUN T WAS SET OFF BY WAY OF FOREIGN INWARD REMITTANCE OF US$ 10,50,000 VIDE REMITTANCE DATED 03/02/2007 AND 14.03.2007 MADE BY M/S ANTLEG LTD. ON BEHALF M/S.ANTLG CYPRUS LTD. AND THUS THE SOURCE OF THE FUNDS WHICH WAS ROUTED THROUGH BANKING CHANNELS AND REPORTED TO THE RBI STANDS EXPLAINED. IF LD. AO WANTED TO BRING CERTAIN OTHER INFORMATION OR EVIDENCE ON RECORD TO NEGATE THE APPELLANT'S CLAIM, HE WAS NOT PRECLUDED FROM DOING SO. HOWEVER, AS BROUGHT OUT EA RLIER, IT IS SEEN THAT HE HAS NOT EVEN CARED TO DISCUSS THE FACTS AVA ILABLE ON RECORD AND HAS MERELY GONE BY THE FIPB REJECTION. AS FAR AS TH E POLICY DECISION OF FIPB UNIT IS CONCERNED, THE SAME CANNOT BE HELD TO BE LEGALLY TENABLE FOR LOOKING INTO THE SOURCE OF FUNDS RECEIVED BY TH E APPELLANT AND FOR WHICH DETAILED FOREIGN REMITTANCE CERTIFICATES WERE ALSO SUBMITTED TO THE LD. AO INCLUDING FORM FCGPR SUBMITTED TO THE RB I. IN THIS CASE, LD. AO HAS BASED HIS FINDINGS ONLY ON THE REJECTION OF INVESTMENT PROPOSAL BY THE FIPB AND IGNORED THE PLETHORA OF EV IDENCE PRODUCED BY THE APPELLANT IN SUPPORT OF THE SOURCE OF FUNDS REM ITTED THROUGH THE BANKING CHANNEL AND FOR WHICH REGULAR FILINGS WERE MADE TO THE RBI AND MINISTRY OF CORPORATE AFFAIRS. THUS, IN VIEW OF THE OVERBEARING EVIDENCE AND POSITION OF LAW ANALYSED SUPRA, ADDITI ON MADE BY THE LD.A0 HAS NO LEGS TO STAND. ACCORDINGLY, GROUND NOS . 2(A) AND 2(B) ARE ALLOWED. 2.5 IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. 3.7. IF THE OBSERVATION MADE IN THE ASSESSMENT ORDER, LEADING TO ADDITION MADE TO THE TOTAL INCOME , CONCLUSION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF K EPT IN JUXTAPOSITION AND ANALYZED, BEFORE ADVERTING FURTHE R, WE ARE EXPECTED TO ANALYZE THE FACTS. WE NOTE THAT THE ADD ITION WAS MADE BY THE LD. ASSESSING OFFICER ON THE PREMISE TH AT THE 5139 & 5338/MUM/2016 IDHASOFT LTD. 56 NATURE AND SOURCE OF INVESTMENT MADE BY M/S ANTLEG CYPRUS LTD. WERE NOT FOUND TO BE GENUINE BY FIPB, WHILE EX AMINING THE PROPOSAL OF M/S PRISM INFORMATICS LTD. FOR ISSU ANCE OF SHARE CAPITAL TO M/S ANTLEG CYPRUS LTD.. NOW, QUES TION ARISES WHETHER ADDITION CAN BE MADE IN THE HANDS OF THE AS SESSEE UNDER SECTION 68 OF THE ACT, WHILE DEALING WITH THE CASE/APPLICATION OF A THIRD PARTY. THE OBVIOUS REPL Y IS NO. BECAUSE, FIRSTLY, THE ASSESSEE IS NOT EXPECTED TO P ROVE THE SOURCE OF SOURCE. SECONDLY, THE IDENTITY OF THE PA RTIES IS NOT IN DISPUTE AND THIRDLY SO FAR AS GENUINENESS OF TRANSA CTION IS CONCERNED, THE ASSESSEE IS NOT EXPECTED TO PROVE TH E GENUINENESS OF TRANSACTION BETWEEN THIRD PARTIES. T HERE ARE SO MANY DECISIONS ON THIS ASPECT WHICH WILL BE DEALT W ITH AT LATER STAGE. AS MENTIONED EARLIER, THE LD. ASSESSING OFFI CER PROCEEDED TO MAKE THE ADDITION MERELY ON THE BASIS OF REJECTION OF APPLICATION DONE BY FIB UNIT WITH RESP ECT TO A THIRD PARTY. THE TOTAL SHARE CAPITAL OF THE ASSESSE E COMPANY WAS RS.27.10 CRORES OUT OF WHICH ISSUED, SUBSCRIBED AND PAID UP CAPITAL WAS RS.22.71 CRORES AND THE SHARE APPLIC ATION MONEY WAS RS.4.39 CRORES. THE LD. ASSESSING OFFICER IGNORED 5139 & 5338/MUM/2016 IDHASOFT LTD. 57 THIS FACTUAL MATRIX THAT THE INVESTMENT MADE M/S AN TLEG CYPRUS LTD. IN ASSESSMENT YEAR 2007-08 WAS ONLY US $ 10,50,000/- AND EVEN THIS PAYMENT MADE BY M/S ANTLE G LTD. ON BEHALF OF M/S ANTLEG CYPRUS LTD. WHICH IS EQUIVA LENT TO RS.4.61 CRORES AS PER THE CERTIFICATE FOR FOREIGN I NWARDS REMITTANCE ISSUED BY CITY BANK AND CONFIRMATION OF M/S ANTLEG LTD. AS WELL AS M/S ANTLEG CYPRUS LTD. FILED BEFORE THE LD. ASSESSING OFFICER. THESE DOCUMENTS WERE DULY CO NSIDERED BY THE LD. ASSESSING OFFICER BUT HE, WHILE MAKING T HE ADDITION, WAS MORE INCLINED TOWARDS THE APPLICATION REJECTED BY FIPB UNIT OF M/S PRISM INFORMATICS LTD.. THE CERTIFICATE OF FOREIGN INWARD REMITTANCE DATED 11/01/2007 (FOR RS.4,42,40, 000/-) AND FURTHER A SUM OF US$30,00,000/- (EQUIVALENT OF RS.13,23,60,000/-) CERTIFICATE DATED 10/01/2007 OF CITY BANK WERE FILED BEFORE THE ASSESSING OFFICER. ALL THESE DOCUMENTS WERE FILED IN FORM FCGPR BEFORE RESERVE BANK OF IND IA AND THUS CANNOT BE SAID THAT THE PRESENT ASSESSEE HIDE SOME INFORMATION. SO FAR AS, THE REMAINING INVESTMENT IS CONCERNED, IT WAS MADE BY THE INDIVIDUAL SHARE HOLDER AS REPOR TED BY RBI AND M/S ANTLEG CYPRUS LTD. WAS NOWHERE IN QUESTION. THE 5139 & 5338/MUM/2016 IDHASOFT LTD. 58 ACTUAL INVESTMENT MADE BY M/S ANTLEG LTD. ON ITS OW N AND ON BEHALF OF M/S ANTLEG CYPRUS LTD. IN ASSESSMENT YEAR 2007-08 IS SUMMARIZED AS UNDER:- NAME OF ALLOTTEE DATE OF RECEIPT OF FUNDS DATE OF ALLOTMENT OF SHARES NO. OF SHARES AMOUNT IN USD AMOUNT IN RS. ANTLEG LTD. 10/01/2007 10/01/2007 17,66,00,000 40,00,000 17,66, 00,000 ANTLEG CYPRUS LTD. 03/02/2007 30/03/2007 21,92,500 5,50,000 2,41,17,50 0 ANTLEG CYPRUS LTD. 14/03/2007 30/04/2007 87,86,250 5,00,000 2,20,06,25 0 TOTA L(A) 50,50,000 22,27,23,750 3.8. IF THE IMPACT OF ABOVE ENTRIES IS ANALYZED IN THE LIGHT OF SECTION 68 OF THE ACT VIS--VIS SECTION 106 OF T HE EVIDENCE ACT. AS PER SECTION 68 OF THE ACT, ONUS IS UPON TH E ASSESSEE TO DISCHARGE THE BURDEN SO CAST UPON. FIRST BURDEN IS UPON THE ASSESSEE TO SATISFACTORILY EXPLAIN THE CREDIT ENTRY CONTAINED IN HIS BOOKS OF ACCOUNTS. THE BURDEN HAS TO BE DISCHAR GED WITH POSITIVE MATERIAL (OCEANIC PRODUCTS EXPORTING COMPA NY VS CIT 241 ITR 497 (KERALA.). THE LEGISLATURE HAD LAID DOW N THAT IN THE ABSENCE OF SATISFACTORY EXPLANATION, THE UNEXPL AINED CASH CREDIT MAY BE CHARGED U/S 68 OF THE ACT. OUR VIEW I S FORTIFIED BY THE RATIO LAID DOWN IN HONBLE APEX COURT IN P. MOHANKALA (2007)(291 ITR 278)(SC). A CLOSE READING OF SECTION 68 AND 69 5139 & 5338/MUM/2016 IDHASOFT LTD. 59 OF THE ACT MAKES IT CLEAR THAT IN THE CASE OF SECTI ON 68, THERE SHOULD BE CREDIT ENTRY IN THE BOOKS OF ACCOUNT WHER EAS IN THE CASE OF 69 THERE MAY NOT BE AN ENTRY IN SUCH BOOKS OF ACCOUNT. THE LAW IS WELL SETTLED, THE ONUS OF PROVI NG THE SOURCE OF A SUM, FOUND TO BE RECEIVED/TRANSACTED BY THE AS SESSEE, IS ON HIM AND WHERE IT IS NOT SATISFACTORILY EXPLAINED , IT IS OPEN TO THE REVENUE TO HOLD THAT IT IS INCOME OF THE ASS ESSEE AND NO FURTHER BURDEN LIES ON THE REVENUE TO SHOW THAT INC OME IS FROM ANY OTHER PARTICULAR SOURCE. WHERE THE ASSESSE E FAILED TO PROVE SATISFACTORILY THE SOURCE AND NATURE OF SUCH CREDIT, THE REVENUE IS FREE TO MAKE THE ADDITION. HOWEVER, WE NOTE THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL) HAS EXA MINED THE ISSUE IN HAND IN A JUSTIFIABLE MANNER. THOUGH THERE IS A DECISION FROM HON'BLE GUWAHATI HIGH COURT IN THE CA SE OF NEMI CHAND KOTHARI, WHICH SAYS THAT PAYMENT BY CHEQ UE IS ALWAYS NOT SACROSANCT AND OTHER ATTENDANT CIRCUMSTA NCES HAS TO BE CONSIDERED. THIS DECISION HAS BEEN CONSIDERED BY HON'BLE DELHI HIGH COURT IN A LATER DECISION IN CIT VS SHIV DHOOTI PEARLS & INVESTMENT LTD. [2015] 64 TAXMANN.C OM 329 (DELHI), WHEREIN, IT WAS HELD AS UNDER:- 5139 & 5338/MUM/2016 IDHASOFT LTD. 60 '12. THE COURT HAS EXAMINED THE DECISION OF THE GAUHATI HIGH COURT IN NEMI CHAND KOTHARI (SUPRA), THEREIN THE GAUHATI HIG H COURT REFERRED TO SECTION 68 OF THE ACT AND OBSERVED THAT THE ONUS OF THE ASSESSEE 'TO THE EXTENT OF HIS PROVING THE SOURCE WHOM WHICH HE HAS RECEIVED THE CASH CREDIT.' THE HIGH COURT HELD THAT THE AO HAD AMPLE 'FREEDOM' TO MAKE INQUIRY 'NOT ONLY INTO THE SOURCE(S) OF THE CREDITOR, BUT A LSO OF HIS (CREDITOR'S) SUB-CREDITORS AND PROVE, AS A RESULT, OF SUCH INQUI RY, THAT THE MONEY RECEIVED BY THE ASSESSEE, IN THE FORM OF LOAN FROM THE CREDITOR, THOUGH ROUTED THROUGH THE SUB-CREDITORS, ACTUALLY BELONGS TO, OR WAS OF, THE ASSESSEE HIMSELF' THEREAFTER, THE HIGH COURT, ON A HARMONIOU S CONSTRUCTION OF SECTION 106 OF THE EVIDENCE ACT AND SECTION 68 OF T HE ACT, HELD AS UNDER:- 'WHAT, THUS, TRANSPIRES FROM THE ABOVE DISCUSSION I S THAT WHILE SECTION 106 OF THE EVIDENCE ACT LIMITS THE ON US OF THE ASSESSEE TO THE EXTENT OF HIS PROVING THE SOURCE FR OM WHICH HE HAS RECEIVED THE CASH CREDIT, SECTION 68 GIVES AMPL E FREEDOM TO THE ASSESSING OFFICER TO MAKE INQUIRY NOT ONLY INTO THE SOURCE(S) OF THE CREDITOR, BUT ALSO OF HIS (CREDITO R'S) SUB- CREDITORS AND PROVE, AS A RESULT, OF SUCH INQUIRY, THAT THE MONEY RECEIVED BY THE ASSESSEE, IN THE FORM OF LOAN FROM THE CREDITOR, THOUGH ROUTED THROUGH THE SUB- CREDIT ORS, ACTUALLY BELONGS TO, OR WAS OF, THE ASSESSEE HIMSEL F. IN OTHER WORDS, WHILE SECTION 68 GIVES THE LIBERTY TO THE ASSESSING OFFICER TO ENQUIRE INTO THE SOURCE/SOURCE S FROM WHERE THE CREDITOR HAS RECEIVED THE MONEY, SECTION 106 MAKES THE ASSESSEE LIABLE TO DISCLOSE ONLY THE SOUR CE(S) FROM WHERE HE HAS HIMSELF RECEIVED THE CREDIT AND IT IS NOT THE BURDEN OF THE ASSESSEE TO SHOW THE SOURCE(S) OF HIS CREDITOR NOR IS IT THE BURDEN OF THE ASSESSEE TO PROVE THE CREDI TWORTHINESS OF THE SOURCE(S) OF THE SUB-CREDITORS. IF SECTION 1 06 AND SECTION 68 ARE TO STAND TOGETHER, WHICH THEY MUST, THEN, THE INTERPRETATION OF SECTION 68 HAS TO BE IN SUCH A WA Y THAT IT DOES NOT MAKE SECTION 106 REDUNDANT. HENCE, THE HARMONIOUS CONSTRUCTION OF SECTION 106 OF THE EVIDE NCE ACT AND SECTION 68 OF THE INCOME TAX ACT WILL BE THAT T HOUGH APART FROM ESTABLISHING THE IDENTITY OF THE CREDITOR, THE ASSESSEE MUST ESTABLISH THE GENUINENESS OF THE TRANSACTION A S WELL AS THE CREDITWORTHINESS OF HIS CREDITOR, THE B URDEN OF THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSA CTIONS AS WELL AS THE CREDITWORTHINESS OF THE CREDITOR MUST R EMAIN CONFINED TO THE TRANSACTIONS, WHICH HAVE TAKEN PLAC E BETWEEN THE ASSESSEE AND THE CREDITOR. WHAT FOLLOWS, AS A COROLLARY, IS THAT IT IS NOT THE BURDEN OF THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTIONS BETWEEN HIS CREDITO R AND SUB-CREDITORS NOR IS IT THE BURDEN OF THE ASSES SEE TO 5139 & 5338/MUM/2016 IDHASOFT LTD. 61 PROVE THAT THE SUB-CREDITOR HAD THE CREDITWORTHINES S TO ADVANCE THE CASH CREDIT TO THE CREDITOR FROM WHOM T HE CASH CREDIT HAS BEEN, EVENTUALLY, RECEIVED BY THE ASSESS EE. IT, THEREFORE, FURTHER LOGICALLY FOLLOWS THAT THE CREDI TOR'S CREDITWORTHINESS HAS TO BE JUDGED VIS-A-VIS THE TRANSACTIONS, WHICH HAVE TAKEN PLACE BETWEEN THE ASSESSEE AND THE CREDITOR, AND IT IS NOT THE BUSINE SS OF THE ASSESSEE TO FIND OUT THE SOURCE OF MONEY OF HIS CREDITOR OR OF THE GENUINENESS OF THE TRANSACTIONS, WHICH TOOK BETWEEN THE CREDITOR AND SUB-CREDITOR AND/OR CREDITWORTHINESS OF THE SUB-CREDITORS, FOR, THESE ASPECTS MAY NOT BE WITHIN THE SPECIAL KNOWLEDGE OF THE ASSESSEE.' 3.9. IN ANOTHER DECISION IN MOD. CREATIONS PVT. LT D. VS INCOME TAX OFFICER (2013) 354 ITR 282 (DELHI), THE HON'BLE HIGH COURT HELD/OBSERVED AS UNDER:- 'IT WILL HAVE TO BE KEPT IN MIND THAT SECTION 68 OF THE I.T. ACT ONLY SETS UP A PRESUMPTION AGAINST THE ASSESSEE WHENEVER UNEXPLAINED CREDITS ARE FOUND IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. IT CANNOT BUT BE GAINSAID THAT THE PRESUMPTION IS REBUTTABLE. IN REFUTING THE PRESUMPT ION RAISED, THE INITIAL BURDEN IS ON THE ASSESSEE. THIS BURDEN, WHICH IS PLACED ON THE ASSESSEE, SHIFTS AS SOON AS THE ASSESSEE ESTABLISHES THE AUTHENTICITY OF TRANSACTIO NS AS EXECUTED BETWEEN THE ASSESSEE AND ITS CREDITORS. IT IS NO PART OF THE ASSESSEE'S BURDEN TO PROVE EITHER THE GENUINENESS OF THE TRANSACTIONS EXECUTED BETWEEN TH E CREDITORS AND THE SUB- CREDITORS NOR IS IT THE BURDEN OF THE ASSESSEE TO PROVE THE CREDITWORTHINESS OF THE SUB-CREDITORS 14. IN MOD. CREATIONS (P.) LTD. (SUPRA) THIS COURT NEGATIVED THE CASE OF THE REVENUE THAT THE ONUS WAS ON THE ASSESSEE TO PROVE THE SOURCE OF THE SUB- CREDITOR. IT WAS OBSERVED AS UNDER: '14. WITH THIS MATERIAL ON RECORD IN OUR VIEW AS FAR AS THE ASSESSEE WAS CONCERNED, IT HAD DISCHARGED INITIAL ONUS PLACE D ON IT. IN THE EVENT THE REVENUE STILL HAD A DOUBT WITH REGARD TO THE GENUINENESS 5139 & 5338/MUM/2016 IDHASOFT LTD. 62 OF THE TRANSACTIONS IN ISSUE, OR AS REGARDS THE CRE DITWORTHINESS OF THE CREDITORS, IT WOULD HAVE HAD TO DISCHARGE THE ONUS WHICH HAD SHIFTED ON TO IT. A BALD ASSERTION BY THE A0. THAT THE CREDITS WERE A CIRCULAR ROUTE ADOPTED BY THE ASSESSEE TO PLOUGH BA CK ITS OWN UNDISCLOSED INCOME INTO ITS ACCOUNTS, CAN BE OF NO AVAIL. THE REVENUE WAS REQUIRED TO PROVE THIS ALLEGATION. AN ALLEGATION BY ITSELF WHICH IS BASED ON ASSUMPTION W ILL NOT PASS MUSTER IN LAW. THE REVENUE WOULD BE REQUIRED TO BRI DGE THE GAP BETWEEN THE SUSPICIONS AND PROOF IN ORDER TO BRING HOME THIS ALLEGATION. THE ITAT, IN OUR VIEW, WITHOU T ADVERTING TO THE AFOREMENTIONED PRINCIPLE LAID STRE SS ON THE FACT THAT DESPITE OPPORTUNITIES, THE ASSESSEE AND/O R THE CREDITORS HAD NOT PROVED THE GENUINENESS OF THE TRA NSACTION. BASED ON THIS THE ITAT CONSTRUED THE INTENTIONS OF THE ASSESSEE AS BEING MA/A TIDE. IN OUR VIEW THE ITAT OUGHT TO HAVE ANALYZED THE MATERIAL RATHER THAN BE BURDENED BY THE FACT THAT S OME OF THE CREDITORS HAD CHOSEN NOT TO MAKE A PERSONAL APPEARA NCE BEFORE THE A.O IF THE ASSESSING OFFICER. HAD ANY DOUBT ABOUT THE MATERIAL PLACED ON RECORD, WHICH WAS LARGELY BANK STATEMENTS OF THE CREDITORS AND THEIR INCOME TAX RETURNS, IT COULD GA THER THE NECESSARY INFORMATION FROM THE SOURCES TO WHICH THE SAID INFORMATION WAS ATTRIBUTABLE TO. NO SUCH EXERCISE H AD BEEN CONDUCTED BY THE A. 0. IN ANY EVENT WHAT BOTH THE A . 0. AND THE ITAT LOST TRACK OF WAS THAT IT WAS DEALING WITH THE ASSESSMENT OF THE COMPANY, I.E., THE RECIPIENT OF THE LOAN AND NO T THAT OF ITS DIRECTORS AND SHAREHOLDERS OR THAT OF THE SUB- CRED ITORS. IF IT HAD ANY DOUBTS WITH REGARD TO THEIR CREDIT WORTHINESS, THE REVENUE COULD ALWAYS BRING IT TO TAX IN THE HANDS OF THE CREDITOR S AND/OR SUB- CREDITORS. [SEE CIT V. DIVINE LEASING & FINANCE LTD. (2008) 299 ITR 268 (DELHI) AND CIT V. LOVELY EXPORTS (P.) LTD. (2008) 216 CTR 195 (SC)!. (EMPHASIS SUPPLIED) 5139 & 5338/MUM/2016 IDHASOFT LTD. 63 3.10. IF THE AFORESAID POSITION OF LAW IS KEPT IN JUXTAPOSITION WITH THE FACTS OF THE PRESENT APPEAL, ONE CLEAR FACT IS OOZES OUT THAT THE ASSESSEE DULY DISCHARGED ITS ONUS AS CAST UPON BY SECTION 68 OF THE ACT, BECAUSE, THE AS SESSEE NOT ONLY FURNISHED THE TRAIL OF BANKING TRANSACTION RAT HER ALSO PRODUCED THE COPIES OF FORM FCGPR SUBMITTED TO THE RBI EVIDENCING RECEIPT OF FUNDS FROM THE FOREIGN ENTITY . AS OBSERVED BY THE LD. COMMISSIONER OF INCOME TAX (APP EAL), THE ASSESSEE ALSO FILED CONFIRMATION OF THE SAID ENTITY BEFORE THE LD. ASSESSING OFFICER WHICH HAS NOT BEEN NEGATED BY HIM, THUS, THE IDENTITY OF THE CREDITOR, ITS CREDITWORTH INESS AND THE GENUINENESS OF THE TRANSACTION HAS BEEN EXPLAINED. IT SEEMS THAT THE LD. ASSESSING OFFICER WAS MORE INFLUENCED BY THE APPLICATION REJECTED WITH RESPECT TO M/S PRISM AND IGNORED THE EVIDENCE OF CITI BANK FOR REMITTANCE OF THE SUM REC EIVED FROM M/S ANTLEG LTD. ALONG WITH THE CONFIRMATION FILED B Y M/S ANTLEG LTD. EVEN OTHERWISE, THE ASSESSEE IS NOT EXP ECTED TO PROVE THE SOURCE OF SOURCE (THOUGH THAT HAS ALSO BE EN PROVED) AS HAS BEEN OBSERVED BY THE FIRST APPELLATE AUTHORI TY. OUR VIEW FINDS SUPPORT FROM THE DECISION FROM HON'BLE 5139 & 5338/MUM/2016 IDHASOFT LTD. 64 JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS TAN IA INVESTMENT PVT. LTD. 322 ITR 394 (BOM.) AND THE BEN CH OF THIS MUMBAI TRIBUNAL IN THE CASE OF INCOME TAX OFFICER V S ANANT SHELTERS PVT. LTD. (2012) 20 TAXMAN.COM 153(MUM.). THE RATIO LAID DOWN BY HON'BLE JURISDICTIONAL HIGH COURT IN T ANIA INVESTMENT PVT. LTD. ((SUPRA)) IS REPRODUCED HEREUN DER FOR READY REFERENCE:- THE REVENUE IS IN APPEAL ON THE FOLLOWING QUESTION : 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW THE HON'BLE TRIBUNAL WAS RIGHT IN DELETING THE ADDITION OF RS.7,41,17,495 MADE BY THE ASSESSING OFFICER TOWARDS UNEXPLAINED C ASH CREDITS EVEN THOUGH THE ASSESSEE-COMPANY HAD NOT PROVED THE CRED ITWORTHINESS OF THE CREDITORS TO ADVANCE THE LOANS TO THE ASSESSEE- COM PANY ?' 2. IN THE INSTANT CASE, THE ASSESSING OFFICER HAS D ISALLOWED THE LOSS ON THE GROUND THAT THERE WAS NO MATERIAL. BEFORE THE COMMI SSIONER OF INCOME- TAX (APPEALS) REMAND REPORT WAS CALLED FROM THE ASS ESSING OFFICER. THE ASSESSING OFFICER ON REMAND IN HIS REPORT ADMITTED THAT THE IDENTITY OF THE PARTIES AND ALSO THAT THERE WAS CORRESPONDING ENTRI ES IN THE BOOKS OF ACCOUNT. THE COMMISSIONER OF INCOME-TAX (APPEALS) C ONSEQUENTLY ALLOWED THE APPEAL. THE REVENUE CAME IN APPEAL BEFO RE THE INCOME-TAX APPELLATE TRIBUNAL WHICH WAS DISMISSED AND CONSEQUE NTLY, THE PRESENT APPEAL. 3. AT THE HEARING ON BEHALF OF THE REVENUE, THE LEA RNED COUNSEL SUBMITS THAT IN THE CASE OF ENTRIES IN BOOKS OF ACCOUNT PER TAINING TO CASH CREDIT, THE ASSESSEE HAS TO ESTABLISH (I) THE IDENTITY OF T HE PARTY, (II) CAPACITY, AND (III)THE GENUINENESS OF THE TRANSACTION. IN THE INSTANT CASE, THE LEARNED COUNSEL ADMITS THAT SO FAR AS IDENTITY IS C ONCERNED, THE PARTIES HAVE BEEN IDENTIFIED AND SIMILARLY IN THE BOOKS OF ACCOUNT PRODUCED BY THEM CORRESPONDING ENTRIES WERE FOUND. THE LEARNED COUNSEL SUBMITS THAT ONE OF THE PREDICATE, NAMELY, CAPACITY TO ADVANCE L OAN WAS NOT ESTABLISHED, AND THE INCOME-TAX APPELLATE TRIBUNAL OUGHT TO HAVE RESTORED THE MATTER TO THE ASSESSING OFFICER FOR RE CONSIDERATION. 4. THE LEARNED TRIBUNAL IN ITS ORDER, IN ORDER TO A NSWER THE SAID CONTENTION, OBSERVED AS UNDER : 'THE LEARNED ASSESSING OFFICER HAVING ANY DOUBT WIT H REGARD TO CAPACITY OF THE PARTY TO ADVANCE LOAN, NO ONE PREVENTED HIM TO VERIFY THE CAPACITY OF THE CREDITORS.' 5139 & 5338/MUM/2016 IDHASOFT LTD. 65 5. IN OUR OPINION, THE BOOKS OF ACCOUNT WERE AVAILA BLE TO THE ASSESSING OFFICER. THE BOOKS OF ACCOUNT ITSELF WOULD INDICATE THE CAPACITY OF THE PARTY TO ADVANCE LOAN. THERE WAS NO FURTHER NEED ON THE PART OF THE ASSESSEE TO PROVE THE CAPACITY OF THE CREDITORS. 6. IN THE INSTANT CASE, IT IS NOT POSSIBLE TO HOLD THAT THE REASONING ADOPTED BY THE TRIBUNAL IS DEVOID OF MERIT AND/OR UNSUSTAIN ABLE. IN THE LIGHT OF THAT, THERE IS NO MERIT IN THE APPEAL, WHICH IS ACC ORDINGLY, DISMISSED. 3.11. IN THE AFORESAID CASE, THE HON'BLE HIGH COUR T WHILE DISMISSING THE APPEAL OBSERVED/HELD THAT WHEN THE B OOKS OF ACCOUNT WERE AVAILABLE TO THE ASSESSING OFFICER AND THE BOOKS THEMSELVES WOULD INDICATE THE CAPACITY OF THE PARTY TO ADVANCE LOAN. THERE WAS NO FURTHER NEED ON THE PART OF THE ASSESSEE TO PROVE THE CAPACITY OF THE CREDITORS. THUS, THE REAS ONING ADOPTED BY THE TRIBUNAL WAS SUSTAINABLE. 3.12. IN ANOTHER CASE OF ACIT VS LINFOX LOGISTICS PVT. LTD. (ITA NO.864/MUM/2012), ORDER DATED 30/09/2015, WHER E THE ISSUE WAS WITH RESPECT TO CASH CREDIT FROM A FOREIG N COUNTRY, THE TRIBUNAL DELETED THE ADDITION MADE ON THE BASIS OF FIRC, ISSUED BY BANK IN FOLLOWING TERMS. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. DU RING THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY RECEI VED A SUM OF RS. 1,02,78,800/-, WHICH WAS CLAIMED TO BE RECEIVED FROM ITS PARENT COMPANY I.E. M/S.LINFOX INTERNATIONAL GROUP PTY. LT D., AUSTRALIA. IN SUPPORT OF SUCH CREDIT, ASSESSEE FURNISHED BEFORE T HE LOWER AUTHORITIES A COPY OF THE F1RC ISSUED BY THE BANK. THE CIT(A) H AS NOTICED THAT THE COPY OF FIRC FURNISHED BY THE ASSESSEE REFLECTS THE NAME OF THE ASSESSEE AS THE BENEFICIARY AND THE NAME OF THE SEN DER/REMITTER - M/S.LINFOX INTERNATIONAL GROUP PTY. LTD., AUSTRALIA WAS ALSO 5139 & 5338/MUM/2016 IDHASOFT LTD. 66 MENTIONED. IT IS ALSO NOTICED BY THE CIT(A) THAT FI RC SHOWS PURPOSE OF THE REMITTANCE AS 'TOWARDS SHARE APPLICATION'. Q UITE CLEARLY, THE IMPUGNED SUM HAS BEEN RECEIVED BY THE ASSESSEE THROUGH BANKING CHANNELS, AND THE MATERIAL ON RECORD CLEARLY BRINGS OUT SOURCE AS WELL AS THE NATURE OF THE AMOUNT RECE IVED. UNDER THESE CIRCUMSTANCES, IN OUR VIEW, THE CIT(A) MADE NO MISTAKE IN HOLDING THAT THE IDENTITY AND CREDITWORTHINESS OF THE CREDI TOR AND GENUINENESS OF THE TRANSACTION STOOD SATISFACTORILY EXPLAINED. IN THE ABSENCE OF ANY CREDIBLE MATERIAL WITH THE REVENUE TO DISPROVE THE FINDINGS OF THE CIT(A), WE HEREBY AFFIRM THE SAME. THUS, ON THIS ASPECT THE REVENUE FAILS.' 3.13. LIKEWISE, HON'BLE DELHI HIGH COURT AFFIRMED THE ORDER OF THE TRIBUNAL IN THE CASE OF CIT VS TULIP F INANCE LTD. (2009) 178 TAXMAN 182 (DELHI) HELD/OBSERVED AS UNDE R:- '3 .......... AS REGARDS THE REMAINING SHAREHOLDER , THAT IS S, IT WAS NOTED THAT HE WAS AN NRI AND THE SHARE CAPITAL OF R S. 15 LEES RECEIVED FROM HIM WAS THROUGH HIS NRE ACCOUNT. THE REMITTANCES WERE THROUGH THREE SEPARATE CHEQUES, OF WHICH DETAI LS WERE AVAILABLE. THE ASSESSEE HAD ALSO FILED BANK CERTIFICATES SUBMI TTED TO THE RBI PRESUMABLY FOR THE PURPOSE OF REMITTANCE OF DIVIDEN D TO SAID S. IN THE LIGHT OF SUCH EVIDENCE, THE CIT(A) AS ALSO THE TRIBUNAL HAD COME TO A CONCLUSION OF FACT THAT THE ASSESSEE HAD DISCHARGED THE BURDEN WHICH LAY UPON IT FOR ESTABLISHING THE I DENTITY OF THE SHAREHOLDERS AS WELL AS THE GENUINENESS OF THE TRANSACTIONS. AS SUCH, THE TRIBUNAL CONFIRMED THE FINDINGS OF THE CIT(A) AND DELETED THE ADDITION WHICH HAD BEEN MADE BY THE AO. IT IS OBVIOUS THAT THE FINDINGS RETURNED BY THE CIT(A) AS WELL AS THE TRIBUNAL ARE PURE FINDINGS OF FACT AND NO QUESTION OF LAW ARISES ON THIS ISSUE.' 3.14. IN ANOTHER CASE, HON'BLE MADHYA PRADESH HIGH COURT, IN THE CASE OF CIT VS PEOPLES GENERAL HOSPIT AL LTD. (2013) 35 TAXMANN.COM 444(MADHYA PRADESH), WHILE AF FIRMING THE DECISION OF THE TRIBUNAL, HELD AS UNDER:- 'IN THE CASE OF CIT V. LOVELY EXPORTS (P.) LTD. [AP PLICATION NO. 11993 OF 2007, DATED 11-1-2008], THE APEX COURT SPE CIFICALLY 5139 & 5338/MUM/2016 IDHASOFT LTD. 67 HELD THAT IF THE IDENTITY OF THE PERSON PROVIDING S HARE APPLICATION MONEY IS ESTABLISHED, THEN THE BURDEN IS NOT ON THE ASSESSEE TO PROVE THE CREDITWORTHINESS OF THE SAID PERSON. HOWE VER, THE DEPARTMENT CAN PROCEED AGAINST THE SAID COMPANY IN ACCORDANCE WITH LAW. [PARE16] THE POSITION OF THE PRESENT CASE IS IDENTICAL- IT IS NOT THE CASE OF ANY OF THE PARTIES THAT THE COMPANY IN SHARJAH IS A BOGUS COMPANY OR A NON-EXISTENT COMPANY AND THE AMOUNT WH ICH WAS SUBSCRIBED BY THE SAID COMPANY BY WAY OF SHARE SUBSCRIPTION WAS IN FACT THE MONEY OF THE ASSESSEE. IN THE PRESENT CASE, THE A.SSESSEE HAD ESTABLISHED THE IDE NTITY OF INVESTOR WHO HAD PROVIDED THE SHARE SUBSCRIPTION AND IT WAS ESTABLISHED THAT THE TRANSACTION WAS GENUINE, THOUGH AS PER CON TENTION OF THE ASSESSEE THE CREDITWORTHINESS OF THE CREDITOR WAS A LSO ESTABLISHED. IN THE PRESENT CASE, IN THE LIGHT OF THE JUDGMENT O F LOVELY EXPORTS (P.) LTD. (SUPRA), ONLY ESTABLISHMENT OF THE IDENTI TY OF THE INVESTOR IS TO BE SEEN. THE DELHI HIGH COURT ALSO, IN THE CASE OF CIT V. DIVINE LEASING & FINANCE LTD. [2008] 299 ITR 2681[2007] 158 TAXMAN 440, CONSIDERING A SIMILAR QUESTION HELD THAT THE A SSESSEE- COMPANY, HAVING RECEIVED SUBSCRIPTIONS FROM THE PUB LIC/RIGHTS ISSUE THROUGH BANKING CHANNELS AND FURNISHED COMPLE TE DETAILS OF THE SHAREHOLDERS, NO ADDITION COULD BE MADE UNDER SECTION 68 IN THE ABSENCE OF ANY POSITIVE MATERIAL OR EVIDE NCE TO INDICATE THAT THE SHAREHOLDERS WERE BENAMIDARS O R FICTITIOUS PERSONS OR THAT ANY PART OF THE SHARE CA PITAL REPRESENTED COMPANY'S OWN INCOME FROM UNDISCLOSED SOURCES. [PARA 16] IN VIEW OF LAW LAID DOWN BY THE APEX COURT, THE SUB STANTIAL QUESTIONS FRAMED IN THESE APPEALS DO NOT ARISE FOR CONSIDERATION. ACCORDINGLY, ALL THESE APPEALS ARE DISMISSED WITH N O ORDER AS TO COSTS.' 3.15. THOUGH WE HAVE ANALYZED THE FACTS IN EARLIER PARAS OF THIS ORDER, WITH THE HELP OF CERTAIN CASES BUT S TILL FACT REMAINS THAT THE WHOLE ADDITION WAS MADE BY THE ASS ESSING OFFICER (AS MENTIONED EARLIER), ON THE BASIS OF APP LICATION REJECTED BY FIPB, WHILE EXAMINING THE PROPOSAL OF M /S PRISM INFORMATICS LTD., FOR ISSUANCE OF SHARE CAPITAL TO M/S ANTLEG 5139 & 5338/MUM/2016 IDHASOFT LTD. 68 CYPRUS BY HOLDING THAT THE PRIMARY CONDITION IS NOT SATISFIED. HOWEVER, AS MENTIONED EARLIER (AND OBSERVED BY FIRS T APPELLATE AUTHORITY ALSO), THE ASSESSEE HAS DISCHAR GED ITS ONUS, CAST UPON IT BY SECTION 68 OF THE ACT. THIS F ACTUAL MATRIX WAS DULY CONSIDERED BY LD. COMMISSIONER OF INCOME T AX (APPEAL) AS WELL AS BY US. THE EXPLANATION OFFERED BY THE ASSESSEE WITH RESPECT TO NATURE AND SOURCE OF THE C REDITS WAS NEITHER NEGATED BEFORE LD. COMMISSIONER OF INCOME T AX (APPEAL) NOR BEFORE THIS TRIBUNAL AS THE ASSESSEE H AS SATISFACTORILY EXPLAINED THE SAME. THE EFFECT OF SE CTION 68 OF THE ACT R.W.S 106 OF THE EVIDENCE ACT IS THAT A SUM FOUND CREDITED IN THE BOOKS OF THE ASSESSEE CAN BE CHARGE D TO TAX IF THE SAME IS SATISFACTORILY NOT EXPLAINED. HOWEVER, WE FIND THAT THE ASSESSEE HAS DULY EXPLAINED THE NATURE AND SOUR CE EVEN THOUGH THE ASSESSEE IS NOT EXPECTED TO PROVE THE SO URCE OF SOURCE STILL WE FIND THAT THE INGREDIENTS ENSHRINED IN SECTION 68 HAS BEEN FULLY EXPLAINED BY THE ASSESSEE AS THE BURDEN HAS BEEN SATISFACTORILY DISCHARGED. THE PAYMENTS WERE T HROUGH ACCOUNT PAYEE CHEQUE AND THE IDENTITY, CREDITWORTHI NESS, GENUINENESS OF THE TRANSACTION (AS THE MONEY WAS RE CEIVED 5139 & 5338/MUM/2016 IDHASOFT LTD. 69 THROUGH FOREIGN REMITTANCE WITH RBI APPROVAL) HAS B EEN ESTABLISHED. THUS, WE FIND NO INFIRMITY IN THE CONC LUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL ), RESULTANTLY, THE APPEAL OF THE REVENUE IS ALSO DISM ISSED. FINALLY, (I) THE APPEAL OF THE REVENUE (ITA NO.5338/MUM/2016) IS DISMISSED (II) THE APPEAL OF THE ASSESSEE (ITA NO.5139/MUM/20 16) IS ALSO DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 06/06/2018. SD/- SD/- ( N.K. PRADHAN ) (JOGINDER SINGH) #!$ / ACCOUNTANT MEMBER %!$ / JUDICIAL MEMBER MUMBAI; * DATED : 13/07/2018 F{X~{T? P.S / +$ 5139 & 5338/MUM/2016 IDHASOFT LTD. 70 !'&%'()*)+' / COPY OF THE ORDER FORWARDED TO : 1. ,-./ / THE APPELLANT 2. 0./ / THE RESPONDENT. 3. 1 1 % 2# ( ,- ) / THE CIT, MUMBAI. 4. 1 1 % 2# / CIT(A)- , MUMBAI 5. 4$5# , 1 ,-(, 6 , % / DR, ITAT, MUMBAI 6. 7!8 / GUARD FILE. !' / BY ORDER, / (DY./ASSTT. REGISTRAR) , % / ITAT, MUMBAI,