ITO 6(3)(2), MUMBAI V. INDO ENERGY INTERNATIONAL LTD, MUMBAI

ITA 523/MUM/2016

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 9730 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 03-02-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANADI YARMA
• Keywords: Reopening of assessment; Unexplained cash credit; Opportunity of being heard; Principle of natural justice; Wholly owned subsidiary; Tangible material; Valuation report; Capital receipt
• Section: 147; 68; 148; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, A M AND SHRI RAM LAL NEGI, JM I.T.A. NO. 523/MUM/2016 ( ASSESSMENT YEAR: 2009 - 10 ) ITO - 6(3)(2) R. NO. 503, 5 TH FLOOR, AAYKAR BHAVAN, M. K. ROAD, MUMBAI - 20 VS. M/S. INDO ENERG Y INTERNATIONAL LTD. J. V. HOUSE, 2 ND 1, D. S. BABREKAR MARG, MUMBAI - 400 028 PAN/GIR NO. AABCI 1739 A ( REVENUE ) : ( ASSESSEE ) & C.O. NO. 234/MUM/2017 (ARISING OUT OF ITA NO.523/MUM/2016) (ASSESSMENT YEAR: 2009 - 10 ) M/S. INDO ENERGY INTERNATIONAL LTD. MUMBAI - 400 028 VS. ITO - 6(3)(2) BHAVAN, M. K. ROAD, MUMBAI - 20 PAN/GIR NO. AABCI 1739 A (ASSESSEE) : ( REVENUE ) REVENUE BY : SHRI ANADI YARMA ASSESSEE BY : SHRI JITENDRA JAIN DATE OF HEARING : 02.08.2018 DATE OF PRONOUNCEMENT : 19.09 .2018 O R D E R PER S HAMIM YAHYA, A. M.: THIS A PPEAL BY THE REVENUE AND CROSS OBJECTION (C.O. FOR SHORT) BY THE ASSESSEE ARISE OUT OF THE ORDER OF THE LEAR N ED COMMISSIONER OF INCOME TAX (APPEALS) - 12, MUMBAI (LD.CIT(A) FOR SHORT) DATED 02.11.2015 AND PERTAIN TO THE ASSESSMENT YEAR (A.Y. FOR SHORT) 2009 - 10. 2. THE GROUNDS OF APPEAL RAISED IN REVENUES APPEAL READ AS UNDER: 1. 'ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.14,74,78,500 / - MADE BY THE ASSESSING OFFICER U/S.68 TOWARDS 'UNEXPLAINED CASH CREDIT'. 2 M/S. INDO ENERGY INTERNATIONAL LTD. 2. 'ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION WITHOUT APPRECIATING THE FACT THAT THE NATURE AND THE CREDITWORTHINESS OF CASH CREDIT OF RS . 14,74,78,500/ - IS NOT EXPLAINED TO THE SATISFACTORY OF THE AO AS PER THE PROVISION OF THE SECTION 68 OF INCOME TAX ACT IN THE ASSESSEE'S CASE.' 3. 'ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION WITHOUT APPR ECIATING THE FACT THAT THE ASSESSEE HAS FAILED TO JUSTIFY AND TO PROVE NATURE OF THE PREMIUM CHARGED OVER AND ABOVE THE INTRINSIC VALUE OF SHARE FROM THE INVESTORS. 4. 'THE APPELLANT PRAYS THAT THE ORDER OF LD. CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED.' 3. THE GROUND RAISED IN C.O. BY THE ASSESSEE READ AS UNDER: 1. THE COMMISSIONER OF INCOME TAX(APPEALS) - 12, MUMBAI ERRED IN CONFIRMING THE ACTION OF AO IN RE - OPENING OF THE ASSESSMENT BY INVOKING THE PROVISION S OF SECTION 147 READ WITH SECTION 148 OF THE INCOME TAX ACT, 1961. THE APPELLANT SUBMITS THAT THE FINDINGS RECORDED BY THE CIT(A) ARE CONTRARY TO THE FACTS ON RECORD AND THE PROVISIONS OF THE ACT AND HENCE NOTICE ISSUED U/S 148 AND REOPENING OF ASSESSMENT U/S 147 IS BAD IN LAW, ILLEGAL, ULTRA - VIRUS AND CONTRARY TO THE PROVISION OF THE I.T. ACT AND SHALL BE QUASHED. 4. IN THIS CASE, THE ASSESSING OFFICER (A.O. FOR SHORT) OBSERVED THAT THE CASE WAS REOPENED U/S. 147 OF THE INCOME TAX ACT, 1961 (THE ACT FOR SHORT), AS IT WAS SEEN THAT THE ASSESSEE WAS IN RECEIPT OF HUGE SHARE PREMIUM AMOUNTING TO RS.14,74,78,500/ - DURING THE FINANCIAL YEAR 2008 - 09 RELATING TO A.Y. 2009 - 10. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MARINE CONSULTANCY, CARGO LIGHTERAGE, & JET TY DEVELOPMENT. THE A.O. OBSERVED THAT THE ASSESSEE COMPANY HAS ALLOTTED EQUITY SHARES OF FACE VALUE OF RS.10/ - EACH AT A PREMIUM OF RS.585/ - EACH TO M/S. OMKAR ENERGY PVT. LTD. THE TOTAL AMOUNT THUS RECEIVED WAS RS.14,99,99,500/ - . THE A.O. OBTAINED THE RE TURN OF INCOME OF M/S. OMKAR ENERGY PVT. LTD. AND BALANCE SHEET. FROM THIS, THE A.O. FOUND THAT THE SAID COMPANY HAS CAPITAL OF RS.1 LAC. THAT THERE HAS BEEN NO ASSET IN THE COMPANY BUT IT HAS MADE INVESTMENT INTO INDO ENERGY INTERNATIONAL PVT. LTD., I.E., AMOUNTING TO RS.14,99,99,500/ - . 3 M/S. INDO ENERGY INTERNATIONAL LTD. THEREFORE, THE A.O. HELD THAT THE CREDIT WORTHINESS OF M/S. OMKAR ENERGY PVT. LTD. IS NOT EXPLAINED TO BE SATISFACTORILY. THE ASSESSEE WAS ASKED TO SUBMIT THE CONFIRMATION FROM THE PARTIES, JUSTIFICATION OF SHARE PREMIUM CH AR G ED AND OTHER DETAILS. FROM THE REPLY OF THE ASSESSEE, THE A.O. NOTED THAT FOR JUSTIFICATION OF THE CHARGING OF THE HUGE SHARE PREMIUM, THE ASSESSEE COMPANY HAD SUBMITTED THE VALUATION REPORT DATED 28.01.2015 , DETERMINING THE FACE VALU E OF THE EQUITY SHA RE AS ON 31.03.2008 AT RS.597 / - PER SHARE. HE NOTED THAT THE VALUATION IS BASED ON DCF METHOD. THE A.O. FURTHER OBSERVED THAT THE PROJECTED PROFIT ON THE BASIS OF WHICH VALUATION HAS BEEN DONE DOES NOT MATCH WITH THE ACTUAL PERFORMANCE. UPON T HE A.O.S QUE RY THAT WHY THIS AMOUNT SHOULD NOT BE TREATED AS UNEXPLAINED INCOME WITHIN THE MEANING OF SECTION 68, THE ASSESSEE SUBMITTED THE COPY OF RETURN FILED OF OMKAR, THE AUDITED FINANCIAL STATEMENT AND BANK STATEMENT. 5 . HOWEVER, THE A.O. WAS NOT SATISFIED. HE OBSERVED THAT THESE SUBMISSIONS OF THE ASSESSEE ARE NOT ACCEPTABLE AS THE NATURE OF THE TRANSACTION WAS VERY UNNATURAL AND SUSPICIOUS. THAT THE VALUATION WAS DONE BASED UPON IMAGINARY PROFIT FIGURES. THAT THE VALUER HAS PASSED THE VALUATION ONLY ON THE BASIS OF THE FINANCIAL PR OJECTIONS. THAT THERE WAS NO BASIS OF ANY WORKING GIVEN IN THE COPY OF THE REPORT F ILE D BY THE ASSESSEE ON RECORD . HENCE , THE A.O. HELD THAT THE ASSESSEE WAS NOT ABLE TO JUSTIFY THE CHARGING OF SUCH HUGE PREMIUM ON ALLOTMENT OF SHA RES. THE A.O. FURTHER OBSERVED THAT THE BOOK VALUE AS ON 01.04.2008 IS ONLY OF RS.13/ - AS PER THE WORKING UNDER RULE 11UA OF THE IT RULES. THAT THE ASSESSEE HAS ALLOTTED SHARES AND CHARGED PREMIUM FROM THE ABOVE PERSONS FOR RS.585/ - PER SHARE. HE FURTHER O BSERVED THAT THE ASSESSEE IN THE LAST FOUR YEAR CLAIMED 4 M/S. INDO ENERGY INTERNATIONAL LTD. LOSSES IN THE RETURN OF INCOME. THAT IT WAS NOT BELIEVABLE THAT ANY INVESTOR WILL BE INVESTING AT SUCH A HUGE PREMIUM WITHOUT ANY BASIS. TH EREFORE, THE A.O. HELD THAT THE TRANSACTION REMAINED UNEXPLAI NED. THE A.O. REFERRED TO THE PROVISION OF SECTION 68 AND SOME CASE LAWS IN THIS REGARD ON BU RDEN OF PROOF. H E ALSO REFERRED TO THE HON'BLE BOMBAY HIGH COURT DECISION IN THE CASE OF MAJOR METALS (SUPRA) AND CONCLUDED AS UNDER: THEREFORE BY APPLYING THE RA TIONS LAID DOWN IN THE ABOVE CASES, CONSIDERING THE FACT OF THE CASE AND THE ASSESSEES SUBMISSION IN THE MATTER, THE AMOUNT BROUGHT IN BY THE ASSESSEE IN ITS BOOKS AS SHARE PREMIUM THE NATURE OF WHICH IS NOT SATISFACTORILY EXPLAINED AND THE SOURCE OF WHIC H IS ALSO NOTE CREDIBLE THE A.Y. 2009 - 10 AMOUNTING TO RS.14,74,78,500/ - IS TREATED AS UNEXPLAINED CREDIT WITHIN THE MEANING OF SECTION 68 OF THE ACT AND TAXED AS INCOME FOR THE YEAR UNDER CONSIDERATION. 6 . THE ASSESSEE APPEALED BEFORE THE LD. CIT(A) CHALL ENGING BOTH THE VALIDITY OF REOPENING AND MERITS OF THE CASE. THE LD. CIT(A) DID NOT DEALT WITH THE ISSUE OF THE REOPENING IN DETAIL. HE CRYPTICALLY HELD THAT THE A.O. HAD TANGIBLE MATERIAL. HENCE, THE A.O. WAS CORRECT IN HIS OPINION THAT IT WAS A CASE OF SHAM TRANSACTION. HE FURTHER OBSERVED THAT THE A.O. HAS SPECIFICALLY RECORDED THE REASONS AND ALSO CONFIRMED THAT THERE HAD BEEN A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE HIS CORRECT INCOME AND ON THAT THE ASSESSEE H A S CONCEALED HIS INCOME. HENCE, THE LD. CIT(A) HELD THAT THE GROUND OF APPEAL NO. 1 IS DISMISSED. THE LD. CIT(A) DID NOT EVEN REFER AS TO WHAT WAS THE REASON OF THE REOPENING OR WHAT WAS THE TANGIBLE MATERIAL BEFORE THE A.O. 7 . THE MERITS OF THE CASE WERE ALSO DEALT WITH SUMMARILY BY TH E LD. CIT(A). T HE LD. CIT(A) HELD THAT THE ASSESSEE COMPANY HAS EXPLAINED THE SOURCE AND NATURE OF THE SHARE PREMIUM RECEIVED AS WELL AS THE CREDIT WORTHINESS OF THE INVESTOR DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HENCE, HE HELD THAT IT CANNOT BE HEL D TO BE UNEXPLAINED CREDIT. IN 5 M/S. INDO ENERGY INTERNATIONAL LTD. THIS REGARD, THE LD. CIT(A) DID NOT MENTION AS TO ON THE BASIS OF WHAT DOCUMENTS AND WHICH FACT AND FIGURE HE WAS OF THE OPINION THAT THE ASSESSEE COMPANY HAS EXPLAINED THE CREDITWORTHINESS OF THE INVESTOR . FURTHERMORE, THE L D. CIT(A) HELD THAT THE ASSESSEE HAS RECEIVED SHARE CAPITAL INCLUDING SHARE PREMIUM FROM OMKAR ENERGY P. LTD. (OPEL). HE OBSERVED THAT OPEL IS WHOLLY OWNED SUBSIDIARY COMPANY OF OMKAR REALTORS & DEVELOPERS P. LTD. (ORDPL). HE OBSERVED THAT THIS COMPANY BEL ONGS TO A WELL KNOWN OMKAR GROUP ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT. THAT BOTH THE COMPANIES ARE PROFIT MAKING COMPANIES AND ARE REGULARLY ASSESSED TO INCOME TAX. THAT THE SHARES HAVE BEEN ISSUED AT A PREMIUM BASED ON D C F METHOD AND IT HAS BEEN DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT AND ALSO REFLECTED IN THE AUDITED ACCOUNTS. THAT THE BALANCE SHEET OF OPEL AS ON 31.03.2009 AND ALSO THAT OF ORDPL AS ON 31.03.2009 DULY JUSTIFIES THE SAME. THE LD. CIT(A) IN THIS REGARD DID NOT MENTION ANY F ACTS AND FIGURES FROM THE BALANCE SHEET OF INVESTOR COMPANY. THE LD. CIT(A) PROCEEDED TO HOLD THAT THE SHARE PREMIUM RECEIPT IS A COMMERCIAL DECISION OF THE BOARD OF THE DIRECTORS . THAT I T I S THE WISDOM OF THE SHAREHOLDERS . HE FURTHER HELD THAT IT IS SETTL ED PROPOSITION OF LAW THAT THE CAPITAL RECEIPT S, UNLESS SPECIFICALLY TAXED UNDER ANY SPECIFIED PROVISION S OF ACT ARE EXCLUDED FROM INCOME. HE CONCLUDED AS UNDER: AS PER SECTION 68 OF THE ACT 1961, THE APPELLANT COMPANY HAS DISCHARGED ITS ONUS TO ESTABLISH IDENTITY, GENUINENESS OF THE TRANSACTION AND THE CAPACITY OF THE LENDER OR THE DEPOSITOR. THE IDENTITY HAS BEEN ESTABLISHED. THE GENUINENESS IS ALSO ESTABLISHED SINCE THE ENTIRE ; TRANSACTION HAS BEEN DONE THROUGH THE BANKING CHANNELS DULY RECORDED IN THE BOOKS OF ACCOUNT OF THE APPELLANT COMPANY AND DULY REFLECTED IN ITS FINANCIAL STATEMENT. HERE, THE CAPACITY OF THE SHAREHOLDER IS ALSO NOT IN DOUBT. . THUS, IT IS SEEN THAT THE A.O. HAS ERRED IN INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT. RELIANCE IS PLACED ON THE RECENT JUDGMENTS OF THE HON. MUMBAI ITAT IN THE CASE OF GREEN INFRA LTD. VS ITO (ITA 7762/MUM/2012) 6 M/S. INDO ENERGY INTERNATIONAL LTD. DATED 23.8.2013 AND ACIT VS GAGANDEEP INFRASTRUCTURE P. LTD. (ITA 5784/MUM/2011) DATED 23.4.2014 WHICH ARE BINDING AS BEING THAT OF JURISDICT IONAL ITAT . 8 . AGAINST THE ABOVE ORDER, THE REVENUE HAS FILED AN APPEAL ON MERITS OF THE CASE AND THE ASSESSEE HAS FILED THE CROSS OBJECTION AGAINST THE VALIDITY OF REOPENING UPHELD BY THE LD. CIT(A). 9 . WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RE CORDS. THE LD. DEPARTMENTAL REPRESENTATIVE (LD. DR FOR SHORT) STATED THAT EARLIER THE ASSESSMENT ORDER WAS PASSED U/S . 143(1). HE SUBMITTED THAT THE ASSESSEE HAS NOT RAISED ANY OBJECTION WHATSOEVER REGARDING THE REOPENING BEFORE THE A.O. I N THIS REGARD, HE REFERRED TO SEVERAL CASE LAWS AND SUBMITTED THAT THE REOPENING IN THIS CASE IS JUSTIFIED. THE LD. DR FURTHER RELIED UPON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF MAJOR METALS LTD. VS. UNION OF INDIA [2013] 359 ITR 450 (BOM) FOR THE PRO POSITION THAT UNJUSTIFIED SHARE PREMIUM CAN BE DISALLOWED. HE ALSO SUBMITTED THAT ON THE MERITS OF THE CASE, THE LD. CIT(A) HAS SUMMARILY DEALT WITH THE ISSUE AND HAS NOT TAKEN INTO ACCOUNT THE OBJECTION OF THE A.O. HE SUBMITTED THAT WITHOUT MEETING THE OB JECTIONS OF THE A.O., THE LD. CIT(A) HAS ERRED IN ALLOWING THE APPEAL ON MERIT. 10 . PER CONTRA, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE LD. CIT(A) HAS SUMMARILY UPHELD THE REOPENING WITHOUT PROPERLY DEALING WITH THE ISSUE. THE LD. COUNSEL OF T HE ASSESSEE ALSO RELIED UPON THE HONBLE APEX COURT DECISION IN THE CASE OF DY. CIT VS. ZUARI ESTATE DEVELOPMENT & INVESTMENT CO. LTD. [2015] 63 TAXMANN.COM 177 (SC). THE LD. COUNSEL OF THE ASSESSEE HAS SUBMITTED THAT THE REASONS FOR REOPENING WERE NOT AT 7 M/S. INDO ENERGY INTERNATIONAL LTD. ALL ADEQUATE. HE SUBMITTED THAT THE REASONS RECORDED CANNOT BE SUBSTANTIALLY IMPROVED UPON. IN THIS REGARD, HE REFERRED TO DECISION OF HINDUSTAN LEVER LTD. VS. R. B. WADKAR [2004] 268 ITR 332 (BOM) . THE LD. COUNSEL OF THE ASSESSEE FURTHER RELIED UPON THE DECISION OF THE KHUBCHANDANI HEALTHPARKS (P.) LTD. VS. ITO [2016] 384 ITR 322 (BOM) HE SUBMITTED THAT IN THIS CASE, THE HON'BLE APEX COURT DECISION IN THE CASE OF ZUARI ESTATE DEVELOPMENT & INVESTMENT CO. LTD. (SUPRA) HAS BEEN DULY CONSIDERED. ON MERITS OF THE CASE, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE LD. CIT(A) HAS PROPERLY CONSIDERED THE ISSUE THAT THE INVESTORS IN THIS CASE ARE ESTABLISHED COMPANIES. THAT THEY ARE NOT FLY BY NIGHT OPERATORS. THAT THE DETAILED REASONS FOR THE LOSS INCURRED AND THE PROJECT NOT GOING ON THE PROJECTED BASIS HAS BEEN GIVEN DULY BY THE A.O. FURTHERMORE, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ISSUE OF SHARE PREMIUM CANNOT BE DEALT WITH IN THE CURRENT ASSESSMENT YEAR. AS HE SUBMITTED THAT NECESSARY AMEN DMENT IN THE ACT ARE NOT APPLICABLE IN THE EXTANT PERIOD. HE SUBMITTED THAT ALL THE NECESSARY DETAILS WERE SUBMITTED BEFORE THE AUTHORITIES BELOW WHICH DULY JUSTIF Y THE CREDITWORTHINESS OF THE INVESTING COMPANIES. THE LD. COUNSEL OF THE ASSESSEE FURTHER PL ACED RELIANCE UPON THE FOLLOWING CASE LAWS: 1 ACIT VS. GAGANDEEP IN FRASTRUCTURE PVT. LTD. [40 CCH 1 28](MUMBAI) 2 CIT VS. GAGANDEEP INFRASTRUCTURE PVT. LTD. [394 ITR 680](BOMBAY) 3 GREEN INFRA LTD VS. ITO [145 ITD 240](MUMBAI) 4 CIT VS. GREEN INFRA LTD [392 ITR 7](BOMBAY) 5 CIT VS. ORCHID INDUSTRIES PVT. LTD. [397 ITR 136](BOMBAY) 6 ITO VS. M/S SRINGERI TECHNOLOGIES PVT. LTD. [ITA NO.3924/MUM/2014] (ITAT MUMBAI) 7 DCIT VS. M/S ALCON BIOSCIENCES P LTD [ITA NO.L946/M/2016](ITAT MUMBAI) 8 KHUBCHANDANI H EALTHPARKS PVT. LTD. VS. ITO [384 ITR 322](BOMBAY) 8 M/S. INDO ENERGY INTERNATIONAL LTD. 11. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT IN THIS CASE, THE A.O. HAS HELD THAT THE ASSESSEE COMPANY HAS RECEIVED HUGE SHARE PREMIUM WHICH ACCORDING TO THE A.O. WAS NOT JUSTIFIED. THE A.O. HAS NOTED THAT THE COMPANY WHICH HAS INVESTED HUGE AMOUNT OF SHARE PREMIUM IN THE ASSESSEE COMPANY HA S ONLY OF ABOUT RS.1 LAC SHARE CAPITAL AND HAS NO OTHER ASSET EXCEPT HUGE INVESTMENT IN THE ASSESSEE COMPANY. THE A.O. HAS ALS O DRAWN ADVERSE INFERENCE ON THE HYPOTHETICAL POSITION ON THE BASIS OF WHICH PROJECTIONS HAVE BEEN MADE AND THE VALUATION OF THE SHARES HAVE BEEN ARRIVED AT. THE A.O. HAS NOTED THAT THE BOOK VALUE OF THE SHARE AS ON 01.04.2008 IS ONLY RS.13/ - AS PER THE WO RKING UNDER RULE 11UA OF THE IT RULES. HENCE, THE A.O. HELD THAT THE PROVISIONS OF SECTION 68 WOULD APPLY. IN THIS REGARD, HE HAS ALSO REFERRED TO THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF MAJOR METALS LTD. VS. UNION OF INDIA [2013] 359 ITR 450 (BOM). 12. FROM THE ORDER OF THE LD. CIT(A), WE FIND THAT THE LD. CIT(A) HAS DEALT WITH THE ISSUE S RAISED VERY CRYPTICALLY. THE ASSESSEES CHALLENGE TO THE VALIDITY OF T HE REOPENING HAS BEEN DISMISSED, I N MERELY FOUR LINES BY MENTIONING THAT THE A.O. HAD TANGIBLE MATERIAL AND THE TRANSACTION WAS SHAM. NO REFERENCE TO THE CONTENT OF TANGIBLE MATERIAL OR REASON OF REOPENING IS THERE I N THIS ORDER. 13. AS REGARDS THE MERITS OF THE CASE ALSO THE LD. CIT(A)S ORDER IS VERY CRYPTIC . HE HAS HELD THAT T HE CREDITWORTHINESS OF THE INVESTOR COMPANIES CANNOT BE DOUBTED AS THEY ARE PROFIT MAKING COMPANIES AND ARE REGULARLY ASSESSED TO INCOME TAX . T HAT THERE BALANCE SHEET JUSTIFIES THE SAME. IN THIS REGARD, NO REFERENCE HAS BEEN MADE WHATSOEVER TO THE 9 M/S. INDO ENERGY INTERNATIONAL LTD. FACTS AN D FIGURE FROM THE BALANCE SHEET WHICH ACCORDING TO THE LD. CIT(A) JUSTIFY THE CREDITWORTHINESS. THE A.O., ON THE OTHER HAND, HAS DULY MENTIONED THAT THE INVESTOR COMPANY HAS ONLY RS.1 LAC PAID UP CAPITAL AND HAS NO ASSET BUT HAS MADE INVESTMENT IN ASSESSEE S COMPANY FOR HUGE SHARE PREMIUM. IF THE LD. CIT(A) WAS TO DISLODGE THIS F INDING HE OUGHT TO HAVE REFERRED TO THE FACTS AND FIGURES FROM THE BALANCE SHEET OF THE INVESTOR COMPANY. BY MERELY REFERRING THAT THE BALANCE SHEET JUSTIFIE S , DOES NOT MAKE THE O RDER OF THE LD. CIT(A) SUSTAINABLE IN LAW. FURTHERMORE, THE LD. CIT(A) HAS OBSERVED THAT THE IDENTITY HAS BEEN EST ABLISHED, THE GENUINENESS IS ALSO ESTABLISHED SINCE THE ENTIRE TRANSACTION HAS BEEN DONE THROUGH BANKING CHANNELS DULY RECORDED IN THE BOOKS O F ACCOUNTS OF THE ASSESSEE COMPANY AND DULY REFLECTED IN THE FINANCIAL YEAR STATEMENTS. HE FURTHER OBSERVED THAT HERE THE CAPACITY OF THE SHAR EHOLDERS IS ALSO NOT IN DOUBT. W E FIND THAT ON WHAT BASIS AND ON EXAMINATION OF WHAT FACT AND FIGURE IN THE RECORD S, THE LD. CIT(A) HAS GIVEN A FINDING THAT THE CAPACITY OF THE SHAREHOLDERS IS ALSO NOT IN DOUBT, IS NOT COMPREHEN D IBLE. THOUGH THE LD. CIT(A) HAS REFERRED TO SEVERAL CASE LAWS FROM THE ITAT, HE HAS NOT AT ALL REFERRED TO THE PROPOSITION IN THE SAID CASE L AW AND HOW THEY ARE APPLICABLE TO THE FACTS OF THE PRESENT CASE. 14. ON THE OVERALL CONSIDERATION OF THE ENTIRE CONSPECTUS OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT(A) HAS PASSED A VERY CRYPTIC ORDER BOTH ON TH E VALIDITY OF THE REOPE NING AND THE MERITS OF THE CASE. IT IS SETTLED LAW THAT EVEN THE ADMINISTRATIVE ORDERS HAVE TO BE CONSISTENT WITH THE RULES OF NATURAL JUSTICE. IN OUR CONSIDERED OPINION, IT WAS INCUMBENT UPON THE LD. CIT(A) TO PASS A SPEAKING ORDER ON 10 M/S. INDO ENERGY INTERNATIONAL LTD. BOTH THE ISSUE OF VA LIDITY OF REOPENING AND THE MERITS OF THE CASE. HENCE, IN OUR CONSIDERED OPINION, THE INTEREST OF JUSTICE WILL BE SERVED IF BOTH THE ISSUE OF VALIDITY OF REOPENING AND MERITS OF THE ADDITION ARE REMITTED TO THE FILE OF THE LD. C IT(A) FOR FRESH ADJUDICATION BY PASSING A SPEAKING ORDER ON THE SUBJECT. NEEDLES TO ADD, THE ASSESSEE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD. 15. IN THE RESULT, THE REVENUES APPEAL AND THE ASSESSEES CROSS OBJECTION ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PR ONOUNCED IN THE OPEN COURT ON 19.09.2018 SD/ - SD/ - ( RAM LAL NEGI ) (S HAMIM YAHYA) J UDICIAL MEMBER A CCOUNTANT MEMBER MUMBAI ; DATED : 19.09.2018 ROSHANI , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD F ILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI