ITO 2(3)(4), MUMBAI V. VIJAYNAGAR ENGINEERING P. LTD., MUMBAI

ITA 5267/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3302 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 24-08-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARAIA
• Keywords: Reopening of assessment; Unexplained cash credit; Gift; Share purchase agreement; Additional evidence; Initiation of penalty proceedings; Accommodation entries; Onus to prove; Reason to believe
• Section: 142(1); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI SANDEEP GOSAIN, JM & SHRI G. MANJUNATHA , AM ITA NO. 5267/MUM/2016 (A.Y. 2012-13) INCOME TAX OFFICER, WARD 2(3)(4),MUMBAI - 400020 VS. VIJAYANAGAR ENGINEERING PRIVATE LIMITED 2 ND FLOOR, VOLTAS INTERNATIONAL HOUSE, NO. 28, BANK STREET, FORT, MUMBAI 400023 APPELLANT .. RESPONDENT PAN NO. AAACV1749C ASSESSEE BY : NONE REVENUE BY : SHRI CHAITANYA ANJARAIA, (DR) DATE OF HEARI NG: 23-08-2018 DATE OF PRONOUNCEMENT : 23-08-2018 O R D E R PER G. MANJUNATHA: THIS APPEAL FILED BY THE REVENUE, IS DIRECTED AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-6, MUMBAI [IN SHORT CIT(A)], DATED 27.05.2016 FOR THE A.Y. 2012-13. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN ALLOWING RELIEF TO THE ASSESSEE TO THE EXTENT IMPUGNED IN THE GROUNDS ENUMERATED BELOW: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) HAS ERRED IN ALLOWING THE APPEAL OF T HE ASSESSEE STATING THAT THE ASSESSEE HAS EXPLAINED THE NATURE AND SOUR CE OF THE IMPUGNED CREDIT OF RS.1,17,00,000/- HOLDING THAT TH E ADDITION MADE BY THE AO U/S.68 OF THE I.T. ACT, 1961 IS NOT JUSTIFIED WITHOUT 2 ITA NO.3104/M/15 A.Y.2010-11 CALLING FOR THE REMAND REPORT FROM THE AO WHICH IS IN VIOLATION OF RULE 46A. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) HAS ERRED IN HOLDING THAT THE ONUS WA S DISCHARGED EVEN WHEN NOTHING WAS ESTABLISH; IDENTITY, CREDITWO RTHINESS AND GENUINENESS OF TRANSACTION AND RELEVANT DOCUMENTS W ERE NOT PRODUCED BEFORE THE AO AT THE TIME OF ASSESSMENT PR OCEEDINGS U/S,143(3) OF THE I.T. ACT, 1961. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE DECISION OF THE CIT(A) MAY BE SET ASID E AND THAT OF THE A.O. RESTORED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF FABRICATION OF SUGAR MACHINERY AND OTHE R FABRICATION WORK FILED ITS RETURN OF INCOME FOR A.Y.2012-13 ON 25.09.2012 DECLARING TOTAL LOSS OF RS.6,930/-. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICES U/S143 (2) AND 142(1) OF THE INCOME TAX ACT, 1961 (IN SHORT THE A CT) WERE ISSUED. IN RESPONSE TO THE NOTICES, THE AUTHORISED REPRESENTAT IVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FILED VARIOUS DETAIL S, AS CALLED FOR. THE ASSESSMENT HAS BEEN COMPLETED U/S.143 (3) OF THE AC T, ON 30.03.2015 DETERMINING TOTAL INCOME AT RS.1,16,93,070/-, BY MA KING ADDITIONS TOWARDS UNEXPLAINED CASH CREDITS U/S 68 OF THE ACT, ON ACCO UNT OF SHARE CAPITAL RECEIVED FROM CERTAIN COMPANIES. THE RELEVANT ORDER OF THE AO IS EXTRACTED BELOW: 4.10. ALL THE DETAILS AVAILABLE ON RECORD HAVE BEE N CAREFULLY PERUSED AND FROM THE SAME, THE FOLLOWING POINTS EMERGES: I. THE ASSESSEE CLAIMED TO HAVE RECEIVED LOANS FROM PUSHTAR TRADING & HOLDINGS, KOLKATA II. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN FRESH LOAN FROM SAID PARTY AMOUNTING TO RS. 1, 17,00,000/- III. IN SUPPORT OF SUCH LOAN TRANSACTION, THE ASSES SEE HAS NOT FURNISHED ANY EVIDENCES AS SOUGHT TO PROVE GENUINENESS OF THE TRA NSACTION AND CREDITWORTHINESS OF THE LENDER. THE ASSESSEE FAILED TO SUBMIT COPY OF RETURN OF INCOME OF THE LOAN CREDITOR AND ITS BANK STATEME NT TO PROVE THE 3 ITA NO.3104/M/15 A.Y.2010-11 CREDITWORTHINESS IN SPITE OF REPEATED SHOW CAUSES I SSUED BY THE UNDERSIGNED. IV. THE ASSESSEE WAS ASKED TO PROVE IDENTITY AND CR EDITWORTHINESS OF THE PERSON FROM WHOM IT CLAIMED TO HAVE TAKEN SUBSTANTI AL UNSECURED LOAN AND GENUINENESS OF THE TRANSACTION. THE ASSESSEE NEITHE R FILED ANY CORROBORATIVE DOCUMENTARY EVIDENCES NOR FILED ANY EXPLANATION WHA TSOEVER IN SUPPORT OF ITS CLAIM FOR THE REASONS BEST KNOWN TO IT ALONE. V. SINCE THE ASSESSEE HAS NOT SUBMITTED ANY CORROBO RATIVE DOCUMENTARY EVIDENCES LIKE COPIES OF RETURN OF INCOME ALONG WIT H AUDITED ACCOUNTS OR COPIES OF RESPECTIVE BANK STATEMENTS OF THE SAID PA RTIES, THE CREDIT WORTHINESS OF THE LOAN CREDITORS IS NOT PROVED. THE ONUS OF PROVING OF THE GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE LENDERS WAS UPON THE ASSESSEE BY FILING RELEVANT DOCUMENTS DISC USSED SUPRA WHICH THE ASSESSEE FAILED TO DO SO. THEREFORE, THE CREDITWORT HINESS OF THE PUSHTAR TRADING & HOLDINGS, KOLKATA, FROM WHICH IT HAS SHOW N TO HAVE TAKEN UNSECURED LOANS IS NOT PROVED AND THE SAME REMAINED AS UNEXPLAINED. VI. IN THIS REGARD, RELIANCE IS PLACED ON THE DECIS ION OF HON'BLE HIGH COURT OF ANDHRA PRADESH IN THE CASE OF DR. D. SIVA SANKARA RAO VS. ITO, WARD-2, ELURU [2013] 29 TAXMANN.COM 17 (AP) WHEREIN IT WAS HELD AS UNDER: 'SECTION 68 OF THE INCOME-TAX ACT, 1961 - CASH CRED ITS - BURDEN OF PROOF - ASSESSMENT YEAR 2002-03 - ASSESSEE HUF CLAI MED TO HAVE RECEIVED A LOAN OF RS. 2.15 LAKHS IN CASH FROM KART A'S WIFE, WHO WAS A STATE GOVERNMENT EMPLOYEE - SHE CLAIMED TO HAVE REC EIVED GIFTS OF RS. 2 LAKH FROM HER PARENTS WHO HAD SUPPOSEDLY EARN ED AMOUNT BY LEASING AGRICULTURAL LAND - HOWEVER, NO EVIDENCE AB OUT SUCH SOURCE WAS SUBMITTED - FURTHER, NO EVIDENCE WAS FILED TAKI NG STATE GOVERNMENT'S PERMISSION AS REQUIRED BEFORE ACCEPTIN G GIFTS OF SUCH AN AMOUNT BY A GOVERNMENT SERVANT - WHETHER CREDITW ORTHINESS OF CREDITOR AND GENUINENESS OF TRANSACTION WAS NOT PRO VED IN INSTANT CASE, EVEN THOUGH IDENTITY OF CREDITOR WAS ESTABLIS HED - HELD YES - WHETHER, THEREFORE, ADDITION OF IMPUGNED AMOUNT WAS APPROPRIATE - HELD, YES [PARAS 20 AND 21] [IN FAVOUR OF REVENUE]' VII. RELIANCE IS ALSO PLACED ON THE DECISION OF HON 'BLE HIGH COURT OF DELHI, IN THE CASE OF CIT VS. FROSTAIR PVT. LTD. [2012] 26 TA XMANN.COM 11 (DELHI) WHEREIN IT WAS HELD AS UNDER: 'SECTION 68, READ WITH SECTION 271(1)(C), OF THE IN COME-TAX ACT, 1961 - CASH CREDIT - WHETHER ASSESSEE IS UNDER A BURDEN TO EXPLAIN NATURE AND SOURCE OF SHARE APPLICATION MONEY RECEIVED IN A GIVEN CASE AND HE HAS TO ESTABLISH SHAREHOLDER'S IDENTITY; GENUINE NESS OF TRANSACTION; AND CREDITWORTHINESS OF SHAREHOLDERS - HELD, YES - ON BEING INFORMED THAT ASSESSEE HAD ACCEPTED SHARE CAP ITAL FROM SOME COMPANIES WHICH WERE ENGAGED IN PROVIDING BOGUS ENT RIES, IN FORM 4 ITA NO.3104/M/15 A.Y.2010-11 OF LOAN AND SHARE APPLICATION MONEY, ASSESSING OFFI CER ASKED FOR DETAILS UNDER SECTION 142 - ASSESSEE SUBMITTED A LI ST OF 18 SHAREHOLDERS - ASSESSING OFFICER DISCERNED THAT PAN / GIR NO. OF SHAREHOLDERS WAS NOT CORRECT, THEY WERE NOT FOUND A T ADDRESSES GIVEN AND THEY WERE NOT FILING THEIR ITRS WITH CONC ERNED OFFICERS - WHETHER SINCE ASSESSING OFFICER HAD EXAMINED ALL FA CTS IN EXHAUSTIVE MANNER, ADDITION UNDER SECTION 68 AND, CONSEQUENTLY INITIATION OF PENALTY PROCEEDINGS WERE JUSTIFIED - HELD, YES [IN FAVOUR OF REVENUE]' VIII. FURTHER RELIANCE IS ALSO PLACED ON THE DECISI ON OF HON'BLE HIGH COURT OF DELHI, IN THE CASE OF PRATIBHA FINVEST (F) LTD. VS. ITO [20131 29 TAXMANN.COM 420 (DELHI) WHEREIN IT WAS HELD AS UNDER: 'SECTION 147, READ WITH SECTION 68, OF THE INCOME-T AX ACT, 1961 - INCOME ESCAPING ASSESSMENT - NON-DISCLOSURE OF PRIM ARY FACTS - CASH CREDITS - ASSESSMENT YEAR 2001-02 - RELYING UPON RE PORT OF INVESTIGATION WING PURSUANT TO SEARCH ON THIRD PART IES CHARACTERIZED AS 'ACCOMMODATION ENTRY PROVIDERS' REVEALING THAT A SSESSEE-COMPANY HAD RECEIVED ACCOMMODATION ENTRY OF CERTAIN AMOUNT UNDER GRAB OF SHARE APPLICATION MONEY, ASSESSING OFFICER REOPENED ASSESSMENT FOR RELEVANT ASSESSMENT YEAR - IN REASSESSMENT, ASSESSI NG OFFICER MADE CERTAIN ADDITION BEING 2 PER CENT OF TOTAL UNEXPLAI NED BALANCE IN BANK ACCOUNT TREATING SAME AS ASSESSEE'S INCOME BY WAY OF COMMISSION ON HAWALA ENTRIES - WHETHER REOPENING OF ASSESSMENT ON BASIS OF INVESTIGATION REPORT WAS JUSTIFIED - HE LD, YES - WHETHER ADDITION MADE BY ASSESSING OFFICER WAS JUSTIFIED EV EN THOUGH SAME DID NOT FORM PART OF 'REASON TO BELIEVE' TO REOPEN ASSESSMENT - HELD, YES [PARA 10] [IN FAVOUR OF REVENUE] SECTION 69A OF THE INCOME-TAX ACT, 1961 - UNEXPLAIN ED MONEYS - BANK DEPOSITS - ASSESSMENT YEAR 2001-02 - DURING AS SESSMENT PROCEEDINGS, ASSESSING OFFICER NOTICED THAT ASSESSE E HAD A CREDIT BALANCE IN HIS BANK ACCOUNT WHICH IT COULD NOT SUBS TANTIATE WITH SUPPORTING DOCUMENTARY EVIDENCE - AS ASSESSEE WAS A N ENTRY OPERATOR AS PER INFORMATION RECEIVED FROM INVESTIGA TION WING, AN AMOUNT OF 2 PER CENT OF CREDIT IN BANK ACCOUNT WAS TREATED AS INCOME TOWARDS PROVIDING ACCOMMODATION ENTRIES AND WAS ADDED TO ASSESSEE'S INCOME - ON APPEAL, COMMISSIONER (APPEAL S) AND TRIBUNAL UPHELD ADDITION WHETHER ADDITION BEING BASED ON A PURE QUESTION OF FACT, TRIBUNAL'S ORDER DID NOT CALL ANY INTERFER ENCE - HELD, YES [PARA 10] [IN FAVOUR OF REVENUE]' 4.11. IN THE INSTANT CASE ALSO, THE ASSESSEE HAS FA ILED TO PROVIDE EVEN A SINGLE PIECE OF EVIDENCE TO ESTABLISH THE IDENTITY OF THE LENDER AND NO IOTA OF EVIDENCES IN RESPECT OF CREDITWORTHINESS OF THE LEN DER AND GENUINENESS OF THE TRANSACTIONS HAS BEEN FILED. SINCE THE ASSESSEE FAILED TO ESTABLISH THE CREDITWORTHINESS OF THE LOAN CREDITOR AND GENUINENE SS OF THE TRANSACTION, THE FRESH LOAN TAKEN DURING THE YEAR AMOUNTING TO R S.1,17,00,000/- 5 ITA NO.3104/M/15 A.Y.2010-11 REMAINED UNEXPLAINED CREDIT IN THE BOOKS OF THE ASS ESSEE. BY RESPECTFULLY FOLLOWING THE AFORESAID JUDICIAL PRONOUNCEMENTS, I CONSIDER FRESH LOANS AMOUNTING TO RS. 1,17,00,000/ - AS UNEXPLAINED CASH CREDIT AND 'INCOME' OF THE ASSESSEE AS PER PROVISIONS OF SECTION 68 OF THE ACT. THUS, AN ADDITION OF RS.1,17,00,000/- IS MADE TO THE TOTAL INCOME OF THE ASSESSEE AS UNEXPLAINED CASH CREDIT. 4. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. BEFORE THE LEARNED CIT (A), THE ASSESSEE FILED ELABORATE WRITTEN SUBMISSION. THE ASSESSEE ALSO FILED VARIOUS DETAILS TO PROVE IDENTITY, GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF PARTIES INCLUDING, SHARE APPLICATION FORM, BANK DETAILS, PAN OF SUBSCR IBERS, MEMORANDUM AND ARTICLES OF ASSOCIATION AND OTHER DETAILS. THE LD. CIT (A) FOR DETAILED DISCUSSION RECORDED IN ITS ORDER DATED 27.05.2016 D ELETED ADDITION MADE BY THE AO TOWARDS SHARE APPLICATION MONEY RECEIVED FROM COMPANIES BY HOLDING THAT THE ASSESSEE HAS FILED ENORMOUS DOCUME NTS TO PROVE IDENTITY, GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF PARTIES. THE RELEVANT ORDER OF THE CIT(A) IS EXTRACTED BELOW: 4.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND THE SUBMISSION MADE BY THE LD. AR. I HAVE ALSO GONE THROUGH THE DE CISIONS RELIED ON BY THE LD. AR AND THE AO. THE ASSESSING OFFICER HAS ADDED RS. 1 ,17,00,000/- BY STATING THAT THE FRESH LOAN TAKEN DURING THE YEAR R EMAINED UNEXPLAINED IN THE BOOKS OF THE ASSESSEE. THE SAID LOAN OF RS.1,17 ,00,000/- WAS STATED TO BE RECEIVED FROM PUSHKER TRADING & HOLDING PVT. LTD . HOWEVER, THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS HAD STATED THAT T HE SAID AMOUNT WAS TAKEN FROM THREE PARTIES, NAMELY, KAUVERY TRADING & HOLDING PVT. LTD. OF RS.60,00,000/-, PUSHKER TRADING & HOLDING PVT. LTD. OF RS.40,00,000/- AND CHANDA CAST IRON INDUSTRIES PVT. LTD. OF RS.17,00,0 00/-. IT WAS STATED THAT THE SAME WAS WRONGLY SHOWN AS TAKEN FROM PUSHKER TR ADING & HOLDING PVT. LTD. THE AO DID NOT ACCEPT THE EXPLANATION OF THE A SSESSEE AND STATED THAT THE ASSESSEE HAS NOT PROVED THE GENUINENESS OF THE TRANSACTION AND THE CREDITWORTHINESS OF THE LENDER. HE FURTHER STATED T HAT THE ASSESSEE HAS NOT SUBMITTED ANY CORROBORATIVE DOCUMENTARY EVIDENCE LI KE COPIES OF THE RETURN OF INCOME ALONGWITH AUDITED ACCOUNTS OR COPIES OF R ESPECTIVE BANK STATEMENTS OF THE SAID PARTIES. THE LD. AR, ON THE OTHER HAND, HAS STATED THAT THE SUM OF RS.1,17,00,000/- WAS RECEIVED TOWAR DS SHARE APPLICATION MONEY DURING THE YEAR UNDER CONSIDERATION, I.E. RS. 60,00,000/- FROM KAUVERY TRADING & HOLDING PVT. LTD., RS.40,00,000/- FROM PUSHKER TRADING & HOLDING PVT. LTD. AND RS.17,00,000/- FROM CHANDA CA ST IRON INDUSTRIES PVT. LTD. IN SUPPORT, THE LD. AR HAS FILED COPIES OF THE SHARE APPLICATION FORM, BOARD RESOLUTION OF THE APPLICANT COMPANIES, PANS, MEMORANDUM AND 6 ITA NO.3104/M/15 A.Y.2010-11 ARTICLES OF ASSOCIATION, DIRECTOR'S REPORT, PROFIT AND LOSS ACCOUNT, BALANCE SHEET, SCHEDULES, AUDIT REPORT, RETURNS OF INCOME, LEDGER CONFIRMATIONS, BANK STATEMENTS ETC. IT WAS SUBMITTED THAT THESE DE TAILS WERE SUBMITTED TO THE AO DURING THE ASSESSMENT PROCEEDINGS WHICH HAVE BEEN COMPLETELY OVERLOOKED BY THE AO. REGARDING THE QUANTUM OF RS. 1,17,00,000/- APPEARING IN THE NAME OF PUSHKER TRADING & HOLDING PVT. LTD., IT WAS STATED THAT THIS WAS A TYPOGRAPHICAL ERROR AND THE CORRECT AMOUNT RECEIVED FROM THE ABOVE COMPANY WAS RS.40,00,000/-. THE OTHER SUM S WERE RECEIVED FROM KAUVERY TRADING & HOLDING PVT. LTD. AND CHANDA CAST IRON INDUSTRIES LTD. THROUGH BANKING CHANNELS. 4.3 I HAVE GONE THROUGH THE DETAILS SUBMITTED BY TH E APPELLANT AND THE SUBMISSION MADE BY IT. THE APPELLANT HAS SUBMITTED THE BANK STATEMENTS, BALANCE-SHEET, PROFIT AND LOSS ACCOUNT AND OTHER DE TAILS MENTIONED ABOVE. IT IS SEEN FROM THE BANK STATEMENTS THAT THE APPELLANT HAD RECEIVED RS.40,00,000/- FROM KAUVERY TRADING & HOLDING PVT. LTD. ON 11.8.2011 AND RS.20,00,000/- ON 9.9.2011. IT HAS RECEIVED RS.40,0 0,000/- FROM PUSHKER TRADING & HOLDING PVT. LTD. ON 22.09.2011. IT HAD A LSO RECEIVED RS.17,00,000/- ON 08.09.2011 FROM CHANDA CAST IRON INDUSTRIES PVT. LTD. THESE SUMS ARE REFLECTED IN THE BANK ACCOUNT OF THE APPELLANT MAINTAINED WITH STATE BANK OF INDIA. IT IS FURTHER SEEN THAT T HESE PAYMENTS ARE ALSO REFLECTED IN THE BANK STATEMENTS OF KAUVERY TRADING & HOLDING PVT. LTD., PUSHKER TRADING & HOLDING PVT. LTD. AND CHANDA CASH IRON INDUSTRIES PVT. LTD. THESE APPLICANTS HAVE FILED THEIR RESPECTIVE R ETURNS OF INCOME FOR THE SUBJECT ASSESSMENT YEAR. IT IS SEEN FROM THE PROFIT AND LOSS ACCOUNTS AND BALANCE-SHEETS OF THE ABOVE APPLICANTS THAT THESE C OMPANIES ARE HAVING CAPITAL AND RESERVES AND SURPLUS OF MORE THAN RS.95 CRORES EACH. THE TURNOVERS WERE ALSO SUBSTANTIAL IN ALL CASES. THE I DENTITY OF THE SHARE APPLICANTS IS SUPPORTED BY THEIR PANS, CERTIFICATES OF INCORPORATION, MEMORANDUM AND ARTICLES OF ASSOCIATION AND MCA DATA DOWNLOADED FROM THE WEBSITE OF MINISTRY OF COMPANY AFFAIRS. THE MCA DATA BASE SHOWS THAT EACH OF THESE COMPANIES HAVE FILED THEIR RESPECTIVE BALANCE SHEET UPTO 31.03.2015 AND ALSO HELD THEIR RESPECTIVE AGM IN SE PTEMBER 2015. REGARDING THE CAPACITY OF THE SHARE APPLICANTS, IT HAS ALREADY BEEN DISCUSSED THAT THEY HAD HUGE CAPITAL AND RESERVES AND THEIR T URNOVER WAS ALSO SUBSTANTIAL. FURTHER, THE AMOUNTS HAVE BEEN PAID TH ROUGH BANKING CHANNEL AND BANK STATEMENTS HAVE BEEN SUBMITTED IN THIS REG ARD. THE GENUINENESS OF THE TRANSACTION IS ALSO SUPPORTED BY THE LEDGER CONFIRMATION OF EACH OF THE APPLICANTS, BOARD RESOLUTION PASSED IN THEIR RE SPECTIVE BOARD MEETINGS, SHARE APPLICATION FORMS AND ACTUAL ALLOTMENT OF SHA RES TO THE SHARE APPLICANTS AND RETURN OF ALLOTMENT FILED WITH ROC A LONGWITH THE BOARD RESOLUTION ETC. IN VIEW OF THESE FACTS, THE APPELLA NT HAS SATISFACTORILY EXPLAINED THE CREDIT REFLECTED IN ITS BOOKS OF ACCO UNT. 4.4 IT MAY BE STATED U/S.68 (I) THERE HAS TO BE CRE DIT OF THE AMOUNTS IN THE BOOKS MAINTAINED BY THE ASSESSEE; (II) SUCH CREDIT HAS TO BE A SUM OF MONEY DURING THE PREVIOUS YEAR; AND (III) EITHER (A) THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH CRE DIT FOUND IN THE BOOKS 7 ITA NO.3104/M/15 A.Y.2010-11 OR (B) THE EXPLANATION OFFERED BY THE ASSESSEE, IN THE OPINION OF THE AO, IS NOT SATISFACTORY. THE EXPRESSION THAT 'THE ASSESSEE OFFERS NO EXPLANATION' MEANS THE ASSESSEE OFFERS NO PROPER, REASONABLE AND ACCEPTABLE EXPLANATION AS REGARDS THE SUMS FOUND CREDITED IN T HE BOOKS MAINTAINED BY THE ASSESSEE. THE OPINION OF THE A.O. IS REQUIRED T O BE FORMED OBJECTIVELY WITH REFERENCE TO THE MATERIAL ON RECORD. APPLICATION OF MIND IS A SINE QUA NON FOR FORMING T HE OPINION. IN THIS CASE, THE APPELLANT HAS GIVEN REASONABLE, PROPER AND ACCE PTABLE EXPLANATION WITH RELEVANT SUPPORTING DOCUMENTS IN RESPECT OF THE SAI D SHARE APPLICATION MONEY OF RS.1,17,00000/- RECEIVED FROM THREE PARTIE S. THE DECISIONS RELIED ON BY THE LD. AR IN THE CASE OF LOVELY EXPORTS (F) LTD. (SUPRA), DIVINE LEASING & FINANCE (SUPRA) AND STELLAR INVESTMENT LTD. (SUPR A) AND OTHER DECISIONS RELIED UPON BY THE LD. AR SUPPORT THE CASE OF THE A PPELLANT. THE HON'BLE DELHI HIGH COURT IN, THE CASE OF CIT VS. VALUE CAPI TAL SERVICES PVT. LTD. 307 ITR 334 HAS HELD THAT IF THE DEPARTMENT WANTS TO MA KE ADDITION ON ACCOUNT OF SHARE APPLICATION MONEY, BURDEN IS ON THE DEPART MENT TO SHOW THAT EVEN IF THE APPLICANTS DO NOT HAVE THE MEANS TO MAKE THE INVESTMENT, INVESTMENT MADE BY THEM ACTUALLY EMANATED FROM THE COFFERS OF THE ASSESSEE SO AS TO ENABLE IT TO BE TREATED AS UNDISCLOSED INCOME OF TH E ASSESSEE. IT IS CLEAR FROM THE FACTS DISCUSSED ABOVE THAT THE CONDITIONS FOR APPLYING THE PROVISIONS OF SECTION 68 ARE NOT FULFILLED IN THE I NSTANT CASE. IN VIEW OF THE ABOVE FACTS AND RESPECTFULLY FOLLOWING THE DECISION S, I AM OF THE CONSIDERED OPINION THAT THE APPELLANT HAS SATISFACTORILY EXPLA INED THE NATURE AND SOURCE OF THE IMPUGNED CREDIT OF RS.1,17,00,000/-. HENCE, THE ADDITION MADE BY THE AO U/S.68 IS NOT JUSTIFIED. ACCORDINGLY, THE SAME I S DELETED AND THE GROUND IS ALLOWED. 5. NONE APPEARED FOR THE ASSESSEE DESPITE SERVICE OF NOTICES. WE HAVE HEARD LD. DR, PERUSED MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ONLY ISSUE ARISES FOR OUR CONSIDERATION FROM REVENUE APPEAL IS ADDITION TOWARDS UNEXPLAINED CREDITS BEING UNSECURED LOANS FROM CERTAIN CREDITORS U/S 68 OF T HE ACT. THE FACTS WITH REGARD TO IMPUGNED DISPUTE ARE THAT DURING COURSE O F ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS R ECEIVED NEW LOANS FROM TWO COMPANIES, VIZ, HOSPET SUGARS PVT LTD FOR RS. 45,00,000/- AND PUSHTAR TRADING AND HOLDING PVT LTD, KOLKOTA FOR RS . 1,17,00,000/-. IN ORDER TO VERIFY CORRECTNESS OF LOANS, THE AO CALLED UPON THE ASSESSEE TO FURNISH NECESSARY EVIDENCES INCLUDING CONFIRMATION LETTERS. IN RESPONSE, THE ASSESSEE FILED A LETTER AND STATED THAT UNFORTU NATELY DETAILS CALLED FOR ARE NOT AVAILABLE BECAUSE THE REVENUE AUTHORITIES A TTACHED REGISTERED 8 ITA NO.3104/M/15 A.Y.2010-11 OFFICE OF THE COMPANY. MEANTIME, THE AO ISSUED 133( 6) NOTICES TO ADDRESS GIVEN BY THE ASSESSEE, BUT ALL NOTICES RETURNED UN- SERVED. THE AO HAS CONFRONTED WITH DETAILS OF NON RESPONSE FROM PARTIE S TO THE AR OF THE ASSESSEE AND ASKED AS TO WHY TOTAL UNSECURED LOANS SHALL NOT BE TREATED AS UNEXPLAINED CREDITS U/S 68 OF THE ACT. LATER, TH E ASSESSEE HAS FILED A LETTER DATED 10.03.2015 AND INTIMATED THAT, IN EARL IER FINANCIAL STATEMENTS LOAN AMOUNT WAS ERRONEOUSLY MENTIONED IN THE NAME O F PUSHTAR TRADING & HOLDING PVT LTD, BUT FACT BEING THAT THE SAID LOA N HAD BEEN ACCEPTED FROM FOUR PARTIES AND ACCORDINGLY, FILED REVISED FI NANCIAL STATEMENTS, WHERE SAID LOAN STATED TO HAVE BEEN ACCEPTED FROM FIVE PA RTIES. THE ASSESSEE COULD NOT FILE ANY DETAILS EXCEPT, FILING FINANCIAL STATEMENTS. THE ASSESSEE EVEN FAILED TO FURNISH CORRECT ADDRESS OF THE PARTI ES. THEREFORE, THE AO TREATED UNSECURED LOANS RECEIVED FROM FOUR PARTIES AS UNEXPLAINED CREDITS U/S 68 OF THE ACT, AND MADE ADDITIONS OF RS. 1,17,0 0,000/- TO TOTAL INCOME. 6. THE CIT(A) HAS DELETED ADDITIONS MADE BY THE AO TOWARDS UNSECURED LOANS OF RS. 1,17,00,000/- ON THE BASIS O F ADDITIONAL EVIDENCES FILED BY THE ASSESSEE. NO DOUBT, THE ASSESSEE HAS F ILED VARIOUS DETAILS IN RESPECT OF ALL FOUR COMPANIES, INCLUDING THEIR PAN, FINANCIAL STATEMENTS, MOA/AOA, SHARE CERTIFICATES AND COMPANY MASTER DATA DOWNLOADED FROM MCA WEBSITE TO PROVE EXISTENCE OF THESE COMPANIES. THE CIT(A) HAS ACCEPTED ADDITIONAL EVIDENCES FILED BY THE ASSESSEE TO DELETED ADDITIONS MADE BY THE AO. NO DOUBT, THE CIT(A) HAS COTERMINOU S POWERS WITH THE AO AND CAN CONTINUE THE PROCEEDINGS AS IF SUCH PROC EEDINGS ARE BEFORE THE ASSESSING OFFICER. BUT, WHEN THERE IS CATEGORIC AL FINDINGS FROM THE AO IN HIS ASSESSMENT ORDER THAT THE ASSESSEE FAILED TO FILE ANY EVIDENCES TO JUSTIFY CREDIT FOUND IN BOOKS OF ACCOUNTS AND SUCH FINDING IS BASED ASSESSEE ADMISSION BY WAY LETTER TO THE AO, IT IS I NCUMBENT UPON THE CIT(A) TO TAKE COGNIZANCE OF OBSERVATIONS OF THE AO , WHEN ASSESSEE HAS FILED DOCUMENTS FIRST TIME BEFORE THE CIT(A). IN SU CH CASES, THE CIT(A) SHALL PROVIDE AN OPPORTUNITY TO THE AO TO COMMENT U PON ADDITIONAL 9 ITA NO.3104/M/15 A.Y.2010-11 EVIDENCES FILED BY THE ASSESSEE BY WAY OF REMAND RE PORT, OTHERWISE IT WOULD VIOLATES PROVISIONS OF RULE 46A OF INCOME TAX RULES, 1962. IN THIS CASE, IT IS ABUNDANTLY CLEAR FROM ORDER OF THE AO T HAT THE ASSESSEE HAS NOT FILED ANY EVIDENCES TO JUSTIFY UNSECURED LOANS AND EXPRESSED ITS INABILITY TO FURNISH ANY EVIDENCES. BUT, ALL OF A SUDDEN, IT HAS FILED VARIOUS DETAILS BEFORE THE CIT(A). THE CIT(A) WITHOUT PROVIDING AN OPPORTUNITY TO THE AO ADMITTED ADDITIONAL EVIDENCES AND DELETED ADDITION MADE TOWARDS UNSECURED LOAN. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT IT IS A CLEAR CASE OF VIOLATION OF RULE 46A OF I.T. RULES, 1962 A ND HENCE, WE SET ASIDE ORDER OF THE CIT(A) AND RESTORED MATTER BACK TO THE FILE OF THE AO TO CONSIDER ISSUE AFRESH IN LIGHT OF ADDITIONAL EVIDEN CES FILED BY THE ASSESSEE. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I N ITA NO. 5267/MUM/2016 IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 23 -08-20 18. SD/- /- SD/- SDSD/D/- (SANDEEP GOSAIN) (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 23-08-2018 MP COPY OF THE ORDER FORWARDED TO : BY ORDER, ASSISTANT REGISTRAR ITAT, MUMBAI 1. T HE APPELLANT 2. THE RESPONDENT. 3. THE CIT (A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//