M/s. Tirupati Energy Solution Pvt. Ltd., Surat V. The Income Tax Officer, Ward-2(1)(4), Surat

ITA 573/AHD/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2244 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 07-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Assessee Lawyers: SAPNESH SHETH
• Keywords: Unexplained cash credit; Bogus Share capital; Share purchase agreement; Opportunity of being heard; Source of fund; Retrospective amendment; Accommodation entries; Capital receipt; Onus to prove
• Section: 131; 68; 144; 133(6); 143(1)

Judgement Text

TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 1 OF 31 , , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT . . , . . , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . ./ I.T.A NO.573/AHD/2017 / A.Y.:2012-13 M/S. TIRUPATI ENERGY SOLUTION PVT. LTD. , 1/B RATNADHAM VINAY APARTMENT , RATNADHAM SANKHUL PIPLOD SURAT PAN: AACCT 7044 G V S . INCOME TAX OFFICER, WARD- 2(1)(4) SURAT APPELLANT /RESPONDENT /ASSESSEE BY SHRI SAPNESH SHETH, CA /REVENUE BY SHRI O. P. SINGH CIT (D.R.) / DATE OF HEARING: 23.08.2018 /PRONOUNCEMENT ON 16 .10.2018 /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, SURAT (IN SHORT THE CIT (A)) DATED 16.12.2016 PERTAINING TO ASSESSMENT YEAR 2012-13, WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE INCOME TAX OFFICER, WARD- 2(1)(4), SURAT (IN SHORT THE AO) TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 2 OF 31 DATED 31.03.2015 UNDER SECTION 143 (3) OF INCOME TAX ACT,1961 (IN SHORT THE ACT). 2. GROUND NO.1: RELATING TO EX-PARTE ORDER PASSED BY THE CIT (A) IS NOT PRESSED BY THE LEARNED COUNSEL FOR THE ASSESSEE, IN THE HEARING BEFORE US, EX-CONSEQUENTI, IT IS TREATED AS DISMISSED AS NOT PRESSED. 3. GROUND NO 2 & 3 STATES THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN MAKING ADDITION OF RS. 4,07,25,000 AS BOGUS SHARE APPLICATION AND SHARE APPLICATION PREMIUM MONEY AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. HENCE, ADDITION MADE BY THE AO AND CONFIRMED BY THE CIT (A) MAY PLEASE BE DELETED. 4. SUCCINCTLY, FACTS AS CULLED OUT FROM THE ORDERS OF LOWER AUTHORITIES ARE THAT THE ASSESSEE COMPANY HAS FILED ITS RETURN OF INCOME ON 11.09.2012 DECLARING TOTAL INCOME OF RS. 39,600, WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUE OF NOTICE UNDER SECTION 143(2) OF THE ACT. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 3 OF 31 RECEIVED A SUM OF RS.4,07,25,000/- TOWARDS INVESTMENT AS SHARE CAPITAL ALONG WITH SHARE PREMIUM FROM 7 COMPANIES/INDIVIDUALS. IN ORDER TO VERIFY THE IDENTITY, CREDIT-WORTHINESS AND GENUINENESS OF TRANSACTION, THE AO REQUESTED THE ASSESSEE TO PROVIDE DETAILS OF SHAREHOLDER VIZ NUMBER OF SHARES ISSUED, FACE VALUE OF SHARES , PARTY-WISE SHARE CAPITAL RECEIPTS WITH PREMIUM , SPECIFYING THE PARTIES WHICH ARE RELATED TO DIRECTORS / FAMILY MEMBERS ALONG WITH VALUE OF SHARE ALLOTTED TO THEM, COPIES OF SHARE APPLICATION FORM , DETAILS OF PAYMENTS RECEIVED AND ASSESSMENT PARTICULAR OF SHARE APPLICANT EARNING PER SHARE AND DIVIDEND DECLARED IN PAST THREE ASSESSMENT YEAR. HOWEVER, THE ASSESSEE HAD PROVIDED ACKNOWLEDGEMENT OF RETURN OF INCOME, AND LEDGER ACCOUNT IN THEIR BOOKS AND CHOSEN NOT TO GIVE ANY SUBMISSIONS IN THIS REGARD. THE DETAILS WERE ALSO RECEIVED FROM TVF FINANCE, DHARA FACILITY LTD. HOWEVER, SUMMON UNDER SECTION 131 WAS ISSUED TO DIRECTOR OF THE ASSESSEE TO ATTEND PERSONALLY AND FURNISH COPY OF RETURN, COPY OF AUDIT REPORT, BALANCE SHEET COPY OF BANK ACCOUNT OF INVESTORS AND ALL COMMUNICATION OF SHARE APPLICATION MONEY RECEIVED AND BOARD RESOLUTION ETC. THE LD. A.R. OF THE ASSESSEE VIDE LETTER DATED 14.02.2015 HAS SUBMITTED SOME CLARIFICATION REGARDING NUMBER OF TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 4 OF 31 SHARES ALLOTTED, COPY OF OFFER LETTER AND LIST OF SHARE ALLOTTEE. THE AO ALSO ISSUED NOTICE UNDER SECTION 133(6) TO ALL INVESTOR COMPANIES BUT RECEIVED BACK WITH REMARKS LEFT OR INCOMPLETE ADDRESS. HOWEVER, REPLY WAS RECEIVED FROM TVF FINANCE PVT. LTD. BUT THIS INVESTOR ALSO NOT PROVIDED ITS BALANCE SHEET NOR AUDIT REPORT NOR ANY SOURCE OF PREMIUM IN ITS BOOKS AND JUST SENT A COPY OF ITR, COPY OF BANK ACCOUNT. THEREAFTER, INSPECTOR WAS SENT WHO DID NOT FOUND THE PARTY ON GIVEN ADDRESS. AFTER ISSUE OF SHOW- CAUSE NOTICE, THE AO MADE ADDITION IN RESPECT OF FOLLOWING COMPANIES : NAME AND ADDRESS NO OF SHARES SHARE CAPITAL SHARE PREMIUM TOTAL IN RS. 1.DHARA FACILITY MANAGEMENT PVT.LTD. 7/3314 ICHHABHAGWAN BUILDING, DHOBHI SHERI SAIYADPURA SURAT 1,23,000 12,30,000 1,10,70,000 1,23,00,000 2 . KETAN KANTILAL SHAH HUF, A401 PARSHWANATH APARTMENT LIMABACHIYA FALIA SURAT 17,300 1,73,000 15,57,000 17,30,000 TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 5 OF 31 3 . PRASHANT BARFIWALA, 6/1249-50, BHUT SHERI MAHIDHARPURA SURAT 10,000 1,00,000 9,00,000 10,00,000 4.SAIDEEP TRADING PVT. LTD. DINDHOSHI MAHASAGAR GOREGAON MUMBAI(E) 2,17,000 21,70,000 1,95,30,000 2,17,00,000 5. DANVEER INVESTMENT (P) LTD. 3198/15 GALI NO.1, 4 TH FLOOR SANGATARSHA PAHARGANJ DELHI 25,000 2,50,000 22,50,000 25,00,000 6 TVF FINANCE & INVESTMENT PVT. LTD. 117/12 3 RD FLOOR NAIWAL KAROL BAUGH NEW DELHI 10,000 1,00,000 9,00,000 10,00,000 7 BAJRANG H. TIBREWALA 49,500 4,95,000 0 4,95,000 TOTAL 4,51,800 45,18,000 3,62,07,000 4,07,25,000 5. IN THE CASE OF DHARA FACILITY MANAGEMENT PVT. LTD.: THE AO OBSERVED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, COPY OF CONFIRMATION OF LEDGER ACCOUNT, NUMBER OF SHARES PURCHASED, SHARE ALLOTMENT LETTER, COPY OF BANK STATEMENT AND COPY OF RETURN TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 6 OF 31 WAS FILED. COPY OF BANK ACCOUNT WITH AXIS BANK OF INVESTOR SHOWED THAT THERE WAS DEPOSIT OF RS. 9,50,000 BY RTGS FROM BINAL GEMS ON 11.04.2011, AND VERY SAME DAY WITHDRAWAL OF THE SAME. AGAIN, THEY HAVE DEPOSIT OF RS. 9 LAKH FROM BINAL GEMS AND WITHDRAWAL FOR CHINTAMANI. AGAIN THERE WAS DEPOSIT FROM BINAL GEMS AND WITHDRAWAL FOR PAYMENT MADE TO BAKABHAI C. SHAH. IN SAME MANNER ON 26.04.2011, THEY HAVE DEPOSIT AN AMOUNT OF RS.44,12,000 BY TRANSFER AND ON THE SAME DAY, THE MONEY IS TRANSFERRED TO THE ASSESSEE COMPANY OF RS. 40 LAKHS. AGAIN, THEY HAVE DEPOSITED AN AMOUNT OF RS. 15,86,000 AND RS. 20 LAKH IS PAID TO THE ASSESSEE COMPANY FOR SHARE APPLICATION MONEY. FURTHER, THE INVESTOR COPY HAS DEPOSITED A CHEQUE OF RS. 25 LAKHS ON 13.05.2011. THE AO, THEREFORE, OBSERVED THAT CREDITWORTHINESS OF THE INVESTOR COMPANY IS NOT ESTABLISHED. THE AO FURTHER NOTED THAT COPY OF ACKNOWLEDGEMENT OF RETURN FOR THE ASSESSMENT YEAR 2011-12 AND A.Y. 2012-13 SHOWED THAT THE INVESTOR COMPANY DECLARED TOTAL INCOME AT RS. 42,790 AND RS. 80,010 RESPECTIVELY. FURTHER, THE COPY OF LEDGER ACCOUNT OF DHARA FACILITY MANAGEMENT PVT. LTD. SUBMITTED DULY SIGNED BY THE DIRECTOR IN WHICH IT HAS BEEN REFLECTED AS SHARE APPLICATION MONEY AMOUNTING TO TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 7 OF 31 RS.1,23,00,000 ON 01.03.2012 . HOWEVER, THE ASSESSEE COMPANY HAS ALLOTTED SHARES ON 31.03.2012 THEREFORE; SAID MONEY SHOULD NOT BE SHARE APPLICATION MONEY. THUS, THERE IS NO VALIDITY OF CONFIRMATION. HENCE, INVESTOR COMPANY FAILED TO FURNISH SOURCE OF FUND INVESTED IN THE ASSESSEE COMPANY. 6. IN THE CASE OF CHETAN KANTILAL SHAH, HUF, THE AO OBSERVED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, COPY OF CONFIRMATION OF LEDGER ACCOUNT, NUMBER OF SHARES PURCHASED, SHARE ALLOTMENT LETTER COPY OF BANK STATEMENT WERE FILED. THE ASSESSEE HAS FURNISHED COPY OF ACKNOWLEDGEMENT OF RETURN SHOWING INCOME OF RS.3,99,180 FOR THE ASSESSMENT YEAR 2012-13. THE COPY OF LEDGER ACCOUNT CONFIRMATION DULY SIGNED BY CHETAN KANTILAL SHAH, HUF, SHOWED RS.17,30,000 ON 01.03.2012 AS SHARE APPLICATION MONEY WHEREAS SHARES WERE ALLOTTED ON 31.03.2012 HENCE, SAID MONEY SHOULD NOT BE SAID AS SHARE APPLICATION MONEY. THUS, THERE IS NO VALIDITY OF CONFIRMATION FILED. HENCE, INVESTOR HAS FAILED TO FURNISH SOURCE OF FUNDS IN THE INVESTOR COMPANY. 7. IN THE CASE OF PRASHANT BARFIWALA; IT WAS NOTICED THAT THE ASSESSEE HAS FURNISHED COPY OF CONTRA OF LEDGER ACCOUNT FOR DETAILS OF SHARE APPLICATION MONEY, DETAILS OF NUMBER OF SHARES TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 8 OF 31 PURCHASED , SHARE ALLOTMENT LETTER COPY OF BANK STATEMENT, COPY OF RETURN OF INCOME ALONG WITH COPY OF FULL AUDIT REPORT WERE FILED. THE INVESTOR COMPANY HAS FAILED TO FURNISH COPY OF BANK ACCOUNT. THE COPY OF RETURN FILED SHOWED THE RETURN OF INCOME AT RS. 2,11,580 FOR THE ASSESSMENT YEAR 2012-13. THE COPY OF LEDGER ACCOUNT CONFIRMATION DULY SIGNED BY THE PROPRIETOR PRASHANT BARFIWALA SHOWED RS.10,00,000 ON 01.03.2012 AS SHARE APPLICATION MONEY WHEREAS SHARES WERE ALLOTTED ON 31.03.2012, HENCE, SAID MONEY SHOULD NOT BE SAID AS SHARE APPLICATION MONEY. THUS, THERE IS VALIDITY OF CONFIRMATION FILED. HENCE, INVESTOR HAS FAILED TO FURNISH SOURCE OF FUNDS IN THE INVESTOR COMPANY. 8. IN THE CASE OF SAIDEEP TRADING PVT. LTD. - THE COPY OF CONFIRMATION OF LEDGER ACCOUNT, SHARE APPLICATION MONEY, SHARE ALLOTMENT LETTER, BANK STATEMENT, COPY OF RETURN WITH AUDIT REPORT WERE FILED. HOWEVER, THE AO NOTED THAT THERE WAS HUGE CASH DEPOSITS IN BANK ACCOUNT OF ICICI AND OUT OF THAT; ACCOUNT TRANSACTION WITH THE ASSESSEE COMPANY HAS BEEN CARRIED OUT. THE AO OBSERVED THAT THE PATTERN OF SHAREHOLDING OF 2,17,000 SHARES ALLOTTED TO SAIDEEP TRADING PVT. LTD. SHOWED THAT IT WAS WRONGLY TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 9 OF 31 BIFURCATED. THEREFORE, THE ASSESSEE COMPANY FAILED TO PROVE THE SOURCE OF SHARE APPLICATION MONEY ALONG WITH PREMIUM RECEIVED. 9. IN THE CASE OF DANVEER INVESTMENT (P) LTD. DETAILS OF COPY OF CONFIRMATION LEDGER ACCOUNT, SHARE APPLICATION MONEY, COPY OF BANK STATEMENT, COPY OF RETURN OF INCOME FILED. THE ASSESSEE COMPANY HAS FURNISHED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012-13 IN WHICH TOTAL INCOME IS DECLARED AT NIL. THE SHARE APPLICATION MONEY AMOUNTING TO RS.25,00,000 REFLECTED ON 01.03.2012 BUT SHARES ALLOTTED ON 31.03.2012 AS PER RESOLUTION PASSED BY BOARD OF DIRECTORS HENCE, THERE IS NOT VALIDITY OF CONFIRMATION FILED BY THE INVESTOR COMPANY HENCE, AND SAME WAS TREATED AS UNEXPLAINED. 10. IN THE CASE OF TVF FINANCE & INVESTMENT PVT. LTD., DETAILS OF CONFIRMATION OF LEDGER ACCOUNT, SHARE APPLICATION MONEY, DETAILS OF NUMBER OF SHARES ALLOTTED BANK STATEMENT; COPY OF RETURN OF INC. WERE FILED. HOWEVER, THE AO OBSERVED THAT INCOME IN THE RETURN HAS BEEN SHOWN AS NIL. THE MANNER IN WHICH TRANSACTION HAS BEEN ROUTED FROM INVESTOR COMPANY SHOWS THAT THESE ARE CARRIED OUT FOR THE BENEFIT OF THE DIRECTORS. THEREFORE, THESE SHARE APPLICATION MONEY WERE TREATED AS UNEXPLAINED. SIMILARLY, INVESTMENT OF TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 10 OF 31 RS.4,95,000 MADE BY THE DIRECTOR SHRI BAJRANG TIBREWALA WAS ALSO TREATED AS UNEXPLAINED. 11. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT (A). HOWEVER, THE CIT (A) OBSERVED THAT NUMBER OF OPPORTUNITY OF BEING HEARD WERE PROVIDED TO THE APPELLANT BUT SAME WERE NOT AVAILED NOR ANY COMPLIANCE IS MADE. THEREFORE, THE APPEAL WAS DECIDED WITHOUT GIVING FURTHER OPPORTUNITIES. THE AO HAS ANALYZED THE BANK ACCOUNT AND FOUND THAT THESE INVESTOR COMPANIES WERE NOT CARRYING OUT ACTUAL BUSINESS ACTIVITY. THE AO ISSUED NOTICE UNDER SECTION 133(6) TO 7 PARTIES, BUT PARTIAL COMPLIANCE WAS MADE. THE APPELLANT DID NOT PRODUCE THE INVESTORS BEFORE THE AO; HENCE, THE APPELLANT HAS FAILED TO DISCHARGE HIS BURDEN OF PROOF. THE CIT (A) OBSERVED THAT THE AO HAS FOUND THAT THE TRAIL OF TRANSACTION FINALLY RESULTING IN RECEIPT OF FUNDS TO THE APPELLANT COMPANY. A HIGH PREMIUM PER SHARE ON A FACE VALUE OF RS.10 HAS BEEN CLAIMED TO HAVE BEEN PAID. THE APPELLANT HAS NOT FURNISHED THE BASIS OF CHARGING OF SHARE PREMIUM DURING THE COURSE OF APPELLATE PROCEEDINGS. IN VIEW OF THESE FACTS AND CIRCUMSTANCES AND AFTER CITING AND DISCUSSING NUMBER OF JUDICIAL PRONOUNCEMENTS IN THE APPELLATE ORDER, THE CIT (A) HAS TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 11 OF 31 CONFIRMED THE FINDINGS OF THE AO AND THE APPEAL OF THE ASSESSEE WAS DISMISSED. 12. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS TAKEN SHARE APPLICATION MONEY FROM SEVEN PARTIES. IT WAS SUBMITTED THAT THE ASSESSEE HAS FILED ALL THE DETAILS OF ALLOTTED SHARES TO SAIDEEP TRADING PVT. LTD. AT RS. 85,000 EQUITY SHARES AND ALSO CLARIFIED THAT THE SHARES OF RS. 1,32,000 PERTAINING TO M/S. SOLIEL TRADING PVT. LTD. WRONGLY CONSIDERED IN THE CASE OF SAIDEEP TRADING PVT. LTD. DUE TO TYPOGRAPHICAL ERROR. THESE DETAILS ARE FILED VIDE LETTER DATED 14.02.2015 PLACED AT PAPER BOOK PAGE NO. 33-34. THE ASSESSEE HAS ALSO FILED COPY OF ITR- V., COMPUTATION OF INCOME, COPY OF AUDITED BALANCE SHEET, PROFIT & LOSS ACCOUNT FOR A.Y. 2011-12 AND BANK STATEMENT OF HDFC IN THE CASE OF SAIDEEP TRADING PVT. LTD. THE ASSESSEE COMPANY FURTHER SUBMITTED DETAILS OF NAME AND ADDRESS , PAN OF THE PARTIES TO WHOM SHARES ISSUED AT PREMIUM, AUDITED ACCOUNTS, BANK STATEMENT, LIST OF DIRECTORS, SHAREHOLDING VIDE LETTER DATED 20.03.2015 (PB- 35-36). THEREFORE, OBSERVATION MADE BY THE AO AT PAGE NO. 31 OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAS NOT FILED DETAILS TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 12 OF 31 ABOUT THESE PARTIES IS INCORRECT; HENCE, THERE IS NO QUESTION TO DOUBT ABOUT THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF TRANSACTION. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THESE DETAILS ARE DULY APPEARING AT PAPER BOOK PAGE NO. 33. IT WAS FURTHER, SUBMITTED THAT THE ASSESSEE HAS FILED DETAILS IN FORM NO. 20B AND FORM NO. 23AC FOR FILING OF ANNUAL RETURN AND BALANCE SHEET WITH OTHER DOCUMENT WITH M. C. A. PORTAL IN RESPECT OF DANVEER INVESTMENT PVT. LTD., T V. FINANCE & INVESTMENT PVT. LTD., SAIDEEP TRADING PVT. LTD. , SOLEIL TRADING PVT. LTD. AND DHARA FACILITY MANAGEMENT PVT. LTD. (PB-37). THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED PARA 3.9 AT PAGE NO. 29 OF ASSESSMENT ORDER, WHEREIN THE AO HAS STATED THAT INQUIRIES WERE GOT CONDUCTED BY ISSUE OF COMMISSION UNDER SECTION 131(D) FROM ADDL. DIT (INV)-1 KOLKATA AND TWO OFFICERS OF HIS RANGE VISITED KOLKATA AND OBTAINED AN REPORT FROM INSPECTOR IS A FACTUALLY INCORRECT FACTS AS ALL THE PARTIES ARE EITHER BASED AT SURAT OR DELHI AND NONE IS BASED AT KOLKATA. THE AO HAS MENTIONED IN PARA 3.8 OF ASSESSMENT ORDER OF THE ISSUE OF SHOW-CAUSE NOTICE ON 16.03.2015, HOWEVER, THERE IS NO MENTION OF ANY INSPECTOR REPORT IN SAID SHOW- CAUSE NOTICE. THUS, THE REPORT OBTAINED FROM INSPECTOR HAS NOT BEEN TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 13 OF 31 SUPPLIED TO THE ASSESSEE. THEREFORE, PLACING RELIANCE ON THE JUDGEMENT OF HON`BLE SUPREME COURT IN THE CASE OF KISHANCHAND CHELLARAM V. CIT [1980] 125 ITR 713(SC); [1980] 4 TAXMAN 29 (SC) CONTENDED THAT UNLESS THE ASSESSEE HAS BEEN CONFRONTED WITH INSPECTOR REPORT, NO ADDITION CAN BE MADE ON THE BASIS OF INSPECTOR REPORT AS THE BURDEN LAY ON THE REVENUE HAS NOT BEEN DISCHARGED. THE ASSESSEE HAS FILED REPLY TO SHOW-CAUSE NOTICE, WHICH HAS BEEN REPRODUCED BY THE AO AT PAGE NO. 26 TO 29 OF ASSESSMENT ORDER. THIS REPLY SHOWS THAT THE ASSESSEE HAS DULY EXPLAINED AND SUBMITTED ALL THE DETAILS OF PAN, AUDITED BALANCE SHEET, BANK STATEMENT OF INVESTOR COMPANIES. FURTHER, IN THE STATEMENT ON OATH RECORDED FROM SHRI BAJRANG TIBREWALA, DIRECTOR OF THE ASSESSEE COMPANY, HE HAS SUBMITTED THE NAME AND ADDRESS, PAN AND TIN OF THE INVESTOR CONCERNS. THUS, THE ALL DETAILS ARE ON RECORD AND THERE IS NO MATERIAL, WHICH INDICATES THAT FUNDS RECEIVED AS SHARE APPLICATION MONEY FROM INVESTORS CAME FROM THE COFFERS OF THE ASSESSEE. THUS, THE ONUS CAST UPON THE ASSESSEE HAS BEEN DISCHARGED. THE AO CARRIED OUT INQUIRIES BY ISSUE OF NOTICE UNDER SECTION 133(6) AND PROPER DETAILS HAVE BEEN FILED. THE LEARNED COUNSEL FOR THE ASSESSEE EXPLAINED THAT CASH DEPOSITS MADE BY THE TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 14 OF 31 INVESTORS IN THEIR ACCOUNTS CAN BE INVESTIGATED INDEPENDENTLY IN THE RESPECTIVE CASES AS THE EXPLANATION TO SECTION 68 IS NOT RETROSPECTIVE AS HELD BY HON`BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. GAGANDEEP INFRASTRUCTURE (P.) LTD. [2017] 394 ITR 680 (BOM) [2017] 247 TAXMAN 245 (BOM), [2017] 80 TAXMANN.COM 272 (BOM) AND PR. CIT V. VEEDHATA TOWER PVT. LTD. 403 ITR 415 (BOM). THE LEARNED COUNSEL FURTHER, PLACING RELIANCE IN THE CASE OF CIT V. KAMDHENU STEEL AND ALLOYS LTD. [2012] 248 CTR (DEL.) 33 / 361 ITR 220 (DELHI) SLP DISMISSED REPORTED CC-15640/2012 DTD. 17.09.2012 SUBMITTED THAT MERE FAILURE OF THE CREDITORS TO RESPOND TO DEPARTMENT`S NOTICES COULD NOT BE A BASIS TO CONCLUDE THAT THE ASSESSEE HAS INVESTED ITS UNDISCLOSED INCOME AND INVOKE THE PROVISIONS OF SECTION 68 AGAINST THE ASSESSEE- AO HAS FAILED TO CARRY HIS SUSPICION TO LOGICAL CONCLUSION BY FURTHER, INVESTIGATION- MORE STEPS WHICH SHOULD HAVE BEEN TAKEN BY THE REVENUE IN ORDER TO FIND OUT CAUSAL CONNECTION BETWEEN CASH DEPOSITS IN THE BANK ACCOUNT OF THE APPLICANT COMPANIES AND THE ASSESSEE WERE NOT TAKEN. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER, RELIED IN THE CASE OF JALAN HARD COKE LTD. [2018] 95 TAXMANN.COM 331 (SC) IN WHICH HEAD NOTE READS AS FOLLOWS: ASSESSING OFFICER REQUIRED TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 15 OF 31 ASSESSEE TO PRODUCE ALL PERSONS/SHARE APPLICANTS FOR EXAMINATION- HOWEVER, ASSESSEE EXPRESS ITS INABILITY AND SUBMITTED THAT SHARE APPLICATION HAD BEEN RECEIVED FROM IDENTIFIABLE PERSONS HAVING CAPACITY AND CREDITWORTHINESS OF MAKING SHARE APPLICATION- NO ADDITION UNDER SECTION 68 SHOULD BE MADE DECISION OF HIGH COURT IN THE CASE OF CIT V. JALAN HARD COKE LTD.[2018] 95 TAXMANN.COM 330 (RAJ) APPROVED THE HIGH COURT IN PARA 5 TOOK NOTE OF ITAT FINDING THAT ALLEGED REPORT OF INSPECTOR OF DEPARTMENT WHO STATED TO HAVE VISITED ADDRESSES OF SHARE APPLICANTS WAS NEVER CONFRONTED TO ASSESSEE. THEREFORE, THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT FACTS ARE IDENTICAL IN THE CASE OF THE ASSESSEE AS ALSO INSPECTORS REPORT DATED 24.03.2015 WAS NEVER CONFRONTED TO THE ASSESSEE. 13. THE LEARNED COUNSEL ALSO PLACED RELIANCE IN THE CASE OF CIT V. LOVELY EXPORTS (P) LTD. [2008] 319 ITR (ST.) 5 (SC) [2008] 216 CTR (SC) / 18 ITJ 717 (SC). CIT V. RANCHHOD JIVABHAI NAKHAVA [2012] 81 CCH 193 GUJ-HC / 21 TAXMANN.COM 159 (GUJARAT), HINDUSTAN INKS & RESINS LTD. V. DCIT [2011] 60 DTR 18, CIT V. UJALA DYEING AND PRINTING MILLS PVT. LTD. 328 ITR 437 (GUJARAT) SLP DISMISSED BY SC IN 317 ITR (ST.)(1) , CIT V. BHAVANA PROPERTY TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 16 OF 31 DEVELOPERS LTD. I.T.A.NO. 1039 OF 2009-(GUJARAT), CIT V. HIMATSU BIMET LTD. [2011] 12 TAXMANN.COM 87 (GUJARAT) , GOYAL SYNTHETIC PVT. LTD. I.T.A.NO. 498 OF 2010 (GUJARAT), CIT CENTRAL-III V. ANSHIKA CONSULTANT (P) LTD. [2015] 93CCH 0016 DELHC / [2015] 62 TAXMANN.COM 192(DELHI), CIT V. ORCHID INDUSTRIES PVT. LTD. [2017] 397 ITR 0136 (BOM)/ (70 ITXA-1433-2014.ODT) (BOM), CIT V. GAGANDEEP INFRASTRUCTURE (P.) LTD. [2017] 394 ITR 680 (BOM) [2017] 247 TAXMAN 245 (BOM), [2017] 80 TAXMANN.COM 272 (BOM) CIT V. KAMDHENU STEEL AND ALLOYS LTD. [2012] 248 CTR (DEL.) 33 / 361 ITR 220 (DELHI) SLP DISMISSED REPORTED CC- 15640/2012 DTD. 17.09.2012 IN SUPPORT OF HIS CONTENTIONS. 14. PER CONTRA , THE LEARNED DEPARTMENTAL REPRESENTATIVE (D.R.) SUPPORTING THE ORDER OF CIT (A) SUBMITTED THAT THE ASSESSEE DID NOT PRODUCE THE INVESTORS BEFORE THE AO NOR PROVIDED LATEST ADDRESS HENCE, FAILED TO DISCHARGE BURDEN OF PROOF. THE INVESTOR COMPANIES HAVE SHOWN VERY MEAGRE INCOME HENCE, CREDITWORTHINESS IS NOT PROVED. THE INVESTOR COMPANYS BANK STATEMENT SHOWED DEPOSITS IN THEIR BANK ACCOUNT BEFORE ISSUE OF CHEQUES. THE SHARES WERE ISSUED ON HIGH PREMIUM AND PARTIES WERE NOT FOUND AT THE GIVEN ADDRESS BY INSPECTOR. THUS, IDENTITY, CREDIT- TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 17 OF 31 WORTHINESS AND GENUINENESS OF TRANSACTION OF INVESTOR COMPANIES/ PARTIES HAS NOT BEEN PROVED BEYOND DOUBT. THE LD. CIT (DR) ALSO PLACED RELIANCE ON THE DECISIONS RELIED BY THE CIT (A) AND IN THE CASE OF CIT V. FOCUS EXPORT PVT. LTD. 111 DTR 12 (DELHI) AND ACIT V. NAKODA FASHION PVT. LTD. I.T.A.NO. 1716/AHD/2012 OF AHMEDABAD TRIBUNAL. THEREFORE, IT WAS CONTENDED THAT THE LOWER AUTHORITIES WERE JUSTIFIED IN TREATING THE SHARE APPLICATION MONEY AS UNDISCLOSED INCOME OF THE ASSESSEE. 15. REPLAYING TO ABOVE, THE LEARNED COUNSEL FOR THE ASSESSEE THE SOURCE OF SOURCE IS NOT REQUIRED TO BE PROVED. THE CASE LAWS RELIED BY THE LEARNED CIT (D.R.) ARE DISTINGUISHABLE ON FACTS. THE DECISION IN THE CASE OF CIT V. FOCUS EXPORT PVT. LTD. (SUPRA) IS NOT APPLICABLE AS IN THAT CASE THE ASSESSEE HAS NOT COOPERATED WITH INQUIRIES AND ASSESSMENT WAS MADE UNDER SECTION 144 OF THE ACT AND DIRECTOR HAS NOT COMPLY WITH THE SUMMONS ISSUED UNDER SECTION 131 OF THE ACT. WHEREAS IN THE INSTANT CASE, THE ASSESSEE HAS FULLY COOPERATED WITH INQUIRIES AND ASSESSMENT HAS BEEN MADE UNDER SECTION 143 (3) OF THE ACT AND DIRECTOR OF THE ASSESSEE COMPANY HAS DULY COMPLIED WITH SUMMONS UNDER SECTION 131 AND HIS STATEMENT ON OATH WAS RECORDED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 18 OF 31 SIMILARLY THE DECISION IN THE CASE OF ACIT V. NAKODA FASHION PVT. LTD. (SUPRA), SHRI JITENDRA JAIN ONE OF THE DIRECTOR OF INVESTOR COMPANY ADMITTED PROVIDING ACCOMMODATION ENTRIES IN HIS STATEMENT UNDER SECTION 131 OF THE ACT, WHEREAS NO SUCH SUMMONS ISSUED UNDER SECTION 131 IN THE CASE OF THE ASSESSEE NOR ANY DIRECTOR OF SUBSCRIBER COMPANY HAS GIVEN ANY STATEMENT ADMITTING OF PROVIDING ACCOMMODATION ENTRIES. THEREFORE, THE CASE LAWS RELIED BY THE LEARNED CIT(D.R.) ARE DISTINGUISHABLE ON FACTS. 16. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ASSESSEE HAS FILED ALL THE DETAILS OF ALLOTTED SHARES TO SAIDEEP TRADING PVT. LTD. AT RS. 85,000 EQUITY SHARES AND ALSO CLARIFIED THAT THE SHARES OF RS. 1,32,000 PERTAINING TO M/S. SOLIEL TRADING PVT. LTD. WRONGLY CONSIDERED IN THE CASE OF SAIDEEP TRADING PVT. LTD. DUE TO TYPOGRAPHICAL ERROR. THESE DETAILS ARE FILED VIDE LETTER DATED 14.02.2015 PLACED AT PAPER BOOK PAGE NO. 33-34. THE ASSESSEE HAS ALSO FILED COPY OF ITR- V., COMPUTATION OF INCOME, COPY OF AUDITED BALANCE SHEET, PROFIT & LOSS ACCOUNT FOR A.Y. 2011-12 AND BANK STATEMENT OF HDFC IN THE CASE OF SAIDEEP TRADING PVT. LTD. THE ASSESSEE COMPANY FURTHER FURNISHED DETAILS OF NAME AND TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 19 OF 31 ADDRESS , PAN OF THE PARTIES TO WHOM SHARES ISSUED AT PREMIUM, AUDITED ACCOUNTS, BANK STATEMENT, LIST OF DIRECTORS, SHAREHOLDING VIDE LETTER DATED 20.03.2015 (PB-35-36). THEREFORE, OBSERVATION MADE BY THE AO AT PAGE NO. 31 OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAS NOT FILED DETAILS ABOUT THESE PARTIES IS INCORRECT, THEREFORE, THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF TRANSACTION IS DULY ESTABLISHED AS THESE DETAILS ARE DULY APPEARING AT PAPER BOOK PAGE NO. 33. WE OBSERVE THAT THE ASSESSEE HAS FILED DETAILS IN FORM NO. 20B AND FORM NO. 23AC FOR FILING OF ANNUAL RETURN AND BALANCE SHEET WITH OTHER DOCUMENT WITH M. C. A. PORTAL IN RESPECT OF DANVEER INVESTMENT PVT. LTD., T V. FINANCE & INVESTMENT PVT. LTD., SAIDEEP TRADING PVT. LTD., SOLEIL TRADING PVT. LTD. AND DHARA FACILITY MANAGEMENT PVT. LTD. (PB-37). THE PERUSAL OF PAGE NO. 29 PARA 3.9 OF ASSESSMENT ORDER SHOWS THAT THE AO HAS STATED THAT INQUIRIES WERE GOT CONDUCTED BY ISSUE OF COMMISSION UNDER SECTION 131(D) FROM ADDL. DIT (INV)-1 KOLKATA AND TWO OFFICERS OF HIS RANGE VISITED KOLKATA AND OBTAINED AN REPORT FROM INSPECTOR IS A FACTUALLY INCORRECT FACTS AS ALL THE ARE EITHER BASED AT SURAT OR DELHI AND NONE IS BASED AT KOLKATA. WE ALSO NOTICE FROM PARA 3.8 OF ASSESSMENT ORDER THAT THE SHOW-CAUSE TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 20 OF 31 NOTICE DTD. 16.03.2015 DOES NOT MENTION OF ANY INSPECTOR REPORT IN THIS SHOW-CAUSE NOTICE. WHEREAS THE AO HAS OBTAINED A REPORT FROM INSPECTOR, WHICH WAS NOT, BEEN SUPPLIED TO THE ASSESSEE. THEREFORE, UNLESS THE ASSESSEE HAS BEEN CONFRONTED WITH INSPECTOR REPORT, NO ADDITION CAN BE MADE ON THAT BASIS INSPECTOR REPORT AS THE BURDEN LAY ON THE REVENUE HAS NOT BEEN DISCHARGED AS LAID DOWN BY HON`BLE SUPREME COURT IN THE CASE OF KISHANCHAND CHELLARAM V. CIT [1980] 125 ITR 713(SC) ; [1980] 4 TAXMAN 29 (SC). THE ASSESSEE HAS FILED REPLY TO SHOW-CAUSE NOTICE, WHICH HAS BEEN REPRODUCED BY THE AO AT PAGE NO. 26 TO 29 OF ASSESSMENT ORDER. THIS REPLY SHOWS THAT THE ASSESSEE HAS DULY FILED ALL THE DETAILS OF PAN, AUDITED BALANCE SHEET, BANK STATEMENT OF INVESTOR COMPANIES IN RESPECT OF ALL SEVEN INVESTOR COMPANIES/ INDIVIDUAL/HUF. FURTHER, IN THE STATEMENT ON OATH RECORDED FROM SHRI BAJRANG TIBREWALA, DIRECTOR OF THE ASSESSEE COMPANY, HE HAS SUBMITTED THE NAME AND ADDRESS, PAN AND TIN OF THE INVESTOR CONCERNS. THUS, THE ALL DETAILS ARE ON RECORD AND THERE IS NO MATERIAL, WHICH INDICATES THAT FUNDS RECEIVED AS SHARE APPLICATION MONEY FROM INVESTORS CAME FROM THE COFFERS OF THE ASSESSEE. THUS, THE ONUS CAST UPON THE ASSESSEE HAS BEEN DULY DISCHARGED. THE AO TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 21 OF 31 CARRIED OUT INQUIRIES BY ISSUE OF NOTICE UNDER SECTION 133(6) AND PROPER DETAILS HAVE BEEN FILED. THE LEARNED COUNSEL FOR THE ASSESSEE EXPLAINED THAT CASH DEPOSITS MADE BY THE INVESTORS IN THEIR ACCOUNTS COULD BE INDEPENDENTLY INVESTIGATED IN THEIR RESPECTIVE CASE, AS THE EXPLANATION TO SECTION 68 IS NOT RETROSPECTIVE. THEREFORE, WE AGREE WITH THE VIEWS OF THE LEARNED COUNSEL FOR THE ASSESSEE. THE CLAIM OF REVENUE THAT PROVISO TO SECTION 68 IS RETROSPECTIVE IN NATURE, WE OBSERVE THAT THE PROVISO IS INTRODUCED WITH EFFECT FROM 1 ST APRIL 2013 AND THEREFORE, THE ONUS TO PROVE THE NATURE AND SOURCE OF SUCH SUM SO CREDITED SHALL BE ON ONLY ON THE ASSESSEE FROM ASSESSMENT YEAR 2013-14 AND NOT PRIOR TO THAT. THIS VIEW IS ALSO FORTIFIED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. GAGANDEEP INFRASTRUCTURE (P.) LTD. [2017] 394 ITR 680 (BOM) [2017] 247 TAXMAN 245 (BOM), [2017] 80 TAXMANN.COM 272 (BOM) RELIED BY THE LEARNED COUNSEL FOR THE ASSESSEE, WHEREIN IT WAS OBSERVED AS: THE PROVISO TO SECTION 68 HAS BEEN INTRODUCED BY THE FINANCE ACT, 2012 WITH EFFECT FROM 1-4-2013. THUS, IT WOULD BE EFFECTIVE ONLY FROM THE ASSESSMENT YEAR 2013-14 ONWARDS AND NOT FOR THE SUBJECT ASSESSMENT YEAR. IN FACT, BEFORE THE TRIBUNAL, TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 22 OF 31 IT WAS NOT EVEN THE CASE OF THE REVENUE THAT SECTION 68 AS IN FORCE DURING THE SUBJECT YEARS HAS TO BE READ/UNDERSTOOD AS THOUGH THE PROVISO ADDED SUBSEQUENTLY EFFECTIVE ONLY FROM 1- 4-2013 WAS ITS NORMAL MEANING. THE PARLIAMENT DID NOT INTRODUCED TO PROVISO OF SECTION 68, WITH RETROSPECTIVE EFFECT NOR DOES THE PROVISO TO INTRODUCED STATES THAT IT WAS INTRODUCED 'FOR REMOVAL OF DOUBTS' OR THAT IT IS 'DECLARATORY'. THEREFORE, IT IS NOT OPEN TO GIVE IT RETROSPECTIVE EFFECT, BY PROCEEDING ON THE BASIS THAT THE ADDITION OF THE PROVISO TO SECTION 68 IS IMMATERIAL AND DOES NOT CHANGE THE INTERPRETATION OF SECTION 68 BOTH BEFORE AND AFTER THE ADDING OF THE PROVISO. IN VIEW OF THE MATTER, THE THREE ESSENTIAL TESTS WHILE CONFIRMING THE SECTION 68 LAID DOWN BY THE COURT NAMELY THE GENUINENESS OF THE TRANSACTION, IDENTITY AND THE CAPACITY OF THE INVESTOR HAVE ALL BEEN EXAMINED BY THE IMPUGNED ORDER OF THE TRIBUNAL AND ON FACT IT WAS FOUND SATISFIED. FURTHER IT WAS A SUBMISSION ON BEHALF OF THE REVENUE THAT SUCH LARGE AMOUNT OF SHARE PREMIUM GIVES RISE TO SUSPICION ON THE GENUINENESS (IDENTITY) OF THE SHAREHOLDERS, I.E., THEY ARE BOGUS. THE APEX COURT IN A CASE IN THIS CONTEXT TO THE PRE-AMENDED SECTION 68 HAS HELD THAT TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 23 OF 31 WHERE THE REVENUE URGES THAT THE AMOUNT OF SHARE APPLICATION MONEY HAS BEEN RECEIVED FROM BOGUS SHAREHOLDERS THEN IT IS FOR THE INCOME-TAX OFFICER TO PROCEED BY REOPENING THE ASSESSMENT OF SUCH SHAREHOLDER AND ASSESSING THEM TO TAX IN ACCORDANCE WITH LAW. IT DOES NOT ENTITLE THE REVENUE TO ADD THE SAME TO THE ASSESSEE'S INCOME AS UNEXPLAINED CASH CREDIT. [PARA 3] 17. THUS, THE PROVISO TO SECTION 68 INTRODUCED BY THE FINANCE ACT, 2012 WITH EFFECT FROM 01-04-2013 WOULD NOT HAVE ANY RETROSPECTIVE EFFECT. THEREFORE, FOLLOWING THE DECISION OF HON`BLE BOMBAY HIGH COURT AS QUOTED ABOVE, WE ARE OF THE VIEW THAT PROVISO TO 68 OF THE ACT IS NOT APPLICABLE FOR THE PRESENT ASSESSMENT YEAR AS IT WOULD BE APPLICABLE FROM A.Y.2013-14. EVEN ON MERIT, THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. GAGANDEEP INFRASTRUCTURE (P.) LTD. (SUPRA) HAS OBSERVED THAT IN VIEW OF THE MATTER THE THREE ESSENTIAL TESTS WHILE CONFIRMING THE SECTION 68 LAID DOWN BY THE COURT NAMELY THE GENUINENESS OF THE TRANSACTION, IDENTITY AND THE CAPACITY OF THE INVESTOR HAVE ALL BEEN EXAMINED BY THE IMPUGNED ORDER OF THE TRIBUNAL AND ON FACT IT WAS FOUND SATISFIED. FURTHER IT WAS A SUBMISSION ON BEHALF OF THE TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 24 OF 31 REVENUE THAT SUCH LARGE AMOUNT OF SHARE PREMIUM GIVES RISE TO SUSPICION ON THE GENUINENESS (IDENTITY) OF THE SHAREHOLDERS, I.E., THEY ARE BOGUS. THE APEX COURT IN A CASE IN THIS CONTEXT TO THE PRE-AMENDED SECTION 68 HAS HELD THAT WHERE THE REVENUE URGES THAT THE AMOUNT OF SHARE APPLICATION MONEY HAS BEEN RECEIVED FROM BOGUS SHAREHOLDERS THEN IT IS FOR THE INCOME-TAX OFFICER TO PROCEED BY REOPENING THE ASSESSMENT OF SUCH SHAREHOLDER AND ASSESSING THEM TO TAX IN ACCORDANCE WITH LAW. IT DOES NOT ENTITLE THE REVENUE TO ADD THE SAME TO THE ASSESSEE'S INCOME AS UNEXPLAINED CASH CREDIT. IN VIEW OF THESE FACTS, WE ARE OF THE VIEW THAT IF THE IDENTITY AND OTHER DETAILS OF SHARE APPLICANT ARE AVAILABLE, THE SHARE APPLICATION MONEY CANNOT BE TREATED AS UNDISCLOSED INCOME IN THE HANDS OF THE COMPANY. IN THE PRESENT CASE, THE ASSESSEE EVEN HAS PROVED THE SOURCE OF SOURCE, THEREFORE, THE CREDITWORTHINESS WAS ALSO PROVED, AND CONSEQUENTLY, NO ADDITION CAN BE MADE UNDER SECTION 68 OF THE ACT. 18. THE LEARNED COUNSEL FURTHER, PLACING RELIANCE IN THE CASE OF CASE OF JALAN HARD COKE LTD. [2018] 95 TAXMANN.COM 331 (SC) IN WHICH HEAD NOTE IS AS- ASSESSING OFFICER REQUIRED ASSESSEE TO PRODUCE ALL PERSONS/SHARE APPLICANTS FOR EXAMINATION- HOWEVER, TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 25 OF 31 ASSESSEE EXPRESS ITS INABILITY AND SUBMITTED THAT SHARE APPLICATION HAD BEEN RECEIVED FROM IDENTIFIABLE PERSONS HAVING CAPACITY AND CREDITWORTHINESS OF MAKING SHARE APPLICATION- NO ADDITION UNDER SECTION 68 SHOULD BE MADE DECISION OF HIGH COURT IN THE CASE OF CIT V. JALAN HARD COKE LTD.[2018] 95 TAXMANN.COM 330 (RAJ) APPROVED-THE HIGH COURT IN PARA 5 TOOK NOTE OF ITAT FINDING THAT ALLEGED REPORT OF INSPECTOR OF DEPARTMENT WHO STATED TO HAVE VISITED ADDRESSES OF SHARE APPLICANTS WAS NEVER CONFRONTED TO ASSESSEE. THEREFORE, THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT FACTS ARE IDENTICAL IN THE CASE OF THE ASSESSEE AS ALSO INSPECTORS REPORT DATED 24.03.2015 WAS NEVER CONFRONTED TO THE ASSESSEE. HENCE, NO ADDITION CAN BE MADE ON THIS ACCOUNT. 19. WE FURTHER FIND SUPPORT FROM DECISION OF THE HON`BLE SUPREME COURT IN THE CASE OF CIT V. LOVELY EXPORTS (P) LTD. [2008] 319 ITR (ST.) 5 (SC) [2008] 216 CTR (SC) / 18 ITJ 717 (SC) WHICH CLEARLY COMES TO RESCUE OF THE ASSESSEE, THE RELEVANT PORTION IS REPRODUCED AS UNDER: SHARE APPLICATION MONEYS RECEIVED BY THE COMPANY 11-01-2008- THEIR LORDSHIPS S.H. KAPADIA AND B. SUDERSHAN REDDY JJ DISMISSED THE DEPARTMENT`S SPECIAL LEAVE PETITION AGAINST THE JUDGEMENT DATED NOVEMBER 16, 2006 OF THE TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 26 OF 31 DELHI HIGH COURT IN I.T.A. NO. 953 OF 2006 REPORTED IN 299 ITR 268 (DELHI) WHEREBY THE HIGH COURT AFFIRMED THE DELETION BY THE TRIBUNAL OF ADDITIONS MADE ON ACCOUNT OF SUMS RECEIVED FROM DIRECTORS OF PROMOTERS AND ALSO BY WAY OF PUBLIC ISSUE. THE COURT WHILE DISMISSING THE SPECIAL LEAVE PETITION HELD AS FOLLOWS: 2. CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME UNDER SECTION 68 OF IT ACT, 1961? WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT, IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT. 20. IF THE ABOVE CONCLUSION DRAWN BY THE HON`BLE APEX COURT IS KEPT IN JUXTAPOSITION WITH THE FACTS OF THE CASE PRESENT APPEAL, IT CAN BE SAID THAT THE IDENTITY OF SHARE APPLICANTS WAS PROVED. IN VIEW OF THESE FACTS, IT CAN BE SAID THAT IF THE DEPARTMENT STILL FINDS SUCH APPLICANTS TO BE BOGUS, THEY ARE FREE TO REOPEN THEIR INDIVIDUAL ASSESSMENTS BUT CERTAIN NO ADDITION CAN BE MADE UNDER SECTION 68 OF THE ACT IN THE HANDS OF THE ASSESSEE COMPANY. TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 27 OF 31 21. WITH REGARD TO CREDITWORTHINESS OF THE SUBSCRIBER COMPANIES, WE FIND THAT THE ASSESSEE COMPANY HAS FILED BANK STATEMENT, FINANCIAL ACCOUNTS, CONFIRMATION LETTERS OF THE SUBSCRIBER COMPANIES, WHICH SHOW THAT AMOUNT OF INVESTMENT AS SHARE APPLICATION MONEY WITH THE ASSESSEE COMPANY HAS BEEN MADE BY ACCOUNT PAYEE CHEQUE AND THROUGH BANKING CHANNEL. THE SOURCE OF THE INVESTMENT IS ALSO FROM SHARE CAPITAL AND SHARE PREMIUM REFLECTED IN THEIR BALANCE SHEETS AND BANK BALANCES REFLECTED IN THEIR BANK ACCOUNTS. THE AO HAS NOT PRODUCE ANYTHING ON RECORD TO SHOW THAT THE SHARE APPLICATION MONEY WAS TAINTED MONEY OF THE ASSESSEE COMPANY, WHICH WAS ROUTED THROUGH THE SUBSCRIBER COMPANIES. THE HONOURABLE JURISDICTIONAL HIGH COURT OF GUJARAT IN THE CASE OF HINDUSTAN INKS & RESINS LTD. V. DCIT [2011] 60 DTR 18 (GUJARAT) IN WHICH REFERRING TO THE DECISION OF THE SUPREME COURT IN CASE OF CIT V. LOVELY EXPORTS (P.) LTD. [APPLICATION NO. 11993 OF 2007, DATED 11-1-2008] OBSERVED THAT WHEN THE COURT FOUND THAT THE INVESTORS WERE NOT EVEN FOUND TO BE BOGUS, OBSERVED THAT IN ANY CASE, NO ADDITION CAN BE MADE IN HANDS OF THE COMPANY. 22. THE LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO RELIED ON THE LATEST DECISION OF HON`BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 28 OF 31 ORCHID INDUSTRIES PVT. LTD. [2017] 397 ITR 0136 (BOM)/ (70 ITXA- 1433-2014.ODT) (BOM) WHEREIN HON`BLE HIGH COURT HAS OBSERVED AS UNDER: THAT THE TRIBUNAL HAS CONSIDERED THAT THE ASSESSEE HAS PRODUCED ON RECORD THE DOCUMENTS TO ESTABLISH THE GENUINENESS OF THE PARTY SUCH AS PAN OF ALL THE CREDITORS ALONG WITH CONFIRMATION, THEIR BANK STATEMENTS SHOWING PAYMENT OF SHARE APPLICATION MONEY. IT WAS ALSO OBSERVED BY THE TRIBUNAL THAT THE ASSESSEE HAS ALSO PRODUCED THE ENTIRE RECORD REGARDING ISSUANCE OF SHARES I.E. ALLOTMENT LETTERS AND SHARE CERTIFICATES, SO ALSO THE BOOKS OF ACCOUNT. THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT OF THESE PERSON HAD SUFFICIENT DISCLOSES THAT THESE PERSONS HAD SUFFICIENT FUNDS IN THEIR ACCOUNTS FOR INVESTING IN THE SHARES OF THE ASSESSEE. IN VIEW OF THESE VOLUMINOUS DOCUMENTARY EVIDENCE, ONLY BECAUSE THOSE PERSON HAD NOT APPEARED BEFORE THE ASSESSING OFFICER WOULD NOT NEGATE THE CASE OF THE ASSESSEE. THE JUDGEMENT IN THE CASE OF GAGANDEEP INFRASTRUCTURE (P) LTD. (SUPRA) WOULD BE APPLICABLE IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. 23. IF THE TOTALITY OF FACTS AND THE JUDICIAL PRONOUNCEMENTS AS DISCUSSED HEREINABOVE, ARE ANALYZED, WE ARE OF THE CONSIDERED OPINION THAT THE ONUS CASTE UPON THE ASSESSEE, AS PROVIDED UNDER SECTION 68 OF THE ACT, HAS BEEN DULY DISCHARGED BY THE ASSESSEE TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 29 OF 31 AS THE IDENTITY OF THE SHARE SUBSCRIBERS, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION IS NOT IN DOUBT OR IT CAN BE SAID THAT THE SAME HAS BEEN PROVED/EXPLAINED BY THE ASSESSEE. NOW, THE ONUS HAS REVERTED UPON THE REVENUE TO PROVE OTHERWISE. THE LD.AO MERELY MADE ADDITION IGNORING THE DOCUMENTARY EVIDENCE IN THE FORM OF COPY OF AUDIT REPORT, BALANCE SHEET AND RETURN AND BANK STATEMENT, CONFIRMATION LETTERS, COPY OF LEDGER ACCOUNT, COPY OF RETURN OF INCOME OF INVESTOR COMPANIES/ INDIVIDUALS/ HUF WERE DULY FILED WITH PAN ADMITTING INVESTMENT. THE REVENUE HAS NOWHERE PROVED THAT THE ASSESSEE DOES ANY MALAFIDE. FAILURE TO DO SO, VITIATE THE ADDITION MADE UNDER THE PRESENT SET OF FACTS. THE SATISFACTION HAS TO BE DERIVED FROM THE RELEVANT FACTS AND THAT TO ON THE BASIS OF PROPER ENQUIRY BY THE ASSESSING OFFICER AND SUCH ENQUIRY MUST BE REASONABLE AND JUST. IN THE PRESENT CASE, THE AO HAS NOT BROUGHT ON RECORD ANY EVIDENCE IN RESPECT OF 7 PARTIES TO PROVE THAT THE AMOUNT RECEIVED IS MERELY ACCOMMODATION ENTRIES. WHEREAS THE ASSESSEE HAS FILED ACKNOWLEDGEMENT OF RETURN OF INCOME OF SHARE APPLICANT, BANK STATEMENT OF SHARE APPLICANT, SHARE APPLICATION FORM, BOARD RESOLUTION OF BOARD MEETING, MOA AND AOA OF THE COMPANY. IN VIEW OF THESE FACTS ABOVE ALSO HELD TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 30 OF 31 WHERE THE ASSESSEE HAS PRODUCED ON RECORD THE DOCUMENTS TO ESTABLISH THE GENUINENESS OF THE PARTY SUCH AS PAN OF ALL THE CREDITORS ALONG WITH CONFIRMATION, THEIR BANK STATEMENTS SHOWING PAYMENT OF SHARE APPLICATION MONEY. THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT OF THESE PERSON HAD SUFFICIENT DISCLOSES THAT THESE PERSONS HAD SUFFICIENT FUNDS IN THEIR ACCOUNTS FOR INVESTING IN THE SHARES OF THE ASSESSEE. IN VIEW OF THIS VOLUMINOUS DOCUMENTARY EVIDENCE, ONLY BECAUSE THOSE PERSON HAD NOT APPEARED BEFORE THE ASSESSING OFFICER WOULD NOT NEGATE THE CASE OF THE ASSESSEE. 24. IN VIEW OF ABOVE DISCUSSION, AND REVERTING TO FACTS OF THIS CASE, WE OBSERVE THE ASSESSEE COMPANY HAVING RECEIVED SHARE APPLICATION MONEY THROUGH BANKING CHANNEL AND FURNISHED COMPLETE DETAILS OF BANK STATEMENTS, COPY OF ACKNOWLEDGEMENT OF THE RETURNS FILED BY SUBSCRIBER COMPANIES WHO ARE BEING ASSESSED TO TAX, COPY OF PAN, CONFIRMATION, AUDIT REPORT, BALANCE SHEET RELATING INVESTMENT IN SHARE CAPITAL, COPY OF ACCOUNTS AND COMPLIED WITH NOTICES ISSUED, THEREFORE, IDENTITY, CREDIT-WORTHINESS AND GENUINENESS OF TRANSACTION HAS BEEN PROVED IN THE LIGHT OF RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT AND OTHER HON`BLE HIGH COURT AS WELL AS HON`BLE SUPREME COURT AS DISCUSSED ABOVE. TIRUPATI ENERGY SOLUTION PVT. LTD. V. ITO 2(1) (4) SURAT/I.T.A. NO.573/AHD/2017/A.Y.:12-13 PAGE 31 OF 31 THEREFORE, RESPECTFULLY FOLLOWING RATIO LAID DOWN IN VARIOUS DECISIONS AND FACTS OF THE CASE NO ADDITION CAN BE MADE UNDER SECTION 68 OF THE ACT. ACCORDINGLY, WE SET-ASIDE THE ORDER OF AUTHORITIES BELOW AND THE ADDITION OF RS.4,07,25,000 MADE ON ACCOUNT OF SHARE APPLICATION MONEY AND SHARE PREMIUM BY THE AO DIRECTED TO BE DELETED. ACCORDINGLY, GROUND NO. 2 & 3 OF APPEAL OF THE ASSESSEE ARE ALLOWED. 25. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 26. ORDER PRONOUNCED IN THE OPEN COURT ON 16.10.2018. SD/- SD/- ( . . /C.M. GARG) ( . . /O.P.MEENA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER SURAT DATED: 16 OCTOBER 2018/ OPM / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( - THE CIT(A), 4. PR. CIT 5. , , / DR, ITAT, SURAT; 6. - GUARD FILE. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT