Bidit Financial Management Pvt. Ltd., Kolkata V. DCIT, Circle-7(1), Kolkata, Kolkata

ITA 579/KOL/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1332 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 24-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH MUKHERJEE
• Assessee Lawyers: MIRAJ D. SHAH
• Keywords: Unexplained cash credit; Unexplained investment; Sale consideration of property below Jantri Value; Gift; Share purchase agreement; Earning of tax free income; Source of fund; Retrospective amendment; Question of law; Accommodation entries; Rule 8D; Set aside
• Section: 271(1)(c); 143(3); 14A; 260A; 133(6); 195; 147; 131; 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C, BENC H KOLKATA BEFORE SHRI A.T.VARKEY, JM &DR. A.L.SAINI, AM ./ITA NO.579/KOL/2017 ( / ASSESSMENT YEAR:2012-13) BIDIT FINANCIAL MANAGEMENT PVT. LTD. C/O, D.J. SHAH & CO. KALYAN BHAWAN, 2, ELGIN ROAD, KOLKATA-700020. VS. DCIT, CIRCLE-7(1), KOLKATA P-7, CHOWRINGHEE SQUARE, KOLKATA- 700069. ./ ./PAN/GIR NO.: AADCB 3619 C (ASSESSEE) .. (REVENUE) ASSESSEE BY : SHRI MIRAJ D SHAH, AR RESPONDENT BY : SHRI SAURABH MUKHERJEE, ADDL. CIT DR / DATE OF HEARING : 18/12/2019 /DATE OF PRONOUNCEMENT : 15/03/2019 / O R D E R PER DR. A. L. SAINI: THE CAPTIONED APPEAL FILED BY THE ASSESSEE,PERTAINI NG TO ASSESSMENT YEAR 2012-13, IS DIRECTED AGAINST AN ORDER PASSED BY T HE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-16, KOLKATA (IN SHORT THE LD. CIT(A)], WHICH IN TURN ARISES OUT OF AN ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) DATED 30 .03.2015. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS FOLLOWS: BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 2 22 2 I) FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE APPELLATE ORDER PASSED WAS IN VIOLATION OF PRINCIPALS OF NATU RAL JUSTICE HENCE IS BAD IN LAW AND BE QUASHED. II) FOR THAT IN THE FACTS AND CIRCUMSTANCES,THE LD. COM MISSIONER OF INCOME TAX(APPEALS)ERRED IN UPHOLDING THE ADDITION OF RS. 1,95,00,000/- ON ACCOUNT OF SHARE APPLICATION MONEY BEING ADDED AS CASH CREDIT U/S 68 OF THE I T ACT, 1961. THE ADDITI ON IS NOT CALLED FOR AND HENCE THE SAME BE DELETED. III) FOR THAT IN THE FACTS AND CIRCUMSTANCES THE LD. COM MISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE DISALLO WANCE OF RS. 75,193/- U/S 14A OF THE I T ACT, 1961. THE DISALLO WANCE IS NOT CALLED FOR AND HENCE THE SAME BE REVERSED. IV) THE ASSESSEE CRAVES LEAVE TO PRODUCE ADDITIONAL EVI DENCES IN TERMS OF RULE 29 OF THE INCOME TAX (APPELLATE TRIBUNAL) R ULES, 1963. V) FOR THAT THE INTEREST COMPUTED U/S 234A/B/C/D OF T HE I T ACT, 1961 IS OVER CHARGED AND WRONGLY CALCULATED AND OR IS NO T APPLICABLE TO THE ASSESSEE CASE IT BE DIRECTED TO RE-COMPUTE THE INTEREST AS PER LAW. VI) THE ASSESSEE CRAVES LEAVE TO PRESS NEW, ADDITIONAL GROUNDS OF APPEAL OR MODIFY, WITHDRAW ANY OF THE ABOVE GROUNDS AT THE TIME OF HEARING OF THE APPEAL. 3. THE GROUND NOS. 1 AND 2 RAISED BY THE ASSESSEE R ELATE TO ADDITION OF RS. 1,95,00,000/- ON ACCOUNT OF SHARE APPLICATION MONEY BEING ADDED AS CASH CREDIT U/S 68 OF THE INCOME TAX ACT, 1961. 4. THE BRIEF FACTS QUA THE ISSUE ARE THAT DURING TH E ASSESSMENT YEAR 2012-13, ASSESSEE(M/S BIDIT FINANCIAL MANAGEMENT PVT. LTD.) ISSUED 97500 SHARES HAVING FACE VALUE OF RS. 10/- EACH WITH A PREMIUM OF RS. 1 90 TO VARIOUS ALLOTTEES, AS MENTIONED BELOW: SL. NO. DATE OF ALLOTMENT NAME & ADDRESS OF APPLICANT NO. OF SHARES NOMINAL AMOUNT PER SHARE PREMIUM AMOUNT PER SHARE 1. 31.03.2012 C.G. SECURITIES PVT. LTD. 25000 10.00 190.00 2. 31.03.2012 WATERLINK ENCLAVE PVT. LTD. 10000 10. 00 190.00 BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 3 33 3 3. 31.03.2012 LINKUP INFRASTRUCTURE PVT. LTD. 1500 0 10.00 190.00 4. 31.03.2012 DHANVARTITRAFIN PVT. LTD. 20000 10.0 0 190.00 5. 31.03.2012 ORTEM ESTATES PVT. LTD. 10000 10.00 190.00 6. 31.03.2012 AGARANI CREDIT &FINVEST PVT. LTD. 17500 10.00 190.00 DURING THE ASSESSMENT PROCEEDINGS ONE DEPARTMENTAL INSPECTOR WAS DEPUTED BY THE ASSESSING OFFICER TO VERIFY THE ABOVE MENTIONED REG ISTERED OFFICES OF THE SHARE ALLOTTEES AS PER THE LATEST ADDRESS AVAILABLE IN MC A(ROC) SITE. BUT THE INSPECTOR REPORTED TO THE ASSESSING OFFICER THAT THESE COMPAN IES ARE NEITHER TRACEABLE NOR THEIR CREDENTIALS WERE ASCERTAINABLE FROM THE NEIGH BOR INDIVIDUALS/ CONCERNS. THE INSPECTOR ALSO REPORTED THAT THE DIRECTORS RESIDEN TIAL ADDRESSES OF THESE COMPANIES ARE NOT ALSO TRACEABLE EITHER DUE IMPROPER ADDRESSE S OR NOT READILY AVAILABLE AT THESE ADDRESSES. THEREFORE, ASSESSING OFFICER ISSUE D SUMMON U/S 131 OF THE ACT TO THE PRINCIPAL OFFICER OF M/S BIDIT FINANCIAL MANAG EMENT PVT. LTD. ON 16.03.2015 ASKING HIM TO PRODUCE ALL THE SHARE ALLOTTEESS BEFO RE HIM. IN RESPONSE TO THE SAID SUMMON, U/S 131 OF THE ACT, THERE WAS PARTIAL COMPLIANCE ON THE PART OF THE ASSESSEE COMPANY. THE ASSESSEE C OMPANYFURNISHED THE SOURCE OF FUNDING OF SUCH SHARE CAPITAL RAISED/SHARE PREMI UM RECEIVED. HOWEVER, THE ASSESSING OFFICER NOTED THAT THE CONTENTION OF THE ASSESSEE WAS SUPPORTED BY FEW DOCUMENTARY EVIDENCES WHICH WERE PERUSED AND EXAMIN ED AND AO FURTHER NOTED THAT THE ASSESSEE WAS NOT ABLE TO PROVE THE GENUINE NESS OF THE TRANSACTION. THEREFORE, AFTER CONSIDERING THE ENTIRE FACTS AND C IRCUMSTANCES, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS FAILED TO COMPL Y THE CONDITIONS MENTIONED U/S 68,VIZ. IDENTITY OF THE PERSONS, CREDITWORTHINESS A ND GENUINENESS OF THE TRANSACTIONS, THEREFORE HE MADE THE ADDITION TO TH E TUNE OF RS. 1,95,00,000/-. 5. AGGRIEVED BY THE STAND SO TAKEN BY THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS REITERATED THE FINDINGS OF THE ASSESSING OFFICER AND CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. AGGRIEVED, THE ASSESSEE IS IN AP PEAL BEFORE US. BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 4 44 4 6. THE LD. DR APPEARING ON BEHALF OF THE REVENUE S TATED BEFORE US THAT DURING THE ASSESSMENT PROCEEDINGS ONE DEPARTMENTAL INSPECTOR W AS DEPUTED BY THE ASSESSING OFFICER TO VERIFY THE ABOVE MENTIONED REGISTERED OF FICES OF THE SHARE ALLOTTEES AS PER THE LATEST ADDRESS AVAILABLE IN MCA(ROC) SITE. BUT THE INSPECTOR REPORTED TO THE ASSESSING OFFICER THAT THESE COMPANIES ARE NEITHER TRACEABLE NOR THEIR CREDENTIALS WERE ASCERTAINABLE FROM THE NEIGHBOR INDIVIDUALS/ C ONCERNS THEREFORE IDENTITY OF THESE SHARE SUBSCRIBING COMPANIES HAVE NOT BEEN PRO VED. HENCE ADDITION MADE BY AO MUST BE SUSTAINED. THE ORDER OF THE LD. CIT(A) I S ALSO BASED ON LOGICAL CONCLUSION THEREFORE HIS ORDER SHOULD BE CONFIRMED. THE LD. DR ARGUED THAT MERE DOCUMENTARY EVIDENCES WERE NOT SUFFICIENT TO DISCHA RGE THE GENUINENESS OF THE TRANSACTIONS AND THAT THE PERSONAL APPEARANCE OF DI RECTORS OF SHARE APPLICANTS WAS INDEED A PRE-REQUISITE TO ASCERTAIN WHETHER THE THR EE INGREDIENTS PRESCRIBED IN SECTION 68 STOOD SATISFIED. THE LD. DR THEREAFTER T OOK US THROUGH THE RELEVANT DOCUMENTS FURNISHED BY THE ASSESSEE COMPANY IN THEI R PAPER BOOK. WITH REGARD TO THE IDENTITY OF THE SHARE SUBSCRIBERS, LD DR SUBMIT TED THAT ALL THE SHARE APPLICANTS WERE PAPER COMPANIES THEREFORE, ADDITION MADE BY AS SESSING OFFICER SHOULD BE SUSTAINED. 7. ON THE OTHER HAND, LD COUNSEL FOR THE ASSESSEE R EITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD, WE NOTE THAT ACCORDING TO SECTION 68 OF THE INCOME TAX ACT, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAIN ED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT SATISFACTORY IN T HE OPINION OF THE ASSESSING OFFICER, THE SUM SO CREDITED MAY BE CHARGED TO INCO ME TAX AS THE INCOME OF THE ASSESSEE OF THAT ASSESSMENT YEAR. THE ASSESSING OFF ICER MAY CONSIDER SUCH SUM AS CASH CREDIT DUE TO LACK OF SUFFICIENT EXPLANATION.I T IS WELL KNOWN THAT PROVISIONS OF SECTION 68 HAVE BEEN INTRODUCED INTO THE TAXING ENA CTMENTS STEP BY STEP IN ORDER TO PLUG LOOPHOLES. EVEN LONG PRIOR TO THE INTRODUCTION OF SECTION 68 OF THE ACT, IN THE BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 5 55 5 STATUTE BOOK, COURTS HAD HELD THAT WHERE ANY AMOUNT S WERE FOUND CREDITED IN THE BOOKS OF THE ASSESSEE IN THE PREVIOUS YEAR AND THE ASSESSEE OFFERED NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANAT ION OFFERED WAS, IN THE OPINION OF THE ASSESSING OFFICER, IS NOT SATISFACTORY, THE SUMS SO CREDITED COULD BE CHARGED TO INCOME-TAX AS INCOME OF THE ASSESSEE OF THE RELE VANT ASSESSMENT YEAR. WE NOTE THAT WITH EFFECT FROM ASSESSMENT YEAR 2013-14, SECT ION 68 OF THE INCOME TAX ACT HAS BEEN AMENDED TO PROVIDE THAT IF A CLOSELY HELD COMPANY FAILS TO EXPLAIN THE SOURCE OF SHARE CAPITAL, SHARE PREMIUM OR SHARE APP LICATION MONEY RECEIVED BY IT TO THE SATISFACTION OF THE ASSESSING OFFICER, THE S AME SHALL BE DEEMED TO BE THE INCOME OF THE COMPANY UNDER SECTION 68 OF THE ACT. WE NOTE THAT THE AMENDED PROVISIONS OF SECTION 68, IS NOT APPLICABLE TO THE ASSESSEE COMPANY UNDER CONSIDERATION, AS THE ASSESSEE`S, ASSESSMENT YEAR I S 2012-13. THE HON`BLE BOMBAY HIGH COURT, IN THE CASE OF GAGANDEEP INFRASTRUCTUR E 80TAXMANN.COM272 (BOM), HELD THAT AMENDMENT TO SECTION 68 IS PROSPECTIVE AN D APPLICABLE ONLY FROM ASSESSMENT YEAR 2013-14. WITH THIS BACKGROUND, NOW WE SHALL PROCEED TO EXAMI NE IN THE ASSESSEE`S CASE UNDER CONSIDERATION, WHETHER ASSESSEE HAS DISCHARGE D HIS ONUS TOPROVE, PRIMA FACIE, THE IDENTITY, CREDITWORTHINESS AND GENUINENE SS OF THE SHARE CAPITAL AND SHARE PREMIUM RECEIVED BY IT FROM SHARE SUBSCRIBERS COMP ANIES. 9. WE NOTE THAT THE ASSESSEE COMPANY HAD RAISED SHA RE APPLICATION MONEY FOR RS. 1,95,00,000/- DURING THE YEAR UNDER CONSIDERATION. THIS CAPITAL WAS RAISED BY WAY OF ISSUE OF 97,500 SHARES OF RS. 10/- AT A PREMIUM OF RS. 190/- PER SHARE. THE LD. ASSESSING OFFICER DISALLOWED THE ENTIRE SHARES APPL ICATION MONEY RECEIVED FROM THE SHARE APPLICANTS DURING THE YEAR UNDER CONSIDER ATION ON THE GROUND THAT DIRECTORS OF SHAREHOLDER COMPANIES FAILED TO APPEAR BEFORE HIM. THESE SHARES WERE ISSUED TO THE FOLLOWING SHAREHOLDERS: BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 6 66 6 WE NOTE THAT ALL SHAREHOLDERS HAD SUBMITTED ALL THE RELEVANT DETAILS AS CALLED FOR AND HAD CONFIRMED THE TRANSACTIONS WITH THE ASSESSE E. THE EVIDENCES WHICH WERE FILED BEFORE THE ASSESSING OFFICER INCLUDED THE FOL LOWING DETAILS: (A) INCOME TAX RETURN OF THE SHARE HOLDERS (B) CERTIFICATE OF INCORPORATION .(C) AUDITED ACCOUNTS OF THE SHARE HOLDERS (D) SHARE APPLICATION FORMS (E) SHARE ALLOTMENT LETTERS (F) COPY OF THE BANK ACCOUNT OF THE SHARE HOLDERS (G) TRANSACTION WITH THE ASSESSEE WAS DULY HIGHLIGH TED IN THE BANK STATEMENT (H) COPY OF ASSESSMENT ORDERS OF THE SHAREHOLDERS (I) EVIDENCES OF SOURCE OF SOURCE OF THE SHARE HOL DERS J) COPY OF FORM 18 (ADDRESS PROOF) BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 7 77 7 ALL THESE EVIDENCES ARE AVAILABLE IN THE PAPER BOOK FROM PAGES 151-364 OF THE PAPER BOOK, WHICH WERE SUBMITTED BEFORE THE ASSESSI NG OFFICER. 10.BEFORE ADDRESSING THE LEGAL ISSUE INVOLVED IN TH IS CASE, WE WOULD LIKE TO BRING ON RECORD THE VARIOUS DOCUMENTS RELATING TO THE SUB SCRIBERS WHICH ARE AVAILABLE IN THE PAPER BOOK. (A) C. G. SECURITIES PRIVATE LIMITED : THIS COMPANY INVESTED A SUM OF RS.50,00,000/- IN THE ASSESSEE COMPANY. THE SHARE A PPLICATION WAS MADE BY ACCOUNT PAYEE CHEQUE. THIS COMPANY WAS INCORPORATED ON 07/11/1994 AND WAS HAVING COMPANY IDENTIFICATION NUMBER U67120WB1994PT C065765. THIS COMPANY DULY FILED ITS RETURN OF INCOME BEFORE THE ITO WARD 6(1), KOLKATA AND WAS HAVING PAN: AABCC0181E. THIS COMPANY WAS HAVING A PAID UP CAPITAL WITH FREE RESERVES AND SURPLUS OF RS.86,71,23,092/-AS ON 31/03/2012 AND RS.1,47,32,020/- AS ON 31/03/2011 RESPECTIVELY. THE COPY OF THE BANK STATEMENT OF THE COMPANY IS DULY AVAILABLE IN THE PAPER BOOK. ON EXAMINATION OF THE BANK STATEMENT IT WILL BE SEEN THAT THERE IS NO DEPOSIT OF CASH. THE COPY OF THE ASSESSMENT ORDER U/S 143(3) FOR AY 2012-13 IS AVAIL ABLE IN THE PAPER BOOK. THE DETAILS OF SOURCE OF FUNDS FROM WHICH THIS COMPANY HAD MADE THE SHARE APPLICATION ARE ALSO AVAILABLE IN THE PAPER BOOK. ALL THE RELEV ANT DOCUMENTS FOR THIS COMPANY ARE AVAILABLE ON PAGES 151-195 OF THE PAPER BOOK. (B). WATERLINK ENCLAVE PRIVATE LIMITED : THIS COMPANY INVESTED A SUM OF RS.20,00,000/- IN THE ASSESSEE COMPANY. THE SHARE A PPLICATION WAS MADE BY ACCOUNT PAYEE CHEQUE. THIS COMPANY WAS INCORPORATED ON 20/01/2012 AND WAS HAVING COMPANY IDENTIFICATION NUMBER U70109WB2012PT C172607. THIS COMPANY DULY FILED ITS RETURN OF INCOME BEFORE ITO WARD 6(4), KOLKATA AND WAS HAVING PAN: AABCW1888Q. THIS COMPANY WAS HAVING A P AID UP CAPITAL WITH FREE RESERVES AND SURPLUS OF RS.7,28,00,925/- AS ON 31/03/2012. THE COPY OF THE BANK STATEMENT OF THE COMPANY IS DULY AVAILABLE IN THE PAPER BOOK. ON EXAMINATION OF THE BANK STATEMENT IT WILL BE SEEN T HAT THERE IS NO DEPOSIT OF CASH. BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 8 88 8 THE COPY OF THE ASSESSMENT ORDER U/S.143(3) FOR AY 2012-13 IS AVAILABLE IN THE PAPER BOOK. THE DETAILS OF SOURCE OF FUNDS FROM WHI CH THIS COMPANY HAD MADE THE SHARE APPLICATION ARE ALSO AVAILABLE IN THE PAPER B OOK. ALL THE RELEVANT DOCUMENTS FOR THIS COMPANY ARE AVAILABLE ON PAGES 196-226 OF THE PAPER BOOK. C). LINKUP INFRASTRUCTURE PRIVATE LIMITED : THIS COMPANY INVESTED A SUM OF RS.30,00,000/- IN THE ASSESSEE COMPANY. THE SHARE A PPLICATION WAS MADE BY ACCOUNT PAYEE CHEQUE. THIS COMPANY WAS INCORPORATED ON 20/05/2011 AND WAS HAVING COMPANY IDENTIFICATION NUMBER U7012011PTC162 831. THIS COMPANY DULY FILED ITS RETURN OF INCOME BEFORE ITO, WARD- 6(2), KOLKATA AND WAS HAVING PAN: AACCL0197N. THIS COMPANY WAS HAVING A PAID UP CAPIT AL WITH FREE RESERVES AND SURPLUS OF RS. 28,21,00,841/- AS ON 31/03/2012. THE COPY OF THE BANK STATEMENT OF COMPANY IS DULY AVAILABLE IN THE PAPER BOOK. ON EXA MINATION OF THE BANKSTATEMENTIT WILL BE SEEN THAT THERE IS NO DEPOS IT OF CASH. THE COPY OF THE ASSESSMENT ORDER U/S.144/143(3) FOR AY 2012-13 IS A VAILABLE IN THE PAPER BOOK. THE DETAILS OF SOURCE OF FUNDS FROM WHICH THIS COMP ANY HAD MADE THE SHARE APPLICATION ARE ALSO AVAILABLE IN THE PAPER BOOK. A LL THE RELEVANT DOCUMENTS FOR THIS COMPANY ARE AVAILABLE ON PAGES 227-256 OF THE PAPER BOOK. (D). DHANVANTRITRAFIN PRIVATE LIMITED : THIS COMPANY INVESTED A SUM OF RS.40,00,000/- IN THE ASSESSEE COMPANY. THE SHARE A PPLICATION WAS MADE BY ACCOUNT PAYEE CHEQUE. THIS COMPANY WAS INCORPORATED ON 29/03/1993 AND WAS HAVING COMPANY IDENTIFICATION NUMBER U67120WB1993PT C058324. THIS COMPANY DULY FILED ITS RETURN OF INCOME BEFORE ITO WARD 1(1), KOLKATA AND WAS HAVING PAN: AABCD0748GG. THIS COMPANY WAS HAVING A PAID UP CAPITAL WITH FREE RESERVES AND SURPLUS OF RS.78,93,49,141/- AS O N 31/03/2012 AND RS.1,09,44,802/- AS ON 31/03/2011 RESPECTIVELY. THE COPY OF THE BANK STATEMENT OF THE COMPANY IS DULY AVAILABLE IN THE PAPER BOOK. ON EXAMINATION OF THE BANK STATEMENT IT WILL BE SEEN THAT THERE IS NO DEPOSIT OF CASH. THE COPY OF THE ASSESSMENT ORDER U/S.143(3) FOR AY 2012-13 IS AVAIL ABLE IN THE PAPER BOOK. THE BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 9 99 9 DETAILS OF SOURCE OF FUNDS FROM WHICH THIS COMPANY HAD MADE THE SHARE ALSO AVAILABLE IN THE PAPER BOOK. ALL THE RELEVANT DOCUM ENTS FOR THIS COMPANY ARE AVAILABLE ON PAGES 257-285 OF THE PAPER BOOK. E) ORTEM ESTATES PRIVATE LIMITED : THIS COMPANY INVESTED A SUM OF RS. 20,00,000/- IN THE ASSESSEE COMPANY. THE SHARE APP LICATION WAS MADE BY ACCOUNT PAYEE CHEQUE. THIS COMPANY WAS INCORPORATED ON 20.0 9.994 AND WAS HAVING COMPANY IDENTIFICATION NUMBER U7010WB1994TC065201. THIS COMPANY DULY FILED ITS RETURN OF INCOME BEFORE ITO, WARD 3(1), K OLKATA AND WAS HAVING PAN: AAAC03188Q. THIS COMPANY WAS HAVING A PAID UP CAPIT AL WITH FREE RESERVES AND SURPLUS OF RS.67,02,66,705/- AS ON 31/03/2012 AND R S.1,56,64,443/- AS ON 31/03/2011 RESPECTIVELY. THE COPY OF THE BANK STATE MENT OF THE COMPANY IS DULY AVAILABLE IN THE PAPER BOOK. ON EXAMINATION OF THE BANK STATEMENT IT WILL BE SEEN THAT THERE IS NO DEPOSIT OF CASH. THE COPY OF THE A SSESSMENT ORDER U/S.143(3) FOR AY 2012-13 IS AVAILABLE IN THE PAPER BOOK. THE DETA ILS OF SOURCE OF FUNDS FROM WHICH THIS COMPANY HAD MADE THE SHARE APPLICATION A RE ALSO AVAILABLE IN THE PAPER BOOK. ALL THE RELEVANT DOCUMENTS FOR THIS COMPANY A RE AVAILABLE ON PAGES 186-321 OF THE PAPER BOOK. (F) AGARANI CREDIT &FINVEST PRIVATE LIMITED: THIS COMPANY INVESTED A SUM OF RS.35,00,000/- IN THE ASSESSEE COMPANY. THE SHARE A PPLICATION WAS MADE BY ACCOUNT PAYEE CHEQUE. THIS COMPANY WAS INCORPORATED ON 10/07/1991 AND WAS HAVING COMPANY IDENTIFICATION NUMBER U65999WB1991PT C052178. THIS COMPANY DULY FILED ITS RETURN OF INCOME BEFORE ITO WARD 1(2), KOLKATA AND WAS HAVING PAN: AACCA2350C. THIS COMPANY WAS HAVING A P AID UP CAPITAL WITH FREE RESERVES AND SURPLUS OF RS.69,14,38,512/- AS O N 31/03/2012 AND RS.2,11,32,689/- AS ON 31/03/2011 RESPECTIVELY. THE COPY OF THE BANK STATEMENT OF THE COMPANY IS DULY AVAILABLE IN THE PAPER BOOK. ON EXAMINATION OF THE BANK STATEMENT IT WILL BE SEEN THAT THERE IS NO DEPOSIT OF CASH. THE COPY OF THE ASSESSMENT ORDER U/S.144/143(3) FOR AY 2012-13 IS A VAILABLE IN THE PAPER BOOK. THESOURCE OF FUNDS FROM WHICH THIS COMPANY HAD MADE THE SHARE APPLICATION ARE BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 1 11 10 00 0 ALSO AVAILABLE IN THE PAPER BOOK. ALL THE RELEVANT DOCUMENTS COMPANY ARE AVAILABLE ON PAGES 322-364 OF THE PAPER BOOK. FROM THE ABOVE DETAILS AND THE PAPER BOOK FILED WHI CH WAS ALSO BEFORE THE ASSESSING OFFICER THEREFORE, IT WILL BE EVIDENT THA T IN CASE OF ALL THE SHARE APPLICANTS THE SHARE APPLICATION FORM AND ALLOTMENT LETTER IS AVAILABLE (II) THE SHARE APPLICANTS ARE INCOME TAX ASSESSEES AND ARE FILING THEIR RETURN OF INCOME (III) THE SHARE APPLICATION WERE MADE OUT OF ACCOUNT PAYEE CH EQUES (IV) THE BANK ACCOUNTS BELONGED TO THE APPLICANTS (V) IN NONE OF THE TRANS ACTIONS HAS THE AO FOUND DEPOSIT OF CASH BEFORE ISSUE OF CHEQUES TO THE ASSESSEE COM PANY (VI) THE APPLICANTS ARE HAVING SUBSTANTIAL CREDITWORTHINESS WHICH IS REPRES ENTED BY THE FREE RESERVES AND CAPITAL. 10. THE LD. DR SUBMITTED THAT THE ASSESSEE HAD NOT JUST IFIED THE REASONS FOR ISSUING SHARES AT A HIGH PREMIUM.THEREFORE, ACCORDING TO TH E LD. DR, THE GENUINENESS OF THE TRANSACTION REMAINED UN-PROVED. HE THEREFORE, VEHEM ENTLY ARGUED THAT THE ORDER OF THE LD. CIT(A) SHOULD BE UPHELD. ON THE OTHER HAND, T HE LD. AR FIRST DREW OUR ATTENTION TO THE SEVERAL GROUNDS RAISED BY THE ASSESSEE IN RESPE CT OF ADDITION MADE U/S 68 OF THE ACT. THEREAFTER ON THE MERITS OF THE CASE, OUR ATTENTION WAS DRAWN BY THE LD. AR TO RELEVANT PAGE OF PAPER BOOK WHERE WE NOTE THAT THE SIX SHARE HOLDERS HAD SUBMITTED THE FOLLOWING RELEVANT DETAILS AS CALLED FOR AND HAD CONFIRMED TH E TRANSACTION WITH THE ASSESSEE COMPANY. THE EVIDENCES WHICH WERE FILED BEFORE THE AO, INCLUDED THE FOLLOWING DETAILS. (A) INCOME TAX RETURN OF THE SHARE HOLDERS (B)COPY OF THE BANK ACCOUNT OF THE SHARE HOLDERS (C) TRANSACTION WITH THE ASSESSEE WAS DULY HIGHLIGH TED IN THE BANK STATEMENT (D) EXPLANATION ALONG WITH EVIDENCE OF SOURCE OF SO URCE OF THE FUNDS OF THE APPLICANT (E) AUDITED ACCOUNTS OF THE SHARE HOLDERS (F) BOARD RESOLUTION PASSED BY THE BOARD OF DIRECTO RS OF INVESTEE COMPANY (G) RELEVANT ADDRESS PROOFS BY WAY OF PROFESSIONAL TAX ENROLMENT CERTIFICATES / FORM 18 FILED BY THE APPLICANTS WITH ROC BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 1 11 11 11 1 11. THE LD. AR SUBMITTED THAT THE DETAILS OF PAN, I T ACKNOWLEDGMENT, PROFESSIONAL TAX ENROLMENT CERTIFICATES ETC. AND TH E FORM 18 FURNISHED BY THE SHARE APPLICANTS WITH THE ROC DULY PROVED THE IDENTITY OF THE SHARE SUBSCRIBERS. THE LD. AR THEREAFTER INVITED OUR ATTENTION TO THE RESPECTI VE BALANCE SHEETS OF THE SHARE APPLICANTS TO SHOW THAT EACH OF THEM HAD SUFFICIENT FUNDS AVAILABLE AT THEIR DISPOSAL TO MAKE INVESTMENT IN THE ASSESSEE COMPANY. REFERRI NG TO THE RESPECTIVE BANK STATEMENTS, IT WAS FURTHER POINTED OUT THAT THE TRA NSACTIONS WERE CONDUCTED THROUGH PROPER BANKING CHANNEL AND THAT THERE WERE NO CASH DEPOSITS IN ANY OF THE BANK ACCOUNT OF THE SHARE APPLICANTS. HE ALSO INVITED OU R ATTENTION TO THE EXPLANATION FURNISHED BY EACH OF THE SHARE APPLICANTS REGARDING THEIR SOURCE OF FUNDS. IT WAS THUS SUBMITTED THAT THE FUND FLOW POSITION OF THE S HARE APPLICANT AND NOT THE PROFITABILITY WAS THE DECISIVE CRITERIA TO EXAMINE THE CREDITWORTHINESS OF THE SHARE APPLICANTS. BEFORE WE ADJUDICATE AS TO WHETHER THE LD. CIT(A)S ACTION IS RIGHT OR ERRONEOUS, LET US LOOK AT SECTION 68 OF THE ACT AND THE JUDICIAL PRECEDENTS ON THE ISSUE AT HAND. SECTION 68 UNDER WHICH, THE ADDITION HAS BEEN MADE BY THE AO READS AS UNDER: '68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS O F AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLA NATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION 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 .' THE PHRASEOLOGY OF SECTION 68 IS CLEAR. THE LEGISLA TURE HAS LAID DOWN THAT IN THE ABSENCE OF A SATISFACTORY EXPLANATION, THE UNEXPLAI NED CASH CREDIT MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. IN THIS CASE THE LEGISLATIVE MANDATE IS NOT IN TERMS OF THE WORDS S HALL BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR'. THE SUPREME COURT WHILE INTERPRETING SIMILAR PHRASEOLOGY USED IN SECTION 69 HAS HELD THAT IN CREATING THE LEGAL FICTION THE PHRASEOLOGY EMPLOYS THE WORD 'MAY ' AND NOT 'SHALL'. THUS THE UN- SATISFACTORINESS OF THE EXPLANATION DOES NOT AND NE ED NOT AUTOMATICALLY RESULT IN DEEMING THE AMOUNT CREDITED IN THE BOOKS AS THE INC OME OF THE ASSESSEE AS ALSO HELD BY THE SUPREME COURT IN THE CASE OF CIT V. SMT. P. K. NOORJAHAN [1999] 237 ITR 570. BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 1 11 12 22 2 12 THE MAIN PLANK ON WHICH THE AO MADE THE ADDITION WAS BECAUSE THE DIRECTORS OF THE SHARE SUBSCRIBERS DID NOT TURN UP BEFORE HIM. FROM THE NOTICES ISSUED U/S 131, IT IS NOTED THAT EACH OF THE SHARE SUBSCRIBING COMPANY WAS REQUIRED TO FURNISH THE FOLLOWING DETAILS FOR EXAMINATION: - DETAILS OF SHARES OF ASSESSEE APPLIED FOR INCLUDI NG NUMBER OF SHARES, NOMINAL PRICE, PREMIUM AND AMOUNT - CORRESPONDENCE MADE FOR APPLICATION OF SHARES - COPY OF BALANCE SHEET, PROFIT & LOSS A/C, IT ACK FOR FY 2011-12 - COPY OF BANK STATEMENTS EVIDENCING TRANSACTION WI TH ASSESSEE - SOURCE OF FUNDS FOR MAKING INVESTMENTS IN THE ASS ESSEE COMPANY - ROC DETAILS AND RELEVANT STATEMENT. - COPY OF RESOLUTION PASSED BY THE BOARD AUTHORIZIN G INVESTMENT IN SHARES OF ASSESSEE - REASONS FOR MAKING PAYMENT OF PREMIUM. IT IS NOTED THAT THE ALL THE ABOVE REQUISITIONED DO CUMENTS WERE FURNISHED BEFORE THE AO WHICH SUBSTANTIATED THE TRANSACTION BETWEEN THE ASSESSEE COMPANY AND THE SHARE APPLICANTS. IT IS THEREFORE NOT A CASE WHERE THE DOCUMENTS SOUGHT FROM THE APPLICANTS TO EXAMINE THE TRANSACTION WERE NOT AVAI LABLE BEFORE THE AO. AS THE REGARDS THE ISSUE OF NON-APPEARANCE OF THE SHARE AP PLICANTS, WE NOTE THAT IN SUCH A CASE THE HON'BLE APEX COURT IN THE CASE OF ORISSA C ORPN. (P) LTD. (SUPRA) 159 ITR 78 AND THE HON'BLE GUJARAT HIGH COURT, IN THE CASE OF DY. CIT V. ROHINI BUILDERS [2002] 256 ITR 360 /[2003] 127 TAXMAN 523, HAS HELD THAT ONUS OF THE ASSESSEE (IN WHOSE BOOKS OF ACCOUNT CREDIT APPEARS) STANDS FULLY DISCHARGED IF THE IDENTITY OF THE CREDITOR IS ESTABLISHED AND ACTUAL RECEIPT OF MONEY FROM SUCH CREDITOR IS PROVED. IN CASE, THE ASSESSING OFFICER IS DISSATISFIED ABOUT T HE SOURCE OF CASH DEPOSITED IN THE BANK ACCOUNTS OF THE CREDITORS, THE PROPER COURSE W OULD BE TO ASSESS SUCH CREDIT IN THE HANDS OF THE CREDITOR (AFTER MAKING DUE ENQUIRI ES FROM SUCH CREDITOR). IN ARRIVING AT THIS CONCLUSION, THE HON'BLE COURT HAS FURTHER STRESSED THE PRESENCE OF WORD 'MAY' IN SECTION 68. RELEVANT OBSERVATIONS AT PAGES 369 AND 370 OF THIS REPORT ARE REPRODUCED HEREUNDER:- 'MERELY BECAUSE SUMMONS ISSUED TO SOME OF THE CREDI TORS COULD NOT BE SERVED OR THEY FAILED TO ATTEND BEFORE THE ASSESSING OFFICER, CANN OT BE A GROUND TO TREAT THE LOANS TAKEN BY THE ASSESSEE FROM THOSE CREDITORS AS NON-GENUINE IN VIEW OF THE PRINCIPLES LAID DOWN BY THE SUPREME COURT IN THE CASE OF ORISSA CORPORATION [19 86] 159 ITR 78. IN THE SAID DECISION THE SUPREME COURT HAS OBSERVED THAT WHEN THE ASSESS EE FURNISHES NAMES AND ADDRESSES OF THE ALLEGED CREDITORS AND THE GIR NUMBERS, THE BURD EN SHIFTS TO THE DEPARTMENT TO ESTABLISH THE REVENUE'S CASE AND IN ORDER TO SUSTAIN THE ADDI TION THE REVENUE HAS TO PURSUE THE BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 1 11 13 33 3 ENQUIRY AND TO ESTABLISH THE LACK OF CREDITWORTHINE SS AND MERE NON-COMPLIANCE OF SUMMONS ISSUED BY THE ASSESSING OFFICER UNDER SECTION 131, BY THE ALLEGED CREDITORS WILL NOT BE SUFFICIENT TO DRAW AND ADVERSE INFERENCE AGAINST TH E ASSESSEE. IN THE CASE OF SIX CREDITORS WHO APPEARED BEFORE THE ASSESSING OFFICER AND WHOSE STATEMENTS WERE RECORDED BY THE ASSESSING OFFICER, THEY HAVE ADMITTED HAVING ADVANC ED LOANS TO THE ASSESSEE BY ACCOUNT PAYEE CHEQUES AND IN CASE THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE CASH AMOUNT DEPOSITED BY THOSE CREDITORS IN THEIR BANK ACCOUNTS , THE PROPER COURSE WOULD HAVE BEEN TO MAKE ASSESSMENTS IN THE CASES OF THOSE CREDITORS BY ' TREATING THE CASH DEPOSITS IN THEIR BANK ACCOUNTS AS UNEXPLAINED INVESTMENTS OF THOSE CREDIT ORS UNDER SECTION 69. 13. UNDISPUTEDLY THE SHARE APPLICANTS IN THIS CASE ARE THE BANK ACCOUNT HOLDER IN THEIR RESPECTIVE BANKS IN THEIR OWN NAME AND ARE SOLE OWNER OF THE CREDITS APPEARING IN THEIR BANK ACCOUNT FROM WHERE THEY ISS UED CHEQUES TO THE ASSESSEE COMPANY. FOR THE PROPOSITION THAT A BANK ACCOUNT HO LDER HIMSELF IS THE 'OWNER' OF 'CREDITS' APPEARING IN HIS ACCOUNT (WITH THE RESULT THAT HE HIMSELF IS ACCOUNTABLE TO EXPLAIN THE SOURCE OF SUCH CREDITS IN WHATEVER WAY AND FORM, THE SAME HAVE EMERGED) SUPPORT CAN BE DERIVED FROM SECTION 4 OF B ANKERS BOOK EVIDENCE ACT 1891 WHICH READS AS UNDER:- '4. MODE OF PROOF OF ENTRIES IN BANKERS' BOOKS SUBJ ECT TO THE PROVISIONS OF THIS ACT, A CERTIFIED COPY OF ANY ENTRY IN A BANKERS' BOOK SHAL L IN ALL LEGAL PROCEEDINGS BE RECEIVED AS PRIMA FACIE EVIDENCE OF THE EXISTENCE OF SUCH EN TRY, AND SHALL BE ADMITTED AS EVIDENCE OF THE MATTERS, TRANSACTIONS AND ACCOUNTS THEREIN RECO RDED IN EVERY CASES WHERE, AND TO THE SAME EXTENT AS, THE ORIGINAL ENTRY ITSELF IS NOW BY LAW ADMISSIBLE, BUT NOT FURTHER OR OTHERWISE. 14. FOLLOWING THE SAID PROVISIONS, THE CO-ORDINATE BENCH OF ALLAHABAD TRIBUNAL IN THE CASE OF ANANDPRAKASHAGARWAL REPORTED IN 6 DT R (ALL-TRIB) 191 HELD AS UNDER:- THE QUESTION THAT REMAINS TO BE DECIDED NOW IS WHE THER THE SUBJECT MATTER OF TRANSFER WAS THE ASSET BELONGING TO THE TRANSFEROR/DONORS THEMSE LVES. THERE IS ENOUGH MATERIAL ON RECORD WHICH GOES TO SHOW THAT THERE WERE VARIOUS C REDITS IN THE BANK ACCOUNTS OF THE DONORS, PRIOR TO THE TRANSACTION OF GIFTS, WHICH UN DISPUTEDLY BELONGING TO THE RESPECTIVE DONORS THEMSELVES, IN THEIR OWN RIGHTS. NO PART OF THE CREDITS IN THE SAID BANK' ACCOUNTS WAS GENERATED FROM THE APPELLANT AND/OR FROM ITS AS SOCIATES, IN ANY MANNER. THE CERTIFICATES ISSUED BY THE BANKS ARE CONSTRUABLE AS EVIDENCE ABOUT THE OWNERSHIP OF THE TRANSFERORS OR THEIR RESPECTIVE BANK ACCOUNTS, AS P ER S.4 OF THE BANKERS' BOOKS EVIDENCE ACT 1891, WHICH READ AS UNDER: '4. WHERE AN EXTRACT OF ACCOUNT WAS DULY SIGNED BY THE AGENT OF THE BANK AND IMPLICIT IN ITS WAS A CERTIFICATE THAT IT WAS A TRUE COPY OF AN ENT RY CONTAINED IN ONE OF THE ORDINARY BOOKS OF THE BANK AND WAS MADE IN THE USUAL AND ORDINARY COURSE OF BUSINESS AND THAT SUCH BOOK WAS IN THE CUSTODY OF THE BANK, IT WAS HELD ADMISSI BLE IN EVIDENCE. RADHESHYAM V. SAFIYABAI IBRAHIM AIR 1988 BOM.361 : 1987 MAH. 725: 1987 BANK J 552. IN VIEW OF THE POSITION OF LAW AS DISCUSSED ABOVE, IT IS ALWAYS OPEN FOR A BORROWER TO CONTEND, THAT EVEN THE CREDITWORTHINESS OF THE LE NDER STANDS PROVED TO THE EXTENT OF BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 1 11 14 44 4 CREDITS APPEARING IN HIS BANK ACCOUNT AND HE SHOULD BE HELD TO BE SUCCESSFUL IN THIS CONTENTION. 15. IN THE CASE OF NEMI CHAND KOTHARI 136 TAXMAN 2 13, (SUPRA), THE HON'BLEGUAHATI HIGH COURT HAS THROWN LIGHT ON ANOTH ER ASPECT TOUCHING THE ISSUE OF ONUS ON ASSESSEE UNDER SECTION 68, BY HOLDING THAT THE S AME SHOULD BE DECIDED BY TAKING INTO CONSIDERATION THE PROVISION OF SECTION 106 OF THE EVIDENCE ACT WHICH SAYS THAT A PERSON CAN BE REQUIRED TO PROVE ONLY SU CH FACTS WHICH ARE IN HIS KNOWLEDGE. THE HON'BLE COURT IN THE SAID CASE HELD THAT, ONCE IT IS FOUND THAT AN ASSESSEE HAS ACTUALLY TAKEN MONEY FROM DEPOSITOR/LE NDER WHO HAS BEEN FULLY IDENTIFIED, THE ASSESSEE/BORROWER CANNOT BE CALLED UPON TO EXPLAIN, MUCH LESS PROVE THE AFFAIRS OF SUCH THIRD PARTY, WHICH HE IS NOT EV EN SUPPOSED TO KNOW OR ABOUT WHICH HE CANNOT BE HELD TO BE ACCREDITED WITH ANY K NOWLEDGE. IN THIS VIEW, THE HON'BLE COURT HAS LAID DOWN THAT SECTION 68 OF INCO ME-TAX ACT, SHOULD BE READ ALONG WITH SECTION 106 OF EVIDENCE ACT. THE RELEVAN T OBSERVATIONS AT PAGE 260 TO 262, 264 AND 265 OF THE REPORT ARE REPRODUCED HEREI N BELOW:- 'WHILE INTERPRETING THE MEANING AND SCOPE OF SECTIO N 68, ONE HAS TO BEAR IN MIND THAT NORMALLY, INTERPRETATION OF A STATUTE SHALL BE GENE RAL, IN NATURE, SUBJECT ONLY TO SUCH EXCEPTIONS AS MAY BE LOGICALLY PERMITTED BY THE STA TUTE ITSELF OR BY SOME OTHER LAW CONNECTED THEREWITH OR RELEVANT THERETO. KEEPING IN VIEW THESE FUNDAMENTALS OF INTERPRETATION OF STATUTES, WHEN WE READ CAREFULLY THE PROVISIONS OF SECTION 68, WE NOTICE NOTHING IN SECTION 68 TO SHOW THAT THE SCOPE OF THE INQUIRY UNDER SECTION 68 BY THE REVENUE DEPARTMENT SHALL REMAIN CONFINED TO THE TRANSACTION S, WHICH HAVE TAKEN PLACE BETWEEN THE ASSESSEE AND THE CREDITOR NOR DOES THE WORDING OF S ECTION 68 INDICATE THAT SECTION 68 DOES NOT AUTHORIZE THE REVENUE DEPARTMENT TO MAKE INQUIR Y INTO THE SOURCE(S) OF THE CREDIT AND/OR SUB-CREDITOR. THE LANGUAGE EMPLOYED BY SECTI ON 68 CANNOT BE READ TO IMPOSE SUCH LIMITATIONS ON THE POWERS OF THE ASSESSING OFFICER. THE LOGICAL CONCLUSION, THEREFORE, HAS TO BE, AND WE HOLD THAT AN INQUIRY UNDER SECTION 68 NE ED NOT NECESSARILY BE KEPT CONFINED BY THE ASSESSING OFFICER WITHIN THE TRANSACTIONS, WHIC H TOOK PLACE BETWEEN THE ASSESSEE AND HIS CREDITOR, BUT THAT THE SAME MAY BE EXTENDED TO THE TRANSACTIONS, WHICH HAVE TAKEN PLACE BETWEEN THE CREDITOR AND HIS SUB-CREDITOR. THUS, WH ILE THE ASSESSING OFFICER IS UNDER SECTION 68, FREE TO LOOK INTO THE SOURCE(S) OF THE CREDITOR AND/OR OF THE SUB-CREDITOR, THE BURDEN ON THE ASSESSEE UNDER SECTION 68 IS DEFINITE LY LIMITED. THIS LIMIT HAS BEEN IMPOSED BY SECTION 106 OF THE EVIDENCE ACT WHICH READS AS F OLLOWS: 'BURDEN OF PROVING FACT ESPECIALLY WITHIN KNOWLEDGE .-WHEN ANY FACT IS ESPECIALLY WITHIN THE KNOWLEDGE OF ANY PERSON, THE BURDEN) OF PROVING THA T FACT IS UPON HIM. ' ******** WHAT, THUS, TRANSPIRES FROM THE ABOVE DISCUSSION IS THAT WHITE SECTION 106 OF THE EVIDENCE ACT LIMITS THE ONUS OF THE ASSESSEE TO THE EXTENT O F HIS PROVING THE SOURCE FROM WHICH HE HAS RECEIVED THE CASH CREDIT, SECTION 68 GIVES AMPLE FR EEDOM TO THE ASSESSING OFFICER TO MAKE INQUIRY NOT ONLY INTO THE SOURCE(S)OF THE CREDITOR BUT ALSO OF HIS (CREDITOR'S) SUB-CREDITORS AND PROVE, AS A RESULT, OF SUCH INQUIRY, THAT THE M ONEY RECEIVED BY THE ASSESSEE, IN THE FORM OF LOAN FROM THE CREDITOR, THOUGH ROUTED THROUGH TH E SUB-CREDITORS, ACTUALLY BELONGS TO, OR WAS OF, THE ASSESSEE HIMSELF. IN OTHER WORDS, WHILE SECTION 68 GIVES THE LIBERTY TO THE BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 1 11 15 55 5 ASSESSING OFFICER TO ENQUIRE INTO THE SOURCE/SOURCE FROM WHERE THE CREDITOR HAS RECEIVED THE MONEY, SECTION 106 MAKES THE ASSESSEE LIABLE TO DISCLOSE ONLY THE SOURCE(S) FROM WHERE HE HAS HIMSELF RECEIVED THE CREDIT AND IT IS NOT TH E BURDEN OF THE ASSESSEE TO PROVE THE CREDITWORTHINESS OF THESOURCE(S) OF THE SUB-CREDITO RS. IF SECTION 106 AND SECTION 68 ARE TO STAND TOGETHER, WHICH THEY MUST, THEN, THE INTERPRE TATION OF SECTION 68 ARE TO STAND TOGETHER, WHICH THEY MUST, THEN THE INTERPRETATION OF SECTION 68 HAS TO BE IN SUCH A WAY THAT IT DOES NOT MAKE SECTION 106 REDUNDANT. HENCE, THE HARMONIO US CONSTRUCTION OF SECTION 106 OF THE EVIDENCE ACT AND SECTION 68 OF THE INCOME- TAX ACT WILL BE THAT THOUGH APART FROM ESTABLISHING THE IDENTITY OF THE CREDITOR, THE ASSE SSEE MUST ESTABLISH THE GENUINENESS OF THE TRANSACTION AS WELL AS THE CREDITWORTHINESS OF HIS CREDITOR, THE BURDEN OF THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTIONS AS WELL A S THE CREDITWORTHINESS OF THE CREDITOR MUST REMAIN CONFINED TO THE TRANSACTIONS, WHICH HAV E TAKEN PLACE 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 H IS CREDITOR AND SUB-CREDITORS NOR IS IT THE BURDEN OF THE ASSESSEE TO PROVE THAT THE SUB- C REDITOR HAD THE CREDITWORTHINESS TO ADVANCE THE CASH CREDIT TO THE CREDITOR FROM WHOM T HE CASH CREDIT HAS BEEN. EVENTUALLY, RECEIVED BY THE ASSESSEE. IT, THEREFORE, FURTHER LO GICALLY FOLLOWS THAT THE CREDITOR'S CREDITWORTHINESS HAS TO BE JUDGED VIS-A-VIS THE TRA NSACTIONS, WHICH HAVE TAKEN PLACE BETWEEN THE ASSESSEE AND THE CREDITOR, AND IT IS NO T THE BUSINESS OF THE ASSESSEE TO FIND OUT THE SOURCE OF MONEY OF HIS CREDITOR OR OF THE GENUI NENESS OF THE TRANSACTIONS, WHICH TOOK BETWEEN THE CREDITOR AND SUB-CREDITOR AND/OR CREDIT WORTHINESS OF THE SUB- CREDITORS, FOR, THESE ASPECTS MAY NOT BE WITHIN THE SPECIAL KNOWLED GE OF THE ASSESSEE. ' ********** ' ... IF A CREDITOR HAS, BY ANY UNDISCLOSED SOURCE, A PARTICULAR AMOUNT OF MONEY IN THE BANK, THERE IS NO LIMITATION UNDER THE LAW ON THE PART OF THE ASSESSEE TO OBTAIN SUCH AMOUNT OF MONEY OR PART THEREOF FROM THE CREDITOR, BY WAY OF CHEQUE IN THE FORM OF LOAN AND IN SUCH A CASE, IF THE CREDITOR FAILS TO SATISFY AS TO HOW HE HAD ACTUALLY RECEIVED THE SAID AMOUNT AND HAPPENED TO KEEP THE SAME IN THE BANK, THE SAID AMO UNT CANNOT BE TREATED AS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCE. IN OTHER WORDS, T HE GENUINENESS AS WELL AS THE CREDITWORTHINESS OF A CREDITOR HAVE TO BE ADJUDGED VIS-A-VIS THE TRANSACTIONS, WHICH HE HAS WITH THE ASSESSEE. THE REASON WHY WE HAVE FORMED TH E OPINION THAT IT IS NOT THE BUSINESS OF THE ASSESSEE TO FIND OUT THE ACTUAL SOURCE OR SOURC ES FROM WHERE THE CREDITOR HAS ACCUMULATED THE AMOUNT, WHICH HE ADVANCES, AS LOAN, TO THE ASSESSEE IS THAT SO FAR AS AN ASSESSEE IS CONCERNED, HE HAS TO PROVE THE GENUINEN ESS OF THE TRANSACTION AND THE CREDITWORTHINESS OF THE CREDITOR VIS-A-VIS THE TRAN SACTIONS WHICH HAD TAKEN PLACE BETWEEN THE ASSESSEE AND THE CREDITOR AND NOT BETWEEN THE C REDITOR AND THE SUB-CREDITORS, FOR, IT IS NOT EVEN REQUIRED UNDER THE LAW FOR THE ASSESSEE TO TRY TO FIND OUT AS TO WHAT SOURCES FROM WHERE THE CREDITOR HAD RECEIVED THE AMOUNT, HIS SPE CIAL KNOWLEDGE UNDER SECTION 106 OF THE EVIDENCE ACT MAY VERY WELL REMAIN CONFINED ONLY TO THE TRANSACTIONS, WHICH HE HAD' WITH THE CREDITOR AND HE MAY NOT KNOW WHAT TRANSACTION(S ) HAD TAKEN PLACE BETWEEN HIS CREDITOR AND THE SUB-CREDITOR... ' ********** 'IN OTHER WORDS, THOUGH UNDER SECTION 68 AN ASSESSI NG OFFICER IS FREE TO SHOW, WITH THE HELP OF THE INQUIRY CONDUCTED BY HIM INTO THE TRANSACTIO NS, WHICH HAVE TAKEN PLACE BETWEEN THE CREDITOR AND THE SUB-CREDITOR, THAT THE TRANSACTION BETWEEN THE TWO WERE NOT GENUINE AND THAT THE SUB-CREDITOR HAD NO CREDITWORTHINESS, IT W ILL NOT NECESSARILY MEAN THAT THE LOAN ADVANCED BY THE SUB-CREDITOR TO THE CREDITOR WAS IN COME OF THE ASSESSEE FROM UNDISCLOSED SOURCE UNLESS THERE IS EVIDENCE, DIRECT OR CIRCUMST ANTIAL, TO SHOW THAT THE AMOUNT WHICH HAS BEEN ADVANCED BY THE SUB-CREDITOR TO THE CREDIT OR, HAD ACTUALLY BEEN RECEIVED BY THE SUB-CREDITOR FROM THE ASSESSEE ....' ********** BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 1 11 16 66 6 'KEEPING IN VIEW THE ABOVE POSITION OF LAW, WHEN WE TURN TO THE FACTUAL MATRIX OF THE PRESENT CASE, WE FIND THAT SO FAR AS THE APPELLANT IS CONCERNED, HE HAS ESTABLISHED THE IDENTITY OF THE CREDITORS, NAMELY, NEMICHANDNAHATA AND SONS (HUF) AND PAWAN KUMAR AGARWALLA. THE APPELLANT HAD ALSO SHOWN, IN ACCORDA NCE WITH THE BURDEN, WHICH RESTED ON HIM UNDER SECTION 106 OF THE EVIDENCE ACT, THAT THE SAID AMOUNTS HAD BEEN RECEIVED BY HIM BY WAY OF CHEQUES FROM THE CREDITORS AFOREMENTIONED . IN FACT THE FACT THAT THE ASSESSEE HAD RECEIVED THE SAID AMOUNTS BY WAY OF CHEQUES WAS NOT IN DISPUTE. ONCE THE ASSESSEE HAD ESTABLISHED THAT HE HAD RECEIVED THE SAID AMOUNTS F ROM THE CREDITORS AFOREMENTIONED BY WAY OF CHEQUES, THE ASSESSEE MUST BE TAKEN TO HAVE PROVED THAT THE CREDITOR HAD THE CREDITWORTHINESS TO ADVANCE THE LOANS. THEREAFTER T HE BURDEN HAD SHIFTED TO THE ASSESSING OFFICER TO PROVE THE CONTRARY. ON MERE FAILURE ON T HE PART OF THE CREDITORS TO SHOW THAT THEIR SUB-CREDITORS HAD CREDITWORTHINESS TO ADVANCE THE S AID LOAN AMOUNTS TO THE ASSESSEE, SUCH FAILURE, AS A COROLLARY, COULD NOT HAVE BEEN AND OU GHT NOT TO HAVE BEEN, UNDER THE LAW, TREATED AS THE INCOME FROM THE UNDISCLOSED SOURCES OF THE ASSESSEE HIMSELF, WHEN THERE WAS NEITHER DIRECT NOR CIRCUMSTANTIAL EVIDENCE ON RECOR D THAT THE SAID LOAN AMOUNTS ACTUALLY BELONGED TO, OR WERE OWNED BY, THE ASSESSEE. VIEWED FROM THIS ANGLE, WE HAVE NO HESITATION IN HOLDING THAT IN THE CASE AT HAND, THE ASSESSING OFFICER HAD FAILED TO SHOW THAT THE AMOUNTS, WHICH HAD COME TO THE HANDS OF THE CREDITO RS FROM THE HANDS OF THE SUB-CREDITORS, HAD ACTUALLY BEEN RECEIVED BY THE SUB-CREDITORS FRO M THE ASSESSEE. IN THE ABSENCE OF ANY SUCH EVIDENCE ON RECORD, THE ASSESSING OFFICER COUL D NOT HAVE TREATED THE SAID AMOUNTS AS INCOME DERIVED BY THE APPELLANT FROM UNDISCLOSED SO URCES. THE LEARNED TRIBUNAL SERIOUSLY FELL INTO ERROR IN TREATING THE SAID AMOUNTS AS INC OME DERIVED BY THE APPELLANT FROM. UNDISCLOSED SOURCES MERELY ON THE FAILURE OF THE SU B-CREDITORS TO PROVE THEIR CREDITWORTHINESS. 16. IN THE CASE OF CIT VSJALAN HARD COKE LTD (95 T AXMANN.COM 330), THE HONBLE RAJASTHAN HIGH COURT NOTED THAT THE ASSESSE E HAD FURNISHED THE DETAILS OF THE SHARE APPLICANTS BUT EXPRESSED ITS INABILITY TO PRODUCE THE SHARE APPLICANTS BEFORE THE AO FOR EXAMINATION. THE HONBLE HIGH COU RT HELD THAT MERE NON- APPEARANCE OF SHARE APPLICANTS COULD NOT BE REASON ENOUGH TO ASSESS THE SHARE APPLICATION MONIES RECEIVED BY WAY OF UNEXPLAINED C ASH CREDIT. THE SLP FILED BY THE REVENUE AGAINST THIS JUDGMENT HAS BEEN DISMISSE D BY THE HONBLE SUPREME COURT. THE RELEVANT EXTRACTS OF THE JUDGMENT ARE AS FOLLOWS: 6.2 TAKING INTO CONSIDERATION THE AFORESAID DECISI ON WE ARE OF THE CONSIDERED OPINION THAT COMPANY CANNOT BE ASSESSED FOR THE INCOME TAX TO FI ND OUT THE PERSON WHO HAS APPLIED AS SHARE HOLDER. THE VIEW OF TAKEN BY THE TRIBUNAL IS JUST AND PROPER, THEREFORE, THE ISSUE IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. 17. FURTHER, IN THE CASE OF CIT V. ORCHID INDUSTRIE S (P.) LTD. [2017] 88 TAXMANN.COM 502/397 ITR 136, THE HONBLE BOMBAY HIG H COURT ON THE ISSUE OF NON-APPEARANCE OF SHARE APPLICANTS HAD HELD AS UNDE R: '[5] THE ASSESSING OFFICER ADDED RS.95 LAKHS AS INC OME UNDER SECTION 68 OF THE INCOME TAX ACT ONLY ON THE GROUND THAT THE PARTIES TO WHOM THE SHARE CERTIFICATES WERE ISSUED AND WHO HAD PAID THE SHARE MONEY HAD NOT APPEARED BEFOR E THE ASSESSING OFFICER AND THE SUMMONS COULD NOT BE SERVED ON THE ADDRESSES GIVEN AS THEY WERE NOT TRACED AND IN RESPECT OF SOME OF THE PARTIES WHO HAD APPEARED, IT WAS OBS ERVED THAT JUST BEFORE ISSUANCE OF CHEQUES, THE AMOUNT WAS DEPOSITED IN THEIR ACCOUNT. BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 1 11 17 77 7 [6] THE TRIBUNAL HAS CONSIDERED THAT THE ASSESSEE H AS PRODUCED ON RECORD THE DOCUMENTS TO ESTABLISH THE GENUINENESS OF THE PARTY SUCH AS P AN OF ALL THE CREDITORS ALONG WITH THE 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 OF SHAR ES TO THESE PARTIES, THEIR SHARE APPLICATION FORMS, ALLOTMENT LETTERS AND SHARE CERT IFICATES, SO ALSO THE BOOKS OF ACCOUNT. THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT OF TH ESE PERSONS DISCLOSES THAT THESE PERSONS HAD SUFFICIENT FUNDS IN THEIR ACCOUNTS FOR INVESTIN G IN THE SHARES OF THE ASSESSEE. IN VIEW OF THESE VOLUMINOUS DOCUMENTARY EVIDENCE, ONLY BECAUSE THOSE PERSONS HAD NOT APPEARED BEFORE THE ASSESSING OFFICER WOULD NOT NEGATE THE C ASE OF THE ASSESSEE. THE JUDGMENT IN CASE OF GAGANDEEP INFRASTRUCTURE (P.) LTD. (SUPRA) WOULD BE APPLICABLE IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE' 18. FURTHER, IN THE CASE OF CIT V. S. KAMALJEET SI NGH [2005] 147 TAXMAN 18(ALL.) THEIR LORDSHIPS, ON THE ISSUE OF DISCHARGE OF ASSESSEE'S ONUS IN RELATION TO A CASH CREDIT APPEARING IN HIS BOOKS OF ACCOUNT, HAS OBSERVED AND HELD AS UNDER:- '4. THE TRIBUNAL HAS RECORDED A FINDING THAT THE AS SESSEE HAS DISCHARGED THE ONUS WHICH WAS ON HIM TO EXPLAIN THE NATURE AND SOURCE OF CASH CREDIT IN QUESTION. THE ASSESSEE DISCHARGED THE ONUS BY PLACING (I) CONFIRMATION LET TERS OF THE CASH CREDITORS; (II) THEIR AFFIDAVITS; (III) THEIR FULL ADDRESSES AND GIR NUMB ERS AND PERMANENT ACCOUNT NUMBERS. IT HAS FOUND THAT THE ASSESSEE'S BURDEN STOOD DISCHARG ED AND SO, NO ADDITION TO HIS TOTAL INCOME ON ACCOUNT OF CASH CREDIT WAS CALLED FOR. IN VIEW OF THIS FINDING, WE FIND THAT THE TRIBUNAL WAS RIGHT IN REVERSING THE ORDER OF THE AA C, SETTING ASIDE THE ASSESSMENT ORDER. 19. FURTHER THE JURISDICTIONAL CALCUTTA HIGH COURT IN THE CASE OF S.K. BOTHRA& SONS, HUF V. INCOME-TAX OFFICER, WARD- 46(3), KOLKA TA (347 ITR 347)ALSO HELD AS FOLLOWS: 15. IT IS NOW A SETTLED LAW THAT WHILE CONSIDERING THE QUESTION WHETHER THE ALLEGED LOAN TAKEN BY THE ASSESSEE WAS A GENUINE TRANSACTION, TH E INITIAL ONUS IS ALWAYS UPON THE ASSESSEE AND IF NO EXPLANATION IS GIVEN OR THE EXPL ANATION GIVEN BY THE APPELLANT IS NOT SATISFACTORY, THE ASSESSING OFFICER CAN DISBELIEVE THE ALLEGED TRANSACTION OF LOAN. BUT THE LAW IS EQUALLY SETTLED THAT IF THE INITIAL BURDEN I S DISCHARGED BY THE ASSESSEE BY PRODUCING SUFFICIENT MATERIALS IN SUPPORT OF THE LOAN TRANSAC TION, THE ONUS SHIFTS UPON THE ASSESSING OFFICER AND AFTER VERIFICATION, HE CAN CALL FOR FUR THER EXPLANATION FROM THE ASSESSEE AND IN THE PROCESS, THE ONUS MAY AGAIN SHIFT FROM THE ASSE SSING OFFICER TO ASSESSEE. 16. IN THE CASE BEFORE US, THE APPELLANT BY PRODUCI NG THE LOAN-CONFIRMATION-CERTIFICATES SIGNED BY THE CREDITORS, DISCLOSING THEIR PERMANENT ACCOUNT NUMBERS AND ADDRESS AND FURTHER INDICATING THAT THE LOAN WAS TAKEN BY ACCOU NT PAYEE CHEQUES, NO DOUBT, PRIMA FACIE, DISCHARGED THE INITIAL BURDEN AND THOSE MATERIALS D ISCLOSED BY THE ASSESSEE PROMPTED THE ASSESSING OFFICER TO ENQUIRE THROUGH THE INSPECTOR TO VERIFY THE STATEMENTS. 20. FURTHER, THEHON'BLE HIGH COURT AT CALCUTTA IN THE CASE OF CRYSTAL NETWORKS (P.) LTD. V. COMMISSIONER OF INCOME-TAX (353 ITR 17 1), ON THE ISSUE OF UNEXPLAINED CASH CREDITS, HELD THAT WHEN THE BASIC EVIDENCES ARE ON RECORD THE MERE FAILURE OF THE CREDITOR TO APPEAR CANNOT BE BASIS T O MAKE ADDITION. THE COURT HELD AS FOLLOWS: BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 1 11 18 88 8 8. ASSAILING THE SAID JUDGMENT OF THE LEARNED TRIBU NAL LEARNED COUNSEL FOR THE APPELLANT SUBMITS THAT INCOME-TAX OFFICER DID NOT CONSIDER TH E MATERIAL EVIDENCE SHOWING THE CREDITWORTHINESS AND ALSO OTHER DOCUMENTS, VIZ., CO NFIRMATORY STATEMENTS OF THE PERSONS, OF HAVING ADVANCED CASH AMOUNT AS AGAINST THE SUPPLY O F BIDIS. THESE EVIDENCE WERE DULY CONSIDERED BY THE COMMISSIONER OF INCOME-TAX (APPEA LS). THEREFORE, THE FAILURE OF THE PERSON TO TURN UP PURSUANT TO THE SUMMONS ISSUED TO ANY WITNESS IS IMMATERIAL WHEN THE MATERIAL DOCUMENTS MADE AVAILABLE, SHOULD HAVE BEEN ACCEPTED AND INDEED IN SUBSEQUENT YEAR THE SAME EXPLANATION WAS ACCEPTED BY THE INCOM E-TAX OFFICER. HE FURTHER CONTENDED THAT WHEN THE TRIBUNAL HAS RELIED ON THE ENTIRE JUD GMENT OF THE COMMISSIONER OF INCOME- TAX (APPEALS), THEREFORE, IT WAS NOT PROPER TO TAKE UP SOME PORTION OF THE JUDGMENT OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AND TO IGNORE THE OTHER PORTION OF THE SAME. THE JUDICIAL PROPRIETY AND FAIRNESS DEMANDS THAT THE EN TIRE JUDGMENT BOTH FAVOURABLE AND UNFAVOURABLE SHOULD HAVE BEEN CONSIDERED. BY NOT DO ING SO THE TRIBUNAL COMMITTED GRAVE ERROR IN LAW IN UPSETTING THE JUDGMENT IN THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS). 9. IN THIS CONNECTION HE HAS DRAWN OUR ATTENTION TO A DECISION OF THE SUPREME COURT IN THE CASE OF UDHAVDASKEWALRAM V. CIT [19671 66 ITR 462. IN THIS JUDGMENT IT IS NOTICED THAT THE SUPREME COURT AS PROPOSITION OF LAW HELD THAT T HE TRIBUNAL MUST IN DECIDING AN APPEAL, CONSIDER WITH DUE CARE, ALL THE MATERIAL FACTS AND RECORD ITS FINDING ON ALL THE CONTENTIONS RAISED BY THE ASSESSEE AND THE COMMISSIONER IN THE LIGHT OF THE EVIDENCE AND THE RELEVANT LAW. 10. WE FIND CONSIDERABLE FORCE OF THE SUBMISSIONS O F THE LEARNED COUNSEL FOR THE APPELLANT THAT THE TRIBUNAL HAS MERELY NOTICED THAT SINCE THE SUMMONS ISSUED BEFORE ASSESSMENT RETURNED UNSERVED AND NO ONE CAME FORWARD TO PROVE. THEREFORE, IT SHALL BE ASSUMED THAT THE ASSESSEE FAILED TO PROVE THE EXISTENCE OF THE C REDITORS OR FOR THAT MATTER THE CREDITWORTHINESS. AS RIGHTLY POINTED OUT BY THE LEA RNED COUNSEL THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS TAKEN THE TROUBLE OF EXAMI NING OF ALL OTHER MATERIALS AND DOCUMENTS, VIZ., CONFIRMATORY STATEMENTS, INVOICES, CHALLANS AND VOUCHERS SHOWING SUPPLY OF BIDIS AS AGAINST THE ADVANCE. THEREFORE, THE ATT ENDANCE OF THE WITNESSES PURSUANT TO THE SUMMONS ISSUED, IN OUR VIEW, IS NOT IMPORTANT. THE IMPORTANT IS TO PROVE AS TO WHETHER THE SAID CASH CREDIT WAS RECEIVED AS AGAINST THE FUTURE SALE OF THE PRODUCT OF THE ASSESSEE OR NOT. WHEN IT WAS FOUND BY THE COMMISSIONER OF INCOM E- TAX (APPEALS) ON FACTS HAVING EXAMINED THE DOCUMENTS THAT THE ADVANCE GIVEN BY TH E CREDITORS HAVE BEEN ESTABLISHED THE TRIBUNAL SHOULD NOT HAVE IGNORED THIS -FACT FINDING . INDEED THE TRIBUNAL DID NOT REALLY TOUCH THE AFORESAID FACT FINDING OF THE COMMISSIONE R OF INCOME-TAX (APPEALS) AS RIGHTLY POINTED OUT BY THE LEARNED COUNSEL. THE SUPREME COU RT HAS ALREADY STATED AS TO WHAT SHOULD BE THE DUTY OF THE LEARNED TRIBUNAL TO DECID E IN THIS SITUATION. IN THE SAID JUDGMENT NOTED BY US AT PAGE 464, THE SUPREME COURT HAS OBSE RVED AS FOLLOWS: 'THE INCOME-TAX APPELLATE TRIBUNAL PERFORMS A JUDIC IAL FUNCTION UNDER THE INDIAN INCOME- TAX ACT; IT IS INVESTED WITH AUTHORITY TO DETERMINE FINALLY ALL QUESTIONS OF FACT. THE TRIBUNAL MUST, IN DECIDING AN APPEAL, CONSIDER WITH DUE CARE ALL THE MATERIAL FACTS AND RECORD ITS FINDING ON ALL THE CONTENTIONS RAISED BY THE ASSESS EE AND THE COMMISSIONER, IN THE LIGHT OF THE EVIDENCE AND THE RELEVANT LAW. ' 11. THE TRIBUNAL MUST, IN DECIDING AN APPEAL, CONSI DER WITH DUE CARE ALL THE MATERIAL FACTS AND RECORD ITS FINDING ON ALL CONTENTIONS RAISED BY THE ASSESSEE AND THE COMMISSIONER, IN THE LIGHT OF THE EVIDENCE AND THE RELEVANT LAW. IT IS ALSO RULED IN THE SAID JUDGMENT AT PAGE 465 THAT IF THE TRIBUNAL DOES NOT DISCHARGE THE DUT Y IN THE MANNER AS ABOVE THEN IT SHALL BE ASSUMED THE JUDGMENT OF THE TRIBUNAL SUFFERS FROM M ANIFEST INFIRMITY. 12. TAKING INSPIRATION FROM THE SUPREME COURT OBSER VATIONS WE ARE CONSTRAINED TO HOLD IN THIS MATTER THAT THE TRIBUNAL HAS NOT ADJUDICATED U PON THE CASE OF THE ASSESSEE IN THE LIGHT OF THE EVIDENCE AS FOUND BY THE COMMISSIONER OF INC OME-TAX (APPEALS). WE ALSO FOUND NO BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 1 11 19 99 9 SINGLE WORD HAS BEEN SPARED TO UP SET THE FACT FIND ING OF THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT THERE ARE MATERIALS TO SHOW THE CASH CREDIT WAS RECEIVED FROM VARIOUS PERSONS AND SUPPLY AS AGAINST CASH CREDIT ALSO MADE . 13. HENCE, THE JUDGMENT AND ORDER OF THE TRIBUNAL I S NOT SUSTAINABLE. ACCORDINGLY, THE SAME IS SET ASIDE. WE RESTORE THE JUDGMENT AND ORDE R OF THE COMMISSIONER OF INCOME-TAX (APPEALS). THE APPEAL IS ALLOWED. 21. WHEN A QUESTION AS TO THE CREDITWORTHINESS OF A CREDITOR IS TO BE ADJUDICATED AND IF THE CREDITOR IS AN INCOME TAX ASSESSEE, IT I S NOW WELL SETTLED BY THE DECISION OF THE CALCUTTA HIGH COURT THAT THE CREDITWORTHINES S OF THE CREDITOR CANNOT BE DISPUTED BY THE AO OF THE ASSESSEE BUT THE AO OF TH E CREDITOR. IN THIS REGARDS OUR ATTENTION WAS DRAWN TO THE DECISION OF THE HON'BLE HIGH COURT, CALCUTTA IN THE CIT VSDATAWAREPVT LTD (ITAT NO. 263 OF 2011) DATED 21.0 9.2011 WHEREIN THE COURT HELD AS FOLLOWS: IN OUR OPINION, IN SUCH CIRCUMSTANCES, THE ASSESSI NG OFFICER OF THE ASSESSEE CANNOT TAKE THE BURDEN OF ASSESSING THE PROFIT AND LOSS ACCOUNT OF THE CREDITOR WHEN ADMITTEDLY THE CREDITOR HIMSELF IS AN INCOME TAX ASSESSEE. AFTER G ETTING THE PAN NUMBER AND GETTING THE INFORMATION THAT THE CREDITOR IS ASSESSED UNDER THE ACT, THE ASSESSING OFFICER SHOULD ENQUIRE FROM THE ASSESSING OFFICER OF THE CREDITOR AS TO TH E GENUINENESS' OF THE TRANSACTION AND WHETHER SUCH TRANSACTION HAS BEEN ACCEPTED BY THE A SSESSING OFFICER OF THE CREDITOR BUT INSTEAD OF ADOPTING SUCH COURSE, THE ASSESSING OFFI CER HIMSELF COULD NOT ENTER INTO THE RETURN OF THE CREDITOR AND BRAND THE SAME AS UNWORT HY OF CREDENCE. SO LONG IT IS NOT ESTABLISHED THAT THE RETURN SUBMI TTED BY THE CREDITOR HAS BEEN REJECTED BY ITS ASSESSING OFFICER, THE ASSESSING OFFICER OF THE ASSESSEE IS BOUND TO ACCEPT THE SAME AS GENUINE WHEN THE IDENTITY OF THE CREDITOR AND THE G ENUINENESS' OF TRANSACTION THROUGH ACCOUNT PAYEE CHEQUE HAS BEEN ESTABLISHED. WE FIND THAT BOTH THE COMMISSIONER OF INCOME TAX (A PPEAL) AND THE TRIBUNAL BELOW FOLLOWED THE WELL-ACCEPTED PRINCIPLE WHICH ARE REQU IRED TO BE FOLLOWED IN CONSIDERING THE EFFECT OF SECTION 68 OF THE ACT AND WE THUS FIND NO REASON TO INTERFERE WITH THE CONCURRENT FINDINGS OF FACT RECORDED BY BOTH THE AUTHORITIES. 22. OUR ATTENTION WAS ALSO DRAWN TO THE DECISION O F THE HON'BLE SUPREME COURT WHILE DISMISSING SLP IN THE CASE OF LOVELY EXPORTS AS HAS BEEN REPORTED AS JUDGMENT DELIVERED BY THE CTR AT 216 CTR 295: 'CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDIS CLOSED INCOME UNDER SECTION 68 OF THE INCOME TAX ACT, 1961? WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEI VED BY THE ASSESSEE- COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN T O THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS I N ACCORDANCE WITH LAW. HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT. 23. OUR ATTENTION WAS ALSO DRAWN TO THE DECISION O F THE HON'BLE CALCUTTA HIGH COURTIN THE APPEAL OF COMMISSIONER OF INCOME TAX, K OLKATA- IVVSROSEBERRY BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 2 22 20 00 0 MERCANTILE (P) LTD., ITAT NO. 241 OF 2010 DATED 10- 01-2011, WHEREIN IT WAS HELD AS BELOW: 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) OUGHT TO HAVE UPHELD THE ASSESSMENT ORDER AS THE TRANSACTION ENTERED INTO BY THE ASSESSEE WAS A SCHEME FOR LAUNDERING BLACK MONEY INTO WHITE MONEY OR ACCOUNTE D MONEY AND THE LD. CIT (A) OUGHT TO HAVE HELD THAT THE ASSESSEE HAD NOT ESTABLISHED THE GENUINENESS OF THE TRANSACTION. ' IT APPEARS FROM THE RECORD THAT IN THE ASSESSMENT P ROCEEDINGS IT WAS NOTICED THAT THE ASSESSEE COMPANY DURING THE YEAR UNDER CONSIDERATIO N HAD BROUGHT RS. 4, 00, 000/- AND RS.20,00,000/- TOWARDS SHARE CAPITAL AND SHARE PREM IUM RESPECTIVELY AMOUNTING TO RS.24,00, 000/- FROM FOUR SHAREHOLDERS BEING PRIVAT E LIMITED COMPANIES. THE ASSESSING OFFICER ON HIS PART CALLED FOR THE DETAILS FROM THE ASSESSEE AND ALSO FROM THE SHARE APPLICANTS AND ANALYZED THE FACTS AND ULTIMATELY OB SERVED CERTAIN ABNORMAL FEATURES, WHICH WERE MENTIONED IN THE ASSESSMENT ORDER. THE A SSESSING OFFICER, THEREFORE, CONCLUDED THAT NATURE AND SOURCE OF SUCH MONEY WAS QUESTIONAB LE AND EVIDENCE PRODUCED WAS UNSATISFACTORY. CONSEQUENTLY, THE ASSESSING OFFICER INVOKED THE PROVISIONS UNDER SECTION 68/69 OF THE INCOME TAX ACT AND MADE ADDITION OF RS .24,00,000/-. ON APPEAL THE LEARNED CIT (A) BY FOLLOWING THE DECI SION OF THE SUPREME COURT IN THE CASE OF CL. T. VS. M/S. LOVELY EXPORTS PVT. LTD., REPORT ED IN (2008) 216 CTR 195 ALLOWED THE APPEAL BY HOLDING -THAT SHARE CAPITAL/PREMIUM OF RS . 24,00,000/- RECEIVED FROM THE INVESTORS WAS NOT LIABLE TO BE TREATED UNDER SECTIO N 68 AS UNEXPLAINED CREDITS AND IT SHOULD NOT BE TAXED IN THE HANDS OF THE APPELLANT COMPANY. AS INDICATED EARLIER, THE TRIBUNAL BELOW DISMISSED THE APPEAL FILED BY THE REVENUE. AFTER HEARING THE LEARNED COUNSEL FOR THE APPELLANT AND AFTER GOING THROUGH THE DECISION OF THE SUPREME COURT IN THE CASE OF CL. T. VS. M/S. LO VELY EXPORTS PVT. LTD. [SUPRA], WE ARE AT ONE WITH THE TRIBUNAL BELOW THAT THE POINT INVOLVED IN THIS APPEAL IS COVERED BY THE SAID SUPREME COURT DECISION IN FAVOUR OF THE ASSESSEE AN D THUS, NO SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN THIS APPEAL. THE APPEAL IS DEVOID OF ANY SUBSTANCE AND IS DISMISSED. 24. OUR ATTENTION WAS ALSO DRAWN TO THE DECISION O F THE HON'BLE HIGH COURT, CALCUTTA IN THE CASE OF COMMISSIONER OF INCOME TAX VS M/S. NISHAN INDO COMMERCE LTD IN ITA NO. 52 OF 2011 DATED 2 DECEMBER , 2013 WHEREIN THE COURT HELD AS FOLLOWS: THE ASSESSING OFFICER WAS OF THE VIEW THAT THE INC REASE IN SHARE CAPITAL BY RS.52,03,500/- WAS NOTHING BUT THE INTRODUCTION OF THE ASSESSEE'S OWN UNDISCLOSED FUNDS/INCOME INTO THE BOOKS OF ACCOUNTS OF THE ASSESSEE COMPANY. THE ASSE SSING OFFICER ACCORDINGLY TREATED THE INVESTMENT AS UNEXPLAINED CREDIT UNDER SECTION 68 O F THE INCOME TAX ACT AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFOR E THE COMMISSIONER OF INCOME TAX (APPEALS) BEING THE FIRST APPELLATE AUTHORITY AND C ONTENDED THAT THE ASSESSING OFFICER HAD NO MATERIAL TO SHOW THAT THE SHARE CAPITAL WAS THE INCOME OF THE ASSESSEE COMPANY AND AS SUCH THE ADDITION MADE BY THE ASSESSING OFFICER UND ER SECTION 68 OF THE ACT WAS WRONG. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AF TER HEARING THE DEPARTMENT AND THE ASSESSEE COMPANY DELETED THE ADDITION OF RS. 52, 03 ,500/- TO THE INCOME OF THE ASSESSEE COMPANY DURING THE ASSESSMENT YEAR IN QUESTION. THE LEARNED COMMISSIONER OF INCOME BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 2 22 21 11 1 TAX APPEALS FOUND THAT THERE WERE AS MANY AS 2155 A LLOTTEES, WHOSE NAMES, ADDRESSES AND RESPECTIVE SHARES ALLOCATION HAD BEEN DISCLOSED. THE COMMISSIONER OF INCOME TAX APPEALS, FURTHER FOU ND THAT THE ASSESSEE COMPANY RECEIVED THE APPLICATIONS THROUGH BANKERS TO THE IS SUE, WHO HAD BEEN APPOINTED UNDER THE GUIDELINES OF THE STOCK EXCHANGE AND THE ASSESSEE C OMPANY HAD BEEN ALLOTTED SHARES ON THE BASIS OF ALLOTMENT APPROVED BY THE STOCK EXCHAN GE. THE ASSESSEE COMPANY HAD DULY FILED THE RETURN OF ALLOTMENT WITH THE REGISTRAR OF COMPANIES, GIVING COMPLETE PARTICULARS OF THE ALLOTTEES. THE COMMISSIONER OF INCOME TAX (APPEALS) FOUND THAT INQUIRES HAD CONFIRMED THE EXISTENCE OF MOST OF THE SHAREHOLDERS AT THE ADDRES SES INTIMATED TO THE ASSESSING OFFICER, BUT THE ASSESSING OFFICER TOOK THE VIEW THAT THEIR INVESTMENT IN THE ASSESSEE COMPANY WAS NOT GENUINE, ON THE BASIS OF SOME EXTRANEOUS REASON S. THE COMMISSIONER OF INCOME TAX (APPEALS) TOOK NOTE OF THE OBSERVATION OF THE ASSES SING OFFICER THAT ENQUIRY CONDUCTED BY THE INCOME TAX INSPECTOR HAD REVEALED THAT NINE PER SONS MAKING APPLICATIONS FOR 900 SHARES WERE NOT AVAILABLE AT THE GIVEN ADDRESS AND RIGHTLY CONCLUDED THAT THE TOTAL SHARE CAPITAL ISSUED BY THE ASSESSEE COMPANY COULD NOT BE ADDED AS UNEXPLAINED CASH CREDIT UNDER 'SECTION 68 OF THE INCOME TAX ACT. MOREOVER, IF THE NATURE AND SOURCE OF INVESTMENT BY ANY SHAREHOLDER, IN SHARES OF THE ASSESSEE COMPA NY REMAINED UNEXPLAINED, LIABILITY COULD NOT BE FOISTED ON THE COMPANY. THE CONCERNED SHAREHOLDERS WOULD HAVE TO EXPLAIN THE SOURCE OF THEIR FUND. THE LEARNED COMMISSIONER ON CONSIDERING THE SUBMISS IONS OF THE, RESPECTIVE PARTIES AND CONSIDERING THE MATERIALS, FOUND THAT THE ASSESSING OFFICER HAD APPLIED THE PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT ARBITRARILY AND IL LEGALLY AND IN ANY CASE WITHOUT GIVING THE ASSESSEE ADEQUATE OPPORTUNITY OF REPRESENTATION AND/OR HEARING. LEARNED TRIBUNAL AGREED WITH THE FACTUAL FINDINGS O F THE LEARNED COMMISSIONER AND ACCORDINGLY THE LEARNED TRIBUNAL DISMISSED THE APPE AL OF THE REVENUE AND AFFIRMED THE DECISION OF THE LEARNED COMMISSIONER. MR. DUTTA APPEARING ON BEHALF OF THE PETITIONERS CI TED JUDGMENT OF THE DIVISION BENCH OF THIS COURT IN COMMISSIONER OF INCOME TAX VS. RUBY T RADERS AND EXPORTERS LIMITED REPORTED IN 236 (2003) ITR 3000 WHERE A DIVISION BE NCH OF THIS COURT HELD THAT WHEN SECTION 68 IS RESORTED TO, IT IS INCUMBENT ON THE A SSESSEE COMPANY TO PROVE AND ESTABLISH THE IDENTITY OF THE SUBSCRIBERS, THEIR CREDIT WORTH INESS AND THE GENUINENESS OF THE TRANSACTION. THE AFORESAID JUDGMENT WAS RENDERED IN THE CONTEXT OF THE FACTUAL BACKGROUND OF THE AFORESAID CASE WHERE, DESPITE SEVERAL OPPORTUNITIES BEING GIVEN TO THE ASSESSEE, NOTHING WAS DISCLOSED ABOUT THE IDENTITY OF THE SHAREHOLDER S. IN THE INSTANT CASE, THE ASSESSEEDISCLOSED THE IDENTITY AND ADDRESS AND PART ICULARS OF SHARE ALLOCATION OF THE SHAREHOLDERS. IT WAS ALSO FOUND ON THE FACTS THAT A LL THE SHAREHOLDERS WERE IN EXISTENCE. ONLY NINE SHAREHOLDERS SUBSCRIBING TO ABOUT 900 SHA RES OUT OF 6, 12,000 SHARES WERE NOT FOUND AVAILABLE AT THEIR ADDRESSES, AND THAT TOO, I N COURSE OF ASSESSMENT PROCEEDINGS IN THE YEAR 1994, I.E., ALMOST 3 YEARS AFTER THE ALLOTMENT . BY AN ORDER DATED 2ND MAY, 2001, THIS COURT ADMITTE D THE APPEAL ON THREE QUESTIONS WHICH ESSENTIALLY CENTRE AROUND THE QUESTION OF WHETHER T HE APPELLATE COMMISSIONER ERRED IN LAW IN DELETING THE ADDITION OF RS. 52, 03, 500/- TO TH E INCOME OF THE ASSESSEE AS MADE BY THE ASSESSING OFFICER. WE ARE OF THE VIEW THAT THERE IS NO QUESTION OF LAW INVOLVED IN THIS APPEAL FAR LESS ANY SUBSTANTIAL QUESTION OF LAW. THE LEARNED TRIBUNAL HAS CONCURRED WITH THE LEARNED COMMISSIONER ON FACTS AND FOUND THAT THERE WERE MATERIALS TO SHOW THAT THE ASSESSEE HAD DISCLOSED THE PARTICULARS OF THE BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 2 22 22 22 2 SHAREHOLDERS. THE FACTUAL FINDINGS CANNOT BE INTERF ERED WITH, IN APPEAL. WE ARE OF THE VIEW THAT ONCE THE IDENTITY AND OTHER RELEVANT PARTICULA RS OF SHAREHOLDERS ARE DISCLOSED, IT IS FOR THOSE SHAREHOLDERS TO EXPLAIN THE SOURCE OF THEIR F UNDS AND NOT FOR THE ASSESSEE COMPANY TO SHOW WHEREFROM THESE SHAREHOLDERS OBTAINED FUNDS. 25. FURTHER, OUR ATTENTION WAS DRAWN TO THE DECISI ON OF THE HON'BLE HIGH COURT, CALCUTTA IN THE CASE OF COMMISSIONER OF INCOME TAX VS M/S. LEONARD COMMERCIAL (P) LTD IN ITAT NO. 114 OF 2011 DATED 13 TH JUNE, 2011 WHEREIN THE COURT HELD AS FOLLOWS: THE ONLY QUESTION RAISED IN THIS APPEAL IS WHETHER THE COMMISSIONER OF INCOME-TAX (APPEALS) AND THE TRIBUNAL BELOW ERRED IN LAW IN DE LETING THE ADDITION OF RS.8,52,000/-, RS. 91,50,000/- AND RS. 13,00,000/- MADE BY THE ASSESSI NG OFFICER ON ACCOUNT OF SHARE CAPITAL, SHARE APPLICATION MONEY AND INVESTMENT IN HTCCL RES PECTIVELY. AFTER HEARING MD. NIZAMUDDIN, LEARNED ADVOCATE APPE ARING ON BEHALF OF THE APPELLANT AND AFTER GOING THROUGH THE MATERIALS ON RECORD, WE FIN D THAT ALL SUCH APPLICATION MONEY WERE RECEIVED BY THE ASSESSEE BY WAY OF ACCOUNT PAYEE CH EQUES AND THE ASSESSEE ALSO DISCLOSED THE COMPLETE LIST OF SHAREHOLDERS WITH THEIR COMPLE TE ADDRESSES AND GIR NUMBERS FOR THE RELEVANT ASSESSMENT YEARS IN WHICH SHARE APPLICATIO N WAS CONTRIBUTED. IT FURTHER APPEARS THAT ALL THE PAYMENTS WERE MADE BY THE APPLICANTS B Y ACCOUNT PAYEE CHEQUES. IT APPEARS FROM THE ASSESSING OFFICERS ORDER THAT H IS GRIEVANCE WAS THAT THE ASSESSEE WAS NOT WILLING TO PRODUCE THE PARTIES WHO HAD ALLEGEDL Y ADVANCED THE FUND. IN OUR OPINION, BOTH THE COMMISSIONER OF INCOME-TAX (APPEALS) AND THE TRIBUNAL BELOW WERE JUSTIFIED IN HOLDING THAT AFTER DISCLOSURE OF THE FULL PARTICULARS INDICATED ABOVE, THE INITIAL ONUS OF THE ASSESSEE WAS SHIFTED AND IT WAS THE DUTY OF THE ASSESSING OFFICER TO ENQUIRE WHETHER THOSE PARTICULARS WERE CORRECT OR N OT AND IF THE ASSESSING OFFICER WAS OF THE VIEW THAT THE PARTICULARS SUPPLIED WERE INSUFFI CIENT TO DETECT THE REAL SHARE APPLICANTS, TO ASK FOR FURTHER PARTICULARS. THE ASSESSING OFFICER HAS NOT ADOPTED EITHER OF THE AFORESAID COURSES BUT HAS SIMPLY BLAMED THE ASSESSEE FOR NOT PRODUCING THOSE SHARE A PPLICANTS. IN OUR VIEW, IN THE CASE BEFORE US SO LONG THE ASSE SSING OFFICER WAS UNABLE TO ARRIVE AT A FINDING THAT THE PARTICULARS GIVEN BY THE ASSESSEE WERE FALSE, THERE WAS NO SCOPE OF ADDING THOSE MONEY UNDER SECTION 68 OF THE INCOME- TAX ACT AND THE TRIBUNAL BELOW RIGHTLY HELD THAT THE ONUS WAS VALIDLY DISCHARGED. WE, THUS, FIND THAT BOTH THE AUTHORITIES BELOW, ON CONSIDERATION OF THE MATERIALS ON RECORD, RIGHTLY APPLIED THE CORRECT LAW WHICH ARE REQUIRED TO BE APPLIED IN THE FACTS OF THE PRESENT CASE AND, THUS, WE DO NOT FIND ANY REASON TO INTERF ERE WITH THE CONCURRENT FINDINGS OF FACT BASED ON MATERIALS ON RECORD. THE APPEAL IS, THUS, DEVOID OF ANY SUBSTANCE AND IS DISMISSED SUMMARILY AS IT DOES NOT INVOLVE ANY SUBSTANTIAL QUESTION OF LAW. 26. FURTHER, IN THE CASE OF PR.CITVS HI-TECH RESIDE NCY (P) LTD (96 TAXMANN.COM 402), THE GRIEVANCE OF THE REVENUE BEFO RE THE HONBLE DELHI HIGH COURT WAS THAT THE NONE OF THE INVESTORS IN THE SHA RE CAPITAL OF THE ASSESSEE HAD BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 2 22 23 33 3 PERSONALLY APPEARED BEFORE THE AO AND FOR THAT REAS ON THE ADDITION MADE BY THE AO U/S 68 WAS JUSTIFIED. WHILE DISMISSING THE APPEAL O F THE REVENUE, THE HIGH COURT HELD AS FOLLOWS: 4. THE COURT FINDS THAT THE EXERCISE FOR DETERMINI NG THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE INVESTORS OF THE SHARE CAPI TAL OF THE ASSESSEE AS WELL AS LENDERS WAS UNDERTAKEN IN AN ELABORATE MANNER BY THE CIT (A). C OMMENTS FROM THE AO WERE SOUGHT. DETAILED REASONS HAVE BEEN GIVEN BY THE CIT (A) TO COME TO THE CONCLUSION THAT THE ASSESSEE HAD DISCHARGED ITS ONUS OF ESTABLISHING TH E IDENTITY, GENUINENESS AND CREDITWORTHINESS OF BOTH THE INVESTORS AS WELL AS T HE LENDERS. THIS HAS BEEN CONCURRED WITH BY THE ITAT IN THE IMPUGNED ORDER WHICH IS AGAIN AN EXTREMELY DETAILED ONE. 5. THE CONCURRENT FACTUAL FINDINGS OF BOTH THE CIT (A) AND ITAT HAVE NOT BEEN SHOWN TO BE PERVERSE BY THE APPELLANT. THIS IS VIRTUALLY THE FO URTH STAGE OF THE LITIGATION. 6. QUESTION (1) IS ACCORDINGLY ANSWERED IN THE NEGA TIVE, I.E., IN FAVOUR OF THE ASSESSEE. IT IS NOTED THAT THE SLP FILED BY THE REVENUE AGAIN ST THIS JUDGMENT HAS BEEN DISMISSED BY THE HONBLE SUPREME COURT. 27. AS NOTED FROM THE JUDICIAL PRECEDENTS CITED AB OVE, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE THEN THERE IS A DUTY CASTED UPON THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF CREDIT FOUND IN HI S BOOKS. IN THE INSTANT CASE, THE CREDIT IS IN THE FORM OF RECEIPT OF SHARE CAPITAL W ITH PREMIUM FROM SHARE APPLICANTS. THE NATURE OF RECEIPT TOWARDS SHARE CAPITAL IS SEEN FROM THE ENTRIES PASSED IN THE RESPECTIVE BALANCE SHEETS OF THE COMPANIES AS SHARE CAPITAL AND INVESTMENTS. IN RESPECT OF SOURCE OF CREDIT, THE ASSESSEE HAS TO PR OVE THE THREE NECESSARY INGREDIENTS I.E. IDENTITY OF SHARE APPLICANTS, GENUINENESS OF T RANSACTIONS AND CREDITWORTHINESS OF SHARE APPLICANTS. FOR PROVING THE IDENTITY OF SHARE APPLICANTS, THE ASSESSEE FURNISHED THE NAME, ADDRESS, PAN OF SHARE APPLICANTS TOGETHER WITH THE COPIES OF BALANCE SHEETS AND INCOME TAX RETURNS. WITH REGARD TO THE C REDITWORTHINESS OF SHARE APPLICANTS, AS WE NOTED SUPRA, THESE COMPANIES ARE HAVING CAPITAL IN SEVERAL CRORES OF RUPEES AND THE INVESTMENT MADE IN THE ASSESSEE C OMPANY IS ONLY A SMALL PART OF THEIR CAPITAL. THESE TRANSACTIONS ARE ALSO DULY REF LECTED IN THE BALANCE SHEETS OF THE SHARE APPLICANTS, SO CREDITWORTHINESS IS PROVED. EV EN IF THERE WAS ANY DOUBT IF ANY REGARDING THE CREDITWORTHINESS OF THE SHARE APPLICA NTS WAS STILL SUBSISTING, THEN AO SHOULD HAVE MADE ENQUIRIES FROM THE AO OF THE SHARE SUBSCRIBERS AS HELD IN THE SEVERAL JUDGMENTS CITED ABOVE, WHICH HAS NOT BEEN D ONE, SO NO ADVERSE VIEW COULD HAVE BEEN DRAWN. THE THIRD INGREDIENT IS GENUINENES S OF THE TRANSACTIONS, FOR WHICH WE NOTE THAT THE MONIES HAVE BEEN DIRECTLY PAID TO THE ASSESSEE COMPANY BY ACCOUNT BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 2 22 24 44 4 PAYEE CHEQUES OUT OF SUFFICIENT BANK BALANCES AVAIL ABLE IN THE BANK ACCOUNTS OF THE SHARE APPLICANTS. IT WILL BE EVIDENT FROM THE PAPER BOOK THAT THE ASSESSEE HAS EVEN DEMONSTRATED THE SOURCE OF MONEY DEPOSITED INTO THE IR BANK ACCOUNTS, WHICH IN TURN HAS BEEN USED BY THEM TO SUBSCRIBE TO THE ASSESSEE COMPANY AS SHARE APPLICATION. HENCE THE SOURCE OF SOURCE IS PROVED BY THE ASSESSE E IN THE INSTANT CASE THOUGH THE SAME IS NOT REQUIRED TO BE DONE BY THE ASSESSEE AS PER LAW AS IT STOOD/ APPLICABLE IN THIS ASSESSMENT YEAR. THE SHARE APPLICANTS HAVE CON FIRMED THE SHARE APPLICATION AS WELL AS THE PAYMENTS MADE TO THE ASSESSEE COMPANY, WHICH ARE DULY CORROBORATED WITH THEIR RESPECTIVE BANK STATEMENTS AND ALL THE P AYMENTS ARE BY ACCOUNT PAYEE CHEQUES. 28. WE FIND THAT THE HONBLE SUPREME COURT IN THE C ASE OF M/S EARTH METAL ELECTRICALS P LTD VS CIT &ANR. REPORTED IN 2010 (7) TMI 1137 IN CIVIL APPEAL NO. 21073 / 2009 DATED 30.7.2010 ARISING FROM THE ORDER OF HONBLE BOMBAY HIGH COURT HAD HELD AS UNDER:- ORDER DELAY CONDONED. LEAVE GRANTED. HEARD LEARNED COUNSEL ON BOTH SIDES. WE HAVE EXAMINED THE POSITION. WE FIND THAT THE SHA REHOLDERS ARE GENUINE PARTIES. THEY ARE NOT BOGUS AND FICTITIOUS. THEREFORE, THE IMPUGN ED ORDER IS SET ASIDE. THE APPEAL IS ALLOWED ACCORDINGLY. NO ORDER AS TO C OSTS. 29. IN THE INSTANT CASE BEFORE US, WE ALSO NOTE THA T THE SHARE SUBSCRIBING COMPANIES ARE DULY ASSESSED TO INCOME TAX.THE LD AR HAD PLACED ON RECORD THE COPIES OF THE ASSESSMENT ORDERS FRAMED IN THE CASES OF SEVERAL OF THE SHARE SUBSCRIBING COMPANIES, AS NOTED ABOVE. IT THEREFORE CANNOT BE DISPUTED THAT THE SHARE SUBSCRIBING COMPANIES ARE NOT IN EXISTENCE. F ROM THE ASSESSMENT ORDERS, IT IS NOTED THAT THE SHARE SUBSCRIBING COMPANIES ARE DULY ASSESSED TO INCOME TAX AND THEIR INCOME TAX PARTICULARS TOGETHER WITH THE COPI ES OF RESPECTIVE INCOME TAX RETURNS WITH THEIR BALANCE SHEETS ARE ALREADY ON RE CORD. WE ALSO FIND THAT THE LD. CIT(A) HAD CATEGORICALLY STATED THAT THE SCRUTINY A SSESSMENTS WERE FRAMED ON THE SHARE SUBSCRIBING COMPANIES FOR THE ASST YEAR 2012- 13 WHICH SHOWS THEIR EXISTENCE IS GENUINE AND TRANSACTIONS CARRIED OUT B Y THEM WERE THE SUBJECT MATTER OF BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 2 22 25 55 5 EXAMINATION BY THE INCOME TAX DEPARTMENT IN SCRUTIN Y PROCEEDINGS. THIS FACT HAS NOT BEEN CONTROVERTED BY THE REVENUE BEFORE US. 30. WE MAY GAINFULLY REFER TO THE JUDGMENT IN THE C ASE OF PR. CIT VS PARADISE INLAND SHIPPING (P) LTD (84 TAXMANN.COM 58) WHEREIN THE BOMBAY HIGH COURT HAD DELETED SIMILAR ADDITION ON SIMILAR SET OF FACTS MA DE ON ACCOUNT OF UNEXPLAINED CASH CREDITS AND THE SLP FILED BY THE REVENUE AGAINST TH E JUDGMENT HAS BEEN DISMISSED BY THE HONBLE SUPREME COURT. THE RELEVANT EXTRACTS OF THE JUDGMENT IS AS FOLLOWS: 5. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATIONS TO THE RIVAL CONTENTIONS OF THE LEARNED COUNSEL AND WE HAVE ALSO GONE THROUGH THE RECORDS. THE BASIC CONTENTION OF THE LEARNED COUNSEL APPEARING FOR THE APPELLANTS REVOLVES UPON THE STAND TAKEN BY THE APPELLANTS WHETHER THE SHAREHOLDERS WHO HAVE INVESTED IN THE S HARES OF THE RESPONDENTS ARE FICTITIOUS OR NOT. IN THIS CONNECTION, THE RESPONDENTS IN SUPP ORT OF THEIR STAND ABOUT THE GENUINENESS OF THE TRANSACTION ENTERED INTO WITH SUCH COMPANIES HAS PRODUCED VOLUMINOUS DOCUMENTS WHICH, INTER ALIA, HAVE BEEN NOTED AT PARA 3 OF THE JUDGMENT OF THE CIT APPEALS WHICH READS THUS : 'THE ASSESSMENT IS COMPLETED WITHOUT REBUTTING THE 550 PAGE DOCUMENTS WHICH ARE UNFLINCHING RECORDS OF THE COMPANIES. THE LIST OF D OCUMENTS SUBMITTED ON 09.03.2015 ARE AS FOLLOWS : 1. SONY FINANCIAL SERVICES LTD. - CIN U74899DL1995P LC068362- DATE OF REGISTRATION 09/05/1995 6. ON GOING THROUGH THE DOCUMENTS WHICH HAVE BEEN PROD UCED WHICH ARE BASICALLY FROM THE PUBLIC OFFICES, WHICH MAINTAIN THE RECORDS OF THE C OMPANIES. THE DOCUMENTS ALSO INCLUDE ASSESSMENT ORDERS FOR LAST THREE PRECEDING YEARS OF SUCH COMPANIES. 7. THE APPELLANTS HAVE FAILED TO EXPLAIN AS TO HOW SU CH COMPANIES HAVE BEEN ASSESSED THOUGH ACCORDING TO THEM SUCH COMPANIES ARE NOT EXI STING AND ARE FICTITIOUS COMPANIES. BESIDES THE DOCUMENTS ALSO INCLUDED THE REGISTRATIO N OF THE COMPANY WHICH DISCLOSES THE REGISTERED ADDRESS OF SUCH COMPANIES. THERE IS NO M ATERIAL ON RECORD PRODUCED BY THE APPELLANTS WHICH COULD REBUT THE DOCUMENTS PRODUCED BY THE RESPONDENTS HEREIN. IN SUCH CIRCUMSTANCES, THE FINDING OF FACT ARRIVED AT BY TH E AUTHORITIES BELOW WHICH ARE BASED ON DOCUMENTARY EVIDENCE ON RECORD CANNOT BE SAID TO BE PERVERSE. LEARNED COUNSEL APPEARING FOR THE APPELLANTS WAS UNABLE TO POINT OU T THAT ANY OF SUCH FINDINGS ARRIVED AT BY THE AUTHORITIES BELOW WERE ON THE BASIS OF MISLEADI NG OF EVIDENCE OR FAILURE TO EXAMINE ANY MATERIAL DOCUMENTS WHILST COMING TO SUCH CONCLUSION S. UNDER THE GUISE OF THE SUBSTANTIAL QUESTION OF LAW, THIS COURT IN AN APPEAL UNDER SECT ION 260A OF THE INCOME TAX ACT CANNOT RE-APPRECIATE THE EVIDENCE TO COME TO ANY CONTRARY EVIDENCE. CONSIDERING THAT THE AUTHORITIES HAVE RENDERED THE FINDINGS OF FACTS BAS ED ON DOCUMENTS WHICH HAVE NOT BEEN DISPUTED, WE FIND THAT THERE ARE NO SUBSTANTIAL QUE STION OF LAW WHICH ARISES IN THE PRESENT APPEAL FOR CONSIDERATION. 31. WE ALSO FIND THAT THE HONBLE APEX COURT RECENT LY IN THE CASE OF PRINCIPAL CIT VSVAISHNODEVIREFOILS&SOLVEX REPORTED IN (2018) 96 TAXMANN.COM 469 (SC) WHEREIN THE SLP OF THE REVENUE HAS BEEN DISMISSED B Y THE HONBLE APEX COURT. THE BRIEF FACTS OF THAT CASE WERE THAT THE ADDITION U/S 68 OF THE ACT WAS MADE BY THE BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 2 22 26 66 6 ASSESSING OFFICER IN RESPECT OF CAPITAL CONTRIBUTED BY THE PARTNER OF THE FIRM. THE HONBLE GUJARAT HIGH COURT NOTED THAT WHEN THE CONC ERNED PARTNER HAD CONFIRMED BEFORE THE ASSESSING OFFICER ABOUT HIS FACT OF MAKI NG CAPITAL CONTRIBUTION IN THE FIRM AND THAT THE SAID INVESTMENT IS ALSO REFLECTED IN HIS INDIVIDUAL BOOKS OF ACCOUNTS, THEN NO ADDITION COULD BE MADE U/S 68 OF THE ACT. THE DECISION OF HONBLE GUJARAT HIGH COURT IS REPORTED IN (2018) 89 TAXMANN.COM 80 (GUJ HC) . THE SLP OF THE REVENUE AGAINST THIS JUDGMENT WAS DI SMISSED BY THE HONBLE SUPREME COURT. 32. WE MAY GAINFULLY REFER TO THE FOLLOWING DECISIO NS OF THE HONBLE HIGH COURT IN THE CASES AS UNDER : (A) IN THE CASE OF PR. CIT VS CHAIN HOUSE INTERNATI ONAL (P) LTD [2018] (98 TAXMANN.COM 47)THE AO HAD ADDED THE SHARE APPLICATI ON BY WAY OF UNEXPLAINED CASH CREDITS WAS THAT THE ASSESSEE WAS UNABLE TO GI VE ANY JUSTIFIABLE REASON FOR ISSUING SHARES AT A PREMIUM. THE HONBLE MADHYA PRA DESH HIGH COURT DID NOT AGREE WITH THIS REASONING GIVEN BY THE AO FOR MAKIN G ADDITION U/S 68, HOLDING AS UNDER: ISSUING THE SHARE AT A PREMIUM WAS A COMMERCIAL DE CISION. IT IS THE PREROGATIVE OF THE BOARD OF DIRECTORS OF A COMPANY TO DECIDE THE PREMI UM AMOUNT AND IT IS THE WISDOM OF SHAREHOLDER WHETHER THEY WANT TO SUBSCRIBE THE SHAR ES AT SUCH A PREMIUM OR NOT. THIS WAS A MUTUAL DECISION BETWEEN BOTH THE COMPANIES. IN DA Y TO DAY MARKET, UNLESS AND UNTIL, THE RATES IS FIXED BY ANY GOVT. AUTHORITY OR UNLESS THE RE IS ANY RESTRICTION ON THE AMOUNT OF SHARE PREMIUM UNDER ANY LAW, THE PRICE OF THE SHARE S IS DECIDED ON THE MUTUAL UNDERSTANDING OF THE PARTIES CONCERNED. [PARA 52] ONCE THE GENUINENESS, CREDITWORTHINESS AND IDENTITY OF INVESTORS ARE ESTABLISHED, THE REVENUE SHOULD NOT JUSTIFIABLY CLAIM TO PUT ITSELF IN THE ARMCHAIR OF A BUSINESSMAN OR IN THE POSITION OF THE BOARD OF DIRECTORS AND ASSUME THE R OLE OF ASCERTAINING HOW MUCH IS A REASONABLE PREMIUM HAVING REGARD TO THE CIRCUMSTANC ES OF THE CASE. [PARA 53] THERE IS NO DISPUTE ABOUT THE RECEIPT OF FUNDS THRO UGH BANKING CHANNEL NOR THERE IS ANY DISPUTE ABOUT THE IDENTITY, CREDITWORTHINESS AND GE NUINENESS OF THE INVESTORS AND, THEREFORE, THE SAME HAS BEEN ESTABLISHED BEYOND ANY DOUBT AND THERE SHOULD NOT HAVE BEEN ANY QUESTION OR DISPUTE ABOUT PREMIUM PAID BY THE INVES TORS; THEREFORE, UNLESS THERE IS A LIMITATION PUT BY THE LAW ON THE AMOUNT OF PREMIUM, THE TRANSACTION SHOULD NOT BE QUESTIONED MERELY BECAUSE THE ASSESSING AUTHORITY T HINKS THAT THE INVESTOR COULD HAVE MANAGED BY PAYING A LESSER AMOUNT AS SHARE PREMIUM AS A PRUDENT BUSINESSMAN. THE TEST OF PRUDENCE BY SUBSTITUTING ITS OWN VIEW IN PLACE O F THE BUSINESSMAN'S HAS NOT BEEN APPROVED BY THE SUPREME COURT. [PARA 54] (B) IN THE CASE OF CIT V. GAGANDEEP INFRASTRUCTURE (P.) LTD. [2017] 80 TAXMANN.COM 272/247 TAXMAN 245/394 ITR 680 THE REVE NUE CONTENDED THAT THE FACT THAT THE SHARES WERE ISSUED AT HIGH PREMIUM RA ISED SUSPICION ON THE BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 2 22 27 77 7 GENUINENESS OF THE TRANSACTIONS. WHILE DISMISSING T HIS PLEA RAISED BY THE REVENUE, THE HONBLE BOMBAY HIGH COURT HELD AS UNDER: (E) WE FIND THAT THE PROVISO TO SECTION 68 OF THE A CT HAS BEEN INTRODUCED BY THE FINANCE ACT 2012 WITH EFFECT FROM 1ST APRIL, 2013. THUS IT WOUL D BE EFFECTIVE ONLY FROM THE ASSESSMENT YEAR 2013-14 ONWARDS AND NOT FOR THE SUBJECT ASSESS MENT YEAR. IN FACT, BEFORE THE TRIBUNAL, IT WAS NOT EVEN THE CASE OF THE REVENUE T HAT SECTION 68 OF THE ACT AS IN FORCE DURING THE SUBJECT YEARS HAS TO BE READ/UNDERSTOOD AS THOUGH THE PROVISO ADDED SUBSEQUENTLY EFFECTIVE ONLY FROM 1ST APRIL, 2013 WA S ITS NORMAL MEANING. THE PARLIAMENT DID NOT INTRODUCE TO PROVISO TO SECTION 68 OF THE A CT WITH RETROSPECTIVE EFFECT NOR DOES THE PROVISO SO 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 6 8 OF THE ACT IS IMMATERIAL AND DOES NOT CHANGE THE INTERPRETATION OF SECTION 68 OF THE ACT BOTH BEFORE AND AFTER THE ADDING OF THE PROVISO. IN ANY VIEW OF THE MATTER THE THREE ESSENT IAL TESTS WHILE CONFIRMING THE PRE-PROVISO SECTION 68 OF THE ACT LAID DOWN BY THE COURTS NAMEL Y 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 FACTS IT WAS FOUND SATISFIED. F URTHER 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. THE Y ARE BOGUS. THE APEX COURT IN LOVELY EXPORTS (P.) LTD.(SUPRA) IN THE CONTEXT TO THE PRE- AMENDED SECTION 68 OF THE ACT HAS HELD THAT WHERE THE REVENUE URGES THAT THE AMOUNT OF SHA RE APPLICATION MONEY HAS BEEN RECEIVED FROM BOGUS SHAREHOLDERS THEN IT IS FOR THE INCOME TAX OFFICER TO PROCEED BY REOPENING THE ASSESSMENT OF SUCH SHAREHOLDERS AND A SSESSING THEM TO TAX IN ACCORDANCE WITH LAW. IT DOES NOT ENTITLE THE REVENUE TO ADD TH E SAME TO THE ASSESSEE'S INCOME AS UNEXPLAINED CASH CREDIT. (F) IN THE ABOVE CIRCUMSTANCES AND PARTICULARLY IN VIEW OF THE CONCURRENT FINDING OF FACT ARRIVED AT BY THE CIT(A) AND THE TRIBUNAL, THE PROP OSED QUESTION OF LAW DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. THUS NOT ENTERT AINED. (C) IN CIT VS. ANSHIKA CONSULTANTS PVT LTD (62 TAXM ANN.COM 192), THE AO HAD ADDED THE SHARE APPLICATION MONIES TREATING IT TO B E THEIR UNACCOUNTEDMONIES ROUTED THOUGH ACCOMMODATION ENTRIES SINCE THE SHARES WERE ISSUED AT A HIGH PREMIUM. THE HONBLE DELHI HIGH COURT DID NOT AGREE WITH THIS CO NTENTION PUT FORTH BY THE REVENUE, BY OBSERVING AS UNDER: WHETHER THE ASSESSEE-COMPANY CHARGED A HIGHER PREM IUM OR NOT, SHOULD NOT HAVE BEEN THE SUBJECT MATTER OF THE ENQUIRY IN THE FIRST INST ANCE. INSTEAD, THE ISSUE WAS WHETHER THE AMOUNT INVESTED BY THE SHARE APPLICANTS WERE FROM L EGITIMATE SOURCES. THE OBJECTIVE OF SECTION 68 IS TO AVOID INCLUSION OF AMOUNT WHICH AR E SUSPECT. THEREFORE, THE EMPHASIS ON GENUINENESS OF ALL THE THREE ASPECTS, IDENTITY, CRE DITWORTHINESS AND THE TRANSACTION. WHAT IS DISQUIETING IN THE PRESENT CASE IS WHEN THE ASSESSM ENT WAS COMPLETED, THE INVESTIGATION REPORT WHICH WAS SPECIFICALLY CALLED FROM THE CONCE RNED DEPARTMENT WAS AVAILABLE BUT NOT DISCUSSED BY THE ASSESSING OFFICER. HAD HE CARED TO DO SO, THE IDENTITY OF THE INVESTORS, THE GENUINENESS OF THE TRANSACTION AND THE CREDITWORTHI NESS OF THE SHARE APPLICANTS WOULD HAVE BEEN APPARENT. EVEN OTHERWISE, THE SHARE APPLICANTS ' PARTICULARS WERE AVAILABLE WITH THE ASSESSING OFFICER IN THE FORM OF BALANCE SHEETS INC OME-TAX RETURNS, PAN DETAILS ETC. WHILE ARRIVING AT THE CONCLUSION THAT HE DID, THE ASSESSI NG OFFICER DID NOT CONSIDER IT WORTHWHILE TO MAKE ANY FURTHER ENQUIRY BUT BASED HIS ORDER ON THE HIGH NATURE OF THE PREMIUM AND CERTAIN FEATURES WHICH APPEARED TO BE SUSPECT, TO D ETERMINE THAT THE AMOUNT HAD BEEN ROUTED FROM THE ASSESSEE'S ACCOUNT TO THE SHARE APP LICANTS' ACCOUNT. AS HELD CONCURRENTLY BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 2 22 28 88 8 BY THE COMMISSIONER (APPEALS) AND THE TRIBUNAL, THE SE CONCLUSIONS WERE CLEARLY BASELESS AND FALSE. THIS COURT IS CONSTRAINED TO OBSERVE THA T THE ASSESSING OFFICER UTTERLY FAILED TO COMPLY WITH HIS DUTY CONSIDERS ALL THE MATERIALS ON RECORD, IGNORING SPECIFICALLY THE MOST CRUCIAL DOCUMENTS. 33. WE ALSO FIND THAT THE RELIANCE PLACED BY THE LD DR ON THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF RAJMANDI R ESTATES SUPRA WAS DISTINGUISHABLE ON FACTS AS THE SAID DECISION WAS R ENDERED IN THE CONTEXT OF VALIDITY OF REVISIONARY JURISDICTION U/S 263 OF THE ACT BY T HE LEARNED ADMINISTRATIVE COMMISSIONER. THIS FACT HAS ALREADY BEEN ADDRESSED BY THIS TRIBUNAL IN THE CASE OF VSP STEEL P LTD SUPRA. NO DECISION WHATSOEVER WAS R ENDERED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF RAJ MANDIR ESTATES P. LTD ON MERITS OF THE ADDITION AND HENCE DOES NOT COME TO THE RESCUE OF T HE REVENUE IN THE FACTS OF THE INSTANT CASE. 33. INSTEAD, WE FIND THAT THE DECISION OF THE HONB LEDELHI HIGH COURT IN THE CASE OF CIT VSGANGESHWARI METAL (P) LTD (ITA NO. 59 7 OF 2012) DATED 21.01.2012 IS OF MUCH RELEVANCE IN THE FACTS OF THE ASSESSEES CASE. IN THIS CASE THE ASSESSEE HAD RECEIVED SHARE APPLICATION MONEY OF RS.55.50 LACS D URING THE YEAR IN QUESTION. THE ASSESSEE FILED THE COMPLETE NAMES, ADDRESSES OF THE SHARE APPLICANTS, CONFIRMATORY LETTERS FROM THEM, COPIES OF BANK STATEMENTS OF BOT H THE COMPANY AS WELL AS THE SHARE APPLICANTS AND COPIES OF SHARE APPLICATION FO RMS. IN SPITE OF THE AFORESAID DOCUMENTARY EVIDENCES THE AO HELD THE EXPLANATION T O BE UNACCEPTABLE AND TREATED THE SHARE APPLICATION AS UNEXPLAINED CASH CREDIT TH EREBY MAKING ADDITION UNDER SECTION 68 OF THE INCOME-TAX ACT, 1961. ON APPEAL T HE CIT(APPEALS) DELETED THE AFORESAID ADDITION HOLDING THAT THE IDENTITY OF THE SHARE APPLICANTS STOOD ESTABLISHED BEYOND DOUBT, ALL THE PAYMENTS WERE THROUGH ACCOUNT PAYEE CHEQUES AND THE SHARE APPLICANTS WERE REGULAR INCOME-TAX ASSESSEES. THE C IT(APPEALS) FURTHER HELD THAT THE REVENUE DID NOT BRING ANY EVIDENCE ON RECORD TO SUGGEST THAT THE SHARE APPLICATION HAD BEEN RECEIVED BY THE ASSESSEE FROM ITS OWN UNDISCLOSED SOURCES NOR ANY MATERIAL WAS BROUGHT ON RECORD TO SHOW THAT .TH E APPLICANTS WERE BOGUS. THE REVENUE WAS NEITHER ABLE TO CONTROVERT THE DOCUMENT ARY EVIDENCES FILED BY THE APPELLANT NOR PROVE THAT THE SHARE APPLICATION WERE INGENUINE OR THE APPLICANTS WERE NON-CREDITWORTHY. THE FINDINGS OF THE CIT(APPEALS) WERE UPHELD BY THE INCOME-TAX APPELLATE TRIBUNAL. ON APPEAL TO THE HIGH COURT, TH E REVENUE PLACED STRONG RELIANCE ON THE DECISION OF ANOTHER COORDINATE BENC H OF THE SAME COURT IN THE' CASE OF CIT VS NOVO PROMOTERS &FINLEASE (P) LTD (342 ITR 169). THE HIGH COURT BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 2 22 29 99 9 HOWEVER HELD THAT THE AFORESAID JUDGMENT WAS DISTIN GUISHABLE FROM THE FACTS OF THE PRESENT CASE. THE COURT OBSERVED THAT IN THAT JUDGM ENT THE ASSESSING OFFICER HAD BROUGHT ON RECORD ENOUGH CORROBORATIVE EVIDENCE TO SHOW THAT THE ASSESSEE HAD ROUTED UNACCOUNTED MONIES INTO ITS BOOKS THROUGH ME DIUM OF SHARE SUBSCRIPTION. THE SHARE APPLICANTS HAD CONFESSED THAT THEY WERE ' ACCOMMODATION ENTRY PROVIDERS'. THE ASSESSING OFFICER IN THE LATTER CAS E WAS ABLE TO PROVE WITH ENOUGH MATERIAL THAT THE SHARE SUBSCRIPTION WAS A PRE-MEDI TATED PLAN TO ROUTE UNACCOUNTED MONIES. IN THE PRESENT CASE HOWEVER THE DEPARTMENT WAS UNABLE TO BRING ANY MATERIAL WHATSOEVER SHOWS THAT SHARE APPLICATION WA S IN THE NATURE OF ACCOMMODATION ENTRIES. THE COURT OBSERVED THAT THE APPELLANT HAD FILED SUFFICIENT DOCUMENTARY EVIDENCES TO ESTABLISH THE IDENTITY AND CREDITWORTHINESS OF THE SHARE APPLICANT AND THE GENUINENESS OF THE TRANSACTION. T HE AO HOWEVER CHOSE TO SIT BACK WITH FOLDED HANDS TILL THE ASSESSEE EXHAUSTED ALL T HE EVIDENCE IN HIS POSSESSION AND THEN MERELY REJECT THE SAME WITHOUT CONDUCTING ANY INQUIRY OR VERIFICATION WHATSOEVER. THE COURT THUS HELD THAT THE DECISION O F CIT VS NOVO PROMOTERS &FINLEASE (P) LTD (342 ITR 169) WAS NOT APPLICABLE TO THE FACTS OF THE CASE. INSTEAD IT WAS HELD THAT THE ISSUE IN HANDS WAS ON THE LINE S OF THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT VS LOVELY EXPORTS PVT LTD (319 ITR 5). ACCORDINGLY, THE ADDITION MADE UNDER SECTION 68 ON ACCOUNT OF SHARE APPLICATION WAS DELETED. THE RELEVANT EXTRACTS OF THE JUDGMENT IS AS FOLLOWS:- AS CAN BE SEEN FROM THE ABOVE EXTRACT, TWO TYPES O F CASES HAVE BEEN INDICATED. ONE IN WHICH THE ASSESSING OFFICER CARRIES OUT THE EXERCIS E WHICH IS REQUIRED IN LAW AND THE OTHER IN WHICH THE ASSESSING OFFICER 'SITS BACK WITH FOLD ED HANDS' TILL THE ASSESSEE EXHAUSTS ALL THE EVIDENCE OR MATERIAL IN HIS POSSESSION AND THEN COM ES FORWARD TO MERELY REJECT THE SAME ON THE PRESUMPTIONS. THE PRESENT CASE FALLS IN THE LATTER CATEGORY. HERE THE ASSESSING OFFICER AFTER NOTING THE FACTS, MERELY REJECTED THE SAME. THIS WOULD BE APPARENT FROM THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESS MENT ORDER TO THE FOLLOWING EFFECT:- ''INVESTIGATION MADE BY THE INVESTIGATION WING OF T HE DEPARTMENT CLEARLY SHOWED THAT THIS WAS NOTHING BUT A SHAM TRANSACTION OF ACCOMMODATION ENTRY. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE SAID AMOUNT OF RS.1,11,50,000 /- MAY NOT BE ADDED TO ITS INCOME. IN RESPONSE, THE ASSESSEE HAS SUBMITTED THAT THERE IS NO SUCH CREDIT IN THE BOOKS OF THE ASSESSEE. RATHER, THE ASSESSEE COMPANY HAS RECEIVED THE SHARE APPLICATION MONEY FOR ALLOTMENT OF ITS SHARE. IT WAS STATED THAT THE ACTU AL AMOUNT RECEIVED WAS RS.55,50,000/- AND NOT RS.1,11,50,000/- AS MENTIONED IN THE NOTICE. TH E ASSESSEE HAS FURNISHED DETAILS OF SUCH RECEIPTS AND THE CONTENTION OF THE ASSESSEE IN RESP ECT OF THE AMOUNT IS FOUND CORRECT. AS SUCH THE UNEXPLAINED AMOUNT IS TO BE TAKEN AT RS.55 ,50,000/-. THE ASSESSEE HAS FURTHER TRIES TO EXPLAIN THE SOURCE OF THIS AMOUNT OF RS.55,50,00 0/- BY FURNISHING COPIES OF SHARE APPLICATION MONEY, BALANCE4 SHEET ETC. OF THE PARTI ES MENTIONED ABOVE AND ASSERTED THAT THE QUESTION OF ADDITION IN THE INCOME OF THE ASSES SEE DOES NOT ARISE. THIS EXPLANATION OF THE ASSESSEE HAS BEEN DULY CONSIDERED AND FOUND NOT ACCEPTABLE. THIS ENTRY REMAINS UNEXPLAINED IN THE HANDS OF THE ASSESSEE AS HAS BEE N ARRIVED BY THE INVESTIGATION WING OF THE DEPARTMENT. AS SUCH ENTRIES OF RS.55,50,000/- R ECEIVED BY THE ASSESSEE ARE TREATED AS AN BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 3 33 30 00 0 UNEXPLAINED CASH CREDIT IN THE HANDS OF THE ASSESSE E AND ADDED TO ITS INCOME. SINCE I AM SATISFIED THAT THE ASSESSEE HAS FURNISHED INACCURAT E PARTICULARS OF ITS INCOME/ PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) ARE BEING INITI ATED SEPARATELY. THE FACTS OF NOVA PROMOTERS AND FINLEASE (P) LTD. ( SUPRA) FALL IN THE FORMER CATEGORY AND THAT IS WHY THIS COURT DECIDED IN FAVOUR OF THE REV ENUE IN THAT CASE. HOWEVER, THE FACTS OF THE PRESENT CASE ARE CLEARLY DISTINGUISHABLE AND FA LL IN THE SECOND CATEGORY AND ARE MORE IN LINE WITH FACTS OF LOVELY EXPORTS (P) LTD. (SUPRA). THERE WAS A CLEAR LACK OF INQUIRY ON THE PART OF THE ASSESSING OFFICER ONCE THE ASSESSEE HAD FURNISHED ALL THE MATERIAL WHICH WE HAVE ALREADY REFERRED TO ABOVE. IN SUCH AN EVENTUAL ITY NO ADDITION CAN BE MADE UNDER SECTION 68 OF THE INCOME TAX ACT 1961. CONSEQUENTLY , THE QUESTION IS ANSWERED IN THE NEGATIVE. THE DECISION OF THE TRIBUNAL IS CORRECT I N LAW 34. FURTHER, IN THE DECISION OF THE HON'BLE DELHI H IGH COURT IN THE CASE OF CIT V. KAMDHENU STEEL & ALLOYS LTD. [2012] 19 TAXMANN.COM 26/206 TAXMAN 254/[2014] 361 ITR 220 IS ALSO RELEVANT, WHEREIN IT WAS HELD AS UNDER : 'ONCE ADEQUATE EVIDENCE/MATERIAL IS GIVEN, WHICH WO ULD PRIMA FACIE DISCHARGE THE BURDEN OF THE ASSESSEE IN PROVING THE IDENTITY OF SHAREHOL DERS, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE SHAREHOLDERS, THEREAFTER IN CASE SUCH EVIDENCE IS TO BE DISCARDED OR IT IS PROVED THAT IT HAS 'CREATED' EVIDENCE, THE RE VENUE IS SUPPOSED TO MAKE THOROUGH PROBE BEFORE IT COULD NAIL THE ASSESSEE AND FASTEN THE AS SESSEE WITH SUCH A LIABILITY UNDER S.68; A.O. FAILED TO CARRY HIS SUSPICION TO LOGICAL CONCL USION BY FURTHER INVESTIGATION AND THEREFORE ADDITION UNDER S.68 WAS NOT SUSTAINABLE.' 35. THE SLP FILED AGAINST THE ABOVE DECISION HAS BE EN DISMISSED BY THE HONBLE SUPREME COURT. 36. IN THE CASE OF FINLEASEPVT LTD. 342 ITR 169 (SU PRA) IN ITA 232/2012 JUDGEMENTDT. 22.11.2012 AT PARA 6 TO 8/ IT WAS HELD AS FOLLOWS. '6. THIS COURT HAS CONSIDERED THE SUBMISSIONS OF TH E PARTIES. IN THIS CASE THE DISCUSSION BY THE COMMISSIONER OF INCOME TAX (APPEALS) WOULD REVE AL THAT THE ASSESSEE HAS FILED DOCUMENTS INCLUDING CERTIFIED COPIES ISSUED BY THE ROC IN RELATION TO THE SHARE APPLICATION AFFIDAVITS OF THE DIRECTORS, FORM 2 FILED WITH THE ROC BY SUCH APPLICANTS CONFIRMATIONS BY THE APPLICANT FOR COMPANY'S SHARES, CERTIFICATES BY AUDITORS ETC. UNFORTUNATELY, THE ASSESSING OFFICER CHOSE TO BASE HIMSELF MERELY ON T HE GENERAL INFERENCE TO BE DRAWN FROM THE READING OF THE INVESTIGATION REPORT AND THE STA TEMENT OF MR. MAHESGARG. TO ELEVATE THE INFERENCE WHICH CAN BE DRAWN ON THE BASIS OF READIN G OF SUCH MATERIAL INTO JUDICIAL CONCLUSIONS WOULD BE IMPROPER, MORE SO WHEN THE ASS ESSEE PRODUCED MATERIAL. THE LEAST THAT THE ASSESSING OFFICER OUGHT TO HAVE DONE WAS T O ENQUIRE INTO THE MATTER BY, IF NECESSARY, INVOKING HIS POWERS UNDER SECTION 131 SU MMONING THE SHARE APPLICANTS OR DIRECTORS. NO EFFORT WAS MADE IN THAT REGARD. IN TH E ABSENCE OF ANY SUCH FINDING THAT THE MATERIAL DISCLOSED WAS UNTRUSTWORTHY OR LACKED CRED IBILITY THE ASSESSING OFFICER MERELY CONCLUDED ON THE BASIS OF ENQUIRY REPORT, WHICH COL LECTED CERTAIN FACTS AND THE STATEMENTS OF MR.MAHESHGARG THAT THE INCOME SOUGHT TO BE ADDED FELL WITHIN THE DESCRIPTION OFS.68 OF THE INCOME TAX ACT 1961. HAVING REGARD TO THE ENTIR ETY OF FACTS AND CIRCUMSTANCES, THE COURT IS SATISFIED THAT THE FINDING OF THE TRIBUNAL IN THIS CASE ACCORDS WITH THE RATIO OF THE DECISION OF THE SUPREME COURT IN LOVELY EXPORTS (SU PRA). THE DECISION IN THIS CASE IS BASED ON THE PECULIAR FACTS WHICH ATTRACT THE RATIO OF LOVELY EXPORTS (SUPRA). WHERE THE ASSESSEE ADDUCES EVIDENC E IN SUPPORT OF THE SHARE APPLICATION BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 3 33 31 11 1 MONIES, IT IS OPEN TO THE ASSESSING OFFICER TO EXAM INE IT AND REJECT IT ON TENABLE GROUNDS. IN CASE HE WISHES TO RELY ON THE REPORT OF THE INVESTI GATION AUTHORITIES, SOME MEANINGFUL ENQUIRY OUGHT TO BE CONDUCTED BY HIM TO ESTABLISH A LINK BETWEEN THE ASSESSEE AND THE ALLEGED HAWALA OPERATORS, SUCH A LINK WAS SHOWN TO BE PRESENT IN THE CASE OF NOVA PROMOTERS &FINLEASE (P) LTD. (SUPRA) RELIED UPON BY THE REVENUE. WE ARE THEREFORE NOT TO BE UNDERSTOOD TO CONVEY THAT IN ALL CASES OF SHARE CAPITAL ADDED UNDER SECTION THE RATIO OF LOVELY EXPORTS (SUPRA) IS ATTRACTED, IRRESPECTIVE O F THE FACTS, EVIDENCE AND MATERIAL. ' 37. WE ALSO NOTE THAT RECENTLY THE ITAT KOLKATA IN SEVERAL CASES HAS DELETED THE ADDITION ON ACCOUNT OF SHARE APPLICATION IN SIMILAR CIRCUMSTANCES. THE RELEVANT PORTION OF THE DECISIONS, ARE AS FOLLOWS: (A) IN THE CASE OF DCIT VS GLOBAL MERCANTILESPVT.L TD IN ITA NO. 1669/KOL/2009 DATED 13-01-2016, THIS TRIBUNAL HELD AS FOLLOWS: 3.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE DETAILED PAPER BOOK FILED BY THE ASSE SSEE. THE FACTS STATED HEREINABOVE REMAIN UNDISPUTED ARE NOT REITERATED HEREIN FOR THE SAKE OF BREVITY. WE FIND THAT THE ASSESSEE HAD GIVEN THE COMPLETE DETAILS ABOUT THE S HARE APPLICANTS CLEARLY ESTABLISHING THEIR IDENTITY, CREDITWORTHINESS AND GENUINENESS OF TRANSACTION PROVED BEYOND DOUBT AND HAD DULY DISCHARGED ITS ONUS IN FULL. NOTHING PREVE NTED THE LEARNED AO TO MAKE ENQUIRIES FROM THE ASSESSING OFFICERS OF THE CONCERNED SHARE APPLICANTS FOR WHICH EVERY DETAILS WERE VERY MUCH MADE AVAILABLE TO HIM BY THE ASSESSEE. WE FIND THAT THE RELIANCE PLACED BY THE LEARNED LD. CIT(1) ON THE DECISION OF THE HON'BLE A PEX COURT IN THE CASE OF CIT VS LOVELY EXPORTS (P) UD REPORTED IN (2008) 216 CTR 195 (SC) IS VERY WELL FOUNDED, WHEREIN, IT HAS BEEN VERY CLEARLY HELD THAT THE ONLY OBLIGATION OF THE COMPANY RECEIVING THE SHARE APPLICATION MONEY IS TO PROVE THE EXISTENCE OF THE SHAREHOLDERS AND FOR WHICH THE ASSESSEE HAD DISCHARGED THE ONUS OF PROVING THEIR EXISTENCE AND ALSO THE SOURCE OF SHARE APPLICATION MONEY RECEIVED. 3.4. 1. WE ALSO FIND THAT THE IMPUGNED ISSUE IS ALS O COVERED BY THE DECISION OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS ROSEBERRY MERCANTILE (P) LTD IN GA NO. 3296 OF 2010 ITAT NO. 241 OF 2010 DATED 10.1.2011, WHEREIN THE- QUESTIONS RAISED BEFORE THEIR LORDSHIPS AND DECISION RENDERED THEREON IS AS UNDER :- 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) OUGHT TO HAVE UPHELD THE ASSESSMENT ORDER AS THE TRANSACTION ENTERED INTO BY THE ASSESSEE WAS A SCHEME FOR LAUNDERING BLACK MONEY INTO WHITE MONEY OR ACCOUNTE D MONEY AND THE LD. CIT(A) OUGHT TO HAVE HELD THAT THE ASSESSEE HAD NOT ESTABLISHED THE GENUINENESS OF THE TRANSACTION. ' HELD AFTER HEARING THE LEARNED COUNSEL FOR THE APPE LLANT AND AFTER GOING THROUGH THE DECISION OF THE SUPREME COURT IN THE CASES OF CIT V S M/S LOVELV EXPORTS PVT LTD, WE ARE AT ONE WITH THE TRIBUNAL BELOW THAT THE POINT INVOLVED IN THIS APPEAL IS COVERED BY THE SAID SUPREME COURT DECISION IN FAVOUR OF THE ASSESSEE AN D THUS, NO SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN THIS APPEAL. THE APPEAL IS DEVOID OF ANY SUBSTANCE AND IS DISMISSED. 3.4.2. IN VIEW OF THE AFORESAID FINDINGS AND RESPEC TFULLY FOLLOWING THE DECISION OF THE APEX COURT (SUPRA) AND JURISDICTIONAL HIGH COURT (SUPRA) , WE FIND NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) AND ACCORDINGLY, THE GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED. 4. THE LAST GROUND TO BE DECIDED IN THIS APPEAL OF THE REVENUE IS AS TO WHETHER THE LEARNED CIT(A) IS JUSTIFIED IN DELETING THE ADDITION U/S 68 OF THE ACT MADE IN RESPECT OF ALLOTMENT OF BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 3 33 32 22 2 SHARES TO 20 INDIVIDUALS FOR AN AMOUNT OF RS.57,00, 000/- IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. 1. THE BRIEF FACT OF THIS ISSUE IS THAT THE ASSE SSEE HAD RECEIVED SHARE APPLICATION MONIES FROM 20 INDIVIDUALS IN THE EARLIER YEAR WHICH WERE KEPT IN SHARE APPLICATION MONEY ACCOUNT. DURING THE ASST YEAR UNDER APPEAL, THE ASS ESSEE ALLOTTED SHARES TO THESE 20 INDIVIDUALS OUT OF TRANSFERRING THE MONIES FROM SHA RE APPLICATION MONEY ACCOUNT TO SHARE CAPITAL ACCOUNT. THE DETAILS OF 20 INDIVIDUALS ARE REFLECTED IN PAGE 6 & 7 OF THE LEARNED CIT(A) ORDER. THE LEARNED AO ASKED THE ASSESSEE TO PRODUCE THE SHAREHOLDERS BEFORE HIM. HE FOUND THAT THE ASSESSEE DID NOT DO SO BUT FURNIS HED COPIES OF PAY ORDERS USED FOR PAYMENTS TO THE ASSESSEE COMPANY AND ALSO FURNISHED INCOME TAX PARTICULARS AND BALANCE SHEETS OF ALL THE SHAREHOLDERS. THE LEARNED AO ON A NALYZING ALL THE BALANCE SHEETS OBSERVED THAT THE SHAREHOLDERS HAVE PALTRY INCOME A ND SMALL SAVINGS AND NONE OF THEM HAVE ANY BANK ACCOUNT AND HUGE CASH BALANCES WERE S HOWN IN THEIR HANDS OUT OF WHICH PAY ORDERS WERE OBTAINED. BASED ON THIS, THE LEARNE D AO CONCLUDED THAT THESE SHAREHOLDERS DO NOT HAVE CREDITWORTHINESS TO INVEST IN THE ASSESSEE COMPANY AND BROUGHT THE ENTIRE SUM OF RS. 57,00,000/- TO TAX AS UNEXPLA INED CASH CREDIT U/S 68 OF THE ACT. 4.2. ON FIRST APPEAL, THE LEARNED CIT(A) OBSERVED T HAT ENTIRE SHARE APPLICATION MONIES OF RS. 57,00,000/- WE RECEIVED DURING THE PREVIOUS YEA R 2004-05 RELEVANT TO ASST YEAR 2005- 06 FROM 20 PERSONS AND THE SHARES WERE ALLOTTED TO THEM DURING THE ASST YEAR UNDER APPEAL. HE OBSERVED THAT THE ASSESSEE HAD FURNISHED DETAILS OF THE SHARE APPLICANTS GIVING THE DATE WISE RECEIPTS, MODE OF PAYMENT, AMOUNT, NAME, ADDRE SS, INCOME TAX RETURNS, PA NO. OF SHARE APPLICANTS ALONG WITH THEIR BALANCE SHEET. TH E LEARNED CITA ALSO OBSERVED THAT THE ASSESSEE IN ITS REPLY TO SHOW CAUSE NOTICE BEFORE T HE LEARNED AO HAD REQUESTED HIM TO USE HIS POWER AND AUTHORITY FOR THE PHYSICAL APPEARANCE OF THE SHAREHOLDERS WHICH WAS NOT EXERCISED BY THE LEARNED AO. INSTEAD THE LEARNED AO CONTINUED TO INSIST ON THE ASSESSEE TO PRODUCE THE SHAREHOLDERS BEFORE HIM. HE ULTIMATELY CONCLUDED THAT THE ASSESSEE HAD DULY DISCHARGED ITS ONUS OF PROVIDING COMPLETE DETAILS O F THE SHAREHOLDERS AND IN ANY CASE, NO ADDITION COULD BE MADE U/S 68 OF THE ACT IN THE ASS T YEAR UNDER APPEAL AS NO SHARE APPLICATION MONIES WERE RECEIVED DURING THE ASST YE AR UNDER APPEAL. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US BY FILING THE FOLLOW ING GROUND:- 'THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE U/S 68 IN RESPECT OF THE ALLOTMENT OF SHARES TO 20 NUMBERS OF INDIVIDUAL INVESTORS FOR AN AMOUNT OF RS. 57 LAKHS, WHERE GENU INENESS OF THE TRANSACTIONS AND CREDITWORTHINESS OF THE INVESTORS WERE NOT ESTABLIS HED. (B) IN THE CASE OF DCIT VS. R.B HORTICULTURE & ANI MAL PROJECTS CO. LTDIN ITA NO. 632/KOL/2011 DATED 13-01-2016, THIS TRIBUNAL HE LD AS FOLLOWS: 4.3. THE LEARNED DR PRAYED FOR ADMISSION OF THE ADD ITIONAL GROUND RAISED BEFORE US AND VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED AO. I N RESPONSE TO THIS, THE LEARNED AR FAIRLY CONCEDED TO ADMISSION OF THIS ADDITIONAL GRO UND AND VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT(A). 4.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD INCLUDING THE DETAILED PAPER BOOK FILED BY THE ASSE SSEE. WE FIND THAT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE SEPARATELY BEFORE US VIDE IT S COVERING LETTER DATED 9. 12.2011 IS ADMITTED AS IT APPEARS TO BE A GENUINE AND BONAFIDE ERROR OF OMISSION ON THE PART OF THE REVENUE FROM NOT RAISING THIS GROUND IN THE ORIGINA L GROUNDS OF APPEAL FILED ALONG WITH THE MEMORANDUM OF APPEAL. MOREOVER, IT DOES NOT REQUIRE ANY FRESH EXAMINATION OF FACTS. HENCE THE SAME IS ADMITTED HEREIN FOR THE SAKE OF A DJUDICATION. BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 3 33 33 33 3 4.4. 1. WE FIND FROM THE DETAILS AVAILABLE ON RECOR D THAT THE SHARE APPLICATION MONIES FROM 20 INDIVIDUALS IN THE SUM OF RS.57,00,000/- HAS BEE N RECEIVED BY THE ASSESSEE DURING THE FINANCIAL YEAR 2004-05 RELEVANT TO ASST YEAR 2005-0 6 AND ONLY THE SHARES WERE ALLOTTED TO THEM DURING THE ASST YEAR UNDER APPEAL. ADMITTEDLY NO MONIES WERE RECEIVED DURING THE ASST YEAR UNDER APPEAL AND HENCE THERE IS NO SCOPE FOR INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT. HENCE WE HOLD THAT THE ORDER PASSED BY THE LEARNED CITA IN THIS REGARD DOES NOT REQUIRE ANY INTERFERENCE. ACCORDINGLY THE GROUN D NO. 3 RAISED BY THE REVENUE IS DISMISSED. 6. WE HAVE HEARD THE LEARNED DR AND WHEN THE CASE WAS CALLED ON FOR HEARING , NONE WAS PRESENT ON BEHALF OF THE ASSESSEE. HOWEVER, WE FIND FROM THE FILE THAT THE ASSESSEE HAD FILED A DETAILED PAPER BOOK AND WRITTEN SUBMISSIONS . HENCE THE CASE IS DISPOSED OFF BASED ON THE ARGUMENTS OF THE LEARNED DR AND WRITTEN SUBM ISSIONS AND PAPER BOOK ALREADY AVAILABLE ON RECORD. THE FACTS STATED IN THE LEARNE D CIT(A) WERE NOT CONTROVERTED BY THE LEARNED DR BEFORE US. WE FIND THAT THE ASSESSEE HAD GIVEN THE COMPLETE DETAILS ABOUT THE SHARE APPLICANTS CLEARLY ESTABLISHING THEIR IDENTIT Y, CREDITWORTHINESS AND GENUINENESS OF TRANSACTION PROVED BEYOND DOUBT AND HAD DULY DISCHA RGED ITS ONUS IN FULL. NOTHING PREVENTED THE LEARNED AO TO MAKE ENQUIRIES FROM THE ASSESSING OFFICERS OF THE CONCERNED SHARE APPLICANTS FOR WHICH EVERY DETAILS WERE VERY MUCH MADE AVAILABLE TO HIM BY THE ASSESSEE. WE FIND THAT THE RELIANCE PLACED BY THE L EARNED CITA ON THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT VSLOVELV EXPO RTS (P) LTD REPORTED IN (2008) 216 CTR 195 (SC) IS VERY WELL FOUNDED, WHEREIN, IT HAS BEEN VERY CLEARLY HELD THAT THE ONLY OBLIGATION OF THE COMPANY RECEIVING THE SHARE APPLI CATION MONEY IS TO PROVE THE EXISTENCE OF THE SHAREHOLDERS AND FOR WHICH THE ASSESSEE HAD DISCHARGED THE ONUS OF PROVING THEIR EXISTENCE AND ALSO THE SOURCE OF SHARE APPLICATION MONEY RECEIVED. 6. 1. WE ALSO FIND THAT THE IMPUGNED ISSUE IS ALSO COVERED BY THE DECISION OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VSROSEBERRV MERCANTILE (P) LTD IN GA NO. 3296 OF 2010 ITAT NO. 241 OF 2010 DATED 10.1.2011, WHEREIN THE QUESTIONS RAISED BEFORE THEIR LORDSHIPS AND DECISION RENDERED THEREON IS AS UNDER :- - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) OUGHT TO HAVE UPHELD THE ASSESSMENT ORDER AS THE TRANSACTION ENTERED INTO BY THE ASSESSEE WAS A SCHEME FOR LAUNDERING BLACK MONEY INTO WHITE MONEY OR ACCOUNTE D MONEY AND THE LD. CIT(A) OUGHT TO HAVE HELD THAT THE ASSESSEE HAD NOT ESTABLISHED THE GENUINENESS OF THE TRANSACTION.' HELD AFTER HEARING THE LEARNED COUNSEL FOR THE APPELLANT AND AFTER GOING THROUGH THE DECISION OF THE SUPREME COURT IN THE CASES OF CIT VS M/S LOVELY EXPORTS PVT LTD, WE ARE AT ONE WITH THE TRIBUNAL BELOW THAT THE POINT INVOLVED IN THIS APPEAL IS COVERED BY THE SAID SUPREME COURT DECISION IN FAVOUR OF THE ASSESSEE AND THUS, NO SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN THIS APPEAL. THE APPEAL IS DEVOID OF ANY SUBSTAN CE AND IS DISMISSED. 6.2. WE FIND THAT THE ISSUE IS ALSO COVERED BY THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS VALUE CAPITAL SERVICES P LTD REP ORTED IN (2008) 307 ITR 334 (DEL) , WHEREIN IT WAS HELD THAT: 'IN RESPECT OF AMOUNTS SHOWN AS RECEIVED BY THE ASS ESSEE TOWARDS SHARE APPLICATION MONEY FROM 33 PERSONS, THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO PRODUCE ALL THESE PERSONS. WHILE ACCEPTING THE EXPLANATION AND ITA NO. 632/KOI 12011--C-AM M/S. R.B HORTICULTURE 6 & ANIMAL PROJ. CO. LTD THE STATEMENTS GIVEN BY TH REE PERSONS THE ASSESSING OFFICER FOUND THAT THE RESPONSE FROM THE OTHERS WAS EITHER NOT AV AILABLE OR WAS INADEQUATE AND ADDED AN AMOUNT OF RS. 46 LAKHS PERTAINING TO 30 PERSONS TO THE INCOME OF THE ASSESSEE. THE COMMISSIONER (APPEALS) UPHELD THE DECISION OF T HE ASSESSING OFFICER. ON APPEAL, THE TRIBUNAL SET ASIDE THE ORDER OF THE COMMISSIONER (A PPEALS) AND DELETED THE ADDITIONS. ON FURTHER APPEAL: BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 3 33 34 44 4 HELD, DISMISSING THE APPEAL, THAT THE ADDITIONAL BU RDEN WAS ON THE DEPARTMENT TO SHOW THAT EVEN IF THE SHARE APPLICANTS DID NOT HAVE THE MEANS TO MAKE THE INVESTMENT, THE INVESTMENT MADE BY THEM ACTUALLY EMANATED FROM THE COFFERS OF THE ASSESSEE SO AS TO ENABLE IT TO BE TREATED AS THE UNDISCLOSED INCOME OF THE ASSESSEE. NO SUBSTANTIAL QUESTION OF LAW AROSE. ' 6.3. WE FIND THAT THE ARGUMENT OF THE LEARNED DR TO SET ASIDE THIS ISSUE TO THE FILE OF THE LEARNED AO FOR VERIFICATION OF SHARE SUBSCRIBERS WO ULD NOT SERVE ANY PURPOSE AS THE RATIO DECIDED IN THE ABOVE CASES IS THAT IN ANY CASE, NO ADDITION COULD BE MADE IN THE HANDS OF THE RECIPIENT ASSESSEE. IN VIEW OF THE AFORESAID FI NDINGS AND RESPECTFULLY FOLLOWING THE DECISION OF THE APEX COURT (SUPRA), JURISDICTIONAL HIGH COURT (SUPRA) AND DELHI HIGH COURT (SUPRA) , WE FIND NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) AND ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. (C) IN THE CASE OF ITO WD.3(2) KOL, VS. M/S. STEEL EMPORIUM LTDIN ITA NO.1061/KO1/2012 DATED 05-02-2016, THIS TRIBUNAL HE LD AS FOLLOWS: 10. WE HAVE HEARD BOTH THE RIVAL PARTIES AND PERUS ED THE MATERIALS AVAILABLE ON RECORD. THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE AO . BEFORE US THE LD. AR SUBMITTED THAT THE ASSESSEE RAISED SHARE APPLICATION MONEY DURING THE YEAR FROM 25 APPLICANTS. THE AO WAS FURNISHED WITH THE COPY OF FORM 2 OF ALLOTMENT OF SHARES TO THE APPLICANTS AS FILED WITH THE REGISTRAR OF COMPANIES, WEST BENGAL. ON TH E DATE OF RECEIPT OF SHARE APPLICATIONS FROM THE APPLICANTS, THEY FURNISHED THEIR ADDRESSES , WHICH WERE RECORDED IN THE REGISTER OF MEMBERS. THE AO OBSERVED THAT AS PER ROC RECORDS TH E ADDRESSES OF THE NINE COMPANIES WERE DIFFERENT FROM THE ADDRESS AS PER FORM FILED W ITH HIM. THE AO ISSUED NOTICES U/S.133(6) TO ALL THE COMPANIES AT THE ADDRESSES FU RNISHED IN FORM 2 AS FILED WITH HIM, WHICH WERE DULY SERVED AT THE GIVEN ADDRESSES. THE A0 ARGUED THAT THE LETTERS SHOULD NOT HAVE BEEN SERVED AT THE GIVEN ADDRESS BY THE ASSESS EE. HE SERVED A SHOW A CAUSE NOTICE DATED 09.12.2011 ASKING FOR THE EXPLANATION FROM TH E ASSESSEE AS TO HOW THE NOTICES U/S. 133(6) COULD BE SERVED TO THESE NINE COMPANIES WHO HAD DIFFERENT ADDRESS AS PER ROC RECORDS. THE AO WAS EXPLAINED VIDE LETTER DATED 20. 12.2011 OF THE ASSESSEE THAT THOSE COMPANIES HAD CHANGED THEIR ADDRESSES SINCE FILING OF FORM 2 WITH THE REGISTRAR. FURTHER, IT WAS NONE OF THE BUSINESS OF THE ASSESSEE TO QUES TION THE ADDRESSES OF THE APPLICANTS AS LONG AS THEY AFFIRM THE ADDRESS. THE APPLICANTS WER E DULY INCORPORATED BODIES UNDER THE COMPANIES ACT. 1956 SINCE LONG. THEY HAVE BEEN REGU LARLY FILING THEIR RETURNS OF INCOME UNDER THE INCOME TAX ACT AND ARE BEING ASSESSED BY THE REVENUE SINCE LONG. SOME OF THEM ARE EVEN REGISTERED AS NON-BANKING FINANCIAL COMPAN IES WITH RESERVE BANK OF INDIA. THEY HAVE BEEN FILING RETURNS REGULARLY WITH REGIST RAR OF COMPANIES AND RBI SINCE LONG. THE LETTERS MIGHT HAVE BEEN RECEIVED AT THEIR OLD A DDRESSES BECAUSE IN CASE OF CHANGE IN THE ADDRESS, PEOPLE INSTRUCT THE INCUMBENTS AT OLD ADDRESSES NOT TO REFUSE THE RECEIPT OF LETTERS AND RECEIVE THE SAME. JUST BECAUSE, A LETTE R WAS RECEIVED AT THE OLD ADDRESS INSTEAD OF PRESENT ADDRESS, IT CANNOT BE SAID THAT THE IDEN TITY OF THE APPLICANT HAS NOT BEEN VERIFIED. ALL OF THESE COMPANIES HAD DULY REPLIED TO NOTICE U /S. 133(6) AND CONFIRMED THE TRANSACTION WITH ALL THE EVIDENCES. THE AO HAS NOT RAISED ANY O BJECTION ON ANY OF THE INFORMATION FURNISHED BEFORE HIM. THE AO HAS NOT ASKED THE RESP ECTIVE COMPANY APPLICANTS ALSO TO EXPLAIN THE ALLEGED DISCREPANCY IN THE ADDRESS. THE AO HAS NOT BROUGHT ANY MATERIAL ON ACCOUNT OF RECORD TO DISBELIEF THE EVIDENCES FURNIS HED WITH HIM AND TREAT THE TRANSACTION AS NOT GENUINE. THE ASSESSEE SUBMITTED THE FOLLOWING M ATERIAL AT THE TIME OF ASSESSMENT. A) COPY OF SHARE APPLICATIONS FROM THE SHARE APPLIC ANTS (COPIES ENCLOSED) B) COPY OF FORM 2 FILED WITH REGISTRAR OF COMPANIES , WEST BENGAL (COPY ENCLOSED) C) COPY OF FORM 18 ABOUT THE REGISTERED OFFICE OF T HE APPLICANTS FOR CHANGE OF ADDRESS SUBSEQUENT TO THE DATE OF ALLOTMENT, I.E. 31.03.200 9 (COPIES ENCLOSED) D) MEMBERS REGISTER E) SHARE APPLICATION & ALLOTMENT REGISTER F) COPY OF BOARD RESOLUTION. BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 3 33 35 55 5 G) REPLIES FROM SHARE APPLICANTS TO THE NOTICE U/S. 133(6) ISSUED TO THEM BY THE AO SEEKING INFORMATION AND DOCUMENTS ABOUT THE SOURCES AND TO EXAMINE THEIR IDENTITY, GENUINENESS OF THE TRANSACTION AND THEIR CREDITWORTHINESS. (COPY E NCLOSED). H) COPY OF AUDITED ACCOUNTS. I) COPY OF BANK STATEMENTS. J) COPY OF INCOME TAX ACKNOWLEDGMENT OF RETURN FILE D FOR AY 2009- K) COPY OF PAN CARD. L) DETAILS OF SOURCES OF FUNDS. M) COPY OF COVERING LETTER FOR DELIVERY OF SHARES. N) COPY OF MASTER DATA AS PER MINISTRY OF COMPANY A FFAIRS RECORDS. O) COPY OF ANNUAL RETURN. P) COPY OF MEMORANDUM AND ARTICLES OF ASSOCIATION. FINALLY THE LD. AR RELIED ON THE ORDER OF THE LD. C IT(A 10. 1 FROM THE AFORESAID DISCUSSION WE FIND THAT THE AO HAS MADE THE ADDITION OF THE SH ARE APPLICATION MONEY BECAUSE ALL THE NINE COMPANIES WERE HAVING THE COMMON ADDRESS AND T HE NOTICE SENT UNDER SECTION 133(6) WAS RECEIVED BY THE SINGLE PERSON. ACCORDINGLY THE AO OPINED THAT THE ASSESSEE HAS USED ITS UNACCOUNTED MONEY IN THE SHARE APPLICATION TRANSACT IONS. HOWEVER WE FIND THAT ALL THE MONEY RECEIVED IN THE FORM OF SHARE CAPITAL IS DULY SUPPORTED WITH THE REQUISITE DOCUMENT AS DISCUSSED ABOVE. TO OUR MIND THE BASIS ON WHICH THE ADDITION WAS MADE BY THE AO IS NOT TENABLE. THE LD. DR ALSO COULD NOT BROUGHT ANYTHING ON RECORD TO CONTROVERT THE FINDINGS OF THE LD. CIT(A). IN VIEW OF ABOVE WE FIND NO REAS ON TO INTERFERE IN THE ORDER OF THE ID. CIT(A). ACCORDINGLY THE GROUND RAISED BY REVENUE IS DISMISSED. (D) IN THE CASE OF ITO VS CYGNUS DEVELOPERS (I) P LTD IN ITA NO. 282/KOL/2012 DATED 2.3.2016, THIS TRIBUNAL HELD AS FOLLOWS: 6. ON APPEAL BY THE ASSESSEE THE CIT(A) DELETED TH E ADDITION MADE BY THE AO OBSERVING AS FOLLOWS '6) I HAVE CONSIDERED THE SUBMISSION OF THE APPELLA NT AND PERUSED THE ASSESSMENT ORDER. I HAVE ALSO GONE THROUGH THE DETAILS AND DOCUMENTS FI LED BY THE APPELLANT COMPANY IN THE COURSE OF ASSESSMENT: PROCEEDINGS VIDE LETTER DT. 3 -10-2007. ON CAREFUL CONSIDERATION OF THE FACTS AND IN LAW I AM OF THE OPINION THAT THE A O WAS NOT JUSTIFIED IN MAKING, THE ADDITION AGGREGATING TO RS.54,00,000/- U/S.68 OF TH E ACT BEING THE AMOUNT OF SHARE APPLICATION MONEY BY HOLDING THAT THE APPELLANT COM PANY HAS FAILED TO PROVE THE IDENTITY, AND CREDITWORTHINESS OF THE CREDITORS AS WELL AS TH E GENUINENESS OF TRANSACTIONS. IT IS OBSERVED THAT ALL THE THREE SHARE APPLICANT COMPANI ES I.E. M/S. SHREE SHYAMTREXIM PVT. LTD., M/S NAVALCO COMMODITIES PVT. LTD. AND M/S. JE WELLOCKTREXIM PVT. LTD. HAD FILED THEIR CONFIRMATIONS WHEREIN EACH OF THEM CONFIRMED THAT T HEY HAD APPLIED FOR SHARES OF THE APPELLANT -COMPANY. ALL THE THREE COMPANIES PROVIDE D- THE CHEQUE NUMBER, COPY OF BANK STATEMENTS AND THEIR PAN. IT IS OBSERVED THAT THESE COMPANIES ALSO FILED, COPIES OF THEIR RETURN OF INCOME AND FINANCIAL STATEMENTS FOR AS WE LL AS COPY OF THEIR ASSESSMENT ORDER U/S. 143(3) OF THE I. T ACT FOR AY 2005-06. IN THE CASE OF M/S. JEWELLOCKTREXIM PVT. LTD. THE ASSESSMENT FOR AY 2005-06 WAS COMPLETED BY THE ITO WARD 9(3), KOLKATA AND THE ASSESSMENTS IN THE CASE OF M/S. NAVALCO COMMODITIES PVT. LTD. AND M/S. SHREE SHYAMTREXIM PVT. LTD. FOR A. Y.2005-06 AND AY.2004- 05 RESPECTIVELY WERE COMPLETED BY THE I TO, WARD 9(4), KOLKATA. UNDER THE CIRCUMSTANC ES, I AM OF THE OPINION THAT THE AO WAS NOT JUSTIFIED IN HOLDING THAT THE SHARE APPLICA NT COMPANIES WERE NOT IN EXISTENCE. THE ASSESSMENT ORDERS WERE COMPLETED ON THE ADDRESS AS PROVIDED BY THE APPELLANT COMPANY IN THE COURSE OF ASSESSMENT PROCEEDINGS. IT IS NOT KNO WN AS TO HOW THE AO'S INSPECTOR HAD REPORTED THAT THE AFORESAID COMPANIES WERE NOT IN E XISTENCE AT THE GIVEN ADDRESS. SINCE THE APPELLANT COMPANY HAD PROVIDED SUFFICIENT DOCUMENTA RY EVIDENCES IN SUPPORT OF ITS CLAIM OF RECEIPT OF SHARE APPLICATION MONEY, I AM OF THE OPINION THAT THE NO ADDITION U/S.68 COULD BE MADE IN THE HANDS OF APPELLANT COMPANY. ON GOING THROUGH THE VARIOUS JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT, IT IS OBSERVED THAT THE VIEW TAKEN AS ABOVE IS BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 3 33 36 66 6 ALSO SUPPORTED BY THEM. IN VIEW OF ABOVE THE AO IS DIRECTED TO DELETE THE ADDITION OF RS.54,00,000/ -. THE GROUND NOS. 2 AND 3 ARE ALLOWE D, ' 7. AGGRIEVED BY THE ORDER OF CIT{A) THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 8. WE HAVE HEARD THE SUBMISSIONS OF THE LEARNED DR, WH O RELIED ON THE ORDER OF AO. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE ORDE R OF CIT(A) AND FURTHER DREW OUR ATTENTION TO THE DECISION OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS RAJ KUMAR AGARWAL VIDE ITA NO. 179/2008, DATED 17. 11.2009 WH EREIN THE HON 'BLE ALLAHABAD HIGH COURT TOOK A VIEW THAT NON PRODUCTION OF THE DIRECT OR OF A PUBLIC LIMITED COMPANY WHICH IS REGULARLY ASSESSED TO INCOME TAX HAVING PAN, ON THE GROUND THAT THE IDENTITY OF THE INVESTOR IS NOT PROVED CANNOT BE SUSTAINED. ATTENTI ON WAS ALSO TO THE SIMILAR RULING OF THE ITAT KOLKATA BENCH IN THE CASE OF ITO VSDEVINDER SI NGH SHANT IN IT A NO.20BIKO112009 VIDE ORDER DATED 17.04.2009. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS., WE AR E OF THE VIEW THAT ORDER OF CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. IT MAY BE SEEN FROM THE GROUNDS OF APPEAL RAISED BY THE REVENUE THAT THE REVENUE DISPUTED ONLY THE PROOF OF IDENTITY OF THE SHAREHOLDER. IN THIS REGARD IT IS SEEN THAT FOR A Y.2004-05 SHREE SHYAMT REXIM PVT. LTD., WAS ASSESSED BY ITO, WARD- 9(4), KOLKATA AND THE ORDER OF ASSESSMENT U/S /143(3) DATED 25.01.2006 IS PLACED IN THE PAPER BOOK. SIMILARLYNAVALCO COMMODITIES PVT. L TD., WAS ASSESSED TO TAX U/S 143(3) FOR A Y.2005- 06 BY I TO, WARD- 9(4), KOLKATA BY ORDER DATED 20.03.2007. SIMILARLYJEWELLOCKTREXIM PVT. LTD WAS ASSESSED TO T AX FOR A Y.2005-06 BY THE VERY SAME ITO- WARD- 9(3), KOLKATA ASSESSING THE ASSESSEE. IN THE LIGHT OF THE ABOVE FACTUAL POSITION WHICH IS NOT DISPUTED BY THE REVENUE, IT CANNOT BE SAID THAT THE IDENTITY OF THE SHARE APPLICANTS REMAINED NOT PROVED BY THE ASSESSEE. THE DECISION OF THE HON'BLE ALLAHABAD HIGH COURT AS WELL AS ITA T KOLKATA BENCH ON WHICH RELIANCE WAS PLACED BY THE LEARNED COUNSEL FOR THE ASSESSEE ALSO SUPPORTS THE VIEW THA T FOR NON PRODUCTION OF DIRECTORS OF THE INVESTOR COMPANY FOR EXAMINATION BY THE AO IT CANNO T BE HELD THAT THE IDENTITY OF A LIMITED COMPANY HAS NOT BEEN ESTABLISHED. FOR THE REASONS G IVEN ABOVE WE UPHOLD THE ORDER OF CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. ' 38. TO CONCLUDE, SECTION 68 OF THE ACT PROVIDES THA T IF ANY SUM FOUND CREDITED IN THE YEAR IN RESPECT OF WHICH THE ASSESSEE FAILS TO EXPLAIN THE NATURE AND SOURCE SHALL BE ASSESSED AS ITS UNDISCLOSED INCOME. IN THE FACTS OF THE PRESENT CASE, BOTH THE NATURE & SOURCE OF THE SHARE APPLICATION RECEIVED W AS FULLY EXPLAINED BY THE ASSESSEE. THE ASSESSEE HAD DISCHARGED ITS ONUS TO P ROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE SHARE APPLI CANTS. THE PAN DETAILS, BANK ACCOUNT STATEMENTS, AUDITED FINANCIAL STATEMENTS AN D INCOME TAX ACKNOWLEDGMENTS WERE PLACED ON AO'S RECORD. WITHOUT DOING SO, THE A DDITION MADE BY THE AO IS BASED ON CONJECTURES AND SURMISES CANNOT BE JUSTIFI ED. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED ABOVE, NO AD DITION WAS WARRANTED UNDER SECTION 68 OF THE ACT. THEREFORE, WE DELETE THE ADD ITION MADE BY THE ASSESSING OFFICER TO THE TUNE OF RS.1,95,00,000/-. BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 3 33 37 77 7 39. GROUND NO. 3 RAISED BY THE ASSESSEE RELATES TO DISALLOWANCE OF RS.75,193/- U/S 14A OF THE ACT. 40. THE BRIEF FACTS QUA THE ISSUE ARE THAT DURING T HE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD MADE INVESTMENT IN SHARES OF VARIOUS QUOTED AND UNQUOTED SHARES AND ALSO NOT SHOWN ANY D ISALLOWANCE U/S 14A READ WITH RULE 8D OF THE INCOME TAX RULES, 1962. THEREFO RE, THE ASSESSING OFFICER COMPUTED THE DISALLOWANCE U/S 14A READ WITH RULE 8D TO THE TUNE OF RS. 75,193/- WHICH CONSISTS DISALLOWANCE UNDER RULE 8D(2)(II) TO THE TUNE OF RS. 1,865/- AND DISALLOWANCE UNDER RULE 8D(2)(III) TO THE TUNE OF R S. 73,328/-. 41. AGGRIEVED BY THE ADDITION MADE BY THE ASSESSING OFFICER THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 42.AFTER GIVING OUR THOUGHTFUL CONSIDERATION TO THE SUBMISSION OF THE PARTIES AND PERUSING THE JUDICIAL DECISIONS RELIED UPON BY THE LD. COUNSEL, WE FIND THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL IS NO LONGER R ES INTEGRA. THE LD. COUNSEL FOR THE ASSESSEE HAS VEHEMENTLY SUBMITTED BEFORE US THA T THE ASSESSEE HAS INVESTED IN SHARES AND SECURITY BUT DOES NOT EARN ANY EXEMPT IN COME DURING THE ASSESSMENT YEAR UNDER CONSIDERATION THEREFORE THERE SHOULD NOT BE ANY DISALLOWANCE. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE HAS DEFENDED THE ORDER PASSED BY THE ASSESSING OFFICER. WE NOTE THAT THE ASSESSEE HAS O WN FUNDS WHICH ARE MORE THAN INVESTMENT MADE IN SHARES AND SECURITIES THEREFORE NO ANY ADDITION CAN BE MADE UNDER RULE 8D (2)(II). THEREFORE, AS FAR AS DISALLO WANCE OF INTEREST EXPENSES UNDER RULE 8D(2)(II) OF THE RULES IS CONCERNED, IT IS CLE AR FROM THE BALANCE SHEET OF THE ASSESSEE THAT THE ASSESSEE HAD NON-INTEREST BEARING FUNDS SUFFICIENT TO COVER THE INVESTMENTS MADE IN SHARES. IT HAS BEEN HELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS RELIANCE UTILITIES AND POWER LTD. (2009) 313 TR 340 (BOM) AND CIT VS HDFC BANK LTD (2014) 49 TAXMANN.COM 335 (BOM) THAT WHERE INTEREST FREE FUNDS AND OVERDRAFT AND LOANS TAKEN A RE AVAILABLE WITH AN ASSESSEE, BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 3 33 38 88 8 THEN A PRESUMPTION WOULD ARISE THAT THE INVESTMENTS WOULD BE OUT OF THE INTEREST FREE FUNDS GENERATED OR AVAILABLE WITH THE ASSESSEE , IF THE INTEREST FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENTS. THE AFORESAID V IEW HAS BEEN FOLLOWED BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF PRINCIPA L CIT VS RASOI LTD. IN ITAT 109 OF 2016 IN GA NO.633 OF 2016 JUDGMENT DATED 15. 02.2017. IN VIEW OF THE AFORESAID LEGAL POSITION AND THE VIEW OF THE FACT T HAT THE ASSESSEE HAD ENOUGH OWN FUNDS WHICH WAS MORE THAN THE INVESTMENTS WHICH YIE LDED TAX FREE INCOME THERE CAN BE NO DISALLOWANCE OF INTEREST EXPENSES IN TERM S OF RULE 8D(2)(II) OF THE RULE. THEREFORE, WE DELETE THE ADDITION UNDER RULE 8D (2) (II) OF THE RULES. APART FROM THIS, THE ASSESSEE DID NOT RECEIVE ANY E XEMPT INCOME DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. WE NOTE THAT IF THE ASSESSEE DOES NOT RECEIVE ANY DIVIDEND INCOME, THERE SHOULD NOT BE ANY DISALL OWANCE U/S 14A READ WITH RULE 8D OF THE I.T. RULES. FOR THAT WE RELY ON THE JUDGM ENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEM INVEST VS CIT 61 TAXMANN. COM 118 (DEL) WHEREIN IT WAS HELD THAT SECTION 14A WILL NOT APPLY IF THE ASS ESSEE DOES NOT RECEIVE ANY EXEMPT INCOME DURING THE RELEVANT PREVIOUS YEAR. T HEREFORE, RELYING ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT WE DELETE THE ADDITION MADE BY THE ASSESSING OFFICER TO THE TUNE OF RS. 75,193/-. 43. GROUND NO. 5 RAISED BY THE ASSESSEE RELATES TO ADDITION OF INTEREST U/S 234A/B/C OF THE ACT, 1961. WE NOTE THAT THIS GROUND IS PREMA TURE AND CONSEQUENTIAL IN NATURE AND THEREFORE DOES NOT REQUIRE ANY ADJUDICAT ION. 44. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE COURT ON 15.03.2019 SD/- SD/- [A T VARKEY] [ A.L. SAINI] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 15.03.2019 SB, SR. PS BIDIT FINANCIAL MANAGEMENT PVT. LTD. ITA NO.579/KOL/2017 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 3 33 39 99 9 COPY OF THE ORDER FORWARDED TO: 1. BIDIT FINANCIAL MANAGEMENT PVT. LTD. 2. DCIT, CIRCLE-7(1), KOLKATA 3. C.I.T(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, KOLKA TA BENCHES