M.K. Cycle Industries Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 6161/DEL/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7472 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 18-04-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 11-11-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RISHPAL BEDI J
• Assessee Lawyers: SSH GAGAN KUMAR
• Keywords: Unexplained cash credit; Unexplained expenditure; Tangible material; Difference of opinion; Accommodation entries; Onus to prove; Reason to believe; Change of opinion
• Section: 143(3); 142(1); 147; 131; 68; 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G : NEW DELHI BEFORE SH. I.C. SUDHIR , JUDICIAL M EMBER AND SH. O.P. KANT , ACCOUNTANT MEMBER ITA NO. 6161 /DEL/ 2014 ASSESSMENT YEAR: 2003 - 04 M/S. M.K. CYCLE INDUSTRIES PVT. LTD. G - 76, SANT NAGAR EXTN., TILAK NAGAR, NEW DELHI (PAN: AAECS3075L) VS. ITO, WARD 6(1), NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY S/SH. GAGAN KUMAR, ADV. & AMIT KAUSHIK, CA RESPONDENT BY SMT. RISHPAL BEDI, JCIT(DR) DATE OF HEARING 18.04.2016 DATE OF PRONOUNCEMENT 10.06.2016 ORDER PER O.P. KANT , A. M. : THE PRESENT APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 19 TH AUGUST, 2014 OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) - X, NEW DELHI, FOR ASSESSMENT YEAR 2003 - 04, RAISING THE FOLLOWING GROUND S : 1. THAT IN LAW AND UNDER THE FACTS OF THE CASE, THE ASSESSMENT ORDER DATED 28.12.2010 PASSED BY LD. INCOME TAX OFFICER, WARD 6(1), NEW DELHI ( ASSESSING OFFICER ) UNDER SECTION 147 READ WITH SECTION 143(3) OF THE INCOME TAX ACT, 1961 ( ACT ) IS ERRONEOUS AND BAD IN LAW. 2. THAT IN LAW AND UNDER THE FACTS OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) X ( COMMISSIONER ) ERRED BY NOT APPRECIATING THE FACT THAT JURISDICTION ASSUMED BY THE LD.AO TO OPEN THE ASSESSMENT UNDER SECTION 147 OF THE ACT ITSELF WAS NOT WARR ANTED BY THE LAW AS THE REASONS OF REOPENING WERE NOT COGENT AND WERE NOT DRAWN ON ANY TANGIBLE MATERIAL. THUS, APPELLATE ORDER UNDER SECTION 250 OF THE ACT ( IMPUGNED ORDER ) IS BAD IN LAW 3. THAT IN LAW AND UNDER THE FACTS OF THE CASE, LD. COMMISSIONER HAS ERRED BY NOT CONSIDERING THE AMPLE EVIDENCES PRODUCED BY THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND UPHOLDING THE ADDITIONS BY MERELY REPRODUCING ASSESSMENT ORDER PASSED BY THE LD. ASSESSING OFFICER . 4. THAT IN LAW AND UNDER THE FACTS OF THE CASE LD. COMMISSIONER HAS ERRED IN UPHOLDING THE ADDITION OF RS. 11,00,000/ - AS UNEXPLAINED CREDIT IN THE BANK ACCOUNTS 2 ITA NO. 6161/DEL/2014 AY: 2003 - 04 DESPITE OF THE FACT THAT APPELLANT HAD DISCHARGED ITS INITIAL ONU S AS REQUIRED UNDER SECTION 68 OF THE ACT DURING THE ASSESSMENT PROCEEDINGS ITSELF. 5. THAT IN LAW AND UNDER THE FACTS OF THE CASE LD. COMMISSIONER HAS ERRED IN UPHOLDING THE ADDITION OF RS. 22,000/ - ON ACCOUNT OF NOTIONAL COMMISSION CHARGE AT THE RATE OF 2% , WHEN THE ADDITION UNDER SECTION 68 OF THE ACT WAS NOT WARRANTED ITSELF. 6. THAT IN LAW AND UNDER THE FACTS OF THE CASE LD. AO HAS ERRED IN INITIATING THE PENALTY PROCEEDINGS UNDER SECTION 271( 1 )(C) OF THE ACT. 7. THE APPELLANT CRAVES FOR LEAVE TO ADD, AMEND, VARY, OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 13 TH OCTOBER, 2003 DECLARING INCOME OF RS. 2,799/ - . THE RET URN WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME - TAX ACT, 1961 (FOR SHORT THE ACT ). THEREAFTER, ON RECEIPT OF INFORMATION FROM INVESTIGATION WING OF THE INCOME TAX DEPARTMENT THAT THE ASSESSEE WAS BENEFICIARY OF AN ACCOMMODATION ENTRY RACKET BEING RU N BY SOME PERSONS , INITIATED THE RE - ASSESSMENT PROCEEDINGS AND ISSUED NOTICE UNDER SECTION 148 OF THE ACT ON 19 TH MARCH, 2010, AFTER RECORDING REASONS AS REQUIRED UNDER THE PROVISIONS OF THE ACT. SUBSEQUENTLY, NOTICE UNDER SECTION 142(1) OF THE ACT WAS ISS UED AND INFORMATION IN RESPECT OF SHARE CAPITAL INTRODUCED BY THE ASSESSEE COMPANY WAS GATHERED BY THE ASSESSING OFFICER. THE REASONS RECORDED WERE ALSO PROVIDED TO THE ASSESSEE ON 19 TH OCTOBER, 2010. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESS ING OFFICER NOTICED THAT THE ASSESSEE RECEIVED MONEY FROM THE FOLLOWING ENTITIES TOWARDS SHARE CAPITAL: S. NO. NAME OF THE PARTY AMOUNT RECEIVED NO. OF SHARES RATE PER SHARE PREMIUM 1. M/S. GUPTESHWAR MARKETING PVT. LTD. 2,00,000/ - 400 100/ - 400/ - 2. M/S. NEW TECH STEEL & ALLOYS PVT. LTD. 5,00,000/ - 100 100/ - 400/ - 3. M/S. DKC INDIA PVT. LTD. 4,00,000/ - 800 100/ - 400/ - 3 ITA NO. 6161/DEL/2014 AY: 2003 - 04 3. THE ASSESSEE FILED PHOTOCOPY OF THE CONFIRMATION OF THOSE PARTIES, COPY OF SHARE APPLICATION FORM AND PART OF BANK STATEMENT S OF THE PARTICULAR DATE ON WHICH THE TRANSACTION WAS MADE. FURTHER, IN VIEW OF THE INFORMATION AND THE DETAILED DOCUMENTS GATHERED BY THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT THAT THE MONEY WAS ROUTED BY THE ASSESSEE THROUGH THE ENTRY OPERATORS IN THE GARB OF SHARE CAPITAL AND THE SHARES WERE ULTIMATELY BROUGHT BACK BY THE DIRECTORS OF THE FAMILY MEMBERS AT A HUGE DISCOUNT, THE ASSESSING OFFICER ISSUED SUMMON S UNDER SECTION 31 OF THE ACT TO THE ALLEGED SHAREHOLDER ENTITIES AT THE ADDRES S PROVIDED BY THE ASSESSEE. HOWEVER, THE SUMMONS WERE RECEIVED BACK UNSERVED WITH POSTAL REMARK TO THE EFFECT THAT NO SUCH FIRM/COMPANY EXISTED AT THE RESPECTIVE ADDRESS. THEREAFTER, THE ASSESSING OFFICER ASKED THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE TO PRODUCE THE PRINCIPAL OFFICER OF THE SAID ENTITIES ALONG WITH BOOKS OF ACCOUNT FOR VERIFICATION OF TH E SHARE CAPITAL APPLIED BY THEM, HOWEVER, T H E ASSESSEE FAILED TO PRODUCE THO SE PARTIES. THE ASSESSING OFFICER ALSO OBSERVED THAT THE SHARES WERE SUBSEQ UENTLY TRANSFERRED IN THE NAME OF DIRECTORS OF THE ASSESSEE COMPANY, I.E., SH. SUKHDEO SINGH AND MRS. MANJIT KAUR AS EARLY AS ON 25 TH NOVEMBER, 2004. THE ASSESSING OFFICER ALSO RECORDED THE STATEMENT OF SH. SUKHDEO SINGH WHO CLAIMED TO BE THE MANAGING DIRE CTOR AND LOOKED AFTER ALL THE AFFAIRS OF THE COMPANY. HOWEVER, IN THE HIS STATEMENT DATED 7 TH DECEMBER, 2010, SH. SUKHDEO SINGH FAILED TO EXP LAIN THE DETAILS OF THE PARTIES TO WHOM THE SHARES WERE ISSUED, HOW THE SHARE PRICE WAS DECIDED, HOW T HE SAME WERE BROUGHT BACK AT A HUGE DISCOUNT WITHOUT ANY J USTIFICATION ETC. THE ASSESSING OFFICER ALSO CALLED FOR THE BANK STATEMENT OF THE SHARE APPLICANT COMPANIES FROM THE BANK AND FOUND THAT THERE WAS INCONSISTENCY IN THE COPY OF BANK ACCOUNTS OF THOSE CONCERN S SU BMITTED BY THE ASSESSEE. THE FINDINGS OF THE ASSESSING OFFICER IN RESPECT OF BANK ACCOUNTS OF THE SHARE APPLICANT ENTITY ARE REPRODUCED AS UNDER: 1. IMMEDIATELY BEFORE THE WITHDRAWAL OF FUNDS IN FAVOUR OF THE ASSESSEE COMPANY I.E. ON 13.05.2002, THERE IS CASH DEPOSIT OF EQUIVALENT AMOUNT IN THE ACCOUNTS OF M/S. SHREE GUPTESHWAR MARKETING PVT. LTD. 4 ITA NO. 6161/DEL/2014 AY: 2003 - 04 2. IMMEDIATELY BEFORE THE WITHDRAWAL OF FUNDS IN FAVOUR OF THE ASSESSEE COMPANY, AN AMOUNT OF RS. 5,00,000/ - IS FOUND TO BE CREDITED (BY C LEARING) IN THE ACCOUNT OF M/S. NEW TECH STEELS PVT. LTD. (CA NO. 0001465. BANK OF MAHARASHTRA, P REET VIHAR, DELHI) BY WAY OF CLEARING ENTRIES OF RS. 2,50,000/ - EACH ON 24.04 . 2002. 3. IMMEDIATELY BEFORE THE WITHDRAWAL OF FUNDS IN FAVOUR OF THE ASSESSEE C OMPANY, AN AMOUNT OF RS. 5,00,000/ - IS FOUND TO BE CREDITED IN THE ACCOUNT OF M/S. DKC INDIA PVT. LTD. (ACCOUNT NO. 1773, INDIAN OVERSEAS BANK, GHAZIABAD) ON 21.05.2002. 4. THE BANK TRANSACTIONS ARE MARKED BY ; A SIMILAR PATTERN OF CREDIT ( BY C ASH/TRANSF ER AND DEBIT OF EQUIVALENT AMOUNTS, LEAVING VERY LITTLE BALANCE { J UST ABOVE THE AMOUNT OF MINIMUM DEPOSIT REQUIRED) 5. IN THE CASE OF M/S SHREE GUPTE SHWAR MARKETING PVT LTD, THERE I S EVIDENCE OF MANIPULATION ON THE PART OF THE SAID ENTITY WITH OR WITHOUT THE COLLUSION OF THE ASSESSEE. WHILE THE ORIGINAL STATEMENT CALLED FOR FROM THE BANK, SHOWS DEPOSIT OF CASH OF RS. 2,00,000/ - ON 13.05.2002 ( IMMEDIATELY BEFORE WITHDRAWAL OF THE AMOUNT OF RS. 2,00,000/ - IN FAVOUR OF THE ASSESSEE VIDE CHEQUE NO. 96 1557) , THE COPY OF THE BANK STATEMENT ( ACCOUNT NO. 010000050099, STATE BANK OF PATIALA, DARYA GANJ, DELHI) FURNISHED PURPORTEDLY ON BEHALF OF THE SAID 'COMPANY' BY THE AR VIDE WRITTEN SUBMISSION DAT ED 26.11.2010 SHOWS A CREDIT BY CLEARING ON 11.05.2002 . THE BANK STATEMENT AS PROVIDED BY THE ASSESSEE READS AS UNDER: DATE DESCRIPTION WITHDRAWALS DEPOSITS BALANCE 09/05/02 TO CLG. 00961554 . 793 16003.40 MFL/05/02 BY CLEARING 200000/ - 216003.40 13/05/02 TO CLEARING 200000 16003.40 AS AGAINST THIS, THE RELEVANT PORTION OF THE ORIGINAL BANK STATEMENT (OBTAINED FROM THE BANK) IS AS UNDER: DATE REF NO. DEBITS CREDITS BALANCE NARRATION 08 - 05 - 02 S 003065 3.00,000/ - 3,05,005/ - BY CASH 08 - 05 - 02 S 003067 - 2,00,000/ - 5,05,005/ - BY CASH 08 - 05 - 02 961559 5,00,000/ - - 5 , 005/ - TO CLG 13 - 05 - 02 S 003027 2,00,000 2,05,005/ - BY CASH 13 - 05 - 02 961559 2,00,000/ - 5,005/ - TO CLG 4. THE ASSESSING OFFICER ALSO DISTINGUISHED THE JUDGMENT OF M/S. LOVELY EXPORT PVT. LTD. (2008) 216 CTR 195 (SC). FINALLY , THE ASSESSING OFFICER CONCLUDED THE FOLLOWING FACTS IN RESPECT OF THE ISSUE IN DISPUTE AND HELD THAT TOTAL AMOUNT OF RS. 11 LACS RECEIVED FROM THE ABOVE PARTIES WAS ONLY A CAMOUFLAGE D TRANSACTION AND IT WAS THE MONEY OF THE ASSESSEE , WHICH WAS ROUTED BACK AND ACCORDING LY THE ADDITION UNDER SECTION 68 OF THE ACT WAS MADE: I ) THE ASSESSEE HAS RECEIVED HUGE AMOUNT OF FUND FROM OUTSIDE PARTIES. II) SUCH PERSONS GIVING CREDIT DID NOT RECEI VE ANY DIVIDEND OR INTEREST OF WHATSOEVER NATURE FROM THE ASSESSEE WHILE THE MONEY REMAINED AT THE LETTER'S DISPOSAL. 5 ITA NO. 6161/DEL/2014 AY: 2003 - 04 III) REPEATED OPPORTUNITIES WERE GIVEN TO THE ASSESSEE TO PRODUCE SUCH PERSONS OR TO FURNISH MATERIAL EVIDENCE OF THEIR IDENTITY OR EVEN ACTUAL EXISTENCE ON THE GROUND. THE ASSESSES HAS FURNISHED ONLY PHOTOCOPIES OF CONFIRMATIONS WHICH CANNOT BE TAKEN COGNIZANCE OF FOR THE SIMPLE REASONS THAT THESE ARE ONLY COPIES AND THEY ARE UND - DATED IV) DESPITE REPEATED OPPORTUNITIES, THE PERSONS HA VE NEITHER APPEARED NOR COULD BE PRODUCED BY THE ASSESSES WHO CANNOT BUT BE PRESUMED TO HAVE POSITIVE INFORMATION AND KNOWLEDGE REGARDING THE WHEREABOUTS OF THE INVESTING PERSONS. V) SHARES SUBSCRIBED AT A HUGE PREMIUM WERE SUBSEQUENTLY BOUGHT BY THE DIRECTORS OF THE ASSESSEE AT A HUGE DISCOUNT VIS - A - VIS THE PRICE AT WHICH THE SAME WERE SUBSCRIBED. VI} ATTEMPT HAS BEEN MADE TO MISREPRESENT FACTS BY SUBMITTING A COPY OF THE BANK ACCO UNT ON BEHALF OF ONE OF THE INVESTORS WHICH DOES NOT TALLY WITH THE ACTUAL BANK STATEMENT OBTAINED FROM THE BANK. VII) THE NATURE OF TRANSACTIONS IN THE BANK STATEMENTS FURTHER SHOWS THAT THEY CANNOT BE SAID TO REPRESENT ANY ACTUAL BUSINESS TRANSACTIONS . IMMEDIATELY BEFORE WITHDRAWALS/DEBITS OF FUNDS, THERE IS INVARIABLY DEPOSIT OF EQUIVALENT AMOUNT. THE DEBITS/CREDITS ARE IN ROUND FIGURES AND AT THE END OF EACH TRANSACTION CYCLE; THE AMOUNT LEFT IN THE ACCOUNT IS VERY SMALL. SUCH TRANSACTION PATTERN IS NOT WITNESSED IN THE NORMAL BANK ACCOUNTS. 5. THE ASSESSING OFFICER ALSO MADE ADDITION OF RS. 22,000/ - UNDER SECTION 69 C OF THE ACT ON THE GROUND THAT OBTAINING ACCOMMODATION ENTRY, THE ASSESSEE MUST HAVE PROVIDED COMMISSION @ 2% TO THE ENTRY PROVID ERS AND THAT WAS NOT EXPLAINED /INCURRED AS BEING OUT OF BOOKS OF ACCOUNT. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) PROVIDED LOT OF OPPORTUNITIES, HOWEVER, NO SUBMISSIONS WERE FILED BY THE ASSESSEE IN RESPECT OF GROUNDS OF THE APPEAL EXCEP T FILING ADJOURNMENT. IN THE ABSENCE OF ANY SUBMISSION, THE LEARNED COMMISSIONER OF INCOME TAX(A PPEALS) DECIDED THE ISSUE IN FAV OUR OF THE REVENUE DISMISSING THE LEGAL GROUNDS AS WELL AS MERIT OF THE ADDITION. AGGRIEVED WITH THE FINDINGS OF THE LEARNED COM MISSIONER OF INCOME TAX(APPEALS), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. IN GROUND S NO. 1 & 2 , THE ASSESSEE HAS CHALLENGED THE JURISDICTION ASSUMED BY THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT. 6. 1 THE LEARNED AUTHORIZED REPRESENTATIVE OF THE ASSESSEE ADDRESSING THE GROUNDS AND REFERRING TO THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT, PLACED ON PAGES 41 & 42 OF THE ASSESSEE S PAPER BOOK, SUBMITTED THAT THE INFORMATION RECEIVED FROM THE IN VESTIGATION WING WAS ONLY MADE THE BASIS FOR 6 ITA NO. 6161/DEL/2014 AY: 2003 - 04 REASON TO BELIEVE AND NO INDEPENDENT INQUIRY WAS MADE BY THE ASSESSING OFFICER AND, THEREFORE, REOPENING OF THE ASSESSMENT WITHOUT VALID REASON TO BELIEVE WAS VOID - AB - INITIO. IN SUPPORT OF THE CONTENTION, THE LE ARNED AUTHORIZED REPRESENTATIVE RELIED ON THE JUDGMENT OF THE HON BLE HIGH COURT OF DELHI IN THE CASE OF M/S. SARTHAK SECURITIES COMPANY PVT. LTD. VS. INCOME TAX OFFICER, REPORTED IN 329 ITR 110; CIT VS. INDO ARAB AIR SERVICES, [2016] 283 CTR 92 (DELHI) AND THE ORDER OF TRIBUNAL IN THE CASE OF VARUN TIBREWAL VS. ITO, IN ITA NO. 2301 & 2302/DEL/2012 (DATED 31 ST OCTOBER, 2013). 6.2 ON THE OTHER HAND, LEARNED SR. DEPARTMENTAL REPRESENTATIVE, REFERRING TO THE REASONS RECORDED, SUBMITTED THAT THE INVESTIGA TION WING OF THE DEPARTMENT HAD CONDUCTED INQUIRY AT LARGE SCALE IN THE CASE S OF THE ENTRY OPERATORS AND ON THE BASIS OF THOSE INQUIRIES, SPECIFIC INFORMATION WAS SENT TO THE ASSESSING OFFICER THAT THE ASSESSEE RECEIVED ACCOMMODATION ENTRY FROM THOSE ENTRY PROVIDERS. THE INFORMATION RECEIVED FROM THE INVESTIGATION WING CONTAINED INSTRUMENT NUMBER BY WHICH THE ENTRY WAS TAKEN, DATE ON WHICH THE ENTRY WAS TAKEN, BANK ACCOUNT AND BRANCH THROUGH WHICH ENTRY RECEIVED WAS BY THE ASSESSEE. SHE FURTHER SUBMITTED TH AT AT THE STAGE OF REOPENING OF THE STATEMENT A PRIMA FACIE REASON TO BELIEVE WAS REQUIRED AND AS THE INFORMATION WAS FROM A CREDIBLE SOURCE, THE ASSESSING OFFICER RECORDED THE REASONS AND REOPENED THE ASSESSMENT. SHE FURTHER SUBMITTED THAT IN THIS CASE ON LY THE PROCESSING WAS DONE AND NO OTHER INFORMATION IN RESPECT OF INTRODUCTION OF THE SHARE CAPITAL WAS AVAILABLE ON THE RECORD, THE ASSESSING OFFICER WAS JUSTIFIED IN REOPENING THE REASSESSMENT. 6.3 LEARNED AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS RELIED ON THE JUDGMENT OF THE HON BLE HIGH COURT O F DELHI IN THE CASE OF SARTHAK SECURITIES COMPANY PRIVATE L IMITED (SUPRA). THE HON BLE HIGH COURT IN PARA 23 OF THE JUDGMENT HAS HELD AS UNDER: 23. THE OBTAINING FACTUAL MATRIX HAS TO BE TESTED ON THE ANVIL OF THE AFORESAID PRONOUNCEMENT OF LAW. IN THE CASE AT HAND, AS IS EVINCIBLE, THE ASSESSING OFFICER WAS AWARE OF THE EXISTENCE OF FOUR COMPANIES WITH WHOM THE ASSESSEE HAD ENTERED INTO TRANSACTION. BOTH THE ORDERS CLEARLY EXPOSIT THAT THE ASSESSING OFFICER WAS MADE AWARE OF 7 ITA NO. 6161/DEL/2014 AY: 2003 - 04 THE SITUATION BY THE INVESTIGATION WING AND THERE IS NO MENTION THAT THESE COMPANIES ARE FICTITIOUS COMPANIES. NEITHER THE REASONS IN THE INITIAL NOTICE NOR THE COMMUNICATION PROV IDING REASONS REMOTELY INDICATE INDEPENDENT APPLICATION OF MIND. TRUE IT IS, AT THAT STAGE, IT IS NOT NECESSARY TO HAVE THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME, BUT WHAT IS NECESSARY IS THAT THERE IS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COUL D HAVE FORMED THE REQUISITE BELIEF. TO ELABORATE, THE CONCLUSIVE PROOF IS NOT GERMANE AT THIS STAGE BUT THE FORMATION OF BELIEF MUST BE ON THE BASE OR FOUNDATION OR PLATFORM OF PRUDENCE WHICH A REASONABLE PERSON IS REQUIRED TO APPLY. AS IS MANIFEST FROM TH E PERUSAL OF THE SUPPLY OF REASONS AND THE ORDER OF REJECTION OF OBJECTIONS, THE NAMES OF THE COMPANIES WERE AVAILABLE WITH THE AUTHORITY. THEIR EXISTENCE IS NOT DISPUTED. WHAT IS MENTIONED IS THAT THESE COMPANIES WERE USED AS CONDUITS. IN THAT VIEW OF THE MATTER, THE PRINCIPLE LAID DOWN IN LOVELY EXPORTS (P.) LTD.'S CASE ( SUPRA ) GETS SQUARELY ATTRACTED. THE SAME HAS NOT BEEN REFERRED TO WHILE PASSING THE ORDER OF REJECTION. THE ASSESSEE IN HIS OBJECTIONS HAD CLEARLY STATED THAT THE COMPANIES HAD BANK ACCOUN TS AND PAYMENTS WERE MADE TO THE ASSESSEE - COMPANY THROUGH BANKING CHANNEL. THE IDENTITY OF THE COMPANIES WAS NOT DISPUTED. UNDER THESE CIRCUMSTANCES, IT WOULD NOT BE APPROPRIATE TO REQUIRE THE ASSESSEE TO GO THROUGH THE ENTIRE GAMUT OF PROCEEDINGS. IT IS T OTALLY UNWARRANTED. 6.4 THE HON BLE HIGH COURT HAS SAID THAT THERE MUST BE RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD FORM BELIEF AND CONCLUSIVE PROOF IS NOT REQUIRED OR ESTABLISHED FACTS OF ESCAPED INCOME ARE NOT NECESSARY AT THE STAGE OF RE CORDING REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. IN THE C ASE OF THE ASSESSEE IN HAND THE, THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT HAD UNEARTHED A MONEY LAUNDERING RACKET THROUGH ENQUIRIES AND OBSERVED THAT THE ASSESSEE HAS ALSO OB TAIN ED AN ACCOMMODATION ENTRY FROM M/S . GUPTESHWAR MARKETING PRIVATE L IMITED. THE INFORMATION CONTAINED ALL THE DETAILS OF AMOUNT RECEIVED, INSTRUMENT NUMBER, BANK BRANCH AND ACCOUNT NUMBER THROUGH WHICH IT WAS RECEIVED. IN THE CASE OF THE ASSESSEE, THE RE TURN OF INCOME WAS ONLY PROCESSED UNDER SECTION 143(1) OF THE ACT AND AS SUCH NO DETAIL OF SHARE APPLICANTS/SHARE HOLDERS OF THE ASSESSEE COMPANY WAS AVAILABLE IN THE RETURN OF INCOME AND THE INFORMATION WAS RECEIVED FROM CREDIBLE SOURCE, THE ASSESSING OFF ICER FORMED BELIEF THAT ASSESSEE OBTAINED AN ACCOMMODATION ENTRY FROM M/S GUPTESHWAR MARKETING PRIVATE L IMITED IN THE FORM OF SHARE CAPITAL. FURTHER , IN THE CITED JUDGMENT OF SARTHAK SECURITIES COMPANY PRIVATE L IMITED (SUPRA), THE ASSESSEE OBJECTED TO THE REASONS RECORDED AND THE ASSESSING OFFICER IN THE REJECTION OF OBJECTION DID NOT REFER TO THE PRINCIPLE LAID DOWN IN LOVELY EXPORTS 8 ITA NO. 6161/DEL/2014 AY: 2003 - 04 PRIVATE LIMITED(SUPRA) , WHEREAS IN THE CASE IN HAND AS PER THE INFORMATION AVAILABLE ON RECORD , THE ASSESSEE DID NOT OBJECT TO THE REASONS RECORDED AND , THEREFORE , THERE WAS NO ORDER REJECTING THE OBJECTION OF THE ASSESSEE. THUS , THE FACTS AND CIRCUMSTANCES OF THE CASE IN HAND ARE DIFFERENT FROM THE CASE CITED BY THE ASSESSEE ABOVE. 6.5 THE LEARNE D AR ALSO RELIED ON THE JUDGM ENT OF THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT ( CENTRAL ) - 1 VS. INDO ARAB AIR S ERVICES (2016) 283 CTR 92 DELHI. IN THIS CASE , THE ASSESSEE WAS A GENERAL SALES AGENT FOR SAUDI ARABIA AIRLINES AND RETURN OF INCOME FILED WAS PROCESSED UNDER SECTION 143 (1) OF THE ACT. SUBSEQUENTLY , THE ASSESSING OFFICER RECEIVED INFORMATION FROM THE ENFORCEMENT DIRECTORATE (ED) THAT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE THERE WERE HUGE CASH DEPOSITS WHICH WERE NOT EXPLAINED AND ON THE BASIS OF THE SAID INFORMATION THE ASSESSING OFFICER SOUGHT TO REOPEN THE ASSESSMENT. THE HON BLE HIGH COURT IN THE CASE OF INDO ARAB AIR SERVICES (SURPA), AFTER CONSIDERING THE VARIOUS DECISIONS INCLUDING THE DECISION IN THE CASE OF CIT VS. ORIENT C RAFT LTD . (2013) 354 ITR 536 , HELD AS UN DER: 20. KEEPING THE ABOVE LEGAL POSITION IN VIEW WHEN THE CASES ON HAND ARE EXAMINED, IT IS SEEN THAT AS FAR AS INDO ARAB IS CONCERNED WHILE THE AO SET OUT THE INFORMATION RECEIVED FROM THE ED, HE FAILED TO EXAMINE IF THAT INFORMATION PROVIDED THE VITAL LINK TO FORM THE 'REASON TO BELIEVE' THAT INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT FOR THE AY IN QUESTION. WHILE THE AO HAS REFERRED TO THE FACT THAT THE ED GAVE INFORMATION REGARDING CASH DEPOSITS BEING FOUND IN THE BOOKS OF THE ASSESSEE, THE AO DID NOT STATE THAT HE EXAMINED THE RETURNS FILED BY THE ASSESSEE FOR THE SAID AY AND DETECTED THAT THE SAID CASH DEPOSITS WERE NOT REFLECTED IN THE RETURNS. IN FACT, THE AO CONTRADICTED HIMSELF IN THE REASONS RECORDED BY HIM BY NOTICING THE INFORMATION OF THE ED TO THE ABOVE EFFECT AND THEN STATING THAT ON PERUSAL OF THE RECORDS FOR THE AY IN QUESTION IT WAS NOTICED THAT THE ASSESSEE 'HAD NOT DISCLOSED THESE TRANSACTIONS IN ITS BOOKS OF ACCOUNT.' FURTHER THE AO REFERS TO THE ED'S INFORMATION THAT MR. CHETAN GUP TA, PARTNER OF THE ASSESSEE, FAILED TO EXPLAIN THE SOURCES OF THE CASH DEPOSITS AS SHOWN IN THE BOOKS OF ACCOUNT. HOWEVER, THAT BY ITSELF COULD NOT HAVE LED THE AO TO EVEN PRIMA FACIE CONCLUDE THAT INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT. THE EXPLANA TION OR THE LACK OF IT OF THE ENTRIES IN THE BOOKS OF ACCOUNT MAY HAVE CERTAIN RELEVANCE AS FAR AS ED IS CONCERNED BUT THAT BY ITSELF DOES NOT PROVIDE THE VITAL LINK FOR CONCLUDING THAT FOR THE PURPOSES OF THE ACT ANY PART OF CASH DEPOSITS CONSTITUTED INCO ME THAT HAD ESCAPED ASSESSMENT. THERE IS A LONG DISTANCE TO TRAVEL BETWEEN A SUSPICION THAT INCOME HAD ESCAPED ASSESSMENT AND FORMING REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. WHILE THE LAW DOES NOT REQUIRE THE AO TO FORM A DEFINITE OPINION BY CONDUCTING ANY DETAILED INVESTIGATION REGARDING THE ESCAPEMENT OF INCOME FROM 9 ITA NO. 6161/DEL/2014 AY: 2003 - 04 ASSESSMENT, IT CERTAINLY DOES REQUIRE HIM TO FORM A PRIMA FACIE OPINION BASED ON TANGIBLE MATERIAL WHICH PROVIDES THE NEXUS OR THE LINK TO HAVING REASON TO BELIEVE THAT INCOME H AS ESCAPED ASSESSMENT. 21. IT IS IN THIS CONTEXT THAT THE COURT FINDS THAT THE DECISION IN MITSUI & CO. INDIA (P.) LTD. V. ITO [2012] 26 TAXMANN.COM 1/[2013] 213 TAXMAN 32 (DELHI) , ON WHICH CONSIDERABLE RELIANCE WAS PLACED BY MR. KAMAL SAWHNEY, IS DISTINGUISHABLE ON FACTS. THE NATURE OF THE INFORMATION PROVIDED BY THE GOVERNMENTAL AGENCY IN THAT CASE DID NOT ITSELF REFER TO ANY AMOUNTS OR ENTRIES IN THE BOOKS OF ACCOUNT O F THE ASSESSEE. IN THE PRESENT CASE, HOWEVER, THE INFORMATION RECEIVED FROM THE ED MAKES A REFERENCE TO WHAT WAS FOUND IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. 22. THE NEXT QUESTION THAT HAD TO BE EXAMINED BY THE AO WAS WHETHER WHAT WAS DISCLOSED IN THE BO OKS OF ACCOUNT WAS ALSO DISCLOSED IN THE RETURNS FILED BY THE ASSESSEES. IF IT WAS NOT DISCLOSED, THEN POSSIBLY THE AO COULD HAVE REASONS TO BELIEVE THAT THE CASH DEPOSITS REFLECTED IN THE BOOKS OF ACCOUNT MAY HAVE ESCAPED ASSESSMENT. HOWEVER, NO EFFORT AP PEARS TO HAVE BEEN MADE BY THE AO TO EXAMINE THE RETURNS FILED BY THE ASSESSEE IN EITHER OF THESE CASES. 6.6 THUS THE HON BLE C OURT PROCEEDED ON THE BASIS THAT THERE HAD TO BE SOME TANGIBLE MATERIAL ON THE BASIS OF WHICH THE A . O . COULD FORM A PRIMA FACIE REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. HOWEVER , IN RECENT DECISION DATED 18 TH OF MAY 2016 I N THE CASE OF INDU LATA RAGWALA , IN WRIT P ETITION (C) NO. 1393/2002, THE HON BLE DELHI HIGH COURT IN PARA - 35.9 HAS SAID THAT DECISION OF THE DELHI HIGH COURT AND OTHER HIGH C OURTS TO THE EXTENT OF INCONSISTENCY WITH THE DECISION OF THE SUPR EME COURT IN THE CASE OF ZUARI ESTATE DEVELOPMENT AND INVESTMENT COMPANY L IMITED (2015) 373 ITR 661 (SC) CANNOT BE SAID TO REFLECT THE CORRECT LEGAL POSITION. IN P ARA - 35.5 TO 35.7, THE HON BLE HIGH COURT HAS SUMMARIZED THE LEGAL POSITION EMANATING FROM THE JUDGMENT OF THE ZUARI ESTATE DEVELOPMENT AND INVESTMENT COMPANY LIMITED (SUPRA) AS UNDER : 35.5 AS EXPLAINED BY THE SUPREME COURT IN RAJESH JHAVERI STOCK BROKERS P. LTD. (SUPRA) AND REITERATED BY IT IN ZUARI ESTATE DEVELOPMENT AND INVESTMENT CO. LTD. (SUPRA) AND INTIMATION UNDER SECTION 143(1)(A) CANNOT BE TREATED TO BE AN ORDER OF ASSESSMENT. THERE BEING NO ASSESSMENT UNDER SECTION 143(1)(A), THE QU ESTION OF CHANGE OF OPINION DOES NOT ARISE. 35.6 WHEREAS IN A CASE WHERE THE INITIAL ASSESSMENT ORDER IS UNDER SECTION 143(3), AND IT IS SOUGHT TO BE REOPENED WITHIN FOUR YEARS FROM THE EXPIRY OF THE RELEVANT ASSESSMENT YEAR, THE ASSESSING OFFICER HAS T O BASE HIS REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT ON SOME FRESH TANGIBLE MATERIAL THAT PROVIDES THE NEXUS OR LINK TO THE FORMATION OF SUCH BELIEF. IN A CASE WHERE THE INITIAL RETURN IS PROCESSED UNDER SECTION 143(1) OF THE ACT AND AN INTIM ATION IS SENT TO THE ASSESSEE, THE REOPENING OF SUCH 10 ITA NO. 6161/DEL/2014 AY: 2003 - 04 ASSESSMENT NO DOUBT REQUIRES THE ASSESSING OFFICER TO FORM REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, BUT SUCH REASONS DO NOT REQUIRE ANY FRESH TANGIBLE MATERIAL. 35.7 IN OTHER WORDS, WHERE REOPENING IS SOUGHT OF AN ASSESSMENT IN A SITUATION WHERE THE INITIAL RETURN IS PROCESSED UNDER SECTION 143(1) OF THE ACT, THE ASSESSING OFFICER CAN FORM REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT BY EXAMINING THE VERY RETURN AND/OR THE DOCUMENT S ACCOMPANYING THE RETURN. IT IS NO NECESSARY IN SUCH A CASE FOR THE ASSESSING OFFICER TO COME ACROSS SOME FRESH TANGIBLE MATERIAL TO FORM REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. 6.7 IN VIEW OF THE ABOVE JUDGMENT , THE RATI O IN THE CASE OF INDO ARAB AIR S ERVICES IS NO LONGER REQUIRED TO FOLLOW. 6.8 THE FACTS IN THE CASE IN HAND ARE ALSO DIFFERENT FROM THE CASE OF VARUN TIBREWAL (SUPRA) AS IN THE CASE IN HAND THE ASSESSING O FFICER HAS REFERRED TO THE EXERCISE OF UNEARTHING THE HUGE RACKET OF MONEY LAUNDERING CARRIED OUT THROUGH BOGUS ENTRY OPERATORS. A DETAILED REPORT IN THIS RESPECT WAS RECEIVED BY THE ASSESSING OFFICER WHICH IS MENTIONED ON PAGE 3 OF THE ASSESSMENT ORDER. T HUS IN THE CASE IN HAND SOME MATERIAL OR EVIDENCE WAS AVAILABLE WITH THE ASSESSING OFFICER WHILE REOPENING THE ASSESSMENT. 6.9 IN VIEW OF THE ABOVE BACKGROUND, WE HOLD THAT THE INFORMATION AVAILABLE WITH ASSESSING OFFICER WAS SUFFICIENT TO FORM A PRIMARY BELIEF THAT INCOME HAD ESCAPED ASSESSMENT AND , THEREFORE , WE DON T FIND ANY INFIRMITY IN THE FINDING OF THE LEARNE D COMMISSIONER OF INCOME - TAX ( APPEALS) IN DISMISSING THE GROUND CHALLENGING THE JURISDICTION IN REOPENING THE ASSESSMENT. ACCORDINGLY , THIS G ROUND OF THE ASSESSEE IS DISMISSED. 7. IN GROUND NO. 3 , THE ASSESSEE HAS RAISED THE ISSUE THAT THE LEARNE D COMMISSIONER OF INCOME - TAX ( APPEALS) HAS NOT CONSIDERED THE EVIDENCE PRODUCED BY THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDING. 7.1 BEFORE US , LEARNED AR REITERATED THE GROUND R AISED AND SUBMITTED THAT LEARNED COMMISSIONER OF INCOME - TAX( APPEALS) HAS ONLY CONSIDERED THE FINDINGS OF THE ASSESSING OFFICER. 11 ITA NO. 6161/DEL/2014 AY: 2003 - 04 7.2 ON THE CONTRARY, THE LEARNE D SR. DR SUBMITTED THAT DESPITE PROVIDING NUMBER OF OPPORTU NITIES BY THE LEARNE D COMMISSIONER OF INCOME - TAX ( APPEALS), THE ASSESSEE DID NOT AVAIL ANY OF THE OPPORTUNITY. 7.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD INCLUDING THE IMPUGNED ORDER WHEREIN THE LEARNE D COMMISSIONER OF INC OME - TAX (APPEALS) HAS GIVEN DETAILS OF REASONS TO DECIDE THE APPEAL IN ABSENCE OF ANY REPLY FROM THE ASSESSEE. THE RELEVANT PARA OF THE IMPUGNED ORDER IS AS UNDER: 2. SEVERAL NOTICES U/S 250 OF THE ACT WERE ISSUED TO THE APPELLANT FOR HEARING THE APPEAL. NOTICE DT. 30 - 01 - 2013 FIXING THE APPEAL FOR 27 - 02 - 2013 AND THEREAFTER NOTICE DT. 16 - 04 - 2013 FIXING FOR 13 - 05 - 2013 WERE ISSUED. ON 13 - 05 - 2013, AN ADJOURNMENT LETTER WAS RECEIVED FROM THE A.R., M/S K.K. KOHLI, CA, REQUESTING FOR FURTHER ADJOURNMENT AND THE A PPEAL WAS ADJOURNED TO 30 - 05 - 2013. ON 30 - 05 - 2013, SH. SUNIL KR FROM M/S. K.K. KOHLI, CA APPEARED AND ON HIS REQUEST THE APPEAL WAS ADJOURNED TO 11 - 07 - 2013. ON 11 - 07 - 2013, APPEAL WAS AGAIN ADJOURNED TO 25 - 07 - 2013 ON APPELLANT'S REQUEST. NOTICE DT. 26 - 07 - 201 3 WAS ISSUED FIXING THE APPEAL FOR 01 - 08 - 2013. ON REQUEST FROM A.R. OF THE APPELLANT, APPEAL WAS AGAIN FIXED FOR 19 - 08 - 2013, 10 - 09 - 2013, 07 - 10 - 2013, 04 - 12 - 2013, 10 - 02 - 2014, 03 - 03 - 2014, 10 - 03 - 2014, 09 - 04 - 2014, 10 - 07 - 2014, 28 - 07 - 2014 AND 13 - 08 - 2014. ON 13 - 08 - 2014, AGAIN AN ADJOURNMENT ALTER WAS SUBMITTED BY ID. A.R. REQUESTING FOR FURTHER ADJOURNMENT AND SUBMITTING THEREIN THAT 'THE CAPTIONED PROCEEDINGS FOR THE AY 2003 - 04 IN RESPECT OF APPEAL ARE FIXED FOR HEARING BEFORE YOUR GOODSELF FOR TODAY. THE RECORDS IN RESPECT OF ASSESSMENT PROCEEDINGS ARE NOT AVAILABLE WITH ME EARLIER COUNSEL ENGAGED FOR ASSESSMENT PROCEEDINGS, THEREFORE, WE ARE REQUIRED TO INSPECT AND TAKE COPIES OF RELEVANT DOCUMENT FOR FILING OUR WRITTEN SUBMISSION AND WE REQUIRE SOME MORE TIME TO PRESENT OUR CASE BEFORE YOUR GOODSELF.' IT IS OBSERVED THAT PRESENT LD. A.R. HAS BEEN ENGAGED BY THE APPELLANT THROUGH ITS POWER OF ATTORNEY DT. 10 - 05 - 2013 AND THEREAFTER ON ONE PRETEXT OR OTHER, THE ADJOURNMENTS ARE SOUGHT BY THEM. AFTER BEING ENGAGED IN THE CASE SINCE MORE THAN 15 MONTHS, TAKING SUCH A GROUND THAT PREVIOUS RECORDS ARE NOT AVAILABLE WITH THEM IS NOTHING BUT AN EXCUSE FOR SEEKING ADJOURNMENT. IN SUCH CIRCUMSTANCES IT WAS MADE KNOWN TO THE APPELLANT THAT NO FURTHER ADJOURNMENT SHALL BE GRAN TED TO THE APPELLANT. HOWEVER, IF WRITTEN SUBMISSIONS ARE RECEIVED BY 19 - 08 - 2014, THE SAME SHALL BE ENTERTAINED OR ELSE THE APPEAL SHALL BE DECIDED ON MERITS. ON 19 - 08 - 2014, AGAIN NOBODY APPEARED NOR ANY WRITTEN SUBMISSIONS WERE FILED. SINCE THE APPELLATE HAS BEEN TAKING ADJOURNMENTS SINCE BEGINNING AND THE APPEAL IS OLD NOW, I HAVE NO OTHER OPTION BUT TO DECIDE THE APPEAL ON MERITS ON THE BASIS AS OF MATERIAL AVAILABLE ON RECORDS. 7.4 FROM THE FINDING OF THE LEARNE D COMMISSIONER OF INCOME - TAX(APPEALS), IT IS EVIDENT THAT THE ASSESSEE WAS PROVIDED ENOUGH OPPORTUNITY TO REPRESENT ITS CASE BUT , HOWEVER , NO SUBMISSION WAS FILED BEFORE THE LEARNE D COMMISSIONER OF INCOME - TAX( APPEALS). IN VIEW OF NON - SUBMISSION, THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) D ECIDED THE ISSUES ON MERIT AND WE DON T FIND ANY 12 ITA NO. 6161/DEL/2014 AY: 2003 - 04 INFIRMITY IN THE FINDING S OF THE LEARNED COMMISSIONER OF INCOME - TAX( APPEALS) ON THE ISSUE IN DISPUTE, ACCORDINGLY , THE GROUND OF THE APPEAL IS DISMISSED. 8. IN GROUND N O. 4 , THE ASSESSEE HAS CHALLENGED THE ADDITION OF RS. 11 LAKH AS UNEXPLAINED CREDIT HELD UNDER SECTION 68 OF THE ACT. 8.1 BEFORE US THE LEARNED AUTHORIZED R EPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT ALL DETAILS IN RESPECT OF THE SHARE APPLICANTS INCLUDING PAN CARD, THERE INCOME TAX RETURNS, BANK STATEMENT ETC . WERE FILED AND , THEREFORE , ASSESSEE DISCHARGE D ITS ONUS AND HENCE NO ADDITION WAS WARRANTED IN THE CASE OF ASSESSEE UNDER SECTION 68 OF THE ACT. IN SUPPORT THEREOF , THE AR RELIED ON THE JUDGMENT IN THE CASE OF KAMDHENU STEEL A ND ALLOYS REPORTED IN 361 ITR 220 (DEL). 8.2 ON THE OTHER HAND , LEARNED SR. D . R . SUBMITTED THAT SUMMONS SENT UNDER SECTION 131 OF THE ACT WERE WRITTEN UNSERVED WITH THE POSTAL REMARKS THAT NO SUCH FIRMS/COMPANIES EXISTED ON THOSE ADDRESSES AND THE ASSESS EE ALSO FAILED TO EITHER PRODUCE OR PROVIDE T HEIR CURRENT ADDRESSES. FURTHER, REFERRING TO THE PAGE NO. 18 OF THE ASSESSEE S PAPER BOOK, THE SR. DR SUBMITTED THAT CREDIT WORTHINESS OF SHREE GUPTESHWAR M ARKETING PRIVATE L IMITED WAS DOUBTFUL AS IT HAS SHOWN A LOSS OF RS. 3, 563 / - IN THE RETURN OF INCOME FILED. FURTHER , HE REFERRED TO PAGE NO. 27 OF THE ASSESSEE S PAPER BOOK AND ACCORDING TO WHICH ANOTHER SHARE APPLICANT M/S . DKC INDIA PRIVATE L IMITED FILED RETURN DECLARING INCOME OF RS. 132 ONLY/ - . THE DR ALSO REFERRED TO THE VARIOUS DISCREPANCIES IN BANK STATEMENTS FOUND BY THE ASSESSING OFFI CER AND ALSO THE FACT THAT SAID SHARES HAVE BEEN BOUGHT BACK BY THE DIRECTORS OF THE ASSESSEE COMPANY AT VERY LOW RATE AND WHICH ESTABLISHED THE FULL CIRCLE OF ROTATION OF THE MONEY BY THE ASSESSEE. THE DR ACCORDINGLY SUBMITTED THAT THE ASSESSING OFFICER HAS DULY REBUTTED THE ONUS OF PROOF AND IT WAS THE DUTY OF THE ASSESSEE TO DISCHARGE THE ONUS WHICH WAS SHIFTED UPON IT BY THE ASSESSING OFFICER AND AS THE ASSESSEE MISERABL Y FAILED IN DISCHARGING ITS ONUS, THE ADDITION WAS RIGHTLY MADE BY THE ASSESSING OFFICER UNDER SECTION 68 OF THE ACT. 13 ITA NO. 6161/DEL/2014 AY: 2003 - 04 8.3 WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD INCLUDING THE ORDERS OF THE LOWER AUTHORITIES. WE FIND THAT THE ASSESSEE HAS INITIALLY PROVIDED DETAILS IN RESPECT OF THE SHARE APPLICANTS TO THE ASSESSING OFFICER , HOWEVER , WHEN THE SUMMONS SENT TO THE SHARE APPLICANTS WRITTEN UNSERVED WITH THE POSTAL REMARKS THAT NO SUCH FIRMS/COMPANIES EXISTED ON THAT ADDRESS AND T HE ASSESSING OFFICER ASKED TO PRODUCE THOSE PARTIES BEFORE HIM, IT WAS THE ONUS OF THE ASSESSEE TO EITHER PRODUCE THOSE PARTIES BEFORE HIM OR PROVIDE THEIR NEW ADDRESSES AS IN THE CASE OF PRIVATE LIMITED COMPANIES, THE SHARES ARE ALLOTTED THROUGH PRIVATE C IRCULATION ONLY. THE ASSESSING OFFICER ALSO OBSERVED DEPOSIT OF CASH IN THE BANK ACCOUNT OF THE SHARE APPLICANT JUST BEFORE ISSUE OF CHEQUES TO THE ASSESSEE. THE ASSESSING OFFICER GATHERED COPY OF BANK STATEMENTS OF THE SHARE APPLICANTS DIRECTLY FROM THE B ANKS THROUGH NOTICE UNDER SECTION 1 33(6) OF THE ACT AND POINTED OUT DISCREPANCY IN THE COPY OF THE BANK STATEMENT OF ONE OF THE SHARE APPLICANT SUPPLIED BY THE ASSESSEE. THE ASSESSING OFFICER ALSO OBSERVED THAT THE SHARES ISSUED AT HIGHER PREMIUM WERE SUBS EQUENTLY BOUGHT BACK BY THE DIRECTORS OF THE ASSESSEE COMPANY AT VERY LOW VALUE. IN VIEW O F ALL THE EVIDENCES, THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) ALSO UPHELD THE FINDING OF THE ASSESSING OFFICER. THE RELEVANT PART OF THE IMPUGNED ORDER IS AS UNDER: (II) GROUND NO.2 OF APPEAL IS AGAINST THE ADDITION OF RS. 11,00,000/ - REPRESENTING SHARE APPLICATION MONEY AND RS. 22,000/ - AS ALLEGED COMMISSION PAID FOR ARRANGING THE ACCOMMODATION ENTRY. IT IS OBSERVED THAT THE APPELLANT REMAINS SILENT ON THE IS SUE DESPITE THE THE FACT THAT THE INITIAL APPEAL WAS FIXED ON 27 - 02 - 2013 VIDE NOTICE U/S 250 OF THE ACT DT. 31 - 01 - 2013. THEREAFTER, THE APPELLANT THROUGH ITS AUTHORIZED REPRESENTATIVE ONLY SOUGHT ADJOURNMENTS AND DID NOT MENTION A SINGLE WORD REGARDING THE MERITS OF THE CASE. DESPITE THE FACT THAT THE APPELLANT WAS MADE WELL KNOWN THAT NO MORE ADJOURNMENTS SHALL BE GIVEN BY THE UNDERSIGNED AND HE WAS FREE TO GIVE WRITTEN SUBMISSIONS BY 19 - 08 - 2014. THE APPELLANT OPTED NOT TO SUBMIT ANY WRITTEN SUBMISSIONS FO R THE REASONS BEST KNOWN TO IT. IT APPEARS THAT THE APPELLANT HAS NOTHING TO SAY ON THE MERITS OF THE CASE. IT IS A CASE WHERE THE A.O. HAS MADE PROPER ENQUIRIES BY ISSUING THE SUMMONS U/S 131 OF THE ACT AND THE ENTITIES FROM WHOM ACCOMMODATION ENTRIES WER E RECEIVED BY THE APPELLANT REMAINED UNTRACEABLE. SUCH FACTS WERE CONFRONTED TO THE APPELLANT COMPANY DURING THE ASSESSMENT PROCEEDINGS ITSELF. IN SUCH CIRCUMSTANCES THE EVIDENCES IN THE SHAPE OF ROC REGISTRATION, COPY OF BALANCE SHEET, ETC. ARE THE DUMB E VIDENCES CREATED ONLY ON PAPER. NOT ONLY THAT THE A.O. EXAMINED THE DIRECTOR OF THE APPELLANT COMPANY AND CONFRONTED THE DIRECTOR WITH THE WHEREABOUTS OF THE ENTITIES FROM ACCOMMODATION ENTRIES WERE RECEIVED BY THE APPELLANT COMPANY, OBSERVED THAT THE 14 ITA NO. 6161/DEL/2014 AY: 2003 - 04 DIRE CTOR OF THE APPELLANT COMPANY MISERABLY FAILED TO EXPLAIN SATISFACTORILY THE TRANSACTIONS AND HE WAS COMPLETELY UNABLE TO FURNISH ANY EVIDENCE IN SUPPORT OF THE IDENTITIES OF THE PARTIES, THE GENUINENESS OF THE TRANSACTIONS AND THE CREDITWORTHINESS OF THE PARTIES. HIS REPLIES BEFORE THE A.O. WERE INCOMPLETE AND EVASIVE. IT CANNOT BE ACCEPTED THAT THE ACRE APPELLANT COMPANY WAS HAVING THESE THREE ANGEL INVESTORS WHO JUST PROVIDED SHARE CAPITAL TO THE APPELLANT AND THEREAFTER JUST DISAPPEARED. THE HON'BLE HIG H COURT IN THE CASE OF CIT V. M/S N.R. PORTFOLIO PVT. LTD. LI 16 & 1019 OF 2011 HAS OBSERVED AS UNDER: '29. IN CIT V. NIPUN BUILDERS AND DEVELOPERS [2013] 350 ITR 407 (DEL), THIS PRINCIPLE HAS BEEN REITERATED HOLDING THAT THE AND THE ASSESSING OFFICER HAVE TO ADOPT A REASONABLE APPROACH AND WHEN THE INITIAL ONUS ON THE ASSESSEE WOULD STAND DISCHARGED DEPENDS UPON FACTS AND CIRCUMSTANCES OF EACH CASE. IN CASE OF PRIVATE LIMITED COMPANIES, GENERALLY PERSONS KNOWN TO DIRECTORS OR SHA REHOLDERS, DIRECTLY OR INDIRECTLY, BUY OR SUBSCRIBE TO SHARES. UPON RECEIPT OF MONEY, THE SHARE SUBSCRIBERS DO NOT LOSE TOUCH AND BECOME INCOMMUNICADO. CALL MONIES, DIVIDENDS, WARRANTS ETC. HAVE TO BE SENT AND THE RELATIONSHIP IS/WAS A CONTINUING ONE. IN S UCH CASES, THEREFORE, THE ASSESSEE CANNOT SIMPLY FURNISH DETAILS AND REMAIN QUIET EVEN WHEN SUMMONS ISSUED TO SHAREHOLDERS UNDER SECTION 131 RETURN UNSERVED AND UNCOMPLIED. THIS APPROACH WOULD BE UNREASONABLE AS A GENERAL PROPOSITION AS THE ASSESSEE CANNO T PLEAD THAT THEY HAD RECEIVED MONEY, BUT COULD DO NOTHING MORE AND IT WAS FOR THE ASSESSING OFFICER TO ENFORCE SHARE HOLDERS ATTENDANCE. SOME CASES MIGHT REQUIRE OR JUSTIFY VISIT BY THE INSPECTOR TO ASCERTAIN WHETHER THE SHAREHOLDERS/SUBSCRIBERS WERE FUNC TIONING OR AVAILABLE AT THE ADDRESSES, BUT IT WOULD BE INCORRECT TO STATE THAT THE ASSESSING OFFICER SHOULD GET THE ADDRESSES FROM REGISTRAR OF COMPANIES WEBSITE OR SEARCH FOR THE ADDRESSES OF SHAREHOLDERS AND COMMUNICATE WITH THEM. SIMILARLY, CREDITWORTHI NESS WAS NOT PROVED BY MERE ISSUE OF A CHEQUE OR BY FURNISHING A COPY OF STATEMENT OF BANK ACCOUNT. CIRCUMSTANCES MIGHT REQUIRE THAT THERE SHOULD BE SOME EVIDENCE OF POSITIVE NATURE TO SHOW THAT THE SAID SUBSCRIBERS HAD MADE A GENUINE, ACTED AS ANGEL INVES TORS, AFTER DUE DILIGENCE OR FOR PERSONAL REASONS. THUS, FINDING OR A CONCLUSION MUST BE PRACTICABLE, PRAGMATIC AND MIGHT CASE TAKE INTO ACCOUNT THAT THE ASSESSEE MIGHT FIND IT DIFFICULT TO UNIMPEACHABLY ESTABLISH CREDITWORTHINESS OF THE SHAREHOLDERS. 3 0. WHAT WE PERCEIVE AND REGARD AS CORRECT POSITION OF LAW IS THE COURT OR TRIBUNAL SHOULD BE CONVINCED ABOUT THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. THE ONUS TO PROVE THE THREE FACTUM IS ON THE ASSESSEE AS THE FACTS ARE WITHIN TH E ASSESSEE S KNOWLEDGE. MERE PRODUCTION OF INCORPORATION DETAILS, PAN NOS. OR THE FACT THAT THIRD PERSONS OR COMPANY HAD FILED INCOME RAX DETAILS IN CASE OF A PRIVATE LIMITED COMPANY MAY NOT BE SUFFICIENT WHEN SURROUNDING AND ATTENDING FACTS PREDICATE A CO VER UP. THESE FACTS INDICATE AND REFLECT PROPER PAPER WORK OR DOCUMENTATION BUT GENUINENESS, CREDITWORTHINESS, IDENTITY ARE DEEPER AND OBTRUSIVE. COMPANIES NO DOUBT ARE ARTIFICIAL OR JURISTIC PERSONS BUT THEY ARE SOULLESS AND ARE DEPENDENT UPON THE INDIVID UALS BEHIND THEM WHO RUN AND MANAGE THE SAID COMPANIES. IT IS THE PERSONS BEHIND THE COMPANY WHO TAKE THE DECISIONS, CONTROLS AND MANAGE THEM.' IT IS, THEREFORE, BEYOND DOUBT THAT THE ACCOMMODATION ENTRIES OF RS.L 1,00,000/ - WERE NOTHING BUT THE APPELLANT 'S OWN UNDISCLOSED INCOME WHICH WAS REFLECTED IN THE SHAPE OF SHARE APPLICATION MONEY IN THE NAMES OF UNTRACEABLE THREE ENTITIES. IT IS FURTHER OBSERVED THAT THE A.O. HAS GONE A STEP FURTHER IN TRACING THAT THE SHARES ALLOTTED TO THESE 15 ITA NO. 6161/DEL/2014 AY: 2003 - 04 THREE ENTITIES WERE ULTIMATELY BOUGHT BACK BY THE DIRECTORS OF THE APPELLANT COMPANY NAMELY SH. SUKHDEV SINGH AND MRS. MANJIT KAUR. IT CLEARLY SHOWS THE FULL CIRCLE OF ROTATION OF MONEY WHICH ESTABLISHES THE MODUS OPERANDI UNEARTHED BY THE INVESTIGATION WING OF THE DEPARTMENT . THE A.O.'S ACTION OF MAKING ADDITION OF RS.11,00,000/ - IN APPELLANT'S INCOME U/S 68 OF THE ACT IS, THEREFORE, FULLY JUSTIFIED AND THE SAME IS HEREBY UPHELD. AS A COROLLARY TO THE ADDITION SUSTAINED IN THE APPELLANT'S CASE, SINCE THE MODUS OPERANDI ADOPT ED BY THE APPELLANT HAS BEEN ESTABLISHED AND UPHELD, IT IS BEYOND REASONABLE DOUBT THAT FOR ARRANGING SUCH ACCOMMODATION ENTRIES, THE APPELLANT MUST HAVE SPENT CERTAIN AMOUNT WHICH WAS ESTIMATED BY THE A.O. @2% OF THE AMOUNT ON THE BASIS OF PREVAILING MARK ET RATE AS UNEARTHED BY THE INVESTIGATION WING OF THE DEPARTMENT. THEREFORE, IN VIEW OF THE JUSTIFICATION MADE BY THE A.O. THE ADDITION OF RS.22,000/ - MADE BY THE A.O. IN APPELLANT'S INCOME TREATING THE SAME AS UNEXPLAINED EXPENDITURE MADE BY THE APPELLANT IN ARRANGING THE ACCOMMODATION ENTRY IS JUSTIFIED AND UPHELD. IN VIEW OF THE ABOVE BOTH ADDITIONS OF RS.11,00,000/ - AND RS.22,000/ - ARE UPHELD. GROUND HE.2 OF APPEAL IS DISMISSED. 8.4 I N THE BACK GROUND OF THE ABOVE DISCUSSION , WE ARE OF THE OPINION TH AT THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS IN RESPECT OF THE CREDIT RECEIVED IN THE FORM OF SHARE CAPITAL BY THE ASSESSEE OF RS. 11 LAKH FROM THE PARTIES AND, THERE FOR E, THERE IS NO INFIRMITY IN THE FINDING S OF L D. COMMISSIONER OF INCOME - TAX ( APPEALS ) ON THE ISSUE IN DISPUTE AND WE , ACCORDINGLY , UPHOLD THE FINDING S OF THE LEARNED C OMMISSIONER OF INCOME - TAX ( APPEALS) ON THIS ISSUE. THIS GROUND OF APPEAL IS DISMISSED. 9. IN GROUND NO. 5 , THE ASSESSEE HAS CHALLENGED THE ADDITION OF RS. 22,000/ - ON ACCOU NT OF NOTIONAL COMMISSION CHARGED THE RATE OF 2% ON THE ACCOMMODATION ENTRIES OBTAINED BY THE ASSESSEE. 9.1 THE LEARNED A UTHORIZE D R EPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE COMMISSION HAS BEEN CHARGED WITHOUT ANY EVIDENCE IN THIS RESPECT AND THE RA TE OF 2% HAS ALSO BEEN CHARGED ARBITRARILY WITHOUT ANY COMPARABLE CASE. THE SR. DR , ON THE OTHER HAND , RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 9.2 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS EVIDENT FROM THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALREADY UPHELD BY US THAT THE ASSESSEE OBTAINED ACCOMMODATION ENTRIES IN RESPECT OF THE SHARE CAPITAL OF RS. 11 LAKH AND BY THE PREPONDERANCE OF PROBABILITY IN THE FACTS OF THE CASE NO PERSON WILL PROVIDE S UCH ENTRIES WITH OUT ANY PAYMENT, THUS, WE UPHOLD 16 ITA NO. 6161/DEL/2014 AY: 2003 - 04 THE UNEXPLAINED COMMISSION EXPENSES PAID BY THE ASSESSEE. HOWEVER, THE ASSESSING OFFICER HAS NOT GIVEN ANY JUSTIFICATION FOR THE RATE OF 2% ON THE AMOUNT OF ACCOMMODATION ENTRY. WE THEREFORE IN THE INTEREST OF JUSTICE RESTO RE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO APPLY THE RATE OF COMMISSION ON THE BASIS OF ANY COMPARABLE CASE. ACCORDINGLY , THIS GROUND OF APPEAL IS ALLOWED PARTLY FOR STATISTICAL PURPOSES. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S A L L O W E D P A R T L Y F O R S T A T I S T I C A L P U R P O S E S . THE DECISION IS PRONOUNCED IN THE OPEN COURT ON 1 0 T H JUNE , 2016 . S D / - S D / - ( I.C. SUDHIR ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 0 T H JUNE , 2016 . LAPTOP / - COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI