ACIT, New Delhi V. M/s. Adamine Construction Pvt. Ltd., New Delhi

ITA 6178/DEL/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3196 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 24-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 18-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K JAIN
• Keywords: Reopening of assessment; Unexplained cash credit; Bogus Share capital; Depreciation; Principle of natural justice; Source of fund; Tangible material; Validity of assessment; Onus to prove; Reason to believe; Reassessment proceedings
• Section: 133A; 147; 131; 68; 69; 148; 132

Judgement Text

1 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCHES: A NEW DELHI ] BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER AND SHRI L. P. SAHU, ACCOUNTANT MEMBER I.T. APPEAL NO. 6178/DEL/2013 ASSESSMENT YEAR : 2009-10. ASSTT. COMMISSIONER M/S.ADAMINE CONSTRUCTION PVT.LTD., OF INCOME TAX, VS. 315, 3 RD FLOOR, E BLOCK, CENTRAL CIRCLE : 13, INTERNATIONAL TRADE TOWER, NEW DELHI. NEHRU PLACE, NEW DELHI. PAN : AAGCA 4039 G A N D C. O. NO. 262/DEL/2015. [ IN I.T. APPEAL NO. 6178/DEL/2013 ] ASSESSMENT YEAR : 2009-10. M/S. ADAMINE CONSTRUCTION PVT. LTD., ASSTT. COMMISSIONER 211, SOMDUTT CHAMBERII, VS. OF INCOME TAX, BHIKAJI CAMA PLACE, CENTRAL CIRCLE : 13, N E W D E L H I 110 066. NEW DELHI. PAN : AAGCA 4039 G (APPELLANTS) (RESPONDENTS) ASSESSEE BY : SHRI ASHWANI KUMAR, C. A.; DEPARTMENT BY : SHRI S. K. JAIN, SR. D. R.; DATE OF HEARING : 24.05.2017 DATE OF PRONOUNCEMENT : 18.08.2017 O R D E R . PER I. C. SUDHIR, J. M. : THIS APPEAL AND THE CROSS OBJECTION AGAINST THE FIRST APPELLATE ORDER FOR THE ASSESSMENT YEAR 2009-10 WERE HEARD TOGETHER AND ARE 2 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. BEING DISPOSED OFF, FOR THE SAKE OF CONVENIENCE, BY THIS COMMON ORDER. SINCE IN THE CROSS OBJECTION THE ISSUE RAISED IS LEGAL IN NATURE GOING TO THE ROOT OF THE MATTER, HENCE PARTIES WERE DIRECTED TO ADVANCE THEIR RESPECTIVE ARGUMENTS ON THE ISSUE RAISED IN THE CROSS OBJECTION. C. O. NO. 262/DEL/2015 : 2. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUND OF APPEAL IN ITS CROSS OBJECTION :- THAT THE ORDER DATED 16.09.2013 PASSED UNDER SECTION 250 OF THE INCOME TAX ACT, 1961 BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-I, NEW DELHI, IS AGAINST LAW AND FACTS ON THE FILE AND BAD IN LAW IN AS MUCH AS HE WAS NOT JUSTIFIED TO UPHOLD THE ACTION OF THE LD. ASSESSING OFFICER IN RESORTING TO THE PROVISIONS OF SECTION 148 OF THE INCOME TAX ACT, 1961. 3. VALIDITY OF INITIATION OF REOPENING OF ASSESSMENT PROCEEDINGS UNDER SECTION 147 / 148 AS WELL AS VALIDITY OF ASSESSMENT FRAMED IN FURTHERANCE THERETO UPHELD BY THE LD. CIT (APPEALS) HAS BEEN OBJECTED BY THE ASSESSEE. 4. IN SUPPORT OF THE ABOVE OBJECTION, THE LD. AR HAS BASICALLY REITERATED SUBMISSIONS MADE IN THIS REGARD BEFORE THE LD. CIT (A). THE 3 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. MAIN THRUST OF HIS ARGUMENT IS THAT INITIATION OF REOPENING PROCEEDINGS BY THE ASSESSING OFFICER WAS BASED ON REPORT FILED BY THE INVESTIGATION WING OF THE DEPARTMENT, WHICH WAS NEVER CONFRONTED TO THE ASSESSEE AND THERE WAS NO APPLICATION OF INDEPENDENT MIND OF THE ASSESSING OFFICER FOR FORMING HIS REASONS TO BELIEVE FOR INITIATION OF REOPENING PROCEEDINGS. 5. THE LD. AR SUBMITTED THAT A PERUSAL OF THE ASSESSMENT ORDER AND HISTORY OF THE ASSESSMENT PROCEEDINGS WOULD SHOW THAT VARIOUS REFERENCES HAVE BEEN MADE TO THE FINDINGS OF VARIOUS WINGS OF THE INVESTIGATION UNIT, A COPY OF WHICH HAS NOT BEEN PROVIDED TO THE APPELLANT COMPANY AT ANY STAGE OF THE ASSESSMENT PROCEEDINGS EVEN AFTER WRITTEN REQUESTS. CONSEQUENTIALLY, THE BASIC PRINCIPLES OF NATURAL JUSTICE WHICH INVOLVE REASONABLE APPLICATION OF PRESCRIBED PROCEDURES WITH A VIEW TO PROMOTE NATURAL JUSTICE AND PREVENT ITS MISCARRIAGE HAVE BEEN DERAILED AND SABOTAGED. AS SUCH A CONCLUSION HAVING A DEEP IMPACT ON THE APPELLANT AND CONFLICTING WITH HIS CONSISTENT STAND HAS BEEN DRAWN WITHOUT GIVING HIM AT LEAST A REASONABLE OPPORTUNITY TO EXAMINE THE SAID EVIDENCES AND TO CROSS EXAMINE THE UNDERLYING WITNESSES AND IS ACCORDINGLY IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE. AS SUCH THE 4 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. ENTIRE EXERCISE MADE IN GROSS VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE IS VOID AB-INITIO AND THE CORRESPONDING CONCLUSIONS DRAWN NEED TO BE NEGATED TO PREVENT FURTHER MISCARRIAGE OF JUSTICE. THE NORTH WALES POLICE V. EVANS [(1982) 1 WLR 1155] JUDICIAL REVIEW IS CONCERNED NOT WITH THE DECISION, BUT WITH THE DECISION-MAKING PROCESS. THE ASSESSMENT PROCEEDING IS A PART OF JUDICIAL PROCESS. WHEN A STATUTORY PROCESS IS EXERCISED BY THE ASSESSING AUTHORITY IN EXERCISE OF ITS JUDICIAL FUNCTIONS WHICH IS DETRIMENTAL TO THE APPELLANT, IT IS NOT AND CANNOT BE ADMINISTRATIVE IN NATURE. PRINCIPLES OF NATURAL JUSTICE ARE BASED ON TWO PRINCIPLES: (I) NOBODY SHALL BE CONDEMNED UNHEARD (AUDI ALTERAM PARTEM); (II) NOBODY SHALL BE JUDGE OF HIS OWN CAUSE (NEMO DEBET ESSE JUDEX IN PROPRIA SUA CAUSA). DUTY TO ASSIGN REASONS IS, HOWEVER, JUDGE-MADE LAW. THE ACTION OF THE LEARNED ASSESSING OFFICER IN RESORTING TO PROVISIONS OF SECTION 148 WHICH IS ALSO BEING CHALLENGED IN THIS APPEAL IS BAD IN LAW AS WOULD BE APPARENT FROM THE SUBMISSION MADE HEREINAFTER. 5.1 THE ABOVE PROVISIONS MAKE IT CLEAR THAT AN ASSESSING OFFICER IF HE HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, - 5 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. ASSESS OR REASSESS SUCH INCOME; AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT; AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER SECTION 147, OR RE-COMPUTE THE LOSS THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE FOR THE RELEVANT ASSESSMENT YEAR. (III) FURTHER THE EXPLANATION 2 TO SECTION 147(NOT REPRODUCED SUPRA) CLARIFIES THAT, FOR THE PURPOSES OF SECTION 147, THE FOLLOWING ARE ALSO TO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT:- WHERE NO RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INCOME OF ANY OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT. DURING THE PREVIOUS YEAR EXCEEDED THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME-TAX. 6 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN DONE AND IT IS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE - HAS UNDERSTAND THE INCOME, OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN; WHERE AN ASSESSMENT HAS BEEN MADE, BUT INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSED; OR INCOME CHARGEABLE TO TAX HAS BEEN ASSESSED AT TOO LOW A RATE; OR INCOME CHARGEABLE TO TAX HAS BEEN MADE THE SUBJECT OF EXCESSIVE RELIEF UNDER THE 1961 ACT; OR EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE UNDER THE 1961 ACT HAS BEEN COMPUTED. 5.2 THUS SECTION 147 OF THE INCOME-TAX ACT, 1961 AUTHORISES AND PERMITS AN ASSESSING OFFICER TO ASSESS OR REASSESS INCOME CHARGEABLE TO TAX IF HE HAS REASON TO BELIEVE THAT THE SAID INCOME FOR ANY ASSESSMENT YEAR HAS ESCAPED ASSESSMENT. THE EXPRESSION ESCAPED ASSESSMENT CLEARLY CONNOTES A VERY BASIC POSTULATE THAT THE INCOME FOR A PARTICULAR ASSESSMENT YEAR WENT UNNOTICED BY THE ASSESSING OFFICER AND BECAUSE OF IT NOT BEING NOTICED BY HIM FOR ANY REASON, IT ESCAPED ASSESSMENT. ACCORDINGLY THERE SHOULD BE A COMPLETE AND DIRECT CONCLUSION AS TO 7 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. INCOME ESCAPING ASSESSMENT SO AS TO RESORT TO THE RE-ASSESSMENT PROVISIONS. 5.3 SECTION 148 TO 151 SET OUT THE FRAME WORK, PROCEDURE AND THE CONDITIONS GOVERNING THE REASSESSMENT PROVISIONS INCORPORATED A SECTION 147. THE SAID SECTIONS SUCCESSIVELY DEAL WITH :- (A) FORM OF NOTICE AND RECORDING OF REASONS FOR ISSUE (S. 148); (B) TIME LIMIT FOR ISSUE (S. 149); (C) ENLARGEMENT OF TIME LIMIT IN CERTAIN CASES AND RESTRICTION THEREON(SECTION 150); (D) SANCTION TO BE OBTAINED FOR ISSUE OF NOTICE (S. 151); 5.4 FOR RESORTING TO REASSESSMENT THE MOST NOTED REQUIREMENT IS THAT THE ASSESSING OFFICER SHOULD HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE FOR THE RELEVANT ASSESSMENT YEAR HAS ESCAPED ASSESSMENT. THE LANGUAGE OF THE SECTION MAKES IT CLEAR THAT ALTHOUGH THE POWERS OF AN ASSESSING OFFICER IN INITIATING RE-ASSESSMENT PROCEEDINGS ARE VERY WIDE AT THE SAME TIME THEY ARE NOT PLENARY IN NATURE. THESE POWERS ARE VITALLY CONTROLLED BY THE WORDS REASON TO BELIEVE EMPLOYED BY THE SECTION. THE REASONS FOR FORMATION OF BELIEF FOR REOPENING AN ASSESSMENT MUST HAVE A RATIONAL CONNECTION OR RELEVANT BEARING ON THE FORMATION OF THE BELIEF. THE EXISTENCE OR OTHERWISE OF SUCH A BELIEF, ON THE PART OF THE ASSESSING OFFICER, IS NOT A MERE QUESTION OF LIMITATION BUT THE VERY FOUNDATION OF HIS 8 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. JURISDICTION. THESE WORDS IMPORT THE PRESENCE OF THE FOLLOWING FOUR ESSENTIAL INGREDIENTS. (I) SOME MATERIAL OR MATERIALS AND NOT MERE FANCY, IMAGINATION, SPECULATION, SUSPICION; (II) A NEXUS BETWEEN SUCH MATERIAL AND THE BELIEF OF ESCAPEMENT OF INCOME FROM ASSESSMENT; (III) AN APPLICATION OF MIND BY THE ASSESSING OFFICER TO SUCH MATERIAL; AND (IV) AN INFERENCE BASED ON REASON DRAWN TENTATIVELY BY THE OFFICER THAT INCOME HAS ESCAPED ASSESSMENT. 5.5 A REVIEW OF THE REASONS RECORDED FOR RESORTING TO REASSESSMENT PROCEEDINGS AND CONSEQUENT ISSUE OF NOTICE U/S 148 WOULD MAKE IT CLEAR THAT BASIS FOR THE FORMATION OF AN OPINION IS A STATEMENT RECORDED, OF AN EMPLOYEE OF BHUSHAN STEELS LTD., DURING THE COURSE OF SURVEY U/S 133A AT THE REGISTERED OFFICE OF THE COMPANY FROM WHICH IT WAS SOUGHT TO BE CONCLUDED THAT THE ASSESSEE COMPANY BELONGED TO THE BHUSHAN GROUP OF COMPANIES AND WAS ALLEGEDLY A PAPER COMPANY ESTABLISHED FOR INTRODUCING MONEY FROM UNEXPLAINED SOURCES. THE FACT REMAINS THAT THE EXISTENCE OF THE COMPANY INCORPORATED AS A SEPARATE LEGAL ENTITY FOLLOWING THE RIGOROUS AND DUE PROCESS OF LAW LAID DOWN IN THE COMPANIES ACT, 1956 HAS NOT BEEN DENIED. IN FACT, SUCH A NEGATION OF ITS CORPORATE EXISTENCE IS NEITHER SUGGESTIBLE NOR INFERABLE EITHER FROM THE SAID STATEMENT OR FROM THE OFFICE OF THE REGISTRAR OF COMPANIES, 9 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. THE STATUTORY REGULATORY BODY, IN THIS REGARD. THE CONCLUSION HAS SOUGHT TO BE DRAWN ON THE BASIS OF A STATEMENT OF A PERSON WHO HAD NO LOCUS STANDI IN THE ASSESSEE COMPANY, AND ACCORDINGLY WAS NOT AUTHORIZED ON ITS BEHALF. WHILE AGAIN EMPHASIZING THE SEPARATE LEGAL EXISTENCE OF THE ASSESSEE COMPANY, IT NEEDS ALSO TO BE UNDERSTOOD THAT THERE IS NOTHING IN LAW TO PROHIBIT SEVERAL COMPANIES HAVING THEIR REGISTERED OFFICES AT THE SAME ADDRESS OR FOR COMPANIES TO SHARE COMMON INFRASTRUCTURE AND FACILITIES SO AS TO ECONOMIZE THE COSTS. IN ADDITION, THE FACT THAT THE DIRECTORS OF THE COMPANY BEING EMPLOYEES OF BHUSHAN LTD, SHOULD ALSO NOT LEAD TO ANY ADVERSE INFERENCE IN AS MUCH AS SUCH AN ARRANGEMENT IS AGAIN A MATTER OF ADMINISTRATIVE AND LOGISTICAL CONVENIENCE TO EASE OPERATIONAL MATTERS. SUCH FACTS DO NOT MERELY THEMSELVES LEAD TO ANY EVIDENCE OR SUGGESTION, WHAT TO TALK OF CONCLUSION, AS TO THE COMPANY BEING JUST A PAPER COMPANY ESTABLISHED FOR INTRODUCING MONEY FROM UNEXPLAINED SOURCES. 5.6 THE ABOVE FACTS MAKE IT CLEAR THAT THE BASIS FOR FORMATION OF THE BELIEF AND RECORDING OF THE REASONS TO ESCAPEMENT OF INCOME SO AS TO RESORT TO REASSESSMENT PROCEEDINGS IS BASED ON MERE SUSPICION AND CONJECTURAL INFERENCES NOT BACKED BY ANY TANGIBLE EVIDENCE. THE BASIS FOR THE ISSUE OF NOTICE IS AN ALLEGED STATEMENT OF SHRI B.S BISHT, ASSISTANT SECRETARIAL OFFICER OF M/S BHUSHAN STEEL LTD. WHILE ON A DEEPER ANALYSIS THE CONTENTS OF THE SAID STATEMENT BY ITSELF DO NOT LEAD TO ANY DAMAGING / ADVERSE INFERENCE. EVEN OTHERWISE, AS DISCUSSED SUPRA, THERE IS NO TANGIBLE EVIDENCE OF ESCAPEMENT OF INCOME TO WARRANT 10 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. A REVISIT OF THE ASSESSMENT AND RESORTING TO REASSESSMENT PROCEEDINGS AND ACCORDINGLY THE BASIS OF RECORDING OF REASON TO BELIEVE AS TO ESCAPEMENT OF INCOME DOES NOT EXIST IN THE INSTANT CASE. 6. THE LD. AR CONTENDED THAT THE REASONS TO BELIEVE RECORDED IN THE PRESENT CASE ARE ONLY SUSPICION AND NOT BELIEF. THERE IS NO TANGIBLE MATERIAL TO SUBSTANTIATE THE BELIEF. 7. IN SUPPORT HE PLACED RELIANCE ON THE FOLLOWING DECISIONS :- (I) M/S. PARASHURAM POTTERY WORKS CO. LTD. VS. ITO (1977) 106 ITR 1 (SC); (II) GANGA PRASAD MAHESHWARI & OTHERS VS. CIT (1983) 139 ITR 1043 (ALL.); (III) SHEO NATH SINGH VS. ACIT CENTRAL, CALCUTTA (1971) 82 ITR 147 (SC); (IV) AJIT JAIN VS. UNION OF INDIA & OTHERS (2000) 242 ITR 302 (DEL.); (V) VXL INDIA VS. ACIT (1995) 215 ITR 295 (GUJ.); (VI) SURAT CITY GYMKHANA VS. ACIT 11 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. 76 ITD 327 (AHD.); (VII) RAM BAI VS. CIT (1999) 236 ITR 696 (SC); (VIII) BAGSU DEVI BAFNA VS. CIT (1966) 62 ITR 506 512 (CAL.); (IX) KISHANCHAND CHELLARAM VS. CIT, BOMBAY CITY-II (1980) 125 ITR 713 (SC); (X) R.B. SHREERAM DURGA PRASAD AND FATECHAND NURSING DAS VS. SETTLEMENT COMMISSION (IT AND WT) AND ANOTHER (1989) 176 R 169 (SC); (XI) RAJESH KUMAR & OTHERS VS. DCIT & OTHERS (2006) 287 R 91 (SC); (XII) C. B. GAUTAM VS. UNION OF INDIA (1993) 199 R 530 (SC); & 1 SSC 78; (XIII) PRAKASH CHAND NAHTA VS. CIT (2008) 301 ITR 134 (MP). 8. THE LD. SR. DR, ON THE OTHER HAND, OPPOSED THE CROSS OBJECTION WITH THIS SUBMISSION THAT THE ASSESSEE WAS GIVEN OPPORTUNITY TO RAISE OBJECTION BEFORE THE ASSESSING OFFICER AGAINST THE INITIATION OF REOPENING PROCEEDINGS. THE ASSESSEE FILED ITS OBJECTIONS AND IT WAS DULY DISPOSED 12 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. OFF BY THE ASSESSING OFFICER, HENCE THERE IS NO SUBSTANCE IN THE CONTENTION OF THE LD. AR THAT ASSESSEE WAS NOT GIVEN OPPORTUNITY TO CROSS EXAMINE ON THE BASIS OF WHOSE SUBMISSIONS REPORTED BY THE INVESTIGATION WING OF THE DEPARTMENT REOPENING PROCEEDINGS WERE INITIATED. 9. HAVING GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW IN VIEW OF THE ABOVE SUBMISSIONS, WE FIND THAT ASSESSEE WAS SUPPLIED WITH THE REASONS RECORDED AND OPPORTUNITY TO RAISE OBJECTIONS THERETO WAS GIVEN TO HIM. IT WAS AVAILED AS THE ASSESSEE RAISED THE OBJECTIONS AGAINST THE VALIDITY OF INITIATION OF REOPENING PROCEEDINGS AND THE ASSESSING OFFICER DULY DISPOSED OFF THE SAID OBJECTIONS. THE REASON TO BELIEVE WAS BASED ON SEARCH OPERATION IN BHUSHAN STEEL GROUP AND SURVEY AT THE ASSESSEE. WE THUS DO NOT FIND SUBSTANCE IN THE CONTENTION OF THE LD. AR THAT INITIATION OF REOPENING PROCEEDINGS AGAINST THE ASSESSEE WAS NOT VALID. IT IS WELL ESTABLISHED POSITION OF LAW THAT FOR INITIATION OF REOPENING PROCEEDINGS FORMATION OF REASONS TO BELIEF IS REQUIRED TO BE BASED UPON A PRIMA FACIE VIEW THAT TAXABLE INCOME HAS ESCAPED ASSESSMENT. SUFFICIENCY OF SUCH BELIEF CANNOT BE QUESTIONED BEFORE THE COURT OF LAW. WE THUS DO NOT FIND REASON TO INTERFERE WITH THE FIRST APPELLATE ORDER IN THIS REGARD, AS IN OUR VIEW, THE LD. CIT 13 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. (APPEALS) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED ABOVE HAS RIGHTLY UPHELD THE VALIDITY OF INITIATION OF REOPENING PROCEEDINGS AND THE ASSESSMENT FRAMED IN FURTHERANCE THERETO. THE FIRST APPELLATE ORDER IN THIS REGARD IS THUS UPHELD. THE CROSS OBJECTION IS ACCORDINGLY REJECTED. I.T. APPEAL NO. 6178/DEL/2013 : 10. THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER ON THE FOLLOWING GROUNDS :- 1. THE ORDER OF LD. CIT (APPEALS) IS NOT CORRECT IN LAW AND FACTS; 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.9,30,00,000/- BEING UNEXPLAINED SHARE CAPITAL INCLUDING SHARE PREMIUM MADE BY ASSESSING OFFICER WITHOUT APPRECIATING THE FACT THAT THE IDENTITY AND THE CREDITWORTHINESS OF THE INVESTORS WERE NOT ESTABLISHED AS ALL THE INVESTORS WERE SHOWING A NOMINAL INCOME. 11. GROUND NO. 2 IS RELATING TO DELETION OF ADDITION OF RS.9,30,00,000/- ON ACCOUNT OF UNEXPLAINED SHARE CAPITAL AND SHARE PREMIUM RECEIVED BY THE APPELLANT COMPANY FROM VARIOUS COMPANIES MADE BY THE ASSESSING OFFICER ON THE GROUND THAT :- 14 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. (I) THE CREDITWORTHINESS OF THE INVESTOR COMPANIES WAS NOT ESTABLISHED AS ALL THE INVESTORS WERE SHOWING A NOMINAL INCOME; (II) NEITHER THE INVESTORS COMPANIES NOR THE APPELLANT COMPANY HAD PRODUCED ANY PROOF TO SUBSTANTIATE THE CREDITWORTHINESS OF THE INVESTORS; & (III) THE GENUINENESS OF THE TRANSACTIONS WAS ALSO IN DOUBT. 12. THE APPELLANT COMPANY HAD FILED ITS ORIGINAL RETURN OF INCOME DECLARING A TOTAL INCOME OF RS.546/- ON 29.09.2009 VIDE E-FILING ACKNOWLEDGEMENT NO. 95415871290909. THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME-TAX ACT, 1961 AT THE RETURNED INCOME. SUBSEQUENTLY, A SEARCH, SEIZURE AND SURVEY OPERATION U/S 132 AND 133A RESPECTIVELY OF THE INCOME-TAX ACT, 1961 WAS CARRIED OUT IN THE BHUSHAN GROUP OF CASES ON 03-03-2010. THE APPELLANT COMPANY WAS ALSO COVERED IN THE SAID SURVEY OPERATION AND ITS JURISDICTION WAS SUBSEQUENTLY TRANSFERRED TO THE OFFICE OF THE ACIT, CENTRAL CIRCLE-13, NEW DELHI. 13. THE CASE OF THE APPELLANT COMPANY FOR THE ASSESSMENT YEAR 2009-10 WAS REOPENED U/S 147 OF THE INCOME TAX ACT, 1961 AND NOTICE U/S 148 WAS ISSUED ON 19.09.2011. IN RESPONSE TO THE SAID 15 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. NOTICE THE APPELLANT COMPANY FILED A REPLY DATED 26-09-2011 STATING THAT ORIGINAL RETURN OF INCOME FILED EARLIER BY IT ON 29.09.2009 VIDE RECEIPT NO. 95415871290909 MAY BE TREATED AS RETURN FILED IN RESPONSE THERETO. 14. THE ASSESSMENT WAS COMPLETED VIDE ORDER DATED 28-03-2013 AT AN INCOME OF RS.9,30,00,546/- WHEREIN THE LD. ASSESSING OFFICER HAS PROCEEDED TO UNJUSTIFIABLY ADD BACK A SUM OF RS. 9,30,00,000/- ON ACCOUNT OF ALLEGED UNEXPLAINED SHARE CAPITAL RECEIVED BY THE APPELLANT COMPANY FROM VARIOUS COMPANIES SITUATED AT MUMBAI AND KOLKATA. THE LD. CIT (APPEALS) HAS DELETED THIS ADDITION, WHICH HAS BEEN QUESTIONED IN THE PRESENT APPEAL BY THE REVENUE. 15. IN SUPPORT OF THE GROUND, THE LD. SR. DR HAS BASICALLY PLACED RELIANCE ON THE ASSESSMENT ORDER WITH THIS CONTENTION THAT ASSESSEE HAS THOROUGHLY FAILED TO ESTABLISH CREDITWORTHINESS OF THE INVESTOR COMPANIES AS WELL AS GENUINENESS OF THE TRANSACTION. SOME OF THE PARTIES WERE NOT FOUND ON THE GIVEN ADDRESS AND SOME OF THEM DID NOT RESPOND TO THE NOTICES ISSUED BY THE ASSESSING OFFICER TO THEM NOR THE ASSESSEE HAS BEEN ABLE TO PRODUCE THEM FOR VERIFICATION BEFORE THE ASSESSING OFFICER. 16 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. IN ABSENCE OF COMPLIANCE OF THESE REQUIREMENTS THE ASSESSING OFFICER WAS VERY MUCH JUSTIFIED IN MAKING THE ADDITION OF RS.9,30,00,000/- UNDER SECTION 68 OF THE ACT ON ACCOUNT OF UNEXPLAINED SHARE CAPITAL AND SHARE PREMIUM RECEIVED BY THE ASSESSEE COMPANY FROM VARIOUS COMPANIES. IGNORING THESE MATERIAL ASPECTS THE LD. CIT (APPEALS) HAS ERRED IN DELETING THE ADDITION. 16. THE LD. AR, ON THE OTHER HAND, TRIED TO JUSTIFY THE FIRST APPELLATE ORDER ON THE ISSUE WITH FOLLOWING SUBMISSIONS :- (1) BY WAY OF A BRIEF INTRODUCTION, IT IS SUBMITTED THAT THE APPELLANT COMPANY HAD RAISED MONEY AMOUNTING TO RS.9,30,00,000/- THROUGH SHARE CAPITAL DURING THE FINANCIAL YEAR 2008-09 FROM VARIOUS PARTIES SITUATED AT MUMBAI AND KOLKATA. THE DETAILS OF THE PARTIES FROM WHOM SHARE CAPITAL AND SHARE PREMIUM HAD BEEN RECEIVED ARE AS UNDER :- S.NO NAME OF INVESTOR COMPANY ADDRESS OF THE INVESTOR COMPANY AMOUNT 1 GROMORE FUND MANAGEMENT CO. LTD 48A/1, NEW ALIPORE ROAD, KOLKATA-700053 90,00,000/- 2 SUPER FINANCE LTD 102, STEPHEN HOUSE, 4 B.B.D. 95,00,000/- 17 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. BAG(E), KOLKATA-700001 3 DELTON EXIM PVT LTD 3, ALIPORE ROAD, KOLKATA- 700027 95,00,000/- 4 TRIDEV MULTITRADE PVT LTD 14, POPATWADI 1ST FLOOR, KALBADEVI, MUMBAI-400002 95,00,000/- 5 ETERNITY MULTITRADE PVT LTD B-G12, CABIN ROAD, BHAYANDER (E) THANE-401105 95,00,000/- 6 GANGA BUILDERS LTD STEPHEN HOUSE, ROOM NO.102, 6TH FLOOR, 4BBD BAGH (EAST), KOLKATA-700001 95,00,000/- 7 BAYANWALA BROTHERS PVT LTD 9, OLD CHINA BAZAR STREET, 5TH FLOOR, R/NO. 84, KOLKATA- 700001 90,00,000/- 8 SHIVLAXMI EXPORTS LTD 102, STEPHEN HOUSE, 4 BBD BAG(E), KOLKATA-700001 90,00,000/- 9 SITAL MERCANTILE & CREDIT PVT LTD 32/C/1, MLB ROAD, GOUND FLOOR, BALLY, HOWRAH-711201 95,00,000/- 10 PENTIUM TECH PVT LTD 32/34, BOMBAY, CHAMBER, 5TH FLOOR, ANANDILAL PAODAR MARG, DHOBI TOLAO, MUMBAI-400002 40,00,000/- 11 REALGOLD TRADING COMPANY PVT LTD BIG TREE BLDG., CHAMBER NO. 6, 1ST FLOOR, MARINE STREET, MUMBAI-400002 50,00,000/- TOTAL 9,30,00,000/ - (2) THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS HAD DESIRED THE APPELLANT COMPANY TO FURNISH THE DETAILS OF THE AMOUNT RECEIVED AND EVIDENCE IN SUPPORT OF IDENTITY AND CREDITWORTHINESS OF THE PARTIES AND ALSO THE GENUINENESS OF THE TRANSACTION OF ALL THE PARTIES FROM WHOM THE SHARE CAPITAL AND SHARE 18 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. PREMIUM HAD BEEN RECEIVED. IN RESPONSE, THE APPELLANT COMPANY VIDE LETTER DATED 13.08.2012 FILED WITH THE ASSESSING OFFICER COPIES OF BANK ACCOUNTS, CONFIRMATION AND INCOME TAX RETURN ACKNOWLEDGEMENTS FROM ALL THE PARTIES TO ESTABLISH THE IDENTITY, GENUINENESS AND SOURCES OF TRANSACTION REGARDING SHARE CAPITAL AND SHARE PREMIUM. THE ENTIRE AMOUNT HAD BEEN RECEIVED BY THE APPELLANT COMPANY THROUGH NORMAL BANKING CHANNELS BY ACCOUNT PAYEE CHEQUES/DEMAND DRAFTS. FURTHERMORE, THE SAID CONFIRMATIONS ALSO CLEARLY REVEAL THE SOURCE OF FUNDS, PARTICULARS OF THE BANK ACCOUNT THROUGH WHICH PAYMENT HAS BEEN RECEIVED AND THE INCOME-TAX PARTICULARS WHICH GO ON TO ESTABLISH THE IDENTITY AND CREDITWORTHINESS OF THE RESPECTIVE SHARE APPLICANTS AUTHORITATIVELY AND CONCLUSIVELY. (3) ON THE BASIS OF THE DOCUMENTS/DETAILS SUBMITTED, THE LEARNED ASSESSING OFFICER, HAS SUMMARIZED AS FOLLOWS :- S.NO. NAME OF THE SHARE HOLDER RETURNED INCOME ASSESSMENT YEAR 1 GROMORE FUND MANAGEMENT CO. LTD RS 14,130/- 2009-10 19 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. 2 SUPER FINANCE LTD RS 10,730/- 2009-10 3 DELTON EXIM PVT LTD RS 11,210/- 2009-10 4 TRIDEV MULTITRADE PVT LTD RS 8,520/- 2009-10 5 ETERNITY MULTITRADE PVT LTD RS 8,620/- 2009-10 6 GANGA BUILDERS LTD RS 5,850/- 2009-10 7 BAYANWALA BROTHERS PVT LTD RS 10,630/- 2009-10 8 SHIVLAXMI EXPORTS LTD RS 10,480/- 2009-10 9 SITAL MERCHANTILE & CREDIT PVT LTD RS 12,020/- 2009-10 10 PENTIUM TECH PVT LTD RS 17,037/- 2009-10 11 REAL GOLD TRADING COMPANY PVT LTD NO ITR SUBMITTED 2009-10 (4) IN ORDER TO FURTHER VERIFY THE GENUINENESS OF ALL THE PARTIES COMMISSIONS U/S 131 WERE SENT BY THE LEARNED ASSESSING OFFICER TO THE RESPECTIVE INVESTIGATION AGENCIES IN MUMBAI AND KOLKATA. IN RESPONSE TO WHICH REPORTS WERE RECEIVED FROM THE OFFICE OF ADDL. CIT, RANGE-10(2), MUMBAI AND ASSISTANT DIRECTOR OF INCOME TAX (INV) UNIT-III(3), KOLKATA. THE ADDL. COMMISSIONER OF INCOME TAX, RANGE 10(2), MUMBAI AND ASSISTANT DIRECTOR OF INCOME TAX (INV), UNIT-III(3), KOLKATA ALSO DEPUTED INSPECTORS OF INCOME TAX TO SERVE THE SUMMONS AND CONDUCT FIELD ENQUIRIES. THE RESULTS OF THE SAID ENQUIRIES ARE AS FOLLOWS :- 20 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. REPORT FROM MUMBAI S NO. NAME OF THE SHAREHOLDER REPORT AS RECEIVED IN RESPONSE TO COMMISSION FROM MUMBAI 1 TRIDEV MULTITRADE PVT LTD THE ADDRESS IS OF B L AGARWAL AND OFFICE OF AMIT TEXTILES. AS PER REPORT OF INSPECTOR DATED 30.11.2011, NO SUCH PERSON HAS EVER RESIDED IN SUCH PREMISES- REPORT OF SHRI AJAY KUMAR INSPECTOR IS ENCLOSED AS ANNEXURE (ANNEXURE-20) 2 ETERNITY MULTITRADE PVT LTD THE ADDRESS WAS NOT FOUND. REPORT OF SHRI AJAY KUMAR INSPECTOR IS ENCLOSED AS ANNEXURE (ANNEXURE-21) 3 PENTIUM TECH PVT LTD PARTY HAS RESPONDED TO THE SUMMONS AND THE DETAILS ARE ANNEXED. DETAILS ANNEXED AS EXHIBIT-E 4 REAL GOLD TRADING COMPANY PVT LTD THE ADDRESS IS OFFICE ADDRESS OF N CHANDULAL & CO., CA. AS PER REPORT OF INSPECTOR DATED 30.11.2011, NO SUCH PERSON HAS EVER RESIDED IN SUCH PREMISES. REPORT OF SHRI AJAY KUMAR INSPECTOR IS ENCLOSED AS ANNEXURE (ANNEXURE-20) REPORT FROM KOLKATA S NO. NAME OF THE SHAREHOLDER REPORT AS RECEIVED IN RESPONSE TO COMMISSION FROM KOLKATA 1 GROMORE FUND MANAGEMENT CO. LTD ASSESSEE MADE A SUBMISSION THROUGH DAK AND SUBMITTED THAT THE COMPANY HAS APPLIED FOR 90,000 EQUITY SHARES OF 21 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. RS 10/- OF M/S ADAMINE CONSTRUCTION PVT LTD IN FY 2008-09 EACH AT A PREMIUM OF RS 90/- THE ASSESSEE HAS NOT GIVEN THE REASON FOR PAYING SUCH A HIGH PREMIUM. THE ASSESSEE HAS ENCLOSED BANK STATEMENT SHOWING PAYMENT WAS MADE BY CHEQUE NO 844721 DATED 11.04.2008 FOR RS 50,00,000/-, AND CHEQUE NO 844721 DATED 11.04.2008 FOR RS 40,00,000/- DRAWN ON DEUTSCHE BANK. THE ASSESSEE HAS NOT ENCLOSED THE BANK STATEMENT SHOWING THE SOURCE OF FUND FOR SHARE APPLICATION MONEY. THE COMPANY HAS SHOWN INCOME OF RS 14,130/- FOR A.Y. 2009-10. 2 SUPER FINANCE LTD ASSESSEE MADE A SUBMISSION THROUGH DAK AND SUBMITTED THAT THE COMPANY HAS APPLIED FOR SHARE OF M/S ADAMINE CONSTRUCTION PVT LTD IN FY 2008-09. THE ASSESSEE HAS NOT SPECIFIED FOR HOW MANY SHARES AND AT WHAT PREMIUM. THE ASSESSEE HAS ENCLOSED BANK STATEMENT SHOWING PAYMENT WAS MADE BY CHEQUE NO 069223 DT 17.04.2008 FOR RS.50,00,000/- AND CHEQUE NO 069224 DT 17.04.2008 FOR RS 45,00,000/- DRAWN ON DEUTSCHE BANK. THE ASSESSEE HAS NOT ENCLOSED THE BANK STATEMENT SHOWING THE SOURCE OF FUND FOR SHARE APPLICATION MONEY. THE COMPANY HAS SHOWN TOTAL INCOME OF RS 10,730/- FOR A.Y 2009-10. 3 DELTON EXIM PVT LTD ASSESSEE MADE A SUBMISSION THROUGH DAK AND SUBMITTED THAT THE COMPANY HAS APPLIED FOR 95,000 EQUITY SHARES OF 22 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. RS 10/- OF M/S ADAMINE CONSTRUCTION PVT LTD IN FY 2008-09 EACH AT A PREMIUM OF RS 90/-. THE ASSESSEE HAS NOT GIVEN REASON FOR PAYING SUCH HIGH PREMIUM. THE ASSESSEE HAS ENCLOSED BANK STATEMENT SHOWING PAYMENT WAS MADE BY CHEQUE NO 611611 DT 17.04.2008 FOR RS 50,00,000/- AND CHEQUE NO 611612 DT 17.04.2008 FOR RS 45,00,000/- DRAWN ON DEUTSCHE BANK. THE ASSESSEE HAS NOT ENCLOSED THE BANK STATEMENT SHOWING THE SOURCE OF FUND FOR SHARE APPLICATION MONEY. THE COMPANY HAS SHOWN INCOME OF RS 11,210 FOR A.Y 2009-10. 4 GANGA BUILDERS LTD ASSESSEE MADE A SUBMISSION THROUGH DAK AND SUBMITTED THAT THE COMPANY HAS APPLIED FOR SHARES OF M/S ADAMINE CONSTRUCTION PVT LTD IN FY 2008-09. THE ASSESSEE HAS NOT SPECIFIED FOR HOW MANY SHARES AND AT WHAT PREMIUM. THE ASSESSSEE HAS ENCLOSED BANK STATEMENT SHOWING PAYMENT WAS MADE BY CHEQUE NO 875658 DT 30.04.2008 FOR RS 45,00,000/- AND CHEQUE NO 875659 DT 30.04.2008 FOR RS 50,00,000/- DRAWN ON DEUTSCHE BANK. THE ASSESSEE HAS NOT ENCLOSED THE BANK STATEMENT SHOWING THE SOURCE OF FUND FOR SHARE APPLICATION MONEY. THE COMPANY HAS SHOWN TOTAL INCOME OF RS 5,850/- FOR A.Y 2009-10. 5 BAYANWALA BROTHERS PVT LTD ASSESSEE MADE A SUBMISSION ON 15.12.2011 THROUGH DAK AND SUBMITTED THAT THE COMPANY HAS APPLIED FOR 90,000 EQUITY SHARE OF M/S ADAMINE 23 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. CONSTRUCTION PVT LTD. EACH AT A PREMIUM OF RS.90/- EACH AND ALLOTTED THE SAME. THE ASSESSEE HAS NOT GIVEN REASON FOR PAYING SUCH HIGH PREMIUM. THE ASSESSEE HAS ENCLOSED BANK STATEMENT SHOWING PAYMENT WAS MADE BY CHEQUE NO 675388 DT 02.05.2008 FOR RS 50,00,000/- AND CHEQUE NO 675289 DT 02.05.2008 FOR RS 40,00,000/- DRAWN ON CENTURION BANK OF PUNJAB, INDIA EXCHANGE PLACE. THE ASSESSEE HAS NOT ENCLOSED THE BANK STATEMENT SHOWING THE SOURCE OF FUND FOR SHARE APPLICATION MONEY. THE COMPANY HAS SHOWN TOTAL INCOME OF RS 10,626/- FOR A.Y 2009-10. 6 SHIVLAXMI EXPORTS LTD ASSESSEE MADE A SUBMISSION THROUGH DAK AND SUBMITTED THAT THE COMPANY HAS APPLIED FOR SHARES OF M/S ADAMINE CONSTRUCTION PVT LTD IN FY 2008-09. THE ASSESSEE HAS APPLIED FOR 90,000 EQUITY SHARE OF RS 10/- OF ADAMINE CONSTRUCTION PVT LTD EACH AT PREMIUM OF RS.90/- AND ALLOTTED THE SAME. THE ASSESSEE HAS ENCLOSED BANK STATEMENT SHOWING PAYMENT WAS MADE BY CHEQUE NO 861812 DT 02.05.2008 FOR RS 30,00,000/- AND CHEQUE NO 861811 DT 02.05.2008 FOR RS 60,00,000/- DRAWN ON DEUTSCHE BANK. THE ASSESSEE HAS NOT ENCLOSED THE BANK STATEMENT SHOWING THE SOURCE OF FUNDS FOR SHARE APPLICATION MONEY. THE COMPANY HAS SHOWN TOTAL INCOME OF RS 10,480/- FOR A.Y 2009-10. 7 SITAL MERCHANTILE & CREDIT ASSESSEE MADE A SUBMISSION ON 24 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. PVT LTD 15.12.2011 THROUGH DAK AND SUBMITTED THAT THE COMPANY HAS APPLIED FOR 95000 EQUITY SHARE OF RS 10/- OF ADAMINE CONSTRUCTION PVT LTD AT A PREMIUM OF RS 90/- AND ALLOTTED THE SAME. THE ASSESSEE HAS NOT GIVEN REASON FOR PAYING SUCH HIGH PREMIUM. THE ASSESSSEE HAS NOT SUBMITTED THE PROPER BANK STATEMENT SHOWING THE PAYMENT. THE ASSESSEE HAS NOT ENCLOSED THE BANK STATEMENT SHOWING THE SOURCE OF FUND FOR SHARE APPLICATION MONEY. THE COMPANY HAS SHOWN TOTAL INCOME OF RS.12,023/- FOR A.Y 2009-10. (5) ON THE BASIS OF THE SAID EXERCISE, THE LEARNED ASSESSING OFFICER HAS OBSERVED AND CONCLUDED AS FOLLOWS:- THE IDENTITY AND THE CREDITWORTHINESS OF THE INVESTORS ARE NOT ESTABLISHED AS ALL THE INVESTORS ARE SHOWING A NOMINAL INCOME. NEITHER THE INVESTOR COMPANY AND NOR THE ASSESSEE COMPANY HAS PRODUCED ANY PROOF TO SUBSTANTIATE THE CREDIT WORTHINESS OF THE INVESTORS (FOR EXAMPLE BALANCE SHEET OF THE INVESTOR COMPANY) THE GENUINENESS OF THE TRANSACTIONS IS ALSO IN DOUBT AS THE INVESTORS HAVE NOT ENCLOSED THE BANK STATEMENT SHOWING THE SOURCE OF FUND FOR SHARE APPLICATION MONEY. (6) THE LEARNED ASSESSING OFFICER HAS ACCORDINGLY HELD THAT THE CREDITWORTHINESS OF THE INVESTORS AND THE GENUINENESS OF THE TRANSACTIONS IS IN DOUBT AND HAS ACCORDINGLY TREATED SHARE CAPITAL AND SHARE PREMIUM 25 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. AMOUNTING TO RS. 9,30,00,000/- AS UNEXPLAINED AND ADDED THIS SAME TO THE TAXABLE INCOME OF THE APPELLANT COMPANY U/S 68 OF THE INCOME TAX ACT, 1961. (7) THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS HAD DESIRED THE APPELLANT COMPANY TO FURNISH THE DETAILS OF THE AMOUNT RECEIVED AND EVIDENCE IN SUPPORT OF IDENTITY AND CREDITWORTHINESS OF THE APPLICANTS AND ALSO THE GENUINENESS OF THE TRANSACTION OF ALL THE PARTIES SITUATED AT MUMBAI AND KOLKATA FROM WHOM THE SHARE CAPITAL AND SHARE PREMIUM HAD BEEN RECEIVED. IN RESPONSE, THE APPELLANT COMPANY FILED COPIES OF CONFIRMATIONS, INCOME TAX RETURN ACKNOWLEDGEMENTS AND BANK ACCOUNTS FROM ALL THE PARTIES ESTABLISHING THE IDENTITY, GENUINENESS AND SOURCES OF TRANSACTION REGARDING SHARE CAPITAL AND SHARE PREMIUM WITH THE ASSESSING OFFICER. THE ENTIRE SHARE APPLICATION MONEY HAD BEEN RECEIVED BY THE APPELLANT COMPANY THROUGH NORMAL BANKING CHANNELS BY ACCOUNT PAYEE CHEQUES/DEMAND DRAFTS. FURTHERMORE, THE SAID CONFIRMATIONS ALSO CLEARLY REVEAL THE SOURCE OF FUNDS, PARTICULARS OF THE BANK ACCOUNT THROUGH WHICH PAYMENT HAS BEEN RECEIVED AND THE INCOME-TAX PARTICULARS WHICH GO ON TO ESTABLISH THE IDENTITY AND CREDITWORTHINESS OF THE VARIOUS PARTIES AUTHORITATIVELY AND CONCLUSIVELY. (8) AS A RESULT OF THE ABOVE DOCUMENTS BEING FILED BEFORE THE LEARNED ASSESSING OFFICER IN RESPECT OF ALL THE PARTIES IN RESPECT OF WHICH NO CAUSE EXISTS AS TO RECOURSE TO THE PROVISIONS OF SECTION 68 OF THE INCOME-TAX ACT, 1961 IN AS MUCH AS THE ONUS CAST ON THE APPELLANT COMPANY VIS-- 26 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. VIS THE GENUINENESS OF THE TRANSACTION AND CREDIT WORTHINESS OF THE PARTIES HAS BEEN EFFECTIVELY AND COMPLETELY DISCHARGED. THE ACTION OF THE LEARNED ASSESSING OFFICER IS NOT ONLY AGAINST THE SPIRIT BUT ALSO LETTER OF THE PROVISIONS RELATING TO ESTABLISHING THE IDENTITY OF CASH CREDITORS AS EMBODIED IN THE INCOME TAX ACT, 1961. INDEPENDENT INVESTIGATIONS FROM PARTIES OVER WHICH AN APPELLANT COMPANY DOES NOT HAVE ANY CONTROL CANNOT BE USED TO FORM ANY CONCLUSION, ADVERSE OF OTHERWISE IN RESPECT OF THE APPELLANT COMPANY. AS SUCH THE SAID ADDITION IS NEITHER WARRANTED NOR JUSTIFIED OR SUSTAINABLE ON THE FACTS OF THE CASE. (9) THE ABOVE FACTUAL STATEMENTS AND ARGUMENTS CAN BE FURTHER BUTTRESSED AND REINFORCED BY AN ANALYSIS OF THE RELEVANT LEGAL PROVISIONS AND LEGAL PRONOUNCEMENTS ON THE ISSUE. BEFORE PROCEEDING FURTHER WITH THE MATTER IT WOULD BE WORTHWHILE TO REPRODUCE THE PROVISIONS OF S.68 OF THE INCOME TAX ACT, 1961 WHICH READS AS FOLLOWS:- S 68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. 27 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. (10) THE ABOVE SECTION ENJOINS UPON AN APPELLANT COMPANY, THE DUTY TO ADEQUATELY, SATISFACTORILY AND SUBSTANTIVELY EXPLAIN THE SOURCE OF ANY CASH CREDIT IN HIS BOOKS OF ACCOUNTS AND NO FURTHER. TO PUT IT DIFFERENTLY AN APPELLANT COMPANYS BURDEN OF PROOF WOULD STAND DISCHARGED IF HE IS ABLE TO PROVE THE NATURE AND SOURCE OF THE CASH CREDIT RECEIVED AND THUS HIS ONUS OF PROOF CANNOT EXTEND TO FAILURE TO PROVE THE SOURCE OF THE PROOF WITH A VIEW TO ARRIVE AT THE ULTIMATE SOURCE OF FUNDS. AS LONG AS THE NATURE, SOURCE AND IDENTITY OF THE INVESTOR IS ESTABLISHED, NO FURTHER ONUS OF PROOF CAN BE ENJOINED ON IT. IN THE INSTANT CASE NO CASE CAN BE MADE OUT TO DOUBT THE GENUINENESS, EXISTENCE OR IDENTITY OF THE INVESTORS AND AS SUCH NO CAUSE EXISTS FOR THE INVOCATION OF S. 68. (11) AN ANALYSIS OF THE PROVISIONS OF SECTION 68 OF THE INCOME-TAX ACT, 1961 WOULD MAKE IT CLEAR THAT IN ORDER TO DISCHARGE THE ONUS, THE ASSESSEE MUST PROVE THE FOLLOWING:- (I) IDENTITY OF THE CREDITOR; (II) CAPACITY OF THE CREDITOR TO ADVANCE MONEY; AND (III) GENUINENESS OF THE TRANSACTION. (12) THE QUESTION OF THE MANNER IN WHICH THE ONUS U/S 68 HAS TO BE DISCHARGED IS TO BE LOOKED AT WITH DIFFERENT PERSPECTIVES AND VARYING PARAMETERS IN EACH DIFFERENT CIRCUMSTANCE AND NO STANDARDS/GUIDELINES CAN BE LEAD OUT IN THIS REGARD. 28 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. (13) IN THE INSTANT CASE THERE IS NO MATERIAL ON RECORD TO PROVE OR EVEN REMOTELY SUGGEST THAT THE SHARE APPLICATION MONEY RECEIVED ACTUALLY EMANATED FOR THE APPELLANT COMPANY. IN FACT IT MAY BE REITERATED THAT THE SHARE APPLICATION MONEY WAS RECEIVED FROM INDEPENDENT LEGALLY INCORPORATED COMPANIES THROUGH NORMAL AND REGULAR BANKING CHANNELS WHICH FACT STANDS DULY CORROBORATED AND CONFIRMED BY THE CONFIRMATIONS BANK STATEMENTS AND INCOME TAX RETURNS OF THE SHARE APPLICANTS DULY PLACED ON RECORD. IN FACT, NO EVIDENCE, DIRECT OR INDIRECT, CONCLUSIVE, OR EVEN CIRCUMSTANTIAL, EXISTS TO DOUBT IN ANY MANNER THE IDENTITY AND CREDIT WORTHINESS OF THE PARTIES AND GENUINENESS OF THE TRANSACTIONS ENTERED INTO. (14) THE APPELLANT COMPANY HAS DISCHARGED ITS ONUS BY SATISFACTORILY DEALING WITH ALL THE ISSUES IN RESPECT OF WHICH ONUS HAS BEEN CAST ON IT U/S 68 OF THE INCOME-TAX ACT, 1961 AS WOULD BE CLEAR FROM THE FOLLOWING DISCUSSION:- (I) WITH RESPECT TO THE IDENTITY OF THE CREDITORS THE NAMES, ADDRESSES AND PANS OF THE ASSESSEE HAS BEEN DULY FURNISHED AND PROVIDED TO THE LD ASSESSING OFFICER DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS AND NO ERROR OR SHORT COMING HAS EITHER BEEN DETERMINED OR POINTED OUT THEREIN SINCE ALL THE SHARE APPLICANTS ARE DULY IDENTIFIED WITH DULY ALLOTTED PANS WHICH ARE 29 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. SUBSISTING IN THE RECORD OF THE INCOME TAX DEPARTMENT. MOREOVER ALL THE SHARE APPLICANTS ARE COMPANIES DULY INCORPORATED AFTER FOLLOWING THE PROCEDURE LAID OUT IN THE COMPANIES ACT, 1956. THUS, NO DOUBT EXISTS OR EVEN ARISES WITH RESPECT TO THE IDENTITY OF THE CREDITORS. (II) WITH RESPECT TO THE CAPACITY/CREDIT WORTHINESS OF THE SHARE APPLICANTS TO ADVANCE MONEY AND THE GENUINENESS OF THE TRANSACTIONS IT NEEDS TO BE UNDERSTOOD, REITERATED AND RE- EMPHASIZED THAT THE ENTIRE TRANSACTION WAS CONSUMMATED THROUGH ACCOUNT PAYEE CHEQUES THROUGH REGULAR BANKING CHANNELS WHICH FACT HAS NOT BEEN DISPUTED OR DENIED IN ANY MANNER. AS SUCH GIVEN THE ENTIRE FACTUAL SITUATION OF THE CASE NO DOUBT ARISES AND REMAINS AS TO THE CAPACITY AND CREDIT WORTHINESS OF THE PARTIES AND GENUINENESS OF THE TRANSACTIONS. (15) MOREOVER, WITHOUT PREJUDICE TO THE SUBMISSIONS MADE ABOVE, IT IS SUBMITTED THAT A SUM OF RS. 50 LAC WAS RECEIVED FROM M/S REAL GOLD TRADING PRIVATE LIMITED DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2008-09 IN WHICH YEAR IT WAS REFLECTED AS SHARE APPLICATION MONEY IN THE ACCOUNTS AND CORRESPONDING ADDITION WAS MADE BY THE LD ASSESSING OFFICER DURING THAT YEAR. SUBSEQUENTLY, DURING THE ASSESSMENT YEAR UNDER APPEAL IT WAS CONVERTED TO SHARE CAPITAL MONEY AND A FURTHER ADDITION OF RS. 50 LACS WAS ALSO MADE WHICH HAS RESULTED IN DOUBLE ADDITION OF THE SAME AMOUNT OVER TWO ASSESSMENT YEARS. 30 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. (16) IN THIS CONNECTION YOUR HONOURS ATTENTION IS ALSO INVITED TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX VS. STELLER INVESTMENTS LIMITED [(1991) 192 ITR 287 (DELHI)] WHEREIN IT HAS BEEN CLEARLY HELD THAT ANY INCREASED CAPITAL IS NOT ASSESSABLE IN THE HANDS OF THE COMPANY. THE RELEVANT OBSERVATIONS OF THE LEARNED JUDGES ARE AS FOLLOWS:- IT IS EVIDENT THAT EVEN IF IT BE ASSUMED THAT THE SUBSCRIBERS TO THE INCREASED SHARE CAPITAL WERE NOT GENUINE, NEVERTHELESS, UNDER NO CIRCUMSTANCES, CAN THE AMOUNT OF SHARE CAPITAL BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE. IT MAY BE THAT THERE ARE SOME BOGUS SHAREHOLDERS IN WHOSE NAMES SHARES HAD BEEN ISSUED AND THE MONEY MAY HAVE BEEN PROVIDED BY SOME OTHER PERSONS. IF THE ASSESSMENT OF THE PERSONS WHO ARE ALLEGED TO HAVE REALLY ADVANCED THE MONEY IS SOUGHT TO BE REOPENED, THAT WOULD HAVE MADE SOME SENSE BUT WE FAIL TO UNDERSTAND AS TO HOW THIS AMOUNT OF INCREASED SHARE CAPITAL CAN BE ASSESSED IN THE HANDS OF THE COMPANY ITSELF. (17) SUBSEQUENT TO THE ABOVE AN APPEAL FILED BY THE DEPARTMENT AGAINST THE JUDGEMENT/OBSERVATIONS OF THE SUPREME COURT WAS ALSO DISMISSED AND THE HONBLE SUPREME COURT DID NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE HIGH COURT IN THE CASE OF CIT VS STELLER INVESTMENT LTD [(2001) 251 ITR 263 (SC)]. AS SUCH THE OBSERVATIONS OF THE HONBLE DELHI HIGH COURT HAVE OBTAINED THE APPROVAL OF THEIR LORDSHIP OF THE SUPREME COURT AND ACCORDINGLY ATTAINED JUDICIAL FINALITY AND STAMP OF APPROVAL. 31 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. (18) IN ADDITION, YOUR HONORS KIND ATTENTION IS ALSO INVITED TO THE FOLLOWING JUDGEMENT OF THE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX V LOVELY EXPORTS PVT LTD [(2008) 299 ITR 268 (DELHI)] HAS HELD AS FOLLOWS:- IN THE CASE OF A COMPANY THE FOLLOWING ARE THE PROPOSITIONS OF LAW UNDER SECTION 68. THE ASSESSEE HAS TO PRIMA FACIE PROVE (1) THE IDENTITY OF THE CREDITOR/ SUBSCRIBER; (2) THE GENUINENESS OF THE TRANSACTION, NAMELY, WHETHER IT HAS BEEN TRANSMITTED THROUGH BANKING OR OTHER INDISPUTABLE CHANNELS; (3) THE CREDITWORTHINESS OR FINANCIAL STRENGTH OF THE CREDITOR / SUBSCRIBER; (4) IF RELEVANT DETAILS OF THE ADDRESS OR PAN IDENTITY OF THE CREDITOR / SUBSCRIBER ARE FURNISHED TO THE DEPARTMENT ALONGWITH COPIES OF THE SHAREHOLDERS REGISTER, SHARE APPLICATION FORMS, SHARE TRANSFER REGISTER, ETC, IT WOULD CONSTITUTE ACCEPTABLE PROOF OR ACCEPTABLE EXPLANATION BY THE ASSESSEE; (5) THE DEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWING AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/ SUBSCRIBER FAILS OR NEGLECTS TO RESPOND TO ITS NOTICES; (6) THE ONUS WOULD NOT STAND DISCHARGED IF THE CREDITOR / SUBSCRIBER DENIES OR REPUDIATES THE TRANSACTION SET UP BY THE ASSESSEE NOR SHOULD THE ASSESSING OFFICER TAKE SUCH REPUDIATION AT FACE VALUE AND CONSTRUE IT, WITHOUT MORE, AGAINST THE ASSESSEE; AND (7) THE ASSESSING OFFICER IS DUTY BOUND TO INVESTIGATE THE CREDITWORTHINESS OF THE CREDITOR/ SUBSCRIBER THE GENUINENESS OF THE TRANSACTION AND THE VERACITY OF THE REPUDIATION. IN THE CASE OF A PUBLIC ISSUE, THE COMPANY CONCERNED CANNOT BE EXPECTED TO KNOW EVERY DETAIL PERTAINING TO THE IDENTITY AS WELL AS 32 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. FINANCIAL WORTH OF EACH OF ITS SUBSCRIBES. THE COMPANY MUST, HOWEVER, MAINTAIN AND MAKE AVAILABLE TO THE ASSESSING OFFICER FOR HIS PERUSAL, ALL THE INFORMATION CONTAINED IN THE STATUTORY SHARE APPLICATION DOCUMENTS. A DELICATE BALANCE MUST BE MAINTAINED WHILE WALKING THE TIGHTROPE OF SECTIONS 68 AND 69 OF THE INCOME TAX ACT. THE BURDEN OF PROOF CAN SELDOM BE DISCHARGED TO THE HILT BY THE ASSESSEE; IF THE ASSESSING OFFICER HARBOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRIPTION, HE IS EMPOWERED, TO CARRY OUT THOROUGH INVESTIGATIONS. BUT IF THE ASSESSING OFFICER FAILS TO UNEARTH ANY WRONG OR ILLEGAL DEALINGS, HE CANNOT ADHERE TO HIS SUSPICIONS AND TREAT THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANY. (19) FURTHER YOUR HONORS KIND ATTENTION IS ALSO INVITED TO THE DECISION OF THEIR LORDSHIP OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS LOVELY EXPORTS PVT LTD [(2008) 216 CTR 195 (SC)] WHEREIN THE SPECIAL LEAVE PETITION FILED BY THE DEPARTMENT AGAINST THE ORDER OF THE DELHI HIGH COURT HAS BEEN DISMISSED WITH THE FOLLOWING REMARKS:- WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGEMENT. 33 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. (20) THE ABOVE DECISION OF THE HONBLE SUPREME COURT FOLLOWS THE EARLIER DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF STELLER INVESTMENT LTD, CITED SUPRA AND FURTHER REINFORCES THE ARGUMENTS PUT FORWARD FOR AND ON BEHALF OF THE APPELLANT COMPANY. (21) IN PARTICULAR, WITH REGARD TO THE ISSUE OF ESTABLISHING THE CREDITWORTHINESS OF THE PARTIES, YOUR HONOURS ATTENTION IS INVITED TO THE FOLLOWING RECENT JUDGEMENTS WHEREIN IT HAS BEEN CONCLUSIVELY HELD, RELYING ON THE DECISIONS IN THE CASE OF M/S LOVELY EXPORTS PVT LTD CITED ABOVE, THAT AS LONG AS THE IDENTITY OF THE SHARE APPLICANT WAS PROVED, THE BURDEN OF PROVING THE CREDITWORTHINESS WAS NOT ON THE ASSESSEE:- COMMISSIONER OF INCOME-TAX, UDAIPUR V. BHAVAL SYNTHETICS [(2013) 35 TAXMANN.COM 83 (RAJASTHAN)]; SHREE BARKHA SYNTHETICS LTD V. ASSISTANT COMMISSIONER OF INCOME- TAX [(2006) 155 TAXMAN 289 (RAJ)]; COMMISSIONER OF INCOME-TAX, BHOPAL (M.P) V. PEOPLES GENERAL HOSPITAL LTD [(2013) 35 TAXMANN.COM 444(MADHYA PRADESH); COMMISSIONER OF INCOME-TAX, MEERUT V. KAMNA MEDICAL CENTRE (P) LTD [(2013) 35 TAXMANN.COM 470(ALLAHABAD)]; COMMISSIONER OF INCOME-TAX, FARIDABAD V. GP INTERNATIONAL LTD [(2010) 186 TAXMAN 229 (PUN &HAR)]; CIT V DWARKADHISH INVESTMENT PVT LTD AND DWARKADHISH CAPITAL PVT LTD [(2011) 330 ITR 298 (DELHI)]; CIT V. WINSTRAL PETROCHEMICALS PVT LTD [(2011) 330 ITR 603 (DELHI)]; 34 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. COMMISSIONER OF INCOME TAX V. GANGOUR INVESTMENT LTD [(2011) 335 ITR 359 (DELHI)]; MOD CREATIONS PVT LTD VS. INCOME TAX OFFICER [(2012) 354 ITR 282(DELHI)]. (22) IT SHOULD BE SPECIFICALLY NOTED IN THE INSTANT CASE THERE WAS NO DENIAL AT ANY STAGE OF THE INVESTIGATION OR THE ASSESSMENT PROCEEDINGS BY ANY OF THE SUBSCRIBERS TO THE SHARE CAPITAL OF THEIR HAVING INVESTED MONEY BY WAY OF SHARE APPLICATION MONEY IN THE APPELLANT COMPANY. MOREOVER THERE IS NO SHRED OF EVIDENCE, DIRECT, INDIRECT OR EVEN PERIPHERAL OF THE SHARE APPLICATION MONEY HAVING EMANATED FROM THE COFFERS OF THE APPELLANT COMPANY. IN FACT, THE INVESTOR COMPANIES, IN THEIR REPLIES FILED BEFORE THE DEPARTMENT (IN RESPONSE TO SUMMONS U/S 131 OF THE ACT), HAVE DULY CONFIRMED, THE FACTUM OF THEIR HAVING MADE THE INVESTMENT AND HAVE FURTHER BUTTRESSED THE SAME WITH THE FOLLOWING DOCUMENTS:- (A) CONFIRMATIONS; (B) ACKNOWLEDGEMENT FOR FILING OF INCOME TAX RETURNS; (C) BANK STATEMENTS REFLECTING THE TRANSACTIONS WITH THE APPELLANT COMPANY; (D) COPIES OF ANNUAL ACCOUNTS. (23) IN VIEW OF THE ABOVE, NO DOUBT REMAINS AS TO THE IDENTITY OF THE INVESTORS, THEIR CREDIT WORTHINESS AND THE GENUINENESS OF THE TRANSACTIONS AND CORRESPONDINGLY NO ADVERSE INFERENCE IS CALLED FOR. 35 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. (24) IN FACT, IN THE INSTANT CASE, RELIANCE IS PLACED ON THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF CIT VS KAMDHENU STEEL & ALLOYS LIMITED AND OTHERS [(2012)206 TAXMAN 254(DELHI)] WHEREIN THE FOLLOWING HAS BEEN HELD : 38. EVEN IN THAT INSTANT CASE, IT IS PROJECTED BY THE REVENUE THAT THE DIRECTORATE OF INCOME TAX (INVESTIGATION) HAD PURPORTEDLY FOUND SUCH A RACKET OF FLOATING BOGUS COMPANIES WITH SOLE PURPOSE OF LANDING ENTRIES. BUT, IT IS UNFORTUNATE THAT ALL THIS EXERCISE IS GOING IN VAIN AS FEW MORE STEPS WHICH SHOULD HAVE BEEN TAKEN BY THE REVENUE IN ORDER TO FIND OUT CAUSAL CONNECTION BETWEEN THE CASH DEPOSITED IN THE BANK ACCOUNTS OF THE APPLICANT BANKS AND THE ASSESSEE WERE NOT TAKEN. IT IS NECESSARY TO LINK THE ASSESSEE WITH THE SOURCE WHEN THAT LINK IS MISSING, IT IS DIFFICULT TO FASTEN THE ASSESSEE WITH SUCH A LIABILITY. 39. WE MAY REPEAT WHAT IS OFTEN SAID, THAT A DELICATE BALANCE HAS TO BE MAINTAINED WHILE WALKING ON THE TIGHT ROPE OF SECTIONS 68 AND 69 OF THE ACT. ON THE ONE HAND, NO DOUBT, SUCH KIND OF DUBIOUS PRACTICES ARE RAMPANT, ON THE OTHER HAND, MERELY BECAUSE THERE IS AN ACKNOWLEDGEMENT OF SUCH PRACTICES WOULD NOT MEAN THAT IN ANY OF SUCH CASES COMING BEFORE THE COURT, THE COURT HAS TO PRESUME THAT THE ASSESSEE IN QUESTIONS AS INDULGED IN THAT PRACTICE. TO MAKE THE ASSESSEE RESPONSIBLE, THERE HAS TO BE PROPER EVIDENCE. IT IS EQUALLY IMPORTANT THAT AN INNOCENT PERSON CANNOT BE FASTENED 36 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. WITH LIABILITY WITHOUT COGENT EVIDENCE. ONE HAS TO SEE THE MATTER FROM THE POINT OF VIEW OF SUCH COMPANIES (LIKE THE ASSESSEE HEREIN) WHO INVITE THE SHARE APPLICATION MONEY FROM DIFFERENT SOURCES OR EVEN PUBLIC AT LARGE. IT WOULD BE ASKING FOR A MOON IF SUCH COMPANIES ARE ASKED TO FIND OUT FROM EACH AND EVERY SHARE APPLICANT/SUBSCRIBERS TO FIRST SATISFY THE ASSESSEE COMPANIES ABOUT THE SOURCE OF THEIR FUNDS BEFORE INVESTING. IT IS FOR THIS REASON THE BALANCE IS STRUCK BY CATENA OF JUDGEMENTS IN LAYING DOWN THAT THE DEPARTMENT IS NOT REMEDILESS AND IS FREE TO PROCEED TO REOPEN THE INDIVIDUAL ASSESSMENT OF SUCH ALLEGED BOGUS SHAREHOLDERS IN ACCORDANCE WITH THE LAW. THAT WAS PRECISELY THE OBSERVATION OF THE SUPREME COURT IN LOVELY EXPORT (SUPRA) WHICH HOLDS THE FIELDS AND IS BINDING. 40. IN CONCLUSION, WE ARE OF THE OPINION THAT ONCE ADEQUATE EVIDENCE/MATERIAL IS GIVEN, AS STATED BY US ABOVE, WHICH WOULD PRIMA FACIE DISCHARGE THE BURDEN OF THE ASSESSEE IN PROVING THE IDENTITY OF SHAREHOLDERS, 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 REVENUE IS SUPPOSED TO MAKE THOROUGH PROBE OF THE NATURE INDICATED ABOVE BEFORE IT COULD NAIL THE ASSESSEE AND FASTEN THE ASSESSEE WITH SUCH A LIABILITY UNDER SECTIONS 68 AND 69 OF THE ACT. 37 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. (25) IT WOULD ALSO BE PERTINENT, TOPICAL AND RELEVANT TO MENTION HERE THAT THE SPECIAL LEAVE PETITION FIELD BEFORE THE HONBLE SUPREME COURT BY THE REVENUE AGAINST THE ABOVE DECISION OF THE HONBLE DELHI HIGH COURT HAS BEEN SUBSEQUENTLY DISMISSED BY THEIR LORDSHIP OF THE SUPREME COURTS AND AS SUCH THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF CIT VS KAMDHENU STEEL & ALLOYS LIMITED AND OTHERS (SUPRA) HAS ATTAINED CONCLUSIVE JUDICIAL FINALITY. (26) TO CONCLUDE IT MAY BE SAID THAT ON THE BASIS OF THE FACTS DISCUSSED SUPRA AND THE RATIO OF THE ABOVE JUDGEMENTS MAKES IT CLEAR THAT IF THE SHARE APPLICANTS ARE IDENTIFIED AND IT IS ESTABLISHED THAT THEY HAVE DEPOSITED MONEY IN THE COMPANY, NO RECOURSE CAN BE MADE TO THE PROVISIONS OF S 68. THE APPELLANT COMPANY HAD PROVIDED ALL THE REQUISITE PARTICULARS TO ESTABLISH THE IDENTITY OF THE SHARE APPLICANTS IN THE CONFIRMATIONS, ITRS AND BANK STATEMENTS ALREADY FILED BEFORE THE ASSESSING OFFICER. THE VARIOUS ARGUMENTS ADVANCED BY THE LEARNED ASSESSING OFFICER ARE FRIVOLOUS AND IRRELEVANT AND THE ONUS ENJOINED UPON THE APPELLANT COMPANY BY THE PROVISIONS OF SECTION 68 STANDS NOT ONLY ADEQUATELY BUT ALSO COMPLETED SATISFIED. (27) ACCORDINGLY SINCE IT IS CLEAR THAT IF THE SHAREHOLDERS / SHARE APPLICANTS ARE IDENTIFIED AND IT IS ESTABLISHED THAT THEY HAVE INVESTED MONEY IN THE PURCHASE OF SHARES, NO RECOURSE CAN BE MADE TO THE PROVISIONS OF S 68. IN THE INSTANT CASE THE APPELLANT COMPANY HAD PROVIDED ALL THE REQUISITE PARTICULARS TO ESTABLISH THE IDENTITY OF THE 38 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. SHARE APPLICANTS IN THE CONFIRMATIONS ALREADY FILED BEFORE THE ASSESSING OFFICER. THE LD. AR ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS :- (I) CIT VS. GANGESHWARI METAL PVT. LTD. ITA. NO. 597/2012 [JUDGEMENT DATED 21.01.2013 (DELHI HIGH COURT); (II) PR. CIT VS. N. C. CABLES LTD. (2017) 391 ITR 11 (DEL.); (III) PR. CIT VS. SOFTLINE CREATIONS P. LTD. (2016) 387 ITR 636 (DEL.); (IV) CIT VS. REAL TIME MARKETING P. LTD. (2008) 306 ITR 35 (DEL.); (V) CIT VS. VALUE CAPITAL SERGVICES P. LTD. (2008) 307 ITR 334 (DEL.); (VI) CIT VS. ORBITAL COMMUNICATION (P) LTD. (2010) 327 ITR 560 (DEL.); (VII) CIT VS. WINSTRAL PETROCHEMICALS P. LTD. (2011) 330 ITR 603 (DEL.); (VIII) CIT VS. KAMDHENU STEEL AND ALLOYS LTD. (2014) 361 ITR 220 (DEL.). 39 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. 17. HAVING GONE THROUGH THE ABOVE CITED DECISIONS, WE FIND THAT THE RATIO LAID DOWN THEREIN IS THAT THE PRIMARY ONUS LIES UPON THE ASSESSEE TO ESTABLISH IDENTITY AND CREDITWORTHINESS OF THE CREDITORS / INVESTORS AS WELL AS GENUINENESS OF THE TRANSACTION AND AFTER DISCHARGING OF THE SAME, ONUS SHIFTS UPON THE REVENUE TO PROVE THE DOCUMENTS FILED BY THE ASSESSEE WHILE DISCHARGING ITS PRIMARY ONUS, AS FALSE TO ATTRACT ADDITION UNDER SECTION 68 OF THE ACT. IN ITS RECENT DECISION DATED 11.01.2017 IN THE CASE OF PR. CIT VS. N.C. CABLES LTD. (SUPRA) THE HONBLE JURISDICTIONAL HIGH COURT OF DELHI HAS BEEN PLEASED TO HOLD THAT NO ADDITION CAN BE MADE UNDER SECTION 68 OF THE I. T. ACT WHERE ASSESSEE IN THE CASE OF SHARE APPLICATION MONEY HAD FURNISHED DOCUMENTS TO EVIDENCE GENUINENESS OF TRANSACTIONS AND IDENTITY AND CREDITWORTHINESS OF PARTIES, BUT THERE WAS FAILURE ON THE PART OF THE ASSESSING OFFICER TO CONDUCT ADEQUATE AND PROPER ENQUIRY INTO MATERIALS WHILE INVOKING SECTION 68 OF THE ACT. AGAIN IN THE CASE OF PR. CIT VS. SOFTLINE CREATIONS P. LTD. (SUPRA), THE ASSESSEE IN SUPPORT OF RECEIPT OF SHARE APPLICATION MONEY HAD FURNISHED PANS, BANK DETAILS OF SHARE APPLICANTS AND AFFIDAVITS OF DIRECTORS OF THOSE SHARE APPLICANT COMPANIES. THE HONBLE HIGH COURT OF DELHI HAS BEEN PLEASED TO HOLD THAT SHARE APPLICATION MONEY CANNOT BE CONSIDERED AS 40 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. UNEXPLAINED CASH CREDITS IN THE HANDS OF THE ASSESSEE. IN THE CASE OF CIT VS. VALUE CAPITAL SERVICES P. LTD. (SUPRA) THE HONBLE JURISDICTIONAL HIGH COURT OF DELHI WHILE DISMISSING THE APPEAL OF THE REVENUE HAS BEEN PLEASED TO HOLD THAT THE ADDITIONAL BURDEN WAS ON THE DEPARTMENT TO SHOW THAT EVEN IF THE SHARE APPLICANTS DID NOT HAVE THE MEANS TO MAKE THE INVESTMENT, INVESTMENT MADE BY THEM ACTUALLY EMANATED FROM THE COFFERS OF THE ASSESSEE SO AS TO ENABLE IT TO BE TREATED AS THE UNDISCLOSED INCOME OF THE ASSESSEE. IN THE CASE OF CIT VS. ORBITAL COMMUNICATION P. LTD. (SUPRA) THE HONBLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF THE CLAIMED SHARE APPLICATION MONEY HAS BEEN PLEASED TO HOLD THAT WHERE SUBSTANTIAL EVIDENCE HAS BEEN PRODUCED BY THE ASSESSEE TO PROVE CREDITWORTHINESS OF THE CREDITORS AND GENUINENESS OF SHARE APPLICATIONS, FAILURE TO PRODUCE CREDITOR IS NOT MATERIAL. IN THE CASE OF CIT VS. WINSTRAL PETRO CHEMICAL P. LTD. (SUPRA) IN THE CASE OF CASH CREDITS / SHARE APPLICATION MONEY, THE HONBLE JURISDICTIONAL HIGH COURT OF DELHI ON THE ISSUE OF BURDEN OF PROOF, HAS BEEN PLEASED TO HOLD THAT INITIAL BURDEN IS ON ASSESSEE TO PROVE IDENTITY OF CREDITORS, THE BURDEN THEN SHIFTS TO REVENUE TO PROVE THAT CREDITS WERE NOT GENUINE. IN THAT CASE WHILE DISMISSING THE APPEAL OF THE REVENUE, THE HONBLE HIGH COURT WAS PLEASED TO HOLD THAT IT HAD NOT BEEN DISPUTED THAT THE SHARE APPLICATION 41 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. MONEY WAS RECEIVED BY THE ASSESSEE COMPANY BY WAY OF ACCOUNT PAYEE CHEQUES THROUGH NORMAL BANKING CHANNELS. ADMITTEDLY, COPIES OF APPLICATION FOR ALLOTMENT OF SHARES WERE ALSO PROVIDED TO THE ASSESSING OFFICER. SINCE THE APPLICANT COMPANIES WERE DULY INCORPORATED, WERE ISSUED PAN CARDS AND HAD BANK ACCOUNTS FROM WHICH MONEY WAS TRANSFERRED TO THE ASSESSEE BY WAY OF ACCOUNT PAYEE CHEQUES, THEY COULD NOT BE SAID TO BE NON-EXISTENT, EVEN IF THEY, AFTER SUBMITTING THE SHARE APPLICATIONS, HAD CHANGED THEIR ADDRESSES OR HAD STOP FUNCTIONING, HELD THE HONBLE HIGH COURT. 18. WHEN WE EXAMINE THE FACTS OF THE PRESENT CASE IN VIEW OF THE ABOVE CITED RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT OF DELHI, WE FIND THAT FACTS ARE ALMOST SIMILAR. IN THE PRESENT CASE THERE WERE 11 INVESTOR COMPANIES CLAIMED TO HAVE INVESTED RS.9,30,00,000/- IN TOTAL IN THE ASSESSEE COMPANY. IN SUPPORT OF THEIR IDENTITY AND CREDITWORTHINESS AS WELL AS GENUINENESS OF THE TRANSACTIONS, AS DISCUSSED ABOVE, THE ASSESSEE HAD FILED BEFORE THE ASSESSING OFFICER, THEIR (INVESTOR COMPANIES) CONFIRMATIONS, INCOME TAX RETURN ACKNOWLEDGEMENTS (EXCEPT IN THE CASE OF REAL GOLD TRADING COMPANY PVT. LTD.), BANK ACCOUNTS WITH THIS SUBMISSION THAT ENTIRE AMOUNT HAD BEEN RECEIVED BY THE ASSESSEE 42 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. COMPANY THROUGH NORMAL BANKING CHANNELS BY ACCOUNT PAYEE CHEQUES / DEMAND DRAFTS. THE CONFIRMATIONS FILED REVEALED THE SOURCE OF FUNDS, PARTICULARS OF THE BANK ACCOUNT THROUGH WHICH PAYMENTS WERE RECEIVED AND THE INCOME TAX PARTICULARS ESTABLISHING THE IDENTITY AND CREDITWORTHINESS OF THE RESPECTIVE SHARE APPLICANTS. WE THUS FIND THAT THE ASSESSEE HAD DISCHARGED ITS PRIMARY ONUS TO ESTABLISH IDENTITY AND CREDITWORTHINESS OF THE INVESTOR COMPANIES AS WELL AS GENUINENESS OF THE TRANSACTIONS, AS PER THE RATIO LAID DOWN IN THE ABOVE CITED DECISIONS OF THE HONBLE HIGH COURT. THE ASSESSING OFFICER, ON THE OTHER HAND, HAD DOUBTED THE GENUINENESS OF THE CLAIMED RECEIPT ON THE BASIS THAT SOME OF THE INVESTOR COMPANIES COULD NOT BE FOUND AT THE GIVEN ADDRESS AND THAT SOME OF THE INVESTOR COMPANIES RESPONDED TO THE SUMMONS BY POST, BUT HAD NOT CAUSED APPEARANCE BEFORE HIM. THE ASSESSING OFFICER ALSO HELD THAT INCOME OF MANY OF THE INVESTOR COMPANIES WAS TOO LOW OR MEAGER TO ENABLE THEM TO MAKE SUCH LARGE INVESTMENTS IN THE SHARE CAPITAL OF THE ASSESSEE COMPANY. THE ASSESSING OFFICER ALSO OBSERVED THAT THERE APPEARED NO JUSTIFICATION FOR LARGE COMPONENTS OF SHARE PREMIUM PAID TO THE ASSESSEE ALONG WITH THE SHARE CAPITAL. THE ASSESSING OFFICER ALSO REMAINED SUSPICIOUS ABOUT THE CLAIMED INVESTOR COMPANIES ON THE BASIS OF REASONS RECORDED FOR INITIATION OF REOPENING OF ASSESSMENT PROCEEDINGS 43 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. BASED ON THE REPORT RELATING TO SURVEY CONDUCTED AT THE PREMISES OF THE ASSESSEE THAT THE BUSINESS PREMISES OF THE ASSESSEE ACTUALLY BELONG TO BHUSHAN STEEL LTD. AND SEVERAL OTHER COMPANIES WERE HAVING THEIR REGISTERED OFFICES IN THE SAME PREMISES. THE SUBMISSION OF THE ASSESSEE IN THIS REGARD REMAINED THAT THERE IS NO LAW THAT MORE THAN ONE COMPANY CANNOT HAVE ITS REGISTERED OFFICE AT ONE ADDRESS AND THAT THERE IS NO LAW THAT COMPANIES CANNOT CHANGE THEIR REGISTERED OFFICES. IT WAS SUBMITTED THAT BUSINESS RAISE CAPITAL AND SUCH CAPITAL IS ROTATED IN ECONOMY FOR INCREASING PRODUCTION AND TRADE AND FOR MAKING MORE EFFICIENT USE OF CAPITAL. COMPANIES CHANGE AND, SOMETIMES IN QUICK SUCCESSION. THIS IS THE NORMAL FORMATION OF CAPITAL IN ANY OPEN ECONOMY AND THE PROCESS OF CAPITAL FORMATION CANNOT BE TAKEN TO BE REPRESENTING ONLY UNACCOUNTED FUNDS OR IMPEDED. IT WAS SUBMITTED THAT ALL THE COMPANIES HAVING REGISTERED OFFICE AT THE PREMISES UNDISPUTEDLY BELONGED TO BHUSHAN GROUP. THE SOURCES OF CAPITAL INTRODUCED IN THESE COMPANIES WERE ESTABLISHED DURING THE RESPECTIVE ASSESSMENT PROCEEDINGS. IT WAS FURTHER CONTENDED THAT NO EVIDENCE WAS FOUND DURING SEARCH TO INDICATE INTRODUCTION OF CASH IN THE FORM OF SHARE CAPITAL. IT IS ALSO PERTINENT TO MENTION OVER HERE THAT OUT OF TOTAL 11 INVESTOR COMPANIES, NOTICES COULD NOT BE SERVED IN CASE OF 3 COMPANIES AS THEY WERE NOT AVAILABLE ON THE 44 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. GIVEN ADDRESSES. THE REMAINING 8 COMPANIES HAD RESPONDED AND HAD FILED THEIR SUBMISSIONS. HOWEVER, THERE IS NO DISPUTE THAT IN CASE OF ALL THE 11 INVESTOR COMPANIES, THE ASSESSEE HAD FILED PRIMARY DOCUMENTS AND HAD ACCORDINGLY DISCHARGED ITS INITIAL ONUS TO ESTABLISH IDENTITY AND CREDITWORTHINESS OF THE INVESTOR COMPANIES AND GENUINENESS OF THE TRANSACTION AS THERE IS NO DISPUTE THAT ALL THE TRANSACTIONS HAVE BEEN DONE THROUGH BANKING CHANNELS I.E. THROUGH ACCOUNT PAYEE CHEQUES AND DEMAND DRAFTS. WE THUS FIND THAT THE ASSESSING OFFICER HAS FAILED TO DISCHARGE ITS ONUS TO PROVE THAT THE DOCUMENTS FILED BY THE ASSESSEE, AS DISCUSSED ABOVE, WERE FALSE OR FABRICATED AS THE ASSESSING OFFICER HAS NOT MADE ANY EFFORTS TO VERIFY THOSE DOCUMENTS ESPECIALLY WHEN THERE IS NO DISPUTE THAT ALL THE INVESTOR COMPANIES WERE FILING THEIR RETURNS OF INCOME AND WERE BEING ASSESSED BY THE DEPARTMENT. THE ASSESSING OFFICER ON THE CONTRARY REMAINED SUSPICIOUS ON THE CLAIMED RECEIPT FROM THE INVESTOR COMPANIES ON SOME OTHER FACTORS LIKE SOME OF THEM WERE NOT FOUND ON THEIR GIVEN ADDRESSES, SOME OF THEM HAD FURNISHED THEIR SUBMISSIONS THROUGH POSTS AND SOME OF THEM WERE NOT HAVING SUFFICIENT INCOME ETC. AS DISCUSSED ABOVE. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE LD. CIT (APPEALS) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.9,30,00,000./- MADE UNDER SECTION 68 OF THE ACT ON ACCOUNT OF 45 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. UNEXPLAINED SHARE CAPITAL AND SHARE PREMIUM. SINCE THE FIRST APPELLATE ORDER IS BASED UPON THE RATIO LAID DOWN IN THE ABOVE CITED DECISIONS OF THE HONBLE JURISDICTIONAL HIGH COURT OF DELHI, WE DO NOT FIND REASON TO INTERFERE THEREWITH. THE SAME IS UPHELD. THE GROUND IS ACCORDINGLY REJECTED. 19. IN RESULT, APPEAL IS DISMISSED. 20. CONSEQUENTLY, CROSS OBJECTION PREFERRED BY THE ASSESSEE AND THE APPEAL FILED BY THE REVENUE, ARE DISMISSED. 21. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON: 18 TH AUGUST, 2017 . SD/- SD/- ( L. P. SAHU ) ( I. C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : THE 18 TH AUGUST, 2017 . *MEHTA* COPY OF THE ORDER FORWARDED TO :- 1. APPELLANTS; 2. RESPONDENTS; 3. CIT; 46 I.T. APPEAL NO. 6178/DEL/2013 C. O. NO. 262/DEL/2015 ASSESSMENT YEAR : 2009-10. 4. CIT (APPEALS); 5. DR, ITAT, ND. BY ORDER ASSISTANT REGISTRAR DATE DRAFT DICTATED ON 18.08.2017 DRAFT PLACED BEFORE AUTHOR 18.08.2017 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. APPROVED DRAFT COMES TO THE SR.PS/PS KEPT FOR PRONOUNCEMENT ON FILE SENT TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.