ARCELI REALTY LTD, MUMBAI V. ITO 15(1)(1), MUMBAI

ITA 6492/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0977 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 07-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R P MEENA
• Assessee Lawyers: NIMESH CHOTANI
• Keywords: Unexplained cash credit; Income from undisclosed sources; Share purchase agreement; Principle of natural justice; Opportunity of cross examination; Retrospective amendment; Question of law; Corroborative evidences; Accommodation entries; Capital receipt; Onus to prove; Reassessment proceedings; Borrowed satisfaction
• Section: 143(3); 142(1); 14A; 133(6); 147; 68; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.6492/MUM /2016 ASSESSMENT YEAR-2007-08 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) C-30, VRINDAVAN RAMAYAND, C.H.S. S.N. ROAD, TAMBE NAGAR, MULUND (W), MUMBAI-400080 / VS. INCOME TAX OFFICER-15(1)(1), MUMBAI PAN NO .A AAACE1176E ( / ASSESSEE) ( / REVENUE) / ASSESSEE BY SHRI NIMESH CHOTANI & SHRI DHARAN GANDHI / REVENUE BY SHRI R.P. MEENA CIT-DR / DATE OF HEARING : 19/04/2017 / DATE OF ORDER: 21/04/2017 ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 19/08/2016 OF THE LD. FIRST APPELLATE AUTHORI TY, MUMBAI. THE FIRST GROUND RAISED BY THE ASSESSEE PE RTAINS TO REOPENING THE PROCEEDINGS U/S 148 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) BY NOT TREATING THE REASSESSMENT PROCEEDINGS AS INVALID AND BAD IN LAW. DURING HEARING, SHRI NIMESH CHOTANI, ALONG WITH SHR I DHARAN GANDHI, LD. COUNSEL FOR THE ASSESSEE, DID NO T PRESS THIS GROUND. THE LD. CIT-DR, SHRI R.P. MEENA, HAD N O OBJECTION TO THE REQUEST OF THE ASSESSEE, THEREFORE , THIS GROUND IS DISMISSED AS NOT PRESSED. 2. THE ONLY EFFECTIVE GROUND ARGUED BY THE LD. COUNSEL PERTAINS TO ADDITION OF RS.20 LAKH MADE U/S 68 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT), BEI NG THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE. T HE CRUX OF ARGUMENT ADVANCED ON BEHALF OF THE ASSESSEE IS THAT THE ASSESSEE DULY FILED THE CONFIRMATION. IT WAS EXPLAINED THAT THE ADDITION WAS MADE BY THE ASSESSI NG OFFICER ON THE PLEA THAT NO DETAILS WERE FILED BY T HE ASSESSEE. HOWEVER, IT WAS CLAIMED THAT THE NECESSA RY DETAILS WERE DULY FILED BY THE ASSESSEE AND THE WHO LE ADDITION WAS MADE ON THE BASIS OF STATEMENTS TENDER ED BY SOME PERSON. IT WAS PLEADED THAT IN SPITE OF ASKIN G BY THE ASSESSEE, CROSS EXAMINATION WAS NOT PROVIDED TO THE ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 3 ASSESSEE. OUR ATTENTION WAS INVITED TO PAGE-7 CONTA INING THE REPLY OF THE ASSESSEE WITH A REQUEST FOR CROSS EXAMINATION. IT WAS CLAIMED THAT THE ASSESSEE IS A PUBLIC LIMITED COMPANY, ANNUAL RETURNS WERE FILED WITH THE REGISTRAR (PAGES 64 TO 69 OF THE PAPER BOOK). DETA ILS OF ALLOTTED SHARES WERE DULY FILED WITH THE MINISTRY O F CORPORATE AFFAIRS, AS REQUIRED UNDER THE ACT (PAGE- 71 OF THE PAPER BOOK). OUR ATTENTION WAS ALSO INVITED TO THE PAGE-81 OF THE PAPER BOOK CONTAINING THE NAMES OF ALLOTTEES BY SUBMITTING THAT EVEN ALL THE DETAILS W ERE DULY MADE AVAILABLE TO THE MINISTRY OF CORPORATE AFFAIRS AND ALSO BEFORE THE ASSESSING OFFICER, THEREFORE, THE O NUS HAS BEEN DISCHARGED. A STRONG RELIANCE WAS PLACED UPON THE DECISION FROM HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS M/S GAGANDEEP INFRASTRUCTURE PVT. LTD. (I TA NO.1613 OF 2014) (BOM.)(HC)(PAGES 3 TO 9 OF THE PAP ER BOOK). RELIANCE WAS ALSO PLACED UPON THE DECISION F ROM HON'BLE APEX COURT IN CIT VS LOVELY EXPORTS PVT. LT D. 216 CTR 195 (SC), CIT VS CREATIVE WORLD TELLY FILMS LTD . (2011) 333 ITR 100 (BOM.) AND VITRAG METALS PVT. LT D. VS INCOME TAX OFFICER (46 ITR (T.) 201)(BOM.)(PAGES 12 TO 13 OF THE PAPER BOOK). THE LD. COUNSEL ALSO EXPLAINED THE SOURCE OF INVESTMENT, WHICH WAS ALSO FILED BEFORE T HE LD. ASSESSING OFFICER AS WELL AS BEFORE THE LD. FIRST A PPELLATE AUTHORITY. 2.1. ON THE ISSUE OF NON-PROVIDING CROSS EXAMINATION, IN SPITE OF REPEATED REQUEST AND VIOLA TION OF ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 4 PRINCIPLE OF NATURAL JUSTICE, THE LD. COUNSEL PLACE D RELIANCE UPON THE DECISION IN ADMAN TIMBER INDUSTRIES VS CCE (281 CTR 241) (SC), H.R. MEHTA VS ACIT 387 ITR 561(BOM.) AND G.K.N. DRIVESHAFTS (INDIA) LTD. VS IN COME TAX OFFICER 259 ITR 19 (SC). IT WAS ALSO CONTENDED THAT THE LD. ASSESSING OFFICER DID NOT APPLY HIS INDEPENDENT MIND WHILE REOPENING THE ASSESSMENT AND MERELY RELIED UP ON BORROWED SATISFACTION PROVIDED BY THE INVESTIGATION WING. 2.2. ON THE OTHER HAND, SHRI R.P. MEENA, LD. CIT-D R STRONGLY DEFENDED THE ORDER OF THE LD. ASSESSING OF FICER AND AS WELL AS OF THE LD. COMMISSIONER OF INCOME TA X (APPEAL) BY CONTENDING THAT ONUS CASTE UPON THE ASS ESSEE WAS NOT DISCHARGED AND THE NECESSARY DETAILS, SOUGH T BY THE ASSESSING OFFICER WERE NOT FILED BY THE ASSESSE E. RELIANCE WAS PLACED UPON THE DECISION IN CIT VS KUN DAN INVESTMENT LTD. 263 ITR 626 (KOL.), 11 ITR 951 (KOL .), ITO VS JANAK U. BHATT 8 SOT 353 (BOM.) AND PARA 2.4.16 OF THE IMPUGNED ORDER. THE CRUX OF THE ARGUMENT BY THE LD. CIT-DR IS THAT THE ONUS CASTE UPON THE ASSESSEE WAS NEVER DISCHARGED, THEREFORE, THE ADDITION WAS RIGHT LY MADE. 2.3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF BUILDING AND DEVELOPING VARIOUS PROJECT S. AS PER THE REVENUE, AN INFORMATION WAS RECEIVED FROM T HE INVESTIGATION WING THAT THE ASSESSEE COMPANY HAS TA KEN ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 5 SHARE APPLICATION MONEY FROM M/S YASH V-JEWELLS LTD . AND M/S ALKA DIAMOND INDUSTRIES LTD. TOTALLING RS.2 0 LAKHS. THE ASSESSMENT WAS REOPENED U/S 147 OF THE A CT, THEREFORE, NOTICE U/S 148 OF THE ACT WAS SERVED UPO N THE ASSESSEE. NOTICE U/S 143(2) DATED 21/10/2014 WAS AL SO SERVED UPON THE ASSESSEE. IN RESPONSE TO NOTICE U/S 133(6) OF THE ACT, DATED 21/01/2015, M/S ALKA DIAMOND INDUSTRIES LTD., VIDE COMMUNICATION DATED 04/02/201 5, SUBMITTED THE DETAILS. AS PER THE REVENUE, PART DET AILS WERE SUBMITTED. THE STAND OF THE REVENUE IS THAT TH E ASSESSEE COULD NOT PROVE THE CREDITWORTHINESS OF TH E INVESTING COMPANY AS WELL AS GENUINENESS OF THE TRANSACTION OF SHARE APPLICATION MONEY, THUS, THE L D. ASSESSING OFFICER, TREATED THE AMOUNT OF RS.20 LAKH , AS UNEXPLAINED CASH CREDIT AND ADDED THE SAME TO THE T OTAL INCOME OF THE ASSESSEE U/S 68 OF THE ACT. 2.4. ON APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS), THE FACTUAL MATRIX WAS CONSID ERED AND THE ADDITION MADE BY THE LD. ASSESSING OFFICER WAS AFFIRMED. BEFORE ADVERTING FURTHER, WE ARE EXPECTED TO REPRODUCE THE SUBMISSIONS OF THE ASSESSEE FOR ANALY SIS, WHICH HAS BEEN SUMMERIZED IN PARA 2.3.1 OF THE IMPU GNED ORDER FOR READY REFERENCE:- 2.3.1 LD. AR HAS, INTER ALIA, SUBMITTED THE FOLLOWI NG ARGUMENTS: 'THE APPELLANT, IN FURTHERANCE TO THE STATEMENT OF FACTS FILED BEFORE YOUR HONOURS ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 6 ALONG WITH GROUNDS OF APPEAL IN FORM NO. 35, WANTS TO STATE AND SUBMIT AS UNDER: 1. THE APPELLANT BEFORE YOUR HONOURS IS A COMPANY E NGAGED IN THE BUSINESS OF BUILDING AND DEVELOPING VARIOUS PROJEC TS. THE APPELLANT FILED THE RETURN FOR THE PREVIOUS YEAR RELEVANT TO THE IMPUGNED ASSESSMENT YEAR 2007-08 ON 30.10.2007 DECLARING TO TAL INCOME OF RS. 56,589/-. THE RETURN FILED BY THE APPELLANT WAS PRO CESSED AND ACCEPTED UNDER THE PROVISIONS OF SECTION 143(1) OF THE ACT. 2. SUBSEQUENTLY, THE APPELLANT WAS, THEREAFTER, SER VED WITH THE NOTICE DATED 14.03.2014 UNDER SECTION 148 OF THE ACT. THE NOTICE UNDER SECTION 148 WAS ISSUED ON THE BASIS OF CERTAIN INF ORMATION RECEIVED FROM THE DGIT (INV.) 3. THE LD. A.O. WITHOUT PROVIDING ANY REASONS FOR I SSUE OF NOTICE U/S 148 ISSUED' NOTICES U/S 143(2) OF THE ACT FOLLOWED BY N OTICES U/S 142(1) OF THE ACT. THE APPELLANT REPLIED TO THE NOTICES ISSUE D U/S 142(1) FROM TIME TO TIME AND FURNISHED THE NECESSARY DETAILS AS REQU IRED BY THE LD. AO. THE LD. AO WANTED TO VERIFY THE DETAILS OF SHARE AP PLICATION MONEY RECEIVED BY THE APPELLANT DURING THE IMPUGNED ASSES SMENT YEAR. THE LD. AO ISSUED A SHOW CAUSE NOTICE TO THE APPELLANT AS TO WHY RS. 10,00,000/- RECEIVED FROM M/S YASH V JEWELS LTD. AN D RS. 10,00,0001- RECEIVED FROM M/S ALKA DIAMOND INDUSTRIES LTD. AS S HARE APPLICATION MONEY SHOULD NOT BE TREATED AS UNEXPLAINED CASH CRE DITS AND ADDED TO THE TOTAL INCOME OF THE APPELLANT. THE APPELLANT SU BMITTED THE NECESSARY DETAILS OF THE PARTIES FROM WHOM THE APPE LLANT HAD RECEIVED SHARE APPLICATION MONEY IN THE IMPUGNED ASSESSMENT YEAR WHICH DISCHARGES THE APPELLANT FROM THE PRIMARY ONUS CAST UPON THE APPELLANT OF PROVING THE GENUINENESS OF THE SAID TRANSACTION. THE APPELLANT HAD ALSO SUBMITTED THE BANK STATEMENT OF M/S YASH V JEW ELS LTD. ALONG WITH THE CONFIRMATION OF M/S YASH V JEWELS LTD. AND M/S ALKA DIAMOND INDUSTRIES LTD. VIDE LETTER DATED 26.03.2015. FURTH ER, RELYING ON THE INFORMATION RECEIVED FROM THE INVESTIGATION WING, T HE LD. AO ISSUED NOTICE U/S 133(6) TO M/S YASH V JEWELS LTD. AND M/S ALKA DIAMOND INDUSTRIES LTD. FOR CORROBORATION OF THE SAID TRANS ACTION AND IN RESPONSE TO THE SAME M/S ALKA DIAMOND INDUSTRIES IGNORED THE VARIOUS DOCUMENTARY EVIDENCES MERELY ON THE BASIS OF SURMIS E; CONJECTURE AND SUSPICION AND FINALIZED THE ASSESSMENT ORDER DATED 26.03.2015 UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 19 61 AFTER MAKING AN ADDITION OF RS. 20, OO,OOO/~ UNDER SECTION 68 OF TH E ACT. 4. THE LD. AO HAS ERRED ON THE FOLLOWING GROUNDS: I. THE LD. A O. ISSUED NOTICES U/S 143(2) AND 142(1 ) WITHOUT PROVIDING REASONS TO THE APPELLANT FOR ISSUING NOTICE ULS 148 . ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 7 II. THE LD. A.O. ISSUED NOTICE U/S 148 WITHOUT ANY APPLICATION OF MIND MERELY RELYING ON THE INFORMATION RECEIVED FROM THE INVESTIGATION WING. III. THE LD. AO FAILED TO APPRECIATE THAT THE APPEL LANT HAD DISCHARGED THE PRIMARY ONUS CAST UPON THE APPELLANT OF PROVING THE GENUINENESS OF THE PARTY FROM WHOM SHARE APPLICATION MONEY WAS RECEIVE D. IV. THE LD. AO IGNORED THE SUPPORTING DOCUMENTARY E VIDENCES PROVIDED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND HAS ACTED MERELY ON THE BASIS OF SURMISE AND CONJECTURE. V. THE LD. AO ERRED IN PASSING THE ASSESSMENT ORDER U/S 143(3) R. W.S. 147 OF THE ACT WITHOUT PROVIDING ANY OPPORTUNITY TO THE APPELLANT FOR CROSS EXAMINATION WHICH IS AGAINST THE PRINCIPLES O F NATURAL JUSTICE. 5. FAILED TO PROVIDE REASONS FOR ISSUE OF NOTICE U/ S 148. THE HON'BLE SUPREME COURT IN CASE OF GKN DRIVESHAFT S - 259 ITR 19 (SC) HAS HELD THE ASSESSING OFFICER IS BOUND TO FURNISH REASONS FOR THE PURPOSE OF ISSUING NOTICE U/S 148 AND THAT ONCE THE REASONS ARE FURNISHED, THEN THE ASSESSEE SHOULD BE GIVEN AN OPPORTUNITY TO REBUT TH E REASONS SO FURNISHED. POST WHICH THE LD. A 0 SHOULD PASS AN ORDER DISPOSI NG OFF THE OBJECTIONS SO RAISED BY THE ASSESSEE. THEN THE LD. AO HAS TO WAIT FOR A PERIOD FOR 4 WEEKS BEFORE PROCEEDING WITH THE ASSESSMENT. IN THE PRESENT CASE, THE LD. A. O. NEVER PROVIDED T HE REASONS FOR ISSUE OF NOTICE U/E 148. THE LD. AO HAS THUS VIOLATED THE BA SIC PROCEDURES LAID DOWN BY THE HON'BLE SUPREME COURT. HENCE, THE ASSES SMENT ORDER PASSED U/S 143(3) R. W.S. 147 IS IN VIOLATION OF THE BASIC PROVISIONS OF LAW AND AGAINST THE PRINCIPLES OF NATURAL. SO WE THEREFORE REQUEST YOUR HONOUR THAT THE SAID ASSESSMENT ORDER SHOULD BE QUASHED AND SET ASIDE. 6. NOTICE U/S 148 WAS ISSUED ON ACCOUNT OF BORROWED SATISFACTION THE LD. A. O. HAD NOT EXERCISED HIS INDEPENDENT MIN D AND HAS ACTED MERELY ON THE BASIS OF CERTAIN INFORMATION RECEIVED FROM THE INVESTIGATION WING WHICH WAS ACCEPTED WITHOUT APPLICATION OF MIND . SECTION 68 OF THE INCOME TAX ACT STALES AS UNDER: 'WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO E XPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERE D BY HIM IS NOT, IN THE OPINION OF THE [ASSESSING] OFFICER, SATISFACTORY, T HE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. ' ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 8 IT IS A SETTLED POSITION OF LAW THAT THE ASSESSING OFFICER HAS TO REACH TO HIS OWN SATISFACTION THAT SOME INCOME HAS ESCAPED ASSES SMENT. THE SATISFACTION HAS TO BASED ON SOME RELIABLE MATERIAL AND JUDICIOUS APPLICATION OF MIND. FURTHER, RELIANCE HAS BEEN PLA CED ON THE FOLLOWING DECISIONS WHICH CLEARLY STATE THAT NO REASSESSMENT PROCEEDING IS PERMITTED TO BE INITIATED ON THE BASIS OF BORROWED SATISFACTI ON. I) CIT VS. ATUL JAIN - (2007) 164 TAXMAN 33 (DELHI) II) CIT VS. SMT. PARAMJIT KAUR- (2008) 168 TAXMAN 3 9 (HE - P&H) III) CIT VS. VIGNESH KUMAR JEWELLERS (2009) T AXMAN 18 (HC - MADRAS) IV) CIT VS. SHREE RAJASTHAN SYNTEX LTD. (2009) 178 TAXMAN 33 (HC - RAJASTHAN) FURTHER, THERE MUST BE A MATERIAL FOR BELIEF AND NO T SUSPECT. THE REASONS TO BELIEVE MUST BE HONEST AND NOT BASED ON SUSPICION O R CONJECTURE. 7. ADDITION U/S 68 ON ACCOUNT OF SHARE APPLICATION MONEY IS UNJUSTIFIED. THE APEX COURT IN CIT V. LOVELY EXPORTS (P) LTD. (S UPRA), HAS HELD THAT THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE A SSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN T O THE ASSESSING OFFICER; THEN THE DEPARTMENT CAN ALWAYS PROCEED AGA INST THEM AND IF NECESSARY REOPEN THEIR INDIVIDUAL ASSESSMENTS. IN THE PRESENT CASE, THE APPELLANT HAS SUBMITTED TH E DETAILS OF A/I THE PARTIES FROM WHOM SHARE APPLICATION MONEY WAS RECEI VED DURING THE IMPUGNED ASSESSMENT YEAR. IN ADDITION TO THE SAME, THE APPELLANT HAS ALSO SUBMITTED THE BANK STATEMENT OF M/S YASH V JEWELS L TD. ALONG WITH THE CONFIRMATION OF M/S YASH V JEWELS LTD. AND MLS ALKA DIAMOND INDUSTRIES LTD. VIDE LETTER DATED 26.03.2015. IT IS SETTLED POSITION OF LAW THAT IN THE MATTER OF CASH CREDIT, THE INITIAL ONUS LIES ON THE ASSESSEE TO PROVE THE GENUINENESS OF TH E TRANSACTION ALONGWITH THE IDENTIFY OF THE LENDER/INVESTOR AND HIS CREDITW ORTHINESS. HAVING DONE SO, THE APPELLANT IN THE INSTANT CASE HAS DISCHARGED TH E ONUS CAST UPON IT. BEYOND THIS, FOR THE CHARGE OF UNEXPLAINED CASH CRE DIT TO STICK, THE ONUS LIES ON THE AO TO DISPROVE THE CLAIM OF THE ASSESSEE BY ESTABLISHING THAT THE EVIDENCE FILED BY THE ASSESSEE WAS FALSE AND BY BRI NGING NEW MATERIAL ON RECORD AND FAILURE TO DO SO WOULD VITIATE THE ADDIT ION MADE ON THIS COUNT. REFERENCE IN THIS REGARD CAN BE MADE THE DECISIONS IN THE CASE OF CIT V. ORISSA CORPORATION PVT. LTD. 1581TR 78 (SE). FURTHE R, IT WAS HELD IN KHANDELWAL CONSTRUCTIONS V CIT (1997) 227 ITR 900 ( GAU.) THAT SINCE THE SATISFACTION OF THE AO IS THE BASIS FOR INVOCATION OF THE POWERS U/S 68, SUCH ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 9 SATISFACTION MUST BE DERIVED FROM RELEVANT FACTORS ON THE BASIS OF PROPER INQUIRY BY THE AD AND SUCH INQUIRY MUST BE REASONAB LE AND JUST. IN THE PRESENT CASE, THE LD. AO HAS NOT FOUND ANY MATERIAL ON RECORD IN ORDER TO PROVE THAT THE SAID AMOUNTS RECEIVED FROM THE M/S Y ASH V JEWELS LTD. AND MLS ALKA DIAMOND INDUSTRIES LTD. ARE MERE ACCOMMODA TION ENTRIES AND THE LD. A 0 HAS MERELY RELIED ON THE INFORMATION RECEIV ED FROM THE INVESTIGATION WING THE APPELLANT WOULD FURTHER LIKE TO RELY UPON CERTA IN CASE LAWS IN THIS REGARD WHICH CLEARLY PROVE THAT THE ACTION OF THE LD. A 0 IS UNJUSTIFIED: CIT VS. VRINDAVAN FARMS (P) LTD. (DELHI HIGH COURT) IF THE IDENTITY AND OTHER DETAILS OF THE SHARE APPL ICANTS ARE AVAILABLE, THE SHARE APPLICATION MONEY CANNOT BE TREATED AS UNDISC LOSED INCOME IN THE HANDS OF THE CO. THE ADDITION, IF AT ALL, SHOULD BE IN THE HANDS OF THE APPLICANTS IF THEIR CREDITWORTHINESS CANNOT BE PROV ED THE HON'BLE MUMBAI HIGH COURT IN THE RECENT JUDGEME NT IN THE CASE OF CIT V CREATIVE WORLD TELE FILMS LTD. (ORDER DATED 12.10 .2009 IN ITA(L) NO. 2182 OF 2009) HAS FOLLOWED THE DECISION OF THE APEX COUR T IN CLT V. LOVELY EXPORTS (P) LTD, AND HAS HELD AS UNDER: 'THE QUESTION SOUGHT TO BE RAISED IN THE APPEAL WAS ALSO RAISED BEFORE THE TRIBUNAL AND THE TRIBUNAL WAS PLEASED TO FOLLOW THE JUDGEMENT OF THE APEX COURT IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD . REPORTED IN (2008) 216 CTR195 (SC) WHEREIN THE APEX COURT OBSERVED THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLE GED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE ASSESSIN G OFFICE' THEN THE DEPARTMENT CAN ALWAYS PROCEED AGAINST THEM AND IF N ECESSARY REOPEN THEIR INDIVIDUAL ASSESSMENTS. IN THE CASE IN HAND, IT IS NOT DISPUTED THAT THE ASSESSEE HAS GIVEN THE DETAILS OF NAME AND ADDRESS OF THE SHAREHOLDERS, THEIR PAN/GIR NUMBER AND HAD ALSO GIVEN THE CHEQUE NUMBER, NAME OF THE BANK. IT WAS EXPECTED ON THE PART OF THE ASSESSING OFFICER TO MAKE PROPER INVESTIGATION AND REACH THE SHAREHOLDERS. THE ASSESSING OFFICER DID NOTHING EXCEPT ISSUING SU MMONS WHICH WAS ULTIMATELY RETURNED BACK WITH AN ENDORSEMENT 'NOT T ENABLE'. IN OUR CONSIDERED VIEW, THE ASSESSING OFFICER OUGHT TO HAV E FOUND OUT THEIR DETAILS THROUGH PAN CARD, BANK ACCOUNT DETAILS OR FROM THEI R BANKERS SO AS TO REACH THE SHAREHOLDERS SINCE ALL THE RELEVANT MATER IAL DETAILS AND PARTICULARS WERE GIVEN BY THE ASSESSEE TO THE ASSES SING OFFICER. IN THE ABOVE CIRCUMSTANCES, THE VIEW TAKEN BY THE TRIBUNAL CANNOT BE FAULTED. NO SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN THE APPE AL. IN THE RESULT, THE APPEAL IS DISMISSED IN LIMINNI WITH NO ORDER AS TO COSTS.' ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 10 8. FAILED TO APPRECIATE THE DOCUMENTARY EVIDENCES P ROVIDED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE LD. AO MERELY RELIED ON THE INFORMATION RECEIVE D FROM THE INVESTIGATION WING AND OVERLOOKED THE FACT THAT THE APPELLANT HAD SUBMITTED THE CONFIRMATION OF THE PARTIES FROM WHOM HE HAS RECEIV ED SHARE APPLICATION MONEY. THE SAID FACT IS VERY EVIDENT AS THE LD. AO HAS MENTIONED AT PARA 5.2 OF THE ASSESSMENT ORDER WHICH READS AS UNDER: 'THE ASSESSEE COMPLETELY FAILED TO SUBMIT THE COPY OF CONFIRMATION FROM THE PARTIES FOR CREDIT IN ASSESSEE'S BOOKS, WHICH W ERE CATEGORICALLY ASKED TO SUBMIT VIDE QUESTIONNAIRE ISSUED U/S 142 OF THE INCOME TAX ACT. THESE FACTS MADE IT CRYSTAL CLEAR THAT THE ASSESSEE DID N OT PROVE THAT THE PARTY HAS CREDIT WORTHINESS TO INVEST IN SHARES OF THE AS SESSEE COMPANY' , IT IS VERY EVIDENT THAT THE LD. AO HAS COMPLETELY I GNORED THE VARIOUS SUPPORTING EVIDENCES AND EXPLANATIONS SUBMITTED DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS AND HAS ACTED MERELY ON THE BASIS OF PM CONCEIVED NOTIONS. HENCE, THE ADDITION OF RS. 20,00 ,000;' UNDER SECTION 68 OF THE ACT IS TOTALLY UNJUSTIFIED AND SHOULD BE DEL ETED. 9. WITHOUT PREJUDICE, IT IS RESPECTFULLY SUBMITTED THAT THE LD. AO HAS RELIED UPON THE INFORMATION OF THE INVESTIGATION WING, BUT HAS NOT SUBMITTED OR FURNISHED ANY INFORMATION. DOCUMENTS TO THE APPELLA NT FOR ITS REBUTTAL. THUS, THE LD. AO HAS FLAUNTED THE PRINCIPLES OF NATURAL J USTICE BY MAKING THE ADDITION BEHIND THE BACK OF THE APPELLANT. FURTHER, NO OPPORTUNITY TO CROSS EXAMINE HAS BEEN GIVEN TO THE APPELLANT. THUS, THIS LAPSE ON THE PART OF THE LD. AO GOES TO THE ROOT OF THE MATTE' SHAKING THE E NTIRE FOUNDATION AND MAKING THE ORDER OF THE. LD. AO NOT ACCEPTABLE IN T HE EYES OF LAW. THUS, THE IMPUGNED ADDITION, ON THIS COUNT ALSO IS LIABLE TO BE DELETED. FURTHER, THE APPELLANT REQUESTS YOUR HONOUR TO PROV IDE AN OPPORTUNITY OF CROSS EXAMINATION. THE APPLICANT THEREFORE, PRAYS THAT THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT IS AGAINST THE PRINCIPLES OF NATURAL JUSTICE AND MAY BE QUASHED AND SET ASIDE. 10. THE APPELLANT CRAVES LEAVE OF YOUR HONOUR TO MA KE FURTHER SUBMISSIONS AS AND WHEN REQUIRED. 2.5. THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) CONSIDERED THE AFOREMENTIONED SUBMISSION OF THE ASS ESSEE AND CONSIDERING VARIOUS DECISIONS LIKE SHRI KRISHNA P. LTD. ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 11 (221 ITR 538), RAYMOND WOOLLEN MILLS VS ITO (236 IT R 34)(SUPREME COURT), CIT VS LOVELY EXPORTS PVT. LTD. (2008) 216 CTR 195 (SUPREME COURT), KALE KHAN MOHAMMED HANIF VS CIT 50 ITR 1 (SUPREME COURT), CIT VS P. MO HAN KALA (291 ITR 278)(SUPREME COURT), CONCLUDED THAT T HE INGREDIENTS OF SECTION 68 WERE NOT ESTABLISHED BY T HE ASSESSEE AND THEREFORE, CONFIRMED THE ADDITION. THE ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFORE THIS TRIBUNAL. 2.6. IF THE OBSERVATION MADE IN THE ASSESSMENT ORDER, LEADING TO ADDITION MADE TO THE TOTAL INCOME , CONCLUSION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RES PECTIVE COUNSELS, IF KEPT IN JUXTAPOSITION AND ANALYZED, WE FIND THAT THERE ARE VARIOUS JUDICIAL PRONOUNCEMENTS, WHI CH ARE IN FAVOUR AND AGAINST THE ASSESSEE. HOWEVER, WE ARE EXPECTED TO EXAMINE THE FACTS IN A OBJECTIVE MANNER AND THEN TO APPLY THE CASE LAWS AFTER CONSIDERING THE F ACTS IN THE PRESENT APPEAL AND THE CASES RELIED UPON BY BOT H SIDES. AS PER THE REVENUE, THERE WAS INFORMATION R ECEIVED FROM THE OFFICE OF THE DGIT (INV.), MUMBAI RELATED TO MR. PRAVIN JAIN & ORS. ON 12/03/2014. AS PER THE LD. CI T- DR, THERE WAS INFORMATION FROM THE INVESTIGATION WI NG THAT MR. PRAVIN JAIN ALONG WITH HIS RELATED CONCERNS, WA S INDULGED IN PROVIDING HAWALA ENTRIES. THE STATEMEN T OF SHRI PRAVIN JAIN AND ORS WAS RECORDED, WHEREIN, THE Y HAVE ADMITTED (AS MENTIONED IN PARA-2 OF THE ASSESSMENT ORDER ALSO) THAT THEY ARE ENGAGED IN PROVIDING ACCOMMODAT ION ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 12 ENTRIES IN LIEU OF CASH, WHICH ARE ROUTED THROUGH T HE COMPANIES UNDER HIS CONTROL. VARIOUS BROKERS WERE ALSO CLAIMED TO BE COVERED DURING THE SEARCH ACTION COND UCTED AT THE GROUP COMPANIES. NOTICE U/S 148 OF THE ACT WAS SERVED UPON THE ASSESSEE. THE ASSESSEE VIDE LETTER DATED 16/10/2014, REPLIED TO THE NOTICE ISSUED U/S 142(1) OF THE ACT AND FURNISHED THE NECESSARY DETAILS. ON VERIFIC ATION OF THE BALANCE SHEET AS ON 31/03/2007, IT WAS OBSERVED BY THE ASSESSING OFFICER THAT AN AMOUNT OF RS.65 LAKHS WAS RECEIVED AS SHARE APPLICATION MONEY FROM INVESTING PARTIES. THE ASSESSEE WAS ASKED TO PRODUCE THE DETA ILS OF THESE INVESTING PARTIES AND ALSO DIRECTED TO FURNIS H THE DETAILS OF SHARE APPLICATION MONEY, THE NAME OF THE PARTIES, AMOUNT RECEIVED AND CONFIRMATION FROM SUCH PARTY ALONG WITH COPY OF BANK STATEMENT, WHERE THE SHARE APPLICATION MONEY WAS DEPOSITED. THE ASSESSEE FURNI SHED THE NECESSARY DETAILS. THE LD. ASSESSING OFFICER, O N RECEIPT OF SUCH DETAILS, ISSUED NOTICES U/S 133(6) DATED 21/01/2015 TO M/S YASH-V-JEWELS LTD. AND M/S ALKA DIAMOND INDUSTRIES LTD. TO FURNISH THE FOLLOWING DE TAILS:- I) PLEASE CONFIRM THAT YOU HAVE SUBSCRIBER FOR SHARES . II) PLEASE GIVE THE EXACT SOURCES OF FUNDS FOR MAKING THE SHARE SUBSCRIPTION BY YOU WITH NECESSARY EVIDENCES T O SHOW THE AVAILABILITY OF FUNDS AS ON THE DATE OF MAKI NG THE PAYMENT BY YOU. III) PLEASE FURNISH DETAILS OF PRESENT STATUS OF THE HOL DING OF THE SAID SHARES. ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 13 IV) PLEASE STATE THE MODE AND COMPLETE DETAILS OF THE BANK THROUGH WHICH THE SAID PAYMENT WAS MADE TO PURCHASE THE SHARES I.E. NAME OF THE BANK AND BRANCH, INSTRUMENT/ TRANSACTION NUMBER AND DATE. V) PLEASE FURNISH COPY OF I-T RETURN FILED FOR A.Y. 2007-08 SHOWING PAN, FULL DESIGNATION OF THE ASSESSING OFFIC ER AND COMPUTATION OF TOTAL INCOME. VI) PLEASE PROVIDE COPY OF YOUR BALANCE SHEET, STATE MENT OF INCOME & EXPENDITURE FOR F.Y.2006-07. VII) PLEASE FURNISH COPIES OF BANK STATEMENTS THROUGH WHICH THE FUNDS WERE RELEASED FOR MAKING THE PURCHAS E OF SHARES FOR THE PERIOD 01.04.2006 TO 31.03.2007 ARE REFLECTED. VIII) DETAILED REASONS AND JUSTIFICATION FOR APPLICATIO N OF SHARES. IX) COPY OF BOARD RESOLUTION PASSED FOR MAKING INVESTMENT I.E. PURCHASE OF SHARES. X) NAME AND ADDRESS OF THE PERSON WHO INTRODUCED YOU TO THE ABOVE COMPANY FOR PURCHASE OF THE SHARE. 2.7. AS PER THE REVENUE, M/S ALKA DIAMOND INDUSTRIES LTD. SUBMITTED PART DETAILS, VIDE LETTER DATED 04/02/2015, WHEREAS, THE NOTICE ISSUED TO M/S YASH- V- JEWELS LTD. WAS RETURNED UNSERVED AS UNCLAIMED. ANOTHER NOTICE WAS ISSUED TO THE ASSESSEE ON 26/03/ 2015 TO WHICH THE ASSESSEE SUBMITTED THE DETAILS WHICH ARE SUMMERIZED AS UNDER:- I. BANK STATEMENT OF THE ASSESSEE, WHERE THE MONEY WAS DEPOSITED, ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 14 II. CONFIRMATION FROM M/S YASH-V-JEWELS ALONG WITH NUMBER OF SHARES APPLIED AND ALLOTTED, III. COPY OF BOARD RESOLUTION PASSED, IV. COPY OF ROC RETURN FILED, V. COPY OF BANK STATEMENT OF M/S YASH-V-JEWELS LTD. REFLECTING THE PAYMENT MADE FOR SHARE APPLICATION MONEY. 2.8. THE ASSESSEE FURTHER CLAIMED THAT THE PAYMENT S ON ACCOUNT OF SHARE APPLICATION MONEY WAS RECEIVED THROUGH BANKING CHANNEL, BOARD RESOLUTION WAS PASSE D FOR INVESTING THE FUNDS IN THE ASSESSEE COMPANY AS SHAR E APPLICATION. THE LD. ASSESSING OFFICER WAS OF THE V IEW THAT THE MONEY RECEIVED THROUGH BANKING CHANNEL IS NOT SACROSANCT AS IT DOES NOT PROVE THE CREDITWORTHINES S OF THE ASSESSEE COMPANY AND ADDITION WAS MADE AND CONFIRME D BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 2.9. UNDER THE AFOREMENTIONED CIRCUMSTANCES, W E ARE EXPECTED TO ANALYZE SECTION 68 OF THE ACT, WHIC H IS REPRODUCED HEREUNDER:- 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 T HEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION O F THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITE D MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR : PROVIDED THAT WHERE THE ASSESSEE IS A COMPANY (NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTER ESTED), AND THE SUM SO CREDITED CONSISTS OF SHARE APPLICATION M ONEY, SHARE CAPITAL, SHARE PREMIUM OR ANY SUCH AMOUNT BY WHATEV ER NAME ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 15 CALLED, ANY EXPLANATION OFFERED BY SUCH ASSESSEE-CO MPANY SHALL BE DEEMED TO BE NOT SATISFACTORY, UNLESS (A) THE PERSON, BEING A RESIDENT IN WHOSE NAME SUC H CREDIT IS RECORDED IN THE BOOKS OF SUCH COMPANY ALSO OFFERS A N EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH SUM SO CREDITED; AND (B) SUCH EXPLANATION IN THE OPINION OF THE ASSESSI NG OFFICER AFORESAID HAS BEEN FOUND TO BE SATISFACTORY: PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRST PROVISO SHALL APPLY IF THE PERSON, IN WHOSE NAME THE SUM REFERRED TO THEREIN IS RECORDED, IS A VENTURE CAPITAL FUND OR A VENTURE CAPITAL COMPANY AS REFERRED TO IN CLAUSE (23FB) OF SECTION 10. 2.10. NOW, WE SHALL ANALYZE VARIOUS CASE LAWS ON THE APPLICABILITY OF SECTION 68 OF THE ACT. WE FIND THA T FULL BENCH OF HON'BLE DELHI HIGH COURT IN CASE OF SOPHIA FINANCE LTD. (1993) 113 CTR (DEL)(FB) 472 : (1994) 205 ITR 98 (DEL)(FB) MADE AN ELABORATE DISCUSSION WHICH STILL HOLDS GOOD AND THE PROVISIONS OF S. 68 ARE APPLICAB LE TO THE CREDITS IN RESPECT OF SHARE APPLICATION MONEY/SHARE CAPITAL. ALL THAT IS REQUIRED TO BE DONE IS THAT TH E ASSESSEE IS REQUIRED TO PROVE THE EXISTENCE OF THE SHAREHOLD ERS BECAUSE AS HELD BY THE HON'BLE DELHI HIGH COURT, IF THE SHAREHOLDERS EXISTS THEN, POSSIBLY NO FURTHER ENQUI RY NEEDS TO BE MADE. IN THE PRESENT APPEAL, EXISTENCE OF THE SHAREHOLDERS, OF COURSE NOT IN DOUBT. HOWEVER, THE ASSESSEE IS REQUIRED TO PLACE THE PRIMARY EVIDENCE AND DISCHARGE THE PRIMARY BURDEN, FOR WHICH RELIANCE CA N BE PLACED UPON THE DECISION IN CIT VS. DIVINE LEASING & FINANCING LTD. (2007) 207 CTR (DEL) 38 : (2007) 158 TAXMAN 440 (DEL) WHEREIN THEIR LORDSHIPS HAVE HELD THAT A DISTILLATION OF THE PRECEDENTS YIELDS FOLLOWING ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 16 PROPOSITIONS OF LAW IN THE CONTEXT OF S. 68. THE AS SESSEE HAS TO PRIMA FACIE PROVE (I) THE IDENTITY OF THE CREDITOR/SUBSCRIBER (II) THE GENUINENESS OF THE TRANSACTION, VIZ, WHETH ER IT HAS BEEN TRANSMITTED THROUGH BANKING OR OTHER INDISPUTABLE CHANNELS (III) THE CREDITWORTHINESS OR FINANCIAL STRENGTH OF THE CREDITOR/ SUBSCRIBER (IV) IF RELEVANT DETAILS OF ADDRESS OR PAN IDENTITY ARE FURNISHED TO THE DEPARTMENT ALONG WITH THE COPIES O F SHAREHOLDER REGISTER, SHARE APPLICATION FORM, SHARE TRANSFER REGISTER ETC, IT WOULD CONSTITUTE ACCEPTAB LE PROOF OR ACCEPTABLE EXPLANATION BY ASSESSEE. 2.11. FURTHER, (I) THE DEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWING AN ADVERSE INFERENCE ONLY BECA USE THE CREDITOR/SUBSCRIBER FAILS OR NEGLECT TO RESPOND THE NOTICES (II) THE ONUS WOULD NOT STAND DISCHARGE IF THE CREDITOR/SUBSCRIBER DENIES OR REPUDIATE THE TRANSAC TION SET UP BY ASSESSEE NOR SHOULD THE AO TAKE SUCH REPUDIAT ION ON FACE VALUE AND CONSTRUE IT , WITHOUT MORE EVIDEN CE AGAINST THE ASSESSEE (III) THE AO IS DUTY BOUND TO INVESTIGATE THE CREDITWORTHINESS OF THE CREDITOR/SU BSCRIBER, THE GENUINENESS OF THE TRANSACTION AND VERACITY OF THE REPUDIATION. IN THAT CASE, THEIR LORDSHIPS UPHELD T HE ORDER OF TRIBUNAL HOLDING THAT THE AO HAD NOT BROUGHT ANY ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 17 POSITIVE MATERIAL OR EVIDENCE TO INDICATE THAT THE SHAREHOLDERS WERE BENAMIDARS OR FICTITIOUS PERSONS OR THAT ANY PART OF THE SHARE CAPITAL REPRESENTED COMPANYS OWN INCOME FROM UNDISCLOSED SOURCES. IN CIT VS. DWARKAD HISH INVESTMENT (P) LTD. (2008) 2 DTR (DEL) 7 : 167 TAXM AN 321 (DEL) CIT VS. DWARKADHISH FINANCIAL SERVICES (2005) 197 CTR (DEL) 202 : (2005) 148 TAXMAN 54 (DEL) WHEREIN, IT WAS HELD THAT IN VIEW OF THE EVIDENCE TO ESTABLISH THAT IDENTITY OF SHAREHOLDERS SUCH AS AFFIDAVITS, COPIES OF THE SHARE APPLICATION FORMS, CONFIRMATION FROM APPLICAN T COMPANIES COPIES OF BOARD RESOLUTION, DETAILS OF CH EQUE NUMBERS, BRANCH AND ADDRESS OF THE BRANCH THROUGH WHICH THE INVESTMENTS ARE MADE ALONG WITH THE FACT THAT SHAREHOLDERS ARE TAX PAYERS, IT WAS HELD THAT IT CO ULD NOT BE PRESUMED THAT THE SHAREHOLDERS, WHO ARE ASSESSED TO TAX, ARE NOT IN EXISTENCE. IN CIT VS. GANGOUR INVES TMENT LTD. (2009) 18 DTR (DEL) 242 : (2009) 179 TAXMAN 1 (DEL) WHEREIN THE HIGH COURT HELD THAT THE ASSESSEE HAD F ILED SUBSCRIPTION FORM FOR EACH OF INVESTORS. THE SAID SUBSCRIPTION FORM CONTAINED DETAILS, WHICH SET OUT NOT ONLY THE IDENTITY OF SUBSCRIBER, BUT ALSO GAVE INFO RMATION WITH RESPECT TO THEIR ADDRESSES AS WELL AS PANS. DU RING SCRUTINY ASSESSING OFFICER HAD ALSO ASKED FOR AND W AS SUPPLIED WITH A COPY OF STATEMENT OF BANK ACCOUNT O F THE SUBSCRIBER. THE PAYMENTS WERE MADE BY CHEQUES. IN V IEW OF THIS THE HON'BLE COURT HELD THAT NO ADDITION COU LD BE MADE UNDER S. 68 BECAUSE ASSESSEE HAS DISCHARGED TH E ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 18 ONUS IN RESPECT OF VERACITY OF THE TRANSACTIONS. CI T VS. K.C. FIBERS LTD. (2010) 187 TAXMAN 53 (DEL) WHEREIN IT I S HELD THAT NO MATERIAL IS BROUGHT BY AO TO HOLD THAT SHAREHOLDERS COMPANIES ARE UMBRELLA COMPANY OR HAVE ANY RELATION WITH EACH OTHER AND THE AMOUNT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE RECIPIENT ASS ESSEE COMPANY. IT ALSO HELD THAT IT IS NOT FOR THE ASSESS EE COMPANY TO PROBE AS TO THE SOURCE. IT WAS FOR ASSES SING OFFICER TO ENQUIRE INTO THE AFFAIRS OF THE INVESTOR COMPANY. THEIR LORDSHIPS HAVE APPLIED THE RATIO OF THE DECIS ION IN CASE OF LOVELY EXPORTS (P) LTD. (SUPRA). CIT VS. DO LPHINE CANPACK LTD. (2006) 204 CTR (DEL) 50 : (2006) 283 I TR 190 (DEL)SHARE APPLICATION MONEY - TRIBUNAL WHILE OBSERVING DETAILS INCLUDING CONFIRMATION DETAILS OF BANK ACCOUNT, PAN OF SUBSCRIBER AND THAT PAYMENTS MADE B Y CHEQUE - JUSTIFIED IN DELETING ADDITION UNDER S. 68 . ALTHOUGH THE LORDSHIPS APPLIED DECISION IN SOPHIA FINANCE LTD. (SUPRA) THEY CAME TO THE CONCLUSION TH AT THE SCOPE IS LIMITED TO EXAMINING THE EXISTENCE OF SHAR EHOLDERS AND SINCE THE ASSESSEE HAS FURNISHED SUFFICIENT MAT ERIAL TO DISCHARGE THE ONUS, DELETION OF ADDITION WAS CORREC T. CIT VS DOWN TOWN HOSPITALS (P) LTD. (2004) 267 ITR 439 (GAU) HELD THAT THE ASSESSEE FILED DETAILS REGARDING SOUR CE OF FUNDS OF THE PARTY AND THEIR INCOME-TAX FILE NUMBER S ETC - NO ADDITION UNDER S. 68 IS PERMISSIBLE WHERE SHAREH OLDERS ARE IDENTIFIED AND IT IS ESTABLISHED THAT THEY HAD INVESTED THE MONEY IN PURCHASE OF SHARES. (PP. 127 TO 131 OF ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 19 JUDGMENT COMPILATION). CIT VS. ILLAC INVESTMENT (P) LTD (2007) 207 CTR (DEL) 687 : (2006) 287 ITR 135 (DEL) HELD THAT ASSESSEE SATISFACTORILY ESTABLISHED IDENTITY O F SHAREHOLDERS, THE ADDITION UNDER S. 68 RIGHTLY DELE TED - NO SUBSTANTIAL QUESTION OF LAW ARISES (PP. 146 AND 147 OF JUDGMENT COMPILATION). DY. CIT VS. ROHINI BUILDERS (2003) 182 CTR (GUJ) 373 : (2002) 256 ITR 360 (GUJ)ASSESS EE FURNISHED ADDRESSES OF ALL CREDITORS ALONG WITH GIR NO/PAN AS WELL AS CONFIRMATIONS ALONG WITH COPIES O F ASSESSMENT ORDERS IN CASE OF INDIVIDUAL CREDITORS W HEREVER AVAILABLE AND COPIES OF RETURNS FILED BY CREDITORS IN OTHER CASES. ALL LOANS RECEIVED AND REPAID BY ACCOUNT PAY EE CHEQUES RIGHTLY DELETED. (PP. NO. 116 AND 117 OF JU DGMENT COMPILATION) CIT VS. SHRI BARKHA SYNTHETICS LTD. (2 003) 182 CTR (RAJ) 175 : (2004) 270 ITR 477 (RAJ) ASSES SEE DISCHARGED ITS INITIAL BURDEN IN RESPECT OF SIX OUT OF SEVEN COMPANIES BUT REVENUE FAILED TO DISCHARGE ITS BURDE N AS IT DID NOT HOLD ANY ENQUIRY INTO GENUINENESS, ADDITION RIGHTLY DELETED. (PP. NO. 107 TO 115 OF JUDGMENT COMPILATIO N) BARKHA SYNTHETIC LTD. VS ASSTT. CIT (2005) 197 CTR (RAJ) 432 : (2006) 283 ITR 377 (RAJ) THE PRINCIPLE RELATI NG TO BURDEN OF PROOF CONCERNING THE ASSESSEE IS THAT WHE RE THE MATTER CONCERNS THE MONEY RECEIPTS BY WAY OF SHARE APPLICATION FROM INVESTORS THROUGH BANKING CHANNELS , THE ASSESSEE HAS TO PROVE THE EXISTENCE OF THE PERSON I N WHOSE NAME SHARE APPLICATION IS RECEIVED. ONCE THE EXISTE NCE OF THE INVESTOR IS PROVED, IT IS NO FURTHER BURDEN OF THE ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 20 ASSESSEE TO PROVE WHETHER THAT PERSON HIMSELF INVES TED THE MONEY OR SOME OTHER PERSON MADE INVESTMENT IN THE N AME OF THAT PERSON. THE BURDEN THEN SHIFTS TO THE REVEN UE TO ESTABLISH THAT SUCH INVESTMENT HAS COME FROM ASSESS EE COMPANY ITSELF. [DECISION IN CASE OF CIT VS. SHRI B ARKHA SYNTHETICS LTD. (SUPRA) FOLLOWED]. WITHOUT PREJUDIC E TO ABOVE CONTENTION BASED ON LOVELY EXPORTS CASE (SUP RA), AN ANALYSIS OF ALL THE ABOVE JUDGMENTS THUS GOES TO SH OW THAT EVEN IF THE PRINCIPLE LAID DOWN BY THE HONBLE DELH I HIGH COURT IN SOPHIAS CASE (SUPRA) IS HELD AS APPLICABL E EVEN THEN THE ASSESSEES BURDEN IS RESTRICTED TO ESTABLI SHING THE EXISTENCE OF SHAREHOLDERS AND ONCE THAT IS ESTABLIS HED. SINCE THE ASSESSEE HAS SUBMITTED VARIOUS DOCUMENTS, CLEARLY INDICATES THAT THE PRIMARY BURDEN WHICH LAY UPON THE ASSESSEE, HAS BEEN DISCHARGED. EVEN OTHERWISE, WE ARE EXPECTED TO FOLLOW THE DECISION OF THE HIGHER FORUM S FOR WHICH RELIANCE CAN BE PLACED UPON THE FOLLOWING DEC ISIONS: I. KAMALAKSHI FINANCE CORPORATION LTD. 55 ELT 433 II. AGRAWAL WAREHOUSING & LEASING LTD. VS. CIT (2002) 177 CTR (MP) 15 : (2002) 257 ITR 235 (MP) III. ASSTT. CCE VS. DUNLOP INDIA LTD. & ORS. (1985) 154 ITR 172 (SC) 2.12. IT IS ALSO NOTED THAT HON'BLE JURISDICTIONA L HIGH COURT IN THE CASE OF CIT VS M/S GANGANDEEP INFRASTRUCTURE PVT. LTD. (ITA NO.1613 OF 2014)(BOM. ) ON IDENTICAL FACT DECIDED THE ISSUE IN FAVOUR OF THE A SSESSEE. ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 21 FOR READY REFERENCE AND ALSO CLAIMED BY THE ASSESSE E, THE FACTS OF THE CASE IN M/S GAGANDEEP INFRASTRUCTURE P VT. LTD. AND THAT OF THE ASSESSEE ARE SUMMARIZED HEREUN DER:- 2.13. WE FIND THAT IN THE AFORESAID CASE, THE HON'BLE JURISDICTIONAL HIGH COURT VIDE ORDER DATED 20/03/2017 HELD/OBSERVED AS UNDER:- ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 22 1. THIS APPEAL UNDER SECTION 260-A OF THE INCOME T AX ACT, 1961 (THE ACT) CHALLENGES THE ORDER DATED 23' APRIL, 2014 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL (T HE TRIBUNAL). THE IMPUGNED ORDER IS IN RESPECT OF ASSE SSMENT YEAR 2008-09. 2. MR. SURESH KUMAR, THE LEARNED COUNSEL APPEARING FOR THE REVENUE URGES THE FOLLOWING RE- FRAMED QUESTIONS OF LAW FOR OUR CONSIDERATION:- '(1) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN DELETING THE ADDITION OF RS.7,53,50,0001- UNDER SEC TION 68 OF THE ACT BEING SHARE CAPITAL/SHARE PREMIUM RECEIVED DURING THE YEAR WHEN THE ASSESSING OFFICER HELD THE SAME AS UN EXPLAINED CASH CREDIT? (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN RESTRICTI NG THE DISALLOWANCE UNDER SECTION 14A OF THE ACT ONLY TO THE AMOUNT OF EXPENDITURE CLAIMED BY THE ASSESSEE IN THE ABSENCE OF ANY SUCH RESTRICTION UNDER SECTIO N 14A AND/OR RULE SD?' 3. REGARDING QUESTION NO.(I):- (A) DURING THE PREVIOUS RELEVANT TO THE SUBJECT ASSESSM ENT YEAR THE RESPONDENT-ASSESSEE HAD INCREASED ITS SHAR E CAPITAL FROM RS.2,50,000/- TO RS.83.75 LAKHS. DURING THE ASSESSM ENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE RESPONDENT HAD COLLECTED SHARE PREMIUM TO THE EXTENT OF RS.6.6 9 CRORES. CONSEQUENTLY HE CALLED UPON THE RESPONDENT TO JUSTI FY THE CHARGING OF SHARE PREMIUM AT RS.190/- PER SHARE. THE RESPOND ENT FURNISHED THE LIST OF ITS SHAREHOLDERS, COPY OF THE SHARE APPLICATION FORM, COPY OF SHARE CERTIFICATE AND FOR M NO.2 FILED WITH THE REGISTRAR OF COMPANIES. THE JUSTIFICATION FOR C HARGING SHARE PREMIUM WAS ON THE BASIS OF THE FUTURE PROSPECTS OF THE BUSINESS OF THE RESPONDENT-ASSESSEE. THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATION/JUSTIFICATIO N OF THE RESPONDENT AND INVOKED SECTION 68 OF THE ACT TO TREAT ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 23 THE AMOUNT OF RS.7.53 CRORES I.E. THE AGGREGATE OF THE ISSUE PRICE AND THE PREMIUM ON THE SHARES ISSUED AS UNEXPLAINED CASH CREDIT WITHIN THE MEANING OF SECTION 68 OF THE ACT. (B) BEING AGGRIEVED, THE RESPONDENT CARRIED THE ISS UE IN APPEAL. BY AN ORDER DATED 24TH MAY, 2011 THE COMMISSIONER OF INCOME TAX (APPEALS) (CIT(A)) DELET ED THE ADDITION OF RS.7.53 CRORES MADE BY THE ASSESSIN G OFFICER BY HOLDING THAT THE ASSESSING OFFICER HAD G IVEN NO REASON TO CONCLUDE THAT THE INVESTMENT MADE (INCLUS IVE OF PREMIUM) WAS NOT GENUINE. THIS INSPITE OF EVIDENCE BEING FURNISHED BY THE RESPONDENT IN SUPPORT OF THE GENUINENESS OF THE TRANSACTIONS. FURTHER HE HELD TH AT THE APPROPRIATE VALUATION OF THE SHARES IS FOR THE SUBSCRIBER/INVESTOR TO DECIDE AND NOT A SUBJECT OF ENQUIRY BY THE REVENUE. FINALLY HE RELIED UPON THE DECISION OF THE APEX COURT IN CIT V/S. LOVELY EXPORTS (P)LTD. 317 ITR 218 TO HOLD THAT IF THE AMOUNTS HAVE BEEN SUBSCRIBED BY BOGUS SHAREHOLDERS IT IS FOR THE REVENUE TO PROC EED AGAINST SUCH SHAREHOLDERS. THEREFORE IT HELD THE ASSESSING OFFICER WAS NOT JUSTIFIED IN ADDING THE AMOUNT OF SHARE CAPITAL SUBSCRIPTION INCLUDING THE SHARE PREMIUM AS UNEXPLAINED CREDIT TINDER SECTION 68 OF THE ACT. (C) BEING AGGRIEVED, THE REVENUE CARRIED THE ISSUE IN THE APPEAL TO THE TRIBUNAL. THE IMPUGNED ORDER O F THE TRIBUNAL HOLDS THAT THE RESPONDENT-ASSESSEE HAD ESTABLISHED THE IDENTITY, GENUINENESS AND CAPACITY OF THE SHAREHOLDERS WHO HAD SUBSCRIBED TO ITS SHARES. THE IDENTITY WAS ESTABLISHED BY THE VERY FACT THAT THE DETAILED NAMES, ADDRESSES OF THE SHAREHOLDERS, PAN NUMBERS, BANK DETAILS AND CONFIRMATORY LETTERS WERE FILED. THE GENUINENESS OF THE TRANSACTION WAS ESTABLISHED BY FILING A COPY OF SHARE APPLICATION FORM, THE FORM FILED WITH THE REGISTRAR OF COMPANIES AND AS ALSO BANK DETAILS OF THE SHAREHOLDERS AND THEIR CONFIRMATIONS WHICH WOUL D INDICATE BOTH THE GENUINENESS AS ALSO THE CAPACITY OF THE SHAREHOLDERS TO SUBSCRIBE TO THE SHARES. FURTHER TH E TRIBUNAL WHILE UPHOLDING THE FINDING OF CIT(A) ALSO THAT THE AMOUNT RECEIVED ON ISSUE OF SHARE CAPITAL ALONGWITH THE PR EMIUM RECEIVED THEREON, WOULD BE ON CAPITAL RECEIPT AND NOT IN THE REVENUE FIELD. FURTHER RELIANCE WAS ALSO PLACED UPON THE DECISION OF ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 24 APEX COURT IN LOVELY EXPORTS (P) LTD. (SUPRA) TO UP HOLD THE FINDING OF THE CIT(A) AND DISMISSING THE REVENUE'S APPEAL. (D) MR. SURESH KUMAR, THE LEARNED COUNSEL APPEARING FOR THE REVENUE CONTENDS THAT PROVISO TO SECTION 68 OF THE ACT WHICH WAS INTRODUCED WITH EFF ECT FROM 1 ST APRIL, 2013 WOULD APPLY IN THE FACTS OF THE PRESENT CASE EVEN FOR A.Y. 2008-09. THE BASIS OF TH E ABOVE SUBMISSION IS THAT THE DE HORS THE PROVISO ALSO THE REQUIREMENTS AS SET OUT THEREIN WOULD HAVE TO BE SA TISFIED. (E) WE FIND THAT THE PROVISO TO SECTION 68 OF THE A CT HAS BEEN INTRODUCED BY THE FINANCE ACT 2012 WITH EF FECT FROM 1 ST APRIL, 2013. THUS IT WOULD BE EFFECTIVE ONLY FROM THE ASSESSMENT YEAR 2013-14 ONWARDS AND NOT FOR THE SUBJECT ASSESSMENT YEAR. IN FACT, BEFORE THE TRIBUN AL, IT WAS NOT EVEN THE CASE OF THE REVENUE THAT SECTION 6 8 OF THE ACT AS IN FORCE DURING THE SUBJECT YEARS HAS TO BE READ/UNDERSTOOD AS THOUGH THE PROVISO ADDED SUBSEQUENTLY EFFECTIVE ONLY FROM F' APRIL, 2013 WAS ITS NORMAL MEANING. THE PARLIAMENT DID NOT INTRODUCE TO PROVISO TO SECTION 68 OF THE ACT WITH RETROSPECTIVE EFFECT NOR DOES THE PROVISO SO INTRODUCED STATES THAT IT WAS INTROD UCED 'FOR REMOVAL OF DOUBTS' OR THAT IT IS 'DECLARATORY' . THEREFORE IT IS NOT OPEN TO GIVE IT RETROSPECTIVE E FFECT, BY PROCEEDING ON THE BASIS THAT THE ADDITION OF THE PR OVISO TO SECTION 68 OF THE ACT IS IMMATERIAL AND DOES NOT CH ANGE THE INTERPRETATION OF SECTION 68 OF THE ACT BOTH BE FORE AND AFTER THE ADDING OF THE PROVISO. IN ANY VIEW OF THE MATTER THE THREE ESSENTIAL TESTS WHILE CONFIRMING THE PRE- PROVISO SECTION 68 OF THE ACT LAID DOWN BY THE COURTS NAMEL Y THE GENUINENESS OF THE TRANSACTION, IDENTITY AND TH E CAPACITY OF THE INVESTOR HAVE ALL BEEN EXAMINED BY THE IMPUGNED ORDER OF THE TRIBUNAL AND ON FACTS IT WAS FOUND SATISFIED. FURTHER IT WAS A SUBMISSION ON BEH ALF OF THE REVENUE THAT SUCH LARGE AMOUNT OF SHARE PREM IUM GIVES RISE TO SUSPICION ON THE GENUINENESS (IDENTIT Y) OF THE SHAREHOLDERS I.E. THEY ARE BOGUS. THE APEX COUR T IN LOVELY EXPORTS (P) LTD. (SUPRA) IN THE CONTEXT TO T HE PRE- AMENDED SECTION 68 OF THE ACT HAS HELD THAT WHERE T HE REVENUE URGES THAT THE AMOUNT OF SHARE APPLICATION MONEY HAS BEEN RECEIVED FROM BOGUS SHAREHOLDERS THE N IT IS FOR THE INCOME TAX OFFICER TO PROCEED BY REOPENI NG THE ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 25 ASSESSMENT OF SUCH SHAREHOLDERS AND ASSESSING THEM TO TAX IN ACCORDANCE WITH LAW. IT DOES NOT ENTITLE THE REVENUE TO ADD THE SAME TO THE ASSESSEES INCOME AS UNEXPLAINE D CASH CREDIT. XXXXXXXXXXXXXXXXXXX 2.14. IN ANOTHER CASE, HON'BLE JURISDICTIONAL HIGH COURT IN CIT VS CREATIVE WORLD TELEFILMS LTD. (201 1) 333 ITR 100 (BOM.) DULY CONSIDERED THE DECISION IN THE CASE OF LOVELY EXPORT PVT. LTD. (SUPRA) AND IT WAS FOUND TH AT THE ASSESSEE HAD GIVEN THE DETAILS LIKE NAME AND ADDRES SES OF SHARE HOLDERS, THEIR PAN/GIR NO., CHEQUE NO., NAME OF THE BANK, AND THUS THE ORDER OF THE TRIBUNAL WAS UP HELD. IDENTICALLY, IN VITRAG METALS PVT. LTD. VS INCOME T AX OFFICER (2016) 46 ITR (TRIB.) 201 (MUM.) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 2.15. IT IS WELL ESTABLISHED PRINCIPLE OF LAW THAT ONCE THE TRANSACTION HAS TAKEN PLACE THROUGH BANKING CHANNELS, THE GENUINENESS OF TRANSACTION CANNOT BE DISPUTED, AS THE ASSESSEE IS NOT REQUIRED TO PROVE SOURCE OF A SOURCE. WE ARE ADDING HERE THAT IT IS ALWAYS N OT SACROSANCT BECAUSE THE ASSESSEE HAS TO SATISFY THE INGREDIENTS OF SECTION 68 OF THE ACT. HOWEVER, THE FACTS CLEARLY INDICATES THAT THE ASSESSEE HAS DISCHARGED ITS PRIMARY BURDEN BECAUSE THE IDENTITY OF THE SHARE SUBSCRIBERS, THEIR CAPACITY AND GENUINENESS OF THE TRANSACTION IS NOT IN DOUBT. RELIANCE CAN BE PLACE D UPON THE RATIO LAID DOWN IN FOLLOWING DECISIONS:- ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 26 I. SAROGI CREDIT CORPORATION VS CIT 1975 CTR (PAT) 1 : (1976) 103 ITR 344 (PAT). II. ADDL. CIT VS. BAHARI BROTHERS (P) LTD. (1984) 42 CTR (PAT) 66 : (1985) 154 ITR 244 (PAT). III. ASHOK LAL DAGA VS CIT (1996) 136 CTR (MP) 235 : (1996) 220 ITR 452 (MP). IV. CIT VS REAL TIME MARKETING (P) LTD. (2008) 10 DTR (DEL) 191 : (2009) 221 CTR (DEL) 716 : (2008) 306 ITR 35 (DEL). V. CIT VS. METACHEM INDUSTRIES (2000) 161 CTR (MP) 444 : (2000) 245 ITR 160 (MP). VI. NEMICHAND KOTHARI VS. CIT & ANR. (2003) 185 CTR (GAU) 635 : (2003) 264 ITR 254 (GAU). VII. P.K. SETHI VS. CIT (2006) 206 CTR (GAU) 445 : (2006) 286 ITR 318 (GAU). VIII. CIT VS. BARJATIYA CHILDREN TRUST (1997) 225 ITR 640 (MP). IX. CIT VS LAUL TRANSPORT CORPORATION (2009) 180 TAXMAN 185 (P&H). X. ARAVALII TRADING CO. VS. ITO (2008) 8 DTR (RAJ) 199 : (2010) 187 TAXMAN 338 (RAJ). 2.16. THE LD. COUNSEL FOR THE ASSESSEE, BEFORE US, CLAIMED THAT THE ASSESSING OFFICER HAS MADE NO EFFO RTS AND NO INDEPENDENT ENQUIRY WAS MADE BY HIM AND MERELY ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 27 MADE THE ADDITION ON THE BASIS OF ALLEGED INFORMATI ON RECEIVED FROM THE INVESTIGATION WING. AS CLAIMED B Y THE ASSESSEE, RETURNS WERE FILED IN THE OFFICE OF REGIS TRAR OF COMPANIES UNDER THE COMPANIES ACT, 1956 AND THE REGISTRAR OF COMPANIES IS A STATUTORY AUTHORITY POS SESSING DETAILS OF COMPANIES. 2.17. WE ARE ALSO EXPECTED TO ANALYZE THE ARGUMENT S ADVANCED BY LEARNED CIT DEPARTMENTAL REPRESENTATIVE WHEREIN, RELIANCE WAS PLACED UPON THE DECISION IN K ALE KHAN MOHD. HANIF VS. CIT (1963) 50 ITR 1 (SC). HE CONTENDED THAT THE SOURCE OF MONEY REMAINED UNEXPLAINED. RELIANCE WAS PLACED UPON THE DECISION OF SUMATI DAYAL VS. CIT (1995) 125 CTR (SC) 124 : (199 5) 214 ITR 801 (SC). A PLEA WAS ALSO RAISED THAT THE ONUS/BURDEN STILL REMAINED FASTENED TO THE ASSESSEE . WE FIND THAT THERE ARE FOLLOWING DECISIONS, WHICH ARE IN FAVOUR OF THE REVENUE BUT BASED UPON THE FACTS OF EACH CAS E. I. CIT VS. NIVENDAN VANIJYA NIYOJAY LTD. (2003) 182 CT R (CAL) 605 II. HINDUSTAN TEA TRADING CO. VS. CIT (2003) 182 CTR (CAL) 585. III. CIT VS. RATHI FINLEASE LTD. (2008) 215 CTR (MP) 429 : (2008) 2 DTR (MP) 31 IV. CIT VS. PRECISION FINANCE (P) LTD. (1994) 121 CTR (C AL) 20 : (1994) 208 ITR 465 (CAL) ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 28 V. STELLAR INVESTMENT LTD. (2000) 164 CTR (SC) 287 : (2001) 251 ITR 263 (SC). 2.18. WE ARE AWARE THAT MANY HIGH COURTS HAVE DISTINGUISHED/ANALYZED/CONSIDERED THE DECISION IN L OVELY EXPORTS (P) LTD. BECAUSE IT WAS MERELY DISMISSAL OF SLP. THE RATIO LAID DOWN IN FOLLOWING CASES CAN BE PLACE D RELIANCE:- I. CIT VS. OASIS HOSPITALITIES (P) LTD. (2011) 238 CTR (DEL) 402 : (2011) 51 DTR (DEL) 74 : (2011) 333 ITR 119 (DEL). II. CIT VS. STL EXTRUSION (P) LTD. (2011) 53 DTR (MP) 97 : (2011) 333 ITR 269 (MP). III. GEOFFREY MANNERS & CO. LTD. (1996) 136 CTR (BOM) 169 : (1996) 221 ITR 695 (BOM); IV. TAYLOR INSTRUMENT CO. LTD. VS. CIT (1999) 153 CTR (DEL) 295 : (1998) 232 ITR 771 (DEL); V. CIT VS. MOHANLAL KANSAL (1978) 114 ITR 583 (P&H); VI. JORHANT GROUP LTD. VS. ASSTT. CIT (2007) 289 ITR 422 (GAU) VII. CIT VS. VRAJLAL MANILAL & CO. (1980) 19 CTR (MP) 182 : (1981) 127 ITR 512 (MP). 2.19. NOW, WE SHALL ANALYZE CERTAIN CASE LAWS, IN CIT VS LOVELY EXPORT PVT. LTD. (2008) 216 CTR 195, THE HON'BLE APEX COURT OBSERVED AS UNDER:- ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 29 IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GI VEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN TH EIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW, BUT IT CANNOT B E REGARDED AS UNDISCLOSED INCOME OF ASSESSEE COMPANY. XXXXXXX 2. CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDIS CLOSED INCOME UNDER S. 68 OF IT ACT, 1961 ? WE FIND NO MER IT IN THIS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE SH ARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLE GED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIV IDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT. 2.20. IN THE CASE OF CIT VS CREATIVE WORLD TELEFIL MS LTD. (2011) 333 ITR 100(BOM.), THE HON'BLE JURISDIC TIONAL HIGH COURT HELD AS UNDER:- HEARD LEARNED COUNSEL FOR THE REVENUE. OFFICE OBJE CTIONS ARE OVERRULED. REGISTRY IS DIRECTED TO REGISTER THE APP EAL. AT THE INSTANCE OF THE REVENUE, THE APPEAL IS TAKEN UP FOR ADMISSIO N. 2. THE QUESTION SOUGHT TO BE RAISED IN THE APPEAL WAS ALSO RAISED BEFORE THE TRIBUNAL AND THE TRIBUNAL WAS PLEASED TO FOLLOW THE JUDGMENT OF THE APEX COURT IN THE CASE OF CIT VS. L OVELY EXPORTS (P) LTD. (2008) 216 CTR (SC) 195 : (2008) 6 DTR (SC) 308 : (2009) 319 ITR 5 (ST.) WHEREIN THE APEX COURT OBSERVED THA T IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE-COMPA NY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AO , THEN THE DEPARTMENT CAN ALWAYS PROCEED AGAINST THEM AND IF N ECESSARY REOPEN THEIR INDIVIDUAL ASSESSMENTS. IN THE CASE IN HAND, IT IS NOT DISPUTED THAT THE ASSESSEE HAD GIVEN THE DETAILS OF NAME AND ADDRESS OF THE SHAREHOLDER, THEIR PAN/GIR NUMBER AND HAD AL SO GIVEN THE CHEQUE NUMBER, NAME OF THE BANK. IT WAS EXPECTED ON THE PART OF THE AO TO MAKE PROPER INVESTIGATION AND REACH THE SHARE HOLDERS. THE AO DID NOTHING EXCEPT ISSUING SUMMONS WHICH WERE ULTIM ATELY RETURNED BACK WITH AN ENDORSEMENT 'NOT TRACEABLE'. IN OUR CO NSIDERED VIEW, THE AO OUGHT TO HAVE FOUND OUT THEIR DETAILS THROUG H PAN CARDS, BANK ACCOUNT DETAILS OR FROM THEIR BANKERS SO AS TO REAC H THE SHAREHOLDERS SINCE ALL THE RELEVANT MATERIAL DETAILS AND PARTICU LARS WERE GIVEN BY THE ASSESSEE TO THE AO. IN THE ABOVE CIRCUMSTANCES, THE VIEW TAKEN BY THE TRIBUNAL CANNOT BE FAULTED. NO SUBSTANTIAL Q UESTION OF LAW IS INVOLVED IN THE APPEAL. IN THE RESULT, THE APPEAL I S DISMISSED IN LIMINE WITH NO ORDER AS TO COSTS. 2.21. SO FAR AS, NON-PROVIDING OPPORTUNITY TO CROS S EXAMINE, IN SPITE OF REPEATED REQUEST MADE BY THE ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 30 ASSESSEE, IS CONCERNED, THE HON'BLE APEX COURT IN ANDAMAN TIMBER INDUSTRIES VS CCE 281 CTR 241 (SC), THE HON'BLE APEX COURT HELD AS UNDER:- NOT ALLOWING THE ASSESSEE TO CROSS-EXAMINE THE WIT NESSES BY THE ADJUDICATING AUTHORITY THOUGH THE STATEMENTS OF THO SE WITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER IS A SERI OUS FLAW WHICH MAKES THE ORDER NULLITY INASMUCH AS IT AMOUNT ED TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. IT IS TO BE BORNE IN MIND THAT THE ORDER OF THE COMMISSIONER WAS BASED UPON THE ST ATEMENTS GIVEN BY THE AFORESAID TWO WITNESSES. EVEN WHEN THE ASSESSEE DISPUTED THE CORRECTNESS OF THE STATEMENTS AND WANT ED TO CROSS- EXAMINE, THE ADJUDICATING AUTHORITY DID NOT GRANT T HIS OPPORTUNITY TO THE ASSESSEE. IT WOULD BE PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER PASSED BY THE ADJUDICATING AUTHO RITY HE HAS SPECIFICALLY MENTIONED THAT SUCH AN OPPORTUNITY WAS SOUGHT BY THE ASSESSEE. HOWEVER, NO SUCH OPPORTUNITY WAS GRAN TED AND THE AFORESAID PLEA IS NOT EVEN DEALT WITH BY THE ADJUDI CATING AUTHORITY. (PARA 6) APPELLANT HAD CONTESTED THE TRUTHFULNESS OF THE STA TEMENTS OF THESE TWO WITNESSES AND WANTED TO DISCREDIT THEIR T ESTIMONY FOR WHICH PURPOSE IT WANTED TO AVAIL THE OPPORTUNITY OF CROSS- EXAMINATION. THAT APART, THE ADJUDICATING AUTHORITY SIMPLY RELIED UPON THE PRICE LIST AS MAINTAINED AT THE DEPOT TO D ETERMINE THE PRICE FOR THE PURPOSE OF LEVY OF EXCISE DUTY. WHETH ER THE GOODS WERE, IN FACT, SOLD TO THE SAID DEALERS/WITNESSES A T THE PRICE WHICH IS MENTIONED IN THE PRICE LIST ITSELF COULD B E THE SUBJECT MATTER OF CROSS-EXAMINATION. THEREFORE, IT WAS NOT FOR THE ADJUDICATING AUTHORITY TO PRESUPPOSE AS TO WHAT COU LD BE THE SUBJECT MATTER OF THE CROSS-EXAMINATION AND MAKE TH E REMARKS AS MENTIONED ABOVE. (PARA 7) IF THE TESTIMONY OF THESE TWO WITNESSES IS DISCREDI TED, THERE WAS NO MATERIAL WITH THE DEPARTMENT ON THE BASIS OF WHI CH IT COULD JUSTIFY ITS ACTION, AS THE STATEMENT OF THE AFORESA ID TWO WITNESSES WAS THE ONLY BASIS OF ISSUING THE SHOW CAUSE NOTICE . (PARA 8) CONCLUSION : NOT ALLOWING ASSESSEE TO CROSS-EXAMINE WITNESSES BY ADJUDICATING AUTHORITY THOUGH STATEMENTS OF THOSE W ITNESSES WERE MADE AS BASIS OF IMPUGNED ORDER, AMOUNTED IN S ERIOUS FLAW WHICH MAKE IMPUGNED ORDER NULLITY AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 31 LIKEWISE, HON'BLE JURISDICTIONAL HIGH COURT IN HR MEHTA VS ACIT 387 ITR 561 (BOM.) HELD AS UNDER:- HELD, THAT THE REVENUE WAS NOT JUSTIFIED IN MAKING ADDITION AT THE TIME OF REASSESSMENT WITHOUT HAVING FIRST GIVEN THE ASSESSEE AN OPPORTUNITY TO CROSS- EXAMINE THE DEPON ENT ON THE STATEMENTS RELIED UPON BY THE ASSISTANT COM- MISSIONER. QUITE APART FROM DENIAL OF AN OPPORTUNIT Y OF CROSS EXAMINATION, THE REVENUE DID NOT EVEN PROVIDE THE MATERIAL ON THE BASIS OF WHICH TH' DEPARTMENT SOUGHT TO CONC LUDE THAT THE LOAN WAS A BOGUS TRANSACTION. IN ME LIGHT OF TH E FACT THAT THE MONIES WERE ADVANCED APPARENTLY BY ACCOUNT PAYEE CH EQUE AND WERE REPAID BY ACCOUNT PAYEE CHEQUE THE LEAST T HAT THE REVENUE SHOULD HAVE DONE WAS TO GRANT AN OPPORTUNIT Y TO THE ASSESSEE TO MEET THE CASE AGAINST HIM BY PROVIDING THE MATERIAL SOUGHT TO BE USED AGAINST THE ASSESSEE BEFORE PASSI NG THE ORDER OF REASSESSMENT. THIS NOT HAVING BEEN DONE, T HE DENIAL OF SUCH OPPORTUNITY WENT TO THE ROOT OF THE MATTER. THE ORDER OF REASSESSMENT WAS NOT VALID. CASES REFERRED TO: ANDAMAN TIMBER INDUSTRIES V. CCE [2016] 38 GSTR 117 (SC) (PARA CIT V. ASHWANI GUPTA [2010] 322 ITR 396 (DELHI) (PARA 9) CIT (ADD!.) V. BAHRI BROS P. LTD. [1985] 154 ITR 244 (PATNA) (PARA 9) CIT (DEPUTY) V. ROHINI BUILDERS [2002] 256 ITR 360 (GUJ) (PARA 9) HASTIMAL (S.) V. CIT [1963] 49 ITR 273 (MAD) (PARA 9) KISHINCHAND CHELLARAM V. CTT [1980] 125 ITR 713 (SC) (PARA 9) MATHER AND PLATT (INDIA) LTD. V. CIT [19871 168 ITR 493 (CAL) (PARA 9) NEMI CHAND KOTHARI V. CIT [2003] 264 ITR 254 (GAUHATI) (PARA 9) RANCHI HANDLOOM EMPORIUM V. CIT [19991 235 ITR 604 (PATNA) (PARA 9) 2.22. IF THE TOTALITY OF FACTS AND THE JUDICIAL PRONOUNCEMENTS, DISCUSSED HEREINABOVE, ARE ANALYZED , WE ARE OF THE CONSIDERED OPINION THAT THE ONUS CASTE U PON THE ASSESSEE, AS PROVIDED U/S 68 OF THE ACT, HAS BEEN D ULY DISCHARGED BY THE ASSESSEE AS THE IDENTITY OF THE S HARE SUBSCRIBERS, CREDITWORTHINESS AND GENUINENESS OF TH E ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 32 TRANSACTION IS NOT IN DOUBT OR IT CAN BE SAID THAT THE SAME HAS BEEN PROVED/EXPLAINED BY THE ASSESSEE. NOW, THE ONUS HAS REVERTED BACK UPON THE REVENUE TO PROVE OTHERWISE. THE LD. ASSESSING OFFICER MERELY RELIED UPON THE INFORMATION RECEIVED FROM THE INVESTIGATION WIN G AND DID NOT MADE ANY INDEPENDENT ENQUIRY. THE ASSESSING OFFICER WAS EXPECTED TO DISPROVE THE CLAIM OF THE A SSESSEE WITH THE HELP OF EVIDENCE, IF ANY, RECEIVED FROM TH E INVESTIGATION WING, AS HAS BEEN CLAIMED BY THE REVE NUE. THE REVENUE HAS NOWHERE PROVED THAT ANY MALAFIDE IS DONE BY THE ASSESSEE. FAILURE TO DO SO, VITIATE TH E ADDITION MADE UNDER THE SET OF FACTS. REFERENCE CAN BE MADE TO THE DECISION IN CIT VS ORISSA CORPORATION PVT. LTD. 158 ITR 78 (SC) AND THE RATIO LAID DOWN IN KHANDELWAL CONSTRUC TION VS CIT 227 ITR 900(GUW.). THE SATISFACTION HAS TO B E DERIVED FROM THE RELEVANT FACTS AND THAT TO ON THE BASIS OF PROPER ENQUIRY BY THE ASSESSING OFFICER AND SUCH EN QUIRY MUST BE REASONABLE AND JUST. IN THE PRESENT CASE, THE ASSESSING OFFICER HAS NOT BROUGHT ANY EVIDENCE ON R ECORD THAT THE AMOUNTS RECEIVED FROM M/S ALKA DIAMOND INDUSTRIES LTD. AND M/S YASH-V-JEWELS LTD. ARE MERE LY ACCOMMODATION ENTRIES. AS MENTIONED EARLIER, THE L D. ASSESSING OFFICER HAS ACTED MERELY ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING. T HE RATIO LAID DOWN BY HON'BLE DELHI HIGH COURT IN CIT VS VRINDABAN FARMS PVT. LTD. SQUARELY GIVES SHELTER TO THE ASSESSEE, WHEREIN, IT WAS HELD THAT IF THE IDENTITY AND ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 33 OTHER DETAILS OF SHARE APPLICANT ARE AVAILABLE, THE SHARE APPLICATION MONEY CANNOT BE TREATED AS UNDISCLOSED INCOME IN THE HANDS OF THE COMPANY. IN THE PRESENT CASE, THE ASSESSEE EVEN HAS PROVED THE SOURCE OF SOURCE, THEREFORE, THE CREDITWORTHINESS WAS ALSO PROVED, CONSEQUENTLY, NO ADDITION MADE U/S 68 OF THE ACT CA N BE SAID TO BE JUSTIFIED. THE RATIO LAID DOWN IN CREAT IVE WORLD TELEFILMS LTD. (SUPRA) BY HON'BLE JURISDICTIONAL HI GH COURT SQUARELY COMES TO THE RESCUE OF THE ASSESSEE. THE ASSESSEE DULY FURNISHED THE PROOF OF IDENTITY LIKE PAN, BANK ACCOUNT DETAILS FROM THE BANK, OTHER RELEVANT MATERIAL, GENUINENESS OF THE TRANSACTION, PAYMENT THROUGH BANKING CHANNEL AND EVEN THE SOURCE OF SOUR CE, THEREFORE, THE ASSESSEE HAS PROVED THE CONDITIONS L AID DOWN U/S 68 OF THE ACT. IT IS ALSO NOTED THAT IN SP ITE OF REPEATED REQUEST, THE LD. ASSESSING OFFICER DID NOT PROVIDE OPPORTUNITY TO CROSS EXAMINE THE CONCERNED PERSONS AND EVEN THE RELEVANT INFORMATION AND ALLEGATION, IF AN Y, MADE THEREIN, WHICH HAS BEEN USED AGAINST THE ASSESSEE, WAS NOT PROVIDED TO THE ASSESSEE. AT THIS STAGE, WE AD D HERE THAT MERE INFORMATION IS NOT ENOUGH RATHER IT HAS T O BE SUBSTANTIATED WITH FACTS. THE INFORMATION MAY AND MAY NOT BE CORRECT. FOR FASTENING THE LIABILITY UPON AN YBODY, THE DEPARTMENT HAS TO PROVIDE THE AUTHENTICITY OF T HE INFORMATION TO THE PERSON AGAINST WHOM SUCH INFORMA TION IS USED. THE PRINCIPLE OF NATURAL JUSTICE, DEMANDS THAT WITHOUT CONFRONTING THE ASSESSEE OF SUCH EVIDENCE, IF ANY, ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 34 OR THE INFORMATION, NO ADDITION CAN BE MADE. EVEN OTHERWISE, AS PER ARTICLE-265 OF THE CONSTITUTION O F INDIA, ONLY LEGITIMATE TAXES HAS TO BE LEVIED AND COLLECTE D. IN OUR HUMBLE OPINION, THE ASSESSEE HAS DULY DISCHARGED TH E ONUS CASTE UPON IT, THEREFORE, RESPECTFULLY FOLLOWI NG THE DECISIONS FROM HON'BLE APEX COURT, HON'BLE HIGH COU RTS AND HON'BLE JURISDICTIONAL HIGH COURT, WE REVERSE T HE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL ), RESULTANTLY, THIS GROUND OF THE ASSESSEE IS ALLOWED . FINALLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED. THIS ORDER WAS PRONOUNCED IN THE OPEN IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 19/04/2017. SD/- S D/- (RAJENDRA) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER MUMBAI; # DATED : 21/04/2017 F{X~{T? P.S/. . . !%$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. %& '( / THE APPELLANT (RESPECTIVE ASSESSEE) 2. )*'( / THE RESPONDENT. 3. ++ , ( %& ) / THE CIT, MUMBAI. 4. ++ , / CIT(A)- , MUMBAI, 5. /01)2 , +%& %23 , / DR, ITAT, MUMBAI ITA NO.6492/MUM/2016 ARCELI REALTY LIMITED (FORMERLY KNOWN AS ELLORA ELECTRICALS LTD.) 35 6. 145 / GUARD FILE. ! / BY ORDER, */&) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI