M/s. Biora Infrastructure Pvt.. Ltd., Indore V. The ACIT., Indore

ITA 66/IND/2010

• Counselvise Citation: 6622714 RSA 2010
• Duration Of Justice: 1 year(s) 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 09-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 08-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN
• Assessee Lawyers: C P RAWKA
• Keywords: Unexplained cash credit; Additional evidence; Question of law; Accommodation entries; Onus to prove
• Section: 69C; 260A; 133(6); 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.66/IND/2010 A.Y. 2005-06 M/S. BIAORA INFRASTRUCTURE P. LTD., INDORE PAN AABCB 7682 F ... APPELLANT VS ACIT-5(1), INDORE ... RESPONDENT APPELLANT BY : SHRI C.P. RAWKA, CA RESPONDENT BY : SHRI ARUN DEWAN, SR. DR DATE OF HEARING : 14.12.2011 DATE OF PRONOUNCEMENT : 14.12.2011 O R D E R PER JOGINDER SINGH THIS IS AN APPEAL BY THE ASSESSEE CHALLENGING THE ORDER DATED 30.11.2009 OF THE LEARNED COMMISSIONER OF INC OME TAX- (APPEALS)-II, INDORE ON THE FOLLOWING GROUNDS: 2 1. THAT THE LD. CIT(A) ERRED IN LAW AND FACTS OF THE CASE AND CONFIRMED THE ADDITION MADE BY ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED INCOME U/S 68 OF RS.25,00,000/- FOR SHARE APPLICATION RECEIVED BY THE CO. WITHOUT CONSIDERING THE FULL FACTS. 2. THAT THE LD. CIT(A) ERRED IN LAW AND FACTS OF THE CASE AND CONFIRMED THE REJECTION OF CLAIM U/S 80-IA OF RS.5,71,781/- BY THE ASSESSING OFFICER WITHOUT CONSIDERING THE FULL FACTS. 3. THAT THE LD. CIT(A) ERRED IN LAW AND FACTS OF THE CASE AND CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OUT OF TELEPHONE EXPENSES OF RS.12,300/- WITHOUT CONSIDERING FULL FACTS. 4. THAT THE LD. CIT(A) ERRED IN LAW AND FACTS OF THE CASE AND CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OUT OF CONVEYANCE EXPENSES OF RS.7,500/- WITHOUT CONSIDERING FULL FACTS. 2. THE FIRST GROUND RAISED BY THE ASSESSEE PERTAINS TO CONFIRMING THE ADDITION ON ACCOUNT OF UNEXPLAINED I NCOME OF RS.25 LACS RECEIVED AS SHARE APPLICATION MONEY AND CONSEQUENT ADDITION U/S 68 OF THE ACT. THE CRUX OF THE ARGUMENT ON BEHALF OF THE ASSESSEE IS THAT NO ADDITION IS RE QUIRED TO BE MADE AS THE GENUINENESS OF THE TRANSACTION IS NOT I N DOUBT. WHEREAS THE LD. SR. DR CONTENDED THAT THE IMPUGNED ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF THI S TRIBUNAL IN THE CASE OF AGRAWAL COAL CORPORATION WHEREIN IDENTI CALLY THE 3 SHARE APPLICATION MONEY WAS RECEIVED FROM SUCH COMP ANIES WHICH HAVE BEEN MENTIONED IN THE CASE OF THE PRESEN T ASSESSEE. THIS FACTUAL MATRIX WAS NOT CONTROVERTED BY THE ASSESSEE BY BRINGING ANY CONTRARY EVIDENCE ON RECOR D. 2.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON FILE. THE FACTS, IN BRIEF , ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN EXECUTION OF CIVIL C ONTRACTS. IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSES SEE RECEIVED SHARE APPLICATION OF RS.10 LACS FROM HINDU STAN CONTINENTAL LTD., RS.5 LACS FROM OPTIMATE TEXTILES INDUSTRIES, RS.5 LACS FROM BHOOMI AGRO OVERSEAS P. LTD. AND RS. 5 LACS FROM DELTA POLYESTER LTD., MUMBAI (TOTAL AGGREGATIN G RS.25 LACS). THE ASSESSEE WAS REQUIRED TO PRODUCE THERE P ARTIES TO WHICH THE ASSESSEE EXPRESSED HIS INABILITY, THEREFO RE, SUMMONS/NOTICES/COMMISSIONS WERE ISSUED BY THE ASSE SSING OFFICER TO THESE PARTIES ALONG WITH A DETAILED SHOW -CAUSE NOTICE. PURSUANT TO THESE ENQUIRIES, ONE OF THESE P ARTIES M/S. DELTA POLYESTER DISOWNED SUCH TRANSACTION AND RATHE R LODGED A COMPLAINT TO THE ADDL. COMMISSIONER OF POLICE (ECON OMIC 4 OFFENCES WING), MUMBAI VIDE LETTER DATED 18.1.2007 MENTIONING THAT SOMEONE HAS FRAUDULENTLY OPENED ACC OUNT IN THE COMPANYS NAME IN UNION BANK OF INDIA. SO FAR A S THE TRANSACTIONS REGARDING BHOOMI AGRO OVERSEAS LTD. IS CONCERNED, NEITHER ANY PARTY APPEARED BEFORE THE AS SESSING OFFICER NOR CONFIRMED OF CONTRIBUTING SHARE APPLICA TION MONEY. THIS FACTUAL MATRIX WAS NOT CONTROVERTED BY THE ASS ESSEE WITH EVIDENCE, THEREFORE, WE FIND NO INFIRMITY WITH RESP ECT TO THESE PARTIES IN THE IMPUGNED ORDER. WITH REGARD TO HINDU STAN CONTINENTAL LTD. AND OPTIMATE TEXTILES INDUSTRIES, THIS BENCH OF THE TRIBUNAL VIDE DETAILED ORDER DATED 31.10.2011 ( ITA NO.151/IND/2009, ITA NO. 283/IND/2010, ITA NO.136/I ND/2009, ITA NO. 34/IND/2010, ITA NO.190/IND/2009, ITA NO.158/IND/2010, ITA NO.196/IND/2009, ITA NO.193/IN D/2010 AND ITA NO.137/IND/2009) FOUND THAT IDENTITY OF THE SE COMPANIES WAS NOT ESTABLISHED BY FURTHER HOLDING TH AT THESE ARE MERELY PAPER COMPANIES AND IN REAL SENSE, ARE N ON- EXISTENT. THE RELEVANT PORTION OF THE ORDER IS REPR ODUCED HEREUNDER: 5 21. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL AVAILABLE ON FILE. BRIEF FACTS OF THE CASE ARE THA T THE ASSESSEE (M/S AGRAWAL COAL CORPORATION PRIVATE LIMITED) IS A PRIVATE LIMITED COMPANY ENGAG ED IN THE TRADING BUSINESS. IN THE YEAR UNDER CONSIDERATION THE COMPANY ENTERED IN THE FIEL D OF POWER GENERATION WITH INSTALLATION OF TWO WIND MILLS AND DECLARED INCOME OF RS.83,46,0 90/- IN ITS RETURN FILED ON 30.10.2005 FOR ASSESSMENT YEAR 2005-06. THE CASE WAS SELECTED FO R SCRUTINY. THE LEARNED ASSESSING OFFICER, DURING THE ASSESSMENT PROCEEDINGS, NOTED THAT M/S H INDUSTAN CONTINENTAL LIMITED, APPLIED FOR 40,000 SHARES OF THE ASSESSEE COMPANY OF THE CO UNTENANCE VALUE OF RS.10/- EACH AT A PREMIUM OF RS.90/- PER SHARE. SIMILARLY, OPTIMATES TEXTILE INDUSTRIES LIMITED ALSO APPLIED FOR 10,000 SHARES OF THE ASSESSEE COMPANY OF THE SAME V ALUE AND PREMIUM PER SHARE. THE LEARNED ADDITIONAL CIT, INDORE (ASSESSING OFFICER), HAS REFERRED THE REPORT OF ACIT 5(1), INDORE, WHEREIN IT WAS FOUND THAT ON THE BASIS OF I NVESTIGATION CARRIED OUT BY HIM IN SOME OTHER CASES, M/S HINDUSTAN CONTINENTAL LIMITED AND OPTIMATES TEXTILES LIMITED ARE NOT THE GENUINE COMPANIES. THE REPORT OF ACIT 5(1) HAS BEE N REPRODUCED IN THE ASSESSMENT ORDER. THIS REPORT WAS CONFRONTED TO THE ASSESSEE COMPANY BY THE ASSESSING OFFICER, DURING THE ASSESSMENT PROCEEDINGS, AND AFTER CONSIDERING THE R EPLY OF THE ASSESSEE COMPANY IT WAS HELD THAT THE SHARE CAPITAL CLAIMED TO BE APPLIED B Y THESE COMPANIES IS UNEXPLAINED, THEREFORE, THE SAME WAS ADDED TO THE INCOME OF THE ASSESSEE COMPANY. THE RELEVANT EXTRACT FROM THE ASSESSMENT ORDER IS EXTRACTED HERE UNDER :- THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE. ASSESSEE HAS RELIED UPON THE DECISION OF HONBLE I.T.A.T., INDORE BENCH, IN CASE OF ACIT VS. KALANI INDUSTRIES LTD. THE SAID DECISION WAS NOT ACCEPTABLE TO THE DEPARTMENT AND I S BEING CONTESTED BEFORE HON'BLE HIGH COURT OF M.P. ASSESSEE HAS TRIED TO PROVE GENUINENE SS OF TRANSACTION BY FURNISHING CONFIRMATION, COPY OF BANK ACCOUNT AND ACKNOWLEDGEM ENT OF RETURN. IT HAS ALSO FURNISHED VARIOUS DECISION IN SUPPORT OF ITS CONTENTIONS. BU T IT IS EVIDENT FROM THE INVESTIGATION MADE BY ACIT 5(1), INDORE THAT BOTH THESE COMPANY ARE NO T EXISTING COMPANIES IN THE REAL SENSE. THESE COMPANIES ARE PAPER COMPANIES ONLY AND EXIST NOWHERE AND WERE USED TO GIVE ACCOMMODATION ENTRIES TO VARIOUS PARTIES WHO WANT T O LAUNDER THEIR UNACCOUNTED MONEY IN THE GUISE OF SHARE APPLICATION OR UNSECURED LOAN OR LONG TERM CAPITAL GAIN. THE ASSESSEE IS A CLOSELY HELD PVT. LTD. COMPANY I N WHICH PUBLIC IS NOT SUBSTANTIALLY INTERESTED. THUS AS PER SECTION 68 ONUS WAS UPON T HE ASSESSEE TO ESTABLISH DEPOSITORS IDENTITY, CREDITWORTHINESS AND GENUINENESS OF TRANS ACTION. ASSESSEE IN ITS WRITTEN SUBMISSION STATED THAT COMPANY HAS RECEIVED SHARE APPLICATION MONEY OF RS. 40,00,000/- FROM HINDUSTAN CONTINENTAL LTD. 19, SHUBH KAMNA APARTMEN T, GUL BAZAR, JABALPUR. AS PER THE REPORT OF THE ACIT 5(1), INDORE, IT IS CLEAR THAT N O SUCH COMPANY EXIST AT THE GIVEN ADDRESS. THE CREDITWORTHINESS OF THE COMPANY HAS ALSO NOT BE EN ESTABLISHED IN VIEW OF THE FACT THAT THERE IS HUGE INFLOW AND OUTFLOW OF FUND IN THE BAN K ACCOUNT WITHOUT ANY LOGIC. THERE IS HUGE CASH DEPOSIT IN THE BANK ACCOUNT OF HINDUSTAN CONTI NENTAL LTD. MAINTAINED UTI BANK LTD. COPY OF WHICH IS FILED BY THE ASSESSEE IN SUPPORT O F ITS CONTENTION. THE COMPANY IS NOT EXISTING IN REAL SENSE THE GENUINENESS OF TRANSACTI ON IS ALSO DOUBTFUL. SINCE ASSESSEE FAILED ESTABLISHED IDENTITY, CREDITWORTHINESS AND GENUINEN ESS OF TRANSACTION, CREDIT IN THE ACCOUNT OF THE ASSESSEE ON ACCOUNT OF SHARE APPLICATION MO NEY FROM HINDUSTAN CONTINENTAL LTD. RS. 4,00,000/- AND SHARE PREMIUM AMOUNT OF RS. 36,00,00 0/- ARE BEING TREATED AS UNEXPLAINED CREDIT U/S 68 AND ADDED BACK TO TAXABLE INCOME. SIMILARLY, ASSESSEE HAS TRIED TO ESTABLISH IDENTIT Y OF M/S OPTIMATES TEXTILE INDUSTRIES LTD., BUT IT IS EVIDENT FROM THE REPORT OF THE ACIT 5(1), INDORE THAT COMPANY IS ALSO A PAPER COMPANY USED TO PROVIDING ACCOMMODATION ENTRIES ONL Y. ENQUIRIES REVEALED THAT NO SUCH COMPANY EXISTS AT THE ADDRESS AS PROVIDED BY THE AS SESSEE. ACIT 5(1), INDORE REPORTED THAT THE ASSISTANT DIRECTOR OF INCOME TAX INVESTIGATION IX(3), MUMBAI HAD CONFIRMED IN HIS REPORT THAT M/S OPTIMATES TEXTILE INDUSTRIES LTD. DOES NOT EXIST AT THE GIVEN ADDRESS AND SEEMS TO BE BOGUS. ASSESSEE HAS GIVEN THE ADDRESS OF THE CO MPANY AS TO DEV KARAN MENSION IIND FLOOR 6 63B PRINCES ESTATE MUMBAI WHEREAS THE BANK ACCOUNT OF THE COMPANY HAS BEEN MENTIONED IN INDORE IN WHICH THE ADDRESS OF THE COMPANY WAS G IVEN AS 13, SOUTH HATI PALA, INDORE. THIS COMPANY IS ALSO NOT EXISTING IN REAL SENSE AND ONLY ACCOMMODATION ENTRIES ARE BEING GIVEN TO THE BENEFICIARIES IN THE FORM OF SHARE APPLICATION MONEY OR UNSECURED LOANS. SINCE ASSESSEE FAILS TO ESTABLISH IDENTITY, CREDITWORTHINESS AND G ENUINENESS OF THE TRANSACTIONS, SHARE APPLICATION MONEY CREDITED ON ACCOUNT OF M/S OPTIMA TES TEXTILE INDUSTRIES LTD. RS. 1,00,000/- SHARE PREMIUM RS.9,00,000/- IS TREATED UNEXPLAINED U/S 68 AND ADDED BACK TO TAXABLE INCOME. TOTAL ADDITION UNDER THIS HEAD IS RS. 50,00 ,000/- 22. THE ABOVE FINDING WAS CONFRONTED TO THE ASSESSE E DURING APPELLATE PROCEEDINGS AGAINST WHICH THE ASSESSEE PREFERRED WRITTEN SUBMIS SIONS. DURING THE FIRST APPELLATE STAGE AS WELL AS BEFORE US, THE LD. COUNSEL FOR ASSESSEE HAS CHALLENGED THE FINDING OF ACIT ON THE GROUND THAT THE SAID COMPANY IS A LISTED COMPANY ON STOCK EXCHANGE AND THE ASSESSING OFFICER WAS IN KNOWLEDGE AND POSSESSION OF THE INCO ME TAX RETURN OF THE COMPANY. OUR ATTENTION WAS INVITED TO THE DETAILS OF CAPITAL WO RK IN PROGRESS AND LICENCE CAPACITY OF HCL LIMITED BY ARGUING THAT THE EXISTENCE AND CREDIT WO RTHINESS OF HCL IS ESTABLISHED SINCE IT IS HAVING SHARE CAPITAL OF RS. 8.09 CRORES. DURING HE ARING BEFORE US, THE LD. COUNSEL FOR ASSESSEE MR. CHOUDHARY, INVITED OUR ATTENTION TO DE POSIT OF CASH IN BANK ACCOUNT OF M/S SAHAYATA MARKETING AND TRANSFER THEREOF THROUGH ACC OUNT PAYEE CHEQUE TO THE BANK ACCOUNT OF M/S SUNIL SHARES STOCKS PRIVATE LIMITED AND THER EAFTER TO THE ULTIMATE BENEFICIARY. IT WAS SUBMITTED THAT THE TRANSACTIONS OF CASH TRANSFER AN D DEPOSITION OF CASH HAS NOTHING TO DO WITH THE ASSESSEE. A STRONG PLEA WAS RAISED BY THE LD. COUNSEL FOR ASSESSEE THAT IDENTITY OF SHARE APPLICANTS IS ESTABLISHED WHICH WAS STRONGLY DENIED BY THE LEARNED CIT DR. AT THIS STAGE, A QUERY WAS RAISED BY THE BENCH AS TO WHETHE R THE ASSESSEE IS IN A POSITION TO PRODUCE BEFORE THIS BENCH ANY OF THE DIRECTORS OR THE EMPLOYEES OF THESE COMPANIES ? THE LD. COUNSEL FOR ASSESSEE CONVENIENTLY CONTENDED THAT THE ASSESSEE CANNOT BE PUT TO ADVERSE BURDEN MEANING THEREBY THAT THE ASSESSEE WA S NOT IN A POSITION TO PRODUCE SUCH PERSONS. THE BENCH AGAIN CONTENDED THAT IN VIEW OF THE ABOVE REPLY OF THE LD. COUNSEL FOR ASSESSEE, AN ADVERSE VIEW MAY BE TAKEN AGAINST THE ASSESSEE. THE LD. COUNSEL FOR ASSESSEE REMAINED MUM AND NOTHING WAS CANVASSED AGAINST THE QUERY RAISED BY THE BENCH . 23. THE NOTICES ISSUED U/S 133(6) OF THE ACT TO M/S HCL LIM ITED AND M/S OPTIMATES TEXTILES INDUSTRIES LIMITED COULD NOT BE SERVED AS THESE COMPANIES WERE FOUND NON-EXISTENT AT THE ADDRESSES SUPPLIED TO THE DEPAR TMENT BY THE ASSESSEE. THEREAFTER, COMMISSION WAS ISSUED TO ADIT(INV.) UNIT-IX-3, MUMB AI, TO VERIFY THE EXISTENCE/GENUINENESS OF THESE COMPANIES, WHO ALSO REPORTED THAT THE SAID COMPANIES DID NOT EXIST AT THE GIVEN ADDRESSES. THE WHOLE ISSUE FOR ADJUDICATION IS WHE THER THE IDENTITY OF THESE COMPANIES WAS ESTABLISHED ? DURING HEARING, THE LD. COUNSEL FOR ASSESSEE CLAIMED THAT IDENTITY OF BOTH THESE COMPANIES HAS BEEN ESTABLISHED AS BOTH THESE COMPANIES WERE REGISTERED WITH REGISTRAR OF COMPANIES AND THEIR INCOME TAX RETURNS WERE FILED AND BOTH ARE HAVING PANS/BANK ACCOUNTS. WE ARE NOT AGREEING WITH THIS P ROPOSITION BECAUSE AT THE TIME OF REGISTRATION, THESE COMPANIES MAY BE EXISTING EITHE R ON PAPERS OR IN REAL SENSE BUT THEREAFTER WERE SPECIFICALLY FOUND NON-EXISTENT AS THE SUMMONS/ NOTICES ISSUED WERE RETURNED BACK UNSERVED AND THE COMMISSION ISSUED WI TH THIS PURPOSE ALSO FOUND THAT THESE COMPANIES WERE NON-EXISTENT. AT THE SAME TIME, NON E OF THE CERTIFICATES, CLAIMED TO BE ISSUED BY VARIOUS AUTHORITIES, DOES NOT ESTABLISH T HE IDENTITY OF THE SHARE APPLICANTS AS THE CERTIFICATES WERE ISSUED WITHOUT PHYSICALLY VERIFYI NG THE EXISTENCE OF APPLICANTS, SUCH AS INCOME TAX DEPARTMENT RECEIVES RETURNS OF INCOME OR DOCUMENTS WITHOUT VERIFICATION OF EXISTENCE OF THE PERSONS FILING THE RETURNS/DOCUMEN TS. PAN IS ALSO ALLOTTED TO THE APPLICANTS 7 ON THE BASIS OF APPLICATIONS WITHOUT VERIFYING THE EXISTENCE OF APPLICANTS AT THE ADDRESS GIVEN IN THE APPLICATION. LIKEWISE, REGISTRAR OF COMPANI ES ALSO REGISTER A COMPANY WITHOUT PHYSICAL VERIFICATION OF THE EXISTENCE OF THE APPLICANT COMP ANY. THERE IS A SPECIFIC FINDING THAT ON VERIFICATION BY THE ACIT IN THE CASE OF M/S SAHAYAT A MARKETING COMPANY NEITHER THE OPERATORS OF THE ACCOUNTS WERE AVAILABLE AT THE ADD RESSES GIVEN TO THE BANK NOR THE INTRODUCER. THEREFORE, THE ASSESSEE CANNOT CLAIM TO HAVE ESTABLISHED THE IDENTITY OF BOTH THESE COMPANIES ON THE BASIS OF SOME DOCUMENTS. LE AVE IT APART, AS MENTIONED ABOVE, THE LD. COUNSEL FOR ASSESSEE, IN REPLY TO A SPECIFIC QU ERY REGARDING PRODUCTION OF ANY OF THE DIRECTORS OR THE EMPLOYEES OF THE SHARE APPLICANTS BEFORE THE BENCH, THE ASSESSEE DID NOT COMPLY WITH THE DIRECTIONS OF THE BENCH, THEREFORE, TO THIS LIMITED EXTENT, WE ARE OF THE VIEW THAT THESE SHARE APPLICANTS ARE NON-EXISTENT AND TH EIR IDENTITY IS NOT PROVED. IT IS PERTINENT TO MENTION HERE THAT THERE IS A DIFFERENCE BETWEEN A PRIVATE AND PUBLIC LIMITED COMPANY AS IN A PRIVATE LIMITED COMPANY, THE PUBLIC AT LARGE I S NOT SUBSCRIBING THE SHARES AS THE SHARES ARE ALLOTTED TO CLOSE RELATIVES, FRIENDS AND OTHER KNOWN PERSONS WHO ARE HAVING FAITH IN THE SUBSCRIBING COMPANY ON PERSONAL RELATIONS WHEREAS T HERE IS AN INVITATION TO THE PUBLIC AT LARGE BY A PUBLIC LIMITED COMPANY AND NOT NECESSARI LY HAVING PERSONAL RELATIONS AND IN THAT CASE, THE INDIVIDUAL RELATIONS ARE NORMALLY FOUND T O BE NON-EXISTENT. IN VIEW OF THESE FACTS, THE SHARE APPLICANTS ARE KNOWN TO THE ASSESSEE COMP ANY, BEING PRIVATE LIMITED COMPANY, AND THERE SHOULD BE NO DIFFICULTY TO PRODUCE THEM O R THEIR REPRESENTATIVE TO ENABLE THE ASSESSING OFFICER TO VERIFY THE IDENTITY, GENUINENE SS OF THE CAPITAL CLAIMED TO BE SUBSCRIBED BY THEM, THEREFORE, THE ASSESSEE CANNOT CLAIM IGNOR ANCE ABOUT THESE COMPANIES. UNLESS THE ASSESSEE IS ABLE TO ESTABLISH IDENTITY OF THE COMPA NIES WHO HAVE SUBSCRIBED IN THEIR SHARE CAPITAL, HOW THE DEPARTMENT WILL PROCEED AGAINST TH ESE COMPANIES IN TERMS OF THE VERDICT OF THE HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXP ORTS (SUPRA). ANY ADDITION IN THE HANDS OF SUCH SUBSCRIBING COMPANIES IS ONLY POSSIBLE WHEN THE ASSESSEE IS ABLE TO ESTABLISH IDENTITY OF THESE COMPANIES WHICH THE ASSESSEE HAS GROSSLY F AILED NOT ONLY BEFORE THE ASSESSING OFFICER BUT ALSO BEFORE LEARNED COMMISSIONER OF INC OME TAX (APPEALS) AND THE TRIBUNAL. UNDER THESE FACTS AND CIRCUMSTANCES, THERE IS NO QU ESTION OF APPLY THE PROPOSITION OF LAW AS SUGGESTED BY THE LD. COUNSEL FOR ASSESSEE. 24. ON THE ISSUE OF DISCHARGE OF ONUS/BURDEN, THE ASSERTION OF THE LD. COUNSEL FOR THE ASSESSEE IS THAT THE ONUS SHIFTED TO THE DE PARTMENT WHEN COPY OF SHARE APPLICATION FORM, PAN, NAME AND ADDRESSES AND ROC REGISTRATION, ETC. WERE FILED BY THE ASSESSEE. WE ARE NOT AGREEING WITH THE SUBMISSION OF THE ASSESSE E IN VIEW OF THE FACT THAT AT THE ADDRESSES (4 PLACES) GIVEN TO THE DEPARTMENT, THESE COMPANIES WERE FOUND TO BE NON-EXISTENT. EVEN THE INSPECTOR WAS DEPUTED TO VERIFY THE ADDRESSES W HO ALSO REPORTED THAT THESE COMPANIES WERE NOT AVAILABLE AT THE GIVEN ADDRESSES. IT IS N OT POSSIBLE THAT THE COMPANIES MAKING HUGE INVESTMENT IN THE FORM OF SHARE APPLICATION ARE NOT FOUND AT THE GIVEN ADDRESSES. THERE IS A POSSIBILITY THAT THERE MAY BE A CHANGE OF ADDRESS B UT TILL THE STAGE OF THE TRIBUNAL, NOT TO TALK OF THE ASSESSING OFFICER OR THE LEARNED COMMISSIONE R OF INCOME TAX (APPEALS), NO SUCH ADDRESS WAS FURNISHED BY THE ASSESSEE, THEREFORE, W E ARE OF THE CONSIDERED OPINION THAT THE ONUS WAS NOT DISCHARGED AS THE ASSESSEE NEITHER FUR NISHED THE CORRECT ADDRESSES NOR THE CREDITORS WERE PRODUCED RATHER THE ASSESSEE TRIED T O STALL THE ASSESSMENT PROCEEDINGS BY GIVING MISLEADING FACTS AND INCORRECT ADDRESSES. EV EN AS PER PREPONDERANCE OF PROBABILITIES, ALL FACTS GO AGAINST THE ASSESSEE AND THE RATIO LAI D DOWN BY THE HON'BLE APEX COURT IN THE CASE OF SUMATI DAYAL (214 ITR 801) GOES AGAINST THE ASSESSEE. HON'BLE CALCUTTA HIGH COURT IN THE CASE OF NIVENDAN VANIJYA NIYOJAY LIMITED (SUPRA ) (PAGE 14) HELD AS UNDER :- AFTER THE INITIAL ONUS WAS DISCHARGED BY ASSESSEE , THE INCOME TAX AUTHORITIES HAVE MADE ENQUIRIES AND HAD COMMUNICATED THE RESULT OF T HE ENQUIRY TO THE ASSESSEE AND REQUIRED 8 THE ASSESSEE TO PRODUCE THE SUBSCRIBERS WHO PROVIDE D SUCH CREDIT, IN ORDER TO ESTABLISH ITS CASE. BUT THE ASSESSEE DID NOT DO SO. ON THIS BAS IS ADDITION MADE BY THE A.O. U/S 68 OF I.T. ACT WAS CONFIRMED. IDENTICALLY, THE HON'BLE CALCUTTA HIGH COURT IN TH E CASE OF HINDUSTAN TEA TRADING COMPANY LIMITED; 182 CTR 585 AT PAGE 23 (PARA 21) WHERE THE IDENTITY OF 12 PERSONS WHO WERE NOT FOUND AT THE ADDRESSES IT WAS HELD THAT IDENTITY IS NOT ESTABLISHED. ON THE ISSUE OF ONUS, IT WAS HELD THAT PRINCIPLE REGARDING ONUS IS LAID DOW N U/S 68 WHEREBY ONCE A REASONABLE ENQUIRY IS MADE, THEN THE ASSESSING OFFICER CAN DO NO FURTHER EXCEPT ARRIVING AT A CONCLUSION. WHEN SUCH CONCLUSION IS COMMUNICATED TO ASSESSEE, O NUS SHIFTS ON THE ASSESSEE. LIKEWISE, HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/ S RATHI FINLEASE LIMITED; 215 CTR 429 AT PAGE 28 WHEN COMPANY IS NOT FOUND AT THE GIVEN ADDR ESS AGAINST THE SUMMONS ISSUED BY THE ASSESSING OFFICER OBSERVED AS UNDER THE ASSESSEE TRIED TO EXPLAIN THE GENUINENESS OF T HE CREDIT ON THE BASIS OF LETTERS OF CONFIRMATIONS. IT COULD NOT BE EXPLAINED AS TO HOW THE TRANSACTION WAS MATERIALISED WHEN THE COMPANIES WERE NOT IN EXISTENCE AND THE AMOUNT WAS PAID BY CHEQUE ONLY ON THE DATE ON WHICH THE AMOUNT WAS CREDITED TO THE ACCOUNT OF THE COMPANY. THE ASSESSEE FAILED TO DISCHARGE THE BURDEN WITH REGARD TO THE CREDIT IN I TS BOOKS AND THE EXISTENCE OF THE CREDITORS TO INDICATE THE GENUINENESS OF THE TRANSACTION. THE FULL BENCH OF HON'BLE DELHI HIGH COURT IN THE C ASE OF M/S SOPHIA FINANCE LIMITED; 205 ITR 98 OBSERVED AS UNDER :- THE ITO WOULD BE ENTITLED TO ENGAGE AND IT WOULD I NDEED BE HIS DUTY TO DO SO WHETHER THE ALLEGED SHAREHOLDERS DO IN FACT EXIST OR NOT. IF T HE SHAREHOLDERS EXIST THEN POSSIBLY NO FURTHER ENQUIRY NEED TO BE MADE. BUT IF THE ITO FINDS THAT THE SHARE HOLDERS DO NOT EXIST, THEN IN EFFECT IT WOULD MEAN THAT THERE IS NO VALID ISSUANC E OF SHARE CAPITAL. SHARES CANNOT BE ISSUED IN THE NAME OF NON-EXISTING PERSONS. THE USE OF WO RDS MAY BE CHARGEDIN SECTION 68 CLEARLY INDICATES THAT THE ITO WOULD THEN HAVE THE JURISDIC TION IF THE FACTS SO WARRANTS TO TREAT SUCH CREDIT TO BE THE INCOME OF THE ASSESSEE. THE HON'BLE CALCUTTA HIGH COURT IN PRECISION FINANC E PRIVATE LIMITED; 208 ITR 465 HELD THAT INQUIRY OF ITO REVEALED THAT EITHER THE ASSESSEE WA S NOT TRACEABLE OR THERE WAS NO SUCH FILE AND ACCORDINBGLY THE FIRST INGREDIENT AS TO THE IDE NTITY OF THE CREDITORS HAS NOT BEEN ESTABLISHED. IF THE IDENTITY OF THE CREDITOR HAS N OT BEEN ESTABLISHED, CONSEQUENTLY, THE QUESTION OF ESTABLISHMENT OF THE GENUINENESS OF THE TRANSACTION OR THE CREDIT WORTHINESS OF THE CREDITORS DID NOT AND COULD NOT ARISE. DURING HEARING RELIANCE WAS PLACED UPON THE DECISION IN THE CASE OF STELLAR INVESTMENT LIMITED; 251 ITR 263 (SC) WHEREIN THE ISSUE WAS SUBSCRIPTION OF SHARE CAPITAL OF A PUBLIC LIMITED C OMPANY WHEREAS IN THE PRESENT APEPALS, PRIVATE LIMITED COMPANIES ARE INVOLVED, THEREFORE, THERE IS A MATERIAL DIFFERENCE BETWEEN THE TWO AS DISCUSSED EARLIER, THE SHARES OF PRIVATE LIM ITED COMPANIES ARE GENERALLY GIVEN TO APPLICANTS KNOWN TO THE DIRECTORS WHEREAS IN A PUBL IC LIMITED COMPANY THE APPLICANTS ARE UNKNOWN TO THE DIRECTORS. IT IS PERTINENT TO MENTI ON THAT WHILE COMING TO A PARTICULAR CONCLUSION, THE FULL BENCH OF DELHI HIGH COURT IN T HE CASE OF SOPHIA FINANCE LIMITED (SUPRA) DULY CONSIDERED THE CASE OF STELLAR INVESTMENT LIMI TED. EVEN IN THE CASE OF M/S LOVELY EXPORTS PRIVATE LIMITED (SUPRA) THE HON'BLEBLE DEL HI HIGHCOURT IN PARA 4 OBSERVED AS UNDER :- 9 REFERENCE TO SECTION 68 OF THE IT ACT IS CONSPICU OUS BY ITS ABSENCE, THE STELLAR INVESTMENT LIMITED RATIO CANNOT BE STRESSED TO THE EXTENT THAT IT PARTAKES AS A REFLECTION ON SECTION 68, WHEN THE INQUIRY PERTAINED ONLY TO SECTION 263. 25. IN VIEW OF THE FACTS NARRATED ABOVE AND THE JU DICIAL PRONOUNCEMENTS DISCUSSED HEREINABOVE, IT CAN BE SAID THAT THE ASSE SSEE DID NOT DISCHARGE THE ONUS CAST UPON IT BY THE PROVISIONS OF THE ACT. WE TEND TO REPROD UCE SECTION 68 OF THE ACT :- 68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATI ON ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OP INION OF THE [ASSESSING] OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. IF THE AFORESAID PROVISION OF THE ACT IS ANALYSED, IT SPEAKS ABOUT CASH CREDITS AND THE SUM FOUND CREDITED IN THE BOOKS OF AN ASSESSEE AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION IS NOT FOUND SATISFACTORY BY THE ASSESSING OFFICER THEN THE SAME MAY BE CHARGED TO TAX AS THE INCOME OF THE ASSESSEE. IN THE PRESENT APPEAL, AT ANY STAGE THE ASSESSEE DID NOT FILE ANY EXPLANATION REGARDING THE IDENTITY OF THE SHARE APPLICANTS, THEREFORE, THE ONUS WAS NOT DISCH ARGED BY THE ASSESSEE. A BARE READING OF SECTION 68 SUGGEST THAT THERE HAS TO BE CREDITS OF AMOUNTS IN THE BOOKS MAINTAINED BY THE ASSESSEE THAT SUCH CREDIT HAS TO BE OF A SUM DURING THE PREVIOUS YEAR AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH CREDIT OR THE EXPLANATION OFFERED BY THE ASSESSEE IN THE OPINION OF THE ASSESSING OFFICER IS NOT SATISFACTORY, IT IS ONLY THEN THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. WE ARE AWARE THAT THE OPINION OF THE ASSESSING OFFICER IS REQUIRED TO BE FORMED OBJECTIVELY WITH REFERENCE TO THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT APPEALS, THE ASSESSING OFFICER WAS NEVER SATISFIED AND THE NOTICES/SUMMONS ISSUED TO THE SUBSCRIBING COMPANIES, WERE FOUND TO BE FICTITIOUS OR NON-EXISTENT, THEREFORE, ONE FACT OOZING OUT THAT THE ASSESSEE HAS NOT FULFILLED THE REQUIREMENT OF SECTION 68. A CLO SE READING OF SECTION 68 MAKES IT CLEAR THAT IN CASE OF SECTION 68 THERE SHOULD BE CREDIT ENTRY IN THE BOOKS OF ACCOUNT. THIS IS A FUNDAMENTAL DIFFERENCE BETWEEN THESE TWO PROVISIONS . THE LAW IS WELL SETTLED THAT THE ONUS OF PROVING THE SOURCE OF A SUM OF MONEY FOUND TO HA VE BEEN RECEIVED BY AN ASSESSEE IS ON HIM WHERE THE NATURE AND SOURCE OF A RECEIPT WHETHE R IT BE OF MONEY OR OTHER PROPERTY, CANNOT BE SATISFACTORILY EXPLAINED BY THE ASSESSEE, IT IS OPEN TO THE REVENUE TO HOLD THAT IT IS THE INCOME OF THE ASSESSEE AND NO FURTHER BURDEN LI ES ON THE REVENUE TO SHOW THAT THE INCOME IS FROM ANY PARTICULAR SOURCE FOR WHICH WE A RE SUPPORTED BY THE DECISION OF THE HON'BLE APEX COURT IN ROSHAN DI HATTI VS. CIT; 107 ITR 938 AND KALE KHAN MOHD. HANIF VS. CIT; 50 ITR 1 (SC). IT IS FOR THE ASSESSEE TO PROV E THAT EVEN IF CASH CREDIT REPRESENTS INCOME IT IS INCOME FROM A SOURCE WHICH HAS ALREADY BEEN TAXE D FOR WHICH WE ARE SUPPORTED BY THE DECISION IN CIT V. DEVIPRASAD VISHWANATHPRASAD; 72 ITR 194 (SC). THE HONBLE APEX IN THE CASE OF SUMATI DAYAL VS. CIT; 214 ITR 801 CLEARLY H ELD THAT IF THE EXPLANATION OF THE ASSESSEE IS UNSATISFACTORY, THE AMOUNT CAN BE TREATED AS INC OME OF THE ASSESSEE. THERE ARE CONTRARY DECISION LIKE ADDL. CIT V. BAHRI BROTHERS; 154 ITR 244 (PAT) HOLDING THAT IDENTITY OF CREDITORS IS NOT RELEVANT FOR CHEQUE TRANSACTIONS BUT AT THE SAM E TIME IT IS NOT SACROSANCT AS WAS HELD IN NEMICHAND KOTHARI VS. CIT; 264 ITR 254 (GAU). IN T HE CASE OF SHRI BARKHA SYNTHETICS LIMITED VS. ACIT; 155 TAXMAN 289 THE HONBLE RAJASTHAN HIGH COURT HELD THAT WHERE THE MATTER CONCERNS MONEY RECEIPTS BY WAY OF SHARE APPLICATION FROM THE INVESTORS THROUGH BANKING 10 CHANNEL, THE ASSESSEE HAS TO PROVE THE EXISTENCE OF THE PERSON I N WHOSE NAME THE SHARE APPLICATION IS RECEIVED . ONCE THE EXISTENCE OF THE INVESTOR IS PROVED, IT IS NOT FURTHER THE BURDEN OF THE ASSESSEE TO PROVE WHETHER THAT PERSON ITSELF HAS INVESTED THE MONEY OR SOME OTHER PERSON HAS MADE INVESTMENT IN THE NAME OF THA T PERSON. THE BURDEN THEN SHIFTS TO THE REVENUE TO ESTABLISH THAT SUCH INVESTMENT HAS C OME FROM THE ASSESSEE COMPANY ITSELF. 26. ONCE THE RECEIPT OF THE CONFIRMATION LETTER F ROM THE CREDITOR IS PROVED AND THE IDENTITY AND EXISTENCE OF THE INVESTOR HAS NOT BEEN DISPUTED, NO ADDITION ON ACCOUNT OF SHARE APPLICATION MONEY IN THE NAME OF SUCH INVESTO R CAN BE MADE IN THE HANDS OF THE ASSESSEE. IN THE CASE OF CIT V. DIVINE LEASING & FI NANCE; 158 TAXMAN 440 (DEL), THE HON'BLE COURT CLEARLY HELD THAT IN CASE OF PUBLIC ISSUE THE COMPANY CONCERNED CANNOT BE EXPECTED TO KNOW EVERY DETAIL PERTAINING TO IDENTITY AS WELL AS FINANCIAL WORTH OF EACH OF ITS SUBSCRIBERS. THE COMPANY MUST HOWEVER MAINTAIN AND MAKE AVAILABL E TO THE ASSESSING OFFICER FOR HIS PERUSAL ALL THE INFORMATION CONTAINED IN THE SHARE APPLICATION DOCUMENTS. THE HON'BLE COURT CLEARLY HELD THAT IN CASE OF PRIVATE PLACEMEN T, THE LEGAL REGIME WOULD NOT BE SAME . A DELICATE BALANCE MUST BE MAINTAINED WHILE WALKING T HE TIGHT ROPE OF SECTION 68 AND 69. THE BURDEN OF PROOF CAN SELDOM BE DISCHARGED TO THE HIL T BY THE ASSESSEE. HOWEVER, IF THE ASSESSING OFFICER HARBOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRIPTION, HE IS EMPOWERED RATHER DUTY BOUND TO CARRY OUT INVESTIGATIONS. THE ASSESSEE MERELY WANTS TO TAKE SHELTER OF THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF LOVELY EXPORTS PRIVATE LIMITED WHEREIN IT WAS HELD THAT EVEN THE SHARE APPLICANTS ARE BOGU S, IT CANNOT BE ADDED IN THE HANDS OF THE ASSESSEE. IN THAT CASE THE TRIBUNAL CLEARLY NOTED THAT THE ASSESSEE WAS A PUBLIC LIMITED COMPANY AND SUBSCRIPTIONS WERE RECEIVED FROM PUBLIC AT LARGE THROUGH BANKING CHANNEL AND THE SHARES WERE ALLOTTED IN CONSONANCE WITH THE PRO VISIONS OF THE SECURITIES CONTRACT (REGULATION) ACT, 1956 AS ALSO THE RULES AND REGULA TIONS OF DELHI STOCK EXCHANGE AND IN PARA 12 THE HON'BLE DELHI HIGH COURT HAS CLEARLY DIFFERE NTIATED THE CASES OF SHARE CAPITAL OF PRIVATE LIMITED COMPANY FROM PUBLIC LIMITED COMPANY BY SAYING IN THE CASE OF PRIVATE PLACEMENT, THE LEGAL REGIME WILL NOT BE THE SAME. THEREFORE, THE FACTS OF THAT CASE ARE NOT APPLICABLE TO THE CASE OF THE ASSESSEE AS IT IS A P RIVATE LIMITED COMPANY OR CLOSELY HELD COMPANY. BESIDES THIS, IN CASE OF M/S LOVELY EXPORT S LIMITED (IN PARA 23), THE HON'BLE DELHI HIGH COURT NOTED THAT THE ASSESSING OFFICER HAS NEI THER CONTROVERTED NOR DISPROVED THE MATERIAL FILED BY THE ASSESSEE. HOWEVER, IN THE P RESENT CASE, THE ASSESSING OFFICER AFTER MAKING INQUIRY DISAPPROVED THE VERY FIRST INFORMATI ON REGARDING IDENTITY OF SUCH CREDITORS AS THEY WERE FOUND NON-EXISTENT AT ALL THE GIVEN ADDRE SSES. SO FAR AS THE ARGUMENT OF THE LEARNED CIT DR THAT DISMISSAL OF SLP IN THE CASE OF LOVELY EXPORT, WHERE THERE IS NO MERGER OF ORDER, IS NOT AN EXPRESSION OF JUDICIAL VIEW NOR A BINDING PRECEDENT. WE ARE NOT GOING INTO THIS CONTROVERSY BECAUSE THE FACTS OF THE PRESENT A PPEALS ARE DISTINGUISHABLE FROM THE FACTS OF LOVELY EXPORTS PRIVATE LIMITED. HONBLE DELHI HI GH COURT IN A LATTER DECISION IN CIT V. OASIS HOSPITALITIES PRIVATE LIMITED (2011) 333 ITR 119 HE LD AS UNDER :- WE ARE OF THE VIEW THAT RATIO LAID DOWN IN STELLE R INVESTMENT LTD. (2001) 251 ITR 263 IS APPLICABLE ONLY IN THOSE CASES WHERE THE ASSESSEE I S A LIMITED COMPANY AND THE SHARES WERE QUOTED IN THE STOCK EXCHANGE. BUT WHENEVER THE ISS UE IS SUBSCRIBED WITHOUT QUOTING IT ON THE STOCK EXCHANGE BY A LIMITED OR PRIVATE LIMITED COMP ANY, THE PRESUMPTION IS VERY STRONG AGAINST THE ASSESSEE THAT SUBSCRIPTION IS AVAILABLE ONLY TO THE CLOSELY CONNECTED PERSONS OF THE ASSESSEE. ONCE THE INFERENCE IS AGAINST THE AS SESSEE THAT THE ISSUE IS SUBSCRIBED BY ITS CLOSELY CONNECTED PERSON, THE ONUS IS UPON THE ASSE SSEE TO PROVE THE IDENTITY OF THE SUBSCRIBERS AND THEIR CREDITWORTHINESS. 11 27. THERE IS ANOTHER PERCEPTION TO LOOK INTO THE D ECISION OF THE HON'BLE APEX COURT IN THE CASE OF LOVELY EXPORTS PRIVATE LIMITED WHEREIN THE HON'BLE APEX COURT HELD THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE A SSESSEE FROM ALLEGED BOGUS SHARE HOLDERS, WHOSE NAMES ARE GIVEN TO THE ASSESSING OFFICER, THE N THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENT IN ACCORDANCE WI TH LAW, BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY. IN OU R VIEW, FIRST OF ALL, THE ALLEGED BOGUS SHARE HOLDERS SHOULD BE IN EXISTENCE, ONLY THEN THE DEPARTMENT MAY BE IN A POSITION TO REOPEN THEIR INDIVIDUAL ASSESSMENT. HOWEVER, IN THE PRESENT APPEALS, THE SHARE APPLICANTS/SHARE SUBSCRIBERS ARE NO MORE IN EXISTEN CE MEANING THEREBY THEIR IDENTITY IS NOT PROVED, THEREFORE, HOW THE DEPARTMENT CAN PROCEED T O REOPEN THEIR INDIVIDUAL ASSESSMENTS. 28. THE HON'BLE MADHYA PRADESH HIGH COURT AFFIRMED THE DECISION OF M/S RATHI FINLEASE LIMITED (SUPRA) IN THE CASE OF M/S S TL EXTRUSION PRIVATE LIMITED (2011) 333 ITR 269, RELIED UPON BY BOTH THE SIDES BEFORE US. WE FIND THAT THE FACTS IN STL EXTRUSION ARE MATERIALLY DIFFERENT FROM BOTH THE ASSESSEES, NAMEL Y, M/S AGRAWAL COAL CORPORATION AS WELL AS FROM M/S RATHI FINLEASE LIMITED. IN THE CASE OF M/S STL EXTRUSION ON RECEIPT OF CONFIRMATION OF SHARE APPLICANTS, EXCEPT OBSERVING DISCREPANCIES IN CONFIRMATION, THE ASSESSING OFFICER NEITHER ASKED ANYTHING FROM THE A SSESSEE NOR MADE ANY INQUIRY TO ARRIVE AT THE CONCLUSION THAT SHARE APPLICANTS WERE BOGUS. H OWEVER, IN THE PRESENT APPEAL, DETAILED INQUIRIES WERE MADE, NOTICES RECEIVED UNSERVED, COM MISSION ALSO RETURNED EMPTY HANDED AS THE SHARE SUBSCRIBING COMPANIES WERE FOUND NON-EXIS TENT. IN THAT SITUATION, THE HON'BLE HIGH COURT CONCLUDED THAT ONCE EXISTENCE OF AN INVE STOR/SHARE HOLDER IS PROVED, ONUS SHIFTS TO THE REVENUE TO ESTABLISH THAT EITHER THE SHARE A PPLICANTS ARE BOGUS OR IMPUGNED MONEY BELONGS TO THE ASSESSEE ITSELF. THE CONTRARY FINDIN G IN THESE CASES WERE CONFRONTED TO THE ASSESSEE BY THE ASSESSING OFFICER BUT THE ASSESSEE IN SPITE OF SUFFICIENT OPPORTUNITY PROVIDED, FAILED TO PROVE THE EXISTENCE OF SUCH SHARE APPLICA NTS COMPANIES AS THE CORRECT ADDRESSES WERE NOT PROVIDED TO THE ASSESSING OFFICER AND EVEN THE DIRECTORS OR ANY OF THE EMPLOYEES OR BOOKS OF ACCOUNT WERE NOT PRODUCED. THEREFORE, THE ONLY CONCLUSION ARRIVED AT BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/ S RATHI FINLEASE LIMITED THAT THE ASSESSEE FAILED TO DISCHARGE BURDEN WITH REGARD TO CREDITS I N ITS BOOKS AND THE EXISTENCE OF ITS CREDITORS, CONSEQUENTLY, ADDITION U/S 68 WAS SUSTAI NED. THIS DECISION IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT APPEALS BECAUSE IDENTIT Y OF SHARE APPLICANT ITSELF WAS NOT PROVED. THE PRINCIPLE LAID DOWN IN THE CASE OF M/S RATHI FI NLEASE LIMITED WAS RECENTLY AFFIRMED BY HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF ST L EXTRUSIONS, IT HAS BECOME BINDING PRECEDENT ON THE TRIBUNAL ESPECIALLY WHEN THE DECIS ION OF THE HON'BLE APEX COURT IN THE CASE OF LOVELY EXPORTS WAS VERY MUCH AVAILABLE. HON'BLE JURISDICTIONAL HIGH COURT WHILE COMING TO A PARTICULAR CONCLUSION FOLLOWED THE DECISION OF TH E HON'BLE KARNATAKA HIGH COURT IN CIT V. ASK BROTHERS LIMITED (2011) 333 ITR 333 AND DULY CO NSIDERED THE DECISION FROM THE HON'BLE APEX COURT IN CIT V. LOVELY EXPORTS PRIVATE LIMITE D AND STELLER INVESTMENT LIMITED (SUPRA). IN ANOTHER LATEST DECISION IN CIT V. OASIS HOSPITAL ITIES PRIVATE LIMITED, UP BONE MILLS INDIA LIMITED AND VIJAY POWER GENERATORS LIMITED, ETC. (2 011) 333 ITR 119 (DEL), IDENTICALLY HELD THAT IDENTITY AND CREDIT WORTHINESS OF SHARE APPLIC ANTS WAS NOT PROVED, THEREFORE, THE ADDITION U/S 68 OF THE ACT WAS JUSTIFIED. WHILE COM ING TO THE AFORESAID DECISION THE HON'BLE DELHI HIGH COURT CONSIDERED THE FOLLOWING DECISIONS :- 1. BHOLA SHANKAR COLD STORAGE P. LTD. V. JCIT; (200 4)270 ITR 487 (CAL (PARA 40) 2. CIT V. AKJ GRANITES P. LTD. (2008) 301 ITR 298 ( RAJ) (PARA 18) 12 3. CIT V. ARUNANANDA TEXTILES P. LTD. (2011) 333 IT R 116 (KARN) (PARA 17) 4. CIT V. ASK BROTHERS LTD. (2011) 333 ITR 111 (KAR N) 5. CIT VS. CREATIVE WORLD TELEFILMS LTD. (2011) 333 ITR 100 (BOM) 6. CIT VS. DIVINE LEASING & FINANCE LTD. (2008) 299 ITR 268 (DEL) 7. CIT V. DOLPHIN CANPACK LTD. (2006) 283 ITR 190 ( DELHI) 8. CIT V. K.C. FIBERS LTD. (2011) 332 ITR 481 (DEL HI) 9. CIT V. LOVELY EXPORTS P. LTD. (2009) 319 ITR (ST .) 5 (HC) 10.CIT V. MOHANKALA (P) (2007) 291 ITR 278 (SC) 11.CIT V. SOPHIA FINANCE LTD. (1994) 205 ITR 98 (DE L) 12.CIT V. STELLER INVESTMENT LTD. (1991) 192 ITR 28 7 (DEL) 13.CIT V. STELLER INVESTMENT LTD. (2001) 251 ITR 26 3 (S.C.) 14.CIT V. VALUE CAPITAL SERVICES P. LTD. (2008) 307 ITR 334 (DEL) 15. MADHURI INVESTMENT PVT. LTD. V. ACIT(ITA NO. 11 0 OF 2004 DATED 18.2.2006 (KARN.) 16. SHREE BARKHA SYNTHETICS LTD. VS. ACIT; (2006) 2 83 ITR 377 (RAJ.) 29. AS PER THE PROVISIONS OF SECTION 68 OF THE ACT, IN CASE THE ASSESSEE HAS NOT BEEN ABLE TO GIVE SATISFACTORY EXPLANATION IN RESPECT OF NATU RE AND SOURCE OF ANY SUM OR IF IN THE OPINION OF THE ASSESSING OFFICER SUCH EXPLANATION I S NOT SATISFACTORY, THE ASSESSING OFFICER MAY TREAT THE SAME AS UNDISCLOSED INCOME AND ADD I T TO THE INCOME OF THE ASSESSEE MEANING THEREBY THE ASSESSEE IS REQUIRED TO GIVE SA TISFACTORY EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH SUMS FOUND CREDITED IN THE BOOKS OF ACCOUNT. WHAT KIND OF PROOF IS TO BE FURNISHED BY THE ASSESSEE IS A QUESTION. IT HAS CO ME UP FOR DISCUSSION IN VARIOUS JUDGMENTS RENDERED BY VARIOUS HON'BLE COURTS INCLUDING HON'BL E SUPREME COURT AND HIGH COURTS. THE LAW DISCUSSED BY THE HON'BLE COURT IN THE CASE OF C IT V. DIVINE LEASING & FINANCE LIMITED (2008) 299 ITR 268 IS ALSO AN IMPORTANT DECISION TO QUOTE. A DELICATE BALANCE HAS TO BE MAINTAINED. THE HON'BLE DELHI HIGH COURT IN CIT V. DOLPHIN CANPACK LTD.; 283 ITR 190 QUOTED AT PAGE 193 THE FOLLOWING OBSERVATIONS :- ....CREDIT ENTRY RELATES TO THE ISSUE OF SHARE CAP ITAL, THE INCOMETAX OFFICER IS ALSO ENTITLED TO EXAMINE WHETHER THE ALLEGED SHAREHOLDERS DO IN FACT EXIST OR NOT. SUCH AN INQUIRY WAS CONDUCTED BY THE ASSESSING OFFICER IN THE PRESENT C ASE. IN THE COURSE OF THE SAID INQUIRY, THE ASSESSEE HAD DISCLOSED TO THE ASSESSING OFFICER NOT ONLY THE NAMES AND THE PARTICULARS OF THE SUBSCRIBERS OF THE SHARES BUT ALSO THEIR BANK ACCOU NTS AND THE PERMANENT ACCOUNT NUMBERS ISSUED BY THE INCOMETAX DEPARTMENT. SUPER ADDED TO ALL THIS WAS THE FACT THAT THE AMOUNT RECEIVED BY THE COMPANY WAS ALL BY WAY OF CHEQUES. THIS MATERIAL WAS, IN THE OPINION OF THE TRIBUNAL, SUFFICIENT TO DISCHARGE THE ONUS THAT LAY UPON THE ASSESSEE. THE HON'BLE HIGH COURT TOOK NOTE OF MANY OTHER JUDG MENTS OF MANY OTHER HIGH COURTS AND ON ANALYSIS OF THOSE JUDGMENTS, FORMULATED THE FOLL OWING PROPOSITIONS WHICH EMERGE AS UNDER (DIVINE LEASING & FINANCE LIMITED; 299 ITR PA GE 282 (DEL) :- 13 IN THIS ANALYSIS, A DISTILLATION OF THE PRECEDENTS YIELDS THE FOLLOWING PROPOSITIONS OF LAW IN THE CONTEXT OF SECTION 68 OF THE INCOME TAX ACT. THE A SSESSEE HAS TO PRIMA FACIE PROVE THE IDENTITY OF THE CREDITOR/SUBSCRIBER THE GENUINENESS OF THE TRANSACTION, NAMELY, WHETHER IT HAS BEEN TRANSMITTED THROUGH BANKING OR OTHER UNDISPUTABLE CHANNELS THE CREDIT WORTHINESS OR FINANCIAL STRENGTH OF THE CREDITOR/SUBSCRIBER IF RELEVANT DETAILS OF ADDRESS OR PAN, IDENTITY OF THE CREDITOR/SUBSCRIBER ARE FURNISHED TO THE DEPARTMENT ALONG WITH COPIES OF THE SHARE HO LDERS REGISTER, SHARE APPLICATION FORMS, SHARE TRANSFER REGISTERS, ETC. IT WOULD CONS TITUTE ACCEPTABLE PROOF OR ACCEPTABLE EXPLANATION BY THE ASSESSEE. THE DEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWING AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCRIBER FAILS OR NEGLECTS TO RESPON D TO ITS NOTICES THE ONUS WOULD NOT STAND DISCHARGED IF THE CREDITOR /SUBSCRIBER DENIES OR REPUDIATES THE TRANSACTION SET UP BY THE ASSESSEE NOR SHOULD T HE ASSESSING OFFICER TAKE SUCH REPUDIATION AT FACE VALUE AND CONSTRUE IT, WITHOUT MORE, AGAINST THE ASSESSEE AND THE ASSESSING OFFICER IS DUTY BOUND TO INVESTIGATE THE CREDIT WORTHINESS OF THE CREDITOR/SUBSCRIBER, THE GENUINENESS OF THE TRANSAC TION AND THE VERACITY OF THE REPUDIATION. 30. IF THE TOTALITY OF FACTS AND THE JUDICIAL PRON OUNCEMENTS DISCUSSED HEREINABOVE ARE KEPT IN JUXTAPOSITION, IT IS CLEAR THAT THE INITIAL BURDEN IS UPON THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE. IN ORDER TO DISCHARGE ITS BURDEN, TH E ASSESSEE IS REQUIRED TO PROVE THE IDENTITY OF THE SHARE HOLDER THE GENUINE OF TRANSACTION THE CREDIT WORTHINESS OF THE SHARE HOLDER DURING HEARING, SHRI R.K. CHAUDHARY AND SHRI K.K. S INGH THE LEARNED COMMISSIONERS OF INCOME TAX CONTENDED THAT HINDUSTAN CONTINENT PV T. LTD.; AGRAWAL ROAD CARRIERS PVT. LTD. AND SUNI SHARES AND STOCK LIMITED (INTER- CONNECTED WITH EACH OTHER), ARE PAPER CONCERNS. THESE COMPANIES PROVIDED ACCOMMODA TION ENTRY TO VARIOUS PARTIES OF INDORE, BHOPAL, GWALIOR, NAGPUR, SURAT, MUMBAI, AHMEDABAD, VADODARA, AND IN VARIOUS OTHER CITIES THROUGH THEIR BANK ACCOUNTS MA INTAINED AXIS BANK, INDORE, 14 DURING THE PERIOD 1.4.2002 TO 31.3.2005. THE MODUS OPERANDI OPERATED WAS THAT THE ACCOMMODATION ENTRIES WOULD FIRST PAY THE CASH WHIC H WAS DEPOSITED IN BANK ACCOUNTS MAINTAINED IN THE NAME OF M/S YASH ASSOCIA TES, M/S G.R. INVESTMENTS, M/S V.S. TRADERS, PATH PRADARSHAK FINVEST PVT. LTD., M. S. RIBEKA GARG AND BHANURAJ SINGH RANAWAT, ETC. MAINTAINED IN THE SAME BANK BRA NCH (IN DUE COURSE OLD ACCOUNTS WERE CLOSED AND NEW ACCOUNTS IN THE NAME O F NEW CONCERNS WERE OPENED). THEREAFTER, THE AMOUNT WAS TRANSFERRED IN ANY OF TH E ACCOUNT OF HINDUSTAN CONTINENTAL PRIVATE LIMITED, AGRAWAL ROAD CARRIERS PRIVATE LIMITED AND SUNIL SHARES & STOCK LIMITED. IT WAS SUBMITTED THAT ON CERTAIN OCCASION THERE IS INTER-TRANSFER OF FUNDS AMONGST THE THREE COMPANIES, THEN THE CHEQUES WERE ISSUED TO DESIRING PARTIES IN THE GARB OF LOAN OR SHARE CAPITAL. NOT ONLY THAT, THE SHARES OF HINDUSTAN CONTINENTAL WERE CLAIMED TO BE TRADED BY SUNIL SHAR ES & STOCK LIMITED, M/S JAI SHARE FIN LIMITED AND OTHERS THROUGH MANIPULATION G IVING RISE TO ARTIFICIAL HEIGHT SO AS TO ENABLE CERTAIN PARTIES TO RE-INTRODUCE THEIR BLA CK MONEY AS HUGE CAPITAL GAIN. IT WAS CLAIMED THAT IN THOSE CASE ALSO THE CASH WAS DE POSITED FIRST IN CERTAIN ACCOUNT AND THEREAFTER THE FUNDS WERE TRANSFERRED TO THE SH ARE BROKERS INVOLVED IN THE MANIPULATION AND THEN ULTIMATELY TO THE ACCOUNTS OF THE PARTY CONCERNED AS SALE PROCEEDS OF SHARES. IT WAS ALSO SUBMITTED THAT SEB I HAS EVEN PENALISED HINDUSTAN CONTINENTAL PRIVATE LIMITED AND SUNIL SHARES & STOC K PRIVATE LIMITED. THIS ASSERTION OF THE LEARNED COMMISSIONER OF INCOME TAX WAS NOT C ONTROVERTED BY THE ASSESSEE BUT MERELY ARGUED THAT THE MONEY WAS TRANSACTED THR OUGH BANKING CHANNEL AND IN VIEW OF THE DECISION IN THE CASE OF LOVELY EXPORTS THEIR INDIVIDUAL ACCOUNTS CAN BE REOPENED. HOWEVER, AS MENTIONED EARLIER, THE EXIS TENCE OF THESE SHARE SUBSCRIBERS/SHARE APPLICANTS WAS NOT FOUND EXISTENT , THEREFORE, WHERE IS THE QUESTION OF REOPENING THEIR INDIVIDUAL ASSESSMENTS. TRANSAC TION ENQUIRY WAS ALSO MADE (PAGES 1 TO 104) OF THE PAPER BOOK FILED ON 4.5.201 0. PAGES 108 TO 125 OF THE PAPER BOOK DATED 4.5.2010 CONTAINS THE ADJUDICATION ORDER U/S 151 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT READ WITH RULE 5(1) O F THE SEBI (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY THE ADJUDICATING OFFICER). RULES 1995 AGAINST OPTIMATES TEXTILES INDUSTRIES LIMITED (FORMERLY KNO WN AS PRIYANSH SAREE INDUSTRIES 15 LIMITED). VIDE PARA 17 OF THE ORDER (PAGE 125) IT HAS BEEN HELD THAT SUNIL SHARES & STOCKS PRIVATE LIMITED FAILED TO PROVIDE NECESSARY INFORMATION TO THE INVESTIGATING AUTHORITY OF SEBI AND PENALTY OF RS. 2 LACS WAS IMP OSED IN TERMS OF PROVISIONS OF SECTION 15A(A) OF SEBI ACT, 1992 FOR FAILURE TO PRO VIDE NECESSARY INFORMATION TO SEBI. 31. THE HON'BLE APEX COURT IN THE CASE OF VIJAY K UMAR TALWAR V. CIT (2011) 330 ITR 1 (S.C.) ON THE ISSUE U/S 68 READ W ITH SECTION 260A DECIDED IN FAVOUR OF THE REVENUE . IDENTICAL RATIO WAS LAID DOWN BY THE HON'BLE SUPREME COURT IN CASE OF CIT V. BIJU PATNAIK; 160 ITR 674. 32. SO FAR AS THE CONTENTION OF THE LD. COUNSEL FO R ASSESSEE TO THE EFFECT THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH IN THE CASE OF KALANI INDUSTRIES IS CONCERNED, WE DO NOT FIND A NY SUBSTANCE IN THE SAME IN VIEW OF THE FACT THAT THE ADDITION MADE IN THE CASES BEF ORE US WAS AFTER PASSING OF THE ORDER BY THE TRIBUNAL AND THE INQUIRY CONDUCTED BY THE DEPARTMENT THEREAFTER. THE ENQUIRY SO CONDUCTED BY THE DEPARTMENT AFTER THE RE LEVANT ASSESSMENT YEARS INVOLVED IN THE CASE OF KALANI INDUSTRY, IT WAS FOU ND THAT NEITHER THE SHARE APPLICANTS WERE FOUND EXISTING AT THE ADDRESS GIVEN BY THE AS SESSEE NOR AT DIFFERENT ADDRESSES SUPPLIED BY THE ASSESSEE TO THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. AS THE FACTS OF SUBSEQUENT YEAR ARE DI FFERENT, THE DECISION ARRIVED AT BY THE TRIBUNAL IN ASSESSMENT YEAR 2003-04 CANNOT BE A PPLIED TO THE ASSESSMENT YEARS 2005-06 & 2006-07, FACTS OF WHICH ARE MATERIALLY DI FFERENT. 33. THE CONTENTION OF THE LD. COUNSEL FOR ASSESSEE THAT IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS, THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE, AS PER OUR CONSIDERED VIEW, THE CASE OF LOVELY EXPORTS (SUPRA) WILL BE APPLICABLE ONLY AFTER THE IDENTITY OF THE SHARE APP LICANT IS ESTABLISHED. SINCE IN THE INSTANT APPEALS BEFORE US, THE IDENTITY ITSELF HAS NOT BEEN ESTABLISHED, THERE IS NO JUSTIFICATION TO APPLY THE RATIO LAID DOWN BY THE HONBLE SUPREME CO URT IN THE CASE OF LOVELY EXPORTS (SUPRA). 34. THE HONBLE JURISDICTIONAL HIGH COURT IN THE C ASE OF RATHI FINLEASE (SUPRA) HAS CLEARLY LAID DOWN THE PROPOSITION WITH RESPECT TO CIRCUMSTANCES WHEREIN THE IDENTITY IS ESTABLISHED IN CASE THE SHARE APPLICANTS ARE COMPAN IES. IT WAS HELD THAT EVEN FILING OF CONFIRMATION OF SHARE APPLICANTS BY THE ASSESSEE WI LL NOT SERVE THE PURPOSE OF ESTABLISHING THE IDENTITY INSOFAR AS THE INQUIRY CONDUCTED BY TH E ASSESSING OFFICER AND THE LETTER ISSUED BY THE ASSESSING OFFICER WERE RETURNED UNSERVED BY THE POSTAL DEPARTMENT WITH THE REMARK THAT THE ADDRESSEES ARE NOT EXISTING AT THE GIVEN A DDRESSES WHICH CLEARLY ESTABLISHES THAT EITHER THE SHARE APPLICANTS ARE NON-EXISTENT OR IF EXIST, THEN MERELY EXIST ON PAPERS AND NOT IN REAL SENSE, THEREFORE, THEIR IDENTITY IS NOT PR OVED. WITH ALL RESPECT, WITHIN THE TERRITORIAL JURISDICTION OF MADHYA PRADESH, WE ARE BOUND TO FOL LOW THE PROPOSITION OF LAW LAID DOWN BY 16 THE HONBLE JURISDICTIONAL HIGH COURT, WHICH WAS FU RTHER CONFIRMED BY HON'BLE HIGH COURT IN THE CASE OF STL EXTRUSION (SUPRA), AFTER CONSIDERIN G THE PROPOSITION LAID DOWN IN THE CASE OF LOVELY EXPORT (SUPRA), THE FACTS OF WHICH ARE PARI MATERIA ESPECIALLY WHEN THE FACTS OF THE INSTANT APPEALS BEFORE US ARE IDENTICAL TO THE FAC TS WHEREIN THE HONBLE HIGH COURT HAS DECIDED IN FAVOUR OF THE REVENUE WHEREAS THE FACTS IN THE CASE OF LOVELY EXPORTS ARE DISTINGUISHABLE, AS DISCUSSED ABOVE. 35. SO FAR AS THE CONTENTION OF THE LD. COUNSEL FO R THE ASSESSEE THAT THE COMPANY CAN ONLY BE WOUND UP BY THE ORDER OF THE HO NBLE HIGH COURT AND DEATH OF THE COMPANY IS KNOWN TO THE PROCESS OF LAW AND ALSO THA T THE COMPANY IS STILL AVAILABLE ON THE WEBSITE OF THE COMPANY LAW BOARD IS CONCERNED, WE A RE NOT AGREEING WITH THIS PROPOSITION OF THE ASSESSEE BECAUSE HERE IT IS NOT A CASE OF WI NDING PROCESS RATHER IT IS A CASE OF ADMISSIBILITY OF CLAIM OF THE ASSESSEE U/S 68 OF TH E ACT. SINCE THE SHARE APPLICANTS/SHARE SUBSCRIBERS IDENTITY IS NOT PROVED, THEREFORE, THE ASSESSEE CANNOT BE PERMITTED TO TAKE SHELTER OF TECHNICALITIES. EVEN OTHERWISE, WEBSITE EXISTENCE ON THE COMPANY LAW BOARD IS NOT A SOLE PROOF THAT IN FACT THE SHARE APPLICANTS ARE IN EXISTENCE ESPECIALLY WHEN RIGHT FROM THE ASSESSMENT STAGE TO THE STAGE OF THE TRIBUNAL ( THREE STAGES) THE ASSESSEE DID NOT PROVE THE IDENTITY OF THE SHARE APPLICANTS. TECHNICALITI ES ALSO HELP THOSE WHO ARE WITH CLEAN HANDS. HOWEVER, WE ARE IN AGREEMENT WITH THE ARGUMENT OF T HE ASSESSEE THAT THE WINDING UP POWERS OF A COMPANY LIES WITH THE HONBLE HIGH COUR T BUT THIS ISSUE IS NOT BEFORE US, THEREFORE, WE ARE REFRAINING OURSELVES TO COMMENT F URTHER. IT WAS FAIRLY ACCEPTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT IN THE PRESENT APPEAL S MERELY THE ASSESSEE FILED CERTAIN DOCUMENTS WHICH DID NOT PROVE THE IDENTITY BUT DID NOT PRODUCE THE SHARE APPLICANTS/SUBSCRIBERS. AT THE SAME TIME, THE LEARN ED CIT DR TIME AND AGAIN IS HARPING THAT THE SHARE APPLICANTS ARE MERELY PAPER COMPANIES. TH EREFORE, FROM THIS ANGLE ALSO, WE ARE NOT CONVINCED WITH THE ARGUMENT OF THE ASSESSEE. WI TH REGARD TO THE CONTENTION OF LD. AR THAT COPY OF THE INQUIRY CONDUCTED BY THE ASSESSING OFFICER WAS FURNISHED TO THE ASSESSEE ONLY ONE DAY PRIOR TO THE COMPLETION OF ASSESSMENT, WE FOUND THAT THE ASSESSEE HAS GOT FULL OPPORTUNITY TO SUBSTANTIATE ITS CLAIM AND NEGATE TH E REPORT BEFORE THE LD. CIT(A) BUT THE ASSESSEE GROSSLY FAILED TO REBUT THE REPORT REGARDI NG NON-ESTABLISHMENT OF IDENTITY OF SHARE APPLICANTS. THE LD. CIT(A) HAS GOT CO-TERMINUS POWE RS TO DO WHAT THE ASSESSING OFFICER HAS FAILED TO DO. PROCEEDIGNS BEFORE LD. CIT(A) IS ALSO EXTENSION OF ASSESSMENT PROCEEDINGS IN ADDITION TO THE APPELLATE PROCEEDINGS. HOWEVER, INS PITE OF FULL OPPORTUNITY THE ASSESSEE FAILED TO REBUT THE CONTENTS OF THE REPORT WHICH IN DICATED THAT NO SHAREHOLDERS EXIST IN THE NAME OF THE COMPANIES SO PROVIDED BY THE ASSESSEE. EVEN THOUGH, THE REPORT RELIED BY THE ASSESSING OFFICER WAS IN RESPECT OF ANOTHER ASSESSE E BUT THE FACT REMAINS THAT THE INQUIRY WAS IN THE CASE OF SAME SHARE SUBSCRIBERS I.E. M/S. HINDUSTAN CONTINENTAL LTD. & M/S. OPTIMATES TEXTILES IND. LTD. UNDER THESE CIRCUMSTAN CES, THE INQUIRY CONDUCTED IN RESPECT OF M/S. HINDUSTAN CONTINENTAL LTD. & M/S. OPTIMATES TE XTILES IND. LTD. WHICH ARE COMMON APPLICANTS IN THE CASE OF ALL THE ASSESSEES BEFORE US, COULD NOT BE SAID TO BE A RELEVANT AND NOT CONCERNING TO THE ASSESSEE IN THE INSTANT CASES . 36. EVEN IF THE CASES RELIED UPON BY THE LD. COUNS EL FOR THE ASSESSEE, AS MENTIONED/CITED/DISCUSSED IN THE PRECEDING PARAS OF THIS ORDER LIKE DIVINE LEASING & FINANCE LIMITED, DWARKADHEESH INVESTMENT PRIVATE LIMITED, G ANGOR INVESTMENT LIMITED, K.C. FIBRES LIMITED, DOLPHIN CANPACK LIMITED, SHREE BARKHA SYNT HETICS (RAJ.), DOWN TOWN HOSPITALS PRIVATE LIMITED, ILLAC INVESTMENTS PRIVATE LIMITED, ROHINI BUILDERS AND SHREE BARKHA SYNTHETICS (RAJ.) (SUPRA) ARE CONSIDERED, THE HONB LE COURTS HAVE CLEARLY HELD THAT AT LEAST THE ASSESSEE HAS TO POVE THE IDENTITY/EXISTENCE OF THE PERSON IN WHOSE NAMES SHARE APPLICATIONS ARE RECEIVED MEANING THEREBY THE BURDEN LIES ON THE ASSESSEE IS TO ESTABLISH THE 17 IDENTITY/EXISTENCE OF SUCH SHARE HOLDINGS AND ONCE IT IS ESTABLISHED, THE ASSESSEE IS NOT REQUIRED TO PROVE ANYTHING FURTHER. THEREFORE, THE SE JUDICIAL PRONOUNCEMENTS ARE IN FAVOUR OF THE REVENUE AND MAY NOT HELP THE ASSESSEE BECAUS E THE ASSESSEE HAS NOT PROVED THE IDENTITY OF SUCH SHARE APPLICANTS. 37. THE CONTENTION OF THE LD. COUNSEL FOR ASSESSEE TO THE EFFECT THAT THE DECISION OF RATHI FINLEASE BY THE JURISDICTIONAL HIGH COURT WAS RENDERED MUCH PRIOR TO THE DECISION OF THE SUPREME COURT IN THE CASE OF LOVELY EXPORTS (SU PRA) THEREFORE, THE PROPOSITION LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN RATHI FINLEASE CANNOT BE APPLIED AFTER THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS , HAVE NO LEGS TO STAND INSOFAR AS THE JURISDICTIONAL HIGH COURT IN THE CASE OF STL EXTRUS ION WHEREIN CASE OF LOVELY EXPORT WAS RELIED ON, DULY APPROVED ITS PREVIOUS PROPOSITION LAID DOW N IN CASE OF RATHI FINLEASE. HE FURTHER SUBMITTED THAT JURISDICTIONAL HIGH COURT IN THE CAS E OF ACIT VS. SHREE KELA PRAKASHAN PRIVATE LIMITED AFFIRMED THE DECISION OF THE TRIBUNAL REPOR TED AT (2010) 14 ITJ 539 DATED 8.10.2009, THEREFORE, THE LATER DECISION HAS TO BE FOLLOWED. A S PER OUR CONSIDERED VIEW, THE CONTENTION OF THE LD. COUNSEL FOR ASSESSEE IS WHOLLY MISPLACED INSOFAR AS DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS (SUPRA) ITSELF PRESUPPOSES THE ESTABLISHMENT OF IDENTITY AS A PRE-CONDITION FOR NOT MAKING ADDITION IN THE HAND S OF THE ASSESSEE COMPANY. IN THE CASE OF SHRI KELA PRAKASHAN PRIVATE LIMITED, THE TRIBUNAL H AS GIVEN A CATEGORICAL FINDING THAT THE ASSESSEE HAS PROVED THE IDENTITY OF THE SUBSCRIBERS . THEREFORE, NO ADDITION WAS WARRANTED IN THE HANDS OF THE ASSESSEE. HOWEVER, IN THE INSTAN T CASE BEFORE US, THE IDENTITY OF THE SUBSCRIBERS HAS NOT BEEN ESTABLISHED AS PER OUR DIS CUSSION DETAILED HEREINABOVE. THIS FINDING OF THE TRIBUNAL WAS AFFIRMED BY THE HON'BLE HIGH CO URT AND, THEREFORE, THE APPEAL FILED BY THE REVENUE WAS DISMISSED, WHEREAS IN THE PRESENT A PPEAL THE MATTER WAS INVESTIGATED BY THE ASSESSING OFFICER AND EVEN THE INSPECTOR OF THE DEPARTMENT WHO WAS DIRECTED BY THE ASSESSING OFFICER TO KNOW THE WHEREABOUTS REPORTED THAT THE SHARE SUBSCRIBING COMPANIES ARE NON-EXISTENT AND THE ADDRESSEES GIVEN OF FOUR P LACES WERE ALSO FOUND TO BE FICTITIOUS. THE SUMMONS/NOTICES ISSUED BY THE DEPARTMENT WERE A LSO RETURNED UNSERVED BY THE POSTAL DEPARTMENT WITH THE REMARK THAT NO SUCH COMPANIES A RE EXISTING AT THE GIVEN ADDRESSES, THEREFORE, IN THE PRESENT APPEALS, THE IDENTITY OF SHARE HOLDERS WAS NOT PROVED AT ANY STAGE, CONSEQUENTLY, THE DECISION IN THE CASE OF SHRI KELA PRAKASHAN PRIVATE LIMITED IS NOT APPLICABLE BEING ON DIFFERENT FINDINGS, THEREFORE, MAY NOT HELP THE ASSESSEE. LIKEWISE, THE HON'BLE KARNATKA HIGH COURT IN THE CASE OF CIT VS. ARUNANANDA TEXTILES PRIVATE LIMITED (2011) 333 ITR 116 DEALT WITH IDENTICAL ISSUE AND THAT TOO AFTER CONSIDERING THE DECISION IN THE CASE OF LOVELY EXPORTS PRIVATE LIMITED AND STELLER INVES TMENT LIMITED. THE HON'BLE COURT HELD AS UNDER :- IT IS NOT FOR THE ASSESSEE TO PLACE MATERIAL BEFOR E THE ASSESSING OFFICER IN REGARD TO THE CREDIT WORTHINESS OF THE SHARE HOLDERS. IF THE ASSESSEE HAS GIVEN THE ADDRESSES OF THE SHAR E HOLDERS AND THEIR IDENTITY IS NOT IN DISPUTE , WHETHER THEY WERE CAPABLE OF INVESTING, THE ASSESSING OFFICER SHALL INVESTIGATE. IT IS NOT FOR THE ASSESSEE TO ESTABLISH BUT IT IS FOR THE DEPARTMENT TO INQUIRE WITH THE INVESTORS ABOUT THEI R CAPACITY TO INVEST THE AMOUNT IN THE SHARES . IF THE AFORESAID CONCLUSION IS ANALYSED, ONE FACT I S CLEAR THAT THE IDENTITY OF THE SHARE HOLDERS HAS TO BE PROVED BY THE ASSESSEE. HOWEVER, IN THE PRESENT APPEALS THE IDENTITY ITSELF IS IN DISPUTE, THEREFORE, THE AFORESAID DECISION CLEARLY SUPPORTS THE CASE OF THE REVENUE. 38. LIKEWISE IN THE CASE OF CIT V. ASK BROTHERS ( 2011) 333 ITR 111 (KARN.) THE SHAREHOLDERS ADMITTED THE PAYMENT OF AMOUNT FOR SHA RES TO BE ALLOTTED. IN THESE 18 CIRCUMSTANCES, HON'BLE COURT HELD THAT THE AMOUNTS OF SHARE CAPITAL CANNOT BE ADDED IN THE ASSESSEES HANDS. HOWEVER, IN THE PRESENT APPEALS, THE SHARE APPLICANTS ITSELF ARE NON- EXISTENT, CONSEQUENTLY, THERE IS NO QUESTION OF ADM ITTING BY THE SHARE HOLDERS REGARDING MONEY INVESTED BY THEM AND THEN SHARES ALLOTTED TO THEM. THIS JUDICIAL PRONOUNCEMENT ALSO GOES AGAINST THE ASSESSEE. HON'BLE DELHI HIGH COUR T IN A LATER DECISION IN VIJAY POWER GENERATORS LIMITED V. DIRECTOR OF INCOME TAX AND OT HERS (ITA NO. 514 OF 2007) (2011) 333 ITR 119 (DEL) AT PAGE 136 THE APPEAL WAS ADMITTED O N THE FOLLOWING QUESTION OF LAW :- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE INCOME TAX APPELLATE TRIBUNAL HAS ERRED IN LAW IN SUSTAINING THE ADDITIO N OF RS. 25,23,500/- ON ACCOUNT OF RECEIPT OF SHARE APPLICATION MONEY ? 37. THE FACTS LEADING TO THE ADMISSION OF THE AFORE SAID QUESTION WERE AS FOLLOWS :- THE ASSESSEE IN THE INCOME TAX RETURN FOR THE ASSE SSMENT YEAR 1997-98 HAD SHOWN RECEIPTS IN THE FORM OF SHARE MONEY SUBSCRIBED OF 1 5 PER CENT TO WHOM THE SHARES WERE LATER ON ALLOCATED. TOTAL MONEY ON THIS ACCOUNT RECEIVED BY THE ASSESSEE WAS RS. 25,23,500. THE INVESTMENT IN THESE SHARES WAS RANGING FROM RS. 1 LAKH TORS. 2.5 LAKHS. IN ORDER TO VERIFY THE GENUINENESS OF THESE TRANSACTIONS, THE ASSESSING OF FICER ISSUED SUMMONS TO THESE PARTIES WHICH WERE RECEIVED BACK EITHER WITH THE REMARKS I NCOMPLETE ADDRESS OR IN SPITE OF BEST EFFORTS THE ADDRESS NOT FOUND OR NOT MET OR NO SUCH PERSON OR NOT FOUND, ETC. THE ASSESSING OFFICER THEREAFTER ASKED THE ASSESSEE TO PRODUCE THESE PERSONS WHO HAD INTRODUCED THE SHARE CAPITAL IN THE COMPANY. THE ASSESSEE WAS ALSO ASKED TO FURNISH CHEQUE NUMBERS/DRAFT NUMBERS FOR PAYMENT OF SHARE APPLICAT ION MONEY ALONG WITH THE NAMES OF THE DRAWEE BANK AND BRANCH OF THE BANK. HOWEVER, NO D ETAILS WERE FURNISHED DESPITE VARIOUS OPPORTUNITIES. THE ASSESSEE COULD NOT EVEN IDENTIFY THE ENTRIES IN THE BANK ACCOUNT REGARDING THE RECEIPTS OF THE SHARE APPLICATION MONEY NOR COU LD HE PRODUCE THE RELEVANT LEDGER FOR VERIFYING THE RECEIPTS, ACCORDING TO THE ASSESSING OFFICER. ULTIMATELY, THE ASSESSEE PRODUCED FIVE PERSONS WHOSE STATEMENTS WERE RECORDED. THE A SSESSEE DID NOT CROSS EXAMINE THESE PERSONS. THEY DID NOT FURNISH ANY PROOF OF THEIR ID ENTITY IN THE FORM OF RATION CARD, ELECTION CARD OR PASSPORT DESPITE REQUEST BY THE ASSESSING O FFICER. THE ASSESSING OFFICER AFTER ANALYSING THE STATEMENTS OF THESE PERSONS OBSERVED THAT THESE FIVE PERSONS WERE SMALL AGRICULTURISTS AND HAD NO MEANS TO MAKE INVESTMENT IN THE COMPANY. 38 . IN THESE CIRCUMSTANCES, THE ENTIRE RECEIPT OF RS .25,23,500/- IN RESPECT OF THESE FIVE PERSONS WAS TREATED AS UNEXPLAINED INVES TMENT AND MADE THE ADDITION U/S 68 OF THE ACT. 39. THE LEARNED COMMISSIONER RE-EXAMINED THE ENTIR E ISSUE ANALYSING THE EVIDENCE IN THE LIGHT OF THE JUDGMENT IN THE CASE O F STELLER INVESTMENT LIMITED AND SOPHIA FINANCE LIMITED (SUPRA) AND ULTIMATELY CONFIRMED TH E ADDITION. ON FURTHER APPEAL, THE TRIBUNAL AFFIRMED THE DECISION OF LEARNED COMMISSIO NER OF INCOME TAX (APPEALS) IN THE FOLLOWING MANNER :- 15. HAVING CAREFULLY EXAMINED THE MATERIAL AVAILAB LE ON RECORD AND THE ORDERS OF THE LOWER AUTHORITIES, WE FIND THAT SHARES WERE NOT QUOTED ON THE STOCK EXCHANGE AND IT WAS SUBSCRIBED BY THE PERSONS WHO WERE KNOWN TO THE ASSESSEE BUT D URING THE COURSE OF HEARING DESPITE VARIOUS OPPORTUNITIES THE ASSESSEE COULD NOT PRODUC E THEM FOR VERIFICATION NOR WAS ANY EVIDENCE FILED WITH REGARD TO THEIR FINANCIAL STATU S. OUT OF 15 SUBSCRIBERS, 5 SUBSCRIBERS WERE 19 PRODUCED BEFORE THE ASSESSING OFFICER AND DURING TH E COURSE OF THE EXAMINATION IT WAS ADMITTED THAT THEY WERE SMALL AGRICULTURISTS AND WE RE CULTIVATING THE AGRICULTURAL LAND AFTER TAKING IT ON LEASE FROM OTHER AGRICULTURISTS. NO E VIDENCE REGARDING THE AGRICULTURAL HOLDINGS WERE PRODUCED BEFORE THE ASSESSING OFFICER NOR HAVE THEY FILED ANY EVIDENCE WITH REGARD TO THEIR FINANCIAL SOUNDNESS WHEREAS THE INVESTMENT IN SHARES WERE MADE BETWEEN RS. 1 LAKH TO RS. 2.5 LAKHS. COPY OF THE STATEMENT ARE (SIC. IS) PLACED ON RECORD AND FROM ITS PERUSAL ONE WOULD FIND THAT ALL THESE 5 PERSONS ARE OF ORDINARY STATUS AND THEY HAVE NO MEANS TO INVEST A HUGE SUM IN SHARES WITH THE ASSESSEE. 16. SO FAR AS THE LEGAL POSITION AND THE JUDGMENT O F THE APEX COURT IN THE CASE OF STELLER INVESTMENT LTD. (2001) 251 ITR 263 IS CONCERNED, WE ARE OF THE VIEW THAT THE RATIO LAID DOWN IN STELLER INVESTMENT LTD. (2001) 251 ITR 263 IS AP PLICABLE ONLY IN THOSE CASES WHERE THE ASSESSEE IS A LIMITED COMPANY AND THE SHARES WERE Q UOTED IN THE STOCK EXCHANGE. ONCE THE SHARES ARE QUOTED IN THE STOCK EXCHANGE AND THE SUB SCRIPTION IS OPEN TO PUBLIC AT LARGE, THE ASSESSEE CANNOT HAVE CONTROL OVER THE SUBSCRIPTION AND ALSO CANNOT MAKE A VERIFICATION OF THE SUBSCRIBERS AS SUBSCRIPTION CAN BE DONE BY ANY PERS ON. BUT WHENEVER THE ISSUE IS SUBSCRIBED WITHOUT QUOTING IT ON THE STOCK EXCHANGE BY A LIMIT ED OR PRIVATE LIMITED COMPANY THE PRESUMPTION IS VERY STRONG AGAINST THE ASSESSEE THA T SUBSCRIPTION IS AVAILABLE ONLY TO THE CLOSELY CONNECTED PERSONS OF THE ASSESSEE. ONCE TH E INFERENCE IS AGAINST THE ASSESSEE THAT THE ISSUE IS SUBSCRIBED BY ITS CLOSELY CONNECTED PE RSONS, THE ONUS IS UPON THE ASSESSEE TO PROVE THE IDENTITY (SIC. IDENTIFICATION) OF THE SUB SCRIBERS AND THEIR CREDIT WORTHINESS. THEIR LORDSHIPS OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF BHOLA SHANKAR COLD STORAGE P. LTD. V. JOINT CIT (2004) 270 ITR 487 HAVE EXAMINED THE JUDGMENT OF THE APEX COURT IN THE CASE OF STELLER INVESTMENT LTD. AND THAT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF SOPHIA FINANCE LTD (1994) 205 ITR 98 AND HAVE HELD THAT IN THE CASE OF STELLER INVESTMENT LTD. THE RATIO LAID DOWN BY THE FULL BENCH OF THE DELHI HIGH COURT WAS NOT OVERRULED AND IT STILL HOLDS THE FIELD. WHENEVER THE ISSUE WAS SUBSCRIBED BY CLO SELY CONNECTED PERSONS OF THE ASSESSEE AND THE ASSESSEE HAS FAILED TO PROVE THE IDENTITY A ND CREDITWORTHINESS THE ADDITION UNDER SECTION 68 CAN BE MADE IN THE HANDS OF THE ASSESSEE . IN THE INSTANT CASE, THE ASSESSEE COULD NOT PLACE ANY EVIDENCE ON RECORD TO PROVE THE IDENT ITY AND THE CREDITWORTHINESS OF THE SO- CALLED SUBSCRIBERS AND THE ASSESSING OFFICER WAS JU STIFIED IN TREATING THIS INVESTMENT AS UNEXPLAINED AND MADE THE ADDITION UNDER SECTION 68 OF THE INCOME TAX ACT. WE, THEREFORE, FIND NO INFIRMITY IN THE ORDER OF THE LEARNED COMMI SSIONER OF INCOME TAX (APPEALS). ACCORDINGLY, WE CONFIRM THE SAME. XXX XXX XXX XXX 42. WE HAVE CONSIDERED THESE SUBMISSIONS IN SO FAR AS THE STATEMENTS OF THE PERSONS WHO ARE PRODUCED ARE CONCERNED, THEY ARE GONE INTO AND ANALYSED BY THE THREE AUTHORITIES BELOW ON THE BASIS OF WHICH FINDING OF FACT IS ARRI VED AT THAT NEITHER THEIR IDENTITY IS ESTABLISHED NOR THEIR CAPACITY TO INVEST THIS KIND OF MONEY IS PROVED. THEY ARE ALL AGRICULTURISTS AND HAD NOT PRODUCED A SINGLE DOCUME NT TO SUPPORT THEIR VERSION. THIS IS A FINDING OF FACT AND THERE IS NO REASON TO INTERFERE WITH THE SAME. LEARNED COUNSEL FOR THE REVENUE HAD DRAWN OUR ATTENTION TO VIEW ALL THESE S TATEMENTS. ONE MR. SUKH LAL SINGH IN HIS STATEMENT HAD STATED THAT HE HAD PURCHASED THE SHAR ES OF RS. 1,90,000. OUT OF THE SHARE MONEY, HE HAD PAID RS. 70,000 OUT OF HIS OWN SOURCE AND RS. 1,20,000 WAS RECEIVED BY HIM FROM HIS FRIENDS AND WAS PAID IN MANY INSTALMENTS. LIKEWISE ONE MR. VIJAY KUMAR WHO ALSO PURPORTEDLY PURCHASED THE SHARES OF RS. 1.90 LAKHS STATED THAT THE PAYMENTS WERE MADE BY HIM IN CASH IN MANY INSTALMENTS. HE ALSO STATED TH AT HE PERSONALLY KNEW THE DIRECTORS OF THE COMPANY AND HAD VERY OLD RELATION WITH HIM. 20 ON THE BASIS OF SUCH STATEMENT WITHOUT AN IOTA OF DOCUMENTARY EVIDENCE TO SUPPORT, WE ARE OF THE OPINION THAT THE FINDINGS OF THE AUTH ORITIES BELOW CANNOT BE TREATED AS PERVERSE. IT IS ON PROPER ANALYSIS OF THE STATEMEN TS OF THESE PERSONS WHICH WERE RECORDED BY THE ASSESSING OFFICER. WHEN WE KEEP IN MIND THE PR INCIPLE OF LAW LAID DOWN IN THE RATIO IN THE AFORESAID DECISIONS AND APPLY THE SAME TO THE FACTS OF THIS CASE, IT IS DIFFICULT TO FIND FAULT WITH THE APPROACH OF THE TRIBUNAL. WE HAVE TO KEEP IN MI ND THAT THE RATIO IN A DECISION CANNOT BE APPLIED IN EACH CASE. THE FACTS AND CIRCUMSTANCES O F EACH CASE ARE TO BE WEIGHED AND EXAMINED AS TO WHETHER A PARTICULAR RATIO DECIDED I N A PARTICULAR CASAE COULD BE APPLIED. AS NOTED ABOVE, THE INITIAL ONUS IS UPON THYE ASSESSEE TO ESTABLISH THREE THINGS NECESSARY TO OBVIATE THE MISCHIEF OF SECTION 68 OF THEACT. THESE ARE : (I) THE IDENTITY OF INVESTORS; (II) THEIR CREDITWORTHINESS/INVESTMENTS, AND (III) THE GENUINE NESS OF THE TRANSACTION. ONLY WHEN THESE THREE INGREDIENTS ARE ESTABLISHED PRIMA FACIE IT IS ONLY THEN THE DEPARTMENT IS REQUIRED TO UNDERTAKE FURTHER EXERCISE AS DISCUSSED ABOVE. IN THE INSTANT CASAE, NO SUCH DOCUMENTS ARE FILED AND NO STEPS TAKEN BY THE ASSESSEE WHICH COUL D ESTABLISH THE AFORESAID THREE INGREDIENTS. ADDITIONAL EVIDENCE IN THE FORM OF BANK STATEMENT, ETC. IS GIVEN BUT THE ASSESSEE HAS NOT DONE ANYTHING TO PROVE THESE BANK ACCOUNTS. ON THIS EVIDENCE PRODUCED BY THE ASSESSEE REMAND REPORT WAS CALLED FOR AND THE ASSESSING OFFI CER IN HIS REMAND REPORT DATED DECEMBER 23, 2003 SUBMITTED AS UNDER :- NONE OF THE 6 ALLEGED SHAREHOLDERS PRODUCED ANY D OCUMENTS IN SUPPORT OF THEIR IDENTITY. THE FACT WAS INTIMATED TO THE ASSESSEE V IDE ORDER SHEET ENTRIES DATED JUNE 13, 2002 AND MARCH 17, 2003 . THEY ARE NOT ASSESSED TO TAX. THEY HAVE NOT PRODUCED ANY DOCUMENTARY EVIDENCE SHOWING THAT THEY ARE CAPABLE OF SAVING/IN VESTING ANY AMOUNT AT ALL. IF THE PERSONS PRODUCVED ARE NOT CARRYING RELEVANT DOCUMENTS TO ES TABLISH THEIR IDENTITY, CREDITWORTHINESS AT THE TIME OF RECORDING OF THE STATEMENTS AND FURN ISHING PHOTO COPY OF SOME DOCUMENTS AFTER A GAP OF SUBSTANTIAL PERIOD, IT IS NOT POSSIB LE TO VERIFY ITS CORRECTNESS UNLESS THE CONCERNED PERSONS ARE PRODUCED WITH NECESSARY DOCUM ENTARY EVIDENCE (IN ORIGINAL) IN SUPPORT OF THEIR IDENTITY AND CREDITWORTHINESS. THE ASSESSEE HAS NOT EVEN FURNISHED BASIC REQUIREM ENTS OF SHARE CAPITAL I.E. CHEQUE NUMBER, DATE, AMOUNT(S), DETAILS OF DRAWEE BANK, ET C. THE ASSESSEES BANK ACCOUNT WAS ALSO NOT PRODUCED. HENCE, THE ASSESSEES CLAIM REGARDIN G INVESTMENT BY THE SHAREHOLDERS REMAINED UNVERIFIABLE. NO COMMENTS CAN NOW BE OFFE RED AT THIS STAGE WITHOUT NECESSARY VERIFICATION. PROOF OF IDENTITY PRODUCED AT A LATE R STAGE CANNOT BE VERIFIED IN THE ABSENCE OF CONCERNED PERSONS ORIGINAL DOCUMENTS. 45. THE ORDER OF THE COMMISSIONER OF INCOME TAX (AP PEALS) CLEARLY DEMONSTRATES THAT THIS REMAND REPORT WAS SENT TO THE ASSESSEE WHO HAD SUBM ITTED HIS REPLY DATED FEBRUARY 10, 2004 WHICH IS EVEN REPRODUCED IN THE ORDER AND THER EAFTER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DISCUSSED THE SAME IN THE LIGH T OF CERTAIN DECISIONS CITED BEFORE HIM AND CAME TO THE CONCLUSION THAT THE ASSESSEE HAD NO T GIVEN SATISFACTORY EVIDENCE TO DISCHARGE THE ONUS. IT HAD MERELY GIVEN NAMES OF T HE PARTIES WITHOUT ANYTHING MORE. THAT WOULD NOT BE SUFFICIENT COMPLIANCE. EVEN THE BANK STATEMENT OF THE ASSESSEE WHICH WAS SUBMITTED HAS NOT BEEN PROVED. 21 46. FOR ALL THESE REASONS, WE ARE OF THE VIEW THAT THE ASSESSEE HAD NOT BEEN ABLE TO DISCHARGE THE ONUS PROBANDI AND ADDITION WAS RIGHTL Y MADE. WE, THEREFORE, ANSWER THE QUESTION IN THE NEGATIVE AND DISMISS THIS APPEAL OF THE ASSESSEE. 40. IF THE AFORESAID CONCLUSION DRAWN BY THE HON'B LE HIGH COURT IS KEPT IN JUXTAPOSITION WITH THE FACTS OF THE PRESENT APPEAL, ONE FACT IS CLEARLY OOZING OUT THAT THE ASSESSEE HAS NOT DISCHARGED ITS ONUS TO THE SATISFA CTION OF THE ASSESSING OFFICER AND EVEN DID NOT PROVE THE IDENTITY OF THE SHARE APPLICANTS. MER ELY GIVING THE NAMES OF SUCH SHARE APPLICANTS IS NOT ENOUGH ESPECIALLY WHEN THESE APPL ICANTS WERE FOUND NON-EXISTENT, THEREFORE, THIS JUDICIAL PRONOUNCEMENT CLEARLY GOES AGAINST THE ASSESSEE. IT IS PERTINENT TO MENTION HERE THAT WHILE COMING TO THE AFORESAID CON CLUSION THE HON'BLE COURT ALSO DISCUSSED THE DECISIONS LIKE AKJ GRANITES PRIVATE LIMITED; 30 1 ITR 291 (RAJ), CIT V. ARUNALANDA TEXTILES PVT. LTD. (2011) 333 ITR 116 (KARN.) (PARA 17) ORDE R DATED 2 ND MARCH, 2010, CIT V. ASK BROTHERS (2011) 333 ITR 111 (KARN.) ORDER DATED 18 TH FEBRUARY, 2010 . IN BOTH THESE CASES, THE HON'BLE KARNATAKA HIGH COURT HAS DULY DISCUSSED THE DECISION IN LOVELY EXPORTS PVT. LTD. AND STELLER INVESTMENT LTD. (SUPRA) MEANING THEREBY THAT BOTH THESE DECISIONS WERE RENDERED AFTER THE PRONOUNCEMENTS OF DECISIONS FROM HON'BLE APEX COURT IN LOVELY EXPORTS PRIVATE LIMITED (SUPRA). AS DISCUSSED IN OTHER PAR AS OF THIS ORDER, SO FAR AS THE DECISION IN THE CASE OF M/S STL EXTRUSION VS. DCIT (2010) 15 ITJ 87 2 (I.T.A.T., INDORE) IS CONCERNED, THAT DECISION WAS RENDERED BY THE BENCH ON THE FACTS THA T SINCE THE ASSESSEE PROVED THE IDENTITY OF THE INVESTORS, THEREFORE, IT WAS HELD THAT NO AD DITION CAN BE MADE IN THE HANDS OF THE ASSESSEE COMPANY WHEREAS IN THE PRESENT APPEALS, TH E EXISTENCE/IDENTITY OF SHARE SUBSCRIBERS WAS NOT PROVED, CONSEQUENTLY, THESE JUD ICIAL PRONOUNCEMENTS RATHER HELPS THE REVENUE AND NOT THE ASSESSEE. 41. EVEN OTHERWISE, IF THE RATIO LAID DOWN BY THE HON'BLE APEX COURT IN THE CASE OF LOVELY EXPORTS PRIVATE LIMITED, WHILE DISMI SSING THE SPECIAL LEAVE PETITION, IT IS CLEAR THAT THE INITIAL BURDEN IS UPON THE ASSESSEE TO PRO VE THE IDENTITY OF SHARE SUBSCRIBERS AND ONCE THE IDENTITY IS PROVED, IN CASE OF BOGUS INVES TMENT, ADDITION CAN BE MADE IN THEIR INDIVIDUAL CAPACITY AND NOT IN THE CASE OF THE COMP ANY. HOWEVER, IN THE PRESENT APPEALS EVEN THE IDENTITY OF SUCH SHARE HOLDERS IS NOT PROV ED AS WE HAVE DISCUSSED ABOVE, THEREFORE, THE INITIAL ONUS HAS NOT BEEN DISCHARGED BY THE ASS ESSEE ESPECIALLY WHEN THE ASSESSEE WAS CONFRONTED WITH THE FINDING OF THE COMMISSION (INSP ECTOR), SUMMONS/NOTICES RETURNED UNSERVED AND THE ADDRESSES GIVEN BY THE ASSESSEE IT SELF THAT TOO AT FOUR PLACES WERE FOUND TO BE FICTITIOUS. THE ASSESSEE HAS NOT GIVEN SATIS FACTORY EVIDENCE TO DISCHARGE THE ONUS. IT HAS MERELY GIVEN THE NAMES OF FICTITIOUS PARTIES AN D IN OUR HUMBLE OPINION THIS IS NOT A SUFFICIENT COMPLIANCE, THEREFORE, THE DECISION FROM HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS MAY NOT HELP THE ASSESSEE. IN A LAT ER DECISION DATED 25 TH OCTOBER, 2010 THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T V. STL EXTRUSION (P) LIMITED; (2011) 17 ITJ 648 (MP) EVEN CONSIDERED VARIOUS DECISIONS INCLUDIN G THE OFF-QUOTED DECISION OF DIVINE LEASING & FINANCE LIMITED, RATHI FINLEASE LIMITED, STELLER INVESTMENT LIMITED AND OF COURSE LOVELY EXPORTS PRIVATE LIMITED WHEREIN THE ASSESSEE FILED LIST OF ALL SUBSCRIBERS AND GAVE AFFIDAVITS OF ALL SUBSCRIBERS IN THE FORM OF CONFIR MATIONS AND IN THAT SITUATION THE HON'BLE COURT HELD THAT THE ASSESSEE IS REQUIRED TO ESTABLI SH THE IDENTITY AND SOURCE OF CREDITS AND FURTHER HELD THAT IF THE CONFIRMATION IS GIVEN, NO ADDITION COULD BE MADE AGAINST THE ASSESSEE WHEREAS IN THE CASE OF THE ASSESSEE THE SHARE APPLI CANTS WERE FOUND TO BE NON-EXISTENT, THEREFORE, THIS JUDICIAL PRONOUNCEMENT FROM THE HON 'BLE JURISDICTIONAL HIGH COURT CLEARLY GOES AGAINST THE ASSESSEE. 22 42. THE NEXT GROUND PERTAINS TO UPHOLDING THE AD H OC DISALLOWANCE OF RS. 1 LAC MADE OUT OF TELEPHONE EXPENSES. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT THE LEARNED ASSESSING OFFICER MADE AD HOC DISALLOWANCE OF RS. 1 LAC OUT OF TOTAL EXPENSES OF RS. 12,29,154/-. WE FIND THAT FIRST NO REASON HAS BEEN ASSIGNED FOR MAKING SUCH AD HOC DISALLOWANCE BY THE ASSESSING OFFICER AND SECONDLY WE ARE OF THE VIEW THAT SINCE THE COMPANY IS A JURISTIC PERSON, NO DISALLOWANCE OF PE RSONAL NATURE CAN BE MADE IN THE CASE OF A COMPANY. WE, THEREFORE, REVERSE THE ORDERS OF THE AUTHORITIES BELOW ON THIS ISSUE AND ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED. 43. IN THE CASE OF AD-MANUM PACKAGING LIMITED (ITA NO. 158/IND/2010) FOR THE ASSESSMENT YEAR 2004-05 THE FIRST GROUND RELATES TO MAINTAINING THE ADDITION OF RS. 10 LACS ON ACCOUNT OF LOAN TAKEN BY THE ASSESSEE FROM HINDU STAN CONTINENTAL LIMITED AND ADDITION AS CASH CREDIT U/S 68. THE LD. COUNSEL FOR THE ASSE SSEE, MR. HITESH CHIMNANI, CONTENDED THAT THE LEARNED ASSESSING OFFICER/THE LEARNED COMMISSIO NER OF INCOME TAX (APPEALS) HAVE GONE STRAY IN PASSING LENGTHY ORDERS DISCUSSING ABOUT CA PITAL GAINS ON SHARES OF M/S HINDUSTAN CONTINENTAL AND THE INVESTMENT OF THE SAME COMPANY IN FIXED ASSETS AND CAPITAL WORK IN PROGRESS. THE FINANCIAL POSITION OF M/S HINDUSTAN C ONTINENTAL WAS HIGHLIGHTED BEFORE US BY FURTHER SUBMITTING THAT THE LENDER COMPANY IS A QUO TED PUBLIC LIMITED COMPANY, THE LOAN AMOUNT WAS ADVANCED BY ACCOUNT PAYEE CHEQUE AND RET URNED WITH INTEREST. IT WAS CONTENDED THAT THE IDENTITY, CAPACITY AND GENUINENE SS OF THE TRANSACTION WERE FULFILLED BY THE LENDER COMPANY, M/S HINDUSTAN CONTINENTAL LIMIT ED. THE NEXT GROUND RELATES TO DISALLOWANCE OF INTEREST OF RS.42,658/- PAID ON THE SAID AMOUNT OF LOAN OF RS. 10 LACS WHICH WAS ARGUED TO BE CONSEQUENTIAL. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISION IN METCHEM INDUSTRIES; 245 ITR 160 (MP); 225 ITR 640 ( MP), KALANI INDUSTRIES, 119 TTJ 140 (DEL) AND 245 DTR 281 (DEL). ON THE OTHER HAND, THE LEA RNED CIT DR DEFENDED THE IMPUGNED ORDER BY SUBMITTING THAT SINCE THE IDENTITY OF M/S HINDUSTAN CONTINENTAL LIMITED WAS NOT ESTABLISHED, THEREFORE, THE ASSERTION MADE BY THE L D. COUNSEL FOR THE ASSESSEE FAILS AT THE INITIAL STAGE ITSELF. SINCE IN THE CASE OF AGRAWAL COAL CORPORATION, IDENTICAL SUBMISSIONS HAVE ALREADY BEEN CONSIDERED, THEREFORE, WE DO NOT FIND ANY MERIT IN THIS APPEAL OF THE ASSESSEE ALSO, CONSEQUENTLY, IT IS DISMISSED. 44. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND TH E FACTS NARRATED BEFORE US AND FURTHER THE DISCUSSION MADE HEREINABOVE, SINCE THE IDENTITY OF THE LENDER COMPANY IS NOT ESTABLISHED AS SUCH COMPANIES WERE FOUND NON-EX ISTENT AT THE GIVEN FOUR ADDRESSES, THEREFORE, VARIOUS DOCUMENTS ALLEGED TO BE FILED BE FORE THE ASSESSING OFFICER IN RESPECT OF NON-EXISTING COMPANIES ARE OF NO USE. WE FIND NO M ERIT IN THIS GROUND OF THE ASSESSEE AND DISMISS THE SAME. 45. THE IDENTICAL GROUNDS IN OTHER APPEALS RELATIN G TO ADDITIONS MADE UNDER SECTION 68 OF THE ACT, AS DISCUSSED ABOVE ARE ALSO DISMISSED FOLLOWING THE REASONINGS GIVEN ABOVE. 46. SO FAR AS THE GROUND RELATING TO AD HOC DISALL OWANCE OF RS. 80,000/- ON ACCOUNT OF TELEPHONE EXPENSES IS CONCERNED (ITA NO. 136/IND/2009), WE ARE OF THE VIEW THAT SINCE THE ASSESSEE COMPANY IS A JURISTIC PERSON, NO AD HOC DISALLOWANCE FOR PERSONAL PURPOSES CAN BE MADE IN THE HANDS OF THE COMPANY. W E, THEREFORE, ALLOW THIS GROUND OF THE ASSESSEE. 23 47. SO FAR AS THE DISALLOWANCE OF RS.6,17,878/- PA ID AS INTEREST ON UNSECURED LOANS IN RESPECT OF ACCOMMODATION ENTRIES IS CONCER NED, WE ARE OF THE VIEW THAT SINCE THE ADDITION MADE U/S 68 HAS BEEN SUSTAINED, THEREFORE , THERE IS NO QUESTION OF PAYMENT OF INTEREST AS THE ADDITION U/S 68 WAS FOUND TO BE ON PAPER ONLY AND NOT IN REAL SENSE, THEREFORE, THIS GROUND IS ALSO DISMISSED. THIS WIL L ALSO COVER THE IDENTICAL GROUND RAISED IN ITA NO. 283/IND/2010 AND ITA NO. 34/IND/2010. 48. IN ITA NO. 190/IND/2009 GROUND NOS. 1 AND 2 AR E IDENTICAL, THEREFORE, DISMISSED. THE NEXT GROUND PERTAINS TO AD HOC DISAL LOWANCE OF RS. 50,000/- OUT OF TELEPHONE EXPENSES. FOR THE REASONS DISCUSSED ON IDENTICAL I SSUE IN ITA NO. 136/IND/2009, NO AD HOC DISALLOWANCE OF PERSONAL NATURE CAN BE MADE IN THE CASE OF A COMPANY, THEREFORE, THIS GROUND IS ALLOWED, CONSEQUENTLY, THIS APPEAL IS PAR TLY ALLOWED. ITA NO. 158/IND/2010 49. GROUND NOS. 1 AND 2 ARE IDENTICAL AS WE HAVE D ISCUSSED IN PRECEDING PARAS OF THIS ORDER, THEREFORE, THESE GROUND ARE DISMISSE D. GROUND NO. 3 IS GENERAL IN NATURE, THEREFORE, THIS APPEAL IS DISMISSED. ITA NOS. 196/IND/2009 50. GROUND NO. 1 PERTAINS TO CONFIRMING THE AD HOC DISALLOWANCE OF RS. 25,000/- MADE OUT OF TELEPHONE EXPENSES. AS DISCUS SED ABOVE, NO ADHOC DISALLOWANCE OF PERSONAL NATURE CAN BE MADE IN THE CASE OF A COMPAN Y, THEREFORE, THIS GROUND OF THE ASSESSEE IS ALLOWED. 51. GROUND NO. 2 PERTAINS TO ADDITION OF RS. 10 LA CS AS UNEXPLAINED CREDIT U/S 68 OF THE ACT. FOR THE REASONS DISCUSSED IN THE PR ECEDING PARAS IN DETAIL, THIS GROUND OF THE ASSESSEE IS DISMISSED, THEREFORE, THIS APPEAL OF TH E ASSESSEE IS PARTLY ALLOWED. ITA NOS. 193/IND/2009 52. GROUND NO. 2 PERTAINS TO DISALLOWANCE MADE U/S 69C OF THE ACT AS INTEREST OF RS. 54,257/- PAID ON UNSECURED LOAN. AS DISCUSSE D ABOVE, IT HAS BEEN MADE ON PAPERS ONLY AND ACTUALLY NOT INCURRED, THEREFORE, THIS GROUND I S DISMISSED. 53. THE FIRST GROUND PERTAINS TO LEVY OF PENALTY O F RS.19,000/- U/S 271(1)(C) OF THE ACT. THE CLAIM OF THE ASSESSEE IS THAT THE INT EREST WAS RIGHTLY CLAIMED AS FOR THE PROVISIONS OF SECTION 36(1)(III) AND SECONDLY NO DI SALLOWANCE CAN BE MADE BY INVOKING THE PROVISIONS OF SECTION 69C OF THE ACT. WE DO NOT FI ND ANY MERIT IN THE CLAIM OF THE ASSESSEE AS WE HAVE DISMISSED THE IDENTICAL GROUND OF PAYMENT O F INTEREST, THEREFORE, SINCE THE ASSESSEE CLAIMED BOGUS INTEREST EXPENSES RESULTING INTO SUPP RESSION OF INCOME, THEREFORE, THE PENALTY WAS RIGHTLY IMPOSED, CONSEQUENTLY, THIS APPEAL OF T HE ASSESSEE IS DISMISSED. ITA NOS. 137/IND/2009 54. BOTH THE GROUNDS RAISED IN THIS APPEAL PERTAIN TO UNSECURED LOAN OF RS. 20 LACS RECEIVED FROM M/S HINDUSTAN CONTINENTAL LIMITE D AND CONSEQUENT ADDITION MADE U/S 68 24 AND FURTHER THE AMOUNT OF RS. 1,61,096/- CLAIMED AS INTEREST PAID. AS WE HAVE DISCUSSED ABOVE, THEREFORE, BOTH THESE GROUNDS ARE DISMISSED. FINALLY, ITA NO.151/IND/2009 IS PARTLY ALLOW ED ITA NO. 283/IND/2010 IS DISMISSED ITA NO.136/IND/2009 IS PARTLY ALLOWED. ITA NO. 34/IND/2010 IS DISMISSED. ITA NO.190/IND/2009 IS PARTLY ALLOWED. ITA NO.158/IND/2010 IS DISMISSED ITA NO.196/IND/2009 IS PARTLY ALLOWED. ITA NO.193/IND/2010 IS DISMISSED ITA NO.137/IND/2009 IS DISMISSED. IN VIEW OF THE ABOVE, SINCE THE TRANSACTION IS FROM AFORESAID NON-EXISTENT PAPER COMPANIES, WHOSE IDENTITY IS NOT PROVED, THEREFORE, WE FIND NO JUSTIFICATION TO INTERFERE WI TH THE CONCLUSION DRAWN IN THE IMPUGNED ORDER, CONSEQUENTLY, THIS GRO UND OF THE ASSESSEE IS HAVING NO MERIT, THEREFORE, DISMISSED. 3. DURING HEARING OF THIS APPEAL, THE LEARNED COUNS EL FOR THE ASSESSEE SHRI C.P. RAWKA DID NOT PRESS GROUND NO.2. THE LD. SR. DR HAS NO OBJECTION TO THE REQUEST OF THE LEARN ED COUNSEL FOR THE ASSESSEE, THEREFORE, GROUND NO.2 IS DISMISS ED AS NOT PRESSED. 4. SO FAR AS THE CONFIRMATION OF DISALLOWANCE OF RS .12,300/- ON ACCOUNT OF TELEPHONE EXPENSES ARE CONCERNED, SIN CE IT IS A 25 CASE OF A COMPANY, NO ADHOC DISALLOWANCE IS JUSTIFI ED, CONSEQUENTLY, THIS GROUND OF THE ASSESSEE IS ALLOWE D. 5. THE LAST GROUND PERTAINS TO DISALLOWANCE OF RS.7 ,500/- ON ACCOUNT OF CONVEYANCE EXPENSES. WE FIND THAT THE AS SESSEE COMPANY WAS MAINTAINING REGULAR BOOKS OF ACCOUNT WH ICH IS AUDITED ONE, THEREFORE, NO ADHOC DISALLOWANCE IS PE RMITTED, CONSEQUENTLY, UNDER THE FACTS AVAILABLE ON RECORD, THIS GROUND OF THE APPEAL OF THE ASSESSEE IS ALSO ALLOWED. FINALLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLO WED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LEARNED REPRESENTATIVES FROM BOTH THE S IDES AT THE CONCLUSION OF THE HEARING. SD SD (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 14.12.2011 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE !VYS!