ACIT, Circle-2, Patna V. M/s Ridhi Sidhi Fincon Pvt Ltd, Kolkata

ITA 70/PAT/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 2342 (ITAT-PATNA)
• Duration Of Justice: 2 year(s) 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 07-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: INDERJI T SINGH
• Assessee Lawyers: A K RASTOGI; RAKESH KUMAR S
• Keywords: Unexplained cash credit; Bogus Share capital; Income from undisclosed sources; Share purchase agreement; Source of fund; Question of law; Assessment record; Set aside
• Section: 143(3); 142(1); 133(6); 251; 208; 264; 192; 147; 131; 68; 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL PATNA BENCH, PATNA , . . , BEFORE SHRI CHANDRA MOHAN GARG, J M & SHRI L .P. SAHU, AM ./ ITA NO. 70 / P AT /20 1 7 ( / ASSESSMENT YEAR : 20 1 2 - 20 1 3 ) THE ACIT, CIRCLE - 2, PATNA VS. M/S RIDHI SIDHI FINCON PVT. LTD., 113, PARK STREET KOLKATA ./ PAN NO. : A ADCR 7993 P /ASSESSEE BY : SHRI A.K.RASTOGI & SHRI RAKESH KUM AR , ADVOCATE S /REVENUE BY : SHRI INDERJIT SINGH, CIT - DR / DATE OF HEARING : 20 /0 9 /2019 / DATE OF PRONOUNCEMENT : 06 / 1 2 /2019 / O R D E R PER BENCH : THE ASSESSEE HAS FILED THIS APPEAL AGAINST THE ORDER OF CIT(A) - I, PATNA, DATED 16.01.2017 , ON THE FOLLOWING GROUNDS OF APPEAL : - (I) . CONSIDERING THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED BOTH IN FACTS AND IN LAW BY ALLOWING RELIEF TO THE ASSESSEE ON ACCOUNT OF SHARE CAP ITAL AND SHARE PREMIUM AMOUNTING TO RS.13,95,00,000/ - , WHEN THE IDENTITY CREDITWORTHINESS OF THE SHAREHOLDERS AND GENUINENESS OF THE TRANSACTION WERE COULD NOT BE PROVED. (II) ANY OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y.2008 - 2009 ON 12.08.2008 DECLARING A LOSS OF RS.3,063/ - . THEREAFTER THE AO ISSUED NOTICE U/S.148 OF THE ACT ON THE GROUND THAT THE ASSESSEE CLAIMED AN EXPENDITURE OF RS.21,800/ - AS PRELIMINAR Y EXPENSES WRITTEN OFF WHICH IS NOT AN ALLOWABLE DEDUCTION U/S.35D OF THE ACT. SUBSEQUENTLY NOTICES U/S.143(2) & 142(1) OF THE ACT WERE ITA NO.70/PAT/2017 2 ISSUED. THEREAFTER THE AO FRAMED ASSESSMENT U/S.147/143(3) OF THE ACT ASSESSING THE TOTAL INCOME AT RS.18,738/ - . SUBSEQU ENTLY, THE CIT INVOKING POWERS U/S.263 OF THE ACT SET ASIDE THE ORDER PASSED BY THE AO U/S.147/143(3) OF THE ACT FOR DENOVO ASSESSMENT HOLDING THAT THE ORDER PASSED BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE LACKING COMPLETE ENQUIRY. ACCORDINGLY, ON THE DIRECTION OF CIT, THE AO ISSUED NOTICE TO THE ASSESSEE TO PRODUCE ALL EVIDENCES AS TO WHY THE TRANSACTIONS WITH THE SAID PARTIES (SHAREHOLDERS) SHOULD NOT BE TREATED AS BOGUS AND SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE SHOULD NOT BE TREATED AS UNACCOUNTED MONEY CONVERTED IN THE FORM OF SHARE CAPITAL AND UNDISCLOSED INCOME. ACCORDINGLY, THE AO MADE ADDITION OF RS.13,95,18,738/ - AS UNEXPLAINED CASH CREDIT AND PASSED ORDER U/S.143(3)/147 R.W.S263 OF THE ACT, DATED 28.03.2014. 3. F EELING AGGRIEVED FROM THE ORDER OF AO, THE ASSESSEE APPEALED BEFORE THE CIT(A) AND THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE AND FINDINGS OF THE AO, DIRECTED TO DELETE THE ADDITION MADE U/S.68 OF THE ACT AND PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 4. AGAINST THE ORDER OF CIT(A), THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE INCOME TAX APPELLATE TRIBUNAL. 5. LD. AR BEFORE US SUBMITTED HIS WRITTEN SUBMISSIONS WHICH READ AS UNDER : - ITA NO.70/PAT/2017 3 WRITTEN SUBMISSION BEFORE INCOME TAX APPELLATE TRIBUNAL, PAT NA BENCH, PATNA IN EASE OF RIDHI SIDHI FINCON PVT. LTD., KOLKATA FOR A.Y. 2008 - 09 (BY THE DEPARTMENT). THE RELEVANT PORTION FROM THE ORDER OF LD. CIT(A) WHILE DELETING THE ADDITION MADE U/S 68 IS REPRODUCED BELOW : - PAGE - 34 PARA 4.48 & 4.49 '4.48 IN ORDER TO INVOKE THE PROVISIONS OF SECTION 68 OF THE ACT ON THE FACTS AND CIRCUMSTANCE OF THE CASE, IT HAS TO BROUGHT ON RECORD THAT THERE HAS LAUNDERING OF CASH (UNACCOUNTED) THROUGH LAYERS OR WITHIN LAYERS OF BANK ACCOUNTS FOR SUBSCRIPTION INTO SHARE C APITAL AT PREMIUM, IN ABSENCE OF SUCH CATEGORICAL OR CIRCUMSTANTIAL FINDING ON RECORD, ANY ACTION IN BRINING THIS AMOUNT TO TAX WOULD FALL IN THE CATEGORY OF CONJECTURE, SUSPICION AND SURMISES WHICH HAS NOT FOUND FAVOUR OF THE APEX COURT, VARIOUS HIGH COUR TS AND BENCHES OF TRIBUNAL IN THE CASES SUPRA AND OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF ADDL. CIT VS. HANUMAN AGGRAWAL 151 ITR 244, IT IS HELD THAT THE AO HAS FAILED TO SPELL OUT HIS DISSATISFACTION ABOUT THE COMPLIANCE OF THE REQUIREMENTS OF THE PROVISIONS OF SECTION 68 OF THE ACT NOR BROUGHT OUT ANY COGENT MATERIAL WHATSOEVER ON RECORD IN THIS REGARD. 4.49 AS DISCUSSED HEREINABOVE, THE DIRECTORS OF THE APPELLANT - COMPANY AND THE DIRECTORS OF THE COMPANIES SUBSCRIBING TO THE SHARE CAPITAL THAT TO O ON A PREMIUM AS DIRECTED UNDER SECTION 263 OF THE ACT HAD NOT BEEN EXAMINED CONSIDERING THE PERNICIOUS PRACTICE OF CONVERSION OF UNACCOUNTED MONEY THROUGH MASQUERADE OF INVESTMENT IN THE SHARE CAPITAL OF A COMPANY WHICH WAS OF IMMENSE IMPORTANCE TO UNDER STAND THE MODUS - OPERANDI OF THE BUSINESS AND TO ESTABLISH THE GENUINENESS OR OTHERWISE OF THE TRANSACTIONS AND CREDITWORTHINESS OF THE SUBSCRIBING COMPANIES IN THE LIGHT OF THE JUDICIAL PRONOUNCEMENTS ON THE SUBJECT AS MANDATED TO INVOKE THE PROVISIONS OF SECTION 68 OF THE ACT ON THE FACE OF PECULIAR FACTS OF THE CASE IN RESPECT OF THE IDENTITY AND CAPACITY OF THE SO - CALLED SHAREHOLDERS ALONG WITH THE GENUINENESS OF THE TRANSACTIONS. IN VIEW OF THIS AND RESPECTFULLY FOLLOWING THE JUD GEMENTS OF THE APEX COURT, VARIOUS HIGH COURTS AS WELL AS THE JURISDICTIONAL HIGH COURT INCLUDING THE TRIBUNALS OF SEVERAL BENCHES, THE AO, THEREFORE, WAS NOT WITHIN HIS JURISDICTION IN TREATING SUCH SHARE CAPITAL AND SHARE PREMIUM AS UNACCOUNTED CASH CREDIT OF THE APPELLANT - COMPANY AND ADDING THE SAME U/S THE ACT. THEREFORE, ADDITION MADE ON THIS SCORE IS DIRECTED TO BE DELETED AND THIS GROUND OF APPEAL IS ALLOWED. ' CASE OF THE A.O AT PAGE 6 OF THE ASSESSMENT ORDER ACCORDING TO THE A.O IN VIEW OF SP ECIFIC DIRECTION OF THE CIT IN ORDER U/S 263, NOTIC ES U/ S . 131 WERE ISSUE AND SENT TO SHARE HOLDERS ASKING THEM TO PERSONALLY APPEAR TO VERIFY THEIR IDENTITY AND CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. IN RESPONSE TO ABOVE NON - APPEARED. FURTHE R, SHOW CAUSE LETTERS WERE ISSUED TO ASSESSEE COMPANY TO PRODUCE ALL THE SHARE HOLDERS WITH EVIDENCE OTHERWISE THE TRANSACTION WITH THE SHARE HOLDERS WILL BE TREATED AS BOGUS AND SHARE APPLICATION MONEY ITA NO.70/PAT/2017 4 SHOULD BE TREATED AS UNDISCLOSED INCOME. THE A.O HAS ALSO DIRECTED THE ASSESSEE IN THE SAID SHOW CAUSE TO PRODUCE MANAGING DIRECTOR OF ALL SHARE HOLDER COMPANIES TO PROVE IDENTITY, GENUINENESS OF TRANSACTION AND CREDITWORTHINESS. ACCORDING TO THE AO, THE ASSESSEE FAILED TO PRODUCE THE SUBSCRIBERS AND HENCE I DENTITY AND CREDITWORTHINESS OF THE SHARE HOLDERS AND GENUINENESS THE TRANSACTION COULD NOT BE VERIFIED. SUBMISSION IT IS RESPECTFULLY SUBMITTED THAT IN THE PRESENT CASE ORDER U/S 147/ 143(3) WAS PASSED ON 29.04.2010 (COPY PLACED PAGE 18 - 19 OF THE PB). D URING THE ASSESSMENT PROCEEDINGS 133(6)WERE ISSUED BY THE THEN A.O WHICH WERE DULY COMPLIED WITH AS WOULD BE EVIDENT FROM THE. ORDER OF THE LD. COMMISSIONER U/S 263 (COPY ENCLOSED AT PAGE 20 - 28 AT PAGE 20 - 21O F PB) WHEREIN IT HAS BEEN OBSERVED 'EXAMINATION OF THE ASSESSMENT RECORD REVEALS THAT THE A.O HAD DRAWN SATISFACTION REGARDING EXISTENCE, GENUINENESS AND CREDITWORTHINESS OF THE SHARE APPLICANTS AND THE SHARE APPLICATION MONEY CLAIMED TO HAVE BEEN RECEIVED BY THE ASSESSEE COMPANY MERELY BY RELYING ON PR ELIMINARY DOCUMENTS LIKE ACKNOWLEDGEMENT OF RETURN OF INCOME, COPY OF ACCOUNTS AND ILLEGIBLE COPY OF BANK STATEMENT SUBMITTED IN THE OFFICE OF THE A.O'. THEREAFTER, IN PARA 3, THE LD. COMMISSIONER HAS OBSERVED 'ONCE THE A.O INITIATES ENQUIRY BY ISSUING NOT ICE U/S 133(6) DURING ASSESSMENT PROCEEDINGS, HE IS AN UNDER OBLIGATION TO TAKE IT TO LOGICAL END THROUGH PROPER ENQUIRY '. THUS, IT IS ESTABLISHED BEYOND ALL REASONABLE DOUBT FROM THE ORDER OF THE LD. CIT THAT NOTICES ISSUED U/S 133(6) IN COURSE OF ORIGIN AL PROCEEDINGS WERE COMPLIED WITH. FURTHER, IN COURSE OF PROCEEDINGS U/S 143(3)/ 147/ 263 ENQUIRIES WERE AGAIN INSTITUTED U/S 133(6) AND THE S AME WAS AGAIN COMPLIED WITH AS WOULD BE EVIDENT FROM ORDER SHEET ENTRY DATED 10.02.2014 (COPY ENCLOSED AT PAGE 32 O F PB) WHERE THE A.O MENTIONS THAT ' LETTER U/S. 133(6) OF THE IT ACT ISSUED TO THE SHARE HOLDERS'. IT IS NOT THE CASE OF THE A.O EITHER IN THE ORDER SHEET OR IN THE ASSESSMENT ORDER THAT THE NOTICES U/S 133(6) WERE RETURNED UNSERVED AND/OR REMAINED UNCOMP LIED WITH. THUS, EVEN AT THE STAGE OF SECOND R OUND OF ASSESSMENT PROCEEDINGS PURSUANT TO ORDER U/S 263, COMPLIANCES WERE MADE IN RESPONSE TO ENQUIRY INSTITUTED U/S 133(6). HOWEVER, UNFORTUNATELY THE A.O AT THE FAG END I.E. ON 21/03/2014 HAS RESORTED TO NOT ICES U/S 131 AND VIDE SHOW CAUSE DATED 27.03.2014 THE ASSESSEE WAS ASKED TO PRODUCE THE INVESTORS AND THE IMPUGNED ASSESSMENT ORDER WAS PASSED ON 28.03.2014. THERE IS NO ALLEGATION AS TO NON - SERVICE OF SUMMONS U/S 131 ISSUED BY THE A.O. ON 21.03.2014 ON TH E RESPECTIVE SHARE HOLDER EITHER IN THE ORDER SHEET OR IN THE IMPUGNED ASSESSMENT ORDER. ON CONSIDERATION OF PECULIAR FACTS AVAILABLE ON RECORD THE LD. CIT(A) HAS DELETED THE ADDITION BY HOLDING THAT THE ONUS CASTED UPON BY SECTION 68 STANDS DISCHARGED. T HE APEX COURT HAD AN OCCASION TO CONSIDER A CASE WHERE THE ASSESSEE HAS DISCHARGED ITS ONUS BY PROVIDING NAMES AND ADDRESSES OF THE CREDITORS ALONG WITH THEIR INCOME TAX FILE NUMBERS. ON THE BASIS OF THE INFORMATION SUPPLIED THE ASSESSING OFFICER ISSUED NO TICES U/S 131 AND THEREAFTER DID NOT PURSUE THE MATTER ANY FURTHER. ON THIS FACTUAL MATRIX ITA NO.70/PAT/2017 5 THE HON'BLE SUPREME COURT HAS BEEN PLEASED TO DELETE THE ADDITION BY HOLDING 'IN THIS CASE, THE ASSESSEE HAD GIVEN THE NAMES AND ADDRESSES OF THE ALLEGED CREDITOR S. IT WAS IN THE KNOWLEDGE OF THE REVENUE THAT THE SAID CREDITORS WERE INCOME TAX ASSESSEES. THEIR INDEX NO. WERE IN THE FILE OF THE REVENUE. THE REVENUE, APART FROM ISSUING NOTICES U/S 131 AT THE INSTANCE OF THE ASSESSEE, DID NOT PURSUE THE MATTER FURTHER . THE REVENUE DID NOT EXAMINE THE SOURCE OF INCOME OF THE SAID ALLEGED CREDITORS TO FIND OUT WHETHER THEY WERE CREDITWORTHY OR WERE SUCH WHO COULD ADVANCE THE ALLEGED LOANS. IN THOSE CIRCUMSTANCES, THE ASSESSEE COULD NOT DO ANYTHING FURTHER. IN THE PREMISE S, IF THE TRIBUNAL CAME TO THE CONCLUSION THAT THE ASSESSEE HAS DISCHARGED THE BURDEN THAT LAY ON HIM, THEN IT COULD NOT BE SAID THAT SUCH A CONCLUSION WAS UNREASONABLE OR PERVERSE OR BASED ON NO EVIDENCE. IF THE CONCLUSION IS BASED ON SOME EVIDENCE ON WHI CH A CONCLUSION COULD BE ARRIVED AT, NO QUESTION OF LAW AS SUCH ARISES'. [ORISSA SALES CORPORATION REPORTED IN 159ITR 78 ] IF THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE IS TESTED ON THE ANVIL OF THE ABOVE SAID JUDGMENT, IT WOULD BE EVIDENT THAT TH E ASSESSING OFFICER HAS NOT PURSUED THE MATTER AFTER ISSUANCE OF SUMMONS DATED 21.03.2014 IN VIEW OF THE COMPLIANCES BY THE INVESTORS IN COURSE OF TWO ASSESSMENT PROCEEDINGS I.E. ORIGINAL AS WELL AS ORDER PASSED PURSUANT TO ACTION U/S 263 BY THE CIT AND CO NCLUDED THE ASSESSMENT ON 28.03.2014. THUS, THE FACTUAL MATRIX OF THE APPELLANT'S CASE IS IDENTICAL TO THE ONE DECIDED BY THE APEX COURT WHEREIN THE ADDITION MADE WAS DELETED BY HOLDING THAT THE ASSESSEE HAS DISCHARGED THE BURDEN LAY UPON HIM. IT IS IN TH ESE PECULIAR FACTS THAT THE LD. CIT(A) HAS DELETED THE ADDITION BY HOLDING THAT THE APPELLANT HAS DISCHARGED THE ONUS SADDLED UPON IT BY SECTION - 68 AND THAT THE DEPARTMENT HAS NOT BEEN ABLE TO PROVE LAUNDERING OF CASH THROUGH LAYERS OR WITHIN LAYERS. THE ISSUE TO BE DECIDED BY THIS HON'BLE TRIBUNAL IS (I) WHETHER THE CIT(A) IS JUSTIFIED IN HOLDING THAT THE ASSESSEE HAS DISCHARGED ITS ONUS SADDLED BY SECTION 68 ? AND (II) WHETHER THE CIT(A) IS JUSTIFIED IN RECORDING A FINDING ON PECULIAR SET OF FACTS THAT T HE DEPARTMENT HAS NOT BEEN ABLE TO PROVE THAT THERE HAS BEEN LAUNDERING OF CASH (UNACCOUNTED) THROUGH LAYERS OR WITHIN LAYERS OF BANK ACCOUNTS FOR SUBSCRIPTION INTO SHARE CAPITAL AT PREMIUM ?. THE APPELLANT CARVE LEAVE TO PRODUCE THE COPIES OF NOTICES ISS UED U/S 133(6) AND ITS COMPLIANCE BY THE SHAREHOLDERS IN COURSE OF FIRST AS WELL AS SECOND ASSESSMENT PROCEEDINGS. THE SAME ARE VOLUMINOUS AND HENCE IS NOT BEEN ENCLOSED WITH W RITTEN SUBMISSION. IT IS ASSERTED AS A MATTER OF FACT AND RECORD THAT THESE EVI DENCES ARE FORMING PART OF ASSESSMENT RECORD [BOTH I.E.147/143(3) AND 147/143(3)/263] WHICH CAN BE REQUISITIONED . ITA NO.70/PAT/2017 6 THE SHARE SUBSCRIBER OF THE APPELLANT COMPANY HAVE ALSO SUBMITTED COMPLIANCES TO DDIT(INV.), KOLKATA IN FEBRUARY, 2016. THE APPELLANT CARVE LEAVE TO PRODUCE THE COMPLIANCES SO MADE BY THE SUBSCRIBING COMPANY BEFORE THE DDIT(INV.), KOLKATA. ON THE BASIS OF EVIDENCE ALREADY ON RECORD IT IS ESTABLISHED BEYOND ALL REASONABLE DOUBT THAT THE APPELLANT HAS DISCHARGED ITS ONUS OF PROVING IDENTITY, G ENUINENESS OF TRANSACTION AND CREDITWORTHINESS IN RESPECT OF THE SHARE APPLICATION / CAPITAL INCLUDING PREMIUM AND HENCE THE FINDING OF THE A.O. THAT IDENTITY, GENUINENESS OF TRANSACTION AND/OR CREDITWORTHINESS COULD NOT BE VERIFIED IS CONTRARY TO THE EVID ENCES / MATERIAL ALREADY ON RECORD. IT IS RESPECTFULLY SUBMITTED THAT THE CASE OF THE APPELLANT IS SQUARELY COVERED BY THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE REPORTED IN 154 ITR 244 (PAT) - ACIT VS BAHRI BROTHERS WHEREIN THEIR LORDSHIPS HAVE HELD AS UNDER : 'IN THE INSTANT CASE, THE TRANSACTION WERE COMPLETED THROUGH ACCOUNT PAYEE CHEQUE. THE CREDITORS GAVE THE AMOUNT IN QUESTION TO THE ASSESSEE BY ACCOUNT PAYEE CHEQUE WHICH WERE ENCASHED BY THE ASSESSEE THROUGH HIS OWN BANK. NOT ONLY TH IS, THE ASSESSEE HAS ALSO SUBMITTED THE COPY OF A CERTIFICATE OF THE BANK TO THE EFFECT THAT THE CHEQUES IN QUESTION, GIVEN BY THE CREDITORS, WERE HONOURED IN FAVOUR OF THE ASSESSEE. ------------------------- WHEN THE ASSESSEE DISCLOSED THE NAMES OF THE CR EDITORS AND THE NAMES OF THE BANK ON WHICH THE CHEQUES WERE DRAWN, THE ASSESSEE DISCHARGED THE PRIMARY ONUS AND THE ASSESSEE NOT ONLY DISCLOSED THE IDENTITY OF THE CREDITOR BUT ALSO THE SOURCE OF INCOME. ------------- ------------- IN VIEW OF THESE FACTS, IT COULD NOT BE SAID/THAT THE CREDITORS WERE FICTITIOUS PERSONS. ' IF THE FACTS OF THE APPELLANT'S CASE IS TESTED ON THE ANVIL OF THE AFORESAID JUDGMENT OF THE JURISDICTIONAL HIGH COURT, THERE IS NO DISPUTE THAT THE SUM IN QUESTION HAD COME FROM SUBSCRIBERS WHO ARE ASSESSED TO TAX, SUM IN QUESTION HAVE - BEEN RECEIVED THROUGH PROPER BANKING CHANNEL, THE SUBSCRIBERS ARE KNOWN TO INCOME TAX, BANK AND ROC AND HENCE THE AFORESAID JUDGMENT OF THE JURISDICTIONAL HIGH COURT APPLIES ON ALL FOURS TO THE FACTS OF THE A PPELLANT'S CASE. FURTHER, THE CASE OF THE APPELLANT IS COVERED BY THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. STELLAR INVESTMENT REPORTED IN 192 ITR 287 WHICH HAS BEEN AFFIRMED BY APEX COURT WHEREBY THE SLP OF THE DEPARTMENT WAS DI SMISSED (REPORTED IN 251 ITR 263). THE RELEVANT PORTION FROM THE JUDGMENT OF THE DELHI HIGH COURT IS REPRODUCED HEREUNDER : - 'THE PETITIONER SEEKS REFERENCE OF THE FOLLOWING QUESTION : ITA NO.70/PAT/2017 7 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE IN COME - TAX APPELLATE TRIB UNA L WAS CORRECT BOTH ON FACTS AND IN LAW IN HOLDING THAT THE PROVISIONS OF SECTION 263 HAVE NOT BEEN VALIDLY INVOKED IN THIS CASE BY IGNORING THE MATERIAL FACT THAT THE ASSESSING OFFICER R HAD FAILED TO DISCHARGE HIS DUTIES REGARDING THE INVESTIGATION WITH REGARD TO THE GENUINENESS AND CREDITWORTHINESS OF THE SHAREHOLDERS, MANY OF THEM BEING STUDENTS AND HOUSEWIVES ? ' IN THE PRESENT CASE, THE SUBSCRIBED CAPITAL OF THE ASSESSEE HAD BEEN INCREASED. THE INCOME - TAX OFFICER ASSESSED THE COMPANY AND ACCEPTED THE INCREASE IN THE SUBSCRIBED CAPITAL. THE COMMISSIONER OF INCOME - TAX CAME TO THE CONCLUSION THAT THE ASSESSING OFFICER DID NOT CARRY OUT A DETAILED INVESTIGATION INASMUCH AS THERE HAD BEEN A DEVICE OF CONVERTING BLACK MONEY INTO WHIT E BY ISSUING SHARES WITH THE HELP OF FORMATION OF AN INVESTMENT COMPANY. THE COMMISSIONER OF INCOME - TAX FURTHER HELD THAT THE ASSESSING OFFICER DID NOT MAKE ENQUIRIES WITH REGARD TO THE GENUINENESS OF THE SUBSCRIBERS OF THE SHARE CAPITAL. HE THEREUPON SET ASIDE THE ORDER OF ASSESSMENT. THE TRIBUNAL REVERSED THIS DECISION FOR REASONS WHICH WE NEED NOT GO INTO. IT IS EVIDENT THAT EVEN IF IT BE ASSUMED THAT THE SUBSCRIBERS TO THE INCREASED SHARE CAPITAL WERE NOT GENUINE, NEVERTHELESS, UNDER NO CIRCUMSTANCES, CAN THE AMOUNT OF SHARE CAPITAL BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE. IT MAY BE THAT THERE ARE SOME BOGUS SHAREHOLDERS IN WHOSE NAMES SHARES HAD BEEN ISSUED AND THE MONEY MAY HAVE BEEN PROVIDED BY SOME OTHER PERSONS. IF THE ASSESSMENT OF THE PERSONS WHO ARE ALLEGED TO HAVE REALLY ADVANCED THE MONEY IS SOUGHT TO BE REOPENED, THAT WOULD HAVE MADE SOME SENSE BUT WE FAIL TO UNDERSTAND AS TO HOW THIS AMOUNT OF INCREASED SHARE CAPITAL CAN BE ASSESSED IN THE HANDS OF THE COMPANY ITSELF. IN OUR OPINI ON, NO QUESTION OF LAW ARISES AND THE PETITION IS, THEREFORE, DISMISSED. ' FURTHER, THE VIEW TAKEN BY THE HON'BLE DELHI HIGH COURT, AS AFORESAID, HAS BEEN REAFFIRMED IN ITS SUBSEQUENT JUDGMENTS REPORTED IN 299 ITR PAGE 268 (DELHI) IN THE CASES OF CIT VS D EVINE LEASING & FINANCE LTD., GENERAL EXPORTS & CREDIT LTD. AND LOVELY EXPORTS PVT. LTD. THE RELEVANT PORTION FROM THE JUDGMENT IS REPRODUCED HEREUNDER : - 'THE TRIBUNAL HAS RECORDED THAT THE ASSESSING OFFICER HAS NOT BROUGHT ANY POSITIVE MATERIAL OR EVIDE NCE WHICH WOULD INDICATE THAT THE SHAREHOLDERS WERE (A) BENAMIDARS OR (B) FICTITIOUS PERSONS OR (C) THAT ANY PART OF THE SHARE CAPITAL REPRESENTED THE COMPANIES OWN INCOME FROM UNDISCLOSED SOURCES. FURTHER, THE TRIBUNAL HAD CATEGORICALLY HELD THAT THE ASSE SSEE HAD DISCHARGED ITS ONUS OF PROVING THE IDENTITY OF THE SHARE SUBSCRIBERS. HAD ANY SUSPICION STILL REMAINED IN THE MIND OF THE ASSESSING OFFICER, HE COULD HAVE INITIATED 'COERCIVE PROCESS' BUT THAT COURSE OF ACTION HAD NOT BEEN ADOPTED. IN VIEW OF THE CONCURRENT FINDING, ITA NO.70/PAT/2017 8 PERTAINING TO THE FACTUAL MATRIX, THERE WAS NO MERIT IN THOSE APPEALS WHICH WERE, ACCORDINGLY, TO BE DISMISSED.' IN THE PRESENT CASE ALSO NO COERCIVE PROCESS AS INDICATED BY THE DELHI HIGH COURT IN THE ABOVE SAID JUDGMENT WAS UNDERTAKE N BY THE A.O. AS THE A.O. HAS NOT TREATED THE INVESTING COMPANIES AS BENAMIDAR OF THE APPELLANT NOR COULD HAVE HELD THAT THE INVESTING COMPANIES ARE FICTITIOUS PERSON IN VIEW OF THE ENQUIRIES INSTITUTED U/S 133(6) AND COMPLIANCES MADE BY THE INVESTING COMP ANY. THE HON'BLE APEX COURT HAS AFFIRMED THE ABOVE JUDGMENT OF DELHI HIGH COURT. THE RELEVANT PORTION FROM THE JUDGMENT OF APEX COURT IS QUOTED BELOW : '319 ITR PAGE 5 (SI) - C1T VS. LOVELY EXPORT (SC) WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION F OR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM THE ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE ASSESSING OFFICER, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT.' THE APPELLANT WOULD LIKE TO DRAW YOUR HONOUR'S KIND ATTENTION TO SOME OTHER JUDGMENTS ON THE ISSUE : - [2018] 401 ITR 83 (DEL) - PRINCIPAL COMMISSIONER OF INCOME - TAX V. ORIEN TAL INTERNATIONAL CO. P. LTD. FACTS NOTICED 2. THE ASSESSEE HAD CLAIMED THAT THESE AMOUNTS WERE RECEIVED AS SHARE APPLICATION MONEY FROM VARIOUS PARTIES, I.E., M/S. CREATIVE FINANCIAL SERVICES PVT. LTD. ; M/S. RAHUL FINLEASE P. LTD. ; M/S. SHRI NIWAS LEAS ING FINANCE LTD. ; M/S. MEGHDOOT EXPRESS P. LTD. AND M/S. NITI HOUSING DEVELOPMENT AND FINANCE CORPORATION LTD. 3. THE ASSESSING OFFICER (AO) WAS OF THE OPINION THAT SUCH LARGE AMOUNTS OF SHARE APPLICATION MONEY NEED TO BE PROBED FURTHER AND, THEREFORE, REQUIRED THE ASSESSEE TO FURNISH PARTICULARS, WHICH IT DID. 4. THE ASSESSEE, INTER ALIA, PROVIDED DETAILS RELATING TO THE SHARE APPLICATION MONEY PROVIDED BY EACH OF THE ENTITIES CONFIRMATION LETTERS ; BOARD RESOLUTIONS FROM EACH COMPANY ; PAN CARD DET AILS ; COPIES OF THE MEMORANDUM AND ARTICLES OF ASSOCIATION ; FORMS 18 AND 32 AND AUDITED FINANCIAL STATEMENTS FOR THE YEARS 2004, 2005 AND 2006 ; COPIES OF PAY ORDERS WHICH WERE USED FOR THE SHARE APPLICATION MONEY. IN ADDITION, THE AFFIDAVITS OF THE DIR ECTORS AND SHARE INVESTORS WERE ALSO FURNISHED. 5. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE MATERIALS FURNISHED AND HELD THAT THE ASSESSEE HAD NOT DISCHARGED THE ONUS/BURDEN OF PROVING THE GENUINENESS OF THE IDENTITY OF THE APPLICANTS, THE ITA NO.70/PAT/2017 9 GENUINEN ESS OF THE TRANSACTIONS OR THE CREDITWORTHINESS OF THE INVESTORS AS REQUIRED BY THE DECISION IN CIT V. LOVELY EXPORTS P. LTD. [2009] 319ITR (ST.) 5 (SC) ; [2008] 216 CTR (SC) 195. ARGUMENTS OF COUNSEL OF THE REVENUE : 5. LEARNED COUNSEL FOR THE REVENUE H IGHLIGHTED THAT THE ASSESSING OFFICER EXAMINED ALL THE MATERIALS IN GREAT DETAIL AND REJECTED THE AFFIDAVIT FURNISHED TO HIM. IT WAS HIGHLIGHTED THAT THE ASSESSING OFFICER TOOK NOTE OF THE STATEMENT MADE BY THE INDIVIDUAL STYLED AS DIRECTOR, DISOWNING THE INVESTMENT MADE IN THE ASSESSEE - COMPANY BY M/S. CREATIVE FINANCIAL SERVICES PVT. LTD. VERDICT OF THE COURT: 9. THIS COURT IS OF THE OPINION THAT THE LONE CIRCUMSTANCE OF A DIRECTOR DISOWNING THE DOCUMENT PER SE COULD NOT HAVE CONSTITUTED A FRESH MATERIAL TO REJECT THE DOCUMENTARY EVIDENCE. IN THIS CASE, THE EXISTENCE OF THE COMPANY AS AN INCOME - TAX ASSESSEE, AND THAT IT HAD FURNISHED AUDITED ACCOUNTS IS NOT IN DISPUTE. FURTHERMORE, ITS BANK DETAILS TOO WERE FURNISHED TO THE ASSESSING OFFICER. IF THE ASSESSING OFFICER WERE TO CONDUCT HIS TASK DILIGENTLY, HE OUGHT TO HAVE AT LEAST SOUGHT THE MATERIAL BY WAY OF BANK STATEMENTS, ETC., TO DISCERN WHETHER IN FACT THE AMOUNTS WERE INFUSED INTO THE SHAREHOLDER'S ACCOUNT IN CASH AT ANY POINT OF TIME OR THA T THE AMOUNT OF RS. 1.3 CRORES ' IN THE CASE OF M/S. CREATIVE FINANCIAL SERVICES PVT. LTD. AND RS. 3.7 CRORES IN THE CASE OF OTHER SHARE APPLICANTS WERE SUCH AS TO BE BEYOND THEIR MEANS. IN THE ABSENCE OF ANY SUCH ENQUIRY, THE COURT IS OF THE OPINION THAT THE FINDINGS HOLDING THAT THE ASSESSEE HAD NOT DISCHARGED THE ONUS PLACED UPON IT BY LAW CANNOT BE CONSIDERED UNREASONABLE. NO QUESTION OF LAW ARISES. 6.8 [2017] 397 ITR 136 (BOM) - COMMISSIONER OF INCOME - TAX V. ORCHID INDUSTRIES PVT. LT D. '6.3 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, ORDERS OF THE TRIBUNAL WAS PERVERSE IN DELETING THE ADDITION OF R S. 95,00,000 MADE UNDER SECTION 68 OF THE ACT, RELYING ONLY ON THE DOCUMENTARY EVIDENCE PRODUCED BY THE RESPONDEN T - COMPANY WHILE IGNORING THE KEY FACTOR THAT THESE ENTITIES WERE NOT TRACEABLE AT THEIR GIVEN ADDRESSES ? 6.4 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL ERRED IN NOT APPRECIATING THE OBSERVATIONS MADE BY THE DELHI H IGH COURT IN CIT V. NOVA PROMOTERS AND FINLEASE PVT. LTD. [2012] 342 ITR 169 (DELHI); [2012] 18 TAXMANN.COM 217 WHEREIN THE COURT HAS OBSERVED THAT CASES OF THIS TYPE CANNOT BE DECIDED ONLY ON THE BASIS OF DOCUMENTARY EVID ENCES ABOVE AND THERE IS NEED TO TAKE INTO ACCOUNT THE SURROUNDING CIRCUMSTANCES ? VERDICT OF THE COURT 5. THE ASSESSING OFFICER ADDED RS. 95 LAKHS AS INCOME UNDER SECTION 68 OF THE INCOME - TAX ACT ONLY ON THE GROUND THAT THE PARTIES TO WHOM THE ITA NO.70/PAT/2017 10 SHARE CERT IFICATES WERE ISSUED AND WHO HAD PAID THE SHARE MONEY HAD NOT APPEARED BEFORE THE ASSESSING OFFICER AND THE SUMMONS COULD NOT BE SERVED ON THE ADDRESSES GIVEN AS THEY WERE NOT TRACED AND IN RESPECT OF SOME OF THE PARTIES WHO HAD APPEARED, IT WAS OBSERVED T HAT JUST BEFORE ISSUANCE OF CHEQUES, THE AMOUNT WAS DEPOSITED IN THEIR ACCOUNT. 6. THE TRIBUNAL HAS CONSIDERED THAT THE ASSESSEE HAS PRODUCED ON RECORD THE DOCUMENTS TO ESTABLISH THE GENUINENESS OF THE PARTY SUCH AS PAN OF ALL THE CREDITORS ALONG WITH TH E CONFIRMATION, THEIR BANK STATEMENTS SHOWING PAYMENT OF SHARE APPLICATION MONEY. IT WAS ALSO OBSERVED BY THE TRIBUNAL THAT THE ASSESSEE HAS ALSO PRODUCED THE ENTIRE RECORD REGARDING ISSUANCE OF SHARES I.E. ALLOTMENT OF SHARES TO THESE PARTIES, THEIR SHARE APPLICATION FORMS, ALLOTMENT LETTERS AND SHARE CERTIFICATES, SO ALSO THE BOOKS OF ACCOUNT. THE BALANCE - SHEET AND PROFIT AND LOSS ACCOUNT OF THESE PERSONS DISCLOSES THAT THESE PERSONS HAD SUFFICIENT FUNDS IN THEIR ACCOUNTS FOR INVESTING IN THE SHARES OF TH E ASSESSEE. IN VIEW OF THESE VOLUMINOUS DOCUMENTARY EVIDENCE, ONLY BECAUSE THOSE PERSONS HAD NOT APPEARED BEFORE THE ASSESSING OFFICER WOULD NOT NEGATE THE CASE OF THE ASSESSEE. THE JUDGMENT IN THE CASE OF GAGANDEEP INFRASTRUCTURE P. LTD. (SUPRA) WOULD BE APPLICABLE IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. ' IT IS RESPECTFULLY SUBMITTED THAT IT IS NOT THE CASE OF THE A.O. THAT THESE SHARE APPLICATION / PREMIUM HAS NOT BEEN RECEIVED THROUGH PROPER BANKING CHANNEL. IT IS ALSO NOT THE CASE OF THE A .O. THAT THE SUM IN QUESTION HAS NOT COME FROM THE BANK ACCOUNT OF THE INVESTOR COMPANY. IT IS ALSO NOT THE CASE OF THE A.O. THAT THE SUM IN QUESTION HAS BEEN DEPOSITED IN CASH IN THE BANK ACCOUNT OF THE INVESTOR COMPANY PRIOR TO INVESTMENT IN THE APPELLAN T'S COMPANY. IT IS ALSO NOT THE CASE OF THE A.O. THAT THESE COMPANIES ARE NOT ASSESSED TO INCOME TAX. IF THE FACTS OF THE APPELLANT'S CASE ARE TESTED ON THE ANVIL OF THE AFORESAID DECISION IT IS CLEAR THAT THE PROCEEDINGS INITIATED U/S 133(6) IN COURSE OF THE TWO ASSESSMENT PROCEEDINGS WERE DULY COMPLIED WITH. THE INVESTORS HAVE PRODUCED THEIR ACKNOWLEDGEMENT OF RETURN, COPY OF ACCOUNTS AND BANK STATEMENTS WHICH PROVES THEIR EXISTENCE, GENUINENESS OF TRANSACTION THROUGH BANK AND CREDITWORTHINESS AS THE SUM IN QUESTION HAVE BEEN GIVEN OUT OF THE BALANCE LYING IN THEIR ACCOUNTS AND THERE WAS NO CASH DEPOSIT IN THEIR BANK ACCOUNT PRIOR TO INVESTMENT IN THE APPELLANT COMPANY. THUS, THE ONUS OF PROVING THE IDENTITY, GENUINENESS OF TRANSACTION AND CREDITWORTHINE SS STANDS PROVED BY (I) COMPLIANCE / CONFIRMATION BY THE SUBSCRIBERS IN RESPONSE TO NOTICE U/S 133(6) IN COURSE OF ORIGINAL AS WELL AS SECOND ROUND OF ASSESSMENT PROCEEDING; (II) TRANSFER OF SHARE CAPITAL THROUGH BANK ACCOUNT OF INVESTOR COMPANY; (III) THE BANK ACCOUNT SHOWS DEBIT OF THE SUM SO SUBSCRIBED IN THE SUBSCRIBERS BANK ACCOUNTS; AND (IV) ALLOTMENT OF SHARES IN FAVOUR OF INVESTORS UNDER NECESSARY INTIMATION TO ROC IN FORM NO.2. ITA NO.70/PAT/2017 11 THE APPELLANT HAS SUBMITTED THE BANK ACCOUNTS OF THE COMPANIES FROM W HOM THE SUBSCRIBERS / INVESTOR COMPANY HAVE RECEIVED THE FUNDS FOR SUBSCRIBING THE SHARE CAPITAL. A CHART SUMMARIZING THE SOURCE FROM WHERE THE SUBSCRIBING COMPANIES HAVE RECEIVED THE FUND WAS ALSO SUBMITTED. COPY OF THE CHART ALONG WITH BANK STATEMENT OF THE COMPANIES FROM WHOM THE SUBSCRIBING COMPANIES HAVE RECEIVED THE FUNDS IS ENCLOSED AT PAGE 33 TO 68 OF PB. AS SUBMITTED ELSEWHERE IN THIS SUBMISSION, THERE IS NO CASH DEPOSIT IN THE BANK ACCOUNT OF INVESTOR COMPANIES PRIOR TO SUBSCRIBING THE FUND TOWARD S SHARE CAPITAL. IT WOULD BE EVIDENT FROM PERUSAL OF THE BANK STATEMENT OF THE COMPANIES FROM WHOM THE SUBSCRIBING COMPANY HAS RECEIVED THE FUND THAT THERE IS NO CASH DEPOSIT IN THE BANK ACCOUNT OF SUCH COMPANIES AS WELL. THUS THE APPELLANT HAS NOT ONLY BE EN ABLE TO EXPLAIN THE SOURCE OF DEPOSIT IN ITS BANK ACCOUNT BUT HAS ALSO ESTABLISHED THE SOURCE OF THE SOURCE I.E. AVAILABILITY OF FUND IN THE HANDS OF THE INVESTOR COMPANIES. THE LD. CIT(A) HAS RECORDED A CATEGORICAL FINDING AT PAGE 34 PARA 4.48 WHICH R EADS 'IN ABSENCE OF SUCH CATEGORICAL OR CIRCUMSTANTIAL FINDING ON RECORD, ANY ACTION IN BRINGING THIS AMOUNT TO TAX WOULD FALL IN THE CATEGORY OF CONJUNCTURE, SUSPICION AND SURMISES WHICH HAS NOT FOUND FAVOUR OF THE APEX COURT, VARIOUS HIGH COURT AND ..... ............'. TO SUBSTANTIATE THE ABOVE SAID FINDING, THE APPELLANT RELIES ON THE FOLLOWING WELL SETTLED PROPOSITION OF LAW ENUNCIATED BY THE APEX COURT WHEREIN IT HAS BEEN HELD THAT SUSPICION HOWSOEVER STRONG CANNOT PARTAKE THE CHARACTER OF PROOF : - 37I TR 271 (SO - UMACHARAN SHAW & BROTHERS VS CIT, WEST BENGAL TAKING INTO CONSIDERATION THE ENTIRE CIRCUMSTANCES OF THE CASE, WE ARE SATISFIED THAT THERE WAS NO MATERIAL ON WHICH THE INCOME - TAX OFFICER COULD COME TO THE CONCLUSION THAT THE FIRM WAS NOT GENU INE. THERE ARE MANY SURMISES AND CONJECTURES, AND THE CONCLUSION IS THE RESULT OF SUSPICION WHICH CANNOT TAKE THE PLACE OF PROOF IN THESE MATTERS. (2009) 2 SCC 570 - ROOP SINGH NEGI VS. PUNJAB NATIONAL BANK & OTHERS ' THE INFERENCE DRAWN BY THE ENQUIRY OF FICER APPARENTLY WERE NOT SUPPORTED BY ANY EVIDENCE. SUSPICION, AS IS WELL KNOWN, HOWEVER HIGH MAY BE, CAN UNDER NO CIRCUMSTANCES BE HELD TO BE A SUBSTITUTE FOR LEGAL PROOF '. IT IS ALSO NOT THE CASE OF THE A.O. THAT THE INVESTORS COMPANIES ARE IN ANY WAY RELATED TO THE APPELLANT AND/OR THE DIRECTORS OF THE APPELLANT'S COMPANY ARE RELATED TO ANY OF THE DIRECTORS / SHARE HOLDERS OF THE INVESTORS COMPANY. THERE IS NO DOUBT WITH REGARD TO IDENTITY OF THE INVESTORS AS INVESTORS ARE NOT ONLY KNOWN TO INCOME TAX BUT ARE ALSO KNOWN TO BANK AND ROC. THUS THE VERY ADDITION MADE IS FIT TO BE DELETED IN VIEW OF JUDGMENT OF HON'BLE RAJASTHAN HIGH COURT REPORTED IN 394 ITR 383. THE RELEVANT PORTION FROM THE JUDGMENT IS QUOTED BELOW : ITA NO.70/PAT/2017 12 [2017] 394 ITR 383 (RAJ) COMMISSIONE R OF INCOME - TAX V. ARL INFRATECH LTD. QUESTION OF LAW 3. COUNSEL FOR THE APPELLANT HAS FRAMED THE FOLLOWING QUESTIONS OF LAW WHICH READS AS UNDER : - (I) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN REVERSING THE ORD ER PASSED BY THE COMMISSIONER OF INCOME - TAX (APPEALS) AND THE ASSESSING OFFICER , THEREBY, DELETING THE ADDITION OF RS. 2,50,00,000 MADE UNDER SECTION 68 OF THE ACT, EVEN WHEN THE ASSESSEE FAILED TO ESTABLISH THE IDENTITY, GENUINENESS AND CREDITWORTHINESS O F THE SHARE APPLICANTS ? (II) WHETHER THE ORDER PASSED BY THE TRIBUNAL IN NOT TREATING THE SUBSCRIPTION OF THE SHARE CAPITAL BY ALLEGED BOGUS SHAREHOLDERS AS UNEXPLAINED CASH CREDIT OF THE ASSESSEE IS LEGALLY SUSTAINABLE, MORE SO, WHEN NO FINDING TO PROVE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE SHARE APPLICANTS HAS BEEN GIVEN BY THE TRIBUNAL ? (HI) WHETHER THE ORDER PASSED BY T HE TRIBUNAL IS PERVERSE AND CON TRARY TO THE SPECIFIC FINDINGS RECORDED BY THE COMMISSIONER OF INCOME - TAX (APPEALS) AS WE LL AS THE ASSESSING OFFICER AND THE ASSES SEE'S OWN STATEMENTS RECORDED DURING SURVEY ? (IV) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE FINDING OF THE TRIBUNAL IS PERVERSE, CONTRARY TO THE RECORD AND UNTENABLE IN THE EYE OF LAW ? ' VERDICT O F COURT 10. TAKING INTO CONSIDERATION THE OBSERVATIONS MADE BY THE TWIN DECISIONS AS OBSERVED BY THE TRIBUNAL THAT ALL THE SHARE APPLICANTS STAND IDENTIFIED. THE ASSESSEE HAS PROVIDED PERMANENT ACCOUNT NUMBERS OF THE SHARE APPLICANTS. THE MODE OF PAYMENT HAS ALSO BEEN EXPLAINED. THERE IS NO DIRECT OR INDIRECT RELATION BETWEEN THE ASSESSEE - COMPANY AND THE SHARE APPLICANTS. THE STATEMENTS RECORDED DURING SURVEY HAS GOT NO EVIDENTIARY VALUE WITHOUT ANY SUPPORTING DOCUMENTS OR EVIDENCE. FURTHER, THE A.O. HAS NOT TREATED THE BANK ACCOUNT OF INVESTING COMPANY AS BENAMI BANK ACCOUNT OF THE APPELLANT AND HENCE, THE ADDITION IN THE HANDS OF THE APPELLANT IS DIRECTLY IN TEETH OF JUDGMENT OF THE APEX COURT, REPORTED IN 211 ITR PAGE 11 (ST) - COMMISSIONER OF INCOME - TA X VS. CHUNNI LAI - WHEREIN THEIR LORDSHIPS HAVE DISMISSED SLP OF THE DEPARTMENT AND HAS AFFIRMED THE FINDING OF THE HON'BLE TRIBUNAL AND HIGH COURT. THE RELEVANT PORTION IS REPRODUCED HEREUNDER : 'THE TRIBUNAL ALLOWED THE ASSESSEE'S APPEAL HOLDING THAT SIN CE THE CASH CREDITS CAME FROM BANK ACCOUNTS HELD BY THE WIFE, THE SON AND THE DAUGHTER IN LAW, THE OFFICER COULD NOT ADD BACK THESE AMOUNTS UNLESS HE COULD PROVE THAT THESE PERSONS WERE THE BENAMIDARS OF THE ASSESSEE.' ITA NO.70/PAT/2017 13 AT THIS STAGE IT WOULD BE FAIR ON TH E PART OF THE APPELLANT TO INFORM THIS HON'BLE BENCH THE LATEST JUDGMENT OF APEX COURT IN THE CASE OF PR. CIT (CENTRAL) - L VS. N R A IRON AND STEEL PVT. LTD. DATED 05.03.2019 IN SLP (C) NO.29855 OF 2018 REPORTED IN (2019) 412 ITR 161 WHEREIN THE APEX COURT HAS OVERTURNED THE ORDERS OF CIT(A) AND ITAT AND THE JUDGMENTS OF THE HON'BLE DELHI HIGH COURT DELETING THE ADDITION ON ACCOUNT OF SHARE CAPITAL / SHARE APPLICATION AND HAS UPHELD THE ORDER OF THE A.O. ON PECULIAR FACTS OF THAT CASE. THE APEX COURT IN PARA 12 OF ITS ORDER HAS NOTED THE OUTCOME OF ENQUIRY CONDUCTED BY THE A.O. THE RELEVANT PORTION IS REPRODUCED HEREUNDER : '12. IN THE PRESENT CASE, THE A. O. HAD CONDUCTED DETAILED ENQUIRY WHICH REVEALED THAT: I. THERE WAS NO MATERIAL ON RECORD TO PROVE, OR EVEN REMOTELY SUGGEST, THAT THE SHARE APPLICATION MONEY WAS RECEIVED FROM INDEPENDENT LEGAL ENTITIES. THE SURVEY REVEALED THAT SOME OF THE INVESTOR COMPANIES WERE NON - EXISTENT, AND HAD NO OFFICE AT THE ADDRESS MENTIONED BY THE ASSESSEE. FOR EXAMPLE: A. THE COMPANIES HEMA TRADING CO. PVT. LTD. AND ETERNITY MULTI TRADE PVT. LTD. AT MUMBAI, WERE FOUND TO BE NON - EXISTENT AT THE ADDRESS GIVEN, AND THE PREMISES WAS OWNED BY SOME OTHER PERSON. B. THE COMPANIES AT KOLKATTA DID NOT APPEAR BEFORE THE A.O., NOR D ID THEY PRODUCE THEIR BANK STATEMENTS TO SUBSTANTIATE THE SOURCE OF THE FUNDS FROM WHICH THE ALLEGED INVESTMENTS WERE MADE. C. THE TWO COMPANIES AT GUWAHATI VIZ. ISPAT SHEET LTD. AND NOVELTY TRADERS LTD., WERE FOUND TO BE NON - EXISTENT AT THE ADDRESS PROV IDED. THE GENUINENESS OF THE TRANSACTION WAS FOUND TO BE COMPLETELY DOUBTFUL. II. THE ENQUIRIES REVEALED THAT THE INVESTOR COMPANIES HAD FILED RETURNS FOR A NEGLIGIBLE TA XABLE INCOME, WHICH WOULD SHOW THAT THE INVESTORS DID NOT HAVE THE FINANCIAL CAPAC ITY TO INVE ST FUNDS RANGING BETWEEN RS. 90,00,000 TO RS. 95,00,000 IN THE ASSESSMENT YEAR 2009 - 10, FOR PURCHASE OF SHARES AT SUCH A HIGH PREMIUM. FOR EXAMPLE: NEHA CASSETES PVT. LTD. - KOLKATTA HAD DISCLOSED A TAXABLE INCOME OF RS. 9,744/ - FOR A. Y. 2009 - 10, BUT HAD PURCHASED SHARES WORTH RS, 90,00,000 IN THE ASSESSEE COMPANY. SIMILARLY WARNER MULTIMEDIA LTD. - KOLKATTA FILED A NIL RETURN, BUT HAD PURCHASED SHARES WORTH RS. 95,00,000 IN THE ASSESSEE COMPANY RESPONDENT. ANOTHER EXAMPLE IS OF GANGA BUILDE RS LTD. - KOLKATTA WHICH HAD FILED A RETURN FOR RS.5,850 BUT INVESTED IN SHARES TO THE TUNE OF RS. 90,00,000 IN THE ASSESSEE COMPANY - RESPONDENT, ETC. ITA NO.70/PAT/2017 14 III.THERE WAS NO EXPLANATION WHATSOEVER OFFERED AS TO WHY THE INVESTOR COMPANIES HAD APPLIED FOR SHARES OF THE ASSESSEE COMPANY AT A HIGH PREMIUM OF RS. 190 PER SHARE, EVEN THOUGH THE FACE VALUE OF THE SHARE WAS RS. 10/ - PER SHARE. IV.FURTHER MORE, NONE OF THE SO - CALLED INVESTOR COMPANIES ESTABLISHED THE SOURCE OF FUNDS FROM WHICH THE HIGH SHARE PREMIUM WAS INVESTED. V. THE MERE MENTION OF THE INCOME TAX FILE NUMBER OF AN INVESTOR WAS NOT SUFFICIENT TO DISCHARGE THE ONUS UNDER SECTION 68 OF THE ACT. ' NONE OF THE FACTS NOTICED BY THE APEX COURT, QUOTED IN THE PRECEDING PARAGRAPH, IS PRESENT IN THE APPELLAN T'S CASE. IN THE SAID CASE, THE INVESTOR COMPANIES WERE FOUND TO BE NON EXISTENT AND HAD NO OFFICE AT THE ADDRESS MENTIONED BY THE ASSESSEE. IN THE PRESENT CASE ENQUIRY U/S 133(6) WERE INITIATED ON TWO OCCASIONS I.E. FIRST WHILE PASSING ORDER U/S 147/143(3 ) AND SECONDLY WHILE PASSING ORDER U/S 147 / 143(3) / 263 AND WERE COMPLIED WITH WHEREBY THE INVESTORS HAVE SUBMITTED THEIR FULL PARTICULARS OF IT ASSESSMENT, CONFIRMATION/ COPY OF ACCOUNT AND BANK STATEMENT. THERE IS NO ALLEGATION OF NON - SERVICE OF NOTICE U/S 131 DATED 21.03.2014 ISSUED IN COURSE OF ASSESSMENT PROCEEDINGS U/S 147 / 143(3) / 263 ON ANY OF THE INVESTORS. IT IS WELL SETTLED THAT A DECISION IS AN AUTHORITY FOR WHAT IT DECIDES AND NOT THAT CAN BE DEDUCED THEREFROM. IN THIS REGARD KIND ATTENTIO N IS INVITED TO THE CONSTITUTION BENCH OF SUPREME COURT IN THE CASE OF PADMASUNDERA RAO (DEED) & OTHERS VS STATE OF TAMIL NADU & OTHERS REPORTED IN 255 ITR 147 AT PAGE 153 HAS CATEGORICALLY HELD THAT : - 'COURTS SHOULD NOT PLACE RELIANCE ON DECISIONS WITHO UT DISCUSSING AS TO HOW THE FACTUAL SITUATION FITS IN WITH THE FACT SITUATION OF THE DECISION ON WHICH RELIANCE IS PLACED. THERE IS ALWAYS PERIL IN TREATING THE WORDS OF A SPEECH OR JUDGMENT AS THOUGH THEY ARE WORDS IN A LEGISLATIVE ENACTMENT, AND IT IS TO BE REMEMBERED THAT JUDICIAL UTTERANCES ARE MADE IN THE SETTING OF THE FACTS OF A PARTICULAR CASE. CIRCUMSTANTIAL FLEXIBILITY, ONE ADDITIONAL OR DIFFERENT FACT MAY MAKE A WORLD OF DIFFERENCE BETWEEN CONCLUSIONS IN TWO CASES '. SIMILAR VIEW HAS BEEN TAKEN BY THE APEX COURT IN THE CASE OF CIT VS SUN ENGINEERING WORKS PVT. LTD REPORTED IN 198 ITR 297. THE RELEVANT PORTION IS EXTRACTED BELOW : - 'IT IS NEITHER DESIRABLE NOR PERMISSIBLE TO PICK OUT A WORD OR A SENTENCE FROM THE JUDGMENT OF THIS COURT, DIVORCED FROM THE CONTEXT OF THE QUESTION UNDER CONSIDERATION AND TREAT IT TO BE COMPLETE 'LAW ' DECLARED BY THIS COURT. THE JUDGMENT MUST BE READ AS A WHOLE AND THE OBSERVATION FROM THE JUDGMENT HAVE TO BE CONSIDERED IN THE LIGHT OF THE QUESTIONS WHICH WERE BEFORE THIS COURT. A DECISION OF THIS COURT TAKES ITS COLOUR FROM THE QUESTIONS INVOLVED IN THE CASE IN WHICH IT IS RENDERED AND, WHILE APPLYING THE DECISION TO A LATER CASE, THE COURT MUST CAREFULLY TRY TO ASCERTAIN THE TRUE PRINCIPLE LAID DOWN BY THE DECISION OF THIS COURT AND NOT TO PICK OUT WORDS OR SENTENCES FROM THE JUDGMENT, DIVORCED ITA NO.70/PAT/2017 15 FROM THE CONTEXT OF THE QUESTIONS UNDER CONSIDERATION BY THIS COURT, TO SUPPORT THEIR REASONING.' THUS WITH DUE RESPECT AND REVERENCE TO THE APEX COURT IT IS HUMBLY SUBMITTED THAT THE ABOVE SAID JUDGMENT IS STARKLY DISTINGUISHABLE ON FACTS AND HENCE WILL NOT COME TO THE RESCUE OF THE REVENUE. THE KOLKATA BENCH OF ITAT HAD AN OCCASION TO CONSIDER THE ABOVE SAID JUDGMENT OF THE SUPREME COURT I.E. NRA IRON & STEEL PVT. LTD. IN O NE OF ITS ORDER DATED 05.04.2019 (COPY PLACED AT PAGES 69 TO 81 OF PB) WHEREIN AT PARA 6.17, THE HON'BLE TRIBUNAL HAS FOUND THE SAID JUDGMENT TO BE NOT - APPLICABLE ON THE FACTS OF THE CASE BEFORE THEM AND HAS ACCORDINGLY DELETED THE ADDITION. THE RELEVANT P ORTION IN THIS REGARD IS QUOTED BELOW : - PARA - 6.17 'WE HAVE GONE THROUGH THE SAID JUDGMENT AND WE FIND IN THAT CASE, THE LD. AO HAS MADE EXTENSIVE ENQUIRIES AND FROM THAT HE HAD FOUND THAT SOME OF THE INVESTOR COMPANIES WERE NON - EXISTENT WHICH IS NOT THE CASE BEFORE US. CERTAIN INVESTOR COMPANIES DID NOT PRODUCED THEIR BANK STATEMENTS PROVING THE SOURCE FOR MAKING INVESTMENTS IN ASSESSEE COMPANY, WHICH IS NOT THE CASE BEFORE US. SOURCE OF FUNDS WERE NEVER ESTABLISHED BY THE INVESTOR COMPANIES IN THE CASE BEFORE THE HON 'BLE APEX COURT, WHEREAS IN THE INSTANT CASE -------------------------------------------- . HENCE, THE DECISION RELIED UPON BY THE LD. CIT DR IS FACTUALLY DISTINGUISHABLE AND DOES NOT ADVANCE THE CASE OF THE REVENUE. ' IN THE PRESENT CASE, TH E FINDINGS OF THE LD. CIT(A) WHILE DELETING THE ADDITION IS SIMILAR TO THE ONE ARRIVED AT BY THE HON'BLE KOLKATA BENCH OF ITAT IN ITS ORDER DATED 05.04.2019 AT PARA 6.19 WHEREBY THE HON'BLE TRIBUNAL HAS CATEGORICALLY HELD THAT 'ACCORDINGLY, ALL THE THREE C ONDITIONS AS REQUIRED U/S 68 OF THE ACT I.E. THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION WERE PLACED BEFORE THE LD. AO AND THE ONUS SHIFTED TO THE LD. AO TO DISPROVE THE MATERIALS PLACED BEFORE HIM. WITHOUT DOING SO, THE ADDITION MADE BY THE LD. AO IS BASED ON CONJUNCTURES AND SURMISES CANNOT BE JUSTIFIED. ' ALTHOUGH THE FINDINGS OF THE CIT(A) WHILE DELETING THE ADDITION HAS BEEN QUOTED ELSEWHERE IN THIS SUBMISSION BUT IN ORDER TO DEMONSTRATE THE SIMILARITY BETWEEN THE ABOVE SAID REAS ONING OF HON'BLE ITAT, KOLKATA BENCH, RELEVANT PORTION OF THE FINDINGS OF CIT(A) IN THE PRESENT CASE ARE AGAIN REPRODUCED HEREUNDER : - '4.48 IN ORDER TO INVOKE THE PROVISIONS OF SECTION 68 OF THE ACT ON THE FACTS AND CIRCUMSTANCE OF THE CASE, IT HAS TO BR OUGHT ON RECORD THAT THERE HAS LAUNDERING OF CASH (UNACCOUNTED) THROUGH LAYERS OR WITHIN LAYERS OF BANK ACCOUNTS FOR SUBSCRIPTION INTO SHARE CAPITAL AT PREMIUM, IN ABSENCE OF SUCH CATEGORICAL OR CIRCUMSTANTIAL FINDING ON RECORD, ANY ACTION IN BRINING THIS AMOUNT TO TAX WOULD FALL IN THE CATEGORY OF CONJECTURE, SUSPICION AND SURMISES WHICH HAS NOT FOUND FAVOUR OF THE APEX COURT, VARIOUS HIGH COURTS AND BENCHES OF TRIBUNAL IN THE CASES SUPRA AND OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF ADDL. C1T VS. ITA NO.70/PAT/2017 16 HA NUMAN AGGRAWAL 151 ITR 244, IT IS HELD THAT THE AO HAS FAILED TO SPELL OUT HIS DISSATISFACTION ABOUT THE COMPLIANCE OF THE REQUIREMENTS OF THE PROVISIONS OF SECTION 68 OF THE ACT NOR BROUGHT OUT ANY COGENT MATERIAL WHATSOEVER ON RECORD IN THIS REGARD. IT IS, THEREFORE, REQUESTED THAT YOUR HONOUR WOULD BE KIND ENOUGH TO DISMISS THE DEPARTMENTAL APPEAL. TO SUPPORT HIS CONTENTIONS, LD. AR RELIED ON THE DECISION OF COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S BABA BHOOTNATH TRADE & COMMERCE LTD., ITA N O.1494/KOL/2017, ORDER DATED 05.04.2019. 6. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDER OF THE AO AND SUBMITTED THAT AS PER THE DIRECTION BY CIT, NOTICES UNDER SECTION 131 WERE ISSUED AND SENT TO SHAREHOLDERS ASKING THEM TO PERSONA LL Y APPEAR BEFORE TH E AO TO VERIFY THE IDENTITY AND CREDITWORTHINESS OF THE SHAREHOLDERS AND GENUINENESS OF THE TRANSACTION MADE BY THEM IN THE ASSESSEE COMPANY. HOWEVER, THE ASSESSEE COULD NOT PROVE THE IDENTITY AND CREDITWORTHINESS OF THE SHAREHOLDERS AND GENUINENESS OF TH E TRANSACTION. EVEN THE ASSESSEE COULD NOT PRODUCE SUBSCRIBERS IN RESPONSE TO THE AFORESAID SHOW CAUSE LETTER. APART FROM THIS, LD. DR ALSO SUBMITTED THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE MADE ON ACCOUNT OF SHARE CAPITAL AND SHARE PREMIUM AMOUN TING TO RS. 13,95,00,000/ - OBSERVING THAT THE AO NEITHER SPELT OUT THE DISSATISFACTION ABOUT THE COMPLIANCE OF THE REQUIREMENTS OF SECTION 68 NOR BROUGHT OUT ANY COGENT MATERIAL IN THIS REGARD IGNORING THE FACT THAT THE AO HAS CLEARLY MENTIONED THE NON COMP LIANCE OF SUMMONS ISSUED U/S 131 BY THE SUBSCRIBER COMPANIES AND FAILURE OF THE ITA NO.70/PAT/2017 17 ASSESSEE COMPANY TO PRODUCE TH E DIRECTORS OF THE SUBSCRIBER COMPANIES . THEREFORE, THE AO HAS RIGHTLY HELD THAT DUE TO NON - COMPLIANCE ON THE PART OF THE SHAREHOLDERS, THE IDENTITY AND CREDITWORTHINESS OF THE SHAREHOLDERS AND GENUINENESS OF THE TRANSACTION BETWEEN SHAREHOLDERS AND ASSESSEE COMPANY COULD NOT BE VERIFIED, ENABLING THE AO TO ADD THE ENTIRE AMOUNT RECEIVED ON ACCOUNT OF ISSUE OF SHARES ALONG WITH THE QUANTUM OF PREMIUM PAID FOR ISSUE OF SHARES TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED CASH CREDIT. ACCORDINGLY, THE LD. DR SUBMITTED THAT THE IMPUGNED ORDER OF CIT(A) DESERVES TO BE QUASHED AND THE ORDER OF AO SHOULD BE RESTORED. 7. AFTER CONSIDERING THE SUBMISSI ONS OF BOTH THE SIDES AND PERUSING THE ENTIRE MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE AO HAS MADE THE IMPUGNED ADDITION U/S.68 OF THE ACT ON ACCOUNT OF UNEXPLAINED CASH CREDIT AS THE CREDITWORTHINESS OF SHAREHOLDERS AND GENUINENESS OF THE TRANSACTIO N BETWEEN SHAREHOLDERS AND ASSESSEE COULD NOT BE VERIFIED. THE CIT(A) DELETED THE ADDITION HOLDING THAT THE AO WAS NOT WITHIN HIS JURISDICTION IN TREATING SUCH SHARE CAPITAL AND SHARE PREMIUM AS UNACCOUNTED CASH CREDIT OF THE ASSESSEE COMPANY AND ADDITION THE SAME U/S.68 OF THE ACT. WE FIND THAT THE ASSESSEE IN THE COURSE OF THE ASSESSMENT PROCEEDINGS AS WELL AS IN THE COURSE OF THE FIRST APPELLATE PROCEEDINGS HAD FAILED TO SATISFY THE VITAL INGREDIENTS OF SECTION 68 OF THE ACT TO THE SATISFACTION OF THE AO PARTICULARLY IN RESPECT ITA NO.70/PAT/2017 18 OF CREDITWORTHINESS AND GENUINENESS OF TRANSACTION INCLUDING THE BONA FIDE OF THE TRANSACTION IN QUESTION PARTICULARLY IN LIGHT OF DETAILED ENQUIRY CARRIED OUT BY THE AO OF THE CASE IN THIS REGARD. THE GENUINENESS OF THE TRANSACTIO N IS NOT JUST LIMITED TO ISSUANCE OF SHARE CAPITAL RATHER IT IS COUPLED AND NECESSARILY HAS TO BE UNDERSTOOD AND READ ALONGWITH RECEIPT AND PAYMENT OF SHARE APPLICATION MONEY WHICH IS COMMENSURATE WITH THE VALUE OF THE SHARES BEING ISSUED AND ALLOTTED TO A ND SUBSCRIBED BY THE PROSPECTIVE SHAREHOLDERS. WHY WOULD A PROSPECTIVE SHAREHOLDER INVEST IN A COMPANY AT A PREMIUM OF RS 240 / - PER SHARE AND FACE VALUE OF SHARE IS RS.10/ - IN THE LARGE VALUE. THE ASSESSEE ALSO NOT ABLE TO SHOW THAT FROM THE DATE OF ISSUE OF SHARES TO THE FLOATING COMPANY, NO ANY DIVIDENDS HAVE BEEN DISTRIBUTED BY THE ASSESSEE COMPANY. IT IS WELL SETTLED PRINCIPLE OF LAW AS DECLARED BY THE HONBLE SUPREME COURT IN THE CASE OF SUMATI DAYAL VS. CIT (214 ITR 801) (SC) THAT THE TRUE NATURE OF TRANSACTION S HAS TO BE ASCERTAINED IN THE LIGHT OF SURROUNDING CIRCUMSTANCES. IT NEEDS TO BE EMPHASIZED THAT STAND OF PROOF BEYOND REASONABLE DOUBT HAS NO APPLICABILITY IN DETERMINATION OF MATTERS UNDER TAXING STATUTES. IT IS ALSO WELL SETTLED THAT TAX AUT HORITIES ARE ENTITLED TO LOOK INTO SURROUNDING CIRCUMSTANCES TO FIND OUT THAT THE REALITY OF THE TRANSACTION BY APPLYING THE TEST OF HUMAN PROBABILITY. THIS WAS THE PRINCIPLE LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. DURGA PRASAD MORE 8 2 ITR ITA NO.70/PAT/2017 19 540(SC). IT IS ALSO WELL SETTLED LAW THAT ONUS OF PROVING CREDITS IN ITS BOOK OF ACCOUNTS LIES SQUARELY ON THE ASSESSEE AND SUCH PROOF CONSISTS OF PROVING THE IDENTITY OF THE SUBSCRIBER OR CREDITOR, CAPACITY OF SUCH CREDITOR OR SUBSCRIBER TO MAKE PA YMENT AND ALSO TO PROVE THE GENUINENESS OF THE TRANSACTION . IT IS ONLY WHEN THE ASSESSEE DISCHARGES THIS PRIMARY ONUS, THAT ONUS SHIFTS TO THE DEPARTMENT. MERELY ESTABLISHING THE IDENTITY OF THE CREDITOR IS NOT SUFFICIENT. THEREFORE, THE PREPONDERANCE OF PROBABILITIES THEORY WILL APPLY IN THIS CASE AS OBSERVED BY THE HONBLE APEX COURT IN CASE OF SUMATI DAYAL & DURGA PRASAD MORE (SUPRA). WHAT IS THE VALUATION METHODOLOGY AND JUSTIFICATION FOR SUCH PREMIUM VARIATION, TERMS OF ISSUE AND THE PAYBACK WHICH HAS BEEN AGREED AND ACTED UPON? THESE ARE SOME OF THE QUESTIONS WHICH REMAIN UNANSWERED. AT LEAST THE ASSESSEE COMPANY SHOULD HAVE COME FORWARD AND ANSWERED THESE QUESTIONS BY ITSELF AND FOR WHICH IT DOESN'T HAVE TO DEPEND UPON THE SHAREHOLDERS TO ESTABLISH T HE GENUINENESS OF THESE TRANSACTIONS. FURTHER, WE FIND THAT THE CREDITWORTHINESS OF THESE SHAREHOLDERS HAVE NOT BEEN ESTABLISHED IN THE INSTANT CASE. MERE CONFIRMATION OR THE FACT THAT THE MONEY HAS BEEN RECEIVED THROUGH THE BANKING CHANNEL IS NOT SUFFICIE NT ENOUGH TO ESTABLISH THE CREDITWORTHINESS OF THESE SHAREHOLDERS. IT IS NOT A CASE OF ESTABLISHING THE SOURCE OF SOURCE BUT AT LEAST BASIC DOCUMENTATION TO ESTABLISH THE CREDITWORTHINESS OF THESE SHAREHOLDERS SHOULD HAVE BEEN ITA NO.70/PAT/2017 20 BROUGHT ON RECORD WHICH ASSES SEE HAS FAILED IN THE INSTANT CASE. WHETHER SHARE SUBSCRIBERS HAVE THEIR OWN PROFIT MAKING APPARATUS AND WERE INVOLVED IN ANY TANGIBLE BUSINESS ACTIVITY OR WERE THEY MERELY ROTATED MONEY, WHICH WAS COMING THROUGH THE BANK ACCOUNTS. THESE ARE SOME OF THE QU ESTIONS WHICH REMAIN UNANSWERED IN THE PRESENT CASE. 8. WE ALSO NOTED FROM THE CHART SUBMITTED BY THE LD. DR WITH REGARD TO PROFITABILITY OF THE SHARE APPLICANT COMPANIES WHICH READS AS UNDER: - SL.NO. NAME OF THE COMPANY INCOME 1. MONALISA GOODS (P) LTD. , 2 ND FLOOR, 3, SAKLAT PLACE, CHANDI CHOWK, KOLKATA NIL 2. SHIVPRIYA FINVEST L TD. PRINCEP T STREET, P - 27, PRINCEPT STREET, KOLKATA 25,480/ - 3. UTTAM FINVEST (P) LTD., 4 TH FLOOR, P - 27, PRINCEPT STREET, CHANDNI CHOWK, KOLKATA 25,710/ - 4. JNJ FINANCE COMPA NY (P) LTD., 9 TH FLOOR, 33, C.R. AVENUE, CHANDNI CHOWK, KOLKATA 76,450/ - 5. TISTA NIRMAN (P) LTD., 85, METACALFE STREET, 2 ND FLOOR, ROOM NO. 206, KOLKATA 149/ - 6. D.D. DEPOSITS & ADVANCES (P) LTD., 7 TH FLOOR, G.C. AVENUE, CHANDNI CHOWK, KOLKATA 43,100/ - 7. JC MOTOR & GENERAL FINANCE COMPANY LTD, CHANDHI CHOWK, KOLKATA 33,240/ - 8. POPCORN VYAPAAR (P) LTD.,6 TH FLOOR, P - 41, PRINCEP STREET, CHANDNI CHOWK, KOLKATA NIL 9. DAMODAR NIKETAN (P) LTD., 85, METCALFE STREET, 2 ND FLOOR, ROOM NO. 206, KOLKATA 420/ - 10. KUBER RESIDENCY (P) LTD.,C/O B.K. CHATTERJEE & COMPNAY, OLD COURT HOUSE STREET, 2 ND FLOOR, B.B.D BAG, KOLKATA 676/ - 11. KASTURI HOME (P) LTD. ,85 METCALFE STREET, 2 ND FLOOR, ROOM NO. 206, KOLKATA 211/ - 12. PUSPAK COMMERCIAL (P) LTD., 2 ND FLOOR, SAKLA T PLACE, CHANDNI CHOWK, KOLKATA NIL 13. CHARMS SUPPLIERS PVT. LTD. 4 TH FLOOR, ANJALI APARTMENT, R.B.C. ROAD, DUMDUM, KOLKATA 36,240/ - 14. ADISHWAR TRADE LINK(P) LTD., 6 TH FLOOR, P - 41, PRINCEP STREET, CHANDNI CHOWK, KOLKATA - PIN - 700072 36,310/ - FROM THE ABOVE SHARE APPLICANTS COMPANIES IT IS CLEAR THAT THEY HAVE MEAGRE INCOME OR NIL INCOME. WHILE GOING THROUGH THE BANK STATEMENTS ITA NO.70/PAT/2017 21 SUBMITTED BY THE ASSESSEE FOR A SMALL PERIOD, WHICH HAVE BEEN PLACED ON RECORD, WE FIND THAT HUGE TRANSACTIONS HAVE BEEN MADE AND THE AMOUNT I.E. MORE OR LESS HAVE BEEN WITHDRAWN ON THE SAME DAY. THE LD. AR OF THE ASSESSEE ALSO UNABLE TO SATISFY THAT THE SHARE APPLICANT COMPANIES HAVE GENUINENESS BUSINESS ACTIVITIES. HOWEVER, BEFORE US, LD. AR COULD NOT SUBMIT ANY FINANCIAL STAT EMENTS TO SUBSTANTIATE THE CREDITWORTHINESS OF THE SHARE APPLICANTS. OUR ABOVE VIEW IS SUPPORTED BY THE HONBLE SUPREME COURT IN THE CASE OF PR. CIT VS. NRA IRON STEEL (P.) LTD. [2019] 103 TAXMANN.COM 48 (SC), WHEREIN THE HONBLE APEX COURT HAS HELD AS UN DER : - 8. WE HAVE HEARD THE LD. COUNSEL FOR THE REVENUE, AND EXAMINED THE MATERIAL ON RECORD. 8.1 THE ISSUE WHICH ARISES FOR DETERMINATION IS WHETHER THE RESPONDENT /ASSESSEE HAD DISCHARGED THE PRIMARY ONUS TO ESTABLISH THE GENUINENESS OF THE TRANSACTION REQUIRED UNDER SECTION 68 OF THE SAID ACT. SECTION 68 OF THE I.T. ACT (PRIOR TO THE FINANCE ACT, 2012) READ AS FOLLOWS: '68. CASH CREDITS - WHERE ANY SUM IS FOUND CREDITED IN THE BOOK OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME - TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR' (EMPHA SIS SUPPLIED) THE USE OF THE WORDS 'ANY SUM FOUND CREDITED IN THE BOOKS' IN SECTION 68 OF THE ACT INDICATES THAT THE SECTION IS WIDELY WORDED, AND INCLUDES INVESTMENTS MADE BY THE INTRODUCTION OF SHARE CAPITAL OR SHARE PREMIUM. 8.2 AS PER SETTLED LAW, THE INITIAL ONUS IS ON THE ASSESSEE TO ESTABLISH BY COGENT EVIDENCE THE GENUINENESS OF THE TRANSACTION, AND CREDIT - WORTHINESS OF THE INVESTORS UNDER SECTION 68 OF THE ACT. THE ASSESSEE IS EXPECTED TO ESTABLISH TO THE SATISFACTION OF THE ASSESSING OFFICER CIT V . PRECISION FINANCE (P.) LTD. [1995] 82 TAXMAN 31/[1994] 208 ITR 465 (CAL.) : ITA NO.70/PAT/2017 22 PROOF OF IDENTITY OF THE CREDITORS; CAPACITY OF CREDITORS TO ADVANCE MONEY; AND GENUINENESS OF TRANSACTION THIS COURT IN THE LAND MARK CASE OF KALE KHAN MOHAMMED HANIF V. CIT [1963] 50 ITR 1 (SC) AND ROSHAN DI HATTI V. CIT [1977] 107 ITR 938 (SC) LAID DOWN THAT THE ONUS OF PROVING THE SOURCE OF A SUM OF MONEY FOUND TO HAVE BEEN RECEIVED BY AN ASSESSEE, IS ON THE ASSESSEE. ONCE THE ASSESSEE HAS SUBMITTED THE DOCUMENTS RELATI NG TO IDENTITY, GENUINENESS OF THE TRANSACTION, AND CREDIT - WORTHINESS, THEN THE AO MUST CONDUCT AN INQUIRY, AND CALL FOR MORE DETAILS BEFORE INVOKING SECTION 68. IF THE ASSESSEE IS NOT ABLE TO PROVIDE A SATISFACTORY EXPLANATION OF THE NATURE AND SOURCE, OF THE INVESTMENTS MADE, IT IS OPEN TO THE REVENUE TO HOLD THAT IT IS THE INCOME OF THE ASSESSEE, AND THERE WOULD BE NO FURTHER BURDEN ON THE REVENUE TO SHOW THAT THE INCOME IS FROM ANY PARTICULAR SOURCE. 8.3 WITH RESPECT TO THE ISSUE OF GENUINENESS OF TRANS ACTION, IT IS FOR THE ASSESSEE TO PROVE BY COGENT AND CREDIBLE EVIDENCE, THAT THE INVESTMENTS MADE IN SHARE CAPITAL ARE GENUINE BORROWINGS, SINCE THE FACTS ARE EXCLUSIVELY WITHIN THE ASSESSEE'S KNOWLEDGE. THE DELHI HIGH COURT IN CIT V. OASIS HOSPITALITIES (P.) LTD. [2011] 9 TAXMANN.COM 179/198 TAXMAN 247/333 ITR 119 , HELD THAT : 'THE INITIAL ONUS IS UPON THE ASSESSEE TO ESTABLISH THREE THINGS NECESSARY TO OBVIATE THE MIS CHIEF OF SECTION 68. THOSE ARE: ( I ) IDENTITY OF THE INVESTORS; ( II ) THEIR CREDITWORTHINESS/INVESTMENTS; AND (III) GENUINENESS OF THE TRANSACTION. ONLY WHEN THESE THREE INGREDIENTS ARE ESTABLISHED PRIMA FACIE, THE DEPARTMENT IS REQUIRED TO UNDERTAKE FURTHER EXERCISE.' IT HAS BEEN HELD THAT MERELY PROVING THE IDENTITY OF THE INVESTORS DOES NOT DISCHARGE THE ONUS OF THE ASSESSEE, IF THE CAPACITY OR CREDIT - WORTHINESS HAS NOT BEEN ESTABLISHED. IN SHANKAR GHOSH V. ITO [1985] 13 ITD 440 (CAL.) , THE ASSESSEE FAILED TO PROVE THE FINANCIAL CAPACITY OF THE PERSON FROM WHOM HE HAD ALLEGEDLY TAKEN THE LOAN. THE LOAN AMOUNT WAS RIGHTLY HELD TO BE THE ASSESSEE'S OWN UNDISCLOSED INCOME. 8.4 RELIANCE WAS ALSO PLACED ON THE DECISION OF CIT V. KAMDHENU STEEL & ALLOYS LIMITED [2012] 19 TAXMANN.COM 26/206 TAXAMAN 254 [2014] 361 ITR 220 (DELHI) WHEREIN THE C OURT THAT : '38. EVEN IN THAT INSTANT CASE, IT IS PROJECTED BY THE REVENUE THAT THE DIRECTORATE OF INCOME TAX (INVESTIGATION) HAD PURPORTEDLY FOUND SUCH A RACKET OF FLOATING BOGUS COMPANIES WITH SOLE PURPOSE OF LENDING ENTRIES. BUT, IT IS UNFORTUNATE THAT ALL THIS EXERCISE IF GOING IN VAIN AS FEW MORE STEPS WHICH SHOULD HAVE BEEN TAKEN BY THE REVENUE IN ORDER TO FIND OUT CAUSAL CONNECTION BETWEEN THE CASE DEPOSITED IN THE BANK ACCOUNTS OF THE APPLICANT BANKS AND THE ASSESSEE WERE NOT TAKEN. IT IS NECESSARY TO LINK THE ASSESSEE WITH THE SOURCE WHEN THAT LINK IS MISSING, IT IS DIFFICULT TO FASTEN THE ASSESSEE WITH SUCH A LIABILITY.' ITA NO.70/PAT/2017 23 9. THE JUDGMENTS CITED HOLD THAT THE ASSESSING OFFICER OUGHT TO CONDUCT AN INDEPENDENT ENQUIRY TO VERIFY THE GENUINENESS OF THE C REDIT ENTRIES. IN THE PRESENT CASE, THE ASSESSING OFFICER MADE AN INDEPENDENT AND DETAILED ENQUIRY, INCLUDING SURVEY OF THE SO - CALLED INVESTOR COMPANIES FROM MUMBAI, KOLKATA AND GUWAHATI TO VERIFY THE CREDIT - WORTHINESS OF THE PARTIES, THE SOURCE OF FUNDS I NVESTED, AND THE GENUINENESS OF THE TRANSACTIONS. THE FIELD REPORTS REVEALED THAT THE SHARE - HOLDERS WERE EITHER NON - EXISTENT, OR LACKED CREDIT - WORTHINESS. 10. ON THE ISSUE OF UNEXPLAINED CREDIT ENTRIES /SHARE CAPITAL, WE HAVE EXAMINED THE FOLLOWING JUDGMEN TS : I. IN SUMATI DAYAL V. CIT [1995] 80 TAXMAN 89/214 ITR 801 THIS COURT HELD THAT : 'IF THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATURE AND SOURCE THEREOF IS , IN THE OPINION OF THE ASSESSING OFFICER, NOT SATISFACTORY, THERE IS PRIMA FACIE EVIDENCE AGAINST THE ASSESSEE, VIS., THE RECEIPT OF MONEY, AND IF HE FAILS TO REBUT THE SAME, THE SAID EVIDENCE BEING UNREBUTTED CAN BE USED AGAINST HIM BY HOLDING THAT IT IS A RECEIPT OF AN INCOME NATURE. WHILE CONSIDERING THE EXPLANATION OF THE ASSESSEE, THE DEPARTMENT CANNOT, HOWEVER, ACT UNREASONABLY' II. IN CIT V. P. MOHANKALA [2007] 16 1 TAXMAN 169/291 ITR 278 THIS COURT HELD THAT: 'A BARE READING OF SECTION 68 OF THE INCOME - TAX ACT, 1961, SUGGESTS THAT (I) THERE HAS TO BE CREDIT OF AMOUNTS IN THE BOOKS MAINTAINED BY THE ASSESSEE ; (II) SUCH CREDIT HAS TO BE A SUM OF MONEY DURING THE P REVIOUS YEAR ; AND (III) EITHER (A) THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH CREDITS FOUND IN THE BOOKS OR (B) THE EXPLANATION OFFERED BY THE ASSESSEE, IN THE OPINION OF THE ASSESSING OFFICER, IS NOT SATISFACTORY. IT IS ONLY T HEN THAT THE SUM SO CREDITED MAY BE CHARGED TO INCOME - TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. THE EXPRESSION 'THE ASSESSEE OFFERS NO EXPLANATION' MEANS THE ASSESSEE OFFERS NO PROPER, REASONABLE AND ACCEPTABLE EXPLANATION AS REGARDS THE SUM S FOUND CREDITED IN THE BOOKS MAINTAINED BY THE ASSESSEE. THE BURDEN IS ON THE ASSESSEE TO TAKE THE PLEA THAT, EVEN IF THE EXPLANATION IS NOT ACCEPTABLE, THE MATERIAL AND ATTENDING CIRCUMSTANCES AVAILABLE ON RECORD DO NOT JUSTIFY THE SUM FOUND CREDITED IN THE BOOKS BEING TREATED AS A RECEIPT OF INCOME NATURE.' (EMPHASIS SUPPLIED) III. THE DELHI HIGH COURT IN A RECENT JUDGMENT DELIVERED IN PR.CIT V. NDR PROMOTERS (P.) LTD. [2019] 102 TAXMANN.COM 182/410 ITR 379 UPHELD THE ADDITIONS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTRODUCING BOGUS SHARE CAPITAL INTO THE ASSESSEE COMPANY ON THE FACTS OF THE CASE. ITA NO.70/PAT/2017 24 IV. THE COURTS HAVE HELD THAT IN THE CASE OF CASH CREDIT ENTRIES, IT IS NECESSARY FOR THE ASSESSEE TO PROVE NOT ONLY THE IDENTITY OF THE CREDITORS, BUT ALSO THE CAPACITY OF THE CREDITORS TO ADVANCE MONEY, AND ESTABLISH THE GENUINENESS OF THE TRANSACTIONS. THE INITIAL ONUS OF PROOF LIES ON THE ASSESSEE. THIS COURT IN ROSH AN DI HATTI V. CIT [1992] 2 SCC 378, HELD THAT IF THE ASSESSEE FAILS TO DISCHARGE THE ONUS BY PRODUCING COGENT EVIDENCE AND EXPLANATION, THE AO WOULD BE JUSTIFIED IN MAKING THE ADDITIONS BACK INTO THE INCOME OF THE ASSESSEE. V. THE GUWAHATI HIGH COURT IN NEMI CHAND KOTHARI V. CIT [2004] 136 TAXMAN 213/[2003] 264 ITR 254 HELD THAT MERELY BECAUSE A TRANSACTION TAKES PLACE BY CHEQUE IS NOT SUFFICIENT TO DISCHARGE THE BURDE N. THE ASSESSEE HAS TO PROVE THE IDENTITY OF THE CREDITORS AND GENUINENESS OF THE TRANSACTION. : 'IT CANNOT BE SAID THAT A TRANSACTION, WHICH TAKES PLACE BY WAY OF CHEQUE, IS INVARIABLY SACROSANCT. ONCE THE ASSESSEE HAS PROVED THE IDENTITY OF HIS CREDITORS , THE GENUINENESS OF THE TRANSACTIONS WHICH HE HAD WITH HIS CREDITORS, AND THE CREDITWORTHINESS OF HIS CREDITORS VIS - A - VIS THE TRANSACTIONS WHICH HE HAD WITH THE CREDITORS, HIS BURDEN STANDS DISCHARGED AND THE BURDEN THEN SHIFTS TO THE REVENUE TO SHOW THAT THOUGH COVERED BY CHEQUES, THE AMOUNTS IN QUESTION, ACTUALLY BELONGED TO, OR WAS OWNED BY THE ASSESSEE HIMSELF ' (EMPHASIS SUPPLIED) VI. IN A RECENT JUDGMENT THE DELHI HIGH COURT CIT V. N.R. PORTFOLIO (P.) LTD. [2014] 42 TAXMANN.COM 339/222 TAXMAN 157 (MAG.) (DELHI) HELD THAT THE CREDIT - WORTHINESS OR GENUINENESS OF A TRANSACTION REGARDING SHARE APPLICATION MONEY DEPENDS ON WHETHER THE TWO PARTIES ARE RELATED OR KNOWN TO EACH OTHER, OR MODE BY WHICH PARTIES APPROACHED EACH OTHER, WHETHER THE TRANSACTION IS ENTERED INTO THROUGH WRITTEN DOCUMENTATION TO PROTECT INVESTMENT, WHETHER THE INVESTOR WAS AN ANGEL INVESTOR, THE QUANTUM OF MONEY INVESTED, CREDIT - WORTHINESS OF THE RE CIPIENT, OBJECT AND PURPOSE FOR WHICH PAYMENT/INVESTMENT WAS MADE, ETC. THE INCORPORATION OF A COMPANY, AND PAYMENT BY BANKING CHANNEL, ETC. CANNOT IN ALL CASES TANTAMOUNT TO SATISFACTORY DISCHARGE OF ONUS. VII. OTHER CASES WHERE THE ISSUE OF SHARE APPLIC ATION MONEY RECEIVED BY AN ASSESSEE WAS EXAMINED IN THE CONTEXT OF SECTION 68 ARE LOVELY EXPOSES (P.) LTD. DIVINE LEASING & FINANCING LTD. ( SUPRA ), AND CIT V. VALUE CAPITAL SERVICE (P.) LTD. [2008] 307 ITR 334 (DELHI) 11. THE PRINCIPLES WHICH EMERGE WHERE SUMS OF MONEY ARE CREDITED AS SHARE CAPITAL/PREMIUM ARE : I. THE ASSESSEE IS UNDER A LEGAL OBLIGATION TO PROVE THE GENUINENESS OF THE TRANSACTION, THE IDENTITY OF THE CREDITORS, AND CREDIT - WORTHINESS OF THE INVESTORS WHO SHOULD HAVE THE FINANCIAL ITA NO.70/PAT/2017 25 CAPACITY TO MAKE THE INVESTMENT IN QUESTION, TO THE SATISFACTION OF THE AO, SO AS TO DISCHARGE THE PRIMARY ONUS. II. THE ASSESSING OFFICER IS DUTY BOUND TO INVESTIGATE THE CRED IT - WORTHINESS OF THE CREDITOR/SUBSCRIBER, VERIFY THE IDENTITY OF THE SUBSCRIBERS, AND ASCERTAIN WHETHER THE TRANSACTION IS GENUINE, OR THESE ARE BOGUS ENTRIES OF NAME - LENDERS. III. IF THE ENQUIRIES AND INVESTIGATIONS REVEAL THAT THE IDENTITY OF THE CREDITO RS TO BE DUBIOUS OR DOUBTFUL, OR LACK CREDIT - WORTHINESS, THEN THE GENUINENESS OF THE TRANSACTION WOULD NOT BE ESTABLISHED. IN SUCH A CASE, THE ASSESSEE WOULD NOT HAVE DISCHARGED THE PRIMARY ONUS CONTEMPLATED BY SECTION 68 OF THE ACT. 12. IN THE PRESENT CAS E, THE A.O. HAD CONDUCTED DETAILED ENQUIRY WHICH REVEALED THAT : I. THERE WAS NO MATERIAL ON RECORD TO PROVE, OR EVEN REMOTELY SUGGEST, THAT THE SHARE APPLICATION MONEY WAS RECEIVED FROM INDEPENDENT LEGAL ENTITIES. THE SURVEY REVEALED THAT SOME OF THE INVE STOR COMPANIES WERE NON - EXISTENT, AND HAD NO OFFICE AT THE ADD RESS MENTIONED BY THE ASSESSEE. : FOR EXAMPLE : A. THE COMPANIES HEMA TRADING CO. PVT. LTD. AND ETERNITY MULTI TRADE PVT. LTD. AT MUMBAI, WERE FOUND TO BE NON - EXISTENT AT THE ADDRESS GIVEN, AND THE PREMISES WAS OWNED BY SOME OTHER PERSON. B. THE COMPANIES AT KOLKATTA DID NOT APPEAR BEFORE THE A.O., NOR DID THEY PRODUCE THEIR BANK STATEMENTS TO SUBSTANTIATE THE SOURCE OF THE FUNDS FROM WHICH THE ALLEGED INVESTMENTS WERE MADE. C. THE TWO COMPANIES AT GUWAHATI VIZ. ISPAT SHEET LTD. AND NOVELTY TRADERS LTD., WERE FOUND TO BE NON - EXISTENT AT THE ADDRESS PROVIDED. THE GENUINENESS OF THE TRANSACTION WAS FOUND TO BE COMPLETELY DOUBTFUL. II. THE ENQUIRIES REVEALED THAT THE INVESTOR COMPANIES HAD FILED RETU RNS FOR A NEGLIGIBLE TAXABLE INCOME, WHICH WOULD SHOW THAT THE INVESTORS DID NOT HAVE THE FINANCIAL CAPACITY TO INVEST FUNDS RANGING BETWEEN RS. 90,00,000 TO RS. 95,00,000 IN THE ASSESSMENT YEAR 2009 - 10, FOR PURCHASE OF SHARES AT SUCH A HIGH PREMIUM. . NEHA CASSETES PVT. LTD. - KOLKATTA HAD DISCLOSED A TAXABLE INCOME OF RS. 9,744/ - FOR A.Y. 2009 - 10, BUT HAD PURCHASED SHARES WORTH RS, 90,00,000 IN THE ASSESSEE COMPANY. ITA NO.70/PAT/2017 26 SIMILARLY WARNER MULTIMEDIA LTD. KOLKATTA FILED A NIL RETURN, BUT HAD PURCHASED SHARES WO RTH RS. 95,00,000 IN THE ASSESSEE COMPANY RESPONDENT. ANOTHER EXAMPLE IS OF GANGA BUILDERS LTD. KOLKATTA WHICH HAD FILED A RETURN FOR RS. 5,850 BUT INVESTED IN SHARES TO THE TUNE OF RS. 90,00,000 IN THE ASSESSEE COMPANY RESPONDENT, ETC. III. THERE WA S NO EXPLANATION WHATSOEVER OFFERED AS TO WHY THE INVESTOR COMPANIES HAD APPLIED FOR SHARES OF THE ASSESSEE COMPANY AT A HIGH PREMIUM OF RS. 190 PER SHARE, EVEN THOUGH THE FACE VALUE OF THE SHARE WAS RS. 10/ - PER SHARE. IV. FURTHERMORE, NONE OF THE SO - CALL ED INVESTOR COMPANIES ESTABLISHED THE SOURCE OF FUNDS FROM WHICH THE HIGH SHARE PREMIUM WAS INVESTED. V. THE MERE MENTION OF THE INCOME TAX FILE NUMBER OF AN INVESTOR WAS NOT SUFFICIENT TO DISCHARGE THE ONUS UNDER SECTION 68 OF THE ACT. 13. THE LOWER APP ELLATE AUTHORITIES APPEAR TO HAVE IGNORED THE DETAILED FINDINGS OF THE AO FROM THE FIELD ENQUIRY AND INVESTIGATIONS CARRIED OUT BY HIS OFFICE. THE AUTHORITIES BELOW HAVE ERRONEOUSLY HELD THAT MERELY BECAUSE THE RESPONDENT COMPANY ASSESSEE HAD FILED ALL T HE PRIMARY EVIDENCE, THE ONUS ON THE ASSESSEE STOOD DISCHARGED. THE LOWER APPELLATE AUTHORITIES FAILED TO APPRECIATE THAT THE INVESTOR COMPANIES WHICH HAD FILED INCOME TAX RETURNS WITH A MEAGRE OR NIL INCOME HAD TO EXPLAIN HOW THEY HAD INVESTED SUCH HUGE S UMS OF MONEY IN THE ASSESSEE COMPANY - RESPONDENT. CLEARLY THE ONUS TO ESTABLISH THE CREDIT WORTHINESS OF THE INVESTOR COMPANIES WAS NOT DISCHARGED. THE ENTIRE TRANSACTION SEEMED BOGUS, AND LACKED CREDIBILITY. THE COURT/AUTHORITIES BELOW DID NOT EVEN ADVERT TO THE FIELD ENQUIRY CONDUCTED BY THE AO WHICH REVEALED THAT IN SEVERAL CASES THE INVESTOR COMPANIES WERE FOUND TO BE NON - EXISTENT, AND THE ONUS TO ESTABLISH THE IDENTITY OF THE INVESTOR COMPANIES, WAS NOT DISCHARGED BY THE ASSESSEE. 14. THE PRACTICE OF C ONVERSION OF UN - ACCOUNTED MONEY THROUGH THE CLOAK OF SHARE CAPITAL/PREMIUM MUST BE SUBJECTED TO CAREFUL SCRUTINY. THIS WOULD BE PARTICULARLY SO IN THE CASE OF PRIVATE PLACEMENT OF SHARES, WHERE A HIGHER ONUS IS REQUIRED TO BE PLACED ON THE ASSESSEE SINCE T HE INFORMATION IS WITHIN THE PERSONAL KNOWLEDGE OF THE ASSESSEE. THE ASSESSEE IS UNDER A LEGAL OBLIGATION TO PROVE THE RECEIPT OF SHARE CAPITAL/PREMIUM TO THE SATISFACTION OF THE AO, FAILURE OF WHICH, WOULD JUSTIFY ADDITION OF THE SAID AMOUNT TO THE INCOME OF THE ASSESSEE. 15. ON THE FACTS OF THE PRESENT CASE, CLEARLY THE ASSESSEE COMPANY - RESPONDENT FAILED TO DISCHARGE THE ONUS REQUIRED UNDER SECTION 68 OF THE ACT, THE ASSESSING OFFICER WAS JUSTIFIED IN ADDING BACK THE AMOUNTS TO THE ASSESSEE'S INCOME. ITA NO.70/PAT/2017 27 16 . THE APPEAL FILED BY THE APPELLANT REVENUE IS ALLOWED. IN THE AFORESAID FACTS AND CIRCUMSTANCES, AND THE LAW LAID DOWN ABOVE, THE JUDGMENT OF THE HIGH COURT, THE ITAT, AND THE CIT ARE HEREBY SET - ASIDE. THE ORDER PASSED BY THE AO IS RESTORED. PENDING APP LICATIONS, IF ANY ARE DISPOSED OF. ORDERED ACCORDINGLY. 9 . RESPECTFULLY FOLLOWING THE ABOVE JUDICIAL DECISIONS OF THE HONBLE SUPREME COURT AS WELL AS THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER , IT IS CLEAR THAT THE CREDITWORTHINESS OF THE SHARE APPLICANTS, IN THE PRESENT CASE IN HAND, HAVE NOT BEEN PROVED BY THE ASSESSEE, THEREFORE, THE AO HAS RIGHTLY MADE ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDIT. IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE, THE CASE LAWS RELIED ON BY THE LD. CIT(A) AS WELL AS LD. AR ARE NOT APPLICABLE IN THE PRESENT CASE IN HAND. ACCORDINGLY, WE DECLINE TO ACCEPT THE FINDINGS RECORDED BY THE CIT(A) DELETING THE ADDITION MADE U/S.68 OF THE ACT. HENCE, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE CIT(A) AND ALLOW THE GROUNDS OF APPEAL OF THE REVENUE. CONSEQUENTLY, APPEAL OF THE REVENUE IS ALLOWED. 10 . IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED . ORDER PRONOUNCED IN PURSUANCE WITH RULE 34 ( 4 ) OF ITAT RULES, 1963 BY PUTTING THE COPY OF THE SAME ON NOTI CE BOARD ON 06 /1 2 /2019 AT PATNA . SD/ - ( C.M.GARG ) SD/ - (L.P.SAHU) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /PATNA ; DATED 06 / 1 2 /201 9 PRAKASH KUMAR MISHRA, S R.P.S ITA NO.70/PAT/2017 28 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( PRIVATE SECRETARY ) , / ITAT, PATNA 1. / THE APPELLANT - . 2. / THE RE SPONDENT - 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, PATNA 6. / GUARD FILE. //TRUE COPY//