Appeal details
Counselvise Citation
[2017] 130 COUNSELVISE.COM (IT) 5587 (ITAT-JAIPUR)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 4 month(s) 8 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
24-02-2017
Appeal Filed By
Department
Order Result
Allowed
Bench Allotted
B
Assessment Year
2009-2010
Appeal Filed On
16-10-2014
Judgement Text
VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO.702/JP/14 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10 THE ACIT, CIRCLE-1, JAIPUR CUKE VS. M/S BRIGHT METALS PVT. LTD. F-671, ROAD NO.9, F-2, VKI AREA, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAACB 9670 N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LSS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SMT. NEENA JEPH (J CIT ) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 29.11.2016 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT: 24/02/2017. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-I, JAIPUR DATED 11.08.2014 WHEREIN THE REVENUE HAS TAK EN FOLLOWING GROUND OF APPEAL: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 75,00,000/- ON ACCOUNT OF UNEXPLAINED CREDIT U/S 68 OF IT ACT. 2. THE FACTS RELEVANT FOR ISSUE UNDER CONSIDERATION ARE THAT DURING THE YEAR UNDER CONSIDERATION, ON EXAMINATION OF BOOKS OF ACC OUNTS OF THE ASSESSEE COMPANY, THE AO OBSERVED THAT THE FOLLOWING COMPANI ES HAVE CONTRIBUTED IN SHARE CAPITAL AND SHARE PREMIUM OF THE ASSESSEE COM PANY WHOSE PARTICULARS ARE AS BELOW: ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 2 NAME & ADDRESS OF THE COMPANY NO. OF SHARES ALLOTTED & RATE PER SHARE AND SHARE PREMIUM PER SHARE. SHARE CAPITAL SHARE PREMIUM OMEGA VINCOM TRADING (P) LTD G-9/10 3RD FLOOR RANI SATI NAGAR CHS LTD. S.V. ROAD, MALAD(W) MUMBAI 400064 SHARES ALLOTTED 6800, RATE PER SHARE RS.100/- SHARE PREMIUM PER SHARE RS. 150/- RS. 6,80,000/- RS. 10,80,000/- PRANJAL TRADING CO. (P) LTD.,1-A, HILL VIEW APT. SHARES ALLOTTED 7200, RATE PER SHARE RS. 100/- SHARE PREMIUM PER SHARE RS. 150/- RS, 7,20,000/- RS. 10,80,000/- MELBRIGHT SUPPLIERS (P). LTD -2, JOGENDA KAVIRAJ ROW, KOLKATTA 700072 SHARES ALLOWED 12000, RATE PER SHARE RS. 100/- SHARE PREMIUM RS.150/- PER SHARE RS. 12,00,000/- RS. 18,00,000/- GAWARJA MERCHANTS (P) LTD., P-27, PRINCEP STREET, 3 RD FLOOR KOLKATTA SHARES ALLOTTED 4000/-, RATE PER SHARE RS. 100/- SHARE PREMIUM PER SHARE RS. 150/- RS. 4,00,000/- RS. 6,00,000/- TOTAL SHARE CAPITAL RS.30,00,000/- RS.45,00,000/- 2.1 TO VERIFY THE GENUINENESS OF SHARE CAPITAL AND SHARE PREMIUM RECEIVED FROM THE SAID COMPANIES, THE AO ISSUED NOTICES TO T HESE COMPANIES UNDER SECTION 133(6) TO FURNISH INFORMATION ALONGWITH DOC UMENTARY EVIDENCES. A COMMISSION U/S 131(1)(D) OF THE INCOME TAX ACT, 196 1 WERE ALSO ISSUED TO THE ADDL. DIT(INV.) AT MUMBAI AND KOLKATTA. 2.2 THE DDIT(INV.) UNIT 1(2), MUMBAI SENT HIS REPOR T TO AO VIDE LETTER DATED 22.12.2011 IN RESPECT OF TWO COMPANIES BASED AT MUM BAI AS UNDER: 1.OMEGA VINCOM TRADING, G-9/10-113RD FLOOR RANI SA TI NAGAR, S.V.ROAD, MALAD (W) MUMBAI: ON ENQUIRY IN ROOM WITH SHRI JIG NESH CHHED (OCCUPANT) HE INFORMED ME THAT HE RESIDIDNG IN THIS ROOM ON RE NTAL BASIS SINCE 3 YEARS. THE OWNER OF ROOM NO. 10 IS SMT.C.S. AGARWAL AND O WNER OF ROOM NO.11 IS SHRI SURESH R. AGARWAL. THE BOTH ROOMS ARE JOINTLY . THE PHONE NO. OF SHRI ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 3 SURESH AGARWAL IS 022-28886401. AS PER HIS KNOWLEDG E, THERE IS NO SUCH COMPANY IN THIS ROOM SINCE LAST 3 YEARS. 2. PRANJAL TRADING CO. PVT. LTD., 1-A, HILL VIEW ,CHS LTD. NEXT TO NAVRANG CINEMA, J.P. ROAD, ANDHERI (W) MUMBAI ON MY VISIT , I FOUND THAT THIS IS THE OFFICE OF CHARTERED ACCOUNTANT SHRI K.K. KHADARIA, ON ENQUIRY WITH OFFICE, SHE INFORMED ME THAT THIS IS THE PUBLICATION OFFICE OF SHRI K.K. KHADARIA. HE IS PRESENTLY SITTING AT PEARL ARCADE, A-WING, 401, 4TH FLOOR, OPP. KANAKRAJ JEWELLERS, OFF J.P. ROAD, ANDHERI (W) MUMBAI. SHE A LSO INFORMED THAT HE HAS SEVERAL COMPANY. SHRI K.K. KHADARIA CAN INFORM YOU PROPERLY ABOUT THE ABOVE SAID COMPANY. 2.3 THE DIT( INV.) UNIT-1(4) KOLKATTA VIDE HIS LETT ER F.NO. ADIT(INV)/UNIT -1(4) /KOL/2010-11 DATED 28.12.2011 SENT HIS REPORT IN RE SPECT OF TWO COMPANIES BASED AT KOLKATTA AS UNDER: AS PER THE COMMISSION U/S 131(1)(D) OF THE IT ACT, 1961 ISSUED BY YOU TO VERIFY THE GENUINENESS OF THE SHARE CAPITAL ALLOTTED TO M ELBRIGHT SUPPLIERS (P) LTD. 2, JOGENDRA KAVIRAJ ROW, KOLKATTA-72 & GAWARJA MERCHA NTS (P) LTD, P-27 PRINCEP STREET, 3RD FLOOR, KOLKATTA, AN INSPECTOR WAS DEPUT ED TO SERVE THE SUMMON U/S 131 OF THE IT ACT, 1961 TO VERIFY BOTH THE COMPANIE S. THE INSPECTOR SERVED THE SUMMON IN THE OFFICE GAWA RJA MERCHANTS (P) LTD. AND IN RESPONSE TO THE SUMMON, THE AR OF THE GAWARJ A MERCHANTS (P) LTD APPEARED ON 27.12.2001 AND PRODUCED DOCUMENTS. TH E AR STATES THAT THE COMPANY APPLIED FOR & WERE ALLOTTED 4000 EQUITY SHA RES OF RS. 100/- EACH AT A PREMIUM OF RS. 150/- PER SHARE OF M/S BRIGHT METALS (P) LTD. AND FINALLY ALLOTTED ON 30.09.2008. THE SAID APPLICATION WAS MADE BY THEM OUT OF THE ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 4 SHARE APPLICATION MONEY RECEIVED FROM M/S REPLICA T RACOM PVT. LTD. HAVING ITS OFFICE AT 106, SAGAR SHOPPING CENTRE, J.P. ROAD, AN DHERI (W) MUMBAI-400058. THE DIRECTORS OF GAWARJA MERCHANTS (P) ARE ALSO PRE SENTLY RESIDING IN MUMBAI AS PER THE SUBMISSION OF THE AR. FROM THE SUBMISSI ON OF THE AR IT IS SEEN THAT THE RETURNED INCOME OF THE COMPANY FOR A.Y. 2009-10 WAS ONLY A MEAGRE INCOME OF RS. 47,129/-. WHILE IN THE OTHER CASE OF M/S BRIGHT METALS IND IA (P) LTD., THE COMPANY NAMED AS MELBRIGHT SUPPLIERS (P) LTD. HAVING ITS OF FICE AT 2, JOGENDRA KAVIRAJ ROW, KOLKATTA-72, THE DEPUTED INSPECTOR COULD NOT SERVED THE SUMMON AS HE FAILED TO LOCATE THE COMPANY IN THE GIVEN ADDRESS. BUT ON 27.12.2011, THE SAME AR OF GAWARJA MERCHANTS (P) LTD. APPEARED AND PRODUCED DOCUMENTS. FROM THE PRODUCED DOCUMENTS, IT IS SEEN THAT DURING THE YEAR 2008-09 THEY HAD APPLIED FOR AND BEEN ALLOTTED 12000 EQUITY SHAR ES OF M/S BRIGHT METALS INDIA (P) LTD. OF RS. 100/- EACH AT A PREMIUM OF RS . 150/- PER SHARE AMOUNTING TO RS. 30 LACS ON 30.09.2008. THE SAID APPLICATION WAS MADE BY THEM OUT OF THE ADVANCES RECEIVED FROM OUTLOOK TRACOM PVT. LTD. HAVING ITS OFFICE AT 3 NO. KHALISA KOTA POLYY, KOLKATTA-150 AMOUNTING TO RS. 20,00,000/- ON 17.6.2008 AND REST 50,00,000/- THROUGH SHARE APPLICATION MONE Y FROM NANDAN MERCHANTS PVT. LTD. HAVING ITS OFFICE AT 11, POLLOCK STREET, KOLKATTA-01. THE DIRECTORS OF THE MELBRIGHT SUPPLIERS (P) LTD. ARE ALSO PRESENTLY RE SIDING IN MUMBAI AS PER THE SUBMISSION OF THE AR. FROM THE SUBMISSION OF THE A R, IT IS SEEN THAT THE RETURNED INCOME OF THE COMPANY FOR A.Y. 2009-10 WAS ONLY A MEAGRE INCOME OF RS. 31,021/-. 2.4 FURTHER, THE AO HAS ASKED THE ASSESSEE COMPANY TO PRODUCE THE DIRECTORS OF THESE INVESTOR COMPANIES VIDE HIS LETT ER DATED 23.12.2011. IN ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 5 RESPONSE, THE ASSESSEE COMPANY SUBMITTED THAT IT WA S NOT POSSIBLE FOR THEM TO APPEAR AT SUCH A SHORT NOTICE AS THEY ALL ARE RESID ING OUT OF JAIPUR. 2.5 THE AO THEREAFTER ISSUED A FINAL SHOW-CAUSE NOT ICE DATED 28.12.2011 AND IN RESPONSE, THE ASSESSEE COMPANY SUBMITTED AS UNDER: WE ARE IN RECEIPT OF YOUR LETTER DATED 28.12.2011 BEARING REF. NO. ADDL. CIT/R- 1/JPR/11-12/2260 PROPOSING ADDITION OF RS.75 LACS IN RESPECT OF SHARE APPLICATION MONEY RECEIVED FROM OUR CCO0MPANIES INT ERALIA BASED ON INQUIRY REPORT FROM ADIT(INV.) UNIT 1(4), KOLKATTA U/S 131( 1)(D), A COPY OF WHICH IS ENCLOSED TO THE SAID LETTER. WE HAVE GONE THROUGH T HE SAID REPORT AND YOUR LETTER UNDER REPLY AND OUR SUBMISSIONS IN THE MATTE R ARE AS UNDER: 1. IN RESPECT OF SHARE APPLICATION MONEY RECEIVED F ROM MELBRIGHT SUPPLIERS (P) LTD. WE HAVE ALREADY STATED THAT PRESENT ADDRE SS OF THE COMPANY IS AT MUMBAI. PROOF OF PRESENT ADDRESS HAD ALSO BEEN IN OUR PREVIOUS REPLIES. AS THE SAID COMPANY HAD SHIFTED ITS OFFICE FROM KOLKA TTA TO MUMBAI, THE QUESTION OF SERVICE OF SUMMONS AT KOLKATTA ADDRESS DOES NOT ARISE. FURTHER A/R OF THE SAID COMPANY HAS SPECIFICALLY STATED THAT DIRECTORS OF THE COMPANY ARE RESIDING IN MUMBAI AND HAS ALSO EXPLAINED WITH SUPPORTING TH E SOURCE OF INVESTMENT IN SHARE CAPITAL OF ASSESSEE COMPANY. 2. IN RESPECT OF SHARE APPLICATION MONEY RECEIVED F ROM GAWARJA MERCHANTS (P) LTD HAVING ITS REGD. OFFICE AT KOLKATTA TO WHO M NOTICE U/S 131 ISSUED BY KOLKATTA DEPT. WAS SERVED, IT WAS SPECIFICALLY INF ORMED BY AR OF THE SAID COMPANY THAT ITS DIRECTORS ARE NOW RESIDING AT MUMB AI AND HAS EXPLAINED WITH SUPPORTING THE SOURCE OF INVESTMENT IN SHARE APPLIC ATION OF OUR COMPANY. ADDRESSES OF THE PRESENT DIRECTORS HAD ALREADY BEEN FURNISHED IN OUR PREVIOUS REPLIES. ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 6 3. WITH REGARD TWO COMPANIES NAMELY PRANJAL TRADIN G CO. (P) LTD. AND OMEGA VINCOM (P) LTD. BASED IN MUMBAI, ON MAKING EN QUIRIES WITH THE SAID COMPANIES IT IS LEANT THAT M/S OMEGA VINCOM (P) LTD . HAS NOT RECEIVED ANY NOTICE FROM YOUR OFFICE. WITH REGARD TO M/S PRANJA L TRADING CO. (P) LTD THEY HAVE INFORMED THAT THEY HAVE ALREADY REPLIED TO THE NOTICE U/S 133(6) ON 24.12.2011 GIVING FULL DETAILS AS REQUIRED IN THE S AID NOTICE. 4. SO FAR AS THE TOTAL INCOME OF MELBRIGHT SUPPLIER S (P) LTD. AND GAWARJA MERCHANTS (P) LTD. FOR THE ASSESSMENT YEAR 2009-10 IS CONCERNED IT IS SUBMITTED THAT THE CREDITWORTHINESS OF A COMPANY CA NNOT BE DECIDED FROM INCOME OF A PARTICULAR YEAR. TO ESTABLISH CREDITWO RTHINESS OF A COMPANY NET WORTH OF THE COMPANY HAS TO EXAMINE. IT IS EVIDEN T FROM THE BALANCE SHEETS OF THE COMPANIES THAT THE NET WORTH OF THE COMPANIES A S AT 31.03.2009 WAS AS UNDER: (A) OMEGA VINCOM TRADING P. LTD. RS. 373 LACS (B) PRANJAL TRADING CO. P LTD. RS, 3626 LACS (C) MELBRIGHT SUPPLIERS P. LTD RS. 3744 LACS (D) GAWARJA MERCHANTS P. LTD. RS. 1743 LACS AS THE NET WORTH OF THE COMPANIES ARE MANY TIMES HIGHER THAN THE AMOUNT INVESTED INTO ASSESSEE COMPANY CREDIT WORTHINESS O F THESE FOUR COMPANIES ARE ESTABLISHED. (A) ALL THE FOUR COMPANIES ARE REGISTERED AND GOVER NED UNDER THE PROVISIONS OF COMPANIES ACT,1956. (B) ALL THE FOUR COMPANIES ARE FILING WITH ANNUAL R ETURNS WITH THE REGISTRAR OF COMPANIES AND THEIR STATUS IS ACTIVE COMPANY. (C) ALL THE COMPANIES HAS PAID AMOUNT TO BRIGHT MET ALS INDIA P. LTD. TOWARDS SHARE CAPITAL ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 7 (D) AMOUNT HAS BEEN INVESTED THROUGH BANKING CHANNE L AND BANK STATEMENT IN SUPPORT OF IT HAS ALSO BEEN FURNISHED. (E) SHARES HAVE BEEN ALLOTTED TO ALL COMPANIES (F) DIRECT SOURCE OF INVESTMENT INTO BRIGHT METALS INDIA P. LTD. HAS ALSO BEEN PROVED BY ALL COMPANIES. (G) ALL COMPANIES ARE REGULARLY FILING THEIR INCOM E TAX RETURNS. (H) ALL THE INGREDIENTS OF SECTION 68 SUCH AS IDENT ITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS HAVE BEEN ESTABLIS HED. THEREFORE, NO ADDITIONS CAN BE MADE UNDER THE PROV ISIONS OF THE 68 OF THE INCOME TAX ACT, 1961. 2.6 THE AO, AFTER CONSIDERING THE ASSESSEES SUBMIS SION, FINALLY RECORDED THE FOLLOWING FACTUAL ASPECTS: (I) THE ASSESSEE HAS VIDE ITS LETTER DATED 25.11.2 011 FURNISHED PHOTOCOPIES OF LETTERS BY THE SAID COMPANIES TO THE EFFECT THAT THEY HAVE APPLIED FOR SHARES OF THE ASSESSEE COMPANY. THE ENQUIRIES WERE CONDUC TED AT THE ADDRESSES GIVEN IN THESE LETTERS BY ISSUING NOTICE U/S 133(6) AND ISSUING COMMISSION U/S 131(1)(D) TO THE ADDL. DIRECTOR OF INCOME TAX (INV. ) AT MUMBAI AND KOLKATTA. THESE NOTICES WERE RECEIVED UNSERVED /UNCOMPLIED W ITH. TWO COMPANIES WERE REPORTEDLY NOT FOUND AT THE GIVEN ADDRESSES. IN CASE OF M/S MELBRIGHT SUPPLIERS (P) LTD. AT KOLKATTA, IT IS REPORTED THAT THE SUMMON COULD NOT BE SERVED AT THE GIVEN ADDRESSES AND NO SUCH COMPANY EXISTED AT THAT ADDRESS. IN CASE OF OMEGA VINCOM TRADING, IT IS CLEARLY MEN TIONED THAT NO COMPANY IS RUN FROM THE ADDRESS OF 9/10-11, 3RD FLOOR RANI SAT I NAGAR, SV ROAD, MALAD (W) MUMBAI FOR LAST THREE YEARS. THE POSTAL AUTHORITIES RETURNED BACK THE NOTICE U/S 133(6) UNSERVED ON 29.12.2011 R ESPECTIVELY IN CASES OF ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 8 GAWARJA MERCHANTS (P) LTD. AND M/S OMEGA VINCOM TR ADING (P) LTD. WITH REMARKS NOT CLAIMED AND RETURNED TO SENDER. THE ASSESSEE WAS ISSUED SHOW CAUSE NOTICE ON 23.12 .20011. THE ASSESSEE VIDE ITS LETTER DATED 26.12.2011 SUBMITTED THAT AS PER I NFORMATION OBTAINED FROM WEB SITE OF MCA, THE COMPANIES HAVE CHANGED THEIR A DDRESSES. IF THAT IS THE CASE, HOW COME THE ASSESSEE FILED PHOTOCOPIES OF LE TTERS BY THE SAID COMPANIES FROM OLD ADDRESSES ON 25.11.2011. THEREF ORE, THE PLEA OF THE ASSESSEE REGARDING CHANGE OF ADDRESS IS REJECTED. (II) THE ASSESSEE HAS FAILED TO FILE THE PROPER CON FIRMATIONS WITH CORRECT PARTICULARS OF THE SAID COMPANIES AND THEIR DIRECTO RS. THE ASSESSEE DID NOT PRODUCE THE DIRECTORS EVEN WHEN ASKED TO DO SO. IN STEAD IT HAS SUBMITTED THAT DEPARTMENT CAN DIRECTLY ISSUE NOTICES U/S 133(6) TO THE COMPANIES ON THE ADDRESSES GIVEN BY THE ASSESSEE IN ITS LETTER DATED 25.11.2011. THEREFORE, NOW SAYING THAT DIRECTORS CANNOT BE PRODUCED AT SUCH A SHORT NOTICE IS NOT ACCEPTABLE. (III) THE ASSESSEE HAS SIMPLY TAKEN OUT INFORMATION FROM THE WEB-SITE WITHOUT GIVING ANY INFORMATION ABOUT THE NATURE OF BUSINESS ACTUALLY CARRIED ON BY THE COMPANIES AND NATURE AND PLACE OF ITS OPERAT IONS. AS HAS BEEN OBSERVED IN NUMBER OF CASES, MERE FILING OF RETURN S OF INCOME BY THE COMPANIES AND THEY HAVING PAN IS NOT SUFFICIENT EV IDENCES TO PROVE GENUINENESS OF THE TRANSACTIONS. IT WAS IN LIGHT O F THIS THAT THE ASSESSEE WAS ASKED TO PRODUCE DIRECTORS BUT IT FAILED TO DO SO. ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 9 (IV) IT CAN BE SEEN FROM THE REPORT OF ADIT (INV.) UNIT-1(4), KOLKOTTA THAT M/S GAWARJA MERCHANTS (P) LTD. AND M/S MELBRIGHT SUPPL IERS (P) LTD. HAS MEAGRE RETURNED INCOME FOR THE ASSESSMENT YEAR 2009-10 AT RS. 47,129/- AND RS. 31,021/-RESPECTIVELY. THE INCOME OF OTHER TWO COMP ANIES IS ALSO MEAGRE AS SEEN FROM DETAILS FILED BY THE ASSESSEE. IN THE CA SE OF M/S PRANJAL TRADING COMPANY (P) LTD. AND M/S OMEGA VINCOM TRADING (P) L TD., THE RETURN INCOME IS RS.26,790/- AND RS. 6,57,203/- RESPECTIVELY. IN A BSENCE OF ANY OTHER DETAILS/DOCUMENTS AVAILABLE FOR SCRUTINY, THE IDENT ITY, GENUINENESS AND CREDIT WORTHINESS OF THE COMPANIES IS NOT PROVED. (V) THE ADIT (INV.) UNIT 1(4), KOLKOTTA HAS REPORT ED THAT THE SAME CHARTERED ACCOUNTANT APPEARED IN THE CASES OF M/S GAWARJA MER CHANTS (P) LTD AND M/S MELBRIGHT SUPPLIERS (P) LTD. EVEN THOUGH THE SUMMON U/S 131 COULD NOT BE SERVED ON ONE OF THE COMPANIES. INCOME TAX INSPECT OR REPORTED THAT M/S MELBRIGHT SUPPLIERS (P) LTD. COULD NOT BE LOCATED ON THE GIVEN ADDRESS. THUS IN VIEW OF ABOVE FACTS, THE IDENTITY AND CREDI T WORTHINESS OF THE COMPANIES AND THE GENUINENESS OF TRANSACTIONS IS NO T ESTABLISHED FULLY. 2.7 THE AO THEREAFTER REFERRED TO VARIOUS COURT DEC ISIONS AND HELD THAT THE GENUINENESS OF THE SHARE CAPITAL AND PREMIUM OF RS. 75,00,000/- IS NOT PROVED AND HENCE AN ADDITION OF RS. 75,00,000/- IS MADE TO THE INCOME OF THE ASSESSEE U/S 68 OF THE IT ACT, 1961. 2.8 BEING AGGRIEVED, THE ASSESSEE COMPANY CARRIED T HE MATTER IN APPEAL AND THE FINDINGS OF THE LD.CIT(A) ARE AS UNDER: ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 10 4. I HAVE CONSIDERED SUBMISSIONS MADE BY THE APPEL LANT AND HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER. IT IS NOTED THAT ON E XAMINATION OF BOOKS OF ACCOUNT OF THE APPELLANT, THE AO NOTED THAT THE A PPELLANT HAD RECEIVED SHARE CAPITAL AND SHARE PREMIUM AMOUNTING TO RS. 75,00,00 0/- FROM 4 DIFFERENT COMPANIES NAMELY OMEGA VINCOM TRADING PVT. LTD. MUM BAI, PRANJAL TRADING CO. PVT. LTD. MUMBAI, MELBRIGHT SUPPLIERS PVT. LT D. KOLKATA AND GAWARJA MERCHANT PVT. LTD., KOLKOTA. IN ORDER TO VERIFY TH E GENUINENESS OF THESE TRANSACTIONS, THE AO ISSUED COMMISSION TO THE ADDL. DIT(INVESTIGATION) AT MUMBAI AND KOLKOTA. THE REPORT FROM ADDL. DIT MUMB AI SHOWED THAT THE COMPANIES WERE NOT FOUND AT THE ADDRESSES GIVEN BY THE APPELLANT. AS REGARDS THE COMPANIES LOCATED AT KOLKATA, THE ADDL. DIT (IN VESTIGATION) INFORMED THAT THE COMPANIES COULD NOT BE LOCATED IN THE GIVEN AD DRESSES. HOWEVER, ON 27.12.2011, THE AR APPEARED AND FURNISHED NECESSARY DETAILS. THE AO THEREFORE, GAVE AN OPPORTUNITY TO THE APPELLANT TO PRODUCE THE DIRECTORS OF THE 4 COMPANIES BEFORE HIM. THE APPELLANT EXPLAINED TH AT THESE COMPANIES WERE FILING THE RETURNS WITH THE MINISTRY OF CORPORATE AFFAIRS AND WERE ALSO FILING THERE INCOME TAX RETURNS. THE PAN OF THESE COMPANI ES WERE ALSO PROVIDED TO THE AO. THE CLAIM OF THE APPELLANT WAS THAT THE ID ENTITY OF THE COMPANIES WAS ESTABLISHED BY WAY OF PAN, INCOME TAX RETURNS AND RETURNS FILED BEFORE THE MINISTRY OF CORPORATE AFFAIRS. THE GENUINENESS OF TRANSACTIONS WAS ESTABLISHED AS THE PAYMENTS HAD BEEN RECEIVED THROUGH THE BANKI NG CHANNELS AND SHARE WERE ALLOTTED TO THESE COMPANIES. THE CREDIT WORTH INESS OF THE COMPANIES ESTABLISHED FROM THE NET WORTH OF THESE COMPANIES W HICH WAS RS. 373 LAKHS IN RESPECT OF OMEGA VINCOM RS. 3626 LAKHS IN RESPECT OF PRANJAL TRADING, RS. 3744 LAKHS IN RESPECT OF MELBRIGHT SUPPLIERS AND RS. 174 3 LAKHS IN RESPECT OF GAWARJA MERCHANTS. IT WAS FURTHER ARGUED THAT THE ADDRESS O F OMEGA VINCOM AND PRANJAL TRADING HAD CHANGED. THE NEW ADDRESS WERE ALSO PROVIDED BY THE ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 11 APPELLANT. IT WAS ALSO SUBMITTED THAT THE DIRECT ORS OF THESE COMPANIES WERE RESIDING OUTSIDE JAIPUR AND THEIR ADDRESSES WERE GI VEN TO THE AO TO SUMMON THEM FOR NECESSARY ENQUIRY. THE AO HOWEVER DID N OT ACCEPT THE EXPLANATION FILED BY THE APPELLANT AND MADE THE ADDITION OF RS. 75,00,000/- AS UNTRUE CREDIT. 4.1 IT IS HOWEVER, NOTED THAT THE APPELLANT HAD GIV EN COMPLETE DETAILS OF THE SHARE APPLICANTS, INCLUDING THEIR PAN. THE COPIES OF RETURN FILED BY THEM HAD ALSO BEEN PRODUCED. THUS THEIR IDENTITIES WERE PR OVED. THE COMPANIES DID NOT HAVE HIGH INCOME BUT THEIR NET WORTH WAS MUCH MORE THAN THE SHARE CAPITAL SUBSCRIBED BY THEM. IT IS FURTHER NOTED THAT THE TRANSACTIONS HAD BEEN MADE THROUGH THE BANKING CHANNELS. THIS SHOWS THAT GENU INENESS OF THE TRANSACTION AND CAPACITY OF THE SHARE APPLICANTS WAS PROVED. I N VIEW OF THESE DOCUMENTARY EVIDENCES FURNISHED BY THE APPELLANT, IT COULD NOT BE SAID THAT THE GENUINENESS OF THE TRANSACTION WAS NOT PROVED. IT MAY BE MENTI ONED HERE THAT IN A SIMILAR CASE NAMELY, M/S ARL INFRATECH LTD. (ITA NO.619/JP /2013), THE HONBLE ITAT JAIPUR BENCH HAS HELD THAT IN CASES WHERE SHARE APP LICATION MONEY IS FOUND RECORDED IN THE BOOKS OF AN ASSESSING WHICH MAY RE PRESENT CREDIT IN THE BOOKS AND SHARE APPLICANT IS IDENTIFIED, THAT AMOUNT CA NNOT BE ADDED IN THE ASSESSEES HAND U/S 68 OF THE ACT. THE HONBLE RAJA STHAN HIGH COURT HAS SO HELD IN THE CASES OF SHREE BARKHA SYNTHETIC LTD. (182 CTR 175) AND BARKHA SYNTHETICS (197 CTR 432). IN THE CASE OF M/S ARL I NFRATECH (SUPRA) THE HONBLE ITAT HAS FURTHER OBSERVED AS UNDER: ADVERTING, THE FACTS OF THE GIVEN CASE, WE ARE OF THE CONSIDERED OPINION THAT ALL THE SHARE APPLICANTS STAND IDENTIFIED. THE ASS ESSEE HAS PROVIDED PANS OF THE SHARE APPLICANTS. THE MODE OF PAYMENT HAS ALSO BEE N MADE EXPLAINED. THERE IS ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 12 NO DIRECT OR INDIRECT RELATION BETWEEN THE ASSESSEE COMPANY AND THE SHARE APPLICANTS. THE STATEMENT RECORDED DURING SURVEY H AS GOT NO EVIDENTIARY VALUE AND THE LAW IS VERY MUCH SETTLED ON THIS ISSUE. IN ANY CASE, EVEN UNDER THE PROVISIONS OF SECTION 68 OF THE ACT, THE ASESSEE CA NNOT BE FORCED TO PROVE THE SOURCE OF THE SOURCE. THE LAW ON THIS SUBJECT IS A LSO SETTLED BY NUMEROUS DECISIONS. THE ALLEGED REPORT OF THE INSPECTOR OF THE DEPARTMENT WHO IS STATED TO HAVE VISITED AT THE GIVEN ADDRESSES OF THE SHARE APPLICANTS WAS NEVER PUT OR CONFRONTED TO THE ASSESSEE. THE CUMULATIVE EFFECT O F THESE REASONS IS THAT THE IMPUGNED ADDITION CANNOT BE ADDED IN THE HANDS OF T HE ASSESSEE COMPANY. ACCORDINGLY, WE ORDER TO DELETE THE ENTIRE ADDITION S AND ALLOW THE APPEAL OF THE ASSESSEE. IN THE PRESENT CASE ALSO, IT IS NOTED THAT THE S HARE HOLDERS ARE IDENTIFIED, THEY HAVE PROVIDED PANS, MODE OF PAYMENT HAS BEEN EXPLAI NED AND THERE IS NO DIRECT OR INDIRECT RELATION BETWEEN THE APPELLANT COMPANY AND THE SHARE APPLICANTS. IT MAY BE MENTIONED THAT IN THE CASE OF M/S ARL (SUPRA), THE ADDITION WAS DELETED EVEN THOUGH THERE WERE STATE MENTS RECORDED IN THE COURSE OF SURVEY WHICH IS NOT THE CASE HERE. IN VI EW OF THE ABOVE FACTS AND DECISION OF THE HONBLE ITAT, THE ADDITION MADE BY THE AO DOES NOT APPEAR TO BE JUSTIFIED AND IS, ACCORDINGLY DELETED. 2.9 THE LD DR VEHEMENTLY ARGUED THE MATTER AND SUPP ORTED THE ORDER OF THE AO AND TOOK US THROUGH THE FINDINGS OF THE AO (REPR ODUCED ABOVE) AND SUBMITTED THAT THE AOS ORDER DESERVE TO BE SUSTAIN ED AND LD CIT(A)S ORDER TO BE SET-ASIDE. IN SUPPORT, SHE HAS RELIED UPON THE FOLLOWING LEGAL AUTHORITIES: (I) NAVODAYA CASTLE (P) LTD VS CIT 56 TAXMANN.COM 18 (S C) ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 13 (II) CIT VS NAVODAYA CASTLE (P) LTD 50 TAXMANN.COM 110 ( DEL) (III) RIDDHI PROMOTERS (P) LTD VS CIT 58 TAXMANN.COM 367 (DEL) (IV) CIT VS JANSAMPARK ADVERTISING & MARKETING (P) LTD 5 6 TAXMANN.COM 286 (DEL) (V) CIT VS EMPIRE BUILDTECH (P) LTD 366 ITR 110 (DEL) (VI) CIT VS ULTRA MODERN EXPORT(P) LTD 40 TAXMANN.COM 45 8 (DEL) 2.10 THE LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE LD CIT(A) AND SUBMITTED THAT THE IDENTITY, GENUINENESS OF THE TRA NSACTION AND CREDITWORTHINESS OF THE CREDITOR OF THE FOUR COMPAN IES FOR WHICH ADDITION IS MADE BY THE AO IS PROVED FROM THE FOLLOWING:- 1. OMEGA VINCOM TRADING (P.) LTD. - ASSESSEE FILED BOARD RESOLUTION, SHARE APPLICATION FORM, CONFIRMATION, PAN, MOA/AOA, BANK STATEMENT, ITR, BALANCE SHEET AN D P&L A/C ALONG WITH RELEVANT SCHEDULES OF THE COMPANY. FROM THE BA LANCE SHEET, IT CAN BE NOTED THAT THE NET WORTH OF THE COMPANY IS RS.37 3 LACS AND IN THE SCHEDULE OF INVESTMENT, THE INVESTMENT IN SHARES OF THE ASSESSEE IS DULY REFLECTED AT RS.17 LACS. - THE DDIT (INV.), MUMBAI VIDE LETTER DT.22.12.2011 I NFORMED THAT AT THE GIVEN ADDRESS, THE COMPANY DOES NOT EXISTS. THE ASS ESSEE, THEREAFTER, PROVIDED THE PRESENT ADDRESS OF THE COMPANY VIDE LE TTER DT. 26.12.2011 AND REQUESTED TO MAKE ENQUIRY ON THE PRESENT ADDRES S BUT STILL THE AO MADE NO ENQUIRY. ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 14 - THE AO REQUIRED THE ASSESSEE TO PRODUCE THE DIRECTO RS OF THE COMPANY ON 26.12.2011. THE ASSESSEE VIDE LETTER DT. 26.12.2 011 PROVIDED THE PRESENT ADDRESS OF THE DIRECTORS OF THE COMPANY AND REQUESTED THE AO TO DIRECTLY ISSUE NOTICE TO THE DIRECTORS FOR THEIR PRESENCE AS THEY ARE NOT RESIDING AT JAIPUR. HOWEVER, NO SUCH NOTICE WAS ISSUED. - FROM THESE FACTS, IT IS EVIDENT THAT ASSESSEE HAS P ROVED THE IDENTITY, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE COMPANY. 2. PRANJAL TRADING COMPANY (P.) LTD. - ASSESSEE FILED BOARD RESOLUTION, SHARE APPLICATION FORM, CONFIRMATION, PAN, MOA/AOA, BANK STATEMENT, ITR, BALANCE SHEET AN D P&L A/C ALONG WITH RELEVANT SCHEDULES OF THE COMPANY. FROM THE BA LANCE SHEET, IT CAN BE NOTED THAT THE NET WORTH OF THE COMPANY IS RS.36 26 LACS AND IN THE SCHEDULE OF INVESTMENT, THE INVESTMENT IN SHARES OF THE ASSESSEE IS DULY REFLECTED AT RS.18 LACS. - THE AO ISSUED NOTICE U/S 133(6) TO FURNISH THE INFO RMATION BY 22.12.2011. IN RESPONSE, THE COMPANY FILED A LETTER CONFIRMING THE INVESTMENT MADE IN THE SHARES OF THE ASSESSEE. - THE DDIT (INV.), MUMBAI VIDE LETTER DT.22.12.2011 I NFORMED THAT AT THE ADDRESS GIVEN IS THE OFFICE OF A CHARTERED ACCOUNTA NT SH. K.K. KHADARIA AND THE PERSON SITTING THERE INFORMED THAT MR. KHAD ARIA CAN ONLY INFORM PROPERLY ABOUT THIS COMPANY. THUS, THE DDIT (INV.), MUMBAI ALSO VERIFIED THE ADDRESS OF THIS COMPANY. SUBSEQUENTLY, THE ADDRESS OF THE ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 15 COMPANY WAS CHANGED AND THE ASSESSEE VIDE LETTER DT . 26.12.2011 PROVIDED THE PRESENT ADDRESS AND REQUESTED TO MAKE ENQUIRY ON THE PRESENT ADDRESS BUT STILL THE AO MADE NO FURTHER EN QUIRY. - THE AO REQUIRED THE ASSESSEE TO PRODUCE THE DIRECTO RS OF THE COMPANY ON 26.12.2011. THE ASSESSEE VIDE LETTER DT. 26.12.2 011 PROVIDED THE PRESENT ADDRESS OF THE DIRECTORS OF THE COMPANY (PB 1 AND 27) AND REQUESTED THE AO TO DIRECTLY ISSUE NOTICE TO THE DI RECTORS FOR THEIR PRESENCE AS THEY ARE NOT RESIDING AT JAIPUR. HOWEVE R, NO SUCH NOTICE WAS ISSUED. - FROM THESE FACTS, IT IS EVIDENT THAT ASSESSEE HAS P ROVED THE IDENTITY, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE COMPANY. 3. GAWARJA MERCHANTS (P) LTD. - ASSESSEE FILED BOARD RESOLUTION, SHARE APPLICATION FORM, CONFIRMATION, PAN, MOA/AOA, BANK STATEMENT, ITR, BALANCE SHEET AN D P&L A/C ALONG WITH RELEVANT SCHEDULES OF THE COMPANY. FROM THE BA LANCE SHEET, IT CAN BE NOTED THAT THE NET WORTH OF THE COMPANY IS RS.17 43 LACS AND IN THE SCHEDULE OF INVESTMENT, THE INVESTMENT IN SHARES OF THE ASSESSEE IS DULY REFLECTED AT RS.10 LACS. - AO CONDUCTED THE ENQUIRY THROUGH ADIT (INV.), KOLKA TTA. SUMMON ISSUED U/S 131 OF THE IT ACT, 1961 WAS SERVED ON TH E COMPANY BY ADIT (INV.), KOLKATTA THROUGH ITS INSPECTOR. IN RESPONSE TO THE SUMMON, AR OF THE COMPANY APPEARED AND CONFIRMED THE INVESTMENT I N THE SHARE ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 16 CAPITAL OF THE ASSESSEE AND ALSO EXPLAINED THE SOUR CE OF SUCH INVESTMENT. - THE AO REQUIRED THE ASSESSEE TO PRODUCE THE DIRECTO RS OF THE COMPANY ON 26.12.2011. THE ASSESSEE VIDE LETTER DT. 26.12.2 011 PROVIDED THE PRESENT ADDRESS OF THE DIRECTORS OF THE COMPANY AND REQUESTED THE AO TO DIRECTLY ISSUE NOTICE TO THE DIRECTORS FOR THEIR PRESENCE AS THEY ARE NOT RESIDING AT JAIPUR. HOWEVER, NO SUCH NOTICE WAS ISSUED. - FROM THESE FACTS, IT IS EVIDENT THAT ASSESSEE HAS P ROVED THE IDENTITY, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE COMPANY. 4. MELBRIGHT SUPPLIERS (P.) LTD. - ASSESSEE FILED BOARD RESOLUTION, SHARE APPLICATION FORM, CONFIRMATION, PAN, MOA/AOA, BANK STATEMENT, ITR, BALANCE SHEET AN D P&L A/C ALONG WITH RELEVANT SCHEDULES OF THE COMPANY. FROM THE BA LANCE SHEET, IT CAN BE NOTED THAT THE NET WORTH OF THE COMPANY IS RS.37 44 LACS AND THE INVESTMENT MADE IN THE SHARES OF THE ASSESSEE IS RE FLECTED IN THE SCHEDULE OF STOCK OF SHARES. - AO CONDUCTED THE ENQUIRY THROUGH ADIT (INV.), KOLKA TTA. SUMMON ISSUED U/S 131 OF THE IT ACT, 1961 COULD NOT BE SER VED BECAUSE OF CHANGE OF ADDRESS BUT WHEN BECAME AWARE OF THE ENQU IRY, THE AR OF THE COMPANY WHO IS ALSO THE AR OF GAWARJA MERCHANTS (P) LTD. APPEARED AND CONFIRMED THE INVESTMENT IN THE SHARE CAPITAL OF THE ASSESSEE AND ALSO EXPLAINED THE SOURCE OF SUCH INVE STMENT. ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 17 - THE AO REQUIRED THE ASSESSEE TO PRODUCE THE DIRECTO RS OF THE COMPANY ON 26.12.2011. THE ASSESSEE VIDE LETTER DT. 26.12.2 011 PROVIDED THE PRESENT ADDRESS OF THE DIRECTORS OF THE COMPANY AND REQUESTED THE AO TO DIRECTLY ISSUE NOTICE TO THE DIRECTORS FOR THEIR PRESENCE AS THEY ARE NOT RESIDING AT JAIPUR. HOWEVER, NO SUCH NOTICE WAS ISSUED. - FROM THESE FACTS, IT IS EVIDENT THAT ASSESSEE HAS P ROVED THE IDENTITY, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE COMPANY. 2.11 THE AR FURTHER SUBMITTED THAT THE LD. CIT(A) AFTER APPRECIATING ALL THESE EVIDENCES AS ALSO THE VARIOUS CASE LAWS ACCEP TED THAT ASSESSEE HAS ESTABLISHED THE IDENTITY OF THE SHAREHOLDERS, GENUI NENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE SHAREHOLDERS. HE, THERE FORE, RIGHTLY DELETED THE ADDITION MADE BY THE AO. THE LD AR FURTHER PLACED RELIANCE ON THE FOLLOWING CASES:- (I) ACIT VS. DHANLAXMI EQUIPMENT PVT. LTD. (2016) 46 CC H 0355 (JPR.) (TRIB.) ITA NO. 1103/JP/11 DATED 21.03.2016 (II) PR. CIT, UDAIPUR VS M/S SHUBH MINES PVT LTD (DB APP EAL NO. 96/15) DATED 3.5.2016 PASSED BY HONBLE RAJASTHAN HIGH COU RT (III) PR. CIT, UDAIPUR VS SOFTLINE CREATIONS PVT LTD 387 ITR 636 (DEL) (IV) CIT VS. SHREE BARKHA SYNTHETICS LTD. (2004) 270 ITR 477 AND (2006) 283 ITR 377 (RAJ.) (HC) (V) JADAU JEWELLERS & MANUFACTURERS PVT. LTD. VS. ACIT (2016) 130 DTR 17 (JAIPUR) (TRIB.) ITA NO. 686/JP/14 DATED 14.12.2015 (VI) WELLMAN WACOMA LTD. VS. JCIT (2016) 46 CCH 0456 (KO L.) (TRIB.) (VII) ITO VS. NISHIT FINCAP (P.) LTD. (2016) 46 CCH 0365 (DEL.) (TRIB.) (VIII) CIT VS. LOVELY EXPORTS (P.) LTD. 216 CTR 195 (SC) (IX) DCIT VS. DOLPHINE MARBLES (P) LTD. 57 DTR 58 (JAB.) (TM) (X) M/S BHARTI SYNTEX LTD., GANGAPUR VS. DCIT XLV TAX W ORLD 169 (JPR.) (ITAT) DT. 13.01.11 ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 18 (XI) CIT VS. DIVINE LEASING AND FINANCE LTD. 299 ITR 268 (DEL.) (HC) (XII) CIT VS. VICTOR ELECTRODES LTD. 329 ITR 271 (DEL.) ( HC) (XIII) CIT VS. GANGOUR INVESTMENT LTD. 18 DTR 242 (DEL.) ( HC) (XIV) CIT VS. UJALA DYEING AND PRINTING MILLS P. LTD. 32 8 ITR 437 (GUJ.) (HC) (XV) CIT VS. NIPUAN AUTO (P) LTD. (2013) 89 DTR 342 (DEL .) (HC) DATED 30.04.2013 (XVI) CIT VS. KAMDHENU STEEL & ALLOYS LTD. & ORS. (2012) 68 DTR 38 (DEL) (HC) DATED 23.12.2011 3. IN ORDER TO APPRECIATE THE RIVAL CONTENTIONS, WE REFER TO VARIOUS LEGAL AUTHORITIES ON THE SUBJECT WHICH HAS BEEN BROUGHT T O OUR NOTICE BY BOTH THE PARTIES. 3.1 IN CASE OF NAVODAYA CASTLE (P) LTD (SUPRA) WHICH IS A CASE OF A PRIVATE LIMITED COMPANY, IT IS NOTED THAT THE SLP HAS BEEN REJECTED BY THE HONBLE SUPREME COURT HOLDING THAT THE COURT DO NOT SEE ANY MERIT IN THE SLP AGAINST THE ORDER OF HONBLE DELHI HIGH COURT. IN THIS CAS E, THE HONBLE DELHI HIGH COURT HAS REFERRED TO CATENA OF EARLIER DECISIONS S UCH AS CASE OF CIT V. NOVA PROMOTERS & FINLEASE (P.) LTD. [2012] 342 ITR 169, CIT V. N.R. PORTFOLIO (P.) LTD. [2014] 222 TAXMAN 157, CIT V. SOPHIA FINANCE LTD. [ 1994] 205 ITR 98(DELHI) (FB), CIT V. DIVINE LEASING & FINANCE LTD. [2008] 2 99 ITR 268, CIT V. DURGA PRASAD MORE [1971] 82 ITR 540 (SC) AND CIT V. NIPUN BUILDERS & DEVELOPERS [2013] 350 ITR 407 AND HAS HELD AS UNDER: 12. THE MAIN SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE IS THAT ONCE THE ASSESSEE HAD BEEN ABLE TO SHOW THAT THE SHAREHO LDER COMPANIES WERE DULY INCORPORATED BY THE REGISTRAR OF COMPANIES, TH EIR IDENTITY STOOD ESTABLISHED, GENUINENESS OF THE TRANSACTIONS STOOD ESTABLISHED AS PAYMENTS WERE MADE THROUGH ACCOUNTS PAYEE CHEQUES/BANK ACCOU NT; AND MERE DEPOSIT OF CASH IN THE BANK ACCOUNTS PRIOR TO ISSUE OF CHEQUE/PAY ORDERS ETC. WOULD ONLY RAISE SUSPICION AND, IT WAS FOR THE ASSE SSING OFFICER TO CONDUCT ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 19 FURTHER INVESTIGATION, BUT IT DID NOT FOLLOW THAT T HE MONEY BELONGED TO THE ASSESSEE AND WAS THEIR UNACCOUNTED MONEY, WHICH HAD BEEN CHANNELIZED. 13. AS WE PERCEIVE, THERE ARE TWO SETS OF JUDGMENTS AND CASES, BUT THESE JUDGMENTS AND CASES PROCEED ON THEIR OWN FACTS. IN ONE SET OF CASES, THE ASSESSEE PRODUCED NECESSARY DOCUMENTS/EVIDENCE TO S HOW AND ESTABLISH IDENTITY OF THE SHAREHOLDERS, BANK ACCOUNT FROM WHI CH PAYMENT WAS MADE, THE FACT THAT PAYMENTS WERE RECEIVED THOROUGH BANKI NG CHANNELS, FILED NECESSARY AFFIDAVITS OF THE SHAREHOLDERS OR CONFIRM ATIONS OF THE DIRECTORS OF THE SHAREHOLDER COMPANIES, BUT THEREAFTER NO FURTHE R INQUIRIES WERE CONDUCTED. THE SECOND SET OF CASES ARE THOSE WHERE THERE WAS EVIDENCE AND MATERIAL TO SHOW THAT THE SHAREHOLDER COMPANY WAS O NLY A PAPER COMPANY HAVING NO SOURCE OF INCOME, BUT HAD MADE SUBSTANTIA L AND HUGE INVESTMENTS IN THE FORM OF SHARE APPLICATION MONEY. THE ASSESSI NG OFFICER HAS REFERRED TO THE BANK STATEMENT, FINANCIAL POSITION OF THE RECIP IENT AND BENEFICIARY ASSESSEE AND SURROUNDING CIRCUMSTANCES. THE PRIMARY REQUIREMENTS, WHICH SHOULD BE SATISFIED IN SUCH CASES IS, IDENTIFICATIO N OF THE CREDITORS/SHAREHOLDER, CREDITWORTHINESS OF CREDITOR S/SHAREHOLDER AND GENUINENESS OF THE TRANSACTION. THESE THREE REQUIRE MENTS HAVE TO BE TESTED NOT SUPERFICIALLY BUT IN DEPTH HAVING REGARD TO THE HUMAN PROBABILITIES AND NORMAL COURSE OF HUMAN CONDUCT. 14. CERTIFICATE OF INCORPORATION, PAN ETC. ARE RELE VANT FOR PURCHASE OF IDENTIFICATION, BUT HAVE THEIR LIMITATION WHEN THER E IS EVIDENCE AND MATERIAL TO SHOW THAT THE SUBSCRIBER WAS A PAPER COMPANY AND NOT A GENUINE INVESTOR. ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 20 18. LOVELY EXPORTS (P.) LTD. (SUPRA) WAS ALSO CONSI DERED AND DISTINGUISHED IN N.R. PORTFOLIO (P.) LTD. (SUPRA) AND IT WAS HELD TH AT THE ENTIRE EVIDENCE AVAILABLE ON RECORD HAS TO BE CONSIDERED, AFTER REL YING UPON CIT V. NIPUN BUILDERS AND DEVELOPERS [2013] 350 ITR 407/214 TAXM AN 429/30 TAXMANN.COM 292 (DELHI), WHEREIN IT HAS BEEN HELD T HAT A REASONABLE APPROACH HAS TO BE ADOPTED AND WHETHER INITIAL ONUS STANDS DISCHARGED WOULD DEPEND UPON FACTS AND CIRCUMSTANCES OF EACH C ASE. IN CASE OF PRIVATE LIMITED COMPANIES, GENERALLY PERSONS KNOWN TO DIREC TORS OR SHAREHOLDERS, DIRECTLY OR INDIRECTLY, BUY OR SUBSCRIBE TO SHARES. UPON RECEIPT OF MONEY, THE SHARE SUBSCRIBERS DO NOT LOSE TOUCH AND BECOME INCO MMUNICADO. CALL MONEY, DIVIDENDS, WARRANTS, ETC. HAVE TO BE SENT AN D THE RELATIONSHIP REMAINS A CONTINUING ONE. THEREFORE, AN ASSESSEE CA NNOT SIMPLY FURNISH SOME DETAILS AND REMAIN QUIET WHEN SUMMONS ISSUED TO SHA REHOLDERS REMAIN UN- SERVED AND UNCOMPLIED. AS A GENERAL PROPOSITION, IT WOULD BE IMPROPER TO UNIVERSALLY HOLD THAT THE ASSESSEE CANNOT PLEAD THA T THEY HAD RECEIVED MONEY, BUT COULD DO NOTHING MORE AND IT WAS FOR THE ASSESSING OFFICER TO ENFORCE SHAREHOLDERS' ATTENDANCE IN SPITE OF THE FA CT THAT THE SHAREHOLDERS WERE MISSING AND NOT AVAILABLE. THEIR RELUCTANCE AN D HIDING MAY REFLECT ON THE GENUINENESS OF THE TRANSACTION AND CREDITWORTHI NESS OF THE CREDITOR. IT WOULD BE ALSO INCORRECT TO UNIVERSALLY STATE THAT A N INSPECTOR MUST BE SENT TO VERIFY THE SHAREHOLDERS/SUBSCRIBERS AT THE AVAILABL E ADDRESSES, THOUGH THIS MIGHT BE REQUIRED IN SOME CASES. SIMILARLY, IT WOUL D BE INCORRECT TO STATE THAT THE ASSESSING OFFICER SHOULD ASCERTAIN AND GET ADDR ESSES FROM THE REGISTRAR OF COMPANIES' WEBSITE OR SEARCH FOR THE ADDRESSES O F SHAREHOLDERS THEMSELVES. CREDITWORTHINESS IS NOT PROVED BY SHOWI NG ISSUE AND RECEIPT OF A CHEQUE OR BY FURNISHING A COPY OF STATEMENT OF BANK ACCOUNT, WHEN CIRCUMSTANCES REQUIRES THAT THERE SHOULD BE SOME MO RE EVIDENCE OF POSITIVE ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 21 NATURE TO SHOW THAT THE SUBSCRIBERS HAD MADE GENUIN E INVESTMENT OR HAD, ACTED AS ANGEL INVESTORS AFTER DUE DILIGENCE OR FOR PERSONAL REASONS. THE FINAL CONCLUSION MUST BE PRAGMATIC AND PRACTICAL, WHICH T AKES INTO ACCOUNT HOLISTIC VIEW OF THE ENTIRE EVIDENCE INCLUDING THE DIFFICULTIES, WHICH THE ASSESSEE MAY FACE TO UNIMPEACHABLY ESTABLISH CREDIT WORTHINESS OF THE SHAREHOLDERS. 20. NOW, WHEN WE GO TO THE ORDER OF THE TRIBUNAL IN TH E PRESENT CASE, WE NOTICE THAT THE TRIBUNAL HAS MERELY REPRODUCED THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND UPHELD THE DELETION OF THE ADDITION. IN FACT, THEY SUBSTANTIALLY RELIED UPON A ND QUOTED THE DECISION OF ITS COORDINATE BENCH IN THE CASE OF MAF ACADEMY (P.) LT D., (SUPRA) A DECISION WHICH HAS BEEN OVERTURNED BY THE DELHI HIGH COURT V IDE ITS JUDGMENT IN MAF ACADEMY (P.) LTD (SUPRA). IN THE IMPUGNED ORDER IT IS ACCEPTED THAT THE ASSESSEE WAS UNABLE TO PRODUCE DIRECTORS AND PRINCI PAL OFFICERS OF THE SIX SHAREHOLDER COMPANIES AND ALSO THE FACT THAT AS PER THE INFORMATION AND DETAILS COLLECTED BY THE ASSESSING OFFICER FROM THE CONCERNED BANK, THE ASSESSING OFFICER HAS OBSERVED THAT THERE WERE GENU INE CONCERNS ABOUT IDENTITY, CREDITWORTHINESS OF SHAREHOLDERS AS WELL AS GENUINENESS OF THE TRANSACTIONS. 21. IN VIEW OF THE AFORESAID DISCUSSION, WE FEEL THAT THE MATTER REQUIRES AN ORDER OF REMIT TO THE TRIBUNAL FOR FRESH ADJUDICATI ON KEEPING IN VIEW THE AFORESAID CASE LAW. THE QUESTION OF LAW IS, THEREFO RE, ANSWERED IN FAVOUR OF THE REVENUE AND AGAINST THE RESPONDENT-ASSESSEE, BU T WITH AN ORDER OF REMIT TO THE TRIBUNAL TO DECIDE THE WHOLE ISSUE AFRESH. O NE OF THE REASONS, WHY WE HAVE REMITTED THE MATTER IS THAT THE CROSS OBJECTIO NS OF THE RESPONDENT- ASSESSEE QUESTIONING NOTICE UNDER SECTION 147/148 W ERE DISMISSED AS ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 22 INFRUCTOUS AND EVEN IF WE DECIDE THE ISSUE ON MERIT S IN FAVOUR OF THE REVENUE, THE CROSS OBJECTIONS WOULD GOT REVIVED AND REQUIRE ADJUDICATION. THE APPEAL IS ACCORDINGLY DISPOSED OF. 3.2 WE NOW REFER TO ANOTHER LEADING CASE OF LOVELY EXPORTS (P) LTD. (SUPRA) WHICH HAS BEEN CONSIDERED AND REFERRED IN NAVODAYA CASTLE CASE (SUPRA) AND WHICH HAS ALSO BEEN QUOTED BY THE LD AR IN SUPPORT OF ITS CONTENTION. IT WAS A CASE OF PUBLIC LIMITED COMPANY WHERE SHARES WERE SU BSCRIBED BY PUBLIC AND THE FACTS THEREOF HAVE BEEN SET OUT IN THE JUDGMENT OF HONBLE DELHI HIGH COURT REPORTED AS DIVINE LEASING & FINANCE LTD.[200 8] 299 ITR 268. THE PETITION FOR LEAVE TO APPEAL AGAINST THIS ORDER WAS DISMISSED BY THE HONBLE SUPREME COURT OBSERVING WE FIND NO MERIT IN THIS S PECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MON EY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, W HOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO R EOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT. IN THAT CASE, THE HONBLE DELHI HIGH COURT HAS HELD AS UNDER: 6. WE FIND IT INDEED REMARKABLE THAT THE ATTENTION OF THE SOPHIA FINANCE FULL BENCH HAD NOT BEEN DRAWN TO THE DECISION OF TH E SUPREME COURT IN CIT V. ORISSA CORPN. (P.) LTD. [1986] 159 ITR 78 , WHICH IF CITED WOULD REALLY HAVE LEFT NO ALTERNATIVE TO THE FULL BENCH BUT TO A RRIVE AT THE CONCLUSION IT DID. THE BOOKS OF ACCOUNT OF THE ASSESSEE CONTAINED THREE CASH CREDITS AGGREGATING RS. 1,50,000 ALLEGEDLY RECEIVED AS LOAN S FROM THREE INDIVIDUAL CREDITORS UNDER HUNDIS. LETTERS OF CONFI RMATION AS WELL AS THE DISCHARGED HUNDIS WERE PRODUCED; BUT NOTICES/SUMMON S SENT TO THEM REMAINED UNSERVED BECAUSE THEY HAD REPORTEDLY LEFT THAT ADDRESS. THE ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 23 VIEW OF THE TRIBUNAL WAS THAT MERELY BECAUSE THE AS SESSEE COULD NOT PRODUCE THESE THREE PARTIES, THERE WAS NEVERTHELESS NO JUSTIFICATION TO DRAW AN ADVERSE INFERENCE. THIS APPROACH AS ACCORDE D APPROVAL BY THE SUPREME COURT IN THESE WORDS : 'IN THIS CASE, THE ASSESSEE HAD GIVEN THE NAMES AND ADDRESSES OF THE ALLEGED CREDITORS. IT WAS IN THE KNOWLEDGE OF T HE REVENUE THAT THE SAID CREDITORS WERE INCOME-TAX ASSESSEES. THEIR INDEX NUMBERS WERE IN THE FILE OF THE REVENUE. THE REVENUE, APART FROM ISSUING NOTICES UNDER SECTION 131 AT THE INSTANCE OF THE AS SESSEE, DID NOT PURSUE THE MATTER FURTHER. THE REVENUE DID NOT EXAM INE THE SOURCE OF INCOME OF THE SAID ALLEGED CREDITORS TO FIND OUT WHETHER THEY WERE CREDITWORTHY OR WERE SUCH WHO COULD ADVANCE TH E ALLEGED LOANS. THERE WAS NO EFFORT MADE TO PURSUE THE SO-CA LLED ALLEGED CREDITORS. IN THOSE CIRCUMSTANCES, THE ASSESSEE COU LD NOT DO ANYTHING FURTHER. IN THE PREMISES, IF THE TRIBUNAL CAME TO THE CONCLUSION THAT THE ASSESSEE HAS DISCHARGED THE BUR DEN THAT LAY ON HIM, THEN IT COULD NOT BE SAID THAT SUCH A CONCLUSI ON WAS UNREASONABLE OR PERVERSE OR BASED ON NO EVIDENCE. I F THE CONCLUSION IS BASED ON SOME EVIDENCE ON WHICH A CON CLUSION COULD BE ARRIVED AT, NO QUESTION OF LAW AS SUCH ARISES.' (P. 84) THIS REASONING MUST APPLY A FORTIORI TO LARGE SCAL E SUBSCRIPTIONS TO THE SHARES OF A PUBLIC COMPANY WHERE THE LATTER MAY HAV E NO MATERIAL OTHER THAN THE APPLICATION FORMS AND BANK TRANSACTION DET AILS TO GIVE SOME INDICATION OF THE IDENTITY OF THESE SUBSCRIBERS. IT MAY NOT APPLY IN CIRCUMSTANCES WHERE THE SHARES ARE ALLOTTED DIRECTL Y BY THE COMPANY/ASSESSEE OR TO CREDITORS OF THE ASSESSEE. T HIS IS WHY THIS COURT ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 24 HAS ADOPTED A VERY STRICT APPROACH TO THE BURDEN BE ING LAID ALMOST ENTIRELY ON AN ASSESSEE WHICH RECEIVES A GIFT. 7. SUMATI DAYAL V. CIT [1995] 214 ITR 801 (SC) A SUCCINCT YET COMPLETE PRECIS ON THE ESSENTIALS OF INCOME-TAX LIABILITY CA N BE DISCERNED FROM THESE WORDS - 'IN ALL CASES IN WHICH A RECEIPT IS S OUGHT TO BE TAXED AS INCOME, THE BURDEN LIES ON THE DEPARTMENT TO PROVE THAT IT IS WITHIN THE TAXING PROVISION AND IF THE RECEIPT IS IN THE NATUR E OF INCOME, THE BURDEN OF PROVING THAT IT IS NOT TAXABLE BECAUSE IT FALLS WITHIN THE EXEMPTION PROVIDED BY THE ACT LIES UPON THE ASSESSEE.' THIS D ECISION IS ADEQUATE AUTHORITY FOR THE PROPOSITION THAT BY VIRTUE OF SEC TION 68 OF THE INCOME- TAX ACT THE ASSESSEE IS OBLIGED TO ESTABLISH THAT A MOUNTS CREDITED IN THE ACCOUNTS DO NOT REPRESENT ITS INCOME; IN THAT CASE THE ASSESSEES VERSION THAT SHE HAD WON THEM THROUGH BETTING ON HORSE RACI NG IN TWO CONSECUTIVE YEARS DID NOT ATTRACT CREDIBILITY. THE APEX COURT HAD FOLLOWED ITS EARLIER DECISION, NAMELY, ORISSA CORPN. (P.) LT D.S CASE (SUPRA) WHEREIN IT HAD HELD THAT SINCE THE ASSESSEE HAD GIVEN THE N AMES AND ADDRESSES OF THE CREDITORS, ALL OF WHOM WERE INCOME-TAX ASSESSEE S, THE FAILURE OF THE CREDITORS TO RESPOND TO THE DEPARTMENTS NOTICES WO ULD NOT JUSTIFY AN ADVERSE INFERENCE BEING DRAWN AGAINST THE ASSESSEES . THE COURT ALSO KEPT IN PERSPECTIVE THE FACT THAT THE DOCUMENTATION HAD ALSO BEEN PRODUCED BY THE ASSESSEE. IT IS OBVIOUS THAT THE SUPREME COU RT CONSIDERED THAT IN THESE CIRCUMSTANCES THE ONUS OF PROOF HAD BEEN DISC HARGED BY THE ASSESSEE. IT IS ALSO PALPABLE THAT THE SUPREME COUR T WAS OF THE FURTHER OPINION THAT THE DEPARTMENT HAD NOT DISCHARGED THE BURDEN OF PROOF THAT HAD SHIFTED TO IT, SINCE IT DID NOTHING MORE T HAN ISSUE NOTICES UNDER SECTION 131 OF THE INCOME-TAX ACT. THEREFORE, THE D EPARTMENT OUGHT TO ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 25 HAVE MADE EFFORTS TO PURSUE THESE NOTICES/CREDITORS TO DETERMINE THEIR CREDITWORTHINESS. THESE OBSERVATIONS SOUND THE DEAT H-KNELL FOR THE CONTENTIONS RAISED ON BEHALF OF THE DEPARTMENT IN T HE PRESENT BATCH OF APPEALS. 13. THERE CANNOT BE TWO OPINIONS ON THE ASPECT THAT TH E PERNICIOUS PRACTICE OF CONVERSION OF UNACCOUNTED MONEY THROUGH THE MASQUERADE OR CHANNEL OF INVESTMENT IN THE SHARE CAPITAL OF A COMPANY MUST BE FIRMLY EXCORIATED BY THE REVENUE. EQUALLY, WHERE TH E PREPONDERANCE OF EVIDENCE INDICATES ABSENCE OF CULPABILITY AND COMPL EXITY OF THE ASSESSEE IT SHOULD NOT BE HARASSED BY THE REVENUES INSISTEN CE THAT IT SHOULD PROVE THE NEGATIVE. IN THE CASE OF A PUBLIC ISSUE, THE CO MPANY CONCERNED CANNOT BE EXPECTED TO KNOW EVERY DETAIL PERTAINING TO THE IDENTITY AS WELL AS FINANCIAL WORTH OF EACH OF ITS SUBSCRIBERS. THE COMPANY MUST, HOWEVER, MAINTAIN AND MAKE AVAILABLE TO THE ASSESSI NG OFFICER FOR HIS PERUSAL, ALL THE INFORMATION CONTAINED IN THE STATU TORY SHARE APPLICATION DOCUMENTS. IN THE CASE OF PRIVATE PLACEMENT THE LEG AL REGIME WOULD NOT BE THE SAME. A DELICATE BALANCE MUST BE MAINTAINED WHILE WALKING THE TIGHTROPE OF SECTIONS 68 AND 69 OF THE IT ACT. THE BURDEN OF PROOF CAN SELDOM BE DISCHARGED TO THE HILT BY THE ASSESSEE; I F THE ASSESSING OFFICER HARBOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRIPTI ON HE IS EMPOWERED, NAY DUTY-BOUND, TO CARRY OUT THOROUGH INVESTIGATION S. BUT IF THE ASSESSING OFFICER FAILS TO UNEARTH ANY WRONG OR ILL EGAL DEALINGS, HE CANNOT OBDURATELY ADHERE TO HIS SUSPICIONS AND TREAT THE S UBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANY. 16. 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 ASSESSEE HAS TO PRIMA FACIE PROVE (1) THE IDENT ITY OF THE CREDITOR/SUB- ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 26 SCRIBER; (2) THE GENUINENESS OF THE TRANSACTION, NA MELY: WHETHER IT HAS BEEN TRANSMITTED THROUGH BANKING OR OTHER INDISPUTA BLE CHANNELS; (3) THE CREDITWORTHINESS OR FINANCIAL STRENGTH OF THE CREDI TOR/SUBSCRIBER; (4) IF RELEVANT DETAILS OF THE ADDRESS OR PAN IDENTITY OF THE CREDITOR/SUBSCRIBER ARE FURNISHED TO THE DEPARTMENT ALONG WITH COPIES O F THE SHAREHOLDERS REGISTER, SHARE APPLICATION FORMS, SHARE TRANSFER R EGISTER ETC. IT WOULD CONSTITUTE ACCEPTABLE PROOF OR ACCEPTABLE EXPLANATI ON BY THE ASSESSEE. (5) THE DEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWIN G AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCRIBER FAIL S OR NEGLECTS TO RESPOND TO ITS NOTICES; (6) THE ONUS WOULD NOT STAN D DISCHARGED IF THE CREDITOR/SUBSCRIBER DENIES OR REPUDIATES THE TRANSA CTION SET UP BY THE ASSESSEE NOR SHOULD THE ASSESSING OFFICER TAKE SUCH REPUDIATION AT FACE VALUE ANDCONSTRUE IT, WITHOUT MORE, AGAINST THE ASS ESSEE. (7) THE ASSESSING OFFICER IS DUTY-BOUND TO INVESTIGATE THE CREDITWORTHINESS OF THE CREDITOR/SUBSCRIBER THE GENUINENESS OF THE TRANSACT ION AND THE VERACITY OF THE REPUDIATION. 3.4 WE NOW REFER TO THE DECISION OF THE HONBLE DEL HI HIGH COURT IN CASE OF COMMISSIONER OF INCOME-TAX V. NOVA PROMOTERS & FINLE ASE (P) LTD. [2012] 342 ITR 169 (DELHI) , WHICH IS AGAIN A CASE OF A PRIVATE LIMITED COMPAN Y AND WHICH HAS BEEN FOLLOWED IN CASE OF NAVODAYA CASTLES (SUPRA). IN THIS CASE, THE HONBLE DELHI HIGH COURT HAS HELD AS UNDER: 38. THE RATIO OF A DECISION (IN CASE OF LOVELY EXPORTS ) HAS TO BE UNDERSTOOD AND APPRECIATED IN THE BACKGROUND OF THE FACTS OF THAT CASE. SO UNDERSTOOD, IT WILL BE SEEN THAT WHERE THE COMPL ETE PARTICULARS OF THE SHARE APPLICANTS SUCH AS THEIR NAMES AND ADDRESSES, INCOME TAX FILE NUMBERS, THEIR CREDITWORTHINESS, SHARE APPLICATION FORMS AND SHARE HOLDERS' REGISTER, SHARE TRANSFER REGISTER ETC. ARE FURNISHED TO THE ASSESSING OFFICER AND THE ASSESSING OFFICER HAS NOT CONDUCTED ANY ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 27 ENQUIRY INTO THE SAME OR HAS NO MATERIAL IN HIS POS SESSION TO SHOW THAT THOSE PARTICULARS ARE FALSE AND CANNOT BE ACTED UPO N, THEN NO ADDITION CAN BE MADE IN THE HANDS OF THE COMPANY UNDER SEC. 68 AND THE REMEDY OPEN TO THE REVENUE IS TO GO AFTER THE SHARE APPLIC ANTS IN ACCORDANCE WITH LAW. WE ARE AFRAID THAT WE CANNOT APPLY THE RA TIO TO A CASE, SUCH AS THE PRESENT ONE, WHERE THE ASSESSING OFFICER IS IN POSSESSION OF MATERIAL THAT DISCREDITS AND IMPEACHES THE PARTICULARS FURNI SHED BY THE ASSESSEE AND ALSO ESTABLISHES THE LINK BETWEEN SELF-CONFESSE D 'ACCOMMODATION ENTRY PROVIDERS', WHOSE BUSINESS IT IS TO HELP ASSE SSEES BRING INTO THEIR BOOKS OF ACCOUNT THEIR UNACCOUNTED MONIES THROUGH T HE MEDIUM OF SHARE SUBSCRIPTION, AND THE ASSESSEE. THE RATIO IS INAPPLICABLE TO A CASE, AGAIN SUCH AS THE PRESENT ONE, WHERE THE INVOLVEMEN T OF THE ASSESSEE IN SUCH MODUS OPERANDI IS CLEARLY INDICATED BY VALID M ATERIAL MADE AVAILABLE TO THE ASSESSING OFFICER AS A RESULT OF I NVESTIGATIONS CARRIED OUT BY THE REVENUE AUTHORITIES INTO THE ACTIVITIES OF S UCH 'ENTRY PROVIDERS'. THE EXISTENCE WITH THE ASSESSING OFFICER OF MATERIA L SHOWING THAT THE SHARE SUBSCRIPTIONS WERE COLLECTED AS PART OF A PRE -MEDITATED PLAN - A SMOKESCREEN - CONCEIVED AND EXECUTED WITH THE CONNI VANCE OR INVOLVEMENT OF THE ASSESSEE EXCLUDES THE APPLICABIL ITY OF THE RATIO. IN OUR UNDERSTANDING, THE RATIO IS ATTRACTED TO A CASE WHE RE IT IS A SIMPLE QUESTION OF WHETHER THE ASSESSEE HAS DISCHARGED THE BURDEN PLACED UPON HIM UNDER SEC. 68 TO PROVE AND ESTABLISH THE IDENTI TY AND CREDITWORTHINESS OF THE SHARE APPLICANT AND THE GEN UINENESS OF THE TRANSACTION. IN SUCH A CASE, THE ASSESSING OFFICER CANNOT SIT BACK WITH FOLDED HANDS TILL THE ASSESSEE EXHAUSTS ALL THE EVI DENCE OR MATERIAL IN HIS POSSESSION AND THEN COME FORWARD TO MERELY REJECT T HE SAME, WITHOUT CARRYING OUT ANY VERIFICATION OR ENQUIRY INTO THE M ATERIAL PLACED BEFORE HIM. THE CASE BEFORE US DOES NOT FALL UNDER THIS CA TEGORY AND IT WOULD BE A TRAVESTY OF TRUTH AND JUSTICE TO EXPRESS A VIEW T O THE CONTRARY. 39. THE CASE OF CIT V. ORISSA CORPORATION (P.) LTD. [1 986] 159 ITR 78 /25 TAXMAN 80 (SC) EXEMPLIFIES THE CATEGORY OF CASES WH ERE NO ACTION IS TAKEN BY THE ASSESSING OFFICER TO VERIFY OR CONDUCT AN ENQUIRY INTO THE PARTICULARS ABOUT THE CREDITORS FURNISHED BY THE AS SESSEE, INCLUDING THEIR INCOME-TAX FILE NUMBERS. IN THE SAME CATEGORY FALL CASES DECIDED BY THIS COURT IN CIT V. DOLPHIN CANPACK [2006] 283 ITR 190 , CIT V. MAKHNI & TYAGI (P.) LTD. [2004] 267 ITR 433 / 136 TAXMAN 641 , CIT V. ANTARTICA INVESTMENT (P.) LTD. [2003] 262 ITR 493 / 133 TAXMAN 605 AND CIT V . ACHAL INVESTMENT LTD. [2004] 268 ITR 211 / 136 TAXMAN 335 . ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 28 3.5 WE NOW REFER TO THE DECISION OF THE HONBLE DEL HI HIGH COURT IN CASE OF COMMISSIONER OF INCOME-TAX V. N.R. PORTFOLIO (P.) LTD [2014] 222 TAXMAN 157 WHICH IS AGAIN A CASE OF A PRIVATE LIMITED COMPANY AND WHICH HAS BEEN FOLLOWED IN CASE OF NAVODAYA CASTLES(SUPRA). IN TH IS CASE, THE HONBLE DELHI HIGH COURT HAS HELD AS UNDER: 18. IN THE REMAND REPORT, THE ASSESSING OFFICER REFERR ED TO THE PROVISIONS OF SECTION 68 OF THE ACT AND THEIR APPLI CABILITY. THIS ACCORDING TO US IS THE CORRECT AND TRUE LEGAL POSITION, AS ID ENTITY, CREDITWORTHINESS AND GENUINENESS HAVE TO BE ESTABLISHED. PAN NUMBERS ARE ALLOTTED ON THE BASIS OF APPLICATIONS WITHOUT ACTUAL DE FACTO V ERIFICATION OF THE IDENTITY OR ASCERTAINING ACTIVE NATURE OF BUSINESS ACTIVITY. PAN IS A NUMBER WHICH IS ALLOTTED AND HELPS THE REVENUE KEEP TRACK OF THE TRANSACTIONS. PAN NUMBER IS RELEVANT BUT CANNOT BE BLINDLY AND WITHOUT CONSIDERING SURROUNDING CIRCUMSTANCES TREATED AS SU FFICIENT TO DISCHARGE THE ONUS, EVEN WHEN PAYMENT IS THROUGH BANK ACCOUNT . 19. ON THE QUESTION OF CREDITWORTHINESS AND GENUINENES S, IT WAS HIGHLIGHTED THAT THE MONEY NO DOUBT WAS RECEIVED TH ROUGH BANKING CHANNELS, BUT DID NOT REFLECT ACTUAL GENUINE BUSINE SS ACTIVITY. THE SHARE SUBSCRIBERS DID NOT HAVE THEIR OWN PROFIT MAKING AP PARATUS AND WERE NOT INVOLVED IN BUSINESS ACTIVITY. THEY MERELY ROTATED MONEY, WHICH WAS COMING THROUGH THE BANK ACCOUNTS, WHICH MEANS DEPOS ITS BY WAY OF CASH AND ISSUE OF CHEQUES. THE BANK ACCOUNTS, THEREFORE, DID NOT REFLECT THEIR CREDITWORTHINESS OR EVEN GENUINENESS OF THE TRANSAC TION. THE BENEFICIARIES, INCLUDING THE RESPONDENT-ASSESSEE, D ID NOT GIVE ANY SHARE- DIVIDEND OR INTEREST TO THE SAID ENTRY OPERATORS/SU BSCRIBERS. THE PROFIT MOTIVE NORMAL IN CASE OF INVESTMENT, WAS ENTIRELY A BSENT. IN THE PRESENT CASE, NO PROFIT OR DIVIDEND WAS DECLARED ON THE SHA RES. ANY PERSON, WHO WOULD INVEST MONEY OR GIVE LOAN WOULD CERTAINLY SEE K RETURN OR INCOME AS CONSIDERATION. THESE FACTS ARE NOT ADVERTED TO AND AS NOTICED BELOW ARE TRUE AND CORRECT. THEY ARE UNDOUBTEDLY RELEVANT AND MATERIAL FACTS FOR ASCERTAINING CREDITWORTHINESS AND GENUINENESS OF TH E TRANSACTIONS 29. IN CIT V. NIPUN BUILDERS & DEVELOPERS (P.) LTD. [2013] 350 ITR 407/214 TAXMAN 429/30 TAXMANN.COM 292 (DELHI) , THIS PRINCIPLE HAS BEEN REITERATED HOLDING THAT THE ASSESSEE AND THE ASSESS ING OFFICER HAVE TO ADOPT A REASONABLE APPROACH AND WHEN THE INITIAL ON US ON THE ASSESSEE WOULD STAND DISCHARGED DEPENDS UPON FACTS AND CIRCU MSTANCES OF EACH ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 29 CASE. IN CASE OF PRIVATE LIMITED COMPANIES, GENERAL LY PERSONS KNOWN TO DIRECTORS OR SHAREHOLDERS, DIRECTLY OR INDIRECTLY, BUY OR SUBSCRIBE TO SHARES. UPON RECEIPT OF MONEY, THE SHARE SUBSCRIBER S DO NOT LOSE TOUCH AND BECOME INCOMMUNICADO. CALL MONIES, DIVIDENDS, W ARRANTS ETC. HAVE TO BE SENT AND THE RELATIONSHIP IS/WAS A CONTINUING ONE. IN SUCH CASES, THEREFORE, THE ASSESSEE CANNOT SIMPLY FURNISH DETAI LS AND REMAIN QUIET EVEN WHEN SUMMONS ISSUED TO SHAREHOLDERS UNDER SECT ION 131 RETURN UNSERVED AND UNCOMPLIED. THIS APPROACH WOULD BE UNR EASONABLE AS A GENERAL PROPOSITION AS THE ASSESSEE CANNOT PLEAD TH AT THEY HAD RECEIVED MONEY, BUT COULD DO NOTHING MORE AND IT WAS FOR THE ASSESSING OFFICER TO ENFORCE SHARE HOLDERS ATTENDANCE. SOME CASES MIGHT REQUIRE OR JUSTIFY VISIT BY THE INSPECTOR TO ASCERTAIN WHETHER THE SHA REHOLDERS/SUBSCRIBERS WERE FUNCTIONING OR AVAILABLE AT THE ADDRESSES, BUT IT WOULD BE INCORRECT TO STATE THAT THE ASSESSING OFFICER SHOULD GET THE ADDRESSES FROM REGISTRAR OF COMPANIES' WEBSITE OR SEARCH FOR THE A DDRESSES OF SHAREHOLDERS AND COMMUNICATE WITH THEM. SIMILARLY, CREDITWORTHINESS WAS NOT PROVED BY MERE ISSUE OF A CHEQUE OR BY FURN ISHING A COPY OF STATEMENT OF BANK ACCOUNT. CIRCUMSTANCES MIGHT REQU IRE THAT THERE SHOULD BE SOME EVIDENCE OF POSITIVE NATURE TO SHOW THAT THE SAID SUBSCRIBERS HAD MADE A GENUINE INVESTMENT, ACTED AS ANGEL INVESTORS, AFTER DUE DILIGENCE OR FOR PERSONAL REASONS. THUS, FINDING OR A CONCLUSION MUST BE PRACTICABLE, PRAGMATIC AND MIGHT IN A GIVEN CASE TAKE INTO ACCOUNT THAT THE ASSESSEE MIGHT FIND IT DIFFICULT T O UNIMPEACHABLY ESTABLISH CREDITWORTHINESS OF THE SHAREHOLDERS. 30. WHAT WE PERCEIVE AND REGARD AS CORRECT POSITION OF LAW IS THAT THE COURT OR TRIBUNAL SHOULD BE CONVINCED ABOUT THE IDE NTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION . THE ONUS TO PROVE THE THREE FACTUM IS ON THE ASSESSEE AS THE FACTS AR E WITHIN THE ASSESSEE'S KNOWLEDGE. MERE PRODUCTION OF INCORPORATION DETAILS , PAN NOS. OR THE FACT THAT THIRD PERSONS OR COMPANY HAD FILED INCOME TAX DETAILS IN CASE OF A PRIVATE LIMITED COMPANY MAY NOT BE SUFFICIENT WHE N SURROUNDING AND ATTENDING FACTS PREDICATE A COVER UP. THESE FACTS I NDICATE AND REFLECT PROPER PAPER WORK OR DOCUMENTATION BUT GENUINENESS, CREDITWORTHINESS, IDENTITY ARE DEEPER AND OBTRUSIVE. COMPANIES NO DOU BT ARE ARTIFICIAL OR JURISTIC PERSONS BUT THEY ARE SOULLESS AND ARE DEPE NDENT UPON THE INDIVIDUALS BEHIND THEM WHO RUN AND MANAGE THE SAID COMPANIES. IT IS THE PERSONS BEHIND THE COMPANY WHO TAKE THE DECISIO NS, CONTROLS AND MANAGE THEM. ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 30 31. THE RESPONDENT HEREIN IS A PRIVATE LIMITED COMPANY . IT IS NOT THE CASE OF THE RESPONDENT THAT THE DIRECTORS OR PERSONS BEH IND THE COMPANIES MAKING THE INVESTMENT IN THEIR SHARES WERE RELATED OR KNOWN TO THEM. IT IS HIGHLY IMPLAUSIBLE THAT AN UNKNOWN PERSON HAD MA DE SUBSTANTIAL INVESTMENT IN A PRIVATE LIMITED COMPANY TO THE TUNE OF RS.63,80,100/- AND RS.75,60,200/- IN TWO CONSECUTIVE ASSESSMENT YE ARS 2002-03 AND 2003-04 RESPECTIVELY WITHOUT ADEQUATELY PROTECTING THE INVESTMENT AND ENSURING APPROPRIATE RETURNS. OTHER THAN THE SHARE APPLICATION FORMS, NO OTHER AGREEMENT BETWEEN THE RESPONDENT AND THIRD CO MPANIES HAD BEEN PLACED ON RECORD. THE PERSONS BEHIND THESE COMPANIE S WERE NOT PRODUCED BY THE RESPONDENT. ON THE OTHER HAND RESPO NDENT ADOPTED PREVARICATE AND NON- COOPERATION ATTITUDE BEFORE TH E ASSESSING OFFICER ONCE THEY CAME TO KNOW ABOUT THE DIRECTED ENQUIRY A ND THE INVESTIGATION BEING MADE. EVASIVE AND TRANSIENT APPROACH BEFORE T HE ASSESSING OFFICER IS LIMPID AND PERSPICUOUS. IDENTITY, CREDITWORTHINE SS OR GENUINENESS OF THE TRANSACTION IS NOT ESTABLISHED BY MERELY SHOWIN G THAT THE TRANSACTION WAS THROUGH BANKING CHANNELS OR BY ACCOUNT PAYEE IN STRUMENT. IT MAY, AS IN THE PRESENT CASE REQUIRED ENTAIL A DEEPER SCR UTINY. IT WOULD BE INCORRECT TO STATE THAT THE ONUS TO PROVE THE GENUI NENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE CREDITOR ST ANDS DISCHARGED IN ALL CASES IF PAYMENT IS MADE THROUGH BANKING CHANNELS. WHETHER OR NOT ONUS IS DISCHARGED DEPENDS UPON FACTS OF EACH CASE. IT DEPENDS ON WHETHER THE TWO PARTIES ARE RELATED OR KNOWN TO EAC H; THE MANNER OR MODE BY WHICH THE PARTIES APPROACHED EACH OTHER, WH ETHER THE TRANSACTION WAS ENTERED INTO THROUGH WRITTEN DOCUME NTATION TO PROTECT THE INVESTMENT, WHETHER THE INVESTOR PROFESSES AND WAS AN ANGEL INVESTOR, THE QUANTUM OF MONEY, CREDITWORTHINESS OF THE RECIPIENT, THE OBJECT AND PURPOSE FOR WHICH PAYMENT/INVESTMENT WAS MADE ETC. THESE FACTS ARE BASICALLY AND PRIMARILY IN KNOWLEDGE OF T HE ASSESSEE AND IT IS DIFFICULT FOR REVENUE TO PROVE AND ESTABLISH THE NE GATIVE. CERTIFICATE OF INCORPORATION OF COMPANY, PAYMENT BY BANKING CHANNE L, ETC. CANNOT IN ALL CASES TANTAMOUNT TO SATISFACTORY DISCHARGE OF O NUS. THE FACTS OF THE PRESENT CASE NOTICED ABOVE SPEAK AND ARE OBVIOUS. W HAT IS UNMISTAKABLY VISIBLE AND APPARENT, CANNOT BE SPURRED BY FORMAL B UT UNRELIABLE PALE EVIDENCE IGNORING THE PATENT AND WHAT IS PLAIN AND WRIT LARGE. 3.6 WE NOW REFER TO THE DECISION IN CASE OF CIT VS. SHREE BARKHA SYNTHETICS LTD. (SUPRA) WHEREIN THE HONBLE RAJASTHAN HIGH COURT HAS HELD AS UNDER (HEAD NOTES): ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 31 THE ASSESSEE HAVING BEEN ASKED TO FURNISH EXPLANAT ION ABOUT THE RECEIPT OF CAPITAL MONEY ON ACCOUNT OF SHARE APPLIC ATION, HAD FURNISHED THE DETAILS OF THE IDENTITY OF PERSONS WHO HAD MADE SUCH INVESTMENTS. THE PARTICULARS OF THE RECEIPT AND GIR NUMBER OF TH E PERSONS, WHO HAD MADE SUCH INVESTMENTS IN THE MATTER OF COMPANIES RE GISTERED UNDER THE COMPANIES ACT, 1956, WERE FURNISHED. NOTICES OF 5 C OMPANIES OUT OF 7 COMPANIES WERE RECEIVED UNSERVED WITH THE REMARK OF THE POSTAL DEPARTMENT THAT THEY HAD SHIFTED THEIR ADDRESSES. B UT NO ATTEMPT WAS MADE BY THE DEPARTMENT TO PURSUE THE ENQUIRY THEREA FTER WHICH, NOTWITHSTANDING THE REMARK ABOUT SHIFTING OF ADDRES SES, PRIMA FACIE ESTABLISHED GENUINENESS OF SUCH COMPANIES AS EXISTI NG PERSONS. IT HAD COME ON RECORD THAT ANOTHER COMPANY DID EXIST AND W AS UNDER LIQUIDATION, THE EXISTENCE OF WHICH AT RELEVANT TIM E COULD NOT BE DOUBTED. LIKEWISE, IN THE CASE OF INDIVIDUAL INVESTORS, THE TRIBUNAL HAD REACHED THE FINDING THAT THEIR IDENTITIES HAD BEEN ESTABLISHED BY THE ASSESSEE. [PARA 10] APPLYING THE PRINCIPLE ENUNCIATED BY THE SUPREME CO URT IN CIT V. ORISSA CORPN. (P.) LTD. [1986] 159 ITR 78 /25 TAXMAN 80F, THE IRRESISTIBLE CONCLUSION WAS THAT THE CONCLUSION OF THE TRIBUNAL THAT THE ASSESSEE HAD DISCHARGED HIS INITIAL BURDEN IN RESPECT OF 6 COMPA NIES AND 9 INDIVIDUAL INVESTORS, WAS BASED ON EVIDENCE AND ADDITIONS MADE BY THE ASSESSING OFFICER WERE ENQUIRED INTO WITHOUT PURSUING CORRECT NESS OF MATERIAL PLACED BEFORE IT BY THE ASSESSEE. NO QUESTION OF LA W COULD BE SAID TO BE ARISING IN SUCH CIRCUMSTANCES IN RESPECT OF FINDING ARRIVED AT BY THE TRIBUNAL, WHICH WAS ESSENTIALLY A FINDING OF FACT A ND DID NOT STAND VITIATED IN LAW. [PARA 11] ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 32 3.7 IN CASE OF RIDDHI PROMOTERS (P) LTD (SUPRA), THE HONBLE DELHI HIGH COURT HELD AS UNDER: 6. IT IS NOT SUFFICIENT THAT THE IDENTITY OF THE S HARE APPLICANT OR THE CREDITOR SHOULD BE ESTABLISHED FOR THE ASSESSEE TO DISCHARGE THE INITIAL ONUS, WHICH IS UPON THE ASSESSEE. UNDER THE REQUIRE MENT OF SECTION 68, THE ASSESSEE HAS TO FURTHER SATISFY THE REVENUE AS TO THE GENUINENESS OF THE TRANSACTION AND THE CREDITWORTHINESS OF THE SHA RE APPLICANT OR THE INDIVIDUAL WHO IS ADVANCING AMOUNTS. THE ASSESSEE'S RELIANCE UPON THE ORDER OF THE COMMISSIONER (APPEALS) TO CONTEND THAT THE SOURCES OF THE FUNDS WERE IN ESSENCE AS DIRECTORS, IS, IN THIS CON TEXT, OF NO AVAIL. THE ASSESSEE HAS CONTENDED THAT IT WAS INCORPORATED JUS T BEFORE THE END OF THE FINANCIAL YEAR. HOWEVER, THE ASSESSEE HAD TO NE CESSARILY SHOW THAT THE AMOUNT WHICH IT INDICATED AS BORROWED FROM THE SIX APPLICANTS IN FACT BELONGED TO THEM. THE CREDITWORTHINESS OF THE SHARE APPLICANTS HAD TO BE SEEN IN THE CONTEXT OF THE ASSERTION MADE BY THEM O R THE MATERIALS PRESENTED BEFORE THE ASSESSING OFFICER AT THE RELEV ANT TIME. THE MATERIALS ON RECORD DISCLOSED THAT SOME INFORMATION FROM AT LEAST TWO INDIVIDUALS INDICATED THAT THE MONEY HAD NOT BEEN G IVEN BY THEM. THE APPEAL IS ACCORDINGLY DISMISSED. 3.8 IN THE CASE OF JANSAMPARK ADVERTISING & MARKETING (P) LTD (SUPRA), THE HONBLE DELHI HIGH COURT HAS HELD AS UNDER (HEAD NO TES): THE FURTHER INQUIRY ENVISAGED UNDER SECTION 250(4) IS GENERALLY BY CALLING WHAT IS KNOWN AS 'REMAND REPORT'. THE PURPO SE OF THIS ENABLING CLAUSE IS ESSENTIALLY TO ENSURE THAT THE MATTER OF ASSESSMENT REACHES FINALITY WITH ALL THE REQUISITE FACTS FOUND. THE AS SESSMENT PROCEEDINGS ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 33 REOPENED ON THE BASIS OF PRELIMINARY SATISFACTION T HAT SOME PART OF THE INCOME HAS ESCAPED ASSESSMENT, PARTICULARLY WHEN SO ME UNEXPLAINED CREDIT ENTRIES HAVE COME TO THE NOTICE (AS IN SECTI ON 68), CANNOT CONCLUDE, SAVE AND EXCEPT BY REACHING SATISFACTION ON THE TOU CHSTONE OF THE THREE TESTS MENTIONED EARLIER; VIZ. THE IDENTITY OF THE T HIRD PARTY MAKING THE PAYMENT, ITS CREDITWORTHINESS AND GENUINENESS OF TH E TRANSACTION. WHILST IT IS TRUE THAT THE ASSESSEE CANNOT BE CALLED UPON TO ADDUCE CONCLUSIVE PROOF ON ALL THESE THREE QUESTIONS, IT IS NONETHELE SS LEGITIMATE EXPECTATION OF THE PROCESS THAT HE WOULD BRING IN S OME PROOF SO AS TO DISCHARGE THE INITIAL BURDEN PLACED ON HIM. SINCE S ECTION 68 ITSELF DECLARES THAT THE CREDITED SUM WOULD HAVE TO BE INC LUDED IN THE INCOME OF THE ASSESSEE IN THE ABSENCE OF EXPLANATION, OR I N THE EVENT OF EXPLANATION BEING NOT SATISFACTORY, IT NATURALLY FO LLOWS THAT THE MATERIAL SUBMITTED BY THE ASSESSEE WITH HIS EXPLANATION MUST ITSELF BE WHOLESOME OR NOT UNTRUE. IT IS ONLY WHEN THE EXPLANATION AND THE MATERIAL OFFERED BY THE ASSESSEE AT THIS STAGE PASSES THIS MUSTER THAT THE INITIAL ONUS PLACED ON HIM WOULD SHIFT LEAVING IT TO THE ASSESSING OFFI CER TO START INQUIRING INTO THE AFFAIRS OF THE THIRD PARTY. [PARA 39] THE COMMISSIONER (APPEALS) AND CONSEQUENTLY THE TRI BUNAL WERE RIGHT TO THE EXTENT OF THEIR CONCLUSION THAT THE ASSESSEE HA D COME UP WITH SOME PROOF OF IDENTITY OF SOME OF THE ENTRIES IN QUESTIO N. BUT, FROM THIS INFERENCE, OR FROM THE FACT THAT THE TRANSACTIONS W ERE THROUGH BANKING CHANNELS, IT DOES NOT NECESSARILY FOLLOW THAT SATIS FACTION AS TO THE CREDITWORTHINESS OF THE PARTIES OR THE GENUINENESS OF THE TRANSACTIONS IN QUESTION WOULD ALSO HAVE BEEN ESTABLISHED. [PARA 41 ] ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 34 THE ASSESSING OFFICER HERE MAY HAVE FAILED TO DISCH ARGE HIS OBLIGATION TO CONDUCT A PROPER INQUIRY TO TAKE THE MATTER TO LOGI CAL CONCLUSION. BUT THE COMMISSIONER (APPEALS), HAVING NOTICED WANT OF PROP ER INQUIRY, CANNOT CLOSE THE CHAPTER SIMPLY BY ALLOWING THE APPEAL AND DELETING THE ADDITIONS MADE. IT WAS ALSO THE OBLIGATION OF THE F IRST APPELLATE AUTHORITY, AS INDEED OF THE TRIBUNAL, TO HAVE ENSURED THAT EFF ECTIVE INQUIRY WAS CARRIED OUT, PARTICULARLY IN THE FACE OF THE ALLEGA TIONS OF THE REVENUE THAT THE ACCOUNT STATEMENTS REVEAL A UNIFORM PATTERN OF CASH DEPOSITS OF EQUAL AMOUNTS IN THE RESPECTIVE ACCOUNTS PRECEDING THE TRANSACTIONS IN QUESTION. THIS NECESSITATED A DETAILED SCRUTINY OF THE MATERIAL SUBMITTED BY THE ASSESSEE IN RESPONSE TO THE NOTICE UNDER SEC TION 148 ISSUED BY THE ASSESSING OFFICER, AS ALSO THE MATERIAL SUBMITTED A T THE STAGE OF APPEALS, IF DEEMED PROPER BY WAY OF MAKING OR CAUSING TO BE MADE A 'FURTHER INQUIRY' IN EXERCISE OF THE POWER UNDER SECTION 250 (4). THIS APPROACH NOT HAVING BEEN ADOPTED, THE IMPUGNED ORDER OF THE TRIB UNAL, AND CONSEQUENTLY THAT OF THE COMMISSIONER (APPEALS), CA NNOT BE APPROVED OR UPHELD. [PARA 42] 3.10 IN THE CASE OF EMPIRE BUILDTECH (P) LTD (SUPRA), THE HONBLE DELHI HIGH COURT HAS HELD AS UNDER (HEAD NOTES): IN LOVELY EXPORTS (SUPRA ), THE SUPREME COURT EMPHASIZED THAT THE INITIAL BURDEN IS UPON THE ASSESSEE TO SHOW AS TO T HE GENUINENESS OF THE IDENTITY OF THE INDIVIDUALS OR ENTITIES WHICH S EEK TO SUBSCRIBE TO THE SHARE CAPITAL. IN THE INSTANT CASE, THE ASSESSING O FFICER IN HIS ORDER, HAS PRODUCED THE TABULAR STATEMENT DESCRIBING THE NUMBE R OF SHARES SUBSCRIBED BY THE INVEST ORS, THE AMOUNTS PAID BY THEM, THE INDIVIDUALS ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 35 WHO PAID THE AMOUNT TOWARDS SHARE CAPITAL AND THE G ROSS INCOME REPORTED BY EACH OF SUCH INVESTORS TO THE REVENUE. A LOOK AT THAT CHART WOULD SHOW THAT THE INVESTORS HAD, BY AND LARGE, RE PORTED AMOUNTS FAR LESS AS COMPARED TO THE SUMS INVESTED BY THEM TOWARDS SH ARE CAPITAL. FURTHERMORE, THE ASSESSING OFFICER HAD, DURING THE COURSE OF ASSESSMENT, ISSUED NOTICES UNDER SECTION 133(6) TO THE INVESTORS - 28 OF THEM RESPONDED; 2 DID NOT RECEIVE THE NOTICE AND 9 OF THE M RECEIVED THE NOTICES AND RESPONDED BUT DID NOT SUBMIT ANY CO NFIRMATION. [PARA 7] HAVING REGARD TO THE CIRCUMSTANCES, PARTICULARLY, T HE FACT THAT THESE INVESTORS NOT ONLY DID NOT SUBMIT CONFIRMATION BUT HAD CONCEDEDLY REPORTED FAR LESS INCOME THAN THE AMOUNTS INVESTED, THE ASSESSEE COULD NOT, UNDER THE CIRCUMSTANCES, BE SAID TO HAVE DISCHARGED THE BURDEN WHICH WAS UPON IT. IT IS NOT SUFFICIENT FOR THE ASSESSEE TO MERELY DISCLOSE THE ADDRESSES OR IDENTITIES OF THE INDIVID UALS CONCERNED. THE OTHER WAY OF LOOKING AT THE MATTER IS THAT HAVING GIVEN THE ADDR ESSES, THE INABILITY OF THE NOTICEES WHO ARE APPROACHED BY THE ASSESSING OFFICER TO AFFORD ANY REASONABLE EXPLANATION AS TO HOW THEY GOT THE AMOUNTS GIVEN THE NATURE OF THEIR INCOME WHICH WAS DISPROPORTION ALLY LESS THAN WHAT THEY SUBSCRIBED AS SHARE CAPITAL WOU LD ALSO AMOUNT TO THE REVENUE HAVING DISCHARGED THE ONUS IF AT ALL WH ICH FELL UPON IT. THE ASSESSEE IN THIS CASE WAS INCORPORATED BARELY FEW M ONTHS BEFORE THE COMMENCEMENT OF THE ASSESSMENT YEAR, AND THERE IS NO FURTHER INFORMATION, OR ANYTHING TO INDICATE WHY ITS MARK U P OF THE SHARE PREMIUM THOUSAND FOLD IN RESPECT OF THE SHARES WHIC H WERE OF THE FACE VALUE OF RS. 10 LAKHS WAS JUSTIFIED. [PARA 8] ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 36 3.11 IN THE CASE OF ULTRA MODERN EXPORT(P) LTD (SUPRA), THE HONBLE DELHI HIGH COURT HAS HELD AS UNDER: 9. AS NOTICED PREVIOUSLY, THE CIT (A) WAS OF THE O PINION THAT THE ASSESSEE HAD DISCHARGED THE BASIC ONUS WHICH WAS CAST UPON I T AFTER CONSIDERING THE RULING IN LOVELY EXPORTS (P.) LTD.'S CASE (SUPRA). THE MATERIAL AND THE RECORDS IN THIS CASE SHOW THAT NOTICE ISSUED TO THE 5 OF TH E SHARE APPLICANTS WERE RETURNED UNSERVED. THE PARTICULARS OF RETURNS MADE AVAILABLE BY THE ASSESSEE AND TAKEN INTO CONSIDERATION IN PARAGRAPH 3.4 BY TH E AO IN THIS CASE WOULD SHOW THAT THE SAID PARTIES/APPLICANTS HAD DISCLOSED VERY MEAGER INCOME. THE AO ALSO NOTICED THAT BEFORE ISSUING CHEQUES TO THE ASSESSEE, HUGE AMOUNTS WERE TRANSFERRED IN THE ACCOUNTS OF SAID SHARE APPL ICANTS. THIS DISCUSSION ITSELF WOULD REVEAL THAT EVEN THOUGH THE SHARE APPL ICANTS COULD NOT BE ACCESSED THROUGH NOTICES, THE ASSESSEE WAS IN A POS ITION TO OBTAIN DOCUMENTS FROM THEM. WHILE THERE CAN BE NO DOUBT TH AT IN LOVELY EXPORTS (P.) LTD. (SUPRA), THE COURT INDICATED THE RULE OF 'SHIFTING ONUS' I.E. THE RESPONSIBILITY OF THE REVENUE TO PROVE THAT SECTION 68 COULD BE INVOKED ONCE THE BASIC BURDEN STOOD DISCHARGED BY FURNISHING REL EVANT AND MATERIAL PARTICULARS, AT THE SAME TIME, THAT JUDGMENT CANNOT BE SAID TO LIMIT THE INFERENCES THAT CAN BE LOGICALLY AND LEGITIMATELY D RAWN BY THE REVENUE IN THE NATURAL COURSE OF ASSESSMENT PROCEEDINGS. THE INFOR MATION THAT ASSESSEE FURNISHES WOULD HAVE TO BE CREDIBLE AND AT THE SAME TIME VERIFIABLE. IN THIS CASE, 5 SHARE APPLICANTS COULD NOT BE SERVED AS THE NOTICES WERE RETURNED UNSERVED. IN THE BACKDROP OF THIS CIRCUMSTANCE, THE ASSESSEE'S ABILITY TO SECURE DOCUMENTS SUCH AS INCOME TAX RETURNS OF THE SHARE APPLICANTS AS WELL AS BANK ACCOUNT PARTICULARS WOULD ITSELF GIVE RISE TO A CIRCUMSTANCE WHICH THE AO IN THIS CASE PROCEEDED TO DRAW INFERENCES FROM. HAVING REGARD TO THE ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 37 TOTALITY OF THE FACTS, I.E., THAT THE ASSESSEE COMM ENCED ITS BUSINESS AND IMMEDIATELY SOUGHT TO INFUSE SHARE CAPITAL AT A PRE MIUM RANGING BETWEEN RS. 90-190 PER SHARE AND WAS ABLE TO GARNER A COLOS SAL AMOUNT OF RS. 4.34 CRORES, THIS COURT IS OF THE OPINION THAT THE CIT ( APPEALS) AND THE ITAT FELL INTO ERROR IN HOLDING THAT AO COULD NOT HAVE ADDED BACK THE SAID AMOUNT UNDER SECTION 68. THE QUESTION OF LAW CONSEQUENTLY IS ANSWERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. 3.12 IN CASE OF M/S SHUBH MINES PVT LTD, THE HONBLE RAJASTHAN HIGH COURT HAS HELD AS UNDER: (7) A BARE PERUSAL OF THE ASSESSMENT ORDER REVEAL S THAT THE AO HAS MADE THE ADDITION ON SUSPICION WHICH IS BASED ON THE STA TEMENTS OF THIRD PARTY SHRI ASSEEM KUMAR GUPTA, ADMITTEDLY, RECORDED IN THE BA CK OF THE ASSESSEE. IT HAS COME ON RECORD THAT THE SHARE APPLICATION MONEY OF RS. 50,00,000/- WAS RECEIVED FROM MODERATE CREDIT CORPORATION LTD., A L ISTED COMPANY. IT IS NOT DISPUTED BEFORE THIS COURT THAT THE INVESTMENT MADE WAS RECEIVED BY ACCOUNT PAYEE CHEQUE AND THE SAME WAS REFUNDED BY AN ACCOUNT PAYEE CHEQUE WHEN THE COMPANY DROPPED ITS PROJECT. IN TH E CONSIDERED OPINION OF THIS COURT, IN ABSENCE OF ANY COGENT EVIDENCE ON RE CORD ESTABLISHING THAT THE MONEY SHOWN TO HAVE RECEIVED AS SHARE APPLICATION M ONEY, WAS AS A MATTER OF FACT, UNACCOUNTED MONEY BELONGING TO THE ASSESSE E COMPANY, THE FINDING ARRIVED AT BY THE AO, WHICH IS BASED ON SUSPICION, HAS RIGHTLY BEEN HELD NOT SUSTAINABLE IN THE EYES OF LAW. SUFFICE IT TO SAY THAT THE FINDING ARRIVED AT BY THE CIT(A), AFFIRMED BY THE ITAT, WHICH REMAINS A F INDING OF FACT, CANNOT BE SAID TO BE CAPRICIOUS OR PERVERSE. 3.13 IN CASE OF SOFTLINE CREATIONS PVT LTD 387 ITR 636 (DEL), THE HONBLE DELHI HIGH COURT HAS HELD AS UNDER: ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 38 (4) THIS COURT HAS CONSIDERED THE CONCURRENT ORDE R OF THE CIT(A) AS WELL AS THE ITAT. BOTH THESE AUTHORITIES PRIMARIL Y WENT BY THE FACT THAT THE ASSESSEE HAD PROVIDED SUFFICIENT INDICATION BY WAY OF PAN NUMBERS, TO HIGHLIGHT THE IDENTITY OF THE SHARE APPLICANTS, AS WELL AS PRODUCED THE AFFIDAVITS OF DIRECTORS. FURTHERMORE, THE BANK DET AILS OF SHARE APPLICANTS TOO HAD BEEN PROVIDED. IN THE CIRCUMSTANCES, IT WAS HE LD THAT THE ASSESSEE HAD ESTABLISHED THE IDENTITY OF THE SHARE APPLICANTS, T HE GENUINENESS OF TRANSACTIONS AND THEIR CREDIT-WORTHINESS. THE AO CHOSE TO PROCEED NO FURTHER BUT MERELY ADDED THE AMOUNTS BECAUSE OF TH E ABSENCE OF THE DIRECTORS PHYSICALLY PRESENT THEMSELVES BEFORE HI M. 6 WE ARE OF THE OPINION THAT NO QUESTION OF LAW ARI SES, HAVING REGARD TO THE CONCURRENT FINDINGS OF FACT. THE ASSESSEE HAS, IN OUR OPINION, COMPLIED WITH THE LAW SPELT OUT BY THE SUPREME COURT IN CIT VS. LOVELY EXPORTS PVT. LTD. 216 CTR (SC) 195. THE APPEAL IS MERITLESS AND IS C ONSEQUENTLY DISMISSED. 4. AFTER GOING THROUGH THE VARIOUS LEGAL AUTHORITIES A S NARRATED ABOVE, THE LEGAL PROPOSITION THAT EMERGES IN THE CONTEXT OF SE CTION 68 IS AS UNDER: 4.1 WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS MAINTA INED BY THE ASSESSEE, SECTION 68 REQUIRES THAT THE ASSESSEE SHO ULD OFFER AN EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH SUM FOUND CREDI TED IN ITS BOOKS OF ACCOUNTS TO THE SATISFACTION OF THE ASSESSING OFFIC ER. IN ABSENCE OF EXPLANATION, OR IN THE EVENT OF EXPLANATION BEING NOT FOUND SATI SFACTORY, THE SUM SO CREDITED WOULD BE INCLUDED IN THE INCOME OF THE ASSESSEE. ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 39 4.2 THE PRIMARY REQUIREMENTS, WHICH SHOULD BE SATISFIED CUMULATIVELY BY THE ASSESSEE IN SUCH CASES IS IDENTIFICATION OF THE SHA REHOLDER, CREDITWORTHINESS OF SHAREHOLDER AND THE GENUINENESS OF THE TRANSACTION. 4.3 THE EXPLANATION OFFERED AND MATERIAL SUBMITTED BY T HE ASSESSEE IN SUPPORT OF ITS EXPLANATION SHOULD BE WHOLESOME, CRE DIBLE AND VERIFIABLE. THESE THREE REQUIREMENTS THEREAFTER HAVE TO BE TESTED BY THE ASSESSING OFFICER NOT SUPERFICIALLY BUT IN DEPTH HAVING REGARD TO THE HUM AN PROBABILITIES AND NORMAL COURSE OF HUMAN CONDUCT. IT IS ONLY WHEN THE EXPLAN ATION AND THE MATERIAL OFFERED BY THE ASSESSEE AT THIS STAGE PASSES THIS M USTER THAT THE INITIAL ONUS PLACED ON IT WOULD SHIFT LEAVING IT TO THE ASSESSIN G OFFICER TO START INQUIRING INTO THE AFFAIRS OF THE THIRD PARTY. 4.4 WHILST IT IS TRUE THAT THE ASSESSEE CANNOT BE CALLE D UPON TO ADDUCE CONCLUSIVE PROOF ON ALL THESE THREE REQUIREMENTS, I T IS NONETHELESS LEGITIMATE EXPECTATION OF THE PROCESS THAT HE WOULD BRING IN S UFFICIENT PROOF, WHICH IS CREDIBLE AND AT THE SAME TIME VERIFIABLE, SO AS TO DISCHARGE THE INITIAL BURDEN PLACED ON HIM. WHETHER INITIAL ONUS STANDS DISCHARG ED WOULD DEPEND UPON FACTS AND CIRCUMSTANCES OF EACH CASE. 4.5 THE DEGREE OF BURDEN OF PROOF ON THE ASSESSEE WILL VARY FROM ASSESSEE TO ASSESSEE. IN CASE OF PRIVATE LIMITED COMPANIES WHER E SHARES ARE ALLOTTED THROUGH PRIVATE PLACEMENT TO PERSONS GENERALLY KNO WN TO DIRECTORS OR SHAREHOLDERS, DIRECTLY OR INDIRECTLY, BURDEN OF PRO OF IS ON HIGHER PEDESTAL AS COMPARED TO PUBLIC LIMITED COMPANIES WHERE THE LARG E SCALE SUBSCRIPTION ARE OFFERED THROUGH PUBLIC ISSUE AND SHARES ARE SUBSCRI BED BY GENERAL PUBLIC. IN ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 40 CASE OF PRIVATE LIMITED COMPANIES, THE COURTS HAVE LAID DOWN A STRICT APPROACH IN TERMS OF SATISFYING SUCH BURDEN OF PROOF. 4.6 IN CASE OF PRIVATE LIMITED COMPANIES, GENERALLY PER SONS KNOWN TO DIRECTORS OR SHAREHOLDERS, DIRECTLY OR INDIRECTLY B UY OR SUBSCRIBE TO SHARES. UPON RECEIPT OF MONEY, THE SHARE SUBSCRIBERS DO NOT LOSE TOUCH AND BECOME INCOMMUNICADO. CALL MONEY, DIVIDENDS, WARRANTS, ETC . HAVE TO BE SENT AND THE RELATIONSHIP REMAINS A CONTINUING ONE. THEREFORE, A N ASSESSEE CANNOT SIMPLY FURNISH SOME DETAILS AND REMAIN QUIET WHEN SUMMONS ISSUED TO SHAREHOLDERS REMAIN UN-SERVED AND UNCOMPLIED. AS A GENERAL PROPOSITION, IT WOULD BE IMPROPER TO UNIVERSALLY HOLD THAT THE ASSESSEE CANN OT PLEAD THAT THEY HAD RECEIVED MONEY, BUT COULD DO NOTHING MORE AND IT WA S FOR THE ASSESSING OFFICER TO ENFORCE SHAREHOLDERS' ATTENDANCE IN SPIT E OF THE FACT THAT THE SHAREHOLDERS WERE MISSING AND NOT AVAILABLE. THEIR RELUCTANCE AND HIDING MAY REFLECT ON THE GENUINENESS OF THE TRANSACTION AND C REDITWORTHINESS OF THE SHAREHOLDER. IT WOULD BE ALSO INCORRECT TO UNIVERSA LLY STATE THAT AN INSPECTOR MUST BE SENT TO VERIFY THE SHAREHOLDERS/SUBSCRIBERS AT THE AVAILABLE ADDRESSES, THOUGH THIS MIGHT BE REQUIRED IN SOME CASES. SIMILA RLY, IT WOULD BE INCORRECT TO STATE THAT THE ASSESSING OFFICER SHOULD ASCERTAIN A ND GET ADDRESSES FROM THE REGISTRAR OF COMPANIES' WEBSITE OR SEARCH FOR THE A DDRESSES OF SHAREHOLDERS THEMSELVES. 4.7 UNLIKE THE CASE OF PRIVATE LIMITED COMPANIES, IN TH E CASE OF PUBLIC LIMITED COMPANY WHICH HAS GONE FOR A PUBLIC ISSUE A ND GOT SHARE SUBSCRIPTIONS FROM PROSPECTIVE SHAREHOLDERS ACROSS THE LENGTH AND BREADTH OF THE COUNTRY, THE LEGAL REGIME MAY NOT BE THE SAME. IN SUCH CASES , THE COMPANY CONCERNED CANNOT BE EXPECTED TO KNOW EVERY DETAIL PERTAINING TO THE IDENTITY AS WELL AS ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 41 FINANCIAL WORTH OF EACH OF ITS SUBSCRIBERS. THE COM PANY MUST, HOWEVER, MAINTAIN AND MAKE AVAILABLE TO THE ASSESSING OFFICE R FOR HIS PERUSAL, ALL THE INFORMATION CONTAINED IN THE STATUTORY SHARE APPLIC ATION DOCUMENTS, BANK TRANSACTIONS DETAILS AND OTHER RELATED KYC DOCUMENT S SUBMITTED ALONG WITH THE SHARE APPLICATION. 4.8 THE WORD 'IDENTITY' MEANS THE CONDITION OR FACT OF A PERSON OR THING BEING THAT SPECIFIED UNIQUE PERSON OR THING. THE ID ENTIFICATION OF THE PERSON WOULD INCLUDE THE PLACE OF WORK, THE STAFF, THE FAC T THAT IT WAS ACTUALLY CARRYING ON BUSINESS AND RECOGNITION OF THE SAID COMPANY IN THE EYES OF PUBLIC. MERELY PRODUCING CERTIFICATE OF INCORPORATION, PAN NUMBER OR ASSESSMENT PARTICULARS DID NOT ESTABLISH THE IDENTITY OF THE PERSON. PAN N UMBERS ARE ALLOTTED ON THE BASIS OF APPLICATIONS WITHOUT ACTUAL DE FACTO VERIF ICATION OF THE IDENTITY OR ASCERTAINING ACTIVE NATURE OF BUSINESS ACTIVITY. TH E ACTUAL AND TRUE IDENTITY OF THE PERSON OR A COMPANY WAS THE BUSINESS UNDERTAKEN BY THEM. FURTHER, THESE DOCUMENTS HAVE THEIR LIMITATION AND CANNOT BE RELIE D UPON BLINDLY WHEN THERE ARE SURROUNDING CIRCUMSTANCES TO SHOW THAT THE SUBS CRIBER WAS A PAPER COMPANY AND NOT A GENUINE INVESTOR. 4.9 IN RESPECT OF THE GENUINENESS OF THE TRANSACTION AN D CREDITWORTHINESS OF THE SHAREHOLDER, IT WOULD BE INCORRECT TO STATE THA T THE ONUS TO PROVE THE SAME STANDS DISCHARGED IN ALL CASES IF PAYMENT IS MADE T HROUGH BANKING CHANNELS. WHETHER OR NOT ONUS IS DISCHARGED DEPENDS UPON FACT S OF EACH CASE. IT DEPENDS ON WHETHER THE TWO PARTIES ARE RELATED OR KNOWN TO EACH OTHER; THE MANNER OR MODE BY WHICH THE PARTIES APPROACHED EACH OTHER, WH ETHER THE TRANSACTION WAS ENTERED INTO THROUGH WRITTEN DOCUMENTATION AND DUE DILIGENCE TO PROTECT THE INVESTMENT AND THE PAY BACK ON SUCH INVESTMENT, WHETHER THE INVESTOR ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 42 PROFESSES AND WAS AN ANGEL INVESTOR, THE OBJECT AND PURPOSE (PROFIT MOTIVE) BEHIND THE INVESTMENT AND WHETHER ANY DIVIDEND DECL ARED AND DISTRIBUTED IN THE PAST OR NOT. WHETHER SHARE SUBSCRIBERS HAVE TH EIR OWN PROFIT MAKING APPARATUS AND WERE INVOLVED IN ANY TANGIBLE BUSINES S ACTIVITY OR WERE THEY MERELY ROTATED MONEY, WHICH WAS COMING THROUGH THE BANK ACCOUNTS, WHICH MEANS DEPOSITS BY WAY OF CASH AND ISSUE OF CHEQUES. CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION IS THEREFORE NOT PRO VED BY SHOWING MERELY ISSUE AND RECEIPT OF A CHEQUE OR BY FURNISHING A CO PY OF STATEMENT OF BANK ACCOUNT OF SHARE SUBSCRIBER, WHEN CIRCUMSTANCES REQ UIRES THAT THERE SHOULD BE SOME MORE EVIDENCE OF POSITIVE NATURE TO SHOW THAT THE SUBSCRIBERS HAD MADE GENUINE INVESTMENT. 4.10 THE ENTIRE EVIDENCE AVAILABLE ON RECORD HAS TO BE C ONSIDERED AND A REASONABLE APPROACH HAS TO BE ADOPTED. THE FINAL CO NCLUSION MUST BE PRAGMATIC AND PRACTICAL, WHICH TAKES INTO ACCOUNT H OLISTIC VIEW OF THE ENTIRE EVIDENCE INCLUDING THE DIFFICULTIES, WHICH THE ASSE SSEE MAY FACE TO UNIMPEACHABLY ESTABLISH IDENTITY, CREDITWORTHINESS OF THE SHAREHOLDERS AND THE GENUINENESS OF THE TRANSACTION. 4.11 WHERE THE ASSESSEE HAS DISCHARGED THE INITIAL BURDE N PLACED UPON HIM UNDER SEC. 68 TO PROVE AND ESTABLISH THE IDENTITY A ND CREDITWORTHINESS OF THE SHARE APPLICANT AND THE GENUINENESS OF THE TRANSACT ION, THE BURDEN OF PROOF SHIFTS ON THE ASSESSING OFFICER. IN SUCH A CASE, TH E ASSESSING OFFICER CANNOT SIT BACK WITH FOLDED HANDS TILL THE ASSESSEE EXHAUSTS A LL THE EVIDENCE OR MATERIAL IN HIS POSSESSION AND THEN COME FORWARD TO MERELY REJE CT THE SAME, WITHOUT CARRYING OUT ANY VERIFICATION OR ENQUIRY INTO THE M ATERIAL PLACED BEFORE HIM. IF THE ASSESSING OFFICER HARBOURS ANY DOUBTS OF THE LE GITIMACY OF ANY ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 43 SUBSCRIPTION, HE IS EMPOWERED, NAY DUTY-BOUND, TO C ARRY OUT THOROUGH INVESTIGATIONS. BUT IF THE ASSESSING OFFICER FAILS TO UNEARTH ANY WRONG OR ILLEGAL DEALINGS OR HAS NO MATERIAL IN HIS POSSESSION, HE C ANNOT OBDURATELY ADHERE TO HIS SUSPICIONS AND TREAT THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANY. 4.12 THE CASE OF CIT V. ORISSA CORPORATION (P.) LTD. [19 86] 159 ITR 78 /25 TAXMAN 80 (SC) EXEMPLIFIES THE CATEGORY OF CASES WH ERE NO ACTION IS TAKEN BY THE ASSESSING OFFICER TO VERIFY OR CONDUCT AN ENQUI RY INTO THE PARTICULARS ABOUT THE CREDITORS FURNISHED BY THE ASSESSEE, INCLUDING THEIR INCOME-TAX FILE NUMBERS. IN THESE CASES, THE DECISION WAS BASED ON THE FUNDAMENTAL RULE OF LAW THAT EVIDENCE OR MATERIAL ADDUCED BY THE ASSESS EE CANNOT BE THROWN OUT WITHOUT ANY ENQUIRY. THE RATIO DOES NOT EXTEND BEYO ND THAT. THE BOUNDARIES OF THE RATIO CANNOT BE, AND SHOULD NOT BE, WIDENED TO INCLUDE THEREIN CASES WHERE THERE EXISTS MATERIAL TO IMPLICATE THE ASSESS EE IN A COLLUSIVE ARRANGEMENT WITH PERSONS WHO ARE SELF-CONFESSED 'AC COMMODATION ENTRY PROVIDERS'. 5. IN LIGHT OF ABOVE LEGAL PROPOSITION, IF WE WERE TO ANALYSE THE FACTS OF THE PRESENT CASE, THE ASSESSEE COMPANY BEING A PRIVATE LIMITED COMPANY, THE BURDEN OF PROOF IS CLEARLY ON HIGHER PEDESTAL AS CO MPARED TO PUBLIC LIMITED COMPANIES. TOWARDS DISCHARGING THE INITIAL ONUS PLA CED ON IT, THE ASSESSEE COMPANY HAS SUBMITTED COPY OF THE BOARD RESOLUTIONS , SHARE APPLICATION FORMS, PAN, ITR, BALANCE SHEET AND P&L A/C ALONG WI TH RELEVANT SCHEDULES OF THE INVESTEE COMPANIES AND THE FACT THAT THE MONEY HAS BEEN RECEIVED FROM THE NORMAL BANKING CHANNELS. TO VERIFY THE GENUINEN ESS OF SHARE CAPITAL AND SHARE PREMIUM RECEIVED FROM THE SAID INVESTEE COMPA NIES, THE AO ISSUED NOTICES TO THE FOUR INVESTEE COMPANIES UNDER SECTIO N 133(6) TO FURNISH ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 44 INFORMATION ALONGWITH DOCUMENTARY EVIDENCES AND A C OMMISSION U/S 131(1)(D) OF THE INCOME TAX ACT, 1961 WERE ALSO ISSUED TO THE ADDL. DIT(INV.) AT MUMBAI AND KOLKATTA. IN CASE OF OMEGA VINCOM TRADING (P) LTD AND PRANJAL TRADING (P) LTD, BOTH THESE COMPANIES BASED IN MUMBAI, THE COMP ANIES WERE NOT FOUND EXISTING AT THE GIVEN ADDRESS AND SUMMONS COULDNT BE SERVED ON THEM. SIMILARLY, IN CASE OF MELBRIGHT SUPPLIERS (P) LTD, THE COMPANY WAS NOT FOUND EXISTING AT THE LAST PROVIDED ADDRESS IN CALCUTTA, ON FURTHER ENQUIRY, THE LD AR APPEARED AND INFORMED THE DEPARTMENT THAT THE ADDRE SS OF THE COMPANY HAS CHANGED TO MUMBAI AND SUBMITTED CERTAIN DOCUMENTS. FURTHER, PERSONAL ATTENDANCE OF THE DIRECTORS OF THE INVESTEE COMPANI ES WERE CALLED FOR BY THE ASSESSING OFFICER, HOWEVER THEY COULDNT APPEAR BEF ORE THE ASSESSING OFFICER AS THE ASSESSEE SUBMITTED THAT THE NOTICE SERVED TO TH EM WAS TOO SHORT AND AS THEY WERE RESIDING OUT OF JAIPUR, THEY COULDNT ATT END THE HEARING BEFORE THE ASSESSING OFFICER. THE IDENTITY OF THESE INVESTEE COMPANIES THEREFORE CANNOT BE SAID TO HAVE BEEN ESTABLISHED AS THERE ARE SURRO UNDING CIRCUMSTANCES TO SHOW THAT THESE COMPANIES DONOT EXIST AT FIRST PLAC E AND SECONDLY, THERE IS NO PROOF THAT THESE COMPANIES WERE CARRYING OUT ANY BU SINESS ACTIVITY. FURTHER, IN CASE OF GAWARJA MERCHANTS, SOURCE OF THE INVESTMENT IN THE ASSESSEE COMPANY WAS SHARE APPLICATION MONEY RECEIVED BY THE REPLICA TRACOM PVT LTD AND RETURNED INCOME FOR AY 2009-10 WAS SHOWN AS MEAGRE RS 47,129. IN CASE OF MELBRIGHT SUPPLIERS (P) LTD, SOURCE OF THE INVESTME NT IN THE ASSESSEE COMPANY WAS ADVANCE MONEY RECEIVED FROM THE OUTLOOK TRACOM PVT LTD AND SHARE APPLICATION MONEY RECEIVED FROM NANDAN MERCHANTS AN D RETURNED INCOME FOR AY 2009-10 WAS SHOWN AS MEAGRE RS 33,021. IN CASE O F OMEGA VINCOM TRADING (P) LTD, THE PROFIT AS PER PROFIT/LOSS ACCOUNT FOR YEAR ENDED 31 MARCH 2009 HAS BEEN SHOWN AT RS 14,391. AND IN CASE OF PRANJAL TR ADING (P) LTD, THE LOSS AS PER PROFIT/LOSS ACCOUNT FOR YEAR ENDED 31 MARCH 2009 HA S BEEN SHOWN AT RS ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 45 48,398. THESE FACTS AGAIN RAISES A QUESTION MARK O N THE GENUINENESS OF THE TRANSACTION AND THE CREDITWORTHINESS OF ALL THESE C OMPANIES AND AS WE HAVE NOTED ABOVE, IT WOULD BE INCORRECT TO STATE THAT TH E ONUS TO PROVE THE SAME STANDS DISCHARGED IN ALL CASES IF PAYMENT IS MADE T HROUGH BANKING CHANNELS. WHETHER INVESTEE COMPANIES HAVE THEIR OWN PROFIT MA KING APPARATUS AND WERE INVOLVED IN ANY TANGIBLE BUSINESS ACTIVITY OR WERE THEY MERELY ROTATED MONEY, WHICH WAS COMING THROUGH THE BANK ACCOUNTS, WHICH MEANS DEPOSITS BY WAY OF CASH AND ISSUE OF CHEQUES. CREDITWORTHINE SS AND GENUINENESS OF THE TRANSACTION IS THEREFORE NOT PROVED BY SHOWING MERE LY ISSUE AND RECEIPT OF A CHEQUE OR BY FURNISHING A COPY OF STATEMENT OF BANK ACCOUNT OF SHARE SUBSCRIBER, WHEN CIRCUMSTANCES REQUIRES THAT THERE SHOULD BE SOME MORE EVIDENCE OF POSITIVE NATURE TO SHOW THAT THE SUBSCR IBERS HAD MADE GENUINE INVESTMENT. IN THE PRESENT CASE, THE ASSESSING OFF ICER CLEARLY HARBOURS DOUBTS ABOUT THE LEGITIMACY OF SHARE SUBSCRIPTION IN THE A SSESSEE COMPANY AND HAS GONE ABOUT ISSUING NOTICES UNDER SECTION 133(6), SU MMONS UNDER SECTION 131 AND CALLING FOR THE PERSONAL ATTENDANCE OF THE DIRE CTORS OF THE INVESTEE COMPANIES. WHEN THE ASSESSING OFFICER SETS ABOUT S EEKING EXPLANATION FOR THE CREDIT ENTRIES IN THE BOOKS OF ACCOUNT OF THE ASSES SEE IN TERMS OF SECTION 68, IT IS LEGITIMATELY EXPECTED THAT THE EXERCISE WOULD BE TAKEN TO THE LOGICAL END. WHILST IT DOES APPEAR THAT THE TIME GIVEN TO THE AS SESSEE COMPANY FOR PROVING THE IDENTITY AND CREDITWORTHINESS OF THE INVESTEE C OMPANIES WAS TOO SHORT, THE WHOLE EXERCISE STARTED AT THE FAG END OF ASSESSMENT PROCEEDINGS AND FURTHER THAT IT IS PROBABLY NOT ALWAYS POSSIBLE FOR THE ASS ESSEE PLACED IN SUCH SITUATION TO BE ABLE TO ENFORCE THE PHYSICAL ATTENDANCE OF TH E DIRECTORS WHO ARE NOT IN JAIPUR, THE CURTAINS ON SUCH EXERCISE AT VERIFICATI ON MAY NOT BE DRAWN AND ADVERSE INFERENCES REACHED ONLY ON THE BASIS OF RET URNING UNDELIVERED OF THE SUMMONS UNDER SECTION 131. CONVERSELY, WITH DOUBTS AS TO THE IDENTITY, ITA NO.702/JP/14 ACIT CIRCLE-1, JAIPUR VS. BRIGHT METALS PVT. LTD. J AIPUR 46 CREDITWORTHINESS AND GENUINENESS OF TRANSACTION PER SISTING IN THE MINDS OF THE ASSESSING OFFICER, THE INITIAL BURDEN ON THE ASSESS EE CANNOT BE SAID TO BE HAVE BEEN DISCHARGED. WE ACCORDINGLY SET ASIDE THE MATT ER TO THE FILE OF THE AO TO EXAMINE THE MATTER A FRESH TAKING INTO CONSIDERATIO N THE LEGAL PROPOSITION AS DISCUSSED ABOVE. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24/02 /2017. SD/- SD/- (KUL BHARAT ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 24/02/2017 VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ACIT, CIRCLE-1, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- M/S BRIGHT METALS INDIA PVT. LTD. 3. VK;DJ VK;QDR@ CIT I, JAIPUR 4. VK;DJ VK;QDRVIHY@ THE CIT(A)-I, JAIPUR 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 702/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR.
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