Sim Tiam Organizers Pvt.Ltd., Surat V. Income Tax Officer Ward 2(1)(3), Surat

ITA 72/SRT/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6427 (ITAT-SURAT)
• Duration Of Justice: 4 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 28-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGLA
• Assessee Lawyers: MEHUL R SHAH
• Keywords: Unexplained cash credit; Unexplained investment; Income from undisclosed sources; Share purchase agreement; Source of fund; Onus to prove
• Section: 143(3); 142(1); 133A; 133(6); 143(1); 143(2); 264; 13; 22; 131; 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRIPAWAN SINGH, JM &DR. A.L.SAINI, AM ./ITA NO.72/SRT/2017 ( [ [ / ASSESSMENT YEAR: (2012-13) (VIRTUAL COURT HEARING) SIM TIAM ORGANIZERS PVT. LTD., C-2216, RAGHUKUL TEXTILE MARKET, UPPER GROUND, RING ROAD, SURAT - 395002 VS. THE INCOME TAX OFFICER, WARD-2(1)(3), SURAT. ./ ./ PAN/GIR NO.: AAQCS 3975 D (ASSESSEE) (RESPONDENT) ASSESSEE BY :SHRI MEHUL R. SHAH- CA RESPONDENT BY :MS. ANUPAMA SINGLA SR.DR / DATE OF HEARING : 26/07/2021 /DATE OF PRONOUNCEMENT : 04/09/2021 / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: CAPTIONED APPEAL FILED BY THE ASSESSEE PERTAINING TO THE ASSESSMENT YEAR (A.Y.) 2012-13, IS DIRECTED AGAINST THE ORDER PASSED BY THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-2, SURAT DATED 14.06.2017, WHICH IN TURN ARISES OUT OF AN ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER, UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ( HEREINAFTER REFERRED TO AS THE ACT), DATED 30.03.2015. 2. GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS FOLLOWS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN MAKING ADDITION OF RS.63,00,000/- ON ACCOUNT OF CASH CREDIT U/S 68 OF THE I.T. ACT, 1961 FOR SHARE APPLICATION AND PREMIUM FROM DIRECTORS & THEIR CONCERNS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN MAKING ADDITION OF RS 74,25,000/- ON ACCOUNT OF CASH CREDIT U/S 68 OF THE I.T. ACT, 1961 FOR SHARE APPLICATION AND PREMIUM FROM OTHER THAN DIRECTORS & THEIR CONCERNS. PAGE | 2 ITA NO.72/SRT/2017 FOR A.Y. 2012-13 SIM TIAM ORGANIZERS PVT. LTD., 3. THE LEARNED CIT(A) HAS ALSO ERRED IN NOT CONFIRMING THE STAND OF THE ASSESSEE BY TAKING THE VIEW THAT THE PREMIUM AMOUNT OF RS 1,08,60,000/- IS EVEN OTHERWISE TAXABLE FOR ALLEGED VIOLATION OF SEC.78(2) OF THE COMPANIES ACT. 4. IT IS THEREFORE PRAYED THAT THE ABOVE ADDITION MADE BY ASSESSING OFFICER AND CONFIRMED BY LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) MAY PLEASE BE DELETED. 5. ASSESSEE CRAVES LEAVE TO ADD, ALTER OR DELETE ANY GROUND(S) EITHER BEFORE OR IN THE COURSE OF HEARING OF THE APPEAL. 3. BRIEF FACTS QUA THE ISSUE ARE THAT ASSESSEE COMPANY FILED ITS RETURN OF INCOME SHOWING TOTAL INCOME AT RS.52,350/- ON 23.11.2012 WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961. LATER, THE ASSESSEES RETURN OF INCOME FOR THE A.Y. 2012-13 WAS SELECTED FOR SCRUTINY AND ACCORDINGLY NOTICE UNDER SECTION 143(2) OF THE INCOME TAX ACT WAS ISSUED ON 29.09.2013. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY WAS ENGAGED IN DEVELOPING OF REAL ESTATE BUSINESS. THE ASSESSING OFFICER OBSERVED THAT DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAS RECEIVED A SUM OF RS.1,08,60,000/- TOWARDS SHARE PREMIUM AND RS.28,65,000/- SHARE CAPITAL ON ACCOUNT OF ISSUE OF SHARES, THEREFORE, A NOTICE UNDER SECTION 142(1) OF THE INCOME TAX ACT, WAS ISSUED TO THE ASSESSEE ASKING CERTAIN DETAILS ABOUT SHARE APPLICANTS. 4. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE HAS SUBMITTED ITS REPLY, AND HAS FURNISHED THE FOLLOWING DETAILS BEFORE THE ASSESSING OFFICER: WE ARE SUBMITTING HEREWITH THE FOLLOWING DETAILS AND DOCUMENTS. 1. SHRI MANGATRAI GOYAL A. COPY OF VOTER CARD B. COPY OF AADHAR CARD C. COPY OF THE ACKNOWLEDGE OF INCOME TAX RETURN. D. COMPUTATION OF TOTAL INCOME. E. COPY OF BALANCE SHEET FOR THE ASST. YEAR 2012-2013. 2. M/S RADHIKA FASHION PRIVATE LIMITED DETAILS SUBMITTING HEREWITH THE FOLLOWING FOR THE ASST. YEAR 2012- 2013. A. COPY OF THE ACKNOWLEDGE OF INCOME TAX RETURN FILED. B. COMPUTATION OF TOTAL INCOME. C. COPY OF SELF ASST. TAX PAID. D. COPY OF THE AUDIT REPORT. PAGE | 3 ITA NO.72/SRT/2017 FOR A.Y. 2012-13 SIM TIAM ORGANIZERS PVT. LTD., E. COPY OF ACCOUNT CONFIRMATION. F. COPY OF BANK ACCOUNT STATEMENT FOR THE PERIOD FROM 01.04.2011 TO 31.03.2012 FOR FULL YEAR. 3. M/S VIRENDRA AGARWAL HUF A. COPY OF THE ACKNOWLEDGE OF INCOME TEA RETURN FILED FOR THE ASST. YEAR 2012-2013 B. COMPUTATION OF TOTAL INCOME FOR THE YEAR UNDER CONSIDERATION. C. COPY OF TRADING, PROFIT AND LOSS ACCOUNT AND BALANCE SHEET FOR THE ASST. YEAR 2012-2013. D. COPY OF THE CAPITAL ACCOUNT FOR THE ASST. YEAR 2012-20/3. E. COPY OF THE BANK ACCOUNT FOR THE PERIOD FROM 01.04.2011 TO 21.03.2012 AND 01.03.2012 TO 07.08.2012. F. COPY OF THE ACCOUNT CONFIRMATION FOR THE YEAR 2011-2012. G. COPY OF THE VOTER CARD OF KARTA OF HUF AS IDENTITY PROOF AND ADDRESS PROOF. 4. SHRI VIRENDRA KUMAR AGARWAL A. COPY OF THE VOTER CARD AS IDENTITY PROOF AND ADDRESS PROOF. B. COPY OF THE ACKNOWLEDGE OF INCOME TAX RETURN FILED FOR THE ASST. YEAR 2012-2013 C. COMPUTATION OF TOTAL INCOME FOR THE YEAR UNDER CONSIDERATION. D. COPY OF TRADING. PROFIT AND LOSS ACCOUNT AND BALANCE SHEET FOR THE ASST. YEAR 2012-2013. E. COPY OF THE CAPITAL ACCOUNT FOR THE ASST. YEAR 2012-2013. F. COPY OF THE SELF ASST. TAX PAID FOR THE YEAR G. COPY OF THE BANK ACCOUNT FOR THE PERIOD FROM 01.04.2011 TO 14.03.2012 AND 01.01.2012 TO 31.03.2012. H. COPY OF THE ACCOUNT CONFIRMATION FOR THE YEAR. 5. SMT. SUMAN VIRENDRA KUMAR AGARWAL. A. COPY OF THE VOTER CARD AS PROOF OF IDENTITY AND ADDRESS PROOF. B. COPY OF THE ACCOUNT CONFIRMATION FOR THE YEAR UNDER CONSIDERATION. C. COPY OF THE ACKNOWLEDGE OF INCOME TAX RETURN FILED FOR THE ASST. YEAR 2012-2013 D. COMPUTATION OF TOTAL INCOME FOR THE YEAR UNDER CONSIDERATION. E. COPY OF TRADING, PROFIT AND LOSS ACCOUNT AND BALANCE. SHEET FOR THE ASST. YEAR 2012-2013 F. COPY OF THE BANK ACCOUNT FOR THE PERIOD FROM 01.04.20II TO 14.03.2012 AND 01.01.20/2 TO 31.03.2012. 6. SHRI ASHOK KUMAR JAIN A.COPY OF THE VOTER CARD B.COPY OF THE ACKNOWLEDGE OF INCOME TAX RETURN FILED FOR THE ASST. YEAR 2012-2013 C. COPY OF COMPUTATION OF TOTAL INCOME FOR THE YEAR UNDER CONSIDERATION. D.COPY OF PROFIT AND LOSS ACCOUNT AND BALANCE SHEET FOR THE ASST. YEAR 2012-2013 PAGE | 4 ITA NO.72/SRT/2017 FOR A.Y. 2012-13 SIM TIAM ORGANIZERS PVT. LTD., E. COPY OF THE BANK ACCOUNT FOR THE PERIOD FROM 01.04.2011 TO 14 03.2012. HERE WE WOULD LIKE TO STATE THAT SHRI SRINIWASMODA HAS ALREADY FILED THE FOLLOWING DETAILS AT YOUR OFFICE ON DATED 15.12.2014 AND THE SAME IS RECEIVED BY PERSON AT ROOM NO. 215. 1. COPY OF INCOME TAX RETURN ALONG WITH COMPUTATION OF INCOME, CAPITAL ATE AND BALANCE SHEET FOR A.Y. 2011-2012 AND A.Y. 2012- 2013. 2. COPY OF INTIMATION U/S 143(1) OF INCOME TAX ACT 1961 FOR THE ASST. YEAR 2012- 2013 AND A. Y. 2013-2014 IS ENCLOSED HEREWITH. 3.COPY OF BANK STATEMENT /PASS BOOK FOR A. Y. 2013-2013 IS ENCLOSED HEREWITH. 4.COPY OF THE BANK STATEMENT ENCLOSED AS PER POINT NO. 3 ABOVE. THE INVESTMENT IN SHARE CAPITAL WAS MADE OUT OF OWN FUND. WE ARE SUBMITTING HEREWITH THE COW OF VOTER CARD AND FAN CURD OF THE FOLLOWING PERSONS AS A PROOF OF IDENTITY TO PROVE THE GENUINENESS OF THE INVESTORS SR. NO. NAME OF THE INVESTORS SERIAL NUMBER AS PER POINT NO.2 1. KAMALA JAIN W/O SOHANLALJI JAIN 21 2. SUMAN VINODKUMAR JAIN 22 3. VIMALDEVI JAIN 07 4. BAITA JAIN 05 5. KASTURCHAND JAIN 04 6. SURESH KUMAR JAIN 03 7. HUKAMCHAND JAIN 06 8. RAJU JAIN 08 9. RAMA KALA 02 10. SURYAMANI JAIN 20 11. NATHU KALA 19 FURTHER WE WOULD LIKE TO STATE THAT AS PER POINT NO. 2.1 OF YOUR LETTER DATED 20.03.2015 FROM SR. NO. 1 TO 22 WE HAVE SUBMITTED THE BANK STATEMENT EITHER FOR LAST THREE YEARS OR FROM ACCOUNT OPENING DATE AS THE CASE MAY BE. WE WOULD FURTHER LIKE TO STATE THAT WE HAVE SUBMITTED THE CONFIRMATION OF ACCOUNT DULY SIGNED BY THE INVESTING PARTIES AS THESE PARTIES ARE SMALL ASSESSEE THEREFORE THEY DOES NOT MAINTAINED THE ANY BOOKS OF ACCOUNTS. WE WOULD LIKE TO STATE WITH REGARD TO POINT NO.2.2 THAT FROM SR. NO. 1 TO 9, 14 TO 15 AND 17 TO 22 SHOWN NOTICE RECEIVED BACK UNNERVED WITH A REMARK LEFT HAPPENS DUE TO CHANGE OF RESIDENCE ADDRESS AND THE FRESH NOTICE CAN BE SERVED AT NEW ADDRESS. PAGE | 5 ITA NO.72/SRT/2017 FOR A.Y. 2012-13 SIM TIAM ORGANIZERS PVT. LTD., 5. THE ASSESSING OFFICER, HAVING GONE THROUGH THE REPLY OF THE ASSESSEE OBSERVED THAT ASSESSEE HAD RECEIVED A SUM OF RS.28,65,000/- TOWARDS SHARE CAPITAL AND RS.1,08,60,000/- TOWARDS SHARE PREMIUM TOTALLING RS.1,37,25,000/- TOWARDS SHARE CAPITAL FROM 29 PERSONS(INDIVIDUALS) DURING THE YEAR UNDER CONSIDERATION. IN ORDER TO VERIFY THE IDENTITY OF THE INVESTOR, CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTIONS, THE AO ISSUED NOTICES TO THE ASSESSEE TO FURNISH THE DETAILS REGARDING THE INVESTORS BUT ONLY PARTIAL COMPLIANCE WAS MADE. THE ASSESSEE DID NOT FILE CONFIRMATION OF THE INVESTMENTS IN ALL THE 29 CASES. EVEN WHEN THE ASSESSEE FILED THE COPY OF RETURN OF INCOME OR BANK STATEMENT, HE DID NOT FILE OTHER DETAILS LIKE CONFIRMATION, PROOF OF IDENTITY, COPY OF CAPITAL ACCOUNT AND BALANCE SHEET. THE AO ISSUED NOTICES U/S 133(6) OF THE ACT TO THE INVESTORS AT THE ADDRESSES GIVEN BY THE ASSESSEE AND THE NOTICES WERE RECEIVED BACK UNSERVED WITH THE REMARK OF THE POSTAL DEPARTMENT NOT KNOWN/LEFT IN 17 CASES. IN 12 CASES THE NOTICES WERE SERVED BUT NO REPLY WAS RECEIVED. THE ASSESSEE COMPANY`S AUTHORIZED REPRESENTATIVE WAS ASKED TO PRODUCE THE INVESTOR'S ALONGWITH THE BOOKS OF ACCOUNTS AS THEY WERE NOT TRACEABLE AT THE GIVEN ADDRESSES. THE AO HAD PROVIDED OPPORTUNITY VIDE SHOW CAUSE NOTICE DATED 20/03/2015 TO THE ASSESSEE COMPANY FOR PRODUCING THE INVESTORS BUT NO COMPLIANCE WAS MADE. THE AO ON THE ANALYSIS OF THE BANK ACCOUNT FOUND THAT THESE INVESTORS WERE NOT CARRYING OUT ANY ACTUAL BUSINESS ACTIVITY. FURTHER, ON VERIFICATION OF BANK STATEMENT OF ALL ABOVE SHAREHOLDERS, IT WAS NOTICED THAT THE ABOVE SHAREHOLDERS HAVE NO BALANCE OR HAVE MEAGRE BALANCE AT ANY POINT OF TIME. IT WAS NOTICED THAT THE CHEQUE/RTGS/NEFT WERE DEPOSITED FROM VARIOUS BANKS IN THE NAME OF THE ASSESSEE COMPANY. FURTHER, DESPITE HAVING NO WORTH THE ABOVE INVESTORS HAVE INVESTED IN A COMPANY WHICH IS NOT PAYING ANY DIVIDEND OR NEITHER THEY ARE GETTING ANY OTHER BENEFIT. THEREFORE AO HELD THAT THE AMOUNT OF INVESTMENT OF RS.1,37,25,000/- IN FORM OF SHARE CAPITAL/SHARE PREMIUM WAS IN FORM OF CASH CREDIT AND THEREFORE HEMADE ADDITION U/S 68 OF THE ACT. 6. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A) WHO HAS DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. PAGE | 6 ITA NO.72/SRT/2017 FOR A.Y. 2012-13 SIM TIAM ORGANIZERS PVT. LTD., 7. SHRI MEHUL R. SHAH, LEARNED COUNSEL FOR THE ASSESSEE, BEGINS BY POINTING OUT THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE COMPANY, SUBMITTED INTER ALIA THE FOLLOWING DETAILS AND DOCUMENTS TO THE ASSESSING OFFICER: (1). COMPLETE POSTAL ADDRESS, (2). NATURE OF BUSINESS, (3). DETAILS OF BANK ACCOUNTS WITH COPIES OF BANK STATEMENTS, (4). DETAILS OF DIRECTORS, (5). INCOME TAX RETURN ACKNOWLEDGEMENTS OF DIRECTORS, (6). COPY OF INCOME TAX RETURN OF THE COMPANY WITH INCOME TAX RETURNACKNOWLEDGEMENT, (7).STATEMENT SHOWING COMPUTATION OF TOTALINCOME, (8).BALANCE SHEET, PROFIT AND LOSS ACCOUNT OF SHARE APPLICANTS, (9).PAN NUMBER AND VOTER CARD. 8. LEARNED COUNSEL FURTHER ARGUES THAT FROM THE ABOVE DETAILS AND THE PAPER BOOK FILED WHICH WAS ALSO BEFORE THE ASSESSING OFFICER, IT WOULD BE EVIDENT THAT IN CASE OF ALL THE SHARE APPLICANTS THE SHARE APPLICATION FORM AND ALLOTMENT LETTER IS AVAILABLE (II) THE SHARE APPLICANTS ARE INCOME TAX ASSESSEE AND ARE FILING THEIR RETURN OF INCOME (III) THE SHARE APPLICATION WERE MADE OUT OF ACCOUNT PAYEE CHEQUES (IV) THE BANK ACCOUNTS BELONGED TO THE APPLICANTS (V) IN NONE OF THE TRANSACTIONS THE AO HAS FOUND DEPOSIT OF CASH BEFORE ISSUE OF CHEQUES TO THE ASSESSEE COMPANY (VI) THE APPLICANTS ARE HAVING SUBSTANTIAL CREDITWORTHINESS WHICH IS REPRESENTED BY THE FREE RESERVES AND CAPITAL. THEREFORE, LD COUNSEL STATED THAT BY SUBMITTING THESE PLETHORA DOCUMENTS, THE ASSESSEE COMPANY HAS PROVED THREE INGREDIENTS OF SECTION 68, NAMELY, IDENTITY, CREDITWORTHINESS AND GENUINENESS, HENCE ADDITION MADE BY THE ASSESSING OFFICER MAY BE DELETED. 9. THE LD. DR FOR THE REVENUE,MS.ANUPAMA SINGLA, SUBMITTED BEFORE THE BENCH THAT ASSESSEE HAS FAILED TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE SHARE CAPITAL AND SHARE PREMIUM RECEIVED FROM VARIOUS ENTITIES. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE ONLY SUBMITTED THE BOOKS OF ACCOUNTS, DOCUMENTS AND SOME DETAILS BEFORE THE ASSESSING OFFICER, BUT DID NOT APPEAR IN PERSON, IN RESPONSE TO THE SUMMONS U/S 131 OF THE ACT. THE DIRECTOR OF THE ASSESSEE COMPANY SHOULD HAVE APPEARED BEFORE THE ASSESSING OFFICER TO EXPLAIN THE DOCUMENTS AND DETAILS SUBMITTED BEFORE HIM. THE ASSESSEE, DURING THE ASSESSMENT PROCEEDINGS WAS JUST DUMPING PAPERS AND DOCUMENTS ON THE TABLE OF PAGE | 7 ITA NO.72/SRT/2017 FOR A.Y. 2012-13 SIM TIAM ORGANIZERS PVT. LTD., THE ASSESSING OFFICER AND THIS DOES NOT MEAN THAT THE ASSESSEE IS MAKING COMPLIANCE. IF THE BOOKS OF ACCOUNTS, DOCUMENTS AND PAPERS ARE NOT EXPLAINED BY THE ASSESSEE, THEN ASSESSING OFFICER WOULD NOT ABLE TO DO COMPLETE EXAMINATION OF THE THREE INGREDIENTS OF THE SECTION 68 NAMELY: IDENTITY, CREDITWORTHINESS AND GENUINENESS. THEREFORE, ASSESSING OFFICER WAS RIGHT IN MAKING THE DISALLOWANCE U/S 68 OF THE ACT. APART FROM THIS, THE ASSESSEE HAS INTRODUCED HIS UNACCOUNTED MONEY BY WAY OF ISSUING SHARES AT A HIGHER PREMIUM. THE ASSESSEE COMPANY DOES NOT HAVE MUCH TRACK RECORD AND GOODWILL THEREFORE IT IS NOT ABLE TO FETCH SO MUCH PREMIUM, THEREFORE, IT IS NOTHING BUT TO INTRODUCE INTO THE SYSTEM, THE UNACCOUNTED MONEY OF THE ASSESSEE COMPANY. THEREFORE, LD DR PRAYS THE BENCH THAT FINDINGS OF THE ASSESSING OFFICER SHOULD BE UPHELD. 10. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE SUBMISSION PUT FORTH ON BEHALF OF THE ASSESSEE ALONG WITH THE DOCUMENTS FURNISHED AND THE CASE LAWS RELIED UPON, AND PERUSED THE FACT OF THE CASE INCLUDING THE FINDINGS OF THE LD CIT(A) AND OTHER MATERIALS BROUGHT ON RECORD. THE ASSESSING OFFICER, DURING THE ASSESSMENT PROCEEDINGS NOTICED THAT ASSESSEE COMPANY HAS RAISED SHARE CAPITAL OF RS.28,65,000/- AT THE PREMIUM OF RS.1,08,60,000/- BY ISSUING SHARES TO TWENTY NINE PERSONS/CONCERNS. THE ASSESSING OFFICER ASKED THE ASSESSEE TO CLARIFY VARIOUS DETAILS RELATING TO THE INVESTORS OF THE COMPANY AND SUBMIT DOCUMENTS RELATING TO IT. IN RESPONSE TO THIS, ASSESSEE FILED AN EXPLANATION ON 24.03.2015 AND DULY EXPLAINED THE POINTS RAISED BY THE ASSESSING OFFICER. WE NOTE THAT ASSESSEE FILED THE FOLLOWING DOCUMENTS IN RELATION TO SHARE CAPITAL AND PREMIUM: (A) COMPUTATION OF INCOME, ACKNOWLEDGEMENT OF RETURN OF INCOME, PROFIT AND LOSS ACCOUNT, CAPITAL ACCOUNT, BALANCE SHEET OF A.Y. 2010-11 TO 2012-13. (B) BANK STATEMENT OF THE INVESTORS OF A.Y. 2010-11 TO A.Y. 2012-13. (C) COPY OF MINUTES BOOK, (D)COPY OF SHARE APPLICATION FORMS FOR SHARES, (E) COPY OF ATTENDANCE REGISTER OF AGM, (F) COPY OF SHARE CERTIFICATES. (G) PAN NUMBER, VOTER ID AND ADAR CARD, (H) ROC DETAILS PAGE | 8 ITA NO.72/SRT/2017 FOR A.Y. 2012-13 SIM TIAM ORGANIZERS PVT. LTD., WE NOTE THAT DURING THE ASSESSMENT PROCEEDINGS, ASSESSING OFFICER OBSERVED THAT NOTICES U/S 131 WERE ISSUED TO ALL THE INVESTORS AND THEY WERE NOT SERVED. TO THIS, ASSESSEE REPLIED THAT IN SOME OF THE CASES NOTICES WERE SERVED AND IN SOME OF THE CASES THEY WERE NOT RECEIVED. HOWEVER, THIS HAPPENED DUE TO CHANGE OF ADDRESS IN MOST OF THE CASES AND ASSESSEE FURTHER REQUESTED THE ASSESSING OFFICER TO UPDATE THE ADDRESS OF THOSE INVESTORS TO WHOM NOTICE U/S133(6) AND SUMMONS U/S 131 COULD NOT BE SERVED. IN THE MEANWHILE, ASSESSING OFFICER ISSUED A SHOW CAUSE NOTICE DATED 20.03.2015 ASKING AS TO WHY THE CREDIT OF RS.1,37,25,000/- SHOULD NOT BE TREATED AS UNEXPLAINED CASH CREDIT AND ADDED TO THE TOTED INCOME OF THE ASSESSEE THE SHOW CAUSE NOTICE IS REPRODUCED AT PARA NO. 6 [ PAGE4-14 ] OF THE ASSESSMENT ORDER. IN RESPONSE TO THIS, ASSESSES FILED A REPLY VIDE LETTER 25.03.2015. HOWEVER ASSESSING OFFICER FAILED TO CONSIDER THIS REPLY. ASSESSEE ALSO FILED VARIOUS DETAILS RELATING TO 6 INVESTORS VIDE ANOTHER LETTER DATED 25.03.2015 WHOSE DETAILS WERE REMAINING TOBE SUBMITTED DURING THE PREVIOUS REPLY. ASSESSEE ALSO FLED IDENTITY PROOFS OF 11 INVESTORS TO PROVE THEIR GENUINENESS. THIS REPLY IS REPRODUCED AT PARA NO. 7 [ PAGE 14 & 15 ] OF THE OF THE ASSESSMENT ORDER. HOWEVER, ASSESSING OFFICER WAS NOT SATISFIED WITH THE REPLY OF THE ASSESSEE AND AS PER HIS OBSERVATIONS AT PARA NO 8 & 9 [ PAGE 16 TO 32 ], HE MADE AN ADDITION ON ACCOUNT OF SHARE CAPITAL AND SHORE PREMIUM OF RS.1,37,25,000/- U/S 68 OF THE I.T.ACT. 11.THE LD COUNSEL SUBMITS BEFORE US THAT EVEN AS PER THE ASSESSING OFFICER, THE SOURCE OF INVESTMENT IN THE ASSESSEE COMPANY IS MONEY RECEIVED THROUGH CHEQUES DEPOSITED ON ACCOUNT OF REPAYMENT OF LOAN FROM BANK ACCOUNT OF M/S. BADE BABA TRADING COMPANY. IN CASE OF M/SBADE BABA TRADING COMPANY PVT LTD., NO CASH HAS BEEN DEPOSITED AND THEY HAVE REPAID THE LOAN THROUGH BANKING CHANNELS OUT OF THEIR GENUINE SOURCE. THE FACT THAT IN SOME INSTANCES, THE CASH WAS DEPOSITED IN THE SAVING BANK ACCOUNT OF PARTIES PRIOR TO ADVANCE OF LOAN TO M/S BADE BABA TRADING COMPANY PVT. LTD. AND THEREAFTER THE LOAN WAS REPAID BY M/S BADE BABA TRADING COMPANY PVT. LTD., TO THE PARTIES THROUGH ACCOUNT PAYEE CHEQUE, THE ASSESSEE-COMPANY NOWHERE INVOLVES IN THE SAID TRANSACTIONS. PAGE | 9 ITA NO.72/SRT/2017 FOR A.Y. 2012-13 SIM TIAM ORGANIZERS PVT. LTD., THE ASSESSING OFFICER HAS WITHOUT PREJUDICE TO ADDITION OF RS.1,37,25,000/- ALSO HELD THAT EVEN OTHERWISE THE PREMIUM OF RS.1,08,60,000/- WAS TAXABLE, AS ASSESSEE VIOLATED THE PROVISIONS OF SECTION 78(2) OF COMPANIES ACT READ WITH DECISION OF HON'BLE APEX COURT ORDER IN CASE OF BHARAT FIRE INSURANCE CO. VS. CIT 34 COS 683 (1964). THE LD COUNSEL CONTENDED BEFORE US THAT ASSESSEE HAS NOT WRITTEN-OFF THE SHARE PREMIUM ACCOUNT AND THE SAME IS OUTSTANDING IN THE AUDITED FINANCIALS OF THE ASSESSEE COMPANY AS ON 31.03.2012, THEREFORE, THE STAND TAKEN BY THE ASSESSING OFFICER IS WITHOUT ANY BASE. 12. WE HAVE OBSERVED THAT: (A)ALL THE SHARE APPLICATION MONIES HAVE BEEN RECEIVED THROUGH PROPER BANKING CHANNEL AND THERE IS NO EVIDENCE THAT ASSESSEE HAS PAID ANY MONEY IN CASH TO THE INVESTORS IN CONSIDERATION OF CHEQUE RECEIVED FROM THE INVESTORS, (B).THE IDENTITY OF ALL THE INVESTORS GETS ESTABLISHED AS ALL THE INVESTORS ARE REGULARLY ASSESSED TO TAX. THE RECEIPT OF SHARE APPLICATION MONEY FROM ALL THE INVESTORS ARE THROUGH ACCOUNT PAYEE CHEQUES WHICH PROVES THE GENUINENESS OF TRANSACTIONS. (C) EVEN OTHERWISE, VARIOUS COURTS HAVE RULED THAT ONCE THE IDENTITY OF THE SHARE APPLICANT IS PROVED, NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE COMPANY EVEN IF THE SHARE APPLICANTS HAVE BEEN FOUND PERSON OF NO MEANS UNTIL AND UNLESS OTHERWISE, IT IS PROVED BY THE REVENUE THAT THERE ARE SOME COLLUSIVE TRANSACTIONS BETWEEN THE ASSESSEE AND THE SHARE APPLICANTS. BUT IN THIS CASE, THE BANK STATEMENT OF ALL THE INVESTORS ARE ALSO FILED IN THE PAPER BOOK WHICH PROVES THE SOURCE AND CREDITWORTHINESS OF SHARE APPLICANTS.IN CASE OF SOME OF THE INVESTORS, THE INVESTORS HAVE GIVEN THE SUM TO ASSESSEE AGAINST LOANS AND ADVANCES RECOVERED FROM SHREE BADE BABA TRADING CO. PRIVATE LIMITED GIVEN IN EARLIER YEARS, THEREFORE, THE ASSESSEE HAS ALSO GIVEN AN EXPLANATION TO PROVE THE SOURCE OF SOURCE, (D) THE HONOURABLE SUPREME COURT IN CASE OF LOVELY EXPORTS (P) LTD. [216 CTR 195] HAS HELD THAT 'IF SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE ASSESSING OFFICER, THEN DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW, BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF ASSESSEE-COMPANY. PAGE | 10 ITA NO.72/SRT/2017 FOR A.Y. 2012-13 SIM TIAM ORGANIZERS PVT. LTD., 13. IN SO FAR ADDITION OF RS.63,00,000/- ON ACCOUNT OF CASH CREDIT U/S 68 OF THE I.T.ACT, 1961 ( FOR SHARE APPLICATION AND PREMIUM FROM DIRECTORS AND THEIR CONCERNS ), IS CONCERNED, THE LD COUNSEL SUBMITS THAT ASSESSEE COMPANY HAS TAKEN RS.30,00,000/- FROM SHRI MANGATRAI GOYAL, RS.7,50,000/- FROM SHRI VIRENDRA KUMAR AGARWAL AND RS.50,000/- FROM ASHOK KUMAR JAIN. ALL THESE PERSONS ARE FIRST DIRECTORS OF THE COMPANY NAMED IN THE ARTICLES OF ASSOCIATION(AOA) OF THE COMPANY. THE ASSESSEE HAS ALREADY FILED ALL THE DETAILS TO PROVE THE IDENTITY, GENUINENESS OF THE TRANSACTIONS AND CREDITWORTHINESS OF THESE DIRECTORS AND PROMOTERS VIDE LETTER DATED 25/03/2015 WHICH IS FILED IN THE PAPER BOOK AND ALSO REPRODUCED IN PARA NO. 7 OF THE ASSESSMENT ORDER, BUT NO COGNIZANCE OF THE SAID, SUBMISSION WAS GIVEN IN THE ASSESSMENT ORDER. THE ASSESSEE FILED THE ACKNOWLEDGEMENT OF RETURN OF INCOME, COMPUTATION OF INCOME, BALANCE SHEET, BANK STATEMENT ETC. OF ALL THE DIRECTORS AND PROMOTERS OF THE COMPANY AND ON PERUSAL OF THE SAME, IT CAN BE SEEN THAT THESE PROMOTERS AND FIRST DIRECTORS ARE ASSESSED TO TAX AND THE INVESTMENT IS APPEARING IN THE ASSET SIDE OF THE BALANCE SHEET. AS REGARDS CREDITWORTHINESS, SHRI MANGATRM GNYAT HAS A CAPITAL OF RS.83,85,180/- AGAINST INVESTMENT OF RS.30,00,000/-. SIMILARLY SHRI VIRENDRA KUMAR AGARWAL HAS A CAPITAL OF RS.22,07,604/- AGAINST INVESTMENT OF RS. 7,50,000/- AND ASHOK KUMAR JAIN HAS A CAPITAL OF RS.40,61,986/- AGAINST INVESTMENT OF RS.50,000/-. ON PERUSAL OF THE BANK STATEMENT, IT CAN BE OBSERVED THAT THERE ARE NO CASH DEPOSITS OF EXACT AMOUNT NOR THERE IS ANY FINDING BY AO THAT THE ASSESSEE COMPANY HAS PAID ANY AMOUNT IN CASH IN LIEU OF CHEQUE. ALLTHESE PERSONS ARE MAN OF MEANS WHO HAVE GOT TOGETHER FOR A NEW VENTURE IN THE NAME OF THE ASSESSEE COMPANY. IN FACT, IN CASE OF MANGATRAI GOYAL THERE WAS A SURVEY OPERATION U/S 133A ON 31.03.2002, WHEREIN THE GROUP MADE A TOTAL DISCLOSURE OF RS.1,41,85,715/ OUT OF WHICH RS.40,87,715/- WAS MADE IN THE HANDS OF MANGATRUI GOYAL (HUF) (PROP, OF SUNITA FASHION). AS STATED ABOVE ALL THE PROMOTERS-CUM- DIRECTORS ARE REGULARLY ASSESSED TO TAX AND THE RETURN OF INCOME ALONG WITH, THE COMPUTATION OF INCOME OF SUBSEQUENT, YEARS ARE ALSO FILED. IN FACT OUT OF RS.38,00,000/ , SHARE CAPITAL OF RS. 1,50,000/- IS THE SUBSCRIBERS CAPITAL ISSUED AT FACE VALUE OF RS.10/- WITHOUT ANY PREMIUM AT THE TIME OF FORMATION OF THE PAGE | 11 ITA NO.72/SRT/2017 FOR A.Y. 2012-13 SIM TIAM ORGANIZERS PVT. LTD., COMPANY BY THE PROMOTERS. IN ANY WAY, THE TOTAL AMOUNT OF RS.38,00,000/- HAS BEEN RAISED AS SHARE CAPITAL, EVEN BEFORE ANY COMMERCIAL ACTIVITIES HAS STARTED FOR THE COMPANY AND THEREFORE, LD COUNSEL SUBMITTED THAT THERE IS NO MANNER IN WHICH THE ASSESSEE COMPANY COULD HAVE EARNED UNACCOUNTED INCOME AND HENCE THE SAID ADDITION SHOULD BE DELETED.IT IS FURTHER SUBMITTED BY LD COUNSEL THAT RS.17,00,000/- IS RECEIVED FROM RADHIKA FASHIONS PVT LID, WHICH IS A COMPANY MANAGED, AND CONTROLLED BY VIRENDRA AGARWAL, WHO IS THE DIRECTOR AND PROMOTER OF THE ASSESSEE COMPANY FOR THE YEAR UNDER CONSIDERATION. IN THE SIMILAR WAY, RS.4,00,000/- IS RECEIVED FROM VIRENDRA AGARWAL (HUF) AND RS.4,00,000/- FROM SUMAN AGARWAL, WHO IS WIFE OF VIRENDRA AGARWAL. THE BANK STATEMENTS AND FINANCIAL OF ALL THESE, CONCERNS IS ALSO FILED IN THE PAPER BOOK, WHICH PROVES THE SOURCE OF SHARE APPLICATION MONEY BEING THE OWN FUNDS OF THE DIRECTOR AND THEIR CONCERNS. MORE SO, WHEN THESE ABOVE CONCERNS DO NOT HAVE ANY CONNECTION WITH SHREE BADE BABA TRADING COMPANY PRIVATE LIMITED WHICH COULD BE CURLED OUT FROM TABLE MENTIONED AT PAGE NO. 11 OF THE ASSESSMENT ORDER AND HENCE LD COUNSEL PRAYS THAT NO ADVERSE VIEW SHOULD BE TAKEN AGAINST THE ASSESSEE COMPANY. 14. LEARNED COUNSEL CONTENDS THAT SO FAR ADDITION OF RS.74,25,000/- ON ACCOUNT OF CASH CREDIT U/S 68 OF THE I.T.ACT, 1961 ( FOR SHARE APPLICATION AND PREMIUM FROM OTHER THAN DIRECTORS AND THEIR CONCERNS ), IS CONCERNED, THE ASSESSEE COMPANY HAS RECEIVED RS.74,25,000/- FROM 23 PARTIES FROM PERSONS OTHER THAN DIRECTORS AND ALL THE PERSONS WERE HAVING VALID SOURCES TO INVEST IN THE ASSESSEE COMPANY. THE ASSESSEE COMPANY HAD ALSO PROVIDED LATEST ADDRESS OF ALL THE INVESTORS AT THE TIME OF ASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER HAS HIMSELF TRACED THE SOURCES OF INVESTMENT IN THE ASSESSEE COMPANY AND STATED, THAT IN CASE OF SOME OF THE INVESTORS, THEY HAVE INVESTED IN ASSESSEE COMPANY OUT OF THE REPAYMENT RECEIVED OF LOAN EARLIER ADVANCED TO SHREE BADE BABA TRADING CO. PRIVATE LIMITED. EVEN IF IT IS TO BE BELIEVED THAT THE INVESTORS WHILE GIVING LOAN TO SHREE BADE BABA TRADING CO. PRIVATE LIMITED WOULD HAVE DEPOSITED CASH AND GIVEN THEN LOAN TO SHREE BADE BABA TRADING CO. PRIVATE LIMITED, NO ADVERSE VIEW IS CALLED FOR IN CASE OF ASSESSEE COMPANY AS IT NOWHERE PROVES THAT THIS IS AN UNACCOUNTED INCOME OF THE ASSESSEE COMPANY. PAGE | 12 ITA NO.72/SRT/2017 FOR A.Y. 2012-13 SIM TIAM ORGANIZERS PVT. LTD., 15. THE LD. COUNSEL EXPLAINED THE BENCH THAT THE DETAILS OF PAN, IT ACKNOWLEDGMENT, PROFESSIONAL TAX ENROLMENT CERTIFICATES ETC. AND THE FORM 18 FURNISHED BY THE SHARE APPLICANTS WITH THE ROC DULY PROVED THE IDENTITY OF THE SHARE SUBSCRIBERS. THE LD. COUNSEL THEREAFTER INVITED OUR ATTENTION TO THE RESPECTIVE BALANCE SHEETS OF THE SHARE APPLICANTS TO SHOW THAT EACH OF THEM HAD SUFFICIENT FUNDS AVAILABLE AT THEIR DISPOSAL TO MAKE INVESTMENT IN THE ASSESSEE COMPANY. REFERRING TO THE RESPECTIVE BANK STATEMENTS, IT WAS FURTHER POINTED OUT THAT THE TRANSACTIONS WERE CONDUCTED THROUGH PROPER BANKING CHANNEL AND THAT THERE WERE NO CASH DEPOSITS IN ANY OF THE BANK ACCOUNT OF THE SHARE APPLICANTS. HE ALSO INVITED OUR ATTENTION TO THE EXPLANATION FURNISHED BY EACH OF THE SHARE APPLICANTS REGARDING THEIR SOURCE OF FUNDS. IT WAS THUS SUBMITTED THAT THE FUND FLOW POSITION OF THE SHARE APPLICANTS, AND NOT THE PROFITABILITY, WAS THE DECISIVE CRITERIA TO EXAMINE THE CREDITWORTHINESS OF THE SHARE APPLICANTS. BEFORE WE ADJUDICATE AS TO WHETHER THE LD. CIT(A)S ACTION IS RIGHT OR ERRONEOUS, LET US LOOK AT SECTION 68 OF THE ACT AND THE JUDICIAL PRECEDENTS ON THE ISSUE AT HAND. SECTION 68 UNDER WHICH, THE ADDITION HAS BEEN MADE BY THE AO READS AS UNDER: '68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR.' THE PHRASEOLOGY OF SECTION 68 IS CLEAR. THE LEGISLATURE HAS LAID DOWN THAT IN THE ABSENCE OF A SATISFACTORY EXPLANATION, THE UNEXPLAINED CASH CREDIT MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. IN THIS CASE THE LEGISLATIVE MANDATE IS NOT IN TERMS OF THE WORDS SHALL BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR'. THE SUPREME COURT WHILE INTERPRETING SIMILAR PHRASEOLOGY USED IN SECTION 69 HAS HELD THAT IN CREATING THE LEGAL FICTION THE PHRASEOLOGY EMPLOYS THE WORD ' MAY ' AND NOT ' SHALL '. THUS, THE UN-SATISFACTORINESS OF THE EXPLANATION DOES NOT AND NEED NOT AUTOMATICALLY RESULT IN DEEMING THE AMOUNT CREDITED IN THE BOOKS AS THE INCOME OF THE ASSESSEE AS ALSO HELD PAGE | 13 ITA NO.72/SRT/2017 FOR A.Y. 2012-13 SIM TIAM ORGANIZERS PVT. LTD., BY THE SUPREME COURT IN THE CASE OF CIT V. SMT. P. K. NOORJAHAN [1999] 237 ITR 570. 16. THE MAIN PLANK ON WHICH THE AO MADE THE ADDITION WAS BECAUSE THE DIRECTORS OF THE SHARE SUBSCRIBERS DID NOT TURN UP BEFORE HIM. FROM THE NOTICES ISSUED U/S 131, IT IS NOTED THAT EACH OF THE SHARE SUBSCRIBING COMPANY WAS REQUIRED TO FURNISH THE FOLLOWING DETAILS FOR EXAMINATION: - CORRESPONDENCE MADE FOR APPLICATION OF SHARES - COPY OF BALANCE SHEET, PROFIT & LOSS A/C, IT ACK FOR FY 2011-12 - COPY OF BANK STATEMENTS EVIDENCING TRANSACTION WITH ASSESSEE - SOURCE OF FUNDS FOR MAKING INVESTMENTS IN THE ASSESSEE COMPANY - ROC DETAILS AND RELEVANT STATEMENT. - COPY OF RESOLUTION PASSED BY THE BOARD AUTHORIZING INVESTMENT IN SHARES OF ASSESSEE - REASONS FOR MAKING PAYMENT OF PREMIUM. IT IS NOTED THAT ALL THE ABOVE REQUISITIONED DOCUMENTS WERE FURNISHED BEFORE THE AO WHICH SUBSTANTIATED THE TRANSACTION BETWEEN THE ASSESSEE COMPANY AND THE SHARE APPLICANTS. IT IS THEREFORE NOT A CASE WHERE THE DOCUMENTS SOUGHT FROM THE APPLICANTS TO EXAMINE THE TRANSACTION WERE NOT AVAILABLE BEFORE THE AO. AS REGARDS THE ISSUE OF NON-APPEARANCE OF THE SHARE APPLICANTS, WE NOTE THAT IN SUCH A CASE THE HON'BLE APEX COURT IN THE CASE OF ORISSA CORPN. (P) LTD. (SUPRA) 159 ITR 78 AND THE HON'BLE GUJARAT HIGH COURT, IN THE CASE OF DY. CIT V. ROHINI BUILDERS [2002] 256 ITR 360 [2003] 127 TAXMAN 523, HAS HELD THAT ONUS OF THE ASSESSEE (IN WHOSE BOOKS OF ACCOUNT CREDIT APPEARS) STANDS FULLY DISCHARGED IF THE IDENTITY OF THE CREDITOR IS ESTABLISHED AND ACTUAL RECEIPT OF MONEY FROM SUCH CREDITOR IS PROVED. IN CASE, THE ASSESSING OFFICER IS DISSATISFIED ABOUT THE SOURCE OF CASH DEPOSITED IN THE BANK ACCOUNTS OF THE CREDITORS, THE PROPER COURSE WOULD BE TO ASSESS SUCH CREDIT IN THE HANDS OF THE CREDITOR ( AFTER MAKING DUE ENQUIRIES FROM SUCH CREDITOR ). IN ARRIVING AT THIS CONCLUSION, THE HON'BLE COURT HAS FURTHER STRESSED THE PRESENCE OF WORD ' MAY ' IN SECTION 68. RELEVANT OBSERVATIONS AT PAGES 369 AND 370 OF THIS REPORT ARE REPRODUCED HEREUNDER:- PAGE | 14 ITA NO.72/SRT/2017 FOR A.Y. 2012-13 SIM TIAM ORGANIZERS PVT. LTD., 'MERELY BECAUSE SUMMONS ISSUED TO SOME OF THE CREDITORS COULD NOT BE SERVED OR THEY FAILED TO ATTEND BEFORE THE ASSESSING OFFICER, CANNOT BE A GROUND TO TREAT THE LOANS TAKEN BY THE ASSESSEE FROM THOSE CREDITORS AS NON- GENUINE IN VIEW OF THE PRINCIPLES LAID DOWN BY THE SUPREME COURT IN THE CASE OF ORISSA CORPORATION [1986] 159 ITR 78. IN THE SAID DECISION THE SUPREME COURT HAS OBSERVED THAT WHEN THE ASSESSEE FURNISHES NAMES AND ADDRESSES OF THE ALLEGED CREDITORS AND THE GIR NUMBERS, THE BURDEN SHIFTS TO THE DEPARTMENT TO ESTABLISH THE REVENUE'S CASE AND IN ORDER TO SUSTAIN THE ADDITION THE REVENUE HAS TO PURSUE THE ENQUIRY AND TO ESTABLISH THE LACK OF CREDITWORTHINESS AND MERE NON-COMPLIANCE OF SUMMONS ISSUED BY THE ASSESSING OFFICER UNDER SECTION 131, BY THE ALLEGED CREDITORS WILL NOT BE SUFFICIENT TO DRAW AND ADVERSE INFERENCE AGAINST THE ASSESSEE. IN THE CASE OF SIX CREDITORS WHO APPEARED BEFORE THE ASSESSING OFFICER AND WHOSE STATEMENTS WERE RECORDED BY THE ASSESSING OFFICER, THEY HAVE ADMITTED HAVING ADVANCED LOANS TO THE ASSESSEE BY ACCOUNT PAYEE CHEQUES AND IN CASE THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE CASH AMOUNT DEPOSITED BY THOSE CREDITORS IN THEIR BANK ACCOUNTS, THE PROPER COURSE WOULD HAVE BEEN TO MAKE ASSESSMENTS IN THE CASES OF THOSE CREDITORS BY' TREATING THE CASH DEPOSITS IN THEIR BANK ACCOUNTS AS UNEXPLAINED INVESTMENTS OF THOSE CREDITORS UNDER SECTION 69. 17. IN THE CASE OF NEMI CHAND KOTHARI 136 TAXMAN 213, (SUPRA), THE HON'BLE GUAHATI HIGH COURT HAS THROWN LIGHT ON ANOTHER ASPECT TOUCHING THE ISSUE OF ONUS ON ASSESSEE UNDER SECTION 68, BY HOLDING THAT THE SAME SHOULD BE DECIDED BY TAKING INTO CONSIDERATION THE PROVISION OF SECTION 106 OF THE EVIDENCE ACT WHICH SAYS THAT A PERSON CAN BE REQUIRED TO PROVE ONLY SUCH FACTS WHICH ARE IN HIS KNOWLEDGE. THE HON'BLE COURT IN THE SAID CASE HELD THAT, ONCE IT IS FOUND THAT AN ASSESSEE HAS ACTUALLY TAKEN MONEY FROM DEPOSITOR/LENDER WHO HAS BEEN FULLY IDENTIFIED, THE ASSESSEE/BORROWER CANNOT BE CALLED UPON TO EXPLAIN, MUCH LESS PROVE THE AFFAIRS OF SUCH THIRD PARTY, WHICH HE IS NOT EVEN SUPPOSED TO KNOW OR ABOUT WHICH HE CANNOT BE HELD TO BE ACCREDITED WITH ANY KNOWLEDGE. IN THIS VIEW, THE HON'BLE COURT HAS LAID DOWN THAT SECTION 68 OF INCOME-TAX ACT, SHOULD BE READ ALONG WITH SECTION 106 OF EVIDENCE ACT. THE RELEVANT OBSERVATIONS AT PAGE 260 TO 262, 264 AND 265 OF THE REPORT ARE REPRODUCED HEREIN BELOW:- 'WHILE INTERPRETING THE MEANING AND SCOPE OF SECTION 68, ONE HAS TO BEAR IN MIND THAT NORMALLY, INTERPRETATION OF A STATUTE SHALL BE GENERAL, IN NATURE, SUBJECT ONLY TO SUCH EXCEPTIONS AS MAY BE LOGICALLY PERMITTED BY THE STATUTE ITSELF OR BY SOME OTHER PAGE | 15 ITA NO.72/SRT/2017 FOR A.Y. 2012-13 SIM TIAM ORGANIZERS PVT. LTD., LAW CONNECTED THEREWITH OR RELEVANT THERETO. KEEPING IN VIEW THESE FUNDAMENTALS OF INTERPRETATION OF STATUTES, WHEN WE READ CAREFULLY THE PROVISIONS OF SECTION 68, WE NOTICE NOTHING IN SECTION 68 TO SHOW THAT THE SCOPE OF THE INQUIRY UNDER SECTION 68 BY THE REVENUE DEPARTMENT SHALL REMAIN CONFINED TO THE TRANSACTIONS, WHICH HAVE TAKEN PLACE BETWEEN THE ASSESSEE AND THE CREDITOR NOR DOES THE WORDING OF SECTION 68 INDICATE THAT SECTION 68 DOES NOT AUTHORIZE THE REVENUE DEPARTMENT TO MAKE INQUIRY INTO THE SOURCE(S) OF THE CREDIT AND/OR SUB-CREDITOR. THE LANGUAGE EMPLOYED BY SECTION 68 CANNOT BE READ TO IMPOSE SUCH LIMITATIONS ON THE POWERS OF THE ASSESSING OFFICER. THE LOGICAL CONCLUSION, THEREFORE, HAS TO BE, AND WE HOLD THAT AN INQUIRY UNDER SECTION 68 NEED NOT NECESSARILY BE KEPT CONFINED BY THE ASSESSING OFFICER WITHIN THE TRANSACTIONS, WHICH TOOK PLACE BETWEEN THE ASSESSEE AND HIS CREDITOR, BUT THAT THE SAME MAY BE EXTENDED TO THE TRANSACTIONS, WHICH HAVE TAKEN PLACE BETWEEN THE CREDITOR AND HIS SUB-CREDITOR. THUS, WHILE THE ASSESSING OFFICER IS UNDER SECTION 68, FREE TO LOOK INTO THE SOURCE(S) OF THE CREDITOR AND/OR OF THE SUB-CREDITOR, THE BURDEN ON THE ASSESSEE UNDER SECTION 68 IS DEFINITELY LIMITED. THIS LIMIT HAS BEEN IMPOSED BY SECTION 106 OF THE EVIDENCE ACT WHICH READS AS FOLLOWS: 'BURDEN OF PROVING FACT ESPECIALLY WITHIN KNOWLEDGE.-WHEN ANY FACT IS ESPECIALLY WITHIN THE KNOWLEDGE OF ANY PERSON, THE BURDEN) OF PROVING THAT FACT IS UPON HIM. ' ******** WHAT, THUS, TRANSPIRES FROM THE ABOVE DISCUSSION IS THAT WHITE SECTION 106 OF THE EVIDENCE ACT LIMITS THE ONUS OF THE ASSESSEE TO THE EXTENT OF HIS PROVING THE SOURCE FROM WHICH HE HAS RECEIVED THE CASH CREDIT, SECTION 68 GIVES AMPLE FREEDOM TO THE ASSESSING OFFICER TO MAKE INQUIRY NOT ONLY INTO THE SOURCE(S)OF THE CREDITOR BUT ALSO OF HIS (CREDITOR'S) SUB-CREDITORS AND PROVE, AS A RESULT, OF SUCH INQUIRY, THAT THE MONEY RECEIVED BY THE ASSESSEE, IN THE FORM OF LOAN FROM THE CREDITOR, THOUGH ROUTED THROUGH THE SUB-CREDITORS, ACTUALLY BELONGS TO, OR WAS OF, THE ASSESSEE HIMSELF. IN OTHER WORDS, WHILE SECTION 68 GIVES THE LIBERTY TO THE ASSESSING OFFICER TO ENQUIRE INTO THE SOURCE/SOURCE FROM WHERE THE CREDITOR HAS RECEIVED THE MONEY, SECTION 106 MAKES THE ASSESSEE LIABLE TO DISCLOSE ONLY THE SOURCE(S) FROM WHERE HE HAS HIMSELF RECEIVED THE CREDIT AND IT IS NOT THE BURDEN OF THE ASSESSEE TO PROVE THE CREDITWORTHINESS OF THE SOURCE(S) OF THE SUB-CREDITORS. IF SECTION 106 AND SECTION 68 ARE TO STAND TOGETHER, WHICH THEY MUST, THEN, THE INTERPRETATION OF SECTION 68 ARE TO STAND TOGETHER, WHICH THEY MUST, THEN THE INTERPRETATION OF SECTION 68 HAS TO BE IN SUCH A WAY THAT IT DOES NOT MAKE SECTION 106 REDUNDANT. HENCE, THE HARMONIOUS CONSTRUCTION OF SECTION 106 OF THE EVIDENCE ACT AND SECTION 68 OF THE INCOME- TAX ACT WILL BE THAT THOUGH APART FROM ESTABLISHING THE IDENTITY OF THE CREDITOR, THE ASSESSEE MUST ESTABLISH THE GENUINENESS OF THE TRANSACTION AS WELL AS THE CREDITWORTHINESS OF HIS CREDITOR, THE BURDEN OF THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTIONS AS WELL AS THE CREDITWORTHINESS OF THE CREDITOR MUST REMAIN CONFINED TO THE TRANSACTIONS, WHICH HAVE TAKEN PLACE BETWEEN THE ASSESSEE AND THE CREDITOR. WHAT FOLLOWS, AS A COROLLARY, IS THAT IT IS NOT THE BURDEN OF THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTIONS BETWEEN HIS CREDITOR AND SUB- CREDITORS NOR IS IT THE BURDEN OF THE ASSESSEE TO PROVE THAT THE SUB- CREDITOR HAD THE CREDITWORTHINESS TO ADVANCE THE CASH CREDIT TO THE CREDITOR FROM WHOM THE CASH PAGE | 16 ITA NO.72/SRT/2017 FOR A.Y. 2012-13 SIM TIAM ORGANIZERS PVT. LTD., CREDIT HAS BEEN. EVENTUALLY, RECEIVED BY THE ASSESSEE. IT, THEREFORE, FURTHER LOGICALLY FOLLOWS THAT THE CREDITOR'S CREDITWORTHINESS HAS TO BE JUDGED VIS-A-VIS THE TRANSACTIONS, WHICH HAVE TAKEN PLACE BETWEEN THE ASSESSEE AND THE CREDITOR, AND IT IS NOT THE BUSINESS OF THE ASSESSEE TO FIND OUT THE SOURCE OF MONEY OF HIS CREDITOR OR OF THE GENUINENESS OF THE TRANSACTIONS, WHICH TOOK BETWEEN THE CREDITOR AND SUB- CREDITOR AND/OR CREDITWORTHINESS OF THE SUB- CREDITORS, FOR, THESE ASPECTS MAY NOT BE WITHIN THE SPECIAL KNOWLEDGE OF THE ASSESSEE. ' ********** ' ... IF A CREDITOR HAS, BY ANY UNDISCLOSED SOURCE, A PARTICULAR AMOUNT OF MONEY IN THE BANK, THERE IS NO LIMITATION UNDER THE LAW ON THE PART OF THE ASSESSEE TO OBTAIN SUCH AMOUNT OF MONEY OR PART THEREOF FROM THE CREDITOR, BY WAY OF CHEQUE IN THE FORM OF LOAN AND IN SUCH A CASE, IF THE CREDITOR FAILS TO SATISFY AS TO HOW HE HAD ACTUALLY RECEIVED THE SAID AMOUNT AND HAPPENED TO KEEP THE SAME IN THE BANK, THE SAID AMOUNT CANNOT BE TREATED AS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCE. IN OTHER WORDS, THE GENUINENESS AS WELL AS THE CREDITWORTHINESS OF A CREDITOR HAVE TO BE ADJUDGED VIS-A-VIS THE TRANSACTIONS, WHICH HE HAS WITH THE ASSESSEE. THE REASON WHY WE HAVE FORMED THE OPINION THAT IT IS NOT THE BUSINESS OF THE ASSESSEE TO FIND OUT THE ACTUAL SOURCE OR SOURCES FROM WHERE THE CREDITOR HAS ACCUMULATED THE AMOUNT, WHICH HE ADVANCES, AS LOAN, TO THE ASSESSEE IS THAT SO FAR AS AN ASSESSEE IS CONCERNED, HE HAS TO PROVE THE GENUINENESS OF THE TRANSACTION AND THE CREDITWORTHINESS OF THE CREDITOR VIS-A-VIS THE TRANSACTIONS WHICH HAD TAKEN PLACE BETWEEN THE ASSESSEE AND THE CREDITOR AND NOT BETWEEN THE CREDITOR AND THE SUB- CREDITORS, FOR, IT IS NOT EVEN REQUIRED UNDER THE LAW FOR THE ASSESSEE TO TRY TO FIND OUT AS TO WHAT SOURCES FROM WHERE THE CREDITOR HAD RECEIVED THE AMOUNT, HIS SPECIAL KNOWLEDGE UNDER SECTION 106 OF THE EVIDENCE ACT MAY VERY WELL REMAIN CONFINED ONLY TO THE TRANSACTIONS, WHICH HE HAD' WITH THE CREDITOR AND HE MAY NOT KNOW WHAT TRANSACTION(S) HAD TAKEN PLACE BETWEEN HIS CREDITOR AND THE SUB- CREDITOR... ' ********** 'IN OTHER WORDS, THOUGH UNDER SECTION 68 AN ASSESSING OFFICER IS FREE TO SHOW, WITH THE HELP OF THE INQUIRY CONDUCTED BY HIM INTO THE TRANSACTIONS, WHICH HAVE TAKEN PLACE BETWEEN THE CREDITOR AND THE SUB-CREDITOR, THAT THE TRANSACTION BETWEEN THE TWO WERE NOT GENUINE AND THAT THE SUB-CREDITOR HAD NO CREDITWORTHINESS, IT WILL NOT NECESSARILY MEAN THAT THE LOAN ADVANCED BY THE SUB-CREDITOR TO THE CREDITOR WAS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCE UNLESS THERE IS EVIDENCE, DIRECT OR CIRCUMSTANTIAL, TO SHOW THAT THE AMOUNT WHICH HAS BEEN ADVANCED BY THE SUB- CREDITOR TO THE CREDITOR, HAD ACTUALLY BEEN RECEIVED BY THE SUB-CREDITOR FROM THE ASSESSEE ....' ********** 'KEEPING IN VIEW THE ABOVE POSITION OF LAW, WHEN WE TURN TO THE FACTUAL MATRIX OF THE PRESENT CASE, WE FIND THAT SO FAR AS THE APPELLANT IS CONCERNED, HE HAS ESTABLISHED THE IDENTITY OF THE CREDITORS, NAMELY, NEMICHAND NAHATA AND SONS (HUF) AND PAWAN KUMAR AGARWALLA. THE APPELLANT HAD ALSO SHOWN, IN PAGE | 17 ITA NO.72/SRT/2017 FOR A.Y. 2012-13 SIM TIAM ORGANIZERS PVT. LTD., ACCORDANCE WITH THE BURDEN, WHICH RESTED ON HIM UNDER SECTION 106 OF THE EVIDENCE ACT, THAT THE SAID AMOUNTS HAD BEEN RECEIVED BY HIM BY WAY OF CHEQUES FROM THE CREDITORS AFOREMENTIONED. IN FACT THE FACT THAT THE ASSESSEE HAD RECEIVED THE SAID AMOUNTS BY WAY OF CHEQUES WAS NOT IN DISPUTE. ONCE THE ASSESSEE HAD ESTABLISHED THAT HE HAD RECEIVED THE SAID AMOUNTS FROM THE CREDITORS AFOREMENTIONED BY WAY OF CHEQUES, THE ASSESSEE MUST BE TAKEN TO HAVE PROVED THAT THE CREDITOR HAD THE CREDITWORTHINESS TO ADVANCE THE LOANS. THEREAFTER THE BURDEN HAD SHIFTED TO THE ASSESSING OFFICER TO PROVE THE CONTRARY. ON MERE FAILURE ON THE PART OF THE CREDITORS TO SHOW THAT THEIR SUB-CREDITORS HAD CREDITWORTHINESS TO ADVANCE THE SAID LOAN AMOUNTS TO THE ASSESSEE, SUCH FAILURE, AS A COROLLARY, COULD NOT HAVE BEEN AND OUGHT NOT TO HAVE BEEN, UNDER THE LAW, TREATED AS THE INCOME FROM THE UNDISCLOSED SOURCES OF THE ASSESSEE HIMSELF, WHEN THERE WAS NEITHER DIRECT NOR CIRCUMSTANTIAL EVIDENCE ON RECORD THAT THE SAID LOAN AMOUNTS ACTUALLY BELONGED TO, OR WERE OWNED BY, THE ASSESSEE. VIEWED FROM THIS ANGLE, WE HAVE NO HESITATION IN HOLDING THAT IN THE CASE AT HAND, THE ASSESSING OFFICER HAD FAILED TO SHOW THAT THE AMOUNTS, WHICH HAD COME TO THE HANDS OF THE CREDITORS FROM THE HANDS OF THE SUB-CREDITORS, HAD ACTUALLY BEEN RECEIVED BY THE SUB-CREDITORS FROM THE ASSESSEE. IN THE ABSENCE OF ANY SUCH EVIDENCE ON RECORD, THE ASSESSING OFFICER COULD NOT HAVE TREATED THE SAID AMOUNTS AS INCOME DERIVED BY THE APPELLANT FROM UNDISCLOSED SOURCES. THE LEARNED TRIBUNAL SERIOUSLY FELL INTO ERROR IN TREATING THE SAID AMOUNTS AS INCOME DERIVED BY THE APPELLANT FROM. UNDISCLOSED SOURCES MERELY ON THE FAILURE OF THE SUB-CREDITORS TO PROVE THEIR CREDITWORTHINESS. 18. IN THE CASE OF CIT VS JALAN HARD COKE LTD (95 TAXMANN.COM 330), THE HONBLE RAJASTHAN HIGH COURT NOTED THAT THE ASSESSEE HAD FURNISHED THE DETAILS OF THE SHARE APPLICANTS BUT EXPRESSED ITS INABILITY TO PRODUCE THE SHARE APPLICANTS BEFORE THE AO FOR EXAMINATION. THE HONBLE HIGH COURT HELD THAT MERE NON-APPEARANCE OF SHARE APPLICANTS COULD NOT BE REASON ENOUGH TO ASSESS THE SHARE APPLICATION MONIES RECEIVED BY WAY OF UNEXPLAINED CASH CREDIT. THE SLP FILED BY THE REVENUE AGAINST THIS JUDGMENT HAS BEEN DISMISSED BY THE HONBLE SUPREME COURT. THE RELEVANT EXTRACTS OF THE JUDGMENT ARE AS FOLLOWS: 6.2 TAKING INTO CONSIDERATION THE AFORESAID DECISION WE ARE OF THE CONSIDERED OPINION THAT COMPANY CANNOT BE ASSESSED FOR THE INCOME TAX TO FIND OUT THE PERSON WHO HAS APPLIED AS SHARE HOLDER. THE VIEW OF TAKEN BY THE TRIBUNAL IS JUST AND PROPER, THEREFORE, THE ISSUE IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. 19. TO CONCLUDE, SECTION 68 OF THE ACT PROVIDES THAT IF ANY SUM FOUND CREDITED IN THE YEAR IN RESPECT OF WHICH THE ASSESSEE FAILS TO EXPLAIN THE NATURE AND SOURCE SHALL BE ASSESSED AS ITS UNDISCLOSED INCOME. IN THE FACTS OF THE PAGE | 18 ITA NO.72/SRT/2017 FOR A.Y. 2012-13 SIM TIAM ORGANIZERS PVT. LTD., PRESENT CASE, BOTH THE NATURE AND SOURCE OF THE SHARE APPLICATION RECEIVED WAS FULLY EXPLAINED BY THE ASSESSEE. THE ASSESSEE HAD DISCHARGED ITS ONUS TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE SHARE APPLICANTS. THE PAN DETAILS, BANK ACCOUNT STATEMENTS, AUDITED FINANCIAL STATEMENTS AND INCOME TAX ACKNOWLEDGMENTS WERE PLACED ON AO'S RECORD. WITHOUT DOING SO, THE ADDITION MADE BY THE AO IS BASED ON CONJECTURES AND SURMISES CANNOT BE JUSTIFIED. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED ABOVE, NO ADDITION WAS WARRANTED UNDER SECTION 68 OF THE ACT. THEREFORE, WE DELETE THE ADDITION MADE BY THE ASSESSING OFFICER TO THE TUNE OF RS.1,37,25,000/-. 20. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 09/09/2021 BY PLACING THE RESULT ON THE NOTICE BOARD AS PER RULE 34(5) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULE 1963. SD/- SD/- (PAWAN SINGH) (DR. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER SURAT/ / DATE: 09/09/2021 / SAMANTA COPY OF THE ORDER FORWARDED TO 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A) 4. PR.CIT 5. DR/AR, ITAT, SURAT 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, SURAT