M/s Merredian Promoters Pvt. Ltd., Visakhapatnam V. The DCIT, Central Circle-2, Visakhapatnam

ITA 74/VIZ/2010

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0213 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 5 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 27-10-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 08-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TH LUCAS PETER
• Assessee Lawyers: C V S MURTHY
• Keywords: Unexplained cash credit; Bogus Share capital; Revised return
• Section: 142(1); 153A; 68; 132

Judgement Text

ITA NO.74/VIZAG/2010 M/S. MERRIDIAN PROMOTERS (P) LTD., VISAKHAPATNAM 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . . . . , ,, , . . . . , , , , % % % % BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER . .. ./ // / I.T.A.NO. 74/VIZAG/2010 ( / ASSESSMENT YEAR : 2003-04 ) M / S . MERRIDIAN PROMOTERS (P) LTD. VISAKHAPATNAM VS. DCIT CENTRAL CIRCLE - 2 VISAKHAPATNAM [ PAN: AACCM7719D ] (, , , , / APPELLANT) (-., -., -., -., / RESPONDENT ) , / / APPELLANT BY : SHRI C.V.S. MURTHY, AR -., / / RESPONDENT BY : SHRI TH. LUCAS PETER, DR / 3 / DATE OF HEARING : 27.10.2015 / 3 / DATE OF PRONOUNCEMENT : 06.11.2015 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF CIT(A), VISAKHAPATNAM DATED 23.11.2009 FOR THE ASSE SSMENT YEAR 2003-04. ITA NO.74/VIZAG/2010 M/S. MERRIDIAN PROMOTERS (P) LTD., VISAKHAPATNAM 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY WHICH IS ENGAGED IN THE BUSINESS OF CONSTRUCTION OF APARTMEN T COMPLEXES. THE ASSESSEE COMPANY HAS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2003-04 ON 1.12.2003 DECLARING A TOTAL INCOME OF RS .3,48,400/-. A SEARCH & SEIZURE OPERATION U/S 132 OF THE INCOME-TA X ACT (HEREINAFTER CALLED AS ACT) WAS CONDUCTED IN THE OFFICE PREMIS ES OF THE COMPANY ON 25.8.2005. DURING THE COURSE OF SEARCH CERTAIN INC RIMINATING DOCUMENTS INCLUDING LOOSE SHEETS WERE SEIZED. CONSEQUENT TO SEARCH PROCEEDINGS, THE ASSESSMENT WAS REOPENED U/S 153 OF THE ACT. TH E ASSESSEE HAS FILED REVISED RETURN U/S 153A OF THE ACT ON 4.5.200 7 ADMITTING THE SAME INCOME AS IN THE ORIGINAL RETURN. THE CASE WAS SEL ECTED FOR SCRUTINY AND NOTICES U/S 143(2) & 142(1) OF THE ACT WERE ISSUED. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT DU RING THE FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR 2003-04, THE ASSES SEE RECEIVED SHARE APPLICATION MONEY OF RS.25,84,904/-. IN ADDITION T O THE SHARE APPLICATION MONEY, THE A.O. FURTHER NOTICED THAT TH E ASSESSEE HAS RECEIVED AN AMOUNT OF RS.8,00,540/- AS ADVANCE FROM CUSTOMERS TOWARDS SALE OF FLATS. DURING THE COURSE OF ASSESS MENT PROCEEDINGS, THE A.O. SUMMONED THE ALLEGED SUBSCRIBERS OF THE SHARE CAPITAL AND RECORDED THEIR STATEMENT. THE SUMMARY OF THE INVES TIGATION AND INFERENCES DRAWN FROM THE STATEMENTS RECORDED FROM THE SUBSCRIBERS TO ITA NO.74/VIZAG/2010 M/S. MERRIDIAN PROMOTERS (P) LTD., VISAKHAPATNAM 3 THE SHARE CAPITAL WAS FURNISHED TO THE ASSESSEE AND ASKED TO EXPLAIN WHY THESE BOGUS SHARE CAPITAL AND ADVANCES FROM CUS TOMERS TOWARDS SALE OF PROPERTY SHALL NOT BE TREATED AS UNEXPLAINE D CASH CREDIT U/S 68 OF THE ACT. IN RESPONSE TO THE SAID SHOW CAUSE NOTICE , THE ASSESSEE SUBMITTED THAT IT HAS ACCEPTED THE SHARE APPLICATIO N MONEY FROM THE CLOSE RELATIVES AND FRIENDS OF THE DIRECTORS OF THE COMPANY AND FURNISHED THE NAMES AND ADDRESSES TO THE ASSESSING OFFICER. AS FAR AS ADVANCE FROM CUSTOMERS IS CONCERNED, THE ASSESSEE STATED TH AT IT HAS COLLECTED ADVANCE FROM 5 PROSPECTIVE BUYERS OF THE FLATS. OU T OF THE 5 PERSONS, TWO CUSTOMERS HAVE CANCELLED THE BOOKINGS AND THE A DVANCE RECEIVED FROM THEM IS RETURNED BY WAY OF CHEQUES. HOWEVER, THE A.O. DID NOT CONVINCED WITH THE REPLIES FILED BY THE ASSESSE, TR EATED THE SHARE APPLICATION MONEY AS WELL AS ADVANCE FROM CUSTOMERS AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT AND BROUGHT TO TAX. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE CIT(A), ASSESSEE CONTENDED THAT WITH REGARD TO THE SHARE APPLICATION MONEY, IT HAS FURNI SHED THE NAMES, ADDRESSES, RELATIONSHIP AND ALSO AFFIDAVITS FROM TH E CONCERNED PARTIES FOR HAVING SUBSCRIBED TO THE SHARE CAPITAL. IT IS FURT HER CONTENDED THAT THE SHAREHOLDERS WHO SUBSCRIBED TO THE SHARE CAPITAL OF THE COMPANY HAS DISCLOSED THE INVESTMENTS IN THEIR INCOME TAX RETUR NS. THE ASSESSEE ITA NO.74/VIZAG/2010 M/S. MERRIDIAN PROMOTERS (P) LTD., VISAKHAPATNAM 4 FURTHER CONTENDED THAT ONCE THE IDENTITY OF THE SHA REHOLDER IS ESTABLISHED AND THE VERY FACT THAT THEY HAVE ACCEPT ED THE INVESTMENT IN THE COMPANY, THE INITIAL BURDEN WHICH LIES ON THE A SSESSEE COMPANY U/S 68 OF THE ACT STANDS DISCHARGED. THE ASSESSEE FURT HER ARGUED THAT ONCE THE INITIAL BURDEN IS DISCHARGED, THEN THE ALLEGED BOGUS SHARE APPLICATION MONEY CANNOT BE BROUGHT TO TAX AS ASSESSEES UNDISC LOSED INCOME IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT I N THE CASE OF CIT VS. LOVELY EXPORTS PVT. LTD. (2008) 216 CTR 195. THE A SSESSEE ALSO PLACED RELIANCE ON THE HONBLE DELHI HIGH COURT DECISION I N THE CASE OF CIT VS. STELLAR INVESTMENTS LTD, (1991) 192 ITR 287. AS FA R AS THE ADVANCE FROM CUSTOMERS IS CONCERNED, THE ASSESSEE CONTENDED THAT IT HAS RECEIVED THE ADVANCE FROM PROSPECTIVE BUYERS OF FLA TS AND WHEREVER THE CUSTOMERS CANCELLED THE BOOKINGS, THE SAME IS RETUR NED BY WAY OF CHEQUES. THEREFORE, THESE ADVANCES FROM CUSTOMERS CANNOT BE TREATED AS ASSESSEES INCOME U/S 68 OF THE ACT. THE CIT(A) AFTER CONSIDERING THE EXPLANATIONS FILED BY THE ASSESSEE HELD DISMISS ING THE ASSESSEES APPEAL THAT THE ASSESSEE EXCEPT FURNISHING THE NAME S AND ADDRESSES OF THE SUBSCRIBERS TO THE SHARE APPLICATION MONEY HAVE FAILED TO SUBSTANTIATE THE CREDITWORTHINESS AND GENUINENESS O F SUCH TRANSACTIONS EITHER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR EVEN DURING THE APPELLATE PROCEEDINGS. THEREFORE, RELYING UPON THE HONBLE APEX COURT ITA NO.74/VIZAG/2010 M/S. MERRIDIAN PROMOTERS (P) LTD., VISAKHAPATNAM 5 DECISION IN THE CASE OF SUMATI DAYALS CASE, HELD T HAT THE ASSESSEE HAS NOT DISCHARGED THE BURDEN OF PROVING THE CREDITWORT HINESS AND GENUINENESS OF THE TRANSACTIONS, THEREFORE, CONFIRM ED THE ADDITIONS MADE BY THE ASSESSING OFFICER. AS FAR AS THE FLAT ADVANCE IS CONCERNED, THE CIT(A) HELD THAT THE ASSESSEE HAS RECEIVED THE ADVANCE FROM THE CUSTOMERS IN CASH AND ALSO THERE IS A UNSIGNED LETT ER FOUND DURING THE COURSE OF SEARCH IN THE ASSESSEES OFFICE PREMISES CANCELLING THE BOOKING OF ADVANCE. THEREFORE, IT IS HIGHLY IMPROBABLE THA T ANY PRUDENT PERSON WOULD EVER ALLOW SUCH LEVERAGE TO THE PRINCIPLES TO GIVE UNSIGNED LETTERS FOR CANCELLATION OF BOOKING OF FLATS. THEREFORE, F OR THE REASONS STATED ABOVE, THE CIT(A) CONFIRMED THE ADDITIONS MADE BY T HE ASSESSING OFFICER AND DISMISSED THE ASSESSEES APPEAL. 4. AGGRIEVED BY THE CIT(A)S ORDER, THE ASSESSEE IS IN APPEAL BEFORE US AND RAISED THE FOLLOWING GROUNDS: 1. THE ORDER DT. 23.11.2009 PASSED BY THE LEARNED C OMMISSIONER OF INCOMETAX (APPEALS), VISAKHAPATNAM IS UNJUST AND UNC ALLED FOR. 2. THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) O UGHT TO HAVE APPRECIATED THE FACT THAT THE ADDITIONS AGGREGATING TO RS.18,68,240/- MADE IN THE IMPUGNED ASSESSMENT NEVER FORMED THE IN COME OF THE APPELLANT COMPANY. 3. THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) OUGHT TO HAVE POSITIVELY CONSIDERED THE FACTS, CIRCUMSTANCES OF T HE CASE, CONTENTIONS RAISED BY THE APPELLANT COMPANY AND THE MATERIAL AN D EVIDENCES BORNE ON RECORD. 4. THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) O UGHT TO HAVE APPRECIATED THE FACT THAT THE APPELLANT COMPANY DIS CHARGED ITS ONUS BY ITA NO.74/VIZAG/2010 M/S. MERRIDIAN PROMOTERS (P) LTD., VISAKHAPATNAM 6 SUBMITTING ALL THE RELEVANT INFORMATION AND EVIDENC ES WITH REGARD TO SHARE APPLICATION MONEY AGGREGATING TO RS.10,67,700/- AND FLAT ADVANCES AGGREGATING TO RS.8,00,540/- RECEIVED IN THE PREVIO US YEAR 2002-2003 RELEVANT TO THE ASST YEAR 2003-04. 5. LET US FIRST TAKE UP THE ISSUE OF ADDITION ON AC COUNT OF UNEXPLAINED SHARE APPLICATION MONEY OF RS.10,67,500/-. AT THE TIME OF HEARING, THE A.R. OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HA S PROVED THE IDENTITY OF THE PERSONS WHO HAD SUBSCRIBED TO THE SHARE APPL ICATION MONEY. THE ASSESSING OFFICER HAS EXAMINED THESE PERSONS AND RE CORDED THEIR STATEMENTS WHICH WERE REPRODUCED IN THE ASSESSMENT ORDER. THE A.R. FURTHER ARGUED THAT THE ASSESSEE DISCHARGED THE INI TIAL BURDEN CAST UPON IT BY FURNISHING THE NAMES AND ADDRESSES OF THE SHA RE HOLDERS. ONCE THE INITIAL BURDEN IS DISCHARGED, THEN THE ADDITION S CANNOT BE MADE TO THE ALLEGED BOGUS SHAREHOLDERS IN VIEW OF THE JUDGE MENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS PVT. LTD. (SUPRA). THE A.R. FURTHER ARGUED THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THE ITAT VISAKHAPATNAM BENCH IN THE CASE OF PRAGATI FER TILISERS PVT. LTD., WHEREIN, THE HONBLE ITAT UNDER THE SIMILAR CIRCUMS TANCES HELD THAT ONCE THE INITIAL BURDEN IS PROVED, THEN ADDITION CA NNOT BE MADE TO THE BOGUS SHARE APPLICATION MONEY IN THE HANDS OF ASSES SEE COMPANY. 6. ON THE OTHER HAND, THE D.R. STRONGLY SUPPORTED T HE ORDER OF THE CIT(A). THE D.R. FURTHER ARGUED THAT ONCE THE INIT IAL BURDEN CAST UPON ITA NO.74/VIZAG/2010 M/S. MERRIDIAN PROMOTERS (P) LTD., VISAKHAPATNAM 7 THE ASSESSEE IS NOT DISCHARGED BY PROVING IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS, THEN ADDITIONS CAN BE MADE IN THE HANDS OF THE ASSESSEE COMPANY. THE D.R. FURTHER AR GUED THAT THE JUDGEMENTS RENDERED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS PVT. LTD. (SUPRA) AND THE HONBL E DELHI HIGH COURT IN THE CASE OF CIT VS. STELLAR INVESTMENTS ARE DISTING UISHED IN THE RECENT JUDGEMENT OF DELHI HIGH COURT IN THE CASE OF CIT VS . FOCUS EXPORTS PVT. LTD., THEREFORE, HE URGED TO CONFIRM THE CIT(A)S O RDER. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIALS AVAILABLE ON RECORD. WE ALSO GONE THROUGH THE CASE LAWS RELIED UPON BY THE PARTIES. THE A.O. MADE ADDITIONS TO THE SHARE A PPLICATION MONEY ON THE GROUND THAT THE ASSESSEE HAS NOT PROVED THE CRE DITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS. HOWEVER, THE A.O. DID NOT DOUBT THE IDENTITY OF THE PERSONS, BECAUSE DURING THE ASSESSM ENT PROCEEDINGS, THESE PERSONS WERE EXAMINED. THE ASSESSING OFFICER STATED THAT THE ALLEGED SUBSCRIBERS TO THE SHARE APPLICATION MONEY DO NOT HAVE SUFFICIENT MEANS TO SUBSCRIBE TO THE SHARE CAPITAL, WHICH WAS REVEALED WHEN THE STATEMENTS WERE RECORDED FROM THEM. THEREFORE, THE A.O. WAS OF THE OPINION THAT JUST BY FILING THE NAMES AND ADDRESSES OF THE PERSONS IS NOT SUFFICIENT TO PROVE THE INITIAL BURDEN CAST UPON TH E ASSESSEE U/S 68 OF ITA NO.74/VIZAG/2010 M/S. MERRIDIAN PROMOTERS (P) LTD., VISAKHAPATNAM 8 THE ACT. THE ASSESSEE ON THE OTHER HAND CONTENDED THAT ONCE THE INITIAL BURDEN IS DISCHARGED BY FILING THE NAMES AND ADDRES SES OF THE PERSONS, THERE IS NO NEED OF PROVING THE CREDITWORTHINESS OF THE ALLEGED SUBSCRIBERS TO THE SHARE CAPITAL. IT IS UP TO THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT AND PROCEED AS PER LAW, IN CA SE THE ALLEGED SHAREHOLDERS DO NOT PROVE THE SOURCES FOR THE INVES TMENT. WE FINDS FORCE IN THE ARGUMENTS OF THE ASSESSEE FOR THE REAS ON THAT ONCE THE INITIAL BURDEN OF IDENTITY OF THE SHAREHOLDER IS PR OVED THEN, THE ASSESSING OFFICER CANNOT MADE ANY ADDITIONS TO THE ALLEGED SH ARE APPLICATION MONEY, EVEN IT IS FOUND TO BE BOGUS. THE LAW STOOD AT THE TIME OF ASSESSMENT YEAR 2003-04 IS THAT EVEN IN CASE THE SH ARE APPLICATION MONEY FOUND TO BE BOGUS, THEN THE ASSESSING OFFICER CANNOT MADE ANY ADDITION TO THE ALLEGED BOGUS SHARE APPLICATION MON EY IN THE HANDS OF THE COMPANY. THIS VIEW WAS SUPPORTED BY THE AMENDME NTS BROUGHT TO SECTION 68 BY THE FINANCE ACT 2012 W.E.F. 1-4-2013. THE PROVISION OF SECTION 68 WAS AMENDED, SO AS TO BRING THE ALLEGED BOGUS SHARE APPLICATION MONEY TO THE TAX IN THE HANDS OF COMPAN IES, IN CASE SHARE APPLICATION MONEY FOUND TO BE BOGUS. 8. IN THE INSTANT CASE, THE ASSESSEE HAS FILED THE NECESSARY DETAILS REGARDING NAMES AND ADDRESSES OF THE PERSONS. IT IS AN ADMITTED FACT ITA NO.74/VIZAG/2010 M/S. MERRIDIAN PROMOTERS (P) LTD., VISAKHAPATNAM 9 THAT ALL THE PERSONS WERE SUMMONED BY THE ASSESSING OFFICER AND THEIR STATEMENTS WERE RECORDED. THE ALLEGED SUBSCRIBERS TO THE SHARE CAPITAL, DEPOSED BEFORE THE ASSESSING OFFICER THAT THEY HAVE SUBSCRIBED TO THE SHARE CAPITAL OF THE COMPANY AND ALSO THEY HAVE SOU RCE FOR THE ABOVE INVESTMENT AND FILED NECESSARY DOCUMENTS REGARDING SOURCES FOR INVESTMENT IN THE FORM OF PROOF OF AGRICULTURAL PRO PERTIES AND ALSO FILED AFFIDAVITS. THEREFORE, IN OUR OPINION THE ASSESSEE HAS DISCHARGED INITIAL BURDEN CAST UPON IT U/S 68 OF THE ACT BY FURNISHING THE NAMES AND ADDRESSES OF THE PERSONS. ONCE IDENTITY IS PROVED, THEN THE ONUS SHIFTS TO THE ASSESSING OFFICER TO PROVE OTHERWISE. THERE FORE, THE A.O. IS NOT RIGHT IN MAKING ADDITIONS TO THE SHARE APPLICATION MONEY IN THE HANDS OF THE ASSESSEE COMPANY. 9. IT IS PERTINENT TO DISCUSS HERE THE CASE LAWS RE LIED UPON BY THE A.R. THE A.R. RELIED UPON THE HONBLE SUPREME COURT JUDG EMENT IN THE CASE OF CIT VS. LOVELY EXPORTS PVT. LTD (SUPRA). THE HO NBLE SUPREME COURT IN THE ABOVE SAID JUDGEMENT CATEGORICALLY HELD THAT IF THE SHARE APPLICATION IS RECEIVED BY THE ASSESSEE COMPANY FRO M ALLEGED BOGUS SHAREHOLDERS WHOSE NAMES ARE GIVEN TO THE A.O., THE N THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THE INDIVIDUAL ASSESSM ENTS IN ACCORDANCE WITH LAW. BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY. ITA NO.74/VIZAG/2010 M/S. MERRIDIAN PROMOTERS (P) LTD., VISAKHAPATNAM 10 10. AN IDENTICAL ISSUE CAME UP FOR CONSIDERATION B EFORE THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS. PRAG ATI FERTILISERS PVT. LTD ITA 694/VIZAG/2004 WHEREIN THE COORDINATE BENCH OF THIS TRIBUNAL HELD IN FAVOUR OF THE ASSESSEE AS UNDER: IN THIS REGARD, THE LD. COUNSEL FOR THE ASSESSEE HA S SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED BY THE JUDGEMENT OF THE APEX COURT IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD (216 CTR 195 SC) AND THE JUDGEMENT OF THE MADRAS HIGH COURT IN THE CASE OF C IT VS. ELECTRO POLYCHEM LTD (294 ITR 661) IN WHICH IT WAS CATEGORI CALLY HELD THAT IF THE SHARE MONEY IS RECEIVED BY THE ASSESSEE COMPANY FRO M THE ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE ASSESSIN G OFFICER, THEN THE DEPARTMENT IS FREE TO PROCEED TO OPEN INDIVIDUAL AS SESSMENTS IN ACCORDANCE WITH LAW, BUT IT CANNOT BE REGARDED AS U NDISCLOSED INCOME BY THE ASSESSEE COMPANY. COPIES OF THE JUDGEMENT ARE PLACED ON RECORD. IN LIGHT OF THESE JUDGEMENTS, WE FIND FORCE IN THE CON TENTION OF THE ASSESSEE. ACCORDINGLY, WE CONFIRM THE ORDER OF THE CIT(A) WHO HAS ADJUDICATED THE ISSUE IN CONSONANCE WITH THE FINDINGS OF THE APEX C OURT. WE THEREFORE, CONFIRM THE ORDER OF THE CIT(A) IN THIS REGARD. 11. THE ASSESSEE PLACED HIS RELIANCE UPON THE JUDGE MENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. STELLAR INV ESTMENTS LTD. (1991) 192 ITR 287, WHICH WAS LATER CONFIRMED BY THE APEX COURT REPORTED IN 251 ITR 263, WHEREIN IT WAS HELD THAT EVEN IF THE S UBSCRIBERS TO THE SHARE CAPITAL WERE NOT GENUINE, UNDER NO CIRCUMSTAN CES THE AMOUNT OF SHARE CAPITAL OR SHARE APPLICATION MONEY COULD BE R ECORDED AS UNDISCLOSED INCOME OF THE ASSESSEE. WE ALSO CONSIDE RED THE CASE LAW REFERRED BY THE DR IN THE LIGHT OF THE FACTS OF THE PRESENT CASE AND COME TO THE CONCLUSION THAT THOUGH THE CASE LAW CITED BY DR IS IN FAVOUR OF ITA NO.74/VIZAG/2010 M/S. MERRIDIAN PROMOTERS (P) LTD., VISAKHAPATNAM 11 REVENUE, WHICH IS RENDERED BY LOWER COURT, THEREFOR E WE PREFERRED TO FOLLOW THE HONBLE SUPREME COURT JUDGEMENT REFERRED BY THE A.R. 12. CONSIDERING THE FACTS AND CIRCUMSTANCES OF TH E CASE AND ALSO APPLYING THE RATIOS OF THE JUDGEMENTS CITED ABOVE, WE ARE OF THE OPINION THAT THE ASSESSEE HAS DISCHARGED THE INITIAL BURDEN CAST UPON IT BY FURNISHING THE NAMES AND ADDRESSES OF THE SUBSCRIBE RS TO THE SHARE CAPITAL. ONCE THE INITIAL BURDEN IS PROVED, THEN A DDITIONS CANNOT BE MADE TO THE SHARE CAPITAL OR SHARE APPLICATION MONE Y IN THE HANDS OF THE ASSESSEE COMPANY. THEREFORE, WE DIRECT THE ASSESSI NG OFFICER TO DELETE THE ADDITIONS MADE TOWARDS SHARE APPLICATION MONEY U/S 68 OF THE ACT. 13. THE NEXT ISSUE CAME UP FOR OUR CONSIDERATION IS ADDITIONS TOWARDS FLAT ADVANCES RECEIVED FROM THE CUSTOMERS. AT THE TIME OF HEARING, THE A.R. SUBMITTED THAT THE ASSESSEE HAS RECEIVED BOOKI NG ADVANCE FROM CERTAIN PROSPECTIVE BUYERS TOWARDS SALE OF FLATS. SUBSEQUENTLY, TWO CUSTOMERS CANCELLED BOOKINGS EXPRESSING THEIR INABI LITY TO BUY FLATS, THEREFORE THE ASSESSEE RETURNED THE AMOUNTS TO THE ABOVE CUSTOMERS BY WAY OF CHEQUES. THE A.R. FURTHER SUBMITTED THAT TH E ASSESSING OFFICER MADE THE ADDITIONS ON THE SOLE GROUND THAT DURING T HE COURSE OF SEARCH PROCEEDINGS, CERTAIN UNSIGNED LETTERS IN THE NAME O F ABOVE PARTIES WERE FOUND, THEREFORE, THE ASSESSEE HAS ROUTED HIS OWN M ONEY IN THE FORM OF ITA NO.74/VIZAG/2010 M/S. MERRIDIAN PROMOTERS (P) LTD., VISAKHAPATNAM 12 ADVANCE FROM CUSTOMERS. THE A.R. FURTHER SUBMITTED THAT IT IS A USUAL PRACTICE IN THIS LINE OF BUSINESS THAT CUSTOMERS BO OK FLATS BY PAYING THE ADVANCE AND AT LATER STAGES, BECAUSE OF VARIOUS REA SONS, THEY COULD NOT BUY THE FLATS AND REQUEST FOR CANCELLATION. THEREFO RE, IN OUR CASE, THE COMPANY RETURNED THE ADVANCES COLLECTED FROM CUSTOM ERS WHICH CANNOT BE REGARDED AS UNEXPLAINED CREDIT. THE A.R. FURTHE R ARGUED THAT THE A.O. IS NOT JUSTIFIED IN MAKING ADDITION IN THE HAN DS OF THE ASSESSEE COMPANY WITHOUT EXAMINING THE PARTIES WHEN THE DETA ILS WERE FURNISHED BY THE ASSESSE. ON THE OTHER HAND, THE D.R. SUPPOR TED THE ORDER OF THE CIT(A). 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIALS AVAILABLE ON RECORD. THE A.O. MADE THE ADDITIONS T O THE ADVANCE COLLECTED FROM CUSTOMERS ON THE SOLE REASON THAT DU RING THE COURSE OF SEARCH PROCEEDINGS, CERTAIN UNSIGNED LETTERS FROM T HESE CUSTOMERS WERE FOUND IN THE PREMISES OF THE ASSESSEE COMPANY. THE REFORE, THE A.O. WAS OF THE OPINION THAT THE ASSESSEE HAS ROUTED HIS OWN MONEY IN THE FORM OF ADVANCE FROM CUSTOMERS, HENCE, MADE THE ADD ITIONS. THE ASSESSEES CONTENTION IS THAT THIS IS BEING THE FIR ST YEAR OF THE OPERATION OF THE COMPANY THE ASSESSEE COMPANY CANNOT GENERATE UNDISCLOSED INCOME IN THE FIRST YEAR OF ITS OPERATIONS. THE AS SESSEE FURTHER ITA NO.74/VIZAG/2010 M/S. MERRIDIAN PROMOTERS (P) LTD., VISAKHAPATNAM 13 CONTENDED THAT IT IS A COMMON PRACTICE IN THIS LINE OF BUSINESS THAT CUSTOMERS WILL BOOK FLATS BY PAYING ADVANCE AND AT LATER STAGES THEY CANCEL THE BOOKINGS ON VARIOUS REASONS. THEREFORE, THESE ARE GENUINE ADVANCES COLLECTED FROM THE CUSTOMERS AND LATER RET URNED. WE HAVE CONSIDERED THE ARGUMENTS OF THE PARTIES AND ALSO OR DERS OF THE LOWER AUTHORITIES. IT IS AN ADMITTED FACT THAT FEW OF TH E CUSTOMERS HAVE PAID THE ADVANCE AMOUNT BY CASH. IT IS ALSO AN ADMITTED FACT THAT THESE ADVANCES WERE RETURNED BY WAY OF CHEQUES BEFORE THE DATE OF SEARCH. THE ASSESSING OFFICER RELIED UPON THE UNSIGNED MODE L/DRAFT CANCELLATION LETTERS FOUND DURING THE COURSE OF SEARCH OPERATION S AND ALSO ON ACCOUNT OF FINDING OF SIGNED BLANK CHEQUE BOOK AND PASS BOO KS IN THE CASE OF TWO PERSONS BUT, AT THE SAME TIME, FAILED TO APPREC IATE THE FACT THAT ACCEPTANCE AND RETURN OF ADVANCE IN THIS LINE OF BU SINESS IS COMMON. IN THE INSTANT CASE, THOUGH ADVANCES WERE ACCEPTED IN CASH, THE REPAYMENT WAS MADE BY WAY OF ACCOUNT PAYEE CHEQUES, THIS FACT WAS NOT DISPUTED BY THE REVENUE. THE A.OS MAIN CONTEN TION IS THAT THESE ARE BOGUS CREDITS CREATED BY THE ASSESSEE IN THE FO RM OF ADVANCE FROM CUSTOMERS. THE A.O. MADE THE ADDITIONS WITHOUT CON DUCTING ANY FURTHER ENQUIRY ABOUT THE GENUINENESS OF THE TRANSACTIONS B Y SUMMONING THE CONCERNED CUSTOMERS. THE CIT(A), WITHOUT APPRECIAT ING THE FACT THAT THESE ADVANCES WERE RETURNED TO THE CUSTOMERS, HELD THAT THE ASSESSE ITA NO.74/VIZAG/2010 M/S. MERRIDIAN PROMOTERS (P) LTD., VISAKHAPATNAM 14 INTRODUCED ITS OWN UNACCOUNTED MONEY UNDER THE GUIS E OF ADVANCE FROM CUSTOMERS. IN OUR OPINION, BOTH THE AUTHORITIES FA ILED TO APPRECIATE THE FACT THAT THE SO CALLED ADVANCE WAS REPAID TO THE C USTOMERS BY WAY OF CHEQUES. 15. IN VIEW OF THE ABOVE FACTUAL POSITION, WE ARE OF THE OPINION THAT THE ADVANCES COLLECTED FROM CUSTOMERS TOWARDS FLAT BOOKINGS AND LATER RETURNED TO THE CUSTOMERS BY WAY OF ACCOUNT PAYEE C HEQUES CANNOT BE AT ANY STRETCH OF IMAGINATION CONSIDERED AS ASSESSE ES INCOME FROM UNDISCLOSED SOURCE. THEREFORE, WE REVERSE THE ORDER OF CIT(A) AND DIRECT THE A.O. TO DELETE THE ADDITIONS MADE ON ACCOUNT OF ADVANCE FROM CUSTOMERS. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 6 TH NOV15. SD/- SD/- ( (( ( . .. . ) ) ) ) ( (( ( . . . . ) ) ) ) ( (( ( V. DURGA RAO ) )) ) ( (( ( G. MANJUNATHA) / // / JUDICIAL MEMBER / // / ACCOUNTANT MEMBER /VISAKHAPATNAM: 6 / DATED : 6.11.2015 VG/SPS / - 7 / COPY OF THE ORDER FORWARDED TO :8 1. , / THE APPELLANT M/S. MERREDIAN PROMOTERS (P) LTD., D.NO.47-329/2, 5 TH LANE, DWARAKANAGAR, VISAKHAPATNAM 2. -., / THE RESPONDENT THE DCIT CENTRAL CIRCLE-2, VISAKHAPATNAM 3. THE CIT (CENTRAL), HYDERABAD ITA NO.74/VIZAG/2010 M/S. MERRIDIAN PROMOTERS (P) LTD., VISAKHAPATNAM 15 4. ; () / THE CIT(A), VISAKHAPATNAM 5. -, , / // / DR, ITAT, VISAKHAPATNAM 6 . . . . / GUARD FILE / BY ORDER // TRUE COPY // @A ( SR.PRIVATE SECRETARY ) , / // / ITAT, VISAKHAPATNAM