KALSHA BUILDERS P. LTD, NAVI MUMBAI V. ACIT 6(2), MUMBAI

ITA 7643/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1743 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 30-12-2013
• Court: TRIBUNAL
• Department Lawyers: A RAMACHANDRAN
• Keywords: Bogus Share capital; Gift; Opportunity of cross examination; Valuation report; Accommodation entries; Capital receipt; Onus to prove
• Section: 143(3); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI RAVISH SOOD , JM ITA NO. 7643 / MUM/20 1 3 & 1808/MUM/2015 ( ASSESSMENT YEAR : 2009 - 10 & 2010 - 11 ) M/S. KALSHA BUILDERS PVT. LTD., A 1, ASHIANA SECTOR - 17 VASHI, NAV I MUMBAI 400705 VS. ACIT - 6(2), MUMBAI PAN/GIR NO. AAACK3955F APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI J.P.BAIRAGRA REVENUE BY SHRI A. RAMACHANDRAN DATE OF HEARING 17/11 /2016 DATE OF PRONOUNCEME NT 05 / 12 /2016 / O R D E R PER R.C.SHARMA (A.M) : THESE ARE APPEALS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) FOR THE ASSESSMENT YEAR 2009 - 10 AND 20110 - 11 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE I.T ACT. 2. IN BOTH THE YEARS COMMON GRIEVANCE O F ASSESSEE RELATES TO ADDITION MADE U/S.68 IN RESPECT OF SHARE APPLICATION MONEY RECEIVED DURING THE YEARS UNDER CONSIDERATION. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 4. FACTS IN BRIEF ARE THAT ASSESSEE IS A BUILDER AND DEVELOPER. I NFORMA TION WAS RECEIVED BY AO FROM THE INVESTIGATION WING OF INCOME TAX DEPARTMENT VIDE LETTER DT.12/09 /2011. AS PER THIS INFORMATION, A SEARCH ACTI ON WAS ITA NO. 7643 - 2013 & 1808 - 2015 M/S. KALSHA BUILDERS PVT . LTD., 2 COND UCTED AT THE PREMISES OF ONE M/ S. MAHASAGAR SECURITIES PVT. LTD. IN THE CONCERNED SEARCH ACTION, IT WA S FOUND THAT THE COMPANY WAS FLOATED BY ONE MR. MUKESH CHOKSI. IN ADDITION TO THIS COMPANY, MR. MUKESH CHOKSI ALSO FLOATED MANY MORE COMPANIES, HAVING SAME REGISTERE D ADDRESS. AS PER REPORT MR. MUKESH CHOKSI ACCEPTED THAT HE USED TO GIVE ACCOMMODATION ENT RIES TO VARIOUS PERSONS THROUGH HIS VARIOUS COMPANIES . 5. DURING THE COURSE OF SCRUTINY ASSESSMENT AO ASKED ABOUT THE SAME, ASSESSEE SUBMITTED THE COPIES OF CHEQUES RECEIVED AND ALSO THE PAN DETAILS, RETURN OF INCOME COPIES OF THE VARIOUS PARTIES WHICH HAD INTRODUCED SHARE CAPITAL IN THE KALSHA BUILDERS PVT. LTD. THE NAMES AND PAN NUMBER OF THE COMPANIES INTRODUCING SHARE CAPITAL ARE AS FOLLOWS, 1 . ALLIANCE INTERMEDIARIES PVT . LTD. PAN: AACCA9750E 2. BUNIYAD CHEMICALS PVT .LTD. PAN: AABCB6954G 3. C OLDSTAR FINVEST PVT. LTD. PAN:. AABCG3811 B 4. KAYCE E SHARES BROKING PVT. LTD. PAN: AACCJ(7839A 5. MIHIR AGENCIES PVT . LTD. PAN: AAGFM0890D/ AABCH7898H 6. ALPHA CHEMIE TRADE AGENCIES PVT. LTD., PAN: AAGFA0609P/ AAECA6031C 6. AO STATED THAT AL L SIX COMPANIES ARE PART OF MAHA SAGAR SECURITIES PVT. LTD. I.E. OWNED BY MR. MU KE SH CHOKSI, AS APPEARING IN THE REPORT RECEIVED FROM INVESTIGATION WING. THIS MEANS, THAT AS SES SEE I.E. KALSHA BUILDERS PVT LTD. HAS TAKEN ACCOMMODATION ENTRY FROM MR. MUKESH CHOKSI, IN THE ITA NO. 7643 - 2013 & 1808 - 2015 M/S. KALSHA BUILDERS PVT . LTD., 3 FORM OF SHARE APPLICATION MONEY. THE AO FURTHER OBSERVED THAT ITAT MUMBAI, VIDE ITS DECISION NO. ' I. T.A. NO. 4912/MUM/ 2005' HAS CONFIRMED THE FACT THAT ABOVE MENTIONED COMPANIES, OWNED BY SHRI MUKESH CHOKSI, HAVE INC O M E FROM COMMISSION RECEIV ED FOR GIVING ACCO MMODATION ENTRIES. THUS, IT AGAIN PROVES THAT THESE COMPANIES WERE ONL Y INVOLVED IN GIVING ACCOMMODATION ENTRIES AND HAD NO OTHER FUNDS OF ITS OWN . IN VIEW OF THE SE OBSERVATIONS , THE AO MADE ADDITION U/S.68 IN BOTH THE YEARS UNDER CONSIDE RATION. 7. BY THE IMPUGNED ORDER CIT(A) CONFIRMED THE ACTION OF THE AO AGAINST WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. 8. LEARNED AR PLACED ON RECORD THE DECISION OF MUMBAI INCOME - TAX APP ELLATE TRIBUNAL DATED 30 . 06 . 2015 IN THE CASE OF ACIT VS M/S K RISHNA SHEET PROCESSORS PVT LTD (ITA NOS 546/MUM/2013 & 7465/MUM/2012) . IN THE ABOVE CASE THE SHARE CAPITAL OF THE COMPANY WERE SUBSCRIBED BY THE 12 COMPANIES OUT OF WHICH FOLLOWING 4 COMPANIES OF SHRI MUKESH CHOKSI GROUP ARE AS UNDER: SR.NO. NAME OF COMPA NY 1 ALLIANCE INTERMEDIARIES PVT LTD 2 MAHASAGAR SECURITIES PVT LTD 3 MIHIR AGENCIES PVT LTD 4 KAYCEE SHARE BROKING PVT LTD 9. OUT OF THE ABOVE THE THREE COMPANIES MENTIONED AT SERIAL NO 1, 3, AND 4 FROM WHOM THE ASSESSEE COMPANY HAS RECEIVED T HE 'SHARE APPLICATION ITA NO. 7643 - 2013 & 1808 - 2015 M/S. KALSHA BUILDERS PVT . LTD., 4 MONEY. IN RESPECT OF ABOVE MENTIONED FOUR PARTIES TH E A O ALLEGED THAT THESE ARE COMPANIES FLOATED BY SHRI MUKESH CHOKSI AND WERE ENGAGED IN BOGUS SHARE CAPITAL INTRODUCTION. 10. THE HON'BLE MUMBAI ITAT HAS GIVEN ITS DECISION IN RESPE CT OF THE ABOVE MENTIONED PARTIES AT PARA 6, PAGE NO 5 TO 6 OF THE ORDER AS FOLLOWS: 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW AND WITH THE ASSISTANCE OF THE LD. COUNSEL, WE HAVE CO NSIDERED THE RELEVANT DOCUMENTARY EVIDENCES BROUGHT ON RECORD AND REFERRED TO BEFORE US. THE UNDISPUTED FACTS ARE THAT OUT OF SIX COMPANIES V IZ., M/ S. KAYCEE SHARE BROKING PVT. LTD., M/ S. MIHIR AGENCIES PUT. LTD. M/ S. ALLIANCE INTERMEDIATERIES & NETWORK PVT. LTD.,M/ S. MAHASAQAR SECURITIES PV T. LTD., BELONG TO SHRI MUKESH CHOKSI GROUP. THE ONLY REASON FOR MAKING THE ADDITION WAS THAT DURING THE COURSE OF SEARCH OPERATION SHRI MUKESH CHOKSI ADMITTED THAT HE IS A NAME LENDOR AND ARRANGING PROFITS/LOSS/ SHA RE APPLICATION MONEY TO VARIOUS PERSONS. EXCEPT FOR THIS, THERE IS NOT HING ON RECORD BROUGHT BY THE AO TO JUSTIFY THE ADDITION. IT IS ALSO AN UNDISPUTED FACT THAT TRANSACTIONS WITH THESE COMPANIES HAVE BEEN DONE THROUGH ACCOUNT PAYEE CHEQUE, RESPECTIVE BAN K STATEMENT HAVE BEEN BROUGHT ON RECORD BEFORE US. EVEN IF WE CONSIDER THE STATEMENT OF SHRI MUKESH CHOKSI RECORDED U/S. 132(4) OF THE ACT AND ALSO SUBSEQUENTLY U/S. 131 OF THE ACT, WE DO NOT FIND ANY REFERENCE TO THE ASSESSEE COMPANY, NOWHERE SHRI MUKESH CHOKSI HAS SAID THAT HE HAS ARRANGED SHARE CAPITAL FOR THE ASSESSEE COMPANY. MERELY BECAUSE SHRI MUKESH CHOKSI IS INDULGED IN CLANDESTINE ACTIVITIES WOULD NOT MAKE THE TRANSACTIONS WITH THE ASSESSEE COMPANY NON GENUINE. THE TRANSACTIONS HAVE BEEN DONE THRO UGH ACCOUNT PAYEE CHEQUE AND IT IS NOT A CASE OF THE REVENUE AUTHORITIES THAT PRIOR TO ISSUING THE CHEQUES THE APPLICANTS HAVE DEPOSITED CASH IN THEIR RESPECTIVE BANK ACCOUNT. THE HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORT PVT. LTD. 216 C1R 195 HAS HELD THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW, BUT IT CAN NOT BE REGARDED AS UNDISCLOSED INC OME OF THE ASSESSEE COMPANY . ITA NO. 7643 - 2013 & 1808 - 2015 M/S. KALSHA BUILDERS PVT . LTD., 5 11 . DECISION OF THE MUMBAI INCOME TAX APPELLATE TRIBUNAL DATED 30 TH NOVEMBER 2015 IN THE FOLLOWING CASES: - ITO VS M/S SUPERLINE CONSTRUCTION PVT LTD AY 2007 - 08 ITA NO 3645/MUM/2014 - ITO V S SITARA PRO PERTIES PVT LTD AY 2006 - 07 ITA N O 3644/MUM/2014 - ITO VS SAMSUNG BUILDERS AND DEVELOPERS PVT LTD AY 2006 - 07 ITA NO 3646/MUM/2014 - ITO VS SOUMYA TRADING AND FINANCE PVT LTD AY 2006 - 07 ITA N O 3647/MUM/2014 - ITO VS PRARUP PRO PERTIES PVT LTD A Y 2007 - 08 ITA N O 3648/MUM/2014 - ITO VS ROOP DARSHAN REAL ESTATE~VT LTD AY 2007 - 08 ITA NO 3650/MUM/2014 - ITO VS SUMANGAL BUILDERS AND DEVELOPERS PVT LTD AY 2007 - 08 ITA NO 3651/MUM/2014 12. IN ITA NO 3645/MUM/ 2014 THE MUMBAI ITAT CONSIDERED ADDITION MA DE UNDER SECTION 68 OF THE ACT FOR SHARE APPLICATION MONEY MADE BY FOLLOWING C OMPANIES OWNED BY MUKESH CHOKSI. 1) MIHIR AGENCIES PVT LTD 2) ALPHA CEMIE TRADE AGENCIES PVT LTD 3) TALENT INFOWAY LTD 13. OUT OF THE ABOVE, THE COMPANIES MENTIONED AT SERI AL NO 1 AND 2 ARE THOSE FROM WHOM THE ASSESSEE COMPANY HAS RECEIVED THE SHARE APPLICATION MONEY. ITA NO. 7643 - 2013 & 1808 - 2015 M/S. KALSHA BUILDERS PVT . LTD., 6 1 4 . THE RULING OF HON'BLE MUMBAI ITAT IS GIVEN IN PARA 2.4 ON PAGE 5 OF THE SAID ORDER AND REPRODUCED BELOW : 'IT WAS FURTHER POINTED OUT THAT ITAT - 'D' BENCH HAS DECIDED THE FOLLOWING CASES IN FAVOUR OF THE ASSESSEE ON SIMILAR ISSUE: A. ITO - 10(2)(1) VS. M/ S. DEEP DARSHAN PROPERTIES PVT LTD IN ITA NO. 2117/MUM/2014: AY 2006 - 07 AND ITA NO.2118/ MU M/ 2014 : AY 2007 - 08 B. ITO - 10(2)(3) VS. AAJIVAN COMPUTERS PVT LTD IN ITA NO.2160/ MU M/ 2014:A Y 2006 - 07 C. ITO - 10(2)(3) VS. DIGNITY SECURITIES TRADING PVT LTD IN ITA NO.2157/MUM/2014:AY 2006 - 07 D. ITO - 10(2)(1)VS. M/ S. BLUE HILL PROPERTIES PVT LTD IN ITA NO.2119/ MUM/ 2014 :AY 2006 - 07 2.3 IT WAS ALSO POINTED OUT IN THE CASE OF CIT VS. M/ S. LOVELY EXPORTS (PVT) LTD, REPORTED IN [ 2008] 216 CTR 195 (SC), IT WAS HELD AS UNDER: - 'IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHARE HOLDERS WHO'S NAME ARE GIVEN TO THE AO THE N THE 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.' 2.4 IN THIS BACKGROUND, IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE ASSESSING OFFICER FAILED TO APPRECIATE THAT THERE IS NO DOCUMENTARY EVIDENCE AGAINST THE ASSESSEE - COMPANY TO SUPPORT SUCH IMPUGNED ADDITIONS. IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT THE ASSESSING OFFICER FAILED TO APPRECIATE THAT THE STATEMENTS OF ANY PERSON R ECORDED U/S 143(3) R.W.S. 147, THE ASSESSEE - COMPANY HAS FULLY DISCHARGED THE BURDEN OF PROOF, ONUS OF PROOF AND EXPLAINED THE SOURCE OF SHARE CAPITAL AND ADVANCES RECEIVED BY ESTABLISHED THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF TRANSACTION BY BANK ING INSTRUMENTS WITH DOCUMENTARY EVIDENCES. THE FURTHER STAND OF THE ASSESSEE HAS BEEN THAT THE ASSESSEE COMPANY SUBSTANTIATED THE DETAILS WITH THE DOCUMENTARY EVIDENCES AS EXTRACTED FROM THE WEBSITE OF MINISTRY OF CORPORATE AFFAIRS, GOVERNMENT OF INDIA BE FORE THE ASSESSING OFFICER. THESE FACTS HAVE NOT BEEN REBUTTED ON BEHALF OF THE REVENUE. 2.5 IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AS WELL AS CONSIDERING THE DECISIONS AS DISCUSSED ABOVE ON THE ITA NO. 7643 - 2013 & 1808 - 2015 M/S. KALSHA BUILDERS PVT . LTD., 7 SIMILAR ISSUE, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE CIT(A) WHO HAS RIGHTLY DELETED THE ENTIRE IMPUGNED ADDITIONS OF RS.40 LAKHS M ADE BY THE ASSESSING OFFICER U/ S 68 OF THE ACT ON ACCOUNT OF SHARE CAPITAL SUBSCRIPTION RECEIVED BY THE ASSESSEE COMPANY. 2.6 ACCORDINGLY, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 15. DECISION OF THE MUMBAI INCOME TAX APPELLATE TRIBUNAL DATED 28 TH SEPTEMB ER 2015 IN THE FOLLOWING CASES: - ITO VS DEEP DARSHAN PROPERTIES PVT LTD AY 2006 - 07 & 2007 - 08 ITA NO 2117 & 2118/MUM/2014 - ITO VS AAJIV AN COMPUTE RS PVT LTD AY 2006 - 07 - ITA N O 2160/M UM/2014 - ITO VS KARAMVEER R EAL ESTATE PVT LTD AY 2006 - 07 - ITA NO 2116/MUM/2014 - ITO VS DIGNITY SECURITIES TRADING PVT LTD AY 2006 - 07 - ITA NO 2157/MUM/2014 - ITO VS BLUE HILL PROPERTIES PVT LTD AY 2006 - 07 - ITA NO 2119/MUM/2014 16. DECISION OF THE MUMBAI INCOME TAX APPELLATE TRIBUNAL DATED 28 TH SEPTEMB ER 2015 WAS ALSO RELIED BY LEARNED AR AND CONTENDED THAT THE ITAT IN THE CASE 2117 & 2118/MUM/2014 ON SIMILAR ADDITION MADE UNDER SECTION 68 OF THE ACT FOR SH ARE APPLICATION MONEY MADE BY FOLLOWING COMPANIES OWNED BY MUKESH CHOKSI 1) SONAL COSMETICS (EXPORT) LTD 2) GABRIEL INVESTMENT PVT LTD 3) JAIHIND SYNTHETICS LTD 4) SONAL SILICHEM LTD 5) MIHIR AGENCIES PVT LTD ITA NO. 7643 - 2013 & 1808 - 2015 M/S. KALSHA BUILDERS PVT . LTD., 8 17. OUT OF THE ABOVE THE COMPANY MEN TIONED AT SERIAL NO 5 FROM WHOM THE ASSESSEE COMPANY HAS RECEIVED THE SHARE APPLICATION MONEY. 1 8 . THE ITAT HELD AS FOLLOWS: 'THE ABOVE DECISION OF ITAT, JAIPUR BENCH ALSO RELATED TO MR. MUKESH CHOKSI'S CASE OF INVESTMENT IN SHARE APPLICATION. THE RATI O OF CHARTI SYN TEX LTD. (ITA NOS 172 & 1731 JP/ 2010) MAKES IT CLEAR THAT IF A SHARE HOLDER HAS INVESTED THE MONEY AND IF ASSESSEE RECEIVES SUCH MONEY AS SHARE APPLICATION MONEY AND ASSESSEE DURING ASSESSMENT PROCEEDINGS PROVIDES THE DETAILS LIKE NAME AND ADDRESS OF CORPORATE ENTITY, PAN NO., R O C NO., THEN THIS MAY BE REFERRED TO THE CONCERNED ASSESSING OFFICER FOR PROCEEDINGS AGAINST SUCH SHARE HOLDERS INSTEAD OF ADDING THE AMOUNT U/S.68 OF THE ACT IN THE HANDS OF ASSESSEE COMPANY. THIS VIEW HAS BEEN UPHEL D BY HON'BLE BOMBAY HIGH COURT IN CASE OF CIT VS. CREATIVE WORLD TELEFILMS LTD. (2011) 333 ITR 100 (BOM) BY OBSERVING AS UNDER: 'IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE ASSESSING OFFICER, THEN THE DEPARTMENT CAN ALWAYS PROCEED AGAINST THEM AND IF NECESSARY REOPEN THEIR INDIVIDUAL ASSESSMENTS. HELD, DISMISSING THE APPEAL, THAT THERE WAS NO DISPUTE THAT THE ASSESSEE HAD GIVEN THE DETAILS OF NAMES AND ADDRESSES OF THE S HARE HOLDERS, THEIR PANI GIR NUMBERS AND HAD ALSO GIVEN THE CHEQUE NUMBERS, NAME OF THE BANKERS. THE ASSESSING OFFICER OUGHT TO HAVE FOUND OUT THEIR DETAILS THROUGH PAN CARDS, BANK ACCOUNTS DETAILS OR FROM THEIR BANKERS SO AS TO REACH THE SHARE HOLDERS. THUS, THE VIEW TAKEN BY THE TRIBUNAL COULD NOT BE FAULTED. ' FURTHER HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS 6 DTR 308 (SC) HAS HELD AS UNDER: 'IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHARE HOLD ERS WHO'S NAME ARE GIVEN TO THE AO THEN THE 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.' 6. COMING BACK TO THE FACTS OF THE PRESENT CASE, IT IS SEEN THAT INVESTMENT IN THE CAPITAL SHARE OF THE ASSESSEE COMPANY WAS MADE BY FIVE COMPANIES. THESE COMPANIES EXIST ON THE RECORDS OF RO C . ALL THESE COMPANIES ARE ASSESSED WITH THE INCOME TAX ITA NO. 7643 - 2013 & 1808 - 2015 M/S. KALSHA BUILDERS PVT . LTD., 9 DEPARTMENT, THEREFORE, THESE EXIST ON THE RECORD OF INCO ME TAX DEPARTMENT. THE ASSESSEE COMPANY ALSO FILED BEFORE THE AA FORM NO. 5 AND 2 AND PAN NO. AND ADDRESS OF ALL THESE SHARE HOLDERS, THEREBY ESTABLISHING IDENTITY AND ALL THESE COMPANIES. FURTHER PAYMENT WAS RECEIVED BY THE ASSESSEE COMPANY THROUGH BANKIN G CHANNELS. THE INVESTMENT HAS BEEN REFLECTED BY THESE SHARE HOLDERS COMPANIES IN THE RESPECTIVE BALANCE SHEETS. THUS, CREDITWORTHINESS OF THESE SHARE HOLDERS WAS ALSO ESTABLISHED. IT IS NOTED FROM THE RECORD THAT FOLLOWING EVIDENCE HAVE BEEN FURNISHED BY THE ASSESSEE WITH RESPECT TO EACH OF THE SHARE HOLDERS. - MEMORANDUM AND ARTICLE OF ASSOCIATION - COPY OF ROC FORM NO. - 2 (ALONGWITH DETAILS OF SHARE APPLICATION AND SHARE ALLOTMENT) - COPY OF AUDITED BALANCE SHEET FULL SET. - COPY OF THE CONFIRMATION LETTER - COPY OF PAN CARD AND - COPY OF IT ACKNOWLEDGMENT EVIDENCES FILING OF RETURN - COPY OF BALANCE SHEET. IN OUR CONSIDERED VIEW, THE ASSESSEE HAS DISCHARGED ITS PRIMARY ONUS BY ESTABLISHING IDENTITY AND CREDITWORTHINESS OF THE SHARE HOLDERS. THE TRANSACTIONS STOOD CONFIRMED ALSO, ON THE BASIS OF CONFIRMATION LETTERS OF ALL THESE SHARE HOLDERS. THE AO DOUBTED THE GENUINENESS BY RELYING UPON SOME STATEMENTS WHICH WERE NOT RECORDED BY THE ASSESSING OFFICER. THE STATEMENTS RELIED BY ID. ASSESSING OFFI CER WERE NOT TESTED IN THE ASSESSMENT PROCEEDINGS CONDUCTED BY THE ASSESSING OFFICER. NO OPPORTUNITY OF CROSS EXAMINATION WAS PROVIDED BY THE ASSESSING OFFICER TO THE ASSESSEE BEFORE USING THESE STATEMENTS AGAINST THE ASSESSING OFFICER. FOLLOWING SUBMISSIO NS HAVE BEEN MADE BEFORE US, IN SUPPORT OF THE CLAIM MADE BY THE ASSESSEE: (I) THE SHARE APPLICATION FORM. IS THE CONFIRMATION OF THE SHARE APPLICANT. THE SHARE ALLOTMENT IN COMPLIANCE OF COMPANIES ACT 1956 IN FORM NO.2 IS FACTUALLY EVIDENT OF THE SHARE CAPITAL. (II) FUNDS OF THE SHARE CAPITAL SUBSCRIPTION ARE THROUGH BANKING CHANNEL AND REFLECTED IN THE BANK STATEMENT. (III) THE ALLOTMENTS OF THE SHARES ARE RECORDED IN THE MINUTES OF THE COMPANY WHICH ARE KEPT IN ACCORDANCE WITH THE APPLICABLE PROV ISIONS OF THE COMPANIES ACT 1956. (IV) ALL SHARES SUBSCRIPTION OF THE COMPANY ARE DULY INCURRED BY CORPORATE ENTITIES HAVING INCOME TAX PERMANENT ACCOUNT ITA NO. 7643 - 2013 & 1808 - 2015 M/S. KALSHA BUILDERS PVT . LTD., 10 NUMBER AND ARE FILING RETURNS OF INCOME AND ARE DULY ASSESSED AND THUS, IDENTITY OF THE SHAREHOLD ERS IS ALSO ESTABLISHED. (V) APPLICANT'S NAME IS NOT MENTIONED IN ANY OF THE STATEMENT OF MR. C. CHOKSI GROUP RECORDED BY THE IT DEPARTMENT. IN VIEW OF THESE PECULIAR FACTS AND CIRCUMSTANCES, WE FIND THAT THE ASSESSEE DISCHARGED ITS ONUS AS PER LAW, AS STIPULATED SECTION 68 OF THE ACT. ON THE OTHER HAND, THE ASSESSING OFFICER WAS NOT IN POSITION TO CONTROVERT THE FACTUAL MATERIAL AND DOCUMENTARY EVIDENCES PLACED BY THE ASSESSEE AND HE COULD NOT BRING ANYTHING CONTRARY ON RECORD TO NEGATE THE DOCUMENT ARY EVIDENCES FURNISHED BY THE ASSESSEE. IN VIEW OF THE PECULIAR FACTS AND CIRCUMSTANCES OF THIS CASE, ORDER OF LD. CIT(A) IS UPHELD. APPEAL FILED BY THE REVENUE IS DISMISSED. 19. ON THE OTHER HAND, LEARNED DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES AND CONTENDED THAT THERE WAS DEFINITE INFORMATION FROM THE INVESTIGATION WING OF INCOME TAX DEPARTMENT ACCORDING TO WHICH ASSESSEE IS IN RESPECT OF ACCOMMODATION ENTRY THROUGH THE COMPANI ES OWNED BY SHRI MUKESH CHOKSI ALLEGED TO BE ENGAGED IN PROVIDING AC COMMODATION ENTRIES. 20. OUR ATTENTION WAS ALSO INVITED TO THE STATEMENT OF SHRI MUKESH CHOKSHI, OWNER OF ALL THESE COMPANIES, WHERE HE REPLIED THAT HIS BUSINESS WAS OF GIVING ACCOMMODATION ENTRIES . A S PER LEARNED DR FROM THE STATEMENT OF SHRI MUKESH CHOKS HI IT IS VERY MUCH CLEAR THAT HE USED TO GIVE ACCOMMODATION ENTRIES ONLY AND THESE COMPANIES DID NOT HAVE ANY FUNDS TO INTRODUCE SHARE CAPITAL IN OTHER CONCERNS. ITA NO. 7643 - 2013 & 1808 - 2015 M/S. KALSHA BUILDERS PVT . LTD., 11 21. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORIT IES BELOW. WE HAD ALSO VERIFIED THE DOCUMENTS FILED BY ASSESSEE COMPANY BEFORE THE LOWER AUTHORITIES WHICH ARE AS FOLLOWS: SR.NO. PARTICULARS 1 COPY OF THE AUDITED FINAL ACCOUNTS FOR 31.03.2009 2 COPY OF THE TAX AUDIT REPORT FOR 31. 03.2009 3 COPY OF STATEMENT OF TOTAL INCOME FOR 31.03.2009 4 COPY OF THE LETTER DTD.16.12.2011 FILED BEFORE THE AO 5 COPY OF THE NOTICE DTD.O8.12.2011 AS RECEIVED FROM THE AO 6 COPY OF THE LETTER DTD.13.01.2012 ADDRESS ED TO THE AO 7 COPY OF THE CERTIFICATE OF INCORPORATION FOR ALLIANCE INTERMEDIATERIES & NETWORK PVT. LTD., 8 COPY OF THE PAN NO. OF ALLIANCE INTERMEDIATERIES & NETWORK PVT. LTD. 9 COPY OF THE RETURN OF INCOME FILED BY ALLIANCE INT ERMEDIATERIES & NETWORK PVT. LTD. FOR A.Y.2007 - 08 10 COPY OF THE RESOLUTION PASSED BY ALLIANCE INTERMEDIATERIES & NETWORK PVT. LTD FOR SUBSCRIPTION OF SHARES OF THE ASSESSEE COMPANY 11 COPIES OF THE SHARE APPLICATION DOCUMENTS FOR WARDED BY THE SAID ALLIANCE INTERRNEDIATERIES & NETWORK PVT. LTD., FOR SUBSCRIPTION OF 600 EQUIRY SHARES OF THE ASSESSEE 12 COPY OF THE CONFIRMATION IN RESPECT OF SUBSCRIPTION OF SHARES ISSUED BY THE SAID ALLIANCE INTERMEDIATERIES & NETWORK PVT. L TD. TO THE ASSESSEE. 13 COPY OF THE BANK STATEMENT EXTRACTS OF THE SAID ALLIANCE INTERMEDIATERIES & NETWORK PVT. LTD. IN RESPECT OF THE AMOUNT PAID TO THE ASSESSEE BY IT FROM ITS CURRENT ALC NO.: 641405050107, MAINTAINED BY IT WITH ICICI BANK. 14 COPY OF THE DEMAND DRAFT I BANKERS CHEQUE FOR A SUM OF RS.15 LACS ON 07.02.2009 ISSUED BY ICICI BANK ON BEHALF OF THE SAID ALLIANCE INTERMEDIATERIES & NETWORK PVT. LTD. ITA NO. 7643 - 2013 & 1808 - 2015 M/S. KALSHA BUILDERS PVT . LTD., 12 15 COPY OF THE CERTIFICATE OF INCORPORATION OF ALPHA CHEMIE TRADE AGENCIES PVT. LTD. 16 COPY OF THE PAN OF THE SAID ALPHA CHEMIE TRADE AGENCIES PVT. LTD. 17 COPY OF THE ACKNOWLEDGEMENT OF FURNISHING OF THE RETURN OF INCOME BY ALPHA CHEM IE TRADE AGENCIES PVT. LTD. FOR AY 2007 - 08. 18 COPY OF THE RESOLUTION PASSED FOR SUBSCRIPTION OF 200 EQUITY SHARES BY THE SAID ALPHA CHEMIE TRADE AGENCIES PVT. LTD., 19 COPIES OF THE DOCUMENTS IN RESPECT OF SUBS CRIPTION OF 200 EQUITY SHARES BY ALPHA CHEMIE TRADE AGENCIES PVT. LTD. 20 COPY OF THE CONFIRMATION ISSUED BY ALPHA CHEMIE TRADE AGENCIES PVT. LTD. FOR SUBSCRIPTION OF 200 EQUITY SHARES. 21 COPY OF THE BANK STATEMENT OF ALPHA CHEMIE TRADE AGENCIES PVT. LTD. WITH ICICI BANK CURRENT ALC NO.: 641405050145 22 COPY OF THE DEMAND DRAFT FOR A SUM OF RS.5 LACS ISSUED BY ICICI BANK. 23 COPY OF THE CERTIFICATE OF INCORPORATION OF BUNIVAD CHEMICALS LTD. 24 COPY OF THE PAN OF THE SAID BUNIYAD CHEMICALS LTD., 25 COPY OF THE ACKNOWLEDGEMENT OF FURNISHING OF THE RETURN OF INCOME BY BUNIYAD CHEMICALS LTD. FOR AY 2007 - 08 26 COPY OF THE RESOLUTION PASSED FOR SUBS CRIPTION OF 200 EQUITY SHARES BY THE SAID BUNIYAD CHEMICALS LTD. 27 COPIES OF THE DOCUMENTS IN RESPECT OF SU BSCRI PTION OF 200 EQUITY SHARES BY BUNIVAD CHEMICALS LTD. 28 COPY OF THE CONFIRMATION ISSUED B Y BUNIYAD CHEMICALS LTD. FOR SUBSCRIPTION OF 200 EQUITY SHARES. 29 COPY OF THE BANK STATEMENT OF BUNIYAD CHEMICALS LTD. WITH ICICI BANK CURRENT ALC NO.: 020905000663. 30 COPY OF THE DEMAND DRAFT FOR A SUM OF RS .5 LACS ISSUED BY ICICI BANK. 31 COPY OF THE CERTIFICATE OF INCORPORATION OF GOLDSTAR FINVEST PVT. LTD. ITA NO. 7643 - 2013 & 1808 - 2015 M/S. KALSHA BUILDERS PVT . LTD., 13 32 COPY OF THE PAN OF THE SAID GOLDSTAR FINVEST PVT. LTD. 33 COPY OF THE ACKNOWLEDGEMENT OF FU RNISHING OF THE RETURN OF INCOME BY GOLDSTAR FINVEST PVT. LTD. FOR AY 2007 - 08 34 COPY OF THE RESOLUTION PASSED FOR SUBSCRIPTION OF 200 EQUITY SHARES BY THE SAID GOLDSTAR FINVEST PVT. LTD., 35 COPIES OF THE DOCUMENTS IN RESPECT OF SU BSCRIPTION OF 200 EQUITY SHARES BY GOLDSTAR FINVEST PVT. LTD. 36 COPY OF THE CONFIRMATION ISSUED BY GOLDSTAR FINVEST PVT. LTD.FOR SUBSCRIPTION OF 200 EQUITY SHARES. 37 COPY OF THE BANK STATEMENT OF GOLDSTA R FINVEST PVT. LTD. WITH ICICI BANK CURRENT ALC NO.: 64140500109. 38 COPY OF THE DEMAND DRAFT FOR A SUM OF RS.5 LACS ISSUED BY ICICI BANK. 39 COPY OF THE CERTIFICATE OF INCORPORATION OF KAYCEE SHARES BRAKING PVT. LTD. 40 COPY O F THE PAN OF THE SAID KAYCEE SHARES BRAKING PVT. LTD. 41 COPY OF THE ACKNOWLEDGEMENT OF FURNISHING OF THE RETURN OF INCOME BY KAYCEE SHARES BRAKING PVT. LTD. FOR AY 2007 - 08 42 COPY OF THE RESOLUTION PASSED FOR SUBSCRIPTION OF 200 EQUITY SHARES BY THE SAID KAYCEE SHARES BRAKING PVT. LTD. 43 COPIES OF THE DOCUMENTS IN RESPECT OF SUBSCRIPTION OF 200 EQUITY SHARES BY KAYCEE SHARES BRAKING PVT. LTD. 44 COPY OF THE CONFIRMATION I SSUED BY KAYCEE SHARES BRAKING PVT. LTD. FOR SUBSCRIPTION OF 200 EQUITY SHARES. 45 COPY OF THE BANK STATEMENT OF KAYCEE SHARES BRAKING PVT. LTD. WITH ICICI BANK CURRENT ALC NO.: 64140505144. 46 COPY OF THE DEMAND DRAFT FOR A SU M OF RS.5 LACS ISSUED BY ICICI BANK. 47 COPY OF THE CERTIFICATE OF INCORPORATION OF MIHIR AGENCIES PVT. LTD., 48 COPY OF THE PAN OF THE SAID MIHIR AGENCIES PVT. LTD., ITA NO. 7643 - 2013 & 1808 - 2015 M/S. KALSHA BUILDERS PVT . LTD., 14 49 COPY OF THE ACKNOWLEDGEMENT OF FURNISHING OF T HE RETURN OF INCOME BY MIHIR AGENCIES PVT. LTD.FOR AY 2007 - 08. 50 COPY OF THE RESOLUTION PASSED FOR SUBSCRIPTION OF 600 EQUITY SHARES BY THE SAID MIHIR AGENCIES PVT. LTD. 51 COPIES OF THE DOCUMENTS IN RESPECT OF SUBSCRIP TION OF 600 EQUITY SHARES BY MIHIR AGENCIES PVT. LTD. 52 COPY OF THE CONFIRMATIONS ISSUED BY MIHIR AGENCIES PVT. LTD. FOR SUBSCRIPTION OF 600 EQUITY SHARES. 53 COPY OF THE BANK STATEMENT OF MIHIR AGENCIES PVT. LTD. WITH ICICI BANK CURRENT ALC NO.: 6410 5050061 54 COPY OF THE DEMAND DRAFT FOR A SUM OF RS.15 LACS ISSUED BY ICICI BANK. 55 COPY OF THE SHARE VALUATION REPORT OF THE ASSESSEE'S SHARE.' 22. WE HAD ALSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS RELIED ON BY LOWER AUTHORITIES IN THEIR RESPE CTIVE ORDERS AS WELL AS CITED BY LEARNED AR AND DR DURING THE COURSE OF HEARING BEFORE US IN THE CONTEXT OF FACTUAL MATRIX OF THE INSTANT CASE. WE FOUND THAT IN THE A.Y.2009 - 10 LEARNE D AO HAS MADE ADDITION FOR THE SHARE APPLICATION MONEY AMOUNTING TO RS 2, 50,00,000/ - RECEIVED BY THE ASSESSEE FROM THE FOLLOWING COMPANIES WHICH WERE ALLEGEDLY A PART OF MAHASAGAR SECURITIES PVT. LTD., OWNED BY ONE MR . MUKESH CHOKSI WHO WAS ALLEGED TO PR OVIDE ACCOMMODATION ENTRIES AS PER INQUIRY CONDUCTED BY THE INVESTIGATION W ING IN THE CASE OF MAHASAGAR SECURITIES PVT. LTD. NAME OF COMPANY NO OF SHARES AMOUNT ALLIANCE INTERMEDIARIES PVT. LTD., 600 75,00,000 GOLDSTAR FINVEST PVT. LTD., 200 25,00,000 BUNIYAD CHEMICALS PVT. LTD., 200 25,00,000 KAYEE SHARE BROKING PVT. LTD. , 200 75,00,000 ITA NO. 7643 - 2013 & 1808 - 2015 M/S. KALSHA BUILDERS PVT . LTD., 15 MIHIR AGENCIES PVT. LTD., 600 25,00,000 ALPHA CHEMIE AGENCIES PVT. LTD., 200 25,00,000 2000 2,50,00,000 23. THE SHARES WE RE ISSUED AT FACE VALUE OF RS.1 00/ - AND PREMIUM OF RS.19, 900 / - PER SHARE. THE SHARE PREMIUM WAS DECIDED AFTER OBTAINING A SHARE VALUATION REPORT FROM E. A. PATIL & ASSOCIATES, CHARTERED ACCOUNTANTS VALUING THE SHARES AT RS 20,260 PER SHARE. 24. WE ALSO FOUND THAT THE EQUITY SHARES WERE ISSUED ON FOLLOWING TERMS: SR. NO. PARTICULARS AMOUNT IN RS. (I) ON APPLICATIO N (TOWARDS PREMIUM OF RS.9,950/ - AND TOWARDS EQUITY SHARES OF RS.50/ - ) 10,000/ - (II) ON CALL MADE ON 28.11.2008 2,500/ - (III) ON CALL MADE IN JUNE 2009 2,500/ - (IV) ON CALL MADE IN OCTOBER 2009 5,000/ - TOTAL 20,000/ - 25. THE AO HAS DISCUSSED THE ADDI TION AT PARA 5 OF HIS ASSESSMENT ORDER. THE CIT(A) HAS ALSO DISCUSSED THE ISSUE AT PARA 5.1 TO 5.3 OF HIS APPEAL ORDER, WHEREIN HE HAS AFFIRMED THE ADDITION MADE BY THE AO. 26. IN THE ASSESSMENT YEAR 2010 - 11, ASSESSEE HAS CHALLENGED THE ADDITION MADE BY LD AO OF RS 50,25,000 / - BEING AMOUNT RECEIVED BY THE ASSESSEE TOWARDS SHARE CAPITAL UNDER SECTION 68 OF THE ACT . 27. FROM THE RECORD WE FOUND THAT DURING AY 2010 - 11 THE ASSESSEE COMPANY RECEIVED CALL MONEY IN THE MONTH OF JUNE 2009 ON T HE ABOVE SHARES AMOUN TING TO RS. 50,00,000/ - FROM THE FOLLOWING PARTIES. SR. NO. PARTICULARS NO.OF SHARES ALLOTTED PAN NO. CALL MONEY RECEIVED IN JUNE 2009 I. ALLIANCE INTERMEDIARIES & NETWORK PVT. LTD., 600 AACCA9750E 15,00,000/ - II. GOLDSTAR FINVEST (P) 200 AABCG3811B 5,00,000/ - ITA NO. 7643 - 2013 & 1808 - 2015 M/S. KALSHA BUILDERS PVT . LTD., 16 LTD., III. BUNIYAD CHEMICALS LTD., 200 AABCB6954G 5,00,000/ - IV KAYCEE SHARES BROKING PVT. LTD., 200 AACCK7839A 5,00,000/ - V MIHIR AGENCIES PVT. LTD., 600 AAGFM0809D 15,00,000/ - VI ALPHA CHEMETRADE AGENCIES PVT. LTD., 200 AAGFA0609P 5,00,000/ - TOTAL 2000 50,00,000/ - 28. SINCE THERE WAS A FAILURE TO PAY THE LAST CALL MONEY OF RS 5,000/ - PER SHARE BY ALL THE SHAREHOLDERS AS STATED ABOVE, THE SHARES IN QUESTION WERE FORFEITED. 29. AS PER THE DECISION RELIED ON BY LEARNED AR AS REPRODUCED ABOVE, THE ASSESSEE HAS FILED ALL THE DOCUMENTARY EVIDENCE IN SUPPORT OF SHARE CAPITAL SO RECEIVED. IN ALL THESE DECISIONS, ADDITIONS WERE MADE BY AO ON ACCOUNT OF SHARE SUBSCRIPTION MADE BY THE GROUP CONCERNS OF SHRI MUKESH CHOKSI, ON THE PLEA THAT SAME WAS BOGU S AND NOT GENUINE. 30. AS CAN BE OBSERVED FROM THE ABOVE DECISIONS, ADDITIONS MADE UNDER SECTION 68 FOR SHARE APPLICATION MONEY INTRODUCED BY THE FOLLOWING COMPANIES OWNED BY MR MUKESH CHOKSI WERE DELETED: I . ALLIANCE INTERMEDIARIES PVT LTD II . KAYCEE S HARES BROKING PVT LTD III . MIHIR AGENCIES PVT LTD IV . ALPHA CHEMIE TRADE AGENCIES PVT LTD 31. THE ABO VE PARTIES ARE COMMON APPLICANT S IN THE ASSESSEE 'S CASE ALSO AND HAVE SUBMITTED ALL RELEVANT DETAILS AS DISCUSSED ABOVE TO DISCHARGE ITA NO. 7643 - 2013 & 1808 - 2015 M/S. KALSHA BUILDERS PVT . LTD., 17 ITS ONUS OF PROV ING THE IDENTITY OF SHARE APPLICANTS, GENUINENESS OF TRANSACTION & CREDIT WORTHINESS OF SHAREHOLDERS . 32. FROM THE RECORD WE FOUND THAT TO ESTABLISH IDENTITY OF SHARE HOLDERS, THE ASSESSEE HAS FILED FOLLOWING DOCUMENTS. A) CERTI FICATE OF INCORPORATION B) PAN IDENTITY OF THE SHAREHOLDER C) CIN IDENTITY OF THE SHAREHOLDER D) COPY OF IT RETURN FILED BY THE SHAREHOLDER 33. TO SUBSTANTIATE GENUINENESS OF TRANSACTION, ASSESSEE HAS FILED FOLLOWING DOCUMENTS. A) COPIES OF BANK PAY ORDERS ISSUED BY THE NEW SHAREHOLDERS TOWARDS A PPLICATION MONEY AND FIRST CALL MONEY. B) COPIES OF THE SHARE APPLICATION FORM. C) COPIES OF THE RESOLUTION PASSED BY THE BOARD OF DIRECTORS TO APPLY FOR ALLOTMENT OF SHARES & RETURNS FOR SHARE ALLOTMENT AS FILED WITH THE ROC. D) CONFIRMATIONS & DECLARATION FROM THE SHAREHOLDER PARTIES FROM WHOM THE SHARE APPLICATION & CALL MONEY WAS RECEIVED STATING THAT THEY HAVE PURCHASED THE SHARES. 34. IN SUPPORT OF CREDITWORTHINESS OF SHARE HOLDERS, T HE ASSESSEE HAS FILED FOLLOWING DOCUMENTS. A) COPY OF THE BANK STATEMENTS OF THE SHAREHOLDER COMPANIES FOR THE RELEVANT PERIOD I N WHICH SUMS TOWARDS SHARE APPLICATION MONEY & FIRST CALL WERE RECEIVED BY THE ASSESSEE. ITA NO. 7643 - 2013 & 1808 - 2015 M/S. KALSHA BUILDERS PVT . LTD., 18 B) COPIES OF IT RETURNS FILED BY T HEM 35. FROM THE RECORD WE ALSO FOUND THAT AO HAS ALSO ISSUED NOTICE U/S.133(6) TO THESE PARTIES. IN RESPONS E TO INFORMATION SOUGHT FOR U/S. 133(6), IT WAS REPLIED BY THEM THAT IT WAS NOT POSSIBLE FOR THEM TO GIVE ANY INFORMATION SINCE THEIR ACCOUN TING DATA HAD BEEN SEIZED BY THE INCOME TAX DEPARTMENT ON 25.11.2009 IN LIGHT OF THE SEARCH & SEIZURE ACTION CONDUCTED ON THEM. THUS THE ABOVE PARTIES HAD RESPONDED TO THE AO AND THE DEPARTMENT WAS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. ONCE THE IDENTITY OF THE SHARE HOLDER HAVE BEEN ESTABLISHED, EVEN IF THERE IS A CASE OF BOGUS SHARE CAPITAL, IT CANNOT BE ADDED IN THE HANDS OF COMPANY UNLESS ANY ADVERSE EVIDENCE IS ON RECORD AS PER VERDICT OF HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS (SUPRA) . IN THE ABSENCE OF ANY EFFORTS ON THE REVENUE'S PART IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF ASSESSEE COMPANY . 36. WE ALSO FOUND THAT VIDE LETTER DATED 16/12/2011, THE ASSESSEE REQUESTED AO TO FURNISH MATERIAL IN RESPECT OF SUCH EVIDENCE COLLECTED BY HIM WITH A REQUEST TO PROVIDE FOR CROSS EXAMINATION OF SHRI MUKESH CHOKSI. HOWEVER, THE AO DID NOT FURNISH THE MATERIAL ON THE BASIS OF WHICH HE HAD COME TO THIS ADVERSE CONCLUSION NOR WAS AN OPPORTUNITY, AFFORDED TO T HE ASSESSEE TO CROSS EXAMINE SHRI MUKESH CHOKSI IN THIS REGARD. 37. WE ALSO FOUND THAT THE AO HAD NEVER FORWARDED THE MATERIAL COLLECTED FROM THE SHAREHOLDERS BY THE INVESTIGATION WING, FOR THE ASSESSEE'S ITA NO. 7643 - 2013 & 1808 - 2015 M/S. KALSHA BUILDERS PVT . LTD., 19 REBUTTAL INCLUDING THE OPPORTUNITY CALLED FOR BY TH E ASS ESSEE FOR CROSS EXAMINATION OF SHRI . MUKESH CHOKS I. WE ALSO FOUND THAT STATEMENT GIVEN BY SHRI . MUKESH CHOKSI, REPRODUCED BY THE AO IN PARA 5 OF THE ASSESSMENT ORDER IS TOO GENE RAL AND DOES NOT PARTICULARLY MENTI ON ABOUT SHAREHOLDING IN THE ASSESSEE C OMPANY . HONBLE BOMBAY HIGH COURT IN THE CASE OF H.R. MEHTA VS ACIT (387 ITR 561) FOR ADDITION MADE UNDER SECTION 68 TOWARDS LOAN AMOUNT IN HANDS OF ASSESSEE ON BASIS THAT NO CONFIRMATION LETTER HAD BEEN OBTAINED FROM LENDER NOR ANY OTHER VERIFIABLE EVIDEN CE IN RESPECT OF LOAN TRANSACTION HAD BEEN RUED. THE HON'BLE BOMBAY HIGH COURT HELD THAT: '17. IN OUR VIEW IN THE LIGHT OF THE FACT THAT THE MONIES WERE ADVANCED APPARENTLY BY THE ACCOUNT PAYEE CHEQUE AND WAS REPAID VIDE ACCOUNT PAYEE CHEQUE THE LEAST THA T THE REVENUE SHOULD HAVE DONE WAS TO GRANT AN OPPORTUNITY TO THE ASSESSEE TO MEET THE CASE AGAINST HIM BY PROVIDING THE MATERIAL SOUGHT TO BE USED AGAINST ASSESSEE IN ARRIVING BEFORE PASSING THE ORDER OF REASSESSMENT. THIS NOT HAVING BEEN DONE, THE DENIAL OF SUCH OPPORTUNITY GOES TO ROOT OF THE MATTER AND STRIKES AT THE VERY FOUNDATION OF THE REASSESSMENT AND THEREFORE RE NDERS THE ORDERS PASSED BY THE C IT (A) AND THE TRIBUNAL VULNERABLE. IN OUR VIEW THE ASSESSEE WAS BOUND TO BE PROVIDED WITH THE MATERIAL U SED AGAINST HIM APART FROM BEING PERMITTING HIM TO CROSS EXAMINE THE DEPONENTS. DESPITE THE REQUEST DATED 15TH FEBRUARY, 19 96 SEEKING AN OPPORTUNITY TO CROSS EXAMINE THE DEPONENT AND FURNISH THE ASSESSEE WITH COPIES OF STATEMENT AND DISCLOSE MATERIAL, THE SE WERE DENIED TO HIM. IN THIS VIEW OF THE MATTER WE ARE INCLINED TO ALLOW THE APPEAL ON THIS VERY ISSUE .' 38. NOW COMING TO THE DECISION RELIED ON BY AO IN THE CASE OF NAMICHAND KOTHARI 264 ITR 254, GUWAHATI HIGH COURT, WE FOUND THAT THE AFORESAID DECI SION IS IN FAVOUR OF THE ASSESSEE . THE AO HAS QUOTED FROM THE FOLLOWING PARA WHICH ITSELF STANDS IN FAVOUR OF THE ASSESSEE : ITA NO. 7643 - 2013 & 1808 - 2015 M/S. KALSHA BUILDERS PVT . LTD., 20 '22. MR. BHUYAN'S CONTENTION THAT A PAYMENT MADE BY CHEQUE CANNOT BE TREATED AS SACROSANCT AND HIS RELIANCE ON THE LAW LAID DOWN IN PRECISION FINANCE (P.) LTD. S CASE (SUPRA) ARE WHOLLY MISPLACED INASMUCH AS EVEN WE DO NOT HOLD THAT A TRANSACTION} WHICH TAKES PLACE BY WAY OF CHEQUE} IS INVARIABLY SACROSANCT. WHAT WE HOLD IS THAT SO FAR AS THE PRESENT ASSESSEE - APPELLANT IS CONCERNED, H IS BURDEN STOOD DISCHARGED, WHEN HE HAD PROVED THE IDENTITY OF HIS CREDITORS, THE GENUINENESS OF THE TRANSACTIONS, WHICH HE HAD WITH HIS CREDITORS AND THE CREDITWORTHINESS OF HIS CREDITORS, VIS - A - VIS THE TRANSACTIONS, WHICH HE HAD WITH THE CREDITORS. THE B URDEN HAD, THEN, SHIFTED TO THE REVENUE TO SHOW THAT THOUGH COVERED BY CHEQUES, THE AMOUNTS, IN QUESTION, ACTUALLL/ BELONGED TO, OR WERE OWNED BY, THE ASSESSEE HIMSELF , BUT NO MATERIAL DIRECT OR INDI RE C T EXISTS ON RECORD TO COME TO SUCH A CONCLUSION CONF ID ENTLY AND B OLDLY . 39. ON THE BASIS OF DOCUMENTARY EVIDENCE PLACED ON RECORD WE FOUND THAT THE ASSESSEE HAS DISCHARGED THE ONUS CAST UPON BY PROVING THE IDENTITY, GENUINENESS AND CREDITWORTHINESS - OF THE PARTIES FROM WHOM IT HAD RECEIVED SHARE APPLICATION M ONE Y. 40. IT WAS ALSO ARGUED BY LEARNED AR THAT ASSESSING OFFICER HAS MADE THE ADDITION MERELY ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING IN RESPECT OF SEARCH TOOK PLACE ON MAHASAGAR SECURITIES PVT LTD WHICH WAS FLOATED BY SHRI MUKESH CHOKSI. THE AO HAS NEITHER SUBMITTED THE DETAILS OF THE INFORMATION RECEIVED AND THE COPY OF THE STATEMENT RECORDED OF SHRI MUKESH CHOKSI TO THE ASSESSEE NOR ALLOWED THE ASSESSEE TO CROSS EXAM IN E. THE AO HAS NOT PROVED THAT THE INVESTMENT ACTUALLY EMANATE D FROM THE COFFERS OF THE ASSESSEE SO AS TO ENABLE IT TO BE TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE AND IN ABSENCE OF SUCH FINDINGS, ADDITION U/ S.68 IS NOT WARRANTED. ITA NO. 7643 - 2013 & 1808 - 2015 M/S. KALSHA BUILDERS PVT . LTD., 21 41. AS PER LEARNED AR E VEN, THE FINDINGS OF THE CIT(A) F OR AY 2009 - 10 UPHOLDING T HE ADDITION MADE OF RS 2.50 CRORES IS ON THE BASIS OF THE THEORY OF PREPONDERANCE OF PROBABILIT Y. 42. OUR ATTENTION WAS ALSO INVITED BY LEARNED AR TO THE FACT THAT SHARE PREMIUM WAS DECIDED AFTER OBTAINING A SHARE VALUATION REPORT FROM E. A. PATIL & ASSOCI ATES, CHARTERED ACCOUNTANT S. 43. RELIANCE WAS PLACED BY LEARNED AR ON THE DECISION IN THE CASE OF ACIT VS M / S GAGANDEEP INFRAST RUCTURE PVT LTD BEARING ITA NO.5784/MUM /2011 ( 2014 - TIOL - 656 - ITAT - MUM) WHEREIN IT HAS BEEN HELD AS UNDER: WHETHER NO ADDITION C AN BE MADE UNDER SECTION 68 FOR HUGE SHARE PREMIUM RECEIVED BY THE ASSESSEE AS IT IS A PREROGATIVE OF THE BOARD OF DIRECTORS OF THE COMPANY TO DECIDE THE PREMIUM AMOUNT AND IT IS THE WISDOM OF THE SHARE HOLDERS WHETHER THEY WANT TO SUBSCRIBE TO SUCH A HEAV Y PREMIUM AND THE REVENUE AUTHORITIES CANNOT QUESTION THE CHARGING OF SUCH HUGE PREMIUM WITHOUT ANY BAR FROM ANY LEGISLATED LAW OF THE LAND - WHETHER ONCE THE INITIAL BURDEN OF PROOF AS RESTED UPON THE ASSESSEE HAS BEEN SUCCESSFULLY DISCHARGED BY THE ASSES SEE EVEN IF IT IS HELD THAT EXCESS PREMIUM HAS BEEN CHARGED, IT DOES NOT BECOME INCOME AS IT IS A CAPITAL RECEIPT . 44. NOW COMING TO THE DECISION RELIED BY LEARNED CIT(A) IN THE CASE OF DURGA PRASAD MORE 82 ITR 540, THE FACTS AND DECISION OF THE CASE OF DURGA PRASAD MORE WAS RENDERED UNDER THE PROVISIONS OF THE ERSTWHILE INDIAN INCOME - TAX ACT, 1922 AND THE MOOT QUESTION IN THAT CASE WAS 'WHETHER ON A PROPER INTERPRETATION OF THE DEED OF CONVEYANCE AND THE DEED OF SETTLEMENT THE TRIBUNAL IS RIGHT IN HOLDIN G THAT THE HOUSE PROPERTY ITA NO. 7643 - 2013 & 1808 - 2015 M/S. KALSHA BUILDERS PVT . LTD., 22 BEING PREMISES NOS. 46A AND 468, WELLESLEY STREET, CALCUTTA, IS NOT TRUST PROPERTY?' SINCE THE ABOVE CASE WAS GIVEN ON COMPLETE DIFFERENT FACTS AND CIRCUMSTANCES AND THE ISSUE INVOLVED THEREIN NOT BEING RELATED TO THE CASE AT HAN D OF THE APPELLANT, THE RATIO OF THE SAID DECISION CANNOT BE APPLIED TO THE CASE OF THE APPELLANT ESPECIALLY WHEN THERE ARE DIRECT JUDGEMENTS AVAILABLE ON THE ISSUE OF ADDITION MADE UNDER SECTION 68 OF THE INCOME TAX ACT, 1961. 45. CIT(A) HAS ALSO RELIED O N DECISION OF HONBLE SUPREME COURT IN CASE OF SUMATI DAYAL VS. CIT 214 ITR 801. THE FACTS OF WHICH WAS AS UNDER: - [A) THE APPELLANT'S KNOWLEDGE OF RACING IS VERY MEAGRE; B) A JACKPOT IS A STAKE OF FIVE EVENTS IN A SINGLE DAY AND ONE CAN BELIEVE A REGULA R AND EXPERIENCED PUNTER CLEARING A JACKPOT OCCASIONALLY BUT THE CLAIM TO THE APPELLANT TO HAVE WON A NUMBER OF JACKPOTS IN THREE OR FOUR SEASONS NOT MERELY AT ONE PLACE BUT AT THREE DIFFERENT CENTRES NAMELY MADRAS, BANGALORE AND HYDERABAD APPEARS, PRIMA F ACIE, TO BE WILDAND CONTRARY TO THE STATISTICAL THEORIES AND EXPERIENCE OF THE FREQUENCIES AND PROBABILITIES; C) THE APPELLANT'S BOOKS DOES NOT SHOW ANY DRAWINGS ON RACE DAYS OR ON THE IMMEDIATELY PRECEDING DAYS FOR THE PURCHASE OF THE JACKPOT COMBINATIO N TICKETS, WHICH ENTITLED SIZEABLE AMOUNTS VARYING GENERALLY BETWEEN RS. 2,000 TO RS. 3,000. THE DRAWINGS RECORDED IN THE BOOKS CANNOT BE EO - RELATED TO THE VARIOUS RACING EVENTS AT WHICH THE APPELLANT MADE THE ALLEGED WINNINGS; D) WHILE THE APPELLANT'S C APITAL ACCOUNT WAS CREDITED WITH THE GROSS AMOUNTS OF THE RACE WINNINGS, THERE WERE NO DEBITS EITHER FOR EXPENSES AND PURCHASE OF TICKETS OR FOR LOSSES; AND E) IN VIEW OF THE EXCEPTIONAL LUCK CLAIMED TO HAVE BEEN ENJOYED BY THE APPELLANT, HER LOSS OF IN TEREST IN RACES FROM ITA NO. 7643 - 2013 & 1808 - 2015 M/S. KALSHA BUILDERS PVT . LTD., 23 1972 ASSUMES SIGNIFICANCE. WINNINGS IN RACING BECAME LIABLE TO INCOME - TAX FROM 1 - 04 - 1972 BUT ONE WOULD NOT GIVE UP AN ACTIVITY YIELDING OR LIKELY TO YIELD A LARGE INCOME MERELY BECAUSE THE INCOME WOUL D SUFFER TAX. THE POSITION WOULD BE DIFFERENT; HOWEVER, I F THE CLAIM OF WINNINGS IN THE RACES WAS FALSE AND WHAT WAS PASSED OFF AS SUCH WINNINGS REALLY REPRESENTED THE APPELLANT'S TAXABLE INCOME FROM SOME UNDISCLOSED SOURCES. 46. AFTER CAREFULLY GOING THROUGH THE DECISION OF HONBLE SUPREM E COURT, WE FOUND THAT IN THE CASE OF SUMATI DAYAL (SUPRA), THE SURROUNDING CIRCUMSTANCES AVAILABLE WERE AGAINST THE ASSESSEE ON WHICH THE RULE OF HUMAN PROBABILITIES CAN BE APPLIED. HOWEVER, IN THE PRESENT CASE, RAT IO OF THIS DECISION CANNOT BE APPLIED SI NCE FACTS IN THIS CASE ARE COMPLETELY DIFFERENT FROM THE FACTS OF THE ASSESSEE'S CASE. FURTHER MORE , HOW THE SAID FACTS CAN BE RELEVANT FOR ASSUMING THAT SHARE APPLICATION MONEY RECEIVED FROM SHARE APPLICANT IS ASSESSEE'S OWN MONEY AND ALSO IN THIS CASE REV ENUE HAS NOT PRODUCED ANY EVIDENCE TO ESTABLISH THE SAM E. 47. DECISION OF DELHI HIGH COURT IN CASE OF NOVA PROMOTERS & FINLEASE (P) LTD., 342 ITR 169 WAS ALSO RELIED ON BY CIT(A). WE FOUND THAT THE RATIO OF THIS CASE CANNOT BE APPLIED IN THE PRESENT CASE O F A SSESSEE SINCE, IN THE CASE OF ASSESSEE NEITHER ANY STATEMENT WAS GIVEN BY THIRD PARTY TO THE INVESTIGATION WING IN WHICH THEY HAVE MENTIONED SPECIFICALLY THAT ASSESSEE WAS IN VOLVED IN THE ARRANGEMENT NOR AO HAS PROVED SPECIFIC INVOLVEMENT OF THE ASSESSE E IN THE ARRANGEMENT OF INTRODUCTION OF OWN MONEY IN THE GARB OF SHARE APPLICATION MONEY . ITA NO. 7643 - 2013 & 1808 - 2015 M/S. KALSHA BUILDERS PVT . LTD., 24 48. RELIANCE WAS ALSO PLACED BY CIT(A) ON THE DECISION OF HONBLE SUPREME COURT IN CASE OF P. MOHANKAKALA 291 ITR 278. RELIANCE WAS ALSO PLACED ON THE FOLLOWING DEC ISIONS. I. RAJEEV TANDON VS ACIT (164 TAXMAN 271) (DEL J - IC) II. CIT VS ANIL KUMAR (292 ITR 552) (DEL) III. D.C.RASTOGI VS ACIT (57 ITD 295) (DEL) IV. C I T VS MIRA S. KHURANA (333 FTR 488)(GUJARAT HC) V. YASH PAL GOEL VS CIT (310 ITR 75)(P&H) 49. IN THE ABOVE CASES THE AO HAD MADE ADDITION FOR GIFTS RECEIVED B Y THE ASSESSEE BASED ON FINDINGS THAT THE GIFTS WERE NOT GENUINE. FURTHER THE ASSESSEE IN THAT CASE HAD NOT PLACED ON RECORD ANYTHING TO SHOW AS TO WHAT WAS FINANCIAL CAPACITY OF DONORS, WHAT WAS CRE DITWORTHINESS OF DONORS, WHAT KIND OF RELATIONSHIP DONORS HAD WITH ASSESSEE, WHAT WERE SOURCES OF FUNDS GIFTED TO ASSESSEE AND WHETHER DONORS HAD CAPACITY OF GIVING LARGE AMOUNT OF GIFT TO ASSESSEE. IT IS IN THESE PECULIAR CIRCUMSTANCES THAT THE COURT HAS UPHELD THE ADDITION MADE BY THE AO. HENCE, THE SAID DECISION CANNOT BE APPLIED IN THE PRESENT CASE OF ASSESSEE WHERE THERE WAS NO SUCH SPECIFIC FINDING OR EVIDENCE WAS MADE AVAILABLE BY THE ASSESSING OFFICER TO PROVE THAT MONEY RECEIVED BY THE ASSESSEE WAS NOT GENUINE AND IT CAME FROM THE COFFERS OF THE ASSESSEE COMPANY. 50. THE CIT(A) HAS ALSO RELIED ON THE DECISION OF ALLAHABAD HIGH COURT IN CASE OF BANARASI PRASAD 304 ITR 239. IN THIS CASE, THE ASSESSEE HAD CERTAIN ENTRIES IN HIS BOOKS OF ACCOUNT SHOWING RECEIPTS FROM HIS WIFE AND ITA NO. 7643 - 2013 & 1808 - 2015 M/S. KALSHA BUILDERS PVT . LTD., 25 MINOR SON. SINCE HE WAS NOT ABLE TO EXPLAIN THE SOURCE OF INCOME IN THE HANDS OF HIS WIFE AND SON, THE ASSESSING OFFICER MADE ADDITIONS UNDER SECTION 68. ON SECOND APPEAL, THE TRIBUNAL UPHELD THE ADDITION HOLDING THAT IN THE CAS E OF CASH CREDITS IN THE ASSESSEE'S BOOKS IN THE NAMES OF CLOSE RELATIVES, THE BURDEN OF PROOF ON THE ASSESSEE UNDER SECTION 68 REQUIRED HIM TO ESTABLISH THE NATURE AND SOURCE OF THE AMOUNT WHICH WAS AFFIRMED BY THE HC. THE SAID CASE BEING RENDERED IN THE SPECIAL CIRCUMSTANCES BEING CREDITS WERE RECEIVED BY THE ASSESSEE FROM CLOSE RELATIVES LIKE HIS NON - EARNING WIFE AND MINOR SON, THE RATIO OF AFORESAID DECISION CANNOT BE APPLIED TO THE A SSESSEES CASE . 51. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND AN Y MERIT IN THE ACTION OF THE LOWER AUTHORITIES FOR MAKING ADDITION U/S.68. 52. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 05 / 12 /2016 S D / - ( RAVISH SOOD ) S D/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 05 / 12 /201 6 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//