M/s. Pankaj Enka Pvt.Ltd., Surat V. The Dy.CIT.,Cent.Circle-1, Surat

ITA 816/AHD/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89428 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 03-03-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 20-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: MEHUL R SHAH
• Keywords: Bogus Share capital; Income from undisclosed sources; Search and seizure; Opportunity of being heard; Opportunity of cross examination; Additional evidence; Question of law; Third party statement; Accommodation entries; Onus to prove; Reason to believe; Reassessment proceedings; Borrowed satisfaction
• Section: 143(3); 133(6); 131; 148; 132; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD , BEFORE SHRI SHAILEND RA K UMAR YADAV, JUDICIAL MEMBER, AND SHRI N. S. SAINI , ACCOUNTANT MEMBER ITA. NO. 816 /AHD/20 1 3 (ASSESSMENT YEAR: 20 0 5 - 0 6 ) M/S. PANKAJ ENKA PVT. LTD. 105, J.K. TOWER, RING ROAD, SURAT - 395002 APPELLANT VS. DCIT, CENTRAL CIRCLE - 1, SURAT RESPONDENT PAN: A A BCP4028R / BY APPEL LANT : SHRI MEHUL R. SHAH , A .R. / BY RESPONDENT : SHRI B. L. YADAV , SR. D. R. / DATE OF HEARING : 11 . 0 3 .2015 / DATE OF PRONOUNCEMENT : 14 . 0 5. 201 5 I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 2 ORDER PER SHAILENDRA KUMAR YADAV, J . M: TH IS APPEAL HAS BEEN FILED BY THE ASSESSE E AGAINST THE ORDER OF COMMISSIONER OF INCOME - TAX (APPEALS) - I , SURAT , DATED 2 8 .0 2 .201 3 FOR A.Y. 20 0 5 - 0 6 ON THE FOLLOWING GROUND : 1 . ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEA RNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN REOPENING ASSESSMENT BY ISSUING NOTICE U/S 148 OF I.T. ACT, 1961. 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEAR NED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN MAKING ADDITION OF RS.1,06,00,000/ - (21,00,000/ - + 85,00,000/ - ) U/S 68 OF THE ACT ON ACCOUNT OF SHARE APPLICATION AND SHARE PREMIUM MONEY. 3. IT IS THEREFO RE PRAYED THAT THE ASSESSMENT FRAMED U/S 143(3) R.W.S. 147 OF THE ACT MAY KINDLY BE QUASHED OR ALTERNATIVELY THE ABOVE ADDITIONS MADE BY THE ASSESSING OFFICER AND CONFIRMED BY COMMISSIONER OF INCOME - TAX (APPEALS) MAY PLEASE BE DELETED. 2. ASSESSEE IS EN GAGED IN THE BUSINESS OF HIGH SEAS SALES OF IMPORTED GOODS, YARN, PLASTIC GRANULES ETC. IN THIS CASE, ORIGINAL RETURN OF INCOME WAS FILED ON 17.10.2005 DECLARING INCOME OF RS.96,520/ - , IT WAS PROCESSED U/S. 143(1) OF THE ACT ON 20.03.2006. CONSEQUENTLY, ASSESSING OFFICER RECEIVED AN INFORMATION FROM THE INVESTIGATION WING, MUMBAI THROUGH THE OFFICES OF DGIT (INV) SURAT, CIT(A) - I, SURAT AND ADDL. CIT(A), I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 3 RANGE - 1, SURAT REGARDING BOGUS SHARE APPLICATION MONEY TO THE EXTENT OF RS.21,00,000/ - CLAIMED TO HAVE BEEN RECEIVED FROM M/S. MIHIR AGENCY PVT. LTD. AND M/S. BUNIYAD CHEMICALS PVT. LTD. THE SHARE APPLICATION MONEY WAS CLAIMED TO HAVE BEEN RECEIVED FROM THESE COMPANIES FOR PURCHASE OF 42000 SHARES ON FACE VALUE OF RS.10/ - AT THE PREMIUM OF RS.40 PER SHARE. 2.1 DURING SEARCH U/S.132 OF THE ACT ON 25.11.2009, CONSEQUENT TO AN ALERT RECEIVED FROM FIU, NEW DELHI IN RESPECT OF SUSPICIOUS TRANSACTION IN THE BANK ACCOUNT OF M/S MAHASAGAR SECURITIES PVT. LTD. DURING COURSE OF SEARCH, IT WAS DETECTED THAT M/S MAHA SAGAR SECURITIES PVT. LTD. ALONG WITH ITS 34 GROUP COMPANIES, WHICH INCLUDED ABOVE TWO COMPANIES FROM WHOM ASSESSEE CLAIMED TO HAVE RECEIVED SHARE APPLICATION MONEY, WAS ENGAGED IN THE ACTIVITY OF GIVING BOGUS ACCOMMODATION ENTRIES TO VARIOUS PERSONS FOR B OGUS SHARE APPLICATION MONEY, BOGUS STCG/LOSS AND BOGUS SHARE TRADING AND SHARE SPECULATION PROFIT/LOSS. 2.2 THE MAIN PERSON BEHIND THIS FRAUDULENT ACTIVITY WAS ALLEGED TO BE MR. MUKESH CHOKSI WHOSE STATEMENT ON OATH WAS RECORDED BY THE INVESTIGATION WING ON 25.11. 2009 IN WHICH, HE EXPLAINED IN DETAIL THE MODUS OPERAND I FOR GIVING DIFFERENT TYPES OF ACCOMMODATION ENTRIES. SHRI MUKESH CHOKSI, IN HIS STATEMENT , ADMITTED THAT HE USED TO OPERATE WITH A CHAIN OF BROKERS/ FRAUDUL ENT AGENTS WHO USED TO ACCEPT C ASH FROM TH E PERSON SEEKING ACCOMMODATION ENTRIES . TH IS CASH USED TO BE I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 4 DEPOSITED IN NUMEROUS BANK ACCOUNTS MAINTAINED BY THE GROUP AN D AFTER TRANSFERRING MONEY FROM ONE ACCOUNT TO ANOTHER, THEY USED TO GIVE CHEQUE FOR ACCOMMODATION ENTRY FOR WHICH COMMIS SION USED TO BE CHARGED, KACHHA CASH BOOK USED TO BE MAINTAINED BY GROUP AND CORRESPONDING CHEQUE OF ACCOMMODATION ENTRIES USED TO BE GIVEN AFTER RECEIPT OF CASH. CHEQUE USED TO BE ISSUED FROM THE BANK ACCOUNT OF ONE OF THE COMPANIES OF THE GROUP OTHER THAN THE COMPANY IN WHICH, CASH WAS DEPOSITED. 2.3 MR. MUKESH CHOKSI ALSO CLAIMED TO ADMIT THAT MANY OF HIS CONCERNS WERE BANNED BY SEB I FOR DOING BROKERA GE BUSINESS. HOWEVER, SAID COMPANIES CONTINUED T O ISSUE BOGUS ACCOMMODATION BILLS FOR THE BENEFIT O F CLIENTS . IN ANSWER TO QUESTION NO.49 OF STATEMENT, SHRI MUKESH CH O KS I CATEGORICALLY STATED THAT 'MY BUSINES S IS GIVING ACCOMMODATION ENTRY. ' 2.4 DURING COURSE OF SEARCH, DATA FROM HARD DISK, FROM THE OFFICE OF SHRI MUKESH CHOKSI, WAS EXTRACTED A ND FROM THE SAID DATA, IT WAS NOTICED THAT ASSESSEE H A D T AKEN BOGUS SHARE APPLICATION MONEY FROM THE ABOVE TWO COMPANIES OF MUKESH CHOKSI GROUP . TH E MODUS OPERA NDI IN RESPECT OF SAME EXPLAINED UNDER THE HEADING ' NOTE ON ACTIVITIES OF THE COMP ANIES OF THE MAHASAGAR GROUP IN DETAILS SENT BY INVESTIGATION WING. PARAGRAPH 6 OF THE SAME IS REPRODUCED HEREIN UNDER: - I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 5 ' ( 6 ) ONE TIME ENTRY/SHARE APPLICATION MONEY : THE COMPAN IES OF THE GROUP ALSO HELP OTHER COMPANIES INTRODUCE THEIR UNACCOUN TED INCOME AS BOGUS SHARE APPLICATION MONEY. FOR THIS THE CLIENT COMPANY PROVIDES THE LIST OF DOCUMENTS TO BE GIVEN BY THE MAHASAGAR GROUP OF COMPANIES WHICH INCLUDES MEMORANDUM AND ARTICLES OF ASSOCIATION OF THE COMPANY MAKING THE INVESTMENT, EXTRA CT OF RE SOLUTION PASSED AT THE MEETING OF THE BOARD OF DIRECTORS OF THE COMPANY MAKING THE INVESTMENT, DECLARATION BY THE C OMPANY MAKING THE INVESTMENT, SHARE APPLICATION FORM, BLANK ACKNOWLEDGEMENT OF RECEIPT OF SALES CONSIDERATION, OF THE SHARES AT A LATER DATE DULY SIGNED BY THE DIRECTO RS OF THE COMPANY MAKING THE INVESTMENT, BLANK TRANSFER DEED, DULY SIGNED BY THE DIRECTORS OF THE COMPANY MAKING THE INVESTMENT, LIST OF ITS PRESENT DIRECTORS. AFTER GIVIN G THE ABOVE MENTIONED DOCUMENTS, CASH IS RECEIVED FR OM THE COMPANY SEEKING THE ENTRY / ADJUSTMENT WHICH IS DEPOSITED IN THE BANK ACCOUNTS OF THE (MUKESH CHOKSI) GROUP COMPANIES OTHER THAN THE COMPANY FROM WHICH ENTRY I S TO BE GIVEN. THE FUNDS ARE TRANSFERRED FROM THE SUBSIDIARY ACCOUNTS TO THE BANK ACCO UNT OF TH E COMPANY MAKING THE INVESTMENT. CH EQUE IS ISSUED IN FAVOUR OF THE COMPANY SEEKING THE ENTRY / ADJUSTMENT FROM THE BANK ACCOUNT OF THE COMPANY MAKING THE INVESTMENT. EVIDENCES GATHERED IN SUPPORT OF THIS ACTIVITY: ANALYSIS OF T HE EXTERNAL HA RD DISK SEIZED FROM MUKESH CHOKSI'S OFFICE REVEALS NUMEROUS ' SHARE APPLICATION ' FORMS FOR DIFFERENT COMPANIES, DULY FILLED OUT , THE AMOUNT GIVEN , BLANK RECEIPTS ISSUED FOR REPURCHASE OF THE SHARE ( S) ( TO BE USED AT A FUTURE D A TE ) , ARTICLES OF ASS OCIATION, MEMORANDUM , EXTRACTS OF RESOLUTIONS PASSED AT THE BOARD MEETINGS OF THE COMPANIES MAKING THE INVESTMENT, BLANK TRANSFER DEEDS ETC IN SHORT ALL EVIDENCES REQUIRED TO PLACE THE SHARE APPLICATION MONEY IN A COMPANY AND HAVE THE SHARES SOLD AT A FUT URE DATE AND THE MONEY RETURNED BACK. STATEMENTS OF ANUPARMI PATIL , KAPIL CHATURVEDI ( EMPLOYEES OF THE GROUP COMPANIES ) AND JOSE PH I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 6 SAMPAT ( DIRECTOR ) ENGAGED I N T HE ACTIVITY FROM CHOKS I'S STATEMENT CONFIRM THE SAME.' 2 .5 THE SAID INFORMATION RECEIVED FROM THE INVESTIGATION WING ALSO HAD DE T AILS REGARDING NAME , PAN, ADDRESS AND AMOUNT OF SHARE APPLICATION MONEY RECEIVED BY ASSESSEE FROM ABOVE COMPANIES. 2 .6 THE NOTICE U/S 148 OF THE ACT WAS ISSUED BY ASSESSING OFFICER ON THE BASIS OF RECEIPT OF THIS SP ECIFIC INFORMATION AFTER DULY RECORDING THE REASONS FOR RE - OPENING. THE SAID REASONS RECORDED BY ASSESSING OFFICER ON 23.06. 201 1 ARE REPRODUCED HEREIN UNDER: - ' THE RETURN OF INCOME WAS FILED O N 1 7 .10. 2005 DECLARING THE INCOME OF R S . 96,552/ - THE SAME IS P ROCESSED U/S 143(1) OF THE ACTON 20.03.2006, ACCEPTING THE RETURNED INCOME. NO ORDER U/S 143 PASSED IN THIS CASE. A SEARCH AND SEIZURE ACTION U/S 132 OF THE INCOME TAX ACT WAS CONDUCTED IN THE CASE OF M/S MAHASAGAR SECURITIES PVT LTD BY THE D IT( INV), (UN I T - (4), MUMBAI ON 25. 11.2009 . THE SEARCH WAS CONDUCTED ON THE BASIS OF INFORMATION RECEIVED IN AN FIU ALERT FROM NEW DELHI REGARDING SUSPICIOUS TRANSACTIONS TAKING PLACE IN THE BANK ACCOUNTS OF THIS COMPANY AND ITS RELATED COMPANIES, THE DIRECTORS OF THE SE COMPANIES WERE ONE MU K ESH M CHOKSHI AND JAYESH K SAMPAT, DURING THE COURSE OF SEARCH, IT WAS REVEALED THAT THE MAHASAGAR SECURITIES PVT LTD, AND ITS RELATED GROUP OF 34 OLD COMPANIES ( THE PROMINENT ONES BEING ALLIANCE INTERMEDIATES AND NETWORK PRIVATE LIMITED, M/S MIHIR AGENCIES PRIVATE LIMITED, M/S GOLD STAR FINVEST PRIVATE LIMITED ETC ALL RUN BY M U KESH CHOKSHI ) WERE ENGAGED IN B ILLING ACTIVITIES AND IN THE BUSINESS OF PROVIDING BOGUS PROFIT / LOSS, SHORT TERM / LONG TERM CAPITAL GAIN/ LOSS, S HA RE APP LICATION MONEY, COMMODITIES PROFIT / LOSS ON COMMODITY I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 7 TRADING (THROUGH MCX ) AND HAD BEEN CONTIN UING THIS BUSINESS FOR MANY YEAR S. IN THE LIST OF CLIENTS WHO HAVE TAKEN ACCOMMODATION ENTRIES FROM THESE COMPANIES, THE NAME OF THIS ASSESSEE IE PANKAJ E NKA P VT LTD IS ALSO APPEARING/ . DURING THE COURSE OF SEARCH AND SEIZURE PROCEEDINGS THE STATEMENT OF SHRI MUK ESH CHOKSHI, MAIN PERSON BEHIND THE SCAM, WAS ALSO RECORDED ON 25.11.2 009 . I N HIS STATEMENT RECORDED ON OATH HE HAS ADMITTED THAT THESE TRANSACTIONS A RE BOGUS . FROM THE DETAILS SUBMITTED BY THE INVESTIGATION WING, MUMBAI , IT IS SEEN THAT THE ASSE S SEE HAS OBTAINED ENTRY OF THE SHARE APPLICATION MONEY OF R S. 11, 00 ,000/ - FROM MIHIR AGENCY PVT L TD , ONE OF COMPANY RUN BY SHRI M U KESH CHOKSHI, DURING THE FI NANCIAL YEAR 2004 - 05 ( A Y 2 005 - 06 ) , IN VIEW OF THIS NEW FACT, I HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT . IN VIEW OF THE ABOVE, INCOME T O THE EXTENT BEING MORE THAN RS . 1 , 00 ,000/ - HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. THEREFORE, NOTICE U/S 148 NE E D TO BE ISSUED . THE AP PROVAL OF THE ADDL. CIT RANG E - 1, SURAT IS, THEREFORE, SOUGHT FOR ISSUE OF NOTICE UNDER THE PROVISIONS OF SECTION 151(2) OF THE ACT . ' 2.7 I N RESPONSE , ASSESSEE VIDE ITS LETTER DATED 25 . 07 . 2011 STATED T HAT ITS RETURN OF INCOME FILED ON 17. 10 . 2005 SHOULD BE TREATED T O HA VE BEEN FILED, IN RESPONSE TO NOTICE U/S . 143 . THE FACTS REGARDING RECEIPT OF INFORMATION FROM INVESTIGATION WING WAS COMMUNICATED TO ASSESSEE VIDE SHOW CAUSE NOTICE DATED 23. 04 . 2012 BY ASSESSING OFFICER REPRODUCED IN PARAGRAPH 5 OF THE ASSESSMENT ORDER . I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 8 2.8 IN THIS CASE, ASSESSEE COULD NOT FURNISH THE REQUIRED INFORMATION AS ASKED BY ASSESSING OFFICER AND ASSESSING OFFICER MADE FOLLOWING ADDITIONS: SR. NO. PARTICULARS ADDITION MADE (IN RS) 1 U/S 68 OF THE ACT IN RESPECT OF SHARE APPLICATION MONEY CLAIMED TO HAVE BEEN RECEIVED FROM M/S MIHIR AGENCY PVT LTD, AND BUNIYAD CHEMICALS P LTD. RS.21,00,000/ - 2 SHARE APPL ICATION MONEY CLAIMED TO HAVE BEEN RECEIVED FROM 12 OTHER COMPANIES. RS.85,00,000/ - 3 ADDITION OF BANK INTEREST BEING INTEREST ON FDR NOT SHOWN BY THE APPELLANT RS.3,43,498 4 ADDITION U/S 68 OF UNSECURED LOANS IN RESPECT OF THREE PARTIES RS.35,50,000/ - 5 LOANS AND ADVANCES GIVEN BY THE APPELLANT RS.1,38,02,539/ - 6 CURRENT LIABILITIES RS.1,06,99,714/ - 3. MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, WHEREIN VARIOUS SUBMISSIONS WERE MADE ON BEHALF OF ASSESSEE INTER ALIA SUBMITTED THAT ASSESSEE WAS NOT PROVIDED DUE OPPORTUNITY OF BEING HEARD. ACCORDINGLY, REMAND REPORT WAS CALLED FOR FROM ASSESSING OFFICER VIDE APPELLATE OFFICE LETTER DATED 26.07.2012, WHICH IS REPRODUCED AS UNDER: 2 . THE APPELLANT DURING T HE COURSE OF APPELLATE PROCEEDINGS, HAS POINTED OUT THAT A SHOW CAUSE LETTER WAS ISSUED ON 23. 04 . 2012 AND THE ASSESSMENT ORDER WAS PASSED ON 1 1 .05.20 12 THOUG H THE APPELLANT ASKED FOR 45 TO 60 D AY S TIME AS THE MATTER WAS VERY OLD. SINCE THE NOTICE U/S 148 O F THE ACT WAS SERVED U PON THE APPELLANT ON 04 .07.2011, THE I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 9 PROCEEDINGS WERE NOT GETTING TIME BARRED BY LIMITATION. THE APPELLANT HAS THEREFORE MADE OUT A CASE U ND ER RULE 46 A(L)(B ) AND 46 A( 1 ) ( D) OF THE I T RULES FOR FURNISHING ADDITIONAL EVIDENCE . 2.1 WI TH REFERENCE TO THE SAME, YOU ARE REQUESTED TO CONFIRM THE FACTS SLATED BY THE APPELLANT, 3. WITHOUT PREJUDICE TO THE ABOVE, AND NOTWITHSTANDING THE FACT THAT YOU MAY OBJECT TO THE ADMISSION OF ADDITIONAL EVIDENCE, YOU ARE BEING GIVEN ART OPPORTUNITY TO E XAMINE THE EVIDENCE AND PRODUCE FURTHER EVIDENCE IF ANY, IN REBUTTAL OF THE EVIDENCE FILED BY THE APPELLANT UNDER RULE 46A(3) (A) AND 46A (9)(B) OF THE IT RULES. 4. THE APPELLANT'S SUBMISSION IN TWO PAPER BOO K IS ENCLOSED HEREWITH FOR YOUR PERUSAL AND REPO RT. 5. YOU ARE ALSO DIRECTED U/S 250(4) OF THE I T ACT TO CONDUCT NECESSARY INQUIRIES IN RESPECT OF ADDITIONS MADE U/S 68 OF THE I T ACT REGARDING SHARE APPLICATION MONEY AND UNSECURED LOAN, APART FROM ADDITION ON ACCOUNT OF CURRENT LIABILITY. SUCH INQUIR Y MAY INVOLVE 3 RD PARTY VERIFICATION AND VERIFICATION OF MOVEMENT OF MONEY THROUGH BANKING CHANNELS. 3.1 THE REPORT OF ASSESSING OFFICER DATED 06.09.2012 FORWARDED BY ADDITIONAL C I T VIDE LETTER DATED 10.9.2012 WAS RECEIVED ON 11.09. 2012. A COPY OF THE S AME WAS GIVEN TO ASSESSEE AND ASSESSEE 'S COMMENTS WERE OBTAINED. HAVING GONE THROUGH SAME, CIT(A) NOTICED THAT CERTAIN ISSUES WERE NOT PROPERLY ADDRESSED OR INVESTIGATED AT ASSESSMENT STAGE OR DURING THE REMAND PROCEEDINGS. THEREFORE, MATTER WAS AGAIN REMA NDED TO ASSESSING OFFICER U/S. 250 (4) OF THE ACT VI DE THIS OFFICE LETTER DATED 11.01. 2013. THE SAID LET TER IS REPRODUCED HEREIN UNDER : - I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 10 2 . WITH REFERENCE TO TH E ABOVE, IT IS NOTICED THAT THE REMAND REPORT SENT DOES NO T ADDRESS A LL THE I SSUES PROPERLY . MOREOVER, VI DE THIS OFFICE LETTER DATED 26. 7 . 2012, DIRECTIONS U/S 250( 4) OF THE IT ACT WERE ALSO ISSUED TO CONDUCT NECESSARY INQUIRY. HOWEVER, IN THE REMAND REPORT SENT MORE OR LESS THE SAME CONTENTIONS MADE IN THE ASSESS MENT ORDER HAVE BEEN REITERATED. T HEREFORE, THIS LETTER BEING ISSUED TO YOU, WITH SPECIFIC DIRECTI ONS TO FURNISH THE FOLLOWING IN FORMATION/S AFTER CONDUCTING NECESSA RY INQUIRY U/S 250 (4) OF THE I T ACT, TO THE EXTENT DIRECTED BY THIS LETTER, IN RESPECT OF EACH OF THE ADDITIONS MADE IN THE ASSESSMENT ORDER. 3. FOR THE REMOVAL OF DOUBT, I T IS CLARIFIED THAT THE SCOPE OF INQUIRY AND THE NATURE OF INFORMATION REQUIRED IS LIMITED TO WHAT IS SPECIFICALLY MENTIONED HEREIN UNDER . A. YOU SHOULD FURNISH A COPY OF THE REASONS RECORDED U/S 1 4 8 OF THE ACT ALONGWITH COPY OF ENTIRE CORRESPONDENCE WITH ITS ENCLOSURE S RECEIVED FROM THE INVESTIGA TION WING SUBSEQUENT TO SEARCH IN THE CASE OF MUKESH CHOKS I GROUP OF CASES. B . IT SHOULD BE CLARIFIED WHETHER THE APPELLANT ASKED FOR COPIES OF REASONS RECORDED D URING THE ASSESSMENT PROCEEDINGS AND IF YES, WHEN AND WHETHER THE REASONS WERE PROVIDED ? C. I T SHOULD ALSO BE CLARIFIED WHETHER THE APPELLANT RAISED ANY OBJECTIONS TO THE REASONS RECORDED FOR ISSU E OF NOTICE U/S 148 AND IF YES, WHETHER T HOSE REASONS WERE DEALT WITH BY WAY OF SPEAKING ORDER. IF YES, A COPY OF THE SPEAKING ORDER SHOULD BE SENT. D. IN RE SPECT OF ADDITION OF RS. 3,43, 3 98 / - BEING BANK INTEREST, THE APPELLANT CLAIMS THAT THESE FDS ARE IN THE NAME OF THE DIRECTORS AND THE DIRECTORS HAVE SHOWN T HIS INTEREST INCOME IN THEIR HANDS. IN THIS REGARD, YOU SHOULD CONFIRM WHETHER THIS INTEREST INCOME HAS BEEN SHOWN IN THE HANDS OF THE DIRECTORS OR NOT ? AND I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 11 WHETHER THESE FDS WERE REFLECTED IN THE RETURNS OF DIRECTORS OR NOT ? E. IN RESPECT OF ADDITION O F ' LOANS AND ADVANCES ' OF RS 1, 3 8, 02,539/ - , IT SHOULD BE CLARIFIED AS TO UNDER WHICH SECTION THE SAID LOANS AND ADVANCES, WHICH APPEARS TO BE REFLECTED ON THE ASSET SIDE OF THE BALANCE SHEET, HAVE BEEN ADDED ? F. I N RESPECT OF ADDITION OF CURRENT LIABI LITIES OF RS. 1,06,99,714/ - PARTY WISE LIST OF THIS AMOUNT SHOULD BE FURNISHED WIT H CLOSING BALANCES IN EACH NAME ON 31.03.2004, 31.3.2005, 31.3. 2006, 31 .3.2007, 31.3.2008, 31. 3.200 9, 31.3.2010, 31.3,2011, AND 31. 3.2012 I N THE FORM OF A SINGLE CHART . IT S HOULD ALSO BE MENTIONED AS TO WHAT COMPONENT ALL THESE LIABILITIES ARE PERTAINING TO A Y 2005 - 06 AND WHAT AMOUNT IS THE OPENING BALANCE ? IN CASE OF AMOUNT PERTAINING TO AY 2005 - 06, THE NATURE OF CREDIT I,.E TRADE CREDIT OR LOAN CREDIT SHOULD BE MENTIONED . G . IN RESPECT OF ADDITION OF SHARE CAPITAL, YOU SHOULD FURNISH THE FOLLOW ING DETAILS IN RESPECT OF EACH SHARE APPLICANT I. THE DAT E OF RECEIPT OF M ONEY. II. THE DATE OF ALLOTMENT OF S HARES. III. SUBSEQUENT MOVEMENT O F SHARES I.E. CHANGES IN OWNERSH IP , SUBSEQUENT TO ALLOTMENT T ILL D A TE, IV. IN CASE THESE SHARES HAV E BEEN SUBSEQUENTLY PURCHASED BY THE APPELLANT COMPANY, OR B Y ITS PROMOTERS, COMPLETE DETAILS OF SUCH TRANSACTION SHOULD B E FURNISHED I.E. DATE, AMOUNT , RATE AND MODE OF PAYMENT OF CONSID ERATION WITH BOOK VALUE OF SHARES ON THE DATE OF PURCHASE. V. BOOK VALUE OF THE SHARE ON THE DATE OF RECEIPT OF SHARE APPLICATION MONEY. H. FROM A PERUSAL OF THE BANK STATEMENT, IN RESPECT OF RECEIPTS OF SHARE APPLICATION MONEY, IT IS NOTICED THAT AMOUNT RECEIVED AS S HARE APPLICATION MONEY BY THE I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 12 APPELLANT HAS BEEN IMMEDIATELY TRANSFERRED TO SOME OTHER CONCERN/ PERSON/S, DETAILS OF WHICH ARE AVAILABLE IN THE BA NK STATEMENT O F THE APPELLANT FILED DURING ASSESSMENT/ EARLIER REMAND PROCEEDIN GS. THE NATURE OF SUCH TRANSFER I.E THE PURPOSE FOR WHICH THIS AMOUNT WAS TRANSFERRED SHOULD BE ENQUIRED. THE BANK STATEMENT OF THE SAID PARTY SHOULD ALSO BE OBTAINED FROM THE APPELLANT, IF IT IS A SISTER CONCERN. IF IT IS NOT A SISTER CONCERN, IT MAY BE OBTAINED FROM B ANK, SINCE BENEFICIARY MAY NOT HAVE BANK ACCOUNT IN THE SAME BANK, YOU MAY HAVE TO WRITE TO CONCERNED BANK AFTER GETTING THE DETAILS OF BENEFICIARIES AND THEIR BANK ACCOUNTS . I. IT IS CLARIFIED THAT THE ABOVE INQUIRY IS LIMIT ED TO ONLY THOSE WITHDRAWALS REFLECTED IN THE BANK STATEMENT WHICH CAN BE DIRECTLY CO - RELATED WITH THE RECEIPT OF SHARE APPLICATION MONEY AND NOT OTHER WITHDRAWALS. II . WITH REFERENCE TO ADDITION OF ' UNSECURED LOANS ' OF RS 35,50,000 / - IT APPEARS THAT THE ADDITION INCLUDES THE ADDITION FOR OPENING BALANCES ALSO. YOU SHOULD CLARIFY HOW MUCH AMOUNT PERTAINS TO A Y 2005 - 06 AND WHAT IS THE PRESENT STATUS OF THESE LOANS. 4. IT IS CLARIFIED THAT THESE DIRECTIONS U/S 250 (4) OF THE ACT HAVE BEEN ISSUED SO AS TO ENSURE A SPECIFIC INQUIRY WITH RESPECT TO THE SHARE APPLICATION MONEY RECEIVED , WHICH, MAY INVOLVE INQUIRIES FROM RESPECTIVE BANKERS AS WELL, ON THE OTHER ISSUES, YOU HAVE ONLY BEEN ASKED TO FURNISH CERTAIN INFORMATION ON THE BASIS OF INCOME TAX RECORD S FROM THE BOOKS OF ACCOUNTS OF THE APPELLANT . 5. Y OUR REPORT SHOULD REACH THIS OFFICE WITHIN 15 DAYS OF RECEIPT OF THIS LETTER . SINCE IT IS A HIGH DEMAND APPEAL FOR WHICH, SPECIFIC REQUEST FROM THE O/O CIT - 1 SURAT REGARDING EARLY DISPOSAL OF APPEAL HAS BEEN RECEIVED, NO EXTENSION FOR FURNISHING REMAND REPORT MAY BE GRANTED AND THIS OFFICE MAY BE C ONSTRAINE D TO DISPOSE OF THE APPEAL, ON TH E BASIS OF INFORMATION AVAILABLE ON FILE, IF THE REQUIRED REMAND REPORT IS NOT RECEIVED IN TIME.' I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 13 3.2 I N RESPONSE TO SAME, ASSESSING OFFICER'S REPORT DATED 28.01.2013 FORWARDED BY ADDL. CIT'S VIDE LETTER DATED 29.01.2013 WAS GIVEN TO ASSESSEE FOR COMMENTS. HOWEVER, CERTAIN ISSUES REMAINED TO BE CLARIFIED IN SAID REMAND REPORT AS WELL. THEREFORE, SAID CLARIFICATION WAS SOUGHT VIDE THIS OFFICE LETTER DATED 30.1.2013, WHICH IS REPRODUCED HEREIN UNDER: 'P LEASE REFER TO THE REMAND REPORT F NO. SRT.ITO/WD 1 (4)/ PANKAJ ENKA/2012 - 13 DATED 28.01.201 3 IN RESPECT OF THE ABOVE CASE . 2. YOUR ATTENTION IS INVITED TO PARA 2 ( G) OF YOUR REPORT ENCLOSING TH E LETTER FROM THE APPELLANT STATING THA T SHARES HAVE NOT BEEN TRANSFERRED TO PROMOTERS OR TO 'OTHER DIRECTORS, IN THIS REGARD, IT IS AGAIN CLARIFIED THAT YOU WERE REQUESTED TO ASCERTAIN THE PRESENT STATUS OF CORRESPONDING SHARES STARTING FROM THE TIME SHARE APPLICATION MONEY WAS RECEIVED TO TILL DATE, I.E. WHEN THE SHARES WERE ALLOTTED AN D WHO ARE THE SUCCESSIVE OWNERS ? THIS INFORMATION IS AVAILABLE IN THE FORM OF DETAILS OF SHARE HOLDING SUBMITTED BY THE COMPANY TO THE REGISTRAR OF COMPANIES. 2.1 SINCE DIRECTIONS WERE ISSUED FOR INQUIRIES U/S 250 (4) OF THE I T ACT, YOU ARE EXPECTED TO OBTAIN THE SAME FROM ROC OR OBTAIN SHARE HOLDERS REGISTER/ COPY OF SHAREHOLDER DETAILS FILED WITH THE ROC FROM THE APPELLANT. YOU SHOULD THEREFOR E, IMMEDIATELY OBTAIN THE ANNUAL SHARE HOLDERS RETURN OR SHAREHOLDERS REGISTER FROM THE APPELLANT AND FURNISH INFORMATION ON SPECIFIC POINTS ASKED MENTIONING THE INFORMATION AS PER PARA 3 (G) ( III ) OF THIS OFFICE LETTER DATED 11 . 01 .201 3. 3. SINCE NO FURTH ER INQUIRY IS NEEDED, EXCEPT OBTAINING THE DETAILS OF SUBSEQUENT OWNERS OF SHARES, TILL DATE, Y OUR REPORT SHOULD BE SUBMITTED TO THIS OFFICE , WITHIN A WEEKS TIME. I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 14 3.3 IN RESPONSE TO SAID CLARIFICATION , ASSESSING OFFICER SUBMITTED ANOTHER REPORT D ATED 04 .02.2013 FORWARDED BY T HE ADDL. CIT ON 0 8.02. 2012 . THIS COPY WAS ALSO GIVEN TO ASSESSEE O N 12.0 2.2013. ASSESSEE 'S WRITTEN SUBMISSION IN RESPECT OF VARIOUS R EM AND REPORTS HAVE BEEN T A KEN ON RECORD. IN THIS BACKGROUND, EACH GROUND OF APPEAL IS BEING TAKEN - UP FOR ADJUDICATION. 3.4 AS STATED ABOVE, SPECIFIC INFORMATION WAS RECEIVED FROM INVESTIGATION WING THAT ASSESSEE HAS RECEIVED BOGUS SHARE APPLICATION MONEY FROM M/S. MIHIR AGENCIES PVT. LTD. AND M/S. BUNIYAD CHEMICALS PVT. LTD. TO THE EXTENT OF RS.21 LACS. EVIDENCE WAS FOUND DURING COURSE OF SEARCH IN CASE OF SHRI MUKESH CHOKSI GROUP CASES AND ON THAT BASIS. ASSESSING OFFICER ISSUED NOTICE U/S. 148 OF THE ACT AFTER RECORDING THE REASONS THOUGH IN REASONS RECORDED FOR ISSUE OF NOTICE U/S. 148 ONLY RS .11 LACS CLAIMED TO HAVE BEEN RECEIVED FROM M/S. MIHIR AGENCIES PVT. LTD. WERE MENTIONED. 3. 5 DU R ING COURS E OF ASSESSMENT PROCEEDINGS, ASSESSEE DID NOT CHALLENGE THE VALIDITY OF NOTICE U/S . 148 OF THE ACT . WITHOUT PREJUDICE TO THE SAME, THE VERY FACT THAT SPECIFIC EVIDENCE WAS DET ECTED IN THIS CA SE, ON THE BASIS OF WHICH, THIS CASE WAS RE - OPENED ESTABLISHES THAT ASSESSING OFFICER NO T ONLY H A D REASON TO BELIEVE THAT INCOME CHARGEABLE TO T AX HAS BEEN ESCAPED ASSESSMENT BUT ALSO DULY RECORDED REASONS FOR THE SAME AND FOLLOWED ALL PROCEDURAL REQUIREMENTS FOR ISSUE OF I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 15 NOTICE U/S 14 8 AND FOR CONDUCTING THE REASSESSMENT PROCEEDINGS. THEREFORE, RE OPENING IN THIS CASE WA S UPHELD BY CIT(A) BY FOLLOWING THE DECISION OF HO N BLE NEW DELHI HIGH COU RT IN CASE OF NOVA PROMOTERS & F IN LEASE ( P ) . L T D . REPORTED IN 342 ITR 169 ( DELHI), WHEREIN ON SIMILAR INFORMATION , REOPENING WAS HELD T O BE VALID. THE RELEVANT PARA OF THE JUDGMENT IS REPRODUCED HERE UNDER : - '21. IT IS NOT IN DISPUTE IN THE PRESENT CASE THAT THE ASSESSMEN T WAS REOPENED ON THE BASIS OF INFORMATION RE CEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT ABOUT THE EXISTENCE OF ACCOMMODATION ENTRY PROVIDERS AND THEIR 'MODUS OPERAND I ' IN WHICH THE ASSESSES WAS ALSO FOUND TO BE INVOLVED. EVEN THE TRIBUNAL HAS RECORDED, WHILE DEALING WITH THE ASSESSES' CROSS OBJECTING CHALLENGING THE JURISDICTION OF THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT, THAT THE INFORMATION WAS SPECIFIC, NOT GENERAL OR VA G UE AND REFERRED TO TRANSACTIONS ENTERED INTO BY THE ASSESSEE DU RING T HE YEAR UNDER CONSIDERATION. IT HAS FURTHER BEEN RECORDED BY THE TRIBUNAL THAT AS PER THE INFORMATION OF THE INVESTIGATION WING, THE NAMES OF THE PERSONS ISSUING THE CHEQUES , THE CHEQUE AMOUNTS, DATES, ETC WERE ALSO MENTIONED PROVIDING A LINK BETWEEN THE ENTRY PROVIDERS AND THE ASSESSEE. WE ARE AWA RE OF THE LEGAL POSITION THAT AT THE STAGE OF ISSUING THE NOTICE U/S 148 THE MERITS OF TH E MATTER ARE NOT RELEVANT AND THE ASSESSING OFFICER AT THAT STAGE IS REQUIRED TO FORM ONLY A PRIMA FACIE BELI EF OR OPINION THAT INCOME CHARGEABLE TO TAX AT ESCAPED ASSESSMENT. HOWEVER, ONCE THAT STAGE IS CROSSED AND THE REASSESSMENT PROCEEDINGS ARE SET IN MOTION, THE MATERIAL ON THE BASIS OF WHICH THE REQUISITE BELIEF WAS FORMED BY THE ASSESSING OFFICER HAS TO BE APPRAISED AND EXAMINED. THAT MATERIAL ON THE BASIS OF WHICH, THE NOTICE UNDER SECTION 148 WAS ISSUED BECOMES RELEVANT IN THE COURSE OF THE REASSESSMENT PROCEEDINGS. ACCORDINGLY, ISSUE ON REOPENING WAS DECIDED AGAINST ASSESSEE. I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 16 4 . SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF ASSESSEE INTER ALIA SUBMITTED THAT CIT(A) ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN REOPENING ASSESSMENT BY ISSUING NOTICE U/S. 148 OF INCOME TAX ACT, 1961. ASSESSEE HAS FILED WRITTEN SUBMISSION IN THIS REGARD AND SUBMITTED THAT CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF ASSESSING OFFICER ASSESSMENT BY ISSUING NOTICE U/S. 148 OF THE ACT. LEARNED AUTHORIZED REPRESENTATIVE RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN CASE OF NOVA PROMOTERS & FINLEASE (P). LTD. (SUPRA). ON OTHER HAND, LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT CIT(A) WAS JUSTIFIED IN CONFIRMING THE ACTION OF ASSESSING OFFICER ASSESSMENT BY ISSUING NOTICE U/S. 148 OF THE ACT. 5. AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATERIAL ON RECORD . ASSESSEE IS ENGAGED IN BUSINESS OF HIGH SEAS SALES OF IMPORTED GOODS, YEARN, PLASTIC GRANULES ETC. O N THE POINT OF REOPENING , WE FIND THAT RETURN OF INCOME WAS FILED BY ASSESSEE ON 17.10.2005 DECLARING TOTAL INCOME AT RS.96,520/ - F OR A.Y. 2005 - 06. RETURN WAS ACCOMPANIED WITH AUDITED ACCOUNTS AS PER AUDIT REPORT IN FORM NO. 3CB AND 3CD AS DISCUSSED ABOVE. IN THIS CASE, NO ASSESSMENT WAS MADE UNDER SCRUTINY ASSESSMENT AND RETURN WAS ACCEPTED U/S. 143(1) ON 20.03.2006. THEREAFTER, A SSESSING OFFICER ISSUED NOTICE U/S. 148 ON 01.07.2011 AFTER RECORDING REASONS DATED 23.06.2011 ON THE BASIS OF DETAILS SUBMITTED BY INV ESTIGATION WING OF I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 17 MUMBAI. THE RELEVANT EXTRACTS OF REASONS RECORDED ARE AS UNDER: 'THE RETURN OF INCOME WAS FILED ON 17 .10.2005 DECLARING TOTAL INCOME OF RS. 96,552/ - . THE SAME IS PROCESSED U/S 143(1) ON 20.03.2006 ACCEPTING THE RETURNED INCOME. NO ORDER U/S 143(3) PASSED IN THIS CASE. A SEARCH AND SEIZURE ACTION U/S. 132 OF T H E INCOME TAX ACT WAS CONDUCTED IN THE CASE OF M/S MAHASAGAR SECURITIES PVT. LTD., BY DY. DIT (INV.) - UNIT - (4), MUMBAI, ON 25.11.2009. THE SEARCH WAS CONDUCTED ON THE BASIS OF INFORMATION RECEIVED IN AN FIU ALERT FROM NEW DELHI REGARDING SUSPICIOUS TRANSACTIONS TAKING PLACE IN THE BANK ACCOUNTS OF TH IS COMPANY AND ITS RELATED COMPANIES. THE DIRECTORS OF THESE COMPANIES WERE ONE MUKESH M. CHOKSHI AND JAYESH K. SAMPAT. DURING THE COURSE OF THE SEARCH IT WAS REVEALED THAT THE MAHASAGAR SECURITIES PVT. LTD., AND ITS RELATED GROUP OF 34 ODD COMPANIES (THE PROMINENT ONES BEING ALLIANCE INTERMEDIARIES & NETWORK PRIVATE LIMITED, M/S MIHIR AGENCIES PRIVATE LIMITED, M/S GOLD STAR FINEST PRIVATE LIMITED ETC. ALL RUN BY MUKESH CHOKSHI) WERE ENGAGED IN FRAUDULENT BILING ACTIVITIES AND IN THE BUSINESS OF PROVIDING B OGUS SPECULATION PROFIT/LOSS, SHORT TERM/LONG TERM CAPITAL GAIN/LOSS, SHARE APPLICATION MONEY, COMMODITIES PROFIT/LOSS ON COMMODITY TRADING (THROUGH MCX) AND HAD BEEN CONTINUING THIS BUSINESS FOR MANY YEARS. IN THE LIST OF CLIENTS WHO HAVE TAKEN ACCOMMODA TION ENTRIES FROM THESE COMPANIES, THE NAME OF THIS ASSESSEE I.E. PANKAJ ENKA PVT. LTD., IS ALSO APPEARING. DURING THE COURSE THE SEARCH AND SEIZURE PROCEEDINGS THE STATEMENT OF SHRI MUKESH CHOKSHI, MAIN PERSON BEHIND THE SCAM, WAS ALSO RECORDED ON 25.11.2 009. IN HIS STATEMENT RECORDED ON OATH HE HAS ADMITTED THAT THESE TRANSACTIONS ARE BOGUS. FROM THE DETAILS SUBMITTED BY THE INVESTIGATION WING, MUMBAI, IT IS SEEN THAT THE ASSESSEE HAS OBTAINED ENTRY OF THE SHARE APPLICATION MONEY OF RS. 11,00,000/ - FROM MIHIR AGENCY PVT. LTD., ONE OF COMPANY RUN BY SHRI MUKESH I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 18 CHOKSHI, DURING THE FINANCIAL YEAR 2004 - 05 (A.Y. 2005 - 06). IN THE VIEW OF THIS NEW FACT, I HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 1 47 OF THE ACT. IN VIEW OF THE ABOVE, INCOME TO THE EXTENT BEING MORE THAN RS.1,00,000/ - HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. THEREFORE, NOTICE U/S.148 NEED TO BE ISSUED. THE APPROVAL OF THE ADDL CIT RANGE - I, SURAT IS THER EFORE, SOUGHT FOR ISSUE OF NOTICE UNDER THE PROVISIONS OF SECTION 151(2) OF THE ACT. ' 5.1 THE PLAIN READING OF REASONS RECORDED BY ASSESSEE MAKES IT CLEAR THAT NOTICE U/S . 148 WAS ISSUED AS PER INFORMATION RECEIVED FROM INVESTIGATION WING FROM MUMBAI. THE REASONS RECORDED BY ASSESSING OFFICER ONLY INDICATE THAT AS PER INFORMATION OF INVESTIGATION WING FROM MUMBAI, CERTAIN COMPANIES OF MUKESH CHOKSHI GROUP WERE OPERATING AND ALLEGEDLY PROVIDING ACCOMMODATION ENTRIES AND ASSESSEE HAS ALSO RECEIVED SHARE APPL ICATION MON EY FROM SUCH COMPANY. ASSESSING OFFICER JUST MADE GENERAL OBSERVATION ABOUT INFORMATION SUPPLIED BY INVESTIGATION WING AND SOUGHT TO REOPEN THE ASSESSMENT WITHOUT POINTING OUT HOW INFORMATION COMING IN HIS POSSESSION HAS NEXUS WITH ESCAPEMENT O F INCOME. T HE PRIMARY CONDITION OF SECTION 148 OF THE ACT IS THAT ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND THIS SATISFACTION SHOULD BE OF ASSESSING OFFICER HIMSELF AND NOT A BORROWED SATISFACTION. I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 19 THEREFORE, NO TICE SO ISSUED TO ASSESSEE WA S ILLEGAL AND BAD IN LAW ON FACT OF IT. 5 .2 AS PER THE PROVISIONS OF SECTION 147/148, IT IS CLEAR THAT FOR TAKING ACTION U/S 147 OF THE ACT, ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT AN INCOME CHARGEABLE TO TAX HAS ES CAPED ASSESSMENT FOR ANY ASSESSMENT YEAR. THEREFORE, ASSESSING OFFICER MUST SATISFY HIMSELF REGARDING ESCAPEMENT OF INCOME. HE SHOULD NOT ACT MECHANICALLY OR ON INFORMATION SUPPLIED BY ANY OTHER PERSON. IN THE PRESENT CASE, ASSESSING OFFICER ACTED ON INFO RMATION SUPPLIED BY THE DIRECTORATE OF INCOME TAX (INV.), MUMBAI BUT HE HAS NOT APPLIED HI S INDEPENDENT MIND AND REASSESSMENT PROCEEDINGS WERE INITIATED ONLY ON THE BASIS OF INFORMATION RECEIVED FROM ABOVE INVESTIGATION WING MUMBAI. HONBLE DELHI HIGH COU RT IN CASE OF CIT V. KAMDHENU STEEL & ALLOYS LTD, (2012) 361 ITR 220 (DELHI) OBSERVED THAT W HERE ASSESSING OFFICER ACTED MECHANICALLY ON INFORMATION SUPPLIED BY THE DIRECTORATE OF IT (INV.) ABOUT THE ALLEGED BOGUS/ACCOMMODATION ENTRIES PROVIDED BY CERTAIN INDIVIDUALS/COMPANIES, WITHOUT APPLYING HIS OWN MIND, HE WAS NOT JUSTIFIED IN INVOKING JURISDICTION U/ S. 147. HONBLE APEX COURT IN CASE OF C ALC UT TA DISCOUNT CO. LTD. (1961) 41 ITR 191 (SC) ANALYSED THE PHRASE 'REASON TO BELIEVE' AND OBSERVED THAT 'IT IS F OR HIM TO DECIDE WHAT INFERENCES OF FACTS CAN BE REASONABLY DRAWN AND WHAT LEGAL INFERENCES HAVE ULTIMATELY TO BE DRAWN.' I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 20 5. 3 T HE CASE OF ASSESSEE IS SQUARELY COVERED BY THE DECISION OF ITAT, JODHPUR BENCH IN CASE OF M/S SURBHI MINCHEM PVT. LTD. (ITA NOS. 102 & 103/JODH/2014). IN S AID CASE , CASE WAS REOPENED U/S . 148 ON THE BASIS OF SAME STATEME NT OF MUKESH CHOKSI DATED 25.11. 2009, THE DIRECTOR OF MAHASAGAR GROUP OF COMPANIES AND ON THIS POINT IT WAS HELD AS UNDER : ' THE REASON RECORDED BY THE ASSESSING OF FICER WERE MERELY ON THE BASIS OF INFORMATION RECEIVED FROM DDIT (INV.) UDAIPUR AND MUMBAI, THEREFORE, FROM THE SO CALLED REASON, IT WAS NOT AT ALL DISCE RN ABLE AS TO WHETHER THE ASSESSING OFFICER HAD APPLIED HIS MIND TO THE INFORMATION AND INDEPENDENTLY AR RIVED AT A BELIEF THAT ON THE BASIS OF THE MATERIAL WHICH HE HAD BEFORE HIM THE INCOME HAD ESCAPED ASSESSMENT, THEREFORE, THE REASSESSMENT U/S 147 OF THE ACT WAS NOT VALID AND ACCORDINGLY THE SAME IS QUASHED. SINCE WE HAVE QUASHED THE REASSESSMENT ORDER, T HEREFORE, NO FINDINGS ARE BEING GIVEN FOR THE GROUNDS RAISED BY THE ASSESSEE ON MERIT.' THE REASONS RECORDED IN CASE OF M/S. SURBHI MINCHEM PVT. LTD. (SUPRA) U/S . 148 ARE REPRODUCED AS UNDER : 'IN DUE COURSE, THE INFORMATION HAVE RECEIVED FROM THE DDIT (I NV. - 2), UDAIPUR ALONGWITH REPORT OF THE DDIT (INV.), UNIT - 1 (4), MUMBAI THAT SEARCH & SEIZURE ACTION UNDER SECTION 132 OF THE INCOME TAX ACT, 1961 WAS UNDERTAKEN IN THE CASE OF MAHASAGAR GROUP OF COMPANIES MUMBAI ON 25.11.2009 ON THE BASIS OF INFORMATION R ECEIVED IN AN FIU ALERT FROM NEW DELHI REGARDING SUSPICIOUS TRANSACTIONS TAKING PLACE IN THE BANK ACCOUNTS OF M/S MAHASAGAR SECURITIES PRIVATE LIMITED AND ITS RELATED COMPANIES. THE DIRECTORS OF THESE COMPANIES WERE ONE MUKESH CHOKSI AND JAYESH K. SAMPAT. DURING THE COURSE OF SEARCH IT WAS REVEALED THAT THE MAHASAGAR SECURITIES PRIVATE LIMITED AND ITS RELATED GROUP OF 34 ODD COMPANIES (THE PROMINENT I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 21 ONES BEING M/S. ALLIANCE INTERMEDIATERIES & NETWORK PRIVATE LIMITED, M/S MIHIR AGENCIES PRIVATE LIMITED, M/S. GOLDSTAR FINVEST PRIVATE LIMITED, ETC. ALL RUN BY MUKESH CHOKSI) WERE ENGAGED IN FRAUDULENT BILLING ACTIVITIES AND IN THE BUSINESS OF PROVIDING BOGUS SPECULATION PROFIT/TOSS, SHORT TERM/LONG TERM GAIN/LOSS, SHARE APPLICATION MONEY, COMMODITIES PROFIT/LOSS ON COMMODITY TRADING (THROUGH MCX) AND HAD BEEN CONTINUING THIS BUSINESS FROM MANY YEARS' IN THIS BACKGROUND, WE FIND THAT LANGUAGE USED IN ABOVE REASONS RECORDED IS EXACTLY SAME AS IN CASE OF ASSESSEE AND HENCE THE CASE OF ASSESSEE IS SQUARELY COVERED B Y CASE OF M/S SURBHI MINCHEM PVT. LTD. (SUPRA). IN FACT PARA NO. 2 OF REASONS RECORDED IN CASE OF ASSESSEE AND ABOVE PARA OF REASONS RECORDED IN CASE OF SURBHI MINCHEM PVT. LTD. WAS EXACTLY SAME. IN THE SAID CASE , CASE WAS REOPENED U/S 148 BY ASSESSING O FFICER MERELY ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGATION WING, MUMBAI., AND THEREFORE, FROM REASON RECORDED, IT WA S NOT AT ALL DISCERNABLE AS TO WHETHER ASSESSING OFFICER HAD APPLIED HIS M IND TO THE INFORMATION AND INDEPENDENTLY ARRIVED AT BEL IEF ON THE BASIS OF MATERIAL WHICH HE HAD BEFORE HIM THAT IF ANY INCOME HAD ESCAPED ASSESSMENT AND THEREFORE, ASSESSMENT FRAMED U/S . 143(3) R.W.S. 147 WAS REQUESTED TO BE QUASHED. NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE WITH REGARDS TO DECISION TAKE N IN SIMILAR FACTS AND CIRCUMSTANCES IN CASE OF M/S. SURBHI MINCHEM PVT. LTD. (SUPRA) WHEREIN R EOPENING WAS QUASHED ON THE GROUND REOPENING U/S.148 OF THE ACT BY ASSESSING OFFICER WAS DONE MERELY ON THE BASIS OF INFORMATION FROM INVESTIGATION WING, I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 22 MUMBAI. EVEN IN CASE BEFORE US, IT CANNOT BE INF E R R ED THAT CONCERN ASSESSING OFFICER HAS APPLIED HIS MIND TO THE INFORMATION AND INDEPENDENTLY ARRIVED AT CERTAIN BELIEF O N THE BASIS OF MATERIAL BEFORE HIM THAT ANY INCOME HAD ESCAPED ASSESSMENT. IN VIEW OF ABOVE LEGAL DISCUSSION , ASSESSMENT FRAMED U/S. 143(3) R.W.S. 147 OF ACT IS QUASHED. 6 . WITHOUT PREJUDICE TO ABOVE, R EGARDING MERIT WE FIND THAT ASSESSING OFFICER MADE ADDITION OF RS. 1,06,00, 000 / - WHICH CAN BE BIFURCAT ED INTO TWO SUB GROUNDS I.E. RS. 21,00,000 / - AND RS. 85,00,000/ - . CIT(A) CONFIRMED BOTH THE ADDITIONS TOTALLING TO RS. 1,06,00, 000/ - BY RELYING ON THE DECISION OF CIT V/S NOVA PROMOTERS & FINLEASE (P) LTD. (SUPRA). 6 . 1 AS STATED ABOVE, FIRST SUB - GROUND IS RELATED TO ADDITION OF RS.21 LACS IN RESPEC T OF RECEIPT OF SHARE APPLICATION MONEY FROM MUKESH CHOKSI GROUP OF CASES AND SECOND SUB=GROUND REGARDING ADDITION OF RS. 85 LACS IN RESPECT OF SHARE APPLICATION MONEY RECEIVED FROM 12 OTHER COMPANIES, FOR WHICH ASSESSEE FAILED TO DISCHARGE ITS ONUS U/S. 6 8 OF THE ACT BEFORE ASSESSING OFFICER. 6 .2 IN RESPECT OF ADDITION OF RS.21 LACS, CIT(A) DECIDED APPEAL IN ANOTHER GROUP CASE OF ASSESSEE I.E. M/S HARMONY YARNS PVT. LTD., SURAT, A.Y. 2005 - 06 IN APPELLATE ORDER NO. CAS - I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 23 1/2008/2011 - 12 DA TED 26.06.2012 AGAINST ASSESSEE. ACCORDING TO CIT(A), IN THE SAID CASE, ASSESSEE HAD ALSO TAKE SHARE APPLICATION MONEY FROM M/S. MIHIR AGENCY PRIVATE LTD. AND M/S. BUNIYAD CHEMICALS P. LTD. OF RS.26 LACS. THE RELEVANT PORTION OF SAID ORDER IS REPRODUCED AS UNDER: '8.1 DURI NG THE COURSE OF APPELLANT PROCEEDINGS, THE APPELLAN T RELIED ON THE DECISION OF HON 'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS (P ) LTD. BEFORE PROCEEDING FURTHER , IT IS N E CESSARY TO DISCUSS THE INTERPRETATION OF THE ABOVE JUDGEMENT BY THE HON'BLE MUM BAI HIGH COURT IN THE CASE OF M/ S . MAJOR METALS LIMITED REPORTED IN 19 TAXMAN. CO M 176 ( BOM ) . THE HON'B LE BOMBAY H IGH COURT IN JUDGMENT DATED 22. 02.2012 HAS ANALYZED THE DECISION OF M/S LOVELY EXPORTS PVT LTD IN DETAIL AND DISTINGUISHE D THE SAME IN THE ABOVE CASE OF ADDITION RELATED TO 'SHARE CAPITAL . THE RELEVANT PARAS OF THE SAID JUDGMENT (PAGES 23 TO 2 8 ) ARE REPRODUCED HEREIN UNDER : - 23..... ...... . NOW IT IS IN THIS BACKGROUND THAT THE SETTLEMENT COMMISSION HAS ARRIVED AT A CONS IDERED FIN DI NG OF F AC T THAT THE TRANSACTIONS OF T HE COMPANIES WERE NOT GENUINE TRANSACTIONS; THAT THE TWO COMPANI ES LACKED A CREDIT STANDING WHICH WOULD HAVE ENABLE THEM TO P A Y LARGE AMOUNTS TOWARDS SHARE PREMIUM OF RS . 990/ - ON A FACE VALU E OF RS 10/ - PE R SHAR E AND THAT NEITHER THE PAST PERFORMANCE OR THE FINANCIALS OF THE PETITIONER ITSELF WOULD JUSTIFY THE PAYMENT OF SUCH A LA RGE PREMIUM. THE SETTLEMENT COMMISSION HAS RELIED UPON TH E LAW LAID DOWN BY THE SUPREME COURT IN SUMATI DAYAL V S. CIT (1995) 214 ITR 801/ 80 T A XMAN 89 ( SC) IN APPLYING TH E TEST OF HUMAN PROBABILITIES. SECTION 68 OF THE INCOME TAX ACT, PROVIDES THAT WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PR E VIOUS YEAR , A ND THE ASSE SSEE OFFERS NO EXPLANATION ABOUT TH E NATURE AND SOURCE THEREOF OR THE EXPLANATION OFF E R ED BY HIM I S NOT, IN TH E OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO C RE DITED MAY B E CHARGED TO I NCOME TAX AS THE INCOME OF I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 24 THE ASSE SSEE OF THAT PRE VIOUS YEAR. TH E SUPREME COURT HELD AS FOLLOWS: ' IT IS N O DOUBT TRUE THAT IN ALL CASES I N WHICH A RECEIPT IS SOUGHT TO BE TAXED AS INCOME, THE BURDEN LIES ON THE DEPARTMENT TO PROVE THAT IT IS WITHIN THE TAXING PROVISION AND IF A RECE IPT IS IN THE MATURE OF INCOME, THE BURD E N OF PROVING TH A T I T IS NOT TAXABLE INCOME BECAUSE IT FAILS WITHIN EXEMPTION PROVIDED BY TH E ACT LIES UPON SHE ASSESS EE . ( SEE PARIMISETTI SEETHARAMAMMA ( 196 5 ) 5 7UTR 5 32 AT PAGE 536) BUT, IN VIEW OF SECTION 68 OF THE ACT, WH ERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF ASSESSE E FOR ANY PREVIOUS YEA R, THE SAME MAY BE CHARGED TO INCOME TAX AS TH E INCOME OF THE ASSESSES OF THAT PREVIOUS YEAR IF THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATURE AND SOURCE THEREOF, IS IN THE OPINION O F THE ASSESSING OFFICER, NOT SATISFACTORY. IN SUCH A CASE, THERE IS , PRIMA FACIE , EVIDENCE AGAINST TH E ASSESSEE VIZ. THE RECEIPT OF MONEY AND IF HE FAILS TO REBUT IT, TH E SAID EVIDENCE BEING UNREBUTTED, CA N B E U SED AGAINST HIM BY HOLDING THAT IT W AS A RECE IPT OF AN INCOME NATURE. WHILE CONSIDERING THE EX P L ANATION OF THE ASSESSE E THE DEPARTMENT CANNOT, HOWEVER, ACT UNREASONABLY. 24. BUT, IT HAS BEEN URGED ON BEHALF OF THE PETITIONER THAT AN ADDITIO N WITHIN THE MEANING OF SECTION 6 8 WOULD NOT BE JUSTIFIED IN LAW IN ITS HANDS EVEN IF THE SHARE APPLICATION MONEY WAS RECEIVED FROM BOGUS SHARE HOLDERS. COUNSEL APPEARING ON BEHALF OF THE PETITIONER SUBMITTED THAT IN THE PRESENT CASE THE REPORT SUBMITTED BY THE COMMISSIONER U/S 245 D (3) SHOWED THAT THE TWO COMPANIE S WERE DULY IDENTIFIED BEING INCOME TAX ASSESSES WHOSE PANS WERE ALSO FURNISHED . CONSEQUENTLY, RELYING ON THE DECISION OF THE DELHI HIGH COURT IN THE CASE O F CIT VS LOVELY EXPORTS (P) LTD. ( 2008) 299 ITR 265 ( 2007) 158 TAX MAN 440 (DELHI) AND THE O RDER RENDERED BY THE SUPREME COURT IN A SPECIAL LEAVE PETITION ARISING THEREFROM, IT WAS URGED THAT RECOURSE TO THE PROVISIONS OF SECTION 68 WAS NOT IN OR DER. NOW, IN ORD ER TO APPRECIATE THE SUBMISSION IT WOULD BE NECESSARY TO CONSIDER THE JUD GMENT OF DELHI HIGH COURT IN LOVELY EXPORTS (P) LTD ( SUPRA). THE DIVISION BENCH OF TH E DELHI HIGH COURT DEALT WITH A BATCH OF APPEALS RELATING TO I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 25 THR E E ASSESSES . IN THE CASE OF LOVELY EXPORTS (P) L TD ( SUPRA), THE ASSESSING OFFICER HA D PROCEEDED TO MA KE AN ADDITION ON TH E GROUND THAT THE SHARE APPLICANTS IN QUESTION D ID NOT EXIST. THE ASSESSEE HAD FURNISHED NECESSARY DETAIL S SUCH AS THE PAN OF THE SHARE APPLICANTS. THE SHAR E MONEY HAD BEEN RECEIVED THROUGH BANKING CHANNELS . THE AO MADE AN ADDITIO N ONLY ON THE GROUND THAT SOME OF THE SUMMONS WHICH WERE ISSUED TO THE APPLICANTS WO RE RETURNED UNSERVED, WHEREAS IN THE CASE OF OTHERS THE SU MMONS THOUGH SERVED, HAD NO T BEEN COMPLIED WITH. NOW, IT IS IN THIS BACKGROUND THAT THE DIVISION B E NCH OF THE DELHI HIGH COURT, NOTED THAT THE ASSESSING OFFICER DID NOT CARRY OUT ANY ENQUIRY INTO THE INCOME T AX RECORD OF THE PERSONS WHO H AD FURNISHED THE D E TAILS IN ORDER TO ASCERTAIN THE STAT US OF THE S HAR E APPLICANTS . SIGNIFICANTLY, THE JUDGMENT OF THE DELHI HIG H COURT MAKES A DISTINCTION BETW EEN A C AS E WH E RE SHAR ES ARE A LLO TTED I N THE COURS E OF A L ARGE SCALE SUBSCRIPTION TO THE SHARES OF A PUBLIC COMPANY ON THE ONE HAND AND A CASE OF PRIVATE PLACEME N T ON THE OTHER. IN TH E CASE OF ALLOTMENT OF SHARES OF A PUBLIC COMPANY, THE COMPANY MAY HAVE NO IDENTITY OF THE SUBSCRIBERS. THIS DISTINCTION BETWEEN A PUBLIC ISSUE OF SHARE CAPITAL AND PRIVATE PLACEMENT HAS BEEN MADE OUT IN THE FOLLOWING OBSERVATIONS OF TH E DELHI HIGH COURT. 1 5. THERE CANNOT BE TWO OPINIONS O N TH E ASPECTS THAT THE PERNICIOUS PRACTICE OF CONVERSION OF UNACCOUNTED MONEY THROUGH THE MASQUERADE OR CHANNEL OF INVESTMENT IN THE SHARE CAPITAL OF A COMPANY MUST BE FIRMLY E XCORIATED B Y THE REV E NUE. EQUALLY, WHERE THE PREPONDERANCE OF EVIDENCE INDICATE S ABSENCE OF CULPABILITY A ND COMPLEXITY (SIC) OF THE ASSESSEE IT SHOULD NOT BE HARASSED BY THE REVENUE S INSISTENCY THAT IT SHOULD PROVE THE NEGATIVE. I N THE CASE OF A PUBLIC ISSUE, THE COMPANY CONCE RN ED CANNOT BE EXPECT ED TO KNOW EVERY DETAILS PERTAINI NG TO THE IDENTITY AS WELL AS FINANCIAL WORTH OF EACH OF ITS SUBSCRIBERS . TH E COMPANY MUST, HOWEVER, MAINTAIN AND MAKE AVAILABLE TO THE ASSESSING OFFICER FOR HIS P ERUSAL, ALL THE INFO R M A T I ON CONTAINED IN THE STATUTORY SHARE APPLICATION DOCUMENTS. IN TH E CASE OF PRIVATE PLACEMENT THE LEGAL REGIME WOULD NOT B E THE SAME. A D ELICATE BALANCE MUST B E MAINTAINED WHILE I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 26 WA L ING THE TIGHTROPE OF SECTIONS 6 8 AND 69 OF THE INCOME TAX ACT. TH E BURD E N OF PRO OF CA N SELDOM BE DISCHARGED TO THE HILT BY THE ASSESSE E; IF T HE AO HARBOURS DOUBTS OF THE L EGITIMACY OF ANY SUBSCRIPTION HE IS EMPOWERED NAY DUTY - BOUND, TO CA RR Y OUT THOROUGH INVESTIGATIONS. BUT IF THE AO FAILS TO UNEARTH ANY WRONG OR ILLEGAL D EAL INGS, H E CAN NOT OBDURATELY ADHER E TO HIS SUSPICIONS AND TR EAT THE SUBSCRIBED CAPITA L AS TH E UNDISCLOSED INCOME OF THE COMPANY (E MPHASI S SUPPLIED). 25. NOW, IT IS THIS DECISION OF TH E DELHI COURT AGAINST WHICH A SPECIAL LEAVE PETITION BEFORE THE SUPREME COURT CAME TO BE DISMISSED ON 11 JANUARY 2008, IN CIT VS LOVELY EXPORTS (P) LTD ( 2008) 6 DTR 308 (SC) WHILE DISMISSING TH E SPECIAL L EAVE PETITION THE SUPREME COURT OBSERVED THAT IF T HE S HAR E APPLICATION MONEY WAS RECEIVED BY TH E ASSESS EE FROM ALLEGEDLY BOGUS SHARE HOLDERS WHOSE NAMES WE RE GIV E N TO THE A O , TH E DEPARTMENT WAS FREE TO PROCEED TO R E - OPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDA NC E WITH LAW. ON THIS GROUND, THE SUPREME COURT WHILE DISMISSING TH E SPECIAL LEAVE PETITION FOUND NO INFIRMITY IN THE JUDGMENT OF THE D ELHI HIGH COURT . TH E PRINCIPLE WHI CH WAS EMPHASIZED BY THA T DELH I HIGH COURT I N THE CASE OF LOVELY EXPORTS WAS FOLLOWED BY ANOTHER DIVISION BENCH IN CIT VS VALUE CAPITAL SERVICES (P) L TD (2008) 307 ITR 334 ( DELHI). IN CIT VS OASIS HOSPITALITIES (P) LTD (2011) 331 ITR 11 9 /19 8 TAXMAN 247/9 TAXMAN.COM 179 ( DELHI), A DIVISION BENCH OF THE DELHI HIGH COURT OBS E RV ED THAT THE INITIAL BURDEN MUST B E UPON THE ASSESSED TO EXPLAIN THE NATURE AND SOURCE OF THE SHARE APPLICATION MONEY RECEIVED. IN ORDER TO DISCHARGE THIS BURDE N, THE ASSESSE E IS R E Q U IR E D TO PROVE ( A ) IDENTITY OF SHAR E HOLDER ( B ) GENUINENESS OF TRANSACTION AND (C) CREDIT WORTHINESS OF SH AREHOLDERS. AS FAR AS THE CR E DITWORTHIN E SS OF THE SUBSCRIBER IS C ONCERNED, THAT CAN BE PROVED BY PRODUCING A BANK STATEMENT OF THE SUBSCRIBER S HOWI N G THAT IT HAS SUFFICIENT BAL A N CE IN ITS ACCOUNT TO ENABLE IT TO SUBSCRIBE TO THE SHAR E CAPITAL. THE DELHI HIGH COURT HEL D THAT ONC E THE INITIAL BURDEN HA S BEEN DISCHARGED, THE OBSERVATIONS O F THE SUPREM E COURT IN THE CASE OF LOV ELY EXPORTS (P) LTD ( SUPRA ) WOULD SUGGEST THAT TH E DEPARTMENT I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 27 IS FRE E TO PROCEED TO R E OPEN T HE INDIVIDUAL ASSESSMENTS IN THE CASE OF ALLEGED BOGUS SHAREHOLDER S IN ACCORDANCE WITH LA W AND IS NOT RE MEDILESS. THIS WOU L D BE MORE SO WHEN THE ASSESSEE IS A PUB LIC LI M IT ED COMPANY AND HAS ISSUED SHARE CAPITAL TO THE PUBLIC AT LARGE AS IN SUCH CASES THE COMPANY CANNOT B E EXP EC TED TO KNOW EVERY D ETAIL PERTAINING TO THE IDENTITY AN D FINANCIAL WORTH OF THE SUBSCRIBER . HOWEVER, TH E INITIAL BURDEN ON THE ASSESSES WOULD BE SOME WHAT H EAVY IN C ASE THE ASSESSES IS A PRIVATE LIMITED COMPANY WHE RE THE SHAREHOLDERS ARE CLOSELY, RELATED BECAUSE IN SUCH A CASE, THE ASSESSEE CANNOT . IGNORANCE ABOUT THE STATUS OF THE PARTIES. TH E JUDGMENT OF A DIVISION BENCH OF THIS COURT IN C I T VS CR E A TIVE WORL D T ELE F IL MS LTD(201 1) 203 TAXMAN 36(MAG) 333 ITR 10 0 /1 5 TAXM ANN .COM 183 (BOM) IS ALONG THE SAME LINES. 26. IN THE PRESENT CASE, IT N EEDS TO BE EMPHASIZED THA T THE SETTLEMENT COMMISSION HAS CONSIDERED ALL THE MATERIAL ON RECORD INCLUDING THE MATERIAL WH ICH HAD A BEARING ON THE CREDIT WORTHINESS AND FINANCIAL STANDING OF TH E ALLEGED SUBSCRIBING COMPANIES TO THE SHARE CAPITAL OF THE PETITIONER. NONE OF THE COMPANIES WAS HELD TO HAVE A FIN ANCIAL STANDING OR CREDIT WORTHINESS WHICH WOULD JUSTIFY MAKING SUCH A LARGE INVESTMENT OF RS. 6 CRORES AT A PREMIU M OF R S . 9 90 / - PER SHARE. THE ALLOTMENT OF SHARES, IT MUST BE N OTE D , HAS T AKE N P L AC E IN PURSUANCE OF A PRIVATE PL ACEMENT. THE PRINCIPLES WHICH HAVE B EEN APPLIED IN RELATION PARTICULARLY TO THE P UBLIC SUBSCRIPTION OF SHARES OF A PUBLIC LIMITED COMPANY CAN OBVIOUSLY HAVE NO APPLICATION TO THE FACTS OF A CASE SUCH AS THE PRESENT THE VIEW WHICH HAS BEEN TAKEN BY THE SETTLEMENT COMMISSION IS CONSEQUENTLY, BORNE OUT ON THE BASIS OF THE MATERIAL ON RECORD. THIS IS NOT A CASE WHERE THE COMMISSION HAS PROCEEDED CONTRARY TO LAW OR ON THE BASIS OF NO EVIDENCE . THERE IS NO PERVERSITY IN THE FINDINGS OF SETTLEMENT COMMISSION. 27. BEFOR E LEAV ING THIS ASP E CT OF TH E MATTER, IT WOULD BE NECESSA RY TO AD V E RT TO TW O DECISIONS OF THIS SUPREME COURT, TH E FIRST BEING IN CIT VS P. MO HA NAKALA (2007) L6L T A XMAN 169 / 291 ITR 278 ( SC). WHI L E CONSIDERING THE S C OPE OF SECTION 68, THE SUPREME COURT OBSERVED AS FOLLOWS : - I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 28 '15. ..... WHEN AND IN WHAT CIRCUM STANCES SECTION 68 OF THE ACT WOULD COM E I NTO P LA Y? THAT A BARE READING OF SECTION 68 SUGGESTS THAT THERE HAS TO BE CREDIT OF AMOUNTS IN THE BOOKS MAINTAINED BY AN ASSESSEE; SUCH CREDIT HAS TO B E OF A SUM DURING THE PREVIOUS YEAR; AND TH E ASSESSE E OFFE R NO E XP L ANAT I ON ABOUT THE NATURE AND SOURCE OF SUCH CREDIT FOUND IN THE TWO BOOKS; OR THE EXPLANATION OFFERED BY THE ASSESSES IN TH E OPINION OF THE AO IS NOT SATISFACTORY. IT IS ONLY THEN TH E SUM SO CRED I T E D MAY BE CHARGED TO INCOME - TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. THE EXPRESSION ' THE ASSESSES OFFER NO EXPLANATION ' MEANS WHE RE THE ASSESSES OFF ER NO PROPER, REASONABL E AND ACCEPTABLE EXPLANATION AS REGARDS TH E SUMS F OUND CREDITED IN THE B OOKS MAINTAINED BY TH E ASSESSEE S. IT IS TRUE THE OPINION OF THE AO FOR NOT ACCEPTING TH E EXPLANATION OFFERED BY TH E ASSESSEE AS NOT SATISFACTORY IS REQUIRED TO BE B ASES ON PROPER APPRECIATION OF MATERIAL AND OTHER ATTENDING CI RCUMSTANCES AVAILABLE ON RECORD. TH E OPINION OF THE AO IS REQU IRED TO BE FORCED OBJECTIVELY WITH REFERENCE TO THE MATERIAL AVAILABLE ON RECORD. APPLICATION OF MIND IS THE SINE QUA NON FOR FORMING T HE OPINION ' THE SUPREME COURT NOTED, FO LLOWING THE EARLI ER DECISION IN C I T VS O RISSA CORPN (P) L TD ( 19 86) 159 ITR 78/25 TAXMAN 80 ( SC) THAT WHERE THE CONCLUSION OF THE TRIBUNAL WAS NOT RE AS ON A BL E OR PERVERSE OR BASED ON NO EVIDENCE, NO QUESTION OF LAW AS SUCH WOULD ARISE FOR CONSIDERATION. THE COURT FURTHER OBSERVED THUS : 25. T HE DOUBTFUL NATURE OF THE TRANSACTION A ND THE MAN NE R IN WHICH THE SUMS WERE FOUND CREDITED IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE HAVE BEEN DULY TAKEN INTO CONSIDERATION BY THE AUTHORITIES BELOW. TH E TRANSACTIONS THOUGH APPARENT WERE HELD TO B E NO T REAL ONE . MAY B E T HE MONEY CAM E BY WAY OF BANK CHEQUES AND PAID THROUGH PROCESS OF BANKING TRANSA CTION BUT THA T ITSELF IS OF NO CONSEQUENCE. ' I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 29 28. IN A MORE RECENT RECENT JUDGMENT OF TH E SUPREME COURT IN VIJAY KUMAR TAL WAR VS C I T ( 2011) 330 ITR 1/ 196 TAXMAN / 136 ( 2010 ) 8 TAXMAN. CO M 264 (SC), THE SAME PRINCIPLE WA S APPLIED IN THE FOLLOWING OBSERVATIONS ; - ' 24 ALL THE AUTHORITIES BELOW, IN PARTICULAR THE TRIBUNAL, HAVE OBSERVED IN UNISON THAT THE ASSESSEE DID NOT PRODUCE A NY EVIDENCE TO REBUT THE PRESUMPTION DRAWN AGAINST HIM UN DER SECTION 68 OF THE A C T, BY PRODUCING THE PARTIES IN WHOSE NAME THE AMOUNTS IN QUESTION HAD BEE N CREDITED BY THE ASSESSES IN HIS BOOKS OF ACCOUNT . IN TH E ABSENCE OF A NY COGENT EVIDENCE, A BALD EXPLANATION FURNISHED BY THE ASSESSEE ABOUT THE SOURCE OF THE CR EDITS IN QUESTION VIZ, REALIZATION FROM THE DEBTORS OF TH E ERSTWHILE FIRM, IN THE OPINION OF THE AO, W A S NOT SATISFACTORY. IT IS WELL SETTLED T HAT IN VIEW OF SECTION 68 OF TH E ACT, WHERE AN Y SUM IS FOUND CREDITED IN TH E BOOKS OF THE A SSESSE E FOR PREVIOUS YEAR, THE SAME MAY HA CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESS E E OF THAT PREVIOUS YEAR, IF THE EXPLANATION OFFERED BY THE ASSESSES ABOUT THE NATURE A ND SOURCE THEREOF, IS, IN OPINION OF THE ASSESSING OFFICER NOT SAT ISFACTORY. 8.2 IN THIS BA CKGROUND WE MAY EXAMINE THE JUDGEMENT OF HON'BLE SUPREME COURT IN THE CASE OF M/S LOVELY EXPORTS (P) LTD WHICH IS REPRODUCED HEREIN BELOW : - ' 1 . DELAY CONDONED . 2. CAN THE AMOUNT O F SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME UNDER SECTION 6 8 OF THE I T ACT, 1961? WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF TH E SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSES COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PRO CEED TO RE - OPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 30 LAW. HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT. 3. SUBJECT TO THE ABOVE, SPECIAL LEAVE PETITION IS DISMISSED ' SINCE THIS DECISION WAS GIVEN IN RES PECT OF THE DECISION OF THE HON 'BLE DELHI COURT AGAINST WHICH, THE SLP WAS FILED, THE FINDINGS OF THE HON 'BLE SUPREME COURT ARE TO BE INFERRED IN THE BACKGROUND OF THE FACTS OF THE SAID CASE. IT IS PERTINENT TO MENTION HERE THAT IN THE CASE OF M/S . LOVELY EXPORTS PVT . LTD, THE ASSESS ING OFFICER HAD MADE AN ADDITION ONLY ON THE GROUND THAT SOME SUMMONS WERE RETURNED 'UN - SERVED' AND SOME PARTIES DID NOT COMPLY WIT H THE SUMMONS ISSUED. FURTHER, THE HON' BL E DELHI HIGH COURT HELD THAT IN THIS CASE, THE ASSESSING OFFICER DID NOT CARRY OUT ANY FURTHER INQUIRIES AND THEREFORE, THE ONUS DID NOT SHIFT PACK TO THE ASSESSES . 8.3 DURING THE COURSE OF APPELLATE PROCEEDINGS, VIDE ORDER SHEET ENTRY DT 17.02.2012, THE APPELLA NT CONFIRMED THAT T HE SHARE APPLICATION MONEY WAS RECEIVED BY PRIVATE PLACEM ENT A ND FRESH CONFIRMATION FROM SHRI MUKES H M. CHOKSI, CANNOT BE FILED. THE APPELLANT WAS ALSO ASKED TO FILE THE PRESENT STATUS OF THE SHARE ISSUED IN T HE NAME OF THOSE TWO COMPANIES I.E. WHETHER THE SHARES CONTINUE IN THE NAME OF THOSE COMPANIES OR HAVE BEEN TRANSFERRED TO SOMEONE ELSE. HOWEVER, THE SAID DETAILS WORE NOT FILED BY THE APPELLANT. 8. 4 ON THE BASIS OF FACTS OF THE CASE AND IN THE INTERPRETATION OF DECISION IN THE CASE OF M/S LOVELY EXPORTS BY THE HON'B L E MUMBAI HIGH COURT'S (SUPRA), IT IS AP PARENT THAT THE DECISION OF M/S L OV ELY E XPORT S DOES NOT A PPLY IN THE PRESENT CASE AS IT WAS A C A SE OF PRIVATE PLACEMENT A N D COLLUSIVE TRANSACTIONS. THE CASH WAS PAID FOR TAKING ACCOMMODATION ENTRIES . EVIDENCE OF THE SAME WAS FOUND IN THE FORM OF LISTS MAI NTAINED BY THE ENTRY PROVIDER . I T IS NOT A CASE WHERE ADDITION HAS BEEN MADE ONLY ON THE BASIS OF STATEMENT OF ENTRY PROVIDER . THE LISTS FOUND DURING THE COURSE OF SEARCH WERE MAINTAINED BY THE ENTRY PROVIDER IN THE NORMAL COURSE OF HIS BUSINESS. THE APPE LLANT WAS I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 31 INFORMED OF THE EVIDENCE GATHERED BUT, IT NEITHER REQUESTED FOR CROSS - EXAMINATION OF ENTRY PROVIDER NOR FU RN I S HED HIS FRESH CONFIRMATION. T HE STATEMENT ON OATH OF SHRI MUK ESH M CHOKSI, DIRECTOR OF THOSE TWO COMPANIES WAS ALSO RECORDED DURING THE COURSE OF SEARCH OPERATION . 6 . 3 MOREOVER, ITAT, AHMEDABAD HAS ACCEPTED THAT SHRI MUKESH CHOKSI AND ITS GROUP OF COMPANIES ARE ACCOMMODATION ENTRY PROVIDERS IN THEIR CASES AND HAS HELD THAT ONLY COMMISSION INCOME FOR GIVING BOGUS ACCOMMODATION ENTRIES WA S TAXABLE IN THEIR CASES. ACCORDING TO CIT(A) ON SIMILAR FACTS, HONBLE DELHI HIGH COURT IN ITS JUDGMENT DATED 15.02.2012 REPORTED IN CASE OF NOVA PROMOTERS FINLEASE PVT. LTD. (SUPRA) HAS DECIDED SIMILAR ISSUE AGAINST ASSESSEE. 6 . 4 IN THIS BACKGROUND, CIT(A) OBSERVED THAT DECISION OF THE H O N BLE SUPREME COURT IN CASE OF M/S . LOVELY EXPORTS (P) LTD . APPLIES ONLY IN THOSE CASES, WHERE DEPARTMENT HAS NOT DETECTED ANY EVIDENCE OF COLLUSIVE TRANSACTION BETWEEN ACCOMMODATION ENTRY PROVIDER AND ASSESSEE A ND OTHER CIRCUMSTANCES OF CASE ARE ALSO SUCH THAT THERE IS NO CIRCUMSTANTIAL EVIDENCE OF EXISTENCE OF ANY COLLUSIVE TRANSACTION. IT MEANS THE DECISION APPLIES IN NOR MAL CASES OF SHARE CAPITAL AND NOT COLOURABLE TRANS ACTIONS. IN CASES , WHERE A SPECI FIC EVIDENCE OF BOGUS SHARE APPLICATION BY WAY OF COLLUSIVE TRANSACTION BETWEEN ENTRY PROVIDER AND ASSESSEE EXISTS OR OTHER CIRCUMSTANTIAL EVIDENCE MAKE OUT A CASE OF COLLUSIVE TRANSACTION . THE DECISION OF HON'BLE SUP REM E COURT WOULD NOT APPLY . I N SUCH CASES, DECISION OF M/S. NOVA I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 32 PROMOTERS FIN LEASE PVT . LTD . WOULD APPLY FO R D E TAILED REASONS GIVEN THEREIN. SIMILAR VIEW HAS BEEN TAKEN BY HON'BLE HIGH COURT OF MU M B A I IN CASE OF M/S . MAJOR METALS LTD . ( SUPRA) WHEREIN DECISION OF M/S. LOVELY EXPOR TS (P) LTD. (SUPRA) HAS BEEN DISTINGUISHED . 6 . 5 IN THIS BACK GROUND, CIT(A) EXAMINED THE EVIDENCE FURNISHED BY ASSESSEE AND CIRCUMSTANTIAL EVIDENCE IN RESPECT OF SHARE APPLICATION MONEY OF RS . 2 1 LA C S AND RS . 85 LA C S ADDED BY ASSESSING OFFICER. AT THIS JU NCTURE, CIT(A) SUMMARIZED CERTAIN FACTUAL ASPECTS RELATED TO THE ISSUE BEFORE US WHICH EMERGED FROM STATEMENTS OF ASSESSEE DURING REMAND PROCEEDINGS, AND INQUIRIES CONDUCTED BY ASSESSING OFFICER ARE BEING MENTIONED HEREINUNDER: [A] THE APPELLAN T RECEI VED SHARE APPLICATION M ON E Y OF RS . 21 LAKHS FROM MIHIR AGENCY PVT . LTD . AND FROM BUNIYAD CHEMICALS PVT. LTD . I N F Y 2004 - 05 AND RS . 85 LAKHS FROM REMAINING TWELVE PARTIES . [B] THE BOOK VALUE OF SHARES AT THAT TIME WAS RS. 17,58 PER SHARE AND THE FACE VALUE OF SHARES WAS RS .10 / - HOWEVER, SHARE APPLICATION MONEY WAS RECEIVED FROM AL L THE FOURTEEN PARTIES AT A SHARE PREMIUM OF RS . 4 0 PER SHORE, [C] ALL THE SHORES WERE ALLOTTED ON 15.03.2005. [D] ALL THE SHARES HOVE BEEN RE - PURCHASED BY THE DIRECTOR OF T HE APPELLANT COMPANY. SH RI ASHO K KUMAR K EJRIWAL AND A GROUP COMPANY OF T HE APPELLANT NAMELY M/S ROMA POLYSYN T H P LTD ON 31.07.2008 AT RS . 10 PER SHARE I.E. A T THE FACE VALUE. [E] THE BOOK VALUE OF THE SHARES WAS STILL RS . 17,58 ON 31.07.200 8 I.E . ALL THE FOURTEEN PARTIES SUFFERED A LOSS OF RS . I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 33 4O PER SHARE, WHICH WAS THE SHARE PREMIUM PAID, WITHIN A SPAN OF 3 YEARS APPROXIMATELY, [F] THE SHARE APPLICANTS CAN BE DIVIDED INTO TWO GROUPS. FIRST GROUP OF M/S MIHIR AGENCY PV T LTD AND M/S. B UNIYA D CHEMICALS PVT LTD BELONGS TO MUKESH CHOKSI GROUP OF CASES FROM WHOM SHARE APPLICATION MONEY OF RS. 21 LAKHS HAS BEEN RECEIVED WITH PREMIUM OF RS. 40 PER SHARE. [G] THE NAME OF THE APPELLANT COMPANY FIGURED IN THE DATA, SEIZED FROM THE PLACE OF MUKESH CH OKSI DURING THE SEARCH WHICH ESTABLISH THAT SHARE APPLICATION MONEY OF RS 21 L AKHS WAS ON ACCOMMODATION ENTRY. [H] MUKESH CHOKSI ADMITTED THE BUSINESS OF ITS GROUP COMPANIES AS ENTRY PROVIDERS AND HO N BLE ITAT ALSO ACCEPTED THE SAME. 6 . 6 IN RESPONSE TO NOTICE U/S 1 3 3(6) OF THE ACT ISSUED BY ASSESSING OFFICER , BOTH THESE COMPANIES CONFIRMED THEIR STATEMENT GIVEN BEFORE THE INVESTIGATION WING, MUMBAI. THEIR LETTER DATED 27.03. 201 2 WHICH IS MENTIONED IN ASSESSMENT ORDER AT PAGE - 8 , IS REPRODUCED HEREIN UNDER : - ' WE HAVE RECEIVED A NOTICE DATED 2 0 TH MARCH, 2012. I N THIS CONNECTION, WE WOULD LIKE TO INFORM YOU THAT WE CONFIRM OUR STATEMENT WHICH WAS GIVEN DURING SEARCH PROCEEDINGS ON 25 TH NOVEMBER, 2009 ' 6 . 7 ASSESSEE IN ITS PAPER - BOOK FILED SHARE APPL ICATION FORM IN THE NAME OF M/S HARMONY YARNS P L TD., WHICH IS GROUP CONCERN OF ASSESSEE COMPANY, RATHER THAN ASSESSEES COMPANY. MOREOVER, SHARE APPLIC ATION FORM OF M/S BUNIYAD CHEMICALS PVT LTD . DOES NOT H A VE ANY DATE . THE SHARE APPLICATION MONEY RECEIV ED BY ASSESSEE HA D BEEN IMMEDIATELY TRANSFERRED TO ASSESSEE S GROUP CONCERN M/S . RAMA TRADELINK PVT LTD. THE I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 34 CHEQUE FOR SHARE APPLICATION MONEY IN CASE OF M/S . MIHIR AGENCIES HAS BEEN ISSUED FROM CURRENT ACCOUNT NO. 4259 WITH C A NARA B A NK. SAN T ACRU Z (EAST) , BRANCH, MUMBAI. FROM THE SAME BANK ACCOUNT, M/S . MIHIR AGENCIES HAS GIVEN SHARE APPLICATION MONEY TO M/S HARMONY YARNS P . LTD . OF RS 6 LAKHS ON SAME D ATE ON WHICH, IT ISSUED CHEQUE T O ASSESSEE COMPANY I .E. ON 20.01.2005. C HEQUE NUMBERS MENTIONED IN LIST ARE 659321 AND 659320 . THE SOURCE WA S BY WAY OF TRANSFER FROM CURRENT ACCOUNT NO. 4041 AND 4280 IN THE SAME BANK ACCOUNT . M/S . BUNIYAD CHEMICALS P . LTD . HA D GIVEN A CHEQUE FROM THIS BANK ACCOUNT NUMBER 0040 5022108 WITH ICICI BANK NARIMAN POINT, MUMBAI. H ERE AGAIN, M/S . BUNIY A D CHEMICALS P . LTD HAS GIVEN SHARE APPLICATION MONEY TO M/S . HARMONY YARNS P . LTD . ALSO APART FROM ASSESSEE COMPANY AND AS STA TED EARLIER THAT SHARE APPLICATION MONEY RECEIVED HAS BEEN IMMEDIATELY TRANSFERRED TO M/S RAMA TRADELINK PVT . LTD . BY ASSESSEE . 6 . 8 FROM PERUSAL OF THESE FACTS, IT WAS OBSERVED BY CIT(A) THAT TW O CO M PANIE S OF SHRI MUKESH CHOKSI GROUP, MAK ING AN APPLICATION FOR ALLOTMENT OF SHA RES AT A PREMIUM OF RS . 40 PER SHARE, IN RESPE CT OF SHARES OF A PRIVATE LIMITED COM PANY WHOSE BOOK VALUE IS ONLY RS . 17.53 AND SUFFERED A LOSS OF RS .40 PER SHARE BY SELLING IT TO DIRECTORS OF THE S A ME COMPANY AND ITS ASSOCIATE CONCERNS AFTER THREE YEARS . MOREOVER, SAME COMPANY OF MUKESH CHOKSI GROUP HAS NOT ONLY GIVEN SHARE APPLICATION M ONEY TO ASSESSEE COMPANY, BUT ALSO TO ITS ASSOCIATE CONCERNS I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 35 M/S HARMONY YARNS PVT . LTD . IN THE SAME YEAR AND AROUND THE SAME DATE. 6 . 9 THIS PECULIAR SCENARIO WA S ANALYZED WITH STATEMENT OF MR. MUKESH CHOKSI, EVIDENCE FOUND DURING SEARCH REGARDING ACCOMMO DATION ENTRIES, THE DECISION OF ITAT IN CASE OF MUKESH CHOKSI GROUP OF CASES ACCEPTING THEIR BUSINESS OF ACCOMMODATION ENTRY PROVIDERS, THE DECISION OF HON'BLE MUMBAI HIGH COURT IN CASE OF MAJOR METALS LTD . (SUPRA) AND THE DECISION OF HON'B LE DELHI HIGH CO URT IN CASE OF NOVA PROMOTERS & FINLEASE PVT . L T D . (SUPRA), IT G OT ESTABLISHED THA T COLLUSIVE TRANSACTION W IT H M /S. MIHIR AGENCIES PVT . LTD . AND BUNIYAD CHEMICALS PVT . L T D . EXI STS. ELSE THERE WA S NO REASON WHY THIS INFORMATION SHOULD BE FOUND IN SEIZED MAT ERIAL DURING COURSE OF SEARCH AT PREMISES OF SHRI MUKESH CHOKSI, CONSEQUENTLY, ADDITION OF RS . 21 LACS. IN THIS BACKGROUND, ADDITION OF RS.21 LACS MADE BY A SSESSING O FFICER WA S CONFIRMED. 6 .1 0 BEFORE US, LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT A SSESSING OFFICER ISSUED NOTICE DATED 12.03.2012 U/S . 133(6) OF THE ACT ASKING FOR CONFIRMATION OF TRANSACTION TO THE ABOVE SAID SHARE APPLICANTS. AS PER PARA 10.3 OF THE ASSESSMENT ORDER, IN RESPONSE TO NOTICE U/S . 133(6) DATED 12.03.2012 ISSUED BY ASSESSI NG OFFICER , M/S MIHIR AGENCIES PVT. LTD. AND M/S BUNIYAD CHEMICALS PVT. LTD. VIDE LETTER DATED 15.03.2012 INTIMATED THAT THEIR ACCOUNTING DATA HAS BEEN I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 36 IMPOUNDED BY I NCOME T AX D EPARTMENT IN SEARCH ACTION CARRIED OUT IN THEIR OFFICE PREMISES BY DDI T - UNIT - 1( 4) ON 25.11.2009. HENCE, THEY WE RE NOT IN POSITION TO PROVIDE ANY INFORMATION IN THE MATTER. THEREAFTER AGAIN NOTICE U/S 133(6) WERE ISSUED TO THE ALLEGED TWO PARTIES AND REPLY WAS RECEIVED VIDE LETTER DATED 27.03.2012 , WHEREIN THEY HAVE SIMPLY GIVEN CON FIRMATION OF THEIR STATEMENT RECORDED AT THE TIME O F SEARCH BUT FAILED TO PROVIDE INFORMATION AS ASKED BY ASSESSING OFFICER VIDE LETTER DATED 12.03.2012 AND ON THE BASIS OF WHICH , ASSESSING OFFICER PROCEEDED TO MAKE ADDITION U/S . 68 OF THE ACT. W HEN REPLY U/S . 133(6) DATED 15.03.2012 OF THE TWO ALLEGED PARTIES CLEARLY STATED THAT THEY CANNOT CONFIRM ANY ALLEGED COLLUSIVE TRANSACTION WITH ASSESSEE WITHOUT ACCOUNTING DATA, LEGAL POSITION OF LAW STILL REMAIN ED UNCHANGED EVEN ON THE RECEIPT OF THEIR LETTER DATE D 27.03.2012. EVEN OTHERWISE ASSESSING OFFICER HAS NOT BOTHERED TO OBTAIN THE RELEVANT INFORMATION FROM IMPOUNDED MATERIAL SEIZED BY THE INCOME TAX DEPARTMENT. THIS SHOWS THAT ASSESSING OFFICER HAS MADE ADDITION WITHOUT MAKING PROPER INQUIRY AND WITHOUT C ONFRONTING THE ASSESSEE TO THE STATEMENT RECORDED U/S 132(4) OF THE ACT AND COMPELLING PERSONS TO BE PRESENT FOR THE PURPOSE OF CROSS EXAMINATION BY ASSESSEE. WE FIND THAT IN CASE OF CIT V/S KAN SINGH RATHORE IN ITA NO. 1 92 /2014 , HONBLE RAJASTHAN HIGH CO URT HAS HELD AS UNDER : 'IT IS NOT IN DISPUTE THAT THE ASSESSING OFFICER TREATED THE TRANSACTION BOGUS SOLELY BY RELYING UPON THE STATEMENT OF MR. MUKESH CHOKSI, WHO REMAINED UNCONFRONTED, THOUGH, I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 37 WAS CALLED FOR AS PER SECTION 133(6) OF THE INCOME TAX ACT, 1961. IN RESPONSE, IT WAS COMMUNICATED TO THE ASSESSING OFFICER THAT NO ADEQUATE ASSISTANCE COULD BE GIVEN AS THE ENTIRE RECORD OF MAHASAGAR SECURITIES WAS EARLIER IMPOUNDED AND WAS IN CUSTODY OF INCOME TAX DEPARTMENT. IN THESE CIRCUMSTANCES, SHRI MUKESH C HOKSI WAS NOT CONFRONTED BY THE ASSESSEE. IN ABSENCE OF IT, THE STATEMENT OF SHRI MUKESH CHOKSI COULD HAVE NOT BEEN USED AGAINST THE ASSESSEE.' 6 .1 1 AS PER WRITTEN SUBMISSION BEFORE CIT(A) DATED 25.10.2012 FILED IN THE PAPER B OOK AT PA G E N O. 65, ASSESSEE REQUESTED FOR OPPORTUNITY FOR CROSS EXAMINATION AND REMAND REPORT WAS AGAIN CALLED FOR WITH SOME SPECIFIC DIRECTIONS BUT NO OPPORTUNITY FOR CROSS EXAMINATION WAS GRANTED BY CONCERNED CIT(A) OR ASSESSING OFFICER. IN ANY CASE, MERE BALD STATEMENT, THAT TOO SELF SERVING, WITHOUT ANY CORROBORATIVE EVIDENCE CANNOT BE MADE A GROUND FOR HUGE ADDITIONS. HON'BLE JURISDICTIONAL GUJARAT HIGH COURT IN THE CASE OF DCIT VS MAHENDRA AMBALA L PATEL IN TAX APPEAL NO. 462 OF 1999 , DATED 13 TH APRIL 2010 [ 40 DTR 243 ] HELD A S UNDER: 'THOUGH THE AO HAS PLACED RELIANCE UPON THE STATEMENTS OF SHRI MANOJ VADODARIA AND SHRI G.C. PATEL FOR THE PURPOSE OF TAXING THE AMOUNT IN THE HANDS OF THE ASSESSEE, DESPITE SPECIFIC REQUEST BEING MADE BY THE ASSESSEE FOR CROSS - EXAMINING BOTH THE SAID PERSONS, THE AO HAS NOT PERMITTED THE ASSESSEE TO CROSS - EXAMINE THEM. IN THE CIRCUMSTANCES, NO RELIANCE COULD BE PLACED UPON THE STATEMENTS OF THE SAID PERSONS AS THE RESPONDENT ASSESSEE HAD NO OPPORTUNITY TO CROSS - EXAMINE THEM. THE STATEMENTS MADE B Y THE AFORESAID PERSONS WOULD HAVE NO EVIDENTIARY VALUE AND AS SUCH, WOULD NOT BE ADMISSIBLE IN EVIDENCE' I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 38 BESIDE THIS, CASE OF ASSESSEE IS SQUARELY COVERED BY THE LATEST DECISION OF ITAT , AHME DABAD BENCH IN CASE OF CHARTERED MOTORS PVT LTD. V S . ACIT (ITA NO. 26/AHD/2012). IN THE SAID CASE, FACTS WERE SIMILAR AS ADDITIONS WERE MADE ON THE BASIS OF STATEMENT OF MUKESH CHOKSHI RECORDED ON DATE 25.11.2009 WHO ADMITTED THAT HE ONLY PROVIDES ACCOMMODATION ENTRIES. EVEN IN SAID CASE AS REFERRED SUPRA, SHARE APP LICATION MONEY WAS RE CEIVED F ROM BUNIYAD CHEMICALS PVT. LTD AN D IT WAS OBSERVED THAT APPARENTLY COMPANY HAS ALLOTTED SHARES AT THE FACE VALUE OF RS. 10/ - AT A PREMIUM OF RS. 90/ - PER SHARE WHICH WERE ULTIMATELY TRANSFERRED TO VARIOUS EMPLOYEES OF DIFFERENT CONCERNS OF FAMILY MEMBERS OF ASSESSEE AT FACE VALUE. EVEN IN THE PRESENT CASE, CIT(A) HAS STATED THAT THE SHARES WERE ISSUED AT A PREMIUM AND WERE RE - PURCHASED BY THE DIRECTOR OF THE ASSESSEE COMPANY AND A GROUP COMPANY OF ASSESSEE AT FACE VALUE. IN SUC H CIRCUMSTANCES, HONBLE ITAT BENCH IN CASE OF CHARTERED MOTORS PVT. LTD. V S . ACIT HELD AS UNDER: 'THUS, WE FIND THAT THE ASSESSEE WAS NOT ALLOWED ANY REAL OPPORTUNITY TO CROSS - EXAMINE THE PERSONS WHO MADE THE STATEMENT AT THE BACK OF THE ASSESSEE. IN OUR CONSIDERED VIEW, IN THE CIRCUMSTANCES, THE STATEMENT OF THOSE PERSONS CANNOT BE READ AGAINST THE ASSESSEE. OUR ABOVE VIEW FINDS SUPPORT FROM THEN DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF: 1. HEIRS AND LEGAL REPRESENTATIVES OF LATE LAXMANBHAI S. PATEL VS. COMMISSIONER OF INCOME TAX (SUPRA) 2. CIT VS. INDRAJIT SINGH SURI (SUPRA) 3. DCIT VS. MAHENDRA AMBALAL PATEL (SUPRA) 4. CIT VS. KANITBHAI REVIDAS PATEL (SUPRA) I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 39 IN VIEW OF THE ABOVE SETTLED POSITION OF LAW, WE FIND FORCE IN THE AR GUMENT OF THE ASSESSEE THAT THE STATEMENTS OF THE PERSONS MENTIONED ABOVE ARE NOT ADMISSIBLE EVIDENCE AGAINST THE ASSESSEE. IN ABSENCE OF THESE STATEMENTS, WE FIND THAT NO OTHER MATERIAL HAS BEEN BROUGHT EN RECORD BY THE REVENUE TO SHOW THAT WHY STILL THE AMOUNT IN QUESTION SHOULD BE TREATED AS INCOME OF THE ASSESSEE WHEN THE ASSESSEE FURNISHED ALL THE DOCUMENTS WHICH WERE AVAILABLE WITH IT TO DISCHARGE THE ONUS WHICH WAS UPON IT U/S . 68 OF THE ACT. IN THE ABOVE CIRCUMSTANCES, IN OUR CONSIDERED VIEW, THE AD DITION WAS MADE SOLELY BASED ON THE INADMISSIBLE AND UNRELIABLE MATERIAL AND THEREFORE ADDITION SO MADE CANNOT BE SUSTAINED. WE, THEREFORE, DELETE THE ADDITION OF RS 2,00,00,000/ - MADE IN THE CASE OF M/S . CHARTED MOTORS PVT. LTD . A S WELL AS ADDITION OF RS 70,00,000/ - MADE IN THE CASE OF M/S. CHARTERED SPEED PRIVATE LIMITED.' 6 . 12 IN REGARD TO THE FINDING OF C I T(A) IN P ARA 14.10 OF ITS ORDER , THE SAID SHARE APPLICANT BUNIYAD CHEMICALS P. LTD HAS ALSO SUBSCRIBED TO SHARE APPLICATION MONEY OF ITS ASSOCIATE C ONCERN M/S . HARMONY YARNS P. LTD ALSO APART FROM ASSESSEE C OMPANY AND FACT S THAT SHARE APPLICATION MONEY HAS BEEN IMMEDIATELY TRANSFERRED TO ANOTHER SISTER CONCERN M/S . RAMA TRADELINK PVT. LTD. BY ASSESSEE . S UCH POST UTILISATION OF SHARE APPLICATION MONEY BY INVESTMENT IN SISTER CONCERN IS NOT BARRED BY LAW NOR ESTABLISH THE FACT THAT SHARE APPLICATION MONEY RECEIVED ARE BOGUS AND HENCE NO ADVERSE VIEW CAN BE CALLED FOR. IN CASE THE ASSESSEE ADDUCES EVIDENCE IN SUPPORT OF SHARE APPLICATION MONE Y , IT IS OPE N TO ASSESSING OFFICER TO EXAMINE IT AND REJECT GROUNDS. IN CASE , HE WISHES TO RELY ON THE REPORT OF INVESTIGATION AUTHORITIES, SOME MEANINGFUL ENQUIRY OUGHT TO BE CONDUCTED BY HIM TO ESTABLISH A LINK I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 40 BETWEEN ASSESSEE AND THE ALLEGED HAWALA OPERATORS, SUC H A LINK WAS SHOWN TO BE PRESENT IN CASE OF NOVA PROMOTERS & FINLEASE (P) LTD. RELIED UPON BY R EVENUE. THE FACTS OF CASE OF NOV A PROMOTERS & FINLEASE (P) LTD. 18 TAXMANN.COM 217 (DELHI) IS DISTINGUISHABLE ON FACTS. IN CASE OF ASSESSEE, SHRI MUKESH CHOKSI IN HIS STATEMENT RECORDED U/S. 132(4) HAS STATED THAT HE WAS ENGAGED IN GIVING ACCOMMODATION ENTRIES AND BOTH THE COMPANIES HAVE CONFIRMED THE STATEMENT GIVEN AT THE TIME OF SEARCH IN RESPONSE TO NOTICE U/S. 133(6). HOWEVER, THEY HAVE INTIMATED TO ASSESSI NG OFFICER IN RESPONSE TO NOTICE U/S. 133(6) THAT THEIR ACCOUNTING DATA HAS BEEN IMPOUNDED BY I NCOME T AX D EPARTMENT IN SEARCH ACTION CARRIED OUT IN THEIR OFFICE PREMISES BY DDI T - UNIT - 1(4) ON 25.11.2009. HENCE THEY WE RE NOT ABLE TO PROVIDE ANY INFORMATION I N THE MATTER. HOWEVER, IN CASE OF NOVA PROMOTERS FINLEASE PVT. LTD. THERE WAS NO SUCH FACT AND THE PARTIES IN THAT CASE HAVE FILED THEIR AFFIDAVIT RETRACTING THEIR STATEMENTS WITHOUT BEING NOTARIZED AND THEY DID N O T APPEAR BEFORE ASSESSING OFFICER FOR CROS S EXAMINATION IN RESPONSE TO SUMMONS U/S. 131. HOWEVER, IN CASE OF ASSESSEE, ASSESSING OFFICER DID N O T ISSUED SUMMONS TO SHRI MUKESH CHOKSI OR THE D IRECTORS OF ALLEGED TWO COMPANIES. IN THE COURSE OF REMAND PROCEEDINGS, PARTIES WERE NOT PRODUCED BEFORE AS SESSEE FOR CROSS EXAMINATION. THE STATEMENT RECORDED U/S 132(4) OF MUKESH CHOKSI, D IRECTOR OF M/S MIHIR AGENCIES PVT. LTD. AND M/S BUNIYAD CHEMICALS PVT. LTD. D ID NOT CONTAIN ANY MENTION OF NAME OF ASSESSEE COMPANY OR ANY I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 41 EVIDENCE OF COLLUSIVE TRANSACTION BETWEEN ALLEGED ACCOMMODATION ENTRY PROVIDERS AND ASSESSEE IN THE FORM OF TRANSFER OF ANY FUNDS/CASH REPRESENTING UNACCOUNTED INCOME FROM THE COFFERS OF THE ASSESSEE COMPANY TO THE SHARE APPLICANTS AGAINST SHARE APPLICATION MON E Y . S HARE APPLICATION MONE Y HAVE BEEN RECEIVED THROUGH PROPER BANKING CHANNEL AND THERE IS NO THING ON RECORD TO ESTABLISH THAT ASSESSEE HAS PAID ANY MONEY IN CASH TO SHARE APPLICANTS IN CONSIDERATION OF CHEQUE RECEIVED FROM THE PARTIES. NO SUCH EVIDENCE APPEARS TO HAVE BEEN GATHERED BY THE DEPARTMENT IN COURSE OF SEARCH PROCEEDINGS AGAINST THE TWO PARTIES. ON PERUSAL OF BANK STATEMENT OF THESE TWO PARTIES, IT CAN BE GATHERED THAT NO CASH HAS BEEN DEPOSITED BY THE SE PARTIES BEFORE ISSUING CHEQUES TO ASSESSEE TOWARDS SHARE APPLICATION MONEY. S HARES ISSUED TO ALLEGED TWO COMPANIES WERE TRANSFERRED TO D IRECTOR OF THE COMPANY ON 31.07.2008 LONG BEFORE SEARCH CONDUCTED IN CASE OF SHRI MUKESH CHOKSI ON 25.11.2009 AND SO THE STATEMENT OF SHRI MUKESH CHOKSI RECORDED AFTER THE TRANSFER OF SHAR ES CANNOT BE RELIED UPON IN ABSENCE OF ANY EVIDENCE COLLECTED IN COURSE OF SEARCH IN CASE OF SHRI MUKESH CHOKSI INDICATING TRANSFER OF CASH. IN CAS E OF KISHINCHAND CHELLARAM V S . CIT [125 ITR 713] [SC], HON BLE SUPREME COURT HAS HELD THAT EVIDENCE WHICH IS NOT SHOWN TO ASSESSEE CAN NOT BE ADMITTED. THE OPPORTUNITY TO CONTROVERT SHOULD BE GIVEN TO ASSESSEE. HONBLE RAJASTHAN HIGH COURT IN CASE OF CIT VS SUPERTECH DIAMOND TOOLS (P) LIMITED (44 TAXMANN.COM 460) (RAJ) HAS I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 42 HELD THAT WHERE INVESTING COMPANIES WER E GENUINELY EXISTING AND IDENTITY OF INDIVIDUAL INVESTORS WERE ALSO ESTABLISHED, NO ADDITION COULD BE MADE UNDER SECTION 68 ON ACCOUNT OF SHARE APPLICATION MONEY, ONLY ON BASIS OF ANY THIRD PARTY STATEMENT . 6 .1 3 REGARDING ADDITION OF RS. 85,00,000/ - ON AC COUNT OF SHARE APPLICATION MONEY AND SHARE PREMIUM MONEY , WE FIND THAT ASSESSEE HAS RECEIVED RS. 85,00,000/ - TOWARDS SHARE APPLICATION MONEY AND SHARE PREMIUM. LIST OF THE SAID PARTIES IS AS UNDER: - SR. NO. NAME OF THE PARTY SHARE APPLICATION MONEY 1. M/S HITESHWARI MARKETING PVT.TD., KOLKATA 5,00,000/ - 2. M/S JMD MERCANTILE PVT. LTD., KOLKATA 5,00, 000 / - 3. M/S SUNFLOWER VINIMAY PVT. LTD., KOLKATA 5,00, 000 / - 4. M/S SUGAM COMMERCIAL PVT. LTD., KOLKATA 5,00,000 / - 5. EDMOND COMMERCIAL PVT. LTD. 5,00 ,000/ - 6. M/S BHAGYALAXMI MERCANTILE PVT. LTD., KOLKATA 5, 00 ,000/ - 7. M/S KOMAL COMMERCIAL LTD., MUMBAI 10,00,000/ - 8. DHAWANI MARKETING PVT. LTD. 15,00,000/ - 9. EMERALD SYSTEM ENG. LTD. 5, 00 ,000/ - 10. M/S LARITE INDUSTRIES LTD., MUMBAI 15,00,000/ - 11. M/S SARGOSSA INVESTMENT & FINANCE PVT. LTD., MUMBAI 5,00,000/ - 12. STUDY SALES PVT. LTD. 5,00,000/ - TOTAL 85,00, 000 / - ASSESSES FILED LIST OF APPLICANTS OF SHARE APPLICATION MONEY VIDE LETTER DATED 22.02.2012. A NOTICE U/S . 133(6) OF THE A CT WAS ISSUED ON 12.03.2012 TO ALL PARTIES. ASSESSING OFFICER OBSERVED THAT NO REPLY IS RECEIVED FROM PARTIES AT S R. N O S . 5, 8, 9 & 12. I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 43 6 .1 4 FURTHER IN ASSESSMENT ORDER, ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS NOT FILED ANY CONFIRMATION AS WE LL AS ORIGINAL SHARE APPLICATION FORM IN RESPECT OF ABOVE 4 PARTIES AND THEREFORE HE MADE ADDITION. IN RESPECT OF 8 PARTIES, A NOTICE DATED 12.03.2012 U/S 133(6) OF THE ACT WAS ISSUED AND SUBSEQUENTLY A REMINDER DATED 03.04.2012 WAS ISSUED. ASSESSING OFFI CER OBSERVED THAT ALL THE PARTIES HAVE GIVEN SAME REPLIES ON THE SAME DAY. A SHOW CAUSE NOTICE DATED 23.04.2012 WAS ISSUED TO ASSESSEE AND ASSESSING OFFICER REQUESTED TO SUPPLY DETAILS ALONG WITH CONFIRMATION. ASSESSEE ASKED FOR MORE TIME FOR SUBMISSION OF DETAILS. HOWEVER, ASSESSING OFFICER WITHOUT PROVIDING SUFFICIENT OPPORTUNITY WENT ON FINALISING ASSESSMENT ORDER. IN ASSESSMENT ORDER, HE CONCLUDED THAT ASSESSEE HAS NOT SUBMITTED DETAILS REQUIRED AND FAILED TO ESTABLISH NATURE AND SOURCE OF CREDIT. ON THIS BASIS, HE MADE ADDITION OF RS. 85,00, 000 / - U/S 68 OF THE ACT TO THE TOTAL INCOME OF ASSESSEE. 6 .1 5 DURING REMAND PROCEEDINGS, ASSESSEE WAS AGAIN REQUESTED TO PRODUCE ORIGINAL SHARE APPLICATION FROM ITS RECORD IN RESPECT OF 4 PARTIES. A SSESSEE VIDE LETTER DATED 09.08.2012 SUBMITTED COPY OF APPLICATION FOR SHARE ALONG WITH COPY OF ACKNOWLEDGEMENT OF RETURN, AUDITED STATEMENT AND COPY OF RELEVANT PORTION OF BANK STATEMENT TOGETHER WITH THEIR REPLY IN RESPONSE TO NOTICE U/S. 133(6) IN RESPECT OF 3 OUT O F 4 PARTIES. IN CASE OF STURDY SALES PVT. LTD., NO SUCH DETAILS HAVE BEEN GIVEN BY ASSESSEE. ON VERIFICATION OF COPY OF SHARE APPLICATION I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 44 FORM, ASSESSING OFFICER OBSERVED THAT SHARE APPLICATION FORMS WERE NOT BEARING DATE. 6 . 1 6 FURTHER, DURING REMAND PR OCEEDINGS , ASSESSEE AGAIN FILED ALL DETAILS IN REGARD TO 8 PARTIES WHO FILED REPLIES BEFORE ASSESSING OFFICER IN RESPONSE TO NOTICE U/S . 133(6) OF THE ACT. ASSESSEE FILED ACKNOWLEDGEMENT OF RETURN OF THEIR INCOME AND AUDITED FINANCIAL STATEMENTS AND COPY OF RELEVANT PORTION OF BANK STATEMENTS OF THE PARTIES. ASSESSEE ALSO PRODUCED ORIGINAL SHARE APPLICATION FORMS DURING THE REMAND PROCEEDINGS. 6 .1 7 WE FIND THAT A LL THE TRANSACTIONS WE RE DULY SUPPORTED BY THE SHARE APPLICATION FORM, ACKNOWLEDGEMENT OF RETU RN OF INCOME, AUDITED FINANCIAL STATEMENTS & BANK STATEMENTS, M EMORANDUM OF A SSOCIATION (HEREINAFTER REFERRED AS MOA) AND ARTICLES OF ASSOCIATION (HEREINAFTER REFERRED AS AOA ) OF THE SHARE APPLICANT. 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 SHARE APPLICANT IN CONSIDERATION OF CHEQUE RECEIVED FROM SHARE. NO INQUIRY IS MADE BY THE ASSESSING OFFICER ONCE THE ASSESSEE HAS DISCHARGED HIS PRIMARY ONUS TO PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE SHARE APPLICANTS. ON PERUSAL OF THE BANK STATEMENTS OF SHARE APPLICANT, IT CAN BE SEEN THAT NO CASH HAS BEEN DEPOSITED BY THEM BEFORE ISSUE OF CHEQUE TO ASSESSEE TOWARDS SHARE APPLICATIO N MONEY. NONE OF THE PARTIES ARE RELATED TO ASSESSEE COMPANY. THE ASSESSEE HAS I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 45 PROVED ALL THE THREE INGREDIENTS OF PROVING A GENUINE CASH CREDIT BY ESTABLISHING IDENTITY (LIMITED/LISTED COMPANIES), GENUINENESS (TRANSACTIONS THROUGH NORMAL BANKING CHANNEL) AND CREDITWORTHINESS (IT RETURNS AND BALANCE SHEET WITH HUGE SHARE C APITAL). IF THE ASSESSING OFFICER DOUBTS THE SOURCE O F THE SOURCE OF THE SOURCE, HE WA S FREE TO CONDUCT INQUIRIES IN THE CASE OF PERSONS FROM WHOM ASSESSEE HAS RECEIVED FUNDS. HOWEVER, ON THAT COUNT, ADDITION CANNOT BE MADE U/S 68 IN THE HANDS OF THE ASSESSEE ONCE THE ASSESSEE DISCHARGES THE ONUS ON IT AS PER THE REQUIREMENT OF SECTION 68. 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 T O THE A SSESSING O FFICER, THEN DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW, BUT IT CANNOT BE REGARD ED AS UNDISCLOSED INCOME OF ASSESSEE COMPANY. HONOURABLE DELHI HIGH COURT IN CASE OF CIT V. KAMDHENU STEEL & ALLOYS LTD. (2012) 361 ITR 220 (DELHI) HELD THAT THOUGH INITIAL BURDEN IS UPON THE ASSESSEE, ONCE HE PROVES THE IDENTITY OF CREDIT/SHARE APPLICATI ONS BY EITHER FURNISHING PERMANENT ACCOUNT NUMBERS OR COPIES OF BANK ACCOUNTS AND SHOWS THE GENUINENESS OF THE TRANSACTION BY SHOWING MONEY IN THE BANKS IS BY ACCOUNT PAYEE CHEQUES OR BY DRAFT, ETC., THEN THE ONUS TO WOULD SHIFT TO THE REVENUE. AFTER ASSES SEE FURNISHED THE REQUIRED DETAILS TO THE REVENUE, ONUS SHIFTED TO THE REVENUE AND REVENUE HAS NOT I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 46 THEREAFTER PROVED THE TRANSACTION OF THE SHARE APPLICATION AS NON - GENUINE. IT HAS BEEN FURTHER HELD IN THIS JUDGEMENT THAT ONCE ADEQUATE EVIDENCE/MATERIAL IS GIVEN, WHICH WOULD PRIMA FACIE DISCHARGE THE BURDEN OF THE ASSESSEE IN PROVING THE IDENTITY OF SHAREHOLDERS, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE SHAREHOLDERS, THEREAFTER IN CASE SUCH EVIDENCE IS TO BE DISREGARDED OR IT IS PROVED THA T IT HAS 'CREATED' EVIDENCE, THE REVENUE IS SUPPOSED TO MAKE THOROUGH PROBE BEFORE IT COULD NAIL THE ASSESSEE AND FASTEN THE ASSESSEE WITH SUCH A LIABILITY U/S 68 OF THE ACT. THE ASSESSING OFFICER FAILED TO CARRY HIS SUSPICION TO LOGICAL CONCLUSION BY FURT HER INVESTIGATION AND THEREFORE ADDITION U/S 68 WAS NOT SUSTAINABLE. THE ABOVE JUDGMENT IS SQUARELY APPLICABLE TO THE FACTS OF THE CASE OF ASSESSEE. THE ASSESSING OFFICER AND C IT (A) HAS RELIED UPON THE DECISION OF DELHI HIGH COURT IN THE CASE OF NOVA PROM OTERS FINLEASE PVT. LTD. WHICH HAS BEEN DISTINGUISHED AND DIFFERED BY THE SAME DE LHI HIGH COURT IN THE CASE OF CI T VS . GA NGESHWARI METAL (P.) LTD. 30 TAXMANN.COM 328 WHEREIN IT WAS HELD THAT WHEN AN ASSESSEE BRINGS VARIOUS DOCUMENTARY EVIDENCES IN SUPPORT OF ITS CLAIM THAT SHARE APPLICATION MONEY IS GENUINE, NO ADDITION CAN BE MADE U/S 68 OF ACT. IN THE RATIO OF NOVA PROMOTERS FINLEASE PVT. LTD, TWO TYPES OF CASES HAVE BEEN INDICATED. ONE IN WHICH THE ASSESSING OFFICER CARRIES OUT THE EXERCISE WHICH IS REQ UIRED IN LAW AND THE OTHER IN WHICH THE ASSESSING OFFICER 'SITS BACK WITH FOLDED HANDS' TILL THE ASSESSEE EXHAUSTS ALL THE EVIDENCE OR MATERIAL IN I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 47 HIS POSSESSION AND THEN COMES FORWARD TO MERELY REJECT THE SAME ON THE PRESUMPTIONS. THE FACTS OF NOVA PROMOT ERS AND FINLEASE (P) LTD. FALL IN THE FORMER CATEGORY AS THE ASSESSING OFFICER HAD REJECTED THE AFFI DAVITS FILED BY APPLICANTS ON MERITS; FURTHER THE AO HAD ALSO INITIATED INQUIRIES THROUGH ISSUANCE OF SUMMONS U/S 131 WHICH RETURNED UNSERVED, AND THAT IS W HY THE COURT DECIDED IN FAVOUR OF THE REVENUE IN SAID CASE. HOWEVER, THE FACTS OF THE PRESENT CASE ARE CLEARLY DISTINGUISHABLE AND FALL IN THE SECOND CATEGORY AND ARE MORE IN LINE WITH FACTS OF LOVELY EXPORTS (P) LTD. (SUPRA). IN THE REMAND REPORT, THE ASS ESSING OFFICER HIMSELF HAS STATED THAT THE ASSESSEE HAS REQUESTED TO ISSUE SUMMONS U/S 131 BUT NO FURTHER PROBE WAS MADE BY THE ASSESSING OFFICER. THUS THERE WAS A CLEAR LACK OF INQUIRY ON THE PART OF THE ASSESSING OFFICER ONCE THE ASSESSEE HAD FURNISHED A LL THE MATERIAL WHICH HAS ALREADY BEEN REFERRED TO ABOVE. FURTHER IN THE CASE OF NOVA PROMOTERS FINLEASE PVT. LTD., THE SHAREHOLDERS DIDN'T CONFIRM THE TRANSACTIONS OF SHARE CAPITAL AND ADMITTED BEFORE ADDITIONAL COMMISSIONER (INVESTIGATION) THAT THEY WERE ACTING AS ACCOMMODATION ENTRY PROVIDERS AND THEREAFTER LATER ON THEY HAVE FILED THE AFFIDAVIT RETRACTING THEIR STATEMENT. THE AFFIDAVITS WERE NOT NOTARIZED AND THE DEPONENTS OF THE AFFIDAVIT DIDN'T APPEAR BEFORE ASSESSING OFFICER FOR CROSS EXAMINATION. S O RATIO OF NOVA PROMOTERS FINLEASE PVT. LTD. DOES NOT SUPPORT CASE OF R EVENUE. IN VIEW OF ABOVE LEGAL AND FACTUAL DISCUSSION ON MERIT, THE ADDITION MADE BY ASSESSING OFFICER OF I T A NO. 816 / AHD/ 13 A.Y. 05 - 06 [M/S. PANKAJ ENKA PVT. LTD. VS. DCIT] PAGE 48 RS.1,06,00,000/ - (RS.21,00,000/ - + RS.85,00,000/ - ) ON ACCOUNT OF SHARE APPLICA TION MONEY UNDER PROVISION OF SECTION 68 OF ACT IS DIRECTED TO BE DELETED. 7 . IN RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOW ED. PRONOUNCED IN THE OPEN COURT ON THIS THE 14 TH DAY OF MA Y , 201 5 . SD/ - SD/ - (N. S. SAINI) (SHAILENDRA KUMAR Y ADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 14 /0 5 /2015 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO: - 1. / REVENUE 2. / ASSESSEE 3. / CONCERNED CIT 4. - / CIT (A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. BY ORDER / , / ,