HONEY CONSULTANCY SERVICES P. LTD, MUMBAI V. DCIT 9(2), MUMBAI

ITA 8706/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3761 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 22-01-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 13-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V V SHASTRI
• Assessee Lawyers: H N MOTIWALLA
• Keywords: Unexplained cash credit; Gift; Business income; Income from undisclosed sources; Transactions in derivatives; Source of fund; Question of law; Corroborative evidences; Assessment record; Onus to prove; Reassessment proceedings; Futures and options
• Section: 131; 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H , BENCH MUMBAI BEFORE SHRI R.K.GUPTA, JM & SHRI P.M.JAGTAP , AM ITA NO. 8706 /MUM/20 1 0 ( ASSESSMENT YEAR : 200 7 - 0 8 ) M/S HONEY CONSULTANCY SERVICES PVT. LTD., 205/12, JAWAHAR NAGAR, ROAD NO. 13, GOREGAON (WEST), MU MBAI - 62 VS. DCIT - 9(2) , MUMBAI PAN NO. : AA BCH 4740 E ( APP ELLANT ) .. ( RESPONDENT ) AND ITA NO. 9103 /MUM/20 10 ( ASSESSMENT YEAR :2007 - 08 ) DCIT - 9(2), MUMBAI VS. M/S HONEY CONSULTANCY SERVICES PVT. LTD., 205/12, JAWAHAR NAGAR, ROAD NO.13, GOREGAON (W EST), MUMBAI - 62 PAN NO. : AABCH 4740 E ( APP ELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI H.N.MOTIWALLA & SHRI PIYUSH CHHAJED REVENUE BY : SHRI V.V.SHASTRI DATE OF HEARING : 15 TH APRIL , 2013 DATE OF PRONOUNCEMENT : 15 TH MAY, 2013 O R D E R PER SHRI R.K.GUPTA, JM : THESE TWO APPEALS HAVE BEEN PREFERRED BY THE ASSESSEE AND BY THE DEPARTMENT AGAINST THE ORDER PASSED BY THE LEARNED CIT(A) - 2 0 , MUMBAI FOR THE ASSESSMENT YEAR 2007 - 08. 2 . THE ASSESSEE IN ITS APPEAL (I. E. ITA NO. 8706/M/2010 ) IS OBJEC TING IN CONFIRMING THE ADDITION OF RS. 96 LACS MADE BY THE AO UNDER SECTION 68, WHEREAS THE DEPARTMENT IN ITS APPEAL (I.E. ITA NO. 9013/M/2010 ) IS OBJECTING IN HOLDING THAT THE PROFIT OF RS. 3,43,62,932/ - ON SALE OF SHARES WAS A SSESSABLE AS CAPITAL GAINS, IN ITA NO S . 8706&9103 /201 0 2 SPITE OF THE FINDING OF THE ASSESSING OFFICER THAT THE SCALE AND VOLUME AS WELL AS NATURE OF THE TRANSACTIONS INDICTED THE INCOME BE ASSESSABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS AND NOT AS CAPITAL GAINS. 3 . SINCE COMMON ISSUES ARE INVOLVED IN BOTH THE CASES, THEREFORE, FOR THE SAKE OF CONVENIENCE, BOTH THE CASES HAVE BEEN HEARD AND DISPOSED OF BY THIS CONSOLIDATED ORDER. 4 . FIRST, WE SHALL DECIDE THE ISSUE INVOLVED IN APPEAL OF THE ASSESSEE I.E. AGAINST CONFIRMING THE ADDITION OF RS. 96 LACS UNDER SECTION 68 . 5 . BRIEF FACTS GIVING RISE TO APPEAL OF THE ASSE S SEE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY INCORPORATED ON 24.05.2004. IT COMMENCED ITS OPERATIONS DURING THE YEAR 2005 - 06 RELEVANT TO THE ASSESSME NT YEAR 2006 - 07. ITS AUTHORIZED AND SUBSCRIBED SHARE CAPITAL AS AT 31 - 03 - 2006 STOOD AT RS.1,00,000 BEING 10,000 EQUITY SHARES OF RS.10 EACH. THE ISSUED AND SUBSCRIBED SHARE CAPITAL ROSE DURING THE CURRENT YEAR TO RS.10,00,000 BEING 1,00,000 EQUITY SHARES O F RS.1 0 EACH. THE ASSESSEE , THUS , ISSUED 89,00 0 EQUITY SHARES OUT OF THEM, 48,000 SHARES WERE ISSUED IN THE NAME OF FOUR COMPANIES (12000 SHARES EACH) AT PREMIUM OF RS.190 PER EQUITY SHARE. THE ASSESSEE RECEIV ED A TOTAL SUM OF RS.96,00,000 IN THE NAMES OF THESE COMPANIES LISTED BELOW: I. DHWANI MARKETING, RS.24,00,000 II. SHREE DATTA INDUSTRIES (INDIA) LTD RS.24,00,000 III. GUJRAT CHEMI PLASTO LTD RS.24,00,000 IV. NEXUS SOFTWARE LTD RS.24,00,000 TOTAL RS.96,00,000 ITA NO S . 8706&9103 /201 0 3 THE BALANCE 41,000 SHARES WE RE ISSUED TO ITS TWO DIRECTORS NAMELY, ARVIND B DELIWALA AND DEEPA K DELIVALA, EACH SUBSCRIBING 20,500 SHARES AT PAR. IN ALL, THE ASSESSEE RECEIVED DURING THE C URRENT YEAR A TOTAL SUM OF RS.1 ,00,10,000 COMPRISING RS.8,90, 000 AS SHARE CAPITAL AND RS.91 ,20,0 00 TOWARDS SHARE PREMIUM. THE A.O. ASKED THE ASSESSEE TO SUBMIT DETAILS ALONG WITH SUPPORTING EVIDENCES IN RELATION TO SUBSCRIPTION OF SHARES. THE ASSESSEE FURNISHED NAME AND ADDRESSES OF ALL THE SHARE HOLDERS AND CONFIRMATION LETTERS ALONG WITH BOARD RESO LUTION AND RELEVANT BANK STATEMENTS IN RESPECT OF SHARES SUBSCRIBED BY THE FOUR COMPANIES. THE CONFIRMATION LETTERS SHOWED CHEQUE NO., DATE AND AMOUNT OF PAYMENTS ALONG WITH THEIR PAN AND THE ASSESSING OFFICERS WITH WHOM THEY WERE BEING ASSESSED. THE CONFI RMATION LETTERS SHOWED THAT THE TOTAL AMOUNT OF RS. 96,00,000 WAS REMITTED VIDE SIX CHEQUES ISSUED BETWEEN 07 - 11 - 2006 AND 20 - 11 - 2006 . THE A.O. NOTICED THAT ALL THE CONFIRMATION LETTERS WERE WRITTEN UNDER BRAND NEW LETTER HEADS APPEARED TO HAVE BEEN OBTAINED RECENTLY, ALL THE SUBSCRIBERS HAD BANK ACCOUNTS WITH KARUR VAISYA BANK, FORT BRANCH, MUMBAI, TWO OF THE PARTIES NAMELY; MIS . DHWANI MARKETING P. LTD AND M/ S. S H REE DATTA INDUSTRIES (I) LTD HAD COMMON ADDRESS AND ANOTHER, NAMELY NEXUS SOFTWARES LTD, THOUGH HAD ITS ADDRESS AT BARODA, WAS OPERATING THE BANK ACCOUNT AT MUMBAI. IN ORDER TO FURTHER VERIFY THE MATTER, SHE TRIED TO SERVE SUMMONS UNDER SECTION 131 ON THE THREE COMPANIES BASED IN MUMBAI THROUGH HER INSPECTOR WHO COULD NOT FIND EITHER THE PREMISES OR THE PARTIES AT THE GIVEN ADDRESS. ON FURTHER ITA NO S . 8706&9103 /201 0 4 ENQUIRIES WITH THE BANK, SHE FOUND OUT THAT THE ACCOUNTS WERE OPENED IN THE NAMES OF SHREE DATTA INDUSTRIES AND GUJARAT CHEMI PLASTO LTD ON THE SAME DATE I.E. 14.11.2005 AND WERE INTRODUCED BY A COMMON ACCOUNT HOLDER. THE BANK HAD NOT BEEN ABLE TO TRACE THE ACCOUNT OPENING DETAILS IN RESPECT OF DHWANI MARKETING LTD. FURTHER. THE BANK ACCOUNT IN THE NAME OF NEXUS S OFTWARE LTD WAS INTRODUCED BY M/ S. LOVMAT ENTERPRISES. A PROPRIETARY CONCERN. SHE FURTHER FOUND THAT THE BANK ACCOUNTS OF ALL THE FOUR COMPANIES HAD A COMMON SOURCE OF FUND. BEING THE BANK ACCOUNT IN THE NAME OF LOVMAT ENTERPRISES IN THE SAME BANK. THE PROPRIETOR OF M/ S LOVMAT ENTERPRISES WAS NOT TRACEABLE AT THE GIVEN ADDRESS. THE AO ALSO CAME TO KNOW T HAT SOON AFTER THE MONEY WAS REMITTED TOWARDS SHARE APPLICATION ALL THE FIVE BANK ACCOUNTS WERE CLOSED. ON BEING CONFRONTED THE ASSESSEE FURNISHED NEW ADDRESSES OF THE THREE COMPANIES AT MUMBAI. IT ALSO FURNISHED THE NAMES OF PRESENT DIRECTORS OF ALL THE F OUR COMPANIES. IT IS NOTED HERE THAT THE CONFIRMATION LETTERS FILED IN THE NAMES OF FOUR COMPANIES WERE SIGNED BY THE FOLLOWING DIRECTORS: I) DHWANI MARKETING SHRI A.N. PATEL, I I) GUJARAT CHEMIPLASTO LTD SHRI SHEKHAR III) SHREE DATTA INDUSTRIES (I ) LTD SHRI S.M. DAVE IV) NEXUS SOFTWARE LTD SHR I ASHOK M. PANCHAL THE N EW LIST OF DIRECTORS HOWEVER SHO WED ONLY ONE COMMON NAME I.E. SHRI ASHOK M. PANCHA L. IN OTHER WORDS, THE DIRECTORS WHO HAVE SIGNED THE CONFIRMATION LETTERS IN RESPECT OF COMPANI ES AT S R. N O.1 TO 3 ABOVE DID NOT APPEAR IN THE NEW LIST OF THE DIRECTORS FURNISHED TO THE A.O. THE A.O. AGAIN COULD NOT FIND THE THREE COMPANIES AT THE NEW ADDRESSES. ITA NO S . 8706&9103 /201 0 5 SHE, THEREFORE, ASKED THE APPELLANT TO PRODUCE THE DIRECTORS OF ALL THE CONCERNS ON 10.11 .2009. THE APPELLANT INFORMED THAT IT VISITED THE NEW ADDRESSES AND FOUND THE OFFICE OF DHWANI MARKETING LTD CLOSED, AND THE BUILDING IN WHICH THE OFFICES OF GUJARAT CH EMI PLASTO LTD AND SHREE DATTA INDUSTRIES WERE SITUATED WAS UNDER RENOVATION AND IT WAS NOT AWARE OF THEIR PRESENT WHERE ABOUT. THE APPELLANT, HOWEVER, FURNISHED COPIES OF THE BALANCE - SHEET, PROFIT AND LOSS ACCOUNT AND ACKNOWLEDGEMENT OF E - RETURN FOR AY 2006 - 07 IN RESPECT OF ALL THE FOUR COMPANIES AND COPIES OF BALANCE - SHEET, PROFIT AND LOS S ACCOUNT AND E - RETURN FOR THE A. Y.2007 - 08 I N RESPECT OF GUJARAT CHEMI PLASTO LTD AND SHREE DATTA INDUSTRIES (I) LTD. THE APPELLANT DECLINED TO PRODUCE THE DIRECTORS OF NEXUS SOFTWARE LTD ON THE PLEA THAT THE COMPANY WAS SITUATED AT BARODA. I T, HOWEVER, DI D NOT STATE ANYTHING ON PRODUCING THE DIRECTORS OF THE THREE COMPANIES AT MUMBAI. THE A.O., THEREAFTER, ISSUED COMMISSION UNDER SECTION 131 (D) ON 17.11.2009 TO THE D D LT (INVESTIGATION) BARODA IN ORDER TO CAUSE VERIFICATIONS WITH MIS. NEXUS SOFTWARE LTD. T HE D D LT INFORMED THAT NO SUCH PARTY EXISTED AT THE GIVEN ADDRESS AND, THEREFORE, COULD NOT PURSUE THE ENQUIRIES. 5.1 THE A.O CONFRONTED THE ABOVE TO THE ASSESSEE . POINTING OUT ITS FAILURE TO PRODUCE THE PARTIES, SHE PROPOSED TO TREAT THE ENTIRE SUBSCRIPT ION MONEY AS UNEXPLAINED CASH CREDITS. THE ASSESSEE REPLIED REITERATING ITS EARLIER SUBMISSION CONTENDING THAT ALL THE RELEVANT DETAILS HAD BEEN SUBMITTED AND THE NATURE AND SOURCE OF THE ENTIRE MONEY SHOULD BE ACCEPTED. REJECTING THE CONTENTIONS OF THE A S SESSEE THE ITA NO S . 8706&9103 /201 0 6 A. O . OBSERVED THAT IT WAS SURPRISING TO NOTE THAT THE APPELLANT DID NOT KNOW THE WHEREABOUTS OR THE CORRECT OR THE PRESENT ADDRESS OF ALL THE FOUR SUBSCRIBERS AND WAS UNABLE TO PRODUCE THEIR DIRECTORS YET IT WAS ABLE TO PROCURE THE COPIES OF THE IR PROFIT AND LOSS ACCOUNT, BALANCE - SHEET AND THE RETURNS OF INCOME. SHE OBSERVED THAT THE RETURNS OF INCOME DID NOT EVIDENCE INVESTMENT IN THE SHARES OF THE ASSESSEE COMPANY. REGARDING NEXUS SOFTWARE LTD, SHE OBSERVED THAT THEIR TELEPHONE NOS. WERE FOUND TO BE BELONGING TO SOME OTHER PERSONS, THE COMPANY HAD NOT FILED ITS RESULTS WITH THE BOMBAY STOCK EXCHANGE SINCE THE QUARTER ENDING 2001 AND THEIR SHARES HAD NOT BEEN TRADED SINCE FEB' 2003. NOTING THAT THE PARTY ALSO DID NOT EXIS T AT THE GIVEN ADDRESS, T HE A.O . OBSERVED THAT THIS SHOWED THAT NEXUS SOFTWARE LTD WAS AT LEAST NOT IN ANY ACTIVITY DURING THE PERIOD IN WHICH THE ASSESSEE CLAIMED TO HAVE RECEIVED SHARE SUBSCRIPTIONS FROM THEM. IN SUM, THE A. O . CONCLUDED THAT THE ASSE S SEE HAD FAILED TO ESTABLISH THE IDENTIT Y OF THE SUBSCRIBERS, AND THE GENUINENESS OF THE TRANSACTIONS LEADING TO CREDITS OF TOTAL SUM OF RS .96,00,000 / - . REGARDING THE BALANCE AMOUNT OF R S.4, 10,000 / - , SHE OBSERVED THAT THE ASSESSEE FAILED TO GIVE ANY EXPLANATION OR SUPPOR TING EVIDENCE. IN RESULT, THE AO ADDED THE TOTAL SUM OF RS.1 ,00,10,000 / - AS UNEXPLAINED CASH CREDITS UNDER SECTION 68 OF THE ACT . 6 . IN APPEAL BEFORE THE CIT(A), THE ASSESSEE STATED THAT THE ADDITION OF RS. 4,10,000/ - WAS UNWARRANTED AS THE SAID SUM WAS CONTRIBUTED BY ITS TWO DIRECTORS NAMELY SHRI ARVIND DELIWALA AND SMT. ITA NO S . 8706&9103 /201 0 7 DEEPA DELIWALA WHOSE NAME, ADDRESS, PAN, COPY OF RETURNS WERE FURNISHED BEFORE THE AO, VIDE LETTER DATED 18 - 6 - 2009. THE ASSESSEE FURTHER SUBMITTED THAT THE AO NEVER ISSUED ANY SUMMON NOR DID SHE ASK T HEM TO BE PRODUCED TO PROVE THEIR IDENTITY OR GENUINENESS OF THE CLAIM. LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSION FOUND THAT THE ADDITION OF RS. 4,10,000/ - WAS NOT JUSTIFIED. ACCORDINGLY, HE DELETED THE ADDITION. 6 .1 REGARDING ADDITION OF RS. 96 LACS, IT WAS SUBMITTED THAT BESIDES FILING THE CONFIRMATION LETTERS SHOWING THEIR PAN, ASSESSMENT PARTICULARS AND THE NATURE AND MODE OF PAYMENT BY EACH OF THE SUBSCRIBER, THE A. O . HERSELF FOUND THAT ALL OF THEM HAD BANK ACCOUNTS AND SOURCE OF FUND. ALL WERE R EGULARLY FILING RETURNS OF INCOME. IT FURNISHED THE COPIES OF THE ASSESSMENT ORDER FOR THE A.Y. 2007 - 08 IN THE CASES OF M/ S. GUJARAT CHEMI PLASTO LTD AND SHREE DATTA INDUSTRIES LTD IN PROOF OF GENUINENESS OF BOTH OF PARTIES. THE ASSESSEE, THEREFORE, SUBMIT TED THAT THE A.O HAD ADDED TILE IMPUGNED AMOUNT BASED ON DOUBTS AND PRESUMPTION. RELIANCE WAS PLACED ON THE DECISION OF NEMICHAND KOTHARI VS. C.I.T. , REPORTED IN 264 I T R 254 (GAU) . I T WAS SUBMITTED THAT THE IDENTITY, GENUINENESS AND CREDITWORTHINESS HAVE BEEN PROVED. FURTHER RELIANCE WAS PLACED ON THE DECISION IN THE CASE OF ELECTRO POLYCHEM LTD , REPORTED IN 294 ITR 661 (MAD) . LEARNED CIT(A) AFTER CONSIDERING THE ORDER OF THE AO AND THE SUBMISSION OF THE ASSESSEE AND ALSO CASE LAWS, FOUND THAT THE ASSESSEE FAILED TO ESTABLISH THE GENUINENESS OF THE AMOUNT RECEIVED AS THE SHARE ITA NO S . 8706&9103 /201 0 8 APPLICATION MONEY BY THE ASSESSEE. THE FINDINGS OF THE LEARNED CIT(A) HAVE BEEN RECO RDED IN PARA 6 TO 6.8, WHICH ARE AS UNDER : - 6. I HAVE CONSIDERED THE ISSUE. IN ORDER TO APPRECIATE THE CONTENTIONS URGED BY THE APPELLANT IT WOULD BE APPROPRIATE TO NOTICE SECTION 68 OF THE ACT WHICH IS REPRODUCED: '68. CASH CREDITS. - WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR AND THE ASSESSEE OFFERS N O EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT , IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY. THE STUN SO CREDI TED MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. ' 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 BE OF A SUM DURING THE PREVIOUS YEAR; AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH CREDIT F OUND IN THE BOOKS; OR THE EXPLANATION OFFERED BY THE ASSESSEE IN THE OPINION OF THE AO IS NOT SATISFACTORY. IT IS ONLY THEN THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. THE EXPRESSION THE ASSESSEE O FFERS NO EXPLANATION MEANS WHERE THE ASSESSEE OFFERS NO PROPER, REASONABLE AND ACCEPTABLE EXPLANATION AS REGARDS THE SUMS FOUND CREDITED IN THE BOOKS MAINTAINED BY THE ASSESSEE. IT IS TRUE THAT THE OPINION OF THE AO FOR NOT ACCEPTING THE EXPLANATION OFFER ED BY THE ASSESSEE AS NOT SATISFACTORY IS REQUIRED TO BE BASED ON PROPER APPRECIATION OF MATERIAL AND OTHER ATTENDING CIRCUMSTANCES AVAILABLE ON RECORD. THE OPINION OF THE ASSESSING OFFICER IS REQUIRED TO BE FORMED OBJECTIVELY WITH REFERENCE TO THE MATERI AL AVAILABLE ON RECORD. APPLICATION OF MIND IS THE SINE QUA NON FOR FORMING THE OPINION. THESE PROPOSITIONS ARE ENUNCIATED IN CIT VS. P. MOHANAKALA, 291 ITR 278 (SC). 6.2 EVEN UNDER THE 1922 ACT WHEREIN THERE WAS NO PROVISION CORRESPONDING TO SECTION 68, IT WAS A SETTLED LAW THAT THE ASSESSEE HAD A LEGAL OBLIGATION TO EXPLAIN THE NATURE AND SOURCE OF CREDIT. IN A GOVINDARAJU MUDALIAR VS COMMISSIONER OF INCOME - TAX [1958] 34 ITR 807 (SC), IT WAS LAID DOWN THAT IF AN ASSESSEE FAILED TO PROVE SATISFACTORILY T HE SOURCE AND NATURE OF AN AMOUNT RECEIVED BY HIM DURING THE ACCOUNTING YEAR, THE AO WAS ENTITLED TO DRAW THE INFERENCE THAT THE RECEIPTS WERE OF AN ASSESSABLE NATURE. IN THAT CASE, THE EXPLANATION OF THE ASSESSEE IN RESPECT OF THE AMOUNTS SHOWN AS CREDITS FOR HIM IN THE ACCOUNT BOOKS OF A FIRM OF WHICH HE WAS A PARTNER WAS REJECTED AS UNTRUE. IT WAS HELD THAT IT WAS OPEN TO THE AO TO HOLD THAT THE AMOUNTS REPRESENTED THE CONCEALED INCOME OF THE ASSESSEE. REFERRING TO THE AFORESAID CASE, THE APEX COURT IN S REELEKHA BANERJEE V. CIT [1963J 49 ITR (SC) 112, 116 - 17, 119 - 20 REITERATED THAT IF THERE WAS RECEIPT OF AN AMOUNT IN THE ACCOUNTING YEAR, IT WAS INCUMBENT IN THE FIRST INSTANCE UPON THE ASSESSEE TO SHOW THAT IT DID NOT BEAR THE CHARACTER OF INCOME. IF HE F AILED TO DO THAT, THE AO WAS COMPETENT TO HOLD THAT. IT REPRESENTED INCOME OF THE ASSESSEE EITHER FROM THE SOURCES HE HAS DISCLOSED OR FROM SOME UNDISCLOSED SOURCE. THE AO WAS NOT AT THAT STAGE ITA NO S . 8706&9103 /201 0 9 REQUIRED TO PROVE ANYTHING. IT COULD ASK THE ASSESSEE TO BRIN G ANY BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR EVIDENCE PERTINENT TO THE EXPLANATION IF ONE WAS FURNISHED, AND EXAMINE THE EVIDENCE AND THE EXPLANATION. IF THE EXPLANATION SHOWED THAT THE RECEIPT WAS NOT OF AN INCOME NATURE, THE AO WOULD NOT ACT UNREASONABLY AND REJECT THAT EXPLANATION TO HOLD THAT IT WAS INCOME. IF THE ASSESSEE PRIMA FACIE DISCHARGES HIS INITIAL BURDEN BY PLACING SOME EVIDENCE, BEFORE THE AO REJECTS SUCH EVIDENCE, HE MUST EITHER SHOW AN INHERENT WEAKNESS IN THE EXPLANATION OR REBUT IT BY PUT TING TO THE ASSESSEE SOME INFORMATION OR EVIDENCE WHICH HE HAS IN HIS POSSESSION. THE AO CANNOT BY MERELY REJECTING UNREASONABLY A GOOD EXPLANATION, CONVERT GOOD PROOF INTO NO PROOF. IF, HOWEVER, THE EXPLANATION WAS UNCONVINCING AND ONE WHICH DESERVED TO B E REJECTED, THE AO WAS COMPETENT TO REJECT THAT AND DRAW THE INFERENCE THAT THE AMOUNT REPRESENTED INCOME EITHER FROM THE SOURCES ALREADY DISCLOSED BY THE ASSESSEE OR FROM SOME UNDISCLOSED SOURCE. IN SUCH CASE, THE AO DID NOT THEN PROCEED ON NO EVIDENCE, B ECAUSE THE FACT THAT THERE WAS RECEIPT OF M ONEY WAS ITSELF EVIDENCE AGAINST THE ASSESSEE. THERE WAS THUS, PRIMA FACIE EV IDENCE AGAINST THE ASSESSEE WHICH HE FAILED TO REBUT AND BEING UN - REBUTTED THAT EVIDENCE COULD BE USED AGAINST HIM BY HOLDING THAT IT WA S A RECEIPT OF AN INCOME NA TURE . IT IS WITHIN THE RANGE OF THESE PRINCIPLES THAT EACH CASE HAS TO BE DECIDED. THESE PRINCIPLES ARE SANCTIFIED IN SECTION 68. 6.3 IT IS THUS CLEAR FROM SECTION 68 THAT THE CONCEPT OF ASSESSMENT AT THE HANDS OF T HE SUBSCRIBE R WHEN THE SUBSCRIPTION CANNOT BE VERIFIED FROM THEIR ACCOUNTS AFTER THE SUBSCRIPTION IS CONFIRMED BY THE SUBSCRIBER IS NO MORE A GOOD LAW. UNDER SECTION 68, THE AO IS EMPOWERED TO LIFT THE VEIL OF CORPORATE IDENTITY AND FIND OUT AS TO WHETHER THE APPARENT IS REAL. IT IS THE ASSESSEE ON WHOM THE ONUS LIES. UNLESS SUFFICIENT MATERIALS ARE PRODUCED, THE ONUS DOES NOT SHIFT ON THE REVENUE. BUT ONCE THE MATERIALS ARE SCRUTINIZED AND THE RESULT OF THE SCRUTINY IS COMMUNICATED TO THE ASSESSEE, THE ONUS SHIFTS FRO M THE REVENUE TO THE ASSESSEE. THEN THE ASSESSEE HAS TO TAKE APPROPRIATE STEPS FOR PROVING ITS CASE. UNLESS THERE ARE SUFFICIENT MATERIALS AFTER SUCH COMMUNICATION, PRODUCED BY THE ASSESSEE, THE AO CAN DO NO FURTHER. IT WAS INCUMBENT ON THE ASSESSEE TO EST ABLISH THE IDENTITY AND PROVE THE CREDITWORTHINESS OF THE SUBSCRIBERS. UNLESS THESE ARE DISCHARGED, THERE IS NO SCOPE FOR ASCERTAINING THE GENUINENESS OF THE TRANSACTION. THUS IN ORDER TO PROVE THAT THE TRANSACTION IS NOT HIT BY SECTION 68, THE ASSESSEE HA S TO ESTABLISH, FIRST THE IDENTITY, SECOND THE CREDITWORTHINESS OF THE CREDITOR AND THIRD THE GENUINENESS OF THE TRANSACTION. ONLY WHEN ALL THE THREE INGREDIENTS ARE ESTABLISHED, PRIMA FACIE THE ONUS SHIFTS ON THE DEPARTMENT. MERE ESTABLISHING OF THE IDENT ITY OF THE CREDITOR WOULD NOT BE ENOUGH; NEITHER PROOF OF CREDITWORTHINESS WOULD BE SUFFICIENT; ALL THE THREE INGREDIENTS ARE TO BE ESTABLISHED [SEE CIT V KUNDAN INVESTMENT LTD 263 ITR 626 (CAL)]. 6.4 IN THE INSTANT CASE THE APPELLANT FILED CONFIRMATION LETTERS OF THE SHAREHOLDERS, THEIR PAN, BANK STATEMENTS AND INCOME TAX RETURNS. IN ORDER TO SHOW GENUINENESS OF THE TRANSACTION THE APPELLANT HAD DISCLOSED THE BANK ACCOUNT NUMBER AND THE INVESTMENT THROUGH CHEQUES. THE CONFIRMATION LETTERS WERE IDENTICAL . THE BANK ACCOUNTS WERE OPENED IN A PARTICULAR BRANCH OF A PARTICULAR BANK IN ITA NO S . 8706&9103 /201 0 10 THE NAME OF EACH OF THE 4 COMPANIES. THEY WERE OPENED JUST TO DEPOSIT HUGE SUM OF MONEY AND WITHDRAW IT FOR INVESTMENT AS SHARE CAPITAL IN THE APPELLANT COMPANY. ALL GOT MONEY F ROM ANOTHER NEW ACCOUNT OPENED IN ANOTHER NAME FOR THAT PURPOSE WHOSE IDENTITY WAS NOT ESTABLISHED. THEY ALL WERE CLOSED AFTER THE AMOUNTS WERE WITHDRAWN. AT THE SAME TIME, WHEN NOTICES UNDER SECTION 131 WERE ISSUED IN ORDER TO ASCERTAIN THE GENUINENESS OF THE TRANSACTION, THE INVESTORS COULD NOT BE TRACED. THE AO ALSO FOUND THAT THE SUBSCRIPTIONS DID NOT APPEAR IN THE BALANCE SHEET AS AT 31 - 03 - 2007 OF ANY OF THE FOUR NAMED COMPANIES EITHER UNDER INVESTMENT OR UNDER LOANS & ADVANCE S. STRIKINGLY, IN THE CASE OF M/ S DHWANI MARKETING, THE BALANCE SHEET AS AT 31 - 03 - 2007 SHOWED TOTAL FUND OF RS.6,00,00U, WHEREAS THE SUBSCRIPTION WITH THE APPELLANT WAS CLAIMED TO BE OF RS .24,00, 000 / - , I . E, FOUR TIMES THE FUND AVAILABLE FOR DEP LOYMENT. IF ONE READ THESE EVIDENCES A L O NG WITH THOSE TO SUPPORT THE IDENTITY/ CREDITWORTHINESS OF THE INVESTORS AND G ENUINENESS OF THE TRANSACTIONS AS DISCUSSED HEREINBEFORE, IT CLEARLY SHOWS THAT IT WAS JUST NOT POSSIBLE TO HOLD BY A REASONABLE MAN THAT THE TRANSACTIONS WERE GENUINE. 6.5 U NLIKE THE CASE OF CIT V. ORISSA CORPORATION (P) LTD. [1986]159 ITR 78 (SC), IN THIS CASE THE AO MADE ALL POSSIBLE EFFORTS TO PURSUE THE SO - CALLED ALLEGED CREDITORS AFTER THE MATERIALS WERE PRODUCED BY THE APPELLANT. NONE OF THE SUBSCRIBERS COULD BE TRACED AT THE GIVEN ADDRESSES AND THE CHANGED ADDRESSES . THE AO COULD DO NO FURTHER. THERE WAS NO OTHER MATERIAL ON THE BASIS OF WHICH SHE COULD HAVE ENQUIRED INTO THE MATTER. THESE FACTS WERE COMMUNICATED TO THE APPELLANT BY THE AO. IN THAT CASE IT WAS THE RESPO NSIBILITY OF THE APPELLANT TO PRODUCE THEM IN ORDER TO BUTTRESS ITS CASE. BUT IT DECLINED TO DO SO. THEREFORE, IT WAS INCUMBENT ON THE APPELLANT TO FIND OUT THEM AND RECONFIRM THE TRANSACTIONS IF THE EARLIER CONFIRMATION HAD ANY EVIDENTIARY VALUE. MERE FIL ING OF CONFIRMATORY LETTERS WOULD NOT DISCHARGE THE ONUS THAT LAY ON THE APPELLANT UNLESS THE IDENTITY OF THE CREDITORS WAS ESTABLISHED [SEE BHARATI (P) LTD VS CIT [1978] 111 ITR 951 (CAL)]. IN THIS CASE, ENQUIRIES WERE CONDUCTED AND IT WAS FOUND THAT THE ALLEGED CREDITORS DID NOT EXIST AT THE GIVEN ADDRESSES, NOR DID THEIR ASSESSMENT RECORDS TALLY WITH THE FACTS MENTIONED BY THE APPELLANT. THE AO HAD MADE INVESTIGATIONS AND BROUGHT ON RECORD THE MATERIALS TO CONTROVERT THE CLAIM OF THE APPELLANT. IN A CASE LIKE THIS WHERE NOT EVEN THE IDENTITY HAS BEEN ESTABLISHED, IT IS CLEAR THAT THE APPELLANT HAS USED THE NAMES OF COMPANIES WHICH EXIST ON THE RECORDS OF THE DEPARTMENT JUST TO GIVE IDENTITY TO NON EXISTING S UBSCRIBERS. EVEN IF THE IDENTITY IS ESTABLISHED , THE CREDITWORTHINESS IS REQUIRED TO BE PROVED. ONCE THE CREDITWORTHINESS IS ESTABLISHED, THE G ENUINENESS OF THE TRANSACTION IS REQUIRED TO BE PROVED. THE CREDITWORTHINESS OF THE SUBSCRIBER AND GENUINENESS OF THE TRANSACTION ARE COMPLEMENTARY TO EACH OTHE R. ESTABLISHMENT OF IDENTITY IS NOT SUFFICIENT EVEN IF THE SUBSCRIBER CONFIRMS THE SUBSCRIPTION. THEREFORE, WITHOUT PROPER VERIFICATION, CREDITWORTHINESS COULD NOT BE PROVED AND UNLESS IT IS PROVED, THE GENUINENESS OF THE TRANSACTION CANNOT BE PROVED [ SEE CIT V KUNDAN INVESTMENT LTD 263 ITR 626 (CAL)]. IN SUCH CIRCUMSTANCES, THE AO RIGHTLY DISBELIEVED THE EXPLANATION OF THE APPELLANT THAT THE FOUR COMPANIES NAMED BY IT HAD ACTUALLY INVESTED IN THE SHARE CAPITAL. IT IS A CLEAR ITA NO S . 8706&9103 /201 0 11 CASE WHERE THE APPELLANT HAS O FFERED NO PROPER, REASONABLE AND ACCEPTABLE EXPLANATION AS REGARDS THE IMPUGNED CREDITS. THE AO HAS NOT ACCEPTED THE EXPLANATION OFFERED BY THE APPELLANT ON PROPER APPRECIATION OF MATERIAL AND OTHER ATTENDING CIRCUMSTANCES AVAILABLE ON RECORD. IT IS A CASE WHERE IT CANNOT BE SAID THAT THE AO DREW HER CONCLUSIONS THAT THE TRANSACTIONS WERE NOT GENUINE WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE APPELLANT. SHE HAS RIGHTLY ADDED RS.96, 00,000/ - AS INCOME OF THE APPELLANT. 6.6 THE APPELLANT CONTENDS CITING TH E DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF ELECTRO POLYCHEM LTD (SUPRA) THAT SINCE IMPUGNED CREDITS REPRESENTED SUBSCRIPTION TO SHARE CAPITAL NO ADDITION CAN BE MADE IN ITS HAND U/S 68. IT IS SEEN THAT THIS DECISION IS RENDERED RELYING ON CIT V . STELLAR INVESTMENT LTD. [1991] 192 ITR 287 (DEL) WHICH WAS DISTINGUISHED BY HON'BLE DELHI HIGH COURT IN CIT VS LOVELY EXPORTS (P) LIMITED 299 ITR 268 (DEL). AN SLP AGAINST THIS DECISION WAS DISMISSED BY THE APEX COURT IN CIT VS LOVELY EXPORTS (P) LIMITED 216 CTR 195 (SC). IT IS MERELY UNSUSTAINABLE IN VIEW OF THE SEVERAL DECISIONS DISCUSSED SUPRA THAT JUST BECAUSE THE APPELLANT IS A COMPANY IT GETS PRECLUDED FROM THE APPLICABILITY OF PROVISIONS OF SECTION 6 8 . JUST LIKE A FIRM OR ANY OTHER PERSON UNDER THE ACT THE PROVISIONS ARE EQUALLY APPLICABLE TO A COMPANY AND THEY DO NOT PROVIDE ANY EXCEPTION UNDER ANY GIVEN CIRCUMSTANCE TO ANY ENTITY. THERE CANNOT BE A FURTHER DISTINCTION IN THIS REGARD BETWEEN A PUBLIC LIMITED COMPANY AND A PRIVATE LIMITED COMPANY. C OMPANIES ARE GROWING IN SIZE AND HAVE HUGE RESOURCES AND FINANCES AT THEIR COMMAND. IN THE COURSE OF THEIR BUSINESS ACTIVITY THEY COMMIT BREACH OF THE LAW. A COMPANY IS LAWFULLY SET UP TO CARRY OUT LAWFUL OBJECTS. IT CANNOT BE MADE AN ENTITY OF BOGUS SHARE HOLDERS AND STILL BE CALLED LAWFULLY CONSTITUTED FOR LAWFUL OBJECT AND ACTIVITY. IT WILL BE WHOLLY WRONG TO ALLOW A COMPANY TO GO SCOT FREE AT THE COST OF OTHER SIMILARLY PLACED ENTITIES UNDER THE ACT. THE INCOME TAX ACT SHOULD NOT BE INTERPRETED IN SUCH A MANNER THAT IT BENDS IN FAVOUR OF AN ASSESSEE SIMPLY BECAUSE IT IS A COMPANY. IF SECTION 68 IS NOT APPLICABLE TO A COMPANY THEN NO OTHER PROVISIONS SHOULD ALSO BE APPLIED TO A COMPANY AND THEY SHOULD BE HELD EXEMPT FROM THE INCOME TAX ACT. 6.7 THE CASE OF LOVELY EXPORTS LTD (SUPRA) IS ALSO CITED IN SUPPORT OF THE CONTENTION THAT NO ADDITION CAN BE MADE U/S 68 IN THE CASE OF A COMPANY EVEN IF THE SHAREHOLDERS ARE FOUND BOGUS. EVEN THOUGH HON'BLE SUPREME COURT DISMISSED THE SLP OF THE DEPARTMENT BY PASSING A SHORT ORDER IT DID NOT LAY DOWN ANY GENERAL PROPOSITION OF LAW WITH REGARD TO ADDITION OF UNEXPLAINED 'CASH CREDITS IN THE HANDS OF A COMPANY. WITHOUT PREJUDICE, THE DISMISSAL OF THE SLP HAS TO BE SEEN IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THAT CAS E WHICH ARE MISSING HERE. IN THE INSTANT CASE THE APPELLANT IS A PRIVATE LIMITED COMPANY AND THERE WE: NO PUBLIC ISSUE OF EQUITY SHARES AS IN THE CASE OF LOVELY EXPORTS LTD. FURTHER, THE DEPARTMENT WAS AWARE OF THE ACTUAL PERSONS BEHIND THE BOGUS SHAREHOLD ERS. HERE THE ALLEGED SHAREHOLDERS EXIST AND SHARES HAVE BEEN SUBSCRIBED THROUGH PRIVATE PLACEMENT BY THE APPELLANT UNLIKE EQUITY SHARES ON A PUBLIC ISSUE. HON'BLE DELHI HIGH COURT WHOSE ORDER WAS UPHELD IN THE CASE OF LOVELY EXPORTS (SUPRA) HASTENED TO CL ARIFY THAT IT CANNOT BE TRUE THAT IN CASE OF SHARE CAPITAL NO ADDITIONS COULD BE MADE IF IT ITA NO S . 8706&9103 /201 0 12 IS ESTABLISHED THAT THE SHAREHOLDERS EXIST. IT MADE A DISTINCTION BETWEEN A PUBLIC ISSUE AND SHARES OF A PRIVATE LIMITED COMPANY. UNLIKE THE CASE OF THE LOVELY EXPO RTS IT IS NOT A CASE OF A PUBLIC LIMITED COMPANY WHICH HAD RECEIVED SUBSCRIPTIONS TO THE PUBLIC ISSUE THROUGH BANKING CHANNELS AND THE SHARES WERE ALLOTTED IN CONSONANCE WITH THE PROVISIONS OF THE SECURITIES CONTRACT (REGULATION) ACT, 1956 AS ALSO THE RULE S AND REGULATIONS OF THE DELHI STOCK EXCHANGE. A CAREFUL PERUSAL OF THE DECISION OF THE HIGH COURT REVEALS THAT THE REASONING OF THE APEX COURT APPLIES TO LARGE - SCALE SUBSCRIPTIONS TO THE SHARES OF A PUBLIC COMPANY WHERE THE LATTER MAY HAVE NO MATERIAL OTH ER THAN THE APPLICATION FORMS AND BANK TRANSACTION DETAILS TO GIVE SOME INDICATION OF THE IDENTITY OF THESE SUBSCRIBERS. IT MAY NOT APPLY IN CIRCUMSTANCES WHERE THE SHARES ARE ALLOTTED DIRECTLY BY THE COMPANY TO A CHOSEN FEW. THE HC HELD THAT THE AO IS DUT Y BOUND TO INVESTIGATE THE CREDITWORTHINESS, OF THE CREDITOR/SUBSCRIBER, THE GENUINENESS OF THE TRANSACTION AND THE VERACITY OF THE REPUDIATION. THE AO HAS BROUGHT ON RECORD ENOUGH MATERIAL TO DISPROVE THE GENUINENESS OF THE TRANSACTIONS. THE AO HAS RIGHTL Y FOUND THE EXPLANATION OFFERED BY THE ASSESSEE UNACCEPTABLE. IT IS CLEAR FROM THE DECISIONS IN THE CASES OF P MOHAN KALA (SUPRA) AND SUMATI DAYAL (SUPRA) THAT IT IS NOT ENOUGH THAT IF A SUM IS RECEIVED THROUGH NORMAL BANKING CHANNELS OR EVEN THROUGH NRE A LE IT WAS LIABLE TO BE ACCEPTED AS GENUINE AND NOT LIABLE TO BE ASSESSED UNDER SECTION 68 OF THE ACT. IN THE INSTANT CASE THE BURDEN OF PROOF CAST ON THE APPELLANT UNDER SECTION 68 OF THE INCOME - TAX ACT, 1961 HAS NOT BEEN DISCHARGED AND THE INGREDIENTS FOR INVOKING SECTION 68 OF THE INCOME - TAX ACT ARE PRESENT. 6.8 IT HAS ALSO BEEN CONTENDED THAT THE APPELLANT COMPANY WAS INCORPORATED ONLY DURING THE FY 2004 - 05 AND IT WAS NOT POSSIBLE TO INTRODUCE UNDISCLOSED/UNACCOUNTED MONEY. NO DOUBT THE APPELLANT HAS B EEN IN EXISTENCE SINCE 2004 - 05. IT BEGAN ITS OPERATIONS IN 2005 - 06. IT FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006 - 07 DECLARING TOTAL INCOME AT RS.62,39,590. THE INCOME DECLARED COMPRISED INCOME FROM SPECULATION IN FUTURES & OPTIONS (F&O) OF RS.3, 13,008, SHORT TERM CAPITAL GAIN ON SALE OF SHARES OF RS.61,90,600 AND INTEREST OF RS .3,38,011 / - . SCOPE OF EARNING UNDISCLOSED INCOME IN THAT YEAR CANNOT, THEREFORE, BE PRECLUDED. THIS IS ENOUGH TO HOLD THAT THIS PART OF THE SHARE CAPITAL REPRESENTED THE AP PELLANT'S OWN INCOME FROM UNDISCLOSED SOURCES. I, THEREFORE, CONFIR M THE ENTIRE ADDITION MADE OF RS .96,00,000 / - . 7 . LEARNED AR OF THE ASSESSEE REITERATED THE CONTENTION RAISED BEFORE THE LOWER AUTHORITIES. COPIES OF THE CASE LAWS WHICH WERE CONSIDERED BY THE CIT( A) WERE FILED BY THE LEARNED AR DURING THE HEARING. ITA NO S . 8706&9103 /201 0 13 8 . ON THE OTHER HAND, LEARNED DR HAS PLACED STRONG RELIANCE ON THE ORDER OF THE AO AS WELL AS ON THE ORDER OF THE LEARNED CIT(A) . 9 . WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THEM CAREFUL LY. AFTER CONSIDERING THE SUBMISSION AND PERUSING THE MATERIAL ALONG WITH VARIOUS CASE LAWS RELIED UPON BY BOTH THE PARTIES, WE FOUND THAT LEARNED CIT(A) WAS JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 96 LACS. NO DOUBT, THE ASSESSEE HAS FILED CONFIRMATION LETTER ALONG WITH NAME AND ADDRESS OF THE SHAREHOLDERS, BOARD RESOLUTION AND RELEVANT BANK STATEMENT IN RESPECT OF SHARES SUBSCRIBED BY THE FOUR COMPANIES. THE CONFIRMATION LETTERS SHOWED CHEQUE NO., DATE AND AMOUNT OF PAYMENTS ALONG WITH THEIR PAN AND THE ASSESSING OFFICER WITH WHOM THEY WERE BEING ASSESSED. HOWEVER, THE AO MADE ENQUIRY, BUT NONE OF THE SHAREHOLDERS RESPONDED. ON ENQUIRY FROM THE BANK, THE AO FOUND THAT THE ACCOUNTS WERE OPENED IN THE NAMES OF SHRI DATTA INDUSTRIES AND GUJARAT CHEMI PLASTO LTD. ON THE SAME DATE I.E. 14 - 11 - 2005 AND WERE INTRODUCED BY A COMMON ACCOUNT HOLDER. ON ENQUIRY, THE AO ALSO FOUND THAT EVEN THE BANK WAS NOT ABLE TO TRACE THE ACCOUNT OPENING DETAILS IN REGARD TO DHWANI MARKETING LTD. THE BANK ACCOUNT IN THE NAME OF NEX US SOFTWARE LTD. WAS INTRODUCED BY M/S LOVMAT ENTERPRISES . SHE FURTHER FOUND THAT SOON AFTER THE MONEY WAS REMITTED TOWARDS SHARE APPLICATION, ALL THE FIVE BANK ACCOUNTS WERE CLOSED. ALL THESE DETAILS WERE CONFRONTED TO THE ASSESSEE. THEREAFTER THE ASSESS EE FILED FRESH CONFIRMATION LETTERS SHOWING DIFFERENT DIRECTORS. AGAINST WHICH THE AO MADE ENQUIRY AND COULD NOT FIND THE THREE ITA NO S . 8706&9103 /201 0 14 COMPANIES AT THE NEW ADDRESSES. REGARDING FOURTH COMPANY, WHICH WAS SITUATED AT BARODA, THE AO MADE ENQUIRY BY ISSUING COMMISSIO N UNDER SECTION 131(D) ON 17 - 11 - 200 9 TO THE DDIT (INVESTIGATION), BARODA IN ORDER TO CROSS VERIFICATION WITH M/S NEXUS SOFTWARE LTD. THE DDIT INFORMED THAT NO SUCH PARTY EXISTED AT THE GIVEN ADDRESS AND, THEREFORE, COULD NOT PURSUE THE ENQUIRIES. AGAIN THE AO CONFRONTED ALL THE INFORMATION GATHERED OR ENQUIRY MADE BY HIM POINTING OUT ITS FAILURE TO PRODUCE THE PARTIES AND IT WAS INFORMED TO THE ASSESSEE THAT SHE PROPOSED TO TREAT THE ENTIRE SUBSCRIPTION MONEY AS UNEXPLAINED CASH CREDITS. THE ASSESSEE REITER ATED ITS EARLIER SUBMISSIONS MADE BEFORE HER. IT IS FURTHER NOTED THAT THE AO HAS OBSERVED A VERY RELEVANT OBSERVATIONS THAT, IT WAS SURPRISING TO NOTE THAT THE ASSESSEE DID NOT KNOW THE WHEREABOUTS OR THE CORRECT OR THE PRESENT ADDRESS OF ALL THE FOUR SU BSCRIBERS AND WAS UNABLE TO PRODUCE THEIR DIRECTORS YET IT WAS ABLE TO PROCURE THE COPIES OF THEIR PROFIT AND LOSS ACCOUNT, BALANCE - SHEET AND THE RETURNS OF INCOME. SHE FURTHER OBSERVED THAT THE RETURNS OF INCOME DID NOT SHOW ANY INVESTMENT IN THE SHARES OF THE ASSESSEE COMPANY. REGARDING M/S NEXUS SOFTWARE LTD, THE AO OBSERVED THAT THEIR TELEPHONE NOS. WERE FOUND TO BE BELONGING TO SOME OTHER PERSONS, THE COMPANY HAD NOT FILED ITS RETURNS/ RESULTS WITH THE BOMBAY STOCK EXCHANGE SINCE THE QUARTER ENDING 200 1 AND THEIR SHARES HAD NOT BEEN TRADED SINCE FEB2003. THE AO ALSO OBSERVED THAT THIS SHOWED THAT NEXUS SOFTWARE LIMITED WAS AT LEAST NOT IN ANY ACTIVITY DURING THE PERIOD IN WHICH THE ASSESSEE CLAIMED TO HAVE RECEIVED ITA NO S . 8706&9103 /201 0 15 SHARE SUBSCRIPTIONS FROM THEM. THE AO CONCLUDED THAT THE ASSESSEE HAD FAILED TO ESTABLISH THE IDENTITY OF THE SUBSCRIBERS, AND THE GENUINENESS OF THE TRANSACTIONS LEADING TO CREDITS OF TOTAL SUM OF RS. 96 LAKHS. ALL THESE FACTS HAVE BEEN NARRATED BY THE CIT(A) ONCE AGAIN IN HIS ORDER AND FOUND THAT THE ONUS LAY UPON THE ASSESSEE HAS NOT BEEN DULY DISCHARGED. VARIOUS CASE LAWS HAVE ALSO BEEN CONSIDERED BY THE CIT(A) . THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LIMITED, REPORTED IN 299 ITR 268 ( SC ) . AFTER G OING THROUGH THE ORDER OF AO AND THE CIT(A), WE NOTED THAT THIS IS NOT A CASE THAT THE IDENTITY OF THE PERSON, WHO TRADED THE MONEY TO THE ASSESSEE ON ACCOUNT OF SHARE APPLICATION MONEY HAS BEEN PROVED. THIS IS ALSO NOT A CASE THAT THE AO SHOULD REOPEN THE CASES OF INDIVIDUAL, WHO APPLIED FOR SHARES OF THE ASSESSEE COMPANY BECAUSE NEITHER IDENTITY OF THE PERSON PROVED NOR ADDRESS OF THE PARTIES WERE CORRECT NOR THE TRANSACTION WAS FOUND GENUINE. EVEN IT IS ESTABLISHED THAT THE CONFIRMATION OF THE PARTIES, W HICH WERE FILED BEFORE THE AO AS WELL AS BEFORE THE CIT(A) ARE NOT GENUINE AS THE IDENTITY OF THE PERSON S HA VE NOT BEEN PROVED. MERELY FILING COPY OF THE ASSESSMENT ORDER IN CASE OF TWO PARTIES, IN OUR CONSIDERED VIEW, DOES NOT PROVE THAT THE PARTIES ARE G ENUINE. IN THE BALANCE SHEET OF THESE PARTIES, NAME OF THE ASSESSEE IS NOT APPEARING SHOWING THE AMOUNT PAID TO THE ASSESSEE. COPY OF THE BALANCE SHEET IS ALSO PLACED IN THE RECORD AND WAS FOUND THAT ONLY IN ONE CASE I.E. IN THE CASE OF SHREE DATTA INDUSTR IES LIMITED, STATEMENT OF COMPUTATION ALONG WITH COPY OF BALANCE SHEET IS PLACED. ITA NO S . 8706&9103 /201 0 16 AS PER THE BALANCE SHEET, TOTAL INVESTMENT HAS BEEN SHOWN BY THE ASSESSEE AT RS. 1,24, 63,362/ - BUT NO INVESTMENT WITH ASSESSEE IS APPEARING. FROM THESE FACTS, IT IS CLEARLY SE EN THAT THE ASSESSEE IS MISLEADING BY FILING WRONG DETAILS AND, THEREFORE, WE ARE OF THE VIEW THAT THE AO AS WELL AS THE CIT(A) WERE CORRECT IN HOLDING THAT THE AMOUNT OF RS. 96 LACS REMAINED UNPROVED. 1 0 . IN A RECENT DECISION OF THE HON BLE DELHI HIGH CO URT IN THE CASE OF CIT VS. M/S N.R.PORTFOLIO PVT. LTD. , DECIDED IN ITA NO.134/2012, VIDE JUDGMENT DATED 21 - 12 - 2012, IT HAS BEE N HELD THAT THE ONUS TO PROVE THE GENUINENESS OF THE SHARE APPLICATION LIES UPON PARTY IN WHOSE ACCOUNTS THE SHARE APPLICATION MO NEY IS CREDITED. IN THIS CASE, THE ASSESSMENT WAS REOPENED UNDER SECTION 147/14 8 . THE ASSESSMENT WAS REOPENED FOR THE REASON THAT THE ASSESSEE HAS CREDITED A SUM OF RS. 35 LAKHS UNDER THE SHARE APPLICATION MONEY. SINCE SUMMONS WERE RECEIVED UNSERVED AND THE PARTIES WERE NOT PRODUCED BEFORE THE AO , T HEREFORE, THE AO TREATED THE AMOUNT AS UNEXPLAINED AND WAS ADDED THE SAME UNDER SECTION 68. HOWEVER, IN APPEAL BEFORE THE CIT(A), THE ADDITION MADE BY THE AO WAS DELETED. LEARNED CIT(A) OBSERVED THAT THE ASSESSEE HAS FURNISHED ALL THE RELEVANT PARTICULARS OF THE SHARE APPLICANTS, WHO HAD INVESTED IN ITS COMPANY. THESE PARTICULARS INCLUDED PAN DETAILS WHICH REVEALED THAT THE INVESTORS WERE FILING INCOME TAX RETURNS. THE COMMISSIONER ALSO CONCLUDED THAT DURING THE C OURSE OF REMAND PROCEEDINGS, THE AO COULD NOT PROVE WITH CERTAINTY THAT THE INVESTORS WERE ENTRY PROVIDERS AND THAT ITA NO S . 8706&9103 /201 0 17 THE TRANSACTIONS ENTERED BY THE ASSESSEE WITH THEM WERE BOGUS. THE TRIBUNAL ALSO CONFIRMED THE ORDER OF THE CIT(A) . RELIANCE WAS PLACED ON T HE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS, REPORTED IN 216 CTR 195 . THEREAFTER IN APPEAL , THE HON BLE DELHI HIGH COURT AFTER CONSIDERING THE DECISION OF THE HON BLE APEX COURT IN CASE OF LOVELY EXPORTS (SUPRA) , HELD THA T THE ONUS LAYS UPON THE ASSESSEE HAS NOT BEEN DISCHARGED. THE OBSERVATION S AND FINDING S OF THE HON BLE DELHI HIGH COURT IN THE CASE OF M/S N.R. PORTFOLIO PVT. LTD. (SUPRA) IN PARA 6 TO 9 ARE AS UNDER : - 6. BEFORE A DISCUSSION ON THE MERITS, IT WOULD BE W ORTHWHILE TO NOTICE THE RELEVANT DISCUSSION BY THIS COURT, IN ITS JUDGMENT IN LOVELY EXPORTS, WHICH WAS CARRIED IN APPEAL TO THE SUPREME COURT. THE RELEVANT EXTRACTS ARE PRODUCED BELOW: 'THERE CANNOT BE TWO OPINIONS ON THE ASPECT THAT THE PERNICIOUS PRACT ICE OF CONVERSION OF UNACCOUNTED MONEY THROUGH THE MASQUERADE OR CHANNEL OF INVESTMENT IN THE SHARE CAPITAL OF A COMPANY MUST BE FIRMLY EXCORIATED BY THE REVENUE. EQUALLY, WHERE THE PREPONDERANCE OF EVIDENCE INDICATES ABSENCE OF CULPABILITY AND COMPLEXITY OF THE ASSESSED IT SHOULD NOT BE HARASSED BY THE REVENUES INSISTENCE THAT IT SHOULD PROVE THE NEGATIVE. IN THE CASE OF A PUBLIC ISSUE, THE COMPANY CONCERNED CANNOT BE EXPECTED TO KNOW EVERY DETAIL PERTAINING TO THE IDENTITY AS WELL AS FINANCIAL WORTH OF EA CH OF ITS SUBSCRIBERS. THE COMPANY MUST, HOWEVER, MAINTAIN AND MAKE AVAILABLE TO THE AO FOR HIS PERUSAL, ALL THE INFORMATION CONTAINED IN THE STATUTORY SHARE APPLICATION DOCUMENTS. IN THE CASE OF PRIVATE PLACEMENT THE LEGAL REGIME WOULD NOT BE THE SAME. A DELICATE BALANCE MUST BE MAINTAINED WHILE WALKING THE TIGHTROPE OF SECTIONS 68 AND 69 OF THE IT ACT. THE BURDEN OF PROOF CAN SELDOM BE DISCHARGED TO THE HILT BY THE ASSESSED; IF THE AO HARBOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRIPTION HE IS EMPOWERED, NAY DUTY BOUND, TO CARRYOUT THOROUGH INVESTIGATIONS. BUT IF THE AO FAILS TO UNEARTH ANY WRONG OR ILLEGAL DEALINGS, HE CANNOT OBDURATELY ADHERE TO HIS SUSPICIONS AND TREAT THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANY.' SEVERAL JUDGMENTS ON APPLICABILITY OF SECTION 68 TO SHARE APPLICATION AMOUNTS, WERE ADVERTED TO, AND THE POSITION WAS SUMMED UP AS F OLLOWS: 'IN THIS ANALYSIS, A DISTILLATION OF THE PRECEDENTS YIELDS THE FOLLOWING PROPOSITIONS OF LAW IN THE CONTEXT OF SECTION 68 OF THE IT AC T. THE ASSESSED HAS TO PRIMA FACIE PROVE (1) THE IDENTITY OF ITA NO S . 8706&9103 /201 0 18 THE CREDITOR/SUBSCRIBER; (2) THE GENUINENESS OF THE TRANSACTION, NAMELY, WHETHER IT HAS BEEN TRANSMITTED THROUGH BANKING OR OTHER INDISPUTABLE CHANNELS; (3) THE CREDITWORTHINESS OR FINANCIAL STRE NGTH OF THE CREDITOR/SUBSCRIBER. (4) IF RELEVANT DETAILS OF THE ADDRESS OR PAN IDENTITY OF THE CREDITOR/SUBSCRIBE RARE FURNISHED TO THE DEPARTMENT ALONG WITH COPIES OF THE SHAREHOLDERS REGISTER, SHARE APPLICATION FORMS, SHARE TRANSFER REGISTER ETC. IT WOUL D CONSTITUTE ACCEPTABLE PROOF OR ACCEPTABLE EXPLANATION BY THE ASSESSED. (5) THE DEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWING AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCRIBER FAILS OR NEGLECTS TO RESPOND TO ITS NOTICES; (6) THE ONUS WOULD NOT STAN D DISCHARGED IF THE CREDITOR/SUBSCRIBER DENIES OR REPUDIATES THE TRANSACTION SET UP BY THE ASSESSED NOR SHOULD THE AO TAKE SUCH REPUDIATION AT FACE VALUE AND CONSTRUE IT, WITHOUT MORE, AGAINST THE ASSESSED. (7) THE ASSESSING OFFICER IS DUTY - BOUND TO INVEST IGATE THE CREDITWORTHINESS OF THE CREDITOR/SUBSCRIBER THE GENUINENESS OF THE TRANSACTION AND THE VERACITY OF THE REPUDIATION.' THE JUDGMENT OF THIS COURT WAS AFFIRMED IN A BRIEF ORDER, BY THE SUPREME COURT; IT READS AS FOLLOWS: 'DELAY CONDONED. CAN THE AM OUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME UNDER S.68 OF IT ACT, 1961? WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON 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. HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT. SUBJECT TO THE ABOVE, SPECIAL LEAVE PETITION IS DISMISSED.' 7. IN THE PRESENT CASE, THE ASSESSEE CLAIMED THAT IT RECEIVED RS. 35 LAKHS FROM SEVEN SHARE APPLICANTS. ITS ASSESSMENT WAS REOPENED. THE ASSESSEE DID NOT ATTEND THE REASSESSMENT PROCEEDINGS, AND SUFFERED AN ADVERSE ORDER. ON ITS MOVING AN APPEAL, THE COMMISSI ONER SOUGHT A REMAND REPORT. THE REMAND REPORT, AN EXHAUSTIVE 41 PAGE DOCUMENT, DISCUSSES THREADBARE THE OPPORTUNITIES GRANTED TO THE ASSESSEE, TO ESTABLISH THE IDENTITY AND CREDITWORTHINESS OF THE SHARE APPLICANTS. THE REPORT HIGHLIGHTS, AMONG OTHER FACTS , THE FOLLOWING SALIENT FEATURES: (1) SHARE APPLICATIONS WERE RECEIVED ON 18.2.2004 BUT THE SHARES WERE SENT TO THE PARTIES ONLY ON 15.6.2004; (2)THE SHARE APPLICANTS DID NOT ATTEND THE PROCEEDINGS DESPITE SUMMONS UNDER SECTION 131; MOST OF THE NOTICES WERE R ECEIVED UNSERVED; (3)THE ASSESSEE, WHICH WAS A STOCK BROKER, DID NOT SHOW ANY TRANSACTIONS IN THAT ACTIVITY, BUT WAS RECEIVING DIVIDENDS. HOWEVER, IT DID NOT DECLARE ANY DIVIDEND, TO ITS INVESTORS. ITS FINANCIAL CONDITION WAS SUCH THAT THERE WAS NO NEED T O INFUSE FRESH SHARE CAPITAL; (4) THE ASSESSEES BANK ACCOUNTS SHOWED LARGE AMOUNTS OF CASH DEBITS AND CREDIT ENTRIES. ITA NO S . 8706&9103 /201 0 19 8. THIS COURT IS CONSCIOUS OF A VIEW TAKEN IN SOME OF THE PREVIOUS DECISIONS THAT THE ASSESSEE CANNOT BE FAULTED IF THE SHARE APPLICAN TS DO NOT RESPOND TO SUMMONS, AND THAT THE STATE OR REVENUE AUTHORITIES HAVE THE WHEREWITHAL TO COMPEL ANYONE TO ATTEND LEGAL PROCEEDINGS. HOWEVER, THAT IS MERELY ONE ASPECT. AN ASSESSEES DUTY TO ESTABLISH THAT THE AMOUNTS WHICH THE AO PROPOSES TO ADD BAC K, UNDER SECTION 68 ARE PROPERLY SOURCED, DOES NOT CEASE BY MERELY FURNISHING THE NAMES, ADDRESSES AND PAN PARTICULARS, OR RELYING ON ENTRIES IN A REGISTRAR OF COMPANIES WEBSITE. ONE MUST REMEMBER THAT IN ALL SUCH CASES, MORE OFTEN THAN NOT, THE COMPANY IS A PRIVATE ONE, AND SHARE APPLICANTS ARE KNOWN TO IT, SINCE THEY ARE ISSUED ON PRIVATE PLACEMENT, OR EVEN REQUEST BASIS. IF THE ASSESSEE HAS ACCESS TO THE SHARE APPLICANTS PAN PARTICULARS, OR BANK ACCOUNT STATEMENT, SURELY ITS RELATIONSHIP IS CLOSER THAN ARMS LENGTH. ITS REQUEST TO SUCH CONCERNS TO PARTICIPATE IN INCOME TAX PROCEEDINGS, WOULD, VIEWED FROM A PRAGMATIC PERSPECTIVE, BE QUITE STRONG, BECAUSE THE NEXT POSSIBLE STEP FOR THE TAX ADMINISTRATORS COULD WELL BE RE - OPENING OF SUCH INVESTORS PROCEEDI NGS. THAT APART, THE CONCEPT OF SHIFTING ONUS DOES NOT MEAN THAT ONCE CERTAIN FACTS ARE PROVIDED, THE ASSESSES DUTIES ARE OVER. IF ON VERIFICATION, OR DURING PROCEEDINGS, THE AO CANNOT CONTACT THE SHARE APPLICANTS, OR THAT THE INFORMATION BECOMES UNVERI FIABLE, OR THERE ARE FURTHER DOUBTS IN THE PURSUIT OF SUCH DETAILS, THE ONUS SHIFTS BACK TO THE ASSESSEE. AT THAT STAGE, IF IT FALTERS, THE CONSEQUENCE MAY WELL BE AN ADDITION UNDER SECTION 68. THIS COURT RECOLLECTS THE ROBUSTNESS WITH WHICH THE ISSUE WAS DEALT WITH, IN A. GOVINDARAJULU MUDALIAR V CIT, (1958) 34 I TR 807, IN THE FOLLOWING TERMS: - 'NOW THE CONTENTION OF THE APPELLANT IS THAT ASSUMING THAT HE HAD FAILED TO ESTABLISH THE CASE PUT FORWARD BY HIM, IT DOES NOT FOLLOW AS A MATTER OF LAW THAT THE AMOUNTS IN QUESTION WERE INCOME RECEIVED OR ACCRUED DURING THE PREVIOUS YEAR, THAT IT WAS THE DUTY OF THE DEPARTMENT TO ADDUCE EVIDENCE TO SHOW FROM WHAT SOURCE THE INCOME WAS DERIVED AND WHY IT SHOULD BE TREATED AS CONCEALED INCOME. IN THE ABSENCE OF SUCH EVIDENCE, IT IS ARGUED, THE FINDING IS ERRONEOUS. WE ARE UNABLE TO AGREE. WHETHER A RECEIPT IS TO BE TREATED AS INCOME OR NOT, MUST DEPEND VERY LARGELY ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. IN THE PRESENT CASE THE RECEIPTS ARE SHOWN IN THE ACCOUNT BOOKS OF A FIRM OF WHICH THE APPELLANT AND GOVINDASWAMY MUDALIAR WERE PARTNERS. WHEN HE WAS CALLED UPON TO GIVE EXPLANATION HE PUT FORWARD TWO EXPLANATIONS, ONE BEING A GIFT OF RS. 80,000 AND THE OTHER BEING RECEIPT OF RS. 42,000 FROM BUSINESS OF WHICH HE CLAIMED TO BE THE REAL OWNER. WHEN BOTH THESE EXPLANATIONS WERE REJECTED, AS THEY HAVE BEEN IT WAS CLEARLY UPON TO THE INCOME - TAX OFFICER TO HOLD THAT THE INCOME MUST BE CONCEALED INCOME. THERE IS AMPLE AUTHORITY FOR THE POSITION THAT WHERE AN ASSESSEE FAI LS TO PROVE SATISFACTORILY THE SOURCE AND NATURE OF CERTAIN AMOUNT OF CASH RECEIVED DURING THE ACCOUNTING YEAR, THE INCOME - TAX OFFICER IS ENTITLED TO DRAW THE INFERENCE THAT THE RECEIPT ARE OF AN ASSESSABLE NATURE. THE CONCLUSION TO WHICH THE APPELLATE TRI BUNAL CAME APPEARS TO US TO BE AMPLY WARRANTED BY THE FACTS OF THE CASE. THERE IS NO ITA NO S . 8706&9103 /201 0 20 GROUND FOR INTERFERING WITH THAT FINDING, AND THESE APPEALS ARE ACCORDINGLY DISMISSED WITH COSTS.' 9. HAVING REGARD TO THE TOTALITY OF FACTS AND CIRCUMSTANCES, PARTICULAR LY THE REMAND REPORT, WHICH WAS NOT CONSIDERED BY THE COMMISSIONER (APPEALS) AND THE ITAT IN ITS PROPER PERSPECTIVE, THIS COURT IS OF THE OPINION THAT THE QUESTION OF LAW REQUIRES TO BE ANSWERED IN FAVOUR OF THE REVENUE, AND AGAINST THE ASSESSEE. THE APPEA L IS THEREFORE, ALLOWED, BUT WITHOUT ANY ORDER AS TO COSTS. 1 1 . AFTER GOING THROUGH THE AFORESAID FINDINGS OF THE HON BLE DELHI HIGH COURT, WE FOUND THAT THAT THE FINDINGS OF THE HON BLE HIGH COURT SQUARELY APPLY ON THE FACTS OF THE PRESENT CASE AS IN T HIS CASE THOUGH THE CONFIRMATION ALONG WITH COMPLETE ADDRESS AND PAN NOS. ETC. WERE GIVEN TO THE AO BY THE ASSESSEE, HOWEVER, NONE OF THE SHARE APPLICANTS WERE FOUND AT THE GIVEN ADDRESS, NOR IT WAS ESTABLISHED AS TO WHETHER THEY HAVE OPENED THE ACCOUNT IN THE BANKS ON THEIR OWN OR BY ANYBODY ELSE. THE AO HAS TRIED TO FIND OUT THAT WHO HAS OPENED THE BANK ACCOUNT BUT HE FAILED BECAUSE OF THE REASON THAT THE BANK ACCOUNT WAS OPENED ONLY FOR THE PURPOSE OF ISSUING CHEQUE TO THE ASSESSEE ON ACCOUNT SHARE APPLI CATION MONEY FROM THE BANK, THE DETAILS OF OPENING ACCOUNT COULD NOT BE ASCERTAINED. THIS FACT WAS CONFRONTED TO THE ASSESSEE TIME AND AGAIN BY THE AO BUT THE ASSESSEE COULD NOT PRODUCE THE PARTIES NOR COULD PROVE THE IDENTITY OF THE PERSONS ALONG WITH GEN UINENESS OF THE TRANSACTIONS. THEREFORE, THE ONUS LAYS UPON THE DEPARTMENT WAS SHIFTED TO THE ASSESSEE TO PROVE THE GENUINENESS. THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND NORMALLY SHARE APPLICATION IS RECEIVED FROM CLOSE PERSONS, WHO KNOW THE DIRECTOR OF THE ASSESSEE COMPANY CLOSELY. HOWEVER, NEITHER THE DIRECTOR COULD PRODUCE THE SHARE APPLICANTS NOR ANY OTHER INFORMATION ITA NO S . 8706&9103 /201 0 21 FROM WHICH IT CAN BE ESTABLISHED THAT THE SHARE APPLICANTS ARE IDENTIFIABLE AND TRANSACTIONS ARE GENUINE. IT IS SURPRISING THAT FOUR COMPANIES HAVE APPLIED FOR SHARE OF THE COMPANY MEANING THEREBY THESE FOUR PARTIES WERE HAVING CREDIT BALANCE WITH THE ASSESSEE COMPANY, EVEN THOUGH THEY ARE NOT COMING FORWARD TO SHOW THAT THEY HAVE APPLIED FOR SHARE APPLICATION MONEY FROM THEIR OWN SOUR CE. IT IS NOT A CASE THAT THESE SHARE APPLICANTS WERE HAVING DEBIT BALANCE WITH THE ASSESSEE COMPANY AND, THEREFORE, THEY ARE NOT COMING FORWARD TO CONFIRM THE DEBIT BALANCE BUT IN THIS CASE THE SHARE APPLICANTS HAVE CREDIT BALANCE IN SHAPE OF SHARE SUBSCR IPTION, EVEN THEN AS STATED ABOVE THEY ARE NOT COMING FORWARD TO CONFIRM THE SUBSCRIPTION PAID BY THEM. THE AMOUNT OF RS. 96 LACS IN TOTAL IS NOT A SMALL AMOUNT AND WHY THEY ARE NOT COMING, EITHER ASSESSEE KNOWS OR THE PARTIES KNOW. IT IS ALSO A MATTER OF F ACT THAT AS HELD BY THE HON BLE SUPREME COURT IN CASE OF LOVELY EXPORTS (SUPRA) THAT IF THE SHARE HOLDERS ARE BOGUS THEN THE AO CAN REOPEN THE CASE FOR TAKING NECESSARY ACTION BUT IN THE PRESENT CASE, WE NOTED THAT TO WHOM THE AO WILL ISSUE NOTICE UNDER SE CTION 147/148 FOR REOPENING THE ASSESSMENT OF THE SHARE APPLICANTS AS NONE OF THE SHAREHOLDERS FOUND AT THE GIVEN ADDRESS. IT IS ALSO NOT ASCERTAINABLE THAT THE ASSESSMENT COMPLETED IN TWO CASES BELONGS TO SHARE APPLICANT OR NOT. THEREFORE, IN OUR VIEW IN T HE PRESENT CASE, EVEN THE AO IS HANDICAPPED FOR ISSUING THE NOTICE FOR THE PURPOSE OF REOPENING OF THE ASSESSMENT IN CASE OF SHARE APPLICANTS AS NONE OF THE ITA NO S . 8706&9103 /201 0 22 SHARE APPLICANTS IS GENUINE BECAUSE OF THE REASON THAT THE IDENTITY OF THE SHARE APPLICANTS REMAIN UNPROVED. 1 2 . KEEPING IN MIND THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PARTICULARLY THE INVESTIGATION MADE BY THE AO TO FIND OUT THE TRUTH IN RESPECT TO SHARE APPLICATION MONEY, WHICH COULD NOT BE VERIFIED, WE ARE OF THE VIEW THAT THE SHAR E APPLICATION MONEY CREDITED IN THE ACCOUNT OF THE ASSESSEE WAS NOT GENUINE. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND IN VIEW OF THE DECISION OF THE HON BLE DELHI HIGH COURT, IN WHICH THE DECISION IN THE CASE OF LOVELY EXPORTS AND OTHER CASE LAWS HAVE BEEN CONSIDERED, WE HOLD THAT THE SHARE APPLICATION MONEY CREDITED IN THE ACCOUNT OF THE ASSESSEE W AS NOT GENUINE AND, THEREFORE, THE AO AS WELL AS LEARNED CIT(A) WERE JUSTIFIED IN MAKING AND CONFIRMING THE ADDITION UNDER SECTION 68. ACCORD INGLY, THE ORDER OF THE CIT(A) ON THIS ISSUE IS CONFIRMED AND THE GROUNDS OF THE ASSESSEE FAIL. 1 3 . NOW, WE WILL TAKE UP THE APPEAL OF THE DEPARTMENT I.E ITA NO. 9103/M/2010 . 1 4 . THE DEPARTMENT IN ITS APPEAL RAISED OBJECTION AGAINST THE INACTION ON THE PA RT OF THE LEARNED CIT(A) IN HOLDING THAT PROFIT OF RS. 3,43,62,932/ - ON SALE OF SHARES WAS ASSESSABLE AS CAPITAL GAINS, IN SPITE OF THE FINDING OF THE ASSESSING OFFICER THAT THE SCALE AND VOLUME AS WELL AS NATURE OF TRANSACTIONS INDICATED THE INCOME BE ASSE SSABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS AND NOT AS CAPITAL GAINS. ITA NO S . 8706&9103 /201 0 23 1 5 . DURING THE ASSESSMENT PROCEEDINGS, THE A.O. OBSERVED THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF INVESTMENT IN SHARES AND HAD DECLARED ITSELF AS AN INVESTMENT COMPANY. O N BEING ASKED, THE ASSESSEE EXPLAINED TO THE A.O. THAT IT HAD PURCHASED THE SHARES FOR INVESTMENT PURPOSES AND HAD TREATED THE GAIN ARISING ON THEIR SALE AS SHORT TERM CAPITAL GAIN. IT SUBMITTED THAT THE SHARES WERE PURCHASED AND SOLD THROUGH DELIVERY BASE D TRANSACTIONS, THERE WAS CONSIDERABLE GAP BETWEEN PURCHASE AND SALE, THE FREQUENCY OF TRANSACTIONS WAS LOW, IT HAD SHOWN THE CLOSING STOCK OF SHARES AS INVESTMENT IN THE BALANCE - SHEET AND THE A.O. HAD ACCEPTED THE INCOME FROM SALE OF SHARES AS SHORT TERM CAPITAL GAINS IN THE ASSESSMENT FOR THE AY. 2006 - 07. REJECTING THE CONTENTION , THE A.O. OBSERVED THAT THE ASSESSEE HAD BEEN INVOLVED PRIMA FACIE IN DERIVATIVE TRADING BY WAY OF TRADING IN FUTURES AND OPTIONS (F&O) APART FROM TRADING IN SHARES. HOWEVER, F OR THE PURPOSES OF PREPARATION OF ITS BOOKS OF ACCOUNTS IT HAD ACCOUNTED RECEIPTS ON DERIVATIVE TRANSACTIONS AS BUSINESS INCOME FROM SPECULATION IN F&O AND THAT ON SALE OF SHARES AS CAPITAL GAINS BEING SHORT TERM CAPITAL GAIN. OBSERVING THAT THE ASSESSEE W AS ADMITTEDLY IN THE BUSINESS OF INVESTMENT IN SHARES AND HAD ITSELF TREATED A PART OF ITS ACTIVITY IN THE STOCK EXCHANGE AS BUSINESS ACTIVITY. THE SHARE TRADING ACTIVITY ALSO EMANATED FROM BUSINESS OPERATION AND INCOME ARISING THERE FROM WAS TAXABLE AS BU SINESS INCOME. SHE DID NOT AGREE THAT SIMPLY BECAUSE THE DEPARTMENT HAD ACCEPTED THE INCOME ON SALE OF SHARES AS SHORT TERM CAPITAL GAIN IN THE EARLIER YEAR NO DIFFERENT VIEW ITA NO S . 8706&9103 /201 0 24 COULD BE TAKEN SUBSEQUENTLY. SHE RELIED ON THE DECISION IN THE CASE OF NEW JAHAGI R VAKIL MILLS LTD V C.I.T. 49 I.T.R. 137 (SC) FOR THE PROPOSITION THAT PRINCIPLE OF RES - JUDICATA OR ESTOPPEL DID NOT APPLY TO INCOME TAX ACT. THE AO, THEREFORE, TREATED THE ENTIRE SUM OF RS.3,43,62.932 / - AS BUSINESS INCOME. BEING AGGRIEVED, THE ASSESSEE RE ITERATES THE CONTENTIONS MADE BEFORE THE AO AND RELYING ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN CIT VS GOPAL PUROHIT, 188 TAXMAN 140 (BOM); 228 CTR 582 (BO M ) TO BUTTRESS ITS CASE. 1 6 . AFTER CONSIDERING THE ORDER OF THE AO AND SUBMISSIONS OF TH E ASSESSEE, THE CIT(A) FOUND THAT THE AO WAS NOT JUSTIFIED IN TREATING THE CAPITAL GAIN AS BUSINESS INCOME. LEARNED CIT(A) FOUND THAT THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. GOPAL PUROHIT, REPORTED IN 228 CTR 582 (BOM) , IS SQUARELY APPLICABLE ON THE FACTS OF PRESENT CASE. ACCORDINGLY, HE ALLOWED THE APPEAL OF THE ASSESSEE ON THE ISSUE INVOLVED. THE FINDINGS OF THE LEARNED CIT(A) RECORDED IN PARA 8 AT PAGE 11 ARE AS UNDER : - 8. I HAVE CONSIDERED THE ISSUE. IT HAS DEALINGS IN DERIVAT IVES BY WAY OF F&O INCOME FROM WHICH IS OFFERED TO TAX AS BUSINESS INCOME. AS REGARDS CLAIM OF SHORT TERM CAPITAL GAIN IT IS SEEN THAT THE APPELLANT DEALT IN ONLY FIVE SCRIPS AND HAD IN ALL 20 TRANSACTIONS OF PURCHASE AND 14 TRANSACTIONS OF SALE. IT IS NOT IN DISPUTE THAT ALL THE TRANSACTIONS WERE DELIVERY BASED. THERE IS NO REPEAT TRANSACTION IN THE SAME SCRIP WHICH COULD GIVE CLEAR INDICATION OF A BUSINESS BENT OF MIND. IT IS ALSO NOT IN DISPUTE THAT THE APPELLANT HAS NOT DEALT IN SHARE TRANSACTIONS OF .A NY OTHER NATURE. IT IS SEEN THAT THE APPELLANT HAD SHOWN CAPITAL GAIN ON SHARES IN EARLIER YEAR AND WAS ACCEPTED BY THE AO. THERE IS CONTINUITY AND CONSISTENCY IN ITS ACTIVITY. THE AO HAS NOT FOUND ANYTHING NEW THIS YEAR TO HOLD A DIFFERENT VIEW. IN THIS R EGARD THE DECISION OF HON'BLE BOMBAY HIG H COURT IN THE CASE OF GOPAL PUROHIT (CITED SUPRA) IS RELEVANT. IN THAT CASE, THE ASSESSEE RETURNED INCOME FROM TRANSACTIONS SETTLED OTHERWISE THAN BY ACTUAL DELIVERY AS BUSINESS INCOME AND THAT FROM TRANSACTIONS SE TTLED BY ACTUAL DELIVERY AS SHORT TERM AND LONG TERM CAPITAL GAIN, AS THE CASE ITA NO S . 8706&9103 /201 0 25 MAY BE. THE AO ASSESSED THE ENTIRE INCOME AS BUSINESS INCOME ON THE BASIS OF FREQUENCY OF THE TRANSACTIONS . ON APPEAL, THE HONBLE TRIBUNAL HELD THAT THE DELIVERY BASED TRANSAC TIONS SHOULD BE TREATED AS THOSE IN THE NATURE OF INVESTMENT TRANSACTIONS AND THE PROFIT RECEIVED THERE FROM SHOULD BE TREATED EITHER AS SHORT TERM OR, AS THE CASE MAY BE, LONG TERM CAPITAL GAIN, DEPENDING UPON THE PERIOD OF HOLDING. THE TRIBUNAL ALSO HELD THAT THOUGH THE PRINCIPLE OF RES JUDICATA WAS NOT APPLICABLE TO ASSESSMENT PROCEEDINGS, YET THERE OUGHT TO BE UNIFORMITY IN TREATMENT AND CONSISTENCY WHEN FACTS AND CIRCUMSTANCES WERE IDENTICAL. HONBLE HIGH COURT UPHELD BOTH THE PROPOSITIONS. IN VIEW OF THIS I HOLD THAT THE AO WAS NOT JUSTIFIED IN TREATING THE SHORT TERM CAPITAL GAIN OF RS. 3,43,62,932/ - AS BUSINESS INCOME. THE CLAIM OF THE APPELLANT IS ALLOWED. THE ISSUE IS DECIDED IN FAVOUR OF THE APPELLANT. 1 7 . THE ABOVE FINDINGS OF THE LEARNED CIT(A) , IN OUR VIEW, ARE CORRECT FINDINGS, WHICH ARE IN CONSONANCE WITH THE FINDINGS OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF GOPAL PUROHIT (SUPRA) . THEREFORE, WE SEE NO REASON TO INTERFERE IN THE FINDINGS OF THE LEARNED CIT(A) . ACCORDINGLY, THE ORDER OF THE CIT(A) ON THE ISSUE INVOLVED IN THE PRESENT CASE IS CONFIRMED. 1 8 . IN RESULT, BOTH APPEAL S OF THE ASSESSEE AS WELL AS DEPARTMENT ARE HEREBY DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15TH DAY OF MAY 2013 . SD/ - SD/ - ( P.M.J AGTAP ) ( R.K.GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED : 1 5 /05/ 2013 . PKM , PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - X, MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUAR D FILE. //TRUE COPY// BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI