M/s. Cauvery Iron & Steel (India) Ltd., Hyderabad V. ACIT, Central Circle-1(2), Hyderabad

ITA 914/HYD/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6537 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-06-2018
• Assessment Year: 2009-2010
• Appeal Filed On: 12-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K SRINIVAS REDDY
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Unexplained cash credit; Unexplained investment; Income from undisclosed sources; Wholly owned subsidiary; Corroborative evidences; Accommodation entries
• Section: 133(6); 68; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 914/HYD/2014 ASSESSMENT YEAR: 2009-10 M/S. CAUVERY IRON & STEEL (INDIA) LTD., SECUNDERABAD [PAN: AABCC3576F] VS ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1(2), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI P. MURALI MOHAN RAO, AR FOR REVENUE : SHRI K. SRINIVAS REDDY, DR DATE OF HEARING : 15-06-2018 DATE OF PRONOUNCEMENT : 05-07-2018 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-II, HYDERABAD, DATED 26-02-2014, ON THE ISSUE OF ADDITION OF SHARE APPLI CATION MONEY/SHARE CAPITAL OF RS. 39,37,06,000/- MADE BY TH E ASSESSING OFFICER (AO) AND CONFIRMED BY THE LD.CIT(A ). 2. THE MAIN ISSUE IN THIS CASE WAS THAT ASSESSEE HAS BROUGHT IN AN INVESTMENT OF RS.39,37,06,000/- FROM VA RIOUS I.T.A. NO. 914/HYD/2014 :- 2 - : COMPANIES AS SHARE CAPITAL. THE AO CONSIDERED THIS INVESTMENT AS UNEXPLAINED FOR THE REASONS MENTIONED BEL OW: (A) ON VERIFICATION OF COPIES OF SHARE APPLICANTS IT WAS NOTICED THAT SAME SIGNATURE IS APPEARING IN MANY COMPANIES IN THE CAPACITY OF DIRECTOR OR AUTHORISED SIGNATORY AND THE HANDWRITING OF SHARE APPLICANTS LOOK S ALIKE IN MOST OF THE OCCASIONS. (B) LETTERS WERE ISSUED TO THE SHARE APPLICANTS SEEKING THE FOLLOWING DETAILS: I. MODE OF PAYMENT, DETAILS OF ALLOTMENT OF SHARES BY CAUVERY IRON & STEELS (INDIA) LTD., II. INCOME TAX PARTICULARS OF A.Y. 2009-10 III. LEDGER EXTRACTS OF CAUVERY IRON & STEELS IN THE BOOKS OF SHARE APPLICANTS. (C) LETTERS WERE ISSUED TO 22 SHARE APPLICANTS AND THE RESPONSE IS AS UNDER: (I) CONFIRMED THE INVESTMENT 5 CASES. THEY ARE : 1. GLOZON ALLOYS & CASTINGS PVT. LTD., NEW DELHI 2. MAHAK TEXTILE PVT. LTD., NEW DELHI 3. AFFLATUS SOFTWARE PVT. LTD., NEW DELHI 4. SPERM TRACOM PVT. LTD., KOLKATA 5. JAMUNA MACHINE TOOLS & MANUFACTURING COMPANY P. LTD., HYDERABAD. I.T.A. NO. 914/HYD/2014 :- 3 - : (II) LETTERS RETURNED WITH THE REMARKS UNKNOWN / NOT KNOWN - 7 CASES. THEY ARE: 1. DOST INTERNATIONAL LTD. 1510/11, SHIV ASHRAM, SP MUKHARJI MARG, DELHI-6. 2. RISHIKESH PROPERTIES PVT. LTD. 18/19, ERIAPPAN ST., SOWKARPET, CHENNAI. 3. RUPE PROMOTERS PVT. LTD., 18/19, ERIAPPAN ST., SOWKARPET, CHENNAI. 4. RUPA MERCHANTS PVT. LTD. 302, 3 RD FLOOR, VARDHAMAN NORTH EX-PLAZA, NETAJEE SUBHASH PLACE, PITAMPURA, NEW DELHI - 6. 5. CEE AAR DECORS PVT. LTD., 1510/11, SHIV ASHRAM, SP MUKHARJI MARG, DELHI-6. 6. ANG FINVEST PVT. LTD., 1510/11, SHIV ASHRAM, SP MUKHARJI MARG, DELHI-6. 7. SHARADARAJ TRADEFIN LTD. ROAD NO.109, KOLKATA - 69. (III) NOTICE UNSERVED / NO REPLY RECEIVED - 10 CASE S. THEY ARE: 1. MA SANTHOSHI INTERNATIONAL LTD., KOLKATA 2. LIMITEX INVESTMENTS LTD., KOLKATA 3. BLUEPRINT SECURITIES LTD., KOLKATA 4. KONARK COMMERCE & INDUSTRIES LTD., KOLKATA 5. IMPEX SERVICES LTD., KOLKATA 6. KUBER HANDICRAFTS PVT. LTD., NEW DELHI 7. PEARL HANDICRAFTS PVT. LTD., NEW DELHI 8. AMAR SHREE INDUSTRIES LTD., KOLKATA I.T.A. NO. 914/HYD/2014 :- 4 - : 9. JULANIA FINANCE PVT. LTD., NEW DELHI 10. GOODLUCK INDUSTRIES LTD., KOLKATA (D) THAT THE COMPANY FAILED TO PRODUCE THE ABOVE PARTIES FO R EXAMINATION. (E) THAT THE SHARES OF RS.10/- WERE ALLOTTED AT A PREMIUM OF RS.490/- PER SHARE WITHOUT ANY VALID JUSTIFICATION FOR THE PREMIUM. (F) TOTAL SHARES ISSUED BY THE COMPANY WERE 7,99,400 TO AL L THE PARTIES. OUT OF WHICH 26,000 SHARES WERE ALLOTTED TO JAMUNA MACHINE TOOLS & MANUFACTURING COMPANY P. LTD., WHICH IS A SISTER CONCERN OF THE ASSESSEE AND THI S SISTER CONCERN HAD NOT YET STARTED THE PRODUCTION BUT RAISED HUGE SHARE CAPITAL WITHOUT PROPERLY EXPLAINING THE SOURCES. THIS SISTER CONCERN HAS ISSUED SHARE OF R S. 10/- EACH TOTALING TO 26,010 SHARES AT A PREMIUM OF RS. 4,990/- TO VARIOUS INVESTORS. (G) THE ASSESSING OFFICER CLEARLY INFORMED THE ASSESSEE THAT IN CASE OF ANY DIFFICULTY TO PRODUCE THE INVESTORS FOR EXAMINATION AT HYDERABAD, HE WOULD LIKE TO VISIT THE PLACES OF THE INVESTORS AND REQUESTED THE ASSESSEE TO CONFIRM SUCH PROPOSAL. HOWEVER, THE ASSESSEE REPLIE D THAT THEY HAVE ALREADY ASKED THEIR INVESTORS TO APPEAR BEFORE THE AO AND HAVE NOT RECEIVED ANY CONFIRMATION FROM THE INVESTORS. (H) ENQUIRIES WITH THE AXIS BANK, RANIGUNJ BRANCH, SECUNDERABAD, THROUGH WHICH SHARE APPLICATION MONEY WAS RECEIVED REVEALED THAT THE MONEY HAD NOT DIRECTLY I.T.A. NO. 914/HYD/2014 :- 5 - : COME FROM THE INVESTORS BUT WAS ROUTED THROUGH SERIES O F OTHER ACCOUNTS. FURTHER, SIMILAR INVESTMENTS WERE MADE IN THE CASE OF JAMUNA MACHINE TOOLS & MANUFACTURING COMPANY P.LTD. (100% SUBSIDIARY OF THE APPELLANT) WHIC H IS THE MAJOR INVESTOR IN THE APPELLANT COMPANY. HERE ALSO IT WAS FOUND THAT THE MONEY HAD NOT COME IN THE ACCOUNT OF JAMUNA MACHINE TOOLS & MANUFACTURING COMPANY P.LTD. DIRECTLY FROM THE INVESTORS AND IT WAS ROUTED THROUGH SERIES OF ACCOUNTS. (I) SINCE THE INVESTORS WERE NOT PRODUCED FOR EXAMINATION, THE ENQUIRIES WERE CONDUCTED BY INCOME-TAX INVESTIGATION OFFICIALS LOCATED AT MUMBAI, KOLKATA, NEW DELHI AND CHENNAI. ALL OF THEM HAVE REPORTED THAT THE COMPANIES DO NOT EXIST AT THE GIVEN ADDRESS AND REPORTE D THAT THESE ARE ONLY PAPER COMPANIES. (J) THAT WITH REFERENCE TO INVESTMENT MADE BY SISTER CONCERN M/S. JAMUNA MACHINE TOOLS & MANUFACTURING COMPANY P.LTD. VITAL DETAILS OF SHARE APPLICANTS AND THE REASONS FOR FIXING THE PREMIUM AT RS.4,990/- WERE NOT SUBMITTED. (K) THAT MR. ASHOK KUMAR GUPTA, MANAGING DIRECTOR OF THE COMPANY ADMITTED THAT THE SHARE APPLICATION MONEY WAS RECEIVED THROUGH AN AGENT MR. K.C. MALU, CA, WHO IS CURRENTLY NOT IN INDIA, BUT HIS ADDRESS, CONTACT NUMBER AND PAN NO. WERE NOT GIVEN. MR. ASHOK KUMAR GUPTA CLEARLY ADMITTED THAT HE DID NOT KNOW ANY OF THE INVESTOR COMPANIES AND THEIR DIRECTORS. HE FURTHER ADMITTED THAT THE PROCESS OF RAISING FUNDS IN THE CASE OF JAMUNA I.T.A. NO. 914/HYD/2014 :- 6 - : MACHINE TOOLS & MANUFACTURING COMPANY P. LTD., WAS ALSO THE SAME, THE FUNDS WERE RAISED THROUGH AN AGEN T. (L) BASED ON THE ABOVE ENQUIRIES, THE ASSESSING OFFICER INFORMED HIS CONCLUSIONS TO ASSESSEE AS UNDER: 'A. THE COMPANIES WHICH YOU CLAIM AS YOUR INVESTORS ARE COMPANIES WITH DUBIOUS DISTINCTION IN PARTICIPA TING IN SUSPICIOUS AND MANIPULATIVE TRANSACTIONS. B. THE SAID INVESTOR COMPANIES EXIST ONLY ON PAPER TO ACCOMMODATE ENTRIES FOR THE PURPOSE OF MANIPULATION OF FUNDS. C. THESE COMPANIES DO NOT EITHER EXIST AT THE GIVEN ADDRESS OR DO NOT HAVE ANY RECORDS / DOCUMENTS TO P ROVE THE EXISTENCE OF THESE COMPANIES AT THE GIVEN ADDRE SS. D. THE ADDRESS FURNISHED EITHER IN THE RETURN OF IN COME / LETTER HEADS ARE DUBIOUS / INCORRECT WITH AN INTE NTION BETTER KNOWN TO THEMSELVES / YOURSELVES. E. THESE COMPANIES, STRANGELY INVEST SUBSTANTIAL SU MS OF MONEY TO TAKE SHARES AT A HIGH PREMIUM WITHOUT KNOWING ANYTHING ABOUT THE COMPANIES IN WHICH SUMS ARE INVESTED. F. THESE COMPANIES HAVE STRANGELY INVESTED SUBSTANTIAL AMOUNTS IN COMPANIES WITH NO HISTORY OF DIVIDEND PAYMENT AND APPARENT RETURNS ON INVESTMENT S. G. NONE OF THESE COMPANIES HAVE THE NECESSARY WHEREWITHAL TO INVEST SUBSTANTIAL SUMS.' 2.1. AFTER REJECTING ASSESSEE SUBMISSIONS, AO HELD TH AT THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF INV ESTORS WAS NOT PROVED AND ON THE OTHER HAND INFORMATION ON R ECORD AND THE ENQUIRIES CONDUCTED BY THE DEPARTMENT REVEAL TH AT THE INVESTORS ARE NOT EXISTING AND BOGUS, THEREFORE, THE EN TIRE I.T.A. NO. 914/HYD/2014 :- 7 - : SHARE APPLICATION MONEY WAS TREATED AS UNEXPLAINED INVESTMENT. 3. BEFORE THE LD.CIT(A), ASSESSEE SUBMITTED THAT : (A) THAT 6 PARTIES HAVE SUBMITTED THE REQUIRED DETAILS CALLE D FOR BY THE AO DIRECTLY TO THE DEPARTMENT AND 16 PARTIES HAVE CONFIRMED THE INVESTMENTS AND SUBMITTED THE DETAILS TO AO THROUGH ASSESSEE; (B) THAT ALL OF THEM ARC INCOME-TAX ASSESSEES, HAVE PAN NOS. THEY HAVE FILED INCOME-TAX RETURNS, COPY OF BAN K STATEMENT, CONFIRMATION LETTERS, COPY OF AUDITED ACCOUNTS WERE SUBMITTED. (C) THAT IT TRIED ITS LEVEL BEST TO PRODUCE INVESTORS BEFORE THE AO BUT THE SAME COULD NOT MATERIALIZE AS THE INVESTORS ARE NOT UNDER ITS CONTROL. (D) THAT THE DEPARTMENT SHOULD HAVE CONDUCTED ENQUIRIES WITH REFERENCE TO SOURCES IN THE HANDS OF INVESTORS. (E) RELIANCE IS PLACED ON THE FOLLOWING DECISIONS: (I) CIT VS. LOVELY EXPORTS (P) LTD (2009) [319 ITR 0005] (SC) (II) CIT VS. OASIS HOSPITALITIES (P) LTD. (2011) [333 ITR 011] (DEL) (III) CIT VS. STL EXTRUSION (P) LTD. (2011) [333 ITR 269] (MADHYA PRADESH) (IV) AQUATECH INTERNATIONAL LTD. VS. ITO (2008) [119 TTJ 0140] (DELHI - TRIB) I.T.A. NO. 914/HYD/2014 :- 8 - : (V) ASST.CIT VS. VENKATESHWAR ISPAT (P) LTD. (2010) (II) ITCL 0355 (CHATTISGARH HC) (VI) HINDUSTAN INKS & RESINS LTD VS. DY.CIT (2011) [60 DTR 0018 (GUJ.HC) 4. LD.CIT(A) VIDE PARA 5 OF THE ORDER HAS CONSIDERE D THAT NONE OF THE INVESTORS ARE EXISTING AT THE ADDRESSES G IVEN, ISSUANCE OF PAN (PERMANENT ACCOUNT NUMBER) DOES NOT PROVE THE PHYSICAL EXISTENCE OF A PERSON UNLIKE THAT OF A PAS SPORT, ALMOST ALL COMPANIES DO NOT HAVE ANY ACTIVITY AT ALL A ND MAJORITY OF THE COMPANIES HAVE SHOWN NIL INCOME OR N OMINAL INCOME AND FURTHER ENQUIRIES CONDUCTED WITH ASSESSEE S BANK ACCOUNT INDICATED THAT THE AMOUNTS ARE ROUTED THROUGH SEVE RAL ACCOUNTS. RELYING ON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. TITAN SECURITIES LTD., (20 13) [84 CCH 184] / [357 ITR 184] (DELHI) AND THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD., [216 CTR 195] (SC) / [319 ITR 0005] (SC) W HICH WAS DISTINGUISHED IN THE ABOVE CASE, LD.CIT(A) HELD THA T INVESTORS ARE NOT EXISTING AND THEY ARE MERE ENTITIES ON PAPER. I T WAS FURTHER HELD AS THE ENTIRE EVIDENCE IS SO GLARING AND APPARENT THAT THESE APPELLANTS OWN UNACCOUNTED MONEY WHICH H AS COME ACCOUNTED, FURTHER THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF INVESTORS DID NOT PROVE. THEREFORE, AS DISCUSSED IN THE ORDER THE ADDITION MADE BY THE AO OF R S. 39,37,06,000/- WAS SUSTAINED. I.T.A. NO. 914/HYD/2014 :- 9 - : 5. ASSESSEE HAS RAISED VARIOUS GROUNDS (13) ON THE ABOVE ISSUE. ASSESSEE HAS PLACED PAPER BOOKS, EVID ENCING THE DETAILS FURNISHED BEFORE THE AUTHORITIES REGARDING CONFIRMATIONS AND CREDITWORTHINESS OF THE INVESTOR COMP ANIES AND BOTH THE PARTIES HAVE FILED DETAILED WRITTEN SUBMI SSIONS IN THE COURSE OF HEARING. 6. IT WAS THE SUBMISSION OF THE LD. COUNSEL THAT ASSESSEE-COMPANY HAD RECEIVED MONEY TOWARDS SHARE CA PITAL AND SHARES ARE ALREADY ALLOTTED. FOLLOWING THE PRINCI PLES LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD., [216 CTR 195] (SC), THE DEPA RTMENT IS FREE TO PROCEED TO REOPEN THE INDIVIDUAL ASSESSMENTS O F INVESTOR COMPANIES IN ACCORDANCE WITH LAW BUT THE ADDI TION CANNOT BE MADE IN THE HANDS OF ASSESSEE. LD. COUNSEL ALSO PLACED RELIANCE ON THE DECISION OF THE HON'BLE AP HI GH COURT IN THE CASE OF CIT VS. LANCO INDUSTRIES LTD., [242 ITR 35 7] (AP), WHEREIN IT WAS HELD THAT IF THE ANY OF SHAREHOLDERS FAI LED TO EXPLAIN THE MEANS OF INVESTMENT THAT SHOULD HAVE BEEN TR EATED AS UNEXPLAINED INCOME IN THEIR HANDS AND CANNOT BE TAXED IN THE HANDS OF ASSESSEE. LD. COUNSEL ALSO PLACED RELI ANCE ON THE AMENDMENT TO SECTION 68 W.E.F. 01-04-2013 TO SUBMIT THAT EXPLANATION ABOUT NATURE AND SOURCE OF SUCH SUM WAS INTRODUCED ONLY W.E.F. 01-04-2013 AND SO THE SAME IS NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION I.E., AY. 2009-10. IT WAS FURTHER SUBMITTED THAT THE INVESTMENT IN SHARE CAPITAL IS NOT PRE-ARRANGED TRANSACTION AND THE ADDITION WAS MADE BASED ON INACCURATE EVIDENCES. IT WAS SUBMITTED THAT MANY OF THE I.T.A. NO. 914/HYD/2014 :- 10 -: ASSESSEES HAVE RESPONDED TO THE AOS ENQUIRY AND HENC E, THEY CANNOT BE TREATED AS NON-EXISTING/BOGUS. IT WAS FURTHE R SUBMITTED THAT AO CAUSED ENQUIRIES AT CHENNAI, WHEREAS A LL THE INVESTOR COMPANIES BELONG TO DELHI OR KOLKATA. TH E ENQUIRIES CAUSED AT KOLKATA HAVE NOT BEEN CONFRONTED TO ASSESSEE AND SO THE PRINCIPLES LAID DOWN BY THE HON'B LE SUPREME COURT IN THE CASE OF CIT VS. SUNITA DHADDA IN SLP (CIVIL) DIARY NO. 9432/2018 WILL APPLY AND THE PRESU MPTION U/S. 292C AGAINST ASSESSEE IS NOT AVAILABLE. 6.1. IT WAS FURTHER SUBMITTED THAT ALL THE COMPANIES HAVE SUBMITTED THEIR CONFIRMATION LETTERS, COPIES OF IN COME TAX RETURNS AND FINANCIAL STATEMENTS SO AS TO PROVE THE INVES TMENT MADE IN ASSESSEE-COMPANY AND THE INVESTOR COMPANIES ALSO GOT THEIR BOOKS AUDITED AND ARE REGULARLY FILED RETURN S OF INCOME. LD. COUNSEL FURTHER SUBMITTED THAT NONE OF THESE COMPANIES HAVE BEEN DELETED FROM THE LIST OF THE COMPA NIES RECENTLY, WHICH PROVES THAT THEY ARE GENUINE COMPANIES. IT WAS FURTHER SUBMITTED THAT ASSESSEE-COMPANY HAS RECEIVE D AN AMOUNT OF RS. 39,97,00,000/ TOWARDS SHARE CAPITAL, WHEREAS AO MADE AN ADDITION OF RS. 39,17,06,000/-, THEREBY AC CEPTING PART OF THE SHARE CAPITAL AND SHARE PREMIUM RECEIVED. IT FURTHER SHOWS THAT AO HAS NOT EXAMINED THE ISSUE PROPERL Y. WITH REFERENCE TO THE SHARE PREMIUM RECEIVED, LD. COUN SEL RELIED ON THE CO-ORDINATE BENCH DECISION IN THE CASE OF M/S. HARIOM CONCAST & STEEL PVT. LTD., VS. ITO IN ITA NO. 1775/HYD/2014 FOR THE PROPOSITION THAT AMOUNT OF PREMIUM CANNOT BE DOUBTED WHEN SHARE CAPITAL WAS ACCEPTED. I T WAS I.T.A. NO. 914/HYD/2014 :- 11 -: FURTHER CONTENDED THAT AO IS TRYING TO ENQUIRE THE SOURCE OF SOURCE TO TREAT THE TRANSACTIONS AS BOGUS, WHICH IS UNSUSTAINABLE AGAINST THE LAW. SINCE ASSESSEE HAD FIL ED THE DETAILS OF INVESTORS, THEIR PAN NUMBERS, ITRS AND CONFIRMATIONS ALONG WITH FINANCIALS, THE SAME HAS TO B E ACCEPTED AS GENUINE UNLESS AND OTHERWISE PROVED TO BE WRONG. IT WAS SUBMITTED THAT SINCE ASSESSEE DISCHARGED THE ONUS, THE CREDITWORTHINESS OF THE COMPANIES INVESTED SHOULD BE ACCEPTED. 7. IN REPLY, IT WAS THE CONTENTION OF THE LD.DR THAT ASSESSEES SISTER CONCERN, JAMUNA MACHINE TOOLS & MANUFACTURING COMPANY P. LTD., (JMTMPL) WAS ALLOTTED 26,600 SHARES AND THE BALANCE WAS ALLOTTED TO 21 COMPA NIES WHICH ARE BASED IN KOLKATA AND NEW DELHI. IT WAS SUB MITTED THAT THE SISTER CONCERN ITSELF RAISED THE AMOUNT BY ISSUIN G FURTHER SHARE CAPITAL IN THE SAME FINANCIAL YEAR AT RS . 5,000/- PER SHARE WHICH INVOLVED PREMIUM OF RS. 4,990/-. AS THERE WAS PREMIUM RECEIVED. AO MADE ENQUIRIES AND FOUND THAT ONLY SIX PERSONS HAVE REPLIED TO THE LETTERS ISSUED U/ S. 133(6) OF THE ACT AND IN SEVEN CASES, THE NOTICES ARE RETURNED UNSERVED, THE BALANCE NINE CASES, NO REPLIES WERE RE CEIVED EVEN THOUGH NOTICES WERE SERVED. IN VIEW OF THAT, AO H AS ISSUED LETTER ON 12-12-2011 TO ASSESSEE-COMPANY, REQ UESTING TO PRODUCE VARIOUS DETAILS AND DOCUMENTARY EVIDENCE IN SUPPORT OF THE INVESTMENTS MADE AND ASSESSEE WAS GRANTED TIME FROM 16-12-2011 TO 22-12-2011. SUMMONS WERE ISS UED TO THE MANAGING DIRECTOR ON 12-12-2011 AND STATEMENT WAS I.T.A. NO. 914/HYD/2014 :- 12 -: RECORDED ON 16-12-2011. IT WAS ADMITTED THAT ASSESSEE- COMPANY HAS FURNISHED DETAILS OF INVESTMENTS MADE BY TH E BALANCE SIX COMPANIES WHICH HAVE NOT RESPONDED TO THE ENQUIRIES U/S. 133(6). IN THE COURSE OF STATEMENT REC ORDED, THE MANAGING DIRECTOR WAS ASKED TO FURNISH EVIDENCES THAT W AS RECEIVED DIRECTLY FROM THE COMPANIES CONCERNED AND R EQUESTED TO PRODUCE THE PARTIES CONCERNED FOR EXAMINATION. LD.DR LATER REFERRED TO THE ENQUIRIES WITH THE BANK I.E., AXIS BANK , RANIGUNJ TO SUBMIT THAT INVESTMENTS WERE NOT DIRECTLY MAD E BUT ROUTED THROUGH VARIOUS OTHER ACCOUNTS OR LAYERS SO AS TO FRUSTRATE THE INVESTIGATION. IT WAS FURTHER SUBMITTED THAT ENQUIRIES WERE CONDUCTED THROUGH INVESTIGATION WING AT KOLKATA AND CHENNAI REGARDING GENUINENESS OF THE COMP ANIES CONCERNED. IT WAS FURTHER SUBMITTED THAT AS PER THE INVESTIGATION REPORT RECEIVED, IT WAS FOUND THAT THE COM PANIES ACTUALLY INVOLVED IN PROVIDING ACCOMMODATION ENTRIES B ASED IN KOLKATA AND OTHER PLACES. FURTHER SUMMONS WERE ISSUED AND A STATEMENT WAS RECORDED ON 30-12-2011 INFORMING ABOUT THE INVESTIGATION CONDUCTED BY THE DEPARTMENT. LD.DR FURTHER STATED THAT THE MANAGING DIRECTOR HAS TAKEN A U TURN WITH REGARD TO MODE OF PROCUREMENT OF FUNDS FROM THE INVESTO RS AND STATED THAT ONE MR. K.C. MALI, CA HAD ARRANGED THE FUND S RATHER THAN IN HIS OWN. SINCE ASSESSEE-COMPANY FAILE D TO FURNISH THE REQUISITE DETAILS IN ORDER TO PROVE THE ID ENTITY OF THE ALLEGED INVESTOR TO ESTABLISH THEIR CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTIONS, AO INVOKED THE PROVI SIONS OF SECTION 68 AND TAXED THE ENTIRE AMOUNT OF INCREASE IN SH ARE CAPITAL AND SHARE PREMIUM ACCOUNT AS INCOME OF ASSESS EE. I.T.A. NO. 914/HYD/2014 :- 13 -: LD.DR RELIED ON THE JUDICIAL PRINCIPLES LAID DOWN BY THE HON'BLE APEX COURT IN THE CASE OF SUMATI DAYAL VS. CI T [80 TAXMAN 89] (SC) AND CIT VS. SOPHIA FINANCE LTD., [205 ITR 98] (DELHI). 7.1. LD.DR FURTHER SUBMITTED THAT THE SURROUNDING CIRCUMSTANCES CONSIDERED BY THE AO ARE : I. RECEIPT OF SHARE PREMIUM OF RS. 490/- PER SHARE WITHO UT ANY JUSTIFICATION WHICH IS NOT COMMENSURATE WITH THE NET WORTH OF THE COMPANY OR PROFIT EARNING ABILITY OF THE COMPANY, AS EVIDENCED BY THE FINANCIAL STATEMENTS; II. IT IS IDENTIFIED THAT MOST OF THE ALLEGED SHAREHOLDERS/COMPANIES ARE LOCATED IN THE SAME ADDR ESS IN DELHI OR KOLKATA; III. IN MOST OF THE CASES, THEY HAVE COMMON DIRECTORS; IV. IN MOST OF THE CASES, THERE ARE COMMON AUDITORS WHO HAVE AUDITED THE ACCOUNTS; V. RETURN OF INCOME HAS BEEN FILED FROM SAME LOCATION I. E. USING THE SAME SYSTEM/COMPUTERS; VI. COMPANIES LOCATED IN KOLKATA HAD FILED RETURNS OF INCO ME FROM DELHI; VII. CHARTERED ACCOUNTANTS BASED IN KOLKATA HAVE SIGNED ACCOUNTS OF DELHI BASED COMPANIES; VIII. SHARE APPLICATIONS ARE STEREO-TYPED WITH SAME WORDING, SAME TYPESETTING AND SAME AMOUNT OF PREMIUM WITHOUT ANY DISCRIMINATION; I.T.A. NO. 914/HYD/2014 :- 14 -: IX. AS SEEN FROM THE BALANCE SHEET OF THE ALLEGED SHAREHOLDERS / COMPANIES, NO BUSINESS ACTIVITIES / INCOME GENERATING ACTIVITIES ARE REFLECTED AND MOST OF THE ACCOUNTS ARE SHOWN IN THE BALANCE SHEET BY WAY OF INCREASE / DECREASE IN CAPITAL / ADVANCES ETC. MOST O F THE ALLEGED SHAREHOLDERS / COMPANIES ARE LOSS MAKING OR DISCLOSED MEAGRE PROFITS WHICH ARE NOT IN COMMENSURATE WITH THE HUGE AMOUNT OF INVESTMENT MADE IN THE ASSESSEES COMPANY. SOURCE OF INVESTMENT IN THE HANDS OF THE ALLEGED SHAREHOLDERS / COMPANIES IN MOST OF THE CASES IS BY WAY OF THEIR EXISTING SALE OF INVESTMENTS O R RAISING CAPITAL BY WAY OF HUGE AMOUNT OF SHARE PREMIU M OR SHARE APPLICATION MONEY; X. WITH REGARD TO FINANCIAL TRANSACTIONS IN ALL THE CASES, NO SURPLUS FUNDS ARE FOUND IN THE BANK ACCOUNTS AS SOURC E OF INVESTMENT MADE IN ASSESSEES COMPANY; XI. IN ALL THE CASES, FUNDS WERE DEPOSITED IN THE B ANK ACCOUNTS BY WAY OF TRANSFER FROM OTHER COMPANIES ON THE SAME DAY OF TRANSFER OF FUNDS TO ASSESSEE-COMPANY TOWARDS SHARE CAPITAL OR SHARE PREMIUM THAT IS TO SAY BACK TO BACK TRANSACTIONS. THE ALLEGED INVESTMENT WAS MADE BY WAY OF LAYERING OF BANK TRANSACTIONS WITHOUT DIRECT INVESTMENT. 7.2. IT WAS FURTHER SUBMITTED THAT ASSESSEE-COMPANY HAS NOT DECLARED ANY DIVIDEND TILL THE DATE OF PASSING THE ORDER OF THE CIT(A) AND SISTER CONCERN, JMTMPL MADE BACK TO BACK I.T.A. NO. 914/HYD/2014 :- 15 -: INVESTMENT AND FUNDS WERE RECEIVED FROM DELHI BASED COMPANIES. LD.DR PLACED RELIANCE ON THE FOLLOWING D ECISIONS: I. CIT VS. DURGA PRASAD MORE [82 ITR 540] (SC) II. SUMATI DAYAL VS. CIT [80 TAXMAN 89] (SC) III. N. TARIKA PROPERTY INVEST (P) LTD., VS. CIT [51 TAXMANN.COM 387] (SC) IV. CIT VS. SOPHIA FINANCE LTD., [205 ITR 98] (DELHI) V. CIT VS. NOVA PROMOTERS & FINLEASE (P) LTD., [18 TAXMANN.COM 217] (DELHI) VI. CIT VS. TITAN SECURITIES LTD., [32 TAXMANN.COM 306] (DELHI) VII. CIT VS. N.R. PORTFOLIO (P) LTD., [42 TAXMANN.COM 339](DEHI) VIII. CO-ORDINATE BENCH DECISION OF ITAT IN THE CASE OF M/S . ROYAL RICH DEVELOPERS PVT. VS. DCIT ITA NOS. 1835 & 1836/MUM/2014. 8. IN REPLY, LD. COUNSEL FOR ASSESSEE SUBMITTED THAT THE SHARE CAPITAL CANNOT BE ENQUIRED IN THE HANDS OF A SSESSEE- COMPANY ONCE THE SHARES WERE ALLOTTED AND CONFIRMATION S WERE FURNISHED BY ASSESSEE. FURTHER NON-DECLARATION OF DIV IDEND CANNOT BE A REASON FOR COMPUTING THE TRANSACTION AS DECLARATION OF DIVIDEND WILL DEPEND ON THE INCOMES E ARNED BY THE COMPANY. IT WAS SUBMITTED THAT NONE OF THE COMPANIES HAVE EITHER SOLD THE SHARES OR TRANSFERRED THE SHARES A ND THEY ARE STILL HOLDING THE SHARE CAPITAL IN ASSESSEE-COMPA NY. I.T.A. NO. 914/HYD/2014 :- 16 -: 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE DOCUMENTS PLACED ON RECORD. BOTH THE PARTIES HAVE PLACED PAPER BOOKS. IT IS SURPRISING TO NOTE THA T REVENUE HAS PLACED THE PAPER BOOK, CONTAINING PAGES 1 TO 20, O UT OF WHICH PAGES 15 TO 20 THE DECISION OF THE HON'BLE DELH I HIGH COURT IN THE CASE OF CIT VS. TITAN SECURITIES LTD., [3 2 TAXMANN.COM 306] (DELHI) WAS PLACED. THUS, PAGES 1 TO 14 ARE ONLY RELEVANT DOCUMENTS ON FACTS, THE INDEX OF WHICH IS AS UNDER: PAPER BOOK S.NO. DETAILS PAGE NOS 1 COPY OF THE SWORN STATEMENT DT. 16/12/2011 OF ASHOK KUMAR GUPTA, MANAGING DIRECTOR OF M/S. CAUVERY IRON & STEEL INDIA LTD., HYDERABAD 1 TO 4 2 COPY OF THE SWORN STATEMENT DT. 20/12/2011 OF ASHOK KUMAR GUPTA, MANAGING DIRECTOR OF M/S. CAUVERY IRON & STEEL INDIA LTD., HYDERABAD 5 TO 7 3 COPY OF ITR - V FOR THE AYS. 2008 - 09, 2009 - 10 & 2011-12 IN THE CASE OF M/S. JAMUNA MACHINE TOOLS MANUFACTURING COMPANY P LTD., HYDERABAD 8 TO 11 4 COPY OF ENQUIRY REPORT IN RESPECT OF KOLKATA BASED COMPANIES RECEIVED FROM DDIT (INV.), UNIT IV(5), KOLKATA 12 TO 13 5 COPY OF ENQUIRY REPORT IN RESPECT OF SHAREHOLDE RS FROM CHENNAI RECEIVED FROM DIT(INV.), CHENNAI 14 9.1. AS CAN BE SEEN FROM THE ABOVE, THERE ARE TWO STATEMENTS RECORDED ( PAGES 1-7) FROM MANAGING DIRECTOR IN THE MONTH OF DECEMBER, 2011 WHICH DOES NOT THROW ANY LI GHT AGAINST ASSESSEE-COMPANY [SINCE IT IS GIVEN BY THE MAN AGING DIRECTOR HIMSELF]. THE COPY OF THE ITR PLACED (IN PG S. 8 TO 11) I.T.A. NO. 914/HYD/2014 :- 17 -: INDICATES THE IT RETURNS OF JMTMPL, WHICH IS A SEPARA TE ENTITY AND ASSESSED AT HYDERABAD. 9.2. COMING TO ITEM NO. 4 (PAGES 12-13), THIS WAS THE ENQUIRY REPORT IN RESPECT OF KOLKATA BASED COMPANIES, RECEIVED FROM DDIT(INV.) UNIT- IV(5), KOLKATA. THE REPORT WAS A S UNDER: SUB: ENQUIRY REPORT IN RESPECT OF VARIOUS KOLKATA B ASED COMPANIES RELATING TO M/S. CAUVERY IRON & STEEL INDIA LTD. MATTER REG. REF: YOUR LETTER F.NO. CIT-I-/HYD./INV./MISC/2010-1 1 DATED 22.12.2011 KINDLY REFER TO THE ABOVE. ENQUIRY IN RESPECT OF THE SHAREHOLDERS OF M/S. CAUV ERI IRON & STEEL INDIA LTD, WAS CARRIED OUT BY DEPUTING INSPECTORS A TTACHED WITH THIS OFFICE. ON PERUSAL OF INSPECTORS REPORT SUBMITTED TO THIS OFFICE IN RESPECT OF IDENTITY AND GENUINENESS OF SHAREHOLDERS OF M/S. CAUVERI IRON & STEEL INDIA LTD., IT HAS BEEN OBSERVED THAT ALL THE SHAREHOLDERS ARE NON-EXISTING AT THEIR ADDRESSES AND APPEAR TO B E PAPER COMPANIES. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, THE IDENTITY AND CREDITWORTHINESS OF THE SHAREHOLDERS COULD NOT BE E XAMINED AT THIS END. THE MODUS OPERANDI ADOPTED BY THIS COMPANY IS SIMPLE THEY DO NOT DO ANY BUSINESS AND INVOLVED IN PROVIDING AC COMMODATION ENTRIES. THIS IS THE TREND IN KOLKATA. SUCH PAPER COMPANIES ARE MANAGED AND OPERATED BY SOME ENTRY OPERATORS THROUG H DUMMY DIRECTORS IN LIEU OF SMALL AMOUNT OF COMMISSION. T HE ASSESSEE WILLING TO MAKE THE ACCOMMODATION ENTRY HAS TO GIVE CASH TO RECEIVE A CHEQUE ALONG WITH A SMALL AMOUNT OF COMMISSION. THE ABOVE REPORT ALONG WITH ANNEXURE-I IS SUBMITTE D FOR YOUR KIND PERUSAL AND NECESSARY ACTION AT YOUR END. YOURS FAITHFULLY, XXXXXXXXX I.T.A. NO. 914/HYD/2014 :- 18 -: 9.3. AS CAN BE SEEN FROM THE ABOVE REPORT, A REFEREN CE FROM THE CIT, HYDERABAD TO THE INVESTIGATION UNIT WAS DA TED 22-12-2011 AND THE REPORT FROM DDIT WAS DATED 26-12-2 011. IT IS NOT UNDERSTANDABLE WHAT ENQUIRIES HAVE BEEN CAU SED IN THE FOUR DAYS I.E., FROM THE DATE OF LETTER OF CIT AND THE REPLY BY THE DDIT, LEAVE ALONE THE DETAILED ENQUIRIES CAUSE D BY THE ABOVE UNIT. THE MODUS OPERANDI ADOPTED IS EXPLAINED IN THE LETTER, BUT THERE IS NO SUCH ENQUIRY REPORT OR ANY DETAI LS /EVIDENCE ENCLOSED TO THE REPORT IN SUPPORT OF SUCH MO DUS OPERANDI. PG. NO. 13 IS ENCLOSURE TO THE REPORT WHICH LISTS THE COMPANIES WHICH ARE SUPPOSED TO BE NON-EXISTING : SL. NO. NAME OF THE COMPANY ADDRESS REMARKS 1) SPERM TRACOM PVT. LTD., 32A, BRINDABAN BASAK LANE, 1 ST FLOOR, KOLKATA NOT EXISTED 2) MA SANTOSHI INTERNATIONAL LTD., 10A, HOSPITAL STREET, KOLKATA-700 072 NOT EXISTED 3) SHARDARJI TRADEFIN LTD 1, CROOCKED LANE, ROOM NO. 109, KOLKATA- 69 NOT EXISTED 4) LIMTEX INVESTMENT LTD., 16, GANESH CHANDRA AVENUE, 7 TH FLOOR, KOLKATA-700 013. NOT EXISTED 5) BLUEPRINT SECURITIES LTD., 1, CROOCKED LANE, ROOM NO. 109, KOLKATA- 69. NOT EXISTED 6) KONARK COMMERCE & INDUSTRIES LTD., 10A, HOSPITAL STREET, KOLKATA-700 027. NOT EXISTED 7) IMPEX SERVICES LTD., 10, RAJA SANTOSH ROAD, KOLKATA-700 027. NOT EXISTED 8) AMAR SHREE INDUSTRIES LTD., 13, BONFIELD LANE, 6 TH FLOOR, KOLKATA-700 001. NOT EXISTED 9) GOODLUCK INDUSTRIES LTD., 13, BONFIELD LANE, 6 TH FLOOR, KOLKATA-700 001. NOT EXISTED EVEN THOUGH THE COMPANIES ARE STATED TO BE NON-EXISTING, AO IN THE ASSESSMENT ORDER ITSELF HAS ACCEPTED THAT SPERM TRACOM I.T.A. NO. 914/HYD/2014 :- 19 -: PVT. LTD., KOLKATA HAS DIRECTLY RESPONDED TO THE 133(6) L ETTERS SENT IN NOVEMBER, 2011. HOW A COMPANY WHICH RECEIVE D AND RESPONDED TO A POSTAL COMMUNICATION FROM THE AO COULD BECOME NON-EXISTENT, WHEN ITI MADE ENQUIRIES IMMEDIATE LY AFTER A MONTH, IS NOT EXPLAINED. 9.4. COMING TO THE REPORT OF DIT (INV.), CHENNAI,( P AGE 14) WHICH BOTH AO/CIT(A) AS WELL AS THE DR RELIED WA S AS UNDER: 2. IT IS VERIFIED FROM THE RECORD THAT THOUGH THE ADDRESSES OF THE TWO COMPANIES ARE IN CHENNAI, ON VERIFICATION IT IS FOU ND THAT THE COMPANIES ARE ASSESSED WITH ITO, WARD XV(4), DELHI. FROM THE RECORD OF THE DIRECTORATE, IT IS SEEN THAT NO INFOR MATION REGARDING THE ABOVE TWO COMPANIES IS AVAILABLE. IT IS SO TRANSPIRED THAT TWO COMPANIES, RUPA PROMOTES PV T. LTD., AND RISHIKESH PROPERTIES PVT. LTD., THOUGH BASED I N DELHI WERE GIVEN CHENNAI ADDRESS BY ASSESSEE AND THEREFORE , ENQUIRIES WERE CONDUCTED WITH INVESTIGATION UNIT AT CHE NNAI. BUT AS SEEN FROM THE REPORT OF THE DIT, CHENNAI, THESE T WO COMPANIES ARE ASSESSED WITH ITO, WARD-XV(4), DELHI. HOW THESE COMPANIES HAVE BECOME NON-EXISTENT, WHEN THE INT ERNAL INVESTIGATION REVEALED THAT THEY ARE ASSESSED WITH ITO, WARD- XV(4), DELHI WAS ALSO NOT EXPLAINED. 9.5. ANOTHER ASPECT STATED IN ASSESSMENT ORDER AND ALSO BY THE LD. CIT(A) IS ABOUT SO CALLED ENQUIRY WI TH AXIS BANK, SECUNDERABAD WHICH IT SEEMS REVEALED LAYERIN G OF TRANSACTION SO AS TO FRUSTRATE THE ENQUIRY BY THE DEPARTM ENT. NONE OF THE DETAILS HAVE BEEN PLACED ON RECORD. IF TH E AO HAS I.T.A. NO. 914/HYD/2014 :- 20 -: MADE SUCH ENQUIRIES WITH AXIS BANK, SECUNDERABAD SO AS TO STATE THAT THE INVESTMENTS ARE LAYERED THROUGH MANY SUCH COMPANIES, NO SUCH ENQUIRY REPORT OR DETAILS HAVE BEE N PLACED ON RECORD. IT IS TO BE NOTED THAT THE APPEAL HAS BEEN FI LED AS EARLY AS 2014 AND CASES HAVE BEEN HEARD OVER A PERI OD OF FOUR YEARS BUT STILL THE REVENUE NEVER THOUGHT IT FIT TO FILE THE NECESSARY ENQUIRY REPORT ON RECORD, SO THAT THIS CAN B E CONFRONTED TO ASSESSEE. IN FACT, IT WAS ONE OF THE CON TENTIONS OF ASSESSEE THAT ENQUIRES CAUSED BEHIND THE BACK OF AS SESSEE HAVE NOT BEEN CONFRONTED TO ASSESSEE AT ALL AND SO THE S AME CANNOT BE RELIED UPON. 9.6. ANALYSING THE PAPER BOOK PLACED ON RECORD, IT REVEALS THAT THE ENQUIRY BY DIT, INVESTIGATION, CHENNAI CONFIRMS THAT TWO COMPANIES ARE ASSESSED AT DELHI. THE RE IS NO EVIDENCE OF MODUS OPERANDI STATED BY THE DDIT IN THE REPORT AND NO SUCH SUPPORTING EVIDENCE HAS BEEN FURNISHED. ONE COMPANY M/S SPERM TRACOM PVT. LTD., KOLKATA HAS RESPON DED DIRECTLY TO AO AS MENTIONED IN THE ASSESSMENT ORDER, BU T THIS COMPANY WAS ALSO REPORTED AS NON-EXISTING COMPANY, TH ROWING DOUBT ABOUT THE VERACITY OF THE REPORT ITSELF. IT IS TO B E MENTIONED HERE THAT NO ENQUIRY HAS BEEN CAUSED AT NEW D ELHI. THUS, REJECTION OF COMPANIES FROM NEW DELHI OUT-RIGH TLY CANNOT BE ACCEPTED. THUS, THE SO CALLED EVIDENCE BY REVENUE IS INCOMPLETE AND DOES NOT JUSTIFY THE CONCLUSIONS DRAW N BY THE AO/ CIT(A) WHEN ASSESSEE HAS FURNISHED WHATEVER EVID ENCE IT COULD COLLECT IN SUPPORT OF THE CASH CREDITS. THE ENQUI RY REPORT FROM DIT, CHENNAI PROVES THAT THE COMPANIES ARE EXISTIN G, I.T.A. NO. 914/HYD/2014 :- 21 -: EVEN THOUGH AO AND CIT(A) SHOWS THAT COMPANIES ARE PA PER ENTITIES AND NOT GENUINE. THEREFORE, RELIANCE ON THE S O CALLED STATEMENTS OF AO AND CIT(A) ABOUT THE MODUS OPERANDI AND INTRODUCTION OF ASSESSEES MONEY IN THE FORM OF SHARE CAPITAL CANNOT BE ACCEPTED ON THE FACE OF IT. 10. COMING TO THE INVESTMENTS MADE BY VARIOUS COMPANIES IN THE ASSESSEE-COMPANY, IT IS TO BE NOTED T HAT AO HAS ADDED AMOUNT OF RS. 13 CRORES WHICH WAS INVESTED BY SISTER CONCERN M/S JAMUNA MACHINE TOOLS & MANUFACTURI NG COMPANY P.LTD. ( JMTMPL) IN HYDERABAD AND ALSO ASSES SED AT HYDERABAD. AO STARTED THE ENQUIRY ONLY ON THE BASIS O F THE HIGH PREMIUM RECEIVED BY THAT COMPANY FROM ITS SHARE HOLDERS, WHICH IN TURN WAS INVESTED IN ASSESSEE-COMPANY. SINC E JMTMPL IS AN EXISTING COMPANY AT HYDERABAD AND ASSESS ED AT HYDERABAD, ON WHICH THERE IS NO DISPUTE, THE COMPANY C ANNOT BE TREATED AS NON-GENUINE. ON THE SHARE CAPITAL REC EIVED BY JMTMPL, IT IS FOR THE AO TO ENQUIRE IN THE ASSESSMENT O F THAT COMPANY, BUT THE INVESTMENT BY THE COMPANY IN THE ASSES SEE- COMPANY CANNOT BE CONSIDERED AS UNEXPLAINED. SINCE THE COMPANY IS IN EXISTENCE AND HAS CONFIRMED THE INVESTM ENT IN ASSESSEE-COMPANY TOWARDS SHARE CAPITAL, THE AMOUNT OF R S. 13 CRORES CANNOT BE BROUGHT TO TAX IN ASSESSEES HANDS. F URTHER, AO CANNOT ENQUIRE THE SOURCE OF SOURCE IN THE HANDS O F ASSESSEE-COMPANY, WHEN JMTMPL HAS CONFIRMED ITS INVESTMENT. THUS, THE INVESTMENT OF RS. 13 CORES BY THE SISTER CONCERN AT HYDERABAD CANNOT BE CONSIDERED AS UNEXPLA INED CASH CREDIT IN THE HANDS OF ASSESSEE-COMPANY BY ANY MEANS. I.T.A. NO. 914/HYD/2014 :- 22 -: 11. THESE ARE THE COMPANIES FROM DELHI WHICH HAVE INVESTED. S.NO. COMPANY NAME INVESTMENT AMOUNT (RS) 1 RUPA MERCHANTS PVT. LTD., 50,00,000 2 RISHIKE SH PROPERTIES PVT. LTD., 25,00,000 3 MAHAK TEXTILES PVT. LTD., 1,40,00,000 4 PEARL HANDCRAFTS PVT. LTD., 50,00,000 5 KUBER HANDICRAFTS PVT. LTD., 50,00,000 6 JULANIA FINANCE PVT. LTD., 1,25,00,000 7 GLOZON ALLOYS & CASTING PVT. LTD., 1,60,00,00 8 DOS T INTERNATIONAL LTD., 50,00,000 9 CEE AAR DECORS PVT. LTD., 25,00,000 10 ANG FINVEST PVT. LTD., 50,00,000 11 AFFLATUS SOFTWARE PVT. LTD., 1,00,00,000 TOTAL 8,25,00,000 11.1. OUT OF THESE, M/S. GLOZON ALLOYS & CASTING PVT. LTD., MAHAK TEXTILES PVT. LTD., AND AFFLATUS SOFTWARE PV T. LTD., HAVE CONFIRMED TO THE AO DIRECTLY ABOUT THEIR INVESTMENT W HEN ENQUIRED U/S. 133(6). IN ADDITION, THE INVESTIGATION R EPORT OF DIT, CHENNAI INDICATES THAT RUPA PROMOTERS PVT. LTD., AN D RISHIKESH PROPERTIES PVT. LTD., WERE ALSO ASSESSED IN DELHI. THUS THESE FIVE COMPANIES CANNOT BE CONSIDERED AS BO GUS. NO INVESTIGATION WAS CONDUCTED AT NEW DELHI AND THERE IS NO EVIDENCE AGAINST ASSESSEE WORTH MENTIONING AS FAR AS TH E INVESTMENT BY THE DELHI COMPANIES ARE CONCERNED. SINCE ASSESSEE HAS FURNISHED THE EVIDENCE AVAILABLE WITH I T IN SUPPORT OF THE CONTENTIONS, WHICH HAVE NOT BEEN CONTROV ERTED, WE HAVE NO HESITATION IN HOLDING THAT THESE COMPANIES CANNOT BE CATEGORISED AS NON-GENUINE. THE INVESTMENTS TO THAT EXTENT FROM THE ABOVE COMPANIES CANNOT BE BROUGHT TO TAX AS UNEXPLAINED CASH CREDITS IN THE HANDS OF ASSESSEE. I.T.A. NO. 914/HYD/2014 :- 23 -: 12. COMING TO THE BALANCE OF INVESTMENT FROM KOLKATA COMPANIES, THE NAME OF THE COMPANY AND AMOUNTS INVESTE D ARE AS UNDER: S.NO. COMPANY NAME INVESTMENT AMOUNT (RS) 1 SPERM TRACOM PVT. LTD., 1 0, 62, 00,000 2 GOOD LUCK INDUSTRIES PVT. LTD., 1 , 00, 00,000 3 AMAR SHREE INDUSTRIES LTD., 85 ,00,000 4 IMPEX SERVICES LTD., 1,0 0,00,000 5 BLUE PRINT SECURITIES LTD., 1,0 0,00,000 6 KONARK CO MMERCE & INDUSTRIES LTD 1, 00 ,00,000 7 LIMTEX INVESTMENTS LTD., 1 ,0 0 ,00,00 0 8 MAASANTOSHI INTERNATIONAL LTD., 1,0 0,00,000 9 SHARDARAJ TRADEFIN LTD., 1,00 ,00,000 TOTAL 18,47,00,000 12.1. OUT OF THESE, AS ALREADY STATED, M/S. SPERM TRACOM PVT. LTD., HAS DIRECTLY CONFIRMED TO THE AO IN RE SPONSE TO NOTICE U/S. 133(6). THEREFORE, THE INVESTMENT TO THAT EXTENT OF RS. 10.62 CRORES MADE BY THAT COMPANY CANNOT BE CONSIDERED AS BOGUS JUST BECAUSE THE DDIT WITHOUT ANY EVIDENCE, REPORTS THAT THE COMPANY IS NON-EXISTING. THE ITRS PLACED ON RECORD FROM THE ABOVE COMPANY AND THE ANNUA L REPORTS WHICH ARE AUDITED DO INDICATE THAT COMPANY IS A N EXISTING COMPANY. THEREFORE, THE ADDITION OF RS. 10,62,00,000/- MADE IN THE NAME OF THE ABOVE COMPANY AS BOGUS DOES NOT SURVIVE. 12.2. THAT LEAVES US WITH THE BALANCE COMPANIES, WHO SE INVESTMENT WAS AT RS. 7,85,00,000/-. WITH REFERENCE TO THESE COMPANIES, THERE IS NO EVIDENCE TO SUPPORT THE ALLEGATIO N THAT THESE COMPANIES ARE BOGUS. THE EVIDENCES PLACED ON R ECORD BY I.T.A. NO. 914/HYD/2014 :- 24 -: ASSESSEE DO INDICATE THAT THEY ARE FILING RETURNS AND HAS SHOWN THE INVESTMENTS IN ASSESSEE-COMPANY IN THEIR B ALANCE SHEETS. IF A COMPANY DO NOT HAVE ANY ACTIVITY OF INC OME, BUT INVESTED MONEYS IN THE ASSESSEE-COMPANY, THE SOURCE OF THE SAME HAS TO BE EXAMINED IN THAT COMPANY. WHAT ACTION HAS BEEN TAKEN BY THE RESPECTIVE AOS IN ASSESSING THE AMOU NTS IN THE RESPECTIVE COMPANYS HANDS HAS NOT BEEN PLACED ON RECORD. SINCE MONEY HAS COME THROUGH THE BANKS AND ASSESSEE HAS DISCHARGED ITS ONUS ABOUT THE EXISTENCE OF THE COMPANY AND AS POINTED OUT BY THE LD. COUNSEL, NONE OF THESE COMPANIES HAVE BEEN DELETED FROM THE LIST OF COMPANI ES AND ARE HOLDING THE INVESTMENTS IN ASSESSEES COMPANY AS S UCH AND AS THE SHARE CAPITAL HAS BEEN ALLOTTED, WE CANNOT UP HOLD THE REVENUE CONTENTION THAT THESE COMPANIES ARE BOGUS. AS ALREADY STATED ABOVE, NO EVIDENCE OF THE SO CALLED MODUS OPERANDI HAS BEEN PLACED ON RECORD. ADDITIONS CANNOT BE MADE ON PRESUMPTIONS AND ASSUMPTIONS. THERE SHOULD BE SOM E EVIDENCE TO SUPPORT THE CONTENTIONS RAISED. SINCE THE REV ENUE HAS NOT PLACED ANYTHING ON RECORD WORTH CONSIDERING TO HOLD THAT THESE COMPANIES ARE BOGUS, JUST BECAUSE AO MENTION S THE SO CALLED MODUS OPERANDI WHICH IN TURN WAS FOLLOWED BY THE CIT(A) IN THE ORDER, THE SAME CANNOT BE ACCEPTED, UN LESS THE FLOW OF FUNDS HAVE BEEN CONFRONTED TO ASSESSEE OR AT L EAST BROUGHT TO THE NOTICE OF ITAT BEING A FINAL FACT FINDIN G AUTHORITY. IN THE ABSENCE OF ANY EVIDENCE TO THE CONTR ARY, THE CONTENTIONS OF ASSESSEE CANNOT BE REJECTED. IN OUR OPI NION, THE REVENUE HAS FAILED TO ESTABLISH THAT IT IS ASSESSEES MO NEY WHICH HAS BEEN ROUTED THROUGH VARIOUS COMPANIES. I.T.A. NO. 914/HYD/2014 :- 25 -: 13. IT MAY NOT BE OUT OF PLACE TO MENTION THAT REVENUE HAS PLACED SOME STATEMENTS RECORDED FROM ONE PERSON SUPPOSED TO HAVE BEEN THE KEY PERSON ESTABLISHING VARI OUS COMPANIES AND ROUTED VARIOUS FUNDS I.E., OF ONE MR. MANOHAR LAL NAGALIA FROM WHOM STATEMENTS HAVE BEEN RECORDED IN THE YEARS 2008 AND 2014. BUT THOSE STATEMENTS HAVE BEEN PLA CED IN THE APPEAL FOR AY. 2013-14 WHICH HAVE BEEN CONSI DERED THERE. NO SUCH EVIDENCE HAS BEEN PLACED FOR AY. 2009 -10. EVEN OTHERWISE ALSO THAT EVIDENCE NO WAY SUPPORT REVENU E CONTENTIONS. IT IS TO BE NOTED THAT FY. 2008-09 WAS BOOM YEAR IN THE INDIAN ECONOMY AND MANY COMPANIES HAVE ISSUED SHARES WITH PREMIUM (ONE EXAMPLE IS THAT OF M/S RELIAN CE PETROLEUM LTD., WHICH HAS COME OUT WITH LARGEST PUBLI C ISSUE WITH PREMIUM). GENERALLY, SHAREHOLDERS RESPOND TO THE BACKGROUND OF THE PROMOTERS, PROJECTS AND ITS VIABILITY . JUST BECAUSE HIGH SHARE PREMIUM WAS RECEIVED BY ASSESSEE , IT CANNOT BE CONSIDERED THAT THE ENTIRE SHARE CAPITAL IS BOG US. BE THAT AS IT MAY, SINCE AO OR THE CIT(A) FAILED TO LI NK THE INVESTMENTS BY THE SHAREHOLDERS TO ASSESSEES MANAGING DIRECTOR OR TO THE COMPANY, THE STATEMENT MADE BY THE CIT( A) THAT THIS IS THE ASSESSEE-COMPANYS MONEY CANNOT BE A CCEPTED. ASSESSEE-COMPANY HAS COMMENCED ITS OPERATIONS IN THE PREVIOUS YEAR AND HAS NO WORTHWHILE REVENUE IN EITHER OF THE YEARS TO CONSIDER THAT THE COMPANY HAS EARNED UNACCOUNTE D MONEY. JUDICIAL PRINCIPLES ESTABLISHED BY THE HON'BL E SUPREME COURT IN THE CASE OF CIT VS. P.K. NOORJAHAN [237 ITR 570] WILL APPLY TO THE FACTS OF THE CASE. SINCE REVENUE FAILED TO PLACE ANY EVIDENCE TO SUPPORT ITS CONTENTIONS AND AS ASSESSEE DISC HARGED I.T.A. NO. 914/HYD/2014 :- 26 -: ITS ONUS, FOR THE REASONS STATED ABOVE, WE FIND THAT NONE OF THE AMOUNTS CAN BE BROUGHT TO TAX AS ASSESSEES UNACCOUNTED INCOME IN THE FORM OF UNEXPLAINED CASH CREDITS. FOL LOWING THE PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD., (SUPRA), THE DEPA RTMENT COULD HAVE ENQUIRED THE AMOUNTS AND THE SOURCES THEREO N IN THE HANDS OF THE RESPECTIVE SHAREHOLDERS. IN VIEW OF TH IS, WE HAVE NO HESITATION TO DELETE THE ENTIRE ADDITION MADE BY THE AO. GROUNDS RAISED BY ASSESSEE ARE ALLOWED. 14. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH JULY, 2018 SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMBER HYDERABAD, DATED 5 TH JULY, 2018 TNMM I.T.A. NO. 914/HYD/2014 :- 27 -: COPY TO : 1. M/S. CAUVERY IRON & STEEL (INDIA) LTD., SECUNDER ABAD. C/O. P. MURALI & CO., CHARTERED ACCOUNTANTS, 6-3- 655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD. 2. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1(2 ), HYDERABAD. 3. CIT(APPEALS)-II, HYDERABAD. 4. CIT-1, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.