M/s Bassi Steels Ltd., Mohali V. DCIT, Mohali

ITA 96/CHANDI/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5080 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2004-2005
• Appeal Filed On: 12-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C CHANDRAKANTA
• Assessee Lawyers: ASHOK GOEL
• Keywords: Gift; Peak credit; Question of law; Accommodation entries; Onus to prove; Reason to believe; Reassessment proceedings
• Section: 260A; 147; 131; 68; 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI. SANJAY GARG, JUDICIAL, MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO.96/CHD/2016 ASSESSMENT YEAR: 2005-06 M/S BASSI STEEL LTD. VS. THE DY. CIT VILL- GHOLU MAJRA CIRCLE-6(1) MOHALI MOHALI C-81, INDUSTRIAL AREA PHASE-VI, MOHALI PAN NO. AABCB2610D (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. ASHOK GOEL DEPARTMENT BY : SMT. C. CHANDRAKANTA DATE OF HEARING : 23/01/2018 DATE OF PRONOUNCEMENT : 27/03/2018 ORDER PER DR. B.R.R.KUMAR, AM THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF THE LD. CIT(A)-2, CHANDIGARH DT. 14/12/2015. 2. IN THE PRESENT APPEAL ASSESSEE HAS RAISED THE FO LLOWING GROUNDS: 1. THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACT ION OF THE AO FOR ISSUE OF NOTICE U/S 148 OF THE INCOME TAX ACT. WHEN THE REAS ON ARE NOT AS PER LAW. 2. THAT LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITIO N OF RS. 10 LACS U/S 68 OF THE INCOME TAX ACT, WHEN ALL THE RELEVANT DOCUMENTS HAVE BEEN PRODUCED. FURTHER THE ORDER OF THE HONBLE ITAT CHANDIGARH BE NCH HAS NOT BEEN FOLLOWED. DURING THE HEARING HELD ON 23/01/2018, THE LD.AR H AS PLEADED FOR PERMISSION TO WITHDRAW THE GROUND NUMBER ONE RAISED ON THE ISSUE OF NOTICE UNDER SECTION 148 WHICH HAS BEEN PERMITTED. ACCORDINGLY THE LD.AR HAS SIGNE D ON THE GROUND OF APPEAL TO THAT EFFECT .HENCE THIS GROUND OF APPEAL IS TREATED AS N OT PRESSED. 3. BRIEF FACTS ON THE ISSUE ARE THAT ASSESSING OFFI CER RECEIVED INVESTIGATION REPORT FROM THE INVESTIGATION WING OF THE DEPARTMEN T THAT ON THE BASIS OF SEARCHES CONDUCTED ON THE PREMISES OF SH. TARUN GOY AL, CA, KAROL BAGH, NEW DELHI, IT WAS ALLEGED THAT HE HAD FLOATED NUMBER OF BOGUS PVT. LTD COMPANIES AND FIRMS FOR PROVIDING ACCOMMODATION ENTRIES. IT W AS HELD BY THE ASSESSING OFFICER THAT SH. TARUN GOYAL ADMITTED THIS IN HIS S TATEMENT ON OATH. IT WAS FURTHER REVEALED THAT SHARE CAPITAL OF RS. 5 LACS EACH HAS BEEN GIVEN BY THESE TWO 2 COMPANIES NAMELY M/S. MAHANIVESH INDIA LTD. AND M/S GEEFCEE FINANCE LTD. OF TARUN GOYAL GROUPS TO THE ASSESSEE COMPANY. 4. GROUND OF APPEAL NO. 2 IS DIRECTED AGAINST THE A DDITION OF RS. 10,00,000/- U/S 68 OF THE ACT CONFIRMED BY THE LD. CIT(A). 5. BEFORE US THE LD. AR REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. HE HAS SUBMITTED THAT THE BANK STATEME NTS HAVE BEEN PROVIDED IN CASE OF GEEFCEE FINANCE LTD. FOR THE RELEVANT PERIO D SHOWING THE DD MADE FROM BANK OF PUNJAB LTD. ON 19/12/2003, IN CASE OF MAHANIVESH INDIA LTD. AS PROVIDED A COPY OF THE BALANCE SHEET REFLECTING THE INVESTMENT IN THE ASSESSEES COMPANY. THE LD. AR SUBMITTED THAT HE HA S PROVIDED COPIES OF THE ITR OF THE PARTIES ALONGWITH BALANCE SHEET. BEFORE US THE LD. AR HAS RELIED ON THE FOLLOWING JU DGMENTS: 1. CIT VS. G.P. INTERNATIONAL LTD. 186 TAXMAN 229 2. CIT VS. FAIR FINVEST LTD. 357 ITR 146 3. CIT VS. GANESHWARI METAL (P) LTD. 214 TAXMAN 423 4. CIT VS. FIVE VISION PROMOTERS (P) LTD. HONBLE DELH I HIGH COURT 5. CIT VS. VRINDAVAN FARMS(P) LTD. HONBLE DELHI HIGH COURT 6. CIT VS. FIRST POINT FINANCE LTD. 286 ITR 477 7. CIT VS. LLIACE INVESTMENT (P) LTD. 287 ITR 135 6. IN THE PAPER BOOK HE HAS SUBMITTED THE COPIES OF SHARE APPLICATION FORM, COPY OF INCORPORATION, COPY OF ITR FIRST PAGE BANK STATEMENT PERTAINING TO THESE TWO COMPANIES. 7. THE LD. AR RELIED ON THE JUDGMENT IN THE CASE O F KISCO CASTINGS PVT. LTD. 152 TTJ 629 ON THE PROPOSITION THAT MERE ASSERTIONS ARE NOT ENOUGH TO DEMOLISH THE WRITTEN DOCUMENT. HE SUBMITTED THAT IDENTITY, C REDITWORTHINESS OF THE PARTIES, AND GENUINENESS OF THE TRANSACTION HAS BEEN PROVED BEFORE THE LOWER AUTHORITIES WHICH HAS BEEN IGNORED. HE ARGUED THAT COPY OF BALANCE SHEETS HAVE ALSO BEEN FILED AND THEREFORE ALL THE NECESSAR Y REQUIREMENT FOR COMPLIANCE U/S 68 HAVE BEEN MADE. THE APPELLANT HAV E PLACED RELIANCE ON 3 VARIOUS JUDICIAL PRONOUNCEMENTS INCLUDING THE CASE OF DELHI HIGH COURT IN FINLEASE PVT. LTD. 342 ITR. 8. LD. DR RELIED ON THE ORDER OF THE LD. CIT(A), TH E RELEVANT PORTION OF THE ORDER OF THE LD. CIT(A) IS AS UNDER: ..A TRANSACTION DOES NOT BECOME GENUINE MERELY B ECAUSE A PAPER TRAIL HAS BEEN CREATED/FILED. THE AO WHILE EXERCISING HIS POW ER AS AN INVESTIGATING OFFICER HAS A RIGHT TO GO BEYOND WHAT IS APPARENT. THE MERE FILING OF AFFIDAVIT, GIFT DEED ETC SHALL NOT MAKE THE GIFT GENUINE .MERELY BECAUS E A PAPER TRAIL HAS BEEN FILED WILL NOT BY ITSELF MAKE THE TRANSACTION GENUI NE. HON'BLE DELHI COURT IN THE CASE OF ASHOK MAHENDRU & SONS (HUF) VS. CIT (2008) 9 DTR (DELHI) 222: (2008)173 TAXMAN 178 HAS HELD THAT EVEN THOUGH THE DOCUMENTATION MAY BE IN ORDER, IF THERE IS ENOUGH MATERIAL TO RAISE A VERY STRONG SUS PICION THAT THERE IS SOMETHING NOT QUITE RIGHT WITH NATURE OF TRANSACTION, THE AUT HORITY UNDER THE ACT MAY REJECT THE DOCUMENT AND REQUIRE THE ASSESSEE TO SHOW THAT THE TRANSACTION IS REALLY ONE WHICH IS ABOVE BOARD.. 7.4 THE MATERIAL FACT IS THUS THAT THE FINANCIAL ST RENGTH OF THE PERSON WHO HAS ALLEGEDLY MADE THE INVESTMENT HAS NOT BEEN ESTABLIS HED. THE APPELLANT HAS FAILED TO DISCHARGE THE PRIMARY ONUS OF PROVING THE IR CAPACITY TO PURCHASE THE SHARES AND TO PROVE THE GENUINENESS OF THE TRANSACT IONS. THE APPELLANT COMPANY HAS NOT DISCHARGED ITS ONUS AND IDENTITY AND THE CR EDITWORTHINESS OF THE INVESTORS HAS NOT BEEN ESTABLISHED. THE FACTS OF THE CASE HAV E ALSO BEEN EXAMINED IN LIGHT OF THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF - INDUS VALLEY PROMOTERS LTD. V. COMMISSIONER OF INCOME-TAX [2008] 305 ITR 0202- WHEREIN IT HAS HELD AS UNDER: 'THE ASSESSEE MUST DISCHARGE THE BURDEN OF PROVING THE IDENTITY OF THE CREDITORS AND ALSO GIVE THE SOURCE OF THE DEPOSITS IN ORDER TO AVOID AN ADDITION UNDER SECTION 68 OF THE INCOME-TAX ACT, 19 61. THE CREDITWORTHINESS OF THE DEPOSITORS MUST BE ESTABLIS HED TO THE SATISFACTION OF THE ASSESSING OFFICER. WHERE THERE IS AN UNEXPLA INED CASH CREDIT IT IS OPEN TO THE ASSESSING OFFICER TO HOLD THAT IT IS TH E INCOME OF THE ASSESSEE AND NO FURTHER BURDEN LIES ON THE ASSESSING OFFICER TO SHOW THAT THE INCOME IN QUESTION COMES FROM ANY PARTICULAR SOURCE . THE ASSESSEE-COMPANY FILED A RETURN DECLARING A LOS S OF RS. 4,93,218/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER NOTICED AN INCREASE IN THE SHARE APPLICATION MONEY ACCOUNT AS COMPARED TO THE PRECEDING ASSESSMENT YEAR AND THAT A SUM OF RS. 11.82 LAKHS HAD BEEN DEPOSITED IN THE ACCOUNT OF THE DIRE CTOR. HE FURTHER NOTICED THAT NO SHARES WERE ALLOTTED DURING THE PRE VIOUS YEAR AND IN THE YEAR UNDER CONSIDERATION AND THAT THE SHARE APPLICA TION MONEY RETAINED THE SAME FORM AND CHARACTER EVEN IN TWO SUBSEQUENT YEARS. THUS THE ASSESSING OFFICER TREATED THIS AMOUNT AS UNSECURED AMOUNT AND NOT AS SHARE APPLICATION MONEY. AS THE ASSESSEE HAD NOT PR ODUCED ANY EVIDENCE IN RESPECT OF THE SOURCE OF THE DEPOSITS, THE ASSESSING OFFICER ADDED THE SUM OFRS. 11.82 AND ALSO ADDED RS. 5 LAKH S AS SHOWN IN THE COMPANY'S BOOKS AS DEPOSITS MADE AGAINST BOOKINGS F OR FLATS IN THE SCHEME OF THE COMPANY BUT WHICH WERE CANCELLED BY T HE PARTIES. THE COMMISSIONER (APPEALS) AS WELL AS THE TRIBUNAL _HEL D,_ DISMISSING THE APPEAL, (I) THAT AS NO SHARES WERE ALLOTTED TO THE DIRECTOR DURING THE YEAR IN QUESTION AND FOR THE SUBSEQUENT TWO ASSESSMENT Y EARS AND THE SHARES WERE ALLOTTED AFTER ENQUIRY DONE BY THE ASSESSING O FFICER, THE AMOUNT OF RS. 11.82 LACS COULD BE TREATED AS UNSECURED LOAN. THE AMOUNT HAD BEEN DEPOSITED IN CASH AND IN SPITE OF ENQUIRY; THE SOUR CE OF THE DEPOSIT WAS NOT EXPLAINED. THE CREDITWORTHINESS OF THE CREDITOR S TO MAKE THE PAYMENT 4 WAS NOT CLEAR FROM THE INCOME SHOWN BY THEM. THERE WAS NO INFIRMITY IN THE REASONING GIVEN BY THE TRIBUNAL FOR UPHOLDING T HE ACTION OF THE TAX AUTHORITIES IN BRINGING TO TAX THE SUM OF RS. 11.82 LACS. (II) THAT THE ASSESSEE HAD NOT BEEN ABLE TO PROVE T HE CREDITWORTHINESS OF THE CREDITORS WITH RESPECT TO THE CASH CREDIT OF RS . 5 LAKHS. ALL THE PERSONS INVOLVED FAILED TO RESPOND TO THE SUMMONS. THE ASSE SSEE RECEIVED ALL THE PAYMENTS IN CASH EVEN THOUGH MOST OF THE PERSONS HA D BANK ACCOUNTS AND THEY HAD NOT ENTERED THE TRANSACTIONS THROUGH T HEIR BANK ACCOUNTS. NO SUBSTANTIAL QUESTION OF LAW AROSE.' 7.5 THE HON'BLE DELHI HIGH COURT IN THE CASE OF COM MISSIONER OF INCOME TAX V. NOVA PROMOTERS AND FINLEASE (P) LTD. [2012] 342 ITR 0169- HAS DISTINGUISHED THE CASE OF CIT V. OASIS HOSPITALITIES P. LTD. [2011] 3 33 ITR 119 (DELHI) AND HAS HELD AS UNDER: 'EVEN WHERE A REFERENCE OF A QUESTION OF LAW IS MAD E TO THE HIGH COURT IN ITS ADVISORY JURISDICTION, AND NOT THE APPELLATE JU RISDICTION, WHERE NORMALLY THE FINDINGS OF FACT RECORDED BY THE TRIBUNAL ARE B INDING ON THE HIGH COURT, THE FINDINGS ARE NOT BINDING ON THE HIGH COU RT IF THEY ARE PERVERSE OR IF THE FINDINGS ARE SUCH THAT NO PERSON ACTING J UDICIALLY AND PROPERLY INSTRUCTED AS TO THE RELEVANT LAW COULD HAVE COME T O THE DETERMINATION UNDER APPEAL. THE POSITION IN AN I APPEAL UNDER SECTION 260A OF THE INCOME-TAX ACT, 1961 IS 'A FORTIORI'. FOR THE ASSESSMENT YEAR 2000-01, THE ASSESSEE-COMPA NY FILED A RETURN OF LOSS WHICH WAS PROCESSED UNDER SECTION 143(1) ACCEP TING THE LOSS. SUBSEQUENTLY, BASED ON A LETTER FROM THE DIRECTOR O F INCOME-TAX (INVESTIGATION) REGARDING ENTRY OPERATORS/ ACCOMMOD ATION PROVIDERS, INFORMING THE ASSESSING OFFICER THAT THERE WERE 16 ENTRY OPERATORS WHO HAD GIVEN ACCOMMODATION ENTRIES TO SEVERAL PERSONS OF WHICH THE ASSESSEE WAS ONE, THAT THERE WERE STATEMENTS RECORD ED FROM PERSONS CONFIRMING THE FACTS, THAT THE ASSESSE E HAD OBTAINED ACCOMMODATION ENTRIES OF RS. 1,18,50,000 FROM THESE PERSONS IN THE GARB OF SHARE APPLICATION MONIES DURING THE RELEVANT YEA R, THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148 OF THE ACT REOPENIN G THE ASSESSMENT OF THE ASSESSEE. IN THE COURSE OF THE REASSESSMENT PRO CEEDINGS, THE ASSESSING OFFICER ISSUED A QUESTIONNAIRE TO THE ASSESSEE. THE ASSESSEE SOUGHT COPIES OF THE DOCUMENTS/MATERIAL IN THE POSSESSION OF THE ASSESSING OFFICER AND OPPORTUNITY TO CROSS-EXAMINE THE PERSON IN CHARGE O F THE 16 COMPANIES WITH REGARD TO THE CONTENTS OF THE STATEMENTS RECOR DED FROM THEM. THE ASSESSING OFFICER ISSUED SUMMONS TO TWO INDIVIDUALS AND TO THE COMPANIES, SOME OF WHICH WERE RECEIVED BACK UNSERVE D AND THE OTHER SUMMONS REMAINED UN-COMPLIED WITH. THE ASSESSING OFFICER SENT AN INSPECTOR TO THE ADDRESSES TO WHICH SUMMONS WERE ISSUED . THE INSPECTOR REPORTED THAT NO SUCH PERSON OR COMPANY WAS AVAILAB LE OR EXISTING AT THE ADDRESSES TO WHICH SUMMONS WERE ISS UED. ON THE BASIS OF THE REPORT OF THE INSPECTOR, THE ASSESSING OFFICER ISSUED NOTICE TO THE ASSESSEE TO PRODUCE THE PERSONS AND COMPANIES FROM WHOM IT HAD RECEIVED SHARE APPLICATIONS MONIES. THIS ALSO WAS N OT COMPLIED WITH BY THE ASSESSEE. THE ASSESSEE LATER FILED AFFIDAVITS O F THE TWO INDIVIDUALS, R AND M, IN WHICH BOTH STATED THAT THE TRANSACTIONS W ITH THE ASSESSEE WERE GENUINE AND THE EARLIER STATEMENTS RECORDED FROM TH EM BY THE INVESTIGATION WING WERE GIVEN UNDER PRESSURE. THE A SSESSING OFFICER CAME TO THE CONCLUSION THAT THE INDEPENDENT ENQUIRIES CA RRIED OUT BY HIM DISCLOSED THAT THE ASSESSEE WAS UNABLE TO PROVE THE GENUINENESS OF THE TRANSACTIONS WITH THE COMPANIES AND THAT IT ALSO PR OVED THAT THE 5 ASSESSEE-COMPANY HAD INTRODUCED ITS OWN MONIES THRO UGH NON-EXISTING COMPANIES USING THE BANKING CHANNEL IN THE SHAPE OF SHARE APPLICATION MONIES. HE ACCORDINGLY INVOKED SECTION 68 OF THE AC T AND ADDED THE AMOUNT OF RS. 1,18,50,000/- TO THE INCOME OF THE AS SESSEE AND A SUM OF RS. 2,96,250 REPRESENTING COMMISSION. ON APPEAL THE COM MISSIONER (APPEALS) REJECTED THE ASSESSEE'S CONTENTION AGAINST THE VALI DITY OF THE REOPENING OF THE ASSESSMENT BUT, TAKING NOTE OF THE STATEMENT OF THE ASSESSEE THAT THE AFFIDAVITS FROM R AND M, WHO WERE DIRECTORS IN THE THREE COMPANIES AS WELL AS THE AFFIDAVITS OF THE DIRECTORS IN OTHER CO MPANIES WHICH PROVIDED THE SHARE CAPITAL, WERE NOT CONSIDERED BY THE ASSES SING OFFICER, THE COMMISSIONER (APPEALS) DIRECTED THE ASSESSING OFFIC ER TO EXAMINE THE CONTENTS OF THE AFFIDAVITS AND VERIFY THE VERACITY AND GENUINENESS THEREOF. THE ASSESSING OFFICER WAS ALSO DIRECTED TO EXAMINE THE GENUINENESS OF THE TRANSACTIONS. THE ASSESSING OFFICER SUBMITTED A REM AND REPORT TO THE EFFECT THAT THE TRANSACTIONS HAD NOT BEEN PROVED GE NUINE AND WERE ONLY INSTRUMENTS USED BY THE ASSESSEE TO MISLEAD THE INC OME-TAX AUTHORITIES. THE COMMISSIONER (APPEALS) CONCLUDED THAT HE ASSES SING OFFICER WAS NOT JUSTIFIED IN MAKING THE ADDITION OF RS. 1,18,50 ,000/-UNDER SECTION 68 OF THE ACT, CONSEQUENTLY, HE ALSO DELETED THE ADDITION OF RS. 2,96,250/- MADE FOR COMMISSION PAID TO THE ENTRY PROVIDERS FOR OBTAINING THE ENTRIES, WHICH HAD BEEN ADDED UNDER SECTION 68. THE TRIBUNAL CONFIRMED THE DELETION OF THE ADDITIONS MADE UNDER SECTION 68 OF THE ACT. ON APPEAL BY THE DEPARTMENT: _HELD,_ THAT THE ASSESSMENT WAS REOPENED ON THE BAS IS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTM ENT ABOUT THE EXISTENCE OF ACCOMMODATION ENTRY PROVIDERS AND THEI R MODUS OPERANDI IN WHICH THE ASSESSEE WAS ALSO FOUND TO BE INVOLVED. T HE TRIBUNAL HAD RECORDED, WHILE DEALING WITH THE ASSESSEE'S CROSS-O BJECTIONS CHALLENGING THE JURISDICTION OF THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT, THAT THE INFORMATION WAS SPECIFIC, NOT GENERAL OR VAGUE, AND REFERRED TO TRANSACTIONS ENTERED INTO BY THE ASSESSEE DURING TH E YEAR UNDER CONSIDERATION, THAT AS PER THE INFORMATION OF THE I NVESTIGATION WING, THE NAMES OF THE PERSONS ISSUING THE CHEQUES, THE CHEQU E AMOUNTS, DATES, ETC., WERE ALSO MENTIONED PROVIDING A LINK BETWEEN THE ENTRY PROVIDERS AND THE ASSESSEE. IN THE STATEMENTS RECORDED FROM R AND M BY THE INVESTIGATION WING, THEY HAD IMPLICATED THE ASSESSE E-COMPANY ALSO, INTER ALIA. A PERUSAL OF THE NAMES OF THE ENTITIES FROM W HOM THE ASSESSEE HAD RECEIVED SHARE APPLICATION MONIES SHOWED THAT 15 NA MES APPEARED IN THE LIST OF 22 COMPANIES MENTIONED IN THE LETTER OF M AND R TO THE ADDITIONAL COMMISSIONER. THIS ESTABLISHED THE LINK BETWEEN THE MATERIALS WHICH WAS PRESENT BEFORE THE ASSESSING OFFICER BOTH AT THE TIME WHEN REASONS FOR REOPENING THE ASSESSMENT WERE RECORDED AND WHEN THE REASSESSMENT PROCEEDINGS WERE MADE. IN FINDING FAUL T WITH THE ASSESSING OFFICER FOR NOT ACCEPTING THE IDENTICALLY WORDED AF FIDAVITS OF R AND M TO THE EFFECT THAT THE TRANSACTIONS OF GIVING CHEQUES TO THE ASSESSEE- COMPANY WERE GENUINE AND THAT THE CHEQUES WERE ISSU ED TO THE ASSESSEE-COMPANY FOR SHARE APPLICATION MONEY FOR AL LOTMENT OF SHARES AND SUBSEQUENTLY SHARES WERE ALSO ISSUED, BOTH THE COMMISSIONER (APPEALS) AS WELL AS THE TRIBUNAL HAD COMMITTED A S ERIOUS ERROR IN APPRECIATING THE EVIDENCE. THE ASSESSING OFFICER IN HIS REMAND REPORT STATED THAT DESPITE REPEATED OPPORTUNITIES THE DEPO NENTS OF THE AFFIDAVITS WERE NOT PRODUCED BEFORE HIM FOR EXAMINATION AND TH AT SUMMONS ISSUED TO ALL THE DEPONENTS OF THE AFFIDAVITS REMAINED UN- COMPLIED WITH AND NONE OF THE PERSONS ATTENDED BEFORE HIM. THE ASSESS EE HAD NOTHING TO 6 SAY AS TO WHY THE DEPONENTS OF THE AFFIDAVITS, WHIC H WERE ALL IN ITS FAVOUR, COULD NOT PRESENT THEMSELVES BEFORE THE ASSESSING O FFICER FOR BEING EXAMINED ON THE AFFIDAVITS. IN THE LIGHT OF THE FAC TS, THE EVIDENTIARY VALUE OF THE AFFIDAVITS WAS OPEN TO SERIOUS DOUBT. THE AF FIDAVITS RETRACTING THEIR EARLIER STATEMENTS, FILED BY M AND R WERE FILED MOR E THAN THREE YEARS AFTER THEY WROTE LETTERS ADMITTING TO THEIR ROLE AS ENTRY PROVIDERS. NO REASON HAD BEEN ADVANCED BY THE ASSESSEE FOR SUCH LONG DELAY I N RETRACTING THE EARLIER LETTERS. THE OBSERVATION OF THE COMMISSIONE R (APPEALS) THAT IF SUMMONS HAD BEEN SERVED IT WOULD MEAN THAT THE PART IES WERE PRESENT AT THE ADDRESSES AND EVEN IF THEY WERE NOT FOUND BY TH E INSPECTOR AT THE ADDRESSES FURNISHED BY THE ASSESSEE, IT WAS FOR THE ASSESSING OFFICER TO HAVE MADE ENQUIRIES FROM THE POST OFFICE REGARDING THE WHEREABOUTS OF THE ADDRESSEES WAS NOT PROPER. THERE WAS, IN THIS C ASE, NO SUCH DUTY CAST ON THE ASSESSING OFFICER. THE ASSESSEE HAD BEEN BLO CKING ANY ENQUIRY BY THE ASSESSING OFFICER AT EVERY STAGE ON SOME PLEA O R THE OTHER, INCLUDING A FRIVOLOUS PLEA THAT NO CROSS-EXAMINATION WAS ALLO WED, OVERLOOKING THAT ONCE THEY FILED THE AFFIDAVITS RETRACTING FROM THEI R EARLIER STATEMENTS THE PLEA LOST FORCE. THE FINDINGS OF THE TRIBUNAL WERE BASED ON IRRELEVANT MATERIAL OR HAD BEEN ENTERED IGNORING RELEVANT MATE RIAL. THE FINDING THAT THE SHARE APPLICATION MONIES HAD COME THROUGH ACCOU NT PAYEE CHEQUES WAS, AT BEST, NEUTRAL. THE QUESTION REQUIRED A THOR OUGH EXAMINATION AND NOT A SUPERFICIAL EXAMINATION. THE FACT THAT THE CO MPANIES WHICH SUBSCRIBED TO THE SHARES WERE BORN ON THE FILE OF T HE REGISTRAR OF COMPANIES WAS AGAIN A NEUTRAL FACT. THAT THESE COMP ANIES WERE COMPLYING WITH SUCH FORMALITIES DID NOT ADD ANY CRE DIBILITY OR EVIDENTIARY VALUE. IN ANY CASE, IT DID NOT IPSO FACTO PROVE THA T THE TRANSACTIONS WERE GENUINE. MATERIAL WAS GATHERED BY THE INVESTIGATION WING AND MADE AVAILABLE TO THE ASSESSING OFFICER, WHO IN TURN HAD MADE IT AVAILABLE TO THE ASSESSEE. THE TRIBUNAL HAD IGNORED RELEVANT MAT ERIAL. THE TRIBUNAL ALSO ERRED IN LAW IN HOLDING THAT THE ASSESSING OFFICER OUGHT TO HAVE PROVED THAT THE MONIES EMANATED FROM THE COFFERS OF THE AS SESSEE-COMPANY AND CAME BACK AS SHARE CAPITAL. SECTION 68 PERMITS THE ASSESSING OFFICER TO ADD THE CREDIT APPEARING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IF THE LATTER OFFERS NO EXPLANATION REGARDING THE NATURE A ND SOURCE OF THE CREDIT OR THE EXPLANATION OFFERED IS NOT SATISFACTORY. IT PLACES NO DUTY UPON HIM TO POINT TO THE SOURCE FROM WHICH THE MONEY WAS REC EIVED BY THE ASSESSEE. EVEN IF ONE WERE TO HOLD THAT THE ASSESSI NG OFFICER WAS BOUND TO SHOW THAT THE SOURCE OF THE UNACCOUNTED MONIES WAS THE COFFERS OF THE ASSESSEE, IN THE FACTS OF THE PRESENT CASE SUCH PRO OF HAD BEEN BROUGHT OUT BY THE ASSESSING OFFICER. THE STATEMENTS OF THE ENTRY PROVIDERS REFERRED TO THE PRACTICE OF TATTING CASH AND ISSUING CHEQUES IN THE GUISE OF SUBSCRIPTION TO SHARE CAPITAL, FOR A CONSIDERATION IN THE FORM OF COMMISSION. THE NAMES OF SEVERAL COMPANIES WHICH FI GURED IN THE STATEMENTS GIVEN BY THE ABOVE PERSONS TO THE INVEST IGATION WING ALSO FIGURED AS SHARE-APPLICANTS SUBSCRIBING TO THE SHAR ES OF THE ASSESSEE- COMPANY. THESE CONSTITUTED MATERIALS UPON WHICH ONE COULD REASONABLY COME TO THE CONCLUSION THAT THE MONIES EMANATED FRO M THE COFFERS OF THE ASSESSEE-COMPANY.' THUS THE LD. CIT(A) HELD THAT THE ASSESSEE HAS BEEN UNABLE TO EXPLAIN THE SOURCE FROM WHICH THE ASSESSEE HAS ALLEGEDLY RECEIVED THE AMOUNTS IN ITS BANK ACCOUNT. LD. CIT(A) HELD AS THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATURE AND SOURCE OF THE SUMS FOUND CREDITED IN THE BOOKS WAS NOT SATISFACTORY 7 THERE WAS, PRIMA FACIE, EVIDENCE AGAINST THE ASSESS EE, VIZ., THE RECEIPT OF MONEY. LD. CIT(A) HELD THAT THE BURDEN WAS ON THE A SSESSEE AND SINCE IT WAS NOT DISCHARGE TO THE SATISFACTION THE AMOUNT HAS BEEN T REATED UNDER SECTION 68. 9. THE LD. DR FURTHER SUBMITTED HER ARGUMENT IN THE WRITTEN FORM WHICH ARE AS UNDER: WRITTEN SUBMISSION IN THE CASE OF M/S BASSI STEEL L TD. IN I.T.A NO 96/CHD/2016 1. THE ASSESSEE TOOK ACCOMMODATION ENTRIES AS SHARE CA PITAL FOR FACE VALE RS 10 PER SHARE FROM FOLLOWING COMPANIES CONTROLLED BY SH TARUN GOYAL, AN ENTRY PROVIDER BASED AT DELHI DURING THE A.Y.2004-05 MAHANIVESH INDIA LTD GEEFCEE FINANCE LTD 2. BEFORE HONBLE INCOME TAX APPELLATE TRIBUNAL,DELH I BENCH: 'B'.SH TARUN GOYAL IN I.T.A. NOS. 4636 & 4637/DEL/2012 FOR ASSESSMENT YEARS: 2003-04 & 2004-05, M/S TEJASVI INVESTMENTS PVT. LTD IN I.T.A. NOS. 2524 TO 2533/DEL/2012 FOR ASSESSMENT YEARS: 2003-04 TO 2009-10, AND 90 OTHER GROUP COMPANIES TOOK THE PLEA THAT THEY WERE IN THE BUSINESS OF PROVIDING AC COMMODATION ENTRIES FOR COMMISSION. HONABLE ITAT, DELHI VIDE ORDER DATED 18/10/2013 HEL D THAT: 20. THE UNDISPUTED FACT ACCEPTED BY THE ASSESSEE IS THA T MR. TARUN GOYAL WAS RUNNING A RACKET OF PROVIDING ACCOMMODATION ENTRIES BY FLOATING NUMEROUS COMPANIES. THE MODUS OPERANDI BROUGHT OUT BY THE AO IN THE ASSESSMENT ORDER, IS NOT DISPUTED BY THE ASSESSEE. THE ONLY ISSUE BEF ORE US IS THE QUANTIFICATION OF THE INCOME IN THE HANDS OF MR. TARUN GOYAL AND EACH OF THE ENTITIES FORMED BY HIM. EACH COMPANY IS AN ASSESSEE AND AN ASSESSMENT ORDER HAS TO BE PASSED SEPARATELY IN EACH CASE. THE CREDITS APPEARING IN T HE BOOKS OF EACH ASSESSEE HAVE TO BE EXPLAINED BY THAT ASSESSEE. THE IDENTITY , CREDITWORTHINESS AND GENUINENESS OF THE CREDITOR HAS TO BE PROVED BY THA T PARTICULAR ASSESSEE AND IF THE SAME IS NOT PROVED, ADDITION MAY BE MADE U/S68. THE ARGUMENT OF THE ID. COUNSEL FOR THE ASSESSEE THAT ALL THE ADDITIONS HAV E TO BE MADE ONLY IN THE HANDS OF MR. TARUN GOYAL IS NOT CORRECT AND HENCE CANNOT HE ACCEPTED. 21. THE CONTENTION THAT THE TOTALITY OF THE CIRCUMS TANCES HAVE TO BE CONSIDERED BY ARRIVING AT THE ASSESSABLE INCOME AND THAT WHEN THE FINDING IS THAT THE ASSESSEE HAS INDULGED IN CIRCUL AR AND MULTIPLE TRANSACTIONS, BY LAYERING, WHAT CAN BE TAXED IS THE PEAK CREDIT AND THAT TOO AT THE FIRST POINT IS ACCEPTABLE AND SHOULD BE THE MANNER OF DETERMINING THE CORRECT INCOME. IF EACH OF THE LAYE R IS BROUGHT OUT TAX, THEN IT WOULD BE CASE OF LEVY OF INCOME TAX, MULTIP LE NO. OF TIMES, ON THE SAME AMOUNT. SUCH LEVY OF DOUBLE OR MULTIPLE TAXES IS AGAINST LAW AND IT WOULD NOT BE THE RIGHT METHOD OF ARRIVING AT THE CO RRECT AMOUNT OF INCOME. IF INCOME IS TAXED IN THE HANDS OF MR. TARU N GOYAL, THE TAXED AMOUNT, WHEN TRANSFERRED TO ANOTHER COMPANY SHOULD BE TREATED AS EXPLAINED CREDIT. THE MULTIPLE TRANSFER OF THIS AMO UNT SHOULD ALSO BE TREATED AS EXPLAINED. BUT THE BURDEN OF PROOF LIES ON THE ASSESSEE. 22. ADMITTEDLY CERTAIN ASSESSMENT OF SHRI TARUN GOYAL, THE KIN PIN ARE AT VARIOUS STAGES AND HAVE NOT REACHED THE TRIBUNAL. UNDER THE SE CIRCUMSTANCES, IT WOULD NOT BE POSSIBLE TO HAVE IN OVER ALL VIEW OF THE MAT TER AND ELIMINATE CHAIN / MULTIPLE TRANSACTION, FOR ARRIVING AT THE CORRECT A SSESSABLE AMOUNT. THUS WE HAVE NO OTHER ALTERNATIVE BUT TO SET ASIDE ALL THESE APP EALS TO THE FILE OF THE AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW. 8 23. THE AO SHALL AFTER EXAMINING THE EVIDENCE SUBMITTED BY THE ASSESSEE, CONSIDER ALL THE CASES TOGETHER AND; A) RESTRICT THE ADDITION U/S 68 TO ONLY THE PEAK UNEXP LAINED CREDIT IN EACH CASE AFTER ELIMINATION CIRCULAR TRANSACTION. B) TO ELIMINATE TAXATION OF THE SAME AMOUNT MULTIPLE T IMES, DUE TO THE CHAIN TRANSACTIONS WHICH RESULTED DUE TO LAYERING INDULGE D BY THE ASSESSEE. C) CONSIDER THE MATERIAL ON RECORD AND THE PRECEDEN CE AVAILABLE ON THE ISSUE AND DETERMINE THE PERCENTAGE OF COMMISSION, WHICH THE ASSESSEES WOULD HAVE EARNED AND BRING THE SAME TO T AX. 24. BEFORE PARTING WE MAKE IT CLEAR THAT THE BURDEN OF PROOF LAY ON THE ASSESSEE. IT IS FOR THE ASSESSEE TO DEMONSTRATE THE CHAIN OF TRANSACTION, THE LAYERING INDULGED BY HIM, THE CALCULATION OF PEAK UNEXPLAINE D CREDIT ETC. AND TO PROVE EACH CREDIT IN THE BOOKS OF EACH ASSESSEE. IN THE R ESULT ALL THESE APPEALS ARE SET ASIDE TO THE FILE OF THE AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW. ORDER PRONOUNCED IN THE OPEN COURT ON 18/10/2013 3.. ALSO, IN THE CASE OF SH PROMOD KUMAR (EMPLOYEE OF SH TARUN GOYAL AND SO CALLED DIRECTOR OF GROUP PAPER COMPANIES) IN ITA NO 6126/DEL/2013 FOR A.Y.2004- 05, VIDE ORDER DATED 17/04/2015 HON'BLE ITAT DELHI FOLLOWED ITS EARLIER DECISION DATED 18/10/2013. 4. THUS IT HAS BEEN CONCLUSIVELY HELD BY HON'BLE IT AT DELHI THAT THE SHARE CAPITAL INVESTED BY TARUN GOYAL AND HIS GROUP COMPANIES IS NOT A GENUINE TRANSACTION AND IS IN NATURE OF ACCOMMODATION ENTRY. IT IS HENC E REQUESTED THAT THE ADDITION MADE U/S 68 AND 69 OF IT ACT IN THIS CASE MAY KINDL Y BE UPHELD AS THE TRANSACTION IS NOT GENUINE AND THERE IS NEXUS BETWEEN THE ASSES SEE AND TARUN GOYAL FOR EVADING TAX. 5. IN THE CASE OF OM MACHINES PVT LTD IN ITA NO 577 9/DEL/2012., HON'BLE ITAT DELHI DE ORDER DATED 25/6/2015 HAS UPHELD THE ADDITION M ADE U/S 68 BY THE ASSESSING OFFICER IN THE HANDS OF THE ASSESSEE COMPANY WHICH HAD TAKEN ACCOMMODATION ENTRY FROM SH TARUN GOYAL AND HIS GROUP PAPER COMAP ANIES. THIS CASE IS VERY SIMILAR TO THE PRESENT FACTS OF THE CASE. 6. THE ASSESSEE HAS FILED PAPER BOOK BEFORE THE HON 'BLE BENCH IN SUPPORT OF ITS CLAIM. FROM THE ANALYSIS OF THESE DOCUMENTS, CERTAI N IMPORTANT FACTS EMERGES WHICH ARE DETAILED AS UNDER WHICH SHOWS THAT THE SH ARE APPLICANTS ARE SHELL COMPANIES OF TARUN GOYAL AND THAT THE TRANSCTION IS NOT GENUINE: ADDRESS OF THE 2 APPLICANT COMPANIES IS SAME AS THA T OF SH TARUN GOYAL. THE ASSESSEE COULD NOT PRODUCE THE DIRECTORS OF THE COMPANIES TO PROVE THE IDENTITY AND GENUINENESS OF TRANSACTION. THE SHARE APPLICANTS HAVE SIMILAR PATTERN OF TRANSA CTION WHICH ARE AS UNDER AND SUPPORT THE FINDING OF THE DEPARTMENT THAT THES E ARE SHELL COMPANIES OF TARUN GOYAL AND THAT THE TRANSACTION OF SHARE APPLI CATION IS NOT GENUINE. > AS PER THE P/L A/C THE GROSS TURNOVER IS MINIMAL. T HE EXPENSES ARE ALMOST SAME RESULTING IN NOMINAL INCOME. ( PAGE 33) > AS PER THE BALANCE SHEET THE SOURCE OF INVESTMEN T IS SHARE CAPITAL/PREMIUM RECEIVED FROM OTHER PAPER COMPANIES. ( PAGE 32,45) > AS PER THE BALANCE SHEET THERE ARE NO FIXED ASSETS. ( PAGE 45) _ - > THE CASH IN HAND AND BANK BALANCE/DEPOSITS IS MIN IMAL. ( PAGE 40) 9 > THE BANK STATEMENTS SHOW DEPOSITS AND IMMEDIATE W ITHDRAWAL OF THE SAME AMOUNT (PAGE 4,5). > THE ROI OF GEEFCEE IS SIGNED BY TARUN GOYAL. ( PAGE 5) 7. IN THE GROUNDS OF APPEAL AND THE PAPER BOOK FILE D BY THE SSESSEE BEFORE THE HON'BLE BENCH, THE ASSESSEE HAS RELIED UPON THE DEC ISION OF HONBLE ITAT CHANDIGARH IN THE CASE OF KISKO CASTING IN WHICH TA RUN GOYAL IS AN ENTRY PROVIDER. WITH DUE RESPET IT IS SUBMITTED THAT IN KISKO CASTI NG THE DECISION OF HON'BLE ITAT 'B' BENCH DELHI IN THE CASE OF SH. TARUN GOYAL GROUP & HIS 91 SHELL CO. IN I.T.A. NOS. 4636 & 4637/DEL/2012 HAS NOT BEEN CONSIDERED AND IS HENCE NOT APPLICABLE IN THE PRESENT FACTS. 8. RELIANCE IS PLACED ON FOLLOWING DECISIONS WHICH ARE SQUARELY APPLICABLE IN THE PRESENT CIRCUMSTANCES. (I) IN NOVA PROMOTERS & FINLEASE, HON'BLE DELHI HC HELD THAT IN VIEW OF THE LINK BETWEEN THE ENTRY PROVIDERS AND INCRIMINATING EVIDE NCE, MERE FILING OF PAN NUMBER, ACKNOWLEDGEMENT OF INCOME TAX RETURNS OF TH E ENTRY PROVIDER, BANK ACCOUNT STATEMENTS ETC. WAS NOT SUFFICIENT TO DISCH ARGE THE ONUS. (II) DELHI HC IN THE UNREPORTED CASE OF CIT V. NR P ORTFOLIO (P.) LTD (INCOME TAX APPEAL NO. 1018 OF 2011 AND 1019 OF 2011) VIDE JUDG MENT DATED 22.11.13 HAVE HELD THAT: MERE PRODUCTION OF INCORPORATION DETAILS, PAN NUMBE RS OR INCOME TAX RETURNS MAY NOT BE SUFFICIENT WHEN SURROUNDING AND ATTENDIN G FACTS PREDICATE A COVER UP. THE PRODUCTION OF INCORPORATION DETAILS, PAN NU MBERS OR INCOME TAX DETAILS MAY INDICATE TOWARDS COMPLETION OF PAPER WORK OR DO CUMENTATION BUT GENUINENESS, CREDITWORTHINESS AND IDENTITY OF INVES TMENT AND THE INVESTORS ARE DEEPER AND OBTRUSIVE THAN MERE COMPLETION OF PAPER WORK OR DOCUMENTATION.(PARA30) HELD THAT THE CONTENTION THAT THE REVENUE MUST HAVE EVIDENCE TO SHOW CIRCULATION OF MONEY FROM THE ASSESSEE TO THE THIRD PARTY IS FALLACIOUS AND HAS BEEN REPEATEDLY REJECTED, EVEN WHEN SECTION 68 OF T HE ACT WAS NOT IN THE STATUTE. THUS WHEN THERE IS AN UNEXPLAINED CASH CRE DIT, IT IS OPEN TO THE ASSESSING OFFICER TO HOLD THAT IT WAS INCOME OF THE ASSESSEE AND NO FURTHER BURDEN LIES ON HIM TO SHOW THE SOURCE. (PARA23). VARIOUS JUDGMENTS OF THE SUPREME COURT A. GOVINDARAJULU MUDALIARV. C/TF 19581 34 ITR 807 (SO , C/7~V. M. GANAPATHI MUDALIAR M9641 53 ITR 623 (SO AND CIT V. DEVI PRASAD VISHWANATH PRASAD [19691 72 ITR 194 (SO WERE REFERRED TO. (III) DELHI HC DECISION IN THE CASE OF CIT V. NR PO RTFOLIO (P.) LTD 263 CTR 456 HAVE HELD THAT, THE CONCEPT OF 'SHIFTING ONUS' DOES NOT MEAN THAT ONCE CERTAIN FACTS ARE PROVIDED, THE ASSESSEE'S DUTIES ARE OVER. IF ON VERIFICATION, OR DURING PROCEEDINGS, THE AO CANNOT CONTACT THE SHARE APPLIC ANTS, OR THAT THE INFORMATION BECOMES UNVERIFIABLE, OR THERE ARE FURT HER DOUBTS IN THE PURSUIT OF SUCH DETAILS, THE ONUS SHIFTS BACK TO THE ASSESSEE. (IV)LN CIT V. NIPUN BUILDERS AND DEVELOPERS F20131 350 ITR 407 (DELHI) , THIS PRINCIPLE HAS BEEN REITERATED HOLDING THAT THE ASSESSEE AND T HE ASSESSING OFFICER HAVE TO ADOPT A REASONABLE APPROACH AND WHEN THE INITIAL ON US ON THE ASSESSEE WOULD STAND DISCHARGED DEPENDS UPON FACTS AND CIRCUMSTANC ES OF EACH CASE. IN CASE OF PRIVATE LIMITED COMPANIES, GENERALLY PERSONS KNO WN TO DIRECTORS OR SHAREHOLDERS, DIRECTLY OR INDIRECTLY, BUY OR SUBSCR IBE TO SHARES. UPON RECEIPT OF MONEY, THE SHARE SUBSCRIBERS DO NOT LOSE TOUCH AND BECOME INCOMMUNICADO. CALL MONIES, DIVIDENDS, WARRANTS ETC. HAVE TO BE SE NT AND THE RELATIONSHIP IS/WAS A CONTINUING ONE. IN SUCH CASES, THEREFORE, THE ASS ESSEE CANNOT SIMPLY FURNISH DETAILS AND REMAIN QUIET EVEN WHEN SUMMONS ISSUED T O SHAREHOLDERS UNDER SECTION 131 RETURN UNSERVED AND UNCOMPLIED. THIS AP PROACH WOULD BE UNREASONABLE AS A GENERAL PROPOSITION AS THE ASSESS EE CANNOT PLEAD THAT THEY HAD RECEIVED MONEY, BUT COULD DO NOTHING MORE AND I T WAS FOR THE ASSESSING OFFICER TO ENFORCE SHARE HOLDERS ATTENDANCE. SOME C ASES MIGHT REQUIRE OR JUSTIFY VISIT BY THE INSPECTOR TO ASCERTAIN WHETHER THE SHA REHOLDERS/SUBSCRIBERS WERE FUNCTIONING OR AVAILABLE AT THE ADDRESSES, BUT IT W OULD BE INCORRECT TO STATE THAT THE ASSESSING OFFICER SHOULD GET THE ADDRESSES FROM REGISTRAR OF COMPANIES' WEBSITE OR SEARCH FOR THE ADDRESSES OF SHAREHOLDERS AND COMMUNICATE WITH THEM. 10 SIMILARLY, CREDITWORTHINESS WAS NOT PROVED BY MERE ISSUE OF A CHEQUE OR BY FURNISHING A COPY OF STATEMENT OF BANK ACCOUNT. CIR CUMSTANCES MIGHT REQUIRE THAT THERE SHOULD BE SOME EVIDENCE OF POSITIVE NATU RE TO SHOW THAT THE SAID SUBSCRIBERS HAD MADE A GENUINE INVESTMENT, ACTED AS ANGEL INVESTORS, AFTER DUE DILIGENCE OR FOR PERSONAL REASONS. THUS FINDING OR A CONCLUSION MUST BE PRACTICABLE, PRAGMATIC AND MIGHT IN A GIVEN CASE TA KE INTO ACCOUNT THAT THE ASSESSEE MIGHT FIND IT DIFFICULT TO UNIMPEACHABLY E STABLISH CREDITWORTHINESS OF THE SHAREHOLDERS. (V) DELHI HC IN THE CASE OF CIT VS MAF ACADEMY P. L IMITED, 361 ITR 258 IN PARA28 HELD THAT IN THE CASE OF PRIVATE LIMITED COM PANIES, GENERALLY PERSON KNOWN TO THE DIRECTORS OR SHAREHOLDERS DIRECTLY OR INDIRECTLY BUY OR SUBSCRIBE TO SHARES. THE SHARE SUBSCRIBERS POST INVESTMENT DO NO T LOSE TOUCH OR BECOME INCOMMUNICADO. IN THE CASE OF PRIVATE LIMITED COMPA NIES WHERE NORMALLY THERE IS CLOSE PROXIMITY BETWEEN THE COMPANY, I.E., THE DIRE CTORS AND SHAREHOLDERS AND THE INVESTORS THE ASSESSEE CANNOT SIMPLY FURNISH DE TAILS AND REMAIN QUIET. (VI) DELHI HC DECISION IN THE CASE OF CIT VS JANSAM PARK ADVERTISING & MARKETING PVT. LTD., (2015)(375 ITR 373) HAS BEEN H ELD THAT CIT(A) AND TRIBUNAL ARE ALSO FORUMS OF FACT FINDING AND THAT IN EVENT OF AO FAILING TO CONDUCT PROPER INQUIRY ON FACTS, THE OBLIGATION TO CONDUCT PROPER INQUIRY ON FACTS WOULD NATURALLY SHIFT TO THE APPELLATE AUTHORITES WHEN THEY HAVE NO TICED WANT OF PROPER INQUIRY, IT CANNOT CLOSE THE CHAPTER SIMPLY BY ALLOWING THE APP EAL AND DELETING THE ADDITION MADE AND THAT MUCH DEFICIENCY SHOULD BE CU RED BY THE APPELLATE AUTHORITIES. (VII)DELHI HC IN A MOST RECENT DECISIO N IN THE CASE OF ITO VS PARAMOUNT INTERCONTINENTAL PVT LTD (2017-LL-0207-80) VIDE ORD ER DATED 7/2/2017 DISMISSED THE ASSESSEE'S APPEAL AND HELD THAT THE ASSESSE WAS UNA BLE TO SATISFACTORILY EXPLAIN THE CORRECTNESS OF ENTRIES AS THE SHARE APPLICANTS APPEARED TO BE NOT IN EXISTENCE AND DID NOT ANSWER THE SUMMONS ISSUED U/S 131 OF IT ACT. IN THIS CASE ALSO ACCOMMODATION ENTRIES WERE TAKEN AND DETAILS S UCH AS CONFIRMATION LETTERS, PAN, BANK DETAILS ETC HAD BEEN PRODUCED. 9. WITH REGARDS TO THE REOPENING U/S 147 IT IS SUBM ITTED THAT THE AO RECEIVED INFORMATION FROM INVESTIGATION WING AND SO ISSUED N OTICE U/S 148 AFTER RECORDING OF REASONS. THE ACTION U/S 147 IS JUSTIFIED AND REL IANCE IS PLACE ON FOLLOWING CASE LAWS : (I) THE HON'BLE SUPREME COURT IN RAYMOND WOOLEN MIL LS VS. ITO (1999) 236 ITR 34 (SC) HAS HELD THAT THERE SHOULD BE REASON TO BEL IEVE ABOUT THE ESCAPEMENT OF INCOME AT THE STAGE OF INITIATION OF REASSESSMENT PROCEEDINGS. SUFFICIENCY OR CORRECTNESS OF SUCH MATERIAL CANNOT BE CONSIDERED AT THAT STAGE. (II) THE HON'BLE APEX COURT HAS HELD IN ACIT VS. RA JESH JHAVERI STOCK BROKER (P) LTD. (2007) 291 ITR 500 (SC) THAT: THE WORD 'REASON ' IN THE PHRASE 'REASON TO BELIEVE' WOULD MEAN CAUSE OR JUSTIFICATION. IF T HE AO HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAD ES CAPED ASSESSMENT, IT CAN BE SAID TO HAVE REASON TO BELIEVE THAT AN INCOME HA D ESCAPED ASSESSMENT. THE EXPRESSION CANNOT BE READ TO MEAN THAT THE AO S HOULD HAVE FINALLY ASCERTAINED THE FACT BY LEGAL EVIDENCE OR CONCLUSIO N'. EXPLAINING THE POSITION FURTHER, IT LAID DOWN THAT: *AT THE INITIATION STAG E, WHAT IS REQUIRED IS 'REASON TO BELIEVE', BUT NOT THE ESTABLISHED FACT OF ESCAPEMEN T OF INCOME. AT THE STAGE OF ISSUE OF NOTICE, THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED A REQUI SITE BELIEF. WHETHER THE MATERIALS WOULD CONCLUSIVELY PROVE THE ESCAPEMENT I S NOT THE CONCERN AT THAT STAGE. THIS IS SO BECAUSE THE FORMATION OF BELIEF B Y THE AO IS WITHIN THE REALM OF SUBJECTIVE SATISFACTION.' (III) HON'BLE SUPREME COURT IN PHOOLCHAND BAJRANG L AI AND ANR VS. ITO AND ANR(1993) 203 ITR 456 (SC), IN WHICH AO'S JURISDICT ION TO INITIATE REASSESSMENT WAS CHALLENGED. REPELLING THE ASSESSEE 'S ARGUMENTS, THE HON'BLE SUPREME COURT HELD THAT AN ITO ACQUIRES JUR ISDICTION TO REOPEN ASSESSMENT UNDER S. 147(A) R/W S. 148 ONLY IF ON TH E BASIS OF SPECIFIC, RELIABLE AND RELEVANT INFORMATION COMING TO HIS POSSESSION S UBSEQUENTLY, HE HAS REASONS WHICH HE MUST RECORD, TO BELIEVE THAT BY RE ASON OF OMISSION OF FAILURE ON THE PART OF THE ASSESSEE TO MAKE A TRUE AND FULL DISCLOSURE OF ALL MATERIAL 11 FACTS NECESSARY FOR HIS ASSESSMENT DURING THE CONCL UDED ASSESSMENT PROCEEDINGS, ANY PART OF HIS INCOME, PROFIT OR GAIN S CHARGEABLE TO INCOME-TAX HAS ESCAPED ASSESSMENT. HE MAY START REASSESSMENT P ROCEEDINGS EITHER BECAUSE SOME FRESH FACTS COME TO LIGHT WHICH WERE N OT PREVIOUSLY DISCLOSED OR SOME INFORMATION WITH REGARD TO THE FACTS PREVIO USLY DISCLOSED COMES INTO HIS POSSESSION WHICH TENDS TO EXPOSE THE UNTRUTHFUL NESS OF THOSE FACTS. IN THAT CASE, THE ITO WAS HELD TO HAVE RIGHTLY INITIAT ED THE REASSESSMENT PROCEEDINGS ON THE BASIS OF SUBSEQUENT INFORMATION, WHICH WAS SPECIFIC, RELEVANT AND RELIABLE. (IV) IN RAJAT EXPORT IMPORT PVT. LTD. VS. ITO (2012 ) 341 ITR 135 (DEL), THE AO RECEIVED REPORT FROM THE INVESTIGATION WING MADE BY THE DIT (INV.), INDICATING THAT THE ASSESSEE IN THAT CASE RECEIVED ACCOMMODATI ON ENTRIES. THE ASSESSEE CHALLENGED NOTICE U/S 148 AS WELL AS ALL T HE SUBSEQUENT PROCEEDINGS EMANATING THEREFROM. DISMISSING THE WRIT PETITION, THE HON'BLE HIGH COURT UPHELD THE VIEW POINT OF THE REVENUE BY HOLDING THAT THE M ATERIAL BEFORE THE AO AFFORDED A LIVE LINK OR NEXUS TO THE FORMATION OF T HE PRIMA FACIE BELIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT IN THE ASS ESSEE'S HANDS AND, HENCE, THE REOPENING OF THE ASSESSMENT WAS DECLARED AS VAL ID. (V) SIMILARLY, IN AGR INVESTMENT LTD. VS. ADDL.CIT AND ANR (2011) 333 ITR 146, THE HON'BLE DELHI HIGH COURT UPHELD THE VALIDITY OF INITIATION OF REASSESSMENT PROCEEDING WHEN A SPECIFIC INFORMATION WAS RECEIVED FROM THE OFFICE OF THE DIT (INV.) AS REGARDS THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH SEVERAL COMPANIES WHICH HAD GIVEN ACCOMMODATION ENT RIES. IT WAS HELD THAT THE FRESH INFORMATION RECEIVED BY THE AO WAS A VALI D MATERIAL ON THE BASIS OF WHICH NOTICE U/S 148 WAS ISSUED. (VI) THE HON'BLE DELHI HIGH COURT DEALT WITH AN IDE NTICAL FACT SITUATION IN CIT VS. NOVA PROMOTERS AND FINLEASE (P) LTD. (2012) 342 ITR 169 (DEL), WHEREIN THE INITIATION OF REASSESSMENT WAS MADE ON THE BASIS OF REPORT OF INVESTIGATION WING ABOUT THE ASSESSEE BEING A BENEFICIARY OF ACCO MMODATION ENTRY. THE HON'BLE HIGH COURT FOUND THAT THE ASSESSMENT WAS RE OPENED ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT ABOUT THE EXISTENCE OF ACCOMMODATION ENTRY PROVIDERS AND THEI R 'MODUS OPERANDI' IN WHICH THE ASSESSEE WAS ALSO FOUND TO BE INVOLVED. U PHOLDING THE INITIATION OF REASSESSMENT, THE HON'BLE HIGH COURT HELD THAT : 'A T THE STAGE OF ISSUING THE NOTICE UNDER SECTION 148 THE MERITS OF THE MATTER A RE NOT RELEVANT AND THE ASSESSING OFFICER AT THAT STAGE IS REQUIRED TO FORM ONLY A PRIMA FACIE BELIEF OR OPINION THAT INCOME CHARGEABLE TO TAX AT ESCAPED AS SESSMENT'. (VII) IN AG HOLDINGS PVT. LTD. VS. ITO(2013) 352 IT R 364 (DEL), THE HON'BLE JURISDICTIONAL HIGH COURT HAS UPHELD THE INITIATION OF REASSESSMENT PROCEEDINGS UNDER SIMILAR CIRCUMSTANCES WHEN THE AS SESSEE THEREIN WAS BENEFICIARY OF SOME ACCOMMODATION ENTRIES ABOUT WHI CH THE REPORT OF INVESTIGATION WING WAS RECEIVED BY THE ASSESSING OF FICER. (VIII) IN CIT VS. JANSAMPARK ADVERTISING AND MARKET ING (P) LTD . (2015) 375 ITR 373 (DEL), THE ASSESSMENT WAS REOPENED AND ADDITION U/S 68 WAS MADE ON THE GROUND THAT THE ASSESSEE WAS IN RECEIPT OF ACCOMMOD ATION ENTRIES. SETTING ASIDE THE ORDER PASSED BY THE TRIBUNAL, THE HON'BLE HIGH COURT HELD THAT THE INITIATION OF REASSESSMENT WAS VALID. (IX) IN BRIGHT STAR SYNTEX PVT. LTD. VS. ITO (2016) 387 ITR 231 (BOM), THE AO INITIATED THE REASSESSMENT ON THE BASIS OF SOME INF ORMATION INDICATING THE ASSESSEE AS A BENEFICIARY TO ACCOMMODATION ENTRY. T HE ASSESSEE CHALLENGED THE INITIATION OF REASSESSMENT BY WAY OF A WRIT. DI SMISSING THE PETITION, THE HON'BLE HIGH COURT HELD THAT AT THE STAGE OF INITIA TION OF REASSESSMENT, THE AO IS NOT REQUIRED TO HAVE CONCLUSIVE EVIDENCE THAT IN COME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. AS THE REASONS RECORDED FOR REO PENING ESTABLISHED A LINK BETWEEN THE MATERIAL AVAILABLE AND THE CONCLUS ION REACHED BY THE AO FOR REOPENING THE ASSESSMENT, THE HON'BLE HIGH COURT RE FUSED TO INTERFERE BY OBSERVING THAT THE EXPRESSION 'REASON TO BELIEVE' C ANNOT BE READ TO MEAN THAT THE AO SHOULD HAVE FINALLY ESTABLISHED BEYOND DOUBT THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. (X) IN YOGENDRA KUMAR GUPTA VS. ITO (2014) 366 ITR 186 (GUJ), THE ASSESSING OFFICER OBTAINED INFORMATION CONTAINED IN THE REPOR T OF DCIT, CENTRAL CIRCLE, CALCUTTA THAT THE ASSESSEE THEREIN OBTAINED ACCOMMO DATION ENTRY IN THE FORM OF 12 LOAN. THE ASSESSEE FILED WRIT PETITION CHALLENGING THE NOTICE OF REOPENING. THE HON'BLE HIGH COURT DISMISSED THE PETITION BY HOLDIN G THAT THERE WAS A LIVE LINK BETWEEN THE MATERIAL COMING INTO THE POSSESSION OF THE ASSESSING OFFICER IN THE FORM OF REPORT OF THE DEPARTMENT AND THE FORMATION OF BELIEF ABOUT THE ESCAPEMENT OF INCOME. RELYING ON THE JUDGMENT OF TH E HON'BLE SUPREME COURT IN THE CASE OF PHOOLCHAND BAJRANGLAL (SUPRA), THE H ON'BLE HIGH COURT HELD THAT SUFFICIENCY OF REASONS RECORDED BY THE ASSESSING OF FICER NEED NOT BE GONE INTO. AT THIS JUNCTURE, IT IS PERTINENT TO MENTION THAT T HE SLP FILED BY THE ASSESSEE AGAINST THE JUDGMENT STANDS DISMISSED BY THE HON'BLE SUPREM E COURT IN YOGENDER KUMAR GUPTA VS. ITO (2014) 227 TAXMAN 374 (SC). (XI) IN A VERY RECENT JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN PARAMOUNT INTE RCONTINENTAL VS. ITO (2017) 392 ITR 505 (DEL), THE INITIATION OF REASSESSMENT PROCE EDINGS HAS BEEN UPHELD UNDER SIMILAR CIRCUMSTANCES. 10. IT IS HENCE REQUESTED THAT THE ORDER OF AO AND THAT OF CIT(A) MAY BE KINDLY UPHELD AND THE ADDITION MADE U/S 68 MAY KINDLY BE C ONFIRMED. 11. WE HAVE GONE THROUGH THE FACTS OF THE TRANSACTI ONS ENTERED BY THE ASSESSEE THROUGH THE TWO ENTITIES AND ALSO THE ORDE R IN THE CASE OF CHEQUER MARKETING PVT. LTD. & OTHERS VS. ACIT THE HONBLE I TAT HAS CONFIRMED THE FACT OF THE OPERATION OF ACCOMMODATION ENTRIES BY SHRI. TAR UN GOYAL AND THE ENTITIES WHICH CONTRIBUTED THE SHARE CAPITAL TO THE ASSESSEE . IN THE CASE OF OM MACHINES PVT LTD IN ITA NO 5779/DEL/2012., HON'BLE ITAT DELHI VIDE ORDER DATED 25/6/2015 HAS UPHELD THE ADDITION MADE U/S 68 BY TH E ASSESSING OFFICER IN THE HANDS OF THE ASSESSEE COMPANY WHICH HAD TAKEN ACCOM MODATION ENTRY FROM SH TARUN GOYAL AND HIS GROUP PAPER COMPANIES. 12. IN THE BACKDROP OF THE OVERALL OPERATION OF THE ENTRY OPERATORS IN GENERAL AND THE CASE LAWS QUOTED BY LD. REPRESENTATIVES OF BOTH THE PARTIES, THE FACTS OF THE PRESENT CASE HAVE BEEN EXAMINED WITH REFEREN CE TO THE ENQUIRIES CONDUCTED BY THE REVENUE AND REPLIES FILED BY THE A SSESSEE. WE OBSERVE THAT THE ASSESSEE HAS SUBMITTED ITRS, BALANCE SHEETS AN D THE RELEVANT BANK STATEMENT FOR THE SHORT PERIOD OF THE CONTRIBUTION OF SHARE CAPITAL. THE ASSESSING OFFICER HAS OBSERVED THAT THE BANK BALANCE AND RETU RNED INCOME ARE MEAGER AND ARE NOT IN A POSITION TO PURCHASE THE SHARE OF THE ASSESSEE COMPANY. NO DIRECT ENQUIRIES ABOUT THE DIRECTORS OR THE SHARE H OLDERS OF THE COMPANIES WHO CONTRIBUTED TO THE SHARE CAPITAL TO THE ASSESSEE CO MPANY WHICH ARE REQUIRED FOR EXAMINATION OF THE CASE. MAJOR RELIANCE WAS GIV EN TO THE REPORT OF THE INVESTIGATION WING. IN OUR VIEW, THE MATTER REQUIRES DEEPER SCRUTINY SO AS TO ARRIVE AT THE CORRECT CONCLUSION. WE, THEREFORE SET ASIDE THE IMPUGNED OR DER AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO FRAME THE A SSESSMENT DENOVO AFTER CONDUCTING PROPER AND NECESSARY ENQUIRIES INCLUDING SUMMONING AND EXAMINING OF WITNESS, IF SO REQUIRED WITH OPPORTUNI TY TO THE ASSESSEE TO CROSS EXAMINE THEM. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 27/03/2018 SD/- SD/- (SANJAY GARG) (DR. B.R.R. KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 27/03/2018 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR