The Circle-1(1), Vijayawada, Vijayawada V. M/s Chemcel Biotech Ltd., Vijayawada

ITA 99/VIZ/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6592 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-11-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 04-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAVI SHANKAR NARAYAN
• Keywords: Unexplained cash credit; Bogus Share capital; Onus to prove
• Section: 68

Judgement Text

ITA NO.99&100/VIZAG/2012 CHEMCEL BIOTECH LTD., VIJAYAWADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.99&100/VIZAG/2012 ( / ASSESSMENT YEAR: 2006-07 & 2007-08) ACIT, CIRCLE - 1(1), VIJAYAWADA VS. CHEM CEL BIOTECH LTD., VIJAYAWADA [P AN: AAACC8998C ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI RAVI SHANKAR NARAYAN, DR / RESPONDENT BY : S HRI G.V.N. HARI, AR / DATE OF HEARING : 21.12.2016 / DATE OF PRONOUNCEMENT : 12.01.2017 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THESE TWO APPEALS FILED BY THE REVENUE ARE DIRECTE D AGAINST ORDER OF THE CIT(A), VIJAYAWADA DATED 12.1.2012 FOR THE ASSESSMENT YEAR 2006-07 AND 2007-08. SINCE, THE FACTS ARE IDEN TICAL AND ISSUES ARE ITA NO.99&100/VIZAG/2012 CHEMCEL BIOTECH LTD., VIJAYAWADA 2 COMMON, THEY ARE CLUBBED, HEARD TOGETHER AND DISPOS ED-OFF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF PESTICIDES, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 & 2007-08 ON 16.10.2008 AND 25.10.2007 DECLARING TOTAL INCOME OF ` 63,09,953/- AND ` 1,46,48,230/- RESPECTIVELY. THE CASES HAVE BEEN S ELECTED FOR SCRUTINY UNDER CASS AND ACCORDINGLY, NOTICE U/S 143(2) & 142 (1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT') WER E ISSUED. IN RESPONSE TO NOTICES, THE AUTHORIZED REPRESENTATIVE OF THE AS SESSEE APPEARED FROM TIME TO TIME AND FURNISHED BOOKS OF ACCOUNTS AND OT HER DETAILS CALLED FOR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS RECEIVED SHARE APPLICATION MONEY F ROM VARIOUS PERSONS THROUGH PRIVATE PLACEMENT. TO ASCERTAIN THE CORREC TNESS OF SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE, THE A.O . ISSUED A SHOW CAUSE NOTICE AND ASKED TO FURNISH COMPLETE NAME AND ADDRESS OF THE SUBSCRIBER TO THE SHARE APPLICATION MONEY AND THEIR PAN NOS. ALONG WITH CONFIRMATION LETTERS TO PROVE THE IDENTITY, GENUINE NESS OF THE TRANSACTIONS AND CREDITWORTHINESS OF THE CREDITORS. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE HAS FILED A LIST OF SUBS CRIBERS TO THE SHARE APPLICATION MONEY ALONG WITH XEROX COPIES OF SHARE APPLICATION FORMS. ITA NO.99&100/VIZAG/2012 CHEMCEL BIOTECH LTD., VIJAYAWADA 3 THE ASSESSEE FURTHER SUBMITTED THAT SHARE APPLICATI ON FORMS CONTAINS THE DETAILS OF NAME AND ADDRESS OF THE SUBSCRIBERS, PAN NO. OF SUBSCRIBERS IN CASE THEY ARE ASSESSEES, MODE OF RE CEIPT, ETC. AND REQUESTED THAT THESE APPLICATIONS MAY BE CONSIDERED AS CONFIRMATION LETTERS. 3. THE A.O., ON PERUSAL OF THE DETAILS FILED BY THE ASSESSEE, OBSERVED THAT ON GOING THROUGH THE INFORMATION CONTAINED IN SHARE APPLICATION FORMS, IT IS NOTICED THAT MOST OF THE INFORMATION S UCH AS ADDRESS, PAN NOS. ARE FOUND TO BE INCORRECT. THE SHARE APPLICAT ION FORM CANNOT BE CONSIDERED AS CONFIRMATION LETTER, BECAUSE IT DOES NOT CONTAIN THE REQUIRED INFORMATION LIKE SOURCES OF MONEY WITH SUP PORTIVE EVIDENCES, WHICH IS ESSENTIAL TO DETERMINE GENUINENESS AND CRE DITWORTHINESS OF THE CREDITORS. THEREFORE, ISSUED ONE MORE LETTER AND A SKED TO FURNISH CONFIRMATION LETTER FROM THE CREDITORS. LATER ON, THE ASSESSEE COULD SUBMIT CONFIRMATION WITH EVIDENCES OF SOURCE OF INV ESTMENT IN A VERY FEW CASES, HOWEVER IN MAJORITY CASES THE ASSESSEE F AILED TO FILE CONFIRMATION LETTERS. THEREFORE, BASED ON THE INFO RMATION AVAILABLE IN THE SHARE APPLICATION FORM IN RESPECT OF CONTRIBUTI ON ABOVE ` 1 LAKH , ENQUIRIES WERE CONDUCTED THROUGH THE JURISDICTIONAL ASSESSING OFFICERS, WHEREVER THE ASSESSEE HAS FILED PAN NOS. OF THE SUB SCRIBERS. IN RESPECT OF NON-ASSESSEES, THE A.O. HAS CAUSED ENQUIRIES BY ISSUING SUMMONS TO ITA NO.99&100/VIZAG/2012 CHEMCEL BIOTECH LTD., VIJAYAWADA 4 THE SUBSCRIBERS AND ASKED THEM TO APPEAR ALONG WITH DETAILS OF INVESTMENT MADE IN SHARE APPLICATION MONEY. 4. THE A.O. HAS ISSUED SUMMONS TO 20 PERSONS. OUT OF THE 20 CASES TO WHOM SUMMONS WERE ISSUED, IN SEVEN CASES SUMMONS WERE RETURNED UN-SERVED WITH A REMARK NOT EXISTING AND NOT AVAIL ABLE. IN THE CASES OF 4 SUBSCRIBERS, THE SUBSCRIBERS HAVE RESPONDED TO SU MMONS AND APPEARED BEFORE THE A.O. THE A.O. ISSUED ONE MORE L ETTER TO THE ASSESSEE AND ASKED TO FILE CONFIRMATION LETTERS IN THE CASES WHEREVER SUMMONS WAS NOT SERVICED TO THE SUBSCRIBERS. THE AS SESSEE NEITHER FURNISHED CONFIRMATION LETTERS NOR FILED ANY DETAIL S. THEREFORE, THE A.O. OPINED THAT THE ASSESSEE HAS FAILED TO DISCHARGE IT S INITIAL BURDEN TO PROVE THE IDENTITY, GENUINENESS OF THE TRANSACTIONS AND CREDITWORTHINESS OF THE PARTIES. THE A.O. FURTHER OBSERVED THAT IN T HE CASE OF 4 SUBSCRIBERS WHERE THEY HAVE RESPONDED TO SUMMONS, T HOUGH THE PARTIES HAVE APPEARED SOURCES FOR THE AMOUNT IS NOT EXPLAIN ED AND INVESTMENT IS MADE IN CASH. IN THE CASES WHERE THE SUBSCRIBER S HAVE NOT RESPONDED TO SUMMONS, THE A.O. OBSERVED THAT THE SO URCE FOR THE INVESTMENT IS NOT EXPLAINED AND THE PARTIES ARE NOT ASSESSED TO INCOME TAX AND PAYMENT IS MADE IN CASH. IT WAS FURTHER OB SERVED THAT IN THE CASES WHERE PAN IS AVAILABLE, THE A.O. HAS FORWARDE D INFORMATION TO THE JURISDICTIONAL ASSESSING OFFICERS AND THE ASSESSING OFFICER CAUSED ENQUIRY ITA NO.99&100/VIZAG/2012 CHEMCEL BIOTECH LTD., VIJAYAWADA 5 AND FOUND THAT IN ONE CASE, THE ASSESSEE HAS DENIED HAVING MADE ANY INVESTMENT IN SHARE APPLICATION MONEY OF THE COMPAN Y. BASED ON THE ANALYSIS OF THE INFORMATION GIVEN BY THE ASSESSEE A ND ALSO BASED ON THE ENQUIRIES CAUSED DURING THE COURSE OF ASSESSMENT PR OCEEDINGS, THE A.O. CAME TO THE CONCLUSION THAT THE ASSESSEE HAS FAILED TO PROVE THE IDENTITY OF THE CREDITOR, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE CREDITOR, WHICH IS THE ESSENTIAL INGREDIENTS OF SECTION 68 OF THE ACT TO PROVE THE SHARE APPLICATION MONEY. THEREFORE, THE A.O. OPINED THAT THE ASSESSEE HAS FAILED TO DISCHARGE THE INITIAL BURDEN CAST UPON IT BY FURNISHING IDENTITY, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE PARTIES AND ACCORDINGLY MADE ADDITIONS OF ` 86,20,000/- AS UNEXPLAINED CASH CREDITS U/S 68 OF THE ACT. 5. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE A.O. THE ASSESSEE FURTHER SUBMITTED THAT THERE IS NEITHER ANY SCOPE NOR ANY REASON OR B ASIS FOR EVEN IF ASSUMING BUT NOT CONCEDING THAT THE AMOUNT RECEIVED THROUGH SHARE APPLICATION MONEY WARRANT ADDITION U/S 68 OF THE AC T, THAT THEY EVEN VERY REMOTELY CONSTITUTE THE INCOME GENERATED FROM BUSINESS ACTIVITY AND NOT DISCLOSED IN THE BOOKS OF ACCOUNTS. THE AS SESSEE FURTHER SUBMITTED THAT WHEN THERE ARE NO ADVERSE INFERENCE AT ALL IN THE INCOME ITA NO.99&100/VIZAG/2012 CHEMCEL BIOTECH LTD., VIJAYAWADA 6 FROM BUSINESS RETURNED BY THE ASSESSEE AND ALSO WHE N THERE IS NO SCOPE FOR ANY INCOME HAVING BEEN EARNED NOT RECORDED IN T HE BOOKS OF ACCOUNTS AND ALSO OUT OF THE CONTRIBUTION RECEIVED TOWARDS SHARE APPLICATION MONEY, SUBSTANTIAL AMOUNT RECEIVED BY L ARGE NUMBER OF PERSONS HAS BEEN FOUND TO BE THE SATISFACTION OF TH E A.O., THE A.O. WAS INCORRECT IN MAKING ADDITION U/S 68 OF THE ACT, ONL Y ON ASSUMPTION AND SUSPICION BASIS. THE ASSESSEE FURTHER SUBMITTED TH AT ALL THE SHARE APPLICATION MONEY RECEIVED IS ROUTED THROUGH BANK A CCOUNT AND THE ASSESSEE HAS FILED COMPLETE DETAILS OF NAME AND ADD RESS ALONG WITH PAN NOS. OF THE SUBSCRIBERS. ONCE THE IDENTITY OF THE C REDITOR IS PROVED BY FILING NECESSARY DETAILS, THE A.O. WAS INCORRECT IN MAKING ADDITIONS BY HOLDING THAT THE ASSESSEE HAS FAILED TO DISCHARGE T HE GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE PARTIES. I N SUPPORT OF ITS ARGUMENTS, RELIED UPON THE DECISION OF HONBLE SUPR EME COURT, IN THE CASE OF CIT VS. LOVELY EXPORT PVT. LTD. 216 CTR 195 (SC). IN ADDITION, THE ASSESSEE ALSO SUBMITTED COPY OF THE ORDER OF IT AT, VISAKHAPATNAM IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005 -06 IN ITA NO.505/VIZAG/2008. 6. THE CIT(A), DURING THE COURSE OF APPELLATE PROCE EDINGS HAS FORWARDED EVIDENCES FILED BY THE ASSESSEE TO THE A. O. FOR FURTHER ENQUIRIES. THE A.O. HAS SUBMITTED HIS REMAND REPORT DATED 16.7.2009, ITA NO.99&100/VIZAG/2012 CHEMCEL BIOTECH LTD., VIJAYAWADA 7 AS PER WHICH A.O. FURTHER EXAMINED THE IDENTITY AND CREDITWORTHINESS OF THE SHARE APPLICANTS AND RECORDED STATEMENTS AND CO NCLUDED THAT SINCE SOME OF THE SHARE APPLICANTS DENIED THEIR INVESTMEN T AND SOME OF THEM ARE NOT PRODUCED PROPER EVIDENCE, THE ADDITION MADE BY THE A.O. U/S 68 OF THE ACT MAY BE UPHELD. THE CIT(A) AFTER CONSIDE RING THE RELEVANT DETAILS FILED BY THE ASSESSEE AND ALSO FOLLOWING TH E ITAT, VISAKHAPATNAM BENCH DECISION IN ITA NO.505/VIZAG/2008 DATED 12.11 .2009, DELETED ADDITIONS MADE BY THE A.O. TOWARDS SHARE APPLICATIO N MONEY. AGGRIEVED BY THE CIT(A) ORDER, THE REVENUE IS IN AP PEAL BEFORE US. 7. THE LD. D.R. SUBMITTED THAT THE LD. CIT(A) OUGHT TO HAVE SEEN THAT THE ASSESSEE COMPANY HAS FAILED TO ESTABLISH T HE IDENTITY OF SHARE HOLDER, GENUINENESS OF THE TRANSACTION AND CAPACITY OF PERSON GIVING SUCH CREDIT. THE LD. CIT(A) FAILED TO NOTE THAT EXC EPT IN 4 CASES, THE PERSONS HAVE NOT RESPONDED TO SUMMONS AND MOST OF I NVESTMENT WAS MADE IN CASH AND NO EVIDENCE WAS SUBMITTED IN SUPPO RT OF INVESTMENT. THE LD. CIT(A) OUGHT NOT HAVE RELIED UPON THE DECIS ION OF APEX COURT, IN THE CASE OF M/S. LOVELY EXPORTS PVT. LTD. VS. CIT ( SUPRA) SINCE, THE PRINCIPLE LAID DOWN IN THAT CASE AND THE FACTS IN T HE PRESENT CASE ARE DISTINGUISHABLE. IN THIS CASE, THE A.O. HAS CONDUCT ED ENQUIRIES AND AFTER CONSIDERING THE FACT THAT MOST OF THE SUBSCRIBERS F AILED TO RESPOND TO THE SUMMONS, CAME TO THE CONCLUSION THAT THE ASSESSEE F AILED TO PROVE THE ITA NO.99&100/VIZAG/2012 CHEMCEL BIOTECH LTD., VIJAYAWADA 8 IDENTITY OF THE CREDIT, THEREFORE, THE A.O. WAS RIG HTLY MADE ADDITIONS TOWARDS SHARE APPLICATION MONEY U/S 68 OF THE ACT A ND HIS ORDER SHOULD BE UPHELD. 8. THE LD. D.R. REFERRING TO THE DECISION OF HONBL E HIGH COURT OF DELHI, IN THE CASE OF CIT VS LOVELY EXPORTS PVT. LT D. IN ITA. NO.953/2006, SUBMITTED THAT THE FACTS OF THE CASE BEFORE THE DEL HI HIGH COURT ARE ENTIRELY DIFFERENT FROM THE FACTS OF THE PRESENT CA SE, THEREFORE, THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS PVT. LTD. CANNOT BE APPLIED TO THE FACTS OF THE PRE SENT CASE. IN THE CASE OF CIT VS. LOVELY EXPORTS PVT. LTD., THE ASSESSEES HAS FURNISHED COMPLETE DETAILS OF NAME AND ADDRESS ALONG WITH PAN NUMBER/INCOME TAX WARD NO. OF THE SHARE APPLICANTS AND SOME OF TH EM ARE ASSESSED TO INCOME TAX. THE SHARE APPLICATION MONEY HAS BEEN R ECEIVED THROUGH BANKING CHANNEL. IN SOME CASES, THE CONFIRMATION/A FFIDAVITS OF SHARE APPLICANTS CONTAINING THE ABOVE DETAILS WERE ALSO F ILED. IT IS SEEN THAT THE A.O. DID NOT CARRIED ANY ENQUIRY INTO THE INCOM E TAX RECORDS OF THE PERSONS WHO HAVE GIVEN THE PAN NO./WARD NO. IN ORDE R TO ASCERTAIN THE NON-EXISTENCE OF THE SHARE APPLICANTS IN QUESTION. THE A.O. HAS NEITHER CONTROVERTED NOR DISAPPROVED THE MATERIAL FILED BY THE ASSESSEE. THE A.O. PROCEEDED TO MAKE THE IMPUGNED ADDITION ON THE GROUND THAT IN SOME CASES SUMMONS WERE RETURNED UNSERVED AND IN SO ME CASES ITA NO.99&100/VIZAG/2012 CHEMCEL BIOTECH LTD., VIJAYAWADA 9 SUMMONS HAVE SERVED BUT THERE WAS NO COMPLIANCE. I N THE PRESENT CASE, THE A.O. HAS CAUSED NECESSARY ENQUIRIES AND A FTER CAUSING SUCH ENQUIRIES CAME TO THE CONCLUSION THAT THE ASSESSEE HAS NOT PROVED THE IDENTITY OF THE CREDITORS. THE A.O. HAD GIVEN A CA TEGORICAL FINDING THAT IN FEW CASES THOUGH ASSESSEES WERE RESPONDED TO SUMMON S, THE INVESTMENT IS MADE IN CASH AND THE SUBSCRIBERS HAVE FAILED TO FILE ANY EVIDENCES IN SUPPORT OF SOURCE OF INCOME. IN FEW C ASES, SUMMONS WAS NOT SERVED AND ALSO INVESTMENT IS MADE IN CASH AND IN FEW CASES, THE SUBSCRIBERS HAVE DENIED ANY INVESTMENT IN SHARE APP LICATION MONEY. THEREFORE, THE FACTS OF THE PRESENT CASE ARE ALTOGE THER DIFFERENT FROM THE FACTS BEFORE THE HONBLE DELHI HIGH COURT AND ACCOR DINGLY, THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT CANNOT BE APPLIED TO THE CASE OF THE ASSESSEE. 9. ON THE OTHER HAND, THE LD. A.R. FOR THE ASSESSEE STRONGLY SUPPORTING THE ORDER OF THE CIT(A), SUBMITTED THAT THE ASSESSEE HAS PROVED THE IDENTITY OF THE CREDITOR BY FILING NECES SARY DETAILS ALONG WITH SHARE APPLICATION FORMS, WHEREIN COMPLETE DETAILS O F NAMES AND ADDRESSES OF THE SUBSCRIBERS AND THEIR PAN NOS. HAV E BEEN GIVEN. THE A.O. MADE ADDITIONS MERELY ON THE GROUND THAT THE S UBSCRIBERS HAVE NOT RESPONDED TO THE SUMMONS. BUT, ONCE THE ASSESSEE H AS DISCHARGED ITS INITIAL BURDEN BY FILING IDENTITY OF THE CREDITORS, IT IS FOR THE A.O. TO ITA NO.99&100/VIZAG/2012 CHEMCEL BIOTECH LTD., VIJAYAWADA 10 PROCEED IN ACCORDANCE WITH LAW ON THE SUBSCRIBERS, BUT ADDITIONS CANNOT BE MADE IN THE HANDS OF THE COMPANY TOWARDS ALLEGED SHARE APPLICATION MONEY. IN SUPPORT OF HIS ARGUMENTS, RELIED UPON TH E DECISION OF HONBLE SUPREME COURT, IN THE CASE OF CIT VS. M/S. LOVELY E XPORTS PVT. LTD. (SUPRA) AND ALSO FILED COPY OF THE ORDER OF JURISDI CTIONAL ITAT, VISAKHAPATNAM IN ASSESSEES OWN CASE FOR THE ASSESS MENT YEAR 2005-06 IN ITA NO.505/VIZAG/2008 DATED 12.11.2009. 10. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE A.O. MADE ADDITIONS TOWARDS ALLEGED BOGUS SHARE APP LICATION MONEY ON THE GROUND THAT THE ASSESSEE HAS FAILED TO PROVE TH E IDENTITY, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE PARTIES. THE A.O. FURTHER OBSERVED THAT THOUGH ASSESSEE HAS FURN ISHED XEROX COPIES OF SHARE APPLICATION FORMS, THE INFORMATION PROVIDE D IN THE SHARE APPLICATION FORM IS INSUFFICIENT. THE PARTICULARS G IVEN IN THE SHARE APPLICATION FORM IS INCORRECT AND IN FEW CASES, THE ASSESSEE HAS NOT FURNISHED PAN NOS. OF THE SUBSCRIBERS. THE A.O. HA S CAUSED NECESSARY ENQUIRIES BEFORE COMING TO THE CONCLUSION THAT THE ASSESSEE HAS FAILED TO DISCHARGE INITIAL ONUS CAST UPON IT TO PROVE THE CR EDITS. ACCORDING TO THE A.O., OUT OF THE 20 CREDITORS, 4 CREDITORS HAVE RES PONDED TO THE SUMMONS, HOWEVER, FAILED TO PROVE THE GENUINENESS O F THE TRANSACTIONS ITA NO.99&100/VIZAG/2012 CHEMCEL BIOTECH LTD., VIJAYAWADA 11 AND CAPACITY OF THE CREDITOR. IN REMAINING CASES, CREDITORS HAVE NOT RESPONDED TO THE SUMMONS, INVESTMENT IS MADE IN CAS H AND ALSO THE CREDITORS HAVE FAILED TO PROVE THE CAPACITY TO SUBS CRIBE TO THE SHARE APPLICATION MONEY. IN FEW CASES, THE A.O. OBSERVED THAT THE CREDITORS HAVE DENIED HAVING MADE ANY INVESTMENT IN SHARE APP LICATION MONEY. THEREFORE, OPINED THAT THE ASSESSEE HAS FAILED TO D ISCHARGE INITIAL BURDEN BY FILING NECESSARY IDENTITY, GENUINENESS OF THE TR ANSACTIONS AND CREDITWORTHINESS OF THE PARTIES. IT IS THE CONTENTI ON OF THE ASSESSEE THAT IT HAS FILED NECESSARY DETAILS ALONG WITH XEROX COP IES OF SHARE APPLICATION FORM, WHEREIN COMPLETE DETAILS OF NAME AND ADDRESS OF THE SUBSCRIBER AND THEIR PAN NO. IS GIVEN. THE A.O. MADE ADDITION S MERELY ON THE GROUND THAT SOME OF THE SUBSCRIBERS HAVE FAILED TO RESPOND TO THE SUMMONS ISSUED BY THE A.O. BUT, THE FACT IS THAT MA JORITY OF THE SHAREHOLDERS HAVE FILED CONFIRMATION LETTERS AND AL SO ALL THE SHARE APPLICATION MONEY HAS BEEN RECEIVED THROUGH PROPER BANKING CHANNEL, THEREFORE, THE A.O. WAS ERRED IN MAKING ADDITIONS T OWARDS SHARE APPLICATION MONEY U/S 68 OF THE ACT. 11. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATE RIAL ON RECORD, WE NOTICED THAT THE ASSESSEE HAS FURNISHED DETAILS OF SHARE APPLICATION MONEY. ON PERUSAL OF THE SHARE APPLICATION FORMS F ILED BY THE ASSESSEE, WE NOTICED THAT THE SHARE APPLICATION FORM CONTAINS NAME AND ADDRESS ITA NO.99&100/VIZAG/2012 CHEMCEL BIOTECH LTD., VIJAYAWADA 12 OF THE SUBSCRIBER AND THEIR PAN NO., WHEREVER THE S UBSCRIBERS ARE ASSESSED TO INCOME TAX. DURING THE COURSE OF ASSES SMENT PROCEEDINGS, THE A.O. CAUSED ENQUIRIES BY ISSUING SUMMONS TO THE SUBSCRIBERS. OUT OF THE TOTAL 20 CASES, 4 SUBSCRIBERS HAVE RESPONDED TO THE SUMMONS AND APPEARED BEFORE THE A.O. THE A.O. HAS RECORDED THE IR STATEMENT AND CAME TO THE CONCLUSION THAT ALTHOUGH THE SUBSCRIBER S HAVE ESTABLISHED THEIR IDENTITY FAILED TO PROVE THE GENUINENESS OF T HE TRANSACTIONS AND CAPACITY OF THE CREDITOR. IN 7 CASES, THE CREDITOR S NOT RESPONDED TO SUMMONS, THEREFORE, THE A.O. OPINED THAT THE CREDIT ORS DOES NOT HAVE SOURCE OF INCOME TO SUPPORT THE INVESTMENT IN SHARE APPLICATION MONEY. THE A.O. ALSO OBSERVED THAT SINCE THE SHAREHOLDERS HAVE MADE INVESTMENT IN CASH, THE GENUINENESS OF THE TRANSACT ION IS NOT PROVED. IN 6 CASES, SUBSCRIBERS ARE NOT RESPONDED TO SUMMONS, HOWEVER INVESTMENT IS MADE BY CHEQUE, THEREFORE, OPINED THA T ALTHOUGH INVESTMENT IS MADE BY CHEQUE, THE SUBSCRIBERS ARE F AILED TO PROVE CAPACITY OF THE CREDITOR TO MAKE THE INVESTMENT IN SHARE APPLICATION MONEY. THE A.O., BASED ON THE ANALYSIS OF THE INFOR MATION FURNISHED BY THE ASSESSEE AND ALSO CONSIDERING THE ENQUIRIES CAU SED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, CAME TO THE CONCL USION THAT THE ASSESSEE HAS FAILED TO DISCHARGE THE INITIAL BURDEN CAST UPON IT TO PROVE THE CREDITORS U/S 68 OF THE ACT. ITA NO.99&100/VIZAG/2012 CHEMCEL BIOTECH LTD., VIJAYAWADA 13 12. WE DO NOT FIND ANY MERITS IN THE FINDINGS OF THE A.O., FOR THE REASON THAT ONCE THE ASSESSEE PROVED THE IDENTITY O F THE CREDITORS BY FILING NAME AND ADDRESS ALONG WITH THEIR PAN NOS./I NCOME TAX WARD OR CIRCLE DETAILS WHERE THEY HAVE ASSESSED, ADDITIONS CANNOT BE MADE TOWARDS ALLEGED BOGUS APPLICATION MONEY, MERELY BEC AUSE THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE TRANSACTIONS AND CAPACITY OF THE CREDITORS. THE HONBLE SUPREME COURT, IN THE CASE O F CIT VS. LOVELY EXPORTS PVT. LTD. (SUPRA), HELD THAT IF THE SHARE A PPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE ASSESSING OFFICER, THE N THE DEPARTMENT IS FREE TO PROCEED TO RE-OPEN THEIR INDIVIDUAL ASSESSM ENTS IN ACCORDANCE WITH LAW, BUT THIS AMOUNT OF SHARE APPLICATION MONE Y CANNOT BE REGARDED AS UNDISCLOSED INCOME U/S 68 OF THE ACT OF THE ASSESSEE COMPANY. THEREFORE, WE ARE OF THE VIEW THAT ONCE T HE ASSESSEE HAS FURNISHED CORRECT NAME AND ADDRESS OF THE SUBSCRIBE RS TO THE SHARE APPLICATION MONEY, IT IS FOR THE DEPARTMENT TO RE-O PEN THE ASSESSMENT OF INDIVIDUAL SUBSCRIBERS TO THE SHARE CAPITAL IN ACCO RDANCE WITH LAW, BUT ADDITIONS CANNOT BE MADE U/S 68 OF THE ACT AS UNEXP LAINED CREDITS. 13. IN THE PRESENT CASE ON HAND, ON PERUSAL OF THE DETAILS AVAILABLE ON RECORD, WE FIND THAT THE ASSESSEE HAS FILED XEROX C OPIES OF SHARE APPLICATION FORMS CONTAINING DETAILS OF NAME AND AD DRESS OF THE ITA NO.99&100/VIZAG/2012 CHEMCEL BIOTECH LTD., VIJAYAWADA 14 CREDITORS. THE ASSESSEE CLAIMS THAT SHARE APPLICAT ION FORM CONTAIN THE COMPLETE DETAILS OF NAME AND ADDRESS AND PAN NO. OF THE SUBSCRIBERS AND ALSO MODE OF RECEIPT OF MONEY. WE FURTHER OBSER VED THAT THE A.O. ALSO ACCEPTED THAT MOST OF THE SHARE APPLICATION MO NEY HAS BEEN RECEIVED THROUGH BANKING CHANNELS, BUT, DISBELIEVED DETAILS FILED BY THE ASSESSEE AND MADE ADDITIONS, MERELY ON THE GROUND T HAT THE SUBSCRIBERS HAVE NOT RESPONDED TO SUMMONS AND ALSO FAILED TO FI LE NECESSARY EVIDENCE IN SUPPORT OF SOURCE OF INCOME TO PROVE TH E CAPACITY OF THE CREDITOR. WE DO NOT FIND ANY MERITS IN THE FINDINGS OF THE A.O., FOR THE REASON THAT ONCE THE ASSESSEE PROVED THE IDENTITY O F THE SUBSCRIBER WITH CORRECT ADDRESS AND THEIR PAN NOS., ADDITIONS CANNO T BE MADE MERELY ON THE GROUND THAT THE SUBSCRIBERS DOES NOT HAVE SOURC E OF INCOME TO EXPLAIN THE INVESTMENT MADE IN SHARE APPLICATION MO NEY AND ALSO SHARE APPLICATION MONEY HAS BEEN PAID IN CASH. THIS VIEW WAS SUPPORTED BY THE FINDINGS OF THE HONBLE SUPREME COURT, IN THE C ASE OF CIT VS. LOVELY EXPORTS PVT LTD. THEREFORE, WE ARE OF THE VIEW THAT THE A.O. WAS ERRED IN MAKING ADDITIONS TOWARDS SHARE APPLICATION MONEY U/ S 68 OF THE ACT, WHERE THE ASSESSEE HAS PROVED THE IDENTITY OF THE C REDITORS. HOWEVER, THIS PLEA CANNOT BE ACCEPTED IN THE CASES, WHERE TH E ASSESSEE HAS NOT PROVED THE IDENTITY OF THE CREDITOR OR EVEN IF THE ASSESSEE FILED IDENTITY OF THE CREDITOR, BUT THE CREDITORS DENIED THE INVES TMENT MADE IN THE ITA NO.99&100/VIZAG/2012 CHEMCEL BIOTECH LTD., VIJAYAWADA 15 SHARE APPLICATION MONEY. IN SUCH CASES, WHERE THE A SSESSEE HAS NOT PROVED IDENTITY OR THE CREDITORS DENIED TRANSACTION WITH ASSESSEE, THE A.O. WAS RIGHT IN MAKING ADDITIONS U/S 68 OF THE AC T, TOWARDS ALLEGED BOGUS SHARE APPLICATION MONEY. 14. COMING TO THE CASE LAWS RELIED UPON BY THE ASSE SSEE. THE ASSESSEE HAS RELIED UPON THE DECISION OF HONBLE SU PREME COURT, IN THE CASE OF CIT VS. M/S. LOVELY EXPORTS PVT. LTD. (SUPR A) AND SUBMITTED THAT ONCE THE IDENTITY OF THE CREDITOR IS PROVED, THEN N O ADDITIONS CAN BE MADE TOWARDS ALLEGED BOGUS SHARE APPLICATION MONEY, WHOSE NAMES ARE GIVEN TO THE ASSESSING OFFICER AND THE DEPARTMENT I S FREE TO PROCEED TO RE-OPEN THE INDIVIDUAL ASSESSMENT IN ACCORDANCE WIT H LAW, BUT THIS AMOUNT OF SHARE MONEY CANNOT BE REGARDED AS UNDISCL OSED INCOME U/S 68 OF THE ACT. WE HAVE GONE THROUGH THE CASE LAWS RELIED UPON BY THE LD. A.R. FOR THE ASSESSEE AND ALSO THE CASE LAW REL IED UPON BY THE LD. D.R. IN THE CASE OF CIT VS. M/S. LOVELY EXPORTS PVT . LTD. (SUPRA) AND FIND THAT THE HONBLE HIGH COURT OF DELHI, HAD GIVEN A C ATEGORICAL FINDING THAT THE ASSESSEE HAS FURNISHED COMPLETE NAME AND ADDRES S OF THE CREDITORS ALONG WITH THEIR PAN NOS./INCOME TAX WARD/GIR NO. W HERE THE SUBSCRIBERS TO THE SHARE APPLICATION MONEY HAVE ASS ESSED TO INCOME TAX. THE SHARE APPLICATION MONEY HAS BEEN RECEIVED THROU GH PROPER BANKING CHANNELS. IN THAT CASE, THE A.O. DID NOT CARRIED A NY ENQUIRY INTO THE ITA NO.99&100/VIZAG/2012 CHEMCEL BIOTECH LTD., VIJAYAWADA 16 INCOME TAX RECORD OF THE PERSONS WHO HAVE GIVEN THE PAN NOS./WARD NO. IN ORDER TO ASCERTAIN THE NON-EXISTENCE OF THE SHAR E APPLICANTS IN QUESTION. THE A.O. HAS NEITHER CONTROVERTED NOR DIS APPROVED THE MATERIAL FILED BY THE ASSESSEE, INSTEAD HE PROCEEDE D TO MAKE THE ADDITION ON THE GROUNDS THAT IN SOME CASES SUMMONS ISSUED WERE RETURNED UN-SERVED AND IN SOME CASES SUMMONS THOUGH SERVED BUT THERE WAS NO COMPLIANCE. IN THE PRESENT CASE ON HA ND, IN SOME OF THE CASES, THE SUBSCRIBERS TO THE SHARE APPLICATION MON EY HAVE DENIED THE INVESTMENT MADE IN THE COMPANY. THEREFORE, WE ARE OF THE VIEW THAT THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT, I N THE CASE OF CIT VS. LOVELY EXPORTS PVT. LTD. CANNOT BE APPLICABLE IN TO TAL TO THE FACTS OF THE PRESENT CASE. 15. IN THE PRESENT CASE, OUT OF THE TOTAL 20 SUBSCR IBERS TO THE SHARE APPLICATION MONEY, TWO SUBSCRIBERS I.E. (1) SHRI B. MAHESHWAR GOUD AND (2) SHRI K. SHIVA KISHORE HAVE DENIED INVESTMENTS I N SHARE APPLICATION MONEY. SHRI B. MAHESHWAR GOUD HAD GIVEN IN WRITING THAT HE HAD NEVER MADE ANY INVESTMENT IN SHARE APPLICATION MONEY OF T HE COMPANY. SIMILARLY, SHRI K. SHIVA KISHORE ALSO APPEARED BEFO RE THE A.O. AND GAVE A STATEMENT THAT HE NEVER MADE ANY INVESTMENT IN TH E COMPANY. THEREFORE, WE ARE OF THE VIEW THAT WHEREVER THE SUB SCRIBERS HAVE DENIED THE INVESTMENT IN SHARE APPLICATION MONEY, T HE A.O. WAS RIGHT IN ITA NO.99&100/VIZAG/2012 CHEMCEL BIOTECH LTD., VIJAYAWADA 17 MAKING ADDITIONS TOWARDS UNEXPLAINED CREDIT U/S 68 OF THE ACT. THE CIT(A) WITHOUT APPRECIATING THE FACTS, SIMPLY DELET ED ADDITIONS MADE BY THE A.O. IN TOTAL BY RELIED UPON THE DECISION OF IT AT, VISAKHAPATNAM BENCH IN ASSESSEES OWN CASE IN ITA NO.505/VIZAG/20 08 DATED 12.11.2009. THEREFORE, WE UPHOLD THE ADDITIONS MADE BY THE A.O. TOWARDS ALLEGED BOGUS SHARE APPLICATION MONEY IN TH E CASE OF SHRI K. SHIVA KISHORE FOR THE A.Y. 2006-07 AND 2007-08 AS U NEXPLAINED CASH CREDIT U/S 68 OF THE ACT. IN RESPECT OF OTHER CREDI TORS, WHERE THE ASSESSEE HAS FILED IDENTITY, WE UPHELD THE CIT(A) O RDER AND DIRECT THE A.O. TO DELETE ADDITIONS. 16. IN THE RESULT, THE APPEALS FILED BY THE REVENUE IN ITA NOS.99 & 100/VIZAG/2012 FOR THE ASSESSMENT YEARS 2006-07 & 2 007-08 ARE PARTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 12 TH JAN17. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 12.01.2017 VG/SPS ITA NO.99&100/VIZAG/2012 CHEMCEL BIOTECH LTD., VIJAYAWADA 18 )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ACIT, CIRCLE-1(1), VIJAYAWAD A 2. / THE RESPONDENT M/S. CHEMCEL BIOTECH LTD., DR.N O.16-30/12, JRD TATA INDUSTRIAL ESTATE, AUTO NAGAR, 3 RD CROSS ROAD, KANURU, VIJAYAWADA 3. + / THE CIT, VIJAYAWADA 4. + ( ) / THE CIT (A), VIJAYAWADA 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM