M/S. SHALIMAR FERROUS METALS PVT. LTD., Mumbai V. THE DCIT (CENTRAL), Indore

ITSSA 105/IND/2015

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 1518 (ITAT-INDORE)
• Duration Of Justice: 7 month(s) 3 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 07-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 03-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA; RAJEEV VARSHNEY
• Keywords: Unexplained cash credit; Income from undisclosed sources; Search and seizure; Principle of natural justice; Peak credit; Source of fund; Deemed to accrue or arise in india; Permanent establishment; Question of law; Accommodation entries; Capital receipt; Onus to prove; Retraction; Revised return; Documents seized
• Section: 143(3); 153A; 133(6); 131; 68; 132

Judgement Text

SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER AND SHRI B.C. MEENA, HONBLE ACCOUNTANT MEMBER IT(SS)A NOS.104 & 105/IND/2015 A.YS.2007-08 & 2008-09 SHALIMAR FERROUS METALS PVT.LTD INDORE PAN AAAICS 4429G ::: APPELLANT VS DY.COMMISSIONER OF INCOME TAX (CENTRAL), INDORE ::: RESPONDENT IT(SS) A NOS. 202 & 203/IND/2015 A.YS. 2007-08 & 2008-09 ASSTT.COMMISSIONER OF INCOME TAX (CENTRAL)-I, INDORE ::: APPELLANT VS SHALIMAR FERROUS METALS PVT.LTD INDORE ::: RESPONDENT ASSESSEE BY SHRI GIRDHAR GARG REVENUE BY SHRI RAJEEV VARSHNEY AND SHRI R.A. VERMA DATE OF HEARING 29.12.2015 DATE OF PRONOUNCEMENT 7 .1.201 6 SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 2 O R D E R PER SHRI B.C. MEENA, AM THESE CROSS-APPEALS BY THE ASSESSEE AND THE REVENUE FOR BOTH ASSESSMENT YEARS EMANATE FROM THE CONSOLIDATED ORDER OF THE LEARNED CIT(A)3, BHOPAL, DAT ED 30.4.2015. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CLOSELY-HELD COMPANY BELONGING TO SIGNET GROUP OF IN DORE. IT IS ENGAGED IN THE BUSINESS OF TRADING AND INVESTMEN T. A SEARCH AND SEIZURE OPERATION U/S.132 WAS CARRIED OUT AT THE BUSINESS PREMISES OF VARIOUS COMPANIES BELONGING TO SIGNET GROUP AS WELL AS PREMISES OF THE ASSESSEE ON 03.11.2011. CONSEQUENTLY, A NOTICE U/S.153A WAS ISSUE D. THE STATUS REGARDING RETURN OF INCOME FURNISHED BY TH E ASSESSEE U/S.139(1) AND 153A OF THE INCOME-TAX ACT, 1 961 SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 3 AND ASSESSMENTS COMPLETED AS PER ORIGINAL ASSESSMENT U/S.143(3) / 143(1) AS WELL AS U/S.153A ARE AS UNDER : A.Y. DATE OF ORIGINAL RETURN FILED RETURNED INCOME U/S.139 (RS.) DATE OF FILING RETURN U/S.153A RETURNED INCOME U/S.153A (RS.) ASSESSED INCOME U/S.153A/ 143(3) RS. 2006-07 22.06.2006 11,930 08.03.2013 11,310 11,930 2007-08 11.10.2007 9,16,762 08.03.2013 7,30,510 8,14,16,760 2008-09 27.02.2009 (40,750) 08.03.2013 3,070 11,65,78,720 2009-10 20.09.2009 2,53,709 08.03.2013 2,63,480 2,63,480 2010-11 30.08.2010 37,035 08.03.2013 37,035 37,040 2011-12 30.09.2011 92,90,720 08.03.2013 95,59,670 95,59,670 2012-13 29.09.2012 8,70,830 - - 8,70,830 3. THE ASSESSEE FILED APPEALS BEFORE THE LEARNED C.I.T. (A) AGAINST THE ASSESSMENTS COMPLETED U/S.153A WHO PARTLY ALLOWED THE ASSESSEES APPEALS. AGAINST THE ORDER PASSED BY THE LEARNED CIT(A), THE ASSESSEE PREFERRED APPEAL BEFO RE THE ITAT. GROUND NO.1.0 & 1.1 (A.YS.: 2007-08 & 2008-09) OF THE ASSESSEES APPEAL : 2.0 GROUND NO.1.0 & 1.1 (A.YS.: 2007-08 & 2008-09) OF A SSESSEES APPEAL READS AS UNDER : ASSESSMENT YEARS :2007-08 & 2008-09 1.0 THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INC OME-TAX (APPEALS)-3, BHOPAL, PARTLY CONFIRMING THE ASSESSME NT ORDER PASSED U/S.153A R.W. SEC.143(3) OF THE INCOME-TAX ACT, 196 1, BY THE DEPUTY COMMISSIONER OF INCOME-TAX IS BOTH BAD-IN-LAW AND B AD-IN-FACTS. 1.1 IN DOING SO, HE DID NOT APPRECIATE THAT NO ADDITION COULD HAVE BEEN MADE WHILE COMPLETING ASSESSMENT U/S.153A OF THE IN COME-TAX ACT, 1961 IN CASE OF COMPLETED ASSESSMENTS IF NO UNDISCL OSED INCOME WAS DETERMINABLE FROM THE MATERIAL FOUND AS A RESULT OF SEARCH. SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 4 4. THERE WAS NO ABATEMENT OF ASSESSMENT. HOWEVER, THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS GROUND GROUND, HENCE, DISMISSED. 5. GROUND NO.2.0 OF THE ASSESSEES APPEAL AND GROUND NO.1 OF REVENUES APPEAL :(A.YS.: 2007-08) GROUND NO.2.0(A.YS.: 2007-08) OF ASSESSEES APPEALS READS AS UNDER: ASSESSMENT YEAR : 2007-08 ADDITION OF UNSECURED LOANS AS UNEXPLAINED CASH CREDIT U/S.68 : RS.90,00,000/- 2.0 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN LAW AS WELL AS IN FACTS IN PARTLY CONFIRMING THE ADDITION OF RS.90,00,000/- MADE BY THE ASSESSING OFFICER IN RESPECT OF UNSECUR ED LOANS RECEIVED FROM THE FOLLOWING LOAN CREDITORS BY TREATING THE S AME AS UNEXPLAINED CASH CREDIT U/S.68: 2.0 NAME OF THE LOAN CREDITOR AMOUNT (RS.) ANUBHAVVANIJYA PVT. LTD. 40,00,000/- SNEHSIL MARKETING PVT. LTD. 50,00,000/- 90,00,000/- 3.0 REVENUES GROUND OF APPEALS(A.YS.: 2007-08) READS A S UNDER: ASSESSMENT YEAR : 2007-08 ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE THE C.I.T.(A). ERRED IN DELETING THE ADDITION MADE UNDER SECTION 68 OF T HE INCOME-TAX ACT, 1961 ON ACCOUNT OF UNSECURED LOAN RECEIVED FOR RS.7,15,0 0,000/-. 6. THE FACTS IN BRIEF ARE THAT THE ASSESSEE RECEIVED UNSECURED LOAN OF RS.8,05,00,000/- FROM THE FOLLOWI NG COMPANIES: SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 5 S.NO. NAME OF PARTY AMOUNT (RS.) 1 ANUBHAVVANIJYAPVT LTD 40,00,000 2 SNEHSIL MARKETING PRIVATE LIMITED 50,00,000 3 RATNAGIRIVINMAYPVT LTD. 15,00,000 4 NALANDA MERCHANTS PVT. LTD. 3,50,00,000 5 UTILITY EXIM PRIVATE LIMITED 3,50,00,000 8,05,00,000 THE ASSESSEE FURNISHED DETAILS OF UNSECURED LOANS RECE IVED BY IT COMPRISING OF NAMES, ADDRESSES, P.A.NOS., CHEQUE NOS. ALONG WITH DATE AND AMOUNT, RELEVANT EXTRACT OF BANK STATEMENTS, AUDITED ANNUAL ACCOUNTS OF THE UNSECURED LOAN CREDITORS, DULY CONFIRMED COPY OF ACCOUNT ETC. TO ES TABLISH IDENTITY AND CREDITWORTHINESS OF LOAN CREDITORS AND GENUINENESS OF THE UNSECURED LOANS TRANSACTION. ALL THE TRANSACTIONS HAD TAKEN PLACE THROUGH NORMAL BANKING CHANNELS AND ALL THE LOAN CREDITOR COMPANIES WERE ASSESSED TO TAX. 7. IN CASE OF NALANDA MERCHANTS PVT. LTD. AND UTILITY EXIM PVT. LTD., THE UNSECURED LOAN OF RS.3,50,00,000 /- EACH WAS GIVEN BY THESE COMPANIES OUT OF LOAN RECEIVED SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 6 FROM SIGNET INDUSTRIES LTD. THE FLOW OF FUNDS CAN BE DEPICTED WAS AS UNDER: BANK LOAN SIGNET INDUSTRIES LTD. NALANDA MERCHANTS PVT. LTD. SHALIMAR FERROUS METALS PVT. LTD BANK LOAN SIGNET INDUSTRIES LTD. UTILITY EXIM PVT. LTD. SHALIMAR FERROUS METALS LTD. 8. THE REASONING GIVEN BY THE A.O IS SUMMARIZED AS UNDER: (A) THE A.O. IS NOT REQUIRED TO PROVE THAT THE ASSESSEE HAS PAID CASH IN LIEU OF CHEQUES RECEIVED. THE ONUS IS UPON THE ASSESSEE TO EXPLAIN THESE TRANSACTIONS TO A.O.S SATISFACTION. THE ASSESSEE CANNOT ESCAPE FROM THIS RESPONSIBILITY BY FAILURE OF THE A.O. TO ESTABLISH CASH TRAIL. (B) THE LOAN THROUGH BANKING CHANNELS DO NOT ESTABLISH GENUINENESS OF THE TRANSACTIONS AND ACTUAL BUSINESS ACTIVITY OF THE CREDITOR. THE LOAN CREDITOR DID NOT HAVE ITS OWN PROFIT MAKING APPARATUS AND MERELY ROTATED MONEY FOR ISSUE OF CHEQUES. (C) THE IDENTITY OF THE CREDITOR IS NOT ESTABLISHED BY MERELY FURNISHING DETAILS OF INCORPORATION, P.A. NO., BANK STATEMENTS, RETURN OF INCOME, CONFIRMATION SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 7 LETTERS, ETC. BUT IS ESTABLISHED THROUGH EXISTENCE I N THE EYES OF PUBLIC, GENUINE BUSINESS ACTIVITIES AND PROPER PLACE OF BUSINESS. (D) THE TURNOVER OF THESE COMPANIES ARE NOT COMMENSURATE WITH THE NET WORTH OF THE COMPANY. THESE COMPANIES INVESTED IN SHARES OF PRIVATE LIMITED COMPANIES ON WHICH NO INCOME WAS EARNED. FURTHER, THERE IS EITHER LOSS OR NEGLIGIBLE PROFIT. (E) THE RESERVE AND SURPLUS ARE MORE THEN 15-18 TIMES OF THE SHARE CAPITAL, WHICH IN TURN SUGGEST THESE COMPANIES HAVE RAISED SHARE CAPITAL ON SUBSTANTIAL PREMIUM FROM DUMMY SHAREHOLDERS/ ACCOMMODATION ENTRIES. (F) IT HAS BEEN ESTABLISHED THE ASSESSE COMPANY ALONG WITH OTHER SIGNET GROUP COMPANIES HAVE BEEN GIVING CASH TO AND RECEIVING CHEQUE IN GRAB OF UNSECURED LOAN FROM KOLKATA BASED COMPANY VIZ. LUCKY COMMOTRADEPVT LTD. (G) THE ASSESSEE HAS FAILED TO PROVE THE IDENTITY, CREDITWORTHINESS OF THE CREDITOR AND GENUINENESS OF THE TRANSACTION REMAINED UNEXPLAINED AS P.A.NO., CERTIFICATE OF INCORPORATION, COPIES OF RETURN OF SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 8 INCOME, BANK STATEMENT , TRANSACTION THROUGH NORMAL BANKING CHANNELS DO NOT ESTABLISH THESE ESSENTIAL INGREDIENTS OF CASH CREDIT. (H) THERE WAS NOTHING ON RECORD TO SHOW AS TO HOW THESE COMPANIES CONTACTED THE SIGNET GROUP. (I) THE RELIANCE WAS PLACED UPON THE FOLLOWING JUDGEMENTS : (I) C.I.T. VS. N R PORTFOLIO PVT. LTD. 263 CTR 456 (DEL) (II) C.I.T. VS. RATHIFINLEASELTD. 215 CTR 429 (MP) (III) NIPUM BUILDERS & DEVELOPERS PVT LTD 350ITR407 (DEL) 9. THE ORDER OF THE C.I.T.(A). IS IN THREE PARTS VIZ . LOAN OF RS.3.5 CRORES EACH FROM NALANDA MERCHANTS PVT. LTD. AND UTILITY EXIM PVT. LTD., LOAN OF RS.15 LACS FROM RATNAGIRIVINIMAY PVT. LTD. AND LOAN OF RS.50 LAC AND RS.4 0 LACS RESPECTIVELY FROM SNEHSIL MARKETING PRIVATE LIMIT ED ANUBHAV VANIJYAPVT LTD SUMMARIZED AS UNDER : SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 9 NALANDA MERCHANTS PVT. LTD. RS.3.50 CRORES AND UTIL ITY EXIM PVT. LTD. RS.3.50 CRORES : (A) IN BOTH THE CASES, THE LOAN WAS GIVEN TO THE ASSESS EE COMPANY OUT OF INTER-CORPORATE LOAN RECEIVED FROM S IGNET INDUSTRIES LTD. AS THE SOURCE OF LOAN ADVANCED WAS DULY EXPLAINED, NO ADDITION U/S.68 ON ACCOUNT OF UNEXPLA INED CASH CREDIT WAS WARRANTED. HENCE, ADDITION OF RS.7 CRORES WAS DELETED. RATNAGIRIVINIMAY PVT. LTD. RS.15 LACS : (B) THE LOAN CREDITOR COMPANY BELONGED TO KALANI GROUP OF INDORE. THE SAID GROUP HAD CLOSE RELATIONSHIP WITH SHRI MUKESHSANGLA. THE LOAN OF RS.15 LACS WAS A TEMPORAR Y LOAN AND THE SAME WAS REPAID WITHIN ONE YEAR. THE L OAN CREDITOR WAS INCORPORATED UNDER THE PROVISIONS OF COMPANIES ACT, 1956. IT WAS REGULARLY ASSESSED TO T AX AND ITSP.A.NO.WASAABCR 1870 R. IT HAS SHARE CAPITAL OF RS.72,45,000/-, SHARE PREMIUM OF RS.4,24,49,631/- A ND NET PROFIT BEFORE TAX OF RS.10,27,351/- IN A.Y.2007 -08. THE COMPANY HAD SUFFICIENT FUNDS AVAILABLE TO ADVANCE TEMPORARY LOAN OF RS.15 LACS. THE LOAN OF RS.15 LAC WAS RECEIVED BY CHEQUE NO. 940620 DT.26.02.2007 OF IDBI BANK AND WAS REPAID VIDE CHEQUE NO. 629439 DT. 11.09.200 7 OF UCO BANK OF RS.15 LACS. WHILE THE ASSESSEE PROVIDED ALL THE EVIDENCE WHICH WERE REQUIRED TO ESTABLISH IDENT ITY AND CREDITWORTHINESS OF THE LOAN CREDITOR AND GENUINENE SS OF LOAN TRANSACTION, THE ASSESSING OFFICER DID NOT BRI NG ANY SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 10 MATERIAL TO SHOW THAT THE IMPUGNED LOAN REPRESENTED UNDISCLOSED INCOME OF THE ASSESSEE. THERE WAS NOT MATERIAL WITH THE A.O. TO REFUTE THE EVIDENCE BROUG HT ON RECORD BY THE ASSESSEE. CONSIDERING THESE FACTS, TH E ADDITION OF RS.15 LACS ON ACCOUNT OF UNEXPLAINED CA SH CREDIT U/S.68 WAS DELETED. SNEHSHIL MARKETING PRIVATE LIMITED ANUBHAVVANIJYAPV T LTD .: (C) THESE COMPANIES WERE KOLKATA BASED PAPER COMPANIES PROVIDING ACCOMMODATION ENTRIES. BOTH THE COMPANIES HAD SHOWN NOMINAL PROFIT VIZ. IN CASE OF ANUBAHAVVANIJY A PVT. LTD. - RS.32,009/- IN A.Y.2006-07 AND RS.2,60,951/- IN A.Y. 2007-08; IN CASE OF SNEHSHIL MARKETING PVT. LT D. RS.14,671/- IN A.Y.2006-07 AND RS.3,07,727/- IN A.Y . 2007-08. THE ASSESSEE COULD NOT PROVIDE THE SOURCE OF DEPOSIT PRIOR TO ISSUE OF CHEQUES TO THE ASSEESEE. THE AMOUNTS WERE TRANSFERRED JUST BEFORE ISSUING CHEQUE S TO THE ASSESSEE. THUS, THE APPELLANT COMPANY FAILED TO PROVE THE CREDITWORTHINESS OF THESE COMPANIES TO GIVE LOA NS TO THE ASSESSEE. MERE TRANSACTIONS THROUGH BANKING CHA NNELS WAS NOT SACROSANCT TO ESTABLISH GENUINENESS OF TRANSACTION. CONSIDERING TOTALITY OF FACT AND SURRO UNDING CIRCUMSTANCES, THE ADDITION OF RS.90,00,000/- ON AC COUNT OF UNEXPLAINED CASH CREDIT WAS UPHELD. SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 11 10. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED AS UNDER :- UNSECURED LOANS : RATNAGIRI VINMAY PVT. LTD. RS.15 LACS, NALANDA MERCHANTS PVT. LTD. RS.3.50 CRORES AND UTILITY EXIM PVT. LTD. RS.3.50 CRORES AS REGARD UNSECURED LOAN OF RS.15 LACS RECEIVED FROM RATNAGIRI VINMAYPVT LTD., RS.3.50 CRORES FROM NALANDA MERCHANTS PVT. LTD. AND RS.3.50 CRORES FROM UTILITY E XIM PVT. LTD., RELIANCE IS PLACED UPON THE FINDINGS OF TH E LEARNED C.I.T.(A)., WHICH ARE APPEARING ON PAGE NO.47 TO 52. EVIDENCE FURNISHED BY THE ASSESSEE FOR ESTABLISHING IDENTITY AND CREDITWORTHINESS OF SHARE APPLICANTS/LOAN CREDITORS AND GENUINENESS OF TRANSACTION THE DETAILS REGARDING IDENTITY AND CREDITWORTHINESS OF THE LOAN CREDITOR AND GENUINENESS OF LOAN TRANSACTION ARE AS UNDER: SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 12 FINANCIALS OF SNEHASHIL MARKETING PVT. LTD., SNEHASHIL MARKETING PVT. LTD. IS A CLOSELY HELD COMPANY, INCORPORATED UNDER THE PROVISIONS OF COMPANIES ACT 1956 AND HAVING P.A. NO. AAJCS 5894 E. ITS REGISTERED OFFICE IS SITUATED AT 157B, LENIN SARANI, GROUND FLOOR, KOLKATA 700013. IT HAD INDEPENDENT BOARD OF DIRECTORS. IT IS REGULARLY ASSESSED TO TAX. ITS SHARE CAPITAL FOR THE YEAR ENDED 31.03.2007 STOOD AT RS.17,77,500/- AND RESERVES AND SURPLUS WAS RS.3,21,40,162/-. THE PROFIT BEFORE TAX FOR THE YEAR WAS RS.3,07,727/-. THE COMPANY ADVANCED A SHORT TERM LOAN OF RS.50,00,000/- TO THE ASSESSEE WHICH WAS REPAID ON 27.09.2007 AND 28.09.2007. THE DETAILS OF LOAN GIVEN TO THE ASSESSEE AND ITS REFUND ARE AS FOLLOWS: DATE CHEQUE NO. AMOUNT (RS.) REMARKS 28.02.2007 388066 10,00,000 PRIOR TO ISSUE OF CHEQUES, THE BANK BALANCE WITH CENTURIAN BANK OF PUNJAB LTD., KOLKATA BRANCH WAS RS.50,62,041/-. 28.02.2007 388067 10,00,000 28.02.2007 388068 10,00,000 28.02.2007 388069 10,00,000 SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 13 28.02.2007 388070 10,00,000 LOAN REPAID DATE CHEQUE NO. AMOUNT (RS.) REMARKS 27.09.2007 629444 25,00,000 CHEQUES WERE ISSUED OUT OF UCO BANK ACCOUNT OF THE ASSESSEE. 28.09.2007 629445 25,00,000 THE COPY OF AUDIT ANNUAL ACCOUNTS, ACKNOWLEDGEMENT FOR RETURN OF INCOME AND BANK STATEMENT WERE ALSO FURNISHED ALONG WITH THE DULY CONFIRMED COPY OF ACCOUNT. FINANCIALS OF ANUBHAVVANIJYA PVT. LTD. ANUBHAVVINIJIYAPVT. LTD. IS A CLOSELY HELD COMPANY, INCORPORATED UNDER THE PROVISIONS OF COMPANIES ACT 1956 AND HAVING P.A. NO. AAFCA 5482 J. ITS REGISTERED OFFICE IS SITUATED AT 59 RAJA NABA KRISHNA STREET, KOLKATA - 700005. IT HAD INDEPENDENT BOARD OF DIRECTORS. IT IS REGULARLY ASSESSED TO TAX. ITS SHARE CAPITAL FOR THE YEAR ENDED 31.03.2007 STOOD AT RS.29,57,250/- AND RESERVES AND SURPLUS WAS RS.5,45,37,805/-. THE PROFIT BEFORE TAX FOR THE YEAR WAS RS.2,60,951/-. THE SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 14 COMPANY ADVANCED A SHORT TERM LOAN OF RS.40,00,000/- TO THE ASSESSEE WHICH WAS REPAID ON 07.09.2007. THE DETAILS OF LOAN GIVEN TO THE ASSESSEE AND ITS REFUND ARE AS FOLLOWS: DATE CHEQUE NO. AMOUNT (RS.) REMARKS 19.02.2007 288811 10,00,000 PRIOR TO ISSUE OF CHEQU ES, THE BANK BALANCE WITH CENTURIAN BANK OF PUNJAB LTD., KOLKATA BRANCH WAS RS.87,87,510/-. 19.02.2007 288812 10,00,000 19.02.2007 294008 10,00,000 19.02.2007 294009 10,00,000 LOAN REPAYMENT DATE CHEQUE NO. AMOUNT (RS.) REMARKS 07.09.2007 629440 40,00,000 CHEQUES WERE ISSUED OUT OF UCO BANK ACCOUNT OF THE ASSESSEE. THE COPY OF AUDIT ANNUAL ACCOUNTS, ACKNOWLEDGEMENT FOR RETURN OF INCOME AND BANK STATEMENT WERE ALSO FURNISHED ALONG WITH THE DULY CONFIRMED COPY OF ACCOUNT. NOTICES U/S.133(6)/SUMMONS UNDER SECTION 131 WAS NOT ISSUED IN THE CASE OF THESE COMPANIES. HOWEVER, THESE COMPANIES PARTICIPATED IN THE ASSESSMENT PROCEEDINGS IN THE SENSE THAT THEY FURNISHED DULY CONFIRMED COPIES OF ACCOUNTS, AUDITED ANNUAL ACCOUNTS FOR THE ASSESSMENT YEAR 2006-07 AND 2007-08, BANK SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 15 STATEMENTS FOR THE RELEVANT PERIOD SHOWING LOAN TRANSACTIONS TO THE ASSESSEE, COPY OF RETURN OF INCOME , ETC. WHICH WERE IN TURN FURNISHED TO THE A.O. UNFORTUNATELY, WHILE THE ASSESSEE DISCHARGED ITS BURDEN, THE A.O. SIMPLY DID NOT TAKE ANY FURTHER ACTIO N AND SIMPLY REJECTED THE EVIDENCE PLACED ON RECORD BY THE ASSESSEE. THE ASSESSING OFFICER FAILED TO BRING ANY MATERIAL OR EVIDENCE ON RECORD TO SHOW THAT UNACCOUNTED CASH OF THE ASSESSEE WAS DEPOSITED IN BANK ACCOUNT OF VARIOUS COMPANIES OR OTHERWISE GIVEN TO THEM AND CHEQUES TOWARDS UNSECURED LOANS WERE ISSUED BY THEM OUT OF CASH SO DEPOSITED OR PAID. THEREFORE, ADDITION U/S.68 OF THE ACT WAS NOT WARRANTED.IN THIS REGARD, THE RELIANCE WAS PLACED ON THE FOLLOWING JUDGEMENTS: (I) C.I.T VS. VALUE CAPITAL SERVICES PVT. LTD. 307 ITR 334 (DEL) SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 16 (II) MIDAS GOLDEN DISTILLERIES (P) LTD. VS.C.I.T [2009] 124 TTJ 25 (CHENNAI) 11. FURTHER, THE LEGAL POSITION OF ADDITION U/S.68 IN RELATION TO SHARE APPLICATION MONEY/UNSECURED LOANS, IT WOULD BE NECESSARY TO REFER FOLLOWING JUDGEMENTS DEL IVERED BY APEX COURT AS WELL AS SEVERAL HIGH COURTS: 1. C.I.T VS. STELLAR INVESTMENT LTD. [192 ITR 287 (DEL)] 2. C.I.T VS. STELLER INVESTMENT LTD. [251 ITR 263 (SC)] 3. C.I.T VS. ELECTRO POLYCHEM LTD. [294 ITR 661 (MAD)] 4. C.I.T VS. DIVINE LEASING AND FINANCE LTD. [299 ITR 268 (DEL)] 5. C.I.T VS. DIVINE LEASING & FINANCE LTD. [CIVIL APPEAL NO. CC375/2008 (SC)] 6. C.I.T VS. SOPHIA FINANCE LTD. [205 ITR 98 (DEL.FB)] 7. C.I.T VS. LOVELY EXPORTS PVT. LTD. [216 CTR 195 (SC)] 8. C.I.T VS. FIRST POINT FINANCE LTD. [286 ITR 477] (RAJ) ]. 9. SHREE BARKHA SYNTHETICS LTD. VS. A.C.I.T [283 ITR 377 ( RAJ)] 10. C.I.T VS. DWARKADHISH INVESTMENT PVT. LTD. [ 194 TAXMAN 43 (DEL)] 11. C.I.T VS. ANTARCTICA INVESTMENT PVT. LTD. [262 ITR 493 (D EL)] 12. C.I.T VS. DOLPHINE CANPACK LTD. [283 ITR 190 (DEL)] 13. C.I.T VS. VALUE CAPITAL SERVICES PVT. LTD. [307 ITR 3 34 (DEL)] 14. C.I.T VS. PEOPLES GENERAL HOSPITAL LTD. [2013] 356 ITR 65 (MP) 15. C.I.T VS. EMPIRE BUILDTECH (P) LTD. [2014] 43 TAXMANN.C OM 269 (DEL) 16. MIDAS GOLDEN DISTILLERIES (P) LTD. VS.C.I.T [2009] 124 TTJ 25 (CHENNAI) 17. C.I.T VS. SHREE RAMA MULTI TECH LTD [2013] 34 TAXMANN.CO M 177 (GUJ.) 18. C.I.T VS. STL EXTRUSION (P) LTD [2011] 11 TAXMANN.COM 125 (MP) 19. KAMDHENU STEEL & ALLOYS LTD.;361 ITR 220(DEL) SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 17 12. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED TH AT ON ANALYSIS OF THE ABOVE JUDGEMENTS, IT EMERGES THAT IN CASE OF SUBSCRIBERS TO THE SHARE CAPITAL, THE COMPANY IS REQUIRED TO ESTABLISH IDENTITY OF THE SHAREHOLDER, WHI CH CAN BE PROVED BY FURNISHING OF PERMANENT ACCOUNT NUMBER, CERTIFICATE OF INCORPORATION, COPIES OF RETURN OF INC OME ETC. (C.I.T VS. DWARKADHISH INVESTMENT PVT. LTD. 194 TAXM ANN 43 (DEL). THE GENUINENESS OF TRANSACTIONS CAN BE ESTABLISHED BY SHOWING THAT THE TRANSACTION HAD TAKEN PLACE THROUGH PROPER BANKING CHANNELS (C.I.T VS. DIVIN E LEASING & FINANCE LTD. (299 ITR 268 DEL). THE CREDITWORTHINESS OF THE SUBSCRIBER CAN BE ESTABLISHED BY FURNISHING P.A.NOS., COPIES OF RETURN OF INCOME, AUD ITED ANNUAL ACCOUNTS, ETC. IF THE TRANSACTIONS ARE MADE THROUGH BANKING CHANNELSAND ONCE THE EXISTENCE OF PERSONS WHO HAD GIVEN SHARE APPLICATION MONEY / LOAN IS SHOWN, THE ASSESSEE COMPANY CANNOT BE HELD RESPONSIBLE TO PROVE SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 18 WHETHER THAT PERSON HIMSELF HAS INVESTED THE SAID MONE Y OR SOME OTHER PERSON HAD MADE INVESTMENT IN THE NAME OF THAT PERSON. THE BURDEN THEN SHIFTS ON THE REVENUE T O ESTABLISH THAT SUCH INVESTMENT HAS COME FROM THE ASSESS EE COMPANY ITSELF. SHREE BARKHA SYNTHETICS LTD. VS. A.C. I.T (283 ITR 377 RAJ).IF SUCH SHAREHOLDERS ARE UNABLE TO P ROVE THEIR CREDITWORTHINESS, THE ASSESSING OFFICER IS DUT Y BOUND TO TAKE NECESSARY ACTION IN THEIR CASES. [C.I.T VS. LOV ELY EXPORTS PVT. LTD. 216 CTR 195 SC]. HE FURTHER SUBMI TTED THAT IT WAS HELD BY THE HONOURABLE DELHI HIGH COURT IN THE CASE OF DIVINE LEASING AND FINANCE LTD. (299 ITR 268) T HAT ... ... .... (4) IF RELEVANT DETAILS OF THE ADDRESS OR PAN IDENTIFY OF THE CREDITOR/SUBSCRIBER ARE FURNISHED TO THE DEP ARTMENT ALONG WITH COPIES OF THE SHAREHOLDERS REGISTER, SHA RE APPLICATION FORMS, SHARE TRANSFER REGISTER, ETC., I T WOULD CONSTITUTE ACCEPTABLE PROOF OR ACCEPTABLE EXPLANATI ON BY THE ASSESSEE. (5) THE DEPARTMENT WOULD NOT BE JUSTIFIED IN SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 19 DRAWING AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCRIBER FAILS OR NEGLECTS TO RESPOND TO ITS NOTICES. IN THE ASSESSEE'S CASE, THE NOTICES U/S. 133(6) WERE NOT EVEN ISSUED BY THE A.O. 13. HE SUBMITTED THAT IN THE ASSESSEES CASE, BOTH THE UNSECURED LOAN CREDITORS PRODUCED EVIDENCE TO SHOW THAT THEY EXISTED IN THE EYES OF LAW, THEY HAD THEIR OFF ICE PREMISES AND THEY WERE CARRYING ON THE BUSINESS OF TRADING, INVESTMENT AND FINANCE. THEIR BUSINESS WAS NOT AT A VERY LARGE SCALE TO MERIT ANY SOCIAL RECOGNITION OR NAT IONAL IDENTITY, NONETHELESS THEY EXISTED. THERE ARE MILLI ONS OF PEOPLE AND THOUSANDS OF COMPANIES WHICH EXIST BUT DO N OT HAVE A PERMANENT PLACE OF BUSINESS, BUT STILL HAVE PLACE OF WORK/LIVING AND CARRY ON SOME OCCUPATION. IN FACT THERE ARE SO MANY PEOPLE WORKING FROM THEIR RESIDENCE AND SO MAN Y COMPANIES WHOSE REGISTERED OFFICE ADDRESSES IS RESIDE NCE OF THEIR DIRECTORS, ETC. AND NOT HAVING A PERMANENT BUSIN ESS SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 20 PLACE OR ARE NOT FAMOUS OR SOCIALLY RECOGNIZED. ALAS! I N THE EYES OF A.O., THEY SIMPLY DO NOT EXIST. IN HIS OPIN ION, ONLY THE BIG AND INFLUENTIAL PERSONS HAVE LEGAL RECOGNITION , IDENTITY AND CREDITWORTHINESS. A COMMON MAN HAS NO EXISTENCE, CREDITWORTHINESS AND GENUINENESS OF TRANSACTIONS IN THE EYES OF THE LAW. THEREFORE, BY PR OVIDING DETAILS AND EVIDENCE RELATING TO IDENTIFICATION AND CREDITWORTHINESS AND ALSO THE GENUINENESS OF THE TRANSACTION, THE ASSESSEE DISCHARGED ITS ONUS AND ESTABLISHED GENUINENESS OF LOAN. 14. IF THE FINDINGS AND INFERENCES OF THE ASSESSING O FFICER AS PER THE ASSESSMENT ORDER ARE PITTED AGAINST THE EVID ENCE PLACED ON RECORD, IT IS QUITE MANIFEST THAT HIS FINDING S AND INFERENCES WERE MERE CONJECTURES AND SURMISES, NOT B ASED UPON ANY EVIDENCE BUT ARRIVED AT BY COMPLETELY AND/OR SELECTIVELY IGNORING A LARGE NUMBER OF EVIDENCE BROUG HT ON RECORD IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 21 INFERENCES DRAWN BY HIM FOR THE PURPOSE OF MAKING ADDITION WERE HEARSE AND LARGELY INFLUENCED BY HIS PERCEPTION ABOUT UNETHICAL AND ILLEGITIMATE PRACTICES ADOPTED BY FEW ASSESSEES IN RAISING SHARE CAPITAL AND NOT ON THE BASIS OF CRITICAL AND SCIENTIFIC ANALYSIS OF FACTS , INFORMATION AND EVIDENCE BROUGHT ON RECORD. 15. IN THE CASE OF LALCHAND BHAGAT AMBICA RAM V. C.I.T. [1959] 37 ITR 288 , THE HONOURABLE SUPREME COURT STRONGLY DISAPPROVED THE PRACTICE OF MAKING ADDITIONS IN THE ASSESSMENT ON MERE SUSPICION AND SURMISES OR BY TAKING NOTE OF THE SO CALLED 'NOTORIOU S PRACTICE' PREVAILING IN TRADE CIRCLES. SIMILAR VIEWS WE RE EXPRESSED BY THE HONOURABLE DELHI HIGH COURT IN THE CASE OF C.I.T. VS. DISCOVERY ESTATES (P.) LTD. (356 ITR 1 59). THE RELEVANT EXTRACT IS AS UNDER : 17. IT ONLY REMAINS FOR US TO REFER TO THE OBSERVAT IONS OF THE ASSESSING OFFICER TO THE EFFECT THAT NO ONE MAK ES A SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 22 LOSS IN REAL ESTATE BUSINESS AND THAT THE MARKET PERCEPTIONS INDICATE THAT THE PRICES OF THE IMMOVEA BLE PROPERTIES ARE ALWAYS ON THE UPWARD TREND. THESE OBSERVATIONS HAVE, INTER ALIA, FORMED THE BASIS OF THE ADDITIONS MADE BY THE ASSESSING OFFICER. IT WAS EVE N SUGGESTED BEFORE US ON BEHALF OF THE REVENUE THAT I T IS A 'NOTORIOUS PRACTICE' PREVAILING IN REAL ESTATE CIRC LES THAT IN ALL PROPERTY TRANSACTIONS THERE IS NON-DISCLOSUR E OF THE FULL CONSIDERATION. AS POINTED OUT EARLIER, THIS CA NNOT PER SE CONSTITUTE THE BASIS OF THE ADDITION, THOUGH WE MUST HASTEN TO ADD THAT IT CAN VERY WELL BE A STARTING P OINT FOR FURTHER INVESTIGATION. IN LALCHANDBHAGATAMBICA RAM V. CIT [1959] 37 ITR 288 , THE SUPREME COURT DISAPPROVED THE PRACTICE OF MAKING ADDITIONS IN THE ASSESSMENT ON MERE SUSPICION AND SURMISES OR BY TAKING NOTE OF THE 'NOTORIOUS PRACTICE' PREVAILING IN TRADE CIRCLES. IT WAS OBSERVED AS UNDER: SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 23 'ADVERTING TO THE VARIOUS PROBABILITIES WHICH WEIGH ED WITH THE INCOME-TAX OFFICER WE MAY OBSERVE THAT THE NOTORIETY FOR SMUGGLING FOOD GRAINS AND OTHER COMMODITIES TO BENGAL BY COUNTRY BOATS ACQUIRED BY SAHIBGUNJ AND THE NOTORIETY ACHIEVED BY DHULIAN AS A GREAT RECEIVING CENTRE FOR SUCH COMMODITIES WERE ME RELY A BACKGROUND OF SUSPICION AND THE APPELLANT COULD N OT BE TARRED WITH THE SAME BRUSH AS EVERY ARHATDAR AND GRAIN MERCHANT WHO MIGHT HAVE BEEN INDULGING IN SMUGGLING OPERATIONS, WITHOUT AN IOTA OF EVIDENCE I N THAT BEHALF.' 3.1 THE HONOURABLE DELHI HIGH COURT HELD IN THE CASE OF NAVODAYA CASTLES PVT.LTD. (367 ITR 306) HELD IN PARA 13 OF ITS ORDER AS UNDER: 13. AS WE PERCEIVE, THERE ARE TWO SETS OF JUDGME NTS AND CASES BUT THESE JUDGMENTS AND CASES PROCEED ON THEIR OWN FACTS. IN ONE SET OF CASES, THE ASSESSEE PRODUCED NECESSARY DOCUMENTS/EVIDENCE TO SHOW AND SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 24 ESTABLISH IDENTITY OF THE SHAREHOLDERS, BANK ACCOUN T FROM WHICH PAYMENT WAS MADE, THE FACT THAT PAYMENTS WERE RECEIVED THOROUGH BANKING CHANNELS, FILED NECESSARY AFFIDAVITS OF THE SHAREHOLDERS OR CONFIRMATIONS OF THE DIRECTORS OF THE SHAREHOLDER COMPANIES BUT THEREAFTER NO FURTHER INQUIRIES WERE CONDUCTED. THE SECOND SET OF CASES ARE THOSE WHERE THERE WAS EVIDENCE AND MATERIAL TO SHOW THAT THE SHAREHOLDER COMPANY WAS ONLY A PAPER COMPANY HAVING NO SOURCE OF INCOME BUT HAD MADE SUBSTANTIAL AND HU GE INVESTMENTS IN THE FORM OF SHARE APPLICATION MONEY. THE ASSESSING OFFICER HAS REFERRED TO THE BANK STATEMEN T, FINANCIAL POSITION OF THE RECIPIENT AND BENEFICIARY ASSESSEE AND SURROUNDING CIRCUMSTANCES. THE PRIMARY REQUIREMENTS, WHICH SHOULD BE SATISFIED IN SUCH CAS ES IS, IDENTIFICATION OF THE CREDITORS/SHAREHOLDER, CREDITWORTHINESS OF CREDITORS/SHAREHOLDER AND THE SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 25 GENUINENESS OF THE TRANSACTION. THESE THREE REQUIREMENTS HAVE TO BE TESTED NOT SUPERFICIALLY BU T IN DEPTH HAVING REGARD TO THE HUMAN PROBABILITIES AND NORMAL COURSE OF HUMAN CONDUCT. 16. IF THE FINDING OF THE FIRST APPELLATE AUTHORITY I S TESTED ON THE TOUCHSTONE OF EVIDENCE FILED BY THE AS SESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT IS QU ITE MANIFEST THAT THE ASSESSEES CASE FELL IN THE FIRST CATE GORY OF CASES ENVISAGED BY THE HONOURABLE DELHI HIGH COURT IN THE CASE OF NAVODAYA CASTLES WHEREIN THE ASSESSEE PRODUCED NECESSARY DOCUMENTS/EVIDENCE TO ESTABLISH IDENTITY OF SHAREHOLDER, FILED BANK ACCOUNTS FOR VERIFICATION OF TRANSACTION, DULY CONFIRMED COPIES OF ACCOUNT AND AUDITE D ANNUAL ACCOUNTS TO ESTABLISH CREDITWORTHINESS OF THE SHAREHOLDER AND GENUINENESS OF TRANSACTION, BUT THE REVENUE DID NOT CONDUCT FURTHER ENQUIRIES, RELIED UP ON IRRELEVANT INFORMATION AND DETAILS AND SIMPLY REJECTED T HE SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 26 ASSESSEES EXPLANATION AND EVIDENCE FOR MAKING ADDITION O N ACCOUNT OF UNEXPLAINED CASH CREDIT U/S.68 OF THE ACT.. 17. IN VIEW OF THE FACTS AND LEGAL POSITION DISCUSSED ABOVE, THE ASSESSEE HUMBLY REQUEST YOUR HONOUR TO KIND LY DELETE THE ADDITION SUSTAINED BY THE C.I.T.(A) IN RES PECT OF UNSECURED LOAN RECEIVED BY THE ASSESSEE FROM VARIOUS COMPANIES. 18. THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND ALSO SUBMITTED A WRITTEN SUBMISSI ON WHICH READS AS UNDER:- UNEXPLAINED UNSECURED LOANS (A.Y. 2007-08 & 2008-09 ) A.O. MADE THE ADDITION OF RS.8.05 CRORE ON ACCOUNT OF UNEXPLAINED UNSECURED LOAN TAKEN FROM 5 COMPANIES I N A.Y. 2007-08 AND RS.1,16,57,56,050/- FROM M/S LUCKY COMMOTRADE PVT. LTD. IN A.Y. 2008-09. OUT OF WHICH PARTLY HAS BEEN DELETED WITH THE FINDINGS THAT SAME COMPANIES WERE USED ONLY AS A CONDUIT BY M/S SIGNET SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 27 INDUSTRIES LTD. TO GIVE LOAN TO APPELLANT COMPANY I N WHICH FUNDS WERE TRANSFERRED FIRST FROM M/S SIGNET INDUST RIES TO THOSE COMPANIES AND THEN THOSE COMPANIES TRANSFERRE D TO THE FUNDS TO THE ASSESSEE COMPANY AND THUS AS THE F UNDS RECEIVED THROUGH M/S SIGNET INDUSTRIES BY CHEQUE IS TREATED AS EXPLAINED AND WHERE THE FUNDS NOT TRANSF ERRED THROUGH M/S SIGNET INDUSTRIES BY CHEQUE IS TREATED AS EXPLAINED AND WHERE THE FUNDS NOT TRANSFERRED THROU GH M/S SIGNET INDUSTRIES, CIT(A) HELD THAT SOURCES OF DEPOSIT IN THE BANK ACCOUNT OFTHOSE COMPANIES BEFORE ISSUIN G CHEQUE TO THE ASSESSEE COMPANY COULD NOT BE TREATED EXPLAINED AS WELL AS ASSESSEE FAILED TO PROVE THE CREDITWORTHINESS OF THOSE COMPANIES AND GENUINENESS OF THE TRANSACTION THOUGH MONEY WASRECEIVED THROUGH BANKING CHANNEL, ADDITION WAS CONFIRMED AND TO THAT EXTENT I RELIED UPON THE FINDINGS OF CIT(A) AS WELL AS SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 28 DECISIONS FROM S.NO. 1 TO 16 IN MY SEPARATE COMPILA TION WHICH ARE DIRECTLY APPLICABLE ON THE ISSUE OF S.68. COMMON GROUND IN REGARD TO ISSUE OF UNSECURED LOAN HAS ALSO BEEN TAKEN IN OTHER CASES OF GROUP AS PER LIST ENCLOSED HEREWITH IN WHICH MY ABOVE SAME SUBMISSION MAY KINDLY BE CONSIDERED. REVENUES APPEAL : ITA NO. (SS) 202 & 203/IND/2015 (A.Y. 2007-08 & 2008-09 1. UNEXPLAINED SECURED LOAN (A.Y. 2007-08 & 2008-0 9) COMMON GROUND HAS BEEN TAKEN IN BOTH THE APPEALS. C IT(A) HAS DELETED THE ADDITION ON ACCOUNT OF UNEXPLAINED UNSE CURED LOAN U/S 68 DUE TO REASONS AS STATED ABOVE BUT TO THAT E XTENT, FINDINGS OF CIT(A) ARE NOT JUSTIFIED BECAUSE NO BASIS/COGENT MATERIAL HAS BEEN PLACED TO SUPPORT HIS FINDINGS THAT HOW THE FU NDS RECEIVED THROUGH M/S SIGNET INDUSTRIES BE TREATED EXPLAINED WHILE MOST OF THE MONEY WAS GIVEN IN CASH TO SHRI PANKAJ KALANI/D EEPAK KALANI WHICH WAS RECEIVED BACK THROUGH M/S LUCKY CO MMONTRADE PVT. LTD., KOLKATTA (PAPER COMPANY) TO M/S SIGNET I NDUSTRIES WHICH WAS ALREADY HELD UNACCOUNTED AND ADMITTED BY ASSESSEE SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 29 IN M/S SIGNET INDUSTRIES. APART FROM THAT MONEY, OT HER AMOUNTS WERE ALSO DEPOSITS IN THE BANK ACCOUNT OF M/S SIGNE T INDUSTRIES FOR WHICH NO COMMENTS WERE GIVEN BY CIT(A). THUS, I N ABSENCE OF ANY EVIDENCE, ONUS IS STILL ON THE ASSESSEE TO PROV E CREDITWORTHINESS AND GENUINENESS OF UNSECURED LOANS . FINDINGS OF CIT(A) ARE NOT JUSTIFIED AND THEREFORE SAME MAY KIN DLY BE SET ASIDE. I RELIED UPON THE DECISIONS FROM S.NO. 1 TO 16 AS GIVEN BY ME IN MY SEPARATE COMPILATION ON THE ISSUE OF S. 68 . COMMON GROUND ON THE SAME ISSUE HAS ALSO BEEN TAKE N BY THE REVENUE IN OTHER CASES OF GROUP AS PER THE LIST ENC LOSED FOR WHICH ABOVE SUBMISSION MAY KINDLY BE CONSIDERED AND FINDI NGS OF CIT(A) MAY BE SET ASIDE. THE LEARNED DR RELIED ON THE FOLLOWING CASE LAWS :- S. NO. C ASE L AW REMARKS 1 M/S AGRAWAL COAL CORP. PVT. LTD. INDORE V/S ADDL. C IT RANGE-5, INDORE. 19 TAXMAN.COM 209 (ITAT INDORE) SECTION-68 2 ACIT V/S NARMADA EXTRUSION LTD. AND OTHERS, 19 ITJ 202, (ITAT INDORE) - DO - 3 SUMATI DAYAL V/S COMMISSIONER OF INCOME TAX 214 I TR 801 (SC) - DO - 4 ROSHAN DI HATTI V/S COMMISSIONER OF INCOME TAX, 1 07 ITR 938 (SC) - DO - 5 SHANKAR INDUSTRIES V/S COMMISSIONER OF INCOME TAX, 114 ITR 689 - DO - SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 30 19. WE HAVE HEARD BOTH THE SIDES. WE HAVE CONSIDERED THE FACTS OF THE CASE IN VIEW OF VARIOUS CA SE LAWS RELIED UPON BY BOTH THE SIDES. WE HAVE CONSIDERED TH E FACTS OF THE ASSESSEES CASE IN THE LIGHT OF THE FACTS INVOL VED IN (CAL) 6 COMMISSIONER OF INCOME TAX V/S BIJU PATNAIK , 160 ITR 674 (SC) - DO - 7 COMMISSIONER OF INCOME TAX V/S PRECISION FINANCE PV T. LTD. 208 ITR 465 CAL.(HC) - DO - 8 COMMISSIONER OF INCOME TAX V/S P. MOHANKALA & ORS. 291 ITR 278 (SC) - DO - 9 COMMISSIONER OF INCOME TAX V/S PODAR CEMENT (P) LTD ., 226 ITR 625, (SC) - DO - 10 COMMISSIONER OF INCOME TAX V/S GOLD COIN HEALTH FOO D (P) LTD., 304 ITR 308 (SC) - DO - 11 COMMISSIONER OF INCOME TAX V/S NOVA PROMOTERS & FIN LEASE (P) LTD., 342 ITR 169 (HC) DELHI. - DO - 12 ASHOK MAHINDRU & SONS (HUF) V/S COMMISSIONER OF INC OME TAX, 173 TAXMAN 178 (HC) DELHI. - DO - 13 JOINT COMMISSIONER INCOME TAX V/S SAHELI LEASING & INDUSTRIES LTD., 324 ITR 170 (SC) - DO - 14 M/S SOPHIA FINANCE LTD. 205 ITR 98 (DELHI) - DO - 15 CIT V/S M/S NAVODAYA CASTLES PVT. LTD., 367 ITR 306 (DELHI) - DO - 16 DURGA PRASAD MORE, 82 ITR 540 (S.C.) - DO - 16 ANANTHARAM VEERASINGHAIAH V/S CIT, 123 ITR 457 ( SC) TELESCOPING 17 GRAND BAZAR V/S ACIT, 292 ITR 269 - DO - 18 S. MUTHUKUMAR V/S INCOME TAX OFFICER, 37 TAXMAN.COM 219 (MAD.) CASH DEPOSIT IN BANK SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 31 THE DECISIONS RELIED UPON BY THE REVENUE. WE FIND T HAT THE FACTS ARE AT VARIANCE, HENCE RATIO LAID DOWN IN THESE DECISIONS IS NOT APPLICABLE TO THE FACTS OF THE ASSESSE ES CASE. THE ASSESSEE RECEIVED LOAN OF RS.08,05,00,000/- FROM THE FOUR COMPANIES, DETAILS OF WHICH ARE AS UNDER :- S.NO. NAME OF PARTY AMOUNT (RS.) 1 ANUBHAVVANIJYAPVT LTD 40,00,000 2 SNEHSIL MARKETING PRIVATE LIMITED 50,00,000 3 RATNAGIRIVINMAYPVT LTD. 15,00,000 4 NALANDA MERCHANTS PVT. LTD. 3,50,00,000 5 UTILITY EXIM PRIVATE LIMITED 3,50,00,000 8,05,00,000 THE ASSESSEE SUBMITTED MEMORANDUM AND ARTICLE OF ASSOCIATION OF THESE COMPANIES, RESOLUTION OF THE BOARD OF DIRECTORS, BANK STATEMENTS WHEREFROM THE UNSECURED LO AN WAS GIVEN. THE OTHER DETAILS LIKE PAN, ADDRESS, ETC. WERE ALSO PROVIDED TO THE ASSESSING OFFICER. THE FINANCIAL ANALYSIS OF THE ACCOUNTS OF THESE COMPANIES ARE AS UNDER :- SNEHASHIL MARKETING PVT. LTD. IS A CLOSELY HELD COMPANY, INCORPORATED UNDER THE PROVISIONS OF COMPANIES ACT 1956 AND HAVING P.A. NO. AAJCS SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 32 5894 E. ITS REGISTERED OFFICE IS SITUATED AT 157B, LENIN SARANI, GROUND FLOOR, KOLKATA 700013. IT HAD INDEPENDENT BOARD OF DIRECTORS. IT IS REGULARLY ASSESSED TO TAX. ITS SHARE CAPITAL FOR THE YEAR ENDED 31.03.2007 STOOD AT RS.17,77,500/- AND RESERVES AND SURPLUS WAS RS.3,21,40,162/-. THE PROFIT BEFORE TAX FOR THE YEAR WAS RS.3,07,727/-. THE COMPANY ADVANCED A SHORT TERM LOAN OF RS.50,00,000/- TO THE ASSESSEE WHICH WAS REPAID ON 27.09.2007 AND 28.09.2007. THE DETAILS OF LOAN GIVEN TO THE ASSESSEE AND ITS REFUND ARE AS FOLLOWS: DATE CHEQUE NO. AMOUNT (RS.) REMARKS 28.02.2007 388066 10,00,000 PRIOR TO ISSUE OF CHEQUES, THE BANK BALANCE WITH CENTURIAN BANK OF PUNJAB LTD., KOLKATA BRANCH WAS RS.50,62,041/-. 28.02.2007 388067 10,00,000 28.02.2007 388068 10,00,000 28.02.2007 388069 10,00,000 28.02.2007 388070 10,00,000 LOAN REPAID DATE CHEQUE NO. AMOUNT (RS.) REMARKS 27.09.2007 629444 25,00,000 CHEQUES WERE ISSUED OUT OF UCO BANK ACCOUNT OF THE ASSESSEE. 28.09.2007 629445 25,00,000 THE COPY OF AUDIT ANNUAL ACCOUNTS, ACKNOWLEDGEMENT FOR RETURN OF INCOME AND BANK SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 33 STATEMENT WERE ALSO FURNISHED ALONG WITH THE DULY CONFIRMED COPY OF ACCOUNT. ANUBHAVVINIJIYAPVT. LTD. IS A CLOSELY HELD COMPANY, INCORPORATED UNDER THE PROVISIONS OF COMPANIES ACT 1956 AND HAVING P.A. NO. AAFCA 5482 J. ITS REGISTERED OFFICE IS SITUATED AT 59 RAJA NABA KRISHNA STREET, KOLKATA - 700005. IT HAD INDEPENDENT BOARD OF DIRECTORS. IT IS REGULARLY ASSESSED TO TAX. ITS SHARE CAPITAL FOR THE YEAR ENDED 31.03.2007 STOOD AT RS.29,57,250/- AND RESERVES AND SURPLUS WAS RS.5,45,37,805/-. THE PROFIT BEFORE TAX FOR THE YEAR WAS RS.2,60,951/-. THE COMPANY ADVANCED A SHORT TERM LOAN OF RS.40,00,000/- TO THE ASSESSEE WHICH WAS REPAID ON 07.09.2007. THE DETAILS OF LOAN GIVEN TO THE ASSESSEE AND ITS REFUND ARE AS FOLLOWS: SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 34 DATE CHEQUE NO. AMOUNT (RS.) REMARKS 19.02.2007 288811 10,00,000 PRIOR TO ISSUE OF CHEQU ES, THE BANK BALANCE WITH CENTURIAN BANK OF PUNJAB LTD., KOLKATA BRANCH WAS RS.87,87,510/-. 19.02.2007 288812 10,00,000 19.02.2007 294008 10,00,000 19.02.2007 294009 10,00,000 LOAN REPAYMENT DATE CHEQUE NO. AMOUNT (RS.) REMARKS 07.09.2007 629440 40,00,000 CHEQUES WERE ISSUED OUT OF UCO BANK ACCOUNT OF THE ASSESSEE. THE COPY OF AUDIT ANNUAL ACCOUNTS, ACKNOWLEDGEMENT FOR RETURN OF INCOME AND BANK STATEMENT WERE ALSO FURNISHED ALONG WITH THE DULY CONFIRMED COPY OF ACCOUNT. NOTICES U/S.133(6) OR SUMMONS UNDER SECTION 131 WAS NOT ISSUED. THESE COMPANIES PARTICIPATED IN THE ASSESSMENT PROCEEDINGS AND FURNISHED DULY CONFIRMED COPIES OF ACCOUNTS, AUDITED ANNUAL ACCOUNTS FOR THE ASSESSMENT YEAR 2006-07 AND 2007-08, BANK STATEMENTS FOR THE RELEVANT PERIOD SHOWING LOAN TRANSACTIONS TO THE ASSESSEE, COPY OF RETURN OF INCOME , ETC. WHICH WERE IN TURN FURNISHED TO THE A.O. THESE FACTS ESTABLISH THAT THE ASSESSEE HAD DISCHARGED ITS SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 35 ONUS. THE ASSESSING OFFICER DID NOT TAKE ANY FURTHER ACTION AND SIMPLY REJECTED THE EVIDENCE PLACED ON RECORD BY THE ASSESSEE. THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL OR EVIDENCE ON RECORD TO SHOW THAT UNACCOUNTED CASH OF T HE ASSESSEE WAS DEPOSITED IN BANK ACCOUNT OF THESE COMPANIES. 20. THE VARIOUS CASE LAWS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE AND CONSIDERING THE FACTUAL ASP ECT OF THIS CASE, WE ARE OF THE VIEW THAT THE ASSESSEE WAS AB LE TO ESTABLISH THE IDENTITY OF THESE CREDITORS BY WAY OF FURNISHING PERMANENT ACCOUNT NUMBER, CERTIFICATE OF INCORPORATION AND COPIES OF RETURNS OF INCOME. THE GENUINENESS OF THE TRANSACTION IS ALSO ESTABLISHED AS AL L THESE TRANSACTIONS WERE THROUGH PROPER BANKING CHANNELS SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 36 AND THERE WAS NO CASH DEPOSIT IN THE BANK ACCOUNTS OF THESE CREDITORS JUST PRIOR TO ADVANCEMENT OF LOAN. THE FINANCIAL ANALYSIS OF THESE COMPANIES ALSO ESTABLISHED THAT THESE COMPANIES WERE HAVING CREDIT WORTHINESS TO ADVANC E SUCH AMOUNT TO THE ASSESSEE. IN VIEW OF THESE FACTS, WE HOLD THAT THE ASSESSEE WAS ABLE TO SHIFT THE BURDEN ON THE REVENUE TO ESTABLISH WHETHER SUCH ADVANCES WERE OUT O F THE ASSESSEES OWN FUNDS. THE REVENUES RELIANCE ONLY ON THE SIGNED BANK TRANSFER FORMS CANNOT BE TAKEN A GROUND TO TREAT THESE ACTIVITIES AS BOGUS. IN THE ABSENCE OF AN Y CORROBORATIVE EVIDENCE WHICH COULD ESTABLISH THAT THE TRANSACTIONS WERE NOT GENUINE OR WERE FICTITIOUS OR AN YTHING ELSE, THE LEARNED CIT(A) WAS NOT JUSTIFIED IN SUSTAINI NG THE ADDITION. MOREOVER, THE ASSESSEE WAS NOT PROVIDED WIT H THE COPY OF STATEMENTS RECORDED BY THE ADIT, INVESTIGATIO N, MUMBAI, WHETHER IT HAS ANY RELEVANCE IN THE ASSESSEES CASE OR NOT. THE ASSESSEE WAS NOT PROVIDED WITH A COPY SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 37 AND ALSO WAS NOT PROVIDED AN OPPORTUNITY TO CROSS-EXAMIN E SHRI JAGDISH PUROHIT WHO HAS RETRACTED FROM THE EARLIE R STATEMENT AND THE CONTENTS OF THE AFFIDAVIT FILED BY HI M REMAINED UNCONTROVERTED. HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF STL EXTRUSION (P) LTD.; 333 ITR 269 AF TER CONSIDERING THE DECISION OF THE HON'BLE JURISDICTIO NAL HIGH COURT IN THE CASE OF CIT VS. RATHI FINLEASE LTD.; (20 08) 215 CTR (MP) 429 HAS HELD AS UNDER :- THOUGH IT IS THE DUTY OF THE ASSESSEE TO ESTABLISH THE GENUINENESS OF THE CREDITS BUT IN THE PRESENT CASE THE ASSESSEE HAS DULY ESTABLISHED THE IDENTITY AND SOURCE OF CREDITS. THE TRIBUNAL HAS ALSO HELD THAT ONCE THE IDENTITY AND SOURCE OF THE SUBSCRIBERS OF THE SHARES IS ESTABLISHED NO ADDITION CAN BE MADE UNDER S. 68. THE ASSESSEE HAVING DULY FURNISHED THE NAME, AGE, ADDRESS, DATE OF FILING THE APPLICATION OF SHARES, NUMBER OF SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 38 SHARES OF EACH SUBSCRIBER THERE WAS NO JUSTIFICATION FOR THE A.O. FOR MAKING THE IMPUGNED ADDITION BECAUSE ONCE THE EXISTENCE OF THE INVESTORS/SHARE SUBSCRIBERS IS PROVED, ONUS SHIFTS ON THE REVENUE TO ESTABLISH THAT EITHER THESHARE APPLICANTS ARE BOGUS OR THE IMPUGNED MONEY BELONGS TO THE ASSESSEE ITSELF. AFTER FILING OF THE AFFIDAVITS OF THE SAID SUBSCRIBER THE APPELLANT AT NO STAGE OF THE PROCEEDINGS SOUGHT ANY OPPORTUNITY TO REBUT THE SAID AFFIDAVITS. HAVING REGARD TO THE AFORESAID, NO QUESTION OF LAW MUCH LESS SUBSTANTIAL QUESTION OF LAW ARISES IN THIS APPEAL. FOR HOLDING SO, WE ALSO GET SUPPORT FROM THE FOLLOWI NG CASE LAWS :- 1. C.I.T VS. STELLAR INVESTMENT LTD. [192 ITR 287 (DEL)] SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 39 IN THE PRESENT CASE, THE SUBSCRIBED CAPITAL OF THE ASSESSEE HAD BEEN INCREASED. THE INCOME-TAX OFFICER ASSESSED THE COMPANY AND ACCEPTED THE INCREASE IN THE SUBSCRIBED CAPITAL. THE COMMISSIONER OF INCOME-TAX CAME TO THE CONCLUSION THAT THE ASSESSING OFFICER DID NOT CARRY OUT A DETA ILED INVESTIGATION INASMUCH AS THERE HAD BEEN A DEVICE OF CONVERTING BLACK MONEY INTO WHITE BY ISSUING SHARES WITH THE HELP OF FORMATION OF AN INVESTMENT COMPANY. THE COMMISSIONER OF INCOME-TAX FURTHER HELD THAT THE ASSESSING OFFICER DID NOT MAKE ENQUIRIES WITH REGARD TO THE GENUINENESS OF THE SUBSCRIBERS OF THE SHARE CAPITAL. HE THEREUPON SET ASIDE THE ORDER OF ASSESSMENT. THE TRIBUNAL REVERSED THIS DECISION FOR REASONS WHICH WE NEED NOT GO INTO. IT IS EVIDENT THAT EVEN IF IT BE ASSUMED THAT THE SUBSCRIBERS TO THE INCREASED SHARE CAPITAL WERE NOT GENUINE, NEVERTHELESS, UNDER NO CIRCUMSTANCES, CAN THE AMOUNT OF SHARE CAPITAL BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE. IT MAY BE THAT THERE ARE SOME BOGUS SHAREHOLDERS IN WHOSE NAMES SHARES HAD BEEN ISSUED AND THE MONEY MAY HAVE BEEN PROVIDED BY SOME OTHER PERSONS. IF THE ASSESSMENT OF THE PERSONS WHO ARE ALLEGED TO HAVE REALLY ADVANCED THE MONEY IS SOUGHT TO BE REOPENED, THAT WOULD HAVE MADE SOME SENSE BUT WE FAIL TO UNDERSTAND AS TO HOW THIS AMOUNT OF INCREASED SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 40 SHARE CAPITAL CAN BE ASSESSED IN THE HANDS OF THE COMPANY ITSELF. 2. C.I.T VS. STELLER INVESTMENT LTD. [251 ITR 263 (SC)] WE HAVE READ THE QUESTION WHICH THE HIGH COURT ANSWERED AGAINST THE REVENUE. WE ARE IN AGREEMENT WITH THE HIGH COURT. PLAINLY, THE TRIBUNAL CAME TO A CONCLUSION ON FACTS AND NO INTERFERENCE IS CALLED F OR. THE APPEAL IS DISMISSED. NO ORDER AS TO COSTS. 3. C.I.T VS. ELECTRO POLYCHEM LTD. [294 ITR 661 (MAD)] . THE ASSESSEE FILED ITS RETURNS FOR THE ASSESSMENT YEARS 1998-99 AND 1999-2000. THE ASSESSING OFFICER MADE ADDITIONS IN RESPECT OF THE SHARE APPLICATION MONEY UNDER SECTION 68 OF THE INCOME- TAX ACT, 1961, ON THE FINDING THAT THE ASSESSEE HAD BROUGHT THE UNDISCLOSED INCOME BY WAY OF SHARE APPLICATIONS IN FICTITIOUS NAMES AND PASSED ORDERS ACCORDINGLY. ON APPEAL BY THE ASSESSEE, THE COMMISSIONER (APPEALS) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 1998-99 AND UPHELD THE ADDITION MADE FOR THE ASSESSMENT YEAR 1999-2000. ON FURTHER APPEALS BY THE ASSESSEE AND THE REVENUE, THE TRIBUNAL ALLOWED THE APPEAL OF THE ASSESSEE AND DISMISSED THE APPEAL BEFORE THE REVENUE. ON APPEAL: SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 41 HELD, DISMISSING THE APPEALS, THAT EVEN IF IT WAS ASSUMED THAT THE SUB-SCRIBERS TO INCREASED SHARE CAPITAL WERE NOT GENUINE, UNDER NO CIRCUMSTANCES COULD THE AMOUNT OF SHARE CAPITAL BE REGARDED AS UNDISCLOSED INCOME OF THE COMPANY . 4. C.I.T VS. DIVINE LEASING AND FINANCE LTD. [299 ITR 268 (DEL)] IN THIS ANALYSIS, A DISTILLATION OF THE PRECEDENTS YIELDS THE FOLLOWING PROPOSITIONS OF LAW IN THE CON TEXT OF SECTION 68 OF THE INCOME-TAX ACT. THE ASSESSEE HAS TO PRIMA FACIE PROVE (1) THE IDENTITY OF THE CREDITOR/SUBSCRIBER; (2) THE GENUINENESS OF THE TRANSACTION, NAMELY, WHETHER IT HAS BEEN TRANSMITTED THROUGH BANKING OR OTHER INDISPUTABLE CHANNELS; (3) THE CREDITWORTHINESS OR FINANCIAL STRENGTH OF THE CREDITOR/SUBSCRIBER; (4) IF RELEVANT DETAILS OF THE ADDRESS OR PAN IDENTIFY OF THE CREDITOR/SUBSCRIBER ARE FURNISHED TO THE DEPARTMENT ALONG WITH COPIES OF THESHAREHOLDERS REGISTER, SHARE APPLICATION FORMS, SHARE TRANSFER REGISTER, ETC., IT WOULD CONSTITUTE ACCEPTABLE PROOF OR ACCEPTABLE EXPLANATION BY THE ASSESSEE.(5) THE DEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWING AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCRIBER FAILS OR NEGLECTS TO RESPOND TO ITS NOTICES;(6) THE ONUS WOULD NOT STAND DISCHARGED IF THE SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 42 CREDITOR/SUBSCRIBER DENIES OR REPUDIATES THE TRANSACTION SET UP BY THE ASSESSEE NOR SHOULD THE ASSESSING OFFICER TAKE SUCH REPUDIATION AT FACE VALUE AND CONSTRUE IT, WITHOUT MORE, AGAINST THE ASSESSEE; AND (7) THE ASSESSING OFFICER IS DUTY-BOUND TO INVESTIGATE THE CREDITWORTHINESS OF THE CREDITOR/SUBSCRIBER THE GENUINENESS OF THE TRANSACTION AND THE VERACITY OF THE REPUDIATION . 5. C.I.T VS. DIVINE LEASING & FINANCE LTD. [CIVIL APPEAL NO. CC375/2008 (SC)] CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME U/S.68 OF THE INCOME-TAX ACT, 1961? WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITIO N FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE- COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE A.O., THEN THE DEPARTMENT IS FREE TO PROCEED TO RE-OPEN THEIR INDIVIDUAL ASSESSMENT IN ACCORDANCE WITH LAW . HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT. 6. C.I.T VS. SOPHIA FINANCE LTD. [205 ITR 98 (DEL.FB)] IF THE SHAREHOLDERS ARE IDENTIFIED AND IT IS ESTABLISHED THAT THEY HAVE INVESTED MONEY IN THE PURCHASE OF SHARES, THEN THE AMOUNT SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 43 RECEIVED BY THE COMPANY WOULD BE REGARDED AS A CAPITAL RECEIPT AND TO THAT EXTENT THE OBSERVATIONS IN C.I.T. VS. STELLAR INVESTMENT LTD. [1991] 192 ITR 287 (DELHI), ARE CORRECT ; BUT THE OBSERVATIONS IN THAT CASE TO THE EFFECT THAT EV EN IF THE SUBSCRIBERS TO THE CAPITAL WERE NOT GENUINE UNDER NO CIRCUMSTANCE COULD THE AMOUNT OF SHARE CAPITAL BE REGARDED AS UNDISCLOSED INCOME OF THE [COMPANY] ARE NOT. 7. C.I.T VS. LOVELY EXPORTS PVT. LTD. [216 CTR 195 (SC)] 2. CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME UNDER SECTION 68 OF IT ACT, 1961?. WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW . HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT. 3. SUBJECT TO THE ABOVE, SPECIAL LEAVE PETITION IS DISMISSED . 8. C.I.T VS. FIRST POINT FINANCE LTD. [286 ITR 477] (RAJ)]. SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 44 THE FINDINGS REACHED BY THE TRIBUNAL WERE FINDINGS OF FACT AND WERE IN CONSONANCE WITH THE DECISION OF THE DELHI HIGH COURT ([1991] 192 ITR 287 ) AFFIRMED BY THE SUPREME COURT IN THE CASE OF STELLER INVESTMENT LTD. [2001] 251 ITR 263 , AND ALSO ON PRINCIPLE ACCEPTED BY ANOTHER DECISION IN CIT V. SOPHIA FINANCE LTD. [1994] 205 ITR 98 (DELHI) [FB]. THE FINDING RECORDED BY THE TRIBUNAL DID NOT GO BEYOND THE PURVIEW OF THE FINDINGS OF FACT. IN THE INSTANT CASE, IT WAS NOT DENIED THAT ALL THE SHAREHOLDERS/SHARE APPLICANTS WERE GENUINELY EXISTING PERSONS. IT WAS ALSO NOT DENIED THAT EACH OF THEM WAS AN INCOME-TAX ASSESSEE AND THE COPIES OF THE RETURN OF THEIR INCOME WERE ALSO PLACED BEFORE THE ASSESSING OFFICER BY THE ASSESSEE WHICH FACT WAS ALSO NOT DENIED. IN THESE CIRCUMSTANCES, NO MATERIAL HAD BEEN BROUGHT ON RECORD EXCEPT INFERRING THAT THE INVESTORS IN THE OPINION OF THE ASSESSING OFFICER WERE NOT CREDITWORTHY TO LINK THE ASSESSEE WITH SUCH INVESTMENT OF MONEY MADE BY THOSE PERSONS . THE CASE SQUARELY FELL WITHIN THE RATIO LAID DOWN IN THE STELLER INVESTMENT LTD. [2001] 251ITR 263 (SC) WHEREIN IT WAS STATED THAT IN SUCH CASES MERELY BECAUSE THE CREDITORS HAVE FAILED TO PROVE THEIR SOURCE OF INVESTMENT, THE SAME CANNOT BE ADDED IN THE INCOME OF THE ASSESSEE BUT IT OUGHT TO BE ADDED BY FINDING PERSONS WHO HAD THEIR NAMES . THERE WAS NO PRESUMPTION THAT SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 45 THE ASSESSEE WAS THE BENAMI OWNER OF THE INVESTMENT MADE BY THE EXISTING PERSONS. THE APPEAL WAS TO BE DISMISSED. 9. SHREE BARKHA SYNTHETICS LTD. VS. A.C.I.T [283 ITR 377 (RAJ)] IF THE TRANSACTIONS ARE MADE THROUGH BANKING CHANNELS AND ONCE THE EXISTENCE OF PERSONS BY NAME IN THE SHARE APPLICATIONS IN WHOSE NAME THE SHARES HAVE BEEN ISSUED IS SHOWN, THE ASSESSEE COMPANY CANNOT BE HELD RESPONSIBLE TO PROVE WHETHER THAT PERSON HIMSELF HAS INVESTED THE SAID MONEY OR SOME OTHER PERSON HAD MADE INVESTMENT IN THE NAME OF THAT PERSON. THE BURDEN THEN SHIFTS ON THE REVENUE TO ESTABLISH THAT SUCH INVESTMENT HAS COME FROM THE ASSESSEE COMPANY ITSELF. 10. C.I.T VS. DWARKADHISH INVESTMENT PVT. LTD. [ 194 TAXMAN 43 (DEL)] ONCE HE PROVES THE IDENTITY OF THE CREDITORS/SHARE APPLICANTS BY EITHER FURNISHING THEIR PAN NUMBERS OR INCOME-TAX ASSESSMENT NUMBERS AND SHOWS THE GENUINENESS OF TRANSACTION BY SHOWING MONEY IN HIS BOOKS EITHER BY ACCOUNT PAYEE CHEQUE OR BY DRAFT OR BY ANY OTHER MODE, THEN THE ONUS OF PROOF WOULD SHIFT TO THE REVENUE.JUST BECAUSE THE SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 46 CREDITORS/SHARE APPLICANTS COULD NOT BE FOUND AT THE ADDRESS GIVEN, IT WOULD NOT GIVE THE REVENUE THE RIGHT TO INVOKE SECTION 68. ONE MUST NOT LOSE SIGHT OF THE FACT THAT IT IS THE REVENUE WHICH HAS ALL THE POWERS AND WHEREWITHAL TO TRACE ANY PERSON . MOREOVER, IT IS SETTLED LAW THAT THE ASSESSEE NEED NOT TO PROVE THE SOURCE OF SOURCE 11. C.I.T VS. ANTARCTICA INVESTMENT PVT. LTD. [262 ITR 493 (DEL)] THE COURT WAS SATISFIED THAT NO INTERFERENCE WAS JUSTIFIED SINCE THE ASSESSEE HAD PRODUCED THE SHARE APPLICATION FORM ALONG WITH CONFIRMATION LETTERS, COPIES OF THEIR ACCOUNTS, COPIES OF THEIR BANK ACCO UNT AND CHEQUES PAYMENTS AND THEIR AUDITORS REPORT. THE ASSESSING OFFICERS CONCLUSION THAT GENUINENESS OF TRANSACTIONS HAD NOT BEEN MADE GOOD WAS NOT UPHELD DESPITE THE FACT THAT THE NOTICES RECEIVED B Y ONE OF THE COMMON DIRECTORS OF TWO SUBSCRIBING COMPANIES HAD BEEN IGNORED AND NO INFORMATION WAS FORTHCOMING FROM THE LATTER. HOWEVER, IT WAS CONFIRMED BY THE UNDER SECRETARY, LAND REVENUE, GOVERNMENT OF SIKKIM, THAT BOTH THE COMPANIES WERE INCORPORATED IN SIKKIM AND THEIR ADDRESSES WERE DISCLOSED IN THE RETURN OF ALLOTMENT; THE SUBSCRIBE R THUS STOOD IDENTIFIED. SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 47 12. C.I.T VS. DOLPHINE CANPACK LTD. [283 ITR 190 (DEL)] IN CASES WHERE THE CREDIT ENTRY RELATES TO THE ISSUE OF SHARE CAPITAL, THE ITO IS ALSO ENTITLED TO EXAMINE WHETHER THE ALLEGED SHAREHOLDERS DO IN FACT EXIST OR NOT. SUCH AN INQUIRY WAS CONDUCTED BY THE ASSESSING OFFICER IN THE INSTANT CASE. IN THE COURSE OF THE SAID INQUIRY, THE ASSESSEE HAD DISCLOSED TO THE ASSESSING OFFICER NOT ONLY THE NAMES AND THE PARTICULARS OF THE SUBSCRIBERS OF THE SHARES BUT ALSO THEIR BANK ACCOUNTS AND THE PERMANENT ACCOUNT NUMBERS ISSUED BY THE INCOME-TAX DEPARTMENT. SUPERADDED TO ALL THIS WAS THE FACT THAT THE AMOUNT RECEIVED BY THE COMPANY WAS ALL BY WAY OF CHEQUES. THAT MATERIAL WAS, IN THE OPINION OF THE TRIBUNAL, SUFFICIENT TO DISCHARGE THE ONUS THAT LAY UPON THE ASSESSEE. THAT WAS EVIDENT FROM THE PASSAGE EXTRACTED FROM THE ORDER PASSED BY THE TRIBUNAL EARLIER. IN THE ABSENCE OF A NY PERVERSITY IN THE VIEW TAKEN BY THE TRIBUNAL OR ANYTHING TO ESTABLISH CONCLUSIVELY THAT THE FINDING REGARDING THE GENUINENESS OF THE SUBSCRIBERS AND THE TRANSACTION SUFFERED FROM ANY IRRATIONALITY NO SUBSTANTIAL QUESTION OF LAW AROSE FOR CONSIDERATION IN INSTANT APPEAL TO WARRANT INTERFERENCE. THE INSTANT APPEAL ACCORDINGLY FAILED AND WAS DISMISSED.[PARA 7] SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 48 13. C.I.T VS. VALUE CAPITAL SERVICES PVT. LTD. [307 ITR 334 (DEL)] IT IS QUITE OBVIOUS THAT IS VERY DIFFICULT FOR THE ASSESSEE TO SHOW THE CREDITWORTHINESS OF STRANGERS. IF THE REVENUE HAD ANY DOUBT WITH REGARD TO THEIR ABILITY TO MAKE THE INVESTMENT, THEIR RETURNS MIGHT BE REOPENED BY THE DEPARTMENT . IF DEPARTMENT WANTS TO MAKE ADDITION ON ACCOUNT OF SHARE APPLICATION MONEY, BURDEN IS ON DEPARTMENT TO SHOW THAT EVEN IF APPLICANT DID NOT HAVE MEANS TO MAKE INVESTMENT, INVESTMENT MADE BY ASSESSEE ACTUALLY EMANATED FROM COFFERS OF ASSESSEE SO AS TO ENABLE IT TO BE TREATED AS UNDISCLOSED INCOME OF ASSESSEE. 14. C.I.T VS. PEOPLES GENERAL HOSPITAL LTD. [2013] 356 ITR 65 (MP) FACTS THE ASSESSING OFFICER MADE ADDITION, HOLDING THAT SHARE SUBSCRIPTION RECEIVED FROM A COMPANY IN SHARJAH WAS UNDISCLOSED INCOME OF THE ASSESSEE, AS HE DOUBTED THE CREDITWORTHINESS OF SUCH COMPANY. HELD SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 49 IN THE CASE OF CIT V. LOVELY EXPORTS (P.) LTD. [APPLICATION NO. 11993 OF 2007, DATED 11-1-2008], THE APEX COURT SPECIFICALLY HELD THAT IF THE IDENTI TY OF THE PERSON PROVIDING SHARE APPLICATION MONEY IS ESTABLISHED, THEN THE BURDEN IS NOT ON THE ASSESSEE TO PROVE THE CREDITWORTHINESS OF THE SAID PERSON. HOWEVER, THE DEPARTMENT CAN PROCEED AGAINST THE SAID COMPANY IN ACCORDANCE WITH LAW. [PARA 16] THE POSITION OF THE PRESENT CASE IS IDENTICAL. IT I S NOT THE CASE OF ANY OF THE PARTIES THAT THE COMPANY IN SHARJAH IS A BOGUS COMPANY OR A NON-EXISTENT COMPANY AND THE AMOUNT WHICH WAS SUBSCRIBED BY THE SAID COMPANY BY WAY OF SHARE SUBSCRIPTION WAS IN FACT THE MONEY OF THE ASSESSEE. IN THE PRESENT CASE, THE ASSESSEE HAD ESTABLISHED THE IDENTITY OF INVESTOR WHO HAD PROVIDED THE SHARE SUBSCRIPTION AND IT WAS ESTABLISHED THAT THE TRANSACTION WAS GENUINE, THOUGH AS PER CONTENTION OF THE ASSESSEE THE CREDITWORTHINESS OF THE CREDITOR WAS ALSO ESTABLISHED. IN THE PRESENT CASE, IN THE LIGHT OF T HE JUDGMENT OF LOVELY EXPORTS (P.) LTD. (SUPRA), ONLY ESTABLISHMENT OF THE IDENTITY OF THE INVESTOR IS TO BE SEEN. THE DELHI HIGH COURT ALSO, IN THE CASE OF CIT V. DIVINE LEASING & FINANCE LTD. [2008] 299 ITR 268/[2007] 158 TAXMAN 440 , CONSIDERING A SIMILAR QUESTION HELD THAT THE ASSESSEE-COMPANY, HAVING RECEIVED SUBSCRIPTIONS FROM THE PUBLIC/RIGHTS ISSUE THROUGH BANKING CHANNELS AND FURNISHED COMPLETE DETAILS OF THE SHAREHOLDERS, NO ADDITION COULD BE SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 50 MADE UNDER SECTION 68 IN THE ABSENCE OF ANY POSITIVE MATERIAL OR EVIDENCE TO INDICATE THAT THE SHAREHOLDERS WERE BENAMIDARS OR FICTITIOUS PERSONS OR THAT ANY PART OF THE SHARE CAPITAL REPRESENTED COMPANY'S OWN INCOME FROM UNDISCLOSED SOURCES. [PARA 16] 15. C.I.T VS. EMPIRE BUILDTECH (P) LTD. [2014] 43 TAXMANN.COM 269 (DEL) THE ADDITION IN RELATION TO SHARE CAPITAL CAN BE MA DE ONLY IN THE CASE OF THOSE SUBSCRIBERS/INVESTORS TO SHARE CAPITAL WHOSE PARTICULARS COULD NOT BE VERIFI ED AND WHO DID NOT RESPOND TO NOTICES ISSUED BY ASSESSING OFFICER. 16. MIDAS GOLDEN DISTILLERIES (P) LTD. VS.C.I.T [2009] 124 TTJ 25 (CHENNAI) FACTS THE ASSESSEE RAISED SHARE CAPITAL AND RECEIVED SHARE APPLICATION MONEY FROM SEVEN PERSONS AGGREGATING RS.1394.15 LAKHS. THE ASSESSEE HAD BROUGHT ON RECORD COMPLETE IDENTITY OF SHAREHOLDERS BY PROVIDING THEIR ADDRESSES AND CONFIRMATIONS TO THE EFFECT THAT THEY HAD CONTRIBUTED TO THE SHARE CAPITAL OF THE ASSESSEE COMPANY. THE MONEYS RECEIVED WERE THROUGH BANKING CHANNEL. THEY ALL WERE SHOWN TO BE REGULARLY ASSESSED TO INCOME-TAX. ASSESSMENT PARTICULARS WITH RESPECT TO EACH OF THEM SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 51 WERE MADE AVAILABLE TO THE ASSESSING AUTHORITY. TWO COMPANIES WHICH HAD MADE CONTRIBUTIONS OF RS.340 LAKHS AND RS.745 LAKHS RESPECTIVELY WERE ASSESSED WITH THE SAME ASSESSING OFFICER WHO ASSESSED THE ASSESSEE. THE ASSESSING AUTHORITY HIMSELF HAD FOUND THAT BOTH THESE APPLICANTS IN THEIR RESPECTIV E ACCOUNTS, HAD DISCLOSED INVESTMENT MADE WITH THE ASSESSEE. HOWEVER, THE SHARE APPLICATION MONEY WAS TREATED AS CASH CREDITS AND ADDED TO THE ASSESSEES INCOME. HELD DESPITE ALL THE MATERIAL AVAILABLE WITH THE ASSESSI NG AUTHORITY AND DISCREET ENQUIRIES AS WERE MADE WITHIN THE SCOPE OF HIS POWERS, THE ASSESSING AUTHORITY FOUND THAT THERE REMAINED A MYSTERY AS TO WHOM THE MONEY REALLY BELONGED . EVEN THOUGH THERE WERE CIRCUMSTANCES LEADING TO SUSPICION, YET HAVING TAKEN AN ACTION UNDER SECTION 132 AND ENQUIRIES MADE IN THE ASSESSMENT PROCEEDINGS, THE ASSESSING AUTHORITY HAD NOT BROUGHT ANY POSITIVE MATERIAL OR EVIDENCE TO INDICATE THAT THE SHARE APPLICATION MONEY AS SUCH REPRESENTED ASSESSEES OWN UNDISCLOSED MONEY BROUGHT BACK IN THE GARB OF SHARE CAPITAL. MERELY BECAUSE OF HIS SUBJECTIVE SATISFACTION THAT THE SOURCE OF AVAILABILITY OF MONEY WITH THE SHAREHOLDERS OR THEIR CREDITWORTHINESS WERE NOT ESTABLISHED, THE ASSESSING OFFICER COULD NOT TREAT THE GENUINELY SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 52 RAISED SHARE CAPITAL AS DEEMED INCOME UNDER SECTION 68 . IN THE EVENT THE INTERMEDIARY COMPANIES WERE TO BE TAKEN AS CONDUITS OR PERSONS WITHOUT REQUISITE CREDITWORTHINESS AND EVEN IF THEY WERE TO BE TREATED AS BOGUS SHAREHOLDERS, THEN ALSO NOTHING STOPPED THE REVENUE TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW AND BRING TO TAX SUCH UNEXPLAINED MONEY IN THEIR RESPECTIVE HANDS. ACCORDINGLY, THE ADDITION WAS TO BE DELETED. 17. C.I.T VS. SHREE RAMA MULTI TECH LTD [2013] 34 TAXMANN.COM 177 (GUJ.) IT IS NOTED THAT COMMISSIONER (APPEALS) AS WELL AS THE TRIBUNAL HAVE DULY CONSIDERED ISSUE AND HAVING FOUND COMPLETE DETAILS OF THE RECEIPTS OF SHARE APPLICATION MONEY, ALONG WITH THE FORM NAMES AND ADDRESSES, PAN AND OTHER REQUISITE DETAILS, THEY FOUND COMPLETE ABSENCE OF THE GROUNDS NOTED FOR INVOKING THE PROVISION OF SECTION 68. MOREOVER, BOT H RIGHTLY HAD APPLIED THE DECISION OF CIT V. LOVELY EXPORTS (P.) LTD. [APPLICATION NO. 11993 OF 2007, DATED 11-1-2003] TO THE CASE OF THE ASSESSEE. THEREFORE, NO REASON WAS FOUND IN ABSENCE OF ANY ILLEGALITY MUCH LESS ANY PERVERSITY TOO TO INTERFER E WITH THE ORDER OF THE BOTH THESE AUTHORITIES, WHO H AD CONCURRENTLY HELD THE DUE DETAILS HAVING BEEN SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 53 PROVED. THE ASSESSEE-COMPANY HAD PRESENTED THE NECESSARY WORTH PROOF BEFORE BOTH THE AUTHORITIES AND IT WAS NOT EXPECTED BY THE ASSESSEE-COMPANY TO FURTHER PROVE THE SOURCE OF THE DECEASED. THIS TAX APPEAL RESULTANTLY RAISES NO QUESTION OF LAW AND THEREFORE DO NOT MERIT FOR THE CONSIDERATION AND IS DISMISSED. [PARA 7] THE HON'BLE DELHI HIGH COURT HELD IN THE CASE OF C.I .T. VS KAMDHENU STEEL AND ALLOY LTD. 361 ITR 220 HELD AS UND ER: 10. BY THIS COMMON JUDGMENT, THE DIVISION BENCH DECIDED THESE APPEALS OF WHICH ONE APPEAL WAS RELATED TO LOVELY EXPORTS PVT. LTD.. AGAINST THE SAI D JUDGMENT, SPECIAL LEAVE PETITION WAS PREFERRED, WHICH WAS DISMISSED BY THE SUPREME COURT VIDE ORDERS DATED 11.01.2008 AND IS REPORTED AS C.I.T. VS. LOVELY EXPORTS (P) LTD. [ 216 CTR 195 (SC)]. THE COURT WHILE DISMISSING THE SLP RECORDED SOME REASONS AS WELL ALBEIT IN BRIEF, WHICH IS AS UNDER: SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 54 '2. CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME UNDER S.68 OF IT ACT, 1961? WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT.' 11. IT IS CLEAR FROM THE ABOVE THAT THE INITIAL BUR DEN IS UPON THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE. IN ORDER TO DISCHARGE THIS BURDEN, THE ASSESSEE IS REQUIRED TO PROVE: (A) IDENTITY OF SHAREHOLDER; (B) GENUINENESS OF TRANSACTION; AND SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 55 (C) CREDIT WORTHINESS OF SHAREHOLDERS. 12. IN CASE THE INVESTOR/SHAREHOLDER IS AN INDIVID UAL, SOME DOCUMENTS WILL HAVE TO BE FILED OR THE SAID SHAREHOLDER WILL HAVE TO BE PRODUCED BEFORE THE AO TO PROVE HIS IDENTITY. IF THE CREDITOR/SUBSCRIBER I S A COMPANY, THEN THE DETAILS IN THE FORM OF REGISTERED ADDRESS OR PAN IDENTITY, ETC. CAN BE FURNISHED. 13. GENUINENESS OF THE TRANSACTION IS TO BE DEMONSTRATED BY SHOWING THAT THE ASSESSEE HAD, IN FACT, RECEIVED MONEY FROM THE SAID SHAREHOLDER AND IT CAME FROM THE COFFERS FROM THAT VERY SHAREHOLDER . THE DIVISION BENCH HELD THAT WHEN THE MONEY IS RECEIVED BY CHEQUE AND IS TRANSMITTED THROUGH BANKING OR OTHER INDISPUTABLE CHANNELS, GENUINENESS OF TRANSACTION WOULD BE PROVED. OTHER DOCUMENTS SHOWING THE GENUINENESS OF TRANSACTION SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 56 COULD BE THE COPIES OF THE SHAREHOLDERS REGISTER, SHARE APPLICATION FORMS, SHARE TRANSFER REGISTER, E TC. 14. AS FAR AS CREDITWORTHINESS OR FINANCIAL STRENG TH OF THE CREDIT/SUBSCRIBER IS CONCERNED, THAT CAN BE PROVED BY PRODUCING THE BANK STATEMENT OF THE CREDITORS/SUBSCRIBERS SHOWING THAT IT HAD SUFFICIEN T BALANCE IN ITS ACCOUNTS TO ENABLE IT TO SUBSCRIBE T O THE SHARE CAPITAL. THIS JUDGMENT FURTHER HOLDS THAT ONCE THESE DOCUMENTS ARE PRODUCED, THE ASSESSEE WOULD HAVE SATISFACTORILY DISCHARGE THE ONUS CAST UPON HIM. THEREAFTER, IT IS FOR THE AO TO SCRUTINIZ E THE SAME AND IN CASE HE NURTURES ANY DOUBT ABOUT THE VERACITY OF THESE DOCUMENTS TO PROBE THE MATTER FURTHER. HOWEVER, TO DISCREDIT THE DOCUMENTS PRODUCED BY THE ASSESSEE ON THE AFORESAID ASPECTS, THERE HAS TO BE SOME COGENT REASONS AND MATERIALS SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 57 FOR THE AO AND HE CANNOT GO INTO THE REALM OF SUSPICION. 15. AT THIS STAGE, WE WOULD LIKE TO REFER TO THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF CIT V. M/S CREATIVE WORLD TELEFILMS LTD. (IN ITA NO.2182 OF 2009 DECIDED ON 12.10.2009). THE RELEVANT PORTION OF THIS ORDER IS REPRODUCED BELOW: 'IN THE CASE IN HAND, IT IS NOT DISPUTED THAT THE ASSESSEE HAD GIVEN THE DETAILS OF NAME AND ADDRESS OF THE SHAREHOLDER, THEIR PA/GIR NUMBER AND HAD ALSO GIVEN THE CHEQUE NUMBER, NAME OF THE BANK. IT WAS EXPECTED ON THE PART OF THE ASSESSING OFFICER T O MAKE PROPER INVESTIGATION AND REACH THE SHAREHOLDERS. THE ASSESSING OFFICER DID NOTHING EXCEPT ISSUING SUMMONS WHICH WERE ULTIMATELY RETURNED BACK WITH AN ENDORSEMENT 'NOT TRACEABLE'. IN OUR CONSIDERED VIEW, THE ASSESSING OFFICER OUGHT SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 58 TO HAVE FOUND OUT THEIR DETAILS THROUGH PAN CARDS, BANK ACCOUNT DETAILS OR FROM THEIR BANKERS SO AS TO REACH THE SHAREHOLDERS SINCE ALL THE RELEVANT MATERIAL DETAILS AND PARTICULARS WERE GIVEN BY THE ASSESSEE TO THE ASSESSING OFFICER. IN THE ABOVE CIRCUMSTANCES, THE VIEW TAKEN BY THE TRIBUNAL CANNOT BE FAULTED. NO SUBSTANTIAL QUESTION OF LAW I S INVOLVED IN THE APPEAL. IN THE RESULT, THE APPEAL IS DISMISSED IN LIMINI WI TH NO ORDER AS TO COSTS. (EMPHASIS SUPPLIED)' 21. CONSIDERING ALL THESE ASPECTS, WE ALLOW THE APPEAL O F THE ASSESSEE. 22. AS REGARDS THE REVENUES APPEAL, WE FIND THAT THE LEARNED CIT(A) HAS DELETED THE ADDITION BY HOLDING AS U NDER :- 49. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT THE APPELLANT HA D SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 59 PROVED THE IDENTITY OF THE CREDITOR, CREDITWORTHINE SS OF THE CREDITOR AND GENUINENESS OF THE TRANSACTION AND , THEREFORE, UNSECURED LOAN OF RS.1,15,00,000/- FROM M/S. RATNAGIRI VINIMAY PVT.LTD. DID NOT FALL WITHIN THE AMBIT OF SECTION 68 OF THE ACT. HENCE, THE A.O. WAS NOT J USTIFIED IN MAKING ADDITION OF RS.15,00,000/- U/S 68 OF THE ACT ON ACCOUNT OF UNSECURED LOAN FROM M/S RATNAGIRI VINIMAY PVT. LTD. THUS, THE ADDITION OF RS.15,00,00 0/- MADE BY THE A.O. U/S 68 OF THE ACT IS DELETED. HOWEVER, IN REGARD TO OTHER FOUR COMPANIES, IT IS N OTICED THAT THESE ARE ONLY PAPER COMPANIES AND HAD PROVIDE D ACCOMMODATION ENTRIES TO THE APPELLANT. BUT THERE ARE PECULIAR FACTS INVOLVED IN THE CASE OF LOAN CREDITO R I.E. M/S NALANDA MERCHANT PVT. LTD. AND M/S UTILITY EXIM PVT .LTD. ON ANALYSIS OF THEN COPY OF BANK STATEMENT OF THE RELE VANT PERIOD OF THESE LOAN CREDITORS, THE APPELLANT WAAS ASKED TO EXPLAIN THE SOURCE OF CREDIT IN THE BANK ACCOUNT OF THESE SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 60 COMPANIES BEFORE THE LOANS WERE GIVEN TO THE APPELL ANT COMPANY. ON VERIFICATION OF DETAILS FURNISHED BY TH E APPELLANT, IT WAS FOUND THAT THESE COMPANIES WERE U SED ONLY AS A CONDUIT BY M/S SIGNET INDUSTRIES LTD. TO GIVE LOAN TO APPELLANT COMPANY. THE FUNDS HAD BEEN TRANSFERRE D FIRST FROM M/S SIGNET INDUSTRIES LTD. TO THESE COMPANIES AND THEN THESE COMPANIES HAD FURTHER TRANSFERRED THE FUNDS T O THE APPELLANT COMPANY. AS REGARDS M/S NALANDA MERCHANT PVT. LTD. IT IS NOT ICED THAT M/S SIGNET INDUSTRIES LTD. (EARLIER KNOWN AS M /S SIGNET OVERSEAS LTD.) HAD ISSUED A CHEQUE NO. 103392 FOR RS.3,50,00,000/- ON 15.03.2007 FROM UCO BANK INDORE TO M/S NALANDA MERCHANT PVT. LTD. ON THE SAME DATE M/S NALANDA MERCHANT PVT. LTD. ISSUED A CHEQUE NO.00060 DATED 15.03.2007 FOR RS.3,50,00,000/- OF KOTAK MAHIDNRA B ANK TO THE APPELLANT COMPANY WHICH WAS DEBITED IN THE ACCO UNT OF M/S NALANDA MERCHANT PVT. LTD. ON 17.03.2007. ON PE RUSAL SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 61 OF BALANCE SHEEET OF M/S NALANDA MERCHANT PVT. LTD. AS ON 31.03.2007, IT IS NOTICED THAT IT HAD SHOWN LOANS A ND ADVANCES GIVEN AT RS.11,60,590/-. THE RELEVANT SCHE DULE OF THE BALANCE SHEET IS REPRODUCED AS UNDER :- LOANS AND ADVANCES 31.03.2007 31,03,2006 SHALIMAR FERROUS METALS PVT. LTD. 3,50,00,000 - OTHER ADVANCE 11,60,590 - 3,61,60,590 - LESS LOANS & ADVANCES TAKEN DURING THE YEAR SIGNET OVERSEAS LTD. 3,50,00,000 - 11,60,590 - IT IS FURTHER NOTICED FROM THE BALANCE SHEET OF M/S SIGNET INDUSTRIES LTD. (EARLIER NAME SIGNET OVERSEAS LTD.) AS ON 31.03.2007 THAT IN THE SUB-SCHEDULE LOANS & ADVANCE S RECOVERABLE THE AMOUNT OF ADVANCE RECOVERABLE IN T HE NAME OF M/S NALANDA MERCHANTS PVT. LTD. IS APPEARIN G AT RS.3,50,00,000/-. SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 62 FROM THE ABOVE, IT IS EVIDENTLY CLEAR THAT THE FUND S OF RS.3,50,00,000/- WERE TRANSFERRED FROM M/S SIGNET INDUSTRIES LTD. (SOL) TO THE APPELLANT COMPANY BY U SING M/S NALANDA MERCHANTS PVT. LTD. AS A CONDUIT ONLY, PROBNABLY DUE TO THE REASON THAT IF LOAN WAAS DIREC TLY GIVEN BY M/S SIGNET INDUSTRIES LTD. TO ANOTHER COMP ANY OF THE SAME GROUP, THERE MAY BE VIOLATION OF PROVIS IONS OF THE COMPANIES ACT, 1956. HOWEVER, THE SOURCE OF THE FUND INTRODUCED AS UNSECURED LOAN IN THE NAME OF M/ S NALANDA MERCHANTS PVT. LTD. STANDS DULY EXPLAINED A S RECEIVED FROM M/S SIGNET INDUSTRIES LTD., THE FLAGS HIP COMPANT OF THE GROUP. SINCE THE SOURCE OF THE AMOUN T OF RS.3,50,00,000/- IS DULY EXPLAINED, NO ADDITION U/S 68 IS REQUIRED TO BE MADE ON ACCOUNT OF THIS LOAN. HEN CE, ADDITION TO THE EXTENT OF RS.3,50,00,000/- ON ACCOU NT OF UNSECURED LOANS IN THE NAME OF M/S NALANDA MERCHANT S PVT. LTD. IS DELETED. SIMILARLY IN THE CASE OF LOAN OF RS.3,50,00,000/- I N THE NAME OF M/S UTILITY EXIM PVT. LTD. ALSO, IT IS NOTI CED THAT M/S. SIGNET INDUSTRIES LTD. HAD TRANSFERRED THE FUN DS TO THE APPELLANT THROUGH M/S UTILITY EXIM PVT. LTD. M/ S SIGNET INDUSTRIES LTD. (SOL) HAD ISSUED A CHEQUE NO . SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 63 103393 FOR RS.2,50,00,000/- ON 15.03.2007 FROM UCO BANK INDORE TO M/S UTILITY EXIM LTD. ON THE SAME DA TE M/S UTILITY EXIM PVT. LTD. ISSUED A CHEQUE NO.00074 DATED 15.03.2007 FOR RS.3,50,00,000/- OF KOTAK MAHINDRA BANK TO THE APPELLANT WHICH WAS DEBITED IN THE BANK ACCOUNT OF M/S UTILITY EXIM PVT. LTD. ON 17.3.2007. ON PERUSAL OF BALANCE SHEET OF M/S UTILI TY EXIM PVT. LTD. AS ON 31.3.2007, IT IS NOTICED THAT IT HAD SHOWN LOANS AND ADVANCES GIVEN AT RS.4,56,713/-.THE RELEVANT SCHEDULE OF THE BALANCE SHEET IS REPRODUCE D AS UNDER :- M/S UTILITY EXIM PRIVATE LIMITED DETAILS OF LOANS 7 ADVANCES LOANS AND ADVANCES 31.03.2007 31.03.2006 SHALIMAR FERROUS METALS PVT. LTD. 3,50,00,000 - OTHER ADVANCES 4,56,713 - 3,54,56,713 LESS LOANS & ADVANCES TAKEN DURING THE YEAR 3,50,00,000 - SIGNET OVERSEAS LTD. 4,56,713 SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 64 IT IS FURTHER NOTICED FROM THE BALANCE SHEET OF M/S SIGNET INDUSTRIES LTD. (SIGNET OVERSEAS LTD.) AS ON 31.03. 2007 THAT IN THE SUB-SCHEDULE LOANS & ADVANCES RECOVERABLE TH E AMOUNT OF ADVANCE RECOVERABLE IN THE NAME OF M/S UT ILITY EXIM PVT. LTD. IS APPEARING AT RS.3,50,00,000/-. FROM THE ABOVE, IT IS EVIDENTLY CLEAR THAT THE FUND S OF RS.3,50,00,000/- WERE TRANSFERRED BY M/S SIGNET IND USTRIES LTD. (EARLIER M/S SIGNET OVERSEAS LTD.) TO THE APPE LLANT COMPANY BY USING M/S UTILITY EXIM PVT. LTD. AS A CO NDUIT ONLY, PROBABLY DUE TO THE REASON THAT IF LOAN WERE DIRECTLY GIVEN BY M/S SIGNET INDUSTRIES LTD. TO ANOTHER COMP ANY OF THE SAME GROUP, THERE MAY BE VIOLATION OF PROVISION S OF THE COMPANIES ACT, 1956. HOWEVER, THE SOURCE OF THE FU NDS INTRODUCED AS UNSECURED LOAN IN THE NAME OF M/S UTI LITY EXIM PVT. LTD. STANDS DULY EXPLAINED AS RECEIVED FR OM M/S SIGNET INDUSTRIES LTD., THE FLAGSHIP COMPANY OF THE GROUP. SINCE THE SOURCE OF THE AMOUNT OF RS. 3,50,00,000/- IS DULY EXPLAINED, NO ADDITION U/S 68 IS REQUIRED TO BE MAD E ON ACCOUNT OF THIS LOAN. HENCE, ADDITION TO THE EXTENT OF RS. 3,50,000/- ON ACCOUNT OF UNSECURED LOANS IN THE NAM E OF M/S UTILITY EXIM PVT. LTD. IS DELETED. SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 65 23. THE LEARNED DR COULD NOT CONTOVERT THE FINDING OF TH E LEARNED CIT(A). THE LEARNED CIT(A) HAS RECORDED THAT I N THE CASE OF M/S NALANDA MERCHANTS PVT. LTD. AND UTILITY EXIM PVT. LTD. THE ASSESSEE WAS ABLE TO EXPLAIN THE SOURCE OF SOURCE ALSO. FURTHER, IN RESPECT OF M/S RATNAGIRI VINI MAY PVT. LTD. THE ASSESSEE WAS ABLE TO ESTABLISH THE IDEN TITY, CREDITWORTHINESS AND GENUINENESS OF TRANSACTION. IN VI EW OF THIS, WE FIND NO MERIT IN THE REVENUES APPEAL AND DIS MISS THE SAME. GROUND NO. 2.0 (A.YS.: 2008-09)OF THE ASSESSEES APPEAL AND GROUND NO.1 OF REVENUES APPEAL : GROUND NO.2.0 (A.YS.: 2008-09) OF ASSESSEES APPEALS READS AS UNDER: ASSESSMENT YEAR : 2008-09 ADDITION OF UNSECURED LOANS FROM LUCKY COMMOTRADE PVT. LTD. AS UNEXPLAINED CASH CREDIT U/S.68 : RS.2,00,00,000/- 2.0 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN LAW AS WELL AS IN FACTS IN PARTLY CONFIRMI NG THE ADDITION OF RS.2,00,00,000/- MADE BY THE ASSESSING OFFICER IN RESPECT OF UNSECURED LOANS RECEIVED FROM LUCKY COMMOTRADE PVT. LTD. BY SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 66 TREATING THE SAME AS UNEXPLAINED CASH CREDIT U/S.68. REVENUES GROUND OF APPEALS (A.YS.: 2008-09)READS AS UNDER: ASSESSMENT YEAR : 2008-09 ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE THE C.I.T.(A). ERRED IN DELETING THE ADDITION MADE UNDER SECTION 68 OF THE INCOME-TAX ACT, 1961 ON ACCOUNT OF UNSECURED LOAN RECEIVED FOR RS.9,65,75,650/-. THE FACTS ON THIS ISSUE ARE BRIEFLY THAT DURING THE YE AR, THE ASSESSEE RECEIVED RS.11,65,75,650/- FROM LUCKY COMMOTRADE PVT. LTD. WHICH IS A KOLKATA BASED COMPANY. TO PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHIN ESS, THE ASSESSEE SUBMITTED THE DULY CONFIRMED COPIES OF ACCOUNT OF UNSECURED LOAN CREDITORS, COPIES OF RELEVAN T BANK STATEMENT AND AUDITED ANNUAL ACCOUNT. IT WAS ALSO SUBMITTED THAT ALL THE UNSECURED LOAN CREDITORS ARE REGULARLY ASSESSED TO TAX AND THE LOAN TRANSACTIONS HAD TAKEN PLACE THROUGH NORMAL BANKING CHANNELS. THE SOURCE SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 67 OF FUNDS ADVANCE BY LUCKY COMMOTRADE PVT. LTD. TO THE ASSESSEE COMPANY WAS AS UNDER: LOAN RECEIVED FROM LUCKY SOURCE OF LOAN RECEIVED DATE AMOUNT (RS.) DATE AMOUNT (RS.) SOURCE 29.03.2008 2,00,00,000 29.03.2008 2,00,00,000 SIGNET INDUSTRIES LTD. 29.03.2008 2,00,00,000 29.03.2008 2,00,00,000 ADROIT INDUSTRIES (INDIA) LTD. 29.03.2008 2,00,00,000 29.03.2008 2,00,00,000 ADROIT INDUSTRIES (INDIA) LTD. 29.03.2008 2,00,00,000 29.03.2008 2,00,00,000 ADROIT INDUSTRIES (INDIA) LTD. 29.03.2008 2,00,00,000 29.03.2008 2,00,00,000 ADROIT INDUSTRIES (INDIA) LTD. 29.03.2008 2,44,00,000 29.03.2008 2,44,00,000 ADROIT INDUSTRIES (INDIA) LTD. 29.03.2008 2,39,40,000 29.03.2008 2,50,00,000 SIGNET INDUSTRIES LTD. 14,83,40,000 14,94,00,000 24. THE CONTENTION OF THE A.O. CAN BE SUMMARISED AS UNDER :- (A) SHRI PANKAJ KALANI, WHO WAS DIRECTOR OF THE SIGNET INDUSTRIES LIMITED AT THAT TIME, ADMITTED BEFORE CENTRAL EXCISE AUTHORITIES THAT CASH RECEIVED FROM SHRI MUKESHSANGLA WERE UTILIZED FOR ARRANGING ACCOMMODATION ENTRIES FROM LUCKY COMMOTRADE PVT. LTD., KOLKATA. (B) THE RETRACTION OF HIS STATEMENT GIVEN BEFORE THE CENTRAL EXCISE AUTHORITIES BY WAY OF AN AFFIDAVIT WAS OF NO CONSEQUENCE AS HE AGAIN ADMITTED THE ABOVE FACTS IN HIS STATEMENT RECORDED U/S.132(4) DURING SEARCH CONDUCTED BY THE INCOME-TAX DEPARTMENT ON 03.11.2011. SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 68 (C) AS SHRI PANKAJ KALANI WAS DIRECTOR OF THE SIGNET INDUSTRIES LIMITED, HIS CROSS EXAMINATION WAS NOT REQUIRED. (D) THE A.O. IS NOT REQUIRED TO PROVE THAT THE ASSESSEE HAS PAID CASH IN LIEU OF CHEQUES RECEIVED. THE ONUS IS UPON THE ASSESSEE TO EXPLAIN THESE TRANSACTIONS TO A.O.S SATISFACTION. THE ASSESSEE CANNOT ESCAPE FROM THIS RESPONSIBILITY BY FAILURE OF THE A.O. TO ESTABLISH CASH TRAIL. MOREOVER, THE CASH TRAIL WAS ESTABLISHED BY THE A.O. (IT MAY BE NOTED THAT THIS FINDING OF THE A.O. WAS ABSOLUTELY FALSE AND NO MATERIAL OR EVIDENCE WAS BROUGHT ON RECORD TO SHOW THAT CASH WAS DEPOSITED AT ANY STAGE BY LUCKY COMMOTRADE PVT. LTD. PRIOR TO ISSUE OF CHEQUES AT ANY LEVEL ). (E) THE LOAN THROUGH BANKING CHANNELS DOES NOT ESTABLISH GENUINENESS OF THE TRANSACTIONS AND ACTUAL BUSINESS ACTIVITY OF THE CREDITOR. THE LOAN SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 69 CREDITOR DID NOT HAVE ITS OWN PROFIT MAKING APPARATUS AND MERELY ROTATED MONEY FOR ISSUE OF CHEQUES. (F) THE IDENTITY OF THE CREDITOR IS NOT ESTABLISHED BY MERELY FURNISHING DETAILS OF INCORPORATION, P.A. NO., BANK STATEMENTS, RETURN OF INCOME, CONFIRMATION LETTERS, ETC. BUT IS ESTABLISHED THROUGH EXISTENCE I N THE EYES OF PUBLIC, GENUINE BUSINESS ACTIVITIES AND PROPER PLACE OF BUSINESS. (G) THE VARIATION IN DATE OF CASH PAYMENT AND RECEIPT OF CHEQUES FROM LUCKY COMMOTRADE PVT. LTD. WAS DUE TO PHYSICAL TRANSFER OF CASH FROM INDORE TO KOLKATA BY EMPLOYEES OF THE ASSESSEE COMPANY (IT MAY BE NOTED THAT THIS FINDING OF THE A.O. WAS ABSOLUTELY FALSE AND NO MATERIAL OR EVIDENCE WAS BROUGHT ON RECORD IN THIS REGARD) . (H) THE ASSESSEE FAILED TO ESTABLISH ITS IDENTITY AND CREDITWORTHINESS OF LUCKY COMMOTRADE PVT. LTD. AS WELL AS GENUINENESS OF TRANSACTION. LUCKY COMMOTRADE WAS A BOGUS PAPER COMPANY AND THE UNSECURED LOANS RECEIVED FROM IT WERE ACCOMMODATION ENTRIES A FACT WHICH WAS SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 70 ESTABLISHED FROM THE STATEMENT OF SHRI PANKAJ KALANI AND MATERIAL SEIZED FROM OFFICE PREMISES OF SHRI DEEPAK KALANI AND SHRI PANKAJ KALANI DURING SEARCH BY INCOME-TAX DEPARTMENT. THE EXTRACT OF SEIZED MATERIAL WAS REPRODUCED IN THE ASSESSMENT ORDER. (I) THEREFORE, UNSECURED LOANS RECEIVED OF RS.11,65,75,650/- WAS TREATED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE INCOME-TAX ACT, 1961. 25. THE CONTENTION OF THE C.I.T.(A) IS SUMMAR ISED AS UNDER :- (A) THE LOAN WAS GIVEN TO THE ASSESSEE COMPANY BY LUCKY COMMOTRADE PVT. LTD. OUT OF INTER-CORPORATE LOAN RECEIVED FROM SIGNET INDUSTRIES LTD AND ADROIT INDUSTRIES (INDIA) LIMITED. THE FUND FLOW CAN BE DEPICTED AS UNDER : SIGNET INDUSTRIES LTD. ADROIT INDUSTRIES (INDIA) LT D. LUCKY COMMOTRADE PVT. LTD. LUCKY COMMOTRADE PVT. LT D. SHALIMAR FERROUS METALS PVT. LTD. SHALIMAR FERROUS METALS PVT. LTD. (B) THE TOTAL CREDIT DURING THE YEAR FROM LUCKY COMMOTRADE PVT. LTD.WAS OF RS.16,86,90,000/- OUT SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 71 OF WHICH THE SOURCE OF RS.14,86,90,000/- WAS EXPLAI NED ON ONE TO ONE BASIS. (C) FOR THE BALANCE CREDIT OF RS.2,00,00,000/-, THE SOU RCE COULD NOT BE EXPLAINED ON ONE TO ONE BASIS AND THE SAME WAS TREATED AS UNEXPLAINED CASH CREDIT. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE BALANCE AMOUNT OF RS.2,00,00,000/- WAS ALSO RECEIVED FROM S IGNET INDUSTRIES AND FURNISHED THE STATEMENT OF LUCKY COM MOTRADE LOAN RECEIVED SOURCE OF LOAN RECEIVED DATE AMOUNT (RS.) DATE AMOUNT (RS.) SOURCE 29.03.2008 2,00,00,000 28.03.2008 1,89,40,000 SIGNET INDUSTRIES LTD. - OUT OF ADVANCE OF RS.2,50,00,000/- RECEIVED ON 28.03.2008 29.03.2008 11,60,000 SIGNET INDUSTRIES LTD. - OUT OF ADVANCE OF RS.2,50,00,000/- RECEIVED ON 29.03.2008 THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTE D THAT THERE WAS COMPLETE VIOLATION OF PRINCIPLES OF NATU RAL JUSTICE ON THE PART OF A.O. IN MAKING ADDITION ON THE BASIS OF DOCUMENTS SEIZED FROM THE PREMISES OF SHRI DEEPAK KALANI AND SHRI PANKAJ KALANI DURING SEARCH BY INCOME-TAX DEPARTMENT ON 03.11.2011, THE STATEMENT OF SHRI PANKAJ KALANI RECORDED U/S.132(4) BY INCOME-TAX DEPARTMENT SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 72 DURING SEARCH AND THE STATEMENT OF SHRI PANKAJ KALANI RECORDED BY THE CENTRAL EXCISE AUTHORIES ON 07.12.20 07 AND 17.12.2007BECAUSE: (A) THE COPIES OF MATERIAL SEIZED FROM THE PREMISES OF SHRI PANKAJ KALANI AND SHRI DEEPAK KALANI AND STATEMENT OF SHRI PANKAJ KALANI RECORDED U/S.132(4) DURING SEARCH, WHICH WERE USED AGAINST THE ASSESSEE, WERE NOT PROVIDED TO THE ASSESSEE DESPITE SPECIFIC REQUEST TO THE A.O.; (B) THE STATEMENTS OF SHRI PANKAJ KALANI, RECORDED BY CENTRAL EXCISE AUTHORITIES ON 06.12.2007 AND SUBSEQUENTLY ON 17.12.2007 IN THE COURSE OF SEARCH IN THE CASE OF SIGNET INDUSTRIES LTD., WHICH WERE USED AGAINST THE ASSESSEE, WERE ALSO NOT PROVIDED TO THE ASSESSEE.; (C) SHRI MUKESHSANGLA WAS NEVER CONFRONTED WITH RESPECT TO (I) THE MATERIAL SEIZED FROM THE PREMISES OF SHRI PANKAJ KALANI AND SHRI DEEPAK KALANI SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 73 (II) PAGE NO. 129 TO 130, 132 TO 137 AND 254 OF LPS 2/14 SEIZED FROM THE OFFICE PREMISES OF SIGNET INDUSTRIES LTD. AND (III) THE STATEMENT OF SHRI PANKAJ KALANI RECORDED DURING INCOME-TAX SEARCH AS WELL AS CENTRAL EXCISE SEARCH EITHER DURING SEARCH OR POST SEARCH INQUIRIES OR ASSESSMENT PROCEEDINGS U/S.153A; AND (D) THE ASSESSEE WAS NEITHER PROVIDED NOR ASKED TO EXPLAIN THE CONTENTS OF MATERIAL SEIZED FROM THE PREMISES OF SHRI DEEPAK KALANI AND SHRI PANKAJ KALANI AND NEVER CONFRONTED WITH THE CONTENTS OF STATEMENT MADE BY HIM. (E) THE A.O. RELIED UPON THE STATEMENT OF A PERSON WHICH WAS RETRACTED BY WAY OF AN AFFIDAVIT AND THE EXAMINATION OF MATERIAL SEIZED FROM HIS OFFICE PREMISES BY THE A.O. SHOWED CASH RECEIVED FROM SIGNET, SOL - MUMBAI, SOL BUT DID NOT REVEAL EVEN A SINGLE ENTRY SHOWING CASH PAYMENT TO LUCKY COMMOTRADE PVT. LTD. OUT OF CASH RECEIVED FROM SIGNET INDUSTRIES LTD. SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 74 26. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT IT IS A SETTLED POSITION IN LAW THAT THE ADMISSION MADE BY A THIRD PARTY IN HIS STATEMENT RECORDED BEFORE AN AUTHORI TY APPOINTED UNDER PROVISIONS OF ANY ACT AND MATERIAL FOUND FROM HIS POSSESSION ARE BINDING UPON HIM IN HIS CASE ONLY AND THE SAME CANNOT BE FOISTED UPON OTHER PARTIES UNLES S THE OTHER PARTY IS CONFRONTED WITH THE STATEMENT, PRO VIDED WITH THE COPIES OF MATERIAL RELIED UPON, GIVEN LEGALLY AVAILABLE OPPORTUNITIES TO REBUT THE SAME WITH EVIDENC E AND THERE IS CORROBORATORY MATERIAL TO SUPPORT THE TRUTHFULNESS OF THE ADMISSION. THE UN-CONFRONTED MATE RIAL AND STATEMENTS ARE NOT ADMISSIBLE EVIDENCE FOR THE PURP OSE OF MAKING ADDITIONS. THE LEARNED COUNSEL FOR THE AS SESSEE FURTHER SUBMITTED THAT THE EVIDENCES OR INFORMATION COLLECTED BY AN ASSESSING OFFICER IN THE COURSE OF ANY ENQUIRY OR OTHERWISE, CANNOT BE USED AGAINST THE ASSESSE E UNLESS SUCH EVIDENCES OR INFORMATION, WHICH ARE SOUGH T TO SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 75 BE USED AGAINST THE ASSESSEE, ARE SUPPLIED TO HIM AND HE IS ALLOWED ADEQUATE OPPORTUNITY TO REBUT THE SAME. IF SUCH EVIDENCES CONSIST OF ORAL EVIDENCES, THE ASSESSEE SHO ULD BE GIVEN AN OPPORTUNITY TO CROSS-EXAMINE THE PERSON CONCERNED. IT WOULD BE THAT TESTIMONY WHICH HAS BEEN SUBJECTED TO CROSS-EXAMINATION, WHICH COULD BE USED AGAINST THE ASSESSEE. 27. IN SUPPORT OF THE ABOVE CONTENTIONS, THE LEARNED COUNSEL FOR THE ASSESSEE WE RELY UPON THE FOLLOWING JUDGEMENTS : (I) C.I.T. VS. M. K. BROTHERS [163 ITR 249 (GUJ)] (II) A.C.I.T. VS. PRABHAT OIL MILLS [52 TTJ 533 (AHD)] (III) KISHINCHANDCHELLARAM VS. C.I.T. [125 ITR 713 (SC)] (IV) ADDL. I.T.O VS. PONKUNNAM TRADERS [102 ITR 366 (KER)] (V) ADDL. C.I.T. VS. MS. LATAMANGESHKAR [97 ITR 696 (BOM) ] (VI) MOLABUX VS. I.T.O. [51 TTJ 1 (JP)] (VII) VIRENDRAKUMARSAKLECHAVS. D.C.I.T. [59 TTJ 785 (IND)] (VIII) I.T.O. VS. BALA PRASAD R. LOKMANYAWAR [18 TTJ 167 (PU NE)] (IX) I.T.O. VS. BAJRANG OIL INDUSTRIES [12 ITD 631 (NAG)] (X) AMAR SINGH VS. I.T.O. [54 ITD 375 (DEL)] (XI) UDEYRAJGOLIYA (HUF) VS. A.C.I.T. [64 ITD 21 (MUM) (TM) ] (XII) SILVER & ARTS PALACE VS. A.C.I.T. [52 ITD 493 (JP)] PAGE NO. 254 OF LPS-2/14(FOUND AND SEIZED FROM OFFICE PREMISES OF SIGNET INDUSTRIES LTD. AND PAGE 86 TO 88 OF SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 76 LPS-10 (FOUND AND SEIZED FROM OFFICE PREMISES OF SHR I DEEPAK KALANI) 28. A PERUSAL OF PAGE NO. 254 OF LPS 2/14 SEIZED FRO M THE OFFICE PREMISES OF SIGNET INDUSTRIES LTD., REVEALS T HAT IT IS A LEDGER ACCOUNT OF SHRI PANKAJ KALANI FOR THE PERIOD 01.06.2005 TO 05.12.2007. IT CONTAINS COLUMNS LIKE D ATE, PARTICULARS, VOUCHER TYPE, FINANCIAL YEAR, DEBIT AMOUNTS, CREDIT AMOUNTS AND DATE-WISE BALANCE. WHILE DATE-WISE AMOUNT APPEARING ON DEBIT SIDE SHOWS CASH PAID TO SHRI PANKAJ KALANI, THE CREDIT SIDE SHOWS CASH RECEIVED FROM SHRI PANKAJ KALANI BY SIGNET INDUSTRIES LIMITED. THE PAGE SHOWS CASH BALANCE OF RS.2,14,24,043/- ON 07.07.2007 LYING WITH SHRI PANKAJ KALANI WHO WAS THE DIRECTOR OF SIGNET INDUSTRIES LIMITED. 29. A PERUSAL OF PAGE NO. 86 TO 88 OF LPS-10 (AS PER A.O. SAME TRANSACTION APPEAR ON PAGE NO. 89-97 OF LPS-10 ) SEIZED FROM THE OFFICE PREMISES OF SHRI DEEPAK KALANI ON SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 77 09.12.2011 SHOWS THAT IT IS AN EXCEL SHEET WHICH HAS BEEN SORTED FOR CASH RECEIVED ON THE FIELD NAMED SIGNET, SOL MUMBAI AND SOL . IT CONTAINS THE COLUMNS SUCH AS DATE , SIGNET, AMOUNT, PK / DK, BHARAT AND TOTAL. AS THE TRANSACTIONS APPEARS TO BE SORTED FOR RECEIPT FROM SIG NET, THE IMPUGNED SHEET DOES NOT CONTAIN ANY TRANSACTION FOR CASH PAYMENT TO SIGNET. 30. A COMPARISON OF TRANSACTIONS FOR THE RELEVANT PERIOD BETWEEN THE PAGE NO. 254 OF LPS-2/14 SEIZED F ROM THE OFFICE PREMISES OF SIGNET INDUSTRIES LIMITED AND PAGE NO. 86 TO 88 OF LPS-10 FOUND FROM THE PREMISES OF S HRI DEEPAK KALANI SHOWS THAT MOST OF THE TRANSACTIONS SHOWING CASH SENT BY SIGNET INDUSTRIES LTD. AND RECE IVED BY SHRI PANKAJ KALANI WERE MATCHING EXCEPT IN THE FOLLOWING CASES: SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 78 CASH PAID APPEARING ON PAGE NO. 254 OF LPS-2/14 BUT NOT APPEARING ON PAGE NO.8688 OF LPS-10 DATE AMOUNT (RS.) 09.02.07 15,00,000 15.02.07 50,00,000 19.02.07 20,00,000 06.04.07 74,043 06.07.07 6,00,000 91,74,043 CASH PAID APPEARING ON PAGE NO. 8688 OF LPS-10 BUT NOT APPEARING ON PAGE NO. 254 OF LPS-2/14 DATE AMOUNT (RS.) 05.02.07 5,00,000 09.02.07 10,00,000 09.02.07 25,00,000 12.03.07 30,00,000 06.07.07 60,00,000 1,30,00,000 CASH PAID APPEARING ON PAGE NO. 8688 OF LPS-10 BUT NO CORRESPONDING DOCUMENT WAS FOUND IN THE ASSESSEES CASE DATE AMOUNT (RS.) 18.08.07 5,00,000 07.09.07 10,00,000 08.09.07 15,00,000 03.10.07 15,00,000 03.10.07 10,00,000 04.10.07 5,00,000 12.12.07 3,75,000 07.02.08 17,50,000 13.02.08 40,00,000 03.03.08 1,09,000 1,22,34,000 THERE ARE NO ENTRIES OF CASH SENT BY SHRI PANKAJ KALANI TO THE ASSESSEE PRESUMABLY AND LOGICALLY BECAUSE OF SORTING OF DATA OF RECEIPT SIDE ONLY BY THE FIELD SIGNET. 31. AS PER PAGE NO. 254 OF LPS 2/14, THE TOTAL PAYMEN T RELEVANT TO ASSESSMENT YEARS 2006-07 & 2007-08 MADE TO SHRI DEEPAK KALANI AND SHRI PANKAJ KALANI WAS SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 79 RS.6,05,00,000/- FOR ASSESSMENT YEAR 2007-08 AND RS.1,61,74,043/- IN THE ASSESSMENT YEAR 2008-09. AS AGAINST IT, THE TOTAL PAYMENT AS PER SHRI DEEPAK KALANI AND SHRI PANKAJ KALANI WAS RS.5,90,00,000/- IN THE ASSESSMENT YEAR 2007-08 AND RS.3,37,34,000/- IN THE ASSESSMENT YEAR 2008-09. HOWEVER, THE ASSESSING OFFICE R MADE ADDITION OF RS.2,95,00,000/- FOR THE REASONS BEST KNOWN TO HIM. MOREOVER, IT APPEARS THAT THE ASSESSING OFFICER CONSIDERED ONLY THE CASH PAID TO SHRI DEEPAK K ALANI AND SHRI PANKAJ KALANI BUT NO COGNIZANCE WAS TAKEN IN RESPECT OF CASH RECEIVED FROM THEM BECAUSE THE SIGNET INDUSTRIES LIMITED RECALLED RS.4,93,00,000/- FROM SH RI DEEPAK KALANI AND SHRI PANKAJ KALANI IN THE ASSESSMENT YEAR 2007-08 AND RS.59,50,000/- IN ASSESSMENT YEAR 2008-09. IN FACT, REGULAR RECEIPT FROM AND PAYMENT OF CASH TO SHRI DEEPAK KALANI AND SHRI PANKAJ KALANI, IF CONSIDERED IN THE LIGHT OF AFFIDAVIT OF SHRI PANKAJ KAL ANI, SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 80 SUPPORTS THE ASSESSEES EXPLANATION THAT THEY USED TO KEEP CASH OF SHRI MUKESHSANGLA FOR TEMPORARY SAFE CUSTODY. TH E IMPUGNED ARRANGEMENT CONTINUED TILL 06.12.2007 I.E. T ILL THE SEARCH BY CENTRAL EXCISE AUTHORITIES. HOWEVER, AF TER THE AFORESAID SEARCH, SHRI PANKAJ KALANI AND SHRI DEEPAK KALANI REFUSED TO ACCEPT ANY CASH FROM SHRI MUKESH SANGLA. THE RESULTANT PEAK OF CASH PAID AND CASH RECEIVED FROM SHRI DEEPAK KALANI AND SHRI PANKAJ KALANI WAS OFFERED FOR TAXATION BY SHRI MUKESHSANGLA IN HIS REVI SED RETURN OF INCOME AND THE SAME WERE ACCEPTED BY INCOME- TAX DEPARTMENT. 32. IT WAS INTERESTING TO NOTE THE FOLLOWING PECULIAR FACTS IN RELATION TO PAGE NO 254 OF LPS-2/14 FOUND AND SEIZED F ROM THE PREMISES OF THE SIGNET INDUSTRIES LIMITED AND PAG E 86 TO 88 OF LPS 10 SEIZED FROM THE OFFICE OF SHRI DEEP AK KALANI VIS--VIS THE ADMISSION SHRI PANKAJ KALANI ON THE BASIS OF WHICH THE A.O. TREATED GENUINE LOANS FROM LUCKY SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 81 COMMOTRADE PVT. LTD. AS UNEXPLAINED CASH CREDIT U/S.68 AND TREATED CASH PAID TO SHRI PANKAJ KALANI AS UNDISCLOSED INCOME OF THE ASSESSEE IN COMPLETE IGNORANCE OF RECOV ERY/ RECALL OF CASH FROM HIM: (A) ALTHOUGH SHRI PANKAJ KALANI ADMITTED IN HIS STATEME NT U/S.132(4) THAT CASH RECEIVED FROM SIGNET INDUSTRIE S LTD. WAS USED FOR ARRANGING ACCOMMODATION ENTRIES FROM L UCKY COMMOTRADE PVT. LTD. AND THE A.O. ALSO REPRODUCED T HE RELEVANT PAGES SHOWING RECEIPT OF CASH FROM SIGNET INDUSTRIES LTD., THE A.O. COULD NOT POINT OUT EVEN A SINGLE ENTRY IN THE MATERIAL SEIZED FROM THE OFFICE PREMIS ES OF SHRI DEEPAK KALANI SHOWING CASH PAYMENT TO LUCKY COMMOTRADE PVT. LTD. OR ITS REPRESENTATIVE FOR ARRA NGING CHEQUES. THE ABSENCE OF ANY ENTRY SHOWING PAYMENT O F CASH FOR ARRANGING ACCOMMODATION ENTRY IN THE GARB OF UNSECURED LOANS FROM LUCKY COMMOTRADE PVT. LTD. FRO M THE MATERIAL SEIZED FROM THE OFFICE PREMISES OF SHR I DEEPAK KALANI CLEARLY ESTABLISHED THE UNTRUTHFULNESS OF TH E STATEMENTS GIVEN BY SHRI PANKAJ KALANI. SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 82 (B) THE RETRACTION OF HIS STATEMENTS GIVEN ON 07.12.200 7 AND 17.12.2007 BEFORE CENTRAL EXCISE AUTHORITY BY SHRI PANKAJ KALANI ON ACCOUNT OF THREAT OF ARREST BY FILING AFF IDAVIT DATED 19.12.2007 AND SUBSEQUENT RE-ADMISSION OF THE SAME ON 03.11.2011 IN HIS STATEMENT RECORDED U/S.13 2(4) DURING THE SEARCH IN HIS CASE BEFORE THE INCOME-TAX AUTHORITIES WITHOUT ANY DOCUMENTARY EVIDENCE IN THE FORM OF ANY SEIZED MATERIAL SHOWS THAT HIS STATEMENT WAS NOT RELIABLE AND SELF-SERVING, PRESUMABLY TO AVOID TAX LIABILITIES IN HIS HANDS BY CREATING STORY OF ARRANGING ACCOMMO DATION ENTRIES FROM LUCKY COMMOTRADE PVT. LTD. FOR THE ASS ESSEE GROUP. (C) IF THE A.O. BELIEVED THE ENTRIES OF PAYMENT TO SHRI PANKAJ KALANI ON THE BASIS OF PAGE NO. 254 OF LPS-2/14, WH ICH SUBSTANTIALLY MATCHED WITH PAGE 86 TO 88 OF LPS-10 FOUND FROM THE PREMISES OF SHRI DEEPAK KALANI, HE SHOULD HAVE ALSO BELIEVED THE OTHER ENTRIES OF RECEIPTS RECORDE D ON THE SAME SEIZED MATERIAL SHOWING RECOVERY /RECALL OF TH E CASH FROM HIM. FOR DETERMINATION OF UNDISCLOSED INCOME I N A SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 83 HOLISTIC AND JUDICIOUS MANNER AND NOT TO THE DETRIM ENT OF THE ASSESSEE, THE A.O. SHOULD HAVE CONSIDERED ALL T HE ENTRIES IN THE SEIZED MATERIAL. THE A.O. CANNOT ADO PT A PICK AND CHOOSE POLICY BY CONSIDERING ONLY THE DE BIT ENTRIES BECAUSE THEY STRENGTHEN HIS CASE AND IGNORE THE CREDIT ENTRIES BECAUSE THEY SUPPORT THE ASSESSEES CASE. (D) AS THE ENTIRE CASE OF THE A.O. WAS BASED UPON THE STATEMENT OF SHRI PANKAJ KALANI WHO ADMITTED CASH R ECEIPT FROM THE ASSESSE GROUP FOR ARRANGING ACCOMMODATION ENTRIES FROM LUCKY COMMOTRADE PVT. LTD., HE SHOULD HAVE BROUGHT EVIDENCE ON RECORD TO SHOW RECEIPT OF CASH FROM THE ASSESSE GROUP AND ITS PAYMENT EITHER TO LUCKY COMMOTRADE PVT. LTD. OR ITS REPRESENTATIVE IN THIS REGARD. HE SHOULD HAVE ALSO ENQUIRED ABOUT MOVEMENT OF FUND S FROM INDORE TO KOLKATA AND BROUGHT EVIDENCE ON RECO RD INSTEAD OF UNQUESTIONINGLY AND BLINDLY BELIEVING TH E STATEMENT OF SHRI PANKAJ KALANI. IT IS IMPOSSIBLE T O BELIEVE THAT THE SOME REPRESENTATIVE OF THE ASSESSEE WOULD CARRY SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 84 CASH RUNNING INTO CRORES OF RUPEES VIA TRAIN OR ROA D TO KOLKATA CONTINUOUSLY FOR SEVERAL YEARS. LPS-11 ON ANALYSIS OF LPS-11, THE FOLLOWING FACTS EMERGES (A) AS PER A.O., LPS-11 SEIZED DURING THE SEARCH, IS A CASH BOOK FOR THE PERIOD 24.01.2007 TO 07.06.2011. HOWEV ER, ON ANALYSIS OF EXTRACT OF LPS-11 GIVEN IN ASSESSMENT O RDER, IT APPEARS THAT IT IS AN EXCEL SHEET WHICH HAS BEEN SO RTED FOR RECEIPTS ON THE FIELD SIGNET, SOL AND SOL MUMB AI. HOWEVER THE DATE-WISE DETAILS OF THE TRANSACTIONS REPRODUCED IN THE ASSESSMENT ORDER REVEALS THAT TRANSACTIONS HAVE BEEN PICKED UP SELECTIVELY FOR TH E PERIOD 29.07.2008 TO 30.09.2009. THEREFORE MANY RECEIPTS A ND PAYMENTS APPEARS TO HAVE BEEN ELIMINATED IN THE PRO CESS OF EXCLUSION OF PERIOD AND SELECTIVE SORTING OF DAT A. (B) THE IMPUGNED CASH BOOK CONTAINS 12 COLUMNS. AS THE A.O. DID NOT EXPLAIN ANYTHING IN RELATION TO THE IMPUGNE D CASH BOOK IN ASSESSMENT ORDER AND SIMPLY TREATED ENTRIES IN THE NAME SIGNET, SOL AND SOL MUMBAI AS RECEIPTS F ROM SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 85 SIGNET INDUSTRIES LTD., THE SAME HAS TO BE ANALYZED ON THE BASIS OF ITS LOGICAL INTERPRETATION. ON COMING TO L OGICAL CONCLUSION IT APPEARS THAT, COLUMN NO. 1 TO 5 SHOWS RECEIPTS ON VARIOUS DATES FROM SIGNET AND CONTAINS COLUMNS LIKE DATE, SIGNET, AMOUNT, PK / DK AND BHAR AT / PK/OFFICE. COLUMN NO 6 TO 9 APPEARS TO BE PAYMENTS MADE TO VARIOUS PARTIES ON DIFFERENT DATES. COLUMN NO. 1 0 APPEARS TO BE CASH BALANCE IN THE OFFICE. COLUMN 11 SHOWS PAYMENT MADE TO SIGNET AND COLUMN 12 SHOWS BALANCE HELD ON ACCOUNT OF SIGNET. (C) THE IMPUGNED INFERENCE HAS BEEN DERIVED FROM THE FA CT THAT IN COLUMN NO. 1, ON 29.07.2008, 33.75 WERE REC EIVED BY PK FROM SIGNET, REPAID 33.75 TO SIGNET WITH NO D ATE MENTIONED THEREIN AND BALANCE WAS 0.00 (NIL). SIMIL ARLY, ON 28.08.2008, 11.00 WERE RECEIVED BY PK FROM SIGNE T, REPAID 11.00 TO SIGNET WITH NO DATE MENTIONED THERE IN AND BALANCE WAS 0.00 (NIL). SIMILARLY, ON 26.03.2009 7. 60 WERE RECEIVED BY PK FROM SIGNET, REPAID 7.60 TO SIGNET W ITH NO DATE MENTIONED THEREIN AND BALANCE WAS 0.00 (NIL). AGAIN SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 86 ON 22.01.2009, 7.00 WERE RECEIVED BY DK, REPAID 7.0 0 TO SIGNET WITH NO DATE MENTIONED THEREIN AND BALANCE W AS 0.00 (NIL). (D) ALSO UPON FURTHER ANALYSIS, IT WAS OBSERVED THAT DU RING THE INTERVENING PERIOD THE DAILY BALANCES WERE NOT MATC HING BECAUSE THE EXCEL SHEET WAS NOT COMPLETE IN ALL RES PECT BECAUSE ENTIRE PERIOD WAS NOT COVERED AND SORTING W AS DONE SELECTIVELY DUE TO WHICH IMPORTANT ENTRIES GOT ELIMINATED. THIS FACT IS EVIDENT FROM THE TRANSACTI ONS ON 10.09.2008, 15.09.2008 AND 06.10.2008, 10.00, 5.00 AND 10.00 WERE RECEIVED BY PK AND 23.50 WAS PAID TO SIG NET AND BALANCE REMAINED 15.00. IT WAS SO BECAUSE CERTA IN INTERVENING ENTRIES OF RECEIPTS AND PAYMENTS GOT OM ITTED DURING THE INTERVENING PERIOD IN THE PROCESSING OF SORTING. (E) CONSIDERING THE INCOMPLETENESS OF THE DATA REPRODUC ED IN THE ASSESSMENT ORDER, THE ASSESSEE RECONSTRUCTED TH E ENTIRE SO CALLED CASH BOOK BY PRESUMING INFORMATION PROVIDED IN THE EXCEL SHEET REPRODUCED IN ASSESSMEN T SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 87 ORDER AS CORRECT. THE SAME IS ENCLOSED HEREWITH FO R YOUR KIND PERUSAL. (F) FROM THE ABOVE CASH BOOK IT IS QUITE CLEAR THAT THE SIGNET INDUSTRIES LIMITED HAD CASH IN HAND OF RS.2,14,24,0 63/- RECALLED FROM SHRI PANKAJ KALANI, WHICH WAS UTILIZE D FOR SENDING HIM FUNDS PERIODICALLY AND RECALLING THE SA ME FROM TIME TO TIME FOR HIS BUSINESS PURPOSES. IF THE PEAK CREDIT ON THE BASIS OF VARIOUS PAYMENTS AND RECEIPT S IS WORKED OUT, IT IS ALWAYS LESS THAN AVAILABLE CASH-I N-HAND RS.2,14,24,063/-. THE IMPUGNED CASH WAS ULTIMATELY UTILIZED FOR PAYMENT OF INCOME-TAX LIABILITY OF SHR I MUKESHSANGLA ARISING FROM THE REVISED RETURNS OF IN COME VOLUNTARILY FILED FOR ASSESSMENT YEAR 2006-07 AND ASSESSMENT YEAR 2007-08 AND RETURN OF INCOME FILED FOR ASSESSMENT YEAR 2008-09. THE DETAILS THEREOF ARE AS UNDER: ASSTT. YEAR UNDISCLOSED INCOME (RS.) TAXES (RS.) 2006-07 45,00,000 20,86,755 2007-08 1,95,00,000 86,88,340 2008-09 1,60,00,000 65,49,450 4,00,00,000 1,73,24,545 SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 88 ACCOMMODATION ENTRIES PRE-SUPPOSES EXCHANGE OF CASH AGAINST CHEQUES: 4.0 EVERY BUSINESS IS RUN ON CERTAIN CUSTOMARY PRACTICE S AND TRADITIONS. IN THE BUSINESS OF ACCOMMODATION ENTRIE S, THE ACCOMMODATION ENTRY PROVIDER GIVES CHEQUE AND RECEI VES CASH OF EQUIVALENT AMOUNT FROM THE BENEFICIARY. THE EXCH ANGE OF CHEQUE AND CASH TAKES PLACE SIMULTANEOUSLY. IT NEVE R HAPPENS THAT THERE IS A TIME GAP OF SEVERAL MONTHS IN SUCH EXCHANGE OF CASH AND CHEQUE. IF THE CONTENTION OF THE ASSESSING OFFICER IS ACCEPTED, THEN THE PAYMENT OF CASH TO SHRI PANKAJ K ALANI AND SHRI DEEPAK KALANI AND RECEIPT OF UNSECURED LOAN FR OM LUCKY COMMOTRADE PVT. LTD SHOULD HAVE BEEN AT THE SAME PO INT OF TIME. IN OTHER WORDS, THERE SHOULD HAVE BEEN ONE T O ONE RELATION BETWEEN CASH PAID TO SHRI PANKAJ KALANI AN D SHRI DEEPAK KALANI AND CHEQUE RECEIVED FROM LUCKY COMMOT RADE PVT. LTD. HOWEVER, THERE IS NO SUCH RELATIONSHIP AS EVIDENT FROM THE FOLLOWING TABLE, WHICH PRIMA FACIE ESTABLISHED THAT THE UNSECURED LOANS FROM LUCKY COMMOTRADE PVT. LTD. WER E SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 89 GENUINE LOANS AND NOT ACCOMMODATION ENTRIES AS ALLE GED BY THE ASSESSING OFFICER : ASSESSMENT YEAR : 2007-08 DATE CASH PAID TO KALANI BROTHERS(RS.) DATE CHEQUE RECEIVED FROM LUCKY COMMOTRADE PVT. LTD. (RS.) 06.02.2007 17,00,000 05.03.2007 60,00,000 06.02.2007 3,00,000 06.03.2007 26,50,000 07.02.2007 10,00,000 09.03.2007 31,50,000 07.02.2007 10,00,000 14.03.2007 30,00,000 09.02.2007 15,00,000 19.03.2007 40,00,000 12.02.2007 35,00,000 20.03.2007 30,00,000 13.02.2007 15,00,000 21.03.2007 20,00,000 13.02.2007 15,00,000 23.03.2007 15,00,000 15.02.2007 10,00,000 15.02.2007 50,00,000 17.02.2007 27,00,000 17.02.2007 23,00,000 19.02.2007 20,00,000 19.02.2007 15,00,000 20.02.2007 40,00,000 23.02.2007 25,00,000 08.03.2007 10,00,000 10.03.2007 40,00,000 13.03.2007 75,00,000 15.03.2007 1,00,00,000 16.03.2007 20,00,000 21.03.2007 30,00,000 6,05,00,000 2,53,00,000 ASSESSMENT YEAR : 2008-09 DATE CASH PAID TOKALANI BROTHERS (RS.) DATE CHEQUE RECEIVED FROMLUCKY COMMOTRADE PVT. LTD. (RS.) 05.04.2007 74,043 29.03.2008 4,20,99,000 17.04.2007 10,00,000 18.04.2007 12,00,000 21.04.2007 25,00,000 25.04.2007 25,00,000 02.07.2007 60,00,000 03.07.2007 13,00,000 06.07.2007 6,00,000 07.07.2007 10,00,000 1,61,74,043 4,20,99,000 ASSESSMENT YEAR : 2009-10 DATE CASH PAID TOKALANI BROTHERS (RS.) DATE CHEQUE RECEIVED FROMLUCKY COMMOTRADE PVT. LTD. (RS.) 04.04.2008 12,00,000 02.05.2008 1,10,00,000 07.05.2008 25,00,000 29.07.2008 20,00,000 02.08.2008 20,00,000 11.08.2008 6,40,000 19.09.2008 23,25,000 06.10.2008 5,20,000 07.10.2008 1,78,000 SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 90 07.11.2008 53,05,000 21.11.2008 17,80,000 12.12.2008 5,30,000 26.12.2008 15,00,000 3,14,78,000 ASSESSMENT YEAR : 2012-13 DATE CASH PAID TOKALANI BROTHERS (RS.) DATE CHEQUE RECEIVED FROMLUCKY COMMOTRADE PVT. LTD. (RS.) 08.02.2012 50,00,000 14.02.2012 50,00,000 22.02.2012 50,00,000 02.03.2012 50,00,000 21.03.2012 50,00,000 2,50,00,000 33. ON PERUSAL OF LPS-11 (PERIOD AUGUST 2008 TO 30 TH MAY 2009) SEIZED IN THE CASE OF SHRI PANKAJ KALANI AND SHRI DEEPAK KALANI AND REPRODUCED AT PAGE 41 OF THE ASSESSMENT ORDER OF SIGNET INDUSTRIES LTD., IT IS SE EN THAT WHILE THE AMOUNTS ARE SHOWN TO HAVE BEEN RECEIVED FROM SIGNET INDUSTRIES LTD., NONE OF THE PAYMENTS ARE MADE TO LUCKY COMMODTRADE PVT. LTD. RATHER IT IS PAID TO GUDDU , SHARMA, CHORASIAJI, VISHAL, CHORASIA BOMBAY, HIMANSHU PIONEER, A.K.PORWAL ETC. FIRSTLY , THERE IS NOTHING IN THE SEIZED MATERIAL FOUND EITHER FROM ASSESSEES PREMISES OR FROM THE OFFICE PREMISES OF SHRI DEEPAK KALANI SUGGEST ING ANY PAYMENT TO SHRI DEEPAK KALANI AND SHRI PANKAJ KALANI SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 91 DURING THE PERIOD AUGUST 2008 TO MAY 2009 FOR ARRANGI NG ACCOMMODATION ENTRIES. SECONDLY , HOW THE PAYMENTS SHOWN TO HAVE BEEN MADE TO GUDDU, SHARMA, CHORASIAJI, VISHAL, CHORASIA BOMBAY, HIMANSHU PIONEER, A.K.PORWAL, ETC. WERE RELATED TO THE ASSESSEE AND THE ALLEGED ACCOMMODATION ENTRIES FROM LUCKY COMMOTRADE PVT. LTD. WAS NOT BROUGHT OUT BY THE A.O. OR C.I.T.(A). 34. AS EARLIER STATED, THE MATERIAL SEIZED DURING SEARCH IN THE CASE OF SHRI DEEPAK KALANI AND SHRI PANKAJ KALANI AS WELL AS THEIR STATEMENTS RECORDED DURING SEARCH WERE NOT PROVIDED TO THE ASSESSEE AND THEREFORE, THE ASSESSEE WAS DEPRIVED OF THE OPPORTUNITIES TO EXAMINE AND EXPLAIN THESE DOCUMENTS AND EXAMINE SHRI DEEPAK KALANI AND SHRI PANKAJ KALANI ABOUT THEIR CONTENTS. SUCH UN- CONFRONTED MATERIAL AND STATEMENTS ARE NOT BINDING IN TH E ASSESSEES CASE AS HELD BY VARIOUS JUDGEMENTS DISCUSSED IN PRECEDING PARAS . SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 92 35. THE CONTENTION OF THE C.I.T.(A). THAT EVEN IN T HE BUSINESS OF ACCOMMODATION ENTRY, THE TRANSACTION OF PAYING CASH AND RECEIVING CHEQUES DO NOT TAKE PLACE AT T HE SAME POINT OF TIME AND GENERALLY CASH IS PAID IN ADVANCE T O ENABLE THE ENTRY PROVIDERS TO ROTATE FUNDS IN VARIOUS LAYERS BEFORE THE RECEIPT OF CHEQUES FROM THEM, IS CONTRARY TO THE BUSINESS PRACTICES. THERE MAY BE DELAY OF FEW DAYS I N PAYMENT OF CASH AND RECEIPT OF CHEQUES BUT THE DELAY CANNOT RUN INTO SEVERAL MONTHS AND YEARS AS IN THE ASSESSEES CASE APPARENT FROM THE TABLE GIVEN ABOVE. AS REGARDS ALLEGED REGULARITY OF CASH AND CHEQUES TRANSACTIONS BETWEEN SHRI PANKAJ KALANI AND LUCKY COMMOTRADE PVT. LTD., THE REVENUE AUTHORITIES COULD NOT BRING AN IOTA OF EVIDENCE ON RECORD FROM THE MATERIAL SEIZED FROM THE OFFICE PREMISES OF SHRI DEEPAK KALANI WHICH SHOWED PAYMENT OF CASH TO LUCKY COMMOTRADE PVT. LTD. OUT OF CASH RECEIVE D SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 93 FROM SIGNET INDUSTRIES LTD. FOR THE PURPOSE OF MANAGI NG ACCOMMODATION ENTRIES . IS LUCKY COMMOTRADE PVT. LTD. A PAPER COMPANY PROVIDIN G ACCOMMODATION ENTRIES? THE IMPORTANT FACTS FOR JUDGING IDENTITY AND CREDITWORTHINESS OF LUCKY COMMOTRADE PVT. LTD. AND I TS FINANCIAL TRANSACTION WITH THE SIGNET GROUP AND ITS RELAT ED CONCERNS ARE SUMMARIZED AS UNDER : (A) A COMPANY IS AN ARTIFICIAL JUDICIAL PERSON. IT CARRIES ON ITS ACTIVITY THROUGH ITS SHAREHOLDERS, ITS BOARD OF DIRECTORS AND ITS EMPLOYEES. IT HAS A PERPETUAL EXISTENCE UNLESS DISSOLVED OR WOUND UP UNDER APPROPRIATE LAW. ALTHOUGH, IT DOES NOT HAVE ANY PHYSICAL EXISTENCE, IT EXISTS DUE TO OPERATION OF LAW . THEREFORE, ITS EXISTENCE CAN BE ESTABLISHED ONLY THROUGH THE IDENTIFICATION ISSUED TO IT UNDER THE STATUTE UNDER WHICH IT WAS INCORPORATED. THE SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 94 CERTIFICATE OF INCORPORATION ISSUED BY COMPETENT STATUTORY AUTHORITY, PERMANENT ACCOUNT NUMBER AND OTHER CERTIFICATES ISSUED UNDER VARIOUS OTHER APPLICABLE LAWS ARE EVIDENCE OF ITS IDENTIFICATION AND EXISTENCE AND THEY CANNOT BE IGNORED OR BRUSHED ASIDE. ( C.I.T. VS. KAMDHENU STEELS AND ALLOYS LTD. 19 TAXMANN.COM 26 DELHI) (B) LUCKY COMMOTRADE PVT. LTD. IS A KOLKATA BASED CLOSELY HELD NON-BANKING FINANCIAL COMPANY INCORPORATED ON 16.03.1994 HAVING P.A. NUMBERS AAACL 4501 E. IT HAS AN INDEPENDENT BOARD OF DIRECTORS INDEPENDENTLY MANAGING ITS BUSINESS AFFAIRS. THE INVESTMENT AND FINANCING BUSINESS IS ITS PROFIT MAKING APPARATUS WHICH IS BEING CARRIED OUT FROM ITS REGISTERED OFFICE. ITS SHARE CAPITAL AND FREE RESERVES AS ON 31.03.2005, STOOD AT RS.1,28,80,000/- AND RS.9,34,20,000/- SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 95 RESPECTIVELY. IT IS NOT A GROUP COMPANY OF SIGNET GROUP. THESE FACTS ESTABLISHED ITS IDENTITY. (C) FOR THE ASSESSMENT YEAR 2007-08, THE SHAREHOLDERS FUND STOOD AT RS.10,63,97,734/- AND THE ASSESSMENT WAS COMPLETED U/S.143(3) AND TOTAL INCOME ASSESSED WAS RS.1,23,92,580/-. A COPY OF ASSESSMENT ORDER WAS PLACED BEFORE THE LOWER AUTHORITIES. THE ASSESSMENT FOR ASSESSMENT YEAR 2005-06 WAS ALSO COMPLETED U/S.143(3) AND A COPY OF ASSESSMENT ORDER WAS PLACED BEFORE THE LOWER AUTHORITIES. THE FINANCIALS OF THE COMPANY AS PER ITS AUDITED ANNUAL ACCOUNTS AND RETURNS OF INCOME FILED BEFORE THE INCOME-TAX DEPARTMENT ARE AS UNDER: ASSESSMENT YEARS PAID-UP SHARE CAPITAL FREE RESERVES PROFIT FOR THE YEAR TAXES PAID 2006-07 1,28,80,000 9,34,25,224 45,137 18,510 2007-08 1,28,80,000 9,34,26,358 19,408 18,274 2008-09 1,28,80,000 9,35,17,734 1,17,408 44,400 2009-10 1,28,80,000 9,40,46,001 6,04,107 75,840 2010-11 1,28,80,000 9,63,52,036 34,40,035 11,34,000 2011-12 1,28,80,000 9,78,27,075 22,03,439 7,28,400 SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 96 2012-13 1,28,80,000 9,85,63,971 11,54,896 4,18,000 THESE FACTS ESTABLISHED CREDITWORTHINESS OF THE LOAN CREDITOR. (D) THE ASSESSEE FILED DULY CONFIRMED COPIES OF ACCOUNT, AUDITED ANNUAL ACCOUNTS, COPIES OF RETURN OF INCOME, ASSESSMENT ORDER, BANK STATEMENTS, ETC. BEFORE THE A.O. AS WELL AS C.I.T.(A). ON ANALYSIS OF THE BANK STATEMENTS, IT WAS QUITE CLEAR THAT NO CASH WAS EVER DEPOSITED BY IT AT ANY TIME DURING THE RELEVANT YEARS. THE ASSESSING OFFICER COULD NOT BRING A SINGLE INSTANCE ON RECORD WHERE LUCKY COMMOTRADE PVT. LTD. DEPOSITED CASH IN ITS BANK ACCOUNT AND ISSUED CHEQUES FOR ADVANCING LOAN OR MAKING INVESTMENT. (E) NO EVIDENCE WAS FOUND DURING SEARCH OR POST SEARCH INQUIRIES OR ASSESSMENT PROCEEDINGS IN RELATION TO (A) PAYMENT OF UNACCOUNTED CASH TO LUCKY COMMOTRADE PVT. LTD. (B) TRANSFER OF UNACCOUNTED CASH BY ASSESSEES EMPLOYEES. (F) ALL THE LOAN TRANSACTIONS WERE THROUGH NORMAL BANKING CHANNELS AND THERE WAS NO EVIDENCE SHOWING DEPOSIT OF CASH PRIOR TO ISSUE OF CHEQUES WHICH COULD HAVE RENDERED THE TRANSACTION SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 97 SUSPICIOUS. IT PRIMA FACIE ESTABLISHED GENUINENESS OF TRANSACTIONS. (G) IN RELATION TO THE LOAN RECEIVED BY THE ASSESSEE GROUP, INTEREST WAS PAID TO LUCKY COMMOTRADE PVT. LTD. AND TAX WAS DEDUCTED AT SOURCE. (H) IT WAS QUITE NATURAL AND ESSENTIALLY A PART OF BUSINESS ACTIVITY OF A NON-BANKING FINANCE COMPANY THAT FOR ADVANCING NEW LOANS OR MAKING NEW INVESTMENTS, IT RECALLS THE LOANS ALREADY GIVEN OR LIQUIDATE A PART OF ITS EXISTING INVESTMENTS. THEREFORE, THERE WAS NOTHING WRONG IN ADVANCING INTER-CORPORATE UNSECURED LOAN TO THE ASSESSEE GROUP OUT OF LOANS / INVESTMENTS REALIZED. (I) ONCE THE INCOME-TAX DEPARTMENT, KOLKATA ASSESSED LUCKY COMMOTRADE PRIVATE LTD. U/S.143(3) FOR ASSESSMENT YEAR 2005-06 AND ASSESSMENT YEAR 2007-08, INCOME-TAX DEPARTMENT, INDORE HAS NO LOCUS STANDI TO TREAT IT AS A BOGUS PAPER COMPANY AND A KNOWN ENTRY PROVIDER PARTICULARLY WHEN NO INVESTIGATION WHAT SO EVER WAS CONDUCTED BY IT AND NOT AN IOTA OF EVIDENCE WAS BROUGHT ON RECORDS IN SUPPORT OF SUCH SERIOUS AND BASELESS ALLEGATIONS. SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 98 (J) IT MAY BE NOTED THAT DURING ENTIRE SEARCH, POST- SEARCH PROCEEDINGS AND ASSESSMENT PROCEEDINGS U/S.153A, THE REVENUE AUTHORITIES DID NOT ISSUE EVEN A SINGLE NOTICE TO IT U/S.133(6) TO COLLECT INFORMATION OR SUMMON U/S 131. (K) IN THE ABSENCE OF ANY INCRIMINATING MATERIAL FOUND AND SEIZED EITHER DURING SEARCH OR POST SEARCH INQUIRIES OR ASSESSMENT PROCEEDINGS U/S.153A, IT CANNOT BE AUTOMATICALLY INFERRED THAT LUCKY COMMOTRADE PVT. LTD - A KOLKATA BASED NBFC COMPANY, WAS A BOGUS PAPER COMPANY ENGAGED IN PROVIDING ACCOMMODATION ENTRIES AND THE LOAN TRANSACTION OF THE ASSESSEE WAS NOT GENUINE. THE SERIOUS CHARGES AGAINST LUCKY COMMOTRADE PVT. LTD. ARE BASELESS, HEARSAY AND MERE CONJECTURES AND SURMISES. IN CASE OF LAL CHAND BHAGATAMBICA RAM VS. C.I.T. 37 ITR 288, HONOURABLE SUPREME COURT STRONGLY DISAPPROVED THE PRACTICE OF MAKING ADDITION IN THE ASSESSMENT ON MERE SUSPICION AND SURMISES OR TAKING NOTE OF SO CALLED NOTORIOUS PRACTICE PREVAILING IN TRADE CIRCLES . SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 99 (L) IT MAY BE NOTED THAT THE A.O. ACCEPTED THE LOANS GIVEN BY LUCKY COMMOTRADE PVT. LTD. TO VARIOUS MEMBERS OF SANGLA FAMILY AS GENUINE AND DID NOT MAKE ANY ADDITION IN RELATION TO SUCH LOANS. THE DETAILS OF SUCH LOANS ARE AS FOLLOWS: ASSESSEES NAME ASSESSMENT YEAR LOAN (RS.) INTEREST (RS.) AVANTIKASANGLA 2009-10 7,15,000 47,484 MONICA SANGLA 2009-10 28,44,000 1,03,570 MUKESHSANGLA 2009-10 35,70,000 2,81,160 SAURABHSANGLA 2009-10 11,10,000 47,392 (M) THE ASSESSING OFFICER CANNOT ADOPT DOUBLE STANDARDS I.E. ALLEGING ON THE ONE HAND THAT THE UNACCOUNTED MONEY WAS INTRODUCED BY THE ASSESSEE IN THE GUISE OF UNSECURE D LOANS AND ABSOLVING HIMSELF ON THE OTHER HAND FROM BRINGI NG ANY EVIDENCE IN SUPPORT OF HIS ASSERTION. HE IS A QUASI JUDICIAL AUTHORITY. HE CANNOT ACT ARBITRARILY. HE HAS TO PER FORM THE ROLE OF A PROSECUTOR AS WELL AS A JUDGE. HE CANNOT ADOPT AN APPROACH WHICH SUITS THE INTEREST OF REVENUE BUT AT THE SAME TIME, DEPRIVE THE ASSESSEES OF NATURAL JUSTICE AT THEIR DETRIMENT. HE HAS TO CONSIDER THE INTEREST OF REVEN UE JUDICIOUSLY AND NOT ARBITRARILY AND VINDICTIVELY. (N) THE STATEMENT OF SHRI PANKAJ KALANI THAT CASH RECEI VED FROM SIGNET GROUP WAS UTILIZED FOR ARRANGING ACCOMMODATION ENTRIES FROM LUCKY COMMOTRADE PVT. LT D. HAD NO EVIDENTIAL VALUE INASMUCH AS NO EVIDENCE COU LD BE FOUND FROM THE MATERIAL SEIZED FROM HIS OFFICE PREM ISES TO SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 100 SHOW THAT CASH RECEIVED FROM SIGNET INDUSTRIES LTD. WAS PAID TO LUCKY COMMOTRADE PVT. LTD. (O) BY PLACING A LARGE NUMBER OF EVIDENCE ON RECORD THE ASSESSEE ESTABLISHED IDENTITY AND CREDITWORTHINESS OF LUCKY COMMOTRADE PVT. LTD. AND GENUINENESS OF THE TRANSACTIONS. THE RELIANCE IS PLACED UPON THE FOLLO WING JUDGEMENTS: 1. C.I.T. VS. KAMDHENU STEELS AND ALLOYS LTD. 19 TAXMANN.COM 26 DELHI 5. WITH THIS DISCOURSE ON THE LEGAL POSITION, WE ADVE RT TO THE CASES AT HAND. IN THESE APPEALS, THERE IS A COMMON THREAD WHICH RUNS THROUGH ALL THESE CASES INSOFAR AS NATURE OF TRANSACTION IS CONCERNED. AS W OULD BE SEEN WHEN WE DISCUSS THE FACTS OF THIS CASE, THE SHARE APPLICANTS ARE ALL COMPANIES INCORPORATED UND ER THE INDIAN COMPANIES ACT, EITHER PUBLIC LIMITED OR PRIVATE LIMITED COMPANIES. SINCE THESE COMPANIES AR E INCORPORATED UNDER THE PROVISIONS OF INDIAN COMPANI ES ACT, THEIR IDENTITY, AT LEAST ON PAPERS, IS ESTABLI SHED. HERE, THEY ARE ASSESSED TO INCOME TAX AS WELL. THES E COMPANIES HAVE PAN NUMBERS AND ARE FILING REGULAR INCOME TAX RETURNS. THE ASSESSEE COMPANIES WHICH HAVE RECEIVED SHARE APPLICANT MONEY FROM SUCH APPLICANTS HAVE PRODUCED DOCUMENTS IN THE FORM OF PAN, INCOME TAX RETURNS, COPIES OF THE BANK ACCOUNT S THROUGH WHICH THE FUNDS WERE TRANSFERRED BY WAY OF CREDIT ENTRIES, DEPOSITS IN THE ACCOUNTS OF SUCH APPLICANTS, ETC. BY FURNISHING SUCH KINDS OF PROOFS/DOCUMENTS, THE ASSESSEES HAVE BEEN ABLE TO DISCHARGE THEIR INITIAL BURDEN. NOTWITHSTANDING THE SAME, AS PER THE AO(S), THE APPLICANTS WERE BOGUS COMPANIES WHICH WERE ONLY PAPER COMPANIES AND THERE IS NO REAL EXISTENCE. IN CERTAIN CASES, IT WAS ALSO FOUND THAT JUST BEFORE ISSUING THE CHEQUES BY THE APPLICA NTS SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 101 TOWARDS SHARE APPLICANT MONEY, CASH WAS DEPOSITED I N THEIR BANK ACCOUNTS. EXCEPT IN ITA NO.726/2011, IN OTHER CASES, THE AOS ALSO RELIED UPON THE INVESTIGA TION REPORT OF DIRECTOR OF INCOME TAX (INVESTIGATION), T HE DETAILS WHEREOF WOULD BE MENTIONED AT THE APPROPRIA TE STAGE. FROM THE AFORESAID AND SOME OTHER ASPECTS PECULIAR TO EACH CASE, THE AO(S) WAS OF THE OPINION THAT THE ASSESSEES HAD NOT DISCHARGED THE BURDEN. 6. WITH THIS BACKGROUND, WE NOW PICK UP ONE OF THE APPEALS, THE OUTCOME WHEREOF WOULD DETERMINE THE FA TE OF ALL THESE APPEALS. ITA NO.972 OF 2009 7. IN THE CASE OF THIS ASSESSEE, WE ARE CONCERNED WIT H THE ASSESSMENT YEAR 2004-05. WHILE SCRUTINIZING THI S CASE, THE AO FOUND THAT THE BALANCE-SHEET REVEALED THAT DURING THE PERIOD RELEVANT TO THE YEAR UNDER ASSESSMENT, THE ASSESSEE HAD RECEIVED SHARE APPLICATION MONEY OF RS. 2.74 CRORES FROM VARIOUS APPLICANTS. THE ASSESSEE FILED DETAILS OF ALL THE S HARE APPLICANTS AND THE AMOUNTS RECEIVED ALONG WITH THEI R CONFIRMATION AND COPIES OF THE BANK ACCOUNTS OF SUC H INVESTORS FROM AS MANY AS 32 SHARE APPLICANTS. ALL THESE APPLICANTS WERE PRIVATE LIMITED COMPANIES. TH E AO WAS OF THE OPINION THAT THE CREDITORS WERE NOT GENUINE PARTIES AND WERE ONLY ENTRY PROVIDERS. HE REFERRED TO THE REPORT DATED 02.3.2006 OF THE DIREC TORATE OF INCOME TAX (INVESTIGATION), UNIT-V, NEW DELHI IN THIS BEHALF. HE ISSUED DETAILED QUESTIONNAIRE ON 09.11.2 006 WHEREIN HE ALSO GAVE SPECIFIC REASONS IN RESPECT OF EACH OF THE APPLICANT WHICH WAS OF THE FOLLOWING NATURE: (I) IN THE BANK ACCOUNT OF THE VARIOUS SHARE APPLIC ANTS, THEY HAD DEPOSITED CASH FOR SPECIFIC PURPOSE FOR APPLYING FOR SHARE IN ADDITION TO PROVIDING ENTRY T O THE ASSESSEE, THE SAME MODUS WAS ADOPTED IN THE OTHER CASES AS WELL. SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 102 (II) MANY COMPANIES DID NOT EXIST AT THE ADDRESSES FURNISHED. THE REGISTERED LETTERS SENT TO THEM HAD BEEN RECEIVED BACK UNDELIVERED. (III) THERE WERE REPORTS OF THE INSPECTORS (INCOME TAX) THAT MANY PARTIES WERE NOT GENUINE ASSESSEES AND WERE NOT IN EXISTENCE. 8. THE ASSESSEE HAD GIVEN REPLY TO THE SAID QUESTIONNAIRE IN WHICH IT HAD SUMMED THE POSITION A S UNDER: '1. ALL THE SHARE APPLICANTS ARE EXISTING ASSESSEES . 2. THESE COMPANIES ARE REGISTERED WITH THE REGISTRA R OF COMPANIES. 3. THE SHARE APPLICANTS HAVE FILED THEIR RESPECTIVE CONFIRMATIONS. 4. THE COMPANIES ARE GENUINE EXISTING SHARE HOLDER. 5. THE INVESTMENTS HAVE BEEN MADE BY THEM BY ACCOUN T PAYEE CHEQUES. 6. AO'S REMARKS THAT THE SHARE APPLICANTS ARE 'ENTR Y PROVIDERS' HAVE NOT BASIS. 7. THE ASSESSEE COMPANY IS NOT ACCOUNTABLE FOR THE SHARE APPLICANTS DEPOSITING CASH IN THEIR ACCOUNTS BEFORE INVESTING BY CHEQUES. 8. AO'S REMARKS 'NOT A GENUINE TAX PAYER' IS THE DEPARTMENT AND THE SHARE APPLICANT IN WHICH THE ASSESSEE HAS NOT ROLE TO PLAY. 9. THE ASSESSEE HAS NOT MEANS TO PRODUCE THE SHAREHOLDERS PHYSICALLY. 10. THE POSTAL REMARKS ON THE COMMUNICATIONS TO THE SHARE APPLICANTS WERE NOT MADE AVAILABLE TO THE ASSESSEE COMPANY. 11. THE REPORT OF THE DIRECTORATE IS ONE SIDED. 12. THE PROPOSAL OF THE AO TO TREAT THE CREDITS REC EIVED AS SHARE APPLICATION MONEY RUNS CONTRARY IN LAW TO THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 103 OF M/S. STELLER INVESTMENTS LTD. (115 TAXMAN PAGE 99).' 9. THE AO WAS NOT CONVINCED WITH THIS EXPLANATION. HE WAS OF THE VIEW THAT THOUGH CONTENTIONS APPEARED GO OD THEORETICALLY, BUT THE ASSESSEE HAD MISERABLY FAILE D TO DISCHARGE BURDEN, IN THE BACKGROUND OF THE FACTS ON RECORD, IN TOTALITY. HE MAINTAINED THAT THE COMPANI ES WERE BOGUS, AS THEY WERE NOT FOUND AT THE EXISTING ADDRESS AND THE CASH WAS ALSO DEPOSITED BY THESE COMPANIES JUST BEFORE ISSUING THE CHEQUES. THE FACT THAT THE ASSESSEE HAD SHOWED ITS INABILITY TO PRODUCE TH EM WAS ALSO VIEWED AGAINST THE ASSESSEE. THE AO RELIED UPON THE REPORT OF THE DIRECTORATE OF THE INCOME TA X (INVESTIGATION) WHICH HAD CONCLUDED THAT ALL THESE COMPANIES WERE BOGUS COMPANIES FLOATED BY ONE MR. MAHESH GARG, WHO WAS MASTER BEHIND IT, WITH INTENT TO PROVIDE ENTRIES. HE INTER ALIA OBSERVED: 'THE ASSESSEE COMPANY HAS COMPLIED WITH ELEMENTARY REQUIREMENTS BY FILING CONFIRMATIONS FROM THE SHARE APPLICANTS WITH THEIR PERMANENT ACCOUNT NUMBERS AND COPIES OF BANK ACCOUNTS THROUGH WHICH THE FUNDS WER E TRANSFERRED BY WAY OF CREDIT ENTRIES. IN MOST OF TH E CASES IN WHICH THE ASSESSEE COMPANY FILED BANK STATEMENTS OF THE SHARE APPLICANTS, THE DEPOSITS IN THE ACCOUNTS OF SUCH APPLICANTS WERE SHOWN TO HAVE BEEN RECEIVED BY WAY OF TRANSFER OF FUNDS TO THEM BUT WH EN SUCH STATEMENTS WERE REQUISITIONED DIRECTLY FROM TH E BANKS UNDER SECTION 133(6) OF THE INCOME TAX ACT, I T WAS DISCOVERED THAT CASH HAD BEEN DEPOSITED IN THE ACCOUNTS OF THE SHARE APPLICANTS BEFORE BEING TRANSFERRED TO THE ACCOUNT OF THE ASSESSEE COMPANY. THIS ANOMALY IS ALMOST UNIVERSAL EXCEPT IN A FEW CA SES WHERE TRANSFER ENTRIES HAVE BEEN ROTATED. IN CERTAI N OTHER CASES BOTH CASH HAS BEEN DEPOSITED AND ENTRIE S ROTATED. THE CLAIM OF THE ASSESSEE THAT HE WAS UNAW ARE OF THIS STATE OF AFFAIRS IS MUCH TOO DIFFICULT TO D IGEST. IN THE LIGHT OF THIS FACT, OTHER CONTENTIONS OF THE AS SESSEE COMPANY IN ITS REPRESENTATION DATED 17.11.2006 SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 104 BECOME REDUNDANT. THE CLAIM OF THE ASSESSEE COMPANY OF ITS INABILITY TO PRODUCE THE SHAREHOLDERS PHYSIC ALLY IS HOLLOW BECAUSE NO SUCH SHAREHOLDER EXISTS TO BE PHYSICALLY PRESENT FOR ANY DEPOSITION. ' 10. WE HAVE TAKEN NOTE OF THE AFORESAID ASSESSMENT ORDER IN DETAIL AS THE ENTIRE ARGUMENT OF THE LEARN ED COUNSEL FOR THE REVENUE WAS BACKED BY AND BASED UPON THE REASONS GIVEN BY THE LEARNED AO(S). IN SUP PORT THEREOF, MR. N.P. SAHNI, LEARNED COUNSEL FOR THE REVENUE, ALSO FURNISHED 'BRIEF NOTE' ON ACCOMMODATI ON ENTRIES' AS PREPARED BY THE DIRECTORATE OF INCOME T AX (INVESTIGATION), THE GIST WHEREOF IS NOTED ABOVE AS RECORDED IN THE ORDERS OF THE AO. IN THE LIGHT OF T HE AFORESAID, MR. SAHNI REFERRED TO THE JUDGMENTS ON O NUS WHICH HAVE ALSO BEEN TAKEN NOTE OF ABOVE BY US. 11. BEFORE WE DEAL WITH THE SAME, LET US FIND OUT THE RAISON D'ETER BEHIND THE ORDERS OF THE TRIBUNAL IN DELETING THE ADDITION, AS CIT (A) HAD CONFIRMED THE ORDERS OF THE AO AGREEING WITH HIS REASONS. THE ORD ER OF THE TRIBUNAL IS VERY BRIEF AND APPEAL WAS ALLOWED FOLLOWING THE JUDGMENT OF THE APEX COURT IN THE CAS E OF CIT V. LOVELY EXPORTS (P) LTD. [2008] 216 CTR 195 AND CIT V. DIVINE LEASING AND FINANCE LTD. [2008] 299 ITR 268 /[2007] 158 TAXMAN 440 OF THIS COURT. THE ENTIRE DISCUSSION CAN BE TRACED IN PARA 3 OF THE IMPUGNED ORDER: '3. WE HAVE CONSIDERED THE RIVAL SUBMISSION. A PERU SAL OF THE ORDER OF THE HON'BLE SUPREME COURT IN THE CA SE OF DIVINE LEASING AND FINANCE LTD. REFERRED TO SUPRA IS IN REGARD TO SLP FILED BY THE REVENUE AGAINST THE ORDE R OF HON'BLE JURISDICTIONAL HIGH COURT AND THE HON'BLE SUPREME COURT HAS SPECIFICALLY WITH A SPEAKING ORDE R DISMISSED THE SLP. THE HON'BLE SUPREME COURT IN THE VARIOUS DECISIONS REFERRED TO BY THE LD. AR HAS CATEGORICALLY HELD THAT THE ADDITION IN REGARD TO T HE SHARE CAPITAL CANNOT BE TREATED AS THE UNDISCLOSED INCOME OF THE ASSESSEE IF THE SHARE APPLICATION MON EY IS SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 105 RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAMES ARE GIVEN TO THE AO. FURTHER, THE HON'BLE SUPREME COURT HAS CATEGORICALL Y HELD THAT THE REVENUE IS FREE TO PROCEED TO RE-OPEN THE INDIVIDUAL ASSESSMENT OF SUCH ALLEGED BOGUS SHAREHOLDERS. THE DECISION OF THE HON'BLE JURISDICT IONAL HIGH COURT IN THE CASE OF VALUE CAPITAL SERVICES LD . HAS ALSO CATEGORICALLY HELD THAT THERE IS ADDITIONAL BU RDEN ON THE REVENUE TO SHOW THAT EVEN IF THE APPLICANT D OES NOT HAVE THE MEANS TO INVESTMENT BUT THE INVESTMENT MADE BY THE APPELLANT SHOULD BE SHOWN T HAVE EMANATED FROM THE COFFERS OF THE ASSESSEE SO AS TO ENABLE IT TO BE TREATED AS UNDISCLOSED INCOME OF TH E ASSESSEE. IT IS NOTICED THAT THE REVENUE HAS NOT BE EN ABLE TO SPECIFICALLY SHOW THAT THE INVESTMENTS HAD EMANATED FROM THE COFFERS OF THE ASSESSEE IN THIS C ASE. IN THESE CIRCUMSTANCES, RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT A S ALSO HON'BLE SUPREME COURT REFERRED TO SUPRA THE ADDITIO N MADE BY THE AO AND HAS CONFIRMED BY THE LD. CIT(A) IN REGARD TO THE ALLEGED BOGUS SHAREHOLDERS REPRESENTE D BY THE INCREASE IN SHARE CAPITAL OF THE ASSESSEE CA NNOT BE TREATED AS UNEXPLAINED CASH CREDITS IN THE HANDS OF THE ASSESSEE. HOWEVER, RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE COURT REFERRED TO SUPRA, IT IS DIRECTED THAT THE DEPARTMENT IS FREE TO PROCEED TO RE- OPEN THE INDIVIDUAL ASSESSMENTS OF SUCH ALLEGED BOG US SHAREHOLDERS. THE DIRECTION IS BEING GIVEN UNDER SE CTION 151(I) READ WITH SECTION 153(3) OF THE INCOME TAX A CT.' 12. WHAT DOES FOLLOW FROM THE AFORESAID? IT IS NOT IN DOUBT THAT THE ASSESSEE HAD GIVEN THE PARTICULARS O F REGISTRATION OF THE INVESTING/APPLICANT COMPANIES; CONFIRMATION FROM THE SHARE APPLICANTS; BANK ACCOUN TS DETAILS; SHOWN PAYMENT THROUGH ACCOUNT PAYEE CHEQUES, ETC. AS STATED BY US IN THE BEGINNING, WIT H THESE DOCUMENTS, IT CAN BE SAID THAT THE ASSESSEE H AS DISCHARGED ITS INITIAL ONUS. WITH THE REGISTRATION OF THE COMPANIES, ITS IDENTITY STANDS ESTABLISHED, THE SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 106 APPLICANT COMPANIES WERE HAVING BANK ACCOUNTS, IT H AD MADE THE PAYMENT THROUGH ACCOUNT PAYEE CHEQUES. 13. NO DOUBT, WHAT THE AO OBSERVED MAY MAKE HIM SUSPICIOUS ABOUT SUCH COMPANIES, EITHER THEIR EXIST ENCE, WHICH MAY BE ONLY ON PAPERS AND/OR GENUINENESS OF THE TRANSACTIONS. WHEN HE FOUND THAT INVESTING COMPANIES ARE NOT AVAILABLE AT GIVEN ADDRESSES OR T HAT THE ISSUANCE OF THE CHEQUE REPRESENTING SHARE APPLICATION MONEY OR PRECEDED BY THE DEPOSIT OF CAS H IN THE BANK ACCOUNT OF THESE INVESTMENT COMPANIES. 14. THE IMPORTANT QUESTION WHICH ARISES AT THIS STAGE IS AS TO WHETHER ON THE BASIS OF THESE FACTS, COULD IT BE SAID THAT IT IS THE ASSESSEE WHICH HAS NOT BEEN ABL E TO EXPLAIN THE SOURCE AND RECEIPT OF MONEY. ACCORDING TO THE ASSESSEE, HE HAD GIVEN THE REQUIRED INFORMATION TO EXPLAIN THE SOURCE AND WAS NOT OBLIGATED TO PROVE SOURCE OF THE MONEY. IT IS THE SUBMISSION OF THE ASSESSEE THAT EVEN IN CASE THERE IS SOME DOUBT ABOU T THE SOURCE OF MONEY IN GIVING INTO COFFERS OF THE S HARE APPLICANTS WHICH THEY INVESTED WITH THE ASSESSEE, I T WOULD NOT AUTOMATICALLY FOLLOW THAT THE SAID MONEY BELONGS TO THE ASSESSEE AND BECOMES UNACCOUNTED MONEY. ACCORDING TO US, THE ASSESSEE APPEARS TO BE CORRECT ON THIS ASPECT. WE FEEL THAT SOMETHING MORE WHICH WAS NECESSARY AND REQUIRED TO BE DONE BY THE AO WAS NOT DONE. THE AO FAILED TO CARRY HIS SUSPICI OUS TO LOGICAL CONCLUSION BY FURTHER INVESTIGATION. AFT ER THE REGISTERED LETTERS SENT TO THE INVESTING COMPANY HA D BEEN RECEIVED BACK UNDELIVERED, THE AO PRESUMED THA T THESE COMPANIES DID NOT EXIST AT THE GIVEN ADDRESS. NO DOUBT, IF THE COMPANIES ARE NOT EXISTING, I.E., THE Y HAVE ONLY PAPER EXISTENCE, ONE CAN DRAW THE CONCLUSION T HAT THE ASSESSEE HAD NOT BEEN ABLE TO DISCLOSE THE SOUR CE OF AMOUNT RECEIVED AND PRESUMPTION UNDER SECTION 68 OF THE ACT FOR THE PURPOSE OF ADDITION OF AMOUNT AT TH E HANDS OF THE ASSESSEE. BUT, IT HAS TO BE CONCLUSIVE LY ESTABLISHED THAT THE COMPANY IS NON-EXISTENCE. SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 107 15. THE AO DID NOT BOTHER TO FIND OUT FROM THE OFFICE OF THE REGISTRAR OF COMPANIES THE ADDRESS OF THOSE COMPANIES FROM WHERE THE REGISTERED LETTER RECEIVED BACK UNDELIVERED. IF THE ADDRESS WAS SAME AT WHICH THE LETTER WAS SENT OR THE INSPECTOR VISITED AND NO CHA NGE IN ADDRESS WAS COMMUNICATED, PERHAPS IT MAY HAVE BEEN ONE FACTOR. IN SUPPORT OF THE CONCLUSION WHICH THE AO WANTED TO ARRIVE AT, THAT BY ITSELF CANNOT BE TREAT ED AS THE CONCLUSIVE FACTOR. AS POINTED OUT ABOVE, THESE APPLICANT COMPANIES HAVE PAN AND ASSESSED INCOME TAX. NO EFFORT WAS MADE TO EXAMINE AS TO WHETHER TH ESE COMPANIES WERE FILING THE INCOME TAX RETURN AND IF THEY WERE FILING THE SAME, THEN WHAT KIND OF RETURNS THE SE COMPANIES WERE FILING. IF THERE WAS NO RETURN, THIS COULD BE ANOTHER FACTOR LEADING TOWARDS THE SUSPICION NURTURED BY THE AO. FURTHER, IF THE RETURNS WERE FI LED AND SCRUTINY THEREOF REVEALS THAT SUCH RETURNS WERE FOR NAMESAKE, THIS COULD YET ANOTHER BE CONTRIBUTING FA CTOR IN THE DIRECTION AO WANTED TO GO. LIKEWISE, WHEN TH E BANK STATEMENTS WERE FILED, THE AO COULD FIND OUT T HE ADDRESS GIVEN BY THOSE APPLICANT COMPANIES IN THE BANK, WHO OPENED THE BANK ACCOUNTS AND ARE THE SIGNATORIES, WHO INTRODUCED THOSE BANK ACCOUNTS AND THE MANNER IN WHICH TRANSACTIONS WERE CARRIED OUT A ND THE BANK ACCOUNTS OPERATED. THIS KIND OF INQUIRY WO ULD HAVE GIVEN SOME MORE MATERIAL TO THE AO TO FIND OUT AS TO WHETHER THE ASSESSEE CAN BE CONVICTED WITH THE TRANSACTIONS WHICH WERE ALLEGEDLY BOGUS AND OR COMPANIES WERE ALSO BOGUS AND WERE TREATED FOR NAMESAKE. WE SAY SO WITH MORE EMPHASIS BECAUSE OF THE REASON THAT NORMALLY SUCH KIND OF PRESUMPTION AGAINST THE ASSESSEE CANNOT BE MADE AS PER THE LAW LAID DOWN IN VARIOUS JUDGMENTS NOTED ABOVE. JUST BECAUSE OF THE CREDITORS/SHARE APPLICANTS COULD NOT BE FOUND AT THE ADDRESS GIVEN IT WOULD NOT GIVE THE REVENUE A RIGHT TO INVOKE SECTION 68 OF THE ACT WIT HOUT ANY ADDITIONAL MATERIAL TO SUPPORT SUCH A MOVE. WE ARE REMINDING OURSELVES OF THE FOLLOWING REMARKS OF A SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 108 DIVISION BENCH OF THIS COURT IN ITS DECISION DATED 02.8.2010 IN THE CASE OF CIT V. DWARKADHISH INVESTMENT (P) LTD. [2010] 194 TAXMAN 43 /[2011] 330 ITR 298 (DELHI) IN THE FOLLOWING WORDS: 'JUST BECAUSE THE CREDITORS/SHARE APPLICANTS COULD NOT BE FOUND AT THE ADDRESS GIVEN, IT WOULD NOT GIVE TH E REVENUE THE RIGHT TO INVOKE SECTION 68. ONCE MUST N OT LOSE SIGHT OF THE FACT THAT IT IS THE REVENUE WHICH HAS ALL THE POWER AND WHEREWITHAL TO TRACE ANY PERSON. MOREOVER, IT IS SETTLED LAW THAT THE ASSESSEE NEED NOT TO PROVE THE 'SOURCE OF SOURCE'. (EMPHASIS SUPPLIED) 16 . WE ARE CONSCIOUS OF THE MALICE OF SUCH KIND OF PERNICIOUS PRACTICE WHICH IS PREVALENT. IN DIVINE LEASING & FINANCE LTD. (SUPRA), THIS COURT HAD ELOQUENTLY HIGHLIGHTED THE SAME IN THE FOLLOWING MANNER: 'THERE CANNOT BE TWO OPINIONS ON THE ASPECT THAT TH E PERNICIOUS PRACTICE OF CONVERSION OF UNACCOUNTED MO NEY THROUGH THE MASQUERADE OR CHANNEL OF INVESTMENT IN THE SHARE CAPITAL OF A COMPANY MUST BE FIRMLY EXCORIATE D BY THE REVENUE. EQUALLY, WHERE THE PREPONDERANCE OF EVIDENCE INDICATES ABSENCE OF CULPABILITY AND COMPLEXITY OF THE ASSESSEE IT SHOULD NOT BE HARASSE D BY THE REVENUE'S INSISTENCE THAT IT SHOULD PROVE THE NEGATIVE. IN THE CASE OF A PUBLIC ISSUE, THE COMPAN Y CONCERNED CANNOT BE EXPECTED TO KNOW EVERY DETAIL PERTAINING TO THE IDENTITY AS WELL AS FINANCIAL WOR TH OF EACH OF ITS SUBSCRIBERS. THE COMPANY MUST, HOWEVER, MAINTAIN AND MADE AVAILABLE TO THE ASSESSING OFFICE R FOR HIS PERUSAL, ALL THE INFORMATION CONTAINED IN T HE STATUTORY SHARE APPLICATION DOCUMENTS. IN THE CASE OF PRIVATE PLACEMENT THE LEGAL REGIME WOULD NOT BE THE SAME. A DELICATE BALANCE MUST BE MAINTAINED WHILE WALKING THE TIGHTROPE OF SECTIONS 68 AND 69 OF THE INCOME TAX ACT. THE BURDEN OF PROOF CAN SELDOM BE DISCHARGED TO THE HILT BY THE ASSESSEE; IF THE ASSE SSING OFFICER HARBOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRIPTION HE IS EMPOWERED, NAY DUTY BOUND. BUT I F SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 109 THE ASSESSING OFFICER FAILS TO UNEARTH ANY WRONG OR ILLEGAL DEALINGS, HE CANNOT OBDURATELY ADHERE TO HI S SUSPICIONS AND TREAT THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANY.' (EMPHASIS SUPPLIED) 17. EVEN IN THE INSTANT CASE, IT IS PROJECTED BY THE REVENUE THAT THE DIRECTORATE OF INCOME TAX (INVESTIGATION) HAD PURPORTEDLY FOUND SUCH A RACKET OF FLOATING BOGUS COMPANIES WITH SOLE PURPOSE OF LANDI NG ENTRIES. BUT, IT IS UNFORTUNATE THAT ALL THIS EXERC ISE IS GOING IN VAIN AS FEW MORE STEPS WHICH SHOULD HAVE BEEN TAKEN BY THE REVENUE IN ORDER TO FIND OUT CAUS AL CONNECTION BETWEEN THE CASH DEPOSITED IN THE BANK ACCOUNTS OF THE APPLICANT BANKS AND THE ASSESSEE WE RE NOT TAKEN. IT IS NECESSARY TO LINK THE ASSESSEE WIT H THE SOURCE WHEN THAT LINK IS MISSING, IT IS DIFFICULT T O FASTEN THE ASSESSEE WITH SUCH A LIABILITY. 18. WE MAY REPEAT WHAT IS OFTEN SAID, THAT A DELICATE BALANCE HAS TO BE MAINTAINED WHILE WALKING ON THE T IGHT ROPE OF SECTIONS 68 AND 69 OF THE ACT. ON THE ON HA ND, NO DOUBT, SUCH KIND OF DUBIOUS PRACTICES ARE RAMPAN T, ON THE OTHER HAND, MERELY BECAUSE THERE IS AN ACKNOWLEDGEMENT OF SUCH PRACTICES WOULD NOT MEAN THAT IN ANY OF SUCH CASES COMING BEFORE THE COURT, THE COURT HAS TO PRESUME THAT THE ASSESSEE IN QUESTIONS AS INDULGED IN THAT PRACTICE. TO MAKE THE ASSESSEE RESPONSIBLE, THERE HAS TO BE PROPER EVIDENCE. IT IS EQUALLY IMPORTANT THAT AN INNOCENT PERSON CANNOT BE FASTENED WITH LIABILITY WITHOUT COGENT EVIDENCE. ON E HAS TO SEE THE MATTER FROM THE POINT OF VIEW OF SUCH COMPANIES (LIKE THE ASSESSEES HEREIN) WHO INVITE TH E SHARE APPLICATION MONEY FROM DIFFERENT SOURCES OR E VEN PUBLIC AT LARGE. IT WOULD BE ASKING FOR A MOON IF S UCH COMPANIES ARE ASKED TO FIND OUT FROM EACH AND EVERY SHARE APPLICANT/SUBSCRIBERS TO FIRST SATISFY THE ASSESSEE COMPANIES ABOUT THE SOURCE OF THEIR FUNDS BEFORE INVESTING. IT IS FOR THIS REASON THE BALANCE IS STRUCK BY CATENA OF JUDGMENTS IN LAYING DOWN THAT T HE SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 110 DEPARTMENT IS NOT REMEDILESS AND IS FREE TO PROCEED TO REOPEN THE INDIVIDUAL ASSESSMENT OF SUCH ALLEGED BO GUS SHAREHOLDERS IN ACCORDANCE WITH THE LAW. THAT WAS PRECISELY THE OBSERVATION OF THE SUPREME COURT IN LOVELY EXPORT (P.) ( SUPRA) WHICH HOLDS THE FIEL DS AND IS BINDING. 19. IN CONCLUSION, WE ARE OF THE OPINION THAT ONCE ADEQUATE EVIDENCE/MATERIAL IS GIVEN, AS STATED BY U S ABOVE, WHICH WOULD PRIMA FACIE DISCHARGE THE BURDEN OF THE ASSESSEE IN PROVING THE IDENTITY OF SHAREHOLDER S, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE SHAREHOLDERS, THEREAFTER IN CASE SUCH EVIDENCE IS TO BE DISCARDED OR IT IS PROVED THAT IT HAS 'CREATED' EVIDENCE, THE REVENUE IS SUPPOSED TO MAKE THOROUGH PROBE OF THE NATURE INDICATED ABOVE BEFORE IT COULD NAIL THE ASSESSEE AND FASTEN THE ASSESSEE WITH SUCH A LIABILITY UNDER SECTION 68 AND 69 OF THE ACT. 2. C.I.T VS. STELLAR INVESTMENT LTD. [192 ITR 287 (DEL)] IN THE PRESENT CASE, THE SUBSCRIBED CAPITAL OF THE ASSESSEE HAD BEEN INCREASED. THE INCOME-TAX OFFICER ASSESSED THE COMPANY AND ACCEPTED THE INCREASE IN T HE SUBSCRIBED CAPITAL. THE COMMISSIONER OF INCOME-TAX CAME TO THE CONCLUSION THAT THE ASSESSING OFFICER D ID NOT CARRY OUT A DETAILED INVESTIGATION INASMUCH AS THER E HAD BEEN A DEVICE OF CONVERTING BLACK MONEY INTO WH ITE BY ISSUING SHARES WITH THE HELP OF FORMATION OF AN INVESTMENT COMPANY. THE COMMISSIONER OF INCOME-TAX FURTHER HELD THAT THE ASSESSING OFFICER DID NOT MAK E ENQUIRIES WITH REGARD TO THE GENUINENESS OF THE SUBSCRIBERS OF THE SHARE CAPITAL. HE THEREUPON SET ASIDE THE ORDER OF ASSESSMENT. SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 111 THE TRIBUNAL REVERSED THIS DECISION FOR REASONS WHI CH WE NEED NOT GO INTO. IT IS EVIDENT THAT EVEN IF IT BE ASSUMED THAT THE SUBSCRIBERS TO THE INCREASED SHARE CAPITAL WERE NOT GENUINE, NEVERTHELESS, UNDER NO CIRCUMSTANCES, CAN THE AMOUNT OF SHARE CAPITAL BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE. IT MAY BE THAT THERE ARE SOME BOGUS SHAREHOLDERS IN WHOSE NAMES SHARES HAD BEEN ISSUED AND THE MONEY MAY HAVE BEEN PROVIDED BY SOME OTHER PERSONS. IF THE ASSESSMENT OF THE PERSONS WHO ARE ALLEGED TO HAVE REALLY ADVANCED THE MONEY IS SOUGHT TO BE REOPENED, THAT WOULD HAVE MADE SOME SENSE BUT WE FAIL TO UNDERSTAND AS TO HOW THIS AMOUNT OF INCREASED SHARE CAPITAL CAN BE ASSESSED IN THE HANDS OF THE COMPANY ITSELF . 3. C.I.T VS. STELLER INVESTMENT LTD. [251 ITR 263 (SC)] WE HAVE READ THE QUESTION WHICH THE HIGH COURT ANSWERED AGAINST THE REVENUE. WE ARE IN AGREEMENT WITH THE HIGH COURT. PLAINLY, THE TRIBUNAL CAME TO A CONCLUSION ON FACTS AND NO INTERFERENCE IS CALLED F OR. THE APPEAL IS DISMISSED. NO ORDER AS TO COSTS. 4. C.I.T VS. ELECTRO POLYCHEM LTD. [294 ITR 661 (MAD)] . THE ASSESSEE FILED ITS RETURNS FOR THE ASSESSMENT Y EARS 1998-99 AND 1999-2000. THE ASSESSING OFFICER MADE ADDITIONS IN RESPECT OF THE SHARE APPLICATION MONEY UNDER SECTION 68 OF THE INCOME-TAX ACT, 1961, ON TH E FINDING THAT THE ASSESSEE HAD BROUGHT THE UNDISCLOS ED SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 112 INCOME BY WAY OF SHARE APPLICATIONS IN FICTITIOUS N AMES AND PASSED ORDERS ACCORDINGLY. ON APPEAL BY THE ASSESSEE, THE COMMISSIONER (APPEALS) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 1998-99 AND UPHELD THE ADDITION MADE FOR THE ASSESSMENT YEAR 1999-2000. ON FURTHER APPEALS BY THE ASSESSEE AND THE REVENUE, THE TRIBUN AL ALLOWED THE APPEAL OF THE ASSESSEE AND DISMISSED TH E APPEAL BEFORE THE REVENUE. ON APPEAL: HELD, DISMISSING THE APPEALS, THAT EVEN IF IT WAS ASSUMED THAT THE SUB-SCRIBERS TO INCREASED SHARE CAPITAL WERE NOT GENUINE, UNDER NO CIRCUMSTANCES COULD THE AMOUNT OF SHARE CAPITAL BE REGARDED AS UNDISCLOSED INCOME OF THE COMPANY . 5. C.I.T VS. DIVINE LEASING AND FINANCE LTD. [299 ITR 268 (DEL)] IN THIS ANALYSIS, A DISTILLATION OF THE PRECEDENTS YIELDS THE FOLLOWING PROPOSITIONS OF LAW IN THE CONTEXT OF SECTION 68 OF THE INCOME-TAX ACT. THE ASSESSEE HAS TO PRIMA FACIE PROVE (1) THE IDENTITY OF THE CREDITOR/SUBSCRIBER; (2) THE GENUINENESS OF THE TRANSACTION, NAMELY, WHETHER IT HAS BEEN TRANSMITTED THROUGH BANKING OR OTHER INDISPUTABLE CHANNELS; (3) THE CREDITWORTHINESS OR FINANCIAL STRENGTH OF THE CREDITOR/SUBSCRIBER; (4) IF RELEVANT DETAILS OF THE ADDRESS OR PAN IDENTIFY OF THE CREDITOR/SUBSCRIBER ARE FURNISHED TO THE DEPARTMENT ALONG WITH COPIES OF THESHAREHOLDERS REGISTER, SHARE APPLICATION FORMS, SHARE TRANSFER REGISTER, ETC., IT WOULD CONSTITUTE ACCEPTABLE PROO F OR ACCEPTABLE EXPLANATION BY THE ASSESSEE.(5) THE SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 113 DEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWING AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCRIBER FAILS OR NEGLECTS TO RESPOND TO ITS NOTICES;(6) THE ONUS WOULD NOT STAND DISCHARGED IF THE CREDITOR/SUBSCRIBER DENIES OR REPUDIATES THE TRANSACTION SET UP BY THE ASSESSEE NOR SHOULD THE ASSESSING OFFICER TAKE SUCH REPUDIATION AT FACE VALUE AND CONSTRUE IT, WITHOUT MORE, AGAINST THE ASSESSEE; AND (7) THE ASSESSING OFFICER IS DUTY-BOUND TO INVESTIGATE THE CREDITWORTHINESS OF THE CREDITOR/SUBSCRIBER THE GENUINENESS OF THE TRANSACTION AND THE VERACITY OF THE REPUDIATION . 6. C.I.T VS. DIVINE LEASING & FINANCE LTD. [CIVIL APPEAL NO. CC375/2008 (SC)] CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME U/S.68 OF THE INCOME-TAX ACT, 19 61? WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE- COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE A.O., THEN THE DEPARTMENT IS FREE TO PROCEED TO RE- OPEN THEIR INDIVIDUAL ASSESSMENT IN ACCORDANCE WITH LAW . HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT. 7. C.I.T VS. SOPHIA FINANCE LTD. [205 ITR 98 (DEL.FB)] IF THE SHAREHOLDERS ARE IDENTIFIED AND IT IS ESTABLISHED THAT THEY HAVE INVESTED MONEY IN THE PURCHASE OF SHARES, THEN THE AMOUNT RECEIVED BY SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 114 THE COMPANY WOULD BE REGARDED AS A CAPITAL RECEIPT AND TO THAT EXTENT THE OBSERVATIONS IN C.I.T. VS. STELLAR INVESTMENT LTD. [1991] 192 ITR 287 (DELHI), ARE CORRECT ; BUT THE OBSERVATIONS IN THAT CASE TO THE EFFECT THAT EVEN IF THE SUBSCRIBERS TO THE CAPITAL WERE NOT GENUINE UNDER NO CIRCUMSTANCE COU LD THE AMOUNT OF SHARE CAPITAL BE REGARDED AS UNDISCLO SED INCOME OF THE [COMPANY] ARE NOT. 8. C.I.T VS. LOVELY EXPORTS PVT. LTD. [216 CTR 195 (SC)] 2. CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME UNDER SECTION 68 OF IT ACT, 1961 ?. WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW . HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT. 3. SUBJECT TO THE ABOVE, SPECIAL LEAVE PETITION IS DISMISSED . 9. C.I.T VS. FIRST POINT FINANCE LTD. [286 ITR 477] (RAJ)]. THE FINDINGS REACHED BY THE TRIBUNAL WERE FINDINGS OF FACT AND WERE IN CONSONANCE WITH THE DECISION OF TH E DELHI HIGH COURT ([1991] 192 ITR 287 ) AFFIRMED BY THE SUPREME COURT IN THE CASE OF STELLER INVESTMENT LTD . [2001] 251 ITR 263 , AND ALSO ON PRINCIPLE ACCEPTED BY ANOTHER DECISION IN CIT V. SOPHIA FINANCE LTD. [199 4] SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 115 205 ITR 98 (DELHI) [FB]. THE FINDING RECORDED BY THE TRIBUNAL DID NOT GO BEYOND THE PURVIEW OF THE FINDI NGS OF FACT. IN THE INSTANT CASE, IT WAS NOT DENIED THAT ALL THE SHAREHOLDERS/SHARE APPLICANTS WERE GENUINELY EXISTING PERSONS. IT WAS ALSO NOT DENIED THAT EACH OF THEM WAS AN INCOME-TAX ASSESSEE AND THE COPIES OF THE RETURN OF THEIR INCOME WERE ALSO PLACED BEFORE THE ASSESSING OFFICER BY THE ASSESSEE WHICH FACT WAS ALSO NOT DENIED. IN THESE CIRCUMSTANCES, NO MATERIAL HAD BEEN BROUGHT ON RECORD EXCEPT INFERRING THAT THE INVESTORS IN THE OPINION OF THE ASSESSING OFFICER WERE NOT CREDITWORTHY TO LINK THE ASSESSEE WITH SUCH INVESTMENT OF MONEY MADE BY THOSE PERSONS . THE CASE SQUARELY FELL WITHIN THE RATIO LAID DOWN I N THE STELLER INVESTMENT LTD. [2001] 251ITR 263 (SC) WHER EIN IT WAS STATED THAT IN SUCH CASES MERELY BECAUSE THE CREDITORS HAVE FAILED TO PROVE THEIR SOURCE OF INVESTMENT, THE SAME CANNOT BE ADDED IN THE INCOME OF THE ASSESSEE BUT IT OUGHT TO BE ADDED BY FINDING PERSONS WHO HAD THEIR NAMES . THERE WAS NO PRESUMPTION THAT THE ASSESSEE WAS THE BENAMI OWNER OF THE INVESTMENT MADE BY THE EXISTING PERSONS. THE APPEAL WAS TO BE DISMISSED. 10. SHREE BARKHA SYNTHETICS LTD. VS. A.C.I.T [283 ITR 377 (RAJ)] IF THE TRANSACTIONS ARE MADE THROUGH BANKING CHANNELS AND ONCE THE EXISTENCE OF PERSONS BY NAME IN THE SHARE APPLICATIONS IN WHOSE NAME THE SHARES HAVE BEEN ISSUED IS SHOWN, THE ASSESSEE SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 116 COMPANY CANNOT BE HELD RESPONSIBLE TO PROVE WHETHER THAT PERSON HIMSELF HAS INVESTED THE SAID MONEY OR SOME OTHER PERSON HAD MADE INVESTMENT IN THE NAME OF THAT PERSON. THE BURDEN THEN SHIFTS ON THE REVENUE TO ESTABLISH THAT SUCH INVESTMENT HAS COME FROM THE ASSESSEE COMPANY ITSELF. 11. C.I.T VS. DWARKADHISH INVESTMENT PVT. LTD. [ 194 TAXMAN 43 (DEL)] .................. ONCE HE PROVES THE IDENTITY OF THE CREDITORS/SHARE APPLICANTS BY EITHER FURNISHING THEIR PAN NUMBERS OR INCOME-TAX ASSESSMENT NUMBERS AND SHOWS THE GENUINENESS OF TRANSACTION BY SHOWING MONEY IN HIS BOOKS EITHER BY ACCOUNT PAYEE CHEQUE OR BY DRAFT OR BY ANY OTHER MODE, THEN THE ONUS OF PROOF WOULD SHIFT TO THE REVENUE.JUST BECAUSE THE CREDITORS/SHARE APPLICANTS COULD NOT BE FOUND AT THE ADDRESS GIVEN, IT WOULD NOT GIVE THE REVENUE THE RIGHT TO INVOKE SECTION 68. ONE MUST NOT LOSE SIGHT OF THE FACT THAT IT IS THE REVENUE WHICH HAS ALL THE POWERS AND WHEREWITHAL TO TRACE ANY PERSON . MOREOVER, IT IS SETTLED LAW THAT THE ASSESSEE NEED NOT TO PROVE THE SOURCE OF SOURCE................ 12. C.I.T VS. ANTARCTICA INVESTMENT PVT. LTD. [262 ITR 493 (DEL)] THE COURT WAS SATISFIED THAT NO INTERFERENCE WAS JUSTIFIED SINCE THE ASSESSEE HAD PRODUCED THE SHARE APPLICATION FORM ALONG WITH CONFIRMATION LETTERS, C OPIES OF THEIR ACCOUNTS, COPIES OF THEIR BANK ACCOUNT AND CHEQUES PAYMENTS AND THEIR AUDITORS REPORT. THE SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 117 ASSESSING OFFICERS CONCLUSION THAT GENUINENESS OF TRANSACTIONS HAD NOT BEEN MADE GOOD WAS NOT UPHELD DESPITE THE FACT THAT THE NOTICES RECEIVED BY ONE O F THE COMMON DIRECTORS OF TWO SUBSCRIBING COMPANIES HAD BEEN IGNORED AND NO INFORMATION WAS FORTHCOMING FRO M THE LATTER. HOWEVER, IT WAS CONFIRMED BY THE UNDER SECRETARY, LAND REVENUE, GOVERNMENT OF SIKKIM, THAT BOTH THE COMPANIES WERE INCORPORATED IN SIKKIM AND THEIR ADDRESSES WERE DISCLOSED IN THE RETURN OF ALLOTMENT; THE SUBSCRIBER THUS STOOD IDENTIFIED. 13. C.I.T VS. DOLPHINE CANPACK LTD. [283 ITR 190 (DEL)] ............ IN CASES WHERE THE CREDIT ENTRY RELATES TO THE ISSUE OF SHARE CAPITAL, THE ITO IS ALSO ENTITLE D TO EXAMINE WHETHER THE ALLEGED SHAREHOLDERS DO IN FACT EXIST OR NOT. SUCH AN INQUIRY WAS CONDUCTED BY THE ASSESSING OFFICER IN THE INSTANT CASE. IN THE COURSE OF THE SAID INQUIRY, THE ASSESSEE HAD DISCLOSED TO THE ASSESSING OFFICER NOT ONLY THE NAMES AND THE PARTICULARS OF THE SUBSCRIBERS OF THE SHARES BUT ALSO THEIR BANK ACCOUNTS AND THE PERMANENT ACCOUNT NUMBERS ISSUED BY THE INCOME-TAX DEPARTMENT. SUPERADDED TO ALL THIS WAS THE FACT THAT THE AMOUNT RECEIVED BY THE COMPANY WAS ALL BY WAY OF CHEQUES. THAT MATERIAL WAS, IN THE OPINION OF THE TRIBUNAL, SUFFICIENT TO DISCHARGE THE ONUS THAT LAY UPON THE ASSESSEE. THAT WAS EVIDENT FROM THE PASSAGE EXTRACTED FROM THE ORDER PASSED BY THE TRIBUNAL EARLIER. IN T HE ABSENCE OF ANY PERVERSITY IN THE VIEW TAKEN BY THE TRIBUNAL OR ANYTHING TO ESTABLISH CONCLUSIVELY THAT THE FINDING REGARDING THE GENUINENESS OF THE SUBSCRIBER S SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 118 AND THE TRANSACTION SUFFERED FROM ANY IRRATIONALITY NO SUBSTANTIAL QUESTION OF LAW AROSE FOR CONSIDERATION IN INSTANT APPEAL TO WARRANT INTERFERENCE. THE INSTANT APPEAL ACCORDINGLY FAILED AND WAS DISMISSED.[PARA 7 ] 14. C.I.T VS. VALUE CAPITAL SERVICES PVT. LTD. [307 ITR 334 (DEL)] .............IT IS QUITE OBVIOUS THAT IS VERY DIFFI CULT FOR THE ASSESSEE TO SHOW THE CREDITWORTHINESS OF STRANGERS. IF THE REVENUE HAD ANY DOUBT WITH REGARD TO THEIR ABILITY TO MAKE THE INVESTMENT, THEIR RETURNS MIGHT BE REOPENED BY THE DEPARTMENT ................... IF DEPARTMENT WANTS TO MAKE ADDITION ON ACCOUNT OF SHARE APPLICATION MONEY, BURDEN IS ON DEPARTMENT TO SHOW THAT EVEN IF APPLICANT DID NOT HAVE MEANS TO MAKE INVESTMENT, INVESTMENT MADE BY ASSESSEE ACTUALLY EMANATED FROM COFFERS OF ASSESSEE SO AS TO ENABLE IT TO BE TREATED AS UNDISCLOSED INCOME OF ASSESSEE. 15. C.I.T VS. PEOPLES GENERAL HOSPITAL LTD. [2013] 356 ITR 65 (MP) FACTS THE ASSESSING OFFICER MADE ADDITION, HOLDING THAT S HARE SUBSCRIPTION RECEIVED FROM A COMPANY IN SHARJAH WAS UNDISCLOSED INCOME OF THE ASSESSEE, AS HE DOUBTED T HE CREDITWORTHINESS OF SUCH COMPANY. HELD IN THE CASE OF CIT V. LOVELY EXPORTS (P.) LTD. [APP LICATION NO. 11993 OF 2007, DATED 11-1-2008], THE APEX COURT SPECIFICALLY HELD THAT IF THE IDENTITY OF THE PERSO N SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 119 PROVIDING SHARE APPLICATION MONEY IS ESTABLISHED, T HEN THE BURDEN IS NOT ON THE ASSESSEE TO PROVE THE CREDITWORTHINESS OF THE SAID PERSON. HOWEVER, THE DEPARTMENT CAN PROCEED AGAINST THE SAID COMPANY IN ACCORDANCE WITH LAW. [PARA 16] THE POSITION OF THE PRESENT CASE IS IDENTICAL. IT I S NOT THE CASE OF ANY OF THE PARTIES THAT THE COMPANY IN SHAR JAH IS A BOGUS COMPANY OR A NON-EXISTENT COMPANY AND TH E AMOUNT WHICH WAS SUBSCRIBED BY THE SAID COMPANY BY WAY OF SHARE SUBSCRIPTION WAS IN FACT THE MONEY OF THE ASSESSEE. IN THE PRESENT CASE, THE ASSESSEE HAD ESTABLISHED THE IDENTITY OF INVESTOR WHO HAD PROVID ED THE SHARE SUBSCRIPTION AND IT WAS ESTABLISHED THAT THE TRANSACTION WAS GENUINE, THOUGH AS PER CONTENTION O F THE ASSESSEE THE CREDITWORTHINESS OF THE CREDITOR W AS ALSO ESTABLISHED. IN THE PRESENT CASE, IN THE LIGHT OF THE JUDGMENT OF LOVELY EXPORTS (P.) LTD. (SUPRA), ONLY ESTABLISHMENT OF THE IDENTITY OF THE INVESTOR IS TO BE SEEN. THE DELHI HIGH COURT ALSO, IN THE CASE OF CIT V. DIVINE LEASING & FINANCE LTD. [2008] 299 ITR 268/[2007] 158 TAXMAN 440 , CONSIDERING A SIMILAR QUESTION HELD THAT THE ASSESSEE-COMPANY, HAVING RECEIVED SUBSCRIPTIONS FROM THE PUBLIC/RIGHTS ISSUE THROUGH BANKING CHANNELS AND FURNISHED COMPLETE DETAILS OF THE SHAREHOLDERS, NO ADDITION COULD BE M ADE UNDER SECTION 68 IN THE ABSENCE OF ANY POSITIVE MAT ERIAL OR EVIDENCE TO INDICATE THAT THE SHAREHOLDERS WERE BENAMIDARS OR FICTITIOUS PERSONS OR THAT ANY PART O F THE SHARE CAPITAL REPRESENTED COMPANY'S OWN INCOME FROM UNDISCLOSED SOURCES. [PARA 16] 16. C.I.T VS. EMPIRE BUILDTECH (P) LTD. [2014] 43 TAXMANN.COM 269 (DEL) SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 120 THE ADDITION IN RELATION TO SHARE CAPITAL CAN BE MA DE ONLY IN THE CASE OF THOSE SUBSCRIBERS/INVESTORS TO SHARE CAPITAL WHOSE PARTICULARS COULD NOT BE VERIFIED AND WHO DID NOT RESPOND TO NOTICES ISSUED BY ASSESSING OFFI CER. 17. MIDAS GOLDEN DISTILLERIES (P) LTD. VS. C.I.T [2009] 124 TTJ 25 (CHENNAI) FACTS THE ASSESSEE RAISED SHARE CAPITAL AND RECEIVED SHAR E APPLICATION MONEY FROM SEVEN PERSONS AGGREGATING RS.1394.15 LAKHS. THE ASSESSEE HAD BROUGHT ON RECOR D COMPLETE IDENTITY OF SHAREHOLDERS BY PROVIDING THEI R ADDRESSES AND CONFIRMATIONS TO THE EFFECT THAT THEY HAD CONTRIBUTED TO THE SHARE CAPITAL OF THE ASSESSEE COMPANY. THE MONEYS RECEIVED WERE THROUGH BANKING CHANNEL. THEY ALL WERE SHOWN TO BE REGULARLY ASSESS ED TO INCOME-TAX. ASSESSMENT PARTICULARS WITH RESPECT TO EACH OF THEM WERE MADE AVAILABLE TO THE ASSESSING AUTHORITY. TWO COMPANIES WHICH HAD MADE CONTRIBUTIONS OF RS.340 LAKHS AND RS.745 LAKHS RESPECTIVELY WERE ASSESSED WITH THE SAME ASSESSING OFFICER WHO ASSESSED THE ASSESSEE. THE ASSESSING AUTHORITY HIMSELF HAD FOUND THAT BOTH THESE APPLICA NTS IN THEIR RESPECTIVE ACCOUNTS, HAD DISCLOSED INVESTM ENT MADE WITH THE ASSESSEE. HOWEVER, THE SHARE APPLICATION MONEY WAS TREATED AS CASH CREDITS AND ADDED TO THE ASSESSEES INCOME. HELD DESPITE ALL THE MATERIAL AVAILABLE WITH THE ASSESSI NG AUTHORITY AND DISCREET ENQUIRIES AS WERE MADE WITHI N THE SCOPE OF HIS POWERS, THE ASSESSING AUTHORITY FO UND THAT THERE REMAINED A MYSTERY AS TO WHOM THE MONEY SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 121 REALLY BELONGED . EVEN THOUGH THERE WERE CIRCUMSTANCES LEADING TO SUSPICION, YET HAVING TAKEN AN ACTION UNDER SECTION 132 AND ENQUIRIES MADE IN THE ASSESSMENT PROCEEDINGS, THE ASSESSING AUTHORITY HAD NOT BROUGHT ANY POSITIVE MATERIAL OR EVIDENCE TO INDICATE THAT THE SHARE APPLICATION MONEY AS SUCH REPRESENTED ASSESSEES OWN UNDISCLOSED MONEY BROUGHT BACK IN THE GARB OF SHARE CAPITAL. MERELY BECAUSE OF HIS SUBJECTIVE SATISFACTION THAT THE SOURCE OF AVAILABILITY OF MONEY WITH THE SHAREHOLDERS OR THEIR CREDITWORTHINESS WERE NOT ESTABLISHED, THE ASSESSING OFFICER COULD NOT TREAT THE GENUINELY RAISED SHARE CAPITAL AS DEEMED INCOME UNDER SECTION 68 . IN THE EVENT THE INTERMEDIARY COMPANIES WERE TO BE TAKEN AS CONDUITS OR PERSONS WITHOUT REQUISITE CREDITWORTHINESS AND EVEN IF THEY WERE TO BE TREATED AS BOGUS SHAREHOLDERS, THEN ALSO NOTHING STOPPED THE REVENUE TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW AND BRING TO TAX SUCH UNEXPLAINED MONEY IN THEIR RESPECTIVE HANDS. ACCORDINGLY, THE ADDITION WAS TO BE DELETED. 18. C.I.T VS. SHREE RAMA MULTI TECH LTD [2013] 34 TAXMANN.COM 177 (GUJ.) IT IS NOTED THAT COMMISSIONER (APPEALS) AS WELL AS THE TRIBUNAL HAVE DULY CONSIDERED ISSUE AND HAVING FOUN D COMPLETE DETAILS OF THE RECEIPTS OF SHARE APPLICATI ON MONEY, ALONG WITH THE FORM NAMES AND ADDRESSES, PAN AND OTHER REQUISITE DETAILS, THEY FOUND COMPLETE ABSENCE OF THE GROUNDS NOTED FOR INVOKING THE PROVI SION SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 122 OF SECTION 68. MOREOVER, BOTH RIGHTLY HAD APPLIED T HE DECISION OF CIT V. LOVELY EXPORTS (P.) LTD. [APPLIC ATION NO. 11993 OF 2007, DATED 11-1-2003] TO THE CASE OF THE ASSESSEE. THEREFORE, NO REASON WAS FOUND IN ABSENCE OF ANY ILLEGALITY MUCH LESS ANY PERVERSITY TOO TO INTE RFERE WITH THE ORDER OF THE BOTH THESE AUTHORITIES, WHO H AD CONCURRENTLY HELD THE DUE DETAILS HAVING BEEN PROVE D. THE ASSESSEE-COMPANY HAD PRESENTED THE NECESSARY WORTH PROOF BEFORE BOTH THE AUTHORITIES AND IT WAS NOT EXPECTED BY THE ASSESSEE-COMPANY TO FURTHER PROVE T HE SOURCE OF THE DECEASED. THIS TAX APPEAL RESULTANTLY RAISES NO QUESTION OF LAW AND THEREFORE DO NOT MERI T FOR THE CONSIDERATION AND IS DISMISSED. [PARA 7] 19. C.I.T VS. STL EXTRUSION (P) LTD [2011] 11 TAXMANN.COM 125 (MP) ............THE ASSESSEE HAVING DULY FURNISHED THE NAMES, AGE, ADDRESS, DATE OF FILING THE APPLICATION OF SHA RE, NUMBER OF SHARES OF EACH SUBSCRIBER THERE WAS NO JUSTIFICATION FOR THE ASSESSING OFFICER FOR MAKING THE IMPUGNED ADDITION BECAUSE ONCE THE EXISTENCE OF THE INVESTORS/SHARE SUBSCRIBERS IS PROVED, ONUS SHIFT O N THE REVENUE TO ESTABLISH THAT EITHER THE SHARE APPLICAN TS ARE BOGUS OR THE IMPUGNED MONEY BELONGS TO THE ASSESSEE ITSELF. WE ALSO FIND THAT AFTER FILING OF THE AFFID AVITS OF THE SAID SUBSCRIBER THE APPELLANT AT NO STAGE OF TH E PROCEEDINGS SOUGHT ANY OPPORTUNITY TO REBUT THE SAI D AFFIDAVITS. THE CONTENTION OF THE A.O. THAT HE IS NOT REQUIRED TO PROVE PAYMENT OF CASH IN LIEU OF THE CHEQUES RECEIVED, TH E ONUS IS SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 123 UPON THE ASSESSEE TO EXPLAIN THESE TRANSACTIONS TO A.O.S SATISFACTION; THE ASSESSEE CANNOT ESCAPE FROM THIS RESPONSIBILITY BY FAILURE OF THE A.O. TO ESTABLISH CASH TRAIL AND CASH TRAIL WAS ESTABLISHED BY THE A.O ., IT IS SUBMITTED THAT THE A.O. DID NOT CONSIDER ALL THE EVIDENCE PLACED BEFORE HIM. HE DID NOT GO THROUGH THE BANK STATEMENTS OF LUC KY COMMOTRADE PVT. LTD. IN WHICH TRANSACTIONS WITH THE ASSESSEE GROUP WERE PROPERLY REFLECTED. HE COULD NOT BRING A SINGLE IOTA OF EVIDENCE TO PROVE THAT CASH WAS DEPOSIT ED IN THE BANK ACCOUNT OF LUCKY COMMOTRADE PVT. LTD. PRIOR T O THE ISSUE OF CHEQUES TO THE ASSESSEE COMPANY OR AT ANY POINT OF TIME. IN FACT, THE ASSESSEE PRODUCED NECESSAR Y DOCUMENTS/EVIDENCE TO ESTABLISH IDENTITY OF LUCKY COMMOTRADE PVT. LTD., FILED BANK ACCOUNTS FOR VERIFICAT ION OF TRANSACTION, DULY CONFIRMED COPIES OF ACCOUNT AND AUDITED ANNUAL ACCOUNTS TO ESTABLISH CREDITWORTHINESS O F THE SHAREHOLDER AND GENUINENESS OF TRANSACTION, BUT TH E SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 124 REVENUE DID NOT CONDUCT FURTHER ENQUIRIES AND SIMPLY REJECTED THE ASSESSEES EXPLANATION AND EVIDENCE FOR MAKING ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S.68 OF THE ACT. 36. THE RELIANCE PLACED BY THE C.I.T.(A). ON FACTS LI KE LUCKY COMMOTRADE PVT. LTD. AS WELL AS THE ASSESSEE COMPANY HAD BANK ACCOUNT WITH THE SAME BANK I.E. UCO BANK, NEW PALASIA ROAD, INDORE; THE BANK PASSBOOK AND CHEQUES BOOK OF LUCKY COMMOTRADE PVT. LTD. WERE FOUND WITH THE ASSESSEE, TO HOLD THAT IT WAS A CONDUIT FOR TRANSFERRING FUNDS TO VARIOUS SIGNET GROUP COMPANIES, IS TOTALLY MISPLACED INASMUCH AS THE BANK ACCOUNT OF THE ASSESSEE AND LUCKY COMMOTRADE PVT. LTD. WERE KEPT IN T HE SAME BANK ACCOUNT TO FACILITATE PROMPT TRANSFER OF FUNDS TO SAME BANK CHARGES AND INTEREST COST. SIMILARLY, THERE W AS NOTHING UNUSUAL IN THE CHEQUES BOOK OF LUCKY COMMOTRDEPVT LTD. FOUND WITH SHRI MUKESHSANGLA SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 125 CONSIDERING CLOSE FRIENDSHIP, FAMILY RELATIONS AND MUT UAL TRUST BETWEEN SANGLA FAMILY AND SHRI RAMCHANDKEDIA OF LUCKY COMMOTRADE PVT. LTD. THE CHEQUES BOOK WAS KEPT T O FACILITATE PROMPT TRANSFER OF FUNDS, SAVE BANK CHARGES AND INTEREST COST AS PHYSICAL MOVEMENT OF CHEQUES BETWEEN KOLKATA AND INDORE WOULD HAVE ENTAILED. IT MAY BE IMPORTANT TO NOTE THAT NET BANKING AND ONLINE BANKING TRANSACTIONS OVER WORLD WIDE WEB (WWW) WAS AT A VERY NASCENT STAGE IN INDIA DURING THE IMPUGNED PERIOD AND PEOPLE WERE VERY SKEPTICAL TO PERUSE THE SAME IN VIEW OF THE E-COMMERCE FRAUD DURING THE PERIOD. 37. AS REGARD CONFIRMATION OF ADDITION OF RS.2 CRORES, BEING LOAN RECEIVED FROM LUCKY COMMOTRDE PVT. LTD., AS UNEXPLAINED CASH CREDIT OF THE C.I.T.(A) BY OBSERVING THAT THE ASSESSEE COULD NOT ESTABLISH ONE TO ONE RELATION BETWEEN SOURCE OF FUNDS AND ADVANCING OF LOAN, IT IS SUBMITTED THAT THE FINDING OF THE C.I.T.(A) IS CONTR ARY TO THE SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 126 FACTS EMERGING FROM THE BANK STATEMENT AS REVEALED BY TH E FOLLOWING POSITION: LOAN RECEIVED SOURCE OF LOAN RECEIVED DATE AMOUNT (RS.) DATE AMOUNT (RS.) SOURCE 29.03.2008 2,00,00,000 28.03.2008 1,89,40,000 SIGNET INDUSTRIES LTD.- OUT OF ADVANCE OF RS.2,50,00,000/- RECEIVED ON 28.03.2008 29.03.2008 11,60,000 SIGNET INDUSTRIES LTD.- OUT OF ADVANCE OF RS.2,50,00,000/- RECEIVED ON 29.03.2008 38. IN VIEW OF THE ABOVE, THE LEARNED COUNSEL FOR TH E ASSESSEE SUBMITTED THAT THE ADDITION U/S.68 IN RELATIO N TO UNSECURED LOANS RECEIVED FROM LUCKY COMMOTRADE PVT. L TD. IS REQUIRED TO BE DELETED. 39. ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED WRITTEN SUBMISSIONS ON THIS WHICH READ AS UNDER :- UNEXPLAINED UNSECURED LOANS (A.Y. 2007-08 & 2008-09 ) A.O. MADE THE ADDITION OF RS.8.05 CRORE ON ACCOUNT OF UNEXPLAINED UNSECURED LOAN TAKEN FROM 5 COMPANIES I N A.Y. 2007-08 AND RS.1,16,57,56,050/- FROM M/S LUCKY COMMOTRADE PVT. LTD. IN A.Y. 2008-09. OUT OF WHICH SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 127 PARTLY HAS BEEN DELETED WITH THE FINDINGS THAT SAME COMPANIES WERE USED ONLY AS A CONDUIT BY M/S SIGNET INDUSTRIES LTD. TO GIVE LOAN TO APPELLANT COMPANY I N WHICH FUNDS WERE TRANSFERRED FIRST FROM M/S SIGNET INDUST RIES TO THOSE COMPANIES AND THEN THOSE COMPANIES TRANSFERRE D TO THE FUNDS TO THE ASSESSEE COMPANY AND THUS AS THE F UNDS RECEIVED THROUGH M/S SIGNET INDUSTRIES BY CHEQUE IS TREATED AS EXPLAINED AND WHERE THE FUNDS NOT TRANSF ERRED THROUGH M/S SIGNET INDUSTRIES BY CHEQUE IS TREATED AS EXPLAINED AND WHERE THE FUNDS NOT TRANSFERRED THROU GH M/S SIGNET INDUSTRIES, CIT(A) HELD THAT SOURCES OF DEPOSIT IN THE BANK ACCOUNT OFTHOSE COMPANIES BEFORE ISSUIN G CHEQUE TO THE ASSESSEE COMPANY COULD NOT BE TREATED EXPLAINED AS WELL AS ASSESSEE FAILED TO PROVE THE CREDITWORTHINESS OF THOSE COMPANIES AND GENUINENESS OF THE TRANSACTION THOUGH MONEY WASRECEIVED THROUGH BANKING CHANNEL, ADDITION WAS CONFIRMED AND TO THAT SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 128 EXTENT I RELIED UPON THE FINDINGS OF CIT(A) AS WELL AS DECISIONS FROM S.NO. 1 TO 16 IN MY SEPARATE COMPILA TION WHICH ARE DIRECTLY APPLICABLE ON THE ISSUE OF S.68. COMMON GROUND IN REGARD TO ISSUE OF UNSECURED LOAN HAS ALSO BEEN TAKEN IN OTHER CASES OF GROUP AS PER LIST ENCLOSED HEREWITH IN WHICH MY ABOVE SAME SUBMISSION MAY KINDLY BE CONSIDERED. REVENUES APPEAL : ITA NO. (SS) 202 & 203/IND/2015 (A.Y. 2007-08 & 2008-09 1. UNEXPLAINED SECURED LOAN (A.Y. 2007-08 & 2008-0 9) COMMON GROUND HAS BEEN TAKEN IN BOTH THE APPEALS. C IT(A) HAS DELETED THE ADDITION ON ACCOUNT OF UNEXPLAINED UNSE CURED LOAN U/S 68 DUE TO REASONS AS STATED ABOVE BUT TO THAT E XTENT, FINDINGS OF CIT(A) ARE NOT JUSTIFIED BECAUSE NO BASIS/COGENT MATERIAL HAS BEEN PLACED TO SUPPORT HIS FINDINGS THAT HOW THE FU NDS RECEIVED THROUGH M/S SIGNET INDUSTRIES BE TREATED EXPLAINED WHILE MOST OF THE MONEY WAS GIVEN IN CASH TO SHRI PANKAJ KALANI/D EEPAK KALANI WHICH WAS RECEIVED BACK THROUGH M/S LUCKY CO MMONTRADE PVT. LTD., KOLKATTA (PAPER COMPANY) TO M/S SIGNET I NDUSTRIES SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 129 WHICH WAS ALREADY HELD UNACCOUNTED AND ADMITTED BY ASSESSEE IN M/S SIGNET INDUSTRIES. APART FROM THAT MONEY, OT HER AMOUNTS WERE ALSO DEPOSITS IN THE BANK ACCOUNT OF M/S SIGNE T INDUSTRIES FOR WHICH NO COMMENTS WERE GIVEN BY CIT(A). THUS, I N ABSENCE OF ANY EVIDENCE, ONUS IS STILL ON THE ASSESSEE TO PROV E CREDITWORTHINESS AND GENUINENESS OF UNSECURED LOANS . FINDINGS OF CIT(A) ARE NOT JUSTIFIED AND THEREFORE SAME MAY KIN DLY BE SET ASIDE. I RELIED UPON THE DECISIONS FROM S.NO. 1 TO 16 AS GIVEN BY ME IN MY SEPARATE COMPILATION ON THE ISSUE OF S. 68 . COMMON GROUND ON THE SAME ISSUE HAS ALSO BEEN TAKE N BY THE REVENUE IN OTHER CASES OF GROUP AS PER THE LIST ENC LOSED FOR WHICH ABOVE SUBMISSION MAY KINDLY BE CONSIDERED AND FINDI NGS OF CIT(A) MAY BE SET ASIDE. 40. THE LEARNED DR ALSO RELIED UPON THE FOLLOWING JUDGMENTS :- S. NO. C ASE L AW REMARKS 1 M/S AGRAWAL COAL CORP. PVT. LTD. INDORE V/S ADDL. C IT RANGE-5, INDORE. 19 TAXMAN.COM 209 (ITAT INDORE) SECTION-68 2 ACIT V/S NARMADA EXTRUSION LTD. AND OTHERS, 19 ITJ 202, (ITAT - DO - SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 130 41. WE HAVE HEARD BOTH THE SIDES. WE HAVE CONSIDERED T HE FACTS OF THE CASE IN VIEW OF VARIOUS CASE LAWS RELIED U PON BY INDORE) 3 SUMATI DAYAL V/S COMMISSIONER OF INCOME TAX 214 I TR 801 (SC) - DO - 4 ROSHAN DI HATTI V/S COMMISSIONER OF INCOME TAX, 1 07 ITR 938 (SC) - DO - 5 SHANKAR INDUSTRIES V/S COMMISSIONER OF INCOME TAX, 114 ITR 689 (CAL) - DO - 6 COMMISSIONER OF INCOME TAX V/S BIJU PATNAIK , 160 ITR 674 (SC) - DO - 7 COMMISSIONER OF INCOME TAX V/S PRECISION FINANCE PV T. LTD. 208 ITR 465 CAL.(HC) - DO - 8 COMMISSIONER OF INCOME TAX V/S P. MOHANKALA & ORS. 291 ITR 278 (SC) - DO - 9 COMMISSIONER OF INCOME TAX V/S PODAR CEMENT (P) LTD ., 226 ITR 625, (SC) - DO - 10 COMMISSIONER OF INCOME TAX V/S GOLD COIN HEALTH FOO D (P) LTD., 304 ITR 308 (SC) - DO - 11 COMMISSIONER OF INCOME TAX V/S NOVA PROMOTERS & FIN LEASE (P) LTD., 342 ITR 169 (HC) DELHI. - DO - 12 ASHOK MAHINDRU & SONS (HUF) V/S COMMISSIONER OF INC OME TAX, 173 TAXMAN 178 (HC) DELHI. - DO - 13 JOINT COMMISSIONER INCOME TAX V/S SAHELI LEASING & INDUSTRIES LTD., 324 ITR 170 (SC) - DO - 14 M/S SOPHIA FINANCE LTD. 205 ITR 98 (DELHI) - DO - 15 CIT V/S M/S NAVODAYA CASTLES PVT. LTD., 367 ITR 306 (DELHI) - DO - 16 DURGA PRASAD MORE, 82 ITR 540 (S.C.) - DO - 16 ANANTHARAM VEERASINGHAIAH V/S CIT, 123 ITR 457 ( SC) TELESCOPING 17 GRAND BAZAR V/S ACIT, 292 ITR 269 - DO - 18 S. MUTHUKUMAR V/S INCOME TAX OFFICER, 37 TAXMAN.COM 219 (MAD.) CASH DEPOSIT IN BANK SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 131 BOTH THE SIDES. WE HAVE CONSIDERED THE FACTS OF THE ASSESSEES CASE IN THE LIGHT OF THE FACTS INVOLVED IN THE DECISIONS RELIED UPON BY THE REVENUE. WE FIND THAT T HE FACTS ARE AT VARIANCE, HENCE RATIO LAID DOWN IN THESE DECISION S IS NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. THE LEARNED CIT(A) TREATED THE CREDITS OF RS.14,86,90,000 /- AS EXPLAINED ON THE BASIS THAT THIS AMOUNT WAS GIVEN BY LUCKY COMMOTRADE PVT. LTD. OUT OF INTER-CORPORATE LOAN RECEIVED FROM SIGNET INDUSTRIES LIMITED AND ADROIT INDUSTRIES (INDIA) LTD. THE LEARNED DR COULD NOT CON TROVERT THE FINDINGS OF THE LEARNED CIT(A). WE, THEREFORE, FIND NO MERIT IN THE APPEAL OF THE REVENUE. 42. ON THE ISSUE OF SUSTAINING THE ADDITION OF RS. 2 CRORES, WE FIND THAT THIS AMOUNT OF RS. 2 CRORES RECE IVED BY THE ASSESSEE ON 29.3.2008 WAS ALSO FROM THE LOAN RECEIV ED OF RS.1,89,40,000/- ON 28.3.2008 AND RS.11,60,000/- ON 29.3.2008 BY LUCKY COMMOTRADE PVT. LTD. FROM THE SIG NET SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 132 INDUSTRIES LIMITED. WE, THEREFORE, FOR THE SAME REASO NS, FIND NO MERIT IN SUSTAINING THE ADDITION. GROUND NO.3.0 (A.YS.: 2007-08)OF THE ASSESSEES APPEA L : 5.0 GROUND NO.3.0(A.YS.: 2007-08) OF ASSESSEES APPEALS READS AS UNDER: ASSESSMENT YEAR : 2007-08 REJECTION OF ASSESSEES CLAIM FOR DEDUCTIONS OF RENT AND INTEREST: 3.0 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN LAW AS WELL AS IN FACTS IN CONFIRMING THE REJECTION OF ASSESSEES CLAIM FOR THE FOLLOWING DEDUCTIONS BY TH E ASSESSING OFFICER : A) RENT : RS.1,76,000/- B) INTEREST : RS. 10,639 /- 43.AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR T HE ASSESSEE DID NOT PRESS THIS GROUND, HENCE, DISMISSED . 44. FINALLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED WHEREAS THE APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED IN OPEN COURT ON 7 TH JANUARY, 2016 SD/- SD/- (D.T. GARASIA) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER 7 TH JANUARY, 2016 SHALIMAR FERROUS METALS PVT. LTD. IT(SS)A NOS.22 & 203/IND/2015 AND IT(SS)A NOS.104 & 105/IND/2015 133 DN/-