THE ACIT, (CENTRAL)-I, Indore V. M/S. SWAN HOLDING PVT. LTD., Indore

ITSSA 194/IND/2015

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 1520 (ITAT-INDORE)
• Duration Of Justice: 6 month(s) 2 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 08-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 06-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA; RAJIV VARSHNEY
• Keywords: Unexplained cash credit; Unexplained investment; Income from undisclosed sources; Search and seizure; Source of fund; Deemed to accrue or arise in india; Permanent establishment; Question of law; Accommodation entries; Capital receipt
• Section: 143(3); 153A; 133(6); 68; 132

Judgement Text

SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/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 NO. 91/IND/2015 A.Y. 2011-12 M/S SWAN HOLDING PVT. LTD. (PRESENTLY KNOWN AS SWAN IRRIEGATION PVT. LTD.), INDORE PAN AAHCS 5040Q VS. DY. COMMR. OF INCOME TAX (CENTRAL) INDORE APPELLANT RESPONDENT IT(SS)A NO. 194/IND/2015 A.Y. 2011-12 ASSTT. COMMR. OF INCOME TAX (CENTRAL)-I INDORE VS M/S SWAN HOLDING PVT. LTD. (PRESENTLY KNOWN AS SWAN IRRIEGATION PVT. LTD.)INDORE APPELLANT RESPONDENT ASSESSEE BY SHRI GIRDHAR GARG REVENUE BY SHRI RAJIV VARSHNEY AND SHRI R.A. VERMA DATE OF HEARING 29.12.2015 DATE OF PRONOUNCEMENT 8 .1.2016 O R D E R PER SHRI B.C. MEENA, AM THESE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE EMANATE FROM THE ORDER OF THE LEARNED CIT(A)- 3, BHOPAL, DATED 30.4.2015. SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 2 2. THE 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 RESIDENTIAL PREMISES OF THE ASSESSEE ON 03.11.2011. CONSEQUENTLY, A NOTICE U/S.153 A WAS ISSUED. THE STATUS REGARDING RETURN OF INCOME FURNISHED BY THE ASSESSEE U/S.139(1) AND 153A OF THE INCOME-TAX ACT, 1961 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 9,480 28.02.2013 9,880 9,880 2007-08 29.09.2007 11,172 28.02.2013 11,170 11,170 2008-09 23.08.2008 15,231 28.02.2013 16,920 84,83,110 2009-10 16.09.2009 13,884 28.02.2013 13,890 13,890 2010-11 14.09.2010 91,233 28.02.2013 92,114 66,61,490 2011-12 26.07.2011 1,684 28.02.2013 1,680 1,38,51,680 2012-13 29.09.2012 NIL - - NIL SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 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 FOR ASSESSMENT YEAR 2011- 12. AGAINST THE ORDER PASSED BY THE LEARNED CIT(A), TH E ASSESSEE PREFERRED APPEAL BEFORE THE INCOME-TAX APPELL ATE TRIBUNAL. 3. GROUND NO. 1 IN THE ASSESSEES APPEAL READS AS UNDER :- THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INC OME- TAX (APPEALS)-3, BHOPAL, CONFIRMING THE ASSESSMENT ORDER PASSED U/S.153A R.W. SEC.143(3) OF THE INCOME-TAX A CT, 1961, BY THE DEPUTY COMMISSIONER OF INCOME-TAX IS B OTH BAD-IN-LAW AND BAD-IN-FACTS. THERE WAS NO ABATEMENT OF ASSESSMENT. LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS THE GROUND, HENCE, DISMISSED. GROUND NO.2.0 OF THE ASSESSEES APPEAL AND GROUND NO.1 OF REVENUES APPEAL GROUND NO.2.0 (A.Y.: 2011-12) OF ASSESSEES APPEALS RE ADS AS UNDER: SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 4 SHARE APPLICATION MONEY TREATED AS UNEXPLAINED INCOME : RS.74,00,000/- THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN LAW AS WELL AS IN FACTS IN PARTLY CONFIRMI NG THE ADDITION OF RS.74,00,000/- MADE BY THE ASSESSING OFFICER U/S.68 OF THE INCOME-TAX ACT, 196 1 BY TREATING SHARE APPLICATION RECEIVED BY THE ASSESSEE FROM THE FOLLOWING COMPANIES AS UNEXPLAINED CASH CREDIT : NAME OF COMPANIES AMOUNT (RS.) SIDDH HOUSING FINANCE PRIVATE LIMITED 25,00,000/ - OCTOPUS INFOTEL PRIVATE LIMITED 9,00,000/ - ALBTROSS SHARE REGISTERY PVT. LIMITED 20,00,000/ - WARNER MULTIMEDIA LIMITED 20,00,000/ - TOTAL 74,00,000/- REVENUES GROUND OF APPEAL READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE C.I.T.(A). ERRED IN DELETING THE ADDITION MADE U/S. 68 OF THE I.T.ACT, 1961 ON ACCOUNT OF SHARE APPLICATION M ONEY RECEIVED OF RS.64,50,000/- OF M/S. KAMDEEP MARKETIN G PVT. LTD.. THE FACTS IN BRIEF ARE THAT THE THE ASSESSEE RECEIVED S HARE APPLICATION MONEY OF RS.74,00,000/- FROM THE FOLLOWIN G COMPANIES: SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 5 NAME OF COMPANIES AMOUNT (RS.) SIDDH HOUSING FINANCE PRIVATE LIMITED 25,00,000/- OCTOPUS INFOTEL PRIVATE LIMITED 9,00,000/- ALBTROSS SHARE REGISTERY PVT. LIMITED 20,00,000/- WARNER MULTIMEDIA LIMITED 20,00,000/- TOTAL 74,00,000/- THE PLEADINGS OF THE LEARNED COUNSEL FOR THE ASSESSEE WERE COMMON ON THE ISSUE OF CASH CREDIT AND SHARE APPLICATION MONEY RECEIVED BY VARIOUS ENTITIES OF THE GROUP. THE REFORE, THE PLEADINGS ON THE ISSUE OF CASH CREDITS AND SHARE APPLICATION ADDED U/S 68 OF THE ACT ARE COMMON IN ALL TH E CASES OF THE GROUP. 4. OTHER FACTS WHICH ARE RELEVANT TO OTHER CASES ALSO O N THIS ISSUE ARE THAT DURING SEARCH, THE BANK STATEMENTS EVIDENCING PAYMENT OF SHARE APPLICATION MONEY/UNSECURE D LOAN, MEMORANDUM AND ARTICLES OF ASSOCIATION OF COMPANIES, RESOLUTIONS OF BOARD OF DIRECTORS, BLANK S IGNED TRANSFER FORMS AND/OR BLANK SIGNED MONEY RECEIPTS, ETC . OF THE FOLLOWING COMPANIES WERE FOUND: (I) ASAN INVESTMENT AND FINANCIAL SERVICES PVT. LTD., SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 6 (II) SIDDHI HOUSING DEVELOPMENT COMPANY LTD., (III) OCTOPUS INFOTEL PVT. LTD. (IV) WARNER MULTIMEDIA LTD. (V) ALBTROSS SHARE REGISTERY PVT. LTD. (VI) ONE 2 SOLUTIONS PVT LTD. (VII) MATRIX SYSTEL PRIVATE LTD. (VIII) ARTILLEGENCE BIO INNOVATIONS LTD. THE STATEMENT OF SHRI JAGDISH PUROHIT, WHO WAS CONTROL LING SOME OF THE COMPANIES, DIRECTLY OR INDIRECTLY, WAS RE CORDED BY ADIT (INV.), UNIT IV(2), MUMBAI U/S.131 OF THE AC T. ASSESSING OFFICER CLAIMS THAT COPY OF THE STATEMENT WAS PROVIDED TO THE ASSESSEE ALONGWITH THE NOTICE U/S 142 (1) ON 30.09.2013 BUT ASSESSEE DENIED THIS FACT. IN THE STATE MENT, SHRI PUROHIT HAS STATED THAT SOME OF THE COMPANIES HAVE PROVIDED ACCOMMODATION ENTRIES TO THE SIGNET GROUP OF COMPANIES. THE NAMES GIVEN WERE AS UNDER :- (IX) WARNER MULTIMEDIA LTD., (X) UNISYS SOFTWARE AND HOLDING INDUSTRIES LTD., (XI) MICROCHIP INFOTEL PVT. LTD. , SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 7 (XII) OCTOPUS INFOTEL PVT. LTD & (XIII) MATRIX SYSTEL PVT. LTD. THE STATEMENT GIVEN BY SHRI JAGDISH PUROHIT WAS SUBSEQUENTLY RETRACTED BY SHRI JAGDISH PUROHIT BY WAY OF FILING AN AFFIDAVIT BEFORE THE ADIT (INV.) UNIT IV(2) , MUMBAI WHEREIN SHRI PUROHIT CATEGORICALLY STATED THAT THE EARLI ER STATEMENT GIVEN BEFORE ADIT (INV.) ADMITTING THAT SHARE APPLICATION MONEY PAID BY THESE COMPANIES CONTROLLED, DIRECTLY OR INDIRECTLY, BY HIM WERE ACCOMMODATION ENT RIES, WAS GIVEN UNDER TREMENDOUS MENTAL STRESS, TENSION AND UTTER CONFUSED STATE OF MIND. THE INVESTMENTS MADE BY THESE COMPANIES WERE REAL AND GENUINE. COPIES OF THES E AFFIDAVITS WERE ALSO FILED BEFORE THE A.O. AS WELL AS BE FORE THE LEARNED CIT(A). 5. OUT OF THE SHARE APPLICATION MONEY/UNSECURED LOAN RECEIVED BY THE ASSESSEE AND OTHER GROUP ENTITIES, A SUBSTANTIAL PART WAS REFUNDED DUE TO NON-ALLOTMENT OF SHARES AND IT WAS MUCH BEFORE THE DATE OF SEARCH. THE SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 8 DETAILS OF THE SAME WERE ALSO FILED BEFORE THE ASSESSIN G OFFICER ALONGWITH THE EVIDENCE. 6. THE SHARE APPLICATION MONEY OF RS.1,38,50,000/- WAS TREATED AS UNEXPLAINED CASH CREDIT BY THE A.O. AND ADDITI ON WAS MADE U/S.68 OF THE ACT. 7. THE REASONINGS GIVEN BY THE C.I.T.(A) FOR SUSTAIN ING THE ADDITION ARE AS UNDER :- IT IS A WELL SETTLED LAW THAT WHERE THERE IS A CREDIT IN THE BOOKS OF ACCOUNT OF AN ASSESSEE DURING PREVIOUS YEAR, THE ONUS IS UPON THE ASSESSEE TO PROVE THE IDENTITY OF THE CREDITOR, HIS CAPACITY/CREDITWORTHINESS TO GIVE THE LOAN/SHARE APPLICATION MONEY AND GENUINENESS OF THE TRANSACTION BY FURNISHING CREDIBLE EVIDENCE. IT IS A WELL SETTLED LAW THAT WHERE AN ASSESSEE FURNISHES THE DOCUMENTS TO PROVE THE GENUINENESS OF THE TRANSACTION AND IF THE SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 9 ASSESSING OFFICER FINDS ON THE BASIS OF ENQUIRY OR OTHER MATERIAL THAT THE DOCUMENTS DISCLOSED BY THE ASSESSEE ARE UNTRUSTWORTHY OR LACKED CREDIBILITY, THE ASSESSING OFFICER CAN REJECT THE EXPLANATION OF THE ASSESSEE AND MAKE ADDITION U/S 68 OF THE ACT. THE RELIANCE WAS PLACED UPON THE FINDING GIVEN BY THE ASSESSING OFFICER AS WELL AS SEIZURE OF SIGNED BLANK TRANSFER FORMS, SIGNED BLANK RECEIPTS, ETC. DURING SEARCH FROM THE OFFICE PREMISES OF SIGNET INDUSTRIES LTD. SHRI JAGDISH PUROHIT, WHO WAS DIRECTLY OR INDIRECTLY CONTROLLING MICROCHIP LNFOTEL PRIVATE LIMITED, OCTOPUS LNFOTEL PVT. LTD. AND MATRIX SYSTEL PRIVATE LIMITED, ADMITTED IN HIS STATEMENT BEFORE THE ADIT (INV.), UNIT IV(2), MUMBAI THAT THESE COMPANIES HAD GIVEN ONLY ACCOMMODATION ENTRIES TO SIGNET GROUP COMPANIES. IT WAS ALSO FOUND ON INVESTIGATION BY SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 10 ADIT (INV.), MUMBAI AND AO THAT THE DIRECTORS OF THESE COMPANIES WERE DUMMY DIRECTORS AND PERSONS OF NO MEANS. THE AFFIDAVIT FILED BY SHRI JAGDISH PUROHIT BEFORE THE A.D.I.T (INV) MUMBAI AS WELL AS THE A.O. WAS AN AFTERTHOUGHT AND, THEREFORE, NOT BELIEVABLE. ALSO HE WAS NOT PRODUCED BEFORE THE A.O. FOR EXAMINING THE VERACITY OF THE CONTENTS OF THE AFFIDAVIT. IN CASE OF WARNER MULTIMEDIA LTD. AND ONE 2 SOLUTION PVT. LTD., THE SHARE APPLICATION MONEY TRANSACTIONS WERE DE-LAYERED BY AO AND IT WAS FOUND THAT THE ULTIMATE SOURCE OF FUNDS COMING FROM THESE COMPANIES WAS CASH DEPOSIT WHICH WAS ROUTED THROUGH TWO OR THREE ENTITIES AND SHARE APPLICATION MONEY WAS PAID TO SIGNET GROUP OF COMPANIES. THE FACTS NOTICED AND ENQUIRIES MADE ESTABLISHED THAT THESE COMPANIES WERE PAPER SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 11 COMPANIES AND SURROUNDING AND ATTENDING FACTS PREDICATED A COVER UP. EXTENSIVE RELIANCE WAS PLACED UPON THE JUDGMENT IN THE CASE OF C.I.T. VS. NAVODAYA CASTLES PVT. LTD. 367 ITR 306 (DELHI) AND IT WAS HELD THAT THE CASE OF THE ASSESSEE FELL IN THE SECOND CATEGORY OF CASES WHERE THERE ARE EVIDENCE AND MATERIAL TO SHOW THAT THE SHAREHOLDER COMPANIES WERE PAPER COMPANIES HAVING NO SOURCE OF INCOME BUT HAVE MADE SUBSTANTIAL AND HUGE INVESTMENT IN THE FORM OF SHARE APPLICATION MONEY. 8. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED BE FORE US THAT THE ASSESSEE IS A LISTED COMPANY. IT IS RELATED TO SIGNET GROUP OF COMPANIES. SHRI MUKESH SANGLA IS WELL KNOWN IN THE FIELD OF TRADING IN PLASTICS, MANUFACTURE OF PLASTIC PRODUCTS, MICRO IRRIGATION SYSTEMS ETC. THIS GROUP IS ALSO WELL KNOWN IN THE MARKET FOR ITS FINANCIAL STABILIT Y. IT SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 12 SUCCESSFULLY MADE GIANT STRIDES INTO MICRO IRRIGATION SYSTEMS AND CPVC PIPES AND ATTAINED SIGNIFICANT RANKING IN STATES LIKE GUJARAT, ANDHRA PRADESH, RAJASTHAN, MADHYA PRADESH FOR SUPPLY OF MICRO IRRIGATION SYSTEMS. THERE ARE A LARGE NUMBER OF INVESTORS INCLUDING FIIS AND FINANCIAL INSTITUTIONS WHICH ARE INTERESTED IN INVESTMENT IN T HE GROUP BY WAY OF EQUITY PARTICIPATION, PREFERENCE SHARES OR IN TER- CORPORATE LOANS. THE OBJECTIVES OF THESE INVESTORS AR E TO INVEST IN THE GROUP ON LONG TERM BASIS AND REAP HANDSO ME RETURNS IN DUE COURSE OF TIME. 9. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE HON 'BLE DELHI HIGH COURT HELD IN THE CASE OF C.I.T. VS KAMDHE NU STEEL AND ALLOY LTD. (361 ITR 220) WHEREIN IT WAS H ELD THAT : 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 SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 13 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: '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 (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 SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 14 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 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 SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 15 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 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. SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 16 THE ASSESSEE GROUP DISCHARGED ITS ONUS OF ESTABLISHING IDENTITY AND CREDITWORTHINESS OF SHARE APPLICANTS/LOAN CREDITORS AND GENUINENESS OF TRANSACTIONS IN THE FOLLO WING MANNER: (A) TO ESTABLISH IDENTITY OF SHARE APPLICANT COMPANIES, THE ASSESSEE FILED DOCUMENTS LIKE THE CERTIFICATE OF INCORPORATION, MEMORANDUM AND ARTICLES OF ASSOCIATION, P.A.N. CARD, COPIES OF RETURN OF INCOME, DETAILS OF REGISTERED OFFICE AND DIRECTORSHIP ETC. BEFORE THE A.O. (B) TO ESTABLISH CREDITWORTHINESS , THE ASSESSEE FURNISHED COPIES OF BANK STATEMENTS OF SHARE APPLICANTS SHOWING THE RELEVANT TRANSACTIONS, THEIR RETURNS OF INCOME, ASSESSMENT ORDERS WHEREVER AVAILABLE, AUDITED ANNUAL ACCOUNTS, DULY CONFIRMED COPIES OF ACCOUNTS, ETC. BEFORE THE A.O. IN ALL THE CASES, THERE WERE SUFFICIENT BANK BALANCES AND IN NONE OF THE CASES, CASH WAS DEPOSITED EITHER PRIOR TO ISSUE OF CHEQUES TOWARDS SHARE APPLICATION MONEY/UNSECURED LOAN OR AT ANY POINT OF TIME DURING THE YEAR. SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 17 (C) TO ESTABLISH GENUINENESS OF TRANSACTIONS , IT WAS DEMONSTRATED THAT ALL THE TRANSACTIONS HAD TAKEN PLACE THROUGH PROPER BANKING CHANNELS AND NO EVIDENCE WHATSOEVER WAS FOUND SHOWING PAYMENT OF CASH TO SHARE APPLICANT COMPANIES/LOAN CREDITORS IN LIEU OF CHEQUES RECEIVED FROM THEM. 10. NOTICES U/S.133(6) WERE ISSUED IN 34 CASES FOR VERIFICATION OF SHARE APPLICATION MONEY/UNSECURED LOAN/VERIFICATION OF SHARES OF ADROIT INDUSTRIES (INDI A) LTD. SOLD AND REACQUIRED BY THE ASSESSEE GROUP. IN ALL THE CAS ES, THE NOTICES ISSUED U/S. 133(6) WERE SERVED UPON THE CREDITOR/SHARE APPLICANT. IN SOME CASES, THESE NOTICES WERE SERVED IMMEDIATELY AND IN SOME CASES, INITIALLY THE NOT ICES WERE RETURNED UNSERVED BUT SUBSEQUENTLY SERVED ON TH E BASIS OF CHANGED ADDRESSES PROVIDED BY THE ASSESSEE. AL L THE COMPANIES PARTICIPATED IN THE ASSESSMENT PROCEEDING S BY CATEGORICALLY REPLYING TO THE SPECIFIC QUERIES RAISE D BY THE ASSESSING OFFICER IN THE NOTICES ISSUED U/S.133( 6) AND SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 18 FURNISHING DOCUMENTS LIKE RETURN OF INCOME, RELEVANT BANK STATEMENTS, DULY CONFIRMED COPIES OF ACCOUNTS, ETC. THESE COMPANIES CATEGORICALLY STATED THAT THEY WERE REGULAR INVESTORS IN SHARES AS WELL AS PROVIDING UNSECURED LOAN S TO BUSINESS ENTERPRISES A FACT EVIDENT FROM THEIR AUDIT ED ANNUAL ACCOUNTS AND WERE ALWAYS LOOKING FOR BETTER INVESTMENT OPPORTUNITIES. THEY ALWAYS TRY TO INVEST AT AN EARLY STAGE SO AS TO REAP GOOD RETURNS. MOREOVER, THE LONG- TERM DECISIONS OF INVESTMENT ARE NOT ONLY BASED UPON PRESENT PERFORMANCE AND DIVIDEND TRACK RECORD ALONE BUT ALSO UPON SEVERAL OTHER FACTORS LIKE REPUTATION OF THE GROUP AND THE PROMOTERS, PRODUCTS IN WHICH THE GROUP DEALS, MARKET PRICE OF THE SHARES - IF LISTED OF FLAGSHIP GRO UP COMPANIES, THE MARKET CAPITALISATION, POTENTIALS OF THE PRODUCT BEING TRADED OR MANUFACTURED, GAINING EASY ACCESS TO THE MANAGEMENT OF THE COMPANY, POTENTIALS OF ACQUISITION OR MERGER OF THE COMPANY, ETC. HOWEVER, T HE SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 19 A.O. SIMPLY BRUSHED ASIDE THE RESULTS OF THE ENQUIRY CONDUCTED BY HIM AND IGNORED A LARGE NUMBER OF EVIDENC E PLACED BEFORE HIM BY THE ASSESSEE GROUP AS WELL AS GATHERED DURING ENQUIRY CONDUCTED BY HIM IN THE COURS E OF ASSESSMENT PROCEEDINGS. THE CONTENTION OF THE A.O. T HAT THE SHARES WERE INTENDED TO BE ALLOTTED AT A HEAVY PREMI UM AND THAT THE SHARE APPLICATION MONEY WAS REFUNDED CONSEQUENT TO THE SEARCH CONDUCTED BY THE INCOME TAX DEPARTMENT WAS COMPLETELY ERRONEOUS AND BASELESS. IN FACT, IN MOST OF THE CASES, SHARE APPLICATION MONEY WAS REFUNDED MUCH BEFORE THE DATE OF SEARCH BY THESE COMPANIES BECAUSE OF DIFFERENCE IN PERCEPTION BETWEEN THE MANAGEMENT OF SIGNET GROUP AND SUCH COMPANIES. AS THE PRIMARY BUSINESS OF THESE SHARE APPLICANT COMPANIES WAS FINANCE, INVESTMENT AND TRADING, IT IS QUITE NATURAL FOR THEM TO ROTATE THEIR INVESTMENT AND LOANS DEPENDING UP ON REQUIREMENTS OF THE CUSTOMER AS WELL AS ITS OWN NEED O F SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 20 FUNDS TO SEEK BETTER INVESTMENT OPPORTUNITIES. IN T HE CASE OF SHARE APPLICANTS, THE SHARE APPLICATION MONEY WAS PAID MAINLY OUT OF RECOVERY OF LOANS AND ADVANCES AND REALISATION OF INVESTMENT AS NO COMPANY HAS INEXHAUSTIBL E SUPPLY OF FUNDS. ON THIS BASIS, THE SHARE APPLICATION MONEY COULD NOT HAVE BEEN TREATED AS UNEXPLAINED INVESTMENT IN THE ABSENCE OF ANY OTHER ADVERSE FINDING . IN NONE OF THE CASES, THE A.O. COULD BRING ANY INSTANCE SHOWING DEPOSIT OF CASH IN THE BANK ACCOUNT OF VARIOUS COMPANIES PRIOR TO ISSUE OF CHEQUES OR AT ANY OTHER POI NT OF TIME DURING THE YEAR. AS REGARD ALLEGATION/FINDING OF THE A.O. THAT THE TRANSACTIONS IN THE CASE OF WARNER MULTIMEDIA LTD. AND ONE 2 SOLUTIONS PVT. LTD. WERE DE - LAYERED AND IT WAS FOUND THAT CASH WAS DEPOSITED PRIOR TO ISSUE OF CHEQUES TO THE ASSESSEE, THE ASSESSEE WAS NOT GIVEN ANY DETAILS ABOUT THE ALLEGED DE-LAYERING DURING ASSESSMENT PROCEEDINGS OR AT ANY POINT OF TIME AS TO HO W SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 21 WAS IT RELEVANT IN THE ASSESSEES CASE. IT IS SUBMITTED THAT THE A.O. CAN CONDUCT ALL ENQUIRIES BEHIND THE ASSESSEE S BACK BUT IF HE WANTS TO USE THE RESULTS OF SUCH ENQUIR IES AGAINST THE ASSESSEE, HE SHOULD PROVIDE ALL THE EVIDENC E GATHERED DURING ENQUIRIES AS WELL AS THE OPPORTUNITY TO THE ASSESSEE FOR REBUTTING THE SAME. THE HON'BLE PUNJAB AN D HARYANA HIGH COURT HELD IN THE CASE OF CHIRANJI LAL STEEL ROLLING MILLS VS. C.J.T. (84 JTR 222) THAT THE PROVISION OF THE INDIAN EVIDENCE ACT CANNOT BE RESORTED TO JUDGE THE ADMISSIBILITY OR LEGALITY OF A PARTICULAR PIECE OF EVIDENCE ON WHICH THE ASSESSING OFFICER RELIES FOR THE PURPOSE OF ASSESSMENT. IT IS OPEN TO ASSESSING OFFICER TO COLL ECT EVIDENCE FROM ANY SOURCE BUT IT IS HIS DUTY TO PUT IT TO THE ASSESSEE BEFORE MAKING IT THE BASIS OF HIS ASSESSMENT. IF TH E ASSESSEE DENIES THE INFORMATION COLLECTED BY THE ASSESSING O FFICER, THE ASSESSING OFFICER HAS TO SATISFY HIMSELF BY MAKING INDEPENDENT ENQUIRY FROM SOURCE CONSIDERED RELIABLE BY HIM SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 22 AND DECIDE WHETHER INFORMATION PASSED ON TO HIM IS TRUE OR NOT. IF, AS A RESULT OF HIS OWN INDEPENDENT ENQUIRY HE COMES TO THE CONCLUSION THAT THE INFORMATION RECEIVED BY HIM IS TRUE, HE IS AT LIBERTY TO ACT THEREUPON AFTER DISCLOSING IT TO THE ASSESSEE AND AFFORDING HIM A REASONABLE OPPORTUNITY OF REBUTTING IT. BUT HE HAS NO RIGHT TO BURDEN THE ASS ESSEE WITH AN EXTRA AMOUNT OF TAX ON A VAGUE INFORMATION GIVEN TO HIM WITHOUT HIMSELF VERIFYING ITS TRUTHFULNESS OR RELIA BILITY 11. IT IS TRUE THAT THE INVESTMENTS ARE MADE WITH PROF IT MOTIVE BUT IMMEDIATE REALISATION OF PROFIT IS NOT NECE SSARY. MANY TIMES, AN INVESTOR INVESTS MONEY IN ANTICIPATION T HAT IT WOULD FETCH GOOD RETURNS FOR IT IN LONG TERM. FO R EXAMPLE, WHEN INFOSYS WAS SET UP NOBODY KNEW IT BUT THE INVES TORS WHO INVESTED MONEY IN INFOSYS EARNED HUGE RETURN ON THEIR INVESTMENT. THEREFORE, PROFIT MOTIVE MAY BE A SIGNIF ICANT PART OF INVESTMENT STRATEGY BUT IT IS NOT THE ONLY FAC TOR AND IMMEDIATE REALISATION OF PROFIT IS NOT NECESSARY. THE SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 23 ASSESSING OFFICER FAILED TO BRING ANY MATERIAL OR EVIDEN CE 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 SHARE APPLICATION MONEY WERE ISSUED BY THEM OUT OF CASH SO DEPOSITED OR PAID. IN THIS REGARD, THE RELIANCE WAS PLAC ED ON THE FOLLOWING JUDGEMENTS: (I) C.I.T VS. VALUE CAPITAL SERVICES PVT. LTD. 307 ITR 334 (DEL) (II) MIDAS GOLDEN DISTILLERIES (P) LTD. VS.C.I.T [2009] 124 TTJ 25 (CHENNAI) 12. AS REGARDS THE LEGAL POSITION OF ADDITION U/S.68 I N RELATION TO SHARE APPLICATION MONEY THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE FOLLOWING DECISIONS :- 1. C.I.T VS. STELLAR INVESTMENT LTD. [192 ITR 287 (DEL)] 2. C.I.T VS. STELLER INVESTMENT LTD. [251 ITR 263 (SC)] SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 24 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 (DEL)] 12. C.I.T VS. DOLPHINE CANPACK LTD. [283 ITR 190 (DEL)] SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 25 13. C.I.T VS. VALUE CAPITAL SERVICES PVT. LTD. [307 ITR 334 (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.COM 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.COM 177 (GUJ.) 18. C.I.T VS. STL EXTRUSION (P) LTD [2011] 11 TAXMANN.COM 125 (MP) THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ON ANALYSIS OF THE ABOVE JUDGEMENTS, IT EMERGES THAT IN CAS E OF SUBSCRIBERS TO THE SHARE CAPITAL, THE COMPANY IS REQUIRE D TO ESTABLISH IDENTITY OF THE SHAREHOLDER, WHICH CAN BE PR OVED BY FURNISHING OF PERMANENT ACCOUNT NUMBER, CERTIFICAT E OF INCORPORATION, COPIES OF RETURN OF INCOME ETC. (C.I. T VS. DWARKADHISH INVESTMENT PVT. LTD. 194 TAXMANN 43 (DEL). SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 26 THE GENUINENESS OF TRANSACTIONS CAN BE ESTABLISHED BY SHOWING THAT THE TRANSACTION HAD TAKEN PLACE THROUGH PROPER BANKING CHANNELS (C.I.T VS. DIVINE 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, AUDITED ANNUAL ACCOUNTS, ET C. 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 I S 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 TH E NAME OF THAT PERSON. THE BURDEN THEN SHIFTS ON THE REVENUE TO ESTABLISH THAT SUCH INVESTMENT HAS COME FRO M THE ASSESSEE COMPANY ITSELF. SHREE BARKHA SYNTHETICS LT D. VS. ACIT (283 ITR 377 RAJ). IF SUCH SHAREHOLDERS ARE UNABLE TO PROVE THEIR CREDITWORTHINESS, THE ASSESSING OFFIC ER IS DUTY SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 27 BOUND TO TAKE NECESSARY ACTION IN THEIR CASES. [CIT VS. LOVELY EXPORTS PVT. LTD. 216 CTR 195 SC] 13. THE DOCUMENTS LIKE SIGNED BLANK TRANSFER FOR MS, DULY SIGNED BLANK RECEIPTS, ETC. WERE OBTAINED FROM T HE SHARE APPLICANTS TO ENSURE THE FIRST RIGHT OF REFUSAL W ITH THE SIGNET GROUP OF COMPANIES AS WELL AS SANGLA FAMILY. IT DETERRED THE INVESTORS FROM TRANSFERRING THEIR SHAREH OLDING WITHOUT PRIOR PERMISSION FROM THE MANAGEMENT AND ENSURED THAT THE CONTROL OF THE COMPANIES REMAINED WIT H THE SIGNET GROUP AND SANGLA FAMILY. IN NONE OF THE CASE S POINTED OUT BY THE ASSESSING OFFICER FROM SEIZED MATE RIAL, SHARES WERE ALLOTTED BY THE RESPECTIVE COMPANIES TO TH E INVESTORS TILL THE DATE OF SEARCH OR EVEN THEREAFTER AND IN MOST OF THE CASES, THE SHARE APPLICATION MONEY WAS REFUNDED TO THE RESPECTIVE SHARE APPLICANT BY ACCOUNT PAYEE CHEQUES MUCH PRIOR TO THE DATE OF SEARCH. MOREOV ER, MERELY BECAUSE OF BLANK DOCUMENTS AS NOTICED BY THE SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 28 ASSESSING OFFICER, IT CANNOT BE INFERRED, IN THE ABSEN CE OF ANY OTHER CORROBORATIVE EVIDENCE, THAT THE TRANSACTION W AS FICTITIOUS OR REPRESENTED AN ACCOMMODATION ENTRY, PARTICULARLY WHEN SHARES WERE NOT ALLOTTED, THE APPLICATI ON MONEY WAS REFUNDED EVEN BEFORE THE DATE OF SEARCH AND REQUISITE EVIDENCE TO ESTABLISH GENUINENESS OF THE TRANSACTIONS WERE PROVIDED TO THE ASSESSING OFFICER. I N RELATION TO STATEMENT OF SHRI JAGDISH PUROHIT, WHO DIR ECTLY OR INDIRECTLY CONTROLLED VARIOUS COMPANIES LIKE MICRO CHIP INFOTEL PVT. LTD., OCTOPUS INFOTEL PVT. LTD. AND MATR IX SYSTEM PVT. LTD. GIVEN BEFORE THE A.D.I.T. (INV.) M UMBAI, THE ASSESSEE WAS NEVER GIVEN THE COPY OF HIS STATEMENT DURING ENTIRE ASSESSMENT PROCEEDINGS. THE STATEMENT OF THE A.O. THAT COPY OF REPORT OF A.D.I.T. (INV.) MUMBAIWAS ENCLOSED WITH THE NOTICE DATED 30.09.2013 IS NOT COR RECT AND CONTRARY TO THE FACTS. THE ASSESSEES REQUEST FOR CR OSS EXAMINATION OF SHRI JAGDISH PUROHIT FELL ON THE DEAF EAR S OF SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 29 THE A.O. AND IT WAS DENIED OPPORTUNITY TO BRING THE C ORRECT FACTS ON RECORD. THE UNCONTROVERTED AFFIDAVIT OF SHRI JAGDISH PUROHIT WAS REJECTED BY C.I.T.(A). AS BEING AN AFTERTHOUGHT AND UNBELIVABLE. AN AFFIDAVIT IS NOT A MERE PIECE OR PAPER RATHER IT CARRIES ITS AUTHENTICITY AS TH E CONTENTS OF THE SAME ARE DULY SWORN BEFORE A MAGISTRATE OR A NOTARY PUBLIC/OATH COMMISSIONER, AS THE CASE MAY BE. DURING SIGNING OF THESE AFFIDAVITS, THE DEPONENT APPEAR S BEFORE THE PERSON BEFORE WHOM THEY ARE SWORN AND THEI R SIGNATURES ARE DULY TAKEN ON THE REGISTER MAINTAINED BY SUCH NOTARY PUBLIC. IF THE ASSESSING OFFICER IS APPREH ENSIVE ABOUT THE AUTHENTICITY OF SUCH AFFIDAVIT, HE CAN ALWAYS CROSS EXAMINE THE DEPONENTS AND TO VERIFY THE CONTENT S OF SUCH AFFIDAVIT. IF HE DOES NOT CONSIDER CROSS EXAMINATI ON OF THE DEPONENT NECESSARY, HE CANNOT QUESTION THE CORRECTNESS OF THE STATEMENTS MADE BY THE DEPONENTS I N THEIR AFFIDAVITS. IN SUPPORT OF THE ABOVE PROPOSITION, SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 30 RELIANCE IS PLACED UPON THE JUDGEMENT OF HONOURABLE SUPREME COURT IN THE CASE OF MEHTA PARIKH & CO. VS. C. I. T (30 1TR 181). 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 EXISTEN CE 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 CERTIFICATE OF INCORPORATION ISSUED BY COMPETENT STATU TORY 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 SIMPLY BECAUSE OF NON-SER VICE OF NOTICES ISSUED BY INCOME-TAX DEPARTMENT. SUCH NON - SERVICE OF NOTICES COULD BE DUE TO N'TH NUMBER OF R EASONS SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 31 INCLUDING CHANGE OF ADDRESS, NON-AVAILABILITY OF ITS SHAREHOLDERS/DIRECTORS/EMPLOYEES AT A PARTICULAR POINT O F TIME ETC. IT WAS HELD BY THE HONOURABLE DELHI HIGH C OURT IN THE CASE OF DIVINE LEASING AND FINANCE LTD. (299 ITR 26 8) THAT (4) IF RELEVANT DETAILS OF THE ADDRESS OR PAN IDENT IFY OF THE CREDITOR/SUBSCRIBER ARE FURNISHED TO THE DEPART MENT 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 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 ULTIMATELY SERVED UPON ALL THE SHARE APPLICANT COMPANIES AND ALL OF THEM FURNISHED REPLIES TO THE NOTICES WITH DOCUMENTS. IT CLEARLY EMERGES FROM THE ASSESSMENT ORD ER THAT THE ASSESSING OFFICER DID NOT GO THROUGH THESE R EPLIES. SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 32 14. IN THE CASE OF SHARE APPLICANT COMPANIES, THEY EXISTED IN THE EYES OF LAW, THEY HAD THEIR OFFICE PR EMISES ALBEIT IT CHANGED FROM THE DATE OF PAYMENT OF SHARE APPLICATION MONEY TO DATE OF SERVICE OF NOTICE AND THEY WERE CARRYING ON THE BUSINESS OF TRADING, INVESTMENT AND FINANCE. THERE ARE MILLIONS OF PEOPLE AND THOUSANDS OF COMPANIES WHICH EXIST BUT DO NOT HAVE A PERMANENT PLACE OF BUSINESS, BUT STILL HAVE PLACE OF WORK/LIVING AND C ARRY ON SOME OCCUPATION. IN FACT THERE ARE SO MANY PEOPLE WORKI NG FROM THEIR RESIDENCE AND SO MANY COMPANIES WHOSE REGISTERED OFFICE ADDRESSES IS RESIDENCE OF THEIR DI RECTORS, ETC. AND NOT HAVING A PERMANENT BUSINESS PLACE OR ARE NO T FAMOUS OR SOCIALLY RECOGNIZED. IN THE OPINION OF THE ASSESSING OFFICER, ONLY THE BIG AND INFLUENTIAL PERSO NS HAVE LEGAL RECOGNITION, IDENTITY AND CREDITWORTHINESS. A C OMMON MAN HAS NO EXISTENCE IN THE EYES OF THE LAW. THEREFOR E, IT HUMBLY SUBMITTED THAT THE IDENTIFICATION OF EXISTENCE SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 33 PROVIDED BY THE ASSESSEE AND SUBSEQUENT COMPLIANCE OF NOTICE ESTABLISHED BOTH I.E. THEIR IDENTITY AS WELL AS THEIR EXISTENCE. 15. 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 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. SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 34 16. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT IN THE CASE OF LALCHAND BHAGAT AMBICA RAM V. C.I.T. [1959] 37 ITR 288 , THE HONOURABLE SUPREME COURT DISAPPROVED THE PRACTICE OF MAKING ADDITIONS IN THE ASSESSMENT ON MERE SUSPICION AND SURMISES OR BY TAKING NOTE OF THE SO CAL LED 'NOTORIOUS PRACTICE' PREVAILING IN TRADE CIRCLES. SIM ILAR VIEWS WERE EXPRESSED BY THE HONOURABLE DELHI HIGH C OURT IN THE CASE OF C.I.T. VS. DISCOVERY ESTATES (P.) LTD. (356 ITR 159). THE RELEVANT EXTRACT IS AS UNDER : 17. IT ONLY REMAINS FOR US TO REFER TO THE OBSERVATIONS OF THE ASSESSING OFFICER TO THE EFFECT THAT NO ONE MAKES A LOSS IN REAL ESTATE BUSINESS AND THAT THE MARKET PERCEPTIONS INDICATE THAT THE PRICES OF THE IMMOVEABLE 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 EVEN SUGGESTED SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 35 BEFORE US ON BEHALF OF THE REVENUE THAT IT IS A 'NOTORIOUS PRACTICE' PREVAILING IN REAL ESTATE CIRCLES THAT IN ALL PROPERTY TRANSACTIONS THERE IS NON-DISCLOSURE OF THE FULL CONSIDERATION. AS POINTED OUT EARLIER, THIS CANNOT PER SE CONSTITUTE THE BASIS OF THE ADDITION, THOUGH WE MUST HASTEN TO ADD THAT IT CAN VERY WELL BE A STARTING POINT FO R 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: 'ADVERTING TO THE VARIOUS PROBABILITIES WHICH WEIGHED 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 SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 36 NOTORIETY ACHIEVED BY DHULIAN AS A GREAT RECEIVING CENTRE FOR SUCH COMMODITIES WERE MERELY A BACKGROUND OF SUSPICION AND THE APPELLANT COULD NOT 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 IN THAT BEHALF.' THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER DISTIN GUISHED THE ORDER RELIED UPON BY THE REVENUE. HE SUBMITS TH AT THE FIRST APPELLATE AUTHORITY EXTENSIVELY RELIED UPON JUDG EMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF NAVODAYA CAS TLE PVT. LTD. (367 ITR 306) AND HELD THAT THE ASSESSEES C ASE FALL IN THE SECOND SET OF CASES WHERE THERE WAS EVIDEN CE AND MATERIAL TO SHOW THAT THE SHAREHOLDER COMPANY WAS A PAPER COMPANY HAVING NO SOURCE OF INCOME BUT MADE SUBSTANTIAL AND HUGE INVESTMENT IN THE FORM OF SHARE APPLICATION MONEY. THE A.O. REFERRED TO BANK STATEMENT, FINANCIAL POSITION OF THE RECIPIENT AND BENEFICIARY AND SURROUNDING CIRCUMSTANCES. THE THREE REQUIREMENTS OF SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 37 IDENTITY, CREDITWORTHINESS AND GENUINENESS OF TRANSACT ION SHOULD NOT BE TESTED SUPERFICIALLY BUT IN DEPTH HAVIN G REGARDS TO HUMAN PROBABILITIES AND NORMAL COURSE OF HUMAN CONDUCT. IF THE FINDING OF THE FIRST APPELLATE AUTHORITY IS TESTED ON THE TOUCHSTONE OF EVIDENCE FI LED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDI NGS AND ALSO COLLECTED BY THE A.O. IN RESPONSE TO NOTICES U/S.133(6), IT IS QUITE MANIFEST THAT THE ASSESSEES CAS E DID NOT FALL IN THE SECOND SET OF CASES AS ENVISAGED IN THE NAVODAYA CASTLES CASE ( SUPRA ) BECAUSE THE EVIDENCE PLACED BEFORE THE A.O. WERE NOT CONSIDERED BY HIM AT ALL. HE DID NOT GO THROUGH THE BANK STATEMENTS OF THE COMPANIES IN WHICH TRANSACTIONS WITH THE ASSESSEE GROUP WERE PROPE RLY REFLECTED. HE DID NOT CONSIDER THE AUDITED ANNUAL ACCO UNTS FILED BY THESE COMPANIES SHOWING HUGE TURNOVER AND INVESTMENTS. HE SIMPLY HARPED UPON THE SIGNED BLANK TRANSFER FORMS, SIGNED BLANK RECEIPTS, ETC. FOUND DUR ING THE SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 38 SEARCH, THE STATEMENT OF SHRI JAGDISH PUROHIT, AND ALLE GED DE-LAYERING IN THE CASE OF WARNER MULTIMEDIA LTD. AND O NE 2 SOLUTIONS PVT. LTD. TO TREAT THE SHARE APPLICATION MONEY/UNSECURED LOAN AS UNEXPLAINED CASH CREDIT. IN FACT , THE ASSESSEES CASE FELL IN THE FIRST CATEGORY 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 AND SIMPLY REJECTED THE ASSESSEES EXPLANATION AND EVIDENCE FOR MAKING ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S.68 OF THE ACT. ON THE BASIS OF EVIDENCE PLACED ON RECORD BY THE ASSESSEE AND EVIDENCE GATHERED IN RESPON SE SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 39 TO NOTICES ISSUED U/S. 133(6) AND THE FINANCIAL ANALYSIS OF VARIOUS COMPANIES FROM WHOM SHARE APPLICATION MONEY AND UNSECURED LOAN RECEIVED IT IS SUBMITTED BY THE LE ARNED COUNSEL FOR THE ASSESSEE THAT IN VIEW OF THESE FACTS AN D LEGAL POSITION, THE ADDITION DESERVES TO BE DELETED. 17. THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AS ALSO THE FOLLOWING CASE LAWS :- S. NO. C ASE L AW REMARKS 1 M/S AGRAWAL COAL CORP. PVT. LTD. INDORE V/S ADDL. CIT 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 ITR 801 (SC) - DO - 4 ROSHAN DI HATTI V/S COMMISSIONER OF INCOME TAX, 107 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 PVT. 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 - DO - SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 40 18. 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 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 (P) LTD., 226 ITR 625, (SC) 10 COMMISSIONER OF INCOME TAX V/S GOLD COIN HEALTH FOOD (P) LTD., 304 ITR 308 (SC) - DO - 11 COMMISSIONER OF INCOME TAX V/S NOVA PROMOTERS & FINLEASE (P) LTD., 342 ITR 169 (HC) DELHI. - DO - 12 ASHOK MAHINDRU & SONS (HUF) V/S COMMISSIONER OF INCOME 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 SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 41 CASE. THE ASSESSEE RECEIVED LOAN OF RS.74,00,000/- FRO M THE FOUR COMPANIES, DETAILS OF WHICH ARE AS UNDER :- NAME OF COMPANIES AMOUNT (RS.) SIDDH HOUSING FINANCE PRIVATE LIMITED 25,00,000/ - OCTOPUS INFOTEL PRIVATE LIMITED 9,00,000/ - ALBTROSS SHARE REGISTERY PVT. LIMITED 20,00,000/ - WARNER MULTIMEDIA LIMITED 20,00,000/ - TOTAL 74,00,000/ - 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 :- 1. SIDDH HOUSING FINANCE PRIVATE LIMITED THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED IN TH IS REGARD THAT BY INADVERTENT MISTAKE, THE LEARNED ASSESSING OFFICER HAS RECORDED THE NAME OF THE SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 42 COMPANY AS SIDDH HOUSING FINANCE PRIVATE LIMITED AND PAN IS 888KCS660H. HE PLEADED THAT SIDDH HOUSING DEVELOPER.CO.LTD. IS GENUINE COMPANY AND ITS DETAIL S MAY BE CONSIDERED FOR EXPLAINING THE SHARE APPLICATION MON EY. AFTER HEARING BOTH THE SIDES, WE FIND THAT TH E LEARNED CIT(A) HAS ALSO WRITTEN THE NAME OF THE COMPANY AS SIDDHA HOUSING FINANCE PRIVATE LIMITED AND THIS ASPECT NEEDS VERIF ICATION AT THE LEVEL OF THE ASSESSING OFFICER. WE, THEREFORE, RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR VERI FICATION OF THE SAME. 2. OCTOPUS INFOTEL PVT. LTD . THE COMPANY WAS INCORPORATED ON 18.8.2008 HAVING PA NO. AABCO0743N.IT IS HAVING REGISTERED OFFICE AND BOARD OF DIRECTORS TO MANAGE AFFAIRS.IT IS FILING RETURN OF INCOME REGULARLY AND BEING ASSESSED.AS PER AUDITED ANNUAL ACCOUNTS THE CAPITAL OF THE COMPANY AS ON 31.3.2011 WAS RS.39,49,29,079/-&DEBTORS OF RS. 1,14,160/-,OTHER R ECEIVABLES OF RS.3,56,50,000/-. INVESTMENT IN SHARES WAS OF RS. SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 43 RS. 49,82,33,000/- AND BANK BALANCE WAS OF RS. 18,56,429/-. FROM THE BANK STATEMENTS FILED IT WAS EVIDENT THAT ALL THE TRANSACTIONS RELATING TO THE SHARE APPLICATION MONEY WERE CARRIED OUT THROUGH BANKING CHANNELS AND NO CASH WAS DEPOSITED IN THE BANK ACCOUNT. THESE FACTS ESTABLISH THE IDENTITY AND CREDITWORTHINESS OF THE INVESTOR COMPANY AND GENUINENESS OF TRANSACTION. 3. ALBTROSS SHARE REGISTRY PRIVATE LIMITED THE COMPANY WAS INCORPORATED ON 13.05.1993 HAVING ITS PA. NO. AAACI 9004 H. IT IS HAVING REGISTERED OF FICE AND BOARD OF DIRECTORS TO MANAGE ITS AFFAIRS. THE RETURN OF INCOME FILED REGULARLY AND REGULARLY ASSESSED. AS PE R THE AUDITED ANNUAL ACCOUNTS, THE CAPITAL FUNDS OF THE COMPANY AS ON 31.03.2011 WAS OF RS.21,22,90,000/- AND DEBTORS OF RS. 7,14,69,800/-. INVESTMENTS IN SHARES WERE OF RS. 14,56,35,800/-, BANK BALANCE WAS OF RS.91,73,683/-. FROM THE BANK STATEMENTS FILED BY THE COMPANY, IT WAS EVIDENT THAT ALL THE TRANSACTION RELATING TO THE SHARE APPLICATION MONEY WERE CARRIED OUT THROUGH PROPER BANKING CHANNELS AND NO CASH WAS DEPOSITED IN THE BANK ACCOUNT. THESE FACTS ESTABLISH SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 44 THE IDENTITY AND CREDITWORTHINESS OF THE INVESTOR COMPANY AND GENUINENESS OF TRANSACTION. 4. WARNER MULTIMEDIA LIMITED THE COMPANY WAS INCORPORATED ON 23.05.1983 HAVING ITS PA.NO. AABCC 0225 H. IT IS HAVING REGISTERED OFF ICE AND BOARD OF DIRECTORS TO MANAGE ITS AFFAIRS. THE DETAILS ARE PLACED ON RECORD. I THE RETURN OF INCOME REGULARLY FILED AND ALSO REGULARLY ASSESSED. AS PER THE AUDITED ANNUAL ACCOUNTS FILED BY THE COMPANY, THE CAPITAL AS ON 31.03.2011 IS OF RS.16,39,41,864/-. THE COMPANY WAS HAVING FIXED ASSETS OF RS.5,48,917/-, DEBTORS OF RS.3,26,820/, OTHER RECEIVABLES OF RS.7,19,45,452/-, INVESTMENT IN SHARES WAS OF RS.32,36,07,600/- AND BANK BALANCE WAS OF RS.35,88,725/-. THE INCOME OF THE COMPANY WAS RS.4,01,278/- AND THE NET PROFIT BEFORE TAX STOOD AT LOSS OF RS.8,54,69,316/-. FROM T HE BANK STATEMENTS FILED BY THE COMPANY, IT WAS EVIDENT THAT ALL THE TRANSACTION RELATING TO UNSECURED LOAN WERE CARRIED OUT THROUGH PROPER BANKING CHANNELS AND NO CASH WAS DEPOSITED IN THE BANK ACCOUNT. THE DULY CONFIRMED COPIES OF ACCOUNTS ARE ALSO PLACED ON RECORD. THESE FACTS ESTABLISH THE IDENTITY AND CREDITWORTHINES S OF THE INVESTOR COMPANY AND GENUINENESS OF THE TRANSACTION. THE VARIOUS CASE LAWS RELIED UPON BY THE LEARNED COUN SEL FOR THE ASSESSEE AND CONSIDERING THE FACTUAL ASPECT OF T HIS SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 45 CASE, WE ARE OF THE VIEW THAT THE ASSESSEE WAS ABLE 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 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 SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 46 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 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 SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 47 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 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 SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 48 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)] 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 SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 49 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. 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 SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 50 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: 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 SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 51 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 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. SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 52 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 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. SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 53 3. SUBJECT TO THE ABOVE, SPECIAL LEAVE PETITION IS DISMISSED . 8. 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 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 SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 54 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. 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 SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 55 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 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 SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 56 DISCLOSED IN THE RETURN OF ALLOTMENT; THE SUBSCRIBE R THUS STOOD IDENTIFIED. 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 SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 57 INSTANT APPEAL ACCORDINGLY FAILED AND WAS DISMISSED.[PARA 7] 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 SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 58 SHARJAH WAS UNDISCLOSED INCOME OF THE ASSESSEE, AS HE DOUBTED THE CREDITWORTHINESS OF SUCH COMPANY. HELD 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 SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 59 THROUGH BANKING CHANNELS AND FURNISHED COMPLETE DETAILS OF THE SHAREHOLDERS, NO ADDITION COULD BE 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 SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 60 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 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 SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 61 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. 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, SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 62 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 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] 19. CONSIDERING ALL THESE ASPECTS, WE ALLOW THE APPEAL O F THE ASSESSEE. 20. NOW WE SHALL TAKE UP THE DEPARTMENTAL APPEAL. 21. AS REGARDS SHARE APPLICATION MONEY RECEIVED FROM KAMDEEP MARKETING PVT. LTD., THE ADDITION OF WHICH WAS DELETED BY THE C.I.T.(A). AND AGAINST WHICH THE REVEN UE IS IN APPEAL, IT WAS SUBMITTED BEFORE US THAT KAMDEEP MARKETING PVT. LTD. IS A CLOSELY HELD COMPANY BELONGIN G TO SIGNET GROUP. IT WAS INCORPORATED UNDER THE PROVISION S OF SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 63 COMPANIES ACT, 1956 BEARING INCORPORATION NO. 10-06208 DATED 19.01.1991. IT IS ENGAGED IN TRADING IN POLYMERS , HOUSEHOLD PRODUCTS AND FINANCING GROUP COMPANIES. ITS REGISTERED OFFICE IS SITUATED AT SURVEY NO. 1, SDA COMPOUND, LASUDIAMORI, DEWAS NAKA, INDORE. ITS P.A.NO. IS AAACK 9556A AND IS REGULARLY ASSESSED TO TAX. FROM THE BANK STATEMENTS OF THE RELEVANT PERIOD WHICH WERE PRODUCED BEFORE THE A.O. AS WELL AS C.I.T.(A). AND VER IFIED BY THEM, IT WAS CLEAR THAT THE SHARE APPLICATION MONEY WAS PAID OUT OF FUNDS RECEIVED FROM SIGNET INDUSTRIES LT D. IN THIS REGARD, WE ARE REPRODUCING HEREWITH THE FINDING GIVEN BY THE LEARNED C.I.T.(A)., ON THE BASIS OF WHICH THE SHARE APPLICATION MONEY WAS HELD TO BE GENUINE TRANSACTION AND ADDITION OF RS.64,50,000/-WAS DELETED : IN CASE OF KAMDEEP MARKETING PVT. LTD., THE FACTS A RE DIFFERENT IN THE SENSE THAT THE SHARE APPLICANT COMPANY BELON GS TO SANGLA GROUP. IT IS MANAGED AND CONTROLLED BY SH RI MUKESHSANGLA .IT IS ENGAGED IN REGULAR BUSINESS ACT IVITIES AND REGULARLY ASSESSED TO TAX. ON VERIFICATION OF BANK STATEMENT OF KAMDEEP MARKETING PVT. LTD., SIGNET INDUSTRIES LIMI TED AND THE SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 64 APPELLANT COMPANY, IT IS SEEN THAT THE APPELLANT CO MPANY RECEIVED SHARE APPLICATION MONEY OUT OF FUNDS RECEI VED FROM SIGNET INDUSTRIES LTD. FOR THE SAKE OF CLARITY, THE SE TRANSACTION ARE DEPICTED AS UNDER : DATE AMOUNT (RS.) SOURCE OF SHARE APPLICATION MONEY DATE AMOUNT (RS.) PAYMENT 16.07.2010 2,55,00,000 SIGNET INDUSTRIES LIMITED 16.07.2010 64,50,000 SHARE APPLICATION MONEY PAID TO SWAN HOLDING PVT. LTD. 16.07.2010 33,75,000 UNSECURED LOAN PAID TO SWAN HOLDING PVT.LTD. CONSIDERING THE FACTS AS DISCUSSED ABOVE, THE SHARE APPLICATION MONEY OF RS.64,50,000/- RECEIVED FROM KAMDEEP MARKE TING PVT.LTD. IS HELD TO BE GENUINE TRANSACTION AND, THE REFORE, ADDITION OF RS.64,50,000/- MADE U/S. BY THE A.O BY TREATING THE ABOVE SHARE APPLICATION MONEY AS NON GENUINE IS HER EBY DELETED. 22. AFTER HEARING BOTH THE SIDES ON THE ISSUE RAISED IN THE REVENUES APPEAL, WE HOLD THAT THE REVENUE HAS FAILED T O CONTROVERT THE FINDINGS RECORDED BY THE LEARNED CIT( A) AND WE DISMISS THE REVENUES APPEAL. 23. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOW ED AND THE REVENUES APPEAL IS DISMISSED. SWAN HOLDING PVT. LTD. IT(SS) A NOS. 91 & 194/IND/2015 65 PRONOUNCED IN OPEN COURT ON 8 TH JANUARY, 2016 SD/- SD/- (D.T. GARASIA) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER 8 TH JANUARY, 2016 DN/-