The ACIT, Central Circle-3, Surat V. M/s. Patdi Commercial & Investment Ltd., Surat

ITSSA 263/AHD/2014

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 1811 (ITAT-SURAT)
• Duration Of Justice: 4 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 10-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 06-03-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 13-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Assessee Lawyers: SAPNESH SHETH
• Keywords: Bogus Share capital; Search and seizure; Principle of natural justice; Opportunity of cross examination; Accommodation entries; Set aside
• Section: 32; 68; 132; 143(3); 153A; 205

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT , , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . / IT(SS)A NO.263/AHD/2014/SRT / ASSESSMENT YEAR: 2006-07 ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3, SURAT. VS. M/S. PATDI COMMERCIAL & INVESTMENT LTD., C-1175 TO 1191, RADHA KRISHNA TEXTILE MARKET, RING ROAD, SURAT 395 003. [PAN: AAACP 3024A] ( ' / APPELLANT) ( #$' /RESPONDENT) / ASSESSEE BY : SHRI SAPNESH SHETH, C.A /REVENUE BY : SHRI O.P. SINGH, CIT-DR /DATE OF HEARING : 23-08-2018 / DATE OF PRONOUNCEMENT : 10-10-2018 / ORDER PER C.M.GARG, JUDICIAL MEMBER: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-II, AHMEDABAD (CIT(A) FOR SHORT) DATED 18.03.2014 FOR THE ASSESSMENT YEAR (A.Y) 2006 -07. 2. THE SOLE GROUND RAISED BY THE REVENUE READ AS FO LLOWS: THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING ADDITION OF RS. 1,55,00,000/- MADE U/S. 68 OF THE ACT ON ACC OUNT OF INTRODUCTION OF SHARE CAPITAL THROUGH ACCOMMODATION ENTRIES FROM BOGUS COMPANIES. 2 ITA NO.263/AHD/2014/SRT (A.Y: 2006-07) M/S. PATDI COMMERCIAL & INVESTMENT LTD. 3. THE BRIEF FACTS GIVING RAISE TO THIS APPEAL ARE THAT A SEARCH ACTION U/S. 132 OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') WAS CARRIED OUT ON 08.06.2010 CASE OF BUILDER GROUP OF SURAT. ONE OF THE SUB-GROUPS COVERED DURING THE COURSE OF THIS SEARCH-ACTION WAS SAGAR-BUILDER GROUP. PRESENT ASSESSEE I.E., PATDI COMMERCIAL & INVESTMEN T LTD. WAS COVERED U/S. 132 OF THE ACT. CONSEQUENT TO THE SEARCH-ACT ION, NOTICES U/S. 153A OF THE ACT WERE ISSUED TO THE ASSESSEES VARIOUS YE ARS. IN RESPONSE TO THE NOTICE U/S. 153A OF THE ACT DATED 07.06.2011 AS SESSEE FILED HIS RETURN OF INCOME FOR THE AY 2006-07 DECLARING TOTAL INCOME OF RS. 3,58,63,000/-. NOTICE U/S. 143(2) OF THE ACT ISSUED ON 17.09.2012 WHICH WAS ISSUED ON 07.03.2012 WHICH WAS DULY SERVED TO THE ASSESSEE. FINALLY, THE AO ON 26.03.2013 PASSED ASSESSMENT ORDER U/S. 143(3) R.W. S 153A OF THE ACT BY MAKING ADDITION OF RS. 1,55,00,000/- U/S. 68 OF THE ACT ON THE ALLEGATION THAT THE ASSESSEE HAD INTRODUCED HIS UNACCOUNTED IN COME IN THE FORM OF BOGUS SHARE CAPITAL THROUGH ENTRY PROVIDER COMPANIE S. AGGRIEVED ASSESSEE FILED APPEAL BEFORE LD. CIT(A) WHICH ALLOW ED AND THE AO WAS DIRECTED TO DELETE THE SOLE IMPUGNED ADDITION MADE U/S. 68 OF THE ACT. NOW, THE AGGRIEVED REVENUE IS BEFORE THIS TRIBUNAL WITH THE GROUNDS AS REPRODUCED ABOVE. 4. APROPOS SOLE GROUND OF THE REVENUE, WE HAVE HEAR D THE ARGUMENTS OF BOTH SIDES AND CAREFULLY PERUSED THE RELEVANT MA TERIAL PLACED ON THE RECORD OF THE TRIBUNAL. THE LD. CIT-DEPARTMENTAL REPRESENTATIVE (DR) 3 ITA NO.263/AHD/2014/SRT (A.Y: 2006-07) M/S. PATDI COMMERCIAL & INVESTMENT LTD. SUBMITTED THAT DURING THE SEARCH AND SEIZURE OPERAT ION ON SHRI MUKESH M. CHOKSI GROUP WAS CONDUCTED ON 08.06.2010 AND ASS ESSMENT U/S. 143(3) R/W S. 153A OF THE ACT WAS FRAMED IN THE REL EVANT CASES INCLUDING PRESENT CASE WHEREIN THE AO MADE ADDITION OF RS. 1. 55 CRORES ON THE ALLEGATION THAT THE ASSESSEE HAD INTRODUCED HIS UNA CCOUNTED INCOME IN THE GARB OF BOGUS SHARE CAPITAL CONTRIBUTION THROUG H BOGUS ENTRY PROVIDERS COMPANIES AS THIS FACT WAS ADMITTED BY SHRI MUKESH M. CHOKSI DURING HIS STATEMENT RECORDED BY THE SEARCH TEAM U/S. 132(4) O F THE ACT. THE LD. CIT-DR FURTHER SUBMITTED THAT AS PER DECISION OF IT AT, AHMEDABAD A BENCH DATED 09.05.2014 IN THE CASE OF KAMALCHAND NATMAL LUNIA VS. ITO PARA 7 TO 11 WHEN IT IS ESTABLISHED THAT THE ASSESS EE HAD OBTAINED BOGUS ACCOMMODATION ENTRIES FROM THE ENTRY PROVIDER COMPA NIES THEN, ADDITION U/S. 68 OF THE ACT HAS TO BE MADE PERTAINING TO THE ENTIRE AMOUNT RECEIVED BY THE ASSESSEE AS BOGUS SHARE CAPITAL. 5. THE LD. CIT-DR ALSO PLACED RELIANCE ON THE DECIS ION OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF MOTI LAL PADAMPAT UDYOG LTD. VS. CIT REPORTED IN 293 ITR 565 (ALL.) AND SUBMITTED THAT WHERE THE STATEMENT HAD ALREADY BEEN RECORDED AND THE ASSESSEE HAD SUFF ICIENT OPPORTUNITY TO CONTROVERT THE MATERIAL GATHERED BY THE AO AND USED AGAINST THE ASSESSEE THE QUESTION OF OPPORTUNITY TO CROSS EXAMI NE THE SAID PERSON DOES NOT ARISE. 4 ITA NO.263/AHD/2014/SRT (A.Y: 2006-07) M/S. PATDI COMMERCIAL & INVESTMENT LTD. 6. THE LD. CIT-DR ALSO VEHEMENTLY AND STRENUOUSLY C ONTENDED THAT THE CASE LAWS RELIED BY THE LD. AR PLACED AT SERIAL NO. 1 TO 6 ARE NOT APPLICABLE TO THE PRESENT CASE AS THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE QUITE DISSIMILAR AND DISTINCT FROM THESE CASES AND THE LD. CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE WITHOUT ANY JUSTIFIE D REASON AND LOGICAL BASIS THEREFORE, THE IMPUGNED ORDER MAY KINDLY BE S ET ASIDE BY RESTORING THAT OF THE AO. 7. REPLYING TO THE ABOVE, THE LD. ASSESSEES REPRES ENTATIVE (AR) SUBMITTED THAT EXCEPT REPORT OF THE INVESTIGATION W ING, MUMBAI AND STATEMENTS OF SHRI MUKESH M. CHOKSI AND SHRI JAYESH K. SAMPATH, RECORDED DURING THE SEARCH AND SEIZURE OPERATION CO NDUCTED US. 132 OF THE ACT ON 25.11.2009 IN THE CASE OF M/S. MAHASAGAR SECURITIES PVT. LTD. NO OTHER MATERIAL WAS WITH THE AO WHILE ISSUING NOT ICE U/S. 153A OF THE ACT AND FRAMING IMPUGNED ASSESSMENT ORDER. SUPPORT ING THE FIRST APPELLATE ORDER, THE LD. AR SUBMITTED THAT COPIES O F THE BANK STATEMENT, RETURNS OF INCOME AND CONFIRMATIONS ETC. ARE SUFFIC IENT TO SHOW THAT ALL FIVE COMPANIES, FROM WHICH THE ASSESSEE RECEIVED SHARE C APITAL CONTRIBUTION ARE REGISTERED WITH THE REGISTRAR OF COMPANIES AND THUS, THEY ARE GENUINE AND IN EXISTENCE HAVING SUFFICIENT FINANCIA L CAPACITY DURING REGULAR BUSINESS AND TO PROVIDE SHARE CAPITAL CONTR IBUTION TO THE ASSESSEE COMPANY. THE LD. AR FURTHER SUBMITTED THAT THE ASS ESSEE RECEIVED ALL SHARE APPLICATION MONEY/AMOUNT THROUGH ACCOUNT PAYE E CHEQUES WHICH 5 ITA NO.263/AHD/2014/SRT (A.Y: 2006-07) M/S. PATDI COMMERCIAL & INVESTMENT LTD. IS ALSO APPARENT AND CLEAR FROM THE BANK STATEMENT OF THE ASSESSEE AND WHEN THE SHARE APPLICATION MONEY HAS BEEN RECEIVED BY AN ASSESSEE AND THE NAMES AND ADDRESSES OF THE APPLICANTS ARE M ADE AVAILABLE TO THE AO ALONG WITH BASIC PROOF OF THE IDENTITY OF THE SH AREHOLDER, THEN THE PRIMARY ONUS IS DEEMED TO HAVE BEEN DISCHARGED BY T HE COMPANY AND THE DEPARTMENT IS FREE TO PROCEED TO EXAMINE THE CA SE OF OTHER COMPANIES WHO HAVE INVESTED THE MONEY AS SHARE CAPI TAL AND TAKE ACTION FOR REOPENING ETC. IN THEIR INDIVIDUAL ASSESSMENT I N ACCORDANCE WITH LAW. 8. FURTHER, THE LD. AR SUBMITTED THAT FOR AY 2006-0 7, THE AO IN THE SCRUTINY ASSESSMENT ORDER PASSED U/S. 143(3) OF THE ACT ON 06.05.2008 HAS NOT MADE ANY ADDITION ON ACCOUNT OF BOGUS SHARE APPLICATION MONEY AND THIS SCRUTINY ASSESSMENT ORDER WAS PASSED AFTER DUE CONSIDERATION OF ALL BOOKS OF ACCOUNTS OF THE ASSESSEE INCLUDING THE AMOUNT OF SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE DURING T HE RELEVANT FINANCIAL PERIOD. THE LD. AR FURTHER SUBMITTED THAT THE LD. CIT(A) HAS DELETED THE PENALTY U/S. 271AAA OF THE ACT FOR AY 2011-12 IN TH E CASES OF THE ASSESSEE AND OTHER GROUP COMPANIES I.E., M/S. KRISH CORPORATION & PARTNER OF THE GROUP SHRI VINODBHAI J. PATEL BY ORD ER DATED 22.03.2014 WHICH AGAIN SUPPORTS THE CASE OF THE ASSESSEE. 9. THE LD. AR FURTHER SUBMITTED THAT ON THE DATE OF SEARCH ON 08.06.2010, THE ASSESSMENT FOR PRESENT AY 2006-07 W AS COMPLETED AND 6 ITA NO.263/AHD/2014/SRT (A.Y: 2006-07) M/S. PATDI COMMERCIAL & INVESTMENT LTD. IT IS NOT A CASE OF ABATED ASSESSMENTS THEREFORE, N O ADDITION COULD HAVE BEEN MADE IN ABSENCE OF INCRIMINATING MATERIAL FOUN D AND SEIZED DURING THE COURSE OF SEARCH AND SEIZURE OPERATION. PRESSI NG INTO SERVICE RULE 27 OF INCOME TAX APPELLATE TRIBUNAL RULES, 1963, THE L D. AR SUBMITTED THAT AS PER DECISION OF HONBLE JURISDICTIONAL HIGH COUR T OF GUJARAT IN THE CASE OF DAHOD SAHAKARI KHARID VECHAN SANGH LTD. VS. CIT REP ORTED IN 73 CCH 673 (GUJ.) , IN THE REVENUE APPEAL CHALLENGING THE DELETION OF ADDITION, IT IS AN ABSOLUTE RIGHT OF RESPONDENT/ASSESSEE TO CHALLEN GE ADVERSE FINDINGS OF LD. CIT(A) EVEN IN ABSENCE OF ANY CROSS APPEAL OR C ROSS OBJECTION. THE LD. AR SUBMITTED THAT AS PER THIS DECISION THE RIGH T GRANTED TO THE RESPONDENT BY RULE 27 ITAT RULES, 1963 CANNOT BE TA KEN AWAY BY REFERRING TO THE PROVISION OF S. 253(4) OF THE ACT. 10. FURTHER PLACING RELIANCE ON THE DECISION OF HON 'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWLA REPORTED IN 380 ITR 573 (DEL.) , THE LD. AR SUBMITTED THAT ASSESSMENT U/S. 153A CAN BE CARRI ED OUT ONLY ON THE BASIS OF SEIZED MATERIAL, WHERE NO INCRIMINATING MA TERIAL WAS UNEARTHED DURING THE SEARCH, NO ADDITIONS COULD BE MADE TO TH E INCOME ALREADY ASSESSED. ALSO PLACING RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. SINHGAD TECHNICAL EDUCATION SOCIETY REPORTED IN 397 ITR 344 (SC) AND DECISION OF HON'BLE JURISDICTIONAL HIGH COURT OF GUJARAT PCIT VS. DIPAK J PANCHAL REPORTED IN 98 CCH 074 (GU J.), THE LD. AR SUBMITTED THAT THE AO WHILE FRAMING THE ASSESSMENT U/S. 153A 7 ITA NO.263/AHD/2014/SRT (A.Y: 2006-07) M/S. PATDI COMMERCIAL & INVESTMENT LTD. OF THE ACT FOR THE BLOCK PERIOD MAY MAKE ADDITION C ONSIDERING THE INCRIMINATING MATERIAL FOUND FOR THE YEAR UNDER CON SIDERATION ONLY WHICH WAS COLLECTED DURING THE SEARCH. FURTHER PLACING R ELIANCE ON THE DECISIONS/ORDERS PLACED AT SERIAL NO. 2 TO 6 OF ASS ESSEES CASE LAW INDEX / PAPER BOOK INCLUDING THE ORDER OF ITAT, AHMEDABAD I N THE CASE OF ACIT VS. VINEET SURESHCHANDRA AGARWAL DATED 06.01.2017, THE LD. AR SUBMITTED THAT ALL THESE FIVE ASSESSEES ARE PERTAIN ING TO SHRI MUKESH M. CHOKSI GROUP AND THE ORDER OF LD. CIT(A) DELETING T HE ADDITION HAS BEEN CONFIRMED BY THE TRIBUNAL BY DISMISSING APPEAL OF T HE REVENUE. THE LD. AR ALSO POINTED OUT THAT IN THE CASE OF CIT VS. RAN CHHOD JIVABHAI NAKHAVA JUDGMENT DATED 20.03.2012 REPORTED IN [2012 ] 81 CCH 193 (GUJ.), THE HONBLE JURISDICTIONAL HIGH COURT OF GU JARAT HAS DISMISSED APPEAL OF THE REVENUE CONFIRMING THE ORDER OF LD. C IT(A) AND THE TRIBUNAL, WHEREIN ADDITIONS MADE BY THE AO HAVE BEEN DELETED. 11. THE LD. AR LASTLY SUBMITTED THAT THE RATIO OF T HE DECISION OF ITAT, AHMEDABAD IN THE CASE OF KAMALCHAND NATHMAL LUNIA ( SUPRA) DOES NOT APPLY TO THE PRESENT CASE AS THAT IS THE CASE OF LO NG TERM CAPITAL GAIN ISSUE AND PRESENT CASE IS PERTAINING TO THE ISSUE O F SHARE CAPITAL CONTRIBUTION. THE LD. AR FINALLY SUBMITTED THAT TH E AO MADE ADDITION WITHOUT HAVING ANY INCRIMINATING MATERIAL FOUND AND SEIZED DURING THE COURSE OF SEARCH ONLY ON THE BASIS OF REPORT OF INV ESTIGATION WING, MUMBAI AND STATEMENTS OF SHRI MUKESH M. CHOKSI AND JAYESH K. 8 ITA NO.263/AHD/2014/SRT (A.Y: 2006-07) M/S. PATDI COMMERCIAL & INVESTMENT LTD. SAMPATH, WITHOUT ALLOWING OPPORTUNITY TO CROSS EXAM INE THESE WITNESSES TO THE ASSESSEE. THEREFORE, THE AO WAS NOT RIGHT A ND JUSTIFIED IN MAKING ADDITION U/S. 68 OF THE ACT WHICH WAS APPARENTLY BA D IN LAW AND NOT SUSTAINABLE IN VIEW OF VARIOUS DECISIONS INCLUDING THE DECISION HON'BLE DELHI HIGH COURT IN THE CASE OF KABUL CHAWLA (SUPRA ) THEREFORE, THE LD. CIT(A) WAS RIGHT IN DELETING THE BASELESS AND UNSUS TAINABLE ADDITION HENCE, FIRST APPELLATE ORDER MAY KINDLY BE UPHELD B Y DISMISSING APPEAL OF THE REVENUE. 12. THE LD. AR REITERATING THE WRITTEN SUBMISSIONS FILED BEFORE THE LD. CIT(A) AND SUBMITTED THAT THE ASSESSEE RECEIVED AMO UNT THROUGH ACCOUNT PAYEE CHEQUES AND THE CONCERNS BY WHICH THE AMOUNT OF SHARE CAPITAL WAS INVESTED IN THE ASSESSEE COMPANY ARE DULY ASSES SED TO TAX AND THERE IS NO ADVERSE EVIDENCE AGAINST THE ASSESSEE W HICH PROVE OR ESTABLISH ANY TRANSFER OF CASH MONEYS FROM THE ASSE SSEE TO SHRI MUKESH M. CHOKSI GROUP OR SHARE CAPITAL CONTRIBUTING APPLI CANTS BY WHOM INVESTMENT WAS MADE. THE LD. AR FURTHER SUBMITTED T HAT EVEN DURING THE SEARCH OPERATION IN THE ASSESSEES OWN GROUP NO EVI DENCE WAS FOUND WHICH MAY ESTABLISH OR PROVE THE TRANSFER OF CASH M ONEYS FROM PATDI GROUP INCLUDING THE PRESENT ASSESSEE COMPANY TO THE MUKESH CHOKSI GROUP OR ANY OF THE SHARE APPLICANTS THEREFORE, NO ADVERSE PRESUMPTION CAN BE DRAWN AGAINST THE ASSESSEE THAT THE ASSESSEE INVESTED OR INTRODUCED ITS OWN UNACCOUNTED MONEY IN THE GARB SH ARE 9 ITA NO.263/AHD/2014/SRT (A.Y: 2006-07) M/S. PATDI COMMERCIAL & INVESTMENT LTD. APPLICATION/SHARE CAPITAL CONTRIBUTION BY WAY OF TA KING ACCOMMODATION ENTRIES FROM THESE FIVE CONTRIBUTORS. THE LD. AR F URTHER POINTED OUT THAT SHRI MUKESH M. CHOKSI THROUGH VIDE HIS LETTER DATED 19.03.2013 SUBMITTED TO THE AO DURING ASSESSMENT PROCEEDINGS C ONFIRMED THE TRANSACTIONS BY HIS GROUP CONCERNED STATING THAT TH E INVESTMENTS IN THE ASSESSEE COMPANY ARE GENUINE BUSINESS TRANSACTION. THE LD. AR SUBMITTED THAT SHRI MUKESH M. CHOKSI GROUP MADE INV ESTMENT AS SHARE APPLICATION MONEY TO GET PROFIT/APPRECIATION FROM T HE INVESTMENT IN THE ASSESSEE COMPANY WHEN THE ASSESSEE COMPANY MIGHT BE LISTED AS PUBLIC LIMITED COMPANY THEREFORE, IT WAS A PRUDENT AND STR ATEGIC BUSINESS DECISION IN MAKING INVESTMENT IN THE ASSESSEE COMPA NY WHICH CANNOT BE ALLEGED AS AN ACT OF PROVIDING BOGUS ACCOMMODATION ENTRIES. THE LD. AR FURTHER DREW OUR ATTENTION TOWARDS PARA 10 OF THE S AID WRITTEN SUBMISSIONS OF THE ASSESSEE AS REPRODUCED IN PARA 4 OF THE FIRS T APPELLATE ORDER, SUBMITTED THAT ALL FIVE COMPANIES HAVE EARNED PROFI TS AND THEIR CAPITAL & RESERVE AS ON 31.03.2006 CLEARLY SHOWS THAT THESE C OMPANIES WERE HAVING SUFFICIENT FUNDS IN THEIR HANDS TO INVEST SH ARE APPLICATION/CAPITAL CONTRIBUTION IN THE ASSESSEE COMPANY WHICH CANNOT B E ALLEGED AS BOGUS ACCOMMODATION ENTRY. 13. THE LD. AR FURTHER SUBMITTED THAT UNLIKE UNSECU RED LOAN, THERE IS NO NEED TO VERIFY THE SOURCE OF INVESTMENT IN THE SHAR E APPLICATION MONEY, ONCE THE GENUINENESS OF SHARE CAPITAL CONTRIBUTORS ARE ESTABLISHED, THE 10 ITA NO.263/AHD/2014/SRT (A.Y: 2006-07) M/S. PATDI COMMERCIAL & INVESTMENT LTD. PROVISIONS OF S. 68 OF THE ACT ARE NOT APPLICABLE I N THE CASE OF APPELLANT SO FAR AS THE DEPOSIT AGAINST SHARE APPLICATION IS CON CERNED. THE LD. AR FURTHER SUBMITTED THAT THE PROMOTER OF THE COMPANY HAD CONFIRMED THEIR INVESTMENT IN THE SHARE APPLICATION MONEY DURING TH E ASSESSMENT PROCEEDINGS ALSO AND, THEREFORE, THE GENUINENESS OF TRANSACTION ARE ESTABLISHED AND HENCE THE PROVISION OF S. 68 OF THE ACT ARE NOT APPLICABLE SPECIALLY WHEN THE APPLICANT COMPANIES ARE REGISTER ED UNDER THE COMPANIES ACT, OWN PAN AND ARE ASSESSED TO TAX. TH E LD. AR DREW OUR ATTENTION TOWARDS PAGES 4 TO 51 OF THE ASSESSEES P APER BOOK DATED 14.2.2018 AND SUBMITTED THAT THE ASSESSEE HAD SUBMI TTED COP OF PAN, COPY OF LETTER DATED 22.12.2005, COPY OF BANK STATE MENT & ROI AND AUDITED ACCOUNTS OF ALL FIVE SHARE CAPITAL CONTRIBU TOR/INVESTOR COMPANIES BEFORE THE AUTHORITIES BELOW AND THESE WERE NOT CON SIDERED IN THE RIGHT PROSPECTIVE BY THE AO AND THE SAME WAS PROPERLY CON SIDERED AND APPRECIATED BY THE LD. CIT(A) BEFORE RECORDING FIND INGS IN FAVOUR OF THE ASSESSEE. THE LD. AR FURTHER SUBMITTED THAT UNLESS THE STATEMENT OF SHRI MUKESH M. CHOKSI IS CONFRONTED IN THE ASSESSMENT PR OCEEDINGS AND AN OPPORTUNITY OF CROSS EXAMINATION IS MADE AVAILABLE, HIS STATEMENT IS NO MORE EVIDENCE AND IT CANNOT BE USED IN THIS CASE. THE APPELLANT RELIES ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE O F KISHANCHAND CHELRAM VS. CIT REPORTED IN 125 ITR 713 (SC) . THE LD. AR CONCLUDED THE ARGUMENTS BY SUBMITTING THAT THE AO MADE ADDITION W ITHOUT ANY JUSTIFIED 11 ITA NO.263/AHD/2014/SRT (A.Y: 2006-07) M/S. PATDI COMMERCIAL & INVESTMENT LTD. REASON AND ADMISSIBLE EVIDENCE AGAINST THE ASSESSEE IN THE CASE WHERE THE ASSESSMENT WAS COMPLETED ON THE DATE OF SEARCH AND THE LD. CIT(A) AFTER CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCE S OF THE CASE DELETED THE ADDITION BY PASSING A LOGICAL AND JUSTIFIED ORD ER THEREFORE, IMPUGNED FIRST APPELLATE ORDER MAY KINDLY BE UPHELD BY DISMI SSING APPEAL OF THE REVENUE BEING DEVOID OF MERITS. 14. PLACING REJOINDER TO THE ABOVE SUBMISSIONS OF T HE LD.AR, ON BEHALF OF REVENUE, THE CIT-DR SUBMITTED THAT THE ISSUE OF NON-AVAILABILITY OF INCRIMINATING MATERIAL WAS NOT RAISED BY THE ASSESS EE DURING ASSESSMENT AND FIRST APPELLATE PROCEEDINGS THEREFORE, THE ASSE SSEE CANNOT BE ALLOWED TO RAISE THIS LEGAL ISSUE WITHOUT FILING ANY CROSS APPEAL OR CROSS OBJECTION ONLY ON THE STRENGTH OF RULE 27 OF ITAT RULES, 1963 . THE LD. DR SUBMITTED THAT THERE WAS REPORT OF INVESTIGATION WI NG, MUMBAI AND STATEMENTS OF SHRI MUKESH M. CHOKSI AND SHRI JAYESH M. SAMPATH IN THE HANDS OF AO WHILE MAKING ADDITION U/S. 68 OF THE AC T WHICH IS SUFFICIENT INCRIMINATING MATERIAL AGAINST THE ASSESSEE THEREFO RE, BENEFIT OF THE RATIO OF THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF KABUL CHAWLA (SUPRA) IS NOT AVAILABLE TO THE ASSESSEE. THE LD. CIT-DR ALSO SUBMITTED THAT ITAT, AHMEDABAD IN THE CASE OF KAMALCHAND (SUP RA) CONSIDERED AND DECIDED IN FAVOUR OF THE REVENUE ON THE ALLEGATION OF BOGUS ENTRY PROVIDERS THEREFORE, RATIO OF THIS DECISION IS APPL ICABLE TO THE PRESENT CASE. 12 ITA NO.263/AHD/2014/SRT (A.Y: 2006-07) M/S. PATDI COMMERCIAL & INVESTMENT LTD. THEREFORE, THE LD. CIT-DR SUBMITTED THAT THE IMPUGN ED FIRST APPELLATE ORDER MAY KINDLY BE SET ASIDE BY RESTORING THAT OF THE AO. 15. THE LD. AR WAS ALLOWED TO PLACE REJOINDER TO TH E CONTENTION OF THE LD. CIT-DR, ONLY ON THE SOLE ISSUE OF APPLICABILITY OF RULE 27 OF ITAT RULES, 1963. THE LD. AR STRENUOUSLY SUBMITTED THAT AS PER DECISION OF HONBLE JURISDICTIONAL HIGH COURT OF GUJARAT IN THE CASE OF DAHOD SAHAKARI KHARID VECHAN SANGH LTD. (SUPRA), EVEN THOUGH THE ASSESSEE HAS NOT FILED CROSS-OBJECTION AGAINST THE FINDINGS OF THE LD. CIT(A) ADVERSE TO IT, IT CANNOT BE CONCLUDED THAT THE SAID FINDING S HAVE BECOME FINAL SUCH INFERENCE WOULD RENDER RULE 27 OF ITAT RULES, 1963, REDUNDANT AND NUGATORY. THEREFORE, THE ASSESSEE HAVE ALL RIGHTS T O CHALLENGE THE ADVERSE FINDINGS OF THE LD. CIT(A) IN ABSENCE OF CR OSS OBJECTION OR CROSS APPEAL AND THIS VIEW ALSO GETS STRONG SUPPORT FROM THE DECISION OF HON'BLE HIGH COURT OF MADHYA PRADESH IN THE CASE OF DCIT VS . TURQUOSIE INVESTMENT & FINANCE LTD. REPORTED IN 74 CCH 0268 M PHC (M.P ). 16. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISS IONS, FIRST OF ALL, WE MAY POINT OUT THAT THE PRESENT CASE IN HAND IS PERT AINING TO AY 2006-07 AND SEARCH AND SEIZURE OPERATION U/S. 32 OF THE ACT WAS CONDUCTED ON 08.06.2010 AND ON THE DATE OF SEARCH THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT BY PASSING ORDER DATED 06.05.2018 HENCE, IT IS A CASE OF COMPLETED ASSESSMENT ON THE DATE OF SEARCH. ON THE STRENGTH OF THIS FACT 13 ITA NO.263/AHD/2014/SRT (A.Y: 2006-07) M/S. PATDI COMMERCIAL & INVESTMENT LTD. AND BY INVOKING PROVISION OF RULE 27 OF THE ITAT RU LES, THE LD. AR TAKING SUPPORT FROM THE RATIO OF THE DECISION OF HON'BLE D ELHI HIGH COURT IN THE CASE OF KABUL CHAWLA (SUPRA) AND DECISION OF HONBLE JURISDICTIONAL HIGH COURT OF GUJARAT IN THE CASE OF PCIT VS. DIPAK J PANCHAL (SUPRA), THE ASSESSEE WANTS TO AGITATE A LEGAL GROUND/CONTENTION THAT IN THE CASE OF COMPLETED ASSESSMENT NO ADDITION COULD HAVE BEEN MA DE IN ABSENCE OF ANY INCRIMINATING MATERIAL FOUND FOR THE YEAR UNDER CONSIDERATION WHICH WAS COLLECTED DURING THE COURSE OF SEARCH WHILE FRA MING ASSESSMENT ORDERS U/S. 153A R/W S. 143(3) OF THE ACT FOR THE A SSESSMENT OF BLOCK PERIOD. 17. WHEN WE TAKE RESPECTFUL COGNIZANCE OF THE PROPO SITION/RATIO LAID DOWN BY HONBLE HIGH COURT OF GUJARAT IN THE CASE O F DAHOD SAHAKARI KHARID VECHAN SANGH LTD. VS. CIT (SUPRA) THEN, WE NOTE THAT THEIR LORDSHIP SPEAKING FOR THE HON'BLE JURISDICTIONAL HI GH COURT HELD THAT IN THE REVENUE APPEAL CHALLENGING THE DELETION OF ADDITION , IT IS AN ABSOLUTE RIGHT OF RESPONDENT/ASSESSEE TO CHALLENGE ADVERSE FINDING S OF LD. CIT(A) EVEN IN ABSENCE OF ANY CROSS APPEAL OR CROSS OBJECTION. THE LD. AR SUBMITTED THAT AS PER THIS DECISION THE RIGHT GRANTED TO THE RESPONDENT BY RULE 27 ITAT RULES, 1963 CANNOT BE TAKEN AWAY BY REFERRING TO THE PROVISION OF S. 253(4) OF THE ACT. IN THE PRESENT CASE ALSO UNDISP UTEDLY NO CROSS APPEAL OR CROSS OBJECTION HAS BEEN FILED BY THE ASSESSEE-R ESPONDENT BUT, IN VIEW OF RATIO LAID DOWN BY HONBLE JURISDICTIONAL HIGH C OURT, WE ALLOW THE 14 ITA NO.263/AHD/2014/SRT (A.Y: 2006-07) M/S. PATDI COMMERCIAL & INVESTMENT LTD. ASSESSEE TO RAISE LEGAL CONTENTION CHALLENGING THE ADVERSE FINDINGS OF THE LD. CIT(A) IN ABSENCE OF CROSS OBJECTION AS THE LD. CIT(A) GRANTED RELIEF TO THE ASSESSEE AND THERE WAS NO OCCASION FOR THE ASSE SSEE TO FEEL AGGRIEVED BY THE FIRST APPELLATE ORDER AND HENCE, I T WAS NOT NECESSARY FOR THE ASSESSEE TO PREFER AN APPEAL OR CROSS OBJECTION . THEREFORE, ASSESSEE IS ALLOWED TO RAISE LEGAL GROUND/ISSUE UNDER RULE 2 7 OF THE ITAT RULES, 1963 AND CONTENTIONS OF THE LD. CIT-DR IN THIS REGA RD ARE DISMISSED. 18. FURTHER, WE FIND IT APPROPRIATE TO CONSIDER AND REPRODUCE THE RELEVANT OPERATIVE PART OF THE FIRST APPELLATE ORDE R WHEREIN THE LD. CIT(A) RECORDED HIS OBSERVATION AND FINDINGS GRANTING RELI EF TO THE ASSESSEE, WHICH READS AS FOLLOWS: 5.3 ON CAREFUL PERUSAL OF THE FACTS AND THE SUBMIS SIONS, IT IS OBSERVED THAT THE APPELLANT HAS RECEIVED SHARE APPL ICATION MONEY FROM DIFFERENT CONCERNS INCLUDING 5 ABOVE MENTIONED COMPANIES IN RESPECT OF WHOM THE ALIENATION WAS THAT THEY BELON G TO SHRI MUKESH CHO KSHI GR OUP OF COMPANIES . THE A.R. HAS EXPLAINED WITH THE HELP OF THE COPY OF THE BANK STATEMENT, COPIES OF RETURNS OF INCOME, CONFIRMATIONS ETC. TO SHOW THAT THESE COMPA NIES ARE GENUINE HAVING SUFFICIENT FINANCIAL WORT H DOING REGULAR BUSINESS. THEY ARE REGISTERED WITH THE REGISTRAR OF COMPANIES . MOREOVER, THE SHARE APPLICATION AMOUNT HAS COME TO THE APPELLANT'S B ANK ACCOUNT THROUGH ACCOUNT PAYEE CHEQUES AND FR OM THE BAN K STATEMENTS ALSO, IT IS SEEN THAT THE TRANSACTIONS HAVE BEEN RO UTED THROUGH BANK ACCOUN TS. I T HAS BEEN HELD BY THE SEVERAL COURTS THAT WHEN THE SHARE APPLICA TION MONEY HAS BEEN RECEIVED BY AN ASSESSEE AND THE NAMES AND ADDRESSES OF THE APPLICA NTS ARE MADE AVAILABLE TO THE ASSESSING OFFICER ALONGWITH B ASIC PROOF OF THE IDENTITY OF THE SHAREHOLDER, THEN THE PRIMARY O NUS IS DEEMED TO HAVE BEEN DISCHARGED BY THE COMPANY AND THE DEPARTM ENT IS FREE TO PROCEED TO EXAMINE THE CASE OF OTHER COMPANIES WHO HAVE INVESTED THE MONEY AS SHARE CAPITA! AND TAKE ACTION FOR REOPENING ETC. IN THEIR INDIVIDUAL ASSESSMENT IN ACCORDANCE WITH LAW. IT IS RELEVANT TO REPRODUCE FEW COURT DECISIONS HER E WHERE 15 ITA NO.263/AHD/2014/SRT (A.Y: 2006-07) M/S. PATDI COMMERCIAL & INVESTMENT LTD. 1. '...:HON'BLE SUPREME COURT IN THE CASE OF CIT VS . LOVELY EXPORTS (P) LTD. (2009) 319 ITR (ST) 5, HAS HELD THAT 'CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME U/S.6 8 OF INCOME-TAX ACT,1961? WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE AP PLICATION MONEY RECEIVED BY THE ASSESSEE COMPANY FOR ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE A.O., THEN THE DEPARTM ENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENT IN AC CORDANCE WITH THE SAW. HENCE, NO INFORMATIVE IS FOUND WITH THE IM PUGNED JUDGMENT. 2. CIT VS. DIVINE LEASING & FINANCE LTD./GENERAL EX PORTS & CREDITS LTD/LOVELY EXPORTS (P) LTD. (2008) 299 ITR 268 (DELHI), HELD THAT 'DISMISSING THE APPEALS, THAT THE TRIBUNA L HAD CATEGORICALLY HELD THAI THE ASSESSEE 'HAS DISCHARGE D ITS ONUS OF PROVIDING THE IDENTITY OF THE SHARE SUBSCRIBERS' . HAD ANY SUSPICION STILL REMAINED IN THE MIND OF THE A.O. HE COULD HAVE INITIATED 'COERCIVE PROCESS' BUT THIS COURSE OF ACT ION HAD NOT BEEN ADOPTED. THE DELETION OF THE ADDITIONS WAS JUS TIFIED.' 3. KISHANCHAND CHELARAM VS. CIT 125 ITR 713 (SC) HE LD THAT IF THE RELEVANT EVIDENCE/STATEMENT OF OTHER PERSON, ON WHICH THE A.O. RELIES, IS NOT CONFRONTED OR AN OPPORTUNITY TO CROSS EXAMINE IS NOT MADE AVAILABLE THEN NO ADDITION IS J USTIFIED ON THE BASE OF SUCH EVIDENCE/STATEMENT' 4. CIT VS. STELLAR INVESTMENT LTD. (192 ITR 287)(DE L,)/251 ITR 269 (SC) HELD THAT 'EVEN IF IT BE ASSUMED THAT SUBS CRIBERS TO THE INCREASE SHARE CAPITAL WERE NOT GENUINE, UNDER NO CIRCUMSTANCES, COULD THE AMOUNT OF SHARE CAPITAL BE REGARDED AS UNDISCLOSED INCOME OF THE COMPANY. NO QUESTION O F LAW AROSE OUT OF TRIBUNAL'S ORDER.' THE A.R. DURING THE APPELLATE PROCEEDINGS HA S FURNISHED COPIES OF DOCUMENTS IN SUPPORT OF THEIR CONTENTIONS SUCH AS CONFIRMATION FROM THESE COMPANIES, THEIR PAN AND AD DRESSES, COPY OF RETURN OF INCOME, BANK STATEMENT, COPY OF A UDIT REPORT AND ITS ANNEXURES TO SHOW THAT THE AMOUNT FOR SHARE CAP ITAL HAS BEEN GIVEN THROUGH ACCOUNT PAYEE CHEQUES AND IN BANK STA TEMENTS OF THESE COMPANIES, THESE TRANSACTIONS ARE DULY REFLEC TED. THE A.R. HAS ALSO FURNISHED COPY OF LETTER O F SHRI MUKESH CHOKSI SUBMITTED TO THE ASSESSING OFFICER DATED 19. 03.2013 DURING THE ASSESSMENT PROCEEDINGS WHERE IT HAS BEEN CONFIRMED BY HIM THAT ABOVE INVESTMENTS HAVE BEEN MADE IN THE NAME OF THE SAID FIVE COMPANIES BY SUBSCRIBING SHARES OF M/S. P ATDI COMMERCIAL & INVESTMENTS LTD. THROUGH PROPER BANKIN G CHANNELS AND INVESTMENT IS MADE OUT OF OWN FUNDS OF THESE CO MPANIES. 16 ITA NO.263/AHD/2014/SRT (A.Y: 2006-07) M/S. PATDI COMMERCIAL & INVESTMENT LTD. IT IS ALSO OBSERVED THAT THE ADDITIONS HAVE B EEN MADE BY THE ASSESSING OFFICER ON THE BASIS OF STATEMENT OF SHRI MUKESH CHOKSI DURING SEARCH BUT IT HAS BEEN REPEATEDLY CONTENDED BY THE A.R. THAT NO OPPORTUNITY OF CROSS EXAMINING SHRI CHOKSI WAS PROVIDED TO BY THE ASSESSING OFFICER. BESIDES, THE SAME PERSON SUBSEQUENTLY HAS CONFIRMED THE TRANSACTIONS WITH THE APPELLANT C OMPANY, AS MENTIONED ABOVE. IT HAS BEEN HELD BY HON'BLE SUPREM E COURT IN THE CASE OF KISHANCHAND CHELLARAM VS. CIT (1980) 19 CTR (SC) 360/125 !TR 713 (SC) THAT WITHOUT CROSS EXAMINATION TO THE PARTY, ADVERSE INFERENCE CANNOT BE DRAWN THOUGH MAY BE STR ONG. THEREFORE, CONSIDERING ALL THE FACTS AND CI RCUMSTANCES OF THE CASE, IN MY CONSIDERED VIEW THE INVESTMENT IN SHARE CAPITAL OF APPELLANT COMPANY IN THE NAME OF THESE COMPANIES IS FOUND TO BE EXPLAINED. THE IDENTITY HAS NOT BEEN DOUBTED BECAUS E THE COMPANIES ARE REGISTERED WITH THE REGISTRAR OF COMP ANIES, HAVE THE PAN AND HAVE FILED RETURNS OF INCOME AND DOING REGULAR BUSINESS. THE COPIES OF BANK STATEMENTS ALSO REFLEC T CORRESPONDING ENTRIES IN RESPECT OF TRANSFER OF AMO UNT THROUGH ACCOUNT PAYEE CHEQUES. THE GENUINENESS OF TRANSACTI ONS AND CREDITWORTHINESS ALSO PROVED. THE ACTION OF THE ASS ESSING OFFICER IS ALSO NOT JUSTIFIED ON THE FOIIOWING GROUNDS: I. THE ASSESSING OFFICER HAS SIMPLY MADE THE ADDITI ON ON THE BASIS OF THE REPORT OF INVESTIGATION WING REGARDING SEARCH ACTION IN ANOTHER CASE AND RELIED ONLY UPON THE REP ORT WITHOUT MAKING FURTHER ENQUIRIES TO CORROBORATE THE VIEWS EXPRESSED IN THE REPORT. II. NO OPPORTUNITY OF CROSS EXAMINATION HAS BEEN GI VEN TO THE APPELLANT IN RESPECT OF STATEMENT OF SHRI MUKESH CH OKSI. III. THE SAME PERSON HAS CONFIRMED THAT THE TRANSAC TION SUBSEQUENTLY VIDE HIS LETTER DATED 19.03.2013 GIVEN TO THE ASSESSING DURING THE ASSESSMENT PROCEEDINGS. IV. THE COPIES OF THE DOCUMENTS FURNISHED REVEAL TH AT THE IDENTITY OF PERSON, GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF INVESTORS ARE FOUND TO BE EXPLA INED. V. IT HAS ALSO NOT BEEN ESTABLISHED BEYOND DOUBT TH AT THERE WAS ANY MATERIAL EVIDENCE TO SHOW THAT THERE WAS TR ANSFER OF CASH FROM THE APPELLANT COMPANY TO THESE COMPANIES AND THE APPELLANT'S OWN MONEY WAS INTRODUCED IN THE GAR B OF SHARE CAPITAL. THUS, TAKING INTO ACCOUNT THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS HELD THAT THE ADDITIONS MADE BY THE ASSESSING OFFICER ARE NOT LIKELY TO BE SUSTAINED. THIS VIEW F INDS SUPPORT FROM THE JUDGEMENTS OF VARIOUS COURTS SUCH AS - 17 ITA NO.263/AHD/2014/SRT (A.Y: 2006-07) M/S. PATDI COMMERCIAL & INVESTMENT LTD. I. STELLAR INVESTMENT 192 ITR 287 (DELHI) II. CIT VS. LOVELY EXPORTS P.LTD. 319 ITR (ST) 5 III. CIT VS. ORISSA CORPORATION (P) LTD. (1988) 52 CTR (SC) 138. IV. KISHANCHAND CHELARAM VS. CIT 125 ITR 713 (SC) V. CIT VS. DIVINE LEASING & FINANCE LTD./GENERAL EX PORTS & CREDITS LTD ./LOVERLY EXPORTS (P) LTD. (2008) 299 I TR 288 (DELHI), VI. CIT VS. VICTOR ELECTRODES LTD. (2010) 329 ITR 2 71 (DELHI) VII. ROHINI BUILDERS VS. DCIT (2003) 182 CTR (GUJ) VIII. ASHISH SATYAPRAKASH GARG BARODA VS. C!T(A)'S ORDER APPEAL NO.CAB/11- 347/11-12 DATED 08.01.2013 IX. ITO 18(1) MUMBAI VS. TRUPTI C SHAH ITA NO. 1492/YURN/2010 (MUMBAI ITAT). TAKING INTO ACCOUNT ENTIRE FACTS AND CIRCUM STANCES OF THE CASE, THE ADDITION MADE BY THE ASSESSING OFFICER U/ S.68 OF THE ACT IS DIRECTED TO BE DELETED. THE APPELLANT GETS RELIE F. 19. AT THIS STAGE, WE ALSO FIND IT APPROPRIATE TO C ONSIDER THE ORDER OF THE ITAT, AHMEDABAD IN THE CASE OF KAMALCHAND NATHMAL L UNIA (SUPRA) WHICH HAS BEEN VEHEMENTLY RELIED BY THE LD. DR WHIC H STATES THAT THE INVESTIGATION OF THE DEPARTMENT REVEALED THAT THE M AHASAGAR GROUP OF COMPANIES WHICH WAS PART OF SHRI MUKESH M. CHOKSI G ROUP WAS ENGAGED IN THE BUSINESS OF ISSUING FRAUDULENT BILLS OF SHOR T TERM CAPITAL GAIN IN THE NAME OF FICTITIOUS PERSONS. IN THIS APPEAL THE TRI BUNAL AFFIRMING FINDINGS OF THE AUTHORITIES BELOW CONFIRMED THE FACT THAT THE M AHASAGAR GROUP WAS ENGAGED IN THE BUSINESS OF ISSUANCE OF FRAUDULENT B ILLS OF SHORT TERM CAPITAL GAIN IN THE NAME OF FICTITIOUS PERSONS AND ADDITION WAS CONFIRMED BY THE TRIBUNAL. THIS ORDER OF TRIBUNAL SUPPORTS T HE FACT THAT THE MAHASAGAR GROUP WAS ENGAGED IN THE BUSINESS OF PROV IDING ACCOMMODATION ENTRIES BUT IN OUR HUMBLE UNDERSTANDI NG OF TAX 18 ITA NO.263/AHD/2014/SRT (A.Y: 2006-07) M/S. PATDI COMMERCIAL & INVESTMENT LTD. JURISPRUDENCE THE AO IS DUTY BOUND TO DISCHARGE ONU S LAY ON HIM U/S. 68 OF THE ACT FOR MAKING ANY DISALLOWANCE OR ADDITION ON ACCOUNT OF BOGUS ENTRIES, THE MERE FACT THAT THE MAHASAGAR GROUP WAS ENGAGED IN PROVIDING ACCOMMODATION ENTRIES ON VARIOUS HEADS OF INCOME, IS NOT SUFFICE TO ESTABLISH THAT THIS FINDING IS HAVING BI NDING AFFECT IN THE OTHER CASES WHEREIN ALLEGATION OF ACCOMMODATION ENTRIES F ROM MAHASAGAR GROUP IS INVOLVED. THE AO AND LD. CIT(A) IS DUTY B OUND TO EVALUATE AND ANALYSES FACTS OF THE EACH CASE AND WITHOUT SUCH EX ERCISE ONUS LAY ON THE SHOULDER OF AO CANNOT BE TAKEN AS DISCHARGED FO R MAKING SUSTAINABLE ADDITION U/S. 68 OF THE ACT. 20. WHEN WE FURTHER PROCEED TO CONSIDER RIVAL CONTE NTIONS ADVANCED BY BOTH THE PARTIES THEN WE FIND THAT THE LD. AR, BEFO RE THE FIRST APPELLATE AUTHORITY HAS PLACED RELIANCE ON THE FOLLOWING JUDG MENTS/DECISIONS: 1. CIT VS. SOPHIA FINANCE LTD. REPORTED IN 205 ITR 98 (DEL.); 2. STELLAR INVESTMENTS LTD. REPORTED IN 192 ITR 287 (DELHI)/251 ITR 263 (SC); 3. CIT VS. LOVELY EXPORTS PVT. LTD. REPORTED IN 319 ITR 5 (SC) 4. CIT VS. DIVINE LEASING & FINANCE LTD./GENERAL EX PORTS & CREDITS LTD./LOVELY EXPORTS (P.) LTD. REPORTED IN 2 99 ITR 268 (DEL.) 5. KISHNCHAND CHELARAM VS. CIT (SUPRA) 6. CIT VS. STELLAR INVESTMENT LTD. REPORTED IN 192 ITR 287 (DEL.) 21. IN THE PRESENT CASE, THE ASSESSEE EXPLAINED WIT H THE SUPPORT OF COPIES OF THE RELEVANT BANK STATEMENTS, COPIES OF R ETURNS OF INCOME AND CONFIRMATIONS MAKING INVESTMENTS BY THE ALLEGED INV ESTORS/SHARE CAPITAL 19 ITA NO.263/AHD/2014/SRT (A.Y: 2006-07) M/S. PATDI COMMERCIAL & INVESTMENT LTD. CONTRIBUTOR ENTITIES TO SHOW THAT ON FIVE COMPANIES ARE GENUINE HAVING SUFFICIENT FINANCIAL WORTH AND THEY ARE DOING REGUL AR BUSINESS AND EARNING INCOME AND THEREAFTER OFFERING THE SAME FOR TAXATIO N BY WAY OF FILING RETURN OF INCOME BUT THE AO KEEPING ASIDE AND WITHOUT EXAM INING THIS EVIDENCE PROCEEDED TO MAKE ADDITION U/S. 68 OF THE ACT ON TH E STRENGTH OF REPORT OF THE INVESTIGATION WING, MUMBAI AND STATEMENTS OF SH RI MUKESH M. CHOKSI AND SHRI JAYESH K. SAMPATH. 22. ON THE ALLEGATION OF NOT PROVIDING OPPORTUNITY TO CROSS EXAMINE THESE WITNESSES TO THE ASSESSEE, WE ARE OF THE CONS IDERED VIEW THAT IN THE CASE OF KISHANCHAND CHELRAM (SUPRA), THE HON'BLE SUPREME COURT HELD THAT IF THE RELEVANT EVIDENCE/STATEMENT OF OT HER PERSON, ON WHICH THE AO RELIES, IS NOT CONFRONTED OR AN OPPORTUNITY TO C ROSS EXAMINE IS NOT MADE AVAILABLE THEN NO ADDITION IS JUSTIFIED ON THE BASE OF SUCH EVIDENCE/STATEMENT. IN THE PRESENT CASE, WE OBSERV E THAT FROM ORDERS OF THE AUTHORITIES BELOW, IT IS VIVID THAT OPPORTUNITY TO CROSS EXAMINE SAID WITNESS HAS NOT BEEN ALLOWED TO THE ASSESSEE THEREF ORE, NO SUSTAINABLE AND VALID ADDITION COULD HAVE MADE U/S. 68 OF THE A CT IN THE HANDS OF THE ASSESSEE ONLY ON THE STRENGTH OF THESE STATEMENTS B Y USING THE SAME AGAINST THE ASSESSEE IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. AT THIS JUNCTURE, WE ALSO TAKE RESPECTFUL COGNIZANCE OF DEC ISION OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF MOTI LAL PADAMP AT UDYOG LTD. (SUPRA), WHICH HAS BEEN VEHEMENTLY RELIED BY THE LD . CIT-DR, WHEREIN IT 20 ITA NO.263/AHD/2014/SRT (A.Y: 2006-07) M/S. PATDI COMMERCIAL & INVESTMENT LTD. WAS HELD THAT SINCE STATEMENT HAD ALREADY BEEN RECO RDED AND ASSESSEE HAD PROPER OPPORTUNITY TO CONTROVERT THE MATERIAL G ATHERED BY ASSESSING AUTHORITY AND USED AGAINST IT, OPPORTUNITY TO CROSS -EXAMINE SAID PERSONS DID NOT ARISE. FACTS OF THIS CASE REVEALS THAT THE AO PROVIDED DUE OPPORTUNITY TO THE ASSESSEE TO CROSS-EXAMINE THE WI TNESSES THE PARTNERS AND EMPLOYEES OF THE FIRM DURING ASSESSMENT PROCEED INGS IN PRESENCE OF THE ASSESSEE AND THE ASSESSEE HAD PROPER OPPORTUNIT Y TO CONTROVERT THE SAME AND THE MATERIAL GATHERED BY THE AO THEREFORE, OPPORTUNITY TO CROSS EXAMINE THE SAID PERSONS DID NOT ARISE. IN VIEW OF THESE FACTS, WE HAVE NO HESITATION TO HOLD THAT FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE QUITE DISSIMILAR AND DISTINGUISHABLE AS THE STATEME NT OF SHRI MUKESH M. CHOKSI AND SHRI JAYESH K. SAMPATH WERE NOT RECORDED DURING THE ASSESSMENT PROCEEDINGS OF THE PRESENT CASE BUT THE SAME WERE RECORDED DURING THE COURSE OF SEARCH AND SEIZURE OPERATION I N THE CASES OF MUKESH CHOKSI COMPANY/ENTITIES ON WHICH OPPORTUNITY TO CRO SS EXAMINE WAS NOT ALLOWED TO THE ASSESSEE. HENCE, WE RESPECTFULLY OB SERVE THAT THE BENEFIT OF THE RATIO OF THE DECISION OF HON'BLE ALLAHABAD H IGH COURT ISNOT AVAILABLE FOR THE REVENUE IN THE PRESENT CASE. THEREFORE, IN VIEW OF FOREGOING DISCUSSION, WE REACH TO A CONCLUSION THAT THE ADDIT ION MADE BY THE AO, ON THE STRENGTH STATEMENTS OF SHRI MUKESH M. CHOKSI AND SHRI JAYESH K. SAMPATH, ALSO FAILS ON THIS COUNT AND HENCE, FINDIN GS RECORDED BY THE LD. CIT(A) DESERVE TO BE UPHELD ON THIS COUNT. 21 ITA NO.263/AHD/2014/SRT (A.Y: 2006-07) M/S. PATDI COMMERCIAL & INVESTMENT LTD. 23. UNDISPUTEDLY, THE ASSESSEE RECEIVED ENTIRE AMOU NT OF SHARE CAPITAL THROUGH BANKING CHANNEL BY WAY OF ACCOUNT PAYEE CHE QUES AND BANK STATEMENTS OF THE ASSESSEE AND SHARE APPLICATION CO NTRIBUTORS SUPPORTS THE FACT THAT THE SHARE APPLICATION MONEY/CAPITAL C ONTRIBUTION HAS BEEN RECEIVED BY THE ASSESSEE THROUGH BANKING CHANNEL AN D THE ASSESSEE MADE AVAILABLE THE NAMES, ADDRESSES AND PAN NUMBERS OF SHARE MONEY CONTRIBUTORS/INVESTORS TO THE AO ALONG WITH BASIC E VIDENCE SHOWING THE EXISTENCE AND IDENTITY OF THE SHAREHOLDER/INVESTOR. 24. IN THE CASE OF CIT VS. LOVELY EXPORTS PVT. LTD. (SUPRA) AND OTHER RELEVANT CASES, THE HON'BLE HIGH COURT OF DELHI HEL D THAT DISMISSING THE APPEALS, THAT THE TRIBUNAL HAD CATEGORICALLY HELD T HAT THE ASSESSEE HAS DISCHARGED ITS ONUS OF PROVIDING THE IDENTITY OF TH E SHARE SUBSCRIBERS. HAD ANY SUSPICION STILL REMAINED IN THE MIND OF THE AO HE COULD HAVE INITIATED COERCIVE PROCESS BUT THIS COURSE OF ACT ION HAD NOT BEEN ADOPTED. THE DELETION OF THE ADDITIONS WAS JUSTIFIE D. THE HON'BLE SUPREME COURT CONFIRMED THE ABOVE OBSERVATIONS AND FINDINGS OF HON'BLE HIGH COURT BY DISMISSING SLP OF THE DEPARTMENT AND HELD THAT CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED IN COME U/S. 68 OF THE ACT? WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITIO N FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE COMPANY FOR ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN T O THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIV IDUAL ASSESSMENT IN 22 ITA NO.263/AHD/2014/SRT (A.Y: 2006-07) M/S. PATDI COMMERCIAL & INVESTMENT LTD. ACCORDANCE WITH THE LAW. HENCE, NO INFIRMITY IS FO UND WITH THE IMPUGNED JUDGMENT. 25. IN THE CASE OF CIT VS. STELLAR INVESTMENT LTD. (SUPRA), AS RELIED BY THE LD. AR, THEIR LORDSHIP SPEAKING FOR THE APEX CO URT HELD THAT EVEN IF IT BE ASSUMED THAT SUBSCRIBERS TO THE INCREASE SHARE C APITAL WERE NOT GENUINE, UNDER NO CIRCUMSTANCES, COULD THE AMOUNT O F SHARE CAPITAL BE REGARDED AS UNDISCLOSED INCOME OF THE COMPANY. AS PER VARIOUS DECISION OF HON'BLE SUPREME COURT AND HON'BLE HIGH COURT INC LUDING THE DECISIONS AS RELIED BY THE LD. AR IN THE PRESENT CASE, THERE MAY BE TWO SITUATIONS VIZ. FIRST, THE AO AFTER RECEIPT OF DOCUMENTARY EVI DENCE AND EXPLANATION OF THE ASSESSEE PROCEED TO EXAMINE AND VERIFY THE SAME AND THEREAFTER RECORDS A CATEGORICAL FINDINGS OF FACT THAT THE IDE NTITY & EXISTENCE OF INVESTOR COMPANY/ENTITY AS WELL AS CAPACITY AND CRE DITWORTHINESS OF THE SAID INVESTOR AND GENUINENESS OF TRANSACTION HAS NO T BEEN PROVED AND ESTABLISHED AND AFTER ALLOWING OPPORTUNITY TO THE A SSESSEE TO REBUT THE SAME PROCEED TO MAKE ADDITION U/S. 68 OF THE ACT AN D THERE MAY BE A SECOND SITUATION, WHEREIN THE AO AFTER RECEIPT OF D OCUMENTARY EVIDENCE AND EXPLANATION OF THE ASSESSEE SITS OVER THE SAME AND WITHOUT VERIFYING, EXAMINING AND CONTROVERTING THE SAME PROCEED TO MAK E ADDITION U/S. 68 OF THE ACT ON THE STRENGTH OF OTHER EXTRANEOUS MATE RIAL. IN THE FIRST SITUATION, THE AO IS RIGHT IN MAKING ADDITION U/S. 68 OF THE ACT, WHEN THE ASSESSEE FAILS TO REBUT THE FINDINGS AND OBSERVATIO NS RECORDED BY THE AO 23 ITA NO.263/AHD/2014/SRT (A.Y: 2006-07) M/S. PATDI COMMERCIAL & INVESTMENT LTD. BUT IN THE SECOND SITUATION, THE AO IS NOT ENTITLED TO MAKE SUSTAINABLE ADDITION U/S. 68 OF THE ACT KEEPING ASIDE THE EXPLA NATION AND DOCUMENTARY EVIDENCE SUBMITTED BY THE ASSESSEE REGA RDING IDENTITY, EXISTENCE AND CREDITWORTHINESS OF THE INVESTOR AND GENUINENESS OF THE TRANSACTION. 26. IN THE PRESENT CASE, FROM VIGILANT READING OF A SSESSMENT ORDER, IT IS CLEAR THAT DESPITE THE FACT THAT THE ASSESSEE SUBMI TTED ALL POSSIBLE DETAILS SUCH AS NAMES, ADDRESSES AND PAN NUMBERS ALONG WITH THE CONFIRMATIONS OF THE INVESTORS & COPIES OF THE BANK STATEMENT AND RETURN OF INCOME OF THE INVESTORS, THE AO WITHOUT VERIFYIN G THESE VOLUMINOUS DOCUMENTS AND MAKING FURTHER INQUIRIES TO CORROBORA TE THE VIEWS/ALLEGATIONS MADE BY THE INVESTIGATION WING IN THE REPORT PROCEEDED TO MAKE ADDITION U/S.68 OF THE ACT WITHOUT SHIFTING THE ONUS ON THE SHOULDERS OF THE ASSESSEE THEREFORE, ADDITION MADE BY THE AO DOES NOT HELD AS SUSTAINABLE ON THIS COUNT AND THE LD. CIT(A ) WAS RIGHT IN DISMISSING THE SAME. 27. ON SECOND CONTENTION OF THE LD. AR THAT THERE W AS NO INCRIMINATING MATERIAL IN THE HANDS OF AO WE ARE OF THE VIEW THAT PRESENT CASE IS PERTAINING TO THE ASSESSMENT PERIOD FALLING IN THE BLOCK PERIOD OF S. 153A OF THE ACT AND UNDISPUTEDLY ASSESSMENT WAS COMPLETE D IN THE CASE OF U/S. 143(3) OF THE ACT ON 06.05.2008 HENCE, IT IS A CASE OF THE COMPLETED 24 ITA NO.263/AHD/2014/SRT (A.Y: 2006-07) M/S. PATDI COMMERCIAL & INVESTMENT LTD. ASSESSMENT. ON BEING ASKED BY THE BENCH, EXCEPT TH E REPORT OF THE INVESTIGATION WING, MUMBAI THE LD. CIT-DR COULD NOT SHOW US ANY OTHER INCRIMINATING MATERIAL WHICH WAS FOUND DURING THE C OURSE OF SEARCH AND SEIZURE OPERATION CONDUCTED ON 08.06.2010 IN THE CO MMERCIAL PREMISES OF THE ASSESSEE COMPANY THEREFORE, WE SAFELY PRESUM E THAT THERE WAS NO INCRIMINATING MATERIAL IN THE HANDS OF AO DURING TH E COURSE OF ASSESSMENT PROCEEDINGS SUPPORTING THE ADDITION U/S. 68 OF THE ACT. 28. AS PER RATIO OF VARIOUS DECISION INCLUDING DECI SION OF HONBLE JURISDICTIONAL HIGH COURT OF GUJARAT IN THE CASE OF PCIT VS. DIPAK J PANCHAL (SUPRA), PCIT VS. DEVANGI ALIAS RUPA TAX AP PEAL NO.54 TO 57 OF 2017 DATED 02.02.2017 (GUJ.), DECISIONS OF HON'BLE HIGH COURT OF DELHI IN THE CASE OF CIT VS KABUL CHAWLA (SUPRA) AND IN THE CASE OF PCIT VS. KURELE PAPER MILLS PVT. LTD. REPORTED IN 380 ITR 57 1 (DEL.), AGAINST WHICH SLP OF THE DEPARTMENT HAS BEEN DISMISSED, THE ADDIT ION U/S. 68 OF THE ACT CAN BE MADE IN THE ASSESSMENT ORDER FRAMED U/S. 143(3) R/W .S 153A OF THE ACT ONLY ON THE BASIS OF SEIZED MATERIAL. W HERE NO INCRIMINATING MATERIAL WAS UNEARTHED DURING THE SEARCH, NO ADDITI ONS COULD BE MADE TO THE INCOME ALREADY ASSESSED. 29. FURTHER, THE STATEMENTS OF SHRI MUKESH M. CHOKS I AND SHRI JAYESH K. SAMPATH HAS BEEN RELIED BY THE LD. AO WHILE MAKI NG ADDITION U/S. 68 OF THE ACT. ON THE OTHER HAND, WE CLEARLY OBSERVE THA T BEFORE THE AUTHORITIES 25 ITA NO.263/AHD/2014/SRT (A.Y: 2006-07) M/S. PATDI COMMERCIAL & INVESTMENT LTD. BELOW AND BEFORE THE BENCH, THE LD. AR HAS ALSO FUR NISHED COPY OF LETTER OF SHRI MUKESH M. CHOKSI SUBMITTED TO THE AO ON 19. 03.2013 DURING THE ASSESSMENT PROCEEDINGS WHERE IT HAS BEEN CONFIRMED BY HIM THAT ABOVE INVESTMENTS HAVE BEEN MADE IN THE NAME OF THE SAID FIVE COMPANIES BY SUBSCRIBING SHARES OF M/S. PATDI COMMERCIAL & INVES TMENTS LTD. THROUGH PROPER BANKING CHANNELS AND INVESTMENT IS MADE OUT OF OWN FUNDS OF THESE COMPANIES. IN THIS SITUATION, IT HAS TO BE P RESUMED THAT THE ASSESSEE DISCHARGED THE PRIMARY ONUS LAY ON HIM BY SUBMITTING ALL THE RELEVANT DOCUMENTARY EVIDENCE SHOWING EXISTENCE AND IDENTITY OF INVESTOR AND CREDITWORTHINESS AND CAPACITY OF THE INVESTOR E STABLISHING THE GENUINENESS OF THE TRANSACTION. THEREAFTER, IT WAS THE DUTY OF THE AO TO EXAMINE THE EVIDENCE SUBMITTED BY THE ASSESSEE, TO REBUT THE CONTENTION AND EXPLANATION OF THE ASSESSEE. 30. FURTHERMORE, AFTER EXAMINING AND VERIFYING THE DOCUMENTARY EVIDENCE AND MATERIAL SUBMITTED BY THE ASSESSEE, TH E LD. CIT(A) RIGHTLY HELD THAT THE IDENTITY OF THE INVESTORS HAS NOT BEE N DOUBTED AS THE COMPANIES ARE REGISTERED WITH THE REGISTRAR OF COMP ANIES HAVING PAN NUMBER AND FILING RETURN OF INCOME AND COPIES OF TH E BANK STATEMENT ALSO REFLECT CORRESPONDING ENTRIES IN RESPECT OF TRANSFE R OF AMOUNTS INVESTED IN THE ASSESSEE COMPANY THROUGH ACCOUNT PAYEE CHEQUES AND IT IS NOT A CASE OF THE AO THAT THERE WAS ANY CASH DEPOSIT IN T HE ACCOUNTS OF THE INVESTORS BEFORE ISSUING CHEQUES TO THE ASSESSEE CO MPANY ON ACCOUNT OF 26 ITA NO.263/AHD/2014/SRT (A.Y: 2006-07) M/S. PATDI COMMERCIAL & INVESTMENT LTD. SHARE CAPITAL CONTRIBUTION. THE LD. CIT(A) AFTER O BSERVING ABOVE FACTUAL SITUATION AND CIRCUMSTANCES IN WHICH INVESTMENT WAS MADE BY THE ALLEGED INVESTORS RIGHTLY HELD THAT THE GENUINENESS OF TRAN SACTION AND CREDITWORTHINESS OF INVESTORS HAS BEEN ESTABLISHED AND PROVED. 31. AT THIS STAGE, IT IS ALSO RELEVANT TO CONSIDER THE CONTENTION OF THE ASSESSEE PLACED BEFORE THE AUTHORITIES BELOW AND RE PRODUCED BY THE LD. CIT(A) IN PARA 10 OF THE FIRST APPELLATE ORDER, IT ALSO REVEALS THAT THE ALL FIVE INVESTOR COMPANIES HAVE SUFFICIENT AND RESERVE AS O N 31.03.2006 AND THEY ARE ALSO SHOWING NET PROFIT AS PER RESPECTIVE PROFIT AND LOSS ACCOUNT WHICH SUPPORTS THE FACT THAT THESE COMPANIES ARE DO ING BUSINESS AND PAYING TAX ETC. BY WAY OF FILING RETURN ON THE INCO ME EARNED BY THEM. THESE FACTS AGAIN SUPPORTS THE FINDINGS OF THE LD. CIT(A) THAT THE ASSESSEE SUCCESSFULLY ESTABLISHED IDENTITY AND EXIS TENCE OF INVESTORS ALONG WITH THEIR CREDITWORTHINESS AND CAPACITY TO I NVEST FUNDS AND FINALLY ESTABLISHING THE GENUINENESS OF TRANSACTION THEREFO RE, WE HAVE NO REASON TO TAKE A DIFFERENT VIEW FROM THE FINDINGS RECORDED BY THE LD. FIRST APPELLATE AUTHORITY. IN VIEW OF ABOVE DISCUSSION, WE ARE INCLINED TO HOLD THAT THERE IS NO AMBIGUITY, PERVERSITY OR ANY OTHER VALID REASON TO INTERFERE WITH THE FINDINGS RECORDED BY THE LD. CIT(A) AND HE NCE, WE UPHOLD THE SAME. CONSEQUENTLY, SOLE GROUND OF REVENUE BEING D EVOID OF MERITS IS DISMISSED. 27 ITA NO.263/AHD/2014/SRT (A.Y: 2006-07) M/S. PATDI COMMERCIAL & INVESTMENT LTD. 32. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 0 TH OCTOBER, 2018. / SURAT ; DATED : 10 TH OCTOBER, 2018 EDN # & / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT ; 3. $ ( ) / THE CONCERNED CIT(A); 4. THE CONCERNED PRL. CIT; 5. , , / DR, ITAT, SURAT; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // * / ASSISTANT REGISTRAR , / ITAT, SURAT SD/- SD/- ( ) ( O.P.MEENA ) / ACCOUNTANT MEMBER ( ) (C.M.GARG) /JUDICIAL MEMBER