Maa Kali Alloys Udyog Pvt Ltd, Kolkata V. DCIT CENTRAL CIRCLE, Dhanbad

ITSSA 4/RAN/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 7798 (ITAT-RANCHI)
• Duration Of Justice: 3 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 08-07-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 04-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: INDERJEET SINGH
• Keywords: Unexplained cash credit; Unexplained investment; Gift; Search and seizure; Principle of natural justice; Source of fund; Question of law; Accommodation entries; Onus to prove
• Section: 143(3); 153A; 133(6); 195; 143(2); 191; 264; 48; 13; 22; 147; 131; 68; 69; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI, BENCH, RANCHI BEFORE SHRI S.S. GODARA, JM &DR. A.L.SAINI, AM ./IT(SS)A NO.04/RAN/2017 ( / ASSESSMENT YEAR:2011-12) MAAKALI ALLOYS UDYOG PVT. LTD. CHHAPARIA& ASSOCIATES, CHARTERED ACCOUNTANTS, 8, CAMAC STREET, SHANTINIKETANBUILDING, 5 TH FLOOR, ROOM NO. 2, KOLKATA- 700017 VS. DCIT, CC-DHANBAD ./ ./PAN/GIR NO.: AADCM 3424 C (APPELLANT) .. (REVENUE) APPELLANTBY :SHRI DEVESH PODDAR, ADVOCATE RESPONDENT BY :SHRI INDERJEET SINGH, CIT (DR) / DATE OF HEARING : 06/03/2020 /DATE OF PRONOUNCEMENT : /07/2020 / O R D E R PER BENCH: THE CAPTIONED APPEAL FILED BY THE ASSESSEE, PERTAIN ING TO ASSESSMENT YEAR 2011-12, IS DIRECTED AGAINST THE ORDER PASSED BY TH E COMMISSIONER OF INCOME TAX (APPEAL)-3, PATNA, WHICH IN TURN ARISES OUT OF AN ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 153A / 143(3) OF THE INCOM E TAX ACT, 1961 (IN SHORT THE ACT) DATED 29/03/2014. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE AR E AS FOLLOWS: 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E A.O HAS ERRED IN MAKING ADDITION OF RS. 5,80,00,000/- IN AN ASSESSME NT UNDER SECTION 153A/L43(3) OF THE INCOME TAX ACT, 1961, SINCE THE PARTICULARS RELATING TO INCREASE IN SHARE CAPITAL AND SHARE PREMIUM WERE ALREADY FORMING PART OF REGULAR BOOKS OF MAA KALI ALLOYS UDYOG PVT.LTD. IT(SS)A NO. 04/RAN/2017 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 2 22 2 ACCOUNTS AND NO INCRIMINATING MATERIAL WHATSOEVER V IZ. BOOKS OF ACCOUNT AND OTHER DOCUMENTS WERE FOUND DURING THE COURSE OF SEA RCH. THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF A.O. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E A.O HAS ERRED IN MAKING ADDITIONS PURELY ON SURMISES WITHOUT ANY INC RIMINATING MATERIAL ON RECORD. THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF A.O. 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E A.O HAS ERRED IN PASSING ORDER UNDER SECTION 153A/143(3) OF THE ACT FOR INSTANT YEAR WITHOUT ISSUING NOTICE U/S 143(2) OF THE ACT AND AS SUCH TH E ORDER U/S 153A / 143(3) OF THE ACT IS VOID-AB-INITIO. 4. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E A.O HAS ERRED IN MAKING ADDITION OF RS. 5,80,00,000/- UNDER SECTION 68 OF THE INCOME TAX ACT, 1961. THE LD. CIT(A) HAS ERRED IN CONFIRMING THE AC TION OF A.O. 4.A) THAT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE A.O HAS ERRED IN CONCLUDING THAT THE APPELLANT COMPANY HAS FAILED TO DISCHARGE ITS ONUS OF PROVING THE IDENTITY AND CREDITWORTHINESS OF SHARE APPLICAN TS AND GENUINENESS OF THE TRANSACTIONS. THE LD. CIT(A) HAS ERRED IN CONFIRMIN G THE ACTION OF A.O. 4.B) THE A.O HAS ERRED IN OBSERVING THAT INVESTORS ARE COMPANIES WHICH HAVE NO FINANCIAL MUSCLE TO INVEST. IN FACT, AS EVIDENT FRO M THE REPLIES OF SHARE APPLICANTS IN RESPONSE TO NOTICES U/S 133(6) OF THE ACT, THAT THE EACH SHARE APPLICANTS HAD SUBSTANTIAL FUNDS IN THE FORM OF SHARE CAPITAL AND RESERVES OUT OF WHICH THE SHARE SUBSCRIPTION AMOUNTS WERE PAID. THE OWN FUNDS OF TH E INVESTORS WERE SUBSTANTIALLY MORE THAN THE AMOUNTS INVESTED IN THE ASSESSEES SHARES. 4. C) THAT IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE A.O HAS ERRED IN MAKING ADDITIONS U/S 68 OF THE ACT BY INTER-ALIA OBSERVING THAT THE PREMIUM OF RS, 49/- PER SHARE WAS NOT JUSTIFIED. THE A.O HAS ERRED IN NOT R ELYING ON SUBMISSIONS AT ASSESSMENT HEARING STAGE WITH RESPECT TO JUSTIFICAT ION OF PREMIUM. THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF A.O. 4.D) THE ADDITIONS MADE BY THE A.O ARE BASED PURELY ON SURMISES, PRE-CONCEIVED NOTION AND ON THE BASIS OF HIS INFERENCE DRAWN FROM THE ALLEGED REPLIES RECEIVED FROM THE SHARE APPLICANTS UNDER SECTION 133(6) OF T HE INCOME TAX ACT, 1961, COPIES OF WHICH WAS NOT COMMUNICATED TO THE APPELLA NT DURING THE ASSESSMENT PROCEEDINGS. HOWEVER SUBSEQUENT TO THE ASSESSMENT O RDER, THE APPELLANT APPLIED FOR CERTIFIED COPIES OF THE ORDER SHEET, COPY OF NO TICES UNDER SECTION 133(6) OF THE ACT AND THE REPLIES FROM THE RESPECTIVE SHARE APPLI CANTS TO THE A.O. THE SAME WAS RECEIVED AND RELIED UPON IN APPELLANT HEARING. THE LD. CIT(A) HAS ERRED IN NOT DISCUSSING THE AFORESAID NOTICES AND REPLIES IN THE APPELLATE ORDER. 4.E) THE A.O HAS ERRED IN DOUBTING THE IDENTITY OF SHARE APPLICANTS WHEN THE A.O HIMSELF HAS ISSUED 133(6) NOTICES TO VARIOUS SHARE APPLICANTS, WHO HAD DULY REPLIED DURING ASSESSMENT HEARING STAGE. SUCH SHARE APPLICANT COMPANIES HAVE SUBMITTED COPIES OF THEIR AUDITED ACCOUNTS, BANK ST ATEMENTS, I.T MAA KALI ALLOYS UDYOG PVT.LTD. IT(SS)A NO. 04/RAN/2017 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 3 33 3 ACKNOWLEDGEMENT, NBFC CERTIFICATE (IF APPLICABLE), ETC. ALONG WITH THEIR REPLIES IN RESPONSE TO NOTICE U/S 133(6) OF THE ACT. 5. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE A.O HAS IRRELEVANTLY REFERRED TO VARIOUS CASE LAWS AND JUDGMENTS WHICH A RE NOT APPLICABLE TO THE CASE OF THE APPELLANT. 6. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN CALLING FOR ENQUIRY BY DDIT (INV), UNIT 2(2), KO LKATA AND RELYING ON THE ENQUIRY REPORT. IN FACT, THE ANNEXURE TO THE ALLEGE D ENQUIRY REPORT (STATEMENTS OF ALLEGED ENTRY OPERATORS) HAS NO SPECIFIC ALLEGATION S AGAINST THE APPELLANT. 7. NO SHOW CAUSE WAS EVER ISSUED DURING ASSESSMENT PROCEEDINGS WHICH COULD GIVE AN INDICATION THAT A.O. WAS NOT SATISFIED WITH RESPECT TO IDENTITY AND GENUINENESS OF SHARE APPLICATION MONEY RECEIVED BY THE APPELLANT COMPANY A.O HAS TREATED SHARE APPLICATION AS UNEXPLAINED CASH C REDITED U/S 68 OF THE ACT PURELY ON CONJECTURE AND SURMISES WITHOUT BRINGING ANY POSITIVE MATERIALS ON RECORD AND ON PRE-DETERMINED NOTION, SURMISES AND O N GUESS WORK ONLY. THE APPELLANT HAS ALL ALONG COMPLIED DURING THE ASSESSM ENT PROCEEDING (APPEARED SEVEN TIMES BESIDES FILING WRITTEN SUBMISSIONS, REP LIES ETC. THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE A.O. 8.A) THAT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) HAS RELYING ON THE AFORESAID ENQUIRY REPORT WITHOUT ALL OWING PROPER OPPORTUNITY TO CROSS EXAMINE THE PERSONS ON WHOSE STATEMENTS HE HA S RELIED UPON WHILE PASSING APPELLATE ORDER. 8.B) THAT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) HAS ERRED IN IGNORING THE REJOINDER TO THE ENQUIRY REPORT FIL ED DURING APPELLATE PROCEEDINGS AND PROCEEDED TO PASS APPELLATE ORDER ON PRE-CONCEI VED NOTION. 9. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSMENT ORDER IS BAD IN LAW, THE LD. CIT (A) HAS ERRED IN CONFIRMATORY THE SAME AS HIS ORDER IS UNTENABLE IN LAW. 10. THAT THE APPELLANT HUMBLY CRAVES LEAVE TO ADD, ALTER, WITHDRAW ALL OR ANY GROUNDS OF APPEAL AT THE TIME OF HEARING. 3. BRIEF FACTS QUA THE ISSUE ARE THAT DURING THE FI NANCIAL YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY RECEIVED SHARE APPLICATION MON EY FROM EIGHT DIFFERENT SUBSCRIBER COMPANIES AT A PREMIUM OF RS. 49 PER SHA RE FOR FACE VALUE OF RS. 1/- PER SHARE. TOTAL NUMBER OF SHARES ISSUED IS 11,60,000 A T THE FACE VALUE OF RS 1/- PER SHARE WITH A PREMIUM OF RS 49/- PER SHARE TOTALING RS 5,80,00,000/-. THE PARTICULARS OF EIGHT DIFFERENT SUBSCRIBER COMPANIE S ARE GIVEN BELOW: MAA KALI ALLOYS UDYOG PVT.LTD. IT(SS)A NO. 04/RAN/2017 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 4 44 4 SL. NO. NAME OF INVESTOR NO. OF SHARES AMOUNT PAID IN RS. 1. ROHAN FINANCE & SECURITIES LTD. 29A, WESTON STREET, 3 RD FLOOR, ROOM NO. C-2, KOLKATA-700012 1,70,000 85,00,000 2. SWASTIK SECURITIES & FINANCE LTD. 33, C.R. AVENUE, 9 TH FLOOR, ROOM NO. 909, KOLKATA-700012 1,70,000 85,00,000 3. CENTAK DISTRIBUTORS PVT. LTD. 1-B, BLACK BURN LANE, 4 TH FLOOR, KOLKATA- 700012 1,00,000 50,00,000 4. ADITI SANCHAR SUVIDHA PVT. LTD. 27, BRABOURNE ROAD, 4 TH FLOOR, KOLKATA- 700001 2,00,000 1,00,00,000 5. ETL INFRASTRUCTURE FINANCE LTD. 1-B, BLOCK, BURN LANE, 4 TH FLOOR, KOLKATA- 12. 1,50,000 75,00,000 6. PARIDHI FINVEST PVT. LTD. 8-LAKE TOWN, BLOCK-B, KOLKATA-700089 1,90,000 95,00,000 7. CONTINENTAL FISCAL MANAGEMENT LTD. 27, BRABOURNE ROAD, 4 TH FLOOR, ROOM NO. 401,KOLKATA-700001 50,000 25,00,000 8. J.P. ENGINEERING CORPORATION P LTD. AE-326, SALTLAKE CITY, GROUND FLOOR, KOLKATA-700064 1,30,000 65,00,000 11,60,000 5,80,00,000 THE ASSESSING OFFICER WAS OF THE VIEW THAT THE INTR ODUCTION OF SHARE CAPITAL WITH SUCH A LARGE PREMIUM IS UNUSUAL, GIVEN THE FACTS OF THE CASE. THE ASSESSEE COMPANY WAS FOUND TO HAVE NEVER ISSUED ANY DIVIDEND . EVEN, THE PORTFOLIO AND FINANCIAL STRENGTH OF THE COMPANY DID NOT WARRANT A TTRACTING SUCH A HUGE PREMIUM. THE INVESTORS ARE COMPANIES WHICH HAVE NOT THE FINA NCIAL MUSCLE TO INVEST. THUS, THE INTRODUCTION OF SHARE APPLICATION MONEY WITH SU CH A HUGE PREMIUM IS MORE THAN WHAT MEETS THE EYE. IT HAS A TELL TALE SIGN OF ARRANGEMENT REACHED BETWEEN THE ASSESSEE COMPANY AND ITS SO CALLED INVESTORS TO GIV E LEGAL SANCTITY TO UNEXPLAINED CASH CREDIT BROUGHT INTO THE COMPANY IN FORM OF SHA RE APPLICATION MONEY WITH MAA KALI ALLOYS UDYOG PVT.LTD. IT(SS)A NO. 04/RAN/2017 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 5 55 5 HUGE PREMIUM.THEREFORE, DURING THE ASSESSMENT STAGE , THE ASSESSEE WAS ASKED TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENES S OF THE SHARE SUBSCRIBING COMPANIES. 4.IN RESPONSE, THE ASSESSEE SUBMITTED REPLY BEFORE THE ASSESSING OFFICER AS FOLLOWS: .WEDO NOT UNDERSTAND WHAT RELATION YOU ARE RE FERRING TO. HOWEVER,ONCE WE HAVE ALLOTTED SHARES TO THE INVESTO RS, THEY BECOME ONE OF THE OWNERS OF THE COMPANY TO THE EXTENT OF THEIR SHAREH OLDING INTEREST. 2. YOU HAVE MENTIONED THAT DIVIDEND WAS NEVER DECLA RED BY THE COMPANY. WE ARE PART OF PODDAR GROUP WHO ARE AGGRESSIVELY EXPANDING THE BUSINESS, THAT IS, THE REASON, PERHAPS, A NUMBER OF INVESTORS REPOSED FAIT H IN US AND INVESTMENTS WERE MADE BY THEM LOOKING AT THE FUTURE GROWTH POTENTIAL S. TO OUR KNOWLEDGE AND BELIEF AN INVESTOR INVESTS IN EQUITY GENERALLY TO L OOK FOR GROWTH RATHER THAN DIVIDEND YIELD. 3.THE PLANT IS HAVING IMMOVABLE PROPERTIES WHOSE MA RKET VALUE IS SIGNIFICANTLY HIGHER THAN THE BOOK VALUE... (IN LAKH RS.) FIN YEAR SALES / CONVERSION CHARGES PROFIT BEFORE DEP. AND TAX PROFIT BEFORE TAX NET PROFIT 31.03.2010 4470 382 271 247 31/03/2011 5158 176 60 44 BASED ON THE ABOVE STRONG FINANCIAL STRENGTH AS PER AUDITED ACCOUNTS, THE COMPANY HAS ISSUED SHARES AT A PREMIUM. 4.BOOK VALUE OF SHARES AT THE END OF THE FINANCIAL YEAR: DATE FACE VALUE BOOK VALUE 31.03.2010 100/- 337.22 THE VALUE SHALL SIGNIFICANTLY INCREASE IF WE CONSID ER THE MARKET VALUE OF IMMOVABLE PROPERTIES HELD BY THE COMPANY AND THE RE PLACEMENT VALUE OF PLANTAND MACHINERY. YOU HAVE RAISED AN ISSUE HOW THE INVESTORS WERE SEC URED. THE INVESTORS WERE ALLOTTED SHARES AND THEY HAD ALL RIGHTS AS AVAILABL E TO A SHAREHOLDER. ALL THE SHARES ISSUED BY THE COMPANY WERE PARI-PASSU IN ALL RESPEC TS. 5.HOWEVER, THE ASSESSING OFFICER REJECTED THE CONTE NTION OF THE ASSESSEE AND HELD AS FOLLOWS: MAA KALI ALLOYS UDYOG PVT.LTD. IT(SS)A NO. 04/RAN/2017 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 6 66 6 THE ASSESSEE IS A PRIVATE LIMITED COMPANY. IT IS N OT THE CASE OF THE COMPANY THAT THEIR DIRECTORS OR PROMOTERS, WHO HAS PURPORTEDLY M ADE INVESTMENT IN THE SHARES, WERE RELATED OR KNOWN TO THEM. IN THE PRESENT CASE SUBSTANTIVE INVESTMENT HAS BEEN MADE IN A PRIVATE LIMITED COMPANY WHICH INCLUD ES SHARE PREMIUM @ RS. 49/- PER SHARE AMOUNTING TO RS. 5,80,00,000/-. IT I S NOT THE CASE OF THE ASSESSEE COMPANY THAT THEY HAVE A PROVEN PAST TRACK RECORD J USTIFYING A HEFTY PREMIUM,FORTY NINE TIME THE FACT VALUE. WHAT WERE P LACED ON RECORD WERE CERTAIN PAPERS WHICH SHOWED THAT THE ASSESSEE COMPANY HAD T AKEN CARE OF ENSURING LEGAL COMPLIANCES. THE SAID EVIDENCE IS PRIMARILY A NEUT RAL DOCUMENTARY EVIDENCE WHICH WOULD NOT ABSOLVE THE ASSESSEE TO DISCHARGE I TS ONUS OF PROVING THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION WHICH IN THE PRESENT CIRCUMSTANCES HAVE NOT BEEN DONE BY THE ASSESSEE. THUS, THE AMOUNT OF SHARE PREMIUM AMOUNTING TO RS. 5,80,00,000/- IS TREATED AS UNEXPLAINED CASH CREDIT AND ADDED U/S 68 OF THE IT ACT, 1961 TO THE TOTAL INCOME OF THE ASSESSEE. 6. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS CONFIRMED T HE ADDITION MADE BY THE ASSESSING OFFICER. THE FINDINGS OF LD CIT(A) TO THE EXTENT APPLICABLE FOR OUR DISCUSSION IS GIVEN BELOW: AFTER CONSIDERING THE ASSESSING OFFICERS FINDING AND SUBMISSION OF THE APPELLANT, I FIND THAT FOLLOWING FACTS EMERGED: 1. AS A RESULT OF SEARCH AND SEIZURE ACTION, PROCEEDIN G U/S 153A WAS INITIATED FOR THE CURRENT AY. DURING THE COURSE OF ASSESSMENT PRO CEEDING, THE ASSESSING OFFICER NOTICED THAT SHARE APPLICATION MONEY TO THE TUNE OF RS. 5,80,00,000/- WAS RECEIVED FROM EIGHT DIFFERENT COMPANIES BASED A T KOLKATA. THE FACE VALUE OF THE SHARE WAS RS. 1/- PER SHARE AND PREMIUM WAS RS. 49/- PER SHARE. TOTAL NOS. OF SHARES ISSUED WAS 11,60,000 @ RS. 50/- PER SHARE (FACE VALUE OF RS. 1/- PER SHARE AND PREMIUM OF RS. 49/- PER SHARE). T HE APPELLANT WAS GIVEN OPPORTUNITY TO EXPLAIN FOR THE JUSTIFICATION OF SHA RE APPLICATION MONEY RECEIVED AT UNREASONABLY HIGH PREMIUM AFTER CONSIDE RING THE FACT THAT THE ASSESSEE COMPANY WAS A PRIVATE LIMITED COMPANY WHIC H HAD NEVER DECLARED ANY DIVIDEND. THE AO ANALYZED THE SHARE PREMIUM ACC OUNT AND INVESTMENT OF THE SUBSCRIBER COMPANIES VIS-A-VIS THE RETURN OF IN COME FILED BY THESE COMPANIES AND FOUND THAT ALL THE SUBSCRIBER COMPANI ES HAD SUBSTANTIAL AMOUNT OF FUND UNDER SHARE PREMIUM ACCOUNT AND SUBS TANTIAL AMOUNT OF INVESTMENTS IN THE BALANCE SHEET BUT THE RETURNS OF INCOME SHOWN WERE VERY MEAGRE IN THE RANGE OF RS. 19,822/- TO RS. 8,51,686 /- (LOSS OF RS. 22,82,278/- IN ONE OF THE CASE) AS AGAINST THE SHARE PREMIUM A CCOUNT INDICATING FUNDS TO THE TUNE OF RS. 25 CRORE TO 60 CRORE AND INVESTMENT S TO THE TUNE OF RS. 15 CRORE TO RS. 58 CRORE. BASED ON THIS ANALYSIS, THE AO CON CLUDED THAT THE SHARE APPLICATION MONEY RECEIVED FROM THE SUBSCRIBER COMP ANIES DEFIED ALL LOGIC AND THE APPELLANT DID NOT DISCHARGE ITS ONUS OF IDE NTITY, CREDITWORTHINESS AND MAA KALI ALLOYS UDYOG PVT.LTD. IT(SS)A NO. 04/RAN/2017 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 7 77 7 GENUINENESS OF THE TRANSACTION LEADING TO ADDITION OF THIS AMOUNT AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. IN THE A PPELLATE PROCEEDING, THE APPELLANT HAS CONTROVERTED THIS FINDING ON FOLLOWIN G ARGUMENTS: I) NO INCRIMINATING DOCUMENT WERE FOUND OR SEIZED DURI NG SEARCH AND SEIZURE ACTION PERTAINING TO THE SHARE APPLICATION MONEY. THEREFORE, THE AO WAS NOT WITHIN HIS JURISDICTION TO ASSESS THIS I SSUE U/S 153A OF THE ACT. II) THE ISSUE OF SHARES APPLICATION PREMIUM IS A CAPITA L A/C TRANSACTION AND NOT A REVENUE TRANSACTION AND IT CANNOT BE SUBJECT MATTER OF ADDITION UNLESS THERE IS SPECIFIC PROVISION IN THE ACT. THE APPLICANT HAS REFERRED TO THE JUDGMENT OF BOMBAY HIGH COURT IN THE CASE OF VO DAFONE INDIA SERVICES PVT LTD VS UNION OF INDIA 50 TAXMANN.COM30 0. III) THE APPELLANT HAS CONTENDED THAT THE COMPANIES FINA NCIAL OVER THE LAST FEW YEARS WERE VERY SOUND WHICH LED THE COMPANY TO ISSU E SHARES AT A PREMIUM. IV) THE APPELLANT HAS CONTENDED THAT THE AO DID NOT GIV E ANY OPPORTUNITY BEFORE USING MATERIAL GATHERED BY HIM AND HAS REFER RED TO THE DECISION OF SUPREME COURT IN THE CASE OF DHAKESHWARI COTTON MIL LS VS CIT 34 ITR 123. BASED ON THIS DECISION, THE APPELLANT CLAIMED THAT THE ORDER WAS PASSED IN VIOLATION OF PRINCIPLE OF NATURAL JUSTICE AND THEREFORE SUFFERS FROM JURISDICTIONAL ERRORS. V) THE APPELLANT HAS CONTENDED THAT ALL THE SUBSCRIBER COMPANIES HAD ADEQUATE NET WORTH TO INVEST IN THE APPELLANT COMPA NY. THIS IS EVIDENT FROM THE AUDITED FINANCIAL STATEMENTS OF SHARE SUBS CRIBER COMPANIES. VI) THE APPELLANT HAS REFERRED TO FOLLOWING OTHER CASE DECISIONS: IN THE CASE OF NEMICHAND KOTHARI VS. CIT [264 ITR 2 54 (GAU)] IT WAS DISCUSSED THAT WHERE AN ASSESSEE RECEIVES ANY MONEY BY ACCOUN T PAYEE CHEQUE FROM ANOTHER PERSON, THEN U/S. 106 OF THE EVIDENCE ACT THE ASSES SEE CAN BE SAID TO HAVE ESTABLISHED THE GENUINENESS AND CREDITWORTHINESS OF THE PAYER. THE HON'BLE DELHI HIGH COURT IN CASE OF COMMISSIONE R ON INCOME TAX VS GANGESHWARI METAL (P.) LTD [2013] 30 TAXMANN.COM 3 28 (DELHI) HELD THAT WHERE ASSESSEE ARE IN SUPPORT OF TRANSACTION OF RECEIPT O F SHARE APPLICATION MONEY BROUGHT ON RECORD VARIOUS DOCUMENTS SUCH AS NAMES A ND ADDRESSES OF SHARE APPLICANTS, THEIR CONFIRMATORY LETTERS, COPIES OF B ANK STATEMENTS ETC, SAID TRANSACTION WAS TO BE REGARDED AS GENUINE AND, CONS EQUENTLY, NO ADDITION COULD BE MADE IN RESPECT OF SAME UNDER SECTION 68. WITH REGARD TO APPELLANTS CONTENTION THAT NO INCRI MINATING DOCUMENTS WERE FOUND OR SEIZED DURING THE SEARCH AND SEIZURE ACTION AND THEREFORE THE ISSUE OF ASSESSMENT OF SHARE APPLICATION MONEY CANNOT BE TAKEN UP IN THE, ASSESSMENT U/S 153A OF THE ACT. I FIND THAT TH E SEARCH AND SEIZURE ACTION TOOK PLACE ON 22.06.2011 MEANING THEREBY THE ASSESSMENT FOR AY 2011-12 FELL WITHIN THE BLOCK OF SIX ASSESSMENT YEA RS WHEREIN THE MAA KALI ALLOYS UDYOG PVT.LTD. IT(SS)A NO. 04/RAN/2017 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 8 88 8 PROCEEDING U/S 153A, HAS TO BE TAKEN UP. THUS, THER E IS NO OPTION BEFORE THE AO TO PROCEED WITH SCRUTINY ASSESSMENT U/S 143( 2) OF THE ACT. THE AO HAS TO PASS ASSESSMENT U/S 153A ONLY FOR ASSESSMENT YEAR 2011-12 WHEREIN THE ISSUES PERTAINING TO REGULAR BOOKS OF A CCOUNT AS WELL AS THE ISSUES PERTAINING TO THE EVIDENCES FOUND DURING THE SEARCH AND SEIZURE ACTION WILL BE TAKEN UP IN THE COMMON ASSESSMENT OR DER. THE HONBLE KERALA HIGH COURT IN ITS DECISION IN THE CASE OF ST FRANCIS CLAY DECOTILES 70 TAXMANN.COM 234 HAS STATED THAT NEITHER U/S 132 NOR U/S 153A, PHRASEOLOGY INCRIMINATING IS USED BY THE PARLIAMENT . THUS, THE APPELLANTS CONTENTION IS NOT SUSTAINABLE ON THE ISSUE OF ASSES SMENT OF SHARE APPLICATION MONEY IN THE PROCEEDING U/S 153A OF THE ACT. AS REGARDS THE APPELLANTS CONTENTION THAT SHARE AP PLICATION PREMIUM IS ON CAPITAL ACCOUNT AND AS PER THE DECISION OF BOMBA Y HIGH COURT IN THE CASE OF VODAFONE INDIA SERVICES PVT. LTD., I FIND T HAT IN THE CURRENT CASE THE SHARE APPLICATION MONEY AND SHARE PREMIUM WAS R ECEIVED FROM SUBSCRIBER COMPANIES WHICH WERE THIRD PARTIES AND T HEIR IDENTITY, GENUINENESS OF TRANSACTION AND CREDITWORTHINESS WAS NOT PROVED BY THE APPELLANT BEFORE THE ASSESSING OFFICER. THESE SUBSC RIBER COMPANIES WERE MERE SHARE APPLICANTS WHOSE CREDENTIALS WERE UNDER QUESTION. IN THE CASE OF VODAFONE INDIA SERVICES PVT. LTD. THE FACTS WERE DIFFERENT AND DISTINGUISHABLE FROM THE FACTS OF THE CURRENT CASE. WITH REGARD TO THE APPELLANTS CONTENTION OF VIOLAT ION OF PRINCIPLE OF NATURAL JUSTICE, I FIND THAT THE AO HAD REQUIRED TH E APPELLANT TO PROVE THE SHARE APPLICATION MONEY RECEIVED FROM VARIOUS PARTI ES AS PER PROVISION OF SEC. 68 OF THE ACT. THE APPELLANT DID NOT BRING ANY OF THE DIRECTORS / REPRESENTATIVES OF THE SUBSCRIBER COMPANIES WHO HAD INVESTED SEVERAL CRORES OF RS. IN THE SHARES OF THE APPELLANT COMPAN Y. IT IS HARD TO BELIEVE THAT THE SUBSCRIBER COMPANIES WHO INVESTED SUBSTANT IAL AMOUNT OF MONEY IN THE SHARE APPLICATION IN THE APPELLANT COMPANY C OULD NOT ATTEND TO THE PROCEEDINGS BEFORE THE AO. THUS, THE APPELLANT FAIL ED IN ITS OBLIGATION TO PROVE THE CREDENTIALS OF SUBSCRIBER COMPANIES AS PE R PROVISION OF SEC. 68 OF THE ACT. THE AO HAS ONLY ANALYSED THE FINANCIALS OF THE SUBSCRIBER COMPANIES RECEIVED U/S 133(6) OF THE ACT TO ARRIVE AT THE CONCLUSION ABOUT THE INVESTMENT BY THESE COMPANIES VIS A VIS MEAGRE INCOME SHOWN IN THEIR RETURNS OF INCOME. THUS, IN MY OPINION NO INFORMATI ON WAS USED BY THE AO WHICH WAS NOT AVAILABLE TO THE APPELLANT / UNKNOWN TO APPELLANT. 2. BEFORE DEALING WITH THE APPELLANTS FURTHER ARGU MENTS AND CASE LAWS, I WOULD LIKE TO BRING OUT THE RESULT OF ENQUIRY REPOR T GOT CONDUCTED U/S 131 (1)(D) OF THE ACT THROUGH INVESTIGATION WING OF THE DEPARTMENT AT KOLKATA. DURING THE COURSE OF APPELLATE PROCEEDING, I GATHER ED THAT THE SUBSCRIBER COMPANIES NAMES HAD CROPPED UP AS ENTRY PROVIDERS I N THE INVESTIGATION DONE BY THE KOLKATA INVESTIGATION WING OF THE DEPAR TMENT. PODDAR GROUP OF COMPANIES HAD RECEIVED SHARE APPLICATION MONEY F ROM 21 SUBSCRIBER COMPANIES BASED AT KOLKATA OUT OF WHICH 8 OF THES E SUBSCRIBER COMPANIES INVESTED RS. 5.80 CRORE IN THE APPELLANT S SHARE. IN VIEW OF THE ABOVE DISCUSSIONS, COURT DECISIONS A ND FACTS OF THE CURRENT CASE, I FIND THAT ALL THE CONTENTIONS OF THE APPELL ANT HAVE BEEN CONTROVERTED AND THERE IS NO DOUBT THAT THE SHARE APPLICATION MO NEY OF RS. 5.80 CRORE MAA KALI ALLOYS UDYOG PVT.LTD. IT(SS)A NO. 04/RAN/2017 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 9 99 9 WAS RECEIVED BY THE APPELLANT COMPANY FROM PAPER EN TITIES BY ACCOMMODATION ENTRIES. THESE SUBSCRIBER COMPANIES I NVESTED IS SHARE APPLICATION MONEY OF THE APPELLANT COMPANY WAS NOT PROVED IN TERMS OF PROVISION OF SEC. 68 OF THE ACT EITHER AT THE TIME OF ASSESSMENT OR AT THE TIME OF APPELLATE PROCEEDINGS. THEREFORE, THE ADDIT ION OF RS. 5.80 CRORE AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT IS HEREBY CONFIRMED. 7. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. 8. LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE S UBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. ON THE OTHER HAND, LD. DR FOR TH E REVENUE, HAS PRIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND THE SAME IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 9. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY GO NE THROUGH THE SUBMISSION PUT FORTH ON BEHALF OF THE ASSESSEE ALONG WITH THE DOCU MENTS FURNISHED AND THE CASE LAWS RELIED UPON, AND PERUSED THE FACT OF THE CASE INCLUDING THE FINDINGS OF THE LD CIT(A) AND OTHER MATERIALS AVAILABLE ON RECORD. WE NOTE THAT ACCORDING TO SECTION 68 OF THE INCOME TAX ACT, WHERE ANY SUM IS FOUND CR EDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANAT ION OFFERED BY HIM IS NOT SATISFACTORY IN THE OPINION OF THE ASSESSING OFFICE R, THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THAT ASSESSMENT YEAR. THE ASSESSING OFFICER MAY CONSIDER SUCH SUM AS CASH CR EDIT DUE TO LACK OF SUFFICIENT EXPLANATION. IT IS WELL KNOWN THAT PROVISIONS OF SE CTION 68 HAVE BEEN INTRODUCED INTO THE TAXING ENACTMENTS STEP BY STEP IN ORDER TO PLUG LOOPHOLES. EVEN LONG PRIOR TO THE INTRODUCTION OF SECTION 68 OF THE ACT, IN TH E STATUTE BOOK, COURTS HAD HELD THAT WHERE ANY AMOUNTS WERE FOUND CREDITED IN THE B OOKS OF THE ASSESSEE IN THE PREVIOUS YEAR AND THE ASSESSEE OFFERED NO EXPLANATI ON ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED WAS, IN THE OPIN ION OF THE ASSESSING OFFICER, IS NOT SATISFACTORY, THE SUMS SO CREDITED COULD BE CHA RGED TO INCOME-TAX AS INCOME OF THE ASSESSEE OF THE RELEVANT ASSESSMENT YEAR. WE NO TE THAT WITH EFFECT FROM ASSESSMENT YEAR 2013-14, SECTION 68 OF THE INCOME T AX ACT HAS BEEN AMENDED TO PROVIDE THAT IF A CLOSELY HELD COMPANY FAILS TO EXP LAIN THE SOURCE OF SHARE CAPITAL, MAA KALI ALLOYS UDYOG PVT.LTD. IT(SS)A NO. 04/RAN/2017 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 1 11 10 00 0 SHARE PREMIUM OR SHARE APPLICATION MONEY RECEIVED B Y IT TO THE SATISFACTION OF THE ASSESSING OFFICER, THE SAME SHALL BE DEEMED TO BE T HE INCOME OF THE COMPANY UNDER SECTION 68 OF THE ACT. WE NOTE THAT THE AMENDED PRO VISIONS OF SECTION 68, IS NOT APPLICABLE TO THE ASSESSEE COMPANY UNDER CONSIDERAT ION, AS THE ASSESSEE`S, ASSESSMENT YEAR IS 2012-13. THE HON`BLE BOMBAY HIGH COURT, IN THE CASE OF GAGANDEEP INFRASTRUCTURE 80 TAXMANN.COM 272 (BOM), HELD THAT AMENDMENT TO SECTION 68 IS PROSPECTIVE AND APPLICABLE ONLY FROM ASSESSMENT YEAR 2013-14. WITH THIS BACKGROUND, NOW WE SHALL PROCEED TO EXAMI NE IN THE ASSESSEE`S CASE UNDER CONSIDERATION, WHETHER ASSESSEE HAS DISCHARGE D HIS ONUS TO PROVE, PRIMA FACIE, THE IDENTITY, CREDITWORTHINESS AND GENUINENE SS OF THE SHARE CAPITAL AND SHARE PREMIUM RECEIVED BY IT FROM SHARE SUBSCRIBERS COMP ANIES. 10. WE NOTE THAT THE ASSESSEE COMPANY HAD RAISED SH ARE APPLICATION MONEY FOR RS. 5,80,00,000/- DURING THE YEAR UNDER CONSIDERATION. DURING THE FINANCIAL YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY RECEIVED SHARE APPLICATION MONEY FROM EIGHT DIFFERENT COMPANIES OTHER THAN GROUP COMPANIES AT A PREMIUM OF RS. 49 PER SHARE FOR FACE VALUE OF RS. 1/- PER SHARE. TOTAL NUMBER O F SHARES ISSUED IS 11,60,000 AT THE FACE VALUE OF RS. 1/- PER SHARE WITH A PREMIUM OF RS.49/- PER SHARE TOTALING RS.5,80,00,000/-. THE PARTICULARS OF EIGHT SHARE SU BSCRIBING COMPANIES ARE GIVEN BELOW: SL. NO. NAME OF INVESTOR NO. OF SHARES AMOUNT PAID IN RS. 1. ROHAN FINANCE & SECURITIES LTD. 29A, WESTON STREET, 3 RD FLOOR, ROOM NO. C-2, KOLKATA-700012 1,70,000 85,00,000 2. SWASTIK SECURITIES & FINANCE LTD. 33, C.R. AVENUE, 9 TH FLOOR, ROOM NO. 909, KOLKATA-700012 1,70,000 85,00,000 3. CENTAK DISTRIBUTORS PVT. LTD. 1-B, BLACK BURN LANE, 4 TH FLOOR, KOLKATA- 700012 1,00,000 50,00,000 4. ADITI SANCHAR SUVIDHA PVT. LTD. 27, BRABOURNE ROAD, 4 TH FLOOR, KOLKATA- 700001 2,00,000 1,00,00,000 MAA KALI ALLOYS UDYOG PVT.LTD. IT(SS)A NO. 04/RAN/2017 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 1 11 11 11 1 5. ETL INFRASTRUCTURE FINANCE LTD. 1-B, BLOCK, BURN LANE, 4 TH FLOOR, KOLKATA- 12. 1,50,000 75,00,000 6. PARIDHI FINVEST PVT. LTD. 8-LAKE TOWN, BLOCK-B, KOLKATA-700089 1,90,000 95,00,000 7. CONTINENTAL FISCAL MANAGEMENT LTD. 27, BRABOURNE ROAD, 4 TH FLOOR, ROOM NO. 401,KOLKATA-700001 50,000 25,00,000 8. J.P. ENGINEERING CORPORATION P LTD. AE-326, SALTLAKE CITY, GROUND FLOOR, KOLKATA-700064 1,30,000 65,00,000 11,60,000 5,80,00,000 WE NOTE THAT ASSESSING OFFICER HAS ISSUED NOTICE UNDER SECTION 133(6) OF THE ACT, TO THESE SHARE SUBSCRIBING COMPANIES. IN RESPONSE, THE SHARE SUBSCRIBING COMPANIES HAD SUBMITTED ALL THE RELEVANT DETAILS AS CALLED FOR AND HAD CONFIRMED THE TRANSACTIONS WITH THE ASSESSEE. THE EVIDENCES W HICH WERE FILED BEFORE THE ASSESSING OFFICER( FILED BY EACH SHARE SUBSCRIBING COMPANY) INCLUDED THE FOLLOWING DETAILS: (A) INCOME TAX RETURN OF THE SHARE SUBSCRIBING COMP ANY, A.Y.2011-12. (B) AUDITED ACCOUNTS OF THE SHARE SUBSCRIBING COMPA NIES, THAT IS COPY OF AUDIT REPORT, PROFIT AND LOSS ACCOUNT AND BALANCE SHEET. (C)BANK STATEMENT FOR THE F.Y. 2010-11 RELATING TO A.Y. 2011-12 INDICATING THE PAYMENT MADE AND THE SOURCE OF FUND. (D) SHARE APPLICATION MONEY WAS PAID BY CHEQUES. (E). SHARE ALLOTMENT LETTERS (F) TRANSACTION WITH THE ASSESSEE WAS DULY HIGHLIGH TED IN THE BANK STATEMENT (G) COPY OF INCOME TAX RETURN ACKNOWLEDGEMENT. (H) EVIDENCES OF SOURCE OF SOURCE OF THE SHARE HOL DERS I) PAN NUMBER/ ROC DETAILS ETC. (ADDRESS PROOF) ALL THESE EVIDENCES ARE AVAILABLE IN THE PAPER BOOK FROM PAGES 138-346 OF THE PAPER BOOK, WHICH WERE SUBMITTED BEFORE THE ASSESSI NG OFFICER. MAA KALI ALLOYS UDYOG PVT.LTD. IT(SS)A NO. 04/RAN/2017 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 1 11 12 22 2 11.BEFORE ADDRESSING THE LEGAL ISSUE INVOLVED IN TH IS CASE, WE WOULD LIKE TO BRING ON RECORD THE VARIOUS DOCUMENTS RELATING TO THE ASS ESSEE COMPANY TO JUSTIFY THE SHARE PREMIUM RECEIVED BY IT, WHICH ARE AVAILABLE I N THE PAPER BOOK AND LD COUNSEL SUBMITTED THE SAME BEFORE THE BENCH.THE LD. COUNSEL SUBMITTED THE AUDITED BOOKS OF ACCOUNTS INCLUDING BALANCE SHEET A ND PROFIT AND LOSS ACCOUNT (VIDE PB 1-18) AND STATES THAT AS PER THE PROFIT AN D LOSS ACCOUNT AS ON 31.03.2011, THE REVENUE OF THE COMPANY IS TO THE TUNE OF RS. 51 ,57,58,397/- AND PROFIT BEFORE TAX IS AT RS.60,55,200/- (PB-07). DURING THE PREVIO US YEAR, THE TURNOVER OF THE COMPANY WAS TO THE TUNE OF RS. 44,69,81,983/- AND PROFIT BEFORE TAX WAS TO THE TUNE OF RS. 2,70,59,794/- (VIDE PB-07). THEREFORE, THE LD. COUNSEL CONTENDS THAT THE COMPANY HAS BEEN EARNING PROFIT AND WORKING ON COMMERCIAL PRACTICES THEREFORE THE COMPANY CAN FETCH THE PREMIUM ON ISS UE OF SHARES WHICH IS JUSTIFIABLE. THE COMPANY HAVE RESERVE AND SURPLUS A ND ACCUMULATED PROFIT TO THE TUNE OF RS. 28,90,47,184/- (PB-08), WHICH SHOWS THA T THE COMPANY IS MAKING A TRACK RECORD IN EARNING THE PROFIT. THE LD COUNSEL SUBMITTED BEFORE US THE COPY OF CERT IFICATE OF INCORPORATION, MEMORANDUM OF ARTICLE OF ASSOCIATION OF COMPANY (PB -19 TO 50), FORM NO. 2 RETURN OF ALLOTMENT DATED 05.04.2010 AND 31.03.2011 (VIDE PB-51 TO 60). THE LD COUNSEL SUBMITTED BEFORE US THE SURVEY REPORT DATED 22.06.2011 (VIDE PB-85) AND ALSO SUBMITTED BEFORE US THE COPY OF COMPLIANCE CER TIFICATE FOR THE YEAR ENDED 31.03.2011 (VIDE PB-134TO 137). THE D COUNSEL FURTH ER CONTENDS THAT SHARE PREMIUM AND SHARE CAPITAL AMOUNT HAS BEEN RECEIVED BY THE ASSESSEE COMPANY THROUGH BANKING CHANNELS AND THERE IS NO EVIDENCE T HAT THE CASH HAS BEEN DEPOSITED IN THE BANK ACCOUNT OF THE SHARE SUBSCRIB ING COMPANIES BEFORE ISSUE OF CHEQUE TO THE ASSESSEE. DURING THE ASSESSMENT STAGE , THE SHARE SUBSCRIBING COMPANIES HAVE REPLIED THE NOTICES ISSUED BY THE AS SESSING OFFICER U/S 133(6) OF THE ACT. THE DOCUMENTS AND EVIDENCES SUBMITTED BY T HE EACH SHARE SUBSCRIBING COMPANY IN RESPONSE TO THE NOTICE U/S 133(6) ARE AS FOLLOWS: 12. THE LD. DR SUBMITTED THAT THE ASSESSEE HAD NOT JUST IFIED THE REASONS FOR ISSUING SHARES AT A HIGH PREMIUM. THEREFORE, ACCORDING TO THE LD. DR, THE GENUINENESS OF THE TRANSACTION REMAINED UN- PROVED. HE THEREFORE, VEHEMENTLY ARGUED THAT THE OR DER OF THE LD. SHOULD BE UPHELD. ON THE OTHER HAND, THE LD. SEVERAL GROUNDS RAISED BY THE ASSESSEE IN RESPECT O F ADDITION MADE U/S 68 OF THE ACT. THEREAFTER ON THE MERITS OF THE CASE, OUR ATTENTION WAS DRAWN BY THE LD. RELEVANT PAGE OF PAPER BOOK WHERE WE NOTE THAT THE SUBMITTED THE FOLLOWING RELEVANT DETAILS AS CALLED FOR AND HAD CONFIRMED THE TRANSACTION WITH THE ASSESSEE COMPANY. THE EVIDENCES WHICH WERE FILED BEFORE THE AO, REPETITION, ARE REPRODUCED BELOW: MAA KALI ALLOYS UDYOG PVT.LTD. IT (SS) ASSESSMENT YEAR: THE LD. DR SUBMITTED THAT THE ASSESSEE HAD NOT JUST IFIED THE REASONS FOR ISSUING SHARES AT A HIGH PREMIUM. THEREFORE, ACCORDING TO THE LD. DR, THE GENUINENESS OF THE TRANSACTION PROVED. HE THEREFORE, VEHEMENTLY ARGUED THAT THE OR DER OF THE LD. SHOULD BE UPHELD. ON THE OTHER HAND, THE LD. COUNSEL FIRST DREW OUR ATTENTION TO THE SEVERAL GROUNDS RAISED BY THE ASSESSEE IN RESPECT O F ADDITION MADE U/S 68 OF THE ACT. THEREAFTER ON THE MERITS OF THE CASE, OUR ATTENTION WAS DRAWN BY THE LD. RELEVANT PAGE OF PAPER BOOK WHERE WE NOTE THAT THE SHARE SUBSCRIBING COMPANIES SUBMITTED THE FOLLOWING RELEVANT DETAILS AS CALLED FOR AND HAD CONFIRMED THE TRANSACTION WITH THE ASSESSEE COMPANY. THE EVIDENCES WHICH WERE FILED BEFORE THE AO, REPETITION, ARE REPRODUCED BELOW: MAA KALI ALLOYS UDYOG PVT.LTD. (SS) A NO. 04/RAN/2017 ASSESSMENT YEAR: 2011-12 P PP PA AA AG GG GE EE E | || | 1 11 13 33 3 THE LD. DR SUBMITTED THAT THE ASSESSEE HAD NOT JUST IFIED THE REASONS FOR ISSUING SHARES AT A HIGH PREMIUM. THEREFORE, ACCORDING TO THE LD. DR, THE GENUINENESS OF THE TRANSACTION PROVED. HE THEREFORE, VEHEMENTLY ARGUED THAT THE OR DER OF THE LD. CIT(A) FIRST DREW OUR ATTENTION TO THE SEVERAL GROUNDS RAISED BY THE ASSESSEE IN RESPECT O F ADDITION MADE U/S 68 OF THE ACT. THEREAFTER ON THE MERITS OF THE CASE, OUR ATTENTION WAS DRAWN BY THE LD. COUNSEL TO SHARE SUBSCRIBING COMPANIES HAD SUBMITTED THE FOLLOWING RELEVANT DETAILS AS CALLED FOR AND HAD CONFIRMED THE TRANSACTION WITH THE ASSESSEE COMPANY. THE EVIDENCES WHICH WERE FILED BEFORE THE AO, AT THE COST OF MAA KALI ALLOYS UDYOG PVT.LTD. IT(SS)A NO. 04/RAN/2017 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 1 11 14 44 4 (A) INCOME TAX RETURN OF THE SHARE SUBSCRIBING COM PANY, A.Y.2011-12. (B) AUDITED ACCOUNTS OF THE SHARE SUBSCRIBING COMPA NIES, THAT IS COPY OF AUDIT REPORT, PROFIT AND LOSS ACCOUNT AND BALANCE SHEET. (C)BANK STATEMENT FOR THE F.Y. 2010-11 RELATING TO A.Y. 2011-12 INDICATING THE PAYMENT MADE AND THE SOURCE OF FUND. (D) SHARE APPLICATION MONEY WAS PAID BY CHEQUES. (E). SHARE ALLOTMENT LETTERS (F) TRANSACTION WITH THE ASSESSEE WAS DULY HIGHLIGH TED IN THE BANK STATEMENT (G) COPY OF INCOME TAX RETURN ACKNOWLEDGEMENT. (H) EVIDENCES OF SOURCE OF SOURCE OF THE SHARE HOL DERS I) PAN NUMBER/ ROC DETAILS ETC. (ADDRESS PROOF) 13. THE LD. COUNSEL SUBMITTED THAT THE DETAILS OF P AN, IT ACKNOWLEDGMENT, AND THE FORM 18 FURNISHED BY THE SHARE APPLICANTS WITH THE ROC DULY PROVED THE IDENTITY OF THE SHARE SUBSCRIBER. THE LD. COUNSEL THEREAFTER INVITE D OUR ATTENTION TO THE RESPECTIVE BALANCE SHEET OF THE SHARE APPLICANTS TO SHOW THAT SHARE APPLICANT HAD SUFFICIENT FUNDS AVAILABLE AT THEIR DISPOSAL TO MAKE INVESTMENT IN T HE ASSESSEE COMPANY. REFERRING TO THE RESPECTIVE BANK STATEMENTS, IT WAS FURTHER POINTED OUT THAT THE TRANSACTIONS WERE CONDUCTED THROUGH PROPER BANKING CHANNEL AND THAT T HERE WERE NO CASH DEPOSITS IN ANY OF THE BANK ACCOUNT OF THE SHARE APPLICANT. HE ALSO IN VITED OUR ATTENTION TO THE EXPLANATION FURNISHED BY EACH OF THE SHARE APPLICANTS REGARDING THEIR SOURCE OF FUNDS. IT WAS THUS SUBMITTED THAT THE FUND FLOW POSITION OF THE SHARE APPLICANT AND NOT THE PROFITABILITY WAS THE DECISIVE CRITERIA TO EXAMINE THE CREDITWORTHINE SS OF THE SHARE APPLICANT. BEFORE WE ADJUDICATE AS TO WHETHER THE LD. CIT(A)S ACTION IS RIGHT OR ERRONEOUS, LET US LOOK AT SECTION 68 OF THE ACT AND THE JUDICIAL PRECEDENTS O N THE ISSUE AT HAND. SECTION 68 UNDER WHICH, THE ADDITION HAS BEEN MADE BY THE AO READS A S UNDER: '68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS O F AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NA TURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFI CER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARG ED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR.' 14. THE PHRASEOLOGY OF SECTION 68 IS CLEAR. THE LEG ISLATURE HAS LAID DOWN THAT IN THE ABSENCE OF A SATISFACTORY EXPLANATION, THE UNEXPLAI NED CASH CREDIT MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PR EVIOUS YEAR. IN THIS CASE THE LEGISLATIVE MANDATE IS NOT IN TERMS OF THE WORDS SHALL BE CHA RGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. THE SUPREME COU RT WHILE INTERPRETING SIMILAR PHRASEOLOGY USED IN SECTION 69 HAS HELD THAT IN CRE ATING THE LEGAL FICTION THE PHRASEOLOGY EMPLOYS THE WORD 'MAY' AND NOT 'SHALL'. THUS, THE U N-SATISFACTORINESS OF THE EXPLANATION MAA KALI ALLOYS UDYOG PVT.LTD. IT(SS)A NO. 04/RAN/2017 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 1 11 15 55 5 DOES NOT AND NEED NOT AUTOMATICALLY RESULT IN DEEMI NG THE AMOUNT CREDITED IN THE BOOKS AS THE INCOME OF THE ASSESSEE AS ALSO HELD BY THE SUPR EME COURT IN THE CASE OF CIT V. SMT. P. K. NOORJAHAN [1999] 237 ITR 570. 15. THE MAIN PLANK ON WHICH THE AO MADE THE ADDITI ON WAS THAT PREMIUM AMOUNT OF RS. 49 PER SHARE, WHICHACCORDING TO HIM WAS HIGHER. AT THIS JUNCTURE, LD COUNSEL SUBMITS THAT ASSESSEE COMPANY IS A PROFIT MAKING COMPANY AND IT HAS PAST ACCUMULATED PROFITS AND VERY GOOD TRACK RECORD. THE ASSESSEE COMPANY HAS BE EN EARNING PROFIT SINCE A LONG AND HAS GOODWILL IN THE MARKET.IT IS NOTED THAT THE ALL THE REQUISITIONED DOCUMENTS WERE FURNISHED BEFORE THE AO WHICH SUBSTANTIATED THE TRA NSACTION BETWEEN THE ASSESSEE COMPANY AND THE SHARE APPLICANTS. IT IS THEREFORE N OT A CASE WHERE THE DOCUMENTS SOUGHT FROM THE APPLICANT TO EXAMINE THE TRANSACTION WERE NOT AVAILABLE BEFORE THE AO. THE ASSESSEE HAS PROVED THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. WE NOTE THAT IN SUCH A CASE THE HON'BLE APEX COURT IN THE CASE OF ORISSA CORPN. (P) LTD. (SUPRA) 159 ITR 78 AND THE HON'BLE GUJARAT HIGH COU RT, IN THE CASE OF DY. CIT V. ROHINI BUILDERS [2002] 256 ITR 360 /[2003] 127 TAXMAN 523, HAS HELD THAT ONUS OF THE ASSESSEE (IN WHOSE BOOKS OF ACCOUNT CREDIT APPEARS) STANDS F ULLY DISCHARGED IF THE IDENTITY OF THE CREDITOR IS ESTABLISHED AND ACTUAL RECEIPT OF MONEY FROM SUCH CREDITOR IS PROVED. IN CASE, THE ASSESSING OFFICER IS DISSATISFIED ABOUT THE SOU RCE OF CASH DEPOSITED IN THE BANK ACCOUNTS OF THE CREDITORS, THE PROPER COURSE WOULD BE TO ASSESS SUCH CREDIT IN THE HANDS OF THE CREDITOR (AFTER MAKING DUE ENQUIRIES FROM SUCH CREDITOR). IN ARRIVING AT THIS CONCLUSION, THE HON'BLE COURT HAS FURTHER STRESSED THE PRESENCE OF WORD 'MAY' IN SECTION 68. RELEVANT OBSERVATIONS AT PAGES 369 AND 370 OF T HIS REPORT ARE REPRODUCED HEREUNDER:- 'MERELY BECAUSE SUMMONS ISSUED TO SOME OF THE CREDI TORS COULD NOT BE SERVED OR THEY FAILED TO ATTEND BEFORE THE ASSESSING OFFICER, CANNOT BE A GR OUND TO TREAT THE LOANS TAKEN BY THE ASSESSEE FROM THOSE CREDITORS AS NON-GENUINE IN VIEW OF THE PRINCIPLES LAID DOWN BY THE SUPREME COURT IN THE CASE OF ORISSA CORPORATION [1986] 159 ITR 78. I N THE SAID DECISION THE SUPREME COURT HAS OBSERVED THAT WHEN THE ASSESSEE FURNISHES NAMES AND ADDRESSES OF THE ALLEGED CREDITORS AND THE GIR NUMBERS, THE BURDEN SHIFTS TO THE DEPARTMENT TO ESTABLISH THE REVENUE'S CASE AND IN ORDER TO SUSTAIN THE ADDITION THE REVENUE HAS TO PURSUE THE ENQUIRY AND TO ESTABLISH THE LACK OF CREDITWORTHINESS AND MERE NON-COMPLIANCE OF SUMMONS ISSUED BY THE ASSESSING OFFICER UNDER SECTION 131, BY THE ALLEGED CREDITORS WILL NOT BE S UFFICIENT TO DRAW AND ADVERSE INFERENCE AGAINST THE ASSESSEE IN THE CASE OF SIX CREDITORS WHO APPEA RED BEFORE THE ASSESSING OFFICER AND WHOSE STATEMENTS WERE RECORDED BY THE ASSESSING OFFICER, THEY HAVE ADMITTED HAVING ADVANCED LOANS TO THE ASSESSEE BY ACCOUNT PAYEE CHEQUES AND IN CASE T HE ASSESSING OFFICER WAS NOT SATISFIED WITH THE CASH AMOUNT DEPOSITED BY THOSE CREDITORS IN THE IR BANK ACCOUNTS, THE PROPER COURSE WOULD HAVE BEEN TO MAKE ASSESSMENTS IN THE CASES OF THOSE CREDITORS BY TREATING THE CASH DEPOSITS IN THEIR BANK ACCOUNTS AS UNEXPLAINED INVESTMENTS OF T HOSE CREDITORS UNDER SECTION 69. MAA KALI ALLOYS UDYOG PVT.LTD. IT(SS)A NO. 04/RAN/2017 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 1 11 16 66 6 16. UNDISPUTEDLY THE SHARE APPLICANT IN THIS CASE I S THE BANK ACCOUNT HOLDER IN HIS RESPECTIVE BANKS IN HIS OWN NAME AND IS SOLE OWNER OF THE CREDITS APPEARING IN HIS BANK ACCOUNT FROM WHERE THEY ISSUED CHEQUES TO THE ASSES SEE COMPANY. FOR THE PROPOSITION THAT A BANK ACCOUNT HOLDER HIMSELF IS THE 'OWNER' O F 'CREDITS' APPEARING IN HIS ACCOUNT (WITH THE RESULT THAT HE HIMSELF IS ACCOUNTABLE TO EXPLAIN THE SOURCE OF SUCH CREDITS IN WHATEVER WAY AND FORM, THE SAME HAVE EMERGED) SUPPO RT CAN BE DERIVED FROM SECTION 4 OF BANKERS BOOK EVIDENCE ACT 1891 WHICH READS AS UN DER:- '4. MODE OF PROOF OF ENTRIES IN BANKERS' BOOKS SUBJ ECT TO THE PROVISIONS OF THIS ACT, A CERTIFIED COPY OF ANY ENTRY IN A BANKERS' BOOK SHALL IN ALL L EGAL PROCEEDINGS BE RECEIVED AS PRIMA FACIE EVIDENCE OF THE EXISTENCE OF SUCH ENTRY, AND SHALL BE ADMITTED AS EVIDENCE OF THE MATTERS, TRANSACTIONS AND ACCOUNTS THEREIN RECORDED IN EVERY CASES WHERE, AND TO THE SAME EXTENT AS, THE ORIGINAL ENTRY ITSELF IS NOW BY LAW ADMISSIBLE, BUT NOT FURTHER OR OTHERWISE. 17. FOLLOWING THE SAID PROVISIONS, THE CO-ORDINATE BENCH OF ALLAHABAD TRIBUNAL IN THE CASE OF ANAND PRAKASH AGARWAL REPORTED IN 6 DTR (AL L-TRIB) 191 HELD AS UNDER:- THE QUESTION THAT REMAINS TO BE DECIDED NOW IS WHE THER THE SUBJECT MATTER OF TRANSFER WAS THE ASSET BELONGING TO THE TRANSFEROR/DONORS THEMSELVES . THERE IS ENOUGH MATERIAL ON RECORD WHICH GOES TO SHOW THAT THERE WERE VARIOUS CREDITS IN THE BANK ACCOUNTS OF THE DONORS, PRIOR TO THE TRANSACTION OF GIFTS, WHICH UNDISPUTEDLY BELONGING TO THE RESPECTIVE DONORS THEMSELVES, IN THEIR OWN RIGHTS. NO PART OF THE CREDITS IN THE SAID BANK ' ACCOUNTS WAS GENERATED FROM THE APPELLANTS AND/OR FROM ITS ASSOCIATES, IN ANY MANNER. THE CERT IFICATES ISSUED BY THE BANKS ARE CONSTRUABLE AS EVIDENCE ABOUT THE OWNERSHIP OF THE TRANSFERORS OR THEIR RESPECTIVE BANK ACCOUNTS, AS PER S.4 OF THE BANKERS' BOOKS EVIDENCE ACT 1891, WHICH READ AS UNDER: '4. WHERE AN EXTRACT OF ACCOUNT WAS DULY SIGNED BY THE AGENT OF THE BANK AND IMPLICIT IN ITS WAS A CERTIFICATE THAT IT WAS A TRUE COPY OF AN ENTRY CON TAINED IN ONE OF THE ORDINARY BOOKS OF THE BANK AND WAS MADE IN THE USUAL AND ORDINARY COURSE OF BU SINESS AND THAT SUCH BOOK WAS IN THE CUSTODY OF THE BANK, IT WAS HELD ADMISSIBLE IN EVIDENCE. RA DHESHYAM V. SAFIYABAI IBRAHIM AIR 1988 BOM.361 : 1987 MAH. 725: 1987 BANK J 552. IN VIEW OF THE POSITION OF LAW AS DISCUSSED ABOVE, IT IS ALWAYS OPEN FOR A BORROWER TO CONTEND, THAT EVEN THE CREDITWORTHINESS OF THE LENDER STAN DS PROVED TO THE EXTENT OF CREDITS APPEARING IN HIS BANK ACCOUNT AND HE SHOULD BE HELD TO BE SUCCES SFUL IN THIS CONTENTION. 18. IN THE CASE OF NEMI CHAND KOTHARI 136 TAXMAN 2 13, (SUPRA), THE HON'BLEGUAHATI HIGH COURT HAS THROWN LIGHT ON ANOTHER ASPECT TOUCH ING THE ISSUE OF ONUS ON ASSESSEE UNDER SECTION 68, BY HOLDING THAT THE SAME SHOULD B E DECIDED BY TAKING INTO CONSIDERATION THE PROVISION OF SECTION 106 OF THE EVIDENCE ACT WH ICH SAYS THAT A PERSON CAN BE REQUIRED TO PROVE ONLY SUCH FACTS WHICH ARE IN HIS KNOWLEDGE . THE HON'BLE COURT IN THE SAID CASE HELD THAT, ONCE IT IS FOUND THAT AN ASSESSEE HAS AC TUALLY TAKEN MONEY FROM DEPOSITOR/LENDER WHO HAS BEEN FULLY IDENTIFIED, THE ASSESSEE/BORROWE R CANNOT BE CALLED UPON TO EXPLAIN, MUCH LESS PROVE THE AFFAIRS OF SUCH THIRD PARTY, WH ICH HE IS NOT EVEN SUPPOSED TO KNOW OR ABOUT WHICH HE CANNOT BE HELD TO BE ACCREDITED WITH ANY KNOWLEDGE. IN THIS VIEW, THE MAA KALI ALLOYS UDYOG PVT.LTD. IT(SS)A NO. 04/RAN/2017 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 1 11 17 77 7 HON'BLE COURT HAS LAID DOWN THAT SECTION 68 OF INCO ME-TAX ACT, SHOULD BE READ ALONG WITH SECTION 106 OF EVIDENCE ACT. THE RELEVANT OBSERVATI ONS AT PAGE 260 TO 262, 264 AND 265 OF THE REPORT ARE REPRODUCED HEREIN BELOW:- 'WHILE INTERPRETING THE MEANING AND SCOPE OF SECTIO N 68, ONE HAS TO BEAR IN MIND THAT NORMALLY, INTERPRETATION OF A STATUTE SHALL BE GENERAL, IN NA TURE, SUBJECT ONLY TO SUCH EXCEPTIONS AS MAY BE LOGICALLY PERMITTED BY THE STATUTE ITSELF OR BY SOM E OTHER LAW CONNECTED THEREWITH OR RELEVANT THERETO. KEEPING IN VIEW THESE FUNDAMENTALS OF INTE RPRETATION OF STATUTES, WHEN WE READ CAREFULLY THE PROVISIONS OF SECTION 68, WE NOTICE NOTHING IN SECTION 68 TO SHOW THAT THE SCOPE OF THE INQUIRY UNDER SECTION 68 BY THE REVENUE DEPARTMENT SHALL RE MAIN CONFINED TO THE TRANSACTIONS, WHICH HAVE TAKEN PLACE BETWEEN THE ASSESSEE AND THE CREDI TOR NOR DOES THE WORDING OF SECTION 68 INDICATE THAT SECTION 68 DOES NOT AUTHORIZE THE REV ENUE DEPARTMENT TO MAKE INQUIRY INTO THE SOURCE(S) OF THE CREDIT AND/OR SUB-CREDITOR. THE LA NGUAGE EMPLOYED BY SECTION 68 CANNOT BE READ TO IMPOSE SUCH LIMITATIONS ON THE POWERS OF THE ASS ESSING OFFICER. THE LOGICAL CONCLUSION, THEREFORE, HAS TO BE, AND WE HOLD THAT AN INQUIRY U NDER SECTION 68 NEED NOT NECESSARILY BE KEPT CONFINED BY THE ASSESSING OFFICER WITHIN THE TRANSA CTIONS, WHICH TOOK PLACE BETWEEN THE ASSESSEE AND HIS CREDITOR, BUT THAT THE SAME MAY BE EXTENDED TO THE TRANSACTIONS, WHICH HAVE TAKEN PLACE BETWEEN THE CREDITOR AND HIS SUB-CREDITOR. THUS, WH ILE THE ASSESSING OFFICER IS UNDER SECTION 68, FREE TO LOOK INTO THE SOURCE(S) OF THE CREDITOR AND /OR OF THE SUB-CREDITOR, THE BURDEN ON THE ASSESSEE UNDER SECTION 68 IS DEFINITELY LIMITED. TH IS LIMIT HAS BEEN IMPOSED BY SECTION 106 OF THE EVIDENCE ACT WHICH READS AS FOLLOWS: 'BURDEN OF PROVING FACT ESPECIALLY WITHIN KNOWLEDGE .-WHEN ANY FACT IS ESPECIALLY WITHIN THE KNOWLEDGE OF ANY PERSON, THE BURDEN) OF PROVING THA T FACT IS UPON HIM. ' ******** WHAT, THUS, TRANSPIRES FROM THE ABOVE DISCUSSION IS THAT WHITE SECTION 106 OF THE EVIDENCE ACT LIMITS THE ONUS OF THE ASSESSEE TO THE EXTENT OF HI S PROVING THE SOURCE FROM WHICH HE HAS RECEIVED THE CASH CREDIT, SECTION 68 GIVES AMPLE FREEDOM TO THE ASSESSING OFFICER TO MAKE INQUIRY NOT ONLY INTO THE SOURCE(S)OF THE CREDITOR BUT ALSO OF HIS ( CREDITOR'S) SUB-CREDITORS AND PROVE, AS A RESULT, O F SUCH INQUIRY, THAT THE MONEY RECEIVED BY THE ASSESS EE, IN THE FORM OF LOAN FROM THE CREDITOR, THOUGH ROUTED THROUGH THE SUB-CREDITORS, ACTUALLY B ELONGS TO, OR WAS OF, THE ASSESSEE HIMSELF. IN OTHER WORDS, WHILE SECTION 68 GIVES THE LIBERTY TO THE ASSESSING OFFICER TO ENQUIRE INTO THE SOURCE/SOURCE FROM WHERE THE CREDITOR HAS RECEIVED THE MONEY, SECTION 106 MAKES THE ASSESSEE LIABLE TO DISCLOSE ONLY THE SOURCE(S) FROM WHERE HE HAS HIMSELF RECEIVED THE CREDIT AND IT IS NOT THE BURDEN OF THE ASSESSEE TO PROVE THE CREDITWORTH INESS OF THESOURCE(S) OF THE SUB-CREDITORS. IF SECTION 106 AND SECTION 68 ARE TO STAND TOGETHER, W HICH THEY MUST, THEN, THE INTERPRETATION OF SECTION 68 ARE TO STAND TOGETHER, WHICH THEY MUST, THEN THE INTERPRETATION OF SECTION 68 HAS TO BE IN SUCH A WAY THAT IT DOES NOT MAKE SECTION 106 RED UNDANT. HENCE, THE HARMONIOUS CONSTRUCTION OF SECTION 106 OF THE EVIDENCE ACT AND SECTION 68 O F THE INCOME- TAX ACT WILL BE THAT THOUGH APART FROM ESTABLISHING THE IDENTITY OF THE CREDITOR, THE ASSESSEE MUST ESTABLISH THE GENUINENESS OF THE TRANSACTION AS WELL AS THE CREDITWORTHINESS OF HIS CREDITOR, THE BURDEN OF THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTIONS AS WELL AS THE CRED ITWORTHINESS OF THE CREDITOR MUST REMAIN CONFINED TO THE TRANSACTIONS, WHICH HAVE TAKEN PLAC E BETWEEN THE ASSESSEE AND THE CREDITOR. WHAT FOLLOWS, AS A COROLLARY, IS THAT IT IS NOT THE BURD EN OF THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTIONS BETWEEN HIS CREDITOR AND SUB-CREDITORS NOR IS IT THE BURDEN OF THE ASSESSEE TO PROVE THAT THE SUB- CREDITOR HAD THE CREDITWORTHINESS TO ADVANCE THE CASH CREDIT TO THE CREDITOR FROM WHOM THE CASH CREDIT HAS BEEN. EVENTUALLY, RECEIVED BY THE ASSESSEE. IT, THEREFORE, FURTHER LOGICALLY FOLLOWS THAT THE CREDITOR'S CREDITWORTHIN ESS HAS TO BE JUDGED VIS-A-VIS THE TRANSACTIONS, WHICH HAVE TAKEN PLACE BETWEEN THE ASSESSEE AND THE CREDITOR, AND IT IS NOT THE BUSINESS OF THE ASSESSEE TO FIND OUT THE SOURCE OF MONEY OF HIS CRE DITOR OR OF THE GENUINENESS OF THE TRANSACTIONS, WHICH TOOK BETWEEN THE CREDITOR AND SUB-CREDITOR AN D/OR CREDITWORTHINESS OF THE SUB- CREDITORS, FOR, THESE ASPECTS MAY NOT BE WITHIN THE SPECIAL KN OWLEDGE OF THE ASSESSEE. ' MAA KALI ALLOYS UDYOG PVT.LTD. IT(SS)A NO. 04/RAN/2017 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 1 11 18 88 8 ********** ' ... IF A CREDITOR HAS, BY ANY UNDISCLOSED SOURCE, A PARTICULAR AMOUNT OF MONEY IN THE BANK, THERE IS NO LIMITATION UNDER THE LAW ON THE PART OF THE A SSESSEE TO OBTAIN SUCH AMOUNT OF MONEY OR PART THEREOF FROM THE CREDITOR, BY WAY OF CHEQUE IN THE FORM OF LOAN AND IN SUCH A CASE, IF THE CREDITOR FAILS TO SATISFY AS TO HOW HE HAD ACTUALLY RECEIVED THE SAID AMOUNT AND HAPPENED TO KEEP THE SAME IN THE BANK, THE SAID AMOUNT CANNOT BE TREATED AS I NCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCE. IN OTHER WORDS, THE GENUINENESS AS WELL AS THE CRED ITWORTHINESS OF A CREDITOR HAVE TO BE ADJUDGED VIS-A-VIS THE TRANSACTIONS, WHICH HE HAS WITH THE A SSESSEE. THE REASON WHY WE HAVE FORMED THE OPINION THAT IT IS NOT THE BUSINESS OF THE ASSESSEE TO FIND OUT THE ACTUAL SOURCE OR SOURCES FROM WHERE THE CREDITOR HAS ACCUMULATED THE AMOUNT, WHIC H HE ADVANCES, AS LOAN, TO THE ASSESSEE IS THAT SO FAR AS AN ASSESSEE IS CONCERNED, HE HAS TO PROVE THE GENUINENESS OF THE TRANSACTION AND THE CREDITWORTHINESS OF THE CREDITOR VIS-A-VIS THE TRAN SACTIONS WHICH HAD TAKEN PLACE BETWEEN THE ASSESSEE AND THE CREDITOR AND NOT BETWEEN THE CREDI TOR AND THE SUB-CREDITORS, FOR, IT IS NOT EVEN REQUIRED UNDER THE LAW FOR THE ASSESSEE TO TRY TO F IND OUT AS TO WHAT SOURCES FROM WHERE THE CREDITOR HAD RECEIVED THE AMOUNT, HIS SPECIAL KNOWL EDGE UNDER SECTION 106 OF THE EVIDENCE ACT MAY VERY WELL REMAIN CONFINED ONLY TO THE TRANSACTI ONS, WHICH HE HAD' WITH THE CREDITOR AND HE MAY NOT KNOW WHAT TRANSACTION(S) HAD TAKEN PLACE BE TWEEN HIS CREDITOR AND THE SUB-CREDITOR... ' ********** 'IN OTHER WORDS, THOUGH UNDER SECTION 68 AN ASSESSI NG OFFICER IS FREE TO SHOW, WITH THE HELP OF THE INQUIRY CONDUCTED BY HIM INTO THE TRANSACTIONS, WHI CH HAVE TAKEN PLACE BETWEEN THE CREDITOR AND THE SUB-CREDITOR, THAT THE TRANSACTION BETWEEN THE TWO WERE NOT GENUINE AND THAT THE SUB-CREDITOR HAD NO CREDITWORTHINESS, IT WILL NOT NECESSARILY ME AN THAT THE LOAN ADVANCED BY THE SUB-CREDITOR TO THE CREDITOR WAS INCOME OF THE ASSESSEE FROM UND ISCLOSED SOURCE UNLESS THERE IS EVIDENCE, DIRECT OR CIRCUMSTANTIAL, TO SHOW THAT THE AMOUNT W HICH HAS BEEN ADVANCED BY THE SUB-CREDITOR TO THE CREDITOR, HAD ACTUALLY BEEN RECEIVED BY THE SUB -CREDITOR FROM THE ASSESSEE ....' ********** 'KEEPING IN VIEW THE ABOVE POSITION OF LAW, WHEN WE TURN TO THE FACTUAL MATRIX OF THE PRESENT CASE, WE FIND THAT SO FAR AS THE APPELLANTS IS CONC ERNED, HE HAS ESTABLISHED THE IDENTITY OF THE CREDITORS, NAMELY, NEMICHANDNAHATA AND SONS (HUF) A ND PAWAN KUMAR AGARWALLA. THE APPELLANTS HAD ALSO SHOWN, IN ACCORDANCE WITH THE B URDEN, WHICH RESTED ON HIM UNDER SECTION 106 OF THE EVIDENCE ACT, THAT THE SAID AMOUNTS HAD BEEN RECEIVED BY HIM BY WAY OF CHEQUES FROM THE CREDITORS AFOREMENTIONED. IN FACT THE FACT THAT THE ASSESSEE HAD RECEIVED THE SAID AMOUNTS BY WAY OF CHEQUES WAS NOT IN DISPUTE. ONCE THE ASSESSE E HAD ESTABLISHED THAT HE HAD RECEIVED THE SAID AMOUNTS FROM THE CREDITORS AFOREMENTIONED BY W AY OF CHEQUES, THE ASSESSEE MUST BE TAKEN TO HAVE PROVED THAT THE CREDITOR HAD THE CREDITWORTHIN ESS TO ADVANCE THE LOANS. THEREAFTER THE BURDEN HAD SHIFTED TO THE ASSESSING OFFICER TO PROV E THE CONTRARY. ON MERE FAILURE ON THE PART OF THE CREDITORS TO SHOW THAT THEIR SUB-CREDITORS HAD CREDITWORTHINESS TO ADVANCE THE SAID LOAN AMOUNTS TO THE ASSESSEE, SUCH FAILURE, AS A COROLLA RY, COULD NOT HAVE BEEN AND OUGHT NOT TO HAVE BEEN, UNDER THE LAW, TREATED AS THE INCOME FROM THE UNDISCLOSED SOURCES OF THE ASSESSEE HIMSELF, WHEN THERE WAS NEITHER DIRECT NOR CIRCUMSTANTIAL EV IDENCE ON RECORD THAT THE SAID LOAN AMOUNTS ACTUALLY BELONGED TO, OR WERE OWNED BY, THE ASSESSE E. VIEWED FROM THIS ANGLE, WE HAVE NO HESITATION IN HOLDING THAT IN THE CASE AT HAND, THE ASSESSING OFFICER HAD FAILED TO SHOW THAT THE AMOUNTS, WHICH HAD COME TO THE HANDS OF THE CREDITO RS FROM THE HANDS OF THE SUB-CREDITORS, HAD ACTUALLY BEEN RECEIVED BY THE SUB-CREDITORS FROM TH E ASSESSEE. IN THE ABSENCE OF ANY SUCH EVIDENCE ON RECORD, THE ASSESSING OFFICER COULD NOT HAVE TREATED THE SAID AMOUNTS AS INCOME DERIVED BY THE APPELLANTS FROM UNDISCLOSED SOURCES. THE LEARNED TRIBUNAL SERIOUSLY FELL INTO ERROR IN TREATING THE SAID AMOUNTS AS INCOME DERIVED BY T HE APPELLANTS FROM. UNDISCLOSED SOURCES MERELY ON THE FAILURE OF THE SUB-CREDITORS TO PROVE THEIR CREDITWORTHINESS. MAA KALI ALLOYS UDYOG PVT.LTD. IT(SS)A NO. 04/RAN/2017 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 1 11 19 99 9 19. IN THE CASE OF CIT VS JALAN HARD COKE LTD (95 TAXMANN.COM 330), THE HONBLE RAJASTHAN HIGH COURT NOTED THAT THE ASSESSEE HAD FU RNISHED THE DETAILS OF THE SHARE APPLICANTS BUT EXPRESSED ITS INABILITY TO PRODUCE T HE SHARE APPLICANTS BEFORE THE AO FOR EXAMINATION. THE HONBLE HIGH COURT HELD THAT MERE NON-APPEARANCE OF SHARE APPLICANTS COULD NOT BE REASON ENOUGH TO ASSESS THE SHARE APPL ICATION MONIES RECEIVED BY WAY OF UNEXPLAINED CASH CREDIT. THE SLP FILED BY THE REVEN UE AGAINST THIS JUDGMENT HAS BEEN DISMISSED BY THE HONBLE SUPREME COURT. THE RELEVAN T EXTRACTS OF THE JUDGMENT ARE AS FOLLOWS: 6.2 TAKING INTO CONSIDERATION THE AFORESAID DECISI ON WE ARE OF THE CONSIDERED OPINION THAT COMPANY CANNOT BE ASSESSED FOR THE INCOME TAX TO FI ND OUT THE PERSON WHO HAS APPLIED AS SHARE HOLDER. THE VIEW OF TAKEN BY THE TRIBUNAL IS JUST A ND PROPER, THEREFORE, THE ISSUE IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. 20. FURTHER, IN THE CASE OF CIT V. S. KAMALJEET SI NGH [2005] 147 TAXMAN 18(ALL.) THEIR LORDSHIPS, ON THE ISSUE OF DISCHARGE OF ASSES SEE'S ONUS IN RELATION TO A CASH CREDIT APPEARING IN HIS BOOKS OF ACCOUNT, HAS OBSERVED AND HELD AS UNDER:- '4. THE TRIBUNAL HAS RECORDED A FINDING THAT THE AS SESSEE HAS DISCHARGED THE ONUS WHICH WAS ON HIM TO EXPLAIN THE NATURE AND SOURCE OF CASH CREDIT IN QUESTION. THE ASSESSEE DISCHARGED THE ONUS BY PLACING (I) CONFIRMATION LETTERS OF THE CASH CRE DITORS; (II) THEIR AFFIDAVITS; (III) THEIR FULL ADDRESSES AND GIR NUMBERS AND PERMANENT ACCOUNT NUM BERS. IT HAS FOUND THAT THE ASSESSEE'S BURDEN STOOD DISCHARGED AND SO, NO ADDITION TO HIS TOTAL INCOME ON ACCOUNT OF CASH CREDIT WAS CALLED FOR. IN VIEW OF THIS FINDING, WE FIND THAT T HE TRIBUNAL WAS RIGHT IN REVERSING THE ORDER OF THE AA C, SETTING ASIDE THE ASSESSMENT ORDER. 21. WHEN A QUESTION AS TO THE CREDITWORTHINESS OF A CREDITOR IS TO BE ADJUDICATED AND IF THE CREDITOR IS AN INCOME TAX ASSESSEE, IT IS NOW W ELL SETTLED BY THE DECISION OF THE CALCUTTA HIGH COURT THAT THE CREDITWORTHINESS OF TH E CREDITOR CANNOT BE DISPUTED BY THE AO OF THE ASSESSEE BUT THE AO OF THE CREDITOR. IN T HIS REGARDS OUR ATTENTION WAS DRAWN TO THE DECISION OF THE HON'BLE HIGH COURT, CALCUTTA IN THE CIT VS DATAWARE PVT LTD (ITAT NO. 263 OF 2011) DATED 21.09.2011 WHEREIN THE COURT HELD AS FOLLOWS: IN OUR OPINION, IN SUCH CIRCUMSTANCES, THE ASSESSI NG OFFICER OF THE ASSESSEE CANNOT TAKE THE BURDEN OF ASSESSING THE PROFIT AND LOSS ACCOUNT OF THE CREDITOR WHEN ADMITTEDLY THE CREDITOR HIMSELF IS AN INCOME TAX ASSESSEE. AFTER GETTING TH E PAN NUMBER AND GETTING THE INFORMATION THAT THE CREDITOR IS ASSESSED UNDER THE ACT, THE ASSESSI NG OFFICER SHOULD ENQUIRE FROM THE ASSESSING OFFICER OF THE CREDITOR AS TO THE GENUINENESS' OF T HE TRANSACTION AND WHETHER SUCH TRANSACTION HAS BEEN ACCEPTED BY THE ASSESSING OFFICER OF THE CREDI TOR BUT INSTEAD OF ADOPTING SUCH COURSE, THE ASSESSING OFFICER HIMSELF COULD NOT ENTER INTO THE RETURN OF THE CREDITOR AND BRAND THE SAME AS UNWORTHY OF CREDENCE. SO LONG IT IS NOT ESTABLISHED THAT THE RETURN SUBMI TTED BY THE CREDITOR HAS BEEN REJECTED BY ITS ASSESSING OFFICER, THE ASSESSING OFFICER OF THE ASS ESSEE IS BOUND TO ACCEPT THE SAME AS GENUINE MAA KALI ALLOYS UDYOG PVT.LTD. IT(SS)A NO. 04/RAN/2017 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 2 22 20 00 0 WHEN THE IDENTITY OF THE CREDITOR AND THE GENUINENE SS' OF TRANSACTION THROUGH ACCOUNT PAYEE CHEQUE HAS BEEN ESTABLISHED. WE FIND THAT BOTH THE COMMISSIONER OF INCOME TAX (A PPEAL) AND THE TRIBUNAL BELOW FOLLOWED THE WELL-ACCEPTED PRINCIPLE WHICH ARE REQUIRED TO BE FO LLOWED IN CONSIDERING THE EFFECT OF SECTION 68 OF THE ACT AND WE THUS FIND NO REASON TO INTERFERE WITH THE CONCURRENT FINDINGS OF FACT RECORDED BY BOTH THE AUTHORITIES. 22. OUR ATTENTION WAS ALSO DRAWN TO THE DECISION O F THE HON'BLE SUPREME COURT WHILE DISMISSING SLP IN THE CASE OF LOVELY EXPORTS AS HAS BEEN REPORTED AS JUDGMENT DELIVERED BY THE CTR AT 216 CTR 295: 'CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDIS CLOSED INCOME UNDER SECTION 68 OF THE INCOME TAX ACT, 1961? WE FIND NO MERIT IN THIS SPEC IAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSE SSEE- 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. 23. OUR ATTENTION WAS ALSO DRAWN TO THE DECISION O F THE HON'BLE CALCUTTA HIGH COURTIN THE APPEAL OF COMMISSIONER OF INCOME TAX, KOLKATA- IVVSROSEBERRY MERCANTILE (P) LTD., ITAT NO. 241 OF 2010 DATED 10- 01-2011, WHEREIN IT WAS HELD AS BELOW: 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) OUGHT TO HAVE UPHELD THE ASSESSMENT ORDER AS THE TRANSACTION ENTERED INTO BY THE ASSESSEE WAS A SCHEME FOR LAUNDERING BLACK MONEY INTO WHITE MONEY OR ACCOUNTED MONEY AND THE LD. CIT (A) OUGHT TO HAVE HELD THAT THE ASSESSEE HAD NOT ESTABLISHED THE GENUINENESS OF THE TRANSACTION. ' IT APPEARS FROM THE RECORD THAT IN THE ASSESSMENT P ROCEEDINGS IT WAS NOTICED THAT THE ASSESSEE COMPANY DURING THE YEAR UNDER CONSIDERATION HAD BRO UGHT RS. 4, 00, 000/- AND RS.20,00,000/- TOWARDS SHARE CAPITAL AND SHARE PREMIUM RESPECTIVEL Y AMOUNTING TO RS.24,00, 000/- FROM FOUR SHAREHOLDERS BEING PRIVATE LIMITED COMPANIES. THE A SSESSING OFFICER ON HIS PART CALLED FOR THE DETAILS FROM THE ASSESSEE AND ALSO FROM THE SHARE A PPLICANTS AND ANALYZED THE FACTS AND ULTIMATELY OBSERVED CERTAIN ABNORMAL FEATURES, WHICH WERE MENT IONED IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER, THEREFORE, CONCLUDED THAT NATURE AND SOURCE OF SUCH MONEY WAS QUESTIONABLE AND EVIDENCE PRODUCED WAS UNSATISFACTORY. CONSEQUEN TLY, THE ASSESSING OFFICER INVOKED THE PROVISIONS UNDER SECTION 68/69 OF THE INCOME TAX AC T AND MADE ADDITION OF RS.24,00,000/-. ON APPEAL THE LEARNED CIT (A) BY FOLLOWING THE DECI SION OF THE SUPREME COURT IN THE CASE OF CL. T. VS. M/S. LOVELY EXPORTS PVT. LTD., REPORTED IN ( 2008) 216 CTR 195 ALLOWED THE APPEAL BY HOLDING -THAT SHARE CAPITAL/PREMIUM OF RS. 24,00,00 0/- RECEIVED FROM THE INVESTORS WAS NOT LIABLE TO BE TREATED UNDER SECTION 68 AS UNEXPLAINED CREDI TS AND IT SHOULD NOT BE TAXED IN THE HANDS OF THE APPELLANTS COMPANY. AS INDICATED EARLIER, THE TRIBUNAL BELOW DISMISSED THE APPEAL FILED BY THE REVENUE. AFTER HEARING THE LEARNED COUNSEL FOR THE APPELLANT S AND AFTER GOING THROUGH THE DECISION OF THE SUPREME COURT IN THE CASE OF CL. T. VS. M/S. LOVELY EXPORTS PVT. LTD. [SUPRA], WE ARE AT ONE WITH THE TRIBUNAL BELOW THAT THE POINT INVOLVED IN THIS APPEAL IS COVERED BY THE SAID SUPREME COURT DECISION IN FAVOUR OF THE ASSESSEE AND THUS, NO SUB STANTIAL QUESTION OF LAW IS INVOLVED IN THIS APPEAL. THE APPEAL IS DEVOID OF ANY SUBSTANCE AND I S DISMISSED. MAA KALI ALLOYS UDYOG PVT.LTD. IT(SS)A NO. 04/RAN/2017 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 2 22 21 11 1 24. OUR ATTENTION WAS ALSO DRAWN TO THE DECISION O F THE HON'BLE HIGH COURT, CALCUTTA IN THE CASE OF COMMISSIONER OF INCOME TAX VS M/S. N ISHAN INDO COMMERCE LTD IN ITA NO. 52 OF 2011 DATED 2 DECEMBER, 2013 WHEREIN THE C OURT HELD AS FOLLOWS: THE ASSESSING OFFICER WAS OF THE VIEW THAT THE INC REASE IN SHARE CAPITAL BY RS.52,03,500/- WAS NOTHING BUT THE INTRODUCTION OF THE ASSESSEE'S OWN UNDISCLOSED FUNDS/INCOME INTO THE BOOKS OF ACCOUNTS OF THE ASSESSEE COMPANY. THE ASSESSING OFF ICER ACCORDINGLY TREATED THE INVESTMENT AS UNEXPLAINED CREDIT UNDER SECTION 68 OF THE INCOME T AX ACT AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFOR E THE COMMISSIONER OF INCOME TAX (APPEALS) BEING THE FIRST APPELLATE AUTHORITY AND CONTENDED T HAT THE ASSESSING OFFICER HAD NO MATERIAL TO SHOW THAT THE SHARE CAPITAL WAS THE INCOME OF THE A SSESSEE COMPANY AND AS SUCH THE ADDITION MADE BY THE ASSESSING OFFICER UNDER SECTION 68 OF T HE ACT WAS WRONG. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AF TER HEARING THE DEPARTMENT AND THE ASSESSEE COMPANY DELETED THE ADDITION OF RS. 52, 03 ,500/- TO THE INCOME OF THE ASSESSEE COMPANY DURING THE ASSESSMENT YEAR IN QUESTION. THE LEARNED COMMISSIONER OF INCOME TAX APPEALS FOUND THAT THERE WERE AS MANY AS 2155 ALLOTTEES, WHOSE NA MES, ADDRESSES AND RESPECTIVE SHARES ALLOCATION HAD BEEN DISCLOSED. THE COMMISSIONER OF INCOME TAX APPEALS, FURTHER FOU ND THAT THE ASSESSEE COMPANY RECEIVED THE APPLICATIONS THROUGH BANKERS TO THE ISSUE, WHO HAD BEEN APPOINTED UNDER THE GUIDELINES OF THE STOCK EXCHANGE AND THE ASSESSEE COMPANY HAD BEEN AL LOTTED SHARES ON THE BASIS OF ALLOTMENT APPROVED BY THE STOCK EXCHANGE. THE ASSESSEE COMPAN Y HAD DULY FILED THE RETURN OF ALLOTMENT WITH THE REGISTRAR OF COMPANIES, GIVING COMPLETE PA RTICULARS OF THE ALLOTTEES. THE COMMISSIONER OF INCOME TAX (APPEALS) FOUND THAT INQUIRES HAD CONFIRMED THE EXISTENCE OF MOST OF THE SHAREHOLDERS AT THE ADDRESSES INTIMATED TO THE ASSESSING OFFICER, BUT THE ASSESSING OFFICER TOOK THE VIEW THAT THEIR INVESTMENT IN THE ASSESSEE COMPANY WAS NOT GENUINE, ON THE BASIS OF SOME EXTRANEOUS REASONS. THE COMMISSIONER OF INC OME TAX (APPEALS) TOOK NOTE OF THE OBSERVATION OF THE ASSESSING OFFICER THAT ENQUIRY C ONDUCTED BY THE INCOME TAX INSPECTOR HAD REVEALED THAT NINE PERSONS MAKING APPLICATIONS FOR 900 SHARES WERE NOT AVAILABLE AT THE GIVEN ADDRESS AND RIGHTLY CONCLUDED THAT THE TOTAL SHARE CAPITAL ISSUED BY THE ASSESSEE COMPANY COULD NOT BE ADDED AS UNEXPLAINED CASH CREDIT UNDER 'SECT ION 68 OF THE INCOME TAX ACT. MOREOVER, IF THE NATURE AND SOURCE OF INVESTMENT BY ANY SHAREHOL DER, IN SHARES OF THE ASSESSEE COMPANY REMAINED UNEXPLAINED, LIABILITY COULD NOT BE FOISTE D ON THE COMPANY. THE CONCERNED SHAREHOLDERS WOULD HAVE TO EXPLAIN THE SOURCE OF THEIR FUND. THE LEARNED COMMISSIONER ON CONSIDERING THE SUBMISS IONS OF THE, RESPECTIVE PARTIES AND CONSIDERING THE MATERIALS, FOUND THAT THE ASSESSING OFFICER HAD APPLIED THE PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT ARBITRARILY AND ILLEGALLY AND IN ANY CASE WITHOUT GIVING THE ASSESSEE ADEQUATE OPPORTUNITY OF REPRESENTATION AND/OR HEARI NG. LEARNED TRIBUNAL AGREED WITH THE FACTUAL FINDINGS O F THE LEARNED COMMISSIONER AND ACCORDINGLY THE LEARNED TRIBUNAL DISMISSED THE APPEAL OF THE RE VENUE AND AFFIRMED THE DECISION OF THE LEARNED COMMISSIONER. MR. DUTTA APPEARING ON BEHALF OF THE PETITIONERS CI TED JUDGMENT OF THE DIVISION BENCH OF THIS COURT IN COMMISSIONER OF INCOME TAX VS. RUBY TRADER S AND EXPORTERS LIMITED REPORTED IN 236 (2003) ITR 3000 WHERE A DIVISION BENCH OF THIS COUR T HELD THAT WHEN SECTION 68 IS RESORTED TO, IT IS INCUMBENT ON THE ASSESSEE COMPANY TO PROVE AND E STABLISH THE IDENTITY OF THE SUBSCRIBERS, THEIR CREDIT WORTHINESS AND THE GENUINENESS OF THE TRANSA CTION. MAA KALI ALLOYS UDYOG PVT.LTD. IT(SS)A NO. 04/RAN/2017 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 2 22 22 22 2 THE AFORESAID JUDGMENT WAS RENDERED IN THE CONTEXT OF THE FACTUAL BACKGROUND OF THE AFORESAID CASE WHERE, DESPITE SEVERAL OPPORTUNITIES BEING GIV EN TO THE ASSESSEE, NOTHING WAS DISCLOSED ABOUT THE IDENTITY OF THE SHAREHOLDERS. IN THE INST ANT CASE, THE ASSESSEE DISCLOSED THE IDENTITY AND ADDRESS AND PARTICULARS OF SHARE ALLOCATION OF THE SHAREHOLDERS. IT WAS ALSO FOUND ON THE FACTS THAT ALL THE SHAREHOLDERS WERE IN EXISTENCE. ONLY N INE SHAREHOLDERS SUBSCRIBING TO ABOUT 900 SHARES OUT OF 6, 12,000 SHARES WERE NOT FOUND AVAIL ABLE AT THEIR ADDRESSES, AND THAT TOO, IN COURSE OF ASSESSMENT PROCEEDINGS IN THE YEAR 1994, I.E., A LMOST 3 YEARS AFTER THE ALLOTMENT. BY AN ORDER DATED 2ND MAY, 2001, THIS COURT ADMITTE D THE APPEAL ON THREE QUESTIONS WHICH ESSENTIALLY CENTRE AROUND THE QUESTION OF WHETHER T HE APPELLATE COMMISSIONER ERRED IN LAW IN DELETING THE ADDITION OF RS. 52, 03, 500/- TO THE I NCOME OF THE ASSESSEE AS MADE BY THE ASSESSING OFFICER. WE ARE OF THE VIEW THAT THERE IS NO QUESTI ON OF LAW INVOLVED IN THIS APPEAL FAR LESS ANY SUBSTANTIAL QUESTION OF LAW. THE LEARNED TRIBUNAL HAS CONCURRED WITH THE LEARNED COMMISSIONER ON FACTS AND FOUND THAT THERE WERE MATERIALS TO SHOW THAT THE ASSESSEE HAD DISCLO SED THE PARTICULARS OF THE SHAREHOLDERS. THE FACTUAL FINDINGS CANNOT BE INTERFERED WITH, IN APPE AL. WE ARE OF THE VIEW THAT ONCE THE IDENTITY AND OTHER RELEVANT PARTICULARS OF SHAREHOLDERS ARE DISC LOSED, IT IS FOR THOSE SHAREHOLDERS TO EXPLAIN THE SOURCE OF THEIR FUNDS AND NOT FOR THE ASSESSEE COMP ANY TO SHOW WHEREFROM THESE SHAREHOLDERS OBTAINED FUNDS. 25.FINALLY THE LD DR PLACED RELIANCE ON THE RECENT DECISION OF THE HON'BLE APEX COURT IN THE CASE OF PRINCIPAL CIT VS. NRA IRON & STEEL (P) LTD REPORTED IN 103 TAXMANN.COM 48 (SC) WHEREIN THE DECISION ON ADDITIO N MADE TOWARDS CASH CREDIT WAS RENDERED IN FAVOUR OF THE REVENUE. WE HAVE GONE THROUGH THE SAID JUDGEMENT AND WE FIND IN THAT CASE, THE LD AO HAD MADE EXTENS IVE ENQUIRIES AND FROM THAT HE HAD FOUND THAT SOME OF THE INVESTOR COMPANIES WERE NON-EXISTENT WHICH IS NOT THE CASE BEFORE US. CERTAIN INVESTOR COMPANIES DID NOT PRODUCE THEIR BANK STATEMENTS PROVING THE SOURCE FOR MAKING INVESTMENTS IN ASSESS EE COMPANY, WHICH IS NOT THE CASE BEFORE US. SOURCE OF FUNDS WERE NEVER ESTABLIS HED BY THE INVESTOR COMPANIES IN THE CASE BEFORE THE HON'BLE APEX COURT, WHEREAS IN THE INSTANT CASE, THE ENTIRE DETAILS OF SOURCE OF SOURCE WERE DULY FURNISHED BY ALL THE RESPECTIVE SHARE SUBSCRIBING COMPANIES BEFORE THE LD AO IN RESPONSE TO SUMMONS U/S 131 OF THE ACT BY COMPLYING WITH THE PERSONAL APPEARANCE OF DI RECTORS. HENCE THE DECISION RELIED UPON BY THE LD DR IS FACTUALLY DISTINGUISHAB LE AND DOES NOT ADVANCE THE CASE OF THE REVENUE. 26. WE NOTE THAT IN CIT VS. ANSHIKA CONSULTANTS PV T LTD (62 TAXMANN.COM 192), THE AO HAD ADDED THE SHARE APPLICATION MONIES TREAT ING IT TO BE THEIR UNACCOUNTED MONIES ROUTED THOUGH ACCOMMODATION ENTRIES SINCE TH E SHARES WERE ISSUED AT A MAA KALI ALLOYS UDYOG PVT.LTD. IT(SS)A NO. 04/RAN/2017 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 2 22 23 33 3 HIGH PREMIUM. THE HONBLE DELHI HIGH COURT DID NOT AGREE WITH THIS CONTENTION PUT FORTH BY THE REVENUE, BY OBSERVING AS UNDER: WHETHER THE ASSESSEE-COMPANY CHARGED A HIGHER PREM IUM OR NOT, SHOULD NOT HAVE BEEN THE SUBJECT MATTER OF THE ENQUIRY IN THE FIRST INSTANCE . INSTEAD, THE ISSUE WAS WHETHER THE AMOUNT INVESTED BY THE SHARE APPLICANTS WERE FROM LEGITIMA TE SOURCES. THE OBJECTIVE OF SECTION 68 IS TO AVOID INCLUSION OF AMOUNT WHICH ARE SUSPECT. THEREF ORE, THE EMPHASIS ON GENUINENESS OF ALL THE THREE ASPECTS, IDENTITY, CREDITWORTHINESS AND THE T RANSACTION. WHAT IS DISQUIETING IN THE PRESENT CASE IS WHEN THE ASSESSMENT WAS COMPLETED, THE INVE STIGATION REPORT WHICH WAS SPECIFICALLY CALLED FROM THE CONCERNED DEPARTMENT WAS AVAILABLE BUT NOT DISCUSSED BY THE ASSESSING OFFICER. HAD HE CARED TO DO SO, THE IDENTITY OF THE INVESTORS, THE GENUINENESS OF THE TRANSACTION AND THE CREDITWORTHINESS OF THE SHARE APPLICANTS WOULD HAVE BEEN APPARENT. EVEN OTHERWISE, THE SHARE APPLICANTS PARTICULARS WERE AVAILABLE WITH THE ASSE SSING OFFICER IN THE FORM OF BALANCE SHEETS INCOME-TAX RETURNS, PAN DETAILS ETC. WHILE ARRIVING AT THE CONCLUSION THAT HE DID, THE ASSESSING OFFICER DID NOT CONSIDER IT WORTHWHILE TO MAKE ANY FURTHER ENQUIRY BUT BASED HIS ORDER ON THE HIGH NATURE OF THE PREMIUM AND CERTAIN FEATURES WHICH AP PEARED TO BE SUSPECT, TO DETERMINE THAT THE AMOUNT HAD BEEN ROUTED FROM THE ASSESSEE'S ACCOUNT TO THE SHARE APPLICANTS' ACCOUNT. AS HELD CONCURRENTLY BY THE COMMISSIONER (APPEALS) AND THE TRIBUNAL, THESE CONCLUSIONS WERE CLEARLY BASELESS AND FALSE. THIS COURT IS CONSTRAINED TO OB SERVE THAT THE ASSESSING OFFICER UTTERLY FAILED TO COMPLY WITH HIS DUTY CONSIDERS ALL THE MATERIALS ON RECORD, IGNORING SPECIFICALLY THE MOST CRUCIAL DOCUMENTS. 27. TO CONCLUDE: WE NOTE THAT IN THE ASSESSEE`S CAS E THE AMENDED PROVISIONS OF SECTION 68 ARE NOT APPLICABLE, AS THE ASSESSMENT YEAR UNDER CONSIDERATION IS A.Y. 2011-12. AS NOTED FROM THE JUDICIAL PRECEDENTS CITED ABOVE, WHE RE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE THEN THERE IS A DUTY CASTED UP ON THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF CREDIT FOUND IN HIS BOOKS. IN THE INS TANT CASE, THE CREDIT IS IN THE FORM OF RECEIPT OF SHARE CAPITAL WITH PREMIUM FROM SHARE AP PLICANT. THE NATURE OF RECEIPT TOWARDS SHARE CAPITAL IS SEEN FROM THE ENTRIES PASSED IN TH E RESPECTIVE BALANCE SHEETS OF THE COMPANIES AS SHARE CAPITAL AND INVESTMENTS. IN RESP ECT OF SOURCE OF CREDIT, THE ASSESSEE HAS TO PROVE THE THREE NECESSARY INGREDIENTS I.E. I DENTITY OF SHARE APPLICANT, GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF SHARE APPLI CANT. FOR PROVING THE IDENTITY OF SHARE APPLICANTS, THE ASSESSEE FURNISHED THE NAME, ADDRES S, PAN OF SHARE APPLICANTS TOGETHER WITH THE COPIES OF BALANCE SHEETS AND INCOME TAX RE TURNS. WITH REGARD TO THE CREDITWORTHINESS OF SHARE APPLICANT, AS WE NOTED SU PRA, THESECOMPANIESAREHAVING SUFFICIENT FUND. THESE TRANSACTIONS ARE ALSO DULY R EFLECTED IN THE BALANCE SHEETS OF THE SHARE APPLICANT, SO CREDITWORTHINESS IS PROVED. EVE N IF THERE WAS ANY DOUBT IF ANY REGARDING THE CREDITWORTHINESS OF THE SHARE APPLICA NT WAS STILL SUBSISTING, THEN AO SHOULD HAVE MADE ENQUIRIES FROM THE AO OF THE SHARE SUBSCR IBERS AS HELD IN THE SEVERAL JUDGMENTS CITED ABOVE, WHICH HAS NOT BEEN DONE, SO NO ADVERSE VIEW COULD HAVE BEEN DRAWN. THE THIRD INGREDIENT IS GENUINENESS OF THE T RANSACTIONS, FOR WHICH WE NOTE THAT THE MONIES HAVE BEEN DIRECTLY PAID TO THE ASSESSEE COMP ANY BY ACCOUNT PAYEE CHEQUES OUT OF MAA KALI ALLOYS UDYOG PVT.LTD. IT(SS)A NO. 04/RAN/2017 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 2 22 24 44 4 SUFFICIENT BANK BALANCES AVAILABLE IN THE BANK ACCO UNTS OF THE SHARE APPLICANT. IT WILL BE EVIDENT FROM THE PAPER BOOK THAT THE ASSESSEE HAS E VEN DEMONSTRATED THE SOURCE OF MONEY DEPOSITED INTO THEIR BANK ACCOUNTS, WHICH IN TURN H AS BEEN USED BY THEM TO SUBSCRIBE TO THE ASSESSEE COMPANY AS SHARE APPLICATION. HENCE TH E SOURCE OF SOURCE IS PROVED BY THE ASSESSEE IN THE INSTANT CASE THOUGH THE SAME IS NOT REQUIRED TO BE DONE BY THE ASSESSEE AS PER LAW AS IT STOOD/ APPLICABLE IN THIS ASSESSMENT YEAR. THE SHARE APPLICANT HAS CONFIRMED THE SHARE APPLICATION AS WELL AS THE PAYMENTS MADE TO THE ASSESSEE COMPANY, WHICH ARE DULY CORROBORATED WITH THEIR RESPECTIVE BANK STATEM ENTS AND ALL THE PAYMENTS ARE BY ACCOUNT PAYEE CHEQUES. WE NOTE THAT SECTION 68 OF THE ACT PROVIDES THAT I F ANY SUM FOUND CREDITED IN THE YEAR, IN RESPECT OF WHICH THE ASSESSEE FAILS TO EXPLAIN THE NATURE AND SOURCE SHALL BE ASSESSED AS ITS UNDISCLOSED INCOME. IN THE FACTS OF THE PRESENT CAS E, BOTH THE NATURE AND SOURCE OF THE SHARE APPLICATION RECEIVED WAS FULLY EXPLAINED BY T HE ASSESSEE. THE ASSESSEE HAD DISCHARGED ITS ONUS TO PROVE THE IDENTITY, CREDITWO RTHINESS AND GENUINENESS OF THE SHARE APPLICANTS. THE PAN DETAILS, BANK ACCOUNT STATEMENT S, AUDITED FINANCIAL STATEMENTS AND INCOME TAX ACKNOWLEDGMENTS WERE PLACED ON AO'S RECO RD. WITHOUT DOING SO, THE ADDITION MADE BY THE AO IS BASED ON CONJECTURES AND SURMISES CANNOT BE JUSTIFIED. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED AB OVE, NO ADDITION WAS WARRANTED UNDER SECTION 68 OF THE ACT. THEREFORE, WE DELETE THE ADD ITION MADE BY THE ASSESSING OFFICER TO THE TUNE OF RS.5,80,00,000/-. 28. WITH REGARD TO ASSESSEES CONTENTION THAT NO IN CRIMINATING DOCUMENTS WERE FOUND OR SEIZED DURING THE SEARCH AND SEIZURE ACTIO N AND THEREFORE THE ISSUE OF ASSESSMENT OF SHARE APPLICATION MONEY CANNOT BE TAK EN UP IN THE ASSESSMENT U/S 153A OF THE ACT . SINCE, WE HAVE ALLOWED THE ASSESSEE`S APPEAL ON ME RITS THEREFORE WE DO NOT ADJUDICATE THIS LEGAL GROUND RAISED BY THE A SSESSEE. 29. BEFORE PARTING, IT IS NOTED THAT THE ORDER IS BEING PRONOUNCED AFTER 90 DAYS OF HEARING. HOWEVER, TAKING NOTE OF THE EXTRAORDINARY SITUATION IN THE LIGHT OF THE COVID-19 PANDEMIC AND LOCKDOWN, THE PERIOD OF LOCKD OWN DAYS NEED TO BE EXCLUDED. FOR COMING TO SUCH A CONCLUSION, WE RELY UPON THE DECISION OF THE CO- ORDINATE BENCH OF THE MUMBAI TRIBUNAL IN THE CASE O F DCIT VS. JCB LIMITED IN ITA NO. 6264/MUM/2018 AND ITA NO. 6103/MUM/2018 FOR A.Y. 2013-14 ORDER DATED 14.05.2020. MAA KALI ALLOYS UDYOG PVT.LTD. IT(SS)A NO. 04/RAN/2017 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 2 22 25 55 5 30. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED IN THE COURT ON 08.07.2020 SD/- ( S.S.GODARA ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA; / DATE: 08/07/2020 ( SB, SR.PS ) COPY OF THE ORDER FORWARDED TO: 1. MAA KALI ALLOYS UDYOG PVT. LTD. 2. DCIT, CC-DHANBAD 3. C.I.T(A)- 4. C.I.T.- RANCHI 5. CIT(DR), RANCHI BENCH, RANCHI . 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, RANCH I BENCH