M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER AND SHRI B.C. MEENA, HONBLE ACCOUNTANT MEMBER IT(SS)A NOS. 83, 84, 85 & 86/IND/2015 A.YS.2007-08, 2008-09, 2010-11 & 2011-12 M/S ORNATE LEASING & FINACNE PRIVATE LIMITED INDORE PAN AABCO 1101A ::: APPELLANT VS DY. COMMR. OF INCOME TAX (CENTRAL) INDORE ::: RESPONDENT IT(SS)A NOS. 190 TO 192/IND/2015 A.YS.2007-08, 2008-09 & 2010-11 ASSTT. COMMR. OF INCOME TAX (CENTRAL)-I INDORE ::: APPELLANT VS M/S ORNATE LEASING & FINACNE PRIVATE LIMITED INDORE ::: RESPONDENT M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 2 APPELLANT BY SHRI GIRDHAR GARG RESPONDENT BY SHRI RAJEEV VARSHNEY AND SHRI R.A. VERMA DATE OF HEARING 29.12.201 6 DATE OF PRONOUNCEMENT 1 9 .1.201 6 O R D E R PER SHRI B.C. MEENA, AM THESE CROSS-APPEALS FILED BY THE ASSESSEE AND THE REVENUE EMANATE FROM THE CONSOLIDATED ORDER OF THE LE ARNED CIT(A)-3, BHOPAL, DATED 29.4.2015. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY INCORPORATED ON 19.12.1988. THE ASSESSE IS ENGAGED IN THE BUSINESS OF TRADING IN COMMODITIES AND INVESTMENT IN SHARES AND SECURITIES. A SEARCH AND SEIZU RE OPERATION U/S.132 WAS CARRIED OUT AT THE BUSINESS PREMISES OF ASSESSEE COMPANY AS WELL AS RESIDENTIAL PREMISES OF THE DIRECTOR SHRI MUKESHSANGLA ON 03.11.2011. CONSEQUENTLY, A NOTICE U/S.153A WAS ISSUE D. THE STATUS REGARDING RETURN OF INCOME FURNISHED BY TH E M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 3 ASSESSEE U/S.139(1) AND 153A OF THE INCOME-TAX ACT, 1 961 AND ASSESSMENTS COMPLETED AS PER ORIGINAL ASSESSMENT U/S.143(3) / 143(1) AS WELL AS U/S.153A ARE AS UNDER : A.Y. DATE OF ORIGINAL RETURN FILED RETURNED INCOME U/S.139 (RS.) DATE OF FILING RETURN U/S.153A RETURNED INCOME U/S.153 A (RS.) ASSESSED INCOME U/S.153A/ 143(3) RS. 2006-07 22.06.2007 6,362 28.02.2013 6,766 6,770 2007-08 10.06.2007 7,63,119 28.02.2013 10,280 96,63,120 2008-09 30.08.2008 29,439 28.02.2013 7,84,220 1,42,17,220 2010-11 14.09.2010 98,721 28.02.2013 98,721 99,44,250 2011-12 26.07.2011 8,989 28.02.2013 12,010 93,12,010 2012-13 29.09.2012 NIL - - NIL THE ASSESSEE FILED APPEALS BEFORE THE LEARNED C.I.T.(A ) CENTRAL, INDORE AGAINST THE ASSESSMENTS COMPLETED U/S.153A WHO PARTLY ALLOWED THE ASSESSEES APPEALS FOR T HE ASSESSMENT YEARS 2007-08, 2008-09 AND 2010-11 AND DISMISSED THE APPEAL FOR THE ASSESSMENT YEAR 2011-12. AGAINST THE ORDER PASSED BY THE LEARNED CIT(A), THE ASSESSEE AND REVENUE PREFERRED APPEAL BEFORE THE INCOME - TAX APPELLATE TRIBUNAL. M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 4 3. GROUND NO.1.0 & 1.1 (A.YS.: 2007-08, 2008-09 & 2010 -11) AND 1.0 (A.YS.: 2011-12) OF THE ASSESSEES APPEAL : GROUND NO.1.0 & 1.1 (A.YS.: 2007-08, 2008-09 & 2010 -11) AND 1.0 (A.Y.: 2011-12) OF ASSESSEES APPEAL READS AS UNDER : ASSESSMENT YEARS : 2007-08, 2008-09 & 2010-11 1.0 THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INC OME-TAX (APPEALS)-3, BHOPAL, PARTLY CONFIRMING THE ASSESSME NT ORDER PASSED U/S.153A R.W. SEC.143(3) OF THE INCOME-TAX A CT, 1961, BY THE DEPUTY COMMISSIONER OF INCOME-TAX IS BOTH BAD-I N-LAW AND BAD-IN-FACTS. 1.1 IN DOING SO, HE DID NOT APPRECIATE THAT NO ADDITION COULD HAVE BEEN MADE WHILE COMPLETING ASSESSMENT U/S.153A OF T HE INCOME-TAX ACT, 1961 IN CASE OF COMPLETED ASSESSMEN TS IF NO UNDISCLOSED INCOME WAS DETERMINABLE FROM THE MATERI AL FOUND AS A RESULT OF SEARCH. ASSESSMENT YEAR : 2011-12 1.0 THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INC OME-TAX (APPEALS)-3, BHOPAL, CONFIRMING THE ASSESSMENT ORDE R PASSED U/S.153A R.W. SEC.143(3) OF THE INCOME-TAX ACT, 196 1, BY THE DEPUTY COMMISSIONER OF INCOME-TAX IS BOTH BAD-IN-LA W AND BAD- IN-FACTS.. 4. THERE WAS NO ABATEMENT OF ASSESSMENT FOR THE ASSESSMENT YEARS 2007-08, 2008-09 AND 2010-11. HOWEVER, THERE WAS ABATEMENT OF ASSESSMENT FOR THE ASSESSMENT YEAR 2011-12. M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 5 5. THE C.I.T.(A) REJECTED THE ASSESSEES CONTENTION BY HOLDING THAT WHERE A SEARCH U/S.132 OF THE ACT IS INI TIATED AFTER 31.05.2003 IN CASE OF A PERSON, THE ASSESSING OF FICER HAS NO OPTION BUT TO ASSESS OR REASSESS THE TOTAL INCOM E FOR EACH OF PRECEDING SIX ASSESSMENT YEARS. THIS IS CLEAR AND UNAMBIGUOUS FROM THE PLAIN LANGUAGE OF SEC.153A(1) OF T HE ACT AND REITERATION IN THE FIRST PROVISO TO SECTION 1 53A. THE TERMS TOTAL INCOME AND SCOPE OF TOTAL INCOME ARE DEFINE D IN SEC.2(45) AND SEC.5 OF THE INCOME-TAX ACT RESPEC TIVELY. THE 'TOTAL INCOME' TO BE ASSESSED OR REASSESSED IN TER MS OF SEC.153A SHALL INCLUDE BOTH REGULAR AND UNDISCLOSED INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITH IN SUCH SIX ASSESSMENT YEARS. UNLIKE CHAPTER XIV-B OF TH E ACT, WHERE THE DEFINITION OF 'UNDISCLOSED INCOME' W AS SPECIFICALLY PROVIDED IN SECTION 158B(B), NO SEPARATE AND DISTINCT DEFINITION OF 'TOTAL INCOME' IS PROVIDED IN SECTION 153A IN CONTRADISTINCTION TO ITS DEFINITION U/S.2(4 5) OF THE M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 6 ACT. HAD THE LEGISLATURE INTENDED TO CURTAIL THE SCOP E OF TOTAL INCOME IN RELATION TO SEARCH AND SEIZURE ASSESSME NTS, IT WOULD HAVE SPECIFICALLY PROVIDED IT UNDER THE RELE VANT PROVISIONS. IN THE ABSENCE OF THE TERM UNDISCLOSED INCOME HAVING BEEN INCORPORATED IN THE SECTION ITSELF, THE S AME CANNOT BE READ INTO THE SECTION. WHILE SEC.153A PROVI DES FOR DETERMINATION OF TOTAL INCOME WHICH INCLUDES BOTH THE DISCLOSED AS WELL AS UNDISCLOSED INCOME, CHAPTER XIV-B PROVIDED FOR DETERMINATION OF UNDISCLOSED INCOME FOR THE WHOLE BLOCK PERIOD. UNLIKE CHAPTER XIV-B, THERE IS NOTHING IN SEC.153A WHICH REQUIRES COMPLETION OF A SEARCH ASSESSMENT ONLY ON THE BASIS OF EVIDENCE FOUND AS A RES ULT OF SEARCH OR OTHER DOCUMENTS AND SUCH OTHER MATERIALS O R INFORMATION AS ARE AVAILABLE WITH THE AO AND RELATABLE TO THE EVIDENCE FOUND. THE AO IS STATUTORILY REQUIRED T O MAKE ASSESSMENT U/S.153A FOR ALL SUCH SIX YEARS AND COMPUTE TOTAL INCOME OF THE ASSESSEE INCLUDING UNDISCLOSED IN COME M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 7 NOTWITHSTANDING THAT RETURNS OF THESE ASSESSMENT YEARS HAVE ALREADY BEEN PROCESSED U/S 143(1) OR ASSESSED U/S 143(3) OF THE ACT. THE SCOPE OF SEC.153A IS SIMILAR TO SEC.143(3) AND IN THAT CONTEXT, THE LEGISLATURE USED T HE WORD TOTAL INCOME. THE FIRST AND SECOND PROVISO TO SEC.153A ARE COMPLEMENTARY TO EACH OTHER AND REQUIRES TH E AO TO ASSESS OR RE-ASSESS THE 'TOTAL INCOME' IN RESPEC T OF EACH ASSESSMENT YEAR FALLING WITHIN SUCH SIX ASSESSMENT YEARS IN ASSESSMENT ORDERS U/S.153A. IN SUPPORT OF HI S CONTENTION, RELIANCE WAS PLACED UPON MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE BILL, 2003 [ (2003) 260 ITR (ST.) 191], THE RULE OF CONSTRUCTION LAID DO WN IN HEYDONS CASE FOR INTERPRETATION OF THE LANGUAGE USED I N SEC.153A AND THE FOLLOWING JUDGEMENTS: C.I.T. VS. RAJ KUMAR ARORA 367 ITR 517 (ALL) CANARA HOUSING DEVELOPMENT COMPANY VS. D.C.I.T. 49 TAXMAN.COM 98 (KAR) NANDINIDELUX VS. C.I.T. 37 ITR (TRIB.) 52 (BANG.) MADUGULAVENU VS. D.I.T. 29 TAXMANN.COM 200 (DEL) SHIVNATH RAI HARNARAIN (INDIA) 117 ITD 74 (DEL) M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 8 LTD.VS.D.C.I.T. MS. SHYAMLATA KAUSHIK VS. A.C.I.T. 306 ITR (A.T.)117 (DEL) HARVEY HEART HOSPITALS LTD. VS. A.C.I.T. 130 TTJ 700 (CHENNAI) DR. MANSUKH KANJIBHAI SHAH VS. A.C.I.T. 129 ITD 3 76 (AHD.) RAJATTRADECOM INDIA (P.) LTD. VS. D.C.I.T. 120 ITD 48 (INDORE) INCOME - TAX - VII V. CHETAN DAS LACHMAN DAS 25 TAXMANN.COM 227 (DEL) C.I.T. VS. ANIL KUMAR BHATIA 24 AXMANN.COM 98 (DEL) 6. HE FURTHER SUBMITTED THAT NO ADDITION CAN BE MADE IN NON-ABATED ASSESSMENTS SANS INCRIMINATING MATERIAL. THE ASSESSMENT U/S.153A IS MADE ONLY IN CASES WHERE A SEARC H IS INITIATED U/S.132 OR BOOKS OF ACCOUNT, OTHER DOCUM ENTS OR ANY ASSETS ARE REQUISITIONED U/S.132A AFTER 31.05.20 03. THEREFORE, SECTION 153A OF THE ACT CANNOT BE READ IN ISOLATION. THE REQUIREMENT OF ASSESSMENT OR REASSESSMEN T OF TOTAL INCOME UNDER THE SAID SECTION HAS TO BE READ I N THE CONTEXT OF SECTIONS 132 OR 132A OF THE ACT. ONCE NO TICE U/S.153A IS ISSUED, THE ASSESSEE IS COMPULSORILY REQU IRED TO FILE RETURN OF INCOME FOR SIX ASSESSMENT YEARS NOTWITHSTANDING DISCOVERY OR OTHERWISE OF ANY INCRIMINATING MATERIAL. ALL THE ASSESSMENT PROCEEDINGS M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 9 WHICH ARE PENDING ON THE DATE OF SEARCH ABATE IN TERMS OF SECOND PROVISO TO SEC.153A. AS A COROLLARY, ALTHOUGH B UT NOT EXPRESSLY PROVIDED IN SECTION, THE ASSESSMENT PROCEEDINGS WHICH ARE NOT PENDING DO NOT ABATE. IF NO THING INCRIMINATING IS FOUND ON ACCOUNT OF SUCH SEARCH OR REQUISITION IN RELATION TO UNABATED ASSESSMENTS I.E. COMPLETED OR CONCLUDED ASSESSMENTS, ONLY ASSESSED INCOME SHOULD BE REITERATED. THE HARMONIOUS CONSTRUCT ION OF ENTIRE PROVISION WOULD LEAD TO AN IRRESISTIBLE CON CLUSION THAT THE TERM ASSESSMENT HAS TO BE READ IN THE CONTE XT OF ABATED ASSESSMENTS AND THE TERM REASSESSMENT HAS BEEN USED IN THE CONTEXT OF UNABATED ASSESSMENTS. IN THE C ASE OF COMPLETED ASSESSMENTS, INCOME HAS TO BE RE-ASSESSE D IN TERMS OF SEC.153A. THE RE-ASSESSMENT REQUIRES BELIEF OF ASSESSING OFFICER REGARDING ESCAPEMENT OF INCOME FROM ASSESSMENT. THE BELIEF SHOULD BE FOUNDED ON EXISTENC E OF APPROPRIATE MATERIAL OR INFORMATION. IT SHOULD BE RATIONAL M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 10 BELIEF HELD IN GOOD FAITH AND NOT ARBITRARY, SUBJECTIVE OR A MERE PRETENCE. THE MATERIAL OR INFORMATION IN HIS POSSESSION SHOULD HAVE DIRECT NEXUS WITH HIS BELIEF REGARDING ESCAPEMENT OF INCOME. THE ABSENCE OF SUCH NEXUS SHALL RENDER THE RE-ASSESSMENT PROCEEDINGS INVAL ID. THUS, THE RE-ASSESSMENT OF INCOME U/S.153A CANNOT BE MADE SANS ANY INCRIMINATING MATERIAL OR MERELY ON CHANGE OF OPINION IN RELATION TO MATERIAL ALREADY CONSIDERED. [INDIAN & EASTERN NEWSPAPER SOCIETY VS. C.I.T. (119 IT R 996 SC); CALCUTTA DISCOUNT CO. LTD. VS. I.T.O (41 ITR 191 SC)] THE CONTENTION OF THE REVENUE TO THE EFFECT TH AT ONCE A NOTICE UNDER SECTION 153A OF THE ACT IS ISSUED, THE ASSESSMENTS FOR ALL THE SIX YEARS ARE AT LARGE FOR THE A O HAS NO WARRANT IN LAW. THE LEARNED COUNSEL FOR THE ASSESSE E PLACED RELIANCE WAS PLACED UPON THE FOLLOWING JUDGMENT S: 1. JAI STEEL (INDIA) VS. A.C.I.T. (2013) 259 CTR 281 ( RAJ ) 19 . THE UNDERLINE PURPOSE OF MAKING ASSESSMENT OF TOTAL INCOME UNDER SECTION 153A OF THE ACT IS, THER EFORE, TO ASSESS INCOME WHICH WAS NOT DISCLOSED OR WOULD N OT M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 11 HAVE BEEN DISCLOSED. THE PURPOSE OF SECOND PROVISO IS ALSO VERY CLEAR, INASMUCH AS, ONCE A ASSESSMENT OR REASSESSMENT IS 'PENDING' ON THE DATE OF INITIATION OF SEARCH OR REQUISITION AND IN TERMS OF SECTION 153A A RETURN IS FILED AND THE AO IS REQUIRED TO ASSESS TH E SAME, THERE CANNOT BE TWO ASSESSMENT ORDERS DETERMINING THE TOTAL INCOME OF THE ASSESSEE FOR TH E SAID ASSESSMENT YEAR AND, THEREFORE, THE PROVISO PROVIDE S FOR ABATEMENT OF SUCH PENDING ASSESSMENT AND REASSESSMENT PROCEEDINGS AND IT IS ONLY THE ASSESSMENT MADE UNDER SECTION 153A OF THE ACT WOULD BE THE ASSESSMENT FOR THE SAID YEAR. 20 . THE NECESSARY COROLLARY OF THE ABOVE SECOND PROVIS O IS THAT THE ASSESSMENT OR REASSESSMENT PROCEEDINGS, WHICH HAVE ALREADY BEEN 'COMPLETED' AND ASSESSMENT ORDERS HAVE BEEN PASSED DETERMINING THE ASSESSEE'S TOTAL INCOME AND, SUCH ORDERS ARE SUBSISTING AT THE TIME WHEN THE SEARCH OR THE REQUISITION IS MADE, THERE I S NO QUESTION OF ANY ABATEMENT SINCE NO PROCEEDINGS ARE PENDING. IN SUCH CASES, WHERE THE ASSESSMENTS ALREA DY STANDS COMPLETED, THE AO CAN REOPEN THE ASSESSMENTS OR REASSESSMENTS ALREADY MADE WITHOUT FOLLOWING THE PROVISIONS OF SECTIONS 147, 148 AND 151 OF THE ACT AND DETERMINE THE TOTAL INCOME OF THE ASSESSEE. 21. THE ARGUMENT RAISED BY THE COUNSEL FOR THE APPELLANT TO THE EFFECT THAT ONCE A NOTICE UNDER SE CTION 153A OF THE ACT IS ISSUED, THE ASSESSMENTS FOR SIX YEARS ARE AT LARGE BOTH FOR THE AO AND ASSESSEE HAS NO WARRANT IN LAW. 22 . IN THE FIRM OPINION OF THIS COURT FROM A PLAIN REA DING OF THE PROVISION ALONG WITH THE PURPOSE AND PURPORT OF THE SAID PROVISION, WHICH IS INTRICATELY LINKED WIT H M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 12 SEARCH AND REQUISITION UNDER SECTIONS 132 AND 132A OF THE ACT, IT IS APPARENT THAT: (A) THE ASSESSMENTS OR REASSESSMENTS, WHICH STAND ABATED IN TERMS OF II PROVISO TO SECTION 153A OF TH E ACT, THE AO ACTS UNDER HIS ORIGINAL JURISDICTION, FOR WH ICH, ASSESSMENTS HAVE TO BE MADE; (B) REGARDING OTHER CASES, THE ADDITION TO THE INCOME T HAT HAS ALREADY BEEN ASSESSED, THE ASSESSMENT WILL BE MADE ON THE BASIS OF INCRIMINATING MATERIAL AND (C) IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE COMPLETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSMENT OR REASSESSMENT CAN BE MADE. THOUGH SUCH A CLAIM BY THE ASSESSEE FOR THE FIRST T IME UNDER SECTION 153A OF THE ACT IS NOT COMPLETED, THE CASE IN HAND, HAS TO BE CONSIDERED AT BEST SIMILAR TO A CASE WHERE IN SPITE OF A SEARCH AND/OR REQUISITION, NOTH ING INCRIMINATING IS FOUND. IN SUCH A CASE THOUGH SECTI ON 153A OF THE ACT WOULD BE TRIGGERED AND ASSESSMENT O R REASSESSMENT TO ASCERTAIN THE TOTAL INCOME OF THE P ERSON IS REQUIRED TO BE DONE, HOWEVER, THE SAME WOULD IN THAT CASE NOT RESULT IN ANY ADDITION AND THE ASSESSMENTS PASSED EARLIER MAY HAVE TO BE REITERATED. ............ 26. THE PLEA RAISED ON BEHALF OF THE ASSESSEE THAT AS THE FIRST PROVISO PROVIDES FOR ASSESSMENT OR REASSESSMENT OF THE TOTAL INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN THE SIX ASSESSMENT YEARS, IS MERELY READING THE SAID PROVISION IN ISOL ATION AND NOT IN THE CONTEXT OF THE ENTIRE SECTION. THE W ORDS 'ASSESS' OR 'REASSESS' HAVE BEEN USED AT MORE THAN ONE PLACE IN THE SECTION AND A HARMONIOUS CONSTRUCTION OF M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 13 THE ENTIRE PROVISION WOULD LEAD TO AN IRRESISTIBLE CONCLUSION THAT THE WORD 'ASSESS' HAS BEEN USED IN THE CONTEXT OF AN ABATED PROCEEDINGS AND REASSESS HAS BEEN USED FOR COMPLETED ASSESSMENT PROCEEDINGS, WHICH WOULD NOT ABATE AS THEY ARE NOT PENDING ON TH E DATE OF INITIATION OF THE SEARCH OR MAKING OF REQUI SITION AND WHICH WOULD ALSO NECESSARILY SUPPORT THE INTERPRETATION THAT FOR THE COMPLETED ASSESSMENTS, THE SAME CAN BE TINKERED ONLY BASED ON THE INCRIMINATIN G MATERIAL FOUND DURING THE COURSE OF SEARCH OR REQUI SITION OF DOCUMENTS. 2. C.I.T. VS. KABUL CHAWLA [I.T.A.NO.707/2014 DT.28.08.2015 (DEL)(HC)] 37. ON A CONSPECTUS OF SECTION 153A(1) OF THE ACT, READ WITH THE PROVISOSTHERETO, AND IN THE LIGHT OF THE L AW EXPLAINED IN THE AFOREMENTIONEDDECISIONS, THE LEGAL POSITION THAT EMERGES IS AS UNDER: I. ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF T HE ACT, NOTICEUNDER SECTION 153 A (1) WILL HAVE TO BE MANDATORILY ISSUED TOTHE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS FOR SIX AYSIMMEDIATELY PRECEDING TH E PREVIOUS YEAR RELEVANT TO THE AY INWHICH THE SEARCH TAKES PLACE. II. ASSESSMENTS AND REASSESSMENTS PENDING ON THE DA TE OF THESEARCH SHALL ABATE. THE TOTAL INCOME FOR SUCH AYS WILL HAVE TOBE COMPUTED BY THE AOS AS A FRESH EXERC ISE. III. THE AO WILL EXERCISE NORMAL ASSESSMENT POWERS IN RESPECT OFTHE SIX YEARS PREVIOUS TO THE RELEVANT AY IN WHICH THE SEARCHTAKES PLACE. THE AO HAS THE POWER T O ASSESS AND REASSESS THE'TOTAL INCOME' OF THE AFOREMENTIONED SIX YEARS IN SEPARATEASSESSMENT ORDE RS M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 14 FOR EACH OF THE SIX YEARS. IN OTHER WORDS THEREWILL BE ONLY ONE ASSESSMENT ORDER IN RESPECT OF EACH OF THE SIXAYS IN WHICH BOTH THE DISCLOSED AND THE UNDISCLOSED INCOMEWOULD BE BROUGHT TO TAX. IV. ALTHOUGH SECTION 153 A DOES NOT SAY THAT ADDITI ONS SHOULD BESTRICTLY MADE ON THE BASIS OF EVIDENCE FOU ND IN THE COURSE OF THESEARCH, OR OTHER POST-SEARCH MATER IAL OR INFORMATION AVAILABLEWITH THE AO WHICH CAN BE RELAT ED TO THE EVIDENCE FOUND, IT DOESNOT MEAN THAT THE ASSESSMENT CAN BE ARBITRARY OR MADE WITHOUTANY RELEVANCE OR NEXUS WITH THE SEIZED MATERIAL. OBVIOU SLY AN ASSESSMENT HAS TO BE MADE UNDER THIS SECTION ONL Y ON THE BASISOF SEIZED MATERIAL. V. IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE COMPLETEDASSESSMENT CAN BE REITERATED AND THE ABATE D ASSESSMENT ORREASSESSMENT CAN BE MADE. THE WORD 'ASSESS' IN SECTION 153 AIS RELATABLE TO ABATED PROCEEDINGS (I.E. THOSE PENDING ON THE DATEOF SEARC H) AND THE WORD 'REASSESS' TO COMPLETED ASSESSMENTPROCEEDINGS. VI. INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED, T HE JURISDICTIONTO MAKE THE ORIGINAL ASSESSMENT AND THE ASSESSMENT UNDERSECTION 153A MERGES INTO ONE. ONLY ONE ASSESSMENT SHALL BEMADE SEPARATELY FOR EACH AY ON THE BASIS OF THE FINDINGS OF THESEARCH AND ANY O THER MATERIAL EXISTING OR BROUGHT ON THE RECORDOF THE AO . VII. COMPLETED ASSESSMENTS CAN BE INTERFERED WITH B Y THE AO WHILEMAKING THE ASSESSMENT UNDER SECTION 153 A ONLY ON THE BASISOF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OFSEARCH OR REQUISITION OF DOCUMENTS OR UNDISCLOSED INCOME ORPROPERTY DISCOVER ED IN THE COURSE OF SEARCH WHICH WERE NOTPRODUCED OR N OT M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 15 ALREADY DISCLOSED OR MADE KNOWN IN THE COURSEOF ORIGINAL ASSESSMENT. 38. THE PRESENT APPEALS CONCERN AYS, 2002-03, 2005- 06 AND 2006-07.ONTHE DATE OF THE SEARCH THE SAID ASSESSMENTS ALREADY STOOD COMPLETED. SINCENO INCRIMINATING MATERIAL WAS UNEARTHED DURING THE SEARCH, NO ADDITIONSCOULD HAVE BEEN MADE TO THE INCOME ALREADY ASSESSED. 39. THE QUESTION FRAMED BY THE COURT IS ANSWERED IN FAVOUR OF THE ASSESSEEAND AGAINST THE REVENUE. 40. THE APPEALS ARE ACCORDINGLY DISMISSED BUT IN TH E CIRCUMSTANCES NOORDERS AS TO COSTS. 3. C.I.T. VS. MURLIAGRO PRODUCTS LTD. [(2014) 49 TAXMANN.COM 172 (BOM)][KINDLY REFER TO PARA 8 TO 10 ] 4. C.I.T VS. CONTINENTAL WAREHOUSING CORPORATION [58 TAXMANN.COM 78 (BOM)] [KINDLY REFER TO PARA 28 TO 3 7] 5. ALL CARGO GLOBAL LOGISTICS LTD. VS. D.I.T. [137 ITD 287 (MUM-SB)] [KINDLY REFER TO PARA 48 TO 53; 53 CONCLU DE THE ISSUE] 6. GOVIND AGARWAL [ITA NO.3389 & 3390/M/2011 DT.10.01.2014 (MUM.TRIB.)] 7. A.C.I.T. VS. PRATIBHA INDUSTRIES LTD. [28 TAXMANN.C OM 246 (MUM. TRIB)] 8. GURINDER SINGH BAWA VS. D.C.I.T.[28 TAXMANN.COM 328 (MUM. TRIB)] 9. DINESH TOBACCO INDUSTRIES VS. D.C.I.T. [148 ITD 118 (JODH. TRIB)] M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 16 7. AS REGARDS JUDGMENTS RELIED UPON BY THE C.I.T. (A), THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAM E WERE DISTINGUISHABLE ON FACTS INASMUCH AS RECOVERY OF INCRIMINATING MATERIAL EITHER DURING SEARCH OR POST SEAR CH INQUIRIES. 8. ON THE ISSUE OF ADDITION SANS INCRIMINATING MATERIAL, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE ARE TWO VIEWS OF VARIOUS JUDICIAL AUTHORITIES. IT IS A SETTLED LEGAL POSITION THAT IF TWO VIEWS ARE POSSIBLE ON A PARTI CULAR ISSUE, THE VIEW WHICH ISFAVOURABLETO THE ASSESSEE SHOU LD BE FOLLOWED. [C.I.T. VS. VEGETABLE PRODUCTS LTD. 88 ITR 192 (SC)]. 9. ON THE OTHER HAND, ON THE ISSUE OF VALIDITY OF ASSESSMENT U/S 153A THE LEARNED DR PLACED RELIANCE ON THE FINDING OF THE LEARNED CIT(A) AND ALSO PLACED RELI ANCE ON THE SET OF CASE LAWS OF WHICH HE HAS PROVIDED A M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 17 COMPILATION BEFORE US. THE CASE LAWS RELIED ON BY THE LD. DR ARE AS UNDER :- 10. WE HAVE HEARD BOTH THE SIDES. WE HAVE ALSO GON E THROUGH THE CASE LAWS RELIED UPON BY BOTH THE SIDES. WE HAVE ALSO CONSIDERED VARIOUS RELEVANT FACTS OF THE CASE. IT IS A SETTLED LEGAL POSITION THAT ONCE A SEARCH AND SEIZURE S. NO. CASE LAW REMARKS 1 CIT V/S RAJKUMAR ARORA 367 ITR 517, HIGH COURT. ALL AHABAD VALIDITY OF SEARCH ASSESSMENT U/S 153-A/C 2 NANDINI DELUX V/S ACIT, 37 ITR (TRB) 52, ITAT BAN GLORE, C BENCH, - DO- 3 SHIVNATH RAI HARNARAIN INDIA LTD. VS/ DCIT, 117 ITD 74, ITAT, DELHI D BENCH - DO- 4 HARVAY HEART HOSPITAL LTD. V/S ACIT 130 TTJ 700 , ITAT CHENNAI A BENCH - DO- 5 DR. MANSUKH KANJIBHAI SHAH V/S ACIT, 129 ITD 376, ITAT AHMADABAD D BENCH - DO- 6 RAJAT TRADECOM INDIA (P) LTD V/S DCIT, 120 ITD 48 , ITAT INDORE BENCH - DO- 7 CANARA HOUSING DEVELOPMENT CO. V/S DCIT, 49 TAXMANN .COM 98 HIGH COURT, KARNATAKA. - DO- 8 MADUGULA VENU V/S DIT, 29 TAXMANN.COM HIGH COURT, DELHI. - DO- 9 CIT V/S CHETANDAS LAXMANDAS 25 TAXMANN.COM 227, DEL HI HIGH COURT - DO- 10 CIT V/S ANIL KUMAR BHATIA, 25 TAXMANN.COM 98, DE LHI HIGH COURT - DO- 11 MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINA NCE BILL 2003 - DO- M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 18 ACTION HAS TAKEN PLACE U/S 132 OF THE ACT OR A REQUISITI ON HAS BEEN MADE U/S 132A, THE PROVISIONS OF SECTION 153 A TRIGGED AND ASSESSING OFFICER IS BOUND TO ISSUE NOTI CE U/S 153A OF THE ACT. ONCE NOTICES ARE ISSUED U/S 153A OF THE ACT THEN ASSESSEE IS LEGALLY OBLIGED TO FILE RETURN O F INCOME FOR SIX YEARS. THE ASSESSMENT AND REASSESSMENT FOR SIX YEARS SHALL BE FINALISED BY THE ASSESSING OFFICER. IT IS ALSO HELD BY VARIOUS COURTS THAT ONCE NOTICE U/S 153A OF T HE ACT ISSUED, THEN ASSESSMENT FOR SIX YEARS SHALL BE AT L ARGE BOTH FOR ASSESSING OFFICER AND ASSESSEE HAVE NO WARRANT OF LAW. IT HAS BEEN ALSO HELD THAT IN THE ASSESSMENT YEARS WHERE ASSESSMENTS HAVE BEEN ABATED IN TERMS OF SECOND PROVISO TO SECTION 153A THEN ASSESSING OFFICER ACTS UNDER ORIGINAL JURISDICTION AND ONE ASSESSMENT IS MADE FOR TO TAL INCOME INCLUDING THE ADDITION MADE ON THE BASIS OF SEI ZED MATERIAL. BUT WHERE THERE IS NO ABATEMENT OF ASSESSMENT S AND ASSESSMENTS WERE COMPLETED ON THE DATE OF SEARCH M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 19 THEN ADDITION CAN BE MADE ONLY ON THE BASIS OF INCRIMINATING DOCUMENTS OR UNDISCLOSED ASSETS, ETC. 11. A SIMILAR ISSUE HAS BEEN DECIDED BY US VIDE OUR ORDER DATED 6.11.2015 IN THE CASE OF DCIT VS. M/S KALAN I BROTHERS (INDORE) PVT. LTD. IN IT(SS)A. NOS. 71 TO 73/IND/2014 AND OTHERS WHEREIN WE HAVE HELD AS UNDER :- 9. WE HAVE HEARD BOTH THE SIDES. WE HAVE ALSO GONE THROUGH THE CASE LAWS RELIED UPON BY BOTH THE SIDES. WE HAVE ALSO CONSIDERED VARIOUS RELEVANT FACTS OF THE CASE. IT IS A SETTLED LEGAL POSITION T HAT ONCE A SEARCH AND SEIZURE ACTION HAS TAKEN PLACE U/S 132 OF THE ACT OR A REQUISITION HAS BEEN MADE U/S 132A, THE PROVISIONS OF SECTION 153A TRIGGED AN D ASSESSING OFFICER IS BOUND TO ISSUE NOTICE U/S 153A OF THE ACT. ONCE NOTICES ARE ISSUED U/S 153A OF THE ACT THEN ASSESSEE IS LEGALLY OBLIGED TO FILE RETURN OF INCOME FOR SIX YEARS. THE ASSESSMENT AND REASSESSMENT FOR SIX YEARS SHALL BE FINALISED BY TH E ASSESSING OFFICER. IT IS ALSO HELD BY VARIOUS COUR TS THAT ONCE NOTICE U/S 153A OF THE ACT ISSUED, THEN ASSESSMENT FOR SIX YEARS SHALL BE AT LARGE BOTH FOR ASSESSING OFFICER AND ASSESSEE HAVE NO WARRANT OF LAW. IT HAS BEEN ALSO HELD THAT IN THE ASSESSMENT YEARS WHERE ASSESSMENTS HAVE BEEN ABATED IN TERMS OF SECOND PROVISO TO SECTION 153A THEN ASSESSING OFFICER ACTS UNDER ORIGINAL JURISDICTION AND ONE ASSESSMENT IS MADE FOR TOTAL INCOME INCLUDING THE ADDITION MADE ON THE BASIS OF SEIZED MATERIAL. M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 20 BUT WHERE THERE IS NO ABATEMENT OF ASSESSMENTS AND ASSESSMENTS WERE COMPLETED ON THE DATE OF SEARCH THEN ADDITION CAN BE MADE ONLY ON THE BASIS OF INCRIMINATING DOCUMENTS OR UNDISCLOSED ASSETS, ETC. IN THESE CASES THERE WAS NO INCRIMINATING DOCUMENT FOUND AND SEIZED. NO ASSESSMENT PROCEEDINGS WERE ABATED IN THESE ASSESSEES. THUS ASSESSMENTS FOR THESE ASSESSMENT YEARS WERE COMPLETED ON THE DATE OF SEARCH. THE ASSESSMENTS WERE COMPLETED U/S 143(3) OF THE ACT READ WITH SECTION 153A/153C OF TH E ACT AFTER THE SEARCH. THERE WAS NO ABATEMENT OF ANY PROCEEDINGS IN THESE CASES FOR THESE ASSESSMENT YEARS IN TERMS OF SECOND PROVISO TO SECTION 153A OF THE ACT. THERE IS NO SEIZED MATERIAL BELONGING TO T HE ASSESSEE WHICH WAS FOUND AND SEIZED IN RELATION TO ADDITIONS MADE. IN A RECENT DECISION, HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWLA (SUPRA) HAS HELD THAT COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE ASSESSING OFFICER WHILE MAKING ASSESSMENT U/S 153A OF THE ACT, ONLY ON THE BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH OR REQUISITION OF DOCUMENTS OR UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH WHICH WAS NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. IN ALL THESE CAS ES NO ASSESSMENTS WERE PENDING ON THE DATE OF SEARCH FOR THESE ASSESSMENT YEARS. NO ASSESSMENTS WERE ABATED IN TERMS OF SECOND PROVISO TO SECTION 153A O F THE ACT. HON'BLE DELHI HIGH COURT IN THE CASE OF C IT VS. KABUL CHAWLA (SUPRA) HAS CONSIDERED VARIOUS HIGH COURT DECISIONS RELIED UPON BY THE LEARNED DR. THE HON'BLE DELHI HIGH COURT HAS CONSIDERED THE CASES OF CANARA HOUSING DEVELOPMENT CO. VS. DCIT; M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 21 MADUGULA VS. DCIT; CIT VS. CHETANDAS LAXMANDAS AND CIT VS. ANIL KUMAR BHATIA (SUPRA). THE ONLY DECISION OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. RAJ KUMAR ARORA; 367 ITR 517 RELIED ON BY THE LEARNED DR WAS NOT CONSIDERED BY HON'BLE DELHI HIGH COURT WHILE DECIDING THE ISSUE IN THE CA SE OF KABUL CHAWLA. THE HON'BLE ALLAHABAD HIGH COURT HAS REVERSED THE ORDER OF THE TRIBUNAL AND REMANDED THE ISSUE TO THE TRIBUNAL TO CONSIDER THE APPEAL OF THE DEPARTMENT ON MERITS. IT IS A SETTLED LEGAL POSITIO N THAT WHEN TWO VIEWS ARE POSSIBLE ON A PARTICULAR ISSUE THEN THE VIEW FAVOURABLE TO THE ASSESSEE SHOULD BE FOLLOWED AS HELD BY THE HON'BLE APEX COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS; 88 ITR 192. RESPECTFULLY FOLLOWING THE DECISION OF TH E HON'BLE APEX COURT, WE DISMISS THE GROUND OF APPEALS OF THE REVENUE. DEPARTMENTAL APPEALS ARE DISPOSED ACCORDINGLY. 12. FOLLOWING THE ABOVE DECISION OF THE TRIBUNAL, W E ALLOW THESE GROUNDS OF THE ASSESSEE IN THE A.YS. WHERE NO INCRI MINATING DOCUMENTS WERE FOUND AND SEIZED AND NO ASSESSMENTS WERE ABATED. 13. GROUND NO.2.0 (A.YS.: 2007-08) OF ASSESSEES APPE ALS READS AS UNDER : ASSESSMENT YEAR : 2007-08 REJECTION OF ASSESSEES CLAIM FOR INTEREST PAID TO M/S ADROIT AGRO AND ALLIED INDUSTRIES : RS.7,52,839/- 2.0 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN LAW AS WELL AS IN FACTS IN CONFIRMING REJECTION OF ASSESSE ES CLAIM FOR DEDUCTION OF RS.7,52,839/- ON ACCOUNT OF INTEREST P AID TO M/S. ADROIT AGRO AND ALLIED INDUSTRIES BY THE ASSESSING OFFICER . M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 22 THERE BEING FACTUAL MISTAKE IN GROUND OF APPEAL. TH E GROUND NO.2.0 (A.YS.: 2007-08) OF ASSESSEES APPEALS WAS R EVISED AS UNDER : 2.0 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN LAW AS WELL AS IN FACTS IN CONFIRMING REJECTION OF ASSESSE ES CLAIM FOR DEDUCTION OF RS.7,50,426/- ON ACCOUNT OF INTEREST P AID TO THE BELOW MENTIONED UNSECURED LOAN CREDITORS BY THE ASSESSING OFFICER. S.NO. NAME OF LOAN CREDITORS INTEREST (RS.) T.D.S. (RS.) 1. LEKHRAJ STEEL PVT. LTD. 31,061 6,444 2. RATNAGIRIVINIMAY PVT. LTD. 1,00,442 20,738 3. SIGNET OVERSEAS LTD. 6,18,923 1,38,886 7,50,426 1,66,068 DURING THE YEAR, THE ASSESSEE PAID INTEREST AMOUNTING TO RS.7,52,839/- TO THE FOLLOWING UNSECURED LOAN CREDIT ORS:- S.NO. NAME OF LOAN CREDITORS INTEREST (RS.) T.D.S. (RS.) 1. LEKHRAJ STEEL PVT. LTD. 31,061 6,444 2. RATNAGIRIVINIMAY PVT. LTD. 1,00,442 20,738 3. SIGNET OVERSEAS LTD. 6,18,923 1,38,886 7,50,426 1,66,068 IN THE ORIGINAL RETURN OF INCOME, THE ASSESSEE DISALLO WED THE IMPUGNED INTEREST U/S. SECTION 40(A)(IA) OF THE I NCOME- TAX ACT, 1961 (BEFORE AMENDMENT TO FIRST PROVISO) BE CAUSE TDS THEREON WAS PAID ON 03.06.2007 AS AGAINST DUE DATE OF 31.05.2007. IN THE RETURN OF INCOME FILED PURSUAN T TO NOTICE U/S.153A, THE ASSESSEE CLAIMED DEDUCTION OF IN TEREST BECAUSE TDS WAS PAID BEFORE DUE DATE OF FILING OF RETUR N OF M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 23 INCOME IN TERMS OF FIRST PROVISO TO SEC.40(A)(IA) (AS AMENDED BY FINANCE ACT, 2010). HOWEVER, THE ASSESSING OFFICER REJECTED THE ASSESSEES CLAIM BY HOLDING THAT THE ASSESSEE COULD NOT MAKE NEW CLAIM IN ITS FAVOUR IN THE RETURN OF INCOME FILED PURSUANT TO NOTICE U/S.153A. THE CONTENTION OF THE A.O. IS AS UNDER : A) THE CONTENTION OF THE FRESH CLAIM OF DEDUCTIONS OF THE ASSESSEE FOR THE RETURN FILED U/S.153A IS REJECTED AS THE ASSESSEE CANNOT MAKE THE FRESH CLAIM FOR DEDUCTION/EXEMPTION IN PROCEEDINGS INITIATED U/S.153A OF THE ACT. B) IF THE ASSESSEE FOUND ANY MISTAKE IN HIS ORIGINAL RETURN OF INCOME, THE CORRECT COURSE WAS TO REVISE THE RETURN WHICH HAS NOT BEEN DONE. THE C.I.T.(A.) RELYING ON THE JUDGEMENT OF JAI STEEL INDIA VS. A.C.I.T. [36 TAXMAN.COM 523 (RAJ)] AND CHARCHIT AGARWAL VS. A.C.I.T. [34 SOT 348 (ITAT-DEL)], THE C.I.T.(A). HE LD THAT M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 24 WHERE A CLAIM FOR DEDUCTION/EXEMPTION WAS NOT MADE BY THE ASSESSEE IN RETURN OF INCOME FILED UNDER ORIGINAL RETURN OF INCOME, NO FRESH DEDUCTION OR CLAIM CAN BE MADE BY THE ASSESSEE IN THE RETURN OF INCOME FILED U/S.153A PURS UANT TO A SEARCH U/S.132 OR REQUISITION U/S.132A BECAUSE THE PROCEEDINGS U/S.153A ARE FOR THE BENEFIT OF REVENUE AND NOT FOR THE BENEFIT OF THE ASSESSEE. 14. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED TH AT THE CLAIMS/DEDUCTIONS MADE BY THE ASSESSEE WHILE FILI NG THE RETURN OF INCOME PURSUANT TO NOTICE U/S.153A WE RE SUCH CLAIM/DEDUCTIONS WHICH WERE LEGALLY ALLOWABLE TO THE ASSESSEE. IN THE ASSESSEES CASE, THE ASSESSEE CLAIMED DEDUCTION IN RESPECT OF INTEREST PAID TO VARIOUS PARTI ES, THE T.D.S. IN RESPECT THEREOF WAS PAID ON 03.06.2007 I.E. MUCH BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME . SECTION 40(A)(IA), AFTER AMENDMENT BY FINANCE ACT, 2010 , READS AS UNDER: M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 25 NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIO NS 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTIN G THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS OR PROFESSION, (IA) ANY INTEREST, COMMISSION OR BROKERAGE, [RENT , ROYALTY,] FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR F OR CARRYING OUT ANY WORK) ] , ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTE R XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, [HA S NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139 :] PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEE N DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCTED DURING TH E PREVIOUS YEAR BUT PAID AFTER THE DUE DATE SPECIFIED IN SUB-SECTION (1 ) OF SECTION 139 , [ THIRTY PER CENT OF ] SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUT ING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS B EEN PAID : EXPLANATION- FOR THE PURPOSE OF THIS SUB-CLAUSE, .. ........... ON A PLAIN READING OF THE PROVISO (INTRODUCED BY FINAN CE ACT, 2010), IT EMERGES THAT IF THE ASSESSEE HAS DEDUC TED THE TAX AT SOURCE AND PAID THE SAME BEFORE THE DUE DATE FOR FILING OF RETURN OF INCOME U/S. 139(1), NO DISALLOW ANCE U/S. 40(A)(IA) SHOULD BE MADE. BEING CLARIFICATORY IN NATURE, THE IMPUGNED PROVISO WAS HELD TO BE RETROSPECTIVE IN OPE RATION. THE HONOURABLE DELHI HIGH COURT HELD IN THE CASE OF CIT V. RAJINDER KUMAR (39 TAXMANN.COM 126 ) THAT EVEN PRIOR TO THE AMENDMENT MADE BY FINANCE BILL, 2010, SECTION 4 0(A)(IA) HAD STIPULATED THAT IN CASE WHERE THE TAX WAS DEDUC TABLE M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 26 AND SO DEDUCTED DURING THE LAST MONTH OF THE PREVIO US YEAR BUT WAS PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SECTION 139(1) OF THE ACT, DEDUCTION/EXPENDITURE WILL BE AL LOWED IN THE PREVIOUS YEAR NOTWITHSTANDING THE MAIN SECTION. THE SECTION AS WELL AS THE PROVISO BEFORE THE AMENDMENT IN 2010 HAD AMBIGUITIES AND DOUBTS. THE PROVISO AS AMENDED BY FINANCE ACT, 2008 WITH RETROSPECTIVE EFFECT FROM 1S T APRIL, 2005 WAS NOT FREE FROM INTERPRETATIVE DIFFICULTIES AND PROBLEMS. THIS ASPECT IS HIGHLIGHTED ABOVE. THE INT ENTION BEHIND SECTION 40(A)(IA) IS TO ENSURE THAT TDS IS D EDUCTED AND PAID. THE OBJECT OF INTRODUCTION OF SECTION 40( A)(IA) IS TO ENSURE THAT TDS PROVISIONS ARE SCRUPULOUSLY IMPLEME NTED WITHOUT DEFAULT IN ORDER TO AUGMENT RECOVERIES. IT IS NOT TO PENALISE AN ASSESSEE WHEN PAYMENT HAS BEEN MADE WIT HIN THE TIME STATED. FAILURE TO DEDUCT TDS OR DEPOSIT T DS RESULTS IN LOSS OF REVENUE AND MAY DEPRIVE THE GOVERNMENT O F THE TAX DUE AND PAYABLE. THE PROVISION SHOULD BE INTERP RETED IN M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 27 A FAIR, JUST AND EQUITABLE MANNER. IT SHOULD NOT BE INTERPRETED IN A MANNER WHICH RESULTS IN INJUSTICE AND CREATES TAX LIABILITIES WHEN TDS HAS BEEN DEPOSITED /PAID..... (PARA 26) 15. SIMILAR VIEW WAS TAKEN BY THE HONOURABLE CALCUTTA HIGH COURT IN THE CASE OF C.I.T. VS. VIRGIN CREATION (I.T.A.302/2011 DATED 23.11.2011) AND IT HELD AS UNDER : THE LEARNED TRIBUNAL ON FACT FOUND THAT THE ASSESS EE HAD DEDUCTED TAX AT SOURCE FROM THE PAID CHARGES BETWEEN THE PERIOD APR IL 1, 2005 AND APRIL 28, 2006 AND THE SAME WERE PAID BY THE ASSESSEE IN JULY AND AUGUST 2006, I.E. WELL BEFORE THE DUE DATE OF FILING OF TH E RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION. THIS FACTUAL POSITION WAS UNDISPUTED. MOREOVER, THE SUPREME COURT, AS HAS BEEN RECORDED BY THE LEAR NED TRIBUNAL, IN THE CASE OF ALLIED MOTORS PVT. LTD. AND ALSO IN THE CAS E OF ALOM EXTRUSIONS LTD., HAS ALREADY DECIDED THAT THE AFORESAID PROVISION HA S RETROSPECTIVE APPLICATION. AGAIN, IN THE CASE REPORTED IN 82 ITR 570, THE SUPREME COURT HELD THAT THE PROVISION, WHICH HAS INSERTED THE REM EDY TO MAKE THE PROVISION WORKABLE, REQUIRES TO BE TREATED WITH RET ROSPECTIVE OPERATION SO THAT REASONABLE DEDUCTION CAN BE GIVEN TO THE SECTI ON AS WELL. IN VIEW OF THE AUTHORITATIVE PRONOUNCEMENT OF THE SUPREME COURT, T HIS COURT CANNOT DECIDE OTHERWISE. HENCE WE DISMISS THE APPEAL WITHOUT ANY ORDER AS TO COSTS . 16. IN THE ASSESSEES CASE, THE TDS ON INTEREST WAS DEPOSITED ON 03.06.2007 WHICH WAS WELL BEFORE THE DU E DATE OF FILING OF RETURN OF INCOME U/S.139(1) [THE D UE DATE OF FILING OF RETURNOF INCOME U/S.139(1) IN THE ASSES SEES M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 28 CASE WAS 15.11.2007].CONSIDERING THE FACTUAL & LEGAL POSITION EXPLAINED ABOVE, YOUR HONOUR IS HUMBLY REQUES TED TO KINDLY DELETE THE DISALLOWANCE OF INTEREST PAID U/S . 40(A)(IA). 17. WITHOUT PREJUDICE TO THE ABOVE, IT IS SUBMITTED THAT IF YOUR HONOUR UPHELD THE DISALLOWANCE OF INTEREST MADE B Y THE ASSESSING OFFICER IN THE ASSESSMENT YEAR 2007-08, THE SAME MAY BE ALLOWED IN THE IMMEDIATELY SUCCEEDING YEAR I.E. ASSESSMENT YEAR 2008-09 (AS CLAIMED BY THE ASSESSE E IN ITS ORIGINAL RETURN OF INCOME FILED U/S.139) IN W HICH TDS WAS PAID BY THE ASSESSEE. 18. IT IS SUBMITTED THAT BY THE VERY NATURE OF THE ASSESSEES CLAIM, THE ASSESSING OFFICER SHOULD HAVE ALLO WED THESE DEDUCTIONS ON HIS OWN AND HE SHOULD NOT HAVE T AKEN ADVANTAGE OF ASSESSEES IGNORANCE. IN THIS REGARD THE RELIANCE IS PLACE ON THE CIRCULAR NO.14(XL-35), DATED A PRIL M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 29 11, 1955 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES, WHICH READS AS UNDER : (3) OFFICERS OF THE DEPARTMENT MUST NOT TAKE ADVANTAGE OF IGNORANCE OF AN ASSESSEE AS TO HIS RIGHTS. IT IS ONE OF THEIR DUTIE S TO ASSIST A TAXPAYER IN EVERY REASONABLE WAY, PARTICULARLY IN THE MATTER OF CLAIMING AND SECURING RELIEFS AND IN THIS REGARD THE OFFICERS SH OULD TAKE THE INITIATIVE IN GUIDING A TAXPAYER WHERE PROCEEDINGS OR OTHER PARTICULARS BEFORE THEM INDICATE THAT SOME REFUND OR RELIEF IS DUE TO HIM. THIS ATTITUDE WOULD, IN THE LONG RUN, BENEFIT THE DEPART MENT FOR IT WOULD INSPIRE CONFIDENCE IN HIM THAT HE MAY BE SURE OF GE TTING A SQUARE DEAL FROM THE DEPARTMENT. ALTHOUGH, THEREFORE, THE RESPO NSIBILITY FOR CLAIMING REFUNDS AND RELIEFS RESTS WITH ASSESSEE ON WHOM IT IS IMPOSED BY LAW, OFFICERS SHOULD- (A) DRAW THEIR ATTENTION TO ANY REFUNDS OR RELIEFS TO W HICH THEY APPEAR TO BE CLEARLY ENTITLED BUT WHICH THEY HAVE OMITTED TO CLAIM FOR SOME REASON OR OTHER ; (B) FREELY ADVISE THEM WHEN APPROACHED BY THEM AS TO TH EIR RIGHTS AND LIABILITIES AND AS TO THE PROCEDURE TO BE ADOPT ED FOR CLAIMING REFUNDS AND RELIEFS. THE HONOURABLE BOMBAY HIGH COURT HELD IN THE CASE OF SANCHIT SOFTWARE AND SOLUTIONS P. LTD. VS. C.I.T. [201 2] (349 ITR 404) AS UNDER : IN ANY CIVILIZED SYSTEM, THE ASSESSEE IS BOUND TO P AY THE TAX WHICH HE LIABLE UNDER THE LAW TO THE GOVERNMENT. THE GOVERNM ENT ON THE OTHER HAND IS OBLIGED TO COLLECT ONLY THAT AMOUNT OF TAX WHICH IS LEGALLY PAYABLE BY AN ASSESSEE. THE ENTIRE OBJECT OF ADMINISTRATION OF TA X IS TO SECURE THE REVENUE FOR THE DEVELOPMENT OF THE COUNTRY AND NOT TO CHARG E ASSESSEE MORE TAX THAN THAT WHICH IS DUE AND PAYABLE BY THE ASSESSEE. IT IS IN AFORESAID CIRCUMSTANCES THAT AS FAR BACK AS IN 11-4-1955 THE CENTRAL BOARD OF DIRECT TAX HAD ISSUED A CIRCULAR DIRECTING ASSESSING OFFIC ER NOT TO TAKE ADVANTAGE OF ASSESSEES IGNORANCE AND/OR MISTAKE. THEREFORE, THE ABOVE CIRCULAR M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 30 SHOULD ALWAYS BE BORNE IN MIND BY THE OFFICERS OF T HE RESPONDENT REVENUE WHILE ADMINISTERING THE SAID ACT. [PARA 5] THERE WAS A FUNDAMENTAL ERROR IN THE ORDER OF C.I.T . AS IT PROCEEDS ON THE ERRONEOUS BASIS THAT THE ASSESSEE HAD ADMITTEDLY NO T CLAIMED THE BENEFIT OF SECTIONS 10(34) AND 10(38) IN RESPECT OF ITS DIV IDEND INCOME AND LONG TERM CAPITAL GAINS ON SALE OF SHARES RESPECTIVELY I N ITS RETURN OF INCOME. IN FACT, IN THE RETURN OF INCOME, THE ASSESSEE HAD ADM ITTEDLY SOUGHT TO EXCLUDE ITS DIVIDEND INCOME AND LONG TERM CAPITAL GAINS FRO M SALE OF SHARES UNDER SECTION 1O AS IS EVIDENT FROM THE RETURN OF INCOME. HOWEVER, IN THE RETURN OF INCOME AS FILED ORIGINALLY ON THE ASSESSEE BY MISTA KE, OMITTED TO EXCLUDE THE DIVIDEND INCOME AND INCOME FROM LONG TERM CAPIT AL GAINS FROM THE TOTAL INCOME BEING DECLARED BY IT. [PARA 6] THE HONOURABLE MADRAS HIGH COURT HELD IN THE CASE OF C.I.T. VS. GEO INDUSTRIES & INSECTICIDES (I) (P.) L TD. (234 ITR 541) AS UNDER : WE ARE OF THE VIEW THAT, WHEN THE ASSESSEE MADE A CLAIM FOR CONSIDERATION OF AN ITEM FOR DEDUCTION DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, IT IS THE DUTY OF THE ITO TO EXAMINE T HE CLAIM ON THE MERITS OF THE CLAIM. THE PRESENT CASE IS NOT A CASE WHERE THE ASSESSEE MADE A CLAIM WITH REFERENCE TO A MATTER WHICH WAS CONCLUDED AND HAS BECOME FINAL IN THE ORIGINAL ASSESSMENT PROCEEDINGS. BUT, ON THE OT HER HAND, IT WAS FOUND IN THE SUBSEQUENT YEARS ASSESSMENT PROCEEDINGS THA T THE LIABILITY OF THE ASSESSEE HAD ACCRUED WHEN THE SUIT FOR INJUNCTION F ILED BY THE ASSESSEE WAS DISMISSED BY THE CITY CIVIL COURT, MADRAS AND I N VIEW OF THE SUBSEQUENT EVENT THAT THE DEDUCTION MIGHT RELATE TO THE PRESENT ASSESSMENT YEAR, THE ASSESSEE MADE A CLAIM FOR DEDUCTION OF TH E DAMAGES AND WHEN SUCH A CLAIM WAS MADE, THE ITO WAS BOUND TO EXAMINE THE CLAIM ON MERITS AND IT IS NOT OPEN TO HIM TO REJECT THE CLAIM EVEN AT THE THRESHOLD AND REFUSE TO ENTERTAIN THE CLAIM. THE ZEAL OF THE ITO TO CARR Y OUT THE DIRECTIONS OF THE HIGHER AUTHORITY MAY BE JUSTIFIED, BUT AT THE SAME TIME IT SHOULD NOT PREVENT HIM FROM EXAMINING THE CLAIM OF THE ASSESSEE ON MER ITS. HIS DUTY TO MAKE AN ASSESSMENT DOES NOT BEGIN AND END WITH THE CARRY ING OUT THE DIRECTIONS OF THE COMMISSIONER OF INCOME-TAX AND HIS DUTY IS S OMETHING MORE, THAT IS, TO DETERMINE THE CORRECT TAXABLE INCOME. WE ARE OF THE OPINION, NOTHING PRECLUDES THE ASSESSEE FROM MAKING A CLAIM BEFORE T HE ITO AT THE TIME OF M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 31 FINALIZATION OF THE ASSESSMENT PROCEEDINGS AND EQUA LLY NOTHING PREVENTS THE ITO FROM EXAMINING THE CLAIM ON MERITS OF THE M ATTER. IT IS WELL TO REMEMBER THAT THE ASSESSMENT WAS BEING REDONE BY TH E ITO WITHIN FOUR YEARS FROM THE DATE OF THE ORIGINAL ASSESSMENT ORDE R AND WHEN HE IS ON THE PROCESS OF THE COMPLETION OF THE ASSESSMENT, HE IS BOUND TO CONSIDER EACH AND EVERY CLAIM PREFERRED BY THE ASSESSEE. LET US I MAGINE A CASE OF A CONCLUDED ASSESSMENT AND THERE ARE NO PENDING ASSES SMENT PROCEEDINGS, BUT WHEN THE ASSESSEE MAKES A CLAIM FOR DEDUCTION O F LOSSES, THE ITO CANNOT REFUSE TO ENTERTAIN THE CLAIM AND HE MAY REJ ECT THE CLAIM ON THE PARAMETERS FOUND IN S. 154 OF THE ACT. IN THE INSTA NT CASE, IT IS A STRONGER CASE FOR THE ASSESSEE AS THE ITO WAS DIRECTED TO DE TERMINE THE CORRECT TOTAL INCOME OF THE ASSESSEE ACCORDING TO LAW AND DURING THAT PROCEEDINGS WHEN THE ASSESSEE MAKES A CLAIM, THE ITO IS BOUND TO CON SIDER THE CLAIM OF THE ASSESSEE. WE ARE OF THE OPINION THAT, WHILE CONSIDE RING SUCH A CLAIM, THE QUESTION OF FULFILLMENT OF THE CONDITIONS FOR RECTI FICATION IS NOT A SINE QUA NON AND EVEN THE CONDITIONS TO RECTIFY THE MISTAKES ARE NOT PRESENT, THE ITO, IN OUR OPINION, SHOULD EXAMINE THE CLAIM OF THE ASSESS EE ON MERITS OF THE CASE. THE POWER OF THE ITO TO MAKE THE ASSESSMENT A S OBSERVED BY THIS COURT IN C.I.T. VS. SETH MANICKLALFOMRA (SUPRA) IS DERIVED FROM THE STATUTORY PROVISIONS OF S.143(3) OF THE ACT. THOUGH THE SUPREME COURT IN THE CASE OF MODI INDUSTRIES LTD. VS. C.I.T. (SUPRA) HAS HELD THAT THE JURISDICTION OF THE ITO IS DERIVED FROM THE ORDER OF THE C.I.T., HIS JURISDICTION TO ALLOW OR DISALLOW THE CARRY FORWARD LOSSES OF THE DEFUNCT BU SINESS WOULD BE DERIVED FROM THE ORDER OF THE C.I.T., BUT IN OTHER RESPECTS AND, FOR COMPLETING THE ASSESSMENT, HIS POWERS WOULD BE TRACEABLE TO S. 143 (3) OF THE ACT. THIS COURT IN FAIZUNNISSABEGAM VS. ASSTT. CED (SUPRA) HA S INDICATED SUCH AN APPROACH AND IT WAS HELD THAT IN SO FAR AS OTHER IT EMS NOT CONSIDERED BY THE HIGHER AUTHORITIES ARE CONCERNED, THE POWER OF THE ITO TO REASSESS THE INCOME WOULD BE TRACEABLE TO THE PROVISIONS OF THE STATUTE. THEREFORE, THE REFUSAL OF THE ITO EVEN TO CONSIDER THE CLAIM OF TH E ASSESSEE IS NOT JUSTIFIABLE AND WE ARE OF THE OPINION THAT BOTH THE C.I.T.(A) AND THE TRIBUNAL WERE RIGHT IN DIRECTING THE ITO TO CONSIDER THE CLA IM OF THE ASSESSEE ON THE MERITS OF THE MATTER. THOUGH WE ARE NOT AGREEING WI TH THE VIEW EXPRESSED BY THE TRIBUNAL THAT THE ENTIRE ASSESSMENT ORDER WA S SET ASIDE BY THE C.I.T., STILL THE POWER OF THE ITO TO CONSIDER THE CLAIM OF THE ASSESSEE IS NEITHER CURTAILED NOR TAKEN AWAY BY THE ORDER OF TH E C.I.T. THE ITO WAS BOUND TO CONSIDER THE CLAIM OF THE ASSESSEE UNDER S . 143(3) OF THE ACT WHEN HE WAS IN FINAL PROCESS OF ASSESSMENT IN THE DETERM INATION OF TOTAL INCOME OF THE ASSESSEE AS THE ASSESSMENT PURSUANT TO THE D IRECTIONS OF THE C.I.T. HAS NOT REACHED THE STAGE OF FINALITY. WE FIND THAT THE CENTRAL BOARD IS M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 32 MORE LIBERAL IN ITS APPROACH AND DIRECTED THE ITO T O CONSIDER THE CLAIM OF STATUTORY DEDUCTION EVEN WHEN THE ASSESSEE HAS NOT MADE SUCH A CLAIM [VIDE: CIRCULAR NO. 14(XL-35) OF 1955 DT. : 11 TH APRIL, 1955 : CHOKSHI METAL REFINERY VS. C.I.T. (1977) 107 ITR 63 (GUJ) AT PAGE 71]. WE ARE OF THE OPINION, SUCH AN ATTITUDE OF THE ITO WOULD INSTIL C ONFIDENCE IN THE MINDS OF THE TAXPAYER THAT HIS INCOME WOULD BE PROPERLY DETE RMINED AND HE IS NOT REQUIRED TO PAY THE TAX, NEITHER ONE PAISE MORE NOR ONE PAISE LESS THAN WHAT IS CORRECTLY AND RIGHTLY DUE IN ACCORDANCE WIT H AND UNDER THE PROVISIONS OF THE STATUTE. IN THIS VIEW OF THE MATT ER, WE ARE OF THE OPINION THAT THE ORDER OF THE TRIBUNAL IS SUSTAINABLE IN LA W, THOUGH FOR DIFFERENT REASONS STATED ABOVE. THE HONOURABLE ALLAHABAD HIGH COURT HELD IN THE CASE OF RAJ RANI GULATI VS. C.I.T. CENTRAL TILAK,(2012) (346 I TR 543) AS UNDER : NEEDLESS TO MENTION THAT PROVISO OF SECTION 112(1) WAS INTRODUCED WITH EFFECT FROM 01.04.2000 BY THE FINANCE ACT, 1999. IN OTHER WORDS, IT WAS INTRODUCED DURING THE ASSESSMENT YEAR UNDER CONSIDE RATION AND ASSESSEE WAS NOT AWARE ABOUT LATEST AMENDMENT INTRODUCED BY THE FINANCE ACT, 1999 W.E.F. 01.04.2000. THOUGH IGNORANCE OF LAW HAS NO EXCUSE, BUT IT CAN BE EXCUSED IN TAX MATTER AS PER THE RATIO LAID DOWN IN THE CASE OF P. V. DEVASSY VS. C.I.T., 84 ITR 502 (KER). IT IS NOT EXP ECTED THAT THE DEPARTMENT SHALL TAKE THE ADVANTAGE OF ASSESSEES IGNORANCE AS PER CB.D. T. CIRCULAR NO.14 (XL 35)1955 DATED 11 APRIL 1955. EVEN UNDER THE BONAFIDE BELIEF, THE ASSESSEE HAS SHOWN THE LONG TERM CAPITAL GAIN A T THE RATE OF 20%, BUT IT WAS EXPECTED FROM THE A.O. TO KNOW THE LATEST AMEND MENT. THE MISTAKE MIGHT HAVE BEEN CORRECTED BY PASSING AN ORDER UNDER SECTION 154 OF THE ACT. IN THE CASE OF C.I.T. VS. MAHALAXMI SUGAR MILL S CO. LTD. (1986) 160 ITR 920 (SC), IT WAS OBSERVED THAT: THERE IS A DUTY CAST ON THE INCOME-TAX OFFICER TO APPLY THE RELEVANT PROVISIONS OF THE INDIAN INCOME-TAX ACT FOR THE PUR POSE OF DETERMINING THE TRUE FIGURE OF THE ASSESSEES TAXAB LE INCOME AND THE CONSEQUENTIAL TAX LIABILITY. THUS THE ASSESSEE FAIL S TO CLAIM THE BENEFIT OF A SET-OFF CANNOT RELIEVE THE INCOME-TAX OFFICER OF HIS DUTY TO APPLY SECTION 24 IN AN APPROPRIATE CASE. M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 33 SIMILAR VIEW WAS TAKEN BY THE HONOURABLE I.T.A.T. IND ORE IN THE CASE OF SUBHADRA DEVI GUPTA VS. A.C.W.T. (WTA NOS. 1 TO 6/IND/2012 DT.28.06.2013). 19. IN VIEW OF THE ABOVE SUBMISSION, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED TO ALLOW THE LEGITIMATE CLAIMS/DEDUCTIONS OF THE ASSESSEE NOTWITHSTANDING THE FACT THAT THESE CLAIMS WERE NOT MADE IN THE ORIGINAL RETURN OF INCOME FILED U/S.139(1) OF THE ACT. 20. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. W E HAVE ALREADY DECIDED THIS ISSUE AGAINST THE ASSESSEE IN OTHER GROUP CASES BY HOLDING THAT NO FRESH CLAIMS CAN BE MADE IN RETURN FILED U/S 153A OF THE ACT. IN THE CASE OF MUKESH SANGLA HUF, WE HAVE DECIDED THE SIMILAR ISSUE AS UNDER :- 65. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE AND ALSO GONE THROUGH THE CASE LAW RELIED UPON. WHI LE FILING THE RETURN OF INCOME U/S 153A/153C OF THE AC T M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 34 SOME OF THESE ASSESSEE HAVE CLAIMED DEDUCTION U/S 80C AND 80D OF THE ACT. NO SUCH CLAIM WAS MADE WHIL E FILING THE RETURN OF INCOME U/S 139(1)/139(4) OF TH E ACT. SINCE WE HAVE ALREADY ALLOWED THE APPEAL OF THE ASSESSEE ON THE GROUND OF ISSUE OF RECORDING SATISFACTION PRIOR TO ISSUE OF NOTICE U/S 153C OF T HE ACT AND ALSO ON THE GROUND THAT NO INCRIMINATING DOCUME NT WAS FOUND AND SEIZED, THEREFORE, THERE IS NO QUESTI ON OF ALLOWING SUCH DEDUCTION TO THE ASSESSEE. FURTHER WE WOULD ALSO LIKE TO STATE THAT THE PROVISIONS OF SEC TION 153A/153C ARE NOT MADE FOR THE BENEFIT OF THE ASSESSEE. RETURN FILED IN RESPONSE TO NOTICE U/S 153A/153C OF THE ACT IS NOT SUBSTITUTE OF REVISED R ETURN FOR THE CLAIM OF SUCH BENEFITS. HON'BLE APEX COURT IN THE CASE OF GOETZE (INDIA) LIMITED VS. CIT; 284 ITR 323 RULED OUT THAT A FRESH CLAIM BEFORE THE ASSESSING O FFICER CAN BE MADE ONLY BY FILING A REVISED RETURN AND NOT M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 35 OTHERWISE. THEREFORE, WHATEVER CLAIM THE ASSESSEE HAS NOT MADE WHILE FILING THE RETURN U/S 139(1)/139(4) OF THE ACT, HE CANNOT MAKE FRESH CLAIM BY FILING THE R ETURN U/S 153A/153C OF THE ACT AND REDUCE THE TAXABLE INCOME ORIGINALLY DECLARED. SUCH VIEW HAS BEEN UPHE LD BY THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF JAI STEELS (INDIA) VS. ACIT (SUPRA). THEREFORE, THIS GR OUND OF THE ASSESSEES APPEAL STANDS DISMISSED. 21. FOLLOWING THE ABOVE ORDER OF THE TRIBUNAL, WE FIN D NO MERIT IN THIS GROUND OF APPEAL WHERE FRESH CLAIMS HAVE BEEN MADE IN THE RETURN FILED IN RESPONSE TO NOTICE U/S 153A OF THE ACT AND THE SAME IS, THEREFORE, DISMISSED . GROUND NO.2.0 (A.Y.: 2008-09 & 2010-11) OF THE ASSE SSEES APPEAL AND GROUND NO.1 (A.Y.: 2008-09 & 2010-11) OF REVENUES APPEAL : 4.0 GROUND NO.2.0 (A.YS.: 2008-09 & 2010-11) OF ASSESSE ES APPEALS READS AS UNDER: ASSESSMENT YEAR : 2008-09 SALE PROCEEDS OF 3,10,550 SHARES OF ADROIT INDUSTRIES (INDIA) LTD. TREATED AS UNEXPLAINED INCOME : RS.1,25,00,000/- M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 36 2.0 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN LAW AS WELL AS IN FACTS IN CONFIRMING THE ADDITION OF RS.1,25,00,000/- MADE IN RESPECT OF SALE PROCEEDS O F 3,10,550 SHARES OF ADROIT INDUSTRIES (INDIA) LTD. B Y THE ASSESSING OFFICER, AS UNEXPLAINED INCOME OF THE ASS ESSEE. ASSESSMENT YEAR : 2010-11 ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE SHARES OF ADROIT INDUSTRIES (INDIA) LTD. : RS.9,05,337/- 2.0 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN LAW AS WELL AS IN FACTS IN CONFIRMING THE ADDITION OF RS.9,05,337/- MADE BY THE ASSESSING OFFICER ON ACCO UNT OF UNEXPLAINED INVESTMENT IN SHARES OF ADROIT INDUSTRI ES (INDIA) LTD. 4.1 GROUND NO.1 (A.YS.: 2008-09 & 2010-11) OF REVENUES APPEALS READS AS UNDER: ASSESSMENT YEAR : 2008-09 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE C.I.T.(A). ERRED IN DELETING THE ADDITION MADE ON A CCOUNT OF UNEXPLAINED INCOME OF RS.7,29,430/- BEING SALE PROC EEDS OF SHARES. ASSESSMENT YEAR : 2010-11 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE C.I.T.(A). ERRED IN RESTRICTING THE ADDITION MADE O N ACCOUNT OF UNEXPLAINED INVESTMENT IN THE SHARES OF ADROIT INDU STRIES (INDIA) LTD. TO RS.9,05,337/- AS AGAINST THE ADDITION OF RS .98,45,525/- MADE BY THE AO. M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 37 22. A SIMILAR ISSUE HAS BEEN DECIDED BY US IN THE CASE OF M/S MUKESH SANGLE HUF VIDE ORDER DATED 5.11.2015 WHEREIN WE HAVE HELD AS UNDER :- 45. THE FACTS IN RELATION TO INVESTMENT AND REACQUISITION OF SHARES OF ADROIT INDUSTRIES (INDIA ) LTD. ARE THAT THE SIGNET GROUP, SANGLA FAMILY AND ITS ASSOCIATES CONCERNS ACQUIRED MANAGEMENT CONTROL OF ADROIT INDUSTRIES (INDIA) LTD., INDORE, A 100% EXPO RT ORIENTED AUTO ANCILLARY UNIT, FROM ANAND FAMILY OF INDORE IN MARCH 2007. THERE IS NO DISPUTE REGARDING THE P RICE AT WHICH SHARES WERE ACQUIRED FROM ANAND FAMILY AS WELL AS FROM EMPLOYEES AND OTHER ASSOCIATES AND THE REVENUE DID NOT DISPUTE THE INVESTMENT BY SIGNET GR OUP, SANGLA FAMILY AND ITS ASSOCIATES CONCERNS. THE DETA ILS OF SHARES PURCHASED ARE AS FOLLOWS: NAME OF THE PARTIES NUMBER OF SHARES PRICE PER SHARES (RS.) TOTAL AMOUNT (RS.) ANAND FAMILY 56,06,750 40.25 22,56,71,688 M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 38 EMPLOYEES, ETC. 14,750 30.00 4,42,500 56,21,500 22,61,14,188 SHARES NOT ACQUIRED IN MARCH 2007 3,500 TOTAL 56,25,000 IN MAY 2007, VARIOUS ENTITIES OF SIGNET GROUP AND M EMBERS OF SANGLA FAMILY SOLD 22,88,025 SHARES TO SHALIMAR FERROUS METALS PVT. LTD., INDORE, (SHALIMAR) AT VARIOUS R ATES RANGING FROM RS.40.35 TO RS.44.80 PER SHARES. THE RESULTANT SHORT TERM CAPITAL GAIN WAS DULY SHOWN IN THEIR RETURN OF INCOME FILED BEFORE THE INCOME-TAX DEPARTMENT. AT THE END OF MARCH 2009, THE SIGNET GROUP WAS HOLDING ONLY 26.51% OF T HE TOTAL PAID UP SHARE CAPITAL OF ADROIT INDUSTRIES (INDIA) LTD. (14,91,400 SHARES) AND REST OF THE SHARES WERE HELD BY NON- SIGNET GROUP ENTITIES (41,33,600 SHARES). IN AUGUST AND SEPTEMBER 2009, THE SHARES OF ADROIT INDUSTRIES (IN DIA) LTD. HELD BY NON-SIGNET GROUP WERE ACQUIRED BY MEMBERS O F SANGLA FAMILY AND OTHER ASSOCIATE CONCERNS AT AROUN D RS.11.25 TO RS.12.25 PER SHARE. BY MARCH 2010, THE ENTIRE M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 39 SHARE CAPITAL OF ADROIT INDUSTRIES (INDIA) LTD. I.E . 56,25,000 SHARES OF ADROIT INDUSTRIES (INDIA) LTD. WERE AGAIN HELD BY VARIOUS ENTITIES OF MEMBERS OF SANGLA FAMILY AND AS SOCIATE CONCERNS. THE TOTAL FUNDS PROVIDED DIRECTLY OR INDI RECTLY FROM SIGNET INDUSTRIES LTD. AMOUNTED TO RS.16.47 CRORES APART FROM ITS OWN INVESTMENTS OF RS.6.00 CRORES IN SHARE S OF ADROIT INDUSTRIES (INDIA) LTD. ADROIT INDUSTRIES (INDIA) LTD. INCURRED EXPENSES TOWARDS PUBLIC ISSUE IN THE FINA NCIAL YEAR 2010-11 & 2011-12 DETAILS OF WHICH ARE AS UND ER :- FINANCIAL YEAR PUBLIC ISSUE EXPENSES (RS.) 2010-11 69,08,696 2011-12 14,72,210 83,80,906 46. THERE WERE NO EVIDENCES FOUND EITHER DURING SEARCH OR POST SEARCH ENQUIRIES OR DURING ASSESSMENT PROCEEDI NGS WHICH COULD SHOW THAT ANY PAYMENT OF ANY CONSIDERA TION OVER AND ABOVE THE RECORDED CONSIDERATION IN BOOKS OF M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 40 SANGLA FAMILY AND THEIR ASSOCIATE CONCERNS WERE PAI D OR RECEIVED AS UNACCOUNTED CASH OR OTHERWISE. 47. THE ASSESSING OFFICER HELD THAT NO PROMOTER WILL DIVEST 73.5% OF ITS HOLDING TO THIRD PARTIES AND TH AT TOO AT A VERY NOMINAL PROFIT, PARTICULARLY WHEN THE PROMOTER INTENDED TO GO PUBLIC AND ANTICIPATED SIGNIFICANT VALUE ADDI TION TO ITS INVESTMENT. ADROIT INDUSTRIES (INDIA) LTD. HAS BEEN CONSISTENTLY PERFORMING WELL. EVIDENT FROM THE FOLL OWING TABLE SHOWING YEAR WISE TURNOVER, PROFITABILITY AND EARNINGS PER SHARE: FINANCIAL YEARS TURNOVER PROFIT BEFORE TAX PROFIT AFTER TAX EARNING PER SHARE 31.03.2007 20,53,03,097 3,24,43,605 2,51,24,433 4.00 31.03.2008 22,11,45,868 2,79,53,727 1,68,66,562 3.00 31.03.2009 24,61,35,713 2,22,92,834 1,45,21,059 2.58 31.03.2010 16,98,84,237 3,13,32,877 2,06,68,119 3.67 31.03.2011 26,16,49,372 6,08,43,868 4,09,00,040 3.89 31.03.2012 23,45,32,888 4,56,79,338 3,20,21,038 3.05 31.03.2013 36,78,86,610 7,13,90,758 4,91,83,297 4.68 THE ASSESSEE HAS NOT GIVEN A SINGLE NAME EITHER OF ANY BROKER OR ANY INVESTOR THROUGH WHOM HE CONTACTED TH E ULTIMATE INVESTOR. ANY PRUDENT BUSINESS GROUP WILL ACQUIRE M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 41 ANOTHER COMPANY ONLY AFTER HAVING FIRM FINANCIAL TI E UPS. THE DIVESTMENT TO THE TUNE OF 73.5% IMMEDIATELY AFT ER ACQUIRING A COMPANY IS AGAINST ALL HUMAN PROBABILIT IES. THE CONTENTION OF THE ASSESSEE THAT DUE TO BAD CAPITAL MARKET SITUATION, THE GROUP COULD NOT GO PUBLIC AND WAS CO MPELLED TO ACQUIRE SHARES OF ADROIT INDUSTRIES (INDIA) LTD. AT RS.11 TO RS.12.5 PER SHARE IS ALSO NOT JUSTIFIED BECAUSE NO INVESTOR WOULD EVER INVEST IN THE SHARES OF THE UNLISTED COM PANY WITHOUT HAVING PROPER EXIT ROUTE AND WITHOUT ENSURI NG PROPER RETURNS ON HIS INVESTMENT PARTICULARLY WHEN THESE S HARES HAVE CHANGED MANY HANDS BEFORE COMING BACK TO SANGL A GROUP WHICH IS USUALLY NOT POSSIBLE IN CASE OF UNLI STED SHARES. THE ASSESSEE DID NOT BRING ANYTHING ON RECO RD THAT THERE WAS HIGH INTEREST BEARING DEBT TO BE DISCHARG ED OR WAS FACING ANY FINANCIAL LIQUIDITY PROBLEM. FURTHER, NO THING WAS BROUGHT ON RECORD TO SHOW THAT THE SALE PROCEEDS WE RE UTILIZED FOR DISCHARGING ANY INTEREST BEARING LIABI LITY. IF THE M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 42 ACQUISITION OF ADROIT INDUSTRIES (INDIA) LTD. WAS S O RISKY, WHY THE INVESTMENT IN ADROIT INDUSTRIES (INDIA) LTD . WAS MADE IN THE FIRST PLACE? IT IS NOT POSSIBLE TO ACCE PT THE ASSERTION OF THE ASSESSEE THAT THE DIVESTMENT OF PA RT OF THE INVESTMENT WAS TO REDUCE THE ASSESSEE GROUPS RISK. MERELY BECAUSE THE ENTIRE TRANSACTION WAS THROUGH BANKING CHANNELS WOULD NOT MAKE A SHAM TRANSACTION GENUINE. THE A.O. HELD THAT THESE INVESTOR COMPANIES WERE PAPER COMPANIES HAVING MEAGER PROFITS AND WERE NOT REGULA RLY FILING THEIR RETURN OF INCOME. THE GROUP DID NOT MA KE ANY ATTEMPT TO GO PUBLIC IN F.Y.2007-08 AND 2008-09. IT WAS ONLY AFTER THE SHARES OF ADROIT INDUSTRIES (INDIA) LTD. WERE ACQUIRED IN SEPTEMBER 2009, THAT THE GROUP TRIED FO R ITS PUBLIC ISSUE IN F.Y.2011-12. 48. THEREFORE THE CONTENTION OF THE ASSESSEE THAT THE SHARES WERE REACQUIRED FOR A PRICE RANGING FROM RS. 11.25 TO RS.12.25 PER SHARE DUE TO ITS INABILITY TO BRING OU T PUBLIC M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 43 ISSUE. THE DIVESTMENT OF SHARES OF ADROIT INDUSTRIE S (INDIA) LTD. WAS A SHAM TRANSACTION AS THESE COMPANIES DID NOT EXIST IN REAL SENSE. IN THEIR STATEMENT RECORDED DU RING THE ASSESSMENT PROCEEDINGS, SHRI PARASRAMPATIDAR AND SH RI VIMAL BANDI (BOTH OF THEM ARE EMPLOYEES OF SIGNET G ROUP) CATEGORICALLY ADMITTED THAT THEY HAD NEITHER ANY ID EA ABOUT THE ACTUAL AFFAIRS OF THE COMPANY NOR ANY INFORMATI ON ABOUT TRANSFER OF SHARES OF ADROIT INDUSTRIES (INDIA) LTD . SHALIMAR FERROUS METAL PVT. LTD. WAS USED AS A CONDUIT TO IN TRODUCE UNACCOUNTED AND UNEXPLAINED INCOME THROUGH BOGUS PA PER COMPANY LIKE LUCKY COMMOTRADE PVT. LTD. OF WHICH THE ULTIMATE BENEFICIARY IS THE ASSESSEE. SINCE THE ASS ESSEE HAS FINALLY RECEIVED THE AMOUNT IN THE GUISE OF SALE PR OCEEDS OF SHARES OF ADROIT INDUSTRIES (INDIA) LTD., THE SAME IS BROUGHT TO TAX AS UNEXPLAINED CASH CREDIT IN ASSESSMENT YEA R 2008- 09. THE REPURCHASE OF SHARES BY THE SIGNET GROUP, S ANGLA FAMILY AND ITS ASSOCIATE CONCERNS IN THE ASSESSMENT YEAR M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 44 2010-11 FROM VARIOUS PAPER COMPANIES WAS NOTHING BU T A COLOURABLE DEVICE AND AN ARRANGED AND MANAGED AFFAI R. THEREFORE THE DIFFERENCE BETWEEN THE FAIR MARKET VA LUE PER SHARE I.E. RS.40.25 AND COST OF REACQUISITION IS TR EATED AS UNEXPLAINED INVESTMENT OF THE ASSESSEE. ACCORDINGLY , THE FOLLOWING ADDITIONS ARE MADE: ASSESSMENT YEAR AMOUNT (RS.) REMARKS 2008-09 14,72,800 UNEXPLAINED CASH CREDIT 2010-11 1,02,65,813 UNEXPLAINED INVESTMENTS 49. THE C.I.T.(A) CONFIRMED THE ACTION OF THE A.O. AND REJECTED THE ASSESSEES CONTENTION. AGREEING TO THE FINDINGS OF THE ASSESSING OFFICER, C.I.T.(A) ALSO OBSERVED T HAT THE SANGLA GROUP HAD INTRODUCED CERTAIN MORE LAYERS OF ENTITIES IN WHOSE NAME THE SHARES WERE TRANSFERRED (IN SOME CASES SIX TRANSFERS) AND FINALLY REPURCHASED THE SHARES A T A PRICE OF RS.11.25 TO RS.12.25 PER SHARE. THE FLOW OF SHAR ES OF M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 45 ADROIT INDUSTRIES (INDIA) LTD. INVOLVING NUMBER OF TRANSFERS IS AS UNDER : CHART-I [FLOW OF TRANSFER OF 22,88,075 SHARES ORIGINALLY HE LD BY ANAND FAMILY] NAME OF SHAREHOLDER OF ANAND FAMILY NO. OF SHARES HELD 1 ST TRANSFER 2 ND TRANSFER DATE NAME NO. OF SHARES RATE AMOUNT DATE NAME NO. OF SHARES RATE AMOUNT JAGJIT SINGH ANAND 3,10,550 13.03.07 ORNATE LEASING & FINANCE PVT. LTD. 3,10,550 40.25 1,25,00,000 10.05.07 SHALIMAR FERROUS METALS PVT. LTD. 3,10,550 42.60 1,32,29,430 GAJENDRA KAUR ANAND JAGJIT SINGH ANAND 3,10,550 13.03.07 SIGNATE LEASING & FINANCE PVT. LTD. 3,10,550 40.25 1,25,00,000 10.05.07 SHALIMAR FERROUS METALS PVT. LTD. 3,10,550 40.35 1,25,30,693 GAJENDRA KAUR ANAND JAGJIT SINGH ANAND 2,00,000 13.03.07 SWAN HOLDING PVT. LTD. 2,00,000 40.20 80,40,625 10.05.07 SHALIMAR FERROUS METALS PVT. LTD. 2,00,000 40.40 80,80,000 GAJENDRA KAUR ANAND JAGJIT SINGH ANAND 3,10,550 13.03.07 SIGNET IMPEX PVT. LTD. 3,10,550 40.25 1,25,00,000 10.05.07 SHALIMAR FERROUS METALS PVT. LTD. 3,10,550 40.35 1,25,30,693 GAJENDRA KAUR ANAND JAGJIT SINGH ANAND 3,10,550 13.03.07 SWAN PETROCHEMICALS PVT. LTD. 3,10,550 40.25 1,25,00,000 10.05.07 SHALIMAR FERROUS METALS PVT. LTD. 3,10,550 40.65 1,26,23,858 GAJENDRA KAUR ANAND VIRENDRA SINGH ANAND 2,84,650 13.03.07 SAURABHSANGLA 2,84,650 40.25 1,14 ,57,163 10.05.07 SHALIMAR FERROUS METALS PVT. LTD. 2,84,650 44.20 1,25,81,530 NARINDER KAUR ANAND JAGJIT SINGH ANAND 3,10,550 13.03.07 PRANAY TRADE LINK PVT LTD 3,10,550 40.25 1,24,99,638 10.05.07 SHALIMAR FERROUS METALS PVT. LTD. 3,10,550 40.40 1,25,46,220 M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 46 ISHDEEP SINGH ANAND 3,750 13.03.07 M/S MUKESHSANGLA HUF 3,750 40.25 1,50,938 10.05.07 SHALIMAR FERROUS METALS PVT. LTD. 32,875 44.80 14,72,800 RUPINDER SINGH ANAND GAMANBHASIN 2,500 13.03.07 M/S MUKESHSANGLA HUF 2,500 40.25 1,00,625 RAJENDRAPAL SINGH BHASIN TARANJOT KAUR CHANDOK 17,875 13.03.07 M/S MUKESHSANGLA HUF 17,875 40.25 7,19,469 RANJEET SINGH CHANDOK RUPINDER SINGH ANAND 2,500 13.03.07 M/S MUKESHSANGLA HUF 2,500 40.25 1,00,625 PARMINDER KAUR ANAND PARMINDER KAUR ANAND 2,500 13.03.07 M/S MUKESHSANGLA HUF 2,500 40.25 1,00,625 RUPINDER SINGH ANAND JASHDEEP SINGH ANAND 3,750 13.03.07 M/S MUKESHSANGLA HUF 3,750 40.25 1,50,938 RUPINDER SINGH ANAND NAME OF SHAREHOLDER OF ANAND FAMILY NO. OF SHARES HELD 1 ST TRANSFER 2 ND TRANSFER DATE NAME NO. OF SHARES RATE AMOUNT DATE NAME NO. OF SHARES RATE AMOUNT KAMAL C. SANGHAVI 1,250 13.03.07 MUKESHSANGLA 1,250 30.00 37,500 10.05.07 SHALIMAR FERROUS METALS PVT. LTD. 217,750 40.85 8,895,088 VIRENDRA SINGH ANAND 103,800 13.03.07 MUKESHSANGLA 103,800 40.24 4,176,912 NARINDER KAUR ANAND JAGJIT SINGH ANAND 99,200 13.03.07 MUKESHSANGLA 99,200 40.32 4,000,000 GAJENDRA KAUR ANAND M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 47 ISHWERLALBHAVSAR 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 RAMESH SEN 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 RAMESH PAL 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 NEELKANTH BADE 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 D.G.KAMBLE 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 SHYAM SHARMA 500 13.03.07 MUKESHSANGLA 50 0 30.00 15,000 JYOTIVALLABHTRIPA THI 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 NARAYAN SURYAVANSHI 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 NAND K. VISHWAKARMA 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 GAJANANDGANGRE 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 TARACHAND JAIN 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 AFSAR ANSARI 500 13.03.07 MUKESHSANGLA 50 0 30.00 15,000 SHARAVAN KUMAR 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 MOHAN SINGH SIDDU 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 ASHOK KUMAR SAHU 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 SHAILESH VYAS 500 13.03.07 MUKESHSANGLA 5 00 30.00 15,000 AJAY GARUD 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 PARVATI BAI BABLE 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 RAMESH NIMBALKAR 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 D.N. VYAS 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 HARI SHANKAR GAUD 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 JAGJIT SINGH PUNJABI 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 ASHOK AWESTHI 500 13.03.07 MUKESHSANGLA 5 00 30.00 15,000 KISHORILAL PATEL 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 RAJESH SETH` 500 13.03.07 MUKESHSANGLA 50 0 30.00 15,000 PAHDURANGPAHALK AR 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 SURENDRA SINGH CHADDA 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 22,88,025 22,88,025 9,19,40,056 22,88,025 9 ,44,90,310 CHART II [FURTHER TRANSFER OF 22,88,025 SHARES OF CHART-I AN D 3,10,550 SHARES ORIGINALLY HELD BY M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 48 SHRI JAGJIT SINGH ANAND AND GAJENDRA KAUR ANAND = 2 5,98,575 SHARES] NAME OF SHAREHOLDER OF ANAND FAMILY NO. OF SHARES HELD 2 ND TRANSFER 3 RD TRANSFER DATE NAME NO. OF SHARES RATE AMOUNT DATE NAME NO. OF SHARES RATE AMOUNT JAGJIT SINGH ANAND 310,550 13.03.07 SHALIMAR F ERROUS METALS PVT. LTD. 310,550 40.25 12,500,000 10.12.07 LUCKY COMMOTRADEP VT LTD 2,598,575 41.37 107,510,026 GAJENDRA KAUR ANAND 310,550 310,550 12,500,000 2,598,57 5 107,510,026 4 TH TRANSFER 5 TH TRANSFER 6 TH TRANSFER DATE NAME NO. OF SHARES RATE AMOUNT DATE NAME NO. OF SHARES RATE AMOUNT DATE NAME NO. OF SHARES RATE AMOUNT 05.03.08 DOOLDRUM INVESTEMNT & FINANCE PVT LTD 7,20,300 41.46 2,98,63,638 08.09.0 9 SAURAB HSANGL A 2,59,750 11.50 29,87,125 08.09.0 9 MUKESH SANGLA 4,60,550 11.50 52,96,325 7,20,300 82,83,450 12.03.08 OSHIN INVESTMENT & FINANCE PVT LTD 6,36,075 40.48 2,57,48,316 12.09.0 9 MUKESH SANGLA 1,89,275 12.25 23,18,619 12.09.0 9 SAURAB HSANGL A 1,18,550 12.25 14,52,238 12.09.0 9 SMT. AVANTIK ASANGL A 2,00,000 12.25 24,50,000 12.09.0 9 CAN INDIA OVERSE AS 1,28,250 12.25 15,71,063 22.09.0 9 SIGNET IMPEXP VT LIMITED 1,28,25 0 12.25 15,71,063 6,36,075 77,91,919 1,28,25 0 15,71,063 M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 49 15.03.08 GYNESHWA R TRADING & CO. LTD 6,21,100 40.95 2,54,34,045 08.09.0 9 SAURAB HSANGL A 2,10,550 12.00 25,26,600 08.09.0 9 MUKESH SANGLA HUF 2,00,000 12.00 24,00,000 08.09.0 9 MONIKA SANGLA 2,10,550 12.00 25,26,600 6,21,100 74,53,200 28.03.08 SIDH HOUSING DEVELOPM ENT COMPANY LTD 6,21,100 40.90 2,54,02,990 12.09.0 9 MUKESH SANGLA HUF 1,60,550 11.50 18,46,325 12.09.0 9 MONIKA SANGLA 1,60,550 11.50 18,46,325 12.09.0 9 AVANTIK ASANGL A 3,00,000 11.50 34,50,000 6,21,100 71,42,650 25,98,57 5 10,64,48,98 9 25,98,575 3,06,71,2 19 CHART III [FLOW OF TRANSFER OF 12,94,775 SHARES ORIGINALLY HE LD BY MANJEET KAUR ANAND] NAME OF SHAREHOLDER OF ANAND FAMILY NO. OF SHARES HELD 1 ST TRANSFER 2 ND TRANSFER DATE NAME NO. OF SHARES RATE AMOUNT DATE NAME NO. OF SHARES RATE AMOUNT MANMEET KAUR ANAND 1,294,775 13.03.07 LUCKY COMMOTRADE PVT LTD 1,294,775 40.25 52,114,694 10.03.09 ISPAT SHEE TS LTD 397,540 40.55 16,120,247 19.03.09 CLIFTON SECURITIES PVT LTD 272,235 40.50 11,025,518 19.03.09 NOVELTY TRADERS LTD 375,000 40.55 15,206,250 M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 50 10.03.09 OLMPUS VISION PVT LTD 250,000 40.50 10,125,000 1,294,775 1,294,775 52,114,694 1,294,775 52,477,015 3 RD TRANSFER 4 TH TRANSFER DATE NAME NO. OF SHARES RATE AMOUNT DATE NAME NO. OF SHARES RATE AMOUNT 0 0 0 25.09.09 SWAN-HOLDING PVT LTD 1,52,500 11.5 0 17,53,750 26.09.09 ORNATE LEASING & FINANCE PVT LTD 2,45,040 11.50 28,17,960 3,97,540 45,71,710 20.03.09 ISPAT SHEET LTD 2,72,235 40.50 1,10,25,518 28.09.09 SHREE BALAJI STARCH & CHEMICALS LTD 2,72,235 11.50 31,30,703 0 0 0 22.09.09 SIGNATE LEASING & FINANCE PVT LTD 1,87,500 11.50 21,56,250 24.09.09 SIGNET IMPEXTPVT LTD 1,87,500 11.50 2 1,56,250 3,75,000 43,12,500 20.03.09 NOVELTY TRADERS PVT LTD 2,50,000 40.50 1,01,25,000 26.09.09 SHREE BALAJI ST ARCH & CHEMICALS LTD 2,50,000 11.50 28,75,000 12,94,775 1,48,89,913 CHART IV [FLOW OF TRANSFER OF 2,37,500 SHARES ORIGINALLY HEL D BY JAGJIT SINGH ANAND& GAJENDRA KAUR ANAND] NAME OF SHAREHOLDER OF ANAND FAMILY NO. OF SHARES HELD 1 ST TRANSFER 2 ND TRANSFER DATE NAME NO. OF SHARES RATE AMOUNT DATE NAME NO. OF SHARES RATE AMOUNT JAGJIT SINGH ANAND 2,37,500 13.03.07 MONIKA SANGLA 2,37,500 40.25 95,59,375 30.10.07 SIDDACHALDEVLO PERS P. LTD. 21,500 46.00 9,89,000 GAJENDRA KAUR ANAND 30.10.07 ANIKANT SHARE & SECURITY 21,500 46.00 9,89,000 M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 51 30.10.07 SAMYANK SHARE & STOCK BROKERS 21,500 46.00 9,89,000 30.10.07 SEA ENTERTAINMENT LTD. 21,500 46.00 9,89,000 30.10.07 SKY TOUCH INFRACTURE 28,000 46.00 12,88,000 30.10.07 PALASIA LEASING & FINANCE LTD. 47,500 46.00 21,85,000 30.10.07 UNO INDUSTRIES LTD. 76,000 46.00 34,96,000 2,37,500 2,37,500 95,59,375 2,37,500 1,09,25, 000 3 RD TRANSFER 4 TH TRANSFER DATE NAME NO. OF SHARES RATE AMOUNT DATE NAME NO. OF SHARES RATE AMOUNT 12.08.09 CAN-INDIA OVERSEAS LIMITED 21,500 11.50 2,47,250 21.09.09 ORNATE LEASING PVT LTD 97,000 11.38 11,03,625 13.08.09 CAN-INDIA OVERSEAS LIMITED 21,500 11.25 2,41,875 23.09.09 SIGNATE LEASING PVT LTD 64,500 11.33 7,30,785 13.08.09 CAN-INDIA OVERSEAS LIMITED 21,500 11.50 2,47,250 23.09.09 SWAN-HOLDING PVT LTD 76,000 11.50 8,74,000 14.08.09 CAN-INDIA OVERSEAS LIMITED 21,500 11.25 2,41,875 17.08.09 CAN-INDIA OVERSEAS LIMITED 28,000 11.50 3,22,000 18.08.09 CAN-INDIA OVERSEAS LIMITED 47,500 11.25 5,34,375 19.08.09 CAN-INDIA OVERSEAS LIMITED 76,000 11.50 8,74,000 M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 52 2,37,500 27,08,625 2,37,500 27,08,410 CHART V NAME OF SHAREHOLDER OF ANAND FAMILY NO. OF SHARES HELD 1 ST TRANSFER DATE NAME NO. OF SHARES RATE AMOUNT VIRENDRA SINGH ANAND 1,490,650 13.03.07 SIGNET OV ERSEAS LTD. 1,490,650 40.25 60,000,403 NARINDER KAUR ANAND YOGENDRA BHATIA 750 05.06.08 MUKESHSANG LA 750 30.00 22,500 50. THE REDUCTION IN MARKET VALUE OF ADROIT IN DUSTRIES (INDIA) LTD. FROM RS.40.25 IN FINANCIAL YEAR 2006-0 7 TO RS.11.25 TO RS.12.25 IN FINANCIAL YEAR 2009-10 IS B EYOND COMPREHENSION PARTICULARLY WHEN THE COMPANY IS CONSISTENTLY EARNING HIGHER PROFITS AS OBSERVED BY THE A.O. THE LEARNED CIT(A) ALSO OBSERVED THAT IT IS BEYOND COMPREHENSION THAT THE SIGNET GROUP, SANGLA FAMILY AND ITS ASSOCIATE CONCERNS WOULD DIVEST ABOUT 75% OF THEIR HOLDING TO UNRELATED PARTIES AFTER TAKING OVER THE CONTROL AND MANAGEMENT OF ADROIT INDUSTRIES (INDIA) LTD. THE CO NTENTION OF THE ASSESSEE ABOUT PUBLIC ISSUE OF ADROIT INDUST RIES (INDIA) LTD. IN FUTURE BEING A REASON FOR DIVESTMENT IS ALS O M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 53 UNCONVINCING. RELYING UPON THE CASE OF C.I.T. VS. RATHI FINLEASE LTD. (2008) 215 CTR 429 (MP) AND INDUSTRIA L FILTERS AND FABRICS PVT. LTD. [APPEAL NO.IT-185/09-10/510 O RDER DT.30.03.2012 PASSED BY C.I.T.(A), INDORE], IT WAS HELD THAT THE INTERMEDIARY COMPANIES LIKE SHRI ANIKET SHARES AND SECURITIES PVT. LTD., UNNO INDUSTRIES LTD., SIDDHAC HAL DEVELOPERS PVT. LTD. AND PALASIA LEASING AND INVEST MENT PVT. LTD. WERE ENTRY PROVIDERS. FURTHER, IN CASE OF SIGNET INDUSTRIES LTD., IT WAS HELD THAT LUCKY COMMOTRADE P VT. LTD. IS A PAPER COMPANY WHICH IS USED BY THE SANGLA GROU P TO INTRODUCE UNSECURED LOAN AND SHARE APPLICATION MONE Y WITHIN THE GROUP CONCERNS. THE TRANSACTION OF TRAN SFER OF SHARES OF ADROIT INDUSTRIES (INDIA) LTD. BY VARIOUS MEMBERS AND CONCERNS OF SANGLA GROUP WERE ONLY ACCOMMODATIO N ENTRIES AND NOT GENUINE TRANSACTIONS AND THEREFORE, THE AMOUNT OF SALE PROCEEDS CREDITED IN THE BOOKS OF VA RIOUS MEMBERS AND CONCERNS OF SANGLA GROUP AMOUNTED TO M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 54 UNEXPLAINED CASH CREDIT IN THE ASSESSMENT YEAR 2008 -09. HOWEVER, THE SHORT TERM CAPITAL GAIN WHICH WAS OFFE RED FOR TAXATION BY VARIOUS ENTITIES OF THE ASSESSEE GROUP WERE REDUCED FROM SALE PROCEEDS. THE WORKING IN THIS REG ARD IS AS UNDER: NO. OF SHARES SOLD RATE (RS.) SALE PROCEEDS (RS.) SHORT TERM CAPITAL GAIN (RS.) UNEXPLAINED CASH CREDIT (RS.) 32,875 44.80 14,72,800 1,49,580 13,23,220 FOR THE ASSESSMENT YEAR 2010-11, ASSUMING FAIR MARK ET VALUE OF THE SHARES AT RS.40.25 (ORIGINAL COST OF A CQUISITION FROM ANAND FAMILY IN MARCH 2007), THE DIFFERENCE BE TWEEN THE COST OF REACQUISITION AND FAIR MARKET VALUE WAS TREATED AS UNEXPLAINED INVESTMENT. HOWEVER, TO AVOID DOUBLE TAXATION, ADDITION ON ACCOUNT OF UNEXPLAINED INVEST MENT WAS NOT MADE IN RELATION TO SHARES SOLD BY THE GROUP EN TITIES IN ASSESSMENT YEAR 2008-09 AS THEIR SALE PROCEEDS WAS M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 55 BROUGHT TO TAX U/S.68 AS UNEXPLAINED CASH CREDIT. T HE WORKING IN THIS REGARD IS AS UNDER: NO. OF SHARES ACTUAL RATE PER SHARE (RS.) PURCHASE RATE DECLARED PER SHARE (RS.) DIFFERENCE UNEXPLAINED INVESTMENT A B C D (B C) E (D X A) 1,67,125 (200000- 32875) 40.25 12.00 28.25 47,21,281 1,60,550 40.25 11.50 28.75 46,15,813 3,27,675 93,37,094 ACCORDINGLY, THE FOLLOWING ADDITIONS WERE PARTLY CO NFIRMED : ASSTT. YEAR AMOUNT (RS.) REMARKS 2008-09 13,23,220 UNEXPLAINED CASH CREDIT 2010-11 93,37,094 UNEXPLAINED INVESTMENTS 51. BEFORE US, IT IS SUBMITTED THAT THE SOURCE OF INVESTMENT BY SIGNET GROUP, MEMBERS OF SANGLA FAMIL Y AND ITS ASSOCIATE CONCERNS IN MARCH 2007 FOR ACQUIRING 56,21,500 SHARES OF ADROIT INDUSTRIES (INDIA) LTD. ALONGWITH ITS CONTROL AND MANAGEMENT WAS NOT DISPUTED BY THE REVENUE AUTHORITIES. THE SOURCE OF INVESTMENT IN TH E SHARES M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 56 OF ADROIT INDUSTRIES (INDIA) LTD. WAS MAINLY OUT OF LOANS PROVIDED BY SIGNET INDUSTRIES LTD. AND PARTLY BY UN SECURED INTER-CORPORATE LOANS, WHICH WERE ADVANCED TO VARIO US GROUP ENTITIES AND LUCKY COMMOTRADE PVT. LTD. THROUGH SHA LIMAR FERROUS METALS PVT. LTD. (SHALIMAR). THE ASSESSEE HAS SUBMITTED A FUND FLOW CHART IN THIS REGARD. SHALI MAR FERROUS METALS PVT. LTD. (SHALIMAR) WAS INCORPORA TED ON 18.06.1986 UNDER THE PROVISIONS OF THE COMPANIES AC T, 1956, HAVING PAN NO. AAICS 4429G. IT WAS REGULARLY ASSESSED TO TAX. THE ASSESSMENT FOR ASSESSMENT YEAR 2007- 08 WAS COMPLETED U/S.143(3) R.W. SEC.264 OF THE INC OME-TAX ACT, 1961. THE RETURNED INCOME WAS ACCEPTED. DURIN G FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 200 7-08 SHALIMAR FERROUS METAL PVT. LTD. RECEIVED UNSECURED LOAN FROM FOLLOWING ENTITIES :- M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 57 NAME OF THE COMPANY P.A.NO. AMOUNT (RS.) NALANDA MERCHANT PVT. LTD. (OUT OF LOAN OF RS.3,50,00,000/- GIVEN BY SIGNET OVERSEAS LTD.) AACCN 2446 C 3,50,00,000 RATNAGIRIVINIMAY PVT. LTD. AABCR 1870 R 15,00,000 UTILITY EXIM PVT. LTD. (OUT OF LOAN OF RS.3,50,00,000/- GIVEN BY SIGNET OVERSEAS LTD.) AAACU 8022 B 3,50,00,000 ANUBHAV INFRASTRUCTURE PVT. LTD. AAFCA 5482 J 40,00,000 SNEHSHIL MARKETING PVT. LTD. AAJCS 5894 E 50,00,000 LEKHRAJ STEEL PVT. LTD. AABCL 0866 B 2,05,000 KAMDEEP MARKETING PVT. LTD. AAACK 9556 A 2,30,000 SIGNET OVERSEAS LTD. AABCS 3489 F 5,46,05,407 BANK OVERDRAFT (CHEQUE ISSUED BUT NOT PRESENTED FOR PAYMENT IN THE BANK AND CLEARED IN THE IMMEDIATELY SUCCEEDING YEAR OUT OF LOAN OF RS.3,73,15,000/- RECEIVED FROM SIGNET OVERSEAS LTD.) 3,58,47,845 17,13,88,252 THE UNSECURED LOANS SO RECEIVED WERE ADVANCED TO TH E FOLLOWING PERSONS/ENTITIES FOR ACQUIRING SHARES OF ADROIT INDUSTRIES (INDIA) LTD. :- NAME OF THE COMPANY P.A.NO. AMOUNT (RS.) M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 58 NAME OF THE COMPANY P.A.NO. AMOUNT (RS.) GROUP COMPANIES ORNATE LEASING & FINANCE PVT. LTD. AABCO 1101 A 14,20,000 SIGNET LEASING & FINANCE PVT. LTD. AAMCS 5841 G 1,26,00,000 SWAN HOLDING PVT. LTD. AAHCS 5640 Q 80,50,000 SIGNET IMPEX PVT. LTD. AAICS 5582 Q 1,26,60,000 SWAN PETROCHEMICALS PVT. LTD. AABCR 9592 C 1,24,40,000 SMT. MONIKA SANGLA ANAPS 5580 Q 1,83,32,399 SHRI SAURABHSANGLA ANBPS3195 G 1,53,41,162 SHRI MUKESHSANGLA ANAPS 5579 F 1,34,62,000 SHRI MUKESHSANGLA HUF AADHM 4930 J 81,947 SMT. AVANTIKASANGLA AEOPG 4774 R 60,000 NON-GROUP COMPANIES LUCKY COMMOTRADE PVT. LTD. AAACL 4501 E 5,21,14,350 PRANAY TRADE LINK PVT. LTD. AADCP 0735 F 1,26,20,000 15,91,81,858 52. THE MEMBERS OF SANGLA FAMILY AND ITS ASSOCIATE CONCERNS SOLD 22,88,025 SHARES OF ADROIT INDUSTRIES (INDIA) LTD. TO SHALIMAR FERROUS METALS PVT. LTD. (SHALIMA R) IN MAY M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 59 2007 FOR A CONSIDERATION RANGING FROM RS.40.35 TO R S.44.80 PER SHARE. AS THE MEMBERS OF SANGLA FAMILY AND ITS ASSOCIATE CONCERNS HAD TAKEN LOAN FROM SHALIMAR WHI LE ACQUIRING THE SHARES OF ADROIT INDUSTRIES (INDIA) L TD., THE SALE PROCEEDS OF SHARES WERE ADJUSTED AGAINST OUTSTANDIN G UNSECURED LOANS. 53. LUCKY COMMOTRADE PVT. LTD. IS A CLOSELY HELD NON- BANKING FINANCIAL COMPANY INCORPORATED ON 16.03.199 4 HAVING PAN NO. AAACL 4501 E. IT IS NOT A GROUP CONCE RN OR ASSOCIATE CONCERN OF SIGNET GROUP. IT IS HAVING AN INDEPENDENT BOARD OF DIRECTORS. ITS SHARE CAPITAL AND FREE RESERVES AS ON 31.03.2005, STOOD AT RS.1,28,80,000/ - AND RS.9,34,20,000/- RESPECTIVELY. FOR A.Y.2007-08 THE SHAREHOLDERS FUND STOOD AT RS.10,63,97,734/-. THE ASSESSMENT FOR A.Y.2007-08 WAS COMPLETED U/S.143(3) AND TOTAL INCOME ASSESSED WAS RS.1,23,92,580/-. THE ASSESSMENT FOR A.Y.2005-06 WAS ALSO COMPLETED U/S. M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 60 143(3). COPY OF ORDER WAS PLACED BEFORE THE LOWER AUTHORITIES. THE FINANCIAL CAPACITY OF THE COMPANY AND ITS CREDITWORTHINESS STOOD ESTABLISHED FROM THE FOLLOWI NG TABLE SHOWING ITS FINANCIALS AS: ASSESSMENT YEARS PAID-UP SHARE CAPITAL FREE RESERVES PROFIT FOR THE YEAR TAXES PAID 2008-09 1,28,80,000 9,35,17,734 1,17,408 44,400 2009-10 1,28,80,000 9,40,46,001 6,04,107 75,840 2010-11 1,28,80,000 9,63,52,036 34,40,035 11,34,000 2011-12 1,28,80,000 9,78,27,075 22,03,439 7,28,400 2012-13 1,28,80,000 9,85,63,971 11,54,896 4,18,000 ONCE THE INCOME-TAX DEPARTMENT, KOLKATA ASSESSED LU CKY COMMOTRADE PRIVATE LTD. U/S. 143(3) FOR ASSESSMENT YEAR 2005-06 AND ASSESSMENT YEAR 2007-08, INCOME-TAX DEPARTMENT, INDORE HAS NO LOCUSSTANDITO TREAT IT AS A BOGUS PAPER COMPANY AND A KNOWN ENTRY PROVIDERPARTICUL ARLY WHEN NO INVESTIGATION WHAT SO EVER WAS CONDUCTED BY IT AND NOT AN IOTA OF EVIDENCE WAS BROUGHT ON RECORDS IN S UPPORT OF SUCH SERIOUS AND BASELESS ALLEGATIONS. IN FACT, DUR ING THE ENTIRE ASSESSMENT PROCEEDINGS U/S.153A/153C OF THE ACT IN M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 61 RESPECT OF ALMOST ALL THE ASSESSEES OF THE GROUP, T HE AUTHORITIES BELOW DID NOT ISSUE EVEN A SINGLE NOTIC E TO IT U/S.133(6) TO COLLECT INFORMATION OR SUMMON U/S 131 FOR MAKING INVESTIGATION. THEREFORE, THESE CHARGES AGAI NST LUCKY COMMOTRADE PRIVATE LTD. ARE BASELESS, HEARSAY AND MERE CONJECTURES AND SURMISES. IN CASE OF LAL CHAND BHAGATAMBICA RAM VS. C.I.T. 37 ITR 288, HONOURABLE SUPREME COURT STRONGLY DISAPPROVED THE PRACTICE OF MAKING ADDITION IN THE ASSESSMENT ON MERE SUSPICION AND SU RMISES OR TAKING NOTE OF SO CALLED NOTORIOUS PRACTICE PREV AILING IN TRADE CIRCLES. 54. SHALIMAR SOLD ITS SHAREHOLDING IN ADROIT INDUS TRIES (INDIA) LTD. TO LUCKY AND THE PROCEEDS THEREOF WERE UTILIZED FOR REPAYMENT OF INTER-CORPORATE LOAN TO SIGNET IND USTRIES LIMITED. THIS FACT WAS EXPLAINED TO THE LOWER AUTHO RITIES WITH EVIDENCE LIKE BANK STATEMENTS OF SHALIMAR, LUCK Y AND SIGNET, DULY CONFIRMED COPIES OF ACCOUNTS. BUT THE SAME WAS M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 62 BRUSHED ASIDE BY THEM ON THE PRETEXT THAT LUCKY SOLD ITS HOLDING TO VARIOUS BOGUS PAPER COMPANIES NOTWITHS TANDING THE FACT THAT THESE SO CALLED BOGUS PAPER COMPANIES PRODUCED ALL THE DOCUMENTS AS REQUIRED BY THE A.O. IN TERMS OF NOTICE U/S 133(6) FOR VERIFICATION OF TRANSACTIO N AND ESTABLISHING THEIR IDENTITIES AND CREDITWORTHINESS. SURPRISINGLY, THE LOWER AUTHORITIES DID NOT BOTHER TO EVEN LOOK INTO THEM AND GIVE ANY FINDING IN THIS REGARD. THEREFORE THE TRANSFER OF SHARES BY SIGNET GROUP AND SANGLA F AMILY WAS GENUINE TRANSACTION. IT APPEARS THAT IN THE EYE S OF INCOME-TAX DEPARTMENT, ALL THE FINANCE AND INVESTME NT COMPANIES OPERATING FROM BOMBAY AND KOLKATA ARE BOG US PAPER COMPANIES. NOTWITHSTANDING PLETHORA OF EVIDEN CE PLACED BEFORE IT TO ESTABLISH IDENTITY AND CREDITWO RTHINESS AND GENUINENESS OF TRANSACTION. 55. THE DIVESTMENT OF SHAREHOLDING OF ADROIT INDUS TRIES (INDIA) LTD. TO THE EXTENT OF 73.5% WAS NECESSITATE D DUE TO M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 63 PERILOUS FINANCIAL POSITION OF THE ENTIRE GROUP DUE TO HUGE CASH OUTFLOW OF ABOUT RS.22.61 CRORES TO FINANCE TH E ACQUISITION. IT IS NOT UNCOMMON FOR THE PROMOTERS T O DIVEST THEIR INVESTMENT PRIOR TO PUBLIC ISSUE, COLLECT FUN DS TO UNBURDEN THE COMPANY OF ITS FINANCIAL LIABILITIES A ND PROVIDE AN HONOURABLE EXIT TO THE INVESTORS. HOWEVER, DUE T O NEGATIVE STOCK MARKET SENTIMENTS (SENSEX FELL FROM HIGH OF 20,500 IN 2007 TO LOWS OF 8,000 IN 2009), THE PUBLI C ISSUE DID NOT MATERIALIZE DESPITE UTMOST EFFORTS OF THE P ROMOTERS. FURTHER, THE AUTO INDUSTRY GLOBALLY WAS FACING TREM ENDOUS RECESSION AND UNCERTAINTY AS EVIDENT FROM BSE AUTO INDEX WHICH FELL FROM A HIGH OF 5,900 IN 2007 TO LOWS OF 2,350 IN 2009. THE TURNOVER OF ADROIT INDUSTRIES (INDIA) LT D. DECLINED FROM RS.24.61 CRORES IN FINANCIAL YEAR 2008-09 TO R S.16.88 CRORES IN FINANCIAL YEAR 2009-10. ALTHOUGH THE PROF IT SHOWED AN INCREASE FROM RS.2.23 CRORES TO RS.3.13 C RORES BUT IT WAS DUE TO VALUATION OF WORK-IN-PROGRESS WHI CH WAS M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 64 WRITTEN OFF IN FINANCIAL YEAR 2011-12. ALSO, THE CO MPANY WAS FACING SEVERE LABOUR PROBLEMS WITH THE ARRIVAL OF TRADE UNIONS AND ULTIMATELY THE ENTIRE WORK FORCE WAS LAI D OFF AFTER INCURRING A HUGE SEVERANCE COST. WITH THESE PROBLEM S, THE INVESTORS WANTED AN HONOURABLE EXIT WHICH ARE ULTIM ATELY PROVIDED BY THE PROMOTERS I.E. SIGNET GROUP AFTER P ROTRACTED NEGOTIATIONS BY ACQUIRING SHARES AT A MUTUALLY AGRE EABLE PRICE BAND OF RS.11.25 TO RS.12.25. THE DETAILS OF INVESTORS WERE PLACED ON RECORD AND HAD ALSO BEEN REPRODUCED IN THE ASSESSMENT ORDER. THEREFORE, THE INFERENCE OF THE A SSESSING OFFICER THAT NO INVESTOR WAS NAMED BY THE ASSESSEE IS TOTALLY BASELESS. THE MULTIPLE TRANSFERS IN SOME CASES WERE DUE TO REQUIREMENTS AND CONVENIENCE OF INVESTING COMPANIES AND THEIR PROMOTERS. GENERALLY, THE INVESTORS ENTER A COMPANY BEFORE ITS PUBLIC ISSUE WITH THE INTENTION TO EARN SIGNIFICANT GAINS ON LISTING OF SHARES. HOWEVER, SOMETIMES THEI R CALCULATION GO HAYWIRE AND THEY HAVE TO EXIT AT A S IGNIFICANT M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 65 LOSS PARTICULARLY IN A SITUATION IN WHICH MOST OF T HE PUBLIC ISSUES DEVOLVED ON BANKERS AND GUARANTORS AND THERE WAS NO PUBLIC PARTICIPATION. THE SAME IS EVIDENT FROM T HE FACT THAT MANY IPOS WERE WITHDRAWN OR DEFERRED BY VARIOU S COMPANIES DURING THIS PERIOD AND NO OF IPOS FELL FR OM 108 IN 2007 TO 22 IN 2009. IN THE CASE OF ADROIT INDUSTRIE S (INDIA) LTD., THE PROMOTERS MADE UTMOST EFFORTS TO BRING IP O AND INCURRED SIGNIFICANT COST (ABOUT RS.83.80 LACS) IN THIS PURSUIT BUT THEY COULD NOT ACHIEVE ANY SUCCESS DUE TO NEGAT IVE MARKET CONDITIONS AND SENTIMENTS AS DISCUSSED ABOVE . THE STATEMENT OF DIRECTORS OF SHALIMAR VIZ. SHRI PARAS RAM PATIDAR AND SHRI VIMAL KUMAR BANDI WAS RECORDED AFT ER A LAPSE OF OVER 4 YEARS (ACQUISITION OF SHARES IN MAY 2007 AND THEIR STATEMENT WAS RECORDED IN NOVEMBER 2011). MOR EOVER, THE DAY TO DAY AFFAIRS OF SHALIMAR WERE LOOKED AFTE R BY THE EMPLOYEES OF SIGNET GROUP AND CONTROLLED BY SHRI MU KESH SANGLA AS ITS EXECUTIVE OFFICER. AS THE TRANSACTION S WERE M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 66 VERIFIABLE FROM BANK STATEMENTS OF RELEVANT ENTITIE S, THE STATEMENTS OF ITS DIRECTORS DO NOT HAVE MUCH SIGNIF ICANCE IN RELATION TO CREDITWORTHINESS AND GENUINENESS OF TRANSACTIONS. IF THE TRANSACTION WITH ALLEGED BOGUS PAPER COMPANIES IS HELD TO BE COLOURABLE DEVICE AND ARRAN GE AND MANAGED AFFAIR AS PER THE CONTENTION OF THE REVENUE AUTHORITIES, THE BENEFIT OF LOSS WAS DERIVED BY THE SE INTERMEDIARY COMPANIES AND THE ACTION SHOULD HAVE B EEN TAKEN IN THEIR CASE. AS THE ASSESSEE GROUP DID NOT DERIVE ANY TAX BENEFIT, IT CANNOT BE PENALIZED FOR FAILURE , IF ANY, OF INTERMEDIARY COMPANIES TO JUSTIFY ACQUISITION OF SH ARES AT A HIGHER PRICE AS WELL AS THEIR SUBSEQUENT DIVESTMENT AT THE LOWER PRICE. SHRI RAMCHAND KEDIA, THE DIRECTORS OF LUCKY COMMOTRADE PVT. LTD. IS A CLOSE FRIEND OF SHRI MUKE SH SANGLA, HEAD OF SIGNET GROUP AND SANGLA FAMILY. ALS O, THERE WERE REGULAR FINANCIAL TRANSACTIONS BETWEEN LUCKY AN D VARIOUS SIGNET GROUP COMPANIES. TO SAVE COST OF TRA NSFER OF M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 67 FUNDS, INTEREST COST AND FACILITATING MOVEMENT OF F UNDS, LUCKY OPENED A BANKING ACCOUNT AT INDORE AND SHRI RAMCHAND KEDIA KEPT A SIGNED CHEQUE BOOK WITH SHRI MUKESH SANGLA. THERE WAS A CLEAR UNDERSTANDING BETW EEN THE TWO THAT SHRI MUKESH SANGLA WOULD GIVE COMPLETE ACCOUNT OF TRANSACTION TO LUCKY IMMEDIATELY AND REC ONCILE THE ACCOUNT INTERSE. THEREFORE, THERE WAS NOTHING S USPICIOUS ABOUT CHEQUE BOOK OF LUCKY HAVING BEEN FOUND WITH SH RI MUKESH SANGLA DURING SEARCH PARTICULARLY WHEN ALL T HE TRANSACTIONS WERE AT ARMS LENGTH, RECORDED IN THE REGULAR BOOKS OF ACCOUNTS OF RESPECTIVE ENTITIES AND INTERE ST BEARING. THERE WERE NO CASH TRANSACTIONS BETWEEN LUCKY AND SI GNET GROUP ENTITIES. AS REGARD PALASIA LEASING & FINANCE LTD., THE HONOURABLE MADHYA PRADESH HIGH COURT CONFIRMED THE ADDITION OF RS.5 LACS IN THE CASE OF RATHI FINLEASE (215 CTR 429) BECAUSE SUMMON COULD NOT BE SERVED ON IT DURIN G ENQUIRY BY THE ASSESSING OFFICER. THE HIGH COURT NE VER HELD M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 68 THAT PALASIA LEASING WAS A BOGUS PAPER COMPANY AN D KNOWN ENTRY PROVIDER. IN THE ASSESSEES CASE, THE N OTICE U/S.133(6) WERE DULY SERVED AND THE COPIES OF BANK STATEMENTS AND OTHER REQUISITE DETAILS WERE FILED B EFORE THE ASSESSING OFFICER IN WHICH THE TRANSACTIONS WERE DU LY REFLECTED. THEREFORE, THE INFERENCE OF C.I.T.(A) IS WITHOUT APPRECIATION OF THE JUDGEMENT AS WELL AS THE FACTS PLACED ON RECORD. AS REGARD SHRI ANEKANT SHARES AND SECURITIE S PVT. LTD., UNNO INDUSTRIES LTD., SIDDHACHAL DEVELOPERS P VT. LTD., THE ASSESSEE WAS NOT GIVEN THE COPY OF JUDGEMENT PA SSED BY C.I.T.(A) II, INDORE IN THE CASE OF INDUSTRIAL F ILTERS AND FABRICS PVT. LTD. AND THEREFORE, THE SAME CANNOT BE USED FOR ADVERSE INFERENCE AGAINST THE ASSESSEE. MOREOVER, I N COMPLIANCE OF NOTICE ISSUED U/S.133(6), THESE COMPA NIES FURNISHED THE COPIES OF THEIR BANK ACCOUNT, RETURN OF INCOME FILED BY THEM ETC. IN WHICH THE TRANSACTIONS WERE D ULY REFLECTED AND NO DISCREPANCY WHATSOEVER WAS BROUGHT ON M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 69 RECORD BY THE LOWER AUTHORITY. AS REGARD CAN-INDIA OVERSEAS LTD., IT WAS A COMPANY IN WHICH THE CLOSE RELATIVES OF SHRI MUKESHSANGLA WERE SHAREHOLDERS AND DIRECTORS. THE COMPANY WAS FILING ITS RETURN OF INCOME REGULARLY A ND ALSO ASSESSED TO TAX. ITS PAID UP SHARE CAPITAL WAS RS.3 0 LACS AND FREE RESERVES OF RS.30 LACS. AS AT 31.03.2010, IT HAD A CASH AND BANK BALANCE OF RS.41,79,012/- AND INVESTM ENT OF RS.8,80,000/- IN 2,40,000 SHARES (INCLUDING BONUS S HARES 1,60,000) OF SIGNET INDUSTRIES LTD. UNDER THESE CIRCUMSTANCES, THE CAN-INDIA OVERSEAS LTD. CANNOT B E CALLED A BOGUS PAPER COMPANY. 56. SECTION 69 OF THE ACT IS APPLICABLE ON CUMUL ATIVE SATISFACTION OF THE FOLLOWING CONDITIONS : I. THE ASSESSEE SHOULD HAVE MADE THE INVESTMENTS AND THE SAME ARE NOT RECORDED IN THE BOOKS OF ACCOUNTS; AND M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 70 II. THE ASSESSEE EITHER OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF INVESTMENT OR THE EXPLANATION OFFERED IS NOT SATISFACTORY IN THE OPINION OF THE ASSESSING OFFICER. III. THE SATISFACTION OF THE ASSESSING OFFICER CANNOT BE ARBITRARY AND SUBJECTIVE BUT HAS TO BE BASED ON THE RELEVANT MATERIAL B) SEC.69B IS APPLICABLE ON CUMULATIVE SATISFACTION OF THE FOLLOWING CONDITIONS: I. THE ASSESSEE SHOULD HAVE MADE THE INVESTMENTS OR IS FOUND TO BE THE OWNER OF ANY BULLION, JEWELLERY OR VALUABLE ARTICLES; II. BASED ON THE MATERIAL FACTS, THE ASSESSING OFFICER FINDS THAT THE AMOUNT EXPENDED ON SUCH INVESTMENT ACTUALLY EXCEEDS THE AMOUNT RECORDED IN THE BOOKS OF ACCOUNT; AND M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 71 III. THE ASSESSEE EITHER OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF INVESTMENT OR THE EXPLANATION OFFERED IS NOT SATISFACTORY IN THE OPINION OF THE ASSESSING OFFICER. IV. THE SATISFACTION OF THE ASSESSING OFFICER CANNOT BE ARBITRARY AND SUBJECTIVE BUT HAS TO BE BASED ON THE RELEVANT MATERIAL 57. WHEREVER THE LEGISLATURE DESIRED DETERMINATION OF INCOME IN A SPECIFIC MANNER OR EXISTENCE OF CERTAIN STATE OF AFFAIRS, IT HAS SPECIFICALLY PROVIDED FOR IN RELEVA NT SECTIONS. SEC.69 AND SEC.69B DEALING WITH TAXATION OF UNACCOU NTED INVESTMENTS ARE DEEMING PROVISION AND DOES NOT DEAL WITH PRESUMPTIVE TAXATION OF UNACCOUNTED/UNDER-VALUED INVESTMENTS. IN ABSENCE OF THE CLEAR LEGISLATIVE MA NDATE, THE A.O. CANNOT PRESUME MARKET VALUE/FAIR VALUE OF INVE STMENTS AND MAKE ADDITION UNDER SEC.69 OR SEC.69B OF THE AC T. RELIANCE IS PLACED UPON THE FOLLOWING JUDGEMENTS: M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 72 (I) C.I.T. VS. NAVEEN GERA 328 ITR 516 (DEL) (II) C.I.T. VS. DINESH JAIN HUF 352 ITR 628 (DEL) (III) RUPEE FINANCE & MANAGEMENT PVT. LTD. VS. A.C.I.T. 119 TTJ 643 (MUM TRIB) 58. IN THE ASSESSEE GROUP CASES,THE ORIGINAL PURCH ASE OF SHARES AT RS.40.25 PER SHARES AS WELL AS REACQU ISITION OF SHARES AT RS.11.25 TO RS.12.25 WERE DULY RECORDED I N THE BOOKS OF ACCOUNTS OF THE RESPECTIVE ASSESSEE. A CHA RT SHOWING SOURCE OF RE-ACQUISITION OF SHARES BY SIGNE T GROUP, MEMBERS OF SANGLA FAMILY AND OTHER ASSOCIATE CONCER NS WAS FILED. THE REVENUE DID NOT BRING ANY EVIDENCE TO SH OW THAT ACTUAL CONSIDERATION PAID BY THE ASSESSEE GROUP EIT HER AT THE TIME OF ORIGINAL ACQUISITION OR AT THE TIME OF REAC QUISITION WAS MORE THAN THE STATED AND RECORDED CONSIDERATION IN THE BOOKS OF RESPECTIVE ASSESSEE. THE A.O. MERELY PRESU MED THE FAIR VALUE OF SHARES AT RS.40.25 PER SHARE (ORIGINA L COST OF ACQUISITION FROM ANAND FAMILY IN MARCH 2007) AND TR EATED M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 73 THE DIFFERENCE BETWEEN THE COST OF REACQUISITION AN D FAIR VALUE PER SHARE AS UNEXPLAINED INVESTMENT IN THE CA SE OF THE ASSESSEE, WITHOUT BRINGING ANY EVIDENCE ON RECORD. HE SIMPLY REJECTED THE EXPLANATION GIVEN BY THE ASSESS EE GROUP. IN THE ASSESSEES CASE, THERE WERE NO INCRIMINATING MATERIAL WHATSOEVER IN RELATION TO INVESTMENT IN SHARES OF A DROIT INDUSTRIES (INDIA) LTD. IN ASSESSMENT YEAR 2007-08, TRANSFER OF THESE SHARES IN ASSESSMENT YEAR 2008-09 AND THEI R REACQUISITION SUBSEQUENTLY IN ASSESSMENT YEAR 2010- 11. NO PROCEEDINGS IN RELATION TO ASSESSMENTS FOR THESE AS SESSMENT YEARS WERE PENDING AND THEREFORE NO ADDITION COULD HAVE BEEN MADE IN ASSESSMENT COMPLETED U/S.153A/153C OF THE ACT IN THE ABSENCE OF ANY INCRIMINATING MATERIAL ON ACCOUNT OF UNEXPLAINED CASH CREDITS IN ASSESSMENT YEAR 2008 -09 AND UNEXPLAINED INVESTMENT IN ASSESSMENT YEAR 2010- 11. THE ADDITION MADE BY THE ASSESSING OFFICER BY WAY O F REASSESSMENT IN RELATION TO IMPUGNED CONCLUDED M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 74 ASSESSMENTS AMOUNTED TO CHANGE IN OPINION ON THE SA ME SET OF FACTS WHICH IS NOT PERMISSIBLE IN LAW EVEN U/S.153A/153C OF THE ACT. 59. THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND PLEADED THAT NO PROMOTER WOUL D DIVEST MAJORITY OF ALL THE SHAREHOLDINGS AND THAT T OO AT A NOMINAL PROFIT WHEN A PUBLIC ISSUE WAS ANTICIPATED IN NEAR FUTURE. HE ALSO SUBMITTED THAT ADROIT INDUSTRIES ( INDIA) LTD. WAS A PROFIT MAKING COMPANY AND NO PRUDENT BUSINESS MAN WILL DIVEST THE HUGE INVESTMENT. HE ALSO PLEADED TH AT THE ASSESSEES CONTENTION THAT THE ASSESSEE COULD NOT G O FOR PUBLIC ISSUE DUE TO CAPITAL MARKET SITUATION IS ALS O NOT JUSTIFIED. THESE SHARES HAVE CHANGED MANY HANDS BE FORE COMING SIGNET GROUP WHICH IS USUALLY NOT POSSIBLE I N UNLISTED SHARES. HE ALSO PLEADED THAT THE ASSESSEE HAS NOT B ROUGHT ON RECORD ANYTHING TO SHOW THAT SALE PROCEEDS WERE UTILISED IN DISCHARGING THE INTEREST BEARING LIABILITIES AND HE PLEADED M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 75 THAT IT IS NOT POSSIBLE TO ACCEPT THE ASSERTIONS OF THE ASSESSEE WITH REGARD TO DISINVESTMENT THAT IT WAS T O REDUCE THE RISK OF THE GROUP. HE PLEADED THAT THE DISINVES TMENT OF SHARES OF ADROIT INDUSTRIES (INDIA) LTD. WAS A SHAM TRANSACTION. HE RELIED UPON THE ORDERS OF THE ASSE SSING OFFICER AND THE LEARNED CIT(A) ON THIS ISSUE. HE AL SO DREW OUR ATTENTION TO VARIOUS CASE LAWS RELIED ON BY HIM . 60. IN EARLIER PART OF THIS ORDER, WE HAVE HEL D THAT THE ASSESSMENTS FRAMED U/S 153A R.W.S. 143(3) OF THE AC T AGAINST THE ASSESSEE ARE NOT AS PER LAW. HOWEVER, W E ARE ALSO DECIDING THE ISSUE ON MERITS OF THE ADDITI ON MADE OF RS. 13,23,220/- IN RESPECT OF SALE PROCEEDS OF 32,875 SHARES OF ADROIT INDIA LIMITED IN THE ASSESS MENT YEAR 2008-09 AS UNEXPLAINED INCOME OF THE ASSESSEE AND ALSO ISSUE REGARDING THE ADDITION MADE ON ACCOU NT OF UNEXPLAINED INVESTMENT IN SHARES OF ADROIT INDUS TRIES LIMITED OF RS.93,37,094/- IN THE ASSESSMENT YEAR 20 10- M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 76 11. THE SANGLA FAMILY AND ASSOCIATES ACQUIRED MANAGEMENT AND CONTROLLING RIGHTS IN ADROIT INDUSTR IES LTD. WHICH WAS 100% EXPORT ORIENTED AUTO ANCILLARY UNIT FROM ANAND FAMILY IN THE MONTH OF MARCH, 2007. THER E IS NO DISPUTE REGARDING THE PRICE OF SHARES PAID FO R ACQUIRING SHARES FROM ANAND FAMILY AS WELL AS TO OT HER PERSONS. IN MAY, 2007 SOME OF THE SHARES WERE SOLD BY THE ASSESSEE AND OTHER GROUP PERSONS AND ASSOCIATES . THE RESULTANT SHORT TERM CAPITAL GAIN WAS OFFERED F OR TAXATION IN THE RETURN OF INCOME. THERE WAS NO INCRIMINATING DOCUMENT SEIZED DURING THE SEARCH OPERATION IN RELATION TO ACQUISITION OF SHARES OF A NAND FAMILY AND TRANSFER OF SHARES BY THE ASSESSEE. THE ASSESSEE HAS EXPLAINED THE REASON FOR TRANSFER OF SHARES TO RAISE THE FUNDS. IT IS ALSO ESTABLISHED THAT ADROIT INDUSTRIES LTD. WAS TO GO FOR PUBLIC ISSUE F OR WHICH EXPENDITURE HAS BEEN DEBITED IN THE FINANCIAL M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 77 YEARS 2010-11 AND 2011-12. ULTIMATELY THIS PUBLIC ISSUE COULD NOT BE MATERIALISED. THE EXPENDITURE DEBITED IN THE BOOKS OF ADROIT INDUSTRIES LTD. ESTABLISHES THAT ADROIT IND. LTD. WAS TO GO TO FOR PUBLIC ISSUE. NO EVIDENCE EITHER DURING THE SEARCH OPERATI ON OR IN THE POST SEARCH INQUIRIES SHOWING EVEN SUGGESTIN G THAT ANY CONSIDERATION OVER AND ABOVE RECORDED IN T HE BOOKS OF ACCOUNTS OF ANY ASSESSEE OF SIGNAT GROUP W AS REALISED IN CASH OR OTHERWISE. EVEN NO POSITIVE EVI DENCE WAS COLLECTED DURING THE PROCEEDINGS U/S 153A/153C OF THE ACT. THUS, THERE IS NO EVIDENCE REGARDING ANY UNACCOUNTED TRANSACTION WITH RELATION TO SHARES ACQUIRED, TRANSFERRED AND RE-ACQUIRED BY VARIOUS FA MILY MEMBERS OF SANGLA FAMILY AND ASSOCIATE CONCERNS. TH E REVENUES CLAIM THAT NO PROMOTER WOULD DIVEST WITH SUCH A HUGE HOLDING AT A VERY NOMINAL PROFIT IS WIT HOUT ANY BASIS AND ONLY A GUESS WORK. THE ASSESSEES M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 78 CONTENTION THAT THE PROMOTERS WERE INTENDED TO GO F OR PUBLIC ISSUE IS WELL ESTABLISHED BY THE FACT THAT EXPENDITURE INCURRED IN THIS REGARD HAS BEEN DEBITE D IN THE BOOKS OF ACCOUNTS OF ADROIT INDUSTRIES LTD., THEREFORE, THE REVENUES CONTENTION THAT THE PROMOT ERS WERE NOT INTENDED TO GO FOR PUBLIC ISSUE IS NOT COR RECT. IN OUR CONSIDERED VIEW, ALL SUCH ALLEGATIONS ARE WILD AND WITHOUT ANY BASIS. THE REVENUE HAS EVEN FAILED TO B RING ANYTHING ON RECORD TO ESTABLISH THAT ANY UNACCOUNTE D TRANSACTION IN ANY FORM WAS DONE BY ANY OF THE PERS ONS OF THIS GROUP AND ASSOCIATES. THERE IS NO EVIDENCE AGAINST THE ASSESSEE WITH REGARD TO TRANSFER AND REACQUISITION OF SHARES OF ADROIT INDUSTRIES LTD. D URING THE RELEVANT PERIOD TO THE ASSESSMENT YEARS 2007-08 , 2008-09 AND 2010-11 RESPECTIVELY. THE REVENUES ALLEGATIONS ARE GENERAL AND NOT SUPPORTED BY ANY EVIDENCE. IN OUR CONSIDERED VIEW, NO ADDITION COULD BE M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 79 SUSTAINED ONLY ON THE BASIS OF GUESS WORK OR IN THE ABSENCE OF ANY POSITIVE EVIDENCE. IN VIEW OF THIS F ACTUAL MATRIX, WE FIND NO MERIT IN THE ADDITION MADE IN TH E ASSESSMENT YEAR 2008-09 ON THE TRANSFER OF SHARES O F ADROIT INDUSTRIES LIMITED AND ALSO THE ADDITION MAD E FOR UNEXPLAINED INVESTMENT ON ACCOUNT OF REACQUISITION OF SHARES OF ADROIT INDUSTRIES LTD. DURING THE FINANCI AL YEAR 2010-11. WE DIRECT TO DELETE THE SAME. 23. IN VIEW OF THESE FACTS, WE ALLOW ALL THESE GROUND S OF THE ASSESSEES APPEALS FOR ALL THE YEARS AND ALSO DISM ISS THE GROUNDS RAISED BY THE REVENUE IN THESE APPEALS. GROUND NO.1 (A.Y.: 2007-08) OF REVENUES APPEAL : REVENUES GROUND OF APPEALS (A.YS.: 2007-08) READS AS UNDER: ASSESSMENT YEAR : 2007-08 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE C.I.T.(A). ERRED IN DELETING THE ADDITION MADE UNDER SECTION 6 8 OF THE INCOME- TAX ACT, 1961 ON ACCOUNT OF UNSECURED LOAN RECEIVED OF RS.90,00,000/-. M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 80 24. AS REGARD UNSECURED LOAN RECEIVED FROM RATNAGIRIVINMAY PVT. LTD., THE ADDITION OF WHICH WAS DELETED BY THE C.I.T.(A). AND AGAINST WHICH THE REVENU E IS IN APPEAL, IT IS SUBMITTED THAT RATNAGIRIVINIMAY PRIVATE LIMITED WAS INCORPORATED ON 29.03.1994 UNDER THE COMPANIES ACT, 1956 AND ITS PERMANENT ACCOUNT NUMBER IS AABCR1870R. THE TOTAL SHARE CAPITAL AND FREE RESERVES OF THE COMPANY AS AT 31.03.2007 WAS RS.72,45,000 & RS.4,24,49,631/- RESPECTIVELY. IT IS REGULARLY ASSESS ED TO TAX. DURING ASSESSMENT PROCEEDINGS. THE ASSESSEE FURNISHED DETAILS OF UNSECURED LOANS RECEIVED BY IT AL ONG WITH NAMES, ADDRESSES, P.A.NOS., CHEQUE NOS., RELEVANT EXTRACT OF BANK STATEMENTS, AUDITED ANNUAL ACCOUNTS OF TH E SHARE APPLICANT COMPANIES ETC. TO ESTABLISH IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE UNSECURED LO ANS RECEIVED BY IT. M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 81 25. THE LEARNED CIT(A) HELD THE LOAN AS GENUINE TRANSACTION AND DELETED THE ADDITION ADDITION OF RS.90,00,000/- BY HOLDING AS UNDER :-: 7.4 I HAVE CAREFULLY CONSIDERED THE SUBMISSION O F THE APPELLANT AND FACTS OF THE CASE. IT IS A TRITE LAW THAT IN TH E CASE OF A CASH CREDIT APPEARING IN THE BOOKS OF ACCOUNT OF AN ASSESSEE, T HE ONUS IS ON THE ASSESSEE TO PROVE WITH COGENT MATERIAL THE IDENTITY OF THE CREDITOR, THE CAPACITY OF SUCH CREDITOR TO ADVANCE SUCH LOAN AND GENUINENESS OF THE CREDITOR. WHEN THE QUESTION ARISES AS TO WHETHER CA SH CREDITOR APPEARING IN THE BOOKS OF THE ASSESSEE HAS TO BE ACCEPTED OR TO BE REJECTED AND THE ADDITION TO BE MADE U/S 68, IT HAS TO BE DECIDED ON THE BASIS OF FACTS AND CIRCUMSTANCES OF EACH CASE TO ASCERTAIN WHETHER THE ASSESSEE HAD PROVED THE IDENTITY OF THE CREDITORS, CREDITWORTHINESS OF THE CREDITORS AND GENUINENESS OF THE TRANSACTIONS. THE HON'BLE CALCUT TA HIGH COURT IN THE CASE OF KOLAY TRADING CO. LTD. (1998) 232 ITR 820 ( CAL.) HELD THAT MERE FILING OF INCOME TAX FILE NUMBER WAS NOT ENOUGH TO PROVE THE GENUINENESS OF CASH CREDITOR. IN THE CASE OF CIT VS. UNITED COMMER CIAL AND INDUSTRIAL CO. PVT. LTD. (1991) 187 ITR 596 (CAL.), IT WAS OBSERVE D THAT MERE PRODUCTION OF CONFIRMATION LETTERS BEFORE THE ITO WOULD NOT BY IT SELF PROVE THAT THE LOANS HAVE BEEN OBTAINED FROM THOSE LOAN CREDITORS OR THA T THEY HAVE CREDITWORTHINESS. THE HON'BLE HIGH COURT HELD THAT THE TRIBUNAL HAD MISDIRECTED ITSELF IN HOLDING THAT THE TRANSACTIONS WERE GENUINE SIMPLY BECAUSE SOME OF THE TRANSACTIONS WERE MADE BY CHEQU ES. THE ASSESSEE HAD FAILED TO PROVE CREDITWORTHINESS OF THE ALLEGED LENDERS AND HAD NOT DISCHARGED ITS BURDEN OF PROVING THAT THE LOANS IN QUESTION WERE GENUINE. IN ANOTHER CASE OF CIT VS. PRECISION FINANCE PVT. LTD. (1994) 208 ITR 465 (CAL.), IT WAS HELD THAT MERE FURNISHING OF PARTICU LARS IS NOT ENOUGH. MERE PAYMENT BY ACCOUNT PAYEE CHEQUE IS NOT SACROSANCT N OR CAN IT MAKE A NON- GENUINE TRANSACTION GENUINE. IN THE CASE OF CIT VS. K MAHIM (1995) 213 ITR 820 (KER.), IT WAS HELD THAT WHERE APART FROM C ONFIRMATORY LETTER, THERE WAS NO MATERIAL TO ESTABLISH THE CAPACITY OF ALLEGE D CREDITORS TO ADVANCE THE AMOUNTS IN QUESTION TO THE ASSESSEE, THE TRIBUN AL WAS JUSTIFIED IN SUSTAINING ADDITION MADE IN RESPECT OF SUCH CASH CR ED ITS. IN THE CASE OF BHARTI PVT. LTD. VS. CIT(1978) 111 ITR 951 (CAL.), WHERE IN RESPECT OF CERTAIN LOANS IN ITS ACCOUNT, THE ASSESSEE PRODUCED CONFIRMATORY LETTERS FROM THE CREDITORS BUT THE ITO'S NOTICES TO SUMMON THECREDITORS CAME BACK M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 82 UN-SERVED, IT WAS HELD THAT THE ASSESSEE HAD FAILED TO PROVE THE IDENTITY OF THE CREDITOR AND CREDITWORTHINESS OF THE CREDITOR A ND, THEREFORE, THE ADDITIONS OF THE AMOUNT OF LOANS AS INCOME FROM UND ISCLOSED SOURCES WAS JUSTIFIED. THEREFORE, WHERE AN ASSESSEE HAS FURNISH ED ONLY CONFIRMATION LETTER OR FURNISHED PAN NUMBER, OR SIMPLY CONTENDED THAT THE LOAN HAS BEEN RECEIVED BY ACCOUNT PAYEE CHEQUES, THAT ALONE WOULD NOT BE SUFFICIENT TO PROVE THAT THE ASSESSEE HAS DISCHARGED HIS ONUS TO PROVE THE IDENTITY OF THE CREDITOR, CREDITWORTHINESS OF THE CREDITOR AND GENU INENESS OF THE TRANSACTION. THEREFORE, THE ASSESSEE HAS TO ADDUCE CONSIDERABLE EVIDENCE WHICH IS TRUSTWORTHY AND BELIEVABLE THAT THE UNSECU RED LOAN SHOWN BY THE ASSESSEE IS GENUINE. HENCE, THIS ISSUE HAS TO BE DE CIDED CONSIDERING THE FACTS OF EACH UNSECURED LOAN AS TO WHETHER THE ASSE SSEE HAS SUCCESSFULLY DISCHARGED HIS ONUS TO PROVE THE IDENTITY OF THE CR EDITOR, CREDITWORTHINESS OF THE CREDITOR AND GENUINENESS OF THE TRANSACTIONS. O NCE THE ASSESSEE DISCHARGED HIS PRIMARY ONUS BY PRODUCING THE COGENT EVIDENCE TO PRIMA FACIE PROVE THE IDENTITY OF THE CREDITOR, CREDITWOR THINESS OF THE CREDITOR AND GENUINENESS OF THE TRANSACTION, IF EVEN THEN THE AO DOES NOT ACCEPT THE CASH CREDIT TO BE GENUINE, THE ONUS SHIFTED ON THE DEPARTMENT TO PROVE THE CONTRARY BY BRINGING THE COGENT MATERIAL ON RECORD TO REJECT THE EXPLANATION OF THE ASSESSEE, AS OBSERVED BY THE PATNA HIGH COUR T IN THE CASE OF SAROGI CREDIT CORPORATION VS. CIT (1976) 103 ITR 304 (PATN A). IF THE AO DOES NOT BRING ANY MATERIAL ON RECORD TO CONTRADICT OR CONTR OVERT THE VERACITY OF THE DOCUMENTS FURNISHED BY THE ASSESSEE, HE CANNOT INVO KE PROVISIONS OF SECTION 68 OF THE ACT AND MAKE ADDITION TO THE TOTA L INCOME. IN THE LIGHT OF THIS DISCUSSION, THE MERIT OF ADDITION U/S 68 MADE BY THE AO ON ACCOUNT OF UNEXPLAINED UNSECURED LOAN IS TO BE EXAMINED. IN THE INSTANT CASE, THE APPELLANT HAD SHOWN UNSECU RED LOAN OF RS.90,00,000/- RECEIVED FROM M/S RATNAGIRIVINIMAY P VT. LTD. IT WAS CLAIMED THAT M/S RATNAGIRIVINIMAY PVT. LTD. BELONGS TO KALANI GROUP OF INDORE AND THE PROMOTER DIRECTOR OF THE APPELLANT C OMPANY SHRI MUKESHSANGLA HAD CLOSE RELATIONSHIP WITH THE DIRECT ORS OF THE CREDITOR GROUP. THE APPELLANT COMPANY HAD TAKEN A TEMPORARY LOAN OF RS.90,00,000/- WHICH WAS REPAID WITHIN ONE YEAR. TH E APPELLANT HAD FURNISHED CONFIRMATION FROM M/S RATNAGIRIVINIMAYPVT . LTD., COPY OF ACKNOWLEDGEMENT OF RETURN OF INCOME FURNISHED BY TH ECREDITOR, COPY OF PROFIT & LOSS ACCOUNT AND BALANCE SHEET OF THE CRED ITOR AND COPY OF BANK STATEMENT OF CREDITOR OF THE RELEVANT PERIOD EVIDEN CING THE TRANSACTIONS OF LOAN RECEIVED AND REPAID BY BANKING CHANNELS. IT IS NOTICED THAT THE LOAN CREDITOR, M/S RATNAGIRIVINIMAY PVT. LTD. IS A NON-B ANKING FINANCE M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 83 COMPANY. THE LOAN CREDITOR COMPANY IS REGULARLY ASS ESSED TO INCOME-TAX HAVING PAN: AABCR1870R. THE LOAN CREDITOR HAD ALSO FURNISHED CONFIRMATION REGARDING THE LOAN GIVEN TO THE APPELL ANT OF RS.90,00,000/- DURING F.Y.2006-07 ON 13.02.2007 & 22.02.2007 BY CH EQUES OF RS.10,00,000/-, RS.35,00,000/- AND OF RS.45,00,000/ -. THE SAID LOAN WAS REPAID BY THE APPELLANT BY CHEQUE ON 05.02.2008 OF RS.90,00,000/- AND ALSO PAID INTEREST OF RS.6,20,173/- ON 27.03.2008 B Y CHEQUE. THUS, THE APPELLANT HAD PROVED THE IDENTITY OF THE LOAN CREDI TOR. AS REGARDS, CREDITWORTHINESS OF THE LOAN CREDITOR, THE APPELLAN T HAD FURNISHED COPY OF ITS PROFIT & LOSS ACCOUNT AND BALANCE SHEET AS ON 3 1.03 .2007 BEFORE THE AO AS WELL AS COPY OF BANK STATEMENT OF THE RELEVAN T PERIOD OF THE LOAN CREDITOR. AS MENTIONED BY THE APPELLANT IN ITS SUBM ISSION, THE LOAN CREDITOR COMPANY HAS CREDITWORTHINESS WHICH ENGAGED IN THE B USINESS OF TRADING OF SHARES AS WELL AS EARNING INCOME FROM INTEREST ON T HE LOANS GIVEN. ON PERUSAL OF BALANCE SHEET, IT IS NOTICED THAT THE AP PELLANT HAD SHARE CAPITAL OF RS.72,45,000/- AND SHARE PREMIUM OF RS.4,24,49,6 31 /-. HENCE, THERE WAS SUFFICIENT CAPITAL AVAILABLE WITH THE LOAN CRED ITOR TO GIVE SUCH LOAN TO THE APPELLANT. ON PERUSAL OF PROFIT & LOSS ACCOUNT ALSO, IT IS NOTICED THAT THE APPELLANT HAD SHOWN PROFIT BEFORE TAX OF RS.10,27,3 51/- IN A.Y.2007-08. THUS, FROM THE PROFIT & LOSS ACCOUNT AND BALANCE SH EET IT CAN BE SEEN THAT THERE WAS CREDITWORTHINESS OF M/S RATNAGIRIVINIMAY PVT. LTD. TO GIVE A TEMPORARY LOAN TO THE APPELLANT. HENCE, THE APPELLA NT HAD ALSO PROVED THE CREDITWORTHINESS OF THE CREDITOR. REGARDING THE GEN UINENESS OF THE TRANSACTION, IT IS NOTICED THAT THE UNSECURED LOAN WAS RECEIVED BY 3 CHEQUES I.E. CHEQUE NO.940610 DATED 13.12.2007 OF I DBI BANK FOR RS.10,00,000/-; CHEQUE NO. 917878 DATED 13.12.2007 OF IDBI BANK FOR RS.35,00,000/- AND CHEQUE NO. 940611 DATED 22.02.20 07 OF IDBI BANK FOR RS.45,00,000/-. IT WAS ALSO FOUND THAT THE APPELLAN T HAD RETURNED THE LOAN OF RS.90,00,000/- VIDE CHEQUE NO.433211 DATED 05.02 .2008 OF UCO BANK AND ALSO PAID INTEREST OF RS.6,20,173/- VIDE CHEQUE NO.433215 DATED 27.03.2008 OF UCO BANK TO THE CREDITOR. SINCE, THE TRANSACTIONS HAD TAKEN PLACE BY CHEQUES THROUGHBANKING CHANNEL, THE GENUIN ENESS OF THE TRANSACTIONS WERE ALSO PROVED BY THE APPELLANT. FRO M THESE FACTS, IT IS EVIDENTLY CLEAR THAT THE APPELLANT HAD DISCHARGED I TS PRIMARY ONUS BY FURNISHING CREDIBLE EVIDENCES TO PROVE THE IDENTITY OF THE CREDITOR, CREDITWORTHINESS OF THE CREDITOR AND GENUINENESS OF THE TRANSACTIONS OF LOAN RECEIVED AND THE LOAN REPAID.THEREAFTER, IF THE AO WAS NOT ACCEPTING THE CASH CREDIT TO BE GENUINE, THE BURDEN HAD SHIFTED O N HIM TO PROVE THE CONTRARY. BUT THE AO HAD NOT BROUGHT ANY MATERIAL O N RECORD TO ESTABLISH THAT THE CREDIT REPRESENTS APPELLANT'S UNDISCLOSED INCOME. IN THE ABSENCE OF M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 84 ANY MATERIAL CONTRARY TO THE DOCUMENTS FURNISHED BY THE APPELLANT, THE AO CANNOT REJECT THE EXPLANATION OF THE APPELLANT. IT IS A WELL KNOWN MAXIM THAT SUSPICION HOWSOEVER STRONG IT MAY BE, CANNOT T AKE THE SHAPE OF EVIDENCE. THE AO CANNOT SIT BACK WITH FOLDED HANDS AND SIMPLY REJECT THE APPELLANT'S EXPLANATION. THE AO HAD NOT MADE ANY EN QUIRY FROM THE CREDITOR AND ALL THE REASONS STATED BY THE AO FOR R EJECTING APPELLANT'S EXPLANATION WERE IN THE REALM OF SURMISES AND SUSPI CION. THE HON'BLE PUNJAB & HARYANA HIGH COURT HAD AN OCCASION TO CONS IDER THE SIMILAR ISSUE IN THE CASE OF CIT VS. VARINDERRAWLLEY (2014) 36 ITR 232 (P & H), HELD AS UNDER (HEADNOTES): 'HELD, DISMISSING THE APPEAL, THAT THE ASSESSEE REC EIVED THE AMOUNT BY WAY OF AN ACCOUNT PAYEE CHEQUE. THE AMOUNT WAS R ETURNED BY WAY OF AN ACCOUNT PAYEE CHEQUE. THE TRANSACTIONS WE RE REFLECTED IN THE BANK ACCOUNTS OF THE ASSESSEE AS WELL AS OF THE CREDITOR. THE CREDITOR WAS AN INCOME-TAX ASSESSEE. ITS PERMANENT ACCOUNT NUMBER WASPLACED ON RECORD. THE ASSESSEE HAD SUFFICIENTLY DISCHARGED THE BURDEN WHICH LEVY UPON IT TO EXPLAIN THE NATURE AND SOURCE OF THE CREDIT APPEARING IN ITS ACCOUNTS AND THE BURDEN CLE ARLY SHIFTED TO THE DEPARTMENT TO PROVE TO THE CONTRARY TO HOLD THAT IN SPITE OF THE ASSESSEE'S EXPLANATION, THE ENTRIES COULD STILL BE HELD TO REPRESENT ASSESSEE'S INCOME. THE ASSESSING OFFICER FAILED TO INVOKE THE PROVISIONS UNDER SECTION 131 OF THE ACT, THE TRIBUN AL HAD RIGHTLY CONCLUDED THAT IT WAS SUFFICIENT TO DELETE THE ADDI TION. ' THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT THE APPELLANT HAD PROVED THE IDENTITY OF THE CREDITOR, CREDITWORTHINESS OF THE CREDITOR ANDGENUINENESS OF THE TRANSACTION AND, THEREFORE, UNSECURED LOAN OF RS.90,00,000/- FROM M/ S RATNAGIRIVINIMAY PVT. LTD. DID NOT FALL WITHIN THE AMBIT OF SECTION 68 OF THE ACT. HENCE, THE AO WAS NOT JUSTIFIED IN MAKING ADDITION OF RS.90,00,00 0/- U/S 68 OF THE ACT ON ACCOUNT OF UNSECURED LOAN FROM M/S RATNAGIRIVINIMAY PVT. LTD. THUS, THE ADDITION OF RS.90,00,000/- MADE BY THE AO U/S 68 OF THE ACT IS DELETED. 26. WE HAVE HEARD BOTH THE SIDES. THE LEARNED DR COULD NOT CONTROVERT THE FINDINGS RECORDED BY THE L EARNED CIT(A). THE ASSESSEE WAS ABLE TO PROVE THE IDENTITY OF THE M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 85 CREDITOR AND ALSO TO ESTABLISH THE CREDITWORTHINESS OF THE CREDITOR. THE ASSESSEE ALSO ESTABLISHED THE GENUINENES S OF THE TRANSACTION. WE DISMISS THIS GROUND OF THE REVENU ES APPEAL. GROUND NO.2 (A.Y.: 2008-09) OF REVENUES APPEAL : REVENUES GROUND OF APPEALS (A.Y.: 2008-09) READS AS UNDER: ASSESSMENT YEAR : 2008-09 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE C.I.T.(A). ERRED IN DELETING THE ADDITION MADE UNDER SECTION 6 8 OF THE INCOME-TAX ACT, 1961 ON ACCOUNT OF UNSECURED LOAN RECEIVED OF RS.9, 33,000/-. 27. AS REGARD UNSECURED LOAN RECEIVED FROM LUCKY COMMOTRADE PVT. LTD., THE ADDITION OF WHICH WAS DELETE D BY THE C.I.T.(A). AND AGAINST WHICH THE REVENUE IS IN APPE AL, IT IS SUBMITTED THAT LUCKY COMMOTRADE PVT. LTD. IS AN NBF C COMPANY. THE COMPANY WAS INCORPORATED ON 16.03.1994 UNDER THE PROVISIONS OF COMPANIES ACT, 1956 AND ITS ISP.A.NO.IS AAACK 9556A. ITS BUSINESS IS INVESTMENT AND FINANCE AND IT HAS BEEN CARRYING THE SAID BUSINESS SINCE ITS INCEPTION. FROM THE BANK STATEMENTS OF THE RELEVANT P ERIOD M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 86 WHICH WERE PRODUCED BEFORE THE A.O. AS WELL AS C.I.T. (A). AND VERIFIED BY THEM, IT WAS CLEAR THAT THE UNSECURED L OAN WAS PAID OUT OF FUNDS RECEIVED FROM SIGNET INDUSTRIES LTD. 28. THE LEARNED C.I.T.(A) HELD THE LOAN AS GENUINE TRANSACTION AND DELETED THE ADDITION OF RS.9,33,000/- B Y HOLDING AS UNDER : 9.4 I HAVE CAREFULLY CONSIDERED THE SUBMISSION O F THE APPELLANT AND FACTS OF THE CASE. IN THE CASE OF CASH CREDITOR , THE ONUS IS ON THE ASSESSEE TO PROVE WITH CREDIBLE EVIDENCE, THE IDENT ITY OF THE CREDITOR, CREDITWORTHINESS OF THE CREDITOR AND GENUINENESS OF THE TRANSACTION. IN THIS CASE, THE SUBMISSION OF THE APPELLANT IS THAT APPEL LANT HAD FURNISHED PAN, COPY OF RETURN OF INCOME OF A.Y. 2008-09, COPY OF F INAL ACCOUNTS, COPY OF CONFIRMED LEDGER ACCOUNT AND COPY OF BANK STATEMENT OF RELEVANT PERIOD OF THE CREDITOR M/S LUCKY COMMOTRADE PVT. LTD. IT WAS THE CONTENTION OF THE APPELLANT THAT BY FURNISHING THESE DOCUMENTS THE AP PELLANT HAD DISCHARGED ITS PRIMARY ONUS TO PROVE THE GENUINENESS OF LOAN O F RS.9,33,000/- RECEIVED FROM M/S LUCKY COMMOTRADE PVT. LTD. MOREOVER, AS TH E TRANSACTIONS HAD TAKEN PLACE THROUGH BANKING CHANNEL THE AO WAS NOT JUSTIFIED IN NOT ACCEPTING THE GENUINENESS OF LOAN OF RS.9,33,000/- FROM M IS LUCKY COMMOTRADE PVT. LTD. AND MAKING ADDITION U/S 68 OF THE ACT. HERE IT MAY BE PERTINENT TO MENTION THAT IN THE APP EAL ORDER IN APPEAL NO. CIT(A)-3/BPL/ IT-485 TO 491/14-15 DATED 29.04.2015 IN THE CASE OF M/S SIGNET INDUSTRIES LTD., IT HAS BEEN HELD THAT M/S L UCKY COMMOTRADE PVT. LTD. IS A PAPER COMPANY AND PROVIDING ACCOMMODATION ENTRIES TO THE PERSONS OF SANGLA GROUP AND UNSECURED LOANS SHOWN T O BE RECEIVED BY M/S SIGNET INDUSTRIES LTD. WERE HELD TO BE NON GENU INE AND ADDITIONS MADE BY THE AO U/S 68 OF THE ACT HAD BEEN CONFIRMED . M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 87 HOWEVER, IT IS NOTICED ON VERIFICATION OF THE COPIE S OF BANK STATEMENTS OF THE RELEVANT PERIOD OF M/S SIGNET INDUSTRIES LTD., M/S LUCKY COMMOTRADE PVT. LTD. AND THE APPELLANT COMPANY THAT THE AMOUNT OF L OAN SHOWN IN THE BOOKS OF THE APPELLANT COMPANY RECEIVED FROM M/S LU CKY COMMOTRADE PVT. LTD. WAS INFACT HAD COME FROM THE FUNDS OF LOANS RE TURNED BY M/S SIGNET INDUSTRIES LTD. TO M/S LUCKY COMMOTRADE PVT. LTD. T HE FUND FLOW CAN BE DEPICTED AS UNDER: M/S SIGNET INDUSTRIES LTD. M/S LUCKY COMMOTRADE PVT. LTD. M/S ORNATE LEASING & FINANCE PVT. LTD. THE APPELLANT HAD SHOWN UNSECURED LOAN OF RS.9,33,0 00/- RECEIVED ON THE FOLLOWING DATES: 12.10.2007 : RS.3, 12,000/- 26.03.2008 : RS.6,21,000/- TOTAL : RS.9,33,000/- AS REGARDS THE LOAN OF RS.3,12,000/- RECEIVED VIDE CHEQUE NO.431158 DATED 12.10.2007, IT IS NOTICED THAT M/S SIGNET IND USTRIES LTD. HAD ISSUED CHEQUE NO. 454944 OF RS.20,61,000/- TO M/S LUCKY CO MMOTRADE PVT. LTD. WHICH WAS DEBITED IN ITS ACCOUNT ON 12.10.2007. THE RE WAS BALANCE OF RS.6,968/- ONLY AS ON 01.10.2007 IN THE BANK ACCOUN T OF M/S LUCKY COMMOTRADE PVT. LTD. AFTER THIS AMOUNT WAS CREDITED IN THE BANK ACCOUNT OF M/S LUCKY COMMOTRADE PVT. LTD., THE SAME WAS TRA NSFERRED TO VARIOUS COMPANIES OF SANGLA GROUP AND THEREAFTER, THE BALAN CE REMAINED IN ITS BANK ACCOUNT WAS RS.6,968/- AS ON 12.10.2007. THE F ACTS EMERGING OUT ON ANALYSIS OF THE BANK ACCOUNT STATEMENT OF THE RELEV ANT PERIOD OF M/S LUCKY COMMOTRADE PVT. LTD. THAT CHEQUES WERE ISSUED IMMED IATELY TO THE FOLLOWING PARTIES: DATE CHEQUE NO. AMOUNT (RS.) NAME OF THE PERSON 12.10.2007 431156 5,51,000 M/S. PRANAY TRADE LINK PVT. LTD. 12.10.2007 431157 5,73,000 M/S. SWAN PETROCHEMICALS PVT. LTD. 12.10.2007 431158 3,12,000 M/S. ORNATE LEASING & FINANCE PVT. LTD. 12.10.2007 431159 3,20,000 M/S. SWAN HOLDING PVT. LTD. M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 88 12.10.2007 431160 3,05,000 M/S. SIGNET LEASING & FINANCE PVT. LTD. TOTAL 20,61,000 THUS, THE SOURCE OF AMOUNT OF RS.3,12,000/- GIVEN A S LOAN BY M/S LUCKY COMMOTRADE PVT. LTD. TO THE APPELLANT COMPANY STAND S EXPLAINED. SIMILARLY IN THE CASE OF LOAN AMOUNT OF RS.6,21,000 /- RECEIVED 26.03.2008, IT IS NOTICED THAT M/S SIGNET INDUSTRIES LTD. HAD I SSUED A CHEQUE OF RS.17,00,000/- ON 24.03.2008 TO M/S LUCKY COMMOTRAD E PVT. LTD. WHO IN TUM HAD ISSUED CHEQUES IN THE NAMES OF VARIOUS CONC ERNS OF SANGLA GROUP AS UNDER: DATE CHEQUE NO. AMOUNT (RS.) NAME OF THE PERSON 24.03.2008 431194 3,50,000 M/S SHALIMAR FERROUS & METAL S PVT. 27.03.2008 431192 1,70,054 M/S SIGNET LEASING & FINANCE PVT. 27.03.2008 431193 2,21,032 M/S PRANAY TRADE LINK PVT. LTD. 27.03.200 431195 6,21,000 M/S ORNATE LEASING PVT. LTD. 27.03.2008 431191 2,65,000 M/S SIGNET IMPEX PVT. LTD. 27.03.2008 431190 55,565 M/S SWAN HOLDING PVT. LTD. TOTAL 16,82,651 FROM THE FUND FLOW MENTIONED ABOVE, IT IS EVIDENTLY CLEAR THAT THE FUNDS OF UNSECURED LOANS INTRODUCED IN BOOKS OF THE APPELLAN T COMPANY IN THE NAME OF M/S LUCKY COMMOTRADE PVT. LTD. HAD INFACT COME F ROM M/S SIGNET INDUSTRIES LTD. AS MENTIONED ABOVE, IN THE CASE OF M/S SIGNET INDUSTRIES LTD., THE UNSECURED LOANS IN THE NAME OF M/S LUCKY COMMOTRADE PVT. LTD. HAD BEEN HELD TO BE NON GENUINE AND THE ADDITIONS M ADE U/S 68 OF THE ACT BY THE AO WERE CONFIRMED. THESE AMOUNTS HAD BEEN SH OWN AS REFUND/ RETURN OF THE UNSECURED LOANS BY M/S SIGNET INDUSTR IES LTD. TO M/S LUCKY COMMOTRADE PVT. LTD. SINCE THE ADDITION U/S 68 OF T HE ACT HAD BEEN CONFIRMED IN THE CASE OF M/SSIGNET INDUSTRIES LTD., NO FURTHER ADDITION IS REQUIRED TO BE MADE IN THE HANDS OF THE APPELLANT C OMPANY FOR THE SAME FUNDS ROUTED THROUGH M/S LUCKY COMMOTRADE PVT. LTD. , OTHERWISE, IT WOULD AMOUNT TO DOUBLE ADDITION. FURTHERMORE, THE SOURCE OF FUNDS INTRODUCED AS UNSECURED LOAN IN THE BOOKS OF ACCOUNT OF THE APPEL LANT COMPANY ALSO STANDS DULY EXPLAINED AS RECEIVED FROM M/S SIGNET I NDUSTRIES LTD. THROUGH M/S LUCKY COMMOTRADE PVT. LTD. HENCE, THE ADDITION MADE U/S 68 OF THE ACT OF RS.9,33,000/- IN THE CASE OF APPELLANT COMPA NY DOES NOT DESERVE TO BE SUSTAINED. ACCORDINGLY, THE ADDITION OF RS.9,33, 000/- MADE U/S 68 OF THE ACT FOR A.Y. 2008-09 IS DELETED. M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 89 29. WE HAVE HEARD BOTH THE SIDES. LEARNED DR COULD NOT CONTROVERT THE FINDINGS OF THE LEARNED CIT(A). MOREOVER, TAX EFFECT IS BELOW THE THRESHOLD LIMIT, HENCE, APPE AL OF THE REVENUE IS DISMISSED. GROUND NO.2.0 (A.Y.: 2011-12) OF THE ASSESSEES APPEA L : GROUND NO.2.0 (A.YS.: 2012-12) OF ASSESSEES APPEALS R EADS AS UNDER : ASSESSMENT YEAR : 2011-12 SHARE APPLICATION MONEY TREATED AS UNEXPLAINED INCOME : RS.93,00,000/- 2.0 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN LAW AS WELL AS IN FACTS IN CONFIRMING THE ADDITION OF RS.9 3,00,000/- MADE BY THE ASSESSING OFFICER U/S.68 OF THE INCOME-TAX ACT, 1961 BY TREATING SHARE APPLICATION RECEIVED BY THE ASSESSEE FROM THE FOLLOWING COMPANIES AS UNEXPLAINED CASH CREDIT : NAME OF THE PARTY AMOUNT (RS.) ONE2 SOLUTION PRIVATE LIMITED 25,00,000/- MATRIX SYSTEL PRIVATE LIMITED 28,00,000/- ARTILLEGENCE BIO INNOVTIONS LIMITED 20,00,000/- ALBTROSS SHARE REGISTERY PVT. LIMITED 20,00,000/- 93,00,000/- 30. THE FACTS IN BRIEF ARE AS FOLLOWS: (A) THE ASSESSEE RECEIVED SHARE APPLICATION MONEY OF RS.93,00,000/- FROM THE FOLLOWING COMPANIES: M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 90 S.NO. NAME OF PARTY AMOUNT (RS.) 1 ONE 2 SOLUTION PRIVATE LIMITED 25,00,000 2 MATRIX SYSTEL PRIVATE LIMITED 28,00,000 3 ARTILLEGENCE BIO INNOVATIONS LTD. 20,00,000 4 ALBTROSS SHARE REGISTERY PVT. LTD. 20,00,000 93,00,000 THE PLEADINGS OF THE LEARNED COUNSEL FOR THE ASSESSEE WERE COMMON ON THE ISSUE OF CASH CREDIT AND SHARE APPLICATION MONEY RECEIVED BY VARIOUS ENTITIES OF THE GROUP. THE REFORE, THE PLEADINGS ON THE ISSUE OF CASH CREDITS AND SHARE APPLICATION ADDED U/S 68 OF THE ACT ARE COMMON IN ALL TH E CASES OF THE GROUP. 31. OTHER FACTS WHICH ARE RELEVANT TO OTHER CASES ALSO ON THIS ISSUE ARE THAT DURING SEARCH, THE BANK STATEMENTS EVIDENCING PAYMENT OF SHARE APPLICATION MONEY/UNSECURE D LOAN, MEMORANDUM AND ARTICLES OF ASSOCIATION OF COMPANIES, RESOLUTIONS OF BOARD OF DIRECTORS, BLANK S IGNED TRANSFER FORMS AND/OR BLANK SIGNED MONEY RECEIPTS, ETC . OF THE FOLLOWING COMPANIES WERE FOUND: M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 91 (I) ASAN INVESTMENT AND FINANCIAL SERVICES PVT. LTD., (II) SIDDHI HOUSING DEVELOPMENT COMPANY LTD., (III) OCTOPUS INFOTEL PVT. LTD. (IV) WARNER MULTIMEDIA LTD. (V) ALBTROSS SHARE REGISTERY PVT. LTD. (VI) ONE 2 SOLUTIONS PVT LTD. (VII) MATRIX SYSTEL PRIVATE LTD. (VIII) ARTILLEGENCE BIO INNOVATIONS LTD. THE STATEMENT OF SHRI JAGDISH PUROHIT, WHO WAS CONTROL LING SOME OF THE COMPANIES, DIRECTLY OR INDIRECTLY, WAS RE CORDED BY ADIT (INV.), UNIT IV(2), MUMBAI U/S.131 OF THE AC T. ASSESSING OFFICER CLAIMS THAT COPY OF THE STATEMENT WAS PROVIDED TO THE ASSESSEE ALONGWITH THE NOTICE U/S 142 (1) ON 30.09.2013 BUT ASSESSEE DENIED THIS FACT. IN THE STATE MENT, SHRI PUROHIT HAS STATED THAT SOME OF THE COMPANIES HAVE PROVIDED ACCOMMODATION ENTRIES TO THE SIGNET GROUP OF COMPANIES. THE NAMES GIVEN WERE AS UNDER :- M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 92 (IX) WARNER MULTIMEDIA LTD., (X) UNISYS SOFTWARE AND HOLDING INDUSTRIES LTD., (XI) MICROCHIP INFOTEL PVT. LTD. , (XII) OCTOPUS INFOTEL PVT. LTD & (XIII) MATRIX SYSTEL PVT. LTD. THE STATEMENT GIVEN BY SHRI JAGDISH PUROHIT WAS SUBSEQUENTLY RETRACTED BY SHRI JAGDISH PUROHIT BY WAY OF FILING AN AFFIDAVIT BEFORE THE ADIT (INV.) UNIT IV(2) , MUMBAI WHEREIN SHRI PUROHIT CATEGORICALLY STATED THAT THE EARLI ER STATEMENT GIVEN BEFORE ADIT (INV.) ADMITTING THAT SHARE APPLICATION MONEY PAID BY THESE COMPANIES CONTROLLED, DIRECTLY OR INDIRECTLY, BY HIM WERE ACCOMMODATION ENT RIES, WAS GIVEN UNDER TREMENDOUS MENTAL STRESS, TENSION AND UTTER CONFUSED STATE OF MIND. THE INVESTMENTS MADE BY THESE COMPANIES WERE REAL AND GENUINE. COPIES OF THES E AFFIDAVITS WERE ALSO FILED BEFORE THE A.O. AS WELL AS BE FORE THE LEARNED CIT(A). M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 93 32. OUT OF THE SHARE APPLICATION MONEY/UNSECURED LOAN RECEIVED BY THE ASSESSEE AND OTHER GROUP ENTITIES, A SUBSTANTIAL PART WAS REFUNDED DUE TO NON-ALLOTMENT OF SHARES AND IT WAS MUCH BEFORE THE DATE OF SEARCH. THE DETAILS OF THE SAME WERE ALSO FILED BEFORE THE ASSESSIN G OFFICER ALONGWITH THE EVIDENCE. 33. THE SHARE APPLICATION MONEY RS.93,00,000/- WAS TREATED AS UNEXPLAINED CASH CREDIT BY THE A.O. AND ADDITI ON WAS MADE U/S.68 OF THE ACT. 34. THE REASONINGS GIVEN BY THE C.I.T.(A) FOR SUSTAI NING THE ADDITION ARE AS UNDER :- NOW, IF THE FACTS OF THE APPELLANTS CASE ARE ANALYSED IN THE LIGHT OF THE ABOVE OBSERVATIONS OF THE HON'BLE DELHI HIGH COURT, IT IS FOUND THAT THE INSTANT CASE FALLS UNDER THE SECOND CATEGORY OF CASES AS REFERRED IN PARA 13 OF THE ABOVE JUDGMENTS. IT IS NOTICED THAT DURING SEARCH AT THE M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 94 OFFICE PREMISES OF M/S SIGNET INDUSTRIES LTD. AT DEWAS NAKA VARIOUS INCRIMINATING DOCUMENTS COMPRISING OF BLANK SHARE TRANSFER FORM AND BLANK SIGNED RECEIPTS WERE FOUND. THESE BLANK TRANSFER FORMS AND RECEIPTS WERE RELATED TO ONE-2 SOLUTION PRIVATE LIMITED, ALBTROSS SHARE REGISTERY PVT. LIMITED, MATRIX SYSTEM PRIVATE LIMITED AND ARTILLEGENCE BIO INNOVATIONS LIMITED FROM WHOM THE APPELLANT HAD RECEIVED SHARE APPLICATION MONEY AND TO WHOM SHARES HAD NOT YET BEEN ALLOTTED. IN CASE OF MATRIX SYSTEL PVT. LTD., OCTOPUS INFOTEL PV T. LTD. AND MICROCHIP INFOTEL PVT. LTD., THE COMMON DIRECTOR OF THESE COMPANIES, SHRI JATDISH PUROHIT ADMITTED IN HIS STATEMENT BEFORE THE ADIT (INVESTMENT.), MUMBAI THAT THESE COMPANIES HAD GIVEN ONLY ACCOMMODATION ENTRIES TO SIGNET GROUP OF COMPANIES. IT WAS ALSO FOUND ON INVESTIGATION M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 95 BY ADIT(INVESTMENT.), MUMBAI THAT THE DIRECTORS OF THESE COMPANIES WERE DUMMY DIRECTORS AND PERSONS OF NO MEANS. ALTHOUGH THE APPELLANT FILED AN AFFIDAVIT FROM SHRI JAGDISH PUROHIT STATING THAT THESE COMPANIES WERE INDIRECTLY CONTROLLED BY HIM AND HE HAD GIVEN THE STATEMENT REGARDING ACCOMMODATION ENTRIES UNDER TREMENDOUS MENTAL STRESS AND IN CONFUSED STATE OF MIND, CONSIDERING THE EVIDENCE FOUND DURING SEARCH I.E. BLANK TRANSFER FORMS AND BLANK RECEIPTS AND ALSO THE STATEMENTS GIVEN BY VARIOUS DIRECTORS OF THESE COMPANIES, THE AFFIDAVIT OF SHRI JAGDISH PUROHIT APPEARS TO BE AN AFTERTHOUGHT AND, THEREFORE, CANNOT BE BELIEVED. FURTHER THE APPELLANT HAD NOT PRODUCED HIM BEFORE THE A.O. FOR EXAMINING THE VERACITY ON THE CONTENTS OF THE AFFIDAVIT. MOREOVER , IN CASE OF M/S WARNER MULTIMEDIA LTD. AND ONE 2 M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 96 SOLUTION PVT. LTD., THE SHARE APPLICATION MONEY TRANSACTIONS WERE DE-LAYERED AND IT WAS FOUND THAT THE ULTIMATE SOURCE OF FUND COMING FROM THESE COMPANIES WAS CASH DEPOSIT WHICH WAS ROUTED THROUGH TWO OR THREE ENTITIES AND SHARE APPLICATION MONEY WAS PROVIDED TO M/S SHRI BALAJI STARCH AND CHEMICALS LTD. AND M/S SIGNET LEASING & FINANCE PVT. LTD., THE CONCERNS BELONG TO SANGLA GROUP. THUS, THE FACTS NOTICED AND ENQUIRIES MADE ESTABLISH THAT THESE WERE PAPER COMPANIES AND SURROUNDING & ATTENDING FACTS PREDICATE A COVER UP. IN THE LIGHT OF THESE FACTS, THE A.O. WAS JUSTIFIED IN REJECTING THE EXPLANATION OF THE APPELLANT REGARDIN G GENUINENESS OF SHARE APPLICATION MONEY CREDITED IN ITS BOOKS OF ACCOUNTS DURING THE YEAR AND HOLDING THAT THE SHARE APPLICANT COMPANIES WERE PAPER COMPANIES AND NOT GENUINE INVESTORS. M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 97 THEREFORE, CONSIDERING THE TOTALITY OF FACTS AND SURROUNDING CIRCUMSTANCES OF THE CASE, I AM IN AGREEMENT WITH THE FINDINGS OF THE A.O. THAT THE SHARE APPLICATION MONEY OF RS.93,00,000/- SHOWN TO BE RECEIVED FROM VARIOUS COMPANIES BY THE APPELLANT WERE NON-GENUINE TRANSACTIONS AND FALL UNDER THE PURVIEW OF SECTION 68 OF THE ACT AS UNEXPLAINED CASH CREDITS. ACCORDINGLY, THE ADDITION OF RS. 93,00,000/- MADE BY THE A.O. U/S 68 OF THE ACT IS HEREBY CONFIRMED. 35. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED B EFORE US THAT THE ASSESSEE IS A LISTED COMPANY. IT IS RELATED TO SIGNET GROUP OF COMPANIES. SHRI MUKESH SANGLA IS WEL L KNOWN IN THE FIELD OF TRADING IN PLASTICS, MANUFACTURE OF PLASTIC PRODUCTS, MICRO IRRIGATION SYSTEMS ETC. THIS GROUP IS ALSO WELL KNOWN IN THE MARKET FOR ITS FINANCIAL STABILIT Y. IT SUCCESSFULLY MADE GIANT STRIDES INTO MICRO IRRIGATION M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 98 SYSTEMS AND CPVC PIPES AND ATTAINED SIGNIFICANT RANKING IN STATES LIKE GUJARAT, ANDHRA PRADESH, RAJASTHAN, MADHYA PRADESH FOR SUPPLY OF MICRO IRRIGATION SYSTEMS. THERE ARE A LARGE NUMBER OF INVESTORS INCLUDING FIIS AND FINANCIAL INSTITUTIONS WHICH ARE INTERESTED IN INVESTMENT IN T HE GROUP BY WAY OF EQUITY PARTICIPATION, PREFERENCE SHARES OR IN TER- CORPORATE LOANS. THE OBJECTIVES OF THESE INVESTORS AR E TO INVEST IN THE GROUP ON LONG TERM BASIS AND REAP HANDSO ME RETURNS IN DUE COURSE OF TIME. 36. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE HO N'BLE DELHI HIGH COURT HELD IN THE CASE OF C.I.T. VS KAMDHE NU STEEL AND ALLOY LTD. (361 ITR 220) WHEREIN IT WAS H ELD THAT : 10. BY THIS COMMON JUDGMENT, THE DIVISION BENCH DECIDED THESE APPEALS OF WHICH ONE APPEAL WAS RELATED TO LOVELY EXPORTS PVT. LTD.. AGAINST THE SAI D JUDGMENT, SPECIAL LEAVE PETITION WAS PREFERRED, WHICH WAS DISMISSED BY THE SUPREME COURT VIDE ORDERS DATED 11.01.2008 AND IS REPORTED AS C.I.T. VS. LOVELY EXPORTS (P) LTD. [ 216 CTR 195 (SC)]. THE M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 99 COURT WHILE DISMISSING THE SLP RECORDED SOME REASONS AS WELL ALBEIT IN BRIEF, WHICH IS AS UNDER: '2. CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME UNDER S.68 OF IT ACT, 1961? WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT.' 11. IT IS CLEAR FROM THE ABOVE THAT THE INITIAL BUR DEN IS UPON THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE. IN ORDER TO DISCHARGE THIS BURDEN, THE ASSESSEE IS REQUIRED TO PROVE: (A) IDENTITY OF SHAREHOLDER; (B) GENUINENESS OF TRANSACTION; AND (C) CREDIT WORTHINESS OF SHAREHOLDERS. 12. IN CASE THE INVESTOR/SHAREHOLDER IS AN INDIVID UAL, SOME DOCUMENTS WILL HAVE TO BE FILED OR THE SAID SHAREHOLDER WILL HAVE TO BE PRODUCED BEFORE THE AO TO PROVE HIS IDENTITY. IF THE CREDITOR/SUBSCRIBER I S A COMPANY, THEN THE DETAILS IN THE FORM OF REGISTERED ADDRESS OR PAN IDENTITY, ETC. CAN BE FURNISHED. M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 100 13. GENUINENESS OF THE TRANSACTION IS TO BE DEMONSTRATED BY SHOWING THAT THE ASSESSEE HAD, IN FACT, RECEIVED MONEY FROM THE SAID SHAREHOLDER AND IT CAME FROM THE COFFERS FROM THAT VERY SHAREHOLDER . THE DIVISION BENCH HELD THAT WHEN THE MONEY IS RECEIVED BY CHEQUE AND IS TRANSMITTED THROUGH BANKING OR OTHER INDISPUTABLE CHANNELS, GENUINENESS OF TRANSACTION WOULD BE PROVED. OTHER DOCUMENTS SHOWING THE GENUINENESS OF TRANSACTION COULD BE THE COPIES OF THE SHAREHOLDERS REGISTER, SHARE APPLICATION FORMS, SHARE TRANSFER REGISTER, E TC. 14. AS FAR AS CREDITWORTHINESS OR FINANCIAL STRENG TH OF THE CREDIT/SUBSCRIBER IS CONCERNED, THAT CAN BE PROVED BY PRODUCING THE BANK STATEMENT OF THE CREDITORS/SUBSCRIBERS SHOWING THAT IT HAD SUFFICIEN T BALANCE IN ITS ACCOUNTS TO ENABLE IT TO SUBSCRIBE T O THE SHARE CAPITAL. THIS JUDGMENT FURTHER HOLDS THAT ONCE THESE DOCUMENTS ARE PRODUCED, THE ASSESSEE WOULD HAVE SATISFACTORILY DISCHARGE THE ONUS CAST UPON HIM. THEREAFTER, IT IS FOR THE AO TO SCRUTINIZ E THE SAME AND IN CASE HE NURTURES ANY DOUBT ABOUT THE VERACITY OF THESE DOCUMENTS TO PROBE THE MATTER FURTHER. HOWEVER, TO DISCREDIT THE DOCUMENTS PRODUCED BY THE ASSESSEE ON THE AFORESAID ASPECTS, THERE HAS TO BE SOME COGENT REASONS AND MATERIALS FOR THE AO AND HE CANNOT GO INTO THE REALM OF SUSPICION. M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 101 15. AT THIS STAGE, WE WOULD LIKE TO REFER TO THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF CIT V. M/S CREATIVE WORLD TELEFILMS LTD. (IN ITA NO.2182 OF 2009 DECIDED ON 12.10.2009). THE RELEVANT PORTION OF THIS ORDER IS REPRODUCED BELOW: 'IN THE CASE IN HAND, IT IS NOT DISPUTED THAT THE ASSESSEE HAD GIVEN THE DETAILS OF NAME AND ADDRESS OF THE SHAREHOLDER, THEIR PA/GIR NUMBER AND HAD ALSO GIVEN THE CHEQUE NUMBER, NAME OF THE BANK. IT WAS EXPECTED ON THE PART OF THE ASSESSING OFFICER T O MAKE PROPER INVESTIGATION AND REACH THE SHAREHOLDERS. THE ASSESSING OFFICER DID NOTHING EXCEPT ISSUING SUMMONS WHICH WERE ULTIMATELY RETURNED BACK WITH AN ENDORSEMENT 'NOT TRACEABLE'. IN OUR CONSIDERED VIEW, THE ASSESSING OFFICER OUGHT TO HAVE FOUND OUT THEIR DETAILS THROUGH PAN CARDS, BANK ACCOUNT DETAILS OR FROM THEIR BANKERS SO AS TO REACH THE SHAREHOLDERS SINCE ALL THE RELEVANT MATERIAL DETAILS AND PARTICULARS WERE GIVEN BY THE ASSESSEE TO THE ASSESSING OFFICER. IN THE ABOVE CIRCUMSTANCES, THE VIEW TAKEN BY THE TRIBUNAL CANNOT BE FAULTED. NO SUBSTANTIAL QUESTION OF LAW I S INVOLVED IN THE APPEAL. IN THE RESULT, THE APPEAL IS DISMISSED IN LIMINI WI TH NO ORDER AS TO COSTS. THE ASSESSEE GROUP DISCHARGED ITS ONUS OF ESTABLISHING IDENTITY AND CREDITWORTHINESS OF SHARE APPLICANTS/LOAN M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 102 CREDITORS AND GENUINENESS OF TRANSACTIONS IN THE FOLLO WING MANNER: (A) TO ESTABLISH IDENTITY OF SHARE APPLICANT COMPANIES, THE ASSESSEE FILED DOCUMENTS LIKE THE CERTIFICATE OF INCORPORATION, MEMORANDUM AND ARTICLES OF ASSOCIATION, P.A.N. CARD, COPIES OF RETURN OF INCOME, DETAILS OF REGISTERED OFFICE AND DIRECTORSHIP ETC. BEFORE THE A.O. (B) TO ESTABLISH CREDITWORTHINESS , THE ASSESSEE FURNISHED COPIES OF BANK STATEMENTS OF SHARE APPLICANTS SHOWING THE RELEVANT TRANSACTIONS, THEIR RETURNS OF INCOME, ASSESSMENT ORDERS WHEREVER AVAILABLE, AUDITED ANNUAL ACCOUNTS, DULY CONFIRMED COPIES OF ACCOUNTS, ETC. BEFORE THE A.O. IN ALL THE CASES, THERE WERE SUFFICIENT BANK BALANCES AND IN NONE OF THE CASES, CASH WAS DEPOSITED EITHER PRIOR TO ISSUE OF CHEQUES TOWARDS SHARE APPLICATION MONEY/UNSECURED LOAN OR AT ANY POINT OF TIME DURING THE YEAR. (C) TO ESTABLISH GENUINENESS OF TRANSACTIONS , IT WAS DEMONSTRATED THAT ALL THE TRANSACTIONS HAD TAKEN PLACE THROUGH PROPER BANKING CHANNELS AND NO M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 103 EVIDENCE WHATSOEVER WAS FOUND SHOWING PAYMENT OF CASH TO SHARE APPLICANT COMPANIES/LOAN CREDITORS IN LIEU OF CHEQUES RECEIVED FROM THEM. 37. NOTICES U/S.133(6) WERE ISSUED IN 34 CASES FOR VERIFICATION OF SHARE APPLICATION MONEY/UNSECURED LOAN/VERIFICATION OF SHARES OF ADROIT INDUSTRIES (INDI A) LTD. SOLD AND REACQUIRED BY THE ASSESSEE GROUP. IN ALL THE CAS ES, THE NOTICES ISSUED U/S. 133(6) WERE SERVED UPON THE CREDITOR/SHARE APPLICANT. IN SOME CASES, THESE NOTICES WERE SERVED IMMEDIATELY AND IN SOME CASES, INITIALLY THE NOT ICES WERE RETURNED UNSERVED BUT SUBSEQUENTLY SERVED ON TH E BASIS OF CHANGED ADDRESSES PROVIDED BY THE ASSESSEE. AL L THE COMPANIES PARTICIPATED IN THE ASSESSMENT PROCEEDING S BY CATEGORICALLY REPLYING TO THE SPECIFIC QUERIES RAISE D BY THE ASSESSING OFFICER IN THE NOTICES ISSUED U/S.133( 6) AND FURNISHING DOCUMENTS LIKE RETURN OF INCOME, RELEVANT BANK STATEMENTS, DULY CONFIRMED COPIES OF ACCOUNTS, ETC. THESE M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 104 COMPANIES CATEGORICALLY STATED THAT THEY WERE REGULAR INVESTORS IN SHARES AS WELL AS PROVIDING UNSECURED LOAN S TO BUSINESS ENTERPRISES A FACT EVIDENT FROM THEIR AUDIT ED ANNUAL ACCOUNTS AND WERE ALWAYS LOOKING FOR BETTER INVESTMENT OPPORTUNITIES. THEY ALWAYS TRY TO INVEST AT AN EARLY STAGE SO AS TO REAP GOOD RETURNS. MOREOVER, THE LONG- TERM DECISIONS OF INVESTMENT ARE NOT ONLY BASED UPON PRESENT PERFORMANCE AND DIVIDEND TRACK RECORD ALONE BUT ALSO UPON SEVERAL OTHER FACTORS LIKE REPUTATION OF THE GROUP AND THE PROMOTERS, PRODUCTS IN WHICH THE GROUP DEALS, MARKET PRICE OF THE SHARES - IF LISTED OF FLAGSHIP GRO UP COMPANIES, THE MARKET CAPITALISATION, POTENTIALS OF THE PRODUCT BEING TRADED OR MANUFACTURED, GAINING EASY ACCESS TO THE MANAGEMENT OF THE COMPANY, POTENTIALS OF ACQUISITION OR MERGER OF THE COMPANY, ETC. HOWEVER, T HE A.O. SIMPLY BRUSHED ASIDE THE RESULTS OF THE ENQUIRY CONDUCTED BY HIM AND IGNORED A LARGE NUMBER OF EVIDENC E M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 105 PLACED BEFORE HIM BY THE ASSESSEE GROUP AS WELL AS GATHERED DURING ENQUIRY CONDUCTED BY HIM IN THE COURS E OF ASSESSMENT PROCEEDINGS. THE CONTENTION OF THE A.O. T HAT THE SHARES WERE INTENDED TO BE ALLOTTED AT A HEAVY PREMI UM AND THAT THE SHARE APPLICATION MONEY WAS REFUNDED CONSEQUENT TO THE SEARCH CONDUCTED BY THE INCOME TAX DEPARTMENT WAS COMPLETELY ERRONEOUS AND BASELESS. IN FACT, IN MOST OF THE CASES, SHARE APPLICATION MONEY WAS REFUNDED MUCH BEFORE THE DATE OF SEARCH BY THESE COMPANIES BECAUSE OF DIFFERENCE IN PERCEPTION BETWEEN THE MANAGEMENT OF SIGNET GROUP AND SUCH COMPANIES. AS THE PRIMARY BUSINESS OF THESE SHARE APPLICANT COMPANIES WAS FINANCE, INVESTMENT AND TRADING, IT IS QUITE NATURAL FOR THEM TO ROTATE THEIR INVESTMENT AND LOANS DEPENDING UP ON REQUIREMENTS OF THE CUSTOMER AS WELL AS ITS OWN NEED O F FUNDS TO SEEK BETTER INVESTMENT OPPORTUNITIES. IN T HE CASE OF SHARE APPLICANTS, THE SHARE APPLICATION MONEY WAS PAID M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 106 MAINLY OUT OF RECOVERY OF LOANS AND ADVANCES AND REALISATION OF INVESTMENT AS NO COMPANY HAS INEXHAUSTIBL E SUPPLY OF FUNDS. ON THIS BASIS, THE SHARE APPLICATION MONEY COULD NOT HAVE BEEN TREATED AS UNEXPLAINED INVESTMENT IN THE ABSENCE OF ANY OTHER ADVERSE FINDING . IN NONE OF THE CASES, THE A.O. COULD BRING ANY INSTANCE SHOWING DEPOSIT OF CASH IN THE BANK ACCOUNT OF VARIOUS COMPANIES PRIOR TO ISSUE OF CHEQUES OR AT ANY OTHER POI NT OF TIME DURING THE YEAR. AS REGARD ALLEGATION/FINDING OF THE A.O. THAT THE TRANSACTIONS IN THE CASE OF WARNER MULTIMEDIA LTD. AND ONE 2 SOLUTIONS PVT. LTD. WERE DE - LAYERED AND IT WAS FOUND THAT CASH WAS DEPOSITED PRIOR TO ISSUE OF CHEQUES TO THE ASSESSEE, THE ASSESSEE WAS NOT GIVEN ANY DETAILS ABOUT THE ALLEGED DE-LAYERING DURING ASSESSMENT PROCEEDINGS OR AT ANY POINT OF TIME AS TO HO W WAS IT RELEVANT IN THE ASSESSEES CASE. IT IS SUBMITTED THAT THE A.O. CAN CONDUCT ALL ENQUIRIES BEHIND THE ASSESSEE S M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 107 BACK BUT IF HE WANTS TO USE THE RESULTS OF SUCH ENQUIR IES AGAINST THE ASSESSEE, HE SHOULD PROVIDE ALL THE EVIDENC E GATHERED DURING ENQUIRIES AS WELL AS THE OPPORTUNITY TO THE ASSESSEE FOR REBUTTING THE SAME. THE HON'BLE PUNJAB AND HARYANA HIGH COURT HELD IN THE CASE OF CHIRANJI LAL STEEL ROLLING MILLS VS. C.J.T. (84 JTR 222) THAT THE PROVISION OF THE INDIAN EVIDENCE ACT CANNOT BE RESORTED TO JUDGE THE ADMISSIBILITY OR LEGALITY OF A PARTICULAR PIECE OF EVIDENCE ON WHICH THE ASSESSING OFFICER RELIES FOR THE PURPOSE OF ASSESSMENT. IT IS OPEN TO ASSESSING OFFICER TO COLL ECT EVIDENCE FROM ANY SOURCE BUT IT IS HIS DUTY TO PUT IT TO THE ASSESSEE BEFORE MAKING IT THE BASIS OF HIS ASSESSMENT. IF TH E ASSESSEE DENIES THE INFORMATION COLLECTED BY THE ASSESSING O FFICER, THE ASSESSING OFFICER HAS TO SATISFY HIMSELF BY MAKING INDEPENDENT ENQUIRY FROM SOURCE CONSIDERED RELIABLE BY HIM AND DECIDE WHETHER INFORMATION PASSED ON TO HIM IS TRUE OR NOT. IF, AS A RESULT OF HIS OWN INDEPENDENT ENQUIRY HE COMES M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 108 TO THE CONCLUSION THAT THE INFORMATION RECEIVED BY HIM IS TRUE, HE IS AT LIBERTY TO ACT THEREUPON AFTER DISCLOSING IT TO THE ASSESSEE AND AFFORDING HIM A REASONABLE OPPORTUNITY OF REBUTTING IT. BUT HE HAS NO RIGHT TO BURDEN THE ASS ESSEE WITH AN EXTRA AMOUNT OF TAX ON A VAGUE INFORMATION GIVEN TO HIM WITHOUT HIMSELF VERIFYING ITS TRUTHFULNESS OR RELIA BILITY 11. IT IS TRUE THAT THE INVESTMENTS ARE MADE WITH PROF IT MOTIVE BUT IMMEDIATE REALISATION OF PROFIT IS NOT NECE SSARY. MANY TIMES, AN INVESTOR INVESTS MONEY IN ANTICIPATION T HAT IT WOULD FETCH GOOD RETURNS FOR IT IN LONG TERM. FO R EXAMPLE, WHEN INFOSYS WAS SET UP NOBODY KNEW IT BUT THE INVES TORS WHO INVESTED MONEY IN INFOSYS EARNED HUGE RETURN ON THEIR INVESTMENT. THEREFORE, PROFIT MOTIVE MAY BE A SIGNIF ICANT PART OF INVESTMENT STRATEGY BUT IT IS NOT THE ONLY FAC TOR AND IMMEDIATE REALISATION OF PROFIT IS NOT NECESSARY. THE ASSESSING OFFICER FAILED TO BRING ANY MATERIAL OR EVIDEN CE ON RECORD TO SHOW THAT UNACCOUNTED CASH OF THE ASSESSEE WAS M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 109 DEPOSITED IN BANK ACCOUNT OF VARIOUS COMPANIES OR OTHERWISE GIVEN TO THEM AND CHEQUES TOWARDS SHARE APPLICATION MONEY WERE ISSUED BY THEM OUT OF CASH SO DEPOSITED OR PAID. IN THIS REGARD, THE RELIANCE WAS PLAC ED ON THE FOLLOWING JUDGEMENTS: (I) C.I.T VS. VALUE CAPITAL SERVICES PVT. LTD. 307 ITR 334 (DEL) (II) MIDAS GOLDEN DISTILLERIES (P) LTD. VS.C.I.T [2009] 124 TTJ 25 (CHENNAI) 38. AS REGARDS THE LEGAL POSITION OF ADDITION U/S.68 I N RELATION TO SHARE APPLICATION MONEY THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE FOLLOWING DECISIONS :- 1. C.I.T VS. STELLAR INVESTMENT LTD. [192 ITR 287 (DEL)] 2. C.I.T VS. STELLER INVESTMENT LTD. [251 ITR 263 (SC)] 3. C.I.T VS. ELECTRO POLYCHEM LTD. [294 ITR 661 (MAD)] . M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 110 4. C.I.T VS. DIVINE LEASING AND FINANCE LTD. [299 ITR 268 (DEL)] 5. C.I.T VS. DIVINE LEASING & FINANCE LTD. [CIVIL APPEAL NO. CC375/2008 (SC)] 6. C.I.T VS. SOPHIA FINANCE LTD. [205 ITR 98 (DEL.FB)] 7. C.I.T VS. LOVELY EXPORTS PVT. LTD. [216 CTR 195 (SC)] 8. C.I.T VS. FIRST POINT FINANCE LTD. [286 ITR 477] (RAJ)]. 9. SHREE BARKHA SYNTHETICS LTD. VS. A.C.I.T [283 ITR 377 (RAJ)] 10. C.I.T VS. DWARKADHISH INVESTMENT PVT. LTD. [ 194 TAXMAN 43 (DEL)] 11. C.I.T VS. ANTARCTICA INVESTMENT PVT. LTD. [262 ITR 493 (DEL)] 12. C.I.T VS. DOLPHINE CANPACK LTD. [283 ITR 190 (DEL)] 13. C.I.T VS. VALUE CAPITAL SERVICES PVT. LTD. [307 ITR 334 (DEL)] M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 111 14. C.I.T VS. PEOPLES GENERAL HOSPITAL LTD. [2013] 356 ITR 65 (MP) 15. C.I.T VS. EMPIRE BUILDTECH (P) LTD. [2014] 43 TAXMANN.COM 269 (DEL) 16. MIDAS GOLDEN DISTILLERIES (P) LTD. VS.C.I.T [2009] 124 TTJ 25 (CHENNAI) 17. C.I.T VS. SHREE RAMA MULTI TECH LTD [2013] 34 TAXMANN.COM 177 (GUJ.) 18. C.I.T VS. STL EXTRUSION (P) LTD [2011] 11 TAXMANN.COM 125 (MP) THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ON ANALYSIS OF THE ABOVE JUDGEMENTS, IT EMERGES THAT IN CAS E OF SUBSCRIBERS TO THE SHARE CAPITAL, THE COMPANY IS REQUIRE D TO ESTABLISH IDENTITY OF THE SHAREHOLDER, WHICH CAN BE PR OVED BY FURNISHING OF PERMANENT ACCOUNT NUMBER, CERTIFICAT E OF INCORPORATION, COPIES OF RETURN OF INCOME ETC. (C.I. T VS. DWARKADHISH INVESTMENT PVT. LTD. 194 TAXMANN 43 (DEL). THE GENUINENESS OF TRANSACTIONS CAN BE ESTABLISHED BY M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 112 SHOWING THAT THE TRANSACTION HAD TAKEN PLACE THROUGH PROPER BANKING CHANNELS (C.I.T VS. DIVINE LEASING & FINANCE LTD. (299 ITR 268 DEL). THE CREDITWORTHINESS OF THE SUBSCRIBER CAN BE ESTABLISHED BY FURNISHING P.A.NOS. , COPIES OF RETURN OF INCOME, AUDITED ANNUAL ACCOUNTS, ET C. IF THE TRANSACTIONS ARE MADE THROUGH BANKING CHANNELS AND ONCE THE EXISTENCE OF PERSONS BY NAME IN THE SHARE APPLICATIONS IN WHOSE NAME THE SHARES HAVE BEEN ISSUED I S SHOWN, THE ASSESSEE COMPANY CANNOT BE HELD RESPONSIBLE TO PROVE WHETHER THAT PERSON HIMSELF HAS INVESTED THE SAID MONEY OR SOME OTHER PERSON HAD MADE INVESTMENT IN TH E NAME OF THAT PERSON. THE BURDEN THEN SHIFTS ON THE REVENUE TO ESTABLISH THAT SUCH INVESTMENT HAS COME FRO M THE ASSESSEE COMPANY ITSELF. SHREE BARKHA SYNTHETICS LT D. VS. ACIT (283 ITR 377 RAJ). IF SUCH SHAREHOLDERS ARE UNABLE TO PROVE THEIR CREDITWORTHINESS, THE ASSESSING OFFIC ER IS DUTY M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 113 BOUND TO TAKE NECESSARY ACTION IN THEIR CASES. [CIT VS. LOVELY EXPORTS PVT. LTD. 216 CTR 195 SC] 39. THE DOCUMENTS LIKE SIGNED BLANK TRANSFER FOR MS, DULY SIGNED BLANK RECEIPTS, ETC. WERE OBTAINED FROM T HE SHARE APPLICANTS TO ENSURE THE FIRST RIGHT OF REFUSAL W ITH THE SIGNET GROUP OF COMPANIES AS WELL AS SANGLA FAMILY. IT DETERRED THE INVESTORS FROM TRANSFERRING THEIR SHAREH OLDING WITHOUT PRIOR PERMISSION FROM THE MANAGEMENT AND ENSURED THAT THE CONTROL OF THE COMPANIES REMAINED WIT H THE SIGNET GROUP AND SANGLA FAMILY. IN NONE OF THE CASE S POINTED OUT BY THE ASSESSING OFFICER FROM SEIZED MATE RIAL, SHARES WERE ALLOTTED BY THE RESPECTIVE COMPANIES TO TH E INVESTORS TILL THE DATE OF SEARCH OR EVEN THEREAFTER AND IN MOST OF THE CASES, THE SHARE APPLICATION MONEY WAS REFUNDED TO THE RESPECTIVE SHARE APPLICANT BY ACCOUNT PAYEE CHEQUES MUCH PRIOR TO THE DATE OF SEARCH. MOREOV ER, MERELY BECAUSE OF BLANK DOCUMENTS AS NOTICED BY THE M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 114 ASSESSING OFFICER, IT CANNOT BE INFERRED, IN THE ABSEN CE OF ANY OTHER CORROBORATIVE EVIDENCE, THAT THE TRANSACTION W AS FICTITIOUS OR REPRESENTED AN ACCOMMODATION ENTRY, PARTICULARLY WHEN SHARES WERE NOT ALLOTTED, THE APPLICAT ION MONEY WAS REFUNDED EVEN BEFORE THE DATE OF SEARCH AND REQUISITE EVIDENCE TO ESTABLISH GENUINENESS OF THE TRANSACTIONS WERE PROVIDED TO THE ASSESSING OFFICER. I N RELATION TO STATEMENT OF SHRI JAGDISH PUROHIT, WHO DIR ECTLY OR INDIRECTLY CONTROLLED VARIOUS COMPANIES LIKE MICRO CHIP INFOTEL PVT. LTD., OCTOPUS INFOTEL PVT. LTD. AND MATR IX SYSTEM PVT. LTD. GIVEN BEFORE THE A.D.I.T. (INV.) M UMBAI, THE ASSESSEE WAS NEVER GIVEN THE COPY OF HIS STATEMENT DURING ENTIRE ASSESSMENT PROCEEDINGS. THE STATEMENT OF THE A.O. THAT COPY OF REPORT OF A.D.I.T. (INV.) MUMBAIWAS ENCLOSED WITH THE NOTICE DATED 30.09.2013 IS NOT COR RECT AND CONTRARY TO THE FACTS. THE ASSESSEES REQUEST FOR CR OSS EXAMINATION OF SHRI JAGDISH PUROHIT FELL ON THE DEAF E ARS OF M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 115 THE A.O. AND IT WAS DENIED OPPORTUNITY TO BRING THE C ORRECT FACTS ON RECORD. THE UNCONTROVERTED AFFIDAVIT OF SHRI JAGDISH PUROHIT WAS REJECTED BY C.I.T.(A). AS BEING AN AFTERTHOUGHT AND UNBELIVABLE. AN AFFIDAVIT IS NOT A MERE PIECE OR PAPER RATHER IT CARRIES ITS AUTHENTICITY AS THE CONTENTS OF THE SAME ARE DULY SWORN BEFORE A MAGISTRATE OR A NOTARY PUBLIC/OATH COMMISSIONER, AS THE CASE MAY BE. DURING SIGNING OF THESE AFFIDAVITS, THE DEPONENT APPEAR S BEFORE THE PERSON BEFORE WHOM THEY ARE SWORN AND THEI R SIGNATURES ARE DULY TAKEN ON THE REGISTER MAINTAINED BY SUCH NOTARY PUBLIC. IF THE ASSESSING OFFICER IS APPREH ENSIVE ABOUT THE AUTHENTICITY OF SUCH AFFIDAVIT, HE CAN ALWAYS CROSS EXAMINE THE DEPONENTS AND TO VERIFY THE CONTENT S OF SUCH AFFIDAVIT. IF HE DOES NOT CONSIDER CROSS EXAMINATI ON OF THE DEPONENT NECESSARY, HE CANNOT QUESTION THE CORRECTNESS OF THE STATEMENTS MADE BY THE DEPONENTS I N THEIR AFFIDAVITS. IN SUPPORT OF THE ABOVE PROPOSITION, M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 116 RELIANCE IS PLACED UPON THE JUDGEMENT OF HONOURABLE SUPREME COURT IN THE CASE OF MEHTA PARIKH & CO. VS. C. I. T (30 1TR 181). A COMPANY IS AN ARTIFICIAL JUDICIAL PERSON . IT CARRIES ON ITS ACTIVITY THROUGH ITS SHAREHOLDERS, ITS BOARD OF DIRECTORS AND ITS EMPLOYEES. IT HAS A PERPETUAL EXISTEN CE UNLESS DISSOLVED OR WOUND UP UNDER APPROPRIATE LAW. ALTHOUGH, IT DOES NOT HAVE ANY PHYSICAL EXISTENCE, IT EXISTS DUE TO OPERATION OF LAW. THEREFORE, ITS EXISTENCE CAN BE ESTABLISHED ONLY THROUGH THE IDENTIFICATION ISSUED TO IT UNDER THE STATUTE UNDER WHICH IT WAS INCORPORATED. THE CERTIFICATE OF INCORPORATION ISSUED BY COMPETENT STATU TORY AUTHORITY, PERMANENT ACCOUNT NUMBER AND OTHER CERTIFICATES ISSUED UNDER VARIOUS OTHER APPLICABLE LAWS ARE EVIDENCE OF ITS IDENTIFICATION AND EXISTENCE AND THEY CANNOT BE IGNORED OR BRUSHED ASIDE SIMPLY BECAUSE OF NON-SE RVICE OF NOTICES ISSUED BY INCOME-TAX DEPARTMENT. SUCH NON - SERVICE OF NOTICES COULD BE DUE TO N'TH NUMBER OF R EASONS M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 117 INCLUDING CHANGE OF ADDRESS, NON-AVAILABILITY OF ITS SHAREHOLDERS/DIRECTORS/EMPLOYEES AT A PARTICULAR POINT O F TIME ETC. IT WAS HELD BY THE HONOURABLE DELHI HIGH C OURT IN THE CASE OF DIVINE LEASING AND FINANCE LTD. (299 ITR 26 8) THAT (4) IF RELEVANT DETAILS OF THE ADDRESS OR PAN IDENT IFY OF THE CREDITOR/SUBSCRIBER ARE FURNISHED TO THE DEPART MENT ALONG WITH COPIES OF THE SHAREHOLDERS REGISTER, SHA RE APPLICATION FORMS, SHARE TRANSFER REGISTER, ETC., I T WOULD CONSTITUTE ACCEPTABLE PROOF OR ACCEPTABLE EXPLANATI ON BY THE ASSESSEE. (5) THE DEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWING AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCRIBER FAILS OR NEGLECTS TO RESPOND TO ITS NOTICES . IN THE ASSESSEE'S CASE, THE NOTICES U/S. 133(6) WERE ULTIMATELY SERVED UPON ALL THE SHARE APPLICANT COMPANIES AND ALL OF THEM FURNISHED REPLIES TO THE NOTICES WITH DOCUMENTS. IT CLEARLY EMERGES FROM THE ASSESSMENT ORD ER THAT THE ASSESSING OFFICER DID NOT GO THROUGH THESE R EPLIES. M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 118 40. IN THE CASE OF SHARE APPLICANT COMPANIES, THEY EXISTED IN THE EYES OF LAW, THEY HAD THEIR OFFICE PR EMISES ALBEIT IT CHANGED FROM THE DATE OF PAYMENT OF SHARE APPLICATION MONEY TO DATE OF SERVICE OF NOTICE AND THEY WERE CARRYING ON THE BUSINESS OF TRADING, INVESTMENT AND FINANCE. THERE ARE MILLIONS OF PEOPLE AND THOUSANDS OF COMPANIES WHICH EXIST BUT DO NOT HAVE A PERMANENT PLACE OF BUSINESS, BUT STILL HAVE PLACE OF WORK/LIVING AND C ARRY ON SOME OCCUPATION. IN FACT THERE ARE SO MANY PEOPLE WORKI NG FROM THEIR RESIDENCE AND SO MANY COMPANIES WHOSE REGISTERED OFFICE ADDRESSES IS RESIDENCE OF THEIR DI RECTORS, ETC. AND NOT HAVING A PERMANENT BUSINESS PLACE OR ARE NO T FAMOUS OR SOCIALLY RECOGNIZED. IN THE OPINION OF THE ASSESSING OFFICER, ONLY THE BIG AND INFLUENTIAL PERSO NS HAVE LEGAL RECOGNITION, IDENTITY AND CREDITWORTHINESS. A C OMMON MAN HAS NO EXISTENCE IN THE EYES OF THE LAW. THEREFOR E, IT HUMBLY SUBMITTED THAT THE IDENTIFICATION OF EXISTENCE M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 119 PROVIDED BY THE ASSESSEE AND SUBSEQUENT COMPLIANCE OF NOTICE ESTABLISHED BOTH I.E. THEIR IDENTITY AS WELL AS THEIR EXISTENCE. 41. IF THE FINDINGS AND INFERENCES OF THE ASSESSING O FFICER AS PER THE ASSESSMENT ORDER ARE PITTED AGAINST THE EVID ENCE PLACED ON RECORD, IT IS QUITE MANIFEST THAT HIS FINDING S AND INFERENCES WERE MERE CONJECTURES AND SURMISES, NOT B ASED UPON ANY EVIDENCE BUT ARRIVED AT BY COMPLETELY AND/OR SELECTIVELY IGNORING A LARGE NUMBER OF EVIDENCE BROUG HT ON RECORD IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE INFERENCES DRAWN BY HIM FOR THE PURPOSE OF MAKING ADDITION WERE HEARSE AND LARGELY INFLUENCED BY HIS PERCEPTION ABOUT UNETHICAL AND ILLEGITIMATE PRACTICES ADOPTED BY FEW ASSESSEES IN RAISING SHARE CAPITAL AND NOT ON THE BASIS OF CRITICAL AND SCIENTIFIC ANALYSIS OF FACTS , INFORMATION AND EVIDENCE BROUGHT ON RECORD. M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 120 42. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT IN THE CASE OF LALCHAND BHAGAT AMBICA RAM V. C.I.T. [1959] 37 ITR 288 , THE HONOURABLE SUPREME COURT DISAPPROVED THE PRACTICE OF MAKING ADDITIONS IN THE ASSESSMENT ON MERE SUSPICION AND SURMISES OR BY TAKING NOTE OF THE SO CAL LED 'NOTORIOUS PRACTICE' PREVAILING IN TRADE CIRCLES. SIM ILAR VIEWS WERE EXPRESSED BY THE HONOURABLE DELHI HIGH C OURT IN THE CASE OF C.I.T. VS. DISCOVERY ESTATES (P.) LTD. (356 ITR 159). THE RELEVANT EXTRACT IS AS UNDER : 17. IT ONLY REMAINS FOR US TO REFER TO THE OBSERVATIONS OF THE ASSESSING OFFICER TO THE EFFECT THAT NO ONE MAKES A LOSS IN REAL ESTATE BUSINESS AND THAT THE MARKET PERCEPTIONS INDICATE THAT THE PRICES OF THE IMMOVEABLE PROPERTIES ARE ALWAYS ON THE UPWARD TREND. THESE OBSERVATIONS HAVE, INTER ALIA, FORMED THE BASIS OF THE ADDITIONS MADE BY THE ASSESSING OFFICER. IT WAS EVEN SUGGESTED M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 121 BEFORE US ON BEHALF OF THE REVENUE THAT IT IS A 'NOTORIOUS PRACTICE' PREVAILING IN REAL ESTATE CIRCLES THAT IN ALL PROPERTY TRANSACTIONS THERE IS NON-DISCLOSURE OF THE FULL CONSIDERATION. AS POINTED OUT EARLIER, THIS CANNOT PER SE CONSTITUTE THE BASIS OF THE ADDITION, THOUGH WE MUST HASTEN TO ADD THAT IT CAN VERY WELL BE A STARTING POINT FO R FURTHER INVESTIGATION. IN LALCHANDBHAGATAMBICA RAM V. CIT [1959] 37 ITR 288 , THE SUPREME COURT DISAPPROVED THE PRACTICE OF MAKING ADDITIONS IN THE ASSESSMENT ON MERE SUSPICION AND SURMISES OR BY TAKING NOTE OF THE 'NOTORIOUS PRACTICE' PREVAILING IN TRADE CIRCLES. IT WAS OBSERVED AS UNDER: 'ADVERTING TO THE VARIOUS PROBABILITIES WHICH WEIGHED WITH THE INCOME-TAX OFFICER WE MAY OBSERVE THAT THE NOTORIETY FOR SMUGGLING FOOD GRAINS AND OTHER COMMODITIES TO BENGAL BY COUNTRY BOATS ACQUIRED BY SAHIBGUNJ AND THE M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 122 NOTORIETY ACHIEVED BY DHULIAN AS A GREAT RECEIVING CENTRE FOR SUCH COMMODITIES WERE MERELY A BACKGROUND OF SUSPICION AND THE APPELLANT COULD NOT BE TARRED WITH THE SAME BRUSH AS EVERY ARHATDAR AND GRAIN MERCHANT WHO MIGHT HAVE BEEN INDULGING IN SMUGGLING OPERATIONS, WITHOUT AN IOTA OF EVIDENCE IN THAT BEHALF.' THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER DISTIN GUISHED THE ORDER RELIED UPON BY THE REVENUE. HE SUBMITS TH AT THE FIRST APPELLATE AUTHORITY EXTENSIVELY RELIED UPON JUDG EMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF NAVODAYA CAS TLE PVT. LTD. (367 ITR 306) AND HELD THAT THE ASSESSEES C ASE FALL IN THE SECOND SET OF CASES WHERE THERE WAS EVIDEN CE AND MATERIAL TO SHOW THAT THE SHAREHOLDER COMPANY WAS A PAPER COMPANY HAVING NO SOURCE OF INCOME BUT MADE SUBSTANTIAL AND HUGE INVESTMENT IN THE FORM OF SHARE APPLICATION MONEY. THE A.O. REFERRED TO BANK STATEMENT, FINANCIAL POSITION OF THE RECIPIENT AND BENEFICIARY AND SURROUNDING CIRCUMSTANCES. THE THREE REQUIREMENTS OF M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 123 IDENTITY, CREDITWORTHINESS AND GENUINENESS OF TRANSACT ION SHOULD NOT BE TESTED SUPERFICIALLY BUT IN DEPTH HAVIN G REGARDS TO HUMAN PROBABILITIES AND NORMAL COURSE OF HUMAN CONDUCT. IF THE FINDING OF THE FIRST APPELLATE AUTHORITY IS TESTED ON THE TOUCHSTONE OF EVIDENCE FI LED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDI NGS AND ALSO COLLECTED BY THE A.O. IN RESPONSE TO NOTICES U/S.133(6), IT IS QUITE MANIFEST THAT THE ASSESSEES CAS E DID NOT FALL IN THE SECOND SET OF CASES AS ENVISAGED IN THE NAVODAYA CASTLES CASE ( SUPRA ) BECAUSE THE EVIDENCE PLACED BEFORE THE A.O. WERE NOT CONSIDERED BY HIM AT ALL. HE DID NOT GO THROUGH THE BANK STATEMENTS OF THE COMPANIES IN WHICH TRANSACTIONS WITH THE ASSESSEE GROUP WERE PROPE RLY REFLECTED. HE DID NOT CONSIDER THE AUDITED ANNUAL ACCO UNTS FILED BY THESE COMPANIES SHOWING HUGE TURNOVER AND INVESTMENTS. HE SIMPLY HARPED UPON THE SIGNED BLANK TRANSFER FORMS, SIGNED BLANK RECEIPTS, ETC. FOUND DUR ING THE M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 124 SEARCH, THE STATEMENT OF SHRI JAGDISH PUROHIT, AND ALLE GED DE-LAYERING IN THE CASE OF WARNER MULTIMEDIA LTD. AND O NE 2 SOLUTIONS PVT. LTD. TO TREAT THE SHARE APPLICATION MONEY/UNSECURED LOAN AS UNEXPLAINED CASH CREDIT. IN FACT , THE ASSESSEES CASE FELL IN THE FIRST CATEGORY OF CASES ENVISAGED BY THE HONOURABLE DELHI HIGH COURT IN THE CASE OF NAVODAYA CASTLES WHEREIN THE ASSESSEE PRODUCED NECESSARY DOCUMENTS/EVIDENCE TO ESTABLISH IDENTITY OF SHAREHOLDER, FILED BANK ACCOUNTS FOR VERIFICATION OF TRANSACTION, DULY CONFIRMED COPIES OF ACCOUNT AND AUDITE D ANNUAL ACCOUNTS TO ESTABLISH CREDITWORTHINESS OF THE SHAREHOLDER AND GENUINENESS OF TRANSACTION, BUT THE REVENUE DID NOT CONDUCT FURTHER ENQUIRIES AND SIMPLY REJECTED THE ASSESSEES EXPLANATION AND EVIDENCE FOR MAKING ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S.68 OF THE ACT. ON THE BASIS OF EVIDENCE PLACED ON RECORD BY THE ASSESSEE AND EVIDENCE GATHERED IN RESPO NSE M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 125 TO NOTICES ISSUED U/S. 133(6) AND THE FINANCIAL ANALYSIS OF VARIOUS COMPANIES FROM WHOM SHARE APPLICATION MONEY AND UNSECURED LOAN RECEIVED IT IS SUBMITTED BY THE LE ARNED COUNSEL FOR THE ASSESSEE THAT IN VIEW OF THESE FACTS AN D LEGAL POSITION, THE ADDITION DESERVES TO BE DELETED. 35. THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AS ALSO THE FOLLOWING CASE LAWS :- S. NO. C ASE L AW REMARKS 1 M/S AGRAWAL COAL CORP. PVT. LTD. INDORE V/S ADDL. C IT RANGE-5, INDORE. 19 TAXMAN.COM 209 (ITAT INDORE) SECTION-68 2 ACIT V/S NARMADA EXTRUSION LTD. AND OTHERS, 19 ITJ 202, (ITAT INDORE) - DO - 3 SUMATI DAYAL V/S COMMISSIONER OF INCOME TAX 214 I TR 801 (SC) - DO - 4 ROSHAN DI HATTI V/S COMMISSIONER OF INCOME TAX, 1 07 ITR 938 (SC) - DO - 5 SHANKAR INDUSTRIES V/S COMMISSIONER OF INCOME TAX, 114 ITR 689 (CAL) - DO - 6 COMMISSIONER OF INCOME TAX V/S BIJU PATNAIK , 160 ITR 674 (SC) - DO - 7 COMMISSIONER OF INCOME TAX V/S PRECISION FINANCE PV T. LTD. 208 ITR 465 CAL.(HC) - DO - 8 COMMISSIONER OF INCOME TAX V/S P. MOHANKALA & ORS. 291 ITR 278 (SC) - DO - 9 COMMISSIONER OF INCOME TAX V/S PODAR CEMENT (P) LTD ., 226 ITR 625, (SC) - DO - 10 COMMISSIONER OF INCOME TAX V/S GOLD COIN HEALTH FOO D (P) LTD., - DO - M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 126 43. WE HAVE HEARD BOTH THE SIDES. WE HAVE CONSIDERED THE FACTS OF THE CASE IN VIEW OF VARIOUS CA SE LAWS RELIED UPON BY BOTH THE SIDES. WE HAVE CONSIDERED TH E FACTS OF THE ASSESSEES CASE IN THE LIGHT OF THE FACTS INVOL VED IN THE DECISIONS RELIED UPON BY THE REVENUE. WE FIND T HAT THE FACTS ARE AT VARIANCE, HENCE RATIO LAID DOWN IN THESE DECISIONS IS NOT APPLICABLE TO THE FACTS OF THE ASSESSE ES CASE. THE ASSESSEE RECEIVED SHARE APPLICATION MONEY OF 304 ITR 308 (SC) 11 COMMISSIONER OF INCOME TAX V/S NOVA PROMOTERS & FIN LEASE (P) LTD., 342 ITR 169 (HC) DELHI. - DO - 12 ASHOK MAHINDRU & SONS (HUF) V/S COMMISSIONER OF INC OME TAX, 173 TAXMAN 178 (HC) DELHI. - DO - 13 JOINT COMMISSIONER INCOME TAX V/S SAHELI LEASING & INDUSTRIES LTD., 324 ITR 170 (SC) - DO - 14 M/S SOPHIA FINANCE LTD. 205 ITR 98 (DELHI) - DO - 15 CIT V/S M/S NAVODAYA CASTLES PVT. LTD., 367 ITR 306 (DELHI) - DO - 16 DURGA PRASAD MORE, 82 ITR 540 (S.C.) - DO - 16 ANANTHARAM VEERASINGHAIAH V/S CIT, 123 ITR 457 ( SC) TELESCOPING 17 GRAND BAZAR V/S ACIT, 292 ITR 269 - DO - 18 S. MUTHUKUMAR V/S INCOME TAX OFFICER, 37 TAXMAN.COM 219 (MAD.) CASH DEPOSIT IN BANK M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 127 RS.93,00,000/- FROM THE FOUR COMPANIES, DETAILS OF WH ICH ARE AS UNDER :- S.NO. NAME OF PARTY AMOUNT (RS.) 1 ONE 2 SOLUTION PRIVATE LIMITED 25,00,000 2 MATRIX SYSTEL PRIVATE LIMITED 28,00,000 3 ARTILLEGENCE BIO INNOVATIONS LTD. 20,00,000 4 ALBTROSS SHARE REGISTERY PVT. LTD. 20,00,000 93,00,000 THE ASSESSEE SUBMITTED MEMORANDUM AND ARTICLE OF ASSOCIATION OF THESE COMPANIES, RESOLUTION OF THE BOARD OF DIRECTORS, BANK STATEMENTS WHEREFROM THE UNSECURED LO AN WAS GIVEN. THE OTHER DETAILS LIKE PAN, ADDRESS, ETC. WERE ALSO PROVIDED TO THE ASSESSING OFFICER. THE FINANCIAL ANALYSIS OF THE ACCOUNTS OF THESE COMPANIES ARE AS UNDER :- 1. ONE2 SOLUTIONS INDIA PVT. LTD . THE COMPANY WAS INCORPORATED ON 27.11.2000 HAVING ITS PA NO. AAACO 5151 D. IT IS HAVING REGISTERED OFF ICE AND BOARD OF DIRECTORS TO MANAGE AFFAIRS. THE RETURN OF INCOME FILED REGULARLY AND ALSO REGULARLY ASSESSED. AS PER THE AUDITED ANNUAL ACCOUNTS, THE CAPITAL FUNDS OF THE COMPANY AS ON 31.3.2011 WAS OF RS.19,07,95,000/- AND COMPANY WASS HAVING RECEIVABLES OF RS.12,05,76,950/-. INVESTMENTS IN SHARES WERE OF RS. 7,93,31,720/-, BANK BALANCE WAS OF M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 128 RS.52,51,537/-. THE TURNOVER OF THE COMPANY WAS RS.88,410/- AND THE NET PROFIT BEFORE TAX STOOD AT RS.18,047/-. FROM THE BANK STATEMENTS FILED BY THE COMPANY, IT WAS EVIDENT THAT ALL THE TRANSACTION RELATING TO THE SHARE APPLICATION MONEY WERE CARRIED OUT THROUGH BANKING CHANNELS AND NO CASH WAS DEPOSITED IN THE BANK ACCOUNT. THESE FACTS ESTABLISHED IDENTITY AND CREDITWORTHINESS OF THE INVESTOR COMPANY AND GENUINENESS OF THE TRANSACTION 2. MATRIX SYSTEL PRIVATE LIMITED THE COMPANY WAS INCORPORATED ON 12.8.2008 HAVING ITS PA. NO. AAFCM 6920 M. IT IS HAVING REGISTERED OFFICE AND BOARD OF DIRECTORS TO MANAGE ITS AFFAIRS. THE DETAILS THEREOF WERE PLACED ON RECORD BEFORE THE ASSESSING OFFICER. THE RETURN OF INCOME REGULARLY FILED AND REGULARLY ASSESSED. AS PER THE AUDITED ANNUAL ACCOUNTS FILED BY THE COMPANY, THE CAPITAL OF THE COMPANY AS ON 31.03.2011 WAS RS.31,67,10,715/- AND THE COMPANY WAS HAVING DEBTORS OF RS. 1,55,970/-, OTHER RECEIVABLES ARE OF RS.22,63,40,000/-. INVESTMENT IN SHARES IS RS.29,00,02,000/- AND BANK BALANCE OF RS. 2,04,200/-. THE TURNOVER OF THE COMPANY WAS RS.78,950/- AND THE NET PROFIT BEFORE TAX STOOD AT RS.12,922/-. FROM THE BANK STATEMENTS FILED BY THE COMPANY, IT WAS EVIDENT THAT ALL THE TRANSACTION RELATING TO UNSECURED LOAN WERE CARRIED OUT THROUGH PROPER BANKING CHANNELS AND NO CASH WAS DEPOSITED IN THE BANK ACCOUNT. THE DULY CONFIRMED COPIES OF ACCOUNTS ARE ALSO PLACED ON RECORD. THESE FACTS M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 129 ESTABLISHED THE IDENTITY AND CREDITWORTHINESS OF THE COMPANY AND ALSO GENUINENESS OF THE TRANSACTION. 3. ARTILLEGENCE BIO-INNOVATIONS LIMITED THE COMPANY WAS INCORPORATED ON 16.04.1983 HAVING ITS PA. NO. AAACI 7359 F. IT IS HAVING REGISTERED OF FICE AND BOARD OF DIRECTORS TO MANAGE ITS AFFAIRS. THE DETAILS THEREOF WERE PLACED ON RECORD BEFORE THE ASSESSING OFFICER. THE RETURN OF INCOME REGULARLY FILED AND REGULARLY ASSESSED. AS PER THE AUDITED ANNUAL ACCOUNTS FILED BY THE COMPANY, THE CAPITAL OF THE COMPANY AS ON 31.03.2011 WAS RS.26,34,65,740/-. THE DEBTORS ARE OF OF RS.1,67,68,820/-.OTHER RECEIVABLES ARE OF RS.12,70,76,460/-. INVESTMENT IN SHARES IS RS.8,37,00,320/-, STOCK IN TRADE IS OF RS.4,25,05,270/-, BANK BALANCE IS OF RS.98,040/-. THE TURNOVER OF THE COMPANY WAS RS.95683854/- AND THE NET PROFIT BEFORE TAX WAS LOSS OF RS.28,13,610/-. FR OM THE BANK STATEMENTS FILED BY THE COMPANY, IT WAS EVIDENT THAT ALL THE TRANSACTION RELATING TO UNSECURED LOAN WERE CARRIED OUT THROUGH PROPER BANKING CHANNELS AND NO CASH WAS DEPOSITED IN THE BANK ACCOUNT. THE DULY CONFIRMED COPIES OF ACCOUNTS ARE ALSO PLACED ON RECORD. THESE FACTS ESTABLISHED THE IDENTITY AND CREDITWORTHINESS OF THE COMPANY AND ALSO GENUINENESS OF THE TRANSACTION. 4. ALBTROSS SHARE REGISTERY PVT. LTD. THE COMPANY WAS INCORPORATED ON 13.05.1993 HAVING ITS PA. NO. AAACI 9004 H. IT IS HAVING REGISTERED OF FICE M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 130 AND BOARD OF DIRECTORS TO MANAGE ITS AFFAIRS. THE RETURN OF INCOME FILED REGULARLY AND REGULARLY ASSESSED. AS PE R THE AUDITED ANNUAL ACCOUNTS, THE CAPITAL FUNDS OF THE COMPANY AS ON 31.03.2011 WAS OF RS.21,22,90,000/- AND DEBTORS OF RS. 7,14,69,800/-. INVESTMENTS IN SHARES WERE OF RS. 14,56,35,800/-, BANK BALANCE WAS OF RS.91,73,683/-. FROM THE BANK STATEMENTS FILED BY THE COMPANY, IT WAS EVIDENT THAT ALL THE TRANSACTION RELATING TO THE SHARE APPLICATION MONEY WERE CARRIED OUT THROUGH PROPER BANKING CHANNELS AND NO CASH WAS DEPOSITED IN THE BANK ACCOUNT. THESE FACTS ESTABLISH THE IDENTITY AND CREDITWORTHINESS OF THE INVESTOR COMPANY AND ALSO GENUINENESS OF THE TRANSACTION. THE VARIOUS CASE LAWS RELIED UPON BY THE LEARNED COUN SEL FOR THE ASSESSEE AND CONSIDERING THE FACTUAL ASPECT OF T HIS CASE, WE ARE OF THE VIEW THAT THE ASSESSEE WAS ABLE TO ESTABLISH THE IDENTITY OF THESE CREDITORS BY WAY OF FURNISHING PERMANENT ACCOUNT NUMBER, CERTIFICATE OF INCORPORATION AND COPIES OF RETURNS OF INCOME. THE GENUINENESS OF THE TRANSACTION IS ALSO ESTABLISHED AS AL L THESE TRANSACTIONS WERE THROUGH PROPER BANKING CHANNELS AND THERE WAS NO CASH DEPOSIT IN THE BANK ACCOUNTS OF M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 131 THESE CREDITORS JUST PRIOR TO ADVANCEMENT OF LOAN. THE FINANCIAL ANALYSIS OF THESE COMPANIES ALSO ESTABLISHED THAT THESE COMPANIES WERE HAVING CREDIT WORTHINESS TO ADVANC E SUCH AMOUNT TO THE ASSESSEE. IN VIEW OF THESE FACTS, WE HOLD THAT THE ASSESSEE WAS ABLE TO SHIFT THE BURDEN ON THE REVENUE TO ESTABLISH WHETHER SUCH ADVANCES WERE OUT O F THE ASSESSEES OWN FUNDS. THE REVENUES RELIANCE ONLY ON THE SIGNED BANK TRANSFER FORMS CANNOT BE TAKEN A GROUND TO TREAT THESE ACTIVITIES AS BOGUS. IN THE ABSENCE OF AN Y CORROBORATIVE EVIDENCE WHICH COULD ESTABLISH THAT THE TRANSACTIONS WERE NOT GENUINE OR WERE FICTITIOUS OR AN YTHING ELSE, THE LEARNED CIT(A) WAS NOT JUSTIFIED IN SUSTAINI NG THE ADDITION. MOREOVER, THE ASSESSEE WAS NOT PROVIDED WIT H THE COPY OF STATEMENTS RECORDED BY THE ADIT, INVESTIGATIO N, MUMBAI, WHETHER IT HAS ANY RELEVANCE IN THE ASSESSEES CASE OR NOT. THE ASSESSEE WAS NOT PROVIDED WITH A COPY AND ALSO WAS NOT PROVIDED AN OPPORTUNITY TO CROSS-EXAMIN E M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 132 SHRI JAGDISH PUROHIT WHO HAS RETRACTED FROM THE EARLIE R STATEMENT AND THE CONTENTS OF THE AFFIDAVIT FILED BY HI M REMAINED UNCONTROVERTED. HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF STL EXTRUSION (P) LTD.; 333 ITR 269 AF TER CONSIDERING THE DECISION OF THE HON'BLE JURISDICTIO NAL HIGH COURT IN THE CASE OF CIT VS. RATHI FINLEASE LTD.; (20 08) 215 CTR (MP) 429 HAS HELD AS UNDER :- THOUGH IT IS THE DUTY OF THE ASSESSEE TO ESTABLISH THE GENUINENESS OF THE CREDITS BUT IN THE PRESENT CASE THE ASSESSEE HAS DULY ESTABLISHED THE IDENTITY AND SOURCE OF CREDITS. THE TRIBUNAL HAS ALSO HELD THAT ONCE THE IDENTITY AND SOURCE OF THE SUBSCRIBERS OF THE SHARES IS ESTABLISHED NO ADDITION CAN BE MADE UNDER S. 68. THE ASSESSEE HAVING DULY FURNISHED THE NAME, AGE, ADDRESS, DATE OF FILING THE APPLICATION OF SHARES, NUMBER OF SHARES OF EACH SUBSCRIBER THERE WAS NO M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 133 JUSTIFICATION FOR THE A.O. FOR MAKING THE IMPUGNED ADDITION BECAUSE ONCE THE EXISTENCE OF THE INVESTORS/SHARE SUBSCRIBERS IS PROVED, ONUS SHIFTS ON THE REVENUE TO ESTABLISH THAT EITHER THESHARE APPLICANTS ARE BOGUS OR THE IMPUGNED MONEY BELONGS TO THE ASSESSEE ITSELF. AFTER FILING OF THE AFFIDAVITS OF THE SAID SUBSCRIBER THE APPELLANT AT NO STAGE OF THE PROCEEDINGS SOUGHT ANY OPPORTUNITY TO REBUT THE SAID AFFIDAVITS. HAVING REGARD TO THE AFORESAID, NO QUESTION OF LAW MUCH LESS SUBSTANTIAL QUESTION OF LAW ARISES IN THIS APPEAL. FOR HOLDING SO, WE ALSO GET SUPPORT FROM THE FOLLOWI NG CASE LAWS :- 1. C.I.T VS. STELLAR INVESTMENT LTD. [192 ITR 287 (DEL)] IN THE PRESENT CASE, THE SUBSCRIBED CAPITAL OF THE ASSESSEE HAD BEEN INCREASED. THE INCOME-TAX OFFICER ASSESSED THE COMPANY AND ACCEPTED THE M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 134 INCREASE IN THE SUBSCRIBED CAPITAL. THE COMMISSIONER OF INCOME-TAX CAME TO THE CONCLUSION THAT THE ASSESSING OFFICER DID NOT CARRY OUT A DETA ILED INVESTIGATION INASMUCH AS THERE HAD BEEN A DEVICE OF CONVERTING BLACK MONEY INTO WHITE BY ISSUING SHARES WITH THE HELP OF FORMATION OF AN INVESTMENT COMPANY. THE COMMISSIONER OF INCOME-TAX FURTHER HELD THAT THE ASSESSING OFFICER DID NOT MAKE ENQUIRIES WITH REGARD TO THE GENUINENESS OF THE SUBSCRIBERS OF THE SHARE CAPITAL. HE THEREUPON SET ASIDE THE ORDER OF ASSESSMENT. THE TRIBUNAL REVERSED THIS DECISION FOR REASONS WHICH WE NEED NOT GO INTO. IT IS EVIDENT THAT EVEN IF IT BE ASSUMED THAT THE SUBSCRIBERS TO THE INCREASED SHARE CAPITAL WERE NOT GENUINE, NEVERTHELESS, UNDER NO CIRCUMSTANCES, CAN THE AMOUNT OF SHARE CAPITAL BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE. IT MAY BE THAT THERE ARE SOME BOGUS SHAREHOLDERS IN WHOSE NAMES SHARES HAD BEEN ISSUED AND THE MONEY MAY HAVE BEEN PROVIDED BY SOME OTHER PERSONS. IF THE ASSESSMENT OF THE PERSONS WHO ARE ALLEGED TO HAVE REALLY ADVANCED THE MONEY IS SOUGHT TO BE REOPENED, THAT WOULD HAVE MADE SOME SENSE BUT WE FAIL TO UNDERSTAND AS TO HOW THIS AMOUNT OF INCREASED SHARE CAPITAL CAN BE ASSESSED IN THE HANDS OF THE COMPANY ITSELF. M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 135 2. C.I.T VS. STELLER INVESTMENT LTD. [251 ITR 263 (SC)] WE HAVE READ THE QUESTION WHICH THE HIGH COURT ANSWERED AGAINST THE REVENUE. WE ARE IN AGREEMENT WITH THE HIGH COURT. PLAINLY, THE TRIBUNAL CAME TO A CONCLUSION ON FACTS AND NO INTERFERENCE IS CALLED F OR. THE APPEAL IS DISMISSED. NO ORDER AS TO COSTS. 3. C.I.T VS. ELECTRO POLYCHEM LTD. [294 ITR 661 (MAD)] . THE ASSESSEE FILED ITS RETURNS FOR THE ASSESSMENT YEARS 1998-99 AND 1999-2000. THE ASSESSING OFFICER MADE ADDITIONS IN RESPECT OF THE SHARE APPLICATION MONEY UNDER SECTION 68 OF THE INCOME- TAX ACT, 1961, ON THE FINDING THAT THE ASSESSEE HAD BROUGHT THE UNDISCLOSED INCOME BY WAY OF SHARE APPLICATIONS IN FICTITIOUS NAMES AND PASSED ORDERS ACCORDINGLY. ON APPEAL BY THE ASSESSEE, THE COMMISSIONER (APPEALS) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 1998-99 AND UPHELD THE ADDITION MADE FOR THE ASSESSMENT YEAR 1999-2000. ON FURTHER APPEALS BY THE ASSESSEE AND THE REVENUE, THE TRIBUNAL ALLOWED THE APPEAL OF THE ASSESSEE AND DISMISSED THE APPEAL BEFORE THE REVENUE. ON APPEAL: HELD, DISMISSING THE APPEALS, THAT EVEN IF IT WAS ASSUMED THAT THE SUB-SCRIBERS TO INCREASED SHARE CAPITAL WERE NOT GENUINE, UNDER NO CIRCUMSTANCES COULD THE AMOUNT OF SHARE M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 136 CAPITAL BE REGARDED AS UNDISCLOSED INCOME OF THE COMPANY . 4. C.I.T VS. DIVINE LEASING AND FINANCE LTD. [299 ITR 268 (DEL)] IN THIS ANALYSIS, A DISTILLATION OF THE PRECEDENTS YIELDS THE FOLLOWING PROPOSITIONS OF LAW IN THE CON TEXT OF SECTION 68 OF THE INCOME-TAX ACT. THE ASSESSEE HAS TO PRIMA FACIE PROVE (1) THE IDENTITY OF THE CREDITOR/SUBSCRIBER; (2) THE GENUINENESS OF THE TRANSACTION, NAMELY, WHETHER IT HAS BEEN TRANSMITTED THROUGH BANKING OR OTHER INDISPUTABLE CHANNELS; (3) THE CREDITWORTHINESS OR FINANCIAL STRENGTH OF THE CREDITOR/SUBSCRIBER; (4) IF RELEVANT DETAILS OF THE ADDRESS OR PAN IDENTIFY OF THE CREDITOR/SUBSCRIBER ARE FURNISHED TO THE DEPARTMENT ALONG WITH COPIES OF THESHAREHOLDERS REGISTER, SHARE APPLICATION FORMS, SHARE TRANSFER REGISTER, ETC., IT WOULD CONSTITUTE ACCEPTABLE PROOF OR ACCEPTABLE EXPLANATION BY THE ASSESSEE.(5) THE DEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWING AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCRIBER FAILS OR NEGLECTS TO RESPOND TO ITS NOTICES;(6) THE ONUS WOULD NOT STAND DISCHARGED IF THE CREDITOR/SUBSCRIBER DENIES OR REPUDIATES THE TRANSACTION SET UP BY THE ASSESSEE NOR SHOULD THE ASSESSING OFFICER TAKE SUCH REPUDIATION AT FACE VALUE AND CONSTRUE IT, WITHOUT MORE, M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 137 AGAINST THE ASSESSEE; AND (7) THE ASSESSING OFFICER IS DUTY-BOUND TO INVESTIGATE THE CREDITWORTHINESS OF THE CREDITOR/SUBSCRIBER THE GENUINENESS OF THE TRANSACTION AND THE VERACITY OF THE REPUDIATION . 5. C.I.T VS. DIVINE LEASING & FINANCE LTD. [CIVIL APPEAL NO. CC375/2008 (SC)] CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME U/S.68 OF THE INCOME-TAX ACT, 1961? WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITIO N FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE- COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE A.O., THEN THE DEPARTMENT IS FREE TO PROCEED TO RE-OPEN THEIR INDIVIDUAL ASSESSMENT IN ACCORDANCE WITH LAW . HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT. 6. C.I.T VS. SOPHIA FINANCE LTD. [205 ITR 98 (DEL.FB)] IF THE SHAREHOLDERS ARE IDENTIFIED AND IT IS ESTABLISHED THAT THEY HAVE INVESTED MONEY IN THE PURCHASE OF SHARES, THEN THE AMOUNT RECEIVED BY THE COMPANY WOULD BE REGARDED AS A CAPITAL RECEIPT AND TO THAT EXTENT THE OBSERVATIONS IN C.I.T. VS. STELLAR INVESTMENT LTD. [1991] 192 ITR 287 (DELHI), ARE CORRECT ; BUT THE OBSERVATIONS IN THAT CASE TO THE EFFECT THAT EV EN IF M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 138 THE SUBSCRIBERS TO THE CAPITAL WERE NOT GENUINE UNDER NO CIRCUMSTANCE COULD THE AMOUNT OF SHARE CAPITAL BE REGARDED AS UNDISCLOSED INCOME OF THE [COMPANY] ARE NOT. 7. C.I.T VS. LOVELY EXPORTS PVT. LTD. [216 CTR 195 (SC)] 2. CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME UNDER SECTION 68 OF IT ACT, 1961?. WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW . HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT. 3. SUBJECT TO THE ABOVE, SPECIAL LEAVE PETITION IS DISMISSED . 8. C.I.T VS. FIRST POINT FINANCE LTD. [286 ITR 477] (RAJ)]. THE FINDINGS REACHED BY THE TRIBUNAL WERE FINDINGS OF FACT AND WERE IN CONSONANCE WITH THE DECISION OF THE DELHI HIGH COURT ([1991] 192 ITR 287 ) AFFIRMED BY THE SUPREME COURT IN THE CASE OF STELLER INVESTMENT LTD. [2001] 251 ITR 263 , AND ALSO ON M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 139 PRINCIPLE ACCEPTED BY ANOTHER DECISION IN CIT V. SOPHIA FINANCE LTD. [1994] 205 ITR 98 (DELHI) [FB]. THE FINDING RECORDED BY THE TRIBUNAL DID NOT GO BEYOND THE PURVIEW OF THE FINDINGS OF FACT. IN THE INSTANT CASE, IT WAS NOT DENIED THAT ALL THE SHAREHOLDERS/SHARE APPLICANTS WERE GENUINELY EXISTING PERSONS. IT WAS ALSO NOT DENIED THAT EACH OF THEM WAS AN INCOME-TAX ASSESSEE AND THE COPIES OF THE RETURN OF THEIR INCOME WERE ALSO PLACED BEFORE THE ASSESSING OFFICER BY THE ASSESSEE WHICH FACT WAS ALSO NOT DENIED. IN THESE CIRCUMSTANCES, NO MATERIAL HAD BEEN BROUGHT ON RECORD EXCEPT INFERRING THAT THE INVESTORS IN THE OPINION OF THE ASSESSING OFFICER WERE NOT CREDITWORTHY TO LINK THE ASSESSEE WITH SUCH INVESTMENT OF MONEY MADE BY THOSE PERSONS . THE CASE SQUARELY FELL WITHIN THE RATIO LAID DOWN IN THE STELLER INVESTMENT LTD. [2001] 251ITR 263 (SC) WHEREIN IT WAS STATED THAT IN SUCH CASES MERELY BECAUSE THE CREDITORS HAVE FAILED TO PROVE THEIR SOURCE OF INVESTMENT, THE SAME CANNOT BE ADDED IN THE INCOME OF THE ASSESSEE BUT IT OUGHT TO BE ADDED BY FINDING PERSONS WHO HAD THEIR NAMES . THERE WAS NO PRESUMPTION THAT THE ASSESSEE WAS THE BENAMI OWNER OF THE INVESTMENT MADE BY THE EXISTING PERSONS. THE APPEAL WAS TO BE DISMISSED. M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 140 9. SHREE BARKHA SYNTHETICS LTD. VS. A.C.I.T [283 ITR 377 (RAJ)] IF THE TRANSACTIONS ARE MADE THROUGH BANKING CHANNELS AND ONCE THE EXISTENCE OF PERSONS BY NAME IN THE SHARE APPLICATIONS IN WHOSE NAME THE SHARES HAVE BEEN ISSUED IS SHOWN, THE ASSESSEE COMPANY CANNOT BE HELD RESPONSIBLE TO PROVE WHETHER THAT PERSON HIMSELF HAS INVESTED THE SAID MONEY OR SOME OTHER PERSON HAD MADE INVESTMENT IN THE NAME OF THAT PERSON. THE BURDEN THEN SHIFTS ON THE REVENUE TO ESTABLISH THAT SUCH INVESTMENT HAS COME FROM THE ASSESSEE COMPANY ITSELF. 10. C.I.T VS. DWARKADHISH INVESTMENT PVT. LTD. [ 194 TAXMAN 43 (DEL)] ONCE HE PROVES THE IDENTITY OF THE CREDITORS/SHARE APPLICANTS BY EITHER FURNISHING THEIR PAN NUMBERS OR INCOME-TAX ASSESSMENT NUMBERS AND SHOWS THE GENUINENESS OF TRANSACTION BY SHOWING MONEY IN HIS BOOKS EITHER BY ACCOUNT PAYEE CHEQUE OR BY DRAFT OR BY ANY OTHER MODE, THEN THE ONUS OF PROOF WOULD SHIFT TO THE REVENUE.JUST BECAUSE THE CREDITORS/SHARE APPLICANTS COULD NOT BE FOUND AT THE ADDRESS GIVEN, IT WOULD NOT GIVE THE REVENUE THE RIGHT TO INVOKE SECTION 68. ONE MUST NOT LOSE SIGHT OF THE FACT THAT IT IS THE M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 141 REVENUE WHICH HAS ALL THE POWERS AND WHEREWITHAL TO TRACE ANY PERSON . MOREOVER, IT IS SETTLED LAW THAT THE ASSESSEE NEED NOT TO PROVE THE SOURCE OF SOURCE 11. C.I.T VS. ANTARCTICA INVESTMENT PVT. LTD. [262 ITR 493 (DEL)] THE COURT WAS SATISFIED THAT NO INTERFERENCE WAS JUSTIFIED SINCE THE ASSESSEE HAD PRODUCED THE SHARE APPLICATION FORM ALONG WITH CONFIRMATION LETTERS, COPIES OF THEIR ACCOUNTS, COPIES OF THEIR BANK ACCO UNT AND CHEQUES PAYMENTS AND THEIR AUDITORS REPORT. THE ASSESSING OFFICERS CONCLUSION THAT GENUINENESS OF TRANSACTIONS HAD NOT BEEN MADE GOOD WAS NOT UPHELD DESPITE THE FACT THAT THE NOTICES RECEIVED B Y ONE OF THE COMMON DIRECTORS OF TWO SUBSCRIBING COMPANIES HAD BEEN IGNORED AND NO INFORMATION WAS FORTHCOMING FROM THE LATTER. HOWEVER, IT WAS CONFIRMED BY THE UNDER SECRETARY, LAND REVENUE, GOVERNMENT OF SIKKIM, THAT BOTH THE COMPANIES WERE INCORPORATED IN SIKKIM AND THEIR ADDRESSES WERE DISCLOSED IN THE RETURN OF ALLOTMENT; THE SUBSCRIBE R THUS STOOD IDENTIFIED. 12. C.I.T VS. DOLPHINE CANPACK LTD. [283 ITR 190 (DEL)] IN CASES WHERE THE CREDIT ENTRY RELATES TO THE ISSUE OF SHARE CAPITAL, THE ITO IS ALSO ENTITLED M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 142 TO EXAMINE WHETHER THE ALLEGED SHAREHOLDERS DO IN FACT EXIST OR NOT. SUCH AN INQUIRY WAS CONDUCTED BY THE ASSESSING OFFICER IN THE INSTANT CASE. IN THE COURSE OF THE SAID INQUIRY, THE ASSESSEE HAD DISCLOSED TO THE ASSESSING OFFICER NOT ONLY THE NAMES AND THE PARTICULARS OF THE SUBSCRIBERS OF THE SHARES BUT ALSO THEIR BANK ACCOUNTS AND THE PERMANENT ACCOUNT NUMBERS ISSUED BY THE INCOME-TAX DEPARTMENT. SUPERADDED TO ALL THIS WAS THE FACT THAT THE AMOUNT RECEIVED BY THE COMPANY WAS ALL BY WAY OF CHEQUES. THAT MATERIAL WAS, IN THE OPINION OF THE TRIBUNAL, SUFFICIENT TO DISCHARGE THE ONUS THAT LAY UPON THE ASSESSEE. THAT WAS EVIDENT FROM THE PASSAGE EXTRACTED FROM THE ORDER PASSED BY THE TRIBUNAL EARLIER. IN THE ABSENCE OF A NY PERVERSITY IN THE VIEW TAKEN BY THE TRIBUNAL OR ANYTHING TO ESTABLISH CONCLUSIVELY THAT THE FINDING REGARDING THE GENUINENESS OF THE SUBSCRIBERS AND THE TRANSACTION SUFFERED FROM ANY IRRATIONALITY NO SUBSTANTIAL QUESTION OF LAW AROSE FOR CONSIDERATION IN INSTANT APPEAL TO WARRANT INTERFERENCE. THE INSTANT APPEAL ACCORDINGLY FAILED AND WAS DISMISSED.[PARA 7] 13. C.I.T VS. VALUE CAPITAL SERVICES PVT. LTD. [307 ITR 334 (DEL)] IT IS QUITE OBVIOUS THAT IS VERY DIFFICULT FOR THE ASSESSEE TO SHOW THE CREDITWORTHINESS OF M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 143 STRANGERS. IF THE REVENUE HAD ANY DOUBT WITH REGARD TO THEIR ABILITY TO MAKE THE INVESTMENT, THEIR RETURNS MIGHT BE REOPENED BY THE DEPARTMENT . IF DEPARTMENT WANTS TO MAKE ADDITION ON ACCOUNT OF SHARE APPLICATION MONEY, BURDEN IS ON DEPARTMENT TO SHOW THAT EVEN IF APPLICANT DID NOT HAVE MEANS TO MAKE INVESTMENT, INVESTMENT MADE BY ASSESSEE ACTUALLY EMANATED FROM COFFERS OF ASSESSEE SO AS TO ENABLE IT TO BE TREATED AS UNDISCLOSED INCOME OF ASSESSEE. 14. C.I.T VS. PEOPLES GENERAL HOSPITAL LTD. [2013] 356 ITR 65 (MP) FACTS THE ASSESSING OFFICER MADE ADDITION, HOLDING THAT SHARE SUBSCRIPTION RECEIVED FROM A COMPANY IN SHARJAH WAS UNDISCLOSED INCOME OF THE ASSESSEE, AS HE DOUBTED THE CREDITWORTHINESS OF SUCH COMPANY. HELD IN THE CASE OF CIT V. LOVELY EXPORTS (P.) LTD. [APPLICATION NO. 11993 OF 2007, DATED 11-1-2008], THE APEX COURT SPECIFICALLY HELD THAT IF THE IDENTI TY OF THE PERSON PROVIDING SHARE APPLICATION MONEY IS ESTABLISHED, THEN THE BURDEN IS NOT ON THE ASSESSEE TO PROVE THE CREDITWORTHINESS OF THE SAID PERSON. HOWEVER, THE DEPARTMENT CAN PROCEED AGAINST THE SAID COMPANY IN ACCORDANCE WITH LAW. [PARA 16] M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 144 THE POSITION OF THE PRESENT CASE IS IDENTICAL. IT I S NOT THE CASE OF ANY OF THE PARTIES THAT THE COMPANY IN SHARJAH IS A BOGUS COMPANY OR A NON-EXISTENT COMPANY AND THE AMOUNT WHICH WAS SUBSCRIBED BY THE SAID COMPANY BY WAY OF SHARE SUBSCRIPTION WAS IN FACT THE MONEY OF THE ASSESSEE. IN THE PRESENT CASE, THE ASSESSEE HAD ESTABLISHED THE IDENTITY OF INVESTOR WHO HAD PROVIDED THE SHARE SUBSCRIPTION AND IT WAS ESTABLISHED THAT THE TRANSACTION WAS GENUINE, THOUGH AS PER CONTENTION OF THE ASSESSEE THE CREDITWORTHINESS OF THE CREDITOR WAS ALSO ESTABLISHED. IN THE PRESENT CASE, IN THE LIGHT OF T HE JUDGMENT OF LOVELY EXPORTS (P.) LTD. (SUPRA), ONLY ESTABLISHMENT OF THE IDENTITY OF THE INVESTOR IS TO BE SEEN. THE DELHI HIGH COURT ALSO, IN THE CASE OF CIT V. DIVINE LEASING & FINANCE LTD. [2008] 299 ITR 268/[2007] 158 TAXMAN 440 , CONSIDERING A SIMILAR QUESTION HELD THAT THE ASSESSEE-COMPANY, HAVING RECEIVED SUBSCRIPTIONS FROM THE PUBLIC/RIGHTS ISSUE THROUGH BANKING CHANNELS AND FURNISHED COMPLETE DETAILS OF THE SHAREHOLDERS, NO ADDITION COULD BE MADE UNDER SECTION 68 IN THE ABSENCE OF ANY POSITIVE MATERIAL OR EVIDENCE TO INDICATE THAT THE SHAREHOLDERS WERE BENAMIDARS OR FICTITIOUS PERSONS OR THAT ANY PART OF THE SHARE CAPITAL REPRESENTED COMPANY'S OWN INCOME FROM UNDISCLOSED SOURCES. [PARA 16] M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 145 15. C.I.T VS. EMPIRE BUILDTECH (P) LTD. [2014] 43 TAXMANN.COM 269 (DEL) THE ADDITION IN RELATION TO SHARE CAPITAL CAN BE MA DE ONLY IN THE CASE OF THOSE SUBSCRIBERS/INVESTORS TO SHARE CAPITAL WHOSE PARTICULARS COULD NOT BE VERIFI ED AND WHO DID NOT RESPOND TO NOTICES ISSUED BY ASSESSING OFFICER. 16. MIDAS GOLDEN DISTILLERIES (P) LTD. VS.C.I.T [2009] 124 TTJ 25 (CHENNAI) FACTS THE ASSESSEE RAISED SHARE CAPITAL AND RECEIVED SHARE APPLICATION MONEY FROM SEVEN PERSONS AGGREGATING RS.1394.15 LAKHS. THE ASSESSEE HAD BROUGHT ON RECORD COMPLETE IDENTITY OF SHAREHOLDERS BY PROVIDING THEIR ADDRESSES AND CONFIRMATIONS TO THE EFFECT THAT THEY HAD CONTRIBUTED TO THE SHARE CAPITAL OF THE ASSESSEE COMPANY. THE MONEYS RECEIVED WERE THROUGH BANKING CHANNEL. THEY ALL WERE SHOWN TO BE REGULARLY ASSESSED TO INCOME-TAX. ASSESSMENT PARTICULARS WITH RESPECT TO EACH OF THEM WERE MADE AVAILABLE TO THE ASSESSING AUTHORITY. TWO COMPANIES WHICH HAD MADE CONTRIBUTIONS OF RS.340 LAKHS AND RS.745 LAKHS RESPECTIVELY WERE ASSESSED WITH THE SAME ASSESSING OFFICER WHO ASSESSED THE ASSESSEE. THE ASSESSING AUTHORITY HIMSELF HAD FOUND THAT BOTH THESE APPLICANTS IN THEIR RESPECTIV E ACCOUNTS, HAD DISCLOSED INVESTMENT MADE WITH THE M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 146 ASSESSEE. HOWEVER, THE SHARE APPLICATION MONEY WAS TREATED AS CASH CREDITS AND ADDED TO THE ASSESSEES INCOME. HELD DESPITE ALL THE MATERIAL AVAILABLE WITH THE ASSESSI NG AUTHORITY AND DISCREET ENQUIRIES AS WERE MADE WITHIN THE SCOPE OF HIS POWERS, THE ASSESSING AUTHORITY FOUND THAT THERE REMAINED A MYSTERY AS TO WHOM THE MONEY REALLY BELONGED . EVEN THOUGH THERE WERE CIRCUMSTANCES LEADING TO SUSPICION, YET HAVING TAKEN AN ACTION UNDER SECTION 132 AND ENQUIRIES MADE IN THE ASSESSMENT PROCEEDINGS, THE ASSESSING AUTHORITY HAD NOT BROUGHT ANY POSITIVE MATERIAL OR EVIDENCE TO INDICATE THAT THE SHARE APPLICATION MONEY AS SUCH REPRESENTED ASSESSEES OWN UNDISCLOSED MONEY BROUGHT BACK IN THE GARB OF SHARE CAPITAL. MERELY BECAUSE OF HIS SUBJECTIVE SATISFACTION THAT THE SOURCE OF AVAILABILITY OF MONEY WITH THE SHAREHOLDERS OR THEIR CREDITWORTHINESS WERE NOT ESTABLISHED, THE ASSESSING OFFICER COULD NOT TREAT THE GENUINELY RAISED SHARE CAPITAL AS DEEMED INCOME UNDER SECTION 68 . IN THE EVENT THE INTERMEDIARY COMPANIES WERE TO BE TAKEN AS CONDUITS OR PERSONS WITHOUT REQUISITE CREDITWORTHINESS AND EVEN IF THEY WERE TO BE TREATED AS BOGUS SHAREHOLDERS, THEN ALSO NOTHING STOPPED THE REVENUE TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 147 WITH LAW AND BRING TO TAX SUCH UNEXPLAINED MONEY IN THEIR RESPECTIVE HANDS. ACCORDINGLY, THE ADDITION WAS TO BE DELETED. 17. C.I.T VS. SHREE RAMA MULTI TECH LTD [2013] 34 TAXMANN.COM 177 (GUJ.) IT IS NOTED THAT COMMISSIONER (APPEALS) AS WELL AS THE TRIBUNAL HAVE DULY CONSIDERED ISSUE AND HAVING FOUND COMPLETE DETAILS OF THE RECEIPTS OF SHARE APPLICATION MONEY, ALONG WITH THE FORM NAMES AND ADDRESSES, PAN AND OTHER REQUISITE DETAILS, THEY FOUND COMPLETE ABSENCE OF THE GROUNDS NOTED FOR INVOKING THE PROVISION OF SECTION 68. MOREOVER, BOT H RIGHTLY HAD APPLIED THE DECISION OF CIT V. LOVELY EXPORTS (P.) LTD. [APPLICATION NO. 11993 OF 2007, DATED 11-1-2003] TO THE CASE OF THE ASSESSEE. THEREFORE, NO REASON WAS FOUND IN ABSENCE OF ANY ILLEGALITY MUCH LESS ANY PERVERSITY TOO TO INTERFER E WITH THE ORDER OF THE BOTH THESE AUTHORITIES, WHO H AD CONCURRENTLY HELD THE DUE DETAILS HAVING BEEN PROVED. THE ASSESSEE-COMPANY HAD PRESENTED THE NECESSARY WORTH PROOF BEFORE BOTH THE AUTHORITIES AND IT WAS NOT EXPECTED BY THE ASSESSEE-COMPANY TO FURTHER PROVE THE SOURCE OF THE DECEASED. THIS TAX APPEAL RESULTANTLY RAISES NO QUESTION OF LAW AND THEREFORE DO NOT MERIT FOR THE CONSIDERATION AND IS DISMISSED. [PARA 7] M/S ORNATE LEASING & FINANCE PVT. LTD. IT(SS) A NOS. 83,84,85,86/INND/2015, ETC. 148 44. CONSIDERING ALL THESE ASPECTS, WE ALLOW THE APPEAL O F THE ASSESSEE. 45. FINALLY, ALL THESE APPEALS OF THE ASSESSEE AND THE REVENUE ARE DISPOSED OF ACCORDINGLY. PRONOUNCED IN OPEN COURT ON 19 TH JANUARY, 2016 SD/- SD/- (D.T. GARASIA) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER 19 TH JANUARY, 2016 DN/-