M/S. SHRI BALAJI STARCH & CHEMICALS LTD., Mumbai V. THE DCIT (CENTRAL), Indore

ITSSA 88/IND/2015

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 1511 (ITAT-INDORE)
• Duration Of Justice: 7 month(s) 5 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 04-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 29-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA; RAJIV VARSHNEY
• Keywords: Unexplained cash credit; Unexplained investment; Income from undisclosed sources; Search and seizure; Source of fund; Deemed to accrue or arise in india; Permanent establishment; Question of law; Accommodation entries; Capital receipt; Revised return; Ignorance of law
• Section: 143(3); 153A; 133(6); 68; 54; 132; 154

Judgement Text

SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER AND SHRI B.C. MEENA, HONBLE ACCOUNTANT MEMBER IT(SS) A NO. 88/IND/2015:A.Y.2011-12 SHRI BALAJI STARCH & CHEMICALS LTD. MUMBAI PAN AABCS 8103E VS. DY. COMMR. OF INCOME TAX (CENTRAL) INDORE APPELLANT RESPONDENT IT(SS) A NO. 204/IND/2015:A.Y.2011-12 DY. COMMR. OF INCOME TAX (CENTRAL),INDORE VS SHRI BALAJI STARCH & CHEMICALS LTD. MUMBAI APPELLANT RESPONDENT ASSESSEE BY SHRI GIRDHAR GARG REVENUE BY SHRI RAJIV VARSHNEY AND SHRI R.A. VERMA DATE OF HEARING 29.12.2015 DATE OF PRONOUNCEMENT 4 .1.2016 O R D E R PER SHRI B.C. MEENA, AM BOTH THESE CROSS-APPEALS BY THE ASSESSEE AND THE REVENUE EMANATE FROM THE ORDER OF THE LEARNED CIT(A)- 3, BHOPAL, DATED 29.4.2015. SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 2 2. BRIEFLY THE FACTS IN THE CASE ARE THAT THE ASSESSEE IS A CLOSELY HELD COMPANY BELONGING TO SIGNET GROUP OF IN DORE. IT IS ENGAGED IN THE BUSINESS OF TRADING AND INVESTMEN T. A SEARCH AND SEIZURE OPERATION U/S.132 WAS CARRIED OUT AT THE BUSINESS PREMISES OF VARIOUS COMPANIES BELONGING TO SIGNET GROUP AS WELL AS RESIDENTIAL PREMISES OF THE ASSESSEE ON 03.11.2011. CONSEQUENTLY, A NOTICE U/S.153 A WAS ISSUED. THE STATUS REGARDING RETURN OF INCOME FURNISHED BY THE ASSESSEE U/S.139(1) AND 153A OF THE INCOME-TAX ACT, 1961 AND ASSESSMENTS COMPLETED AS PER ORIGINAL ASSESSMENT U/S.143(3) / 143(1) AS WELL AS U/S.153A ARE AS UNDER : A.Y. DATE OF ORIGINAL RETURN FILED RETURNED INCOME U/S.139 (RS.) DATE OF FILING RETURN U/S.153A RETURNED INCOME U/S.153A (RS.) ASSESSED INCOME U/S.153A/ 143(3) RS. 2006-07 30.11.2006 - 28.02.2013 - NIL 2007-08 31.10.2007 - 28.02.2013 - NIL 2008-09 30.09.2008 - 28.02.2013 - NIL 2009-10 24.09.2009 - 28.02.2013 - NIL 2010-11 15.09.2010 - 28.02.2013 - 1,50,14,260 2011-12 05.08.2011 (5,080) 28.02.2013 (9,320) 2,87,44,920 2012-13 29.09.2012 (ORIGINAL) --- (REVISED) (60,260) (11,365) - - (11,370) SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 3 3. 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 YEAR 2011-12. AGAINST THE ORDER OF THE CIT( A), THE ASSESSEE PREFERRED APPEAL BEFORE THE INCOME-TAX APPELLATE TRIBUNAL . 4. GROUND NO.1.0 OF ASSESSEES APPEAL READS AS UNDER :- 1.0 THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-3, BHOPAL, CONFIRMING THE ASSESSMENT ORDER PASSED U/S.153A R.W. SEC.143(3) OF THE INCOME-TAX ACT, 1961, BY THE DEPUTY COMMISSIONER OF INCOME-TAX IS BOTH BAD-IN-LAW AND BAD-IN-FACTS. 5. THERE WAS NO ABATEMENT OF ASSESSMENTS. THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS THE GROUND OF APPEAL, HENCE, DISMISSED. 6. GROUND NO.2.0 (A.YS.: 2011-12) OF ASSESSEES APPEAL S READS AS UNDER: SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 4 REJECTION OF ASSESSEES CLAIM FOR DEDUCTION U/S.35D : RS.5,000/- 2.0 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN LAW AS WELL AS IN FACTS IN CONFIRMING THE REJECTION OF ASSESSEES LEGAL CLAIM FOR DEDUCTION O F PRELIMINARY EXPENSES OF RS.5,000/- U/S.35D OF THE INCOME-TAX ACT, 1961 BY THE ASSESSING OFFICER. 7. WHILE FILING THE RETURN PURSUANT TO THE NOTICE IS SUED U/S.153A, THE ASSESSEE CLAIM THE FOLLOWING DEDUCTIONS : S.N O PARTICULARS AMOUNT (RS.) (A) DEDUCTION OF PRELIMINARY EXPESNES U/S.35D 5,000/ - THIS CLAIM WAS NOT MADE WHILE FILING THE RETURN U/S.139(1)/139(4). A.O.S CASE : 8. THE CONTENTION OF THE A.O. IS AS UNDER : THE CONTENTION OF THE FRESH CLAIM OF DEDUCTIONS OF T HE ASSESSEE FOR THE RETURN FILED U/S.153A IS REJECTED AS THE ASSESSEE CANNOT MAKE THE FRESH CLAIM FOR SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 5 DEDUCTION/EXEMPTION IN PROCEEDINGS INITIATED U/S.153 A OF THE ACT. IF THE ASSESSEE FOUND ANY MISTAKE IN HIS OR IGINAL RETURN OF INCOME, THE CORRECT COURSE WAS TO REVISE THE RETURN WHICH HAS NOT BEEN DONE. 9. THE C.I.T.(A.) RELYING ON THE JUDGEMENT OF JAI ST EEL INDIA VS. A.C.I.T. [36 TAXMAN.COM 523 (RAJ)] AND CHARCH IT AGARWAL VS. A.C.I.T. [34 SOT 348 (ITAT-DEL)], THE C.I .T.(A). HELD THAT 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 CLAI M CAN BE MADE BY THE ASSESSEE IN THE RETURN OF INCOME FILED U/S.153A PURSUANT 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 ASS ESSEE. ASSESSEES CONTENTION: 10. IT IS SUBMITTED THAT THE CLAIMS/DEDUCTIONS MADE BY THE ASSESSEE WHILE FILING THE RETURN OF INCOME PURSU ANT TO NOTICE U/S.153A WERE SUCH CLAIM/DEDUCTIONS WHICH WER E SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 6 LEGALLY ALLOWABLE TO THE ASSESSEE. IN FACT, BECAUSE OF TH EIR VERY NATURE, THE ASSESSING OFFICER SHOULD HAVE ALLOWED THESE DEDUCTIONS ON HIS OWN AND HE SHOULD NOT HAVE TAK EN ADVANTAGE OF ASSESSEES IGNORANCE. IN THIS REGARD THE RELIANCE IS PLACE ON THE CIRCULAR NO.14(XL-35), DATED A PRIL 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 RIG HTS. IT IS ONE OF THEIR DUTIES TO ASSIST A TAXPAYER IN E VERY REASONABLE WAY, PARTICULARLY IN THE MATTER OF CLAIM ING AND SECURING RELIEFS AND IN THIS REGARD THE OFFICER S SHOULD TAKE THE INITIATIVE IN GUIDING A TAXPAYER WH ERE PROCEEDINGS OR OTHER PARTICULARS BEFORE THEM INDICA TE THAT SOME REFUND OR RELIEF IS DUE TO HIM. THIS ATTI TUDE WOULD, IN THE LONG RUN, BENEFIT THE DEPARTMENT FOR IT WOULD INSPIRE CONFIDENCE IN HIM THAT HE MAY BE SURE OF SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 7 GETTING A SQUARE DEAL FROM THE DEPARTMENT. ALTHOUGH , THEREFORE, THE RESPONSIBILITY FOR CLAIMING REFUNDS AND RELIEFS RESTS WITH ASSESSEE ON WHOM IT IS IMPOSED B Y LAW, OFFICERS SHOULD- (A) DRAW THEIR ATTENTION TO ANY REFUNDS OR RELIEFS TO WHICH 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 THEIR RIGHTS AND LIABILITIES AND AS TO THE PROCEDURE TO BE ADOPTED 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 PAY THE TAX WHICH HE LIABLE UNDER THE LAW TO THE GOVERN MENT. SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 8 THE GOVERNMENT ON THE OTHER HAND IS OBLIGED TO COLL ECT 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 COUNT RY AND NOT TO CHARGE 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 OFFICER NOT TO TAKE ADVANTAGE O F ASSESSEES IGNORANCE AND/OR MISTAKE. THEREFORE, THE ABOVE CIRCULAR SHOULD ALWAYS BE BORNE IN MIND BY TH E OFFICERS OF THE RESPONDENT REVENUE WHILE ADMINISTE RING 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 H AD ADMITTEDLY NOT CLAIMED THE BENEFIT OF SECTIONS 10(3 4) AND 10(38) IN RESPECT OF ITS DIVIDEND INCOME AND LONG T ERM SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 9 CAPITAL GAINS ON SALE OF SHARES RESPECTIVELY IN ITS RETURN OF INCOME. IN FACT, IN THE RETURN OF INCOME, THE AS SESSEE HAD ADMITTEDLY SOUGHT TO EXCLUDE ITS DIVIDEND INCOM E AND LONG TERM CAPITAL GAINS FROM SALE OF SHARES UND ER SECTION 1O AS IS EVIDENT FROM THE RETURN OF INCOME. HOWEVER, IN THE RETURN OF INCOME AS FILED ORIGINALL Y ON THE ASSESSEE BY MISTAKE, OMITTED TO EXCLUDE THE DIVIDEND INCOME AND INCOME FROM LONG TERM CAPITAL 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 DU RING THE COURSE OF ASSESSMENT PROCEEDINGS, IT IS THE DUT Y OF THE ITO TO EXAMINE THE CLAIM ON THE MERITS OF THE C LAIM. THE PRESENT CASE IS NOT A CASE WHERE THE ASSESSEE M ADE SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 10 A CLAIM WITH REFERENCE TO A MATTER WHICH WAS CONCLU DED AND HAS BECOME FINAL IN THE ORIGINAL ASSESSMENT PROCEEDINGS. BUT, ON THE OTHER HAND, IT WAS FOUND I N THE SUBSEQUENT YEARS ASSESSMENT PROCEEDINGS THAT THE LIABILITY OF THE ASSESSEE HAD ACCRUED WHEN THE SUIT FOR INJUNCTION FILED BY THE ASSESSEE WAS DISMISSED BY T HE CITY CIVIL COURT, MADRAS AND IN VIEW OF THE SUBSEQU ENT EVENT THAT THE DEDUCTION MIGHT RELATE TO THE PRESEN T ASSESSMENT YEAR, THE ASSESSEE MADE A CLAIM FOR DEDUCTION OF THE 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 CLAI M EVEN AT THE THRESHOLD AND REFUSE TO ENTERTAIN THE CLAIM. THE ZEAL OF THE ITO TO CARRY 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 MERITS. HIS DUTY TO MAKE AN ASSESSMENT SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 11 DOES NOT BEGIN AND END WITH THE CARRYING OUT THE DIRECTIONS OF THE COMMISSIONER OF INCOME-TAX AND HI S DUTY IS SOMETHING MORE, THAT IS, TO DETERMINE THE C ORRECT TAXABLE INCOME. WE ARE OF THE OPINION, NOTHING PREC LUDES THE ASSESSEE FROM MAKING A CLAIM BEFORE THE ITO AT THE TIME OF FINALIZATION OF THE ASSESSMENT PROCEEDINGS AND EQUALLY NOTHING PREVENTS THE ITO FROM EXAMINING THE CLAIM ON MERITS OF THE MATTER. IT IS WELL TO REMEMB ER THAT THE ASSESSMENT WAS BEING REDONE BY THE ITO WITHIN F OUR 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 IMAGINE A CA SE OF A CONCLUDED ASSESSMENT AND THERE ARE NO PENDING ASSESSMENT PROCEEDINGS, BUT WHEN THE ASSESSEE MAKES A CLAIM FOR DEDUCTION OF LOSSES, THE ITO CANNOT REF USE TO ENTERTAIN THE CLAIM AND HE MAY REJECT THE CLAIM ON THE SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 12 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 DETERMINE THE CORRECT TOTAL INCOME OF THE ASSESSEE ACCORDING TO LAW AND DURING THAT PROCEEDIN GS WHEN THE ASSESSEE MAKES A CLAIM, THE ITO IS BOUND T O CONSIDER THE CLAIM OF THE ASSESSEE. WE ARE OF THE O PINION THAT, WHILE CONSIDERING SUCH A CLAIM, THE QUESTION OF FULFILLMENT OF THE CONDITIONS FOR RECTIFICATION IS NOT A SINE QUA NON AND EVEN THE CONDITIONS TO RECTIFY THE MIST AKES ARE NOT PRESENT, THE ITO, IN OUR OPINION, SHOULD EX AMINE THE CLAIM OF THE ASSESSEE ON MERITS OF THE CASE. TH E POWER OF THE ITO TO MAKE THE ASSESSMENT AS OBSERVED BY THIS COURT IN C.I.T. VS. SETH MANICKLALFOMRA (SU PRA) IS DERIVED FROM THE STATUTORY PROVISIONS OF S.143(3) O F THE ACT. THOUGH THE SUPREME COURT IN THE CASE OF MODI INDUSTRIES LTD. VS. C.I.T. (SUPRA) HAS HELD THAT TH E JURISDICTION OF THE ITO IS DERIVED FROM THE ORDER O F THE SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 13 C.I.T., HIS JURISDICTION TO ALLOW OR DISALLOW THE C ARRY FORWARD LOSSES OF THE DEFUNCT BUSINESS WOULD BE DER IVED 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 FAIZUNNISSA BEGAM VS. ASSTT. CED (SUPRA) HAS INDICA TED SUCH AN APPROACH AND IT WAS HELD THAT IN SO FAR AS OTHER ITEMS NOT CONSIDERED BY THE HIGHER AUTHORITIES ARE CONCERNED, THE POWER OF THE ITO TO REASSESS THE INC OME WOULD BE TRACEABLE TO THE PROVISIONS OF THE STATUTE . THEREFORE, THE REFUSAL OF THE ITO EVEN TO CONSIDER THE CLAIM OF THE ASSESSEE IS NOT JUSTIFIABLE AND WE ARE OF THE OPINION THAT BOTH THE C.I.T.(A) AND THE TRIBUNAL WE RE RIGHT IN DIRECTING THE ITO TO CONSIDER THE CLAIM OF THE ASSESSEE ON THE MERITS OF THE MATTER. THOUGH WE ARE NOT AGREEING WITH THE VIEW EXPRESSED BY THE TRIBUNAL TH AT THE ENTIRE ASSESSMENT ORDER WAS SET ASIDE BY THE C. I.T., SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 14 STILL THE POWER OF THE ITO TO CONSIDER THE CLAIM OF THE ASSESSEE IS NEITHER CURTAILED NOR TAKEN AWAY BY THE ORDER OF THE C.I.T. THE ITO WAS BOUND TO CONSIDER T HE CLAIM OF THE ASSESSEE UNDER S. 143(3) OF THE ACT WH EN HE WAS IN FINAL PROCESS OF ASSESSMENT IN THE DETERMINA TION OF TOTAL INCOME OF THE ASSESSEE AS THE ASSESSMENT PURSUANT TO THE DIRECTIONS OF THE C.I.T. HAS NOT RE ACHED THE STAGE OF FINALITY. WE FIND THAT THE CENTRAL BOA RD IS 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 CONFIDENCE IN THE MINDS OF THE TAXPAYER THAT HIS INCOME WOULD BE PROPERLY DETERMINED AND HE IS NOT REQUIRED TO PAY THE TAX, NEITHER ONE PAISE MORE NOR ONE SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 15 PAISE LESS THAN WHAT IS CORRECTLY AND RIGHTLY DUE I N ACCORDANCE WITH AND UNDER THE PROVISIONS OF THE STA TUTE. IN THIS VIEW OF THE MATTER, WE ARE OF THE OPINION T HAT THE ORDER OF THE TRIBUNAL IS SUSTAINABLE IN LAW, 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 FINAN CE ACT, 1999. IN OTHER WORDS, IT WAS INTRODUCED DURING THE ASSESSMENT YEAR UNDER CONSIDERATION 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 EXCUS ED IN TAX MATTER AS PER THE RATIO LAID DOWN IN THE CASE O F P. V. DEVASSY VS. C.I.T., 84 ITR 502 (KER). IT IS NOT EXP ECTED SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 16 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 BONAFID E BELIEF, THE ASSESSEE HAS SHOWN THE LONG TERM CAPITA L GAIN AT THE RATE OF 20%, BUT IT WAS EXPECTED FROM T HE A.O. TO KNOW THE LATEST AMENDMENT. THE MISTAKE MIGH T HAVE BEEN CORRECTED BY PASSING AN ORDER UNDER SECTI ON 154 OF THE ACT. IN THE CASE OF C.I.T. VS. MAHALAXMI SUGAR MILLS CO. LTD. (1986) 160 ITR 920 (SC), IT WAS OBSE RVED THAT: THERE IS A DUTY CAST ON THE INCOME-TAX OFFICER TO APPLY THE RELEVANT PROVISIONS OF THE INDIAN INCOME- TAX ACT FOR THE PURPOSE OF DETERMINING THE TRUE FIGURE OF THE ASSESSEES TAXABLE INCOME AND THE CONSEQUENTIAL TAX LIABILITY. THUS THE ASSESSEE FAIL S TO CLAIM THE BENEFIT OF A SET-OFF CANNOT RELIEVE TH E SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 17 INCOME-TAX OFFICER OF HIS DUTY TO APPLY SECTION 24 IN AN APPROPRIATE CASE. 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). IN VIEW OF THE ABOVE SUBMISSION, LEARNED COUNSEL FOR THE ASSESSEE PRAYED F OR ALLOWING THE LEGITIMATE CLAIMS/DEDUCTIONS OF THE ASSESS EE NOTWITHSTANDING THE FACT THAT THESE CLAIMS WERE NOT MADE IN THE ORIGINAL RETURN OF INCOME FILED U/S.139(1) OF THE ACT. 11. AFTER HEARING BOTH THE SIDES, WE DECIDE THE ISS UE AS UNDER. 12. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE AND ALSO GONE THROUGH THE CASE LAW RELIED UPON. WHILE FILING THE RETURN OF INCOME U/S 153A OF THE ACT THE ASSESSEE HA S CLAIMED DEDUCTION U/S 35D OF THE ACT. NO SUCH CLAIM W AS MADE WHILE FILING THE RETURN OF INCOME U/S 139(1)/13 9(4) OF THE ACT. WE WOULD ALSO LIKE TO STATE THAT THE PROVISIO NS OF SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 18 SECTION 153A ARE NOT MADE FOR THE BENEFIT OF THE ASSE SSEE. RETURN FILED IN RESPONSE TO NOTICE U/S 153A OF THE ACT IS NOT SUBSTITUTE OF REVISED RETURN FOR THE CLAIM OF SU CH BENEFITS. HON'BLE APEX COURT IN THE CASE OF GOETZE ( INDIA) LIMITED VS. CIT; 284 ITR 323 RULED OUT THAT A FRESH C LAIM BEFORE THE ASSESSING OFFICER CAN BE MADE ONLY BY FILI NG A REVISED RETURN AND NOT OTHERWISE. THEREFORE, WHATEVE R 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 RETURN U/S 153A OF THE ACT AND REDUCE THE TAXABLE INCOME ORIGINALLY DECLARED. SUCH VIEW HAS BEEN UPHELD BY THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF JAI STE ELS (INDIA) VS. ACIT (SUPRA). THEREFORE, THIS GROUND OF T HE ASSESSEES APPEAL STANDS DISMISSED. 13. GROUND NO.3.0 (A.YS.: 2011-12) OF ASSESSEES APPE ALS READS AS UNDER: SHARE APPLICATION MONEY TREATED AS UNEXPLAINED INCOME : RS.2,07,00,000/- SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 19 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN LAW AS WELL AS IN FACTS IN PARTLY CONFIRMI NG THE ADDITION OF RS.2,07,00,000/- MADE BY THE ASSESSING OFFICER U/S.68 OF THE INCOME-TAX ACT, 196 1 BY TREATING SHARE APPLICATION RECEIVED BY THE ASSESSEE FROM THE FOLLOWING COMPANIES AS UNEXPLAINED CASH CREDIT : NAME OF COMPANIES AMOUNT(RS.) ARTILLEGENCE BIO INNOVATIONS LIMITED 20,00,000/- WARNER MULTIMEDIA LIMITED 34,00,000/- UNISYS SOFTWARE & HOLDING INDIA LIMITED 40,00,000/- STOCKNET INTERNATIONAL LIMITED 29,00,000/- JMD SOUNDS LIMITED 24,00,000/- MICRO CHIP INFOTEL PRIVATE LIMITED 20,00,000/- ONE2 SOLUTIONS INDIA PRIVATE LIMITED 20,00,000/- OCTOPUS INFOTEL PRIVATE LIMITED 20,00,000/- TOTAL 2,07,00,000/- 14. REVENUES GROUND OF APPEALS (A.YS.: 2011-12) READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE C.I.T.(A). ERRED IN DELETING THE UNEXPLAINED CA SH CREDIT IN THE FORM OF SHARE APPLICATION MONEY OF RS.80,50,000/- UNDER SECTION 68 OF INCOME-TAX ACT. SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 20 15. THE FACTS IN BRIEF ARE THAT THE ASSESSEE RECEIVED S HARE APPLICATION MONEY OF RS.2,87,50,000/- FROM THE FOLLOW ING COMPANIES :- S.NO. NAME OF PARTY AMOUNT (RS.) 1 ARTILLEGENCE BIO INNOVATIONS LIMITED 20,00,000/ - 2 WARNER MULTIMEDIA LIMITED 34,00,000/ - 3 UNISYS SOFTWARE & HOLDING INDIA LIMITED 40,00,000/ - 4 STOCKNET INTERNATIONAL LIMITED 29,00,000/ - 5 JMD SOUNDS LIMITED 24,00,000/ - 6 MICRO CHIP INFOTEL PRIVATE LIMITED 20,00,000/ - 7 ONE2 SOLUTIONS INDIA PRIVATE LIMITED 20,00,000/ - 8 OCTOPUS INFOTEL PRIVATE LIMITED 20,00,000/ - 9 ARTILLEGENCE BIO INNOVATIONS LIMITED 20,00,000/ - 10 KAMDEEP MARKETING PVT LTD 80,50,000/ - 2,87,50,000/- 16. THE PLEADINGS OF THE LEARNED COUNSEL FOR THE ASSES SEE WERE COMMON ON THE ISSUE OF CASH CREDIT AND SHARE APPLICATION MONEY RECEIVED BY VARIOUS ENTITIES OF THE GROUP. SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 21 THEREFORE, THE PLEADINGS ON THE ISSUE OF CASH CREDITS AND SHARE APPLICATION ADDED U/S 68 OF THE ACT ARE COMMON IN ALL THE CASES OF THE GROUP. 17. 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: (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. SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 22 THE STATEMENT OF SHRI JAGDISH PUROHIT, WHO WAS CONTROL LING SOME OF THE COMPANIES, DIRECTLY OR INDIRECTLY, WAS RE CORDED BY ADIT (INV.), UNIT IV(2), MUMBAI U/S.131 OF THE AC T. ASSESSING OFFICER CLAIMS THAT COPY OF THE STATEMENT WAS PROVIDED TO THE ASSESSEE ALONGWITH THE NOTICE U/S 142 (1) ON 30.09.2013 BUT ASSESSEE DENIED THIS FACT. IN THE STATE MENT, SHRI PUROHIT HAS STATED THAT SOME OF THE COMPANIES HAVE PROVIDED ACCOMMODATION ENTRIES TO THE SIGNET GROUP OF COMPANIES. THE NAMES GIVEN WERE AS UNDER :- (IX) WARNER MULTIMEDIA LTD., (X) UNISYS SOFTWARE AND HOLDING INDUSTRIES LTD., (XI) MICROCHIP INFOTEL PVT. LTD. , (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 SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 23 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). 18. 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. SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 24 19. THE SHARE APPLICATION MONEY OF RS.2,87,50,000 /- WAS TREATED AS UNEXPLAINED CASH CREDIT BY THE A.O. AND ADDITION WAS MADE U/S.68 OF THE ACT. 20. THE REASONINGS GIVEN BY THE C.I.T.(A) FOR SUSTAINING THE ADDITION ARE AS UNDER :- IT IS A WELL SETTLED LAW THAT WHERE THERE IS A CRE DIT IN THE BOOKS OF ACCOUNT OF AN ASSESSEE DURING PREVIOUS YEAR, THE ONUS IS UPON THE ASSESSEE TO PROVE THE IDENTITY OF THE CREDITOR, HIS CAPACITY/CREDITWORTHINESS TO GIVE THE LOAN/SHARE APPLICATION MONEY AND GENUINENESS OF THE TRANSACTION BY FURNISHING CREDIBLE EVIDENCE. IT IS A WELL SETTLED LAW THAT WHERE AN ASSESSEE FURNISHES THE DOCUMENTS TO PROVE THE GENUINENESS OF THE TRANSACTION AND IF THE ASSESSING OFFICER FINDS ON THE BASIS OF ENQUIRY OR OTHER MATERIAL THAT THE DOCUMENTS DISCLOSED BY THE SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 25 ASSESSEE ARE UNTRUSTWORTHY OR LACKED CREDIBILITY, THE ASSESSING OFFICER CAN REJECT THE EXPLANATION OF THE ASSESSEE AND MAKE ADDITION U/S 68 OF THE ACT. THE RELIANCE WAS PLACED UPON THE FINDING GIVEN BY THE ASSESSING OFFICER AS WELL AS SEIZURE OF SIGNED BLANK TRANSFER FORMS, SIGNED BLANK RECEIPTS, ETC. DURING SEARCH FROM THE OFFICE PREMISES OF SIGNET INDUSTRIES LTD. SHRI JAGDISH PUROHIT, WHO WAS DIRECTLY OR INDIRECTLY CONTROLLING MICROCHIP LNFOTE L PRIVATE LIMITED, OCTOPUS LNFOTEL PVT. LTD. AND MATR IX SYSTEL PRIVATE LIMITED, ADMITTED IN HIS STATEMENT BEFORE THE ADIT (INV.), UNIT IV(2), MUMBAI THAT THE SE COMPANIES HAD GIVEN ONLY ACCOMMODATION ENTRIES TO SIGNET GROUP COMPANIES. IT WAS ALSO FOUND ON INVESTIGATION BY ADIT (INV.), MUMBAI AND AO THAT THE DIRECTORS OF THESE COMPANIES WERE DUMMY DIRECTORS AND PERSONS OF NO MEANS. THE AFFIDAVIT SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 26 FILED BY SHRI JAGDISH PUROHIT BEFORE THE A.D.I.T (I NV) MUMBAI AS WELL AS THE A.O. WAS AN AFTERTHOUGHT AND, THEREFORE, NOT BELIEVABLE. ALSO HE WAS NOT PRODUCED BEFORE THE A.O. FOR EXAMINING THE VERACITY OF THE CONTENTS OF THE AFFIDAVIT. IN CASE OF WARNER MULTIMEDIA LTD. AND ONE 2 SOLUTION PVT. LTD., THE SHARE APPLICATION MONEY TRANSACTIONS WERE DE- LAYERED BY AO AND IT WAS FOUND THAT THE ULTIMATE SOURCE OF FUNDS COMING FROM THESE COMPANIES WAS CASH DEPOSIT WHICH WAS ROUTED THROUGH TWO OR THREE ENTITIES AND SHARE APPLICATION MONEY WAS PAID TO SIGNET GROUP OF COMPANIES. THE FACTS NOTICED AND ENQUIRIES MADE ESTABLISHED THAT THESE COMPANIES WERE PAPER COMPANIES AND SURROUNDING AND ATTENDING FACTS PREDICATED A COVER UP. EXTENSIVE RELIANCE WAS PLACED UPON THE JUDGMENT IN THE CASE OF C.I.T. VS. NAVODAYA CASTLES PVT. LTD . SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 27 367 ITR 306 (DELHI) AND IT WAS HELD THAT THE CASE OF THE ASSESSEE FELL IN THE SECOND CATEGORY OF CASE S WHERE THERE ARE EVIDENCE AND MATERIAL TO SHOW THAT THE SHAREHOLDER COMPANIES WERE PAPER COMPANIES HAVING NO SOURCE OF INCOME BUT HAVE MADE SUBSTANTIAL AND HUGE INVESTMENT IN THE FORM OF SHARE APPLICATION MONEY . 21. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTE D BEFORE US THAT THE ASSESSEE IS A LISTED COMPANY. IT IS RELATED TO SIGNET GROUP OF COMPANIES. SHRI MUKESH SANGLA I S WELL KNOWN IN THE FIELD OF TRADING IN PLASTICS, MANU FACTURE OF PLASTIC PRODUCTS, MICRO IRRIGATION SYSTEMS ETC. TH IS GROUP IS ALSO WELL KNOWN IN THE MARKET FOR ITS FINANCIAL STABI LITY. IT SUCCESSFULLY MADE GIANT STRIDES INTO MICRO IRRIGATION SYSTEMS AND CPVC PIPES AND ATTAINED SIGNIFICANT RANKING IN STATES LIKE GUJARAT, ANDHRA PRADESH, RAJASTHAN, MADHYA PRADESH FOR SUPPLY OF MICRO IRRIGATION SYSTEMS. THERE ARE A SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 28 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 ARE TO INVEST IN THE GROUP ON LONG TERM BASIS AND REAP HANDS OME RETURNS IN DUE COURSE OF TIME. 22. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE HON'BLE DELHI HIGH COURT HELD IN THE CASE OF C.I.T. VS KAMDHENU STEEL AND ALLOY LTD. (361 ITR 220) WHEREIN IT WAS HELD 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 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? SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 29 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. 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 . SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 30 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. 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: SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 31 '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. 23. THE ASSESSEE GROUP DISCHARGED ITS ONUS OF ESTABLIS HING IDENTITY AND CREDITWORTHINESS OF SHARE APPLICANTS/LOAN CREDITORS AND GENUINENESS OF TRANSACTIONS IN THE FOLLO WING MANNER: SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 32 (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 EVIDENCE WHATSOEVER WAS FOUND SHOWING PAYMENT OF CASH TO SHARE APPLICANT COMPANIES/LOAN CREDITORS IN LIEU OF CHEQUES RECEIVED FROM THEM. SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 33 24. 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 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 SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 34 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 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 SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 35 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 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 SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 36 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 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 SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 37 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 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 SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 38 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 25. IT IS TRUE THAT THE INVESTMENTS ARE MADE WITH PROFIT MOTIVE BUT IMMEDIATE REALISATION OF PROFIT IS N OT NECESSARY. MANY TIMES, AN INVESTOR INVESTS MONEY IN ANTICIPATION THAT IT WOULD FETCH GOOD RETURNS FOR IT I N LONG TERM. FOR EXAMPLE, WHEN INFOSYS WAS SET UP NOBODY KN EW IT BUT THE INVESTORS WHO INVESTED MONEY IN INFOSYS EARNED HUGE RETURN ON THEIR INVESTMENT. THEREFORE, PROFIT MOTIVE MAY BE A SIGNIFICANT PART OF INVESTMENT STRATEGY BUT I T IS NOT THE ONLY FACTOR AND IMMEDIATE REALISATION OF PROFIT IS NOT NECESSARY. THE ASSESSING OFFICER FAILED TO BRING ANY MAT ERIAL OR EVIDENCE ON RECORD TO SHOW THAT UNACCOUNTED CASH OF THE ASSESSEE WAS DEPOSITED IN BANK ACCOUNT OF VARIOUS COMPANIES OR OTHERWISE GIVEN TO THEM AND CHEQUES TOWARD S SHARE APPLICATION MONEY WERE ISSUED BY THEM OUT OF CAS H SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 39 SO DEPOSITED OR PAID. IN THIS REGARD, THE RELIANCE WAS PLACED ON THE FOLLOWING JUDGEMENTS: (I) C.I.T VS. VALUE CAPITAL SERVICES PVT. LTD. 307 ITR 334 (DEL) (II) MIDAS GOLDEN DISTILLERIES (P) LTD. VS.C.I.T [2009] 124 TTJ 25 (CHENNAI) 26. AS REGARDS THE LEGAL POSITION OF ADDITION U/S.68 IN 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)] . 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)]. SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 40 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)] 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 SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 41 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 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. SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 42 VS. ACIT (283 ITR 377 RAJ). IF SUCH SHAREHOLDERS ARE UNABLE TO PROVE THEIR CREDITWORTHINESS, THE ASSESSING OFFIC ER IS DUTY BOUND TO TAKE NECESSARY ACTION IN THEIR CASES. [CIT VS. LOVELY EXPORTS PVT. LTD. 216 CTR 195 SC] 27 THE DOCUMENTS LIKE SIGNED BLANK TRANSFER FORM S, 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 SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 43 PAYEE CHEQUES MUCH PRIOR TO THE DATE OF SEARCH. MOREOV ER, MERELY BECAUSE OF BLANK DOCUMENTS AS NOTICED BY THE ASSESSING OFFICER, IT CANNOT BE INFERRED, IN THE ABSEN CE OF ANY OTHER CORROBORATIVE EVIDENCE, THAT THE TRANSACTION W AS FICTITIOUS OR REPRESENTED AN ACCOMMODATION ENTRY, PARTICULARLY WHEN SHARES WERE NOT ALLOTTED, THE APPLICATI ON MONEY WAS REFUNDED EVEN BEFORE THE DATE OF SEARCH AND REQUISITE EVIDENCE TO ESTABLISH GENUINENESS OF THE TRANSACTIONS WERE PROVIDED TO THE ASSESSING OFFICER. I N RELATION TO STATEMENT OF SHRI JAGDISH PUROHIT, WHO DIR ECTLY OR INDIRECTLY CONTROLLED VARIOUS COMPANIES LIKE MICRO CHIP INFOTEL PVT. LTD., OCTOPUS INFOTEL PVT. LTD. AND MATR IX SYSTEM PVT. LTD. GIVEN BEFORE THE A.D.I.T. (INV.) M UMBAI, THE ASSESSEE WAS NEVER GIVEN THE COPY OF HIS STATEMENT DURING ENTIRE ASSESSMENT PROCEEDINGS. THE STATEMENT OF THE A.O. THAT COPY OF REPORT OF A.D.I.T. (INV.) MUMBAIWAS ENCLOSED WITH THE NOTICE DATED 30.09.2013 IS NOT COR RECT SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 44 AND CONTRARY TO THE FACTS. THE ASSESSEES REQUEST FOR CR OSS EXAMINATION OF SHRI JAGDISH PUROHIT FELL ON THE DEAF EAR S OF 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 SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 45 CORRECTNESS OF THE STATEMENTS MADE BY THE DEPONENTS I N THEIR AFFIDAVITS. IN SUPPORT OF THE ABOVE PROPOSITION, RELIANCE IS PLACED UPON THE JUDGEMENT OF HONOURABLE SUPREME COURT IN THE CASE OF MEHTA PARIKH & CO. VS. C. I. T (30 1TR 181). A COMPANY IS AN ARTIFICIAL JUDICIAL PERSON . IT CARRIES ON ITS ACTIVITY THROUGH ITS SHAREHOLDERS, ITS BOARD OF DIRECTORS AND ITS EMPLOYEES. IT HAS A PERPETUAL EXISTEN CE UNLESS DISSOLVED OR WOUND UP UNDER APPROPRIATE LAW. ALTHOUGH, IT DOES NOT HAVE ANY PHYSICAL EXISTENCE, IT EXISTS DUE TO OPERATION OF LAW. THEREFORE, ITS EXISTENCE CAN BE ESTABLISHED ONLY THROUGH THE IDENTIFICATION ISSUED TO IT UNDER THE STATUTE UNDER WHICH IT WAS INCORPORATED. THE CERTIFICATE OF INCORPORATION ISSUED BY COMPETENT STATU TORY AUTHORITY, PERMANENT ACCOUNT NUMBER AND OTHER CERTIFICATES ISSUED UNDER VARIOUS OTHER APPLICABLE LAWS ARE EVIDENCE OF ITS IDENTIFICATION AND EXISTENCE AND THEY CANNOT BE IGNORED OR BRUSHED ASIDE SIMPLY BECAUSE OF NON-SER VICE SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 46 OF NOTICES ISSUED BY INCOME-TAX DEPARTMENT. SUCH NON - SERVICE OF NOTICES COULD BE DUE TO N'TH NUMBER OF R EASONS 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 SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 47 DOCUMENTS. IT CLEARLY EMERGES FROM THE ASSESSMENT ORD ER THAT THE ASSESSING OFFICER DID NOT GO THROUGH THESE R EPLIES. 28. 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 SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 48 MAN HAS NO EXISTENCE IN THE EYES OF THE LAW. THEREFOR E, IT HUMBLY SUBMITTED THAT THE IDENTIFICATION OF EXISTENCE PROVIDED BY THE ASSESSEE AND SUBSEQUENT COMPLIANCE OF NOTICE ESTABLISHED BOTH I.E. THEIR IDENTITY AS WELL AS THEIR EXISTENCE. 29. 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 BROU GHT 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 SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 49 ON THE BASIS OF CRITICAL AND SCIENTIFIC ANALYSIS OF FACTS , INFORMATION AND EVIDENCE BROUGHT ON RECORD. 30. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITT ED THAT 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 TAKIN G NOTE OF THE SO CALLED 'NOTORIOUS PRACTICE' PREVAILING IN TRADE CIRCLES. SIMILAR VIEWS WERE EXPRESSED BY THE HONOURA BLE DELHI HIGH COURT 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, SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 50 INTER ALIA, FORMED THE BASIS OF THE ADDITIONS MADE BY THE ASSESSING OFFICER. IT WAS EVEN SUGGESTED 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 SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 51 OBSERVE THAT THE NOTORIETY FOR SMUGGLING FOOD GRAINS AND OTHER COMMODITIES TO BENGAL BY COUNTRY BOATS ACQUIRED BY SAHIBGUNJ AND THE NOTORIETY ACHIEVED BY DHULIAN AS A GREAT RECEIVING CENTRE FOR SUCH COMMODITIES WERE 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, SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 52 FINANCIAL POSITION OF THE RECIPIENT AND BENEFICIARY AND SURROUNDING CIRCUMSTANCES. THE THREE REQUIREMENTS OF 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 SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 53 INVESTMENTS. HE SIMPLY HARPED UPON THE SIGNED BLANK TRANSFER FORMS, SIGNED BLANK RECEIPTS, ETC. FOUND DUR ING THE SEARCH, THE STATEMENT OF SHRI JAGDISH PUROHIT, AND ALLE GED DE-LAYERING IN THE CASE OF WARNER MULTIMEDIA LTD. AND ONE 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 SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 54 U/S.68 OF THE ACT. ON THE BASIS OF EVIDENCE PLACED ON RECORD BY THE ASSESSEE AND EVIDENCE GATHERED IN RESPON SE 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. 31. THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AS ALSO THE FOLLOWING CASE LAWS :- S. NO. C ASE L AW REMARKS 1 M/S AGRAWAL COAL CORP. PVT. LTD. INDORE V/S ADDL. CIT RANGE-5, INDORE. 19 TAXMAN.COM 209 (ITAT INDORE) SECTION-68 2 ACIT V/S NARMADA EXTRUSION LTD. AND OTHERS, 19 ITJ 202, (ITAT INDORE) - DO - 3 SUMATI DAYAL V/S COMMISSIONER OF INCOME TAX 214 ITR 801 (SC) - DO - 4 ROSHAN DI HATTI V/S COMMISSIONER OF INCOME TAX, 107 ITR 938 (SC) - DO - SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 55 32. 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 5 SHANKAR INDUSTRIES V/S COMMISSIONER OF INCOME TAX, 114 ITR 689 (CAL) - DO - 6 COMMISSIONER OF INCOME TAX V/S BIJU PATNAIK , 160 ITR 674 (SC) - DO - 7 COMMISSIONER OF INCOME TAX V/S PRECISION FINANCE PVT. LTD. 208 ITR 465 CAL.(HC) - DO - 8 COMMISSIONER OF INCOME TAX V/S P. MOHANKALA & ORS. 291 ITR 278 (SC) - DO - 9 COMMISSIONER OF INCOME TAX V/S PODAR CEMENT (P) LTD., 226 ITR 625, (SC) - DO - 10 COMMISSIONER OF INCOME TAX V/S GOLD COIN HEALTH FOOD (P) LTD., 304 ITR 308 (SC) - DO - 11 COMMISSIONER OF INCOME TAX V/S NOVA PROMOTERS & FINLEASE (P) LTD., 342 ITR 169 (HC) DELHI. - DO - 12 ASHOK MAHINDRU & SONS (HUF) V/S COMMISSIONER OF INCOME TAX, 173 TAXMAN 178 (HC) DELHI. - DO - 13 JOINT COMMISSIONER INCOME TAX V/S SAHELI LEASING & INDUSTRIES LTD., 324 ITR 170 (SC) - DO - 14 M/S SOPHIA FINANCE LTD. 205 ITR 98 (DELHI) - DO - 15 CIT V/S M/S NAVODAYA CASTLES PVT. LTD., 367 ITR 306 (DELHI) - DO - 16 DURGA PRASAD MORE, 82 ITR 540 (S.C.) - DO - 16 ANANTHARAM VEERASINGHAIAH V/S CIT, 123 ITR 457 (SC) TELESCOPING 17 GRAND BAZAR V/S ACIT, 292 ITR 269 - DO - 18 S. MUTHUKUMAR V/S INCOME TAX OFFICER, 37 TAXMAN.COM 219 (MAD.) CASH DEPOSIT IN BANK SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 56 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 RS.2,87,50,000/- FROM THE FOUR COMPANIES, DETAILS OF WHICH ARE AS UNDER :- S.NO. NAME OF PARTY AMOUNT (RS.) 1 ARTILLEGENCE BIO INNOVATIONS LTD. 2 0 ,00,000 2 WARNER MULTIMEDIA LTD. 34 ,00,000 3 UNISYS SOFTWARE & HOLDING INDIA LTD. 40 ,00,000 4 STOCKNET INTERNATIONAL LTD. 2 9 ,00,000 5 JMD SOUNDS LTD. 24,00,000 6 MICRO CHIP INFOTEL PVT. LTD. 20,00,000 7 ONE2 SOLUTIONS INDIA PVT.LTD. 20,00,000 8 OCTOPUS INFOTEL PVT. LTD. 20,00,000 9 ARTILLEGENCE BIO INNOVATIONS LTD. 20,00,000 10 KAMDEEP MARKETING PVT. LTD. 80,50,000 TOTAL 2,87,50 ,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 SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 57 ALSO PROVIDED TO THE ASSESSING OFFICER. THE FINANCIAL ANALYSIS OF THE ACCOUNTS OF THESE COMPANIES ARE AS UNDER :- 1. 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 RETURN OF INCOME REGULARLY FILED AND REGULARLY ASSESSED. AS PE R 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 TRANSACTIONS RELATING TO SHARE APPLICATION MONEY WERE CARRIED OUT THROUGH BANKING CHANNELS AND NO CASH WAS DEPOSITED IN THE BANK ACCOUNT. THESE FACTS ESTABLISHED THE IDENTITY AND CREDITWORTHINESS OF THE INVESTOR COMPANY AND ALSO GENUINENESS OF THE TRANSACTION. 2. WARNER MULTIMEDIA LIMITED THE COMPANY WAS INCORPORATED ON 23.05.1983 HAVING ITS PA.NO. AABCC 0225 H. IT IS HAVING REGISTERED OFF ICE SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 58 AND BOARD OF DIRECTORS TO MANAGE ITS AFFAIRS. THE RETURN OF INCOME REGULARLY FILED AND ALSO REGULARLY ASSESSED. AS PER THE AUDITED ANNUAL ACCOUNTS FILED BY THE COMPANY, THE CAPITAL AS ON 31.03.2011 IS OF RS.16,39,41,864/-. THE COMPANY WAS HAVING FIXED ASSETS OF RS.5,48,917/-, DEBTORS OF RS.3,26,820/, OTHER RECEIVABLES OF RS.7,19,45,452/-, INVESTMENT IN SHARES WAS OF RS.32,36,07,600/- AND BANK BALANCE WAS OF RS.35,88,725/-. THE INCOME OF THE COMPANY WAS RS.4,01,278/- AND THE NET PROFIT BEFORE TAX STOOD AT LOSS OF RS.8,54,69,316/-. FROM THE BANK STATEMENTS FILED BY THE COMPANY, IT WAS EVIDENT THAT ALL THE TRANSACTIONS RELATING TO 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 GENUINENESS OF THE TRANSACTION. 3. UNISYS SOFTWARE AND HOLDING INDUSTRIES LIMITED THE COMPANY WAS INCORPORATED ON 01.10.1992 HAVING ITS PA.NO. AABCC 1191 Q. IT IS HAVING REGISTERED OFF ICE AND BOARD OF DIRECTORS TO MANAGE ITS AFFAIRS. THE RETURN OF INCOME FILED REGULARLY AND ALSO REGULARLY ASSESSED. AS PER THE AUDITED ANNUAL ACCOUNTS FILED BY THE COMPANY, THE CAPITAL AS ON 31.03.2011 WAS OF RS.55,71,13,171/-, COMPANY WAS HAVING FIXED ASSETS OF RS.1,72,82,600/-, DEBTORS OF RS.61,13,56,214/, OTHER RECEIVABLES OF RS.38,89,99,687/-, INVESTMENT I N SHARES WAS OF RS.112,76,11,701/- AND BANK BALANCE WAS OF RS.60,75,013/-. THE TURNOVER OF THE COMPANY WAS RS.133,04,49,118/- AND THE NET PROFIT BEFORE TAX SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 59 STOOD AT RS.1,61,00,739/-. FROM THE BANK STATEMENTS FILED BY THE COMPANY, IT WAS EVIDENT THAT ALL THE TRANSACTIONS RELATING TO 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 GENUINENESS OF THE TRANSACTION 4. STOCKNET INTERNATIONAL LIMITED THE COMPANY WAS INCORPORATED ON 15.04.1983 HAVING ITS PA.NO. AAECS 8494 F. IT IS HAVING REGISTERED OFF ICE AND BOARD OF DIRECTORS TO MANAGE ITS AFFAIRS. THE RETURN OF INCOME FILED REGULARLY AND REGULARLY ASSESSED. AS PE R THE AUDITED ANNUAL ACCOUNTS FILED BY THE COMPANY, THE CAPITAL OF THE COMPANY ON 31.03.2011 IS OF RS.10,00,00,000/- AND THE DEBTORS ARE OF RS.86,95,300/-. OTHER RECEIVABLES ARE OF RS.5,20,14,590/-. INVESTMENT IN SHARES WAS OF RS.2,84,85,000/-, STOCK IN TRADE WAS OF RS.1,50,73,870/-, BANK BALANCE WAS OF RS.3,68,430/-. THE TURNOVER OF THE COMPANY WAS RS.7,39,35,370/- AND THE NET PROFIT BEFORE TAX STOOD AT LOSS OF RS.59,28,210/-. FROM THE BANK STATEMENTS FILED BY THE COMPANY, IT WAS EVIDENT THAT ALL THE TRANSACTIONS RELATING TO SHARE APPLICATION MONEY WERE CARRIED OUT THROUGH BANKING CHANNELS AND NO CASH WAS DEPOSITED IN THE BANK ACCOUNT. THESE FACTS ESTABLISH THE IDENTI TY AND CREDITWORTHINESS OF THE INVESTOR COMPANY AND GENUINENESS OF THE TRANSACTION. SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 60 5. JMD SOUNDS LIMITED THE COMPANY WAS INCORPORATED ON 6.7.1993 HAVING ITS PA.NO. AABCH 1970H. IT IS HAVING REGISTERED OFFICE AND BOARD OF DIRECTORS TO MANAGE ITS AFFAIRS. THE RETURN OF INCOME REGULARLY FILED AND ALSO REGULARLY ASSESSED. AS PER THE AUDITED ANNUAL ACCOUNTS FILED BY THE COMPANY, THE CAPITAL AS ON 31.03.2011 AMOUNTED TO RS.57,00,17,150/- AND THE COMPANY WAS HAVING FIXED ASSETS OF RS.1,02,89,442/-, DEBTORS OF RS.3,93,50,000/, OTHER RECEIVABLES OF RS.25,27,86,355/-, INVESTMENT IN SHARES WAS OF RS.32,03,08,539/-, STOCK IN TRADE OF RS.3,84,551/- AN D BANK BALANCE OF RS. 3,79,826/-. THE TURNOVER OF THE COMPANY WAS RS.29,69,930/- AND THE NET PROFIT BEFORETAXSTOOD AT RS. 6,32,463/-. FROM THE BANK STATEMENTS FILED BY THE COMPANY, IT WAS EVIDENT THAT AL L THE TRANSACTIONS RELATING TO SHARE APPLICATION MONEY OR UNSECURED LOAN WERE CARRIED OUT THROUGH BANKING CHANNELS AND NO CASH WAS DEPOSITED IN THE BANK ACCOUNT. THESE FACTS ESTABLISH THE IDENTITY AND CREDITWORTHINESS OF THE COMPANY AND GENUINENESS OF THE TRANSACTION. 6. MICRO CHIP INFOTEL PVT. LTD. THE COMPANY WAS INCORPORATED ON 13.8.2008 HAVING ITS PA. NO. AAFCM 6919. IT IS HAVING REGISTERED OFFICE AN D BOARD OF DIRECTORS TO MANAGE ITS AFFAIRS. THE RETURN OF INCOME REGULARLY FILED AND REGULARLY ASSESSED. AS PER SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 61 THE AUDITED ANNUAL ACCOUNTS FILED BY THE COMPANY, THE CAPITAL OF THE COMPANY AS ON 31.03.2011 WAS RS.36,19,74,905/-AND COMPANY WAS HAVING OTHER RECEIVABLES OF RS25,41,52,000/-. INVESTMENT IN SHARES IS OF RS.46,01,80,000/- AND BLANCE BALANCE OFRS. 33,06,584/-. THE NET PROFIT BEFORE TAX WAS AT RS.10,097/-. FROM THE BANK STATEMENTS FILED BY THE COMPANY, IT WAS EVIDENT THAT ALL THE TRANSACTIONS RELATING TO SHARE APPLICATION MONEY WERE CARRIED OUT THROUGH BANKING CHANNELS AND NO CASH WAS DEPOSITED IN THE BANK ACCOUNT. THESE FACTS ESTABLISHED THE IDENTITY AND CREDITWORTHINESS OF THE INVESTOR COMPANY AND ALSO GENUINENESS OF THE TRANSACTION. 7. 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 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 SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 62 DEPOSITED IN THE BANK ACCOUNT. THESE FACTS ESTABLISHED IDENTITY AND CREDITWORTHINESS OF THE INVESTOR COMPANY AND GENUINENESS OF THE TRANSACTION. 8. OCTOPUS INFOTEL PRIVATE LIMITED THE COMPANY WAS INCORPORATED ON 18.08.2008 HAVING ITS PA.NO. AABCC 0743 N. IT IS HAVING REGISTERED OFF ICE AND BOARD OF DIRECTORS TO MANAGE AFFAIRS. IT IS FILING RETURN OF INCOME REGULARLY FILED AND ALSO BEING ASSESSED. AS PER THE AUDITED ANNUAL ACCOUNTS, THE CAPITAL AS ON 31.03.2011 WAS OF RS. 39,49,29,079/- AND DEBTORS OF RS.1,14,160/, OTHER RECEIVABLES OF RS.3,56,50,000/-. INVESTMENT IN SHARES WAS OF RS.49,82,33,000/- AND BANK BALANCE WAS OF RS.18,56,429/-. FROM THE BANK STATEMENTS FILED IT WAS EVIDENT THAT ALL THE TRANSACTION RELATING TO SHARE APPLICATION MONEY WERE CARRIED OUT THROUGH BANKING CHANNELS AND NO CASH WAS DEPOSITED IN THE BANK ACCOUNT. THESE FACTS ESTABLISH THE IDENTITY AND CREDIT WORTHINESS OF INVESTOR COMPANY AND GENUINENESS OF TRANSACTIONS. 9. KAMDEEP MARKETING PVT. LTD. THE COMPANY WAS INCORPORATED ON 9.1.1991 HAVING ITS PA.NO. AAACK 9556. IT IS HAVING REGISTERED OFFICE AND BOARD OF DIRECTORS TO MANAGE ITS AFFAIRS. THE RETURN OF INCOME FILED REGULARLY AND REGULARLY ASSESSED. AS PER THE AUDITED ANNUAL ACCOUNTS FILED BY THE COMPANY, THE CAPITAL OF THE COMPANY ON 31.03.2011 IS OF RS.1,50,12,923/- AND THE DEBTORS ARE OF RS.8,78,64,948/-. OTHER RECEIVABLES ARE OF RS.11,79,49,240/-. INVESTMENT IN STOCK IN TRADE OF SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 63 RS.4,08,23,567/-, BANK BALANCE WAS OF RS.22.84,174/. THE TURNOVER OF THE COMPANY WAS RS.59,42,42,541/- AND THE NET PROFIT BEFORE TAX STOOD AT RS.12,65,430/- . FROM THE BANK STATEMENTS FILED BY THE COMPANY, IT WAS EVIDENT THAT ALL THE TRANSACTION RELATING TO SHARE APPLICATION MONEY WERE CARRIED OUT THROUGH BANKING CHANNELS AND NO CASH WAS DEPOSITED IN THE BANK ACCOUNT. THESE FACTS ESTABLISHE THE IDENTITY AND CREDITWORTHINESS OF THE COMPANY AND GENUINENESS OF THE TRANSACTION. THE VARIOUS CASE LAWS RELIED UPON BY THE LEARNED COUN SEL FOR THE ASSESSEE AND CONSIDERING THE FACTUAL ASPECT OF T HIS CASE, WE ARE OF THE VIEW THAT THE ASSESSEE WAS ABLE TO ESTABLISH THE IDENTITY OF THESE CREDITORS BY WAY OF FURNISHING PERMANENT ACCOUNT NUMBER, CERTIFICATE OF INCORPORATION AND COPIES OF RETURNS OF INCOME. THE GENUINENESS OF THE TRANSACTION IS ALSO ESTABLISHED AS AL L THESE TRANSACTIONS WERE THROUGH PROPER BANKING CHANNELS AND THERE WAS NO CASH DEPOSIT IN THE BANK ACCOUNTS OF THESE CREDITORS JUST PRIOR TO ADVANCEMENT OF LOAN. THE FINANCIAL ANALYSIS OF THESE COMPANIES ALSO ESTABLISHED THAT SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 64 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 SHRI JAGDISH PUROHIT WHO HAS RETRACTED FROM THE EARLIE R STATEMENT AND THE CONTENTS OF THE AFFIDAVIT FILED BY HI M SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 65 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 JUSTIFICATION FOR THE A.O. FOR MAKING THE IMPUGNED ADDITION BECAUSE ONCE THE EXISTENCE OF THE SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 66 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. 33. FOR HOLDING SO, WE ALSO GET SUPPORT FROM THE FOL LOWING CASE LAWS :- 1. C.I.T VS. STELLAR INVESTMENT LTD. [192 ITR 287 (DEL)] IN THE PRESENT CASE, THE SUBSCRIBED CAPITAL OF THE ASSESSEE HAD BEEN INCREASED. THE INCOME-TAX OFFICER ASSESSED THE COMPANY AND ACCEPTED THE INCREASE IN THE SUBSCRIBED CAPITAL. THE COMMISSIONER OF INCOME-TAX CAME TO THE CONCLUSION THAT THE ASSESSING OFFICER DID NOT CARRY OUT A DETA ILED SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 67 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. 2. C.I.T VS. STELLER INVESTMENT LTD. [251 ITR 263 (SC)] SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 68 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 CAPITAL BE REGARDED AS UNDISCLOSED INCOME OF THE COMPANY . SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 69 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, AGAINST THE ASSESSEE; AND (7) THE ASSESSING OFFICER IS DUTY-BOUND TO INVESTIGATE THE SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 70 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 THE SUBSCRIBERS TO THE CAPITAL WERE NOT GENUINE UNDER NO CIRCUMSTANCE COULD THE AMOUNT OF SHARE SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 71 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 PRINCIPLE ACCEPTED BY ANOTHER DECISION IN CIT V. SOPHIA FINANCE LTD. [1994] 205 ITR 98 (DELHI) [FB]. SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 72 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. 9. SHREE BARKHA SYNTHETICS LTD. VS. A.C.I.T [283 ITR 377 (RAJ)] SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 73 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 REVENUE WHICH HAS ALL THE POWERS AND WHEREWITHAL TO TRACE ANY PERSON . MOREOVER, IT IS SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 74 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 TO EXAMINE WHETHER THE ALLEGED SHAREHOLDERS DO IN FACT EXIST OR NOT. SUCH AN INQUIRY WAS SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 75 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)] SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 76 IT IS QUITE OBVIOUS THAT IS VERY DIFFICULT FOR THE ASSESSEE TO SHOW THE CREDITWORTHINESS OF STRANGERS. IF THE REVENUE HAD ANY DOUBT WITH REGARD TO THEIR ABILITY TO MAKE THE INVESTMENT, THEIR RETURNS MIGHT BE REOPENED BY THE DEPARTMENT . IF DEPARTMENT WANTS TO MAKE ADDITION ON ACCOUNT OF SHARE APPLICATION MONEY, BURDEN IS ON DEPARTMENT TO SHOW THAT EVEN IF APPLICANT DID NOT HAVE MEANS TO MAKE INVESTMENT, INVESTMENT MADE BY ASSESSEE ACTUALLY EMANATED FROM COFFERS OF ASSESSEE SO AS TO ENABLE IT TO BE TREATED AS UNDISCLOSED INCOME OF ASSESSEE. 14. C.I.T VS. PEOPLES GENERAL HOSPITAL LTD. [2013] 356 ITR 65 (MP) FACTS THE ASSESSING OFFICER MADE ADDITION, HOLDING THAT SHARE SUBSCRIPTION RECEIVED FROM A COMPANY IN SHARJAH WAS UNDISCLOSED INCOME OF THE ASSESSEE, AS HE DOUBTED THE CREDITWORTHINESS OF SUCH COMPANY. HELD 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. SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 77 HOWEVER, THE DEPARTMENT CAN PROCEED AGAINST THE SAID COMPANY IN ACCORDANCE WITH LAW. [PARA 16] THE POSITION OF THE PRESENT CASE IS IDENTICAL. IT I S NOT THE CASE OF ANY OF THE PARTIES THAT THE COMPANY IN SHARJAH IS A BOGUS COMPANY OR A NON-EXISTENT COMPANY AND THE AMOUNT WHICH WAS SUBSCRIBED BY THE SAID COMPANY BY WAY OF SHARE SUBSCRIPTION WAS IN FACT THE MONEY OF THE ASSESSEE. IN THE PRESENT CASE, THE ASSESSEE HAD ESTABLISHED THE IDENTITY OF INVESTOR WHO HAD PROVIDED THE SHARE SUBSCRIPTION AND IT WAS ESTABLISHED THAT THE TRANSACTION WAS GENUINE, THOUGH AS PER CONTENTION OF THE ASSESSEE THE CREDITWORTHINESS OF THE CREDITOR WAS ALSO ESTABLISHED. IN THE PRESENT CASE, IN THE LIGHT OF T HE JUDGMENT OF LOVELY EXPORTS (P.) LTD. (SUPRA), ONLY ESTABLISHMENT OF THE IDENTITY OF THE INVESTOR IS TO BE SEEN. THE DELHI HIGH COURT ALSO, IN THE CASE OF CIT V. DIVINE LEASING & FINANCE LTD. [2008] 299 ITR 268/[2007] 158 TAXMAN 440 , CONSIDERING A SIMILAR QUESTION HELD THAT THE ASSESSEE-COMPANY, HAVING RECEIVED SUBSCRIPTIONS FROM THE PUBLIC/RIGHTS ISSUE THROUGH BANKING CHANNELS AND FURNISHED COMPLETE DETAILS OF THE SHAREHOLDERS, NO ADDITION COULD BE 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] SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 78 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 ASSESSEE. HOWEVER, THE SHARE APPLICATION MONEY SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 79 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 WITH LAW AND BRING TO TAX SUCH UNEXPLAINED SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 80 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] 34. CONSIDERING ALL THESE ASPECTS, WE ALLOW THE APPEAL O F THE ASSESSEE. SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 81 35. AS REGARD SHARE APPLICATION MONEY RECEIVED FROM KAMDEEP MARKETING PVT. LTD., THE ADDITION OF WHICH WAS DELETED BY THE C.I.T.(A). AND AGAINST WHICH THE REVENU E IS IN APPEAL, IT IS SUBMITTED THAT KAMDEEP MARKETING PVT. LTD. IS A CLOSELY HELD COMPANY BELONGING TO SIGNET GROUP. IT WAS INCORPORATED UNDER THE PROVISIONS OF COMPANIES ACT, 1956 BEARING INCORPORATION NO. 10-06208 DATED 19.01.1991. I T IS ENGAGED IN TRADING IN POLYMERS, HOUSEHOLD PRODUCTS AND FINANCING GROUP COMPANIES. ITS REGISTERED OFFICE IS S ITUATED AT SURVEY NO. 1, SDA COMPOUND, LASUDIAMORI, DEWAS NAKA, INDORE. ITS P.A.NO.IS AAACK 9556A AND IS REGULAR LY ASSESSED TO TAX. FROM THE BANK STATEMENTS OF THE RELEV ANT PERIOD WHICH WERE PRODUCED BEFORE THE A.O. AS WELL AS C.I.T.(A). AND VERIFIED BY THEM, IT WAS CLEAR THAT THE SHARE APPLICATION MONEY WAS PAID OUT OF FUNDS RECEIVED FROM SIGNET INDUSTRIES LTD. SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 82 36. IN THIS REGARD, WE ARE REPRODUCING HEREWITH THE F INDING GIVEN BY THE LEARNED C.I.T.(A)., ON THE BASIS OF WHIC H THE SHARE APPLICATION MONEY WAS HELD TO BE GENUINE TRANSACTION AND ADDITION OF RS.80,50,000/- WAS DELETED : IN CASE OF KAMDEEP MARKETING PVT. LTD., THE FACTS ARE DIFFERENT IN THE SENSE THAT THE SHARE APPLICANT C OMPANY BELONGS TO SANGLA GROUP. IT IS MANAGED AND CONTROLLED BY SHRI MUKESHSANGLA .IT IS ENGAGED IN REGULAR BUSINESS ACTIVITIES AND REGULARLY ASSESSED TO TAX. ON VERIFICATION OF BANK STATEMENT OF KAMDEEP MARKETING PVT. LTD., SIGNET INDUSTRIES LIMITED AND THE APPELLANT COMPANY, IT IS SEEN THAT THE APPELLANT COMPANY RECEIVED SHARE APPLICATION MONEY OUT OF FUN DS RECEIVED FROM SIGNET INDUSTRIES LTD. FOR THE SAKE O F CLARITY, THESE TRANSACTION ARE DEPICTED AS UNDER : DATE AMOUNT (RS.) SOURCE OF SHARE APPLICATION MONEY DATE AMOUNT (RS.) PAYMENT 11.06.2010 1,00,00,000 SIGNET INDUSTRIES LIMITED 11.06.2010 60,00,000 SHARE APPLICATION MONEY PAID TO SHREE BALAJI STARCH & CHEMICALS PVT. LTD. 11.06.2010 46,00,000 SIGNET INDUSTRIES LIMITED 11.06.2010 40,00,000 UNSECURED LOAN TO SHRI BALAJI STARCH & CHEMICALS PVT.LTD 16.07.2010 2,55,00,000 SIGNET INDUSTRIES LIMITED 16.07.2010 20,50,000 SHARE APPLICATION MONEY PAID TO SHREE BALAJI STARCH & CHEMICALS PVT. LTD. SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 83 CONSIDERING THE FACTS AS DISCUSSED ABOVE, THE SHARE APPLICATION MONEY OF RS.80,50,000/- RECEIVED FROM KAMDEEP MARKETING PVT.LTD. IS HELD TO BE GENUINE TRANSACTION AND ADDITION TO THE EXTENT OF RS.80,50, 000/- MADE U/S. 68 BY THE AO ON THIS ACCOUNT IS HEREBY DELETED. 37. AFTER HEARING BOTH THE SIDES ON THE REVENUES APPEAL, WE HOLD THAT THE REVENUE HAS FAILED TO CONTROVER T THE FINDINGS RECORDED BY THE LEARNED CIT(A). WE UPH OLD THE ORDER OF THE LEARNED CIT(A) AND DISMISS THE REVENUE S APPEAL. 8. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED AND THE REVENUES APPEAL IS DISMISSED. PRONOUNCED IN OPEN COURT ON 4 TH JANUARY, 2016 SD/- SD/- (D.T. GARASIA) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER 4 TH JANUARY, 2016 DN/- SHRI BALAJI STARCH & CHEMICALS LTD. IT(SS)A NOS. 88 & 204/IND/2015 84