M/s Paywell Securities P. Ltd.,, Delhi v. ITO, New Delhi

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `F: NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA VICE PRESIDENT AND SHRI C.L.SETHI JUDICIAL MEMBER. I.T. A. NO.2831/DEL/2009 ASSESSMENT YEAR: 2000-01 INCOME TAX OFFICER M/S. PAYWELL SECURITIES P. LT D. WARD-14(2) NEW DELHI. VS. B-6/5 & 6 SECTOR-3 ROH INI DELHI. PAN: AABCP9431F AND C.O. NO.393/DEL/2009 ASSESSMENT YEAR: 2000-01 M/S. PAYWELL SECURITIES P. LTD. INCOME-TAX OFFICE R HOUSE NO. 5 & 6 SECTOR-3 VS. WARD-14(2) NEW DEL HI. PKT B-6 ROHINI NEW DELHI. (APPELLANTS) (RESPOND ENTS) DEPARTMENT BY: SHRI H.K. LAL SR. DR. ASSESSEE BY: SHRI SALIL AGGARWAL ADVOCATE. O R D E R PER C.L. SETHI JUDICIAL MEMBER: THE REVENUE IS IN APPEAL AGAINST THE ORDER DATED 16 .03.2009 PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IN THE MATTER OF AN ASSESSMENT MADE UNDER SEC. 147 OF THE INCOME-TAX AC T 1961 (THE ACT) BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2000- 01. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION IN RELATION THERETO. 2 2. THE ONLY GROUND RAISED BY THE REVENUE IN THIS AP PEALS IS AS UNDER:- THAT THE CIT(A) ERRED IN LAW AND ON FACTS OF THE C ASE IN DELETING THE ADDITION OF RS.40 00 000/- MADE ON ACC OUNT OF SHARE APPLICATION MONEY U/S 68 OF THE INCOME-TAX AC T. 3. IN THE CROSS OBJECTION THE ASSESSEE HAS CHALLEN GED THE CIT(A)S ORDER IN UPHOLDING THE VALIDITY OF INITIATION OF PROCEEDI NGS UNDER SEC. 147 OF THE ACT BY THE ASSESSING OFFICER. 4. WE SHALL FIRST TAKE UP THE APPEAL FILED BY THE R EVENUE FOR OUR DECISION. 5. IN THE REVENUES APPEAL THE GROUND OF APPEAL IS REGARDING THE ADDITION OF RS.40 00 000/- MADE BY THE AO ON ACCOUNT OF SHAR E CAPITAL MONEY RECEIVED BY THE ASSESSEE THAT HAS BEEN DELETED BY T HE LEARNED CIT(A). 5. FACTS GIVING RISE TO THE ISSUE ARE SET OUT IN EN SUING PARAS IN THIS CASE ORIGINAL RETURN WAS FILED BY THE ASSE SSEE ON 30.11.2000 DECLARING TOTAL INCOME AT RS.10 970/-. THEREAFTER THE ASSESSING OFFICER INITIATED PROCEEDINGS U/S 147 OF THE ACT BY RECORDI NG THE REASONS IN WRITING ON 29.03.2007. NECESSARY APPROVAL FROM THE ADDITIO NAL COMMISSIONER OF INCOME-TAX WAS TAKEN BEFORE ISSUING NOTICE U/S 148 OF THE ACT. NOTICE U/S 148 WAS ISSUED ON 30.03.2007 WHICH WAS DULY SERVED UPON THE ASSESSEE. IN RESPONSE TO THE NOTICE U/S 148 THE ASSESEE SUBMITT ED BEFORE THE AO THAT THE RETURN ORIGINALLY FILED MAY BE CONSIDER ED AS A RETURN IN RESPONSE 3 TO NOTICE U/S 148 OF THE ACT. REASONS RECORDED WER E SUPPLIED TO THE ASSESSEE. NOTICE U/S 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE. 5.1 IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAD RECEIVED SHARE APPLICATION MONEY OF RS.89.65 LAKH DURING THE RELEV ANT ACCOUNTING YEAR. NOTICES U/S 133(6) WERE ISSUED TO ALL THE SHARE APP LICANTS WHO ALLEGEDLY PAID SHARE APPLICATION MONEY TO THE ASSESSEE COMPANY. T HE AO RECEIVED REPLIES FROM THE SHARE APPLICANTS EXCEPT THE FOLLOWING APPL ICANTS:- SL.NO. NAME OF THE ASSESSEE SHARE APPLICATION MONEY GIVEN POSTAL REMARKS 1. M/S. PERFORMANCE TRADING & INVESTMENT (P) LTD. RS.8 00 000 NO SUCH PERSON 2. M/S. GANGA INFIN (P) LTD. RS.7 00 000 SHOP REMAI NS ALWAYS CLOSED. 3. M/S. TECHNOCOM ASSOCIATES (P) LTD. RS.7 00 000 REFUSED 4. M/S. TRANSPEN FINANCIAL SERVICES (P) LTD. RS.12 00 000 REFUSED 5. M/S. SOBER ASSCOIATES (P) LTD. RS.6 00 000 NO SUCH PERSON. 5.2 THE ASSESSING OFFICER REQUIRED THE ASSESSEE COM PANY TO PROVIDE LATEST ADDRESSES OF THE AFORESAID PARTIES AND PRODUCE DIRE CTORS WITH COPY OF CONFIRMATION BANK STATEMENT AND INCOME-TAX RETURN COPY IDENTIFICATION PROOF OF DIRECTORS IN ORDER TO PROVE GENUINENESS AN D CREDITWORTHINESS OF TRANSACTIONS/PARTIES. IT IS STATED BY THE AO THAT NEITHER THE REQUISITE DETAILS WERE PROVIDED BY THE ASSESSEE AT THAT STAGE NOR ANY OF THE DIRECTORS WERE 4 PRODUCED BEFORE THE AO. HOWEVER THE ASSESSEE LATE R PROVIDED THE LATEST ADDRESSES OF THE AFORESAID 5 COMPANIES AND ITS DIRE CTORS. THE AO THEN ISSUED SUMMONS U/S 131 TO THEM WHEREIN THE AO REQUI RED THE AFORESAID 5 COMPANIES TO FILE FOLLOWING DETAILS:- 1. PERSONAL DEPOSITION WITH IDENTIFICATION PROOF. 2. BOOKS OF ACCOUNT FOR A.Y. 2000-01. 3. ASSESSMENT PARTICULARS. 5.3 SUMMONS ISSUED U/S 131 WERE RETURNED WITH POSTA L REMARKS THAT THEY WERE NOT LIVING AT THE GIVEN ADDRESSES OR NOT FOUND . THESE FACTS WERE CONVEYED BY THE AO TO THE ASSESSEE COMPANY. 5.4 BEFORE THE AO THE ASSESSEE SUBMITTED THAT INIT IAL BURDEN U/S 68 LIES ON THE ASSESSEE HAS BEEN DISCHARGED BY THE ASSESSE E BY FILING THE COPY OF ITR. IT WAS FURTHER SUBMITTED THAT ALL SHARE APPLI CANTS WERE INCOME-TAX ASSESSES AND THE TRANSACTIONS WERE ROUTED THROUGH T HE BANKING CHANNEL IN SUPPORT THEREOF COPY OF BANK STATEMENT WAS FILED T O PROVE THE CREDITWORTHINESS OF THE PARTIES. THE ASSESSEE FURT HER SUBMITTED THAT THE TRANSACTIONS WERE DULY RECORDED IN THE REGULAR BOOK S OF ACCOUNTS. THE ORIGINAL CONFIRMATIONS ALONG WITH ORIGINAL AFFIDAVI TS FROM THE SHARE APPLICANTS WERE ALSO FILED. HOWEVER THE AO HAS TA KEN A VIEW THAT DEPARTMENT HAS MADE AN ALLEGATION THAT THESE CREDIT S REPRESENTED ACCOMMODATION ENTRIES. IN THIS BACKGROUND THE AO ADDED THE SUM OF RS.40 5 LAKH AS UNEXPLAINED CREDIT UNDER SEC. 68 OF THE ACT IN THE HANDS OF THE ASSESSEE. 6. BEING AGGRIEVED THE ASSESSEE PREFERRED AN APPEA L BEFORE THE CIT(A). 7. BEFORE THE CIT(A) THE ASSESSEE SUBMITTED THAT T HE DETAILS ABOUT 5 SHARE APPLICANTS IN QUESTION WERE DULY FURNISHED BE FORE THE AO AND THE ASSESSEE HAS BEEN ABLE TO DISCHARGE INITIAL BURDEN THAT LAY UPON IT U/S 68 OF THE ACT. THE ASSESSEE FURTHER SUBMITTED BEFORE THE CIT(A) THAT NO ADDITION WAS CALLED FOR IN THE LIGHT OF THE FOLLOWING EVIDEN CES FILED BY THE ASSESSEE IN RESPECT OF THE AFORESAID FIVE SHAREHOLDERS IN QUEST ION:- S.NO. NAME AMOUNT EVIDENCE FILED (PAG ES OF PB) 1. M/S. PERFORMANCE TRADING & INVESTMENT (P) LTD. 8 00 000 I) COPY OF DETAIL OF COMPANY (47). II) COPY OF CERTIFICATE OF INCORPORATION (48). III) COPY OF PAN NO.AAEEP3615K (49) IV) COPY OF APPLICATION FOR SHARES (50) V) COPY OF BOARD RESOLUTION OF M/S. PERFORMANCE TRADING & INVESTMENT (P) LTD. (51). VI) COPY OF CONFIRMATION (52) VII) COPY OF PAN NO. AAEFP3615J (53). 6 VIII) COPY OF RETURN OF INCOME FOR A.Y. 2000-01 ALONGWITH BALANCE SHEET AND PROFIT AND LOSS ACCOUNT (54-56). IX) COPY OF FORM NO.32 WITH ROC RECEIPT (57). X) COPY OF BANK STATEMENT FOR THE PERIOD OF 01.03.2000 TO 31.12.2000 OF M/S. PERFOR- MANCE TRADING & INVESTMENT (P) LTD. (58). XI) COPY OF AFFIDAVIT DATED 06.12.2007 OF SH. TRILOK CHAND BANSAL DIRECTOR OF M/S. PERFORMANCE TRADING AND INVESTMENT PVT. LTD. CONFIRMING THE FACT THAT AMOUNT PAID BY ACCOUNT PAYEE CHEQUE DATED 22.03.2000 DRAWN ON STATE BANK OF INDIA BRANCH DARYAGANJ NEW DELHI 110 001 AND THAT SHAREHOLDERS IS INCOME TAX ASSESSEE. IT ALSO SHOWS THE SOURCE OF INCOME. (59). XII) COPY OF AFFIDAVIT DATED 06.12.2007 OF SH. SANTOSH KUMAR DIRECTOR OF M/S. PERFORMANCE TRADING AND INVESTMENT PVT. LTD. CONFIRMING THE FACT THAT AMOUNT PAID BY ACCOUNT PAYEE CHEQUE DATED 22.03.2000 DRAWN ON STATE BANK OF INDIA BRANCH DARYAGANJ NEW DELHI-110 001 AND THAT 7 SHAREHOLDERS IS INCOME TAX ASSESSEE. IT ALSO SHOWS THE SOURCE OF INCOME. (60). XIII) COPY OF CONFIRMATION GIVEN BY SH. SANTOSH KUMAR CHOWDHARY DIRECTOR OF M/S. PERFORMANCE TRADING & INVESTMENT PVT. LTD. (61). XIV) COPY OF REPLY FILED IN RESPONSE TO NOTICE ISSUED U/S 131 OF THE ACT. (COPY NOT AVAILABLE WITH THE ASSESSEE). 2. M/S. GANGA INFIN PRIVATE LTD. 7 00 000 I) COPY OF CERTIFICATE OF INCORPORATION (62). II) COPY OF PAN NO.AAACG4449G (63). III) COPY OF APPLICATION FOR SHARES (64) IV) COPY OF CONFIRMATION (65) V) COPY OF BOARD RESOLUTION OF M/S. GANGA INFIN PVT. LTD. (66). VI) COPY OF RETURN OF INCOME FOR A.Y.(S) 1999-00 2000-01 2001-02 AND 2005-06 (67-70). VII) COPY OF BALANCE SHEET AS ON 31.03.2000 ALONG WITH PROFIT AND LOSS ACCOUNT (71- 72). VIII) COPY OF AFFIDAVIT DATED 8 22.03.2000 AND 20.11.2007 OF SH. BALRAJ JAIN DIRECTOR OF M/S. GANGA INFIN PVT. LTD. CONFIRMING THE FACT THAT AMOUNT PAID BY ACCOUNT PAYEE CHEQUE DATED 22.03.2000 DRAWN ON RAMGARHIA CO-OP. BANK LTD. PAHAR GANJ NEW DELHI 110 055 AND THAT SHAREHOLDERS IS INCOME TAX ASSESSEE. IT ALSO SHOWS THE SOURCE OF INCOME. (73-74). IX) COPY OF AFFIDAVIT DATED 20.11.2007 OF SH. MAHESH GARG DIRECTOR OF M/S. GANGA INFIN PVT. LTD. CONFIRMING THE FACT THAT AMOUNT PAID BY ACCOUNT PAYEE CHEQUE DATED 23.02.2000 DRAWN ON RAMGARHIA CO-OPERATIVE BANK LTD. PAHAR GANJ NEW DELHI AND THAT SHAREHOLDERS IS INCOME TAX ASSESSEE. IT ALSO SHOWS THE SOURCE OF INCOME. (75). X) COPY OF CONFIRMATION GIVEN BY SH. BAL RAJ JAIN DIRECTOR OF M/S. GANGA INFIN PVT. LTD. (76). XI) COPY OF BALANCE SHEET AS ON 31.03.1999 (150). XII) COPY OF PROFIT AND LOSS ACCOUNT AS ON 31.03.1999 (151). XIII) COPY OF ROCS RECEIPT 9 (152). XIV) COPY OF REPLY FILED BY DIRECTOR OF M/S. GANGA INFIN PVT. LTD. (COPY NOT AVAILABLE WITH THE ASSESSEE). 3. M/S. TRANSPAN FINAN- CIAL SERVICES PVT. LTD. 12 00 000 I) COPY OF CERTIFICATE OF INCORPORATION (77). II) COPY OF PAN NO.AACT107N (78). III) COPY OF APPLICATION FOR SHARES (79-80) IV) COPY OF BOARD RESOLUTION OF M/S. TRANSPAN FINANCIAL SERVICES PVT. LTD. (81). V) COPY OF CONFIRMATION (82- 83) VI) COPY OF RETURN OF INCOME FOR A.Y.(S) 1999-00 2000- 01 AND 2005-06 (84-86). VII) COPY OF BALANCE SHEET ALONG WITH PROFIT AND LOSS ACCOUNT AS ON 31.03.1999 31.03.2000 AND 31.03.2001 (87-91). VIII) COPY OF BANK STATEMENT OF M/S. TRANS FINANCIAL SERVICES PVT. LTD. (92). IX) COPY OF FORM NO.32 WITH ROC RECEIPT (93). 10 X) COPY OF AFFIDAVIT DATED 29.05.2000 OF SH. ASHOK KUMAR AGGARWAL DIRECTOR OF M/S. TRANSPAN FINANCIAL SERVICES LTD. CONFIRMING THE FACT THAT AMOUNT PAID BY ACCOUNT PAYEE CHEQUE DATED 22.03.2000 DRAWN ON STATE BANK OF PATIALA DARYAGANJ NEW DELHI 110 001 AND THAT SHAREHOLDERS IS INCOME TAX ASSESSEE. IT ALSO SHOWS THE SOURCE OF INCOME. (94-95). X) COPY OF AFFIDAVIT DATED 07.12.2007 OF SH. SANJAY MITTAL DIRECTOR OF M/S. TRANSPAN FINANCIAL SERVICES LTD. CONFIRMING THE FACT THAT AMOUNT PAID BY ACCOUNT PAYEE CHEQUE DATED 22.03.2000 DRAWN ON STATE BANK OF INDIA BRANCH DARYAGANJ NEW DELHI -110 001 AND THAT SHARE- HOLDERS IS INCOME TAX ASSESSEE. IT ALSO SHOWS THE SOURCE OF INCOME. (96). XI) COPY OF CONFIRMATION GIVEN BY SH. SANJAY MITTAL DIRECTOR OF M/S. TRANSPAN FINANCIAL SERVICES LTD. (97). XII) COPY OF REPLY FILED BY DIRECTOR OF M/S. TRANSPAN FINANCIAL SERVICES LTD. (COPY NOT AVAILABLE WITH THE ASSESSEE). XII) COPY OF REPLY FILED IN 11 RESPONSE TO NOTICE ISSUED U/S 131 OF THE ACT. (COPY NOT AVAILABLE WITH THE ASSESSEE). 4. M/S. TECHNOCOM ASSOCIATES PVT. LTD. 7 00 000 I) COPY OF CERTIFICATE OF INCORPORATION (98). II) COPY OF PAN NO.AACT0787E (99). III) COPY OF APPLICATION FOR SHARES (100) IV) COPY OF BOARD RESOLUTION OF M/S. TECHNOCOM ASSOCIATES PVT. LTD. (101). V) COPY OF CONFIRMATION (102) VI) COPY OF RETURN OF INCOME FOR A.Y.(S) 1999-00 ALONG WITH BALANCE SHEET PROFIT AND LOSS ACCOUNT (103-104). VII) COPY OF BALANCE SHEET ALONG WITH PROFIT AND LOSS ACCOUNT AS ON 31.03.2005 (105-106). VIII) COPY OF FORM NO.32 ALONG WITH ROC RECEIPT (107- 109). IX) COPY OF BANK STATEMENT OF M/S. TECHNOCOM ASSOCIATES PVT. LTD. (110). X) COPY OF ORDER OF ASSESSMENT U/S 143(1) OF THE ACT 1961 FOR ASSESSMENT YEAR 12 1999-2000 DATED 09.08.2000 OF M/S. TECHNOCOM ASSOCIATES PVT. LTD. (111). XI) COPY OF RETURN OF INCOME FOR A.Y(S) 2001-02 (112). XII) COPY OF INTIMATION U/S 143(1)(A) OF THE ACT 1961 FOR ASSESSMENT YEAR 2000-01 DATED 10.07.2001 (113). XIII) COPY OF BALANCE SHEET AS ON 31.03.2001 ALONG WITH PROFIT AND LOSS ACCOUNT (114- 115). XIV) COPY OF ORDER OF ASSESSMENT U/S 143(3) OF THE ACT 1961 FOR A.Y. 1993-94 DATED 06.12.1996 OF M/S. TECHNOCOM ASSOCIATES PVT. LTD. (116) XV) COPY OF RETURN OF INCOME FOR A.Y. 2003-04 ALONG WITH BALANCE SHEET AND PROFIT AND LOSS ACCOUNT (117-119). XVI) COPY OF AFFIDAVIT DATED 22.03.2000 OF SH. R.S. SINGAL DIRECTOR OF M/S. TECHNOCOM ASSOCIATES PVT. LTD. CONFIRMING THE FACT THAT AMOUNT PAID BY ACCOUNT PAYEE CHEQUE DATED 22.03.2000 DRAWN ON BOMBAY MERCANTILE CO-OPERATIVE BANK LTD. DARYAGANJ NEW DELHI 110 001 AND THAT SHAREHOLDERS IS 13 INCOME TAX ASSESSEE. IT ALSO SHOWS THE SOURCE OF INCOME. (120-121). XVII) COPY OF AFFIDAVIT DATED 06.12.2007 OF SMT. SAROJ BALA MITTAL DIRECTOR OF M/S. TECHNOCOM ASSOCIATES PVT. LTD. CONFIRMING THE FACT THAT AMOUNT PAID BY ACCOUNT PAYEE CHEQUE DATED 22.03.2000 DRAWN ON BOMBAY MERCANTILE CO-OPERATIVE BANK LTD. DARYAGANJ NEW DELHI -110 001 AND THAT SHARE-HOLDERS IS INCOME TAX ASSESSEE. IT ALSO SHOWS THE SOURCE OF INCOME. (122). XVIII) COPY OF AFFIDAVIT DATED 06.12.2007 OF SH. AJAY MITTAL DIRECTOR OF M/S. TECHNOCOM ASSOCIATES PVT. LTD. CONFIRMING THE FACT THAT AMOUNT PAID BY ACCOUNT PAYEE CHEQUE DATED 22.03.2000 DRAWN ON BOMBAY MERCANTILE CO-OPERATIVE BANK LTD. DARYAGANJ NEW DELHI -110 001 AND THAT SHARE-HOLDERS IS INCOME TAX ASSESSEE. IT ALSO SHOWS THE SOURCE OF INCOME. (123). XIX) COPY OF CONFIRMATION GIVEN BY SMT. SAROJ BALA DIRECTOR OF M/S. TECHNOCOM ASSOCIATES (P) LTD. (124). XX) COPY OF ACKNOWLEDGE- 14 MENT OF RETURN OF INCOME FOR A.Y. 2000-01 (153). XXI) COPY OF BALANCE SHEET AS ON 31.03.2000 (154). XXII) COPY OF PROFIT AND LOSS ACCOUNT AS ON 31.03.2000 (155). XXIII) COPY OF ORDER U/S 143(1) OF THE ACT 1961 FOR ASSESSMENT YEAR 1997-98 OF M/S. TECHNOCOM ASSOCIATES PVT. LTD. (156). XXIV) COPY OF ROCS RECEIPT (157-158). XXV) COPY OF REPLY FILED BY DIRECTOR OF M/S. TECHNOCOM ASSOCIATES PVT. LTD. (COPY NOT AVAILABLE WITH THE ASSESSEE). XXVI) COPY OF PROFIT AND LOSS ACCOUNT WITH BALANCE AS ON 31.03.2002 AND 31.3.2004. (COPY NOT AVAILABLE WITH THE ASSESSEE). 5. M/S. SOBER ASSOCIATES PVT. LTD. 6 00 000 I) COPY OF CERTIFICATE OF INCORPORATION (125). II) COPY OF PAN NO. AACA31821 (126). III) COPY OF APPLICATION FOR SHARES (127) IV) COPY OF BOARD RESOLUTION 15 OF M/S. SOBER ASSOCIATES PVT. LTD. (128). V) COPY OF CONFIRMATION (129) VI) COPY OF RETURN OF INCOME FOR A.Y.(S) 1999-00 AND 2005- 06 (130-131). VI) COPY OF BALANCE SHEET ALONG WITH AS ON 31.03.1999 (132). VII) COPY OF BALANCE SHEET ALONG WITH PROFIT AND LOSS ACCOUNT AS ON 31.03.2000 AND 31.03.2005 (133-136). VIII) COPY OF BANK STATEMENT OF M/S. SOBER ASSOCIATES PVT. LTD. (137) IX) COPY OF FORM NO.32 ALONG WITH ROC RECEIPT (138). X) COPY OF AFFIDAVIT DATED 22.03.2000 OF SH. R.S. SINGAL DIRECTOR OF M/S. SOBER ASSOCIATES PVT. LTD. CONFIRMING THE FACT THAT AMOUNT PAID BY ACCOUNT PAYEE CHEQUE DATED 22.03.2000 DRAWN ON BOMBAY MERCANTILE CO-OPERATIVE BANK LTD. DARYAGANJ NEW DELHI 110 001 AND THAT SHAREHOLDERS IS INCOME TAX ASSESSEE. IT ALSO SHOWS THE SOURCE OF INCOME. (139-140). 16 XI) COPY OF AFFIDAVIT DATED 06.12.2007 OF SMT. SAROJ BALA MITTAL DIRECTOR OF M/S. SOBER ASSOCIATES PVT. LTD. CONFIRMING THE FACT THAT AMOUNT PAID BY ACCOUNT PAYEE CHEQUE DATED 22.03.2000 DRAWN ON BOMBAY MERCANTILE CO-OPERATIVE BANK LTD. DARYAGANJ NEW DELHI -110 001 AND THAT SHARE-HOLDERS IS INCOME TAX ASSESSEE. IT ALSO SHOWS THE SOURCE OF INCOME. (141). XII) COPY OF AFFIDAVIT DATED 06.12.2007 OF SH. AJAY MITTAL DIRECTOR OF M/S. SOBER ASSOCIATES PVT. LTD. CONFIRMING THE FACT THAT AMOUNT PAID BY ACCOUNT PAYEE CHEQUE DATED 22.03.2000 DRAWN ON BOMBAY MERCANTILE CO-OPERATIVE BANK LTD. DARYAGANJ NEW DELHI -110 001 AND THAT SHARE-HOLDERS IS INCOME TAX ASSESSEE. IT ALSO SHOWS THE SOURCE OF INCOME. (142). XIII) COPY OF CONFIRMATION GIVEN BY SHRI AJAY MITTAL OF M/S. SOBER ASSOCIATES (P) LTD. (143). XIV) COPY OF ACKNOWLEDGE- MENT OF RETURN OF INCOME FOR ASSESSMENT YEAR 2000-01 (159). 17 XV) COPY OF REPLY FILED BY DIRECTOR OF M/S. SOBER ASSOCIATES (P) LTD. (COPY NOT AVAILABLE WITH THE ASSESSEE). XVI) COPY OF REPLY FILED IN RESPONSE TO NOTICE ISSUED U/S 131 OF THE ACT. (COPY NOT AVAILABLE WITH THE ASSESSEE). 7.1 BEFORE THE CIT(A) THE ASSESSEE RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. STELLAR INVEST MENT LTD. REPORTED IN 251 ITR 263 AND ALSO RELIED UPON THE FOLLOWING DECISION S:- 1. CIT VS. ELECTRO POLYCHEM LTD. 217 CTR 371 (MAD.). 2. JAYA SECURITIES LTD. VS. CIT 166 TAXMAN 7 (ALL). 3. M/S. BHAV SHAKTI STEEL MINES PVT. LTD. VS. CIT 4. M/S. VALUE CAPITAL SERVICES 307 ITR 334 (DEL). 8. AFTER CONSIDERING THE AOS ORDER ASSESSEES SUB MISSIONS AND DETAILS FILED BY THE ASSESSEE THE LEARNED CIT(A) DELETED T HE ADDITION BY OBSERVING AS UNDER:- 4.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE ORDER OF THE AO AND SUBMISSIONS MADE BY THE LD. AR APPEARING FOR THE APPELLANT COMPANY. IT IS NOTED THAT THE AO MADE THIS ADDITION OF RS.40 LACS PRIMARILY ON THE BASIS OF TH E ENQUIRIES CONDUCTED BY THE INVESTIGATION WING AS WELL AS THE ENQUIRIES CONDUCTED BY HIM THROUGH ISSUE OF NOTICES UNDER 133 (6)/131 TO THE COMPANIES FROM WHOM THE APPELLANT HAS RECEIVED CERTAIN DEPOSITS DETAILS OF WHICH HAVE BEEN MENTIONED BY T HE AO IN THE ASSESSMENT ORDER. THE INVESTIGATION WING ON THE BA SIS OF STATEMENTS OF SH. MAHESH GARG CONCLUDED THAT ENTRY OPERATIONS WERE BEING CARRIED ON BY SH. MAHESH GARG AND HIS AS SOCIATES. ACCORDINGLY RELYING ON THE STATEMENTS RECORDED BY THE 18 INVESTIGATION WING AND HIS OWN ENQUIRY WHEREIN THE ALLEGED DEPOSITORS DID NOT PROPERLY RESPOND TO THE NOTICE O F AO THE AO CONSIDERED VARIOUS ENTRIES IN THE BANK ACCOUNTS OF THE APPELLANT TO BE ACCOMMODATION ENTRIES ACQUIRED BY THE APPELLA NT UNDER THE GARB OF SHARE APPLICATION MONEY. EVEN THOUGH T HE INITIAL INFORMATION RECEIVED BY THE AO PERTAINED TO THE ENT RIES OF APPROXIMATELY RS.27 LACS BUT AFTER CONSIDERING THE OTHER CREDIT ENTRIES IN THE BANK ACCOUNTS RELATED TO THE SHARE C APITAL THE AO MADE AN ADDITION OF RS.40 LACS IN RESPECT OF FIVE C ORPORATE SHAREHOLDERS AS UNEXPLAINED INCOME U/S 68 OF I.T. A CT IN THE HANDS OF THE APPELLANT. THE AO HAS OBSERVED THT TH E APPELLANT DID NOT PRODUCE SUFFICIENT DOCUMENTARY EVIDENCE TO PROVE THE GENUINENESS OF THE ALLEGED SHAREHOLDERS AS THE APPE LLANT HAD ONLY FILED CONFIRMATIONS THE DETAILS OF PAN AND IT RETURNS AND AFFIDAVITS ETC. OF THE INVESTORS WHICH DO NOT PROV E THE GENUINENESS OF THE TRANSACTION OF SHARE APPLICATION MONEY. ACCORDINGLY THE AO HAD FORMED THE OPINION THAT THE APPELLANT HAD NOT DISCHARGED ITS ONUS OF ESTABLISHING THE IDE NTITY AND GENUINENESS OF THE TRANSACTIONS. IN THE ASSESSMENT ORDERS THE AO HAS ALSO OBSERVED THAT INFORMATION CALLED FROM T HE PARTIES TO WHOM NOTICE U/S 133(6) WERE ISSUED DID NOT COME AS TWO PARTIES REFUSED TO TAKE THE NOTICES IN ONE CASE SH OP WAS FOUND CLOSED AND IN TWO CASES POSTAL AUTHORITIES PUT THE REMARK `NO SUCH PERSON. IT IS NOTED THAT THE AO HAS STOPPED HIS ENQUIRIES AT THIS STAGE AND NO ATTEMPT WAS MADE THROUGH THE A OS ETC. OF THE CONCERNED COMPANIES AS THE INCOME TAX DETAILS O F ALL THE 5 COMPANIES WERE MADE AVAILABLE BY THE APPELLANT TO T HE AO. IT IS FURTHER NOTED THAT THOUGH THE AO HAS RELIED HEAV ILY ON THE STATEMENT OF SH. MAHESH GARG HOWEVER IT APPEARS T HAT NO OPPORTUNITY OF CROSS EXAMINATION WAS PROVIDED TO TH E APPELLANT TO CONFRONT THE ALLEGATION MADE BY SH. MAHESH GARG IN SPITE OF SPECIFIC REQUEST OF THE APPELLANT. IN ADDITION TO THAT THE AO HAS NOT SPECIFICALLY BROUGHT ON RECORD ANY SPECIFIC STATEMENT OF SH. MAHESH GARG AND HE HAS SIMPLY RELIED ON HIS STA TEMENT RECORDED BY INVESTIGATION WING TO ESTABLISH THAT TH E AMOUNT RECEIVED BY THE APPELLANT WAS ACTUALLY RECEIVED AS AN ACCOMMODATION ENTRIES. THE ISSUE OF SHARE APPLICATION MONEY VIS--VIS THE APPLICABILITY OF SEC. 68 ON THE DEPOSITS RECEIVED F OR SHARE 19 APPLICATION HAS RECENTLY BEEN REVIEWED BY THE JURIS DICTIONAL HIGH COURT DELHI AND THE APEX COURT. IN VIEW OF TH E RECENT DECISION IN THE CASE OF CIT VS. VALUE CAPITAL (SUPR A) THE AO HAS TO SUBSTANTIATE THAT THE UNDISCLOSED INCOME OF THE APPELLANT HAS BEEN RECEIVED THROUGH THE SHARE CAPITAL. IN TH E CASE OF CIT VS. LOVELY EXPORTS (SUPRA) AS WELL AS IN CASE OF C IT VS. DIVINE LEASING (SUPRA) AND OTHERS TOO IT IS HELD THAT THE ADDITION OF SHARE CAPITAL SHOULD BE MADE IN THE HANDS OF SHAREH OLDERS ONLY. FROM THE ASSESSMENT ORDER IT IS ALSO SEEN THAT TH E AO HAS NOT DENIED THAT THESE COMPANIES HAVE OBTAINED P ANS FROM THE DEPARTMENT AND ARE FILING THEIR INCOME TAX RETU RN. DURING THE COURSE OF APPELLATE PROCEEDINGS THE AR OF THE APPELLANT HAD FURTHER EMPHASIZED THAT WITH REGARD TO ALL THE 5 COMPANIES FROM WHOM THE AMOUNTS WERE RECEIVED VARIOUS DETAIL S PERTAINING TO THESE PARTIES TO ESTABLISH THE IDENTI TY CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION HAD ALREADY BEEN SUBMITTED BEFORE THE AO WHICH INCLUDED PAN CONFIRMATIONS LETTERS COPY OF IT RETURNS DETAILS OF BANK ACCOUNTS ETC. THESE DOCUMENTS HAVE NOT BEEN CONTRO VERTED BY THE AO. IT WAS ALSO VEHEMENTLY CONTENDED BY THE LD . AR THAT ON THE ISSUE OF ADDITIONS U/S 68 RELATED TO DEPOSITS O F SHARE CAPITAL THE APEX COURT HAS LAID DOWN IN THE CASE OF CIT VS. LOVELY EXPORT (SUPRA) THAT EVEN IF THE AMOUNTS ARE FOUND T O BE BOGUS THE SHARE MONEY CANNOT BE REGARDED AS UNDISCLOSED I NCOME OF THE COMPANY U/S 68 OF THE I.T. ACT. FURTHER IN TH E CASE OF CIT VS. DIVINE LEASING IT HAS BEEN HELD BY THE JURISDI CTIONAL HIGH COURT OF DELHI THAT ONCE THE IDENTITY OF SUBSCRIBER HAS BEEN ESTABLISHED AND DETAILS REGARDING PAN IDENTITY HAS BEEN SUBMITTED TO THE DEPARTMENT JUST BECAUSE THE SUBSC RIBER DOES NOT RESPOND TO ITS NOTICES ADVERSE INFERENCE CANNO T BE DRAWN BY THE DEPARTMENT AND THE AO IS DUTY BOUND TO INVES TIGATE THE CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION S. IN THE CASE OF CIT VS. VALUE CAPITAL SERVICES PVT. LTD. (S UPRA) TOO IT HAS BEEN HELD BY THE DELHI HIGH COURT THAT THE ADDI TIONAL BURDEN WAS ON REVENUE TO SHOW THAT THE SHARE APPLIC ANT DID NOT HAVE THE MEANS TO MAKE SUCH INVESTMENTS AND THE AMO UNTS EMANATED FROM THE COFFERS OF THE ASSESSEE. I FIND FORCE IN THE ARGUMENTS OF THE LD. AR AS IT IS EVIDENT THAT IN TH E LIGHT OF THESE JUDGMENTS IN THE PRESENT CASE IT IS APPARENT THAT THE AO HAS NOT 20 SHIFTED THE ONUS OF PROVING THE GENUINENESS OF THE TRANSACTIONS ON THE APPELLANT. THE VARIOUS SUPPORTING DOCUMENTS FILED BY THE APPELLANT HAVE NOT BEEN CONTROVERTED BY THE AO. THERE IS NO SPECIFIC EVIDENCE TO ESTABLISH THAT THE APPELLAN T WAS HAVING ANY FINANCIAL IRREGULARITIES IN HIS ACCOUNTS OR BAN K STATEMENTS. THEREFORE THE CONCLUSION OF THE AO WHICH IS BASED MERELY ON SUSPICION AND WITHOUT MAKING ANY DEEPER INVESTIGATI ON DOES NOT APPEAR JUSTIFIED. THE AO HAD SUFFICIENT DATA AND I NFORMATION REGARDING THE ASSESSING OFFICERS OF THE FIVE COMPAN IES FROM WHOM THE SHARE CAPITAL HAD BEEN RECEIVED BY THE APP ELLANT THEREFORE HE WAS REQUIRED TO MAKE FURTHER INVESTIG ATIONS BEFORE ARRIVING AT AN ADVERSE INFERENCE. HOWEVER NO SUCH FATS OR ADVERSE DOCUMENTS HAVE BEEN BROUGHT ON RECORD BY TH E AO. IN ADDITION TO THIS FACT IN VIEW OF THE VARIOUS JUDIC IAL PRONOUNCEMENTS DISCUSSED ABOVE TOO THE ADDITIONS OF RS.40 LACS MADE BY THE AO DOES NOT APPEAR TO BE JUSTIFIED BECAUSE THE APPELLANT HAD DISCHARGED ITS INITIAL BURDEN OF ESTABLISHING THE IDENTITY OF THE PARTIES AND ALSO SUBMITTED DOCU MENTS WHICH PRIMA FACIE PROVE THE TRANSACTIONS. THE AO CANNOT SUMMARILY REJECT ALL THE DOCUMENTS WITHOUT DEEPER INVESTIGATI ON WHICH BRING OUT SPECIFIC MATERIAL WHICH COULD INDICATE TH AT AMOUNTS WERE NOT GENUINE DEPOSITS RECEIVED TOWARDS SHARE CA PITAL. IN THE LIGHT OF THESE OBSERVATIONS THE ADDITION OF RS .40 LACS MADE BY THE AO ON ACCOUNT OF SHARE MONEY RECEIVED FROM T HE FIVE COMPANIES DESERVE TO BE DELETED. ACCORDINGLY THIS GROUND OF APPEAL IS ALLOWED. 9. HENCE THE DEPARTMENT IS IN APPEAL BEFORE US. 10. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUB MITTED THAT SINCE THE ASSESSEE FAILED TO PRODUCE THE DIRECTOR OR PRINCIPA L OFFICER OF SHARE-APPLICANT COMPANIES IN QUESTION AND IT HAS BEEN REPORTED BY I NVESTIGATION WING THAT THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSE E ARE IN THE NATURE OF ACCOMMODATION ENTRY PROVIDED BY ENTRY PROVIDER SHRI MAHESH GARG THE A.O. IS JUSTIFIED IN TREATING THE SHARE-APPLICATION MONEY IN QUESTION AS 21 UNACCOUNTED MONEY OF THE ASSESSEE COMPANY. HE THE REFORE SUPPORTED THE AOS ORDER. 11. THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMIT TED THAT ONCE ENTIRE SUM OF RS.40 LAKH WAS RECEIVED AS SHARE CAPITAL MON EY FROM FIVE INCOME-TAX ASSESSEES BY ACCOUNT PAYEE CHEQUES AND NECESSARY DE TAILS AND EVIDENCES IN RESPECT OF THE AFORESAID SHAREHOLDERS SUCH AS COPY OF CERTIFICATE OF INCORPORATION COPY OF PERMANENT ACCOUNT NUMBER CO PY OF APPLICATION FOR SHARES COPY OF CONFIRMATION COPY OF INCOME-TAX RE TURN FOR VARIOUS YEARS COPY OF BANK STATEMENT AND AFFIDAVIT FROM THE CONCE RNED DIRECTOR HAVE BEEN FURNISHED WHICH HAS NOT BEEN FOUND TO BE FALSE AND WHICH AHS NOT BEEN REBUTTED BY THE AO THE ADDITION HAS BEEN RIGHTLY D ELETED BY THE LEARNED CIT(A). HE FURTHER SUBMITTED THAT THE AO HAS NOT D ENIED THE FACT THAT THE SHARE APPLICANTS HAD VALID PERMANENT ACCOUNT NO. OB TAINED FROM THE DEPARTMENT AND HAD FILED THEIR INCOME-TAX RETURNS AND THE AO HAS NOT BEEN ABLE TO BRING ANY MATERIAL TO CONTROVERT VARIOUS DE TAILS PERTAINING TO THE SHARE APPLICANTS WHICH HAS BEEN SUBMITTED BY THE A SSESSEE TO ESTABLISH THE IDENTITY CREDITWORTHINESS AND GENUINENESS OF THE T RANSACTION. HE FURTHER SUBMITTED THAT MERE BECAUSE SOME DIRECTOR OR PRINCI PAL OFFICER OF THE SHARE APPLICANT COMPANY DID NOT RESPOND TO THE NOTICES IS SUED BY THE AO THAT BY 22 ITSELF IS NOT SUFFICIENT TO REJECT THE ASSESSEES C ASE. IN THIS CONNECTION THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE FO LLOWING DECISIONS:- (1) CIT VS. LOVELY EXPORT PVT. LTD. 216 CTR 195. (2) M/S. VALUE CAPITAL SERVICES 307 ITR 334 (DEL). (3) CIT VS. M/S. ELECTRO POLYCHEM LTD. 217 CTR 371 (MA D.). 11.1 THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER S UBMITTED THAT THE ASSESSEE WAS NOT PROVIDED ANY OPPORTUNITY TO CROSS EXAMINE SHRI MAHESH GARG ON THE BASIS OF WHOSE STATEMENT A REPORT HAS BEEN SUBMITTED BY THE INVESTIGATION WING TO THE AO AND THEREFORE THE R EPORT OF INVESTIGATION WING HAS NO EVIDENTIARY VALUE. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO RELIED UPON THE RECENT DECISIONS OF THE HONBLE DEL HI HIGH COURT WHICH SHALL BE REFERRED TO HEREINAFTER IN THIS ORDER. 12. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF BOT H THE PARTIES AND HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW. WE HAVE CAREFULLY PERUSED THE MATERIAL ON RECORD. SECTION 68 OF THE ACT WITH REFERENCE TO THE SHARE APPLICATION MONEY HAS BEEN I NTERPRETED BY THE HONBLE DELHI HIGH COURT IN NUMBER OF CASES. 13. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. M/S. DWARKADHISH INVESTMENT (P) LTD. IN ITA 911/2010 DEC IDED ON 2 ND AUGUST 2010 HELD AS UNDER:- 23 6. IN OUR OPINION AS SECTION 68 OF THE ACT 1961 HAS BEEN INTERPRETED AS RECENTLY AS 208 BY A DIVISION BENCH OF THIS COURT IN DIVINE LEASING & FINANCE LTD. (SUPRA) AFTER CONS IDERING ALL THE RELEVANT JUDGMENTS WE DO NOT HAVE TO RECONSIDE R ALL THE JUDGMENTS REFERRED TO BY MR. SAHNI WHICH ARE PRIOR IN DATE AND TIME TO THE AFORESAID JUDGMENT. IN FACT A SPECIAL LEAVE PETITION FILED AGAINST THE SAID DIVISION BENCH JUDG MENT WAS DISMISSED BY THE SUPREME COURT BY WAY OF A SPEAKING ORDER IN COMMISSIONER OF INCOME TAX VS. LOVELY EXPORTS (P) L TD. 216 CTR 195 (SC). THE SUPREME COURT IN LOVELY EXPORTS (P) LTD. (SUPRA) HAS HELD 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 7. CONSEQUENTLY THE DOCTRINE OF MERGER WOULD APPLY AND THE JUDGMENT OF THE SUPREME COURT IN LOVELY EXPORTS (P) LTD. (SUPRA) WOULD COVER THE FIELD WITH REGARD TO INTERP RETATION OF SECTION 68 OF THE ACT 1961. 8. IN ANY MATTER THE ONUS OF PROOF IS NOT A STATIC ONE. THOUGH IN SECTION 68 PROCEEDINGS THE INITIAL BURDE N OF PROOF LIES ON THE ASSESSEE YET ONCE HE PROVES THE IDENTIT Y OF THE CREDITORS/SHARE APPLICANTS BY EITHER FURNISHING THE IR PAN NUMBER OR INCOME TAX ASSESSMENT NUMBER AND SHOWS TH E GENUINENESS OF TRANSACTION BY SHOWING MONEY IN HIS BOOKS EITHER BY ACCOUNT PAYEE CHEQUE OR BY DRAFT OR BY AN Y OTHER MODE THEN THE ONUS OF PROOF WOULD SHIFT TO THE REV ENUE. JUST BECAUSE THE CREDITORS/SHARE APPLICANTS COULD NOT BE FOUND AT THE ADDRESS GIVEN IT WOULD NOT GIVE THE REVENUE THE RI GHT TO INVOKE 24 SECTION 68. ONE MUST NOT LOSE SIGHT OF THE FACT TH AT IT IS THE REVENUE WHICH HAS ALL THE POWER AND WHEREWITHAL TO TRACE ANY PERSON. MOREOVER IT IS SETTLED LAW THAT THE ASSES SEE NEED NOT TO PROVE THE `SOURCE OF SOURCE. FROM THE AFORESAID DECISION OF THE HONBLE DELHI HI GH COURT IN THE CASE OF M/S. DWARKADHISH INVESTMENT (P) LTD. (SUPRA) IT IS CLEAR TO US THAT INITIAL BURDEN TO PROVE THE IDENTITY OF THE CREDITORS OR SH ARE APPLICANTS CAN BE DISCHARGED BY THE ASSESSEE BY EITHER FURNISHING THE IR PAN NUMBER OR INCOME-TAX ASSESSMENT NUMBER. IN THE PRESENT CASE IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS FURNISHED PERMANENT ACCOUNT NUMBER OR COPY OF INCOME-TAX RETURNS OF ALL THE SHARE APPLICANTS AND THE SAME HA S NOT BEEN FOUND TO BE FALSE OR UNTRUE BY THE ASSESSING OFFICER. THE ASSE SSEE HAS ALSO PRODUCED THE CERTIFICATE OF INCORPORATION OF COMPANY UNDER THE C OMPANIES ACT ALONG WITH THEIR IDENTIFICATION NUMBER. ALL THESE DOCUMENTS W ERE FURNISHED BEFORE THE ASSESSING OFFICER AND THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL TO THE CONTRARY. THE AO HAS MERELY STATED THAT THE AS SESSEE HAS NOT BEEN ABLE TO PROVE THE IDENTITY OF THE CREDITORS OR SHARE APP LICANTS BECAUSE THEY WERE NOT FOUND AVAILABLE AT THE GIVEN ADDRESSES BUT THAT BY ITSELF IS NOT SUFFICIENT TO CONTROVERT THE VARIOUS DOCUMENTS OR PAPERS FILED BY THE ASSESSEE SUCH AS PERMANENT ACCOUNT NO. COPY OF INCOME-TAX RETURN C OPY OF CERTIFICATION OF INCORPORATION AND OTHER DETAILS. THE ASSESSEE HAS ALSO PRODUCED THE BANK 25 DETAILS OF THE SHARE APPLICANTS WHICH GOES TO INDIC ATE AND ESTABLISH THAT ALL THE SHARE APPLICANTS WERE EXISTING ACCOUNT HOLDERS AND WERE OPERATING THE BANK ACCOUNT AS PER NORMS FIXED BY THE BANK. THERE FORE IDENTITY OF THE CREDITORS CAN SAID TO HAVE BEEN PROVED BY THE ASSES SEE AND DEPARTMENT HAS NOT BEEN ABLE TO REBUT THE SAME. IN THAT CASE BEFO RE THE HONBLE HIGH COURT IT HAS ALSO BEEN HELD THAT GENUINENESS OF THE TRANS ACTIONS CAN BE PROVED BY SHOWING THAT THE MONEY IN THE BOOKS HAD BEEN RECEIV ED EITHER BY ACCOUNT PAYEE CHEQUE OR BY DRAFT OR BY ANY OTHER MODE WHIC H CONDITION IS SATISFIED IN THE PRESENT CASE BEFORE US. IT IS NOT IN DISPUT E THAT THE ASSESSEE HAS RECEIVED THE SHARE APPLICATION MONEY BY ACCOUNT PAY EE CHEQUE AND DETAILS OF THE BANK ACCOUNT OF SHARE APPLICANTS AS WELL AS OF THE ASSESSEE HAVE BEEN DULY FURNISHED. THEREFORE IN THE LIGHT OF THE ABO VE-REFERRED DECISION OF HONBLE DELHI HIGH COURT WE HOLD THAT THE ASSESSEE HAS BEEN ABLE TO DISCHARGE ITS INITIAL BURDEN TO PROVE THE IDENTITY OF THE CREDITORS AND GENUINENESS OF THE TRANSACTION. THE SAME CANNOT BE REJECTED MERELY BECAUSE THE CREDITORS OR SHARE APPLICANTS COULD NOT BE FOUN D AT THE ADDRESS GIVEN AND IT WOULD NOT GIVE THE REVENUE THE RIGHT TO INVOKE S EC. 68 OF THE ACT. THEREFORE IN THE LIGHT OF THE PROPOSITION LAID DOW N BY THE HONBLE DELHI HIGH COURT IN THIS CASE THE ORDER OF THE CIT(A) IN DELETING THE ADDITION CANNOT BE SAID TO BE IMPROPER AND UNJUSTIFIED. 26 14. SIMILARLY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. VICTOR ELECTRODES LTD. (2010) 42 DTR (DEL) 152 HELD AS UN DER:- 6. THE SPECIAL LEAVE PETITION FILED BY THE REVENUE AGAINST HE ABOVE-REFERRED DECISION OF THIS COURT WAS DISMISSED BY THE SUPREME COURT VIDE ITS DECISION IN CIT VS. LOVELY E XPORTS (P) LTD. (2008) 216 CTR (SC) 195 : (2008) 6 DTR (SC) 30 8 WHICH INTER ALIA READS AS UNDER:- CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME UNDER S. 68 OF IT ACT 1961? WE FIND NO IN 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 NO INFIRMITY IS FOUND WITH THE IMPUGNED JUDGMENT. 7. IT HAS NOT BEEN DISPUTED BEFORE US THAT THE SHAR E APPLICATION MONEY WAS RECEIVED BY THE ASSESSEE COMP ANY BY WAY OF ACCOUNT PAYEE CHEQUES THROUGH NORMAL BANKIN G CHANNELS. IT IS NOT THE CASE OF THE REVENUE THAT T HE PAYMENT OF SHARE APPLICATION MONEY WAS NOT MADE FROM THE BANK ACCOUNT OF THE APPLICANT COMPANIES. ADMITTEDLY COPIES OF APPLICATION FOR ALLOTMENT OF SHARES WERE ALSO PROVIDED TO THE A O. IT IS NOT THE CASE OF THE REVENUE THAT THE SHARE APPLICATIONS WERE NOT SIGNED ON BEHALF OF THE APPLICANT COMPANIES AND WER E FORGED DOCUMENTS. IT IS ALSO NOT THE CASE OF THE REVENUE THAT THE SHARES WERE NOT ACTUALLY ALLOTTED TO THE COMPANIES. 8. THE ASSESSEE FILED COPIES OF RESOLUTIONS PASSED BY THE BOARD OF DIRECTORS OF APPLICANT COMPANIES BESIDES THEIR BANK STATEMENTS AND IT RETURNS. THE ADDRESSES OF THE AP PLICANT COMPANIES ARE RECORDED IN THESE DOCUMENTS. IT IS N OT THE CASE 27 OF THE REVENUE THAT THE COPIES OF BOARD RESOLUTIONS IT RETURNS AND BANK STATEMENTS WERE NOT GENUINE DOCUMENTS. TH E AO DID NOT MAKE ANY VERIFICATION IN THIS REGARD EITHER FRO M THE INTERNAL RECORD OF THE DEPARTMENT OR FROM THE CONCERNED BANK S. IF HE SO WANTED HE COULD HAVE CALLED FOR THE IT RETURNS OF THE SHARE APPLICANTS TO ASCERTAIN WHETHER THE INVESTMENT MADE IN THE ASSESSEE COMPANY WAS REFLECTED IN THEIR BALANCE SHE ETS OR NOT. NOTHING PREVENTED THE AO FROM SUMMONING THE RECORD OF THE BANKS ON WHICH CHEQUES ISSUED BY THE APPLICANT COMP ANIES WERE DRAWN. NO SUCH COURSE WAS HOWEVER ADOPTED B Y HIM. 9. THERE WAS NO LEGAL OBLIGATION ON THE ASSESSEE TO PRODUCE SOME DIRECTOR OR OTHER REPRESENTATIVE OF THE APPLIC ANT COMPANIES BEFORE THE AO. THEREFORE FAILURE OF ASS ESSEE TO PRODUCE THEM COULD NOT BY ITSELF HAVE JUSTIFIED T HE ADDITIONS MADE BY THE AO WHEN THE ASSESSEE HAD FURNISHED DOC UMENTS ON THE BASIS OF WHICH THE AO IF HE SO WANTED COU LD HAVE SUMMONED THEM FOR VERIFICATION. NO ATTEMPT WAS MAD E BY THE AO TO SUMMON THE DIRECTORS OF THE APPLICANT COMPANI ES. THE ADDRESSES OF THESE COMPANIES MUST BE AVAILABLE ON T HE SHARE APPLICATIONS MEMORANDUM AND ARTICLES OF ASSOCIATIO N AND THEIR IT RETURNS. IF THE AO HAD ANY DOUBT ABOUT IDENTITY OF THE SHARE APPLICANTS HE COULD HAVE SUMMONED THE DIRECTORS OF THE APPLICANT COMPANIES. NO SUCH ATTEMPT WAS HOWEVER MADE BY HIM. THEREFORE THE CIT(A) AND THE TRIBUNAL IN OU R VIEW WERE JUSTIFIED IN HOLDING THAT THE IDENTITY OF SHARE APP LICANTS AND THE GENUINENESS OF THE TRANSACTIONS HAD BEEN ESTABLISHE D BY THE ASSESSEE. 15. IN THIS DECISION IN THE CASE OF CIT VS. VICTOR ELECTRODES LTD. (SUPRA) IT HAS BEEN CLEARLY LAID DOWN BY THE HONBLE DELHI HIGH COURT THAT THERE IS NO LEGAL OBLIGATION ON THE ASSESSEE TO PRODUCE SOME DIRECTOR OR REPRESENTATIVE OF THE APPLICANT COMPANIES BEFORE T HE AO AND THEREFORE FAILURE OF ASSESSEE TO PRODUCE THEM COULD NOT BY I TSELF HAVE JUSTIFIED THE 28 ADDITIONS MADE BY THE ASSESSING OFFICER WHEN THE A SSESSEE HAD FURNISHED DOCUMENTS ON THE BASIS OF WHICH THE AO IF HE SO WANTED COULD HAVE SUMMONED THEM FOR VERIFICATION. SIMILARLY IN THE P RESENT CASE MERE BECAUSE DIRECTORS OF SHARE APPLICANT COMPANIES WERE NOT FOUND AVAILABLE AT THE ADDRESSES GIVEN THAT BY ITSELF IS NOT SUFFICIE NT FOR THE AO TO REJECT ASSESSEES CASE WHEN THE ASSESSEE HAS FURNISHED ALL DOCUMENTS RELATING TO SHARE APPLICANTS SUCH AS THEIR PERMANENT ACCOUNT N O. DETAILS OF INCOME-TAX ASSESSMENT REGISTRATION OF COMPANIES UNDER COMPANI ES ACT AND BANK DETAILS. THEREFORE THIS CASE IS ALSO SQUARELY APP LICABLE TO THE PRESENT CASE IN UPHOLDING THE ORDER OF THE CIT(A). 16. FURTHER THE HONBLE DELHI HIGH COURT IN THE CA SE OF CIT VS. WINSTRAL PETROCHEMICALS PVT. LTD. IN ITA 592/2010 IN THEIR DECISION DELIVERED ON 12.05.2010 HELD AS UNDER:- 7. IT HAS NOT BEEN DISPUTED BEFORE US THAT TH E SHARE APPLICATION MONEY WAS RECEIVED BY THE ASSESSEE COMP ANY BY WAY OF ACCOUNT PAYEE CHEQUES THROUGH NORMAL BANKIN G CHANNELS. IT IS NOT THE CASE OF THE REVENUE THAT T HE PAYMENT OF SHARE APPLICATION MONEY WAS NOT MADE FROM THE BANK ACCOUNT OF THE APPLICANT COMPANIES. ADMITTEDLY COPIES OF APPLICATION FOR ALLOTMENT OF SHARES WERE ALSO PROVIDED TO THE A SSESSING OFFICER. IT IS NOT THE CASE OF THE REVENUE THAT TH E SHARE APPLICATIONS WERE NOT SIGNED ON BEHALF OF THE APPLI CANT COMPANIES AND WERE FORGED DOCUMENTS. IT IS ALSO NO T THE CASE OF THE REVENUE THAT THE SHARES WERE NOT ACTUALLY AL LOTTED TO THE COMPANIES. THEREFORE THE COMMISSIONER OF INCOME TA X (APPEALS) AND THE INCOME TAX APPELLATE TRIBUNAL IN OUR VIEW 29 WERE JUSTIFIED IN HOLDING THAT THE GENUINENESS OF T HE TRANSACTIONS HAD BEEN DULY ESTABLISHED BY THE ASSES SEE. 8. AS REGARDS IDENTITY OF THE SUBSCRIBERS. THE ASSE SSEE FILED COPIES OF CERTIFICATIONS OF INCORPORATION PAN CARD S PAN DETAILS AND COMPANY DETAILS DOWNLOADED FROM THE SI TE OF DEPARTMENT OF COMPANY AFFAIRS BESIDES WRITTEN CONFI RMATION FROM THE APPLICANTS. IT IS NOT THE CASE OF THE REVE NUE THAT THE COPIES OF CERTIFICATES OF INCORPORATION PAN CARDS PAN DETAILS OR COMPANY DETAILS SUBMITTED BY THE ASSESSEE WERE F ORGED DOCUMENTS. IN FACT THE ASSESSING OFFICER DID NOT EVEN MAKE AN ATTEMPT TO VERIFY THE GENUINENESS OF THESE DOCUMENT S BY SUMMONING THE RECORD OF REGISTRAR OF COMPANIES OR DEPARTMENT OF COMPANY AFFAIRS. IF HE ENTERTAINED A NY DOUBT ABOUT THE GENUINENESS OF THESE DOCUMENTS NOTHING P REVENTED HIM FROM SUMMONING THE RECORD FROM THESE AUTHORITIE S. IF THE ASSESSING OFFICER SO DESIRED THE GENUINENESS OF TH E PAN CARDS AND PAN DETAILS COULD EASILY HAVE BEEN VERIFIED BY HIM FROM THE RECORD AVAILABLE WITH THE DEPARTMENT. THE ASSE SSEE COMPANY ALSO FURNISHED WRITTEN CONFIRMATION FROM TH E APPLICANT COMPANIES. ALL THE SHARE APPLICANTS WERE DULY SERV ED WITH THE NOTICES UNDER SECTION 133(6) OF THE ACT. IN THESE CIRCUMSTANCES THE FINDING OF COMMISSIONER OF INCOM E TAX (APPEALS) AND INCOME TAX APPELLATE TRIBUNAL THAT TH E IDENTITY OF THE SUBSCRIBERS STOOD DULY ESTABLISHED FROM THE DOCUMENTS PRODUCED BY THE ASSESSEE CANNOT BE SAID TO BE PERV ERSE AND DOES NOT CALL FOR INTERFERENCE BY THIS COURT. 9. THE FINDING OF FACT RECORDED BY THE TRIBUNAL WH ICH IS THE FINAL FACT FINDING AUTHORITY CANNOT BE SAID TO BE PERVERSE MERELY BECAUSE SOME OF THE APPLICANTS HAD A COMMON ADDRESS AND THE INSPECTOR DEPUTED BY THE ASSESSING OFFICER TO MAKE FIELD INQUIRIES DID NOT FIND FIVE APPLICANTS FUNCTI ONING AT THE ADDRESSES PROVIDED TO HIM. THERE IS NO LEGAL BAR T O MORE THAN ONE COMPANIES BEING REGISTERED AT THE SAME ADDRESS. SINCE THE APPLICANT COMPANIES WERE DULY INCORPORATED WERE IS SUED PAN CARDS AND HAD BANK ACCOUNTS FROM WHICH MONEY WAS TRANSFERRED TO THE ASSESSEE BY WAY OF PAYEE ACCOUNT S CHEQUE 30 THEY CANNOT BE SAID TO BE NON-EXISTENCE EVEN IF TH EY AFTER SUBMITTING THE SHARE APPLICATION HAD CHANGED THEIR ADDRESS OR HAD STOPPED FUNCTIONING. 10. IN VIEW OF THE DECISION OF THIS COURT IN THE CA SE OF DIVINE LEASING & FINANCE LTD. (SUPRA) THE IDENTITY OF THE SHARE APPLICANTS WOULD BE ESTABLISHED IF DETAILS OF ADDRE SS OR PAN CARD ARE FURNISHED TO THE DEPARTMENT ALONG WITH THE COPIES OF SHAREHOLDERS REGISTER/ SHARE APPLICATION FORM SHAR E TRANSFER REGISTER ETC. IN THIS CASE SHARE APPLICATION FOR MS WERE DULY PRODUCED BEFORE THE ASSESSING OFFICER AND THIS IS N OT THE CASE OF THE REVENUE THAT THE ASSESSING OFFICER HAD ASKED TH E ASSESSEE TO PRODUCE SHAREHOLDERS REGISTER AND SHARE TRANSFE R REGISTERS BUT THE ASSESSEE COMPANY HAD FAILED TO D O SO. 11. THE ASSESSING OFFICER WAS NOT JUSTIFIED IN ADDI NG THE AMOUNT OF SHARE APPLICATION MONEY TO THE INCOME OF THE ASSESSEE MERELY BECAUSE THE APPLICANTS DID NOT RESP OND TO THE NOTICE SENT TO THEM. FURTHER THE ASSESSING OFFICER SO WANTED HE COULD HAVE FOUND OUT THE CORRECT ADDRESS OF THE APPLICANTS BUT ACCORDING TO THE REPORTS OF THE INSPECTOR WERE NOT FOUND FUNCTIONING AT THE ADDRESS GIVEN TO THE ASSESSING O FFICER BY SUMMONING THE DIRECTORS ETC. OF THOSE COMPANIES AND ASKING THEM TO FURNISH THE CURRENT ADDRESS OF THE COMPANY. THE NAMES AND ADDRESSES OF THE DIRECTORS IF NOT AVAILABLE WI TH THE ASSESSEE WOULD HAVE BEEN OBTAINED FROM THE OFFICE OF THE REGISTRAR OF COMPANIES OR FROM THE BANKS ON WHICH T HE CHEQUES WERE DRAWN. NO SUCH ATTEMPT HOWEVER WAS MA DE BY THE ASSESSING OFFICER. IN THESE CIRCUMSTANCES WE F OUND NO REASON TO DISTURB THE FINDING OF THE FACT RECORDED BY THE ITAT. 17. FURTHER THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS PVT. LTD. (SUPRA) HAS TAKEN A VIEW THAT EVE N IF THE SHARE CAPITAL MONEY IS RECEIVED BY THE ASSESSEE FROM ALLEGED BOGU S SHAREHOLDERS WHOSE NAMES ARE GIVEN TO THE AO THEN THE DEPARTMENT IS F REE TO PROCEED TO REOPEN 31 THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE COMP ANY. 18. FURTHER THE HONBLE DELHI HIGH COURT IN THE CA SE OF M/S. VALUE CAPITAL SERVICES (SUPRA) HAS HELD THAT BEFORE TREAT ING THE SHARE APPLICATION MONEY TO BE AN UNDISCLOSED INCOME OF THE ASSESSEE THE DEPARTMENT HAS TO PROVE AND ESTABLISH THAT THE UNACCOUNTED MONEY HAS ACTUALLY EMANATED FROM THE COFFERS OF THE ASSESSEE COMPANY. IN THE PRESEN T CASE BEFORE US THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO PROVE AND ESTABLISH THAT THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE IS ACTUA LLY UNACCOUNTED MONEY OF THE ASSESSEE COMPANY BY REBUTTING THE VARIOUS EV IDENCES AND DETAILS FILED BY THE ASSESSEE IN RESPECT OF THE SHARE APPLICANTS. 19. IN THE LIGHT OF THE DISCUSSION MADE ABOVE AND R ESPECTFULLY FOLLOWING THE AFORESAID DECISIONS OF THE HONBLE DELHI HIGH C OURT AND HONBLE SUPREME COURT AND IN THE LIGHT OF THE DETAILED REAS ONS GIVEN BY THE LEARNED CIT(A) AND IN THE LIGHT OF THE DETAILED ANALYSIS BY THE LEARNED CIT(A) OF VARIOUS EVIDENCES AND MATERIALS PRODUCED BY THE ASS ESSEE WE ARE INCLINED TO UPHOLD THE ORDER OF THE CIT(A) IN DELETING THE ADDI TION ON ACCOUNT OF SHARE CAPITAL RECEIVED BY THE ASSESSEE FROM VARIOUS SHARE APPLICANTS IN QUESTION DURING THE YEAR UNDER CONSIDERATION. THE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE IS THUS UPHELD. 32 20. NOW WE SHALL COME TO THE CROSS OBJECTION FILED BY THE ASSESSEE. 21. IN THE LIGHT OF OUR DECISION IN THE REVENUES A PPEAL WHEREBY THE ORDER OF THE CIT(A) IN DELETING THE ADDITION ON ACCOUNT O F SHARE CAPITAL MONEY HAS BEEN UPHELD THE ISSUE INVOLVED IN THE CROSS OBJECT ION RAISED BY THE ASSESSEE CHALLENGING THE VALIDITY OF INITIATION OF PROCEEDIN GS U/S 147 OF THE ACT HAS BECOME ACADEMIC AT THIS STAGE. WE THEREFORE NEED NOT TO DECIDE THE ISSUE INVOLVED IN THE CROSS OBJECTION AS IT HAS BECOME IN FRUCTUOUS. 22. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS TREATED TO BE IN FRUCTUOUS. 23. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 18 TH FEBRUARY 2010. SD/- SD/- (G.E. VEERABHADRAPPA) (C.L. SETHI) VICE PRESIDENT JUDICIAL MEMBER DATED: 18 TH FEBRUARY 2010. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR ITAT.