B.K. Silk Mills Pvt. Ltd., Surat v. Assistant Commissioner of Income Tax, Circle -1(1)(1), Surat

ITA 118/SRT/2018 | 2012-2013
Pronouncement Date: 31-08-2021 | Result: Allowed

Appeal Details

RSA Number 11825614 RSA 2018
Assessee PAN AAECB4896Q
Bench Surat
Appeal Number ITA 118/SRT/2018
Duration Of Justice 3 year(s) 6 month(s) 2 day(s)
Appellant B.K. Silk Mills Pvt. Ltd., Surat
Respondent Assistant Commissioner of Income Tax, Circle -1(1)(1), Surat
Appeal Type Income Tax Appeal
Pronouncement Date 31-08-2021
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 31-08-2021
Assessment Year 2012-2013
Appeal Filed On 26-02-2018
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH SURAT BEFORE SHRI PAWAN SINGH JM & DR. A. L. SAINI AM ./ITA NO.118/SRT/2018 ( [ [ / ASSESSMENT YEAR: (2012-13) (VIRTUAL COURT HEARING) B. K. SILK MILLS PVT. LTD. O-2797-2797 MILLENIUM TEXTILE MARKET RING ROAD SURAT 395002. VS. THE ACIT CIRCLE-1(1)(1) SURAT. ./ ./ PAN/GIR NO.: AAECB4896Q (ASSESSEE) (RESPONDENT) ASSESSEE BY : SHRI RASESH SHAH CA REVENUE BY : MS ANUPAMA SINGHLA SR. DR / DATE OF HEARING : 04/08/2021 /DATE OF PRONOUNCEMENT : 31/08/2021 / O R D E R PER DR. A. L. SAINI ACCOUNTANT MEMBER: CAPTIONED APPEAL FILED BY THE ASSESSEE PERTAINING TO ASSESSMENT YEAR (AY) 2012-13 IS DIRECTED AGAINST THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-1 SURAT [IN SHORT THE LD. CIT(A)] IN APPEAL NO. CAS/1/267/2015-16 DATED 04.12.2017 WHICH IN TURN ARISES OUT OF AN ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) DATED 31.03.2015. 2. GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS FOLLOWS: 1. ON FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE ACTION OF THE LEARNED AO IN TREATING THE SHARE CAPITAL INCLUDING PREMIUM OF RS.1 00 00 000/- AS RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AS UNEXPLAINED CASH CREDITS U/S 68 OF THE ACT BY CONSIDERING THE DATA AS PERTAINING TO SOME OTHER ASSESSEE WITHOUT APPRECIATING THAT THE ASSESSEE HAS NOT RECEIVED ANY SHARE CAPITAL EVER FROM THE SHAREHOLDERS WHOSE CREDITWORTHINESS HAS BEEN ADJUDICATED IN THE ASSESSMENT ORDER AND THE CIT(A) ORDER. PAGE | 2 ITA NO.118/SRT/2018 ASSESSMENT YEAR.2012-13 B K SILK MILLS PVT. LTD . HENCE SUCH IMPUGNED ADDITION AS MADE BY THE LEARNED AO AND CONFIRMED BY THE LEARNED CIT(A) BY RELYING ON THE DATA NOT AT ALL PERTAINING TO THE ASSESSEE IS NOT ONLY ABSOLUTELY ERRONEOUS INCORRECT AND BAD-IN-LAW BUT ALSO SHOWS NON APPLICATION OF MIND AND HENCE NEEDS TO BE SHUNNED OUT RIGHTLY. 2. WITHOUT PREJUDICE TO THE AFORESAID GROUND OF APPEAL NO.1 EVEN OTHERWISE ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE ACTION OF THE LEARNED AO IN TREATING THE SHARE CAPITAL INCLUDING PREMIUM OF RS.1 00 00 000/- AS RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AS UNEXPLAINED CASH CREDITS U/S 68 OF THE ACT WHICH IS ABSOLUTELY ERRONEOUS INCORRECT AND BAD-IN-LAW AND NEEDS TO BE DELETED. 3. THE ASSESSEE CRAVES TO ADD AMEND ALTER SUBSTITUTE MODIFY ANY OR ALL THE ABOVE GROUNDS OF APPEAL IF NECESSARY ON THE BASIS OF SUBMISSIONS TO BE MADE AT THE TIME OF PERSONAL HEARING. 3. BRIEF FACTS AS DISCERNABLE FROM THE ORDERS OF LOWER AUTHORITIES ARE THAT DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS IT WAS OBSERVED BY ASSESSING OFFICER THAT ASSESSEE COMPANY HAD RECEIVED SUBSTANTIAL AMOUNT OF SHARE APPLICATION MONEY DURING THE YEAR UNDER CONSIDERATION TOWARDS SHARE CAPITAL AND SHARE PREMIUM. THE FOLLOWING TABLE DEPICTS A BIRD'S EYE VIEW OF THE RECEIPTS BY THE ASSESSEE TOWARDS SHARE CAPITAL AND SHARE PREMIUM. NAME OF INVESTOR ADDRESS OF INVESTOR NO. OF SHARES FACE VALUE PER SHARE PREMIUM PER SHARE TOTAL FACE VALUE TOTAL SHARE PREMIUM TOTAL AMOUNT PAID N1RDESH TRADING PVT.LTD. 23A N.S.ROAD KOLKATA- 700001 (W.B) 20000 10 90 200000 1800000 2000000 RENU FINPROP PRIVATE LIMITED 2/L/TOLLYGUNGE CIRCULAR ROAD KO1KATA- 700033(WB) 35000 10 90 350000 3150000 3500000 SNEHA RESIDENCY PVT.LTD 31/33 RAMESHWAR MALIA LST BY LANE 2ND FLOOR HOWRAH KOLKATA- 711101(WB) 25000 10 90 250000 2250000 2500000 SUSHMITA DISTRIBUTERS PVT.LTD 23A NETAJI SUBHAS ROAD KOLKATA-700001 (W.B) 20000 10 90 200000 1800000 2000000 TOTAL 100000 1000000 9450000 10000000 THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 142(1) OF THE ACT ASKING THE ASSESSEE TO FURNISH DETAILS AND SUPPORTING MATERIAL TO ESTABLISH THE IDENTITY GENUINENESS OF SOURCE AND CREDITWORTHINESS IN RESPECT OF ADDITION TO SHARE CAPITAL PAGE | 3 ITA NO.118/SRT/2018 ASSESSMENT YEAR.2012-13 B K SILK MILLS PVT. LTD . AND RECEIPT OF SHARE PREMIUM DURING THE YEAR. THE ASSESSING OFFICER ALSO ISSUED NOTICES U/S 133(6) OF THE ACT TO THE INVESTORS WHO HAD PAID SHARE APPLICATION MONEY TO THE ASSESSEE COMPANY TOWARDS SHARE CAPITAL AND SHARE PREMIUM. DETAILS RELATING TO SERVICE OF NOTICES U/S 133(6) OF THE ACT AND GIST OF RESPONSES FROM THE SAID INVESTORS ARE DEPICTED IN THE FOLLOWING TABLE: NAME OF INVESTOR WHETHER NOTICE U/S 133(6) SERVED OR NOT WHETHER REPLY TO NOTICE U/S 133(6) RECEIVED OR NOT GIST OF REPLY RECEIVED U/S 133(6) HITESH B.GAJERA SERVED YES PRAVIN D.THUMMAR SERVED YES MANISH D.THUMMAR SERVED YES RACHANABEN A. DHAMI SERVED YES RANCHHODBHAI K. DHAMI SERVED YES NIRDESH TRADING PVT. LTD. SERVED YES RENJJ FINPROP PRIVATE LIMITED SERVED YES SNEHA RESIDENCY PVT. LTD SERVED YES SUSHMITA DISTRIBUTERS PVT. LTD SERVED YES 4. IN ORDER TO VERIFY THE IDENTITY CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTIONS AN ENQUIRY WAS GOT CONDUCTED BY THE AO IN RESPECT OF THE ABOVE FOUR INVESTOR COMPANIES. THE AO FOUND ON MAKING BANK INQUIRIES RELATED TO THE INVESTOR COMPANIES THAT CASH DEPOSITS HAVE BEEN MADE AT THE THIRD LAYER OF BANKING TRANSACTIONS AND ALSO TRANSFER OF FUNDS HAVE BEEN MADE BY KNOWN ENTRY OPERATORS RUNNING VARIOUS SHELL COMPANIES. THE INQUIRIES REVEALED THAT THESE INVESTORS COMPANIES WERE NOT HAVING ANY INCOME /OR EXTREMELY LOW INCOME AND THEREFORE DID NOT HAVE CREDITWORTHINESS TO MAKE THE INVESTMENT. THE ASSESSEE COMPANY WAS DIRECTED IN THE SHOW CAUSE NOTICE TO PRODUCE THE INVESTORS BEFORE THE AO ON 09.03.2015 FOR EXAMINATION BUT NO COMPLIANCE WAS MADE AND THE INVESTORS WERE NOT PRODUCED. THE AO HAD PROVIDED SEVERAL OPPORTUNITIES TO THE ASSESSEE COMPANY FOR PRODUCING THE INVESTORS BUT NO COMPLIANCE WAS MADE. THE AO ON THE ANALYSIS OF THE BANK ACCOUNT FOUND THAT THESE INVESTOR COMPANIES WERE NOT CARRYING OUT ANY ACTUAL BUSINESS ACTIVITY. THE AO HELD THAT THE AMOUNT OF INVESTMENT OF RS.1 00 00 000/- IN FORM OF SHARE CAPITAL/SHARE PREMIUM WAS IN FORM OF CASH CREDIT AND THEREFORE AO MADE AN ADDITION OF RS.1 00 00 000/-U/S 68 OF THE ACT. PAGE | 4 ITA NO.118/SRT/2018 ASSESSMENT YEAR.2012-13 B K SILK MILLS PVT. LTD . 5. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. 6. SHRI RASESH SHAH LEARNED COUNSEL FOR THE ASSESSEE BEGINS BY POINTING OUT THAT ALL THE TRANSACTIONS WERE DULY SUPPORTED BY SHARE APPLICATION FORM ACKNOWLEDGEMENT OF RETURN OF INCOME AUDITED FINANCIAL STATEMENTS BANK STATEMENTS BALANCE SHEET AND PROFIT AND LOSS ACCOUNT MEMORANDUM OF ASSOCIATION (MOA) AND ARTICLES OF ASSOCIATION (AOA) OF THE SHARE APPLICANTS. IT WAS ALSO CONTENDED BY LD COUNSEL THAT THE TRANSACTIONS HAVE BEEN MADE THROUGH PROPER BANKING CHANNELS AND THE INVESTOR COMPANIES ARE REGISTERED WITH REGISTRAR OF COMPANIES (ROC) AND ARE ACTIVE COMPANIES AS PER ROC RECORDS. THE LD COUNSEL RELIED ON SEVERAL CASE LAWS IN SUPPORT OF HIS CONTENTION REGARDING THE GENUINENESS OF THE SHARE CAPITAL AND PRAYED THE BENCH THAT ADDITION MADE BY THE ASSESSING OFFICER MAY BE DELETED. 7. ON THE OTHER HAND MS ANUPAMA SINGHLA LEARNED DR FOR THE REVENUE VEHEMENTLY SUBMITTED THAT AMOUNTS CLAIMED TO BE RECEIVED BY THE ASSESSEE COMPANY DO NOT IN ANY WAY APPEAR TO BE GENUINE SHARE CAPITAL. THEY ARE NOTHING BUT ARRANGED AFFAIRS BEING PRE-ORDAINED SERIES OF TRANSACTIONS AND TAX EVASION DEVICE WHERE MONEY LAUNDERING TRANSACTIONS HAVE BEEN CAMOUFLAGED AS SHARE CAPITAL. HENCE NO CREDENCE CAN BE PLACED ON THE COPIES OF VARIOUS DOCUMENTS FILED BY ASSESSEE COMPANY TO SUPPORT SUCH CLAIM OF SHARE CAPITAL CONTRIBUTION. THEREFORE SHE PRAYED THE BENCH THAT ADDITION MADE BY THE ASSESSING OFFICER MUST BE SUSTAINED. 8. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE SUBMISSION PUT FORTH ON BEHALF OF THE ASSESSEE ALONG WITH THE DOCUMENTS FURNISHED AND THE CASE LAWS RELIED UPON AND PERUSED THE FACT OF THE CASE INCLUDING THE FINDINGS OF THE LD CIT(A) AND OTHER MATERIALS BROUGHT ON RECORD. THE MAIN ISSUE BEFORE US PERTAINS TO MAKING ADDITION OF RS.1 00 00 000/- ON ACCOUNT OF SHARE CAPITAL AND SHARE PREMIUM U/S 68 OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE PAGE | 5 ITA NO.118/SRT/2018 ASSESSMENT YEAR.2012-13 B K SILK MILLS PVT. LTD . AO FOUND THAT ASSESSEE HAD RECEIVED A SUM OF RS.10 00 000/- TOWARDS SHARE CAPITAL AND RS.90 00 000/- TOWARDS SHARE PREMIUM TOTALING RS.1 00 00 000/- FROM THE FOLLOWING FOUR COMPANIES DURING THE YEAR UNDER CONSIDERATION. 1. NIRDESH TRADING PVT.LTD. RS. 20 00 000/- 2. RENU FINPROP PVT.LTD RS. 35 00 000/- 3. SNEHA RESIDENCY PVT. LTD. RS. 25 00 000/- 4. SUSHMITA DISTRIBUTERS PVT. LTD. RS. 20 00 000/- TOTAL RS. 1 00 00 000 /- THE SHARE PREMIUM OF RS.90/- HAS BEEN RECEIVED FROM FOUR COMPANIES BASED AT KOLKATA. THE ASSESSING OFFICER MADE ADDITION BECAUSE ASSESSEE COMPANY HAS FAILED TO PROVE THE IDENTITY CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTIONS. ON APPEAL LD CIT(A) HAS CONFIRMED THE ACTION OF THE ASSESSING OFFICER AND THEREFORE NOW THE ASSESSEE IS IN APPEAL BEFORE US. WE NOTE THAT ACCORDING TO SECTION 68 OF THE INCOME TAX ACT WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT SATISFACTORY IN THE OPINION OF THE ASSESSING OFFICER THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THAT ASSESSMENT YEAR. THE ASSESSING OFFICER MAY CONSIDER SUCH SUM AS CASH CREDIT DUE TO LACK OF SUFFICIENT EXPLANATION. IT IS WELL KNOWN THAT PROVISIONS OF SECTION 68 HAVE BEEN INTRODUCED INTO THE TAXING ENACTMENTS STEP BY STEP IN ORDER TO PLUG LOOPHOLES. EVEN LONG PRIOR TO THE INTRODUCTION OF SECTION 68 OF THE ACT IN THE STATUTE BOOK COURTS HAD HELD THAT WHERE ANY AMOUNTS WERE FOUND CREDITED IN THE BOOKS OF THE ASSESSEE IN THE PREVIOUS YEAR AND THE ASSESSEE OFFERED NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED WAS IN THE OPINION OF THE ASSESSING OFFICER IS NOT SATISFACTORY THE SUMS SO CREDITED COULD BE CHARGED TO INCOME-TAX AS INCOME OF THE ASSESSEE OF THE RELEVANT ASSESSMENT YEAR. WE NOTE THAT WITH EFFECT FROM ASSESSMENT YEAR 2013-14 SECTION 68 OF THE INCOME TAX ACT HAS BEEN AMENDED TO PROVIDE THAT IF A CLOSELY HELD COMPANY FAILS TO EXPLAIN THE SOURCE OF SHARE CAPITAL SHARE PREMIUM OR SHARE APPLICATION MONEY RECEIVED BY IT TO THE SATISFACTION OF THE ASSESSING OFFICER THE SAME SHALL BE DEEMED TO BE THE INCOME OF THE COMPANY PAGE | 6 ITA NO.118/SRT/2018 ASSESSMENT YEAR.2012-13 B K SILK MILLS PVT. LTD . UNDER SECTION 68 OF THE ACT. WE NOTE THAT THE AMENDED PROVISIONS OF SECTION 68 IS NOT APPLICABLE TO THE ASSESSEE COMPANY UNDER CONSIDERATION AS THE ASSESSEE`S ASSESSMENT YEAR IS 2012-13. THE HON`BLE BOMBAY HIGH COURT IN THE CASE OF GAGANDEEP INFRASTRUCTURE 80 TAXMANN.COM 272 (BOM) HELD THAT AMENDMENT TO SECTION 68 IS PROSPECTIVE AND APPLICABLE ONLY FROM ASSESSMENT YEAR 2013-14. WITH THIS BACKGROUND NOW WE SHALL PROCEED TO EXAMINE IN THE ASSESSEE`S CASE UNDER CONSIDERATION WHETHER ASSESSEE HAS DISCHARGED HIS ONUS TO PROVE PRIMA FACIE THE IDENTITY CREDITWORTHINESS AND GENUINENESS OF THE SHARE CAPITAL AND SHARE PREMIUM RECEIVED BY IT FROM SHARE SUBSCRIBER COMPANIES. 9. WE NOTE THAT ASSESSEE BEFORE US IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF TRADING OF FINISHED FABRICS. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY HAD RECEIVED NEW SHARE CAPITAL INCLUDING PREMIUM TOTALING TO RS.1 00 00 000/- FROM FOUR INVESTOR COMPANIES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE LEARNED AO REQUIRED THE ASSESSEE COMPANY TO FURNISH DETAILS AND SUPPORTING MATERIAL TO ESTABLISH THE IDENTITY GENUINENESS AND CREDITWORTHINESS IN RESPECT OF THE AFORESAID SHARE CAPITAL INCLUDING PREMIUM. IN RESPONSE TO THIS THE ASSESSEE COMPANY FURNISHED DETAILED REPLY ALONG WITH THE FOLLOWING DOCUMENTARY EVIDENCES TO DISCHARGE THE PRIMARY ONUS CAST UNDER SECTION 68 OF THE ACT: (I) NAME OF THE INVESTOR COMPANIES; (II) ADDRESS OF THE INVESTOR COMPANIES; (III) PAN OF THE INVESTOR COMPANIES; (IV) NUMBER OF SHARES ALLOTTED; (V) VALUE OF SHARES ALLOTTED; (VI) SHARE APPLICATION FORM AS FILED BY THE INVESTOR COMPANIES (VII) CONFIRMATION OF THE INVESTOR COMPANIES HAVING MADE THE INVESTMENT EXPLAINING THE SOURCE OF MAKING THE INVESTMENT; (VIII) COPY OF INCOME TAX RETURN OF THE INVESTOR COMPANIES; (IX) AUDITED ANNUAL ACCOUNTS OF THE INVESTOR COMPANIES; PAGE | 7 ITA NO.118/SRT/2018 ASSESSMENT YEAR.2012-13 B K SILK MILLS PVT. LTD . (X) BANK STATEMENT OF THE INVESTOR COMPANIES; (XI) AFFIDAVIT OF THE DIRECTORS OF THE INVESTOR COMPANIES CONFIRMING THE INVESTMENTS MADE BY THEM AND ALSO EXPLAINING THE BUSINESS PRUDENCE BY WHICH THEY MADE THE INVESTMENTS. LEARNED COUNSEL FOR THE ASSESSEE STATES BEFORE THE BENCH THAT BY SUBMITTING THESE PLETHORA DOCUMENTS THE ASSESSEE COMPANY HAS DISCHARGED THE PRIMARY ONUS CAST UNDER SECTION 68 OF THE ACT TO PROVE THE IDENTITY CREDITWORTHINESS AND GENUINENESS OF SHARE CAPITAL AND SHARE PREMIUM. 10. WE NOTE THAT ON THE BASIS OF THE DETAILS FURNISHED BY THE ASSESSEE COMPANY THE ASSESSING OFFICER ISSUED NOTICES U/S 133(6) OF THE ACT TO THE FOUR INVESTOR COMPANIES ASKING THEM TO FURNISH DETAILS TO ESTABLISH THE IDENTITY GENUINENESS AND CREDITWORTHINESS IN RESPECT OF THE SHARE CAPITAL RECEIVED BY THE ASSESSEE COMPANY WHICH WERE DULY SERVED IN THE CASE OF ALL THE FOUR INVESTOR COMPANIES THE SAME IS EVIDENT FROM THE FINDINGS OF THE ASSESSING OFFICER AT PAGE 5 OF ASSESSMENT ORDER WHICH IS REPRODUCED BELOW: NAME OF INVESTOR WHETHER NOTICE U/S 133(6) SERVED OR NOT WHETHER REPLY TO NOTICE U/S 133(6) RECEIVED OR NOT GIST OF REPLY RECEIVED U/S 133(6) HITESH B.GAJERA SERVED YES PRAVIN D.THUMMAR SERVED YES MANISH D.THUMMAR SERVED YES RACHANABEN A. DHAMI SERVED YES RANCHHODBHAI K. DHAMI SERVED YES NIRDESH TRADING PVT. LTD. SERVED YES RENJJ FINPROP PRIVATE LIMITED SERVED YES SNEHA RESIDENCY PVT. LTD SERVED YES SUSHMITA DISTRIBUTERS PVT. LTD SERVED YES THIS SHOWS THAT INVESTOR COMPANIES ARE NOT PAPER COMPANIES THESE COMPANIES ARE EXISTED ON THE ADDRESS GIVEN TO THE ASSESSING OFFICER. NOT ONLY THAT THESE INVESTOR COMPANIES FILED THE FOLLOWING DOCUMENTS AND EVIDENCES IN RESPONSE TO NOTICES UNDER SECTION 133(6) OF THE ACT: PAGE | 8 ITA NO.118/SRT/2018 ASSESSMENT YEAR.2012-13 B K SILK MILLS PVT. LTD . (I) COPY OF RETURN OF INCOME ALONG WITH ENCLOSURES AUDIT REPORT AND BALANCE SHEET FOR A.Y. 2011-12 AND A.Y. 2012-13. (II) COPY OF BANK STATEMENT FOR F.Y. 2011-12 RELEVANT TO ASSESSMENT YEAR 2012-13. (III) COPY OF BANK BOOK FOR THE PERIOD 1 WEEK BEFORE AND AFTER THE TRANSACTION RELATING TO THE INVESTMENT IN THE ASSESSEE COMPANY WITH THE DETAILS OF SOURCE OF FUNDS. (IV) COPY OF SHARE CERTIFICATE RECEIVED. THEREFORE WE NOTE THAT ASSESSING OFFICER HAS HIMSELF CALLED FOR THE ABOVE DETAILS FROM THE INVESTOR COMPANIES TO SATISFY HIMSELF AS REGARDS THE IDENTITY OF THE INVESTORS THE GENUINENESS OF THE TRANSACTIONS AS ALSO THE CREDITWORTHINESS OF THE INVESTORS. THUS WE NOTE THAT ASSESSEE COMPANY HAS DISCHARGED ITS ONUS TO PROVE THE SHARE CAPITAL BY ESTABLISHING THE IDENTITY OF THE SHAREHOLDERS THE GENUINENESS OF THE TRANSACTIONS AND EVEN THE CREDITWORTHINESS OF THE SHAREHOLDERS. WE NOTE THAT ASSESSING OFFICER HAS NOT EVEN AN IOTA OF EVIDENCE TO HOLD THAT THE SHARE CAPITAL IS NON-GENUINE SINCE IN THE INQUIRY CARRIED OUT BY HIM THE SHARE CAPITAL HAS BEEN FOUND TO BE GENUINE AND THE FINDINGS IN THE ASSESSMENT ORDER ARE NOT RELEVANT AS THEY ARE PERTAINING TO SOME OTHER ASSESSEE AND NOT TO THE ASSESSEE UNDER CONSIDERATION. THEREFORE WE NOTE THAT DESPITE OF COMPLETE COMPLIANCE MADE BY THE INVESTOR COMPANIES AND FURNISHING OF ALL THE DETAILS AS REQUIRED BY THE LEARNED AO TO ESTABLISH THE IDENTITY CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION THE IMPUGNED ASSESSMENT ORDER AS PASSED BY THE LEARNED AO IS ABSOLUTELY ERRONEOUS. 11. BEFORE WE ADJUDICATE AS TO WHETHER THE LD. CIT(A)S ACTION IS RIGHT OR ERRONEOUS LET US LOOK AT SECTION 68 OF THE ACT AND THE JUDICIAL PRECEDENTS ON THE ISSUE AT HAND. SECTION 68 UNDER WHICH THE ADDITION HAS BEEN MADE BY THE AO READS AS UNDER: PAGE | 9 ITA NO.118/SRT/2018 ASSESSMENT YEAR.2012-13 B K SILK MILLS PVT. LTD . '68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT IN THE OPINION OF THE ASSESSING OFFICER SATISFACTORY THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR.' THE PHRASEOLOGY OF SECTION 68 IS CLEAR. THE LEGISLATURE HAS LAID DOWN THAT IN THE ABSENCE OF A SATISFACTORY EXPLANATION THE UNEXPLAINED CASH CREDIT MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. IN THIS CASE THE LEGISLATIVE MANDATE IS NOT IN TERMS OF THE WORDS SHALL BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR'. THE SUPREME COURT WHILE INTERPRETING SIMILAR PHRASEOLOGY USED IN SECTION 69 HAS HELD THAT IN CREATING THE LEGAL FICTION THE PHRASEOLOGY EMPLOYS THE WORD 'MAY' AND NOT 'SHALL'. THUS THE UN-SATISFACTORINESS OF THE EXPLANATION DOES NOT AND NEED NOT AUTOMATICALLY RESULT IN DEEMING THE AMOUNT CREDITED IN THE BOOKS AS THE INCOME OF THE ASSESSEE AS ALSO HELD BY THE SUPREME COURT IN THE CASE OF CIT V. SMT. P. K. NOORJAHAN [1999] 237 ITR 570. 12. WE NOTE THAT ALL THE ABOVE REQUISITIONED DOCUMENTS WERE FURNISHED BEFORE THE AO WHICH SUBSTANTIATED THE TRANSACTION BETWEEN THE ASSESSEE COMPANY AND THE SHARE APPLICANTS. IT IS THEREFORE NOT A CASE WHERE THE DOCUMENTS SOUGHT FROM THE APPLICANTS TO EXAMINE THE TRANSACTION WERE NOT AVAILABLE BEFORE THE AO. AS REGARDS THE ISSUE OF NON-APPEARANCE OF THE SHARE APPLICANTS WE NOTE THAT IN SUCH A CASE THE HON'BLE APEX COURT IN THE CASE OF ORISSA CORPN. (P) LTD. (SUPRA) 159 ITR 78 AND THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF DY. CIT V. ROHINI BUILDERS [2002] 256 ITR 360 /[2003] 127 TAXMAN 523 HAS HELD THAT ONUS OF THE ASSESSEE (IN WHOSE BOOKS OF ACCOUNT CREDIT APPEARS) STANDS FULLY DISCHARGED IF THE IDENTITY OF THE CREDITOR IS ESTABLISHED AND ACTUAL RECEIPT OF MONEY FROM SUCH CREDITOR IS PROVED. IN CASE THE ASSESSING OFFICER IS DISSATISFIED ABOUT THE SOURCE OF CASH DEPOSITED IN THE BANK ACCOUNTS OF THE CREDITORS THE PROPER COURSE WOULD BE TO ASSESS SUCH CREDIT IN THE HANDS OF THE CREDITOR (AFTER MAKING DUE ENQUIRIES FROM SUCH CREDITOR). IN ARRIVING AT THIS CONCLUSION THE HON'BLE COURT HAS FURTHER STRESSED PAGE | 10 ITA NO.118/SRT/2018 ASSESSMENT YEAR.2012-13 B K SILK MILLS PVT. LTD . THE PRESENCE OF WORD 'MAY' IN SECTION 68. RELEVANT OBSERVATIONS AT PAGES 369 AND 370 OF THIS REPORT ARE REPRODUCED HEREUNDER:- 'MERELY BECAUSE SUMMONS ISSUED TO SOME OF THE CREDITORS COULD NOT BE SERVED OR THEY FAILED TO ATTEND BEFORE THE ASSESSING OFFICER CANNOT BE A GROUND TO TREAT THE LOANS TAKEN BY THE ASSESSEE FROM THOSE CREDITORS AS NON- GENUINE IN VIEW OF THE PRINCIPLES LAID DOWN BY THE SUPREME COURT IN THE CASE OF ORISSA CORPORATION [1986] 159 ITR 78. IN THE SAID DECISION THE SUPREME COURT HAS OBSERVED THAT WHEN THE ASSESSEE FURNISHES NAMES AND ADDRESSES OF THE ALLEGED CREDITORS AND THE GIR NUMBERS THE BURDEN SHIFTS TO THE DEPARTMENT TO ESTABLISH THE REVENUE'S CASE AND IN ORDER TO SUSTAIN THE ADDITION THE REVENUE HAS TO PURSUE THE ENQUIRY AND TO ESTABLISH THE LACK OF CREDITWORTHINESS AND MERE NON-COMPLIANCE OF SUMMONS ISSUED BY THE ASSESSING OFFICER UNDER SECTION 131 BY THE ALLEGED CREDITORS WILL NOT BE SUFFICIENT TO DRAW AND ADVERSE INFERENCE AGAINST THE ASSESSEE. IN THE CASE OF SIX CREDITORS WHO APPEARED BEFORE THE ASSESSING OFFICER AND WHOSE STATEMENTS WERE RECORDED BY THE ASSESSING OFFICER THEY HAVE ADMITTED HAVING ADVANCED LOANS TO THE ASSESSEE BY ACCOUNT PAYEE CHEQUES AND IN CASE THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE CASH AMOUNT DEPOSITED BY THOSE CREDITORS IN THEIR BANK ACCOUNTS THE PROPER COURSE WOULD HAVE BEEN TO MAKE ASSESSMENTS IN THE CASES OF THOSE CREDITORS BY' TREATING THE CASH DEPOSITS IN THEIR BANK ACCOUNTS AS UNEXPLAINED INVESTMENTS OF THOSE CREDITORS UNDER SECTION 69. 13. TO CONCLUDE WE NOTE THAT THE AMENDED PROVISIONS OF SECTION 68 IS NOT APPLICABLE TO THE ASSESSEE COMPANY UNDER CONSIDERATION AS THE ASSESSEE`S ASSESSMENT YEAR IS 2012-13 THEREFORE THE ASSESSEE UNDER CONSIDERATION NEED NOT TO PROVE SOURCE OF THE SOURCE. WE FIND THAT THE ASSESSEE HAD GIVEN THE COMPLETE DETAILS ABOUT THE SHARE APPLICANTS CLEARLY ESTABLISHING THEIR IDENTITY CREDITWORTHINESS AND GENUINENESS OF TRANSACTION PROVED BEYOND DOUBT AND HAD DULY DISCHARGED ITS ONUS IN FULL. NOTHING PREVENTED THE LEARNED AO TO MAKE ENQUIRIES FROM THE ASSESSING OFFICERS OF THE CONCERNED SHARE APPLICANTS FOR WHICH EVERY DETAILS WERE VERY MUCH MADE AVAILABLE TO HIM BY THE ASSESSEE. WE ALSO RELY ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS LOVELY EXPORTS (P) LTD REPORTED IN (2008) 216 CTR 195 (SC) WHEREIN IT HAS BEEN VERY CLEARLY HELD THAT THE ONLY OBLIGATION OF THE COMPANY RECEIVING THE SHARE APPLICATION MONEY IS TO PROVE THE EXISTENCE OF THE SHAREHOLDERS AND FOR WHICH THE ASSESSEE HAD DISCHARGED THE ONUS OF PROVING THEIR EXISTENCE AND ALSO THE SOURCE OF SHARE PAGE | 11 ITA NO.118/SRT/2018 ASSESSMENT YEAR.2012-13 B K SILK MILLS PVT. LTD . APPLICATION MONEY RECEIVED. CONSIDERING THESE FACTS AND THE PRECEDENTS APPLICABLE TO THE FACTS AS NARRATED ABOVE WE ARE NOT INCLINED TO ACCEPT THE CONTENTION OF THE ASSESSING OFFICER IN ANY MANNER AND HENCE THE ADDITION SO MADE IS DELETED. HENCE THESE GROUNDS OF THE ASSESSEE ARE ALLOWED. 14. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER IS PRONOUNCED ON 31/08/2021 BY PLACING RESULT ON NOTICE BOARD. SD/- SD/- (PAWAN SINGH) (DR. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER LWJR /SURAT / DATE: 31/08/2021 SAMANTA COPY OF THE ORDER FORWARDED TO 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A) 4. PR. CIT 5. DR/AR ITAT SURAT 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR/SR. PS/PS ITAT SURAT