ACE Matrix Solutions Ltd.,, Delhi v. ITO, New Delhi

ITA 1219/DEL/2010 | 2005-2006
Pronouncement Date: 29-02-2012 | Result: Allowed

Appeal Details

RSA Number 121920114 RSA 2010
Assessee PAN AABCA6670J
Bench Delhi
Appeal Number ITA 1219/DEL/2010
Duration Of Justice 1 year(s) 11 month(s) 11 day(s)
Appellant ACE Matrix Solutions Ltd.,, Delhi
Respondent ITO, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 29-02-2012
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 29-02-2012
Date Of Final Hearing 13-02-2012
Next Hearing Date 13-02-2012
Assessment Year 2005-2006
Appeal Filed On 18-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI. BEFORE SHRI I.P. BANSAL AND SHRI K.G. BANSAL I.T.A. NO.1219(DEL)/2010 ASSESSMENT YEAR: 2005-06 ACE MATRIX SOLUTIONS LTD. INC OME-TAX OFFICER B-97 ALL HEAVEN BUILDING VS. COY. WARD 1(2) NEW DELHI. WAZIRPUR INDL. AREA DELHI-110052. PAN: AABCA6670J (APPLICANT) (RESPONDEN T) APPELLANT BY : SHRI K.P. GARG FCA RESPONDENT BY: MRS . ANUSHA KHURANA SR. DR. DATE OF HEARIN G: 13.02.2012 DATE OF PRONOUN CEMENT: 29.02.2012. ORDER PER K.G. BANSAL : A.M THE ASSESSEE HAS TAKEN THREE GROUNDS IN THIS A PPEAL. THE REAL GRIEVANCE OF THE ASSESSEE IS PROJECTED IN GROUND NO. 2 THAT THE LD. CIT(APPEALS) ERRED ON FACTS AND IN LAW IN UPHOLD ING THE ADDITION OF RS. 37 40 743/- MADE BY THE AO AS UNEXPLAINED INVE STMENT U/S 69 OF THE INCOME-TAX ACT 1961. 1.1 THE FACTS OF THE CASE ARE THAT THE ASSESSE E-COMPANY FILED ITS RETURN ON 20.03.2006 DECLARING LOSS OF RS. 12 057/-. THE RETURN WAS PROCESSED ITA NO. 1219(DEL)/2010 2 U/S 143(1) ON 22.03.2006. SUBSEQUENTLY ASSESSM ENT PROCEEDINGS WERE INITIATED BY ISSUING NOTICE U/S 143(2) OF THE ACT ON 28.02.2007 WHICH WAS SERVED ON THE ASSESSEE. A NOTICE U/S 142(1) A ND A QUESTIONNAIRE WERE ALSO ISSUED AND SERVED IN THE COURSE OF ASSESSME NT PROCEEDINGS. IT WAS FOUND THAT THE ASSESSEE IS ENGAGED IN THE BUSINES S OF PURCHASE AND SALE OF SHARES. 1.2 IN THE ASSESSMENT PROCEEDINGS OF ANOTHER COMPAN Y AGM MANAGEMENT SERVICES LTD. (AGM FOR SHORT) FOR ASSESSMENT YEAR 2005- 06 IT CAME TO THE NOTICE OF THE AO THAT THE AS SESSEE-COMPANY ACQUIRED 5 90 800 SHARES OF THIS COMPANY WHICH WERE REC ORDED AS SUCH IN THE SHAREHOLDER LEDGER. THE ASSESSEE ON THE OTHER HAND DID NOT SHOW THE PURCHASE OF THESE SHARES IN ITS ACCOUNTS. THE REFORE THE ASSESSEE WAS REQUIRED TO STATE ITS POSITION IN RESPECT OF A CQUISITION OF THE AFORESAID SHARES. IT WAS SUBMITTED THAT AS PER ITS BOOKS OF ACCOUNT NO SHARE OF AGM WAS PURCHASED IN THE PERIOD UNDER CONSIDERATION . 1.3 AS THERE WAS A CONTRADICTION IN THE STANDS OF THE TWO COMPANIES AGM WAS REQUIRED TO FURNISH ITS COMMENTS ON THE STAND OF THE ASSESSEE. THIS COMPANY FURNISHED THE DETAILS OF THE SHARES WHICH WERE TRANSFERRED ITA NO. 1219(DEL)/2010 3 IN THE NAME OF THE ASSESSEE-COMPANY ON THE BASIS O F SHARE TRANSFER APPLICATIONS LODGED WITH IT. PAGE NOS. 2 AND 3 OF THE ASSESSMENT ORDER CONTAIN THE DETAILS OF THE SHARES IN TERMS OF DISTINCTIVE NUMBER CERTIFICATE NUMBER NUMBER OF SHARES NAME OF THE TRANSFEROR AND THE DATE OF TRANSFER. COPIES OF TRANSFER DEEDS WE RE ALSO FILED. 1.4 ON RECEIPT OF THIS INFORMATION THE AO ISSUE D LETTERS U/S 133(6) TO THE SELLERS OF THE SHARES SHRI ANIRUDH KUMAR AN D SMT. SUDHA AGGARWAL TO FURNISH CERTAIN DETAILS. THE REPLY RECEIVE D FROM THEM SHOWED THAT- (A) 1 18 300 FULLY PAID-UP SHARES AND 4 00 000 PA RTLY PAID-UP SHARES WERE SOLD BY SHRI ANIRUDH KUMAR FOR WHICH RS. 26 92 800/- WERE RECEIVED BY HIM DURING F.Y. 2004-05. (B) 72 500 FULLY PAID-UP SHARES WERE SOLD BY SMT. SUDHA AGGARWAL FOR WHICH RS. 11 60 000/- WERE RECEIVED BY HER DURIN G F.Y. 2004-05. (C) EXCEPT FOR 9 100 SHARES FOR WHICH RS. 1 00 000/- WERE RECEIVED FROM M/S RCI INDUSTRIES & TECHNOLOGIES LTD. (RC I FOR SHORT) ALL THE OTHER SHARES WERE SOLD THROUGH M/S CREATIV E FINANCIAL SERVICES (P) LTD. FROM WHOM AN AMOUNT OF RS. 37 52 800/- W AS RECEIVED THROUGH BANKERS CHEQUES DURING THE PERIOD FEB- MARCH 2005. EVIDENCE OF RECEIPT OF THE ABOVE CHEQUES WAS F ILED IN THE FORM OF COPIES OF THESE BANKERS CHEQUES. 1.5 ON RECEIPT OF THE AFORESAID INFORMATION ST ATEMENT OF SHRI ANIRUDH KUMAR WAS RECORDED ON OATH U/S 131 OF THE ACT ON 13.12.2007. THE CRUCIAL PART OF THE STATEMENT IS REPRODUCED OVER LEAF:- ITA NO. 1219(DEL)/2010 4 (A) I STAND BY THE REPLY TO LETTER U/S 133(6) AND F URTHER I STATE THAT I AND MY MOTHER WERE HOLDING MAJORITY SHARES IN THE AG M AND WE HAVE RECEIVED THE ABOVE SAID CONSIDERATION. (B) WHEN WE AGREED TO SELL THE ABOVE SAID SHARES O F THE COMPANY THE PARTY WHO AGREED TO BUY THESE SHARES THEY BEC AME DIRECTORS OF THE COMPANY. THEIR NAMES WERE MR. RAJEEV GUPTA AND M R. PRADEEP GUPTA. THE REGISTERED OFFICE OF THE COMPANY WAS ALSO TRANSFERRED TO THE PREMISES HELD BY THEM. WE HAVE SUBMITTED FOR M 29 FORM 32 AND FORM 18 FOR CHANGE OF SITUATION OF REGISTERED OFFICE IN YOUR WARD. THESE PERSONS HAD AGREED TO GIVE US THE TOTAL SALE CONSIDERATION OF THE SHARES AS STATED ABOVE. (C) FIRST CHEQUE OF RS. 1 00 000/- HAS BEEN GIVEN BY THEM FROM ONE OF THEIR ENTITY R.C. I AND FOR REST OF THE AMOUNT MR. RAJEEV GUPTA ONE OF THE NEW DIRECTOR STATED THAT HE WOULD TRA NSACT THROUGH A DSE BROKER. HE FURTHER STATED THAT ME AND MY MOTHER WOULD BE PAID THROUGH THAT BROKERS ACCOUNT. IN THIS MAN NER WE RECEIVED THE REST OF THE CONSIDERATION (AMOUNTING TO RS. 3 7 52 800/-) BY WAY OF CHEQUES/DEMAND DRAFT OF THE SAID BROKER (CFSL ) AND CONTRACT NOTES OF THAT BROKER WERE ALSO GIVEN TO ME. THE ENTIRE CHEQUES/DRAFT BROKERS NOTES ETC. HAVE BEEN RECE IVED BY US THROUGH THE REPRESENTATIVE OF MR. RAJEEV GUPTA. THESE SHARES WERE TRANSFERRED AS PER AGREED PRICE AND VALUATION OF THE COMPANY AND IN TURN ME AND MY MOTHER SIGNED THE TRANSFER DEEDS DURING THE PERIOD NOVEMBER 2004 TO FEBRUARY 2004-05. THE SHARE CER TIFICATES IN RESPECT OF THESE TRANSACTIONS WERE HANDED OVER T O SHRI RAJEEV GUPTA DURING THE PERIOD NOV. 2004 TO FEB. 2004-05. 1.6 IT WILL BE SEEN FROM THE STATEMENT THAT SU BSTANTIAL AMOUNT OF RS. 37 52 800/- WERE RECEIVED FROM THE BROKERAGE FI RM CFSL AND CONTRACT NOTES WERE SUPPLIED BY THIS FIRM. THEREFORE THE STATEMENT OF SHRI SURESH GARG DIRECTOR IN CFSL WAS RECORDED. IT WAS INTER-ALIA DEPOSED THAT HE DOES NOT KNOW ANYTHING ABOUT CREATIVE FINANCIAL (P) LTD. BUT CFSL HAS ITA NO. 1219(DEL)/2010 5 BEEN A MEMBER OF DELHI STOCK EXCHANGE SINCE 1995 . THIS COMPANY HAS NOT DONE ANY BUSINESS SINCE JUNE 2001. HE D ENIED HAVING KNOWN THE AGM THE ASSESSEE SHRI ANIRUDH KUMAR SMT. SUDHA AGGARWAL AND SHRI RAJEEV GUPTA. ON BEING SHOWN THE CONTRACT NOTE S IN RESPECT OF SALE OF SHARES OF AGM IT WAS DEPOSED WITH CERTAINTY A ND FULL CONVICTION THAT THE NOTES WERE NOT ISSUED BY CFSL. THE NOTES WERE STATED TO BE OBVIOUSLY FAKE DOCUMENTS WHICH HAVE WRONGLY AN D FRAUDULENTLY USED THE NAME OF CFSL. IN THIS CONNECTION ATTENTION WAS ALSO DRAWN TOWARDS THE BOTTOM RIGHT CORNER OF THE DOCUMENT USING THE NAME OF CREATIVE FINANCIAL (P) LTD. REINFORCING THE STATEMENT TH AT THERE IS DIFFERENCE IN THE DOCUMENT ITSELF. ON BEING SHOWN THE BANKERS CHEQUES PAID TO SHRI ANIRUDH KUMAR AND SMT. SUDHA AGGARWAL IT WAS STATED THAT THESE WERE NOT PAID THROUGH THE FUNDS OF CFSL OR ANY OF HIS ASSOCIATED CONCERN. CLARIFYING THE MATTER FURTHER IT WAS STATED TH AT CFSL HAD ONLY ONE BANK ACCOUNT C.A. NO. 3074 AND 3075 WITH CANARA BANK DSE BRANCH ASAF ALI ROAD DELHI. THIS COMPANY HAS NOT MAINTAINE D ANY ACCOUNT WITH STATE BANK OF BIKANER & JAIPUR NEW ROHTAK ROAD N EW DELHI THROUGH WHICH PAYMENTS WERE MADE TO SHRI ANIRUDH KUMAR AN D SMT. SUDHA AGGARWAL. THE SIGNATURES ON THE CHEQUES WERE S TATED TO BE OF SHRI DEEPAK CHANGIA ADDITIONAL DIRECTOR OF CFSL DUR ING THE PERIOD APRIL ITA NO. 1219(DEL)/2010 6 2003 TO SEPTEMBER 2003. IT WAS FURTHER DEPOSED THAT HE HAS NOT HEARD OF SHRI DEEPAK CHANGIA SINCE SEPTEMBER 2003. IT W AS ALSO VOLUNTARILY DEPOSED THAT HE WAS AWARE OF FRAUDULENT TRANSA CTIONS BEING CARRIED OUT IN THE NAME OF CFSL AND HE HAS SUBMITTED A STATEMENT TO THE SEBI IN THIS REGARD. SUBSEQUENTLY HE ALSO FILED SOME DETAILS ASKED BY THE AO WHICH LEAD TO AN INFERENCE THAT SHRI DEEPAK CH ANGIA OPENED A CURRENT ACCOUNT NUMBER 24852 IN THE NAME OF CFSL IN THE PERIOD 2004-05 AND PAYMENTS TO SHRI ANIRUDH KUMAR AND SMT. SUDHA AGGA RWAL WERE MADE FROM THIS ACCOUNT. 1.7 IT APPEARS THAT THE INVESTIGATION WING OF THE DEPARTMENT HAD ALSO CONDUCTED ENQUIRIES IN RESPECT OF ACCOMMODATION ENTRIES PROVIDED BY A NUMBER OF PERSONS INCLUDING THE CFSL. THEIR O BSERVATIONS ARE THAT SHRI MAHESH GARG HAD BEEN PROVIDING ACCOMMODATION ENTR IES IN THE NAME OF CFSL. THE CASH WAS RECEIVED AND DEPOSITED IN TH E BANK ACCOUNT AND THEREAFTER CHEQUES OR DRAFTS WERE ISSUED TO TH E BENEFICIARIES. SHRI DEEPAK CHANGIA WAS ALSO ONE OF THE PERSONS THRO UGH WHOM SHRI MAHESH GARG OPERATED THE BUSINESS OF PROVIDING ACCOMMOD ATION ENTRIES. HOWEVER EFFORTS TO TRACE SHRI DEEPAK CHANGIA PR OVED FUTILE. ITA NO. 1219(DEL)/2010 7 1.8 ON THE BASIS OF AFORESAID ENQUIRIES THE AO DREW A NUMBER OF TENTATIVE CONCLUSIONS THAT (A) SHRI RAJEEV GUPTA DIRECTOR OF THE ASSESSEE-COMP ANY ARRANGED IMPUGNED CONSIDERATION FOR THE SALE OF SHARES; (B) HE ALSO BECAME DIRECTOR IN AGM AND THE REGISTE RED OFFICE OF THE AGM WAS TRANSFERRED TO THE ADDRESS OF THE ASSES SEE COMPANY; (C) THE PERIOD OF SIGNING OF TRANSFER DEEDS BY SHRI ANIRUDH KUMAR AND SMT. SUDHA AGGARWAL IS THE SAME AS THE PERIOD IN WHICH THE SHARES WERE TRANSFERRED TO THE NAME OF THE ASSESSEE IN T HE BOOKS OF AGM; (D) THE SELLER RECEIVED CONSIDERATION OF RS. 37 52 80 0/- THROUGH CFSL A BROKER; (E) SHRI SURESH GARG DENIED THAT THE TRANSACTIONS HA VE BEEN UNDERTAKEN THROUGH CFSL AND STATED THAT THE CONTRACT NOTES ARE BOGUS AND CLIENT CODE NUMBER IS NOT MENTIONED IN THE CONTRA CT NOTES WHICH IS AN ESSENTIAL CONDITION; ITA NO. 1219(DEL)/2010 8 (F) THE BANK ACCOUNT USED BELONGS TO ENTRY PROVIDER SHRI MAHESH GARG AND SHRI DEEPAK CHANGIA; AND (G) FINALLY A TENTATIVE CONCLUSION WAS DRAWN THAT THE BURDEN TO PROVE THE ENTRIES AND SOURCE OF FUNDS AMOUNTING TO RS. 37 5 2 800/- LIED ON THE ASSESSEE AS SAID INVESTMENT HAS BEEN MADE BY IT. 1.9 THESE CONCLUSIONS WERE COMMUNICATED TO THE A SSESSEE AND IT WAS REQUIRED TO STATE ITS CASE IN THE MATTER. FOR THIS PURPOSE A DETAILED SHOW CAUSE NOTICE HAS BEEN ISSUED WHICH DEALS WITH A LL ASPECTS OF THE ENQUIRY. THE SHOW CAUSE NOTICE WAS ACCOMPANIED BY A NO TICE U/S 142(1). THE ASSESSEE RESPONDED TO THE NOTICE BY WAY OF A L ETTER DATED 22.12.2007. IT WAS SUBMITTED THAT : (A) 2 42 100 SHARES OF AGM WERE PURCHASED THROUGH C FSL @ RS. 0.95 PER SHARE; (B) THE RATE AT WHICH SHRI ANIRUDH KUMAR AND SMT. SUD HA AGGARWAL SOLD THESE SHARES TO THE BROKER IS NOT KNOWN TO I T; ITA NO. 1219(DEL)/2010 9 (C) THE STATEMENT OF SHRI ANIRUDH KUMAR DOES NOT CONT AIN ANYTHING CONCRETE AND IN ALL PROBABILITY IT IS A MADE U P STATEMENT; (D) THE STATEMENT OF SHRI SURESH GARG SHOWS THAT CFS L HAS NOT CONDUCTED THE BUSINESS OF SHARE BROKING FIRM SIN CE JUNE 2001; (E) THE BROKERAGE FIRM HAD A NUMBER OF ACCOUNTS AND IT IS NOT KNOWN FROM WHICH ACCOUNT THE SUM OF RS. 37 52 800/- HAS BEEN PAID TO THE SELLERS OF THE SHARES HOWEVER THERE IS NO EVIDE NCE THAT THE ASSESSEE- COMPANY HAD MADE THIS PAYMENT; (F) THE ASSESSEE HAD PURCHASED SHARES OF THIS COMPAN Y @ RS. 0.95 PER SHARE AND SOLD THE SAME AT RS. 1.00 PER SHARE W ITHIN A SHORT PERIOD THEREBY EARNING A MARGINAL PROFIT; AND (G) THE SHARES WERE SOLD TO ANUPAM CONSTRUCTION (P) LTD. (1 42 100 SHARES) AND MITTAL DAIRY AND HORTICULTURE PRODUCT S PVT. LTD. FOR WHICH INVOICES AND STATEMENTS OF ACCOUNT HAVE B EEN FILED. THESE ITA NO. 1219(DEL)/2010 10 TRANSACTIONS PERTAIN TO IMMEDIATELY SUCCEEDING YEAR AND NOT THIS YEAR. 1.10 IN THE CIRCUMSTANCES THE AO WAS REQUESTED T O VERIFY THE RECORDS OF THE CFSL MAINTAINED WITH REGISTRAR OF COMPANIES. IN VIEW OF THE SPECIFIC REQUEST OF THE ASSESSEE IT WAS GRANTED OPPORTU NITY TO CROSS-EXAMINE THE DEPONENTS SHRI ANIRUDH KUMAR AND SHRI SURESH GARG ON 31.12.2007 BUT AS PER THE A.O NONE ATTENDED ON BEHALF OF THE A SSESSEE FOR SUCH CROSS- EXAMINATION. 1.11 THE CASE OF THE AO IS THAT THE SHARES HAVE B EEN TRANSFERRED IN THE NAME OF THE ASSESSEE-COMPANY IN THIS YEAR BUT IT HAS NOT SHOWN THE TRANSACTIONS IN ITS BOOKS OF ACCOUNT. THE INVESTM ENT OF RS. 37 40 743/- MADE IN PURCHASE OF SHARES HAS THUS NOT BEEN S ATISFACTORILY EXPLAINED AS TO THE SOURCE AND NATURE. THE REPLIES OF THE A SSESSEE DO NOT MATCH WITH THE PATTERN OF ACTUAL EVENTS. THEREFORE THIS AMO UNT HAS BEEN ADDED LEADING TO COMPUTATION OF TOTAL INCOME AT RS. 37 40 743/-. 2. THE ASSESSEE FILED APPEAL AGAINST THIS ORDER BE FORE THE CIT(APPEALS)- IV DELHI. FIVE GROUNDS WERE TAKEN UP BEFORE H IM. THE REAL GRIEVANCE ITA NO. 1219(DEL)/2010 11 HAS BEEN PROJECTED IN GROUND NO. 3 THAT THE A SSESSING OFFICER ERRED IN LAW AND ON FACTS IN MAKING ADDITION OF RS. 37 40 7 43/- ON ACCOUNT OF ALLEGED UNEXPLAINED INVESTMENT BY INVOKING THE PROVISION CONTAINED IN SECTION 69 OF THE ACT. VARIOUS SUBMISSIONS WERE MADE BEFORE HIM. THESE SUBMISSIONS ARE MORE OR LESS THE SAME AS THE SUBMISSIONS MADE BEFORE THE AO THAT ENQUIRIES HAVE BEEN MADE AT THE BA CK OF THE ASSESSEE STATEMENTS OF VARIOUS PERSONS RECORDED SHOULD BE MADE AVAILABLE FOR THE PURPOSE OF CROSS-EXAMINATION AND REBUTTAL AN D THAT THE ASSESSEE HAD NOTHING TO DO WITH PAYMENT OF RS. 37 52 800/- TO S HRI ANIRUDH KUMAR AND SMT. SUDHA AGGARWAL. THE COMMENTS OF THE AO WER E ALSO OBTAINED WHO REITERATED THE FINDINGS FURNISHED IN THE AS SESSMENT ORDER. IT WAS EMPHASIZED THAT SHRI ANIRUDH KUMAR AND SHRI SURESH GARG PRESENTED THEMSELVES IN THE OFFICE OF THE AO FOR THE PURP OSE OF CROSS-EXAMINATION BUT NOBODY ATTENDED ON BEHALF OF THE ASSESSEE FOR THIS PURPOSE. AS THE RESULTS OF THE ENQUIRY WERE COMMUNICATED TO THE ASSESSEE THEREFORE IT CANNOT BE SAID THAT THE ASSESSEE WAS NOT GRANT ED FAIR CHANCE TO REBUT THE EVIDENCE FOUND AGAINST HIM. AFTER CONSIDERING T HE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE HIM IT HAS BEEN CONCLUD ED THAT -(A) THE ENQUIRIES MADE BY THE AO SHOW THAT THE SHARES WE RE TRANSFERRED IN THE NAME OF THE ASSESSEE IN FEBRUARY-MARCH 2005 (B) CONCURRENTLY SHRI ITA NO. 1219(DEL)/2010 12 RAJEEV GUPTA AND SHRI PRADEEP GUPTA BROTHERS BE CAME DIRECTORS IN THE AGM WHOSE OFFICE WAS SHIFTED TO THE PREMISES O F THE ASSESSEE AND (C) THE TRANSFERORS HAVE BEEN PAID A SUM OF RS. 37 52 800/- AS CONSIDERATION FOR SHARES AND THE PAYMENT HAS BEEN MADE THROUGH CFSL. THE CRUCIAL PART OF HIS CONCLUSION IS THAT THERE IS NO REAS ON AS TO WHY CFSL WOULD TRANSFER A SUM OF RS. 37 52 800/- WITHOUT ANY BENE FIT. THE SOURCE OF THIS AMOUNT MAY NOT HAVE BEEN FULLY EXAMINED AND THERE FORE THIS MATTER MAY ALSO BE REFERRED TO THE AO OF CFSL FOR MAKING R EQUISITE ENQUIRY AND ASSESSMENT. HOWEVER THE FACTS INDICATE THAT TH E ULTIMATE BENEFICIARY IS THE ASSESSEE-COMPANY AND IT HAS RECEIVED THE S HARES OF AGM. THE AMOUNT HAS BEEN ARRANGED BY SHRI RAJEEV GUPTA A COMMON DIRECTOR IN THE ASSESSEE-COMPANY AND THE AGM. THEREFORE THE AMO UNT REPRESENTS UNEXPLAINED INVESTMENT MADE BY THE ASSESSEE. TH US THE FINDING OF THE AO HAS BEEN UPHELD. 3. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE FILED DETAILS OF EVENTS IN CHRONOLOGICAL ORDER WHICH ARE REPRODUCED BELOW: DATE EVENT PAGE 21/08/2007 WHEN INVESTIGATION WING WAS ENQUIRING ABOUT CFSPL CARRYING ON THE BUSINESS AS ENTRY OPERATORS CFSPL FILES WITH ROC ANNUAL RETURNS OF THE CO. FOR THE YEARS 2004 225-279 ITA NO. 1219(DEL)/2010 13 2005 & 2006 ( RT. AT P.278) ALL SIGNED BY CA. SURESH GARG EXCLUDING THE NAME OF DEEPAK CHANGIA DIR. 18/11/07 AMSL IN RESPONSE TO AO W 1 (2) NOTICE U/S.133(6) RE: PURCHASE OF SHARES OF AGMMSL DURING FY 04-05 TILES REPLY BEFORE AO THAT AMSL DID NOT ACQUIRE ANY SHARES OF AGMMSL DURING THE FY 2004-05 AND FILED COPIES OF PURCHASES/SALES WITH EVIDENCE AUDITED ACCOUNTS CONFIRMATIONS ETC. PB1/31-65 18/11/07 AO W 1 (2) ISSUES DETAILED ENQUIRY NOTICE U/S.142(1) TO AMSL FOR COMPLIANCE ON 20/11/07 PB1/30 20/11/07 AMSL FILED DETAILED REPLY TO NOTICE DT. 18/11/07 WITH EVIDENCE RE: PURCHASE AND SALE OF SHARES IN AGMMSL DURING FY 05-06 AND STATING THAT SOME TRANSACTIONS TOOK PLACE IN FY 05-06 AND FILED NECESSARY EVIDENCE PB1/10-29 12/12/07 AO ISSUES SUMMONS U/S.131 TO CA. SURESH GARG RE: AMSPL AS PER REPLY FILED ON 24/27.12.07 WHEN AO RECEIVED REPORT OF INVESTIGATION WING STATING THAT CFSPL IS AN ENTRY OPERATOR IS NOW KNOWN NOR COPY OF ANY SUCH REPORT FURNISHED TO THE ASSESSEE N.A. 287 13/12/07 AO RECORDED THE STATEMENT OF CA. SURESH GARG DIRECTOR OF CFSPL IN THE CASE OF AGMMSLLAMSPL U/S.131 RE: CHEQUES ISSUED BY CFSPL ON SBBJ TO ANIRUDHA KR RS.25 92 800 & ON BK. OF RAJ.TO SMT. SUDHA AGGARWAL FOR RS.9 10 000/- BETWEEN 28.01.05 TO 14.03.05 CA SURESH GARG FILES B/S. P&L OF CFSPL 06 ACCEPTED CHEQUES ISSUED BY DIR. DEEPAK CHANGIA 117-122 119 158-159 118 13/12/07 AO RECORDED STATEMENT OF CA. ANIRUDHA KUMAR DIR OF AGMMSL U/S.131 IN THE CASE OF AMSL CA ANIRUDHA 156-157 17/12/07 CA ANIRUDH KUMAR DIR OF AGMMSL FILED LETTERS WITH AO W-1 (1) RE: CONSENT OF RAJIV & PRADEEP GUPTA DURING ASSESSMENT 144 149 ITA NO. 1219(DEL)/2010 14 PROCEEDINGS OF AGMMSL FOR AY 05-06 BEING ATTENDED TO BY HIM FILED WITH ROC ON DATE - ILLEGIBLE/UNKNOWN 17/12/07 CA. SURESH GARG DIR OF CFSPL FILES WITH THE AO LETTER WITH COPIES OF AUDITED B/S. P&L FY 04 TO 06 LIST OF DIRECTORS OF CFSPL SINCE 1999 WHICH INCLUDES THE NAME OF DEEPAK CHANGIA FILES S/A CANARA BK (170-176) ITR 02-03 FILES COPY OF COMPLAINT TO SEBI DT. 7.11.06 RE: SOME CUSTOMS FRAUD OF SOME MFG. UNITS HOWEVER NO FURTHER ACTION TAKEN. 215 178-21 214 177 213 18/12/07 AO ISSUED NOTICE DATED 14/18-12-07 TO AMSL RE: THEIR ASSESSMENT PROCEEDINGS FOR AY 05- 06 STATING THAT DURING ASSESSMENT PROCEEDINGS OF AGMMSL SOME FACTS HAVE EMERGED RE: SALE OF 590800 SHARES IN AGMMSL HELD BY CA. ANIRUDHA KR. AND HIS MOTHER TO RAJIV GUPTA & PRADEEP GUPTA AS PER SOME AGREEMENT ENTERED INTO BETWEEN THEM (NO SUCH AGREEMENT IS AVAILABLE ON RECORD WITH THE AO OR OTHERWISE) PB1/8-9 24/12/07 CFSP LTD TO SBBJ TO CLOSE THE A/C IN THAT BANK-LETTER SIGNED BY CA. SURESH GARG DIRECTOR 284 24/12/07 CFSP LTD. ISSUES A CAUTION NOTICE SIGNED B Y CA. SURESH GARG & FILES THE SAME WITH AO W-1 (2) 280-283 26/12/07 AO ISSUES SHOW CAUSE NOTICE TO AMSL AS TO WHY RS.37 52 800/- SHOULD NOT BE TAXED IN THEIR HANDS U/S.69 AS YOU HAVE FAILED TO EXPLAIN THE SOURCE FOR COMPLIANCE ON 28/12/2007 PB1/6-7 27/12/07 CA. SURESH GARG FILES REPLY TO SUMMONS U/S.131 DT.12.12.07 WITH W.1(2) WITH AFFIDAVIT CAUTION NOTICE ETC. DENYING TRANSACTIONS WITH AMSL & AGMMSL AND OWNERSHIP OF SBBJ (BUT NOT BK OF RAJASTHAN FROM WHERE CHEQUES WERE ISSUED BY CFSPL TO MRS. SUDHA AGGARWAL) 287 28/12/07 AT 4 PM AMSL FILED WS IN RESPONSE TO NOTICE DATED 26/12/2007 EXPLAINING EVERY PB1/3-5 ITA NO. 1219(DEL)/2010 15 THING IN DETAIL AND QUESTIONING THE ALLEGED SELF-SERVING STATEMENT OF CA ANIRUDH KUMAR WHO WAS THE BENEFICIARY OF RT. OF CHEQUES/DRAFTS FROM CFSPL AND WHO WAS THE CONTROLLING DIRECTOR OF AGMMSL DURING THE RELEVANT YEARS & ATTENDED TO THE HEARINGS BEFORE AO IN THE CASE OF AGMMSL. REQUESTING THE AO ONCE AGAIN TO GIVE COPIES OF MATERIAL BEING RELIED UPON AS EXTRACTS AS REPRODUCED DO NOT GIVE THE DESIRED INFORMATION 28/12/07 AT 5.00 P.M. AO HANDS OVER THE NOTICE TO T HE REP. OF AMSL FOR 31/12/07 FOR CROSS EXAMINATION OF CA. SURESH GARG & ANIRUDHA KUMAR BETWEEN 11-12 AM PB1/1-2 31/12/07 SHRI RAJIV GUPTA APPEARS AND WAITS UPT O 12.30 PM BUT NO ATTENDANCE MARKED AS ASSESSMENT ALREADY MADE AS STATED BY AO AND THAT THE WITNESSES HAD NOT COME. 09/03/09 AFFIDAVIT DT. 20/02/2009 OF SH. RAJIV GUPT A FILED WITH CITA IN APPEAL NO.87/07-08 OF THE ASSESSEE FOR 05-06. REGARDING HIS ATTENDANCE ON 31/12/07 & NON-APPEARANCE OF THE WITNESSES. 20/02/09 WS DT. 18/02/09 FILED BEFORE CITA - 25 PAG ES 13/03/09 ASSESSEE FILED REQUEST DATED 9.3.09 FOR CO PIES OF MATERIAL RELIED UPON FOR MAKING THE ASSESSMENT LISTING 26 DOCUMENTS. 31/03/09 REQUEST DT. 12/3/09 FILED BEFORE CITA IN DUPLICATE TO DIRECT THE AO TO PROVIDE COPIES OF MATERIAL RELIED UPON AS REQUESTED BY THE ASSESSEE ON 09-13/03/09. 15/04/09 REQUEST DT. 12/3/09 FILED BEFORE CITA IN DUPLICATE TO DIRECT THE AO TO PROVIDE COPIES OF MATERIAL RELIED UPON AS REQUESTED BY THE ASSESSEE ON 09-13/03/09 FILED BEFORE AO ONCE AGAIN 04/09/09 ASSESSEE FILED BEFORE AO THE FOLLOWING DOCUMENTS AS DIRECTED BY CITA FOR SUBMISSION OF REPORT BY AO: PB-1 65 PAGES WS FILED BEFORE CITA ON 20/02/09 25 PAGES ITA NO. 1219(DEL)/2010 16 AFFIDAVIT OF SHRI RAJIV GUPTA IN DENIAL OF FACTS STATED BY AO ASSESSEE'S SUBMISSIONS RE: RULE 46A DT. 9/3/09. WS FILED BEFORE CITA ON 31/3/09 SEEKING DIRECTIONS TO AO FOR SUPPLYING COPIES OF MATERIAL RELIED UPON. 27/11/09 AO SUBMITS REMAND REPORT 14/01/10 AO SUPPLIED COPIES OF SOME DOCUMENTS OUT OF THE LIST OF REQUIREMENTS MADE ON 12/3/2009 - REST NOT AVAILABLE ON HIS RECORD AS PER INSPECTION OF FILE CARRIED ON 12/01/2010 AND LISTING THE AVAILABLE RECORD AS DIRECTED BY THE AO ON 13/1/10. 28/01/10 ASSESSEE FILES SYNOPSIS AND REJOINDER TO A O REPORT WITH COMMENTS ON THE DOCUMENTS SUPPLIED ON 14/01/2010 AND PB-2 CONSISTING OF COPIES OF MATERIAL SUPPLIED ON 14/1/10. 3.1 IT IS SUBMITTED THAT THE ASSESSEE IS ENGAGED I N THE BUSINESS OF DEALING IN SHARES. THE POINT OF DISPUTE IS REGARDING ALL EGED INVESTMENT OF RS. 37 52 800/- MADE BY THE ASSESSEE IN PURCHASE OF 5 90 800 SHARES OF THE AGM. THE SELLING PRICE HAS BEEN FIXED BY THE AO ON THE BASIS OF THE STATEMENT OF SHRI ANIRUDH KUMAR AT RS. 16/- PER S HARE FOR 1 90 800 FULLY PAID-UP SHARES AND RS. 2/- PER SHARE FOR 4 00 00 0 PARTLY PAID SHARES. THE ASSESSEE HAS NOT MADE THE INVESTMENT AND SUCH PURCHASE IS NOT RECORDED IN ITS BOOKS OF ACCOUNT. IT APPEARS THAT THE AO RECEIVED A REPORT FROM THE INVESTIGATION WING TO THE EFFECT THAT SHRI ANIRUD H KUMAR AND HIS MOTHER SMT. SUDHA AGGARWAL ARE BENEFICIARIES OF ACCOMMOD ATION ENTRIES PROVIDED BY SHRI MAHESH GARG AND HIS FRONT COMPANIES INC LUDING CFSL. THE ITA NO. 1219(DEL)/2010 17 PROCEEDINGS IN THE CASE OF THE ASSESSEE AND THE CASE OF CFSL WERE BEING CONDUCTED AT THE SAME TIME IN THE LAST QUARTER OF THE YEAR 2007. SHRI ANIRUDH KUMAR ALLEGED THAT HE SOLD SHARES OF A GM TO SHRI RAJEEV GUPTA AND SHRI PRADEEP GUPTA FOR A CONSIDERATION OF RS. 3 7 52 800/-. THE CONSIDERATION WAS STATED TO HAVE BEEN RECEIVED IN THE MONTHS OF FEBRUARY/MARCH 2005 BY ACCOUNT PAYEE CHEQUES/PAY ORDERS FROM CFSL THE BROKER. ON THE BASIS OF THIS STATEMENT THE ASSESSEE WAS REQUIRED TO EXPLAIN THE SOURCE OF INVESTMENT IN THE SHARES OF THE AGM. WHILE THE ASSESSEE DENIED TO HAVE UNDERTAKEN ANY TRANSACTI ON IN THE SHARES OF AGM IN FINANCIAL YEAR 2004-05 IT WAS CONFIRMED T HAT CERTAIN TRANSACTIONS TOOK PLACE IN FINANCIAL YEAR 2005-06. IN RESPECT OF THESE TRANSACTIONS PURCHASE AND SALE BILLS AND BOOKS OF ACCOUNT WE RE PRODUCED. IN THAT YEAR THE ASSESSEE HAD ACQUIRED 2 42 000 SHARES OF THE AGM ON 15.05.2005 FOR A CONSIDERATION OF RS. 2 29 995/- I.E. @ RS. 0.9 5 PER SHARE. THESE SHARES WERE SOLD TO ANUPAM CONSTUCTION (P) LTD. AND MIT TAL DAIRY AND HORTICULTURE PRODUCTS PVT. LTD. @ RE. 1/- PER SHARE. THE AO IGNORED THE INVESTIGATION REPORT AND THE FACT THAT SHRI ANIRUDH KUMAR AND HIS MOTHER WERE BENEFICIARIES OF THE TRANSACTIONS. THUS THE VERSION OF THE ASSESSEE WAS REJECTED. IN THIS WAY HE COMPLET ELY MISCONSTRUED THE REAL FACTS AND RELIED ON IRRELEVANT FACTS. THESE F ACTS ARE - ITA NO. 1219(DEL)/2010 18 (A) SHRI ANIRUDH KUMAR AND HIS MOTHER WERE SUBSTANTIA L OWNERS OF THE AGM; (B) THE INVESTIGATION REPORT SHOWED THAT HE AND HIS MOTHER RECEIVED CHEQUES FROM CFSL IN FINANCIAL YEAR 2004-05 AG GREGATING IN AMOUNT OF RS. 37 52 800/-. NO AGREEMENT BETWEEN SHRI ANIRUDH KUMAR AND SHRI RAJEEV GUPTA WAS BROUGHT ON RECO RD WHICH COULD SHOW IN ANY MANNER THAT THE ASSESSEE WAS A PARTY TO THIS AGREEMENT; (C) ALTHOUGH THE CONSIDERATION OF THE SHARE WAS SAID TO HAVE MADE ON THE BASIS OF A VALUATION REPORT SUCH REPORT IS NOT ON RECORD; (D) SHRI ANIRUDH KUMAR IS THE REAL BENEFICIARY WHO MAN AGED TO FABRICATE THE RECORDS OF THE AGM TO SUIT HIS REQUIREMENT; A ND (E) INSTEAD OF EXAMINING SHRI SURESH GARG THE DIREC TOR IN CFSL THE A.O SHOULD HAVE EXAMINED SHRI DEEPAK CHANGIA LOOK ING TO THE FACT THAT THE LATTER WAS MANAGING THE SHOW AND THE C HEQUES WERE SIGNED BY HIM UNDER OVERALL CONTROL OF SHRI MAHESH GARG . ITA NO. 1219(DEL)/2010 19 3.2 ACCORDINGLY IT IS ARGUED THAT THE ASSESSEE HAS NOT MADE ANY INVESTMENT IN THE SHARES OF AGM. THEREFORE T HE ADDITION MADE BY THE AO AND SUSTAINED BY THE LD. CIT(APPEALS) MAY BE DELETED. 3.3 IT APPEARS THAT ONE SHRI RAJEEV GUPTA FILED AN APPLICATION UNDER THE RIGHT TO INFORMATION ACT 2005 BEFORE INCOME-TAX OFFICER WARD 1(2) NEW DELHI (THE CPIO). IN THIS APPLICATION INFORM ATION WAS SOUGHT ON 13 POINTS. THE CPIO HELD THAT THE APPLICANT REQUE STED FOR INFORMATION IN RESPECT OF A THIRD PARTY PRIMARILY THE AGM AS SESSED UNDER HIS CHARGE. THE DISCLOSURE OF SUCH INFORMATION IS EXEMPT U/ S 8 OF THAT ACT. FURTHER THE INFORMATION DOES NOT PERTAIN TO THE INCOME-TA X MATTERS. THEREFORE IT HAS BEEN HELD THAT THE SAME CANNOT BE MADE AVAILA BLE TO THE APPLICANT. 4. IN REPLY THE LD. SENIOR D.R. SUBMITTED THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS OF THE AGM IT WAS FOUND THAT THE ASSESSEE- COMPANY ACQUIRED ITS 5 90 800 SHARES. SUCH ACQU ISITION WAS CONFIRMED BY THE AGM BY FILING COPIES OF SHARE TRANSFER DE EDS. THEREFORE ENQUIRY WAS CONDUCTED INTO ACQUISITION OF THESE SHARES BY THE ASSESSEE. STATEMENT OF SHRI ANIRUDH KUMAR THE SELLER WAS RECORDED. IT WAS DEPOSED THAT ALL ITA NO. 1219(DEL)/2010 20 THE SHARES SAVE 9 100 WERE SOLD BY HIM THROUGH C FSL. HE AND HIS MOTHER RECEIVED THE CONSIDERATION AND THE PARTIES WHO AG REED TO BUY THESE SHARES BECAME DIRECTOR IN THE AGM. THEIR NAMES ARE SHRI RAJEEV GUPTA AND SHRI PRADEEP GUPTA. CONSEQUENT UPON THIS TRAN SACTION THE REGISTERED OFFICE OF THE AGM WAS TRANSFERRED TO THE PREMIS ES OF THE ASSESSEE- COMPANY. AN AMOUNT OF RS. 1 00 000/- WAS RECEIVE D FROM R.C. INDUSTRIES A GROUP CONCERN OF THE ASSESSEE AND THE BALANCE AMOUNT WAS RECEIVED THROUGH CFSL A DELHI STOCK EXCHANGE B ROKER. THEREAFTER SHRI SURESH GARG DIRECTOR OF CFSL WAS EXAMINED. HE DENIED THAT HE ISSUED THE CONTRACT NOTES OR THAT ANY PAYMENT WAS MADE T HROUGH THE FUNDS OF CFSL. THE ENQUIRY FROM STATE BANK OF BIKNER & J AIPUR SHOWED THAT THE ACCOUNT THROUGH WHICH PAYMENTS WERE MADE WAS OPENED BY SHRI DEEPAK CHANGIA ON BEHALF OF CFSL. HE IS ONE OF T HE PERSONS THROUGH WHOM SHRI MAHESH GARG THE ENTRY OPERATOR ACTED . THE FIRST PAYMENT OF RS. 1.00 LAKH HAS BEEN MADE BY ONE OF THE ENTITIES OF SHRI RAJEEV GUPTA. THIS PAYMENT LAID FOUNDATION FOR FURTHER TRANSAC TIONS THE PAYMENT OF WHICH WAS MADE THROUGH THE BANK ACCOUNT OF CFSL OPERATED BY SHRI DEEPAK CHANGIA. CFSL HAS CONFIRMED THAT THE SHA RES WERE TRANSFERRED IN THE NAME OF THE ASSESSEE IN THIS FINANCIAL YEAR . THEREFORE IT IS CLEAR THAT THE ASSESSEE PURCHASED THE SHARES. THE ASSESSE E WAS GIVEN OPPORTUNITY ITA NO. 1219(DEL)/2010 21 TO CROSS-EXAMINE SHRI ANIRUDH KUMAR AND SHRI SURESH GARG WHICH WAS NOT AVAILED OF BY THE ASSESSEE. THESE FACTS LEAD TO THE CONCLUSION THAT THE ASSESSEE HAD ACQUIRED THE SHARES AND THEREFORE THE ONUS TO PROVE THE INVESTMENT AS TO ITS NATURE AND SOURCE WAS ON IT. 4.1 IT MAY BE MENTIONED HERE THAT THE LD. SENIOR D.R. PRODUCED THE CASE RECORD. SHE FILED COPIES OF FIVE SHARE TRANSFER FORMS IN RESPECT OF TRANSFER OF 40 000 1 16 800 32 50 4 00 000 AND 1 500 SHARES OF THE AGM TO THE ASSESSEE. IT IS SEEN THAT ONE FORM REGARDING 1500 SHARES HAS BEEN SIGNED AS TRANSFEROR BY SHRI ANIRUDH KUMAR AND ALL OTHE R FORMS HAVE BEEN SIGNED BY SHRI ANIRUDH KUMAR AND SMT. SUDHA AGGARWAL JOI NTLY. ALL THESE FORMS HAVE BEEN DULY WITNESSED. FURTHER ALL THESE FORM S HAVE BEEN SIGNED BY SHRI RAJEEV GUPTA DIRECTOR/AUTHORIZED SIGNATORY O F THE ASSESSEE-COMPANY AS TRANSFEREE/BUYER. TWO TRANSFER APPLICATIONS HA VE BEEN PROCESSED ON 07.12.2004 AND THE TWO OTHERS HAVE BEEN PROCESSE D ON 24.02.2005 BY THE AGM. SHE ALSO FILED A COPY OF REGISTER OF MEM BERS WHICH SHOWS THAT THE ASSESSEE-COMPANY BECAME REGISTERED SHAREHOLDE R OF THE AGM ON 07.12.2004 AND FURTHER SHARES WERE ADDED TO I TS NAME ON 24.02.2005. ITA NO. 1219(DEL)/2010 22 5. IN THE REJOINDER THE LD. COUNSEL SUBMITTED T HAT THE AGM COULD ONLY BE TREATED AS A WITNESS IN RESPECT OF ALLEGED TRANSACTIONS BETWEEN SHRI ANIRUDH KUMAR AND SMT. SUDHA AGGARWAL ON ONE SIDE AND THE ASSESSEE ON THE OTHER. THE BOOKS OF THE AGM DO NOT SHOW R ECEIPT OF ANY SHARE TRANSFER FEE. THE TRANSFER OF SHARES OF A COMP ANY HAS TO TAKE PLACE IN ACCORDANCE WITH A SET PROCEDURE. THIS INVOLVES LODGING OF VALID SHARE TRANSFER FORMS CONTAINING DETAILS OF THE CONSIDE RATION. THE FORMS HAVE TO BE DULY STAMPED AND SIGNED. IN THIS CASE THE FORMS HAVE NOT BEEN STAMPED. THE REGISTER OF SHAREHOLDERS HAS TO BE MAINTAINED IN A PRESCRIBED FORM AND ONLY COPIES OF RELEVANT PAGES OF THIS REGISTER HAS BEEN PRODUCED. THE REGISTER HAS NOT BEEN PROPERLY MAINTAINED. TH E ANNUAL RETURN FILED WITH REGISTRAR OF COMPANIES IN RESPECT OF TRANSFER OF SHARES TO THE ASSESSEE HAS ALSO NOT BEEN BROUGHT ON RECORD. THE LOWER AUTHORITIES HAVE IGNORED THE INVESTIGATION REPORT. THE CHEQ UES OF RS. 37 52 800/- HAVE BEEN ISSUED BY CFSL AND THIS AMOUNT HAS NOT BEEN LINKED WITH THE ASSESSEE IN ANY MANNER. IT IS AN ADMITTED FACT THAT A SUM OF RS. 1.00 LAKH IS PAID THROUGH RCI A COMPANY OF SHRI RAJEEV GUPTA AND SHRI PRADEEP GUPTA WHO ASSUMED THE CONTROL OF THE AGM AFT ER THIS TRANSACTION. THE AO HAS ALSO IGNORED THE STATEMENT OF SHRI SURESH GARG IN WHICH THE TRANSACTION WAS DENIED TO HAVE BEEN CARRIED THRO UGH CFSL AND SHRI ITA NO. 1219(DEL)/2010 23 DEEPAK CHANGIA HAS NOT BEEN EXAMINED AT ALL W HO WAS OPERATING THE BANK ACCOUNT OF CFSL THROUGH WHICH PAYMENT HAS B EEN MADE TO SHRI ANIRUDH KUMAR AND SMT. SUDHA AGGARWAL. AS PER IN FORMATION OBTAINED BY THE ASSESSEE HEARINGS WERE CONDUCTED IN ITS CASE ONLY UP TO 27.11.2007. NO OPPORTUNITY WAS GRANTED TILL T HAT DATE FOR CROSS- EXAMINATION OF SHRI ANIRUDH KUMAR OR SHRI RAJEV GU PTA. THE LD. SENIOR D.R. HAD ALSO PRODUCED THE INSTRUMENT DRAWN ON STATE BANK OF BIKANER & JAIPUR BY WAY OF WHICH SALE CONSIDERATION WAS PAID TO SHRI ANIRUDH KUMAR AND SMT. SUDHA AGGARWAL. IT IS ARGUED THAT THESE INSTRUMENTS WERE NOT DRAWN BY THE ASSESSEE BUT BY CFSL AND THERE IS NO EVIDENCE ON RECORD THAT THE ASSESSEE PAID ANY MONEY TO THE CFSL. 6. WE HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS MADE BEFORE US. THE MAIN QUESTION IN THIS CASE IS-WHET HER THE ASSESSEE-COMPANY HAS MADE INVESTMENT OF RS. 37 40 743/- IN PURCHASE OF 5 90 800 SHARES OF THE AGM? THE CASE OF THE REVENUE IS BASED ON S TATEMENTS OF SHRI ANIRUDH KUMAR (SELLER) SHRI SURESH GARG (BROKER) THE DIRECTOR IN CFSL SHARE TRANSFER FORMS AND THE SHARE HOLDER REGIS TER OF THE AGM. THE LD. COUNSEL HAS DENIED THE PURCHASE OF SHARES IN TH IS FINANCIAL YEAR. IT HAS BEEN ARGUED THAT NONE OF THE AFORESAID EVIDENCES LEAD TO THE CONCLUSION ITA NO. 1219(DEL)/2010 24 THAT THE SHARES WERE PURCHASED BY THE ASSESSEE-C OMPANY IN THIS YEAR. WITH THESE BRIEF REMARKS WE MAY NOW EXAMINE EA CH OF THE EVIDENCE INITIALLY SEPARATELY AND THEREAFTER CONSIDER THE CUMULATIVE EFFECT OF ALL THESE EVIDENCES. 6.1 THE GIST OF STATEMENT OF SHRI ANIRUDH KUMAR I S THAT WHEN HE AND HIS MOTHER AGREED TO SELL THESE SHARES THE INTE NDING BUYER PARTY BECAME THE DIRECTORS IN THE AGM. THE INTENDING BUYERS WERE SHRI RAJEEV GUPTA AND SHRI PRADEEP GUPTA. ON PURCHASE OF SHARES THE REGISTERED OFFICE OF THIS COMPANY WAS ALSO CHANGED TO THEIR ADDRESS WHICH IS THE SAME AS THAT OF THE ASSESSEE-COMPANY. THE FIRST CHEQUE OF RS. 1.00 LAKH EMANATED FROM R.C. INDUSTRIES. SHRI RAJEEV GUPTA AND ONE MORE DIRECTOR HELD OUT THAT FURTHER TRANSACTIONS WILL BE DONE THROUGH A DELHI STOCK EXCHANGE BROKER AND THE CONSIDERATION WILL BE PAID THROUGH THE BROKERS ACCOUNT. THE CONSIDERATION OF RS. 37 52 800/- WAS THUS REC EIVED THROUGH THE ACCOUNT OF BROKER CFSL. IT WILL BE SEEN FROM TH E STATEMENT THAT SHRI ANIRUDH KUMAR THAT HE HAS NOT IMPLICATED THE AS SESSEE IN ANY MANNER BY WAY PURCHASING PARTY OR PAYMENT OF CONSIDERATIO N FROM ITS ACCOUNT. THERE IS NO DISPUTE ABOUT FIRST PAYMENT OF RS. 1.00 LAKH. SUBSEQUENT ITA NO. 1219(DEL)/2010 25 PAYMENTS AGGREGATING TO RS. 37 52 800/- HAVE BEEN STATED TO BE EMANATING FROM THE ACCOUNT OF CSFL. 6.2 COMING TO THE STATEMENT OF SHRI SURESH GARG THE DIRECTOR IN CFSL HE DENIED ANY ACQUAINTANCE WITH THE AGM THE A SSESSEE SHRI ANIRUDH KUMAR SMT. SUDHA AGGARWAL OR SHRI RAJEEV GUPTA . IT IS SPECIFICALLY STATED THAT THE CONTRACT NOTES ALLEGEDLY ISSUED B Y CFSL HAVE NOT BEEN ISSUED BY THIS COMPANY AS IT HAS NOT CONDUCTED ANY BUSINESS FROM JUNE 2001. THE BANK ACCOUNT OF THIS COMPANY HAD BEEN MAINTAINED WITH CANARA BANK DSE BRANCH ASAF ALI ROAD DELHI O NLY. THE CHEQUES AGGREGATING TO RS. 37 52 800/- WERE NOT ISSUED BY THIS COMPANY AS IT NEVER MAINTAINED ANY ACCOUNT WITH STATE BANK OF BIKANE R & JAIPUR FROM WHERE THE BANKERS CHEQUES ETC. ORIGINATED. FINALLY I T WAS DEPOSED THAT HE WAS AWARE THAT SOME FRAUDULENT TRANSACTIONS ARE BEI NG CARRIED OUT IN THE NAME OF HIS COMPANY AND HE HAS SUBMITTED A STATEMENT IN THIS REGARD TO THE SEBI. THIS STATEMENT ALSO DOES NOT IMPLICATE THE ASSESSEE IN ANY MANNER. THE DIRECTOR DENIED ACQUAINTANCE WITH S ELLER BUYER THE AGM OR THE BANK ACCOUNT. THE SIGNATURES IN THE CHEQUE S WERE STATED TO BE THOSE OF SHRI DEEPAK CHANGIA AN ADDITIONAL DIREC TOR IN CFSL FROM APRIL 2003 TO SEPTEMBER 2003. THE ONLY INFERENC E WHICH CAN BE DRAWN ITA NO. 1219(DEL)/2010 26 FROM THIS STATEMENT IS THAT SHRI DEEPAK CHANGIA MAINTAINED AN UNAUTHORIZED ACCOUNT IN THE NAME OF BROKERAGE COM PANY WITH STATE BANK OF BIKANER & JAIPUR AND THE PAYMENT MADE TO SHRI ANIRUDH KUMAR EMANATED FROM THIS ACCOUNT. 6.3 ACCORDING TO THE LD. SENIOR DR THE CLINCHING EVIDENCE IN THIS CASE IS IN THE FORM OF FIVE SHARE TRANSFER FORMS CO PIES OF WHICH WERE FILED BEFORE US. THESE FORMS SHOW THAT SHRI ANIRUDH K UMAR AND HIS FAMILY MEMBERS SOLD SHARES TO THE ASSESSEE-COMPANY AND TRANSFER APPLICATIONS WERE PROCESSED ON 7.12.2004 AND 24.2.2005. THES E FORMS HAVE BEEN DULY SIGNED AS TRANSFEREE BY SHRI RAJEEV GUPTA THE DIRECTOR IN THE ASSESSEE- COMPANY. THE LD. COUNSEL HAS POINTED OUT THREE DEFECTS IN THESE FORMS I.E. THE TRANSFER CONSIDERATION IS NOT MENTIONED NECESSARY STAMPS FOR TRANSFER OF SHARES HAVE NOT BEEN AFFIXED AND FE ES CHARGED BY THE COMPANY HAS NOT BEEN MENTIONED. IT IS FURTHER SUBMITTED THAT THE STATEMENT OF SHAREHOLDERS FILED WITH THE REGISTRAR OF COMPANY HAS NOT BEEN BROUGHT ON RECORD. IT IS HIS CASE THAT IN ABSENCE OF SPEC IFICATION OF CONSIDERATION AND AFFIXING OF STAMPS THESE SHARE TRANSFER FORMS ARE INVALID. WE FIND THAT THE DEFECTS POINTED OUT BY THE LD. COUNSEL EXIS T IN ALL SHARE TRANSFER FORMS. IN ABSENCE OF MENTIONING OF CONSIDERATION OF TR ANSFER THE AMOUNT ITA NO. 1219(DEL)/2010 27 ALLEGEDLY PAID BY THE ASSESSEE FOR PURCHASE OF T HESE SHARES CANNOT BE ASCERTAINED FROM THE FORMS. NON-PAYMENT OF STAMP DUTY IS ANOTHER VITAL DEFECT. THEREFORE THESE FORMS BY THEMSELVES CANN OT BE RELIED UPON. FURTHER THE FACT THAT THE PAYMENT WAS MADE THROU GH THE BANK ACCOUNT OF CFSL MAINTAINED WITH STATE BANK OF BIKANER & JAI PUR WAS KNOWN TO THE AO. HE COULD HAVE EXAMINED THIS ACCOUNT FURTHER BY FINDING OUT THE SOURCE OF CREDIT IN THIS ACCOUNT AND ASCERTAIN WHETHER SUCH SOURCE WAS THE ASSESSEE RAJIV GUPTA OR ANIRUDHA KUMAR. THI S HAS NOT BEEN DONE. THE ASSESSEE HAS NOT SHOWN PURCHASE OF THESE SHARES IN ITS ACCOUNT. THEREFORE EXISTENCE OF THESE FORMS DOES NOT LE AD TO ANY CLEAR INFERENCE THAT THE ASSESSEE HAS MADE INVESTMENT IN PURCHAS E OF THESE SHARES. THIS CONCLUSION IS CORROBORATED BY THE STATEMENT OF SHRI SURESH GARG WHO DEPOSED THAT THE AFORESAID ACCOUNT WAS NOT THE RE GULAR ACCOUNT OF CFSL BUT IT WAS MAINTAINED BY SHRI DEEPAK CHANGIA FO R UNDERTAKING CERTAIN TRANSACTIONS WHICH WERE FRAUDULENT IN NATURE. 6.4 THE POSITION OF THE SHAREHOLDER REGISTER AL THOUGH STATED TO HAVE RECEIVED BY A FORWARDING LETTER IS ALSO UNSAT ISFACTORY BECAUSE IT DOES NOT BEAR THE SIGNATURES OF THE AUTHORIZED PERSO N OR THE SEAL OF THE COMPANY. ITA NO. 1219(DEL)/2010 28 6.5 WE MAY NOW LOOK AT THESE FOUR EVIDENCES TO GETHER. WHEN WE DO SO IT CAN BE SAID THAT THE AO DID NOT CARRY T HE MATTER TO ITS LOGICAL CONCLUSION IN SPITE OF THE STATEMENT OF SHRI SUR ESH GARG ABOUT FRAUDULENT TRANSACTIONS AND ROLE OF SHRI DEEPAK CHANGIA. HE WAS IN THE KNOWLEDGE THAT THE PAYMENTS HAVE BEEN MADE THROUGH STATE BAN K OF BIKANER & JAIPUR BUT NO LINKAGE WAS ESTABLISHED IN RESPECT OF CORR ESPONDING CREDITS IN THIS ACCOUNT WITH THE ASSESSEE. 7. AT THIS STAGE WE MAY EXAMINE THE CASES REL IED UPON BY THE LD. SENIOR D.R. IN THE CASE OF HIMMATRAM LAXMINARAIN VS. CIT (1986) 161 ITR 7 (P&H) THE AO DETECTED THAT THE ASSESSE E HAD BEEN CARRYING OUT BUSINESS THE TRANSACTIONS IN RESPECT OF WHICH WER E NOT ENTERED IN THE BOOKS OF ACCOUNT. THE TRANSACTIONS WERE NOT DEN IED BY THE ASSESSEE BUT CLAIMED THAT THE PAYMENT TO THE VENDOR WAS MADE OU T OF SALE PROCEEDS COLLECTED BY IT. THE QUESTION AS TO WHETHER THE T RIBUNAL WAS RIGHT IN SUSTAINING THE ADDITION OF RS. 73 075/- U/S 6 9 WAS ANSWERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. FURTHER I N THE CASE OF UNIT CONSTRUCTION CO. LTD. VS. ACIT (2003) 260 ITR 18 8 (CAL.) THE QUESTION WAS IN REGARD TO THE COMPUTATION OF INVESTMENT MA DE IN THE PROPERTY. THE ITA NO. 1219(DEL)/2010 29 ASSESSEE HAD SHOWN THE EXPENDITURE OF RS. 8 3 1 225/-. IT WAS ADMITTED THAT THERE WAS A FURTHER SPENDING OF RS. 2 68 986/-. THE VALUER HAD DETERMINED THE COST AT RS. 10 67 638/- AGAINST T HE SUM OF RS. 11 00 211/- AS ACCEPTED BY THE ASSESSEE. IN THESE FACTS TH E HONBLE COURT HELD THAT THE PROVISIONS OF SECTION 69 WERE APPLICABLE A ND THERE WAS NO ERROR IN THE ORDER OF THE TRIBUNAL WHICH ACCEPTED THE FIGURE OF INVESTMENT AT RS. 10 67 638/-. FINALLY THE CITATION OF THE CASE AT (2002) 254 ITR 117 (DEL) IS INCORRECT BECAUSE THE CASE REPORTED THERE CIT VS. SOHAN SINGH DEALS WITH LEVY OF PENALTY U/S 271(1)(C) ON THE AMOUNT ADDED TO THE INCOME REPRESENTING THE INCOME OF THE BENAMI FIR M. 7.1 FROM ALL THESE CASES IT IS CLEAR THAT THE INVESTMENT HAD BEEN ADMITTED BY THE ASSESSEE AND THE QUESTION WAS ON LY REGARDING EXAMINATION OF THE EXPLANATION OF THE ASSESSEE. IN THIS CASE THE ASSESSEE HAS NOT ADMITTED TO ANY INVESTMENT IN THE SHARES O F THE AGM IN THIS YEAR. THEREFORE THE RATIO OF THESE CASES IS NOT APPL ICABLE. 8. SECTION 69 REGARDING UNEXPLAINED INVESTMENTS IS APPLICABLE WHERE THE ASSESSEE HAS MADE INVESTMENTS WHICH AR E NOT RECORDED IN THE BOOKS OF ACCOUNT IF ANY MAINTAINED BY HIM FOR AN Y SOURCE OF INCOME. IT ITA NO. 1219(DEL)/2010 30 PROVIDES THAT IF THE ASSESSEE OFFERS NO EXPLANA TION ABOUT THE NATURE AND SOURCE OF INVESTMENT OR THE EXPLANATION IS NOT FOU ND TO BE SATISFACTORY THE VALUE OF INVESTMENTS MAY BE DEEMED TO BE THE INC OME OF THE ASSESSEE OF THE RELEVANT FINANCIAL YEAR. THE FIRST LIMB OF TH E PROVISION DEALS WITH INVESTMENT MADE WHICH IS NOT RECORDED IN THE BO OKS OF ACCOUNT IF ANY MAINTAINED BY THE ASSESSEE. THE BURDEN TO PROVE T HAT THE INVESTMENT HAS BEEN MADE IS ON THE ASSESSING OFFICER. ONCE SUCH BURDEN IS DISCHARGED WE MOVE TO THE SECOND LIMB WHICH PROVIDES THAT IT IS FOR THE ASSESSEE TO SATISFACTORILY EXPLAIN THE NATURE AND SOURCE OF I NVESTMENT. WE ARE OF THE VIEW THAT THE BURDEN TO PROVE THAT THE INVESTMENT HAS BEEN MADE BY THE ASSESSEE HAS NOT BEEN DISCHARGED BY THE AO. THE EVIDENCE ON RECORD SHOWS THAT THE MONEY FLOWED FROM THE CFSL FOR THE ULTIMATE BENEFIT OF SHRI ANIRUDH KUMAR AND HIS FAMILY MEMBERS. AS P ER ENQUIRIES OF THE INVESTIGATION WING CFSL WAS INDULGING IN PROVID ING ACCOMMODATION ENTRIES. IN ABSENCE OF ANY DIRECT LINKAGE WITH T HE ASSESSEE AS DISCUSSED ABOVE IT IS HELD THAT THE BURDEN CAST ON THE AO U/S 69 REMAINS UN- DISCHARGED. THEREFORE THE ADDITION MADE TO THE I NCOME CANNOT BE SUSTAINED. ITA NO. 1219(DEL)/2010 31 8.1 IT MAY BE MENTIONED THAT CERTAIN OTHER ARGUM ENTS WERE TAKEN BY THE LD. COUNSEL. THESE ARE LACK OF OPPORTUNITY TO C ROSS-EXAMINE THE DEPONENTS THOUGH THE VERSION OF THE LD. SENIOR D.R. IS DIFF ERENT NON-EXAMINATION OF SHRI DEEPAK CHANGIA ETC. ARE NOT DISCUSSED BECAU SE OF THE PRIMARY FINDING THAT IT HAS NOT BEEN PROVED THAT THE ASSESSEE HAS MADE INVESTMENT IN THE SHARES. 9. IN THE RESULT THE APPEAL IS ALLOWED. SD/- SD/- (I.P. BANSAL) (K.G. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER SP SATIA COPY OF THE ORDER FORWARDED TO:- ACE MATRIX SOLUTIONS LTD. NEW DELHI. ITO COY. WARD 1(2) NEW DELHI. CIT(A) CIT THE D.R. ITAT NEW DELHI. ASSISTANT REGISTRAR.