Shreenath Heritage Liquor Pvt Ltd New Delhi v. Acit Jhunjhunu

Vk Dj Vihyh Vf Kdj K T Iqj U K Ihb T Iqj In The Income Tax Appellate Tribunal Jaipur Benche S Jaipur Jh Fot Ikwy Jko U Kf D Lnl Oa Jh Foe Flag Kno Ys Kk Lnl Ds Le K Before Shri Vijay Pal Rao Jm Shri Vikram Singh Yadav Am Vk Dj Vihy La Ita No 130 Jp 2017 Fu Kzkj K Ok Z Assessment Years 2012 13 M S Shreenath Heritage Liquor Pvt Ltd G 1 100 Riico Area Junjhunu 333001 Cuke Vs Acit Circle Junjhunu Rajasthan Lfkk H Ys Kk La Thvkbzvkj La Pan Gir No Aaics 3950 L Vihykfkhz Ap Pellant Izr Fkhz Respondent Fu Kzkfjrh Dh Vksj L S Assessee By Shri Himanshu Goyal Ca Jktlo Dh Vksj Ls Revenue By Smt Roshanta Meena Jcit Lquokbz Dh Rkjh K Date Of Hearing 11 10 2017 Mn Kksk Kk Dh Rkjh K Date Of Pronouncement 18 12 2017 Vknsk Order Per Vikram Singh Yadav A M This Is An Appeal Filed By The Assessee Against Th E Order Of Ld Cit A Iii Jaipur Dated 22 09 2016 For Assessment Year 2012 13 Wherein The Assessee Has Taken The Following Ground S Of Appeal As Under 1 That On The Facts And As Per The Circumstances Of The Case Both The Lower Authorities I E Ao Cit A Have E Rred In Assessing The Income Of The Appellant At Rs 96 30 000 Made Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 2 By The Ao As Confirmed By The First Appellate Aut Hority May Please Be Deleted 2 That On The Facts And In The Circumstances Of Th E Case In Law The Ld Cit A Have Erred In Confirming The Ad Dition Aggregating To Rs 96 30 000 Made By The Ao The Ao Cit A Failed To Consider The Creditworthiness Gen Uineness And Identity Of The Parties From Whom The Share Capital And Securities Premium Has Been Received And Also Failed To Apprec Iate The Fact That The Primary Onus Was Duly Discharged By The Ap Pellant And That The Ao Had Failed To Conduct Direct Enquiries The Failure Of Ao Cannot Be Construed To The Prejudice Of The Appe Llant Merely On The Basis Of Preponderance Of Probalities As Su Ch The Aggregate Addition Of Rs 96 30 000 Made To The R Eturned Income May Please Be Deleted 3 That The Lower Authorities Have Failed To Apprec Iate The Creditworthiness Of The Share Applicants Solely On The Basis Of Income Criteria Of The Share Applicants Without Loo King Into Their Financial Status Capacity As Such The Addition Of Rs 96 30 000 Made To The Returned Income May Please Be Deleted 4 That On The Facts And In The Circumstances Of Th E Case In Law The Direction Of The Ld Cit A Qua Initiatio N Of Penalty Proceedings U S 271 D Is Incorrect And Is Averse To Judicial Propositions And As Such It May Be Held That Such Directions Are Invalid And Impermissible Under The Law 5 That On The Facts And In The Circumstances Of Th E Case In Law The Lower Authorities Have Failed To Appreciat E That The Purported Non Compliance During The Assessment Proc Eeding Was Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 3 Beyond The Control Of The Appellant And The Appella Nt Was Prevented By The Sufficient Reasons On Account Of F Inancial Crises And Dispute With Bankers 2 The Issue In Ground No 1 To 3 Of The Assessee S Appeal Relates To Addition Made By Ao U S 68 Of The Act Amounting To Rs 96 30 000 These Additions Have Been Made In Respect Of Amount Received By The Assessee Company From Shri Janardhan Sharma Amounti Ng To Rs 30 00 000 And From Shri Jagjit Singh Amounting To Rs 66 30 000 During The Year Under Consideration 3 Briefly Stated The Facts Of The Case Are That Du Ring The Assessment Proceedings On Verification Of Books Of Accounts The Ao Observed That The Assessee Company Has Received Capital In The Fo Rm Of Share Application Money And Share Premium And The Assesse E Was Accordingly Asked To Furnish The Necessary Details In This Regard In Respect Of Shri Janardhan Sharma The Assessee Subm Itted That He Is A Contractor In Delhi From Whom The Assessee Has Rece Ived Share Application Money In Cash For A Sum Of Rs 30 00 00 0 It Was Submitted Shri Janardhan Sharma Has A Sanctioned Ca Sh Credit Limit With Drawing Power Of Rs 1 35 00 000 Which Has B Een Used For Paying The Share Application Money Further Copy O F His Income Tax Return For Last 3 Years Was Also Submitted 4 The Assessing Officer On Perusal Of The Balance Sheet Of Shri Janardhan Sharma Proprietary Concern M S K K Cons Truction Company Observed That He Has Shown Investments Of Rs 53 20 000 In Respect Of Shares In Indian Companies Without Any Specific Endorsement That Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 4 Any Investment Was Made With The Assessee Company The Assessing Officer Further Observed That The Bank Statements F Iled Alongwith The Above Reply Does Not Reflect Any Evidence That An A Mount Of Rs 30 00 000 Was Paid To The Assessee Further The Contention Of The Assessee That Shri Zanardhan Sharma Has Paid The Sh Are Application Money Through His Cash Credit Account Was Not Accep Ted For Reason That Cc Limit In Respect Of Which Drawing Power Is Made Available To The Person Is For His Business Exigencies And Not For T He Investment In Shares Of The Assessee Company Further The Asse Ssing Officer Has Gone Through The Return Of Income Filed By Shri Zan Ardhan Sharma For Ay 2010 11 2011 12 2012 13 Which Shows The Retur Ned Income Of Rs 9 72 540 Rs 6 89 600 And Rs 8 04 400 R Espectively And Observed That The Returned Income Was Meager As Com Pared To The Share Application Money Of Rs 30 000 00 Paid To The Assessee Company Further The Ld Ar Was Specifically Asked To Produce Shri Zanardhan Sharma Vide Order Sheet Entry Dated 25 03 2015 However There Was No Compliance 5 The Assessing Officer Referred To The Decision O F Honble Supreme Court In Case Of N Tarika Property Invest P Ltd Vs Commissioner Of Income Tax Reported In 51 Taxmann Com 387 Wherein I T Was Held That Where False Evidences Had Been Adduced By The Asses See To Give Colour Of Genuineness To Bogus Entries Through Bank Accoun Ts And Deposits Which Were Mostly In Cash The Assessing Officer Wa S Justified In Making Addition U S 68 Of The Act It Was Accordingly Held By The Ao That Share Application Money Received From Shri Zanardhan Shar Ma Amounting To Rs 30 00 000 Remained Unproven And Found Infirmi Ty In His Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 5 Creditworthiness And Genuineness And The Whole Amou Nt Was Brought To Tax U S 68 Of The Act 6 Being Aggrieved The Assessee Carried The Matter In Appeal Before The Ld Cit A The Ld Cit A Again Gone Through Th E Details So Relied Upon By The Assessee As Submitted During The Assess Ment Proceedings And Observed That Shri Zanardhan Sharma Has Made Co Ntributions Towards Share Application Money In Cash And It Is N Ot Understandable As To Why He Made Cash Payment On Various Dates When H E Had A Bank Account It Was Further Held By The Ld Cit A That Mere Filing Of Confirmation Does Not Absolve From Liability Of Pro Ving The Creditworthiness Of The Applicant When The Amount I S Received In Cash For No Valid Reasons Further From Perusal Of The Bank Statement Shri Zanardhan Sharma The Ld Cit A Observed From Peru Sal Of Bank Statements That The Funds Available Were Utilized F Or Business Purpose Of His Proprietary Concern M S K K Construction Co And He Has Failed To Give Any Nexus Between Fund Drawn From His Bank Account With The Investments Made In The Assessee Company 7 The Above Findings Of The Ld Cit A Remain Uncon Troverted Before Us The Ld Ar Has Not Been Able To Demonstrate Thr Ough Any Verifiable Evidence That Share Application In Form Of Cash Has Been Withdrawn From Shri Janardhan Sharmas Bank Account And Which Has Been Paid To The Assessee Company The Same Thus Puts A Ques Tion Mark On Genuineness Of The Whole Transaction And The Initia L Onus Cast On The Assessee In Terms Of Section 68 Cannot Be Said To H Ave Been Discharged In The Instant Case Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 6 8 In Respect Of Shri Jagjit Singh Who Is British C Itizen From Whom The Assessee Has Claimed To Be Received Rs 66 30 000 D Uring The Year Under Consideration The Assessee Has Submitted The Return Of Share Allotment A Copy Of Itr Returns Of His Company Qu Ick Forex Transfer Limited For Last 3 Years A Copy Of His Nri Accoun T Bank Statement A Copy Of His Passport And A Copy Of His Domestic Ele Ctricity Bill It Was Also Submitted That Rs 30 000 00 Was Sent Direct Ly From His Bank Account And The Balance Amount Of Rs 36 30 000 Was Paid By His Relatives In Snhl Bank Account On Perusal Of The N Otes To The Financial Statement For The Year Ended 31 08 2011 In The Case Of Quick Forex Transfer Limited Wherein He Is Only The Share Holde R Cum Director The Assessing Officer Observed That The Said Financial Statements Do Not Support The Credit Worthiness Of Shri Jagjit Singh In Making Advance To The Assessee Company It Was Further Held That The Assessee Has Not Filed Any Evidence Regarding His Wifes Income Whic H Has Been Contended By The Ld Ar In Support Of His Family Cr Editwothiness It Was Accordingly Held That Share Application Money Recei Pt From Shri Jagjit Singh Amounting To Rs 66 30 000 Remains Unproven And Found Infirmity In His Creditworthiness And Genuineness A Nd The Whole Amount Was Accordingly Brought To Tax U S 68 Of The Act 9 On Appeal To The Ld Cit A She Also Confirmed The Finding Of The Assessing Officer And Her Relevant Findings Are As Under With Regard To Other Credit Of Rs 66 30 000 Rec Eived From Nri Sh Jagjit Singh From The Details Of His Income And Ot Her Documents As Filed Before Me It Is Seen From Balance Sheet Of H Is Company Quick Forex Transfer Limited That He Is Having Income Of 6705 13780 Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 7 11703 Only For The Year Ended On 31 08 2009 31 03 2010 31 03 2011 Respectively Which Are Net Of Payment O F Taxes From Details It Appears That Jagjit Singh Has Only One S Ource Of Income And That Is From This Company Whereas Electricity Bills For 2 Months 7 Aug 19 Oct 2011 Itself Is Of 35085 Therefore From These Facts It Is Evident That His Cost Of Living In Uk Could Only Be Met Out From The Above Stated Income And He Had No Additional Funds For Making Investments With The Appellate Company His Creditworthiness Was Not Proved By Bank Stateme Nt Documentary Evidence In These Circumstances The Addition On A Ccount Of Share Application Made U S 68 Of Rs 96 30 000 Is Uphel D 10 Before Us The Ld Ar Again Has Not Been Able To Demonstrate Through Any Verifiable Evidence As To How The Above Findings Of The Ld Cit A Are Perverse From Appreciation Of Material Available On Record Firstly It Is Noted That Only An Amount Of Rs 30 L Acs Has Been Received From Jagjit Singhs Own Bank Account And The Balanc E Has Been Claimed To Have Been Received Directly By The Assessee Comp Any From His Relatives There Is Nothing On Record To Support T He Fact That His Relatives Have Paid The Money On His Behalf To The Assessee Company There Is No Confirmation Either From The Relatives Or The Bankers To The Effect That Money Has Been Remitted On Behalf Of Ja Gjit Singh Towards The Share Application Money Further Both The Ao As Well As Ld Cit A Have Analysed The Financial Statements And Tax Retu Rns Of His Company And Found That Jagjit Singh Is Not Creditworthy To Make Such An Investment Of Rs 63 30 Lacs In The Assessee Company In Light Of The Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 8 Same We Find That The Initial Onus Cast On The Ass Essee Company In Terms Of Section 68 Has Not Been Discharged In The Instant Case 11 Now Coming To Various Legal Authorities On The Subject Which Have Been Quoted By The Ld Ar In Support Of His Contenti Ons The Same Have Recently Been Analysed By Us Speaking Through One Of Us In Exhaustive Detail In Case Of Acit Circle 1 Jaipur Vs Bright Metals Pvt Ltd Jaipur Ita No 702 Jp 14 Dated 24 02 2017 As Under 3 In Order To Appreciate The Rival Contentions W E Refer To Various Legal Authorities On The Subject Which Has Been Bro Ught To Our Notice By Both The Parties 3 1 In Case Of Navodaya Castle P Ltd Supra Which Is A Case Of A Private Limited Company It Is Noted That The Slp Has Been Rejected By The Honble Supreme Court Holding That The Court Do Not See Any Merit In The Slp Against The Order Of Honble Delhi High Court In This Case The Honble Delhi High Court Has Referred To Catena Of Earlier Decisions Such As Case Of Cit V Nova Promoters Finlease P Ltd 2012 342 Itr 169 Cit V N R Portfolio P Ltd 2014 222 Taxman 157 Cit V Sophia Finance Ltd 1994 205 Itr 98 Delhi Fb Cit V Divine Leasing Finance Ltd 2008 299 Itr 268 Cit V D Urga Prasad More 1971 82 Itr 540 Sc And Cit V Nipun Builders Developers 2013 350 Itr 407 And Has Held As Under 12 The Main Submission Of The Learned Counsel For The Assessee Is That Once The Assessee Had Been Able To Show That T He Shareholder Companies Were Duly Incorporated By The Registrar O F Companies Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 9 Their Identity Stood Established Genuineness Of Th E Transactions Stood Established As Payments Were Made Through Acc Ounts Payee Cheques Bank Account And Mere Deposit Of Cash In T He Bank Accounts Prior To Issue Of Cheque Pay Orders Etc W Ould Only Raise Suspicion And It Was For The Assessing Officer To Conduct Further Investigation But It Did Not Follow That The Money Belonged To The Assessee And Was Their Unaccounted Money Which Had Been Channelized 13 As We Perceive There Are Two Sets Of Judgments And Cases But These Judgments And Cases Proceed On Their Own Fact S In One Set Of Cases The Assessee Produced Necessary Documents Ev Idence To Show And Establish Identity Of The Shareholders Ba Nk Account From Which Payment Was Made The Fact That Payments Were Received Thorough Banking Channels Filed Necessary Affidavi Ts Of The Shareholders Or Confirmations Of The Directors Of T He Shareholder Companies But Thereafter No Further Inquiries Were Conducted The Second Set Of Cases Are Those Where There Was Evide Nce And Material To Show That The Shareholder Company Was Only A Pap Er Company Having No Source Of Income But Had Made Substantia L And Huge Investments In The Form Of Share Application Money The Assessing Officer Has Referred To The Bank Statement Financi Al Position Of The Recipient And Beneficiary Assessee And Surrounding Circumstances The Primary Requirements Which Should Be Satisfied In Such Cases Is Identification Of The Creditors Shareholder Credit Worthiness Of Creditors Shareholder And Genuineness Of The Transa Ction These Three Requirements Have To Be Tested Not Superficia Lly But In Depth Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 10 Having Regard To The Human Probabilities And Normal Course Of Human Conduct 14 Certificate Of Incorporation Pan Etc Are Rele Vant For Purchase Of Identification But Have Their Limitation When Ther E Is Evidence And Material To Show That The Subscriber Was A Paper Co Mpany And Not A Genuine Investor 18 Lovely Exports P Ltd Supra Was Also Consi Dered And Distinguished In N R Portfolio P Ltd Supra A Nd It Was Held That The Entire Evidence Available On Record Has To Be C Onsidered After Relying Upon Cit V Nipun Builders And Developers 2013 350 Itr 407 214 Taxman 429 30 Taxmann Com 292 Delhi Wher Ein It Has Been Held That A Reasonable Approach Has To Be Adop Ted And Whether Initial Onus Stands Discharged Would Depend Upon Facts And Circumstances Of Each Case In Case Of Private Limi Ted Companies Generally Persons Known To Directors Or Shareholder S Directly Or Indirectly Buy Or Subscribe To Shares Upon Receip T Of Money The Share Subscribers Do Not Lose Touch And Become Inco Mmunicado Call Money Dividends Warrants Etc Have To Be Sent An D The Relationship Remains A Continuing One Therefore An Assessee Ca Nnot Simply Furnish Some Details And Remain Quiet When Summons Issued To Shareholders Remain Un Served And Uncomplied As A General Proposition It Would Be Improper To Universally Ho Ld That The Assessee Cannot Plead That They Had Received Money But Could Do Nothing More And It Was For The Assessing Officer T O Enforce Shareholders Attendance In Spite Of The Fact That The Shareholders Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 11 Were Missing And Not Available Their Reluctance An D Hiding May Reflect On The Genuineness Of The Transaction And C Reditworthiness Of The Creditor It Would Be Also Incorrect To Univers Ally State That An Inspector Must Be Sent To Verify The Shareholders S Ubscribers At The Available Addresses Though This Might Be Required In Some Cases Similarly It Would Be Incorrect To State That The Assessing Officer Should Ascertain And Get Addresses From The Registr Ar Of Companies Website Or Search For The Addresses Of Shareholders Themselves Creditworthiness Is Not Proved By Showing Issue And Receipt Of A Cheque Or By Furnishing A Copy Of Statement Of Bank Account When Circumstances Requires That There Should Be Some Mo Re Evidence Of Positive Nature To Show That The Subscribers Had Ma De Genuine Investment Or Had Acted As Angel Investors After D Ue Diligence Or For Personal Reasons The Final Conclusion Must Be Prag Matic And Practical Which Takes Into Account Holistic View O F The Entire Evidence Including The Difficulties Which The Assessee May Face To Unimpeachably Establish Creditworthiness Of The Sha Reholders 20 Now When We Go To The Order Of The Tribunal In Th E Present Case We Notice That The Tribunal Has Merely Reprod Uced The Order Of The Commissioner Of Income Tax Appeals And Upheld The Deletion Of The Addition In Fact They Substantially Relied Upon And Quoted The Decision Of Its Coordinate Bench In The Case Of Maf Academy P Ltd Supra A Decision Which Has Been Overturned By The Delhi High Court Vide Its Judgment In Maf Academy P Ltd Su Pra In The Impugned Order It Is Accepted That The Assessee Was Unable To Produce Directors And Principal Officers Of The Six Shareholder Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 12 Companies And Also The Fact That As Per The Informa Tion And Details Collected By The Assessing Officer From The Concern Ed Bank The Assessing Officer Has Observed That There Were Genu Ine Concerns About Identity Creditworthiness Of Shareholders As Well As Genuineness Of The Transactions 21 In View Of The Aforesaid Discussion We Feel That The Matter Requires An Order Of Remit To The Tribunal For Fres H Adjudication Keeping In View The Aforesaid Case Law The Questio N Of Law Is Therefore Answered In Favour Of The Revenue And Ag Ainst The Respondent Assessee But With An Order Of Remit To The Tribunal To Decide The Whole Issue Afresh One Of The Reasons Why We Have Remitted The Matter Is That The Cross Objections Of The Respondent Assessee Questioning Notice Under Section 147 148 W Ere Dismissed As Infructous And Even If We Decide The Issue On Me Rits In Favour Of The Revenue The Cross Objections Would Got Revived And Require Adjudication The Appeal Is Accordingly Disposed Of 3 2 We Now Refer To Another Leading Case Of Lovely Exports P Ltd Supra Which Has Been Considered And Referred In Navodaya Castle Case Supra And Which Has Also Been Quoted By The Ld Ar In Support Of Its Contention It Was A Case Of Public Limited Company Where Shares Were Subscribed By Public And The Fact S Thereof Have Been Set Out In The Judgment Of Honble Delhi High Court Reported As Divine Leasing Finance Ltd 2008 299 Itr 268 T He Petition For Leave To Appeal Against This Order Was Dismissed By The Honble Supreme Court Observing We Find No Merit In This S Pecial Leave Petition For The Simple Reason That If The Share Ap Plication Money Is Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 13 Received By The Assessee Company From Alleged Bogus Shareholders Whose Names Are Given To The Ao Then The Departmen T Is Free To Proceed To Reopen Their Individual Assessments In A Ccordance With Law Hence We Find No Infirmity With The Impugned Judgm Ent In That Case The Honble Delhi High Court Has Held As Under 6 We Find It Indeed Remarkable That The Attention Of The Sophia Finance Full Bench Had Not Been Drawn To The Decisi On Of The Supreme Court In Cit V Orissa Corpn P Ltd 19 86 159 Itr 78 Which If Cited Would Really Have Left No Alternat Ive To The Full Bench But To Arrive At The Conclusion It Did The B Ooks Of Account Of The Assessee Contained Three Cash Credits Aggreg Ating Rs 1 50 000 Allegedly Received As Loans From Three Ind Ividual Creditors Under Hundis Letters Of Confirmation As Well As The Discharged Hundis Were Produced But Notices Summon S Sent To Them Remained Unserved Because They Had Reportedly Left That Address The View Of The Tribunal Was That Merely B Ecause The Assessee Could Not Produce These Three Parties The Re Was Nevertheless No Justification To Draw An Adverse In Ference This Approach As Accorded Approval By The Supreme Court In These Words In This Case The Assessee Had Given The Names And Addresses Of The Alleged Creditors It Was In The K Nowledge Of The Revenue That The Said Creditors Were Income Tax Assessees Their Index Numbers Were In The File Of The Revenue The Revenue Apart From Issuing Notices Un Der Section 131 At The Instance Of The Assessee Did No T Pursue The Matter Further The Revenue Did Not Examine The Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 14 Source Of Income Of The Said Alleged Creditors To F Ind Out Whether They Were Creditworthy Or Were Such Who Cou Ld Advance The Alleged Loans There Was No Effort Made To Pursue The So Called Alleged Creditors In Those Circumstances The Assessee Could Not Do Anything F Urther In The Premises If The Tribunal Came To The Conclu Sion That The Assessee Has Discharged The Burden That Lay On Him Then It Could Not Be Said That Such A Conclusion Wa S Unreasonable Or Perverse Or Based On No Evidence I F The Conclusion Is Based On Some Evidence On Which A Conclusion Could Be Arrived At No Question Of Law As Such Arises P 84 This Reasoning Must Apply A Fortiori To Large Scal E Subscriptions To The Shares Of A Public Company Where The Latter May Have No Material Other Than The Application Forms And Bank Transaction Details To Give Some Indication Of The Identity Of These Subscribers It May Not Apply In Circumstances Wher E The Shares Are Allotted Directly By The Company Assessee Or To Creditors Of The Assessee This Is Why This Court Has Adopted A Very Strict Approach To The Burden Being Laid Almost Entirely O N An Assessee Which Receives A Gift 7 Sumati Dayal V Cit 1995 214 Itr 801 Sc A Succinct Yet Complete Precis On The Essentials Of Income Tax Lia Bility Can Be Discerned From These Words In All Cases In Which A Receipt Is Sought To Be Taxed As Income The Burden Lies On Th E Department To Prove That It Is Within The Taxing Provision And If The Receipt Is Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 15 In The Nature Of Income The Burden Of Proving That It Is Not Taxable Because It Falls Within The Exemption Provi Ded By The Act Lies Upon The Assessee This Decision Is Adequate Authority For The Proposition That By Virtue Of Section 68 Of The Income Tax Act The Assessee Is Obliged To Establish That Amounts C Redited In The Accounts Do Not Represent Its Income In That Case The Assessees Version That She Had Won Them Through Betting On Ho Rse Racing In Two Consecutive Years Did Not Attract Credibility The Apex Court Had Followed Its Earlier Decision Namely Orissa C Orpn P Ltd S Case Supra Wherein It Had Held That Since The Ass Essee Had Given The Names And Addresses Of The Creditors All Of Whom Were Income Tax Assessees The Failure Of The Creditors To Respond To The Departments Notices Would Not Justify An Adver Se Inference Being Drawn Against The Assessees The Court Also K Ept In Perspective The Fact That The Documentation Had Als O Been Produced By The Assessee It Is Obvious That The Su Preme Court Considered That In These Circumstances The Onus Of Proof Had Been Discharged By The Assessee It Is Also Palpabl E That The Supreme Court Was Of The Further Opinion That The D Epartment Had Not Discharged The Burden Of Proof That Had Shi Fted To It Since It Did Nothing More Than Issue Notices Under Section 131 Of The Income Tax Act Therefore The Department Ought To Have Made Efforts To Pursue These Notices Creditors To D Etermine Their Creditworthiness These Observations Sound The Deat H Knell For The Contentions Raised On Behalf Of The Department In The Present Batch Of Appeals Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 16 13 There Cannot Be Two Opinions On The Aspect That Th E Pernicious Practice Of Conversion Of Unaccounted Mo Ney Through The Masquerade Or Channel Of Investment In The Shar E Capital Of A Company Must Be Firmly Excoriated By The Revenue E Qually Where The Preponderance Of Evidence Indicates Absen Ce Of Culpability And Complexity Of The Assessee It Shoul D Not Be Harassed By The Revenues Insistence That It Should Prove The Negative In The Case Of A Public Issue The Compan Y Concerned Cannot Be Expected To Know Every Detail Pertaining To The Identity As Well As Financial Worth Of Each Of Its Subscribe Rs The Company Must However Maintain And Make Available To The A Ssessing Officer For His Perusal All The Information Contai Ned In The Statutory Share Application Documents In The Case Of Private Placement The Legal Regime Would Not Be The Same A Delicate Balance Must Be Maintained While Walking The Tightr Ope Of Sections 68 And 69 Of The It Act The Burden Of Pro Of Can Seldom Be Discharged To The Hilt By The Assessee If The A Ssessing Officer Harbours Doubts Of The Legitimacy Of Any Subscripti On He Is Empowered Nay Duty Bound To Carry Out Thorough Investigations But If The Assessing Officer Fails To Unearth Any Wrong Or Illegal Dealings He Cannot Obdurately Adh Ere To His Suspicions And Treat The Subscribed Capital As The Undisclosed Income Of The Company 16 In This Analysis A Distillation Of The Precedents Yields The Following Propositions Of Law In The Context Of Sec Tion 68 Of The Income Tax Act The Assessee Has To Prima Facie Pro Ve 1 The Identity Of The Creditor Sub Scriber 2 The Genui Neness Of The Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 17 Transaction Namely Whether It Has Been Transmitte D Through Banking Or Other Indisputable Channels 3 The Cre Ditworthiness Or Financial Strength Of The Creditor Subscriber 4 If Relevant Details Of The Address Or Pan Identity Of The Credi Tor Subscriber Are Furnished To The Department Along With Copies O F The Shareholders Register Share Application Forms Sha Re Transfer Register Etc It Would Constitute Acceptable Proof Or Acceptable Explanation By The Assessee 5 The Department Wou Ld Not Be Justified In Drawing An Adverse Inference Only Beca Use The Creditor Subscriber Fails Or Neglects To Respond To Its Notices 6 The Onus Would Not Stand Discharged If The Creditor Subscriber Denies Or Repudiates The Transaction Set Up By The Assessee Nor Should The Assessing Officer Take Such Repudiation At Face Value Andconstrue It Without More Against The Assessee 7 The Assessing Officer Is Duty Bound To Investigate The Creditworthiness Of The Creditor Subscriber The Gen Uineness Of The Transaction And The Veracity Of The Repudiation 3 4 We Now Refer To The Decision Of The Honble Del Hi High Court In Case Of Commissioner Of Income Tax V Nova Promoters Finlease P Ltd 2012 342 Itr 169 Delhi Which Is Again A Case Of A Private Limited Company And Which Has Bee N Followed In Case Of Navodaya Castles Supra In This Case The Hon Ble Delhi High Court Has Held As Under 38 The Ratio Of A Decision In Case Of Lovely Exports Has To Be Understood And Appreciated In The Background Of The Facts Of That Case So Understood It Will Be Seen That Wher E The Complete Particulars Of The Share Applicants Such As Their N Ames And Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 18 Addresses Income Tax File Numbers Their Creditwor Thiness Share Application Forms And Share Holders Register Shar E Transfer Register Etc Are Furnished To The Assessing Office R And The Assessing Officer Has Not Conducted Any Enquiry Int O The Same Or Has No Material In His Possession To Show That Thos E Particulars Are False And Cannot Be Acted Upon Then No Additio N Can Be Made In The Hands Of The Company Under Sec 68 And The Remedy Open To The Revenue Is To Go After The Share Applic Ants In Accordance With Law We Are Afraid That We Cannot A Pply The Ratio To A Case Such As The Present One Where The Asses Sing Officer Is In Possession Of Material That Discredits And Impea Ches The Particulars Furnished By The Assessee And Also Esta Blishes The Link Between Self Confessed Accommodation Entry Provide Rs Whose Business It Is To Help Assessees Bring Into Their B Ooks Of Account Their Unaccounted Monies Through The Medium Of Shar E Subscription And The Assessee The Ratio Is Inappl Icable To A Case Again Such As The Present One Where The Involvemen T Of The Assessee In Such Modus Operandi Is Clearly Indicate D By Valid Material Made Available To The Assessing Officer As A Result Of Investigations Carried Out By The Revenue Authoriti Es Into The Activities Of Such Entry Providers The Existence With The Assessing Officer Of Material Showing That The Shar E Subscriptions Were Collected As Part Of A Pre Meditated Plan A Smokescreen Conceived And Executed With The Connivance Or Invol Vement Of The Assessee Excludes The Applicability Of The Rati O In Our Understanding The Ratio Is Attracted To A Case Whe Re It Is A Simple Question Of Whether The Assessee Has Discharged The Burden Placed Upon Him Under Sec 68 To Prove And Establis H The Identity And Creditworthiness Of The Share Applicant And The Genuineness Of The Transaction In Such A Case The Assessing O Fficer Cannot Sit Back With Folded Hands Till The Assessee Exhausts A Ll The Evidence Or Material In His Possession And Then Come Forward To Merely Reject The Same Without Carrying Out Any Verificat Ion Or Enquiry Into The Material Placed Before Him The Case Befor E Us Does Not Fall Under This Category And It Would Be A Travesty Of Truth And Justice To Express A View To The Contrary 39 The Case Of Cit V Orissa Corporation P Ltd 1 986 159 Itr 78 25 Taxman 80 Sc Exemplifies The Category Of Case S Where No Action Is Taken By The Assessing Officer T O Verify Or Conduct An Enquiry Into The Particulars About The C Reditors Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 19 Furnished By The Assessee Including Their Income T Ax File Numbers In The Same Category Fall Cases Decided By This Court In Cit V Dolphin Canpack 2006 283 Itr 190 Cit V Makhni Tyagi P Ltd 2004 267 Itr 433 136 Taxman 641 Cit V Antartica Investment P Ltd 2003 262 Itr 493 133 Taxman 605 And Cit V Achal Investment Ltd 2004 268 Itr 211 136 Taxman 335 3 5 We Now Refer To The Decision Of The Honble Del Hi High Court In Case Of Commissioner Of Income Tax V N R Portfolio P L Td 2014 222 Taxman 157 Which Is Again A Case Of A Private Limited Company And Which Has Been Followed In Case Of Navo Daya Castles Supra In This Case The Honble Delhi Hi Gh Court Has Held As Under 18 In The Remand Report The Assessing Officer Referr Ed To The Provisions Of Section 68 Of The Act And Their Appli Cability This According To Us Is The Correct And True Legal Posit Ion As Identity Creditworthiness And Genuineness Have To Be Establi Shed Pan Numbers Are Allotted On The Basis Of Applications W Ithout Actual De Facto Verification Of The Identity Or Ascertaini Ng Active Nature Of Business Activity Pan Is A Number Which Is Allo Tted And Helps The Revenue Keep Track Of The Transactions Pan Num Ber Is Relevant But Cannot Be Blindly And Without Consider Ing Surrounding Circumstances Treated As Sufficient To Discharge The Onus Even When Payment Is Through Bank Account 19 On The Question Of Creditworthiness And Genuinenes S It Was Highlighted That The Money No Doubt Was Received Th Rough Banking Channels But Did Not Reflect Actual Genuin E Business Activity The Share Subscribers Did Not Have Their Own Profit Making Apparatus And Were Not Involved In Business Activity They Merely Rotated Money Which Was Coming Through The Bank Accounts Which Means Deposits By Way Of Cash And I Ssue Of Cheques The Bank Accounts Therefore Did Not Refl Ect Their Creditworthiness Or Even Genuineness Of The Transac Tion The Beneficiaries Including The Respondent Assessee D Id Not Give Any Share Dividend Or Interest To The Said Entry Operat Ors Subscribers Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 20 The Profit Motive Normal In Case Of Investment Was Entirely Absent In The Present Case No Profit Or Dividend Was Declared On The Shares Any Person Who Would Invest Money Or G Ive Loan Would Certainly Seek Return Or Income As Considerat Ion These Facts Are Not Adverted To And As Noticed Below Are True And Correct They Are Undoubtedly Relevant And Material Facts For Ascertaining Creditworthiness And Genuineness Of Th E Transactions 29 In Cit V Nipun Builders Developers P Ltd 2013 350 Itr 407 214 Taxman 429 30 Taxmann Com 292 Delhi This Principle Has Been Reiterated Holding That The Asse Ssee And The Assessing Officer Have To Adopt A Reasonable Approa Ch And When The Initial Onus On The Assessee Would Stand Discha Rged Depends Upon Facts And Circumstances Of Each Case In Case Of Private Limited Companies Generally Persons Known To Direc Tors Or Shareholders Directly Or Indirectly Buy Or Subscr Ibe To Shares Upon Receipt Of Money The Share Subscribers Do Not Lose Touch And Become Incommunicado Call Monies Dividends W Arrants Etc Have To Be Sent And The Relationship Is Was A Continuing One In Such Cases Therefore The Assessee Cannot Simpl Y Furnish Details And Remain Quiet Even When Summons Issued T O Shareholders Under Section 131 Return Unserved And Uncomplied This Approach Would Be Unreasonable As A General Pr Oposition As The Assessee Cannot Plead That They Had Received Mo Ney But Could Do Nothing More And It Was For The Assessing Officer To Enforce Share Holders Attendance Some Cases Might Require Or Justify Visit By The Inspector To Ascertain Whether The Shareholders Subscribers Were Functioning Or Availa Ble At The Addresses But It Would Be Incorrect To State That The Assessing Officer Should Get The Addresses From Registrar Of Companies Website Or Search For The Addresses Of Shareholders And Communicate With Them Similarly Creditworthiness Was Not Proved By Mere Issue Of A Cheque Or By Furnishing A Copy Of Statement Of Bank Account Circumstances Might Requ Ire That There Should Be Some Evidence Of Positive Nature To Show That The Said Subscribers Had Made A Genuine Investment Acted As Angel Investors After Due Diligence Or For Persona L Reasons Thus Finding Or A Conclusion Must Be Practicable Pragma Tic And Might In A Given Case Take Into Account That The Assessee Might Find It Difficult To Unimpeachably Establish Creditworthine Ss Of The Shareholders Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 21 30 What We Perceive And Regard As Correct Position Of Law Is That The Court Or Tribunal Should Be Convinced Abou T The Identity Creditworthiness And Genuineness Of The Transaction The Onus To Prove The Three Factum Is On The Assessee As The Fa Cts Are Within The Assessees Knowledge Mere Production Of Incorp Oration Details Pan Nos Or The Fact That Third Persons Or Company Had Filed Income Tax Details In Case Of A Private Limit Ed Company May Not Be Sufficient When Surrounding And Attending Fa Cts Predicate A Cover Up These Facts Indicate And Reflect Proper Paper Work Or Documentation But Genuineness Creditworthiness Id Entity Are Deeper And Obtrusive Companies No Doubt Are Artifi Cial Or Juristic Persons But They Are Soulless And Are Dependent Upo N The Individuals Behind Them Who Run And Manage The Said Companies It Is The Persons Behind The Company Who Take The Decisions Controls And Manage Them 31 The Respondent Herein Is A Private Limited Company It Is Not The Case Of The Respondent That The Directors Or Pe Rsons Behind The Companies Making The Investment In Their Shares Were Related Or Known To Them It Is Highly Implausible That An Unknown Person Had Made Substantial Investment In A Private Limited Company To The Tune Of Rs 63 80 100 And Rs 75 60 200 In Two Consecutive Assessment Years 2002 03 And 2003 04 Respectively Without Adequately Protecting The Investment And Ensuring Appropriate Returns Other Than The Share Application Forms No Other Agreement Between The Respondent And Third Companies Had Been Placed On R Ecord The Persons Behind These Companies Were Not Produced By The Respondent On The Other Hand Respondent Adopted Pr Evaricate And Non Cooperation Attitude Before The Assessing Officer Once They Came To Know About The Directed Enquiry And Th E Investigation Being Made Evasive And Transient App Roach Before The Assessing Officer Is Limpid And Perspicuous Id Entity Creditworthiness Or Genuineness Of The Transaction Is Not Established By Merely Showing That The Transaction Was Through Banking Channels Or By Account Payee Instrument It May As In The Present Case Required Entail A Deeper Scrutiny It Would Be Incorrect To State That The Onus To Prove The Genui Neness Of The Transaction And Creditworthiness Of The Creditor St Ands Discharged In All Cases If Payment Is Made Through Banking Cha Nnels Whether Or Not Onus Is Discharged Depends Upon Fact S Of Each Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 22 Case It Depends On Whether The Two Parties Are Rel Ated Or Known To Each The Manner Or Mode By Which The Parties Ap Proached Each Other Whether The Transaction Was Entered Int O Through Written Documentation To Protect The Investment Wh Ether The Investor Professes And Was An Angel Investor The Q Uantum Of Money Creditworthiness Of The Recipient The Objec T And Purpose For Which Payment Investment Was Made Etc These Fa Cts Are Basically And Primarily In Knowledge Of The Assesse E And It Is Difficult For Revenue To Prove And Establish The Ne Gative Certificate Of Incorporation Of Company Payment By Banking Channel Etc Cannot In All Cases Tantamount To Sat Isfactory Discharge Of Onus The Facts Of The Present Case No Ticed Above Speak And Are Obvious What Is Unmistakably Visible And Apparent Cannot Be Spurred By Formal But Unreliabl E Pale Evidence Ignoring The Patent And What Is Plain And Writ Large 3 6 We Now Refer To The Decision In Case Of Cit Vs Shree Barkha Synthetics Ltd Supra Wherein The Honble Rajasthan High Court Has Held As Under Head Notes The Assessee Having Been Asked To Furnish Explanat Ion About The Receipt Of Capital Money On Account Of Share Ap Plication Had Furnished The Details Of The Identity Of Persons Wh O Had Made Such Investments The Particulars Of The Receipt An D Gir Number Of The Persons Who Had Made Such Investments In Th E Matter Of Companies Registered Under The Companies Act 1956 Were Furnished Notices Of 5 Companies Out Of 7 Companie S Were Received Unserved With The Remark Of The Postal Dep Artment That They Had Shifted Their Addresses But No Attempt Wa S Made By The Department To Pursue The Enquiry Thereafter Whi Ch Notwithstanding The Remark About Shifting Of Addres Ses Prima Facie Established Genuineness Of Such Companies As Exist Ing Persons It Had Come On Record That Another Company Did Exist And Was Under Liquidation The Existence Of Which A T Relevant Time Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 23 Could Not Be Doubted Likewise In The Case Of Indi Vidual Investors The Tribunal Had Reached The Finding Tha T Their Identities Had Been Established By The Assessee Para 10 Applying The Principle Enunciated By The Supreme Co Urt In Cit V Orissa Corpn P Ltd 1986 159 Itr 78 25 Taxman 80 F The Irresistible Conclusion Was That The Conclusion Of The Tribunal That The Assessee Had Discharged His Initial Burden In R Espect Of 6 Companies And 9 Individual Investors Was Based On Evidence And Additions Made By The Assessing Officer Were Enquir Ed Into Without Pursuing Correctness Of Material Placed Bef Ore It By The Assessee No Question Of Law Could Be Said To Be Ar Ising In Such Circumstances In Respect Of Finding Arrived At By T He Tribunal Which Was Essentially A Finding Of Fact And Did Not Stand Vitiated In Law Para 11 3 7 In Case Of Riddhi Promoters P Ltd Supra The Honble Delhi High Court Held As Under 6 It Is Not Sufficient That The Identity Of The S Hare Applicant Or The Creditor Should Be Established For The Assessee To Discharge The Initial Onus Which Is Upon The Assessee Under The Requirement Of Section 68 The Assessee Has To Furt Her Satisfy The Revenue As To The Genuineness Of The Transaction An D The Creditworthiness Of The Share Applicant Or The Indi Vidual Who Is Advancing Amounts The Assessees Reliance Upon The Order Of The Commissioner Appeals To Contend That The Sour Ces Of The Funds Were In Essence As Directors Is In This Con Text Of No Avail Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 24 The Assessee Has Contended That It Was Incorporated Just Before The End Of The Financial Year However The Assesse E Had To Necessarily Show That The Amount Which It Indicated As Borrowed From The Six Applicants In Fact Belonged To Them T He Creditworthiness Of The Share Applicants Had To Be Seen In The Context Of The Assertion Made By Them Or The Materi Als Presented Before The Assessing Officer At The Relevant Time The Materials On Record Disclosed That Some Information From At L East Two Individuals Indicated That The Money Had Not Been G Iven By Them The Appeal Is Accordingly Dismissed 3 8 In The Case Of Jansampark Advertising Marketing P Ltd Supra The Honble Delhi High Court Has Held As Under He Ad Notes The Further Inquiry Envisaged Under Section 250 4 Is Generally By Calling What Is Known As Remand Report The Pu Rpose Of This Enabling Clause Is Essentially To Ensure That The M Atter Of Assessment Reaches Finality With All The Requisite Facts Found The Assessment Proceedings Reopened On The Basis Of Pre Liminary Satisfaction That Some Part Of The Income Has Escap Ed Assessment Particularly When Some Unexplained Cred It Entries Have Come To The Notice As In Section 68 Cannot Conclude Save And Except By Reaching Satisfaction On The Touchsto Ne Of The Three Tests Mentioned Earlier Viz The Identity Of The Third Party Making The Payment Its Creditworthiness And Genuin Eness Of The Transaction Whilst It Is True That The Assessee Ca Nnot Be Called Upon To Adduce Conclusive Proof On All These Three Questions It Is Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 25 Nonetheless Legitimate Expectation Of The Process T Hat He Would Bring In Some Proof So As To Discharge The Initial Burden Placed On Him Since Section 68 Itself Declares That The C Redited Sum Would Have To Be Included In The Income Of The Asse Ssee In The Absence Of Explanation Or In The Event Of Explanat Ion Being Not Satisfactory It Naturally Follows That The Materia L Submitted By The Assessee With His Explanation Must Itself Be Wholes Ome Or Not Untrue It Is Only When The Explanation And The Mat Erial Offered By The Assessee At This Stage Passes This Muster Th At The Initial Onus Placed On Him Would Shift Leaving It To The As Sessing Officer To Start Inquiring Into The Affairs Of The Third Pa Rty Para 39 The Commissioner Appeals And Consequently The Tri Bunal Were Right To The Extent Of Their Conclusion That The As Sessee Had Come Up With Some Proof Of Identity Of Some Of The Entri Es In Question But From This Inference Or From The Fact That The Transactions Were Through Banking Channels It Does Not Necessar Ily Follow That Satisfaction As To The Creditworthiness Of The Parties Or The Genuineness Of The Transactions In Question Would A Lso Have Been Established Para 41 The Assessing Officer Here May Have Failed To Disch Arge His Obligation To Conduct A Proper Inquiry To Take The Matter To Logical Conclusion But The Commissioner Appeals Having Noticed Want Of Proper Inquiry Cannot Close The Ch Apter Simply By Allowing The Appeal And Deleting The Additions M Ade It Was Also The Obligation Of The First Appellate Authorit Y As Indeed Of The Tribunal To Have Ensured That Effective Inquir Y Was Carried Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 26 Out Particularly In The Face Of The Allegations Of The Revenue That The Account Statements Reveal A Uniform Pattern Of Cash Deposits Of Equal Amounts In The Respective Accounts Precedi Ng The Transactions In Question This Necessitated A Detai Led Scrutiny Of The Material Submitted By The Assessee In Response To The Notice Under Section 148 Issued By The Assessing Officer As Also The Material Submitted At The Stage Of Appeals If Deem Ed Proper By Way Of Making Or Causing To Be Made A Further Inqu Iry In Exercise Of The Power Under Section 250 4 This Ap Proach Not Having Been Adopted The Impugned Order Of The Trib Unal And Consequently That Of The Commissioner Appeals Ca Nnot Be Approved Or Upheld Para 42 3 10 In The Case Of Empire Buildtech P Ltd Supra The Honble Delhi High Court Has Held As Under Head No Tes In Lovely Exports Supra The Supreme Court Emphasized That The Initial Burden Is Upon The Assessee To Show As To T He Genuineness Of The Identity Of The Individuals Or Entities Which S Eek To Subscribe To The Share Capital In The Instant Case The Assessi Ng Officer In His Order Has Produced The Tabular Statement Desc Ribing The Number Of Shares Subscribed By The Investors The Amounts Pai D By Them The Individuals Who Paid The Amount Towards Share Capit Al And The Gross Income Reported By Each Of Such Investors To The Re Venue A Look At That Chart Would Show That The In Vestors Had By And Large Reported Amounts Far Less As Compared To The Sums Invested B Y Them Towards Share Capital Furthermore The Assessing Officer H Ad During The Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 27 Course Of Assessment Issued Notices Under Section 133 6 To The Investors 28 Of Them Responded 2 Did Not Receive The Notice And 9 Of Them Received The Notices And Responded But Did Not Submit Any Confirmation Para 7 Having Regard To The Circumstances Particularly T He Fact That These Investors Not Only Did Not Submit Confirmation B Ut Had Concededly Reported Far Less Income Than The Amounts Invested The Assessee Could Not Under The Circumstances Be Said To Have Discharged The Burden Which Was Upon It It Is Not Sufficient For The Assessee To Merely Disclose The Addresses Or Identi Ties Of The Individuals Concerned The Other Way Of Looking At The Matter I S That Having Given The Addresses The Inability Of The Noticees Who Are Approached By The Assessing Officer To Afford Any Reasonable E Xplanation As To How They Got The Amounts Give N The Nature Of Their Income Which Was Disproportionally Less Than What They Subscribe D As Share Capital Would Also Amount To The Revenue Having Discharged The Onus If At All Which Fell Upon It The Assessee In This Case Was I Ncorporated Barely Few Months Before The Commencement Of The Assessment Year And There Is No Further Information Or Anything To Ind Icate Why Its Mark Up Of The Share Premium Thousand Fold In Respect Of The Shares Which Were Of The Face Value Of Rs 10 Lakhs Was Justifie D Para 8 3 11 In The Case Of Ultra Modern Export P Ltd Supra The Honble Delhi High Court Has Held As Under 9 As Noticed Previously The Cit A Was Of The O Pinion That The Assessee Had Discharged The Basic Onus Which Was Ca St Upon It After Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 28 Considering The Ruling In Lovely Exports P Ltd S Case Supra The Material And The Records In This Case Show That Not Ice Issued To The 5 Of The Share Applicants Were Returned Unserved The Particulars Of Returns Made Available By The Assessee And Taken In To Consideration In Paragraph 3 4 By The Ao In This Case Would Show That The Said Parties Applicants Had Disclosed Very Meager Income The Ao Also Noticed That Before Issuing Cheques To The Assessee Huge Amounts Were Transferred In The Accounts Of Said Share Appl Icants This Discussion Itself Would Reveal That Even Though The Share Applicants Could Not Be Accessed Through Notices The Assessee Was In A Position To Obtain Documents From Them While There Can Be N O Doubt That In Lovely Exports P Ltd Supra The Court Indicat Ed The Rule Of Shifting Onus I E The Responsibility Of The Reve Nue To Prove That Section 68 Could Be Invoked Once The Basic Burden S Tood Discharged By Furnishing Relevant And Material Particulars At The Same Time That Judgment Cannot Be Said To Limit The Inferences Tha T Can Be Logically And Legitimately Drawn By The Revenue In The Natura L Course Of Assessment Proceedings The Information That Assess Ee Furnishes Would Have To Be Credible And At The Same Time Veri Fiable In This Case 5 Share Applicants Could Not Be Served As The Notices Were Returned Unserved In The Backdrop Of This Circumst Ance The Assessees Ability To Secure Documents Such As Inco Me Tax Returns Of The Share Applicants As Well As Bank Account Partic Ulars Would Itself Give Rise To A Circumstance Which The Ao In This Ca Se Proceeded To Draw Inferences From Having Regard To The Totality Of The Facts I E That The Assessee Commenced Its Business And Immedi Ately Sought To Infuse Share Capital At A Premium Ranging Between R S 90 190 Per Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 29 Share And Was Able To Garner A Colossal Amount Of R S 4 34 Crores This Court Is Of The Opinion That The Cit Appeals And The Itat Fell Into Error In Holding That Ao Could Not Have Added Back The Said Amount Under Section 68 The Question Of Law Conseq Uently Is Answered In Favour Of The Revenue And Against The A Ssessee 3 12 In Case Of M S Shubh Mines Pvt Ltd The Honble Rajasthan High Court Has Held As Under 7 A Bare Perusal Of The Assessment Order Reveal S That The Ao Has Made The Addition On Suspicion Which Is Base D On The Statements Of Third Party Shri Asseem Kumar Gupta Admittedly Recorded In The Back Of The Assessee It Has Come O N Record That The Share Application Money Of Rs 50 00 000 Was Rece Ived From Moderate Credit Corporation Ltd A Listed Company It Is Not Disputed Before This Court That The Investment Made Was Received By Account Payee Cheque And The Same Was Refunded By An Account Payee Cheque When The Company Dropped Its Project In The Considered Opinion Of This Court In Absence Of Any Cogent Evidence On Record Establishing That The Money Shown To Have Received As Share Application Money Was As A Matter Of Fact U Naccounted Money Belonging To The Assessee Company The Findi Ng Arrived At By The Ao Which Is Based On Suspicion Has Rightly Be En Held Not Sustainable In The Eyes Of Law Suffice It To Say That The Finding Arrived At By The Cit A Affirmed By The Itat Whi Ch Remains A Finding Of Fact Cannot Be Said To Be Capricious Or Perverse 3 13 In Case Of Softline Creations Pvt Ltd 387 Itr 636 Del The Honble Delhi High Court Has Held As Under Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 30 4 This Court Has Considered The Concurrent Orde R Of The Cit A As Well As The Itat Both These Authoriti Es Primarily Went By The Fact That The Assessee Had Provided Sufficie Nt Indication By Way Of Pan Numbers To Highlight The Identity Of Th E Share Applicants As Well As Produced The Affidavits Of Directors F Urthermore The Bank Details Of Share Applicants Too Had Been Provi Ded In The Circumstances It Was Held That The Assessee Had Es Tablished The Identity Of The Share Applicants The Genuineness O F Transactions And Their Credit Worthiness The Ao Chose To Proceed No Further But Merely Added The Amounts Because Of The Absence Of The Directors Physically Present Themselves Before Him 6 We Are Of The Opinion That No Question Of Law Ari Ses Having Regard To The Concurrent Findings Of Fact The Ass Essee Has In Our Opinion Complied With The Law Spelt Out By The Sup Reme Court In Cit Vs Lovely Exports Pvt Ltd 216 Ctr Sc 195 The Appeal Is Meritless And Is Consequently Dismissed 4 After Going Through The Various Legal Authorities A S Narrated Above The Legal Proposition That Emerges In The Co Ntext Of Section 68 Is As Under 4 1 Where Any Sum Is Found Credited In The Books Mainta Ined By The Assessee Section 68 Requires That The Assessee Sho Uld Offer An Explanation About The Nature And Source Of Such Sum Found Credited In Its Books Of Accounts To The Satisfaction Of The As Sessing Officer In Absence Of Explanation Or In The Event Of Explanat Ion Being Not Found Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 31 Satisfactory The Sum So Credited Would Be Included In The Income Of The Assessee 4 2 The Primary Requirements Which Should Be Satisfied Cumulatively By The Assessee In Such Cases Is Identification Of The Shareholder Creditworthiness Of Shareholder And The Genuineness Of The Transaction 4 3 The Explanation Offered And Material Submitted By T He Assessee In Support Of Its Explanation Should Be Wholesome Credible And Verifiable These Three Requirements Thereafter Hav E To Be Tested By The Assessing Officer Not Superficially But In Depth Ha Ving Regard To The Human Probabilities And Normal Course Of Human Cond Uct It Is Only When The Explanation And The Material Offered By Th E Assessee At This Stage Passes This Muster That The Initial Onus Plac Ed On It Would Shift Leaving It To The Assessing Officer To Start Inquir Ing Into The Affairs Of The Third Party 4 4 Whilst It Is True That The Assessee Cannot Be Calle D Upon To Adduce Conclusive Proof On All These Three Requirem Ents It Is Nonetheless Legitimate Expectation Of The Process T Hat He Would Bring In Sufficient Proof Which Is Credible And At The Same Time Verifiable So As To Discharge The Initial Burden Placed On Him Whet Her Initial Onus Stands Discharged Would Depend Upon Facts And Circu Mstances Of Each Case 4 5 The Degree Of Burden Of Proof On The Assessee Will Vary From Assessee To Assessee In Case Of Private Limited Co Mpanies Where Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 32 Shares Are Allotted Through Private Placement To Pe Rsons Generally Known To Directors Or Shareholders Directly Or Ind Irectly Burden Of Proof Is On Higher Pedestal As Compared To Public L Imited Companies Where The Large Scale Subscription Are Offered Thro Ugh Public Issue And Shares Are Subscribed By General Public In Case O F Private Limited Companies The Courts Have Laid Down A Strict Appro Ach In Terms Of Satisfying Such Burden Of Proof 4 6 In Case Of Private Limited Companies Generally Per Sons Known To Directors Or Shareholders Directly Or Indirectly B Uy Or Subscribe To Shares Upon Receipt Of Money The Share Subscriber S Do Not Lose Touch And Become Incommunicado Call Money Dividends Wa Rrants Etc Have To Be Sent And The Relationship Remains A Continuin G One Therefore An Assessee Cannot Simply Furnish Some Details And Rem Ain Quiet When Summons Issued To Shareholders Remain Un Served And Uncomplied As A General Proposition It Would Be Improper To Univ Ersally Hold That The Assessee Cannot Plead That They Had Received Money But Could Do Nothing More And It Was For The Assessing Officer T O Enforce Shareholders Attendance In Spite Of The Fact That The Shareholders Were Missing And Not Available Their Reluctance And Hid Ing May Reflect On The Genuineness Of The Transaction And Creditworthi Ness Of The Shareholder It Would Be Also Incorrect To Universa Lly State That An Inspector Must Be Sent To Verify The Shareholders S Ubscribers At The Available Addresses Though This Might Be Required In Some Cases Similarly It Would Be Incorrect To State That The Assessing Officer Should Ascertain And Get Addresses From The Registrar Of C Ompanies Website Or Search For The Addresses Of Shareholders Themsel Ves Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 33 4 7 Unlike The Case Of Private Limited Companies In Th E Case Of Public Limited Company Which Has Gone For A Public Issue A Nd Got Share Subscriptions From Prospective Shareholders Across The Length And Breadth Of The Country The Legal Regime May Not Be The Same In Such Cases The Company Concerned Cannot Be Expected To Know Every Detail Pertaining To The Identity As Well As Financial Wor Th Of Each Of Its Subscribers The Company Must However Maintain An D Make Available To The Assessing Officer For His Perusal All The I Nformation Contained In The Statutory Share Application Documents Bank Tra Nsactions Details And Other Related Kyc Documents Submitted Along Wit H The Share Application 4 8 The Word Identity Means The Condition Or Fact Of A Person Or Thing Being That Specified Unique Person Or Thing The Identification Of The Person Would Include The Place Of Work The Sta Ff The Fact That It Was Actually Carrying On Business And Recognition O F The Said Company In The Eyes Of Public Merely Producing Certificate Of Incorporation Pan Number Or Assessment Particulars Did Not Establish The Identity Of The Person Pan Numbers Are Allotted On The Basis Of Ap Plications Without Actual De Facto Verification Of The Identity Or Asc Ertaining Active Nature Of Business Activity The Actual And True Identity Of The Person Or A Company Was The Business Undertaken By Them Furthe R These Documents Have Their Limitation And Cannot Be Relie D Upon Blindly When There Are Surrounding Circumstances To Show That Th E Subscriber Was A Paper Company And Not A Genuine Investor Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 34 4 9 In Respect Of The Genuineness Of The Transaction An D Creditworthiness Of The Shareholder It Would Be In Correct To State That The Onus To Prove The Same Stands Discharged In All Cases If Payment Is Made Through Banking Channels Whether Or Not Onus Is Discharged Depends Upon Facts Of Each Case It Depends On Whet Her The Two Parties Are Related Or Known To Each Other The Man Ner Or Mode By Which The Parties Approached Each Other Whether Th E Transaction Was Entered Into Through Written Documentation And Due Diligence To Protect The Investment And The Pay Back On Such Inv Estment Whether The Investor Professes And Was An Angel Investor T He Object And Purpose Profit Motive Behind The Investment And W Hether Any Dividend Declared And Distributed In The Past Or No T Whether Share Subscribers Have Their Own Profit Making Apparatus And Were Involved In Any Tangible Business Activity Or Were They Mere Ly Rotated Money Which Was Coming Through The Bank Accounts Which M Eans Deposits By Way Of Cash And Issue Of Cheques Creditworthiness And Genuineness Of The Transaction Is Therefore Not Proved By Showing Merely Issue And Receipt Of A Cheque Or By Furnishing A Copy Of Stat Ement Of Bank Account Of Share Subscriber When Circumstances Req Uires That There Should Be Some More Evidence Of Positive Nature To Show That The Subscribers Had Made Genuine Investment 4 10 The Entire Evidence Available On Record Has To Be C Onsidered And A Reasonable Approach Has To Be Adopted The Final Conclusion Must Be Pragmatic And Practical Which Takes Into Account H Olistic View Of The Entire Evidence Including The Difficulties Which T He Assessee May Face Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 35 To Unimpeachably Establish Identity Creditworthine Ss Of The Shareholders And The Genuineness Of The Transaction 4 11 Where The Assessee Has Discharged The Initial Burde N Placed Upon Him Under Sec 68 To Prove And Establish The Identi Ty And Creditworthiness Of The Share Applicant And The Gen Uineness Of The Transaction The Burden Of Proof Shifts On The Asse Ssing Officer In Such A Case The Assessing Officer Cannot Sit Back With Folded Hands Till The Assessee Exhausts All The Evidence Or Material In H Is Possession And Then Come Forward To Merely Reject The Same Withou T Carrying Out Any Verification Or Enquiry Into The Material Placed Be Fore Him If The Assessing Officer Harbours Any Doubts Of The Legiti Macy Of Any Subscription He Is Empowered Nay Duty Bound To C Arry Out Thorough Investigations But If The Assessing Officer Fails To Unearth Any Wrong Or Illegal Dealings Or Has No Material In His Possessi On He Cannot Obdurately Adhere To His Suspicions And Treat The S Ubscribed Capital As The Undisclosed Income Of The Company 12 We Have Also Gone Through Other Legal Authoriti Es On The Subject As Brought To Our Notice By The Ld Ar Which Have Be En Rendered In The Context Of Specific Facts And Circumstancances Of T He Individual Cases However The Similar Proposition Emerges As We Hav E Discussed Above And Hence These Authorities Have Not Been Discusse D Separately 13 In Light Of Above Legal Proposition If We Were To Analyse The Facts Of The Present Case The Assessee Company Being A P Rivate Limited Company The Burden Of Proof Is Clearly On Higher P Edestal As Compared To Public Limited Companies Which It Has Failed To Discharge In The Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 36 Instant Case As We Have Discussed Above In Terms Of Creditworthiness And Genuineness Of The Transaction And Till Such Ti Me Initial Burden Is Not Satisfied The Burden Cannot Be Said To Have Be En Shifted On The Revenue To Conduct Further Enquiries Accordingly We Hereby Affirm The Action Of The Ld Cit A In Sustaining The Addi Tion Of Rs 93 30 Crores In The Hands Of The Assessee Company U S 68 Of The Act In The Result Ground No 1 3 Are Dismissed 14 Ground No 4 Is Regarding Initiation Of Penalty Proceedings U S 271 D No Contentions Have Been Raised Before Us By The Ld Ar Further The Impunged Order Is In Respect Of Quantum Additio Ns Sustained By The Ld Cit A And In Any Case Where Any Action Is Take N By The Ao U S 271 D The Assessee Shall Be At Liberty To Challenge The Same Separately In Light Of The Same Ground No 4 Is Not Been Adju Dicated Upon 15 Ground No 5 Is General In Nature Which Doesn T Require Any Separation Adjudication In The Result The Appeal Of The Assessee Is Dismis Sed Order Pronounced In The Open Court On 18 12 2017 Sd Sd Fot Ikwy Jko Foe Flag Kno Vijay Pal Rao Vikram Singh Yadav U Kf D Lnl Judicial Member Ys Kk Lnl Accountant Member Tk Iqj Jaipur Fnukad Dated 18 12 2017 Ganesh Kr Vknsk Dh Izfrfyfi Vxzsfkr Copy Of The Order Forwarded To Ita No 130 Jp 2017 M S Shreenath Heritage Liquour Pvt Ltd Jhunjhunu Vs Acit Jhunjhunu 37 1 Vihykfkhz The Appellant M S Shreenath Heritage Liquor Pvt L Td Jhunjhunu 2 Izr Fkhz The Respondent Acit Jhunjhunu 3 Vk Dj Vk Qdr Cit 4 Vk Dj Vk Qdr Cit A 5 Fohkkxh Izfrfuf K Vk Dj Vihyh Vf Kdj K T Iqj Dr Itat Jaipur 6 Xkmz Qkbzy Guard File Ita No 130 Jp 2017 Vknskkuqlkj By Order Lgk D Iathdkj Asst Registrar