CHAT COMPUTERS LTD ( FORMERLY KNOWN AS CHAT COMPUTERS P. LTD), MUMBAI v. DCIT CEN CIR 40, MUMBAI

ITA 3859/MUM/2009 | 2006-2007
Pronouncement Date: 22-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 385919914 RSA 2009
Assessee PAN AABCC1122B
Bench Mumbai
Appeal Number ITA 3859/MUM/2009
Duration Of Justice 2 year(s) 1 month(s) 10 day(s)
Appellant CHAT COMPUTERS LTD ( FORMERLY KNOWN AS CHAT COMPUTERS P. LTD), MUMBAI
Respondent DCIT CEN CIR 40, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 22-07-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 22-07-2011
Date Of Final Hearing 09-06-2011
Next Hearing Date 09-06-2011
Assessment Year 2006-2007
Appeal Filed On 12-06-2009
Judgment Text
1 ITA NO. 3859/MUM/2009 (ASST YEAR 2006-07 ) IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI C BENCH MUMBAI BENCHES MUMBAI BEFORE SHRI P M JAGTAP AM & SHRI VIJAY PAL RAO JM ITA NO. 3859/MUM/2009 (ASST YEAR 2006-07 ) CHAT COMPUTERS LTD (FORMERLY KNOWN AS CHAT COMPUTERS P LTD) BHUPEN CHAMBERS GR. FLOOR 9 DALAL ST. FORT MUMBAI 23 VS THE DY COMMR OF INCOME TAX CEN.CIR 40 MUMBAI (APPELLANT) (RESPONDENT) PAN NO. AABCC1122B ASSESSEE BY SHRI R S KHANDEWLWAL REVENUE BY SHRI DEVI SINGH PER VIJAY PAL RAO JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 12.3.1999 OF THE CIT(A) FOR THE ASSESSMENT YEAR 2006-07. 2 THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE G ROUND IN THIS APPEAL: I) THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN MAKING AN ADDITION OF A SUM OF RS 5 57 50 000 BEING AMOUN T RECEIVED ON ALLOTMENT OF PREFERENCE SHARE CAPITAL. II) THE CIT(A ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN TREATING BUSINESS LOSS AS SPECULATION LOSS BY INVOKING THE P ROVISIONS OF EXPLANATION TO SEC. 73 OF THE ACT. III) THE CIT(A) ERRED IN CONFIRMING THE ACTION OF TH E ASSESSING OFFICER IN CHARGING INTEREST OF RS. 1 87 65 450/- U/S 234B OF T HE ACT. 3 DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS REPAID THE LOAN AMOUNT TO THE TUNE OF RS. 5.51 CRORES BY ALLOTTING PREFERENTIAL SHARES TO PRIVATE CORPORATE BODIES. T HE ASSESSING OFFICER FOUND THAT 11 150 CUMULATIVE REDEEMABLE PREFERENTIAL SHARES OF RS. 1000/- EACH WERE ALLOTTED 2 ITA NO. 3859/MUM/2009 (ASST YEAR 2006-07 ) AT A PREMIUM OF RS. 4000/-TO DIFFERENT PRIVATE CORP ORATE BODIES. THE ASSESSEE HAS RECEIVED AN AMOUNT OF RS. 1 11 50 000/- TOWARDS FAC E VALUE OF THE SHARES AND RS. 4 46 00 000/- TOWARDS PREMIUM OF SHARES. HENCE THE TOTAL AMOUNT OF RS. 5 57 50 000/- WAS RECEIVED BY THE ASSESSEE TOWARDS THE ALLOTMENT OF 11150 CUMULATIVE PREFERENTIAL SHARES. THE ASSESSING OFF ICER RELIED UPON THE REPORTS OF ADIT(INV) KOLKATA RECEIVED ON 4.12.2006 29.9.2006 23.2.2007 AND 24.4.2007 WHILE ADDRESSING THE ISSUE OF REPAYMENT OF LOAN AMOUNT. 3.1 THE ASSESSING OFFICER MADE AN ADDITION OF RS. 5 57 50 000 U/S 68 BY TREATING THE SHARE APPLICATION MONEY AS ASSSESSEES OWN INCO ME AS BOGUS CASH CREDIT. THE ASSESSING OFFICER WHILE MAKING THIS ADDITION MAINL Y RELIED UPON THE INVESTIGATION REPORT OF THE ADIT(INV) WING KOLKATA AND THE STATE MENTS OF THE DIRECTORS OF THE INVESTING COMPANIES RECORDED DURING THE INVESTIGAT ION BY THE INVESTIGATION WING UNIT-1 KOLKATA. 3.2 ON APPEAL THE CIT(A) HAS CONFIRMED THE ACTION OF THE ASSESSING OFFICER WHILE PASSING THE IMPUGNED ORDER. 4 BEFORE US THE LD AR OF THE ASSESSEE HAS SUBMITTE D THAT THE APPELLANTS HAVE GIVEN THE NAME ADDRESS PAN NO. NO. OF SHARES ALL OTTED AND DETAILS OF CHEQUES RECEIVED & ISSUING BANK. THE APPLICANTS OF SHARE AP PLICATIONS ARE ALL CORPORATE ENTITIES INCORPORATED UNDER THE COMPANIES ACT WHICH IS EVIDENCED BY THE CERTIFICATE OF INCORPORATION OF EACH APPLICANT-COMP ANY FILED IN THE PAPER BOOK. THUS THE IDENTITY OF THE APPLICANTS IS PROVED. ALL TRANSACTIONS ARE THROUGH BANKING CHANNEL AND SUPPORTED BY SHARE APPLICATION FORMS B OARD RESOLUTIONS ETC AND IN PARTICULAR BALANCE SHEETS OF EACH COMPANY ARE ON R ECORD AND HENCE 3 ITA NO. 3859/MUM/2009 (ASST YEAR 2006-07 ) GENUINENESS OF EACH TRANSACTIONS AND CREDITWORTHINE SS OF EACH COMPANY IS PROVED. HE HAS REFERRED THE RELEVANT PAGES OF THE PAPER BOO K TO SHOW THAT THE TRANSACTIONS HAVE BEEN RECORDED AND REFLECTED IN BANK ACCOUNTS BOOKS OF ACCOUNT BALANCE SHEET AND SUBMITTED THAT ALL THESE RECORDS WERE FIL ED BEFORE THE LOWER AUTHORITIES. 4.1 HE HAS FURTHER CONTENDED THAT THERE IS NO DISPU TE OR DENIAL ON THE PART OF THE REVENUE THAT THERE WAS NO CASH DEPOSIT IN THE BANK ACCOUNT OF THE INVESTING COMPANY FROM WHERE THE SHARE APPLICATION MONEY WAS PAID. IT IS SUBMITTED THAT THE SHARE APPLICANTS ARE CORPORATE BOLIDES AND THEI R BOOKS OF ACCOUNT INCLUDING BALANCE SHEET BOARD RESOLUTION SHARE APPLICATION FORMS ACKNOWLEDGMENT OF RETURN OF INCOME AND CONFIRMATIONS WERE PRODUCED BEFORE TH E AUTHORITIES TO ESTABLISH THE SOURCE OF THE APPLICATION MONEY AND GENUINENESS OF THE TRANSACTIONS. THE LD AR OF THE ASSESSEE HAS CONTENDED THAT ALL THE DOCUMENTARY EVIDENCES CLEARLY SHOW THAT THE STATEMENTS OF THE DIRECTORS OF THE INVESTING CO MPANY WERE OBTAINED BY THE INVESTIGATING TEAM AND THERE WAS NO BASIS OR CORROB ORATION OF THE SAID STATEMENTS. 4.2 THE ASSESSING OFFICER HAS MERELY RELIED UPON TH E REPORT(S) OF THE OFFICERS OF INVESTIGATION WING. THE ASSESSING OFFICER HIMSELF H AS NOT DONE ANY THING TO BRING ON RECORD ANY EVIDENCE TO TAX THE AMOUNT UNDER SECTION 68 OF THE ACT. ASSESSING OFFICER BEING QUASI JUDICIAL AUTHORITY HAS TO PASS THE ORDER ON THE BASIS OF HIS OWN INVESTIGATION AND BY APPLYING HIS OWN MIND. 4.3 ALL INVESTIGATION REPORTS AND STATEMENTS ON OAT H OF EACH DIRECTOR OF THE APPLICANT COMPANY MENTIONED IN PARA 4.2 OF THE ASSE SSMENT ORDER WERE NOT GIVEN TO THE ASSESSEE. THEREFORE THESE STATEMENTS SHOULD BE IGNORED AND CANNOT BE RELIED 4 ITA NO. 3859/MUM/2009 (ASST YEAR 2006-07 ) UPON. IN SUPPORT OF HIS CONTENTION THE LD. A.R. HAS RELIED UPON THE DECISION OF HONBLE SUPREME COURT REPORTED IN 125 ITR-713 (SC). 4.4 TD. AR OF THE ASSESSE THEN REFERRED PARA 4.2 OF THE ASSESSMENT ORDER AND SUBMITTED THAT EVEN FROM THE STATEMENTS OF DIRECT ORS THE FOLLOWING ISSUES ARISE. (A) STATEMENTS RECORDED COVERING TRANSACTIONS RS.3 90 0 0 000 ONLY. THERE IS NO STATEMENT FOR TRANSACTIONS OF RS.1 67 50 000 DETAIL S GIVEN BELOW:- REGENCY SHARES & HOLDINGS PVT. LTD. 50 00 000 M.G. GREENFIELD PVT. LTD. 60 00 000 CLIX SECURITIES 7 50 000 CUBE TRAFIN PVT. LTD. 50 00 000 ALL STATEMENTS ON OATH OF DIRECTORS OF VARIOUS COMP ANIES PROBABLY NOT ON THE FILES OF THE ASSESSING OFFICER AS HE HAS GIVEN ONLY THE ONES IN PAPER BOOK PAGE NOS. 694 TO 7/26-WHICH ARE ONLY VERY FEW. THUS THE ADDITION IS ON THE BASIS OF INSUFFICIENT/NON-EXISTENCE / NON-AVAILABLE MATERIAL. (B) ALL STATEMENTS ABSOLUTELY SIMILAR AND GIVE TO THE FACT THAT EITHER COLLUSION BETWEEN THE DEPARTMENT AND DIRECTORS OF VARIOUS COM PANIES OR DIRECTORS THREATENED TO GIVE THE STATEMENT IN THE MANNER GIVE N BECAUSE OF THE DISCREPANCIES MENTIONED IN LETTER DATED 8 TH JANUARY 2009. (C) THE DIRECTORS OF THE COMPANIES HAVE STATED THAT THE Y GOT CASH FROM THE COMPANIES MENTIONED IN THE STATEMENTS. NO MODUS OPE RANDI MENTIONED BY THE DIRECTORS AS TO WHO GAVE THE CASH TO THEM W HETHER CASH WAS DEPOSITED BY THE DIRECTORS IN THE BANK ACCOUNT OF T HE COMPANIES TO ISSUE CHEQUES TO INVEST IN SHARE CAPITAL. REFERENCE WAS MADE TO THE ANNEXURE TO THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2006-07 MENTIONS CASH 5 ITA NO. 3859/MUM/2009 (ASST YEAR 2006-07 ) DEPOSITED IN LAYER 2 TO 4. THUS THE STATEMENT OF DIRECTORS NOT CORROBORATED BY THE REPORT OF ADDITIONAL DIT (INVES TIGATION) KOLKATA. (D) BANK STATEMENT OF APPLICANT COMPANIES DEMOLISH THE REPORT OF THE DDIT (INV) KOLKATA BECAUSE IT WAS NOT VERIFIED WHETHER THE ALLEGED CASH RECEIVED FROM THE ASSESSE/GROUP COMPANIES WAS DEPOS ITED IN THE BANK ACCOUNT TO ISSUE CHEQUES IN FAVOUR OF THE ASSESSE. (E) BALANCE SHEET OF COMPANIES ALSO NOT REQUIRED AND VE RIFIED BY THE DDIT (INV) KOLKATA TO VERIFY THE BUSINESS OF COMPANIES. (F) IT IS A POSSIBILITY THAT THE COMPANIES IN KOLKATA H AVE CREATED THE VARIOUS LAYERS TO GIVE THE CHEQUES TO INVEST IN THE PREFERE NCE SHARE CAPITAL OF THE APPELLANTS AS THE TERMS AND CONDITIONS OF THE PREFE RENCE SHARE CAPITAL ARE QUITE LUCRATIVE. (G) NO MATERIAL HAS BEEN BROUGHT ON RECORD TO VERIFY TH E CORRECTNESS OF THE STATEMENTS OF THE DIRECTORS OF APPLICANT-COMPANIES IN SPITE OF THE DIRECTOR OF THE ASSESSE DENYING THE ALLEGATION UNDER OATH O F ANY CASH TRANSACTION BETWEEN THE INVESTING COMPANIES AND THE ASSESSEE. THE LD. AR OF THE ASSESSE ARGUED THAT IN VIEW OF TH E POINT RAISED NO WEIGHTAGE CAN BE GIVEN TO THE STATEMENT OF DIRECTORS OF VARIOUS C OMPANIES RECORDED BY THE INVESTIGATION UNIT OF KOLKATA AND HENCE SHOULD BE IGNORED. 4.5 IT HAS BEEN STRESSED THAT THE ASSESSING OFFICER HAS NOT EVEN BOTHERED TO VERIFY WHETHER THE ADDITION HAS BEEN MADE IN THE ASSESSMEN TS OF VARIOUS COMPANIES IN KOLKATA. IF ADDITION IS MADE THERE ADDITION AGAIN CANNOT BE MADE IN THE ASSESSMENT OF THE APPELLANTS. IF NO ADDITION IS MAD E IN THEIR ASSESSMENTS THEN THERE IS NO REASON OR JUSTIFICATION TO MAKE IMPUGNED ADDITIO N. 6 ITA NO. 3859/MUM/2009 (ASST YEAR 2006-07 ) 4.6 WITHOUT PREJUDICE ALL STATEMENTS OF DIRECTORS OF VARIOUS COMPANIES ARE NOT ON THE FILE OF THE ASSESSING OFFICER AS HE HAS GIVEN O NLY THOSE WHICH ARE FILED IN PAPER BOOK AT PAGE NOS. 134 TO 139. THUS IT IS PLEADED T HAT THE ADDITION OF THE BALANCE AMOUNT OF RS.1 67 50 000 IS ON THE BASIS OF NON-EXI STENT AND NON-AVAILABLE MATERIAL AND HENCE NEEDS TO BE QUASHED. 4.7 THE LD AR OF THE ASSESSEE HAS POINTED OUT THAT IN ALL THE STATEMENTS THE SAME ERROR HAS CREPT WHICH SHOWS THAT THESE STATEMENTS W ERE NOT RECORDED AT THE SPOT ON THE BASIS OF THE AVERMENTS OF THE DIRECTORS OF THE INVESTING COMPANY; BUT ALREADY PREPARED BY THE DEPARTMENT AND GOT THEM SIGNED FROM THE CONCERN PERSONS. HE HAS REFERRED PAGE 134 AS WELL AS PAGE 136 OF THE PA PER BOOK AND SUBMITTED THAT AT PAGE 134 OF THE PAPER BOOK THE STATEMENT OF ONE S HRI ROHIT JAIN ALLEGEDLY RECORDED ON 5.12.2006 AND THERE IS A MISTAKE IN QUE STION NO.4 WHICH READS AS DOES YOU COMPANY AND AN IDENTICAL MISTAKE IN QUESTION NO. 4 APPEAR S IN THE STATEMENT OF SHRI KALI KANT CHOUDHARY ALLEGEDLY RECORDED ON 2 4.11.2006 WHICH READS AS DOES YOU COMPANY . THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE SE STATEMENTS WERE NOT RECORDED AS PER THE AVERMENTS OF THE CONCERNED PERSONS BUT APPEARS TO BE ALREADY PREPARED BY THE DEPARTMENT AND GOT IT SIGNE D FROM THE PERSONS. HE HAS FURTHER SUBMITTED THAT IN ANSWER TO QUESTION NO.6 O F THE STATEMENT OF SHRI KALI KANT CHOUDHARY THERE IS A MISTAKE WHILE RECORDING THE S ENTENCE ABOVE STATEMENT GAS BEEN. THE SAME MISTAKE HAS BEEN REPEATED IN THE STATEM ENT OF SHRI CHANDRESH KUMAR JAIN AT PAGE 139 WHICH FURTHER SHOWS THAT THE SE STATEMENTS WERE ALREADY PREPARED AND THE SIGNATURES OF THE CONCERNED PERSON WERE OBTAINED BY THE DEPARTMENT WITHOUT ANY REAL INVESTIGATION. 7 ITA NO. 3859/MUM/2009 (ASST YEAR 2006-07 ) 4.8 THE LD AR OF THE ASSESSEE HAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS NOT GIVEN ANY OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE THE PERSONS WHOSE STATEMENTS HAVE BEEN RELIED UPON BY THE ASSESSING O FFICER. HE HAS REFERRED THE LETTER DATED 16.9.2008 AT PAGE 128 OF THE PAPER BOO K AND SUBMITTED THAT NO SPECIFIC DATE OF HEARING OR CROSS EXAMINATION WAS G IVEN BY THE ASSESSING OFFICER IN THE SAID LETTER. THE ASSESSEE FILED ITS REPLY TO T HE SAID LETTER WHICH IS PLACED AT PAGE 133 OF THE PAPER AND DEMANDED OPPORTUNITY TO HAVE C ROSS EXAMINATION AND SUMMONS OF THE WITNESSES TO PRODUCE THEM FOR CROSS EXAMINATION. HE HAS RELIED UPON THE FOLLOWING DECISIONS: I) CIT VS DIVINE LEASING& FINANCE LTD 299 ITR 268( DEL) II) CIT VS LOVELY EXPORTS P LTD 216 CTR 195 (SC) III CIT VS OASIS HOSPITALITIES P LTD 238 CTR 402 (DEL)/333 ITR 119(DELHI) IV CIT VS ASHWANI GUPTA 322 ITR 396(DEL) V) CIT VS SMC SHARE BROKERS LTD 288 ITR 345(DEL) VI) DCIT VS DOPLHINE MARBLES P LTD 129 ITYD 163 ( JAB.) (TM) 4.9 THE LD AR HAS SUBMITTED THAT WHEN THE ASSESSEE PRIMA FACIE PROVED THE IDENTITY OF THE CREDITORS GENUINENESS OF THE TRAN SACTION CREDITWORTHINESS OF THE CREDITORS AND THE RELEVANT DETAILS OF THE APPLICAN TS VIZ PAN NO IDENTITY AND SOURCE OF APPLICATION MONEY HAS BEEN PRODUCED THEN ITS ON US STANDS DISCHARGED BY THE ASSESSEE AND IF THE ASSESSING OFFICER HAS ANY DOUBT THEN HE HAS TO PROVE CONTRARY BY PROPER INVESTIGATION BEFORE TREATING THE TRANSA CTION AS BOGUS AND THE SHARE APPLICATION MONEY AS INCOME OF THE ASSESSE. HE HAS REFERRED THE DECISION OF HONBLE DELHI HIGH COURT IN CASE OF CIT VS OASIS HOSPITAL ITIES P LTD (SUPRA) AND SUBMITTED THAT IT HAS BEEN HELD THAT WHEN THE ASSESSEE BEING A PUBLIC LIMITED COMPANY RECEIVED SUBSCRIPTIONS TO PUBLIC ISSUE THROUGH BANK ING CHANNELS AND THE SHARES WERE ALLOTTED AS PER THE PROVISIONS OF SECURITIES AND CO NTRACT (REGULATION) ACT AND ALSO THE RULES AND REGULATIONS OF STOCK EXCHANGE THEN THERE IS NO JUSTIFICATION IN MAKING THE ADDITION U/S 68. 8 ITA NO. 3859/MUM/2009 (ASST YEAR 2006-07 ) 4.10 THE LD AR OF THE ASSESSEE STRONGLY CONTENDED A ND RELIED UP ON THE DECISIONS OF THE HONBLE DELHI HIGH COURT IN THE CASE OF OASI S HOSPITALITIES P LTD (SUPRA) AND SUBMIITED THAT WHEN THE INVESTIGATION CARRIED BY T HE INVESTIGATION WING HAD NOT GIVEN ANY OPPORTUNITY TO CROSS EXAMINE THE PERSONS CONCERNED WHOSE STATEMENTS WERE RECORDED BY THE INVESTIGATION TEAM TO DRAW A DVERSE CONCLUSION AGAINST THE ASSESSEE THEN THE STATEMENT SO RELIED UPON BY THE A SSESSING OFFICER CANNOT BE USED AGAINST THE ASSESSEE. 4.11 PER CONTRA THE LD DR HAS SUBMITTED THAT REPEATED OPPORTUNITIES WE RE GIVEN TO THE ASSESSEE TO CROSS EXAMINE THE PERSONS WHOSE ST ATEMENTS WERE RECORDED BY THE INVESTIGATION TEAM. HE HAS POINTED OUT THAT THE A SSESSING OFFICER HAS MENTIONED IN THE ASSESSMENT ORDER THAT THE INVESTIGATION UNIT-1 KOLKATA HAS GIVEN SEVERAL OPPORTUNITIES TO THE ASSESSEE TO CROSS EXAMINE THE DIRECTORS OF THE INVESTING COMPANY. FURTHER THE ASSESSING OFFICER HAS ALSO G IVEN ONE MORE OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE THE PERSONS. THE LD DR H AS POINTED OUT THAT ON IDENTICAL FACTS OF THE CASE OF THE ASSESSEE FOR AY 2005-06 THE TRIBUNAL HAS REMANDED THE ISSUE TO THE RECORD OF THE ASSESSING OFFICER VIDE O RDER DATED 8.10.2010 IN ITA NO.1714/MUM/2009. THEREFORE IN ANY CASE THE MATTE R IS REQUIRED TO BE VERIFIED AND EXAMINED BY THE ASSESSING OFFICER AND TO DECIDE THE ISSUE AFRESH. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 4.12 IN REBUTTAL THE LD AR OF THE ASSESSEE HAS SUB MITTED THAT WHEN THE MATERIAL ON RECORD IS ENOUGH TO ESTABLISH THAT THE ADDITION IS NOT JUSTIFIED AND THE STATEMENTS RECORDED DURING THE INVESTIGATION ARE NOT SUFFICIEN T TO WARRANT SUCH AN ADDITION THEN THE CASE SHOULD NOT BE REMANDED BACK TO THE ASSESSI NG OFFICER BUT MAY BE 9 ITA NO. 3859/MUM/2009 (ASST YEAR 2006-07 ) DECIDED ON THE BASIS OF THE FACTS AND MATERIAL ON R ECORD. HE HAS RELIED UPON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF RAJEH BABUBHAI DAMANIA VS ITO REPORTED IN 251 ITR 541(GUJ). 5 WE HAVE CONSIDERED THE RIVAL CONTENTION AND PERUS ED THE RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER HAS DISCUSSED TH E ISSUE IN PARA 4.1 TO 4.4 OF HIS ORDER AS UNDER: 4.1 DURING THE ASSESSMENT PROCEEDINGS IT HAS BEEN OBSERVED THAT THE ASSESSEE HAS REPAID THE LOAN TO THE TUNE OF RS. 5.51 CRORES BY ALLOTTING PREFERENCE SHARES TO PRIVATE CORPORATE BO DIES. IT IS VERIFIED FROM RECORDS THAT 11 150 CUMULATIVE REDEEMABLE PREF ERENCE SHARES OF RS. 1000 EACH AT A PREMIUM OF RS. 4000/- PER SHARES WERE ALLOTTED TO THE DIFFERENCE PRIVATE CORPORATE BODIES. FURTHER I T IS SEEN THAT THE AMOUNT OF RS. 1 11 50 000 IS RECEIVED TOWARDS THE F ACE VALUE OF THE SHARES AND RS. 4 46 0 00 IS RECEIVED TOWARDS PRE MIUM OF THE SHARES HENCE TOTAL AMOUNT OF RS. 5 57 50 00 RECEIVED T5OWA RDS ALLOTMENT OF11 150 CUMULATIVE REDEEMABLE PREFERENCE SHARES. 4.2 DEPARTMENT HAS CONDUCTED INVESTIGATION TO VERIF Y THE SOURCE OF FUNDS TAKEN BY THE ASSESSEE FOR REPAYMENT OF ITS DU ES TO M/S MADHAVPURA MERCANTILE COOPERATIVE BANK LTD. SPECIAL TEAM WAS CONSTITUTED FOR THIS PURPOSE BY CBDT. THE REPORTS O F THE ADDL.DIT (INV) UNIT I KOLKATA WAS RECEIVED BY THIS OFFICE ON 4.12 .2006 23 2 2007 AND ON 24.4.2007. AS PER THE INVESTIGATION REPORT RECEIVED FROM THEAD DL.DIT)(INV) UNIT I KOLKATA THE FOLLOWING COMPANIES HAS PAID SHARE APP LICATION MONEY TO THE ASSESSEE: SL.NO. NAME OF THE PARTY SHARES ALLOTTED AMOUNT RECD. 1 REGENCY SHARES & HOLDINGS P LTD 1000 5000000 2 YULAN MARKETING P LTD 1200 6000000 3 NILHAT PROMOTERS & FISCALS P LTD 600 3000000 4 M G GREENFIELD P LTD 1200 6000000 5 DABRIWAL INVESTMENT & FINANCIERS P LTD 200 10000000 6 ASRARA FINTRADE P LTD 1000 5000000 7 HOOGHLY VINIMARY P LTD 1000 5000000 8 CLIX SECURITIES P LTD 150 750000 9 PNR HOLDINGS P LTD 200 10000000 10 CUBE TRAFIN P LTD 1000 5000000 TOTAL 11150 5 57 50 000 10 ITA NO. 3859/MUM/2009 (ASST YEAR 2006-07 ) THE DIRECTORS OF THE ABOVE COMPANIES WERE SUMMONED U/S 131 OF THE I T ACT. THE DIRECTORS OF AFORESAID INVESTMENT COMPANY IN THEIR SWORN STATEMENT RECORDED U/S 131 HAS STATED THAT I GOT CASH OF EQUIVALENT AMOUNT FROM THE COMPANY (M/S CHAT COMPUTERS P LTD) AND AGAINST THE SAME CHEQUE HAVE BEEN ISSUED. 4.3 THE ADIT(INV) UNIT 1 KOLKATA HAS ALSO RECORD ED STATEMENT OF ONE SHRI KISHAN KUMAR VERMA S/O VIJAY KUMAR VERMA RE SIDENT OF HOWRAH 2 WHO HAS ADMITTED IN HIS STATEMENT RECORDED U/S 131 OF THE I T ACT 1961 ON 13.10.2006 THAT HE RENDERED HIS INDIVIDUAL BANK ACCOUNT AS WELL HIS PROPRIETY CONCERNS BANK ACCOUNTS TO DEPOSIT CASH IN LIEU OF SIGNED BLANK ACCOUNT PAYEE CHEQUES TO SHRI PAWAN KUMAR AGARWAL S/O SHRI AGARWAL RESIDENT OF 2C DOVER RIOAD KOLKATA 19 AND SHRI D K NAHATA RESIDENT OF KOLKATA FOR A COMMISSION OF RS. 100 FOR PER RS. 1 00 0/-. HE ALSO STATED THAT SIMILAR TRANSACTIONS WERE MADE WITH ONE SHRI MURARI AGARWAL. THE BLANK CHEQUES SO ISSUED WERE USED BY SHRI PAWAN KUMAR AGARWAL AND SHRI N K NAHATA AS AND WHEN REQUIRED. HE ALSO S TATED THAT ALL THE CASH DEPOSITED IN HIS ACCOUNTS WERE MADE BY DELHI BASED PARTIES WHICH WERE NOT KNOWN TO HIM. LATER ON STATEMENT OF SHRI PAWAN KMAR AGARWAL WHO WAS FORMER DIRECTOR OF M/S MRUGIYA ELEC TRONICS INDUSTRIES P LTD RECORDED BY THE ADIT(INV0 UNIT 1 KOLKATA /S 131 OF THE I T ACT. IN HIS STATEMENT HE HAS DENIED THE OWNERSHIP OF THE CASH. BUT AT THE SAME TIME HE HAS ADMITTED THAT THE CHEQUES RECEIVED FROM SHRI KISHAN KUMAR VERMA AND SHRI MURARI AGARWAL WERE UTILIZED TO INVE ST IN THE SHARE APPLICATION MONEY OF M/S CHAT COMPUTERS P LTD (FORM ERLY KNOWN AS M/S CHITRAKUT COMPUTERS P LTD). IT IS VERY MUCH CLEAR F ROM THE ABOVE THAT THE ASSESSEE HAS MOBILIZED THE UNACCOUNTED CASH BY CREATING VARIOUS LAYERS OF WHICH THEY ARE THE ULTIMATE BENEFICIARY. 4.4 SIMILAR TRANSACTIONS HAVE BEEN DONE BY THE GROU P CONCERNS OF THE ASSESSEE WHICH ARE GIVEN IN ANNEXURE I WHICH IS THE REPORT OF INVESTIGATION WING OF THE DEPARTMENT. WHEREIN IT IS CLEARLY ESTABLISHED THAT CASH WAS DEPOSITED IN ONE ACCOUNT AND AFTER PA SSING THROUGH VARIOUS LEVELS IT HAS REACHED TO THE ASSESSEE COMPA NY. FEW SUCH INSTANCES ARE COVERED IN THE REPORT ANNEXED HEREWIT H. 6 IT IS EVIDENT FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER HAS NOT CONDUCTED ANY INDEPENDENT ENQUIRY DURING THE ASSESS MENT PROCEEDINGS; BUT SIMPLY RELIED UPON THE REPORT OF THE ADIT(INV) UNIT 1 KO LKATA AS WELL AS THE STATEMENTS OF THE DIRECTORS OF VARIOUS KOLKATA BASED COMPANIES W HO HAVE PAID THE APPLICATION MONEY. THE SAID INVESTIGATION BY THE ADIT(INV) UN IT 1 KOLKATA WAS NOT CARRIED OUT DURING THE ASSESSMENT PROCEEDINGS; THEREFORE THE S AID INVESTIGATION WAS NEITHER THE 11 ITA NO. 3859/MUM/2009 (ASST YEAR 2006-07 ) INQUIRY CARRIED OUT DURING THE ASSESSMENT PROCEEDI NGS NOR PART OF THE ASSESSMENT PROCEEDINGS. IT IS CLEAR THAT THE SCRUTINY ASSESSM ENT COMMENCED AFTER ABOUT ONE YEAR FROM THE ALLEGED INVESTIGATION WAS OVER. THE ASSESSING OFFICER HAS HEAVILY RELIED UPON THE INVESTIGATION REPORT AND PROCEEDINGS AND S PECIFICALLY ON THE POINT THAT THE ASSESSEE WAS GIVEN OPPORTUNITY TO CROSS EXAMINE THE DIRECTORS OF THE INVESTING COMPANIES WHO PAID THE APPLICATION MONEY AND FURTH ER THE ASSESSEE WAS ALSO ASKED BY THE ASSESSING OFFICER TO PRODUCE THE DIREC TORS WHOSE STATEMENTS WERE RECORDED BY THE INVESTIGATION UNIT 1 KOLKATA FOR C ROSS EXAMINATION OF THEM. 6.1 IN PARA 4.5 AND 4.6 THE ASSESSING OFFICER HAS RECORDED THE REASONS FOR FORMING THE VIEW THAT THE ASSESSEE WAS GIVEN SEVERA L OPPORTUNITIES TO CROSS EXAMINE THE DIRECTORS OF THE INVESTING COMPANIES AS UNDER: 4.5 AS PER THE STATEMENTS OF THE DIRECTORS OF VARI OUS KOLKATA BASED COMPANIES AND THE OTHER PERSONS IT IS CLEAR THAT T HE ASSESSEE HAD GIVEN CASH TO SO CALLED COMPANIES WHICH IN TURN ISSUED BA CK TO ASSESSEE CHEQUES/DEMAND DRAFT OF EQUIVALENT AMOUNT. THIS FAC T WAS STATED ON OATH BY THE DIRECTORS OF THE SAID COMPANIES. HOWEVE R DIRECTOR OF THE ASSESSEE SHRI KIRITI KUMAR N PAREKH DENIED TO HAVE PAID ANY CASH TO THESE PARTIES IN HIS STATEMENT BEFORE ADIT(INV) UNI T IX(2) MUMBAI. IN HIS STATEMENT HE STATED HIS INTENTION TO CROSS EXAMINE THE AFORESAID DIRECTORS TO PROVE HIS STAND. DDIT(INV) UNIT 1(2) K OLKATA HAS GIVEN SEVERAL OPPORTUNITIES TO THE ASSESSEE TO CROSS EXAMINE THE AFORESAID DIRECTORS AT ITS KOLKATA OFFICE. IN SPITE OF REPEATED OPPORTUNIT IES GIVEN TO THE ASSESSEE THE SAID CROSS EXAMINATION COULD NOT TAKE PLACE AS THE ASSESSEE SOUGHT ADJOURNMENT EVERY TIME. THEREAFTER THE ASSESSEE STATED THAT HE WOULD EXERCISE HIS RIGHT OF CROSS EXAMINE AT THE TIME OF ASSESSMENT. 4.6 A LETTER DATED 16.9.2008 WAS ISSUED BY THIS OFF ICE TO THE MANAGING DIRECTOR OF THE COMPANY GIVING HIM OPPORTU NITY TO CROSS EXAMINE THE SHARE4 APPLICANTS AND WAS ASKED TO FILE CONFIRMATION OF THE SAID SHARE APPLICANTS ON 30 TH SEPT 2008. HOWEVER NO ONE APPEARED ON 30 TH SEPT 200. IT IS PERTINENT TO MENTION HERE THAT ASS ESSEE WAS GIVEN SEVERAL OPPORTUNITIES BY THE DDIT(INV) UNIT I(2) KO LKATA TO CROSS EXAMINE THE SAID DIRECTORS OF KOLKATA BASED COMPANIES TO PR OVE THE GENUINENESS OF HIS STAND WHICH HE AHS RECORDED TO THE ADIT(INV) UNIT IX(2) MUMBAI. BUT INSTEAD ASSESSEE AHS SOUGHT ADJOURNMENT EVERY TIME AND 12 ITA NO. 3859/MUM/2009 (ASST YEAR 2006-07 ) THEREAFTER STATED THAT HE WILL EXERCISE HIS RIGHT OF CROSS EXAMINATION AT THE TIME OF ASSESSMENT. THIS CLEARLY SHOWS THE INTE NTION OF THE ASSESSEE TO STALL THE TIME. MOREOVER THE ONUS OF PROVING GENUI NENESS OF THE TRANSACTION LIES ON THE ASSESSEE WHICH THE ASSESSE E HAS TRIED TO SHIFT ON THE ASSESSING OFFICERS SHOULDER. 6.2 SINCE THE INVESTIGATION PROCEEDINGS WERE NOT PA RT OF THE ASSESSMENT PROCEEDINGS IN THE CASE OF THE ASSESSEE AND EVEN TH E INVESTIGATION WAS NOT EITHER U/S 132 OR U/S 133 OF THE I T ACT. IT SEEMS THAT IN VESTIGATION BY THE ADIT(INV) UNIT 1 KOLKATA IS PRELIMINARY INVESTIGATION ONLY TO VERIF Y THE SUSPICION OF ANY CONCEALMENT OF INCOME. THE ASSESSING OFFICER DURING THE COURS E OF ASSESSMENT PROCEEDINGS ASKED THE ASSESSEE TO PRODUCE THE SAID DIRECTORS FO R CROSS EXAMINATION. IT IS EVIDENT FROM THE LETTER OF THE ASSESSING OFFICER DATED 01 .10.2008 AS WELL AS DATED 16.9.2008 THAT THE ASSESSING OFFICER DID NOT SUMMON THESE D IRECTORS TO BE PRESENT IN THE OFFICE OF THE ASSESSING OFFICER FOR THE PURPOSE OF CROSS E XAMINATION BY THE ASSESSEE; BUT ON THE CONTRARY THE ASSESSEE WAS ASKED TO PRODUCE THE SE DIRECTORS FOR CROSS EXAMINATION PURPOSE. THIS IS A GROSS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE WHEN THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE THE DIRECTORS FOR AVAILING OPPORTUNITY OF CROSS EXAMINATION. THE ASSESSING O FFICER RELIED UPON THE STATEMENT OF THE DIRECTORS OF THE INVESTING COMPANY RECORDED DURING THE INVESTIGATION PROCEEDINGS BY THE ADIT(INV) UNIT 1 KOLKATA. INSTE AD OF ENSURING THE PRESENCE OF THESE PERSONS FOR GIVING OPPORTUNITY TO THE ASSESSE E TO CROSS EXAMINE THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE THEM WHICH I N OUR CONSIDERED OPINION IS AN ABSOLUTE UNJUST AND OPPOSITE TO THE RULE OF LAW AND WHAT PROCEDURE DEMANDS. THEREFORE THERE IS A TOTAL DENIAL OF OPPORTUNITY T O THE ASSESSEE TO CROSS EXAMINE THE PERSONS WHOSE STATEMENTS ARE USED AGAINST THE ASSE SSEE. 13 ITA NO. 3859/MUM/2009 (ASST YEAR 2006-07 ) 6.3 FURTHER WHEN THE DIRECTOR OF THE ASSESSEE CATE GORICALLY DENIED DURING THE INVESTIGATION THE ALLEGATION OF GIVING CASH TO THO SE INVESTING COMPANIES THEN THE ONUS IS ON THE REVENUE TO PROVE THAT THE APPLICATIO N MONEY RECEIVED BY THE ASSESSEE IS ASSESSES OWN MONEY ROUTED THROUGH THO SE APPLICANTS COMPANIES. THERE IS NO EVIDENCE OR MATERIAL BROUGHT ON RECORD BY THE ASSESSING OFFICER EXCEPT THE UN-CROSS EXAMINED STATEMENTS OF THE THIRD PARTY TO SHOW ANY MOVEMENT OF CASH ROUTED BACK TO THE ASSESSEE IN FORM OF APPLICATION MONEY IN THE ALLEGED ALLOTMENT OF CUMULATIVE PREFERENTIAL SHARES. RATHER IT IS U NDISPUTED FACT THAT THE APPLICATION MONEY WAS RECEIVED THROUGH ACCOUNT PAYEE CHEQUE/BAN K DRAFT GIVEN BY THE INVESTING COMPANIES FROM THEIR RESPECTIVE BANK ACCO UNT. IT IS ALSO AN ACCEPTED FACT THAT SOURCE OF THE APPLICATION MONEY WAS FOUND IN THE BANK ACCOUNT OF THE INVESTING COMPANIES DEPOSITED THROUGH ACCOUNT PAYEE CHEQUES; THEREFORE NO CASH TRANSACTION WAS FOUND BY THE ASSESSING OFFICER IN THE BANK ACCOUNT OF THE INVESTING COMPANIES. 6.4 THE ASSESSING OFFICER DOUBTED THE MOVEMENT OF C ASH FROM THE ASSESSEE AS BEING PASSING THROUGH VARIOUS LEVELS AND REACHED TO THE ASSESSEE COMPANY. HOWEVER NO FINDING HAS BEEN GIVEN TO THE EFFECT AS TO HOW THE ALLEGED CASH/MONEY OF THE ASSESSEE COMPANY ROUTED THROUGH V ARIOUS LEVELS FINALLY REACHED TO THE ASSESSEE. NOT AN IOTA OF EVIDENCE OR MATERI AL HAS BEEN BROUGHT ON RECORD TO SHOW EVEN PRIMA FACIE THAT THE SAID AMOUNT REPRESE NTING APPLICATION MONEY MOVED FROM THE ASSESSEE AND REACHED TO THE ASSESSEE . RATHER DOCUMENTARY EVIDENCE ON RECORD EXHIBITS DIFFERENT FACTS I.E. AS PER BOOKS OF ACCOUNT OF THE ASSESSEE AS WELL AS THOSE OF INVESTING COMPANIES TO GETHER WITH THE RETURN OF INCOME BOARD RESOLUTION GO TO PROVE THAT THE SAID APPLICA TION MONEY WAS PAID BY THE 14 ITA NO. 3859/MUM/2009 (ASST YEAR 2006-07 ) INVESTING COMPANY TO THE ASSESSEE AGAINST ALLOTMENT S OF THE PREFERENTIAL SHARES. THE INVESTING COMPANIES HAVE SHOWN THE SAID AMOUNT AS I NVESTMENT IN THEIR BOOKS OF ACCOUNT. THE MONEY ROUTED THROUGH BANKING CHANNELS AND THROUGH ACCOUNT PAYEE CHEQUES/BANK DRAFT UNDISPUTED GIVEN BY THE PARTIES . EVEN THE SOURCE OF THE APPLICATION MONEY WAS FOUND IN THE BANK ACCOUNT OF THE INVESTING COMPANIES NOT BY ANY CASH DEPOSIT; BUT THROUGH ACCOUNT PAYEE CHEQ UES. THEREFORE WHEN ALL THE DOCUMENTARY EVIDENCE CONTRADICTS THE STATEMENTS OF THE DIRECTORS RECORDED BY THE INVESTIGATION UNIT OF THE DEPARTMENT THEN SUCH STAT EMENTS ALONE CANNOT BE TAKEN AS THE BASIS MUCH LESS A GOOD OR PROPER BASIS FOR ANY ADDITION. 6.5 IT IS SETTLED PROPOSITION OF LAW THAT THE STATE MENT RECORDED DURING THE COURSE OF INVESTIGATION WITHOUT CORROBORATIVE EVIDENCE HAS NO EVIDENTIARY VALUE. IT IS PERTINENT TO MENTION THAT THE STATEMENTS RECORDED I N THIS CASE ARE NOT UNDER SEARCH OR SURVEY OR ASSESSMENT PROCEEDINGS THEREFORE THE S AME CANNOT BE USED AGAINST THE ASSESSE WITHOUT FOLLOWING THE DUE PROCESS OF CORROB ORATION AND CROSS EXAMINATION. EVEN OTHERWISE THE STATEMENT WITHOUT CROSS EXAMINA TION AND CORROBORATIVE EVIDENCE CANNOT BE USED AGAINST THE ASSESSEE. 6.6 AS POINTED OUT BY THE LD AR OF THE ASSESSEE TH E CREDIBILITY OF THE STATEMENTS IS ALSO NOT FREE FROM DOUBT AS IT APPEARS THAT ALL THE STATEMENTS ARE PREPARED BY THE DEPARTMENT IN AN IDENTICAL FASHION AND MANNER BEFOR E THOSE WERE GOT SIGNED ON DIFFERENT DATES. IT IS APPARENT THAT CERTAIN IDENT ICAL MISTAKES ARE APPEARING IN THOSE STATEMENTS ALLEGEDLY RECORDED ON DIFFERENT DATES. FOR EXAMPLE:- 15 ITA NO. 3859/MUM/2009 (ASST YEAR 2006-07 ) QUESTIONNO.4:- DOES YOU COMPANY HAS TRANSACTION WIT H THE FOLLOWING COMPANIES? IF SO GIVE DETAILS AND NATURE OF SUCH T RANSACTION: THIS MISTAKE DOES YOU IS APPEARING IN QUESTION NO . 4 OF ALL THE STATEMENTS WHICH SHOWS THAT QUESTIONNAIRE WAS ALREADY PREPARED AND A NSWERS WERE ALREADY WRITTEN IN THE SAME MANNER AS IT IS EVIDENT FROM THE ANSWER TO QUESTION NO.6 AS UNDER: QUESTION NO. 6 DO YOU HAVE TO SAY ANYTHING ELSE? ANS: I HAVE GONE THROUGH THE ABOVE STATEMENT AND TH E SAME HAS BEEN RECORDED CORRECTLY AND WITHOUT ANY FABRICATION. THE AB OVE STATEMENT GAS BEEN GIVEN BY ME WITHOUT THE USE OF ANY FORCE COER CION OR THREAT. THE MISTAKE IN THE ANSWER NO. 6 IS ALSO IDENTICAL I N ALL THE STATEMENTS RECORDED ON DIFFERENT DATES. SINCE THE STATEMENTS WERE RECOR DED BY THE INVESTIGATION TEAM OF ADIT(INV) UNIT 1 KOLKATA AND NOT DURING THE PROCEE DINGS BEFORE ANY COURT OF LAW; THEREFORE ALL THESE FACTS SUGGEST AND INDICATE TO BELIEVE THAT THE SAME ARE NOT RECORDED AS A VERBATIM OF WHAT THE CONCERNED PERSO N STATED; BUT OBTAINED BY THE DEPARTMENT IN A MECHANICAL MANNER. HOWEVER WITHOU T GOING INTO VALIDITY OF THE STATEMENTS WHEN ALL OTHER RECORDS MATERIAL AND DOC UMENTARY EVIDENCES CONTRADICT AND NULLIFY THE STATEMENTS THEN THE RELI ANCE PLACED BY THE ASSESSING OFFICER ON SUCH STATEMENT IS HIGHLY UNJUSTIFIED AND IMPROPER. 7 EVEN OTHERWISE IN THE CASE OF THE ASHWANI GUPTA (SUPRA) THE HONBLE DELHI HIGH COURT HAS TAKEN A NOTE OF THE FINDING OF THE T RIBUNAL IN PARA 2 AS UNDER: 2. THE TRIBUNAL HAS CONFIRMED THE ORDER PASSED BY THE CIT(A) WHICH HELD THE ENTIRE ADDITION MADE BY THE ASSESSING OFFICER TO BE INVALID AND HAD DELETED 16 ITA NO. 3859/MUM/2009 (ASST YEAR 2006-07 ) THE SAME. THE CIT(A) HAD CLEARLY HELD THAT THE ASSES SING OFFICER HAD PASSED THE ASSESSMENT ORDER IN VIOLATION OF THE PRINCIPLES O F NATURAL JUSTICE IN AS MUCH AS HE HAD NEITHER PROVIDED COPIES OF THE SEIZED MATE RIAL TO THE ASSESSEE NOR HAD HE ALLOWED THE ASSESSEE TO CROSS-EXAMINE ONE MR. MANOJ AGGARWAL ON THE BASIS OF WHOSE STATEMENT THE SAID ADDITION WAS MADE. THE CIT(A) ALSO HELD THAT THE ENTIRE ADDITION DESERVED TO BE DELETED PARTICULARLY SO BECAUSE THE TRANSACTIONS ALSO STOOD DULY REFLECTED IN HIS RE GULAR RETURNS. 7.1 THE HONBLE HIGH COURT HAS HELD THAT ONCE THERE IS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BY NOT PROVIDING SEIZED MATERIAL TO THE ASSESSEE AS WELL AS CROSS EXAMINATION OF THE PERSONS ON WHOSE STATEMENTS THE ASSESSING OFFICER RELIED UPON AMOUNTS TO DENIAL OF OPPORTUNITY AND WOULD BE FATAL TO THE PROCEEDINGS. THE HONBLE DELHI HIGH COURT HAS OBSERVED IN PARA 7 AS UNDER: 7. IN VIEW OF THE FOREGOING CIRCUMSTANCES WE FEEL T HAT NO INTERFERENCE WITH THE IMPUGNED ORDER IS CALLED FOR. THE TRIBUNAL HAS CORR ECTLY UNDERSTOOD THE LAW AND APPLIED IT TO THE FACTS OF THE CASE. ONCE T HERE IS A VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE IN AS MUCH AS SEIZED M ATERIAL IS NOT PROVIDED TO AN ASSESSEE NOR IS CROSS-EXAMINATION OF THE PERSON ON WH OSE STATEMENT THE ASSESSING OFFICER RELIES UPON GRANTED THEN SUCH DEFICIENCIES WOULD AMOUNT TO A DENIAL OF OPPORTUNITY AND CONSEQUENTLY WOULD BE FATAL TO THE PROCEEDINGS. FOLLOWING THE APPROACH ADOPTED BY US I N SMC SHARE BROKERS LTD. (SUPRA) WE SEE NO REASON TO INTERFERE WITH THE IMPUGNED ORDER. NO SUBSTANTIAL QUESTION OF LAW ARISES FOR OUR CONSIDERATI ON. 8 SIMILARLY IN THE LATEST DECISION THE HONBLE DE LHI HIGH COURT IN THE CASE OF OASIS HOSPITALITIES P LTD (SUPRA) AFTER CONSIDERIN G ALL THE RELEVANT DECISIONS ON THE ISSUE INCLUDING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS P LTD (SUPRA) DECISION OF THE FULL BENCH O F THE HONBLE DELHI HIGH COURT IN THE CASE OF SOPHIA FINANCE LTD REPORTED IN 205 ITR 98 (DEL)(FB) AND THE DECISION IN THE CASE OF DIVINE LEASING & FINANCE LTD (SUPRA) HA S OBSERVED IN PARAS 11 TO 16 AS UNDER: 17 ITA NO. 3859/MUM/2009 (ASST YEAR 2006-07 ) IT IS CLEAR FROM THE ABOVE THAT THE INITIAL BURDEN IS UPON THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF THE SHARE APPLICA TION MONEY RECEIVED BY THE ASSESSEE. IN ORDER TO DISCHARGE THIS BU RDEN THE ASSESSEE IS REQUIRED TO PROVE : (A) THE IDENTITY OF SHAREHOLDER ; (B) THE GENUINENESS OF TRANSACTION ; AND (C) THE CREDITWORTHINESS OF SHAREHOLDERS. 12 IN CASE THE INVESTOR/SHAREHOLDER IS AN INDIVIDUAL SOME DOCUMENTS WILL HAVE TO BE FILED OR THE SAID SHAREHOL DER WILL HAVE TO BE PRODUCED BEFORE THE ASSESSING OFFICER TO PROVE HIS ID ENTITY. IF THE CREDITOR/SUBSCRIBER IS A COMPANY THEN THE DETAILS IN T HE FORM OF REGISTERED ADDRESS OR PAN IDENTITY ETC. CAN BE FURN ISHED. 13 THE GENUINENESS OF THE TRANSACTION IS TO BE DEMON STRATED BY SHOWING THAT THE ASSESSEE HAD IN FACT RECEIVED M ONEY FROM THE SAID SHAREHOLDER AND IT CAME FROM THE COFFERS OF THAT VERY SHAREHOLDER. THE DIVISION BENCH HELD THAT WHEN THE MONEY IS RECEIVED BY CHEQUE AND IS TRANSMITTED THROUGH BANKING OR OTHER INDISPUTABLE CHANNELS THE GENUINENESS OF TRANSACTION WOULD BE PROVED. OTHER DOC UMENTS SHOWING THE GENUINENESS OF TRANSACTION COULD BE COP IES OF THE SHAREHOLDERS REGISTER SHARE APPLICATION FORMS SHARE TRANSFER REGISTER ETC. 14 AS FAR AS CREDITWORTHINESS OR FINANCIAL STRENGTH O F THE CREDITOR/SUBSCRIBER IS CONCERNED THAT CAN BE PROVED BY PRODUCING THE BANK STATEMENT OF THE CREDITOR/SUBSCRIBER SHOWI NG THAT IT HAD SUFFICIENT BALANCE IN ITS ACCOUNTS TO ENABLE IT TO SUBSCRIBE TO THE SHARE CAPITAL. THIS JUDGMENT FURTHER HOLDS THAT ONCE THESE DOCUMENTS ARE PRODUCED THE ASSESSEE WOULD HAVE SATISFACTORILY DI SCHARGED THE ONUS CAST UPON HIM. THEREAFTER IT IS FOR THE ASSESSING OFFICER TO SCRUTINIZE THE SAME AND IN CASE HE NURTURES ANY DOUBT ABOUT THE VERA CITY OF THESE DOCUMENTS TO PROBE THE MATTER FURTHER. HOWEVER TO DIS CREDIT THE DOCUMENTS PRODUCED BY THE ASSESSEE ON THE AFORESAID ASPECTS THERE HAVE TO BE SOME COGENT REASONS AND MATERIALS FOR THE A SSESSING OFFICER AND HE CANNOT GO INTO THE REALM OF SUSPICIO N. 15 AT THIS STAGE WE WOULD LIKE TO REFER TO THE JUDG MENT OF THE BOMBAY HIGH COURT IN THE CASE OF CIT V. CREATIVE WO RLD TELEFILMS LTD. (IN I. T. A. NO. 2182 OF 2009 DECIDED ON OCTOBER 12 2009) [2011] 333 ITR 100. THE RELEVANT PORTION OF THIS ORDER IS REPRODUC ED BELOW: 18 ITA NO. 3859/MUM/2009 (ASST YEAR 2006-07 ) 'IN THE CASE IN HAND IT IS NOT DISPUTED THAT THE A SSESSEE HAD GIVEN THE DETAILS OF NAME AND ADDRESS OF THE SHAREHO LDER THEIR PA/GIR NUMBER AND HAD ALSO GIVEN THE CHEQUE NUMBER NAME OF THE BANK. IT WAS EXPECTED ON THE PART OF THE AS SESSING OFFICER TO MAKE PROPER INVESTIGATION AND REACH THE SHAREHOLDERS. THE ASSESSING OFFICER DID NOTHING EXCE PT ISSUING SUMMONS WHICH WERE ULTIMATELY RETURNED BACK WITH AN ENDORSEMENT `NOT TRACEABLE'. IN OUR CONSIDERED VIEW THE ASSESSING OFFICER OUGHT TO HAVE FOUND OUT THEIR DETAI LS THROUGH PAN CARDS BANK ACCOUNT DETAILS OR FROM THEIR BANKE RS SO AS TO REACH THE SHAREHOLDERS SINCE ALL THE RELEVANT MATERIA L DETAILS AND PARTICULARS WERE GIVEN BY THE ASSESSEE TO THE A SSESSING OFFICER. IN THE ABOVE CIRCUMSTANCES THE VIEW TAKEN BY THE TRIBUNAL CANNOT BE FAULTED. NO SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN THE APPEAL. IN THE RESULT THE APPEAL IS DISMISSED IN LIMINE WITH NO ORDER AS TO COSTS.' ( EMPHASIS SUPPLIED) 16 THE COURT THUS CLEARLY HELD THAT ONCE DOCUMENTS L IKE PAN CARD BANK ACCOUNT DETAILS OR DETAILS FROM THE BANKERS WE RE GIVEN BY THE ASSESSEE ONUS SHIFTS UPON THE ASSESSING OFFICER AN D IT IS ON HIM TO REACH THE SHAREHOLDERS AND THE ASSESSING OFFICER CANN OT BURDEN THE ASSESSEE MERELY ON THE GROUND THAT SUMMONS ISSUES T O THE INVESTORS WERE RETURNED BACK WITH THE ENDORSEMENT 'NOT TRACEABLE '. THE SAME VIEW IS TAKEN BY THE KARNATAKA HIGH COURT IN MADHURI INVESTMENTS PVT. LTD. V. ASST. CIT (IN I. T. A. NO. 110 OF 2004 DE CIDED ON FEBRUARY 18 2006). IN THIS CASE ALSO SOME OF THE SHARE APPLICA NTS DID NOT APPEAR AND NOTICES SENT TO THEM WERE RETURNED WITH REMARKS 'WITH NO SUCH PERSON'. ADDITION WAS MADE ON THAT BASIS WHICH WAS TURNED DOWN BY THE HIGH COURT IN THE FOLLOWING WORDS : ' 6. HAVING HEARD THE LEARNED COUNSEL FOR THE PARTIES WE NOTICE THAT WHENEVER A COMPANY INVITES APPLICATIONS FOR AL LOTMENT OF SHARES FROM DIFFERENT APPLICANTS THERE IS NO PROCEDU RE CONTEMPLATED TO FIND OUT THE GENUINENESS OF THE AD DRESS OR THE GENUINENESS OF THE APPLICANTS BEFORE ALLOTTING THE SHARES. IF FOR ANY REASON THE ADDRESS GIVEN IN THE APPLICATION WER E TO BE INCORRECT OR FOR ANY REASON IF THE SAID APPLICANTS HAVE CHANGED THEIR RESIDENCE OR THE NOTICES SENT BY THE ASSESSING OFFICER HAVE NOT BEEN RECEIVED BY SUCH APPLICANTS THE ASSESSEE- COMPANY CANNOT BE BLAMED. THEREFORE WE ARE OF THE VIEW THA T THE TRIBUNAL WAS NOT JUSTIFIED IN ALLOWING THE APPEAL OF THE REVENUE ONLY RELYING UPON THE STATEMENT OF SRI ANIL RAJ MEHT A A CHARTERED ACCOUNTANT.' 19 ITA NO. 3859/MUM/2009 (ASST YEAR 2006-07 ) 8.1 THE HONBL HIGH COURT FURTHER DISCUSSED THE ISS UE IN PARAS 20 TO 24 AS UNDER: 20 THE OBSERVATIONS OF THE SUPREME COURT IN THE CA SE OF LOVELY EXPORTS P. LTD. [2009] 319 ITR (ST.) 5 (SC) GO TO SUGGEST THAT THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THE INDIVIDUA L ASSESSMENTS IN THE CASE OF ALLEGED BOGUS SHAREHOLDERS IN ACCORDANCE WITH LAW AND THUS NOT REMEDILESS. IT IS THUS FOR THE ASSESSIN G OFFICER TO MAKE FURTHER INQUIRIES WITH REGARD TO THE STATUS OF THESE PARTIES TO BRING ON RECORD ANY ADVERSE FINDINGS REGARDING THEIR CREDITWORTHINESS . THIS WOULD BE MORE SO WHERE THE ASSESSEE IS A PUBLIC LIMITED COMPAN Y AND HAS ISSUED THE SHARE CAPITAL TO THE PUBLIC AT LARGE AS IN SUCH CASES THE COMPANY CANNOT BE EXPECTED TO KNOW EVERY DETAIL PERTA INING TO THE IDENTITY AND THE FINANCIAL WORTH OF THE SUBSCRIBERS. FURTHER THE INITIAL BURDEN ON THE ASSESSEE WOULD BE SOMEWHAT HEAVY IN CA SE THE ASSESSEE IS A PRIVATE LIMITED COMPANY WHERE THE SHARE HOLDERS ARE FAMILY FRIENDS/CLOSE ACQUAINTANCES ETC. IT IS BECA USE OF THE REASON THAT IN SUCH CIRCUMSTANCE THE ASSESSEE CANNOT FEIG N IGNORANCE ABOUT THE STATUS OF THESE PARTIES. 21 WE MAY ALSO USEFULLY REFER TO THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF CIT V. P. MOHANAKALA [2007] 29 1 ITR 278. IN THAT CASE THE ASSESSEE HAD RECEIVED FOREIGN GIFTS FROM ON E COMMON DONOR. THE PAYMENTS WERE MADE TO THEM BY INSTRUMENTS ISSUED BY FOREIGN BANKS AND CREDITED TO THE RESPECTIVE ACCOUNTS OF THE ASSESSEES BY NEGOTIATIONS THROUGH BANK IN INDIA. TH E EVIDENCE INDICATED THAT THE DONOR WAS TO RECEIVE SUITABLE COM PENSATION FROM THE ASSESSEES. THE ASSESSING OFFICER HELD THAT THE G IFTS THOUGH APPARENT WERE NOT REAL AND ACCORDINGLY TREATED ALL TH OSE AMOUNTS WHICH WERE CREDITED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AS THEIR INCOME APPLYING SECTION 68 OF THE ACT. THE ASSESSE E DID NOT CONTEND THAT EVEN IF THEIR EXPLANATION WAS NOT SATISFACTORY THE AMOUNTS WERE NOT OF THE NATURE OF INCOME. THE COMMISSIONER OF INC OME-TAX (APPEALS) CONFIRMED THE ASSESSMENT. ON FURTHER APPEA L THERE WAS A DIFFERENCE OF OPINION BETWEEN THE TWO MEMBERS OF TH E APPELLATE TRIBUNAL AND THE MATTER WAS REFERRED TO THE VICE PRE SIDENT WHO CONCURRED WITH THE FINDINGS AND CONCLUSIONS OF THE ASSESSING OFFICER AND THE COMMISSIONER OF INCOME-TAX (APPEALS). ON AP PEAL THE HIGH COURT RE-APPRECIATED THE EVIDENCE AND SUBSTITUTED ITS OWN FINDINGS AND CAME TO THE CONCLUSION THAT THE REASONS ASSIGNE D BY THE TRIBUNAL WERE IN THE REALM OF SURMISES CONJECTURE AND SUSPICION . ON APPEAL TO 20 ITA NO. 3859/MUM/2009 (ASST YEAR 2006-07 ) THE SUPREME COURT THE COURT WHILE REVERSING THE DECIS ION OF THE HIGH COURT HELD THAT THE FINDINGS OF THE ASSESSING OFFICE R COMMISSIONER OF INCOME-TAX (APPEALS) AND THE TRIBUNAL WERE BASED ON THE MATERIAL ON RECORD AND NOT ON ANY CONJECTURES AND SURMISES. THAT TH E MONEY CAME BY WAY OF BANK CHEQUES AND WAS PAID THROUGH TH E PROCESS OF BANKING TRANSACTION AS NOT BY ITSELF OF ANY CONSEQUE NCE. THE HIGH COURT MISDIRECTED ITSELF AND ERRED IN DISTURBING THE CONCURRENT FINDINGS OF FACT. WHILE DOING SO THE LEGAL POSITION CONTAI NED IN SECTION 68 OF THE ACT WAS EXPLAINED BY THE SUPREME COURT BY ASSES SING THAT A BARE READING OF SECTION 68 OF THE ACT SUGGESTS THAT (I) THERE HAS TO BE CREDIT OF AMOUNTS IN THE BOOKS MAINTAINED BY THE ASSESSEE ; (II) SUCH CREDIT HAS TO BE A SUM OF MONEY DURING THE PREVIOUS YEAR ; AN D (III) EITHER (A) THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATUR E AND SOURCE OF SUCH CREDITS FOUND IN THE BOOKS OR (B) THE EXPLANAT ION OFFERED BY THE ASSESSEE IN THE OPINION OF THE ASSESSING OFFICER IS NOT SATISFACTORY. IT IS ONLY THEN THAT THE SUM SO CREDITED MAY BE CHARGED TOI NCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. THE EXPRESSION 'THE ASSESSEE OFFERS NO EXPLANATION' MEANS THE ASSESSEE OFFERS NO PROPER REASONABLE AND ACCEPTABLE EXPLANATION AS REGARDS THE SUMS FOUND CREDITED IN THE BOOKS MAINTAINED BY THE ASSESSEE. TH E OPINION OF THE ASSESSING OFFICER FOR NOT ACCEPTING THE EXPLANATION OFFERED BY THE ASSESSEE AS NOT SATISFACTORY IS REQUIRED TO BE BASED ON PROPER APPRECIATION OF MATERIAL AND OTHER ATTENDING CIRCUMST ANCES AVAILABLE ON THE RECORD. THE OPINION OF THE ASSESSING OFFICER I S REQUIRED TO BE FORMED OBJECTIVELY WITH REFERENCE TO THE MATERIAL ON RECORD. APPLICATION OF MIND IS THE SINE QUA NON FOR FORMING THE OPINION. IN CASES WHERE THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATURE AND SOURCE OF THE SUMS FOUND CREDITED IN THE BOOKS IS NOT SATISFACTORY THERE IS PRIMA FACIE EVIDENCE AGAINST THE ASSESSEE VIZ. THE RECEIPT OF MONEY. THE BURDEN IS ON THE ASSESSEE TO REBUT THE SAME AND IF HE FAILS TO REBUT IT IT CAN BE HELD AGAINST THE ASSESSEE THAT IT WAS A RECEIPT OF AN INCOME NATURE. THE BURDEN IS ON THE ASSESSEE TO TAKE THE PLEA THAT EVEN IF THE EXPLANA TION IS NOT ACCEPTABLE THE MATERIAL AND ATTENDING CIRCUMSTANCES AVAILABLE ON RECORD DO NOT JUSTIFY THE SUM FOUND CREDITED IN THE BOOKS BEING TREATED AS A RECEIPT OF INCOME NATURE. 22 WE WOULD LIKE TO REFER TO ANOTHER JUDGMENT OF THE DIVISION BENCH OF THIS COURT IN THE CASE OF CIT V. VALUE CAPITAL SERVICES P. LTD. [2008] 307 ITR 334. THE COURT IN THAT CASE HELD THAT THE A DDITIONAL BURDEN WAS ON THE DEPARTMENT TO SHOW THAT EVEN IF SHARE APPLICA NTS DID NOT HAVE THE MEANS TO MAKE INVESTMENT THE INVESTMENT MADE BY THEM ACTUALLY EMANATED FROM THE COFFERS OF THE ASSESSEE SO AS TO ENABLE IT TO BE TREATED AS THE UNDISCLOSED INCOME OF THE ASSE SSEE. IN THE 21 ITA NO. 3859/MUM/2009 (ASST YEAR 2006-07 ) ABSENCE OF SUCH FINDINGS ADDITION COULD NOT BE MAD E IN THE INCOME OF THE ASSESSEE UNDER SECTION 68 OF THE ACT. 23 IT IS ALSO OF RELEVANCE TO POINT OUT THAT IN CI T V. STELLAR INVESTMENT LTD. [1991] 192 ITR 287 (DELHI) WHERE THE INCREASE I N SUBSCRIBED CAPITAL OF THE RESPONDENT-COMPANY ACCEPTED BY THE INCOME-TA X OFFICER AND REJECTED BY THE COMMISSIONER OF INCOME-TAX ON THE GRO UND THAT A DETAILED INVESTIGATION WAS REQUIRED REGARDING THE GENU INENESS OF SUBSCRIBERS TO SHARE CAPITAL AS THERE WAS A DEVICE OF CONVERTING BLACK MONEY BY ISSUING SHARES WITH THE HELP OF FORMATION O F AN INVESTMENT WHICH WAS REVERSED BY THE TRIBUNAL THIS COURT HELD THAT EVEN IF IT BE ASSUMED THAT THE SUBSCRIBERS TO THE INCREASED SHARE CAPITAL WERE NOT GENUINE UNDER NO CIRCUMSTANCES THE AMOUNT OF SHARE CAPITAL COULD BE REGARDED AS UNDISCLOSED INCOME OF THE COMPANY. TH IS VIEW WAS CONFIRMED BY THE APEX COURT IN CIT V. STELLER INVESTM ENT LTD. [2001] 251 ITR 263. 24 HAVING TAKEN NOTE OF THE LEGAL POSITION IN DETAI L WE NOW PROCEED TO DECIDE EACH APPEAL ON THE APPLICATION O F THE AFORESAID PRINCIPLES. I. T. A. NO. 2093 OF 2010 AND I. T. A. N O. 2095 OF 2010 9 IT IS CLEAR FROM THE DECISION OF THE HONBLE DELH I HIGH COURT IN THE CASE OF OASIS HOSPITALITIES P LTD (SUPRA) THAT ONCE THE ASS ESSEE FILED COPY OF PAN ACKNOWLEDGEMENT COY OF THE RETURN OF INCOME OF THE INVESTING COMPANIES THEIR BANK ACCOUNTS STATEMENTS FOR THE RELEVANT PERIOD; THEN EVEN THE PARTIES WERE NOT PRODUCED IN SPITE OF THE SPECIFIC DIRECTIONS OF THE ASSESSING OFFICER THE ADDITION COULD NOT BE SUSTAINED AS THE PRIMARY ONUS WAS DISC HARGED BY THE ASSESSEE BY PRODUCING THE PAN BALANCE SHEET COPY OF THE ACKN OWLEDGEMENT COPY OF RETURN OF THE APPLICANTS ETC. 10 IN THE CASE IN HAND THERE IS NO DISPUTE ABOUT T HE IDENTITY OF THE APPLICANT COMPANIES WHO HAD PAID THE APPLICATION MONEY AND T HE SOURCE OF THE APPLICATION MONEY WAS ALSO FOUND IN THE RESPECTIVE BANK ACCOUNT S OF THE INVESTING COMPANIES 22 ITA NO. 3859/MUM/2009 (ASST YEAR 2006-07 ) AND THERE WAS NO TRACE OF CASH DEPOSIT IN THE BANK ACCOUNTS OF THE INVESTING COMPANIES THEN THE ACTION OF THE ASSESSING OFFICE R UNDER INFLUENCED OF THE REPORT OF THE INVESTIGATION WING WITHOUT GIVING OPPORTUNIT Y TO THE ASSESSEE FOR CROSS EXAMINATION OF THE PERSONS IS NOT SUSTAINABLE. 11 THE ASSESSING OFFICER HAS RAISED SOME DOUBTS AND SUSPICION ABOUT THE MOVEMENT OF THE MONEY THROUGH VARIOUS LEVELS BUT CO ULD NOT ESTABLISH ANY DIRECT OR INDIRECT LINK OF THE SAID OUTWARD MOVEMENT FROM THE ASSESSEE AND THEN AGAIN RECEIVED BY THE ASSESSEE IN THE FORM OF APPLICATION MONEY. EVEN THE REVENUE HAS FAILED TO BRING ANYTHING ON RECORD TO SHOW MOVEMENT OF THE ALLEGED CASH FROM THE ASSESSE. 12 THE HONBLE DELHI HIGH COURT IN THE CASE OF OAS IS HOSPITALITIES P LTD (SUPRA) IN PARA 33 AND 34 HAS OBSERVED AS UNDER: 33 THE TRIBUNAL WHILE CONFIRMING THE AFORESAID VIEW OF THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS SUMMARIZED T HE DISCUSSION AS UNDER: '9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION S IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. THE NECESSARY DETA ILS WERE FILED BY THE ASSESSEE WITH THE ASSESSING OFFICER TO SHOW THE IDENTITY OF THE PERSON WHO HAD APPLIED FOR THE SHA RES. THE SHARES ALSO BEEN ALLOTTED TO RESPECTIVE PERSONS IN RESPECT OF WHICH INTIMATION WAS GIVEN TO THE REGISTRAR OF COMPA NIES AND NECESSARY EVIDENCE HAS ALSO BEEN PLACED ON RECORD IN THE PAPER BOOK WHICH FOUND PLACE AT PAGES 23 AND 24 OF THE PAPER BOOK. THE ASSESSEE ALSO HAD PLACED ON RECORD TH E EVIDENCE AS WELL AS COPY OF INCOME-TAX RETURNS OF T HE SHARE APPLICANTS. KEEPING IN VIEW ALL THESE EVIDENCE IT CANNOT BE HELD THAT THE ASSESSEE DID NOT ESTABLISH THE IDENT ITY OF THE SHARE APPLICANTS. IF IT IS SO THEN THE LAW AS PRONOUNCE D BY THE HON'BLE 23 ITA NO. 3859/MUM/2009 (ASST YEAR 2006-07 ) SUPREME COURT IN THE CASE OF CIT V. LOVELY EXPORTS P. LTD. [2009] 319 ITR (ST.) 5 IS CLEAR THAT IF THE SHARE APPLICA TION MONEY IS RECEIVED BY THE ASSESSEE-COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAMES ARE GIVEN TO THE ASSESSING O FFICER THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW BUT THE SAME CANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASS ESSEE. IN THIS VIEW OF THE SITUATION WE FIND NO INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) VIDE WHICH ADD ITION MADE ON ACCOUNT OF SHARE APPLICATION MONEY HAS BEEN DELETED.' 34 HAVING REGARD TO THE DECISIONS NOTED ABOVE WE ARE OF THE VIEW THAT THE ADDITION WAS RIGHTLY DELETED BY THE COMMIS SIONER OF INCOME- TAX (APPEALS) AND THE TRIBUNAL. REQUISITE DOCUMENTS WERE FURNISHED SHOWING THE EXISTENCE OF THE SHAREHOLDERS FROM BANK ACCOUNTS AND EVEN THEIR INCOME-TAX DETAILS. FROM BANK ACCOUNTS OF THESE SHAREHOLDERS IT WAS FOUND THAT THEY HAD DEPOSED CE RTAIN CASH AND SOURCE THEREOF WAS QUESTIONABLE. THE ASSESSING OFFIC ER SHOULD HAVE MADE FURTHER PROBE WHICH HE FAILED TO DO. MOREOVER THE REMEDY OF THE DEPARTMENT LIES IN REOPENING THE CASE OF THESE INVESTORS AND THE ADDITION CANNOT BE MADE IN THE HANDS OF THE ASSESS EE. THUS IN VIEW OF THE ABOVE OBSERVATION OF HONBLE HI GH COURT WHEN REQUITE DOCUMENT WERE PRODUCED AND AVAILABLE WITH THE A O T O ESTABLISH THAT NO CASH WAS DEPOSITED IN THE BANK ACCOUNTS OF THE INVESTING COM PANIES THEN WITHOUT FURTHER PROBE TO PROVE CONTRARY THE ADDITION IN THE HAND OF THE ASSESSE CANNOT BE MADE. 13 AS REGARDS THE ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2005-06 IT IS EVIDENT THAT THE COO RDINATE BENCH OF THE TRIBUNAL WAS ALSO OF THE VIEW THAT THE ASSESSING OFFICER DID NOT FULLY ESTABLISH HIS CASE THAT THE MONEY HAS BEEN RECEIVED BY THE INVESTING COMPANIES FROM THE ASSESSEE COMPANY. THE TRIBUNAL HAS OBSERVED IN PARA 11 AS UNDER: 11. ASSESSEE HAS FURNISHED VARIOUS DOCUMENTS IN SUPP ORT OF THE CONTENTION THAT IT HAS RECEIVED SHARE APPLICATION MONEY FROM VARI OUS COMPANIES DULY SUPPORTED BY THEIR ANNUAL REPORTS AND BALANCE SHEETS A ND EVIDENCED IN RESPECT OF CHEQUES. THE A.O. DID NOT FULLY ESTABLISH HIS ARGUMENT THAT THE MONIES HAVE BEEN RECEIVED BY THE COMPANIES FROM THE A SSESSEE COMPANY 24 ITA NO. 3859/MUM/2009 (ASST YEAR 2006-07 ) TO ITS LOGICAL END BEFORE FORMING THE OPINION THAT A SSESSEE HAS ROUTED ITS OWN MONIES. AS SEEN FROM THE BANK ACCOUNTS OF THE SAID C OMPANIES ENCLOSED AS AN EVIDENCE IT CAN BE NOTICED THAT THOSE COMPANIES INVARIABLY RECEIVED FUND BY WAY OF CHEQUES FROM ANOTHER SOURCE. ON THE BA SIS OF ENQUIRY IN FEW CASES THE A.O. WAS OF THE OPINION THAT ALL THE MONI ES WERE FROM THE ASSESSEE AND TREATED THEM AS INCOME FROM UNACCOUNTED SOURCES. IT IS ONE OF THE CONTENTIONS OF THE ASSESSEE THAT THE ASSESSEE WAS N OT GIVEN ALL THE STATEMENTS AND ONLY 15 OF THE 37 STATEMENTS WERE FURNISHED. AS SEEN FROM THE RECORD THIS ASPECT IS CORRECT. AS SEEN FROM THE STATEMENT RECORDED FROM THE COMPANIES IN KOLKATA IT IS NOTICED THAT THEY HAVE INVESTED I N VARIOUS GROUP COMPANIES OF THE ASSESSEE AT THE SAME POINT OF TIME. THIS ASPECT ALSO HAS NOT BEEN EXAMINED AND THE ISSUE WHETHER THE INVESTMENT IN THO SE COMPANIES BY THE SAME COMPANY WAS ACCEPTED OR NOT WAS ALSO NOT ON REC ORD. FEW OF THE COMPANIES OF THE ASSESSEES GROUP LIKE LUMINANTS INV ESTMENTS LTD. NETSCAPE SOFTWARE PVT. LTD. AND SAIMANGAL INVESTRADE PVT. LT D. WERE ALSO INVOLVED IN GETTING SHARE APPLICATION MONEY / FUNDS AS CAN BE SE EN FROM THE STATEMENT RECORDED BY THE ADIT. SOURCES OF FUND ALSO REQUIRED TO B E EXAMINED/CORRELATED WHETHER THOSE COMPANIES HAVE CAP ACITY TO INVEST MONIES IN ASSESSEE COMPANYS CASE AND ALSO IN OTHER GROUP COMPANIES AND THE TREATMENT GIVEN IN THEIR CASES ABOUT THE SOURCE OF THEIR FUNDS. 13.1 SINCE THERE WAS A PLEA ON BEHALF OF THE ASSES SEE THAT THE ASSESSEE WAS NOT GIVEN AN OPPORTUNITY TO CROSS EXAMINE THE WITNESSES THE TRIBUNAL INSTEAD OF GOING INTO THE MERITS OF THE CASE REMANDED THE MATTER TO THE RECORDS OF THE ASSESSING OFFICER ON THE REASON AS RECORDED IN PARA 13 AS UND ER: 13. IN VIEW OF THE ABOVE PRIMA-FACIE IT CANNOT BE CONCLUDED THAT THE ASSESSEE RECEIVED SHARE APPLICATION MONEY WHICH CANNO T BE TREATED AS UNACCOUNTED INCOME. COMPLETE FACTS ARE NOT ON RECORD TO GIVE SUCH A FINDING. HOWEVER IT IS NOTICED THAT THE ASSESSEE W AS NOT GIVEN PROPER OPPORTUNITY TO SUBSTANTIATE ITS CLAIM AND DEFEND THE DEPARTMENTS OBSERVATIONS/ALLEGATIONS. IT IS ALSO NOTICED THAT TH E DEPARTMENT HAS NOT FOLLOWED UP ITS OWN INVESTIGATION TO ITS LOGICAL EN D AND NOT PLACED ON RECORD THE COMPLETE ENQUIRIES MADE IN THE CASE OF MADHAVPU RA MERCANTILE COOPERATIVE BANK LTD. OR IN THE GROUP COMPANIES SO AS TO COME TO A CONCLUSION THAT ABOUT THE SOURCE OF FUNDS RECEIVED. T HE STATUS IN THE HANDS OF THOSE COMPANIES WHO WERE ALSO ALLEGED TO HAVE RECEIV ED FUNDS IN CASH HAS NOT BEEN PLACED ON RECORD. SINCE IT IS ONE OF THE CO NTENTIONS OF THE ASSESSEE THAT THEY WERE NOT GIVEN PROPER OPPORTUNITY IN THE CO URSE OF THE ASSESSMENT AND ALSO RAISED GROUND THAT ADEQUATE OPPORTUNITY FOR CRO SS EXAMINATION OF SAID COMPANIES HAS NOT BEEN ALLOWED TO THE ASSESSEE WE ARE OF THE OPINION 25 ITA NO. 3859/MUM/2009 (ASST YEAR 2006-07 ) THAT THE ISSUE REQUIRE SET ASIDE BACK TO THE FILE OF THE A.O. TO MAKE COMPLETE ENQUIRY AND TO GIVE PROPER OPPORTUNITY TO THE ASSESSE E. 13 THERE IS NO QUARREL ON THE ASPECT THAT SO FAR AS IT IS POSSIBLE THE CONSISTENCY OF THE VIEW HAS TO BE MAINTAINED; HOWEVER IN THE CASE OF THE ASSESSEE THE TRIBUNAL FOR THE AY 2005-06 HAS NOT FORMED ANY OPINION OR GI VEN ANY FINDING ON THIS ISSUE; BUT REMANDED THE SAME TO THE FILE OF THE ASSESSING OFFI CER FOR FRESH ADJUDICATION. 13.1 BEFORE US THE LD AR OF THE ASSESSEE HAS FORCI BLY URGED THAT IN VIEW OF THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF OASIS HOSPITALITIES P LTD (SUPRA) AS WELL AS THE DECISION OF THE HONBLE GUJA RAT HIGH COURT IN THE CASE OF RAJEH BABUBHAI DAMANIA (SUPRA) THE ISSUE MAY BE DECIDED ON MERITS ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD. 14 IT IS TO BE NOTED THAT IT IS NOT THE CASE OF ANY ADDITIONAL EVIDENCE OR FRESH MATERIAL PRODUCED BY ANY OF THE PARTIES BEFORE US W HICH REQUIRES EXAMINATION OR INVESTIGATION TO VERIFY THE CORRECTNESS OF THE NEW FACTS FIRST TIME BROUGHT BEFORE US. THE CASE OF THE REVENUE IS THAT THE CASH MOVED FROM THE ASSESSE ROUTED THOUGH VARIOUS LEVELAND THEN REACHED TO THE ASSESSE IN THE FORM OF SHARE APPLICATION MONEY. THE STAND OF THE REVENUE IS NOT IN CONSONANC E WITH THE STATEMENTS OF THE DIRECTORS OF THHE INVESTING COMPANIES WHICH IS THE BASIS OF THE INVESTIGATION REPORT AS WELL AS ADDITION BY THE AO. IN THEIR STATEMENTS THE DIRECTORS STATED TO HAVE RECEIVED CASH FROM ASSESSE FOR INVESTING IN THE PREFERENTIAL SHARE OF THE ASSESSE COMPANY WHEREAS THIS FACT WAS NOT FOUND TO BE CORRECT FROM THE RECORD AND THE REVENUE ALSO TOOK A STAND THAT THE CASH WAS NOT DIRECTLY GIVEN T O THE INVESTING COMPANIES BUT ROUTED THROUGH VARIOUS LEVELS. WHEN IT WAS FOUND BY THE INVESTIGATING UNIT AS WELL AS RECORDED BY THE AO THAT THE FUND IN THE BANK ACCOUN T OF THE INVESTING COMPANIES WAS DEPOSITED THROUGH A/C PAYEE CHEQUES THAN IT IS APPARENT THAT THE STATEMENTS 26 ITA NO. 3859/MUM/2009 (ASST YEAR 2006-07 ) OF THE DIRECTORS ARE IN TOTAL CONTRADICTION OF THE FACTS EMERGED FROM THE RECORD AS WELL AS STAND OF THE REVENUE. HENCE THE SAID STATEM ENTS DO NOT SUPPORT THE CASE OF THE REVENUE AND THE RELIANCE PLACE BY THE AO ON SUC H STATEMENTS IS HIGHLY MISPLACED AND IMPROPER. WHEN THE STAND OF THE REVE NUE IS IN TOTAL CONTRACTION OF THE MATERIAL ON RECORD THEN THEN IN VIEW OF THE LA TEST DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF OASIS HOSPITALITIES P LTD (SUPRA) WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE CAN BE DECIDED ON MERIT AND NEED NOT TO BE REMAND TO THE RECORD OF THE AO BECAUSE AT THE TIME OF THE ORDER F OR THE AY 2005-06 THE COORDINATE BENCH OF THE TRIBUNAL WAS NOT HAVING THE BENEFIT OF THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE CITED SUPRA. F URTHER IN VIEW OF THE DECISION OF HONBLE GUJRAT HIGH COURT IN CASE OF RAJEH BABUBHA I DAMANIA (SUPRA) WE SEE NO REASON FOR GIVING THE A.O. ANY FURTHER INNINGS TO F ILL UP THE LACUNAS OR LAPSES IN THE ASSESSMENT WHICH WOULD CAUSE A GREAT INJUSTICE TO T HE ASSESSE. 15 IN VIEW OF THE ABOVE DISCUSSION AND THE FACTS AN D CIRCUMSTANCES OF THE CASE THE SHARE APPLICATION MONEY CANNOT BE TREATED AS IN COME OF THE ASSESSEE COMPANY UNTIL AND UNLESS IT IS PROVED BEYOND DOUBT THAT THE ASSESSES OWN MONEY HAS COME BACK THROUGH SOME CLOSELY RELATED APPLICAN T. ONCE THE IDENTITY OF THE APPLICANT IS DISCLOSED AND FOUND AS CORRECT THEN E VEN IF THE SAID TRANSACTION IS SUSPECTED BY THE REVENUE AUTHORITIES THE SAME CANN OT BE TREATED AS INCOME OF THE ASSESSEE COMPANY WHICH IS A PUBLIC LIMITED COMPANY. ACCORDINGLY WE DELETE THE ADDITION MADE BY THE ASSESSING OFFICER AND CONFIRME D BY THE CIT(A) ON THIS ACCOUNT. HOWEVER WE MAY CLARIFY THAT OUR FINDINGS ON THE ISSUE ARE BASED ON PARTICULAR FACTS OF THIS ASSESSMENT YEAR AND THEREF ORE WOULD NOT AFFECT THE RESPECTIVE RIGHTS OF THE PARTIES FOR THE OTHER ASSE SSMENT YEARS. 16 GROUND NO.2 REGARDING SPECULATION LOSS. 27 ITA NO. 3859/MUM/2009 (ASST YEAR 2006-07 ) 17 AT THE TIME OF HEARING THE LD AR OF THE ASSESSE E HAS STATED THAT THE ASSESSEE DOES NOT PRESS THIS GROUND AND THE SAME MAY BE DISM ISSED AS NOT PRESSED. THE LD DR HAS NO OBJECTION IF THE GROUND IS DISMISSED AS NOT PRESSED. ACCORDINGLY WE DISMISS THIS GROUND BEING NOT PRESSED. 18 REMAINING GROUND IS REGARDING CHARGING OF INTERE ST U/S 234B. SINCE THE LEVY OF INTEREST U/S 234B IS CONSEQUENTIAL IN NATURE AND TH EREFORE NO SPECIFIC ADJUDICATION IS REQUIRED. IN VIEW OF THE ADJUDICATION OF OTHER ISSU ES THE ASSESSING OFFICER IS DIRECTED TO RECOMPUTE THE INTEREST U/S 234B ACCORDINGLY. 19 IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THE 22 ND DAY OF JULY 2011. SD/- SD/- ( P M JAGTAP ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 22 ND JULY 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR ITAT MUMBAI