SWASTIK REALTORS, MUMBAI v. ASST CIT 15(3), MUMBAI

ITA 800/MUM/2012 | 2007-2008
Pronouncement Date: 27-10-2016 | Result: Dismissed

Appeal Details

RSA Number 80019914 RSA 2012
Assessee PAN ABAFS2576A
Bench Mumbai
Appeal Number ITA 800/MUM/2012
Duration Of Justice 4 year(s) 8 month(s) 21 day(s)
Appellant SWASTIK REALTORS, MUMBAI
Respondent ASST CIT 15(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 27-10-2016
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 27-10-2016
Date Of Final Hearing 30-07-2015
Next Hearing Date 30-07-2015
Assessment Year 2007-2008
Appeal Filed On 06-02-2012
Judgment Text
E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH MUMBAI BEFORE SHRI C.N. PRASAD JUDICIAL MEMBER AND SHRI RAMIT KOCHAR ACCOUNTANT MEMBER ./ I.T.A. NO.800 /MUM/2012 & 6314/MUM/2012 ( / ASSESSMENT YEAR : 2007-08 & 2008-09) SWASTIK REALTORS 312 SWASTIK DISHA CORPORATE PARK KOHINOOR TEXTILE PRINTING COMPOUND OPP. SHREYAS CINEMA LBS MARG GHATKOPAR(W) MUMBAI-400 086 / V. THE ASSISTANT COMMISSIONER OF INCOME TAX 15(3) MATRU MANDIR I T OFFICE NANA CHOWK GRANT ROAD MUMBAI. ./ PAN : ABAFS2576A ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY DR. K. SHIVARAM REVENUE BY : SHRI SANJEEV KASHYAP / DATE OF HEARING : 01-08-2016 / DATE OF PRONOUNCEMENT : 27-10-2016 / O R D E R PER RAMIT KOCHAR ACCOUNTANT MEMBER THESE TWO APPEAL FILED BY THE ASSESSEE FIRM BEIN G ITA NO. 800/MUM/2012 AND 6314/MUM/2012 ARE FOR THE ASSESSME NT YEAR 2007-08 AND 2008-09 RESPECTIVELY . SINCE IDENTICAL QUESTION S ARE INVOLVED THESE TWO APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. FIRST WE SHALL TAKE UP THE APPEAL FOR THE ASSESSM ENT YEAR 2007-08 IN ITA NO. 800/MUM/2012 WHICH IS DIRECTED AGAINST THE APPELLAT E ORDER DATED 30 TH NOVEMBER 2011 PASSED BY LEARNED COMMISSIONER OF IN COME TAX (APPEALS)- ITA 800/MUM/2012 & 6314/MUM/2012 2 28 MUMBAI (HEREINAFTER CALLED THE CIT(A)) FOR T HE ASSESSMENT YEAR 2007- 08 THE APPELLATE PROCEEDINGS BEFORE THE LEARNED CI T(A) ARISING FROM THE ASSESSMENT ORDER DATED 26 TH NOVEMBER 2009 PASSED BY THE LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO) U/S 143(3) OF THE INCOME-TAX ACT 1961 (HEREINAFTER CALLED THE ACT). 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE FIR M IN THE MEMO OF APPEAL FILED WITH THE INCOME TAX APPELLATE TRIBUNAL MUMBAI (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LEARNED COMMISSIONER OF INCOME (APPEALS) [CIT(A)] ERRED IN FACT AND IN LAW IN CONFIRMING THE ADDITION OF RS.1.00 CRORE MADE BY TH E LEARNED ASSESSING OFFICER ALLEGING THE LOAN TAKEN BY THE APPELLANT FROM ONE M/S MOXDIAM DURING THE PREVIOUS YEAR RELEVANT TO A.Y.2007-08 AS FICTITIOUS. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE DISALLOWAN CE OF INTEREST OF RS.93 000/- MADE BY THE LEARNED ASSESSING OFFICER ON THE ALLEGED UNPROVED/FICTITIOUS LOAN. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN NOT ADJUDICATING THE DISAL LOWANCE OF RS.25 000/- MADE OUT OF SUNDRY EXPENSES BY THE LEARNE D ASSESSING OFFICER. 4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE TH E LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE ADDITIONS & DISALLOWANCES TOTALING TO RS.1 01 18 000/- WITHOUT APPRECIATING THE FA CT THAT THE APPELLANT HAD FILED ADEQUATE EVIDENCES CONFIRMATION TO PROVE THE IDENTITY SOURCES AND CAPACITY OF THE LENDER AND DETAI LS OF THE EXPENSES. 5) THE LEARNED CIT(A)S ORDER AND ASSESSING OFFICER S ORDER BEING CONTRARY TO LAW EVIDENCE AND FACTS OF THE CASE THE AP PELLANT PRAYS TO ANNUL SET ASIDE AMENDED OR MODIFIED THE SAME IN T HE LIGHT OF THE GROUNDS DEDUCED HEREIN ABOVE. 6. ALL THE ABOVE GROUNDS OF APPEAL ARE INDEPENDENT A ND WITHOUT PREJUDICE TO EACH OTHER. ITA 800/MUM/2012 & 6314/MUM/2012 3 3. AT THE OUTSET THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE ASSESSEE DOES NOT WANT TO PRESS GROUND NO 3 RE GARDING THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF SUNDRY EXPENSES DISALLOWE D TO THE TUNE OF RS. 25 000/- THE DISALLOWANCE OF WHICH WAS CONFIRMED/S USTAINED BY THE LEARNED CIT(A) AND PRAYED THAT THE SAME MAY BE DISMISSED AS BEING NOT PRESSED . ACCORDINGLY WE DISMISS THE SAID GROUND NO 3 REGARD ING THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF SUNDRY EXPENSES DISALLOWE D TO THE TUNE OF RS. 25 000/- AS BEING NOT PRESSED BY THE ASSESSEE.WE ORDER ACCORDINGLY. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A FIRM ENGAGED IN THE CONSTRUCTION AND DEVELOPMENT OF REAL ESTATE. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(3) READ WITH SECTION 143(2) OF THE ACT ON THE PERUSAL OF THE BALANCE S HEET OF THE ASSESSEE IT WAS OBSERVED BY THE AO THAT THE ASSESSEE HAS BORROWED R S. 1.00 CRORES FROM AN ENTITY NAMED M/S MOXDIAM. THE AO ALSO OBSERVED THAT THE SURVEY ACTION U/S 133A OF THE ACT WAS CARRIED OUT IN THE CASE OF M/S MOXDIAM ON 07-07-2008 APART FROM OTHER ASSOCIATED ENTITIES M/S BASANT DIA JEWELS AND M/S MOREWEL IMPEX PRIVATE LIMITED BASED ON REFERENCE RECEIVED F ROM FIU-IND THAT CERTAIN ENTITIES WERE INVOLVED IN SUSPICIOUS TRANSACTIONS WHEREBY THESE ENTITIES WERE PROVIDING ACCOMMODATION BILLS AND ACCOMMODATION ENT RIES THROUGH WEB OF SEVERAL BANK ACCOUNT FOR FACILITATING TRANSFER OF F UNDS TO VARIOUS INTERESTED BENEFICIARIES IN THE MARKET. THE STATEMENT OF MR. B ASANT D. JAIN PROP. OF BASANT DIA JEWELS AND PARTNER OF MOXDIAM WAS RECORD ED U/S. 131 OF THE ACT WHEREIN HE CONFESSED THAT THESE ENTITIES WERE ENGAG ED IN PROVIDING ACCOMMODATION BILLS AND HAWALA ENTRIES TO VARIOUS PARTIES. SH. NITESH JAIN PARTNER OF MOXDIAM AND MR. RAMESH JAIN DIRECTOR O F M/S. MOREWEL IMPEX PRIVATE LIMITED ALSO CONFESSED TO THE SAME WHEREIN IT WAS ADMITTED THAT MAIN BUSINESS OF THESE ENTITIES WAS TO PROVIDE ACCOMMODA TION BILLS AND HAWALA ENTRIES AND THESE ENTITIES WERE NEVER INVOLVED IN R EGULAR AND COMMERCIAL ITA 800/MUM/2012 & 6314/MUM/2012 4 GENUINE BUSINESSES. THE ONLY REMUNERATION WHICH THE BUSINESS GENERATED FOR THESE ENTITIES WAS BY WAY OF COMMISSION INCOME WHIC H WAS RECEIVED WHEN THE TRANSACTIONS OF PROVIDING HAWALA BILLS/ ENTRIES WER E EFFECTED WITH THE PARTIES. WITH RESPECT TO TWO PARTIES WHO WERE BENEFICIARIES OF THESE ACCOMMODATION TRANSACTIONS AGAINST WHOM SURVEY ACTION U/S 133A OF THE ACT WAS ALSO CARRIED OUT NAMELY M/S COMBINED DIAMONDS LIMITED AND STARGE MS CONFESSED TO HAVING ENTERED INTO FICTITIOUS TRANSACTIONS WITH TH E ABOVE ENTITIES INCLUDING MOXDIAM AND OFFERED INCOME OF RS.1.80 CRORES AND RS .2.25 CRORES FOR THE ASSESSMENT YEAR 2007-08 TO 2009-10 RESPECTIVELY. THE PARTNER OF THE FIRM M/S MOXDIAM MR. NITESH JAI N VIDE LETTER DATED 10- 07-2008 EXPRESSED THAT DURING THE COURSE OF SURVEY CARRIED OUT U/S 133A OF THE ACT ON MOXDIAM CERTAIN BOOKS OF ACCOUNTS AND LOOSE SHEETS WERE IMPOUNDED ON 09-07-2008 . IT WAS SUBMITTED BY SAID MR. NITESH JAIN THAT STATEMENT OF MR. BASANT D. JAIN WAS RECORDED U/S 13 1 OF THE ACT DATED 09- 07-2008 WHICH WAS DULY ACKNOWLEDGED AND ENDORSED BY MR NITESH JAIN WHEREBY AMONG OTHER THINGS THE MODUS OPERANDI OF THE BUSINESS OF GIVING ACCOMMODATION BILLS AND ACCOMMODATION ENTRIES WAS E LABORATELY REVEALED AND EXPLAINED ALONG-WITH INVOLVEMENT OF VARIOUS INT ERESTED PARTIES FROM THE MARKET. THE SAID MR. NITESH JAIN REITERATED THAT TH E BUSINESS OF M/S MOXDIAM IS PROVIDING ACCOMMODATION BILLS AND ACCOMM ODATION ENTRIES TO THE INTERESTED PARTIES IN THE MARKET. THE ASSESSEE HAD DURING THE PREVIOUS YEAR RELEVANT TO THE IMPUGNED ASSESSMENT YEAR BORROWED RS. 1.00 CRORES FROM MOXDI AM AND PROVIDED FOR INTEREST OF RS.93 000/- ON THE SAID LOAN. THE ASSES SEE SUBMITTED THE FOLLOWING DOCUMENTS / EXPLANATIONS BEFORE THE AO DURING ASSES SMENT PROCEEDINGS U/S. 143(3) READ WITH SECTION 143(2) OF THE ACT :- A. LOAN CONFIRMATION FROM MOXDIAM ITA 800/MUM/2012 & 6314/MUM/2012 5 B. COPY OF BANK STATEMENT OF THE LENDER MOXDIAM REFLE CTING THE PAYMENT MADE TO THE ASSESSEE OF RS.1 00 00 000/- DURING MAR CH 2007. C. COPY OF ACKNOWLEDGMENT OF RETURN OF INCOME FILED BY MOXDIAM FOR THE ASSESSMENT YEAR 2007-08 TOGETHER WITH BALANCE SHEET AS AT 31-03-2007 AND SCHEDULE THERETO OF MOXDIAM. IN THE SCHEDULE TO THE BALANCE SHEET UNDER THE HEADING LOANS AND ADVANCES A SUM OF R S.1 00 00 000/- WAS OUTSTANDING IN THE NAME OF THE ASSESSEE. D. IT WAS SUBMITTED THAT THE AMOUNT WAS RECEIVED THROU GH CROSSED ACCOUNT PAYEE CHEQUES. E. IT WAS SUBMITTED THAT THE SAID LOAN WAS REPAID BY T HE ASSESSEE TO M/S MOXDIAM DURING SEPTEMBER 2008 TO MARCH 2009 THROUGH CHEQUES INCLUDING INTEREST. THE ASSESSEE ALSO ENCLOSED ITS BANK STATEMENT BEFORE THE AO REFLECTING THE PAYMENTS MADE TO MOXDIAM. F. IT WAS SUBMITTED THAT INTEREST IS PAID AND TAX WAS DEDUCTED AT SOURCE. THE TDS RETURNS WERE ALSO FILED IN TIME. G. THE ASSESSEE SUBMITTED THAT IT ENTERED INTO TRANSAC TIONS WITH MOXDIAM WHICH IS GENUINE TRANSACTION. H. IT WAS SUBMITTED THAT THE ASSESSEE TRIED TO CONTACT THE SAID PARTY MOXDIAM WHO HAS SHIFTED TO SURAT AT 403 GHANSHAYM BUILDING HATFALIA MADHARPURA SURAT 395003 AND THE PARTNER OF THE SAI D FIRM WAS NOT AVAILABLE TO BE PRESENT BEFORE THE AO PRESENTLY DUE TO THEIR FAMILY AND PERSONAL PROBLEM BUT WILL BE AVAILABLE BEFORE THE A O AFTER THEIR PERSONAL AND FAMILY PROBLEMS ARE OVER. IT WAS SUBMITTED THAT THE SAID PARTY MOXDIAM HAS SENT FRESH CONFIRMATION OF ACCOUNT FOR THE YEAR ENDED 31-03- 2009 RECONFIRMING DEALING WITH THE ASSESSEE TOGETHE R WITH COPY OF THEIR ITA 800/MUM/2012 & 6314/MUM/2012 6 BANK STATEMENT OF ING VYSYA BANK FOR THE PERIOD SEP TEMBER 2008 TO MARCH 2009 TO SHOW THE REPAYMENT MADE BY THE ASSESS EE WHICH WAS DULY CREDITED IN THEIR BANK ACCOUNT ALONG WITH ACKNOWLED GMENT FOR FILING OF RETURN OF INCOME BY MOXDIAM FOR ASSESSMENT YEAR 200 8-09 AND 2009-10. THE AO ISSUED DETAILED SHOW CAUSE NOTICE TO THE ASS ESSEE WHICH WAS REPLIED BY THE ASSESSEE WHEREIN THE AFORE-SAID CONTENTIONS WERE REITERATED BY THE ASSESSEE. THE AO REJECTED THE CONTENTIONS OF THE AS SESSEE BY HOLDING THAT MOXDIAM CREDITWORTHINESS IS NOT PROVED. ITS FINAN CIAL CAPACITY AND ITS BUSINESS BACKGROUND IS DUBIOUS. IT WAS OBSERVED BY THE AO THAT THE M/S MOXDIAM IS NOT CARRYING OUT ANY GENUINE BUSINESS BU T WAS ESTABLISHED TO EARN MERE COMMISSION ON ITS HAWALA DEALINGS. THE AO RELIED UPON DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT V. DURGA P RASAD MORE 82 ITR 540(SC) HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT V. EMERALD COMMERCIAL LIMITED (2001) 250 ITR 539(CAL.) AND ITA T DELHI DECISION IN THE CASE OF DCIT V. SMT. PHOOLWATI DEVI(2009) 314 ITR A T 1(DELHI) . HENCE THE AO MADE ADDITION OF SUM OF RS.1 00 00 000/- FOUND C REDITED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE WHICH WAS NOT SATISFACTORI LY EXPLAINED IN REGARD TO NATURE AND SOURCE THEREOF THEREBY ENABLING THE SAID SUM OF RS. 1.0 CRORE SO CREDITED TO BE CHARGED TO TAX AS INCOME OF THE ASSE SSEE OF THE PREVIOUS YEAR UNDER ASSESSMENT AND FURTHER THE AMOUNT OF RS.93 000/- BEING INTEREST PURPORTEDLY PAID BY THE ASSESSEE WAS ALSO DISALLOWE D BY THE AO AS FICTITIOUS EXPENDITURE VIDE ASSESSMENT ORDER DATED 26.11.200 9 PASSED BY THE AO U/S 143(3) OF THE ACT. 6. AGGRIEVED BY THE ASSESSMENT ORDER DATED 26.11.2 009 PASSED BY THE AO U/S 143(3) OF THE ACT THE ASSESSEE FILED FIRST APP EAL WITH THE LEARNED CIT(A). 7. THE ASSESSEE SUBMITTED BEFORE THE LEARNED CIT(A) VIDE LETTER FILED ON 24-02- 2011 COPIES OF AFFIDAVITS OF THE PARTNERS OF M/S MOXDIAM DATD 22.08.2008 ITA 800/MUM/2012 & 6314/MUM/2012 7 AND 18.02.2011 RETRACTING THE STATEMENTS MADE BEFOR E THE SURVEY AND ENQUIRIES PURSUANT TO THE SURVEY. THE SAID AFFIDAVI TS OF THE PARTNERS DATED 22.08.2008 AND 18.02.2011 WERE SUBMITTED AS AN ADD ITIONAL EVIDENCES U/R. 46A OF THE INCOME-TAX RULES 1962. IT WAS CLAIMED B Y THE ASSESSEE THAT THE LOAN TRANSACTIONS WITH M/S MOXDIAM WAS GENUINE TRAN SACTION AND CONFIRMATION LETTER FROM THE LENDER ALONG WITH EVID ENCE FOR REPAYMENT OF LOAN TO MOXDIAM IN SUPPORT OF THE CLAIM THAT TRANSACTION WITH MOXDIAM WAS GENUINE TRANSACTION WERE SUBMITTED BY THE ASSESSEE. . THESE DOCUMENTS WERE FORWARDED BY LEARNED CIT(A) TO AO FOR VERIFICATION AND NECESSARY ENQUIRY FOR SUBMITTING REMAND REPORT. REMAND REPORT WAS RECEIVED BY LEARNED CIT(A) FROM T HE AO WHICH WAS FORWARDED TO THE ASSESSEE FOR HIS COMMENTS. IN THE REMAND REPORT IT WAS HELD BY THE AO THAT THE SURVEY ACTION U/S 133A OF T HE ACT WAS CONDUCTED BY THE REVENUE ON THE PREMISES OF M/S MOXDIAM M/S. B ASANT DIA JEWELS AND M/S MOREWELL IMPEX PRIVATE LIMITED ON 07-07-2008. I T WAS REVEALED DURING SURVEY ACTION U/S. 133A OF THE ACT THAT THE AFORE-S AID ENTITIES HAVE CREATED A MAZE OF BANK ENTRIES FOR FACILITATING TRANSFER OF F UNDS VIDE HAWALA ENTRIES TO VARIOUS INTERESTED PARTIES IN THE MARKET. FURTHER I NVESTIGATIONS HAVE REVEALED THAT CERTAIN INTERESTED PARTIES IN DIAMOND AND REAL ESTATE MARKET HAD AVAILED OF ACCOMMODATION ENTRIES FOR POSSIBLE ADJUS TMENTS IN THEIR PROJECT/LOAN ACCOUNTS WITH THE PURPOSE OF COVERTLY INTRODUCING THEIR UNACCOUNTED INCOME EARNED FROM UNDISCLOSED SOURCES INTO THEIR BUSINESS THROUGH ACCOMMODATION ENTRIES FROM THE AFORESAID PA RTIES. STATEMENT OF SH. BASANT D. JAIN PARTNER OF MOXDIAM WAS RECORDED U/S 131 OF THE ACT ON 09- 07-2008 WHEREIN HE ADMITTED THAT THE AFORESAID EN TITIES ARE PROVIDING HAWALA ENTRIES TO VARIOUS PARTIES. THIS STATEMENT W AS FURTHER ENDORSED BY SH. NITESH JAIN PARTNER OF MOXDIAM AND MR RAMESH JAIN DIRECTOR OF MOREWEL IMPEX PRIVATE LIMITED WHEREIN THEY ADMITTED THAT THE ONLY INCOME GENERATED BY THEM THROUGH THIS ACTIVITY IS BY WAY OF COMMISSI ON INCOME. CONSEQUENT TO ITA 800/MUM/2012 & 6314/MUM/2012 8 SURVEY ACTION ON THESE ENTITIES TWO PARTIES VIZ. M/S COMBINE DIAMONDS PRIVATE LIMITED AND M/S STAR GEMS PRIVATE LIMITED A DMITTED TO FICTITIOUS TRANSACTIONS WITH M/S MOXDIAM AND OFFERED FOR TAXAT ION UNACCOUNTED INCOME OF RS.1.80 CRORES AND RS.2.25 CRORES FOR THE ASSESS MENT YEAR 2007-08 TO 2009-10. THE ASSESSEE WAS ASKED TO PRODUCE THE PART NERS OF M/S MOXDIAM FOR EXAMINATION WHICH THE ASSESSEE COULD NOT PRODUC E BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS. HOWEVER THE ASSESSEE S UBMITTED DETAILS OF RECEIPT AND REPAYMENT OF LOAN FROM MOXDIAM INCLUDI NG COPIES OF RETURN OF INCOME FILED BY MOXDIAM BANK STATEMENT PRESENT AD DRESS OF LENDER ETC. . SINCE THE ASSESSEE COULD NOT PRODUCE THE PARTNERS O F MOXDIAM AND COULD NOT PRODUCE EVIDENCE TO NEGATE THE FINDINGS OF SURVEY A CTION THE ALLEGED LOAN OF RS.1.0 CRORE ALONG WITH INTEREST PAYMENT OF RS.93 000/- WAS DISALLOWED BY THE AO VIDE ASSESSMENT ORDER DATED 26.11.2009. IT WAS OBSERVED BY THE AO DURING THE REMAND REPORT PROCEEDINGS THAT THE ASSESSEE HAS REQUESTED FOR ADMISSION OF FOLLOWING T WO EVIDENCES BEFORE THE LEARNED CIT(A) :- I) AFFIDAVIT DATED 22.08.2008 OF SH. NITESH JAIN PART NER OF M/S MOXDIAM II) AFFIDAVIT DATED 18.02.2011 OF SH. BASANT D. JAIN PARTNER OF M/S MOXDIAM IT WAS SUBMITTED BY THE ASSESSEE THAT THESE EVIDENC ES COULD NOT BE SUBMITTED BEFORE THE AO SINCE THE PARTNER OF M/S MOXDIAM WERE OUT OF STATION. THE AO OBSERVED THAT SURVEY ACTION U/S 133A OF THE ACT WAS CONDUCTED ON 07-07- 2008 DURING THE COURSE OF WHICH PARTNERS OF MOXDI AM ADMITTED THAT THEY WERE ENGAGED IN PROVIDING ACCOMMODATION ENTRIES. IT WAS OBSERVED BY THE AO THAT THE ASSESSMENT WAS MADE AFTER A SPAN ON 15 MON THS ON 26/11/2009 AND THE RETRACTIONS WERE AFTERTHOUGHT AND ALSO THE ASSESSEES EXPLANATION OF ITA 800/MUM/2012 & 6314/MUM/2012 9 NOT PRODUCING THE EVIDENCE DURING ASSESSMENT PROCEE DINGS IS NOT ACCEPTABLE. IT WAS OBSERVED BY THE AO DURING REMAND REPORT PROC EEDINGS THAT THE REPAYMENTS OF THE LOAN WERE MADE BETWEEN SEPTEMBER 2008 TO MARCH 2009 WHICH WERE PRIOR TO COMPLETION OF ASSESSMENT IN THE CASE OF THE ASSESSEE AND YET THE ASSESSEE IS CLAIMING THAT IT HAD NO CONTACT WITH THE PARTNERS OF MOXDIAM. PROPER OPPORTUNITY OF BEING HEARD WAS PROV IDED TO THE ASSESSEE DURING ASSESSMENT PROCEEDINGS AND HENCE IT WAS SUBM ITTED BY THE AO IN REMAND REPORT THAT ADDITIONAL EVIDENCES BE NOT ADMI TTED. THE AO WITHOUT PREJUDICE EXAMINED THE MATTER AFRESH AND OBSERVED THAT PROFIT OF M/S MOXDIAM BY WAY OF PROVIDING ACCOMMODATION BILLS WAS COMPUTED AS UNDER: F.Y. 2006-07 RS.2 49 530/- F.Y.2007-08 RS.1 64 596/- F.Y.2008-09 (-)RS.9 936/- (UPTO THE DATE OF SURVE Y) ON PERUSAL OF BALANCE SHEET OF M/S MOXDIAM AS AT 31 -03-2007 IT WAS OBSERVED THAT TOTAL CAPITAL OF THE FIRM WAS RS.1 00 000/- WHEREAS AGGREGATE OF CURRENT ACCOUNT WAS DEFICIT (-) RS.12 02 375/- . TH E AMOUNT PAYABLE TO CREDITORS WAS SHOWN AT RS.16 29 83 032/- AND AN AMO UNT OF RS.10 40 12 58/- WAS SHOWN AS RECEIVABLE FROM DEBTO RS. THERE IS NO BANK LOAN OR ANY OTHER LOAN TAKEN BY MOXDIAM WHICH INDIC ATES THAT THE LOANS HAVE BEEN PAID BY MOXDIAM OUT OF ALLEGED CREDITORS APPEA RING IN BALANCE SHEET. IN RESPONSE THE ASSESSEE SUBMITTED BEFORE THE AO I N REMAND REPORT PROCEEDINGS THAT THE ABOVE LOANS WERE NOT AN ACCOMM ODATION ENTRIES BUT GENUINE LOAN TRANSACTIONS DULY REFLECTED IN BANK AC COUNTS OF BOTH THE PARTIES AND ALSO RECORDED IN BOOKS OF ACCOUNTS. THE NOTICES U/S 133(6) OF THE ACT AND SUMMONS U/S 131 OF THE ACT WERE ISSUED BY THE AO IN REMAND REPORT PROCEEDINGS AND IN RESPONSE MR. BASANT D. JAIN PAR TNER OF MOXDIAM APPEARED BEFORE THE AO ON 23/06/2011 AND FILED LET TER DATED 22/06/2011 ITA 800/MUM/2012 & 6314/MUM/2012 10 ENCLOSING DETAILS OF TRANSACTION OF MOXDIAM WITH TH E ASSESSEE COPY OF LEDGER BANK STATEMENT AND COPY OF ACKNOWLEDGMENT OF RETURN OF INCOME FILED FOR ASSESSMENT YEAR 2007-08 2008-09 AND 2009-10. THE S TATEMENT U/S 131 OF THE ACT WAS RECORDED OF MR BASANT D. JAIN PARTNER OF MOXDIAM WAS ASKED TO EXPLAIN THE SOURCE OF LOAN WHEREIN HE REPLIED THAT THE MONIES WERE ADVANCED TO THE ASSESSEE OUT OF RECEIVABLE I.E. DEBTORS. IT WAS OBSERVED BY THE AO THAT THE LOANS WERE AVAILED BY THE ASSESSEE IN MARCH 200 7 WHICH WERE REPAID IN SEPTEMBER 2008 TO MARCH 2009. THE AO IN REMAND PROC EEDINGS ISSUED NOTICES U/S 133(6) OF THE ACT TO ICICI BANK TO FURN ISH COPIES OF BANK STATEMENT OF THE ASSESSEEE TO VERIFY REPAYMENTS OF LOAN MADE BY THE ASSESSEE TO MOXDIAM. FROM THE PERUSAL OF BANK STATEMENTS SO OBTAINED IT WAS OBSERVED BY THE AO THAT ON THE SAME DATES WHEN THE ASSESSEE REPAID THE LOAN THERE ARE CREDIT TRANSFER ENTRIES OF THE SAME AMOUNT THROUGH RTGS TRANSFERS IN THE ASSESSEES BANK ACCOUNT WITH ICICI BANK. THE AO ASKED ICICI BANK TO FURNISH DETAILS OF RTGS TRANSFERS TO THE AS SESSEE BANK ACCOUNT WHICH REVEALED THAT THE TRANSFERS HAVE COME FROM RISING S TAR AND SEVEN STAR JEWELS THROUGH ING VYSYA BANK. THE NOTICES U/S 133 (6) OF THE ACT WAS ISSUED BY THE AO TO ING VYSYA BANK LIMITED TO FURNI SH BANK STATEMENTS OF THESE TWO PARTIES FOR THE PERIOD DURING WHICH RTGS TRANSFERS WERE MADE BY THEM. SUMMONS U/S 131 OF THE ACT WERE ISSUED TO M/S RISING STAR AND SEVEN STAR JEWELS ASKING FOR DETAILS SUCH AS NATURE OF TR ANSACTION WITH AND LEDGER ACCOUNT OF THE ASSESSEE IN THEIR BOOKS OF ACCOUNTS AND THEIR COPIES OF RETURN OF INCOME ALONG WITH COPIES OF PROFIT AND LOSS ACCO UNTS BALANCE SHEETS AUDIT REPORTS ETC. FOR ASSESSMENT YEARS 2007-08 20 08-09 AND 2009-10 . ON PERUSAL OF DETAILS SUBMITTED BY THE SAID ENTITIES IT WAS OBSERVED BY THE AO THAT M/S RISING STAR IS A PROPRIETARY CONCERN SITUA TED AT SURAT . THE CAPITAL OF THE CONCERN IS MEAGER RS.2 33 404.89. THE SUNDRY CR EDITORS ARE RS.17 36 42 925/- AND SUNDRY DEBTORS ARE AT RS.6 96 55 789/-. NO LOANS HAVE BEEN TAKEN BY THE CONCERN BUT IT HAS ADVANCED LOANS OF RS.4 43 29 747/- WHICH INCLUDED LOAN OF RS.1 35 00 000/- ADVANCED TO THE ITA 800/MUM/2012 & 6314/MUM/2012 11 ASSESSEE. THE CONCERN SEVEN STAR JEWELS IS ALSO A P ROPRIETARY CONCERN WITH A MEAGER CAPITAL OF RS.3 70 874/- SUNDRY CREDITORS ARE RS.53 18 93 628 AND SUNDRY DEBTORS ARE AT RS.38 06 99 297/- AS AT 31/3/ 2009. THE CONCERN HAD NOT TAKEN ANY LOAN BUT HAS ADVANCED LOAN OF RS.8 90 32 200/- WHICH IS INCLUSIVE OF LOAN OF RS.60 00 000/- ADVANCED TO THE ASSESSEE. BOTH THESE PARTIES ARE LOCATED AT SURAT AND HAD DEALING WITH M OXDIAM AND MOREWEL IMPEX PRIVATE LIMITED WAS THE OBSERVATIONS OF THE A O DURING REMAND REPORT PROCEEDINGS. THE AO OBSERVED THAT IN BOTH THE CASES LOANS ARE ADVANCED OUT OF SUNDRY CREDITORS. . THE PROPRIETORS CAPITAL IS MEAGER OF BOTH THESE ENTITIES AND THERE ARE NO SECURED OR UNSECURED LOANS TAKEN B Y THESE ENTITIES WHICH INDICATED THAT THESE ENTITIES WERE ALSO ENGAGED IN PROVIDING ACCOMMODATION ENTRIES AND THEIR BANK ACCOUNTS FORM A PART OF CHAI N OF MOVEMENT OF FUNDS FROM ONE CONCERN TO ANOTHER WHICH IS INDICATIVE OF THE CIRCULAR MOVEMENT OF HAWALA ENTRIES THROUGH BANK ACCOUNTS OF VARIOUS ENT ITIES INCLUDING THE ENTRIES REFERRED TO ABOVE. THE AO IN REMAND REPORT PROCEEDINGS OBSERVED THAT T HE LOAN OF RS.1.0 CRORES ADVANCED BY MOXDIAM TO THE ASSESSEE IS ACCOMMODATIO N ENTRY. THE AO OBSERVED THAT : A) THE AFFIDAVIT OF SH BASANT D. JAIN RETRACTING THE E ARLIER STATEMENT IS DATED 18/02/2011 WHICH IS ABOUT 2 YEARS AND 8 MON THS AFTER THE SURVEY ACTION CONDUCTED ON 07/07/2008. THE AVERMENT S IN AFFIDAVIT ARE CLEARLY AN AFTERTHOUGHT AND CONTRADICTORY TO FA CTS AND MATERIAL ON RECORD AND THE FACTS THAT HAVE EMERGED AS A RESU LT OF SURVEY CONDUCTED BY THE INVESTIGATION WING. IT WAS OBSERVE D BY THE AO THAT THE AFFIDAVIT OF MR. NITISH JAIN WAS NOT FILED BEFO RE THE AO AND HENCE THE AO OBSERVED THAT NO COMMENTS CAN BE OFFERED IN THIS RESPECT. ITA 800/MUM/2012 & 6314/MUM/2012 12 B) THE ENQUIRIES CONDUCTED DURING REMAND PROCEEDINGS R EVEALED THAT THERE IS CIRCULAR MOVEMENT OF FUNDS BETWEEN ENTITIE S SUCH AS MOXDIAM MORWEL IMPEX PRIVATE LIMITED M/S RISING STAR AND M/S SEVEN STAR JEWELS. THESE ENTITIES ARE SITUATED AT S URAT HAVE MEAGER CAPITAL AND HAD NO BORROWED FUNDS WHILE SUNDRY DEB TORS AND CREDITORS ARE HUGE. THIS INDICATED THAT THE RESPECT IVE BANK ACCOUNTS ARE USED ONLY FOR MOVEMENT OF FUNDS. C) IN RESPECT OF LOANS THE ONUS WAS ON THE ASSESSEE T O PROVE THE IDENTITY CREDITWORTHINESS OF THE LENDER AND THE G ENUINENESS OF THE TRANSACTION. IT WAS OBSERVED BY THE AO THAT MERELY BECAUSE THE ASSESSEE ARRANGED PAPER WORK THE LOAN COULD NOT BE HELD TO BE GENUINE. THE AO RELIED UPON DECISION OF DCIT V. SMT . PHOOLWATI DEVI (2009) 314 ITR AT 1(DELHI) AND DECISION OF HONBLE SUPREME COURT IN THE CASE OF SUMATI DAYAL V. CIT(1995) 214 ITR 801(S C). D) THE FINDING ARRIVED AT DURING SURVEY ACTION DATED 0 7/07/2008 AND THE STATEMENT RECORDED U/S. 131 OF THE ACT OF SH BA SANT D. JAIN ON 09/07/2008 WAS DULY CONFIRMED BY SH. NITESH JAIN P ARTNER OF MOXDIAM AND SH RAMESH JAIN DIRECTOR OF MOREWEL IM PEX PRIVATE LIMITED. AFTER THE SURVEY ACTION STATEMENTS OF SH. NITESH JAIN SH BASANT D. JAIN AND SH. RAMESH JAIN WAS RECORDED U/S 131 OF THE ACT ON 07.08.2008 AND 18.07.2008 WHEREIN THEY HAV E CONFIRMED THAT THEY HAD INDULGED IN THE ACTIVITY OF GIVING HA WALA BILLS TO VARIOUS PARTIES IN THE MARKET. E) CONSEQUENT TO SURVEY ACTION TWO PARTIES NAMELY M/ S COMBINE DIAMONDS PRIVATE LIMITED AND M/S STAR GEMS PRIVATE LIMITED ADMITTED TO THEIR FICTITIOUS TRANSACTIONS WITH M/S MOXDIAM AND OFFERED THE INCOME SO DERIVED TO TAX WHICH CONCLUSI VELY PROVES THAT ITA 800/MUM/2012 & 6314/MUM/2012 13 M/S MOXDIAM HAS PROVIDED ACCOMMODATION ENTRIES TO V ARIOUS ENTITIES. F) IT WAS OBSERVED BY THE AO THAT IT IS NOT SUFFICIENT THAT THE FUNDS MOVED THROUGH BANKING CHANNEL AND THE ENTITIES CONC ERNED HAVE ARRANGED THE PAPERWORK THE TRANSACTION CANNOT BE H ELD AS GENUINE AS THE MATTER IS TO BE VIEWED IN ITS ENTIRETY AND V ARIOUS FACTS CONCERNING THE SAME AS DETAILED ABOVE. THE LEARNED CIT(A) OBSERVED THAT THE ASSESSEE HAS F AILED TO DISCHARGE THE BURDEN OF PROVING CREDITWORTHINESS OF THE ALLEGED L ENDER. THE ASSESSED INCOME OF THE ALLEGED LENDER M/S MOXDIAM IS AS UNDER: AY 2007-08 RS.2 49 530/- AY 2008-09 RS.1 64 596/- AY 2009-10 UPTO THE DATE OF SURVEY (-) RS.9 936/- THE CAPITAL OF THE PARTNER WAS RS.1 00 000/- AND TH E AGGREGATE CURRENT ACCOUNT OF THE PARTNER WAS TO THE TUNE OF DEFICIT/D EBIT (-) RS12 02 374/- AND LEARNED CIT(A) DISBELIEVE THE ASSERTION/CONTENTION OF THE ASSESSEE THAT THE LOAN OF RS.1.0 CRORE WAS GIVEN BY M/S MOXDIAM TO TH E ASSESSEE AS THE ALLEGED LENDER DID NOT HAD CAPACITY TO ADVANCE THE LOAN OF RS.1.0 CRORE TO THE ASSESSEE ( THE TOTAL LOAN ADVANCED BEING RS. 5.14 C RORES AS AT 31-03-2007) AS THE SAID MOXDIAM IS NOT HAVING GENUINE BUSINESS AND ALSO THE ONLY SOURCE OF INCOME IS COMMISSION INCOME FOR ARRANGING ACCOMMODA TION ENTRIES AS THE SAID MOXDIAM DOES NOT HAVE RESOURCES TO ADVANCE LOA N OF RS.1.0 CRORE TO THE ASSESSEE ( THE TOTAL LOAN ADVANCED BEING RS. 5.14 C RORES AS AT 31-03-2007). THE LEARNED CIT(A) OBSERVED THAT THE RETRACTION HAS NOT BEEN FILED BY THE PARTNERS OF M/S MOXDIAM AT THE EARLIEST WHICH IS FI LED AFTER 2 YEARS AND 8 MONTHS WHICH CONFIRMS THAT MOXDIAM IS ENGAGED IN BU SINESS OF ARRANGING ITA 800/MUM/2012 & 6314/MUM/2012 14 ACCOMMODATION ENTRIES FOR COMMISSION FOR ITS CLIENT S.THE ADMISSION MADE BY MR. BASANT D. JAIN ON 09-07-2008 WAS CONFIRMED BY S H. NITESH T.JAIN ON 09-07-2008. THE ADMISSION WAS ALSO CONFIRMED BY DIR ECTOR OF ASSOCIATE COMPANY M/S MOREWEL IMPEX PRIVATE LIMITED SH RAMES H JAIN ON 09-07- 2008.THEREAFTER SH. NITESH JAIN SH BASANT D. JAIN AND SH. RAMESH JAIN AGAIN CONFIRMED IN THEIR STATEMENT RECORDED ON 18.0 7.2008 AND 07.08.2008 THAT THE FIRM M/S MOXDIAM AND THE M/S MOREWEL IMPEX PRIVATE LIMITED HAD INDULGED IN THE ACTIVITY OF GIVING HAWALA BILLS (AC COMMODATION ENTRIES) TO VARIOUS PARTIES IN THE MARKET. SH. NITESH JAIN PAR TNER MOXDIAM ALSO GAVE LETTER DATED 10-07-2008 WHEREBY HE AGAIN CONFIRMED THAT THE FIRM IS ENGAGED IN GIVING ACCOMMODATION ENTRIES. IT WAS OBSERVED BY LEARNED CIT(A) THAT MOXDIAM HAS SHOWN IN ITS BOOKS DEBTORS OF RS. 10.40 CRORES AND CREDITORS OF RS. 16.29 CRORES. THE RETRACTION BY SH. BASANT D. JAIN WAS AFTER 2 YEARS AND 8 MONTHS AND SUCH RETRACTION HAS NO EVIDENTIARY VA LUE WHICH NEEDS TO BE REJECTED. THE LEARNED CIT(A) OBSERVED THAT THE PART NERS OF THE FIRM HAD ADMITTED THAT THEY INDULGED IN HAWALA ACTIVITIES AN D THAT NO GENUINE PURCHASE AND SALE OF DIAMONDS WAS CARRIED OUT BY TH EM THEREFORE THE NATURAL COROLLARY IS THAT ALL THE TRANSACTIONS SHOW N IN BOOKS OF ACCOUNTS OF M/S MOXDIAM AND ITS ASSOCIATE COMPANY M/S MOREWEL I MPEX PRIVATE LIMITED ARE NOT GENUINE TRANSACTIONS BUT ONLY A MAKE BELIEF AND ARE FICTITIOUS TRANSACTIONS . THE LEARNED CIT(A) FURTHER OBSERVED THAT TWO PARTIES NAMELY M/S. COMBINE DIAMONDS PRIVATE LIMITED AND M/S. STAR GEMS PRIVATE LIMITED WHO WERE BENEFICIARIES OF ACCOMMODATION ENTRIES GIV EN BY MOXDIAM ADMITTED VOLUNTARILY THAT TRANSACTIONS WITH MOXDIAM WERE NOT GENUINE AND WERE ONLY ACCOMMODATION ENTRIES AND BOTH THESE COMPANIES OFFE RED FOR TAX THE FICTITIOUS TRANSACTIONS WITH MOXDIAM. THUS THE LEARNED CIT(A) HELD THAT THE TRANSACTIONS OF THE ASSESSEE WITH MOXDIAM ARE NOT G ENUINE TRANSACTIONS AND ARE FOUND TO BE FICTITIOUS. SIMILARLY WITH RESPECT TO REPAYMENT OF LOAN TO MOXDIAM IN THE FORM OF CHEQUES OF RS. 38 LACS ON 18 .09.2008 AND RS. 60 LACS ON 17.12.2008 IT WAS OBSERVED THAT THESE REPAYMENT S ARE NOT FROM GENUINE ITA 800/MUM/2012 & 6314/MUM/2012 15 RESOURCES OF THE ASSESSEE FIRM BUT THROUGH ALLEGED LOANS TAKEN BY IT FROM RISING STAR AND SEVEN STAR JEWELS. IT WAS OBSERVED BY LEARNED CIT(A) THAT ENQUIRIES WITH THESE TWO CONCERNS NAMELY SEVEN STAR JEWELS AND RISING STAR HAVE ALSO BROUGHT OUT THAT THESE TWO ENTITIES DO NO T HAVE FINANCIAL STANDING TO GIVE THE ALLEGED LOAN TO MOXDIAM. IT WAS OBSERVED B Y THE LEARNED CIT(A) THAT WEB OF ENTRIES/ CREDIT HAS BEEN CREATED BY THESE TW O ENTITIES IN THEIR BOOKS OF ACCOUNTS TO JUSTIFY THE AVAILABILITY OF FUNDS WHERE AS CAPITAL OF THESE TWO PROPRIETARY CONCERNS/ ENTITIES IS ONLY A MEAGER SUM OF RS. 2 83 409/- OF RISING STAR AND RS. 3 70 874/- OF SEVEN STAR JEWELS . THESE ENTITIES HAVE SHOWN HUGE CREDITS IN THEIR BOOKS TO THE TUNE OF RS .17.36 CRORES AND RS. 53.19 CRORES RESPECTIVELY TO CREATE AN ILLUSION THA T THESE ENTITIES HAVE THE NECESSARY FUNDS FROM WHICH IT GIVE LOAN TO THE ASSE SSEE WHICH WAS UTILIZED BY THE ASSESSEE FOR REPAYING THE LOAN TO MOXDIAM. THUS IT WAS HELD BY THE LEARNED CIT(A) THAT THE LOAN OF RS. 1.0 CRORE GIVEN BY MOXDIAM TO THE ASSESSEE IS NOT A GENUINE TRANSACTION. THE LEARNED CIT(A) FU RTHER OBSERVED THAT ADMISSION OF THE PARTNERS OF MOXDIAM DURING SURVEY CAN BE RELIED UPON TO FASTEN LIABILITY ON THE ASSESSEE AND NOTHING FURTHE R NEED TO BE PROVED BY THE REVENUE RELYING ON SEVERAL CASE LAWS AS MENTIONED I N HIS APPELLATE ORDERS. THE ASSESSEE HAVING FAILED TO PROVE THAT THE ADMISS ION MADE BY THE PARTNERS OF M/S MOXDIAM WAS NOT TRUE AND WAS NOT MADE VOLUNT ARILY . THE RETRACTION WAS AFTER A GAP OF 2 YEARS 8 MONTHS WHICH HAS NO EV IDENTIARY VALUE AND DESERVES TO BE REJECTED OUT-RIGHTLY. THUS THE LEAR NED CIT(A) CONFIRMED THE ACTION OF THE AO AND DISMISSED THE APPEAL OF THE AS SESSEE VIDE APPELLATE ORDERS DATED 30.11.2011. 8. AGGRIEVED BY THE APPELLATE ORDERS DATED 30.11.20 11 OF THE LEARNED CIT(A) THE ASSESSEE FILED SECOND APPEAL BEFORE THE TRIBUNA L. 9. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS WERE MADE BEFORE THE AUTHORITIES BELOW. THE LEARNED COUN SEL HAS FILED WRITTEN ITA 800/MUM/2012 & 6314/MUM/2012 16 SUBMISSIONS WHICH ARE PLACED IN FILE. IT WAS SUBMIT TED THAT THE ASSESSEE RAISED LOAN OF RS 1.0 CRORE FROM FIRM M/S MOXDIAM D URING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR. HE DREW OUR ATTENT ION TO THE ORDERS OF THE AUTHORITIES BELOW. THE LEARNED COUNSEL SUBMITTED TH AT THE AO HAS ALLEGED THAT THE ASSESSEE HAS RAISED RS. 1.0 CRORE THROUGH MOXDI AM WHO IS ALLEGED BY REVENUE TO BE AN ACCOMMODATION BILL AND ACCOMMODATI ON ENTRY PROVIDER. THE AO DIRECTED THE ASSESSEE TO PRODUCE THE PARTNERS OF MOXDIAM DURING THE ASSESSMENT PROCEEDINGS BUT THE ASSESSEE COULD NOT P RODUCE THE PARTNERS DURING ASSESSMENT PROCEEDINGS BUT THE PARTNER OF MOXDIAM MR. BASANT D JAIN APPEARED BEFORE THE AO DURING REMAND REPORT PR OCEEDINGS CONDUCTED BY AO. IT WAS SUBMITTED BY LEARNED COUNSEL FOR THE ASS ESSEE THAT AFFIDAVITS HAVE BEEN PRODUCED BEFORE THE LEARNED CIT(A) AS AN ADDIT IONAL EVIDENCES U/R 46A OF INCOME-TAX RULES 1962 VIDE LETTER DATED 23-02-2 011 FILED BEFORE LEARNED CIT(A) ON 24-02-2011(PAGE 92-102/PB) DULY EXECUTED BY PARTNERS OF MOXDIAM CONFIRMING THAT THE SAID FIRM IS NOT ENGAGED IN PRO VIDING ACCOMMODATION BILLS AND ACCOMMODATION ENTRIES. THE PARTNER OF THE FIRM M/S MOXDIAM MR BASANT D. JAIN HAS GIVEN STATEMENT ON OATH DURING REMAND R EPORT PROCEEDINGS BEFORE THE AO WHEREBY HE HAS STATED THAT MOXDIAM IS NOT E NGAGED IN PROVIDING ACCOMMODATION ENTRIES. IT WAS SUBMITTED THAT THE AS SESSEE HAS DISCHARGED BURDEN CAST UPON IT . THERE WAS RETRACTION FROM THE PARTNERS OF MOXDIAM OF THE STATEMENTS RECORDED DURING SURVEY PROCEEDINGS W HEREBY THEY RETRACTED AND DENIED THAT THE FIRM M/S. MOXDIAM IS ENGAGED IN PROVIDING ACCOMMODATION BILLS AND ACCOMMODATION ENTRIES. THE LEARNED COUNSEL SUBMITTED THAT ADDITIONS HAVE BEEN MADE BASED ON TH E STATEMENT OF THIRD PARTY WHICH ALSO WAS RETRACTED. THE AFFIDAVIT OF TH E PARTNERS OF MOXDIAM RETRACTING THEIR STATEMENTS RECORDED DURING SURVEY PROCEEDINGS AND POST SURVEY ENQUIRIES WHEREBY VIDE AFFIDAVIT DATED 22-08 -2008 MR NITISH JAIN RETRACTED FROM HIS STATEMENT THAT MOXDIAM WAS ENGAG ED IN ACCOMMODATION ENTRIES WERE BROUGHT TO OUR ATTENTION WHICH IS PLAC ED AT PAGE 95-98/PAPER BOOK. THE ASSESSEE ALSO BROUGHT TO OUR ATTENTION AF FIDAVIT OF MR. BASANT D. ITA 800/MUM/2012 & 6314/MUM/2012 17 JAIN DATED 18-02-2011 WHEREBY HE RETRACTED FROM HIS STATEMENTS GIVEN TO THE DEPARTMENT THAT MOXDIAM WAS ENGAGED IN GIVING ACCOM MODATION ENTRIES THE SAID AFFIDAVIT IS PLACED IN PAPER BOOK PAGE 99-102. THE LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO PAGE 392/PB WHER EBY VIDE QUESTION NO 9 VIDE STATEMENT RECORDED OF MR. NITESH JAIN UNDER OA TH U/S 131 ON 07-07- 2008 HE WAS ASKED TO PRODUCE THE BOOKS OF ACCOUNTS OF MOXDIAM AND HE STATED THAT THE BOOKS OF ACCOUNTS WERE WITH ACCOUNT ANT OF THE FIRM WHO HAS NOT COME. IT WAS SUBMITTED THAT LOAN OF RS.1.0 CROR E RAISED BY ASSESSEE FROM MOXDIAM WAS DULY PAID BACK TO MOXDIAM BY THE ASSESS EE FROM SEPTEMBER 2008 TO MARCH 2009 AND CONFIRMATION IS PLACED ON RE CORD AT PAGE 79/PB FROM MOXDIAM ALONG WITH BANK STATEMENT OF THE ASSESSEE A T PAGE 80-82/PB. OUR ATTENTION WAS ALSO DRAWN TO STATEMENT OF SH. BASANT D JAIN PARTNER MOXDIAM DATED 23-06-2011 WHICH WAS RECORDED DURING THE COURSE OF ASSESSMENT PROCEEDINGS OF THE ASSESSEE WHEREBY IN R EPLY TO QUESTION NO 8 IT WAS ANSWERED THAT MONEY WAS ADVANCED BY MOXDIAM FRO M THE RECEIVABLES I.E. FROM DEBTORS. OUR ATTENTION WAS ALSO DRAWN TO QUEST ION NO 9 WHEREBY HE ANSWERED THAT HE CONFESSED UNDER PRESSURE THAT THE FIRM WAS DOING ACCOMMODATION ENTRIES WHICH HE RETRACTED AFTERWARDS (PAGE 441-442/PB). OUR ATTENTION WAS ALSO DRAWN TO REMAND REPORT PREPA RED BY THE AO WHICH IS PLACED AT PAGE 275-280/PB. OUR ATTENTION WAS ALSO D RAWN TO WRITTEN SUBMISSIONS SUBMITTED BY THE ASSESSEE BEFORE THE L EARNED CIT(A) WHICH IS PLACED AT PAPER BOOK PAGE 281-286. IT WAS SUBMITTED THAT WHEN THE ORIGINAL STATEMENTS WERE RECORDED DURING SURVEY OPERATIONS O F THE PARTNERS OF MOXDIAM THEN THE ASSESSEE NAME DID NOT FIGURE IN THE SAID STATEMENTS. THE RELIANCE WAS PLACED BY THE LEARNED COUNSEL ON THE D ECISION OF THE TRIBUNAL IN THE CASE OF KATARIA KETAN ISHWARLAL V. ITO IN ITA N O. 4304/MUM/2007 VIDE ORDERS DATED 30.04.2010.IT WAS SUBMITTED THAT THE P ARTNERS OF THE FIRM MOXDIAM DID NOT TAKE THE NAME OF THE ASSESSEE THAT THE LOAN GIVEN BY THEM TO THE ASSESSEE WAS AN ACCOMMODATION ENTRY.IT WAS SUBM ITTED THAT THE TRANSACTION OF THE ASSESSEE WITH MOXDIAM WAS GENUIN E TRANSACTION WHICH IS ITA 800/MUM/2012 & 6314/MUM/2012 18 SUPPORTED BY AFFIDAVITS/STATEMENTS ON OATH RECORDED U/S 131 OF THE ACT OF PARTNERS OF MOXDIAM. OUR ATTENTION WAS DRAWN TO THE AUDITED BALANCE SHEET OF MOXDIAM AS AT 31-03-2008 WHICH IS PLACED AT PAGE 188/PB.IT WAS SUBMITTED THAT REPAYMENT OF THE LOAN WAS MADE BY TH E ASSESSEE PRIOR TO THE ISSUE OF NOTICES U/S 142(1) OF THE ACT WHICH WAS I SSUED ON 24-06-2009. IT WAS SUBMITTED THAT THERE IS NO MATERIAL ON RECORD T O SHOW THAT CASH HAS CHANGED HANDS. THE ATTENTION WAS DRAWN TO TAX AUDIT REPORT OF MOXDIAM WHEREBY THERE IS NO SUCH ADVERSE AUDIT REMARK THAT CASH HAS CHANGED HANDS/PLACED AT PAGE 178/PB. THE LEARNED COUNSEL FO R THE ASSESSEE DREW OUR ATTENTION TO THE ASSESSMENT ORDERS PASSED U/S 143(3 ) READ WITH SECTION 147 OF THE ACT IN THE CASE OF M/S MOXDIAM FOR THE ASSES SMENT YEAR 2007-08 WHICH IS PLACED AT PAGE 213-217/PAPER BOOK ASSESSMENT OR DER FOR ASSESSMENT YEAR 2008-09 OF MOXDIAM IS PACED AT PAGE 219-221/PAPER B OOK.THE AUDITED ACCOUNTS AND ACKNOWLEDGEMENT OF INCOME TAX RETURN O F MOXDIAM ARE ALSO PLACED IN PAPER BOOK/PAGE 146-212 FOR THE ASSESSMEN T YEAR 2007-08 TO 2009-10.IT WAS SUBMITTED THAT THE ASSESSEE RAISED L OANS FROM RISING STAR AND SEVEN STAR JEWEL TO REPAY MOXDIAM AND COPIES OF THE IR LEDGER ACCOUNTS CONFIRMATIONS INCOME TAX RETURN ACKNOWLEDGEMENT BANK STATEMENTS ARE PLACED IN PAPER BOOK PAGE 223-274. THE ATTENTION WA S DRAWN TO PAGE 6- 7/WRITTEN SUBMISSION AND IT WAS SUBMITTED THAT THE SAID MOXDIAM WAS ALLEGEDLY ENGAGED IN ALLEGED ACCOMMODATION ENTRIES RELATED TO SALE AND PURCHASE OF MATERIAL AND NOT OF LOANS AS WERE GRANT ED TO THE ASSESSEE .THE ASSESSEE RELIED ON DECISION OF MUMBAI TRIBUNAL IN A CIT V. G V SONS ITA NO. 2239-40/MUM/2012 DATED 05-12-2014 AND OUR ATTENTION WAS DRAWN TO PARA 17 WHEREBY TRANSACTION OF THE TAX-PAYER G V SONS WI TH MOXDIAM WAS HELD NOT TO BE SHAM TRANSACTION AND THE TRIBUNAL UPHELD DECI SION OF THE LEARNED CIT(A) IN DELETING THE ADDITION MADE BY THE AO. IT WAS SUB MITTED THAT BALD STATEMENT HAS BEEN MADE BY THE AO AND LOAN TRANSACTIONS WERE HELD TO BE NOT GENUINE. OUR ATTENTION WAS DRAWN TO PAGE 8-9/WRITTEN SUBMISS IONS WHEREBY IT WAS SUBMITTED THAT LEARNED CIT(A) IGNORED THAT M/S MOXD IAM HAS DEBTORS OF RS. ITA 800/MUM/2012 & 6314/MUM/2012 19 10 CRORES FROM WHICH AS STATED BY MR. BASANT D. JAI N PARTNER OF MOXDIAM LOAN OF RS. 1.0 CRORE HAD BEEN GIVEN TO THE ASSESSE E. IT WAS SUBMITTED THAT THERE IS NO REQUIREMENT TO PROVE SOURCE OF SOURCE O F LOAN. THE ASSESSEE RELIED UPON DECISION OF ORIENT TRADING COMPANY LIMITED V. CIT (1963) 49 ITR 723(BOM. HC) THAT THE TAX-PAYER HAS NOT TO PROVE TH E SOURCE OF SOURCE OF LOAN. THE ASSESSEE ALSO RELIED UPON DECISION OF CIT V. ORISSA CORPORATION PRIVATE LIMITED (1986) 159 ITR 78(SC) AND SUBMITTED THAT ONCE LOAN CONFIRMATIONS ARE FILED THE BURDEN OF THE ASSESSE E IS DISCHARGED. THE ASSESSEE SUBMITTED THAT THE SOURCES OF LOAN STOOD E XPLAINED. THE ASSESSEE RELIED UPON DECISION OF DCIT V. ROHINI BUILDERS (20 02) 256 ITR 360(GUJ. HC) CIT V. ABT LIMITED (2015) 370 ITR 159(MAD.HC) CIT V. KAPOOR CHAND MAGNESH CHAND(2003) 218 TAXMAN 157(MAG.)(ALL. HC) CIT V. CHANDELA TRADING COMPANY PRIVATE LIMITED (2015) 372 ITR 232( CAL. HC) CIT V. SMT SANGHAMITA BHARALI (2014) 361 ITR 481(GAU. HC) CIT V. JAI KUMAR BAKLIWAL (2014) 366 ITR 217(RAJ. HC) CIT V. NEMICHAND KOTHA RI (2003) 264 ITR 254(GAU. HC) CIT V. SHIV DHOOTI PEARLS AND INVESTM ENT LIMITED(2016) 237 TAXMAN 104(DEL HC) CIT V. KHADER KHAN SONS (2013) 352 ITR 480(SC) . OUR ATTENTION WAS ALSO DRAWN TO INSTRUCTION NO. F.NO. 2 86/2/2003-IT(INV.) DATED 10-03-2003 ISSUED BY CBDT WITH RESPECT TO CONFESSIO NS OF ADDITIONAL INCOME DURING SEARCH AND SURVEY OPERATIONS WHEREIN CBDT IN STRUCTED THE OFFICERS CONDUCTING SEARCH AND SURVEYS NOT TO EXTRACT FORCIB LE CONFESSIONS AND RATHER FOCUS ON COLLECTING EVIDENCES. THE LEARNED COUNSEL ALSO SUBMITTED THAT THE ASSESSEE HAS DULY PAID INTEREST ON THESE LOANS AND TAX HAS BEEN DEDUCTED AT SOURCE UNDER CHAPTER XVII-B OF THE ACT. THE LEARNED COUNSEL SUBMITTED THAT THE CASE LAW RELIED UPON BY THE AUTHORITIES BELOW A RE NOT APPLICABLE. HE SUBMITTED THAT IN CASE OF SUMATI DAYAL V. CIT (1998 ) 214 ITR 801(SC) THE TAX-PAYER WON HORSE RACE EVERY YEAR. IN THE INSTANT CASE THE ASSESSEE HAS PRODUCED THE PARTY AFFIDAVITS WERE FILED STATEME NTS WERE TAKEN ON OATH AND HENCE RATIO OF SUMATI DAYAL (SUPRA) IS NOT APPLICAB LE. FURTHER THE LEARNED COUNSEL DISTINGUISHED THE CASE OF DCIT V. SMT PHOOL AN DEVI(2009) 314 ITR ITA 800/MUM/2012 & 6314/MUM/2012 20 1(TRIB) AND SUBMITTED THAT IN THE SAID CASE CASH WA S DEPOSITED IN THE BANK NO INTEREST WAS PAID NOT ASSESSED TO TAX WHILE IN TH E INSTANT CASE INTEREST WAS PAID TDS WAS DEDUCTED HUGE TRANSACTION OF PURCHA SE AND SALE AND ASSESSMENTS WERE COMPLETED. THUS THE JUDGMENT OF P HOOLWATI DEVI(SUPRA) CANNOT BE APPLIED. SIMILARLY IT WAS SUBMITTED THAT THE DECISION OF CIT V. DURGA PRASAD MORE(1971) 82 ITR 540(SC) AND CIT V. E MARALD COMMERCIAL LIMITED(2001) 250 ITR 539(CAL.HC) ARE DISTINGUISHAB LE AND NOT APPLICABLE. THE LEARNED COUNSEL FOR THE ASSESSEE MOVED AN APPLI CATION UNDER RULE 29 OF INCOME-TAX (APPELLATE TRIBUNAL) RULES 1963 WHEREIN ADDITIONAL EVIDENCES ARE SUBMITTED BEFORE THE TRIBUNAL AND PRAYER IS MADE FO R ADMISSION OF THESE ADDITIONAL EVIDENCES WHICH ARE MAINLY IN THE FORM O F MVAT AUDIT REPORT OF MOXDIAM RISING STAR AND SEVEN STAR JEWELS INCOM E-TAX ASSESSMENT ORDERS OF LENDERS AND ALSO DETAILS OF SOURCES TO ADVANCE LOANS BY THESE ENTITIES PAGE 291-356 OF PAPER BOOK.THE ASSESSEE HAS PRAYED THAT THESE ADDITIONAL EVIDENCES ARE PRODUCED BEFORE THE TRIBUNAL FOR THE FIRST TIME AS THE SAME HAS GOT DIRECT BEARING ON THE ISSUES INVOLVED IN THE PR ESENT APPEAL AS THE SAME ARE IMPORTANT TO ESTABLISH AND SUBSTANTIATE THE MER ITS AND GENUINENESS OF THE CASE . IT WAS SUBMITTED THAT THE SAME WERE CALLED U PON TO SUBSTANTIATE ARGUMENTS PUT FORWARD IN REMAND PROCEEDINGS WHICH HAD BEEN REJECTED WITHOUT ANY EXPLANATION SOUGHT FOR. THE LEARNED COU NSEL SUBMITTED THAT CERTAIN DOCUMENTS VIZ. ASSESSMENT ORDERS IT RETUR NS OF THE LENDERS FOR THE RELEVANT ASSESSMENT YEARS WERE ALREADY AVAILABLE WI TH INCOME-TAX DEPARTMENT. IT WAS SUBMITTED THAT THESE ADDITIONAL EVIDENCES FILED FOR THE FIRST TIME BEFORE THE TRIBUNAL GOES TO THE ROOT OF THE MA TTER IN ESTABLISHING THE MERITS OF THE CASE AND GENUINENESS OF THE CASE OF T HE ASSESSEE AND THE SAME MAY BE ADMITTED IN THE INTEREST OF JUSTICE AND FAIR PLAY. THE ASSESSEE RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN T HE CASE OF SMT PRABHAVATI SHAH V. CIT 231 ITR 1 (BOM. HC) AND DECI SION OF PATNA ITAT IN THE CASE OF ABHAY KUMAR 63 ITD 144(PAT)(TM). ITA 800/MUM/2012 & 6314/MUM/2012 21 THE LEARNED DR ON THE OTHER HAND SUBMITTED THAT SUR VEY WAS CONDUCTED U/S. 133A OF THE ACT IN THE CASE OF MOXDIAM ON 07-07-200 8 WHEREIN STATEMENTS WERE RECORDED ON OATH U/S 131 OF THE ACT OF THE PAR TNERS WHEREIN THEY ADMITTED THAT MOXDIAM IS ENGAGED IN PROVIDING ACCOM MODATION ENTRIES. THE LD DR DREW OUR ATTENTION TO THE STATEMENT ON OATH R ECORDED OF MR. NITESH T. JAIN U/S 131 OF THE ACT ON 18.07.2008 WHICH IS PLAC ED AT PAGE 407/PB WHEREIN IN REPLY TO QUESTION NO 4 HE RE-CONFIRMED AND RE-AFFIRMED AS TRUE AND CORRECT THE STATEMENTS OF SH. BASANT D. JAIN RE CORDED ON OATH U/S 131 OF THE ACT ON 09.07.2008 AND OF MR RAMESH SIROYA DIR ECTOR OF M/S MOREWEL IMPEX PRIVATE LIMITED WHEREIN THE MODUS OPERANDI AD OPTED BY MOXDIAM WAS EXPLAINED TO PROVIDE ACCOMMODATION BILLS TO VARIOUS INTERESTED PARTIES IN MARKET. IT WAS SUBMITTED THAT THERE IS AN ADMISSION OF ACCOMMODATION ENTRIES BEING GIVEN BY MOXDIAM TO VARIOUS PARTIES B Y THE PARTNERS OF MOXDIAM AS WELL TWO BENEFICIARIES OF THE ACCOMMODA TION ENTRIES NAMELY M/S COMBINED DIAMONDS LIMITED AND STARGEMS PRIVATE LIMI TED HAD ADMITTED THAT MOXDIAM IS ENGAGED IN PROVIDING ACCOMMODATION ENTRI ES AND OFFERED FOR TAXATION THE AMOUNT OF ACCOMMODATION ENTRIES RECEIV ED BY THEM. THE LEARNED DR ALSO DREW OUR ATTENTION TO THE STATEMENT OF MR. BASANT D. JAIN RECORDED ON OATH U/S 131 OF THE ACT ON 07.08.2008 WHEREIN HE FURNISHED CONSOLIDATED LIST OF BENEFICIARIES OF ACCOMMODATION ENTRIES. THE PARTIES ADMITTED OF HAVING ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES AND THERE IS A RETRACTION AFTER A GAP OF MORE THAN TWO YEARS. THE GENUINENESS AND CREDITWORTHINESS OF TRANSACTIONS IS NOT PROVED AND INGREDIENTS OF SECTION 68 OF THE ACT ARE NOT FULFILLED. THERE IS A MEAGER CAP ITAL OF PARTNERS INVESTED IN MOXDIAM WHICH IS RATHER DEFICIT/DEBIT AFTER CONSIDE RING CURRENT ACCOUNT OF PARTNERS AND RETURNED INCOME OF MOXDIAM DOES NOT JUSTIFY THE GRANT OF HUGE LOANS TO THE TUNE OF RS. 5.14 CRORE IN AGGREGATE AS AT 31-03-2007 ADVANCED BY MOXDIAM WHICH DID NOT STOOD PROVED TO BE GENUINE AN D CREDITWORTHINESS DID NOT STOOD PROVED. THE LEARNED DR RELIED UPON THE DE CISION OF HONBLE DELHI ITA 800/MUM/2012 & 6314/MUM/2012 22 HIGH COURT IN THE CASE OF CIT V. N R PORTFOLIO PRIV ATE LIMITED (2014) 42 TAXMANN.COM 339(DELHI). THE LD DR RELIED UPON THE O RDERS OF THE AUTHORITIES BELOW AND ALSO OPPOSED THE ADMISSION OF ADDITIONAL EVIDENCES FILED BY THE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHER H AND SUBMITTED IN REJOINDER THAT THERE WAS RETRACTION WITHIN A MONTH BY NITISH T. JAIN WHEREBY HE DREW OUR ATTENTION TO AN AFFIDAVIT DATED 22.08.2008 EXEC UTED BY MR. NITESH T. JAIN WHEREIN HE CONFIRMED AND AFFIRMED THAT THEY ARE NOT INVOLVED IN PROVIDING ACCOMMODATION ENTRIES AND OTHER MAL PRACTICES ALBEI T THE SAME WAS FILED FOR THE FIRST TIME BEFORE LEARNED CIT(A) AS ADDITIONAL EVIDENCE U/R 46A OF THE INCOME-TAX RULES 1962 ON 24-02-2011. IT WAS SUBMIT TED THAT PARTNERS OF MOXDIAM HAS PROVIDED LIST OF BENEFICIARIES OF ACCOM MODATION ENTRIES GRANTED BY THEM AND NAME OF THE ASSESSEE DID NOT FIGURE IN THE SAID LIST. THE SOURCE OF THE LOAN OF RS. 1.0 CRORES STOOD EXPLAINED BY THE A SSESSEE. IT WAS SUBMITTED THAT THE PARTNER OF THE SAID FIRM MOXDIAM APPEARED BEFORE THE AO IN REMAND PROCEEDINGS WHILE IN THE CASE OF N R PORTFOLIO(SUPR A) NONE APPEARED BEFORE THE AO. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD INCLUDING THE ORDERS OF THE AUTHORITIES BELOW WRIT TEN SUBMISSIONS OF THE ASSESSEE CASE LAWS RELIED UPON BY BOTH THE PARTIES AND ALL OTHER MATERIAL AVAILABLE ON RECORDS. WE HAVE CAREFULLY AND COMPLET ELY GONE THROUGH THE COMPLETE CASE RECORDS IN FILE BEFORE US AND GIVEN A N ANXIOUS THOUGHT TO THE SAME BEFORE ARRIVING AT THE CONCLUSIONS AND DECISIO N IN THIS ORDER. WE HAVE OBSERVED THAT THE ASSESSEE HAS FILED AN ADD ITIONAL EVIDENCES UNDER RULE 29 OF INCOME-TAX(APPELLATE TRIBUNAL) RULES 19 63 FOR THE FIRST TIME BEFORE THE TRIBUNAL AND PRAYED FOR ADMISSION OF THE SAME A S IT HAS BEARING ON THE SUBSTANTIATING THE CASE OF THE ASSESSEE(PB/PAGE 291 -356). WE DIRECT ITA 800/MUM/2012 & 6314/MUM/2012 23 ADMISSION OF THESE ADDITIONAL EVIDENCES IN THE INTE REST OF JUSTICE AND FAIR PLAY AS THE ASSESSEE HAS SUBMITTED THAT THE OMISSION TO SUBMIT THESE ADDITIONAL EVIDENCES WAS NEITHER WILLFUL NOR MALAFIDE AND IT C OULD NOT PRODUCE THESE DOCUMENTS BEFORE LOWER AUTHORITIES SINCE SAME ARE C ALLED UPON TO SUBSTANTIATE ARGUMENTS PUT FORWARD IN REMAND PROCEE DINGS WHICH HAS BEEN REJECTED WITHOUT ANY EXPLANATION SOUGHT FOR AND THE SE ADDITIONAL EVIDENCES HAS GOT DIRECT BEARING ON THE ISSUE INVOLVED IN THE INSTANT APPEALS. AFTER OBSERVING AS ABOVE WE ARE NOW PROCEEDINGS T O ADJUDICATE THIS APPEAL AFTER ALSO DULY CONSIDERING THE ADDITIONAL EVIDENCE S FILED BY THE LEARNED COUNSEL FOR THE ASSESSEE AND AFTER DULY WEIGHING IT S RELEVANCE TO THE MERITS OF THE CASE. WE HAVE OBSERVED THAT THE ASSESSEE HAS RAISED A LOA N OF RS.1.0 CRORES FROM THE FIRM M/S MOXDIAM DURING PREVIOUS YEAR RELEVANT TO THE IMPUGNED ASSESSMENT YEAR AND THE ADDITIONS HAVE BEEN MADE BY THE AO U/S 68 OF THE ACT WHICH WAS SUSTAINED BY LEARNED CIT(A) IN THE FI RST APPEAL AS THE ASSESSEE FAILED TO PROVE GENUINENESS OF THE LOAN TRANSACTION AS WELL COULD NOT PROVE CREDITWORTHINESS OF THE LENDER . IT WILL BE PROFITABLE AT THIS STAGE TO REPRODUCE SE CTION 68 OF THE ACT AS APPLICABLE FOR THE RELEVANT ASSESSMENT YEAR UNDER C ONSIDERATION READS AS UNDER:- CASH CREDITS. 68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR AND THE ASSESSEE OF FERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT IN THE OPINION OF THE [ASSESSING] OFFICER SATISFACTO RY THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSES SEE OF THAT PREVIOUS YEAR. ITA 800/MUM/2012 & 6314/MUM/2012 24 SECTION 68 OF THE ACT CAST OBLIGATION ON THE TAX-PA YER WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN TAX-PAYER MAINTA INED FOR ANY PREVIOUS YEAR AND THE TAX-PAYER OFFERS NO EXPLANATION ABOUT THE N ATURE AND SOURCE OF CREDIT THEREOF OR THE EXPLANATION OFFERED BY THE TAX-PAYER IS FOUND NOT SATISFACTORY IN THE OPINION OF THE AO THE SUM SO CREDITED MAY BE T REATED AS INCOME AND CHARGED TO INCOME-TAX AS INCOME OF THE TAX-PAYER OF THAT PREVIOUS YEAR. THE BURDEN/ONUS IS CAST ON THE TAX-PAYER AND THE TAX-PA YER IS REQUIRED TO EXPLAIN TO THE SATISFACTION OF THE AO CUMULATIVELY ABOUT THE IDENTITY CREDITWORTHINESS OF THE CREDITORS ALONG WITH THE GE NUINENESS OF THE TRANSACTION TO THE SATISFACTION OF THE AO. ALL THE CONSTITUENTS ARE REQUIRED TO BE CUMULATIVELY SATISFIED. IF ONE OR MORE OF THEM I S ABSENT THEN THE AO CAN MAKE THE ADDITIONS U/S 68 OF THE ACT AS AN INCOME. THE BURDEN IS VERY HEAVY ON THE ASSESSEE TO SATISFY CUMULATIVELY THE INGREDI ENTS OF SECTION 68 OF THE ACT AS TO IDENTITY AND ESTABLISH THE CREDIT WORTHINESS OF THE CREDITORS AND GENUINENESS OF THE TRANSACTION TO THE SATISFACTION OF THE AO OTHERWISE THE AO SHALL BE FREE TO PROCEED AGAINST THE ASSESSEE CO MPANY AND MAKE ADDITIONS U/S 68 OF THE ACT AS UNEXPLAINED CASH CREDIT. THE U SE OF THE WORD ANY SUM FOUND CREDITED IN THE BOOKS IN SECTION 68 INDICAT ES THAT IT IS WIDELY WORDED AND THE AO CAN MAKE ENQUIRIES AS TO THE NATURE AND SOURCE THEREOF . THE AO CAN GO TO ENQUIRE/INVESTIGATE INTO TRUTHFULNESS OF THE ASSERTION OF THE ASSESSEE REGARDING THE NATURE AND THE SOURCE OF THE CREDIT IN ITS BOOKS OF ACCOUNTS AND IN CASE THE AO IS NOT SATISFIED WITH T HE EXPLANATION OF THE ASSESSEE WITH RESPECT TO ESTABLISHING IDENTITY AND CREDIT WORTHINESS OF THE CREDITOR AND THE GENUINENESS OF THE TRANSACTIONS T HE AO IS EMPOWERED TO MAKE ADDITIONS TO THE INCOME OF THE ASSESSEE U/S 68 OF THE ACT AS AN UNEXPLAINED CREDIT IN THE HANDS OF THE ASSESSEE COM PANY RAISING THE LOAN/SHARE CAPITAL BECAUSE THE AO IS BOTH AN INVEST IGATOR AND ADJUDICATOR. ONCE TAX-PAYER FILES THE BASIC DETAILS SUCH AS NAME AND ADDRESS OF CREDITOR PAN INCOME TAX RETURN CONFIRMATION AND BANK STATE MENT THE INITIAL ONUS ITA 800/MUM/2012 & 6314/MUM/2012 25 GETS DISCHARGED AND IF THE REVENUE DOUBTS THE IDENT ITY AND/OR CREDITWORTHINESS OF THE LENDER AND/OR GENUINENESS O F THE TRANSACTION THE ONUS SHIFTS BACK TO THE TAX-PAYER TO OFFER AN EXPLA NATION TO THE SATISFACTION OF THE AO AS CONTEMPLATED U/S 68 OF THE ACT SO THAT TR UTH BEHIND THE SMOKESCREEN COULD HAVE BEEN UNRAVELED BY THE AO. IN THE ABSENCE OF THE SAME THE AO HAS THE POWERS TO MAKE ADDITIONS TO TH E INCOME AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT BECAUSE THE AO IS BO TH AN INVESTIGATOR AND ADJUDICATOR. THUS MERELY SUBMISSION OF THE NAME AND ADDRESS OF THE LENDER INCOME TAX RETURNS BALANCE SHEET/STATEMENT OF AFFA IRS BANK STATEMENT OF THE LENDER IS NOT SUFFICIENT AS THE AO IS TO BE SAT ISFIED AS TO THE IDENTITY AND CREDITWORTHINESS OF CREDITOR AS WELL AS TO THE GENU INENESS OF THE TRANSACTION ENTERED INTO WITH THE CREDITOR. WE HAVE OBSERVED THAT THE ASSESSEE HAS RAISED A LOA N OF RS.1.0 CRORES FROM THE FIRM M/S MOXDIAM DURING THE PREVIOUS YEAR RELEV ANT TO THE IMPUGNED ASSESSMENT YEAR WHICH WAS RAISED THROUGH CROSSED AC COUNT PAYEE CHEQUES. THE SAID FIRM MOXDIAM WAS STATED TO BE IN THE BUSIN ESS OF DIAMOND TRADE. THE SAID FIRM MOXDIAM WAS SUBJECT TO SURVEY ACTION U/S. 133A OF THE ACT ON 07-07-2008 WHEREIN THE PARTNERS OF THE SAID FIRM MOXDIAM HAS CONFESSED/ADMITTED IN THE STATEMENT RECORDED ON OAT H U/S 131 OF THE ACT DURING SURVEY OPERATIONS AND ALSO DURING POST SURVE Y ENQUIRIES CONDUCTED BY REVENUE THAT THE SAID FIRM M/S MOXDIAM IS ENGAGED I N THE BUSINESS OF PROVIDING ACCOMMODATION BILLS AND ACCOMMODATION ENT RIES ON COMMISSION BASIS. IT IS ALSO CONFESSED / ADMITTED BY THE PARTN ERS OF M/S MOXDIAM IN THE STATEMENT RECORDED ON OATH U/S 131 OF THE ACT THAT THEY ARE PERSONS OF MEAGER FINANCIAL MEANS/RESOURCES AND SEVERAL BANK A CCOUNTS WERE OPENED BY MOXDIAM TO PROVIDE ACCOMMODATION BILLS AND ACCOMMO DATION ENTRIES TO VARIOUS PARTIES IN LIEU OF COMMISSION INCOME. THE L EARNED COUNSEL FOR THE ASSESSEE HAD STATED BEFORE US THAT THE ADMISSION OF THE PARTNERS OF THE FIRM M/S MOXDIAM IS RESTRICTED TO PROVIDING OF ACCOMMODA TION BILLS FOR PURCHASE ITA 800/MUM/2012 & 6314/MUM/2012 26 AND SALE INVOICES OF DIAMONDS AND IT CANNOT BE EXTE NDED TOWARDS ACCOMMODATION ENTRIES OF THE NATURE OF LOANS AS AR E EXTENDED BY MOXDIAM TO THE ASSESSEE. WE ARE AFRAID THAT THIS CONTENTION OF THE ASSESSEE CANNOT BE ACCEPTED AS IT IS ADMITTED BY PARTNERS OF MOXDIAM T HAT THE FIRM IS ENGAGED IN PROVIDING ACCOMMODATION ENTRIES AND ACCOMMODATION B ILLS IN LIEU OF COMMISSION INCOME AND WE CANNOT GIVE A HYPER TECHNI CAL RESTRICTED MEANING TO THE WORDS OF THE PARTNERS RECORDED IN THE STATEM ENT AS THE PARTNERS CLEARLY STATED AND MEANT THAT THE FIRM M/S MOXDIAM IS ENGAG ED IN ACTIVITIES OF PROVIDING ACCOMMODATION ENTRIES AND ACCOMMODATION B ILLS TO VARIOUS PARTIES AND HAIR SPLITTING BY GIVING HYPER TECHNICAL RESTRI CTIVE MEANINGS TO THE WORDS RECORDED IN THE STATEMENT CANNOT BE ALLOWED AS IS REFERRED TO BY THE LEARNED COUNSEL FOR THE ASSESSEE RATHER IT IS TO BE SEEN FR OM THE PERSPECTIVE OF THE ADMISSION OF PARTNERS OF MOXDIAM WHEREIN THEY HAVE ADMITTED/CONFESSED THAT THE FIRM MOXDIAM IS NOT DOING ANY REGULAR AND GENUI NE COMMERCIAL AND BUSINESS DEALINGS BUT IS ENGAGED IN PROVIDING ACCOM MODATION ENTRIES AND ACCOMMODATION BILLS IN LIEU OF COMMISSION INCOME WHICH ALSO STOOD CORROBORATED BY THE FINANCIAL STATEMENTS OF MOXDIAM WHICH ON PERUSAL CLEARLY REVEALS THAT THERE ARE NO OWN FUNDS INVESTED BY PAR TNERS IN MOXDIAM AS THE CAPITAL INVESTED BY PARTNERS IN MOXDIAM SEEN ALONG WITH THEIR CURRENT ACCOUNT WILL REVEAL A DEFICIT / DEBIT FIGURE OF (-) RS.11 02 375.90(PB / PAGE 58). FURTHER DURING RECORDING OF STATEMENT DURING THE CO URSE OF SURVEY OPERATIONS AND POST SURVEY ENQUIRIES THE PARTNERS HAVE CONFES SED/ADMITTED THAT THEY ARE PERSONS OF MEAGER MEANS. FURTHER IT ALSO CAME OUT DURING THE RECORDING OF STATEMENTS OF PARTNERS OF MOXDIAM THAT THE PARTN ERS DO NOT HAVE ADEQUATE AND SUFFICIENT KNOWLEDGE OF TRADE/BUSINESS OF DIAMO NDS AS THEY FALTERED AND FAILED TO GIVE PROPER REPLIES TO THE QUESTIONS PUT BY THE OFFICERS OF REVENUE WHILE RECORDING STATEMENT DURING SURVEY AND POST SU RVEY ENQUIRIES W.R.T. TO DIAMOND TRADE INCLUDING NATURE QUALITIES PHYSICA L TRAITS AND VARIETIES OF DIAMOND AVAILABLE WHICH IS A STRONG INDICATION THAT THE PARTNERS OF MOXDIAM WERE NOT AWARE OF THE TRAITS OF DIAMOND PERSE AND A LSO OF TARDE/BUSINESS OF ITA 800/MUM/2012 & 6314/MUM/2012 27 DIAMOND INDUSTRY WHICH KNOWLEDGE IS A MINIMUM PRE -REQUISITE EXPECTED FROM THE OWNERS FOR CARRYING ON ANY BUSINESS . PERU SAL OF BALANCE SHEETS OF MOXDIAM AS AT 31-03-2007 WILL REVEAL THAT THERE IS NO CAPITAL ASSETS SUCH AS PLANT MACHINERIES EQUIPMENTS TOOLS FURNITURE FIXTURE AND OTHER INFRASTRUCTURE HELD BY MOXDIAM AS PER BALANCE SHEE T OF MOXDIAM AS AT 31- 03-2008 WHICH ARE BARE NECESSARY FOR CARRYING ON DI AMOND TRADE. THE ONLY FIXED ASSET APPEARING IN BALANCE SHEET OF MOXDIAM A S AT 31-03-2007 IS COMPUTER OF VALUE RS. 23 800 AND NO OTHER PLANT MACHINERY EQUIPMENT TOOLS FURNITURE FIXTURE AND OTHER INFRASTRUCTURE AS ARE NECESSARY FOR CARRYING ON BUSINESS OF DIAMOND TRADE ARE APPEARING IN BALAN CE SHEET OF MOXDIAM AS AT 31-03-2007. ON BEING ASKED BY THE REVENUE OFFICE RS OF SURVEY TEAM NO PROPER EXPLANATION WAS SUBMITTED BY THE PARTNERS OF MOXDIAM AND RATHER EVASIVE REPLIES WERE GIVEN BY THEM. IT WAS CONFESSE D/ADMITTED BY THE PARTNERS OF THE MOXDIAM THAT IMPORT OF DIAMOND WERE MADE AT THE BEHEST OF IMPORTERS AND THE SAID IMPORTERS TAKE THE IMPORTED DIAMOND IM MEDIATELY ON THE DATE OF IMPORT ITSELF AGAINST CASH PAYMENTS WITHOUT ANY BIL LS / INVOICES IN A CLANDESTINE MANNER AND THEREAFTER BOGUS ACCOMMODAT ION BILLS ARE ISSUED TO FICTITIOUS BUYERS TO SQUARE THE IMPORTED QUANTITIES OF DIAMOND OVER A PERIOD OF NEXT 7-8 DAYS AND IN THIS PROCESS CIRCUITOUS AND CI RCULAR CASH TRANSACTIONS TOOK PLACE IN LIEU OF CHEQUES FROM THE PERSONS TO F ICTITIOUS BUYERS TO WHOM ACCOMMODATION SALE INVOICES ARE ISSUED WHEREIN AC TUAL IMPORTER GIVES CASH FOR DIAMONDS WITHOUT INVOICES AND THE BENEFICIARIES OF ACCOMMODATION INVOICES FOR SALES GIVE CHEQUES IN LIEU OF RECEIPT OF CASH FROM THE MOXDIAM ETC WHICH CHEQUE REMITTANCES ARE UTILIZED BY MOXDIAM FO R MAKING REMITTANCE FOR IMPORTS AND SO ON WHEREIN THE INTEREST OF MOXDIAM IS LIMITED TO THE COMMISSION INCOME ON THESE ACCOMMODATION ENTRIES AS MOXDIAM WAS MERELY NAME LENDER TO THIS FICTITIOUS AND CLANDESTINE TRAD E IN DIAMONDS . THE ASSESSMENT IN THE CASE OF MOXDIAM WAS FINALIZED BY REVENUE POST SURVEY FOR ASSESSMENT YEAR 2007-08 U/S 143(3) READ WITH SECTIO N 147 OF THE ACT VIDE ASSESSMENT ORDER DATED 12.03.2010 WHEREIN COMMISSIO N INCOME EARNED BY ITA 800/MUM/2012 & 6314/MUM/2012 28 MOXDIAM ON ACCOUNT OF THESE CLANDESTINE ACCOMMODATI ON ENTRIES AND ACCOMMODATION BILLS WERE BROUGHT TO TAX BY REVENUE AND THE AFORE-STATED ORDER OF ASSESSMENT DATED 12-03-2010 PASSED BY REVE NUE U/S 143(3) READ WITH SECTION 147 OF THE ACT ATTAINED FINALITY AS MO XDIAM DID NOT FILE ANY FURTHER APPEAL WITH THE APPELLATE AUTHORITIES AGAIN ST THE SAID ASSESSMENT ORDER DATED 12-03-2010 AS PER RECORDS AND EXPLANATI ONS FURNISHED BEFORE US. THUS IN NUT SHELL MOXDIAM ACCEPTED ITSELF TO BE AN CLANDESTINE ACCOMMODATION ENTRY PROVIDER WHEREIN THE ASSESSMENT SO FRAMED BY BRINGING TO TAX COMMISSION INCOME ON CLANDESTINE ACCOMMODATI ON ENTRIES IN THE HANDS OF MOXDIAM WAS TACITLY ACCEPTED BY MOXDIAM BY NOT GOING INTO FURTHER APPEALS AGAINST THE AFORE-STATED ASSESSMENT ORDER D ATED 12-03-2010 PASSED BY REVENUE U/S 143(3) READ WITH SECTION 147 OF THE ACT IN THE CASE OF MOXDIAM. WHILE ON THE OTHER HAND THE PARTNERS OF MO XDIAM HAVE TURNED AROUND AFTER 2 YEARS AND 8 MONTHS OF SURVEY ACTION AND RETRACTED THEIR ADMISSION OF MOXDIAM BEING ACCOMMODATION ENTRY AND ACCOMMODATION BILL PROVIDER. THE AFFIDAVIT DATED 22-08-2008 OF MR NITE SH JAIN AND AFFIDAVIT DATED 18.02.2011 OF MR BASANT D JAIN BOTH PARTNERS OF M OXDIAM RETRACTING THE ADMISSIONS MADE DURING SURVEY ACTION ON 07-07-2008 AND POST SURVEY ENQUIRIES BY REVENUE THAT MOXDIAM WAS ENGAGED IN BU SINESS OF PROVIDING ACCOMMODATION BILLS AND ACCOMMODATION ENTRIES WERE FILED AS AN ADDITIONAL EVIDENCES UNDER RULE 46A OF INCOME-TAX RULES 1962 BEFORE LEARNED CIT(A) VIDE LETTER DATED 23-02-2011 FILED ON 24-02-2011 WH ICH IS ALMOST AFTER 2 YEARS AND 8 MONTHS FROM THE DATE OF SURVEY U/S 133A OF THE ACT ON MOXDIAM ON 07-07-2008 (PAGE 92-102/PB). THE AFFIDAVIT DATED 22.08.2008 EXECUTED BY MR NITISH T. JAIN RETRACTING THE ADMISSION OF MOXDI AM BEING ACCOMMODATION ENTRY PROVIDER WAS DENIED BY THE REVENUE TO BE BEFO RE THEM AT THAT STAGE OF ITS EXECUTION IN AUGUST 2008 WHICH IN-FACT WAS BR OUGHT BEFORE REVENUE FOR THE FIRST TIME VIDE LETTER DATED 23-02-2011 FILED O N 24-02-2011 BEFORE LEARNED CIT(A) AND IN ANY CASE IN THE FINALIZED AND ACCEPTE D ASSESSMENT OF MOXDIAM U/S 143(3) READ WITH SECTION 147 OF THE ACT VIDE AS SESSMENT ORDERS DATED 12- ITA 800/MUM/2012 & 6314/MUM/2012 29 03-2010 FOR ASSESSMENT YEAR 2007-08 (PAGE 213-217/P B) THE AFORE-STATED RETRACTIONS OF THE PARTNERS WERE REJECTED BY REVENU E AND ASSESSMENT WAS FRAMED IN THE HANDS OF MOXDIAM BY BRINGING TO TAX C OMMISSION INCOME ON THESE ACCOMMODATION ENTRIES AND ACCOMMODATION BILLS PROVIDED BY MOXDIAM TO VARIOUS CLIENTS WHICH ATTAINED FINALITY IN THE H ANDS OF MOXDIAM AS IT DID NOT CHOSE TO FILE ANY APPEAL AGAINST SAID ASSESSMEN T ORDER DATED 12-03-2010 PASSED U/S 143(3) READ WITH SECTION 147 OF THE ACT( PAGE 213-217/PB) . THE PERUSAL OF BALANCE SHEET OF MOXDIAM AS AT 31-03-200 7(PAGE 58/PB) ALSO REVEALS THAT THERE IS A MEAGER CAPITAL CONTRIBUTION BY THE PARTNERS OF RS.1 00 000/- WHILE PARTNER CURRENT ACCOUNT IS DEFI CIT BEING (-) 12 02 376/- (RATHER THE CAPITAL CONTRIBUTION BY PARTNERS IN MOX DIAM KEEPING IN VIEW CURRENT ACCOUNT DEFICIT IS NEGATIVE/DEFICIT ) AND THE MAJOR OUTSTANDING AMOUNTS IN BALANCE SHEET IS SUNDRY DEBTORS OF RS. 1 0 40 12 857/- SUNDRY CREDITORS ARE TO THE TUNE OF RS.16 29 83 032/- AND LOANS AND ADVANCES ARE TO THE TUNE OF RS.5 14 54 247/- WHILE LOANS RAISED BY MOXDIAM ARE NIL STOCK OF DIAMOND HELD IS NIL FIXED ASSETS HELD BEING ONLY COMPUTER OF RS.23 800 WHICH IS BACKED BY ADMISSION OF THE PARTNERS OF MOX DIAM VIDE STATEMENT ON OATH RECORDED U/S 131 OF THE ACT THAT THE FIRM MOXD IAM IS ENGAGED IN BUSINESS OF PROVIDING CLANDESTINE ACCOMMODATION BIL LS AND ACCOMMODATION ENTRIES. THE PARTNERS HAVE GONE ON TO SAY THAT THE INVESTMENTS IN MOXDIAM BELONGED TO OTHERS AND IF THE IDENTITY OF INVESTORS IS REVEALED THEN THEIR LIVES WILL BE IN DANGER. THE STATEMENTS OF THE PARTNERS AS RECORDED BY REVENUE ARE PLACED IN PAPER BOOK PAGE 357-408. THE ASSESSEE HAS PROVIDED LOAN CONFIRMATIONS PAN INCOME TAX RETURNS BANK STATE MENTS COPIES OF AUDITED FINANCIAL STATEMENTS OF MOXDIAM BEFORE THE AUTHORIT IES BELOW AND ALSO BEFORE US BUT THE CREDITWORTHINESS OF MOXDIAM AND GENUINEN ESS OF THE LOAN TRANSACTION COULD NOT BE PROVED KEEPING IN VIEW OUR OBSERVATIONS AS ABOVE AND DISCUSSIONS CARRIED IN THE ORDERS OF THE AUTHOR ITIES BELOW ALBEIT IDENTITY OF MOXDIAM GOT ESTABLISHED. WE HAVE ALSO GONE THROU GH ADDITIONAL EVIDENCES SUBMITTED BY THE ASSESSEE WHEREIN MVAT AUDIT REPORT IS SUBMITTED OF ITA 800/MUM/2012 & 6314/MUM/2012 30 MOXDIAM AS ALSO SOURCES FOR ADVANCING LOANS TO THE ASSESSEE BY MOXDIAM ARE FURNISHED(PB/PAGE 291-309). WE HAVE GONE THROUGH TH E SAME AND ARE AFRAID THAT THESE ARE OF NO HELP TO THE ASSESSEE AS IT IS OBVIOUS THAT THE SURVEY WAS CONDUCTED UNDER THE INCOME-TAX ACT 1961 WHEREIN THE RE IS AN ADMISSION OF PARTNERS OF MOXDIAM THAT MOXDIAM IS AN ACCOMMODATIO N ENTRY PROVIDER AND SURVEY/SEARCH WAS NOT CONDUCTED UNDER THE MVAT ACT AND OBVIOUSLY THE ASSESSEE WILL NOT GET MVAT AUDIT DONE INCRIMINATING ITSELF AND SECONDLY SOURCES FOR LOAN WERE STATED TO BE RECEIPTS FROM DE BTORS BUT THE PERUSAL OF BALANCE SHEET REVEALS THAT THERE IS NO INVESTMENTS BY PARTNER IN THE FIRM NEITHER ANY LOANS WERE RAISED BY MOXDIAM AND THE SA LE AND PURCHASE OF DIAMONDS WERE ADMITTED TO BE ACCOMMODATION BILLS AN D IN OUR CONSIDERED VIEW KEEPING IN VIEW THE FINANCIAL POSITION OF MOXD IAM AS INDICATED ABOVE AND ADMISSION OF PARTNERS TO BE OF MEAGER RESOURCES IT IS HIGHLY IMPROBABLE THAT THE MOXDIAM HAD CAPACITY TO ADVANCE GENUINE AND BON AFIDE LOANS OF RS.5 14 54 247/- WHICH INCLUDED LOAN OF RS.1.0 CROR E TO THE ASSESSEE(PAGE58/PB). FURTHER WHILE MAKING REPAYMEN T OF LOAN TO MOXDIAM DURING SEPTEMBER 2008 TO MARCH 2009 THE ASSESSEE R AISED LOANS FROM RISING STAR AND SEVEN STAR JEWELS TO REPAY LOANS TO MOXDIA M . THE FINANCIAL STATEMENTS OF THE SAID CONCERNS FOR THE YEAR ENDED 31-03-2009 ALSO REVEAL SIMILAR PATTERN AS OF MOXDIAM THAT THE SAID CONCERN S ALSO HAVE MEAGER FINANCIAL INVESTMENT BY THEIR PROPRIETORS AND THE RE ARE HUGE SUNDRY DEBTORS AND CREDITORS REFLECTED IN THEIR ACCOUNTS NO LOANS RAISED AND HUGE LOANS BEING RAISED OUT OF RECOVERIES FROM DEBTORS(PAGE 24 3 268/PB) AND DID NOT PROVE THEIR FINANCIAL CAPACITY TO LEND TO THE ASSE SSEE AND ALSO GENUINENESS OF THE LOAN GRANTED TO THE ASSESSEE BY THESE CONCERNS DID NOT STOOD PROVED. WE HAVE GONE THROUGH ALL THE EVIDENCES SUBMITTED W.R.T . THESE TWO CONCERNS INCLUDING ADDITIONAL EVIDENCES FILED BEFORE THE TRI BUNAL BUT IN OUR CONSIDERED VIEW THESE TWO CONCERNS WHO ARE ALSO INCIDENTALLY BASED IN SURAT DOES NOT HAVE FINANCIAL CAPACITY TO GRANT THESE LOANS NOR GE NUINENESS OF THE LOANS STOOD PROVED. MOXDIAM WAS SURVEYED U/S 133A OF THE ACT BY REVENUE ON 07 TH ITA 800/MUM/2012 & 6314/MUM/2012 31 JULY 2008 WHEREIN ADMISSIONS WERE MADE BY PARTNERS OF MOXDIAM AS TO MOXDIAM BEING AN ENTITY ENGAGED IN PROVIDING ACCOMM ODATION BILLS AND ACCOMMODATION ENTRIES WHILE REPAYMENT OF LOAN FRO M THE ASSESSEE TO MOXDIAM STARTED FROM SEPTEMBER 2008 AND ENDED ON M ARCH 2009. THE ASSESSEE WAS ISSUED NOTICES U/S 143(2) OF THE ACT B Y REVENUE FOR THE FIRST TIME ON 06-08-2008 FOR THE IMPUGNED ASSESSMENT YEA R IN WHICH THE ASSESSEE RAISED THE LOAN OF RS. 1.0 CRORE FROM MOXDIAM AND H ENCE IT IS QUITE OBVIOUS THAT ONCE MOXDIAM IS SURVEYED ON 07-07-2008 AND THE ASSESSEE CASE WAS OPENED FOR SCRUTINY ASSESSMENT BY REVENUE ON 06-08- 2008 THEN THE ASSESSEE WOULD LIKE TO QUICKLY SQUARE AND CLOSE THE LOAN RAISED FROM MOXDIAM TO AVOID ANY ADDITIONS BY REVENUE U/S 68 OF THE ACT WHICH LOAN OF RS. 1.0 CRORES RAISED FROM MOXDIAM ON BEING REPAID FROM SEP TEMBER 2008 TO MARCH 2009 BY THE ASSESSEE WAS NOT PAID OUT OF ITS OWN RE SOURCES BUT IN-FACT GOT REPLENISHED FROM FRESH LOAN RAISED FROM RISING STAR AND SEVEN STAR JEWELS TO REPAY MOXDIAM. THESE THREE ENTITIES I.E.MOXDIAM RI SING STAR AND SEVEN STAR JEWELS ARE INCIDENTALLY ENGAGED IN DIAMOND TRADE A ND ARE INCIDENTALLY BASED IN SURAT AND AS STATED BY REVENUE HAS INTER-SE DEAL ING AMONG THEMSELVES. SECTION 68 OF THE ACT CAST OBLIGATION ON THE ASSESS EE WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FO R ANY PREVIOUS YEAR AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF CREDIT THEREOF OR THE EXPLANATION OFFERED BY THE ASSESSEE IS FOUND NOT SATISFACTORY IN THE OPINION OF THE AO THE SUM SO CREDITED MAY TREA TED AS INCOME AND CHARGED TO INCOME-TAX AS INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. THE BURDEN/ONUS IS CAST ON THE ASSESSEE AND THE ASSESSE E IS REQUIRED TO EXPLAIN TO THE SATISFACTION OF THE AO CUMULATIVELY ABOUT TH E IDENTITY AND CREDITWORTHINESS OF THE CREDITORS ALONG WITH THE GE NUINENESS OF THE TRANSACTION TO THE SATISFACTION OF THE AO. ALL THE CONSTITUENTS ARE REQUIRED TO BE CUMULATIVELY SATISFIED. IF ONE OR MORE OF THEM I S ABSENT THEN THE AO CAN MAKE THE ADDITIONS U/S 68 OF THE ACT AS AN INCOME. THE BURDEN IS VERY HEAVY ON THE ASSESSEE TO SATISFY CUMULATIVELY THE INGREDI ENTS OF SECTION 68 OF THE ACT ITA 800/MUM/2012 & 6314/MUM/2012 32 AS TO IDENTITY AND ESTABLISH THE CREDIT WORTHINESS OF THE CREDITORS AND GENUINENESS OF THE TRANSACTION TO THE SATISFACTION OF THE AO OTHERWISE THE AO SHALL BE FREE TO PROCEED AGAINST THE ASSESSEE CO MPANY AND MAKE ADDITIONS U/S 68 OF THE ACT AS UNEXPLAINED CASH CREDIT. THE U SE OF THE WORD ANY SUM FOUND CREDITED IN THE BOOKS IN SECTION 68 INDICAT ES THAT IT IS WIDELY WORDED AND THE AO CAN MAKE ENQUIRIES AS TO THE NATURE AND SOURCE THEREOF . THE AO CAN GO TO ENQUIRE/INVESTIGATE INTO TRUTHFULNESS OF THE ASSERTION OF THE ASSESSEE REGARDING THE NATURE AND THE SOURCE OF THE CREDIT IN ITS BOOKS OF ACCOUNTS AND IN CASE THE AO IS NOT SATISFIED WITH T HE EXPLANATION OF THE ASSESSEE WITH RESPECT TO ESTABLISHING IDENTITY AND CREDIT WORTHINESS OF THE CREDITOR AND THE GENUINENESS OF THE TRANSACTIONS T HE AO IS EMPOWERED TO MAKE ADDITIONS TO THE INCOME OF THE ASSESSEE U/S 68 OF THE ACT AS AN UNEXPLAINED CREDIT IN THE HANDS OF THE ASSESSEE COM PANY RAISING THE SHARE CAPITAL BECAUSE THE AO IS BOTH AN INVESTIGATOR AND ADJUDICATOR. THE SAID STATEMENTS SO RECORDED OF THE PARTNERS OF MOXDIAM W ERE RETRACTED BY THE PARTNERS LATER ON AFTER ALMOST 2 YEARS AND 8 MONTHS ( AS THE RETRACTION OF MR NITESH T JAIN DATED 22.08.2008 IS NOT ON RECORD WIT H REVENUE AT THAT STAGE ) WHICH IN OUR CONSIDERED VIEW KEEPING IN VIEW THE EN TIRE BACKGROUND OF MOXDIAM AND PREPONDERANCE OF HUMAN PROBABILITIES THE RETRACTION OF PARTNERS APPEARS TO BE AN AFTERTHOUGHT WHICH IS FOR AN OBVIOUS REASONS IS TO SAFEGUARD THE ASSESSEE WHILE ON THE OTHER HAND IN ITS OWN ASSESSMENT FRAMED BY THE REVENUE THE MOXDIAM ACCEPTED TO BE ASSESSED WITH AN COMMISSION INCOME BASED ON THE CONTENTION OF THE RE VENUE THAT MOXDIAM IS ENGAGED IN PROVIDING CLANDESTINE ACCOMMODATION BILL S AND ACCOMMODATION ENTRIES WHICH ORDER OF ASSESSMENT DATED 12-03-2010 PASSED BY REVENUE U/S 143(3) READ WITH SECTION 147 OF THE ACT IN THE CASE OF MOXDIAM FOR ASSESSMENT YEAR 2007-08 HAD ATTAINED FINALITY. THE ASSESSMENT ORDER SO FRAMED BY REVENUE AGAINST THE MOXDIAM HAD ATTAINED FINALITY AS THE SAME WAS NOT CHALLENGED BEFORE THE HIGHER APPELLATE AUTH ORITIES BY MOXDIAM AND WAS ACCEPTED BY MOXDIAM. THE ASSESSEE HAS STATED TO HAVE REPAID THE LOANS ITA 800/MUM/2012 & 6314/MUM/2012 33 TO MOXDIAM DURING THE PERIOD OF SEPTEMBER 2008 TO M ARCH 2009 WHERE IN IT IS OBSERVED THAT FOR REPAYMENT OF LOAN TO MOXDIAM THE ASSESSEE MADE BORROWINGS FROM TWO PROPRIETARY CONCERNS BASED IN S URAT NAMELY RISING STAR AND SEVEN STAR JEWELS WHOSE FINANCIAL POSITIONS IS ON SIMILAR PATTERN TO MOXDIAM AS THEY WERE ALSO HAVING LOW CAPITAL BASE I NVESTMENT BY PROPERIETOR AND HUGE DEBTOR/CREDITORS FIXED ASSETS WERE NEGLIG IBLE LOANS RAISED WERE NIL AND THE LOANS ADVANCED WERE FROM SUNDRY CREDITORS/ RECOVERIES FROM SUNDRY DEBTORS WHICH CLEARLY REFLECT LACK OF FINANCIAL CAP ACITY TO GRANT LOANS AS ARE REFLECTED IN THEIR FINANCIAL STATEMENTS WHICH ARE P LACED IN PAPER BOOK FILED BY THE ASSESSEE BEFORE THE TRIBUNAL(PB/PAGE 243 AND 26 8). THE SAID CONCERNS ARE ALSO STATED TO BE IN BUSINESS OF DIAMONDS. IT I S THE SAY OF THE ASSESSEE COUNSEL THAT THE LOANS ARE REPAID TO MOXDIAM PRIOR TO ISSUE OF NOTICE TO THE ASSESSEE U/S 142(1) OF THE ACT BY THE REVENUE WHIC H WAS ISSUED ON 24/06/2009 WHILE THE LOANS WERE REPAID DURING SEP TEMBER 2008 TO MARCH 2009 . THIS ARGUMENTS WITH DUE RESPECT CANNOT BE AC CEPTED AS THE SAID FIRM MOXDIAM WAS SURVEYED ON 07/07/2008 I.E. PRIOR TO ST ART OF REPAYMENT OF LOAN TO MOXDIAM IN SEPTEMBER 2008 AND SECONDLY AS PER TH E ASSESSMENT ORDER PASSED IN THE CASE OF THE ASSESSEE BY THE AO U/S 14 3(3) OF THE ACT DATED 26.11.2009 THE FIRST NOTICE U/S 143(2) OF THE ACT WAS ISSUED TO THE ASSESSEE ON 06.08.2008 COMMENCING SCRUTINY PROCEEDINGS PRIOR TO START OF REPAYMENT OF LOAN TO MOXDIAM IN SEPTEMBER 2008 AND HENCE ARGU MENT OF THE ASSESSEE ARE REJECTED. EVEN OTHERWISE IF WE ESCHEW THE STA TEMENTS OF THE PARTNERS OF MOXDIAM THEN ALSO AFTER CONSIDERING THE ENTIRE BAC KGROUND OF THE SAID FIRM MOXDIAM AND BASED ON THEIR FINANCIAL PARAMETERS AS EMERGING FROM MOXDIAM FINANCIAL STATEMENTS AS DISCUSSED ABOVE IN DETAILS WE ARE OF CONSIDERED VIEW THAT THE CAPACITY OF LENDER M/S MOXDIAM TO GRANT LO AN AND GENUINENESS OF THE SAID LOAN TRANSACTION OF RS 1.0 CRORE IS NOT PROVED BY THE ASSESSEE AS IN OUR CONSIDERED VIEW BASED ON THE FINANCIAL STATEMENTS O F MOXDIAM AS AT 31-03- 2007 IT DOES NOT HAVE THE FINANCIAL CAPABILITIES TO GRANT LOANS OF THE ITA 800/MUM/2012 & 6314/MUM/2012 34 MAGNITUDE OF RS.1.0 CRORE TO THE ASSESSEE( THE TOTA L LOAN ADVANCED BY MOXDIAM AS AT 31-03-2007 STOOD AT RS.5.14 CRORES) . NOW WE SHALL DEAL WITH THE CASE LAWS REFERRED TO B Y THE ASSESSEE AS UNDER: A) KATARIA KETAN ISHWARLAL V. ITO (ITA NO. 4304/MUM/20 07)- MUMBAI ITAT- THIS CASE WAS DECIDED ON ITS OWN FACTS WHEREI N IT WAS OBSERVED THAT MR MUKESH CHOKSI FACILITATED NUMBER O F PARTIES BY ISSUING BOGUS CAPITAL GAIN BILLS BUT IN HIS STATEME NT RECORDED ON 26- 04-2002 MR MUKESH CHOKSI CONFIRMED TO HAVE ISSUED BOGUS BILLS OF SHARE TRANSACTIONS AND CHARGED COMMISSION BUT IT WA S CONTENDED THAT MR MUKESH CHOKSI DID NOT MENTION THE NAME OF T HE ASSESSEE BEING BENEFICIARY OF ACCOMMODATION ENTRIES. THE TA X-PAYER IN THE SAID CASE DULY FURNISHED ALL OTHER RELEVANT EVIDENT IARY MATERIAL BEFORE THE AO TO SUBSTANTIATE THAT SALE OF SHARE UN DERTAKEN BY HIM IS GENUINE. THE SAID CASE WAS DECIDED IN FAVOUR OF THE TAX-PAYER BUT IN THE INSTANT CASE BEFORE US HOWEVER THE ASSE SSEE IS NOT ABLE TO PROVE THE CAPACITY OF LENDER M/S MOXDIAM TO GRANT L OAN OF RS. 1.0 CRORE TO THE ASSESSEE AND ALSO GENUINENESS OF THE T RANSACTION OF LOAN GRANTED BY MOXDIAM IS NOT PROVED. B) ACIT V. G V SONS AND OTHERS ITA NO. 2239/MUM/2012 2240/MUM/2012 AND 2238/MUM/2012- MUMBAI TRIBUNAL. I N THIS CASE THE TAX-PAYER GV SONS WAS ENGAGED IN BUSINESS OF TRADING IN GOLD DIAMOND SILVER PRECIOUS STONES ETC. SINCE 2006 WHILE PARENT FIRM M/S G V ZAVERI RAJPARA WAS IN TRADE SINCE 1949 . THE TAX-PAYER HAD DEALING WITH ONE OF THE CONCERN OF MOXDIAM GROU P WHEREBY THERE WERE PURCHASES ON PHYSICAL DELIVERY BASIS WER E MADE FROM CONCERNS OF MOXDIAM GROUP. THE TAX-PAYER WERE DULY ABLE TO SUBMIT COMPLETE STOCK DETAILS AND WAS ABLE TO RECONCILE TH E PURCHASES AND ITA 800/MUM/2012 & 6314/MUM/2012 35 SALE MADE OF DIAMOND AND NO DISCREPANCIES WERE FOUN D THUS THIS CASE WAS DECIDED ON ITS OWN FACTS WHEREIN THE ADDIT IONS WERE DELETED BY THE TRIBUNAL. C) ORIENT TRADING COMPANY LIMITED V. CIT (1963) 49 I TR 723(BOM. HC) THE HONBLE BOMBAY HIGH COURT IN THIS CASE HA S HELD THAT ONCE THE TAX-PAYER SATISFIES THE AO AS TO THE IDENTITY OF THE THIRD PARTY AND ALSO SUPPLIES SUCH OTHER EVIDENCE WHICH W ILL SHOW PRIMA FACIE THAT THE ENTRY IS NOT FICTITIOUS THE INITIA L BURDEN WHICH LIES ON THE TAX-PAYER CAN BE SAID TO HAVE BEEN DISCHARGED B Y HIM. IT WILL NOT THEREAFTER BE FOR THE TAX-PAYER TO EXPLAIN FU RTHER HOW OR IN WHAT CIRCUMSTANCES THE THIRD PARTY OBTAINED MONEY AND HO W OR WHY HE CAME TO MAKE A DEPOSIT OF THE SAME WITH THE TAX-PAY ER. THE BURDEN WILL THEN SHIFT ON TO THE DEPARTMENT TO SHOW WHY TH E TAX-PAYER'S CASE CANNOT BE ACCEPTED AND WHY IT MUST BE HELD THAT THE ENTRY THOUGH PURPORTING TO BE IN THE NAME OF A THIRD PARTY STIL L REPRESENTS THE INCOME OF THE ASSESSEE FROM A SUPPRESSED SOURCE. IN ORDER TO ARRIVE AT SUCH A CONCLUSION HOWEVER THE DEPARTMENT HAS T O BE IN POSSESSION OF SUFFICIENT AND ADEQUATE MATERIAL. WHILE IN THE INSTANT CASE BEFORE US SUPPORT THE PROPOSITION OF REVENUE A S THEY HAVE DOUBTED THE CAPACITY OF LENDER MOXDIAM TO LEND LOAN OF RS. 1.0 CRORE TO THE ASSESSEE AS WELL GENUINENESS OF THE TRANSACT ION WAS DOUBTED BY REVENUE OWING TO STATEMENTS OF PARTNERS OF MOXDI AM ADMITTING INDULGING IN CLANDESTINE ACCOMMODATION ENTRIES AND ACCOMMODATION BILLS AS WELL THE FINANCIAL STATEMENTS OF MOXDIAM D OES NOT SUPPORT THE CAPACITY OF MOXDIAM TO LEND SUCH A HUGE SUM OF MONEY AS LOAN TO THE ASSESSEE AND UNDER THESE CIRCUMSTANCES THEN THE BURDEN GOT SHIFTED TO ASSESSEE TO PROVE VIDE COGENT EVIDENCES THAT THE APPARENT IS REAL AND IS NOT MERELY SMOKE SCREEN TO INTRODUCE ASSESSEES OWN MONEY BY THIS APPARENT LOAN TRANSACTION. ITA 800/MUM/2012 & 6314/MUM/2012 36 D) CIT V. ORISSA CORPORATION PRIVATE LIMITED (1986) 1 59 ITR 78(SC)- IN THIS CASE THE TAX-PAYER HAD GIVEN THE NAMES AND ADD RESSES OF THE ALLEGED CREDITORS. IT WAS IN THE KNOWLEDGE OF THE R EVENUE THAT THE SAID CREDITORS WERE THE INCOME-TAX ASSESSEES. THEIR INDEX NUMBER WAS IN THE FILE OF THE REVENUE. THE REVENUE APART FROM ISSUING NOTICES UNDER SECTION 131 OF THE ACT AT THE INSTANC E OF THE ASSESSEE DID NOT PURSUE THE MATTER FURTHER. THE REVENUE DID NOT EXAMINE THE SOURCE OF INCOME OF THE SAID ALLEGED CREDITORS TO F IND OUT WHETHER THEY WERE CREDIT-WORTHY OR WERE SUCH WHO COULD ADVA NCE THE ALLEGED LOANS. THERE WAS NO EFFORT MADE TO PURSUE THE SO-CA LLED ALLEGED CREDITORS. IN THOSE CIRCUMSTANCES THE TAX-PAYER CO ULD NOT DO ANY FURTHER. IN THE PREMISES IF THE TRIBUNAL CAME TO T HE CONCLUSION THAT THE ASSESSEE HAD DISCHARGED THE BURDEN THAT LAY ON HIM THEN IT COULD NOT BE SAID THAT SUCH A CONCLUSION WAS UNREAS ONABLE OR PERVERSE OR BASED ON NO EVIDENCE. IF THE CONCLUSION WAS BASED ON SOME EVIDENCE ON WHICH A CONCLUSION COULD BE ARRIVE D AT NO QUESTION OF LAW AS SUCH COULD ARISE WAS THE DECISIO N OF HONBLE COURT. WHILE IN THE INSTANT CASE BEFORE US SUPPORT THE PRO POSITION OF REVENUE AS THEY HAVE DOUBTED THE CAPACITY OF LENDER MOXDIAM TO LEND LOAN OF RS. 1.0 CRORE TO THE ASSESSEE AS WELL GENUINENESS OF THE TRANSACTION WAS DOUBTED BY REVENUE OWING TO STATEME NTS OF PARTNERS OF MOXDIAM ADMITTING INDULGING IN CLANDEST INE ACCOMMODATION ENTRIES AND ACCOMMODATION BILLS AS WE LL THE FINANCIAL STATEMENTS OF MOXDIAM DOES NOT SUPPORT TH E CAPACITY OF MOXDIAM TO LEND SUCH A HUGE SUM OF MONEY AS LOAN TO THE ASSESSEE AND UNDER THESE CIRCUMSTANCES THEN THE BURDEN GOT S HIFTED TO ASSESSEE TO PROVE VIDE COGENT EVIDENCES THAT THE AP PARENT IS REAL AND IS NOT MERELY SMOKE SCREEN TO INTRODUCE ASSESSEES OWN MONEY BY THIS APPARENT LOAN TRANSACTION. ITA 800/MUM/2012 & 6314/MUM/2012 37 E) DCIT V. ROHINI BUILDERS (2002) 256 ITR 360(GUJ.)-IN THIS CASE THE TAX-PAYER WAS ABLE TO PROVE THE IDENTITY AND CAPACI TY OF THE LENDERS AND THE ONLY ISSUE WAS THE EXPLANATION OF CASH DEPO SITED IN THE BANK ACCOUNT OF LENDER WHEREBY THE COURT HELD THA T THE TAX-PAYER IS NOT REQUIRED TO PROVE SOURCE OF SOURCE. WHILE IN TH E INSTANT CASE BEFORE US SUPPORT THE PROPOSITION OF REVENUE AS THE Y HAVE DOUBTED THE CAPACITY OF LENDER MOXDIAM TO LEND LOAN OF RS. 1.0 CRORE TO THE ASSESSEE AS WELL GENUINENESS OF THE TRANSACTION WAS DOUBTED BY REVENUE OWING TO STATEMENTS OF PARTNERS OF MOXDIAM ADMITTING INDULGING IN CLANDESTINE ACCOMMODATION ENTRIES AND ACCOMMODATION BILLS AS WELL THE FINANCIAL STATEMENTS OF MOXDIAM D OES NOT SUPPORT THE CAPACITY OF MOXDIAM TO LEND SUCH A HUGE SUM OF MONEY AS LOAN TO THE ASSESSEE AND UNDER THESE CIRCUMSTANCES THE N THE BURDEN GOT SHIFTED TO ASSESSEE TO PROVE VIDE COGENT EVIDEN CES THAT THE APPARENT IS REAL AND IS NOT MERELY SMOKE SCREEN TO INTRODUCE ASSESSEES OWN MONEY BY THIS APPARENT LOAN TRANSACT ION. F) CIT V. ABT LIMITED (2015) 370 ITR 159(MAD.)- IN THI S CASE THE TAX- PAYER WAS ABLE TO PRODUCE DOCUMENTS AND THE DETAILS OF REPAYMENT MADE THROUGH CHEQUE. EVEN THE BANK CONFIRMATIONS WE RE FILED BY THE TAX-PAYER SHOWING THAT THE CHEQUES ISSUED BY TH E TAX-PAYER WERE ENCASHED BY THE RESPECTIVE PARTIES. THE TAX-PAYER H AD ALSO FURNISHED IDENTITY OF PERSONS WITH COMPLETE DETAILS OF ADDRES SES AND THE FD APPLICATIONS SHOWING DETAILS. WHILE IN THE INSTANT CASE BEFORE US SUPPORT THE PROPOSITION OF REVENUE AS THEY HAVE DOU BTED THE CAPACITY OF LENDER MOXDIAM TO LEND LOAN OF RS. 1.0 CRORE TO THE ASSESSEE AS WELL GENUINENESS OF THE TRANSACTION WAS DOUBTED BY REVENUE OWING TO STATEMENTS OF PARTNERS OF MOXDIAM ADMITTING INDULGING IN ACCOMMODATION ENTRIES AND ACCOMMODATIO N BILLS AS WELL ITA 800/MUM/2012 & 6314/MUM/2012 38 THE FINANCIAL STATEMENTS OF MOXDIAM DOES NOT SUPPOR T THE CAPACITY OF MOXDIAM TO LEND SUCH A HUGE SUM OF MONEY AS LOAN TO THE ASSESSEE AND UNDER THESE CIRCUMSTANCES THEN THE B URDEN GOT SHIFTED TO ASSESSEE TO PROVE VIDE EVIDENCES THAT TH E APPARENT IS REAL AND IS NOT MERELY SMOKE SCREEN TO INTRODUCE ASSESSE ES OWN MONEY BY THIS APPARENT LOAN TRANSACTION. G) CIT V. KAPOOR CHAND MANGESH CHAND (2013) 218 TAXMAN 157 (ALL.) (MAG.)- IN THIS CASE THERE WAS NO ADMISSION BY TH E TAX-PAYER THEREIN THAT THEY WERE INVOLVED GIVING BOGUS/ACCOMM ODATION ENTRIES. FROM THE FACTS FOUND BY THE AUTHORITIES I T WAS CLEAR THAT THE AMOUNT OF LOAN WAS ADVANCED THROUGH THE ACCOUNT PAY EE CHEQUES AND PANS WERE ALSO FURNISHED. THE AMOUNT HAS BEEN R EPAID THROUGH ACCOUNT PAYEE CHEQUES AND THE LENDERS HAS SUFFICIEN T FUNDS IN THEIR BANK ACCOUNTS NOT BY CASH DEPOSITED ON THE PRECEDIN G DATE OR WHEN THE CHEQUES WERE ISSUED BY THE MONEY LENDERS . WHILE IN THE INSTANT CASE BEFORE US SUPPORT THE PROPOSITION OF REVENUE A S THEY HAVE DOUBTED THE CAPACITY OF LENDER MOXDIAM TO LEND LOAN OF RS. 1.0 CRORE TO THE ASSESSEE AS WELL GENUINENESS OF THE TRANSACT ION WAS DOUBTED BY REVENUE OWING TO STATEMENTS OF PARTNERS OF MOXDI AM ADMITTING INDULGING IN CLANDESTINE ACCOMMODATION ENTRIES AND ACCOMMODATION BILLS AS WELL THE FINANCIAL STATEMENTS OF MOXDIAM D OES NOT SUPPORT THE CAPACITY OF MOXDIAM TO LEND SUCH A HUGE SUM OF MONEY AS LOAN TO THE ASSESSEE AND UNDER THESE CIRCUMSTANCES THE N THE BURDEN GOT SHIFTED TO ASSESSEE TO PROVE VIDE COGENT EVIDEN CES THAT THE APPARENT IS REAL AND IS NOT MERELY SMOKE SCREEN TO INTRODUCE ASSESSEES OWN MONEY BY THIS APPARENT LOAN TRANSACT ION. ITA 800/MUM/2012 & 6314/MUM/2012 39 H) CIT V. CHANDELA TRADING COMPANY PRIVATE LIMITED (20 15) 372 ITR 232(CALCUTTA) IN THIS CASE THE TAX-PAYER GAVE PROPER EXPLANATION OF EVERY TRANSACTION OF LOAN WHICH WAS MADE THROUGH BA NK PARTICULARS OF THE CREDITORS' INCOME TAX FILE FURNISHED AND AS SUCH THE TAX-PAYER HAD DONE EVERYTHING IN ITS POWER TO DO IN OFFERING SUCH EXPLANATION. THE REVENUE COULD NOT CONTRADICT SUCH EXPLANATION W HILE IN THE INSTANT CASE BEFORE US SUPPORT THE PROPOSITION OF REVENUE AS THEY HAVE DOUBTED THE CAPACITY OF LENDER MOXDIAM TO LEND LOAN OF RS. 1.0 CRORE TO THE ASSESSEE AS WELL GENUINENESS OF THE TR ANSACTION WAS DOUBTED BY REVENUE OWING TO STATEMENTS OF PARTNERS OF MOXDIAM ADMITTING INDULGING IN ACCOMMODATION ENTRIES AND AC COMMODATION BILLS AS WELL THE FINANCIAL STATEMENTS OF MOXDIAM D OES NOT SUPPORT THE CAPACITY OF MOXDIAM TO LEND SUCH A HUGE SUM OF MONEY AS LOAN TO THE ASSESSEE AND UNDER THESE CIRCUMSTANCES THE N THE BURDEN GOT SHIFTED TO ASSESSEE TO PROVE VIDE COGENT EVIDEN CES THAT THE APPARENT IS REAL AND IS NOT MERELY SMOKE SCREEN TO INTRODUCE ASSESSEES OWN MONEY BY THIS APPARENT LOAN TRANSACT ION. I) CIT V. SMT SANGHAMITRA BHARALI (2014) 361 ITR 481(G AUHATI HC) IN THIS CASE THE TAX-PAYER DISCHARGED ITS PRIMARY B URDEN AS CAST U/S. 68 OF THE ACT WHEREBY IDENTITY CREDITWORTHINE SS AND GENUINENESS OF THE TRANSACTION STOOD PROVED. NOW T HE BURDEN SHIFTED TO REVENUE TO PROVE THE CONTRARY. WHILE IN THE INSTANT CASE BEFORE US SUPPORT THE PROPOSITION OF REVENUE AS THEY HAVE DOU BTED THE CAPACITY OF LENDER MOXDIAM TO LEND LOAN OF RS. 1.0 CRORE TO THE ASSESSEE AS WELL GENUINENESS OF THE TRANSACTION WAS DOUBTED BY REVENUE OWING TO STATEMENTS OF PARTNERS OF MOXDIAM ADMITTING INDULGING IN CLANDESTINE ACCOMMODATION ENTRIES AND ACCOMMODATION BILLS AS WELL THE FINANCIAL STATEMENTS OF MOXDIAM D OES NOT SUPPORT THE CAPACITY OF MOXDIAM TO LEND SUCH A HUGE SUM OF MONEY AS LOAN ITA 800/MUM/2012 & 6314/MUM/2012 40 TO THE ASSESSEE AND UNDER THESE CIRCUMSTANCES THE N THE BURDEN GOT SHIFTED TO ASSESSEE TO PROVE VIDE COGENT EVIDEN CES THAT THE APPARENT IS REAL AND IS NOT MERELY SMOKE SCREEN TO INTRODUCE ASSESSEES OWN MONEY BY THIS APPARENT LOAN TRANSACT ION. J) CIT V. JAI KUMAR BAKLIWAL (2014) 366 ITR 217(RAJ. H C) IN THIS CASE ALSO THE TAX-PAYER DISCHARGED ITS PRIMARY BURDEN AS CAST U/S. 68 OF THE ACT WHEREBY IDENTITY CREDITWORTHINESS AND GENU INENESS OF THE TRANSACTION STOOD PROVED. NOW THE BURDEN SHIFTED T O REVENUE TO PROVE THE CONTRARY AND THE TAX-PAYER CANNOT BE ASKE D TO PROVE SOURCE OF SOURCE OF THE CREDITOR. WHILE IN THE INSTANT CASE BEFORE US SUPPORT THE PROPOSITION OF REVENUE AS THEY HAVE DOU BTED THE CAPACITY OF LENDER MOXDIAM TO LEND LOAN OF RS. 1.0 CRORE TO THE ASSESSEE AS WELL GENUINENESS OF THE TRANSACTION WAS DOUBTED BY REVENUE OWING TO STATEMENTS OF PARTNERS OF MOXDIAM ADMITTING INDULGING IN ACCOMMODATION ENTRIES AND ACCOMMODATIO N BILLS AS WELL THE FINANCIAL STATEMENTS OF MOXDIAM DOES NOT SUPPOR T THE CAPACITY OF MOXDIAM TO LEND SUCH A HUGE SUM OF MONEY AS LOAN TO THE ASSESSEE AND UNDER THESE CIRCUMSTANCES THEN THE B URDEN GOT SHIFTED TO ASSESSEE TO PROVE VIDE COGENT EVIDENCES THAT THE APPARENT IS REAL AND IS NOT MERELY SMOKE SCREEN TO INTRODUCE ASSESSEES OWN MONEY BY THIS APPARENT LOAN TRANSACTION. K) NEMI CHAND KOTHARI V. CIT (2003) 264 ITR 254(GAU. H C)- IN THIS CASE ALSO IT WAS HELD THAT THE ASSESSEE IS NOT REQU IRED TO PROVE SOURCE OF SOURCE AND ONCE PRIMARY ONUS IS DISCHARGE D BY THE ASSESSEE AS TO ESTABLISHING IDENTITY AND CREDITWORT HINESS OF THE CREDITOR AND GENUINENESS OF THE LOAN TRANSACTION T HEN IT IS FOR REVENUE TO DISPROVE THE SAME. WHILE IN THE INSTANT CASE BEFORE US SUPPORT THE PROPOSITION OF REVENUE AS THEY HAVE DOU BTED THE ITA 800/MUM/2012 & 6314/MUM/2012 41 CAPACITY OF LENDER MOXDIAM TO LEND LOAN OF RS. 1.0 CRORE TO THE ASSESSEE AS WELL GENUINENESS OF THE TRANSACTION WAS DOUBTED BY REVENUE OWING TO STATEMENTS OF PARTNERS OF MOXDIAM ADMITTING INDULGING IN ACCOMMODATION ENTRIES AND ACCOMMODATIO N BILLS AS WELL THE FINANCIAL STATEMENTS OF MOXDIAM DOES NOT SUPPOR T THE CAPACITY OF MOXDIAM TO LEND SUCH A HUGE SUM OF MONEY AS LOAN TO THE ASSESSEE AND UNDER THESE CIRCUMSTANCES THEN THE BU RDEN GOT SHIFTED TO ASSESSEE TO PROVE VIDE COGENT EVIDENCES THAT THE APPARENT IS REAL AND IS NOT MERELY SMOKE SCREEN TO INTRODUCE ASSESSEES OWN MONEY BY THIS APPARENT LOAN TRANSACTION L) CIT V. SHIV DHOOTI PEARLS AND INVESTMENT LIMITED (2 016) 237 TAXMAN 104(DELHI) - IN THIS CASE ALSO IT WAS HELD T HAT THE ASSESSEE IS NOT REQUIRED TO PROVE SOURCE OF SOURCE AND ONCE PRI MARY ONUS IS DISCHARGED BY THE ASSESSEE AS TO ESTABLISHING IDENT ITY AND CREDITWORTHINESS OF THE CREDITOR AND GENUINENESS OF THE LOAN TRANSACTION THEN IT IS FOR REVENUE TO DISPROVE THE SAME. WHILE IN THE INSTANT CASE BEFORE US SUPPORT THE PROPOSITION OF REVENUE AS THEY HAVE DOUBTED THE CAPACITY OF LENDER MOXDIAM TO LEND LOAN OF RS. 1.0 CRORE TO THE ASSESSEE AS WELL GENUINENESS OF THE TR ANSACTION WAS DOUBTED BY REVENUE OWING TO STATEMENTS OF PARTNERS OF MOXDIAM ADMITTING INDULGING IN ACCOMMODATION ENTRIES AND AC COMMODATION BILLS AS WELL THE FINANCIAL STATEMENTS OF MOXDIAM D OES NOT SUPPORT THE CAPACITY OF MOXDIAM TO LEND SUCH A HUGE SUM OF MONEY AS LOAN TO THE ASSESSEE AND UNDER THESE CIRCUMSTANCES THEN THE BURDEN GOT SHIFTED TO ASSESSEE TO PROVE VIDE COGENT EVIDENCES THAT THE APPARENT IS REAL AND IS NOT MERELY SMOKE SCREEN TO INTRODUCE ASSESSEES OWN MONEY BY THIS APPARENT LOAN TRANSACTION ITA 800/MUM/2012 & 6314/MUM/2012 42 M) CIT V. S.KHADER KHAN SON-(2012) 352 ITR 480(SC)- IN THIS CASE THE HONBLE SUPREME COURT HELD THAT SECTION 133A OF THE ACT DOES NOT EMPOWER REVENUE OFFICERS TO EXAMINE ANY PERSON ON O ATH AND HENCE STATEMENT RECORDED U/S 133A OF THE ACT HAS NO EVIDE NTIARY VALUE AND ANY ADMISSION MADE DURING SUCH STATEMENT CANNOT BE THE BASIS OF ADDITION . WHILE IN THE INSTANT CASE BEFORE US SUPPORT THE PROPOSITION OF REVENUE AS THEY HAVE DOUBTED THE CAP ACITY OF LENDER MOXDIAM TO LEND LOAN OF RS. 1.0 CRORE TO THE ASSESS EE AS WELL GENUINENESS OF THE TRANSACTION WAS DOUBTED BY REVEN UE OWING NOT ONLY TO STATEMENTS OF PARTNERS OF MOXDIAM ADMITTING INDULGING IN ACCOMMODATION ENTRIES AND ACCOMMODATION BILLS BUT T HE FINANCIAL STATEMENTS OF MOXDIAM ALSO DOES NOT SUPPORT THE CAP ACITY OF MOXDIAM TO LEND SUCH A HUGE SUM OF MONEY AS LOAN TO THE ASSESSEE AND UNDER THESE CIRCUMSTANCES THEN THE BURDEN GOT S HIFTED TO ASSESSEE TO PROVE VIDE COGET EVIDENCES THAT THE APP ARENT IS REAL AND IS NOT MERELY SMOKE SCREEN TO INTRODUCE ASSESSEES OWN MONEY BY THIS APPARENT LOAN TRANSACTION NOW WE WILL ANALYZE THE CASE LAWS RELIED UPON BY R EVENUE/ LD. DR A) CIT V. DURGA PRASAD MORE (1971) 82 ITR 540(SC) IN THIS CASE THE HONBLE SUPREME COURT HAS HELD AS UNDER:- 8. NOW WE SHALL PROCEED TO EXAMINE THE VALIDITY OF THOSE GROUNDS THAT APPEALED TO THE LEARNED JUDGES IT IS TRUE THAT AN APPARENT MUST BE CONSIDERED REAL UN TIL IT IS SHOWN THAT THERE ARE REASONS TO BELIEVE THAT THE APPARENT IS NOT THE REAL PARTY WHO RELIES ON A RECI TAL IN A DEED HAS TO ESTABLISH THE TRUTH OF THOSE RECITALS OTHER WISE IT WILL BE VERY EASY TO MAKE SELF-SERVIN G STATEMENTS IN DOCUMENTS EITHER EXECUTED OR TAKEN BY A PARTY AND RELY ON THOSE RECITALS. IF ALL THAT AN AS SESSEE WHO WANTS TO EVADE TAX IS TO HAVE SOME RECITALS MAD E ITA 800/MUM/2012 & 6314/MUM/2012 43 IN A DOCUMENT EITHER EXECUTED BY HIM OR EXECUTED IN HIS FAVOUR THEN THE DOOR WILL BE LEFT WIDE OPEN TO EVADE TAX. A LITTLE PROBING WAS SUFFICIENT IN THE PRESENT CASE TO SHOW THAT THE APPARENT WAS NOT THE REAL. THE TAX ING AUTHORITIES WERE NOT REQUIRED TO PUT ON BLINKERS WH ILE LOOKING AT THE DOCUMENTS PRODUCED BEFORE THEM. THEY WERE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY OF THE RECITA LS MADE IN THOSE DOCUMENTS. 9. NOW COMING TO THE QUESTION OF ONUS THE LAW DOES NOT PRESCRIBE ANY QUANTITATIVE TEST TO FIND OUT WHE THER THE ONUS IN A PARTICULAR CASE HAS BEEN DISCHARGED O R NOT. IT ALL DEPENDS ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. IN SOME CASES THE ONUS MAY BE HEAVY WHEREAS IN OTHERS IT MAY BE NOMINAL. THERE IS NOTHING RIGID ABOUT IT. HEREIN THE ASSESSEE WAS RECEIVING SOME INCOME. HE SAYS THAT IT IS NOT HIS INCOME BUT HIS WIFE'S INCOME. HIS WIFE IS SUPPOSED TO HAVE HAD TWO LAKHS OF RUPEES NEITHER DEPOSITED IN BANKS NOR ADVANCED TO OTHERS BUT SAFELY KEPT IN HER FATHER'S SAFE. ASSESSEE IS UNABLE TO SAY FROM WHAT SOURCE SHE BUILT UP THAT AMOUNT. TWO LAKHS BEFORE T HE YEAR 1940 WAS UNDOUBTEDLY A BIG SUM. IT WAS SAID THAT THE SAID AMOUNT WAS JUST LEFT IN THE HANDS OF THE FATHER-IN-LAW OF THE ASSESSEE. THE TRIBUNAL DISBELI EVED THE STORY WHICH IS PRIMA FACIE A FANTASTIC STORY . IT IS A STORY THAT DOES NOT ACCORD WITH HUMAN PROBABILITI ES. IT IS STRANGE THAT THE HIGH COURT FOUND FAULT WITH THE TRIBUNAL FOR NOT SWALLOWING THAT STORY. IF THAT STO RY IS FOUND TO BE UNBELIEVABLE AS THE TRIBUNAL HAS FOUND AND IN OUR OPINION RIGHTLY THEN THE POSITION REMAI NS THAT THE CONSIDERATION FOR THE SALE PROCEEDED FROM THE ASSESSEE AND THEREFORE IT MUST BE ASSUMED TO BE H IS MONEY. ITA 800/MUM/2012 & 6314/MUM/2012 44 10. IT IS SURPRISING THAT THE HIGH COURT HAS FOUND FAU LT WITH THE INCOME-TAX OFFICER FOR NOT EXAMINING THE W IFE AND THE FATHER-IN-LAW OF THE ASSESSEE FOR PROVING T HE DEPARTMENTS CASE. ALL THAT WE CAN SAY IS THAT THE HIGH COURT HAS IGNORED THE FACTS OF LIFE. IT IS UNFORTUN ATE THAT THE HIGH COURT HAS TAKEN A SUPERFICIAL VIEW OF THE ONUS THAT LAY ON THE DEPARTMENT. 11. IT IS TRUE THAT NEITHER THE PRINCIPLE OF RES - JUDICATA NOR THE RULE OF ESTOPPEL IS APPLICABLE TO ASSESSMENT PROCEEDINGS. BUT THE FACT THAT THE ASSESSEE INCLUDED THE INCOME OF THE PREMISES IN HIS RETURNS FOR SEVERAL YEARS AND THAT AFTER OBJECTING TO THE INCLUSION OF THAT INCOME IN HIS TOTAL INCOME IN THE ASSESSMENT YEAR 1942-43 IN THE ABSENCE OF ANY SATISFACTORY EXPLANATION IS UNDOUBTEDLY A CIRCUMSTANCE WHICH THE TAXING AUTHORITIES WERE ENTITLED TO TAKE INTO CONSIDERATION. 12. NOW COMING TO THE GROUNDS THAT COMMENDED THEMSELVES TO MUKHARJI J. (THE PRESENT CHIEF JUSTIC E OF THE HIGH COURT OF CALCUTTA) WE ARE UNABLE TO FIND OUT HOW THE LEARNED JUDGE WAS ABLE TO COME TO THE CONCLUSION THAT THERE WAS NO PROOF OR CHARGE THAT T HE ASSESSEE HAD CONCEALED ANY INCOME OF HIS. THE ORDER S OF THE INCOME-TAX OFFICER APPELLATE ASSISTANT COMMISSIONER AND THE TRIBUNAL PROCEEDED ON THE BASIS THAT THE ASSESSEE WAS ATTEMPTING TO CONCEAL A PORTION OF HIS INCOME BY PUTTING FORWARD THE STORY THAT THE INCOME FROM THE PREMISES IS THE INCOME OF THE T RUST CREATED BY HIS WIFE. THE PROOF OF THAT CHARGE DEPEN DS ON THE CORRECTNESS OF THE FINDINGS OF THOSE AUTHORI TIES. 13. IN STATING THAT THERE IS NO PROOF THAT THE CONSIDERATION FOR THE CONVEYANCE PASSED FROM THE ASSESSEE THE LEARNED JUDGE IN OUR OPINION LOOKED AT ITA 800/MUM/2012 & 6314/MUM/2012 45 THE CASE FROM A WRONG ANGLE. THERE IS NO DISPUTE TH AT THE CONSIDERATION FOR THE SALE WAS IN FACT PAID BY THE ASSESSEE. HE SAYS THAT HE PAID IT ON BEHALF OF THE TRUST ORALLY CREATED BY HIS WIFE. THEREFORE THE QUESTION IS WHETHER HE HAS SATISFACTORILY PROVED THAT CASE. IF HE HAS FAILED TO PROVE THAT CASE AS WE THINK IT TO BE SO AND IN THE ABSENCE OF ANY OTHER ALTERNATIVE CASE PLEADED BY HIM IT FOLLOWS AS A MATTER OF COURSE TH AT THE CONSIDERATION FOR THE SALE PASSED FROM HIM. SCI ENCE HAS NOT YET INVENTED ANY INSTRUMENT TO TEST THE RELIABILITY OF THE EVIDENCE PLACED BEFORE A COURT O R TRIBUNAL. THEREFORE THE COURTS AND TRIBUNALS HAVE TO JUDGE THE EVIDENCE BEFORE THEM BY APPLYING THE TEST OF HUMAN PROBABILITIES. HUMAN MINDS MAY DIFFER AS TO THE RELIABILITY OF A PIECE OF EVIDENCE. BUT IN THAT SPHERE THE DECISION OF THE FINAL FACT FINDING AUTHORITY IS MADE CONCLUSIVE BY LAW. 14. THE FACT THAT THE ASSESSEE KEPT A SEPARATE ACCOUNT IN RESPECT OF THE INCOME AND EXPENDITURE RELATING T O THE PREMISES IN QUESTION IS OF LITTLE EVIDENTIARY VALUE IF ONE TAKES INTO CONSIDERATION THE PAST HISTORY OF THE CA SE. AT ANY RATE WHAT VALUE SHOULD BE ATTACHED TO THAT CIRCUMSTANCE IS FOR THE FINAL FACT FINDING BODY. 15. THE CIRCUMSTANCE THAT THE ASSESSEE HAD AT THE VERY OUTSET PRODUCED THE SALE DEED AND THE TRUST DE ED BEFORE THE INCOME-TAX OFFICER IS OF NO SIGNIFICANCE . THOSE DOCUMENTS FORMED THE SHEET ANCHOR OF THE ASSESSEES CASE. THERE WAS NO PARTICULAR VIRTUE IN THE ASSESSEES PRODUCING THOSE DOCUMENTS BEFORE THE INCOME-TAX OFFICER. 16. IN OUR OPINION NO QUESTION OF LAW AROSE FROM THE ORDER OF THE TRIBUNAL AND THEREFORE THE HIGH COUR T WAS NOT JUSTIFIED IN DIRECTING THE TRIBUNAL TO STAT E A CASE AND WE ARE FURTHER OF OPINION THAT THE ANSWER GIVEN BY THE HIGH COURT TO THE QUESTION REFERRED TO IT IS ITA 800/MUM/2012 & 6314/MUM/2012 46 UNSUSTAINABLE. WE ACCORDINGLY DISCHARGE THAT ANSWER AND ANSWER THAT QUESTION IN THE AFFIRMATIVE AND IN FAVOUR OF THE DEPARTMENT. THE ASSESSEE SHALL PAY THE COSTS OF THE DEPARTMENT BOTH IN THIS COURT AS WELL AS IN THE HIGH COURTHEARING FEE ONE SET. THUS IT IS FOR THE ASSESSEE TO PROVE THAT APPARENT IS REAL BY BRINGING ON RECORD COGENT MATERIAL AS THE REVENUE HAS BROUGH T ON RECORD THAT MOXDIAM IS ENGAGED IN THE BUSINESS OF PROVIDIN G ACCOMMODATION ENTRIES AND ACCOMMODATION BILLS AND M OXDIAM IS ASSESSED AS AN ACCOMMODATION ENTRY/BILL PROVIDER WH EREBY THE FIRM MOXDIAM WAS SMOKE SCREEN FOR PROVIDING FICTITIOUS E NTRIES AND ALSO ITS FINANCIAL CAPABILITIES TO GRANT THE LOAN TO THE TUNE OF RS. 1.0 CRORE TO THE ASSESSEE THE TOTAL LOANS BEING ADVANCE TO TH E TUNE OF RS. 5.14 CRORES EXISTING AS AT 31-03-2007 IS UNDER CLOUT AND TRANSACTIONS ARE DUBIOUS IN NATURE. THE ASSESSEE HAVING FAILED TO DI SCHARGE ITS BURDEN AS ONCE REVENUE DOUBTS THE TRANSACTIONS WITH INCRIMINATING MATERIAL ON RECORD THE ONUS SHIFTS BACK TO PROVE T HAT APPARENT IS REAL. WHILE IN THE INSTANT CASE BEFORE US SUPPORT THE PROPOSITION OF REVENUE AS THEY HAVE DOUBTED THE CAPACITY OF LENDER MOXDIAM TO LEND LOAN OF RS. 1.0 CRORE TO THE ASSESSEE AS WELL GENUINENESS OF THE TRANSACTION WAS DOUBTED BY REVENUE OWING NOT ONLY T O STATEMENTS OF PARTNERS OF MOXDIAM ADMITTING INDULGING IN ACCOMMOD ATION ENTRIES AND ACCOMMODATION BILLS BUT THE FINANCIAL STATEMENT S OF MOXDIAM DOES NOT SUPPORT THE CAPACITY OF MOXDIAM TO LEND SU CH A HUGE SUM OF MONEY AS LOAN TO THE ASSESSEE AND UNDER THESE C IRCUMSTANCES THEN THE BURDEN GOT SHIFTED TO ASSESSEE TO PROVE VI DE COGENT EVIDENCES THAT THE APPARENT IS REAL AND IS NOT MERE LY SMOKE SCREEN TO INTRODUCE ASSESSEES OWN MONEY BY THIS APPARENT LOAN TRANSACTION WHICH THE ASSESSEE IN THIS CASE FAIL T O PROVE THE ITA 800/MUM/2012 & 6314/MUM/2012 47 CREDITWORTHINESS OF THE LENDER AND GENUINENESS OF T HE LOAN TRANSACTION. B) SUMATI DAYAL V. CIT (1995) 214 ITR 801(SC) IN THI S CASE HONBLE SUPREME COURT HELD AS UNDER: THESE APPEALS FILED BY THE ASSESSEE AGAINST THE ORD ER DATED 24-2-1977 PASSED BY THE INCOME TAX SETTLEMENT COMMI SSION RELATE TO THE ASSESSMENT YEARS 1971-72 AND 1972-73. THE APPELLANT CARRIES ON BUSINESS AS A DEALER IN ART PI ECES ANTIQUES AND CURIOS AT BANGALORE. DURING THE ASSESSMENT YEAR 1971-72 THE APPELLANT RECEIVED A TOTAL AMOUNT OF RS. 3 11 8 31 BY WAY OF RACE WINNINGS IN JACKPOTS AND TREBLE EVENTS IN RACE S AT TURF CLUBS IN BANGALORE MADRAS AND HYDERABAD. THE SAID AMOUNT WAS SHOWN BY THE APPELLANT IN THE CAPITAL ACCOUNT I N THE BOOKS. THE APPELLANT FILED A RETURN ON 27-3-1972 DECLARING AN INCOME OF RS. 27 829. THE APPELLANT ALSO MADE A SWORN STAT EMENT ON 6- 1-1973 BEFORE THE ITO AND ON THE BASIS OF THE SAID STATEMENT THE ITO MADE AN ASSESSMENT ORDER DATED 27-3-1974 WH EREIN HE HELD THAT THE SUM OF RS. 3 11 831 IS NOT WINNING S IN RACES AND HE TREATED THE SAID RECEIPTS AS INCOME FROM UND ISCLOSED SOURCES AND ASSESSED THE SAME AS INCOME FROM OTHER SOURCES. FOR THE ASSESSMENT YEAR 1972-73 THE APPELLANT SHOW ED RECEIPTS OF RS. 93 500 AS RACE WINNINGS IN TWO JACK POTS AT BANGALORE AND MADRAS AND THE SAID AMOUNT WAS CREDIT ED IN THE CAPITAL ACCOUNT IN THE BOOKS. THE APPELLANT FIL ED A RETURN DECLARING AN INCOME OF RS. 3 827 ON 3-2-1973. IN HI S ASSESSMENT ORDER DATED 31-8-1974 THE ITO INCLUDED T HE AMOUNT OF RS. 93 500 - AS INCOME FROM OTHER SOURCES AND AS SESSED THE INCOME OF THE APPELLANT ON THAT BASIS. THE APPEALS FILED BY THE ITA 800/MUM/2012 & 6314/MUM/2012 48 APPELLANT AGAINST THE ASSESSMENT ORDERS WERE DISPOS ED OF BY THE AAC BY ORDER DATED 12-12-1975 WHEREBY THE ASSES SMENT OF RS. 3 11 831 AS INCOME UNDER THE HEAD 'INCOME FROM OTHER SOURCES' FOR THE ASSESSMENT YEAR 1971-72 AND RS. 93 500 FOR THE ASSESSMENT YEAR 1972-73 WAS CONFIRMED. THE APPE ALS FILED AGAINST THE SAID ORDER BEFORE THE TRIBUNAL WERE WIT HDRAWN BY THE APPELLANT UNDER SECTION 245M(2) OF THE INCOME-T AX ACT 1961 ('THE ACT') AND ON 6-8-1976 SHE MOVED THE APPLICAT ION GIVING RISE TO THIS APPEAL BEFORE THE SETTLEMENT COMMISSI ON WHEREIN THE APPELLANT STATED THAT SHE WAS AGREEABLE TO A RE ASONABLE ADDITION ON A REASONABLE BASIS SHOULD THE COMMISSIO N HOLD THAT THE DRAWINGS OF 1970-71 AND 1971-72 WERE NOT A DEQUATE FOR PURCHASE OF JACKPOT TICKETS OTHER EXPENSES IN CONNECTION WITH THE RACES AND LOSSES IF ANY ESTIMATED BY THE SETTLEMENT COMMISSION TO HAVE BEEN SUSTAINED BY THE APPELLANT. ON THE SAID APPLICATION THE COMMISSIONER SUBMITTED HIS RE PORT DATED 29-1-1977 WHEREIN HE URGED THAT THE ACTION OF THE D EPARTMENT IN TAXING THE ENTIRE WINNINGS AS INCOME FROM UNDISC LOSED SOURCES SHOULD BE UPHELD INASMUCH THE APPELLANT LAC KED ANY KNOWLEDGE OF RACE TECHNIQUES AND THE THEORY OF PROB ABILITIES PRECLUDED ANY SYSTEMATIC AND CONTINUOUS WINNINGS AT RACES ON AS MANY AS 16 OCCASIONS DURING A PERIOD OF LESS THA N TWO YEARS. IN HIS REPORT THE COMMISSIONER ALSO SUBMITT ED THAT THE BOOKS OF ACCOUNT DID NOT INDICATE THE EXPENDITURE ON TRAVEL AND OTHER INCIDENTAL EXPENSES WHICH HAD BEEN INCURRED B Y THE APPELLANT FOR ATTENDING THE RACES AT BANGALORE AND HYDERABAD. THE COMMISSIONER ALSO ASKED FOR REOPENING OF THE AS SESSMENT YEAR 1970-71 WHERE THE APPELLANT HAD WON A SUM OF R S. 74 681 AND WHICH WAS NOT BROUGHT TO TAX BY THE ITO. ITA 800/MUM/2012 & 6314/MUM/2012 49 2. THE MATTER WAS HEARD BY THREE MEMBERS OF THE SETTL EMENT COMMISSION. BY ORDER DATED 24-2-1977 TWO MEMBERS OF THE COMMISSION (SHRI R.S. CHADDA AND SHRI K. SRINIVASSA N) UPHELD THE ASSESSMENT FOR THE ASSESSMENT YEARS 1971-72 AND 1972-73 MADE BY THE ITO AND CONFIRMED BY THE AAC BUT DID NO T FIND IT POSSIBLE UNDER SECTION 245E OF THE ACT TO ACCEDE TO THE REQUEST OF THE COMMISSIONER THAT THE ASSESSMENT FOR 1970-71 WHICH WAS MADE WITHOUT BRINGING TO TAX THE ALLEGED RACE W INNINGS OF RS. 74 681 MAY BE REOPENED ON THE VIEW THAT THE AS SESSMENT FOR 1970-71 WAS NOT SO CONNECTED WITH THE CASE PEND ING BEFORE THEM AS TO MAKE IT NECESSARY TO REOPEN IT FOR THE P ROPER DISPOSAL OF THE ASSESSMENTS FOR 1971-72 AND 1972-73. THE CHA IRMAN OF THE SETTLEMENT COMMISSION SHRI C.C. GANAPATHY HAS HOWEVER DISSENTED FROM THE SAID VIEW. 3. SHRI B.K. MEHTA THE LEARNED SENIOR COUNSEL APPEAR ING FOR THE APPELLANT HAS SUBMITTED THAT THE SOURCE OF THE REC EIPT OF THE AMOUNTS HAS BEEN ESTABLISHED BY THE APPELLANT BY PL ACING ON RECORD THE CERTIFICATES FROM THE VARIOUS RACE CLUBS WHICH SHOW THAT THE SAID AMOUNTS WERE RECEIVED BY WAY OF WINNI NGS FROM RACES AND THE BURDEN LAY ON THE DEPARTMENT TO SHOW THAT THE SAID AMOUNTS WERE NOT WINNINGS FROM RACES BUT WAS A N INCOME FROM OTHER SOURCES. THE SUBMISSION OF SHRI MEHTA IS THAT IN THE PRESENT CASE THE DEPARTMENT HAS NOT ADDUCED ANY EVI DENCE TO DISCHARGE THE SAID BURDEN WHICH LAY ON IT AND THE M AJORITY VIEW OF THE SETTLEMENT COMMISSION IS UNSUSTAINABLE INASM UCH AS IT IS BASED ON NO EVIDENCE AND IS FOUNDED ON MERE SUSP ICION AND SURMISES. ACCORDING TO SHRI MEHTA THE CHAIRMAN OF THE ITA 800/MUM/2012 & 6314/MUM/2012 50 SETTLEMENT COMMISSION IN HIS DISSENTING OPINION H AS CORRECTLY APPLIED THE LAW. SHRI MEHTA HAS PLACED RELIANCE ON THE DECISIONS OF THIS COURT IN PARIMISETTI SEETHARAMAMMA V. CIT [1965] 57 ITR 532 ; SREELEKHA BANERJEE V. CIT [1963] 49 ITR 112 ; AND CIT V. ORISSA CORPN. (P.) LTD. [1986] 159 ITR 78 . SHRI J. RAMAMURTHY THE LEARNED SENIOR COUNSEL APPEARING FOR THE REVENUE HAS SUPPORTED TH E MAJORITY VIEW AND HAS SUBMITTED THAT HAVING REGARD TO THE FA CTS AND CIRCUMSTANCES OF THE CASE THE RECEIPTS CLAIMED TO B E WINNINGS FROM RACES WERE INCOME FROM OTHER SOURCES AND THAT NO CASE IS MADE OUT FOR INTERFERENCE BY THIS COURT IN APPEAL U NDER ARTICLE 136 OF THE CONSTITUTION. 4. IT IS NO DOUBT TRUE THAT IN ALL CASES IN WHICH A R ECEIPT 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 A RECEIPT IS IN THE NATURE OF INCOME THE BURDEN OF PROVING THAT IT IS NOT TAXABLE BECAUSE IT FALLS WITHIN EXEMPTION PROVIDED BY THE ACT LIES UPON THE ASSESSEE - PARIMISETTI SEETHARAMAMMA' S CASE (SUPRA) AT P. 536. BUT IN VIEW OF SECTION 68 OF TH E ACT WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF THE ASSES SEE FOR ANY PREVIOUS YEAR THE SAME MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR IF THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATURE AND SOURCE THEREOF IS IN THE OPINION OF THE ASSESSING OFFICER NOT SATISF ACTORY. IN SUCH CASE THERE IS PRIMA FACIE EVIDENCE AGAINST THE ASSESSEE VIZ. THE RECEIPT OF MONEY AND IF HE FAI LS TO REBUT THE SAID EVIDENCE BEING UNREBUTTED CAN BE USED AGAINST HIM BY HOLDING THAT IT WAS A RECEIPT OF AN INCOME NATURE. WHILE ITA 800/MUM/2012 & 6314/MUM/2012 51 CONSIDERING THE EXPLANATION OF THE ASSESSEE THE DEP ARTMENT CANNOT HOWEVER ACT UNREASONABLY - SREELEKHA BANER JEE'S CASE (SUPRA) AT P. 120. 5. IN THE INSTANT CASES THE AMOUNT IS CREDITED IN CAP ITAL ACCOUNT IN THE BOOKS OF THE APPELLANT. THE APPELLANT HAS OF FERED HER EXPLANATION ABOUT THE SAID RECEIPTS BEING HER WINNI NGS FROM RACES. THE SAID EXPLANATION HAS BEEN CONSIDERED IN THE LIGHT OF THE SWORN STATEMENT OF THE APPELLANT DATED 6-1-1973 AND OTHER MATERIAL ON RECORD. THE ITO AND THE AAC HAVE NOT AC CEPTED THE EXPLANATION OFFERED BY THE APPELLANT. THE TWO MEMBE RS CONSTITUTING THE MAJORITY IN THE SETTLEMENT COMMISS ION HAVE ALSO TAKEN THE SAME VIEW. 6. THERE IS NO DISPUTE THAT THE AMOUNTS WERE RECEIVED BY THE APPELLANT FROM VARIOUS RACE CLUBS ON THE BASIS OF W INNING TICKETS PRESENTED BY HER. WHAT IS DISPUTED IS THAT THEY WERE REALLY THE WINNINGS OF THE APPELLANT FROM THE RACES . THIS RAISES THE QUESTION WHETHER THE APPARENT CAN BE CONSIDERED AS REAL. AS LAID DOWN BY THIS COURT APPARENT MUST BE CONSID ERED REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO BELIEVE THAT THE APPARENT IS NOT THE REAL AND THAT THE TAXING AUTHOR ITIES ARE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY AND THE MATTER HAS TO BE CONSIDERED BY APPLYING THE TEST OF HUMAN PROBABILITIES - CIT V. DURGA PRASAD MORE [1971] 82 ITR 540 AT PP. 545 547 (SC). 7. IN THIS CONTEXT IT WOULD BE RELEVANT TO MENTION TH AT IN ORDER TO GIVE EFFECT TO THE RECOMMENDATIONS OF THE DIRECT TA XES ENQUIRY ITA 800/MUM/2012 & 6314/MUM/2012 52 COMMITTEE (UNDER THE CHAIRMANSHIP OF JUSTICE K.N. W ANCHOO RETIRED CHIEF JUSTICE OF INDIA) THE DEFINITION OF ' INCOME' IN SECTION 2(24) OF THE ACT WAS AMENDED WITH EFFECT FROM 1-4-1 972 BY THE FINANCE ACT 1972 SO AS TO INCLUDE WITHIN ITS AMBIT WINNINGS FROM LOTTERIES CROSSWORD PUZZLES RACES INCLUDING HORSE RACES CARD GAMES AND OTHER GAMES OF ANY SORT OR FROM GAMB LING OR BETTING OF ANY FORM OR NATURE WHATSOEVER. THE REASO N UNDERLYING THE SAID AMENDMENT WAS THAT EXEMPTION FR OM TAX THAT WAS ENJOYED IN RESPECT OF SUCH WINNINGS HAD PR OVIDED SCOPE FOR CONVERSION OF 'BLACK' MONEY INTO 'WHITE' INCOME. THE SAID EXEMPTION FROM TAX AVAILABLE IN RESPECT OF SUC H WINNINGS DURING THE ASSESSMENT YEARS 1971-72 AND 1972-73. 8. DURING THE YEAR 1970-71 (PERTAINING TO THE ASSESSM ENT YEAR 1971-72) BETWEEN 6-4-1970 TO 20-3-1971 THE APPELLA NT CLAIMS TO HAVE WON IN HORSE RACES A TOTAL AMOUNT OF RS. 3 11 831 ON 13 OCCASIONS OUT OF WHICH 10 WINNINGS WERE FROM JACKPO TS AND 3 WERE FROM TREBLE EVENTS. SIMILARLY IN THE YEAR 197 1-72 THE APPELLANT WON RACES ON 2 OCCASIONS AND BOTH THE TIM ES WINNINGS WERE FROM JACKPOT. IN HER SWORN STATEMENT DATED 6-1- 1973 THE APPELLANT HAD STATED THAT SHE STARTED GOI NG FOR RACES FROM THE END OF 1969 AND THAT SHE FIRST WON JACKPOT ON 12-12- 1969 ON THE FIRST DAY SHE WENT TO RACES. THE APPELL ANT ALSO STATED THAT SHE WORKED OUT THE COMBINATION ON THE B ASIS OF WHAT HER HUSBAND ADVISED HER BUT SHE USED TO ADD A FEW HORSES OF HER OWN ALTHOUGH SHE ADMITTED THAT SHE DI D NOT KNOW ANYTHING ABOUT THE PERFORMANCE OF THESE HORSES BEFO RE DECEMBER 1969. AS REGARDS HER HUSBAND THE APPELLAN T STATED THAT HE WON ONCE IN CALCUTTA AND ONCE IN MADRAS AND HE HAD ITA 800/MUM/2012 & 6314/MUM/2012 53 SIMILAR WINS ALSO. THE APPELLANT HAD ALSO STATED TH AT SHE HAD NOT GONE TO RACES IN 1972. THE APPELLANT ADMITTED T HAT SHE HAD BEEN BUYING JACKPOT TICKETS OF THE VALUE OF RS. 2 0 00 RS. 1 400 AND EVEN TICKETS FOR RS. 3 000 HAVE BEEN BOUGHT AND THAT ON THE FIRST DAY SHE WON THE JACKPOT SHE PURCHASED A JACKP OT COMBINATION TICKET FOR APPROXIMATELY RS. 2 500 AND THAT ON 8- 11-1970 SHE HAD BOUGHT TWO COMBINATIONS EACH FOR A BOUT RS. 2 000. THE APPELLANT ALSO ADMITTED THAT SHE HAD NOT CLAIMED ANY LOSS IN RACES AND ONLY WINNINGS WERE SHOWN AND STATED THAT SHE WON SIMILAR AMOUNTS WHICH WERE NOT ACCOUNT ED AND THE LOSSES WERE MET OUT OF THE SAID AMOUNTS. THE AP PELLANT FURTHER STATED THAT SHE HAD NO RECORD OF HER EXPEND ITURE AT THE RACE COURSE AS AGAINST HER CLAIM OF WINNINGS. 9. HAVING REGARD TO THE SAID STATEMENT OF THE APPELLA NT THE TWO MEMBERS CONSTITUTING THE MAJORITY ON THE SETTLEMEN T COMMISSION CAME TO THE CONCLUSION THAT THE APPAREN T IS NOT THE REAL AND THAT THE APPELLANT'S CLAIM ABOUT HER WINNI NG IN RACES IS CONTRIVED AND NOT GENUINE FOR THE FOLLOWING REASONS : (I)THE APPELLANT'S KNOWLEDGE OF RACING IS VERY MEAG RE. (II)A JACKPOT IS A STAKE OF FIVE EVENTS IN A SINGLE DAY AND ONE CAN BELIEVE A REGULAR AND EXPERIENCED PUNTER CLEARI NG A JACKPOT OCCASIONALLY BUT THE CLAIM OF THE APPELLANT TO HAVE WON A NUMBER OF JACKPOTS IN THREE OR FOUR SEASONS N OT MERELY AT ONE PLACE BUT AT THREE DIFFERENT CENTRES NAMELY MADRAS BANGALORE AND HYDERABAD APPEARS PRIMA FACI E TO BE WILD AND CONTRARY TO THE STATISTICAL THEORIES AN D EXPERIENCE OF THE FREQUENCIES AND PROBABILITIES. ITA 800/MUM/2012 & 6314/MUM/2012 54 (III)THE APPELLANT'S BOOKS DO NOT SHOW ANY DRAWINGS ON RACE DAYS OR ON THE IMMEDIATELY PRECEDING DAYS FOR THE P URCHASE OF JACKPOT COMBINATION TICKETS WHICH ENTAILED SIZA BLE AMOUNTS VARYING GENERALLY BETWEEN RS. 2 000 AND RS. 3 000. THE DRAWINGS RECORDED IN THE BOOKS CANNOT BE CO- RELATED TO THE VARIOUS RACING EVENTS AT WHICH THE A PPELLANT MADE THE ALLEGED WINNINGS. (IV)WHILE THE APPELLANT'S CAPITAL ACCOUNT WAS CREDI TED WITH THE GROSS AMOUNTS OF RACE WINNINGS THERE WERE NO D EBITS EITHER FOR EXPENSES AND PURCHASES OF TICKETS OR FOR LOSSES. (V)IN VIEW OF THE EXCEPTIONAL LUCK CLAIMED TO HAVE BEEN ENJOYED BY THE APPELLANT HER LOSS OF INTEREST IN R ACES FROM 1972 ASSUMES SIGNIFICANCE. WINNINGS IN RACING BECAM E LIABLE TO INCOME-TAX FROM 1-4-1972 BUT ONE WOULD NO T GIVE UP AN ACTIVITY YIELDING OR LIKELY TO YIELD A LARGE INC OME MERELY BECAUSE THE INCOME WOULD SUFFER TAX. THE POSITION W OULD BE DIFFERENT HOWEVER IF THE CLAIM OF WINNINGS IN RAC ES WAS FALSE AND WHAT WERE PASSED OFF AS SUCH WINNINGS REA LLY REPRESENTED THE APPELLANT'S TAXABLE INCOME FROM SOM E UNDISCLOSED SOURCES. 10. THE MAJORITY OPINION CONCLUDES THAT IT WOULD NOT B E UNREASONABLE TO INFER THAT THE APPELLANT HAD NOT RE ALLY PARTICIPATED IN ANY OF THE RACES EXCEPT TO THE EXTENT OF PURCHAS ING THE WINNING TICKETS AFTER THE EVENTS PRESUMABLY WITH UNACCOUNTE D FUNDS. ITA 800/MUM/2012 & 6314/MUM/2012 55 11. THE CHAIRMAN OF THE SETTLEMENT COMMISSION IN HIS DISSENTING OPINION HAS LAID EMPHASIS ON THE FACT THAT THE APP ELLANT HAD PRODUCED EVIDENCE IN SUPPORT OF THE CREDITS IN THE FORM OF CERTIFICATES FROM THE RACING CLUBS GIVING PARTICULA RS OF THE CROSSED CHEQUES FOR PAYMENT OF THE AMOUNTS FOR WINNING OF J ACKPOTS ETC. THE CHAIRMAN HAS REJECTED THE CONTENTION REGARDING LACK OF EXPERTISE IN RESPECT OF THE APPELLANT AND HAS OBSER VED THAT THE EXPERTISE IS THE LAST THING THAT IS NECESSARY FOR A GAME OF CHANCE AND ANYBODY HAS TO GO AND CALL FOR FIVE NUMBERS IN COUNTER AND OBTAIN A JACKPOT TICKET AND THAT BOOKS CONTAINING I NFORMATION ARE AVAILABLE WHICH ARE QUITE CHEAP. 12. THIS IN OUR OPINION IS A SUPERFICIAL APPROACH TO THE PROBLEM. THE MATTER HAS TO BE CONSIDERED IN THE LIGHT OF HUM AN PROBABILITIES. THE CHAIRMAN OF THE SETTLEMENT COMMISSION HAS EMPHA SISED THAT THE APPELLANT DID POSSESS THE WINNING TICKET WHICH WAS SURRENDERED TO THE RACE CLUB AND IN RETURN A CROSSE D CHEQUE WAS OBTAINED. IT IS IN OUR VIEW A NEUTRAL CIRCUMSTANC E BECAUSE IF THE APPELLANT HAD PURCHASED THE WINNING TICKET AFTER TH E EVENT SHE WOULD BE HAVING THE WINNING TICKET WITH HER WHICH S HE COULD SURRENDER TO THE RACE CLUB. THE OBSERVATION BY THE CHAIRMAN OF THE SETTLEMENT COMMISSION THAT 'FRAUDULENT SALE OF WINNING TICKET IS NOT AN USUAL PRACTICE BUT IS VERY MUCH OF AN UNU SUAL PRACTICE' IGNORES THE PREVALENT MALPRACTICE THAT WAS NOTICED BY THE DISTRICT TAXES ENQUIRY COMMITTEE AND THE RECOMMENDATIONS MAD E BY THE SAID COMMITTEE WHICH LED TO THE AMENDMENT OF THE AC T BY THE FINANCE ACT 1972 WHEREBY THE EXEMPTION FROM TAX TH AT WAS AVAILABLE IN RESPECT OF WINNINGS FROM LOTTERIES CR OSSWORD PUZZLES RACES ETC. WAS WITHDRAWN. SIMILARLY THE OBSERVATI ON BY THE ITA 800/MUM/2012 & 6314/MUM/2012 56 CHAIRMAN THAT IF IT IS ALLEGED THAT THESE TICKETS W ERE OBTAINED THROUGH FRAUDULENT MEANS IT IS UPON THE ALLEGER TO PROVE THAT IT IS SO IGNORES THE REALITY. THE TRANSACTION ABOUT PURC HASE OF WINNING TICKET TAKES PLACE IN SECRET AND DIRECT EVIDENCE AB OUT SUCH PURCHASE WOULD BE RARELY AVAILABLE. AN INFERENCE AB OUT SUCH A PURCHASE HAS TO BE DRAWN ON THE BASIS OF THE CIRCUM STANCES AVAILABLE ON THE RECORD. HAVING REGARD TO THE CONDU CT OF THE APPELLANT AS DISCLOSED IN HER SWORN STATEMENT AS WE LL AS OTHER MATERIAL ON THE RECORD AN INFERENCE COULD REASONABL Y BE DRAWN THAT THE WINNING TICKETS WERE PURCHASED BY THE APPE LLANT AFTER THE EVENT. WE ARE THEREFORE UNABLE TO AGREE WITH THE VIEW OF THE CHAIRMAN IN HIS DISSENTING OPINION. IN OUR OPINION THE MAJORITY OPINION AFTER CONSIDERING SURROUNDING CIRCUMSTANCES AND APPLYING THE TEST OF HUMAN PROBABILITIES HAS RIGHTLY CONCLUD ED THAT THE APPELLANT'S CLAIM ABOUT THE AMOUNT BEING HER WINNIN G FROM RACES IS NOT GENUINE. IT CANNOT BE SAID THAT THE EXPLANATION OFFERED BY THE APPELLANT IN RESPECT OF THE SAID AMOUNTS HAS BEEN R EJECTED UNREASONABLY AND THAT THE FINDING THAT THE SAID AMO UNTS ARE INCOME OF THE APPELLANT FROM OTHER SOURCES IS NOT B ASED ON EVIDENCE. 13. IN THE CIRCUMSTANCES NO CASE IS MADE OUT FOR INTE RFERENCE WITH THE ORDER PASSED BY THE SETTLEMENT COMMISSION. THE APPEALS THEREFORE FAIL AND ARC ACCORDINGLY DISMISSED WITH COSTS. THUS IT IS FOR THE ASSESSEE TO PROVE THAT APPARENT IS REAL BY BRINGING ON RECORD COGENT MATERIAL AS THE REVENUE HAS BROUGHT O N RECORD THAT MOXDIAM IS ENGAGED IN THE BUSINESS OF PROVIDING ACC OMMODATION ENTRIES AND ACCOMMODATION BILLS AND MOXDIAM IS ASSE SSED AS AN ACCOMMODATION ENTRY/BILL PROVIDER WHEREBY THE FIRM MOXDIAM WAS SMOKE SCREEN FOR PROVIDING FICTITIOUS ENTRIES AND A LSO ITS FINANCIAL ITA 800/MUM/2012 & 6314/MUM/2012 57 CAPABILITIES TO GRANT THE LOAN TO THE TUNE OF RS. 1 .0 CRORE TO THE ASSESSEE THE TOTAL LOANS BEING ADVANCE TO THE TUNE OF RS. 5. 14 CRORES EXISTING AS AT 31-03-2007 IS UNDER CLOUT AND TRANSACTIONS ARE D UBIOUS IN NATURE AND ALSO CONDUCT IS NOT SUPPORTED ON THE TOUCHSTONE OF HUMAN PROBABILITIES THAT MEN OF MEAGER MEANS HAVING DEFIC IT/DEBIT CAPITAL CONTRIBUTION OF THEIR OWN IN MOXDIAM CAN GRANT HUGE LOANS TO THE TUNE OF RS.5.14 CRORES AND THAT TOO WITHOUT ANY SECURIT Y/GUARANTEES AS NOTHING IS BROUGHT ON RECORD BY THE ASSESSEE THAT T HESE LOANS SO RAISED WERE SECURED LOANS. THE ASSESSEE HAVING FAILED TO D ISCHARGE ITS BURDEN AS ONCE REVENUE DOUBTS THE TRANSACTIONS WITH INCRIM INATING MATERIAL ON RECORD THE ONUS SHIFTS BACK TO PROVE THAT APPARENT IS REAL. WHILE IN THE INSTANT CASE BEFORE US SUPPORT THE PROPOSITION OF REVENUE AS THEY HAVE DOUBTED THE CAPACITY OF LENDER MOXDIAM TO LEND LOAN OF RS. 1.0 CRORE TO THE ASSESSEE AS WELL GENUINENESS OF THE TRANSACTION WAS DOUBTED BY REVENUE OWING NOT ONLY TO STATEMENTS OF PARTNERS OF MOXDIAM ADMITTING INDULGING IN ACCOMMODATION ENTRIES AND ACCOMMODATIO N BILLS BUT THE FINANCIAL STATEMENTS OF MOXDIAM DOES NOT SUPPORT TH E CAPACITY OF MOXDIAM TO LEND SUCH A HUGE SUM OF MONEY AS LOAN TO THE ASSESSEE AND UNDER THESE CIRCUMSTANCES THEN THE BURDEN GOT S HIFTED TO ASSESSEE TO PROVE VIDE COGENT EVIDENCES THAT THE APPARENT IS REAL AND IS NOT MERELY SMOKE SCREEN TO INTRODUCE ASSESSEES OWN MON EY BY THIS APPARENT LOAN TRANSACTION WHICH THE ASSESSEE IN TH IS CASE FAIL TO PROVE THE CREDITWORTHINESS OF THE LENDER AND GENUINENESS OF THE LOAN TRANSACTION. C) CIT V. N.R.PORTFOLIO PRIVATE LIMITED (2014) 42 TAXM ANN.COM 339(DELHI)- THE HONBLE DELHI HIGH COURT HELD AS UN DER: THESE TWO APPEALS BY THE REVENUE RELATE TO A COMMO N ASSESSEE I.E. N.R. PORTFOLIO PVT. LTD. AND THE QUE STIONS RAISED ITA 800/MUM/2012 & 6314/MUM/2012 58 RELATING TO ASSESSMENT YEARS 2002-03 AND 2003-04 AR E SIMILAR. THEY PERTAIN TO THE ADDITIONS MADE BY THE ASSESSING OFFICER UNDER SECTION 68 OF THE INCOME TAX ACT 1961 (ACT FOR SHORT) OF RS.1 2 34 100/- AND RS.75 60 200/- FOR THE ASSESSME NT YEARS 2002-03 AND 2003-04 ON ACCOUNT OF SHARE APPLICATION MONEY. 2. THE CONTENTION OF THE REVENUE IS THAT THE INCOME T AX APPELLATE TRIBUNAL (TRIBUNAL) HAS DEALT WITH THE IS SUE SUPERFICIALLY AND HAS FAILED TO NOTICE THE MONEY LA UNDERING INDULGED INTO AND THE CLANDESTINE MANNER IN WHICH UNACCOUNTED AND BLACK MONEY HAD BEEN BROUGHT INTO B OOKS BY THIS DUBIOUS METHOD. IT IS CONTENDED THAT THE DECIS ION IN THE CASE OF CIT V. LOVELY EXPORTS LTD. [2008] 299 ITR 268/[2007] 158 TAXMAN 440 (DELHI) IS BEING MISUNDERSTOOD AND MISINTERPRETED RESULTING IN A SPATE OF MATTERS WHER EIN ASSESSEES HAVE ADOPTED THIS SURREPTITIOUS METHOD TO CONVERT UNACCOUNTED FOR MONEY INTO SHARE APPLICATION MONEY. 3. REVENUE HAS RELIED UPON THE DECISION OF THIS COURT IN THE CASE OF CIT V. NOVA PROMOTERS & FINLEASE (P.) LTD. [2012] 342 ITR 169/206 TAXMAN 207/18 TAXMANN.COM 217 . 4. BY ORDER DATED 13TH AUGUST 2013 THE FOLLOWING SU BSTANTIAL QUESTION OF LAW WAS FRAMED IN THE TWO APPEALS: 'WHETHER THE INCOME TAX APPELLATE TRIBUNAL WAS RIGH T IN DELETING THE ADDITIONS OF RS.63 80 100/- AND RS.75 60 200/- IN RESPECT OF ASSESSMENT YEARS 2002-03 AND 2003-04 UNDER SECTION 68 OF THE INCOME TAX ACT 1961 AND WHETHER THE DECISION OF THE TRIBUNAL IS PERVERSE?' 5. THE RESPONDENT-ASSESSEE IS A PRIVATE LIMITED COMPA NY AND FOR THE ASSESSMENT YEARS 2002-03 AND 2003-04 HAD FI LED ITA 800/MUM/2012 & 6314/MUM/2012 59 RETURNS DECLARING INCOME OF RS.11 566/- AND 18 720/ - RESPECTIVELY. THESE RETURNS WERE PROCESSED UNDER SE CTION 143(1) OF THE ACT. SUBSEQUENTLY REASSESSMENT PROCEEDINGS WERE INITIATED UNDER SECTION 147/148 OF THE ACT ON THE B ASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING TH AT THE ASSESSEE WAS ONE OF THE BENEFICIARIES WHO HAD PROC URED SHARE APPLICATION MONEY FROM ENTRY PROVIDERS. ASSESSMENT PROCEEDINGS UNDER SECTION 147/148 OF THE ACT IN THE TWO YEARS WERE INITIATED BY ISSUE OF NOTICES ON 28TH NOVEMBER 2006. THE NOTICES WERE RECEIVED BACK UNSERVED AND SUBSEQUENTL Y WERE SERVED BY AFFIXTURE AT THE LAST KNOWN ADDRESS I.E. THE ADDRESS GIVEN IN THE RETURNS. THE ASSESSEE HOWEVER DID NO T APPEAR IN RESPONSE TO THE SAID NOTICES. THE ASSESSING OFFICER THEREUPON ON 8TH OCTOBER 2007 ISSUED SHOW CAUSE NOTICE UNDER SE CTION 144 READ WITH SECTION 147 OF THE ACT WHICH WAS SENT TH ROUGH SPEED POST BUT WAS RETURNED UNSERVED WITH THE REMARK 'NO SUCH FIRM'. RESPONDENT-ASSESSEE AGAIN WAS SERVED THROUGH AFFIXT URE ON 25TH OCTOBER 2007. ON EXAMINING THE RETURN FOR THE ASSESSMENT YEAR 2004-05 IT WAS NOTICED THAT M/S PRAKASH K. PR AKASH CHARTERED ACCOUNTANTS HAD CERTIFIED THE ACCOUNTS OF THE RESPONDENT-ASSESSEE. OFFICE OF M/S PRAKASH K. PRAKA SH CHARTERED ACCOUNTANTS WAS CONTACTED AND THEREUPON T HEY FILED THEIR POWER OF ATTORNEY ON 1ST NOVEMBER 2007. THE SAID CHARTERED ACCOUNTANTS ALSO FILED A LETTER THAT THE RESPONDENT COMPANY HAD NOT RECEIVED ANY NOTICE AND HAD BEEN RE GULARLY FILING THEIR RETURNS MENTIONING THE CORRECT ADDRESS AND AFTER THAT THERE WAS CHANGE IN ADDRESS THE SAME WAS INFORMED. ALONG WITH THIS LETTER NO DETAIL OF NEW ADDRESS WAS FILE D. THEY HAD NOT MENTIONED THE PRESENT/CURRENT ADDRESS. ITA 800/MUM/2012 & 6314/MUM/2012 60 6. ANOTHER SHOW CAUSE NOTICE WAS ISSUED AND SENT AT T HE LAST KNOWN ADDRESS OF THE RESPONDENT-ASSESSEE AND THE AD DRESS OF THE CHARTERED ACCOUNTANTS FIXING THE HEARING ON 4TH DECEMBER 2007. THE LETTER REFERRED TO THE NOTICE UNDER SECTI ON 147/148 OF THE ACT SHOW CAUSE NOTICE UNDER SECTION 144 DATED 8TH OCTOBER 2007 AND THE FACT THAT THE REASONS COULD BE PROVIDE D ONLY AFTER RETURN OF INCOME WAS FILED BUT YET IN THE INTEREST OF JUSTICE AND FOR THE PURPOSE OF PROCEEDINGS IT WAS STATED THAT A S PER INFORMATION AVAILABLE THE SHARE CAPITAL WAS RECEIV ED DURING THE YEARS FROM THE PERSONS WHO HAD BEEN IDENTIFIED AS E NTRY OPERATORS. THUS THE RESPONDENT-ASSESSEE HAD RECEIV ED ACCOMMODATION ENTRIES WHICH WERE LIKELY TO BE HIT U NDER SECTION 68 AS UNEXPLAINED CASH CREDIT. DETAILS AND MANNER I N WHICH ENTRIES WERE MADE IN THE BOOKS OF ACCOUNT AND THE C LANDESTINE MANNER OF CIRCULATION WAS STATED IN DETAIL IN THE SHOW CAUSE NOTICE. 7. ON 4TH DECEMBER 2007 NO ONE APPEARED AT THE TIME OF HEARING. SUBSEQUENTLY A REQUEST FOR ADJOURNMENT WA S RECEIVED BY WAY OF COURIER FROM M/S PRAKASH K. PRAKASH CHART ERED ACCOUNTANTS AND THEY WERE ALLOWED TIME UP TO 10TH D ECEMBER 2007 BUT ON THE SAID DATE ALSO NO ONE APPEARED AN D NO WRITTEN REQUEST WAS RECEIVED. ACCORDINGLY EX-PARTE OR BEST JUDGMENT ASSESSMENT ORDERS BOTH DATED 17TH DECEMBER 2007 WE RE PASSED FOR THE TWO ASSESSMENT YEARS. WE SHALL BE RE FERRING TO THE DETAILS/CONTENTS OF THE ASSESSMENT ORDERS SUBSE QUENTLY. 8. THE RESPONDENT-ASSESSEE HOWEVER PREFERRED APPEAL S AND SUBSTANTIALLY SUCCEEDED ON MERITS BEFORE THE COMMIS SIONER OF INCOME TAX (APPEALS) BUT DID NOT SUCCEED IN THEIR C HALLENGE TO ITA 800/MUM/2012 & 6314/MUM/2012 61 REOPENING UNDER SECTION 147/148 OF THE ACT OR ON TH E QUESTION OF SERVICE OF NOTICE. 9. TWO CROSS APPEALS WERE PREFERRED BEFORE THE TRIBUN AL BY THE REVENUE AND THE RESPONDENT-ASSESSEE FOR THE TWO ASS ESSMENT YEARS BUT THE SAME HAVE BEEN DISMISSED BY THE IMPUG NED ORDER DATED 29TH OCTOBER 2010. THE REASONING GIVEN BY TH E TRIBUNAL IS THAT THE RESPONDENT-ASSESSEE HAD FURNISHED PERMANEN T ACCOUNT NUMBER (PAN) OF THE SHARE APPLICANTS EXCEPT WITH RE GARD TO THE SHARE CAPITAL OF RS.4 50 000/- AND BEFORE THE COMMI SSIONER (APPEALS) THE ASSESSEE HAD ALSO SUBMITTED VARIOUS DETAILS AND DOCUMENTS TO ESTABLISH IDENTITY OF THE INVESTORS/SH ARE APPLICANTS. THE IMPUGNED ORDER IN PARAGRAPH 6 REFER S TO AND QUOTES SEVERAL PARAGRAPHS FROM THE ORDER PASSED BY THE COMMISSIONER (APPEALS) AND IN PARAGRAPH 7 REFERS TO THE OBSERVATIONS MADE BY THE COMMISSIONER (APPEALS). TH EREAFTER IN PARAGRAPH 8 IT IS RECORDED THAT THE TRIBUNAL HAD GONE THROUGH VARIOUS REASONS AND PRINCIPLES ON WHICH COMMISSIONE R (APPEALS) HAD DELETED THE ADDITION. COMMISSIONER (A PPEALS) HAD GIVEN A FINDING THAT VERIFICATION OF PAN WAS MADE A ND FOUND TO BE CORRECT EXCEPT WITH REGARD TO THE SHARE APPLICAT ION MONEY OF RS.4 50 000/- AND THEREFORE IN THE LIGHT OF THE J UDGMENTS OF DELHI HIGH COURT IN LOVELY EXPORTS (P.) (SUPRA) CI T V. WINSTRAL PETROCHEMICALS (P.) LTD. [2011] 330 ITR 603/199 TAXMAN 135 (MAG.)/10 TAXMANN.COM 137 (DELHI) AND CIT V. DWARKADHISH INVESTMENT (P.) LTD. [2011] 330 ITR 298/[2010] 194 TAXMAN 43 (DELHI) AND OTHER CASES ADDITION WAS NOT JUSTIFIED AND NO T IN ACCORDANCE WITH LAW. ITA 800/MUM/2012 & 6314/MUM/2012 62 10. CROSS OBJECTIONS FILED BY THE ASSESSEE WERE NOT PR ESSED AND IN PARAGRAPH 20 OF THE IMPUGNED ORDER IT IS SPECIFI CALLY RECORDED THAT THE VALIDITY OF NOTICE UNDER SECTION 148 WAS N OT ARGUED BY THE RESPONDENT-ASSESSEE AND IT WAS FAIRLY ACCEPTED THAT THE ASSESSEE'S APPEALS HAD NO MERIT. THE TRIBUNAL THERE AFTER HELD THAT THEY HAD GONE THROUGH THE ORDER OF THE COMMISS IONER (APPEALS) AND THE FINDINGS RECORDED ON THE SAID ISS UE WERE RIGHT. AT THIS STAGE WE WOULD LIKE TO REPRODUCE THE FINDI NGS RECORDED BY THE COMMISSIONER (APPEALS) ON THIS ISSUE: '3.6.2 SIMILAR IS THE POSITION WITH REGARD TO SERVI CE OF SHOW- CAUSE NOTICE FOR COMPLETING THE IMPUGNED ASSESSMENT U/S 144 OF THE ACT AS IT IS AN ESTABLISHED FACT THAT IN ABSENCE OF ANY INTIMATION WITH REGARD TO CHANGE OF REGISTERED OFFICE ADDRESS FROM THE APPELLANT COMPANY THE ASSESSING O FFICER HAS LEFT WITH VERY LITTLE OPTION EXCEPT GETTING THE SAME SERVED THROUGH AFFIXTURE. IT IS BEYOND DOUBT THAT THE ASSE SSING OFFICER TOOK PAINS TO LOCATE THE AUTHORIZED REPRESE NTATIVE M/S PRAKASH K. PRAKASH CAS AND SERVED SHOW- CAUSE NOTI CE ON THEM MEANING THEREBY THAT THE APPELLANT WAS FULLY I N KNOWN OF THE THINGS THAT THE ASSESSMENT PROCEEDINGS ARE G OING ON AND IT IS REQUIRED TO FILE INFORMATION WITH REGARD TO THE VARIOUS POINTS ON THE BASIS WHICH THE CASE WAS REOP ENED U/S 147/148 OF THE ACT. IT IS MATTER OF RECORD THAT AFTER THE AUTHORIZED AR COULD BE LOCATED BY THE ASSESSING OFF ICER THE AR FILED A LETTER DATED NIL' ALONG WITH POA DATED 1-11-2007 BUT STILL THE APPELLANT CHOSE NOT TO INTIMATE THE A DDRESS TO THE ASSESSING OFFICER EXCEPT VAGUELY STATING THAT T HE DEPARTMENT HAVE BEEN INFORMED ABOUT THE CHANGE OF ADDRESS FROM TIME TO TIME. IN THESE CIRCUMSTANCES I DO NOT ITA 800/MUM/2012 & 6314/MUM/2012 63 SEE ANY JUSTIFICATION ON THE PART OF THE APPELLANT TO EITHER RAISE THE ISSUE OF NON- SERVICE OF NOTICES OR IMPRO PER PROCEDURE OF SUBSTITUTED SERVICE AND ACCORDINGLY I HOLD THAT THE IMPUGNED ASSESSMENT IS IN ORDER. THE CONTENTIONS OF THE APPELLANT COMPANY THAT THE I MPUGNED ASSESSMENT HAS BEEN FRAMED WITHOUT LOOKING INTO THE CONTENTIONS OF THE APPELLANT HAS ALSO NOT FOUND FAV OUR WITH ME AS DESPITE KNOWING FULLY WELL THAT THE ASSESSMEN T SHALL BE TIME BARRED AS ON 31-12-2007 THE AR CHOSE TO SE NT THE DETAILS THROUGH POST WHICH WERE RECEIVED BY THE ASS ESSING OFFICER ON 18-12-2007 WHEREAS THE IMPUGNED ORDER US PASSED ON 17-12-2008. OTHERWISE TOO DURING THE PRE SENT PROCEEDINGS THE ASSESSING OFFICER SUBMITTED A REMA ND REPORT WHEREIN THE APPELLANT HAS NOT BEEN GIVEN AN OPPORTU NITY TO PUT FORTH ITS VIEW POINTS AND ON WHICH REJOINDER HA S ALSO BEEN FILED WHICH MEANS THAT THE PRINCIPLE OF NATURA L JUSTICE HAS BEEN ADHERED TO AND HENCE CONTENTION OF THE LD. AR NEEDS REJECTION.' 11. OTHER FINDINGS RECORDED BY THE COMMISSIONER (APPEA LS) REFERS TO THE REMAND REPORT WHICH WAS CALLED FROM THE ASSESSING O FFICER STATING THAT NOTICE UNDER SECTION 148 WAS SENT AT THE LAST KNOWN ADDRESS I.E. F-280 NEW RAJINDER NAGAR NEW DELHI WHICH WAS ALSO MENTI ONED IN THE RETURN OF INCOME BUT WAS RECEIVED UNSERVED WITH THE REMAR K 'NO SUCH ASSESSEE' BUT SUBSEQUENTLY SERVED THROUGH AFFIXTUR E AT A-46 MOHAN CO- OP. INDUSTRIAL ESTATE MATHURA ROAD NEW DELHI THE ADDRESS WHICH WAS SHOWN IN THE RETURN OF INCOME FOR THE ASSESSMENT YE AR 2004-05. THE ASSESSING OFFICER IN THE REMAND REPORT HAS MENTIONE D THAT THE ASSESSEE'S REGISTERED OFFICE WAS LOCATED AT A-46 MOHAN CO-OP. INDUSTRIAL ESTATE MATHURA ROAD NEW DELHI ON THE DATE OF AFFIXTURE OF NOTICE. SUBSEQUENTLY ITA 800/MUM/2012 & 6314/MUM/2012 64 ON 18TH APRIL 2007 THEY SHIFTED THEIR REGISTERED OFFICE TO A-15 B-1 EXTENSION MOHAN CO-OP. INDUSTRIAL ESTATE MATHURA ROAD NEW DELHI. WE HAVE ALREADY QUOTED THE OBSERVATION OF THE ASSESSIN G OFFICER AFTER M/S PRAKASH K. PRAKASH CHARTERED ACCOUNTANTS WERE SERVE D AND THEY IN THEIR LETTER DATED 1ST NOVEMBER 2007 HAD NOT FURNI SHED THE NEW ADDRESS THOUGH THE RESPONDENT-ASSESSEE HAVE STATED THAT THEY HAD SHIFTED THEIR REGISTERED OFFICE ADDRESS FROM A-46 MOHAN CO-OP. INDUSTRIAL ESTATE MATHURA ROAD NEW DELHI TO A-15 B-1 EXTENS ION MOHAN CO-OP. INDUSTRIAL ESTATE MATHURA ROAD NEW DELHI. THE RES PONDENT-ASSESSEE HAD ALSO STATED THAT THEY HAD 'MISPLACED' THE INTIM ATION FILED WITH THE DEPARTMENT ON CHANGE OF ADDRESS. THE COMMISSIONER ( APPEALS) HAS RECORDED A FINDING THAT THE RESPONDENT-ASSESSEE HAD WRONGLY CLAIMED THAT THEY HAD INFORMED THE DEPARTMENT ABOUT CHANGE OF THEIR REGISTERED OFFICE ADDRESS AS NOT EVEN A SINGLE INTIMATION WAS PRESENTED BEFORE THE ASSESSING OFFICER OR HIM. 12. THE CONTENTION OF THE LD. AR FOR THE APPELLANT TH AT THEY HAD INTIMATED CHANGE OF ADDRESS TO REGISTRAR OF COMPANI ES AND THE ASSESSING OFFICER SHOULD HAVE ASCERTAINED THE SAID ADDRESS IT WAS RIGHTLY OBSERVED COULD NOT CUT ANY ICE IN THE FACTS OF THE PRESENT CASE. IT WAS THE OBLIGATION AND RESPONSIBILITY OF THE RESPON DENT- ASSESSEE TO INTIMATE CHANGE OF ADDRESS TO THE ASSESSING OFFICER AS NO RETURN WITH THE NEW ADDRESS WAS FURNISHED OR EVEN FILED. FURTHER T HE CONDUCT OF THE RESPONDENT WHEN THEY DID NOT GIVE THE LATEST ADDRE SS IN SPITE OF THE FACT THAT M/S PRAKASH K. PRAKASH CHARTERED ACCOUNTANTS WERE SERVED AND INFORMED ABOUT THE PROCEEDINGS SPEAKS FOR ITSELF. THEIR CONDUCT IN NOT RESPONDING AND APPEARING BEFORE THE ASSESSING OFFIC ER WAS ADVERSELY COMMENTED UPON BY THE COMMISSIONER (APPEALS) AND TH E SAID FINDING HAS NOT BEEN DISTURBED BY THE TRIBUNAL. HOWEVER TH IS FACT AND THE CONDUCT OF THE RESPONDENT BEFORE THE ASSESSING OFFI CER WAS NOT NOTICED ITA 800/MUM/2012 & 6314/MUM/2012 65 AND GIVEN ADEQUATE REFERENCE WHILE DEALING WITH THE QUESTION OF DELETION OF ADDITION ON MERITS. 13. THE ASSESSING OFFICER IS BOTH AN INVESTIGATOR AND AN ADJUDICATOR. WHEN A FACT IS ALLEGED AND STATED BEFORE THE ASSESS ING OFFICER BY AN ASSESSEE HE MUST AND SHOULD EXAMINE AND VERIFY WH EN IN DOUBT OR WHEN THE ASSERTION IS DEBATABLE. NORMALLY A FACTUAL ASSERTION MADE SHOULD BE ACCEPTED BY THE ASSESSING OFFICER UNLESS FOR JUSTIFICATION AND REASONS THE ASSESSING OFFICER FEELS THAT HE NEEDS/R EQUIRES A DEEPER AND DETAILED VERIFICATION OF THE FACTS ALLEGED. THE ASS ESSEE IN SUCH CIRCUMSTANCES SHOULD COOPERATE AND FURNISH PAPERS DETAILS AND PARTICULARS. THIS MAY ENTAIL ISSUE OF NOTICES TO TH IRD PARTIES TO FURNISH AND SUPPLY INFORMATION OR CONFIRM FACTS OR EVEN ATTEND AS WITNESSES. THE ASSESSING OFFICER CAN ALSO REFER TO INCRIMINATING M ATERIAL OR EVIDENCE AVAILABLE WITH HIM AND CALL UPON THE ASSESSEE TO FI LE THEIR RESPONSE. WE CANNOT LAY DOWN OR STATE A GENERAL OR UNIVERSAL PRO CEDURE OR METHOD WHICH SHOULD BE ADOPTED BY THE ASSESSING OFFICER WH EN VERIFICATION OF FACTS IS REQUIRED. THE MANNER AND MODE OF CONDUCTIN G ASSESSMENT PROCEEDINGS HAS TO BE LEFT TO THE DISCRETION OF THE ASSESSING OFFICER AND THE SAME SHOULD BE JUST FAIR AND SHOULD NOT CAUSE ANY HARASSMENT TO THE ASSESSEE OR THIRD PERSONS FROM WHOM CONFIRMATIO N OR VERIFICATION IS REQUIRED. THE VERIFICATION AND INVESTIGATION SHOULD BE DONE WITH THE LEAST AMOUNT OF INTRUSION INCONVENIENCE OR HARASSMENT ES PECIALLY TO THIRD PARTIES WHO MAY HAVE ENTERED INTO TRANSACTIONS WIT H THE ASSESSEE. THE ULTIMATE FINDING OF THE ASSESSING OFFICER SHOULD RE FLECT DUE APPLICATION OF MIND ON THE RELEVANT FACTS AND THE DECISION SHOULD TAKE INTO CONSIDERATION THE ENTIRE MATERIAL WHICH IS GERMANE AND WHICH SHOULD NOT BE IGNORED AND EXCLUDE THAT WHICH IS IRRELEVANT. CE RTAIN FACTS OR ASPECTS MAY BE NEUTRAL AND SHOULD BE NOTED. THESE SHOULD NO T BE IGNORED BUT THEY CANNOT BECOME THE BEDROCK OR SUBSTRATUM OF THE CONCLUSION. THE ITA 800/MUM/2012 & 6314/MUM/2012 66 PROVISIONS OF EVIDENCE ACT ARE NOT APPLICABLE BUT THE ASSESSING OFFICER BEING A QUASI JUDICIAL AUTHORITY MUST TAKE CARE AN D CAUTION TO ENSURE THAT THE DECISION IS REASONABLE AND SATISFIES THE C ANONS OF EQUITY FAIRNESS AND JUSTICE. THE EVIDENCE SHOULD BE IMPART IALLY AND OBJECTIVELY ANALYZED TO ENSURE THAT THE ADVERSE FINDINGS AGAINS T THE ASSESSEE WHEN RECORDED ARE ADEQUATELY AND DULY SUPPORTED BY MATER IAL AND EVIDENCE AND CAN WITHSTAND THE CHALLENGE IN APPELLATE PROCEE DINGS. PRINCIPLE OF PREPONDERANCE OF PROBABILITIES APPLIES. WHAT IS STA TED AND THE SAID STANDARD EQUALLY APPLY TO THE TRIBUNAL AND INDEED THIS COURT. THE REASONING AND THE GROUNDS GIVEN IN ANY DECISION OR PRONOUNCEMENT WHILE DEALING WITH THE CONTENTIONS AND ISSUES SHOULD REFL ECT APPLICATION OF MIND ON THE RELEVANT ASPECTS. 14. WHEN AN ASSESSEE DOES NOT PRODUCE EVIDENCE OR TRIE S TO AVOID APPEARANCE BEFORE THE ASSESSING OFFICER IT NECESSA RILY CREATES DIFFICULTIES AND PREVENTS ASCERTAINMENT OF TRUE AND CORRECT FACT S AS THE ASSESSING OFFICER IS DENIED ADVANTAGE OF THE CONTENTION OR FA CTUAL ASSERTION BY THE ASSESSEE BEFORE HIM. IN CASE AN ASSESSEE DELIBERATE LY AND INTENTIONALLY FAILS TO PRODUCE EVIDENCE BEFORE THE ASSESSING OFFI CER WITH THE DESIRE TO PREVENT INQUIRY OR INVESTIGATION AN ADVERSE VIEW S HOULD BE TAKEN. WE SHALL NOW COME TO THE MERITS AND THE FINDINGS RECOR DED BY THE COMMISSIONER (APPEALS) WHICH AS NOTED ABOVE HAVE BEEN SIMPLY AFFIRMED BY THE TRIBUNAL WITHOUT VERIFYING OR REFER RING TO THE FACTS. 15. IN THE PRESENT CASE THE UNDISPUTED POSITION IS TH AT THE RESPONDENT HAD RECEIVED SHARE APPLICATION MONEY OF RS.68 30 10 0/- AND RS.75 60 200/- IN THE ASSESSMENT YEARS 2002-03 AND 2003-04 RESPECTIVELY. FOR THE ASSESSMENT YEAR 2002-03 THE ASSESSING OFFICER HAD TAKEN THE SHARE APPLICATION MONEY RECEIVED IN T HE YEAR AS RS.1 20 34 100/- WHICH INCLUDED RS.32 80 000/- AND RS.19 24 000/- RELATED TO PREVIOUS YEARS OR WAS THE OPENING SHARE CAPITAL. AS NOTED ITA 800/MUM/2012 & 6314/MUM/2012 67 ABOVE ADDITION OF RS.4 50 000/- HAS BEEN SUSTAINED IN THE ASSESSMENT YEAR 2002-03. THUS THE COMMISSIONER (APPEALS) AND THE TRIBUNAL HAVE DELETED ADDITIONS OF RS.63 80 100/- AND RS.75 60 20 0/- IN THE TWO ASSESSMENT YEARS. BEFORE THE COMMISSIONER (APPEALS) THE RESPONDENT- ASSESSEE HAD FURNISHED NAME OF THE SHARE APPLICANTS WHICH MOSTLY CONSISTED OF COMPANIES. IT WAS ACCORDINGLY SUBMITTE D THAT THE RESPONDENT HAD BEEN ABLE TO ESTABLISH IDENTITY OF THE SHAREHOL DERS THEIR CREDITWORTHINESS AND ALSO GENUINENESS OF THE TRANSA CTION AS THE PAYMENTS WERE RECEIVED THROUGH BANKING CHANNELS. TH US THE RESPONDENT HAD DISCHARGED THE PRIMARY ONUS AND THERE WAS NO EV IDENCE OR MATERIAL TO SHOW THAT UNACCOUNTED FOR MONEY WAS RECYCLED AND INTRODUCED IN THE BOOKS AS SHARE APPLICATION MONEY. THE COMMISSIONER (APPEALS) HAS RECORDED THAT VERIFICATION OF PAN NUMBERS WAS DONE IN THE PRESENT CASE AND WAS FOUND TO BE CORRECT EXCEPT IN THE CASE OF T ECHNOCHEM ASSOCIATES PRIVATE LIMITED AND M/S YOGESH GUPTA FROM WHOM SHAR E APPLICATION MONEY OF RS.1 50 000/-EACH WAS RAISED BUT NO PAN DE TAILS WERE FURNISHED. REGARDING GANGA INFIN PRIVATE LIMITED P AN NUMBER FURNISHED WAS FOUND TO BE INCORRECT AND ACCORDINGLY ADDITION OF RS.1 50 000/- WAS JUSTIFIED. WITH REGARD TO OTHERS THE COMMISSIONER (APPEALS) HAS RECORDED THAT THE ASSESSING OFFICER HAD NOT AFFECTED INQUIRI ES TO BRING ON RECORD AND ESTABLISH THAT THE OTHER PARTIES HAD GIVEN ACCO MMODATION ENTRIES AND THE MONEY I.E. THE SHARE APPLICATION MONEY WA S ASSESSEE'S OWN UNDISCLOSED INCOME. IT WAS FURTHER RECORDED THAT TH E RESPONDENT HAD NOT BEEN PROVIDED AN OPPORTUNITY TO CROSS-EXAMINE THE S O-CALLED ENTRY PROVIDERS AND THE ASSESSING OFFICER SIMPLY RELIED U PON THE INVESTIGATION REPORTS/INFORMATION PROVIDED BY THE INFORMATION WIN G OF THE DEPARTMENT. 16. THE AFORESAID FINDING OF THE COMMISSIONER (APPEALS ) WHICH HAVE BEEN AFFIRMED BY THE TRIBUNAL IGNORES THE FINDING OF THE ASSESSING OFFICER THAT THE ASSESSEE HAD FAILED TO ATTEND THE ASSESSME NT PROCEEDINGS ITA 800/MUM/2012 & 6314/MUM/2012 68 EXPLAIN AND PUT FORWARD THEIR STAND AND STANCE. TO THIS EXTENT THERE IS CONTRADICTION IN THE ORDER PASSED BY THE COMMISSION ER (APPEALS) WHICH WAS IGNORED AND NOT TAKEN NOTE OF BY THE TRIBUNAL. 17. THE COMMISSIONER (APPEALS) THEREAFTER PROCEEDED ON THE BASIS THAT EVEN IF THE SUBSCRIBERS TO THE SHARE CAPITAL WERE N OT GENUINE THE AMOUNT RECEIVED CANNOT BE REGARDED AS UNDISCLOSED INCOME O F THE RESPONDENT- ASSESSEE. REFERENCE WAS MADE TO THE DECISION OF THE DELHI HIGH COURT IN LOVELY EXPORTS (P.) LTD. (SUPRA). REFERENCE WAS MADE TO SOME DECISION OF THE TRIBUNAL. IT WOULD BE HERE RELEVANT TO HIGHL IGHT AND NOTE WHAT WAS RECORDED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER HAS MENTIONED THAT THE SUBSCRIBER S BELONGED TO MAHESH GARG GROUP OF ENTRY OPERATORS WHICH INCLUDE D 51 COMPANIES/ PERSONS WHO WERE OPERATING MORE THAN 100 BANK ACCO UNTS IN DIFFERENT BANKS/BRANCHES. THEIR MODUS OPERANDI WAS TO PROVIDE ACCOMMODATION ENTRIES TO DIFFERENT PERSONS/BENEFICIARIES. REFEREN CE WAS MADE TO THE BANK STATEMENTS OF THE ENTRY OPERATORS THAT SHOWED SUBSTANTIAL DEPOSIT OF CASH IN THE BANK ACCOUNTS AND SUBSEQUENT ISSUE O F CHEQUES TO THE BENEFICIARIES. THIS WAS THE ONLY ACTIVITY OF THESE COMPANIES/PERSONS. THE SAID COMPANIES/PERSONS WERE NOT CARRYING ON ANY OTH ER BUSINESS ACTIVITY I.E. MANUFACTURING OR TRADING ACTIVITY. THE ASSESS MENT ORDER HAS QUOTED AND REFERRED TO THE BANK ACCOUNT STATEMENTS IN SUPP ORT OF THE SAID ASSERTION AND FINDING. THE ASSESSING OFFICER HAS ME NTIONED THAT THE RESPONDENT-ASSESSEE WAS A PRIVATE LIMITED COMPANY CLOSELY HELD AND THERE SHOULD BE PROXIMATE RELATIONSHIP BETWEEN THE PROMOTER DIRECTORS AND THE SHAREHOLDERS. CLOSELY HELD COMPANIES USUALL Y RECEIVE SHARE CAPITAL SUBSCRIPTIONS FROM FRIENDS RELATIVES AND N OT FROM UNRELATED/ UNKNOWN THIRD PARTIES/ GENERAL PUBLIC. THERE WAS NO RELATIONSHIP OR CONNECTION BETWEEN THE SUBSCRIBERS AND THE RESPONDE NT-ASSESSEE FOR SUBSCRIBERS TO BECOME INVESTORS. ASSESSMENT ORDER R ECORDS THAT TO ITA 800/MUM/2012 & 6314/MUM/2012 69 ESTABLISH IDENTITY AND AVAILABILITY OF FUNDS IT WA S NECESSARY TO HAVE AT LEAST SOME IDEA IF NOT COMPLETE DETAILS OF THE ACTU AL BUSINESS UNDERTAKEN AND ENGAGED IN BY THE RESPONDENT-ASSESSEE AND EXPLA INED HOW AND WHY THESE UNRELATED AND UNCONNECTED THIRD PARTIES DECID ED TO BECOME INVESTORS IN THE ABSENCE OF PUBLIC ISSUE OR ADVERTI SEMENT. 18. IN THE REMAND REPORT THE ASSESSING OFFICER REFERR ED TO THE PROVISIONS OF SECTION 68 OF THE ACT AND THEIR APPLICABILITY. T HE WORD 'IDENTITY' AS DEFINED IT WAS OBSERVED MEANT THE CONDITION OR FAC T OF A PERSON OR THING BEING THAT SPECIFIED UNIQUE PERSON OR THING. THE ID ENTIFICATION OF THE PERSON WOULD INCLUDE THE PLACE OF WORK THE STAFF THE FACT THAT IT WAS ACTUALLY CARRYING ON BUSINESS AND RECOGNITION OF TH E SAID COMPANY IN THE EYES OF PUBLIC. MERELY PRODUCING PAN NUMBER OR ASSE SSMENT PARTICULARS DID NOT ESTABLISH THE IDENTITY OF THE PERSON. THE A CTUAL AND TRUE IDENTITY OF THE PERSON OR A COMPANY WAS THE BUSINESS UNDERTA KEN BY THEM. 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 WITHOUT A CTUAL DE FACTO VERIFICATION OF THE IDENTITY OR ASCERTAINING ACTIVE NATURE OF BUSINESS ACTIVITY. PAN IS A NUMBER WHICH IS ALLOTTED AND HEL PS THE REVENUE KEEP TRACK OF THE TRANSACTIONS. PAN NUMBER IS RELEVANT B UT CANNOT BE BLINDLY AND WITHOUT CONSIDERING SURROUNDING CIRCUMSTANCES T REATED 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 GENUINE BUSINE SS ACTIVITY. THE SHARE SUBSCRIBERS DID NOT HAVE THEIR OWN PROFIT MAKING AP PARATUS AND WERE NOT INVOLVED IN BUSINESS ACTIVITY. THEY MERELY ROTATED MONEY WHICH WAS COMING THROUGH THE BANK ACCOUNTS WHICH MEANS DEPOS ITS BY WAY OF CASH AND ISSUE OF CHEQUES. THE BANK ACCOUNTS THERE FORE DID NOT REFLECT ITA 800/MUM/2012 & 6314/MUM/2012 70 THEIR CREDITWORTHINESS OR EVEN GENUINENESS OF THE T RANSACTION. THE BENEFICIARIES INCLUDING THE RESPONDENT-ASSESSEE D ID NOT GIVE ANY SHARE- DIVIDEND OR INTEREST TO THE SAID ENTRY OPERATORS/SU BSCRIBERS. THE PROFIT MOTIVE NORMAL IN CASE OF INVESTMENT WAS ENTIRELY A BSENT. IN THE PRESENT CASE NO PROFIT OR DIVIDEND WAS DECLARED ON THE SHA RES. ANY PERSON WHO WOULD INVEST MONEY OR GIVE LOAN WOULD CERTAINLY SEE K RETURN OR INCOME AS CONSIDERATION. 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. 20. VICKY CHAURASIA ADDITIONAL DIRECTOR OF THE RESPON DENT COMPANY WAS ASKED TO APPEAR BEFORE THE ASSESSING OFFICER PURSUA NT TO THE LETTER BY THE COMMISSIONER (APPEALS) DIRECTING THE ASSESSING OFFI CER TO GO THROUGH THE SUBMISSIONS AND SUBMIT A REPORT AFTER CARRYING OUT NECESSARY INQUIRIES. HE WAS ASKED TO PRODUCE BOOKS OF ACCOUNTS AND EVIDE NCE IN SUPPORT. BY LETTER DATED 12TH OCTOBER 2009 THE RESPONDENT-ASS ESSEE WAS ASKED TO FURNISH DETAILS/INFORMATION. THESE INCLUDED DETAILS OF DIVIDEND PAID TO THE SHAREHOLDERS AND TO SHOW AND ESTABLISH CREDITWO RTHINESS OF THE PARTIES. STATEMENT OF VICKY CHAURASIA RECORDED UNDE R SECTION 131 OF THE ACT DATED 5TH NOVEMBER 2009 HAS BEEN PLACED ON REC ORD BY THE RESPONDENT IN ITA NO. 1019/2011. HE HAS STATED THAT HE ALONG WITH SANDEEP CHAURASIA HAD BEEN DIRECTORS OF THE COMPANY SINCE JUNE 2003 AND THE COMPANY WAS ENGAGED IN INVESTMENT AND FINAN CE BUT HE COULD NOT GIVE DETAILS OF THE SUBSCRIBED SHARE CAPITAL OF RS.2 CRORES AS IT WAS STATED THAT THIS WAS BEFORE HE BECAME THE DIRECTOR. HE COULD NOT ALSO GIVE DETAILS OF HOW SHARE CAPITAL GOT SUBSCRIBED IN A PR IVATE LIMITED COMPANY. SPECIFIC QUESTION WAS PUT TO HIM REGARDING VERIFICA TION OF THE SHAREHOLDERS AS THE SUMMONS ISSUED TO THEM HAD BY A ND LARGE REMAINED UNCOMPLIED FOR WANT OF CORRECT ADDRESSES. IN RESPON SE HE HAD STATED THAT THE COMPANY HAD SUPPLIED ADDRESSES OF SHAREHOL DERS AS PER SHARE ITA 800/MUM/2012 & 6314/MUM/2012 71 APPLICATION FORMS AND IN THE ABSENCE OF DIVIDEND OR ANY FORM OF RETURN ON THE INVESTMENT THE COMPANY WAS NOT IN A POSITION T O CALL THE SUBSCRIBERS FOR CROSS- EXAMINATION. THE COMPANY HAD NOT RECEIVE D ANY LETTER FOR CHANGE OF ADDRESS ETC. VICKY CHAURASIA STATED THAT ACCORDING TO HIM THE SUBSCRIBERS WHO WERE ALLOTTED SHARES CONTINUED AN D HAD NOT CEASED TO BE SHAREHOLDERS. WITH REGARD TO THE PAST DIRECTORS HE HAD STATED THAT THEY HAD RESIGNED AND HE WAS NOT IN A POSITION TO P RODUCE THE SAME. IN THE REMAND REPORT IT WAS SPECIFICALLY MENTIONED TH AT BOOKS OF ACCOUNTS WERE NEITHER PRODUCED ON 5TH NOVEMBER 2009 NOR DUR ING THE COURSE OF REMAND PROCEEDINGS. 21. THE ASSESSING OFFICER HAD ISSUED NOTICES BY SPEED POST TO 31 PARTIES AS PER ADDRESSES GIVEN BY THE RESPONDENT-ASSESSEE R EQUIRING THEM TO APPEAR FOR PERSONAL DEPOSITION PRODUCE BOOKS OF AC COUNTS WITH COMPLETE VOUCHERS AND BILLS AND STATEMENT OF BANK ACCOUNTS F OR THE RELEVANT PERIOD. IN RESPECT OF 22 PARTIES THE NOTICE SUMMON S WERE RECEIVED BACK WITH POSTAL REMARKS 'NO SUCH FIRM/COMPANY/PERSON' O R A FEW 'LEFT WITHOUT ADDRESS' AND A VERY FEW 'REFUSED TO ACCEPT' . REMAINING 9 PARTIES NEITHER ATTENDED AND FILED ANY APPLICATION FOR ADJOURNMENTS NOR FILED DETAILS. THUS IT WAS OBSERVED THAT THE IDENT ITIES HAD BEEN ONLY PROVED ON PAPER I.E. IN FORM OF NEUTRAL DOCUMENTS LIKE PAN NUMBER ITR REGISTRAR OF COMPANIES REGISTRATION BUT WITHOUT FU LL DETAILS AS TO THE ACTUAL BUSINESS ACTIVITIES UNDERTAKEN BY THESE COMP ANIES THE REASON WHY THESE COMPANIES HAD MADE INVESTMENT IN A PRIVAT E LIMITED COMPANY ETC. THIS COUPLED WITH THE FACT THAT THERE WAS CASH DEPOSITS IN THEIR BANK ACCOUNTS AND WITHDRAWALS WERE HIGHLIGHTED. 22. IN THE REJOINDER FILED TO THE REMAND REPORT IT WA S STATED THAT THE SHARE APPLICANTS WERE REQUIRED TO APPEAR IN PERSON ON 17TH NOVEMBER 2008 IN RESPONSE TO SUMMONS UNDER SECTION 131 DATED 23RD OCTOBER 2009. SUBSEQUENTLY FRESH SUMMONS DATED 30TH OCTOBE R 2009 WERE ITA 800/MUM/2012 & 6314/MUM/2012 72 ISSUED REQUIRING COMPLIANCE BY 7TH NOVEMBER 2009 BUT THE ASSESSING OFFICER HAD SENT THE REMAND REPORT ON 6TH NOVEMBER 2009 WITHOUT WAITING FOR COMPLIANCE OF SUMMONS. THE SAID SUBMISS ION IS WITHOUT MERIT AS WE NOTICE THAT THE ORDER OF THE COMMISSIONER (AP PEALS) IS DATED 1ST OCTOBER 2010 I.E. MUCH AFTER THE DATE 17TH NOVEM BER 2009 AND 7TH NOVEMBER 2009. A WRONG YEAR WAS MENTIONED IN THE E ARLIER SUMMONS DATED 23RD OCTOBER 2009. IT WAS ONLY A TYPOGRAPHIC AL ERROR AND A RESPONSE OR REPLY FROM THE SHAREHOLDER WOULD HAVE B EEN SUFFICIENT. FURTHER IN THE CASE OF 22 PARTIES THE SUMMONS WER E RECEIVED BACK UNDELIVERED/UNSERVED. 23. THE CONTENTION THAT THE REVENUE MUST HAVE EVIDENCE TO SHOW CIRCULATION OF MONEY FROM THE ASSESSEE TO THE THIRD PARTY IS FALLACIOUS AND HAS BEEN REPEATEDLY REJECTED EVEN WHEN SECTION 68 OF THE ACT WAS NOT IN THE STATUTE. IN A. GOVINDARAJULU MUDALIAR V. CIT [1958] 34 ITR 807 (SC) SUPREME COURT OBSERVED THAT IT WAS NOT THE DUTY OF THE REVENUE TO ADDUCE EVIDENCE TO SHOW FROM WHAT SOURCE INCOME WAS DERIV ED AND WHY IT SHOULD BE TREATED AS CONCEALED INCOME. THE ASSESSEE MUST P ROVE SATISFACTORILY THE SOURCE AND NATURE OF CASH RECEIVED DURING THE ACCOU NTING YEAR. SIMILARLY OBSERVATIONS WERE MADE IN CIT V. M. GANAPATHI MUDAL IAR [1964] 53 ITR 623 (SC) INTER ALIA HOLDING THAT IT WAS NOT NECESSARY FOR THE REVENUE TO LOCATE THE EXACT SOURCE. THIS PRINCIPLE WAS REITERATED IN CIT V. DEVI PRASAD VISHWANATH [1969] 72 ITR 194 (SC) WHEREIN THE CONTENTION THAT THE ASSESSING OFFICER SHOULD INDICATE THE SOURCE OF INC OME BEFORE IT WAS TAXABLE WAS DESCRIBED AS AN INCORRECT LEGAL POSITI ON. THUS WHEN THERE IS AN UNEXPLAINED CASH CREDIT IT IS OPEN TO THE ASSES SING OFFICER TO HOLD THAT IT WAS INCOME OF THE ASSESSEE AND NO FURTHER BURDEN LI ES ON HIM TO SHOW THE SOURCE. IN YADU HARI DALMIA V. CIT [1980] 126 ITR 48/4 TAXMAN 525 (DELHI) A DIVISION BENCH OF DELHI HIGH COURT HAS OBSERVED : ITA 800/MUM/2012 & 6314/MUM/2012 73 'IT IS WELL KNOWN THAT THE WHOLE CATENA OF SECTIONS STARTING FROM S. 68 HAVE BEEN INTRODUCED INTO THE TAXING ENACTMENTS STE P BY STEP IN ORDER TO PLUG LOOPHOLES AND IN ORDER TO PLACE CERTA IN SITUATIONS BEYOND DOUBT EVEN THOUGH THERE WERE JUDICIAL DECISI ONS COVERING SOME OF THE ASPECTS. FOR EXAMPLE EVEN LONG PRIOR T O THE INTRODUCTION OF S. 68 IN THE STATUTE BOOK COURTS HAD HELD THAT WHERE ANY AMOUNTS WERE FOUND CREDITED IN THE BOOKS OF THE ASSESSEE IN THE PREVIOUS YEAR AND THE ASSESSEE OFFERED NO EXPLANATION ABOUT THE N ATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED WAS IN THE OPIN ION OF THE ITO NOT SATISFACTORY THE SUMS SO CREDITED COULD BE CHARGED TO INCOME-TAX AS INCOME OF THE ASSESSEE OF A RELEVANT PREVIOUS YEAR. SECTION 68 WAS INSERTED IN THE I.T. ACT 1961 ONLY TO PROVIDE STA TUTORY RECOGNITION TO A PRINCIPLE WHICH HAD BEEN CLEARLY ADUMBRATED IN JU DICIAL DECISIONS.' 24. WE ARE CONSCIOUS OF THE DOCTRINE OF 'SOURCE OF SOU RCE' OR 'ORIGIN OF ORIGIN' AND ALSO POSSIBLE DIFFICULTY WHICH AN ASSES SEE MAY BE FACED WITH WHEN ASKED TO ESTABLISH UNIMPEACHABLE CREDITWORTHIN ESS OF THE SHARE SUBSCRIBERS. BUT THIS ASPECT HAS TO BE DECIDED ON F ACTUAL MATRIX OF EACH CASE AND STRICT OR STRINGENT TEST MAY NOT BE APPLIE D TO ARMS LENGTH ANGEL INVESTORS OR NORMAL PUBLIC ISSUES. DOCTRINE OF SOU RCE OF SOURCE' OR ORIGIN OF ORIGIN' CANNOT BE APPLIED UNIVERSALLY WITHOUT R EFERENCE TO THE FACTUAL MATRIX AND FACTS OF EACH CASE. THE SAID TEST IN CAS E OF NORMAL BUSINESS TRANSACTIONS MAY BE LIGHT AND NOT VIGOROUS. THE SAI D DOCTRINE IS APPLIED WHEN THERE IS EVIDENCE TO SHOW THAT ASSESSEE MAY NO T BE AWARE COULD NOT HAVE KNOWLEDGE OR WAS UNCONCERNED AS TO THE SOU RCE OF MONEY PAID OR BELONGING TO THE THIRD PARTY. THIS MAY BE DUE TO THE NATURE AND CHARACTER OF THE COMMERCIAL/BUSINESS TRANSACTION RE LATIONSHIP BETWEEN THE PARTIES STATUTORY POSTULATES ETC. HOWEVER WHE N THERE IS SURROUNDING EVIDENCE AND MATERIAL MANIFESTING AND REVEALING INV OLVEMENT OF THE ASSESSEE IN THE 'TRANSACTION' AND THAT IT WAS NOT E NTIRELY AN ARM'S LENGTH ITA 800/MUM/2012 & 6314/MUM/2012 74 TRANSACTION RESORT OR RELIANCE TO THE SAID DOCTRIN E MAY BE COUNTER- PRODUCTIVE AND CONTRARY TO EQUITY AND JUSTICE. THE DOCTRINE IS NOT AN ELDRITCH OR A CAMOUFLAGE TO CIRCULATE ILL GOTTEN AN D UNRECORDED MONEY. WITHOUT BEING OBLIVIOUS TO THE CONSTRAINTS OF THE A SSESSEE AN OBJECTIVE AND FAIR APPROACH/DETERMINATION IS REQUIRED. THUS NO ASSESSEE SHOULD BE HARASSED AND HARRIED BUT ANY DISHONEST FAADE AN D SMOKESCREENS WHICH MASQUERADE AS PRETENCE SHOULD BE EXPOSED AND NOT ACCEPTED. 25. IN LOVELY EXPORTS LTD. (SUPRA) A DIVISION BENCH E XAMINED TWO EARLIER DECISIONS OF THIS COURT IN CIT V. STELLER INVESTMEN T LTD. [1991] 192 ITR 287/59 TAXMAN 568 (DELHI) AND CIT V. SOPHIA FINANCE LTD. [1994] 205 ITR 98/[1993] 70 TAXMAN 69 (DELHI) (FB) . THE DECISION IN STELLER INVESTMENT'S CASE (SUPRA) WAS AFFIRMED BY THE SUPRE ME COURT BUT BY OBSERVING THAT THE CONCLUSION WAS ON THE FACTS AND NO INTERFERENCE WAS CALLED FOR. LOVELY EXPORTS LTD. (SUPRA) WAS A CASE OF PUBLIC LIMITED COMPANY WHERE SHARES WERE SUBSCRIBED BY PUBLIC AND IT WAS ACCORDINGLY OBSERVED: '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 WHERE 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 AP PROACH TO THE BURDEN BEING LAID ALMOST ENTIRELY ON AN ASSESSEE WH ICH RECEIVES A GIFT.' 26. THEREAFTER REFERENCE WAS MADE TO FULL BENCH DECISI ON IN THE CASE OF SOPHIA FINANCE LTD.'S (SUPRA) WHEREIN IT HAS BEE N OBSERVED THAT IF THE SHAREHOLDERS EXISTS THEN 'POSSIBLY' NO FURTHER EN QUIRY NEEDS TO BE MADE AND THAT THE FULL BENCH HAD NOT REFLECTED UPON THE QUESTION OF WHETHER ITA 800/MUM/2012 & 6314/MUM/2012 75 THE BURDEN OF PROOF RESTED ENTIRELY ON THE ASSESSEE AND AT WHICH POINT THIS BURDEN JUSTIFIABLY SHIFTED TO THE ASSESSING OF FICER. THE FULL BENCH HAS OBSERVED THAT THEY WERE NOT DECIDING AS TO ON WHOM AND TO WHAT EXTENT WAS THE ONUS TO SHOW THAT THE AMOUNT CREDITED IN TH E BOOKS OF ACCOUNTS WAS SHARE CAPITAL AND WHEN THE ONUS WAS DISCHARGED WAS NOT DECIDED. THE STANDARD OF PROOF MIGHT BE RIGOROUS AND STRINGE NT AND WAS DEPENDENT UPON NATURE OF THE TRANSACTION AND WHERE THERE WAS EVIDENCE THAT THE SOURCE OF INVESTMENT CANNOT BE MANIPULATED IT WAS MATERIAL. SIMILARLY IT WAS OBSERVED THAT ASSESSEE COULD SCAR CELY BE HEARD TO SAY THAT HE DID NOT KNOW THE PARTICULARS OF A DONOR IN CASE OF A GIFT. IT WAS HELD: 'THERE CANNOT BE TWO OPINIONS ON THE ASPECT THAT TH E PERNICIOUS PRACTICE OF CONVERSION OF UNACCOUNTED MONEY THROUGH THE MASQUERADE OR CHANNEL OF INVESTMENT IN THE SHARE CA PITAL OF A COMPANY MUST BE FIRMLY EXCORIATED BY THE REVENUE. E QUALLY WHERE THE PREPONDERANCE OF EVIDENCE INDICATES ABSENCE OF CULPABILITY AND COMPLEXITY OF THE ASSESSEE IT SHOULD NOT BE HARASSE D BY THE REVENUE'S INSISTENCE THAT IT SHOULD PROVE THE NEGA TIVE. IN THE CASE OF A PUBLIC ISSUE THE COMPANY CONCERNED CANNOT BE EXPECTED TO KNOW EVERY DETAIL PERTAINING TO THE IDENTITY AS WEL L AS FINANCIAL WORTH OF EACH OF ITS SUBSCRIBERS. THE COMPANY MUST HOWEVER MAINTAIN AND MAKE AVAILABLE TO THE ASSESSING OFFICE R FOR HIS PERUSAL ALL THE INFORMATION CONTAINED IN THE STATU TORY SHARE APPLICATION DOCUMENTS. IN THE CASE OF PRIVATE PLACE MENT THE LEGAL REGIME WOULD NOT BE THE SAME. A DELICATE BALANCE MU ST BE MAINTAINED WHILE WALKING THE TIGHTROPE OF SECTION 6 8 AND 69 OF THE INCOME TAX ACT. THE BURDEN OF PROOF CAN SELDOM BE D ISCHARGED TO THE HILT BY THE ASSESSEE; IF THE AO HARBOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRIPTION HE IS EMPOWERED NAY DUTY-BOUND ITA 800/MUM/2012 & 6314/MUM/2012 76 TO CARRY OUT THOROUGH INVESTIGATIONS. BUT IF THE AS SESSING OFFICER FAILS TO UNEARTH ANY WRONG OR ILLEGAL DEALINGS HE CANNOT OBDURATELY ADHERE TO HIS SUSPICIONS AND TREAT THE SUBSCRIBED C APITAL AS THE UNDISCLOSED INCOME OF THE COMPANY.... ** ** ** ....ONCE MATERIAL TO PROVE THESE INGREDIENTS ARE PR ODUCED IT IS FOR THE ASSESSING OFFICER TO FIND OUT AS TO WHETHER ON THESE MATERIALS THE ASSESSED HAS SUCCEEDED IN ESTABLISHING THE INGR EDIENTS MENTIONED ABOVE. THE ASSESSING OFFICER `LIFT THE VE IL' AND ENQUIRE INTO THE REAL NATURE OF THE TRANSACTION. CIT V. RUB Y TRADERS AND EXPORTERS LTD. [2003] 263 ITR 300 (CAL.) CIT V. NIVEDAN VANIJYA NIYOJAN LTD. [2003] 263 ITR 623 (CAL.) AND CIT V. KUNDAN INVESTMENT LTD. [2003] 263 ITR 626 (CAL.) ARE THE OTHER THREE. IN THIS ANALYSIS A DISTILLATION OF THE PRECEDENTS YIELDS THE FOLLOWING PROPOSITIONS OF LAW IN THE CONTEXT OF SECTION 68 OF THE IT ACT. THE ASSESSEE HAS TO PRIMA FACIE PROVE (1) THE IDENTITY OF THE CREDITOR/SUBSCRIBER; (2) THE GENUINENESS OF THE TRA NSACTION NAMELY WHETHER IT HAS BEEN TRANSMITTED THROUGH BANKING OR OTHER INDISPUTABLE CHANNELS; (3) THE CREDITWORTHINESS OR FINANCIAL STR ENGTH OF THE CREDITOR/SUBSCRIBER. (4) IF RELEVANT DETAILS OF THE ADDRESS OR PAN IDENTITY OF THE CREDITOR/SUBSCRIBER ARE FURNISHED TO THE DEP ARTMENT ALONG WITH COPIES OF THE SHAREHOLDERS REGISTER SHARE APPLICAT ION FORMS SHARE TRANSFER REGISTER ETC. IT WOULD CONSTITUTE ACCEPTA BLE PROOF OR ACCEPTABLE EXPLANATION BY THE ASSESSED. (5) THE DEPARTMENT WOU LD NOT BE JUSTIFIED IN DRAWING AN ADVERSE INFERENCE ONLY BECAUSE THE CR EDITOR/SUBSCRIBER FAILS OR NEGLECTS TO RESPOND TO ITS NOTICES; (6) TH E ONUS WOULD NOT STAND DISCHARGED IF THE CREDITOR/SUBSCRIBER DENIES OR REP UDIATES THE TRANSACTION SET UP BY THE ASSESSEE NOR SHOULD THE ASSESSING OFF ICER TAKE SUCH REPUDIATION AT FACE VALUE AND CONSTRUE IT WITHOUT MORE AGAINST THE ITA 800/MUM/2012 & 6314/MUM/2012 77 ASSESSEE; AND (7) THE ASSESSING OFFICER IS DUTY-BOU ND TO INVESTIGATE THE CREDITWORTHINESS OF THE CREDITOR/ SUBSCRIBER THE GE NUINENESS OF THE TRANSACTION AND THE VERACITY OF THE REPUDIATION.' 27. THE DECISION IN THE CASE OF LOVELY EXPORTS LTD. (S UPRA) WAS CONSIDERED IN NOVA PROMOTERS AND FINLEASE (P) LTD. (SUPRA) AND IT WAS ELUCIDATED: '38. THE RATIO OF A DECISION IS TO BE UNDERSTOOD AN D APPRECIATED IN THE BACKGROUND OF THE FACTS OF THAT CASE. SO UNDERSTOOD IT WILL BE SEEN THAT WHERE THE COMPLETE PARTICULARS OF THE SHARE AP PLICANTS SUCH AS THEIR NAMES AND ADDRESSES INCOME TAX FILE NUMBERS THEIR CREDITWORTHINESS SHARE APPLICATION FORMS AND SHARE HOLDERS' REGISTER SHARE TRANSFER REGISTER ETC. ARE FURNISHED TO THE A SSESSING OFFICER AND THE ASSESSING OFFICER HAS NOT CONDUCTED ANY ENQUIRY INTO THE SAME OR HAS NO MATERIAL IN HIS POSSESSION TO SHOW THAT THOS E PARTICULARS ARE FALSE AND CANNOT BE ACTED UPON THEN NO ADDITION CA N BE MADE IN THE HANDS OF THE COMPANY UNDER SEC.68 AND THE REMEDY OP EN TO THE REVENUE IS TO GO AFTER THE SHARE APPLICANTS IN ACCO RDANCE WITH LAW. WE ARE AFRAID THAT WE CANNOT APPLY THE RATIO TO A C ASE SUCH AS THE PRESENT ONE WHERE THE ASSESSING OFFICER IS IN POSS ESSION OF MATERIAL THAT DISCREDITS AND IMPEACHES THE PARTICULARS FURNI SHED BY THE ASSESSEE AND ALSO ESTABLISHES THE LINK BETWEEN SELF -CONFESSED 'ACCOMMODATION ENTRY PROVIDERS' WHOSE BUSINESS IT IS TO HELP ASSESSEES BRING INTO THEIR BOOKS OF ACCOUNT THEIR U NACCOUNTED MONIES THROUGH THE MEDIUM OF SHARE SUBSCRIPTION AND THE A SSESSEE. THE RATIO IS INAPPLICABLE TO A CASE AGAIN SUCH AS THE PRESENT ONE WHERE THE INVOLVEMENT OF THE ASSESSEE IN SUCH MODUS OPERA NDI IS CLEARLY INDICATED BY VALID MATERIAL MADE AVAILABLE TO THE A SSESSING OFFICER AS A RESULT OF INVESTIGATIONS CARRIED OUT BY THE RE VENUE AUTHORITIES INTO THE ACTIVITIES OF SUCH 'ENTRY PROVIDERS'. THE EXISTENCE WITH THE ASSESSING OFFICER OF MATERIAL SHOWING THAT THE SHAR E SUBSCRIPTIONS ITA 800/MUM/2012 & 6314/MUM/2012 78 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 RATIO. I N OUR UNDERSTANDING THE RATIO IS ATTRACTED TO A CASE WHERE IT IS A SIMP LE QUESTION OF WHETHER THE ASSESSEE HAS DISCHARGED THE BURDEN PLAC ED UPON HIM UNDER SEC.68 TO PROVE AND ESTABLISH THE IDENTITY AN D CREDITWORTHINESS OF THE SHARE APPLICANT AND THE GENUINENESS OF THE T RANSACTION. IN SUCH A CASE THE ASSESSING OFFICER CANNOT SIT BACK WITH FOLDED HANDS TILL THE ASSESSEE EXHAUSTS ALL THE EVIDENCE OR MATE RIAL IN HIS POSSESSION AND THEN COME FORWARD TO MERELY REJECT T HE SAME WITHOUT CARRYING OUT ANY VERIFICATION OR ENQUIRY INTO THE M ATERIAL PLACED BEFORE HIM. THE CASE BEFORE US DOES NOT FALL UNDER THIS CATEGORY AND IT WOULD BE A TRAVESTY OF TRUTH AND JUSTICE TO EXPR ESS A VIEW TO THE CONTRARY.' 28. IN NOVA PROMOTERS & FINLEASE (SUPRA) IT WAS HELD THAT IN VIEW OF THE LINK BETWEEN THE ENTRY PROVIDERS AND INCRIMINATING EVIDENCE MERE FILING OF PAN NUMBER ACKNOWLEDGEMENT OF INCOME TAX RETURN S OF THE ENTRY PROVIDER BANK ACCOUNT STATEMENTS ETC. WAS NOT SUFF ICIENT TO DISCHARGE THE ONUS. 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 ASSESSEE AND THE A SSESSING OFFICER HAVE TO ADOPT A REASONABLE APPROACH AND WHEN THE INITIAL ONUS ON THE ASSESSEE WOULD STAND DISCHARGED DEPENDS 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 INCOMMUNIC ADO. CALL MONIES DIVIDENDS WARRANTS ETC. HAVE TO BE SENT AND THE RE LATIONSHIP IS/WAS A ITA 800/MUM/2012 & 6314/MUM/2012 79 CONTINUING ONE. IN SUCH CASES THEREFORE THE ASSES SEE CANNOT SIMPLY FURNISH DETAILS AND REMAIN QUIET EVEN WHEN SUMMONS ISSUED TO SHAREHOLDERS UNDER SECTION 131 RETURN UNSERVED AND UNCOMPLIED. THIS APPROACH WOULD BE UNREASONABLE AS A GENERAL PROPOSI TION AS THE ASSESSEE CANNOT PLEAD THAT THEY HAD RECEIVED MONEY BUT COULD DO NOTHING MORE AND IT WAS FOR THE ASSESSING OFFICER T O ENFORCE SHARE HOLDERS ATTENDANCE. SOME CASES MIGHT REQUIRE OR JUSTIFY VIS IT BY THE INSPECTOR TO ASCERTAIN WHETHER THE SHAREHOLDERS/SUBSCRIBERS WERE FUNCTIONING OR AVAILABLE AT THE ADDRESSES BUT IT WOULD BE INCORRE CT TO STATE THAT THE ASSESSING OFFICER SHOULD GET THE ADDRESSES FROM REG ISTRAR OF COMPANIES' WEBSITE OR SEARCH FOR THE ADDRESSES OF SHAREHOLDERS AND COMMUNICATE WITH THEM. SIMILARLY CREDITWORTHINESS WAS NOT PROV ED BY MERE ISSUE OF A CHEQUE OR BY FURNISHING A COPY OF STATEMENT OF BANK ACCOUNT. CIRCUMSTANCES MIGHT REQUIRE THAT THERE SHOULD BE SO ME EVIDENCE OF POSITIVE NATURE TO SHOW THAT THE SAID SUBSCRIBERS H AD MADE A GENUINE INVESTMENT ACTED AS ANGEL INVESTORS AFTER DUE DIL IGENCE OR FOR PERSONAL REASONS. THUS FINDING OR A CONCLUSION MUST BE PRAC TICABLE PRAGMATIC AND MIGHT IN A GIVEN CASE TAKE INTO ACCOUNT THAT TH E ASSESSEE MIGHT FIND IT DIFFICULT TO UNIMPEACHABLY ESTABLISH CREDITWORTH INESS OF THE SHAREHOLDERS. 30. WHAT WE PERCEIVE AND REGARD AS CORRECT POSITION OF LAW IS THAT THE COURT OR TRIBUNAL SHOULD BE CONVINCED ABOUT THE IDE NTITY CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. THE ONUS TO PRO VE THE THREE FACTUM IS ON THE ASSESSEE AS THE FACTS ARE WITHIN THE ASSESSE E'S KNOWLEDGE. MERE PRODUCTION OF INCORPORATION DETAILS PAN NOS. OR TH E FACT THAT THIRD PERSONS OR COMPANY HAD FILED INCOME TAX DETAILS IN CASE OF A PRIVATE LIMITED COMPANY MAY NOT BE SUFFICIENT WHEN SURROUND ING AND ATTENDING FACTS PREDICATE A COVER UP. THESE FACTS INDICATE AN D REFLECT PROPER PAPER WORK OR DOCUMENTATION BUT GENUINENESS CREDITWORTHI NESS IDENTITY ARE ITA 800/MUM/2012 & 6314/MUM/2012 80 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 PERSON S BEHIND THE COMPANIES MAKING THE INVESTMENT IN THEIR SHARES WER E RELATED OR KNOWN TO THEM. IT IS HIGHLY IMPLAUSIBLE THAT AN UNKNOWN P ERSON HAD MADE SUBSTANTIAL INVESTMENT IN A PRIVATE LIMITED COMPANY TO THE TUNE OF RS.63 80 100/- AND RS.75 60 200/- IN TWO CONSECUTIV E ASSESSMENT YEARS 2002-03 AND 2003-04 RESPECTIVELY WITHOUT ADEQ UATELY PROTECTING THE INVESTMENT AND ENSURING APPROPRIATE RETURNS. OT HER THAN THE SHARE APPLICATION FORMS NO OTHER AGREEMENT BETWEEN THE R ESPONDENT AND THIRD COMPANIES HAD BEEN PLACED ON RECORD. THE PERSONS BE HIND THESE COMPANIES WERE NOT PRODUCED BY THE RESPONDENT. ON T HE OTHER HAND RESPONDENT ADOPTED PREVARICATE AND NON- COOPERATION ATTITUDE BEFORE THE ASSESSING OFFICER ONCE THEY CAME TO KNOW ABOUT THE DIRECTED ENQUIRY AND THE INVESTIGATION BEING MADE. EVASIVE AND TRANSIENT APPROACH BEFORE THE ASSESSING OFFICER IS LIMPID AND PERSPICUOUS. IDENTI TY CREDITWORTHINESS OR GENUINENESS OF THE TRANSACTION IS NOT ESTABLISHED B Y 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 O NUS TO PROVE THE GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE CREDITOR STANDS DISCHARGED IN ALL CASES IF PAYMENT IS MADE T HROUGH BANKING CHANNELS. WHETHER OR NOT ONUS IS DISCHARGED DEPENDS UPON FACTS OF EACH CASE. IT DEPENDS ON WHETHER THE TWO PARTIES ARE REL ATED OR KNOWN TO EACH; THE MANNER OR MODE BY WHICH THE PARTIES APPRO ACHED EACH OTHER WHETHER THE TRANSACTION WAS ENTERED INTO THROUGH WR ITTEN DOCUMENTATION ITA 800/MUM/2012 & 6314/MUM/2012 81 TO PROTECT THE INVESTMENT WHETHER THE INVESTOR PRO FESSES AND WAS AN ANGEL INVESTOR THE QUANTUM OF MONEY CREDITWORTHIN ESS OF THE RECIPIENT THE OBJECT AND PURPOSE FOR WHICH PAYMENT/INVESTMENT WAS MADE ETC. THESE FACTS ARE BASICALLY AND PRIMARILY IN KNOWLEDG E OF THE ASSESSEE AND IT IS DIFFICULT FOR REVENUE TO PROVE AND ESTABLISH THE NEGATIVE. CERTIFICATE OF INCORPORATION OF COMPANY PAYMENT BY BANKING CHANNE L ETC. CANNOT IN ALL CASES TANTAMOUNT TO SATISFACTORY DISCHARGE OF ONUS. THE FACTS OF THE PRESENT CASE NOTICED ABOVE SPEAK AND ARE OBVIOUS. W HAT IS UNMISTAKABLY VISIBLE AND APPARENT CANNOT BE SPURRED BY FORMAL B UT UNRELIABLE PALE EVIDENCE IGNORING THE PATENT AND WHAT IS PLAIN AND WRIT LARGE. 32. IN VIEW OF THE AFORESAID DISCUSSION THE SUBSTANTIA L QUESTION OF LAW FRAMED IN THE TWO APPEALS IS ANSWERED IN FAVOUR OF APPELLANT-REVENUE AND AGAINST THE RESPONDENT- ASSESSEE. THE APPEAL IS ACCORDINGLY ALLOWED TO THE EXTENT INDICATED ABOVE. THE APPELLAN T IS ALSO ENTITLED TO COSTS WHICH IS ASSESSED AT RS.20 000/-. IN THE CASE OF N R PORTFOLIO PRIVATE LIMITED(SUPRA) THE HONBLE DELHI HIGH COURT HELD THAT THE COURT IS CONSCIOUS OF A VIEW TAKEN IN SOME OF T HE PREVIOUS DECISIONS THAT THE TAX-PAYER CANNOT BE FAULTED IF T HE SHARE APPLICANTS DO NOT RESPOND TO SUMMONS AND THAT THE REVENUE AUTHORITIES HAVE THE WHEREWITHAL TO COMPEL ANYONE TO ATTEND LEGAL PROCEEDINGS. HOWEV ER THE COURT HELD THAT IS MERELY ONE ASPECT. AN TAX-PAYERS DUTY TO ESTABLISH THAT THE AMOUNTS W HICH THE ASSESSING OFFICER PROPOSE TO ADD BACK UNDER SEC TION 68 ARE PROPERLY SOURCED DOES NOT CEASE BY MERELY FURNISHING THE NAM ES ADDRESSES PAN PARTICULARS AND ENTRIES IN REGISTRAR OF COMPANIES W EBSITE. ONE MUST REMEMBER THAT IN ALL SUCH CASES THE COMPANY IS A PR IVATE ONE AND SHARE APPLICANTS ARE KNOWN TO IT SINCE THEY ARE ISSUED O N PRIVATE PLACEMENT OR EVEN ON REQUEST BASIS. IF THE TAX-PAYER HAS ACCESS TO TH E SHARE APPLICANT'S PAN PARTICULARS OR BANK ACCOUNT STATEMENT SURELY ITS R ELATIONSHIP IS CLOSURE THAN ARM'S LENGTH. ITS REQUEST TO SUCH CONCERNS TO PARTI CIPATE IN INCOME-TAX ITA 800/MUM/2012 & 6314/MUM/2012 82 PROCEEDINGS WOULD VIEWED FROM A PRAGMATIC PERSPEC TIVE BE QUITE STRONG BECAUSE THE NEXT POSSIBLE STEP FOR THE TAX ADMINIST RATORS COULD WELL BE REOPENING OF SUCH INVESTOR'S PROCEEDINGS. THAT APART THE CONCEPT OF 'SHIFTING ONUS' DOES NOT MEAN THAT ONCE CERTAIN FACTS ARE PRO VIDED THE TAX-PAYERS DUTIES ARE OVER. IF ON VERIFICATION OR DURING PROCE EDINGS THE ASSESSING OFFICER CANNOT CONTACT THE SHARE APPLICANTS OR THE INFORMAT ION BECOMES UNVERIFIABLE OR THERE ARE FURTHER DOUBTS IN THE PURSUIT OF SUCH DETAILS THE ONUS SHIFTS BACK TO THE TAX-PAYER. AT THAT STAGE IF IT FALTERS THE CONSEQUENCE MAY WELL BE AN ADDITION UNDER SECTION 68. THUS THE HONBLE DEL HI HIGH COURT HELD THAT HAVING REGARD TO THE TOTALITY OF FACTS AND CIRCUMST ANCES PARTICULARLY THE REMAND REPORT THE APPELLATE AUTHORITIES WERE WRONG IN DELETING THE IMPUGNED ADDITION MADE BY THE ASSESSING OFFICER. THE DECISION OF HONBLE DELHI HIGH COURT SUPPORTS THE PROPOSITION OF REVENUE. HENCE BASED ON OUR DETAILED DISCUSSIONS AND REASONI NG AS SET-OUT ABOVE WE ARE OF CONSIDERED VIEW THAT THE ADDITIONS MADE BY T HE AO AND SUSTAINED BY LEARNED CIT(A) ARE TO BE AFFIRMED AS WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(A) WHICH WE WITH DUE RESPECT AFFIRM WITH RESPECT OF RAISING OF LOAN OF RS 1.0 CRORE BY THE ASSESSEE FROM MOXDIAM W HICH IS HELD TO BE INCOME OF THE ASSESSEE AS AN UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT . CONSEQUENTIALLY INTEREST OF RS.93 000/- PROVIDED BY THE ASSESSEE ON THE SAID LOAN ALSO CANNOT BE HELD TO BE GENUINE INTEREST AND IS ORDERED TO BE DISALLOWED AS DEDUCTION CLAIMED BY THE ASSESSEE . T HIS DISPOSES OF ALL THE GROUNDS RAISED BY THE ASSESSEE IN THE MEMO OF APPEA L FILED WITH THE TRIBUNAL EXCEPT GROUND NO. 3 WHICH WE HAVE ALREADY DISPOSED OFF IN THIS ORDER IN PRECEDING PARAS. WE ORDER ACCORDINGLY. 11. IN THE RESULT APPEAL FILED BY THE ASSESSEE IN ITA NO. 800/MUM/2012 FOR THE ASSESSMENT YEAR 2007-08 IS DISMISSED AS IND ICATED ABOVE. ITA 800/MUM/2012 & 6314/MUM/2012 83 12. OUR ABOVE DECISION IN ITA NO. 800/MUM/2012 FOR THE ASSESSMENT YEAR 2007-08 SHALL APPLY MUTATIS MUTANDIS TO THE DECISIO N IN ITA NO. 6314/MUM/2012 FOR THE ASSESSMENT YEAR 2008-09 AS TH E FACTS ARE IDENTICAL. WE ORDER ACCORDINGLY. 13. IN THE RESULT BOTH THE APPEALS FILED BY THE AS SESSEE IN ITA NO.800/MUM/2012 FOR ASSESSMENT YEAR 2007-08 AND ITA NO. 6314/MUM/2012 FOR THE ASSESSMENT YEAR 2008-09 ARE D ISMISSED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH OCTOBER 2016. # $% &' 27-10-2016 ( ) SD/- SD/- (C.N. PRASAD) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 27-10-2016 [ .9../ R.K. R.K. R.K. R.K. EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED MUMBAI 4. : / CIT- CONCERNED MUMBAI 5. =>( 99?@ ?@ $ / DR ITAT MUMBAI E BENCH 6. (BC / GUARD FILE. / BY ORDER = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) $ / ITAT MUMBAI