M/S. SHREE VIGNESHWARE HOUSE AND DISTRIBUTORS (P) LTD., Bhopal v. THE ACIT 1(2), Bhopal

ITSSA 170/IND/2013 | 2005-2006
Pronouncement Date: 17-11-2014 | Result: Allowed

Appeal Details

RSA Number 17022716 RSA 2013
Assessee PAN AAACB8511C
Bench Indore
Appeal Number ITSSA 170/IND/2013
Duration Of Justice 1 year(s) 4 month(s) 6 day(s)
Appellant M/S. SHREE VIGNESHWARE HOUSE AND DISTRIBUTORS (P) LTD., Bhopal
Respondent THE ACIT 1(2), Bhopal
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 17-11-2014
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 17-11-2014
Assessment Year 2005-2006
Appeal Filed On 11-07-2013
Judgment Text
1 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI P.K. BANSAL HONBLE ACCOUNTANT MEMBER AND SHRI MUKUL SHRAWAT HONBLE JUDICIAL MEMBER IT(SS) NO. 168 TO 170/IND/2013 : (A.YS : 2003 - 04 TO 2005 - 06) M/S. SHREE VIGNESH WAREHOUSE AND DISTRIBUTORS PVT. LTD. 18 - H INDUSTRIAL AREA J.K. ROAD GOVINDPURA BHOPAL (APPELLANT) PAN : AAACB8511C VS ASST . COMMISSIONER OF INCOME TAX - 1(2) BHOPAL ( RESPONDENT ) IT(SS) NO. 199 TO 205/IND/2013 : (A.YS : 2002 - 03 TO 2008 - 09) ASST . COMMISSIONER OF INCOME TAX - 1(2) BHOPAL ( APPELLANT ) VS M/S. SHREE VIGNESH WAREHOUSE AND DISTRIBUTORS PVT. LTD. 18 - H INDUSTRIAL AREA J.K. ROAD GOVINDPURA BHOPAL (RESPONDENT) PAN : AAACB8511C CO NOS. 91 TO 95/IND/2013 (OUT OF IT(SS) NO. 201 TO 205 /IND/2013) : (A.YS : 2004 - 05 TO 2008 - 09) M/S. SHREE VIGNESH WAREHOUSE AND DISTRIBUTORS PVT. LTD. 18 - H INDUSTRIAL AREA J.K. ROAD GOVINDPURA BHOPAL (CROSS OBJECTOR) PAN : AAACB8511C VS ASST . COMMISSIONER OF INCOME TAX - 1(2) BHOPAL ( RESPONDENT ) ASSESSEE BY : B.K. NEMA& K.P. DEWANI ADV. REVENUE BY : LAL CHAND CIT DR DATE OF HEARING : 17 /09/2014 DATE OF PRONOUNCEMENT : 17/11 /2014 O R D E R PER BENCH 2 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) ALL THESE APPEALS OF THE REVENUE AND CROSS OBJECTIONS FILED BY THE AS S ESSEE ARISE OUT OF COMMON ORDER OF LD CIT(A) BILASPUR CAMP AT BHOPAL DATED 18.3.2013 FOR THE ASSESSMENT YEARS 2002 - 03 TO 2008 - 09. HOWEVER THE ASSESSEE HAS FILED CROSS APPEALS ONLY IN RESPECT OF ASSESSMENT YEAR 2004 - 05 TO 200 8 - 0 9 RESPECTIVELY. F OR THE SAKE OF CONVENIENCE ALL THESE APPEALS ARE DISPOSED OF BY THIS COMMON ORDER. 2. THE ONLY GROUND IN THE APPEALS FILED BY THE REVENUE RELATING TO ASSESSMENT YEARS 2002 - 03 AND 2003 - 04 RELATE TO THE DELETION OF THE ADDITION MADE ON ACCOUNT OF SHARE AP PLICATION MONEY AMOUNTING TO RS. 3 90 000/ - AND 15 00 000/ - RESPECTIVELY. WHILE THE ONLY GROUND TAKEN IN ASSESSMENT YEAR 2004 - 05 TO 2008 - 09 RELATE S TO DISALLOWANCE OF SALARY PAID TO GAURAV SHARMA AND SMT. SHASHI SHARMA. 3. FIRST WE WILL DEAL WITH THE APPEAL FOR THE ASSESSMENT YEAR 2002 - 03 WHICH RELATE TO THE ADDITION IN RESPECT OF SHARE APPLICATION MONEY INDIVIDUALLY CONTRIBUTED BY SHRI ASHOK GUPTA GAYATRI GAD RAMESHWAR SHARMA VIVA DHUBE AND S MT S ASHI SHARMA TOTALLING TO RS. 3 9 0 000/ - . THE ASSESS ING OFFICER SINCE NOTED THAT SHRI GAURAV SHARMA WAS A STUDENT THEREFORE HE TREATED THE SAME AS UNDISCLOSED INCOME OF SHRI YOGIRAJ SHARMA. WHEN THE MATTER WENT BEFORE THE CIT(A). THE ASSESSEE CONTENDED THAT THE SHARE APPLICATION MONEY HAS BEEN RECEIVED THR OUGH PROPER BANKING CHANNEL. THE CONFIRMATION OF ALL THE SHARE HOLDERS WAS FILED BEFORE A.O. OUT OF A SUM OF RS. 3 90 000/ - A SUM OF RS. 1 50 000/ - RELATE TO SHRI GAURAV SHARMA AND SMT SASHI SHARMA. THE INVESTMENT MADE BY THESE TWO PERSONS ARE SHOWN IN T HEIR INDIVIDUAL RETURNS. OTHER PARTIES ARE ALSO RESIDING AT BHOPAL AND ARE ASSESSED TO TAX. THE CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER : - ON CAREFUL CONSIDERATION OF THE MARTIAL AVAILABLE ON RECORD I FIND THAT THERE IS NO MATERIAL INCRIMINA TING DOCUMENTS FOUND AND SEIZED LIKE IN THE CASES OF SHARE APPLICATION MONEY RECEIVED FROM THE AFORESAID COMPANIES TO SUGGEST THAT THE SHARE APPLICATION MONEY INVESTED BY CERTAIN INDIVIDUAL ARE NOT GENUINE. ON THE OTHER HAND THE AMOUNT OF INVESTMENT BY EA CH INDIVIDUAL IS NOT SUBSTANTIAL. EVEN THE INVESTMENT OF RS.1 50 000/ - BY SHRI GAURAV SHARMA AND SMT S H ASHI SHARMA COULD NOT HAVE BEEN SOURCED OUT FROM THE INTEREST INCOME ON TUITION INCOME. THE CONFIRMATION LETTERS AND BANK ACCOUNTS OF THE INVESTORS ARE ALREADY ON RECORD. MOREOVER THERE IS NO SUBSTANTIVE ASSESSMENT OF THE SUM IN THE HAND OF DR. YOGIRAJ SHARMA. IN VIEW OF THE ABOVE I FIND THAT THE ADDITION ITSELF IS NOT SUSTAINABLE AND HENCE IT IS DELETED. 4. AFTER HEARING THE RIVAL SUBMISSIONS WE N OTED THAT THE CIT(A) HAS GIVEN CATEGORICAL FINDING AFTER APPRECIATING THE EVIDENCES ON RECORD THAT THERE IS NO EVIDENCE THAT 3 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) THE SHARE APPLICATION MONEY RECEIVED BY THE COMPANY FROM CERTAIN INDIVIDUALS IS NOT GENUINE. THE LD. A.R. EVEN THOUGH VEHEMENT LY RELIED ON THE ORDER OF THE ASSESSING OFFICER BUT COULD NOT ADDUCE OR PRODUCE BEFORE US ANY EVIDENCE WHICH MAY WARRANT OUR INTERFERENCE IN THE ORDER OF THE CIT(A). WE ACCORDINGLY DISMISS THE GROUND TAKEN BY THE REVENUE. 5. IN THE ASSESSMENT YEAR 2004 - 05 TO 2008 - 09 THE ONLY GROUND TAKEN BY THE REVENUE RELATE TO DISALLOWANCE OF THE SALARY PAID TO THE DIRECTOR SHRI GAURAV SHARMA AND SMT SASHI SHARMA. AFTER HEARING THE RIVAL SUBMISSIONS WE NOTED THAT THE SALARY PAID BY THE COM PANY TO THE DIRECTOR EVEN IN THE ASSESSMENT YEAR 2002 - 03 AND 2003 - 04 AND NO SUCH DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER IN THE SUBSEQUENT YEAR HAS BEEN DELETED BY THE CIT(A) OBSERVING AS UNDER : - SMT S H ASHI SHARMA AND SHRI GAURAV SHARMA ARE THE DIRECTORS OF THE APPELLANT COMPANY. IN COURSE OF SEARCH ACTION SMT S H ASHI SHARMA HAD CATEGORICALLY ADMITTED THAT SHE IS A HOUSEWIFE AND SPENDS MOST OF THE TIME IN TAKING CARE OF AILING DAUGHTER. ADMITTEDLY SHE IS UNAWARE OF THE AFFAIRS OF THE COMPANY. LIKEWISE SHRI GAURAV SHARMA WAS PURSUING STUDIES UPTO NOVEMBER 2006. ADMITTEDLY HE WAS ALSO UNAWARE OF ACTIVITIES OF THE APPELLANT COMPANY. IT IS REGISTERED AND OUGHT TO HAVE MAINTAINED THE FORMALITIES FOR COMPLIANCE OF COMPANIES ACT 1956 REGARDING PAYMENT OF SALARY TO THE DIRECTOR. BUT NOTHING IN THIS REGARD OR ANY PROOF OF SERVICES OF THE DIRECTORS RENDERED TO THE COMPANY WAS FOUND IN COURSE OF SEARCH OR PRODUCED IN COURSE OF ASSESSMENT PROCEEDINGS. THERE IS NO EVIDENCE OF ANY RESOLUTION PASSED I N THE ANNUAL GENERAL MEETING SPECIFYING THE ALLOTMENT OF WORKS OF THE DIRECTORS FOR WHICH SALARY WAS TO BE PAID. THERE IS NO CONTROVERSY THAT A DIRECTOR OF A COMPANY ENJOYS A DUEL CAPACITY. HE MIGHT BE A DIRECTOR AS WELL AS AN EMPLOYEE BUT THAT HE IS AN EMPLOYEE MUST NOT BE MERELY ON PAPER RATHER IT SHOULD BE PROVED AND ESTABLISHED IN RECORD AS A FACT. IN THE CASE OF APPELLANT COMPANY NO ATTEMPT WAS MADE TO PROVE THIS FACT ON RECORD. IN WHAT MANNER THE DIRECTORS REALLY RENDERED EXTRA SERVICES TO THE APPELLANT COMPANY AS WAS EXPECTED AND REQUIRED FOR IT IS NOT KNOWN. THERE IS NO EVIDENCE OF EMPLOYER EMPLOYEE RELATIONSHIP. HOWEVER THE AO IS NOT CONSISTENT IN ASSESSING SALARY OF THE DIRECTORS SUBSTANTIVELY IN THE HANDS OF DR. YOGIRAJ SHARMA I.E. THERE IS NO SUBSTANTIVE ADDITION IN THE HANDS OF DR. YOGIRAJ SHARMA. IT WILL BE NOT PROPER TO UPHOLD THE DISALLOWANCE OF SALARY APPEARING IN THE BOOKS OF ACCOUNT OF THE APPELLANT COMPANY WHEN THERE IS NO SUBSTANTIVE ADDITION IN THE HANDS OF DR. YOGIRAJ SHARMA AND THE DIRECTORS HAVE DISCLOSED THEIR SALARY INCOME IN THEIR RETURNS. IN VIEW OF THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE THE GROUND OF APPEAL IS ALLOWED. 6. THE LD. D.R EVEN THOUGH RELIED ON THE ORDER OF THE ASSESSING OFFICER BUT WE COULD N OT FIND ANY SUBSTANTIVE ADDITION BEING MADE IN THE HANDS OF DR. YOGIRAJ SHARMA. THE 4 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER MERELY OBSERVING THAT SHRI GAURAV SHARMA AND SMT SHASHI SHARMA WERE NOT AWARE OF ABOUT THE AFFAIR OF THE COMPANY. BOTH SMT S ASHI SHARMA AND SHRI GAURAV SHARMA HAVE FILED RETURN PRIOR TO THE SEARCH UPTO THE ASSESSMENT YEAR 2007 - 08 AND THE SALARY INCOME HAS BEEN ACCEPTED. EVEN NO INCRIMINATING MATERIAL WAS BROUGHT TO OUR KNOWLEDGE TO JUSTIFY THE DISALLOWANCE. WE THEREFORE DO NOT FIND ANY LEGALITY OR INFIRMITY IN THE ORDER OF THE CIT(A) AND CONFIRM THE SAME DELETING THE DISALLOWANCE OF THE SALARY IN EACH OF THE ASSESSMENT YEARS. THUS THE APPEAL FOR THE ASSESSMENT YEAR 2004 - 05 TO 2008 - 09 STANDS DISMISSED. SO FAR THE APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2003 - 04 IS CONCERNED. AFTER HEARING THE RIVAL SUBMISSIONS WE NOTED THAT CIT(A) HAS NOT DELETED THE ADDITION OF RS.15 00 000/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INVESTMENT IN SHARE APPLICATION MONEY. THIS GRO UND RAISED IS MISCONCEIVED. WE THEREFORE DISMISS THE GROUND AS WELL AS APPEAL FOR THE ASSESSMENT YEAR 2003 - 04 ALSO. IN THE RESULT THE APPEAL FOR THE ASSESSMENT YEARS 2002 - 03 TO 2008 - 09 FILED BY THE REVENUE STANDS DISMISSED. 7 . COMING TO THE CROSS OBJECTIONS FILED BY THE ASSESSEE IN EACH OF THE ASSESSMENT YEARS LD A.R. WAS FAIR ENOUGH TO CONCEDE THAT THE CROSS OBJECTIONS FILED ARE SUPPORTIVE TO THE ORDER OF LD CIT(A) IN RESPECT OF GROUND OF APPEAL TAKEN BY THE REVENUE. SINCE WE HAVE ALREADY DISMIS SED THE APPEALS FILED BY THE REVENUE IN ALL HE ASSESSMENT YEARS THEREFORE CROSS OBJECTIONS FILED BY THE ASSESSEE IN OUR OPINION HAVE BECOME INFRUCTUOUS. WE ACCORDINGLY DISMISS THE CROSS OBJECTIONS FILED BY THE ASSESSEE IN ALL THE ASSESSMENT YEARS AS INFRUCTUOUS. 8 . IN THE RESULT APPEALS FILED BY THE REVENUE AND CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED. 9 . NOW WE TAKE UP THE APPEALS FILED BY THE ASSESSEE FOR ASSESSMENT YEARS 200 3 - 0 4 TO 200 5 - 0 6 . 1 0 . IN ALL THE ASSESSMENT YEARS THE ASSESSEE HAS TAKEN FOLLOWING COMMON GROUNDS OF APPEAL EXCEPT CHANGE IN FIGURE IN GROUND NO.4.. 1 1 . BOTH PARTIES AGREED THAT THESE APPEALS BE DECIDED ON THE BASIS OF FACTS RELATING TO ASSESSMENT YEAR 2003 - 04. 5 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) 1 2 . GROUNDS OF APPEAL TAKEN IN ASSESSMENT YEAR 2003 - 04 ARE AS UNDER: 1. THE NOTICE ISSUED U/S 153C OF IT ACT 1961 IS ILLEGAL INVALID AND BAD IN LAW. THUS CONSEQUENT ASSESSMENT FRAMED THERE UPON IS LIABLE TO BE CANCELLED. 2. THE LEARNED CIT (APPEALS) ERRED IN HOLDING THAT ASSESSING OFFICER HAS VA LIDLY ASSUMED JURISDICTION U/S 1 53C OF IT ACT 1961. 3. THE LEARNED CIT (APPEALS) ERRED IN HOLDING THAT THE SHARE CAPITAL CONTRIBUTION OF THE CORPORATE SHARE HOLDERS IS LIABLE TO BE ASSESSED AS UNEXPLAINED INCOME AT THE HANDS OF ASSESSEE COMPANY. 4 . THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SHARE CAPITAL CONTRIBUTION RECEIVED DURING THE PREVIOUS YEAR AT RS 15 00 000/ - IS UNJUSTIFIED UNWARRANTED AND EXCESSIVE. 5. THE LEARNED AUTHORITIES OUGHT TO HAVE ACCEPTED SHARE CAPITAL CONTRIBU TION RECEIVED DURING THE YEAR AND NO ADDITION FOR THE SAME OUGHT TO HAVE BEEN MADE FOR DETERMINING ASSESSABLE INCOME AT THE HANDS OF ASSESSEE. 6. THE ASSESSEE DENIES LIABILITY TO BE ASSESSED TO INTEREST U/S 234A 234B AND 2340 OF THE LT. ACT 1961. WITHOUT PREJUDICE THE LEVY OF INTEREST U/S 234A 234B AND 234C IS UNJUSTIFIED UNWARRANTED AND EXCESSIVE. 1 3 . IN GROUND NO.4 FOR ASSESSMENT YEAR 2004 - 05 RS.10 00 000/ - IN A.Y. 2005 - 06 RS. 1 50 00 000/ - BE READ IN PLACE OF RS. 15 00 000/ - 1 4 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY INCORPORATED ON 11.12.2002. REGULAR BOOKS OF ACCOUNT AS REQUIRED UNDER THE DIFFERENT STATUTE ARE MAINTAINED AUDITED AND ANNUAL RETURNS AS REQUIRED UNDER THE COMPANIES ACT WERE REGULARLY FILED ALONGWITH AUDITED BALANCE SHEET PROFIT AND LOSS ACCOUNT AND AUDIT REPORT FOR ALL THESE ASSESSMENT YEARS UNDER SECTION 139(1) OF THE ACT AS DETAILED BELOW: ASST. YEAR DATE OF FILING OF RETURN TAXABLE INCOME 2003 - 04 18 . 08 .2003 ( - ) RS . 3 4 862 / - 2004 - 05 20.09.2004 RS. 63 814 / - 2005 - 06 RS.1 71 374/ - 1 5 . THE DETAILS OF THE SHARE CAPITAL ISSUED AS WELL AS SHARE PREMIUM WERE AVAILABLE IN THE AUDITED BALANCE SHEET. SMT. SHASHI SHARMA AND SHRI GAURAV SHARMA ARE THE DIRECTORS OF 6 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) THE ASSESSEE COMPANY. SEARCH ACTION UNDER SECTION 132 WAS CONDUCTED IN THE RESIDENTIAL AND OFFICE PREMISES OF DR. YOGIRAJ SHARMA SHRI ASHOK NANDA & OTHERS. DURING THE COURSE OF SEARCH ACTION CERTAIN LO OSE PAPERS/DOCUMENTS BELONGING TO THE ASSESSEE WERE FO UND AND SEIZED. ON THE BASIS OF SOME OF THE SEIZED PAPERS THE ASSESSING OFFICER RECORDED THE REASONS AND ISSUED NOTICE UNDER SECTION 153C R.W.S 153A OF THE ACT ON 10.7.2008. IN RESPONSE THERETO ASSESSEE FILED RETURNS SHOWING THE SAME INCOME AS HAS BEEN SHOWN IN THE ORIGINAL RETURNS. AFTER ISSUING NOTICE AND QUESTIONNAIRE THE AO COMPLETED THE ASSESSMENTS FOR DIFFERENT ASSESSMENT YEARS MAKING CERTAIN ADDITIONS AND ASSESSING THE INCOME OF THE COMPANY AS WELL AS SHARE APPLICATION MONEY IN THE HANDS OF DR. YOGIRAJ SHARMA SUBSTANTIVELY AND PROTECTIVELY IN THE HANDS OF THE ASSESSEE ON THE PLEA THAT MR GAURAV SHARMA WAS 23 YEARS OF AGE AND WAS A STUDENT AND WAS STUDYING FROM THE YEAR MAY 2005 TO TILL NOVEMBER 2006. THEREFORE HE SHOULD NOT HAVE LOOKED AFTER T HE AFFAIRS OF THE COMPANY. SIMILARLY ST. SHASHI SHARMA WIFE OF DR. YOGIRAJ SHARMA DEVOTED MOST OF HER TIME IN TAKING CARE OF HER AILING DAUGHTER AND IN HOUSEHOLD WORKS. THEREFORE BOTH SON AS WELL AS WIFE OF DR. YOGIRAJ SHARMA SHOULD NOT HAVE BECOME THE DIRECTORS OF THESE COMPANIES. THE ASSESSING OFFICER THEREFORE TOOK THE VIEW THAT WHATEVER INVESTMENT BY WAY OF SHARE CAPITAL WAS BROUGHT IN THESE COMPANIES THE MONEY BELONG TO DR. YOGIRAJ SHARMA AND ASSESSED THE CAPITAL CONTRIBUTION RECEIVED BY THESE COM PANIES SUBSTANTIALLY IN THE HANDS OF DR. YOGI RAJ SHARMA AND PROTECTIVELY IN THE HANDS OF ASSESSEE COMPANY. WHEN THE MATTER WENT IN APPEAL BEFORE CIT(A) CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE DELETING THE ADDITION SUBSTANTIALLY IN THE HANDS OF DR. YOGI RAJ SHARMA. 1 6 . THE ISSUE INVOLVED IN GROUND NOS.1 AND 2 RELATE TO THE VALIDITY OF PROCEEDINGS INITIATED UNDER SECTION 153C OF THE ACT TAKEN IN EACH OF THE ASSESSMENT YEARS. 17 . LD A.R. IN THIS REGARD VEHEMENTLY CONTENDED THAT NOTICE UNDER SEC TION 153C HAS BEEN ISSUED IN EACH OF THE ASSESSMENT YEARS IN PURSUANCE TO ACTION U/S.132(1) TAKEN IN THE PREMISES OF DR. YOGIRAJ SHARMA SHRI ASHOK NANDA & OTHERS ON 7.9.2007. THE AO HAS DISCUSSED THE LOOSE PAPERS/DOCUMENTS BELONGING TO THE ASSESSEE FOUND DURING THE SEARCH ACTION FROM THE PREMISES AT PAGES 1 - 2 OF THE ASSESSMENT ORDER. ON THE BASIS OF THESE DOCUMENTS JURISDICTION TO ISSUE NOTICE U/S.153C HAS BEEN ASSUMED IN THE CASE OF THE ASSESSEE AND NOTICE UNDER SECTION 153C HAS BEEN ISSUED TO THE ASSE SSEE ON 10.4.2008 FOR EACH OF THE ASSESSMENT YEARS. THE DOCUMENTS SEIZED WOULD INDICATE THAT NO DOCUMENT IS IN THE NATURE OF INCRIMINATING MATERIAL TO SHOW THAT THERE IS UNDISCLOSED INCOME ASSESSABLE AT 7 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) THE HANDS OF THE ASSESSEE. THE DOCUMENTS SEIZED ARE RECORDED DOCUMENTS VERIFIABLE WITH REFERENCE TO RETURNS SUBMITTED BY THE ASSESSEE IN THE COURSE OF REGULAR ASSESSMENT PROCEEDINGS. IN THE ABSENCE OF DOCUMENTS BEING OF INCRIMINATING NATURE NO VALID ASSUMPTION OF JURISDICTION UNDER SECTION 153C OF THE I NCOME TAX ACT 1961 CAN BE ASSUMED BY THE ASSESSING OFFICER. IN THIS REGARD RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS: 1) ITAT ORDER IN ITA NO.4514 & 45L5/DEL/2012 IN THE CASE OF THERAPEUTIC INDIA (P) LTD. VIDE ORDER DATED 31/5/2013. 2) ITAT ORDER IN ITA NO.5460 TO 5465/DEL/2012 IN THE CASE OF V.K. FISCAL SERVICES PVT. LTD. VIDE ORDER DATED NOVEMBER 2013. 3) ITAT ORDER IN ITA NO.1344/DEL/2012 IN THE CASE OF M/S. DSL PROPERTIES (P) LTD. VIDE ORDER DATED 22/3/2013. 4) ITAT ORDER IN ITA NO.917 TO 922/PN/2010 IN THE CASE OF BHARATI VIDYAPEETH VIDE ORDER DATED 28/4/2011. 5) ITAT ORDER IN ITA NO.114 TO 117!PN/2010 IN THE CASE OF SINHGAD TECHNICAL EDUCATION SOCIETY VIDE ORDER DATED 28/1/2011. (THE COPIES OF DECISIO NS ARE PLACED BEFORE US IN THE PAPER BOOK VOL - I) 18 . IT WAS CONTENDED THAT NO ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER ON THE BASIS OF SEIZED DOCUMENTS REFERRED TO ASSESSMENT ORDER ON THE BASIS OF WHICH NOTICE UNDER SECTION 153C HAS BEEN ISSUED IN THE CASE OF ASSESSEE. THEREFORE THE DOCUMENTS FOUND AND SEIZED DURING THE COURSE OF SEARCH WERE NOT INCRIMINATING DOCUMENTS. THEREFORE THE ASSESSMENT FRAMED ON THE BASIS OF INVALID ASSUMPTION OF JURISDICTION IS LIABLE TO BE CANCELLED. IT WAS FURTHER S UBMITTED THAT ON PERUSAL OF PROVISIONS OF SECTION 132(1) OF THE I.T.ACT 1961 WHICH LAYS DOWN THAT SEIZURE OF BOOKS OF ACCOUNTS DOCUMENTS MONEY BULLION JEWELLERY OR VALUABLE ARTICLES OR THINGS SHOULD BE SUCH WHICH IS IN THE NATURE OF UNDISCLOSED INCOME /ASSETS. IN THIS REGARD RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS: I) SRIRAM JAISWAL VS. UNION OF INDIA & ORS.176 ITR 261 (ALL.) II) OMPARKASH JINDAL & ANR. VS.UNION OF INDIA & ORS 104 ITR 389 (P&H) 19 . THE DOCUMENTS WHICH FALL FOR CONSIDERAT ION U/S 132(1)(III) AND LIABLE TO BE SEIZED ALONE CAN BE BASED FOR ASSUMING VALID JURISDICTION U/S 153C OF IT. ACT 1961. THESE DOCUMENTS IN THE CASE OF ASSESSEE COMPANY DID NOT INDICATE ANY UNDISCLOSED ASSETS/INCOME. THE SHARE CAPITAL ISSUED BY THE ASSE SSEE AS WELL AS SHARE PREMIUM RECEIVED BY THE ASSESSEE WERE DULY RECORDED IN THE REGULAR BOOKS OF ACCOUNT AND HAVE SHOWN IN THE AUDITED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT ENCLOSED A L ONGWITH INCOME TAX RETURNS 8 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) FILED BY THE ASSESSEE UNDER SECTION 139( 1) OF THE ACT. NO ADDITION HAS BEEN MADE ON THE BASIS OF DOCUMENTS FOUND FROM 71 - H SHAKTI NAGAR BHOPAL AND OFFICE OF HIPL AT A - 5 KASTURBA NAGAR BHOPAL. AS REGARDS TO DOCUMENTS FOUND FROM A - 70 SHAKTI NAGAR BHOPAL THESE DOCUMENTS PERTAINS TO SHARE APPL ICATION MONEY RECEIVED BY THE ASSESSEE COMPANY FROM OPTIMA TEXTILES INDUSTRIES LTD DURING THE YEAR ENDING 31/03/2006. THE AFORESAID TRANSACTION IS AVAILABLE IN REGULAR BOOKS OF ACCOUNT AND WAS NOT IN THE NATURE OF ANY INCRIMINATING MATERIAL TO ASSESS THE S AME AS UNDISCLOSED INCOME IN THE HANDS OF ASSESSEE. THE DOCUMENTS FOUND ARE NOT RELATED TO ASSESSMENT YEARS 2003 - 04 2004 - 05 AND 2005 - 06. THUS THERE WAS NO SCOPE OF ISSUE OF NOTICE U/S 153C OF INCOME TAX ACT 1961 IN RESPECT OF ASSESSMENT YEARS 2003 - 04 TO 2005 - 06. THE ASSESSMENT SO FRAMED DESERVES TO BE CANCELLED. FOR THIS PROPOSITION OF LAW RELIANCE WAS ON THE FOLLOWING DECISIONS: 1. BHARATI VIDAPEETH (ITA NO.917 TO 922/PN/2010) 2. SINHGAD TECHNICAL EDUCATION SOCIETY (ITA NO.114 TO 117/PN/2010) 2 0 . ON THE OTHER HAND LD DEPARTMENTAL REPRESENTATIVE RELIED ON ORDER OF LD CIT(A) AND VEHEMENTLY CONTENDED THAT AS PER PROVISIONS OF SECTION 153C(1) OF THE ACT THAT IF THE DOCUMENTS SEIZED OR REQUISITIONED BELONGS OR BELONG TO A PERSON OTHER THAN THE PERS ON REFERRED TO IN SECTION 153A THEN THE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED SHALL BE HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON IN WHOSE CASE SEARCH HAS BEEN CONDUCTED AND THAT ASSESSING OF FICER SHALL PROCEED AGAINST EACH SUCH OTHER PERSON AND ISSUE SUCH OTHER PERSON NOTICE AND ASSESS OR REASSESS INCOME OF SUCH OTHER PERSON IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A. THEREFORE HE VEHEMENTLY CONTENDED THAT SECTION 153(1) GIVE JURISDI CTION TO THE ASSESSING OFFICER TO ISSUE NOTICE U/S.153C OVER THE ASSESSEE. LD D.R. SUBMITTED THAT THIS FACT IS NOT DENIED BY THE ASSESSEE THAT DOCUMENTS RELATING TO THE ASSESSEE WERE FOUND AND SEIZED. ONCE THE DOCUMENTS BELONGING TO THE ASSESSEE ARE FOUN D AND SEIZED AT THE PLACES IN WHOSE CASE THE SEARCH HAD TAKEN PLACE THE AO GOT THE VALID JURISDICTION. SECTION DOES NOT TALK OF INCRIMINATING DOCUMENTS BEING FOUND DURING THE COURSE OF SEARCH. IN RESPECT OF DECISIONS RELIED BY LD A.R LD D.R. CONTENDED THAT THESE DECISIONS ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 2 1 . WE HAVE HEARD RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AS WELL AS CASE LAWS AS HAS BEEN RELIED UPON BEFORE US. 9 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) 2 2 . WE NOTED THAT DURING THE COURSE OF SEARCH AND SEIZURE ACTION CARRIED OUT UNDER SECTION 132 OF THE ACT AT THE RESIDENTIAL AND OFFICE PREMISES OF DR. YOGIRAJ SHARMA SHRI ASHOKA NANDA AND OTHERS ON 7.9.2007 FOLLOWING LOOSE PAPERS/DOCUMENTS BELONGING TO THE ASSESSEE COMPANY WERE FOU ND AND SEIZED: 1. A - 70 SHAKTI NAGAR BHOPAL RESIDENCE OF DR. YOGIRAJ SHARMA LPS 1/8 PAGE 47 IS THE CH NO.335492 & 335493 DT.7.2.2006 FAVOURING GAJANNAN DISTRIBUTORS & DEVELOPERS PVT LTD OF THE UTI BANK INDORE A.C NO.043010200021997 OF OPTIMATE TEXT ILES IND. THERE IS ALSO THE CH. NOS.384935 384933 384934 389432 & 384931 OF TOTAL AMOUNT RS.25 00 000/ - FAVOURING GAJANNAN DISTRIBUTORS & DEVELOPERS PVT LTD. OF THE UTI BANK INDORE ACCOUNT OF SPECTRUM CHEMICALS PVT. LTD. 2. 71 - H SHAKTI NAGAR BHOPAL R ESIDENCE OF SHRI ASHOK NANDA LPS - III/2 3/NB - 88 NEW BAHAR DUPLEX SAHARA STATES - GAJANAN DISTRIBUTORS & DEVELOPERS PVT. LTD. LPS - III/17 VEHICLE FINANCE BY GAJANAN DISTRIBUTORS & DEVELOPERS PVT. LTD. MP04HB9267 AGREEMENT NO. 10668252. LPS - III/1 3/NB NEW BAHAR DUPLEX SAHARA STATES - GAJANAN DISTRIBUTORS & DEVELOPERS PVT. LTD. RS. 15.30 LACS. 3. OFFICE OF HIPL AT A 5 KASTURBA NAGAR BHOPAL LPS 1/3 CANARA BANK & PNB A/C FD - M13 10474 DATED 25.05.2007. LPS 1 / 15 CONTAINING PURCHASE OF IMMO VABLE PROPERTIES. LPS 1/5 PAGE 34 CONTAINING PURCHASE OF IMMOVABLE PROPERTIES. 2 3 . THEREFORE AFTER BEING SATISFIED AND RECORDING THE SATISFACTION THE AO IN THE CASE OF DR. YOGIRAJ SHAMA REFERRED TO THESE DOCUMENTS TO THE ASSESSING OFFICER OF THE ASSESSEE AND NOTICE U/S.153C R.W. S 153A WAS ISSUED TO THE ASSESSEE ON 10.4.2008. WE HAV E GONE THROUGH THE PROVISIONS OF SECTION 153A. THE PROVISIONS OF SECTION 153A 153B & 153C WERE INSERTED BY THE FINANCE ACT 2003 W.R.E.F 1.6.2003. ORIGINALLY SECTION 153A OF THE ACT DID NOT HAVE ANY SUB - SECTION. HOWEVER SUB - SECTION (2) TO SECTION 153A WAS INSERTED BY THE FINANCE ACT 2008 W.E.F FROM 1.6.2003. SECTION 153A PROVIDES FOR AN ASSESSMENT IN CASE OF A PERSON IN WHOSE CASE SEARCH IS INITIATED U/S.132 OF THE ACT OR BOOKS OF ACCOUNT OTHER 10 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) DOCUMENTS OR ANY ASSETS ARE REQUISITIONED UNDER SECTION 132A AFTER THE 31ST DAY OF MAY 2003. SECTION 153B PROVIDES FOR TIME LIMIT FOR COMPLETION OF ASSESSMENT UNDER SECTION 153A AND SECTION 153C OF THE ACT . SECTION 153C PROVIDES FOR ASSESSMENT OF INCOME OF PERSON OR OTHER THAN PERSON IN RESPECT OF WHOM WAR RANT OR AUTHORISATION IS ISSUED U/S.132 OF THE ACT. 2 4 . SECTION 153A AND SECTION 153C ARE EXTRACTED BELOW: 153A. ASSESSMENT IN CASE OF SEARCH OR REQUISITION. - (1) NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 139 SECTION 147 SECTION 148 SECTION 149 SECTION 151 AND SECTION 153 IN THE CASE OF A PERSON WHERE A SEARCH IS INITIATED UNDER SECTION 132 OR BOOKS OF ACCOUNT OTHER DOCUMENTS OR ANY ASSETS ARE REQU ISITIONED UNDER SECTION 132A AFTER THE 31ST DAY OF MAY 2003 THE ASSESSING OFFICER SHALL (A) ISSUE NOTICE TO SUCH PERSON REQUIRING HIM TO FURNISH WITHIN SUCH PERIOD AS MAY BE SPECIFIED IN THE NOTICE THE RETURN OF INCOME IN RESPECT OF EACH ASSESSMENT YE AR FALLING WITHIN SIX ASSESSMENT YEARS REFERRED TO IN CLAUSE (B) IN THE PRESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MANNER AND SETTING FORTH SUCH OTHER PARTICULARS AS MAY BE PRESCRIBED AND THE PROVISIONS OF THIS ACT SHALL SO FAR AS MAY BE APPLY ACCOR DINGLY AS IF SUCH RETURN WERE A RETURN REQUIRED TO BE FURNISHED UNDER SECTION 139; (B) ASSESS OR REASSESS THE TOTAL INCOME OF SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUISITION IS MADE : PROVIDED THAT THE ASSESSING OFFICER SHALL ASSESS OR REASSESS THE TOTAL INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SUCH SIX ASSESSMENT YEARS: PROVIDED FURTHER THAT ASSESSMENT OR REASSESSMENT IF ANY RELATING TO ANY ASSES SMENT YEAR FALLING WITHIN THE PERIOD OF SIX ASSESSMENT YEARS REFERRED TO IN THIS SUB - SECTION PENDING ON THE DATE OF INITIATION OF THE SEARCH UNDER SECTION 132 OR MAKING OF REQUISITION UNDER SECTION 132A AS THE CASE MAY BE SHALL ABATE. (2) IF ANY PROCEEDI NG INITIATED OR ANY ORDER OF ASSESSMENT OR REASSESSMENT MADE UNDER SUB - SECTION (1) HAS BEEN ANNULLED IN APPEAL OR ANY OTHER LEGAL PROCEEDING THEN NOTWITHSTANDING ANYTHING CONTAINED IN SUB - SECTION (1) OR SECTION 153 THE ASSESSMENT OR REASSESSMENT RELATIN G TO ANY ASSESSMENT YEAR WHICH HAS ABATED UNDER THE SECOND PROVISO TO SUB - SECTION (1) SHALL STAND REVIVED WITH EFFECT FROM THE DATE OF RECEIPT OF THE ORDER OF SUCH ANNULMENT BY THE COMMISSIONER: PROVIDED THAT SUCH REVIVAL SHALL CEASE TO HAVE EFFECT IF SU CH ORDER OF ANNULMENT IS SET ASIDE. EXPLANATION. FOR THE REMOVAL OF DOUBTS IT IS HEREBY DECLARED THAT (I) SAVE AS OTHERWISE PROVIDED IN THIS SECTION SECTION 153B AND SECTION 153C ALL 11 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) OTHER PROVISIONS OF THIS ACT SHALL APPLY TO THE ASSESSMENT MADE UND ER THIS SECTION; (II) IN AN ASSESSMENT OR REASSESSMENT MADE IN RESPECT OF AN ASSESSMENT YEAR UNDER THIS SECTION THE TAX SHALL BE CHARGEABLE AT THE RATE OR RATES AS APPLICABLE TO SUCH ASSESSMENT YEAR. XX XX XX XX 153C.ASSESSMENT OF INCOME OF ANY OTHER PERSON. - (1) NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 139 SECTION 147 SECTION 148 SECTION 149 SECTION 151 A ND SECTION 153 WHERE THE ASSESSING OFFICER IS SATISFIED THAT ANY MONEY BULLION JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS SEIZED OR REQUISITIONED BELONGS OR BELONG TO A PERSON OTHER THAN THE PERSON REFERRED TO IN SECTI ON 153A THEN THE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED SHALL BE HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON AND THAT ASSESSING OFFICER SHALL PROCEED AGAINST EACH SUCH OTHER PERSON AND ISSUE SUC H OTHER PERSON NOTICE AND ASSESS OR REASSESS INCOME OF SUCH OTHER PERSON IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A : PROVIDED THAT IN CASE OF SUCH OTHER PERSON THE REFERENCE TO THE DATE OF INITIATION OF THE SEARCH UNDER SECTION 132 OR MAKING OF RE QUISITION UNDER SECTION 132A IN THE SECOND PROVISO TO SUB - SECTION (1) OF SECTION 153A SHALL BE CONSTRUED AS REFERENCE TO THE DATE OF RECEIVING THE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED BY THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON. (2) WHERE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED AS REFERRED TO IN SUB - SECTION (1) HAS OR HAVE BEEN RECEIVED BY THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON AFTER THE DUE DATE FOR FURNISH ING THE RETURN OF INCOME FOR THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SEARCH IS CONDUCTED UNDER SECTION 132 OR REQUISITION IS MADE UNDER SECTION 132A AND IN RESPECT OF SUCH ASSESSMENT YEAR (A) NO RETURN OF INCOME HAS BEEN FURNISHED BY SU CH OTHER PERSON AND NO NOTICE UNDER SUB - SECTION (1) OF SECTION 142 HAS BEEN ISSUED TO HIM OR (B) A RETURN OF INCOME HAS BEEN FURNISHED BY SUCH OTHER PERSON BUT NO NOTICE UNDER SUB - SECTION (2) OF SECTION 143 HAS BEEN SERVED AND LIMITATION OF SERVING THE NO TICE UNDER SUB - SECTION (2) OF SECTION 143 HAS EXPIRED OR (C) ASSESSMENT OR REASSESSMENT IF ANY HAS BEEN MADE BEFORE THE DATE OF RECEIVING THE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED BY THE ASSESSING OFFICER HAVING JURISDICTION O VER SUCH OTHER PERSON SUCH ASSESSING OFFICER SHALL ISSUE THE NOTICE AND ASSESS OR REASSESS TOTAL INCOME OF SUCH OTHER PERSON OF SUCH ASSESSMENT YEAR IN THE MANNER PROVIDED IN SECTION 153A. 12 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) 2 5 . IN OUR OPINION THE ASSESSING OFFICER ASSUMED JURISDICTION FOR FRAMING THE ASSESSMENT U/S.153C OF THE ACT WHERE THE ASSESSING OFFICER IS SATISFIED THAT ANY MONEY BULLION JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS SEIZED OR REQUISITIONED BELONGS OR BELONG TO A PERSON OTHER THAN THE PERSON IN WHOSE CASE SEARCH IS CONDUCTED U/S.132 OF THE ACT. THEREFORE FOR INITIATING ACTION U/S.153C OF THE ACT AND FRAMING ASSESSMENT U/S.153A OF THE ACT THE PRE - REQUISITE IS THAT THE SATI SFACTION OF THE ASSESSING OFFICER THAT THE MONEY DOCUMENTS AND PAPERS ETC BELONGS TO A PERSON OTHER THAN THE PERSON IN WHOSE CASE SEARCH IS CONDUCTED U/S.132 OF THE ACT. THE AO NOTED IN THE ASSESSMENT ORDER AT PAGES 1 & 2 AS REPRODUCED BY US HEREINABOV E AND HAS CATEGORICALLY LAID DOWN THAT DURING THE COURSE OF SEARCH THESE LOOSE PAPERS/DOCUMENTS BELONGING TO THE ASSESSEE WERE FOUND AND SEIZED. IT IS NOT DENIED BY LD A.R. EVEN THOUGH HE HAS VEHEMENTLY CONTENDED THAT THESE DOCUMENTS ARE NOT INCRIMINAT ING DOCUMENTS THAT THESE DOCUMENTS OR PAPERS DOES NOT BELONG TO THE ASSESSEE. LD A.R. CONTENDED THAT THE TRANSACTION RELATING TO CHEQUES AS HAS BEEN FOUND AND SEIZED ARE ALREADY RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE COMPANY. SIMILARLY THE TR ANSACTION UNDER THE AGREEMENT FOR VEHICLE FINANCE ETC. ARE DULY RECORDED IN THE REGULAR BOOKS OF ACCOUNT BUT IT CANNOT BE SAID THAT THESE TRANSACTION DID NOT BELONG TO THE ASSESSEE. 2 6 . IT IS APPARENT FROM THE LANGUAGE OF SECTION THAT THE SECTION DOES NO T REQUIRE THAT THE DOCUMENTS BELONGING TO THE ASSESSEE MUST BE INCRIMINATING DOCUMENTS. SECTION 153C GIVES THE JURISDICTION TO THE ASSESSING OFFICER ONCE THE DOCUMENTS BELONGING TO THE ASSESSEE ARE FOUND IN THE CASE OF THE ASSESSEE IN WHOSE CASE THE SEARC H HAD TAKEN PLACE. 27 . WE HAVE GONE THROUGH THE VARIOUS DECISIONS AS HAS BEEN RELIED UPON BY LD A.R. IN THIS REGARD WE NOTED THAT IN THE CASE OF ACIT VS. THERAPEUTIC INDIA (P) LTD. (ITA NO.4514 & 4515/DEL/2012) DELHI H BENCH VIDE ITS ORDER DATED 31. 5.2013 HAS INTER ALIA HELD AS UNDER: THUS THERE IS NOTHING INCRIMINATING IN THESE DOCUMENTS WHICH CAN LEAD TO FORMING OF THE SATISFACTION ON PART OF THE AO TO INITIATE PROCEEDINGS U/S 153C OF THE ACT. IN THE SPIRIT OF ENACTMENT OF SECTION 153C I T WOULD BE IMPLICIT AND INHERENT REQUIREMENT THAT THERE MUST BE EXISTENCE OF PRIMA FACIE UNRECORDED UNACCOUNTED TRANSACTION RECORDED IN THE DOCUMENTS BELONGING TO THE ASSESSEE BEFORE THE SAID PROVISION CAN BE INVOKED IN CASE OF A THIRD PARTY WHO HAS NO T BEEN SUBJECTED TO SEARCH U/S 132 OF THE IT ACT. ANY OTHER INTERPRETATION OF SECTION 153C WOULD RESULT IN UNINTENDED CONSEQUENCES IN CASE OF THIRD PARTIES TO THE SEARCH IN ANY CASE THE AUDITED ACCOUNTS BALANCE SHEET & P & L ACCOUNT/ ACKNOWLEDGMENT OF RETURNS LIST OF DIRECTORS CANNOT BE SUCH AS ENVISAGED U/S 153C OF THE IT ACT UNLESS THESE ARE PRIMA FACIE INDICATIVE OF 13 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) UNACCOUNTED/UNRECORDED TRANSACTIONS. IN VIEW THEREOF IT IS HELD THAT SINCE THERE IS NO VALID SATISFACTION U/S 153C IN THIS CASE THEREF ORE THE ASSESSMENT PROCEEDINGS ITSELF ARE LIABLE TO BE QUASHED AND GROUND NOS 3 & 4 ARE ACCORDINGLY ALLOWED IN FAVOUR OF THE APPELLANT. 28 . THIS DECISION IN OUR OPINION WILL NOT HELP THE ASSESSEE AS IN THAT CASE THE COPY AUDITED ACCOUNTS BALANCE SHEET AND PROFIT AND LOSS ACCOUNT/ ACKNOWLEDGEMENT OF RETURNS AND LIST OF DIRECTORS OF THE ASSESSEE COMPANY WERE FOUND DURING THE COURSE OF SEARC H CARRIED OUT AT GOPAL ZARDA GROUP ON 15.1.2009. SINCE THESE DOCUMENTS ARE PUBLIC DOCUMENTS AND ARE AVAILABLE AT PUBLIC DOMAIN THEREFORE THE TRIBUNAL HAS TAKEN THE VIEW THAT ON THE BASIS OF THESE DOCUMENTS EVEN THOUGH THEY BELONG TO THE ASSESSEE THERE CANNOT BE ANY PRIMA FACIE UNACCOUNTED AND UNRECORDED TRANSACTION. THE DOCUMENTS AS IS APPARENT FROM THE ASSESSMENT FOUND IN THE CASE OF THE ASSESSEE ARE NOT AUDITED BALANCE SHEET PROFIT AND LOSS ACCOUNT ACKNOWLEDGEMENT RETURNS OR LIST OF DIRECTORS BUT THE DOCUMENTS FOUND RELATE TO FINANCIAL TRANSACTION. THIS DECISION GOT SUPERSEDED BY THE DECISION OF HONBLE HIGH COURT OF DELHI IN THE CASE OF SSP AVIATION LTD. V. DY. CIT (2012) 20 TAXMANN.COM 214 (DELHI). 29 . IN THE CASE OF V.K.FISCAL SERVICES PVT LT D. VS DCIT (ITA NOS.5460 TO 5465/DEL/2012) ORDER DATED NOVEMBER 2013 THE DELHI TRIBUNAL H BENCH TOOK THE VIEW AT PARA 13 THAT SINCE THERE IS NO INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH AND SEIZURE ACTION THE AO SHOULD HAVE DROPPED THE PROCEEDINGS INITIATED UNDER SECTION 153C OF THE ACT. IN THIS CASE THE TRIBUNAL HAS NOTED THAT NO BOOKS OF ACCOUNT BELONGING TO THE ASSESEE WERE FOUND AND SEIZED IN THE PREMISES OF THE OTHER PERSONS. WHAT WAS FOUND WAS IN THE HARD DISK WAS ONLY A CONFIRM ATION OF ACCOUNT THAT AN ATTACHED ANNEXURES. THESE DOCUMENTS WERE HELD BY THE TRIBUNAL NOT TO BE BOOKS OF ACCOUNT OR DOCUMENTS BELONGING TO THE ASSESSEE. IN VIEW OF THIS FACT THE TRIBUNAL HAS TAKEN THE VIEW THAT THE AO SHOULD HAVE DROPPED THE PROCEEDING S INITIATED UNDER SECTION 153C OF THE ACT. THE TRIBUNAL DID NOT TOOK THE VIEW THAT THE PROCEEDINGS INITIATED U/S.153C WAS WITHOUT JURISDICTION. THUS THIS DECISION WILL NOT ALSO ASSIST THE ASSESSEE. 3 0 . WE HAVE GONE THROUGH THE DECISION OF ITAT DELHI B BENCH IN THE CASE OF M/S. DSL PROPERTIES (P LTD VS DCIT (SUPRA) WHEREIN THE TRIBUNAL AT PARA 17 HELD AS UNDER: AT THE TIME OF HEARING BEFORE US THE LEARNED COUNSEL FOR THE ASSESEE HAS VEHEMENTLY CONTENDED THAT THE PHOTOCOPY OF THE AUDITED PROFIT & LOSS ACCOUNT AND BALANCE SHEET WAS BELONGING TO THE SHAREHOLDER/DIRECTOR FROM WHOM THE SAME WAS FOUND AND NOT TO THE ASSESSEE. WE AGREE WITH THIS CONTENTION OF THE LEARNED 14 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) COUNSEL. WHEN A COMPANY SUPPLIES PHOTOCOPY OF ITS PROFIT & LOSS ACCOUNT AND B ALANCE SHEET TO ITS SHAREHOLDERS/DIRECTORS SUCH PHOTOCOPY OF THE PROFIT & LOSS ACCOUNT AND BALANCE SHEET BELONG TO SUCH SHAREHOLDER/DIRECTOR AND NOT TO THE ASSESSE COMPANY. IF THE ARGUMENT OF THE REVENUE IS ACCEPTED THEN IF DURING THE COURSE OF SEARC H OF ANY PERSON THE PHOTOCOPY OF THE PROFIT AND LOSS ACCOUNT/BALANCE SHEET OF ANY LISTED COMPANY SAY RELIANCE INDUSTRIES TATA MOTORS OR BAJAJ AUTO IS FOUND THEN AS PER THE INTERPRETATION OF SECTION 153C BY THE DEPARTMENT THE ASSESSING OFFICER WOUL D BE ENTITLED TO TAKE ACTION UNDER SECTION 153C IN THE CASE OF SUCH LISTED COMPANY. THAT INTERPRETATION WOULD LEAD TO ABSURD RESULTS. THEREFORE WE HOLD THAT THE UNDERLYING CONDITION FOR INVOKING THE JURISDICTION UNDER SECTION 153C IS NOT SATISFIED IN THE CASE OF THE ASSESSEE. 3 1 . IN THIS CASE WE NOTED THAT DURING THE COURSE OF SEARCH AT CHAURASIA GROUP OF CASES PHOTOCOPY OF THE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET OF THE ASSESSEE WERE FOUND AND SEIZED. ASSESSEE CONTENDED THAT PHOTOCOPY OF THE BALANCE SHEET WAS GIVEN BY THE COMPANY TO ITS DIRECTORS OR SHAREHOLDERS. UNDER THESE CIRCUMSTANCES THE TRIBUNAL TOOK THE VIEW THAT SINCE THE PHOTOCOPY OF PROFIT AND LOSS ACCOUNT AND BALANCE SHEET ARE GIVEN AS REQUIRED UNDER THE COMPANIES ACT BY THE ASSE SSEE COMPANY TO ITS SHAREHOLDERS/DIRECTORS THEREFORE THESE DOCUMENTS DO NOT BELONG TO THE ASSESSEE COMPANY BUT BELONG TO THE SHAREHOLDERS OR DIRECTORS. ON THESE FACTS THE TRIBUNAL TOOK THE VIEW THAT THE CONDITIONS STIPULATED UNDER SECTION 153C ARE NOT SATISFIED. THIS IS NOT FACT IN THE CASE OF THE ASSESSEE THAT DOCUMENTS FOUND DO NOT BELONG TO THE ASSESSEE. THUS THIS DECISION WILL ALSO NOT HELP THE ASSESSEE. 3 2 . WE HAVE ALSO GONE THROUGH THE DECISION OF ITAT PUNE BENCH IN THE CASE OF BHARATI VIDYAPEE TH (SUPRA). WE NOTED THAT IN PARA 23 THE TRIBUNAL HAS CATEGORICALLY HELD THAT FOR ASSESSMENT YEAR 2005 - 06 THE SEIZURE OF ONLY AN INWARD REGISTER FOR APPLICATIONS RECEIVED UNDER MANAGEMENT QUOTA FOR ADMISSION IN MDS COURSE AND THERE ARE NO FINANCIAL TRAN SACTIONS OF ANY KIND AND THEREFORE THE TRIBUNAL TOOK THE VIEW THAT NOTICE U/S.153C OF THE ACT IS INVALID. WHILE HOLDING SO THE TRIBUNAL HAS RELIED ON THE DECISION OF ITAT KOLKATTA BENCH IN THE CASE OF LMJ INTERNATIONAL LTD 119 TTJ (KOL) 214 IN WHICH IT HAS BEEN HELD WHERE NOTHING INCRIMINATING IS FOUND IN THE COURSE OF SEARCH RELATING TO ANY ASSESSMENT YEARS THE ASSESSMENTS FOR SUCH YEARS CANNOT BE DISTRIBUTED; ITEMS OF REGULAR ASSESSMENT CANNOT BE ADDED BACK IN THE PROCEEDINGS UNDER SECTION 153C WH EN NO INCRIMINATING DOCUMENTS WERE FOUND IN RESPECT OF THE DISALLOWED AMOUNTS IN THE SEARCH PROCEEDINGS. WE NOTED THAT ON THE ISSUE WHETHER ANY ADDITION CAN BE MADE IN THE ASSESSMENT MADE U/S.153A WHEN NO INCRIMINATING DOCUMENTS IS FOUND DURING THE CO URSE OF SEARCH A SPECIAL 15 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) BENCH WAS CONSTITUTED IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD VS. DCIT (2012) 137 ITD 287 (SB)(MUM) ON THE FOLLOWING QUESTION: WHETHER ON THE FACTS AND IN LAW THE SCOPE OF ASSESSMENT U/S 153A ENCOMPASSES ADDITIONS N OT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH? BEFORE THE SPECIAL BENCH LD SR. COUNSEL RELIED ON THE DECISION OF LMG INTERNATIONAL LTD (SUPRA) AS IS APPARENT FROM PARA 16 OF THAT ORDER. WE NOTED THAT IN THE SAID JUDGMENT IN PARA 52 OF ITS ORDER THE TRIBUNAL HAS HELD THAT SECTION 153A COMES INTO OPE RATION IF A SEARCH OR REQUISITION IS INITIATED AFTER 31.5.2003. ON THE SATISFACTION OF THIS CONDITION THE AO IS UNDER OBLIGATION TO ISSUE NOTICE TO THE PERSONS REQUIRING HIM TO FURNISH THE RETURN OF INCOME OF SIX YEARS IMMEDIATELY PRECEEDING THE YEAR OF SEARCH. THIS FINDING IMPLIED THAT THE PROCEEDINGS U/S.153A IS NOT TO BE RESTRICTED TO THE YEARS FOR WHICH INCRIMINATING MATERIAL IS FOUND DURING THE SEARCH. ULTIMATELY IN RESPECT OF QUESTION REFERRED TO THE SPECIAL BENCH THE SPECIAL BENCH IN PARA 58 OF ITS ORDER HELD AS UNDER: 8. THUS QUESTION NO.1 BEFORE US IS ANSWERED AS UNDER : A) IN ASSESSMENTS THAT ARE ABATED THE AO RETAINS THE ORIGINAL JURISDICTION AS WELL AS JURISDICTION CONFERRED ON HIM U/S 153A FOR WHICH ASSESSMENTS SHALL BE MADE F OR EACH OF T HE SIX ASSESSMENT YEARS SEPARATELY. B) IN OTHER CASES IN ADDITION TO THE INCOME THAT HAS ALREADY BEEN ASSESSED THE ASSESSMENT U/S 153A WILL BE MADE ON THE BASIS OF INCRIMINATING MATERIAL WHICH IN THE CONT EXT OF RELEVANT PROVISIONS M EANS (I) BOOKS OF ACCOUNT OTHER DOCUMENTS FOUND IN T HE COURSE OF SEARCH BUT NOT PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT AND; ( II) UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH. 3 3 . IN VIEW OF THE DECISION OF SPECIAL B ENCH IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD(SUPRA) NO DOUBT THE ADDITION IN THE CASE OF THE ASSESSEE CAN BE MADE BY THE ASSESSING OFFICER ONLY ON THE BASIS OF INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH BUT THE AO GOT JURISDICTION FOR INITIATING PROCEEDINGS U/S.153C R.W. SECTION 153A AGAINST THE ASSESSEE IN VIEW OF DOCUMENTS ETC BELONGING TO THE ASSESSEE ARE FOUND IN THE CASE OF THE PERSON IN WHOSE CASE SEARCH HAD TAKEN PLACE. THUS THIS DECISION WILL ALSO NOT HELP THE ASSESSEE. 3 4 . WE HAVE ALSO GONE THROUGH THE DECISION OF ITAT PUNE IN THE CASE OF SINGHAD TECHNICAL EDUCATION SOCIETY (SUPRA) IN WHICH THE TRIBUNAL HAS RELIED ON THE DECISION IN THE CASE OF LMG INTERNATIONAL LTD (SUPRA) AND TOOK THE VIEW THAT THE JURISDICTION U/S.153C CAN 16 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) BE BASED ONLY ON THE BASIS OF INCRIMINATING DOCUMENTS. WE HAVE ALREADY MENTIONED THAT IN THIS DECISION IS CONTRARY TO THE DECISION OF SPECIAL BENCH BUT THIS DECISION HAS BEEN RENDERED BY THE TRIBUNAL PRIOR TO THE DECISION OF THE SPECIAL BENCH. IN VIEW OF THE DECISION OF SPECIAL BENCH THIS DECISION WILL NOT HELP TO THE ASSESSEE. THIS DECISION WILL ASSIST THE ASSESSEE ONLY TO THE EXTENT THAT WHILE FRAMING THE ASSESSMENT THE AO CAN MAKE ADDITION IN THE ASSESSMENT WHICH HAS ALREADY BEEN COMPLETED ONLY I F INCRIMINATING DOCUMENTS ARE FOUND. THE DECISION OF SPECIAL BENCH IS BINDING ON US. 3 5 . WE NOTED THAT THE ISSUE IS COVERED BY THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF SSP AVIATION LTD VS DCIT (2012) 252 CTR (DEL) 291. PARA 15 OF THIS JUDGMENT READS THAT THE SATISFACTION THAT IS REQUIRED TO BE REACHED BY THE ASSESSING OFFICER HAVING JURISDICTION OVER THE SEARCHED PERSON IS THAT THE VALUABLE ARTICLE OR BOOKS OF ACCOUNT OR DOCUMENTS SEIZED DURING THE SEARCH BELONG TO A PERSON OTHER THAN THE SEARCHED PERSON. THE LAST LINE STATES THAT THERE IS NO REQUIREMENT IN SECTION 153C(1) TH AT THE ASSESSING OFFICER SHOULD ALSO BE SATISFIED THAT SUCH VALUABLE ARTICLES OR BOOKS OF ACCOUNT OR DOCUMENTS BELONGING TO THE OTHER PERSON MUST BE SHOWN TO SHOW TO CONCLUSIVELY REFLECT OR DISCLOSE ANY UNDISCLOSED INCOME. THE FACTS OF THIS CASE ARE THAT THERE HAD BEEN A SURVEY IN P GROUP OF COMPANIES. IN THE COURSE OF SEARCH CERTAIN DOCUMENTS WERE FOUND SHOWING THAT THE ASSESSEE ACQUIRED CERTAIN DEVELOPMENT RIGHTS FROM P GROUP OF COMPANIES. A SATISFACTION WAS RECORDED BY THE ASSESSING OFFICER IN THE CAS E OF THE ASSESSEE U/S 153C. THEREAFTER THE PROCEEDINGS WERE INITIATED AGAINST THE ASSESSEE U/S 153A AND THE ASSESSEE WAS DIRECTED TO FILE RETURNS FOR THE SIX ASSESSMENT YEARS. ASSESSMENTS WERE COMPLETED U/S 143(3) READ WITH SECTION 153C. AS THE APPEALS WE RE PENDING BEFORE THE CIT(A) THE ASSESSEE FILED WRIT PETITION BEFORE THE HONBLE HIGH COURT CONTENDING THAT THE AO HAD ILLEGALLY ASSUMED JURISDICTION U/S 153C READ WITH SECTION 153A AND THAT THERE WAS NO UNDISCLOSED INCOME TO BE ASSESSED IN THE ASSESSEES HANDS. DISMISSING THE PETITION THE HONBLE HIGH COURT HELD THAT THE SATISFACTION THAT IS REQUIRED TO BE REACHED BY THE AO HAVING JURISDICTION OF THE PERSON SEARCHED IS THAT THE VALUABLE ARTICLES OR BOOKS OF ACCOUNT ETC. SEIZED DURING THE SEARCH BELONG TO A PERSON OTHER THAN THE PERSON SEARCHED AND THERE WAS NO REQUIREMENT IN SECTION 153C(1) THAT THE AO SHOULD ALSO BE SATISFIED THAT SUCH VALUABLE ARTICLES OR BOOKS OF ACCOUNT ETC. BELONGING TO THE OTHER PERSON MUST CONCLUSIVELY REFLECT OR DISCLOSE ANY UNDISCLOSED INCOME. 17 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) 3 6 . NO CONTRARY DECISION OF ANY OTHER HONBLE HIGH COURT WAS BROUGHT TO OUR KNOWLEDGE. WE THEREFORE CONFIRM THE ORDER OF LD CIT(A) DISMISSING THE GROUND RELATING TO THE JURISDICTION. GROUND NOS.1 & 2 IN ALL THE ASSESSMENT YEAR S STAND DISMISSED. 37 . GROUND NOS.3 TO 5 RELATE TO THE ADDITION MADE IN RESPECT OF SHARE CAPITAL CONTRIBUTION RECEIVED BY THE ASSESSEE DURING EACH OF THE ASSESSMENT YEARS. 38 . THE BRIEF FACTS RELATING TO THESE GROUNDS FOR ASSESSMENT YEARS 2003 - 04 TO 2006 - 07 ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY HAVING TWO DIRECTORS SMT SHASHI SHARMA WIFE OF DR. YOGIRAJ SHARMA AND GAURAV SHARMA SON OF DR. YOGIRAJ SHARMA. THE ASSESSING OFFICER TOOK THE VIEW THAT NO SUBSTANTIAL BUSINESS WAS CARRIED ON BY THE A SSESSEE COMPANY AND AS PER THE ENQUIRIES IN RESPECT OF INTRODUCTION OF SHARE CAPITAL IN THESE COMPANIES DURING THE AFORESAID ASSESSMENT YEAR. IT WAS NOTED THAT THESE COMPANIES HAVE RECEIVED HUGE SHARE CAPITAL FROM INDORE BASED AND KOLKATA BASED COMPANIES. THE AO ON THE BASIS OF DETAILED ENQUIRIES MADE THE ADDITIONS ON ACCOUNT OF UNDISCLOSED SHARE CAPITAL IN ASSESSEE COMPANY PROTECTIVELY AND SUBSTANTIVELY IN THE HANDS OF DR. YOGIRAJ SHARMA. WHEN THE MATTER WENT ON APPEAL BEFORE LD CIT(A) LD CIT(A) DIRE CTED THE ASSESSING OFFICER TO ASSESS SHARE CAPITAL IN THE HANDS OF THE ASSESSEE AS THE INCOME OF THE RESPECTIVE YEAR AND DELETED SUBSTANTIVE ADDITION IN THE HANDS OF DR. YOGIRAJ SHARMA INTER ALIA OBSERVING AS UNDER: I HAVE CAREFULLY CONSIDERED THE SUBM ISSION OF THE APPELLANT AND FINDINGS OF AO IN ASSESSMENT ORDER. (I) THE FINDINGS OF THE AO ARE BASED ON VARIOUS INCRIMINATING DOCUMENTS FOUND AND SEIZED IN COURSE OF SEARCH ACTION IN THE RESIDENTIAL PREMISES OF THE DR. YOGIRAJ SHARMA SHRI SUNIL AGRAWAL SHRI RAJESH JAIN AND SURVEY CONDUCTED IN THE PREMISES OF OTHER RELATED PERSONS STATEMENT RECORDED DURING SEARCH AND SURVEY ACTION AND POST SEARCH ENQUIRIES CONDUCTED BY THE INVESTIGATION WING. THE FINDINGS OF THE AO ARE SPECIFIC SUFFICIENT TO PROVE THE EXIS TENCE OF ACCOMMODATION OF ENTRY PROVIDERS NAMELY SHRI SUNIL AND JAIN AND SHRI RAJESH JAIN AND ACCOMMODATION ENTRIES PROVIDED BY THEM FOR APPELLANT M/S. GAJANAN DEVELOPERS AND DISTRIBUTORS PVT. LTD. IN EXCHANGE OF COMMISSION THEY CHARGED FROM THE COMPANY FO R PROVIDING SUCH SERVICES. THE INCRIMINATING PAPER IN LPS - 5 IS EVIDENCE OF ACCOMMODATION ENTRIES GIVEN THROUGH THE BANK ACCOUNT OF SPECTRUM CHEMICALS PVT. LTD. AND OPTIMATE TEXTILE LIMITED ALSO WORKING OUT OF COMMISSION ON THE BASIS OF AMOUNT MONTH AND D ATES. M/S. DAZZAL CONFINDIVE LIMITED IS CONTROLLED BY SHRI SUNIL AGRAWAL. THE HUGE CASH DEPOSITS FOUND IN THE BANK ACCOUNT OF THE COMPANY IS UTILIZED FOR PROVIDING ACCOMMODATION ENTRIES THOUGH SHRI AGRAWAL FAILED TO FURNISH THE NAME OF THE BENEFICIARIES WHO DEPOSITED CASH IN THE BANK ACCOUNT. ON OBSERVING THE TRAIL IT 18 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) IS FOUND THAT SHRI SUNIL AGRAWAL USED TO RECEIVE CASH THROUGH SHRI VINAY GANDHI FROM SHRI GAURAV SHARMA WHICH WERE DEPOSITED IN THE BANK ACCOUNTS OF HIS EMPLOYEES AND ACQUAINTANCE AND THE IR CONCERNS NAMELY ASHMIT SAGAR RAKESH SHARMA RIBEKA GARG SATYAM KANUNGO VINISHA GARG ETC.. THE PAGE NO. 2 3 AND 6 OF LPS - 4 SIGNIFIES THE ROLE OF REGULATING AND CONTROLLING THE BANK ACCOUNTS OF THE EMPLOYEES. IT CAN BE SEEN IN THE TRAIL THAT CASH D EPOSITED IN THESE ACCOUNTS WERE UTILIZED FOR SUBSEQUENT ISSUE OF CHEQUES TO CONCERNS RELATED / ASSOCIATED WITH SHRI SUNIL AGRAWAL LIKE OPTIMATE TEXTILES INDUSTRIES LIMITED SPECTRUM CHEMICALS PVT. LTD. M/S. RAPID COMMERCIAL AND FINLEASE PVT. LTD. M/S. RC G FINANCE PVT. LTD. HINDUSTAN CONTINENTAL LIMITED. THE INCOME RETURNED BY THE EMPLOYEES IS NEGLIGIBLE AND QUITE DISPROPORTIONATE TO CASH DEPOSITS AND VOLUME OF TRANSACTIONS IN THEIR RESPECTIVE BANK ACCOUNTS. SIMILARLY SHRI RAJESH JAIN IS AN ENTRY PROVI DER FROM MUMBAI AND KOLKATA BASED COMPANIES AND HE PROVIDED ENTRIES TO APPELLANT COMPANIES M/S. GAJANAN DISTRIBUTORS & DEVELOPERS PVT. LTD. AND SHREE VIGHNESH DISTRIBUTORS AND DEVELOPERS PVT. LTD. FROM HIS PAPER COMPANIES JUBILANT MULTITRADE PVT. LIMITED DIMPLE MULTITRADE PVT. LTD. ORCHID CONSULTANCY PVT. LTD. COMFORT COMMERCIAL PVT. LTD. HILTON INFRASTRUCTURE PVT. LTD. MIDTOWN TRADING PVT. LTD. ETC. HAVING NO BUSINESS PREMISES FOR BUSINESS BUT WITH BANKS FOR ROUTING OF FUNDS. NO ATTEMPT WAS MADE AT ANY STAGE BY THE APPELLANT COMPANY TO PROVE THAT THE MATERIALS GATHERED AND USED AGAINST HIM ARE FALSE. IN THE CASE OF AGRAWAL COAL CORPORATION PVT. LTD. VS. ACIT REPORTED IN 142 TTJ 409 HONBLE ITAT INDORE BENCH INDORE HAS HELD THAT THE OPTIMATE T EXTILES INDUSTRIES LIMITED IS A PAPER COMPANY. SIMILARLY M/S. ORCHID CONSULTANCY PVT. LTD. IS A COMPANY CONTROLLED BY SHRI RAJESH JAIN OPERATING IN PAPER FROM 911 9 TH FLOOR NAVJEEVAN - 3 LAMINGTON ROAD MUMBAI AND THE AO HAS DISCUSSED THE ISSUE AT LENGTH IN HER ORDER OF ASSESSMENT. ACCORDINGLY THE ARGUMENT THAT THE AO HAD NOT ADVERSE FINDINGS ON GENUINENESS OF SHARE APPLICATION MONEY RECEIVED FROM M/S. ORCHID CONSULT ANCY PVT. LTD. IS MISPLACED. (II) INSPITE OF THE COMPANY SHOWING ONLY LOSS OR MINOR PROFIT IT RECEIVED SHARE APPLICATION MONEY FROM THE COMPANIES LISTED ABOVE. THE SHARE APPLICATION MONEY HAD FINALLY BEEN ADJUSTED IN BOTH THE COMPANIES I.E. IN SHREE VIGHN ESH WAREHOUSE AS WELL AGAINST SHARE ALLOTTED AT PREMIUM OF RS. 90 PER SHARE AGAINST FACE VALUE OF RS. 10 PER SHARE. TILL DATE NO DIVIDEND HAS BEEN GIVEN TO THE SHAREHOLDERS. THIS FACT LEADS TO A QUESTION WHY ANY PRUDENT SHARE HOLDER WHO IS UNRELATED TO THE COMPANY AND ITS DIRECTOR WHICH IS NOT DOING ANY SUBSTANTIAL BUSINESS ACTIVITY AND THATS TOO AT A HUGE PREMIUM. NO BOOKS OF ACCOUNT BANK DETAILS NATURE OF BUSINESS ACTIVITIES OF THE ABOVE COMPANIES AND EVEN THEIR CONFIRMATION WERE PRODUCED FOR VERIF ICATION BEFORE THE AO. IT WAS NOTICED FROM THE RETURN OF INCOME OF M/S. JUBILANT THAT IT HAD FILED RETURNS OF NEGLIGIBLE INCOME COMPARED TO HUGE ASSET HOLDINGS (I.E. INVESTMENTS) WHICH SHOWS THAT THE MAIN BUSINESS OF THE COMPANY WAS EARNING FROM INVESTME NT BUT THE COMPANY WAS NOT EVEN EARNING INCOME AT THE RATE OF BANK INTEREST OF 5% ON ITS INVESTMENTS. NO GENUINE BUSINESS CONCERN WOULD OPERATE IN SUCH A MANNER OVER SEVERAL YEARS. 19 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) A PERUSAL OF THE BALANCE SHEET OF APPELLANT M/S. GAJANAN DISTRIBUTORS & DEVELOPERS PVT. LTD. IN THE RELEVANT ASSESSMENT YEARS SHOWS THAT THE COMPANY HAD INVESTED IN PURCHASE OF AGRICULTURAL LAND OF SUBSTANTIAL WHICH HAD NO CONNECTION WITH ANY BUSINESS ACTIVITY OF THE COMPANY OR AS LOANS TO THE DIRECTORS WHICH MAKES IT CLEAR T HAT THE COMPANY HAS JUST BEEN USED TO CREATE A VEIL FOR INVESTMENT IN VARIOUS ASSETS OUT OF UNDISCLOSED INCOME. SINCE REAL ESTATE HAS BEEN PURCHASED BY THE COMPANY THE AMOUNT APPEARING AS SHARE APPLICATION MUST HAVE ORIGINATED SOMEWHERE. THE AO HAD ALSO GIVEN HIS FINDINGS THAT THE ASSESSEE - COMPANY HAS EARNED INCOME FROM INTEREST AND BUS RUNNING AND COULD NOT HAVE GENERATED THE UNACCOUNTED FUNDS. (III) THERE IS NO EVIDENCE ADDUCED BY THE LD. AR WHICH REQUIRES VETTING IN ORDER TO FORM BEDROCK OF THE APPELLATE ORDER EXCEPT HIS HARPING UPON THE CONTENTION THAT SHARE APPLICATION MONIES TO THE ALLEGED COMPANY HAVE CAME THROUGH THE ACCOUNT PAYEE CHEQUES AND THE COMPANIES WHICH SUBSCRIBED TO THE SHARES OF THE ALLEGED COMPANY ARE BORN ON THE FILE OF REGISTER OF COMPA NIES. THESE ARGUMENTS ARE AT BEST NEUTRAL. EVERY COMPANY INCORPORATED UNDER COMPANIES ACT 1956 HAS TO COMPLY THE STATUTORY FORMALITIES. THE COMPANIES WHO INTRODUCED FAKE CAPITALS WERE ALSO COMPLYING WITH SUCH FORMALITIES WHICH DO NOT ADD ANY CREDIBILIT Y OF EVIDENTIARY VALUE. IN ANY CASE SUCH ARGUMENT DOES NOT IF SO FACTO PROVE THAT THE TRANSACTIONS ARE GENUINE. ON THE WHOLE THESE ARGUMENTS ARE BASED ON IRRELEVANT MATERIAL WHICH CANNOT IGNORE THE RELEVANT MATERIAL COLLECTED AND BROUGHT TO RECORD BY THE AO IN HER ORDER OF ASSESSMENT. THE LD. ARS ARGUMENT THAT THERE WAS DENIAL OF OPPORTUNITY TO CROSS EXAMINE THE PERSONS WHOSE STATEMENT WERE RECORDED AND USED AGAINST DR. YOGIRAJ SHARMA IS ALSO MISPLACED. IT IS EVIDENT FROM THE RECORD THAT THE AO SENT COPY OF THE STATEMENTS OF DIFFERENT PERSONS AS MENTIONED ABOVE AND CALLED FOR COMMENT IF ANY OR CROSS EXAMINATION OF THE DEPONENTS BY THE APPELLANT COMPANIES OR SHRI GAURAV SHARMA IF NEEDED. THERE WAS NO RESPONSE TO SUCH OFFER THOUGH RECORDS REVEALED THAT THE OFFER WAS DULY WITHIN THE KNOWLEDGE OF THE APPELLANT OR SHRI GAURAV SHARMA. IN THE LIGHT OF THIS THE ARGUMENT OF THE LD. AR LOSES FORCE. IT IS BECAUSE OF BLOCKING ANY FURTHER ENQUIRY THE APPELLANT COMPANIES OR SHRI GAURAV SHARMA AVOIDED THE OF FER. ONCE THE OPPORTUNITY GIVEN AT THE ASSESSMENT STAGE WAS NOT AVAILED TO CROSS EXAMINE THE DEPONENTS THE GRIEVANCE OF THE APPELLANT COMPANY CANNOT RIGHTLY BE MAPPED OR PLOTTED WITHIN THE TERRAIN OF PRINCIPLES OF NATURAL JUSTICE. THE APPELLANT COMPANY CANNOT PLEAD BACK OF ADEQUATE TIME IN DISCHARGING THE ONUS. (IV) THE LD. AR HEAVILY RELIED ON RATIO OF THE CASE IN CIT VS. LOVELY EXPORT PVT. LTD. REPORTED IN 319 ITR (ST) 5 (SC) . THE RELIANCE IS ALSO MISPLACED SPECIALLY DUE TO MIS - UNDERSTANDING AND MIS - APPRECIATION OF THE BACK GROUNDS OF THE FACTS OF THE CASE IN LOVELY EXPORT PVT. LTD. THE RATIO OF A DECISION IS TO BE UNDERSTOOD AND APPRECIATED IN THE BACKGROUND OF THE FACTS OF THAT CASE. SO UNDERSTOOD IT WILL BE SEEN THAT WHERE THE COMPLETE PARTICUL ARS OF THE SHARE APPLICANTS SUCH AS THEIR NAMES AND ADDRESSES INCOME - TAX FILE NUMBERS THEIR CREDITWORTHINESS SHARE APPLICATION FORMS AND SHARE HOLDERS REGISTER SHARE TRANSFER 20 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) REGISTER ETC. ARE FURNISHED TO THE AO AND THE AO HAS NOT CONDUCTED ANY ENQU IRY INTO THE SAME OR HAS NO MATERIAL IN HIS POSSESSION TO SHOW THAT THOSE PARTICULARS ARE FALSE AND CANNOT BE ACTED UPON THEN NO ADDITION CAN BE MADE IN THE HANDS OF THE COMPANY UNDER SECTION 68 AND THE REMEDY OPEN TO THE REVENUE IS TO GO AFTER THE SHARE APPLICANTS IN ACCORDANCE WITH LAW. I AM AFRAID THAT I CANNOT APPLY THE RATIO TO A CASE SUCH AS THE PRESENT ONE WHERE THE AO IS IN POSSESSION OF MATERIAL THAT DIS - CREDITS AND IMPEACHES THE PARTICULARS FURNISHED BY THE ASSESSEE COMPANY AND ALSO ESTABLISHE S THE LINK BETWEEN SELF - CONFESSED ACCOMMODATION ENTRY PROVIDERS WHOSE BUSINESS IT IS TO HELP ASSESSEES BRING INTO THEIR BOOKS OF ACCOUNT THEIR UNACCOUNTED MONIES THROUGH THE MEDIUM OF SHARE SUBSCRIPTION AND THE ASSESSEE. THE RATIO IS INAPPLICABLE TO A CASE AGAIN SUCH AS THE PRESENT ONE WHERE THE INVOLVEMENT OF THE DR.YOGIRAJ SINGH IN SUCH MODUS OPERANDI IS CLEARLY INDICATED BY VALID MATERIAL MADE AVAILABLE TO THE AO AS A RESULT OF SEARCH AND SEIZURE OPERATION AND ENQUIRIES MADE BY THE INVESTIGATION WING INTO THE ACTIVITIES OF SUCH ENTRY PROVIDERS. THE EXISTENCE WITH THE AO OF MATERIAL SHOWING THAT THE SHARE SUBSCRIPTIONS WERE COLLECTED AS PART OF A PRE - MEDICATED PLAN - SMOKE - SCREEN - CONCEIVED AND EXECUTED WITH THE CONNIVANCE OR INVOLVEMENT OF THE DR . YOGIRAJ SHARMA IN THE GUISE OF HIS SON EXCLUDES THE APPLICABILITY OF THE RATIO. THE RATIO IS ATTRACTED TO A CASE WHERE IT IS SIMPLE QUESTION OF WHETHER THE ASSESSEE HAS DISCHARGED THE BURDEN PLACED UPON HIM U/S 68 TO PROVE AND ESTABLISH THE IDENTITY AN D CREDITWORTHINESS OF THE SHARE APPLICANT AND THE GENUINENESS OF THE TRANSACTION. IN SUCH A CASE THE AO CANNOT SIT BACK WITH FOLDED HANDS TILL THE ASSESSEE EXHAUSTS ALL THE EVIDENCE OR MATERIAL IN HIS POSSESSION AND THEN COME FORWARD TO MERELY REJECT THE SAME WITHOUT CARRYING OUT ANY VERIFICATION OR ENQUIRY INTO THE MATERIAL PLACED BEFORE HIM. THE CASE BEFORE ME DOES NOT FALL UNDER THIS CATEGORY AND IT WOULD BE A TRAVESTY OF TRUTH AND JUSTICE TO EXPRESS A VIEW TO THE CONTRARY. IN THIS REGARD I DERIVED SUPPORT FROM THE JUDGMENT OF THE CASE IN CIT VS. NOVA PROMOTERS AND FINLEASE (P) LTD. 342 ITR 169 (DEL.); ITA NO. 124 TO 127/IND/2011 DATED 31 - 01 - 2012 OF ITAT INDORE BENCH INDORE IN LUNKAD GROUP OF CASES AND IN THE CASE OF AGRAWAL COAL CORPORATION PVT. LTD. REPORTED IN 118 ITJ 717 / 142 TTJ 409 ETC.. (V) IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE I FIND THAT AO IS JUSTIFIED IN TREATING THE SHARE APPLICANTS AS PAPER COMPANIES. THE NEXT QUESTION THAT IS REQUIRED TO BE DECIDED IS AT WHOSE HANDS T HE BOGUS SHARE APPLICATION MONIES OUGHT TO BE ASSESSED WHETHER IN THE HANDS OF THE APPELLANT COMPANIES RECEIVING BOGUS SHARE CAPITAL OR IN THE HANDS OF THE DR. YOGIRAJ SHARMA. THE INVESTMENTS IN SHARE APPLICATION MONEY THROUGH ACCOMMODATION ENTRIES ARE OBVIOUSLY NOT OUT OF THE UNDISCLOSED SOURCE OF M/S. GAJANAN DISTRIBUTORS & DEVELOPERS PVT. LTD. OR SHREE VIGHNESH WAREHOUSE AND DISTRIBUTORS PVT. LTD. FOR THE REASON ALREADY DISCUSSED ABOVE. IT IS THE NAME OF SHRI GAURAV SHARMA WHICH IS APPEARING IN THE STATEMENT OF ENTRY PROVIDERS. THEY HAVE ADMITTED TO HAVE RECEIVED CASH FROM SHRI GAURAV SHARMA. BUT AS DISCUSSED ABOVE SHRI GAURAV SHARMA HAS NO SUCH BUSINESS ACTIVITIES KNOWN TO THE DEPARTMENT. HE HAS NO ACTIVITIES TO EARN UNACCOUNTED MONIES AND IT I S FOR THIS REASON THE AO HAS RULED OUT ANY SUSPICION WHICH WOULD HAVE WARRANTED PROTECTIVE ASSESSMENTS OF THE ALLEGED BOGUS SHARE CAPITAL IN HIS HANDS. ON THE OTHER HAND IT IS SEEN THAT DR. YOGIRAJ SHARMA HAS UNACCOUNTED 21 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) INCOME WHICH CAN BE TRACED BACK T O EARLY YEARS PRECEDING THE ASSTT. YR. 2007 - 08 AND 2008 - 09. THERE ARE AMPLE EVIDENCE OF CLOSE CONNECTION OF DR. YOGIRAJ SHARMA WITH THE SUPPLIERS NAMELY SHRI ASHOK NANDA AND SHRI YOGESH PATARIYA. THERE ARE VARIOUS BUSINESS CONCERNS OF SHRI ASHOK NANDA IN CLUDING NETAM INDUSTRIES AND SHRI UMESH KAJVE WHOSE NAME IS LANDED IN THE CASE OF NETAM INDUSTRIES WAS THE DIRECTOR OF THE DIMPLE MULTITRADE PVT. LTD.. SHRI NANDA IS THE SHARE HOLDER OF THE COMPANIES OF SHRI GAURAV SHARMA AND ALSO MANAGING DIRECTOR. SHRI YOGESH PATARIYA IS A CLOSE FAMILY FRIEND OF THE DR. YOGIRAJ SHARMA. HE IS PROPRIETOR OF RADIATION IMAGE COMMUNICATION GLOBAL ENTERPRISES AND OTHERS. BOTH OF THEM GET HUGE SUPPLY ORDERS FROM THE DEPARTMENT OF HEALTH. THE LOOSE PAPERS IN PAGE NO. 81 - 84 OF LPS - 2/30 SEIZED FROM A - 70 SHAKTI NAGAR BHOPAL ARE COPIES OF DD NO. 476319 476320 DATED 28 - 03 - 2007 FOR RS. 2.20 LACS EACH 476313 476314 DATED 28 - 03 - 2007 FOR RS.1.50 LAKHS EACH 476315 476316 DATED 28 - 03 - 2007 OF RS. 3.00 LAKHS EACH 476317 4756318 DATED 28 - 03 - 2007 FOR RS. 1.50 LAKHS EACH OF BANK OF BARODA HABIBGANJ BRANCH BHOPAL IN FAVOUR OF RAPID COMMERCIAL AND FINLEASE PVT. LTD. THE JOTTINGS IN PAGE NO. 81 RELATE TO PLANNING OF INVESTMENT IN SHARE APPLICATION MONEY IN GAJANAN DEVELOPERS AND DIS TRIBUTORS AND SHRI VIGHNESH WAREHOUSE. THE PAPER WAS WRITTEN IN THE HAND WRITING OF SHRI YOGESH PATARIYA. IT WAS DATED 26 - 03 - 2007 AND THE JOTTINGS THEREIN ARE PLAN OF INVESTMENTS IN FAKE SHARE APPLICATION MONEY OF THE ALLEGED COMPANIES THROUGH RAPID COMM ERCIAL AND FINLEASE PVT. LTD. OPTIMATE TEXTILE INDUSTRIES SPECTRUMS CHEMICALS ETC. HAVE DIRECT NEXUS WITH THE COPY OF THE DRAFT DISCUSSED ABOVE. THE DRAFTS WERE BASICALLY PAYMENTS MADE TO THE TWO SHARE HOLDING COMPANIES OF INDORE FROM ACCOUNT IN BANK O F BARODA HABIBGANJ AND THE COPY OF THE SAME WAS FOUND AT THE RESIDENCE OF DR. YOGIRAJ SHARMA. ON FURTHER ENQUIRIES IT IS LEARNT THAT SHRI SUNIL KUMAR DESHMUKH HAVING ACCOUNT NO.6485 SHRI MAHENDRA SURYAWANSHI HAVING ACCOUNT NO.6493 WHO ARE ALSO SHARE HO LDERS IN THE ALLEGED COMPANY SHRI PRAVEEN JARWADE HAVING ACCOUNT NO. 6481 AND SHRI RAMESH PRAJAPATI HAVING ACCOUNT NO. 6487 HAVE MADE THE PAYMENTS FROM THEIR RESPECTIVE ACCOUNTS MAINTAINED AT BANK OF BARODA HABIBGANJ BRANCH. THEY ARE THE LOW PAID EMPLOY EES OF SHRI YOGESH PATARIYA AND THEY HAVE ADMITTED THAT THEIR BANK ACCOUNTS WERE MAINTAINED AND CONTROLLED BY SHRI PATARIYA. THERE ARE EVIDENCES OF PAYMENTS RECEIVED BY DR. YOGIRAJ SHARMA ON SPECIFIC PERCENTAGE OVER THE VALUE OF WORK ORDERS OF SUPPLY AND DISBURSEMENT MADE TO SHRI NANDA AND SHRI PATARIYA MADE AS DISCUSSED IN SEPARATE PARA OF THE APPELLATE ORDER. SHRI L. MANISH ANOTHER SHARE HOLDER IS ALSO REGULAR SUPPLIER OF HEALTH DEPARTMENT. SHRI MAHESH SHARMA AND SMT. MALTI SHARMA OTHER SHAREHOLDERS IN THE ALLEGED COMPANY ARE CLOSE RELATIVES OF THE DR. YOGIRAJ SHARMA. INCRIMINATING DOCUMENTS AND PASSBOOKS OF THE AFORESAID EMPLOYEES OF SHRI YOGESH PATARIYA INCLUDING PASSBOOKS AND OTHER DOCUMENTS OF SHRI MAHESH SHARMA AND SMT. SHASHI SHARMA WERE FOUND IN POSSESSION OF THE DR. YOGIRAJ SHARMA IN HIS RESIDENCE AT A - 70 SHAKTI NAGAR BHOPAL. THUS SHRI ASHOK NANDA SHRI SUNIL KUMAR DESHMUKH SHRI MAHENDRA SURYAVANSHI SHRI MANISH SHRI MAHESH SHARMA SMT. SHASHI SHARMA ARE THE SHARE HOLDERS OTHER THAN THE ALLEGED PAPER COMPANIES WHEREIN SMT. SHASHI SHARMA AND SHRI GAURAV SHARMA ARE THE DIRECTORS WITH CERTAIN SHARE HOLDINGS. 22 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) (VI) THE SUBSCRIBING COMPANIES ARE FOUND TO BE FICTITIOUS OR NON - EXISTENT THEREFORE ONE FACT IS OOZING OUT THAT M/S. GAJANAN DIS TRIBUTORS AND DEVELOPERS PVT. LTD. AND M/S. SHREE VIGHNESH WAREHOUSE AND DISTRIBUTORS PVT. LTD. HAVE TO DISCHARGE THE ONUS TO ESTABLISH THE CREDITS OF AMOUNTS RECEIVED FROM THE ALLEGED SUBSCRIBING COMPANIES IN THEIR BOOKS OF ACCOUNT TO OBVIATE THE MISCHI EF OF SECTION 68 OF INCOME TAX ACT. THE LAW IS WELL SETTLED THAT ONUS TO PROVE THE SOURCE OF MONEY FOUND TO HAVE BEEN RECEIVED BY AN ASSESSEE IS ON HIM WHERE THE NATURE AND SOURCE OF A RECEIPT WHETHER IT BE OF MONEY OR OTHER PROPERTY CANNOT BE SATISFAC TORILY EXPLAINED BY THE ASSESSEE IT IS OPEN TO THE REVENUE TO HOLD THAT IT IS THE INCOME OF THE ASSESSEE AND NO FURTHER BURDEN LIES ON THE REVENUE TO SHOW THAT THE INCOME IS FROM ANY PARTICULAR SOURCE FOR WHICH I AM SUPPORTED BY THE DECISION OF HONBLE AP EX COURT RASHAN DI HATTI V/S CIT REPORTED IN 107 ITR 938 AND KELA KHAN MOHD. HANIF REPORTED IN 50 ITR 1. IN THE PRESENT CASE IN HAND THE COMPANIES RECEIVING THE ACCOMMODATION ENTRIES HAVE GROSSLY FAILED TO ESTABLISH THREE INGREDIENTS OF SECTION 68 OF TH E ACT. AS DISCUSSED ABOVE THE HONBLE TRIBUNAL INDORE BENCH INDORE IN THE CASE OF AGARWAL COAL CORPORATION PVT. LTD. HAS FOUND THAT THE IDENTITY OF SHAREHOLDERS LIKE OPTIMATE TEXTILE INDUSTRIES LTD. AND HINDUSTAN CONTINENTAL LTD. IS NOT PROVED AND THER EFORE THE INITIAL ONUS HAS NOT BEEN DISCHARGED BY THE ASSESSEE SPECIALLY WHEN THE ASSESSEE WAS CONFRONTED WITH FINDINGS OF COMMISSION SUMMONS RETURNED UNSERVED AND THE ADDRESS GIVEN BY THE ASSESSEE ITSELF THAT TOO AT FOUR PLACES WERE FOUND TO BE FICTITIO US. THE ASSESSEE HAS NOT GIVEN SATISFACTORY EVIDENCE TO DISCHARGE THE ONUS. IT HAS MERELY GIVEN THE NAMES OF THE FICTITIOUS PARTIES AND THIS IS NOT SUFFICIENT COMPLIANCE. THUS THE ASSESSMENT OF SHARE APPLICATION MONEY IN THE HANDS OF THE ASSESSEE COMPA NY HAS BEEN A UPHELD BY THE HONBLE TRIBUNAL. SIMILARLY THE HONBLE TRIBUNAL INDORE BENCH INDORE UPHELD THE ASSESSMENT OF ACCOMMODATION ENTRIES RECEIVED AS SHARE APPLICATION MONEY IN THE LUNKAD GROUP OF CASES IN ITA NO. 124 TO 127/IND/2011 DATED 31.01. 2012. M/S. GAJANAN DISTRIBUTORS & DEVELOPERS PVT. LTD. AND M/S. SHREE VIGHNESH WAREHOUSE AND DISTRIBUTORS PVT LTD. HAVE CLAIMED TO HAVE RECEIVED SHARE APPLICATION MONEY FROM THE SAME OPTIMATE TEXTILE INDUSTRIES LTD. THE RATIO OF THE CASES DISCUSSED ABO VE IS SQUARELY APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE. THE ENTRIES OF SHARE APPLICATION MONEY ARE ULTIMATELY APPEARING IN THE BOOKS OF ACCOUNT OF THE COMPANIES AND THE AFFAIRS OF THE COMPANIES ARE UNDER CONTROL OF DR. YOGIRAJ SHARMA. FROM THE PERUSAL OF THE MATERIAL AVAILABLE ON RECORD AND DISCUSSION MADE ABOVE I FIND THAT LOOKING TO THE PECULIARITY OF THE CASE THE PROPOSITION LAID DOWN IN CIT V/S GUJARAT HEAVY CHEMICALS LTD. 256 ITR 795 IS DISTINGUISHABLE. IN VIEW OF THE OVERALL FACTS A ND IN GIVEN CIRCUMSTANCES OF THE CASE AS DISCUSSED ABOVE I FIND THAT THE ASSESSMENT OF SHARE CAPITAL RECEIVED FROM THE FICTITIOUS SUBSCRIBING COMPANIES THROUGH ACCOMMODATION ENTRIES OUGHT TO BE ASSESSED SUBSTANTIVELY IN THE HANDS OF M/S. GAJANAN DISTRIBUT ORS & DEVELOPERS PVT. LTD. AND SHREE VIGHNESH WAREHOUSE AND DISTRIBUTORS PVT. LTD. ACCORDINGLY THE AO IS DIRECTED TO ASSESS THE SAME IN THE HANDS OF THE COMPANIES AS INCOME OF THE YEAR. 23 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) THE SUBSTANTIVE ASSESSMENT OF THE SUM IN THE HANDS OF DR. YOGIRAJ S HARMA IS VACATED . 39 . LD A.R. BEFORE US CONTENDED THAT THE ASSESSEE HAS RECEIVED SHARE APPLICATION DURING THE YEAR BUT ALL THE SHARE APPLICATION MONEY WAS NOT TREATED BY THE AO TO BE OF UNDISCLOSED NATURE AND TAXED SUBSTANTIVELY IN THE HANDS OF DR. YOGI RAJ SHARMA. IT IS ONLY THE SHARE APPLICATION MONEY RECEIVED FROM THE FOLLOWING PERSONS/CONCERNS WHICH WERE TAKEN TO BE OF UNDISCLOSED NATURE AS DETAILED BELOW: NAME OF COMPANY AY 2003 - 04 AY 2004 - 05 A Y 2005 - 06 M / S. ORCHID CO N S ULT A NC Y P V T. L TD . 15000 00 1 0 0000 0 RAPID COMM E R C IAL & FI NLEA S E P V T . L TD . 4 5 00000 R C C F I NA N CE 15 00000 S P ECT RUM C H E MI CALS P VT. LT D . 15 00000 OPTI M A T E TEX TI LE I NDU S TRI ES PV T . L TD . 2 5 00000 HINDU S TAN CO NTIN E NTAL P V T . L TD . 500 0000 TOTAL 15 0 000 0 1 00 00 0 0 1500 0 0 00 TOTAL 17500000 4 0 . THE ADDITIONS HAVE BEEN MADE ON ACCOUNT OF SHARE CAPITAL CONTRIBUTIONS FROM AFORESAID PARTIES ON THE BASIS OF VARIOUS OBSERVATIONS MADE IN THE ASSESSMENT ORDER. THE AO OBSERVED THAT VARIOUS CORPORATE SHAREHOLDERS HAVE SUBMITTED INCOME TAX RETURNS. THE AO HAS ALSO ANALYSED THE BANK STATEMENTS OF SUCH CORPORATE SHAREHOLDERS AND EXAMINED CREDITS AND WITHDRAWALS FROM BANK ACCOUNTS OF CORPORATE SHARE - HOLDERS. THE A.O. HAS REFERRED TO DETAILS OBTAINED FROM THE REGISTRAR OF COMPANIES IN RESPECT TO CERTAIN CORPOR ATE SHARE - HOLDERS. ALL THE SHARE CAPITAL CONTRIBUTIONS ARE THROUGH PROPER BANKING CHANNEL AND ALL CORPORATE SHARE - HOLDERS ARE ASSESSED TO TAX. MOST OF THE SHARE - HOLDERS HAD ALSO CONTRIBUTED FOR SHARE CAPITAL IN THE CASE OF FLEXI TUFF INTERNATIONAL LTD. ON E OF THE ASSESSEE AT INDORE. THE A.O. HAS ALSO REFERRED IN THE CASE OF THE ASSESSEE IN THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2005 - 06 THE ASSESSMENT ORDER MADE IN THE CASE OF FLEXI TUFF INTERNATIONAL LTD. . FOR THIS OUR ATTENTION IS DRAWN TOWARDS P AGE 12 OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2005 - 06. IT WAS POINTED OUT THAT THE AO HAS OBSERVED THAT THE COMPANIES SUBSCRIBING TO SHARE CAPITAL IN THE CASE OF ASSESSEE COMPANY ARE SAME AS THAT IN THE CASE OF M/S. FLEXI TUFF INTERNATIONAL LTD. WHEREIN SUCH SHARE - HOLDERS HAVE BEEN HELD TO BE BOGUS. THE A.O. HAS OBSERVED THAT THE ASSESSMENT ORDER IN THE CASE OF SAID COMPANY HAS BEEN PASSED ON 31/03/2006. THE ASSESSMENT ORDER IN THE CASE OF ASSESSEE COMPANY HAS BEEN PASSED BY THE A.O. ON 31/12/20 09. IT WAS SUBMITTED THAT THE ASSESSMENT MADE IN THE CASE 24 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) OF M/S. FLEXI TUFF INTERNATIONAL LTD. ON 31/03/2006 WAS DULY CONSIDERED BY THE HONBLE ITAT INDORE BENCH INDORE IN ITA NO. 530/LND/2006. WHEN THE MATTER TRAVELLED TO THE TRIBUNAL IN THE CASE OF FLEXI TUFF INTERNATIONAL LTD (SUPRA) THE TRIBUNAL HAS DISPOSED OFF THAT MATTER VIDE ITS ORDER DATED 22/12/2006. THE AO WHILE RELYING ON THE DECISION OF ITAT INDORE BENCH IN THE CASE OF FLEXI TUFF INTERNATIONAL LTD (SUPRA) HAS IGNORED THE DECISION OF ITAT EVEN THOUGH THAT ORDER WAS AVAILABLE AT THE TIME OF PASSING THE ASSESSMENT ORDER FOR REASONS BEST KNOWN TO HER. THE ITAT IN THAT CASE AFTER CONSIDERING THE ENTIRE FACTS HAS CONCLUDED THAT THE VARIOUS SHAREHOLDERS IN THE CASE OF AFORESAID COMPANY ARE PERSON WHOSE IDENTITY HAS BEEN ESTABLISHED AND THUS ADDITION MADE UNDER SECTION 68 OF L.T. ACT 1961 WAS DIRECTED TO BE DELETED. IN THIS REGARD OUR ATTENTION WAS DRAWN TO THE DECISION OF ITAT INDORE BENCH IN THE CASE OF ACIT VS. M/S. KALANI INDUSTRIES LTD. AND MS. FLEXITUFF INTERNATIONAL LTD. 8(2007) 8 ITJ 165 (IND. TRIB) ORDER DATED 22.12.2006 COPY OF WHICH IS AVAILABLE AT PAGES 44 TO 131 OF PB (VOL - III). SPECIFIC ATTENTION WAS DRAWN TO PAGES 51 110 114 118 AND 119 TO DEMONSTRATE THAT THE VARIOUS COMPANI ES WHO HAVE CONTRIBUTED THE SHARE CAPITAL WITH THE ASSESSEE COMPANY ARE THE SAME COMPANIES FROM WHOM THE SHARE CAPITAL CONTRIBUTION WAS HELD TO BE NOT LIABLE TO BE ASSESSED UNDER SECTION 68 OF THE I.T.ACT 1961. THUS IT WAS CONTENDED THAT THERE IS NO JUS TIFICATION FOR MAKING ANY ADDITION U/S.68 OF THE ACT IN RESPECT OF SHARE CAPITAL RECEIVED BY THE ASSESSEE IN EACH OF THE ASSESSMENT YEAR. IN RESPECT OF SHARE APPLICATION MONEY GIVEN BY M/S/ ORCHID CONSULTANCY PVT. LTD. DURING THE ASSESSMENT YEARS 2003 - 04 IT WAS SUBMITTED THAT M/S. ORCHID CONSULTANCY PVT. LTD. HAS FILED RETURN OF INCOME AND SHOWN ITS REGISTERED OFFICE AT 911 9 TH FLOOR NAVJEEVAN LAMINATAN ROAD MUMBAI AND HE IS MAINTAINING BANK ACCOUNTS FROM WHERE CHEQUES HAVE BEEN ISSUED TO THE ASSESSEE. THE AO OBSERVED THAT SURVEY CONDUCTED BY THE ITO INVESTIGATION UNIT - III MUMBAI FOUND THAT THE AFORESAID PREMISES WERE USED FOR RECEIVING MAIL MESSAGING FACILITY. THE AO FURTHER OBSERVED THAT SHRI R.P. AGRAWAL WAS FOUND TO BE THE DIRECTOR AND AUTHORISE D SIGNATORY OF THIS COMPANY AND THE STATEMENT OF RAJENDRA PRASAD AGARWAL WAS RECORDED BY THE AO ON 4.12.2009. THE AO HAS NOTED THAT THE ADDRESS OF THE COMPANY IS 12 3 RD FLOOR MP NAGAR ZONE - II BHOPAL. IN THE ACCOUNT OPENING FORM SHRI R.P. AGRAWAL IS T HE DIRECTOR. CONCLUSION OF THE AO IS MERE INFERENCE AND THERE ARE NO LEGAL DOCUMENTS FOR RECORD TO SHOW THAT ORCHID CONSULTANCY PVT. LTD. HAS NOT MADE CAPITAL CONTRIBUTION WITH THE ASSESSEE COMPANY OR DR. YOGIRAJ SHARMA HAS ANY NEXUS OR CONNECTION TO THES E COMPANIES. THE CONCLUSION OF THE AO IS ON MERELY SUSPICION CONJECTURE AND SURMISES. SIMILARLY IN RESPECT OF CAPITAL CONTRIBUTION MADE BY OTHER COMPANIES THE FACTS AND OBSERVATIONS OF THE AO ARE SIMILAR. IT IS NO WHERE CONNECTED WITH DR. YOGIRAJ SHA RMA. THEY ARE INDEPENDENT AND HAVING 25 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) INDEPENDENT IDENTITY. OUR ATTENTION WAS DRAWN TOWARDS ASSESSMENT ORDER AS WELL AS THE ORDER OF LD CIT(A) AND SPECIFICALLY POINTED OUT THAT NONE OF THE PERSONS RELATING TO VARIOUS COMPANIES WHO HAVE CONTRIBUTED THE SHA RE CAPITAL DENIED THAT THEY HAVE NOT GIVEN CHEQUES FOR CAPITAL CONTRIBUTION TO THE ASSESSEE COMPANY. NO DOUBT THEY HAVE STATED IN THE STATEMENT THAT THEY HAVE TAKEN THE CASH FROM SHRI GAURAV SHARMA BUT ALL THE STATEMENTS HAVE BEEN RECORDED AT THE BACK OF THE ASSESSEE. THE ASSESSEE HAS NOT BEEN GIVEN THE COPY OF THE STATEMENT FOR ITS REBUTTAL. EVEN NO OPPORTUNITY WAS GIVEN TO THE ASSESSEE FOR CROSS EXAMINATION OF THESE PERSONS. THE STATEMENT RECORDED AT THE BACK OF THE ASSESSEE CANNOT BE RELIED. IN THIS REGARD RELIANCE WAS PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF KISHINCHAND CHELLARAM 125 ITR 713 (SC) AND THAT OF DAULAT RAM RAWATMAL (1973) 87 ITR 349 (SC). ALL THESE STATEMENT RECORDED AT THE BACK OF THE ASSESSEE HAVE BEEN UTILISED BY THE AO ADVERSELY JUST FOR THE PURPOSE OF MAKING THE ADDITION. ATTENTION WAS DRAWN TOWARDS THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF HEIRS AND LRS OF LATE LAXMIBHAI S PATEL 327 ITR 290 (GUJ) FOR THE PROPOSITION THAT THE ADDITION MADE B EING NOT IN ACCORDANCE WITH LAW IS LIABLE TO BE DELETED. RELIANCE WAS ALSO MADE ON THE WRITTEN SUBMISSION MADE BEFORE LD CIT(A). OUR ATTENTION WAS DRAWN TOWARDS REMAND REPORT GIVEN BY THE ASSESSING OFFICER ON THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE T HE CIT(A). FROM THE REMAND REPORT COPY OF WHICH IS AVAILABLE AT PAGE 71 TO 74 OF PB (VOL - IV). ATTENTION WAS DRAWN TO PAGE 39 (PAGE 73 OF PB) IN THE CASE OF DR. YOGIRAJ SHARMA AT VOL - 4 AND THUS IT WAS CONTENDED THAT THE AO IN THE REMAND REPORT HAS NOT DISPUTED THE CLAIM OF THE ASSESSEE. AS REGARDS TO THE FACT THAT VARIOUS PERSONS OF WHOSE STATEMENTS RECORDED WERE USED AGAINST THE ASSESSEE WERE NOT CROSS EXAMINED. THE AO IN THE REMAND REPORT HAD REQUESTED THE CIT(A) TO GRANT SUCH OPPORTUNITY DURING THE APPELLATE PROCEEDINGS. THE RELEVANT OBSERVATIONS OF THE AO READ AS UNDER: AS REGARDS THE CLAIM OF THE ASSESSEE REGARDING INADEQUATE OPPORTUNITY PROVIDED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ALSO THE DENIAL OF OPPORTUNITY TO CROSS EXAMI NE THE PERSONS WHOSE STATEMENT WERE RECORDED AND USED AGAINST THE ASSESSEE IT IS REQUESTED THAT SINCE THE HONBLE CIT(A) HAS THE POWERS COTERMINOUS WITH THE AO. IT IS REQUESTED THAT HE MAY KINDLY GRANT SUCH OPPORTUNITY DURING THE APPELLATE PROCEEDINGS OR IF DEEMED FIT DIRECT THE UNDERSIGNED TO PROVIDE SUCH OPPORTUNITY TO THE ASSESSEE. 4 1 . OUR ATTENTION WAS DRAWN TOWARDS PAGE 26 OF THE ORDER OF LD CIT(A) AND SUBMITTED THAT LD CIT(A) HAS REFERRED TO LPS - 4 FOR CONCLUDING THAT IT IS INCRIMINATING PAPER WHICH IS EVIDENCE OF ACCOMMODATION ENTRIES GIVEN THROUGH BANK ACCOUNTS OF THE CORPORATE SHAR EHOLDERS. THE SAID LPS - 4 HAS BEEN A SCANNED COPY AND REFERRED TO THE ASSESSMENT 26 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) ORDER FOR ASSESSMENT YEAR 2006 - 07 AT PAGES 14 & 15. FROM THIS PAPER IT IS EVIDENT THAT THE ENTRIES STATED THEREIN DATED 24.7.2007 AND 1.9.2007 AND THESE HAVE BEEN SEIZED FRO M THE RESIDENCE OF SHRI SUNIL AGARWAL DURING THE COURSE OF SEARCH ON 7.9.2007. THESE LOOSE PAPERS DOES NOT RELATE TO PERIOD TO WHICH ASSESSEE COMPANY HAS RECEIVED SHARE CAPITAL CONTRIBUTION FROM THE VARIOUS SHAREHOLDERS. BY REFERRING TO PAGE 15 OF THE AS SESSMENT ORDER IT WAS CONTENDED THAT THE AO HIMSELF OBSERVED THAT PAGES 2 3 & 6 OF LPS - 4 SHOW THE DETAILS OF BALANCE OF THE AMOUNT PRESENT IN THE DIFFERENT BANK ACCOUNTS ON 24.7.2007 AND 1.9.2007. THE LIST INDICATE THAT SUNIL AGARWAL WAS MONITORING THE BA LANCE OF AMOUNT IN VARIOUS ACCOUNTS WHICH HE WAS USING FOR PROVIDING SHARE CAPITAL/CAPITAL GAIN ACCOMMODATION ENTRIES. THE LOSE PAPERS CANNOT BE REGARDED TO BE INCRIMINATING DOCUMENTS FOUND DURING THE COURSE OF SEARCH. OUR ATTENTION WAS DRAWN TOWARDS PAG E 27 OF LD CIT(A) ORDER SUB - PARA 2 IN WHICH IN THE LAST LINE HE HAS OBSERVED THAT THE AO HAS GIVEN FINDING THAT THE ASSESSEE HAS EARNED INCOME FROM INTEREST AND BUS RUNNING AND COULD NOT HAVE GENERATED THE UNACCOUNTED FUNDS. ON THE FACE OF SUCH FINDINGS OF THE AO THERE IS NO JUSTIFICATION TO MAKE THE ADDITION IN RESPECT OF ANY CORPORATE SHAREHOLDERS AT THE HANDS OF THE ASSESSEE. ATTENTION WAS DRAWN TO PAGE 30 OF LD CIT(A) ORDER IN WHICH HE HAS DISCUSSED LOSE PAPERS PAGES 81 TO 84 OF LPS - 2 /30 SEIZED FR OM A - 70 SHAKTI NAGAR BHOPAL. REFERRING TO THESE PAGES IT WAS POINTED OUT THAT IT CONTAINS ALL THE DETAILS DATED 28.3.2007 WHICH ARE RELEVANT FOR THE ASSESSMENT YEAR 2007 - 08 AND IS NOT RELATED TO ANY OF THE IMPUGNED ASSESSMENT YEARS IN WHICH SHARE CAP ITAL CONTRIBUTION HAS BEEN RECEIVED BY THE ASSESSEE COMPANY. RELIANCE WAS PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. GUJARAT HEAVY CHEMICALS LTD. 256 ITR 795 (SC). RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS: I) (2013) 356 ITR 65 (MP) CIT VS. PEOPLES GENERAL HOSPITAL LTD. II) ITAT ORDER IN ITA NO.545/IND/2010 IN THE CASE OF M/S. RAJSHREE FINSEC PRIVATE LTD. VIDE ORDER DATED 6/2/2012 III) (2013) 214 TAXMAN 423 (DELHI) CIT VS. GANGESHWARI METAL PVT. LTD. IV) (2008) 216 CTR (SC) 195 CIT VS. LOVELY EXPORTS (P) LTD. V) HONBLE MUMBAI HIGH COURT ORDER IN ITA NO.2182 OF 2009 IN THE CASE OF M/S. CREATIVE TELEFILMS LTD. VI) (2009) 221 CTR (DEL.) 511 CIT VS. VALUE CAPITAL SERVICES (P) LTD. VII) HONBLE BOMBAY HIGH COURT ORDER IN ITA NO.16 OF 2012 IN THE CASE OF GOA SPONGE AND POWER LTD. VIII) CIT VS. MITACHEM INDUSTRIES (2000) 245 ITR 160 (MP) 27 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) IX) CIT VS. DWARKADHIS INDUSTRIES PVT LTD. (2011) 330 ITR 298 (DEL). IT WAS VEHEMENTLY SUB MITTED THAT THE ISSUE INVOLVED IN THESE GROUNDS IN ALL THE ASSESSMENT YEARS IS DULY COVERED IN FAVOUR OF THE ASSESSEE. IT WAS CONTENDED THAT THE HONBLE ITAT IN THE CASE OF M/S. RAJSHREE FINSEC PRIVATE LD (SUPRA) HAS FOLLOWED THE DECISION OF HONBLE APE X COURT IN THE CASE OF LOVELY EXPORTS LTD (SUPRA) AND HAS ALSO CONSIDERED THE DECISION OF AGRAWAL COAL CORPORATION OF ITAT INDORE BENCH IN THE AFORESAID JUDGEMENT. THE DISCUSSION AND ENQUIRY MADE BY A.O. AMPLY DEMONSTRATED IDENTITY OF CORPORATE SHAREHOLDE RS BEYOND DOUBT. A.O. HAS MADE ADDITION AS HE WAS NOT SATISFIED ABOUT THE CREDITWORTHINESS OF SUCH COMPANIES AND DEPOSITS IN THE BANK ACCOUNT OF SUCH COMPANIES. THE A.O. HAS EXAMINED BANK ACCOUNT OF ALL THE CORPORATE SHAREHOLDERS ROC DETAILS DIRECTORS AN D OFFICE OF SUCH COMPANIES. IN VIEW THERE OF AMPLE LEGAL EVIDENCE IS ON RECORD TO DEMONSTRATE AS TO IDENTITY OF SHAREHOLDERS. ATTENTION WAS INVITED TO PROVISO TO SEC. 68 INTRODUCED W.E.F. ASSESSMENT YEAR 2013 - 14 TO DISCHARGE THE ONUS TO EXPLAIN SHARE CAPI TAL. THE PROVISIONS OF SEC. 68 CLEARLY DEMONSTRATES THAT PRIOR TO ASSESSMENT YEAR 2013 - 14 THE ASSESSEE IF NOT ESTABLISHING THE IDENTITY OF SHAREHOLDERS NO ADDITION IN RESPECT TO SHARE CAPITAL CAN BE MADE AT THE HANDS OF COMPANY RECEIVING SHARE APPLICATION MONEY. 4 2 . IT WAS SUBMITTED THAT IT IS SETTLED PROPOSITION OF LAW THAT ASSESSEE CANNOT BE ASKED TO EXPLAIN SOURCE OF SOURCE S . THE EVIDENCE ON RECORD CLEARLY DEMONSTRATES THAT THE MONEY HAS FLOWN FROM THE ACCOUNTS OF CORPORATE SHAREHOLDERS TO ASSESSEE. TH E DEPOSIT IN BANK ACCOUNT OF CORPORATE SHAREHOLDER IS THE RESPONSIBILITY OF SHAREHOLDER TO EXPLAIN THE SAME TO REVENUE AUTHORITIES. ASSESSEE CANNOT BE SADDLED WITH LIABILITY ON A.O. DOUBTING THE DEPOSIT OF CORPORATE SHAREHOLDERS. THERE IS NO ADVERSE EVIDEN CE EXCEPT FOR THE STATEMENT OF FEW PERSONS WHICH WERE NOT CROSS EXAMINED BY ASSESSEE AND WHOSE STATEMENT HAVE BEEN RECORDED AT THE BACK OF THE ASSESSEE . THE ASSESSEE HAS NO TRANSACTION WITH SUCH PERSON BUT THEY ARE HAVING TRANSACTIONS WITH PERSON WHO HAD M ADE SHARE APPLICATION WITH ASSESSEE COMPANY. EVEN IF ANY ADVERSE VIEW IS REQUIRED TO BE TAKEN IN RESPECT TO STATEMENT THE SAME CAN BE TAKEN ONLY IN THE CASE OF COMPANIES SUBSCRIBING SHARE CAPITAL AND NOT IN THE CASE OF ASSESSEE IN VIEW OF THE DECISION OF H ONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS(SUPRA) . 4 3 . LASTLY IT WAS SUBMITTED THAT IN THE COURSE OF SEARCH NO INCRIMINATING EVIDENCE HAS BEEN FOUND TO DOUBT THE GENUINENESS OF SHARE CAPITAL CONTRIBUTION. THE SHARE CAPITAL CONTRIBUTION WAS DIS CLOSED BY THE ASSESSEE COMPANY IN ITS REGULAR RETURN OF INCOME. IN THE 28 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) ABSENCE OF INCRIMINATING EVIDENCE HAVING BEEN FOUND IN THE COURSE OF SEARCH SHARE CAPITAL CONTRIBUTION RECEIVED IN THE COURSE OF REGULAR ASSESSMENT HAS ACHIEVED FINALITY AND CANNOT BE ASSESSED TO TAX IN THE PROCEEDINGS UNDER SECTION 153C/143(3) OF THE I.T.ACT 1961. 4 4 . ON THE OTHER HAND LD D.R. RELIED ON THE ORDERS OF AUTHORITIES BELOW. 4 5 . WE HAVE HEARD RIVAL CONTENTIONS AND CAREFULLY CONSIDERED THE ORDERS OF AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE DECISIONS RELIED UPON BY LD COUNSEL FOR THE ASSESSEE. WE NOTED THAT THE ASSESSEE COMPANY WAS INCORPORATED ON 11.12.2002. IT IS SUBMITTED THAT THE RETURN FOR THE IMPUGNED ASSESSMENT YEARS DURING WHICH ASSESSEE HAS RECEIVED SHAR E CAPITAL DETAILS OF WHICH ARE AS UNDER: NAME OF COMPANY AY 2003 - 04 AY 2004 - 05 A Y 2005 - 06 M / S. ORCHID CO N S ULT A NC Y P V T. L TD . 15000 00 1 0 0000 0 RAPID COMM E R C IAL & FI NLEA S E P V T . L TD . 4 5 00000 R C C F I NA N CE 15 00000 S P ECT RUM C H E MI CALS P VT. LT D . 15 00000 OPTI M A T E TEX TI LE I NDU S TRI ES PV T . L TD . 2 5 00000 HINDU S TAN CO NTIN E NTAL P V T . L TD . 500 0000 TOTAL 15 0 000 0 1 00 00 0 0 1500 0 0 00 TOTAL 17500000 4 6 . THE ASSESSEE HAS RECEIVED SHARE CAPITAL DURING THE IMPUGNED ASSESSMENT YEARS WHICH WERE ADDED IN T HE HANDS OF THE ASSESSEE U/S.68 AS DETAILED IN THE PRECEEDING PARAGRAPH PROTECTIVELY BUT SUBSTANTIALLY IN THE ASSESSMENT OF DR. YOGIRAJ SHARMA. WHEN THE MATTER WENT BEFORE THE CIT(A) THE CIT(A) DIRECTED THE AO TO MAKE THE ADDITION SUBSTANTIALLY IN THE HANDS OF THE ASSESSEE. 47 . WE ALSO NOTED THAT NOTICE UNDER SECTION 143(2) IN EACH OF THE ASSESSMENT YEAR S IN RESPECT OF RETURNS FILED BY THE ASS ESSEE U/S.139(1) COULD HAVE BEEN ISSUED AS PER THE PROVISO TO SECTION 143(2)(1) BEFORE THE EXPIRY OF 12 MONTHS FROM THE END OF THE MONTH IN WHICH THE RETURN IS FURNISHED BY THE ASSESSEE AS PER THE PROVISION PREVAILING DURING THE IMPUGNED ASSESSMENT YEARS . THE RETURN S FOR ASSESSMENT YEAR S 2003 - 04 2004 - 05 2005 - 06 & 2006 - 07 RESPECTIVELY WERE FILED IN THE MONTH OF OCTOBER 2003 OCTOBER 2004. SEPTEMBER 2005 AND JULY 2006. THEREFORE NOTICE S U/S.143(2) COULD HAVE BEEN ISSUED BY 29 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) THE AO WITHIN 12 MONTHS BY AUGUST 2004 SEPTEMBER 2005 SEPTEMBER 2006 AND SEPTEMBER 2007 FOR THE ASSESSMENT YEARS 2003 - 04 TO 2006 - 07 RESPECTIVELY. AFTER THE EXPIRY OF 12 MONTHS THE AO COULD NOT HAVE ISSUE D NOTICE S U/S.143(2) AFTER THE AFORESAID DATES AND THEREFORE THE AO COULD NOT HAVE TAKEN THE SCRUTINY ASSESSMENT. IT IS AN UNDISPUTED FACT THAT SHARE CAPITAL CONTRIBUTION TOWARDS SHARE CAPITAL BY THESE COMPANIES WERE DULY SHOWN BY THE ASSESSEE IN THE AUDITED PROFIT AND LOSS ACCOUNT BALANCE AND ANNEXURES THERETO FILED AL ONGWITH INCOME TAX RETURNS U/S.139(1) OF THE ACT PRIOR TO SEARCH HAD TAKEN PLACE IN THE CASE OF DR. YOGIRAJ SHARMA ON 7.9.2007. IN THE ASSESSMENT U/S.153C R.W.S 153A THE AO MADE THE ADDITION U/S.68 OF THE ACT ON ACCOUNT OF CAPITAL CONTRIBUTION MADE BY VA RIOUS COMPANIES DULY DISCLOSED IN THE BALANCE SHEET OF THE ASSESSEE. NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH RELATING TO CAPITAL CONTRIBUTION. WE NOTED THE AO NOWHERE HAS REFERRED TO PAGE 2 3 6 AND PAGE 5 OF LPS - 4 WHICH HAS BE EN SCANNED AT PAGES 14 & 15 OF THE ASSESSMENT ORDER. FROM THESE PAGES IT IS APPARENT AND MENTIONED BY THE AO THAT THESE PAGES SHOW DETAILS OF BALANCE OF AMOUNT IN THE DIFFERENT BANK ACCOUNT S AS ON 24.7.2007 AND 1.9.2007 AND THE LIST INDICATE THAT SHRI S. K.AGARWAL WAS MONITORING THE BALANCE IN THESE VARIOUS ACCOUNTS. THE DETAILS OF THESE PAGES DOES NOT RELATE TO THE ASSESSEE RELATING TO IMPUGNED ASSESSMENT YEAR. IN OUR OPINION THE IMPUGNED QUANTUM ADDITION MADE IN EACH OF THE ASSESSMENT YEAR S ARE MERELY BASED ON THE ENTRIES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND ARE NOT BASED ON UNACCOUNTED BOOKS OF ACCOUNT OF THE ASSESSE E OR BOOKS NOT PRODUCED BEFORE THE AO EARLIER OR THE INCRIMINATING MATERIAL GATHERED BY THE INVESTIGATION WING OF THE REVENUE. 48 . THE ONLY QUESTION BEFORE US ARISES WHETHER IN RESPECT OF COMPLETED ASSESSMENT S ANY ADDITION CAN BE MADE WHEN THERE IS NO INCRIMINATING MATERIAL BEING FOUND IN THESE ASSESSMENT YEARS. IN OUR OPINION THE ISSUE IS DULY COVERED BY THE DECISION OF THE SPEC IAL BENCH IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD(SUPRA) 137 ITD (SB) 26 IN WHICH THE QUESTION NO.1 BEFORE THE SPECIAL BENCH WAS ANSWERED AS UNDER: A) IN ASSESSMENTS THAT ARE ABATED THE AO RETAINS THE ORIGINAL JURISDICTION AS WELL AS JURISDICT I ON CONFERRED ON HIM U/S 153A FOR W HICH ASSESSMENTS SHALL BE MADE FOR EACH OF T HE SIX ASSESSMENT YEARS SEPARATELY. B) IN OTHER CASES IN ADDITION TO THE INCOME THAT HAS ALREADY BEEN ASSESSED THE ASSESSMENT U/S 153A WILL BE MADE ON THE BASIS OF INCRIM INATING MATERIAL WHICH IN THE CONT EXT OF RELEVANT PROVISIONS MEANS (I) BOOKS OF ACCOUNT OTHER DOCUMENTS FOUND IN T HE COURSE OF SEARCH BUT NOT PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT AND; 30 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) ( II) UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH. 49 . SIMILAR VIEW HAS BEEN TAKEN IN THE CASES OF CHETANDAS LAXMANDAS 254 CTR (DEL) 392 AND ANIL KUMAR BHATIA 352 ITR 493 (DEL) . 5 0 . WE NOTED THAT HONBLE DELHI HIGH COURT IN THE CASE OF CHETANDAS LAXMANDAS 254 CTR (DEL) 392 HAS TAKEN SIMILAR VIEW. IN PARA 11 OF THIS JUDGEMENT THE HONBLE HIGH COURT HELD THAT OBVIOUSLY AN ASSESSMENT HAS TO BE MADE UNDER THIS SECTION ONLY ON THE BASIS OF THE SEIZED MATERIAL. EVEN WE NOTED THAT THE HONBLE DELHI HIGH COURT IN THE CASE O F ANIL KUMAR BHATIA 352 ITR 493 (DEL) UNDER PARA 20 IT HAS BEEN OBSERVED AS UNDER: EVEN IF ASSESSMENT ORDER HAD ALREADY BEEN PASSED IN RESPECT OF ONE OR ANY OF THE SIX RELEVANT ASSESSMENT YEARS EITHER U/S143(1)(A) OR 143(3)PRIOR TO THE INITIATIO N OF SEARCH STILL THE AO IS EMPOWERED TO REOPEN THOSE PROCEEDINGS U/S 153A WITHOUT ANY FETTERS AND REASSESS TOTAL INCOME TAKING NOTE OF UNDISCLOSED INCOME IF ANY UNEARTHED DURING THE SEARCH. '20. A QUESTION MAY ARISE AS TO HOW THIS IS SOUGHT TO BE ACHIEVED WHERE AN ASSESSMENT ORDER HAD ALREADY BEEN PASSED IN RESPECT OF ALL OR ANY OF THOSE SIX ASSESSMENT YEARS EITHER UNDER SECTION 143(1)(A) OR SECTION 143(3) OF THE ACT. IF SUCH AN ORDER IS ALREADY IN EXISTENCE HAVING OBVIOUSLY BEEN PASSED PRIOR TO THE INITIATION OF THE SEARCH/REQUISITION THE ASSESSING OFFICER IS EMPOWERED TO REOPEN THOSE PROCEEDINGS AND REASSESS THE TOTAL INCOME TAKING NOTE OF THE UNDISCLOSED INCOME IF ANY UNEART HED DURING THE SEAR CH. 5 1 . THE ABOVE OBSERVATIONS OF HONBLE HIGH COURT WHICH ARE THOUGH OBITER DICTA MAKE IT POINT CLEAR THAT WHERE AN ASSESSMENT ORDER HAS ALREADY BEEN PASSED FOR A YEAR OF YEARS WITHIN THE RELEVANT SIX ASSESSMENT YEARS THEN THE AO I S DULY BOUND TO REOPEN THOSE PROCEEDINGS AND REASSESS THE TOTAL INCOME BUT BY TAKING NOTE OF THE UNDISCLOSED INCOME IF ANY UNEARTHED DURING THE SEARCH. THE EXPRESSION UNEARTHED DURING THE SEARCH IS QUITE SIGNIFICANT TO DENOTE THAT IN RESPECT OF COMPLE TED OR NON - PENDING ASSESSMENT THE AO IS ALBEIT DUTY BOUND TO ASSESS OR REASSESS THE TOTAL INCOME BUT IF THERE IS SCOPE FOR ADDITIONS IN SUCH ASSESSMENT ON THE BASIS OF INCOME UNEARTHED DURING THE SEARCH HE CAN MAKE THE ADDITION. IN OTHER WORDS THE DETERMINATION OF TOTAL INCOME IN RESPECT OF THE ASSESSMENT YEARS FOR WHICH THE ASSESSMENTS ARE ALREADY COMPLETED ON THE DATE OF SEARCH SHALL NOT BE INFLUENCED BY THE ITEMS OF INCOME OTHER THAN THOSE BASED ON THE MATERIAL UNEARTHED DURING THE COURSE OF S EARCH. HOWEVER THE SCOPE OF SUCH DETERMINATION OF TOTAL INCOME IS DIFFERENT IN RESPECT OF THE YEARS FOR WHICH THE ASSESSMENTS ARE PENDING VIS - VIS THE YEARS FOR WHICH 31 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) ASSESSMENTS ARE NON - PENDING. THE TOTAL INCOME SHALL BE DETERMINED IN RESPECT OF ASSESSM ENT YEAR FOR WHICH ORIGINAL ASSESSMENTS HAVE ALREADY BEEN COMPLETED ON THE DATE OF SEARCH BY RESTRICTING ADDITIONS ONLY TO THOSE WHICH FLOW FROM INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH. IF NO INCRIMINATING MATERIAL IS FOUND IN RESPECT OF S UCH COMPLETED ASSESSMENT THEN THE TOTAL INCOME IN THE PROCEEDINGS U/S 153A SHALL BE COMPUTED BY CONSIDERING THE ORIGINALLY DETERMINED INCOME IF SOME INCRIMINATING MATERIAL IS FOUND IN RESPECT OF SUCH ASSESSMENT YEARS FOR WHICH THE ASSESSMENT IS NOT PENDI NG THEN THE TOTAL INCOME WOULD BE DETERMINED BY CONSIDERING THE ORIGINALLY DETERMINED INCOME PLUS INCOME EMANATING FROM THE INCRIMINATING MATERIAL FOUND DURING T HE COURSE OF SEARCH. IN RESPECT OF ASSESSMENT PENDING ON THE DATE OF SEARCH WHICH GOT ABA TE IN TERMS OF SECOND PROVISO TO SECTION 153A(1) THE TOTAL INCOME SHALL BE COMPUTED AFRESH UNINFLUENCED BY THE FACT WHETHER OR NOT THERE IS ANY INCRIMINATING MATERIAL. THIS POSITION OF LAW WHICH IS PRONOUNCED IN OUR OPINION WILL APPLY IN ALL THESE DECI SIONS. 5 2 . WE HAVE ALREADY OBSERVED THAT NO INCRIMINATING MATERIAL HAS BEEN FOUND RELATING TO THE YEAR IN WHICH THE ASSESSEE COMPANY HAS RECEIVED SHARE CAPITAL. THEREFORE IN OUR OPINION NO ADDITION ON ACCOUNT OF THE SHARE CAPITAL CAN BE SUSTAINED. ACCO RDINGLY ON THIS BASIS ITSELF WE DELETE THE ADDITION ON ACCOUNT OF SHARE CAPITAL IN EACH OF THE ASSESSMENT YEARS. 5 3 . EVEN ON MERIT WE NOTE THAT THE CASE OF THE ASSESSEE IS DULY COVERED BY THE DECISION OF ITAT INDORE BENCH IN THE CASE OF AC IT VS. KALAN I NDUSTRIES LTD (SU P R A) & M/S. FLEXI TUFF INTERNATIONAL LTD (SUPRA). WE NOTED FROM PAGE 172 OF THE ORDER OF THE TRIBUNAL THAT M/S RAPID COMMERCIAL & FINLEASE LTD. RCG FINANCE LTD. INDORE M/S. OPTIMATES TEXTILES INDUSTRIES LTD. AND HINDUSTAN CONTINENTAL PVT. LTD. ARE THE SAME PARTIES WHO HAVE INVESTED IN THE ASSESSEE COMPANY BY MAKING CONTRIBUTION TOWARDS THE SHARE CAPITAL WHICH WAS TREATED BY THE AO TO BE NON - GENUINE. WE NOTED THAT THIS TRIBUNAL DELETED THE ADDITION MADE BY T HE AO IN THE CASE OF M/S. FLEXI TUFF INTERNATIONAL LTD (SUPRA). THE ASSESSING OFFICER HERSELF HAS OBSERVED THAT SIMILAR PARTIES HAVE CONTRIBUTED THE CAPITAL IN THE CASE OF THE ASSESSEE. EVEN WE NOTED THAT THE ASSESSING OFFICER WHILE MAKING THE ADDITION IN THE CASE OF THE ASSESSEE RELYING ON THE ORDER IN THE CASE OF M/S. FLEXI TUFF INTERNATIONAL LTD FOR THE ASSESSMENT YEAR 2003 - 04 PASSED ON 31.3.2006 BUT IGNORED THE FACT THAT THE ADDITION MADE IN THE CASE OF M/S. FLEXI TUFF INTERNATIONAL LTD (SUPRA) IN RESPECT OF CAPITAL CONTRIBUTION MADE BY THESE COMPANIES HAVE ALREADY BEEN DELETED BY THE TRIBUNAL VIDE ITS ORDER DT.22.12.2006. WE ARE BOUND TO FOLLOW THE DECISION OF THE COORDINATE BENCH. LD D.R. DID NOT DISPUTE THIS FACT. WE ALSO NOTED THAT ALL THE AD DITION IN RESPECT OF SAID CONTRIBUTION 32 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) HAS BEEN MADE BY THE ASSESSING OFFICER ON THE BASIS OF STATEMENT OF THIRD PARTY RECORDED AT THE BACK OF THE ASSESSEE BY ADI OR BY THE STATEMENT RECORDED U/S.131. IN EACH OF THE STATEMENT NONE OF THE PERSON HAS DENIED THAT THEY HAVE ISSUED CHEQUE TO THE ASSESSEE TOWARDS THE CAPITAL CONTRIBUTION BUT THE PERSONS HAVE STATED THAT THEY RECEIVED CASH FROM SHRI GAURAV SHARMA AND IN LIEU OF THE CASH RECEIVED THEY HAVE CONTRIBUTED IN THE CAPITAL OF THESE COMPANIES. THE STATE MENT SO RECORDED WAS NOT PLACED BY THE AO BEFORE THE ASSESSEE FOR HIS REBUTTAL. THERE IS NO OPPORTUNITY FOR CROSS EXAMINATION WAS GIVEN BY THE ASSESSEE. THIS FACT IS APPARENTLY CLEAR NOT ONLY FROM THE ASSESSMENT ORDER BUT ALSO FROM THE REMAND REPORT SENT BY THE ASSESSING OFFICER IN WHICH THE AO HAS REQUESTED THE CIT(A) TO GIVE AN OPPORTUNITY TO THE ASSESSEE. THE RELEVANT PARAGRAPH OF THE REMAND REPORT ARE REPRODUCED AS UNDER: AS REGARDS THE CLAIM OF THE ASSESSEE REGARDING INADEQUATE OPPORTUNITY PROVI DED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ALSO THE DENIAL OF OPPORTUNITY TO CROSS EXAMINE THE PERSONS WHOSE STATEMENT WERE RECORDED AND USED AGAINST THE ASSESSEE IT IS REQUESTED THAT SINCE THE HONBLE CIT(A) HAS THE POWERS COTERMINOUS WITH T HE AO. IT IS REQUESTED THAT HE MAY KINDLY GRANT SUCH OPPORTUNITY DURING THE APPELLATE PROCEEDINGS OR IF DEEMED FIT DIRECT THE UNDERSIGNED TO PROVIDE SUCH OPPORTUNITY TO THE ASSESSEE. 5 4 . THIS IS SETTLED LAW IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF KISHINCHAND CHELLARAM (SUPRA) THAT NO ADDITION CAN BE MADE ON THE BASIS OF THE STATEMENT OF THE THIRD PARTY RECORDED AT THE BACK OF THE ASSESSEE ON WHICH THE ASSESSEE HAS RELIED. SIMILARLY ON THE BASIS OF THE LAW PRONOUNCED BY THE HONBLE SUPREME COURT IN THE CASE OF RAWATMAL DAULATRAM THE BURDEN OF PROOF WAS ON THE DEPARTMENT TO PROVE THAT THE AMOUNT BELONGED TO THE ASSESSEE AS THE REVENUE HAS ALLEGES THAT THE SHARE CAPITAL BROUGHT IN BY THE SHAREHOLDER IS NOT GENUINE. LETTERS O F MANAGER IN THE ABSENCE OF SAME BEING SUPPLIED TO THE ASSESSEE COULD NOT BE USED AGAINST THE ASSESSEE. IN THIS CASE WE NOTED THAT THERE WAS SEARCH & SEIZURE ACTION IN THE CASE OF DR. YOGIRAJ SHARMA BUT NO MATERIAL WAS FOUND DURING THE COURSE OF SEARCH WHICH MAY PROVE THAT DR. YOGIRAJ SHARMA ASSESSEE OR GAURAV SHARMA HAS GIVEN CASH OR THE FUNDS IN LIEU OF CHEQUES FOR THE PURPOSE OF CONTRIBUTING IN THE CAPITAL OF THE ASSESSEE. MERELY A THIRD PARTY HAS STATED IN THEIR STATEMENT RECORDED AT THE BANK OF THE ASSESSEE THAT THEY HAVE ISSUED CHEQUES AFTER RECEIVING CASH FROM SHRI GAURAV SHARMA THE ADDITION CANNOT BE SUSTAINED. EVEN NO EVIDENCE IS BROUGHT ON RECORD THAT THESE PARTIES WERE CARRYING ON ENTRY OPERATION BUSINESS AND WERE FILING RETURNS SHOWING THE INCOME FROM ENTRY OPERATION BUSINESS TO SUBSTANTIATE THEIR STATEMENTS. THE CASE IS DULY COVERED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS (SUPRA) IN WHICH THE HONBLE SUPREME COURT TOOK THE VIEW THAT IF THE SHA RE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM THE ALLEGED BOGUS SHAREHOLDERS WHOSE 33 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) NAMES ARE GIVEN TO THE AO THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENT IN ACCORDANCE WITH LAW BUT IT CANNOT BE REGARDED AS UNDIS CLOSED INCOME OF THE ASSESSEE COMPANY. EVEN HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. PEOPLES GENERAL HOSPITAL LTD. (2013) 356 ITR 65 (MP) FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS LTD (SUPRA) HELD THAT IF THE IDENTITY OF THE PERSON PROVIDING SHARE APPLICATION MONEY IS ESTABLISHED THEN THE BURDEN WAS NOT ON THE ASSESSEE TO PROVE CREDITWORTHINESS OF SAID PERSON. HOWEVER THE DEPARTMENT CAN PROCEED AGAINST THE SAID PERSONS IN ACCORDANCE WITH LAW. 5 5 . IN T HE CASE BEFORE US WE NOTED THAT ALL THE COMPANIES WHO HAS CONTRIBUTED TOWARDS THE SHARE CAPITAL OF THE ASSESSEE ARE DULY REGISTERED UNDER THE COMPANIES ACT WITH THE REGISTRAR OF COMPANIES. IT IS NOT A CASE WHERE THE COMPANIES ARE NOT IN EXISTENCE. THE CO MPANIES ARE HAVING THEIR RESPECTIVE PAN NOS. FILING THEIR INCOME TAX RETURNS HOLDING BANK ACCOUNT ISSUING CHEQUES IN FAVOUR OF THE ASSESSEE AS CONTRIBUTION TOWARDS SHARE CAPITAL. THE IDENTITY OF THE COMPANIES WHO HAVE CONTRIBUTED TOWARDS SHARE CAPITAL ARE DULY PROVED. THE TRANSACTION THAT THEY HAVE CONTRIBUTED TOWARDS SHARE CAPITAL IS ALSO PROVED AS THEY HAVE ISSUED CHEQUES BY SUBMITTING THE SHARE APPLICATION TO THE COMPANY AND THE COMPANY HAS ALLOWED THE SHARES IN THE NAME OF THOSE COMPANIES. THIS FA CT HAS NOT BEEN DENIED. MERELY BECAUSE THESE COMPANIES ARE NOT ABLE TO PROVE THE SOURCE FROM WHERE THEY HAVE INVESTED AND DEPOSITED THE AMOUNT IN THEIR BANK ACCOUNTS THE ASSESSEE CANNOT BE MADE LIABLE AS IN OUR OPINION THE ASSESSEE IS NOT REQUIRED TO P ROVE THE SOURCE OF SOURCE. THE PROVISO IN SECTION 68 HAS BEEN INSERTED W.E.F.1.4.2013 AND THEREFORE THE ONUS TO PROVE THE NATURE AND SOURCE OF SUCH SUM SO CREDITED SHALL BE ON THE ASSESSEE ONLY FROM ASSESSMENT YEAR 2013 - 14 NOT PRIOR TO THAT. HONBLE JURI SDICTIONAL HIGH COURT IN THE CASE OF CIT VS. METACHEM INDUSTRIES 245 ITR 160(MP) HAS ALSO TAKEN THE SIMILAR VIEW. EVEN THE HONBLE GUJARAT HIGH COURT IN THE CASE OF DEPUTY COMMISSIONER OF INCOME TAX VS ROHINI BUILDER 256 ITR 360 (GUJ) HAS ALSO TAKEN TH E VIEW THAT THE ASSESSEE IS NOT REQUIRED TO PROVE THE SOURCE OF SOURCE. ON THIS BASIS ALSO FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS (SUPRA) THE ADDITIONS MADE ARE TO BE DELETED. THE AO IS DIRECTED TO TAKE ACTION IN THE HANDS OF THE COMPANIES/PERSONS WHO HAS CONTRIBUTED TOWARDS SHARE CAPITAL IN THE CASE OF THE ASSESSEE IN ACCORDANCE WITH LAW IN RESPECT OF WHICH THE ADDITION HAS BEEN MADE. THUS WE ACCORDINGLY ALLOW THE GROUND NOS.3 4 5 IN EACH OF THE ASSESSMENT YE ARS. 34 IT(SS) NOS. 168 - 170 & 199 - 205/IND/2013 & CO NOS. 91 - 95/IND/2013 (ASST. YEARS : 2003 - 04 TO 2008 - 09) 56 . GROUND NO.6 IN EACH OF THE ASSESSMENT YEARS IS CONSEQUENTIAL FOR CHARGING OF INTEREST UNDER SECTION 234A 234B & 234C OF THE ACT. WE ACCORDINGLY DIRECT THE AO TO RE - COMPUTE THE INTEREST UNDER SECTION 234A 234B AND 234C AFTER GIVING EFFECT TO TH IS ORDER. 57 . IN THE RESULT ALL THE APPEALS OF THE REVENUE ARE DISMISSED AND CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN ACCORDANCE WITH RULE 34(4) OF ITAT RULES BY PUTTING ON THE NOTICE BOARD AT INDORE ON . SD/ - SD/ - ( MUKUL SRAWAT ) (P.K.BANSAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / DATED 17/11 /2014 B.K.PARIDA SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. . 6. / GUARD FILE. / BY ORDER ASST. REGISTRAR ITAT //TRUE COPY//