DCIT - 14(2)(2), vs M/S MISHAL CONSTRUCTION P. LTD, MUMBAI

Income Tax Appellate Tribunal, MUMBAI ‘B’ BENCH, MUMBAI

Appearances by Himanshu Sharma for the appellant None for the respondent Date of concluding the hearing : December 13, 2021 Date of pronouncement of order : December 23, 2021 O R D E R Per Pramod Kumar, VP:

1. 1. These five appeals pertains to the same assessee, arises out of materially similarly set of facts and heard together. As the matter of convenience therefore all the five appeals are being disposed of by way of this common order.

2. We first take up the appeal for the assessment year 2010-11 which is lead appeal.

3. By way of this appeal the Assessing Officer has challenged correctness of the order dated 28th February 2019, passed by the learned Commissioner of Income Tax in the matter of assessment u/s. 143(3) r.w.s. 147 of the Income Tax Act 1961, for the assessment year 2010- 11on the following grounds:

1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 3,05,00,000/ - made by the AO u/s 68 in respect of unsubstantiated unsecured loans." to 3565/Mum/2019 Assessment years: 2010-11 to 2014

15. Page 2 of 11

"On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the assessee had discharged the primary onus cast upon it, without addressing the significant improbabilities identified by the AO particularly vide Para 4.4 and 4.9 of his order." 3. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in failing to appreciate that documents furnished by the assessee have to be seen in the light of antecedent circumstances before concluding in respect of genuineness of a transaction. 4. "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of interest of Rs. 17,80,807/-claimed to have been paid to the lenders of the above loans which remained unsubstantiated." 5. "The appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal

at any time before or at the time of hearing of appeal." 6. "The appellant prays that the order of CIT(A) on the above ground be set-aside and that of the assessing officer be restored.”

4. Briefly stated the material facts are like this. It is a case of reopened assessment proceedings during the course of resultant assessment proceedings. The Assessing Officer noted that during the relevant previous year the assessee have obtained unsecured loans from various parties aggregating to Rs. 4,45,000,00/- and paid interest of Rs. 25,00,817/- thereon. The details of these loans are as follows:- 4.1 On verification of balance sheet filed by the assessee during the course of assessment proceedings, it is seen that during the current year it has obtained unsecured loan from various person. The assessee company has obtained loans (from concerns other than the directors and their relatives) during the F.Y 2009-10 relevant to the assessment year 2010-11 following amounts as loans:

Sr. No Name of the concern Total amount Total interest accrued received as unsecured on the loan during loan during A.Y AY 2010-11 2010-11 1. BloomdaleFinvest Pvt. Ltd. 45,00,000 2,54,022 2. Divyadhwani Investment Pvt. Ltd. 20,00,000 66,871 3. Jai Hind Mercantile Pvt. Ltd. 65,00,000 2,65,561 4. Lalita Exports Pvt. Ltd. 60,00,000 4,60,406 5. Kuvam International Pvt Ltd. 1,40,00,000 7,20,000 6. Plumetti Exports Pvt. Ltd. 95,00,000 6,17,376 7. Tinal Pharmaceuticals Pvt. Ltd. 20,00,000 1,61,581 Total 4,45,00,000 1,61,581

When the matter was probed further and the assessee was required to furnish documentary evidences to prove identity creditworthiness and financial capacity of the investors. to 3565/Mum/2019 Assessment years: 2010-11 to 2014-15 Page 3 of 11 The assessee declined to comply with the requisition on the ground that the time given to the assessee was too short. The assessee was further given some time the complied with the requisition and in the meantime notices u/s. 133 sub section 6 were issued to the persons from whom the assessee had borrowed the above funds. In response of these notices one person filed the details by way of bank statements and ITR’s etc. The Assessing Officer noticed that file of the companies from which unsecured loans are taken are at the same address and even the directors of the same. It was further noticed that there have been corresponding deposits of similar amount just immediately prior to the money is being received through these companies. While admittedly the details the money were received through banking channels. The Assessing Officer did question bonafides and genuineness of these transactions. It was this backdrop that the Assessing Officer proceeded to made an addition of the unexplained cash credits in question aggregating to Rs. 3,05,00,000/- and disallowed interest payment of such unsecured loan aggregating to Rs. 17,80,807/-. While doing so the Assessing Officer observed as follows:- 4.4 However, on verification of Copies of returns of income and copies of bank statements of persons from whom loans are borrowed, it was seen that the parties were filing their returns of income with total income being much less than the amount of money invested given as loan in many cases. Further, no profit and loss account or balance sheet or capital account of these parties was filed by the assessee company despite being asked specifically. In the absence of any such details filed, the creditworthiness of the parties to lend such huge sums of money cannot be ascertained. In fact perusal of extract of the bank statement of these parties shows that these parties do not have any regular source of income. Funds of exactly equal amounts are credited to bank accounts by way of clearing immediately prior to alleged investment and these funds are subsequently advanced as share application money. Also, observed was that funds remain in these loans parties accounts for a very short period of a few days and in some cases the funds are transferred on the same day on which the amount was deposited. For example, on verification of the details field it is seen that M/s. Plumetti Exports Pvt Ltd has filed its return of income for A.Y. 2010-11 declaring total income at Rs. 9,96,502/- and on further verification of bank statement, it is seen that there is a deport of Rs. 27.25 lacs on 02.05.2009 and on the same day the amount was transferred to the assessee company, which is not in line with the income declared by it in the return of income. The same is the case for other payments of the above party to the assessee company and in the case of other party as well. Merely routing transactions through banking channel without justifying the nature of these deposits with the regular sources of income would not lead to conclusion that the share applicant has creditworthiness. 4.5 Therefore in view of these specific observations and without prejudice to the fact that the assessee company has not been able to discharge its onus to establish the creditworthiness, genuineness as well as identity of the alleged share applicant with the credible documentary evidence. 4.6 In view of above adverse findings and observations, was asked to show cause as to why the amount received from the above parties should not be treated as unexplained cash credit u/s 68 of the Act and added to its total income to personally produce the alleged the persons from whom loans borrowed before the undersigned for verification as the onus lies upon it to prove the genuineness of the transactions with the identity as well as creditworthiness of the persons from whom loans borrowed. to 3565/Mum/2019 Assessment years: 2010-11 to 2014-15 Page 4 of 11 4.7 In response to the above show cause, the assessee company has not filed any further details or explanations till date. The assessee company has also not produced the persons for verification at this office despite being directed to do so. Further, no justification has been provided in response to show cause issued as to why alleged loans borrowed should not be treated as unexplained cash credit u/s 68 of the Act. 4.8 It is observed at Para 4.4 above from the partial details filed by the assessee company with regard to these parties that the creditworthiness of these parties have not been established. 4.9 It is quite strange to note here that letter could be filed in response to the notice u/s 133(6) but the assessee could not attend the office personally and that also in spite of the Assessing Officer asked to do so, only one entity i.e. Kuvam International Pvt. Ltd. appeared and submitted the details called for. The partial details allegedly filed by these parties also do not contain any seal of those companies. Further, the identity as well as genuineness of the signatory claiming to be authorized signatory of these alleged entities is not known or verifiable from these papers. Further, the details filed also do not contain any documentary evidence to establish creditworthiness of those parties. These submissions give in response to notice u/s 133(6) have been allegedly stage managed by the assessee company to show mechanical & partial compliance to the requirements of section 68 to the extent of filing of some papers only to allegedly demonstrate that the alleged share applicants are actually existent but these documents also do not establish the creditworthiness, identity of these parties or genuineness of the alleged transactions. The assessee company has not been producing these parties before the undersigned only for the simple reason that the parties are merely accommodation entry providers and it does not have any credible sources to invest such huge sums of money in the assessee company. Therefore, the assessee company does not want to subject them to examination on oath by the undersigned to unearth the true state of their affairs. 4.10 The onus lies on the assessee company to establish the identity, creditworthiness of the parties and genuineness of the transaction with necessary and sufficient documentary evidence. In absence of the same, it clearly suggests that the assessee company is deliberately avoiding furnishing of requisite details by not complying fully with the terms of the statutory notices issued, specific query raised vide order sheet notings and show cause issued to it. It is settled law that mere furnishing of particulars is not enough. Mere payment by account payee cheque is not sacrosanct nor can it make a non-genuine transaction genuine. Documentary façade created by the assessee company cannot be accepted as being genuine in view of the surrounding facts and circumstances of the case discussed in detail above. 4.11 Sections 68 of Income-tax Act, 1961 reads as under:- "Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the assessing officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year." 4.12 Thus, the conditions for applicability of section 68 are (i) Existence of books of account; (ii) A credit of sum in the books of account of an assessee; and (iii) Absence of a satisfactory explanation or no explanation by the assessee about the nature and source of the sum credited. It needs no elaboration that through a catena of decisions the Courts have laid down the following three fundamental tests which have to be established by the assessee to to 3565/Mum/2019 Assessment years: 2010-11 to 2014-15 Page 5 of 11 discharge the burden under section 68 of the Act are i) Identity of the creditor; ii) Creditworthiness of the creditor, and iii) Genuineness of the transaction. 4.13 The burden of proof to establish the three fundamental tests laid down by the various decisions lies on the assessee in whose books of account a sum is found to be credited. The principle has been firmly established by the Apex Court in various judgments, some of which are highlighted as under: -  Supreme Court in case of CIT v. P. Mohanakala (2007] 291 ITR 278 / 161 Taxman 169 held that the expression "assessee offers no explanation" means where the assessee offers no proper, reasonable and acceptable explanation as regards the sum found credited in the books maintained by the assessee.  The law is well-settled that the onus of proving the source of a sum of money found to have been received by an assessee is on him and where the nature and source of a receipt, whether it be of money or other property, cannot be satisfactorily 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 [Roshan Di Hatti v. CIT [1977] 107 ITR 938 (SC)]  The burden to prove the genuineness of cash credit lies on the taxpayer. If the assessee fails to prove satisfactorily the source and nature of amounts of cash received and creditworthiness of the creditor, the AO is entitled to draw inference that the receipts are of an assessable nature [A. Govindarajulu Mudaliar v. CIT [1958] 34 IT 807 (SC)] 4.14 As a matter of fact, Section 68 is a statutory recognition of what was previously established by judicial decisions to the effect that where certain sums of money were claimed by the assessee to have been borrowed from certain persons, it was for the assessee to prove by cogent and proper evidence that there were genuine borrowings as the facts are exclusively within the assessee's knowledge. This has been noted in the decisions of [Sikri& Co. P. Ltd V. CIT 106 IT 682,688; CIT Vs. KulwantKaur 121 IT 914; CIT Vs. Sahibganj Electric Cables P Ltd, 115 IT 408,414]. 4.15 In Bharti P. Ltd. Vs. CIT -111 IT 951; CIT vs. W J Walker & Co 117 IT 690; CIT Vs. United Commercial Co. 187 IT 596; the Hon'ble Calcutta High Court has held that mere filing of confirmatory letters does not discharge the onus that lies on the assessee. 4.16 In CIT Vs. Precision Finance Pvt. Ltd. 208 IT 465; Nizam Wool Agency Vs. CIT 193 ITR 318; the Hon'ble Courts have held that mere furnishing of particulars is not enough. Mere payment by account payee cheque is not sacrosanct nor can it make a non-genuine transaction genuine. 4.17 In SumatiDayal V. CIT ((1995) 214 IT 801,806, 808-809 (SC)], the Apex Court has observed that - apparent must be considered real until it is shown that there are reasons to disbelieve that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and matter has to be considered by applying the test of human probabilities. to 3565/Mum/2019 Assessment years: 2010-11 to 2014-15 Page 6 of 11 4.18 DCIT vs. Smt. Phoolwati Devi (2009) 314 ITR AT1 (Delhi) wherein the Hon'ble ITAT, Delhi Bench held that "despite the documentation supporting the claim of the assessee superficially, the evidence could not be accepted in view of the surrounding circumstances and human probabilities. There were certain features of the case which belie the documentary evidence" 4.19 Kachwala Gems vs JCIT (2006) 206 CTR (SC) 585, 2858 ITR 10 (SC), wherein the Hon'ble Apex Court held that payment by account payee cheque is not sufficient to establish the genuineness of transactions. 4.20 CIT vs Prashant (P) (1994) 121 CTR (Cal) 20, wherein the Calcutta High Court has held that even payment by account payee cheque is not sacrosanct and it would not make an otherwise non-genuine transaction genuine. 4.21 CIT Vs Durga Prasad More 82 ITR.540(SC) wherein it is held by the Apex Court that where a party relies on self-serving recitals in a document, it is for that party to establish the truth of these recitals. It was further held by the Apex Court in this case that the tax authorities are entitled to look into the surrounding circumstances to find out the reality of such recitals. The Hon'ble Apex Court has specifically observed as under: "Science has not yet invented any instrument to test the reliability of the evidence placed before a Court or Tribunal. Therefore, the Courts and Tribunals are applying the test of human probabilities. Human minds may differ as to the reliability of a piece of evidence.” 4.22 Juggilal Kamlapat Vs CIT 73 IT 702(SC), wherein it was held that the Assessing Officer could go beyond the legal form and find out substance having regard to the economic realities behind the legal facade. 4.23 It is quite clear from the above discussion that in the instant case, the assessee company has failed to discharge its burden of establishing the identity and creditworthiness of the alleged parties & genuineness of the transaction of funds. 4.24 In view of above discussion, it is held that amount of Rs.3,05,00,000 /- is treated as unexplained cash credit within the meaning of section 68 of the Act and added to the total income of the assessee company. Penalty proceedings u/s 271(1)(c) of the Act are separately initiated for furnishing inaccurate particulars of income and concealment of income. 4.25 Since the assessee have not proved the genuineness of transaction and creditworthiness of the loan creditors. However, in view of the above specific observations, the interest paid to these parties and debited to the P & L account is disallowed and added back to the total income of the assessee. 4.26 In view of above discussion, the total unsecured loans received by the assessee amounting to Rs. 3,05,00,000 /- is added back to the total income of the assessee. Further total interest debited to the P & L account amounting to Rs.17,80,807 /- is disallowed and added back to the total income of the assessee company. Penalty proceedings u/s 271(1) (c) of the Act are separately initiated for furnishing inaccurate particulars of income and concealment of income. to 3565/Mum/2019 Assessment years: 2010-11 to 2014-15 Page 7 of 11 6. Aggrieved assessee carried the matter in appeal before the learned CIT(A). Learned CIT(A) referred to several judicial precedents and taking note of the fact that the amounts were received through banking channels and were supported by confirmation of account deleted the above addition and disallowance. While doing so learned CIT(A) observed as follows:- Thus, respectfully following the judicial decision of Hon’ble Apex Court and Hon’ble High Courts and Hon’ble ITAT and considering the fact that entire loans have been received though banking channel and supported with confirmation of account, bank statement, I.T. ack. Receipts and also considering the fact that the Appellant has repaid the loan amount, which support the argument of genuineness of the transactions, further the AO had not brought any contrary evidence on record to disapprove the loans. Therefore, I hold that AO is not justified in treating such loans as non-genuine and thus the addition made u/s. 68 cannot be sustained and is hereby deleted. I direct AO to delete the addition of Rs. 3,05,00,000/-. Then this ground of appeal

is allowed.

7. The Assessing Officer is aggrieved as in appeal before us.

8. We have heard the learned Departmental Representative but none appeared for the assessee. We also perused the material on record and duly considered facts of the case in the light of the applicable legal position.

9. We find that in the present case the Assessing Officer has granted the impugned relief simply of the basis that amounts are received through banking channels and the supported by the balance confirmation and bank statement etc. which, accordingly to the learned CIT(A), by itself prove genuineness of the transaction. Such an approach however is clearly unsustainable in law in view of the fact that the amounts having come through banking channels and the balance confirmation being on record cannot by itself prove or establish genuineness of the transaction while on the aspect of the matter we may usefully refer to following observations of the coordinate bench in the case of DCIT vs. Leena Power Tech Pvt Ltd. [2021] 130 taxmann.com 341 (Mumbai - Trib.) are as under:-

7. The fundamental question that we have to deal with is whether or not the learned CIT(A) was justified in deleting the addition of Rs. 8,13,29,600 as unexplained credit under section 68 in the hands of the assessee, and the most critical thing to be examined in this regard is explanation of the assessee with respect to these credits. There is no, and there cannot be any, dispute on the fundamental legal position that the onus is on the assessee to prove 'bonafides' or 'genuineness' of the share application money credited in his books of accounts. This approach finds support from the scheme of Section 68, which provides that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income tax as the income of that assessee for that previous year. The burden is thus on the assessee to prove the nature and source thereof, to the satisfaction of the Assessing Officer. Everything thus hinges on the explanation given by the assessee and on how acceptable is the explanation so given by the assessee. The next question is as to what is the kind of explanation that the assessee is expected to give. As noted by Hon'ble Delhi High Court, in the context of issuance of share capital and in the case of CIT v. Youth Construction (P.) Ltd. [2014] 44 to 3565/Mum/2019 Assessment years: 2010-11 to 2014-15 Page 8 of 11 taxmann.com 364/[2013] 357 ITR 197, "it involves three ingredients, namely, the proof regarding the identity of the share applicants, their creditworthiness to purchase the shares and the genuineness of the transaction as a whole". That is the approach adopted by Hon'ble Courts above all along. In the case of CIT v. United Commercial & Industrial Co. (P.) Ltd. [1991] 56 Taxman 304/187 ITR 596, Hon'ble Calcutta High Court has held that under the scheme of Section 68 "it was necessary for the assessee to prove prima facie the identity of creditors, the capacity of such creditors and lastly the genuineness of transactions". Similarly, in the case of Precision Finance (P.) Ltd. (supra), it was observed that "it is for the assessee to prove the identity of creditors, their creditworthiness and genuineness of transactions". It is thus also a settled legal position that the onus of the assessee, of explaining nature and source of credit, does not get discharged merely by filing confirmatory letters, or demonstrating that the transactions are done through the banking channels or even by filing the income tax assessment particulars. The genuineness of the transaction as a whole is thus a very important and critical factor in the examination of explanation of the assessee, as required under section 68, with respect to the share application monies received by an assessee.

8. It would thus appear that the learned counsel for the assessee is not really right in approaching on the basis as if the onus is on the Assessing Officer to prove the alleged money laundering racket - an onus that may perhaps be relevant only when the money laundering racket is being prosecuted, but that is something we are not really concerned about. As far as we are concerned, we must remain confined to the narrow issue of onus on the assessee to prove 'bonafides' or 'genuineness' of the share application money credited in his books of accounts, and that is the call we have to take in the light of facts before us and the ground realities of the commercial world. As we proceed to deal with the genuineness aspect, it is also important to bear in mind the fact that what is genuine and what is not genuine is a matter of perception based on facts of the case vis-à-vis the ground realities. The facts of the case cannot be considered in isolation from the ground realities. The allegation of the revenue is that the assessee has received share application money through a complex web of shell entities and multiple layering of the transfers from one company to another. It will, therefore, be useful to understand as to how the shell entities, which the share applicants are alleged to be, typically function, and then compare these characteristics with the facts of the case and in the light of well settled legal principles. A shell entity is generally an entity without any significant trading, manufacturing or service activity, or with high volume low margin transactions- to give it colour of a normal business entity, used as a vehicle for various financial manoeuvres. A shell entity, by itself, is not an illegal entity, but it is their act of abatement of, and being part of, financial manoeuvring to legitimise illicit monies and evade taxes, that takes it actions beyond what is legally permissible. These entities have every semblance of a genuine business- its legal ownership by persons in existence, statutory documentation as necessary for a legitimate business and a documentation trail as a legitimate transaction would normally follow. The only thing which sets it apart from a genuine business entity is lack of genuineness in its actual operations. The operations carried out by these entities, are only to facilitate financial maneuvering for the benefit of its clients, or, with that predominant underlying objective, to give the colour of genuineness to these entities. These shell entities, which are routinely used to launder unaccounted monies, are a fact of life, and as much a part of the underbelly of the financial world, as many other evils. Even laymen, much less Members of this specialized Tribunal, responsible public servants like IRS officers and very well educated and very well informed people like the learned counsel, cannot be oblivious of these ground realities. to 3565/Mum/2019 Assessment years: 2010-11 to 2014-15 Page 9 of 11

9. It is also important that when we examine the genuineness of the transactions entered into by the assessee, we must also bear in mind Hon'ble Supreme Court's observation, in the case of CIT v. Durga Prasad More [1971] 82 ITR 540, to the effect that "Science has not yet invented any instrument to test the reliability of the evidence placed before a court or tribunal. Therefore, the courts and Tribunals have to judge the evidence before them by applying the test of human probabilities". Similarly, in a later decision in the case of Sumati Dayal v. CIT [1995] 80 Taxman 89/214 ITR 801 (SC)], Hon'ble Supreme Court rejected the theory that it is for alleger to prove that the apparent and not real, and observed that, "This, in our opinion, is a superficial approach to the problem. The matter has to be considered in the light of human probabilities.... Similarly the observation.... that if it is alleged that these tickets were obtained through fraudulent means, it is upon the alleger to prove that it is so, ignores the reality. The transaction about purchase of winning ticket takes place in secret and direct evidence about such purchase would be rarely available In our opinion, the majority opinion after considering surrounding circumstances and applying the test of human probabilities has rightly concluded that the appellant's claim about the amount being her winning from races is not genuine. It cannot be said that the explanation offered by the appellant in respect of the said amounts has been rejected unreasonably". We will be superficial in our approach in case we examine the claim of the assessee solely on the basis of documents filed by the assessee and overlook clear the unusual pattern in the documents filed by the assessee and pretend to be oblivious of the ground realities. As Hon'ble Supreme Court has observed, in the case of Durga Prasad More (supra),………"it is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents". As a final fact finding authority, this Tribunal cannot be superficial in its assessment of the genuineness of a transaction, and this call is to be taken not only in the light of the face value of the documents sighted before the Tribunal but also in the light of all the surrounding circumstances, the preponderance of human probabilities and ground realities. There may be a difference in subjective perception on such issues, on the same set of facts, but that cannot be a reason enough for the fact-finding authorities to avoid taking subjective calls on these aspects, and remain confined to the findings on the basis of irrefutable evidence. Hon'ble Supreme Court has, in the case of Durga Prasad More (supra), observed that "human minds may differ as to the reliability of a piece of evidence but in that sphere the decision of the final fact finding authority is made conclusive by law". This faith in the Tribunal by Hon'ble Courts above makes the job of the Tribunal even more onerous and demanding and, in our considered view, it does require the Tribunal to take a holistic view of the matter, in the light of surrounding circumstances, the preponderance of probabilities and ground realities, rather than being swayed by the not so convincing, but apparently in order, documents and examining them, in a pedantic manner, with the blinkers on.

10. We may also add that the phenomenon of shell entities being subjected to deep scrutiny by tax and enforcement officials is rather recent, and that, till recently, little was known, outside the underbelly of the financial world, about modus operendi of shell entities. There were, to 3565/Mum/2019 Assessment years: 2010-11 to 2014-15 Page 10 of 11 therefore, not many questions raised about the genuineness of transactions in respect of shell entities. That is not the case any longer. Just because these issues were not raised in the past does not mean that these issues cannot be raised now as well, and, to that extent, the earlier judicial precedents cannot have blanket application in the current situation as well. As Hon'ble Supreme Court has observed in the case in Mumbai Kamgar Sabha v. Abdulbhai Faizullabhai AIR 1976 SC 1455 "It is trite, going by Anglophonic principles that a ruling of a superior court is binding law. It is not of scriptural sanctity but of ratio-wise luminosity within the edifice of facts where the judicial lamp plays the legal flame. Beyond those walls and de hors the milieu we cannot impart eternal vernal value to the decisions, exalting the precedents into a prison house of bigotry, regardless of the varying circumstances and myriad developments. Realism dictates that a judgment has to be read, subject to the facts directly presented for consideration and not affecting the matters which may lurk in the dark". Genuineness of transactions thus cannot be decided on the basis of inferences drawn from the judicial precedents in the cases in which genuineness did come up for examination in a very limited perspective and in the times when shell entities were virtually non-existent.

11. The above approach has met the judicial approval as recently as 2018 when one of the decisions of this Tribunal, authored by one of us (i.e. the Vice President), in the case of Pavankumar M Sanghvi (supra) came up for consideration before Hon'ble Gujarat High Court, and Their Lordships of Hon'ble Gujarat High Court, in the judgment reported as Pavankumar M Sanghvi v. ITO [2018] 90 taxmann.com 386/404 ITR 601 approved the said approach and declined to interfere in the matter by observing that "the Tribunal has minutely examined the position of the lenders, the circumstances under which, the amounts were allegedly loaned to come to the conclusion that the transactions were not genuine". The genuineness of the transactions and examination of circumstances in which money was received was thus approved to be the determinative factor. The matter did not end there. The assessee brought the matter before Hon'ble Supreme Court in a special leave petition, and Their Lordships of Hon'ble Supreme Court, in the judgment reported as Pavankumar M Sanghvi v. ITO [2018] 97 taxmann.com 398/258 Taxman 160, dismissed the special leave petition and declined to interfere as well. What essentially follows is that genuineness of a transaction is one of the most important, foundational and critical factors in determining whether explanation given by the assessee is acceptable or not is its genuineness and this genuineness is to be examined in the light of ground realities, rather than random extracts from judicial precedents isolated from their true context as an exposition of law on a standalone basis. Undoubtedly, that is a subjective exercise, but that cannot be excuse enough to fight shy of this call of duty and not to probe the matter properly for taking a well-considered call on whether the impugned share application monies received, in this case, a genuine transaction or not. We cannot, as we have noted earlier as well, afford to be rather superficial in this respect. Being superficial in approach is not only against the ethos of the judiciary, but certainly an antithesis for justification of the specialized Tribunals like this Tribunal. Unlike in a court of law, this Tribunal has the benefit of expertise of technical members, from accountancy and revenue service background, and the least expected of them is to ensure that the facts are properly analyzed, in the light of expert domain knowledge they have or they are legitimately expected to have, and set out the same before application of the legal principles on those facts. That is the approach that has been upheld right upto Hon'ble Supreme Court in the case of Pavankumar M Sanghvi (supra). On a somewhat similar note, and particularly in the context of issuance of shares at high premium to the companies which are seemingly shell companies, Hon'ble Supreme Court has, in the case of Pr. CIT v. NRA Iron & Steel (P.) Ltd. [2019] 103 taxmann.com 48/262 Taxman 74/412 ITR 161 observed that "The practice of

DCIT - 14(2)(2), vs. M/S MISHAL CONSTRUCTION P. LTD, MUMBAI