ITO 13(3)(3), MUMBAI vs. VULVAN TRADERS P. LTD, MUMBAI

आदेश / O R D E R Per Joginder Singh (Vice President)

The Revenue as well as assessee is in cross appeal

against the impugned order dated 09/04/2015 of the Ld.

First Appellate Authority, Mumbai. First, we shall take up

the appeal of the assessee (ITA No.4144/Mum/2015),

wherein, grounds no. 1 to 5, raised by the assessee, is with

respect to reopening of assessment under section 147/148

of the Income Tax Act, 1961 (hereinafter the Act).

Shri Neelkanth Khandelwal, drew our attention to the

reasons recorded by the Ld. Assessing Officer by

contending that in the reasons, the name of the assessee

has not been mentioned to the effect that from where the

share capital was received. It was contended that the

reasons recorded by the Ld. Assessing Officer are

incomplete and the reopening was objected by the

assessee. The crux of the argument is that the reasons so

recorded cannot be improved upon by the Ld. Assessing

Officer at the later stage. Our attention was invited to the

statement of facts available at Page-3 of the paper book. It

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was pleaded that the assessment was reopened on

25/03/2013 whereas the search was carried out on

01/10/2013. Plea was also raised that the payment is

through banking channel and even the Ld. Commissioner

of Income Tax (Appeal) granted relief to the assessee

amounting to Rs.2.76 crores, which has been challenged by

the Revenue by way of cross appeal. On the other hand, the

Ld. DR, Shri Rajiv Gubgotra, defended the reopening of

assessment by submitting that the Ld. Assessing Officer

received information with respect to the transactions,

therefore, the reasons recorded by the Ld. Assessing Officer

are sufficient. The reopening of assessment was defended.

2.1. We have considered the rival submissions and

perused the material available on record. So far as, re-

opening of assessment u/s 147/148 of the Act on the plea

that the Ld. Assessing Officer ignored the fact that there

was no reason to believe that income has escaped

assessment as there was no tangible material with the

Assessing Officer and independent application of mind is

concerned, we find that the assessee company, during the

relevant time, was engaged in the business of general

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merchants, trader in goods and commodities on ready or

forward basis, commission agents, brokers, importers

besides sale and dealing in shares and stocks etc, declared

income of Rs.9,290/- in its return filed on 18/09/2008,

which was processed under section 143(1) of the Act on

19/08/2009. Subsequently, the Ld. Assessing Officer

recorded the reasons and reopened the assessment under

section 147/148 of the Act. The assessee asked for the

reasons which were provided to the assessee. The reasons

of reopening are as under:-

“It was alleged that appellant company has taken accommodation entries to the tune of Rs.2,76,70,000/- from one Shri Surendra Kumar Jain group in lieu of cash in the form of share capital/share premium/loan. The Assessing Officer also stated in the reasons recorded that analysis of ITR of the appellant showed that there was increase in the issued capital from Rs.9,70,000/- to Rs.97,55,000/- and also that securities premium of Rs.11,78,10,000/- was received during the year.” Pursuant to notice under section 148 of the Act,

issued to the assessee, vide written submissions dated

28/11/2013 the assessee raised objections and challenged

the reopening of assessment on the plea that even the

Department does not know the name of the party from

whom the alleged accommodation entries were received and

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the reassessment was done merely on the basis of

suspicion.

2.2. In the light of the foregoing discussions, it is our

bounded duty to examine the validity of reopening u/s 147

r.w.s 148 of the Act, therefore, before adverting further we

are reproducing hereunder the relevant provision of section

147 of the Act for ready reference and analysis:-

“. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are

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the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1.—Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.—For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :— (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E; (c) where an assessment has been made, but— (i) income chargeable to tax has been underassessed ; or (ii) such income has been assessed at too low a rate ; or (iii) such income has been made the subject of excessive relief under this Act ; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed; (d) where a person is found to have any asset (including financial interest in any entity) located outside India. Explanation 3.—For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148. Explanation 4.—For the removal of doubts, it is hereby clarified that the provisions of this section, as amended by the Finance Act,

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2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012.”

2.3. If the aforesaid provision of the Act is analyzed,

we find that after insertion of Explanation -3 to section 147

of the Act by the Finance (No.2) Act of 2009 with effect from

01/04/1989 section 147 has an effect that Assessing

officer has to assess or reassess income (such income)

which has escaped assessment and which was basis of

formation of belief and, if he does so, he can also assess or

reassess any other income which has escaped assessment

and which came to the notice during the course of

proceedings. Identical ratio was laid down by Hon’ble

jurisdictional High Court in CIT vs Jet Airways India Pvt.

Ltd. (2010) 195 taxman 117 (Mum.) and the full Bench

decision from Hon’ble Kerala High Court in CIT vs Best

Wood Industries and Saw Mills (2011) 11 taxman.com 278

(Kerala)(FB). A plain reading of explanation-3 to section

147 clearly depicts that the Assessing Officer has power to

make addition, where he arrived to a conclusion that

income has escaped assessment which came to his notice

during the course of proceedings of reassessment u/s

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147/148 of the Act. Our view is fortified by the decision in

Majinder Singh Kang vs CIT (2012) 25 taxman.com

124/344 ITR 358 (P & H) and Jay Bharat Maruti Ltd. Vs

CIT (2010) Tax LR 476 (Del.) and V. Lakshmi Reddy vs ITO

(2011) 196 taxman 78 (Mad.). The provision of the Act is

very much clear as with effect from 01/04/1989, the

Assessing Officer has wide powers to initiate proceedings of

reopening. The Hon’ble Kerala High Court in CIT vs Abdul

Khadar Ahmad (2006) 156 taxman 206 (Kerala) even went

to the extent so long as the AO has independently applied

his mind to all the relevant aspect and has arrived to a

belief the reopening cannot be said to be invalid.

2.4. We are aware that “mere change of opinion”

cannot form the basis of reopening when the necessary

facts were fully and truly disclosed by the assessee in that

situation, the ITO is not entitled to reopen the assessment

merely on the basis of change of opinion. However, powers

under amended provision are wide enough where there is a

reasonable belief with the Assessing Officer, that income

has escaped assessment, because the powers with effect

from 01/04/1989 are contextually different and the

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cumulative conditions spelt out in clauses (a) and (b) of

section 147, prior to its amendment are not present in the

amended provision. The only condition for action is that

the Assessing Officer “should have reason to believe” that

income chargeable to tax has escaped assessment. Such

belief can be reached in any manner and is not qualified by

a pre-condition of faith and true disclosure of material facts

by an assessee as contemplated in pre-amended section

147 of the Act. Viewed in that angle, power to reopen

assessment is much wider under the amended provision.

Our view is fortified by the decision from Hon’ble Delhi

High Court in Bawa Abhai Singh vs DCIT (2001) 117

taxman 12 and Rakesh Agarwal vs ACIT (1996) 87 taxman

306 (Del.). The Hon’ble Apex Court in CIT vs Sun

Engineering works Pvt. Ltd. 198 ITR 297 (SC) clearly held

that proceedings u/s 147 are for the benefit for the

Revenue, which are aimed at gathering the ‘escaped

income’. At the same time, we are aware that powers u/s

147 and 148 of the Act are not unbridled one as it is

hedged with several safeguards conceived in the interest of

eliminating room for abuse of this power by the AO.

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However, the material available on record, clearly indicates

that income chargeable to tax had escaped assessment,

therefore, the ld. Assessing Officer was within his

jurisdiction to reopen the assessment. The Hon’ble Apex

Court in Ess Ess Kay Engineering Co. Pvt. Ltd. (2001) 247

ITR 818 (SC) held that merely because the case of the

assessee was correct in original assessment for the relevant

assessment year, it does not preclude the ITO to reopen the

assessment of an earlier year on the basis of finding of

facts that fresh material came to his knowledge.

2.5. Under section 147, as substituted with effect

from 01/04/1989, the scope of reassessment has been

widened. After such substitution, the only restriction, put

in that section is that “reason to believe”. That reason has

to be a reason of a prudent person which should be fair

and not necessarily due to failure of the assessee to

disclose fully and partially some material facts relevant for

assessment (Dr. Amin’s Pathology Laboratory vs JCIT

(2001) 252 ITR 673, 682 (Bom.) Identical ratio was laid

down by Hon’ble Delhi High court in United Electrical

Company Pvt. Ltd. vs CIT (2002) 258 ITR 317, 322 (Del.)

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and Prafull Chunnilal Patel vs ACIT 236 ITR 832, 838

(Guj.). The essential requirement for initiating

reassessment proceeding u/s 147 r.w.s 148 of the Act is

that the ld. Assessing Officer must have reason to believe

that any income chargeable to tax has escaped assessment.

The Hon’ble Gujarat High Court in Prafull Chunnilal

Patel vs ACIT (supra) even went to the extent that at

the initiation stage formation of reasonable belief is

needed and not a conclusive finding of facts. Identical

ratio was laid down in Brijmohan Agrawal vs ACIT (2004)

268 ITR 400, 405 (All.) and Ratnachudamani S. Utnal vs

ITO (2004) 269 ITR 272, 277 (Karnataka) applying

Sowdagar Ahmed Khan vs ITO (1968) 70 ITR 79(SC).

2.6. So far as, the meaning of expression, “reason to

believe” is concerned, it refers to belief which prompts the

Assessing Officer to apply section 147 to a particular case.

It depend upon the facts of each case. The belief must be of

an honest and reasonable person based on reasonable

grounds. The Assessing Officer is required to act, not on

mere suspicion, but on direct or circumstantial evidence.

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Our view find support from the ratio laid down in following

cases:-

i. Epica Laboratories Ltd. vs DCIT 251 ITR 420, 425-426 (Bom.), ii. Vishnu Borewell vs ITO (2002) 257 ITR 512 (Orissa), iii. Central India Electric Supply Company Ltd. vs ITO (2011) 333 ITR 237 (Del.), iv. V.J. Services Company Middle East ltd. vs DCIT (2011) 339 ITR 169 (Uttrakhand), v. CIT vs Abhyudaya Builders (P. ) Ltd. (2012) 340 ITR 310 (All.), vi. CIT vs Dr. Devendra Gupta (2011) 336 ITR 59 (Raj.), vii. Emirates Shipping Line FZE vs Asst. DIT (2012) 349 ITR 493 (Del.). viii. Reference may also made to following judicial decisions:- ix. Safetag international India P. Ltd. (2011) 332 ITR 622 (Del.), x. CIT vs Orient Craft Ltd. (2013) 354 ITR 536 (Del.) xi. Acorus Unitech Wirelss Pvt. Ltd. vs ACIT (2014) 362 ITR 417 (Del.). xii. Praful Chunilal Patel: Vasant Chunilal Patel vs Asst. CIT (1999) 832, 843-44, 844-45 (Guj.), xiii. Venus Industrial Corporation vs Asst. CIT (1999) 236 ITR 742, 746 (Punj.), xiv. Srichand Lalchand Talreja vs Asst. CIT (1998) 98 taxman 14, 19 (Bom.), xv. Usha Beltron Ltd. vs JCIT (1999) 240 ITR 728, 736-37, 739 (Pat.) xvi. Kapoor Brothers vs Union of India (2001) 247 ITR 324, 331, 332-33 xvii. Vippy Processors Pvt. Ltd. vs CIT (2001) 249 ITR 7, 8 (MP)

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2.8. In Dilip S. Dahanukar vs Asst. CIT (2001) 248 ITR

147, 150-51 (Bom.). The Hon’ble jurisdictional High Court

held as under:-

“Held, that there was material on record on the basis of survey and statement of person to show that the assessee had wrongfully claim deduction u/s 80IA. Therefore, the Assessing Officer had reason to believe that income had escaped assessment for assessment year 1994- 95.”

Identically in the case of Srichand Lalchand Talreja

v. Asst. CIT, (1998) 98 Taxman 14, 19 (Bom), where the

information regarding acquisition of the asset was not

available with the Assessing Officer during the relevant

assessment year 1992-93 and such information was

disclosed in the return for the assessment year 1995-

96, the Hon’ble jurisdictional High Court held that the

Assessing Officer can form a bona fide belief that there

was escapement of income in relation to assessment

year 1992-93.

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2.9. The Hon’ble jurisdictional High Court in Export

Credit Guarantee Corporation of India Ltd. v. Addl. CIT,

(2013) 350 ITR 651 (Bom), where there had been no

application of mind to the relevant facts during the course

of the assessment proceedings by the Assessing Officer, the

reopening of the assessment was held to be valid.

2.10. The Hon’ble jurisdictional High Court in

Girilal & Co. v. S.L. Meena, ITO, (2008) 300 ITR 432

(Bom), held that in order to invoke the extraordinary

jurisdiction of the court the petitioner must also make

out a case that no part of the relevant material had

been kept out from the Assessing Officer). The

information was in the annexures and consequently

Explanation 2(c)(iv) of section 147 would apply. The

reassessment proceedings after four years were valid.

2.11. In the case of Deputy CIT v. Gopal Ramnarayan

Kasat, (2010) 328 ITR 556 (Bom), it was not the case of the

assessee that the notice issued was after the expiry of the

time limit provided in section 153(2). The reassessment

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proceedings were held to be valid. In Indian Hume Pipe Co.

Ltd. v. Asst. CIT, (2012) 348 ITR 439 (Bom), both in the

computation of taxable long-term capital gains in the

original return of income and in the computation that was

submitted in response to the query of the Assessing Officer

there was a complete silence in regard to the dates on

which the amounts were invested, as such there being a

failure to disclose fully and truly material facts necessary

for assessment. The reassessment proceedings were held to

be valid. This view was also confirmed in following cases:-

a. Dalmia P. Ltd. v. CIT, (2012) 348 ITR 469 (Del); b. CIT v. K. Mohan & Co. (Exports), (2012) 349 ITR 653 (Bom); c. Remfry & Sagar v. CIT, (2013) 351 ITR 75 (Del); d. OPG Metals & Finsec Ltd. v. CIT, (2013) 358 ITR 144 (Del).

2.12. In the case of Venus Industrial Corporation v.

Asst. CIT, (1999) 236 ITR 742, 746 (P & H) [Where initiation

was started within four years for re-examining the

deduction under section 80HHC, was held to be wrongly

allowed in the original assessment. Identically, in the case

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of Happy Forging Ltd. v. CIT, (2002) 253 ITR 413,416-17 (P

& H), where excise duty paid in advance was shown as an

asset in the balance sheet and was allowed as a deduction,

reassessment notice on the ground that excise duty was

shown as an asset in the balance sheet and was not routed

through the profit and loss account. The reopening at this

stage was held to be valid. In the case of Vipan Khanna

v. CIT, (2002) 255 ITR 220, 230 (P & H), where from the

facts it was clear that the assessee had claimed

depreciation in the return at the rate of 50 per cent and he

had nowhere disputed the fact that the admissible rate of

depreciation to him was 40 per cent., such fact alone was

sufficient to initiate reassessment proceedings under

section 147 of the Act, therefore, such initiation was

sustained. The Hon’ble Punjab & Haryana High Court in

Mrs. Rama Sinha v. CIT, (2002) 256 ITR 481, 483, 486,

where the reassessment notice has been issued on the

basis of definite information from CBI regarding

investments by the assessee which had not been disclosed

during the original assessment proceedings, such initiation

has been upheld.

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2.13. In the case of Pal Jain v. ITO, (2004) 267 ITR

540, 544-45, 548, 549 (P & H), applying Phool Chand

Bajrang Lal v. ITO, (1993) 203 ITR 456 (SC), although the

transaction of sale of shares was disclosed and accepted in

the original assessment, but the subsequent discovery by

the DDI (Investigation) revealed that the transaction was

not genuine, a reassessment notice after four years has

been held to be valid because there was no true disclosure

of the material facts. In this regard, the petitioner-assessee

cannot draw any support from the statement for

challenging the validity of the notice for reassessment. It

goes without saying that for the purpose of making the

assessment, the Assessing Officer shall have to confront the

petitioner with the entire material in his possession on the

basis of which he proposes to make the additions. In

Punjab Leasing Pvt. Ltd. v. Asst. CIT, (2004) 267 ITR 779,

781-82 (P & H), where depreciation was allowed to the

assessee, who was engaged in the business of financing of

vehicles and consumer durables on 'hire-purchase basis' as

well as on 'lease/rent basis', a reassessment notice issued

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after four years has been held not to suffer from any

illegality as the same was based on the bona fide action of

the competent authority to determine whether or not the

vehicles in respect of which the petitioner had been

claiming depreciation, were actually owned by it.

2.14. In Jawand Sons v. CIT(A), (2010) 326 ITR 39 (P &

H), in the initial assessment, the benefit of deduction of the

duty drawback and DEPB under section 80-IB was wrongly

granted to the assessee, for which it was not entitled.

Therefore, reassessment proceedings to withdraw the

deduction were held to be valid. Likewise, in CIT v.

Hindustan Tools & Forgings P. Ltd., (2008) 306 ITR 209 (P

& H), where, the assessee in the regular assessment had

been allowed deduction more than actually allowable under

section 80HHC. Therefore, the action initiated by the AO for

reassessment under section 147(b) could not be held to be

invalid.

2.15. In the case of Markanda Vanaspati Mills Ltd. v.

CIT, (2006) 280 ITR 503 (P & H), wherein, the information

furnished by the assessee gave no clue to the payment of

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liability in regard of the sales tax collected in excess. The

Assessing Officer was held to be validly initiated the

reassessment proceedings under section 147 for both the

years under consideration. In the case of Sat Narain v.

CIT, (2010) 320 ITR 448 (P & H), the document did not form

the sole basis for the Assessing Officer to initiate

reassessment proceeding but he also took into

consideration the letter written by the Assistant

Commissioner as well as the fact that no return had been

filed by the assessee for assessment year 1995-96. Thus, it

was held that the Assessing Officer had rightly invoked the

jurisdiction to initiate the reassessment proceedings under

section 147. In the case of CIT v. Hukam Singh, (2005)

276 ITR 347 (P & H), it was held that the respondents did

not have the locus standi to question the orders of

reassessment on the ground of lack of notice. Non-issuance

of notice to some of the legal heirs of the late P was merely

an irregularity and the same did not affect the validity of

the reassessment orders. Likewise, in Tilak Raj Bedi v.

Joint CIT, (2009) 319 ITR 385 (P & H), wherein, facts

coming to light in a subsequent assessment year could

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validly form the basis for initiating reassessment

proceedings, in view of Explanation 2 to section 147. The

action of the income tax authorities in reopening the

assessment of the assessee and restricting the deduction

under section 80-IB was held to be valid.

2.16. In the case of Smt. Usha Rani v. CIT, (2008) 301

ITR 121 (P & H), there was nothing on record to show the

relationship between the donor and the donee, capacity of

the donor to make gifts and the occasion therefore. The

assessee had failed to discharge the onus to prove the gifts.

The reassessment proceedings were held to be valid. In the

case of Usha Beltron Ltd. v. Joint CIT, (1999) 240 ITR 728,

736-37, 739 (Pat), where the investigation report indicated

that the Officer had reason to believe that on account of

failure on the part of the petitioner-assessee to disclose

true and full facts, income had been grossly under

assessed, reassessment proceedings were held validly

initiated.

2.17. In the case of Kapoor Brothers v. Union of India,

(2001) 247 ITR 324, 331, 332-33 (Pat), where the material

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evidence for the purpose of reopening of the assessment

already completed has been brought to the notice of the

authority during the course of enquiry. The notice was held

to be valid by the Hon’ble High Court. In the case of Vippy

Processors Pvt. Ltd. v. CIT, (2001) 249 ITR 7, 8 (MP), where

the need to issue notice arose due to noticing of vast

difference in value of properties disclosed by the assessee

and that of the report of the Valuation Officer and the

reasons that led to the issue of the notice were duly

recorded and the same were also adequate and based on

relevant facts and material, initiation was upheld. In Triple

A Trading & Investment Pvt. Ltd. v. Asst. CIT, (2001) 249

ITR 109, 110-11 (MP), where the notice was issued after

recording reasons in that regard, initiation was upheld.

2.18. Likewise, Hon’ble Gujarat High Court in Garden

Finance Ltd. v. Add/. CIT, (2002) 257 ITR 481, 489, 494-

95, special leave petition dismissed by the Supreme Court:

(2002) 255 ITR (St.) 7-8 (SC), where the assessee was

holding shares in an amalgamating company and he was

allotted shares in the amalgamated company and such

shares were sold by him and he has disclosed the market

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price of such shares as on the date of amalgamation as the

cost of acquisition of such shares and has not disclosed the

cost of acquisition of shares in the amalgamating company

in accordance with section 49(2) read with section 47(vii),

initiation of reassessment proceedings after four years has

been sustained because there was failure on the part of the

assessee to disclose material facts necessary for

assessment. Likewise, in Suman Steels v. Union of India,

(2004) 269 ITR 412,418-19 (Raj), where the return of the

assessee for assessment year 1995-96 was processed under

section 143(1)(a) accepting the net profit rate declared by

the assessee, who carried on con- tract business, initiation

of reassessment proceedings by issuing a notice dated 15-

5-2001 proposing to reassess petitioner-assessee at higher

rate in view of the presumptive rate prescribed under

section 44AD has been sustained. In the case of Dr. Sahib

Ram Giri v. ITO, (2008) 301 ITR 294 (Raj), the

reassessment proceedings were initiated after recording

reasons in writing by the AO. The non-availability of a few

documents demanded by the assessee would not make the

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reassessment proceedings initiated for the reasons recorded

in detail illegal.

2.19 In the case of Desh Raj Udyog : Chaman Udyog

v. ITO, (2009) 318 ITR 6 (All), in the assessment years in

question, the matter was still to be decided finally by the

assessing authority whether the income should be treated

under the head 'Business income' or 'property income'. The

assessee would get opportunity to show sufficient cause to

the assessing authority during the course of assessment.

Thus, it could not be said that there was no relevant

material to initiate proceedings under section 147. In the

case of Kartikeya International v. CIT, (2010) 329 ITR 539

(All), in view of the matter, the petitioner was not entitled

for the deduction on the duty drawback amount under

section 80-IB and since it had been allowed in the

assessment order passed under section 143(1), it had

escaped assessment. On these facts the initiation of the

proceedings under section 147 read with section 148 for

assessment years 2005-06 and 2006-07 was legal and in

accordance with law.

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2.20. Likewise, in the case of Sunil Kumar lain: Suresh

Chandra lain v. ITO, (2006) 284 ITR 626 (All),

notwithstanding the fact that the amount had been

assessed to tax in the hands of P, he had taken a stand

that the amount did not belong to him and instead

belonged to S. Thus, it was not clear as to in whose hands

the amount in question had to be assessed. The ITO was

justified in taking proceedings under section 147 for

assessing the amounts in the hands of the petitioners

according to the claim made by the petitioners. Likewise,

Hon’ble Kerala High Court in CIT v. Dr. Sadique Ummer,

(2010) 322 ITR 602 (Ker), where, the Assessing Officer

collected further information to complete the reassessments

which was also permissible under the Act. The finding of

the first appellate authority as well as the Tribunal, that

the Assessing Officer had no material to believe that the

income had escaped assessment was wrong and contrary to

facts. The assessee had not maintained any books of

account. Therefore, the reopening of assessments was held

to be valid and within time. In the case of CIT v. Uttam

Chand Nahar, (2007) 295 ITR 403 (Raj), the notice

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requiring the assessee to file the return within 30 days was

in accordance with section 148 as it must be deemed to be

in force with effect from 1-4-1989, and in force as on the

date notice was issued. There was no violation of section

148 in respect of the specified period within which the

return is to be submitted. The reassessment proceedings

were held to be valid.

2.21. In the case of CIT v. C. V. layachandran, (2010)

322 ITR 520 (Ker), where, the assessee did not concede the

income on capital gain either under the un-amended

provision or un-der the amended provision, the recourse

open to the Department was to bring to tax income

escaping assessment under section 147 which was not time

barred or otherwise invalid. Likewise, in Atul Traders v.

ITO, (2006) 282 ITR 536 (All), the account books or record

and other material were all common which were being

considered by the CIT(A) in the proceedings relating to

three appeals. The petitioner had notice and opportunity of

being heard. The reassessment proceedings were held to be

validly initiated. In the case of Inductotherm (India) P. Ltd.

v. lames Kurian, Asst. CIT, (2007) 294 ITR 341 (Guj), the

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Assessing Officer had found that there were errors in the

computation of allowances. The reassessment proceedings

were held to be valid. In the case of Papaya Farms Pvt. Ltd.

vs. DCIT, (2010) 323 ITR 60 (Mad), where the assessee had

furnished incorrect particulars and therefore, the reopening

of the assessment was held to be justified.

2.22. In the case of CIT v. Kerala State Cashew

Development Corporation Ltd., (2006) 286 ITR 553 (Ker),

wherein, the assessee was following the mercantile system

of accounting should not have claimed deduction of penal

interest which had accrued not in the previous year

relevant to the assessment year but in earlier years. This

the assessee had not disclosed. The reassessment was held

to be valid. Likewise, in Kusum Industries P. Ltd. v. CIT,

(2008) 296 ITR 242 (All), as the award had become final it

would be taken that the directors of the assessee had

accepted the factum of earning of secret profit not reflected

in the books of account, which was also binding on the

company. The non-appearance of one of the arbitrators and

one of the directors in respect of the summon issued under

section 131 would not make the reassessment invalid. The

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Hon’ble Kerala High Court in CIT v. Indo Marine Agencies

(Kerala) P. Ltd., (2005) 279 ITR 372 (Ker), held that the

entry would amount to an order under section 144. The

mere fact that it was not communicated to the assessee

would not make such an assessment recorded in the order

sheet illegal and that would not bar further proceedings

under section 147 of the Act. Thus, the assessment was

held to be validly reopened under Explanation 2(c) to

section 147. Likewise, in CIT v. N. Jayaprakash, (2006)

285 ITR 369 (Ker), where, the assessee could not, after

having persuaded the assessing authority to withdraw the

notice dated 1-10-1993, pointing out that it was not in

conformity with law, be allowed to contend that the notice

was valid due to the omission of the time-limit by the

Finance (No.2) Act, 1996, with effect from 1-4-1989. In the

absence of specific provision in the Finance (No. 2) Act,

1996, invalidating proceedings initiated by the Income-tax

Officer, the action taken by him applying the then existing

law could not be said to be invalid.

2.23. Likewise, in CIT v. S.R. Talwar, (2008) 305 ITR

286 (All), the factum of taking advances or loan from T and

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K, in which the assessee was one of the directors had not

been disclosed nor a copy of the ledger account of the

assessee maintained by the company filed. In view of the

absence of these details, the Assessing Officer could not

examine the taxability of advances or loan raised by the

assessee. There was failure to disclose material facts

necessary for assessment. The reassessment proceedings

were held to be valid. In another case, the Hon’ble

Allahabad High Court in Chandra Prakash Agrawal v. Asst.

CIT, (2006) 287 ITR 172 (All), wherein, the Income-tax

Department had sent a requisition on 27-3-2002, under

section 132A requisitioning the books of account and other

documents seized by the Central Excise Department. The

record of the proceeding dated 18-4-2002, showed that the

requisition was not fully executed as all the books of

account and other documents had not been delivered to the

requisitioning authority. The proceedings initiated under

section 147 was held to be valid.

2.24. In Ramilaben Ratilal Shah v. CIT, (2006) 282

ITR 176 (Guj), held that the noting in the diary

constituted sufficient information for the escapement

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of income by either non-declaration of correct sale

consideration or furnishing of inaccurate particulars as

regards sale consideration. Thus, the Tribunal was

justified in holding that the assessee had failed to

disclose fully and truly all material facts necessary for

the assessment of the relevant assessment year. The

reassessment proceedings had been validly initiated.

2.25. Likewise, in CIT v. Abdul Khader Ahamed,

(2006) 285 ITR 57 (Ker), it was clear from the reasons

recorded by the Deputy CIT that he prima facie had reason

to believe that the assessee had omitted to disclose fully

and truly the material facts and that as a consequence

income had escaped assessment. The reassessment was

held to be valid. In the case of U.P. State Brassware

Corporation Ltd. v. CIT, (2005) 277 ITR 40 (All), the

principles laid down by the Calcutta High Court in CIT v.

New Central Jute Mills Co. Ltd. : (1979) 118 ITR 1005 (Cal)

did constitute information on a point of law which should

be taken into consideration by the ITO in forming his belief

that the income to that extent had escaped assessment to

tax and, the reassessment was held to be valid. In Sunder

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Carpet Industries v. ITO, (2010) 324 ITR 417 (All), held that

the Departmental Valuer's Report constituted material for

entertaining a belief of escaped income in the years under

consideration. The reassessment proceeding was held to be

valid.

2.26. In Aurobindo Sanitary Stores v. CIT, (2005) 276

ITR 549 (Ori), there being a substantial difference between

the figures of liabilities towards sundry creditors in the

party ledgers of the assessee-firm and the figures of

liabilities towards sundry creditors in the balance-sheet of

the assessee-firm for the previous year relevant to the

assessment year 1989-90. These materials had a direct link

and nexus for formation of a belief by the Assessing Officer

that income of the assessee-firm had escaped assessment

because of failure of the assessee to disclose fully and truly

all material facts necessary for the assessment. In the case

of CIT v. Best Wood Industries & Saw Mills, (2011) 331 ITR

63 (Ker), the assessee challenged the validity of the

reassessment on the ground that the AO had exceeded his

jurisdiction under section 147 and both the first appellate

authority as well as the Tribunal accepted the contention of

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the assessee holding that so far as the reassessments

related to assessment of unexplained trade credits, they

were invalid. On appeal, it has been held that the

reassessments were to be valid. In Honda Siel Power

Products Ltd. v. Deputy CIT, (2012) 340 ITR 53 (Del), there

being omission and failure on the part of the assessee to

disclose fully and truly material facts Thus reassessment

proceedings were held to be valid.

2.27. In Atma Ram Properties Private Ltd. v. Deputy

CIT, (2012) 343 ITR 141 (Del), as the books of account and

other material were not produced and no letter was filed,

the order passed by the Commissioner (Appeals) in the

assessment year 2001-02 would constitute 'information' or

material from any external source and, as such, the

reassessment proceedings for the assessment year 2000-01

were held to be valid. Likewise, in the case of CIT v. Smt.

R. Sunanda Bai, (2012) 344 ITR 271 (Ker), the

reassessment in question were held to be valid on the fact

that the assessee claimed and was given relief under

section 80HHA for the three preceding year which

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disentitled her for deduction under section 80HH for the

assessment years 1992-93 and 1993-94.

2.28. In the case of Aquagel Chemicals P. Ltd. v. Asst.

CIT, (2013) 353 ITR 131 (Guj), since there being sufficient

material on record for the Assessing Officer to form a belief

as regards the escapement of income in relation to the

claim of depreciation in respect of the building of coal fire

boiler, the reassessment was held to be valid. In the case

of Convergys Customer Management v. Asst. DIT, (2013)

357 ITR 177 (Del), where there being prima facie material in

the possession of the Assessing Officer to form a tentative

belief that section 9(1)(i) held attracted, said reason by itself

constituted a relevant ground to reopen the assessment of

the assessee.

Reference may also be made to

i. Ajai Verma v. CIT [(2008) 304 ITR 30 (All)]; ii. Ashok Arora v. CIT [(2010) 321 ITR 171 (Del)]; iii. CIT v. Chandrasekhar BaLagopaL [(2010) 328 ITR 619 (Ker)]; iv. Jayaram Paper Mills Ltd. v. CIT [(2010) 321 ITR 56 (Mad)]; v. Kerala Financial Corporation v. Joint CIT [(2009) 308 ITR 434 (Ker)];

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vi. Mavis Satcom Ltd. v. Deputy CIT [(2010) 325 ITR 428 (Mad)]; vii. CIT v. Madhya Bharat Energy Corporation Ltd. [(2011) 337 ITR 389 (Del)]; viii. Kone Elevator India P. Ltd. v. ITO [(2012) 340 ITR 454 (Mad)]; ix. Vijay Kumar Saboo v. Asst. CIT [(2012) 340 ITR 382 (Karn)]; x. Siemens Information Systems Ltd. v. Asst. CIT [(2012) 343 ITR 188 (Bom)]; xi. I.P. Patel & Co. v. Deputy CIT [(2012) 346 ITR 207 (Guj)]; xii. Dishman Pharmaceuticals & Chemicals Ltd. v. Deputy CIT [(2012) 346 ITR 228 (Guj)]; xiii. Video Electronics Ltd. v. Joint CIT [(2013) 353 ITR 73 (Del)]; xiv. A G Group Corporation v. Harsh Prakash [(2013) 353 ITR 158 (Guj)]; xv. Inductotherm (India) P. Ltd. v. M. GopaLan, Deputy CIT [(2013) 356 ITR 481 (Guj)]; CIT v. Dhanalekshmi Bank Ltd. [(2013) 357 ITR 448 (Ker)]; xvi. Sitara Diamond Pvt. Ltd. v. ITO [(2013) 358 ITR 424 (Bom)]; xvii. Rayala Corporation P. Ltd. v. Asst. CIT [(2014) 363 ITR 630 (Mad)].

2.29. So far as, the decision in the case of CIT vs

Kelvinator of India Ltd. (2010) 320 ITR 561 (SC) is

concerned, the Hon’ble Apex Court, while coming to a

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particular conclusion, only in a situation, when not a single

piece of paper or document was recovered, therefore, the

Hon’ble Court held that since there was no tangible

material found and the addition was merely on the basis of

statement only then reopening of assessment u/s 147 of

the Act was not permissible. Likewise, in the case of CIT vs

S. Khader Khan Son (2012) 254 CTR 228 (SC), affirming

the decision of Madras High Court in (2008) 300 ITR 157

(Mad.), the whole addition was made solely on the basis of

statement u/s 133A and no other material was found, in

that situation, it was held that the such statement has no

evidentiary value.

2.30. In the case of Aradhna Estate Pvt. Ltd. vs DCIT

(2018) 91 taxmann.com 119 (Gujarat), the Hon'ble High

Court observed/held as under:-

“In reasons recorded by the Assessing Officer for reopening the assessment. He pointed out that the information was received from the investigation wing of the department at Calcutta regarding shell companies which had given accommodation entries for share premium to Surat based companies. A list of 114 Calcutta based companies was provided which had given accommodation entries to such Surat based companies. Statements of many entry operators and dummy Directors recorded during various search and seizure operation, survey operation and investigation were checked. The Assessing Officer thereupon proceeded to record that "On perusal of data so provided by the Deputy Director (Investigation), it is noticed that during the period under consideration, the assessee company has accepted share capital/share

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premium from the following entries/parties which have been proved to be shell companies based on the investigation conducted by the Deputy Director (Investigation). Underneath, he provided a list of 17 companies who had transacted with the assessee company during the year under consideration and were alloted equity shares by purported investment of sizeable share capital and share premium amounts. On verification of such materials, the Assessing Officer noted that the assessee had received share capital/share premium amount, since the investor companies were found to be shell companies indulging in providing accommodation entries, the Assessing Officer was of the opinion that the share capital/share premium claimed to have been received from the company by the assessee was not genuine. Amount is nothing but assessee's own money introduced in the garb of share capital/share premium from the shell companies and therefore, such amount is liable to be taxed under section 68. He therefore, recorded his satisfaction that the income had escaped assessment and that this was due to the assessee having failed to disclose truly and fully all facts. [Para 7] Section 147 provides inter alia that if the Assessing Officer has the reason to believe that any income chargeable to tax has escaped assessment, he may subject to the provisions of sections 148 to 153, assess or reassess such income. Proviso to section 147 of course requires that where the assessment under sub-section (3) of section 143 has been made for the relevant assessment year, no action shall be taken under this section after the expiry of the four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment by reason of the failure on part of the assessee to make return under section 139 or in response to a notice issued under sub-section (1) of section 142 or 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. In this context, it is well settled that the requirement of full and true disclosure on part of the assessee is not confined to filing of return alone but would continue all throughout during the assessment proceedings also. In this context, the materials on record would suggest that the Assessing Officer had received fresh information after the assessment was over prima facie suggesting that sizeable amount of income chargeable to tax in case of the assessee had escaped assessment and that such escapement was on account of failure on part of the assessee to disclose truly and fully all material facts. The Assessing Officer formed such a belief on the basis of such materials placed before him and upon perusal of such material. This is not a case where the Assessing Officer was reexamining the materials and the documents already on record filed by the assessee along with the return or subsequently, brought on record during the assessment proceedings. It was a case where entirely new set of documents and materials was placed for his consideration compiled in the form of report received from the investigation wing. Such material was perused by the Assessing Officer and upon examination thereof, he formed a belief that the assessee company had received share application and share premium money from as many as 20 different investor

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companies who were found to be shell companies and indulging in giving accommodation entries. From this view point, since the Assessing Officer had sufficient material at his command to form such a belief. Such materials did not form part of the original assessment proceedings and was placed before the Assessing Officer only after the assessment was completed. Since on the basis of such materials, Assessing Officer, came to a reasonable belief that income chargeable to tax had escaped assessment, merely because these transactions were scrutinised by the Assessing Officer during the original assessment also would not preclude him from reopening the assessment. His scrutiny during the assessment will necessarily be on the basis of the disclosures made by the assessee. [Para 8] The contention that there was no failure on part of the assessee to disclose truly and fully facts cannot be accepted. The Assessing Officer, as noted, received fresh material after the assessment was over, prima facie, suggesting that the assessee company had received bogus share application/premium money from number of shell companies. [Para 10] Merely because the transactions in question were examined by the Assessing Officer during the original assessment would not make any difference. The scrutiny was on the basis of disclosures made and materials supplied by the assessee. Such material is found to be prima facie untrue and disclosures not truthful. Earlier scrutiny or examination on the basis of such disclosures or materials would not debar a fresh assessment. Each individual case of this nature is bound to have slight difference in facts. [Para 11] The next contention that the Assessing Officer did not demonstrate any material enabling him to form a belief that income chargeable to tax has escaped assessment is fallacious. The Assessing Officer recorded detailed reasons pointing out the material available which had a live link with formation of belief that the income chargeable to tax had escaped assessment. At this stage, as is often repeated, one would not go into sufficiency of such reasons. [Para 13] Section 68 as is well known, 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 the assessee of that previous year. That the share application money received by the assessee from above-noted companies was only by nature of accommodation entries and in reality, it was the funds of the assessee which was being re-routed. Undoubtedly. Section 68 would have applicability. Proviso added by the Finance Act, 2012 with effect from 1-4-2013, does not change this position. [Para 14] As per this proviso, where the assessee is a company and the sum so credited consists of share application money, share capital, share

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premium or any such amount by whatever name called, explanation offered by the assessee company shall be deemed to be not satisfactory, unless the person in whose name such credit is recorded in the books of the company also offers an explanation about the nature and source of sum so credited and such explanation in the opinion of the Assessing Officer has been found to be satisfactory. Essentially, this proviso eases the burden of proof on the revenue while making addition under section 168 with respect to non genuine share application money of the companies. Even in absence of such proviso as was the case governing the periods with which we are concerned in the present case, if facts noted by the Assessing Officer and recorded in reasons are ultimately established, invocation of section 68 would be called for. [Para 15] The contention that the Assessing Officer had merely and mechanically acted on the report of the investigation wing also cannot be accepted. One has reproduced the reasons recorded by the Assessing Officer and noted the gist of his reasons for resorting to reopening of the assessment. The Assessing Officer had perused the materials placed for his consideration and thereupon, upon examination of such materials formed a belief that income chargeable to tax had escaped assessment. [Para 16] In the result, petition is dismissed. [Para 17]” 2.31. The Hon'ble Gujarat High Court while validating

the reopening of assessment under section 147/148 of the

Act in a later order (aforesaid) dated 20/02/2018 on the

issue of cash credit (share application money) duly

considered the arguments of both sides and followed the

following the decisions

I. Jayant Security and Finance Ltd. v. Asstt. CIT [Special Civil Application No. 18921 of 2017, dated 12-2-2018] (para 12); II. Raymond Woolen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC) (para 13); III. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500/161 Taxman 316 (SC) (para 13)

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IV. Pr. CIT v. Gokul Ceramics [2016] 241 Taxman 1/71 taxmann.com 341 (Guj.) (para 16)

And distinguished the following decisions

i. Allied Strips Ltd. v. Asstt. CIT [2016] 384 ITR 424/69 taxmann.com 444 (Delhi) (para 11) and ii. Yogendrakumar Gupta v. ITO [2014] 366 ITR 186/46 taxmann.com 56 (Guj.) (para 11)

The Hon'ble High Court while upholding the validity of

reopening also considered following decision, which were

referred by both sides-

I. Allied Strips Ltd. v. Asstt. CIT [2016] 384 ITR 424/69 taxmann.com 444 (Delhi) (para 5), II. Harikrishan Sunderlal Virmani v. Dy. CIT [2017] 394 ITR 146 (Guj.) (para 5), III. Raymond Woolen Mills Ltd.v. ITO [1999] 236 ITR 34 (SC) (para 6), IV. Yogendrakumar Gupta v. ITO [2014] 366 ITR 186/46 taxmann.com 56 (Guj.) (para 6), V. Aaspas Multimedia Ltd. v. Dy. CIT [2017] 83 taxmann.com 82/249 Taxman 568 (Guj.) (para 6), VI. Jayant Security & Finance Ltd. v. Asstt. CIT [Sp. Civil Application No. 18921 of 2017, dated 12-2-2018] (para 12), VII. Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500/161 Taxman 316 (SC) (para 13) and VIII. Pr. CIT v. Gokul Ceramics [2016] 241 Taxman 1/71 taxmann.com 341 (Guj.) (para 16).

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2.32. The sum and substance of the aforesaid decision

was that since the Assessing Officer was having sufficient

material at his command to form a reasonable belief that

income chargeable to tax had escaped assessment, merely

because this transactions were scrutinize by the Assessing

Officer during the original assessment, would not preclude

him from reopening assessment. Thus, the assessment

notice was held to be justified. In the appeal before us, the

assessment was processed merely under section 143(1) of

the Act on 19/08/2009, accepting the returned income and

the assessment was reopened after duly recording the

reasons as required under section 148(2) of the Act. It is

not the case that original assessment as framed under

section 143(3) of the Act and even the reasons recorded by

the ld. Assessing Officer by duly conveyed to the assessee

on 09/05/2013, which were objected by the assessee.

Notice under section 143(2) and thereafter 142(1) along

with questionnaire were issued and served upon the

assessee. In the present appeal, the details and information

available on record clearly shows that there was

search/survey action was carried out at the

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residential/business premises of Shri Surendra Kumar

Jain and his brother Shri Birendra Jain on 14/09/2010 by

the Investigation Wing, Delhi, wherein it was found that

both these persons were providing accommodation entries

to various beneficiaries in lieu of cash. A similar

information was received from Investigation Wing at

Mumbai, therefore, the Ld. Assessing Officer was under a

reasonable belief that income chargeable to tax has

escaped assessment as the Ld. Assessing Officer had not

formed any opinion and this information was received at

the later stage, which in our opinion was sufficient to

initiate reassessment proceedings. Explanation-1 to section

147 of the Act supports our view. Referring to the said

explanation in consolidated Photo & Finvest Ltd. (2006)

281 ITR 394 (Del.), Hon'ble High Court observed as under:-

“8. It is clear from the above that the two critical aspects which need to be addressed in any action under section 147 are whether the Assessing Officer has "reason to believe" that any income chargeable to tax has escaped assessment and whether the proposed reassessment is within the period of limitation prescribed under the proviso to section 147. Explanation (1 ) to the said provision makes it clear that production of account books or other evidence from which the Assessing Officer could with due diligence discover material evidence would not necessarily amount to disclosure within the meaning of the proviso that stipulates an extended period of limitation for action in cases where the escapement arises out of the failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment.”

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The formation of opinion by the Assessing Officer has

to be considered on the touch stone whether there was

reasonable belief that income chargeable to tax had

escaped assessment and for that purpose, the Hon'ble Apex

Court in Raymond Woolen Mills Ltd. vs Income Tax Officer

throws light on the issue and further by Hon'ble

jurisdictional High Court in M/s Girilal & Company vs

Income Tax Officer 300 ITR 432 (Bom.). Thus, we found

that there was fresh information with the Assessing Officer,

which in our view, entitle the Assessing Officer to have

prima facie reason to believe that income chargeable to tax

had escaped assessment. The ratio laid down by Hon'ble

Apex Court in Claggett Brachi Company Ltd. vs CIT 177

ITR 409 (Supreme Court), Hon'ble Bombay High Court in

Anusandhan Investment Ltd. vs DCIT 287 ITR 482 and

Piaggio Vhicles Pvt. Ltd. vs DCIT 290 ITR 377 (Bom.) held

that in a case of reopening after four years subsequent to

scrutiny assessment, contradiction was recovered by

between tax audit report and return of income, it was a

case of omissions and/or failure on the part of the assessee

to disclose fully and truly all facts for computation of

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income. So far as, the contention of the ld. counsel for the

assessee that the addition of Rs.2,76,70,000/-, which was

the basis of reopening the assessment, is concerned, such

addition was deleted by the Ld. Commissioner of Income

Tax (Appeal) himself, therefore, reopening is not

substantiated. We are not convinced with this argument of

the assessee because so far as deleting the addition on

merit is concerned, it was done at the first appellate stage,

whereas, we are examining the validity of reopening at the

assessment stage itself. Possibly, the assessee may or may

not be having a good case on merit but so far as reopening

is concerned, we find no infirmity in the conclusion drawn

by the Ld. Commissioner of Income Tax (Appeal).

Therefore, respectfully following the aforesaid decisions and

the factual matrix narrated before us, we upheld the same,

resulting in to, dismissal of the grounds (1 to 6) raised by

the assessee with respect to reopening of assessment.

under section 68 of the Act is concerned, we note that the

assessee received share capital/premium from 12 parties,

which are summarized hereunder:-

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Sr. Name of the Person Amount in No. Rs. 1 Eagle Infratech Pvt. Ltd. 22,10,000 2 Finage Leasing & Finance (I) Ltd. 22,10,000 3 Lotus Realcon Pvt. Ltd. 8,50.000 4 Mega Top Promoters Pvt. Ltd. 22,10,000 5 Manimala Delhi Properties Pvt.Ld. 22,10,000 6 Shalini Holding Ltd. 22,10,000 7 Singhal Securities Pvt. Ltd. 22,10,000 8 V.I. P. Leasing and Finance Pvt. Ltd. 22,10,000 9 Virgin Capital Services Pvt. Ltd. 22,10,000 10 Zenith Automotive Pvt. Ltd. 22,10,000 11 Microland Developers Pvt. Ltd. 22,10,000 12 Brite Industires Resources Ltd. 20,10,000 Total 2,76,70,000

So far as, the above share capital/premium from

twelve parties is concerned, the same was deleted by the

First Appellate Authority by observing as under:-

“5.7 I have circumspected the spectrum of facts and circumstances of the case and have also carefully considered the finding of the Assessing Officer and counter representation of the appellant. I have also perused the paper book containing 258 pages and various case laws relied upon by the Assessing Officer as well as Ld AR of the appellant. I find that Ld. Assessing Officer has made addition of share capital and premium of Rs.2,76,70,000/- mainly on the basis of report of Investigation Wing, without corroborating the finding with any reliable evidence. It is very evident from the assessment order that Assessing Officer has jumped to the conclusion on the basis of presumption without establishing the in genuineness of source of share capital and premium shown in the name of 12 companies The various presumptive finding of the Assessing Officer has been successfully refuted by. the appellant / Ld. A.R. during the appellate proceedings. 5.8 Before coming to the various references of statement and outcome of search and survey proceeding u/.s 132 / 133A in the cases of Surendra Kumar Jain and Virendra Kumar Jam, at the outset, it is pertinent

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to mention that an amount of Rs.22,10,000/- mentioned by the Assessing Officer in the name of M/s. Microland Developers Pvt. Ltd. and Rs.20,00,000/- in the name of M/s. Brite Industries Resources Ltd., has not been credited in the books of account of the appellant, hence there is no reason of making any such addition. I find that the AC has not brought any adverse material on record to suggest that the appellant has actually received the cheques and/or en-cashed impugned cheques or, Inter alia the appellant company has issued any shares to them matching the alleged amounts during the year AY 2008-01. The addition u/s 68 can be made only for amount that are credited in the books of the appellant company, in case the AO finds the creditors are bogus and/or there is no creditworthiness of the creditors. Since the amount of Rs.42,10,000/- out of Rs.2,76,70,000/- is not credited in the of the books of account of the appellant company, the appellant was not under any obligation to prove the identity of alleged creditors genuineness of the alleged transactions and creditworthiness of these two parties named at serial No.11 & 12 of the table mentioned by the Assessing Officer. Moreover, the stand of the AO appears to be contradictory with respect to these two parties as he has not made any distinction of these two parties with the rest of ten parties in the table. The AO was in possession of the copy of the Bank Statements for the period w.r.t. the impugned assessment year and he could not point out these entries in those Bank Statements. It is not the case of the AO that the appellant had not produced the requisite accounts for his examination before him during re-assessment proceedings. His stand that since assessee could not confirm from his books that he had not received such amounts, and therefore addition is called for u/s. 68, is highly unjustified. Nobody under Law is burdened to prove a negative fact. Rather, AO was under obligation to establish the fact that these amounts are actually received by the appellant, if he alleges the same. The question of onus probandi is certainly important in the early stage of a case. It may also assume importance where no evidence at all is led on the question in dispute by either side; in such a contingency the party on whom the onus lies to prove a certain fact must fail. Where, however, evidence has been led by the contesting parties on the question in issue, abstract considerations of onus are out of place; the truth or otherwise of the case must always be adjudged on the

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evidence led by the parties (Kalwa Devadattam v. Union of India, (1963) 49 ITR (SC) 165, 175), Such stand and approach of the Assessing Officers has been disapproved by the Hon'ble ITAT in the case of ITO vs. Balaram Jakhar (2005) 98 TTJ 924 (Amritsar ITAT) 5.9 As regards rest of the addition of Rs.2,44,60,000/-, being share capital and premium appearing in the name of 10 companies in the table given by the Assessing Officer, I further find that Assessing Officer has not been able to establish with any reliable evidence that such share capital is unexplained and received from non-existing person / companies. Some of the references and statements relied upon by the Assessing Officer may be good for investigation and consequentialverification but no addition could be made as there is no direct and livenexus that cheques have been received after giving cash to such parties. Had there been no search and survey in the cases of Surendra Kumar Jain and Virendra Kumar Jain, the finding of the Assessing Officer based on the presumption would have been having some force. However, when search and survey has been conducted effectively and no evidence of receipt of cash from appellant company has been found and there is no evidence of nexus of transaction between appellate company and Surendra Kumar Jain / Virendra Kumar Jain, it is very difficult to subscribe to the finding of the Assessing Officer. 5.10 The finding of the Assessing Officer that the investing companies are not in existence or their transaction is not genuine or these are only companies on paper get contradicted or refuted by the fact that out of 15 companies, 6 companies were subjected to search and seizure proceeding and that is why order u/s.153A/ (C) have been passed by the ACIT Central Circle 23, New Delhi on 28.03,2013 , that is exactly one year before the order of the Assessing Officer dated 27.03.2014. These companies are as under:- i.Finage Lease and Finance India Pvt. Ltd. ii.Lotus Realcon Pvt.ltd iii. Manimala Delhi PRO Pvt.Ltd. iv.Shalini Holdings Pvt. Ltd. v.Singhal Securities Pvt. Ltd.

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vi.VIP Leasing Finance Pvt. Ltd. 5,11 The copies of assessment orders of the above companies appear at Page No.69 to 80 of the paper book of the appellant. Since, Department has accepted the existence of the above companies and even after search on Surendra Kumar Jain and Virendra Kumar Jain on 14.09.2010, after three years, assessments have been made of above companies and no adverse inference has been drawn nor has been held that these are companies only on papers, there is no propriety on the part of the Assessing Officer to presume that these companies are paper floated companies, having no existence or source of income or there is no genuine transaction of such investment under reference. Such conclusive evidences filed by the appellant during the course of assessment proceedings has been ignored by the Assessing Officer without any contrary evidence in possession. It is relevant to mention that by letter dated 14.3.2014, the Ld. A.R. of the appellant had submitted the copies of the assessment order u/s.153C of the I.T. Act of these companies who had made investments in shares, hence unless otherwise is established , such conclusive evidence has to be accepted. 5.12 Further, an important evidence is also worth highlighting that during the course of assessment proceedings itself, Assessing Officer has issued summons to the following parties who had duly replied to the Assessing Officer and had communicated the fact of investment in equity shares of the appellant company — i. Zenith Automotive Pvt. Ltd. ii, VT Leasing Finance Pvt, Ltd. iii. Virgin Capital Services Pvt. Ltd. iv, Shalini Holdings Pvt. Ltd. v. Singhal Securities Pvt. Ltd. vi, Manimala Delhi PRO Pvt. Ltd. Vii Eagle Infratech Pvt. Ltd. viii. Mega Top Promoters Pvt. Ltd ix. Finance Finage Lease and Finance India Pvt, Ltd. x. Lotus Realcon Pvt. Ltd.

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When after search on 14.09.2010, during the course of assessment proceedings, Assessing Officer had made enquiry from the above parties who had given information and had confirmed the investments in equity -shares, Assessing Officer cannot ignored these facts and evidences and cannot proceed for making addition on the basis of report from the Investigation Wing without establishing otherwise. 5.13 Further, it is pertinent to mention that by letter dated 10.03.2014, Ld. A.R. of the appellant has explained the receipt of share capital and has referred to in Para '5' the replies of above companies to the Assessing Officer, it was the responsibility of the Assessing Officer to prove otherwise for making any such additions. Apparently, Ld. Assessing Officer has failed to do so, hence such conclusive evidences cannot be ignored. Similarly, the explanation and counter arguments of the appellant, Ld. A.R. cannot he lightly ignored. Obviously, Ld. Assessing Officer has ignored the explanation and such evidences without contrary evidence unearthed by him subsequently, hence he cannot refer to the statements of various persons not disproving claim of the appellant of receipt of share capital from various companies under reference. Therefore the approach and finding of the Assessing Officer cannot be approved. 5.14 When by letter dated 23.12.2013, appellant had submitted the copies of following documents of the above companies, it was the responsibility of the Assessing Officer to prove otherwise if he wanted to make addition of such share capital, but, as evident from the assessment order that Ld. Assessing Officer has failed to do so, hence such addition is found to be baseless. The following documents, as referred to hereinabove, support the contention of the appellant- 1. Application Forms 2, Acknowledgement of return of income 3, Bank Statement 4. Confirmation of ledger accounts 5. Board Resolution 6. Memorandum of Association

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the addition made against the judgment of Supreme Court is bad in law and liable to be struck dawn, Similarly, the Jurisdictional Mumbai Tribunal in the case of Saimangal Investment Ltd. 3924/Mum/2009 concluded as under- “it is clear from the decision of the Hon’ble Delhi High Court in the case of Oasis Hospitalities Pvt. Ltd (supra) that once the assessee filed copy of PAN, Acknowledgment copy of the return of income of the investing companies, their bank accounts statements for the relevant period; then even the parties were not produced in spite of the specific directions of the Assessing Officer, the addition could not be sustained as the primary onus was discharged by the assessee by producing the PAN, balance sheet, copy of the acknowledgment copy of return of the applicants etc. 10 in the case in hand, there is no dispute about the identity of the applicant companies, who had paid the application money and the source of the application money was also found in the respective bank accounts f the investing companies and there was no trace of cash deposit in the bank accounts of the investing companies, then, the action of the Assessing Officer under influenced of the report of the investigation wing without giving opportunity to the assessee for cross examination of the persons, is not sustainable" 5.17 Further, appellant gets support from the following decisions- 1. I.T.O. vs. Provid Trade Impex Pvt.Ltd in IT appellant No. 2219/Mum/2009 2. I.T.O. vs. Alex Securities Pvt.Ltd. In ITappellant No. 4241/Mum/2009 3. CIT vs. Creative World Tele-films Ltd. [333 ITR 100] 4. CIT vs. Lovely Exports Pvt.Ltd. [2009] 319 ITR (st.)5. (SC) 5. Shree Barkha Synthetics Ltd. Vs. Asst. CIT(283 ITR 377) 6. M/s. Uma Polymers Pvt.Ltd vs. DCIT [100 ITD1, ™ 7. CIT vs Dwrkadhish Investment (P) Ltd. (330 ITR 298 9. CIT vs. Value Capital Services Ltd. (307 ITR 334, Delhi)

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10.CIT vs. Arunananda Textiles Pvt.Ltd. (333 ITR 116 Kar) 11. Aim properties vs Income-tax Officer, I.T. Appellate No. 7426/Mum/2012 Recently the Delhi High Court in the case of Kamdhenu Steel (surpa) summarized all the earlier judgment of all the courts including the judgment of Hon’ble Bombay High Court in the case of Creative world (supra) and held that when the assessee has submitted the details of Identity, genuineness and creditworthiness of the transaction he has discharged its burden and now it is for the revenue to prove that the amount came from the coffers of the assessee. 5.18 The case of the appellant is on better footing as not only the details of the parties were submitted but the parties have also confirmed the transactions, therefore, in the background of these legal propositions, the approach and finding of the Assessing Officer cannot be sustained. 5.19 As regards, statement of Mr. Rajkumar Agrawal, it is pertinent to mention that he has neither any connection with the appellant company nor he has mentioned the appellant's name categorically in his impugned statement and further statement had not been provided to the appellant during the reassessment proceedings by the AO. There is no material on record that can suggest that Mr. Rajkumar Agrawal, though, a third party, has any relation with the appellant company or its Directors. Moreover the AO has not provided the copy of statement of Mr. Rajkumar Agrawal to the appellant during the reassessment proceeding so his statement being of third party, at the back of the appellant, could not have been utilized against the appellant without providing the copy of the statement to the appellant and without providing an opportunity for cross-examination if desired by the appellant company. Obviously, such statement cannot be utilized in round about manner without any direct evidence against the appellant. Further, there is no material on record that can suggest or indicate that Rajkumar Agrawal or Shri Surndra Kumar Jain/ Virendra Jain has accepted in any of their statements recorded during the search and seizure operation reproduced by the AO in his assessment order, that they are in the business of providing alleged accommodation entries or named the

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appellant company or its directors as beneficiary to issue such alleged accommodation entries in favour of the appellant company. 5.20 Even there is no rebuttal by the AO in his assessment order as to how the share allotted to the companies mentioned in table pars in 6.1. of the impugned assessment order to the parties mentioned at serial no. 1. to 10 to the extent of Rs,2,44,60,000/- are an eye wash and these shares have not actually been allotted by the appellant company to the persons by following due process as required by the Companies Act 1956. Neither of these persons has denied the receipt of their respective shares worth Rs.2,44,60,000/- collectively. 5.20 As far as the addition for the amounts totalling to Rs. 2,44,60,000/- u/s 68 corresponding to the 10 parties in the said table is concerned as discussed above. I find that there is no dispute that shares to these parties have been duly issued through their share applications and the parties have confirmed the payment of share application money along with their return of Income, Balance Sheet, Copy of Bank Statement from where cheques for payment of shares application money were appearing before the AO in response to the notices issued u/s 133(6) of the IT Act, 1961 during the re-assessment proceedings. Further, the appellant company has also filed copy of the board resolution, MOA, copy of return of Allotment filed with the ROC. Thus, I find that the appellant company has discharged its onus under section 68 of the Act by proving the Identity of the parties, genuineness of the transactions and creditworthiness of the parties and the AO had not found any foul play in that. He has simply made the addition relying on the report of the Investigation wing without rebutting properly the evidence came in his way through these confirmations and documents. 5.21 The Learned AO has disputed on the creditworthiness of the parties on the ground that during the year under consideration the profit and loss account of these parties does not show significant business activities and their total income for the year is also less, This is not a correct view to judge creditworthiness for any transaction. The creditworthiness represents one's capacity to invest money and it has nothing to do with the income earned

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alone in a single year or the activity undertaken in that year. As held by the Hon’ble Delhi High Court in the case of Kamdhenu Steel and Alloy Ltd 361 ITR 220 (supra) that creditworthiness can be proved with the fact that the party has sufficient bank balance to subscribe to the share capital. In the bank statement produced in the paper book of these parties have sufficient bank balances on that date. Thus the creditworthiness of the parties stands proved. Nothing adverse has been brought on record by the AO to establish that the Share Application Money received by the appellant from these parties came from the coffers of the appellant company or there is any trace of cash deposit in the bank account of the investing company/companies. 5.22 The AO further held that the appellant could not produce these Parties for examination. Once, the parties have confirmed the transaction, the appellant was under no obligation to produce them before the AO and the AO could have called them by issuance of summon u/s 131. Even otherwise there are series of decisions on this point when the Identity and the capacity of the creditors has been proved by the assessee and source being the banking channel also established by producing relevant evidences then without finding any defect in the evidences produced by the assessee, the AO is not justified to make the addition solely on the ground that the assessee failed to produce the creditors in person. 5.23 Nevertheless, the fact that the parties in question are known to the AO which is evident from the fact that the Department had assessed them for AY 2008-09 u/s 143(3) r.w.s. 153A. The AO could have not ignored to mention in his assessment order and the other fact also that none of these parties are assessed for commission on account of alleged business of accommodation entries, The Assessment Order has been framed by the Assessing Officer only on the basis of the information received from the Investigation Wing of the Department without making any further investigation. Nothing adverse has been brought on record by the AO to establish that the Share Application Money received by the appellant represented its own undisclosed income. Hence, this addition is not justified in the facts & circumstances of the instant case. In holding this, I am fortified by the law propounded by Hon’ble Apex Court in CIT vs. Divine Leasing & Finance Ltd. (CC 375/2008)

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dated 21.01.2008; Apex Court in the case of Lovely exports Pvt Ltd 216 CTR 195, Hon’ble Bombay High Court in the cases of Creative World Telefilms Ltd, 333 ITR 100 (Bom), Decision of Delhi High Court in the case of Kamdhenu Steels and alloys Ltd 361 ITR 220, Mumbai Tribunal in the case of Provid Trade Impex Pvt Ltd 2219/Mum 2009, AIM Proprieties and Investment Pvt Ltd 2219/Mum 2009, AIM Proprieties and Investment Pvt Ltd ITA 7426/Mum/2012, Saimangal Investment Ltd 3924/Mum/2009, Uttam Chand Jain that upheld the decision of Spl, Bench of ITAT, Mumbai apart from latest clinching decision of Hon’ble ITAT (DELHI-E Bench) dt. 1.4. 2015 in ITA No. 2821/ Del/2009 in the case of ITO, Ward 13(2), New Delhi vs. Neelkanth, Finbuild Ltd., New Delhi. As discussed above, undoubtedly the issue has been settled by the Hon’ble ITAT, “J” Bench, Mumbai vide: Saimangal Investment Ltd 3924/Mum/2009 dt. 20.12.2013. Following the decision of Hon’ble Supreme Court in the case Union of India v. Kamlakshi Finance Corporation Ltd., AIR 1992 SC 711; [1991] 55 ELT 433 (SC). The relevant portion on judicial propriety from the aforesaid judgment of the Hon’ble Madhya Pradesh High Court is reproduced here under for the purposes of clarity: “Needless to say the orders passed by the Tribunal are binding on all the Revenue authorities functioning under the jurisdiction of the Tribunal. Dealing with this very aspect of the matter, the Supreme Court in the case of Union of India v. Kamlakshi Finance Corporation Ltd., AIR 1992SC 711; [1991] 55 ELT 433 (SC) emphasized: “It cannot be too vehemently emphasized that it is of utmost importance that, in disposing of the quasijudicial issues before them revenue officers are bound by the decisions of the appellate authorities. The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not ‘acceptable’ to the Department-in itself an objectionable phrase—and is the subject-matter of an appeal can furnish no ground for not following it unless its operation has been suspended

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by a competent court. If this healthy rule is not followed, the result will only be undue harassment to assessee and chaos in administration of tax laws. 5.24 Thus, in the light of the above factual analysis evidences on record, considering successful rebuttal by the appellant, unsubstantiated finding of the Assessing Officer, various judicial propositions and uncontroverted representation of the Ld. A.R., I find that Ld. Assessing Officer has made addition of Rs.2,76,70,000/- without any "conclusive evidence" and without discharging onus shifted upon him on account of various evidences submitted by the appellant during the course of assessment proceedings. Thus, Assessing Officer is directed to delete the baseless addition of Rs.2,76,70,000/- 5.25. In the result, Ground Nos. 6 to 10 are allowed.” If the aforesaid conclusion of the First Appellate

Authority is analyzed, it is noted that the Ld. Commissioner

of Income Tax (Appeal) has duly considered the basis of

addition made by the Ld. Assessing Officer, wherein, the

creditworthiness of the parties were suspected. The Ld.

First Appellate Authority relied upon the decision from the

Hon'ble Delhi High Court in the case of Kamdhenu Steels

and Alloy Ltd. 361 ITR 220 ((Supra)) and duly found from

the bank statement of these parties that they were having

sufficient bank balances and concluded that the

creditworthiness of the parties stands proved. The share

application money received by the assessee from these

parties were found to be genuine and the capacity of the

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investing parties was also proved. The parties also

confirmed the transactions and if the Ld. Assessing Officer

was still apprehensive of their creditworthiness, nothing

prevented him to issue summons under section 131 of the

Act. It is also noted that these parties/investing parties

were assessed by the Department under section 143(3)

r.w.s 153A of the Act and this fact has been mentioned in

the assessment order itself. Nothing adverse has been

brought on record by the Ld. Assessing Officer. Thus,

following the decision from Hon'ble Apex Court in the case

of CIT vs Devine Leasing and Finance Ltd., order dated

21/01/2008, Lovely Export Pvt. Ltd. (216 CTR

195)(Supreme Court), Hon'ble Bombay High Court in

Creative World Telefilms Ltd. 333 ITR 100 (Bom.), Hon'ble

Delhi High Court in Kamdhenu Steels and Alloys Ltd. 361

ITR 220 and various other decisions quoted in the

impugned order, we find no infirmity in the conclusion

drawn by the Ld. Commissioner of Income Tax (Appeal). So

far as the deleting the addition of Rs.2,76,70,000/- is

concerned, which was made by the ld. Assessing Officer

without any evidence and merely based on surmises, more

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specifically when the investment were made through

banking channel and sufficient material was produced by

the assessee during assessment stage itself by discharging

its onus cast upon the assessee.

Rs.1,25,50,000/- is concerned the argument of the Ld.

counsel for the assessee is that this addition was made by

the Ld. Assessing Officer merely on the basis of statement

of Shri Pravin Kumar Jain/Surendra Kumar Jain, who has

never specifically named the assessee. Our attention was

invited to various pages of the assessment order and more

specifically pages 2 to 26 by submitting that the name of

the assessee has nowhere mentioned by Mr. Jains in their

statements. The Ld. counsel cited various decisions of this

Tribunal, wherein on identical facts, the issue was decided

in favour of the assessee. The decisions cited are Income

Tax Officer vs M/s Chand Merchant Pvt. Ltd. (ITA

No.4868/Mum/2015) order dated 05/12/2018, Income

Tax Officer vs Ms/ Trishul Traders Pvt. Ltd.(ITA

No.3060/Mum/2017), order dated 20/12/2018. On the

other hand, the Ld. DR defended the order of the Ld.

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Commissioner of Income Tax (Appeal) by placing reliance

upon the decision from Hon'ble Delhi High Court in Pr. CIT

vs NDR Promoter Pvt. Ltd. (ITA No.49/2018) dated

17/01/2019. The ld. counsel for the assessee explained

that the aforesaid decision from Hon'ble Delhi High Court

is not applicable because the facts are entirely different.

4.1. In the light of the aforesaid arguments made

from both sides, we deem it appropriate to reproduce the

aforesaid decisions cited before us. The first such decision

is order dated 05/12/2018 of this Tribunal in the case of

Income Tax Officer vs Chand Merchant Pvt. Ltd. (ITA

No.4868/Mum/2015):-

“This appeal filed by the revenue is directed against the order of the CIT(A)-16, Mumbai dated 10-06-2015 and it pertains to AY 2018-19. The revenue has raised the following grounds of appeal:-

i) “Whether on the facts and in the circumstances of the case,the Ld. CIT(A) erred in deleting the addition of Rs.1,10,00,000 made u/s 68 of the I.T.Act despite of the facts that the appellant failed to prove creditworthiness of the creditors and their identity & genuineness of transaction as the creditors were accommodation entry providers?” ii) Whether on the facts and in the circumstances of the case the Ld. CIT(A) erred in not relying on investigation carried out by DIT Delhi and without calling remand report from the AO the additions has been deleted it has co terminus power of the Assessing Officer.” iii) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.5,25,000/- on account of commission paid @2.75% to obtain alleged entry to the tune of Rs.1,10,000 iv)

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addition of Rs.1,75,000 being 1.75% commission paid to Shri Satish Garg for arranging accommodation entries through companies controlled by Shri SK Jain,

"3.4 I have gone through the contents of the impugned assessment order dt. 29.3.2014., arguments and written submissions of the Ld. AR, case law relied upon in the instant case and the material available on record. I find that it's wrongly mentioned by AO in para 4 of the impugned assessment order that the case was selected in scrutiny as notice u/s 143(2) cannot he issued on 24.07.2013 for AY 2008-09 since the return is filed indisputably on 12.09.2008. This, notice was issued only because & subsequent to the notice u/s 148 issued on 26.03.2013.

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Though, the reasons recorded & conveyed to the appellant & manner of information received by AO, it has been clarified by him in para 3 that it's DIT (Inv).)-II, New Delhi who conducted action u/s 132/133(A) of the IT Act, 1961 on business/residential premises of Shri Surendra Kumar Jain & his brother Shri Virendra Kumar Jain and sent intimation to the AO of the appellant suggesting that appellant had taken accommodation entries from the persons of the group of those persons. It's a well settled law that the "belief u/s 147 is a subjective matter of an individual AO and that cannot be a matter of judicial scrutiny. What can be scrutinized is, the very existence of “reason” supported by valid material to form belief and invoke jurisdiction u/s 147 before issuing noticing u//s 148. I find that the source of intimation being Investigation Wing of IT Dept., it is a justified reason to record & form belief that there is a case for escapement to be scrutinized by the AO. There is no adverse material available on record that can suggest that his belief is not “honest belief” as no officer of the IT Department would honestly disbelieve their report prima facie that alone is required at the time of recoding his reasons to believe about escapement at the stage of-re-opening, irrespective of the fact whether, the AO confirms the suggested ,escapement or not at the end of the scrutiny & finalization of assessment proceedings. Hence, I don't concur with views of Ld. AR that it was a 'reason to suspect" only & not a "reason to believe" within the meaning of' Sec. 147 of the I.T. Act, 1961 5. Insofar as addition made u/s 68 towards share application money received from five companies, the Ld.CIT(A) held that there is no dispute that the parties have confirmed the payment of share application money along with their return of income balance-sheet and copy of bank statement. The Ld. CIT(A) further observed that the assessee also proved the creditworthiness of the parties by filing their financial statements, as per which, the share application money received by the assessee is sufficiently explained as out of share capital and reserves and surplus. Therefore, there is no reason for the AO to make addition when assessee has filed complete details in respect of five companies to prove identity, creditworthiness of the parties and genuineness of transactions. The Ld.C1T(A) also deleted addition made by the AO towards estimated commission @1.75% on total amount of share application money received by the assessee by holding that the AO has made the addition having a perception that the assessee might have paid 1.75% commission for obtaining alleged accommodation entries. The relevant observations of the Ld. CIT(A) are extracted below:-

4.6 I find that appellant’s submissions is correct that neither the copy of statement, if any, of the Shri Surendra Kumar Jain/ Virendra Jain has been provided to the appellant during the

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assessment proceeding nor the incrementing part, if any, of those alleged statement had been incorporated in the body of the impugned assessment order. A perusal of the show cause notice issued by the AO of the appellant during the assessment proceeding also does not give any specific and definite incrementing piece of evidence arising out Survey/Search and Seizure operation on the Jain Brothers that can be tagged with the case of theappellant company of accepted in any of their statements recorded during the search and seizure operation reproduced by the O in his assessment order that they are in the business of providing alleged accommodation entries or named the appellant company or its directors as beneficiary to issue such alleged accommodation entries in favour of the appellant company

4.7 As far as the addition for the amounts totaling to Rs.1,00,00,000/- u/s 68 corresponding to the 5 parties in the said table is concerned as discussed above, I find that there is no dispute that the parties have confirmed the payment of share application money along with their return of Income. Balance Sheet. Copy of 1ank Statement of the appellant wherechecjues received on account of shares application money and cheque paid for return of share application money were appearing. Had the AO was in doubt he could have further investigated the source of money as well as the recipient of the return of money by the way of issuing notice u/s 133(6) at least as genuinely requested by the appellant during the assessment proceedings. Without taking that recourse the AO was not justified in presuming that the amount was credited from non-existing, and non- credit worthy creditors and returned the same to some bogus persons. No adverse material has been bought by the AO to support his action on record. Thus, such addition appears to have been made on the basis of vague information received. 4.8 The AO has doubted creditworthiness of the parties M/s Finange Leasing and Finance Pvt Ltd. on the ground that the turnover of the company was meagre and Net current assets of the company as on 31.3.2007 to a negative figure of 17.78 crores. He has not observed that actually the Net Current Assets is a positive figure of Rs.1,72,950/- as on 31.3.2008 and the net worth of the company also was for 14,57 Comes. Similar is the case of Singhal Securities Pvt Ltd, M/s ShaliniHolidngs Ltd and Brite Industrial Resource Limited where the AO has not given thought to the net worth ef Ks.20,00,000/- each. The reason given for rejecting their creditworthinessfor Vogue Leasing and Finance Ltd are very vague and the AO has not given thought to the huge net worth of 17.61 crores as on 31.3.2008. Whereas this party also has paid the share application money for Rs.20,00,000/- only. Thereforeon one of the parties can be held lacking in their creditworthiness as wrongly presumed by the AO. The Identify of these parties was never in doubt as the details of their PAN was provided to the AO by the appellant during the assessment proceedings by furnishing the copy of acknowledgment of return of income.

4.9 Thus I find that the AO has not been able to establish the Fact that the amount from these parties is received in cheque in lieu of cash given to them through any credible piece of evidence. the reference and statements if any relied upon by the AO during the assessment proceedings could have been the beginning point and

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goods for further investigation and consequential verification but no addition out of the impugned addition could have been made merely on the material with the AO that had decisively no direct and live nexus with the cheque received from the parties and alleged cash given to such parties in lieu of such checks. The department had conducted Search and Survey both in the case of Surendra Kumar Jain and Virendra Kumar Jain that are biggest tool of accurate fact finding and affairs of the parties. If these tools could not provide any credible evidence to establish direct and live nexus between cheques received and alleged cash given to the parties. The AO could have not made the addition on the flimsy ground or simply because recommendation of some other I.Tax Authority devoid of such a credible evidence in his possession. The very important fact has also been ignored by the AO that all these parties have given back their due money during the year itself without entertaining their claim for allotment of shares as per their respective application. Hence the allegation, even if, iota of doubt could have been in the mind of the AO about these parties to have been engaged in business of providing entries only though this share application money, should have gone in view of the fact that return of money is never a part of business of entry providers.

4.10 Nevertheless, the fact that the parties in question arc known to the AO which is evident from the fact that the Department had assessed them for AY 2008-09 u/s 143(3) r.w.s. 153A. The AO could have not ignored to mention in his impugned assessment order, the other fact also that none of these parties are assessed for commission on account of alleged business of accommodation entries. The impugned Assessment Order has been framed by the Assessing Officer only on the basis of the information received from the Investigation Wing of the Department without making any further investigation. Nothing adverse has been brought on record by the AO to establish that the Share Application Money received by the appellant represented its own undisclosed income. Hence, this addition too, is not justified in the facts & circumstances of the instant case. In holding this & these additions, I am fortified by the law propounded by Hon'ble Apex Court in C1T vs Divine Leasing & Finance ,Ltd (CC 375/2008) dated 21.04.2008; Apex Court in the case of Lovely Exports Pvt Ltd 216 CTR [95,Hon'ble Bombay High Court in the cases of Creative World Telefilms Ltd, 333 ITR 100 (Bom), Decision of Delhi High Court in the case of Kamdhenu Steels and alloys Ltd 361 ITR 220, Mumbai Tribunal in the case of' Provid Trade Impex Pvt Ltd 2219/Mum 2009, AIM Proprieties and InvestmentPv Ltd ITA 7426/Mum/2012, Saimangal Investment Ltd 3924/Mum/2009, Uttam Chand Jain that upheld that decision of Sp. Bench of ITAT, Mumbai apart from latest clinching decision of Hon’ble ITAT (DELHI-E) Bench) dt. 1.4.2015 in ITA No. 2821/Del/2009 in the case of ITO, Ward 13(2), New Delhi vs. Neelkanth, Finbuild Ltd., New Delhi. As discussed above, undoubtedly the issue has been settled by the Hon’ble ITAT, “J” Bench, Mumbai, (Saimangal Investment Ltd 3924/Mum/2009 dt, 20.12.2013) in the similar facts and circumstances of share application money vis a vis allegation of accommodation entries as discussed above and that is the jurisdictional final fact finding authority and superior to the Commissioner of Income Tax (Appeals) under their jurisdiction in Mumbai. Thus, in view of the decision of Hon’ble Madhya Pradesh

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High Court in the case of Aggarwal Warehousing & Leasing Ltd V. C.I.T. (257 ITR 235), I. CIT(A) being the authority subordinate to the Hon’ble ITAT have no option but to follow respectfully the decision of Hon’ble Jurisdictional ITAT on the issue in tandem with judicial propriety that has been emphasized by the Hon’ble Madhya Pradesh High Court following the decision of Hon’ble Supreme Court in the case Union of India v. Kamlakshi Finance Corporation Ltd., AIR 1992 SC 711; [1991] 55 ELT 433 (SC). The relevant portion on judicial propriety from the aforesaid judgment of the Hon’ble Madhya Pradesh High Court is reproduced here under for the purposes of clarity:- "Needless to say the orders passed by the Tribunal are binding on all the Revenue authorities functioning under the jurisdiction of the Tribunal Dealing with this very aspect of the matter, the Supreme Court in the case of Union of India v. Kamlakshi Finance Corporation Ltd., AIR 1992 SC 711; [1991] 55 ELT 433 (SC) emphasized:

“It cannot be too vehemently emphasized that it is of utmost importance that, in disposing of the quasi-judicial issues before them revenue officers are bound by the decisions of the appellate authorities. The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not ‘acceptable’ to the department-in itself an objectionable phrase-and is the subject-matter of an appeal can furnish no ground for not following it unless it operation has been suspended by a competent court. If this healthy rule is not followed. The result will only be undue harassment to assessees and chaos in administration of tax laws.”

4.11 Obviously, the Commissioner of Income-tax (Appeals) not only committed judicial impropriety but also erred in law in refusing to follow the order of the Appellate Tribunal. Even where he may have some reservations about the correctness of the decision of the Tribunal, he had to follow the order. He Could and should have left it to the Department to take the

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matter in further appeal to the Tribunal and get the mistake, if any rectified. “Therefore the total addition of Rs.1,10,000/- is deleted in view of above discussion. (Relief: Rs. 1,10,00,0007-) 4.12 Ground 11

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assessment proceedings and also appellate proceedings where the assessee has furnished complete details of identity, genuineness of transactions and creditworthiness of the parties. The Ld.AR further submitted that the AO has made addition on the basis of information received from Investigation Wing which was further supported by statement of Shri S.K. Jain where in his case, during search he stated that he was involved in providing accommodation entries. During assessment proceedings, the assessee has sought details of evidences relied upon by the AO to draw an adverse inference against the assessee including statement recorded from Shri S.K. Jain. The assessee also sought cross examination of the witness, but the AO has turned down the request of the assessee and made addition only on the basis of information received from Investigation Wing in respect of share application money received from five companies, even through the assessee has filed completed details of companies, which subscribed to share application money. In this regard, he relied upon the decision of Hon'ble Supreme Court in the case of CIT vs SunitaDhadda in SLP (C) No.9002 of 2018 reported in 403 ITR 309 (SC). The assessee also relied upon the decision of Hon'ble Supreme Court in the case of Andaman Timber Industries vs Commissioner of Central Excise 52 GST 355 (SC).

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not allowed the assessee to examine the statement given by Shri SK Jain and also to cross examine the witness before making addition, even though the assessee has specifically asked for statement of Shri S.K. Jain and also cross examination of the witnesses. in this regard, the assessee has filed copies of letter address to the AO during assessment proceedings wherein it was specifically asked to furnish statement Of Shri SK Jain and also to allow cross examination of witness. The AO has turned down the request of the assessee and made addition u/s 68 on the basis of statement of Shri SK Jain. When third party information / evidences are relied upon or used against the assessee to draw an adverse inference, it is the duty of the AO to furnish such evidence and also to allow cross examination of witness before taking any adverse inference on the assessee. This legal proposition is supported by the decision of Hon’ble Supreme Court in the case of CIT vs SunitaDhadda (supra),wherein Their Lordships Adarsh Kumar Goel and Rohington Fali Narimancategorically held that unless it was established on record by the departmentthat as a matter of fact the consideration did pass to the seller from the purchaser in advance, especially, since none of the witnesses were examined by the AO and the assessee did not have any opportunity to cross examine them. This legal proposition is further supported by the decision of Hon'ble Supreme Court, in the cae of Andaman Timber Industries vs CCE (supra), wherein it was held that when statement of witnesses are made basis of admission, not allowing assessee to cross examine witness, is a serious flaw which makes order nullity as it amounts to violation of principles of natural justice. In this case, on perusal of details it is very clear that the assessee has sought for statement of witnesses and also cross examination during assessment proceedings. The AO, neither allowed the assessee to cross examine witnesses nor furnished statement which was used against the assessee to make addition towards share application money. Therefore, we are of the considered view that the AO has violated principles of natural justice during the course of assessment proceedings while making addition towards share application money u/s 68 of the Income-tax Act, 1961.

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filed enormous details to prove identity and also filed financial statements of subscribers and bank statement to prove creditworthiness of the parties and genuineness of transactions. The Ld.CIT(A) further observed that the subscribers to the share capital are having capacityto explain share application money given to the assessee which is evident from the fact that they are having huge net worth in the form of share capital and reserves. The AO neither pointed out any cash deposits or any other credits in the bank statements of the subscribers immediately preceding the day on which the amount has been transferred to the assessee. It is also not a case of the AO that the companies are not having enough source of income to establish creditworthiness. Therefore, we are of the considered view that the assessee has discharged its burden cast upon u/s 68 of the Act, to prove the credits found in the books of account. The Ld.CIT(A), after considering relevant facts has rightly deleted addition made by the AO towards share application money u/s 68 of the Act. We do not find any error in the findings of the Ld.CIT(A) and hence, we are inclined to uphold order of the Ld.CIT(A) and dismiss the appeal filed by the revenue.

4.2. Another decision cited before us is Income Tax Officer

vs M/s Trishul Traders Pvt. Ltd. (ITA

NO.3060/Mum/2017), order dated 20/12/2018, which is

reproduced hereunder:-

“The present Appeal filed by the revenue is against the order of Ld. CIT (Appeal) – 21, Mumbai dated 17.02.17 for AY 2012-13 on the grounds mentioned herein below:- 1. Whether on the facts and in the circumstances of the case, the ld.CIT(A) erred in deleting the addition made of Rs.5,75,00,000/-, when the assessee had failed to discharge its onus of establishing identity, genuineness and creditworthiness of the investors, ignoring the ratio of decision in the following cases:

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(i) CIT Vs N.R.Portfolio(P) Ltd. (ii) CIT Vs Ultra Modern Exports P. Ltd. (iii) Agrawal Coal Corporation P. Ltd Vs. Addl.CIT, Range 5 (iv) CIT Vs Youth Construction P. Ltd. (v) Nova Promoters & Finlease P. Ltd. 2. Whether on the facts and in the circumstances of the case, the ld.CIT(A) failed to appreciate the fact that the statement of witness recorded was not concluded due to non-cooperation of the deponent, and hence, no adverse inference could be drawn out of it. 3. Whether on the facts and in the circumstances of the case, the ld.CIT(A) erred in concluding that no opportunity has been provided to the assessee for cross examination of witness, while he has also concluded that opportunity for cross examination did not advance the case of the AO. 4. The appellant prays that the order of the ld.CIT(A) on the grounds be set aside and that of the Assessing Officer be restored. 5. The appellant craves leave to add, amend or alter all or any of the grounds of appeal which may be necessary.

Ground No. 1 to 3

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those of the Apex Court and High Court have considered credits made to capital account of the assessee's to be covered under the provisions of section 68 and therefore deemed income. The rule for application of section 68 is that the identity and credit worthiness of the investor/lender /creditor has to be established and the genuineness of the transaction has to be established. 4.10. The Apex Court upheld the addition u/s 68 in the case of credits as share capital in the case of N. Tarika Property Invest. (P.) Ltd. v. Commissioner of Income-tax*[2014] 51 taxmann.com 387 (SC) by dismissing the SLP filed by the appellant. 4.11. In the remand report called the assessing officer was clearly given a free hand to bring in any evidence that specifically linked the appellant company receiving share capital money in lieu of cash. No specific person was specified and it was stated as a general proposition that for any statement to be used against the appellant, an opportunity of cross examination must be provided. The assessing officer has made efforts to bring in Shri Praveen Jam, but has not obtained any statement incriminating the appellant. The statement recorded of Shri Praveen Jain on 9.1.2017 does appear to be meandering and too short for the three hours for which Shri Jain attended. Not a single question relating to the investors in this case was asked. It is also noted that there is nothing asked nor confirmed to link the investor companies in this case to Shri Praveen Jam, much, less link it to the appellant company. 4.12. A perusal of the assessment order shows that though the conclusions of the investigation wing has been referred to in the assessment order, there are no specific reference to the appellant company. There are no evidences to show that there is any cash trail in respect of the amounts received by the appellant company from the investors. Though the AO was specifically asked to furnish specific incriminating evidences, it is noted that the AO has not been able to pin point the specific evidences which would clearly show that the share application money has been received in lieu of cash. The fact remains that the investor companies are

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assessed to tax and have filed their returns of income. Notices u/s 133(6) were served on the investors except in 2 cases and even then replies were filed by all of them later, and therefore it cannot be said that the parties did not exist at their addresses. Copy of bank statement, ledger account, share application form, board resolution authorizing investments, income tax return and audited accounts of the investor companies have been filed before the assessing officer and also in the appellate proceedings. 4.13. The investment and the corresponding source of funds of investor as seen from the copy of their audited accounts for FY 2006-07 is tabulated below.

Sr.N Name of the Total Share Capital Profit as P o. Shareholder amount and reserves & L invested account 1 M/s. Kavya Share 30,00,000 2,24,81,101 3,86,824 86 Securities Pvt. Ltd. 2 M/s.Dev Share 30,00,000 2,46,10,675 5,00,568 Trading Pvt. Ltd. 3 M/s. Prajan 30,00,000 3,03,55,461 5,20,299 Trading Pvt. Ltd. 4 M/s. Arawalli 30,00,000 1,63,90,103 4,87,875 Stock Broking Pvt ltd 5 M/s. Colourunion 50,00,000 2,30,51,700 3,43,358 International Pvt. Ltd. 6 M/s.Ramdev 1,00,00,000 2,97,72,514 21,69,240 Shares & Securities Pvt. Ltd. Now known as Koina Trading P. Ltd 7 M/s. Jasol Maa 1,00,00,000 4,11,30,413 5,32,200 Share Trading 8 Yashita Trading 95,00,000 41,58,066 (-) 42177 Pvt. Ltd. Plus share application money 40,00,000

9 Ashrita Trading 85,00,000 50,83,061 (-) 40,851 Co. Pvt. Ltd. Plus share application money

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50,00,000 10 Accurate 25,00,000 42,28,354 (-) Multitrade Pvt. Plus share 2,460/- Ltd. application money 40,00,000 TOTAL 5,75,00,000

In the case of Koina Trading Pvt. Ltd., copy of assessment order u/s 143(3) for AY 12-13 passed by ITO 14(2)(2) was also filed.

4.14. It can be seen from the observation of the Assessing Officer that he has only referred to the information related to the outcome of search in the case of Shri Pravin Kumar Jain Group who were providing accommodation entries but the Ld.Assessing Officer has failed to demonstrate any such evidence that the appellant has in reality obtained any accommodation entries. There is no direct specific mention of the appellant by the director or key persons of the investor company. There is no evidence of cash deposits linked to the investors. The assessing officer did not bring specific incriminating evidence linking the investor to the appellant. The only link is that the investors have invested in appellant company. That the appellant has given cash to the investors in lieu of entry is merely alleged but not demonstrated. Opportunity for cross examination was provided to the appellant in the remand proceedings but Shri Praveen Jain did not confirm that any accommodation entries were provided. Papers/evidence found in the search action raises presumption but the same is available in the case of person, searched but not in the case of third parties unless proved and corroborated. Similarly, retraction may be rejected as motivated, but the same can be considered only against the person who has retracted in his assessment. Such statement in the case of another person loses its sanctity unless opportunity of cross examination is granted and /or is corroborated with other evidences. In the present case even the basic premise that the investor companies belong to Praveen Jain is not shown. When the investor company is filing regular return of income and there is a transaction through banking channel, no addition can be made without

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having any contrary or cogent evidences in possession. Over such issue there are plethora of judgements to support the appellant. Some of them are discussed here below:- (i) The Hon'ble Supreme Court in the case of CIT V/s Lovely Exports 6 DTR 308 has held as under: If the share application money is received by the assessee company from alleged bogus share holderswho's name are given to the Assessing Officer then the department is free to proceed to reopen their individual assessments in accordance with law but it cannot be regarded as undisclosed income of assessee company". (ii) The Hon'ble Bombay High Court in the case of CIT v/s Creative World Teleflims Ltd 333 ITR 100 has held as under: "If the share application money is- received by the assessee company from alleged bogus share holders who's name are given to the Assessing Officer then the department can always proceed against them and if necessary reopen their individual assessments. Held, dismissing the appeal, that there was no dispute that the assessee had given the details of names and addresses of the shareholders, their PAN/ GIR numbers and had also given the cheque numbers, name of the bankers. The Assessing Officer ought to have found out their details through PAN cards, bank reholders. Thus, the view taken by the Tribunal could not be faulted. (iii) The Hon'ble Supreme Court of India in the case of CIT vs. Orissa Corporation reported in 159 ITR 78 (SC) has held as under: "That in this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessee's. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notice under section 131 at the instance of the respondent, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they are creditworthy. There was no effort made to pursue the so- called alleged creditors. In those circumstances, the respondent could not do anything furtheyn the premises, if the Tribunal came to the conclusion that th.ne Respondent

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had discharged the burden that lay on it, then, it could not be said that such a conclusion was unreasonable or perverse or based on no evidence". Reliance is also placed on the following decisions: i. Hon'ble Delhi High Court in case of Commissioner of Income Tax v/s. Value Capital Services P.Ltd. (2008) 307 ITR 334 (Delhi). ii. Hon'ble Punjab and Haryana High Court in the case of Commissioner of Income Tax v/s. GP International Ltd. (2010) 325 ITR 25 (P&H). iii. Hon'ble Madras High Court in the case of Commissioner of Income Tax v/s. Electro Polychem Ltd (2007)294 ITR 661 (Mad). iv. Hon'ble Rajasthan High Court in case of Commissioner of Income Tax v/s. AKJ Granites P.Lt4. (2008)301 ITR 298 (Raj.) V. Hon'ble Delhi High Court in case of Commissioner of Income Tax v/s. Oasis Hospitalities Pvt.) Ltd. (2011) 51 DTR 74 (Delhi). Sec. 69 places the burden of proof on the tax payer to explain the nature and source of any credit found in the books. But, when assessee proves or submit the basic information like identification, genuineness of transactions and creditworthiness of the creditors, onus is discharged by him and if Assessing Officer disbelieve the genuineness of the same, he has to prove otherwise, merely, doubting or pointing out some discrepancy is not the foundation for discarding the genuineness of the deposit or share money or substance of the matter, held by the Hon'ble Supreme Court in the case of CIT v. Gujarat-Heavy Chemicals Ltd. (2002)256 ITR 795 (SC). In view of the above the question of making any addition u/s. 68 of the Act does not arise." 4.15.Further, Hon'ble jurisdictional ITAT in the case of ITO- 10(2)(3) VS. M/S J.J. MultitradePvt.Ltd. ITA No.2158 & 2159/Mum/2014 order dated 11.03.2015 has deleted additions on similar facts.

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Further, tht: Ho'ble jurisdictional ITAT in the case of M/s S.D.B. Estate Pvt.L d. vs ITO-5(3)(2) ITA No.584/M/2015 has deleted similar addition made u/s 68 of the I.T. Act. The Hon'ble ITAT (Jaipur Bench)In the case of Bharti Syntex Ltd. vs. DCIT ITA Nos. 172 & 173/Jp/2010 has held in para 24.4 as under:- "24.4 In this case also no cross examination was allowed to the assessee. Therefore, adverse inference cannot be drawn only on the statement of Shri MukeshChoksi. We further noted that all other necessary details have been filed before AG. Amounts were received through account payee cheque. Both the companies are assessed to tax in Mumbai. Confirmation along with copies of share certificate, bank statement, memorandum of articles, copy of share application money, audited balance sheet and P&L a/c of these parties were filed. These are similar details as were filed in case of three other companies for asst. yr. 2005-06. We have already disposed of the appeal for asst. yr. 2005-06 whereby we have held that the assessee has discharged its onus by filing necessary details and further have relied on the decisions of Hon'ble Supreme Court and Hon'ble Delhi High Court alongwith various other decisions of Tribunal and have held that addition cannot be made under S. 68 in the hands of the assessee company. Therefore, in view of the same reasoning, we cancel the entire addition made and confirmed by the lower authorities here also. The above decision of ITAT also related to Mr.MukeshChoksi's case of investment in share application money. On perusal of above case it is clear that if a bogus shareholder has invested the money and if appellant receives such money as share application money and appellant during assessment proceedings provides the details like name &address of the corporate entity, PAN No., ROC No., then ITAT held that this may be referred to the concerned A. 0. or proceeding against such bogus shareholders instead of adding -,amount u/s 68 of the IT Act in the name of the company" The appellant has referred to the decision of the Hon'ble Bombay High Court in the case of M/s Green Infra Ltd. ITA 1162 of 2014. I however find that the facts in that case were somewhat different, though the question regarding high

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premium at which shares were issued was raised by the department. 4.16. It is noted that no specific incriminating material linking investor to the appellant or showing the investment to be bogus is provided. Also opportunity for cross examination did not advance the case of the assessing officer. The assessing officer has not been able to bring on record any direct or corroborative evidence that the share application money received is unexplained as covered u/s 68 even after opportunity was given in the remand proceedings. No statement of Shri Praveen Jain names the appellant specifically. In any case, it is cardinal principle of natural justice, that before conclusions are drawn against a person based on statement of a third party, he must be allowed an opportunity for cross examination. - This has not been provided. In this fact matrix, and the judicial decisions covering the scope of section 68, the addition made of Rs 575,00,000 lakhs u/s 68 in the case of the appellant is deleted. The grounds of appeal is allowed.

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there was any cash trail in respect of the amounts received by the assessee company from the investors. We noticed that though the AO was specifically asked to furnish specific incriminating evidences, but the AO was unable to pin point the specific evidences which could clearly show that the share application money was received in lieu of cash. It is an admitted fact that the investor companies were assessed to tax and had filed their returns of income. The notices u/s 133(6) were complied with by the parties and copy of bank statement, ledger account, share application form, board resolution authorizing investments, income tax return and audited accounts of the investor companies were filed before the assessing officer and Ld. CIT(A). We also considered the investment and the corresponding source of funds of investor as seen from the copy of their audited accounts for FY 2006- 07, which are tabulated in para no. 4.13 of Ld. CIT(A) and the same is reproduced below. Sr.N Name of the Total Share Capital Profit as P o. Shareholder amount and reserves & L invested account 1 M/s. Kavya Share 30,00,000 2,24,81,101 3,86,824 86 Securities Pvt. Ltd. 2 M/s.Dev Share 30,00,000 2,46,10,675 5,00,568 Trading Pvt. Ltd. 3 M/s. Prajan 30,00,000 3,03,55,461 5,20,299 Trading Pvt. Ltd. 4 M/s. Arawalli 30,00,000 1,63,90,103 4,87,875 Stock Broking Pvt ltd 5 M/s. Colourunion 50,00,000 2,30,51,700 3,43,358 International Pvt. Ltd. 6 M/s.Ramdev 1,00,00,000 2,97,72,514 21,69,240 Shares & Securities Pvt. Ltd. Now known as Koina Trading P. Ltd 7 M/s. Jasol Maa 1,00,00,000 4,11,30,413 5,32,200 Share Trading 8 Yashita Trading 95,00,000 41,58,066 (-) 42177 Pvt. Ltd. Plus share application money 40,00,000

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9 Ashrita Trading 85,00,000 50,83,061 (-) 40,851 Co. Pvt. Ltd. Plus share application money 50,00,000 10 Accurate 25,00,000 42,28,354 (-) Multitrade Pvt. Plus share 2,460/- Ltd. application money 40,00,000 TOTAL 5,75,00,000

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iii. Hon'ble Madras High Court in the case of Commissioner of Income Tax v/s. Electro Polychem Ltd (2007)294 ITR 661 (Mad). iv. Hon'ble Rajasthan High Court in case of Commissioner of Income Tax v/s. AKJ Granites P.Lt4. (2008)301 ITR 298 (Raj.) V. Hon'ble Delhi High Court in case of Commissioner of Income Tax v/s. Oasis Hospitalities Pvt.) Ltd. (2011) 51 DTR 74 (Delhi). Sec. 69 places the burden of proof on the tax payer to explain the nature and source of any credit found in the books. But, when assessee proves or submit the basic information like identification, genuineness of transactions and creditworthiness of the creditors, onus is discharged by him and if Assessing Officer disbelieve the genuineness of the same, he has to prove otherwise, merely, doubting or pointing out some discrepancy is not the foundation for discarding the genuineness of the deposit or share money or substance of the matter, held by the Hon'ble Supreme Court in the case of CIT v. Gujarat-Heavy Chemicals Ltd. (2002)256 ITR 795 (SC). In view of the above the question of making any addition u/s. 68 of the Act does not arise." 11. Apart from above, the Ld. AR had also relied upon other decisions of the Coordinate Benches, but when we have already relied upon the judgments of Hon’ble Supreme Court and Jurisdictional High Court, therefore there is no need to rely on the orders of the Coordinate Benches on the same point.

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Ground No. 4 & 5. 13. These grounds raised by the revenue are general in nature, thus requires no specific adjudication.

4.3. The Ld. DR relied upon the decision from Hon'ble

Delhi High Court in the case of Pr. CIT vs NDR Promoters

Pvt. Ltd. (ITA NO.49/2018) order dated 17/01/2019, which

is also reproduced hereunder:-

“This appeal by the Revenue under Section 260A of the Income Tax Act, 1961 („Act‟, for short), in the case of NDR Promoters Pvt. Ltd. relates to Assessment Year 2008-09 and arises from the order dated 3rd March, 2019 passed by the Income Tax Appellate Tribunal („Tribunal‟, for short). 2. The appeal was admitted for hearing vide order dated 17th January, 2018 on the following substantial question of law:- “Whether the ITAT fell into error in upholding the deletion directed by the CIT (A) in respect of the amount of Rs.1,51,50,000/- brought to tax under Section 68 of the Income Tax Act, 1961, in the circumstances of the case ?” 3. It is an undisputed position that during the Assessment Year 2008-09, the respondent-assessee had received money in the form of share capital/share premium as per the following details:-

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Issue raised in this appeal relates to first five companies, who had invested Rs.1,51,50,000/- as share application money with premium as per details given in above table. 4. The Assessing Officer vide assessment order dated 30th December, 2010, made an addition of Rs.1,51,50,000/- recording that the aforesaid companies were „creation‟ of and de facto operated by one Tarun Goyal, Chartered Accountant, who had set up about 90 companies/firms including the aforesaid 5 companies for providing accommodation entries. Paper work was perfect but there were chinks, which had revealed that the true nature of the transactions was to convert illegitimate money by providing bogus or accommodation entries. These evidences and details collected and ascertained during the course of search under Section 132 of the Act conducted by the Investigation Wing in the case of Tarun Goyal, had revealed that the registered office of 90 companies was located at 13/34, Main Arya Samaj Road, Karol Bagh and their former office was at 203,

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Dhaka Chambers, 2069/39, Naiwala, Karol Bagh, New Delhi. These companies were not carrying on any genuine business activities. Directors of these companies were employees of Tarun Goyal, who were working as peons, receptionists etc. Entries in the books were bogus. Modus operandi in such cases is well known, money is circulated by first depositing cash in the bank account of one such company, and thereupon it is transferred/circulated within the group companies before cheque is issued to the beneficiary. 5. The Assessing Officer had asked the respondent-assessee to produce Directors of the shareholder companies for examination after recording:- (i) most of the directors in their statement recorded by the Investigation Wing had admitted that they had signed documents/papers on direction of Tarun Goyal. (ii) shares of face value of Rs.10/- were issued at a premium of Rs.40/- (total Rs.50/-). There was no justification and reason for a third person to purchase shares in the respondent-assessee and to pay substantial premium. (iii) The respondent-assessee had shown receipts of Rs.16.38 lakhs and „Nil‟ income in the year ending 31st March, 2008 and 31st March, 2007, respectively. There were no fixed assets and the respondent-assessee had incurred expenses amounting to Rs.12.17 lakhs and „Nil‟ in the year ending 31st March, 2008 and 31st March, 2007, respectively. (iv) share capital/share premium of Rs.168 lakhs was after deposit shown as investment partly as advance for land and as advance to S.M. Udyog and Guruji Industries. FDR of Rs.80 lakhs was obtained from Oriental Bank of Commerce. 6. Respondent-assessee was also asked to produce all papers relating to issue of shares; state, how the dealings had started with the shareholder companies; if directly, state the year/date since when they were known to each other; if indirectly, give the name of the introducer and state that since when the introducer was known including years of relationship; state, whether the applications for allotment of shares were received in one lot or on different dates and whether they were received by hand or post. If acknowledgement was issued, supporting evidence should be

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given; provide the proof if any offer letter was received or issued; whether stamp duty was paid on allotment of shares; whether the share certificates were delivered by hand or post. If by hand, details of the person who had delivered the certificates. If share certificates were issued by post, state whether they were received back; indicate whether annual reports, balance sheet or notices of AGM/EGM of the respondent-assessee company were sent to the shareholders. 7. The respondents-assessee did not produce the Directors for examination. Other details and particulars were also not filed as required by the Assessing Officer. However, the respondent-assessee had filed:- (i) Copy of the ledger account of share application. (ii) Copy of the bank statement of the account in which money was received. (iii) Copy of the ledger account of share capital. (iv) Copy of balance sheet and profit & loss account reflecting receipt of share application money. (v) Share application form with complete list of shareholders, old and new. (vi) Annual return filed before the Registrar of Companies. (vii) Copy of Form No.2 i.e., return of allotment filed before the Registrar of Companies. (viii) Affidavits of Directors of the shareholder companies along with PAN details, copy of PAN cards, Board Resolutions, confirmations from the parties, share application forms, bank account statements of the shareholder companies, Memorandum and Articles of Association, confirmation of receipt of shares from M/s Bhawani Portfolio and CIN details of M/s Bhavani Portfolio. 8. The Assessing Officer made an addition of Rs.1,51,50,000/- as unexplained cash after referring to the factual matrix including failure to produce Directors of the shareholder companies so that they could be examined on oath. He observed that no prudent businessman would invest in the shares of the respondent-assessee at five times the face value of shares. There was sufficient evidence to indicate and infer that beneficiaries i.e. the respondent-assessee had

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introduced income from undisclosed sources into their business in the garb of share capital/share premium. 9. The addition was deleted by the Commissioner of Income Tax (Appeals) on the ground that the respondent-assessee had been able to establish identity, creditworthiness of the shareholders and genuineness of the transactions in terms of several decisions of this Court including CIT Vs. Oasis Hospitalities Pvt. Ltd. decided on 31st January, 2011. He held that once documents like PAN or bank account details were given, then the onus had shifted on the Assessing Officer and it was up to him to reach the shareholders. This burden could not be passed on to the assessee, merely on the ground that the summons issued to the shareholders were returned. Assessing Officer had issued notice Section 133 (6) of the Act and in response had received replies confirming the investment. The shareholder companies were incorporated and had invested money through banking channels, which was reflected in the books. Investment was proved by the bank statements that disclosed sufficient balance before cheques were issued. Accordingly, the three requirements i.e. identity of the investor, creditworthiness of the investors and genuineness of the transactions were satisfied. 10. Appeal preferred by the Revenue against the said deletion has been dismissed by the impugned order passed by the Tribunal, which records as under:- “4. In view of above citations, when we go through the orders of the authorities below, we find that there is no dispute that the assessees in support of genuineness of their claims regarding receipt of share application moneys from different parties had furnished their confirmatory letters, PAN details, copies of Income Tax Returns as well as share application forms and complete name and address of share applicants. These documents were sufficient to establish the identity of share applicants. It is also not in dispute that all the transactions have been routed through banking channels and share application money has been received through account payee cheques, details of which were furnished. The assessees had also furnished returns of income of the creditors accepted by the Department and thus, we are of the view that in absence of rebuttal of these facts there was no reason to doubt the genuineness of the transactions. The

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creditworthiness of the share applicants was also established by the assessee by filing the audited balance sheet of each of the share-holder company. On the contrary, no evidence has been brought on record by the Assessing Officer to prove that share application money emanated from the coffers of the assessees. It is also pertinent to note here that in response to the notices issued under section 133(6) of the Act by the Assessing Officer were responded by the share applicants. Merely because the assessee, as directed by the Assessing Officer, could not produce any of the share applicants, cannot be a reason for doubting the genuineness of the transactions. This view is well supported by the decisions of the Hon'ble jurisdictional High Court of Delhi in the cases of CIT Vs. Rakam Money Matters Pvt. Ltd. (supra) and CIT Vs. Victor Electrodes (supra), relevant extract thereof, are respectively reproduced hereunder :- CIT Vs. Rakam Money Matters Pvt. Ltd, : " 12. A perusal of the order of the AO shows that its foundation is the report of the DIT (Investigation). Admittedly, the Assessee was not confronted with that material in the course of the reassessment proceedings. The Assessee was also not confronted with the statements recorded in the course of the investigation. Once that material is kept aside then the scope of enquiry can only be whether the Assessee has produced documents to discharge the initial onus of proving the genuineness and creditworthiness of the companies who were stated to have subscribed to the Assessee's shares. 13. It is not in dispute that extensive material was produced by the assessee in the present case to prove the identity, genuineness and creditworthiness of the companies who had subscribed to its shares. Among the materials produced were the Income Tax Returns and the PAN card details of the eight companies. Even if the Directors of these companies did not respond to the summons issued by the AO, it was not impossible for the AO to make proper enquiries to ascertain the genuineness of these entities and satisfy himself of their creditworthiness. As pointed out by the CIT(A), the AO failed to make any effort in that direction. He did not take to the logical end the halfhearted attempt at getting the Directors to appear before him. He did not even seek the assistance of the

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AOs of the concerned companies whose ITRs and PAN card copies had been produced. 14. The view taken by the CIT(A) that the AO failed to come up with the material to disprove what had been produced by the Assessee is certainly a plausible view in the facts and circumstances of the case. Likewise, the view taken by the ITAT concurring with the CIT(A) on facts cannot be said to be perverse. " CIT Vs. Victor Electrodes : "There was no legal obligation on the assessee to produce same Director or other representative of the applicant companies before the Assessing Officer. Therefore, failure of assessee to produce then could not by itself have justified the additions made by A. 0. " 4.1 As discussed above, we find that the assessees have been able to discharge its initial onus to establish the genuineness of the claimed transactions of share application moneys by furnishing all the necessary possible evidences and thus, the onus to disprove those evidences were shifted upon the Assessing Officer the Assessing Officer has failed to discharge by not disproving those evidences. The assessees were thus, able to establish the identification as well as creditworthiness of the share applicants and the genuineness of the claimed receipt of share application moneys from those parties. The ld. CIT (Appeals) was thus justified in deleting the additions made under section 68 of the Act on account of the alleged unexplained share application money. The same is upheld. The grounds questioning the action of the Id. CIT (Appeals) in this regard are thus rejected.” 11. Issue of bogus share capital in the form of accommodation entries has been subject matter of several decisions of this Court and we would like to refer to decision in Commissioner of Income Tax Vs. Navodaya Castles Pvt. Ltd. [2014] 367 ITR 306, wherein the earlier judgments were classified into two separate categories observing as under:- “11. We have heard the Senior Standing counsel for the Revenue, who has relied upon decisions of the Delhi High Court in Commissioner of Income Tax Vs. Nova Promoters and Finlease (P) Ltd. [2012] 342 ITR 169 (Delhi), Commissioner of Income Tax Vs. N.R. Portfolio Pvt. Ltd., 206

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(2014) DLT 97 (DB) (Del) and Commissioner of Income Tax- II Vs. MAF Academy P. Ltd., 206 (2014) DLT 277 (DB) (Del). The aforesaid decisions mentioned above refer to the earlier decisions of Delhi High Court in Commissioner of Income Tax Vs. Sophia Finance Ltd., [1994] 205 ITR 98 (FB)(Delhi), CIT Vs. Divine Leasing and Finance Limited [2008] 299 ITR 268 (Delhi) and observations of the Supreme Court in CIT Vs. Lovely Exports P. Ltd. [2008] 319 ITR (St.) 5 (SC). 12. The main submission of the learned counsel for the assessee is that once the assessee had been able to show that the shareholder companies were duly incorporated by the Registrar of Companies, their identity stood established, genuineness of the transactions stood established as payments were made through accounts payee cheques/bank account; and mere deposit of cash in the bank accounts prior to issue of cheque/pay orders etc. would only raise suspicion and, it was for the Assessing Officer to conduct further investigation, but it did not follow that the money belonged to the assessee and was their unaccounted money, which had been channelized. 13. As we perceive, there are two sets of judgments and cases, but these judgments and cases proceed on their own facts. In one set of cases, the assessee produced necessary documents/evidence to show and establish identity of the shareholders, bank account from which payment was made, the fact that payments were received thorough banking channels, filed necessary affidavits of the shareholders or confirmations of the directors of the shareholder companies, but thereafter no further inquiries were conducted. The second set of cases are those where there was evidence and material to show that the shareholder company was only a paper company having no source of income, but had made substantial and huge investments in the form of share application money. The assessing officer has referred to the bank statement, financial position of the recipient and beneficiary assessee and surrounding circumstances. The primary requirements, which should be satisfied in such cases is, identification of the creditors/shareholder, creditworthiness of creditors/shareholder and genuineness of the transaction. These three requirements have to be tested

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not superficially but in depth having regard to the human probabilities and normal course of human conduct. 14. Certificate of incorporation, PAN number etc. are relevant for purchase of identification, but have their limitation when there is evidence and material to show that the subscriber was a paper company and not a genuine investor. It is in this context, the Supreme Court in CIT Vs. Durga Prasad More [1971] 82 ITR 540 (SC) had observed:- “Now we shall proceed to examine the validity of those grounds that appealed to the learned judges. It is true that the apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a 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.” 15. Summarizing the legal position in Nova Promoters and Finlease (P) Ltd.(supra), and highlighting the legal effect of section 68 of the Act, the Division Bench has held as under:- “32. The tribunal also erred in law in holding Assessing Officer ought to have proved that the monies emanated from the coffers of the assessee- company and came back as share capital. Section 68 permits the Assessing Officer to add the credit appearing in the books of account of the assessee if the latter offers no explanation regarding the nature and source of the credit or the explanation offered is not satisfactory. It places no duty upon him to point to the source from which the money was received by the assessee. In A. Govindarajulu Mudaliar v CIT, (1958) 34 ITR 807, this argument advanced by the assessee was rejected by the Supreme Court. Venkatarama Iyer, J., speaking for the court observed as under (@ page 810): -

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“Now the contention of the appellant is that assuming that he had failed to establish the case put forward by him, it does not follow as a matter of law that the amounts in question were income received or accrued during the previous year, that it was the duty of the Department to adduce evidence to show from what source the income was derived and why it should be treated as concealed income. In the absence of such evidence, it is argued, the finding is erroneous. We are unable to agree. Whether a receipt is to be treated as income or not, must depend very largely on the facts and circumstances of each case. In the present case the receipts are shown in the account books of a firm of which the appellant and Govindaswamy Mudaliar were partners. When he was called upon to give explanation he put forward two explanations, one being a gift of Rs. 80,000 and the other being receipt of Rs. 42,000 from business of which he claimed to be the real owner. When both these explanations were rejected, as they have been it was clearly upon to the Income-tax Officer to hold that the income must be concealed income. There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipt are of an assessable nature. The conclusion to which the Appellate Tribunal came appears to us to be amply warranted by the facts of the case. There is no ground for interfering with that finding, and these appeals are accordingly dismissed with costs.” (emphasis supplied) Section 68 recognizes the aforesaid legal position. The view taken by the Tribunal on the duty cast on the Assessing Officer by section 68 is contrary to the law laid down by the Supreme Court in the judgment cited above. Even if one were to hold, albeit erroneously and without being aware of the legal position adumbrated above, that the Assessing Officer is bound to show that the source of the unaccounted monies was the coffers of the assessee, we are inclined to think that in the facts of the present case such proof has been brought out by the Assessing Officer. The statements of Mukesh Gupta and Rajan Jassal, the entry providers, explaining their modus operandi to help assessee‟s having unaccounted monies

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convert the same into accounted monies affords sufficient material on the basis of which the Assessing Officer can be said to have discharged the duty. The statements refer to the practice of taking cash and issuing cheques in the guise of subscription to share capital, for a consideration in the form of commission. As already pointed out, names of several companies which figured in the statements given by the above persons to the investigation wing also figured as share- applicants subscribing to the shares of the assessee-company. These constitute materials upon which one could reasonably come to the conclusion that the monies emanated from the coffers of the assesseecompany. The Tribunal, apart from adopting an erroneous legal approach, also failed to keep in view the material that was relied upon by the Assessing Officer. The CIT (Appeals) also fell into the same error. If such material had been kept in view, the Tribunal could not have failed to draw the appropriate inference.” 12. The present case would clearly fall in the category where the Assessing Officer had not kept quiet and had made inquiries and queried the respondent-assessee to examine the issue of genuineness of the transactions. The Tribunal unfortunately did not examine the said aspect and has ignored the following factual position:- (a) The shareholder companies, 5 in number, were all located at a common address i.e. 13/34, WEA, Fourth Floor, Main Arya Samaj Road, Karol Bagh, New Delhi. (b) The total investment made by these companies was Rs.1,51,00,000/-, which was a substantial amount. (c) Evidence and material on bogus transactions found during the course of search of Tarun Goyal. Evidence and material that the companies were providing accommodation entries to beneficiaries was not considered. (d) The findings recorded as mentioned in the assessment order, which read as under:- “1. From the finding of search, it is evident and undeniable that all the companies including the alleged shareholders companies belong to Sh. Tarun Goyal. This is enforced even more from the following:- i. All the companies are operated from the-office premises of Sh. Tarun Goyal.

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ii. All the directors are either his employees or close relatives. Sh. Tarun Goyal could never produce the directors nor furnish their residential address. iii. The statement of employees of Sh. Tarun Goyal is ,on record, whereby they have clearly stated that they signed on the papers produced before them by Sh Tarun GoyaL They do not know about the basic details of the companies like shareholding patterns, nature of business of these companies etc. iv. The statement of auditors of Sh. Tarun Goyal is on record. They have stated to have never meet (sic) the directors of the companies and audited the accounts only on the directions of Sh Tarun Goyal. As per the statement of auditors, the employees of Sh Tarun Goyal were directors of the companies run by them, also they could not ascertain the so called share capital subscribed by Sh Tarun Goyal as documentary proof of the same was lacking. v. During the course of search, all the passbooks, cheque books, PAN Cards etc. were always in possession of Sh Tarun Goyal. On his directions all the employees signed all the documents. vi. All the bank account opening forms appear to be in the handwriting of Sh Tarun Goyal. vii. All the books of accounts of all the companies have been retrieved from the computers/laptop of Sh Tarun Goyal. viii. Sh Tarun Goyal has given letters for the release of bank accounts of companies put under restraints after search. No such application was received from so called directors of the companies. ix. Sh Tarun Goyal appears in all the scrutiny assessments as well as appeals of his companies himself before various income' tax authorities. From verification carried out in respective wards/ circles where the above mentioned companies are assessed, it is' evident that Sh Tarun Goyal is appearing in all the income tax proceedings on behalf of all the companies. He is not charging any fees for appearing in these cases. x. During the post search investigation it was revealed that besides, aiding and abetting the evasion of taxes, Sh Tarun

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Goyal has been indulging in violation other provisions of the law of the land. This matter has also been taken up by REIC for multi-agency probe.” (e) The respondent-assessee did not have any business income in the year ending 31st March, 2007 and had income from other sources of Rs.16.38 lakhs in the year ending 31st March, 2008. The respondent-assessee had not incurred any expenditure in the year ending 31st March, 2007 and had incurred expenditure of Rs.12.17 lakhs in the year ending 31st March, 2008. (f) Shares of face value of Rs.10/- each were issued at a premium of Rs.40/- (total Rs.50/-). (g) The respondent-assessee had failed to produce Directors of the companies, though they had filed confirmations, and therefore, were in touch with the respondent-assessee. The respondent-assessee had also failed to produce the details and particulars with regard to issue of shares, notices etc. to the shareholders of AGM/EGM etc. 13. In view of the aforesaid factual position, we have no hesitation in holding that the transactions in question were clearly sham and make-believe with excellent paper work to camouflage their bogus nature. Accordingly, the order passed by the Tribunal is clearly superficial and adopts a perfunctory approach and ignores evidence and material referred to in the assessment order. The reasoning given is contrary to human probabilities, for in the normal course of conduct, no one will make investment of such huge amounts without being concerned about the return and safety of such investment. 14. Accordingly, the appeal is allowed. The substantial question of law framed above is accordingly answered in favour of the appellant-revenue and against the respondent– assessee. There would be no order as to costs”. 4.4. If the aforesaid decisions are analyzed, we note that in the case of M/s Chand Merchant Pvt. Ltd., the issue relates to share application money and consequent addition made under section 68 of the Act. It is noted that this addition was made on the basis of statement of Shri SK Jain, recorded under section 132(4) of the Act and during search

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proceedings he tendered that he was involved in providing accommodation entries in the form of share application/unsecured loans. The First Appellate Authority decided the issue in favour of the assessee, which was affirmed by the Tribunal, dismissing the appeal of the Revenue. Identically, in the case of Income Tax Officer vs M/s Trishul Pvt. Ltd. ((supra)) the addition was made on the basis of search carried out in the case of Shri Pravin Kumar Jain Group. Identical is the situation in the case before us. The First Appellate Authority decided the issue in favour of the assessee. The Tribunal duly considered various decisions and ultimately by placing reliance upon various decisions dismissed the appeal of the Revenue by upholding the stand of the Ld. Commissioner of Income Tax (Appeal). In the case before Hon'ble Delhi High Court, NDR Promoter Pvt. Ltd.((supra)), cited by Ld. DR, it was found that the cash was deposited in the bank account of one such company and thereafter transferred/ circulated within the group companies before the cheque is issued to the beneficiaries. It is also noted (page-14, para-12) that the share holder companies (five in numbers) were all located at the common address i.e. 13/34 WEA, Fourth Floor, Arya Samaj Road, New Delhi. In that situation, Hon'ble Delhi High Court reached to a particular conclusion. It is clear that the facts in the case of NDR Promoter Pvt. Ltd., relied upon by the Ld. DR, are different and distinguishable. It is also noted (para-4 of the order of the Hon'ble Delhi High Court) that the money was

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circulated by first depositing the cash in the bank account of one such company and thereafter transferred/circulated (group companies before cheque is issued to the beneficiaries), therefore, may not help the Revenue. In the light of this background, now we shall analyze the provisions of section 68 of the Act, so that we can reach to a fair conclusion, which is reproduced hereunder for ready reference and analysis:-

“68. 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 : Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and

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(b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB)of section 10.” 4.5. As per section 68 of the Act, onus is upon the

assessee to discharge the burden so cast upon. First

burden is upon the assessee to satisfactorily explain the

credit entry contained in his books of accounts. The

burden has to be discharged with positive material

(Oceanic Products Exporting Company vs CIT 241 ITR 497

(Kerala.). The legislature had laid down that in the absence

of satisfactory explanation, the unexplained cash credit

may be charged u/s 68 of the Act. Our view is fortified by

the ratio laid down in Hon’ble Apex Court in P. Mohankala

(2007)(291 ITR 278)(SC). A close reading of section 68 and

69 of the Act makes it clear that in the case of section 68,

there should be credit entry in the books of account

whereas in the case of 69 there may not be an entry in

such books of account. The law is well settled, the onus of

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proving the source of a sum, found to be

received/transacted by the assessee, is on him and where

it is not satisfactorily explained, it is open to the Revenue

to hold that it is income of the assessee and no further

burden lies on the Revenue to show that income is from

any other particular source. Where the assessee failed to

prove satisfactorily the source and nature of such credit,

the Revenue is free to make the addition. The principle laid

down in Ganpati Mudaliar (1964) 53 ITR 623/A. Govinda

Rajulu Mudaliar (34 ITR 807)(SC) and also CIT vs Durga

Prasad More (72 ITR 807)(SC) are the landmark decisions.

The ratio laid down therein are that if the explanation of

the assessee is unsatisfactory, the amount can be treated

as income of the assessee. The ratio laid down in Daulat

Ram Rawatmal 87 ITR 349 (SC) further supports the case

of the assessee. In the case of a cash entry, it is necessary

for the assessee to prove not only the identity of the

creditor but also the capacity of the creditor and

genuineness of the transactions. The onus lies on the

assessee, under the facts available on record. A

harmonious construction of section 106 of the evidence Act

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and section 68 of the Income Tax Act will be that apart

from establishing the identity of the creditor, the assessee

must establish the genuineness of the transaction as well

as the creditworthiness of the creditors. In CIT vs Korlay

Trading Company Ltd. 232 ITR 820 (Cal.), it was held that

mere mention of file number of creditor will not suffice and

each entry has to be explained separately by the assessee

(CIT vs R.S. Rathaore) 212 ITR 390 (Raj.). The Hon’ble

Guwahati High Court in Nemi Chandra Kothari vs CIT (264

ITR 254)(Gau) held that transaction by cheques may not be

always sacrosanct. However, once the onus cast upon the

assessee is discharged, it shifts to the Revenue to prove

otherwise. In the present appeal, the assessee has duly

established the identity, genuineness and creditworthiness,

therefore, now it is up to the Revenue to bring on record

any adverse material. Merely on the basis of statement, no

addition can be made unless and until, it is corroborated

with cogent material. It is also noted that even the persons

(Jain Brothers) who tendered their statements before the

Department, nowhere specifically named the assessee and

the statement is general in nature, such type of general

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statement cannot be the basis for making the addition

unless and until it is corroborated with tangible material.

Even otherwise, the case of the assessee is covered by the

decision of the Tribunal in the case of M/s Trishul Trader

Pvt. Ltd. ((supra)) and M/s Chand Merchant Pvt. Ltd.

((supra)) where the facts are identical and the issue was

based upon the statement of S. K. Jain/Pravin Kumar

Jain. The Tribunal reached to a particular conclusion by

placing reliance upon the decision in CIT vs Value Capital

Service Pvt. Ltd. (2008) 307 ITR 334 (Del.), CIT vs G.P.

International Ltd. (2010) 325 ITR 25 (P & H), CIT vs Electro

Polychem Ltd. (2007) 294 ITR 661 (Madras), CIT vs AKJ

Granites Pvt. Ltd. (2008) 301 ITR 298 (Raj.), CIT vs Oasis

Hospitalities Pvt. Ltd. (2011) 51 DTR 74 (Del.), CIT vs

Gujarat Heavy Chemical Ltd. (2002) 256 ITR 795, CIT vs

Sunita Dhadda 403 ITR 309 (Supreme Court), Andaman

Timbers Industries vs Commissioner of Central Excise 52

GST 355 (Supreme Court) and various other decisions.

Even otherwise, during hearing of these appeals, the Bench

asked the Ld. DR is there any evidence of cash transaction,

the Ld. DR fairly and judiciously agreed that there was no

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cash deposit before the issuance of cheque. Another

question raised by the Bench, whether in the statement,

the name of the assessee has been specifically mentioned

to this also, the ld. DR fairly agreed that the name of the

assessee has not been specifically mentioned. Thus,

considering the totality of facts, discussion made in the

earlier paras of the order and the ratio laid down in the

cases discussed hereinabove, the grounds no. 7 to 10 are

decided in favour of the assessee and for ground no.6, we

affirm the stand of the Ld. Commissioner of Income Tax

(Appeal).

sustaining the addition of Rs.2,51,000/- (out of

Rs.20,11,000/-) assuming that the assessee has paid 2%

commission, is concerned, the crux of the argument from

both sides is that it is consequential in nature, since, we

have decided the issue in favour of the assessee and

affirming the stand of the Ld. Commissioner of Income Tax

(Appeal) on ground no.6, this ground is consequential in

nature and decided in favour of the assessee.

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NO.4137/Mum/2015), is concerned, the first ground is

raised by the Revenue pertains to deleting the addition of

Rs.2,76,70,000/- as unexplained share premium/share

application money of Surendra Kumar Jain Group, we note

that while deliberating upon the issue in hand in the

appeal of the assessee, we have made an elaborate

discussion, therefore, the same is not being repeated for

the sake brevity and may be read as part and parcel of this

ground, therefore, on the basis of same reasoning and the

judicial pronouncement, discussed therein, we find no

infirmity in the order of the Ld. Commissioner of Income

Tax (Appeal), in deleting the impugned addition, therefore,

this ground of the Revenue is dismissed.

to confirming the addition made under section 69C of the

Act on account of commission expenses to the tune of

Rs.2,51,000/- as against the addition of Rs.20,11,000/- is

concerned, we note that while deliberating upon the issue

in the appeal of the assessee, we have deleted the addition

102 ITA No.4137 & 4144/Mum/2015 Vulvan Traders Pvt Ltd.

by an elaborate discussion, therefore, this ground of the

Revenue also fails as the part addition sustained by the Ld.

Commissioner of Income Tax (Appeal) has been deleted by

the Tribunal. Thus, there is no merit in the impugned

ground raised by the Revenue.

disallowance of Rs.2,57,349/- made under section 14A of

the Act r.w.s. 8D of the Rules. The crux of the argument on

behalf of the Revenue is in support of the addition made by

the ld. Assessing Officer, whereas, the ld. counsel for the

assessee, defended the impugned order.

8.1. We have considered the rival submissions and

perused the material available on record. The stand of the

Revenue is that the assessee has paid interest of

Rs.3,14,431/-, therefore, it comes under section 14A of the

Act and further such expenditure has been incurred and

disallowance has been made as per Rule-8D. The stand of

the assessee is that such disallowance has been made on

notional basis without pointing out as to whether the

assessee has incurred any expenditure or not. The Ld.

103 ITA No.4137 & 4144/Mum/2015 Vulvan Traders Pvt Ltd.

Commissioner of Income Tax (Appeal) noted that the ld.

Assessing Officer wrongly disallowed the expenditure

without pointing out as to which expenditure relates to any

exempt income. The interest expenditure of Rs.3,14,431/-

is the interest expenditure of the bank which was not

utilized for any investment nor relates to exempt income. In

view of this factual matrix, we find no infirmity in the

conclusion of the Ld. Commissioner of Income Tax (Appeal)

decided in favour of the assessee.

Finally,

(i) The appeal of the Revenue is dismissed

(ii) The appeal of the assessee is partly allowed.

This Order was pronounced in the open court in the

presence of ld. representatives from both sides at the

conclusion of the hearing on 24/01/2019.

Sd/- Sd/- (N.K. Pradhan) (Joginder Singh) लेखा सद�य / ACCOUNTANT MEMBER उपा�य� /VICE PRESIDENT मुंबई Mumbai; �दनांक Dated : 30/01/2019 f{x~{tÜ? P.S/.�न.स.,

104 ITA No.4137 & 4144/Mum/2015 Vulvan Traders Pvt Ltd.

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. आयकर आयु�त,(अपील) / The CIT, Mumbai. 4. आयकर आयु�त / CIT(A)- , Mumbai 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाईल / Guard file.

आदेशानुसार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील�य अ�धकरण, मुंबई / ITAT, Mumbai