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Shree Global Tradefin Ltd, Mumbai vs DCIT | ITAT Mumbai 2018 | BharatTax

SHREE GLOBAL TRADEFIN LTD,MUMBAI vs. DCIT CEN CIR 5(1), MUMBAI

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ITA 7312/MUM/2017Status: DisposedITAT Mumbai15 October 2018AY 2008-09463 pages

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Cases cited in this judgment

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CIT v. Kelvinator of India Ltd.
320 ITR 561 · 2010 · SC
1,660 citing
GKN Driveshafts (India) Ltd. v. ITO
259 ITR 19 · 2003 · SC
1,343 citing
ITO v. Lakhmani Mewal Das
103 ITR 437 · 1976 · SC
721 citing
Hindustan Lever Ltd. v. R.B. Wadkar
268 ITR 332 · 2004 · HC
690 citing
CIT v. Foramer France
264 ITR 566 · 2003 · SC
253 citing
153 (Gujarat) 8 Shakti Karnawat v. ITO
296 ITR 90 · 2008 · HC
171 citing
German Remedies Ltd. v. Dy. CIT
287 ITR 494 · 2006 · HC
89 citing
Well Intertrade (P) Ltd., & Another v. Income Tax Officer
308 ITR 22 · 2009 · HC
74 citing
NYK Lime (India) Ltd. v. DCIT (No.2)
325 ITR 459 · 2012 · HC
71 citing
Sound Casting (P) Ltd. v. Dy. CIT
250 CTR 119 · 2012 · HC
51 citing
Jashan Textile Mills (P) Ltd. v. Deputy Commissioner of Income Tax
284 ITR 542 · 2006 · HC
30 citing
Commr. of I.Tax v. Foramer France
250 CTR 116 · 2012 · HC
6 citing

Income Tax Appellate Tribunal, MUMBAI BENCHES “J”, MUMBAI

Before: Shri Joginder Singh, & Shri N.K. Pradhan

For Appellant: Shri D.V. Lakhani, Shri N.C

Hearing: 14/08/2018

Per Joginder Singh (Judicial Member) This bunch of four appeals is by the assessee against the impugned orders all dated 17/11/2017 of the Ld. First Appellate Authority, Mumbai, for Assessment Years 2007-08 to 2010-11.

2. First, we shall take up the appeal for Assessment Year 2007-08 (ITA No.7313/Mum/2017), wherein, grounds no. 1 to 3, raised by the assessee, pertains to validity of issuance of notice under section 148 of the Income Tax Act, 1961 (hereinafter the Act), which as per the assessee, is bad in law as the basic conditions enshrined in section 147 are not complied with.

2.1. During the hearing, the ld. counsel for the assessee, Shri D. V. Lakhani, advanced arguments identical to the grounds raised by explaining that during the original assessment proceedings, the assessee furnished the audited financial statements, all schedules and other relevant documents, along with the return wherein no addition was 3 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 made and thereafter the assessment was completed under section 143(3) of the Act on 15/12/2009. It was explained that notice under section 153C of the Act was issued on 26/12/2011, to which also, it was claimed that during these proceedings, complete information along with necessary details/evidences were filed and there also no addition was made while passing the order under section 143(3) r.w.s. 153C of the Act. It was further explained that notice under section 148 of the Act was issued on 21/03/2014 for which our attention was invited “to the reasons recorded” by the Ld. Assessing Officer (pages 5 & 6 of the paper book). The ld. counsel invited our further attention to the objections filed by the assessee (page-7 to 9 of the paper book). The Ld. Assessing Officer rejected the objections for which our attention was invited to page-10 & 11 of the paper book). The ld. counsel also explained that in the rejection order, the ld. Assessing Officer mentioned wrong date of issuance of notice under section 148 as 16/12/2013, whereas, in fact notice under section 148 was issued on 21/03/2014. It was also pointed out that the ld. Assessing Officer wrongly mentioned the date

2.7. On the other hand, the Ld. Sr. Standing Counsel, Shri N. C. Mohanty, strongly defended the issuance of notice under section 148 of the Act by contending that income chargeable to tax had escaped assessment, for which our attention was invited to the observation made in the assessment order as well as in the impugned order. It was pleaded that the statements of Shri B. L. Agarwal, Shri Om Hari Halan and Shri Mukesh Chokshi were recorded, wherein, they have tendered that the assessee is the beneficiary of bogus share capital and the income was rooted through various companies, thus, based upon the statement upon these persons, notice under section 148 of the Act were issued in March 2014 and thus additions were rightly made under section 68 of the Act. It was also explained that survey action under section 133A of the Act as carried out in the case of M/s Lloyad Steel Industries on 20/12/2012 and the statement of Shri Babulal Agarwal and Shri Mukesh Chokshi and Shri Om Hari Halan were recorded. It was explained that 12 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 Shri Babul lal Agarwal is the director of M/s Lloyd Steel Industries and the Director had admitted that there was suppression of yield in the manufacturing activites and claiming deduction of bogus expenses in the case of M/s Lloyd Steel Industries and this suppressed income was routed through fourteen companies. Our attention was invited to the statement of Shri Om Hari Halan recorded on 19/12/2012, wherein, he admitted that he was looking after the affairs of fourteen companies , thus, on the basis of statement of these three persons, notice under section 148 of the Act was rightly issued in March 2014 and thus the consequent addition under section 68 of the Act was rightly made. At this stage, the Bench asked the ld. Sr. Standing Counsel whether any tangible material came in the possession of the ld. Assessing Officer at the later stage, for which it was explained that statements were recorded from these three persons. These statements were claimed to be tangible material. However, the Ld. counsel for the assessee, in rejoinder argued that as far as statements of Shri Mukesh Choksi is concerned there is no whisper about any transaction with the Appellant Company.

23 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 AO rejected the objections which are on pages 10 & 11 of the paper book. � In the rejection order the AO has wrongly mentioned the date of issue of notice u/s. 148 as 16/12/2013. The AO has wrongly mentioned the date of filing of the return as 09/1/2014. AO also has not considered the issues raised in the objections and has not dealt with any of the issues which have been raised. � AO has relied upon the statement recorded during the survey proceedings u/s. 133A in the case of Lloyds Group of cases. Reliance is placed on the statement of Shri B.L. Agarwal, Shri Mukesh Choksi and Shri Om Hari Halan. The copies of these statements are on pages 174 to 225 of the paper book filed for A.Y. 2007-08. � The AO has relied upon the statement of Shri Mukesh Choksi which was recorded on 16/1/2013 whereas in the reasons he has referred to the statements recorded on 25/11/2009 and 26/11/2009. AO cannot improve upon any aspects beyond the reasons recorded. � The order passed u/s. 153C has been quashed by the Hon’ble Tribunal as per orders which are on pages 2779 to 2786 of the paper book 2 containing the order passed. � The reassessment proceedings are in respect of the order passed u/s. 153C. Once the order passed u/s. 153C itself is quashed the question of escapement of income in respect of that particular income determined in the order passed u/s. 153C does not arise. � The statements of all the 3 persons does not have any direct relationship with escapement of income in the hands of the appellant company. In the statements there is a reference to transactions between certain parties and fourteen companies. There is not a whisper in the statement of all the 3 parties to the effect that any transaction with the appellant company. In order to invoke the provisions of reassessment proceedings there has to be a direct and live link between the material available with the Assessing Officer and his conclusion that income chargeable to tax has escaped assessment. � The notice is issued beyond 4 years from the end of the assessment year. Proviso of Section 147 is applicable as original assessment was completed in 143(3). In order to issue a valid notice, in the reasons there must be a finding to the effect that the income chargeable to tax has escaped assessment on account of failure on the part of the appellant to disclose fully and truly all

4. The Petitioner made its claim for the first time in respect of the profits derived from the industrial undertaking under section 80-IB of the Act for assessment year 2001-02. The case of the Petitioner for assessment year 2001-02 was selected for scrutiny and during the course of the assessment proceedings, queries were raised with respect to the entitlement of the Petitioner to claim a deduction under section 80-IB. By its letter dated 3-12-2002, the Petitioner submitted details as regards the setting up of the industrial undertaking. An order of assessment was passed under section 143(3) of the Act on 31-10- 2002 for assessment year 2001-02. A deduction under section 80-IB was allowed. The return for assessment year 2002-03 claiming a 26 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 deduction under section 80-IB was processed under section 143(1)(a). For assessment year 2003-04, an order of assessment was passed under section 143(3). During the course of the assessment proceedings, the Petitioner inter aliasubmitted its Certificate of Registration as an SSI Unit and an Audit Report in Form 10CCB. Among the details disclosed included the circumstance that a license to work had been issued by the local Authority. A copy of the license to work the factory issued on 14-8-2000 by the Chief Inspector of Factories, Daman was annexed to the Form 10CCB. The license contains a specific endorsement to the effect that the plans had been approved by the Sarpanch on 12-9-1988. Further details were filed by the Petitioner by a letter dated 25-1-2005 during the course of assessment proceedings for assessment year 2003-04, including the Certificate of Registration as an SSI Unit and the power connection release order. On 28-2-2005, an assessment order was passed under section 143(3) of the Act for assessment year 2003-04. The assessment order duly notes that the assessee had claimed a deduction under section 80-IB of the Act for the unit which was set up in an industrially backward area and that Form 10CCB was available on record.

12. Section 147 provides that 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 163 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 the section. Under the first proviso, where an assessment has been made under sub-section (3) of section 143 or section 147 for the relevant assessment year, no action can be initiated under section 147 after the expiry of four years from the end of the relevant assessment year unless the income chargeable to tax has escaped assessment by reason of the failure of the assessee inter alia to disclose fully and truly all material facts necessary for his assessment, for that assessment year. The jurisdictional condition under section 147 is the formation of belief by the Assessing Officer that income chargeable to tax has escaped assessment for any assessment year. The reasons which are recorded by the Assessing Officer are crucial and it is on the basis of those reasons alone that the validity of the order reopening an assessment has to be decided. Where an assessment has been made under section 143(3), action can be initiated after the expiry of four years from the end of the relevant assessment year if the income chargeable to tax has escaped assessment because of the failure of the assessee to make fully and truly a disclosure of the material facts. The provisions of section 147 have been interpreted in a recent judgment of the Supreme Court in CIT v. Kelvinator of India Ltd. [2001] 320 ITR 561. The Supreme Court noted that after 1-4-1989 the power to reopen is much wider than earlier since the substantive part of section 147 only imposes one condition namely that the Assessing Officer must have reason to believe that income has 30 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 escaped assessment. The Supreme Court held that nonetheless, a mere change of opinion would not justify the exercise of the power to reopen an assessment and there must be tangible material before the Assessing Officer to come to the conclusion that income has escaped assessment. The Supreme Court held thus : ". . ., one needs to give a schematic interpretation to the words 'reason to believe' failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of 'mere change of opinion', which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain pre-condition and if the concept of 'change of opinion' is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of 'change of opinion' as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1-4-1989, Assessing Officer has power to reopen, provided there is 'tangible material' to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief."

14. Moreover, the fact that plans for the building were approved in the year 1988 would make no difference to the claim of the assessee to a deduction under section 80-IB of the Act. Both in the notice reopening the assessment and in the order disposing of the objections of the assessee, reliance has been sought to be placed on the provisions of sub-clause (i) of clause (1) of sub-section (2) of section 80-IB. Sub- clause (i) postulates that the industrial undertaking ought not to have been formed either by splitting up or reconstruction of a business already in existence. On the basis of the facts and circumstances and as recorded by the Assessing Officer, it cannot possibly be postulated that the industrial undertaking of the assessee was formed either by the splitting up or by the reconstruction of a business already in existence. As already noted, it is an admitted position that the land and building was sold by MSFC in exercise of its statutory powers and the purchaser in turn has leased out the land and building to the assessee. It is not the case of the Revenue in the reasons for reopening the assessment that the plant and machinery installed by the assessee has been previously used. Section 80-IB(2)(ii) provides that the industrial undertaking should not be formed by transfer to a new business of plant and machinery or a plant previously used for any other purpose. It is not the case of the Revenue in the reasons for reopening the assessment that the industrial undertaking of the assessee has been formed by transfer of plant and machinery which has been previously used for any other purpose. The assessee has annexed to the petition before the Court a copy of the Deed of Conveyance under which MSFC transferred the right of the defaulter only in respect of the land and building. The plant and machinery was not the subject-matter of the sale. The Deed of Conveyance contains a specific recital that the machinery was not being sold. In these circumstances, it is apparent from the record before the Court that there was no failure on the part of the assessee to disclose fully and truly all the material facts necessary for the assessment so as to justify the invocation of the powers under section 148 of the Act beyond the 32 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 expiry of a period of four years from the end of the relevant assessment year.

“ Prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under two conditions, viz., if (a) the ITO had reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the ITO or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax had escaped assessment for that year, or (b ) the ITO had in consequence of information in his possession reason to believe that income chargeable to tax had escaped assessment for any assessment year. The fulfilment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 with effect from 1-4-1989 those conditions are given a go-by and only one condition has remained, viz., where the Assessing Officer has reason to believe that income has escaped assessment, the section confers jurisdiction to reopen the assessment. Therefore, post 1-4-1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words 'reason to believe', failing which section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of 'mere change of opinion', which cannot be per se reason to reopen. One must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess, but the reassessment has to be based on fulfilment of certain pre-conditions and if the concept of 'change of opinion' is removed as contended on behalf of the department, then in the garb of reopening the assessment, review would take place. One must treat the concept of 'change of opinion' as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1-4- 1989, the Assessing Officer has power to reopen, provided there is 'tangible material' to come to conclusion that there is escapement of income from assessment. Under the Direct Tax Laws (Amendment) Act, 1987, the Parliament not only deleted the words 'reason to believe' but also inserted the word 'opinion' in section 147. However, on receipt of representations from the companies against omission of 39 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 the words 'reason to believe', the Parliament re-introduced the said expression and deleted the word 'opinion' on the ground that it would vest arbitrary powers in the Assessing Officer. [ Para 4]”

49 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 could with due diligence have been discovered by the ITO will not necessarily amount to disclosure contemplated by law. The duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends. It is for the ITO to draw the correct inference from the primary facts. It is no responsibility of the assessee to advise the ITO with regard to the inference which he should draw from the primary facts. If an ITO draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment. The grounds or reasons which lead to the formation of the belief contemplated by section 147(a) must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Once there exist reasonable grounds for the ITO to form the above belief, that would be sufficient to clothe him with jurisdiction to issue notice. Whether the grounds are adequate or not is not a matter for the court to investigate. The sufficiency of the grounds which induce the ITO to act is, therefore, not a justiciable issue. It is, of course, open to the assessee to contend that, the ITO did not hold the belief that there had been such non-disclosure. The existence of the belief can be challenged by the assessee but not the sufficiency of the reasons for the belief. The expression "reason to believe" does not mean a purely subjective satisfaction on the part of the ITO. The reason must be held in good faith. It cannot be merely a pretence. It is open to the Court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief and are not extraneous or irrelevant for the purpose of the section. To this limited extent, the action of the ITO in starting proceedings in respect of income escaping assessment is open to challenge in a Court of law. Reference to the names of 'N', 'D' 'S' in the report of the ITO to the Commissioner of in the instant case did not stand on a better footing than the reference to the three names in the report made by the ITO in the case of Chhugamal Rajpal v. S.P. Challita [1971] 79 ITR 603 (SC). Therefore, it was that the second ground mentioned by the ITO, i.e., reference to the names of 'N', 'D', 'S' could not have led to the formation of the belief that the assessee's income of the respondent-assessee chargeable to tax had escaped assessment for that year because of the failure or omission of the 50 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 assessee to disclose fully and truly all material facts. Therefore, the High Court was justified in excluding this ground from consideration. 'M' against whose name there was an entry about the payment in the books of the assessee, having made a confession that he was doing only name-lending, there was nothing to show that the above confession related to a loan to the assessee and not to someone else, much less to the loan which was shown to have been advanced by that person to the assessee-respondent. There was also no indication as to when that confession was made and whether it related to the period which was the subject-matter of the assessment sought to be responded. The report was made on 13-2-1967. In the absence of the date of the alleged confession, it would not be unreasonable to assume that the confession was made a few weeks or months before the report. To infer from that confession that it related to the period from 1-4-1957, to 31-3-1958, and that it pertained to the loan shown to have been advanced to the assessee would be rather far-fetched. The reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the ITO and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. The court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the ITO on the point as to whether action should be initiated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. The fact that the words "definite information" which were there in section 34 of the Act of 1922, at one time before its amendment in 1948, are not there in section 147 of the Act of 1961, would not lead to the conclusion that action can now be taken for reopening assessment even if the information is wholly vague, indefinite, far-fetched and remote. The reason for the formation of the belief must be held in good faith and should not be a mere pretence. The powers of the ITO to reopen assessment, though wide, are not plenary. The words of the statute are "reason to believe" and not "reason to suspect". The reopening of the assessment after the lapse of many years is a serious matter. The Act, no doubt, contemplates the 51 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. The underlying reason for that is that instances of concealed income or other income escaping assessment in a large number of cases come to the notice of the income-tax authorities after the assessment has been completed. The provisions of the Act in this respect depart from the normal rule that there should be, subject to right of appeal and revision, finality about orders made in judicial and quasi-judicial proceedings. It is, therefore, essential that before such action is taken the requirements of the law should be satisfied. The live link or close nexus which should be there between the material before the ITO in the instant case and the belief which he was to form regarding the escapement of the income of the assessee from assessment because of the latter's failure or omission to disclose fully and truly all material fact was missing in the case. In any event, the link was too tenuous to provide a legally sound basis for reopening the assessment. The High Court was not in error in holding that the said material could not have led to the formation of the belief that the assessee's income had escaped assessment because of his failure or omission to disclose fully and truly all material facts. The revenue's appeal was, thus, dismissed.”

16. Mr. Desai, with respect to the contention that the notice under section 148 is barred by limitation and that the Assessing Officer has no jurisdiction to issue such notice, contends that even if the words "failure to disclose fully and truly all material facts relevant for assessment for assessment year" are absent in the reasons recorded, still such reasons can be inferred on the text of the reasons recorded. He, therefore, submits that the notice under challenge is well within the scope of section 147 as such this petition is liable to be dismissed being without any substance. Consideration : 17. Having heard the parties at length, we are of the opinion that the petitioner can be disposed of on the first contention raised by the petitioner, wherein the petitioner has contended that the notice issued under section 148 is without jurisdiction being hit by the proviso to section 147 of the Act as such not within the prescribed period provided under proviso to section 147 of the Act. In the circumstances, it would be necessary to turn to section 147 of the Act, which reads as under : "147. Income escaping assessment.—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 (hereinafter 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 56 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 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."

20. The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing Officer to form his 57 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced.

We have heard both the parties on this issue and also gone through the orders passed by the lower authorities as well as the judgments relied upon before us. In our view, we need to decide following issues, before we go into any other issues or merits of the impugned order: 1. Whether the assessee can challenge the validity of an assessment order during the appellate proceedings pertaining to examination of validity of order passed u/s 263? 2. Whether the impugned assessment order passed u/s 143(3) dated 24-10-2013 was valid in the eyes of law or a nullity as has been claimed by the assessee? 3. If the impugned assessment order passed u/s 143(3) was illegal or nullity in the eyes of law, then, whether the CIT had a valid jurisdiction to pass the impugned order u/s 263 to revise the non est assessment order? In our considered view, since these issues are jurisdictional issues and go to the root of the matter, therefore before dealing with any other issue, we shall first deal with all above three issues one by one, as under: 8. Challenging the jurisdictional defects of assessment order for assailing the jurisdictional validity of the revision order passed u/s 263: The first issue that arises for our consideration is - whether the assessee can challenge the jurisdictional validity of order passed u/s 143(3) in the appellate proceedings taken up for challenging the order passed u/s 263? If we analyse the nature of both of these proceedings, which are under consideration before us, we find that the original assessment proceedings can be classified in a way as 'primary proceedings'. These are, in effect, basic / foundational proceedings and akin to a platform upon which any subsequent proceedings connected therewith can rest upon. The proceedings initiated u/s 263 seeking to revise the original assessment order is off shoot of the primary proceedings and therefore, these may be termed as 'collateral proceedings' in the legal framework. The issue that arises here is whether any illegality/invalidity in the order passed in the 'primary proceedings' can be set up in the 'collateral proceedings' and if yes, then of what nature?

64 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 8.1. We have analysed this issue carefully. There is no doubt that after passing of the original assessment order, the primary (i.e. original proceedings) had come to an end and attained finality and, therefore, outcome of the same cannot be disturbed, and therefore, the original assessment order framed to conclude the primary proceedings had also attained finality and it also cannot be disturbed at the instance of the assessee, except as permitted under the law and by following the due process of law. Under these circumstances, it can be said that effect of the original assessment order cannot be erased or modified subsequently. In other words, whatever tax liability had been determined in the original assessment order that had already become final and that cannot be sought to be disturbed by the assessee. But, the issue that arises here is that if the original assessment order is illegal in terms of its jurisdiction or if the same is null & void in the eyes of law on any jurisdictional grounds, then, whether it can give rise to initiation of further proceedings and whether such subsequent proceedings would be valid under the law as contained in Income Tax Act? It has been vehemently argued before us that the subsequent proceedings (i.e. collateral proceedings) derive strength only from the order passed in the original proceedings (i.e. primary proceedings). Thus, if order passed in the original proceedings is itself illegal, then that cannot give rise to valid revision proceedings. Therefore, as per law, the validity of the order passed in the primary (original) proceedings should be allowed to be examined even at the subsequent stages, only for the limited purpose of examining whether the collateral (subsequent) proceedings have been initiated on a valid legal platform or not and for examining the validity of assumption of jurisdiction to initiate the collateral proceedings. If it is not so allowed, then, it may so happen that though order passed in the original proceedings was illegal and thus order passed in the subsequent proceedings in turn would also be illegal, but in absence of a remedy to contest the same, it may give rise to an 'enforceable' tax liability without authority of law. Therefore, the Courts have taken this view that jurisdictional aspects of the order passed in the primary proceedings can be examined in the collateral proceedings also. This issue is not res integra. This issue has been decided in many judgments by various courts, and some of them have been discussed by us in followings paragraphs.

65 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 8.2. In a matter that came up before Hon'ble Supreme Court in the case of Kiran Singh & Ors. v. Chaman Paswan & Ors., [1955] 1 5CR 117 the facts were that the appellant in that case had undervalued the suit at Rs.2,950 and laid it in the court of the Subordinate Judge, Monghyr for recovery of possession of the suit lands and mesne profits. The suit was dismissed and on appeal it was confirmed. In the second appeal in the High Court the Regist ry raised th e object ion as to valuat ion under Section 11. The value of the appeal was fixed at Rs.9,980. A contention then was raised by the plaintiff in the High Court that on account of the valuation fixed by the High Court the appeal against the decree of the court of the Subordinate Judge did not lie to the District Court, but to the High Court and on that account the decree of the District Court was a nullity. Alternatively, it was contended that it caused prejudice to the appellant. In considering that contention at page 121, a four Judge Bench of Hon'ble Supreme Court speaking through Vankatarama Ayyar, J. held that: “It is a fundamental principle well-established that a decree passed by a Court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the Court to pass any decree and such a defect cannot be cured even by consent of parties." 8.3. This judgment was subsequently followed by Hon'ble Supreme Court in the landmark case of Sushil Kumar Mehta vs Gobind Ram Bohra, (1990) 1 SCC 193, wherein an issue arose whether a decree can be challenged at the stage of execution and whether a decree which remained uncontested operates as res-judicata qua the parties affected by it. Hon'ble apex court, taking support from aforesaid judgment, observed as under: "In the light of this position in law the question for determination is whether the impugned decree of the Civil Court can be assailed by the appellant in execution. It is already held that it is the Controller under the Act that has exclusive jurisdiction to order ejectment of a tenant from a building in the urban area leased out by 66 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 the landlord. Thereby the Civil Court inherently lacks jurisdiction to entertain the suit and pass a decree of ejectment. Therefore, though the decree was passed and the jurisdiction of the Court was gone into in issue Nos. 4 and 5 at the ex-parte trial, the decree there-under is a nullity, and does not bind the appellant. Therefore, it does not operate as a res judicata. The Courts below have committed grave error of law in holding that the decree in the suit operated as res judicata and the appellant cannot raise the same point once again at the execution." 8.4. Similar view has been taken by Hon'ble Supreme Court by following aforesaid judgments recently in the case of Indian Bank vs Manual Govindji Khona reported in 2015 (3) SCC 712. Further, similar view was emphasized by Hon'ble Bombay High Court (GOA Bench) in the case of Mavany Brothers vs CIT (Tax Appeal No 8 of 2007) in its order dt 17th April, 2015 wherein it was held that an issue of jurisdiction can be raised at any time even in appeal or execution.

67 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 This case arose under the Income Tax Act with reference to the provisions of Section 147 dealing with re-assessment. The facts were that the assessment was sought to be reopened under Section 147 and notice under section 148 was issued. Validity of reopening was not challenged upto Tribunal and additions were challenged on merits only. The Tribunal restored the matter to the Assessing Officer with some directions to reexamine the issue on merits. When the matter came back to the assessing officer the assessee specifically raised the point of jurisdiction to reopen the assessment, contending that the notice of reopening was prompted by a mere change of opinion. The AO rejected plea of the assessee but the AAC accepted this ground and also held the reassessment to be bad in law on jurisdictional ground. Against the order of the AAC the Revenue went in appeal before the Tribunal and specifically raised the plea that the question of jurisdiction to reopen the assessment having been expressly given up by the assessee in the appeal against the reassessment order in the first round, the assessee was debarred from raising that point again before the AAC and the AAC was equally wrong in permitting the assessee to raise that point which had become final in the first round and in adjudicating upon the same. The plea of the Revenue impressed the Tribunal which took the view that after its earlier order in the first round of proceedings the matter attained finality with regard to the point of jurisdiction which was given up before the AAC and not agitated further and that in the remand proceedings what was open before the Assessing Officer was only the question whether the addition was justified on merits and the point regarding the jurisdictional aspect was not open before the Assessing Officer. According to the Tribunal, the assessee having raised the point in the first round and having given it up could not revive it in the second round of proceedings where the issue was limited to the merits of the additions. In this view, the Tribunal accepted the Revenues plea. The assessee thereafter carried order of the Tribunal in reference before the Gujarat High Court. The High Court after considering various judgments of the Supreme Court on the point of jurisdiction to reopen the assessment and also after specifically discussing the judgment of the Supreme Court in Onkarmal Nathmal Trust (supra) and Dasa Muni Reddy (supra) held that the Tribunal was in error in holding that the question of jurisdiction became final when it passed the earlier remand order. It was held that neither the question of res judicata nor the rule of estoppel could be invoked where the jurisdiction of an authority was 68 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 under challenge. According to Hon'ble Gujarat High Court, the rule of res judiccitci cannot be invoked where the question involved is the competence of the Court to assume jurisdiction, either pecuniary or territorial or over the subject matter of the dispute. Hon'ble High Court further held that since neither consent nor waiver can confer jurisdiction upon the Assessing Officer where it did not exist, no importance could be attached to the fact that the assessee, in the first round of proceedings, expressly gave up the plea against the erroneous assumption of jurisdiction by the assessing authority. According to the Hon'ble Court, the "finality or conclusiveness could only arise in respect of orders which are competent orders with jurisdiction and if the proceedings of reassessment are not validly initiated at all, the order would be a void order as per the settled legal position which could never have any finality or conclusiveness. If the original order is without jurisdiction, it would be only a nullity confirmed in further appeals'. In this view of the matter, Hon'ble High Court finally answered the reference in favour of the assessee. 8.7. It is further noted that many of these judgments were discussed and followed by the co-ordinate bench of the Tribunal in the case of Indian Farmers Fertilizers Co-operative Ltd vs KIT 105 lTD 33 (Del), wherein a similar issue had arisen. In this case, the issue raised before the bench was whether it is open to the assessee, not having appealed against the reassessment order, to set up or canvass its correctness in collateral proceedings taken for rectification thereof u/s 154. The bench minutely analysed law in this regard and applying the principle of 'coram non judice' and following aforesaid judgments of the supreme court, it was held that if an assessee seeks to challenge the reassessment proceedings as being without jurisdiction, when action for rectification is sought to be taken on the assumption of the validity of the reassessment order, then the assessee has to step in and protect its interests and the liberty to question even the validity of the reassessment proceedings ought to be given to it....... " (emphasis supplied). 8.8. Similar view was taken in another decision of the Tribunal in the case of Dhiraj Suri vs ACIT 98 lTD 87 (Del). In the said case, appeal was filed by the assessee before the Tribunal against the levy of penalty. In the appeal challenging the penalty order, the assessee challenged the validity of block assessment order which had determined the tax liability of the assessee on the basis of which penalty was levied subsequently. The revenue objected with 69 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 respect to the ground of the assessee raising jurisdictional issues of assessment proceedings in the appeal against the penalty order. After analysing the legal position, as clarified by Hon'ble Gujrat High Court in the case of P.V. Doshi, supra and Hon'ble Bombay High Court in the case of Jainaravan Babulal vs CIT. 170 ITR 399, the bench held as that if the block assessment itself is without jurisdiction then there is no question of levy of any penalty u/s. 158BFA(2) and therefore it is open to the assessee to set up the question of validity of the assessment in the appeal against the levy of penalty. 8.9. We also derive support from another judgement of Hon'ble Bombay High Court in the case of Inventors Industrial Corporation Ltd vs CIT 194 ITR 548 (Bombay) wherein it was held that assessee was entitled to challenge the jurisdiction of the AO to initiate re-assessment proceedings before the CIT(A) in the second round of proceedings, even though he had not raised it in earlier proceedings before the Assessing Officer or in the earlier appeal. 8.10. Thus, on the basis of aforesaid discussion we can safely hold that as per law, the assessee should be permitted to challenge the validity of order passed u/s 263 on the ground that the impugned assessment order was non est and we hold accordingly.

(c) Being aggrieved, the Revenue carried the issue in the appeal to the Tribunal. The impugned order of the Tribunal holds that the respondent-assessee had established the identity, genuineness and capacity of the shareholders who had subscribed to its shares. The identity was established by the very fact that the detailed names, addresses of the shareholders, PAN numbers, bank details and confirmatory letters were filed. The genuineness of the transaction was established by filing a copy of share application form, the form filed with the Registrar of Companies and as also bank details of the shareholders and their confirmations which would indicate both the genuineness as also the capacity of the shareholders to subscribe to the shares. Further the Tribunal while upholding the finding of CIT(A) also that the amount received on issue of share capital alongwith the premium received thereon, would be on capital receipt and not in the revenue field. Further reliance was also placed upon the decision of Apex Court in Lovely Exports (P) Ltd. (supra) to uphold the finding of the CIT(A) and dismissing the Revenue's appeal. (d) Mr. Suresh Kumar, the learned counsel appearing for the Revenue contends that proviso to Section 68 of the Act which was introduced with effect from 1st April, 2013 would apply in the facts of the present case even for A.Y. 2008-09. The basis of the above submission is that the de hors the proviso also the requirements as 84 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 set out therein would have to be satisfied. (e) We find that the proviso to Section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced "for removal of doubts" or that it is "declaratory". Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre- proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it was found satisfied. Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in Lovely Exports (P) Ltd. (supra) in the context to the pre-amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee’s income as unexplained cash credit.

(1) Reassessment proceedings can be validly initiated in case return of income is processed under section 143(1) and no scrutiny assessment is undertaken. In such cases there is no change of opinion. (2) Reassessment proceedings will be invalid in case the assessment order itself records that the issue was raised and is decided in favour of the assessee. Reassessment proceedings in the said cases will be hit by the principle of "change of opinion". (3) Reassessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the Assessing Officer does not make any addition in the assessment order. In such situations it should be accepted that the issue was examined but 98 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 the Assessing Officer did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The reassessment will be invalid because the Assessing Officer had formed an opinion in the original assessment, though he had not recorded his reasons. 3.8. Thus, where an Assessing Officer incorrectly or erroneously applies law or comes to a wrong conclusion and income chargeable to tax has escaped assessment, resort may be made through section 263 of the Act. But initiation of reassessment proceedings will be invalid on the ground of change of opinion. Here a distinction has to be drawn between erroneous application/interpretation/ understanding of law and cases where fresh or new factual information comes to the knowledge of the Assessing Officer subsequent to the passing of the assessment order. If new facts, material or information comes to the knowledge of the Assessing Officer, which was not on record and available at the time of the assessment order, the principle of "change of opinion" will not apply. The reason is that "opinion" is formed on facts. "Opinion" formed or based on wrong and incorrect facts or which are belied and untrue do not get protection and cover under the principle of "change of opinion". Factual information or material which was incorrect or was not available with the Assessing Officer at the 99 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 time of original assessment would justify initiation of reassessment proceedings. The requirement in such cases is that the information or material available should relate to material facts. The expression "material facts" means those facts which if taken into account would have an adverse effect on the assessee by a higher assessment of income than the one actually made. Correct material facts can be ascertained from the assessment records also and it is not necessary that the same may come from a third person or source, i.e., from source other than the assessment records. However, in such cases, the onus will be on the Revenue to show that the assessee had stated incorrect and wrong material facts resulting in the Assessing Officer’s proceeding on the basis of facts, which are incorrect and wrong. The reasons recorded and the documents on record are of paramount importance and will have to be examined to determine whether the stand of the Revenue is correct. A decision from Hon’ble Delhi High Court dated September 26, 2011 in Dalmia P. Ltd. v. CIT [2012] 348 ITR 469 (Delhi) throws light on the issue.

104 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 ■ The power of the Assessing Officer under sections 147 and 148 to reopen an assessment is classified into two: (a) Reopening of assessment within a period of four years from the end of the relevant assessment year and (b) Reopening of assessment beyond a period of four years from the end of the relevant assessment year. ■ The common jurisdictional requirement for reopening of assessment both within and beyond a period of four years has to be on the basis of reason to believe that income chargeable to tax has escaped assessment and the reasons for issuing a notice to reopen are recorded before issuing a notice. However, there is one additional jurisdictional requirement to be satisfied while seeking to reopen the assessment beyond the period of four years from the end of the relevant assessment year viz. that there must have been a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment during the original assessment proceedings. Thus the primary requirement to reopen any assessment is a reason to believe that income chargeable to tax has escaped assessment. However, as observed by the Supreme Court in the case of CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561/187 Taxman 312 in the context of sections 147 and 148 that reason to believe found therein does not give arbitrary powers to reopen an assessment. The concept of change of opinion is excluded/omitted from the words reason to believe. Thus a change of opinion would not be reason to believe that income chargeable to tax has escaped assessment. Besides the power to reassess is not a power to review. Further reopening must be on the basis of tangible material. [Para 11] ■ Therefore, the power to reassess cannot be exercised on the basis of mere change of opinion. If all facts are available on record and a particular opinion is formed, then merely because there is change of opinion on the part of the Assessing Officer notice under sections 147 and 148 is not permissible. The powers under sections 147 and 148 cannot be exercised to correct errors/mistakes on the part of the Assessing Officer while passing the original order of assessment. There is a sanctity bestowed on an order of assessment and the same can be disturbed by exercise of powers under sections 147 and 148 only on satisfaction of the jurisdictional requirements. Further the reasons for reopening an assessment have to be tested/examined only on the basis of the reasons recorded at the time of issuing a notice under section 148 seeking to reopen an assessment. These reasons cannot be improved upon and/or supplemented much less substituted by affidavit and/or oral submissions.

105 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 ■ Moreover the reasons for reopening an assessment should be that of the Assessing Officer alone, who is issuing the notice, and he cannot act merely on the dictates of any another person in issuing the notice. Moreover the tangible material upon the basis of which the Assessing Officer comes to the reason to believe that income chargeable to tax has escaped assessment can come to him from any source. However, the reasons for the reopening have to be only of the Assessing Officer issuing the notice. At the stage of issuing notice under section 148 to reopen a concluded assessment, the satisfaction of the Assessing Officer issuing the notice is of primary importance. This satisfaction must be prima facie satisfaction of having a reason to believe that income chargeable to tax has escaped assessment. At the stage of the issuing of the notice under section 148 it is not necessary for the Assessing Officer to establish beyond doubt that income indeed has escaped assessment. [Para 12] ■ The parties proceeded on the basis that the impugned notice dated 28-3-2013 seeking to reopen the assessment was a notice within a period of four years from the end of the relevant assessment year. The reason seeking to reopen the assessment is that the assessee had so written/manipulated its account that the normal business profit in share trading was claimed as short-term capital gain so as to attract the lower rate of tax. [Para 13] ■ During the assessment proceedings, the assessee had by a letter dated 9-7-2010 pointed out that it was engaged in the business of financing, trading and investment in shares and securities. Further by a letter dated 8-9-2010, the assessee has disclosed in detail as to why its profit on sale of investments should not be taxed as business profits but charged to tax under the head capital gain. In support of its contention, the assessee had also relied upon CBDT Circular No. 4/2007, dated 15-6-2007. It would, therefore, be noticed that the very ground on which the notice dated 28-3-2013 seeks to reopen the assessment was considered by the Assessing Officer while originally passing assessment order dated 12-10- 2010. This by itself demonstrates the fact that notice dated 28-3- 2013 under section 148 seeking to reopen assessment is based on mere change of opinion. ■ However, according to the revenue, the aforesaid issue now raised has not been considered earlier, as the same is not referred to in the assessment order dated 12-10-2010 passed for the assessment year 2008-09. Once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment. It is not necessary that an assessment order should contain reference

106 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 and/or discussion to disclose its satisfaction in respect of the query raised. There can be no doubt in the instant case that the very issue of taxability of sale of shares under the head capital gain or the head profits and gains from business was a subject matter of consideration by the Assessing Officer during the original assessment proceedings leading to an order dated 12-10-2010. It would, therefore, follow that the reopening of the assessment by impugned notice dated 28-3-2013 is merely on the basis of change of opinion of the Assessing Officer from that held earlier during the course of assessment proceeding leading to the order dated 12-10- 2010. This change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment. [Para 14] ■ It was contended by the revenue that this is not a case of change of opinion, as the reopening is based on fresh tangible material, namely, audit report furnished by the internal audit department of the revenue. Neither the reasons furnished to the assessee disclose the material obtained from the audit report of the internal audit department of the revenue as the basis for reopening assessment, nor the order dated 20-11-2013 rejecting the assessee's objection state that the ground for reopening is the tangible material disclosed by the internal audit department of the revenue. The Bombay High Court in the case of Hindustan Lever v. R.B.Wadkar [2004] 268 ITR 332/137 Taxman 479 has held that the challenge to reopening of an assessment can only be resisted on the basis of the reasons recorded at the time of issuance of notice and no further reasons either orally at the bar or by filing of an affidavit can be considered to meet the challenge to reopening of an assessment. Therefore, it would not be permissible for the revenue to advance submissions on the basis of an audit report, which was not basis of the reasons recorded at the time of issuing notice under section 148. [Para 15] ■ Be that as it may, even if, one examines audit report dated 29-9- 2011 from the internal audit department it would be noticed that the basis of the audit report is the interpretation/inference drawn by the auditors from the accounts submitted by the assessee to the department during the course of its assessment proceedings. The reasons as indicated in the audit report are similar to the reasons as set out in the grounds for reopening the assessment by the Assessing Officer. Neither the audit report, nor the grounds for reopening assessment disclose any tangible material for the purpose of reopening the assessment but relies upon opinion/inferences drawn by the internal audit department on existing material and these inferences/opinion differ from the one drawn by the Assessing Officer while passing assessment order dated 12-10-2010. This is not a case of any new fact being

What then, is the difference between the situations envisaged in propositions (2) and (4) of Kalyanji Maviji's case [1976] 102 ITR 287 (SC). The difference, if one keeps in mind the trend of the judicial decisions, is this. Proposition (4) refers to a case where the Income- tax Officer initiates reassessment proceedings in the light of 'information' obtained by him by an investigation into material already on record or by research into the law applicable thereto which has brought out an angle or aspect that had been missed earlier, for e.g., as in the two Madras decisions referred to earlier. Proposition (2) no doubt covers this situation also but it is so widely expressed as to include also cases in which the Income-tax Officer, having considered all the facts and law, arrives at a particular conclusion, but reinitiates proceedings because, on a reappraisal of the same material which had been considered earlier and in the light of the same legal aspects to which his attention had been drawn earlier, he comes to a conclusion that an item of income which he had earlier consciously left out from the earlier assessment should have been brought to tax. In other words, as pointed out in Indian and Eastern Newspaper Society's case [1979] 119 ITR 996 (SC), it also ropes in cases of a 'bare or mere change of opinion' where the Income-tax Officer (very often a successor officer) attempts to reopen the assessment because the opinion formed earlier by himself (or, more often, by a predecessor Income- tax Officer) was, in his opinion, incorrect. Judicial decisions had consistently held that this could not be done and the 113 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 Indian and Eastern Newspaper Society's case [1979] 119 ITR 996 (SC) has warned that this line of cases cannot be taken to have been overruled by Kalyanji Mavji [1976] 102 ITR 287 (SC). The second paragraph from the judgment in the Indian and Eastern Newspaper Society's case [1979] 119 ITR 996 (SC) earlier extracted has also reference only to this situation and insists upon the necessity of some information which make the Income-tax Officer realise that he has committed an error in the earlier assessment. This paragraph does not in any way affect the principle enumerated in the two Madras cases cited with approval in Anandji Haridas 21 STC 326. Even making allowances for this limitation placed on the observations in Kalyanji Mavji, the position as summarised by the High Court in the following words represents, in our view, the correct position in law (at page 629 of 102 ITR) :

118 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 inferences from those primary or material facts are for the Assessing Officer to draw in order to complete the assessment and it is not for the assessee to advise him, for obvious reasons. The Explanation, however, cautions the assessee that he cannot remain smug with the belief that since the assessee has produced the books of account before the Assessing Officer from which material or evidence could have been with due diligence gathered by him, he has discharged his duty. It is for him to point out the relevant entries which are material, without leaving that exercise to the Assessing Officer. The caveat, however, is that such production of books of account may, in the light of the facts and circumstances, amount to full and true disclosure; this is clear from the use of the expression "not necessarily" in the Explanation. Thus, the question of full and true disclosure of primary or material facts is a pure question of fact, to be determined on the facts and circumstances of each case. No general principle can be laid down. It was observed by the Hon’ble Apex Court, in various cases that there should be some "tangible material" coming into the possession of the Assessing Officer in such cases to 119 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 enable him to resort to section 147 of the Act. Despite being a case of full and true disclosure, tangible material coming to the possession of the Assessing Officer after he made the original assessment under section 143(3), would influence the opinion, formed or presumed to have been formed earlier, by the assessing authority; he can with justification change it, but that would not be a case of a "mere change of opinion" unguided by new facts or change in the legal position. It will be a case of the assessing authority having "reason to believe", notwithstanding that full and true particulars were furnished by the assessee which were examined, or presumed to be examined, by him. There was a divergence of opinion amongst various High Courts as to what constitute “Information” for the purposes of section 34(1)(b) of the 1922 Act (which corresponds to section 147(b) of the 1961 Act) the Hon’ble Apex Court in CWT vs Imperial Tobacco Company Ltd. (1966)

123 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 that income chargeable to tax had escaped assessment on account of failure on the part of the assessee to disclose the material facts fully and truly then the reopening is illegal as the same as amounts to change of opinion on the same set of facts without having any tangible material. It is further observed that the condition of proviso to section 147 are not satisfied as there is no failure on the part of the assessee to disclose fully and truly all material facts, which were necessary for framing the assessment. The facts in all the Assessment Years are identical. The Ld. Assessing Officer merely relied upon the statement recorded during survey proceedings under section 133A in the case of Lloyd Group of cases and the statements of three persons (statements are available on pages 174 to 225 of the paper book) and further the Ld. Assessing Officer relied upon the statement of Shri Mukesh Chokshi recorded on 16/01/2013, whereas, in the reasons recorded, the Ld. Assessing Officer made reference to the statements recorded on 25/11/2009 and 26/11/2009, thus, the Ld. Assessing Officer is not permitted to improve upon any aspect beyond the reasons recorded as we have 124 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 made an elaborate discussion in earlier paras of this order by following the ratio laid down in various cases passed by the Hon'ble Apex Court/High Courts. The statement of all the three persons does not have any direct relationship or material which could construe that there is escapement of income in the hands of the present assessee. It is further noted that in the statement, there was a reference made to the transaction between certain parties and fourteen companies and even there is no whisper in the statements tendered by all the three persons to the effect that any transaction was made with the assessee company. In order to invoke the provisions of section 147 of the Act, there should be a direct and live link between the material available with the Ld. Assessing Officer and his conclusion that income chargeable to tax had escaped assessment. It is further noted that there was not a single transaction with any of the parties which are alleged to manage by Shri Mukesh Chokshi with the assessee, thus, no value can be attributed to the statement tendered by Shri Mukesh Chokshi. Similarly the statements of Shri BL Aggarwal and Shri Om Hari Hallan also does not relate to any 125 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 direct material or information which could be construed as escapement of income by the present Assessee. It is further noticed that the assessee made full disclosure in the proceedings under section 143(3) and 153C r.w.s. 143(3) and there was no tangible material with the Ld. Assessing Officer with regard to amount received by the assessee from four parties in respect of whom the additions were made. Based on the same facts, without having any evidence, the Ld. Assessing Officer issued notices under section 148 and thus this tantamount to change of opinion on the same set of facts without having any change in the material.

“The word 'reason' in the phrase 'reason to believe' would mean cause or justification. If the Assessing Officer has a cause or justification to think or to suppose that income has escaped assessment, he can be said to have a reason to believe that such income had escaped assessment. The words 'reason to believe' cannot mean that the 'Assessing Officer' should have finally ascertained the facts by legal evidence. They only mean that he forms a belief from the examination he makes and if he likes, from any information he receives. If he discovers or finds or satisfies himself that the taxable income has escaped assessment, it would amount to saying that he has reason to believe that such an income has escaped assessment. The justification for his belief is not to be judged from the standards of proof required for coming to a final decision. A belief, though justified for the purpose of initiation of the proceedings under section 147, may ultimately stand altered after the hearing and while reaching the final conclusion on the basis of the intervening enquiry. At the stage where he finds a cause or justification to believe that such an income has escaped assessment, the Assessing Officer is not required to base his belief on any final adjudication of the matter. [Para 9] In the instant case, the assessee submitted with immense vehemence that it had entered into correspondence to have the documents but the Assessing Officer treated them as objections and made a communication. However, on a scrutiny of the order, it was perceivable that the authority had passed the order dealing with the objections in a very careful and studied manner. He had taken note of the fact that transactions involving Rs. 27 lakhs mentioned in the report of the Directorate of Investigation constituted fresh information in respect of the assessee as a beneficiary of bogus accommodation entries provided to it and represented the undisclosed income. The Assessing Officer had referred to the subsequent information and adverted to the concept of true and full disclosure of facts. There was specific information received from the office of the Directorate of Investigation as regards the transactions entered into by the assessee-company with a number of concerns which had made accommodation entries and they were not genuine transactions. It was neither a change of opinion nor did it convey a particular interpretation of a specific provision which was done in a particular manner in the original assessment and was sought to be done in a different manner in the proceeding under section 147. The reason to believe had been appropriately understood by the Assessing Officer and there was 127 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 material on the basis of which the notice was issued. The Court, in exercise of jurisdiction under article 226 of the Constitution of India pertaining to sufficiency of reasons for formation of the belief, cannot interfere. The same is not to be judged at that stage. [Para 22] In the instant case, the assessee was desirous of an adjudication by the writ Court with regard to the merits of the controversy. In fact, it required the Court to adjudge the sufficiency of the material and to make a roving enquiry that the initiation of proceedings under sections 147 and 148 was not tenable. The same does not come within the ambit and sweep of exercise of power under article 226 of the Constitution of India. It was open to the assessee to participate in the reassessment proceedings and to put forth its stand and stance in details to satisfy the Assessing Officer that there was no escapement of taxable income. [Para 23] Consequently, the writ petition was liable to be dismissed.” 3.23. A division Bench of Hon’ble Delhi High Court in New Light Trading Co. v. CIT [2002] 256 ITR 391 (Delhi), referred to the decision of the Hon’ble Apex Court in CIT v. P. V. S.

129 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 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 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.

130 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 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 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]

131 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 ■ 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 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]

“The ITO can issue the notice under section 148 proposing to reopen the assessment only where he has reason to believe that on Account of either the omission or failure on the part of the assessee to file the return or on account of the omission or failure on the part of the 135 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 assessee to disclose fully and truly all material facts necessary for his assessment for that year income has escaped assessment. The existence of the reason( s) to believe is supposed to be the check, a limitation, upon his power to reopen the assessment. Section 148(2) impose a further check upon the said power, viz., the requirement of recording of reasons for such reopening by the ITO. Section 151 imposes yet another check upon the said power, viz., the Commissioner or the Board as the case may be, has to be satisfied, on the basis of the reasons recorded by the ITO, that it is a fit case for issuance of such a notice. The power conferred upon the ITO by sections 147 and 148 is thus not an umbridled one. It is hedged in with several safeguards conceived in the interest of eliminating room for abuse of this power by the Assessing Officers. The idea was to save the assessees from harrassment resulting from mechanical reopening of assessment but this protection avails only those assessees who disclose all material facts truly and fully. In the instant case, the Assessing Officer had submitted a chart showing that out of the unsecured hundi loans of Rs. 8,53,298 claimed by the assessee, ten persons who were said to have lent a total amount of Rs. 30,80,000 were common to both the assessment years 1959-60 and 1960-61. In other words, these very ten persons were said to have advanced loans again during the next year and all ten were found to be bogus lenders as recorded in the assessment proceedings relating to assessment year 1960-61. In the reasons recorded by the ITO (as required by section 148(2) , he had, stated clearly that in the course of assessment proceedings for the succeeding assessment year, it was found that out of the unsecured hundi loans put forward by the assessee, a larger number were found to be bogus and that many of the so-called lenders were found to be near relations of the directors or the principal shareholders. He stated that similar loans were also noticed for the assessment year 1959-60 and, therefore, he had reason to believe that there had been no true and full disclosure of all material facts by the assessee for the assessment year 1959-60 leading to escapement of income. It was not alleged by the assessee that the Assessing Officer had not checked up or tallied the names of the alleged lenders for both the assessment years and that he merely went by the fact that there were unsecured hundi loans for both the assessment years. In the absence of any such allegation which allegation, if made, could have afforded an opportunity to the Assessing Officer to answer the said averment, it must be presumed that the Assessing Officer did find that a large number of alleged lenders who were found to be bogus during the assessment year 1960-61 were also put forward as lenders during the assessment year 1959-60 as well Evidently, this was what he meant in the context, whenhe spoke of 'similar loans' being noticed for the year in question as well In such a situation, it was impossible to say that the Assessing Officer had no reasonable ground to believe that there had been no full and true disclosure of all

136 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 material facts by the assessee during the relevant assessment year and that on that account, income chargeable to tax had escaped assessment. Every disclosure is not and cannot be treated to be a true and full disclosure. A disclosure may be a false one or true one. It may be a full disclosure or it may not be. A partial disclosure may very often be a misleading one. What is required is a full and true disclosure of all material facts necessary for making assessment for that year. This calls for an examination of the decisions of the Court analysing and elucidating sections 147 and 148. The obligation on the assessee to disclose the material facts—or what are called, primary facts—is not a mere disclosure but a disclosure which is full and true. A false disclosure is not a true disclosure. The disclosure must not only be true but must be full— 'fully and truly'. A fake assertion, or statement, of material fact, therefore, attracts the jurisdiction of the ITO under section 147. In the instant case according to the Assessing Officer on the basis of investigations and enquiries made during the assessment proceeding relating to the subsequent assessment year, he had come in to possession of material, on the basis of which he had reasons to believe that the assessee had put forward certain bogus and fake unsecured hundi loans said to have been taken by him from non- existent persons or his dummies, as the case may be, and that on that account income chargeable to tax had escaped assessment. According to him, this was a fake assertion to the knowledge of the assessee. The ITO said that during the assessment relating to subsequent assessment year, similar loans (from some of these very persons) were found to be bogus. On that basis, he sought to reopen the assessment. Having created and recorded bogus entries of loans, the assessee could not say that he had truly and fully disclosed all material facts necessary for his assessment for that year. True it was that ITO could have investigated the truth of the said assertion—which he actually did in the subsequent assessment year—but that did not relieve the assessee of his obligation, placed upon him by the statute, to disclose fully and truly all material facts. Indubitably, whether a loan, alleged to have been taken by the assessee, was true or fake, was a material fact and not aninference,factual or legal, to be drawn from given facts. In the instant case, it was shown that ten persons who had allegedly lent loan were established to be bogus persons or mere namelenders in the assessment proceeding relating to the subsequent assessment year. The dispute was at the stage of the validity of the notice under section 148/ 147. The enquiry at this stage k only to see whether there are reasonable grounds for the ITO to believe and not whether the omission/failure and the escapement of income is established.

144 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 and 2010-11, we find that the facts are identical and the assessee made full disclosure of material facts in proceedings under section 143(3) for both the years and u/s 153C r.w.s 143(3) of the Act for AY 2009-10. For both the years also no tangible material was available with the Ld. Assessing Officer as regards the amounts received by the assessee from various parties in respect of whom the additions were made in the aforesaid two assessment years. Based on the same facts, without having any evidence, the Ld. Assessing Officer issued notice under section 148, thus, this tantamount to change of opinion on the same set of facts without having any tangible material that income chargeable to tax escaped assessment. In the light of this factual finding the decision from Hon'ble ((supra)) and Kelvinator of India Ltd. ((supra)) from Hon'ble Apex Court clearly comes to the rescue of the assessee as the conditions of proviso to section 147 of the Act are not satisfied as even in the reasons there is no allegation to the effect that there was failure on the part of the assessee to disclose the material facts fully and truly. The cases in favour of the 145 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 assessee has already been discussed by us from Hon'ble Apex Court, Hon'ble jurisdictional High Court and Hon'ble Delhi High Court, therefore, the same are not being repeated. As we have discussed there has to be a live link and direct relationship between the information available with the ld. Assessing Officer and the conclusion that income chargeable to tax has escaped assessment. It is also noted that there is no live link with regard to statement tendered by Shri Mukesh Chokshi as there was no transaction took place with any of the alleged company managed by Shri Mukesh Chokshi. The Ld. Assessing Officer while reopening the assessment has mentioned the statement of Shri Mukesh Chokshi tendered on 16/01/2013 at the time of rejecting the objections raised by the assessee, whereas in the reasons recorded, reference has been made to the statement of Shri Chokshi recorded on 25/11/2009 and 26/11/2009 and no reference was made to the statement recorded on 16/01/2013, thus, the Ld. Assessing Officer is not permitted to improve upon the reasons recorded by the Ld. Assessing Officer as was held by Hon'ble jurisdictional High Court in Hindustan Lever Ltd. 268 ITR 332

5.1. During hearing, the Ld. counsel for the assessee, vehemently argued that the addition made under section 68 of the Act is not justified as the assessee has fulfilled all the conditions enshrined under section 68 of the Act and the assessee is not expected to prove the source of source. It was argued on behalf of the assessee that the assessee received funds from four parties during Assessment Years 2007-08 and the amount so received in Assessment Year 2007-08 was treated as share application money in Assessment Year 2010- 11 and preference shares were issued, at par, in Assessment Year 2011-12 and no premium was received by the assessee against issuance of such preference share. It was explained that the assessee filed necessary declaration, details of issue of preference shares, at par, to the Registrar of the companies and in the books of accounts also, no premium was received against the issue of preference shares. It was argued that the assessee filed original return on 23/10/2007, annexed with audited financial statement and other relevant details and 148 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 thus the order was passed under section 143(3) accepting the return income and thereafter notice under section 153C was issued to the assessee on 16/12/2011 and further notices under section 143(2) and 142(1) of the Act were issued asking the assessee for complete details and information about the amount received in Assessment Year 2007-08 and further issue of preference share in the subsequent period. It was explained that the assessee further filed the details and thereafter order under section 143(3) r.w.s. 153C was passed at the claim of the assessee was accepted and no addition was made. The Ld. counsel further explained that thereafter notice under section 148 of the Act was issued on 21/03/2014 and finally addition of Rs.15,50,00,000/- was made under section 68 of the Act and on further appeal, the addition was confirmed. The Ld. Counsel invited our attention to annexure- 1, wherein, party-wise details of addition made and other particulars of the said parties were enclosed. It was contended that all the four parties are separate legal entities, assessed to tax and have independently filed their return along with PAN Nos. and the transactions are duly reflected in the regular

153 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 4 4 Ledger account confirmations 1 2 3 NA 4 5 Pref. Shares Application forms 29 30 32 33 4 6 Pref. Shares Allottment Letters 45 46 48-49 50-51 6 Details of Money received 4 giving complete bank details 66-68 69-70 73-75 76-77 7 Round (1) 8 Order Passed u/s. 153A/C 2 167-170 232-235 335-357 412-415 9 order of the CIT (A) 2 NA NA 669-706 NA 10 Order of ITAT 2 NA NA 760-839 NA 11 Round (2) 12 Order Passed u/s. 143(3) r.w.s147 2 928-942 970-983 1034-1047 1076-1089 13 order of the CIT (A) 2 1705-1919 1920-2133 2339-2548 2549-2765 5.6. We have analyzed the assessment order, impugned order and submissions from both sides carefully and found that all the four parties are separate legal entities, they are assessed to tax and filed the tax returns under their PAN No. regularly for all the years including for A.Y. 2007-08. All the transactions are reflected by them in their regular books of accounts which are audited and were submitted before various authorities. The details of the cheque Nos., name of the bank, date and the branch were also submitted during all the assessment and appellate proceedings. The said transactions were also confirmed by all the four parties. In their audited financial statements the said transactions are reflected. All the four parties are assessed to tax by the same Assessing Officer who has passed the assessment order in the case of 154 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 assessee for A.Y. 2007-08. All the parties have filed all the details in support of their claim of receipt of money in their hands and investments made with the assessee during their assessment proceedings. The copies of the orders passed by the Assessing Officer in their cases are also made available by the assessee in the paper book filed before this Tribunal. The reference of the documents filed by each of the party is given in paperbooks filed during the course of appellate proceedings before the Tribunal. The written submissions were filed before the Ld. Commissioner of Income Tax (Appeal) and as annexure to the submission made before CIT (Appeals) all the documents refer to above were filed.

2. We have heard the counsels for both the parties and we have also perused the material placed on record as well as the orders passed by the revenue authorities. As per the facts of the present case, assessee is a listed public limited company engaged in the business of manufacturing steel. The assessee has a manufacturing plant situated at wardha.. A survey action u/s 133A was taken by the Investigation Wing against the assessee on 19/12/2012. The survey took place at the office premises as well as at the factory premises where the manufacturing activity is carried on. Not a single piece of paper is found either from the office premises or from the factory premises which could prove or indicate or suggest that the assessee has earned unaccounted income. However, during course of survey, statement of Director of Company Shri Babu Lal was recorded on 21/12/2012, wherein he offered income earned during the course of business. No iota of proof is also found regarding the manufacturing results disclosed by the assessee. The Investigation Wing has not issued a - single letter or a show cause or a questionnaire after conduct of the survey to the assessee pointing out any discrepancy or defect in the books of account or regarding detection of unaccounted income. The assessee on its own voluntarily filed a letter dated 27/12/2012 on 07/01/2013 with the Investigation Wing offering the income of Rs.557.50 crores for A.V. 2007-08 to 2010-11. As no incrementing material/document was found, the assessee was left with no choice but to state that the said income was generated on account of difference in yield, when in fact and in substance there was no defect or error in the yield which is disclosed by the assessee in the regular books of accounts. The assessee thereafter filed the return of income disclosing the income offered in the letter dated 27/12/2012 on 15/01/2013 and filed a copy of the same with the Investigation Wing. Notice u/s 148 was issued on 25/11/2013 received by the assessee on 27/11/2013. The assessee filed a letter stating that the return filed voluntarily on 15/01/2013 may be treated as return in response to notice u/s 148. The assessments for the impugned assessment years were framed u/s 147 r.w.S. 143(3) of the Income Tax Act("the Act"). The impugned penalty in respect of impugned assessment years were imposed by the ACIT, Central Circle-41, Mumbai("AO") u/s.271(1)(c) of the IT Act.

60. Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out satisfaction of the existence of the grounds mentioned in Section 271(1)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to 169 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, he places his version and tries to substantiate his claim, if at all, penalty is to be imposed, it should be imposed only on the grounds on which he is called upon to answer. It is not open to the authority, at the time of imposing penalty to impose penalty on the grounds other than what assessee was called upon to meet. Otherwise though the initiation of penalty proceedings may be valid and legal, the final order imposing penalty would offend principles of natural justice and cannot be sustained. Thus once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of order of penalty must be determined with reference to the information, facts and materials in the hands of the authority imposing penalty at the time the order was passed and further discovery of facts subsequent to the imposition of penalty cannot validate the order of penalty which, when passed, was not sustainable.

61. The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). Concealment, furnishing inaccurate particulars of income are different. Thus the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The Apex Court in the case of Ashok Pai reported in 292 ITR 11 at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujrat High Court in the case of MANU ENGINEERING reported in 122 ITR 306 and the Delhi High Court in the case of VIRGO MARKETING reported in 171 Taxmn 156, has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. Therefore, when the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The standard proforma without 170 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 striking of the relevant clauses will lead to an inference as to non-application of mind". P) Notice under section 274 of the Act should specifically state the grounds mentioned in Section 271(1)(c), i.e., whether it is for concealment of income or not furnishing of incorrect particulars of income. q) Sending printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law. r) The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. s) Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law".

7. On merits it was contended by learned AR that it was a voluntary disclosure and nothing incriminating was found either during the course of survey or thereafter. He invited our attention to the income assessed which was equal to the return income except in the A.Y.2010-11. As per learned AR, there was addition of Rs.4,38,93,410/- in the A.Y.2010-11 as compared to the return income and the disclosure made by the assessee in the revised return. As per learned AR the said addition also does not call for levy of concealment penalty in view of the replies submitted by the assessee dated December 30, 2013 when it was submitted that the purchases made during the year from M/s Gupta Metallics and power Ltd. all the necessary details were filed. All the purchases are duly reflected in the books of account and purchases are supported by the invoices. It was submitted that material in respect of these purchases were received at the factory premises of the assessee at wardha. The payments are made by a/c payee cheques and the material purchased was consumed in the manufacturing process. The AO conveniently ignored all these submissions only on the ground that the said supplier company did not file sales tax return / income tax returns for last three to four years. The addition is made simply for the reason that the supplier party did not show the sales before the sales tax department or the income tax department. It is submitted that by producing all the necessary details the assessee had discharged the onus prima facie. If the AO was to disallow the purchases then he was required to make further queries which he did not make. The assessee, in view of losses did not contest such addition but that in itself cannot be held to be sufficient for levy of concealment penalty without having brought any material on record that the submissions made by the assessee regarding purchase of the material from the said party was in anyway incorrect, more particularly when yield declared by the assessee 171 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 in the revised return was duly accepted by the AO on the purchases which include the impugned purchases. The law is well-established that penalty proceedings are distinct and different from assessment proceedings and even if the assessee does not challenge the addition the levy of concealment penalty is not automatic. Therefore, it is requested that the mere addition made to the income cannot be a ground for sustainable of concealment penalty, particularly in the facts and circumstances of the present case.

8. Following judicial pronouncements were relied on by learned AR:- Vipul Life Sciences Ltd., v DCIT [2015]68 SOT 321 (Mum) In this case survey under section 133A was conducted on November 20, 2012. During the survey assessee offered additional income of Rs. 34,73,47/- in addition to original returned income at Rs. 8,43,618. In response to notice under section 148 return of income was filed at Rs. 1,19,10,300/- and assessment was completed at Rs. 1,19,11,555/- by making small addition of Rs. 1,235/- to the returned income filed in response of notice under section 148. On the additional income offered penalty of Rs. 11,80,489/- was levied. The AO rejected the objection of the assessee that penalty should not be levied as the assessment has been framed according to the returned income in which the additional income was offered. The AO observed that the returned of income was neither filed under section 139( 1) nor it was a revised return as per provisions of section 139(5). This fact is mentioned in para 6 while reproducing the order passed by the CIT(A). It was further 'Observed by the AO that in consequent to survey action taken on November 20, 2012 the assessee filed letter dated January 14, 2013 and subsequently has filed return of income in response to notice under section 148 dated March 4, 2013 and assessment was framed vide order dated March 26,2013. In these circumstances the levy of penalty was sustained by CIT(A) and his order was challenged before the ITAT. The ITAT taking note of all the above facts mentioning in para 24 of the order and taking recourse to the decision of the coordinate bench in the cases of Muninaga Reddy v ACIT [2013] 37 taxmann.com 440(8ang.); Vasavi Shelters v. ITO [2013] 32 taxmann.com 26(8ang.); Ajay Sangari v ACIT [2011] 51 SOT 127(Chd.); CIT v Shankaerlal Nebhumal Uttamchandani [2009] 311 ITR 327(Guj.); Oilip Kedia v ACIT [2013] 40 taxmann.com 102(Hyd.); SVC Projects (P.) Ltd. v JCIT [2011] 132 ITO 11(Vishaka.); after referring to 172 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 all these decisions and after extracting relevant portions of the decision it has been held by the Tribunal that in all these cases either there was a search operation or there was a survey operation on the assessee and a consequence thereof, the assessee filed its return/revised return/reassessment return including the amount offered for tax and which was accepted by the AO. IT was observed that in all these cases the judicial fora was of the view that the penalty was not exigible. The relevant portion from the said decision is reproduced below:-

30.

We are supported by the decision of the coordinate Bench at Bangalore in the case of Muninaga Reddy v. Asstt. CIT [2013J 37 taxmann.com 440, where it was held, "There can be no concealment or nondisclosure, as the assessee had made a complete disclosure in the return and offered the surrendered amount for the purposes of tax and, therefore, no penalty under section 271(1)(c) could be levied. The words 'in the course of any proceedings under this Act' in section 271(1) are prefaced by the satisfaction of the Assessing Officer or the Commissioner (Appeals). When a survey is conducted by a survey team, the question of satisfaction of Assessing Officer or the Commissioner (Appeals) or the Commissioner does not arise. One has to keep in mind that it is the Assessing Officer who initiates penalty proceedings and directs the payment of penalty. He cannot record any satisfaction during the course of survey. Decision to initiate penalty proceedings is taken while making assessment order. It is thus obvious that the expression 'in the course of any proceedings under this Act' cannot have the reference to survey proceedings. It necessarily follows that concealment of particulars of income or furnishing of inaccurate particular of income by the assessee has to be in the return filed by him. The assessee can furnish the particulars of income in his return and everything would depend upon the return filed by the assessee. This view gets supported by Explanations 4, 5 and 5A of section 271 (1). Obviously no penalty can be imposed unless the conditions stipulated in the said provisions are duly and unambiguously satisfied. Section 271 (1 )(c) has to be construed strictly. Unless it is found that there is actually a concealment or nondisclosure of the particulars of income, penalty cannot be imposed. There is no 173 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 such concealment or non disclosure, as the assessee had made a complete disclosure in the return and offered the surrendered amount for the purposes of tax". This is an identical case, where survey operations had taken place and the assessment was reopened u/s 148, the coordinate Bench deleted the penalty.

In this case search was conducted on October 27, 1987 at the premises of firm and its partners. During the course of search various documents, loose papers, pass books, bank statements, etc. were found and seized on the basis of bank pass books in the names of various family members of the assessee, certain queries were raised by the revenue and proceedings were going on. On February 27,1989 the assessee surrendered the amount reflected in the bank accounts in the name of family members as his own income from undisclosed sources which was followed by revised return filed on March 31, 1989. Notices u/s 148 were issued to regularise those returns on February framed in the 177 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 basis of revised returns including estimated addition of marriage expenses and concealment penalty was initiated. On the offered income penalty was levied which was upheld by the CIT(A). The Tribunal deleted the penalty on the ground that though queries were raised from the assessee with regards to deposits in the bank accounts but no specific notice was issued by the departmental authorities alleging particular item of income which has been concealed by the assessee. Thus, there was only a prima facie belief that the assessee has concealed his income and the process of detection was not complete by dated March 31, 1989 when the assessee filed the revised return in which the additional income was offered. On these facts it was argued on behalf of the department before Hon'ble High Court that Tribunal has failed to appreciate that the default was committed by the assessee when the return on income was originally filed and declaration in the revised return did not absorb the assessee so as to delete the penalty imposed. It was also argued that filing of revised return consequent upon certain queries raised by the department was an admission of the assessee regarding concealment of income and therefore Tribunal has erred in coming to the conclusion that there was no detection and the returns were voluntary in nature. These submissions of the department are recorded in para 8 of the judgment. On these submissions their Lordships have held that Tribunal was right in coming to the conclusion that till March 31, 1989 process of detection was not complete and their Lordships noted the fact that the very same amount standing to the credit of the bank account of various family members had already been assessed by the revenue authorities. Thus, their Lordship's have upheld the order of the Tribunal vide which the penalty was deleted. For the sake of completeness para 11 to 13 from the above decision are being reproduced:- "11. As noted hereinbefore, the Tribunal has in terms found that though certain queries were raised and put to the assessee there was no specific pinpointing of particular items of income which have been concealed by the assessee. The Tribunal has found, as a matter of fact, that till March 31, 1989, the process of detection was not complete, the date March 31, 1989, being the date of filing of the revised returns. In face of these findings recorded on the basis of evidence appreciated by the Tribunal,

16. As per learned DR, the undisclosed income is unearthed as a result of survey u/s. 133A and investigations carried out by the department. Due to this, the assessee offered additional income of Rs. 557.5 cr. for the AYs 2007-08 to 2010-11. The assessee never intended to offer this income to the department and the assessee had guilty mind with all the elements of mens rea. That is why the assessee did not offer this income in the original returns filed u/s. '139(1) for the AYs 2007-08 to 2010-11. This income is offered after the survey operation when the assessee was totally cornered and had no alternate but to offer this income' for taxation. The assessee is giving the wrong statement that this is a self declaration. The evidences of undisclosed income were detected at the time of survey itself. Shri Babulal Agarwal, Managing Director of the assessee company had categorically admitted in his statement recorded on 21.12.2012 that the assessee company had generated unaccounted fund in various years which was invested as share application money in fourteen companies which in turn invested the same in share application money of Shree Global Tradefin Ltd. and finally invested in the assessee company as share application money.12. Reliance was placed by Ld. DR in the case of Mak Data Ltd. The Hon'ble Delhi High Court vide order dated 22.01.2013 reported in 31 Taxman 35. In that case also a survey u/s. 133A was conducted and the assessee surrendered undisclosed income on account of share application money. The argument of the assessee was that surrender of income was suo moto before any investigation and there was no other evidence in the possession of the department except the surrender. The Hon'ble High Court did not accept the argument of the assessee and confirmed levy of penalty by the AO and set aside the order of the ITAT which had cancelled the penalty. The assessee filed appeal before the Hon'ble Supreme Court The Hon'ble Supreme Court vide order dated 30.10.2013 reported in 38 Taxmann.com 448 has confirmed the order of the Hon'ble Delhi High Court.

184 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 4 A. purchase from other Bogus purchases from 0 0 0.16 parties for 15 parties which were manufacturing identified by Sales Tax authorities as non- genuine 5 B. purchase from other Bogus purchases with 33399 10.96 10.96 parties for three parties viz., VMN manufacturing steel Chem (India) Pvt. Ltd., Akash Steel Traders and Rajvi Trading Pvt. Ltd., 6 Difference on a/c. of Difference in “Yield as 0 142.00 yield per Steel-Industrial norms(84.5%)” and yield shown by assessee TOTAL 171.47 A.Y.2008-09 Sr. Nature of head Particulars Qty (MT) Gross Income No. 1 Trading Sales A Trading other than 100025 338.87 7.03 “Ragni trading & Investment Ltd., and Shree Global Tradefin Ltd., (assessee sister concern) 2 Trading Sales B “Trading with Ragni 0 35.73 0.72 trading & Investment Ltd., and Shree Global Tradefin Ltd., (assessee sister concern) 3 A. purchase from other Bogus purchases from 0 0 0.23 parties for 15 parties which were manufacturing identified by Sales Tax authorities as non- genuine 4 Difference on a/c. of Difference in “Yield as 0 0 118.00 yield per Steel-Industrial norms(84.5%)” and yield shown by assessee TOTAL 125.98 2009-10 Sr. Nature of head Particulars Qty (MT) Gross Income No. 1 Trading Sales A Trading other than 118580 524.82 22.68 “Ragni trading & Investment Ltd., and 185 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 Shree Global Tradefin Ltd., (assessee sister concern) 2 Trading Sales B “Trading with Ragni 0 32.85 1.41 trading & Investment Ltd., and Shree Global Tradefin Ltd., (assessee sister concern) 3 A. purchase from other Bogus purchases from 0 0 1.32 parties for 15 parties which were manufacturing identified by Sales Tax authorities as non- genuine 4 Capex Addition to P & M 0 2.91 0.22 worth 2.91 cr in A.Y.2009-10 not fully supported with evidence & vouchers 5 Difference on a/c. of Difference in “Yield as 0 0 130.00 yield per Steel-Industrial norms(84.5%)” and yield shown by assessee TOTAL 155.63 2010-11 Sr. Nature of head Particulars Qty (MT) Gross Income No. 1 Trading Sales A Trading other than 189238 793.96 22.55 “Ragni trading & Investment Ltd., and Shree Global Tradefin Ltd., (assessee sister concern) 2 Trading Sales B “Trading with Ragni 0 0 0.7 trading & Investment Ltd., and Shree Global Tradefin Ltd., (assessee sister concern) 3 A. purchase from Bogus purchases from 0 0 0.7 other parties for 15 parties which were manufacturing identified by Sales Tax authorities as non- genuine 4 Capex Addition to P & M worth 0 0 0.4 2.91 cr in A.Y.2009-10 not fully supported with evidence & vouchers 5 Difference on a/c. of Difference in “Yield as 0 0 80.00

23. On the above facts AO has levied the concealment penalty and the CIT(A) has upheld the concealment penalty. We found that Ld. CIT(A) has narrated the discussion made by the AO in the penalty order in para 4.1 and at pg. 19 of the impugned order the CIT(A) has extracted the analysis of the AO in the penalty order in respect of AY 2007-08 and in para 4.2 it has been specifically stated by the CIT(A) that the facts ·relevant to all the assessment years are identical with the facts of AY 2007-08 except of quantum of additional income declared by the assessee which was then added by the AO while passing the reassessment orders under section 147 r.w.s 143(3) in para 4.3 he has reproduced the analysis of the AO in which it was stated by the AO that the submissions of the assessee with regards to non levy of penalty can be summarised which inter alia include that the disclosure has been made suo moto by the assessee and it was to buy peace and was conditional subject to non-levy of penalty. The AO observed that the action taken under section 133A and post survey investigation resulted in unearthing the concealment of additional income which was due to departmental action in 2010 and then in 2012; that the assessee was facing consistent and repeated investigation, therefore, was not left with any choice except to come clean and offered the suppressed income over the years as additional income. Therefore the AO has held that penalty was leviable. Such conclusion of the AO has been reproduced at pg. 23 of the impugned order. From the record we found that the assessee has had raised before CIT(A) manifold arguments that notice issued under section 271 (1 )(c) is not justified and such contention is recorded at Pg. 27 of the impugned order. From Pgs. 28-36 Ld. CIT(A) reproduced the submissions made by the assessee before him. At Pgs. 28-32 the submissions of the factual aspect are recorded and specific submission were made in respect of each of the addition and it was pointed out that neither the survey team nor the AO had any proof or evidence to conclude that the assessee had filed inaccurate particulars regarding the total addition of Rs. 171.47 crores. These submissions are reproduced by Ld. CIT(A) in para 5.1 at pg. 24-36 of the impugned order.

25. In reply to CIT(A) calling the remand report, the AO submitted two letters dated April 29,2015 and May 18,2015. From the letter dated April 29, 2015 it was noted by the CIT(A) that AO did not give specific answers to the queries raised by CIT(A). Therefore, it has been mentioned by him in para 6.3 at pg. 39 of the impugned order that the first remand report sent by the AO was cryptic and did not address the points on which the comments were sought. Therefore, Ld. CIT(A) provided second opportunity to the AO for which the second letter was submitted. In second reply too no reference was made to any evidence or material to substantiate the additions except the excerpt from the statements recorded during the course of survey regarding voluntary offer of the addition and reference can be made to the second remand report of the AO which has been reproduced in the impugned order at pgs. 39-62 of the order. The conclusion drawn by CIT(A) to uphold the addition are recorded in para 10.1 from pg. 63 of the impugned order. It can be seen from the impugned order that from para 10.1 to 11.11 Ld. CIT(A) has discussed the admission made by the then director of the assessee company who made the declaration of additional income which was duly reflected in the return filed immediately after the statement made during the survey, thereafter, in para 12.1 Ld. CIT(A) has discussed that whether the addition was solely on the basis of admission of income by the assessee. He has observed that he has perused the material available on record including survey report and statement of various persons recorded. Again, CIT(A) was referring to the survey and search actions taken on Mukesh Chokshi group and M/s Shree Global Tradefin Ltd., etc. and after referring to the statements only he concluded that in view of the search and survey conducted by the Department on Mukesh Chokshi group and M/s Global Tradefin Ltd., the assessee was left with no other alternative but to surrender and offer the amount involved as its income. Such conclusion of the CIT(A) is recorded in para 12.4 to 12.6 of the impugned order at pg. 73-75.

190 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 proceedings and addition of Rs. 40,47,000/- was made. The Supreme Court while affirming the penalty has taken the note of the fact that the survey was conducted more than ten months before the assessee filed its regular return of income. The Supreme Court took note of the fact that had it been the intention of the assessee to make true and full disclosure of its income, it would have filed the return declaring the income inclusive of the amount which was surrendered later during the course of assessment proceedings and from these facts, consequentially, it is clear that the assessee had no intention to declare its true income. It is therefore levy of penalty was upheld. The facts in the present case are entirely different as the assessee, before detection of the impugned addition had made voluntary disclosure in the statement submitted during the course of survey which was followed by detailed letter submitted on January 7, 2013 and return of income on January 15, 2013 including the offered income which has been accepted by the AO. To substantiate the above submissions reference is invited to the following observations of the Hon'ble apex court from this decision:- "9. We are of the view that the surrender of income in this case is not voluntary in the sense that the offer of surrender was made in view of detection made by the AO in the search conducted in the sister concern of the assessee. In that situation, it cannot be said that the surrender of income was voluntary. AO during the course of assessment proceedings has noticed that certain documents comprising of share application forms, bank statements, memorandum or association of companies, affidavits, copies of Income Tax Returns and assessment orders and blank share transfer deeds duly signed, have been impounded in the course of survey proceedings under Section 133A conducted on 16.12.2003, in the case of a sister concern of the assessee. The survey was conducted more than 10 months before the assessee filed its return of income. Had it been the intention of the assessee to make full and true disclosure of its income, it would have filed the return declaring an income inclusive of the amount which was surrendered later during the course of the assessment proceedings. Consequently, it is clear that the assessee had no intention to declare its true income. It is the statutory duty of the assessee to record all its transactions in the books of account, to explain the source of payments made by it and to declare its true income in the return of income filed by it from year to year. The AO, in our view, has recorded a categorical finding that he was satisfied that the assessee had concealed true particulars of income

5. Without prejudice to the above, the learned CIT(A) failed to appreciate that the AO has not specified the exact charge in the penalty order whether the Assessee had concealed its income or furnished inaccurate particulars thereof. Therefore, the levy of penalty is not justified. 30. The two charges for initiating the penalty operate on two different footing and under the penal provision the charge has to be very specific and not vague. These charges are not to be reckoned as any casual remark, which can be interchanged by the AO at any stage on his whims and fancies. It is not an error which is rectifiable or to be ignored, albeit it is a fatal error which vitiates the entire initiation itself. If charge itself is vague and not clear, then the onus cast upon the assessee under Explanation itself gets vitiated as assessee is precluded from a chance to give a specific rebuttal on that charge. It is a trite law that circumstances and facts for levy of penalty under both the grounds operate in a different fields. The courts have held that in the notice under section 274 r.w.s. 271, the AO has to specify the charge on which he intends to levy penalty. This aspect of the matter has been consistently reiterated by the Hon'ble High Courts from time to time. 31. We found that Notice under section 271(1)(c) is issued on standard performa in which inappropriate words and paragraphs were neither struck off nor deleted. Reference is made to the copy of notice issued under section 274 r.w.s 271 of the Income Tax Act, 1961 on January 2, 2014 in respect of all the assessment years the copies of which are placed in the paper book. We found that the said notices have been issued on standard performa and in the notices the inappropriate words and paragraphs were neither struck off nor deleted. Thus, the assessing authority was not sure as to whether he had proceeded on the basis that the assessee had either concealed its income or had furnished inaccurate particulars. Thus, the 194 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 notices so issued are not in compliance with the requirement of the particular section and therefore it is a vague notice, which is attributable to a patent non-application of mind on the part of the assessing authority.

In view of the above, the question as framed do not give rise to any substantial question of law Thus, not entertained" 42. The Hon'ble Supreme Court in Dilip N. Shroff v/s JCIT, [2007] 291 ITR 519 (SC), has observed that while issuing the notice under section 274 r/w section 271, in the standard format, the Assessing Officer should delete the inappropriate words or paragraphs, otherwise, it may indicate that the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or had furnished inaccurate particulars of income. This, according to the Hon'ble Supreme Court, deprives the assessee of a fair opportunity to explain its stand, thereby, violates the principles of natural justice. As held by the Hon'ble Supreme Court in CIT v/s Reliance Petroproducts Pvt. Ltd. [2010] 322 ITR 158 (SC), the aforesaid principle laid in Dilip N. Shroff (supra) still holds good in spite of the decision of the Hon'ble Supreme Court in UOI v/s Dharmendra Textile Processors (2008) 306 ITR 277 (SC). The Hon'ble Jurisdictional High Court in CIT v/s Smt. Kaushalya & Ors., [1995] 216 ITR 660 (Bom), observed that notice issued under section 274 must reveal application of mind by the Assessing Officer and the assessee must be made aware of the exact charge on which he had to file his explanation. The Court observed, vagueness and ambiguity in the notice deprives the assessee of reasonable opportunity as he is unaware of the exact charge he has to face. The Hon'ble Jurisdictional High Court in Samson Perinchery (supra), following the decision of Hon'ble Karnataka High Court in CIT v/s Manjunatha Cotton & Ginning Factory, [2013] 359 ITR 565 (Kar.), held, order imposing penalty has to be made only on the ground on which the penalty proceedings has been initiated. 43. In addition to the aforesaid binding judgments, there are several orders passed by co-ordinate Benches of he Tribunal on this very point. In all those 198 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 orders also penalty levied u s. 271(l)(c) of the Act on the basis of similar vague notice was cancelled. Relevant paragraphs from some such orders are extracted below: (a) Prakash H. Savla v. ACIT (ITA No. 3381/Mum/2015 dated 11.11.2016): "5. We have considered the rival submissions and perused the relevant material on record We have gone through the notice u/s. 274 r.ws. 271(1)(c) of the Act issued on 30.122009 by the AD (p. 40-41 of the Paper Book). At the end of the notice, it has been mentioned that inappropriate words end paragraph should be deleted The AD has not done so. In fact in the said notice. 'have concealed the particulars of your income or furnished inaccurate particulars of such income' are appearing. There is no denial above fact by the Id DR. 5.4 In CIT vs. Smt Kaushalya (1994) 75 Taxman 549 (Bom), the Hon'ble Bombay High Court has held that 'The vagueness and ambiguity in the notice had also prejudiced the right of reasonable opportunity of the assessee since he did not know what exact charges he had to face. In this background, quashing of the penalty proceedings for the assessment year 1967-68 seems to be fully justified .

199 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 6.4. In CIT vs. Smt. Kaushalya [1994] 75 Taxman 549 (Bom), the Hon’ble Bombay High Court has held that 'The vagueness and ambiguity in the notice had also prejudiced the right of reasonable opportunity of the assessee since he did not know what exact charges he had to face. In this background, quashing of the penalty proceedings for the assessment year 1967-68 seems to be fully justified' Respectfully following the above decisions, we hold that the notice dated 27122011 issued by the AO u/s. 274 r. w. s. 271 of the Act for the A Y 2004-05 for initiating penalty proceeding u/s. 271(1)(c) of the Act in the present case is invalid In view of the above, the other grounds of appeal raised by the assessee against the levy of penalty u/s. 271 (1) (c) of the Act require no adjudication at this stage. The order of the Id CIT (A) sustaining the penalty of the Act is thus set aside." (c) Chandru K. Mtrchandani vs. ITO (ITA No. 5368/Mum/2014 dated 05.04.2017) "4.1.2 In this regard the learned A.R. of the assessee drew the attention of the Bench to the notice issued by the Assessing Officer to the ITO Ward 14(3)3), Mumbai under section 274 r w. s. 271 (l)(c,) of the Act dated 30.12.2011 (copy placed at pg 1 of paper book). It is submitted that the notice is a standard printed notice which does not indicate the required particulars, le. as to whether the initiation of penalty is for concealment of income or for furnishing of inaccurate particulars of income, since the AO has not deleted therein the inappropriate words and paragraphs; thereby evidencing total non-application of mind by the AO and of his not being clear as to under which of the two limbs the penalty was to be considered for. 4.3.3 The Legal position- has been reiterated by the Hon'ble Karnataka High court in the case of CIT vs. Manjunatha Cotton & Ginning Factory (2013) 359 ITR 5675 (Kart) and which has not been interfered with by the Hon'ble Apex Court in the appeal preferred against it by Revenue. This proposition has been affirmed and upheld by the Hon'ble Bombay H19l7 Court in the case of CIT vs. Samson Perinchery "supra). Before us, no contrary judgment of the Hon'ble High Courts or of Hon 'h/e Apex Court, referred to and followed by the coordinate Bench in its order in Precisions Containers Ltd. (supra) has been brought to our notice or cited or referred to. Therefore, taking into consideration the facts and circumstances of the case on hand and applying the ratio

11. We are therefore respectfully following the ratio laid down by the Hon'ble High Courts including the jurisdictional High Court and Supreme Court hold that the order of the CIT (A) upholding the imposition of penalty u/s. 271(1)(c) of the Act where the AO had not specified or mentioned the charge on which the penalty has been imposed is not correct and cannot be sustained In view of the foregoing discussion we set aside the order of CIT(A) and direct the AO to delete the penalty levied u/s. 271(1)(c) of the Act." (e) Dr. Santa Wind Davare v. ACIT & vice versa (ITA No. 2187/Mum/2014 & anr dated 2 1.12.2016) "12. A combined reading of the decision rendered by the Hon'ble Bombay High Court in the case of Smt. B. Kaushalya and Others (supra) and the decision rendered by Hon'ble Supreme Court in the case of D111p N. Shroff (supra) would make it clear that there should be application of mind on the part of the AU at the time of issuing notice. Here, in the instant case, the assessing officer did not specify the charge for which the penalty proceedings were initiated and also issued an incorrect notice. Both the acts of the 201 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 AG, in our view, clearly show that the AO did not apply his mind when he issued notice to the assessee and he was not sure as to what purpose the notice was issued The Hon'ble Bombay High Court has discussed about non-application of mind in the case of Kaushalya "supra) and observed as under- The notice clearly demonstrated non-application of mind on the part of the Inspecting Assistant Commissioner The vagueness and ambiguity in the notice had also prejudiced the right of reasonable opportunity of the assessee since he did not know what exact charge he had to face. In this back ground quashing of the penalty proceedings for the assessment year 1967-68 seems to be fully justified' In the instant case also, we are of the view that the A 0 has issued a notice, that too incorrect one, in a routine manner Further the notice did not specify the charge for which the penalty notice was issued Hence, in our view, the AG has failed to apply his mind at the time of issuing penalty notice to assessee, 14. In view of the foregoing discussions, we are of the view that assessee should succeed on this legal issue. Accordingly, the penalty proceedings initiated by the A0 without application of mind is liable to be set aside and we order accordingly." (f) Wadhwa Estate & Developers India Pvt. Ltd. V. ACIT (ITA No. 2158/Mum/2016 dated 24.02.2017 7. Further on a reference to the notice issued under section 274 r/w sect/on 271, which is in a standard printed format, a copy of which is placed at Page-i 7 of the paper book, we have found that the Assessing Officer has not specified which limb of the provision contained under section 271(1)(c) is attracted to the assessee. The Hon'ble Jurisdictional High Court in CIT v/s. Smt. Kaushalya & Ors. [1995] 216 ITR 660 (Bom), observed that notice issued under section 274 must reveal application of mind by the Assessing Officer and the assessee must be made aware of the exact charge on which he had to file his explanation. The Court observed vagueness and ambiguity in the notice deprives the assessee of reasonable opportunity as he is unaware of the exact charge he has to face. The Hon'ble Jurisdictional High Court in Samson Perinchety (supra) following the decision of Hon'ble Karnataka High Court in CIT v/s. Manjunatha Cotton & Ginning Factory [2013] 359 ITR 5675 (Karn) held, order imposing penalty has to be made only on the ground on which the penalty proceedings has been initiated In the present case, neither the 202 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 assessment order nor the notice issued under section 274 indicate the exact charge on the basis of which the Assessing Officer intends to impose penalty under section 271(1)(c). Therefore, viewed in the light of the principles laid down in the judicial precedents discussed herein above, we are of the opinion that the Assessing Officer having failed to record his satisfaction while initiating proceedings for imposition of penalty under section 271(1)(c) as to which limb of the provisions of section 271(1)(c) is attracted, the order imposing penalty is invalid.........................

44. In so far as the judgment of the Hon'ble Bombay High Court in the case of CIT v. Smt. Kaushalya and Ors (216 ITR 660), rendered on 14.01.1992, it may be noted that in their subsequent and recent decision in the case of CIT v. Shri Samson Perinchery (supra), discussed above, the issue was decided in favour of the taxpayer. It is well settled that when there are conflicting judgments, the latter one has to be followed as per Bhika Ram and Ors. v. UOI [238 ITR 113 (Del)]. The ratio laid down in Bhika Ram and Ors. v. UOI [238 ITR 113 (Del)] was followed in Datamatics Financial Services Ltd. v. JCIT [95 lTD 23, 30 (Mum)]. The relevant observations made by the Tribunal in that case on the point were: "7 Considering the first submission, we find that it is only the later decision which has a precedent over earlier decision even in a case where earlier decision was neither cited nor discussed in the later decision. The situation in the present case is rather on strong footing as the earlier decision was under consideration of their Lordships In the later decision. In the case of Bhika Ram (238 ITR 113), their Lordships of Delhi High Court, when faced with a situation where in a later decision, the Hon 'ble Supreme Court did not consider the earlier decision, observed as follow:- 'However, learned counsel for the petitioner relied on Satinder Singh v. limrao Singh AIR 1961 SC 908, to submit that compensation would not be treated as income. Learned counsel further submitted that the decision of the Supreme Court in Satinder Singh 's case AIR 1961 SC 908 was not brought to the notice of the Supreme Court when Bikram Sigh 's case [1997] 224 IT!? 551, was decided. It /5 also submitted that the reasoning on which their Lordsh,s have proceeded in the case of Satinder Singh AIR 1961 SC 908, was also not argued before the Supreme Court in Bikram Singh 's case [1997] 224 ITR 551. Not only are we not satisfied about the correctness of the submission so made, we are also of the opinion that such a plea is not open for consideration by us and Bikram Singh 's case [1997]224 ITR 551 (SC), being a later pronouncement of the Supreme Court by a Bench of co-equal strength, it is binding on us."

46.

In fact, the co-ordinate Benches have already followed this precedent in Prakash H. Savia v. ACIT, Oleander Farms P. Ltd. V. DCIT, Dr. Santa Milind Davare v. ACIT & vice versa and Wadhwa Estate & Developers India Pvt. Ltd. v. ACIT, discussed hereinabove. It was also held in that when there are conflicting judgments of jurisdictional High Court and if the earlier judgment is not referred to at all in the latter one, it is open to the Tribunal to follow the judgment, the reasoning of which appeals to it, vide CIT v. Madhukant M. Mehta [132 ITR 159, 180 (Guj)]. 47. Recently ITAT Mumbai Bench in the case of Meherjee Cassinath Holdings Pvt. Ltd., in vide order dated 28/04/2017 has held as under:- 8. We have carefully considered the rival submissions. Sec. 271(1)(c) of the Act empowers the Assessing Officer to impose penalty to the extent specified if, in the course of any proceedings under the Act, he is satisfied that any person has concealed the 204 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 particulars of his income or furnished inaccurate particulars of such income. In other words, what Sec. 271(1)(c) of the Act postulates is that the penalty can be levied on the existence of any of the two situations, namely, for concealing the particulars of income or for furnishing inaccurate particulars of income. Therefore, it is obvious from the phraseology of Sec. 271(1)(c) of the Act that the imposition of penalty is invited only when the conditions prescribed u/s 271(1)(c) of the Act exist. It is also a well accepted proposition that 'concealment of the particulars of income' and 'furnishing of inaccurate particulars of income' referred to in Sec. 271(1)(c) of the Act denote different connotations. In fact, this distinction has been appreciated even at the level of Hon'ble Supreme Court not only in the case of Dilip N. Shroff (supra) but also in the case of T.Ashok Pai, 292 ITR 11 (SC). Therefore, if the two expressions, namely 'concealment of the particulars of income' and 'furnishing of inaccurate particulars of income' have different connotations, it is imperative for the assessee to be made aware as to which of the two is being put against him for the purpose of levy of penalty u/s 271(1)(c) of the Act, so that the assessee can defend accordingly. It is in this background that one has to appreciate the preliminary plea of assessee, which is based on the manner in which the notice u/s 274 r.w.s. 271(1)(c) of the Act dated 10.12.2010 has been issued to the assessee- company. A copy of the said notice has been placed on record and the learned representative canvassed that the same has been issued by the Assessing Officer in a standard proforma, without striking out the irrelevant clause. In other words, the notice refers to both the limbs of Sec. 271(1)(c) of the Act, namely concealment of the particulars of income as well as furnishing of inaccurate particulars of income. Quite clearly, non-striking-off of the irrelevant limb in the said notice does not convey to the assessee as to which of the two charges it has to respond. The aforesaid infirmity in the notice has been sought to be demonstrated as a reflection of non-application of mind by the Assessing Officer, and in support, reference has been made to the following specific discussion in the order of Hon'ble Supreme Court in the case of Dilip N. Shroff (supra):- "83. It is of some significance that in the standard proforma used by the Assessing Officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to 205 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 be deleted, but the same had not been done. Thus, the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. Even before us, the learned Additional Solicitor General while placing the order of assessment laid emphasis that he had dealt with both the situations.

84.

The impugned order, therefore, suffers from non-application of mind. It was also bound to comply with the principles of natural justice. (See Malabar Industrial Co. Ltd. v. CIT [2000] 2 SCC 718]" 9. Factually speaking, the aforesaid plea of assessee is borne out of record and having regard to the parity of reasoning laid down by the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra), the notice in the instant case does suffer from the vice of non- application of mind by the Assessing Officer. In fact, a similar proposition was also enunciated by the Hon'ble Karnataka High Court in the case of M/s. SSA's Emerald Meadows (supra) and against such a judgment, the Special Leave Petition filed by the Revenue has since been dismissed by the Hon'ble Supreme Court vide order dated 5.8.2016, a copy of which is also placed on record. 10. In fact, at the time of hearing, the ld. CIT-DR has not disputed the factual matrix, but sought to point out that there is due application of mind by the Assessing Officer which can be demonstrated from the discussion in the assessment order, wherein after discussing the reasons for the disallowance, he has recorded a satisfaction that penalty proceedings are initiated u/s 271(1)(c) of the Act for furnishing of inaccurate particulars of income. In our considered opinion, the attempt of the ld. CIT-DR to demonstrate application of mind by the Assessing Officer is no defence inasmuch as the Hon'ble Supreme Court has approved the factum of non-striking off of the irrelevant clause in the notice as reflective of non-application of mind by the Assessing Officer. Since the factual matrix in the present case conforms to the proposition laid down by the Hon'ble Supreme Court, we proceed to reject the arguments advanced by the ld. CIT-DR based on the observations of the Assessing Officer in the assessment order. Further, it is also noticeable that such proposition has been considered by the 206 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 Hon'ble Bombay High Court also in the case of Shri Samson Perinchery, ITA Nos. 1154, 953, 1097 & 1126 of 2014 dated 5.1.2017 (supra) and the decision of the Tribunal holding levy of penalty in such circumstances being bad, has been approved.

11.

Apart from the aforesaid, the ld. CIT-DR made an argument based on the decision of the Hon'ble Bombay High Court in the case of Smt. Kaushalya & Others, 216 ITR 660 (Bom.) to canvass support for his plea that non-striking off of the irrelevant portion of notice would not invalidate the imposition of penalty u/s 271(1)(c) of the Act. We have carefully considered the said argument set-up by the ld. CIT-DR and find that a similar issue had come up before our coordinate Bench in the case of Dr. Sarita Milind Davare (supra). Our coordinate Bench, after considering the judgment of the Hon'ble Bombay High Court in the case of Smt. Kaushalya & Ors., (supra) as also the judgments of the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra) and Dharmendra Textile Processors, 306 ITR 277 (SC) deduced as under :- "12. A combined reading of the decision rendered by Hon'ble Bombay High Court in the case of Smt. B Kaushalya and Others (supra) and the decision rendered by Hon'ble Supreme Court in the case of Dilip N Shroff (supra) would make it clear that there should be application of mind on the part of the AO at the time of issuing notice. In the case of Lakhdir Lalji (supra), the AO issued notice u/s 274 for concealment of particulars of income but levied penalty for furnishing inaccurate particulars of income. The Hon'ble Gujarat High Court quashed the penalty since the basis for the penalty proceedings disappeared when it was held that there was no suppression of income. The Hon'ble Kerala High Court has struck down the penalty imposed in the case of N.N.Subramania Iyer Vs. Union of India (supra), when there is no indication in the notice for what contravention the petitioner was called upon to show cause why a penalty should not be imposed. In the instant case, the AO did not specify the charge for which penalty proceedings were initiated and further he has issued a notice meant for calling the assessee to furnish the return of income. Hence, in the instant case, the assessing officer did not specify the charge for which the penalty proceedings were initiated and also issued an incorrect notice. Both the acts of the AO, in our view, clearly show that the AO did not apply his mind when he issued notice to the 207 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 assessee and he was not sure as to what purpose the notice was issued. The Hon'ble Bombay High Court has discussed about non- application of mind in the case of Kaushalya (supra) and observed as under:- "....The notice clearly demonstrated non-application of mind on the part of the Inspecting Assistant Commissioner. The vagueness and ambiguity in the notice had also prejudiced the right of reasonable opportunity of the assessee since he did not know what exact charge he had to face. In this back ground, quashing of the penalty proceedings for the assessment year 1967-68 seems to be fully justified." In the instant case also, we are of the view that the AO has issued a notice, that too incorrect one, in a routine manner. Further the notice did not specify the charge for which the penalty notice was issued. Hence, in our view, the AO has failed to apply his mind at the time of issuing penalty notice to the assessee."

22. We find identical issue had come up before the Pune Bench of the Tribunal in the case of Sanjog Tarachand Lodha Vs. ITO vide and 689/PN/2014 order dated 31-08- 2014 for A.Yrs. 2007-08 and 2008-09. We find the Tribunal under identical circumstances had held the notice issued u/s.271(1)(c) r.w.s. 274 as invalid and cancelled the penalty levied on the basis of such invalid notice by observing as under: "5. We have heard the submissions made by the ld. DR and have thoroughly perused the written submission along with paper book 210 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 filed by the assessee. A search and seizure action u/s. 132 of the Act was conducted on 21-05-2009 in the case of Lodha Group. Pursuant to notice issued u/s. 153A, the assessee filed his return of income for the impugned assessment years. In the return of income for the impugned assessment years, the assessee declared additional income admitted during the course of search. The assessment was completed u/s. 153A r.w.s. 143(3) by accepting the income returned by the assessee. Thus, no further addition was made during the course of assessment proceedings. Penalty u/s. 271(1)(c) was initiated against the assessee on the additional income admitted during search and returned u/s. 153A proceedings. The assessee has placed on record notices issued u/s. 271(1)(c) r.w.s. 274 of the Act for levy of penalty in the assessment years 2007-08 and 2008-09. The said notices are at pages 15 and 16 of the paper book. A perusal of notices show that they are stereo type notices, with blank spaces. Specific reasons for levy of penalty u/s. 271(1)(c), whether it is for concealment of particulars or for furnishing inaccurate particulars or for both, have not been specified. The assessee in his written submission has pointed out that if the irrelevant columns of the printed form of notice u/s. 274 have not been stuck off by the Assessing Officer, the notice for levy of penalty u/s. 271(1)(c) shall be deemed to be invalid. In support of these submissions, reliance has been placed on the decision of Hon'ble Karnataka High Court in the case of CIT Vs. Manjunatha Cotton & Ginning Factory reported as 359 ITR 565 (Karan).

8. The Hon'ble Karnataka High Court in the case of CIT Vs. Manjunatha Cotton & Ginning Factory (supra) has held that where it is not clear from the notice u/s. 274 the reasons for levying of penalty the notice itself is bad in law and the penalty order passed on the basis of such notice is not sustainable. The relevant extract of the order of Hon'ble High Court reads as under: "NOTICE UNDER SECTION 274 59. As the provision stands, the penalty proceedings can be initiated on various ground set out therein. If the order passed by the Authority categorically records a finding regarding the existence of any said grounds mentioned therein and then penalty proceedings is initiated, in the notice to be issued under Section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Explanation-1 or in Explanation-1(B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. In either event, the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest 212 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under Section 274 should satisfy the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee.

60. Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out satisfaction of the existence of the grounds mentioned in Section 271(1)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, he places his version and tries to substantiate his claim, if at all, penalty is to be imposed, it should be imposed only on the grounds on which he is called upon to answer. It is not open to the authority, at the time of imposing penalty to impose penalty on the grounds other than what assessee was called upon to meet. Otherwise though the initiation of penalty proceedings may be valid and legal, the final order imposing penalty would offend principles of natural justice and cannot be sustained. Thus once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of the order of penalty must be determined with reference 213 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 to the information, facts and materials in the hands of the authority imposing the penalty at the time the order was passed and further discovery of facts subsequent to the imposition of penalty cannot validate the order of penalty which, when passed, was not sustainable.

49.

Recently ITAT Mumbai Bench in the case of Visaria Securities Pvt. Ltd., in vide order dated 08/05/2017 has held as under:- 13. We have heard arguments on this issue and a perusal of the notice issued under section 274 r.w.s. 271 of the Act dated 26.12.11 and 11.08.14 reveals that the AO has not deleted the inappropriate words and parts of the notice, whereby it is not clear as to the default committed by the assessee, i.e. whether it is concealment of particulars of income or furnishing of inaccurate particulars of income that the penalty under section 271(1)(c) of the Act is sought to be levied. In this regard, we find that the Hon'ble High Court of Karnataka in its order in the case of M/s Manjunatah Cotton & Ginning Factory in ITA No. 2546 of 2005 dated 13.12.2012, relied on by the assessee, has held that such a notice, as has also been issued in the case on hand, is invalid and the consequential penalty proceedings are also not valid. The relevant portion of their Lordships judgement at paras 59 to 62 thereof are extracted hereunder for reference: - “59. As the provision stands, the penalty proceedings can be initiated on various ground set therein. If the order passed by the Authority categorically records a finding regarding the existence of any said grounds mentioned therein and then penalty proceedings is initiated, inthe notice to be issued under Section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained 216 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 in Explanation-1 or in Explanation-1(B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. In either event, the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed farm where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under Section 274 should satisfy the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee.

60. Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out satisfaction of the existence of the grounds mentioned in Section 271(1)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, he places his version and tries to substantiate his claim, if at all, penalty is to be imposed, it should be imposed only on the grounds on which he is called upon to answer. It is not open to the authority, at the time of imposing penalty to impose penalty on the grounds other than what assessee was called upon to meet. Otherwise though the initiation of penalty proceedings may be valid and legal, the final order imposing penalty would offend principles of natural justice and cannot be sustained. Thus once the 217 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of the order of penalty must be determined with reference to the information, facts and materials in the hands of the authority imposing the penalty at the time the order was passed and further discovery of facts subsequent to the imposition of penalty cannot validate the order of penalty which, when passed, was not sustainable.

56.

Taking up the first foundation of levy of penalty it can be observed that there is no evidence whatsoever, except the survey statement, to support the allegation of cash generation. As explained in detail before the lower authorities the statements were general in nature and in fact, during the course of the proceedings before the Assessing Officer himself, the assessee had taken a categorical stand that there is no generation of cash by mis-declaring yield of steel or by resorting to any other method. Nothing has been brought on record by the Assessing Officer to prove anything contrary. Thus, there is no evidence or material on record to support the allegation of cash generation. When the assessee took a categorical stand before the Assessing Officer to the effect that there is no generation of cash, it is incumbent upon the Assessing Officer to prove with the help of material on record that there was in fact a generation of cash and thereby concealment of income. Nothing of that sort has been done. 57. In respect of the declaration of income on account of correct yield in the steel production, we found that the addition was made purely on the basis of adhoc formulae contained in the statement of the assessee. The 220 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 actual yield of the steel was compared with the standard yield of 84.5% in each of the assessment years and varying amounts were offered in the four assessment years under consideration on the assumption that there has to be an uniform yield of 84.5% year-afteryear. During the assessment proceedings, the Assessing Officer had, in fact, wanted further justification in respect of additional income on account of difference in yield. Accordingly, he made the following observations in para 2.11 on page No. 10 of the assessment order for A.Y. 2007-08. '2.11 In these assessment proceedings, the AR of the assessee vide order sheet entry dated 09-12-2012 was asked to furnish justification in respect of the additional Income on account of difference in yield detected during the course of survey and post survey proceedings."

69.

It is a well-settled proposition in law that levy of penalty u/s. 271(1)(c) of the Act is permitted only on those counts on which the same was 225 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 initiated and satisfaction was recorded. In other words, penalty cannot be levied on a ground which is not specified in the assessment order while initiating the penalty and for which satisfaction has not been recorded. In support of this view, reliance is placed upon the binding judgement of the jurisdictional High Court in the case of CIT v. Acme Associates [2016] 76 taxmann.com 242. In this case, noticing that the aggregate area of two flats bought by a couple through a joint agreement exceeded 1,000 sq. It, the claim for deduction u/s. 80-IB(10) of the Act was disallowed by the Assessing Officer. Simultaneously, proceedings u/s. 271(1)(c) of the Act were initiated for furnishing 'inaccurate information/concealing of income'. The appeal filed in quantum proceedings was withdrawn as during its pendency the assessee was served with notice u/s. 153A of the Act consequent to search u/s. 132 of the Act. Thereafter, the Assessing Officer levied penalty u/s. 271(1)(c) of the Act on the very ground for which proceedings under this provision were initiated. However, in the appeal filed there against, it was confirmed on a different ground, namely, that during the search the assessee had disclosed that the project in respect of which the deduction was claimed was not completed before the due date, i.e. 31.03.2008. This order, however, was overturned in second appeal. In the appeal filed u/s. 260A of the Act at the instance of the revenue, the Hon'ble jurisdictional High Court was pleased to uphold the order impugned in the following words: "9. It is undisputed position before us that initiation of penalty under Section 271 (1)(c) of the Act by the Assessing Officer is on the ground of area of flat being sold in excess of 1000 sq. ft. being concealed It was this ground that the Respondent -assessee is required to offer explanation during penalty proceedings to establish that the claim as made in the return of income was not on account of furnishing of inaccurate particulars of income or concealment of income vis-a-vis of selling flat having area of 1000 sq. ft. The Assessing Officer under the Act also considered the Respondent -assessee '5 explanation in the context in which the penalty proceedings were initiated and did not rightly place any reliance upon the subsequent events. In an appeal from the order of the Assessing Officer, the CIT (A) could not have imposed penalty on a new ground which was not the basis for initiation of penalty. The appeal before the CIT (A) was with regard to issue of penalty under Section 271(1)(c) of the Act only on the ground on which the penalty proceedings were initiated in the assessment order"

71.

Most importantly, the additions made in most of the aforesaid companies were deleted by the CIT (A) and they were concurred with in the further proceedings. In the case of Jogia Properties Ltd., one of the fourteen companies, the additions on account of share application money were made by the Assessing Officer in assessment years 2008-09 and 2009-10 and when his orders were carried in appeals, they were deleted by the CIT (A) holding that such additions were not warranted. Feeling aggrieved, the dispute was carried by the revenue in further proceedings to the Tribunal and, relying upon the admission and offer made by one of the directors and another and also the linkage of one Shri Mukesh Chokshi, a hawala dealer with the receipt, restoration of the additions was sought for. However, in absence of any corroborating evidence, as in the case of the assessee, the Tribunal after considering a plethora of rulings on the point, had decided the controversy in favour of the assessee by observing as under: 14 We have perused the case laws relied upon by the Ld Representatives of the parties. In our view, each case has to be decided on its own facts. Merely because, in the case of one company Gold Star Finvest Pvt. Ltd run by Mukesh Choksh, the income has been determined on percentage/commission basis treating the said company as accommodation entry provider, that Itself cannot hold a justification to completely ignore the facts and evidences brought on the file by the assessee. The case of the assessee has to be adjudged on the basis of its own set of facts and evidences. Moreover the facts and circumstances of the case of the assessee are squarely covered by the various decisions of the Hon 'b/e Jurisdictional High court Of Bombay. We further find that the issue, relating to the investments made by the companies relating to the said Mr. Mukesh Chokshi in some other cases, has travelled up to the level of Hon'ble Supreme Court In the case of "Shri Mukesh R. Marolia vs. Additional CIT" (2006) 6 SOT 247 (Mum), the assessee had 227 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 made share transaction through the companies M/s. Richmond Securities Pvt. Ltd. and M/s. Scorpio Management Mr Mukesh Chokshi has been the director of M/s. Richmond Securities Pvt. Ltd The Tribunal, after considering the overall facts and circumstances of the case, observed inter- alia that on the basis of evidence available and there being no incriminating material found during the search action, observed that the assessment has to be completed on the basis of records and material available before the Assessing Authority. The personal know/edge and excitement on events should not lead the AO to a state of affairs where salient evidences are overlooked Where every transaction of the assessee has been accounted, documented and supported in such an event even though, the amount invested by the assessee has grown into a very sizeable amount which looks quite amazing the evidence produced by the assessee cannot be brushed aside. The Tribunal under such circumstances deleted the addition. The Revenue took the matter to the Hon'ble Bombay High Court. The Hon'ble Bombay High Court, while adjudicating the above issue in tI7e case styled as "CIT vs. Shri Mukesh R. Marolia" in I/A No. 456 of 2007 decided on 07.09.2011, observed that though there was some discrepancy in the statement of director (Mr Mukesh Chokshi) of M/s. Richmond Securities Pvt Ltd regarding the sale transact/on, but owing to the factual finding given by the Tribunal on the basis of evidences furnished by the assessee, the decision of the Tribunal cannot be faulted. The Hon 'ble Bombay High Court upheld the finding of the Tribunal holding the sale transactions as genuine. The Department preferred appeal before the Hon'ble Supreme Court. The Hon'ble Supreme Court dismissed the SLP No.20146/2012 styled as "CIT vs. Shri Mukesh R. Marolia vide order dated 27.01.14 Similarly in the case of "CIT vs. M/s. Kesar A. Gada in ITA No. 300 of 2013 decided on 21.01.15 wherein the AO, while making the additions under section 68 of the Act, had relied upon the statement of Mr. Mukesh Chokshi that he had given various accommodation entries to various parties. The Hon 'b/e Bombay High Court observed that where the assessee had brought the relevant evidences regarding the 228 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 genuineness of transaction and that in his statement Mr Mukesh Chokshi had not mentioned the name of the respondent/assessee as one to whom accommodation entries were given, the Hon 'ble Bombay High Court upheld the findings of the Ld. CIT(A) which were further confirmed by the Tribunal holding that the transactions were genuine and the additions under sect/on 68 of the Act were not warranted Similar findings have been given by the Hon'ble Bombay High Court in the case of 'CIT vs. Kasturben H Gada" in ITA No. 299 of 2013 decided on 21.01.15 In CIT vs. M/s. Sharda Credit Pvt. Ltd (supra), the Hon'ble High Court has dismissed the appeal of the revenue on identical facts. The Hon'ble Bombay High Court while upholding the order of the Tribunal in the above stated appeals has also relied upon the decision of the Hon'ble Bombay High Court in the case of "Shri Mukesh R. Marolia" (supra). Even in the case of "Smt Rajni S Chowdhry" (supra), the Hon'ble Bombay High Court has upheld the decision of the Tribunal given on the basis of appreciation of evidence and factual finding accepting the transaction carried carries through broker M/s Gold Star Finvest (P) ltd as genuine.

244 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 PVT.LTD ALPHA CHEMIE TRADE 2 AADCA9890L 0 79000000 0 0 0 0 0 0 0 79000000 AGENCIES PVT LTD ARTILEGENCE BIO- AAACI7359F 20000000 5000000 15000000 0 0 25000000 0 5000000 17500000 87500000 3 INNOVATIONS LTD BAY INLAND 4 FINANCE AABCB9510A 10000000 0 15000000 0 0 10000000 0 13500000 2500000 51000000 PVT.LTD. BHASKAR FUND 5 MANAGEMENT AABCB3120E 0 0 20000000 0 0 20000000 0 0 10000000 50000000 PVT. LTD. CLIFTON PEARSON 6 AACCC0049A 10000000 10000000 10000000 0 12300000 40000000 0 0 0 82300000 EXPORT & AGENCIES LTD. CLIFTON AAACC5995P 0 10000000 20000000 0 0 5000000 0 10000000 4500000 49500000 7 SECURITIES PVT LTD DELTON EXIM 8 AABCD6200F 0 10000000 0 0 20000000 0 5000000 10000000 45000000 PVT. LTD. DOLDRUM INVESTMENT AACCD5604L 21000000 31000000 37500000 0 0 7500000 0 27500000 8500000 133000000 9 AND FINANCE PVT.LTD. GANGA BUILDER AAACG9808K 0 0 0 0 0 10000000 0 0 0 10000000 10 LTD GATEWAY AABCG7845F 0 0 10000000 0 0 0 5000000 9500000 24500000 11 COMPUTERS PVT. LTD. GROMORE FUND AAACG9919K 0 5500000 10000000 0 0 10000000 0 0 0 25500000 12 MANAGEMENT CO. PVT. LTD. GYNESHWAR TRADING & 13 AACCG7998L 10000000 5000000 21500000 0 0 5000000 0 22500000 22000000 86000000 FINANCE PVT.LTD HINGORA 14 FINVEST PVT AAACH6694N 0 12500000 17500000 0 0 0 0 0 30000000 LTD ISPAT SHEETS 15 AAACI4429E 20000000 20000000 35000000 0 0 30000000 0 17500000 2000000 124500000 LTD. MACROSOFT AAECM2069A 0 5000000 10000000 0 0 0 0 0 15000000 16 TECHNOLOGY PVT LTD MIHIR AABCH7898H 0 15000000 0 25000000 15000000 0 0 0 55000000 17 AGENCIES PVT. LTD. NEWOUTLOOK 18 SECURUITES AABCN6529M 5000000 7500000 12000000 0 5000000 0 5000000 3500000 38000000 LTD NICCO 19 SECURITIES PVT AABCN1737D 10000000 10000000 15000000 0 5000000 0 5000000 3500000 48500000 LTD NOVELTY 20 AABCN8817E 10000000 20000000 38000000 0 10000000 15000000 0 29000000 5000000 127000000 TRADERS LTD OLYMPUS 21 AAACO3898H 0 10500000 20000000 0 0 0 0 0 0 30500000 VISION PVT.LTD OSHIN INVESTMENT & 22 AAACO9051G 24000000 21000000 37500000 0 10000000 22500000 0 12500000 9000000 136500000 FINANCE PVT LTD PAREKH ESTATE 23 & PROPERTIES AAACP4173A 0 5000000 0 0 32500000 0 66500000 0 0 104000000 PVT.LTD PENTIUM HI 24 AACCP0374P 0 0 10000000 0 0 0 0 0 0 10000000 TECH PVT LTD RADHA GOPAL AAACR0658N 0 16000000 0 0 26100000 0 0 0 0 42100000 25 SALES AGENIES PVT.LTD. SEATRANS DAN AACCS0822K 0 15000000 5000000 35000000 4500000 0 0 0 0 59500000 26 SHIPPING PVT.LTD SHAKTI ISPAT 27 PRODUCTS AAGCS8347D 15000000 0 10000000 0 0 0 0 18500000 43500000 PVT.LTD. ARJIT 28 SECURITIES PVT AABCS4462Q 0 5000000 17500000 47000000 0 0 0 0 0 69500000 LTD SHIVLAXMI 29 AADCS6058E 0 0 0 0 20000000 0 0 3500000 23500000 EXPORTS LTD. SIDH HOUSING AAKCS6606H 12500000 4000000 17500000 0 5000000 0 10000000 28000000 77000000 30 DEVELOPMENT CO LTD. STOCKNET 31 INTERNATIONAL AAECS8494F 15000000 9000000 17500000 0 25000000 0 5000000 12500000 84000000 LTD SUPER FINANCE AAGCS7188C 5000000 0 0 0 20000000 0 10000000 2500000 37500000 32 LTD TALENT 33 AACCT9444L 0 0 0 14000000 0 0 0 0 0 14000000 INFOWAY LTD.

245 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 TERRY TOWEL 34 INDUSTRIES AACCT2642J 0 59000000 3500000 62500000 45600000 0 23700000 0 0 194300000 LTD. WILCO FINEXIM 35 PRIVATE AAACW4586E 0 0 0 0 5000000 0 0 5000000 5000000 15000000 LIMITED YAMROOSH 36 INVESTMENT AAACY1193P 0 10000000 0 4000000 21500000 0 33300000 0 0 68800000 PVT.LTD. Total 187500000 410000000 435000000 187500000 187500000 295000000 123500000 187500000 177500000 2191000000 5.22. It is further noted that in the assessment proceedings u/s. 143(3) rws 153C the department has accepted the source of the funds in the hands of eights companies. Wherever the Assessing Officer did not accept the source of the funds in the hands of the companies the Ld. Commissioner of Income Tax (Appeal) deleted the addition and on the 2nd appeal filed by the department the Hon’ble Tribunal confirmed the orders of the CIT(A). This clearly proves that all the companies had their independent source of funds which is also proved and established by each one of them in their own independent proceedings before the department. The Ld. Commissioner of Income Tax (Appeal) while deleting the additions made by the Learned AO, the lead case of Reva Properties Ltd. has categorically held in para 4.11 that “it is also pertinent to mention that during the appellate proceedings the case was discussed with the AO and the Addl. CIT, Central Range- 8, Shri R. M. Tiwari. During the discussion, I have 246 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 asked the addl. CIT to explain whether any investigation regarding the bank details have been made in this case. The Addl. CIT has fairly admitted that complete bank enquires were made in case of all investing companies on the basis of details submitted by the assessee upto third down layer but nowhere it was found that cash was deposited in any account before issuing the cheques for investments made in the purchase of shares of the assessee company. He has further stated that since no adverse finding was recorded during the bank account investigation, therefore it was not mentioned in the assessment order”. The Tribunal also confirmed the deletion of the addition by the Ld. Commissioner of Income Tax (Appeal) and has categorically observed that “once the assessee has given the complete details and information of the investors who have made investments in the share capital of the company and proved the identity then no addition can be made in the hands of the assessee company in respect of such investments”. This fact clearly proves that even in the hands of nine companies the source of the funds is explained meaning thereby the assessee has not only explained the 247 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 source of the funds being the amount received from nine companies but also has proved the source of the source in the hands of the said nine companies also.

The AO observed that Shri Ajay Kumar, Director of the company had offered the amount received as share capital from above said companies as unexplained credits in AY. 2008-09 & AY 2009-10. Since the undisclosed income declared in the statement was not offered for taxation in the return filed, therefore, the AO gave a show cause notice to the assessee to submit complete details of share application money received and utilized. The AO also asked the assessee to submit the complete evidences to prove the identity, credit worthiness and genuineness of the transaction of the share holding companies. In response to the show cause notice, the Ld. AR of the assessee submitted its reply along with relevant details, confirmations and evidences etc.; The AO however was not satisfied with the reply of the assessee and noted certain discrepancies in the 250 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 evidences submitted by the assessee viz. the assessee had not provided share application form; No Board resolution was provided; Bank statements were not provided in some cases or that the directors of the company were not produced for cross examination. The AO thereafter discussed the issue of retraction of statement given by the Director of the company, Shri Ajay Kumar and observed that the statement recorded by the income-tax authorities u/s. 131 has evidentiary value even after its retraction and that the same can be used against the assessee. The AO further held that the documents filed relating to share application money were all result of an afterthought and the same cannot be relied or considered as supporting documentary evidences for receiving share application money and retracting the declaration made. In view of all these facts and circumstances, the AO held that the assessee had failed to prove the identity, credit worthiness and genuineness of the transaction of the above share holding companies, he therefore, treated the investment made by these companies amounting to Rs.12,80,00,000/- and Rs.3,90,00,000/- for the AYs. 2008-09 & 2009-10 respectively as undisclosed income of the assessee company u/s. 68 of the I.T. Act. Being aggrieved by the above additions, the assessee filed appeal before the CIT(A).

5. The Ld. CIT(A), after considering the submissions of the assessee and analyzing the facts and circumstances of the case, observed that 10 companies had subscribed the share application money in the assessee company. The papers relating to the identity, creditworthiness and genuineness of the transaction relating to these companies were submitted by the assessee to the AO. The AO had also made bank enquiry in this respect but no discrepancy or incriminating evidence was found. The Ld. CIT(A) further noted that no incriminating document relating to the share application money was found or seized during the course of search. Further in respect to the companies, M/s. Mihir Agencies P. Ltd. & M/s. Talent Infoway Ltd. in which one Mr. Mukesh Choksi has been a director, the Ld. CIT(A) observed that these companies had been registered with the registrar of companies. These companies had subscribed to the shares of the assessee company in AY 2009-10. The Ld. CIT(A) in this respect observed that during assessment proceedings, the Ld. AR of the assessee had submitted all the details relating to these companies. All the companies were having PAN and independently and regularly assessed to tax. Complete details of cheque number., date of cheque, bank a/c. share allotment letters giving detail of share certificate number, copy of bank account of the assessee was submitted before the AO. He further noted that the statement of Mr. Choksi was not recorded in the context of this case but was recorded in some other case. Mr. Choksi had given a general statement that he was giving accommodation entries to the companies against cash received from them. Nowhere in the statement, had he stated that 251 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 cash was received from the assessee company and cheque was issued against the cash as share application money. There was no mention in the said statement that transaction with the assessee company was not genuine. No incriminating document was found and seized during search operation to prove that cash was given against cheques received from these companies. Even independent enquiry made in respect of the bank accounts of these companies, the AO could not find any instance of cash deposit against issuing of cheques. The Ld. CIT(A) thereafter examined the applicability of section 68 of the Act to the set of facts of the case of the assessee and concluded that for the establishment of identity, each company was having PAN and regularly assessed to tax; For creditworthiness, each company had independent bank account and details were submitted to the AO; For genuineness of transaction, all payments were made through account payee cheques duly reflected in the bank of each company and the assessee company's bank account. Therefore, all the conditions, i.e. identity, creditworthiness and genuineness of transaction were fulfilled. Thus reliance cannot be placed on a general statement of Mr. Choksi alone which was not corroborated by any documentary evidence. He therefore held that in totality of facts & circumstances, the case was covered by the decision of Hon'ble Supreme Court in case of Lovely Exports Pvt. Ltd.[216 CTR 195 (SC)].He therefore deleted the additions so made by the Assessing Officer u/s. 68 of the Act. Being aggrieved by the above deletion of the additions made by the AO, the Revenue has thus come in appeal before us.

We find force in the above submissions of the Ld. AR. of the assessee. Mr. Jose Mathews was the employee of Shree Global Trade fin. Ltd. and not of the assessee company neither of the alleged seven Group companies of the assessee. The said Mr. Jose Mathews was even in no way related to the investing companies who made investments in the assessee company, the transactions relating to which have been treated bogus by the AO. When the said person was neither the employee of the assessee company nor was in any way related to the investing companies, his statement in the circumstances could not be said to have any evidentiary value. Mr. Jose Mathews was the employee of the company in which the assessee had made the investments, which was a totally different transaction. He was not in any manner connected to the transactions in question before us. As regards the statement of Shri Ajay Kumar Halan, the Ld. AR while inviting our attention to answer to question 256 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 No.3 of the statement has submitted that he was appointed as the director on 15.2.2010 only. That he was not the director in the previous year relevant to A.Y. 2009-10. He was also not the Director during the previous year from 1.4.2009 to 15.2.2010, during the time when the transaction had taken place. He was not the employee of the assessee company nor was any way connected with the business of the assessee prior to 15.2.2010. He has further pointed out that there was no direct admission of Sh. Ajay Kumar about any unexplained income. He has demonstrated that he was given an impression that in view of the statement of Sh. Mukesh Chokshi and Sh. Mr. Jose Mathews in some other search or survey actions, it was established that the assessee had received unexplained investment, in response to which he stated that he has come to know about these facts then only as revealed by the department and taking into consideration the fact and circumstances as were before him when these question were put to him, he agreed to offer the amount as unexplained income of the company. In view of this the Ld. AR has submitted that no reliance can be placed on the statement of Sh. Ajay Kumar who was neither in any way connected with the activities of the company when the transaction took place nor his admission was based on his personal knowledge, rather he agreed to admit the additions on the basis of facts presented to him i.e. the alleged unreliable statements of Mukesh Chokshi and Mr. Jose Mathews.

14. We have perused the case laws relied upon by the Ld. Representatives of the parties. In our view, each case has to be decided on its own facts. Merely because, in the case of one company Gold Star Finvest Pvt. Ltd. run by Mukesh Chokshi, the income has been determined on percentage/commission basis treating the said company as accommodation entry provider, that itself cannot hold a justification to completely ignore the facts and evidences brought on the file by the assessee. The case of the assessee has to be adjudged on the basis of its own set of facts and evidences. Moreover the facts and circumstances of the case of the assessee are squarely covered by the various decisions of the Hon’ble Jurisdictional High Court Of Bombay. We further find that the issue, relating to the investments made by the companies relating to the said Mr. Mukesh Chokshi in some other cases, has travelled up to the level of Hon’ble Supreme Court. In the case of “Shri Mukesh R. Marolia vs. Additional CIT” (2006) 6 SOT 247 (Mum), the assessee had made share transaction through the companies M/s. Richmond Securities Pvt. Ltd. and M/s. Scorpio Management. Mr. Mukesh Chokshi has been the director of M/s. Richmond Securities Pvt. Ltd. The Tribunal, after considering the overall facts and circumstances of the case, observed inter-alia that on the basis of evidence available and there being no incriminating material found during the search action, observed that the assessment has to be completed on the basis of records and material available before the Assessing Authority. The personal knowledge and excitement on events should not lead the AO to a state of affairs where salient evidences are overlooked. Where every transaction of the assessee has been accounted, documented and supported in such an event, even though, the amount invested by the assessee has grown into a very sizeable amount which looks quite amazing, the evidence produced by the assessee cannot be brushed aside. The Tribunal under such circumstances deleted the addition. The Revenue took the matter to the Hon’ble Bombay High Court. The Hon’ble Bombay High Court, while adjudicating the above issue in the case styled as “CIT vs. Shri Mukesh R. Marolia” in of 2007 decided on 07.09.2011, observed that though there was 260 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 some discrepancy in the statement of director (Mr. Mukesh Chokshi) of M/s. Richmond Securities Pvt. Ltd. regarding the sale transaction, but owing to the factual finding given by the Tribunal on the basis of evidences furnished by the assessee, the decision of the Tribunal cannot be faulted. The Hon’ble Bombay High Court upheld the finding of the Tribunal holding the sale transactions as genuine. The Department preferred appeal before the Hon’ble Supreme Court. The Hon’ble Supreme Court dismissed the SLP No.20146/2012 styled as “CIT vs. Shri Mukesh R. Marolia vide order dated 27.01.14. Similarly in the case of “CIT vs. M/s. Kesar A. Gada in ITA No.300 of 2013 decided on 21.01.15 wherein the AO, while making the additions under section 68 of the Act, had relied upon the statement of Mr. Mukesh Chokshi that he had given various accommodation entries to various parties. The Hon’ble Bombay High Court observed that where the assessee had brought the relevant evidences regarding the genuineness of transaction and that in his statement Mr. Mukesh Chokshi had not mentioned the name of the respondent/assessee as one to whom accommodation entries were given, the Hon’ble Bombay High Court upheld the findings of the Ld. CIT(A) which were further confirmed by the Tribunal holding that the transactions were genuine and the additions under section 68 of the Act were not warranted. Similar findings have been given by the Hon’ble Bombay High Court in the case of “CIT vs. Kasturben H. Gada” in ITA No.299 of 2013 decided on 21.01.15. In CIT vs. M/s Sharda Credit Pvt. Ltd. (supra), the Hon’ble High Court has dismissed the appeal of the revenue on identical facts. The Hon’ble Bombay High Court while upholding the order of the Tribunal in the above stated appeals has also relied upon the decision of the Hon’ble Bombay High Court in the case of “Shri Mukesh R. Marolia” (supra). Even in the case of “Smt Rajni S Chowdhry” (supra), the Hon’ble Bombay High Court has upheld the decision of the Tribunal given on the basis of appreciation of evidence and factual finding, accepting the transaction carried carries through broker M/s Gold Star Finvest (P) ltd. as genuine.

3. We understand that the search proceedings started on 4/3/2010 continued in the case of Jogia Properties Ltd. and on 15/4/2010 the prohibitory order was lifted which was placed in the business premises of M/s. Jogia Properties Ltd. I was asked to be present at the premises of Jogia Properties Ltd. situated at 208, Ashirwad Building, Ahmedabad Street, Masjid Bunder, Mumbai - 400 009 to explain the papers belonging to the company found from the premises of Jogia Properties Ltd. Statement u/s. 132 was recorded by the Income tax officials. At that point of time I did not have all books of account or records of our company. I was informed that transaction of share application with the five parties viz. Oshin Investments & Finance Pvt. Ltd., Sidh Housing Development Co. Ltd., Gyaneshwar Trading & Finance Pvt. Ltd., Hingora Finvest Pvt. Ltd. and Doldrum Investment & Finance Pvt. Ltd. who are the shareholders of our company are not genuine. Reference was made to the statement of one Mr. Jose Mathew wherein he has stated that share application money is received by paying cash. I am not conversant with the provisions of Income Tax Act. I was not the director of the company during the financial year relevant to A.V. 2009-10. I did not have all the books of accounts or records. I had stated that Mr. Jose Mathew is not aware about the business activity of our company. The statement made by Mr. Jose Mathew is not true. No evidence was found that share application is received from five companies by paying cash in lieu of the cheques received. In this background and based on the information given to me by the officials of the Income tax department I had admitted that the investments made by five companies into the share capital of our company is not explainable and made a disclosure of income of Rs. 13,15,00,000/-. I state that the disclosure was made purely on mistaken belief that the transaction of share investments by five companies cannot be explained and the taxable income of the company will be to the extent of Rs. 13,15,00,000/- pertaining to A.Y. 2009-10 and 2010-11.

271 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 was recorded who has submitted that the share capital received in these companies is collected through cheques from different companies against the cash given back to the share holders. In the post search enquiries, the statement of Shri Ajay Kumar, Director was also recorded u/s. 131 who has stated that Shri Jose Mathew is not aware about the business activity of the company. The statement made by Shri Jose Mathew is not correct because he was not an employee with these companies and was not aware about the share application money. But, Shri Ajay Kumar has declared this share application money as undisclosed income. However, in the return filed in response to notice u/s. 153A, this amount was not declared. Then, the AO issued show cause notice to the assessee to explain the same. In response to this show cause notice, the AR of the appellant has submitted that the statement of Shri Jose Mathew was retracted by an affidavit filed before the Dy. Director of Investigation and there was no discrepancy found in the share capital and no incriminating document was found and seized and the appellant also retracted the statement recorded u/s. 131 by not offering income in the return filed. Therefore, the undisclosed income declared in the statement has not been disclosed in the return of income filed. After considering the reply of the appellant, the AO has given his observation and inferences of each company-wise. In nutshell, the AO has raised objection that the equity share of Rs.10/- of the assessee is issued at a premium of Rs.240/- per share and the assessee has not provided share application form. Secondly, it was alleged that no board resolution was provided. Thirdly, no bank account statement was submitted. Fourthly, the confirmation certificate submitted was signed only by one Director. Next, the AO has raised the 'objection that P & L account and Balance-sheet submitted were not certified by the Chartered Accountant. Finally, the AO, objected that the Directors of the company were not produced to prove the identity, creditworthiness and genuineness of the investors and the documents submitted by the AR of the appellant were not found during the course of survey and search operation. In view of these Facts, the AO has treated the investment made by the above said nine companies as unexplained u/s. 68 of the IT. Act and added back Rs.6,00,00,000/- Rs.7,20,00,000/- and Rs.7,75,00,000/- to the taxable income for the AYs. 2007-08, 2008-09 & 2009- 10 respectively.

272 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 4.6 On the other hand, the AR of the appellant has submitted that during the course of search and survey operation in case of M/s. Jogia Group of companies, no incriminating document was found and seized relating to eight companies including the assessee. The statement recorded of Shri Jose Mathew was retracted by submitting an affidavit that he was not acting as Jt. General Manager of these companies but he was working as Jt. General manager with other group companies and he do not know anything about these companies and moreover, the statement was recorded by using undue influence on him which are narrated in the affidavit filed before the Dy. Director of Investigation. To rebut the objections of the AO, the appellant has submitted that complete details of share application money received alongwith confirmation from the respective companies was furnished before the AO. The complete details about payment towards share application money giving cheque No., date, name of the bank was also submitted. The Board resolution was not available with the appellant as the appellant has no legal right to ask for the Board resolution when complete information about the investments is made available by the investing company. Regarding the bank statement, the AR of the appellant has submitted that complete details of cheque No., date, name of the bank was submitted. The confirmation of the parties was submitted before the AO. The objection of the AO that the investing companies are not generating significant income was reverted by the AR of the appellant by submitting that net worth of the companies was substantial as mentioned in the balance- sheet in each case. Regarding the presence of Directors of the investing company, the AR has submitted that it has, no authority to produce any director of the company and request was made to the AO but no summons were issued by the AO to the directors. Regarding the allegation of the AO that no documents were found during the search and survey operations, it was submitted that no search and survey was undertaken against the appellant and other 7 group of companies and nobody has asked for the documents during the search and survey operations. To strengthen the evidences submitted before the AO, the AR of the appellant has also relied on various decisions including the decision of Hon'ble Supreme Court in case of Lovely Exports Pvt. Ltd. supra. Thus, the AR of the appellant has argued that since all the documents were submitted to prove the identity, creditworthiness and genuineness of the transaction of the investing companies, no addition is called for.

4.7 From the perusal of the submissions and the arguments of the AO, it is observed that in the present case 9 investing companies supra has made investment in the shares at a premium of Rs.240/- per share. The AO has raised objections regarding the submissions filed by the appellant during the assessment proceedings each company-wise and the AR of the appellant has also rebut the objections of the AO each company-wise in the submissions filed during the appellate proceedings. Since the facts and documents in all the companies are the same, therefore, to avoid repetition and for the sake of convenience, a combined discussion has been made for all the above said investing companies. As per the provisions of section 68, the AO is empowered to call for the details to prove the identity, creditworthiness and genuineness of the transaction. During the assessment proceedings, the AO has given show cause notice to the assessee company to submit complete details regarding the share application money received from the above said investing companies. The AR of the appellant has submitted the PAN, complete details of cheque No., date and name of the bank of each company, confirmation certificate of each company duly signed by the directors to confirm that investment has been made, P&L account and balance-sheet of each company were submitted and moreover, no incriminating document was found and seized during the course of search in case of M/s. Jogia Properties Ltd. relating to these companies. The main objection of the AO was that in the post search enquiries, the statement of Shri Ajay Kumar, Director of the company was recorded who has declared the share application money as undisclosed income and promised to declare in the return to be filed in response to notice u/s. 153A. In the return filed, the assessee has not declared the undisclosed income on account of share application money as admitted in the statement recorded u/s. 131 of the I.T. Act. The AO has made a lengthy discussion on the retraction of the statement recorded of Shri Jose Mathew and Shri Ajay Kumar, Director of the company. Shri Jose Mathew has submitted an affidavit before the DDI (Inv.)two days after the search by explaining that he is not an employee of the companies and he do not know anything about the. share application money or functioning of these companies and the statement was recorded by putting undue pressure on him. Neither the DDI(lnv) nor the AO has given any comment on this affidavit in the assessment order except by writing that it was only an afterthought. A 274 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 copy of the documents filed before the AO was also submitted before me from the perusal of which it was . noticed that all the investing companies are assessed to income-tax which is clear from their PAN. During the appellate proceedings, the AR was also asked to submit the copy of acknowledgment of filing of return which was also filed and noticed that all the investing companies are assessed to tax. Secondly, from the perusal of bank details submitted, it is noticed that the date of cheque with cheque No. name of the bank, amount etc. all details were submitted before the AO. The copy of P&L account and the balance-sheet of each company was submitted, from the perusal of which it shows that each company have reserves and surplus of substantial amount as disclosed in the balance-sheet. The confirmation certificate was also submitted before the AO duly signed by the director of the investing company to confirm that investment was made for the purchase of shares of this company. The objection of the AO that investing companies are showing very low income cannot determine the investments made by. these companies because the balance-sheet shows the reserves and surplus worth crores of rupees in all cases. The other objection of the AO that documents submitted during the course of assessment proceedings were not found during the course of search is not based on any reasoning and substance because no search operation was carried out in case of the assessee and other 7 group companies. Further, the AR has also submitted that nobody had asked for the documents during the search operation in case of M/s. Jogia Properties Itd.

We may also usefully refer to the judgment of the Supreme Court in the case of Commissioner of Income Tax Vs. P. Mohanakala [(2007) 291 ITB 278 (SC)]. In that case, the assessee had received foreign gifts from one common donor. The payments were made to them by Instruments issued by foreign banks and credited to the respective accounts of the assessees by negotiations through bank in India. The evidence indicated that the donor was to receive suitable compensation from the assessees. The AO held that the gifts though apparent were not real and accordingly treated all those amounts which were credited In the books of account of the assessee, as their Income applying Section 68 of the Act. The assessee did not contend that even If their explanation was not satisfactory the amounts were not of the nature of Income. The CIT (A) confirmed the assessment. On further appeal, there was a difference of opinion between the two Members of the Appellate Tribunal and the matter was referred to the Vice President who concurred with the findings and conclusions of the AO and the CIT(A). On appeal, the High Court re- appreciated the evidence and substituted Its own findings and came to the conclusion that the reasons assigned by the Tribunal were in the realm of surmises, conjecture and suspicion. On appeal to the Supreme Court, the Court while reversing the decision of the High Court held that the 281 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 findings of the AO, CIT (A) and the Tribunal were based on the material on record and not on any conjectures and surmises. That the money came by way of bank cheques and was paid through the process ITA Nos.2093, 2094, 2095 of 2010, 514 of 2007 & 539 of 2008 Page 12 of 27 of banking transaction as not by itself of any consequence. The High Court misdirected itself and erred in disturbing the concurrent findings of fact. While doing so, the legal position contained in Section 68 of the Act was explained by the Supreme Court by assessing that a bare reading of Section 68 of the Act suggests that (i) here has to be credit of amounts in the books maintained by the assessee; (if) such credit has to be sum of money during the previous year; and (ii) either (a) the assessee offers no explanation about the nature and source of such credits found In the books or (b) the explanation offered by the assessee, in the opinion of the AO, is not satisfactory. It is only then that the sum so credited may be charged to income tax as the income of the assessee of that previous year. The expression "the assessee offers no explanation" means the assessee offers no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. The opinion of the AO tor not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on the record. The opinion of the AO is required to be formed objectively with reference to the material on record. Application of mind is the sine qua non for forming the opinion. In cases where the explanation offered by the assessee about the nature and source of the sums found credited in the books Is not satisfactory there is, prima facie, evidence against the assessee, viz., the receipt of money. The burden is on the assessee to rebut the same, and, if he fails to rebut it, it can be held against the assessee that it was a receipt of an income nature. The burden is on the assessee to take the plea that even If the explanation is not acceptable, the material and attending circumstances available on record do not ITA Nos.2093, 2094, 2095 of 2010, 514 of 2007 & 539 of 2008 Page 13 of 27 justify the sum found credited In the books being treated as a receipt of Income nature.

ITA NO.2094 of 2010 In this case, the assessee had shown receipt of 99.18 lacs on account of share application money. In order to prove the genuineness of the transactions and Identity of the share applicants and their creditworthiness, the assessee had filed confirmation from these parties, which were 30 In number. The assessee had also supplied Income tax particulars of these share applicants. The AO issued notices under Section 133(6) of the Act, which remained unserved on 22 out of 30 parties. Even remaining 08 persons did not respond. Local inquiry made through Inspector revealed that the parties did not exist at the given addresses. On Inquiries from bank, the AO found various discrepancies In the statement sent by the bank and the statement produced by the assessee. Even some of the names given by the assessee were not the same as In the bank records. The AO confronted entire material to the assessee and allowed various opportunities. However, the assessee did not produce even a single party. Accordingly, the AO made an addition of '99.18 lacs to the Income of assessee on account of unexplained share capital under Section 68 of the Act. Similarly, the AO also made addition of 3.1 0 lacs on account of unexplained credit under Section 68 of the Act. 2094, 2095 of 2010,514 of 2007 & 539 of 2008 Page 18 of 27 The CIT (A) allowed the appeal and deleted the addition. After recording the findings that necessary documents to prove the identity of Investors, creditworthiness and genuineness of the transactions were produced by the assessee, he was of the opinion that even when some discrepancies were found in the bank statement of these Investors produced by the assessee, facts remain that the AO had himself obtained the copies of the bank statement of some of the share applicants and the perusal of those statements reveals that there was a debit entry in support of demand draft purchased by the share applicant. The assessee had also filed copies of the confirmations In acknowledgement of Income tax returns filed by the share applicants from which it was clear that the tax payers were the existing assessees and they had filed the return of income in Delhi Itself. On this evidence, It was concluded that the shareholders were identifiable who were assessed to Income tax and therefore under no 286 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 circumstances, the share capital could be treated as undisclosed Income of the company.

"Thus, the question is whether in the present case, the Assessing Officer had material to conclude that the share applicants, In question did not exist. It is seen that the assessee company has furnished the necessary details such as PAN No./lncome-tax Ward No./PAN card of the share applicants and some of them are assessed to tax. No share application money has been received through banking charges. In some cases, the confirmations/affidavits of share applicants containing the above detail were also filed. It is seen that the Assessing Officer did not carry out any inquiry into the income-tax record of the persons who had given the PAN No./Ward No. In order to ascertain the non-existence of the share applicants In question. The Assessing Officer has neither controverted nor disapproved the material filed by the assessee. In the case of CIT v. Makhnl and Tyagi P. Ltd. reported in [2004] 267 ITR 433 (Delhi), the jurisdictional High Court has decided that when the documentary evidence was placed on record to prove the Identity of all the shareholders Including their PAN/GIR number and filing of other documentary evidence In the form of ration card etc., which had neither been controverted nor disapproved by the Assessing Officer, no interference was called for. The Tribunal has justified in deleting the addition. The Assessing Officer proceeded to make the impugned addition on the ground that in some cases where summons issued were returned unserved and in some cases summons though served but there was no compliance. In this connection, it may be mentioned that In the case of CIT v. Orissa Corporation Ltd. [1986] 159 ITR 78 (SC) the Hon'ble Court has held that when the assessee borrows the loan and if an assessee gives names and addresses of the creditors, who are assessed to tax and full particulars' Is furnished then the assessee ahs discharged the duty. If the Revenue merely issues summons under section 131 and does not pursue the matter further, the assessee does not become responsible for the same even if the creditors do not appear. Addition cannot be made under section 68". No question of law, far less any substantial question of law arises for out consideration. We may, however, briefly

4.13' In my knowledge there were two decisions in favour of the revenue which were also confronted to the assessee during the appellate proceedings, the decision of Hon'ble Delhi High Court in case of Nova promoters & Finleys P. Ltd. (342 ITR 169). The AR of the appellant has submitted that the facts of the present case are distinguishable as all evidences in support of claim that investment was made by genuine shareholders were submitted before the AO and during the appellate proceedings also. There is no allegation of availing accommodation entry as alleged in the decision of Hon'ble Delhi High Court. There is no proof of giving cash against the cheques issued by the investing companies. No statement of any director of the investing company was recorded nor any summons were issued. The AD has not rejected any submission made during the course of assessment proceedings. In an other case of Indore Bench of Tribunal in case of Agrawal Coal Corporation Ltd. (135 ITD 27.0), the AR has submitted that complete submissions from the investing companies, details of cheque No., name of the bank and date of cheques were submitted before the AO. The confirmation from the auditors of the company were also submitted. The balance-sheet and P&L account of the investing company which had shown substantial net worth were also submitted. The proof of filing statutory returns by the companies for the current period were also submitted. The proof of filing statutory returns by the companies for the current period were also submitted. The proof of issue of notice to the 'shareholders were also filed. The appellant had also already issued shares and the detail of distinctive No., share certificate No., intimation to ROC about issue of shares, payment of stamp duty, interest and statutory reserves maintained under the Companies Act were submitted and no summons were issued by the AO to prove that the companies were not existing. In view of these facts, it is observed that the facts given in the decision of Hon'ble Delhi High Court and the Tribunal are distinguishable to the facts of the present case. Since in 293 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 this case no company belonging to Mr. Choksi had made investment in shares, therefore, there is no relevance of the statement mentioned by the AO. 4.14 In view of the above facts and judicial decisions of Hon'ble Courts, it is held that the assessee has proved the identity, creditworthiness and genuineness of the transaction by submitting documentary evidences during the course of assessment proceedings and before me. Moreover, the facts of the present case are covered by the decision of Hon'ble Supreme Court in case of Lovely Exports Pvt. Ltd. supra and the other decisions as discussed above where it is held that once the identity of the shareholder/subscriber is established, payment was made through account payee cheques, net worth of the subscriber is proved by filing balance-sheet and moreover, confirmation letters are filed, no addition can be made on account of share application money in the hands of the company. In totality of facts and circumstances, it is held .that the three conditions of section 68 are proved by submission of documentary evidences and no incriminating document was found and seized and nothing adverse was found in the investigation of the bank account by the AO in each case of the company, therefore, the addition made by the AO is not sustainable, hence deleted.

14. Addition made on account of share capital in case of M/s. Karburi Properties Ltd., was deleted by CIT(A) after observing as under:- Since the appellant company is a group company and the modus operandi for collecting the share application money and the evidences filed relating to the investing companies are the. same and there is no change in the facts and circumstances of the present case, therefore, the same decision is followed in this case. In the case of M/s. Reva Properties Ltd., there were nine companies who have subscribed the share application money but In the present case there are eight companies. Out of these eight companies, 7 companies are the same as discussed in the case of M/s. Reva Properties Ltd. and only M/s. Mihir Agencies P. Ltd. is new company in this case who have subscribed the share capital in AY 2009-10 amounting to Rs.1,50,000/-.The papers relating to the identity, creditworthiness and genuineness of the transaction relating to this company were also the same as submitted and discussed in the case of other companies. On the basis of the submissions made and the bank enquiry made by the Assessing Officer, no discrepancy was pointed out and moreover, no incriminating document was found and seized during the course of search relating to the share application money. M/s. Alpha Chemi Trade Agency Pvt. Ltd., M/s. Alembic Securities Pvt. Ltd., M/s. Mihir Agencies P. Ltd. & M/s. Talent Infoway Ltd. are the companies registered with the registrar of companies. One Mr. Mukesh Choksi is a director in these companies: These companies had also subscribed shares of the assessee company. In the assessment order, the Assessing Officer has made reference that in one statement recorded in some other case, Mr. Choksi has stated that he was engaged in giving accommodation entries to the companies for creating bogus capital gain and was also issuing the bogus bills. From this statement, the AO has drawn inference that the share capital subscribed by these companies was bogus, i.e. cheques were issued against cash received from the assessee company. During assessment proceedings, the AR of the appellant has submitted details relating to these companies. It was submitted that all the companies were having PAN and independently and regularly assessed to tax. Complete details of cheque No.,' date of cheque, bank a/c. share allotment letters giving detail of share certificate

299 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 Ltd., Gyaneshwar Trading & Refer page No.12 of the Order of the CIT(A) in Finance Co. Ltd., 2009-10 the case of Auster Properties Ltd., Refer page No.13 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Mihir Agencies P. Ltd., 2009-10 Ltd., Refer page No.12 of the Order of the CIT(A) in Alembic Securities Pvt. Ltd., 2009-10 the case of Auster Properties Ltd., Alpha Chemi trade Agency Refer page No.12 of the Order of the CIT(A) in Pvt. Ltd., 2009-10 the case of Auster Properties Ltd., 5 Cikura Properties Ltd., Refer page No.11 of the Order of the Hon'ble Oshin Investment & Fin P. ITAT J Bench in the case of Jogia Properties Ltd., 2009-10 Ltd., Refer page No.11 of the Order of the Hon'ble Doldrum Investments & ITAT J Bench in the case of Jogia Properties Finance P. Ltd., 2009-10 Ltd., Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Hingora Finvest Pvt. Ltd., 2009-10 Ltd., Refer page No.11 of the Order of the Hon'ble Sidh Housing Development ITAT J Bench in the case of Jogia Properties Co. Ltd., 2009-10 Ltd., Gyaneshwar Trading & Refer page No.11 of the Order of the CIT(A) in Finance Co. Ltd., 2009-10 the case of Cikura Properties Ltd., Refer page No.10 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Deltron Exim Pvt. Ltd., 2009-10 Ltd., 6 Karburi Properties Ltd., Refer page No.11 of the Order of the Hon'ble Oshin Investment & Fin P. ITAT J Bench in the case of Jogia Properties Ltd., 2008-09 Ltd., Refer page No.11 of the Order of the Hon'ble Doldrum Investments & ITAT J Bench in the case of Jogia Properties Finance P. Ltd., 2008-09 Ltd., Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Hingora Finvest Pvt. Ltd., 2008-09 Ltd., Refer page No.11 of the Order of the Hon'ble Sidh Housing Development ITAT J Bench in the case of Jogia Properties Co. Ltd., 2008-09 Ltd., Gyaneshwar Trading & Refer page No.11 of the Order of the CIT(A) in Finance Co. Ltd., 2008-09 the case of Karburi Properties Ltd., Refer page No.11 of the Order of the Hon'ble Hema Trading Company Pvt. ITAT J Bench in the case of Jogia Properties Ltd., 2008-09 Ltd., Refer page No.10 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Deltron Exim Pvt. Ltd., 2008-09 Ltd., 7 Karburi Properties Ltd., Refer page No.11 of the Order of the Hon'ble Oshin Investment & Fin P. ITAT J Bench in the case of Jogia Properties Ltd., 2009-10 Ltd., Refer page No.13 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Mihir Agencies Pvt. Ltd., 2009-10 Ltd., 8 Reva Properties ltd., Refer page No.10 of the Order of the CIT(A) in Javda India Impex Ltd., 2007-08 the case of Reva Properties Ltd., 9 Reva Properties Ltd., Refer page No.11 of the Order of the Hon'ble Oshin Investment & Fin P. ITAT J Bench in the case of Jogia Properties Ltd., 2008-09 Ltd., Refer page No.11 of the Order of the Hon'ble Doldrum Investments & ITAT J Bench in the case of Jogia Properties Finance P. Ltd., 2008-09 Ltd.,

300 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Hingora Finvest Pvt. Ltd., 2008-09 Ltd., Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Realgold trading co. Pvt. Ltd., 2008-09 Ltd., Refer page No.11 of the Order of the Hon'ble Hema Trading Company Pvt. ITAT J Bench in the case of Jogia Properties Ltd., 2008-09 Ltd., 10 Reva Properties Ltd., Refer page No.11 of the Order of the Hon'ble Oshin Investment & Fin P. ITAT J Bench in the case of Jogia Properties Ltd., 2009-10 Ltd., Refer page No.11 of the Order of the Hon'ble Doldrum Investments & ITAT J Bench in the case of Jogia Properties Finance P. Ltd., 2009-10 Ltd., Refer page No.11 of the Order of the Hon'ble Sidh Housing Development ITAT J Bench in the case of Jogia Properties Co. Ltd., 2009-10 Ltd., Gyaneshwar Trading & Refer page No.11 of the Order of the CIT(A) in Finance Co. Ltd., 2009-10 the case of Reva Properties Ltd., Refer page No.10 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Deltron Exim Pvt. Ltd., 2009-10 Ltd., 11 Vedisa Properties Ltd., Refer page No.11 of the Order of the Hon'ble Oshin Investment & Fin P. ITAT J Bench in the case of Jogia Properties Ltd., 2008-09 Ltd., Refer page No.11 of the Order of the Hon'ble Doldrum Investments & ITAT J Bench in the case of Jogia Properties Finance P. Ltd., 2008-09 Ltd., Refer page No.11 of the Order of the Hon'ble Sidh Housing Development ITAT J Bench in the case of Jogia Properties Co. Ltd., 2008-09 Ltd., Refer page No.11 of the Order of the CIT(A) in Javda India Impex Ltd., 2008-09 the case of Vedisa Properties Ltd., Gyaneshwar Trading & Refer page No.11 of the Order of the CIT(A) in Finance Co. Ltd., 2008-09 the case of Vedisa Properties Ltd., Refer page No.10 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Deltron Exim Pvt. Ltd., Ltd., 12 Vedisa Properties Ltd., Refer page No.11 of the Order of the Hon'ble Oshin Investment & Fin P. ITAT J Bench in the case of Jogia Properties Ltd., 2009-10 Ltd., Refer page No.11 of the Order of the Hon'ble Doldrum Investments & ITAT J Bench in the case of Jogia Properties Finance P. Ltd., 2009-10 Ltd., Refer page No.11 of the Order of the Hon'ble Sidh Housing Development ITAT J Bench in the case of Jogia Properties Co. Ltd., 2009-10 Ltd., Gyaneshwar Trading & Refer page No.11 of the Order of the CIT(A) in Finance Co. Ltd., 2009-10 the case of Vedisa Properties Ltd., Refer page No.10 of the Order of the Hon'ble ITAT J Bench in the case of Deltron Exim Pvt. Ltd., 2009-10 Jogia Properties Ltd.,

308 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 further noted that the above concerns were sister concerns and their nature and the modus operandi was same as that of the assessee company. The AO further observed that the search and seizure operation was also conducted on one Shri Mukesh Chokshi, who was operating many companies through which he was indulged in providing the bogus entries including long term capital gain, short term capital gain, losses, speculative losses and share application money etc. It was also observed that two companies of Mr. Mukesh Chokshi, i.e. M/s. Talent Infoway and M/s. Mihir Agencies have also made investment in AY 2009-10 for the purchase of shares in the M/s. Jogia Group of companies. The AO observed that Shri Ajay Kumar, Director of the company had offered the amount received as share capital from above said companies as unexplained credits in AY. 2008-09 & AY 2009-10. Since the undisclosed income declared in the statement was not offered for taxation in the return filed, therefore, the AO gave a show cause notice to the assessee to submit complete details of share application money received and utilized. The AO also asked the assessee to submit the complete evidences to prove the identity, credit worthiness and genuineness of the transaction of the share holding companies. In response to the show cause notice, the Ld. AR of the assessee submitted its reply along with relevant details, confirmations and evidences etc.; The AO however was not satisfied with the reply of the assessee and noted certain discrepancies in the evidences submitted by the assessee viz. the assessee had not provided share application form; No Board resolution was provided; Bank statements were not provided in some cases or that the directors of the company were not produced for cross examination. The AO thereafter discussed the issue of retraction of statement given by the Director of the company, Shri Ajay Kumar and observed that the statement recorded by the income-tax authorities u/s. 131 has evidentiary value even after its retraction and that the same can be used against the assessee. The AO further held that the documents filed relating to share application money were all result of an afterthought and the same cannot be relied or considered as supporting documentary evidences for receiving share application money and retracting the declaration made. In view of all these facts and circumstances, the AO held that the assessee had failed to prove the identity, credit worthiness and genuineness of the transaction of the above share holding companies, he therefore, treated the investment made by these companies amounting to Rs.12,80,00,000/- and Rs.3,90,00,000/- for the AYs. 2008-09 & 2009-10 respectively as undisclosed income of the assessee company u/s. 68 of the I.T. Act. Being aggrieved by the above additions, the assessee filed appeal before the CIT(A).

309 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 5. The Ld. CIT(A), after considering the submissions of the assessee and analyzing the facts and circumstances of the case, observed that 10 companies had subscribed the share application money in the assessee company. The papers relating to the identity, creditworthiness and genuineness of the transaction relating to these companies were submitted by the assessee to the AO. The AO had also made bank enquiry in this respect but no discrepancy or incriminating evidence was found. The Ld. CIT(A) further noted that no incriminating document relating to the share application money was found or seized during the course of search. Further in respect to the companies, M/s. Mihir Agencies P. Ltd. & M/s. Talent Infoway Ltd. in which one Mr. Mukesh Choksi has been a director, the Ld. CIT(A) observed that these companies had been registered with the registrar of companies. These companies had subscribed to the shares of the assessee company in AY 2009-10. The Ld. CIT(A) in this respect observed that during assessment proceedings, the Ld. AR of the assessee had submitted all the details relating to these companies. All the companies were having PAN and independently and regularly assessed to tax. Complete details of cheque number., date of cheque, bank a/c. share allotment letters giving detail of share certificate number, copy of bank account of the assessee was submitted before the AO. He further noted that the statement of Mr. Choksi was not recorded in the context of this case but was recorded in some other case. Mr. Choksi had given a general statement that he was giving accommodation entries to the companies against cash received from them. Nowhere in the statement, had he stated that cash was received from the assessee company and cheque was issued against the cash as share application money. There was no mention in the said statement that transaction with the assessee company was not genuine. No incriminating document was found and seized during search operation to prove that cash was given against cheques received from these companies. Even independent enquiry made in respect of the bank accounts of these companies, the AO could not find any instance of cash deposit against issuing of cheques. The Ld. CIT(A) thereafter examined the applicability of section 68 of the Act to the set of facts of the case of the assessee and concluded that for the establishment of identity, each company was having PAN and regularly assessed to tax; For creditworthiness, each company had independent bank account and details were submitted to the AO; For genuineness of transaction, all payments were made through account payee cheques duly reflected in the bank of each company and the assessee company's bank account. Therefore, all the conditions, i.e. identity, creditworthiness and genuineness of transaction were fulfilled. Thus reliance cannot be placed on a general statement of Mr. Choksi alone which was not corroborated by any documentary evidence. He therefore held that in totality of facts & circumstances, the case was covered by the decision of 310 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 Hon'ble Supreme Court in case of Lovely Exports Pvt. Ltd.[216 CTR 195 (SC)].He therefore deleted the additions so made by the Assessing Officer u/s. 68 of the Act. Being aggrieved by the above deletion of the additions made by the AO, the Revenue has thus come in appeal before us.

8. He has further contended that there was nothing incriminating found either during the search action or otherwise on the record warranting such additions in the case of assessee. The Ld. AR has further invited our attention to the written submissions filed before the Ld. CIT(A), wherein, each of the objections raised by the AO in respect of the evidences submitted in relation to each of the eight companies was duly replied and dealt with. It has been explained that the assessee had provided the complete details of the share application money received together with confirmations and that there was no statutory obligation to obtain the application form from the investor. The investor companies had given a ledger account confirmations. Complete details about the bank account giving cheque number, date, name of bank was submitted. The Ledger Account confirmation in the books of Investor company was also submitted. The board resolution was not available with assessee as the assessee has got no legal right to ask for copy of board resolution when complete information about the investments made was available. The evidence relating to the net worth of the investing companies was also submitted. The Ld. DR on the other hand, though, has fairly admitted that no direct incriminating material against the assessee was found during the search action, he, however, has contended that it is a case of circumstantial evidence which is corroborated with the admission of one of the directors of the assessee company. At this stage the Ld. AR has pointed to the question No. 15 in the statement of Sh. Ajay Kumar, Director of the company, wherein it was pointed out to him that one Mr. Jose Mathews had on 4.3.2010, during the course of survey in the case of Shree Global Trade fin. Ltd., had stated that the share application received in case of the assessee from certain companies had been obtained by paying cash. In reply to question No. 15, it has been stated by the said Sh. Ajay Kumar that the statement given by Mr. Jose Mathews was not true. He was not aware about the business activity of the assessee company. The Ld. AR has further stated that Mr. Jose Mathews had nothing to do with the business activity of the assessee company. Mr. Jose Mathews also had retracted the statement which was recorded during the course of survey u/s. 133A and the necessary proof and evidence for the same was also produced 312 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 before the AO. The AO had also thereafter not issued any notice to Mr. Jose Mathews. The Ld. AR therefore has submitted that no reliance can be placed in the statement of Mr. Jose Mathews.

We find force in the above submissions of the Ld. AR. of the assessee. Mr. Jose Mathews was the employee of Shree Global Trade fin. Ltd. and not of the assessee company neither of the alleged seven Group companies of the assessee. The said Mr. Jose Mathews was even in no way related to the investing companies who made investments in the assessee company, the transactions relating to which have been treated bogus by the AO. When the said person was neither the employee of the assessee company nor was in any way related to the investing companies, his statement in the circumstances could not be said to have any evidentiary value. Mr. Jose Mathews was the employee of the company in which the assessee had made the investments, which was a totally different transaction. He was not in any manner connected to the transactions in question before us. As regards the statement of Shri Ajay Kumar Halan, the Ld. AR while inviting our attention to answer to question No.3 of the 314 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 statement has submitted that he was appointed as the director on 15.2.2010 only. That he was not the director in the previous year relevant to A.Y. 2009-10. He was also not the Director during the previous year from 1.4.2009 to 15.2.2010, during the time when the transaction had taken place. He was not the employee of the assessee company nor was any way connected with the business of the assessee prior to 15.2.2010. He has further pointed out that there was no direct admission of Sh. Ajay Kumar about any unexplained income. He has demonstrated that he was given an impression that in view of the statement of Sh. Mukesh Chokshi and Sh. Mr. Jose Mathews in some other search or survey actions, it was established that the assessee had received unexplained investment, in response to which he stated that he has come to know about these facts then only as revealed by the department and taking into consideration the fact and circumstances as were before him when these question were put to him, he agreed to offer the amount as unexplained income of the company. In view of this the Ld. AR has submitted that no reliance can be placed on the statement of Sh. Ajay Kumar who was neither in any way connected with the activities of the company when the transaction took place nor his admission was based on his personal knowledge, rather he agreed to admit the additions on the basis of facts presented to him i.e. the alleged unreliable statements of Mukesh Chokshiand Mr. Jose Mathews.

316 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 courts of law have been almost unanimous in holding that though the admission is an important piece of evidence but it can not be said that it is conclusive; it is open to the person who made the admission to show that it is incorrect and that merely on the basis of statement recorded during the search under mistaken belief and which has been retracted subsequently and without there being any corroborative evidence or incriminating material found, no addition can be made. As regards the statement of Mr. Mukesh Choksi relied upon by the revenue, the Ld. AR has submitted that he had never stated that assessee had given any cash to him or any accommodation entry was provided by him to the assessee. No name of the assessee figured in his statement recorded in any other case. During the course of survey/search on assessee also, not a single evidence was found to suggest that cash was given to Mr. Mukesh Choksi and accommodation entries were taken. The ld. AR has relied upon the decisions of the Hon’ble Bombay High Court as well as various decisions of the Mumbai Tribunal wherein it has been held that no reliance can be placed on the statement of Mr. Mukesh Choksi when the assessee has independently established the genuineness of the transaction. The Ld. AR has further relied upon the following decisions wherein it has been held that once the assessee submits the basic information about the investor company and substantiates the same no addition can be made by invoking the provisions of Section 68 of the Income Tax Act, 1961. a) Lovely Exports Pvt. Ltd. – 299 ITR (Delhi High Court) page 268 and SLP rejected by the Supreme Court in 319 ITR (statute page 5). b) CIT vs Creative World Telefilms Limited 333 ITR p. 100 (Bombay High Court) c) ACIT vs. Venketeshwar Ispat (P) Ltd. (Chhatisgarh High Court) (2010) 41 DTR – 350 d) CIT vs Gangour Investments Ltd. (2009) 18 DTR (Delhi) – 242 e) CIT vs STL Extrusion Pvt. Ltd. (2011) 333 ITR – p. 269 (MP High Court) f) CIT vs. G.P. International Limited (2010) 325 ITR p. 25 (P&H) g) CIT vs. Siri Ram Syal Hydro Power Pvt. Ltd. 196 Taxman p. 444 (Delhi High Court) h) CIT vs HLT Finance Pvt. Ltd. (2011) 201 Taxman p. 28 (Delhi High Court)

318 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 14. We have perused the case laws relied upon by the Ld. Representatives of the parties. In our view, each case has to be decided on its own facts. Merely because, in the case of one company Gold Star Finvest Pvt. Ltd. run by Mukesh Chokshi, the income has been determined on percentage/commission basis treating the said company as accommodation entry provider, that itself cannot hold a justification to completely ignore the facts and evidences brought on the file by the assessee. The case of the assessee has to be adjudged on the basis of its own set of facts and evidences. Moreover the facts and circumstances of the case of the assessee are squarely covered by the various decisions of the Hon’ble Jurisdictional High Court Of Bombay. We further find that the issue, relating to the investments made by the companies relating to the said Mr. Mukesh Chokshi in some other cases, has travelled up to the level of Hon’ble Supreme Court. In the case of “Shri Mukesh R. Marolia vs. Additional CIT” (2006) 6 SOT 247 (Mum), the assessee had made share transaction through the companies M/s. Richmond Securities Pvt. Ltd. and M/s. Scorpio Management. Mr. Mukesh Chokshi has been the director of M/s. Richmond Securities Pvt. Ltd. The Tribunal, after considering the overall facts and circumstances of the case, observed inter-alia that on the basis of evidence available and there being no incriminating material found during the search action, observed that the assessment has to be completed on the basis of records and material available before the Assessing Authority. The personal knowledge and excitement on events should not lead the AO to a state of affairs where salient evidences are overlooked. Where every transaction of the assessee has been accounted, documented and supported in such an event, even though, the amount invested by the assessee has grown into a very sizeable amount which looks quite amazing, the evidence produced by the assessee cannot be brushed aside. The Tribunal under such circumstances deleted the addition. The Revenue took the matter to the Hon’ble Bombay High Court. The Hon’ble Bombay High Court, while adjudicating the above issue in the case styled as “CIT vs. Shri Mukesh R. Marolia” in ITA No.456 of 2007 decided on 07.09.2011, observed that though there was some discrepancy in the statement of director (Mr. Mukesh Chokshi) of M/s. Richmond Securities Pvt. Ltd. regarding the sale transaction, but owing to the factual finding given by the Tribunal on the basis of evidences furnished by the assessee, the decision of the Tribunal cannot be faulted. The Hon’ble Bombay High Court upheld the finding of the Tribunal holding the sale transactions as genuine. The Department preferred appeal before the Hon’ble Supreme Court. The Hon’ble Supreme Court dismissed the SLP No.20146/2012 styled as “CIT vs. Shri Mukesh R. Marolia vide order dated 27.01.14. Similarly in the case of “CIT vs. M/s. Kesar A. Gada in ITA No.300 of 2013 decided on 21.01.15 wherein the AO, while making the additions under section 68 of the Act, had relied upon the statement of Mr. Mukesh Chokshi that he had given various accommodation entries to various parties. The Hon’ble Bombay High Court observed that where the assessee 319 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 had brought the relevant evidences regarding the genuineness of transaction and that in his statement Mr. Mukesh Chokshi had not mentioned the name of the respondent/assessee as one to whom accommodation entries were given, the Hon’ble Bombay High Court upheld the findings of the Ld. CIT(A) which were further confirmed by the Tribunal holding that the transactions were genuine and the additions under section 68 of the Act were not warranted. Similar findings have been given by the Hon’ble Bombay High Court in the case of “CIT vs. Kasturben H. Gada” in ITA No.299 of 2013 decided on 21.01.15. In CIT vs. M/s Sharda Credit Pvt. Ltd. (supra), the Hon’ble High Court has dismissed the appeal of the revenue on identical facts. The Hon’ble Bombay High Court while upholding the order of the Tribunal in the above stated appeals has also relied upon the decision of the Hon’ble Bombay High Court in the case of “Shri Mukesh R. Marolia” (supra). Even in the case of “Smt Rajni S Chowdhry” (supra), the Hon’ble Bombay High Court has upheld the decision of the Tribunal given on the basis of appreciation of evidence and factual finding, accepting the transaction carried carries through broker M/s Gold Star Finvest (P) ltd. as genuine.

16. In the result, the above captioned appeals of the Revenue are hereby dismissed. Order pronounced in the open court on 18.12.2015. 34. It is clear from the order of the Tribunal that all the share applicants for which additions have been made by AO have been dealt by Tribunal in threadbare. The Tribunal have also considered the judicial pronouncements cited before it as applicable to the facts of the instant case and confirmed the finding of the CIT(A) with reference to the merit of the addition so made by AO on account of share capital which was deleted by the CIT(A). We found that CIT(A) in all these years have also deleted the addition after recording detailed finding which are as per material on record. Detailed finding has been recorded by CIT(A) while deleting addition in the hands of Jogia Properties Ltd., with reference to the very same share applicants and the Tribunal in its order dated 18/12/2015 had further fortified the finding of CIT(A). Thus two appellate authorities have given the concurrent finding with regard to the identity, genuineness and creditworthiness of all the share applicants, therefore, no addition was warranted on account of these share applicants. Respectfully following the order of the Tribunal in case of Jogia Properties Ltd., wherein also from the very same applicants, share capital was received except Gyaneshwar Trading & Finance Co. Ltd., We had also gone through the documentary evidences filed in case of Gyaneshwar Tradings to prove the identity, genuineness and creditworthiness. As per the documents placed at page 83 to 105 of paper book for A.Y.2008- 09, all the three conditions have been satisfied and no addition u/s.68 is warranted for the amount invested by Gyaneshwar Trading & Finance Co. Ltd., Accordingly, we do not find any reason to interfere in the order of CIT(A) for deleting the addition so made on account of share capital. 35. With regard to the legal issue taken by the assessee in the cross objection, as per our considered view, the same can be taken at any time as per the verdict of Hon’ble Supreme Court in case of National Thermal Power Co. Ltd., 229 ITR pg.383. We also found that assessee has given sufficient reason for delay in filing the cross objection. Since it is purely legal issue which goes to the root of the issue considering the reasons filed for condonation of delay, we are satisfied that there was sufficient

38. Hon’ble Gujarat High Court in the case of Vijaybhai N Chandrani 333 ITR 436 held as under:- Sections 153A, 1538 and 153C of the Income-tax Act, 1961, lay down a scheme for assessment in case of search and requisition. Section 153C which is similarly worded to section 158BD of the Act, provides that where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A he shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person. However, there is a distinction between the two provisions inasmuch as under section 153C notice can be' issued only where the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong to such other person, whereas under section 158BD if the Assessing Officer was satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or assets were requisitioned under section 132A, he could proceed against such other person under section 158BC. Thus a condition precedent for issuing notice under section 153C and assessing or reassessing income of such other person, is that the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned should belong to such 323 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 person. If the requirement is not satisfied, recourse cannot be had to the provisions of section 153C. Held, allowing the petition, that admittedly, the three loose papers recovered during the search proceedings did not belong to the petitioner. It was not the case of the Revenue that the three documents were in the handwriting of the petitioner. In the circumstances, when the condition precedent for issuance of notice was not fulfilled action taken under section 153C of the Act stood vitiated.

4. These above-referred companies were found to be engage in investment activities in share of various companies. The investments were made out of share capital of the company which consist of share application money received from the other various concerned. It was also revealed that Director in one company is also the Director of other company. The Directors are brothers and from the same family. On the basis of material and fact emerge during the search and survey, the assessing officer concluded that all concerned are sister concern and their nature and modus operandi the same as of the assessee. The warrant has been issued in the name of Jogia Properties. Hence, the assessee was also covered u/s 153A ( along with other seven group companies) on the basis of document found and seized and the disclosure made by Directors of respective company. A search action was also conducted on one Mrs. Mukesh Choksy, who was indulged in providing bogus entries in both survey/search proceedings. During the investigation it was revealed that Jogia Group have taken bogus share application money from Mukesh Choksy Group concerned. The statement of Shri Narayan Hari Halan Director , Shri Ajay Kumar Director of company and Shri Jose Mathew and were also recorded on15.04.2010 wherein Sh. Narayan Hari Halan Director offered income of Rs. 5.00 Crore. On the basis of their statement, the A.O. recorded the reasons and issued notice u/s 153C dated 23.07.2010. In reply to the notice, the assessee filed return of income on 29.09.2010 declaring total income at Rs. Nil. On 330 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 verification of return of income the AO noticed that the assessee has not disclosed the income of Rs. 5.00 Crore as disclosed in the statement recorded u/s 131 on 15.04.2010.The AO served the notice u/s 142(1) dated 05.05.2011 and asked to give the details of share application money and utilization thereon in respect of share application money of Rs. 2.00 Crore received from M/s Delton Exim Pvt Ltd. The assessee filed its reply dated 01.11.2011 and contended that all share holding of company who have made investment in assessee-company are independent existing corporate bodies, they are maintaining their regular books of account, having their own bank account, filed separate return of income, all details were supplied, the assessee further contended that identity of share holder is established, therefore, confirmation is filled with supported document. The assessee further vide its letter dated 30.11.2011 submitted another reply for AY 2009-10 and 2010-11 which is reproduced as under:

3. We understand that search proceedings started on4/3/2010 continued in the case of Jogia properties Ltd and on15/04/2010 the prohibitory order was lifted which was placed in the business premises of M/s Jogia properties Ltd. On15/04/2010 I was asked to be present at the premises of Jogia properties Ltd situated at 208 Ashirwad building, Ahemdabad Street, Masjid Bunder, Mumbai 400009 to explain the papers belonging to the company found from the premise of Jogia properties Ltd. Statement under section 131 was recorded by the income tax official. At the point of time I did not have all books of accounts or record of our company. I was informed that transaction of share application with the 5 companies viz Ocean investments and finance private limited, Sidh Housing Development company Ltd, Gyaneshwar trading and finance private limited, Ganga Builders Ltd and Doldrum Investment and finance private limited, who are the shareholder of our company are not genuine. Reference was made to the statement of one Mr. Jose Matthew wherein he had stated that share application money is received by paying cash. I have not convergent with the provision of income tax act. I was not the director of the company during the financial year relevant to the assessment year 2009-10. I did not have all books of accounts or record. I had stated that Mr Jose Matthew is not aware about the business activity of our company. The statement of Mr Jose Matthew is not true. No evidence was found that share application is received from 5 companies by paying cash s in lieu of cheque received. In this background and based on the information given to me by the officer of income tax Department I had admitted that investment made by 5 331 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 companies into share application of our company is not explainable and made the disclosure of income of Rs. 5 crore. I state that disclosed that was made purely on mistaken belief that the transaction of share investments by 5 companies cannot be explained and the taxable income of company will not be to the extent of Rs. 5 crore pertaining to AY 2009- 10.

38.

Hon‟ble Gujarat High Court in the case of Vijaybhai N Chandrani 333 ITR 436 held as under:- Sections 153A, 1538 and 153C of the Income-tax Act, 1961, lay down a scheme for assessment in case of search and requisition. Section 153C which is similarly worded to section 158BD of the Act, provides that where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A he shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person. However, there is a distinction between the two provisions inasmuch as under section 153C notice can be' issued only where the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong to such other person, whereas under section 158BD if the Assessing Officer was satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or assets were requisitioned under section 132A, he could proceed against such other person under section 158BC. Thus a condition precedent for issuing notice under section 153C and assessing or reassessing income of such other person, is that the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned should belong to such person. If the requirement is not satisfied, recourse cannot be had to the provisions of section 153C. Held, allowing the petition, that admittedly, the three loose papers recovered during the search proceedings did not belong to the petitioner. It was not the case of the Revenue that the three documents were in the handwriting of the petitioner. In the circumstances, when the condition precedent for issuance of 336 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 notice was not fulfilled action taken under section 153C of the Act stood vitiated.

40.

For understanding of legal requirement of initiating proceeding u/s.153C, we here below reproduce provision of Section 153C. Assessment of income of any other person. Section 153C reads as under. Assessment of Income of any other person. 153C. Notwithstanding anything contained in section 139, section 147, section 148, section 149, Section 151 and section 153, where the Ld. Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Ld. Assessing Officer having jurisdiction over such other person and that Ld. Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A. Provided that in case of such other person, the reference to the date of initiation of the search under Section 132 or making of requisition under section 132A in the second proviso to [sub- Section (1) of 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Ld. Assessing Officer having other person. Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Ld. Assessing Officer shall not be required to issue notice for assessing or reassessing the total assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made except in cases where any assessment has abated." In Order to issue a valid notice u/s 153C, the Ld. Assessing Officer of a person against whom search action is taken, records a satisfaction that any money, bullion, jewellery or other valuable article or thing, or books of account or 337 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 documents seized, belong to a person, other than a person referred to in Section 153A, then the such books of account or documents or assets seized shall be handed over to the Ld. Assessing Officer having jurisdiction over such other person. The recording of the satisfaction is a must and even if the Ld. Assessing Officer for the person searched and the 'other person' is the same, still the satisfaction has to be recorded by the Ld. Assessing Officer of the search person referred to in Section 153A. 41. of the proposition that for initiating proceedings u/s.153C, satisfaction should be recorded in the file of searched person, reliance can be placed on the following judicial pronouncements.

(Amount in Rs.) Order Retu Not Order of Order of Order u/s Share passed u/s Order of CIT(A) rn Inco ice CIT(A)-41 ITAT 143(3) rws 147 Balanc 143(3) Appli Name of filed me u/s. e cation Addi Deleti the Co. u/s decl 143 Additio Recei dat Addi dat tion on Addit Addition 139( ared (2) n Dat Date ved ed tion ed delet Confi dated ion deleted 1) ed d ed rmed 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 22- 08- 26- 23- 26- Martand 31- 17- 09- 14000 11- 12- 2500 07- 2500 05- 25000 14000 14000000 Prop. Ltd. 03-15 11-17 10 Nil 0000 10 11 0000 12 0000 17 000 0000 0 Nil 22- Bulls Eye 09- 24045 Prop. Ltd. 10 Nil 0000 NA NA - NA - NA - NA - NA - Nil 22- Buildzone 09- 14500 Prop. Ltd. 10 Nil 0000 NA NA - NA - NA - NA - NA - Nil 22- Indraneel 09- 43500 Prop. Ltd. 10 Nil 0000 NA NA - NA - NA - NA - NA - Nil 22- 29- 23- Prasoon 09- 31150 09- 11- Prop. Ltd. 10 Nil 0000 11 12 - NA - NA - NA - NA - Nil 22- Rochan 17- 09- 39920 Prop. Ltd. 12-12 10 Nil 0000 NA NA - NA - NA - - NA - Nil 22- 28- 19- Nirvan 09- 43500 09- 11- Prop. Ltd. 10 Nil 0000 11 12 - NA - NA - NA - NA - Nil Total 210,61,50,000 7.1. We note that all the seven parties are separate legal entities, and are assessed to tax. They filed their respective tax returns along with PAN nos. regularly for all the years including for A.Y. 2010-11. All the transactions are reflected in their regular books of accounts which are audited one and were submitted before the Revenue/various authorities. The transactions are reflected in the regular bank account. The details of the cheque Nos., name of the bank, date and the branch were also submitted during all the assessment and 349 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 appellate proceedings. The said transactions are also confirmed by all the seven parties. In their audited financial statements the said transactions are reflected. The reference of the documents filed by each of the party is given below giving the reference to the paper book which is filed during the course of appellate proceedings before the tribunal. It is further noted that the assessee filed written submission before the First Appellate Authority along with annexure/documents referred above. The details of the same is as under :

352 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 ALPHA CHEMIE AADCA9 2 TRADE - - - - - 3,95,00,000 - 3,95,00,000 890L AGENCIES PVT LTD ARTILEGEN CE BIO- AAACI73 3 - 1,50,00,000 4,50,00,000 2,00,00,000 2,00,00,000 1,00,00,000 - 11,00,00,000 INNOVATION 59F S LTD BAY INLAND AABCB9 4 FINANCE - - 1,50,00,000 1,00,00,000 1,00,00,000 1,00,00,000 - 4,50,00,000 510A PVT.LTD. BHASKAR FUND AABCB3 5 - - 1,00,00,000 1,00,00,000 1,50,00,000 - - 3,50,00,000 MANAGEME 120E NT PVT. LTD. CLIFTON PEARSON AACCC0 6 EXPORT & - 50,00,000 1,50,00,000 - 2,00,00,000 50,00,000 - 4,50,00,000 049A AGENCIES LTD. CLIFTON AAACC5 7 SECURITIES - - 50,00,000 2,00,00,000 - - - 2,50,00,000 995P PVT LTD DELTON AABCD6 8 EXIM PVT. - - 50,00,000 - 1,00,00,000 50,00,000 - 2,00,00,000 200F LTD. GANGA AAACG9 9 BUILDER - - 1,50,00,000 - 1,00,00,000 - - 2,50,00,000 808K LTD GATEWAY AABCG7 10 COMPUTERS - - 1,00,00,000 - 1,50,00,000 1,00,00,000 - 3,50,00,000 845F PVT. LTD. GROMORE FUND AAACG9 11 MANAGEME - 50,00,000 50,00,000 - 1,50,00,000 - - 2,50,00,000 919K NT CO. PVT. LTD. GYNESHWA R TRADING AACCG7 12 - - 2,50,00,000 - 1,50,00,000 50,00,000 - 4,50,00,000 & FINANCE 998L PVT.LTD ISPAT AAACI44 13 - - 5,40,00,000 2,00,00,000 5,00,00,000 50,00,000 - 12,90,00,000 SHEETS LTD. 29E KINGS AADCK0 14 MERCHANTS 80,00,000 - - - - - 6,75,00,000 7,55,00,000 285F PVT.LTD. LITTLE STAR AABCL3 15 80,00,000 - - - - - 6,00,00,000 6,80,00,000 VYAPAAR 152C PVT LTD MAHASAGA R AADCM3 16 - - - - - 3,37,00,000 - 3,37,00,000 SECURITIES 257P PVT LTD NEWOUTLO OK AABCN6 17 - 1,00,00,000 1,50,00,000 - 1,50,00,000 - - 4,00,00,000 SECURUITES 529M LTD NICCO AABCN1 18 SECURITIES - - 1,50,00,000 1,00,00,000 - - - 2,50,00,000 737D PVT LTD NOVELTY AABCN8 19 TRADERS - 50,00,000 3,60,00,000 1,00,00,000 6,00,00,000 50,00,000 - 11,60,00,000 817E LTD OLYMPUS AAACO3 20 VISION - 1,00,00,000 50,00,000 - 1,50,00,000 50,00,000 - 3,50,00,000 898H PVT.LTD OSHIN AAACO9 21 INVESTMEN - 2,50,00,000 3,50,00,000 1,00,00,000 3,00,00,000 50,00,000 - 10,50,00,000 051G T & FINANCE

3. Reliance has been placed on behalf of the assessee on CIT v. Stellar Investment Ltd. [1991] 192 ITR 287 1 (Delhi) which has been repeatedly relied upon in several subsequent decisions. In our opinion this ruling has been misinterpreted and misconstrued. We, therefore, reproduce the entire Order verbatim for facility of reference: "The petitioner seeks reference of the following question : ‘Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct both on facts and in law in holding that the provisions of section 263 have not been validly invoked in this case by ignoring the material fact that the Assessing Officer had failed to discharge his duties regarding the investigation with regard to the genuineness and creditworthiness of the shareholders, many of them being students and housewives ?’ In the present case, the subscribed capital of the assessee had been increased. The Income-tax Officer assessed the company and accepted the increase in the subscribed capital. The Commissioner of Income-tax came to the conclusion that the Assessing Officer did not carry out a detailed investigation inasmuch as there had been a device of converting black money into white by issuing shares with the help of formation of an investment company. The Commissioner of Income-tax further held that the Assessing Officer did not make enquiries with regard to the genuineness of the subscribers of the share capital. He thereupon set aside the order of assessment. The Tribunal reversed this decision for reasons which we need not go into. It is evident that even if it be assumed that the subscribers to the increased share capital were not genuine, nevertheless, under no circumstances, can the amount of share capital be regarded as undisclosed income of the assessee. It may be that there are some bogus shareholders in whose names shares had been issued and the money may have been provided by some other persons. If the assessment of the persons who are alleged to have really advanced the money is sought to be reopened, that, would have made some sense but we fail to understand as to how this amount of increased share capital can be assessed in the hands of the company itself.

4. In Stellar Investment the Division Bench had observed firstly, that no question of law had arisen before it; secondly, that if some bogus shareholders had been detected their assessment could justifiably be re- opened; and thirdly that the amount of increased share capital could not be assessed in the hands of the company. The later two aspects undeniably possess the character of question of fact. Reference to section 68 of the Income-tax Act (hereafter referred to as the ‘IT Act’) is conspicuous by its absence. The Stellar Investment ratio cannot be stretched to the extent that it partakes as a reflection on section 68, when the enquiry pertained only to section 263. In Mysore State Road Transport Corpn. v. Mysore Road Transport Appellate Tribunal AIR 1974 SC 1940, the Supreme Court had referred to an essay by Professor A.L. Goodhart for the proposition that the ratio decidendi of a case is determined by taking into account the facts treated by the Judge deciding the case as being material, and that his decision is based thereon. Mention should immediately be made of the view prevailing in the Gujarat High Court expressed in Nirma Industries Ltd. v. Dy. CIT [2006] 155 Taxman 330, to the effect that the dismissal of an appeal under section 260A of the Income- tax Act "implies that the order of ITAT on the issue stands merged in the order of the High Court, and for all intents and purposes it is the decision of the High Court which is operative and which is capable of being given effect to." Indeed, this precedent contains a comprehensive and erudite discussion on the question of merger of assailed judgments/orders into the decision of the Appellate Court, and with humility, we commend its careful reading. The views of the Supreme Court have been assimilated from a plethora of precedents on this aspect of the law. What should not be lost sight of is the reality that the ITAT actively considers disputes pertaining to the facts as well as to the interpretation of the law. When the High Court dismisses an appeal filed under section 260A of the Act it does not ignore the factual matrix pertaining to the particular assessee; and it also does not interpret the law in abstraction or in its generality. If the High Court considers it necessary to speak broadly on the law it invariably frames a substantial question of law and thereafter decides it by a judgment in contradistinction to an order. The question before the Bench in Nirma Industries Ltd.’s case (supra) was whether the ITAT could assume a question being open to discussion despite the fact that the High Court had declined to admit the appeal on that question in respect of that assessee, for a previous assessment year. We are in the agreement with the Bench of the Gujarat High Court that the rejection of the appeal on certain grounds would operate as res 358 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 judicata, but in our understanding it would operate between the litigating parties. We are unable to concur with the argument of Mr. Aggarwal, learned counsel for the assessee that the dismissal of an appeal under section 260A constitutes an expression of a judicial view on the questions of law which the appellant had proposed in the appeal. In other words, Stellar Investment would have to be restricted to the facts that had occurred strictly in those appeals and no further. We are in respectful agreement with the understanding of the Division Bench in CIT v. Dolphin Canpack Ltd. [2006] 204 CTR (Delhi) 50 as articulated in this sentence - "In Steller Investment Ltd.’s case (supra) the issue which the revenue proposed to raise, related to the propriety of the Tribunal taking resort to section 263 in the case by ignoring the material fact that the Assessing Officer had failed to discharge his duties regarding the investigation with regard to the genuineness and creditworthiness of the shareholders, many of whom were found to be students and housewives." Rejection of an appeal under section 260A is similar to the dismissal in limine by the Supreme Court of Special Leave Petition. This is also the view of the Calcutta High Court. Authority for the proposition is available in Municipal Corpn. of Delhi v. Gurnam Kaur AIR 1989 SC 38 and more recently in Director of Settlements, AP. v. M.R. Apparao AIR 2002 SC 1598. The Full Bench of the Patna High Court in Smt. Tej Kumari v. CIT [2001] 247 ITR 210 1 has pithily made a distinction between the dismissal in limine of an SLP and the dismissal of a regular civil appeal by a non-speaking order. The view was that in the former it would not be possible to extract any expression on the legal position on the part of the Court.

6. We find it indeed remarkable that the attention of the Sophia Finance Full Bench had not been drawn to the decision of the Supreme Court in CIT v. Orissa Corpn. (P.) Ltd. [1986] 159 ITR 78 3, which if cited would really have left no alternative to the Full Bench but to arrive at the conclusion it did. The books of account of the assessee contained three cash credits aggregating Rs. 1,50,000 allegedly received as loans from three individual creditors under hundis. Letters of confirmation as well as the discharged hundis were produced; but notices/summons sent to them remained unserved because they had reportedly ‘left’ that address. The view of the Tribunal was that merely because the assessee could not produce these three parties, there was nevertheless no justification to draw an adverse inference. This approach as accorded approval by the Supreme Court in these words : "In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were 359 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 income-tax assessees. Their index numbers were in the file of the revenue. The revenue, apart from issuing notices under section 131 at the instance of the assessee, 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 were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do anything further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises." (p. 84) This reasoning must apply a fortiori to large scale subscriptions to the shares of a public company where the latter may have no material other than the application Forms and Bank transaction details to give some indication of the identity of these subscribers. It may not apply in circumstances where the shares are allotted directly by the company/assessee or to creditors of the assessee. This is why this Court has adopted a very strict approach to the burden being laid almost entirely on an assessee which receives a gift.

10. Returning to Sophia Finance, the Full Bench which was now presided over by B.N. Kirpal, J. (as the Chief Justice of India then was) had enunciated that section 68 reposes in the Income-tax Officer or Assessing Officer the jurisdiction to inquire from the assessee the nature and source of the sum found credited in its books of account. If the explanation proffered by the assessee is found not to be satisfactory, further enquiries can be made by the Income-tax Officer himself, both in regard to the nature and the source of the sum credited by the assessee in its books of account, since the wording of section 68 is very wide. The Full Bench opined that - "If the shareholders exist then, possibly, no further enquiry need be made. But if the Income-tax Officer finds that the alleged shareholders do not exist then, in effect, it would mean that there is no valid issuance of share capital. Shares cannot be issued in the name of non-existing persons.... . If the shareholders are identified and it is established that they have invested money in the purchase of shares then the amount received by the company would be regarded as a capital receipt but if 361 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 the assessee offers no explanation at all or the explanation offered is not satisfactory then, the provisions of section 68 may be invoked." It will at once become obvious that the Court had not reflected upon the question of whether the burden of proof rested entirely on the assessee, and at which point, if any, this burden could justifiably be shifted to the Assessing Officer. The Full Bench in fact clarified that they were "not deciding as to whom and to what extent is the onus to show that an amount credited in the books of account is share capital and when does that onus stand discharged. This will depend on the facts of each case." It has been argued, but without substance, that the Full Bench did not go further than holding that the only responsibility on the assessee is to identify the subscriber; or that the Assessing Officer was not required to delve into the creditworthiness of the subscriber; or that the Assessing Officer need not be satisfied about the genuineness of the transaction.

12. The Calcutta High Court has held in CIT v. Precision Finance (P.) Ltd. [1994] 208 ITR 4651 that it is not sufficient for an assessee to disclose that credits in their Books had been received through Banking channels; the identity as well as the creditworthiness of the creditor must nevertheless be proved. In Sajan Dass & Sons v. CIT [2003] 264 ITR 435 2 (Delhi) the Division Bench was not convinced that merely because moneys could be identified and traced through banking channels the genuineness of the Gift in question stood established. This is obviously because an assessee can scarcely be heard to say that he does not know all particulars pertaining to the donor. Thereafter, the same dialectic lead the Bench to arrive at the opposite 362 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 Sibal [2004] 269 ITR 429 3 (Delhi). conclusion in CIT v. R.S. In CIT v. Makhani & Tyagi (P.) Ltd. [2004] 267 ITR 4334 (Delhi), this Court has not given its imprimatur to the inaction of the Assessing Officer in doing nothing further after the issuance of summons under section 131 of the Income-tax Act. It did not condone the Assessing Officer, failing to issue coercive process, and in this manner attempting incorrectly to shift the burden on the assessee to establish the legitimacy of the transaction. In CIT v. Antarctica Investment (P.) Ltd. [2003] 262 ITR 493(Delhi), the Court was satisfied that no interference was justified since the assessee had produced the Share Application Forms along with confirmation letters and copies of their accounts, copies of their bank accounts of cheque payments and their Auditor’s Report. The Assessing Officer’s conclusion that the genuineness of the transaction had not been made good was not upheld. This conclusion was reached despite the fact that notices received by one of the common Directors of the two subscribing companies had been ignored and no information was forthcoming from the latter. However, the Under Secretary (Land Revenue, Government of Sikkim, Gangtok) had stated that both the subscribing companies were incorporated in Sikkim and their addresses were disclosed in the return of allotments; the subscribers thus stood identified. Their financial standing or capacity was not investigated by the Court. The decision in CIT v. Achal Investment Ltd. [2004] 268 ITR 2115 (Delhi) is also on the same lines.

15. In Bharati (P.) Ltd. v. CIT [1978] 111 ITR 951 (Cal.) where notices to these alleged creditors had come back unserved, the Division Bench affirmed that the mere filing of confirmatory letters by the assessee did not discharge the onus that lay on the assessee. Different Division Benches of the same High Court have opined that the assessee must prove ( a) the identity, (b) the capacity of the creditors to advance money, (c) the genuineness of the transaction. (See Shankar Industries v. CIT [1978] 114 ITR 689 (Cal.); C. Kant & Co. v. CIT [1980] 126 ITR 63 3 (Cal.) and CIT v. United Commercial & Industrial Co. (P.) Ltd. [1991] 187 ITR 596 4 (Cal.). In CIT v. Korlay Trading Co. Ltd. [1998] 232 ITR 820 (Cal.), certain shares purchased through a broker were lost. The assessee furnished the name of the broker, as also the date of the sale, amount of purchase money and sale money. The broker was found not to have maintained regular accounts. However, the Court refused to draw an inference adverse to the assessee’s interests. Instead the Calcutta High Court observed that the ITO ought to have investigated the matter more thoroughly to controvert the claim of the assessee, and concurred with the conclusion of the Tribunal that the latter had discharged the initial burden that lay on it. The High Court set aside the decision of the Tribunal which had reversed the findings of the ITO as well as the CIT (Appeals) since the assessee had supplied the income-tax file number of the creditor before it. The High Court noted that the mere filing of the income-tax number was not sufficient to establish the identity and creditworthiness of the creditor and genuineness of the transaction. Although Orissa Corporation was referred to the decision of the Full Bench of this Court in Sophia Finance was not even cited. Korlay Trading as well as Sophia Finance was applied by the same Division Bench of the Calcutta High Court in four decisions delivered in March 2003. In Hindusthan Tea Trading Co. v. CIT [2003] 263 ITR 2891 (Cal.), the Bench opined that in the case of a subscription to the share capital of a company, if section 68 of the Income-tax Act is to be resorted to, it is necessary for the assessee to prove and establish the identity of the subscriber, their creditworthiness and the genuineness of the ‘transaction’. Once material to prove these ingredients are produced it is for the Assessing Officer to find out as to whether, on these materials, the assessee has succeeded in establishing the ingredients mentioned above. The Assessing Officer can ‘lift the veil’ and enquire into the real nature of the 364 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 transaction. CIT v. Ruby Traders & Exporters Ltd. [2003] 263 ITR 3002 (Cal.), CIT v. Nivedan Vanijya Niyojan Ltd. [2003] 263 ITR 623 3 (Cal.) and CIT v. Kundan Investment Ltd. [2003] 263 ITR 626 4 (Cal.) are the other three.

17.

For a complete understanding of the concept of ‘burden of proof’ attention should be drawn to decisions delivered in the context of penalty proceeding under section 271 of the Income-tax Act CIT v. Anwar Ali [1970] 76 ITR 696 was decided by the Apex Court holding that, if there is no evidence on record except the explanation of the assessee, which explanation has been found to be false, it still does not follow that the receipt constitutes taxable income. This decision was followed by the Apex Court in Anantharam Veerasinghaiah & Co. v. CIT [1980] 123 ITR 457 opining that the "mere falsity of the explanation given by the assessee is insufficient without there being, in addition, cogent material or evidence from which the necessary conclusion attracting a penalty can be drawn." However, as has been noted in Addl. CIT v. Jeevan Lal Sah 1995 Supp. (4) SCC 247 amendments were incorporated by Finance Act, 1964, into section 271 which had deleted the word "deliberately" in its sub-section 1(c), thereby shifting the onus of proof onto the assessee, rendering Anwar Ali’s case (supra) ineffectual. Nevertheless, in CIT v. Mussadilal Ram Bharose [1987] 165 ITR 141 it has been enunciated by the Supreme Court that though the explanation shifts the burden to the assessee to show absence of fraud, this onus is a rebuttable one. The burden is not discharged by the assessee tendering an incredible or fantastic explanation; and every explanation does not have to be accepted. In our opinion, it is for Parliament to introduce legislation if the duty presently resting on the Department is thought to be too onerous. We ought not to twist the language of a statute to remove the burden of proof altogether from the Department even though it 365 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 has the necessary wherewithal to discharge it. The malaise can also be arrested if unclaimed share subscriptions are taken over by the State and/or if the assessee concerned is precluded from distributing dividends, bonus shares etc. against such share subscriptions unless they are duly claimed by the original subscribers within a prescribed period, perhaps not exceedings three years. Thereafter the shares could automatically stand transferred to the State on the principle of escheat. For these events to happen, requisite amendments to the Income-tax Act may be required.

20. In connection with assessment year 1985-86 the ITAT has extracted portions of the Orders of the CIT(A) and we must assume that it did so to adopt that reasoning. The ITAT has not articulated its own reasoning in respect of Ground No. 1 before it viz. deletion of the addition of Rs. 13,05,450 on account of unexplained shares subscription; whilst it has done so with regard to the other ground viz., deletion of addition of Rs. 9,95,000 made on account of unexplained loans. The ITAT has categorically held that the assessee "has discharged its onus of proving the identity of the share subscribers". Had any suspicion still remained in the mind of the Assessing Officer he could have initiated ‘coercive process’ but this course of action has not been adopted. In view of the concurrent finding pertaining to the factual matrix we find no merit in these Appeals which we accordingly dismiss. ITA No. 880/2006 21. In respect of this assessee namely, General Exports & Credits Ltd., the ITAT has reversed the decision of the CIT(A) on the subject with which we are presently concerned. It is trite that the decision of the ITAT should not be 366 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 interfered with by the High Court unless it finds it perverse and totally unacceptable. This is especially so with regard to the factual aspects of any appeal where there are concurrent conclusions of the lower Authorities. The assessee as well as the revenue had assailed the order dated 22-2-2002 of the CIT(A) pertaining to the assessment year 1989-90. We are presently concerned with the dispute raised by the revenue relating to the deletion of the addition of Rs. 1,00,18,500 made by the Assessing Officer under section 68 of the Income-tax Act. The Assessing Officer had noticed that the assessee had received these amounts towards share capital and share application money on account of issue of rights shares to five companies pursuant perforce to the renunciation of rights shares by several individual shareholders. At the time of the search conducted of the assessee the requisite renunciation Forms were not found. As in the case of Divine Leasing & Finance Ltd., these five companies were registered in Sikkim and remarkably at the same address, namely, Dorjee Building, Nam Nang Road, Gangtok. All of them had replied to the Department asking for further time to provide details. The CIT(A) has noted that (a) the stridently adverse findings of the Assessing Officer at Calcutta had been struck down in Appeal; (b) Notices under section 143(6) of the Income-tax Act sent to the five Companies were replied to by them; (c) these Companies were duly incorporated under the Sikkimese Companies Act; (d) assessment of these Companies had been framed under the Sikkimese Taxation Manual; (e) their share subscriptions or capital were received through Banking channels. The CIT(A) deleted the addition for the reason that the identity of the shareholders had been established on the strength of Steller Investment, which approach may not be entirely correct in the light of the discussion above. We have already concluded that this merely shifts the burden of proving the illegal or illegitimate nature of the transaction onto the Department. The investigations carried out by the Assessing Officer in Calcutta cannot be relied upon by the Assessing Officer, Bulandshahar consequent on those proceedings being found to be without jurisdiction. While rejecting the assault of the revenue on this aspect the ITAT has cogently noted that the share capital issued to the original shareholders in the assessment year 1984-85, which had been cancelled by the Assessing Officer, Calcutta, was found to be valid by the jurisdictional Assessing Officer at Bulandshahar. But we hasten to clarify that the statement of law made by the ITAT to the effect that in case of share capital no additions could be made if it is established that the shareholders exist is not completely correct, and has not been so enunciated by this Court in Sophia Finance.

367 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 Corpn. v. ITO [1998] 231 ITR 200 1. The Apex Court observed that - "If any remittance of foreign exchange had been made in excess of the prescribed limit from January 1, 1969, that will be for the Reserve Bank or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. That, however, cannot be a ground for the Income-tax Officer to assume jurisdiction to start reassessment proceedings either under section 147(a) or 147(b) of the Act on the ground that that will be ‘in consequence of information’ in his possession in the shape of these two letters". The analogy commends application to these proceedings also. In these circumstances we find no scope for interference under section 260A of the Income-tax Act. This appeal is accordingly dismissed. There shall be no order as to costs. ITA No. 953/2006 23. The ITAT has dismissed the revenue appeal and thus there are concurrent findings pertaining to the factual matrix. The following paragraph from the impugned decision adequately encapsulates the necessary details : "Thus, the question is whether in the present case, the Assessing Officer had material to conclude that the share applicants in questions did not exist. It is seen that the assessee-company has furnished the necessary details such as PAN No./Income-tax Ward No./ration card of the share applicants and some of them are assessed to tax. The share application money has been received through banking channel. In some case, the confirmations/affidavits of share applicants containing the above detail were also filed. It is seen that the Assessing Officer did not carry out any inquiry into the income-tax record of the persons who have given the PAN No./Ward No. in order to ascertain the non-existence of the share applicants in question. The Assessing Officer has neither controverted nor disapproved the material filed by the assessee. In the case of CIT v. Makhani & Tyagi (P.) Ltd. [2004] 267 ITR 433 1 (Delhi), the jurisdictional High Court has held that when the documentary evidence was placed on record to prove the identity of all the shareholders including their PAN/GIR numbers and filing of other documentary evidence in the form of ration card etc. which had neither been controverted nor disapproved by the Assessing Officer, no interference was called for. The Tribunal was justified in deleting the addition. The Assessing Officer proceeded to make the impugned addition on the ground that in some case some summons issued were returned unserved and in some case summons though served but there was no compliance. In this connection, it may be mentioned that in the case of CIT v. Orissa Corpn. (P.) Ltd. [1986] 159 ITR 78 2 (SC) the Hon’ble Court has held that when the assessee borrows the loan and if an assessee gives names and addresses of the creditors, who are assessed to tax and full particulars is furnished then the assessee has discharged the duty. If the revenue merely issues summons under section 131 and does not pursue the matter further, the assessee does not become responsible for the same even if the creditors do not appear. Addition cannot be made under section 68.

The revenue has filed this appeal under section 260A of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), against the order dated 12-2-2009, passed by the Income-tax Appellate Tribunal, Delhi Bench 'I' New Delhi (hereinafter referred to as 'the ITAT') in pertaining to the assessment year 1996-97, while raising the following substantial questions of law : (1)Whether on the facts and in the circumstances of the case, the learned ITAT was right in law in upholding the order of the learned CIT(A) in deleting the addition of Rs. 3,30,000 made by the Assessing Officer on account of liability of M/s. Axis Chemicals & Pharmaceuticals even though the assessee had failed to prove the existence and genuineness of the liability? (2)Whether on the facts and in the circumstances of the case, the learned ITAT was right in law in confirming the order of the learned CIT (A) in deleting the addition of Rs. 15,00,000 made by the Assessing Officer on account of unproved share capital disregarding the fact that the assessee had failed to prove the existence, genuineness and creditworthiness of these shareholders despite specific requirement of the law? 2. In the present case, the Assessing Officer, while completing the assessment under section 143(3) of the Act, made addition of Rs. 3,30,000 in respect of outstanding payable to M/s. Axis Chemicals & Pharmaceuticals Ltd., Faridabad and addition of Rs. 15,00,000 on account of unexplained share capital besides other additions. On appeal filed by the assessee, the CIT(A) vide its order dated 9-8-2000 set aside the assessment order and remanded back the matter to the Assessing Officer to frame the assessment afresh after providing full opportunity of being heard to the assessee. Thereafter, the Assessing Officer completed the assessment under section 143(3) read with section 250 of the Act and again made the aforesaid two additions. The assessee again filed appeal against the order of the Assessing Officer. The CIT(A) deleted both the aforesaid additions. The appeal filed by the revenue against the order of the CIT(A) has been dismissed by the ITAT. Hence, this appeal. We have heard learned counsel for the appellant-revenue. As far as the addition of Rs. 3,30,000 is concerned, it has been held that during the proceedings under section 143(3) read with section 250 of the Act, the assessee furnished a confirmation certificate from M/s. Axis Chemicals & Pharmaceuticals Ltd., Faridabad along with PAN. On asking of the Assessing Officer, the assessee has confirmed that the said liability is still outstanding. In spite of that material, the Assessing Officer made the addition of the 373 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 amount on the basis that this liability has ceased to exist and the same is not payable by the assessee, and treated the said liability as income by invoking provision of section 41(1) of the Act. The CIT(A), while deleting the said addition, has observed that the similar addition was made in the case of Febon Con, Faridabad, where the similar liability was shown to be payable to the same party i.e., M/s. Axis Chemicals & Pharmaceuticals Ltd., Faridabad. In that case, the said addition was deleted by the ITAT. It is the admitted position that the said order of the ITAT passed in ITA Nos. 114 to 116/Delhi/2004 has become final. In view of these facts, in our opinion, the ITAT has rightly come to the conclusion that the aforesaid liability of the assessee cannot be said to have ceased to exist and the provision of section 41(1) and Explanation to this provision are not applicable, because the assessee is still showing it as a liability in its books and has not written off the same.

3. However, upon a perusal of the file, we find that the said addition was deleted by the Commissioner of Income-tax (Appeals) [for short 'CIT(A)'] and the Tribunal on the ground that identity of share applicant was not in doubt and he was an Income-tax assessee holding a valid Permanent Account Number (PAN). In fact, the CIT(A) in its order has observed as under:- "2.5 I have carefully considered the submissions made on behalf of appellant. It is true that in appeal proceedings, the appellant's AR himself attended and volunteered for producing Sh. Sujit Acharya before the Assessing Officer for examination which shows genuine intention of the appellant. On this specific request the remand order was passed. However the witness could be produced in the remand proceedings. The AR has explained the reasons for appellant's inability to produce him. However from the documents placed before the Assessing Officer and in appeal it is found that the identity of the share applicant is not in doubt. Copy of his PAN card, for No. 32 his consent letter to be a director of the company and bank account (although of subsequent period) do prove the existence and identity of the party. He is a director of the company. The PAN number has also been checked on the computer system of department and it shows the jurisdiction of Sh. Sujit Acharya with ITO ward 23(4) New Delhi. It is also seen that the signature of Sh. Sujit Acharya on various documents do tally with each other. Same signatures appear on the confirmation letter in which he has confirmed having paid Rs. 50 lacs to the appellant company. It is not in dispute that the payment has been made as share application money in lieu of which two share certificate allotting total 50,000 shares of Rs. 100 each were issued to him on 1-2-2007. The ratio of Supreme Court decision in the case of Lovely Exports is very clear and has been reconsidered or reviewed. In fact the ratio has been followed in many cases by other judicial authorities. Since in this case the identity of the person and genuineness of 375 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 transaction is proved, in my opinion the addition of share application money in the case of appellant company is not justified. If the Assessing Officer has any doubt about the source of payment, he may send the information to the Assessing Officer having jurisdiction over Sh. Sujit Acharya for further necessary action. In view of this addition of Rs. 50 lakhs is deleted."

4. The Tribunal in its impugned order has also observed as under:— "6. In the present case, it is not in dispute that the assessee has received share application money from its Director Shri Sujit Acharya, who has filed confirmation letter before the Assessing Officer. The existence of Shri Sujit Acharya was not in dispute inasmuch as his identity and existence is established by fact that he was having Permanent Account Number as well as he is maintaining bank account with Axis Bank, a copy of which was filed before the Assessing Officer. His existence is also established from the fact that in Form No. 22, filed with the Registrar of Companies, Shri Sujit Acharya has been shown as a Director and he has given his consent to act as a Director of the Company. It is, thus, a case where identity of the shareholder has been established, and it is the case where the shareholder has confirmed that he has made investment of Rs. 50 lakhs towards share capital in the assessee company. The CIT(A) has also made his own enquiry and found that PAN has been allotted to Shri Sujit Acharya having jurisdiction with Income-tax Officer, Ward-23(4), New Delhi. The CIT(A) has also compared the signature of Shri Sujit Acharya on various documents and found that the signature were tallied with each other. It is also not in dispute that the shares were allotted to him on 1-2-2007. In the light of these facts, the CIT(A) has deleted the addition by applying the ratio of decision of Hon'ble Supreme Court in the case of CIT v. Lovely Exports 216 CTR 195. It is also pertinent to note that it is not the case where certain investigation have been made by the department where from it has been revealed that this transaction of payment of share application money is bogus, and it is merely an accommodation entry. The department has also not been able to point out any material or evidence on the basis of which it could be said that money has been emanated from coffers of the assessee company so as to treat the share application money as undisclosed income of the assessee company. In case the department has any doubt about the source of payment made by Shri Sujit Acharya, the department is free to proceed against Shri Sujit Acharya for further action as so observed by the ld. CIT(A).

3. However, upon a perusal of the file, we find that the said addition was deleted by the ITAT on the ground that the share applicants were identified and the revenue was at liberty to reopen the assessment of all such bogus shareholders. In fact, ITAT in the impugned order has observed as under:— "3. It was argued by the learned AR that all the primary information with regard to shareholders was furnished before the lower authorities. Our attention was drawn to Annexure I wherein with respect to each and every shareholder the assessee has furnished status of person, relationship with the company and the documents filed before the lower authorities. From this statement, we found that assessee has filed confirmation in respect of Shri N.R. Suri and Mrs. Harvinder Kaur. In respect of Shri M.P. Khanna and Shri J.P. Khanna, the assessee has filed capital account in the firm from where withdrawal for this investment was made and these two are the directors of the assessee company. The assessee has also filed copies of ledger account. In respect of three private limited companies, the assessee has filed copy of ledger account and in case of Hallmark Healthcare 377 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 Limited, the assessee has also filed affidavit for advancing the money on account of share capital. In respect of all these three companies, the Assessing Officer has directly obtained the bank statement from where relevant cheques on account of share capital were issued. On the basis of these certificates as narrated by the Assessing Officer and CIT(A) we can safely conclude that identity of the shareholders was established and the only grievance of the CIT(A) was with regard to creditworthiness of these shareholders and genuineness of transaction. Hon'ble Supreme Court in the case of Divine Leasing and Finance Limited dismissed the SLP filed by the Revenue against the order of Hon'ble Jurisdictional High Court, with speaking order. In case of Value Capital Service (P.) Ltd., in ITA No. 348/08, vide order dated 25-4-2008, Hon'ble Delhi High Court held that it is very difficult for the assessee to show the creditworthiness of strangers and if the revenue had any doubt with regard to ability to make the investment, their returns may be reopened by the department. Hon'ble Supreme Court in the case of Lovely Exports while rejecting the department's SLP No. 11993/07 dated 11-1-2008, held that when the share application money is received by the assessee-company from alleged bogus shareholders whose names are given to the Assessing Officer, then the department is free to proceed to reopen their individual assessments in accordance with law. Similar was the finding of Hon'ble Supreme Court in the case of Shipra Retailers (P.) Ltd. In SLP No. 451/08 dated 21-1-2008 as also in the case of Divine Leasing & Finance Ltd. In SLP No. 375/08 dated 21-1-2008.

“As per the provisions of section 68, in case the assessee has not been able to give satisfactory explanation in respect of certain expenditure or where any sum is found credited in the books of account, the Assessing Officer can treat the same as undisclosed income and add it to the income of the assessee. The assessee is required to give satisfactory explanation about the 'nature and source' of such sum found credited in the books of account. [Para 3] It is a common knowledge that insofar as the companies incorporated under the Indian Companies Act are concerned, whether private limited or public limited companies, they raise their capital through shares, though the manner of raising the share capital in the private limited companies on the one hand and public limited companies on the other hand would be different. In the case of private limited companies, normally, the shares are subscribed by family members or persons known/close to the promoters. Public limited companies, on the other hand, generally raise public issues inviting general public at large for subscription of these shares. Yet, it is also possible that in case of public limited companies, the share capital is issued in a close circuit. [Para 4] When the companies incorporated under the Companies Act raise their capital through shares, various persons would apply for shares and, thus, deposit share application money. These amounts received from such shareholders would, naturally, be the sums credited in the books of account of the assessee. If the Assessing Officer doubts the genuineness of the investors, who had purportedly subscribed to the share capital, he may ask the assessee to explain the nature and source of those sums received by it on account of share capital. It is in this scenario, the question arises about the genuineness of the transactions. The plain language of section 68 suggests that when the assessee is to give satisfactory explanation about receipts, burden of proof is on the assessee to provide nature and source of those receipts. [Para 5] In order to discharge this burden, the assessee is required to prove : (a ) identity of the shareholder;

379 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 (b ) genuineness of the transaction; and (c ) creditworthiness of the shareholders. [Para 11] In case the investor/shareholder is an individual, some documents will have to be filed or the said shareholder will have to be produced before the Assessing Officer to prove his identity. If the creditor/subscriber is a company, then the details in the form of its registered address or PAN identity, etc., can be furnished. [Para 12] Genuineness of the transaction is to be demonstrated by showing that the assessee had, in fact, received money from the said shareholder and it had come from the coffers of that very shareholder. When the money is received by cheque and is transmitted through banking or other indisputable channels, genuineness of the transaction would be proved. Other documents showing the genuineness of the transaction can be the copies of the shareholders' register, share application forms, share transfer register, etc. [Para 13] As far as the creditworthiness or financial strength of the creditor/subscriber is concerned, that can be proved by producing the bank statement of the creditors/subscribers showing that it had sufficient balance in its accounts to enable it to subscribe to the share capital. Once these documents are produced, the assessee would have satisfactorily discharged the onus cast upon him. Thereafter, it is for the Assessing Officer to scrutinize the same and in case he nurtures any doubt about the veracity of these documents, to probe the matter further. However, to discredit the documents produced by the assessee on the aforesaid aspects, there has to be some cogent reasons and materials for the Assessing Officer and he cannot go into the realm of suspicion. [Para 14] The observations of the Supreme Court in the case ofCIT v. Lovely Exports (P.) Ltd. [2008] 216 CTR (SC) 195 go to suggest that the department is free to proceed to reopen the individual assessment in case of alleged bogus shareholders in accordance with law and, thus, not remediless. It is, thus, for the Assessing Officer to make further inquiries with regard to the status of these parties to bring on record any adverse findings regarding their creditworthiness. This would be more so where the assessee is a public limited company and has issued the share capital to the public at large, as in such cases the company cannot be expected to know every detail pertaining to the identity and the financial worth of the subscribers. Further, initial burden on the assessee would be somewhat heavy in case it is a private limited company where the shareholders are family friends/close acquaintances, etc. It is because of the reason that in such circumstances, the assessee cannot feign ignorance about the status of the parties. [Para 20] The Supreme Court, in the case ofCIT v. P. Mohanakala[2007] 291 ITR 278 / 161 Taxman 169, held that the expression 'the assessee

380 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 offers no explanation' means that the assessee offers no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by it. The opinion of the Assessing Officer for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on the record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material on record. Application of mind is the sine qua non for forming the opinion. In cases where the explanation offered by the assessee about the nature and source of the sums found credited in the books is not satisfactory, there is, prima facie, evidence against it, viz., the receipt of money. The burden is on the assessee to rebut the same, and if he fails to rebut it, it can be held against the assessee that it was a receipt of an income nature. The burden is on the assessee to take the plea that even if the explanation is not acceptable, the material and attending circumstances available on record do not justify the sum found credited in the books being treated as a receipt of income nature. [Para 21] Having taken note of the legal position in detail, each appeal would have to be decided on the application of aforesaid principles. [Para 24] IT Appeal Nos. 2093 and 2095 of 2010 Addition could not be sustained as the primary onus was discharged by the assessee by producing PAN, bank account, copies of the income-tax returns of the share applicants, etc. It was also found that the Assessing Officer was influenced by the information received by the investigating Wing and on that basis general modus operandi by such entry operators was discussed in details. However, whether suchmodus operandi existed in the instant case or not was not investigated by the Assessing Officer. The assessee was not confronted with the investigation carried out by the Investigating Wing nor was it given an opportunity to cross-examine the persons whose statements were recorded by the Investigating Wing. [Para 28] As regards discrepancies found by the Assessing Officer in the bank statement, it was to be mentioned that the bank statements that were filed by the assessee were provided by the shareholders and were computer printed on the bank stationery. The same were filed by the assessee during the assessment proceedings without any suspicion of their being incorrect. During the assessment proceedings the assessee was never confronted by the Assessing Officer that there were discrepancies between the bank statements filed and the statements directly called for by the Assessing Officer. However, even after considering the alleged discrepancies, it did not follow that the amount of share capital was the undisclosed income of the assessee. Even the correct bank statements as claimed by the Assessing Officer revealed that the assessee had received cheques from the shareholders. [Para 29]

381 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 Therefore, the addition could not be sustained [Para 30] IT Appeal No. 2094 of 2010 The addition was rightly deleted by the Commissioner (Appeals) and the Tribunal. Requisite documents were furnished showing the existence of the shareholders from bank accounts and even from their income-tax details. From bank accounts of those shareholders, it was found that they had deposed that certain cash and source thereof was questionable. The Assessing Officer should have further probed which he had failed to do. Moreover, remedy with the department lay in reopening the cases of those investors and, therefore, the addition could not be made in the hands of the assessee. [Para 34] Therefore, the revenue's appeal was to be dismissed. [Para 35] IT Appeal No. 514 of 2007 Insofar as the statements of the five persons produced were concerned, they were gone into and analyzed by the three authorities below on the basis of which finding of fact was arrived at that neither their identity was established nor their capacity to invest that kind of money was proved. They were all agriculturists and had not produced a single document to support their version. That was a finding of fact and there was no reason to interfere with the same. [Para 42] The findings of the authorities below could not be treated as perverse as those were on the basis of proper analysis of the statements of those persons which were recorded by the Assessing Officer. The initial onus is upon the assessee to establish three things necessary to obviate the mischief of section 68. Those are: (i) identity of the investors; (ii) their creditworthiness/investments; and (iii) genuineness of the transaction. Only when these three ingredients are established prima facie, the department is required to undertake further exercise. In the instant case, no such documents were filed and no steps were taken by the assessee which could establish the aforesaid three ingredients. [Para 43] Additional evidence in the form of bank statement, etc., was given, but the assessee had not done anything to prove those bank accounts. [Para 44] For all those reasons, the assessee had not been able to discharge the onus ptomaine and addition had been rightly made. [Para 46] 8.9. The Delhi Bench of the Tribunal in ACIT vs Adamine Construction Pvt. Ltd. (87 taxman.com 216)(Del.) held as under:-

382 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 ■ In the present case there were 11 investor companies claimed to have invested in the assessee-company. In support of their identity and creditworthiness as well as genuineness of the transactions, the assessee had filed before the Assessing Officer, their (investor companies) confirmations, Income Tax return acknowledgements (except in the case of RGTC), bank accounts with this submission that entire amount had been received by the assessee-company through normal banking channels by account payee cheques/demand drafts. The confirmations filed revealed the source of funds, particulars of the bank account through which payments were received and the Income Tax particulars establishing the identity and creditworthiness of the respective share applicants. Thus, the assessee had discharged its primary onus to establish identity and creditworthiness of the investor companies as well as genuineness of the transactions. ■ The Assessing Officer, on the other hand, had doubted the genuineness of the claimed receipt on the basis that some of the investor companies could not be found at the given address and that some of the investor companies responded to the summons by post, but had not caused appearance before him. The Assessing Officer also held that income of many of the investor companies was too low or meager to enable them to make such large investments in the share capital of the assessee- company. The Assessing Officer also observed that there appeared no justification for large components of share premium paid to the assessee along with the share capital. ■ The Assessing Officer also remained suspicious about the claimed investor companies on the basis of reasons recorded for initiation of reopening of assessment proceedings based on the report relating to survey conducted at the premises of the assessee that the business premises of the assessee actually belong to BSL and several other companies were having their Registered offices in the same premises. ■ The submission of the assessee in this regard remained that there is no law that more than one company cannot have its Registered office at one address and that there is no law that companies cannot change their Registered offices. It was submitted that business raise capital and such capital is rotated in economy for increasing production and trade and for making more efficient use of capital. Companies change and, sometimes in quick succession. This is the normal formation of capital in any open economy and the process of capital formation cannot be taken to be representing only unaccounted funds or impeded. ■ It was submitted that all the companies having Registered office at the premises undisputedly belonged to one, 'B' Group. The sources of capital introduced in these companies were established during the respective assessment proceedings. It was further contended that no evidence was found during search to indicate introduction of cash in the form of share capital. It is also pertinent to mention over here that out of 383 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 total 11 investor companies, notices could not be served in case of 3 companies as they were not available on the given addresses. The remaining eight companies had responded and had filed their submissions. However, there is no dispute that in case of all the 11 investor companies, the assessee had filed primary documents and had accordingly discharged its initial onus to establish identity and creditworthiness of the investor companies and genuineness of the transaction as there is no dispute that all the transactions have been done through banking channels, i.e., through account payee cheques and demand drafts. ■ Thus, the Assessing Officer has failed to discharge its onus to prove that the documents filed by the assessee, as discussed above, were false or fabricated as the Assessing Officer has not made any efforts to verify those documents especially when there is no dispute that all the investor companies were filing their returns of income and were being assessed by the Department. The Assessing Officer on the contrary remained suspicious on the claimed receipt from the investor companies on some other factors like some of them were not found on their given addresses, some of them had furnished their submissions through posts and some of them were not having sufficient income etc. as discussed above. Under these circumstances, the Commissioner (Appeals) was justified in deleting the addition made under section 68 on account of unexplained share capital and share premium. [Para 18]

■ Whether the assessee-company charged a higher premium or not, should not have been the subject matter of the enquiry in the first instance. Instead, the issue was whether the amount invested by the share applicants were from legitimate sources. The objective of section 68 is to avoid inclusion of amount which are suspect. Therefore, the emphasis on genuineness of all the three aspects, identity, creditworthiness and the transaction. What is disquieting in the present case is when the assessment was completed, the investigation report which was specifically called from the concerned department was available but not discussed by the Assessing Officer. Had he cared to do so, the identity of the investors, the genuineness of the transaction and the creditworthiness of the share applicants would have been apparent. Even otherwise, the share applicants' particulars were available with the Assessing Officer in the form of balance sheets income-tax returns, PAN details etc. While arriving at the conclusion that he did, the Assessing Officer did not consider it worthwhile to make any further enquiry but based his order on the high nature of the premium and certain features which appeared to be suspect, to determine that the amount had been routed from the assessee's account to the share applicants' account. As held concurrently by the Commissioner (Appeals) and the Tribunal, these conclusions were clearly baseless and false. This Court is constrained to observe that the Assessing Officer utterly failed to comply with his duty considers all the materials on record, ignoring specifically the most crucial documents. [Para 6] ■ For the above reasons, the concurrent findings of fact, as to the true identity of the share applicants, their creditworthiness and genuineness of the transaction, are based on sound reasoning and do not call for interference. No substantial question of law arises. The appeals are 386 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 dismissed. [Para 7] 8.11. The Delhi Bench of the Tribunal in ACIT vs Bahubali Dyes Ltd. (55 taxman.com 357)(Del.) held as under:-

“Assessee having filed necessary details like certificate of incorporation of investor companies, their PANs, their balance sheets and also share certificates issued in order to prove that actual share money had been received and shares had been allotted to respective parties, addition made under section 68 in respect of said share money in assessee's hands was not justified [In favour of assessee] The assessee-company had received share application money from the three companies. The Assessing Officer observed that investments made by these three companies in shares of assessee-company were prima facie doubtful. On examination, he found that the share application money received by the assessee-company was prima facie an accommodation entry. The Assessing Officer also found that a director of company, from which assessee had 387 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 received share application money had accepted the fact that the transactions were not genuine and it was merely accommodation entry. In view of these facts, the Assessing Officer made addition under section 68. The Commissioner (Appeals) sustained the addition. Held that certificate of incorporation of investor companies was placed on record. It means that they were registered companies under the Companies Act. PANs of all the three parties had been given and surprisingly no enquiry had been made by the Department from its own department whether the PANs allotted to these parties were correct or not or these companies were assessed to tax or not. The assessee-company had filed copy of its balance sheet also showing the shares of the assessee-company in their books of account on said assets. Year-wise these shares had been shown in their balance sheet and they had stated that they were regularly assessed to tax. Copy of confirmation along with affidavit and share certificates issued were also placed on record. Therefore, by merely saying that these parties were not traceable and treating the share application money as unexplained money under section 68 was not correct. The assessee had filed necessary details for the purpose of proving that it had received actual share application money and the shares had been allotted. Shares had been allotted to the respective companies. The assessee-company was showing the shareholders in its balance sheet and these companies were also showing the assets in their balance sheet in the shape of shares in the assessee-company. All these companies were assessed to tax and, therefore, the addition sustained by the Commissioner (Appeals) was not justified.”

“The sources from which the money was realised by the third party were not within the special knowledge of the assessee as the depositor happened to be his wife. Whether he had knowledge at all of the source of the money deposited by the third-party was a matter which had to be decided on 394 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 evidence. The mere fact that the third party making the deposit happened to be the wife of the assessee did not ipso facto make the assessee come into the knowledge of the sources from which the money was realised. Under law, in the absence of specific proof of that knowledge, it cannot be assumed that the assessee had the knowledge in question within the meaning of section 106 of the Evidence Act. In order to rely on this section, which lays down that when any fact is especially within the knowledge of any person, the burden of proving that fact is upon him, it must be established first that the person has especial knowledge of that fact, having regard to the circumstances of the case. It would appear that the accounts of the firm which had been produced in the case had been accepted and acted upon by the department and no serious challenge had been made to their genuineness or that they were kept regularly in the course of business. That being the case, the accounts were relevant and afford prima facie proof of the entries and the correctness thereof under section 34 of the Evidence Act, so that where a deposit is found to have been made by a third party in the accounts of the firm, that entry was prima facie proof that that amount in question was deposited by the person in whose name the deposit stood. To require the firm or the individual partners to go further and adduce proof of the sources from which the deposits in question appearing in the accounts in the name of third parties were derived by them, would be placing a burden on the firm as well as the partners, which was not required or justified by law. In most cases it may be imposable for the firm or the partners to determine the sources from which the money deposited with them had been realised by the depositors. In the instant case, there were not only the accounts of the firm showed that the deposit stood in the name of assessee’s wife but also, in addition, the declaration made by her that the money belonged to her and the deposit was made by her. It was also significant that lady was also assessed to income-tax on the basis of a return made by her. The enquiry as to the source from which this amount was acquired or obtained by her might perhaps, be relevant in an investigation into the assessment to be made regarding her income and when determining the correctness of the return submitted by her. But the mere fact that the assessee was unable to satisfy the monies which she deposited with the firm could not, be used against the assessee. The Tribunal, therefore, was not justified in either demanding proof or in drawing an adverse inference against the assessee on his failure to produce the same. The only other circumstance relied on by the Tribunal was that a similar sum of Rs. 10,000 was deposited on the same day by another partner's wife with the firm. This circumstance might have been a coincidence or might have been done by the two ladies agreeing to invest their respective monies with the firm. Whatever may be the reason, the fact that somebody else made a similar deposit on the same day was, totally irrelevant in deciding upon the nature of the deposit made by assessee’s wife. The Tribunal, therefore, was not justified in relying on the circumstance as a price of evidence against the assessee. Undoubtedly, it was not a "material" at all on which the Tribunal could base its decision.

Onus is upon the assessee to prove the identity and creditworthiness of subscribers and the genuineness of transactions under section 68 • Under section 68 the onus is on the assessee to prove the three ingredients, i.e., identity and creditworthiness of the person from whom the monies were taken and the genuineness of the transaction. As to how the onus can be discharged would depend on the facts and circumstances of each case. It is expected of both the sides - The assessee and the assessing authority - to adopt a reasonable approach. • The assessee was a private limited company, which cannot issue shares in the same manner in which a public limited company does. It has to generally depend on persons known to its directors or shareholders directly or indirectly to buy its shares. Once the monies are received and shares are issued, it is not as if the share-subscribers and the assessee- company lose touch with each other and become incommunicado. It is a continuing relationship. • The share-subscribers in the present case have each invested substantial amounts in the assessee's shares. Most of them, barring two or three, are 402 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 themselves private limited companies. The assessee-company received the share monies; it even says that the communications sent by it at the addresses did not return unserved, yet when the Assessing Officer requested it that too only after trying to serve the summons unsuccessfully to produce the principal officer of the subscribing companies, the assessee developed cold feet and said it cannot help if those companies did not appear and that it was for the Assessing Officer to enforce their attendance. • It was not open to the assessee, given the facts of this case, to direct the Assessing Officer to go to the website of the company law department/ROC and search for the addresses of the share-subscribers and then communicate with them for proof of the genuineness of the share- subscription. That is the onus of the assessee, not of the Assessing Officer. [Para 7] • So far as creditworthiness of the share subscribers is concerned, difficulty may be faced by the assessee to unimpeachably establish the creditworthiness of the share-subscribers, but at the same time mere furnishing of the copies of the bank accounts of the subscribers is not sufficient to prove their creditworthiness. There must be some positive evidence to show the nature and source of the resources of the share- subscriber himself. • If the assessee was serious enough to establish its case, it ought to have produced the principal officers of the subscribing companies before the Assessing Officer so that they could explain the sources from which the share-subscription was made. That would also have taken care of the difficulty of the assessee in proving the creditworthiness of the subscriber companies. • Instead , the assessee took an adamant, attitude and failed to comply with the direction of the Assessing Officer. It also challenged the Assessing Officer's finding that the summons sent to the companies came back unserved with the remark 'no such company', which was also supported by the report of the inspector who made a visit to the addresses. • The assessee thus took a very extreme stand which was not justified; certainly it did nothing worthwhile to discharge the onus to prove the creditworthiness of the subscribing companies. [Para 8] Tribunal did not seriously appraise the facts and circumstances of the case. • A perusal of the order of the Tribunal shows that it has gone on the basis of the documents submitted by the assessee before the Assessing Officer and has held that in the light of those documents, it can be said that the assessee has established the identity of the parties. It has further been observed that the report of the investigation wing cannot conclusively prove that the assessee' s own monies were brought back in the form of share application money. • It is not the burden of the Assessing Officer to prove that connection. There has been no examination by the Tribunal of the assessment proceedings in 403 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 any detail in order to demonstrate that the assessee has discharged its onus to prove not only the identity of the share applicants, but also their creditworthiness and the genuineness of the transactions. • No attempt was made by the Tribunal to scratch the surface and probe the documentary evidence in some depth, in the light of the conduct of the assessee and other surrounding circumstances in order to see whether the assessee has discharged its onus under section 68. • With respect, it appears that there has only been a mechanical reference to the case-law on the subject without any serious appraisal of the facts and circumstances of the case. [Para 12] • In view of above, it has to be held that the Tribunal was not right in law in upholding the order of the Commissioner (Appeals) deleting the addition made under section 68 on the ground that the assessee had proved the nature and source of the share subscription money and had established the identity and creditworthiness of the share-subscribers and the genuineness of the transactions. [Para 13] 9.3. Another case relied upon by the Revenue is CIT vs Empire Builtech Pvt. Ltd. (2014) 366 ITR 110 (Del.), wherein, it was held as under:-

'What, thus, transpires from the above discussion is that while Section 106 of the Evidence Act limits the onus of the Assessee to the extent of his proving the source from which he has received the cash credit, Section 68 gives ample freedom to the Assessing Officer to make inquiry not only into the source(s) of the creditor, but also of his (creditor's) sub- creditors and prove, as a result, of such inquiry, that the money received by the Assessee, in the form of loan from the creditor, though routed through the sub- creditors, actually belongs to, or was of, the Assessee himself. In other words, while Section 68 gives the liberty to the Assessing Officer to enquire into the source/sources from where the creditor has received the money, Section 106 makes the Assessee liable to disclose only the source(s) from 410 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 where he has himself received the credit and it is not the burden of the Assessee to show the source(s) of his creditor nor is it the burden of the Assessee to prove the creditworthiness of the source(s) of the sub-creditors. If Section 106 and Section 68 are to stand together, which they must, then, the interpretation of Section 68 has to be in such a way that it does not make Section 106 redundant. Hence, the harmonious construction of Section 106 of the Evidence Act and Section 68 of the Income Tax Act will be that though apart from establishing the identity of the creditor, the Assessee must establish the genuineness of the transaction as well as the creditworthiness of his creditor, the burden of the Assessee to prove the genuineness of the transactions as well as the creditworthiness of the creditor must remain confined to the transactions, which have taken place between the Assessee and the creditor. What follows, as a corollary, is that it is not the burden of the Assessee to prove the genuineness of the transactions between his creditor and sub-creditors nor is it the burden of the Assessee to prove that the sub-creditor had the creditworthiness to advance the cash credit to the creditor from whom the cash credit has been, eventually, received by the Assessee. It, therefore, further logically follows that the creditor's creditworthiness has to be judged vis-a-vis the transactions, which have taken place between the Assessee and the creditor, and it is not the business of the Assessee to find out the source of money of his creditor or of the genuineness of the transactions, which took between the creditor and sub-creditor and/or creditworthiness of the sub-creditors, for, these aspects may not be within the special knowledge of the Assessee." 9.10. In another decision in Mod. Creations Pvt. Ltd. vs Income Tax Officer (2013) 354 ITR 282 (Delhi), the Hon'ble High Court held/observed as under:-

11. The next ground for Assessment Year 2009-10 (grounds no. 9 to 11) are with respect to addition made on account of bogus purchases @ 12.5% of the purchases from various parties. The ld. counsel for the assessee explained that 422 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 the total purchases made from three parties are to the tune of Rs.24,44,25,543/- , whereas, the Ld. Assessing Officer made addition of the equal amount and the Ld. Commissioner of Income Tax (Appeal) restricted the addition to 12.5% of the value of the purchases amounting to Rs. 3,05,53,190/- It was explained by the Ld. Counsel that the assessee is a trader dealing in steel on wholesale basis and clearly identified/explained every purchase with the corresponding sale. It was submitted that quantitative information about the transaction in steel trading were duly furnished before the authorities. It was empathetically argued that the parties to whom the goods are sold are accepted as genuine and the assessee purchased steel from various other parties which is also at the respective same rate and the same has been accepted by the Assessing Officer. The assessee earned margin of about 0.30% on the steel trading transactions for which our attention was invited to page-285 of the paper book. In respect of the trading transaction in respect of the three parties, the assessee earned profit @ 0.26%, whereas, the profit earned in respect of the transaction which are not 423 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 accepted by the Assessing Officer is at par with the profit earned in other transaction where the Ld. Assessing Officer has accepted the genuineness of the purchases. In support of this proposition the appellant relies upon following decisions: � DCIT 25 (3) Mumbai Vs Rajeev G. Kalathil ITAT Mumbai � Free India Assurance Services Ltd Vs Dy. Commr. of Income tax ITAT Mumbai 12 taxman 424 (Mum) � Jagdamba Trading Co. Vs income tax Officer ITAT Jodhpur 16 SOT 66 � Ganpatraj A. Sanghavi Vs Asst. Comm. Of Income Tax 15 (3) ITAT Mumbai � Babulal C. Borana Vs Third Income Tax Officer 282 ITR pages 251 Bom High Court � Commr. Of income Tax-II Vs Gujarat Ambuja Export Ltd. 43 Taxmann 244 Guj. High Court � Commissioner of income tax Vs M.K. Brothers 30 Taxmann 547 (Guj. HC) � Commr. Of income tax-I Vs Nangalia Fabrics P.Ltd. 220 Taxmann 17 HC Guj. � Commr. Of Income tax-I Mumbai Vs Nikunj Eximp Enterprises P. Ltd. 372 ITR 619 (Bom HC) � Sagar Bose Vs Income Tax Officer ITAT, Calcutta 56 ITD 561 (CAL.)

12. Thus, it is apparent that both the Commissioner (Appeals) and the Tribunal have concurrently accepted the finding of the Assessing Officer that the apparent sellers who had issued sale bills were not traceable. That goods were received from the parties other than the persons who had issued bills for such goods. Though the purchases are shown to have been made by making payment thereof by account payee cheques, the cheques have been deposited in bank accounts ostensibly in the name of the apparent sellers, thereafter the entire amounts have been withdrawn by bearer cheques and there is no trace or identity of the person withdrawing the amount from the bank accounts. In the light of the aforesaid nature of evidence it is not possible to record a different conclusion, different from the one recorded by the Commissioner (Appeals) and the Tribunal concurrently holding that the apparent sellers were not genuine, or were acting as conduit between the assessee-firm and the actual sellers of the raw materials. Both the 426 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 Commissioner (Appeals) and the Tribunal have, therefore, come to the conclusion that in such circumstances, the likelihood of the purchase price being inflated cannot be ruled out and there is no material to dislodge such finding. The issue is not whether the purchase price reflected in the books of account matches the purchase price stated to have been paid to other persons. The issue is whether the purchase price paid by the assessee is reflected as receipts by the recipients. The assessee has, by set of evidence available on record, made it possible for the recipients not being traceable for the purpose of inquiry as to whether the payments made by the assessee have been actually received by the apparent sellers. Hence, the estimate made by the two appellate authorities does not warrant interference. Even otherwise, whether the estimate should be at a particular sum or at a different sum, can never be an issue of law.” In the aforesaid case, the Hon'ble High Court accepted that the apparent sellers, who issued the said bills were not traceable and the goods received from parties other than the persons, who had issued the bills for such goods. The purchases were shown to have been made by making payments, through banking channel and thus the apparent sellers were not genuine or were acting as conduit between the assessee and the actual seller. In such a situation, the conclusion drawn by the Ld. Commissioner of Income Tax (Appeal) as well as by the Tribunal was affirmed. Hon'ble Apex Court in Kachwala Gems vs JCIT (2007) 158 taxman 71

“The Tribunal in the case of Vijay Proteins Ltd. (supra) has observed that it would be just and proper to direct the Assessing Officer to restrict the addition in respect of the undisclosed income relating to the purchases to 25% of the total purchases. The said decision was confirmed by this Court as well. On consideration of the matter, we find that the facts of the present case are identical to those of M/s. Indian Woollen Carpet Factory (supra) or Vijay Proteins Ltd. (supra) In the present case the Tribunal has categorically observed that the assessee had shown bogus purchases amounting to Rs. 2,92,93,288/- and taxing only 25% of these bogus claim goes against the principles of Sections 68 and 69C of the Income Tax Act. The entire purchases shown on the basis of fictitious invoices have been debited in the trading account since the transaction has been found to be bogus. The Tribunal having once come to a categorical finding that the amount of Rs. 2,92,93,288/- represented alleged purchases from bogus suppliers it was not incumbent on it to restrict the disallowance to only Rs. 73,23,322/-. 6.1 In the case of NR Paper & Boards Ltd. (supra), this Court has discussed the issue as to whether after making of block assessment, regular assessment is barred or prohibited by law. This court has held that there would be no overlapping in the nature of assessment made under this Chapter of undisclosed income and the regular assessment made u/s 143(3). However, if the said decision is read in context of questions raised in the present appeal, it cannot be read as having held that even if the material found during the course of search expose the falsity of the entries made in the regular books of accounts, the consequent concealed income cannot be assessed as undisclosed income in the block assessment under Chapter XIV-B. The said decision shall therefore not be applicable on the facts and circumstances of the present case. The Tribunal is justified in holding the same against the assessee and in favour of revenue.”

14. In relation to the proposed question (F) which relates to the deletion of addition of Rs. 44,54,426 made on account of purchase of crane and allowing depreciation on the same, the Assessing Officer observed that the assessee had purchased a crawler crane for an amount of Rs. 24,61,000 excluding the cost of spare parts of Rs. 14,98,490. The Assessing Officer after examining the evidence on record and considering the explanation given by the assessee, made addition of Rs. 44,54,426, Rs. 39,59,490 being the purchase price of the crane along with its spare parts and Rs. 4,94,936 being depreciation claimed by the assessee. The Commissioner (Appeals), upon appreciation of evidence on record, was of the view that the Assessing Officer has not appreciated the facts of the case properly and had made disallowance which was not permitted by the Income-tax Act. It was held that disallowance could only have been made in respect of expenses debited to the profit and loss account whereas in the present case the purchase of crane and spare parts of the crane and other machineries were in the nature of acquisition of capital asset. According to the Commissioner (Appeals), the disallowance could have been made on depreciation only if at all the Assessing Officer conclusively proved that the purchases of crane and other parts are bogus. Upon appreciation of the material on record the Commissioner (Appeals) found that the Assessing Officer has simply brushed aside all the evidence on account of technical infirmities and that the evidence such as octroi receipt ; hypothecation of the crane to the bank; existence of the crane even till date with the assessee conclusively proved that the crane was purchased and it was in use even as on date with the assessee. The Commissioner (Appeals) accordingly found that there was no scope for any disallowance and 432 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 accordingly deleted the disallowance made on account of purchase of crane and allowed the depreciation as claimed by the assessee.

“Being aggrieved by the aforesaid order, the assessee went in second appeal before the Tribunal. It was urged on behalf of the assessee that the transactions in question were normal business transactions and the assessee had made payments by cheques. The parties did not come forward and if they did not come, the assessee should not suffer. However, on behalf of the Revenue, it was urged that detailed inquiries were made and thereafter the conclusion was reached. The Tribunal found that there was no evidence anywhere that these concerns gave bogus vouchers to the assessee. No doubt, there were certain doubtful features, but the evidence was not adequate to conclude that the purchases made by the assessee from the said parties were bogus. The Tribunal accordingly, did not sustain the addition retained by the Appellate Assistant Commissioner. Hence, at the instance of the Revenue, the aforesaid question has been referred to this court for opinion. On a perusal of the order of the Tribunal, it clearly appears that whether the said transactions were bogus or not was a 434 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 question of fact. The Tribunal has also pointed out that nothing is shown to indicate that any part of the fund given by the assessee to these parties came back to the assessee in any form. It is further observed by the Tribunal that there is no evidence anywhere that these concerns gave vouchers to the assessee. Even the two statements do not implicate the transactions with the assessee in any way. With these observations, the Tribunal ultimately has observed that there are certain doubtful features, but the evidence is not adequate to conclude that the purchases made by the assessee from these parties were bogus. It may be stated that the assessee was given credit facilities for a short duration and the payments were given by cheques. When that is so, it cannot be said that the entries for the purchases of the goods made in the books of account were bogus entries. We, therefore, do not find that the conclusion arrived at by the Tribunal is against the weight of evidence. In that view of the matter, we answer the question in the affirmative, that is, in favour of the assessee and against the Revenue. Accordingly, the reference stands disposed of with no order as to costs.”

“2.2.Aggrieved by the order of the AO, assessee preferred an appeal before the First Appellate Authority(FAA).Before him it was argued that assessee had filed copies of bills of purchase from DKE and NBE, that both the suppliers were registered dealers and were carrying proper VAT and registration No.s, that ledger accounts of the parties in assessee's books showed bills accounted for, that payment was made by cheques, that a certificate from the banker giving details of cheque payment to the said parties was also furnished. Copies of the consignment, received from the Government approved transport contractors showing that material purchased was actually delivered at the site was furnished before the AO. It was also argued that some of the material purchased from the said parties were lying part of closing stock as on 31.03.2009 as per the statement submitted on record. After considering the assessment order and the submissions made by the assessee, FAA held that the transactions were supported by proper documentary evidences, that the payments made to the parties by the assessee were in 435 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 confirmation with bank certificate, that the suppliers was shown as default under the Maharashtra VAT Act could not be sufficient evidences to hold that the purchases were non- genuine, that the AO had not brought any independent and reliable evidences against the assessee to prove the non- genuineness of the purchases, that there was no evidence regarding cash received back from the suppliers. Finally, he deleted the addition made by the AO . “2.3.Before us, Departmental Representative argued that both the suppliers were not produced before the AO by the assessee, that one of them was declared hawala dealer by VAT department, that because of cheque payment made to the supplier transaction cannot be taken as genuine. He relied upon the order of the G Bench of Mumbai Tribunal delivered in the case of Western Extrusion Industries. (ITA/6579/Mum/2010- dated 13.11.2013). Authrorised representative (AR) contended that payments made by the assessee were supported by the banker’s statement, that goods received by the assessee from the supplied was part of closing stock, that the transporter had admitted the transportation of goods to the site.He relied upon the case of Babula Borana (282 ITR251), Nikunj Eximp Enterprises (P) Ltd. (216Taxman171)delivered by the Hon’ble Bombay High Court. 2.4.We have heard the rival submissions and perused the material before us. We find that AO had made the addition as one of the supplier was declared a hawala dealer by the VAT Department. We agree that it was a good starting point for making further investigation and take it to logical end. But, he left the job at initial point itself. Suspicion of highest degree cannot take place of evidence. He could have called for the details of the bank accounts of the suppliers to find out as whether there was any immediate cash withdrawal from their account. We find that no such exercise was done. Transportation of good to the site is one of the deciding factor to be considered for resolving the issue. The FAA has given a finding of fact that part of the goods received by the assessee was forming part of closing stock. As far as the case of Western Extrusion Industries. (supra)is concerned, we find that in that matter cash was immediately withdrawn by the supplier and there was no evidence of movement of goods. But, in the case before us, there is nothing, in the order of the AO, about the cash traial. Secondly, proof of movement of goods is not in doubt. Thererfore, considering the peculiar facts and circumstances of the case under appeal, we are of the opinion that the order of the FAA does not suffer from any legal infirmity and there are not sufficient evidence on file to endorse

,raised by AO,is about not sustaining addition of Rs.3.65 crores made under the head peak credit of transactions related to bogus purchases.The AO had received information from the office of the DGIT(Inv.),Mumbai regarding search actions which were carried out in the cases of Bhanwarlal Jain Group and Rajendra Jain Group.As per the informa -tion of the investigation wing,Bhanwarlal Jain(BJ)and other persons associated with him as well as Rajendra Jain(RJ)and person of his group had admitted, under oath during the course of search and seizure proceedings,that they were providing accommodation entries for bogus purchases, through their various benami concerns.On the basis of the information received,the AO held that the assessee had obtained non-genuine bills form following five entities: Name Amount 1.M/s. A2 Jewels(AJ)- Rs.1.88 crores 2.M/s. Daksh Diamonds(DD)- Rs. 33.87 lakhs 3.M/s.Jewel Diam (JM)- Rs.82.87 lakhs 4.M/s.Little Daim (JD)- Rs.58.09 lakhs 5.M/s.Vitrag Rs.1.91 lakhs He made an addition of Rs.3,65,08,250/-to the total income of the assessee,as per the provisions of section 69. C of the Act.The AO further observed that BJ had explained the modus operandi and had confessed that the group was issuing bogus bills and was providing accommodation entries. 4.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority(FAA)and made detailed submissions.After considering the available material,he observed that mere payment by account-payee-cheques would not be sacrosanct.He referred to the case of Precision Finance(P)Ltd.(208ITR465)of the Hon Calcutta High Court and held that the AO had held that the accommodation entries were given in form of cheques/ RTGS,that same were routed through bank accounts of various bogus entities of BJ Group,that BJ had admitted that his group was issuing bogus bills,that later on 437 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 BJ had retracted his statement,that those evidences could not be overlooked,that the assessee had made purchases from some other parties probably in cash,that it had taken bills from the other parties to regularize the transactions.He referred to the case of Vijay Proteins Ltd. (58ITD428), Sanjay Oil Cakes (316 ITR 274) and Simit P Seth (356ITR451)and held that once the sales were accepted by the AO the very basis of purchases could not be questioned,that the entire purchase price could not be disallowed,that only the profit element embedded in such purchases could be added to the income of the assessee,that the estimation would vary with business to business.Finally,he held that in the case under consideration purchases were not beyond doubt,that the assessee had shown correspond -ing sales in the books of account,that what could be taxed was differential gross profit.He estimated the GP @ 12.5% and directed the AO to reduce the GP already shown by the assessee from the estimate. 5.During the course of hearing before us,the Departmental Representative(DR)stated that assessee did not produce the stock register during the assessment proceedings,that the AO had doubted the sales made by the assessee,that transactions routed through banking channels did not prove genuineness of the transactions,that notices issued u/s.133(6) remained unserved,that there was no justification for restricting the addition to 12.5%.He relied upon the case of N K Proteins Ltd.(2017-TOIL-23-SC-IT,dated 16/01/2017). The Authorised Representative(AR)argued that the AO had not provided opportunity of cross examining BJ,that from day-one the assessee was asking for cross examination,that he had raised a specific ground before FAA about not following the principles of natural justice and denying the opportunity of cross examination by the AO,that the FAA wrongly stated that request by assessee was made late,that AO had rejected the books of account without finding any defect in them,that on the basis of uncorroborated statement of third parties books of accounts should not have been rejected,that assessee had filed the evidence to prove genuineness of purchases,that it had filed ledger account(Pg.36 of the PB),copy of bank statement,confirmation letter(Pg.49 of the PB),purchase bill,copy of acknowledgement of return of income for the AY.2007-08 from LD along with bank statement of the supplier,that it had also filed an affidavit of the supplier stating that disputed transaction was genuine,that similar documents were also submitted for JD, DD,AJ and Vitrag.He referred to pages 66 to 169 of the PB. He further stated that VAT department had treated these transaction as genuine,that BJ had retracted his statement,that the suppliers were assessed to tax,that copies of their returns of income and balance sheets were furnished during the assessment proceedings,that the AO had not proved that the returns of incomes of the suppliers were non genuine,that in response to the notices issued u/s.133(6)of the Act the suppliers had admitted to have supplied goods to the assessee,that the AO deliberately did not mention said fact while completing assessment order, that regular stock registers were maintained by all the suppliers,that there was no evidence of cash withdrawal,that the AO had not rejected the sales made by the assessee,that basic conditions for invoking the provisions of section 69 C were not fulfilled.He referred to cases of Indo Unique

438 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 Trading Pvt.Ltd.(ITA.s/6341/ Mum/2016 & 6721/Mum/2016-AY.07- 08,dtd.16/8/2017);wherein the addition made by AO were deleted by the Tribunal.In that case statement made by BJ were considered(Pg.118-124 of the Legal PB-II).He also relied upon the cases of Ronak Gems Pvt.Ltd.(ITA/3118/Mum/2017,AY.2007-08,dated 04/10/2017);M/s.Vaman International Pvt.Ltd. (ITA.s/1020 & 1041/Mum/ 2017,A.Y.2007-08,2008-09& appeals for other AY. s);Kaysons Agencies Private Ltd.(ITA/3812/ Mum/2014,AY.2005-06,dtd.17/3/2017);M/s. Fancy Wear(ITA/ 1596/Mum/2016,AY.2011-12).He also referred to VAT returns filed by DD,AJ and LD filed for the AY.2007-08..Finally, he relied upon the order of the Tribunal in the case of M/s. Vama International(ITA.s/7315-7317/Mum/2016,AY.s2013- 14,2012-13,2011-12,dtd.15/2/2018).In that case the Tribunal had deliberated upon identical issue i.e.alleged bogus purchases from BJ group. 6.Here,we would like to mention that identical issue was decided by us while adjudicating the appeals filed by the AO and Jitendra M Kitawat(HUF) vide our dated 11.04.2018 (ITA/ 7047/ Mum/2016/& ITA/7100/Mum/2016-AY.2007- 08).Relevant portion of the order is reproduced here for ready reference. “ 5.Before proceeding further,we would like to reproduce the relevant portion of the order of the Tribunal in the case of Vama International(supra)which contains the facts of the case,arguments of the AR and the DR and the finding of the Tribunal.The order reads as under: “3 .Briefly stated the facts are that, the assessments for the Assessment Years 2011-12 to 2013-14 were reopened u/s. 147 of the Act based on the information received from DGIT(Investigation), Mumbai that the assessee is one of the beneficiaries of bogus purchases made by certain entities operated/managed by Bhanwarlal Jain group which is only a bogus concern. During the course of search, Shri Bhanwarlal Jain has admitted in the statement taken on oath u/s. 132(4) of the Act that he has indulged in providing accommodation entries and also admitted that these are paper companies with no real business transactions. It was also admitted by him that he was engaged in business of bill shopping through all the concerns due to which they do not have any physical stock of diamond with them at any of its places at any point of time. It was also admitted that they were merely lending names of various concerns to importer of diamonds who takes actual delivery. Based on this information from DGIT(Investigation) the assessments were reopened and in the course of re-assessment proceedings assessee was required to prove the genuineness of the purchases made from the entities operated by Shri Bhanwarlal Jain. Assessee furnished its submissions along with purchase bills, copy of ledger account, copies of bank statements etc. to verify the genuineness of the purchases. The Assessing Officer issued notices u/s.133(6) of the Act to the parties and some of the parties have confirmed that the transactions from the assessee was genuine. Parties have filed their acknowledgment of Income-tax return filed, copy of invoice, ledger account of the assessee firm in their books showing payments received from the assessee. However, the Assessing Officer not convinced with the submissions of the assessee and since no delivery challans were furnished to prove the delivery of goods have been actually made by the alleged suppliers to the assessee and since the Directors/ Proprietors of the supplier companies/firms have deposed on oath that all the concerns controlled and managed by them are not doing any real trading in diamonds but indulged in paper transaction only, the Assessing Officer rejected the submissions of the assessee that the purchases made from these entities are genuine. The Assessing Officer stated that the statement recorded from Shri Bhanwarlal Jain clearly established that the 439 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 concerns controlled and operated by them are not carrying out any genuine business activity.

It was also observed by the Assessing Officer that the report received from the office of the DGIT (Investigation) during the course of post search inquiries the modus-operandi followed by the group concerns have been accepted by the key persons in the group. Even during the post search enquires Shri Bhanwarlal Jain admitted the fact that they are engaged in paper transaction only without any physical stock of the goods in the name of their numerous concerns they import rough and cut and polished diamonds for the other clients who do not want to show import in their own books. Further these concerns issued bills accommodation entries in a commission to various parties who normally purchases diamonds in cash from undisclosed parties and need bills to show purchases against sales in their account. Further these concerns also provide accommodation entries to unsecured loan against cash. Therefore, the Assessing Officer concluded that the transactions made by these entities managed by Shri Bhanwarlal Jain are only providing accommodation entries to the beneficiaries and assessee is one among such beneficiaries. Therefore, the Assessing Officer concluded that the material was debited against various suppliers have entered into stock register and the assessee has shown corresponding sales against the said purchases debited and this could only mean that the diamonds were brought by the assessee from the gray market without bill and to adjust these transactions into the Books of Accounts, assessee has obtained bills from Shri Bhanwarlal Jain group concerns. Therefore, he concluded that the assessee obtained only the bogus bills without movement of goods and goods were purchased in gray market by paying cash. Therefore, taking note of all these factors into consideration the Assessing Officer in so far as the Assessment Years 2012-13 and 2013-14 treated 12.5% of the purchases as non- genuine and in so far as Assessment Year 2011-12 is concerned 100% of the purchases were treated as bogus purchases.

15. In this regard, the ratio was laid down by the Hon'ble High Court of Bombay in the case of CIT v.Nikunj Eximp Enterprises(P.)Ltd.,is very relevant,wherein it was held that- “When the assessee have filed letter of confirmations of the suppliers, Bank statements highlighting the payment entries through account payee cheque, copies of invoices, stock reconciliation statements before the AO; and merely because the suppliers did not appear before the AO, one cannot conclude that the purchases were not made by the assesses. The AO cannot disallow the purchases on the basis of suspicion because the suppliers were not produced before them." 16.The facts and circumstances as outlined above, clearly suggest that the purchases by the appellant from M/s.Daksh Diamonds cannot be doubted but a major flaw in these transactions is the unverifiable nature of transactions of these purchases from M/s. Daksh Diamonds as it was not found available at the given address. Thus the purchase prices shown on the invoices are not subjected to verification and as such it was difficult to establish the correctness of the purchase prices paid for the materials purchased from them. Such verification of the sale price shown on the invoices/bills was necessary to ascertain the correctness of the profits shown by the appellant for the period under consideration. This verification was also vital to determine as to whether the purchase prices shown on the bills/invoices, are as per prevailing market prices of the materials purchased and to ascertain that the price paid for the materials purchased from M/s.Daksh Diamonds is not over invoiced. In the absence of any such verification of the correctness of the price paid for the materials purchased by the appellant, the purchase price paid as mentioned on the invoices/bills cannot be accepted as the correct price paid for the goods purchased from M/s.Daksh Diamonds. In view of the same, the possibility of over-invoicing of the materials purchased to reduce the profit, 'cannot be ruled out. Therefore, the gross profit rate shown by the appellant for the year under consideration cannot be relied upon. In the circumstances, the correct approach in such transactions would be to estimate the additional benefit or profit earned on these purchases and not to disallow the entire purchases from M/s. Daksh Diamonds. The disallowance of the entire amount of purchases from M/s.Daksh Diamonds would not be logical and would amount to travesty of justice. In my view either the purchases from above mentioned party are over invoiced or the purchases were actually made but not from the said party from which it was claimed to have been made and instead may have been purchased from grey market without proper billing or documentation.

443 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 18. In the case of CIT-1 Vs Simit P. Sheth, ITA no. 553 of 2012, order dated 16.01.2013, while deciding a similar issue the Hon'ble High Court of Gujarat has held that: “We are broadly in agreement with the reasoning adopted by the Commissioner (Appeals) with respect to the nature of disputed purchases of steel. It may be that the three suppliers from whom the assessee claimed to have purchased the steel did not own up to such sales. However, vital question while considering whether the entire amount of purchases should be added back to the income of the assessee or only the profit element embedded therein was to ascertain whether the purchases themselves were completely bogus and nonexistent or that the purchases were actually made but not from the parties from whom it was claimed to have been made and instead may have been purchased from grey market without proper billing or documentation. In the present case, CIT believed that when as a trader in steel the assessee sold certain quantity of steel, he would have purchased the same quantity from some source. When the total sale is accepted by the Assessing Officer, he could not have questioned the very basis of the purchases. In essence therefore, the Commissioner (Appeals) believed assessee s theory that the purchases were not bogus but were made from the parties other than those mentioned in the books of accounts. That being the position, not the entire purchase price but only profit element embedded in such purchases can be added to the income of the assessee. So much is clear by decision of this Court. In particular, Court has also taken a similar view in case of Commissioner of Income Tax-IV vs. Vijay M Mistry Construction Ltd. vide order dated 10.01.2011 passed in Tax Appeal No. 1090 of 2009 and in case of Commissioner of Income Tax-I vs. Bholanath Poly Fab Pvt. Ltd. vide order dated 23.10.2012 passed in Tax Appeal No. 63 of 2012. The view taken by the Tribunal in case of Vijay Proteins Pvt. Ltd. Vs. CIT reported in 58 ITD 428 came to be approved.” (Emphasis supplied) 19. Similarly while dealing with an identical issue, in the case of CIT v. Bholanath Poly Fab (Purchase)Ltd. ITA.No.No. 63 of 2012, in the order dated 23/10/2012, the Hon'ble High Court of Gujarat has held as under:- “We are of the opinion that the Tribunal committed no error. Whether the purchases themselves were bogus or whether the parties from whom such purchases were allegedly made were bogus is essentially a question of fact. The Tribunal having examined the evidence on record came to the conclusion that the assesses did purchase the cloth and sell the finished goods. In that view of the matter, as natural corollary, not the entire amount covered under such purchase, but the profit element embedded therein would be subject to tax.This was the view of this court in the case of Sanjay Oilcake Industries v. CIT (2009] 316 ITR 274 (Guj). Such decision is also followed by this court in a judgment dated August 16,2011, in Tax Appeal No. 679 of 2010 in the case of CIT v. Kishor Amrutlal Patel. In the result, tax appeal is dismissed."

18. The reason for treating these purchases as non-genuine /bogus is the statements given by Bhanwarlal Jain group and non-submission of delivery invoices by the assessee. It is the submission of the assessee that the statements given by Bhanwarlal Jain group have been retracted by them subsequently and there is a practice of hand delivery of such precious and light weighing materials like Diamonds is prevailing in the industry. Therefore, no adverse conclusion can be drawn merely due to absence of documents proving deliveries. The analysis furnished before us on the Gross Profit margin shown by the assessee also suggest that assessee is consistent in showing overall Gross Profit around 6% in these Assessment Years. The average Gross Profit shown by the assessee stood at 6.04% for these Assessment Years. Therefore even if we go by the submissions of the Ld.DR that the profit element should be estimated at 6% as per the CBDT Circular the assessee has already shown 6.04% of overall Gross Profit during these three Assessment Years. The disallowance/estimation of profit on purchases by treating them as bogus cannot be made only on the statements recorded from third parties, especially when those parties have responded to the notice issued u/s.133(6) of the Act by filing all necessary documents to prove that they have made sales to the assessee. It is also the submission of the assessee that none of the impugned parties have been declared as Hawala dealers or suspicious dealers by the Sales Tax Department and the genuineness of the purchases have been doubted merely on the basis of the statement given by the Bhanwarlal Jain group. The assessee has furnished all necessary evidence to prove the genuineness of the purchases, the parties have also responded to the notices u/s. 133(6) of the Act by filing necessary evidence as to prove that the purchases are genuine. Thus the assessee discharged the onus to prove the genuineness of the transactions made by the assessee from the impugned parties. The Assessing Officer completely failed to make further enquiries in these cases. The documents furnished by the supplier of the goods have not been disproved by the Assessing Officer in these matters.

7.Grond no.6,raised by the Assessee,is about direction given by the FAA to the AO to estimate the profit of 12.5% of the purchase from above mentioned five suppliers namely,AJ,DD,JD, LD and Vitarag.The assessee has also objected to addition of Rs.25.53 lakhs to his income as well invoking of section 69C of the Act. 7.1.While deciding the appeal filed by the AO,we have decided the issue against the AO. Following the same,we decide ground no.6 in favour of the assessee.We are also of the opinion that provisions of section 69C are not applicable in case of alleged bogus purchases. 8.Next Ground is about addition of Rs.79,80,000/-.During the assessment proceedingings,the AO found that the assessee had taken unsecured loans of Rs.79.80 lakhs.After discussing the modus operandi followed by BJ Group,the AO treated the amount in question as unexplained cash credit,invoking the provision of section 68 of the Act. 8.1.In the appellate proceedings before the FAA,the assessee made detailed submissions.After considering the assessment order and the submission of the assessee,the FAA held that he had received unsecured loan of Rs.79.80 lakhs from LD,that he had admitted that loan was received through banking channels and that same could not be considered as unexplained cash credit,that during the appellate proceedings the assessee had changed its stand,that before him the assessee claimed that it had received advances from LD,that it was also claimed that advances received were for business purposes and that disputed amount was returned back to LD.The FAA further observed that it did not furnish details of the business deals which did not materialize.Finally,he upheld the order of the AO. 8.2.Before us,the AR argued that supporting evidences-to prove genuineness of loan like ledger account,bank statement,confirmation letter,purchase bill,copy of return of income filed by LD for the year under appeal-were submitted before the departmental authorities,that in its affidavit LD had admitted of advancing

447 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 loans,that identity, creditworthiness and genuineness of the transactions were proved beyond doubt,that money was returned back to the lender in the subsequent year,that LD had admitted receiving back the money,that the assessee was one of the creditors of LD.He referred to the cases of Sanghavi Reality Pvt.Ltd.(ITA.s/3018-20/Mum/2017 AY.2008-09-2011-12),Vikram Muktilal Vora(ITA/842/Mum/2017,AY.2007-08),Gujarat Construction(ITA/7040/Mum/2016,AY.2007-08) 8.3.We have heard the rival submissions and perused the material before us.We find that the FAA had observed that the transaction with LD could not be considered genuine as it had advanced unsecured loans to the assessee.It is found that LD in its affidavit has admitted that it had advanced loan to the assessee. 8.4.We find that identical issue was decided by us,in the case of Jitendra M Kitawat(HUF)that was decided by us on 11.04.2018(supra).We are reproducing the order dealing with the issue and it reads as follow: “8.3.Here we would like to refer to the case of Reliance Corporation (ITA/1069-71/Mum/ 2017, AY.2008-09 to 2010-11,dtd.12/04/2017)wherein the similar issue was dealt with.In that case also,on the basis of search and seizure operations carried out in the case of BJ, additions u/s.68 were made to the total income of the assessee.We are reproducing the relevant portion of the order and it reads as under: 4.Facts of the case are that the assessee filed its return of income on 15.10.2010 declaring a total income at Rs.56,732/-.The return was processed under section 143(1) and the assessment was completed u/s 143(3) assessing and other three appeals the total income of the assessee at an income of Rs.33,82,280/- vide order dated 20.3.2013. The case of the assessee was re-opened under section 147, on the basis that the information has been received from DGIT(Inv), Mumbai upon search and seizure action u/s 132 of the Act carried out on the group of Shri Bhanwarlal Jain that the assessee has received accommodation entries from the said parties/ concerns managed and operated by him.According to the information,the assessee obtained accommodation entries in the form of unsecured loans from M/s Laxmi Trading Company, M/s Rose Impex and Megha Gems, which are belonging to Shri Bhanwarlal Jain. The AO accordingly formed an opinion that the income to the tune of Rs.2,02,62,016/- has escaped assessment within the meaning of section 147 of the Act and accordingly reopened the assessment by issuing notice under section 148 of the Act dated18.3.2015 and ultimately the assessment was completed vide order dated 4.3.2016 passed under section 143(3) read with section 147 of the Act assessing the total income of the assessee at an income of Rs.1,66,31,511/- as against the earlier assessment made at Rs.33,82,280/- made under section 143(3) dated 20.3.2013 thereby making two additions namely unexplained cash credit from the parties referred hereinabove of Rs.1,29,04,231/- and unexplained expenditure of Rs.3,45,000/- under section 69C of the Act. The assessee filed before the AO various informations/details like loan confirmations from the lenders, ledger account, PAN of the parties, Profit & Loss account and the and other three appeals balance sheet etc including the bank statement of the lenders and also of the assessee confirming the receipt of money through banking channel and form No.16 qua the TDS deducted. The lenders confirmed the loans having been given to the assessee during personal appearance before the AO in response to notice u/s 133(6) of the Act However, the AO acting solely on the information received

448 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 from DGIT(Inv), Mumbai rejected the contentions of the assessee and framed the assessment as stated above. 5.Aggrieved by the order of the AO, the assessee preferred and appeal before the ld.CIT(A) who dismissed the appeal of the assessee ex-parte on the ground that the assessee failed to appear before the ld.CIT(A) by observing and holding as under : “4 Decision on grounds of appeal no.1: 4.1 The relevant facts are like this. The assessee is a firm which is engaged in the business of builders & developers. A search & seizure action was conducted in the Bhanwarlal Jain group of cases by Investigation Wing Mumbai. As a result of search, it was found by the Investigation Wing that this group is a leading entry provider of Mumbai. There are many concerns floated by the group who provide accommodation entries of bogus loan The AO received an information that the appellant has also taken loan from concerns found in the list of entry providers related with Bhanwarlal Jain group of cases. The AO asked the appellant to show cause as to why loan taken from Mls Laxmi Trading Company & Mls Rajan Diamonds should not be disallowed and added to the total income. As per the assessment order the appellant did not file any written submission on this issue. The AO added the amount of fresh loans and interests on existing doubtful loans paid during the AY 2010-11 to the total income of the appellant. In this way, addition of Rs 1,29,04,231/- was made to the total income of the appellant and other three appeals 4.2 During the course of appeal proceedings, no one appeared nor was any written submission made. In the statement of facts and grounds ofappeal only general facts are stated. In absence of any written submission against the view taken by the AO in the assessment order it is held that the AO has rightly made the addition. The grounds of appeal No.1 is accordingly dismissed. 5 Decision on grounds of appeal no.2: 5.1 As per the assessment order the AO took a view that the appellant had introduced unexplained cash credits from entities related with Bhanwarlal Jain group of cases through accommodation entries arranged on commission basis. The AO accordingly computed 3% of Rs 1,15,00,000/- as undisclosed expenditure within the meaning of section 69C of the Act. In this way addition of Rs 3,45,000/- was made to the total income of the appellant. 5.2 During the course of appeal proceedings, no one appeared nor was any written submission made. In the statement of facts and grounds of appeal only general facts are stated. In absence of any written submission and/or document to substantiate the argument of the appellant against the view taken by the AO in the assessment order it is held that the AO has rightly made the addition. The grounds of appeal no.2 is accordingly dismissed. Aggrieved by the order of the FAA, the assessee is in appeal before us.

449 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 of the transactions and (iii) creditworthiness of the creditors. The ld.AR submitted that the onus is cast upon the assessee to explain the sources from which he has received the cash credit and the creditworthiness of the creditors is to be gauged vis –a-vis the transactions and other three appeals which occurred between the assessee and the creditors. The ld. AR submitted that it was not the burden or responsibility of the assessee to find out the source of creditors or the capacity of the creditors in order to prove the genuineness of transactions as has been held by the Hon’ble Gauhati High Court in the case of CIT V/s Smt. Sangmitra Bharali reported in 361 ITR 481). The ld AR further submitted that the addition was made out of unsecured loans raised by the assessee from the group concern of Bhanwarilal Jain Group engaged in providing accommodation entries. On the contrary , there was no indication or proof that loans taken by the assessee were merely accommodation entries and the money actually gone back to the lenders . The ld.AR also submitted that the creditors appeared before the AO in response to the notice issued u/s 133(6) and during the course of recording statements by the AO the lenders confirmed the loans having given to the assessee. Besides all the necessary details were submitted before the AO during the assessment proceedings.The assessee also provided the loan confirmation from the creditors, PAN of creditors ledger extract copy of Income tax return, profit and loss account, balance sheet and bank statement of the creditors and also of the assessee and form no.16 issued qua the TDS deducted and deposited. The ld. AR further submitted that the assessee has completely discharged its onus cast upon it by filing necessary informations/details before the AO and the AO without carrying out any further investigations and verification in the matter solely relied upon the and other three appeals information received from the DGIT(Inv) Mumbai that the creditors were engaged in issuing accommodation entries. In support of his contention, the ld.AR relied on the decision of the Hon’ble Supreme Court in the case of ITO V/s Lakhmani Mewal Das reported in (1976) 103 ITR 437 (SC), the decision of the Hon’ble Delhi High Court in the case of CIT V/s Gangeshwari Metal (P) Ltd reported in (2013) 96 DTR 299, wherein it has been held that there was a clear lack of enquiry on the part of the AO. Once the assessee had furnished all the material including PAN, loan confirmations and bank statements, in such an eventuality, no addition can be made u/s 68 of the Act. According to the ld.AR, the AO merely proceeded on the basis of information received from the third party and framed the assessment by making additions by stating in the assessment order that the explanation of the assessee is not acceptable. The ld. AR further relied upon the number of decisions like : i) CIT V/s Varinder Rawley (2014) 366 ITR 232 (P&H); ii) CIT V/s Sachital Communications (2014) 227 Taxman 219 (Mag); iii) CIT V/s Patel Ramniklal Hirji (2004) 222 Taxman 15 (Mag); iv) CIT V/s Jaikumar Bakliwal (2014) 366 ITR 217 (Raj); v) Nemi Chand Kothari V/s CIT (2003) 264 ITR 254(Gauhati); vi) CIT V/s Shalimar Buildwell Pvt (2014) 220 Taxman 138) (All); vii) CIT V/s Lalpuria Construction P L (2013) 215 Taxman 12(Mag) (Raj) viii) M/s Rushabh Enterprise V/s ACIT (Mum) WP 167/2015 and other three appeals ix) Andaman Timber Industries V/s CCE (2015) 281 CTR 0241 (SC) x) CIT V/s M/s Ashish International in ITA 4299/Mum/2009 7. Per contra, the ld.DR relied upon the orders of the authorities below by submitting that the loan creditors M/s Bhanvarilal Jain group was found to be engaged in the business of providing accommodation entries during the search and seizure action his group and the assessee was found to be the one of the beneficiaries of the said accommodation entries. The ld. DR submitted that in the present case though the assessee has filed all the necessary information but since the assessee borrowing monies from the tainted parties who were provided accommodation entries, it is beyond doubt that money borrowed by the assessee was nothing but accommodation entries. Lastly, the ld. DR prayed that in 450 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 view of the facts and the order of the FAA should be upheld by dismissing the appeal of the assessee. 8.We have heard the rival contentions perused the material placed before us including the orders of authorities below and orders relied upon by the parties. We find that undisputedly the assessee has borrowed money by way of loan from three aforesaid three parties i.e M/s Laxmi Trading Company, M/s Rose Impex and Megha Gems from whom the assessee borrowed the money and total outstanding including the interest as on 31.3.2010 were amounting to Rs.1,29,04,231/-. The case of the assessee was re-opened upon receiving the and other three appeals information from DGIT(Inv), Mumbai that the assessee was one of the beneficiary of the said accommodation entries provided by Mr.Bhanwarlal Jain and group. We find from the record that the assessee filed during the course of assessment proceedings all the details like loan confirmation letters from the creditors, PAN of the creditors, bank statements og the creditors and the assessee, form no.16 qua TDS on interest ,profit and loss account and balance sheet including the ledger account of the creditors, and ITR etc. Moreover, the loan creditors also appeared before the AO in compliance to the notice issued under section 133(6) of the Act and filed confirmations before the AO that loans were actually given to the assessee. From all these details and facts on record, we find that the assessee has discharged its onus cast upon it by filing all the necessary details as called for by the AO to corroborate the transactions of borrowing the money and thereby satisfied all the three main ingredients i.e. creditworthiness of the creditors, genuineness of the transactions and identity of the creditors by filing all the details as discussed above which proved that the identity of the creditors, genuineness of the transactions and creditworthiness of the creditors have been established by the assessee. So much so that the loan creditors in response to the notice issued under section 133(6) appeared before the AO and confirmed the that they have given interest bearing loans to the assessee on which TDS have been deducted and paid and form no.16A issued to the loan creditors also filed before the AO. Once the assessee has filed all and other three appeals the necessary documents before the AO then the onus is shifted to the department to disprove the stand of the assessee, which department has failed to do so in the present case. The AO has merely proceeded and relied on the information received from the DGIT(Inv), Mumbai that the assessee is one of the beneficiary of the accommodation entries without bringing any material against the assessee on record by contrary to the defense put up by the assessee during the course of appellant proceedings. No cross examination was allowed to the assessee and information was used against the assessee causing violation of natural justice. The FAA dismissed the appeal of the assessee exparte for non attendance of the ld.AR. In the case of Lakhmani Mewal (supra) the Hon’ble Supreme Court has¬ held as under : “Section 147 of the Income-tax Act, 1961 [Corresponding to section 34(1) of Indian Income-tax Act, 1922] – Income escaping assessment – Illustrations – Assessment year 1958-59 – Whether reasons for formation of belief contemplated by section 147(a) for reopening of assessment must have rational connection with or relevant bearing on formation of belief, and rational connection postulates that there must be direct nexus or live link between material coming to Income-tax Officer’s notice and formation of his belief that there has been escapement of assessee’s income from assessment in particular year because of his failure to disclose fully and truly all material facts – Held, yes – Whether duty cast upon assessee is to make true and full disclosure of primary facts at time original assessment, and it is for Income-tax Officer to draw correct inference from primary facts – Held, yes – Whether if Income-tax Officer draws inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment – Held, yes – ITO completed original assessment by allowing deduction of interest paid to certain creditors – Subsequently, he reopened

451 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 assessment for reasons recorded in report submitted to Commissioner for and other three appeals obtaining sanction under section 147(a) that one creditors had confessed that he was doing only name lending and that other creditors were only name lenders – There was no material to show that confession made by said creditor related to loan to assessee and not to some one else and also that said confession related to period which was subject matter of assessment – There was also no material to show that other creditors were name lenders – Whether live link or close nexus which should be there between material before Income-tax Officer and belief which he was to form regarding escapement of income of assessee from assessment because of latter’s failure or omission to disclose fully and truly all material facts was missing in case – Held, yes – Whether, thus, High court was not in error in holding that said material could not have led to formation of belief that income of assessee had assessment because of his failure or omission to disclose fully and truly all material facts – Held, yes. In the case of Smt. Sangmitra Bharali (upra) the Hon’ble Gauhati High-Court held as under : “ I. Section 68, read with sections 45 and 54F, of the Income-tax Act, 1961 - Cash credits (Undisclosed income v. LTCG) - Assessment year 2001-02 - Assessee held shares of company BPAL just for a period over 12 months and declared sale value 25 times more than purchase price - Company BPAL was not found at given address nor were its directors traceable - Purchase was not made through banking channel nor purchase price was verifiable in any way - Whether it was simply a sort of modus operandi to convert undisclosed income into a long-term 'capital gain' claiming same to be exempted invoking section 54F - Held, yes [Para 44] [In favour of revenue] II. Section 68 of the Income-tax Act, 1961 - Cash credits (Advance by purchaser) - Assessment year 2001-02 - One VHPL allegedly advanced assessee cash against booking of flat - Assessee proved that amount so received was duly recorded in books of account of VHPL - Identity of VHPL was also established by filing its IT returns, balance sheets, etc. - Whether no addition could be made in hands of assessee - Held, yes [Para 59] [In favour of assessee] III. Section 68 of the Income-tax Act, 1961 - Cash credits (Advance by purchaser) - Purchaser of car advanced certain sum to assessee - Identity of purchaser and genuineness of transaction was established - Whether transaction could not be treated as bogus and impugned amount could not be treated as an undisclosed income of assessee - Held, yes [Para 64] [In favour of assessee]” In the case of Gangeshwari Metal (P)Ltd (supra), the Hon’ble Delhi High Court has held as under : “ There are two types of cases, one in which the Assessing Officer carries out the exercise which is required in law and the other in which the Assessing Officer 'sits back with folded hands' till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The present case falls in the latter category. Here the Assessing Officer, after noting the facts, merely rejected the same. [Para 9] • There was a clear lack of inquiry on the part of the Assessing Officer once the assessee had furnished all the relevant material. In such an eventuality no addition can be made under section 68. [Para 10] • In view of above, impugned order passed by the Tribunal was to be upheld. [Para 11] In the case of Varinder Rawley (supra), the Hon’ble Punjab and Hariyana High Court has held as under :

452 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 “where the assessee shows that the entries regarding credit in a third party’s account were in fact received from third party and are genuine, he discharges the onus. In that case, the sum cannot be charged as the assessee’s income in the absence of any material to indicate that it belongs to the assessee”, particularly in a case where no summons u/s 131 is issued against the third party” In the case of Sachitel Communications P.Ltd (supra), the hon’ble Gujara High Court has held as under : “II. Section 68 of the Income-tax Act, 1961 - Cash credit (Loans) - Assessment year 2006-07 - Commissioner (Appeals) and Tribunal concurrently found that assessee proved identity of creditor and capacity to pay and that payment was made through banking channel - Whether no addition could be made on account of unsecured loan - Held, yes [Para 3] [In favour of assessee]” In the case of Patel Ramniklal Hirji, the Hon’ble Gujrat High Court has held as under : "The addition on the basis that four depositors furnished requisite details to prove their identity and showed the place of their residence. The loan was received through account payee cheques. Copies of Bank Statements was given and the details of PAN were available. All the materials duly proved the genuineness of the transaction of loan as well as creditworthiness of the depositors. Hence, the addition u/s. 68” In the case of Jaikumar Bakliwal (supra), the Hon’ble Rajasthan High Court has held as under: “Three things are required to be proved by recipient of money i.e. (1) identity of the creditor (2) capacity of the creditor to advance money and (3) genuineness of the transaction. Held, dismissing the appeal, that all cash creditors were assessed to income-tax and they proved a confirmation as well as their permanent account number. They had their own respective bank accounts which they had been operating and it was not the claim of the Assessing Officer that the assessee was operating their bank accounts. Most of the cash creditorsappeared before the Assessing Officer and their statements under Section 131 of the Income-tax Act, 1961, were also recorded on oath. There was no clinching evidence nor had the Assessing Officer been able to prove that the money actually belonged to none but the assessee. The addition of Rs.17,27,2501- under section 68 was not justified.” In the case of Nemi Chand Kothari (supra), the Hon’ble High Court has held as under : “16. A person may have funds from any source and an assessee, on such information received, may take loan from such a person. It is not the business of the assessee to find out whether the source or sources from which the creditor had agreed to advance the amounts were genuine or not. If a creditor has, by any undisclosed source, a particular amount of money in the bank, there is no limitation under the law on the part of the and other three appeals assessee to obtain such amount of money or part thereof from the creditor, by way of cheque in the form of loan and in such a case, if the creditor fails to satisfy as to how he had actually received the said amount and happened to keep the same in the bank, the said amount cannot be treated as income of the assessee from undisclosed source. In other words, the genuineness as well as the creditworthiness of a creditor have to be adjudged vis-a- vis the trasnactions, which he has with the assessee. The reason why we have formed the opinion that it is not the business of the assessee to find out the actual source or sources from where the creditor has accumulated the amount, which he advances, as loan, to the assessee is that so far as an assessee is concerned, he has to prove the genuinenss of the transaction and the creditworthiness of the creditor visa-vis the transactions, which had taken place between the assessee and the creditor and not 453 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 between the creditor and the sub-creditors, for, it is not even required under the law for the assessee to try to find out as to what source or sources from where the creditor had received the amount, his special knowledge under section 106 of the Evidence Act may very well remain confined only to the transctions, which he had with the creditor and he may not know what transaction(s) had taken place between his creditor and the sub-creditor. No such additional burden can be placed on an assessee, which is not envisaged by section 106 of the the Evidence Act. The Revenue/Assessing Officer, however, remains free to show that the amount, which has come to the hands of the assessee by way of loan from the creditor actually belonged to the assessee, but this conclusion cannot be reached by mere failure on the part of the sub-creditor to show his creditworthiness and/or the genuineness of the trsnaction between the creditor and sub-creditor, for, the creditor may receive any amount from sources known to the creditor only and if he fails to show how he has received the amount, in question, or if he fails to show the creditworthiness of his sub-creditor, such an amount may be treated as the income from undisclosed source of the creditor or of the sub-creditor, as the case may be, but such failure, on the part of the creditor cannot, in the absence of any clinching evidence, be treated as the income of the assessee derived from undisclosed source. :Held (i) that the assessee had established the identity of the creditors. The assessee had also shown, in accordance with the burden, which rested on him, under section 106 of the Evidence Act, that the said amounts had been received by him by way of cheques from the creditors which was not in dispute. Once the assessee had established these, the assessee must be taken to have proved that the creditor had the creditworthiness to advance the loans. Thereafter, the burden had shifted and other three appeals to the Assessing Office to prove the contrary. The failure on the part of the creditors to show that their Sub-creditors had creditworthiness to advance the said loan amounts to the assessee, could not, under the law be treated as the income by the appellant from undisclosed sources merely on the failure of the sub-creditors to prove their creditworthiness from undisclosed sources of the assessee himself, when there was neither direct nor circumstantial evidence on record that the said loan amounts actually belonged to, or where owned by, the assessee. The Assessing Officer failed to show that the amounts, which had come to the hands of the creditors from the hands of the sub-creditors, had actually been received by the sub-creditors from the assessee. Therefore, the Assessing Officer could not have treated the said amounts as income derived by the assessee from undisclosed sources." (ii) that no assessment could be made contrary to the provisions of law. In the instant case, the very basis for making the assessment was under challenge. If the assessment was based on a completely erroneous view of law, such findings could not be regarded as mere findings of facts, but must be treated as substantial questions of law. Therefore, the question raised in the appeal was a substantial question of law because it went to the very root of the assessment made. The aforesaid view has been also considered and fortified and favourably referred to by the Allahabad High Court in the case of C.I.T. v. Shalimar Buildwell Pvt. Ltd. (2014) 220 Taxman 138 (All.) In the case of Lalpuria Construction P. Ltd (supra) the Hon. Rajasthan High Court has held that “that in the case of Accommodation entry - without giving an opportunity of cross examination merely on the basis of oral statement additions cannot be made u/s.

454 M/s Shree Global Tradefin Ltd. to 7313/Mum/2017 had occasion to go through the identical issue and two of the Creditors in that case, i.e. Mls. Laxmi Trading Co. and Mls. Rose Impex were also parties in the case of the assessee. In the case of Andaman Timber Industries (supra), the Hon’ble Supreme Held as under :. "Not allowing the assessee to cross exarrune the witnesses by the Adjudicating authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullify in as much as it amounted to violation of principles of Natural Justice because of which the assessee was adversely affected." The order was vacated. The aforesaid view was earlier considered by the Jurisdictional High Court in the case of CIT v. Ashish International. In our considered view the facts of the assessee case are squarely covered by the ratio laid down in the decisions referred to above. We ,therefore , in view of our observations and the ratio laid down by the various decisions are inclined to set aside the order of CIT(A) and direct he AO to delete the additions of Rs. 1,29,04,231/-. Since we have decided the issue of addition u/s 68 in favour of the assessee, the addition as sustained by the ld CIT(A) u/s 69C of the Act of Rs. 3,45,000/- is also ordered to be deleted. In result the appeal of the assessee is allowed.” We find that in the cases relied upon by the assessee i.e. Sanghavi Reality Pvt.Ltd.( supra), Vikram Muktilal Vora(supra),Gujarat Construction(supra),the order of the Reliance Corporation(supra) has been followed.As the fact of the case under consideration are similar to above referred cases,so,following those orders,we decide seventh ground of appeal,raised by the assessee,in its favour. Following the above referred order of the Jitendra M Kitawat-HUF(supra),we decide GOA 7 in favour of the assessee. ITA/7099/Mum/2016-AY.2009-10: 9.Effective ground of appeal,raised by the AO,for the year under consideration,is not sustaining the addition of Rs.1.03 crores made invoking the provisions of section 69C of the Act.We find that facts for the year are identical to the facts of 2007-08-the only difference is the names of suppliers.As per the AO the alleged bogus purchases were made from Kothari & Co.(KC),LD, Megha Gems(MG)and Minal Gems(Minal).Following our order dtd.11.04.2018 in the case of Jitendra M Kitawat(HUF),we dismiss the effective ground of appeal raised by the AO. ITA/7049/Mum/2016-AY.2009-10: 10.First effective ground(GOA-6)raised by the assessee is about confirming the addition of Rs. 12.99 lakhs on account of purchases made from four parties mentioned at paragraph no.9. Following our order for the AY.2007-08,we decide GOA in favour of the assessee. 11.Seventh ground pertains to addition of Rs.1.30 lakhs made u/s.68 of the Act for the unsecured loan taken by the assessee from KC.We have already dealt with the issue while adjudicating the order for the year 2007-08.Following the same,we decide GOA 7 in assessee’s favour.