ACIT, NEW DELHI vs. M/S. ELEGANT SECURITY SERVICES PVT. LTD., NEW DELHI

ORDER PER BHAVNESH SAINI, J.M.

This appeal by Revenue has been directed against the order of the Ld. CIT(A)-1, New Delhi, dated 19th September, 2013, for the A.Y. 2008-2009, challenging the deletion of addition of Rs.9 crores under section 68 of the I.T. Act, 1961.

2. Briefly the facts of the case are that search, seizure and survey operations under sections 132 and 133A of the Act was carried-out in the Bhushan Steel Group of cases on 3rd March, 2010.

2 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. The case of the assessee-company was covered under the survey operation under section 133A of the I.T. Act. The case of the assessee was reopened under section 147 of the I.T. Act by recording the reasons of the same. The assessee was provided copy of the reasons who filed its objections for reopening of the assessment which have been decided separately. The A.O. on perusal of the details submitted, noticed that assessee-company has received share capital and share premium from various companies situated at Kolkata and Mumbai of Rs.9 crores. The details of the same are noted in para-3 of the assessment order and page-4 of this order which are 10 investor companies from two places mentioned above. The assessee was asked to furnish the details of the amount received and evidence in respect of identity and creditworthiness of the investors and also the genuineness of the transaction. In response to the same, assessee submitted copies of the bank accounts, confirmations and income tax returns acknowledgment for all the investors. The A.O. noted from them that they have meagre returned income. In order to verify the genuineness of the above 10 parties/investors, Commission under section 131 were sent to Mumbai and Kolkata. In response, report of the O/o. Addl. CIT, Range-10(2), Mumbai and report of O/o.

3 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. ADIT (Inv.) Wing-III(3), Kolkata were received. The report is reproduced in the assessment order in which it was pointed out that Inspector have visited the place where some parties responded but some parties did not find at the premises. The A.O. therefore, noted that the existence of the Investors have not been proved. The A.O. on the basis of the details submitted and enquiries conducted through Commission observed that assessee has not established the identity and creditworthiness of the investors. Investors have shown nominal income. Creditworthiness of the investors have not been proved. The genuineness of the transaction is also in doubt as the Investors have not enclosed the bank statement showing the source of fund for share application money. The A.O. accordingly, made addition of Rs.9 crores as unexplained share capital/share premium. This addition was challenged before the Ld. CIT(A). The assessee also challenged the order of the A.O. because the addition is based on an Investigation and enquiry conducted through Commission result of which were never confronted to the assessee-company at any stage of the assessment and thereby, principles of natural justice have been violated. The submissions of the assessee on merits is 4 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. reproduced by the Ld. CIT(A) in the impugned order which reads as under :

“The submissions of the appellant in this regard are as under:

“(1) By way of a brief introduction, it is submitted that the Appellant Company had raised money amounting to Rs.9,00,00,000/- through share capital during the financial year 2007-08 from various parties situated at Mumbai and Kolkata. The details of the parties from whom Share Capital and Share Premium had been received are as under:-

Sl. Name of the Address Amount (Share Capital /Premium) No. Investor Company (in Rs ) 1. Sumitra Investment B-607, Pushpak Aptt. Ghartan Pada, 1,02,00,000/- and finance P Ltd. Western Express Highway, Dahisar(E) Mumbai-400068 2. Oshin Investment B-501, Pushpak Aptt. Ghartan Pada, 99,00,000/- and finance P Ltd Western Express Highway, Dahisar(E) Mumbai -400068 Alka Diamond 233, Panehratna, Opera House, Mumbai- 93,00,000/- Industries Ltd. 400004 4. Poonam Corporation 137, Dadhiseth Agrilane, 2nd Floor, Office No 96,00,000/- Ltd. 20, Kalbadevi, Mumbai- 400020 5. Vibhuti Multitrade 14. Popatwadi, Kalbadevi Road, 1st floor, 60,00,000/- Pvt Ltd Mumbai-400002 6. Yash V Jewels Ltd A-43, Flappy Home Apt Saihbaba, Nagar, 1,05,00,000/- Borivali(w) Mumbai- 400092 7. New Outlook Amritdham, flat no 202, p o Danesh Sekh 96,00.000/- Securities Ltd Lane, Nityanand Nagar, Bakutala, Howrah- 711109 Jolly Multitrade P 14, Popatwadi kalbadevi Road, I st floor, 96,00,000/- 8. Ltd Mumbai-400002 9. Twenty First 1, Crooked Lane. 1st Flor, Room no 107 93,00,000/- Century (India) Ltd Kolkata-700069 Kapindra Multitrade 14, Popatwadi kalbadevi Road, 1st floor, 60,00,000/- 10. Pvt Ltd Mumbai-400002 Total 9,00,00,000/-

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(2) The Assessing Officer in the course of assessment proceedings had desired the Appellant Company to furnish the details of the amount received and evidence in support of identity and creditworthiness of the parties and also the genuineness of the transaction of all the parties from whom the share capital and share premium had been received. In response, the Appellant Company vide letter dated 13.08.2012 filed with the Assessing Officer copies of bank accounts, confirmation and income Tax Return acknowledgements from all fee parties to establish the identity, genuineness and sources of transaction regarding share capital and share premium. The entire amount had been received by the Appellant Company through normal banking channels by account payee cheques/demand drafts. Furthermore, the said confirmations also clearly reveal the source of funds, particulars of the bank account through which payment has been received and the Income- Tax particulars which go on to establish the identity and creditworthiness of the respective share applicants authoritatively and conclusively.

(3) On the basis of the documents/details submitted, the Learned Assessing Officer, has summarized as follows:-

Name of the Share Holder Returned Income Assessment Sl. No Year o. Rs. 5,560/- 2008-09 Sumitra Investment and finance F 1 Ltd Oshin Investment and finance P Ltd Rs. 26,496/- 2008-09 2.

3. Alka Diamond Industries Ltd Rs. 4,62,300/- 2008-09 4. Poonam Corporation Ltd -Nil- 2006-07 5. Vibhuti Multitrade Pvt Ltd Rs. 6,680/- 2007-08 Yash V Jewels Ltd Rs.5.30,430/'- 2008-09 6.

7. New Outlook Securities Ltd Rs. 2,310/- 2008-09 Jolly Multitrade P Ltd Rs. 5,2807- 2007-08 8.

9. Twenty First Century (India) Ltd -Nil- 2008-09 Kapindra Multitrade Pvt Ltd Rs. 10,820/- 2009-10 10.

In order to further verify the genuineness of all the parties commissions u/s 131 were sent by the Learned Assessing Officer to the respective Investigation agencies in Mumbai and Kolkata. In response to which reports were received from the office of Addl CIT, Range-10(2), Mumbai and Assistant Director of Income Tax (Inv) Unit-III(3), Kolkata. The 6 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi.

Addl. Commissioner of Income Tax, Range 10(2), Mumbai and Assistant Director of Income Tax (Inv), Unit-III(3), Kolkata also deputed Inspectors of Income Tax to serve the summons and conduct field enquiries. The results of the said enquiries are as follows:-

Report from Mumbai :

S.No. Name of the shareholder Report as received in response to commission from Mumbai.

1. Sumitra Investment and The address is residential address of R.N. Finance P. Ltd., Chaturvedi. As per report of inspector Sh Ajav Kumar dated 30.11.2011, no such person has ever resided in such premises. Report of Inspector Shri Ajay Kumar Enclosed with (annexure-19).

2. Oshin Investment and The address is residential address of R.N. Finance P. Ltd., Chaturvedi. As per report of Inspector Sh Ajay Kumar dt 30.11.2011 no such person has ever resided in such premises. Report of inspector Shri Ajay Kumar enclosed with Annexure. (Annexure-19).

3. Alka Diamond Industries Party has responded to the summons and Ltd., the details are assessed. Details annexed as Exhibit B.

4. Poonam Corporation Ltd., This is also residential address as reported by Inspector in his report details of the same.30.11.2011. Report of Shri Ajay Kumar, Inspector is enclosed as annexure (Annexure-19).

5. Vibhuti Multitrade Pvt. The address is of B L Aggarwal and office of Ltd., Amit Textiles. As per report of Inspector dt 30.1 1.2011 no such person has ever resided in such premises. Report of Shri Ajav Kumar Inspector is enclosed as annexure (Annexure- 19) 6. Yash V. Jewels Ltd., The residential building was demolished for redevelopment. No building is in existence. Report of Shri Ajay Kumar Inspector is enclosed as annexure (Annexure-19) 7. Jolly Multitrade P. Ltd., The address is of B L aggarwal and office of Amit Textiles. As per report of Inspector dt 30.11.2011 no such person has ever resided in such premises. Report of Shri Ajay Kumar Inspector is enclosed as annexure) (Annexure- 19)

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8. Kapindra Multitrade Pvt. The address is of B L aggarwal and office Ltd., of Amit Textiles. As per report of Inspector dt 30.11.2011 no such person has ever resided in such premises. Report of Shri Ajay Kumar Inspector is enclosed as annexure) (Annexure-19)

Report from Kolkata S.No. Name of the shareholder Report as received in response to commission from Mumbai.

2. Twenty First Century The assessee had not submitted (India) Ltd., documents related to the company.

(5) On the basis of the said exercise, the Learned Assessing Officer has observed and concluded as follows:- > The identity and the creditworthiness of the investors are not established as all the investors are showing a nominal income. Neither the investor company and nor the assessee company has produced any proof to substantiate the credit worthiness of the investors (for example balance sheet of the investor company).

8 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. > The genuineness of the transactions is also in doubt as the investors have not enclosed the bank statement showing the source of fund for share application money.

(6) The Learned Assessing Officer has accordingly held that the creditworthiness of the investors and the genuineness of the transactions is in doubt and has accordingly treated share capital and share premium amounting to Rs.9,00,00,000/- as unexplained and added this same to the taxable income of the Appellant Company u/s 68 of the Income -tax Act, 1961.

(7) The Assessing Officer in the course of assessment proceedings had desired the Appellant Company to furnish the details of the amount received and evidence in support of identity and creditworthiness of the applicants and also the genuineness of the transaction of all the parties situated at Mumbai and Kolkata from whom the share capital and share premium had been received. In response, the Appellant Company filed copies of confirmations. Income Tax Return acknowledgements and bank accounts from all the parties establishing the identity, genuineness and sources of transaction regarding share capital and share premium with the Assessing Officer. The entire share application money had been received by the Appellant Company through normal banking channels by account payee cheques/demand drafts. Furthermore, the said confirmations also clearly reveal the source of funds, particulars of the bank account through which payment has been received and the Income-Tax particulars which go on to establish the identity and creditworthiness of the various parties authoritatively and conclusively.

(8) As a result of the above documents being filed before the Learned Assessing Officer in respect of all the parties in respect of which no cause exists as to recourse to the provisions of Section 68 of the Income-tax Act, 1961 in as much as the onus cast on the Appellant Company vis-a-vis the genuineness of the transaction and credit worthiness of the parties has been effectively and completely discharged. The action of the Learned Assessing Officer is not only against the spirit but also letter of the provisions relating to establishing the identity of cash creditors as embodied in the Income tax Act, 1961. Independent investigations from parties over which an Appellant

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Company does not have any control cannot be used to form any conclusion, adverse of otherwise in respect of the Appellant Company. As such the said addition is neither warranted nor justified or sustainable on the facts of the case.

(9) The above factual statements and arguments can be further buttressed and reinforced by an analysis of the relevant legal provisions and legal pronouncements on the issue. Before proceeding further with the matter it would be worthwhile to reproduce the provisions of S.68 of the Income tax Act, 1961 which reads as follows:-

S.68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the officer, satisfactory7, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.

The above Section enjoins upon an Appellant Company, the duty to (10) adequately, satisfactorily and substantively explain the source of any cash credit in his books of accounts and no further. To put it differently an Appellant Company’s burden of proof would stand discharged if he is able to prove the nature and source of the cash credit received and thus his onus of proof cannot extend to failure to prove the source of the proof with a view to arrive at the ultimate source of funds. As long as the nature, source and identity of the investor is established, no further onus of proof can be enjoined on it. In the instant case no case can be made out to doubt the genuineness, existence or identity of the investors and as such no cause exists for the invocation of S. 68.

An analysis of the provisions of Section 68 of the Income-tax Act, (11) 1961 would make it clear that in order to discharge the onus, the Assessee must prove the following:-

(i) identity of the creditor; (ii) capacity of the creditor to advance money; and (iii) genuineness of the transaction.

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(12) The question of the manner in which the onus u/'s 68 has to be discharged is to be looked at with different perspectives and varying parameters in each different circumstance and no standards/guidelines can be lead out in this regard.

In the instant case there is no material on record to prove or even (13) remotely suggest that the share application money received actually emanated for the Appellant Company. In fact it may be reiterated that the share application money was received from independent legally incorporated companies through normal and regular banking channels which fact stands duly corroborated and confirmed by the confirmations bank statements and Income Tax Returns of the share applicants duly placed on record. In fact, no evidence, direct or indirect, conclusive, or even circumstantial, exists to doubt in any manner the identity and credit worthiness of the parties and genuineness of the transactions entered into.

(14) The Appellant Company has discharged its onus by satisfactorily dealing with all the issues in respect of which onus has been cast on it u/s 68 of the Income-tax Act. 1961 as would be clear from the following discussion:-

(i) With respect to the identity of the creditors the names, addresses and PANs of the Assessee has been duly furnished and provided to the Ld Assessing Officer during the course of the assessment proceedings and no error or short coming has either been determined or pointed out therein since all the share applicants are duly identified with duly allotted PANs which are subsisting in the record of the Income Tax Department. Moreover all the share applicants are companies duly incorporated after following the procedure laid out in the Companies Act, 1956. Thus, no doubt exists or even arises with respect to the identity of the creditors.

(ii) With respect to the capacity/credit worthiness of the share applicants to advance money and the genuineness of the transactions it needs to be understood, reiterated and re-emphasized that the entire transaction was consummated through account payee cheques through regular banking channels which fact has not been disputed or denied in any manner. As 11 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. such given the entire factual situation of the case no doubt arises and remains as to the capacity and credit worthiness of the parties and genuineness of the transactions.

(15) In this connection Your Honour’s attention is also invited to the decision of the Hon’ble Delhi High Court in the case of Commissioner of Income-Tax vs. Steller Investments Limited [(1991) 192 ITR 287 (Delhi)] wherein it has been clearly held that any increased capital is not assessable in the hands of the company. The relevant observations of the Learned Judges are as follows:-

“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."

(16) Subsequent to the above an appeal tiled by the Department against the judgment/observations of the Supreme Court was also dismissed and the Hon’ble Supreme Court did not find any reason to interfere with the order of the High Court in the case of CIT vs Steller Investment Ltd [(2001) 251 ITR 263 (SC)]. As such the observations of the Hon’ble Delhi High Court have obtained the approval of their Lordship of the Supreme Court and accordingly attained judicial finality and stamp of approval.

(17) In addition, Your Honor's kind attention is also invited to the following judgment of the Delhi High Court in the case of Commissioner of Income Tax v Lovely Exports Pvt Ltd [(2008) 299 ITR 268 (Delhi)] has held as follows:-

In the case of a company the following are the propositions of law under section 68. The assessee has to prima facie prove (1) the identity of the creditor/ subscriber; (2) the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable

12 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. channels; (3) the creditworthiness or financial strength of the creditor / subscriber; (4) if relevant details of the address or PAN identity of the creditor / subscriber are furnished to the Department alongwith copies of the shareholders’ register, share application forms, share transfer register, etc, it would constitute acceptable proof or acceptable explanation by the assessee; (5) the Department would not be justified in drawing an adverse inference only because the creditor/ subscriber fails or neglects to respond to its notices; (6) the onus would not stand discharged if the creditor / subscriber denies or repudiates the transaction set up by the assessee nor should the Assessing Officer take such repudiation at face value and construe it, without more, against the assessee; and (7) the Assessing Officer is duty bound to investigate the creditworthiness of the creditor/ subscriber the genuineness of the transaction and the veracity of the repudiation. In the case of a public issue, the company concerned cannot be expected to know every detail pertaining to the identity as well as financial worth of each of its subscribes. The company must, however, maintain and make available to the Assessing Officer for his perusal, all the information contained in the statutory share application documents. A delicate balance must be maintained while walking the tightrope of sections 68 and 69 of the Income -Tax Act. The burden of proof can seldom be discharged to the hilt by the assessee; if the Assessing Officer harbours doubts of the legitimacy of any subscription, he is empowered, to cam' out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot adhere to his suspicions and treat the subscribed capital as the undisclosed income of the company”.

(18) Further Your Honor's kind attention is also invited to the decision of their Lordship of the Hon’ble Supreme Court in the case of CIT vs Lovely Exports Pvt Ltd [(2008) 216 CTR 195 (SC)] wherein the special leave petition filed by the Department against the order of the Delhi High Court has been dismissed with the following remarks :-

“We find no merit in this Special Leave Petition for the simple reason that if the share application money is received by the Assessee Company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgement”.

13 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi.

(19) The above decision of the Hon’ble Supreme Court follows the earlier decision of the Hon’ble Supreme Court in the case of Steller Investment Ltd, cited supra and further reinforces the arguments put forward for and on behalf of the Appellant Company.

In particular, with regard to the issue of establishing the (20) creditworthiness of the parties, Your Honour’s attention is invited to the following recent judgements wherein it has been conclusively held, relying on the decisions in the case of M/s Lovely Exports Pvt Ltd cited above, that as long as the identity of the share applicant was proved, the burden of proving the creditworthiness was not on the Assessee:-

> Commissioner of Income-tax, Udaipur v. Bhaval Synthetics [(2013) 35 Taxmann.com 83 (Rajasthan)];

> Shree Barkha Synthetics Ltd v. Assistant Commissioner of Income- tax [(2006) 155 Taxman 289 (Raj)]; > Commissioner of Income-tax, Bhopal (M.P) v. Peoples General Hospital Ltd [(2013) 35 taxmann.com 444(Madhya Pradesh); > Commissioner of Income-tax. Meerut v, Kamna Medical Centre (P) Ltd [(2013) 35 taxmann.com 470(Allahabad)]; > Commissioner of Income-tax, Faridabad v, GP International Ltd [(2010) 186 Taxman 229 (Pun &Har)]; > CIT v Dwarkadhish Investment Pvt Ltd and Dwarkadhish Capital Pvt Ltd [ (2011) 330 ITR298 (Delhi) ];

> CIT v. Winstral Petrochemicals Pvt Ltd [(2011) 330 ITR 603 (Delhi)]; > Commissioner of Income Tax v. Gangour Investment Ltd [(2011) 335 ITR 359 (Delhi)];

> MOD Creations Pvt Ltd vs. income Tax Officer [(2012) 354 ITR 282(Delhi)].

(21) It should be specifically noted in the instant case there was no denial at any stage of the investigation or the assessment proceedings by any of the 14 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. subscribers to the share capital of their having invested money by way of share application money in the Appellant Company. Moreover there is no shred of evidence, direct, indirect or even peripheral of the share application money having emanated from the coffers of the Appellant Company. In fact, the investor companies, in their replies filed before the Department (in response to summons u/s 131 of the Act), have duly confirmed, the factum of their having made the investment and have further buttressed the same with the following documents:-

(a) Confirmations; (b) Acknowledgement for filing of Income Tax Returns; (c) Bank statements reflecting the transactions with the Appellant Company; (d) Copies of Annual Accounts.

(22) In view of the above, no doubt remains as to the identity of the investors, their credit worthiness and the genuineness of the transactions and correspondingly no adverse inference is called for.

(23) In fact, in the instant case, reliance is placed on the decision of the Delhi High Court in the case of CIT vs Kamdhenu Steel & Alloys Limited and Others [(2012)206 Taxman 254(Delhi)] wherein the following has been held :

“38. Even in that instant case, it is projected by the Revenue that the Directorate of Income Tax (Investigation) had purportedly found such a racket of floating bogus companies with sole purpose of landing entries. But, it is unfortunate that all this exercise is going in vain as few more steps which should have been taken by the Revenue in order to find out causal connection between the cash deposited in the bank accounts of the applicant banks and the assessee were not taken. It is necessary to link the assessee with the source when that link is missing, it is difficult to fasten the assessee with such a liability.

We may repeat what is often said, that a delicate balance has to be 39. maintained while walking on the tight rope of sections 68 and 69 of the Act. On the one hand, no doubt, such kind of dubious practices are rampant, on the other hand, merely because there is an acknowledgement of such 15 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. practices would not mean that in any of such cases coming before the Court, the Court has to presume that the assessee in questions as indulged in that practice. To make the assessee responsible, there has to be proper evidence. It is equally important that an innocent person cannot be fastened with liability without cogent evidence. One has to see the matter from the point of view of such companies (like the assessee herein) who invite the share application money from different sources or even public at large. It would be asking for a moon if such companies are asked to find out from each and every share applicant/subscribers to first satisfy the assessee companies about the source of their funds before investing. It is for this reason the balance is struck by catena of judgements in laying down that the Department is not remediless and is free to proceed to reopen the individual assessment of such alleged bogus shareholders in accordance with the law. That was precisely the observation of the Supreme Court in Lovely Export (supra) which holds the fields and is binding.

40. In conclusion, we are of the opinion that once adequate evidence/material is given, as stated by us above, which would prima facie discharge the burden of the assessee in proving the identity of shareholders, genuineness of the transaction and creditworthiness of the shareholders, thereafter in case such evidence is to be discarded or it is proved that it has ‘created'' evidence, the Revenue is supposed to make thorough probe of the nature indicated above before it could nail the assessee and fasten the assessee with such a liability under Sections 68 and 69 of the Act.”

(24) It would also be pertinent, topical and relevant to mention here that the Special Leave Petition field before the Hon’ble Supreme Court by the Revenue against the above decision of the Hon’ble Delhi High Court has been subsequently dismissed by Their Lordship of the Supreme Courts and as such the decision of the Delhi High Court in the case of CIT vs Kamdhenu Steel & Alloys Limited and Others (supra) has attained conclusive judicial finality.

(25) To conclude it may be said that on the basis of the facts discussed supra and the ratio of the above judgements makes it clear that if the share applicants are identified and it is established that they have deposited money in the Company, no recourse can be made to the provisions of S 68.

16 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi.

The Appellant Company had provided all the requisite particulars to establish the identity of the share applicants in the confirmations, ITRs and bank statements already filed before the Assessing Officer. The various arguments advanced by the Learned Assessing Officer are frivolous and irrelevant and the onus enjoined upon the Appellant Company by the provisions of section 68 stands not only adequately but also completed satisfied.

(26) Accordingly since it is clear that if the shareholders/share applicants are identified and it is established that they have invested money in the purchase of shares, no recourse can be made to the provisions of S 68. In the instant case the Appellant Company had provided all the requisite particulars to establish the identity of the share applicants in the confirmations already filed before the Assessing Officer.

3.2. The case of the revenue is that some of the investor companies could not be found at the given address and also that some of the investor companies responded to the summons by post but did not cause appearance before the tax authorities. It is also stated that the 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 appellant company. It is further contended that there appears no justification for large component of share premium paid to the appellant along with the share capital. Based on these observations, the revenue has held the subscription to share capital, including the share premium, amounting to Rs.9,00,00,000/- as unexplained credits of the appellant and held to be unexplained income. The case of the appellant, on the other hand, is that it had discharged its onus to establish the identity of the share holders/applicants, and the source of the money by filing confirmations from the said parties alongwith copies of bank statements and ITRs. Therefore, the question of invoking the provisions u/s 68 against the appellant did not arise. The appellant has also relied on several case laws to support its claim.

17 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. 3. The Ld. CIT(A) considering the explanation of assessee in the light of material and evidence on record, deleted the entire addition. His findings in paras 3.3 to 3.5 of the order are reproduced as under :

“3.3. I have considered the rival claims. The fact that appellant filed the requisite documents before the AO is undisputed. Thus, the appellant had discharged its primary onus of establishing the identity of the share holders / applicants and source of the money. The only reason for the revenue to cause further verification was the report relating to survey conducted at the premises of the appellant which forms part of the satisfaction recorded for reopening the assessment proceedings. From the said report it transpires that the business premises of the appellant actually belonged to M/s Bhushan Steel Ltd. and several other companies were having their registered offices in the same premises. This led to the suspicion that these companies were paper companies. During further verification of the identity of the 8 shareholders in Mumbai, six shareholders were not found at the given address, one building had been demolished for redevelopment, and one shareholder responded to the summons. In Kolkata, out of the two shareholders, no response was received from the one party and another party responded by post but did not appear.

3.4. There is no law that more than one company cannot have its registered office at one address. There is no law that companies cannot change their registered office. Several companies can have the same registered office. Businesses raise capital and such capital is rotated in economy for increasing production and trade and for making more efficient use of capital. Companies change hands, sometimes in quick succession.

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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. All the companies having registered office at that premises undisputedly belonged to Bhushan Group. The sources of capital introduced in these companies were established during the respective assessment proceedings, including this appellant company. No evidence was found during the search to indicate introduction of unaccounted cash /funds in the form of share capital in these companies. In these circumstances, the conclusion based on the facts relied upon by the revenue that the share capital introduced in the companies belonging to Bhushan Group, including the appellant company, are unexplained, is premature.

3.5. In the above facts and circumstances of the matter, and in view of the case laws relied upon by the Ld. AR, the addition made cannot be legally sustained and is deleted. This ground of appeal is allowed”.

3.1. It may also be noted here that the Ld. CIT(A) decided the issue of not giving opportunity to the assessee to rebut the enquiry report which was not confronted to the assessee. The Ld. CIT(A) decided the issue separately in para 4.2 of his order relevant findings reads as under “However, do not I find from the assessment order that the result of enquiry made at Mumbai and Kolkata was made available to the appellant. To that extent, the right of appellant to know the facts and have the opportunity to rebut the evidence was not granted.”

19 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. 3.2. The Ld. CIT(A) however, on account of deleting the addition on merit, did not decide the issue of validity of the proceeding against the assessee for not following the principles of natural justice and dismissed same.

4. The Revenue is in appeal only on the ground of challenging the deletion of addition on merit. These findings of the Ld. CIT(A) in para 4.2 have not been challenged in the present appeal. Thus, the findings of fact recorded by the Ld. CIT(A) in para 4.2 have become final that result of enquiry at Mumbai and Kolkata was not made available to assessee at assessment stage.

5. The Ld. D.R. relied upon the order of the A.O. and submitted that assessee did not prove the identity of the Investors, their creditworthiness and genuineness of the transaction in the matter.

6. On the other hand, Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that assessee filed confirmation of all the investors, copy of their bank accounts, copy of PAN and income tax return, copy of ROC. The Investors have directly confirmed the transaction with the 20 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. assessee in their replies in response to the Commission issued under section 131 of the I.T. Act supported by confirmation, PAN, bank statement and copy of the annual accounts. He has submitted that the identical issue have been considered by ITAT, Delhi Bench in the group cases in which on identical facts and similar findings of the Ld. CIT(A), the Departmental Appeals have been dismissed. The Orders of the Tribunal, on which, Learned Counsel for the Assessee placed reliance are as under :

1. ACIT, Central Circle-13, New Delhi vs. Adamine Construction Pvt. Ltd., ITA.No.6175/Del./2013 and CO.No.259/Del./2015 dated 18.08.2017.

2. ACIT, Central Circle-13, New Delhi vs. Adamine Construction Pvt. Ltd., ITA.No.6178/Del./2013 and CO.No.262/Del./2015 dated 18.08.2017.

3. ACIT, Central Circle-13, New Delhi vs. BNR Infotech Pvt. Ltd., ITA.No.6171/Del./2013 and CO.No.256/Del./2015 dated 18.08.2017.

6.1. He has submitted that all the documents/evidences of the Investors are filed in the paper book. He has submitted that the issue is therefore, covered in favour of the assessee by the above orders of 21 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. the Tribunal especially in the case of ACIT vs. NRA Iron and Steel Pvt.

Ltd., (supra) in which in paras 2 to 21, the Tribunal considered identical issue and held as under :

22 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. application money has been received by the assessee- company through normal banking channels by account payee cheques/demand drafts. Furthermore, the said confirmations also clearly reveal the source of funds, particulars of bank accounts through which payment have been received and income tax particulars which go to establish their identity and creditworthiness. It was therefore, submitted that there were no cause exists to make a recourse to the provisions of Section 68 of the I.T. Act, 1961. In the instant case, there is no material on record to prove or even remotely suggest that the share application money received actually emanate from the assessee-company. The share application money was received from independent legally incorporated Companies through banking channels. The initial onus upon assessee has thus been discharged. The assessee relied upon the decision of the Delhi High Court in the case of CIT vs. Steller Investment Ltd., (1991) 192 ITR 287 (Del.) in which it was held that any increased capital is not assessable in the hands of the assessee which has been confirmed by the Hon’ble Supreme Court in the case of CIT vs. Steller Investment Ltd., (2001) 251 ITR 263 (SC). The assessee also relied upon the decision of the Hon’ble Supreme Court in the case of CIT vs. Lovely Exports Pvt. Ltd., 216 CTR 195 in which it was held that “if the share application money is received by the assessee-company from alleged bogus share holders whose names are given to the A.O, then the Department is free to proceed to reopen their individual

23 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. assessments in accordance with law”. The assessee relied upon several decisions in support of the contention. The A.O. however, did not accept the contention of the assessee on the basis of the enquiries conducted by him. It was found that existence of investment companies and genuineness of the transactions has not been proved. The A.O. noted that as regards Mumbai based Companies, some notices were served and some could not be served and no reply have been received from them. In respect of Kolkata based Companies, they have filed their reply through Dak counter confirming the transaction with the assessee, but copy of the bank account has not been enclosed. In respect of Guwahati based company, it was noted that this company do not exist at the address. Therefore, it was held that assessee failed to prove the genuineness of the transaction and accordingly, addition of Rs.17.60 crores was made in the hands of the assessee.

3. The assessee challenged the reopening of the assessment

as well as addition on merits before Ld. CIT(A). The detailed contention of the assessee as regards reopening of the assessment has been noted in the impugned order. However, the Ld. CIT(A), confirmed the reopening of the assessment and dismissed this ground of appeal of assessee, particularly, when he has allowed the relief to the assessee on merit. Therefore, no 24 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. detailed reasoning have been given because it was found that the issue is left with academic discussion only.

4. The assessee as regards the addition, on merit, reiterated

the same submissions before Ld. CIT(A) and it was submitted that A.O. made the addition arbitrarily and unjustifiably. The assessee produced all the relevant documents before A.O. which have not been doubted. The assessee filed confirmations of all the share applicants, copy of their income tax returns, bank accounts and copy of annual accounts. Therefore, no adverse inference has been drawn against the assessee. The Ld. CIT(A) on going through the documents and material on record, deleted the entire addition of Rs.17.60 crores and allowed the appeal of assessee. His findings in paras 3.3 to 3.5 of the impugned order are reproduced as under :

“3.3. I have considered the rival claims. The fact that appellant filed the requisite documents before the AO is undisputed. Thus, the appellant had discharged its primary onus of establishing the identity of the share holders / applicant ire source of the money. The only reason for the revenue to cause further verification was the report relating to survey conducted at the premises of the appellant which forms part of the satisfaction recorded for reopening the assessment proceedings. From the said report it transpires that the business premises of 25 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. the appellant actually belonged to M/s Bhushan Steel Ltd. and several other companies were having their registered offices in the same premises. This led to the suspicion that these companies were paper companies. During further verification of the identity of the shareholders in Mumbai, some summons were served but parties did not respond. In Guwahati, both parties were not found at the given address. In Kolkata, all 11 parties responded by post but no one appeared.

3.4. There is no law that more than one company cannot have its registered office at one address. There is no law that companies cannot change their registered office. Several companies can have the same registered office. Businesses raise capital and such capital is rotated in economy for increasing production and trade and for making more efficient use of capital. Companies change hands, 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. All the companies having registered office at that premises undisputedly belonged to Bhushan Group. The sources of capital introduced in these companies were established during the respective assessment proceedings, including in the case of this appellant company. No evidence was found during the search to indicate introduction of unaccounted cash / funds in the form of share capital in these companies. Therefore, the conclusion based on the facts relied upon by the revenue that the share capital introduced in the companies belonging to Bhushan Group, including the appellant company, are unexplained, is at best premature.

3.5. In the above facts and circumstances of the matter, and in view of the case laws relied upon by the Ld. AR, the addition made cannot be legally sustained and is deleted. This ground of appeal is allowed.”

26 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi.

i. CIT vs. Precision Finance (P) Ltd., (1994) 208 ITR 465 (Cal.) ii. CIT vs. United Commercial & Industries Co. (P) Ltd., (1991) 187 ITR 596 (Cal.) iii. CIT vs. Nipun Builders & Developers (P) Ltd., (2013) 350 ITR 407 (Del.) iv. CIT vs. Nova Promoters & Finlease (P) Ltd., (2012) 342 ITR 169 (Del.). v. Mukesh Shah vs. ITO (2012) 246 CTR 82 (Jharkhand) vi. CIT vs. N.R. Portfolio (P) Ltd., (2013) 263 CTR 456 (Del.) vii. CIT vs. Empire Buildtech (P) Ltd., (2014) 366 ITR 110 (Del.) viii. CIT vs. Focus Exports (P) Ltd., (2014) 51 taxmann.com 46 (Del.).

27 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. New Delhi ITA.No.6175/Del./2013 and C.O.No.259/Del./ 2015 dated 18th August, 2017, in which, on identical issue, the Departmental appeal and cross-objection of the assessee have been dismissed. He has submitted that most of the parties are similar in this case as have been considered in the case of the assessee on identical facts. It is the case of sister concern of the assessee. He has submitted that all the documents were filed before A.O. which proved the identity of the share applicants, their creditworthiness and genuineness of the transaction. All companies are registered with Registrar of Companies and filed their bank statements. No cash have been deposited in the bank accounts of the share applicants. They were having sufficient funds with them to make investment in the assessee-company. He has submitted that the issue is covered in favour of the assessee by the order of the ITAT, Delhi Bench, in the case of M/s. Adamine Construction Pvt. Ltd., (supra).

29 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi.

(C) Guwahati based companies 1. Ispat Sheets Ltd., 90,00,000 2. Novelty Traders Ltd., 90,00,000 Total Amount 17,60,00,000

8. The Learned Counsel for the Assessee relied upon the order of the ITAT, Delhi Bench in the case of ACIT, Central Circle- 13, New Delhi vs. M/s. Adamine Construction Pvt. Ltd., (supra), in which the departmental appeal, on the identical question have been dismissed. The findings of the Tribunal in paras 10 to 18 of the Tribunal are reproduced as under :

“I.T.Appeal No. 6175/Del/2013 :

10. The Revenue has questioned first appellate order on the following grounds :-

“ 1. The order of Ld. CIT (Appeals) is not correct in law and facts;

2. On the facts and circumstances of the case the ld. CIT (Appeals) has erred in deleting the addition of Rs.4,65,00,000/- being unexplained share capital including share premium and Rs.50,00,000/- being unexplained share application money made by Assessing Officer without appreciating the fact that the identity and the creditworthiness of the investors were not established as all the investors were showing a nominal income.”

30 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. (i) the creditworthiness of the investor companies was not established as all the investors were showing a nominal income;

(ii) neither the investors companies nor the Appellant Company had produced any proof to substantiate the credit worthiness of the Investors; and (iii) the genuineness of the transactions was also in doubt.

12. The relevant facts are that the appellant company had filed its original return of income declaring a total income of Rs.715/- on 25.09.2008 vide receipt No.39312931250908. The return was processed under section 143(1) of the Income Tax Act, 1961 at the returned income. Subsequently, a search, seizure and survey operation under section 132 and 133A respectively of the Income Tax Act, 1961 was carried out in the Bhushan Group of cases on 3.03.2010. The appellant company was also covered in the said survey operation and its jurisdiction was subsequently transferred to the Office of the ACIT, Central Circle – 13, New Delhi.

14. The assessment was completed vide order dated 28.03.2013 at an income of Rs.5,15,00,715/- wherein the ld. Assessing Officer has proceeded to add back a sum of Rs.5,15,00,000/- on account of alleged unexplained share capital received by the appellant company from various companies situated at Mumbai and Kolkata. The ld. CIT (Appeals) has, however, deleted the addition being convinced with the submissions of the assessee.

15. In support of the ground, the ld. Sr. DR has basically placed reliance on the assessment order with this contention that assessee has thoroughly failed to establish creditworthiness of the investor

31 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. companies as well as genuineness of the transaction. Some of the parties were not found on the given address and some of them did not respond to the notices issued by the Assessing Officer to them nor the assessee has been able to produce them for verification before the Assessing Officer. In absence of compliance of these requirements the Assessing Officer was very much justified in making the addition of Rs.5,15,00,000/- under section 68 of the Act on account of unexplained share capital and share premium received by the assessee company from various companies. Ignoring these material aspects the ld. CIT (Appeals) has erred in deleting the addition.

(1) By way of a brief introduction, it is submitted that the Appellant Company had raised money amounting to Rs.5,15,00,000/- through share capital/application money during the financial year 2007-08 from various parties situated at Mumbai and Kolkata. The details of the parties from whom Share Capital and Share Premium had been received are as under :-

S No. Name of the Investor Address Amount(Share Company Capital/Application money/ Premium) (in Rs.) 1. Vanguard Jewels Ltd G-3, Silver Anket Yari Road, Versova, 95,00,000/- Mumbai -400061 2. Ganga Builders Ltd Stephen House, Room No. 102, 6th Floor, 95,00,000/- 4BBD Bagh (East), Kolkata -700001 3. Shivlaxmi Exports Ltd 102, Stephen House, 4BBD BAG(E) 90,00,000/- Kolkata -700001 CS-1, Silver Anket, Yari Road, Versova, 4. Lexus Infotech Ltd 90,00,000/- Andheri (W), Mumbai 400061 5. Hema Trading Co Pvt 303-B Minal Park, C.S Road, Dahisar 95,00,000/- Ltd (East) Mumbai 400068 6. Realgold Trading Pvt BIG Tree Bldg Chamber No. 6, 1st Floor, 50,00,000/- Ltd Marine Street, Mumbai 400002 Total 5,15,00,000/-

32 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi.

(2) The Assessing Officer in the course of assessment proceedings had desired the Appellant Company to furnish the details of the amount received and evidence in support of identity and creditworthiness of the parties and also the genuineness of the transaction of all the parties from whom the share capital and share premium had been received. In response, the Appellant Company vide letter dated 13.08.2012 filed with the Assessing Officer copies of bank accounts, confirmation and Income Tax Return acknowledgements from all the parties to establish the identity, genuineness and sources of transaction regarding share capital and share premium. The entire amount had been received by the Appellant Company through normal banking channels by account payee cheques / demand drafts. Furthermore, the said confirmations also clearly reveal the source of funds, particulars of the bank account through which payment has been received and the Income-Tax particulars which go on to establish the identity and creditworthiness of the respective share applicants authoritatively and conclusively.

(2) On the basis of the documents/details submitted, the Learned Assessing Officer, has summarized as follows :-

S.No. Name of the Share Holder Returned Income Assessment Year 1 Vanguard Jewels Ltd Rs. 3,42,600/- 2008-09 2. Ganga Builders Ltd (Rs. 2,910/-) 2008-09 3. Shivlaxmi Exports Ltd Nil 2008-09 4. Lexus Infotech Ltd 15,64,590/- 2008-09 5. Hema Trading Co Pvt Ltd 17,16,207/- 2008-09

33 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi.

(4) In order to further verify the genuineness of all the parties commissions u/s 131 were sent by the Learned Assessing Officer to the respective Investigation agencies in Mumbai and Kolkata. In response to which reports were received from the office of Addl. CIT, Range-10(2), Mumbai and Assistant Director of Income Tax (Inv) Unit-III(3), Kolkata. The Addl Commissioner of Income Tax, Range 10(2), Mumbai and Assistant Director of Income Tax (Inv), Unit-III(3), Kolkata also deputed Inspectors of Income Tax to serve the summons and conduct field enquiries. The results of the said enquiries are as follows:-

Report from Mumbai S No. Name of the Shareholder Report as received in response to commission from Mumbai 1. Vanguard Jewels Ltd Party has responded to the summons and the details are annexed. Details annexed as Exhibit-C 2. Lexus Infotech Ltd Party has responded to the summons and the details are annexed. Details annexed as Exhibit-D.

Report from Kolkata

S No. Name of the Shareholder Report as received in response to commission from Kolkata 1. Ganga Builders Ltd Assessee made a submission through dak and submitted that the company has applied for share of M/s Adamine Construction Pvt Ltd in F.Y 2007-

34 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi.

8. The assessee has not specified for how many shares and at what premium. The assessee has enclosed bank statement showing payment was made by cheque no. 875638 dated 07.02.2008 for Rs. 55,00,000/- and cheque no. 875656 dated 07.02.2008 for Rs. 40,00,000/- drawn on Deutsche Bank. The assesee has not enclosed the bank statement showing the source of fund for share application money. The company has shown Nil income for A.Y. 2008-09 2. Shivlaxmi Exports Ltd Assessee made a submission through dak and submitted that the company has applied for 90000 equity share of Rs. 10/- of M/s Adamine Construction Pvt Ltd each at a premium of Rs. 90/- and allotted the same. The assessee has not given the reason for paying such a high premium. The assessee has enclosed bank statement showing payment was made by cheque no. 611654 dated 08.02.2008 for Rs. 50,00,000/- and cheque no. 611515 dated 08.02.2008 for Rs 40,00,000/- drawn on Deutsche Bank. The assessee has not enclosed the bank statement showing the source of fund for share application money. The company has shown Nil income for A.Y. 2008-09.

(5) On the basis of the said exercise, the Learned Assessing Officer has observed and concluded as follows:-

� The identity and the creditworthiness of the investors are not established as all the investors are showing a nominal income. Neither the investor company and nor the assessee company has produced any proof to substantiate the credit worthiness of the investors (for example balance sheet of the investor company);

� The genuineness of the transactions is also in doubt as the investors have not enclosed the bank statement showing the source of fund for share application money.

35 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. (6) The Learned Assessing Officer has accordingly held that the creditworthiness of the investors and the genuineness of the transactions is in doubt and has accordingly treated share capital/application money and share premium amounting to Rs.5,15,00,000/- as unexplained and added this same to the taxable income of the Appellant Company u/s 68 of the Income Tax Act, 1961.

(7) The Assessing Officer in the course of assessment proceedings had desired the Appellant Company to furnish the details of the amount received and evidence in support of identity and creditworthiness of the applicants and also the genuineness of the transaction of all the parties situated at Mumbai and Kolkata from whom the share capital and share premium had been received. In response, the Appellant Company filed copies of confirmations, Income Tax Return acknowledgements and bank accounts from all the parties establishing the identity, genuineness and sources of transaction regarding share capital and share premium with the Assessing Officer. The entire share application money had been received by the Appellant Company through normal banking channels by account payee cheques/demand drafts. Furthermore, the said confirmations also clearly reveal the source of funds, particulars of the bank account through which payment has been received and the Income-Tax particulars which go on to establish the identity and creditworthiness of the various parties authoritatively and conclusively.

(8) As a result of the above documents being filed before the Learned Assessing Officer in respect of all the parties in respect of which no cause exists as to recourse to the provisions of Section 68 of the Income-tax

36 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. Act, 1961 in as much as the onus cast on the Appellant Company vis-à-vis the genuineness of the transaction and credit worthiness of the parties has been effectively and completely discharged. The action of the Learned Assessing Officer is not only against the spirit but also letter of the provisions relating to establishing the identity of cash creditors as embodied in the Income –tax Act, 1961. Independent investigations from parties over which an Appellant Company does not have any control cannot be used to form any conclusion, adverse of otherwise in respect of the Appellant Company. As such the said addition is neither warranted nor justified or sustainable on the facts of the case.

(9) The above factual statements and arguments can be further buttressed and reinforced by an analysis of the relevant legal provisions and legal pronouncements on the issue. Before proceeding further with the matter it would be worthwhile to reproduce the provisions of S.68 of the Income tax Act, 1961 which reads as follows:-

“S 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.

(10) The above Section enjoins upon an Appellant Company, the duty to adequately, satisfactorily and substantively explain the source of any cash credit in his books of accounts and no further. To put it differently an Appellant Company’s burden of proof would stand discharged if he is able to prove the nature and source of the cash credit received and thus his

37 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. onus of proof cannot extend to failure to prove the source of the proof with a view to arrive at the ultimate source of funds. As long as the nature, source and identity of the investor is established, no further onus of proof can be enjoined on it. In the instant case no case can be made out to doubt the genuineness, existence or identity of the investors and as such no cause exists for the invocation of S. 68.

(11) An analysis of the provisions of Section 68 of the Income-tax Act, 1961 would make it clear that in order to discharge the onus, the Assessee must prove the following:-

(i) identity of the creditor; (ii) capacity of the creditor to advance money; and (iii) genuineness of the transaction.

(12) The question of the manner in which the onus u/s 68 has to be discharged is to be looked at with different perspectives and varying parameters in each different circumstance and no standards/ guidelines can be lead out in this regard.

(13) In the instant case there is no material on record to prove or even remotely suggest that the share application money received actually emanated for the Appellant Company. In fact it may be reiterated that the share application money was received from independent legally incorporated companies through normal and regular banking channels which fact stands duly corroborated and confirmed by the confirmations bank statements and Income Tax Returns of the share applicants duly placed on record. In fact, no evidence, direct or indirect, conclusive, or even

38 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. circumstantial, exists to doubt in any manner the identity and credit worthiness of the parties and genuineness of the transactions entered into.

(14) The Appellant Company has discharged its onus by satisfactorily dealing with all the issues in respect of which onus has been cast on it u/s 68 of the Income-tax Act, 1961 as would be clear from the following discussion:-

(i) With respect to the identity of the creditors the names, addresses and PANs of the Assessee has been duly furnished and provided to the Ld Assessing Officer during the course of the assessment proceedings and no error or short coming has either been determined or pointed out therein since all the share applicants are duly identified with duly allotted PANs which are subsisting in the record of the Income Tax Department. Moreover all the share applicants are companies duly incorporated after following the procedure laid out in the Companies Act, 1956. Thus, no doubt exists or even arises with respect to the identity of the creditors.

(ii) With respect to the capacity/credit worthiness of the share applicants to advance money and the genuineness of the transactions it needs to be understood, reiterated and re- emphasized that the entire transaction was consummated through account payee cheques through regular banking channels which fact has not been disputed or denied in any manner. As such given the entire factual situation of the case no doubt arises and remains as to the capacity and credit worthiness of the parties and genuineness of the transactions.

39 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. (15) In this connection Your Honour’s attention is also invited to the decision of the Hon’ble Delhi High Court in the case of Commissioner of Income-Tax vs. Steller Investments Limited [(1991) 192 ITR 287 (Delhi)] wherein it has been clearly held that any increased capital is not assessable in the hands of the company. The relevant observations of the Learned Judges are as follows:-

“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.”

(16) Subsequent to the above an appeal filed by the Department against the judgement/observations of the Supreme Court was also dismissed and the Hon’ble Supreme Court did not find any reason to interfere with the order of the High Court in the case of CIT vs Steller Investment Ltd [(2001) 251 ITR 263 (SC)]. As such the observations of the Hon’ble Delhi High Court have obtained the approval of their Lordship of the Supreme Court and accordingly attained judicial finality and stamp of approval.

40 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. (17) In addition, Your Honor’s kind attention is also invited to the following judgement of the Delhi High Court in the case of Commissioner of Income Tax v Lovely Exports Pvt Ltd [(2008) 299 ITR 268 (Delhi)] has held as follows :-

“ In the case of a company the following are the propositions of law under section 68. The assessee has to prima facie prove (1) the identity of the creditor/ subscriber; (2) the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels; (3) the creditworthiness or financial strength of the creditor / subscriber; (4) if relevant details of the address or PAN identity of the creditor / subscriber are furnished to the Department along with copies of the shareholders’ register, share application forms, share transfer register, etc, it would constitute acceptable proof or acceptable explanation by the assessee; (5) the Department would not be justified in drawing an adverse inference only because the creditor/ subscriber fails or neglects to respond to its notices; (6) the onus would not stand discharged if the creditor / subscriber denies or repudiates the transaction set up by the assessee nor should the Assessing Officer take such repudiation at face value and construe it, without more, against the assessee; and (7) the Assessing Officer is duty bound to investigate the creditworthiness of the creditor/ subscriber the genuineness of the transaction and the veracity of the repudiation. In the case of a public issue, the company concerned cannot be expected to know every detail pertaining to the identity as well as financial worth of each of its subscribes.

41 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. The company must, however, maintain and make available to the Assessing Officer for his perusal, all the information contained in the statutory share application documents. A delicate balance must be maintained while walking the tightrope of sections 68 and 69 of the Income –Tax Act. The burden of proof can seldom be discharged to the hilt by the assessee; if the Assessing Officer harbours doubts of the legitimacy of any subscription, he is empowered, to carry out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot adhere to his suspicions and treat the subscribed capital as the undisclosed income of the company”. (18) Further Your Honor’s kind attention is also invited to the decision of their Lordship of the Hon’ble Supreme Court in the case of CIT vs Lovely Exports Pvt Ltd [(2008) 216 CTR 195 (SC)] wherein the special leave petition filed by the Department against the order of the Delhi High Court has been dismissed with the following remarks :-

“We find no merit in this Special Leave Petition for the simple reason that if the share application money is received by the Assessee Company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgement”.

(19) The above decision of the Hon’ble Supreme Court follows the earlier decision of the Hon’ble Supreme Court in the case of Steller

42 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. Investment Ltd, cited supra and further reinforces the arguments put forward for and on behalf of the Appellant Company. (20) In particular, with regard to the issue of establishing the creditworthiness of the parties, Your Honour’s attention is invited to the following recent judgements wherein it has been conclusively held, relying on the decisions in the case of M/s Lovely Exports Pvt Ltd cited above, that as long as the identity of the share applicant was proved, the burden of proving the creditworthiness was not on the Assessee:-

� Commissioner of Income-tax, Udaipur v. Bhaval Synthetics [(2013) 35 Taxmann.com 83 (Rajasthan)]; � Shree Barkha Synthetics Ltd v. Assistant Commissioner of Income-tax [(2006) 155 Taxman 289 (Raj)]; � Commissioner of Income-tax, Bhopal (M.P) v. Peoples General Hospital Ltd [(2013) 35 taxmann.com 444(Madhya Pradesh);

� Commissioner of Income-tax, Meerut v. Kamna Medical Centre (P) Ltd [(2013) 35 taxmann.com 470(Allahabad)]; � Commissioner of Income-tax, Faridabad v. GP International Ltd [(2010) 186 Taxman 229 (Pun &Har)]; � CIT v Dwarkadhish Investment Pvt Ltd and Dwarkadhish Capital Pvt Ltd [(2011) 330 ITR 298 (Delhi)]; � CIT v. Winstral Petrochemicals Pvt Ltd [(2011) 330 ITR 603 (Delhi)]; � Commissioner of Income Tax v. Gangour Investment Ltd [(2011) 335 ITR 359 (Delhi)]; � MOD Creations Pvt Ltd vs. Income Tax Officer [(2012) 354 ITR 282 (Delhi)].

43 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. (21) It should be specifically noted in the instant case there was no denial at any stage of the investigation or the assessment proceedings by any of the subscribers to the share capital of their having invested money by way of share application money in the Appellant Company. Moreover there is no shred of evidence, direct, indirect or even peripheral of the share application money having emanated from the coffers of the Appellant Company. In fact, the investor companies, in their replies filed before the Department (in response to summons u/s 131 of the Act), have duly confirmed, the factum of their having made the investment and have further buttressed the same with the following documents :-

(a) Confirmations; (b) Acknowledgement for filing of Income Tax Returns; (c) Bank statements reflecting the transactions with the Appellant Company; (d) Copies of Annual Accounts.

(22) In view of the above, no doubt remains as to the identity of the investors, their credit worthiness and the genuineness of the transactions and correspondingly no adverse inference is called for.

(23) In fact, in the instant case, reliance is placed on the decision of the Delhi High Court in the case of CIT vs Kamdhenu Steel & Alloys Limited and Others [(2012)206 Taxman 254(Delhi)] wherein the following has been held :-

“38. Even in that instant case, it is projected by the Revenue that the Directorate of Income Tax (Investigation) had 44 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. purportedly found such a racket of floating bogus companies with sole purpose of landing entries. But, it is unfortunate that all this exercise is going in vain as few more steps which should have been taken by the Revenue in order to find out causal connection between the cash deposited in the bank accounts of the applicant banks and the assessee were not taken. It is necessary to link the assessee with the source when that link is missing, it is difficult to fasten the assessee with such a liability.

45 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. with the law. That was precisely the observation of the Supreme Court in Lovely Export (supra) which holds the fields and is binding.

(24) It would also be pertinent, topical and relevant to mention here that the Special Leave Petition field before the Hon’ble Supreme Court by the Revenue against the above decision of the Hon’ble Delhi High Court has been subsequently dismissed by Their Lordship of the Supreme Courts and as such the decision of the Delhi High Court in the case of CIT vs Kamdhenu Steel & Alloys Limited and Others (supra) has attained conclusive judicial finality.

(25) To conclude it may be said that on the basis of the facts discussed supra and the ratio of the above judgements makes it clear that if the share applicants are identified and it is established that they have deposited money in the Company, no recourse can be made to the provisions of S 68. The Appellant Company had provided all the requisite particulars to establish the identity of the share applicants in the confirmations, ITRs and 46 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. bank statements already filed before the Assessing Officer. The various arguments advanced by the Learned Assessing Officer are frivolous and irrelevant and the onus enjoined upon the Appellant Company by the provisions of section 68 stands not only adequately but also completed satisfied.

(26) Accordingly since it is clear that if the shareholders / share applicants are identified and it is established that they have invested money in the purchase of shares, no recourse can be made to the provisions of S 68. In the instant case the Appellant Company had provided all the requisite particulars to establish the identity of the share applicants in the confirmations already filed before the Assessing Officer.

The ld. AR also placed reliance on the following decisions :-

(i) CIT Vs. Gangeshwari Metal Pvt. Ltd. [judgement dated 21.01.2013 (Delhi High Court);

(ii) Pr. CIT Vs. N. C. Cables Ltd. (2017) 391 ITR 11 (Del.); (iii) Pr. CIT Vs. Softline Creations P. Ltd. (2016) 387 ITR 636 (Del.); (iv) CIT Vs. Real Time Marketing P. Ltd. (2008) 306 ITR 35 (Del.); (v) CIT Vs. Value Capital Sergvices P. Ltd. (2008) 307 ITR 334 (Del.); (vi) CIT Vs. Orbital Communication (P) Ltd. (2010) 327 ITR 560 (Del.);

47 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. (vii) CIT Vs. Winstral Petrochemicals P. Ltd. (2011) 330 ITR 603 (Del.); (viii) CIT Vs. Kamdhenu Steel and Alloys Ltd. (2014) 361 ITR 220 (Del.).

17. Having gone through the above cited decisions, we find that the ratio laid down therein is that the primary onus lies upon the assessee to establish identity and creditworthiness of the creditors/ investors as well as genuineness of the transaction and after discharging of the same, onus shifts upon the Revenue to prove the documents filed by the assessee while discharging its primary onus, as false to attract addition under section 68 of the Act. In its recent decision dated 11.01.2017 in the case of Pr. CIT Vs. N.C. Cables Ltd. (supra) the Hon’ble jurisdictional High Court of Delhi has been pleased to hold that no addition can be made under section 68 of the I.T. Act where assessee in the case of share application money had furnished documents to evidence genuineness of transactions and identity and creditworthiness of parties, but there was failure on the part of the Assessing Officer to conduct adequate and proper enquiry into materials while invoking section 68 of the Act. Again in the case of Pr. CIT Vs. Softline Creations P. Ltd. (supra), the assessee in support of receipt of share application money had furnished PANs, bank details of share applicants and affidavits of Directors of those share applicant companies. The Hon’ble High Court of Delhi has been pleased to hold that share application money cannot be considered as unexplained cash credits in the hands of the assessee. In the case of CIT Vs. Value Capital Services P. Ltd. (supra) the Hon’ble jurisdictional High Court of Delhi while dismissing the appeal of the Revenue has been pleased to hold that the additional burden was on the 48 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. Department to show that even if the share applicants did not have the means to make the investment, investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. In the case of CIT Vs. Orbital Communication P. Ltd. (supra) the Hon’ble jurisdictional High Court of Delhi in the case of the claimed share application money has been pleased to hold that where substantial evidence has been produced by the assessee to prove creditworthiness of the creditors and genuineness of share applications, failure to produce creditor is not material. In the case of CIT Vs. Winstral Petro Chemical P. Ltd. (supra) in the case of cash credits/share application money, the Hon’ble jurisdictional High Court of Delhi on the issue of burden of proof, has been pleased to hold that initial burden is on assessee to prove identity of creditors, the burden then shifts to Revenue to prove that credits were not genuine. In that case while dismissing the appeal of the Revenue, the Hon’ble High Court was pleased to hold that it had not been disputed that the share application money was received by the assessee company by way of account payee cheques through normal banking channels. Admittedly, copies of application for allotment of shares were also provided to the Assessing Officer. Since the applicant companies were duly incorporated, were issued PAN Cards and had bank accounts from which money was transferred to the assessee by way of account payee cheques, they could not be said to be non-existent, even if they, after submitting the share applications, had changed their addresses or had stop functioning, held the Hon’ble High Court.

18. When we examine the facts of the present case in view of the above cited ratio laid down by the Hon’ble jurisdictional High Court of Delhi, we

49 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. find that facts are almost similar. In the present case there were 6 investor companies claimed to have invested Rs.5,15,00,000/- in total in the assessee company. In support of their identity and creditworthiness as well as genuineness of the transactions, as discussed above, the assessee had filed before the Assessing Officer, their (investor companies) confirmations, Income Tax return acknowledgements, 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. We thus find that the assessee had discharged its primary onus to establish identity and creditworthiness of the investor companies as well as genuineness of the transactions, as per the ratio laid down in the above cited decisions of the Hon’ble High Court. 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 50 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. report relating to survey conducted at the premises of the assessee that the business premises of the assessee actually belong to Bhushan Steel Ltd. 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 Bhushan 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 total 6 investor companies, notices could not be served in case of 2 companies as they were not available on the given addresses and in case of 1 company notice could not be served as the premises was found locked on various days. The remaining 4 companies had responded and had filed their submissions. However, there is no dispute that in case of all the 6 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

51 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. have been done through banking channels i.e. through account payee cheques and demand drafts. We thus find that 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, we are of the view that the ld. CIT (Appeals) was justified in deleting the addition of Rs.5,15,00,000./- made under section 68 of the Act on account of unexplained share capital and share premium. Since the first appellate order is based upon the ratio laid down in the above cited decisions of the Hon’ble jurisdictional High Court of Delhi, we do not find reason to interfere therewith. The same is upheld. The ground is accordingly rejected.”

have not responded to the letter issued by the A.O, however, three of them have already been found existing and genuine

Companies and two of the Companies from Kolkata based are 52 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. also found existing and genuine in the case of ACIT, Central

Circle-13, New Delhi vs. M/s. Adamine Construction Pvt. Ltd.,

(supra). All Kolkata parties confirmed genuineness of transactions in their reply before A.O. Therefore, the issue is covered in favour of the assessee by the above said judgments.

The Hon’ble Rajasthan High Court in the case of CIT vs. ARL

Infratech Ltd., 394 ITR 383 considered the identical issue of share application money in which the assessee filed PAN and other details of the investor companies. No direct relation was also found between assessee and the investor companies.

Therefore, additions deleted, were found fully justified.

Lovely Exports Pvt. Ltd., (2008) 216 CTR 195 held as under :

(i) “If the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of assessee company.”

53 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. 11. The Hon’ble Delhi High Court in the case of CIT vs. Kamdhenu Steel & Alloys Ltd., & Ors. 361 ITR 220 (Del.) held as under :

Once adequate evidence/material is given, which would prima facie discharge the burden of the assessee in proving the identity of shareholders, genuineness of the transaction and creditworthiness of the shareholders, thereafter in case such evidence is to be discarded or it is proved that it has “created evidence, the Revenue is supposed to make thorough probe before it could nail the assessee and fasten the assessee with such a liability under s.68; AO failed to carry his suspicion to logical conclusion by further investigation and therefore addition under s.68 was not sustainable.”

13. The Hon’ble Delhi High Court in the case of CIT vs. Laxman Industrial Resources Pvt. Ltd., in ITA.No.169 of 2017 dated 14.03.2017 in which the CIT(A) took note of the material filed by the assessee and provided opportunity to the AO in Remand proceedings. The AO merely objected to the material furnished but did not undertake any verification. The CIT(A) deleted the addition by relying upon the decision of the Hon’ble Apex Court in the case of Lovely Exports Pvt.Ltd. (supra) and 54 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. judgement of Delhi High Court in the case of CIT vs Divine Leasing & Finance Ltd. [2008] 299 ITR 268. The ITAT confirmed the opinion of the Ld.CIT(A). Hon’ble High Court in view of the above findings noted that the assessee had provided several documents that could have showed light into whether truly the transactions were genuine. The assessee provided details of share applicants i.e. copy of the PAN, Assessment particulars, mode of amount invested through banking channel, copy of resolution and copies of the balance sheet. The AO failed to conduct any scrutiny of the document, the departmental appeal was accordingly dismissed.

55 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. share application money from the investor Companies. The assessee on the basis of the documentary evidences have been able to establish that the share holders are genuine parties and they are not bogus and fictitious. The Hon’ble Delhi High Court in the case of CIT vs. Divine Leasing & Fin. Ltd., 299 ITR 268 held that “no adverse inference should be drawn if shareholders failed to respond to the notice by AO.”

56 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi.

16. The Hon’ble Delhi High Court in the case of CIT vs. Dwarkadhish Investment P. Ltd., (ITA.No.911 of 2010) and Dwarkadhish Capital P. Ltd., (2011) 330 ITR 298 (Del.) held “In any matter, the onus of proof is not a static one. Though in section 68 of the Income Tax Act, 1961, the initial burden of proof lies on the assesses yet once he proves the identity of the creditors/share applicants by either furnishing their PAN number or income-tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the Revenue. Just because the creditors/share applicants could not be found at the address given, it would not give the Revenue the right to invoke section 68. One must not lose sight of the fact that it is the Revenue which has all the power and wherewithal to trace any person. Moreover, it is settled law that the assessee need not to prove the "source of source". The assessee-company was engaged in the business of financing and trading of shares. For the assessment year 2001- 02 on scrutiny of accounts, the Assessing Officer found an addition of Rs.71,75,000 in the share capital of the assessee. The Assessing Officer sought an explanation of the assessee about this addition in the share capital. The assessee offered a detailed explanation. However, according to the Assessing Officer, the assessee failed to explain the addition of share application money from five of its subscribers. Accordingly, the Assessing Officer made an addition of Rs.35,50,000/- with the aid of section 68 of the Act, 1961 on account of unexplained cash credits appearing in the books of the assessee. However, in appeal, the Commissioner of Income-tax (Appeals) deleted the addition on the 57 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. ground that the assessee had proved the existence of the shareholders and the genuineness of the transaction. The Income-tax Appellate Tribunal confirmed the order of the Commissioner of Income-tax (Appeals) as it was also of the opinion that the assessee had been able to prove the identity of the share applicants and the share application money had been received by way of account payee cheques. On appeal to the High Court: Held, dismissing the appeals, that the deletion of addition was justified.”

60 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. of Rs.17.60 crores. The Departmental appeal fails and is accordingly, dismissed.

7. We have considered the rival contentions. It is not in dispute that assessee filed the confirmations of all the Investors, copies of their bank accounts and income tax return, acknowledgment and PAN of the Investors before A.O. The A.O. instead of examining these material evidence placed before him, wanted to verify the genuineness of these 10 parties and issued Commission under section 131 of the I.T. Act to Mumbai and Kolkata Office of the Department. The reports of the Commission were sent to the A.O. which were based upon report of the Inspectors. The A.O. heavily relied upon the reports of the Commission based on report of the Inspectors for the purpose of making the addition. The assessee however, challenged the findings of the A.O. before Ld. CIT(A) by submitting that the result of enquiry and report of the Commission was not confronted to the assessee thus principles of natural justice have been violated. No opportunity have been given to assessee to rebut the report of the Commission and without allowing any cross- examination to the reports and statements of the Inspectors. The Ld.

61 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. CIT(A) in para 4.2 of the appellate order accepted the contention of assessee by holding that he does not found from the assessment record that the result of enquiry made at Mumbai and Kolkata were made available to the assessee. To that extent, the right of the assessee to know the facts and have the opportunity to rebut the findings was not granted. The Ld. CIT(A) however, in view of the fact that addition on merit have been deleted observed that this ground raised against the validity of the proceedings for not following the principles of natural justice does not survive. These findings of fact recorded by the Ld. CIT(A) have not been challenged in the departmental appeal. It, therefore, stands proved on record that the result of enquiry and report of the Commission under section 131 submitted by Mumbai and Kolkata Office have not been confronted to the assessee and no right of cross-examination have been given to assessee. It is well settled law that any material collected at the back of the assessee, when not confronted to the assessee, cannot be read in evidence against the assessee. We rely upon the decision of Hon’ble Supreme Court in the case of Kishan Chand Chelaram 125 ITR 713.

The report of the Commission and result of enquiries shall have to be excluded from consideration. It may be noted at the cost of repetition

62 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. that when this finding of fact has not been challenged in the Departmental appeal, the result of enquiry and report of the Commission cannot be taken into consideration against the assessee.

There is no other evidence on record against assessee. Therefore, we proceed to decide the issue on merit in the light of material available on record i.e., documentary evidence produced by the assessee before the A.O. and the Ld. CIT(A), confirmations of the Investors, copies of their bank statement, copy of PAN and ITR of the Investors and copy of the ROC of the Investors. Learned Counsel for the Assessee submitted that no cash was found deposited in the bank accounts of the Investors. Copies of the bank statements of the Investors are filed in the paper book which shows that before making investment in assessee-company investors are having sufficient bank balances with them and no cash have been deposited in their bank accounts. In the case of the assessee survey under section 133A was conducted after search was conducted in the case of M/s. Bhushan Steel group of cases. However, A.O. has not mentioned any material was found against the assessee in the survey to make the above addition.

Therefore, it is clear that no incriminating material was found against the assessee during the course of survey so as to make the above

63 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. addition. No evidence was also brought on record that share application money received by the assessee actually emanated from the coffers of the assessee. No direct relations between the assessee- company and investors were found. No efforts have been made by the A.O. for production of the Investors for examination before him on oath. Learned Counsel for the Assessee referred to his submissions made before the Ld. CIT(A) in which it was specifically submitted that all the Investors have directly confirmed the genuineness of the transaction with the assessee in their replies filed in response to the Commission under section 131 of the I.T. Act supported by all the relevant documents and copies of the annual accounts. The reply of the assessee before Ld. CIT(A) have not been rebutted by the Revenue Department through any evidence or material on record. The A.O. in the last part of the assessment order has mentioned that Investors have not enclosed the bank statement showing the source of the fund for share application money which would support the explanation of assessee that Investors have filed replies before A.O. confirming the genuineness of the transaction in the matter. The observation of the A.O. is incorrect that copy of the bank statement is not filed because the A.O. in the assessment order itself has mentioned that assessee

64 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. filed copy of their bank statements before him for examination. Thus, evidences and material on record clearly prove identity of the Investors, their creditworthiness and genuineness of the transaction in the matter. We rely upon the decision of the Hon’ble Supreme Court in the case of Orissa Corporation Pvt. Ltd., 159 ITR 78. Since the assessee produced sufficient evidence before A.O. therefore, initial burden upon assessee to prove identity of the Investors, their creditworthiness and genuineness of the transaction have been discharged. The case set-up by the A.O. against the assessee was that the premises belong to M/s. Bhushan Steel Companies and other companies are having same registered office. This created a suspicion in the mind of the Revenue. The Ld. CIT(A) therefore, rightly noted that there is no Law that more than one Company cannot have its registered Office at one address. The Investor Companies would have changed their address later on. It is also an admitted fact that source of the capital introduced in these companies were established during the respective assessment proceedings, including in the assessee. No evidence was found during the course of search or survey to indicate introduction of unaccounted cash/funds in the form of share capital in these companies. All the points taken by the 65 ITA.No.6173/Del./2013 M/s. Elegant Security Services Pvt. Ltd., New Delhi. A.O. have been addressed by the Ld. CIT(A) as well as in the group cases of ACIT vs. NRA Iron and Steel Pvt. Ltd., (supra). The Ld. D.R. did not point out any infirmity in the order of the Ld. CIT(A) in deleting the addition. Considering the above discussion, we do not find any merit in the Departmental appeal, the same is accordingly dismissed.

Order pronounced in the open Court.