ITO, New Delhi v. M/s. New Tech Steels Pvt. Ltd, New Delhi

ITA 1928/DEL/2009 | 2003-2004
Pronouncement Date: 29-01-2010 | Result: Partly Allowed

Appeal Details

RSA Number 192820114 RSA 2009
Assessee PAN AAACN2891F
Bench Delhi
Appeal Number ITA 1928/DEL/2009
Duration Of Justice 8 month(s) 21 day(s)
Appellant ITO, New Delhi
Respondent M/s. New Tech Steels Pvt. Ltd, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 29-01-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted F
Tribunal Order Date 29-01-2010
Date Of Final Hearing 21-01-2010
Next Hearing Date 21-01-2010
Assessment Year 2003-2004
Appeal Filed On 08-05-2009
Judgment Text
I.T.A. NO.1927 1928 1929 /DEL/2009 1/19 IN THE INCOME TAX APPELLATE TRIBUNAL NEW DELHI BENCH F BEFORE SHRI K. D. RANJAN ACCOUTANT MEMBER AND SHRI GEORGE MATHAN JUDICIAL MEMBER ITA NO. 1927 1928 & 1929/DEL/2009 (ASSESSMENT YEAR 2001-02 2003-04 & 2004-05) ITO WARD 13(2) VS. M/S. NEW TECH STEELS PVT. LTD. NEW DELHI 824 VIKAS DEEP LAXMI NAGAR DISTT. CENTRE DELHI-92 (APPELLANTS) (RESPONDENTS) PAN / GIR NO. AAACN 2891F APPELLANT BY: SHRI H. K. LAL SR. DR RESPONDENT BY: SHRI RAVI GUTPA ADV. ORDER PER GEORGE MATHAN JM: 1. I.T.A. NO. 1927/DEL/2009 IS THE APPEAL OF THE RE VENUE PREFERRED AGAINST THE ORDER OF LD. CIT(A) XVI NEW DELHI IN APPEAL NO.93/2007-08 DATED 06.02.2009 FOR THE ASSESSMENT YEAR 2001-02 I.T.A. NO. 1928/DEL/2009 I S THE APPEAL BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) XVI NEW DELHI IN APPEAL NO.92/2007-08 DATED 06.02.2009 FOR THE ASSESSMENT YEAR 2003-04 AND I.T. A. NO. 1929/DEL/2009 IS THE APPEAL BY THE REVENUE AGAI NST THE ORDER OF CIT(A) XVI NEW DELHI IN APPEAL NO.94/2007-08 DATED 06.02.2009 FOR THE ASSESSMENT YEAR 2004-05. SHRI H K LAL SR. DR REPRESENTED FOR THE I.T.A. NO.1927 1928 1929 /DEL/2009 2/19 REVENUE AND SHRI RAVI GUTPA ADVOCATE REPRESENTED FO R THE ASSESSEE. 2. IT WAS THE SUBMISSION BY BOTH THE LD. A.R. AND T HE LD. D.R. THAT THE ISSUE IN THESE APPEALS WAS IDENTICAL. IT WAS THE SUBMISSION THAT THE ISSUE IN THESE APPEALS WERE BASICALLY ON ACCOUNT OF SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE IN I.T.A. NO. 1927/DEL/200 9 AND THE 2 ND ISSUE WAS IN RESPECT OF THE SALE PROCEEDS OF THE SHARES IN I.T.A. NOS.1927/DEL./2009 1928/DEL/2009AND I.T.A. NO. 1929/DEL/2009. THE 3 RD ISSUE WAS AGAINST THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION MADE BY THE A.O. ON ACCOUNT O F UNEXPLAINED EXPENDITURE IN RESPECT OF THE COMMISSIO N FOR ARRANGING THE SHARE APPLICATION MONEY AND THE SALE PROCEEDS OF THE SHARES WHICH HAVE BEEN TREATED AS UNEXPLAINED INCOME OF THE ASSESSEE. IT WAS THE SUBMISSION BY THE LD. D.R. THAT THERE WAS AN ERROR IN THE FIGURES AS MENTIONED IN THE GROUNDS OF APPEAL I N I.T.A. NO. 1927/DEL/2009 IN SO FAR AS IN GROUND NO. 1 THE AMOUNT AGAINST THE SHARE APPLICATION MONEY WAS SHOWN AT RS.18 LACS BUT THE SAME WAS TO BE READ AS RS.10 LACS AND IN RESPECT OF THE SALE PROCEEDS OF S HARES THE AMOUNT WAS SHOWN AS RS.10 LACS AND THE SAME WAS TO BE READ AT RS.18 LACS. HE REQUESTED THAT THE TYPOGRAPHICAL ERROR MAY BE CORRECTED TO WHICH THE L D. I.T.A. NO.1927 1928 1929 /DEL/2009 3/19 A.R. HAD NO OBJECTION. CONSEQUENTLY THE PRAYER IS ACCEPTED. 3. IT WAS THE FURTHER SUBMISSION BY THE LD. D.R. TH AT IN THE COURSE OF ASSESSMENTS PROCEEDINGS THE ASSESSEE HAD BEEN DIRECTED BY THE A.O. TO PRODUCE THE SHARE APPLICANTS. THE ASSESSEE HAD NOT PRODUCED THE SHA RE APPLICANTS. HOWEVER THE ASSESSEE HAD GIVEN THE NAM ES & ADDRESSES OF THE SHARE APPLICANTS BUT WHEN THE A. O. HAD ISSUED NOTICE TO THE SHARE APPLICANTS NO RESPO NSE HAD BEEN RECEIVED FROM THEM. IT WAS THE FURTHER SUBMISSION THAT THE INVESTIGATION DEPARTMENTS OF TH E REVENUE HAD RECORDED THE STATEMENT FROM ONE SHRI MUKESH GUPTA SRI RAJAN JASSAL AND ONE SHRI TRILOK CHAND BANSAL WHEREIN THEY HAD CONFIRMED THAT THEY H AD BEEN GIVING BOGUS ENTRIES TO VARIOUS PERSONS. IT W AS THE SUBMISSION THAT THE COMPANY WHICH HAS MADE THE SHAR E APPLICATION IN THE ASSESSEE COMPANY SHARES WERE CONTROLLED BY THESE THREE INDIVIDUALS WHO HAD CONFI RMED THAT THEY HAD BEEN GIVING BOGUS ENTRIES. IT WAS THE SUBMISSION BY THE LD. D.R. THAT ON ACCOUNT OF THE INFORMATION AVAILABLE WITH THE A.O. THAT THE COMPAN Y WHICH HAD MADE THE SHARE APPLICATION WERE CONTROLLE D BY THE ENTRY OPERATORS THE A.O. HAD GIVEN THE ASSE SSEE THE COPIES OF THE STATEMENTS RECORDED BY THE INVESTIGATION WING FROM THE SAID THREE PERSONS. IT WAS THE SUBMISSION THAT AS THE ASSESSEE WAS UNABLE TO I.T.A. NO.1927 1928 1929 /DEL/2009 4/19 PRODUCE THE SHARE APPLICANTS FOR CONFIRMATION THE A.O. ADDED THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE AS THE UNEXPLAINED CASH CREDIT. IT WAS TH E SUBMISSION THAT THE LD. CIT(A) HAD DELETED THE ADDI TION MADE BY THE A.O. HOLDING THAT THE IDENTITY OF THE S HARE APPLICANTS WERE KNOWN AND THE AMOUNT HAD BEEN RECEIVED BY CHEQUE. IT WAS THE SUBMISSION THAT THE CIT(A) HAD RELIED UPON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS PVT. LT D. REPORTED IN 299 ITR 268 AND DELETED THE ADDITION. IT WAS THE SUBMISSION BY THE LD. D.R. THAT THE DECISIO N OF HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS PVT. LTD. DID NOT APPLY IN SO FAR AS THE VERY IDENT ITY OF THE SHARE APPLICANTS WERE DISPUTED. IT WAS THE FUR THER SUBMISSION THAT IN RESPECT OF THE SALE OF SHARES T HE ASSESSEE HAD BEEN ASKED TO PRODUCE THE PURCHASERS O F THE SHARES WHICH HAD ALSO NOT BEEN DONE. IT WAS T HE SUBMISSION THAT NAMES AND ADDRESSES OF THE SHARE PURCHASERS WHICH HAD BEEN GIVEN TO THE A.O. HAD BEE N VERIFIED AND IT WAS FOUND THAT THE PURCHASERS WERE NOT AVAILABLE AT THE ADDRESSES GIVEN. IT WAS THE SUBMI SSION THAT FOR THE ASSESSMENT YEAR 2003-04 AND 2004-05 T HE ASSESSEE HAD ALSO MADE A CLAIM THAT THE SHARES HAD BEEN SOLD THROUGH BROKERS. IT WAS THE FURTHER SUBMISSIO N THAT EVEN FOR THE ASSESSMENT YEAR 2003-04 AND 2004-05 WHEN THE BROKERS ADDRESSES WERE VERIFIED IT WAS F OUND I.T.A. NO.1927 1928 1929 /DEL/2009 5/19 THAT THE BROKERS DID NOT EXIST AT THE SPECIFIED ADD RESSES. IT WAS THE SUBMISSION THAT THE CIT(A) HAD DELETED T HE ADDITION WITHOUT GIVING ANY SPECIFIC REASONS THERET O. IT WAS THE SUBMISSION THAT THE CIT(A) HAD GIVEN A FIND ING IN RELATION TO THE SHARE APPLICATION MONEY AND HAD CLUBBED HIS FINDINGS IN RESPECT OF THE SALE PROCEED S OF THE SHARES ALONG WITH THE FINDINGS IN RESPECT OF TH E SHARE APPLICATION MONEY AND HAD DELETED THE SAME. IT WAS THE FURTHER SUBMISSION THAT THE ADDITION MADE BY THE A. O. ON ACCOUNT OF THE ALLEGED COMMISSION PAID FOR OBTAI NING THE HAWALA ENTRIES HAD ALSO BEEN DELETED BY THE CIT (A). IT WAS THE SUBMISSION THAT THE ORDER OF THE CIT(A) WAS LIABLE TO BE REVERSED. 4. IN REPLY THE LD. A.R. SUBMITTED THAT THE ASSESSE E HAD IN THE COURSE OF ASSESSMENT PROCEEDINGS PROVIDED THE COPIES OF THE PAN OF THE SHARE APPLICANTS AS ALSO T HE COPIES OF THE INCOME TAX RETURNS. IT WAS THE FURTH ER SUBMISSION THAT THE STATEMENT OF THE PERSONS BEING SHRI MUKESH GUPTA SHRI RAJAN JASSAL AND SHRI TRILOK CHA ND BANSAL AND SHRI S B SINGH THOUGH HAD BEEN GIVEN TO THE ASSESSEE THE ASSESSEE HAD SPECIFICALLY ASKED FOR A N OPPORTUNITY FOR CROSS EXAMINATION AND THAT OPPORTUN ITY WAS NOT GIVEN TO THE ASSESSEE. IT WAS THE FURTHER SUBMISSION THAT IN THE STATEMENT RECORDED FROM THE PERSONS THERE WAS NO REFERENCE TO THE ASSESSEES NA ME AND THE STATEMENT WERE ALSO VERY VAGUE. IT WAS THE I.T.A. NO.1927 1928 1929 /DEL/2009 6/19 SUBMISSION THAT THE STATEMENT HAD BEEN RECORDED FRO M THE CORRECT PERSONS WHO WERE INVOLVED IN THE AFFAIR S OF THE COMPANY WHICH HAVE MADE SHARE APPLICATIONS AND CONSEQUENTLY THE IDENTITY WAS LIABLE TO BE HELD TO HAVE BEEN PROVED BUT THE STATEMENT AS RECORDED COULD NOT BE RELIED UPON MORE SO THE CONTENTS OF THE STATEMENTS IN SO FAR AS NO OPPORTUNITY HAD BEEN GIVEN TO THE ASSESSE E TO CROSS EXAMINE THEM. IT WAS THE FURTHER SUBMISSION THAT THE IDENTITY OF THE SHARE APPLICANTS HAVE BEEN PROV ED AND THE DECISION OF THE HON'BLE SUPREME COURT IN TH E CASE OF LOVELY EXPORTS PVT. LTD. SQUARELY APPLIES. HE HAS PLACED RELIANCE UPON THE DECISION OF THE HON'BL E HIGH COURT OF DELHI IN THE CASE OF GANGOUR INVESTME NTS LTD. REPORTED IN 179 TAXMAN 01(DEL.) TO SUPPORT HIS CONTENTIONS THAT THE CIT(A) HAD CONSIDERED THE EVIDENCE ON RECORD AND HAD HELD THAT THE ASSESSEE H AD DISCHARGED ITS ONUS AND SATISFIED THE REQUIREMENTS OF SECTION 68 AND THERE WAS NO EVIDENCE ON RECORD TO SUPPORT THE FINDINGS OF THE A.O. AND CONSEQUENTLY H E HAD DECIDED THE ADDITION AND THE TRIBUNAL HAD ALSO CONFIRMED THE ORDER OF THE CIT(A). IT WAS THUS THE SUBMISSION THAT ON THE BASIS OF THE FACTS AVAILABLE THE ASSESSEE HAD DISCHARGED ITS ONUS AND THE ORDER OF T HE CIT(A) WAS LIABLE TO BE UPHELD. HE FURTHER PLACED RELIANCE ON THE DECISION OF HON'BLE HIGH COURT OF D ELHI IN THE CASE OF BAWA SHAKTI STEELS MANUFACTURERS PVT . I.T.A. NO.1927 1928 1929 /DEL/2009 7/19 LTD. 179 TAXMAN 25 (DEL.) WHEREIN IT HAD BEEN HELD THAT THE LD. CIT(A) NOT ONLY FOUND THAT THE IDENTIT Y OF EACH OF THE SHARE HOLDERS STOOD ESTABLISHED BUT HAD ALSO EXAMINED THE FACT THAT EACH OF THEM WERE INCOME TAX ASSESSEE AND HAD DISCLOSED THE SHARE APPLICATION MO NEY IN THEIR ACCOUNTS WHICH WAS DULY REFLECTED IN THEIR INCOME TAX RETURNS AS WELL AS IN THEIR BALANCE SHEE T AND CONSEQUENTLY THE SHARE APPLICATION MONEY RECEIVED B Y THE ASSESSEE WAS NOT LIABLE TO BE ADDED U/S 68 OF T HE ACT. HE FURTHER PLACED RELIANCE ON THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF M/S. J D SECURITIES & FINANCE LTD. IN I.T.A. NO. 2897 2898/DEL/2008 WHEREIN THE TRIBUNAL HAD FOLLOWED THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS REFERRED TO SUPRA AND HAD DELETED TH E ADDITION OF THE SHARE APPLICATION MONEY ON THE GROU ND THAT THE ASSESSEE HAD PRODUCED THE CONFIRMATION OF THE SHARE HOLDERS INDICATING DETAILS OF ADDRESSES AND P AN AND PARTICULARS OF CHEQUES THROUGH WHICH THE AMOUNT WAS PAID TOWARDS SHARE APPLICATION MONEY. IT WAS H IS FURTHER SUBMISSION THAT THE SHARE APPLICATION MONEY HAS BEEN RECEIVED FROM THE PERSONS WHOSE IDENTITY WAS PROVED. THE DETAILS HAVE ALSO BEEN PRODUCED BEFORE THE A.O. AND THE LD. CIT(A). HE FURTHER DREW OUR ATTEN TION TO PAGES 37-43 OF THE PAPER BOOK WHICH WAS THE COP Y OF THE EVIDENCE IN RESPECT OF M/S. M V MARKETING PV T. I.T.A. NO.1927 1928 1929 /DEL/2009 8/19 LTD. WHO WAS ONE OF THE SHARE APPLICANTS FOR AN AMO UNT OF RS.5 LACS. HE FURTHER DREW OUR ATTENTION TO PAG ES 44- 50 OF THE PAPER BOOK WHICH WAS THE COPY OF THE EVIDENCE PRODUCED IN RELATION TO ETHNIC CREATIONS P VT. LTD. WHICH WAS ONE OF THE SHARE APPLICANTS. AT P AGE 51-69 IS THE EVIDENCE IN RESPECT OF M/S. SHRADHA CONSTRUCTION PVT. LTD. AND AT PAGE 70-86 IS THE EVI DENCE IN RESPECT OF FAIR N SQUARE EXPORTS P. LTD. AND PAG E 87- 90- WHICH WAS THE COPY OF THE EVIDENCE IN RESPECT O F PERFORMANCE TRADING & INVESTMENT PVT. LTD. IT WAS THE SUBMISSION THAT THE ASSESSEE HAD ALSO SOLD CERTAIN SHARES HELD BY IT AS INVESTMENT TO M/S. SGC PUBLISHING PVT . LTD. FAIR N SQUARE PVT. LTD. AND PERFORMANCE TRADI NG & INVESTMENT PVT. LTD. FOR THE ASSESSMENT YEAR 2001 - 02 AND TO M/S. SRS VIJAY SALES PVT. LTD. S J CAPIT AL LTD. AND CREATIVE FINANCIAL SERVICES PVT. LTD. FOR THE ASSESSMENT YEAR 2003-04 AND 2004-05. IT WAS THE SUBMISSION THAT THE SHARES HAVE BEEN HELD AS INVEST MENT BY THE ASSESSEE AND THE SAME HAD BEEN SOLD AND THE SALE PROCEEDS HAVE BEEN RECEIVED. IT WAS THE SUBMISSION THAT THE SHARES WHICH HAD BEEN SOLD HAD BEEN SHOWN AS INVESTMENT IN THE BALANCE SHEET. HE DREW OUR ATTEN TION TO PAGE 26 OF THE PAPER BOOK WHICH WAS THE COPY OF THE DETAILS OF INVESTMENT IN SHARES AS ON 31.03.200 0 AS ALSO PAGE 25 OF THE PAPER BOOK WHICH WAS THE COPY OF THE DETAILS OF INVESTMENT IN SHARES AS ON 31.03.200 1. IT I.T.A. NO.1927 1928 1929 /DEL/2009 9/19 WAS THE FURTHER SUBMISSION THAT THE SHARE APPLICATI ON MONEY RECEIVED BY THE ASSESSEE HAD BEEN ACCEPTED AN D THE SHARES HAD ALSO BEEN ALLOTTED TO THE SHARE APPL ICANTS AND EVEN AS ON TODAY THE SHARES WERE HELD IN THE N AME OF THE APPLICANTS. IT WAS THE FURTHER SUBMISSION T HAT IN RESPECT OF THE SHARES WHICH HAVE BEEN HELD AS INVESTMENT AND WHICH HAVE BEEN SOLD BY THE ASSESSEE THE ASSESSEE DID NOT HAVE ANY INFORMATION AS TO WHE THER THE SHARES HAVE BEEN TRANSFERRED IN THE NAME OF THE PURCHASERS. IT WAS THE SUBMISSION THAT THE CIT(A) HAD CORRECTLY APPRECIATED THE EVIDENCES AND HAD DELETED THE ADDITIONS. 5. ON BEING ASKED BY THE BENCH TO THE LD. D.R. AS T O WHETHER ANY PROCEEDINGS HAVE BEEN INITIATED IN THE NAME OF SHRI TILAK CHAND BANSAL MUKESH GUPTA AND SHRI RAJAN JASSAL AND THE COMPANIES IN WHICH THEY W ERE DIRECTORS AND WHICH THEY THEMSELVES HAD CLAIMED TO BE USED FOR GIVING BOGUS ENTRIES OR WHETHER ANY PROCEEDINGS U/S 281B HAS BEEN INITIATED FOR ATTACHI NG THE SHARES HELD BY THEM AND THEIR COMPANY IN ANY OF THE ALLEGED BOGUS SHARE TRANSACTION FOR RECOVERY OF THE DUES IN RESPECT OF ANY PROCEEDINGS PENDING AGAINST THEM OR WHETHER ANY PROCEEDING U/S 179(1) AND SECTION 178(1 ) OF THE ACT WERE INITIATED IT WAS THE SUBMISSION BY THE LD. D.R. THAT HE HAD NO SPECIFIC INFORMATION AND IT WOULD HAVE BEEN CALLED FOR FORM THE A.O. OF THE SAI D I.T.A. NO.1927 1928 1929 /DEL/2009 10/19 PERSONS. IT WAS THE FURTHER SUBMISSION BY THE LD. D .R. THAT THE DECISION OF THIS TRIBUNAL IN THE CASE OF D HINGRA GLOBAL CREDENCE PVT. LTD. IN I.T.A. NO. 2927/DEL/20 09 DATED 31.12.2009 WOULD APPLY WHEREIN IT HAS BEEN HE LD AS FOLLOWS: AS RIGHTLY CONTENDED BY THE LEARNED DR THE ASSESSE E BEING A PRIVATE LIMITED COMPANY THE BASIC STRUCTURE OF A PRIVATE LIMITED COMPANY IS SUCH THAT A PRIVATE LIMITED COMP ANY CANNOT MAKE AN INVITATION FOR ISSUE OF SHARES TO TH E PUBLIC. PRIVATE LIMITED CO. IS/ARE PROHIBITED FROM MAKING A NY INVITATION TO THE PUBLIC TO SUBSCRIBE FOR ANY SHARE S IN THE COMPANY. THIS PROVISION IS CONTAINED IN SECTION 3 OF THE COMPANIES ACT 1956 WHEREBY SUB-CLAUSE (III) OF SUB -SECTION (1) OF SECTION 3 DEFINES A PRIVATE COMPANY. THE PRIMARY DOCUMENT TO HOLD THAT THE AMOUNT WAS RECEIVED BY WA Y OF SHARE APPLICATION ITSELF IS MISSING I.E. THE APPLIC ATION FOR ALLOTMENT OF SHARE ITSELF. AS PER THE BALANCE-SHEE T OF THE ASSESSEE COMPANY AS PER ITS PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31.3.2004 THERE WERE NEITHER ANY BUSINE SS NOR ANY INCOME. IT ONLY INCURRED ADMINISTRATIVE EXPENS ES OF RS.24 356/- AND THE UNABSORBED LOSSES STOOD AT RS.5 1 512/-. NEITHER THERE WAS ANY BUSINESS PLAN NOR ANY INSTANC E WHICH AFFECT THE PROFITABILITY OF THE COMPANY TO AN EXTEN T THAT IT CAN COMMAND A PREMIUM 9 TIMES ITS FACE VALUE. AS A COM MON PERCEPTION PREVAILING EVEN IN CASE OF LISTED COMPAN IES THE PRICE IS GENERALLY RELATED TO THE EARNING PER SHARE AND SUCH PE RATIO IS GENERALLY 10. THEREFORE IF THE PE RAT IO IS ONE THE MARKET PRICE WILL BE TO THE EXTENT OF ITS FACE VALU E. IN THE PRESENT CASE IT IS SEEN THAT THE COMPANY HAS NEGATI VE RESERVE AND INCURRED LOSSES ALL ALONG. THEREFORE IT WILL BE PUTTING BLINKER ON THE EYE TO BELIEVE THAT THE COMPANY COMM ANDS PREMIUM AS HIGH AS 9 TIMES ITS FACE VALUE. THEREFO RE THERE IS SOMETHING MORE THAN THAT MEETS THE EYES. MERE F ILING OF UNDATED CONFIRMATION LETTERS/AFFIDAVITS WILL NOT PR OVE THE IDENTITY OF THE SHARE APPLICANTS OR THE GENUINENESS OF THE TRANSACTION. THE OBSERVATION OF HONBLE SUPREME CO URT WHILE DECIDING THE SPECIAL LEAVE PETITION IN THE CA SE OF LOVELY EXPORTS (P) LTD. (SUPRA) CANNOT BE CONSIDER ED TO BE A LAW DECLARED WHICH HAS A BINDING PRECEDENT UNDER AR TICLE 141 OF THE CONSTITUTION OF INDIA. SUCH OBSERVATION S ARE I.T.A. NO.1927 1928 1929 /DEL/2009 11/19 PURELY ON THE FACTS OF THE RESPECTIVE CASE AND CANN OT BE APPLIED ACROSS THE BOARD EVEN WHEN THE FACTS IN OTH ER CASES ARE ALTOGETHER DIFFERENT. THE COURT WHILE DECIDING THE APPEAL WILL NOT PUT BLINKER IN ITS SIGHT AND MERELY BELIEV E WHAT IS WRITTEN ON PAPER BUT ALSO CONSIDER CONCERNING CIRCU MSTANCES AND GROUND REALITY AS OBSERVED BY THE HONBLE SUPRE ME COURT IN THE CASES OF CIT VS. DURGA PRASAD MORE 8 2 ITR 540 (SC) AND SUMATI DAYAL 214 ITR 801. IN THE PRE SENT CASE IN SPITE OF ALL THE EFFORTS WHERE THE A.O. COU LD NOT EVEN LOCATE THE RESPECTIVE SOCALLED APPLICANTS THE ASSE SSEE COULD FILE UNDATED CONFIRMATIONS AND AFFIDAVITS. THEREFO RE IT IS A CASE WHERE ALL THE PAPERS ARE MANUFACTURED AT THE I NSTANCE OF ASSESSEE AND NOT THE REAL TRANSACTION. WE THEREFO RE MERELY ON THE BASIS OF SUCH PAPERS CANNOT HOLD THAT THE AM OUNT RECEIVED BY WAY OF SHARE CAPITAL IS EXPLAINED WITHI N THE MEANING OF SECTION 68 OF THE ACT. THE FULL BENCH O F DELHI HIGH COURT IN THE CASE OF SOPHIA FINANCE LTD. (SUPR A) HAVE HELD THAT PROVISION OF SECTION 68 SHALL EQUALLY APP LY EVEN IN THE CASE OF AMOUNT STATED TO BE RECEIVED TOWARDS SH ARE CAPITAL. SINCE THE ASSESSEE FAILED TO PROVE EVEN T HE BASIC IDENTITY AS ALSO THE CREDITWORTHINESS AND THE GENUI NENESS OF THE TRANSACTION IN THE FORM OF SHARE PREMIUM THE A DDITION WAS RIGHTLY MADE BY THE ASSESSING OFFICER. IN REPLY IT WAS SUBMITTED BY THE LD. A.R. THAT THE DECISION DID NOT APPLY TO THE FACTS OF THE ASSESSEE S CASE AND EACH CASE HAS TO BE DECIDED ON THE FACTS OF ITS OWN. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN RES PECT OF THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSE E IT IS NOTICED THAT THE ASSESSEE HAS RECEIVED THE SHARE APPLICATION MONEY FROM M/S. M V MARKETING PVT. LTD. AND M/S. ETHNIC CREATIONS P. LTD. A PERUSAL OF THE EVIDENCE PRODUCED IN RESPECT OF EACH OF THE SHARE APPLICATIONS IS CONSIDERED. PAGE 37 OF THE PAPER B OOK IS THE CONFIRMATION LETTER DATED 12 TH OCTOBER 2004 OF M/S. M V MARKETING P. LTD. THIS LETTER HAS BEEN IS SUED I.T.A. NO.1927 1928 1929 /DEL/2009 12/19 BY ONE SHRI MUKESH GUPTA AS DIRECTOR OF M/S. M V MARKETING P. LTD. THIS LETTER DOES NOT CONTAIN ANY SEAL OF THE COMPANY AND THE ADDRESS IS SHOWN AS WZ134 PLOT NO.170 VISHNU GARDEN NEW DELHI. PAGE 38 IS THE COPY OF THE LETTER OF ALLOTMENT OF DISTINCTIVE NUMBERS OF SHARES WHICH IS THE LETTER ISSUED BY THE ASSESSE E. PAGE 39 IS THE COPY OF THE SHARE APPLICATION FORM I N RESPECT OF M/S. M V MARKETING P. LTD. DATED 17.05.2000. PAGE 43 IS THE COPY OF PAN ALLOTTED TO M/S. M V MARKETING P. LTD. VIDE LETTER DATED 01.11.2000. HOWEVER IT IS ALSO NOTICED HERE THAT IN THE SHARE APPLICATION FORM THE ASSESSEE HAS MENTIONED THE PAN AS EARLY AS ON 17.05.2000. PAGE 40-42 IS THE C OPY OF THE INCOME TAX RETURN OF M/S. M V MARKETING P. L TD. FOR THE ASSESSMENT YEAR 2002-03 AS ALSO THE COPY OF THE BALANCE SHEET AND P & L ACCOUNT WITHOUT ANY ENCLOSURES. INTERESTINGLY THE ADDRESS IN THE RETUR N OF INCOME IN RESPECT OF M/S. M V MARKETING P. LTD. IS SHOWN AS A-10/204 SAI BHAWAN COMMERCIAL COMPLEX RANJEET NAGAR NEW DELHI. HERE THE TRANSACTION OF SHARE APPLICATION IN THE ASSESSEES CASE IS THE ASSESSMENT YEAR 2001-02. THE COPY OF THE RETURN FI LED IN THE CASE OF M V MARKETING RELATE TO THE ASSESSME NT YEAR 21.03.2002 AND IN THE BALANCE SHEET INVESTMENT HAS BEEN SHOWN RS.42 LACS BUT THE BREAK UP OF SUCH INVESTMENT IS NOT SHOWN. THIS RETURN IN THE CASE O F M V I.T.A. NO.1927 1928 1929 /DEL/2009 13/19 MARKETING HAS ALSO BEEN SIGNED BY ONE SHRI HUKAM CHAND. THUS IT IS NOTICED THAT IN THE SHARE APPLIC ATION FORM M V MARKETING HAS DISCLOSED PAN MUCH BEFORE THE RECEIPT OF COMMUNICATION FROM THE DEPARTMENT OF PAN. THE REGISTERED OFFICE OF THE ASSESSEE IS ONE WHEREAS THE ASSESSEE IS DECLARING ANOTHER ADDRESS I N THE RETURN OF INCOME. THE ADDRESS GIVEN BY THE ASSESSE E TO THE A.O. IN RESPECT OF SHARE APPLICATIONS IS THE REGISTERED OFFICE ADDRESS TO WHICH SUMMONS HAD BEEN SENT AND THE SAME HAVE NOT BEEN COMPLIED WITH. ENQUIRIES MADE THROUGH THE INSPECTOR OF THE DEPARTM ENT SHOWED THAT THE COMPANY WAS NOT OPERATING AT THE ADDRESSES GIVEN. IT IS NOTICED THAT THE A.O. HAD A LSO VERIFIED THE ADDRESS AS GIVEN IN THE RETURN OF INCO ME AND EVEN HERE THE COMPANY WAS NOT EXISTING. NOW COMIN G TO THE STATEMENT RECORDED WHICH HAVE BEEN GIVEN TO THE ASSESSEE IT IS CLEARLY UNDERSTOOD THAT THE SAME HA VE NO EVIDENTIARY VALUE IN SO FAR AS THE OPPORTUNITY TO C ROSS EXAMINE HAS NOT BEEN GIVEN TO THE ASSESSEE. THEREF ORE THESE STATEMENTS CANNOT BE RELIED UPON FOR THE PURP OSE OF ASSESSMENT. HOWEVER LD. A.R. HAS MADE CATEGORIC AL STATEMENT THAT THE STATEMENT HAS BEEN RECORDED FROM THE CORRECT PERSONS I.E. IN THE CASE OF M V MARKETING THE CORRECT PERSON IDENTIFIED IS SHRI MUKESH GUPTA. TH E COPY OF THE RETURN FILED ALONG WITH BALANCE SHEET O F M/S. M V MARKETING DOES NOT SHOW THE NAME OF SHRI I.T.A. NO.1927 1928 1929 /DEL/2009 14/19 MUKESH GUPTA THE SHARE APPLICATION ALSO DOES NOT SPECIFY THE NAME OF SHRI MUKESH GUPTA. ONLY THE CONFIRMATION LETTER WHICH DOES NOT CONTAIN ANY SEAL OF THE COMPANY M/S. M V MARKETING P. LTD. WHICH WAS FOUND AT PAGE 37 OF THE PAPER BOOK AND WHICH BEARS THE DATE 12 TH OCTOBER 2004 TALKS OF SHRI MUKESH GUPTA AS DIRECTOR OF M/S. M V MARKETING P. LTD. IN THESE CIRCUMSTANCES IT CANNOT BE SAID THAT THE IDENTITY OF THIS SHARE APPLICANT IS SAID TO BE PROVED. NOW COMING T O THE 2 ND SHARE APPLICANT NAMELY M/S. ETHNIC CREATION P. LTD . IT IS NOTICED THAT HERE IT IS NOTICED THAT THE CONF IRMATION HAS BEEN SIGNED BY ONE SHRI MUKESH GUPTA COPY OF WHICH HAS BEEN FILED FOR THE ASSESSMENT YEAR 2002-0 3 WHEREIN INVESTMENT AS ON 31.03.2001 HAS BEEN SHOWN AT RS.46 LACS. THE ANNEXURE TO THE BALANCE SHEET AND THE P & L ACCOUNT ARE ALSO MISSING. IT IS FURTHER NOTI CED THAT THE RETURN IN THE CASE OF ETHNIC CREATION P. L TD. HAS BEEN SIGNED BY SHRI RAJESH GUPTA. THE NAME OF SHRI MUKESH GUPTA DOES NOT APPEAR ANYWHERE EXCEPT IN CONFIRMATION LETTER WITHOUT ANY COMPANY SEAL ON THE LETTERHEAD OF ETHNIC CREATION P. LTD. DATED 12 TH OCTOBER 2004. IT IS NOTICED THAT THE PAN HAS BEEN COMMUNICATED TO THE ASSESSEE VIDE A LETTER DATED 25.10.2000 FROM THE CIT PAN COMPUTER OPERATIONS WHEREAS THE SHARE APPLICATION MADE ON 17.05.2000 IT SELF CONTAIN THE PAN. IT IS ALSO NOTICED THAT THE REGIS TERED I.T.A. NO.1927 1928 1929 /DEL/2009 15/19 OFFICE ADDRESS OF M/S. ETHNIC CREATION P. LTD. IS T HE SAME AS M V MARKETING P. LTD. OBVIOUSLY WHEN FILING OF INCOME TAX RETURN FOR THE PURPOSE OF DECIDING TH E TERRITORIAL JURISDICTION IT IS COMPULSORY FOR THE R ETURN TO DISCLOSE THE REGISTERED OFFICE. THE FACT THAT THIS HAS NOT BEEN DONE CLEARLY THROW DOUBT ON THE EXISTENCE AND THE IDENTITY OF THE SHARE APPLICANT. HERE ALSO IT IS N OTICED THAT THE A.O. HAD SENT HIS INSPECTOR FOR VERIFICATI ON AND HAD FOUND THAT THERE WAS NO SUCH BUSINESS AT THESE TWO ADDRESSES. THUS EVEN IN THIS CASE IT CANNOT BE S AID THAT THE ASSESSEE HAS DISCHARGED ITS ONUS OF PROVING THE IDENTITY OR THE GENUINENESS OR THE CREDITWORTHINESS OF THE SHARE APPLICANTS. COMING TO THE ISSUE OF SALE OF SHARES HELD AS INVESTMENT BY THE ASSESSEE IT IS NO TICED THAT THE ASSESSEE HAS SOLD SHARES HELD BY IT AS INVESTMENT. IN THE COPY OF INVESTMENT IN SHARES AS FILED IN THE PAPER BOOK FOR THE YEAR ENDED 31.03.2000 AND 31.03.2001 IT IS NOTICED THAT THE SPECIFIED SHARES WHICH HAVE BEEN ALLEGEDLY SOLD BY THE ASSESSEE HAD BEEN REMOVED FROM THE LIST. HOWEVER IT IS NOTICED THAT THE A.O. HAD ASKED THE ASSESSEE TO PRODUCE THE PURCHASE R OF THE SHARES BUT THE ASSESSEE HAS ONLY PROVIDED THE ADDRESSES OF THE PURCHASERS OF THE SHARES. THE A.O . AFTER VERIFICATION OF THE ADDRESSES FOUND THAT THE PURCHASERS OF THE SHARES WERE NOT AVAILABLE AT THE ADDRESSES FURNISHED BY THE ASSESSEE. FURTHER THE I.T.A. NO.1927 1928 1929 /DEL/2009 16/19 ASSESSEE WAS ALSO ASKED BY THE A.O. TO GIVE A COPY OF THE SHARE CERTIFICATES AND THE TRANSFER CERTIFICATE S AND THE DEED OF CONFIRMATION FROM THE PURCHASING COMPANY. EVEN THIS HAD NOT BEEN PRODUCED. IN SHORT ALL THAT THE ASSESSEE HAS PRODUCED IS THE LIST OF THE PURCHASERS ACKNOWLEDGING THE RECEIPT OF SHARE CERTIFICATES AND NOTHING MORE HAS BEEN DONE. IF WE CONSIDER THE EVIDENCES WHICH HAVE BEEN PRODUCED MORE SPECIFICAL LY IN RESPECT OF THE SGC PUBLISHING PVT. LTD. IT IS N OTICED THAT THE ASSESSEE HAS FILED A COPY OF THE RETURN OF INCOME OF SGC PUBLISHING P. LTD. FOR THE ASSESSMENT YEAR 2005-06. BUT AGAIN THE SAME IS WITHOUT THE ENCLOSU RES OR THE SCHEDULES TO THE BALANCE SHEET AND THE P & L ACCOUNT. THE SAME ALSO IS IN RESPECT OF THE FAIR N SQUARE EXPORTS P. LTD. IT IS ALSO NOTICED THAT THE REGISTERED OFFICE OF SGC PUBLISHING P. LTD. IS SHOW N AS A2/46 C MIG FLATS PASCHIM VIHAR DELHI WHEREAS THE RETURN HAS BEEN FILED SHOWING THE ADDRESS 50/12 ASH OK NAGAR NEW DELHI. REGARDING FAIR N SQUARE EXPORTS THE ADDRESS IS THE SAME AS THAT OF M/S. M V MARKETI NG P. LTD. AND ETHNIC CREATIONS P. LTD. INTERESTINGLY IN THE PAPER BOOK AT PAGE 89-90 IS A COPY OF E-FILING EXTR ACT SHOWING PAN DETAILS OF PERFORMANCE OF TRADING & INVESTMENT P. LTD. ANOTHER ONE OF THE PURCHASERS OF THE SHARES FROM THE ASSESSEE WHICH IS SHOWING THAT M/S. PERFORMANCE TRADING & INVESTMENT PVT. LTD. IS HOLDI NG I.T.A. NO.1927 1928 1929 /DEL/2009 17/19 TWO PAN BEING AAEFP3615J AND AAACP5233B AND THE COPY OF THE RETURN OF M/S. PERFORMANCE TRADING & INVESTMENT P. LTD. IS NOT AVAILABLE. THUS A PERUS AL OF THE EVIDENCE PRODUCED ALSO DOES NOT SHOW ANY EVIDEN CE TO PROVE THE PURCHASE OF SHARES FROM THE ASSESSEE. SAME IS THE SITUATION IN RESPECT OF THE PURCHASERS OF SHARES FOR THE ASSESSMENT YEAR 2003-04 AND 2004-05. THUS IT CANNOT BE SAID THAT THE ASSESSEE HAS DISCH ARGED THE ONUS CAST UPON IT TO PROVE THE IDENTITY GENUIN ENESS OR CREDITWORTHINESS OF THE SHARE APPLICANTS AND THE PURCHASERS OF THE SHARES HELD AS INVESTMENT BY THE ASSESSEE COMPANY. HOWEVER A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE ASSESSEE HAS NOT BE EN GIVEN ADEQUATE OPPORTUNITY TO PRODUCE THE SHARE APPLICANTS AND THE PURCHASERS OF THE SHARES. THIS IS BECAUSE SUMMONS U/S 131 HAD BEEN ISSUED ON 29.11.2007 TO THE SHARE APPLICANTS AND TO THE PERSO NS WHO HAD PURCHASED THE SHARES. ON 6.12.2007 ON THEI R FAILURE THE SHOW CAUSE NOTICE HAS BEEN ISSUED TO T HE ASSESSEE AND THE ASSESSMENT HAS BEEN COMPLETED ON 14.12.2007. THUS IT CANNOT BE SAID THAT THE MANDA TORY PROVISION FOR NATURAL JUSTICE BEING A MINIMUM OF 15 DAYS HAS BEEN GIVEN TO THE ASSESSEE IN RESPECT OF T HE SUMMONS ISSUED U/S 131 OF THE ACT. THUS A PROCEDU RAL LAPSE HAS TAKEN PLACE IN THE ASSESSMENT. IN THESE CIRCUMSTANCES WE ARE OF THE VIEW THAT THESE ISSUES MUST I.T.A. NO.1927 1928 1929 /DEL/2009 18/19 BE RESTORED TO THE FILE OF THE A.O. FOR PROVIDING T HE ASSESSEE ADEQUATE OPPORTUNITY TO PRODUCE THE SHARE APPLICANTS AS ALSO THE PURCHASERS OF THE SHARES FRO M THE ASSESSEE AND WE DO SO. 7. IN THE SET ASIDE PROCEEDINGS THE A.O. SHALL GIV E THE ASSESSEE ADEQUATE OPPORTUNITY TO PRODUCE THE SHARE APPLICANTS AS ALSO THE PURCHASERS OF THE SHARES. T HE A.O. IS ALSO AT LIBERTY TO VERIFY THE RETURNS FILED BY THE SHARE APPLICANTS AS ALSO THE PURCHASERS OF THE SHAR ES AFTER OBTAINING THE RELEVANT RETURN COPIES FROM THE CONCERNED A.OS ON THE BASIS OF THE PAN PROVIDED. THE A.O. MAY ALSO CALL FOR THE SHAREHOLDERS REGISTER FR OM THE COMPANY WHOSE SHARES HAVE BEEN SOLD BY THE ASSESSEE TO VERIFY AS TO WHETHER THE SHARES AS HAVE BEEN IDENTIFIED BY THE SPECIFIC IDENTIFICATION NUMBER HA VE BEEN TRANSFERRED FROM HANDS OF THE ASSESSEE COMPANY TO THE PURCHASERS. THE A.O. SHALL IN THE SET ASIDE PROCEEDINGS GIVE A COPY OF ALL SUCH EVIDENCES WHIC H HE PROPOSES TO USE AGAINST THE ASSESSEE FOR THE ASSESS EES REBUTTAL. NO STATEMENT SHALL BE USED AGAINST THE ASSESSEE WITHOUT GIVING THE ASSESSEE ADEQUATE OPPORTUNITY TO CROSS-EXAMINE. 8. IN RESPECT OF THE ADDITIONS MADE BY THE A.O. ON ACCOUNT OF ALLEGED COMMISSION PAID BY THE ASSESSEE FOR OBTAINING THE ALLEGED ENTRIES THIS ISSUE IS ALSO RE STORED TO THE FILE OF THE A.O. FOR RE-ADJUDICATION AS THE ISS UE OF I.T.A. NO.1927 1928 1929 /DEL/2009 19/19 THE SHARE APPLICATION MONEY AND THE SALE OF SHARES HELD AS INVESTMENT BY THE ASSESSEE HAS TO BE RESTORED TO THE FILE OF THE A.O. FOR RE-ADJUDICATION. WITH THESE DIRECTIONS THESE ISSUES ARE RESTORED TO THE FILE O F THE A.O. FOR RE-ADJUDICATION AND THE ORDER OF THE CIT(A ) IS SET ASIDE. IN THESE CIRCUMSTANCES THE APPEALS OF THE REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES . 9. IN THE RESULT THE APPEALS OF THE REVENUE ARE PA RTLY ALLOWED FOR STATISTICAL PURPOSES. 10. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT ON 29 TH JAN. 2010. SD./- SD./- (K. D. RANJAN) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:29 TH JAN. 2010 SP. COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR ITAT NEW DELHI