M/S Soni Hospitals Pvt. Ltd v. Income Tax Appellate Tribunal, Jaipur Bench, Jaipur

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 12 / 2016 M/S Soni Hospitals Pvt. Ltd., 11, Chetak Marg, Jawahar Lal Nehru Marg, Jaipur through its Managing Director Dr. B.R. Soni son of Shri S.K. Soni, aged 60 years. ----Appellant Versus 1. Income Tax Appellate Tribunal, Jaipur Bench, Jaipur. 2. Commissioner of Income Tax (Appeals)-II, Central Revenue Building, Jaipur. 3. Dy. Commissioner of Income Tax, Circle-5, Jaipur. ----Respondent _____________________________________________________ For Appellant(s) : Mr. K.K. Sharma, Sr. Adv. with Ms. Alankrita Sharma, Mr. M.S. RajpurohitSharma, Mr. M.S. Rajpurohit For Respondent(s) : Mr. R.B. Mathur with Mr. K.D. Mathur & Mr. Prateek KedawatPrateek Kedawat _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYASJudgment 30/10/2017 1.By way of this appeal, the appellant-assessee has challengedthe judgment and order of the tribunal whereby tribunal hasallowed the appeal preferred by the department and reversing theview taken by CIT(A) and confirming the view taken by the AO. 2.This court while admitting the appeal on 27.9.2016 framedfollowing substantial questions of law:- “1. Whether the finding of the Tribunal thatthe source of the income of the applicantwho had put any share application moneyi.e. the source of the source should alsohave been proved by the assessee isincorrect in law.the source of the income of the applicantwho had put any share application moneyi.e. the source of the source should alsohave been proved by the assessee isincorrect in law. 2. Whether the documents in the form ofapplication formed showing the chequenumbers, name of bank and branch,Income-tax Permanent Account Numbersand addresses of the applicants and in caseof companies incorporated, the copy thememorandum and articles of association ofthe company and names and addresses ofthe promoter directors as well as copy ofthe board resolution to show the intentionfor making share application was in lawsufficient to prove the identity of theapplicants and constituted sufficientsafeguards in the eyes of law and whetherthe Income Tax Appellate Tribunal despiteavailability of all these evidences could stillmake an addition of Rs. 99.00 lacs in thecase of the assessee appellant.” 3.The facts of the case are that the appellant is a PrivateCompany and accepted the share applications from differentpersons. The return shown loss of Rs.2,82,73,070/- was filed on31.10.2005 which was processed at returned income on31.3.2006. The case was selected for scrutiny and notice wasissued u/s 143(2) and CA of the appellant attended and fileddetails, produced accounts books and vouchers etc. which wereexamined by test check and case was discussed with him. 4.Counsel for the appellantcontended that the AO whileconsidering the matter has not given opportunity to the appellantinspite of the fact that some of the companies have changed theaddress in the application which was given prior to the date ofassessment order and the same was not considered and the AOhas seriously committed error in relying upon the record whichwas not thoroughly convincing. 4.1He also relied upon the observations made by the CIT(A) which reads as under:- 4.Counsel for the appellantcontended that the AO whileconsidering the matter has not given opportunity to the appellantinspite of the fact that some of the companies have changed theaddress in the application which was given prior to the date ofassessment order and the same was not considered and the AOhas seriously committed error in relying upon the record whichwas not thoroughly convincing. 4.1He also relied upon the observations made by the CIT(A) which reads as under:- “Since the complete information about the shareapplicants, ie. their PAN, address, bank account,existence etc. were in possession of theDepartment for almost 31 months beforemaking the assessment, the A.O. should haveverified the facts and in case of contradiction, heshould have brought such facts on record andfor rebuttal by the appellant company. Byretaining the papers for such a long time, theDepartment has thus in our considered opinionabsolved the assessee from discharging itsburden. As regards non attendance of the shareapplicants before the AO, it is humbly submittedthat the AO did not inform the assessee of thisfact during assessment proceedings. The fact ofnon attendance has come to the knowledgethrough the assessment order only. Even theattendance in our opinion could be desirable onlyafter gathering contradictory evidences becausethe desired information was in the possession ofthe AO for almost two and half years. The PAN,address, mode of payment etc. were inpossession of the AO. Since the share applicantswere existing income tax assesses, theircreditworthiness was also beyond doubt as hasbeen held by the Rajasthan High Court in thecase of Kamal Motor Company [2003] 131Taxman 155. The jurisdictional Rajasthan HighCourt has held in this case that when the cashcreditor is an existing income tax assessee, itcan not be said that the cash creditor is not aman of means. As regards non service ofsummons to three limited companies from whomamount of Rs.20,00,000/- was received inaggregate during the year, it was informed byletter dated 3.12.07 to the AO that the partiesmight have shifted their office to some otherplace and that the assessee company wouldprovide their latest addresses as soon as it cameto its knowledge. In fact, new address of M/SLexus Infotech Limited (from whom amount ofRs.10,00,00!0/- was received as shareapplication) was informed to the A.O on28.12.2007 through a letter wherein the newaddress of the said company was stated as CS-1, Silver Anklet, Yari Road, Versova, Andheri(W), Mumbai-61. Since the share applicantswere limited companies registered under theCompanies Act, and the amount was received through banking channels and the companieswere existing income tax assessees, theirexistence was beyond any doubt, it wasrequested that no adverse inference be drawn.The appellant company has taken services of aCompany Secretary to take search report fromthe office of the Registrar of Companies aboutthe existence of said companies and the copy ofthe search report is enclosed. As regards bogusentities run by B C Purohit & Co. involved inproviding accommodation entries, it is humblysubmitted that the limited companies are legaljuristic entities and can not be called as bogusby any sort of logic. If any illegal business oractivities are being run under their names, thenadverse inference could be taken against thepersons who are running the companies and notthe persons who have done transactions with thesaid companies. The AO did not bring on recordany corroborative evidence to negate the abovestatements of the CMD of the Company. Hesimply relied upon the statements of thirdperson while making addition to the returnedincome. Thus no addition should have been tothe returned income of the company in absenceof corroborative evidences. Further no evidencesin the form of cash receipts are there for makingpayment of such a huge amount by theappellant company nor the company had such ahuge amount in cash with it on the said dates asevidenced from the cash book of the company.The AO did not contradict the entries of cashbook as evident from the assessment order itselfwhere not a single word has been mentioned.Thus the AO has erred in making addition simplyon the basis of third party statement withoutbringing any related evidence on record. It isthus apparent from the assessment order thataddition has been made on assumptions,presumptions and doubts. It is also submittedthat out of the total share application moneywhich was subject matter of addition, amount ofRs.95,50,000/- was received prior to thecommencement of the services by the hospitalowned by the appellant company i.e22.10.2004, the date on which the VicePresident of India, inaugurated the opening ofthe hospital and further that RedeemablePreference Shares have been allotted to theshare applicants, it is also again submitted thatexisting income tax assessees, operating bankaccounts can not be called as bogus and furtherthat the corporate entities being registeredunder the Indian Companies Act, 1956 can not be bogus or non existent persons. In the light ofdecisions of the Apex and other courts, and inview of the facts and lack of corroborativeevidences against the appellant company it wastherefore requested to delete the addition ofRs.99,00,000/- as undisclosed investment inshare application money. be bogus or non existent persons. In the light ofdecisions of the Apex and other courts, and inview of the facts and lack of corroborativeevidences against the appellant company it wastherefore requested to delete the addition ofRs.99,00,000/- as undisclosed investment inshare application money. 3.1 I have duly considered the submissions ofthe appellant. I find that in the present case, theappellant had filed the subscription forms fromeach of the investors. The said subscription formcontained complete details, which disclosed notonly the identity of the subscribers, but alsotheir complete address along with PAN.Therefore the appellant had been able todischarge its onus in respect of the veracity ofthe transactions. The AO has alleged thatdocumentary evidences were not filed by theassessee company but in reality, all the primarydocuments and records were in the custody ofthe AO as these were impounded on 03.05.2005when a survey was conducted U/s 133(A) by theInvestigation Wing at the premises of theappellant. All these documents were still in thepossession of the Department as on date. sincethe share applicants were limited companiesregistered under the Companies Act, and theamount was received through banking channelsand the companies were existing income taxassessees, their existence was beyond anydoubt. It was held by Honourable Delhi Tribunalin the case of Sky properties Pvt LTD vs. ITO(258 ITR AT 098) that there is a differencebetween an ordinary cash credit and credit byway of share capital. While in the case ofordinary loans, the onus is on the assessee toprove not only the identity of the creditors butalso the genuineness and the capacity of thepersons to lend, with reference to-share capitalfor which share have been issued, the onus onthe company is very much limited in the light ofthe law under the Companies Act. In the case oflimited companies, the jurisdiction of theAssessing Officer would be limited only to seewhether the identity of the shareholders isestablished. In the instant case out of fiveshareholders four shareholders were companiesincorporated under the Companies Act. Theywere regularly assessed to tax. They wereregularly filing their statements with theRegistrar of Companies. All the four companieshad huge share capital and their investments inshares of various companies was huge. The audited copy of the accounts were also onrecord. Looking to these documents, there couldnot be any dispute about their identity, credit-worthiness as well as genuineness of thetransaction. It was held by Honourable DelhiTribunal in the case of A-One Housing ComplexLtd (299 ITR .AT 327) that the onus on theassessee in the case of share capital by publicissue was a lighter one and therefore such onuswould stand discharged if the identity of theshare applicant was established. there wasnothing wrong if confirmations were prepared bythe assessee and got signed from the shareapplicants since the assessee was required toprove only the identity of the share applicant.Even otherwise they had not been found to befalse or forged. There was nothing wrong ifsome of the shareholders had accounts with thesame bank. It was not the case of the Revenuethat such accounts were bogus or operated bythe assessee. lt was also not the case of theRevenue that either of the share applicants wasa benami of the assessee. Therefore the reasonsgiven by the Assessing Officer were to berejected. 3.2 The degree of responsibility of the companyto prove the genuineness of amounts receivedtowards share capital has been the subjectmatter of a number of decisions. The Delhi HighCourt after a review of the precedents on thesubject in Divine Leasing and Finance Ltd. (299ITR 268) held that section 68 would require boththe identity of the depositor and hiscreditworthiness to be proved. Where a companyfurnishes the address and permanent accountnumber (PAN), such identity is established. Asregards creditworthiness in a matter ofsubscription to public issue, more may not beexpected from the assessee. The burden of proofthat is expected as regards creditworthiness hasto be decided in the light of the facts of eachcase. Where the subscriptions were receivedthrough banking channels as prescribed underSEBI regulations, the inference that thesubscribers lack creditworthiness could not havebeen lightly drawn without some investigationon the part of the Assessing officer. The additionwithout such investigation should be treated asbased upon mere surmises. The principle thatidentity is more important in such cases hasbeen reiterated and that even wherecreditworthiness is not established to thesatisfaction of the Assessing officer, it need not be unexplained income of the company, sincethe legitimate inference is that the income isthat of the subscriber as long as the advance ofthe amount to the company is established andthere is nothing to suggest that the amountbelonged to the company. If the shareapplication money is received by the assessee-company from alleged bogus shareholders,whose names are given to the Assessing officer,then the Department is free to proceed toreopen their individual assessments inaccordance with law. If relevant details of theaddressorPANidentityofthecreditor/subscriber are furnished to theDepartment along with copies of theshareholders' register, shares application forms,share transfer register, etc., it would constituteacceptable proof or acceptable explanation bythe assessee. The Department would not bejustified in drawing an adverse inference onlybecause the creditor/subscriber fails or neglectsto respond to its notices. In the case of a publicissue, the company concerned cannot beexpected to know every detail pertaining to theidentity as well as financial worth of each of itssubscribers. The company must, however,maintain and make available to the Assessingofficer for his perusal, all the informationcontained in the statutory share applicationdocuments. A delicate balance must bemaintained while walking the tightrope ofsections 68 and 69 of the lncome tax Act. Theburden of proof can seldom be discharged to thehilt by the assesse; if the Assessing officerharbours doubts of the legitimacy of anysubscription, he empowered, to carry outthorough investigations. But if the AssessingOfficer fails to unearth any wrong or illegaldealings, he cannot adhere to his suspicions andtreat the subscribed capital as the undisclosedincome of the company. In the cited case, theassessee-company had commenced its businessof extending finance to industrial enterprise. Thetotal issued, subscribed and paid-up capital inthe assessment years 1984-85, 1985-86 and1986-87 was Rs. 99,80,000 received fromdirectors/promoters and also by way of a publicissue. These sums were received throughbanking channels and complete record weremaintained. The Assessing Officer madeadditions to the income for all the years. InMarch, 1987, the assessee filed a revised returnfor the assessment years 1984-85 and 1985-86taking advantage of the Amnesty Scheme and surrendered Rs. 62,500 and Rs. 1,87,000 in therespective years. In these fresh assessmentproceedings, the Assessing Officer issuedsummons under section 131 of the Income-taxAct and thereafter impounded the shareholders'register, share application forms and sharetransfer register. The assessee contended thatbecause these materials were in the custody ofthe Department it was unable to furnish anyfurther details pertaining to the subscribers. TheIncome tax Appellate Tribunal noted that theassessee was a public limited company whichhad received subscriptions to the public issuethrough banking channels and the shares wereallotted in consonance with the provisions of theSecurities Contracts (Regulation) Act, 1956, asalso the rules and regulations of the Delhi StockExchange. Complete details appeared to havebeen furnished. The Income-tax AppellateTribunal further recorded that the AssessingOfficer had not brought any positive material orevidence which would indicate that theshareholders were (a) benamidars or (b)fictitious persons or (c) that any, part of theshare capital represented the company's ownincome from undisclosed sources. The additionof Rs. 76,51,650 for the assessment year 1986-87 deleted by the Commissioner (Appeals) wasupheld. On appeal, it was held dismissing theappeals, that the Tribunal had categorically heldthat the assessee "has discharged its onus ofproving the identity of the share subscribers".Had any suspicion still remained in the mind ofthe Assessing Officer he could have initiated"coercive process" but this course of action hadnot been adopted. The deletion of the additionswas justified. The Honourable Delhi Tribunal inthe case of M/s A-one Housing Complex Ltd. VsITO (299 ITR (AT) 327) held that the case ofwhere the company was able to get letters ofconfirmation as proof of identity of theshareholders, and the genuineness of thedeposits, it cannot be dismissed merely on theground that the confirmations were prepared bythe assessee and got signed. It was pointed outthat there was nothing amiss in such aprocedure and that there was no material tojustify the inference that the amount receivedtowards share capital was not proved. In thecase of CIT vs Value Capital Services Pvt Ltd(307 ITR 334) it was held that the additionalburden was on the Department to show thateven if the share applicants did not have themeans to make the investment, the investment made by them actually emanated from thecoffers of the assessee so as to enable it to betreated as the undisclosed income of theassessee. The Delhi High Court in CIT v. OrbitalCommunication (P) Ltd. (327 ITR 560), followedthe decision of the Supreme Court in CIT v.Lovely Exports (P) Ltd. (319 ITR (St) 5) for theproposition that in the case of share applicationmoney, where the persons are identified, is notreasonable to expect the Assessing Officer toestablish that the monies belonged to thecompany without making any enquiries againstthe shareholders, since there is no presumptionthat they are bogus shareholders. Normal rule ofpresumption under section 68 does not go so faras to justify the inference that it is for thecompany to satisfy the Assessing Officer, thatthe sources of the shareholders are alsoestablished. Once genuineness of shareapplication is manifest from the facts, theremedy for the Revenue, if it entertains anyfurther doubt, is only enquiry with theshareholders. It is unfortunate that additions arebeing made for share capital contributionsroutinely and what is more, appeals are filedagainst the orders of the first appellate authoritywhich are eminently found to be fair as ithappened in CIT v, Victor Electrodes Ltd. (329ITR 271), where the share capital wascontributed by four private companies and theassessee obtained and furnished evidence ofpayment by account payee cheques along withtheir bank account, resolution of the companies,their Memorandum and Articles and theirincome-tax particulars. The High Court cited twodecisions for its conclusion relating to sharecapital. The information in this case would nothave justified the treatment as unproved cashcredits, even if they were not share capital,regarding which the burden should normallyshift once the identity of the subscribers isestablished. On appeal to the Delhi High Court,it was held dismissing the appeal, that it had notbeen disputed that the share application moneywas received by the assessee by way of accountpayee cheques, through normal bankingchannels. Admittedly, copies of applications forallotment of shares were also provided to theAssessing Officer. It was not the case of theRevenue that the share applications were notsigned on behalf of the applicant-companies andwere forged documents. It was also not the caseof the Revenue that the shares were not actuallyallotted to the companies. lf the Assessing Officer had any doubt about the identity of theshare applicants, he could have summoned thedirectors of the applicant-companies. No suchattempt was, however, made by him. Therefore,the Commissioner (Appeals) and the Tribunalwere justified in holding that the identity of theshare applicants and the genuineness of thetransactions had been established by theassessee. The amount was not assessable undersection 68. 3.3 Since the share capital contributions arematched by share certificates, a companycannot ordinarily be expected to satisfy itself asto the source of funds, while issuing shares, sothat identification of the source itself should besufficient in most cases, unless there is primafacie case for the inference that the share capitalmoneys are out of unaccounted income of theassessee company itself. The issue of providingaccommodation entries in the garb of sharecapital came up for consideration before theHonourable Delhi High Court in the case of CITVs Oasis Hospitalities Pvt Ltd (2010-TIOL-69-HC-Del.) The observations Honourable Court arereproduced as under: 3.3 Since the share capital contributions arematched by share certificates, a companycannot ordinarily be expected to satisfy itself asto the source of funds, while issuing shares, sothat identification of the source itself should besufficient in most cases, unless there is primafacie case for the inference that the share capitalmoneys are out of unaccounted income of theassessee company itself. The issue of providingaccommodation entries in the garb of sharecapital came up for consideration before theHonourable Delhi High Court in the case of CITVs Oasis Hospitalities Pvt Ltd (2010-TIOL-69-HC-Del.) The observations Honourable Court arereproduced as under: "The order of the AO would reveal that he hadreceived an information from the InvestigationWingwhichhadmadevariousenquiries/investigations on the basis of which itwas found that these six investors belong to oneMahesh Garg Group who were not carrying onany real busines activity and were ratherengaged in the business of providingaccommodations entries, They were, thus, entryoperators of which the assessee was thebeneficiary. According to the AO, the modusoperandi involved in such type of activity waslike this: an entry operator operates a number ofaccounts in the same bank/branch or in differentbranches in the name of companies, firms,proprietary concerns and individuals and for theoperation of these bank accounts, filing incometax returns etc., persons ar hired. Most of thesepersons work on part-time basis and are calledupon to sign documents, cheque books, etc.whenever required. Whenever any beneficiary isinterested in taking an entry, he would approachthe entry operator and handover the cashalongwith commission and take cheques,Demand Draft, Postal order. The cash isdeposited by the Entry Operator in a bankaccount either in his name or in the name ofrelative/friends or other person hired by him for the purposes of opening the bank account. Afterthe deposit of cash when there is sufficientbalance, the Entry Operator issues DemandDraft, Postal orders, cheques in the name ofbeneficiary. Most of these concerns/individualsalso have obtained PAN from the Departmentand are filing income tax returns, but what isshown in the return is not actual state ofaffairs." the purposes of opening the bank account. Afterthe deposit of cash when there is sufficientbalance, the Entry Operator issues DemandDraft, Postal orders, cheques in the name ofbeneficiary. Most of these concerns/individualsalso have obtained PAN from the Departmentand are filing income tax returns, but what isshown in the return is not actual state ofaffairs." "The assessees filed copies of PAN,acknowledgement of filing income lax returns ofthe companies, their bank account statementsfor the relevant period, i.e., for the period whenthe cheques were cleared. However, the partieswere not produced in spite of specific directionof the AO instead of taking opportunities in thisbehalf. Since the so-called Directors of thesecompanies were not produced on this groundcoupled with the outcome of the detailed inquirymade by the Investigating Wing of theDepartment, the AO made the addition. Thisaddition could not be sustained as the primaryonus was discharged by the assessee byproducing PAN number, bank account, copies ofincome tax returns of the share applicants, etc.We also find that the Assessing Officer wasinfluenced by the information received by theInvestigating Wing and on that basis generallymodus operandi by such Entry operators isdiscussed in detail. However, whether suchmodus operandi existed in the present case ornot was not investigated by the AO. Theassessee was not confronted with theinvestigation carried out by the InvestigatingWing or was given an opportunity to, cross-examine the persons whose statements wererecorded by the Investigating wing. As regardsdiscrepancies found by the AO in the bankstatement, suffice is to mention that the bankstatements that were filed by the assessee wereprovided by the shareholders and werecomputer printed on the bank stationery. Thesame were filed by the assessee during theassessment proceedings without any suspicionof their being incorrect. During the assessmentproceedings, the assessee was never confrontedby the AO that there are discrepancies betweenthe bank statements filed and the statementsdirectly called by the AO. However, even afterconsidering the alleged discrepancies, it doesnot follow that the amount of share capital wasthe undisclosed income of the assessee. Eventhe correct Bank statements as claimed by the AO reveal that the assessee has receivedcheques from the shareholders. In thisbackdrop, the following observations of thisCourt in the case of Commissioner of IncomeTax vs. K.C Fibres Ltd. (187 Taxman 53) arereproduced: It is strange that when the Assessing officer isquestioning the bona fides of M/s DiamondProtein Ltd. for collecting money to subscribe tothe share to the capital of the assessee, but it isthe assessee who is fastened with the liability.The Assessing officer did not question M/sDiamond Protein Ltd. in this behalf. Insofar asAssessing Company is concerned, it is notdisputed that money was paid to its towards theaforesaid share application money, by means ofcheques. It is not for the Assessing Company toprobe as to the source from where M/s DiamondProtein Ltd. collected the aforesaid money. Itwas for the Assessing Officer, in thesecircumstances to inquire into the affairs of M/sDiamond Protein Ltd. which is an independentcompany inasmuch as no finding is arrived at bythe Assessing Officer that the two companies areumbrella companies or have any relationshipwith each other." 3.4 As regards addition of Rs 20,00,000/- madeon account of subscription from 3 corporateentities, the appellant filed certain additionalevidences. The AO had alleged that noticesissued to M/s Labh Tronics Overseas Pvt. Ltd.and M/S Shash Sales & Marketing Pvt. Ltd. werereturned by the postal authority with theremarks 'no such person/firm in this location'.On the other hand, the search report of theCompany Secretary clearly indicated that theabove named companies were registered on28.12.1997 and 15.03.1993 respectively. It wasstated that the companies namely M/s LabhTronics Overseas Private Limited and M/s ShashiSales and Marketing Private Limited might haveshilled to some other place in the meantime. Theappellant company subsequently receivedinformation about the present address of theabove named two companies, which was A-4/181, Sector No 17, Rohini, New Delhi 110085.According to the financial statements of both thecompanies for the year ended 31.03.2006, thesaid companies had enough credit worthiness tomake investment in the share capital of theappellant company. In this regard, the appellantsubmitted following additional evidences: i) Copy of the financial statements of both thecompanies for the year ending 31.03.2008 whichproved beyond doubt that the said companieshad sufficient resources to invest in the sharecapital of the appellant company. ii) M/S Labh Tronics overseas Pvt Ltd. and M/sShashi Sales & Marketing Pvt Ltd. had nowshifted to A-4/181, Sector No.17, Rohini, NewDelhi 110085. iii) Photocopies of the Balance sheets of both thecompanies as on 31.03.2006 and the Profit &Loss Account for the year ending 31.03.2006alongwith copies of respective ITR-V for theA.Y.2006-07 iv) Photocopy of the Balance Sheet as on31.03.2008 and the Profit & Loss Account for theyear ending 31.03.2008 of M/S Lexus InfotechLtd along with photocopy of acknowledgement ofReturn (now known as Traingular Infocom Ltd)alongwith copy of PAN Card thereof. These additional evidences were forwarded tothe ACIT, Circle-5, Jaipur vide my letter dated4.2.11 for examination. The remand report wasdue by 15.2.11 However till date, the AO has notbothered to submit the remand report.Moreover, it is obvious that the AO has failed tomake further inquiries as desired from her. Inthese circumstances, I have no alternative but todecide the matter on the basis of evidences filedby the appellant. Nothing adverse is noticed inthe documents filed by the appellant.Accordingly, I direct the AO to delete theaddition of Rs 99,00,000/-. This ground ofappeal is allowed.” 4.2He contended that CIT(A) while considering the SupremeCourt judgment rightly held in favour of the assessee. 4.3He has taken us to the observations made by the tribunalwhich reads as under:- “4. He further argued that Hon'ble SupremeCourt decision in the case of M/s Lovely Export(supra) is longer law of the land as various HighCourt including Hon'ble Delhi High Court in thecase of CIT vs. Empire Builtech P. Ltd., 366 ITR 110 wherein the Supreme Court decision incase of M/s Lovely Exports(supra) has beenconsidered in respect of notice under scetion133 (6) issued to 11 investors. The investorshad not submitted any confirmation andreporting for less income than amount invested.The assessee had not discharge its burden, theaddition u/s 68 held justified.” 4.4He contended that without considering the material whichhas been considered by the CIT(A), the tribunal has summarilyreversed the finding of CIT(A) and contended that the tribunalought to have considered the finding and confirmed theobservations made by the CIT(A). 4.5He has relied upon the following decisions:- In Commissioner of Income Tax vs. NRPortfolio Pvt. Ltd., (2014) 264CTR(Del)258,it was held as under:- 110 wherein the Supreme Court decision incase of M/s Lovely Exports(supra) has beenconsidered in respect of notice under scetion133 (6) issued to 11 investors. The investorshad not submitted any confirmation andreporting for less income than amount invested.The assessee had not discharge its burden, theaddition u/s 68 held justified.” 4.4He contended that without considering the material whichhas been considered by the CIT(A), the tribunal has summarilyreversed the finding of CIT(A) and contended that the tribunalought to have considered the finding and confirmed theobservations made by the CIT(A). 4.5He has relied upon the following decisions:- In Commissioner of Income Tax vs. NRPortfolio Pvt. Ltd., (2014) 264CTR(Del)258,it was held as under:- 17. In the remand report, the Assessing Officerreferred to the provisions of Section 68 of theAct and their applicability. The word "identity" asdefined, it was observed meant the condition orfact of a person or thing being that specifiedunique person or thing. The identification of theperson would include the place of work, thestaff, the fact that it was actually carrying onbusiness and recognition of the said company inthe eyes of public. Merely producing PANnumber or assessment particulars did notestablish the identity of the person. The actualand true identity of the person or a companywas the business undertaken by them. Thisaccording to us is the correct and true legalposition, as identity, creditworthiness andgenuineness have to be established. PANnumbers are allotted on the basis of applicationswithout actual de facto verification of theidentity or ascertaining active nature of businessactivity. PAN is a number which is allotted andhelps the Revenue keep track of thetransactions. PAN number is relevant but cannotbe blindly and without considering surroundingcircumstances treated as sufficient to discharge the onus, even when payment is through bankaccount. 18. On the question of creditworthiness andgenuineness, it was highlighted that the moneyno doubt was received through bankingchannels, but did not reflect actual genuinebusiness activity. The share subscribers did nothave their own profit making apparatus andwere not involved in business activity. Theymerely rotated money, which was comingthrough the bank accounts, which meansdeposits by way of cash and issue of cheques.The bank accounts, therefore, did not reflecttheir creditworthiness or even genuineness ofthe transaction. The beneficiaries, including therespondent-assessee, did not give any share-dividend or interest to the said entryoperators/subscribers. The profit motive normalin case of investment, was entirely absent. Inthe present case, no profit or dividend wasdeclared on the shares. Any person, who wouldinvest money or give loan would certainly seekreturn or income as consideration. These factsare not adverted to and as noticed below aretrue and correct. They are undoubtedly relevantandmaterialfactsforascertainingcreditworthiness and genuineness of thetransactions. In Commissioner of Income Tax-II vs. MAFAcademy P. Ltd. [2014] 361ITR258(Delhi),it was held as under:- 23. Recently in the case of Commissioner ofIncome Tax Vs. NR Portfolio Pvt. Ltd. (IncomeTax Appeal No. 1018 Of 2011 And 1019 OF2011) vide Judgment dated 22.11.13 we haveheld as under: In Commissioner of Income Tax-II vs. MAFAcademy P. Ltd. [2014] 361ITR258(Delhi),it was held as under:- 23. Recently in the case of Commissioner ofIncome Tax Vs. NR Portfolio Pvt. Ltd. (IncomeTax Appeal No. 1018 Of 2011 And 1019 OF2011) vide Judgment dated 22.11.13 we haveheld as under: 14. When an assessee does not produceevidence or tries to avoid appearance before theAssessing Officer, it necessarily createsdifficulties and prevents ascertainment of trueand correct facts as the Assessing officer isdenied advantage of the contention or factualassertion by the assessee before him. In case anassessee deliberately and intentionally fails toproduce evidence before the Assessing Officerwith the desire to prevent inquiry orinvestigation, an adverse view should be taken.We shall now come to the merits and thefindings recorded by the Commissioner(Appeals), which as noted above, have been simply affirmed by the tribunal without verifyingor referring to the facts. 17. The Commissioner (Appeals) thereafterproceeded on the basis that even if thesubscribers to the share capital were notgenuine, the amount received cannot beregarded as undisclosed income of therespondent-assessee. Reference was made tothe decision of the Delhi High Court in LovelyExports Private Limited and Divine Leasing andFinance Limited (supra). Reference was made tosome decision of the tribunal. It would be hererelevant to highlight and note what wasrecorded by the Assessing Officer in theassessment order. The Assessing Officer hasmentioned that the subscribers belonged toMahesh Garg group of entry operators, whichincluded 51 companies/persons, who wereoperating more than 100 bank accounts indifferent banks/branches. Their modus operandiwas to provide accommodation entries todifferent persons/beneficiaries. Reference wasmade to the bank statements of the entryoperators that showed substantial deposit ofcash in the bank accounts and subsequent issueof cheques to the beneficiaries. This was theonly activity of these companies/persons. Thesaid companies/persons were not carrying onany other business activity i.e., manufacturing ortrading activity. The assessment order hasquoted and referred to the bank accountstatements in support of the said assertion andfinding. The Assessing Officer has mentionedthat the respondent-assessee was a privatelimited company, closely held and there shouldbe proximate relationship between the promoterdirectors and the shareholders. Closely heldcompanies usually receive share capitalsubscriptions from friends, relatives and notfrom unrelated/unknown third parties/generalpublic. There was no relationship or connectionbetween the subscribers and the respondent-assessee, for subscribers to become investors.Assessment order records that to establishidentity and availability of funds, it wasnecessary to have at least some idea if notcomplete details of the actual businessundertaken and engaged in by the respondent-assessee and explained how and why theseunrelated and unconnected third parties decidedto become investors in the absence of publicissue or advertisement. 18. In the remand report, the Assessing Officerreferred to the provisions of Section 68 of theAct and their applicability. The word "identity" asdefined, it was observed meant the condition orfact of a person or thing being that specifiedunique person or thing. The identification of theperson would include the place of work, thestaff, the fact that it was actually carrying onbusiness and recognition of the said company inthe eyes of public. Merely producing PANnumber or assessment particulars did notestablish the identity of the person. The actualand true identity of the person or a companywas the business undertaken by them. Thisaccording to us is the correct and true legalposition as identity, creditworthiness andgenuineness have to be established. PANnumbers are allotted on the basis of applicationswithout actual de facto verification of theidentity or ascertaining active nature of businessactivity. PAN is a number which is allotted andhelps the Revenue keep track of thetransactions. PAN number is relevant but cannotbe blindly and without considering surroundingcircumstances treated as sufficient to dischargethe onus, even when payment is through bankaccount. 19. On the question of creditworthiness andgenuineness, it was highlighted that the moneyno doubt was received through bankingchannels, but did not reflect actual genuinebusiness activity. The share subscribers did nothave their own profit making apparatus andwere not involved in business activity. Theymerely rotated money, which was comingthrough the bank accounts, which meansdeposits by way of cash and issue of cheques.The bank accounts, therefore, did not reflecttheir creditworthiness or even genuineness ofthe transaction. The beneficiaries, including therespondent-assessee, did not give any share-dividend or interest to the said entryoperators/subscribers. The profit motive wasnormal in case of investment entirely wasabsent. In the present case, no profit ordividend was declared on the shares. Anyperson, who would invest money or give loanwould certainly seek return or income asconsideration. These facts are not adverted toand as noticed below are true and correct. Theyare undoubtedly relevant and material facts forascertaining creditworthiness and genuinenessof the transactions. 23. The contention that the Revenue must haveevidence to show circulation of money from theassessee to the third party is fallacious and hasbeen repeatedly rejected, even when Section 68of the Act was not in the statute. In A.Govindarajulu Mudaliar v. CIT : (1958) 34 ITR807, Supreme Court observed that it was notthe duty of the Revenue to adduce evidence toshow from what source, income was derived andwhy it should be treated as concealed income.The assessee must prove satisfactorily thesource and nature of cash received during theaccounting year. Similarly observations weremade in CIT vs. M. Ganapathi Mudaliar : (1964)53 ITR 623 (SC), inter alia holding that it wasnot necessary for the Revenue to locate theexact source. This principle was reiterated in CITvs. Devi Prasad Vishwanath Prasad : (1969) 72ITR 194 (SC), wherein the contention that theAssessing Officer should indicate the source ofincome before it was taxable, was described asan incorrect legal position. Thus when there isan unexplained cash credit, it is open to theAssessing Officer to hold that it was income ofthe assessee and no further burden lies on himto show the source. In Yadu Hari Dalmia vs.CIT : (1980) 126 ITR 48, a Division Bench ofDelhi High Court has observed:- It is well known that the whole catena ofsections starting from s. 68 have beenintroduced into the taxing enactments step bystep in order to plug loopholes and in order toplace certain situations beyond doubt eventhough there were judicial decisions coveringsome of the aspects. For example, even longprior to the introduction of s. 68 in the statutebook, courts had held that where any amountswere found credited in the books of the assesseein the previous year and the assessee offered noexplanation about the nature and source thereofor the explanation offered was, in the opinion ofthe ITO, not satisfactory, the sums so creditedcould be charged to income-tax as income of theassessee of a relevant previous year. Section 68was inserted in the I.T. Act, 1961, only toprovide statutory recognition to a principle whichhad been clearly adumbrated in judicialdecisions. 24. We are conscious of the doctrine of 'sourceof source' or 'origin of origin' and also possibledifficulty which an assessee may be faced withwhen asked to establish unimpeachable creditworthiness of the share subscribers. But this aspect has to be decided on factual matrix ofeach case and strict or stringent test may not beapplied to arms length angel investors or normalpublic issues. Doctrine of 'source of source' or'origin of origin' cannot be applied universally,without reference to the factual matrix and factsof each case. The said test in case of normalbusiness transactions may be light and notvigorous. The said doctrine is applied when thereis evidence to show that assessee may not beaware, could not have knowledge or wasunconcerned as to the source of money paid orbelonging to the third party. This may be due tothenatureandcharacterofthecommercial/business transaction relationshipbetween the parties, statutory postulates etc.However, when there is surrounding evidenceand material manifesting and revealinginvolvement of the assessee in the "transaction"and that it was not entirely an arm's lengthtransaction, resort or reliance to the saiddoctrine may be counter-productive and contraryto equity and justice. The doctrine is not aneldritch or a camouflage to circulate ill gottenand unrecorded money. Without being obliviousto the/constraints of the assessee, an objectiveand fair approach/determination is required.Thus no assessee should be harassed andharried but any dishonest façade andsmokescreens which masquerade as pretenceshould be exposed and not accepted. 25. In Lovely Exports (supra), a Division Benchexamined two earlier decisions