Rapid Diagnostic Pvt. Ltd Vs ITO

ORDER

PER T.S. KAPOOR, AM:

These two appeals are filed by the assessee against separate orders of Ld. CIT(A) both dated 08.10.2012. These appeals were heard together and therefore, are being disposed off through a consolidated order. In I.T.A.No. 137/Del/2013, the only ground raised by the assessee is the grievance with the action of CIT(A) by which he had confirmed the disallowance u/s 14A amounting to Rs.7,53,689/-. In I.T.A.No. 138/Del/2013, the assessee is aggrieved with the action of Ld. CIT(A) by which he had confirmed the

addition of Rs.12 lacs made by the Assessing Officer as unexplained cash credit under the provisions of Section 68 of the Act.

2. Ld. A.R. advanced his arguments first in respect of I.T.A.No. 137/Del/2013. It was submitted that Ld. CIT(A) has wrongly upheld the  action of the Assessing Officer in making disallowance u/s 14A as no expenditure was incurred by the assessee and Assessing Officer without

recording any finding with respect to incurring of any expenditure, has made the addition in accordance with the provisions of Rule 8D. It was submitted that the Hon'ble Delhi High Court in the case of Maxopp Investment Ltd. and others Vs CIT reported at 347 ITR 272 has held that the Assessing Officer shall determine the amount of expenditure with respect to actual expenditure incurred and if the claim of the assessee that no expenditure was incurred is rejected the Assessing Officer has to give cogent reasons for rejecting such claim. He further relied upon the case law of Hero Cycles Ltd. as decided by Hon'ble High Court of Punjab & Haryana reported at 323 ITR 518 wherein the Hon'ble Court has rejected the contention of the Revenue that directly or indirectly, some expenditure is always incurred and he invited our attention to Ld. CIT(A)’s order which had upheld the disallowance u/s 14A on the same pretext. Continuing his arguments he submitted that the assessee had not made any investment during the year and in support of his argument, he invited our attention to paper book page 4 where the same amount of investment was reflected in the financial year ended 31.03.2008 and 31.03.2009. It was submitted that investments were made in earlier years and, therefore, no disallowance was to be made in the

year under consideration. Reliance in this respect was placed on the case law of G D Matsteel P. Ltd. Vs CIT 47 SOT 62 (Mum.) wherein, it was held that when an investment is made in the earlier year and there is no disallowance u/s 14A, in that year in which investment was made, no disallowance can be made in succeeding year. Further, it was submitted that the assessee had surplus funds and it had placed surplus funds in Fixed Deposits and against Fixed Deposits, it has been availing O/D limit firm the

bank on which interest was paid. However, the net interest after reducing interest paid from interest received was positive. To support his arguments, our attention was invited to paper book page 14 wherein the assessee had reflected an amount of Rs.26.42 lacs as bank interest income. He further took us to page 5 of the paper book to highlight that against this bank interest income, the assessee had booked expenditure at Rs.10.03 lacs only and, therefore, relying upon the case law of DCIT Vs Trade Apartament Ltd. 1277/Kol./2011, it was submitted that when there is surplus in the interest income, no disallowance u/s 14 read with Rule 8D is warranted. Further, reliance was placed on the decision in I.T.A.No. 2228/Ahd/2012 in the case of ITO Vs Karnavati Petrochem P. Ltd. wherein, it was held that when the interest income is more than the interest expenditure and there is net interest income and debit of interest cannot be considered for disallowance u/s 14A. Further relying on the case law of CIT Vs Reliance Utilities & Power Ltd. 313 ITR 340, Ld. A.R. argued that where the assessee’s own funds are in excess amount of investment in investments earning exempt income, it has to be presumed that investments were made out of interest free funds available with the assessee. Ld. A.R. further submitted that during the year the assessee had not earned any exempt income and, therefore, disallowance could not have been made. In view of the above, it was submitted that the disallowance u/s 14A in the present set of facts and circumstances, was not warranted.

 3. As regard I.T.A.No. 138/Del/2013, in respect of addition on account of unexplained cash credit, the Ld. A.R. submitted that during the course of assessment proceedings, the assessee had filed all relevant documents like confirmation copy of the bank account, copy of acknowledgement of Income tax return and, therefore the action of the Assessing Officer and further confirmation of it by Ld. CIT(A) was jot justified which was only on account of non production of share applicants. He further submitted that the assessment in this case was completed after reopening under the provisions of Section 147/148 but the reasons recorded were not made available to the assessee. He submitted that as per paper book page 1, there is a copy of notice u/s 148 of the Act wherein, it has been mentioned that the reasons recorded u/s 148 are enclosed however, these were never provided to the assessee. Inviting our attention to page 8 of the paper book, Ld. A.R. submitted that in respect of all share applicants, all documents including PAN, Bank Statement, Balance Sheet, copy of return, identity proof etc. were enclosed but the Assessing Officer without considering the above documentary evidence, proceeded to disallow the claim on the basis of assumptions that these were bogus share capital arranged from entry operators. He further submitted that Ld. CIT(A) has also not considered his submissions and, therefore, it was prayed that appeal of the assessee be allowed.

4. Ld. D.R. on the other hand heavily relied upon the findings of the Assessing Officer and Ld. CIT(A) in respect of both appeals.

5. We have heard rival parties and have gone through the material placed on record. First, we take up I.T.A.No. 137/Del/2013 (assessment year 2009-10). Ld. CIT(A) has confirmed the action of the Assessing Officer for making disallowance u/s 14A as per the provisions of Rule 8D for an amount of Rs.7,53,689/- consisting of two amounts of RS.4,93,689/- relating to interest and Rs.2.60 lacs relating to administrative expenses. From the facts of the case, we find that the assessee is having net interest income as is apparent from the figures of the P & L account as placed in paper book page 41-55. The assessee had received a net interest income of RS.26.42 lacs against which he has incurred an expenditure of Rs.10.03 lacs and, therefore, the assessee had a net positive income of bank interest. These figures are verifiable from the paper book pages 14 and 5 respectively. Moreover, we find that the assessee had not made any investment during the year under consideration as is apparent from the paper book page 4 where the same amount of investment is appearing for the financial year ending 31.03.2008 and 31.03.2009. Further, we find from the order of Ld. CIT(A) at page 3 that the investment made by the assessee amounting to Rs.2 crores was for the shares in the associated companies and regarding the investment of balance amount of Rs.3.2 crores, it was in mutual funds run by various asset management companies. It is an established fact that the investment in associated companies is never made with the purpose of earning dividend but these investments are made for strategic purpose and similarly, investments in mutual funds also do not involve much cost as compared to making investment in direct equity shares. Moreover, the Assessing Officer has not pointed out any specific expenditure which the assessee had incurred for earning the exempt income. Therefore, if considered from all angles, the disallowance u/s 14A in this case was not warranted as held in various judicial pronouncements relied upon by assessee. The Hon'ble High Court of Punjab & Haryana in the case of Hero Cycles 323 ITR 518 has held as under:

“Contention that even where the assessee claimed that no expenditure had been incurred, the correctness of such claim could be gone into by the Assessing Officer and in the present case, the claim of the assessee that no expenditure was incurred was found to be not acceptable by the Assessing Officer and thus disallowance was justified is not sustainable. In view of finding of the Tribunal, it is

clear that the expenditure on interest was set off against the income from interest and the investments in the share and funds were out of the dividend proceeds. In view of this finding of fact, disallowance

under s.14A was not sustainable. Whether, in a given situation, any expenditure was incurred which was to be disallowed, is a question of fact. The contention of the Revenue that directly or indirectly some

expenditure is always incurred which must be disallowed under s.14A and the impact of expenditure so incurred cannot be allowed to be set off against the business income which may nullify the mandate of

s.14A, cannot be accepted. Disallowance under s.14A requires finding of incurring of expenditure; where it is found that for earning exempted income no expenditure has been incurred, disallowance under s.14A cannot stand. In the present case finding on this aspect, again the Revenue, is not shown to be perverse. Consequently, disallowance is not permissible – CIT Vs Winsome Textile Industries Ltd. (IT appeal No.504 of 2008, dt. 25th Aug., 2009) followed.”

6. We find that both, the Assessing Officer and Ld. CIT(A) have held that some amount must have been incurred for earning exempt income, ignoring the important fact that no new investment was made in the year under consideration and significant part of investment was in associate companies and moreover there is no nexus between the borrowed funds and investments. Above all, we find that the assessee has earned net interest income meaning thereby that no net interest expenditure was incurred. In view of the above, in the facts and circumstances of the present case, following the various judgements relied upon by Ld. A.R., the disallowance u/s 14A is not sustainable and hence, the appeal of the assessee is allowed.

7. Now, coming to I.T.A.No. 138/Del/2013, we find that the only issue in this case is regarding addition u/s 68 of the Act and the Assessing Officer  on the basis of an investigation report, had reopened the assessment u/s 147 and had observed that the assessee had received an amount of Rs.12 lacs from six share applicants amounting to Rs.2 lacs each. The Assessing Officer after discussing the modus operandi of entry providers for providing accommodation entries required the assessee to file confirmation and to produce share holders from whom share application money was received. The assessee in reply filed various documents consisting of bank statement, confirmation, copy of income tax return etc but did not produce the share holders. The Assessing Officer issued summons u/s 131 to share applicants and in the case of two applicants, the summons were received back as unserved and rest of share applicants also not responded. Therefore, the Assessing Officer made the addition u/s 68 of the Act. Before Ld. CIT(A), the Ld. A.R. filed various submissions which included that necessary confirmations and other documents relating to amounts received as were furnished before the Assessing Officer. Ld. CIT(A) after considering the submissions of the assessee and after relying upon a number of case laws, upheld the addition made by the Assessing Officer by holding as under:

“4.2 I have carefully considered the assessment order and the

submissions filed by the appellant. I find that the reopening u/s

147/148 has been done by the AO after recording of reasons as per

law showing "reason to believe", based on information received

from the Investigation Wing, and after approval of competent

authority. In this connection reference is also placed on the

following judicial pronouncements.

In CIT Vs. India Terminal Connector Systems Ltd. dated 21.03.2012, the Hon'ble Delhi High Court has held that assessment can be reopened on the basis of information provided by the DIT(investigation) which was not available with the AO during the course of original proceeding. The Hon’ble High Court thus held as under:

"In the present case it cannot be disputed at a/l that the material present before the Assessing Officer at the time of recording reasons for reopening the assessment did show link between M/s. Shivam Softech Ltd., described as an entry provider, with the petitioner herein. Not only was there a link between the two names, but the met-riel a/s,) disclosed the date on which the entry was taken the cheque or DD number, the name of the bank and branch and the account number With such precise material before the Assessing Officer, the existence of which is beyond challenge, can hardly be said that the Assessing Officer could not have had even a prima facie belief that income chargeable to tax had escaped assessment in the hands of the assessee for the assessment year 2004-05.”

[2007] 291 ITR 0500 - Assistant Commissioner of Income-tax v. Rajesh Jhaveri Stock Brokers P. Ltd. (Supreme Court of India)

The expression "reason to believe" in section 147 would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, ·he can be

said to have reason to believe that income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. What is required is "reason to believe" but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material a" which a reasonable person could have formed the requisite belief. Whether materiel would conclusively prove escapement of income is not the concern at that stage. This is so because the formation of the belief is within the realm of the subjective satisfaction of the Assessing Officer.

Coal Co. P. Ltd. [1996] 217 ITR 597 SC) and Raymond

Woollen Mills Ltd. vs. ITO [1999] 236 ITR 34 (SG) followed.

The Hon'ble Delhi High Court in the case of Mayawati v. Commissioner of Income-tax [2010] 321 ITR 034,9 has held as under:

"Section 148 of the Income-tax Act, 1961 enjoins that the Assessing Officer must serve on the assessee a notice requiring him/her to furnish a return of his/her income, in respect ~" which he/she is assessable under the Act during the previous year corresponding to the relevant assessment year. In stark contrast,

section 149 of the Act speaks only of the issuance of a notice under the preceding section within a prescribed period Section 149 of the Act does not mandate that such a notice must also be served on the assessee within the prescribed period.

Wherever service, a notice is essential or critical, section 27 of the General 'Clauses Act, 1897 creates a statutory presumption to the effect that if a letter is properly addressed, it must be deemed to have been served.

An inspector of the Revenue endeavoured to serve a notice on the assessee at her Humayun Road, New Delhi residence, in the course of which he was informed that she had shifted her residence to 3, Nehru Road, Cantonment, Lucknow, Uttar Pradesh where the notice should now be delivered. It was in these

circumstances that the inspector dispatched the notice dated March 25, 2008 by speed post on March 29, 2008 to the Lucknow address furnished to her. On a writ petition on the ground that there was no proper service of notice:

Held,_ dismissing, he petition, that it was evident that the assesse declined to accept the notice, firstly at Humayun Road, New Delhi, secondly at Nehru Road, Cantonment, Lucknow, Uttar Pradesh and, thirdly, at Kalidas Marg, Lucknow, Uttar Pradesh. All the three addresses belonged to 'the assessee at the relevant time. The notice must be presumed to have been served on the- addressee by virtue of the provisions of section ::'7 of the General Clauses Act."

Further, the appellant has not raised any objection during the course of assessment proceedings regarding issue of notice under section 148. Grounds of appeal directed against assumption of jurisdiction under section 148 are, therefore, rejected. In regard to the action of the Assessing Officer in treating Rs. 12,00,000/- share application money as income of the assessee under section 68, as per the assessment order, the same has been done on the basis of:

• Information received from the Investigation Wing of the Department in the case of Mukesh Gupta Group that the appellant Company had taken accommodation entries from the persons: from whom share application money had been allegedly received;

• The appellant filed original confirmations, copy of acknowledgement form of the LT. Department, photocopy of bank statements and photocopies of the sources. However, the appellant did not produce the share applicants;

• The average daily balance in the bank account was very low and amounts were deposited either by cheque or in cash a day or two before issue of cheque to the appellant;

• Inspite of summons issued to all the share applicants for personal attendance, none attended and in case of Shri Deepchand Gupta, the summons was received back. But inspite of this. share application form and bank statement was received from all the share applicants including Shri Deepchand Gupta.

• The confirmation. were undated. During appellate proceedings. the appellant claimed that the Assessing Officer had not doubted the identity of the shareholders and the financial capacity and the genuineness of the persons was proved by the documents and evidences submitted during assessment proceedings. The appellant Company had, therefore, discharged its onus. On careful examination of the matter, I find that the appellant by producing the confirmation, affidavit, of .py of share application and ITR along with Permanent Account Number card, personal balance Sheet, and bank statement has created a paper trail to prove the genuineness of the transaction. However, the close examination of the documents show that the income tax returns are for the receding previous year, the bank accounts show deposit of equivalent amounts just before the withdrawals and it is apparent that the persons do not have the capacity to invest and neither they are the type of persons who would make investment in a Private Limited Company with un-quoted shares and that too at a heavy premium. The claim of the appellant of adequate capital in the hands of the investors is not borne out by evidence on record since the capital is not available in liquid form, but stands already .invested.The liquid funds available in the hands of the alleged investors are hardly enough to explain the source of investment being carried out by them does not generate income commensurate with the amount of investment reflected by them. It is also surprising that in response to summons issued by the Assessing Officer, there was no compliance by the various Companies and in fact, one of the summons i.e. of Deepchand Gupta was received back, but inspite of that the confirmations were received from all the parties including Shri Deepchand Gupta. This shows a preconceived plan on part of the appellant to file the confirmations. The entire transaction is against human probability. Thus there is enough material to raise a very strong suspicion, to question the authenticity of the transaction and reject the paper trail created by the appellant and require the assessee to show that the transaction is really one which is above board which the appellant has failed.

Hon’ble Supreme Court in the case of Sumiti Dayal 214 ITR 801 has held that the genuineness of t. re transaction is to be considered on the basis of surrounding circumstances, humun probabilities and the

conduct of the connected parties. A transaction does nor become genuine merely because a paper trail has been created/filed. The AO while exercising his power as an investigating officer has a right to go

beyond what is apparent. The mere filing of affidavit, gift deed etc shall not make the gift genuine. Hon'ble Supreme Court in the case of Sumiti Dayal (Supra) signifies that what is apparent must be examined on the touchstone of surrounding circumstances, human probabilities. Merely because as per trail has been filed will not by itself make the transaction genuine. Hon’ble Delhi Court in the case of Ashok  Mahendru & Sons (HUF) v CIT (2008) 9 DTR (Delhi) 222: (2008)173 TAXMAN 178 has held that even though the documentation n lay be in order, if there is enough material to raise a very strong suspicion that there is something not quite right with nature of transaction, the authority under the Act may reject the document and require the assessee to show that the transactions really one which is above board. Accordingly the explanation submitted by the assessee with regards to genuineness of the transactions is rejected.

The material fact is thus that the identity and financial strength of the persons who have allegedly made the in" statement has not been established. The appellant has failed to discharge the primary onus of

proving their capacity to purchase the shares and to prove the genuineness of the transactions. The appellant Company has not discharged its onus and identity and the creditworthiness of the investors has not been established.

The facts of the case have also been examined in light of the judgement of Hon'ble Delhi High Court in the case of - Indus Valley Promoters Ltd. v. Commissioner of Income-tax [2008] 305 ITR. 0202 wherein it has held as under:

"The assessee must discharge the burden of proving the identity of the creditors and also give the source of the deposits in order to avoid an addition under section 68 of the Income-tax Act, 1961. The

creditworthiness of the depositors must be established to the satisfaction of the Assessing Officer. Where there is an unexplained cash credit is open to the Assessing Officer to hold that it is the income of the assessee and no further burden lies on the Assessing Officer to show that the income in question comes from any particular source. The assessee-company filed a return declaring a loss of Rs. 4,93,218/-.

During the course of assessment proceedings, the Assessing Officer noticed an increase in the share application money account as compared to the preceding assessment year and that a sum of Rs. 11.82 lakhs had been deposited in the account of the director. He further noticed that no shares were allotted during the previous year and in the year under consider: lion and that the share application money retained the same form and character even in two subsequent years. Thus the Assessing Officer. treated this amount as unsecured amount and not as share application money. As the assessee had r)t produced any evidence in respect of the source of the deposits, the Assessing Officer added the sum of Rs. 11.82 and also added Rs. 5 lakhs as shown in the company's books as deposits made against bookings for flats in the scheme of the company but which were cancelled by the parties. The Commissioner (Appeals) as well as the Tribunal dismissed the appeal filed by the assessee. On further appeal:

_Held,_ dismissing the appeal, (i) that as no shares were allotted to the director during the year in question and for the subsequent two assessment years and the shares were allotted after enquiry done by the Assessing Officer, the amount of Rs.11.82 lakhs could be treated as unsecured loan. The amount had been deposited in cash and in spite ct enquiry; the source of the deposit was not explained. The

creditworthiness of the creditors to make the payment was not clear from the income shown by them. There was no infirmity in the reasoning given by the Tribunal for upholding the action of the tax authorities in bringing to tax the sum of Rs. 11.82 lakhs.

(ii) That the assessee had not been able to prove the creditworthiness of the creditors with respect to the cash credit of Rs. 5 lakhs. All the persons involved failed to respond to the summons. The assessee

received all the payments in cash even though most ct the persons had bank accounts and they had not entered the transactions through their bank accounts. No substantial question of law arose.”

The decision of Hon'ble Supreme Court in the case of Commissioner of Income-tax vs. P. Mohanakala 291 ITR 2;'8 is also relevant to the case as the Hon'ble court has held as under:

A bare reading of suction 68 of the Income-tax Act, 1961, suggests (i) that there has to be credit of amounts in the books maintained by the assessee; (ii) such credit has to be a sum of money during the previous year and (iii) either (a) the assessee offers no explanation about the nature and source of such credits found In the books or (b) the explanation offered by the assessee, in the opinion of the Assessing

Officer, is not satisfactory. It is only then that the sum so credited may be charged to income-tax as the income of the assessee of that previous year. The expression "the assessee offers no explanation" means the assessee offers no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. The opinion of the Assessing Officer for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on the record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material on record. Application of mind is the sine qua non for forming  the opinion.

In cases where the explanation offered by the assessee about the nature and source of the sums found credited in the books is not satisfactory there is, prima facie, evidence against the assessee, viz., the receipt of money. The burden is on the assessee to rebut the same, and, if he fails to rebut it, it can be held against the assess1e that it was receipt of an income nature.

The burden is on the assessee to take the plea that, even if the explanation is not acceptable, the material and attending circumstances available 6n record do not justify the sum found credited in the books being treated as a receipt of income nature. The assessees received foreign gifts from one common donor. The payments were made to them by instruments issued by foreign banks and credited to the respective account of the essessees by negotiation through a bank in India. Most of the cheques sent from abroad were drawn on the Citibank, N. A. Singapore. The evidence indicated that the donor was to receive suitable compensation from the assessees. On this material the Assessing Officer held that the gifts though apparent were not real and accordingly treated all those amounts which were

credited in the account books of the assessees as their income applying section 68 of the Income-tax Ad, 1961. The assessees did not contend that even if their explanation was not satisfactory the amounts were not of the nature of income. The Commissioner (Appeals) confirmed the assessment. On further appeal, there was a difference of opinion between the two Members of the Appellate Tribunal and the matter was referred to the Vice President who concurred with the findings and conclusions of the Assessing Officer and the Commissioner (Appeals).

On appeal the High Court re-appreciated the evidence and substituted its own findings and came to the conclusion that the reasons assigned by the Tribunal were in the realm of surmises, conjecture and suspicion. On appeal to the Supreme Court:

Held, reversing the decision of the High Court, that the findings of the Assessing Officer, the Commissioner (Appeals) and the Tribunal were based on the material on record and not on my conjectures and surmises. That the money came by way of bank cheques and was paid through the process of banking transaction was not by itself of any consequence. The High Court misdirected itself and erred in disturbing the concurrent findings of fact.

Sumati Dayal v. CI T [1995] 214 ITR 801 (SC) ; [1995] Supp 2 SCC 453 relied on. K. S. Kannan Kunty v. CIT [1969] 72 ITR 757 (Ker) considered.

Decision of the Madras High Court in A. Rajendran v. Asst. CIT [2007] 291 ITR 178 reversed."

The Hon'ble Delhi High Court in the case of Commissioner of Income-tax vs Nova Promoters and Finlease (P) Ltd. [2012] 342 ITR 0169- has distinguished the case of CIT Vs. Oasis Hospitalities P. Lid. [2011] 333 ITR 119 (Delhi) and has held as under:

"Even where a reference of a question of law is made to the High Court in its advisory jurisdiction and not the appellate jurisdiction, where normally the findings of fact recorded by 'the Tribunal are binding on the High Court, the findings are not binding on the High Court " they are perverse or if the findings are such that no person acting judicially and properly instructed as to the relevant law could have come to the determination under appeal, The position in an appeal under section 260A of the Income tax Act '1961 is "a fortiori", For the assessment year 2000-01, the assessee-company filed a return of loss which was processed under section 143(1) accepting the loss, Subsequently, based on a letter from the director of Income-tax (Investigation) regarding entry operators accommodation providers, informing the Assessing Officer that there were 16 entry operators who had given accommodation entries to several persons of which the assessee was one, Olaf there were statements recorded from persons confirming the facts, that the assessee had obtained accommodation entries of Rs. 1,18,50,000 from these persons if' the garb of share application monies during the relevant year, the Assessing Officer

issued notice under section 148 of the Act reopening the assessment of the assessee. In the course of the reassessment proceedings, the Assessing Officer issued a questionnaire to the assessee, The  assesse sought copies of the documents / material in the possession of the Assessing Officer and opportunity to cross-examine the person in charge of the 16 companies with regard to the contents of the statements recorded from them, The Assessing Officer issued summons to two individuals and to the companies, some of which were received back un-served and the other summons remained uncomplied with. The Assessing Officer sent an Inspector to the addresses to which summons Were issued, The Inspector reported that no such person or company was available or existing at the addresses to which summons were issued, on the basis of the report of the Inspector, the Assessing Officer issued notice to the assessee to produce the persons and companies from whom it had received share applications monies. This also was not complied with by the assessee. The assessee later filed affidavits of the two individuals, Rand M, in which both stated that the transactions with the assessee were genuine and the earlier statements recorded from them by the investigation wing were given under pressure. The Assessing Officer came to the conclusion that the independent enquiries carried out by him disclosed that the assessee was unable to prove the genuineness of the transactions with the companies and that it also proved that the assessee-company had introduced its own monies through nonexisting companies using the banking channel in the shape of share application monies. He accordingly invoked section 68 of the Act and added the amount of Rs. 1,18,50,000/- to the income of the assesse and a sum of Rs. 2,96,250 representing commission. On appeal the Commissioner" (Appeals) rejected the assessee contention against the validity of the reopening of the assessment but, taking note of the statement of the assessee that the affidavits from R and M, who were directors in the three companies as welt as the affidavits of the directors in other companies which provided the share capital, were not considered by the Assessing Officer, the Commissioner (Appeals) directed the Assessing Officer to examine the contents of the affidavits and verify the veracity and genuineness thereof The Assessing Officer was also directed to examine the genuineness of the transactions. The Assessing Officer submitted a remand report to the effect that the transactions had not been proved genuine and were only instruments used by he assessee to mislead the income-tax authorities. The Commissioner (Appeal) concluded that the Assessing Officer was not justified in taking the addition of as, 1, 18,50,000/- under section 68 of the Act. Consequently, he also deleted the addition of Rs. 2,96,250/-made for commission paid to the entry providers for obtaining; the entries, which had been added under section 68.

 The Tribunal confirmed the: deletion of the additions made under section 68 of the Act. On appeal by the Department:-

_Held,_ that the assessment was reopened: on the basis of information received from the investigation wing of the Department about the existence of accommodation entry; providers and their modus operandi in which the assessee was also found to be involved. The Tribunal had recorded, while dealing with the assesee’s cross objections challenging the jurisdiction of the Assessing Officer to reopen the assessment, that the information was specific, not general or vague, and referred to transactions entered into by the assesse during the year under consideration, that as per the information of the investigation wing, the names of the persons issuing the cheques, the cheque amounts, dates, etc., were also mentioned providing a link between the entry providers and the assessee. In the statements

recorded from R and M by the investigation wing, they had implicated the assessee- company also, inter alia. A perusal of the names of the entities from whom the assessee had received share application monies showed that 15 names appeared in the list of 22 companies mentioned in the letter of M and R to the Additional Commissioner. This established the link between the materials which was present before the Assessing Officer both at the tim1e when reasons for reopening the assessment were recorded and when the reassessment proceedings were made. In finding fault with the Assessing Officer for not accepting the identically worded affidavits of R' and M to the effect that the transactions of giving cheques to the assessee-company were genuine and that the cheques were issued to the assessee-company for share application money for allotment of shares and subsequently shares were also issued, both the Commissioner (Appeals? as well as the Tribunal had committed a serious error in appreciating the evidence. The Assessing Officer in hit remand report stated that despite repeated opportunities the deponents of the affidavits were not produced before him for examination and that summons issued to all the deponents of the affidavits remained un-complied with and none of the persons attended before him. The assessee had nothing to say as to why the deponents (If the affidavits, which were all in its favour, could not present themselves before the . Assessing Officer for being examined on the affidavits. In the light of the facts, the evidentiary value of the affidavits was open to serious doubt. The affidavits retracting their earlier statements, filed by M and R were filed more than three years after they wrote letters admitting to their role as entry providers. No reason had been advanced by the assessee for such long delay in retracting the earlier letters. The observation of the

Commissioner (Appeals) that if summons had been served it would mean that the parties were present at the addresses and even if they were not found by the Inspector at the addresses furnished by the

assessee, it was for the Assessing Officer to have made enquiries from the post office regarding the whereabouts of the addressees was not proper. There was, in this case, no such duty cast on. Assessing Officer. The assessee had been blocking any enquiry by the Assessing Officer at every stage on some plea or the other, including a frivolous plea that no cross-examination was allowed, overlooking that once they filed the affidavits retracting from their earlier statements the plea lost force. The findings of the Tribunal were based on irrelevant material or had been entered ignoring relevant material. The finding that the share application monies had come through account payee cheques was, at best,' neutral. The question required a thorough examination and not a superficial examination. The fact that the companies which subscribed to the shares were borne on the file of the Registrar of Companies was

again a neutral fact. That these companies were complying with such formalities did not add any credibility or evidentiary Value. In any case, it did not ipso facto prove 'hat the transactions were

genuine. Material was gathered by the investigation wing and made available to the Assessing Officer,

who in turn had made it available to me assessee. The Tribunal had ignored relevant material. The Tribunal also erred in law in holding that the Assessing Officer ought to have proved that the monies

emanated from the coffers of the assessee-company and came back as share capital Section 68 permits the Assessing Officer to add the credit appearing in the books of account of the assess1ee if the latter

offers no explanation regarding the nature. and source of the credit or the explanation offered is not satisfactory. It places no duty upon him to point to the source from which the money was received by the assessee. Even if one were to hold that the Assessing Officer was bound to show that the source of the unaccounted monies was the coffers of the assessee, in the facts of the present case such proof

had been brought it by the Assessing officer... The statements of the entry providers referred to the practice of taking cash and issuing cheques in the guise of subscription to share capital, for a consideration in the form of commission. The names of several companies which figured in the statements given by the above persons to the investigation wing also figured as share-applicants subscribing to the shares of the assessee-company. These constituted materials upon which one could reasonably come to the conclusion that the monies emanated from the coffers of the assessee-company.

" The appellant has thus been unable to explain the creditworthiness of the persons who have allegedly made this investment. As the explanation offered by the assessee about the nature and source of the sums found credited in the books was not satisfactory there was, prima facie, evidence against the assessee, viz., the receipt of money. The burden was on the assessee to rebut the same, and, it failed to rebut it, it can therefore be held against the assessee that it was a receipt of an income nature. The appellant has failed to discharge its onus ·to produce legal acceptable evidence of creditworthiness of the persons. The expression "the assesse offers no explanation" means the assessee offers no proper,

reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. In this case the appellant has offered no creditable explanation about the amounts credited in his books, the receipt of Rs.12,00,000/- therefore, cannot be treated as explained. Considering the above facts, the addition of Rs.12,00,000/- made by the AO u/s 68 is confirmed.”

8. We find that Ld. CIT(A) has elaborately dealt with the issue and also rightly upheld the addition and, therefore, we do not see any infirmity in the same. As regards the arguments of Ld. A.R. that the Assessing Officer had not lawfully reopened the assessment by not supplying the copy of reasons

recorded, we find that no specific ground has been taken by the assessee in the grounds of appeal and neither the assessee had filed any application for admission of additional ground and moreover, we find that Ld. CIT(A) has adjudicated the issue of reopening and we are in agreement with his finding.

9. In view of above, the appeal filed by the assessee in I.T.A.No. 138/.Del/2013 is dismissed.

10. In nutshell, I.T.A.No. 137/Del/2013 is allowed and I.T.A.No. 138/Del/2013 is dismissed.

11. Order pronounced in the open court on 31st July, 2014.