Full Text
ITA 871/2015
COMMISSIONER OFINCOME TAX-VIII Appellant
Through: Mr Kamal Savvhney, Senior Standing Counsel, Raghvendra Singh, Junior Standing
Counsel, Mr Shikliar Garg and Mr Sharad Agarwal,Advocates.
Aggarwal,Advocates.
Through; Mr Kamal Sawliney, Senior, Standing Counsel, P.aghvendra Singh, Junior Standing
Counsel, Mr Shildiar Garg and Mr Sharad Agarwal,Advocates.
Through: Mr C. S. Aggarwal, Senior Advocate
■ with Mr Prakash Kumar and Mr Rupinder
Aggarwal,Advocates.
ITA Nos.871,872,873,874,875,87.,,883,962,963,964,965&966of2015 Page I of23
2015:DHC:11140-DB r COMMISSIONER OFINCOME TAX-VIII Appellant
Through: Mr Kamal Sawhney, Senior Standing Counsel, Raghvendra Singh, Junior Standing
Counsel, Mr Shikhar Garg and Mi- Sharad Agarwal,Advocates.
Through: Mr C. S. Aggarwal, Senior Advocate with Mr Prakash Kumar and Mr Rupinder
Aggarwal,Advocates.
Through: Mr Kamal Sawhney, Senior Standin^t Counsel, Raghvendra Singh, Junior Standing
Counsel, Mr Shikhar Garg and Mr Sharad Agarwal,Advocates.
Through: Mr C. S. Aggarwal, Senior Advocate with Mr Prakash Kumar' and Mr Rupinder
Aggarwal,Advocates.
COMMISSIONER OF EJCOME TAX-VIII Appellant
Through: Mr Kamal Sawhney, Senior Standing Counsel, Raghvendra Singh, Junior Standing
ITA N0S.S71,872,873,874,875,876,883,962,963,964,965&966of2015 Page2of23
2015:DHC:11140-DB Counsel, Mr . Shildiar Garg and Mr Sharad
Agarwal,Advocates.
^
Through: Mr C. S. Aggarwal, Senior Advocate with Mr Prakash Kumar and Mr Rupinder
Aggarwal,Advocates.
COMMISSIONER OFINCOME TAX-VIII . Appellant 7'hrough: Mi- Kamal Sawhney, Senior Standing
Counsel, Raghvendra Singh, Junior Standing.
Counsel, Shikhar Garg and Mr Sharad Agarwal,Advocates.
Through: Mr C. S. Aggarwal, Senior Advocate with Mr Prakash Kumar and Mr Rupinder
Aggarwal,Advocates. wm
COMMISSIONER OFINCOME TAX-VIII Appellant JLrough: Mr Kamal Sawhney, Senior Standing
Counsel, Raghvendra Singh, Junior Standing Counsel, Mr Shilchar CJarg and Mr Sharad
Agarwal,Advocates.
2015:DHC:11140-DB SVP BUILDERS(INDIA)LIMITED Respondent
Through: Mr C. S. Aggarwal, Senior Advocate with Mr Prakash Kumar and Mr Rupinder
■ , Aggarwal,Advocates.
COMMISSIONER OFINCOME TAX-VIII Appellant
Through: Mr Kamal Sawhney, Senior Standing
Counsel, Raghvendra Singh, • Junior Standing
Counsel, Mr Shikhar Garg ~and Mr Sharad- Agarwal,Advocates.
Aggarwal,Advocates.
COMMISSIONER OFINCOME TAX-VIII Appellant
Through: Mr Kamal Sawhney, Senior Standing
■ Counsel, Raghvendra Singh, Junior Standing
Counsel, Mr Shildiar Garg and Mr Sharad Agarwal,Advocates.
SVP BUILDERS(INDIA)LIMITED Respondent
Through: Mr C. S. Aggarwal, Senior Advocate with Mr Prakash Kumar and Mr Rupinder
ITA Nos.871,872,873,874,875,876,883,962,963,964,965& 966of2015 Page4of23
2015:DHC:11140-DB Aggarwal,Advocates.
COMMISSIONER OFINCOME TAX-VIII , Appellant
Through: Ivlr Kamal Sawhney, Senior Standing Counsel, Raghvendra Singh, Junior Standing
Counsel, Mr Shikhar Garg and Mi' Sharad Agarwal,Advocates.
Through: Mr C. S. Aggarwal, Senior Advocat" with Mr Prakash Kumar and Mr Rupinde.
Aggarwal,Advocates.
COMMISSIONER OFINCOMETAX-VIII Appellant
Through: Mr Kamal Sawhney, Senior Standing Counsel, Raghvendra Singh, Junior Standing
Counsel, Mr Shildiar Garg and Mr Sharad Agarwal,Advocates.
Aggarwal,Advocates.
AND
I
ITA Nos.871,872,873,874,875,876,883,962,963,964,965&966of2015 Page5of23
2015:DHC:11140-DB
COMMISSIONER OFINCOMETAX-VIII .....Appellant
Through; Mr Kamal Sawhney, Senior Standing Counsel, Raghyendra Singh, Junior Standing
Counsel, Mr Shikhar Garg and Mr Sharad Agarwal,Advocates.
Through: Mr C. S. Aggarwal, Senior Advocate with Mr Prakash Kumar and Mi* Rupinder
Aggarwal,Advocates.
15.12.2015 CM No.30897/2015 in ITA No.962/2015
CM No.30899/2015 in ITA No.963/2015 CM No.30901/2015 in ITA No.964/2015
CM No.30904/2015 in ITA No.965/2015 CM No.30906/2015 in ITA No.966/2015
1.Allowed,subjectto alljustexceptions.
2.The applications stand disposed of.
CM No.26995/2015 in ITA No.871/2015 CM No.26997/2015 in ITA No.872/2015
CM No.26999/2015 in ITA No.873/2015 CM No.27001/2015 in ITA No.874/2015
CM No.27003/2015 in ITA No.875/2015 CM No.27005/2015 in ITA No.876/2015
CM No.27018/2015 in ITA No.883/2015 ITA Nos.871,872,873,874,875,876,883,962,963,964,965&966of2015 Pane6of23
2015:DHC:11140-DB CM No.30898/2015 in ITA No.962/2015 ^
CM No.30900/2015 in ITA No.963/2015 CM No.30902/2015 in ITA No.964/2015
CM No.30905/2015 in ITA No.965/2015 CM NO.3Q907/2015 in ITA No.966/2015
ORDER
3. For the reasons^stated therein, the delay in re-filing the appeals is condoned.
4. The applications stand disposed of. ITA Nos.871/2015, 872/2015, 873/2015, 874/2015, 875/2015, 876/2015, 883/2015,962/2015,963/2015,964/2015,965/2015 &966/2015
5. These appeals by the Revenue are directed againstthe common impugned order dated 29"^ April, 2014 passed by the Income Tax Appellate Tribunav (ITAT)for Assessment Years(AYs)2003-2004 to 2009-2010 in respect of the thi-ee Respondent-Assessees herein, i.e. SVP Builders (India) Limited (SVPB), SVP Developers Limited (SYPD) and SV Liquor India Limited (SVLI). In all these appeals, the only question urged by the Revenue for consideration is as under: "Whether theITAT erred in deleting the addition under Section -68 ofthe Income Tax Act(Act)on the facts and circumstances ofthe present case?"
6. The background facts are that a search was conducted on 14^*^' Octobef 2008 in the premises of SYPD and the SYP Group of Companies. According to the Revenue,four companies comprised the core ofthe SYP Group,i.e., SYPB,SYPD,SYIT and Five Vision Promoters Private Limited (Five Vision). These four companies were found to have received share capital from 106 companies between AYs 2003-2004 and 2009-2010. The ITA Nos.871,872,873,874,875,876,883,962,963,964,965&966of2015 Page 7of23 2015:DHC:11140-DB \ said shareholders have been categorised as Table-I, Table-II and Table-Ill shareholders. Shareholder companies in Table-I were subjected to search under Section 132 ofthe Act. As regards shareholder companies in Table-II, proceedings were initiated under Section 153C of the Act against them consequent upon the search. Table-Ill comprised 74 shareholder companies whose identity and existence were not doubted since they were being regularly assessed to tax.
7. The case ofthe Revenue is that the SVP Group ofcompanies(in whose premises and the residential premises of their Directors, searches were conducted) were engaged in the business of construction of residential, commercial and business complexes and also sale/purchase of lands. The further case of the Revenue was that the Group had been charging 'onmoney' on the sale offlats, shops etc. which was not accounted for in thei regular books ofaccounts. The allegation was that'on-money' was taken in cash and in turn was routed back into the Group companies in the form of share application money/unsecured loans,share capital etc.The unaccounted money routed through the said channel was reinvested in the purchase of further lands and for new projects. The share application money received in cash was also utilized for booking bogus expenses as site development charges forinflating the costofconstruction to bring down profits.
8. The further case ofthe Revenue was that during the pre-search enquiries it was gathered that SVP Group of companies had been receiving shaR capital from several companies which did not undertake any genuine business activities but acted as 'conduit chamiels' for converting black ITA Nos.871,872,873,874,875,876,883,962,963,964,965&966of2015 Page8of23 ■ 1 money into white.The broad general allegation was that in the course ofthe investigation undertaken by the Additional Director of Income Tax (Investigation), Ghasjiabad, the SVP Group of comipanies did not produce the shareholders despite being served with notices for that puipose. It was alleged that the shareholders were not produced till finalization of assessmentorder,i.e.,upto21 monthsthereafter. j
9. As far as SVPB is concerned it was incorporated on 28"'February,2000 under the Companies Act, 1956. SVPD was incorporated on 9^" February, 1996 and SVLIon 4'"Febmary,1994. Thesaid Respondents are engaged in the business ofreal estate and are regularly assessed to tax.
10. A statement of one Mr. Yijay Kumar Jindal was recorded on 15"' October 2008, one day after the search operation took place. On 25"' October 2010,notices were issued to the three Respondents in respect ofthe share capital year-wise for AYs 2003-2004 to 2009-2010 in the case of SVPB, for the years 2007-2008 and 2008-2009 in the case of SVPD (although it had notcommenced businessin those AYs)and AYs2004-2005 to 2009-2010 in the case ofSVLI. Further notice was issued under Section 142(1) ofthe Act to the three Assessees on 22"" November,2010 (in the case ofSVPB and SVPD)and 2""December,2010inthe case ofSVLI. N
11. On the basis of the replies filed by the Assessees, assessments we/f framed under Section 153A/143(3) ofthe Act and additions were made as unexplained cash credit under Section 68 of the Act. The findings of the Assessing Officer(AO)in theAssessment Order dated 13"'December,2010 were as under: ITA Nos.871,872,873,874,875,876,883,962,963,964,965&966of2015 Page 9of23 \L
(i) As far as Table I shareholders were concerned, the AO noted that none of the companies' were found to be operating at the given addresses. There was neither any display board bearing the names of these companies nor their books of accounts and other related accounts or documents found from such premises. (ii)Moreover,even the persons available at the said premises namely Shri Bajrang Bahadur Dubey,Smt. Meena Goyal,Smt. Sushila Goyal and Shri Sachin Garg denied that any ofthe said companies existed at the said addresses. Further, despite letter dated 5"" March 2009, and summons under Section 131 dated 20^'' March and 6"'April 2009,the Assessee failed to produce the shareholders for cross examination.
(iii) As far as the Table III companies were concerned, many ofthe summons issued were returned unserved with the remarks "unknown" or "no such person".24 ofthe companies submitted replies and some filed affidavits but did not submit any other details. The letter of M/s. Ganesh Buildtech showed that it had invested Rs. 10.50 crores in 16 ofthe companies figuring in Tables III and they in turn invested in the SyP Group companies. This was proofofthe said,companies acting as a "conduit channel". Further, the Assessee failed to produce the shareholders for cross-examination.
(iv) Also, the nexus ofthe shareholders and the beneficiary, i.e. the
SYP Group,stood proved from the fact that shares were bought back by the individuals/concerns belonging to SYP Group. During the search, original share certificates worth Rs. 38 crores were found, ITA Nos.871,872,873,874,875,876,883,962,963,964,965&.966of2015 Page 10of23 2015:DHC:11140-DB some of which were seized. During the search one Shri Vijay Jindal gave a statementthat shares were allotted at Rs. 10 per share and later on bought back at Rs.2-3/- per share. The actual average purchase price was Rs. 1.04 per share. Thus shares that were initially issued by the SVP Group to the extent of Rs. 81.19 crores had been cheaply bought back for Rs. 10.38 crores and therefore the transactions v^erc sham.
(v) Thus the Assessee had failed to prove the identity, genuineness and creditworthiness of the said shareholders. Accordingly, the aforementioned sums shown as investments in its shares for the AYs in question were added to its income for those AYs.
12. After the Commissioner ofIncome Tax (Appeals)[CIT(A)] by orders dated 21®' May 2012 dismissed the appeals of the Assessees, thereby sustaining the additions, the Assessees filed appeals before the ITAT. Allowing the appeals,the ITAT by its impugned order held as under: (i)The Revenue had been unable to deny the factual position that only 11 of the 20.companies in Table I had actually been searched. The material on record showed that directors of 18 companies of the 20 compariies were examined by the AO in the course of the remand proceedings and found from the books ofaccountsthatthe share capitaf stands duly recorded in their books of accounts. Thus there was lu. justification for drawing an adverse inference particularly since no contraiy material was placed on record by the revenue. /TA N0S.S71,S72,873,874,875,876,883,962,963,964,965 966 of2015 Page U of23 (ii)The statements of Shri Bajrang Dubey and Shri Sachin Garg when carefully examined did not show that the investor companies did not exist or.did not in fact subscribe to the share capital ofthe SVP Group companies. (iii). As far as Ganesh Buildtech was concerned, while no addition was made,by the AO ofthe sum ofRs.28 lakhs invested by it in Five Vision for AY 2006-07 and Rs. 1,57,27,500 in AY 2007-08,he added the sum of Rs; 1,74,75,000 received from it in AY 2007-08. This apparent contradiction showed that the addition was made without appreciating the complete facts on record.
(iv) The decision of this Court in CIT v. M/s. Nova Promoters
Finlease (P) Ltd. 342 ITR 169 (Del) was distinguishable on facts since in that case two directors ofthe shareholder companies admitted to maintaining benami accounts and providing accommodation entries, whereas in the-present cases there were no vsuch statements. Also,here the AO did not take any steps to rebut the confirmation and evidence tendered by the shareholders.
(v) The common address of shareholders was not a valid basis to disregard the claim ofthe Assessee in view ofthe decision ofthis Court in CITV. Winstral-PetrochemicalsPvt.Ltd.330ITR 603(Del).
(vi) The subsequent sale ofthe shares subscribed was not germane to the question ofthe genuineness ofthe share capital amountreceived by the Assessees. Once the capital raised stood explained, the issue of ITA Nos.871,S72,873,874,875,876,883,962,963,964,965&966of2015 Page12of23 2015:DHC:11140-DB e disinvestment by the shareholder subsequently was a non-issue. The addition if at all was to be examined in the hands of the perso]! purchasing the shares.
(vii) There was no material to support the Revenue's case that the 'onmoney' collected in cash was routed back into the SVP Group companies in the form ofshare application money and later reinvested in purchase offurther lands for new projects. (viii)There was no material to conclude that some ofthe investors were 'paper' companies. They had been regularly assessed to tax and had produced their books of accounts during their respective.assessment proceedings to show that they had made the investment in questior This had been accepted by the CIT(A)in their assessments by deleting the additions made of the said sums to.their income by the AO concerned by holding that the additions if at all should be made in the hands of the beneficiaries. In the appeals filed in those cases, the Revenue had contended that the additions oughtto have been sustained. Thus,the stand ofthe Revenue was contradictory and untenable.
(ix) The Assessee had discharged its primary onus of proving the identity,genuineness and creditworthiness ofthe said shareholders.
13. In particular in para 8.[7] ofthe impugned order,theITAT held as under: "8.[7] Having regard to the above judicial pronouncements rendered by the Hon'ble jurisdictional High Court, we now proceed to examine the evidence tendered by the four appellant companies to discharge their initial onus under section 68 ofthe ITA Nos.871,872,873,874,875,876,883,962,963,964,965&966of2015 Page 13of23 2-^ Act. In the instant case, it is undisputed that all the 106 shareholders are corporate entries having been incorporated ■ under the Companies Act. These shareholders are also assessed to tax. The documentary evidence for all the shareholders placed on record includes confirmation,affidavits ofdirections, returns of income of shareholders, bank statements of shareholders,board resolutions,certificate ofincorporation and,..Memorandum of Association of shareholder companies. The Assessing Officer issued summons under section 131 ofthe Act to such shareholders who then independently confirmed that they have only subscribed to the share capital ofthe appellant companies. No further investigation was carried out by the Assessing Officer during the course ofassessment proceedings in respect of such share capital received by the appellant companies.The finding recorded in the order ofassessmentthat the appellantthe shareholders had been directed to be produced during the course ofassessment proceedings,has been admitted I to be factually incon-ect both in the remand report by th-^ ■ Assessing Officer and further in the.written submission filec before the Ld. CIT DR.Further investigation was also carried out by the Ld. CIT(A)to verify the genuineness ofthe capital and the evidence led by the appellant during the remand proceedings. He had directed the appellant to produce 7 directors of 39 shareholders companies. Out of 7 directors, 6 directors had been produced whose statements had been recorded and in their statements, they have duly deposed and confirmed that they have subscribed to the capital of the appellant companies.These directors had not only produced the books.of accounts that source of the shareholders companies but also established from such books ofaccounts that source of investment was duly recorded in the books ofsuch companies. I No other evidence placed on record to'rebut the documentaryevidence placed by the appellant to support the share capiti received by the appellant companies. In such circumstances, it hasto be held in tenns ofthejudgment ofthe Hon'ble Supreme Court in the case of Lovely Exports (supra) and Hon'ble jurisdiction Allahabad High Court in the case of Jay Dee Securities and Finance Ltd.(supra) and M/s Misra Preservers ITA Nos.871,872,873,874,875,876,883,962,963,964,965&966of2015 Page 14of23 Pvt. Ltd. (supra) the initial burden which lay upon the appellants to establish the source of the share capital received stands duly discharged."
14. At the. outset it requires to be noticed that the grounds urged in the present appeals by the Revenue and the question of law urged is similar to that urged in the appeals filed by the Revenue againstthe 5^*^ company in the core group in the SVP Group of Companies, i.e., Five Vision, viz., ITA Nos.234, 235 and 236/2015. Those appeals were also directed against the same common impugned judgement dated 29^'' April, 2014 passed by the ITAT. This Court has by aJudgementdated 27^^'November,2015 dismissed the said appeals holding that the Revenue had not been able to show that there was any legal infirmity in the impugned order ofthe ITAT as regards the analysis of the facts and application oflaw in relation to Section 68 cT the Act.
15. In the present appeals, a pemsal ofthe grounds urged by the Revenue shows that they are no different from what was urged in the.P..evenue's appeals in the case ofFive Vision, viz.,that the Assessees had manipulated substantial funds movement through 'paper existence' of the investor companies; that the CIT(A) found that common directors repeatedlyappeared in the list of directors ofthe Assessee Companies which shov/ed that they belonged to the same group and were manipulating their books for the purpose of introduction of unexplained cash money and creating 5steps ofcheque transactions before the investment wasmade eventually in SVP Group of Companies; that the creditworthiness of tliree siiareholding companies-did not haA'e any worthwhile share capital and iheir activities ITA Nos.871,872,873,874,875,876,883,962,963,964,965&966of2815 Puf;e 15 of23 2015:DHC:11140-DB hi-were only in the forin of management offund rotation in the garb ofshare application money invested in each other with a view to artificially inflate their creditworthiness; that the Assessee bought back its own shares at a very low price; that the shares allotted at the face value of Rs.lO/- were transferred in the names ofindividuals/concerns belonging to SVP Group at a meagre price ranging fi-om Rs.0.50 to Rs.2.00 per share; that the persons available at the premises during the search ofthe Table-I companies denied ^ the existence ofsuch companies;thatthe cash ofRs.2,23,40,000/- was found during the- search operation from the residence of the Directors of the Assessees and the fact that it had received Rs.44.15 crore in cash as share application money was ignored;,that the decision in CIT v. Nova Promoters andFinlease(P)Ltd.(supra)was wrongly distinguished and the decision c. the Supreme Court in CIT v. Lovely Exports(P)Ltd. 216 CTR 195(SC) was distinguishable on facts.
16. It has been pointed out by the Assessees in their written note of submissions before this Court that apart from the fact that all of the corporate shareholders invested in the share capital ofthe Assessees were Income Tax Assessees who had filed independent confirmations that they had contributed towards the share capital and the sums had been recorded in their respective books ofaccounts,no incriminating evidence was found as resuRofthe search to suspect that the shareholders had not contributed to the share capital. Further itis pointed outthatin respectofeach ofthe share holders,the following evidence was tendered by the Respondent-Companies before the AO: "i)Name and address ofthe Investor ITA Nos.871,S72,873,874,875,876,883,962,963,964,965&966of2015 Page 16 of23 2015:DHC:11140-DB i ( ii)PAN ofthe Investor iii) Ward ofthe Investor iv)Bank account details ofthe investors y)Detail of amounts received and mode ofreceipt cheque no. date ofcheque;amountofcheque vi)Copy ofcertificate ofincoiporation ofthe investor vii)Copy ofITR viii)Copy ofShare Application forni ix)Copy ofBoard resolution x)ConfinTiation in the affidavit by the investor xi)Copy ofthe letter with enclosures submitted by the investor, companies in response to the summon u/s 131 ofthe Act."
17. It is pointed out that for AYs 2008-2009 and 2009-2010, the contributions of the share capital of the three Assessee was by Table-Ill companies in respectofwhich the CIT(A)observed as under: "I have carefully appreciated the contentions and do admit that at least- these few companies do not seem to be havin; ■ connection with the majority of the 'conduit' companies anu their common directors and that their financial creditworthiness is on much better footing."
18. Additionally it is pointed out that as ihr as SVPB is concerned no business had conunenced during AYs 2007-2008 and 2008-2009.The Profit and Loss Account of the aforesaid AYs showed that the only revenue received was interest from the banks. Therefore the allegation of"charging on-money"in cash and routing back ofthe same into the main stream in i:he foim ofshare capital,etc.,is incoiTect.
19. The Respondents have placed before the Court charts to show the detai.o ofthe investments made by the investor companies in each,ofthem yearwise. The tlmee companies appear to have been in existence much prior to ITA Nos.871,S72,873,874,875,876,883,962,963,964,965cli 966of2015 Page 17of23 2015:DHC:11140-DB the date ofthe search and commenced their business operations at least 5-6 years earlier thereto. It has been pointed out that as far as SVPB is concerned,the following details were furnished: "Details/Evidence of 20 share holders contributing Rs. 10,96,00,000/- ofTable I in A.Y.2003-04 to 2009-10; 12 share holders contributing Rs. 8,26,00,000/- of Table 11 in A,Y. 2003-04 to 2009-10; & 44 share holders contributing Rs.15,85,50,000/- ofTable III in A.Y. 2003-04 to 2009-10 and evidence filed before AO in respect ofthese shareholders."
20. As far as.SVPD is concerned,the following details were furnished: "Details/Evidence of. 16 share holders contributing Rs.3,32,50,000/- of Table I in A.Y. 2007-08 & 2008-09; 10 share holders contributing Rs.1,70,00,000/- ofTable II in A.Y. d 2007-08- & 2008-09; & 30 share holders contributing Rs. 5,22,50,000/- of Table III in A.Y. 2007-08 &2008-09 am, evidence filed before AO in respect ofthese shareholders"
21. As far as SVLIis concerned,the following details were furnished: "Details/Evidence of 19 share holders contributing Rs.7,16,00,000/- of Table I in A.Y. 2004-05 to 2009-10; 10 share holders contributing Rs.3,58,50,000/- ofTable II in A.Y. 2004-05 to 2009-10; & 36 share holders contributing Rs.17,10,50,000/- ofTable III in A.Y.2004-05 to 2009-10 and.evidence filed before AO in respect ofthese shareholders"
22. The other submission is that the Revenue's allegation that the Assessees I* ■, were themselves being used as conduits for routing the 'onmoney' or that the investment in the Assessees was also for routing such 'on money' hs, not evenpminafacie been able to be establishedby the Revenue. On the one hand there is an attempt to treat the cash credit found in the Assessees' books of accounts to be the 'undisclosed income of the Assessee' by showing the investors to be 'paper companies'. On the other hand, the attempt is to show ITA Nos.871, 872, 873, 874, 875, 876, 883, 962, 963, 964, 965 & 966of2015 Page IS of23 2015:DHC:11140-DB z thatthis money in fact belongs to certain other entities whose source has not been explained by the Assessees. As noted by the ITAT in the assessment proceedings ofthe investor companies,the monies invested were sought to be added as income ofthose companies by the AOs.The said additions were deleted by the CIT(A) in their cases holding that the additions if at all should be made in the hands of the beneficiaries. The Revenue then filed appeals in the ITAT insisting on the additions being sustained. Thus there is no clarity in the stand ofthe Revenue in these cases.
23. Coming to the core issue concerning the identity, creditworthiness and genuineness ofthe investor companies, it is seen that as far as the Table 1 investors were concerned,only 9 were searched and in their cases,the ITAT on a veiy detailed examination was satisfied that they not only existed, bu that the Assessees had discharged the primary onus of proving their credilworthiness and-genuineness. They had responded to the summons issued to them. Directors of14 ofthese companies appeared before the AO and produced their books ofaccounts
24. As regards Tableau companies, notices were issued under Section 131 of the Act to which many of them responded confimiing having made investments. The Assessees had been asked by the CIT(A)to produce 7 directors of the Table III companies. 6 directors appeared and their statements were recorded. They had confirmed that they had subscribed t:. the share capital ofthe Assessees.These directors had not only produced the books of accounts but showed that the source of investment was dulv ITA N0S.S71,872,87.3,874,875,876,883,%2,963,964,965&966of2015 Page 19of23 < Zi' recorded therein.The Revenue on the other hand did notproduce any further evidence to dispute the above evidence produced by the Assessees.
25. As far as Table II shareholders were concerned, ifthe Revenue was of the view that they were simply using the Assessees for parking their undisclosed income,'then it was certainly open to the Revenue to make additions to the income of those Table-II companies. As far as Table-I shareholders was concerned, none of them denied having made the investment in the Assessee companies. The AO does not appear to have undertaken any particular investigation into the affairs ofthe Table-I, II or Table III companies apart from issuance ofthe notices under Section 131 of the Act which were duly responded to.
26. Detailedfindings have been given by theITAT in the present cases after a thorough examination ofthe records. The Court finds no reason to differ from the decision ofthe ITAT in its rejection ofthe very same contentions urged before the Court by the Revenue.In particular,the Court concurs with the ITAT that the mere fact that some of the investors have a common address is not a valid basis to doubttheir identity or genuineness. '
27. Also,the factthat the shares ofthe Assessees were subsequently sold at a reduced price is indeed not germane to the question ofthe genuineness of the investment in the share capital of the Assessees. The question cT avoidance of tax thereby may have to be examined in the hands of the person purchasing the shares.
28. Some ofthe investor companies, for e.g.,(i) Quality Security Services ITA Nos.871,872,873,874,875,876,883,962,963,964,965&966of2015, Page20of23 2.[7] Pvt. Ltd., (ii) United Head Hunters Pvt. Ltd. and (iii) Wellset Pharma & DrugsPvt.Ltd.have been shown to be filing returns and being assessed on a regular basis. Some ofthem have been shown to be in existence even before the incorporation of the Assessee. Indeed the Revenue was unable to produce material to substantiate its case that the genuineness and creditworthiness of the investors and the source of the money received by the Assessee by way of investments in the AYs in question was not satisfactorily explained by the Assessees. Also, the ITAT riglitly distinguished the decision in CIT v. M/s.Nova Promoters andFinlease(P) Ltd.{supra)in its application to the facts ofthe present case.
29. The law concerning Section 68 ofthe Act has been discussed in some detail by this Court in its decision dated 2?"' November, 2015 in ITA No.234/2015{CIT v. Five Vision Promoters Pvt. Ltd.).In the said decision, reference has been-made to the decisions in CIT v. Lovely Exports(P)Ltd. 216 CTR 195(SC), the decision dated 2U^ Januaiy 2008 of the Supreme Courtin SLP(Civil)(CC)375 of2008(CIT v.DivineLeasing andFinance Ltd.)and decision dated 17^'' September 2012 ofthe Supreme Court in SLP (Civil)CC 15640 of2012(C/T v. KamdhenuSteel& AlloysLimited).In all the above three decisions the Supreme Courthad affirmed the corresponding decisions ofthis Court including CIT v. Divine Leasing and Finance Ltd. 299ITR 268. Reference was also made to the decisions ofthis Court in CI
V. Sophia Finance Ltd. (1994) 205 ITR 98(FB)(Del), CIT v. Dolphin
Canpack Ltd. 283 ITR 190, CIT v. Kamdhenu Steel & Alloys Ltd. 206 Taxman 254,Sarthak Securities Co.(P)Ltd. v.ITO 329ITR 110, CIT v. Nipun Builders aridDevelopers(2013)350ITR 407(Del)and CIT v. N.R. ITA N0S.S7I,872,873,874,875,876,883,962,963,964,965c& 966of2015 Page21 of23 2015:DHC:11140-DB i ' ■ ■ ' z-S Portfolio Pvt.Ltd.(2014)206DLT97(DB). 30..In sum,it was explained by this Court in CIT v. Five Vision Promoters Pvt. Ltd.{supra)that: "under Section 68 ofthe Act,the AO hasjurisdiction to undertake enquiries with regard to the amount credited in the books ofthe accounts ofan Assessee. This could be any sum whether in the form ofsale proceeds or-receipt of share capital money. First, the AO is to enquire whether the alleged shareholders in fact exist or not. The truthfulness ofthe assertion by the Assessee regarding the nature and the source ofthe credit in its books ofaccounts can be examined by the AO.Where the identity ofthe shareholders stands established and it is shown thatthey had in fact invested money in the purchase of the Assessee's shares, then the amount received would be regarded as capital. Where the Assessee offers no explanation at all or the explanation offered is unsatisfactory, the provision of Section 6o may be invoked." >1. When the impugned order ofthe ITAT is examined in the light ofthe law governing Section 68 ofthe Act,the Courtfinds thattheITAT was fully justified in coming to the conclusion that there exists no evidence to. establish that.there was any re-routing of the money collected by the Respondent-Companies.None ofthe shareholders denied having contributed I to their share capital. The Revenue has not been able to show why the decision ofthe Supreme Court in CIT v. Lovely Exports(P)Ltd. {suprc' does not apply to the facts and circumstances ofthe case.
32. The Court accordingly concludes thatin the present appeals the Revenue has not been able to show that the impugned decision of the ITAT in its ITA Nos.871,872,873,874,875,876,883,962,963,964,965&966of2015 Page22of23 2015:DHC:11140-DB analysis of the facts or application ofthe law governing Section 68 ofthe Act suffersfrom any legal infinnity.
33. No substantial question of law arises for consideraiioh from the impugned order ofthe ITAT vis-a-vis the Respondents/Assessees in ttiese appeals.
34. The appeals are accordingly dismissed but in the circumstances with no orders as to costs.
DECEMBER 15,2015 S.MURALIDHAR,J. VIBHU BAKHRU,J. b'nesh ITA Nos.871,872,873,874,875,876,883,962,963,964,965&966 of2015 Page 23of23