TMI Blog2011 (12) TMI 394X X X X Extracts X X X X X X X X Extracts X X X X ..... o make thorough probe of the nature indicated above before it could nail the assessee and fasten the assessee with such a liability under Section 68 and 69 of the Act. the share-applicants could not be examined by the AO, since they were existing on the file of the Income Tax Department and their income-tax details were made available to the AO, it was equally the duty of the AO to have taken steps to verify their assessment records and if necessary to also have them examined by the respective AOs having jurisdiction over them (share-applicant), which has not been done by him - It is settled proposition of law that the information gathered behind the back of the assessee cannot be used against him unless until an opportunity of rebutting the same is given to the assessee. It is against the principle of natural justice - Decided in favor of the assessee - IT APPEAL NOS. 1324 OF 2008, 972 OF 2009, 29, 1710 AND 1228 TO 1230 OF 2010 AND 8, 339, 613 AND 726 OF 2011 - - - Dated:- 23-12-2011 - A.K. SIKRI, AND M.L. MEHTA, JJ. Kiran Babu, Ms. Rashmi Chopra, N.P. Sahni, Sanjeev Sabharwal, Sanjeev Rajpal and Kamal Sawhney for the Appellant. Ajay Vohra, Ms. Kavita Jha, Somnath S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year." 3. As per the provisions of this Section, in case the assessee has not been able to give satisfactory explanation in respect of certain expenditure or where any sum is found credited in the books of accounts, the AO can treat the same as undisclosed income and add to the income of the assessee. The assessee is required to give satisfactory explanation about the "nature and source" of such sum found credited in the books of accounts. 4. It is a common knowledge that insofar as the companies incorporated under the Indian Companies Act are concerned, whether private limited or public limited companies, they raise their capital through shares, though the manner of raising the share capital in the private limited companies on the one hand and public limited companies on the other hand, would be different. In the case of private limited companies, normally, the shares are subscribed by family members or persons known/close to the promoters. Public limited companies, on the other hand, generally raise public issue inviting general pub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l pertaining to the identity as well as financial worth of each of its subscribers. The Company must, however, maintain and make available to the AO for his perusal, all the information contained in the statutory share application documents. In the case of private placement the legal regime would not be the same. A delicate balance must be maintained while walking the tightrope of Section 68 and 69 of the IT Act. The burden of proof can seldom be discharged to the hilt by the assessed; if the AO harbours doubts of the legitimacy of any subscription he is empowered, nay duty-bound, to carry out thorough investigations. But if the AO fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the Company." 7. Taking note of the earlier judgment of Full Bench of this Court in the case of Commissioner of Income Tax v. Sophia Finance Ltd. [(1994) 205 ITR 98], the Court observed that the Full Bench had enunciated that Section 68 reposes in the Income-tax Officer or AO the jurisdiction to inquire from the assessed the nature and source of the sum found credited in its Books of Accounts. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubscriber. (4) If relevant details of the address or PAN identity of the creditor/subscriber are furnished to the Department along with copies of the Shareholders Register, Shared Application Forms, Share Transfer Register etc. it would constitute acceptable proof or acceptable Explanation by the assessed. (5) The Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices; (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessed nor should the AO take such repudiation at face value and construe it, without more, against the assessed. (7) The Assessing Officer is duty-bound to investigate the creditworthiness of the creditor/subscriber the genuineness of the transaction and the veracity of the repudiation." 10. By this common judgment, the Division Bench decided these appeals of which one appeal related to Lovely Exports P. Ltd. . Against the said judgment, Special Leave Petition was preferred, which was dismissed by the Supreme Court vide orders dated 11.01.2008 and is reported as Commissioner of Income Tax v. Lovely E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discredit the documents produced by the assessee on the aforesaid aspects, there has to be some cogent reasons and materials for the AO and he cannot go into the realm of suspicion. 15. At this stage, we would like to refer to the judgment of the Bombay High Court in the case of CIT v. M/s Creative World Telefilms Ltd. (in ITA No.2182 of 2009 decided on 12.10.2009). The relevant portion of this order is reproduced below: "In the case in hand, it is not disputed that the assessee had given the details of name and address of the shareholder, their PA/GIR number and had also given the cheque number, name of the bank. It was expected on the part of the Assessing Officer to make proper investigation and reach the shareholders. The Assessing Officer did nothing except issuing summons which were ultimately returned back with an endorsement 'not traceable'. In our considered view, the Assessing Officer ought to have found out their details through PAN cards, bank account details or from their bankers so as to reach the shareholders since all the relevant material details and particulars were given by the assessee to the Assessing Officer. In the above circumstances, the view taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt passed in ASK Brothers Ltd. v. Commissioner of Income Tax , wherein this Court following the judgments of the Supreme Court in the case of Commissioner of Income Tax v. Lovely Exports (P) Ltd. reported in (20089) 216 CTR (SC 195) and also in the case of Commissioner of Income Tax v. Steller Investment Ltd. reported in (2001) 251 ITR 263 (SC) has ruled that it not for the assessee to place material before the Assessing Officer in regard to creditworthiness of the shareholders. If the company has given the addresses of the shareholders and their identity is not in dispute, where they were capable of investing, the assessing officer shall investigate. It is not for the assessee company to establish but it is for the department to enquire with the investor about their capacity to invest the amount in the shares. Therefore, we are of the view that the substantial questions of law framed in this appeal are to be answered against the revenue and in favour of the assessee. Accordingly, this appeal is dismissed." 18. Rajasthan High Court had an occasion to deal with the submission of the Revenue predicated on Benami transactions in the case of Commissioner of Income Tax v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income Tax v. P. Mohanakala [(2007) 291 ITR 278 (SC)]. In that case, the assessee had received foreign gifts from one common donor. The payments were made to them by instruments issued by foreign banks and credited to the respective accounts of the assessees by negotiations through bank in India. The evidence indicated that the donor was to receive suitable compensation from the assessees. The AO held that the gifts though apparent were not real and accordingly treated all those amounts which were credited in the books of account of the assessee, as their income applying Section 68 of the Act. The assessee did not contend that even if their explanation was not satisfactory the amounts were not of the nature of income. The CIT(A) 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 AO and the CIT(A). 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nother judgment of the Division Bench of this Court in the case of Commissioner of Income Tax v. Value Capital Services P. Ltd. [(2008) 307 ITR 334 (Delhi)]. The Court in that case held that the additional burden was on the Department to show that even if share application did not have the means to make investment, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. In the absence of such findings, addition could not be made in the income of the assessee under Section 68 of the Act. 23. It is also of relevance to point out that in Commissioner of Income Tax v. Stellar Investment Ltd. [(1991) ITR 287 (Del.)] where the increase in subscribed capital of the respondent company accepted by the ITRO and rejected by the CIT on the ground that a detailed investigation was required regarding the genuineness of subscribers to share capital, as there was a device of converting black money by issuing shares with the help of formation of an investment which was reversed by the Tribunal, this Court held that even if it be assumed that the subscribers to the increased share capital wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was paid by cheque only on the date on which the amount was credited to the account of the company. It was for the assessee to discharge this burden " (B) Calcutta High Court in CIT v. Kundan Investment Ltd. [2003] 263 ITR 626/130 Taxman 689 held as under:- " .Under Section 68, the Income-tax Officer is empowered to lift the veil of corporate identity and find out as to whether the apparent is real. It is the assessee on whom the onus lies. Unless sufficient materials are produced, the onus does not shift on the Revenue. But once the materials are scrutinized and the result of the scrutiny is communicated to the assessee, the onus shifts from the Revenue to the assessee. Then the assessee has to take appropriate steps for proving its case. Unless there are sufficient materials after such communication, produced by the assessee, the Income-tax Officer can do no further." (C) This Court in CIT v. Sophia Finance Ltd. [1994] 205 ITR 98/[1993] 70 Taxman 69 dealt with the issue as under :- " ..As we read Section 68 it appears that whenever a sum is found credited in the books of account of the assessee then, irrespective of the colour or the nature of the sum re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese circumstances, we are of the view that simply because the amount is credited in the books of the firm in the partner's capital account it cannot be said that it is not the undisclosed income of the firm and in all cases it has to be assessed as an undisclosed income of the partner alone. In these circumstances, we are of the view that the Tribunal was not justified in holding that the cash credits of Rs. 11,502 in the account of Shri Kishorilal, one of the partners, could not be assessed in the hands of the firm and in deleting the same. Since the matter was not considered by the Tribunal on the merits, the Tribunal would be free to hear the arguments of both the parties and decide afresh in view of the observations made above. Accordingly, the reference is answered in favour of the Revenue and against the assessee." (D) CIT v. Korlay Trading Co. Ltd. [1998] 232 ITR 820 (Cal.) was cited by the Revenue to press the following:- " .There should be a genuine transaction. The income tax file number has been given but that is not enough to prove the genuineness of the cash credit. Admittedly, there is no affidavit to this effect, by the creditor, on record. Considering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rporated under the Indian Companies Act, either public limited or private limited companies. Since these companies are incorporated under the provisions of Indian Companies Act, their identity, at least on papers, is established. Here, they are assessed to income tax as well. These companies have PAN numbers and are filing regular income tax returns. The assessee companies which have received share applicant money from such applicants have produced documents in the form of PAN, income tax returns, copies of the bank accounts through which the funds were transferred by way of credit entries, deposits in the accounts of such applicants, etc. by furnishing such kinds of proofs/documents, the assessees have been able to discharge their initial burden. Notwithstanding the same, as per the AO(s), the applicants were bogus companies which were only paper companies and there is no real existence. In certain cases, it was also found that just before issuing the cheques by the applicants towards share applicant money, cash was deposited in their bank accounts. Except in ITA No.726/2011, in other cases, the AOs also relied upon the investigation report of Director of Income Tax (Investigation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applicants depositing cash in their accounts before investing by cheques. 8. AO's remarks "not a genuine tax payer" is the Department and the share applicant in which the assessee has not role to play. 9. The assessee has not means to produce the shareholders physically. 10. The postal remarks on the communications to the share applicants were not made available to the assessee company. 11. The report of the Directorate is one sided. 12. The proposal of the AO to treat the credits received as share application money runs contrary in law to the judgment of the Hon'ble Supreme Court in the case of M/s. Steller Investments Ltd. (115 Taxman Page 99)." 9. The AO was not convinced with this explanation. He was of the view that though contentions appeared good theoretically, but the assessee had miserably failed to discharge burden, in the background of the facts on record, in totality. He maintained that the companies were bogus, as they were not found at the existing address and the cash was also deposited by these companies just before issuing the cheques. The fact that the assessee had showed its inability to produce them was also viewed against the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d appeal was allowed following the judgment of the Apex Court in the case of CIT v. Lovely Exports (P) Ltd. [2008] 216 CTR 195 and CIT v. Divine Leasing and Finance Ltd. [2008] 299 ITR 268/[2007] 158 Taxman 440 of this Court. The entire discussion can be traced in para 3 of the impugned order: "3. We have considered the rival submission. A perusal of the order of the Hon'ble Supreme Court in the case of Divine Leasing and Finance Ltd. referred to supra is in regard to SLP filed by the Revenue against the order of Hon'ble Jurisdictional High Court and the Hon'ble Supreme Court has specifically with a speaking order dismissed the SLP. The Hon'ble Supreme Court in the various decisions referred to by the Ld. AR has categorically held that the addition in regard to the share capital cannot be treated as the undisclosed income of the assessee if the share application money is received by the assessee company from alleged bogus shareholders whose names are given to the AO. Further, the Hon'ble Supreme Court has categorically held that the Revenue is free to proceed to re-open the individual assessment of such alleged bogus shareholders. The decision of the Hon'ble Jurisdictiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lain the source and receipt of money. According to the assessee, he had given the required information to explain the source and was not obligated to prove source of the money. It is the submission of the assessee that even in case there is some doubt about the source of money in giving into coffers of the share applicants which they invested with the assessee, it would not automatically follow that the said money belongs to the assessee and becomes unaccounted money. According to us, the assessee appears to be correct on this aspect. We feel that something more which was necessary and required to be done by the AO was not done. The AO failed to carry his suspicious to logical conclusion by further investigation. After the registered letters sent to the investing company had been received back undelivered, the AO presumed that these companies did not exist at the given address. No doubt, if the companies are not existing, i.e., they have only paper existence, one can draw the conclusion that the assessee had not been able to disclose the source of amount received and presumption under Section 68 of the Act for the purpose of addition of amount at the hands of the assessee. But, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oke Section 68. Once must not lose sight of the fact that it is the Revenue which has all the power and wherewithal to trace any person. Moreover, it is settled law that the assessee need not to prove the "source of source". (Emphasis supplied) 16. We are conscious of the malice of such kind of pernicious practice which is prevalent. In Divine Leasing Finance Ltd. ( supra ), this Court had eloquently highlighted the same in the following manner: "There cannot be two opinions on the aspect that the pernicious practice of conversion of unaccounted money through the masquerade or channel of investment in the share capital of a company must be firmly excoriated by the Revenue. Equally, where the preponderance of evidence indicates absence of culpability and complexity of the assessee it should not be harassed by the Revenue's insistence that it should prove the negative. In the case of a public issue, the company concerned cannot be expected to know every detail pertaining to the identity as well as financial worth of each of its subscribers. The company must, however, maintain and made available to the Assessing Officer for his perusal, all the information contained in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... free to proceed to reopen the individual assessment of such alleged bogus shareholders in accordance with the law. That was precisely the observation of the Supreme Court in Lovely Export (P.) ( supra ) which holds the fields and is binding. 19. In conclusion, we are of the opinion that once adequate evidence/material is given, as stated by us above, which would prima facie discharge the burden of the assessee in proving the identity of shareholders, genuineness of the transaction and creditworthiness of the shareholders, thereafter in case such evidence is to be discarded or it is proved that it has "created" evidence, the Revenue is supposed to make thorough probe of the nature indicated above before it could nail the assessee and fasten the assessee with such a liability under Section 68 and 69 of the Act. 20. During the arguments, we had posed these queries. Learned counsel appearing for the Revenue understood the limitation of their case. For this reason, a fervent plea was made that this case be remitted back to the AOs to enable him to make further investigation. 21. However, in the facts and circumstances of these cases, it would be difficult to give such an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the additions are sustainable and there is adequate material to support the same if not the addition has to be deleted. At that stage, the tribunal would not order further inquiry. It is to be kept in mind that the AO is prosecutor as well as adjudicator and it is for the AO to collect sufficient material to make addition. There may be exceptional circumstances in which such an inquiry can be ordered, but normally this course is not resorted to. 22. In the facts of these cases, where the appeals relate to the assessment years, which are of 7-8 years old or even more and going by the nature of evidence which is required, it may not be apposite to make such an order. 23. We had taken ITA No.972 of 2009 as the lead case and the facts situation in all other appeals of the Revenue is almost similar and therefore, it may not be necessary to deal with these cases individually. ITA 972/2009, ITA 29/2010, ITA 1710/2010, ITA 8/2011 and ITA 339/2011 are accordingly dismissed. ITA No.726 of 2011 24. Insofar as this appeal is concerned, the facts in brief are that the respondent assessee is a private limited company incorporated on 27.4.2004 under the Companies Act, 1956 to carr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en confronted with these reports. The assessee also argued that the AO brushed aside the voluminous evidence furnished to establish that the shareholders are corporate entities and duly assessed to tax and money had been received by account payee cheques. The AO had neither examined the assessment records of shareholders and not the ROC records of the shareholders. In fact, no summons were even issued to the bankers of the subscribing companies. In view thereof, addition was made arbitrarily and was, thus, in disregard of the statutory provisions of law. It was also argued that in the remand report, the AO did not dispute the fact that the notices sent under Section 131 of the Act to the Directorate of the investing companies were duly served. It was pointed out that the AO had made adverse comments on "physically unavailability" of the three parties and in the report in respect of remaining 14 parties, the AO never adversely commented about their availability or otherwise. It was further argued that in any case, even those three shareholder companies had duly confirmed having put in share application money and also confirmed that they had filed income tax return for the Assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord that the AO had made addition on account of unexplained credits under Section 68 of the Act in the sum of Rs. 1.52/- Crores and Rs. 3,04,000/- on account of commission for obtaining accommodation entry. It was made on the basis of information received from the Investigation Wing pursuant to the statements recorded from Shri Mukesh Gupta, Shri Rajan Jassal, Shri S.P. Singh and Shri Mukesh Garg. 31. In appeal, the CIT(A) set aside the order of the AO and deleted the addition. Before doing so, the CIT(A) had called for the remand report. The CIT(A) recorded that the AO had himself observed in the assessment order as well as in the remand report that during the course of the assessment proceedings, following particulars/details were furnished by the assessee: "( a ) Confirmation from shareholders containing the complete details of amount invested, cheque number, date, bank particulars, PAN: ( b ) Copy of acknowledgement of Income Tax Return of shareholders: ( c ) Copy of Bank Statement of shareholders reflecting the transaction:" 32. On this basis, CIT (A) observed that the assessee had discharged its onus under Section 68 of the Act and the AO had not made furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information gathered behind the back of the assessee cannot be used against him unless until an opportunity of rebutting the same is given to the assessee. It is against the principle of natural justice. Reliance is placed on the decision of Hon'ble Supreme Court in case of Prakash Chand Nahta v. Union of India (2001) 247 ITR 274 in support of the proposition that cross-examination of the witness is must, before the A.O. relies on the statement of the witness for making addition. Reliance is also place on the decision of Allahabad High Court in the case of Nathu ram Premchand v. CIT (1963) 49 ITR 561, wherein the Hon'ble court explained that it was the duty of the Assessing Officer to enforce the attendance of a witness, if his witness is material in exercise of his powers under order 19, r, 10 of CPC and where the officer does not do so, no inference can be drawn against the assessee, Reliance is also placed on the decision of the jurisdictional High Court i.e. Delhi High Court in Commissioner of Income Tax v. Pradeep Kumar Gupta and Vijay Gupta (2008) 303 ITR 95 (Delhi) wherein it was held hat reopening of assessment is not permissible on mere adverse statements fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire Assessment Orders. At the highest, the High Court should have directed the Assessing Officer to grant an opportunity to the assessee to cross-examine the concerned witness. Be that as it may, we are of the view that, even on this particular aspect, the assessee could have gone in appeal to CIT (Appeals). The assessee has failed to avail the statutory remedy. In the circumstances, we are of the view that the High Court should not have quashed the assessment proceedings vide impugned order. Consequently, the impugned order is set aside. Liberty is granted to the assessee to move CIT (Appeals). It is made clear that the assessee herein will move the CIT (Appeals) within a period of six weeks from today." 35. Accordingly, we find nothing wrong in the approach of the Tribunal in remitting the case back to the AO in the instant case. This appeal is accordingly dismissed. ITA Nos.1228, 1229, 1230/2010 36. These three appeals pertain to two assessment years. There are two appeals in respect of Assessment Year 2001-02 and one appeal in respect of Assessment Year 2002-03. The assessee filed two appeals in respect of Assessment Year 2001-02 and one is on merit and other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns. He also held in Para 4.2. (a) that the AO has not brought anything on record to dispute the facts/details filed by the appellant. 40. The matter was carried before the Tribunal by the Revenue. The assessee also field the Cross-Objection against the issuance of the notice under Section 148 of the Act dated 28.3.2008. The Tribunal vide its order dated 09.10.2009 dismissed the Cross-Objection on the ground that the reason recorded by the AO have the substantive satisfaction and adequate material to belief the escapement of the income in the hands of the appellant and the in the appeal of Revenue, restored the matter back to the file of the AO on the ground that the facts of the case needs to be investigated by the AO. While upholding the validity of reopening, the Tribunal relied on the decision of the Supreme Court in the case of Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P) Ltd. [2007] 291 ITR 500/161 Taxman 316. 41. It is under these circumstances, these appeals are filed for these assessment years. We shall first take up the facts regarding validity of notice under Section 148 of the Act. Learned counsel for the assessee argued that this notice was admittedly is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s escaped assessment, which is required to be assessed to tax under the provision of Section 147 of the I.T. Act, 1961." 44. It is clear from the above that the AO acted mechanically on the information supplied by the Directorate of Income Tax (Investigation) without applying his own mind. He did not even care to see the apparent mistake in the particulars where three entries were repeated twice each. Almost on identical facts, a Division Bench of this Court set aside such a notice under Section 147/148 of the Act in the case Sarthak Securities Co. (P.) Ltd. v. ITO [2010] 329 ITR 110/195 Taxman 262 (Delhi). After taking note of various judgments delineating the scope of Section 148 of the Act as well as law regarding undisclosed income under Section 68 of the Act, the Court held that: "The obtaining factual matrix has to be tested on the anvil of the aforesaid pronouncement of law. In the case at hand, as is evincible, the assessing officer was aware of the existence of four companies with whom the assessee had entered into transaction. Both the orders clearly exposit that the assessing officer was made aware of the situation by the investigation wing and there is no ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant ward. These three sentence are followed by the following sentence, which is the concluding portion of the so-called reasons:- "Thus, I have sufficient information in my possession to issue notice u/s 148 in the case of M/s SFIL Stock Broking Ltd. on the basis of reasons recorded as above." 10. From the above, it is clear that the Assessing Officer referred to the information and the two directions as "reasons" on the basis of which he was proceeding to issue notice under Section 148. We are afraid that these cannot be the reasons for proceeding under Section 147/148 of the said Act. The first part is only an information and the second and the third parts of the beginning paragraph of the so-called reasons are mere directions. From the so-called reasons, it is not at all discernible as to whether the Assessing Officer had applied his mind to the information and independently arrived at a belief that, on the basis of the material which he had before him, income had escaped assessment. Consequently, we find that the Tribunal has arrived at the correct conclusion on facts. The law is well settled. There is no substantial question of law which arises for our consideration. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iving his approval. The reasons recorded reflect that the Assessing Officer did not independently apply his mind to the information received from the Director of Income-Tax (Investigation) and arrive at a belief whether or not any income had escaped assessment. 16. It may be noted here that a company by the name of Swetu Stone Pvt. Ltd. had applied for and was allotted shares in the petitioner company on payment by cheque of Rs. 5 lacs. As noticed above, in the Annexure the name of the company/account holder is mentioned as Swetu Stone PV. The same is also mentioned in the undated reasons mentioned above. 17. In the counter affidavit it is stated that M/s Swetu Stone Pvt. Ltd. had applied for allotment of shares worth Rs. 5 lacs and the same were allotted by the petitioner. It is further stated that statements of Mahesh Garg and Shubhash Gupta were recorded by the Director of Income-Tax (Investigation) and on the basis of the statements they have come to the conclusion that the said persons were entry operators. Copy of the statements of Mahesh Garg and Shubhash Gupta have not been placed on record by the respondent. The petitioner, has, however, enclosed copy of statements of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dently arrived at a belief on the basis of material which he had before him that the income had escaped assessment. In our considered opinion, the decision rendered therein is not applicable to the factual matrix in the case at hand. In the case of Sarthak Securities Co. Pvt. Ltd. ( supra ), the Division Bench had noted that certain companies were used as conduits but the Assessee had, at the stage of original assessment, furnished the names of the companies with which it had entered into transaction and the assessing officer was made aware of the situation and further the reason recorded does not indicate application of mind. That apart, the existence of the companies was not disputed and the companies had bank accounts and payments were made to the Assessee company through the banking channel. Regard being had to the aforesaid fact situation, this Court had interfered. Thus, the said decision is also distinguishable on the factual score." 18. The facts indicated above do not show that M/s Swetu Stone Pvt. Ltd. is a non-existing and a fictitious entity/person. Decision in AGR Investment Limited ( supra ), therefore, does not help the case of the respondent. 19. For the rea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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