TMI Blog2013 (5) TMI 329X X X X Extracts X X X X X X X X Extracts X X X X ..... ntiary value of these on which the Tribunal has relied, ought to have been examined in the light of the stand taken by those companies in their assessment proceedings for the same assessment year. We have extracted a specimen letter written by the Director of Ethnic Creations Pvt. Ltd. wherein it has been admitted that the company carries on the business of providing accommodation entries for commission. Identically worded letters were written by the other companies to their respective assessing officer, which are all reproduced in the assessment order. It seems that the Tribunal has looked at only the evidence adduced by the assessee and has not adverted to the attempts made by the assessing officer in the course of the assessment proceedings to examine the evidence and discredit the same. Therefore the impugned order is set aside. The substantial questions of law are answered in favour of the revenue. The appeal is remitted to the Tribunal for being disposed of afresh. - ITA 263/2012 - - - Dated:- 28-2-2013 - S. Ravindra Bhat And R. V. Easwar,JJ. For the Appellant : Ms. Suruchi Aggarwal, Sr. Standing Counsel. For the Respondent : Mr. S. Krishnan, Advocate. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objections which were rejected by an order which was served on the assessee on 10.12.2008. On 20.12.2008, barely 10 days before the assessment was going to be barred by limitation, the assessee furnished the new addresses of the persons who subscribed to the share capital of the assessee-company. On account of the fact that hardly any time was left for the completion of the assessment, the assessing officer requested the assessee to produce the principal officers of the companies which allegedly subscribed to the share capital of the assessee-company to the extent of Rs.35 lakhs. The assessee, however, did not produce those persons but on 24.12.2008 sought to make its final submissions against the proposed additions of Rs.35 lakhs. 3. The assessing officer thereafter noted that the companies who subscribed to the share capital were established entry operators who gave accommodation entries to several persons and this fact was also admitted by them in a sworn statement filed before the investigation wing. In letters written to their respective assessing officers in connection with the assessment proceedings for the assessment year 2001-02, these companies admitted to have provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Polo Leasing Finance P. Ltd., the amount received by the assessee-company as share subscription was transferred to the account of the share subscriber by another company by name M. V. Marketing P. Ltd. in whose account cash was deposited on the same day. Similarly, amounts were transferred into the account of M/s. Polo Leasing Finance P. Ltd. from another company by name FNS Consultancy Ltd. Since there was no standing balance in this account, money was received by clearing cheque and then the proceeds were transferred to M/s. Polo Leasing Finance P. Ltd. to be further transferred to the assessee as share subscription. Monies were also transferred from the account of one Satwant Singh Sodhi to M/s. Polo Leasing Finance P. Ltd. to the assessee. 5. The assessing officer has brought out similarly the trail of money flowing into the bank accounts of the subscriber companies and sought to establish that the first transfer of monies was always preceded by an equivalent amount of cash deposited in the account of the transferor. He has also sought to establish that there are series of money transfers before the money goes into the bank account of the subscriber-company maki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reiterated that the shareholders did not appear before him despite a specific direction, that they did not respond to the summons issued under section 131 of the said Act and in these circumstances he could not accept the genuineness of the share subscriptions. 7. The assessee would appear to have questioned the sworn statement of the directors of the subscriber-companies submitted to the investigation wing of the income tax department and wanted to know whether such statements actually implicated the assessee. The response of the assessing officer to this, in the assessment order, was that these statements corroborated the accommodation entry business carried on by those companies and that when they have stated in the sworn statement as well as in the letters written to the respective assessing officer and that in this background it was not necessary that those companies should have implicated the assessee-company by name. For these reasons the assessing officer added the amount of Rs.35 lakhs under section 68 of the said Act as income from undisclosed sources. On appeal the CIT (Appeals), after noticing the facts, held that the assessing officer has not carried out any verifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while required of it. It failed to note that this is not a case which would fall within the parameters laid down by the Supreme Court in Lovely Exports (P) Ltd. (supra). In the case of Nova Promoters and Finlease P. Ltd. (2012) 342 ITR 169, a Division Bench of this Court made a distinction between the cases where the assessing officer makes no inquiry into the evidence/ material adduced by the assessee in support of the share subscription received by it and cases where an inquiry is made into the evidence/ material adduced by the assessee, in the course of which he finds that the assessee has no satisfactory explanation regarding the nature and source of the share capital. The former type of cases have also to be distinguished from cases where the department is in possession of some evidence and requires the assessee to explain the share capital in the light of such evidence and also carries out further inquiries and investigation which are sought to be blocked by the assessee. The following passage from Nova Promotors (supra) makes the distinction in the following manner: - The ratio of a decision is to be understood and appreciated in the background of the facts of that case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CIT v. Orissa Corporation [1986] 159 ITR 78 (SC) exemplifies the category of cases where no action is taken by the Assessing Officer to verify or conduct an enquiry into the particulars about the creditors furnished by the assessee, including their income-tax file numbers. In the same category fall cases decided by this court in CIT v. Dolphin Canpack [2006] 283 ITR 190 (Delhi), CIT v. Makhni and Tyagi P. Ltd. [2004] 267 ITR 433 (Delhi), CIT v. Antartica Investment P. Ltd. [2003] 262 ITR 493 (Delhi) and CIT v. Achal Investment Ltd. [2004] 268 ITR 211 (Delhi). To put it simply, in these cases the decision was based on the fundamental rule of law that evidence or material adduced by the assessee cannot be thrown out without any enquiry. The ratio does not extend beyond that. The boundaries of the ratio cannot be, and should not be, widened to include therein cases where there exists material to implicate the assessee in a collusive arrangement with persons who are selfconfessed "accommodation entry providers". Reference was also made on behalf of the assessee to the recent judgment of a Division Bench of this court in CIT v. Oasis Hospitalities P. Ltd. [2011] 333 ITR 119 (Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer in that case had not shown whether any link between them and the assessee existed. No enquiry had been made in this regard. Further, the assessee had not been confronted with the material collected by the investigation wing or was given an opportunity to cross-examine the persons whose statements were recorded by the investigation wing. 11. Again in a Division Bench judgment of this Court in CIT v. Fair Finvest Ltd., in ITA No.232/2012 dated 22.11.2012, has held as follows: - 8. The decision in this case is based on the peculiar facts which attract the ratio of Lovely Exports (supra). Where the assessee adduces evidence in support of the share application monies, it is open to the assessing officer to examine it and reject it on tenable grounds. In case he wishes to rely on the report of the investigation authorities, some meaningful enquiry ought to be conducted by him to establish a link between the assessee and the alleged hawala operators; such a link was shown to be present in the case of Nova Promoters Finlease (P) Ltd. (supra) relied upon by the revenue. We are therefore not to be understood to convey that in all cases of share capital added under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such company s principal officers. 13. In the aforesaid judgment this Court has brought out the reasons why it is necessary in certain circumstances for the assessee to ensure the attendance of the share subscriber-companies and these circumstances exist in the present case too. 14. In the present case the Tribunal, with respect, appears to have approached the matter rather superficially and mechanically. It ought to have adverted to the attempts made by the assessing officer to probe into the matter deeper by issuing notices/ summons to the subscriber-companies which evoked no response. It also failed to note that the assessee started participating in the assessment proceedings only from 02.12.2008, though the reassessment notice was issued in March, 2008. The conduct of the assessee is a matter to be taken note of in such cases. The assessee no doubt submitted documentary evidence to show that the companies which subscribed to its shares were income tax assesses and they had also prepared profit and loss account, balance sheet, etc. but the evidentiary value of these on which the Tribunal has relied, ought to have been examined in the light of the stand taken by those co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mine finally all questions of fact. The Tribunal must, in deciding an appeal, consider with due care all the material facts and record its finding on all the contentions raised by the assessee and the Commissioner in the light of the evidence and the relevant law.....................The Tribunal was undoubtedly competent to disagree with the view of the Appellate Assistant Commissioner. But in proceeding to do so, the Tribunal had to act judicially, i.e., to consider all the evidence in favour of and against the assessee. An order recorded on a review of only a part of the evidence and ignoring the remaining evidence cannot be regarded as conclusively determining the questions of fact raised before the Tribunal. 15. We are of the view that the Tribunal has not disposed of the appeal in the manner required by law. It is not taken into account the relevant material and the evidence which was brought on record by the assessing officer. Its findings are, therefore, vitiated and cannot be acted upon. 16. For the above reasons we set-aside the impugned order of the Tribunal and restore the appeal to its file to be disposed of afresh in accordance with law. Whatever observations we h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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