hcs 1 48.ia1349.15 IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1349 OF 2015 Konark Structural Engineering Pvt. Ltd. .. Appellant. Vs. Dy. Commissioner of Income Tax-9(2), & Anr. .. Respondents. Mr.Jitendra Singh for Appellant. Mr.Arvind Pinto for Respondent. CORAM : A.S. OKA & A.K. MENON, JJ. DATED : 5TH DECEMBER, 2017 P.C. 1. In this appeal under Section 260A of Income Tax Act, 1961 (for short said Act ), following questions questions of law have been pressed into service : (A) Whether Appellate Tribunal is right in law in reversing order of Ld. CIT (A) and upholding action of Respondent No.1 in making addition of share application money under section 68 of Act amounting to Rs.95,10,000/- ? (B) Whether Appellate Tribunal is justified in law in upholding action of Respondent No.1 in making addition of Rs.95,10,000/- under section 68 of Act without appreciating ::: Uploaded on - 05/01/2018 ::: Downloaded on - 06/01/2018 09:50:40 ::: 2 48.ia1349.15 that Appellant has proved identity, capacity and genuineness of transaction ? (C) Whether, in facts and circumstances of case, and in law, order of Tribunal is perverse as it is based on irrelevant and erroneous considerations while ignoring material and relevant considerations and, as such, is liable to be quashed ? 2. appellant assessee filed return of income for assessment year 2007-08 declaring total income at Rs.71,51,330/-. appellant is private limited company which is carrying on business as builders and developers. case of appellant was selected for scrutiny. Assessing Officer noticed that share capital of appellant had increased by amount of Rs.19,98,000/- and general reserve had increased on addition of share capital by amount of Rs.76,08,000/-. After being called upon, appellant submitted that list of 23 parties who had allegedly subscribed to its share capital and numbers of shares allotted to them. Assessing Officer while passing order dated 22nd December, 2009 noted that after giving further opportunity, assessee filed copies of acknowledgments of returns of income for assessment year 2007-08 in cases of 20 subscribers. Assessing Officer in assessment order recorded finding that almost all parties were new assessees in sense ::: Uploaded on - 05/01/2018 ::: Downloaded on - 06/01/2018 09:50:40 ::: 3 48.ia1349.15 that they had filed returns for first time. Secondly, it was found that most of them had income of Rs.1.25 lakhs and none of them had income above Rs.3 lakhs. It was also found that most of them were in early twenties. In paragraph 4.5 of assessment order, it is noted that notice/summons under Section 131 of Act were issued to 23 parties. It is pointed out that summons in case of 22 cases were unserved with remark that addressee was unavailable. Therefore, Assessing Officer recorded finding that there was complete absence of basic evidence to corroborate case of appellant - assessee. Therefore, Assessing Officer treated amount of Rs.95,10,000/- which was claimed by appellant/assessee as amount in lieu of equity share subscription as unexplained cash credit and same was added to total income of assessee. 3. Being aggrieved by order of Assessing Officer, appeal was preferred by appellant assessee before Commissioner of Income Tax (Appeals) [CIT (A)]. We may note here that assessment order was passed on 22nd December, 2009. Along with letter addressed to CIT (A), appellant purported to file affidavits of 23 persons affirmed before notary public. 4. CIT (A) passed order of remand and remand report dated 9th September, 2010 was submitted by Assessing Officer. Assessing Officer observed that sufficient opportunity ::: Uploaded on - 05/01/2018 ::: Downloaded on - 06/01/2018 09:50:40 ::: 4 48.ia1349.15 was granted by him during assessment proceedings to produce evidence. Assessing officer was, therefore, of view that application made by appellant - assessee under Rule 46 of Income Tax Rules, 1961 had no merit. Apart from this, Assessing Officer observed that franking made on all twenty three affidavits is dated 8th April, 2010 and affidavits have been affirmed before same notary public between 8th to 13th April, 2010. It is also mentioned that there was no change in addresses of these persons and addresses mentioned in affidavits were same as stated on share applications. Assessing Officer was of view that appellant has failed to establish identity of persons who filed affidavits and, therefore, even genuineness of claim made by same was not established. 5. CIT (A) proceeded to allow appeal for appellant assessee by deleting Rs.95,10,000/- as unexplained cash credit. Being aggrieved by said judgment and order, appeal was preferred by respondent revenue before Income Tax Appellate Tribunal (for short Tribunal ). By impugned judgment and order dated 17th September, 2014, appeal was allowed by setting aside order of first Appellate Authority and order of Assessing Officer was restored. 6. learned counsel appearing for appellant submitted that appellant discharged burden on him by producing ::: Uploaded on - 05/01/2018 ::: Downloaded on - 06/01/2018 09:50:40 ::: 5 48.ia1349.15 affidavits of 23 persons and if there was any doubt about genuineness of contents of said affidavits, Assessing Officer could have always issued summons to declarants. He submitted that Assessing Officer did not give any opportunity to appellant/assessee to procure presence of said 23 persons. He submitted that if Appellate Tribunal was inclined to hold that identity, genuineness and capacity of shareholders was not established by appellant, then order of remand ought to have been made to enable appellant to lead evidence by producing said persons for examination. He submitted that when appeal was pending before CIT (A), appellant was willing to procure presence of persons who had filed affidavits. He submitted that appeal may be admitted by this Court on substantial questions of law agitated by assessee. 7. We have given careful consideration to submissions. It is true that in remand report dated 9th September, 2010 Assessing Officer has come to conclusion that no case is made out by appellant for producing additional evidence. Assessing Officer in remand report observed that it was case of appellant that said twenty three persons were his business partners. He noted that when summonses under Section 131 of Act were issued to said persons, they were not available at given addresses. He observed that from declaration/ ::: Uploaded on - 05/01/2018 ::: Downloaded on - 06/01/2018 09:50:40 ::: 6 48.ia1349.15 affidavits, it appears that franking was done on all affidavits on 8th April, 2010 and were allegedly affirmed before notary public from 8th to 13th April, 2010. copies of said affidavits are annexed to memorandum of appeal and we find that said two observations made by Assessing Officer are correct on perusal of said affidavits. 8. In written response to remand report, appellant has not offered to procure presence of persons whose affidavits were filed by it. We have also perused findings of fact recorded by Appellate Tribunal. Appellate Tribunal observed that though opportunity was granted by Assessing Officer, appellant could not procure presence of said parties. It is observed that during pendency of appeal before first Appellate Authority, assessee filed affidavits of said persons and pleaded that due of requirement of work, they kept on changing their addresses. However, address mentioned in affidavits were same as addresses filed before Assessing Officer on which summonses under Section 131 were issued. Out of 23 persons, summonses issued to 22 were returned on ground that addressees was not available. Appellate Tribunal also noted that all said persons have their bank accounts only in Borivali branch of Vijaya Bank and all persons appear to have made cheque payments on 23rd August, 2006. It is specifically observed that all persons had made cheque payments by using ::: Uploaded on - 05/01/2018 ::: Downloaded on - 06/01/2018 09:50:40 ::: 7 48.ia1349.15 first leaf of cheque books issued to them. numbers of cheques are also mentioned by way of illustration. On basis of details of cheques, another finding of fact was recorded that said persons have been issued cheque books from same series and probably on same day. All those persons filed Income Tax returns for first time during relevant year. It is reiterated that when summonses were issued to these 23 persons, 22 were returned unserved. All these factual aspects have been examined in context of case of appellant that said persons were his business partners. specific finding of fact has been recorded that appellant failed to produce even single person before Assessing Officer despite specifically asked by Assessing Officer. 9. We may note here that even order dated 22nd December, 2009 passed by Assessing Officer records that repeated opportunities were granted to appellant to substantiate its case. However, basic evidence was not produced by appellant to corroborate its claim. 10. issue before authorities was of identity, genuineness and capacity of alleged shareholders. In facts of case it was not sufficient for appellant to have produced affidavits of said persons. It was incumbent upon him to establish identity of persons signing affidavits/declarations and their ::: Uploaded on - 05/01/2018 ::: Downloaded on - 06/01/2018 09:50:40 ::: 8 48.ia1349.15 genuineness and capacity as they had allegedly subscribed to shares. 11. There is one more aspect of matter. We have perused copies of affidavits/declarations annexed to memorandum of appeal. declarants are residing at various places in Mumbai Suburban District, Mira Bhayandar in Thane District and Vasai in Palghar District. However, all affidavits/declarations have been affirmed before same notary public Shri Deepak Malkani having office at Malad (West), Mumbai. Almost all declarants have been identified by same Advocate Mr.Ashok M.Pandya. More importantly, registration number of said declarations in notorial register maintained by notary public has not been mentioned on declarations/affidavits. 12. cheque numbers have been mentioned in said affidavits. dates of cheques mentioned in all affidavits are 23rd August, 2006 and cheques had been drawn on Vijaya Bank, Borivali branch. last digit of cheque numbers is 1 and that is how finding has been recorded that cheque books issued to all 23 persons were of same series and first leaf was used by all of them for allegedly making payment of subscription. findings of fact of Appellate Tribunal are completely borne out from record. As stated earlier, neither before CIT (A) nor before Appellate Tribunal, appellant offered to procure ::: Uploaded on - 05/01/2018 ::: Downloaded on - 06/01/2018 09:50:40 ::: 9 48.ia1349.15 presence of those 23 persons. Therefore, there is finding of fact recorded by Appellate Tribunal confirming observation of Assessing Officer that appellant -assessee had failed to establish creditworthiness of subscribers and even genuineness of transactions. 13. Hence, we find absolutely no merit in appeal and accordingly, appeal is dismissed. There will be no order as to costs. (A.K. MENON, J.) (A.S. OKA, J.) ::: Uploaded on - 05/01/2018 ::: Downloaded on - 06/01/2018 09:50:40 ::: Konark Structural Engineering Pvt. Ltd. v. Dy. Commissioner of Income-tax-9(2), & Anr