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September, 27th 2014

+                  INCOME TAX APPEAL NO. 320/2012

                                          Reserved on: 17th July, 2014
%                                  Date of Decision: 25th August, 2014

        COMMISSIONER OF INCOME TAX               ..... Appellant
                Through   Ms. Suruchi Aggarwal, Sr. Standing


         M/S NAVODAYA CASTLES PVT LTD.         ..... Respondent
                 Through Mr. Ved Jain and Mr. Pranjal
                         Srivastava, Advocates.



        Revenue in this appeal, which relates to assessment year 2002-

03, has raised the following substantial question of law:-

               "Whether the ITAT fell into error in upholding
           the deletion of Rs.54 lakh, which was directed to be
           added back by virtue of section 68 of the Income
           Tax Act on the ground that assessee has discharged
           the onus of proving the identity and credit-
           worthiness of the share subscriber and the
           genuineness of the subscription?"

ITA No. 320/2012                                     Page 1 of 20
2.      The appeal arises out of the impugned order dated 31st October,

2011, passed by the Income Tax Appellate Tribunal, upholding the

order passed by the Commissioner of Income Tax (Appeals) deleting

addition of Rs.54,00,000/- made under Section 68 of the Income Tax

Act, 1961 (Act, for short), by the Assessing Officer on account of share


3.      The assessee, a company, had filed their return of income for the

assessment year 2002-03 declaring loss of Rs.1,58,035/- on 20th

October, 2002, which was processed under Section 143(1) of the Act.

Subsequently, on the basis of a report submitted by the Investigation

Wing that the assessee was a recipient of accommodation entries in

form of share application money/share capital/share premium, notice

under Section 147 read with Section 148 of the Act was issued and

served on 25th March, 2009. The assessee, in response, pleaded that

the return filed earlier under Section 139 (1) on 20 th October, 2002,

may be considered as a return, filed pursuant to the said notice. In

response to the assessee's letter dated 18th April, 2009, reasons

recorded for issue of notice under Section 147/148, were

communicated to the respondent assessee on 2nd September, 2009.

ITA No. 320/2012                                     Page 2 of 20
4.      Authorized representative of the assessee appeared on 9 th

September, 2009, and sought adjournment for providing documents,

evidence etc. in response to the notice under Section 143(2), which was

issued on 2nd September, 2009.       The case was adjourned to 11th

September, 2009, but no one attended the proceedings and belatedly on

14th September, 2009, request for adjournment was made on the

ground that authorized representative was ill. To give further

opportunity, proceeding was adjourned to 22nd September, 2009, and

other details were sought. On 22nd September, 2009, again request for

adjournment was made. On the said date, a questionnaire along with

notice under Sections 142(1) and 143(2) was issued, fixing the hearing

on 8th October, 2009. On 8th October, 2009, authorized representative

of the respondent-assessee once again requested for time on the ground

that the requisite information was under preparation/compilation. The

assessee was required to furnish details of shareholders who were

allotted shares in the year under consideration, their confirmations,

copy of the income tax returns, bank accounts, copy of share certificate

issued, allotment letter etc. The case was adjourned to 22 nd October,

2009, but the said hearing yet again remained unattended. Belatedly,

on 17th November, 2009, part information was furnished by the

ITA No. 320/2012                                    Page 3 of 20
     authorized representative.                        Further details were required to be


     5.        On 17th November, 2009, the assessee raised objection to re-

     opening and submitted that reasons for re-opening were merely

     surmises and conjectures.                         It was stated that the five amounts

     aggregating to Rs. 47,00,000/-, which were mentioned twice in the list

     prepared by the Investigation Wing, did not relate them. However, the

     assessee accepted that they had received six amounts aggregating to

     Rs.54,00,000/- as per the details given below:-

 Bene-     Bene- Ficiary Valueof     lnstru Date On        Name of a/c      Bank         Branch of     A/c No. of
 Ficiary   Bank Branch Entrytaken   - ment Which            Account         from        entry giving     Entry
  Bank                     Entry                             which          Bank          giving
 Name.                              Which taken         Holder of Entry     entry                       Account.
                                    Entry                      Giving       given

 HDFC        Rejender 700000        972521   7.3.02      Sekhawati           SBP           Daryaganj     50111
  Bank        Nagar                                       Finance
             Mkt.,ND                                       P.Ltd.

HDFC           Old    1000000                13.3.02    D.K.Ispat     &      SBP                  -      50090
             Rajender                                     Timber Ltd.                      do-
            Nagar, ND

HDFC           --do--   650000               13.3.02     Kuberso Sales       SBP                  -      50084
                                                            P.Ltd.                         do-

HDFC           --do--   1200000              14.3.02         Dinanath                  S          -      50103
                                                            Luhariwal         BP           do--
                                                          Spinning Mills

HDFC       -do--        850000      33834    16.3.02      Technocom        Innovatiy       Wazirpur       220
                                                        Associates P.Ltd. e

     ITA No. 320/2012                                                                  Page 4 of 20
HDFC       --do--     1000000         18.3.02   Chintpuri Credits   SBP         DG       50058

           Total      5400000

   6.       The assessee did not appear in the proceedings held on 25 th

   November, 2009. However, the Assessing Officer wrote a detailed

   questionnaire for information and compliance and fixed the hearing on

   2nd December, 2009.

   7.      Summons under Section 131 of the Act were sent to the alleged

   shareholders and they were asked to furnish details on 10th December,

   2009. Directors/Principal officers were required to personally come

   and depose. The summons, as per the assessment order, were received

   back unserved.               At the same time, the assessee filed details and

   confirmations of the alleged share capital. Earlier on 8th December,

   2009, a detailed show cause notice was issued, fixing the hearing on

   14th December, 2009.                The assessee was asked to produce the

   shareholders along with their books of accounts to substantiate its

   claim of genuineness of the cash credits. In fact on 10th December,

   2009, authorized representative had appeared and he was apprised that

   the summons issued to the shareholders under Section 131 had been

   received back unserved in five cases and he was requested to provide

   the present postal address of the parties.                       In the meanwhile, the

   ITA No. 320/2012                                                       Page 5 of 20
Assessing Officer managed to get hold of the bank statements of the

shareholders, who had allegedly made deposits by way of cheques and

pay orders. The assessment order specifically records that huge cash

deposits in lacs were being regularly deposited in the said accounts and

then pay orders/cheques were issued to the respondent assessee.

8.      On 14th December, 2009, authorized representative appeared and

stated that the assessee was unable to produce directors or principal

officers of the six shareholder companies pleading that they were not

shareholders now and seven years had passed since the transactions

took place. The assessment order records and mentions about the

transactions recorded in the bank accounts of the shareholder/entry

operator companies to show and establish that there was immediate

deposit of cash and then issue of cheques. It was further mentioned

that these companies were under control of one Mahesh Garg and his

group, who were operating various accounts. The Assessing Officer

made addition of Rs.54,00,000/- under Section 68 of the Act and

Rs.1,08,000/- as commission paid for procuring the said shares being

2% of Rs.54,00,000/-.

9.      Commissioner of Income Tax (Appeals) deleted the aforesaid

additions on merits. However, he upheld the issuance of notice under

Section 147/148 of the Act. He observed that the respondent assessee

ITA No. 320/2012                                    Page 6 of 20
had submitted various letters/documents in support of genuineness of

the transactions towards share capital subscribed, but this was rejected

by the Assessing Officer without adducing even a single instance of

infirmity and shortcoming. The said evidence was in the form of share

application forms, copy of bank statements of the share subscribers

from where the share application amount was paid, confirmation of the

companies towards investment in share capital, certificate of

incorporation with copy of memorandum and articles of association,

copy of PAN card, ITR etc. Thus, it was held that the assessee was

able to prove the identity of the shareholders, genuineness of the

transactions and there was no room for doubt and suspicion. The

Assessing Officer, it was observed, had not made any inquiries

regarding the fact that assessee had been given accommodation entries

and had routed their undisclosed income in the guise of share

application money. Reference was made to several decisions of the

Delhi High Court in support.

10.     Revenue preferred an appeal before the tribunal and cross-

objections were filed by the assessee. Appeal of the Revenue has been

dismissed. The cross objections filed by the respondent assessee to re-

opening were disposed of as infructuous, observing that they have

become academic and did not require adjudication.

ITA No. 320/2012                                    Page 7 of 20
11.     We have heard the Senior Standing counsel for the Revenue,

who has relied upon decisions of the Delhi High Court in

Commissioner of Income Tax Vs. Nova Promoters and Finlease (P)

Ltd. [2012] 342 ITR 169 (Delhi), Commissioner of Income Tax Vs.

N.R. Portfolio Pvt. Ltd., 206 (2014) DLT 97 (DB) (Del) and

Commissioner of Income Tax-II Vs. MAF Academy P. Ltd., 206

(2014) DLT 277 (DB) (Del). The aforesaid decisions mentioned above

refer to the earlier decisions of Delhi High Court in Commissioner of

Income Tax Vs. Sophia Finance Ltd., [1994] 205 ITR 98 (FB)(Delhi),

CIT Vs. Divine Leasing and Finance Limited [2008] 299 ITR 268

(Delhi) and observations of the Supreme Court in CIT Vs. Lovely

Exports P. Ltd. [2008] 319 ITR (St.) 5 (SC).

12.     The main submission of the learned counsel for the assessee is

that once the assessee had been able to show that the shareholder

companies were duly incorporated by the Registrar of Companies, their

identity stood established, genuineness of the transactions stood

established as payments were made through accounts payee

cheques/bank account; and mere deposit of cash in the bank accounts

prior to issue of cheque/pay orders etc. would only raise suspicion and,

it was for the Assessing Officer to conduct further investigation, but it

ITA No. 320/2012                                     Page 8 of 20
did not follow that the money belonged to the assessee and was their

unaccounted money, which had been channelized.

13.     As we perceive, there are two sets of judgments and cases, but

these judgments and cases proceed on their own facts. In one set of

cases, the assessee produced necessary documents/evidence to show

and establish identity of the shareholders, bank account from which

payment was made, the fact that payments were received thorough

banking channels, filed necessary affidavits of the shareholders or

confirmations of the directors of the shareholder companies, but

thereafter no further inquiries were conducted. The second set of cases

are those where there was evidence and material to show that the

shareholder company was only a paper company having no source of

income, but had made substantial and huge investments in the form of

share application money. The assessing officer has referred to the bank

statement, financial position of the recipient and beneficiary assessee

and surrounding circumstances.      The primary requirements, which

should be satisfied in such cases is, identification of the

creditors/shareholder, creditworthiness of creditors/shareholder and

genuineness of the transaction. These three requirements have to be

tested not superficially but in depth having regard to the human

probabilities and normal course of human conduct.

ITA No. 320/2012                                    Page 9 of 20
14.     Certificate of incorporation, PAN number etc. are relevant for

purchase of identification, but have their limitation when there is

evidence and material to show that the subscriber was a paper company

and not a genuine investor. It is in this context, the Supreme Court in

CIT Vs. Durga Prasad More [1971] 82 ITR 540 (SC) had observed:-

             "Now we shall proceed to examine the validity of
             those grounds that appealed to the learned judges.
             It is true that the apparent must be considered real
             until it is shown that there are reasons to believe
             that the apparent is not the real. In a case of the
             present kind a party who relies on a recital in a
             deed has to establish the truth of those recitals,
             otherwise it will be very easy to make self-
             serving statements in documents either executed
             or taken by a party and rely on those recitals. If
             all that an assessee who wants to evade tax is to
             have some recitals made in a document either
             executed by him or executed in his favour then
             the door will be left wide open to evade tax. A
             little probing was sufficient in the present case to
             show that the apparent was not the real. The
             taxing authorities were not required to put on
             blinkers while looking at the documents produced
             before them. They were entitled to look into the
             surrounding circumstances to find out the reality
             of the recitals made in those documents."

15.     Summarizing the legal position in Nova Promoters and

Finlease (P) Ltd.(supra), and highlighting the legal effect of section 68

of the Act, the Division Bench has held as under:-

           "32.     The tribunal also erred in law in holding
           Assessing Officer ought to have proved that the
           monies emanated from the coffers of the assessee-

ITA No. 320/2012                                           Page 10 of 20
           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 assessee 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. In A. Govindarajulu Mudaliar v CIT,
           (1958) 34 ITR 807, this argument advanced by the
           assessee was rejected by the Supreme Court.
           Venkatarama Iyer, J., speaking for the court
           observed as under (@ page 810): -
           "Now the contention of the appellant is that
           assuming that he had failed to establish the case put
           forward by him, it does not follow as a matter of law
           that the amounts in question were income received
           or accrued during the previous year, that it was the
           duty of the Department to adduce evidence to show
           from what source the income was derived and why it
           should be treated as concealed income. In the
           absence of such evidence, it is argued, the finding is
           erroneous. We are unable to agree. Whether a
           receipt is to be treated as income or not, must
           depend very largely on the facts and circumstances
           of each case. In the present case the receipts are
           shown in the account books of a firm of which the
           appellant and Govindaswamy Mudaliar were
           partners. When he was called upon to give
           explanation he put forward two explanations, one
           being a gift of Rs. 80,000 and the other being receipt
           of Rs. 42,000 from business of which he claimed to
           be the real owner. When both these explanations
           were rejected, as they have been it was clearly upon
           to the Income-tax Officer to hold that the income
           must be concealed income. There is ample authority
           for the position that where an assessee fails to prove
           satisfactorily the source and nature of certain
           amount of cash received during the accounting year,
           the Income-tax Officer is entitled to draw the
           inference that the receipt are of an assessable

ITA No. 320/2012                                      Page 11 of 20
           nature. The conclusion to which the Appellate
           Tribunal came appears to us to be amply warranted
           by the facts of the case. There is no ground for
           interfering with that finding, and these appeals are
           accordingly dismissed with costs."
                                          (emphasis supplied)
           Section 68 recognizes the aforesaid legal position.
           The view taken by the Tribunal on the duty cast on
           the Assessing Officer by section 68 is contrary to the
           law laid down by the Supreme Court in the judgment
           cited above. Even if one were to hold, albeit
           erroneously and without being aware of the legal
           position adumbrated above, that the Assessing
           Officer is bound to show that the source of the
           unaccounted monies was the coffers of the assessee,
           we are inclined to think that in the facts of the present
           case such proof has been brought out by the
           Assessing Officer. The statements of Mukesh Gupta
           and Rajan Jassal, the entry providers, explaining their
           modus operandi to help assessee's having
           unaccounted monies convert the same into accounted
           monies affords sufficient material on the basis of
           which the Assessing Officer can be said to have
           discharged the duty. The statements refer 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. As already
           pointed out, 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 constitute materials upon which one
           could reasonably come to the conclusion that the
           monies emanated from the coffers of the assessee-
           company. The Tribunal, apart from adopting an
           erroneous legal approach, also failed to keep in view
           the material that was relied upon by the Assessing
           Officer. The CIT (Appeals) also fell into the same
           error. If such material had been kept in view, the

ITA No. 320/2012                                         Page 12 of 20
           Tribunal could not have failed to draw the
           appropriate inference.

16.     In the said case, the Division Bench had also examined the

decision of the Supreme Court in Lovely Exports P. Ltd. (supra) and

other cases in which the assessee had succeeded. It was noticed that in

the case of Lovely Exports P. Ltd. affidavits/confirmations of

shareholders were filed and income tax record numbers of the

shareholders were made available, but the Assessing Officer, who had

sufficient time, failed to carry out inquiry and examination. reference

was made to the observations in Divine Leasing (supra) to the effect

that there cannot be two opinions on the aspect that the pernicious

practice of conversion of unaccounted money through the masquerade

or channel of investment as share capital must be firmly excoriated by

the Revenue, but when there is preponderance of evidence to show

absence of culpability, the assessee should not be harassed by the

Revenue. A delicate balance must be maintained between the two

interests. In Divine Leasing (supra), the following proposition was


          "In this analysis, a distillation of the precedents yields the
          following propositions of law in the context of Section 68
          of the IT Act. The assessed has to prima facie prove (1) the
          identity of the creditor/subscriber; (2) the genuineness of

ITA No. 320/2012                                           Page 13 of 20
          the transaction, namely, whether it has been transmitted
          through banking or other indisputable channels; (3) the
          creditworthiness     or     financial    strength    of    the
          creditor/subscriber. (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,
          Share 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

17.     Nova Promoters and Finlease (P) Ltd. (supra) after referring to

the dismissal of SLP against Divine Leasing case (supra) observed as


             "...............So understood, it will be seen that
             where the complete particulars of the share
             applicants such as their names and addresses, income
             tax file numbers, their creditworthiness, share
             application forms and share holders' register, share
             transfer register etc. are furnished to the Assessing
             Officer and the Assessing Officer has not conducted
             any enquiry into the same or has no material in his
             possession to show that those particulars are false
             and cannot be acted upon, then no addition can be
             made in the hands of the company under sec.68 and

ITA No. 320/2012                                           Page 14 of 20
             the remedy open to the revenue is to go after the
             share applicants in accordance with law. We are
             afraid that we cannot apply the ratio to a case, such
             as the present one, where the Assessing Officer is in
             possession of material that discredits and impeaches
             the particulars furnished by the assessee and also
             establishes the link between self-confessed
             "accommodation entry providers", whose business it
             is to help assessees bring into their books of account
             their unaccounted monies through the medium of
             share subscription, and the assessee. The ratio is
             inapplicable to a case, again such as the present one,
             where the involvement of the assessee in such modus
             operandi is clearly indicated by valid material made
             available to the Assessing Officer as a result of
             investigations carried out by the revenue authorities
             into the activities of such "entry providers". The
             existence with the Assessing Officer of material
             showing that the share subscriptions were collected
             as part of a pre-meditated plan ­ a smokescreen ­
             conceived and executed with the connivance or
             involvement of the assessee excludes the
             applicability of the ratio. In our understanding, the
             ratio is attracted to a case where it is a simple
             question of whether the assessee has discharged the
             burden placed upon him under sec.68 to prove and
             establish the identity and creditworthiness of the
             share applicant and the genuineness of the
             transaction. In such a case, the Assessing Officer
             cannot sit back with folded hands till the assessee
             exhausts all the evidence ormaterial in his
             possession and then come forward to merely reject
             the same, without carrying out any verification or
             enquiry into the material placed before him. The
             case before us does not fall under this category and
             it would be a travesty of truth and justice to express
             a view to the contrary."
18.     Lovely Exports Pvt. Ltd. (supra) was also considered and

ITA No. 320/2012                                       Page 15 of 20
distinguished in N.R. Portfolio Pvt. Ltd. (supra) and it was held that

the entire evidence available on record has to be considered, after

relying upon CIT Vs. Nipun Builders and Developers, [2013] 350 ITR

407 (Delhi), wherein it has been held that a reasonable approach has to

be adopted and whether initial onus stands discharged would depend

upon facts and circumstances of each case. In case of private limited

companies, generally persons known to directors or shareholders,

directly or indirectly, buy or subscribe to shares. Upon receipt of

money, the share subscribers do not lose touch and become

incommunicado. Call money, dividends, warrants, etc. have to be sent

and the relationship remains a continuing one. Therefore, an assessee

cannot simply furnish some details and remain quiet when summons

issued to shareholders remain un-served and uncomplied. As a general

proposition, it would be improper to universally hold that the assessee

cannot plead that they had received money, but could do nothing more

and it was for the Assessing Officer to enforce shareholders'

attendance in spite of the fact that the shareholders were missing and

not available. Their reluctance and hiding may reflect on the

genuineness of the transaction and creditworthiness of the creditor. It

would be also incorrect to universally state that an Inspector must be sent

to verify the shareholders/subscribers at the available addresses, though

ITA No. 320/2012                                      Page 16 of 20
this might be required in some cases. Similarly, it would be incorrect

to state that the Assessing Officer should ascertain and get addresses

from the Registrar of Companies' website or search for the address es

of shareholders themselves.         Creditworthiness is not proved by

showing issue and receipt of a cheque or by furnishing a copy of

statement of bank account, when circumstances requires that there

should be some more evidence of positive nature to show that the

subscribers had made genuine investment or had, acted as angel

investors after due diligence or for personal reasons.                 The final

conclusion must be pragmatic and practical, which takes into account

holistic view of the entire evidence including the difficulties, which the

assessee may face to unimpeachably establish creditworthiness of the


19.     In N.R. Portfolio Pvt. Ltd. (supra), it has been held as under:-

             "18.     In the remand report, the Assessing Officer
             referred to the provisions of Section 68 of the Act
             and their applicability. The word "identity" as
             defined, it was observed meant the condition or fact
             of a person or thing being that specified unique
             person or thing. The identification of the person
             would include the place of work, the staff, the fact
             that it was actually carrying on business and
             recognition of the said company in the eyes of
             public.     Merely producing PAN number or
             assessment particulars did not establish the identity
             of the person. The actual and true identity of the

ITA No. 320/2012                                       Page 17 of 20
             person or a company was the business undertaken by
             them. This according to us is the correct and true
             legal position, as identity, creditworthiness and
             genuineness have to be established. PAN numbers
             are allotted on the basis of applications without
             actual de facto verification of the identity or
             ascertaining active nature of business activity. PAN
             is a number which is allotted and helps the Revenue
             keep track of the transactions. PAN number is
             relevant but cannot be blindly and without
             considering surrounding circumstances treated as
             sufficient to discharge the onus, even when payment
             is through bank account.
             19.       On the question of creditworthiness and
             genuineness, it was highlighted that the money no
             doubt was received through banking channels, but
             did not reflect actual genuine business activity. The
             share subscribers did not have their own profit
             making apparatus and were not involved in business
             activity. They merely rotated money, which was
             coming through the bank accounts, which means
             deposits by way of cash and issue of cheques. The
             bank accounts, therefore, did not reflect their
             creditworthiness or even genuineness of the
             transaction.     The beneficiaries, including the
             respondent-assessee, did not give any share-dividend
             or interest to the said entry operators/subscribers.
             The profit motive normal in case of investment, was
             entirely absent. In the present case, no profit or
             dividend was declared on the shares. Any person,
             who would invest money or give loan would
             certainly seek return or income as consideration.
             These facts are not adverted to and as noticed below
             are true and correct. They are undoubtedly relevant
             and material facts for ascertaining creditworthiness
             and genuineness of the transactions.
             30. What we perceive and regard as correct position
             of law is that the court or tribunal should be
             convinced about the identity, creditworthiness and
             genuineness of the transaction. The onus to prove

ITA No. 320/2012                                      Page 18 of 20
             the three factum is on the assessee as the facts are
             within the assessee's knowledge. Mere production of
             incorporation details, PAN Nos. or the fact that third
             persons or company had filed income tax details in
             case of a private limited company may not be
             sufficient when surrounding and attending facts
             predicate a cover up. These facts indicate and reflect
             proper paper work or documentation but
             genuineness, creditworthiness, identity are deeper
             and obtrusive. Companies no doubt are artificial or
             juristic persons but they are soulless and are
             dependent upon the individuals behind them who
             run and manage the said companies. It is the persons
             behind the company who take the decisions, controls
             and manage them."
20.     Now, when we go to the order of the tribunal in the present case,

we notice that the tribunal has merely reproduced the order of the

Commissioner of Income Tax (Appeals) and upheld the deletion of the

addition. In fact, they substantially relied upon and quoted the decision

of its coordinate bench in the case of MAF Academy P. Ltd., a

decision which has been overturned by the Delhi High Court vide its

judgment in C.I.T vs. MAF Academy P.Ltd [ (2014) 206 DLT 277). In

the impugned order it is accepted that the assessee was unable to

produce directors and principal officers of the six shareholder

companies and also the fact that as per the information and details

collected by the Assessing Officer from the concerned bank, the

Assessing Officer has observed that there were genuine concerns about

ITA No. 320/2012                                       Page 19 of 20
identity, creditworthiness of shareholders as well as genuineness of the


21.     In view of the aforesaid discussion, we feel that the matter

requires an order of remit to the tribunal for fresh adjudication keeping

in view the aforesaid case law. The question of law is, therefore,

answered in favour of the Revenue and against the respondent-

assessee, but with an order of remit to the tribunal to decide the whole

issue afresh. One of the reasons, why we have remitted the matter is

that the cross objections of the respondent-assessee questioning notice

under Section 147/148 were dismissed as infructous and even if we

decide the issue on merits in favour of the Revenue, the cross

objections would got revived and require adjudication. The appeal is

accordingly disposed of.

                                               (SANJIV KHANNA)

                                             (V. KAMESWAR RAO)
AUGUST 25th, 2014

ITA No. 320/2012                                     Page 20 of 20
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