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IN THE INCOME TAX APPELLATE TRIBUNAL
C BENCH, AHMEDABAD
BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND
SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER
./ ITA No. 1679/Ahd/2014
/A.Y. 2002-03
Umiya Pipes Pvt. Ltd., Vs Asst. Commissioner of
C/o. Shri chandrakant Patel Income-tax,
(M.D.), 602, Chandralok Circle-8,
Tower, Nr. Shahibaug Dafnala, Ahmedabad
Shahibaug, Ahmedabad

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PAN : AAACU 3549 D

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/ (Appellant) / (Respondent)
By Assessee :
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Shri S.N. Soparkar, AR
By Revenue : Shri D.P. Gupta, CIT-DR
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/Date of Hearing : 05/09/2017
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/Dat of Pronouncement: 12/09/2017

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/O R D E R
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PER BENCH :-

This assessees appeal for assessment year 2002-03 arises against

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the CIT(A)-XXI, Ahmedabads order dated 18.03.2014 in case

No.CIT(A)-XXI/136/13-14, upholding Assessing Officers action
adding net profit and share premium sum under Section 68 amounting
to Rs.79,85,090/- and Rs.5,31,00,000/-; respectively in proceedings
under section 143(3) r.w.s. 254 of the Income-tax Act, 1961; in short the
Act.

2. We come to the former issue of net profit addition amounting to

Rs.79,85,090/-. Case file reveals the instant lis to be second round of
proceedings between the parties before this tribunal. This assessee is a
 ITA No. 1679/Ahd/2014
Umiya Pipes Pvt Ltd vs. ACIT
A.Y : 2002-03
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private limited company manufacturing PVC pipes. It filed return on

31.03.2003 stating loss of Rs.60,56,640/-. Its turnover in the impugned
assessment year was of Rs.33,48,51,667/- with other income of
Rs.49,37,686/- stating net profit of Rs.95,17,392/- as compared to the
corresponding figures in preceding assessment year of Rs.25,13,43,604/-,
Rs.31,36,669/- and Rs.1,25,79,237/-; respectively. The Assessing Officer
then noticed the above net profit to have come down from 4.94% to
2.35% in the two assessment years. He issued various notices under

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Section 142(1) of the Act in scrutiny seeking reasons thereof. The

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assessee filed its reply. It pleaded therein that its in-charge person Shri
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Chandrakant Patel had gone out since 11-12 months. It therefore
expressed its inability to produce all of its books as its creditors M/s.
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GSFC, J&K Bank and IDBI had got its factory premises sealed. This
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made the assessing authority to reject its books under Section 145 of the
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Act. He thereafter adopted NP rate of 4.94% in best judgment

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assessment framed under Section 144 of the Act making the impugned
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addition of Rs.79,85,090/- in his order dated 02.03.2005. The CIT(A)

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confirmed the same in first round lower appellate order dated

14.09.2005. He concluded therein that the assessee had not produced
any of its relevant vouchers in order to get the expenditure in question
verified from the field authorities.

3. The assessee filed ITA No.2253/Ahd/2005 before this tribunal.

The co-ordinate bench remitted the said first round litigation back to
the Assessing Officer in its order dated 12.06.2009 reading as under:-

16. We have heard the rival submissions and perused the orders of the
lower authorities and the materials available on record . In the instant
case, the Assessing Officer completed the assessment u/s. 144 of the
Income Tax Act, 1961 due to failure of the assessee to furnish the
 ITA No. 1679/Ahd/2014
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required details. The assessee explained before the Assessing Officer that
all its books of account and vouchers, etc. were kept in the factory
premises which was sealed by the bank and, therefore, requested for
keeping the assessment proceedings in abeyance till the release of the
books of account. However, the Assessing Officer completed the
assessment because of the time limit available in the Statue was going to
be barred for passing the order. In the assessment so made, the
Assessing Officer made addition by estimating net profit at the rate
4.94% which was the rate of net profit accepted in the case of the assessee
in the immediately preceding year. On appeal, the ld. CIT(Appeals)
confirmed the above addition. Before us, the Ld. Authorized
Representative of the assessee explained that no defect in the explanation
given by the assessee before the Assessing Officer was found by the

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Revenue and, therefore, the estimation of profit in such circumstances

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was not justified. He also submitted that as the relevant books are now
released the same can be produced before the Department for their
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verification. In the circumstances in our considered opinion, it shall be
in the interest of justice to restore the matter back to the file of the
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Assessing Officer for reframing the assessment after proper verification
as per law. We, therefore, set aside the order of the lower authorities and
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restore the matter back t the file of the Assessing Officer. The Assessing
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Officer shall allow reasonable opportunity of hearing to the assessee,

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before reframing the assessment as per law.

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17. The assessee also taken a ground of appeal against addition made of
Rs.5.31 crores under section 68 of the Income-tax Act, 1961 in respect of
Share Premium Money for want of details. The other objection which
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was raised by the assessee being that the ld. CIT(A) having refused
additional grounds of appeal which were in respect of allowance of
deduction for deferred Revenue expenditure of Rs.18,37,270/- which was
debited in the balance-sheet and the claim for deduction under section
80IA of the Income Tax Act, 1961. We find that the addition of Rs.5.31
crores was made for want of details which the assessee could not furnish
before the Assessing Officer for reasons beyond his control. In the
circumstances, in our considered opinion, the ld. CIT(Appeals) was not
justified in not admitting the fresh evidence filed by the assessee by
following Rule 46A. However, as we have set aside the issue regarding
determination of business income to the file of the Assessing Officer, we
also set aside the issue to the file of Assessing Officer. Similarly, in
respect of disallowance for deferred Revenue expenditure and exemption
claimed under section 80IA of the Income Tax Act, 1961, we set aside
the orders of the lower authorities and restore the issue to the file of the
 ITA No. 1679/Ahd/2014
Umiya Pipes Pvt Ltd vs. ACIT
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Assessing Officer. The Assessing Officer is directed to reframe the

assessment on all the above issues in accordance with law, after proper
verification and after allowing sufficient opportunity of hearing to the
assessee. All the above stated grounds are allowed for statistical
purposes.

4. The Assessing Officer took up consequential proceedings. He

appears to have issued section 143(2) notices dated 02.09.2009,
29.06.2010, 06.07.2010 and 28.07.2010 to assessee. Shri Patel (supra)
appears this time on 01.11.2010. The Assessing Officer then issued
section 144 notice dated 19.11.2010. The assessee rep ied the same on

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25.11.2010 pleading therein that learned. City Civil Court, Ahmedabad

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had sealed its premises in its order dated 22.08.2007. All of its books
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were claimed to be lying in the said sealed premises. The Assessing
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Officer therefore reiterated his earlier addition in second round of
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assessment as well finalized on 07.12.2010.

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5. The assessee instituted its latter lower appeal on 19.01.2011. It

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filed the following documents before the CIT(A) in course of the

impugned lower appellate proceedings in second round :
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Sr. Date Particulars Filed before Annexure

No. authority
1 07-10-11 Submission before CIT(A) alongwith
following enclosures:
2 02-03-05 Assessment order passed u/s. 143(3) 'A'
3 14-09-05 Order passed by CIT(A) 'B'
4 12-06-09 Order passed by I.T.A.T. 'C'
5 04-05-09 Paper Book filed before I.T.A.T. CIT(A) & ITAT 'D'
27-08-05 Submission before CIT(A) alongwith
following enclosures
02-09-02 Accounts
31-03-03 Return of Income
19-05-05 Possession certificate issued by Gujarat
State Financial Corporation
- Details of share premium received
6 25-11-10 Submission before the ld. A.O. A.O. 'E'
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6. The CIT(A) sought for a remand report. The Assessing Officer

filed its first remand report on 02.01.2012 rejecting assessees various
pleas explaining its net profit rate of 2.59% in the impugned assessment
year as compared to that at the rate 4.94% in preceding assessment year
as follows:-

1. In the paper book he contends that book should not have been
rejected because the assessee was in a peculiar condition as the
company's premises were sealed. The assessee further contends that the
reason for fall in N/p was due to increased interest cost and claim of

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depreciation.

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2. The assessee's premises were sealed vide order dated 22/08/07 whereas
the original assessment order was passed on 02/03/05 therefore the
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contention that assessee was in a peculiar condition as the company's
premises were sealed' is not correct and cannot be acceded to.
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3. As regards fall in N/P assessee accepts that it is due to increased
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interest cost and claim of depreciation.

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(A) Increased interest cost

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The assessee has not produced any evidence to show that

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- the amount borrowed has been used for the purpose of business
- the increase in interest expenditure was justified and as per the
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provisions of the act.

The expenditure on interest to others increased from nil in AY 2001-
02 to Rs. 78.13 lacs in A.Y. 2002-03. The assessee has not submitted any
evidence to justify the said expenditure. Furthermore the sales of the
assessee has increased by Approx. 33% over the previous year whereas
the interest expense has increased by 200%. Thus there is abnormal
increase in expenses and in view of the above the AO has correctly and
judiciously made the addition on the basis of N/p instead of disallowing
the entire claim of interest.

(B) Claim of depreciation

During the relevant AY the assessee has made huge investment in fixed
assts and claimed depreciation for full year on the same. However during
the assessment proceedings and set aside proceedings the assessee has not
established the source of investment in fixed assets and also not
 ITA No. 1679/Ahd/2014
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A.Y : 2002-03
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established whether the assets were put to use during the year or not.
The assessee has also not established whether the interest upto the date of
put to use ( if the assets were purchased from borrowed funds) has been
capitalized or not. In view of the above the claim of the assessee is not
justified and the AO has correctly and judiciously made the addition on
the basis of N/p instead of disallowing the entire claim of depreciation.

7. The Assessing Officer thereafter submitted two more remand

reports dated 27.03.2012 and 07.08.2012. This latter report forms part of
the paper-book pages 149 151. He again quoted assessees failure in
producing necessary bills/vouchers of fixed assets as well as utilization

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of interest bearing funds in purchases thereof.

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8.
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We now advert to CIT(A)s lower appellate order under
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challenge. He observes therein that various notices had been issued to
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the assessee regarding its appeal hearing on 08.10.2013, 21.10.2013,

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13.11.2013, 28.11.2013, 02.01.2014, 09.01.2014 and 21.03.2014. His order

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under challenge reads that neither the assessee nor its authorized
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representative put in appearance to rebut remand findings reiterating

the impugned additions. The CIT(A) therefore affirms the impugned
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addition once again. This leaves the assessee aggrieved.

9. Mr. S.N. Soparkar is the learned authorized representative

appearing at assessees behest. He pleads first of all that the assessee
could not file its necessary books in the instant second round as well as
the learned City Civil Court had sealed assessees premises. This first
plea goes against the record as learned co-ordinate bench in earlier
round of litigation (supra) had duly observed that relevant books of
accounts stood released by that time, i.e. well before 12.06.2009. There
is hardly any quarrel that said clinching observation has attained
 ITA No. 1679/Ahd/2014
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finality. The assessee never made any attempt to get the same modified
in any manner whatsoever. It rather chose to adopt total non-
cooperation in consequential round of assessment. It claimed before the
Assessing Officer that learned City Civil Court had sealed its factory
premises vide order dated 22.08.2007 despite the fact that learned co-
ordinate bench had just made the above contrary observation. There is
no material in the instant case file indicating as to how and in what
circumstances the assessee has come to be in possession of the

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impugned additional evidence (supra) claiming interest expenditure

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and deprecation in the impugned assessment year for the first time over
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and above its corresponding expenditure in previous assessment year.
We repeat that we are in second consequential round of proceedings.
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This tribunal had already accepted assessees plea of availability of
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record. It fails to justify its total non-cooperation in Assessing Officers

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consequential proceeding resulting in second ex-parte assessment as

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well. Its form 35 filed before the lower appellate authority does not
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explain its non-cooperation in various grounds pleaded therein. We

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thus reject the instant first argument.

10. The assessees next contention refers to merit of the issue. It takes
us to page(s) 135-137 (its letter dated 07.10.2012) addressed to the
CIT(A) tabulating various items of sale, raw materials consumed,
purchases, manufacturing expenses, selling, administrative and other
expenses followed by interest and depreciation as under:-

Particulars Amount for Acct. Amount for Acct.

Year 2001-02 Year 2000-01
Sales 334,851,676 251,343,604
Raw material consumption & 314,706,967 243,415,167
purchases of finished goods
 ITA No. 1679/Ahd/2014
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Manufacturing Expenses 9,093,575 5,957,066

Selling, Administrative & 2,158,998 1,554,478
Other Expenses
Interest 12,950.103 4,332,087
Depreciation 5,626,817 2,262,716
Profit/Loss (before tax) 9,517,392 12,579,237

11. The assessee accordingly seeks to reiterate its case that the NP in
question in previous as well as the impugned assessment year is at the
rate of 6.72% and 6.71% indicating a very minor fraction of difference. It

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attributes the same to its interest expenditure to secured loans as on

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31.03.2002 of Rs.1453.22 lacs obtained
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institutions/banks for business purposes thereby increasing its block of
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fixed assets from Rs.636.71 lacs to Rs 1184.31 lacs during the relevant
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previous year indicating addition of Rs.562.52 lacs followed by its

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deprecation claim as accepted in assessment order. The assessee then

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states his figures of secured loan in preceding assessment year to be

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much less involving a sum of Rs.823.53 lacs. It also refers to paper-book

pages 1-39 in this regard. Its balance-sheet is at pages 1-2 revealing
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fixed asset figures of Rs.118,431,143/- as on 31.03.2002. This follows its

P&L accounts indicating interest outgo of Rs.12,950,103/- at page 3.
Pages 4-5 are its schedules annexed to and forming part of accounts. We
however find that there is no evidence available in all the above stated
material; item-wise indicating bills and vouchers of relevant fixed asset
purchases. Nor does the entire above evidence highlight the crucial
nexus between assessees so-called secured loans to have been actually
utilized in purchase of the above fixed assets only. We wish to repeat
that we are in second round of proceedings. Much water has flown
down the bridge since the impugned assessment year 2002-03. There is
 ITA No. 1679/Ahd/2014
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no possibility for the lower authorities to verify this crucial fact at the
instant belated stage which has involved two assessment orders, three
remand reports and two CIT(A)s order along with this tribunals
remand order. We therefore see no reason to accept assessees instant
plea on merit as well seeking to delete the impugned net profit addition
of Rs.79,85,090/-.

12. Next comes assessees challenge to the CIT(A)s order that his
findings adjudicating the instant issue do not show a detailed

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discussion as follows:-

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6. Ground of appeal No.2 is against addition of Rs.79,85,090/-by
estimating the profit as per the previous year. The appellant has not
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produced books of accounts in support of the profits shown in the return
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of income before the AO or during the course of appellate proceedings,

despite the submission made before the Hon'ble ITAT that relevant books
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are now with the assessee and same can be produced before the
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department for verification. In view of the non production of books of

accounts and oth r documents, the profit estimated by the AO and
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confirmed by the learned CIT(A)-XIV, Ahmedabad vide his order dated

14.09.2005 is confirmed.
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13. We do not find any substance in assessees instant technical

argument as well. We find that it is seeking to read the CIT(A)s above
extracted observation in isolation. It is evident that the CIT(A)s
relevant portion comes after a detailed extract of the third remand
report (supra) which has already gone unrebutted from assessees side
despite the fact that the instant case involves 8th innings in all (supra).
We accordingly are of the view that assessees instant technical plea
does not form a sufficient reason to condone its own failure in filing the
requisite details. We therefore affirm both the lower authorities action
 ITA No. 1679/Ahd/2014
Umiya Pipes Pvt Ltd vs. ACIT
A.Y : 2002-03
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adding the impugned net profit amount of Rs.79,85,090/- in assessees

hands. This former issue accordingly stands decided in Revenues
favour.

14. We now advert to the latter issue of share premium addition of

Rs.5,31,00,000/- made in both the lower proceedings under Section 68
of the Act. The Assessing Officers former assessment order added the
said sum as the assessee had not filed even a list of the corresponding
premium paying parties. He therefore treated the impugned sum as

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assessees income from undisclosed sources. The assessee thereafter

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chose to file a chart indicating names of its share premium parties with
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dates and PAN particulars and photocopies of confirmation in some of
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the cases. The CIT(A) rejected the said additional evidence. He further
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observed that the assessees balan e-sheet on the one hand had stated
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receipt of these amounts between 01.04.2001 to 31.03.2002 whereas its

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chart in additional evidence revealed the relevant dates between

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February to March 2001 to the contrary. He therefore confirmed the

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impugned addition. It has already come on record that this tribunals

earlier order (supra) sent back the case to the Assessing Officer. The
assessee admittedly to chose to adopt non-cooperation in second round
of assessment as well. It rather raised a total false plea that its relevant
books were not available in view of learned City Civil Courts order
sealing its premises (supra). The Assessing Officer therefore reiterated
the impugned addition in his consequential assessment order.

15 We proceed further to notice that the assessee filed its additional

evidence/submissions in second round of lower appellate proceedings
in the nature of share premium applicants name, cheque no., banks
 ITA No. 1679/Ahd/2014
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branch, date, amount and PAN etc. on 07.10.2011. The Assessing

Officers first remand report (supra) rejected the said explanation on the
ground that it had failed to identity, genuineness and creditworthiness
of the 13 share premium paying parties in question. The assessee
would file its rejoinder thereto on 10.01.2012 that an amount of
Rs.3,20,30,000/- stood received well before 31.03.2001. The Assessing
Officers second remand report dated 27.03.2012 and the final one dated
08.08.2012 (supra) did not accept the same. He observed in his last

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remand report that the assessee has filed a summary of share premium

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account along with photocopy of confirmation from Shri Chandravadan
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M. Patel, Unity Pipes Pvt Ltd., Shri K.N. Patel and Shri Manilal M. Patel
instead of filing original confirmation along with bank statements and
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other details. The CIT(A) thereafter confirmed the impugned addition
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in para 7 of his lower appellate order under challenge.

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16. The assessee pl ads in the course of hearing to have filed all
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necessary details proving identity, capacity, genuineness and

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creditworthiness of its share premium paying parties. It refers to page

89 of the paper-book Annexure-6 comprising of the following 13 share
premium paying parties as under:-

Details of share amount and share premium a/c. Annexure-6

Name of Share Holders Total amt Share capital Share
premium
Ankush Finstock Ltd 3500000 350000 3150000
Ankush Overseas Ltd 1500000 150000 1350000
Ankush Holdings Ltd 4000000 400000 3600000
Danvidhya Impex Ltd 8000000 800000 7200000
Danvidhya Financial Investment 3000000 300000 2700000
Consultant Services Ltd
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Frontline Biosystems Ltd 2000000 200000 1800000

Kutchh Gujarat Finstock Ltd 2000000 200000 1800000
Shankheshwar Metals Pvt Ltd 1000000 100000 900000
Shalibhadra Steel Pvt Ltd 1000000 100000 900000
Chandravadan M. Patel 6500000 650000 5850000
Unity Pipes Pvt Ltd 20000000 2000000 18000000
Kamlaben M. Patel 1500000 150000 1350000
Manilal A Patel 5000000 500000 4500000
Total Rs.--> 59000000 5900000 53100000

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17. The assessee thereafter refers to paper-book pages 90 onwards
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comprising of share applications indicating it to have received share
premium of Rs.90/- per share from the above parties through banking
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channel followed by their PAN details and confirmations. The
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assessees case therefore is the lower authorities ought not to have

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made the impugned addition in its hands. Case law CIT vs Pragati Co-
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operative Bank Ltd (2005) 278 ITR 178 (Guj) and Murlidhar Lahorimal
vs. CIT (2006) 280 ITR 512 (Guj) is quoted in support.
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18. Learned Departmental Representative draws strong support from

both the lower authorities action making the impugned addition. He
points out that some of the above share premium paying parties did not
even have PAN cards. One of such party M/s. Frontline Biosystems
Ltds application(s) form part of the paper-book pages 102-104
indicating absence of PAN card. Same is the case with M/s. Kutchh
Gujarat Finstock Ltd (pages 107). The Revenue further highlights that
one of the said applicants claimed to have applied for PAN only in 2005
whereas we are dealing with assessment year 2002-03. It thereafter
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submits that the assessee has not filed even original confirmation in
case of a single party inspite of the fact that the instant issue has seen 8
innings till date. It is accordingly argued that assessees mere assertion
of having filed PAN details, list of share premium paying parties
through banking channel does not form sufficient evidence to discharge
its onus much less burden for the purpose of deleting the impugned
addition under Section 68 of the Act. Case law Sumati Dayal vs. CIT
(1995) 214 ITR 801 (SC), CIT vs. Durgaprasad More (1971) 82 ITR 540

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(SC), CIT vs. United Commercial & Industrial Co Pvt. Ltd (1991) 187

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ITR 596 (Cal) and CIT vs. Precision Finance Pvt Ltd (1994) 208 ITR 465
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(Cal) is relied upon in seeking us to uphold the impugned addition.
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19. We have given our thoughtful consideration to above rival
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submission. Relevant findings perused. There is no dispute that

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assessee has received share premium at the rate of Rs.90 per share in
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case of face value of Rs.10/- each. We reiterate first of all that there is
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no explanation much less a justifiable one in support of its non-

cooperation adopted in second round of assessment before the
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Assessing Officer taken up in furtherance to this tribunals directions.

The assessee admittedly did not undertake even a single step to prove
identity, capacity and genuineness/creditworthiness of its 13 share
premium paying applicants. We repeat that this is not the assessees
case of having not being afforded adequate opportunity of hearing in
the instant consequential proceedings. The same factual position
continued in the three remand proceedings as well wherein it would
file only photocopy of the confirmations in some of the cases. All the
above 13 parties seem to be based in Ahmedabad only. The assessee
still could not produce even one of the 13 parties in question. We notice
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from the case record that all the above photocopy confirmations are
dated 01.09.2005 i.e. well before this tribunals remand direction dated
12.06.2009. Rather the same is well before the CIT(A)s former order
dated 14.09.2005 (supra). All this reflects assessees lack of explanation
despite getting its matter remanded back to the Assessing Officer. We
further observe that the assessees act and conduct in not being able to
file even a single original confirmation and its subsequent action in
submitting all 4 photocopies of the same date indicates a very serious

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genuineness issue. We observe therefore that the assessee has not made

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any effort in discharging its initial onus so as to satisfy the basic factors
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of identity, capacity, genuineness and creditworthiness of the 13 parties
in question who have paid it a very hefty share premium of Rs.90/- per
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share in question. We find in this factual backdrop that all the above
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evidence is not sufficient to delete the impugned addition. We observe

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in light of honble Calcutta high courts decisions (supra) that such an

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onus does not get discharged by mere filing of confirmation letter or by

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receiving the amount in question through banking channel or by filing

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PAN particulars

20. We now advert to assessees case law. Former judicial precedent

of Pragati Co-operative Bank (supra) does not seem to apply in facts of
the instant case as the assessee therein was a co-operative bank already
governed under the Banking Regulations Act, 1949 duly maintaining all
requisite details of its customers depositing the money in question. So
is the position regarding assessees latter decision in Muralidhar
Lahorimals case (supra) wherein the issue in question was a gift
instance. The donor had duly supported the said assessees case before
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the Assessing Officer. We repeat that this is not the case before us
wherein the assessee has not filed even a confirmation in case of a
single party. We therefore conclude that honble apex courts two
decisions in Sumati Dayal and Durgaprasad More (supra) propounding
genuineness theory on the touchstone of human probability squarely
applies in facts of the instant case as the assessees entire evidence has
not been able to satisfy any of the above four benchmarks.

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21. We further deem it appropriate to emphasis significance of the

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above genuineness aspect in such kind of cases inviting Section 68
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addition. There is no quarrel that the assessee has received the
impugned share premium @ Rs.90/- per share having value of Rs.10
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each. It is therefore assessees onus to prove genuineness thereof to the
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hilt. As against this, it admi tedly has not been able to even prima facie
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demonstrate the above intrinsic value of shares to be at par with the

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impugned share premium charged as followed by producing cogent

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material on re ord to show the crucial nexus between the premium in

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question vis--vis its in built potential being the subscribing company

justifying the exorbitant premium in dispute claimed to have been
received in its own right. This clinching onus has remained
undischarged despite a number of innings afforded to the assessee. We
bear in mind that there can be no straight jacket formula for
determining share premium which depends upon current strength and
future potential of an enterprise. The assessees act and conduct herein
in having received such a high share premium purportedly towards
share capital and premium in showing continuing inability to furnish
the requisite information citing subsequent financial difficulties leading
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to its premises being seized therefore does not inspire confidence. The
above explanation supporting non-production of evidence despite
tribunals clear cut observations is highly unpalpable and improbable.
We find that an SMC bench recent decision in Pawankumar M.
Sanghvi vs. ITO ITA 2447/Ahd/2016 decided on 17.05.2017 very well
emphasis significance of genuineness with reference to section 68
addition as under:-

..I am not inclined to believe that these are genuine business

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transactions. As I do so, I am reminded of Hon'ble Supreme Court's

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observation, in the case of CIT Vs Durga Prasad More [(1971) 82 ITR
540 (SC)], to the effect that "Science has not yet invented any
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instrument to test the reliability of the evidence placed before a court or
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tribunal. Therefore, the courts and Tribunals have to judge the evidence
before them by applying the test of human probabilities". Similarly, in a
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later decision in the case of Sumati Dayal Vs CIT [(1995) 214 ITR 801
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(SC)], Hon'ble Supreme Court rejected the theory that it is for alleger to
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prove that the apparent and not real, and observed that, "This, in our
opinion, is a superficial approach to the problem. The matter has to be
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considered in the light of human probabilities. ...........Similarly the

observation. ....... that if it is alleged that these tickets were obtained
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through fraudulent means, it is upon the alleger to prove that it is so,

ignores the reality. The transaction about purchase of winning ticket
takes place in secret and direct evidence about such purchase would be
rarely available..............In our opinion, the majority opinion after
considering surrounding circumstances and applying the test of human
probabilities has rightly concluded that the appellant's claim about the
amount being her winning from races is not genuine. It cannot be said
that the explanation offered by the appellant in respect of the said
amounts has been rejected unreasonably". I will be superficial in my
approach in case I donot examine the claim of the assessee on the basis of
documents and affidavits filed by the assessee and overlook clear the
unusual pattern in the documents filed by the assessee and pretend to be
oblivious of the ground realities. As Hon'ble Supreme Court has
 ITA No. 1679/Ahd/2014
Umiya Pipes Pvt Ltd vs. ACIT
A.Y : 2002-03
- 17 -

observed, in the case of Durga Prasad More (supra), ".....it is true that
an apparent must be considered real until it is shown that there are
reasons to believe that the apparent is not the real 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

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documents produced before them. They were entitled to look into the
surrounding circumstances to find out the reality of the recitals made in

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those documents". As a final fact finding authority, this Tribunal cannot
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be superficial in its assessment of genuineness of a transaction, and this
call is to be taken not only in the light of the face value of the documents
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sighted before the Tribunal but also in the light of all the surrounding
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circumstances, preponderance of human probabilities and ground

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realties. Genuineness is a matter of perception but essentially a call on

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genuineness of a transaction is to be taken in the light of well settled

legal principles. There may be difference in subjective perception on such
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issues, on the same set of facts, but that cannot be a reason enough for
the fact finding authorities to avoid taking subjective calls on these
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aspects, and remain confined to the findings on the basis of irrefutable

evidences. Hon'ble Supreme Court has, in the case of Durga Prasad
More (supra), observed that "human minds may differ as to the
reliability of a piece of evidence but in that sphere the decision of the final
fact finding authority is made conclusive by law". This faith in the
Tribunal by Hon'ble Courts above makes the job of the Tribunal even
more onerous and demanding and, in my considered view, it does
require the Tribunal to take a holistic view of the matter, in the light of
surrounding circumstances, preponderance of probabilities and ground
realities, rather than being swayed by the not so convincing, but
apparently in order, documents and examining them, in a pedantic
manner, with the blinkers on. I may also add that the phenomenon of
shell entities being subjected to deep scrutiny by tax and enforcement
officials is rather recent, and that, till recently, little was known, outside
 ITA No. 1679/Ahd/2014
Umiya Pipes Pvt Ltd vs. ACIT
A.Y : 2002-03
- 18 -

the underbelly of financial world, about modus operendi of shell entities.

There were, therefore, not many questions raised about genuineness of
transactions in respect of shell entities. That is not the case any longer.
Just because these issues were not raised in the past does not mean that
these issues cannot be raised now as well, and, to that extent, the earlier
judicial precedents cannot have blanket application in the current
situation as well. As Hon'ble Supreme Court has observed in the case
in Mumbai Kamgar Sabha v. Abdulbahi Faizullabhai AIR 1976 SC 1455
"It is trite, going by Anglophonic principles that a ruling of a superior
court is binding law. It is not of scriptural sanctity but of ratio-wise
luminosity within the edifice of facts where the judicial lamp plays the

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legal flame. Beyond those walls and de hors the milieu we cannot impart
eternal vernal value to the decisions, exalting the precedents into a

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prison house of bigotry, regardless of the varying circumstances and
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myriad developments. Realism dictates that a judgment has to be read,
subject to the facts directly presented for consideration and not affecting
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the matters which may lurk in the dark". Genuineness of transactions
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thus cannot be decided on the basis of inferences drawn from the judicial
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precedents in the cases in which genuineness did come up for

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examination in a very limited perspective and in the times when shell

entities were virtually non-existent. As the things stand now,
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genuineness of transactions is to be examined in the light of the

prevailing ground realities, and that is precisely what I have done. In my
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considered view, and for the detailed analysis set out earlier in this order,
the alleged loan transactions of the assessee cannot be held to be genuine
on the peculiar facts and circumstances of this case. As the genuineness
of transactions stands rejected, it is not really necessary to deal with
other aspects of the matter.

We accordingly express our respectful agreement with the above

reasoning herein as well to conclude that the assessee has miserably
failed in proving genuineness of its share premium in question.

22. The assessee further contends that it had received a part of the
above share premium in preceding assessment year and not in the
 ITA No. 1679/Ahd/2014
Umiya Pipes Pvt Ltd vs. ACIT
A.Y : 2002-03
- 19 -

impugned assessment year so as to be added under section 68 of the

Act. We find no substance in the instant plea as well. There is no
material on record revealing the assessee to have proved genuineness of
the impugned sums even in preceding assessment year. Or that the
assessing authority had ever conducted any inquiry in this regard. We
therefore are of the opinion that the instant plea without any other
substantive evidence proving genuineness does not inspire acceptance
on mere technical reasons. We further quote section 153(6) clauses (i) &

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(ii) read with Explanation 2 thereto to conclude that even if we hold

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that a part of the impugned sum had been received in preceding
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assessment year, the same would visit consequential interest demand
only. We therefore reject the instant argument as well.
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23. The assessees next argument takes us to the CIT(A)s order in

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para 7. Its case is that the same are totally non-speaking. It however
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fails to dispute that the CIT(A) operative findings already extract

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Assessing Officers third remand report (supra). We have already

rejected the very contention whilst adjudicating the former issue in
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preceding paragraphs. We adopt the same reasoning herein as well to

decline the assessees instant argument.

24. The assessee lastly contends that the Assessing Officer or the
CIT(A) have nowhere admitted or discussed its additional evidence as
per this tribunals remand directions. We see no merit in the instant
technical plea as well. We have already observed that the assessee
never co-operated in second round assessment. It has come on record
that the Assessing Officer framed the impugned consequential
assessment after issuing section 144 notice (supra). Be that as it may,
 ITA No. 1679/Ahd/2014
Umiya Pipes Pvt Ltd vs. ACIT
A.Y : 2002-03
- 20 -

the CIT(A) has afforded it sufficient opportunities in seeking three

remand reports on merits in view of all material submitted in additional
evidence. We have already discussed the issue at length in concluding
that the assessees all evidence nowhere discharges its onus in proving
identity, genuineness and creditworthiness of the impugned share
premium amount of Rs.5,31,00,000/- added under Section 68 of the Act.
The assessee fails in its instant latter substantive ground as well.

25. This assessees appeal is accordingly dismissed.

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Order pronounced in the Court on 12th September, 2017 at Ahmedabad

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Sd/- .O Sd/-
IT
(PRADIP KUMAR KEDIA) (S.S. GODARA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
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Ahmedabad, Dated 12/09/2017

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*Bt
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! "!/Copy of the Order forwarded to :

1. / The Appellant
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2. / The Respondent.
3. " $
/ Concerned CIT
4. $
() / The CIT(A)
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5. ' **", ", / DR, ITAT, Ahmedabad

6. / / Guard file.

/ BY ORDER,
TRUE COPY
/ (Dy./Asstt.Registrar)
' (, / ITAT, Ahmedabad