Referring matter to valuation officer unjustified as books of accounts not rejected

ITO Vs Pritham and Prathik Hospitals Pvt. Limited (ITAT Hyderabad)

ITAT Hyderabad held that prior to 01.10.2014 it was essential for the Assessing Officer to reject the books of accounts of the assessee before referring the matter to the Valuation Officer for determining different entries and the expenditure incurred by the assessee.

Facts- A survey u/s 133A of the Income-tax Act, 1961 was conducted at business premises of the assessee and during the survey proceedings, certain documents/loose sheets found at the business premises were impounded. Assessee company did not file its Return of Income for the A.Y.2014-15. Subsequently, the case was selected for compulsory scrutiny. A notice under section 142(1) of the I.T.Act was served on the assessee calling for return of income. The assessee company filed Return of Income on 31/07/2015 admitting total income as Nil. Thereafter, AO completed the assessment on 31.12.2016 by making an addition of Rs.64,10,599/- u/s 143(3) of the Act on account of difference in Cost of Construction as per valuation Report u/s 69 of the I.T.Act,1961 and also added Rs.1,29,10,000/- as unexplained share capital money appearing in the balance sheet as on 31.03.2014 assessed u/s.68 of the I.T.Act after reducing initial Share Application Money invested during the F.Y.2012-13.

Feeling aggrieved with the order of Assessing Officer, assessee carried the matter before ld.CIT(A), who allowed the appeal in favour of the assessee. Feeling aggrieved with the order of ld.CIT(A), Revenue is now in appeal before us.

Conclusion- Hon’ble Supreme Court in the case of Sargam Cinema vs. Commissioner of Income Tax, reported it was held that without rejecting the books of accounts, it is not open for the Assessing Officer to refer the matter to Valuation Cell, Income Tax Department for determining different entries and the expenditure incurred by the assessee.

Held that prior to 01.10.2014 it was essential for the Assessing Officer to reject the books of accounts of the assessee before referring the matter to the Valuation Officer.

FULL TEXT OF THE ORDER OF ITAT HYDERABAD

This appeal by the Revenue and cross-objection by the assessee are directed against the order of Commissioner of Income Tax (Appeals), Kurnool dated 29.11.2018 for the assessment year 2014-15.

2. The Revenue has raised the following grounds :

“(i) The order of ld.CIT(A) is erroneous both on facts and in law.

(ii) The Ld.CIT(A) erred, in holding that the reference to Valuation Officer cannot be made without rejecting the books of account, by ignoring the amended provisions of 142A(2) of the Act w.e.f. 01-10-2014 which stipulates that the AO may make a reference to the Valuation Officer, whether or not satisfied about the correctness or completeness of the accounts of the assessee.

(iii) The Ld.CIT(A) erred in holding that the appellant discharged the onus of proving the credits, ignoring the fact that many of the alleged share applicants did not appear for examination and the others who appeared denied on examination under oath to have paid share application money.

(iv) The learned CIT (A) ignored the fact that the main shareholders Sri T. Dinakar Reddy and Smt. G. Aparna could not prove their genuineness of the gifts which were used by them for investing in share application money.

(v) Under the facts and circumstances of the case, the Ld. CIT(A) erred in holding that the company discharged the onus of proving the credits ignoring the jurisdictional HC decision iii the case of Dhanalakshmi Steel Rerolling Mills Vs.CIT (AP) 228 ITR 780 and the Hon’ble SC decision in the case of CIT Vs.BijuPatnaik 160 ITR 674.

(vi) Under the facts and circumstances of the case, the Ld. CIT(A) erred in directing the AO to delete the additions made u/s 68 and u/s 69 of the Act, on the ground that the company was not carrying on any business activity daring the year under consideration and no source of income exists.

(vii) The Ld. CIT(A) was erred in holding that the share application money was to be taxed in the hands of shareholders for not proving their creditworthiness ignoring the amended provisions of section 68 w.e.f. 01-04-2013.”

3. The only effective ground raised by the assessee in C.O. reads as under :

“The learned Commissioner of Income-Tax (Appeals) ought to have considered the fact that the Valuation of cost of construction is not properly made and if the correct working is made, there would be no addition on account of difference in valuation.”

4. The C.O. filed by the assessee is barred by limitation by 26 days. It has moved a condonation explaining reasons thereof. We have heard both the parties on this preliminary issue. Having regard to the reasons given in the petition, we condone the delay and admit the C.O., of the assessee for hearing.

5. First, we take up the appeal of Revenue i.e. ITA 97/Hyd/2019 for adjudication.

5.1. Though the assessee has raised six grounds but out of them, ground No.1 is general in nature, ground no. 2 is with respect to addition of Rs.64,10,599/- made u/s 69 of the Act and the remaining grounds are inter-connected and are with respect to addition of Rs.1,29,10,000/- towards unexplained share capital money u/s 68 of the Act.

5.2. Facts of the case, in brief, are that a survey u/s 133A of the Income-tax Act, 1961 was conducted at business premises of the assessee and during the survey proceedings, certain documents/loose sheets found at the business premises were impounded. Assessee company did not file its Return of Income for the A.Y.2014-15. Subsequently, the case was selected for compulsory scrutiny. A notice under section 142(1) of the I.T.Act was served on the assessee calling for return of income. The assessee company filed Return of Income on 31/07/2015 admitting total income as Nil. Thereafter, Assessing Officer completed the assessment on 31.12.2016 by making an addition of Rs.64,10,599/- u/s 143(3) of the Act on account of difference in Cost of Construction as per valuation Report u/s 69 of the I.T.Act,1961 and also added Rs.1,29,10,000/- as unexplained share capital money appearing in the balance sheet as on 31.03.2014 assessed u/s.68 of the I.T.Act after reducing initial Share Application Money invested during the F.Y.2012-13.

6. Feeling aggrieved with the order of Assessing Officer, assessee carried the matter before ld.CIT(A), who allowed the appeal in favour of the assessee.

6.1. Feeling aggrieved with the order of ld.CIT(A), Revenue is now in appeal before us. However, ld.CIT(A) had granted relief to the assessee and the reasoning given by ld.CIT(A) mentioned at Paras 6 and 6.1 at Pages 20 and 21 read as under :

“6. The assessment order, statement of facts, grounds of appeal and written submissions have been perused. It is evident that the books of accounts of the appellant are audited u/s.44AB of the I.T.Act and the AO not rejected the books of accounts. The AO compared the value determined by the DVO with the value of construction adopted by the appellant itself implies that the AO is satisfied by the books of accounts of the appellant. The facts of the present case may be examined in the light of the statutory scheme discussed by the Hon’ble Supreme Court in Sargam Cinema v. Commissioner of Income Tax, reported in (2010) 328 ITR 513 (SC). In this regard, a perusal of the assessment order reveals that the AO has made the reference to the Valuation Officer merely to seek expert advice regarding the cost of construction. There is nothing in the assessment order to suggest that the AO had any doubt regarding the cost of construction or that he was not satisfied regarding the correctness or completeness of the books of account. Before making the reference to the Valuation Officer for ascertaining the fair priced of construction, the Assessing Officer does not appear to have ascertained the correctness or otherwise of the cost of construction shown by the appellant in its books of account. Thus, prior to making the reference to the Valuation Officer, the AO has not ascertained as to what was the defect in the cost of construction disclosed by the appellant in its returns of income. Moreover, it is apparent that the only reason for making the addition u/s.69 of the Act is that there is a difference in the cost of construction as determined by the Valuation Officer and as shown by the assessee. At no stage of the assessment proceedings does the AO appear to have mentioned that the books of account are defective or that the cost of construction as shown in the books of account is not the true cost of construction. Thus, while making the reference to the Valuation Officer, the AO has not recorded any defect in the books of account nor he rejected the same. Except for the difference in the estimated cost determined by the Valuation Officer and the actual cost as shown by the appellant, the AO has not brought any material on record to establish that the appellant had made any unaccounted investment in the construction of the building in question and that the books of account do not reflect the correct cost of construction.

6.1  Considering the facts and circumstances of the case, there was no occasion for the Assessing Officer to make a reference to the Valuation Officer. I hold that reference made to the Valuation Officer, not being in consonance with the provisions of law, was, therefore, invalid. Accordingly, the report made by the Valuation Officer pursuant to such an invalid reference could not have been made the basis for addition under section 69 of the Act. Hence, the AO is directed to delete the addition of Rs.64,10,599/-on account of difference in Cost of Construction as per valuation Report u/s 69 of the I.T.Act, 1961.”

7. Addition of Rs.64,10,599/- u/s 69 of the Act on account of difference in DVO valuation and the cost of construction incurred by the assessee as per books of accounts:

7.1. With respect to addition of Rs.64,10,599/- u/s 69 of the Act, the ld. DR had drawn our attention to Paras 4 and 5 of the assessment order wherein the Assessing Officer after referring the matter to the Valuation Cell, Income Tax Department, for valuation had determined the cost of construction and he found the probable expenditure incurred by the assessee for the assessment year under consideration was Rs.3,35,40,081/- whereas as per the assessee, it was Rs.2,17,24,352/-. Thus, there was a difference of Rs.64,10,599/-. For the ready reference, Paras 4 and 5 of assessment order are reproduced hereunder :

4. notices u/s 143(2) and 142(1) of I.T. Act, 1961 dated 03.08.2015 along with questionnaire were issued and duly served on the Managing Director of Assessee company on 10.09.2015. In response to the notices issued, the Company’s Authorized Representative Sri M. Subba Reddy, CA appeared and filed the Certificate of Incorporation, Memorandum of Association and copy of Return of Income for the assessment year 2014-15 along with its enclosures. The assessee company’s Authorized Representative has been asked to produce books of account, bill and vouchers for the huge expenditure incurred in the construction of Hospital Building besides providing documentary evidences in support of loans and gifts received and copies of statements of all the Banks Accounts and any other relevant information in respect of the pending assessment proceedings. The Authorized Representative of assessee company has furnished the information called for. On examination of Return of Income filed by the Assessee-Company, it is seen that the Company has introduced Share Capital to the tune of Rs.1,50,00,000/- during the financial year 2013-14 relevant to the Asst. Year 2014-15 and incurred expenditure on the construction of Hospital Building. As per the books of account of the Assessee-Company and recording of the investment in the construction of the Hospital Building were concerned, there is a discrepancy with reference to the material impounded at the time of survey proceedings. In light of the above, in order to ascertain the actual expenditure incurred in the construction of Hospital Building by the Assessee-Company a reference has been made to the Valuation Cell, Income Tax Department, Hyderabad on 23/03/2016. The Superintending Engineer (Val), Income Tax Department, era ad had furnished his valuation report vide File.No.SE(V)Hyd/2799/Cost/3690 dated 20/12/2016 which is received in this office on 26/12/2016. The Hospital Building was valued at the details as under:

5. As per report of Valuation Cell, there is a difference of expenditure incurred in the construction of Hospital Building to the extent of is at Rs.64,10,599/- for the Asst. Year 2014-15. An opportunity letter dated 26­12¬2016 was issued to the Assessee-Company, why the difference of expenditure as per valuation report should not be brought to tax as per provisions of section 69 of the Income Tax Act, 1961. In response, the Asssessee-Company has filed its reply on 29-12-2012 stating that without rejecting the books of accounts, it would not be open to AO to have ordered the valuation officer to value the property in terms of sec. 142(A) and further the Company requested 30 days time to submit details as called for by the AO. The time sought by the Assessee-Company to submit details is not accepted, due to lack of time for completion of assessment, since the case is barred by limitation by 31/12/2016. Further, there is no merit in the contention of the Company with regard rejection of books before making reference to the Valuation Officer to value the property in terms of sec. 142A. Earlier, it was held by some Courts that the matter cannot be referred to DVO for determining cost of construction without rejecting books of account. Section 142A(2) has been substituted w.e.f. 01.10.2014 empowering the AO to make a reference to the Valuation Officer under sub­section (1) whether or not he is satisfied about the correctness or completeness of the accounts of the assessee. Therefore, the objection of the assessee is not tenable and hence, the difference of Rs.64,10,599/-between the cost of construction as determined by the Valuation Officer and actual cost shown by the Assessee-Company is added to the income returned and brought to tax as per provisions of section 69 of the Income Tax Act, 1961.”

8. Ld. DR had submitted that once the independent valuation report has been received by the Assessing Officer and then it is not permissible in law for the ld.CIT(A) to delete the addition on account of difference in expenditure incurred for construction of hospital building.

9. Per contra, ld. AR submitted that the books of accounts of the assessee have not been rejected by the Assessing Officer more particularly, when it was the case of the assessee that during the course of survey, the loose papers/diary recovered from the assessee wherein the assessee has meticulously noted the expenditure on day-to-day basis. Nothing objectionable was found in the diary so recovered during the course of survey and it was the case of the assessee that in the absence of any rejection of books of accounts, the entries found to be made in the diary maintained by the assessee are required to be accepted.

10. We have heard the rival submissions and perused the material on record. The ld.CIT(A) in Para 6 of his order had examined the case of the assessee with sufficient details and after relying upon the decision of Hon’ble Supreme Court in the case of Sargam Cinema vs. Commissioner of Income Tax, reported in (2010) 328 ITR 513 (SC) wherein it was held that without rejecting the books of accounts, it is not open for the Assessing Officer to refer the matter to Valuation Cell, Income Tax Department for determining different entries and the expenditure incurred by the assessee. In the present case, it is also worth appreciating that during the course of survey, the diary/ loose papers were recovered from the premises of assessee and the entries made therein have not been doubted by the Assessing Officer. In the above scenario, we are of the opinion that in view of section 292C of the Income Tax Act, if a document is found to be in possession of the assessee during the course of search or survey, then it is presumed to be belonging to the assessee and it was validly maintained by the assessee.

10. Further, we are of the opinion that prior to 01.10.2014 it was essential for the Assessing Officer to reject the books of accounts of the assessee before referring the matter to the Valuation Officer. Needful has not been done. Further, we are also in agreement with the finding recorded by the ld.CIT(A) whereby he had noted that the DVO had worked out the expenditure on construction of hospital building based on the CPWD rates of Delhi and not on the rates prevailed in District Kadapa. For the above said reason, we do not find any reason to interfere with the order passed by the ld.CIT(A) and accordingly, this ground raised by the Revenue is dismissed.

Addition of Rs.1,29,10,000/- towards unexplained share capital money u/s 68 of the Act.

11. With respect to addition of Rs.1,29,10,000/-, the ld. DR had drawn our attention to paras 7.1 and 7.2 of the order passed by ld.CIT(A) which are to the following effect.

“7.1 From the information furnished in written submissions, it is clear that the appellant provided the address of the person, confirmation letter from him. I also find that some of these creditors were present before the Assessing Officer and they explained the source for their investment.

7.2 In the circumstances, I hold that the appellant discharged the onus of proving the credits and, therefore, the addition of Rs.1,29,10,000/- is deleted. The addition needs to be deleted even on the ground that the appellant company had no source of income during the year under consideration. The decision of the Apex Court in the case of CIT vs. Bharat Engg. and Construction reported in 83 ITR and the decision of the Hon’ble Supreme Court in the case of CIT vs. P.K.Noorjahan reported in 237 ITR 570 are also applicable. The Hon’ble Delhi High Court in the case CIT vs.Vrindavan Farms(P) Ltd 42 ITR 169 (Delhi) held that “if the identity and other details of the share applicants are available, the share application money cannot be treated as undisclosed income in the hands of the Company. The addition, if at all, should be in the hands of the applicants if their creditworthiness cannot be proved.”

12. In respect of this ground, it was submitted by the ld. DR that the ld.CIT(A) has not considered the submission of the Assessing Officer wherein the Assessing Officer had categorically pointed out that despite grant of sufficient opportunities to the shareholders, they have not appeared before the Assessing Officer and only four shareholders had appeared and they were examined. However, on examination, the said shareholders have failed to prove their source of investment made in the company of the assessee. Thereafter, he relied on the written submissions to the following effect :

“2. A survey was conducted on 26.02.2015 to evaluate the cost of construction of hospital and to verify the sources of investment made in the construction of hospital. During survey the AO noticed that no ROI was filed by the assessee company. The case was taken up for scrutiny. Subsequently the assessee filed its ROI on 31/07/2015. During scrutiny the AO noticed that there is discrepancy in the cost of construction and investment recorded in books of accounts. The AO referred the matter to DVO to ascertain the cost of construction. As per the report of the DVO, the total expenditure is Rs.5.73 cr as against that recorded by the assessee at Rs.3.71 cr. For AY 2014-15 the cost is Rs.1.81 cr and the expenditure recorded is Rs.1.17 cr. The AO thus added the difference of Rs.64.10 lacs.

3. On the objection that reference cannot be made unless books of accounts are rejected, the AO relied upon the amended provision of 142(2A) wef 01.10.2014 empowering the AO to make reference to DVO whether or not he is satisfied about the correctness or completeness of the accounts.

4. Further for AY 2014-15, the AO noticed that assessee is in receipt of Rs.1.50 cr as share capital. In all there were 22 subscribers to shares. Out of which Dr. T. Dinkar Reddy and Dr. G. Aparna were the founders of the assessee company. The entire share capital has been raised in cash. AO issued summons to all the shareholders. 12 shareholders attended and their statements were recorded. 8 out of 12 shareholders who attended deposed that they have neither given share applications nor did the company allot any share to them. AO noticed that these were agriculturists having very meager land holdings of 3 to 5 acres. He thus made addition of Rs.31 lacs.

The balance shareholders were examined.

(i) Dr. T. Dinkar Reddy: Invested Rs.29.90 lacs. When the AO enquired into the sources, it was seen that Dinker Reddy has received gifts of Rs.16 lacs in cash, but no evidence was produced. He thus made addition of Rs.16 lacs.

(ii) Dr. G. Aparna: Invested Rs.20.10 lacs. AO noticed that the shareholder did not have sufficient income as well as could not produce evidence for receiving gifts. He thus added Rs.13.10 lacs.

(i) Smt. G. Venkata Lakshmi: Invested Rs.10 lacs. The shareholder could produce no evidence in support of her investment. AO thus added Rs.10 lacs.

(iv) Smt. T. Haritha: Invested Rs.2.50 Lacs. The shareholder could produce no evidence in support of her investment. AO thus added Rs.2.50 lacs. Thus, a total of Rs.1.29 cr was added on account of unexplained share capital -u/s 68. The AO relied on as many as 12 decisions in support of making addition u/s 68.

5. Remaining 10 share holders did not attend. The assessee on behalf of such non-attending shareholders submitted particulars. It was noticed that they were all agriculturists and have invested in cash only. AO noticed that no shares were actually allotted. He thus made addition of Rs.56.50 lacs as the identity, genuineness and creditworthiness was not established.

Total addition is Rs.1.29 cr, out of total Rs.1.50 cr.

6. Before CIT the assessee contended that as there is no income, it is not required to file ROI. With regard to the cost of construction, the assessee submitted that if correct figures are taken there would hardly be any difference. Assessee further stated that no addition can be made when there is no income during the year. Assessee relied upon the SC decision in the case of Noorjahan and Bharat Engineering.

However as per the Income Tax Act, a firm a company have to necessarily file their ROIs.

With regard to the unexplained shareholders the assessee relying on the AP HC decision in the case of Lanco Industries Ltd. 242 ITR 357 held that amount invested has to be considered in the hands of shareholder himself. Assessee also relied upon the SC decision in the case of Lovely Exports P. Ltd.

The CIT(A) held, that assessee is not carrying on any business activity and no s sources exists. The decisions of SC are applicable to the case and no addition is required to be made. The AO did not mention any such discrepancy in the assessment order. The valuation report does not refer to any discrepancy. There is no error in the books.

7. On the decision of the CIT(A) the grounds of appeal are that the CIT did not appreciate that AO in his order has rejected the books of accounts. Further as per the amended provisions of 142A AO can make reference to DVO whether or not he is satisfied about the correctness or completeness of the accounts. In fact, a survey was conducted just to evaluate the cost of construction. The CIT did not appreciate that addition u/s 69 can still be made even if there is no activity or income during the year. Lastly the CIT did not appreciate that addition u/s 68 can still be made even if there is no activity or income during the year.

8. (i) In the case of AP HC in Lanco Industries, the Tribunal observed that in view of the short time-lag left to the Assessing Officer, the assessment was completed without making necessary enquiries and without calling upon the assessee to furnish more details. It emerges that AO could not complete the enquiries and could not hold the shareholders as dummy. In the present case, the AO has summoned the persons and recorded their statements. After thoroughly examining the witness, the AO has come to the conclusion that the shareholders have no source for investment and made addition in the hands of the assessee. There are several judgments of the High Court which have clearly laid dc principle that the onus lay with the assessee in section 68 of the Act.

(ii) SC decision in the case of P.K. Noorjahan in (1999) 103 taxman 32 is entirely in different context. In that case, the assessee, a young lady of 20 years, purchased certain lands and submitted that the investments were financed from out savings from the income of properties which were left by her step-father. The Assessing Officer, however, made an addition of the amount as her income from other sources. On appeal, the AAC affirmed the order of the Assessing Officer. second appeal, the Tribunal observed that though the-explanation about the nature and sources of purchase money was not satisfactory, but in instant case it is impossible for the assessee of such tender age to earn the amount for a decade more. The Tribunal held that section 69 confers only a discretion on the Assessing Officer to deal with investment and it does not make it mandatory to deal w income of the assessee in each and every case. Therefore, in view of circumstances, the Tribunal deleted the addition which was affirmed by the High Court reference.

It is the case where the source of income for investment was not found taxable the hands of the assessee. It is not the case that no addition can be made when there is no income.

(i) In the case of Bharat Engineering & Constructions P Ltd in (1972) 83 ITR 187 the assessee-company was an engineering construction company. It commenced business in May, 1943, and in their accounts, there were several cash credit entries in the first year of its business. The explanation given by the assessee found to be false by the ITO, the AAC and the Tribunal. But, the Tribunal felt these cash credit entries could not represent the assessee’s income or profit as they were all made very soon after the company commenced its business. Tribunal further rejected the revenue’s reference application under section 66(1), no question of law arose from its findings. The High Court also rejected application under section 66(2). On appeal. before the Supreme Court, their lordships observed – In the absence of satisfactory explanation from the assessee the ITO might assume that cash credit entries in its books represented income from undisclosed sources. But what inference should be drawn from the facts proved was a question of fact and the Tribunal’s finding on that question was final. The SC in fact held that the AO might assume that cash credit entries in its books represented income from undisclosed income. However, it held that what inference is to be drawn is a question of fact and the tribunal’s finding on that question is final. Thus, the facts of the case are entirely different.

9. Following the decisions of different courts in CIT v. Sophia Finance Ltd. (1994) 205 ITR 98, Hindustan Tea Trading Co. Ltd. v. CIT (2003) 263 ITR 289 (Cal), CIT v. Ruby Traders 86 Exporters Ltd. (2003) 263 ITR 300 (Cal) and CIT v. Nivedan Vanijya Niyojan Ltd. (2003) 263 ITR 623 (Cal) etc, the law is now absolutely clear that unless the assessee is able to establish the identity of the subscribers, their creditworthiness as well as genuineness of the transaction will be regarded as non-genuine for the purposes of Section 68 of the Income Tax Act, 1961. There are plethora of decisions consequent to the decision of Lovely Exports. It is also well settled law that onus of proving credits in its book of accounts lies squarely on the assessee and such proof consists of proving the identity of the subscriber or creditor, capacity of such creditor or subscriber to make payment and also to prove the genuineness of the transaction. It is only when the assessee discharges this primary onus, that onus shifts to the Department. Merely establishing the identity of the creditor is not sufficient. This is the ratio in a large number of decisions including:

• • Shankar Industries vs CIT (1978) 114 ITR 689(Ca1);
  • Kant & Co vs CIT (1980) 126 ITR 63 (Cal);
  • Prakash Textile Agency vs CIT (1980) 121 ITR 890(Cal);
  • Oriental Wire Industries P. Ltd vs CIT(1981) 131 ITR 688(Cal)
  • CIT vs United Commercial &Industires Co.(P) Ltd., (1991) 187 ITR 596, 599(Cal)
  • A UnneeriKutti vs CIT (1992) 198 ITR 147, 150(Ker), Special Leave Petition dismissed by the Supreme Court (1993) 201 ITR (St.) 23 (SC);
  • CIT vs Precision Finance Pvt Ltd (1994) 208 ITR 465, 470(Cal)
  • The manner of payment by the account payee cheque is also no sacrosanct and this cannot make a bogus transaction as genuine one:
  • CIT vs Precision Finance Pvt Ltd 208 ITR 465, 470, 471(Cal)
  • CF. Nizam Wool Agency vs CIT (1992) 193 ITR 318, 320(A11).”

13. Per contra, ld. AR for the assessee had submitted that one more opportunity may kindly be granted to the assessee to prove and produce the shareholders before the Assessing Officer / ld.CIT(A) to prove the genuineness, creditworthiness and identity of the shareholders.

14. We have heard the rival submissions and perused the material on record. Ld. DR submitted that though Assessing Officer had granted several opportunities, all the shareholders did not appear before the Assessing Officer except four shareholders and even they also failed to prove the source of their investment in the assessee company. On the other hand, ld. AR prayed for grant of remand to produce the shareholders before the Assessing Officer to prove its case. In light of the above, we find force in the argument of the ld. AR for the assessee whereby he sought remanding the matter to the file of Assessing Officer to produce the shareholders before the Assessing Officer to prove the genuineness, creditworthiness and identity of the shareholders in order to prove its case. Hence, we remand the matter back to the file of Assessing Officer with a direction to record denovo finding about the genuineness and creditworthiness of the alleged shareholders after affording sufficient opportunity of hearing to the assessee in accordance with law. Needless to say the assessee may file any documents / evidence in support of its claim to prove the genuineness and creditworthiness of the subject transactions. Thus, this ground of Revenue is allowed for statistical purposes.

15. In the result, the appeal of Revenue is partly allowed for statistical purposes.

16. Now, we take up the Cross Objection filed by the assessee.

17. Before us, ld. AR for the assessee submitted that if once the appeal of Revenue is decided, the C.O. of the assessee would become academic and infructuous.

18. Since the appeal of Revenue is allowed for statistical purposes, therefore, the Cross Objection filed by the assessee rendered academic. However, the assessee can take all the legal objections as may be permissible in law before the Assessing Officer against the subject matter of the assessment. Thus, the C.O. filed by the assessee is dismissed in the above terms.

19. To sum up, the appeal filed by the Revenue is partly allowed for statistical purposes and the Cross Objection filed by the assessee is dismissed.

Order pronounced in the Open Court on 29th November, 2022.