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TMI Blog2018 (9) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... cussions, as also bearing in mind, learned CIT(A) was indeed justified in upholding the validity of reassessment. We uphold his action and decline to interfere in the matter. For the merits of addition in the case of CIT v. Precision Finance (P.) Ltd [1993 (6) TMI 17 - CALCUTTA HIGH COURT] it was observed that “it is for the assessee to prove the identity of creditors, their creditworthiness and genuineness of transactions”. There is thus no escape from proving genuineness of a transaction. The assessee has failed to do so. We, therefore, confirm the addition in respect of alleged share subscriptions received from these two companies- namely Mahanivesh and Geefcee. As regards the addition in respect of commission, we have seen that there is a categorical finding that these entities were arranging the accommodation entries on the basis of 2.5% commission. We, therefore, confirm this addition as well. - ITA No. 4978/Del/2014 - - - Dated:- 23-8-2018 - Pramod Kumar AM And Sudhanshu Srivastava JM For The Appellant : Vinod Bindal For The Respondent : Ravi Kant Gupta ORDER Per Pramod Kumar, AM: 1. When the hearing in this case was concluded on 30th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned CIT(A) in dismissing the ground nos. 1,2,3,4 and 5 was bad in law and facts keeping in view the fact that the inspection of AO s file was allowed in June 2013, i.e. about 4 months after completion of the assessment. 7. That learned CIT(A) failed to appreciate that amended provisions of Section 68 which are substantive in nature were applicable prospectively and were not applicable for the AY 2005-06. 8. That the action of the CIT(A) in confirming the action of the learned Assessing Officer in making the impugned addition and framing the impugned assessment order is contrary to law and facts, void ab initio, beyond jurisdiction and without giving adequate opportunity of hearing, by recording incorrect facts and finding, and the same is not sustainable on legal and factual grounds. 9. That the learned CIT(A) failed to appreciate that the AO had failed to follow the principles of natural justice. 5. In substance, thus, grievance of the assessee is that (a) learned CIT(A) erred in upholding the reopening the impugned assessment proceedings; and that (b) learned CIT(A) erred in upholding the addition of ₹ 80,00,000 as unexplained credit in respect of sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocument/records show that the entire transaction lacks ingredients of genuineness and is totally fishy. It can, therefore, be safely inferred that this amount is unaccounted money of the assessee introduced in his books of accounts after routing the same through these entry providers/groups to avoid taxing of such amounts. In view of the above, I have reasons to believe that the assessee company has taken bogus/ accommodation entries as discussed above to the tune of ₹ 80,00,000 in the period relevant ton the assessment year 2005-06 resulting into an escapement of income to this extent plus the amount of commission paid out of the books. .. 8. While there is not much discussions about the stand of the assessee against the initiation of these reassessment proceedings, the ground of appeal take before the CIT(A) show the following grievances raised by the assessee: 1. The learned Assessing Officer erred in issue of notice under section 148 for reopening the assessment without having adequate grounds to come to the conclusion that there existed reasonable belief that due to failure of the assessee to furnish full and true particulars, income had escape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned CIT(A) observed that it is seen that the appellant was provided inspection of file by the AO and photocopies of the relevant documents provided and, thus, rejected this plea as well. Coming to the plea that material information was not confronted to the assessee, learned CIT(A) observed that since the appellant has inspected the file and taken photostat copies of the material, it is not known what other material was required to be given to the appellant and rejected this plea as well. It was in this backdrop that the CIT(A) confirmed the reopening of assessment. The assessee is not satisfied and is in further appeal before us. 10. Learned counsel for the assessee begins by pointing out that the very notice under section 148 is vitiated in law for more reasons than one. It is pointed out that the said notice states that this notice is being issued after obtaining the necessary satisfaction of the Commissioner of Income Tax/ Additional Commissioner of Income Tax but it does not strike off any of these two authorities. It is then pointed out that the said notice also states that the copy of reasons recorded for initiating proceedings under section 147/148 are enclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned reassessment deserves to be quashed. Learned counsel then submits that the Assessing Officer did not furnish, despite specific requisitions of the assessee, the material based on which the Assessing Officer had formed his opinion that income had escaped the assessment. It is only elementary that unless an assessee is confronted with the material which is being used against him, such a material has no evidentiary value. Accordingly, as per the stand taken by the learned counsel, the material on the basis of which is impugned reassessment proceedings are resorted to, does not have any legally sustainable foundation. When the material does not have legally sustainable foundation, the reassessment, on the basis of such material, is inherently bad in law. He then submits that since the reasons for reopening the assessment were not given alongwith the basis of reopening the assessment, for this reason also, the impugned reassessment proceedings are vitiated in law. It is not submitted that it is not only the reasons for reopening the assessment, but the material constituting basis for coming to this conclusion, must also be shared with the assessee. He then submits that even during i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... un Goyal as running a racket of providing accommodation entries by floating various entities and this modus operendi is not disputed even by Tarun Goyal himself. The painstaking investigation by the investigation wing also brought on record these facts. It is not even the case of the assessee, or, for that purpose, anyone, that these group entities were involved in any genuine business activities. On these facts, the inputs from investigation wing coupled with the fact of the assessee having entered into transactions with these entities, which were solely involved in the business of providing accommodation entries, was a reasonable material for coming to the conclusion that the assessee has introduced own ill gotten funds with the help of the accommodation entries provided by these entities. The decision of the Assessing Officer was a well considered decision and a right decision. It is not the requirement of law that at the stage of the reopening the assessment, the Assessing Officer must have conclusive evidence to establish escapement of income. A bonafide reasonable belief for holding the belief that income has escaped assessment is good enough for reopening the assessment, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed earlier, there is no dispute that the Assessing Officer had material to show that Tarun Goyal group entities were solely involved in the business of providing accommodation entries and that the assessee had received share subscriptions from such entities. Learned Departmental Representative submits that, on these facts, any reasonable person would have prima facie belief that income, to the extent of such alleged share capital subscription as also to the extent of expenses incurred to obtain these accommodation entries for share capital subscription, has escaped assessment. That was the material before the AO, the Addl CIT and the CIT. This material, according to learned counsel, was reasonable basis for coming to the conclusion that income has escaped assessment. Learned Departmental Representative further submits that the assessment was reopened on the basis of reasons recorded by the Assessing Officer, which constituted reasonable basis for coming to the conclusion that income has escaped assessment, and that it did not suffer from any legal infirmity. We are thus urged to confirm the action of the CIT(A) in this regard, and decline to interfere in the matter. In brief rejoin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the reasons. As regards sharing of the basis on which conclusions were arrived at and the material on the basis of which the opinion was formed, we donot find any support, either in law or even in judicial precedents, for this proposition. All that the Assessing Officer is required to share with the assessee are the reasons recorded for reopening the assessment. Rather than objecting to the reasons recorded by the Assessing Officer, the assessee kept on asking for the basis of forming such reasons. That requisition by the assessee, in our humble understanding, was well beyond what was permitted to the assessee. All that is required to be looked into at this stage is whether the Assessing Offcier had a reasonable ground to reopen the assessment. There was no occasion to examine fine points about the legality and legal nuances about the material based on which such prima facie opinion is formed by the Assessing Officer. In any case, despite our several specific questions, learned counsel could not point out any legal support in response to this requisition. 12. Coming to the approval by the Commissioner, in the place of Additional Commissioner, we see merits in the plea of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion sanction or approval refers to. The sanction consists of recording the satisfaction that, on the reasons recorded by the Assessing Officer, it is a fit case for issue of such notice for reopening the assessment. What is material is that such a satisfaction is recorded by the prescribed authority, and it is this satisfaction, we may clarify at the cost of repetition, which is statutorily treated as sanction in the heading of section 151. The words approved or sanctioned are not even required to be used by the prescribed authority, because, under the scheme of section 151, it is satisfaction of the authority, on the reasons recorded by the Assessing Officer, that this is a fit case for reopening the assessment. The use of words that the reassessment is being done with the approval of the Commissioner is meaningless unless the actual satisfaction of the Commissioner is actually seen, and we see that actual processing sheet for so called approval of the Commissioner, it is plain on facts that the satisfaction on the reasons recorded by the Assessing Officer that it is a fit case for issuance of notice under section 148 is not only of the Commissioner but also of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s filed before us fall in the category in which there is nothing on the record to demonstrate, or even suggest, that the Joint/ Additional Commissioner concerned has recorded his satisfaction that, on the reasons recorded by the Assessing Officer, it is a fit case for initiating the reassessment proceedings. We have carefully perused these precedents but we do not find any reference to the finding that in those cases satisfaction of the Joint/Addl. Commissioner of Income-tax, to the effect that, on the reasons recorded by the Assessing Officer, it was a fit case for initiating the reassessment proceedings, was also on record. A decision rendered without taking note of this fact cannot be an authority for the proposition that even when such a satisfaction by the appropriate authority is on record, just because similar satisfaction is expressed by the higher authority is also on record, requirements of section 151 cannot be taken as having been complied with. The binding nature of judicial precedents is only for what they actually decide and not what can be inferred from these judicial precedents. Nothing, therefore, turns on these precedents in the present case. On the contrary, bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ardless of the varying circumstances and myriad developments. Realism dictates that a judgment has to be read, subject to the facts directly presented for consideration and not affecting the matters which may lurk in the dark . Lest we may be blamed for departing from, in the name of reverence to the judicial precedents, a judicial forum's unflinching commitment for the cause of justice, once the factual matrix has admittedly shown a different shade of truth, we must not remain constrained by the judicial precedents which were given oblivious of the facts now glaring at us. 13. The views so expressed by the coordinate bench were approved by Hon ble Gujarat High Court in the judgment reported as Mayurbahi Mangaldas Patel Vs ITO [(2018) 93 taxmann.com 220 (Gujarat)]. While approving the conclusions arrived at by the coordinate bench, Their Lordships have, inter alia, observed as follows: 10. The legal proposition is that when the statute casts a duty on a certain administrative officer, the same must be performed by him and the satisfaction arrived at even by the higher authority would not be sufficient. However, in the present case, there was no lack of satisfaction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his position, as laid down by the Hon'ble Bombay High Court in the case of CIT v. Godavari Devi Saraf ( 113 ITR 589). For slightly different reasons and alongwith some other observations on the issue, which we shall set out a little later, we are in agreement with the conclusions arrived in this case. 6. That takes us to the question whether this decision stands overruled by the Hon'ble Bombay High Court's later judgment in the case of Thana Electricity Co. Ltd. (supra), as submitted by the learned Departmental Representative. 7. It is also important to bear in mind that the question requiring adjudication by Their Lordship was whether or not decision of one of the High Courts was binding on the other High Courts. This will be clear from following observations made by Their Lordships in the beginning of the judgment : On a careful consideration of the submissions of the learned counsel for the assessee, we find that before taking up the issue involved in the question of law referred to us in this case for consideration, it is necessary to first decide.... whether this Court, while interpreting an all India statute like Income-tax Act, is bound to fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ictum and in this very judgment, Their Lordships have held that even in the case of Hon'ble Supreme Court judgments, which are binding on all Courts, except Supreme Court itself, but 'what is binding, of course, is the ratio of the decision and not every expression found therein'. Their Lordships have also referred to the oft quoted judgment of the Hon'ble Supreme Court in the case of CIT v. Sun Engg. Works (P.) Ltd. ( 198 ITR 297) wherein it is held that 'it is neither desirable nor permissible to pick out a word or a sentence from the judgment of this Court, divorced from the context of question under consideration, and treat it to be complete law declared by this Court. [Emphasis supplied]. 10. In this light, and bearing in mind the fact that limited question before Their Lordships was whether or not decision of one of the High Courts is binding on another High Court, it would appear to us that ratio decidendi in Thana Electricity Co. Ltd. (supra), is on the nonbinding nature of a High Court's judgment on another High Court. In any case, this Division Bench did not, and as stated in this judgment itself, could not have differed with another Divis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be followed by a Bench of the Incometax Appellate Tribunal. To that extent, and irrespective of some casual observations on the applicability of non-jurisdictional High Court judgments on subordinate courts and Tribunals, these two decisions deal in two different areas. As we have noticed earlier also, in Thana Electricity Co. Ltd.'s case, a note was taken of Godavari Devi Saraf's judgment and neither the said judgment was dissented nor overruled. In any event, in Thana Electricity Co. Ltd.'s case, Hon'ble Court was alive to the fact, which was acknowledged in so many words, that a Co-ordinate Bench decision cannot be overruled. In this view of the matter, it is difficult to hold, as has been strenuously argued before us by the learned Departmental Representative, that the Hon'ble Bombay High Court's judgment in the case of Godavari Devi Saraf's case stands overruled by Their Lordship's judgment in the case of Thana Electricity Co. Ltd.'s case. The only way in which we can harmoniously interpret these judgments is that these decisions deal with two different issues and ratio decidendi of these decisions must be construed accordingly. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed, we see no need to address matters which are rendered academic in the present context. 17. In this view of the matter, we are inclined to uphold the preliminary objection raised by the assessee. As rightly pointed by the learned counsel, Hon'ble Gauhati High Court has held that when the Assessing Officer does not issue notice under section 143(2) within one year from the end of the month in which block return is filed, it cannot be open to him to start the scrutiny assessment proceedings after the end of that period. A view indeed seems possible that it is not necessary that each of the block assessment return must be subjected to the scrutiny of the Assessing Officer. According to this school of thought, in the scheme of things is they exist today, assessment by scrutiny is an option available to the Assessing Officer and it is not always required to be followed in all the block assessment cases. We, however, see no need to go into all these issues. Suffice to say that respectfully following the Hon'ble Gauhati High Court's judgment in the case of Bandana Gogoi (supra) and having noted the position that notice under section 143(2) was admittedly not issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isfaction ITO v. Selected Dalurband Coal Co. (P.) Ltd. [1996] 217 ITR 597 (SC); Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC). 17. What essentially follows is that the Assessing Officer has a reasonable cause or justification to know or suppose that income has escaped assessment. As long as the Assessing Officer has that justification, he is legally permitted to reopen the assessment. It is this limited justification that is required to be examined while starting the process of reopening the assessment or to approve such an initiation of process of reopening the assessment. Hon ble Supreme Court in the case of Calcutta Discount Co. Ltd. [(1961) 41 ITR 191 (SC)] has observed that It is for him (i.e. the Assessing Officer) to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else to tell the assessing authority what inferences, whether of facts or law, should be drawn. The question, therefore, that is required to be examined whether on the basis of material available at the time of forming, or approving, the opinion that income has escaped assessment, a reasonable person would co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and his supervising officials also clearly applied their mind as much as it was required to come to the conclusion that there is reason to believe that income, to the above extent, has escaped assessment in this case. As a matter of fact, the facts available with the assessee and the belief held by the assessee are in perfect harmony with each other, and it is not a case that the reassessment has been initiated without any application of mind, though, given the simplicity of factual matrix, not much application of mind was needed anyway at the stage of recording reasons for holding this belief. It does not need rocket science to understand as to what is natural corollary of these entities adfmittedly being engaged wholly in the business of providing accommodation entries and the assessee admittedly having received alleged share subscription money from these entities. While coming to the firm conclusion about the income having escaped assessment, and brining it to tax will certainly need much more of an exercise than holding this prima facie belief, there can be little doubt that at the stage of reopening the assessment all that is needed is existence of a prima facie belief t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioner first argues that the notice was not preceded by valid approval based upon proper application of mind by the concerned Commissioner; secondly, that it was not served in the proper manner and was rather served allegedly through affixation. Last and most importantly, it is urged that the reasons to believe furnished are not premised upon any tangible material, instead it vaguely refers to the report of the Investigation Wing. Counsel for the respondent/Revenue urged that the petition should not be entertained. It was pointed out that unlike the other cases (which the petitioner had relied upon in the first instance for AY 2008-09 and 2010-11, W.P.(C) 10664 and 11692/2015 - both of which were decided on 18.10.2016) in the present assessment year, the proviso to Section 147 is inapplicable. For that, it is contended that the assessment was not completed after scrutiny, but was more of an acceptance of intimation of the return. It is next urged that so far as the question of approval is concerned, CIT (A) had clearly considered the reasons to believe that was put up to him and approved the notice. Lastly, it was urged that affixation is a known and accepted mode of servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the case of N C Cables (supra), we find that in this case. Hon ble Delhi High Court has also observed that It is not as if the CIT has to record elaborate reasons for agreeing with the noting put up. At the same time, satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner . Given the simplicity of the factual matrix of this case, and clearly correct inference drawn from the same, learned CIT clearly showed application of mind when he observed that based on the reasons recorded above, I am satisfied that this is a fit case for issue of notice under section 148 of the Income Tax Act . It has not been shown to us as to how this observation reflects non application of mind so far as concealment of income is concerned. We donot see as to how this decision supports the case of the assessee 21. In the light of these discussions, as also bearing in mind, learned CIT(A) was indeed justified in upholding the validity of reassessment. We uphold his action and decline to interfere in the matter. 22. Lets now turn to the impugned additions of ₹ 80,00,000, in respect of alleged bogus share capital subscription, and ₹ 2,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the law was in force in the assessment year 2005- 06, it is for the (income tax) department to satisfy itself to ascertain the credit worthiness of the investors failing which it undertakes suitable remedial measures in the hands of the investor(s) and not in the hands of the recipient company . The assessee also pointed out that the evidences submitted included PAN cards of these entities, board resolutions passed by these entities, related bank accounts of both the entities from which the payments for share capital subscriptions were made, copies of distinctive share certificates, copies of letter from these two entities confirming the fact of share subscriptions and extracts from the minutes of meeting of the directors of the assessee company authorising issuance of share capital to these entities. The submissions so made by the assessee did not satisfy the Assessing Officer. He was of the view that genuineness of these two companies subscribing to the share capital was not proved nor there were satisfactory details about the source of funds in the hands of these two companies. The Assessing Officer sent an inspector at the given address but he could not locate these companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned to certain technicalities. It was submitted that while entire assessment order was wordprocessed, only the dates were left out in all the crucial documents. This fact, according to the learned counsel, showed that the assessment order was ready much before the assessment proceedings were concluded and that the Assessing Officer was proceeding with a predetermined mind. Learned counsel then again referred to a large number of judicial precedents on the basis of sweeping generalizations. He submitted that the additions under section 68 cannot be made only because investigation wing believes that the entries are accommodation entries, and that there is nothing more, to support the case of the revenue, in the present case. We were thus urged to delete the impugned additions. Learned Departmental Representative, on the other hand, submits that in any unexplained credit addition, the most crucial element is genuineness and the assessee has not at all proved genuineness of the transaction. It is submitted that genuineness cannot be proved simply by giving evidences of existence of the assessee and procedural compliance, because even if the assessee is involving in not so genuine an ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irm the findings of the CIT(A) and decline to interfere in the matter. In rejoinder, learned counsel for the assessee once again reiterates his submissions and urged us to delete the impugned additions as there is no material to justify the same. 25. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 26. While dealing with the scope of Section 68 so far as alleged accommodation entries are concerned, we consider it appropriate to refer to the following observations made by Ahmedabad SMC bench of the Tribunal in the case of Pavankumar M Sanghvi (supra): 7. In my considered view, so far as the legal foundation of the impugned additions is concerned, it consists of assessee's inability to satisfy the Assessing Officer about all the three essential ingredients of a credit entry in the books of accounts- existence of the lender, ability of the lender to advance funds in question, and, above all, genuineness of the transaction. There is no dispute about the basic legal position about section 68 which provides that where any sum is found credited in the books of accounts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed on facts of the case vis- -vis the ground realities. The facts of the case cannot be considered in isolation with the ground realties. It will, therefore, be useful to understand as to how the shell entities, which the loan creditors are alleged to be, typically function, and then compare these characteristics with the facts of the case and in the light of well settled legal principles. A shell entity is generally an entity without any significant trading, manufacturing or service activity, or with high volume low margin transactions- to give it colour of a normal business entity, used as a vehicle for various financial manoeuvres. A shell entity, by itself, is not an illegal entity but it is their act of abatement of, and being part of, financial manoeuvring to legitimise illicit monies and evade taxes, that takes it actions beyond what is legally permissible. These entities have every semblance of a genuine business- its legal ownership by persons in existence, statutory documentation as necessary for a legitimate business and a documentation trail as a legitimate transaction would normally follow. The only thing which sets it apart from a genuine business entity is lack of g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .79 crores), and sells these products too but all that the lender has spent on salaries is ₹ 2,26,000, on office expenses is ₹ 8,560, on office rent is ₹ 27,600 and on printing and stationery is ₹ 8,560. All this is simply not representative of what a genuine business would typically be. As regards Mohit International also, the story is no different. The bank statement, which is placed at pages 75 onwards, has the same theme of high transactions during the day and a consistently minimal balance at the end of the working day. On 28th April 2006, i.e. the day the assessee is given ₹ 10,00,000, there are credit entries of almost similar amounts, and he balance after these transactions is a small amount of ₹ 13,020. Similar is the pattern of transactions on all the days in respect of which this statement is placed before me. On 23rd March 2007, for example, the opening balance is ₹ 1,36,611 and there are huge debits and credit entries on 23rd and 24th March, aggregating to almost ₹ 4 crores on debit as also credit, and the closing balance at the end of 24th March is ₹ 85,991. On a turnover of ₹ 127.87 crores, the profit is les ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our opinion, is a superficial approach to the problem. The matter has to be considered in the light of human probabilities. ..........................Similarly the observation ...........that if it is alleged that these tickets were obtained 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 observed, in the case of Durg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nner, 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 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 legal flame. Beyond those walls and de hors the milieu we cannot impart eternal vernal value to the decisions, exalting the precedents into a prison house of bigotry, regardless of the var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecedent. Let us, in this light, revert to the facts of the case before us. The assessee before us is a private limited company which is, by law, prohibited from offering its securities for subscription by general public. It cannot, therefore, be really open to the assessee to say that we have no clue about who the subscribers to the share capital are; these cannot be rank outsiders or walk in subscribers- as perhaps in the cases of public limited companies. Yet, all that the company has to offer, to establish genuineness of transactions of subscribing to the shares, are the bank statements. The assessee is not able to produce the brains behind these companies and the documents with respect to the their financials either. As for the other documents, these documents have to be there for issuance of share capital anyway- genuine subscription or not so genuine subscription. Genuineness of a transaction cannot be demonstrated on the basis of these documents. The assessee has not been able to produce the principal officers of these entities, but then, given the way the facts about these entities have unfolded, the reasons for the limitations of the assessee are not difficult to seek. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me other company. On 25th June and 28th June, it is the same story again though the amounts or debits and credits are ₹ 15,00,0000 and ₹ 10,00,000 respectively. As regards the other bank account of Geefcee in ABN Amro Bank is concerned, the situation is no better. On 3rd June, i.e. opening day of this bank statement, there is a credit balance of ₹ 5,742.32. On June 9, there are deposits of ₹ 20,10,000 and, on the same day, a payment of ₹ 20,15,000 is made leaving a balance of less than ₹ 1,000. On 11th June, there are deposits of ₹ 10,00,000 and on the same day, there is a payment of ₹ 10,00,000. On 16th June again, it is the same story but the amount is now ₹ 20,00,000. On other dates in the ABN Amro Bank statement, as given to us, is the same story. What do we conclude from these statements? The overnight balance in the bank accounts are of small amounts and the payments made from these accounts are almost at the time of making payment are transferred from other sources, for which no explanation is available. This is typical of a situation in which the bank accounts are used as a conduit to launder the ill gotten money. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts where the judicial lamp plays the legal flame. Beyond those walls and de hors the milieu we cannot impart eternal vernal value to the decisions, exalting the precedents into a prison house of bigotry, regardless of the varying circumstances and myriad developments. Realism dictates that a judgment has to be read, subject to the facts directly presented for consideration and not affecting the matters which may lurk in the dark . Genuineness of transactions thus cannot be decided on the basis of inferences drawn from the judicial precedents in the cases in which genuineness did come up for examination in a very limited perspective and in the times when shell entities were virtually non-existent. As the things stand now, genuineness of transactions is to be examined in the light of the prevailing ground realities, and that is precisely what we have done. We are of the considered view that there is nothing to establish genuineness of the share subscription transactions on the facts of this case. The assessee does not know anything about these companies or these persons. The assessee has no documents about their financial activities or their balance sheets. The assessee is a private ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll effect . The risk is that when a specific provision, to make the things clear and beyond any doubt, is enacted with respect to a particular point of time and a particular consequence is envisaged by the provision, interpretation of the law or treaty will invariably be inclined to draw to the inference that no such consequence was envisaged by the legislature or the treaty prior to the amendment coming into force. That is a common and fairly well accepted approach. There is, however, a rider. The rider is that even on the first principles and in a situation in which a binding judicial precedent or judicial analysis of the pre-amendment legal has already come to the same conclusions, as indicated by the specific amendment as a measure of abundant caution, such a kill effect is ruled out. That precisely is the situation before us. In such cases, the impact of amendment remains confined to the areas on which either (i) on the areas on which, with the help of pre- amendment provisions, the judicial conclusions are at variance with the conclusions arrived at with the help of amendment; or (ii) such areas have remained intact from the judicial precedent. Viewed thus, merely because t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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