The onus to prove the identity, creditworthiness, and genuineness of a transaction lies with the assessee, and mere formal evidence such as incorporation details and banking transactions may not be sufficient. Deeper scrutiny and a reasonable approach by both the assessee and the Assessing Officer are necessary.

Sanjiv Khanna, J.

1. These two appeals by the Revenue relate to a common assessee i.e., N.R. Portfolio Pvt. Ltd. and the questions raised relating to assessment years 2002-03 and 2003-04 are similar. They pertain to the additions made by the Assessing Officer under Section 68 of the Income Tax Act, 1961 (Act, for short) of Rs.1,2,34,100/- and Rs.75,60,200/- for the assessment years 2002-03 and 2003-04 on account of share application money.

2. The contention of the Revenue is that the Income Tax Appellate Tribunal (tribunal) has dealt with the issue superficially and has failed to notice the money laundering indulged into and the clandestine manner in which unaccounted and black money had been brought into books by this dubious method. It is contended that the decision in the case of CIT Vs. Lovely Exports Ltd. 299 ITR 268 (Del) is being misunderstood and misinterpreted resulting in a spate of matters wherein assessees have adopted this surreptitious method to convert unaccounted for money into share application money.

3. Revenue has relied upon the decision of this Court in the case of CIT vs. Nova Promoters and Finlease (P) Ltd. [2012] 342 ITR 169 (Del).

4. By order dated 13th August, 2013, the following substantial question of law was framed in the two appeals:-

“Whether the Income Tax Appellate Tribunal was right in deleting the additions of Rs.63,80,100/- and Rs.75,60,200/- in respect of Assessment Years 2002-03 and 200304 under Section 68 of the Income Tax Act, 1961 and whether the decision of the Tribunal is perverse?”

5. The respondent-assessee is a private limited company and for the assessment years 2002-03 and 2003-04 had filed returns declaring income of Rs.11,566/- and 18,720/-, respectively. These returns were processed under Section 143(1) of the Act. Subsequently, reassessment proceedings were initiated under Section 147/148 of the Act on the basis of information received from the Investigation Wing that the assessee was one of the beneficiaries, who had procured share application money from entry providers. Assessment proceedings under Section 147/148 of the Act in the two years were initiated by issue of notices on 28th November, 2006. The notices were received back unserved and subsequently were served by affixture at the last known address i.e., the address given in the returns. The assessee, however, did not appear in response to the said notices. The Assessing Officer thereupon on 8th October, 2007 issued show cause notice under Section 144 read with Section 147 of the Act, which was sent through Speed Post, but was returned unserved with the remark “no such firm”. Respondent-assessee again was served through affixture on 25th October, 2007. On examining the return for the assessment year 2004-05, it was noticed that M/s Prakash K. Prakash Chartered Accountants had certified the accounts of the respondent-assessee. Office of M/s Prakash K. Prakash Chartered Accountants was contacted and thereupon they filed their power of attorney on 1st November, 2007. The said Chartered Accountants also filed a letter that the respondent company had not received any notice and had been regularly filing their returns mentioning the correct address and after that there was change in address, the same was informed. Along with this letter, no detail of new address was filed. They had not mentioned the present/current address.

6. Another show cause notice was issued and sent at the last known address of the respondent-assessee and the address of the Chartered Accountants fixing the hearing on 4th December, 2007. The letter referred to the notice under Section 147/148 of the Act, show cause notice under Section 144 dated 8th October, 2007 and the fact that the reasons could be provided only after return of income was filed but yet in the interest of justice and for the purpose of proceedings it was stated that as per information available, the share capital was received during the years from the persons who had be