TaxTMI 
TaxTMI 
1987 (1) TMI 168
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....hat asst. has not been correctly framed by the ITO. This is the first year of the company in which shareholders have invested a sum of Rs. 9,02,600 out of this, investment made by the shareholders as detailed hereunder has not been properly looked into and they have been accepted without enquiry : Rs. (1) Smt. Santosh Kumari 10,000 (2) Shri D. R. Bhatia 25,000 (3) Mrs. R. Geetha 42,000 (4) Shri M. P. Bhatia 24,000 (5) Shri K. R. Sachdeva 10,000 (6) Shri Jurnail Sing 25,000 (7) Shri Rajesh Kumar Sachdeva 20,000 2. Keeping in view the above facts I am of the opinion that asst. framed by the ITO is not only er....
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....ere is nothing on the record to show that any enquiry was made by the Income-tax Officer in this regard. Even some of the confirmations appear to have been obtained after the assessment was made. In the case of the depositors who were not income-tax assesses the Income-tax Officer ought to have made enquiry regarding the source of the investments made which has not been done. The failure of the Income-tax Officer to make the enquiries which were obviously called for, makes the order, passed by him, clearly erroneous and prejudicial to the interests of revenue. It is, therefore, necessary that this case should go back to Income-tax Officer for verifying the genuineness of the investments made by the shareholder. The assessment made by the Income-tax Officer is accordingly cancelled and he is directed to make a fresh assessment in accordance with law keeping in view the observations made above." 4. The learned counsel for the assessee addressed on the enquiry made by the ITO. According to him the ITO had insisted for the confirmation from the shareholders during the assessments which were given to him. It was not a fact that confirmations were filed subsequently and not during the....
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.... register of its members, and enter therein the following particulars : (a) the name and address, and the occupation, if any, of each member : (b) in the case of a company having a share capital, the shares held by each member, distinguishing each share by its member, and the amount paid or agree to be considered as paid on those shares; (c) the date at which each person was entered in the register as a member; (d) the date at which any person ceased to be a member." A perusal of these provisions shows that the company has got to maintain not only a registered office but also a statutory register of shareholders giving their names, full particulars of their addresses and their shareholding. But nowhere the Companies Act authorises it to seek information from its shareholders regarding the source of their investment made in its shares. Our familiarity with the provisions of Income-tax Act also informs us that a company is not authorised to enquire from which source the shareholders have made their investments. It is enough for the company to know if they have made the subscriptions or investment in shares of the company, the number of shares subscribed and held and th....
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....iability of the company. Take for granted that a shareholder is not able to account for the source of the funds as invested in the shares of the company. Will the ITO be justified in including the unexplained funds to be the income of the company derived from undisclosed sources. The answer is a categorical 'No". We have already brought out that the relationship of the company vis-a-vis its shareholders is not what it is in the cast of a partnership firm vis-a-vis its partners. The veil of incorporation makes the company a separate juridical entity distinct and distinguishable from its body of shareholders who are also liable for their own liability for tax. Therefore, a company cannot be held liable for the liability for its shareholders. Provision contain in sec. 68 was referred to by the D. R. in her address. It was contended that sec. 63 casts on the assessee to account for the source of the funds found credited in its books of account. Therefore, according to the D. R. the enquiry made by the ITO would not be an illegal exercise of discretion, but would appear to be provided for by the provisions contained in section 68. It appears the D. R. made out the plea losing sight of t....