TaxTMI 
TaxTMI 
2012 (2) TMI 189
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.... on records. (iii) That the CIT(A) has erred both on facts and in law in confirming the addition on account of share capital despite the fact that the assessee has discharged his onus by establishing the identity of the shareholders. 3. That the above-said additions are untenable in the eye of law, having been made on the basis of the material collected at the back of the assessee without providing copy of the same and providing opportunity to rebut the same. 4. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition which was made on the basis of statement of a person without giving assessee an opportunity to cross examine the same. 5. The appellant craves leave to add, amend or alter any of the grounds of appeal." 2. Facts, in brief, as per relevant orders are that return declaring income of Rs.1.23.800/- filed on 19.10.2005 by the assessee, after being processed on 13.01.2006 u/s 143(1) of the Income-tax Act, 1961 (hereafter referred to as the Act), was selected for scrutiny with the service of a notice u/s 143(2) of the Act issued on 28th July, 2006. During the course of assessment proceedings, ....
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....ed CIT(A) upheld the addition in the following terms:- "6.3 I have carefully considered the submissions made by learned AR and my observations on the issue are as under:- i) During the year under consideration, the appellant has raised the share Capital of Rs.32 lacs. During the assessment proceedings, the Assessing Officer asked for the details of the additions made to share capital and issued notices u/s 133(6) to various shareholders. It is evident from the assessment order that notice u/s 133(6) sent to M/s Jainco Metals (P) Ltd. at the given address was received back unserved. Similarly, for notice uls 133(6) sent to M/s. Rapid Impex Pvt. Ltd., no reply was received. In such circumstances, the Assessing Officer required the presence of persons controlling M/s. Jainco Metals (P) Ltd. and M/s. Rapid Impex Pvt. Ltd. respectively alongwith books of accounts to verify the claim of genuineness. As per para 4.2 of the assessment order, the appellant submitted that the confirmation, cheque and bank details, PAN and copy of the Income Tax Return have already been submitted. Similarly, vide para 4.4 of the assessment order it is evident that for M/s. Rapid Impex (P) Ltd. the appel....
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....ies. The appellant has nowhere indicated that what efforts have been made by him and why the same had failed. iv) I further find that the Ld. A.R. has raised objection on the reliance placed by the Assessing Officer on the statement of Sh. S.H. Malik. However, I find that in this regard, what the Assessing Officer did was to apprise the appellant about the facts emerging from the statement of Sh. S.H. Malik. A copy of its statement of Sh. S.H. Malik was also given to the appellant. However, at the same time, the appellant was asked to prove the identity, genuineness and creditworthiness of the entries made with regard to Onyx Exim Pvt. Ltd. and M/s. Shimmer Marketing(P)Ltd. It is not a case where the Assessing Officer has based his decision entirely on the statement of Sh. S.H. Malik. The appellant has been provided specific opportunity to prove the entries appearing in books of accounts. v) Vide Ground No. 4 of the appeal, the 'appellant has raised the objection that the amount actually disallowed is Rs.15,00,000/- as against: Rs. 16,50,000/- as per the details given below :- a) Onyx Exim (P) Ltd. ] Rs. 7,50,000/- b) Shimmer Marketing (P) Ltd. ] c) Rapid lmpe....
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....as jurisdiction to make enquiries with regard to the nature and source of a sum credited in the books of account of an assessee and it would be immaterial as to whether the amount so credited is given the colour of a loan or a sum representing the sale proceeds or even receipt of share application money. The use of the words "any sum found credited in the books" in section68 indicates that the said section is very widely worded and an Income-tax Officer is not precluded from making an enquiry as to the true nature and source there of even if the same is credited as receipt of share application money." While discussing the application of section 68 Hon'ble High Court in case of CIT vs. Sophia Finance Ltd further opined as under: "What is clear, however, is that section 68 clearly permits an Incometax Officer to make enquiries with regard to the nature and source of any or all the sums credited in the books of account of the company irrespective of the nomenclature or the source indicated by the assessee. In other words, the truthfulness of the assertion of the assessee regarding the nature And the source of the credit in its books of account can be gone into by the Income-tax Off....
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....orded on 23rd June, 2004 while the amounts were received from the aforesaid companies on 23rd December, 2004, 28.12.2004 and 6th January, 2005. Thus, no reliance can be placed on the statement of Shri S.H. Malik. On the other hand, learned DR supported the findings of the ld. CIT(A). 5. We have heard both the parties and gone through the facts of the case as also the aforesaid decisions. As is apparent from the facts of the case, the assessee, inter alia, received following amounts towards share capital: Sl. No. Name PAN No. of shares Amount[In Rs.] Cheque nos & date 1. Onyx Exim P. Ltd, 2842, Classic Apmt. Daryaganj, Delhi AAACO1979R 45,000 4,50,000 Ch. No.326178 Dt.23.12.04 of Synd Bank 2. Rapid Impex Pvt. Ltd., H-16/332 Bapa Nagar, Karol Bagh, N.D.-5 AACCR5081P 30,000 3,00,000 Ch.No.325932 Dt.23.12.04 5. Jainco Metals Ind.Pvt. Ltd., 313 Thansingh Ngr. Anand Parbat, N.D. AABCR2938C 45,000 4,50,000 Ch.No.000011 Dt.28.12.04 6. M/s Shimmer Marketing Pvt. Ltd., 2842, Moti Mahal ST Daryaganj, Delhi AAFCS1881B 45,000 4,50,000 Ch.No.326202 Dt.6.1.2005. 5.1 The assessee submitted confirmations....
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.... section 68 of the Act, 1961 has been interpreted as recently as 2008 by a Division Bench of this Court in Divine Leasing and Finance Ltd. (Supra) after considering all the relevant judgements, we do not have to reconsider all the judgements referred to by Mr. Sahni which are prior in date and time to the aforesaid judgement. In fact, a Special Leave Petition filed against the said Division Bench Judgement was dismissed by the Supreme Court by way of speaking order in C.I.T. vs. Lovely Exports (P) Ltd. 216 CTR 195 (SC). The Supreme Court in Lovely Exports Pvt. Ltd. (Supra) has held as under:- "Can the amount of share money be regarded as undisclosed income under section 68 of the Income Tax Act, 1961. We find no merit in this Special Leave Petition for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the Assessing Officer, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgement." 7. Consequently, the doctrine of merger would apply and the judgement of the Supreme Court in Lovely....
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....After the deposit of cash when there is sufficient balance, the entry operator issues demand draft, postal orders, cheques in the name of beneficiary. Most of these concerns / individuals also have obtained PAN from the department and are filing income tax returns, but what is shown in the return is not actual state of affairs. 28. The appellant filed copies of PAN, acknowledgement of filing of income tax returns of the companies, their bank account statements for the relevant period, i.e. for the period when the cheques were cleared. However, the parties were not produced in spite of specific direction of the Assessing Officer instead of taking opportunities in this behalf. Since the so called Directors of these companies were not produced on this ground coupled with the outcome of the detailed inquiry made by the investigation wing of the department, the Assessing Officer made the addition. This addition could not be sustained as the primary onus was discharged by the appellant by producing PAN number, bank account, copies of income tax returns of the share applicants, etc. We also find that the Assessing Officer was influenced by the information received by the Investigating ....