TaxTMI 
TaxTMI 
2012 (8) TMI 813
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....71 (i) (c) of the Income Tax Act, 1961." 3. The brief facts necessary to decide the cases are that the assessee company had filed its return declaring the income @ Rs..10,986/- on 29.11.1996. The Revenue received information alleging that assessee had accepted share capital from companies engaged in providing bogus entries in the form of loan and share application money to interested parties. Accordingly, the AO called for information under Section 142 (1) by letter dated 29.12.1998. The assessee filed a list of shareholders who contributed share capital including premium aggregating to Rs..95 Lakhs. It transpired that the assessee had increased its share capital by Rs..95 Lakhs to which end it had issued 9500 shares of a face value of Rs..100/-, at a premium of Rs..900/- each. The total amount was invested by 18 companies who were share applicants. The AO felt that the nature of the assess company and its business was not such as to attract a premium of Rs..900/- per share. He also was of the opinion that the share applicants were not known to the assessee or its management and investment of Rs..5 Lakh by each of them except M/s Kanpur Properties and Finance Ltd. - which had in....
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....deposited in one account and from this account, the amount transferred to the account from where the cheques for share application monies were cleared". 5. The AO further analyzed information relating to names of account holders who operated, the listed and specified accounts and were indulging in entry provision services. The account of some of the share applicants were scrutinized on the basis of their banker's statements. These included statements given by Vijaya Bank, Kamla Nagar, Punjab National Bank, Tri Nagar and Syndicate Bank, G.T. Karnal Road. The AO noticed the following common features: - "Before I conclude, from the verification of the above bank accounts out of which few are the name lenders share-holders of the company, it is found: - a) some of the accounts are opened on the same date and have common introducer. b) either cash has been deposited or amount has been transferred or clearance received after depositing cash in the base account from where the transfer entries started. c) huge amounts of cheques and pa orders have been issued immediately after the amounts were deposited. d) introducers of the accounts are not traceable. e) share....
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....oinder of the; AR on the remand report of the AO. I am not inclined to agree with the view of the AR inasmuch as the question of proving the onus with regard to credits in the accounts of so called shareholders lies upon the appellant and not upon the shareholders who had invested money in the appellant company which the appellant has failed to discharge. The case law of Sophia Finance Co. relied upon by the appellant is not applicable in the present case as the identity of the shareholders remained unproved. Moreover, in this case, it was also held by the Hon'ble High Court that the AO would be entitled to enquire and would indeed he is duty bound to do so where the alleged share holders had, in fact, existing and in such as case, the AO would have the jurisdiction, if the facts so warrant, to treat such credit to be the income of the assessee since in the instant case the identity of the share holders as mentioned supra has not been proved by the appellant, therefore, the AO is well within his jurisdiction to treat it as unexplained investment of the appellant company. Further the reliance placed by the AR on the ratio of the decision of the Hon'ble Supreme Court in CIT v. Stelli....
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....aking a broad generalization that the assessee had discharged its onus by furnishing the names, addresses and GIR particulars is unsustainable in law. 9. Learned counsel for the assessee argued that the reasoning of the Tribunal is well founded. Counsel submitted that in this case, the Department could not have fastened the liability only on the basis of the suspicion. There was no independent material to suggest that a premium of Rs..900/- on every share having a face value of Rs..100/- was unwarranted. Furthermore, neither the AO nor the CIT (Appeals) had held that there was any connection between the assessee and the share applicants or that they had common shareholders. The assessee could not be punished for the details of the share applicants who might be tax offenders. The fact that amounts invested by the share applicants were not brought to tax in their hands ought not to have prejudiced the assessee's since no nexus could actually be established between it and those concerns. 10. Fortunately for this Court, the correct approach which should be adopted by Assessing Officers who suspect that amounts which are claimed to bear one kind of description, are not genu....
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....orsed by the Supreme Court, has been applied in subsequent decisions. Thus, the assessee is under a burden to explain the nature and source of the share application money received in a given case. For discharging this, the assessee has to establish: (a) the shareholder's identity; (b) genuineness of the transaction ; and (c) the creditworthiness of shareholders. In case the investor/shareholder is an individual, some documents will have to be filed or the said shareholder will have to be produced before the Assessing Officer to prove his identity. If the creditor/subscriber is a company, the registered address or PAN identity, and other relevant details are to be furnished. Genuineness can also be proved by disclosing materials pointing to receipt of the share application money from the applicant. Copies of shareholders' register, share application forms, transfer registers, etc. can be furnished. So far as the share applicants' creditworthiness is concerned, the assessee can prove it by producing bank statements. Prima facie, these may satisfy the requirement of law. The Assessing has to then examine the materials to probe the matter further. He can reject these docume....