TaxTMI 
TaxTMI 
2013 (5) TMI 329
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....heir own admittance of providing accommodation entries & in light of observation in Para 13 of Hon‟ble High Court in case of Oasis Hospitalities whether Hon‟ble ITAT was correct in holding that genuineness of the transactions was established? III. Whether in view of report of Investigation Wing, the onus of assessee gets discharged in normal course by merely paper documents like PAN card, ROC documents, IT returns etc.? IV. Whether on the facts and circumstances of the case, findings of the ITAT are perverse?" 2. The assessee is a company. We are concerned with the assessment year 2001-02. A return of income was filed declaring income of Rs.26,440/- which was first accepted under section 143(1). The return was later taken up for scrutiny and an assessment order under section 143(3) was passed on 30.03.2002 on an income of Rs.41,290/-. Subsequently, the assessment was reopened on the basis of information received from the investigation wing of the income tax department and a notice on 28.03.2008 under section 148, was issued after duly recording the reasons and obtaining the sanction of the CIT as required by section 151 of the said Act. Though the notice was is....
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.... of 0.8% i.e. 80 paisa per hundred on the accommodation entries given by the assessee company appears to be on the higher side and the this cannot be treated as income from undisclosed sources as the assessee company earned commission on providing accommodation entries during the course of its business activities and it earned commission ranging from 0.25% to 0.30%. It may also be mentioned that in case like that of the assessee the commission rate had been applied at 0.45%. That in the case of the assessee for the assessment year 2000-2001 the net rate of 70 paisa per hundred was applied on the accommodation entries provided to various parties. Thanking you Yours faithfully (Surender Pal Singh) Director" 4. Nevertheless the assessing officer, apparently in compliance with the rules of natural justice and the need to give a fair opportunity, issued notices to the above companies which evoked no response; some of the letters issued were returned unserved. It was only after this that the assessee appeared before the assessing officer on 20.12.2008 and gave the new addresses of subscriber-companies. It was in these circumstances, and considering the fact that the assess....
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....ratus other than by providing services to interested persons like the assessee to deposit their unaccounted cash and to give it back through banking channel in the garb of share capital etc. Thus the source of the said cash deposit which found destination in the account of the assessee remained unexplained. c) The money found its destination from the source in cash to the account of the assessee on the same day. This proves that the all such accounts are controlled by same persons. d) It is interesting to note that such persons are playing with these accounts to baffle the authorities to track the source. If the ultimate source was to be cash only and such cash was explainable then why would a person route it through number of accounts." 6. In view of the above facts and in order to verify the genuineness of the transaction and the identity and creditworthiness of the subscriber-companies, the assessing officer issued summons under section 131 of the said Act which were not complied with. In the course of the assessment proceedings the assessee would appear to have filed written submissions stating that the share subscription was confirmed by the shareholders and their inc....
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.... from Private Limited companies. The assessee has also submitted copy of application for shares, income tax return, acknowledgement, profit and loss account, balance sheet and confirmation letter, date of incorporation and PAN numbers. Thus, it is clear that assessee has provided necessary details to establish the identity of the share applicants. However, Assessing Officer has not verified these details and he has also not disputed these details. Thus, we are in agreement with the finding of the Ld. Commissioner of Income Tax (Appeals) that the assessee has provided necessary details including the Ward/ Circle where the share applicants were assessed to income tax and discharged the onus cast on it. We find that Hon'ble Apex Court in the case of C.I.T. vs. Lovely Exports P. Ltd. (216 CTR 195) held that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to reopen their individual assessments in accordance with law, but cannot be regarded as undisclosed income of the assessee." 9. We have carefully considered the facts and the rival contentions. The following substantial questions of law are framed: - (a) W....
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....ing Officer is in possession of material that discredits and impeaches the particulars furnished by the assessee and also establishes the link between self-confessed "accommodation entry providers", whose business it is to help assessees bring into their books of account their unaccounted monies through the medium of share subscription, and the assessee. The ratio is inapplicable to a case, again such as the present one, where the involvement of the assessee in such modus operandi is clearly indicated by valid material made available to the Assessing Officer as a result of investigations carried out by the Revenue authorities into the activities of such "entry providers". The existence with the Assessing Officer of material showing that the share subscriptions were collected as part of a pre-meditated plan-a smokescreen-conceived and executed with the connivance or involvement of the assessee excludes the applicability of the ratio. In our understanding, the ratio is attracted to a case where it is a simple question of whether the assessee has discharged the burden placed upon him under section 68 to prove and establish the identity and creditworthiness of the share applicant and t....
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....ntries. They were entry operators and the assessee in that case was alleged to be a beneficiary. While disposing of these appeals, this court observed (page 133): "The assessees filed copies of PAN, acknowledgment of filing 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 Investigating Wing of the Department, the Assessing Officer made the addition. This addition could not be sustained as the primary onus was discharged by the assessee 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 Wing and on that basis generally modus operandi by such entry operators is discussed in detail. However, whether such modus operandi existed in the present case or not was no....
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....ssessee under Section 68, we do not see how proof of the resources of the creditor/share subscriber can be completely excluded from the sweep of the burden. It may not be required of the assessee to give in-depth particulars and details about the resources of the creditor or the share subscriber, but the minimum required of him would be, in our opinion, information that will prima face satisfy the AO about the creditworthiness. Mere furnishing of the bank statements of the share subscribers without any explanation for the deposits in the accounts may not meet the requirements of Section 68. It may be necessary to know the business activities of the share-subscribers in order to ascertain whether they are financially sound and are able to purchase shares for substantial amounts; if they have borrowed monies for making the investment, whether they were capable of repaying them having regard to the nature of their business, volume of the business, etc. These are very relevant, in our opinion, to establish the creditworthiness of the investors. It is for this purpose that it is necessary for the assessee, in appropriate cases where the facts and surrounding circumstances justify, to se....
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....e and has not adverted to the attempts made by the assessing officer in the course of the assessment proceedings to examine the evidence and discredit the same in CIT v. Walchand And Co. Private Ltd., (1967) 65 ITR 381 the Supreme Court held as under: - "It is necessary to emphasize that, though the Tribunal is not a court, it is invested with judicial power to be exercised in manner similar to the exercise of power of an appellate court acting under the Code of Civil Procedure. Authority to "pass such orders thereon as it thinks fit" in section 33(4) of the Income-tax Act, 1922, is not arbitrary: the expression is intended to define the jurisdiction of the Tribunal to deal with and determine questions which arise out of the subject-matter of the appeal in the light of the evidence, and consistently with the justice of the case. In the hierarchy of authorities the Appellate Tribunal is the final fact-finding body : its decisions on questions of fact are not liable to be questioned before the High Court. The nature of the jurisdiction predicates that the Tribunal will approach and decide the case in a judicial spirit and for that purpose it must indicate the disputed questions be....