TaxTMI 
TaxTMI 
2013 (11) TMI 964
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....iii) Adonis Financial Services Ltd. Rs. 15,00,000/-. 2.1. In reassessment proceedings assessing officer called on the assessee to justify them in terms of Sc. 68. Assessee vide letter dated 8-11-2011 filed following documents: (i) share application forms; (ii) Resolution of Board of Directors for making the investment; (iii) Memorandum of article and association with certificate of incorporation and main objects of the companies; (iv) Copies of returns of income of the investors along with copy of PAN Certificate. (v) Copies of bank statements from where the money came. (vi) Confirmations. 2.2. Assessing officer, however, on 8-11-2011 asked the assessee to produce the directors of these companies, however, no summons on directors were issued. The directors could not attend and on 16-12-2011 the assessment order was passed u/s 143(3) read with section 147 holding that the assessee has failed to furnish any substantive evidence regarding the creditworthiness of the investors. The assessing officer added the aforesaid sum of Rs. 40,00,000/- to the income of the assessee u/s 68. 2.3....
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....he hands of the company unless any adverse evidence is not on record. In the instant case the appellant has provided evidence in the form of PAN, ROC details, copy of IT return filed and copy of confirmation and affidavit to establish the genuineness of the transaction. 6.8. There are plethora's of judgments of various judicial authorities, including Hon'ble Apex Court and also the jurisdictional High Court wherein it has been held that in case of money received towards share capital, only the identity of the shareholders needs to be proved. Once identity of the shareholders is established and it is proved that the money did in fact come from them, it is not for the assessee to prove as to how the shareholders came to be in possession of the money. 6.9. Apart form the case laws relied upon by the appellant, I find that Hon'ble Delhi High Court in the case of CIT vs. Gangour Investment Ltd. (Income Tax Act No.34/2007) dated 30.1.2009 has held that Revenue can make addition under Section 68 of the Act only if the assessee is unable to explain the credits appearing in its books of accounts. In the said case the appellant has duly explained the said cred....
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.... 21/01/2008 wherein it was held - "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 AD, then the Department, is free to proceed to re-open their individual assessments in accordance with law." Reliance in this regard is also placed on the decision of Hon'ble Delhi High Court in the case of CIT vs. Pondy Metal and Rolling Mill Pvt Ltd (Delhi) (ITA No.788/2006) dated 19.02.2007, wherein the Hon'ble Court concurred with the findings of the Appellate Tribunal, Delhi Bench 'F' that once the identity of the investor has been manifest and is proved, the investment cannot be said to be the undisclosed income of the assessee. At best, the amount could be added in the hands of the investor but it certainly could not be treated as undisclosed income of the assessee. The appeal filed against the said decision, was dismissed by the Hon'ble Supreme Court in c.c. 12860/2007 dated 08/01/2008. 6.13. On the similar facts in the recent decision of Hon'ble Delhi High Court in th....
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....on-production of directors, the assessing officer has rightly drawn adverse inference. (ii) The information was provided by the Investigation Wing of the department to the effect that by systematic plan the accommodation entries about share application moneys were being received in the bank accounts. (iii) Assessing officer at page 2 has reiterated the method by which accommodation entries were being transacted. (iv) Since the assessee failed to produce the directors, the amount has been rightly added as undisclosed income of the assessee. 3.1. Ld. DR also relied on the ratio of decision of Hon'ble Delhi High Court in the case of CIT Vs. Nova Promoters 342 ITR 169. 4. Ld. Counsel for the assessee, on the other hand, vehemently argues that the share application moneys in question were received by the assessee in October 2003. The share application moneys were accepted in original assessment which was famed u/s 115JB; after about eight years the assessment was reopened. The assessee in order to discharge its burden in respect of primary onus, as contemplated by sec. 68 in respect of above share applicant submitted following docume....
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....itted through banking or other indisputable channels, the genuineness of the transaction would be proved. Other documents showing the genuineness of the transaction could be copies of the shareholder register, share application forms, share transfer register, etc. As far as the creditworthiness or financial strength of the creditor/ subscriber is concerned, that can be proved by producing the bank statement of the creditors/subscribers showing that it had sufficient balance in its accounts to enable it to subscribe to the share capital. Once these documents are produced, the assessee would have satisfactorily discharged the onus cast upon him." (ii) CIT Vs. Dwarkadish Investment (P) Ltd. 330 ITR 298 - inter alia, holding as under: "In any matter, the onus of proof is not a static one. Though in section 68 proceedings, the initial burden of proof lies on the assessee, yet once he proves the identity of the creditors/ share applicants by either furnishing their PAN numbers or income-tax assessment numbers and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any o....
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....g officer to examine it and reject it on tenable grounds. In case he wishes to rely on the report of the investigation authorities, some meaningful enquiry ought to be conducted by him to establish a link between the assessee and the alleged hawala operators; such a link was shown to be present in the case of Nova Promoters & Fin/ease (P) Ltd. (supra) relied upon by the revenue. We are therefore not to be. understood to convey that in an cases of share capital added under section 68, the ratio of Lovely Exports (supra) is attracted, irrespective of the facts, evidence and material. No substantial question of law arises. The appeal IS accordingly dismissed." (iv) CIT Vs. Gangeshwari Metal Pvt. Ltd. (ITA 597/2012 - order dated 21-01-2013 Delhi High Court) - in which the scope of Nova Promoter's case has been explained and distinguished. The Hon'ble Court decided the case in favour of the assessee by following observations: "8. Mr. Sabharwal, appearing on behalf of the revenue/ appellant sought to place reliance on a Division Bench decision of this Court in CIT v. Nova Promoters and Finleas....
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....not sit back with folded hands till the assessee exhausts all the evidence or material in his possession and then come forward to merely reject the same, without carrying out any verification or enquiry into the material placed before him. The case before us does not fall under this category and it would be a travesty of truth and justice to express a view to the contrary. 9. As can be seen from the above extract, two types of cases have been indicated. One in which the assessing officer carries out the exercise which is required in law and the other in which the assessing officer 'sits back with folded hands' till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The present case falls in the latter category. Here the assessing office, after noting the facts, merely rejected the same. This would be apparent from the observations of the assessing officer in the assessment order to the following effect:- "Investigation made by the Investigation Wing of the Department clearly showed that this w....
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....eshwari Metal Pvt. Ltd. (supra). Therefore, the ratio of decision in the case of Nova Promoters (supra), cited by the ld. DR will not be applicable to this case as the facts are totally distinguishable. In the case of Nova Promoters the assessing officer refuted the evidence filed by the assessee with cogent reasons. In this case, except asking the assessee to produce the directors 8 days prior to framing the assessment no inquiry what-so-ever has been initiated by assessing officer. Neither any summons u/s 131, notice u/s 133(6) or any cross inquiry of the investors whose entire income-tax record was furnished by the assessee was ever conducted by the assessing officer. In these circumstances the ratio of Hon'ble Delhi High court in the case of Fair Finvest Ltd. (supra) Gangeshwari Metal Pvt. Ltd. (supra) is squarely applicable. 5. We have heard rival contentions and perused the material available on record. It is not disputed that the assessee submitted plethora of the evidence including income tax record as mentioned above to substantiate the identity, genuineness and creditworthiness of the transactions qua the share applicants. Assessing officer asked the assessee to produc....