TaxTMI 
TaxTMI 
2014 (9) TMI 704
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....edly received by the respondent assessee, a company, on account of share allotment. It has been held that the assessee has been able to discharge the onus and prove the identity, creditworthiness of the share applicants, and genuineness of the transactions on the ground that copy of the PAN number, income tax returns and bank details, etc. were filed and hence, ratio of the decision of the Supreme Court in CIT vs. Lovely Exports P. Ltd. (2008) 299 ITR 268 (SC) and that of Delhi High Court in CIT vs. Rockford Metal & Minerals Ltd. 198 Taxman 497 (Del), applied. Consequently, the addition of the above said amount by invoking Section 68 of the Income Tax Act, 1961 ("Act", for short) by the Assessing Officer, was contrary to law, and should be deleted. 3. At the outset, we notice that there is a big divergence on the aspect of PAN details, income tax returns, etc. as recorded in the assessment order dated 18th December, 2007 and as per the findings recorded by CIT(A) and the Tribunal. The assessment order records that the authorized representative of the assessee was pointedly asked to provide details vide note sheet entry dated 20th July, 2007, on the business activities carried out ....
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....d a cheque in favour of the assessee was cleared on the same day. In the case of Baldev Harish Electrical Pvt. Ltd., a transfer entry of Rs. 5,00,000/- dated 6th March, 2002, was noticed along with a cheque of the next date, i.e. 7th March, 2002, transferring the amount to the account of the assessee. Further, the bank account statement showed that there were regular deposits and cheques were cleared and payments were made to third parties on the same day. Reference was made to the investigation made in the case of Arun Finvest and statement of Mukesh Gupta on oath. He had stated that cash received from third parties used to be deposited in the bank accounts and transferred to the same parties by charging a commission @ 25 paise. The said details and particulars came to the knowledge of the Revenue after assessment order under Section 143(3) dated 29th November, 2004 was passed. 6. As noticed above, the assessee did not furnish complete details and particulars and virtually "absconded" during the course of reassessment proceedings, resulting in a best judgment assessment. These facts have been completely ignored by both the CIT(A) and the Tribunal. Obvious inference is that the as....
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.... appropriate returns, in a company which did not have a proven, reputable and a reliable record. Any and every reasonable man is normally expected to practice due diligence while investing his hard earned money, let alone purchase shares of an unknown company. It is not a case where angel investors had invested upon being satisfied about the innovativeness and entrepreneurial skills of the management. The aforesaid facts have to be read along with factum that the summons issued to the Directors to appear in person under Section 131 of the Act remained uncomplied with. Further, details with regard to the loans and advances, job work income, etc., were not furnished. Lastly, bank accounts of Tashi Contractors (P) Ltd. and Baldev Harish Electrical Pvt. Ltd. did indicate deposits and immediate withdrawals/transfers of money. The Assessing Officer had also noticed the statement of Mukesh Gupta on the said entries. The aforesaid facts have dented the creditworthiness of the said creditors and the genuineness and legitimacy of the transactions. The transactions were merely a façade to mislead the tax authorities. 8. In view of the aforesaid factual position and the copious materia....
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....) 216 CTR (SC) 195, which upheld the decisions of this court in (1) CIT versus Divine Leasing and Finance Limited, (2) General Exports and Credits Limited and (3) Lovely Exports Private Limited (Del), (2008) 299 ITR 268 (Del.) wherein it was observed that in spite of sufficient time to carry out examination of the documents, the Assessing Officer remained a mute spectator and did not conduct investigation to controvert or disprove the material filed by the assessee. In Divine Leasing and Finance Limited (supra) the following observations were made by the Delhi High Court:- "In this analysis, a distillation of the precedents yields the following propositions of law in the context of Section 68 of the IT Act. The assessed has to prima facie prove (1) the identity of the creditor/subscriber; (2) the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels; (3) the creditworthiness or financial strength of the creditor/subscriber. (4) If relevant details of the address or PAN identity of the creditor/subscriber are furnished to the Department along with copies of the Shareholders Register, Share Application Forms, Share Tra....
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....reen - 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 sec.68 to prove and establish the identity and creditworthiness of the share applicant and the genuineness of the transaction. In such a case, the Assessing Officer cannot 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." 11. Thereafter, in Commissioner of Income Tax versus Nipun Builders and Developers Private Limited, (2013) 350 ITR 407 (Del.) referring to CIT versus M. Ganapathi Mudaliar, (1964) 53 ITR 623 (SC), CIT versus Devi Prasad Vishwanath Prasad, (1969) 72 ITR 194 (SC) and decision of Delhi High Court in Yadu Hari Dalmia versus CIT, (1980) 126 ITR 48 on the ambit and scope of Sect....
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....annot lay down or state a general or universal procedure or method which should be adopted by the assessing officer when verification of facts is required. The manner and mode of conducting assessment proceedings has to be left to the discretion of the assessing officer, and the same should be just, fair and should not cause any harassment to the assessee or third persons from whom confirmation or verification is required. The verification and investigation should be done with the least amount of intrusion, inconvenience or harassment especially to third parties, who may have entered into transactions with the assessee. The ultimate finding of the assessing officer should reflect due application of mind on the relevant facts and the decision should take into consideration the entire material, which is germane and which should not be ignored and exclude that which is irrelevant. Certain facts or aspects may be neutral and should be noted. These should not be ignored but they cannot become the bedrock or substratum of the conclusion. The provisions of Evidence Act are not applicable, but the assessing officer being a quasi judicial authority, must take care and caution to ensure that....
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....not reflect their creditworthiness or even genuineness of the transaction. The beneficiaries, including the respondent-assessee, did not give any share-dividend or interest to the said entry operators/subscribers. The profit motive normal in case of investment, was entirely absent. In the present case, no profit or dividend was declared on the shares. Any person, who would invest money or give loan would certainly seek return or income as consideration. These facts are not adverted to and as noticed below are true and correct. They are undoubtedly relevant and material facts for ascertaining creditworthiness and genuineness of the transactions." 13. Proof or evidence to show the circulation in money was clearly rejected in view of the statutory provision of Section 68 of the Act and on the question of doctrine of "source of source" or "origin of origin" it was observed:- "23. We are conscious of the doctrine of "source of source" or "origin of origin" and also possible difficulty which an assessee may be faced with when asked to establish unimpeachable creditworthiness of the share subscribers. But this aspect has to be decided on factual matrix of each case and strict or stringe....