2015 (4) TMI 338

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....ent Year (AY) was framed under Section 143(1) of the Income Tax Act, 1961 (hereinafter referred as "the Act"). Subsequently, the Revenue sought to re-open the assessment under Sections 147 and 148 of the Act. In the reassessment proceedings, a sum of Rs. 24 lakhs was added since the Assessing Officer (AO) was not convinced by the explanation furnished by the assessee; he felt that the onus under Section 68 of the Act has not been discharged. The appellant has urged that the share applicants were in effect being friends and relatives of the Directors of the appellant company and that since the entity was incorporated just a few days before the end of the financial year, it was unexpected to generate any income. The assessee's appeal was reje....

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....f the Directors or key persons of such company and not from public at large. This is a private arrangement by the private limited company through its Directors/ shareholders by accepting the sum of money from friends/ relatives etc. as share application money/ share capital. Therefore, in the case of private limited company where funds are arranged through personal contacts of directors, giving it a color of share application money/ share capital was within the reach of the assessee company. It is beyond doubt to say that sham transaction is given color to introduce their own money as such type of transaction are purely arrangements between the two known entities." 3. The Tribunal rejected the appeal preferred against the order of the CIT ....

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.... In our opinion, though the order of the Tribunal is not happily worded, its finding appears to be that in the very nature of things the assessee could not have earned such a huge amount as profits very soon after it commenced its activities. A construction company takes time to earn profits. It could not have earned a profit of Rs. 1,00,000 within a few days, after the commencement of its business. Hence, it is reasonable to assume that those cash credit entries are capital receipts though for one reason or other the assessee had not come out with the true story as regards the person from whom it got those amounts. It is true that in the absence of satisfactory explanation from the assessee the Income-tax Officer may assume that cash credi....