AI Drafter 
TaxTMI 
TaxTMI 
2015 (5) TMI 815
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.... of convenience and brevity. 2. First we will deal with the appeal in ITA No. 1324/Del/2013 for the assessment year 2003-04. The only effective ground raised in this appeal reads as under: "That on the facts and in the circumstances of the case and in law, the authorities below erred in holding that the Appellant had furnished inaccurate particulars of income, thereby imposing penalty u/s 271(1)(c) of the Act in a sum of Rs. 22,96,875/-" 3. Facts of the case in brief are that a search and seizure operation was carried out at the business premises of the assessee on 04.09.2008 and thereafter the assessment proceedings u/s 153A of the Act r.w.s 143(3) of the Act were completed after making an addition of Rs. 62,50,000/- on account of paid up share capital in the assessee company. The assessee was confronted with the findings of the Investigation Wing of the Income Tax Department as regards the shareholders who were found not existing at the given addresses. It was therefore implied that those entities were made by the group on paper only to introduce its unaccounted income generated from tea....
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....oath all these facts as stated in the confirmation. In the circumstances, all the shares applicants were and are identifiable and creditworthy. The mere facts the Directors of applicant companies are not produced as asked by AO, cannot make the identity of the shareholder doubtful. When documentary evidence was placed on record to prove the identify of all the shareholders including their PAN/GIR numbers and filling of other documentary evidence in the form of ration cara etc. which had neither been controverted nor disproved by the AO, then no further interference, is called for. It is undisputed that all the share applicants has confirmed their investment in the share capital of the appellant company, had given their PAN, were assessed to tax, relied on CIT Vs Makhni and Tyagi (P) Ltd. Reported in 267 ITR 433 (2001). Department has also accepted in assessment order itself that "the details regarding introduction of share application were given through income tax return and as well as through registrar of companies. All the details, regarding share application money were also produced during the year. Further it is well established in various case decisions that the assessing o....
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....e assessee cannot be held responsible for non production of directors. Further there was no legal obligation on the assessee to produce director of other representative of the applicant companies before the AO, as held in the following case: In the case of CIT vs. Victor Electronics Ltd. ( supra) ( 2010) 42 DTR (Del) 152, it has been clearly laid down by the Hon'ble Delhi High Court that "There is no obligation on the assessee to produce director or representative of the applicant companies before the AO, and therefore, failure of assessee to produce them could not, by itself, have justified the additions made by the Assessing Officer, when the assessee had furnished documents, on the basis of which, the AO, if he so wanted, could have summoned them for verification. Similarly, in the present case, mere because directors of share applicants companies were not found available at the addresses given that by itself is not sufficient for the AO to reject assessee's case when the assessee has furnished all documents relating to share applicants, such as their permanent account no., details of Income- tax asses....
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....nt companies, besides their hank statements and IT returns. The addresses of the applicant companies are recorded in these documents. AO has not declined that the copies of board resolutions, IT returns and bank statements were not genuine documents. These companies are active and properly filling their income tax return. Further ROC related compliances are properly complied by these companies which can be verified from ROC website. Then without proper verification, how AO can decide that these companies are not in existence. The AO has merely relied upon the Investigation wing without referring to the evidences or materials on the basis of which it could be said that the companies are bogus. The AO has not made any enquiry from the respective AO assessing those share applicants. The AO has also not made any enquiry from the office of registrar. The AO has also not made any enquiry from the office of ROC about existence of these companies and the details of their directors. As held by ITAT, DELHI F Bench in the case of INCOME TAX OFFICER vs. PURVI FABRICS & TEXTURISE (P) LTD. ITA No. 4382/Del/2009 AY 2001-02 (2010) 47 DTR (Del) (Trib.) 225 that there was no legal obligatio....
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....ies. The addresses of these companies are available on the share application forms, memorandum and articles of association and their IT returns. If the AO had any doubt identity of the share applicants, he could have summoned the directors of the applicant companies. No such attempt was, however, made by him. Similarly in the case of SOPHIA FINANCE LIMITED it has been held that if the shareholders are identified and it is established that they have invested money for the purchase of shares, then the amount received by the company would be regarded as a capital receipt. It is further submitted that from all the material placed on record by us, there is no doubt that we have fulfilled the onus of establishing the source of share capital, genuineness of the transaction and the credit worthiness of the shareholder. With reference to the genuineness of the transaction it is submitted that the payments were received by account payee cheques/bank draft only. A perusal of the bank statement of the investor company makes it clear that it had made many such transaction during the year under assessment and that this was not the only transactions that had taken place during the year. ....
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.... Income Tax Authority has accepted the 1st condition of surrender but not considered the 2nd condition of no penalty. c) There was no any concealment of fringe benefits. d) We have not furnished any inaccurate particulars of fringe benefits. Leaving aside the technically or legality of the matter, it is submitted with due regards that, it is not out of place to submit that at the time of completing assessment, surrender was offered only to buy peace of mind and with the precondition that we will not be liable for any panel action in respect of the same. It is also amply clear from our stand which we took as per mutual agreement that we did not file any appeal before any appellate authority against the addition made as we were under bonafide belief that no penalty proceedings shall be initiated as mutually agreed and discussed with regard to the surrender made. We have paid the full taxes on the demand created on the addition made. Hence keeping in view our discussions and our commitment, penalty should not be levied. Further, Assessee relied on a plethora of cases to submit that there was no concealment in regard to the share capital. The same was duly shown in the balance....
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....urrender the amount as income subject to condition that offer is by way of voluntarily disclosure without admitting any concealment and subject to no initiation of penalty." 6. The ld. CIT(A) after considering the submissions of the assessee observed that the penalty u/s 271(1)(c) of the Act is to be levied if the assessee has concealed particulars of income or had furnished inaccurate particulars of such income. He further observed that the assessee introduced its share capital through certain companies, despite knowing the fact that those companies were existing only in paper. The ld. CIT(A) mentioned that no doubt the share capital was raised in the assessment years 2003-04, 2004-05 and 2005-06 which had been disclosed in its returns of income filed u/s 139(1) of the Act and those returns were also assessed u/s 143(3) of the Act. However, the entire activity came to light only after a search was conducted on the assessee group of companies and consequent to which proceedings were initiated u/s 153A of the Act. The ld. CIT(A) pointed out that as per the provisions of section 153A(1) of the Act, once the assessee is subjected to the process of section 132(1) of the Act, the AO ....
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.... and further submitted that all the documents relating to the introduction of share capital in the assessment years 2003-04, 2004-05 and 2005-06 were furnished before the AO during the course of regular assessment proceedings and the AO after proper verification, framed the assessment u/s 143(3) of the Act. The ld. Counsel for the assessee referred to the page no. 8 of the penalty order dated 28.03.2011 and submitted that the assessee proved the identity and the existence of the company by furnishing the following documents: • Proof of filing of income tax return in the shape of ITR • Application for investment in shares. • Proof of allotment of shares made by the assessee company in shape of Form No. 2 and receipt of ROC. • Affidavit for investing in equity shares of the assessee company. • Copy of bank statement of both sides. • Copy of MOA • Copy of certificate of Incorporation. It was further submitted that the aforesaid documents were also furnished during the course of assessment proceedings u/s 153A(1)(b) of the Act, which established that all the companies were genuine. It was also....
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....eipt of ROC, affidavit for investment in equity share of the assessee, copy of bank statement of the assessee as well as the investor, copy of memorandum of Association, copy of certificate of incorporation and proof of filing of the Income Tax Returns by the investor. Therefore, it cannot be said that the assessee concealed any particulars or information relating to the share applications from the department. The aforesaid fact has also been admitted by the AO at Page No. 11 of the penalty order wherein he has mentioned as under: "The fact that despite providing the details like proof of Income Tax Return, PAN, copy of certificate of incorporation, MOA etc., the assessee chose to surrender the introduction of share capital being bogus. If this was not the case, he would not have produced a letter of surrender during the assessment proceedings. What more is pertinent to note that it was as a result of investigation carried out by the Department that the assessee was forced to furnish a letter of surrender by accepting that the share capitals introduced by him was his own unaccounted money given the colour of genu....