TaxTMI 
TaxTMI 
2016 (2) TMI 400
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....siness. The assessee filed e-Return declaring total Income under Rs. 11,43,594.- (after setting off the b/f losses of Rs. 5,640/-) on 19.09.2007. The return was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter 'the Act'). The case was selected for compulsory scrutiny under CASS norms. A notice u/s 143(2) was issued on 24.09.2008 and subsequently, notice u/s 142(1) of the Act along with questionnaire was issued to the assessee on 27.08.2009. 3.1 The AO observed that during the year under consideration, the share capital of the assessee was increased from Rs. 1,00,000/- to Rs. 43,00,000/- i.e. an increase of Rs. 42,00,000/- along with an increase of Rs. 3,78,00,000/- in the share premium account. The AO asked the assessee to produce the details of these increases and details of newly introduced share capital and to prove the identity, creditworthiness & genuineness of the parties to whom the shares were allotted. In response to the same, assessee furnished a list of 23 parties to whom the shares were allotted along with number of shares allotted to each. However, the AO observed that no credible submissions were made which could prove the Existence, Identity, Creditwo....
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....at these submissions were grossly insufficient to prove the creditworthiness or genuineness of these transactions and moreover the existence of these parties was even more doubtful. After perusing the submissions of the assessee and failure on the part of the aforesaid four companies to make representation before him, the AO observed that these parties did not exist and they were paper companies who were engaged in the malpractice of providing accommodation entry and the assessee had routed its unaccounted money through them in the guise of application money. 3.3 In the end, the AO observed that despite availing more than sufficient and fair opportunity for proving the existence, identity, creditworthiness & genuineness of the above four companies, assessee failed to provide any specific detail i.e. confirmation from the investor, copies of ITRs, Balance-sheet and bank statement of the parties. He further observed that the assessee has not come forward to prove the existence & creditworthiness of these parties on account of failure to produce the parties for verification of the transactions. The onus to do so lies on the assessee which has not been discharged by it. Therefore, t....
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....at the addresses given and replies were filed by the parties alongwith necessary documents before the AO. It is argued that the addition has been made by the AO merely on the basis of information received from the Investigation Wing which was at the back of the appellant and on account of inability of the appellant to produce the directors of the above four investor companies personally before the AO. It is further argued that the appellant company was incorporated on 14.02.2006 with the main object of carrying out business of real estate and infrastructure development and has not commenced its business, other than raising the share capital during the year under consideration which has been invested in bank deposits / loans on which interest income has been earned which has been shown for taxation. It is argued that since this is practically the first year of the company and the business has not commenced, the impugned addition u/s 68 is bad in law. It is also argued that cross examination in relation to the evidences if any with the AO pertaining to the above company was not provided to the appellant by the AO, although specifically asked for by the appellant. It is further argued....
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....urther, it was held in Khandelwal Constructions v. CIT (1997) 227 ITR 900 (Gau.) that since the satisfaction of the AO is the basis for invocation of the powers u/s 68, such satisfaction must be derived from relevant factors on the basis of proper inquiry by the AO and such inquiry must be reasonable and Just. 4.3.4. It is also settled law that it is mandatory for the AO to confront the assessee with any material collected by the AO at the back of the assessee, and in case of statement of third party recorded at the back of the assessee, opportunity of cross examination has to be offered to the assessee, failing which the said material/statement etc. will be rendered on unreliable and additions made on the basis of such material/statement etc. shall be rendered illegal. Reference in this regard can be made to the decisions in the case of R. B. Shreeram Durga Prasad 176 ITR 169 (SC), 125 ITR 713 (SC), Jindal Vegetable (order of Hon'ble Delhi High Court in ITA no. 428 of 2007, 174 Taxmann 440 (Raj.) and Laxman Bhai Patel (order of Hon'ble Gujarat High Court dated 22.07.2008 in ITR no. 41/1997). 4.3.5. Further, in the case of N.P. Garodia (order dated 13.01.2....
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....f the High Court of Delhi). Following the aforesaid decision of the Apex Court in CIT v. Lovely Exports (P) Ltd. (supra), the Hon'ble Mumbai High Court in the recent judgement in the case of CIT v Creative World Telifilms Ltd. (order dated 12.10.2009 in ITA(L) no. 2182 of 2009) has held as under: "The question sought to be raised in the appeal was also raised before the Tribunal and the Tribunal was pleased to follow the judgement of the Apex Court in the case of CIT vs. Lovely Exports (p) Ltd. reported in (2008) 216 CTR 195 (SC) wherein the Apex. Court observed that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the assessing officer, then the department can always proceed against them and if necessary reopen their individual assessments. In the case in hand, it is not disputed that the assessee has given the details of name and address of the shareholders, their PAN/GIR number and had also given the cheque number, name of the bank. It was expected on the part of the assessing officer to make proper investigation and reach the shareholders. The assessing officer did nothing except issuing su....
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....hal to trace any person. Moreover, it is settled law that the assessee need not to prove the "source of source". ........ 10. We are also informed that a Special Leave Petition against the aforesaid Division Bench judgment in the case of the respondent- assessee has been dismissed by the Supreme Court. Accordingly, we are of the opinion that no question of law arises in the present cases as the matter is fully covered by the judgment of the Supreme Court in Lovely Exports (P) Ltd. (supra) as well as the Division Bench judgment of this Court in the case of the respondent-assessee itself. 11. Consequently, we are of the view that the present appeals amount to relitigation. The Supreme Court in KK Modi Vs. KN. Modi and Ors., (1998) 3 see 573 has held, "It is an abuse of the process of the court and contrary to justice and public policy for a party to relitigate the same issue which has already been tried and decided earlier against him. The reagitation mayor may not be barred as res judicata. But if the same issue is sought to be reagitated, it also amounts to an abuse of the process of the court ...." 12. Though we were initially inclined to impose....
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....o bring any evidence on record before making addition of Rs. 70,00,000/- u/s 68 of the Act on account of share capital received and Rs. 1,40,000/- on account of commission paid for taking accommodation entries. He further submitted that after giving proper explanation and adducing evidence in respect of existence, identity, creditworthiness and genuineness of the receipt of share capital by both the assessee and the persons to whom summons were issued, the AO had not issued any show cause notice before making addition that he was not satisfied with the explanation furnished by the assessee. He submitted that the assessee had furnished details of share capital received aggregating to Rs. 4,20,00,000/- from 23 parties along with confirmations vide letters dated 16.11.2009 and 08.12.2009 which inter alia included PAN and confirmation from the said four parties also from whom Rs. 70 lakhs was received on account of share capital. He further submitted that the AO made additions based on doubt, suspicion, conjecture and surmises; and the AO failed to bring any material on record that the contention of the assessee is false. He submitted that the assessee and the persons to whom summons w....
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....ich has been duly reflected in the audited financial statements for the year ended on 31.03.2007. The AO, during the scrutiny, asked the assessee to furnish details of shares aggregating to 4,20,000 issued to authorized persons along with the evidences regarding existence, identity, creditworthiness and genuineness of the transaction entered with the said shareholders. As per the AO, the assessee furnished list of shareholders along with their names, addresses, PAN, shares allotted and amount received vide replies dated 16.11.2009 and 08.12.2009. The AO notes that out of the 23 shareholders, 4 parties from this list figures in the information on accommodation entries received from the Directorate of Income-tax (Investigation), New Delhi and they were M/s. Archit Fincap Limited Rs. 9 lakhs, M/s. At All Time Your Securities Ltd. Rs. 42,40,000/-, M/s. Focus Industrial Resources Limited Rs. 6,60,000/- and M/s. Paras Fincap Pvt. Ltd. Rs. 12 lakhs, thus totaling amount to Rs. 70 lakhs. Thereafter, we find that the AO asked the assessee to prove the identity, creditworthiness and genuineness of the aforesaid 4 parties and issued summons u/s 131 of the Act to the aforesaid four companies. ....