TaxTMI 
TaxTMI 
2011 (1) TMI 1389
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....ew of this information, the reasons were recorded u/s 147 and notice was issued u/s 148 on 24.3.2009. In the course of assessment proceedings, the assessee was required to prove the identity of the creditor, his capacity and the genuineness of the transaction. It is mentioned that the assessee failed to prove the aforesaid ingredients necessary to discharge onus u/s 68. Therefore, the amount of Rs. 27,85,500/- has been brought to tax. A further sum of Rs. 41,782/- has been added to the income in respect of commission paid to these persons, calculated @ 1.5% of the aggregate of the entries amounting to Rs. 27,85,000/-. Taking into account the income of Rs. 255/- declared by the assessee, the total income has been computed at Rs. 28,27,530/-. 2. In appeal, the ld. CIT(A) came to the conclusion that Shri Ranjan Jassal and Shri Radhuvir Singh had contributed Rs. 4,50,000/- and Rs. 4,70,000/- respectively towards share capital of the company. Thus, the sum of Rs. 9,20,000/- was in respect of contribution towards share capital. Various amounts were received from four other persons, namely, M/s G.P. Enterprises, M/s Manak International, Shri Perminder Singh and Shri Kamal Dhawan. The a....
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.... 2.3 On the basis of aforesaid details, the ld. CIT(A) has held that the assessee has provided requisite details of the share applicants. Thus, it has discharged the onus cast on it. Therefore, the addition of Rs. 9,20,000/- has been deleted. In the case of sale proceeds of the shares of Uttranchal Finance Ltd, it has been mentioned that the AO has not disputed the acquisition of shares by the assessee and the purchase consideration has been paid through cheques. Necessary evidence in respect of sale of 186550 shares has also been placed on record of the AO. The AO has not controverted these facts except stating that the transactions were not believable. The ld. CIT(A) held that the identity of the purchasers has been proved. The transactions of sale have been settled by payment through cheques. There is nothing unusual about these transactions. Therefore, the addition of Rs. 18,65,500/- has also been deleted. 2.4 The addition on account of commission has been held to be consequential in nature. Since the entries have been held to be genuine entries, the amount of Rs. 41,782/- has also been deleted from the assessment. 3. In its appeal, the revenue has challenged t....
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....nnot be two opinions on the aspect that the pernicious practice of conversion of unaccounted money through the masquerade or channel of investment in the share capital of a company must be firmly excoriated by the Revenue. Equally, where the preponderance of evidence indicates absence of culpability and complexity of the assessee it should not be harassed by the revenue's insistence that it should prove the negative. In the case of public issue, the company concerned cannot be expected to know every details pertaining to the identity as well as financial worth of each of its subscribers. The company must, however, maintain and make available to the Assessing Officer for his perusal, all the information contained in the statutory share application documents. In the case of private placement the legal regime would not be the same. A delicate balance must be maintained while walking the tightrope of section 68 and 69 of the Incometax Act. The burden of proof can seldom be discharged to the hilt by the assessee; if the Assessing Officer harbours doubts of the legitimacy of any subscription he is empowered, nay duty bound, to carry out through investigations. But if the Assessing Office....
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....ished bank statement of the contributors or purchasers of shares. Therefore, creditworthiness of the parties has not been established. Even if there was some lapse on the part of the AO in making full enquiry, the powers vested in the CIT(A) are co-terminus with the powers of the AO and, therefore, he should have made further enquiries or caused further enquiry to be made in the matter. In the case of sale of shares, it is submitted that additional evidence was filed regarding purchase of two lakh shares of Uttranchal Finance Ltd. This evidence was not forwarded to the AO for his rebuttal. The balance-sheet of Uttranchal Finance Ltd. has not been filed and, therefore, the value of its shares on the date of the sale is not known. It is also not known whether the shares are quoted or unquoted, those were in material or demat form and who was the broker. Therefore, the matter regarding purchase and sale of shares should have been remanded to the AO. Thus, it is urged that the order of the AO may be upheld or the matter may be remanded to the file of the AO for further enquiry. 5. In reply, the ld. counsel submitted that the reasons for issuance of notice u/s 148 were furnished to t....
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....e ld. CIT(A) may be upheld. 6. We have considered the facts of the case and rival submissions. The facts in respect of ground no. 1 are that the assessee received share application money of Rs. 4,50,000/- from Shri Ranjan Jassal and Rs. 4,70,000/- from Shri Raghubir Singh. In the case of Shri Ranjan Jassal, copies of application, affidavit, confirmation and intimation u/s 143(1)(a) were filed. This person is assessed to tax and his permanent account number was also furnished. In case of Shri Raghubir Singh, copies of application, acknowledgment of income-tax return, affidavit and confirmation were filed. This person is also assessed to tax and his PAN was furnished. 6.1 In the case of CIT Vs. M. Ganapathi Mudaliar (1964) 53 ITR 623 (SC), relied upon by the ld. DR, the facts are that the AO assessed the remittances from Singapore at Rs. 61,538/-. The profits were assessed at Rs. 2,10,600/- which covered the remittances. The AAC substantially confirmed the findings of the AO but held that in absence of accounts showing the exact income, which the appellant got from the source, his income inclusive of profits from his own business may be taken at Rs. 1,80,000/-. The matter was t....
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....st place, the shares have been issued at par and not at premium at nine times the face value. The AO has not carried out any enquiry whatsoever to prove that shareholders are non-existent. 6.1 The ld. counsel has relied on the decision of Hon'ble Supreme Court in the case of Lovely Exports (P) Ltd. (supra). The Hon'ble Supreme Court affirmed the decision of Hon'ble Delhi High Court by observing as under:- "Can the amount of share money be regarded as undisclosed income under s. 68 of IT Act, 1961? 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 AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment." 6.2 Thus, the decision is that if the names are given to the AO, the department is free to proceed to reopen their assessments in accordance with law, but amount of share money received by the company cannot be regarded undisclosed income u/s 68 of the Act. We may also reproduce the relevant portion of the judgment of H....
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....f the creditors do not appear. Addition cannot be made u/s 68." 6.3 We find that the facts are similar to the facts of Lovely Exports (P) Ltd. (supra). The assessee has provided all the details necessary for establishing the identity of the contributors. The AO has discarded the whole evidence without any enquiry and chose to follow the findings of the investigation wing. This is not in accordance with the decision of the jurisdictional High Court and the apex court. Therefore, it is held that the amount could not have been charged to tax u/s 68. 7. In respect of ground no. 2, there is a preliminary question as to whether the ld. CIT(A) admitted any fresh evidence, which was not filed before the AO. It is seen that the claim of the assessee is that he sold shares to four persons. The ld. CIT(A) wanted it to file evidence to show the purchase of the shares. This evidence was not filed suo motu by the assessee but was requisitioned by the ld. CIT(A). Therefore, the evidence cannot be said to be additional evidence. Needless to say that the ld. CIT(A) could call for such evidence. In such circumstances, no useful purpose will be served by remanding the matter to the AO for furth....