TaxTMI 
TaxTMI 
TaxTMI 
2012 (1) TMI 263
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.... money had been received for 3,700 cumulative redeemable preference shares of ₹ 1,000 each at a premium of ₹ 4,000/- per shares were allotted to different private corporate bodies. The AO further noticed that the amount of ₹ 37,00,000/- was received towards the face value of the shares and ₹ 1,48,00,000/- towards premium of the shares and hence total amount of ₹ 1,85,00,00/- was received towards share application money for allotment of 3700 cumulative redeemable preference shares. It was found on investigation by the Addl. DIT(Inv.) , Unit-I, Kolkata that following companies had paid share application money to the assessee: S. No. Name of Party Shares applied Amount received 1 Platinum Commerce Pvt. Ltd. 100 500000 2 Nilhat Promoters & Fiscals Pvt. Ltd. 600 3000000 3 Ventex Trade Pvt. Ltd. 1000 5000000 4 Ankita Finvest Pvt. Ltd. 1000 5000000 Total 18500000 5. The AO noticed that the directors of the above companies in their sworn statement recorded u/s 131 has stated that "I got cash of equivalent amount from this company and against the same cheque have been issued". The Addl. DIT(Inv.) also recorded statement of one Shri Kishan....
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....rce Pvt. ltd. with photocopies of share application, acknowledgment slip, certificate of incorporation etc. It was noticed that the confirmation was not signed by the directors, but by the authorized signatory. The details of the authorized signatory was not mentioned in the confirmation letter. Therefore, genuineness of the confirmation could not be established. In view of the above findings, the AO held that since the burden of proving genuineness of transaction pertains to socalled corporate bodies, was on the assessee and it failed to carry the burden. It could not get away from this responsibility by putting it on the shoulders of the AO. It was the assessee's responsibility to produce directors of so called Kolkatta based companies for cross verification. Besides, it failed to file original confirmation for all so called share applicant companies from the directors. Accordingly, the amount received by share application money for allotment of cumulative redeemable preference shares amounting to ₹ 1.85 crores was treated as its own unexplained money added u/s 69A of the Act. Aggrieved by the order of the AO, the assessee carried the matter in appeal before the CIT(A). 6.....
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.... chose to stal l and delay necessary investigation by the Investigation Wing and never intended in the right earnest to cross-examine such persons, if at all it was of the view that entire investment was sacrosanct and beyond doubt. Had all such transactions were bona f ide and genuine, the assessee could have conveniently obtained the denial of the directors on some or other ground, in the form of respective aff idavits or statements. Moreover, respective directors would not have disowned such transactions in any circumstances, involving huge sums unless they acted a conduit for such unaccounted transactions and entered into accommodation entries with the assessee company. They would not have been naïve enough to disown their own investments, had everything been overboard. Therefore, the genuineness of the transaction which is also one of the ingredients for a genuine credit, has not been proved in any manner. In such circumstances, the addition made by the AO by invoking the provisions of section 68 and not section 69A as correctly pointed out by the assessee is fully justif ied. The CIT(A) further held as under:- "5.4 In so far as the contention that section 69A does not ....
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....ter concern cases namely Chat Computers (supra) and Netscape Software Ltd. (supra). 9. We have heard the rival submissions and perused record as well as gone through the orders of the authorities below. In this case the addition made by the AO and confirmed by the CIT(A) was based on the Investigation Report of the ADIT(Investigation) Unit-IX(2), Mumbai and based on the statements of the directors of investing companies recorded by the Investigation Wing, Unit-1(2), Calcutta. This aspect was carefully considered by the Tribunal in the case of M/s chat Computers Pvt. Ltd. (supra) at page 122 vide paras 6.2 to 6.3 in its order. The Tribunal has observed that the AO relied on the statements of the directors during the course of investigation proceedings by the DDIT9Inv.) , Unit-1(2), Calcutta and no opportunity was given to the assessee to cross-examine during the course of assessment proceedings and it is violation of principles of natural justice. It was further observed by the Tribunal that the share application was received through account-payee cheques/draft and the share application money was found in the bank accounts of the investing companies deposited through account-payee ....
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....field P Ltd 1200 6000000 5. Dabriwal Investment & Financiers P Ltd 200 10000000 6. Asrara Fintrade P Ltd 1000 5000000 7. Hooghly Vinimary P Ltd 1000 5000000 8. Clix Securities P Ltd 150 750000 9. PNR Holdings P Ltd 200 10000000 10. Cube Trafin P Ltd 1000 5000000 Total 11150 5,57,50,000 The Directors of the above companies were summoned u/s 131 of the I T Act. The Directors of aforesaid investment company, in their sworn statement recorded u/s 131 has stated that " I got cash of equivalent amount from the company (M/s Chat Computers P Ltd) and against the same cheque have been issued." 4.3 The ADIT(Inv), Unit 1, Kolkata has also recorded statement of one Shri Kishan Kumar Verma S/o Vijay Kumar Verma, resident of Howrah 2 who has admitted in his statement recorded u/s 131 of the I T Act, 1961 on 13.10.2006 that he rendered his individual bank account as well his propriety concerns Bank accounts to deposit cash in lieu of signed blank account payee cheques to Shri Pawan Kumar Agarwal, S/o Shri Agarwal, resident of 2C Dover Rioad, Kolkata 19 and Shri D K Nahata resident of Kolkata for a commission of ₹ 100 for per ₹ 1,00,0/-. He also stated ....
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.... by the investigation unit 1, Kolkata for cross examination of them. 6.1 In para 4.5 and 4.6, the Assessing Officer has recorded the reasons for forming the view that the assessee was given several opportunities to cross examine the directors of the investing companies as under: "4.5 As per the statements of the Directors of various Kolkata based companies and the other persons, it is clear that the assessee had given cash to so called companies which in turn issued back to assessee cheques/demand draft of equivalent amount. This fact was stated on oath by the directors of the said companies. However, director of the assessee Shri Kiriti Kumar N Parekh denied to have paid any cash to these parties in his statement before ADIT(Inv) Unit IX(2), Mumbai. In his statement he stated his intention to cross examine the aforesaid directors to prove his stand. DDIT(Inv) Unit 1(2) Kolkata has given several opportunities to the assessee to cross examine the aforesaid directors at its Kolkata office. In spite of repeated opportunities given to the assessee, the said cross examination could not take place as the assessee sought adjournment every time. Thereafter, the assessee stated that 'he ....
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....on is an absolute unjust and opposite to the rule of law and what procedure demands. Therefore, there is a total denial of opportunity to the assessee to cross examine the persons, whose statements are used against the assessee. 6.3 Further, when the director of the assessee categorically denied, during the investigation, the allegation of giving cash to those investing companies then the onus is on the revenue to prove that the application money received by the assessee is assesse's own money routed through those applicants companies. There is no evidence or material brought on record by the Assessing Officer, except the un-cross examined statements of the third party, to show any movement of cash routed back to the assessee in form of application money in the alleged allotment of cumulative preferential shares. Rather, it is undisputed fact that the application money was received through account payee cheque/bank draft given by the investing companies from their respective bank account. It is also an accepted fact that source of the application money was found in the bank account of the investing companies deposited through account payee cheques; therefore, no cash transaction ....
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....kes are appearing in those statements allegedly recorded on different dates. For example:- Questionno.4:- Does you company has transaction with the following companies? If so, give details and nature of such transaction: This mistake "Does you" is appearing in question No. 4, of all the statements, hich shows that questionnaire was already prepared and answers were already Written in the same manner as it is evident from the answer to question no.6 as under: Question No. 6 Do you have to say anything else? Ans: I have gone through the above statement and the same has been recorded correctly and without any fabrication. The above statement has been given by me without the use of any force, coercion or threat. The mistake in the answer no. 6 is also identical in all the statements recorded on different dates. Since the statements were recorded by the investigation team of ADIT(Inv) Unit 1, Kolkata and not during the proceedings before any Court of law; therefore, all these facts suggest and indicate to believe that the same are not recorded as a verbatim of what the concerned person stated; but obtained by the department in a mechanical manner. However, without going into validi....
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....rt in the case of Lovely Exports P Ltd (supra), decision of the Full Bench of the Hon'ble Delhi High Court in the case of Sophia Finance Ltd reported in 205 ITR 98 (Del)(FB) and the decision in the case of Divine Leasing & Finance Ltd (supra) has observed in paras 11 to 16 as under: " It is clear from the above that the initial burden is upon the assessee to explain the nature and source of the share application money received by the assessee. In order to discharge this burden, the assessee is required to prove : (a) the identity of shareholder ; (b) the genuineness of transaction ; and (c) the creditworthiness of shareholders. 12 In case the investor/shareholder is an individual, some documents will have to be filed or the said shareholder will have to be produced before the Assessing Officer to prove his identity. If the creditor/subscriber is a company, then the details in the form of registered address or PAN identity, etc., can be furnished. 13 The genuineness of the transaction is to be demonstrated by showing that the assessee had, in fact, received money from the said shareholder and it came from the coffers of that very shareholder. The Division Bench held that....
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....nts like PAN card, bank account details or details from the bankers were given by the assessee, onus shifts upon the Assessing Officer and it is on him to reach the shareholders and the Assessing Officer cannot burden the assessee merely on the ground that summons issues to the investors were returned back with the endorsement "not traceable". The same view is taken by the Karnataka High Court in Madhuri Investments Pvt. Ltd. v. Asst. CIT (in I. T. A. No. 110 of 2004, decided on February 18, 2006). In this case also, some of the share applicants did not appear and notices sent to them were returned with remarks "with no such person". Addition was made on that basis which was turned down by the High Court in the following words : " 6. Having heard the learned counsel for the parties, we notice that whenever a company invites applications for allotment of shares from different applicants, there is no procedure contemplated to find out the genuineness of the address or the genuineness of the applicants before allotting the shares. If for any reason the address given in the application were to be incorrect or for any reason if the said applicants have changed....
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.... between the two Members of the Appellate Tribunal and the matter was referred to the Vice President who concurred with the findings and conclusions of the Assessing Officer and the Commissioner of Income-tax (Appeals). On appeal, the High Court re-appreciated the evidence and substituted its own findings and came to the conclusion that the reasons assigned by the Tribunal were in the realm of surmises, conjecture and suspicion. On appeal to the Supreme Court, the court while reversing the decision of the High Court held that the findings of the Assessing Officer, Commissioner of Income-tax (Appeals) and the Tribunal were based on the material on record and not on any conjectures and surmises. That the money came by way of bank cheques and was paid through the process of banking transaction as not by itself of any consequence. The High Court misdirected itself and erred in disturbing the concurrent findings of fact. While doing so, the legal position contained in section 68 of the Act was explained by the Supreme Court by assessing that a bare reading of section 68 of the Act suggests that (i) there has to be credit of amounts in the books maintained by the assessee ; (ii) such cre....
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....ed capital of the respondent-company accepted by the Income-tax Officer and rejected by the Commissioner of Income-tax on the ground that a detailed investigation was required regarding the genuineness of subscribers to share capital, as there was a device of converting black money by issuing shares with the help of formation of an investment which was reversed by the Tribunal, this court held that even if it be assumed that the subscribers to the increased share capital were not genuine, under no circumstances the amount of share capital could be regarded as undisclosed income of the company. This view was confirmed by the apex court in CIT v. Steller Investment Ltd. [2001] 251 ITR 263. 24. Having taken note of the legal position in detail, we now proceed to decide each appeal on the application of the aforesaid principles. I. T. A. No. 2093 of 2010 and I. T. A. No. 2095 of 2010" 9. It is clear from the decision of the Hon'ble Delhi High Court in the case of Oasis Hospitalities P Ltd (supra) that once the assessee filed copy of PAN, Acknowledgement coy of the return of income of the investing companies, their bank accounts statements for the relevant period; then even the parti....
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....is received by the assessee-company from alleged bogus shareholders whose names are given to the Assessing Officer, then the Department is free to proceed to reopen their individual assessments in accordance with law, but the same cannot be regarded as undisclosed income of the assessee. In this view of the situation, we find no infirmity in the order of the Commissioner of Income-tax (Appeals) vide which addition made on account of share application money has been deleted." 34 Having regard to the decisions noted above, we are of the view that the addition was rightly deleted by the Commissioner of Income-tax (Appeals) and the Tribunal. Requisite documents were furnished showing the existence of the shareholders from bank accounts and even their incometax details. From bank accounts of these shareholders, it was found that they had deposed certain cash and source thereof was questionable. The Assessing Officer should have made further probe which he failed to do. Moreover, the remedy of the Department lies in reopening the case of these investors and the addition cannot be made in the hands of the assessee." Thus in view of the above observation of hon'ble High Court when r....
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.... their cases about the source of their funds." 13.1 Since there was a plea on behalf of the assessee that the assessee was not given an opportunity to cross examine the witnesses, the Tribunal, instead of going into the merits of the case, remanded the matter to the records of the Assessing Officer on the reason as recorded in para 13 as under: "13. In view of the above, prima-facie it cannot be concluded that the assessee received share application money which cannot be treated as unaccounted income. Complete facts are not on record to give such a finding. However, it is noticed that the assessee was not given proper opportunity to substantiate its claim and defend the department's observations/allegations. It is also noticed that the Department has not followed up its own investigation to its logical end and not placed on record the complete enquiries made in the case of Madhavpura Mercantile Cooperative Bank Ltd. or in the group companies so as to come to a conclusion that about the source of funds received. The status in the hands of those companies who were also alleged to have received funds in cash has not been placed on record. Since it is one of the contentions of the a....
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....and the reliance place by the AO on such statements is highly misplaced and improper. When the stand of the revenue is in total contraction of the material on record then then in view of the latest decision of the Hon'ble Delhi High Court in the case of Oasis Hospitalities P Ltd (supra), we are of the considered opinion that the issue can be decided on merit and need not to be remand to the record of the AO because at the time of the order for the AY 2005-06, the coordinate Bench of the Tribunal was not having the benefit of the decision of the Hon'ble Delhi High Court in the case cited supra. Further in view of the decision of hon'ble Gujrat High Court in case of Rajeh Babubhai Damania (supra), we see no reason for giving the A.O. any further innings to fill up the lacunas or lapses in the assessment which would cause a great injustice to the assesse. 15. In view of the above discussion and the facts and circumstances of the case, the share application money cannot be treated as income of the assessee company until and unless it is proved beyond doubt that the assesse's own money has come back through some closely related applicant. Once the identity of the applicant is disclose....
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....annels, the genuineness of the transaction would be proved. Other documents showing the genuineness of the transaction could be copies of the shareholders register, share application forms, share transfer register, etc. As far as the creditworthiness or financial strength of the creditor/subscriber is concerned, that can be proved by producing the bank statement of the creditors/subscribers showing that it had sufficient balance in its accounts to enable it to subscribe to the share capital. Once these documents are produced, the assessee would ave satisfactorily discharged the onus cast upon him. Thereafter, it is for the Assessing Officer to scrutinise the same and in case he nurtures any doubt about the veracity of these documents, to probe the matter further. However, to discredit the documents produced by the assessee on the aspects, there have to be some cogent reasons and materials for the Assessing Officer and he cannot go into the realm of suspicion." 15. The Hon'ble Bombay High Court in the case of CIT Vs. Creative World Telefilms Ltd. 333 ITR 100 (Bom) observed that if the share application money is received by the assessee-company from alleged bogus shareholders, whose....
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....ing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices ; (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessee nor should the Assessing Officer take such repudiation at face value and construe it, without more, against the assessee ; and (7) the Assessing Officer is duty bound to investigate the creditworthiness of the creditor/subscriber the genuineness of the transaction and the veracity of the repudiation. In the case of a public issue, the company concerned cannot be expected to know every detail 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. A delicate balance must be maintained while walking the tightrope of sections 68 and 69 of the Income-tax 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, to carry out thorough investigat....
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....rent entities (all are limited companies), the evidence produced by the Assessee are discussed itemwise: a) Star Trafin Pvt.Ltd.: This company made an application for allotment of 800 preference shares and paid a sum of ₹ 40,00,000 along with the application. The sum of ₹ 40,00,000/- had been paid by Cheque No.643628 dated 5.5.2005 drawn on ABN Amro Bank, Brabourne Road Branch, Kolkata-1. The company is stated to be assessed to Income Tax under PAN No.AADCS5989A. The Assessee had filed copy of the application form for allotment of preference shares, Extract of the Minutes of the Board Resolution authorizing Mr.Chandresh Kumar Jain, Director to make investments, Certificate of Incorporation of the company on 4.9.96, acknowledgement of having filed Income Tax return for A.Y 2006-07 declaring total income of ₹ 34,349/-, Memorandum and Articles of Association of the company. b)Rajesh Vinimay & Vyapar Pvt. Ltd.: This company made an application for allotment of 400 preference shares and paid a sum of ₹ 20,00,000 along with the application. The sum of ₹ 40,00,000/- had been paid by Cheque No.794853 dated 3.5.2005 drawn on ABN Amro Bank, Brabourne Road Br....
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.... filed copy of the application form for allotment of preference shares, Extract of the Minutes of the Board Resolution dated 23/8/04 authorizing Mr.Chandresh Kumar Jain, Director to make investments, Certificate of Incorporation of the company on 6/5/96, acknowledgement of having filed Income Tax return for A.Y 2006-07 dated 30/10/06, Memorandum of Association and Articles of Association of the company has also been filed. e) Sunny Fincom Pvt. Ltd.: This company made an application for allotment of 1000 preference shares and paid a sum of ₹ 50.00 lacs along with the application by Cheque No.509741 dated 5.5.2005 drawn on ABN Amro Bank, Brabourne Road Branch, Kolkata-1. The company is stated to be assessed to Income Tax under PAN No.AAGCS5048H. The Assessee had filed copy of the application form for allotment of preference shares, Extract of the Minutes of the Board Resolution dated 8/8/04 uthorizing Mr.Chandresh Kumar Jain, Director to make investments, Certificate of Incorporation of the company on 14/7/98, acknowledgement of having filed Income Tax return for A.Y 2004-05 dated 6/10/04, Memorandum of Association and Articles of Association of the company has also been file....
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.... allotment of 1000 preference shares and paid a sum of ₹ 50.00 lacs along with the application by Cheque No.329992 dated 27/7/2005 drawn on ABN Amro Bank, Brabourne Road Branch, Kolkata-1. The company is stated to be assessed to Income Tax under PAN No.AACCA2015N. The Assessee had filed copy of the application form for allotment of preference shares, Extract of the Minutes of the Board Resolution dated 19/04/2005 authorizing Mr. Iteprata Biswas & Mr.Chandresh Kumar Jain, Directors to make investments, Certificate of Incorporation of the company on 11/3/96, acknowledgement of having filed Income Tax return, Memorandum of Association and Articles of Association of the company, Directors report, auditors report and audited accounts for the year ending 31/3/06 has also been filed. j) Macro Leafin Pvt. Ltd.: This company made four applications for allotment of 1700 preference shares and paid a sum of ₹ 85.00 lacs along with the application by fours Cheques viz., cheque No.633238 dated 10/1/06 for ₹ 20.00 lacs drawn on ABN Amro Bank, Brabourne Road Branch, Kolkata-1, Cheque No.003947 dated 6/1/06 for ₹ 30.00 lacs drawn on Standard Charted Bank, Cheque No.633236 ....
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....uthorizing Mr.Govind B.Sharma, Director to make investments, Certificate of Incorporation of the company on 14/7/98, acknowledgement of having filed Income Tax return for A.Y 2006-07 dated 20/10/2006, Memorandum of Association and Articles of Association of the company has also been filed. 20. We are of the view that identity of the shareholders has been sufficiently explained by the Assessee. The mode of payment of application money has been through banking channels and these details are available in the application forms. Thus the genuineness of the transaction has been prima facie established by the Assessee. The Assessee has given the Income Tax Permanent Account Number (PAN) in almost all the share applicants. This would be prima facie proof of the creditworthiness of the Assessee. 21. The Hon'ble Delhi High Court in the case of Divine Leasing (supra) has laid down that if the Assessee satisfies prima facie the three ingredients as set out above then what the AO has to do. The Hon'ble Court has held that the onus thereupon shifts to the AO and he has to show that the money in question is that of the Assessee. The Hon'ble Court has held that the onus on the part of the AO wou....
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....s; therefore, the said investigation was neither the inquiry carried out during the assessment proceedings nor part of the assessment proceedings. It is clear that the scrutiny assessment commenced after about one year from the alleged investigation was over. The Assessing Officer has heavily relied upon the investigation report and proceedings and specifically on the point that the assessee was given opportunity to cross examine the directors of the investing companies, who paid the application money and further, the assessee was also asked by the Assessing Officer to produce the directors, whose statements were recorded by the investigation unit 1, Kolkata for cross examination of them. 6.1 ……… 6.2 Since the investigation proceedings were not part of the assessment proceedings in the case of the assessee and even the investigation was not either u/s 132 or u/s 133 of the I T Act. It seems that investigation by the ADIT(Inv) Unit 1, Kolkata is preliminary investigation only to verify the suspicion of any concealment of income. The Assessing Officer, during the course of assessment proceedings asked the assessee to produce the said directors for cross exa....
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....as to how the alleged cash/money of the assessee company routed through various levels finally reached to the assessee. Not an iota of evidence or material has been brought on record to show even, prima facie that the said amount representing application money moved from the assessee and reached to the assessee. Rather, documentary evidence on record exhibits different facts i.e. as per books of account of the assessee as well as those of investing companies together with the return of income, board resolution go to prove that the said application money was paid by the investing company to the assessee against allotments of the preferential shares. The Investing companies have shown the said amount as investment in their books of account. The money routed through banking channels and through account payee cheques/bank draft, undisputed given by the parties. Even, the source of the application money was found in the bank account of the investing companies not by any cash deposit; but through account payee cheques. Therefore, when all the documentary evidence contradicts the statements of the directors recorded by the investigation unit of the department then such statements alone ca....
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....pta (supra), the Hon'ble Delhi High Court has taken a note of the finding of the Tribunal in para 2 as under: "2. The Tribunal has confirmed the order passed by the CIT(A) which held the entire addition made by the Assessing Officer to be invalid and had deleted the same. The CIT(A) had clearly held that the Assessing Officer had passed the assessment order in violation of the principles of natural justice in as much as he had neither provided copies of the seized material to the assessee nor had he allowed the assessee to cross-examine one Mr. Manoj Aggarwal on the basis of whose statement the said addition was made. The CIT(A) also held that the entire addition deserved to be deleted, particularly so, because the transactions also stood duly reflected in his regular returns." 7.1 The Hon'ble High Court has held that once there is violation of principles of natural justice by not providing seized material to the assessee as well as cross examination of the persons on whose statements, the Assessing Officer relied upon, amounts to denial of opportunity and would be fatal to the proceedings. The Hon'ble Delhi High Court has observed in para 7 as under: "7. In view of the foreg....
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....tion forms, share transfer register, etc. 14 As far as creditworthiness or financial strength of the creditor/subscriber is concerned, that can be proved by producing the bank statement of the creditor/subscriber showing that it had sufficient balance in its accounts to enable it to subscribe to the share capital. This judgment further holds that once these documents are produced, the assessee would have satisfactorily discharged the onus cast upon him. Thereafter, it is for the Assessing Officer to scrutinize the same and in case he nurtures any doubt about the veracity of these documents to probe the matter further. However, to discredit the documents produced by the assessee on the aforesaid aspects, there have to be some cogent reasons and materials for the Assessing Officer and he cannot go into the realm of suspicion. 15 At this stage, we would like to refer to the judgment of the Bombay High Court in the case of CIT v. Creative World Telefilms Ltd. (in I. T. A. No. 2182 of 2009 decided on October 12, 2009) [2011] 333 ITR 100. The relevant portion of this order is reproduced below: "In the case in hand, it is not disputed that the assessee had given the details of ....
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....he statement of Sri Anil Raj Mehta, a chartered accountant." 8.1 The Hon'bl High Court further discussed the issue in paras 20 to 24 as under: " 20 The observations of the Supreme Court in the case of Lovely Exports P. Ltd. [2009] 319 ITR (St.) 5 (SC) go to suggest that the Department is free to proceed to reopen the individual assessments in the case of alleged bogus shareholders in accordance with law and, thus, not remediless. It is, thus, for the Assessing Officer to make further inquiries with regard to the status of these parties to bring on record any adverse findings regarding their creditworthiness. This would be more so where the assessee is a public limited company and has issued the share capital to the public at large, as in such cases the company cannot be expected to know every detail pertaining to the identity and the financial worth of the subscribers. Further the initial burden on the assessee would be somewhat heavy in case the assessee is a private limited company where the shareholders are family friends/close acquaintances, etc. It is because of the reason that in such circumstance, the assessee cannot feign ignorance about the status of these parties.....
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.... not satisfactory. It is only then that the sum so credited may be charged to income-tax as the income of the assessee of that previous year. The expression "the assessee offers no explanation" means the assessee offers no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. The opinion of the Assessing Officer for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on the record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material on record. Application of mind is the sine qua non for forming the opinion. In cases where the explanation offered by the assessee about the nature and source of the sums found credited in the books is not satisfactory there is, prima facie, evidence against the assessee, viz., the receipt of money. The burden is on the assessee to rebut the same, and, if he fails to rebut it, it can be held against the assessee that it was a receipt of an income nature. The burden is on the assessee to take the plea t....
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....etc. 10. In the case in hand, there is no dispute about the identity of the applicant companies, who had paid the application money and the source of the application money was also found in the respective bank accounts of the investing companies and there was no trace of cash deposit in the bank accounts of the investing companies, then, the action of the Assessing Officer under influenced of the report of the investigation wing without giving opportunity to the assessee for cross examination of the persons, is not sustainable. 11. The Assessing Officer has raised some doubts and suspicion about the movement of the money through various levels but could not establish any direct or indirect link of the said outward movement from the assessee and then again received by the assessee in the form of application money. Even the revenue has failed to bring anything on record to show movement of the alleged cash from the assesse. 12. The Hon'ble Delhi High Court, in the case of Oasis Hospitalities P Ltd supra) in para 33 and 34 has observed as under: "33 The Tribunal while confirming the aforesaid view of the Commissioner of Income-tax (Appeals) has summarized the discussion as under:....
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....rder of the coordinate Bench of the Tribunal in assessee's own case for AY 2005-06, it is evident that the coordinate bench of the Tribunal was also of the view that the Assessing Officer did not fully establish his case that the money has been received by the investing companies from the assessee company. The Tribunal has observed in para 11 as under: "11. Assessee has furnished various documents in support of the contention that it has received share application money from various companies duly supported by their annual reports and Balance Sheets and evidenced in respect of cheques. The A.O. did not fully establish his argument that the monies have been received by the companies from the assessee company to its logical end, before forming the opinion that assessee has routed its own monies. As seen from the bank accounts of the said companies enclosed as an evidence it can be noticed that those companies invariably received fund by way of cheques from another source. On the basis of enquiry in few cases the A.O. was of the opinion that all the monies were from the assessee and treated them as income from unaccounted sources. It is one of the contentions of the assessee that ....
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.... back to the file of the A.O. to make complete enquiry and to give proper opportunity to the assessee." 13 There is no quarrel on the aspect that so far as it is possible the consistency of the view has to be maintained; however, in the case of the assessee, the Tribunal, for the AY 2005-06 has not formed any opinion or given any finding on this issue; but remanded the same to the file of the Assessing Officer for fresh adjudication. 13.1 Before us, the ld AR of the assessee has forcibly urged that in view of the decision of the Hon'ble Delhi High Court in the case of Oasis Hospitalities P Ltd (supra) as well as the decision of the Hon'ble Gujarat High Court in the case of Rajeh Babubhai Damania (supra), the issue may be decided on merits on the basis of the material available on record. 14. It is to be noted that it is not the case of any additional evidence or fresh material produced by any of the parties before us which requires examination or investigation to verify the correctness of the new facts first time brought before us. The case of the revenue is that the cash moved from the assesse routed though various level and then reached to the assesse in the form of share a....
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....d confirmed by the CIT(A) on this account. However, we may clarify that our findings on the issue are based on particular facts of this assessment year and therefore, would not affect the respective rights of the parties for the other assessment years." 23. The above observations of the Tribunal in our view are squarely applicable to the case of the Assessee also as the statement of the directors of the companies who applied for shares were also similar in the case of the Assessee as well as the case of Chat Computers (supra). The order of the AO as well as that of the CIT(A) in both the cases are verbatim the same. 24. Apart from the above, we also find that the Assessee has filed before the Registrar of Companies return of allotment in respect of the shares which were allotted to the applicants and the same has been taken on file by the Registrar of Companies. Perusal of the same reveals that the shares allotted to the various companies totaling ₹ 27,61,50,000/- has been duly shown as shares allotted in those returns. The objections raised by the learned D.R. before us at best could raise doubts about the satisfaction of the three conditions for accepting credit entry i....