AI Drafter 
TaxTMI 
TaxTMI 
2016 (5) TMI 801
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....he reserve and surplus which as at 31st March, 2008 was a sum of Rs. 77,398.31 paise rose to a sum of Rs. 39,92,61,247.60 paise. The increase in the share capital and the reserve and surplus is consequent to the issuance of 7,92,737 shares of Rs. 10/- each at a premium of Rs. 390/-. The authorised share capital of the assessee during the relevant assessment year was Rs. 1,36,00,000/-. The assessee originally filed a return showing a gross total income of Rs. 24,658/-. The assessee thereafter wrote to the assessing officer that due to inadvertence it had not disclosed receipt of a sum of Rs. 61,000/- on account of consultancy fees. The mistake, it was pointed out, was due to the fact that the sum of Rs. 61,000/- had been spent in making donation to a club. In the circumstances a notice dated 15th February, 2011 under Section 148 was issued. A notice dated 23rd February, 2011 under Section 142(1) of the Income Tax Act was also issued, seeking amongst other the details of share application money received by the assessee, including the names of the applicants, their address, date of receipt and the total amount received. It was submitted by Mr. Poddar that consequent to the notice date....
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....thout application of mind and without requisite enquiry into the increase of the share capital including the premium received by the assessee. The assessee replied stating, inter alia, as follows:- "On a bare perusal of the impugned Showcause Notice, it would appear that the allegations of the Revenue may be summarized as under: (i) That the Assessing Officer did not make requisite enquiry on the issue as to "what prompted the subscribers" to subscribe Shares at a high premium, issued by a closely held company. (ii) That there is no evidence on record which can show that the issue of subscription of Shares had been examined objectively and, therefore, it appeared to the Revenue that the assessment order was passed without application of mind. Before proceeding to reply to the aforesaid allegations, which, in our humble view, are wholly unfounded, it would be appropriate to recall the undisputed facts borne out by record, as under: In the previous year relevant to the assessment year 2009-10 the assessee- company had issued 7,92,737 Equity Shares of the Face Value of Rs. 10/- each at a premium of Rs. 390/-. Such shares were offered to, an....
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....eal. Mr. Poddar, learned senior advocate appearing for the appellant- assessee advanced the following submissions:- (1) Before an order under Section 263 can be passed, the Commissioner is obliged to satisfy twin conditions: (i) that the order passed by the assessing officer is erroneous and; (ii) that the order is prejudicial to the interest of the revenue. Unless both these conditions are satisfied, the CIT has no jurisdiction to tinker with the order of the assessing officer. (2) Receipt of share capital during the relevant assessment year was not a taxable event. He drew our attention to Section 56(2)(viib) which was introduced with effect from 1st April, 2013 which reads as follows:- "56. Income from other sources.- (1)... (2) In particular and without prejudice to the generality of the provisions of sub-section (1), the following incomes shall be chargeable to income tax under the head "Income from other sources", namely:- . . . (vii-b) where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any considerati....
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....f the assessee can be brought within Section 68 of the Income Tax Act. He in support of his submissions relied upon the judgement in the case of CIT, West Bengal -Vs- Calcutta Discount Company Limited reported in (1973) 91 ITR 8 (SC) wherein the following views were expressed:- "The question that, when an assessee transfers some of his stock-in-trade to another person at a price less than the market price, whether that assessee can be considered to have made any profit merely because he has transferred some of his stock-intrade not at the market price but at a lesser price, came up for consideration before the High Court of Madras in Sri Ramalinga Choodambikai Mills Ltd. v. CIT [(1955) 28 ITR 952 (Mad)] . The facts of that case as set out in the head-note are: a limited company sold certain goods showed in its stock-in-trade to its managing agency firm and to another firm in which one of its directors was interested. The sales in question were held to be bona fide sales. At the same time it was held that the goods were sold at a concessional rate. The Income Tax Officer sought to tax the assessee therein after computing the profits earned by that firm on the basis of th....
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....ial affairs that charge of tax is distributed is not prohibited. A taxpayer may resort to a device to divert the income before it accrues or arises to him. Effectiveness of the device depends not upon considerations of morality, but on the operation of the Income Tax Act. Legislative injunction in taxing statutes may not, except on peril of penalty, be violated, but it may lawfully be circumvented." It is a well accepted principle of law that an assessee can so arrange his affairs as to minimise his tax burden. Hence, if the assessee in this case has arranged its affairs in such a manner as to reduce its tax liability by starting a subsidiary company and transferring its shares to that subsidiary company and thus foregoing part of its own profits and at the same time enabling its subsidiary to earn some profits, such a course is not impermissible under law." He submitted that Section 92BA has been enacted and given effect from 1st April, 2013 in order to avoid the applicability of the aforesaid judgement of the Apex Court in the case of CIT -Vs- Calcutta Discount Co. Ltd. (4) He drew our attention to Schedule 10 of the Companies Act in order to show that the increase....
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....see were all furnished before the Assessing Officer and they have also been produced before us. The finding recorded by the Commissioner is also belied, according to him, by the fact that notices issued to 15 out of 39 subscribers by the Assessing Officer under Section 133(6) of the Income Tax Act were duly served and the noticees duly responded thereto which goes to show beyond any pale of doubt that the subscribing companies were very much available at the given address. (c) The Commissioner opined that:- "In the recent years, it has become a common practice to introduce unaccounted money by way of share capital in dummy companies. The present assessee company is part of the large number of such cases in Kolkata as well as other parts of the country. The share capital is introduced by rotating the money to dummy companies which have been created solely for this purpose. The Directors of such companies are more often than not low paid employees such as peons, darbans, drivers or other persons of humble means. The modus operandi for introduction of unaccounted money as share capital is that unaccounted cash is deposited in the bank accounts of different persons/compa....
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....es are carried out in a routine and superficial matter. Confirmations & other documents regarding the share capital are filed which are placed on record. Thereafter, order u/s.147/143(3) is passed adding back the amount offered by the assessee supposedly left out by mistake. It is needless to say that no independent inquiries are carried out regarding the share capital. The company is then passed on to the final purchaser after charging a percentage of the capital in the company. This modus operandi has been confirmed in may search operations carried out by the Investigation Wing on entry operators & others over the past few years." Mr. Poddar contended that there is nothing to show that the assessee requested for issuance of any notice under Section 148 of the Income Tax Act. The assessee merely pointed out a mistake discovered subsequent to filing of the return. This, the assessee did in compliance of Section 273A. Uncharitable remarks cannot be passed against the assessee simply because he complied with the law. (e) The Commissioner relied upon the judgement in the case of Sumati Dayal -Vs- CIT reported in (1995) 214 ITR 801 (SC) which, according to him has no manner of ap....
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.... Commissioner has referred to in his order under Section 263, can have no manner of application to the facts and circumstance of this case. (h) He submitted, which we quote verbatim, that "supposing there is a chain; the last or the first person in the chain, admits to have applied unaccounted fund in the transaction or it is proved that unaccounted funds have, in fact been used by him, even then there is no material to show or link the unaccounted fund with the assessee. In that case the person who admits or is proved to have used unaccounted funds can be assessed under Section 68. The others cannot be assessed because for the same money repeated assessments cannot be made. For the purpose of taxing the assessee under Section 68 nexus between the assessee and the unaccounted money has to be established. In the ultimate analysis the object of any investigation is to find out whether there has been any unaccounted transaction which can come within the provision of Section 68 of the Income Tax Act." Section 68, he contended, insists upon the satisfaction of the assessing officer. Unless the satisfaction of the assessing officer is perverse, the CIT has no jurisdiction to interf....
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....orted in (2013) 357 ITR 388 (Del). (8) He in support of his submission that any further investigation is not only not called for but is also not permissible relied upon the following judgements:- (a) CIT -Vs- Steller Investment Ltd. reported in (1991) 192 ITR 287 (Delhi). The Delhi High Court refused to admit reference when the revenue sought to challenge an order of the Tribunal setting aside an order under Section 263 holding as follows:- "The petitioner seeks reference of the following question: "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct both on facts and in law in holding that the provisions of section 263 have not been validly invoked in this case by ignoring the material fact that the Assessing officer had failed to discharge his duties regarding the investigation with regard to the genuineness and creditworthiness of the shareholders, many of them being students and housewives?" In the present case, the subscribed capital of the assessee had been increased. The Income-tax Officer assessed the company and accepted the increase in the subscribed capital. The Commissioner of Inco....
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....d amount. When an explanation in regard thereto is given by the assessee, then it is for the Income-tax Officer to be satisfied when the said explanation is correct or not. It is in this regard that enquiries are usually made in order to find out as to whether, firstly, the persons from whom money is alleged to have been received actually existed or not. Secondly, depending upon the facts of each case, the Income-tax Officer may even be justified in trying to ascertain the source of the depositor, assuming he is identified, in order to determine whether that depositor is a mere name-lender or not. be that as it may, it is clear that the Income-tax Officer has jurisdiction to make enquiries with regard to the nature and source of a sum credited in the books of account of an assessee and it would be immaterial as to whether the amount so credited is given the colour of a loan or a sum representing the sale proceeds or even receipt of share application money. The use of the words "any sum found credited in the books" in Section 68 indicates that the said section is very widely worded and an Income-tax Officer is not precluded from making an enquiry as to the true nature and source the....
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.... that they have invested money in the purchase of shares then the amount received by the company would be regard as a capital receipt and to that extent the observations in the case of Steller Investment Ltd. [1991] 192 ITR 287 (Delhi), are correct but if, on the other hand, the assessee offers no explanation at all or the explanation offered is not satisfactory then, the provisions of section 68 may be invoked. In the latter case section 68, being a substantive section, empowers the Income-tax Officer to treat such a sum as income of the assessee which is liable to be taxed in the previous year in which the entry is made in the books of account of the assessee." Mr. Poddar contended that the existence of the share-holders in this case has duly been proved. Therefore, even the judgement in the case of Sophia Finance Ltd. does not militate against the assessee. (c) The next judgement relied upon by Mr. Poddar is in the case of CIT -Vs- Lovely Exports Pvt. Ltd. reported in (2008) 299 ITR 268 (Delhi) wherein the following views were expressed:- "Therefore, for a detailed discussion on Section 68 one should first turn to Gee Vee Enterprises v. Addl. CIT (1975) 99 ITR 375....
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....ance 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 empowerd, nay duty-bound, to carry out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the company. "in this analysis, a distillation of the precedents yields the following propositions of law in the context of section 68 of the Income-tax Act. The assessee has to prima facie prove (1) the identity of the creditor/ subscriber; (2) the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels; (3) the creditworthiness or financial strength of the creditor/subscriber; (4) if relevant details of the address or PAN identity of the creditor/subscriber are furnished to the Department along with copies of the shareholders register, share application forms, share transfer register, etc., it would constitute acc....
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....e share application money 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. Hence, we find no infirmity with the impugned judgement." : CIT v. Lovely Exports P. Ltd. : S. L. P. (Civil ) No.1153 of 2008." Mr. Poddar submitted that the views expressed by the Apex Court in the case of Steller Investment Ltd. were really endorsed by the aforesaid views expressed in the Lovely Exports Pvt. Ltd. The main plank of the argument advanced by Mr. Poddar is that if the share application money received by the assessee, is bogus, the department is free to proceed to reopen the individual assessment of the applicants of the shares. He contended that the views expressed by the Apex Court both in the case of Steller Investment Ltd. and Lovely Exports Pvt. Ltd. were binding and therefore, the assessing officer could not have taken a different view of the matter. The Commissioner, according to him, drawing upon his imaginary grounds interfered with the order of the assessing officer and that was erroneously upheld by the learned....
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....one of them is absent -if the order of the AO is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue-recourse cannot be had to section 263(1). This view is taken by Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83, 88 (SC). Accordingly, in the present case before us, the assessment framed by AO is neither erroneous nor prejudicial to the interest of revenue and this is clearly demonstrated by facts discussed by AO in his order and documents produced before us by assessee. Accordingly, we set aside the order of CIT passed u/s. 263 of the Act being not as per law." (e) This Court in ITAT No.125 of 2012 CIT -Vs- M/s. Lotus Capital Financial Services Pvt. Ltd. refused to admit an appeal preferred by the revenue. The object of citing this judgement, Mr. Poddar contended, is that the facts and circumstances of the case before us are on all fours of the aforesaid judgment and, therefore, a similar view should be taken. (f) In an unreported judgement of this Court in the case of CIT -Vs- M/s Dataware Pvt. Ltd. (ITAT No. 263 of 2011) addition made by the assessing officer was deleted by the C....
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....fficer had taken an adverse view only because the subscriber initially did not respond to the summons but subsequently they did. He also drew our attention for an identical proposition to CIT -Vs- Kamdhenu Steel & Alloys Ltd. reported in (2014) 361 ITR 220 (Delhi). A special leave petition preferred by the revenue was also dismissed. Based on the aforesaid judgements Mr. Poddar contended that there can be no doubt that the assessing officer took a possible view in accepting the increase of the share capital as genuine. He added that if the views of the assessing officer are a possible view, the CIT does not have any jurisdiction to interfere. (10) The next contention advanced by Mr. Poddar is that the assessee is not required to prove the source of source. He in support of his submission relied upon a judgement in the case of CIT -Vs- Dwarkadhish Capital Pvt. Ltd. reported in (2011) 330 ITR 298 (Delhi) Vol.5. In this case share capital was increased by a sum of Rs. 71.75 lakhs. The assessing officer asked for explanations which were duly filed. The assessing officer was, however of the opinion that the assessee had failed to offer proper explanation with respect to 5 subscrib....
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....rity." (b) He drew our attention to the similar view also expressed by the Allahabad High Court in the case Zafa Ahmad & Co. -Vs- CIT reported in (2013) 214 Taxman 440 (All). Similar view was also taken by the Allahabad High Court in the case of Anil Rice Mills -Vs- CIT reported in (2006) 282 ITR 236. In the aforesaid judgement reference was also made to other cases as would appear from page 248 which is as follows:- "It has been held by the various High Courts that the assessee cannot be asked to prove source of source or the origin of origin [vide S. Hastimal v. CIT [1963] 49 ITR 273 (Mad) ; Tolaram Daga v. CIT [1966] 59 ITR 632 (Assam) ; CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC); Sarogi Credit Corporaion v. CIT [1976] 103 ITR 344 (Patna)]." (11) The next judgement cited by Mr. Poddar is an unreported judgement of the Delhi High Court in the case of CIT -Vs- Five Vision Promoters Pvt. Ltd. (ITA 234 of 2015). Mr. Poddar submitted that the facts and circumstances in the aforesaid cases are similar to the facts and circumstances of the case before us. The similarity lies in the fact that part of the share capital of the assessee was contributed by 16 co....
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....mited, litigation would have no end," except when legal ingenuity is exhausted". "To do so..... to divide one argument into two and to multiply the litigation." What had happened in that case was that an explanation was accepted by the assessing officer. The CIT was of the opinion that the explanation was not acceptable. The CIT was, however unable to point out any error in allowing the explanation. The order of the CIT was set aside by the Tribunal and the High Court had upheld that order. In doing so the aforesaid observations were made. (a) The next judgement cited by Mr. Poddar is in the case of Hari Iron Trading Co. -Vs- CIT reported in (2003) 263 ITR 437 for the following proposition:- "In the absence of any suggestion by the Commissioner as to how the inquiry was not proper, we are unable to uphold the action taken by him under section 263 of the Act." Taking inspiration from the aforesaid views expressed in the case Hari Iron Trading Company, Mr. Poddar contended that in the case before us, the CIT has directed the assessing officer to "carry out enquiries about various layers through which the share capital has been rotated". Mr. Poddar contended that the en....
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....r should it act on no evidence at all or on improper rejection of material and relevant evidence or partly on evidence and partly on suspicions, conjectures or surmises and if it does anything of the sort, its findings, even though on questions of fact, will be liable to be set aside by this court." Mr. Poddar contended that the aforesaid views of the Supreme Court are equally applicable to the order passed by the CIT in the exercise of his revisional jurisdiction. Mr. Poddar drew our attention to another judgement of the Supreme Court in the case of Lalchand Bhagat Ambica Ram -Vs- CIT reported in (1959) 37 ITR 288 (SC) wherein the following observations were made:- "Adverting to the various probabilities which weighed with the Income-tax Officer we may observe that the notoriety for smuggling food grains and other commodities to Bengal by country boats acquired by Sahibgunj and the notoriety achieved by Dhulian as a great receiving centre for such commodities were merely a background of suspicion and the appellant could not be tarred with the same brush as every arhatdar and grain merchant who might have been indulging in smuggling operations, without an iota of eviden....
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....cial year must apply to the assessment of that year. Any amendments in the Act which come into force after the first day of April of a financial year, would not apply to the assessment for that year, even if the assessment is actually made after the amendments come into force." (b) Mr. Poddar submitted that the proviso to Section 68 is neither procedural nor explanatory as would appear from the objects for introduction of the same as would appear from the Parliamentary Notes which is as follows:- "C. MEASURES TO PREVENT GENERATION AND CIRCULATION OF UNACCOUNTED MONEY Cash credits under section 68 of the Act Section 68 of the Act provides that if any sum is found credited in the books of an assessee and such assessee either (i) does not offer any explanation about nature and source of money; or (ii) the explanation offered by the assessee is found to be not satisfactory by the Assessing Officer, then, such amount can be taxed as income of the assessee. The onus of satisfactorily explaining such credits remains on the person in whose books such sum is credited. If such person fails to offer an explanation or the explanation is ....
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....g officer by the views of the Commissioner. He in support of his contention relied upon the judgement in the case of CIT -Vs- Sunbeam Auto Ltd. reported in (2011) 332 ITR 167 (Del.) (17) The next submission advanced by Mr. Poddar is that the assessing officer in his notice under Section 142(1) specified a large number of documents to be produced by the assessee which is a pointer to show that the assessing officer had duly applied his mind. He in support of his submission relied upon a judgement of this Court in the case of Grindlays Bank Ltd. -Vs- ITO reported in (1978) 115 ITR 799 which reads as follows:- "We feel no hesitation in agreeing with the learned trial judge that before any notice under this provision could be issued calling upon an assessee to produce any document, the ITO must be satisfied that such a document would be needed for the purpose of making the assessment or in other words the document must have its bearing on the pending assessment, and, secondly, that he requires the document to be so produced for the purpose of making the assessment. To fulfil these requirements it is quite obvious that the ITO must apply his mind because without such applica....
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.... taken by him is not shown by the Revenue to be erroneous and was also considered both by the Tribunal as also by us to be a possible view, strengthens the presumption under clause (e) of Section 114 of the Evidence Act. A prima facie evidence, on the basis of the aforesaid presumption, is thus converted into a conclusive proof of the fact that the order was passed by the Assessing Officer after due application of mind." (18) Mr. Poddar reiterated that even if the share-holders are bogus, the share capital contributed by them shall not become taxable at the hands of the assessee, in view of the law laid down by the Apex Court in the case of Lovely Exports (supra) and Steller Investment (supra). Therefore, the assessing officer had no option but to accept the share capital. Mr. Poddar submitted that in any event this was a possible view. If this was a possible view the Commissioner could not have exercised the revisional jurisdiction. In support of his submission he relied upon the views expressed by the Apex Court in the case of Malabar Industrial Co. Ltd. -Vs- CIT reported in (2000) 243 ITR 83 at page 88 (SC). He added that if it is a possible view then the view cannot be said ....
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....e the relevant enquiry was not undertaken, as in this case, the order is erroneous and prejudicial too and, therefore, revisable. Investigation should always be faithful and fruitful. Unless all fruitful areas of enquiry are pursued the enquiry cannot be said to have been faithfully conducted. In a different context the apex court observed "contra veritatem lex nunquam aliquid permittit: implies a duty on the court to accept and accord its approval only to a report which is the result of faithful and fruitful investigation" (b) The next judgement cited by him is in the case of CIT -Vs- Navodaya Castles Pvt. Ltd. reported in (2014) 367 ITR 306 (Del). This was a case where receipts were on account of share application money. The assessee had submitted the share application forms, copies of bank statements of the subscribers of shares to show that the share application amount was debited to their account; confirmation by the applicant companies; certificates of incorporation together with copies of memorandum and articles of association; copies of pan card and income tax return etc. Based on the aforesaid documents no further enquiries were made and the return was processed under S....
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.... apart, the concept of "shifting onus" does not mean that once certain facts are provided, the assessee's duties are over. If on verification, or during proceedings, the AO cannot contact the share applicants, or that the information becomes unverifiable, or there are further doubts in the pursuit of such details, the onus shifts back to the assessee. At that stage, if it falters, the consequence may well be an addition under Section 68. This court recollects the robustness with which the issue was dealt with, in A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC), in the following terms: Now the contention of the appellant is that assuming that he had failed to establish the case put forward by him, it does not follow as a matter of law that the amounts in question were income received or accrued during the previous year, that it was the duty of the Department to adduce evidence to show from what source the income was derived and why it should be treated as concealed income. In the absence of such evidence, it is argued, the finding is erroneous. We are unable to agree. Whether a receipt is to be treated as income or not, must depend very largely on the facts and ....
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....urces. We do not find any reason why the Income-tax Officer will be precluded from making an enquiry where such enquiry is called for on the facts and in the circumstances of a case. Whether or not ultimately the shareholder fails to disclose the income out of which the shares of the assesseecompany were acquired will be for the Assessing Officer to deal with, depending on the facts and circumstances of the case. Before any sum is added as the undisclosed income of the assesseecompany, a link has to be established between the company and the shareholders' unaccounted money and, unless such link is established, it may not be possible to sustain the assessment ultimately. It is one thing to adjudge the validity of an assessment, but another to say as to what procedure should be followed by the Assessing Officer in making the assessment of the company. In our view, on the facts of this case, it cannot be said that the Assessing Officer has no jurisdiction to ask for information from the shareholders regarding the source of investment made in the company. As a matter of fact, the Commissioner of Income-tax, in this particular case, came to the conclusion on the facts that the matte....
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.... In an appeal the Tribunal set aside the order passed by the CIT. In an appeal preferred by the revenue the matter was placed before the Larger Bench because of an apparent conflict between the judgements of two Division Benches. The Larger Bench after analyzing various authorities came to the following conclusion:- "We have already referred to the judgments of this court In Rajendra Singh [1990] 79 STC 10 (Gauhati) and two single Bench judgments following the said judgment in Bongaigaon Refinery and Petrochemicals Ltd. [2006] 287 ITR 120 (Gauhati) and Shyam Sundar Agarwal [2003] 131 STC 70 (Gauhati) as also the second Division Bench judgment in Daga Entrade P. Ltd. [2010] 327 ITR 467 (Gauhati). No doubt, in Rajendra Singh [1990] 79 STC 10 (Gauhati), an observation was made that erroneous assessment referred to the defect which is jurisdictional in nature, as against substitution of one view for the other, merely on the ground that a different view was possible. If read as a whole, the judgment does not exclude error in assessment order, by ignoring relevant material. Not holding such inquiry as is normal and not applying mind to the relevant material would certainly be....
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....bunal is perverse? [22] We shall consider the second question first. In a commentary on the Prevention of Money Laundering Act, 2002 by Dr. M. C. Mehanathan published by Lexis Nexis, 2014, the steps of money laundering are described as follows:- "STEPS OF MONEY-LAUNDERING Although money-laundering often involves a complex series of transactions, it generally includes the following three basic steps: 1. Placement It involves introduction of the proceeds of crime into the financial system. This is accomplished by breaking up large amounts of cash into smaller sums that are then deposited directly into a bank account, or by purchasing monetary instruments, transferring the cash overseas for deposit in banking/financial institutions, use for purchase of high value things such as gold, precious stones, art works etc. and reselling the same through cheques or bank transfers etc. 2. Layering This involves formation of complex layers of financial transactions which distance the illicit proceeds from their source and disguise the audit trail. In this process a series of conversions or transactions are involved for moving the funds ....
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....ntributing to the share capital of the assessee, on account of share application money. In other words, those 19 applicants collected funds on account of share application money in their respective companies and that money was contributed to the share capital of the assessee. 15 out of the 39 applicants procured the requisite fund by selling shares. The rest of the applicants of shares, in the share capital of the assessee company, did not disclose the nature of receipt at their end though the source of fund was identified. What has not been specified is, as to on what account was the money received. (c) The forms of share application purporting to have been signed by the applicant companies have also been disclosed from which it appears that the date of allotment, number of allotment, number of shares allotted, share ledger folio, allotment register folio, application number, have all been kept blank. These particulars, Mr. Poddar, submitted should have been filled up by the assessee, but that has not been done. (d) Another significant fact admitted by the assessee in reply to the notice to show cause under Section 263 is that the "shares were offered to, and subscribed by t....
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....y Mr. Poddar, upon us, have not been satisfied. Identity of the alleged share-holders is known but the transaction was not a genuine transaction. The transaction was nominal rather than real. The creditworthiness of the alleged share holders is also not established because they did not have any money of their own. Each one of them received from somebody and that somebody received from a third person. Therefore, prima facie, the share-holders are mere name lenders. [25] For the reasons discussed in the preceding paragraph, we are satisfied that the judgement in the case of CIT -Vs- Steller Investment (supra) has no manner of application to the facts and circumstances of this case. The question as to whether there has been a device adopted for money laundering also did not crop up for consideration in that case. The Prevention of Money Laundering Act, 2002 was not also there on the statute at that point of time. Before the appeal in Steller Investment Ltd. was dismissed by the Apex Court, the question had cropped up in the case of Sophia Finance Ltd. reported in (1994) 205 ITR 98 wherein a special bench held as follows:- "As we read section 68 it appears that whenever ....
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....lpability. [26] The learned Tribunal in the impugned judgement in paragraphs 3, 4 and 5 observed, inter alia as follows:- "We have heard the rival submissions and perused the relevant material on record. It is relevant to mention that we have disposed of more than 500 cases involving same issue through certain orders with the main order having been passed in a group of cases led by Subhlakshmi Vanijya Pvt. Ltd. -Vs- CIT (ITA No.1104/Kol/2014) dated 30.07.2015 for the A. Y. 2009-10. Both the sides have fairly admitted that facts and circumstances of the cases under consideration are mutatis mutandis similar to those decided earlier, except for certain issues which we will advert to a little later. In our aforesaid order in Subhalakshmi Vanijya Pvt. Ltd., vs. CIT (ITA No. 1104/Kol/2014 A.Y. 2009-10), we have drawn the following conclusions:- * * * It is noticed that all or some of the above conclusions are applicable to the appeals in this batch." The appellant has disclosed a copy of the judgement delivered by the learned Tribunal in Subhalaxmi Vanijya Pvt. Ltd. -Vs- CIT. The learned Tribunal in paragraph 17.i. opined as follows:- ....
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....espect of the income of which she made a voluntary return. This contention in our view is unwarranted by the language of section 33B. The words of the section enable the Commissioner to call for and examine the record of any proceeding under the Act and to pass such orders as he deems necessary as the circumstances of the case justify when he considers that the order passed was erroneous in so far as it is prejudicial to the interests of the revenue. It is not, as submitted by the learned advocate, prejudicial to the interests of the revenue only if it is found that the assessment for the year was disclosed on the basis that an income had been earned which is assessable. Even where an income has not been earned and is not assessable, merely because the assessee wants it to be assessed in his or her hands in order to assist someone else who would have been assessed to a larger amount, an assessment so made can certainly be erroneous and prejudicial to the interests of the revenue. If so and we think it is so the Commissioner under section 33B has ample jurisdiction to cancel the assessment and may initiate proceedings for assessment under the provisions of the Act against some other....
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.... the following views were expressed:- "It is not the law that the Assessing Officer occupying the position of an investigator and adjudicator can discharge his function by perfunctory or inadequate investigation. Such a course is bound to result in erroneous and prejudicial orders. Where the relevant enquiry was not undertaken, as in this case, the order is erroneous and prejudicial too and, therefore, revisable. Investigation should always be faithful and fruitful. Unless all fruitful areas of enquiry are pursued the enquiry cannot be said to have been faithfully conducted. In a different context the apex court observed "contra veritatem lex nunquam aliquid permittit : implies a duty on the court to accept and accord its approval only to a report which is the result of faithful and fruitful investigation" (See Sidhartha Vashisht alais Manu Sharma v. State (NCT of Delhi) reported in [2010] 6 SCC 1 paragraph 200 at page 80)" In the case of CIT -Vs- N. R. Portfolio Pvt. Ltd. reported in (2014) 2 ITR 68 (Delhi) the following views were expressed:- "What we perceive and regard as correct position of law is that the Court or Tribunal should be convinced abo....
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....ablished by the assessee. Reference in this regard may be made to the judgement in the case of Sumati Dayal -Vs- CIT (supra) wherein Their Lordships held that any sum "found credited in the books of the assessee for any previous year, the same may be charged to income tax....". We are unable to accept the submission that any further investigation is futile because the money was received on capital account. The Special Bench in the case of Sophia Finance Ltd. (supra) opined that "the use of the words "any sum found credited in the books" in Section 68 indicates that the said section is very widely worded and an Income-tax Officer is not precluded from making an enquiry as to the true nature and source thereof even if the same is credited as receipt of share application money. Mere fact that the payment was received by cheque or that the applicants were companies, borne on the file of Registrar of Companies were held to be neutral facts and did not prove that the transaction was genuine as was held in the case of CIT -Vs- Nova Promoters and Finlease (P) Ltd. (supra). Similar views were expressed by this Court in the case of CIT -Vs- Precision Finance Pvt. Ltd. (supra). We need not de....