AI Drafter 
TaxTMI 
TaxTMI 
2004 (6) TMI 36
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....Bengal. The Assessing Officer proceeded to verify the genuineness of such huge share capital introduced. He issued summons under section 131 of the Income-tax Act to several shareholders. Most of them appeared in response to the summons. In the course of examination the Assessing Officer found that: (a) most of the share applicants were farmers with negligible agricultural land having no other business or source of income; (b) they are mostly potato growers and used to sell and keep potatoes in the cold storage of the appellant; (c) bank accounts were opened in their names on a single day just to deposit a huge sum of money and withdraw it in the next cheque for investment as share capital in the assessee-company; (d) even the number of bank drafts were in serial order; (e) none of the parties summoned could produce original share certificate nor even the bank pass-books at the time of deposition; (f) most of the applicants have filed Form No. 4A on payment of income-tax amounting to Rs. 1,400 showing an annual income of Rs. 8,000 to Rs. 10,000, even though agricultural income was exempted from income-tax. On the aforesaid materials, the Assessing Officer disbe....
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.... Mr. Dutta, learned counsel for the assessee, had relied on the decision in Hindusthan Tea Trading Co. Ltd. v. CIT [2003] 263 ITR 289, a decision on this point rendered by this particular Bench. Mr. Dutta goes on arguing that in the aforesaid decision it was so held that the power of the Assessing Officer under section 68 is not an absolute one. It is subject to its satisfaction where an explanation is offered. The power is absolute where the assessee offers no explanation. The satisfaction with regard to explanation is in effect an in-built safeguard in section 68 protecting the interest of the assessee. Once it is explained, it is incumbent on the Assessing Officer to consider the same and form an opinion whether the explanation is satisfactory or not. It has further been held that in the process of inquiry by the Assessing Officer the assessee has no right of hearing. But the assessee has a right to challenge the conclusion arrived at on the basis of the enquiry made. The assessee may point out the perversity in the finding. It may question the validity of the process undertaken or it may point out that a particular material was not considered and only then the onus is shifted ....
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....appear that any income-tax file number was disclosed. On the other hand, the particulars of filing of Form No. 4A for that particular previous year were furnished. Furnishing particulars of Form No. 4A would not establish the creditworthiness of the investor in a case where the income earned by the applicants were alleged to have been earned from agriculture outside the purview of the Income-tax Act. It was not known why persons earning between Rs. 8,000 to Rs. 10,000 would submit Form No. 4A for the assessment year 1996-97 when the income exigible to tax under the Income-tax Act, 1961, was far above Rs. 10,000. This clearly indicated a very futile attempt to paint the colour of creditworthiness of the investors. Therefore, the ratio decided in any of the decisions cited by Mr. Dutta to support his contention would not be applicable in this case. However, the aforesaid decision cited by Mr. Shome was distinguished by Mr. Dutta in contending that a decision becomes binding as a precedent only when the court decides a particular question of law or lays down the ratio through conscious adjudication. Agreement with the finding of fact without adverting to the ratio laid down does no....
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....Cal) and Hindusthan Tea Trading Co. Ltd. [2003] 263 ITR 289 (Cal) would be applicable. We may refer to the decision cited by the respective counsel for the parties in order to deduce briefly the ratio laid down therein. At the same time, we must keep in mind that a principle of law laid down in the ratio in a decision cannot be treated to be a straightjacket formula to be applied in each case. The facts and circumstances of each case are to be weighed with and examined as to whether a particular ratio decided in a particular case could be applied. The ratio that has been laid down in the case of Ruby Traders and Exporters Ltd. [2003] 263 ITR 300 (Cal) and Hindusthan Tea Trading Co. Ltd. [2003] 263 ITR 289 (Cal) makes it clear that the explanation offered is to be examined by the Assessing Officer as to whether the explanation offered is satisfactory. In case it is found unsatisfactory, then the assessee has to be informed about the materials so collected and that it was found to be unsatisfactory, in order to enable the assessee to furnish such other materials to establish its case since the assessee was not involved in the enquiry so made under section 68 and as such the assess....
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....ther before the learned Tribunal or before this court. Through Form No. 4A a sum of Rs. 1,400 was deposited as income-tax. Whereas in the course of deposition, the applicants had stated that their respective annual income was between Rs. 8,000 and Rs. 10,000. They had also disclosed that they had very negligible quantum of agricultural land. Apart from the agricultural land, they did not disclose that they had any other source of income or business. They grew potatoes, which they used to keep in the cold storage of the assessee. Thus, it appears that on the examination the applicants disclosed that they were all farmers growing potatoes and used to keep the same in the cold storage of the assessee having no other source of income or business. On these materials, no one can form an opinion that these applicants had any income exigible to income-tax under the 1961 Act. Since they did not have any other source of income or business, the income derived from agricultural land by growing potatoes would be income derived from agriculture outside the scope of the Income-tax Act. Section 10(1) of the 1961 Act excludes the application of the 1961 Act in respect of income derived from agri....
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....er. Now turning to the question of genuineness of the transaction. The assessee had disclosed the bank account number and the investment through demand drafts. It appears that the bank accounts were opened in a particular branch of a particular bank on the same single day by each of the 40 investors. Each of the 40 investors had withdrawn the amount deposited in the bank account on the same day the accounts were for the purpose of purchasing the demand drafts. These demand drafts bear successive serial numbers continuously in order, namely, were issued in one continuous transaction. The subscribers could not produce the passbook. The counterfoil of the share scrips and minutes books were produced by the assessee. But none of the investors could produce the share scrips issued to them. Neither the assessee had requested the Assessing Officer to issue notice under section 131 or section 133 upon the investors to produce the share scrips. At the same time, when notices under section 131 were issued in order to ascertain the genuineness of the transaction, the investors were supposed to produce the share scrips to establish their claim. Inasmuch as a genuine subscriber would do so n....
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....in the books of account of the assessee in the previous year as income of the assessee, if the assessee offers no explanation about the nature and source of such entry or the explanation offered by him, in the opinion of the Assessing Officer, is not satisfactory. There is an inbuilt safeguard in the section itself to protect the interest of the assessee in the form of offering of explanation. We had occasion to deal with this principle in Hindusthan Tea Trading Co. Ltd. v. CIT [2003] 263 ITR 289 (Cal) and CIT v. Ruby Traders and Exporters Ltd. [2003] 263 ITR 300 (Cal). The principle laid down therein was sought to be attracted in the present case by learned counsel for the appellant. True, such principle is attracted in a case within the scope and ambit of section 68. But the application of a ratio is dependent on the facts of each case. There must be sufficient material, i.e., evidence to attract the principles laid down in the ratio. It is the evidentiary value of the materials produced, which would be the determining factor. We may remind ourselves that though the entries made in the books of account kept in regular course of business, are admissible as relevant evidence as is ....
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....R.D. Council [1927] 1 Ch. 367 at page 397 (CA) observed: ". . . there can only be sufficient evidence to shift the onus from one side to the other if the evidence is sufficient prima facie to establish the case of the party on whom the onus lies. It is not merely a question of weighing feathers on the one side or the other, and on saying that if there were two feathers on one side and one on the other that would be sufficient to shift the onus. What is meant is, that in the first instance, the party on whom the onus lies must prove his case sufficiently to justify a judgment in his favour if there is no other evidence." In Ruby Traders and Exporters Ltd. [2003] 263 ITR 300 (Cal) cited by Mr. Dutta, we had occasion to deal with a case where the subscription to the share capital was made through cheques. In that case, except furnishing the list of the subscribers, no attempt was made to establish the identity of the subscribers neither there was any attempt on the part of the assessee to prove the creditworthiness of the subscribers. In that case, we held that simply because the payment was made by cheque, it would not be concluded that section 68 would not be attracted and that t....
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....dusthan Tea Trading Co. Ltd. [2003] 263 ITR 289 (Cal) did not lay down an absolute proposition of giving of an opportunity. It is dependent on the facts of each case. In Hindusthan Tea Trading Co. Ltd. [2003] 263 ITR 289 (Cal); Kundan Investment Ltd. [2003] 263 ITR 626 (Cal) and Ruby Traders [2003] 263 ITR 300 (Cal) as discussed above, we had occasion to deal with this question of shifting of onus where we had occasion to hold that after the materials received on the basis of the disclosure by the assessee and when the Assessing Officer. forms an opinion that the explanations given is unsatisfactory, the Assessing Officer has an obligation to inform the assessee about the opinion in order to enable him to rebut the formulation of the opinion. This principle has a universal application in all such cases where the three ingredients, as stated above, appear to have been prima facie established. If on the face of the materials that were made available before the Assessing Officer fails even to prima facie make out a case for establishing one or the other of the ingredients, then this principle would not be attracted. Brother Sinha J., had very rightly and elaborately dealt with the ....