TaxTMI 
TaxTMI 
2017 (12) TMI 1203
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....reopening of the assessment which have been decided separately. The A.O. on perusal of the details submitted, noticed that assessee-company has received share capital and share premium from various companies situated at Kolkata and Mumbai of Rs. 9 crores. The details of the same are noted in para-3 of the assessment order and page-4 of this order which are 10 investor companies from two places mentioned above. The assessee was asked to furnish the details of the amount received and evidence in respect of identity and creditworthiness of the investors and also the genuineness of the transaction. In response to the same, assessee submitted copies of the bank accounts, confirmations and income tax returns acknowledgment for all the investors. The A.O. noted from them that they have meagre returned income. In order to verify the genuineness of the above 10 parties/investors, Commission under section 131 were sent to Mumbai and Kolkata. In response, report of the O/o. Addl. CIT, Range-10(2), Mumbai and report of O/o. ADIT (Inv.) Wing-III(3), Kolkata were received. The report is reproduced in the assessment order in which it was pointed out that Inspector have visited the place where som....
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....1st floor, Mumbai-400002 60,00,000/- 6. Yash V Jewels Ltd A-43, Flappy Home Apt Saihbaba, Nagar, Borivali(w) Mumbai- 400092 1,05,00,000/- 7. New Outlook Securities Ltd Amritdham, flat no 202, p o Danesh Sekh Lane, Nityanand Nagar, Bakutala, Howrah711109 96,00.000/- 8. Jolly Multitrade P Ltd 14, Popatwadi kalbadevi Road, I st floor, Mumbai-400002 96,00,000/- 9. Twenty First Century (India) Ltd 1, Crooked Lane. 1st Flor, Room no 107 Kolkata-700069 93,00,000/- 10. Kapindra Multitrade Pvt Ltd 14, Popatwadi kalbadevi Road, 1st floor, Mumbai-400002 60,00,000/- Total 9,00,00,000/- (2) The Assessing Officer in the course of assessment proceedings had desired the Appellant Company to furnish the details of the amount received and evidence in support of identity and creditworthiness of the parties and also the genuineness of the transaction of all the parties from whom the share capital and share premium had been received. In response, the Appellant Company vide letter dated 13.08.20....
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.... per report of inspector Sh Ajav Kumar dated 30.11.2011, no such person has ever resided in such premises. Report of Inspector Shri Ajay Kumar Enclosed with (annexure-19). 2. Oshin Investment and Finance P. Ltd., The address is residential address of R.N. Chaturvedi. As per report of Inspector Sh Ajay Kumar dt 30.11.2011 no such person has ever resided in such premises. Report of inspector Shri Ajay Kumar enclosed with Annexure. (Annexure-19). 3. Alka Diamond Industries Ltd., Party has responded to the summons and the details are assessed. Details annexed as Exhibit B. 4. Poonam Corporation Ltd., This is also residential address as reported by Inspector in his report details of the same.30.11.2011. Report of Shri Ajay Kumar, Inspector is enclosed as annexure (Annexure-19). 5. Vibhuti Multitrade Pvt. Ltd., The address is of B L Aggarwal and office of Amit Textiles. As per report of Inspector dt 30.1 1.2011 no such person has ever resided in such premises. Report of Shri Ajav Kumar Inspector is enclosed as annexure (Annexure- 19) 6. Yash V. Jewels Ltd., The residential building was demolished for redevelopment. No building is in existence.....
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....ed and added this same to the taxable income of the Appellant Company u/s 68 of the Income -tax Act, 1961. (7) The Assessing Officer in the course of assessment proceedings had desired the Appellant Company to furnish the details of the amount received and evidence in support of identity and creditworthiness of the applicants and also the genuineness of the transaction of all the parties situated at Mumbai and Kolkata from whom the share capital and share premium had been received. In response, the Appellant Company filed copies of confirmations. Income Tax Return acknowledgements and bank accounts from all the parties establishing the identity, genuineness and sources of transaction regarding share capital and share premium with the Assessing Officer. The entire share application money had been received by the Appellant Company through normal banking channels by account payee cheques/demand drafts. Furthermore, the said confirmations also clearly reveal the source of funds, particulars of the bank account through which payment has been received and the Income-Tax particulars which go on to establish the identity and creditworthiness of the various parties authoritatively ....
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.... cause exists for the invocation of S. 68. (11) An analysis of the provisions of Section 68 of the Income-tax Act, 1961 would make it clear that in order to discharge the onus, the Assessee must prove the following:- (i) identity of the creditor; (ii) capacity of the creditor to advance money; and (iii) genuineness of the transaction. (12) The question of the manner in which the onus u/'s 68 has to be discharged is to be looked at with different perspectives and varying parameters in each different circumstance and no standards/guidelines can be lead out in this regard. (13) In the instant case there is no material on record to prove or even remotely suggest that the share application money received actually emanated for the Appellant Company. In fact it may be reiterated that the share application money was received from independent legally incorporated companies through normal and regular banking channels which fact stands duly corroborated and confirmed by the confirmations bank statements and Income Tax Returns of the share applicants duly placed on record. In fact, no evidence, direct or indirect, conclusive, or even ci....
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....lleged to have really advanced the money is sought to be reopened, that would have made some sense but we fail to understand as to how this amount of increased share capital can be assessed in the hands of the company itself." (16) Subsequent to the above an appeal tiled by the Department against the judgment/observations of the Supreme Court was also dismissed and the Hon'ble Supreme Court did not find any reason to interfere with the order of the High Court in the case of CIT vs Steller Investment Ltd [(2001) 251 ITR 263 (SC)]. As such the observations of the Hon'ble Delhi High Court have obtained the approval of their Lordship of the Supreme Court and accordingly attained judicial finality and stamp of approval. (17) In addition, Your Honor's kind attention is also invited to the following judgment of the Delhi High Court in the case of Commissioner of Income Tax v Lovely Exports Pvt Ltd [(2008) 299 ITR 268 (Delhi)] has held as follows:- In the case of a company the following are the propositions of law under section 68. The assessee has to prima facie prove (1) the identity of the creditor/ subscriber; (2) the genuineness of the transaction, namel....
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....see 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 judgement". (19) The above decision of the Hon'ble Supreme Court follows the earlier decision of the Hon'ble Supreme Court in the case of Steller Investment Ltd, cited supra and further reinforces the arguments put forward for and on behalf of the Appellant Company. (20) In particular, with regard to the issue of establishing the creditworthiness of the parties, Your Honour's attention is invited to the following recent judgements wherein it has been conclusively held, relying on the decisions in the case of M/s Lovely Exports Pvt Ltd cited above, that as long as the identity of the share applicant was proved, the burden of proving the creditworthiness was not on the Assessee:- > Commissioner of Income-tax, Udaipur v. Bhaval Synthetics [(2013) 35 Taxmann.com 83 (Rajasthan)]; > Shree Barkha Synthetics Ltd v. Assistant Commissioner of Income- tax [(2006) 155 Taxman 289 (Raj)]; > Commissioner of Income-tax, Bhopal (M.P....
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....in order to find out causal connection between the cash deposited in the bank accounts of the applicant banks and the assessee were not taken. It is necessary to link the assessee with the source when that link is missing, it is difficult to fasten the assessee with such a liability. 39. We may repeat what is often said, that a delicate balance has to be maintained while walking on the tight rope of sections 68 and 69 of the Act. On the one hand, no doubt, such kind of dubious practices are rampant, on the other hand, merely because there is an acknowledgement of such practices would not mean that in any of such cases coming before the Court, the Court has to presume that the assessee in questions as indulged in that practice. To make the assessee responsible, there has to be proper evidence. It is equally important that an innocent person cannot be fastened with liability without cogent evidence. One has to see the matter from the point of view of such companies (like the assessee herein) who invite the share application money from different sources or even public at large. It would be asking for a moon if such companies are asked to find out from each and every share app....
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....t they have invested money in the purchase of shares, no recourse can be made to the provisions of S 68. In the instant case the Appellant Company had provided all the requisite particulars to establish the identity of the share applicants in the confirmations already filed before the Assessing Officer. 3.2. The case of the revenue is that some of the investor companies could not be found at the given address and also that some of the investor companies responded to the summons by post but did not cause appearance before the tax authorities. It is also stated that the income of many of the investor companies was too low or meager to enable them to make such large investments in the share capital of appellant company. It is further contended that there appears no justification for large component of share premium paid to the appellant along with the share capital. Based on these observations, the revenue has held the subscription to share capital, including the share premium, amounting to Rs. 9,00,00,000/- as unexplained credits of the appellant and held to be unexplained income. The case of the appellant, on the other hand, is that it had discharged its onus to establish t....
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....urces of capital introduced in these companies were established during the respective assessment proceedings, including this appellant company. No evidence was found during the search to indicate introduction of unaccounted cash /funds in the form of share capital in these companies. In these circumstances, the conclusion based on the facts relied upon by the revenue that the share capital introduced in the companies belonging to Bhushan Group, including the appellant company, are unexplained, is premature. 3.5. In the above facts and circumstances of the matter, and in view of the case laws relied upon by the Ld. AR, the addition made cannot be legally sustained and is deleted. This ground of appeal is allowed". 3.1. It may also be noted here that the Ld. CIT(A) decided the issue of not giving opportunity to the assessee to rebut the enquiry report which was not confronted to the assessee. The Ld. CIT(A) decided the issue separately in para 4.2 of his order relevant findings reads as under "However, do not I find from the assessment order that the result of enquiry made at Mumbai and Kolkata was made available to the appellant. To that extent, the right of app....
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....He has submitted that the issue is therefore, covered in favour of the assessee by the above orders of the Tribunal especially in the case of ACIT vs. NRA Iron and Steel Pvt. Ltd., (supra) in which in paras 2 to 21, the Tribunal considered identical issue and held as under : 2. "Briefly the facts of the case are that A.O. issued notice under section 148 of the I.T. Act after recording the reasons for reopening. The assessee submitted before A.O. that return already filed may be treated as return having been filed in response to notice under section 148 of the I.T. Act. The A.O. issued detailed questionnaire on the above issue of share capital and the assessee filed necessary details and clarifications before A.O. time to time. The assessee filed objections to the reopening of the assessment under section 148 of the I.T. Act, which was rejected on 13th August, 2012. The assessee submitted before A.O. that it has raised money aggregating to Rs. 17.60 crores through share capital/share premium during the assessment year under appeal from various parties which are Mumbai based companies, Kolkata based companies and Gauhati based companies. The details of which are noted at pag....
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.... based Companies, they have filed their reply through Dak counter confirming the transaction with the assessee, but copy of the bank account has not been enclosed. In respect of Guwahati based company, it was noted that this company do not exist at the address. Therefore, it was held that assessee failed to prove the genuineness of the transaction and accordingly, addition of Rs. 17.60 crores was made in the hands of the assessee. 3. The assessee challenged the reopening of the assessment as well as addition on merits before Ld. CIT(A). The detailed contention of the assessee as regards reopening of the assessment has been noted in the impugned order. However, the Ld. CIT(A), confirmed the reopening of the assessment and dismissed this ground of appeal of assessee, particularly, when he has allowed the relief to the assessee on merit. Therefore, no detailed reasoning have been given because it was found that the issue is left with academic discussion only. 4. The assessee as regards the addition, on merit, reiterated the same submissions before Ld. CIT(A) and it was submitted that A.O. made the addition arbitrarily and unjustifiably. The assessee produced all the ....
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....any. No evidence was found during the search to indicate introduction of unaccounted cash / funds in the form of share capital in these companies. Therefore, the conclusion based on the facts relied upon by the revenue that the share capital introduced in the companies belonging to Bhushan Group, including the appellant company, are unexplained, is at best premature. 3.5. In the above facts and circumstances of the matter, and in view of the case laws relied upon by the Ld. AR, the addition made cannot be legally sustained and is deleted. This ground of appeal is allowed." 5. The Ld. D.R. relied upon the orders of the A.O. and submitted that some parties did not file reply before A.O. and many parties filed reply at the Dak counter. No reasons have been given for the higher premium paid. Copy of the bank statements were not filed before A.O. The income declared by assessee and the share applicant companies were very small. Therefore, addition was correctly made by the A.O. The Ld. D.R. relied upon the following decisions. i. CIT vs. Precision Finance (P) Ltd., (1994) 208 ITR 465 (Cal.) ii. CIT vs. United Commercial & Industries Co. (P) Ltd., (199....
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.... bank balance to make investment in assesseecompany. The assessee received the share capital/ premium through banking channel from the following companies situated at Mumbai, Kolkata and Guwahati as under : S Name of the shareholder Amount (A) Mumbai Based Companies 1. Clifton Securities Pvt. Ltd., 95,00,000 2. Lexus Infotech Ltd., 95,00,000 3. Nicco Securities Pvt. Ltd., 95,00,000 4. Real Gold Trading Company Pvt. Ltd., 90,00,000 5. Hema Trading Company Pvt. Ltd., 95,00,000 6. Eternity Multi-trade Pvt. Ltd., 90,00,000 (B) Kolkata Based Companies 1. Neha Cassettes Pvt. Ltd., 90,00,000 2. Warner Multimedia Ltd., 95,00,000 3. Gopikar Supply Pvt. Ltd., 90,00,000 4. Ganga Builders Ltd., 90,00,000 5. Gromore Fund Management Co. Ltd., 95,00,000 6. Bayanwala Brothers Pvt. Ltd., 95,00,000 7. Super Finance Ltd., 90,00,000 8. Shivalaxmi Export Ltd., 95,00,000 9. Natraj Vinimay Pvt. Ltd., 95,00,000 10. Neelkanth Commodities Pvt. Ltd., 95,00,000 11. Prominent Vyapaar Pvt. Ltd., 95,00,000....
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....ration and its jurisdiction was subsequently transferred to the Office of the ACIT, Central Circle - 13, New Delhi. 13. The case of the appellant company for the assessment year 2008-09 was reopened under section 147 of the Income Tax Act, 1961 and notice under section 148 was issued on 19.09.2011. In response to the said notice the appellant company filed a reply dated 26.09.2011 stating that original return of income filed earlier by it on 25.09.2008 vide receipt No. 39312931250908 may be treated as return filed in response thereto. 14. The assessment was completed vide order dated 28.03.2013 at an income of Rs. 5,15,00,715/- wherein the ld. Assessing Officer has proceeded to add back a sum of Rs. 5,15,00,000/- on account of alleged unexplained share capital received by the appellant company from various companies situated at Mumbai and Kolkata. The ld. CIT (Appeals) has, however, deleted the addition being convinced with the submissions of the assessee. 15. In support of the ground, the ld. Sr. DR has basically placed reliance on the assessment order with this contention that assessee has thoroughly failed to establish creditworthiness of the investor ....
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....t Company vide letter dated 13.08.2012 filed with the Assessing Officer copies of bank accounts, confirmation and Income Tax Return acknowledgements from all the parties to establish the identity, genuineness and sources of transaction regarding share capital and share premium. The entire amount had been received by the Appellant Company through normal banking channels by account payee cheques / demand drafts. Furthermore, the said confirmations also clearly reveal the source of funds, particulars of the bank account through which payment has been received and the Income-Tax particulars which go on to establish the identity and creditworthiness of the respective share applicants authoritatively and conclusively. (2) On the basis of the documents/details submitted, the Learned Assessing Officer, has summarized as follows :- S.No. Name of the Share Holder Returned Income Assessment Year 1 Vanguard Jewels Ltd Rs. 3,42,600/- 2008-09 2. Ganga Builders Ltd (Rs. 2,910/-) 2008-09 3. Shivlaxmi Exports Ltd Nil 2008-09 4. Lexus Infotech Ltd 15,64,590/- 2008-09 5. Hema Trading Co Pvt Ltd 17,16,207/- 2008-09 &nb....
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....has applied for 90000 equity share of Rs. 10/- of M/s Adamine Construction Pvt Ltd each at a premium of Rs. 90/- and allotted the same. The assessee has not given the reason for paying such a high premium. The assessee has enclosed bank statement showing payment was made by cheque no. 611654 dated 08.02.2008 for Rs. 50,00,000/- and cheque no. 611515 dated 08.02.2008 for Rs. 40,00,000/- drawn on Deutsche Bank. The assessee has not enclosed the bank statement showing the source of fund for share application money. The company has shown Nil income for A.Y. 2008-09. (5) On the basis of the said exercise, the Learned Assessing Officer has observed and concluded as follows:- * The identity and the creditworthiness of the investors are not established as all the investors are showing a nominal income. Neither the investor company and nor the assessee company has produced any proof to substantiate the credit worthiness of the investors (for example balance sheet of the investor company); * The genuineness of the transactions is also in doubt as the investors have not enclosed the bank statement showing the source of fund for share application money. (6) ....
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....ts of the case. (9) The above factual statements and arguments can be further buttressed and reinforced by an analysis of the relevant legal provisions and legal pronouncements on the issue. Before proceeding further with the matter it would be worthwhile to reproduce the provisions of S.68 of the Income tax Act, 1961 which reads as follows:- "S 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. (10) The above Section enjoins upon an Appellant Company, the duty to adequately, satisfactorily and substantively explain the source of any cash credit in his books of accounts and no further. To put it differently an Appellant Company's burden of proof would stand discharged if he is able to prove the nature and source of the cash credit received and thus his onus of proof cannot extend to failure to prove the source of the proof with a view to arrive at th....
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....ompanies Act, 1956. Thus, no doubt exists or even arises with respect to the identity of the creditors. (ii) With respect to the capacity/credit worthiness of the share applicants to advance money and the genuineness of the transactions it needs to be understood, reiterated and reemphasized that the entire transaction was consummated through account payee cheques through regular banking channels which fact has not been disputed or denied in any manner. As such given the entire factual situation of the case no doubt arises and remains as to the capacity and credit worthiness of the parties and genuineness of the transactions. (15) In this connection Your Honour's attention is also invited to the decision of the Hon'ble Delhi High Court in the case of Commissioner of Income-Tax vs. Steller Investments Limited [(1991) 192 ITR 287 (Delhi)] wherein it has been clearly held that any increased capital is not assessable in the hands of the company. The relevant observations of the Learned Judges are as follows:- "It is evident that even if it be assumed that the subscribers to the increased share capital were not genuine, nevertheless, under no circumstances, can....
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.... 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 subscribes. 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 investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot adhere to his suspicions and treat the subscribed capital as the undisclosed income of the company". (18) Further Your Honor's kind attention is also invited to the decision of their Lordship of the Hon'ble Supreme Court in the case of CIT vs Lovely Exports Pvt Ltd [(2008) 216 CTR 195 (SC)] wherein the special leave ....
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....in the Appellant Company. Moreover there is no shred of evidence, direct, indirect or even peripheral of the share application money having emanated from the coffers of the Appellant Company. In fact, the investor companies, in their replies filed before the Department (in response to summons u/s 131 of the Act), have duly confirmed, the factum of their having made the investment and have further buttressed the same with the following documents :- (a) Confirmations; (b) Acknowledgement for filing of Income Tax Returns; (c) Bank statements reflecting the transactions with the Appellant Company; (d) Copies of Annual Accounts. (22) In view of the above, no doubt remains as to the identity of the investors, their credit worthiness and the genuineness of the transactions and correspondingly no adverse inference is called for. (23) In fact, in the instant case, reliance is placed on the decision of the Delhi High Court in the case of CIT vs Kamdhenu Steel & Alloys Limited and Others [(2012)206 Taxman 254(Delhi)] wherein the following has been held :- "38. Even in that instant case, it is projected by the Revenue that the Dire....
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....ed above before it could nail the assessee and fasten the assessee with such a liability under Sections 68 and 69 of the Act. (24) It would also be pertinent, topical and relevant to mention here that the Special Leave Petition field before the Hon'ble Supreme Court by the Revenue against the above decision of the Hon'ble Delhi High Court has been subsequently dismissed by Their Lordship of the Supreme Courts and as such the decision of the Delhi High Court in the case of CIT vs Kamdhenu Steel & Alloys Limited and Others (supra) has attained conclusive judicial finality. (25) To conclude it may be said that on the basis of the facts discussed supra and the ratio of the above judgements makes it clear that if the share applicants are identified and it is established that they have deposited money in the Company, no recourse can be made to the provisions of S 68. The Appellant Company had provided all the requisite particulars to establish the identity of the share applicants in the confirmations, ITRs and bank statements already filed before the Assessing Officer. The various arguments advanced by the Learned Assessing Officer are frivolous and irrelevant and the o....
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....of share application money had furnished PANs, bank details of share applicants and affidavits of Directors of those share applicant companies. The Hon'ble High Court of Delhi has been pleased to hold that share application money cannot be considered as unexplained cash credits in the hands of the assessee. In the case of CIT Vs. Value Capital Services P. Ltd. (supra) the Hon'ble jurisdictional High Court of Delhi while dismissing the appeal of the Revenue has been pleased to hold that the additional burden was on the Department to show that even if the share applicants did not have the means to make the investment, investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. In the case of CIT Vs. Orbital Communication P. Ltd. (supra) the Hon'ble jurisdictional High Court of Delhi in the case of the claimed share application money has been pleased to hold that where substantial evidence has been produced by the assessee to prove creditworthiness of the creditors and genuineness of share applications, failure to produce creditor is not material. In the case of CIT Vs. Winstral Petro Chemical P....
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....stor companies could not be found at the given address and that some of the investor companies responded to the summons by post, but had not caused appearance before him. The Assessing Officer also held that income of many of the investor companies was too low or meager to enable them to make such large investments in the share capital of the assessee company. The Assessing Officer also observed that there appeared no justification for large components of share premium paid to the assessee along with the share capital. The Assessing Officer also remained suspicious about the claimed investor companies on the basis of reasons recorded for initiation of reopening of assessment proceedings based on the report relating to survey conducted at the premises of the assessee that the business premises of the assessee actually belong to Bhushan Steel Ltd. and several other companies were having their Registered offices in the same premises. The submission of the assessee in this regard remained that there is no law that more than one company cannot have its Registered office at one address and that there is no law that companies cannot change their Registered offices. It was submitted that b....
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....plained share capital and share premium. Since the first appellate order is based upon the ratio laid down in the above cited decisions of the Hon'ble jurisdictional High Court of Delhi, we do not find reason to interfere therewith. The same is upheld. The ground is accordingly rejected." 9. It may be noted here that in this case five parties from Mumbai and Kolkata are same as have been considered in the present Departmental appeal. Even if Mumbai based companies have not responded to the letter issued by the A.O, however, three of them have already been found existing and genuine Companies and two of the Companies from Kolkata based are also found existing and genuine in the case of ACIT, Central Circle-13, New Delhi vs. M/s. Adamine Construction Pvt. Ltd., (supra). All Kolkata parties confirmed genuineness of transactions in their reply before A.O. Therefore, the issue is covered in favour of the assessee by the above said judgments. The Hon'ble Rajasthan High Court in the case of CIT vs. ARL Infratech Ltd., 394 ITR 383 considered the identical issue of share application money in which the assessee filed PAN and other details of the investor companies. No direct relatio....
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....d.CIT(A). Hon'ble High Court in view of the above findings noted that the assessee had provided several documents that could have showed light into whether truly the transactions were genuine. The assessee provided details of share applicants i.e. copy of the PAN, Assessment particulars, mode of amount invested through banking channel, copy of resolution and copies of the balance sheet. The AO failed to conduct any scrutiny of the document, the departmental appeal was accordingly dismissed. 14. The Hon'ble Supreme Court in the case of M/s. Earthmetal Electrical Pvt. Ltd., vs. CIT dated 30th July, 2010 in SLP. No.21073/99 in which Hon'ble Apex Court held "we have examined the position, we find that the shareholders are genuine parties. They are not bogus and fictitious therefore, the impugned order is set aside." In this case, the Hon'ble Bombay High Court and the ITAT, Mumbai Bench, which was the subject matter in SLP before Hon'ble Supreme Court observed that assessee failed to produce any evidence regarding confirmation of the amount supposed to have been received as share capital from third party. The case of the assessee is therefore, on better footing as against the d....
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....eness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the Revenue. Just because the creditors/share applicants could not be found at the address given, it would not give the Revenue the right to invoke section 68. One must not lose sight of the fact that it is the Revenue which has all the power and wherewithal to trace any person. Moreover, it is settled law that the assessee need not to prove the "source of source". The assessee-company was engaged in the business of financing and trading of shares. For the assessment year 2001- 02 on scrutiny of accounts, the Assessing Officer found an addition of Rs. 71,75,000 in the share capital of the assessee. The Assessing Officer sought an explanation of the assessee about this addition in the share capital. The assessee offered a detailed explanation. However, according to the Assessing Officer, the assessee failed to explain the addition of share application money from five of its subscribers. Accordingly, the Assessing Officer made an addition of Rs. 35,50,000/- with the aid of section 68 of the Act, 1961 on account of unexplained cash c....
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....o efforts are made by A.O. for production of investors at assessment stage. Therefore, the assessee has been able to prove identity of the share applicants, their creditworthiness and genuineness of the transactions in the matter. The Ld. CIT(A), on examination of the material on record, further found that the only reason for the Revenue to goes for further verification was the report relating to survey conducted at the premises of the assessee-company which forms part of satisfaction recorded for reopening of the assessment proceedings. From the said report, Ld. CIT(A) found that the business premises of the assessee actually belong to M/s. Bhushan Steel Ltd., and several other Companies having their Registered Offices at the same address. This created a suspicion in the mind of the Revenue. The Ld. CIT(A) therefore, rightly noted that there is no law that more than one Company cannot have its Registered Office at one address. The Companies could have change their address later on. It is also an admitted fact that source of the capital investment companies were established during their respective assessment proceedings including in the case of the present assessee-company as per t....
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....wing any cross- examination to the reports and statements of the Inspectors. The Ld. CIT(A) in para 4.2 of the appellate order accepted the contention of assessee by holding that he does not found from the assessment record that the result of enquiry made at Mumbai and Kolkata were made available to the assessee. To that extent, the right of the assessee to know the facts and have the opportunity to rebut the findings was not granted. The Ld. CIT(A) however, in view of the fact that addition on merit have been deleted observed that this ground raised against the validity of the proceedings for not following the principles of natural justice does not survive. These findings of fact recorded by the Ld. CIT(A) have not been challenged in the departmental appeal. It, therefore, stands proved on record that the result of enquiry and report of the Commission under section 131 submitted by Mumbai and Kolkata Office have not been confronted to the assessee and no right of cross-examination have been given to assessee. It is well settled law that any material collected at the back of the assessee, when not confronted to the assessee, cannot be read in evidence against the assessee. We rely ....