TaxTMI 
TaxTMI 
2003 (3) TMI 53
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....from the public through advertisement in the newspapers and the whole paraphernalia of subscription for shares was undergone in accordance with law. These subscriptions were dealt with through nationalised banks and the receipts were received by cheques. However, the Assessing Officer and the Commissioner (Appeals) and the learned Tribunal had treated part of the receipts to the extent of Rs. 8,70,387 as receipt from undisclosed sources of income under section 68 of the Income-tax Act, 1961 ("the Act"). In the proceedings, the assessee had disclosed the names and addresses of each of the subscribers. The Assessing Officer had issued notice upon 37 subscribers on test basis, namely, who had subscribed between 300 and 3,400 shares each. Out of these 37 persons, ten persons appeared and produced satisfactory evidence regarding the genuineness about the persons and the sources of the funds out of which the shares were subscribed. One Mr. Vijay Kumar Singhania appeared and prayed for time, but did not appear subsequently to prove that the 700 shares purchased by him were from his own genuine fund. About 14 persons, though served, did not respond. Whereas in respect of 12 persons, the no....
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....of the Income-tax Act, 1961, empowers the Assessing Officer to treat any sum found credited in the books of account of the assessee for any previous year, if the assessee fails to offer explanation about the nature and sources of such fund or if the explanation offered by the assessee is not, in the opinion of the Assessing Officer, satisfactory, as income from undisclosed sources and charge the same to tax as income of the assessee of that previous year. Therefore, it appears 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 the explanation is in effect an in-built safeguard in section 68 protecting the interest of the assessee. It provides for an opportunity to the assessee to explain the nature and source of the fund. 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. The expression used in the section clearly lays the burden on the assessee to explain the nature and source of the fund. Un....
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....formation or materials are furnished, the Assessing Officer is bound to examine the same and form his final opinion and pass an appropriate order. Such opinion is also subject to examination by the Commissioner (Appeals) or the learned Tribunal and if it involves a question of law, it is also subject to scrutiny by the High Court under section 256. Findings of fact, may also form the basis of a question of law if the inference drawn from the facts found are not in consonance with legal principles or the findings are perverse. In such a case the High Court may interfere. If two views are possible, even if the High Court is of the other view, it cannot interfere with the view taken by the taxing authority. The decision in CIT v. Stellar Investment Ltd. [1991] 192 ITR 287 (Delhi) cited by Mr. Pal is no longer good law in view of the decision in CIT v. Sophia Finance Ltd. [1994] 205 ITR 98 (Delhi) [FB]. But Mr. Pal contended that Sophia Finance Ltd.'s case [1994] 205 ITR 98 (Delhi) [FB] is no more a good law since Stellar Investment Ltd.'s case [1991] 192 ITR 287 (Delhi) was affirmed by the apex court in CIT v. Steller Investment Ltd. [2001] 251 ITR 263. But this view does not seem to....
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....rsue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do anything further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises." In CIT v. Prarthana (P) Ltd. disposed of by this court by Y.R. Meena, J. (as his Lordship then was) and Arunava Barua J. on March, 21, 2001, relied on by Mr. Pal, after taking into consideration almost all the other decisions, it was held that if there are explanations, the authority has to consider the same and find out as to whether the explanation is sufficient or not. It can reject only when there is no explanation or the explanation is insufficient. In CIT v. Active Traders Pvt. Ltd. [1995] 214 ITR 583 (Cal), ci....
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....ature. Therefore, the burden of proving the source of such income is on the assessee. In Kale Khan Mohammad Hanif v. CIT [1963] 50 ITR 1 (SC), it was held that particular income, derived from a particular source, can be decided only on the basis of the materials and on the facts available in the case whether the entry in the books of account of the business is an income of that business or of another business. It is to be decided on the facts, which showed the business to which it belonged. It cannot proceed on percentage basis simply because it was so done on an earlier occasion or for any other business. Such case is to be decided on all facts and only when the assessee fails to produce sufficient evidence and the evidence so produced is insufficient then only such a conclusion can be drawn. In CIT v. Sophia Finance Ltd. [1994] 205 ITR 98 (Delhi), the Full Bench laid down that it is open to the Assessing Officer to enquire into the identity of the shareholders and their creditworthiness and availability of funds for subscribing the fund. This can be done through a test basis for coming to a conclusion on the basis of percentage. The authority can find out as to whether the shar....
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....he assessee was not traceable and there was no such file. Therefore, the first ingredient as to the identity was not established. Similar view was taken in CIT v. Korlay Trading Co. Ltd. [1998] 232 ITR 820 (Cal), cited by Mr. Agarwal. The creditors should be identified. There should be creditworthiness. There should be genuineness of the transaction. The furnishing of income-tax file number is not enough to prove the genuineness of the cash credit. The assessee has to prove the genuineness. In the present case, it was not a cash transaction but obtained through cheques and that too through nationalised banks after having invited subscription through public advertisement. Therefore, when the income-tax file number was given, it was for the Income-tax Officer to enquire into the same and find out the creditworthiness of the subscriber and genuineness of the transaction. If after making such enquiry, the Income- tax Officer would have come to the conclusion against the creditworthiness of the subscriber and genuineness of the transaction, then the question would have been otherwise. Therefore, the decision in Korlay Trading Co. Ltd.'s case [1998] 232 ITR 820 (Cal) having regard to th....
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....whether enquiry was made reasonably with the prudence of a reasonable man. If after such enquiry having regard to the materials, the officer had come to a conclusion then it would be a finding of fact, unless it is shown that the inference drawn on the basis of the proved fact was perverse. But if some of the materials are not considered or it is stopped there and does not undertake a reasonable enquiry, then the conclusion arrived at, cannot be said to be a legal inference on the basis whereof such conclusion could be arrived at. Then it does not remain a question of fact but becomes a question of law. Having regard to the proposition as discussed above and the ratio decided in the various decisions cited by the respective counsel, we may now examine the facts of the present case in order to answer the question referred to. It appears from page 69 of the paper book that the assessee had contended that the shareholders were income-tax assessees and that their respective balance sheets were enclosed with the income-tax returns and that the share capital was subscribed by them out of withdrawals made from their respective bank accounts. Thus, the identity and creditworthiness of th....