TaxTMI 
TaxTMI 
2018 (2) TMI 1754
X X X X Extracts X X X X
X X X X Extracts X X X X
....es, which are not carrying on any business but providing accommodation entries. A statement was recorded in which he has admitted that he was providing accommodation entries. Since the assessee has received accommodation entries from the companies run by Shri Tarun Goel, therefore, case was selected for scrutiny. Initially, notice issued by A.O. remained uncompiled with. However, assessee later on attended the proceedings before A.O. and on 16th December, 2010 and also on 20th December, 2010, the A.O. by order sheet entries on those dates asked the assessee to produce the investors and the case was discussed. Since, it was found that share application money of Rs. 2.44 crores have been received by assessee from the companies run by Shri Tarun Goel in the year under appeal, accordingly, enquiry letters under section 133(6) of the Act were issued to those parties. Reply has been received from some of the parties but the assessee did not produce any of the investors. Since the assessee failed to produce parties for recording their statements, A.O. was of the view that assessee failed to prove the identity, genuineness of the transaction and creditworthiness of the investors. Therefore....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ged. The A.O. made independent enquiries from these parties by issuing notice u/s 133(6) of the I.T. Act and it has been confirmed by the A.O. that some of the parties have replied to the query made by A.O. but no such fact was informed to the assessee and was also not recorded in the assessment order. Many of the investors in their reply directly to the A.O. confirmed the investments made in assessee-company and filed their affidavits confirming the transaction, confirmations, copy of PAN, ration card, copy of ITR, copy of audited account with balance-sheet and bank statements. The assessee, therefore, proved genuineness of the transaction in the matter. The assessee also relied upon various decisions of different High Courts in support of the contention that assessee proved ingredients of Section 68 of the I.T. Act. The Ld. CIT(A), however, confirmed the addition and dismissed the appeal of assessee. His findings in paras 8.1 to 8.32 of the order are reproduced as under : "8.1. During the year the A. O. received information that the appellant was receiving ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ou are requested to specifically intimate the names of the companies which have contributed the share capital of Rs. 2,44,00,000/-, the names of the companies out of the above which are connected with Shri Tarun Goel, CA, the companies from whom you have received the replies. Also intimate whether or not the assessee furnished confirmation from all the share holders or companies who have contributed the share capital of Rs. 2,44,00,000/- with PAN, details of the assessing officers, copy of ITR etc. as the same is not mentioned in the assessment order. In case the above information has not been furnished by the assessee, kindly furnish the names of such companies. One of the grounds taken by the assessee is that the notice u/s 143(2) was not served within the statutory period. Kindly verify the records and intimate whether there is any evidence on record regarding the service of 143(2) notice on the assessee. It is requested that the above information may kindly be furnished to this office by 31.05.2011. It is also requested that in future earnest efforts should be made to incorporate all the relevant facts in the assessment order itself as the same would ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rier and placed on records. Sr. No. PARTICULRAS AMOUNT 1. MULTITECH SEMICONDUCTORS (P). LTD. 10,00,000 2. MANISH SEXENA 5,00,000 3. RIBBEL MANUFACTURES & EXPORTERS (P). LTD. 5,00,000 4. ZENITH AUTOMOTIVE (P) LTD. 10,00,000 5. SHAUN 1 HOLDING LTD. 10,00,000 6. ANKUR KAPUR PROP. A. S. INTERNATIONAL 12,00,000 7. VIVEK GHAI 10,00,000 In the above cases it is not denied that the assessee had established the identity of these parties but the facts remains that the share applicants had never appeared before the AO to confirm that they have creditworthiness to subscribe to the shares of the company. Hence addition in returned income was made on account of share application money Rs. 2,44,00,000/- u/s 68 of I. T. Act. As regard the notice issued u/s 143(2), it is submitted that first scrutiny notice u/s 143(2) was issued on 25.09.2009 by speed post vide acknowledgment no. ED91040868081. This notice was not received back in this office. The assessee company never raised this objection during the assessment proceedings & attended the proceedings after issue of notice." 8.5. The AO in the report ....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 5,00,000/- on 25.07.2007. 8.15. In the case of Shalini Holding Ltd. Rs. 5,00,000/- was invested. Return of income showing income of Nil. Copy of bank account shows deposit of Rs. 16,10,000/- on 24.04.2007 and withdrawal on 25.04.2007. 8.16. In the case of Skyline Softwares (P) Ltd. Rs. 10,00,000/- was invested. Return of income shows income of Rs. 58,795. Copy of bank account shows deposit of Rs. 5,00,000/- on 17.04.2007 and withdrawal of same amount on 20.04.2007. Deposit of Rs. 5,00,000/- on 18.08.2007 and 19.08.2007 and withdrawal on 20.08.2007. 8.17. Shri Vivek Ghai has unvested 1 crore. Return of income shows income of Rs. 79,813/-. In the bank account nowhere is the name of Prinku mentioned. However, there are huge deposits and then amounts are withdrawn Rs. 50 lakhs are deposited on 14.08.2007 and 16.08.2007 and 17.08.2007 Rs. 25 lakhs are withdrawn. Again on 17.08.2007 Rs. 50 lakhs are deposited and on 18.08.2007 Rs. 25 lakhs each are withdrawn. 8.18. Shri V. K. Verma has invested Rs. 2 lakhs. Return of income shows income of Rs. 3,08,483/-. Bank account shows deposit of Rs. 2 lakhs on 14.03.208 and withdrawal on 15.03.2008. Throughout ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....alleged shareholders do in fact exist or not. 8.26. The latest judgement of the Hon'ble Delhi High Court in the case of CIT v. Oasis Hospitalities Pvt. Ltd. dated 31st January, 2011 has dealt with the issue at length and after examining the various judgments has settled certain parameters to decide an issue like this. After analyzing the provisions of the Companies Act, Section 68 of the IT Act and the judgements delivered in the cases of CIT v Divine Leasing & Finance Ltd. 299 ITR 268 (Del), CIT v. Sophia Finance Ltd. [1994] 205 ITR 98 (Del)(FB), CIT v. Dolphin Canpack Ltd. 283 ITR 190, CIT v. Lovely Exports Pvt. Ltd.216 CTR 195 it was held that the initial burden is upon the appellant to explain the nature and source of share application money received by the appellant. If the creditor/subscriber is a company then the details in the form of resolution or PAN identity, etc. can be furnished. As regards the genuineness of the transaction to be demonstrated, the Court held that by showing that the appellant had in fact received money from the said shareholder and the money came from the corpus of that very shareholder the genuineness was duly established. The Division B....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the AO not satisfactory. Such opinion found itself constitutes a prima facie evidence against the assessees, viz., the receipt of money, and if the assessees fail to rebut the said evidence the same can be used against the assessee by holding that it was a receipt of an income nature. In the case in hand the authorities concurrently found the explanation offered by the assessee unacceptable." 5. Indus/alley Promoters Ltd. v. CIT [2008] 305 ITR 202 (Delhi) it is stated that: It is well settled that the assessee must discharge the burden of proving the identity of the creditors and also to give the source of the deposits. In other words, the credit worthiness of the depositors must be established to the satisfaction of the AO. Where there is an unexplained cash credit, it is open to the AO to hold that it is income of the assessee and no further burden lies on the AO to show that income in question comes from any particular source. 8.28. The ratio of the judgement in the case of Nova Promoters and Finance (P) Ltd (Delhi Court) can be applied to this case as the facts are similar. Extracts of the judgement are given below: - "For the assessment ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Rs. 1,18,50,000 to the income of the assessee and a sum of Rs. 2,96,250 representing commission. On appeal the Commissioner (Appeals) rejected the assessee's contention against the validity of the reopening of the assessment but, taking note of the statement of the assessee that the affidavits from R and M, who were directors in the three companies as well as the affidavits of the directors in other companies which provided the share capital, were not considered by the Assessing Officer, the Commissioner (Appeals) directed the Assessing Officer to examine the contents of the affidavits and verify the veracity and genuineness thereof. The Assessing Officer was also directed to examine the genuineness of the transactions. The Assessing Officer submitted a remand report to the effect that the transactions had not been proved genuine and were only instruments used by the assessee to mislead the income-tax authorities. The Commissioner (Appeals) concluded that the Assessing Officer was not justified in making the addition of Rs. 1,18,50,000 under section 68 of the Act. Consequently, he also deleted the addition of Rs. 2,96,250 made for commission paid to the entry providers for obta....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., could not present themselves before the Assessing Officer for being examined on the affidavits. In the light of the facts, the evidentiary value of the affidavits was open to serious doubt. The affidavits retracting their earlier statements, filed by M and R were filed more than three years after they wrote letters admitting to their role as entry providers. A.O. reason had been advanced by the assessee for such long delay in retracting the earlier letters. The observation of the Commissioner (Appeals) that if summons had been served it would mean that the parties were present at the addresses and even if they were not found by the Inspector at the addresses furnished by the assessee, it was for the Assessing Officer to have made enquiries from the post office regarding the whereabouts of the addressees was not proper. There was, in this case, no such duty cast on the Assessing Officer. The assessee had been blocking any enquiry by the Assessing Officer at every stage on some plea or the other, including a frivolous plea that no cross-examination was allowed, overlooking that once they filed the affidavits retracting from their earlier statements the plea lost force. The findings....
X X X X Extracts X X X X
X X X X Extracts X X X X
....appeals before us the identity itself has not been established there is no justification to apply the ratio laid down by the Supreme court in the case of Lovely Exports." "Even if the cases relied upon by the Id. Counsel for the assessee, as mentioned/cited/discussed in the preceding paras of this order like Divine Leasing & Finance Limited, Dwarkadheesh Investment Private Limited, Gangor Investment Limited, K.C. Fibres Limited, Dolphin Canpack Limited, Shree Barkha Synthetics (Raj.), Down Town Hospitals Private Limited, ILLAC Investments Private Limited; Rohinj Builders and Shree Barkha Synthetics (Raj.) (supra) are considered, the Hon'ble Courts have clearly held that at least the assessee has to prove the identity/existence of the person, in whose names share applications are received meaning thereby the burden lies on the assessee is to establish the identity/existence of such share holdings and once it is established, the assessee is not required to prove anything further. Therefore, these judicial pronouncements are in favour of the revenue and may not help the assessee because the assessee has not proved the identity of such share applicants." ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rthiness of the said creditors with respect to the cash credits in question was also not proved. The persons giving the loans show meagre income and insufficient cash leading to doubts about their creditworthiness. In a lot of cases there is a deposit of the same amount as was invested and then withdrawal either on the same day on within a few days. Besides this deposit, the balance at any point of time is very negligible. The sources of income had not been given. Further, no evidence was given to prove the genuineness of the transaction. 8.32. The appellant has not been able to prove the identity or creditworthiness of the creditors and the genuineness of the transactions. A sum of Rs. 2.44 Crores was found credited in the books of the appellant as share application money and no explanation was given by the appellant about the nature and source thereof. In view thereof the amount credited is considered to be unexplained. I therefore confirm the addition of Rs. 2.44 Crores made by the AO. This ground of appeal is ruled against the appellant.' 3.1. The Learned Counsel for the Assessee reiterated the submissions made before the authorities below. PB-26 is list of shar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ourt in the case of CIT v. MAF Academy (P.) Ltd. [2014] 361 ITR 258/224 Taxman 212/42 taxmann.com 377 and Navodaya Castle (P.) Ltd. [2014] 367 ITR 306/226 Taxman 190 (Mag.)/50 taxmann.com 110 which is confirmed by the Hon'ble Supreme Court. 5. We have considered the rival submissions. It is not in dispute that assessee at the assessment stage produced sufficient evidences before A.O. in support of the explanation to have received genuine share capital money from 15 parties, which are, certificate of their incorporation, copy of ITR, confirmations, bank statements, balance-sheet and payment details which are also noted in the written submissions of the assessee in the appellate order. The A.O. filed the remand report dated 9th June, 2011 before Ld. CIT(A) in which he has mentioned about the information received from investigation wing about the search conducted in the case of Shri Tarun Goel that assessee received so much money of Rs. 20 lakhs from M/s. Torus Iron and Steel Co. Pvt. Ltd., which information not available in scrutiny assessment and assessee did not receive any such amount from this company not shown in books. The A.O. in the remand report accepted that assessee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ord their statements. It was, therefore, proved that assessee has made a request to the A.O. on 20th December, 2010 that the investors may be summoned under section 131 of the I.T. Act for their production for recording their statements at assessment stage in order to verify genuineness of the transaction in the matter. However, the A.O. did not issued any summons under section 131 of the I.T. Act on the request of the assessee and the A.O. passed the assessment order on next day i.e., on 21st December, 2010 itself. The Hon'ble Allahabad High Court in the case of Munnalal Murlidhar v. CIT [1971] 79 ITR 540 held that A.O. should assist the assessee by exercising power to enable the assessee to produce evidence otherwise assessment would vitiate. 5.1. The Hon'ble M.P. High Court in the case of CIT v. Ramesh Chandra Shukla (MAIT.No.71 of 2003 decided on 1st April, 2005) held that "it is now well settled that where assessee requests the A.O. to issue summons, to enforce attendance of the creditors to establish the genuineness and capacity of the creditors, it is the duty of the A.O. to enforce attendance of creditors by issuing summons. If the A.O. does not choose to issue s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es in response to notice under section 133(6) of the I.T. Act. The Hon'ble Delhi High Court in the case of CIT v. Vrindavan Farms (P.) Ltd. etc., in ITA.No.71 of 2015 dated 12th August, 2015 held as under : "The sole basis for the Revenue to doubt their creditworthiness was the low income as reflected in their return of income. It was observed by the ITAT that the AO had not undertaken any investigation of the veracity of the documents submitted by the assessee, the departmental appeal was dismissed by the Hon'ble High Court." 5.3. Therefore, such point could not be considered against the assessee for making the addition. Further, it is not the case of the authorities below that cash was found deposited in the bank accounts of the investors before making investments in assessee-company. The authorities below have also not brought any evidence on record if the investments came from the coffers of the assessee-company. Thus all the points raised by the authorities below to reject the explanation of assessee are not justified and would not support the case of the Revenue. The evidences on record clearly support the explanation of assessee-company that assessee-comp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nus of proof is not a static one. Though in section 68 of the Income Tax Act, 1961, the initial burden of proof lies on the assesses yet once he proves the identity of the creditors/share applicants by either furnishing their PAN number or income-tax assessment number and shows the genuineness 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. Howev....