TaxTMI 
TaxTMI 
2018 (10) TMI 61
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....04/-. During assessment proceeding, it was found that the assessee has issued share capital with premium of Rs. 1.94 crores to 8 companies. The share applicant companies are found to be operated by one of the accommodation entry provider Mr. Tarun Goyal, Shri Pramod Kumar and Harpreet Singh. The Investigation Wing on 15.09.20018 conducted search u/s 132 of the Act at the office premises of Shri Tarun Goyal, Chartered Accountant. The statement of Shri Tarun Goyal and Ms. Ritu Saxena was recorded on oath on 02.12.2008. The assessee has issued share capital of Rs. 38.80 lakhs at a share premium of Rs. 155.20 lakhs totaling to Rs. 1.94 crores to these companies. The ld AO issued notices to the assessee but it was not complied. Therefore, the ld AO issued show cause notice to the assessee to explain why the addition of Rs. 1.94 crores should not be made in the hands of the assessee, as the assessee has not produced any details of share capital with respect to identity, and creditworthiness of investors and Genuineness of the transaction. The ld AO also asked to produce individuals/ directors of these companies along with respective documents. The assessee did not comply firstly. H....
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....ed the requisite details and produced the books of A/cs upto 15/10/2010, vide notices u/s 143(2) & 142(1) and show-cause dated 15/10/2010 to assessee was asked to show cause as to why the share capital and share premium raised amounting to Rs. 1,94,00,000/-, may not be added to the income. The assessee had shown addition to share capital at Rs. 38,80,000/- and share premium at Rs. 1,55,20,000/-, totaling to Rs. Rs. 1,94,00,000/-. As no details of share capital raised during the year with evidences in support of identity, genuineness of transaction and creditworthiness of the parties, had been submitted, the assessee was asked to produce ail the individuals and the directors / principal officers of the companies/ firms alongwith ail the documents and to prove their identity, creditworthiness and genuineness of the transactions. The assessee was also told that in case they are not able to substantiate their claim, the amount received as share application will be treated as undisclosed income, being unexplained .cash creeds u/s 68 of the Income-tax Act, 1961 and the share capital raised amounting to Rs. 1,94,00.000/- would be added to the income. Notices u/s 143(2) S....
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....ty 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 acceptable proof or acceptable explanation by the assessee; (5) the Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices; (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessee nor should the Assessing Officer take such repudiation at face value and construe it, ''without more, against the assessee; (7) the Assessing Officer is duty bound to investigate the creditworthiness of the creditor/subscriber, the genuineness of the transaction and the veracity of the repudiation. The Hon'ble Delhi High Court in the case of CIT vs Dwarkadhish Investment (P) Ltd (2008) 2 DTR (Del) 7 (167 TAXMANN 321), has followed the ratio of the case of CIT v. Divine Leasing & Finance Ltd. [2007] 158 Taxman 440 (Delhi) The present case of the assessee cov. is differentiable from the case of CIT Vs. Lovely Exports Pvt. Ltd.. CI....
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....ation each piece of evidence may appear to be of little weight, on an overall appreciation it would be permissible to consider their cumulative effect and decide one way or the other. In the case of M/s Gold Leaf Capital Corporation India Pvt. Ltd. Vs. JCIT, the Hon'ble ITAT, New Delhi vide order dated J. 1/01/2008 in ITAT No. 237(del)/2002 for Asstt. Year 1995- 96 observed as under with regard to-genuineness of transactions u/s 68. "On going through the decision in the case of Divine Leasing & Finance (Supra) and other relevant case law it is clear that the degree of onus would depend upon the facts of each case and no standard degree of proof can be applied generally to all cases, irrespective of the nature of receipts because in the case of share investment for public placements the degree of proof mav be light but in the case of private placement if may be stringent, the reason being a public issue cannot be made by a Private Limited Company. However with requisite permission the share capital can be received through private placement normally to known persons / companies. Similar would be the position when the shares are allotted by a Public Company on pr....
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.... to 31/03/2008 (pertainina to AY 2008- 09). 7) In case the above investment was made in cash the evidence regarding the source of cash and copy of the Cash Book is required to be produced. Another show-cause dated 16/11 /2C1G was issued to the assessee. whereby assessee company was again asked to show cause as to why the share capital & share premium raised amounting to Rs. 1,94,0,000/-, may not be added to the income. This show cause alongwith the notices u/s 143(2) & 142(1) dt. 16/11/2010 were sent by Speed Post and were also received by Sh. Amitoi Aneia. CA & AR of the assessee on 19/11/2010 by signing, on both the show cause and the notices. The following show cause dated 16/11/2010, was issued to the assessee company: "Vide the show cause dt. 15/10/2010 you were required to produce all the individuals and the directors / principal officers of the companies / firms, alongwith all the documents and to prove their identity, creditworthiness and genuineness of the transactions. The details filed by you on 10/11/2010 show that you have received the share capital and share premium amounting to Rs. 1,94,00,000/- from the following parties:....
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....th during and after the search operations by the Investigation Wing. II) The perusal of the above affidavits reveals the following: S No. Name N ; Stamp paper No. Date of purchase of Stamp papers Name of the Vendor who sold the paper Address of Vendor Name of the Notary Public who attested the Affidavits on 28/10/10 Regd No 1 M/S Tejasvi Investment Pvt. Ltd. DELHI 10AA 25/05/2007 S. P. Srivastava L. No. 325 Tis Hazari Court, Delhi Sudha Shankar 28/06 Ap M/S Tejasvi InvestmentPvt. Ltd. DELHI 16AA 26/02/2008 - do - - do - - do - - dc - 2 M/s Campari Fiscal Services Pvt. Ltd. DELHI 16AA 23/02/2008 - do - - do - - do - - do - M/s Campari Fiscal es Pvt. Ltd. DELHI 09AA 22/03/2007 - do - - do - - do - - do - 3 M/s Thar steels Pvt. Ltd. DELHI 14AA 04/01/2008 - do - - do - - do - - do - iM/s Thar steels Pvt. Ltd. DELHI 10AA 566633 16/06/2007 - do - - do - - do - - do -. 4. !M/s Sai Baba Finvest ! Pvt. Ltd. DELHI 12 AA 04/10/2007 - do - - do - - do - - do - M/....
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....ement on oath of the employees present at the premises of Shri Tarun Goyal were recorded. These include Sh. Pramod Kumar, his peon, Sh. Harpreet Singh, Accountant. In their statements they stated that they were mere employees of Sh. Tarun Goya: and they were signing various documents related to many companies at his behest, as and vjhen asked by Sh. Tarun Goyal. Ms. Ritu Saxena, former receptionists, in her statements recorded on oath, has stated that various bank accounts were opened in her name by Sh. Tarun Goyal, who himself operated these accounts and deposited cash in them. As such, she could not refuse the same as she was mere employee. All the passbooks, cheque-books, various important documents were in his total control. In view of the above, you are required to produce all the individuals and the directors / principal officers of the companies / firms, alonawith all the documents to prove then- identity, creditworthiness and genuineness of the transactions. In case the you are not, able to substantiate your claim, the amount received as share application will be treated as your undisclosed income, being unexplained cash credits u/s 68 of the Inco....
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....asvi Investment Pvt. Ltd. 13/34, W.E.A IVth Floor Karol Bagh New Delhi110005 Tarun Goyal 4,80,000 19,20,000 24,00,000 2 M/s Campari Fiscal Services Pvt. Ltd. 13/34, W.E.A IVth Floor Karol Bagh New Delhi110005 Pramod Kumar 4,80,000 19,20,000 24,00,000 3 M/s Thar steels Pvt. Ltd. 203, Dhaka Chambers 2069/39, Naiwala Karol Bagh New Delhi-110005 Tarun Goyal 4,60,000 18,40,000 23,00,000 4 M/s Sai Baba Fin vest Pvt. Ltd. 13/34, W.E.A. IVth floor Main Arya Samaj Road Karol Bag'j New Delhi-110005 Pramod Kumar 1,60,000 6,40,000 8,00,000 5 M/s Bhavani Portfolio Pvt. Ltd. 13/34, W.E.A. IVth floor Main Arya Samaj Road Karol Bagj New Delhi-110005 Ritu Saxena 4,00,000 1,60,000 2,00,000 6 M/s Rishabh Shoes Private Ltd. 13/34, W. E. A. IVth floor Main Arya Samaj Road Karol Bagj New Delhi-110005 Pramod Kumar 4,00,000 1,60,000 2,00,000 ~7 / M/s Taurus Iron & Steel Co. Pvt. Ltd. 13/34, W.E.A. IVth floor Main Arya Samaj Road Karol Bagj New Delhi-110005 Tarun Goyal 6,00,000 24,00,000 30,00,000 8 M/s DU Secu....
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....oyal, Chartered Accountant at 13/34', WEA, Arya Samaj Road, Karo! Bagh, New Delhi by the Investigation Wing on 15/09/2008. 1. The signatures of Sh. Tarun Goyal, Sh. Parmod Kumar, Sh. Harpreet Singh and Ritu Saxena on these affidavits signed and notarized on 28/10/2010 and submitted in this office on 10/11/2010, do not match with their signatures on their statements recorded on oath during and after the search operations by the Investigation Wing of the Income Tax Department. 2. It is strange that though the stamp papers were purchased as long back as 13/03/2007, the same were signed on 28/10/2010 i.e. after a gap of almost three and a half years. 3. All the affidavits were attested/notarized by Sudha Shankar Mishra on 28/10/2010, i.e. all the directors presented themselves before the Notary Public, Sudha Shankar Mishra on 28/10/2010, for signing the affidavits. 4. A. During the course of search it was established that Sh. Tarun Goyal had floated many companies for the purpose of providing accommodation entries. B. All the companies floated by Sh. Tarun Goyal are not carrying out any genuine activity and are merely being used to provi....
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.... three times vide issue of show cause notices dt. 15/10/2010, 16/11/2010 and 25/11/2010. Till date the assessee company has not produced any of the above individuals or any of the directors / principal officers of the above companies, alongwith all the documents requisitioned. The assessee company has also not been able to prove the creditworthiness of the above share applicants and genuineness of the transactions. The above shows that the assessee company has nothing to say in the matter. As the assessee company has also not been able to substantiate its claim, therefore the above amount received is treated as undisclosed income, being unexplained cash credits u/s 68 of the Income-tax Act. 1961 and the amount of Rs. 1,94.00,000/- is hereby added to the income. Instead of producing the above said directors, has only tried to relied on the judicial decisions as mentioned above. In the cases of the above judicial decisions, the shareholders had not denied the fact that they had contributed to the share capital of the company. In the case of the assessee company, the shareholders have admitted the fact that they are mere name lenders and the actual ....
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...., Rs. 1,94,97,000/- is hereby added to the income of the assessee under section 68 of the Income Tax Act, 1961, being unaccounted money in the hand of the assessee for which it has failed to offer any explanation. Keeping in view the facts mentioned above, I am satisfied that the assessee has concealed the particulars of its income to the tune of Rs. 1,94,97,000/-. Therefore, penalty proceedings under section 271(l)(c) of the Income Tax Act,'1961 are being initiated separately." { bold highlight provided by us} 4. The ld AO noted that these are all accommodation entries therefore, he further added 5% commission expenses incurred by the assessee on the accommodation entries. The percentage was taken as admitted by Shri Tarun Goyal, Chartered Accountant in his statement. Consequently, the assessment u/s 143(3) of the Act was passed on 13.12.2010 determining the total income of the assessee at Rs. 20200200/-. 5. The assessee challenged the same before the ld CIT(A), who dealt with the above issue as under:- "Ground No. 1, 4. 5 and 6 I have considered the facts stated above by the assessee as well as perused the assessment order by the Assessing Off....
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.... 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 to to prove the source of source. We also find that in the case of the respondent assessee itself, a Division Bench of this Court in Commissioner of Income Tax Vs Dwarikadhish Investment (P) Ltd. (2008) 176 Taxman 321 (Delhi) had dealt with a similar issue with regard to the assessment year 1997-98. The relevant portion of the order passed by the Division Bench in the said judgement is reproduced hereinbelow:- "3 The Assessing Officer required the assessee to furnish details and documents. The assessee produced copies of sale and purchase bills of the share brokers through whom the transactions took place and photocopies of confirmations of persons who had contributed the fresh share application money. The assessee furnished the PAN(GIR) numbers of the application, the details of the cheque number and dates. The assesses contended that letters sent to the shareholders had not been responded to. 1. The Assessing Officer required the asessee to furnish bank ....
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....which reads thus: "In this analysis, a distillation of the precedents yields the following propositions of law in the context of section 68 of the I T Act. The assessee has to prima facie prove (1) the identity of the creditors/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 ofthe creditors/ 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, shared Application Forms, share Transfer Register etc., it would constitute acceptable proof or acceptable explanation by the assessee; (5) the Department would not be justified in drawing an adverse inference only because the creditors/subscriber fails or neglects to respond to its notices; (6)the onus would not stand discharged if the creditors/subscriber denies or repudiates the transaction set up. by the assessee nor should the AO take such repudiation at face value and construe it, without more, against the assessee; (7) the assessing Officer is duty-bound to investigate the....
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....ants are true the share application money and the share capital have been routed through banking channel an amount of Rs. 1.94 crores cannot be added in the hands of the assessee. The ld AO aggrieved with the order of the ld CIT (A) has preferred an appeal before us. 7. The ld CIT DR submitted a written submission raising several contentions relying on several judicial precedents which is as under:- "In the above case, it is humbly submitted that the following decisions may kindly be considered with regard to addition made u/s 68 of I.T.Act: 1. CIT Vs MAF Academy (P.) Ltd (361 ITR 258) where Hon'ble Delhi High Court held that where assessee, a private limited company, sold its shares to unrelated parties at a huge premium and thereupon within short span of time those shares were purchased back even at a loss, share transactions in question were to be regarded as bogus and, thus, amount received from said was to be added to assesee's taxable income under section 68 It was held as follows: "53. In contrast to the above judgments, in the present case, the Assessee is a private limited company and in the factual matrix, we have held that the A....
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....s (P.) Ltd (30 taxmann.com 292, 214 Taxman 429, 350 ITR 407, 256 CTR 34) where Hon'ble Delhi High Court-held that where assessee failed to prove identity and capacity of subscriber companies to pay share application money, amount so received was liable to be taxed under section 68. It was held as follows: "12. A perusal of the order of the Tribunal shows that it has gone on the basis of the documents submitted by the assessee before the AO and has held that in the light of those documents, it can be said that the assessee has established the identity of the parties. It has further been observed that the report of the investigation wing cannot conclusively prove that the assessee's own monies were brought back in the form of share application money. As noted in the earlier paragraph, it is not the burden of the AO to prove that connection. There has been no examination by the Tribunal of the assessment proceedings in any detail in order to demonstrate that the assessee has discharged its onus to prove not only the identity of the share applicants, but also their creditworthiness and the genuineness of the transactions. No attempt was made by the Tribunal to scr....
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....pt of share application money, Assessing Officer sent notices to share applicants which returned unserved, however, assessee still managed to secure documents such as their income tax returns as well as bank account particulars, in such circumstances, Assessing Officer was justified in drawing adverse inference and adding amount in question to assessee's taxable income under section 68. It was held as follows: "9. As noticed previously, the CIT (A) was of the opinion that the assessee had discharged the basic onus which was cast upon it after considering the ruling in Lovely Exports (P.) Ltd. 's case (supra). The material and the records in this case show that notice issued to the 5 of the share applicants were returned unserved. The particulars of returns made available by the assessee and taken into consideration in paragraph 3.4 by the AO in this case would show that the said parties/applicants had disclosed very meager income. The AO also noticed that before issuing cheques to the assessee, huge amounts were transferred in the accounts of said share applicants. This discussion itself would reveal that even though the share applicants could not be acces....
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....pon assessee to disclose true and correct details of said investors and since identity of alleged investors was never established additions made under section 68 was justified 8 CIT Vs Frostair (P.) Ltd (26 taxmann.com 11. 210 Taxman 221) where Hon'ble Delhi High Court held that where details furnished by assessee about share applicants were incorrect, addition under section 68 was proper. It was held as follows: 12. The application of the ratio of every decision by a quasi-judicial body like the IT AT has to be nuanced, and contextual. Thus, while the findings in Divine Leasing, Oasis International or even Lovely Exports might be preceded by a general discussion of the correct approach to be adopted by the AO, in a given case where additions are sought to be made on account of share application moneys not found to be genuine, the basic facts of the case cannot be lost sight of. On a proper application of the ratio in Oasis - and subsequently, the Division Bench ruling in CIT v. Nova Promoters & Finlease (P) Ltd [2012] 206 Taxman 207/ 18 taxmann.com 217 (Delhi) it is evident that the AO took into account - if we may say so, in exhaustive detail, after a p....
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....ons. Loan entries are generally masked to pump in black money into banking channels and such practices continue to plague Indian economy 11 Rick Lunsford Trade & Investment Ltd Vs CIT T20161 385 ITR 399 (Cal) (The assessee did not produce books of account or bank accounts or shareholders' register Eight out of fifty six persons from shareholders' list provided by assessee denied subscription. Remaining notices returned with endorsement ''not known". Hon'ble Calcutta High Court held that unexplained share application money was rightly treated as assessee's income 12 Rick Lunsford Trade & Investment Ltd Vs CIT r2016-TIQL-207-SC-IT1 (Supreme Court) where Hon'ble Supreme Court dismissed SLP upholding that it is open to the Revenue Department to make addition on account of alleged share capital u/s 68, where the assessee company has failed to show genuineness of its shareholders." 8. This appeal is filed in the year 2011 before us. The first hearing took place on 5.1.2012 where the representative of the assessee remained present and sought adjournment. Subsequently hearings are fixed for 11 times, every time assessee's representative sought adjourn....
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....lly shows that premium collected by the assessee on issue of meager share capital of the assessee is not genuine. Even otherwise, the assessee has not attempted to show the genuineness of this premium sum. Furthermore, no business details of these eight companies and the purpose for which these eight companies have made investment in the assessee's company were shown before the lower authorities. It is very surprising that unknown companies invest in unknown company without any business purposes and without any expectation of return or without any expectation of growth makes such a huge investment. In view of this, the whole investment is proved by the ld AO not genuine purpose. 10. The ld CIT (A) has deleted the addition with respect to following evidence shown to her. We deal with all the evidences shown based on which the ld CIT (A) has deleted the additions. 11. In the findings at page no 14 of the order, The ld CIT (A) has deleted the addition holding that assessee has shown a. Copies of share application forms b. PAN and AO details c. Appellant companies bank statement d. Details of share allotment in form no 2 e. share appli....
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....trar of companies. The nature of business submitted in form No 49A is also at the time of formation of company is taken as submitted to ROC. The Income tax Department neither has any authority to verify even the address of the company. Therefore, even the whereabouts of the company is also not verified by the income Tax department. The current practice is also to be noted that at the time of formation of the company itself the Permanent account number s allotted to the company. Hence, it cannot be said that there is any iota of proof of even identification of the company when the transaction takes place Therefore Permanent Account number. AT the most when the company was formed the above documents serves as the identity of the company. When the assessee is required to discharge its onus u/s 68 of the Income Tax Act, assessee is required to prove the cotemporary identity of the depositor and not the identity when the company was formed. Income Tax Department has nothing to do with the details submitted before The Registrar of companies. Even other wise the assessee cannot rely on the forms submitted in other regulatrory laws to shred its responsibility cast up on under the ....
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....ve some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents." e. Sanctity of the transaction entered in to by cheque Now a days it is naïve to believe that the transactions entered in to through banking channel proves identity, creditworthiness, and genuineness of the transactions. The many reason are that in cash assessee could not have accepted such a huge amount. Necessarily accommodation entries are an exercise of introducing unaccounted money in to the books of accounts of the assessee without payment of taxes and therefore to give it a colour of genuinity the transactions are entered through banking channel. The accommodation entries are only with the object of camouflaging unaccounted money as tax paid and genuine money. One of the ways to do this i....
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....account of the depositor with the business of the investors of the shareholder companies. Apparently, in this case assessee failed to prove it. 12. Therefore we hastened to add that production of one documents or non production of one documents cannot be used against or for the assessee while deciding the case of the assessee so far as the issue of introduction of unaccounted money in the guise of share capital and its taxation u/s 68 of the act. The whole transaction needs to be examined after keeping all the circumstances in perspective while deciding the issue. 13. The Ld CIT (A) has not provided any answer in order that despite the following findings of the ld AO how the issue of share capital to non descript bogus companies operated by accommodation entry provider Mr. Tarun Goyal is a genuine transaction:- a. The signatures of Sh. Tarun Goyal, Sh. Parmod Kumar, Sh. Harpreet Singh and Ritu Saxena on these affidavits signed and notarized on 28/10/2010 and submitted in this office on 10/11/2010, do not match with their signatures on their statements recorded on oath during and after the search operations by the Investigation Wing of the Income Tax Departme....
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....l entities, it cannot be believed that these are genuine business transactions. 15. Now we come to various decisions cited before ld CIT (A). On the issue of share application money whether can be added u/s 68 of the act, There is plethora of judicial precedents where the additions u/s 68 are contested by the assessee. The honourable Delhi High court in 367 ITR 306 has compartmentalized them in two segments in general as under :- "13. As we perceive, there are two sets of judgments and cases, but these judgments and cases proceed on their own facts. In one set of cases, the assessee produced necessary documents/evidence to show and establish identity of the shareholders, bank account from which payment was made, the fact that payments were received thorough banking channels, filed necessary affidavits of the shareholders or confirmations of the directors of the shareholder companies, but thereafter no further inquiries were conducted. The second set of cases are those where there was evidence and material to show that the shareholder company was only a paper company having no source of income, but had made substantial and huge investments in the form of share applicatio....
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....d that the said decision cannot be considered to have laid down the proposition that unless the deponents of the affidavits are cross-examined, the affidavits cannot be rejected. It was explained that the decision of the Supreme Court lays down "that if there is no material whatsoever on record for doubting the veracity of the statements made in the affidavits and if the deponents have also not been subjected to cross-examination for bringing out the validity of their statements, then the Tribunal would not be justified in doubting the correctness of the statement made by the deponents in the affidavits." Thus, the affidavits need not be accepted as reliable when there is enough material on record to doubt the veracity of the transaction. In such a case it cannot be said that the affidavits can be rejected only after cross examination. In the present case, there is enough material on record to negate the claim of the genuineness of the transactions and in the light of over-whelming material, the plea that the Assessing Officer should not have rejected the affidavits without cross-examination of the deponents has no force. The said exercise has resulted in complete miscarriage of ju....
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....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 Depart ment 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 circumstances of each case. In the present case, the receipts are shown in the account books of a firm of which the appellant and Govindaswamy Mudaliar were partners. When he was called upon to give explanation he put for ward two explanations, one being a gift of Rs. 80,000 and the other being receipt of Rs. 42,000 from business of which he claimed to be the real owner. When both these explanations were rejected, as they have been it was clearly open to the Incometax Officer to hold that the income must be concealed income. There is ample authority for the position that where an assessee fails to prove satisfactor....
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....the complete particulars of the share applicants such as their names and addresses, Income-tax file numbers, their creditworthiness, share application forms and share holders' register, share transfer register, etc., are furnished to the Assessing Officer and the Assessing Officer has not conducted any enquiry into the same or has no material in his possession to show that those particulars are false and cannot be acted upon, then no addition can be made in the hands of the company under section 68 and the remedy open to the Revenue is to go after the share applicants in accordance with law. We are afraid that we cannot apply the ratio to a case, such as the present one, where the Assessing Officer is in possession of material that discredits and impeaches the particulars furnished by the assessee and also establishes the link between selfconfessed "accommodation entry providers", whose business it is to help assessees bring into their books of account their unaccounted monies through the medium of share subscription, and the assessee. The ratio is inapplicable to a case, again such as the present one, where the involvement of the assessee in such modus operandi is clearly indi....
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....A delicate balance must be maintained between the two interests. In Divine Leasing (supra), the following proposition was elucidated:- "In this analysis, a distillation of the precedents yields the following propositions of law in the context of Section 68 of the IT Act. The assessed 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 acceptable proof or acceptable Explanation by the assessed. (5) The Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices; (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessed nor should the AO take such repudiation at face value ....
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....bers had made genuine investment or had, acted as angel investors after due diligence or for personal reasons. The final conclusion must be pragmatic and practical, which takes into account holistic view of the entire evidence including the difficulties, which the assessee may face to unimpeachably establish creditworthiness of the shareholders." 23. Further with respect to the argument of examination of "source of source", while examining cash credit u/s 68 of the act , the Hon Calcutta high court in case of CIT v. Sophia Finance Ltd. [1994] 205 ITR 98 (Delhi) at page no 104 and reiterated by Hon Calcutta High court in Rajmandir Estates Pvt. Ltd. v. Principal CIT [2016] 386 ITR 162 (Cal) has held as under :- "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." Therefore, in such a case where the investors are merely name lenders AO is duty bound to enquire the source of source of depositors. Assessee has failed to show it in this case. 24. On careful consideration of as....
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....e facts about these entities have unfolded, the reasons for the limitations of the assessee are not difficult to seek. As per decisions of this Tribunal filed by the assessee on his own, these entities, as indeed other entities in Tarun Goyal group, were never involved in any genuine business anyway and were only in the business of providing accommodation entries. The shell entities, like these two entities before us, have every semblance of a genuine business- its legal ownership by persons in existence, statutory documentation as necessary for a legitimate business and a documentation trail as a legitimate transaction would normally follow. The only thing which sets it apart from a genuine business entity is lack of genuineness in its actual operations. The operations carried out by these entities, are only to facilitate financial manoeuvring for the benefit of its clients, or, with that predominant underlying objective, to give the colour of genuineness to these entities. These shell entities, which are routinely used to launder unaccounted monies, are a fact of life, and as much a part of the underbelly of the financial world, as many other evils. Even a layman, much a Member o....
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.... bank accounts are used as a conduit to launder the ill gotten money. It is impossible for even a layman, leave aside Members of this specialized Tribunal, to come to the conclusion that these transactions represent bonafide investment transactions. It is also important to note that there is nothing else about the genuine business activities, even if any, of the investor companies, about the backdrop of the promotors about the relationship these people had with the companies, and we are to take the call on genuineness only on the basis of these two bank statements for a limited period. We are unable to come to a positive conclusion about the bonafides of the investors on the basis of these bank statement, and quite to the contrary to the claim made by the assessee, these statements show lack of bonafides. Hon'ble Supreme Court has, in the case of Durga Prasad More (supra), observed that "human minds may differ as to the reliability of a piece of evidence but in that sphere the decision of the final fact finding authority is made conclusive by law". This faith in the Tribunal by Hon'ble Courts above makes the job of the Tribunal even more onerous and demanding and, ....
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....ee has no documents about their financial activities or their balance sheets. The assessee is a private limited company and these entities could not have therefore been rank outsiders like walk in investors and yet the assessee does not throw enough light on these entities. A lot of emphasis is placed on bank transactions, on PAN cards and on board resolutions but all these factors have to be present in the cases of shell companies involved in money laundering as well. Nothing, therefore, turned on these documents so far as genuineness aspect is concerned. It is also a settled legal position that the onus of the assessee, of explaining nature and source of credit, does not get discharged merely by filing confirmatory letters, or demonstrating that the transactions are done through the banking channels or even by filing the income tax assessment particulars. In the case of CIT v. United Commercial and Industrial Co (P.) Ltd [1991] 187 ITR 596/56 Taxman 304 (Cal) , Hon'ble Calcutta High Court has held that "it was necessary for the assessee to prove prima facie the identity of creditors, the capacity of such creditors and lastly the genuineness of transactions". Similarly, in the....
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....th the help of amendment; or (ii) such areas have remained intact from the judicial precedent. Viewed thus, merely because there is a specific amendment to Section 68 with effect from 1st April 2012, it does not affect the interpretation of Section 68 on the basis of the binding judicial precedents, de horse this amendment, and the first principles. 30. In view of these discussions, as also bearing in mind entirety of the case, we are unable to see any merits in the grievances raised by the assessee. The conclusions arrived at by the learned CIT(A) are correct and donot call for any interference. While we have carefully perused all the judicial precedents cited at the bar, it is not possible to specifically deal all of these precedents as all of them are not really relevant in the perspective of our approach or are somewhat repetitive in effect." 26. Honourabel Supreme court in case of Sumati dayal [214ITR 801] with respect to provision of section 68 of the act has held that :- "It is no doubt true that in all cases in which a receipt is sought to be taxed as income, the burden lies upon the Department to prove that it is within the taxing provision and if a re....