TaxTMI 
TaxTMI 
2018 (11) TMI 943
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....plication monies along with premium in the aggregate of 71.40.00,0001- disclosed by the appellant invites the mischief of the provisions of s 68 of the Act or not. The provisions of s. 68 of the Act deal with cash credit which reads as under: "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 Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year" According to this section, if identity. creditworthiness of the creditor and genuineness of the transaction are not proved and the explanation offered by the assessee is not in the opinion of the Assessing Officer, satisfactory. the sum so credited may be charged to income-tax as income of the assessee of that previous year. In other words, providing of an opportunity is inherently embedded within the second limb of such provisions. Thus, it is a mandatory duty to call for an explanation in this respect. Admittedly the AO has never given any opportunity to the appellant to ....
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....ed life or liberty had to be a just. fair and reasonable procedure which necessarily meant the observance of the principles of natural justice. That is why these principles have been called as part of the universal law. as part of the rule of law and have also been termed as fair play in action. Audi alterarm partem is one of the fundamental principles of natural justice. A quasi-judicial or administrative decision rendered or an order made in violation of the rule of audi alteram partem is null and void and the order made in such a case can be struck down as Invalid on that score alone - Maneka Gandhi v. Union of India AIR 1978 SC 597. Gangadharan Pillai v. ACED [1980] 126 ITR 356 at pp. 365 to 367 (Ker.). In other words, the order which infringes the fundamental principle. passed in violation of audi alteram partem rule is a nullity. When a competent Court of authority holds such an order as invalid or sets It aside. the impugned order becomes null and void - Nawabkhan Abbaskhan v State of Gujarat AIR 1971 SC 1471 at p 1479 In the light of these decisions, the additions made by the Assessing Officer in violation of the principle» of natural justice had to be set aside as ....
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....he investments made by each of them are duly and fully reflected In their audited books of accounts as well as their income tax return. The appellant had duly filed its return of total income u/s 139(1) of the Act in respect of the assessment year 2012-13. In the course of the assessment proceedings, the appellant in response to the requisitions made by the AO, from time to time, produced its audited books of accounts, filed copies of its audited annual accounts including various details and other documents as desired by the AO The details and documents so produced and filed with the AO included inter alia, full details of each of the six share applicants, who had subscribed to the aggregate share capital as well as share premium money raised by the appellant during the assessment year under appeal. The AO, on receipt of the aforesaid details from the appellant did not pursue the matter further. He solely doubted the genuineness of the said share capital and the creditworthiness of the share applicants in the teeth of the cast iron evidence to the contrary on mere presumption and added the sum of Rs.1.40,00,000/- in respect of the share capital to the total income of the appellan....
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....act of allotment of shares to the share applicant. It is further observed that the net worth of each of the share applicant, as disclosed in their Balance Sheets, far exceed the amount of investments made by them in the shares of the appellant. It is found that the funds held by the shareholders were disclosed in the balance sheets of the share applicants viz. Sonali Suppliers Pvt. Ltd. is in a sum of Rs.43,58,07,751/- as on 31.03.2012 and a sum Rs.25,00,000/- was invested as share application money with the appellant. Nihon Impex Pvt. Ltd. is in a sum of Rs.51,89,32,502/- as on 31.03.2012 and a sum of Rs.25,00,000/- was invested as share application money with the appellant, Sivarpan Vanijya Pvt Ltd. is in a sum of Rs.45,80,51,770/- as on 31.03.2012 and a sum of Rs.25,00,000/- was invested as share application money with the appellant, Saurabh Management Pvt. Ltd. is in a sum of Rs.5,79,75,856/- as on 31.03.2012 and a sum of Rs.25,00,000/- was invested as share application money with the appellant, Jagajyoti Commodities Pvt. Ltd. is in a sum of Rs.48,94,28,558/- as on 31.03.2012 and a sum of Rs.25,00,000/- was invested as share application money with the appellant and Mangalraj Me....
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....esses of the alleged creditors It was in the knowledge of the revenue that the said creditors were the income-tax assessees. Their index number was in the file of the revenue The revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy 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 any further. In the premises, if the Tribunal came to the conclusion that the assessee had 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 was based on some evidence on which a conclusion could* be arrived at, no question of law as such could arise." The ratio laid down in the aforesaid case is squarely applicable to the case at hand. In the instant case, thus, the AO had not controverted these indisputable evidences adduced on record but acted on his whims and fancies in disregarding them....
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....on 147 or when the summons were issued to them. We find that the assessee has filed before the AO, copies of share application forms duly signed along with the complete addresses of the .investors along with their I.T file numbers, account payee cheque numbers and the assessee's bank statements disclosing the deposits of these amounts In these facts we find that the assessee has discharged its initial onus to prove the Identity of the Investors as well as their creditworthiness, It is not the case of the Revenue that the investor parties did not exist or that the money was not invested by them through banking channels, " Having found such, the Tribunal had relied on the judgement in Hindusthan Tea Trading Co. Lid. v. CIT (Cal): 263 ITR 289 (Cal) to uphold the order of the CIT. in view of the findings above noted, no substantial question of law arises and therefore, the appeal and the application are dismissed" 6.2 Again, the Hon'ble Jurisdictional High Court in the case of CIT vs, Sanchati Projects (P.) Ltd. [ITAT 140 of 2011 dated 08.06.2011] it was observed as under: "It appears from record that the assessee company during the relevant assessment year under appeal r....
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....orities below on the basis of the aforesaid materials on record were quite justified in deleting the aforesaid addition of Rs. 45, 00, 000/- done by the Assessing Officer. We are of the view that the order Impugned does not suffer from any defect whatsoever and no question of substantial error of law arises justifying our interference. The appeal is. thus. summarily dismissed. " There is no evidence adduced on record to show that the identities of the share applicants are not proved and/or that the subscription made by them to the share capital of the appellant was not genuine and/or the source of investment was not fully explained to the satisfaction of the AO. Further, the Hon'ble Jurisdictional High Court in the case of CIT vs. Dataware Private Ltd. [ITAT No. 263 of 2011 dated 21.09.2011] wherein while examining the issue of addition of share application money received by the assessee therein u/s. 68 of the Act. the Hon'ble Jurisdictional High Court held that after getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing Officer should enquire from the Assessing Officer of the creditor as to the genuineness of th....
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....tor/subscriber, the genuineness of the transaction and the veracity of the repudiation. " 7.1 Further this decision of the hon'ble Delhi High Court was approved by the Hon'ble Supreme Court in CIT vs. Lovely Exports Ltd (2008) 216 CTR 195 (SC) wherein it was held as under "2. Can the amount of share money be regarded as undisclosed income under section 68 of IT Act, 1961? We find no merit in this Special Leave Petition for the simple reason that if the share application money is received by the assessee 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. " In other words, it is observed that if share application money is received by an assessee from subscribers, whose names are given to the AO. are allegedly bogus, then the Revenue is free to proceed to reopen their individual assessments in accordance with law. The facts of the present are on a better footing to the one as decided above. In the instant case, the appellant had provided evidences in relation b) all the share applicants before the AO which were not disputed by him and as such. ther....
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.... that the assessee had, in fact, received money from the said shareholder and it had come from the coffers of that very shareholder. When the money is received by cheque and is transmitted through banking or other indisputable channels. genuineness of the transaction would be proved. Other documents showing the genuineness of the transaction can be the copies of the shareholders' register, share application forms. share transfer register, etc. [Para 13] As far as the creditworthiness or financial strength of the creditor/subscriber is concerned, that can be proved by producing the bank statement of the creditors/subscribers showing that it had sufficient balance in its accounts to enable it to subscribe to the share capital. Once these documents are produced. the assessee would have satisfactorily discharged the onus cast upon him. Thereafter. it is for the Assessing Officer to scrutinize the same and in case he nurtures any doubt about the veracity of these documents, to probe the matter further. However. to discredit the documents produced by the assessee on the aforesaid aspects, there has to be some cogent reasons and materials for the Assessing Officer and he cannot go i....
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....f such subscriptions as unexplained credit under section 68 is unwarranted. " 7.6. The instant case is further supported by the decision. of Hon'ble Allahabad High Court in the case of CIT vs. Vacmet Packaging (India) (P.) ~td (2014) 367 ITR ?17 (All). wherein their Lordship has held as under: "That apart, as regards genuineness of the transaction, the view which has been taken by the Tribunal is at least a possible view to take on the basis of the material on the record. The assessee undoubtedly had to discharge the onus of establishing the identity and creditworthiness of the applicant companies and of the genuineness of the transaction. In this regard, both the Commissioner (Appeals) and the Tribunal had noted that the assessee had established all the three aspects by producing, during the course of the assessment, necessary documentary material such as the share application forms, copies of bank accounts, income tax returns and balance sheets The view which was taken by the Commissioner (Appeals) and which was sustained by the Tribunal would thus have to be regarded as being, at least, a possible view to take in the circumstances of the case. In the present case the....
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....practice that was noticed by the Direct Taxes Enquiry Committee and the recommendations made by the said Committee which led to the amendment of the Act by the Finance Act of 1972, whereby the exemption from tax that was available in respect of winnings from lotteries. crossword puzzles. races. etc., was withdrawn. Similarly, the observation by the Chairman that if it is alleged that these tickets were obtained through fraudulent means, it is upon the alleger to prove that it is so, ignores the reality, The transaction about purchase of winning ticket takes place in secret and direct evidence about such purchase would be rarely available. An inference about such a purchase has to be drawn on the basis of the circumstances available on the record. Having regard to the conduct of the appellant as disclosed in her sworn statement as well as other material on the record an inference could reasonably be drawn that the winning tickets were purchased by the appellant after the event. We are, therefore, unable to agree with the view of the Chairman in his dissenting opinion. In our opinion, the majority opinion after considering the surrounding circumstances and applying the test of huma....
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....l the share applicants are existing assessees under the Act and that some of them were subject to scrutiny assessment during the same period establish the identity and authenticity of the share applicants. About the genuineness of the transactions there is neither any adverse finding in the assessment order nor one which is contrary to the facts brought on record by the appellant during the course of assessment proceeding. The creditworthiness of the share applicants as regards their subscription to the share capital is proved by the source as apparent from their audited balance sheet return and bank statement. The net worth of such subscribers are in excess of the amounts invested by each of them with the appellant. The addition made by AO is based on extraneous parameters not germane for deciding the issue, The AO had not dealt with the issue judiciously and rejected the evidence adduced during the course of the assessment proceedings by the appellant out of hand, Thus, it is held that the investment by the share applicants in the share capital of the appellant do not warrant the inference that such share application monies received is unaccounted cash credit. There is no mater....
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.... approval(s). All this takes care of the Revenue's argument terming these five an NBFCs as mere sham companies. We make it clear that the Assessing Officer nowhere issued sec. 131 or 133 process against all these investors. Relevant paper book comprising of 106 pages makes it clear that assessee had placed on record all share application / NBFC registrations certificates, bank statements, income-tax returns and audited accounts pertaining to its investors during the course of assessment. The Revenue's stand that this assessee was not carried out any business activity does have no substance in view of relevant raw materials stock of Rs.94,53,816.5 work-in-progress of Rs.283,74,528/- followed by other details of finished goods wastage and stores forming part of record before us. Its director's report at page 132 onwards suggests operational profits as on 31.03.2012 vis-à-vis in preceding assessment year. Its balance-sheet states sufficient current assets as on 31.03.2012. The assessee's revenue from operations as per its profit and loss account is Rs.41,94,84,590/- as against Rs.26,86,14,612/- in earlier assessment year. 5. Learned Departmental Representative at this stage s....
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....under:- a) Flower Distributors Pvt. Ltd.: This company invested a sum of Rs. 25,00,000/- in the appellant company. The share application was made by account payee cheque. This company was incorporated on 03.03.2011 and was having company identification number U52190WB2011PTC160152. This company duly filed its return of income before ITO, Ward-1(2), Kolkata and was having PAN AABCF 6846 M. This company was having a paid up capital with free reserves and surplus of Rs. 4,34,79,170/- as on 31.03.2012 and Rs. 55,84,414/- as on 31/03/2011 respectively. The copy of the bank statement of the Company is duly available in the paper book. On examination of the bank statement it will be seen that there is no deposit of cash. The copy of the assessment order passed u/s 143(3) of the Act for the AY 2012-13 is also available in the paper book. The details of source of funds from which this company had made the share application are also available in the paper book. All the relevant documents for this company are available on pages 57-80 of the paper book. (b) Forever Vintrade Private Limited: This Company invested a sum of Rs. 25,00,000 in the appellant company. The share application was m....
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....ly. The copy of the bank statement of the Company is duly available in the paper book. On examination of the bank statement it will be seen that there is no deposit of cash. The copy of the assessment order passed u/s 143(3) of the Act for the AY 2012-13 is also available in the paper book. The details of source of funds from which this company had made the share application are also available in the paper book. All the relevant documents for this company are available on pages 123-148 of the paper book. (e) Mandira Suppliers Private Limited: This Company invested a sum of Rs. 30,00,000 in the appellant company. The share application was made by account payee cheque. This company was incorporated on 03/03/2011 and was having company identification number U52190WB2011 PTC160162. This company duly filed its return of income before ITO Ward 1 (2), Kolkata and was having PAN AAHCM0355J. This company was having a paid up capital with free reserves and surplus of Rs. 4,93,81,014/- as on 31/03/2012 and Rs. 55,84,484/- as on 31103/2011 respectively. The copy of the bank statement of the Company is duly available in the paper book. On examination of the bank statement it will be seen th....
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....foresaid details, we find that in case of all the share applicants - a) The share application form and allotment letters are available. b) The share applicants are income tax assessees and had filed their income tax returns regularly. c) The investment in share application money were made out by account payee cheques. d) The bank accounts of the share applicants reveal that there were no deposits of cash before issue of cheques to the assessee company. e) The share applicants are having substantial creditworthiness in the form of free reserves and capital in their balance sheet. 5.3. As per the mandate of section 68 of the Act, the nature and source of credit in the books of the assessee company has been duly explained by the assessee. The credit is in the form of receipt of share capital from share applicants. The nature of receipt towards share capital is well established from the entries passed in the respective balance sheets of the companies as share capital and investments, as the case may be. Hence the nature of receipt is proved by the assessee beyond doubt. In respect of source of credit, the assessee has to prove the three necessary ingredients i.e identity ....
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....lishd and actual receipt of money from such creditor is proved. In case, the Assessing Officer is dissatisfied about the source of 'cash deposited in the bank accounts of the creditors' , the proper course would be to assess such credit in the hands of the creditor (after making due enquiries from such creditor). In arriving at this conclusion, the Hon'ble Court has further stressed the presence of word 'may' in section 68 of the Act. Relevant observations of Hon'ble Gujarat High Court at pages 369 & 370 are as under :- "Merely because summons issued to some of the creditors could not be served or they failed to attend before the Assessing Officer, cannot be a ground to treat the loans taken by the assessee from those creditors as non-genuine in view of the principles laid down by the Supreme Court in the case of Orissa Corporation (1986) 159 ITR 78. In the said decision the Supreme Court has observed that when the assessee furnishes names and addresses of the alleged creditors and the GIR numbers, the burden shifts to the Department to establish the Revenue's case and in order to sustain the addition the Revenue has to pursue the enquiry and to establish the lack of creditworthi....
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....wner of the credits appearing in their bank account from where they issued cheques to the appellant. For the proposition that a Bank Account holder himself is the 'owner' of 'credits' appearing in his account (with the result that he himself is accountable to explain the source of such credits in whatever way and form, the same have emerged) support can be derived from section 4 of Bankers Book Evidence Act 1891 which reads as under:- "4. Mode of proof of entries in bankers' books Subject to the provisions of this Act, a certified copy of any entry in a bankers' book shall in all legal proceedings be received as prima facie evidence of the existence of such entry, and shall be admitted as evidence of the matters, transactions and accounts therein recorded in every cases where, and to the same extent as, the original entry itself is now by law admissible, but not further or otherwise." Following the said provisions, the co-ordinate bench of Allahabad Tribunal in the case of Anand Prakash Agarwal reported in 6 DTR (All-Trib) 191 held as under:- "The question that remains to be decided now is whether the subject matter of transfer was the asset belonging ....
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....he Hon'ble Court has laid down that section 68 of Income-tax Act, should be read along with section 106 of Evidence Act. The relevant observations at page 260 to 262, 264 and 265 of the report are reproduced herein below:- "While interpreting the meaning and scope of section 68, one has to bear in mind that normally, interpretation of a statute shall be general, in nature, subject only to such exceptions as may be logically permitted by the statute itself or by some other law connected therewith or relevant thereto. Keeping in view these fundamentals of interpretation of statutes, when we read carefully the provisions of section 68, we notice nothing in section 68 to show that the scope of the inquiry under section 68 by the Revenue Department shall remain confined to the transactions, which have taken place between the assessee and the creditor nor does the wording of section 68 indicate that section 68 does not authorize the Revenue Department to make inquiry into the source(s) of the credit and/or sub-creditor. The language employed by section 68 cannot be read to impose such limitations on the powers of the Assessing Officer. The logical conclusion, therefore, has to be....
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....s of the creditor must remain confined to the transactions, which have taken place between the assessee and the creditor. What follows, as a corollary, is that it is not the burden of the assessee to prove the genuineness of the transactions between his creditor and sub-creditors nor is it the burden of the assessee to prove that the sub-creditor had the creditworthiness to advance the cash credit to the creditor from whom the cash credit has been. eventually, received by the assessee. It, therefore, further logically follows that the creditor's creditworthiness has to be Judged vis-a-vis the transactions, which have taken place between the assessee and the creditor, and it is not the business of the assessee to find out the source of money of his creditor or of the genuineness of the transactions, which took between the creditor and sub-creditor and/or creditworthiness of the sub- creditors, for, these aspects may not be within the special knowledge of the assessee. " ********** " ... If a creditor has, by any undisclosed source, a particular amount of money in the bank, there is no limitation under the law on the part of the assessee to obtain such amount of money or part....
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....er section 106 of the Evidence Act, that the said amounts had been received by him by way of cheques from the creditors aforementioned. In fact the fact that the assessee had received the said amounts by way of cheques was not in dispute. Once the assessee had established that he had received the said amounts from the creditors aforementioned by way of cheques, the assessee must be taken to have proved that the creditor had the creditworthiness to advance the loans. Thereafter the burden had shifted to the Assessing Officer to prove the contrary. On mere failure on the part of the creditors to show that their sub-creditors had creditworthiness to advance the said loan amounts to the assessee, such failure, as a corollary, could not have been and ought not to have been, under the law, treated as the income from the undisclosed sources of the assessee himself, when there was neither direct nor circumstantial evidence on record that the said loan amounts actually belonged to, or were owned by, the assessee. Viewed from this angle, we have no hesitation in holding that in the case at hand, the Assessing Officer had failed to show that the amounts, which had come to the hands of the c....
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....orthiness and also other documents, viz., confirmatory statements of the persons, of having advanced cash amount as against the supply of bidis. These evidence were duly considered by the Commissioner of Income-tax (Appeals). Therefore, the failure of the person to turn up pursuant to the summons issued to any witness is immaterial when the material documents made available, should have been accepted and indeed in subsequent year the same explanation was accepted by the Income-tax Officer. He further contended that when the Tribunal has relied on the entire judgment of the Commissioner of Income-tax (Appeals), therefore, it was not proper to take up some portion of the judgment of the Commissioner of Incometax (Appeals) and to ignore the other portion of the same. The judicial propriety and fairness demands that the entire judgment both favourable and unfavourable should have been considered. By not doing so the Tribunal committed grave error in law in upsetting the judgment in the order of the Commissioner of Income-tax (Appeals). 9. In this connection he has drawn our attention to a decision of the Supreme Court in the case of Udhavdas Kewalram v. CIT [19671 66 ITR 462. In th....
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....e and the relevant law. It is also ruled in the said judgment at page 465 that if the Tribunal does not discharge the duty in the manner as above then it shall be assumed the judgment of the Tribunal suffers from manifest infirmity. 12. Taking inspiration from the Supreme Court observations we are constrained to hold in this matter that the Tribunal has not adjudicated upon the case of the assessee in the light of the evidence as found by the Commissioner of Income-tax (Appeals). We also found no single word has been spared to up set the fact finding of the Commissioner of Income-tax (Appeals) that there are materials to show the cash credit was received from various persons and supply as against cash credit also made. 13. Hence, the judgment and order of the Tribunal is not sustainable. Accordingly, the same is set aside. We restore the judgment and order of the Commissioner of Income-tax (Appeals). The appeal is allowed. 5.9. It is not in dispute that all the share applicant companies in the instant case before us are assessed to income tax and assessments framed on some of them by the revenue. We find that the assessee had duly proved the source of source of source in th....
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....sdictional High Court in the case of CIT vs Roseberry Mercantile (P) Ltd in ITAT No. 241 of 2010 dated 10.1.2011 , while relying on the Hon'ble Supreme Court in the case of Lovely Exports reported in 216 CTR 295 (SC) , had held :- "On the facts and in the circumstances of the case, Ld. CIT(A) ought to have upheld the assessment order as the transaction entered into by the assessee was a scheme for laundering black money into white money or accounted money and the Ld. CIT (A) ought to have held that the assessee had not established the genuineness of the transaction. " It appears from the record that in the assessment proceedings it was noticed that the assessee company during the year under consideration had brought Rs. 4,00,000/- and Rs. 20,00,000/- towards share capital and share premium respectively amounting to Rs. 24,00,000/- from four shareholders being private limited companies. The Assessing Officer on his part called for the details from the assessee and also from the share applicants and analyzed the facts and ultimately observed certain abnormal features, which were mentioned in the assessment order. The Assessing Officer, therefore, concluded that nature and source ....
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....tax (Appeals) and the Tribunal below were justified in holding that after disclosure of the full particulars indicated above, the initial onus of the assessee was shifted and it was the duty of the Assessing Officer to enquire whether those particulars were correct or not and if the Assessing Officer was of the view that the particulars supplied were insufficient to detect the real share applicants, to ask for further particulars. The Assessing Officer has not adopted either of the aforesaid courses but has simply blamed the assessee for not producing those share applicants. In our view, in the case before us so long the Assessing Officer was unable to arrive at a finding that the particulars given by the assessee were false, there was no scope of adding those money under section 68 of the Income- tax Act and the Tribunal below rightly held that the onus was validly discharged. We, thus, find that both the authorities below, on consideration of the materials on record, rightly applied the correct law which are required to be applied in the facts of the present case and, thus, we do not find any reason to interfere with the concurrent findings of fact based on materials on rec....
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....assessee-company is also proved. By this, the creditworthiness of the share applicants is also proved beyond doubt. Third ingredient is genuineness of the transactions. We find that the five share applicants had paid the monies to the assessee company by account payee cheques out of sufficient bank balances available in their bank accounts, which are quite evident from the bank statements enclosed in the paper book. We agree with the arguments of the ld AR that the source of source of share applicants need not be proved by the assessee herein. We hold that the decision rendered by this tribunal in Subhalakshmi Vanijya relied upon by the ld DR was rendered in the context of validity of revision proceedings u/s 263 of the Act and not on the merits of the case. This tribunal in that case decided the validity of invoking revisionary jurisdiction u/s 263 of the Act by the ld CIT and whether adequate enquiries were made by the ld AO in the facts and circumstances of that case. This tribunal in Subhalakshmi Vanijya case supra never had an occasion to look into the merits of the addition proposed to be made towards share capital in the facts and circumstances of that case and no decision....
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....resented by a capital and reserve as noted above. 29. As noted from the judicial precedents cited above, where any sum is found credited in the books of an assessee then there is a duty casted upon the assessee to explain the nature and source of credit found in his books. In the instant case, the credit is in the form of receipt of share capital with premium from share applicants. The nature of receipt towards share capital is seen from the entries passed in the respective balance sheets of the companies as share capital and investments. In respect of source of credit, the assessee has to prove the three necessary ingredients i.e. identity of share applicants, genuineness of transactions and creditworthiness of share applicants. For proving the identity of share applicants, the assessee furnished the name, address, PAN of share applicants together with the copies of balance sheets and Income Tax Returns. With regard to the creditworthiness of share applicants, as we noted supra, these Companies are having capital in several crores of rupees and the investment made in the appellant company is only a small part of their capital. These transactions are also duly reflected in the ba....
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....the Investigation Wing of the department clearly showed that this was nothing but a sham transaction of accommodation entry. The assessee was asked to explain as to why the said amount of Rs. 1,11,50,000/- may not be added to its income. In response, the assessee has submitted that there is no such credit in the books of the assessee. Rather, the assessee company has received the share application money for allotment of its share. It was stated that the actual amount received was Rs. 55,50,000/- and not Rs. 1,11,50,000/- as mentioned in the notice. The assessee has furnished details of such receipts and the contention of the assessee in respect of the amount is found correct. As such the unexplained amount is to be taken at Rs. 55,50,000/-. The assessee has further tries to explain the source of this amount of Rs. 55,50,000/- by furnishing copies of share application money, balance4 sheet etc. of the parties mentioned above and asserted that the question of addition in the income of the assessee does not arise. This explanation of the assessee has been duly considered and found not acceptable. This entry remains unexplained in the hands of the assessee as has been arrived by the In....
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....rial disclosed was untrustworthy or lacked credibility the Assessing Officer merely concluded on the basis of enquiry report, which collected certain facts and the statements of Mr.Mahesh Garg that the income sought to be added fell within the description ofS.68 of the Income Tax Act 1961. Having regard to the entirety of facts and circumstances, the Court is satisfied that the finding of the Tribunal in this case accords with the ratio of the decision of the Supreme Court in Lovely Exports (supra). The decision in this case is based on the peculiar facts which attract the ratio of Lovely Exports (supra). Where the assessee adduces evidence in support of the share application monies, it is open to the Assessing Officer to examine it and reject it on tenable grounds. In case he wishes to rely on the report of the investigation authorities, some meaningful enquiry ought to be conducted by him to establish a link between the assessee and the alleged hawala operators, such a link was shown to be present in the case of Nova Promoters & Finlease (P) Ltd. (supra) relied upon by the revenue. We are therefore not to be understood to convey that in all cases of share capital added under ....
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....are not bogus and fictitious. Therefore, the impugned order is set aside. The appeal is allowed accordingly. No order as to costs. In the instant case before us, the share subscribing companies are duly assessed to income tax and the ld AR had also placed on record a copy of the assessment order framed in the case of M/s Capricorn Abasan Pvt Ltd (one of the share subscribing company) u/s 143(3) of the Act dated 31.12.2015 for the Asst Year 2013-14 by the Income Tax Officer, Ward -1(1), Kolkata, which are enclosed in pages 221 to 226 of paper book filed before us. It is not in dispute that the share subscribing companies are in existence. It is not in dispute that the share subscribing companies are duly assessed to income tax and their income tax particulars together with the copies of respective income tax returns with their balance sheets are already on record. We also find that the ld CITA had categorically stated that the scrutiny assessments were framed on the share subscribing companies for the Asst Year 2012-13 which shows their existence is genuine and transactions carried out by them were the subject matter of examination by the income tax department in scrutiny proc....
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....independently, should confront the assessee, if necessary, based on the materials gathered against the assessee and then the procedure of cross examination, if sought for by the assessee, needs to be provided in order to bring the entire enquiries and examination to the logical end. In the instant case, the ld AO had not followed the due process of law. He called for all the relevant details from the assessee which were duly provided in time. Even the director of the assessee company appeared before the ld AO and a statement was recorded from him in the course of assessment proceedings. Then the onus shifts to the ld AO. The ld AO without making any independent enquiries, if any, from his side, directed the assessee to produce the directors of the share subscribing companies, which remain uncomplied by the assessee company and which eventually led to the ld AO drawing adverse inference about the transaction of receipt of share capital and share premium by the assessee company. This process followed by the ld AO, in our considered opinion, is not in accordance with the due process of law. Even for one share subscribing company where the notice u/s 133(6) of the Act remain uncomplied....