TaxTMI 
TaxTMI 
2017 (6) TMI 1284
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.... Rs. 1,90,00,000/- & Share Premium of Rs. 188,10,00,000/- during the Asst. Year 2010-11. The assessee credited Rs. 1,90,00,000/- in total in its books against the above receipts. The assessee claimed that the detail of receipts are as under :- Table-1 Particulars of Receipts of Share Capital/Investment during Asst. Year 2010-11 Date of Application : 05-06-2009 Date of Allotement : 22-06-2009 SI No. Name & Address of the Share Holder No. of Share Capital Amount of Share Capital (Face Value : @ 10/-) Amount of Share Premium (Value : @ 990/-) Total Amount (Total Value : @ 1,000/-) 1 Double Plus Softwre Pvt. Ltd. 10159, Padam Singh Road, Karol Bagh, New Delhi - 110 007.PAN: AABCD3206F 650000 65,00,000 64,35,00,000 65,00,00,000 2 Sayaji Marketing Pvt. Ltd 5, Russel Street, 1st Floor, Kol.-71. PAN : AAGCS0147M 650000 65,00,000 64,35,00,000 65,00,00,000 3 Stephens Financial Services Pvt. Ltd. Vasundhara, 6th Floor, 2/7, Sarat Bose Road, Kolkata- 700 020. PAN : AAGCS2740G. 600000 60,00,000 59,40,00,000 60,00,00,000 19000000 19,00,00,000 188,10,00,000 190,00,00,....
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....r verified the claims of the assessee and this process is recorded at Para 1.4. to 1.4.1. of the Assessment Order. 3.1. The A.O. concluded that the assessee has not proved the genuineness and creditworthiness of the cash credits. At para 1.5 and 1.6 of his order he held as follows:- Para 1.5 Modus operandi of the transaction: - From the above discussion it is clear that the four companies including the assessee company are circulating the above mentioned four cheques among themselves by endorsement only one after another until it returns to the issuer. The modus operandi of the assessee company & other three companies is to raise fictitious funds through book entry. The assessee & other three companies raised their capital to the tune of Rs. 190,00,00,000/- each through this fictitious book entry. Para 1.6 Conclusion: - The above facts & circumstances leads to a reasonable conclusion that the above arrangement were made by the assessee with other three companies. The idea of counterbalancing the capital raise by way of investment of similar nature does not sound novel or worth mentioning. The unique feature of the overall transactions lies in ....
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.... of Rs. 190,00,00,000/- in total in its books for Asst. Year 2010-11 as receipts of share capital & premium and (B) the explanation offered by the assessee is not satisfactory. Therefore, the sum of Rs. 190,00,00,000/- is to be charged to income tax as income of the assessee for the previous year ended 31-03-2010. In view of the above, the entire sum of Rs. 190,00,00,000/- is added to the total income of the assessee for the Asst. Year 2010-11 as unexplained Cash Credit. The assessee furnished inaccurate particulars in this regard and by this way understand its income. Hence, Penalty proceeding u/s 271(1)(c) is applicable in this issue and accordingly initiated. Accordingly, total income of the assessee for the Asst. Year 2010-11 is assessed & calculated as under:- Total Returned Income : Rs. NIL Total Loss as per return : -668 Add: (i) Unexplained Cash Credit, as in Para 1.6 : 190,00,00,000.00 ----------------------------------- Total Assessed Income = Rs. 189,99,99,332.00 Rs.189,99,99,330.00 ....
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....he course of assessment in respect of capital of Rs. 190 Cr. Received during the period. 2. The appellant craves leave to adduce addition and / or supplementary ground / grounds and to amend and / or alter the ground / grounds any time before or at the time of hearing of the appeal." 7. The ld. Counsel for the Revenue, Mr. Goulen Hangshing, CIT, DR., submitted that Section 68 of the Act, applies on the facts and circumstances of the case, as the assessee has shown a credit in its books of account. He contended that the assessee received a cheque and after crediting the same in its books of account, endorsed it to a third party. The mode of utilisation of the credit, as per the ld. CIT, DR, is not relevant in the facts and circumstances of the case and what is to be seen is whether the three ingredients i.e. the identity, creditworthiness and genuineness of the credit transactions have been proved by the assessee. He took this Bench through the order of the ld. A.O. and submitted that circular transactions have been undertaken by the assessee at huge premium, without any justification. He pointed out to the cash balance available in the bank account of these companies on....
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....e requirements of Section 68 of the Act, have been complied with, in this case. The genuineness of the transaction is proved as the parties have confirmed the transaction. He further submitted that if it is the Revenue‟s case that the entire transactions are sham transactions, then the transactions should be ignored and no cognigence should be taken of the same and hence no addition can be made. He argued that no money whatsoever was received by any of the companies and it was a case of "book building" by exchange of share capital. He relied on the order of the ld. CIT(A) and argued that the same may be upheld as this is a case where no real income has accrued to the assessee. 9. Rival contentions heard. On a careful consideration of the facts and circumstances of the case, a perusal of the papers on record as well as of the order of the Authorities below and case laws cited, we hold as follows:- 9.1. Section 68 of the Act, reads as follows: "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 ....
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....o the facts of the case, as the Hon‟ble Tribunal was in that considering a case where accounting entries were passed by debiting accounts of sister concerns without actual inflow of cash. Here a valid cheque was received and credited in the books of account as valuable consideration for allotment of shares. 9.4.2. Similarly, in the case of ACIT vs. Mahendra Kumar Agarwal(supra), the Jaipur Bench of the Tribunal was considering a case of unexplained investment, where there were certain journal entries passed without any cash transactions. It was not a case where cheques have been issued. Thus, on facts this case law does not apply. 9.4.3. In the case of Jatia Investment Co. (supra), the facts were that entries were made in the books of account so as to comply with the directions of RBI given to NBFC‟s. These directions were in the public domain. The RBI had directed the three companies belonging to Jatia Group to maintain a particular ratio of loans to share capital and reserves. This required discharge of loans and through a transparent arrangement these three companies sold shares held by them in various other companies of Jatia Group and the consideration receiv....
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....rate that they are not more than a couple Hundreds of rupees or few thousands of rupees. No figures are in lakhs also, except the cheque issued. Bank Balance are around Rs. 12,000/- Thus in our view the creditworthiness is not proved. As the genuineness of the transactions and the creditworthiness of the parties have not been proved, the addition has been correctly made u/s 68 of the Act by the A.O. 13. The last contention of the ld. Counsel for the assessee is that, if these credits as well as investments are sham, then no addition whatsoever can be made as these are not real transactions. He submits that when the A.O. gives a categorical finding that these are fictitious book entries, then logically no additions should be made. In our view, this argument has to be dismissed for the reason that credit entry has been made in the books of account consequent to receipt of cheques against which share capital has been allotted by the assesse company which, by the admission of the assessee, are legally valid transaction. The requirements of the Negotiable Instruments Act and the Companies Act are fulfilled in this case. Shares have been legally allotted. Amounts have been validly rec....
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....can be made u/s 68. We dismiss this argument as devoid of merit. 15. The "B" Bench of the ITAT, Delhi in ITA No. 378 & 2164/Del/2008, Assessment Year 2000-2001, ITO vs. M/s. SBS Properties & Finvest Pvt. Ltd., order dt. 30.05.2016, wherein one of us is the author of the decisions, has held as follows: 27. We now consider the merits of the addition without taking into consideration the statement of Shri S.K. Jain or the material found during the search of Shri S.K. Jain. On a perusal of the documents submitted by the assessee, we are of the considered opinion that the genuineness of the transaction and the creditworthiness of the creditors has not been demonstrated by the assessee. The AO in his order at page 7 has clearly recorded that the assessee company has no financial base or business and the money received by it was withdrawn the very same day or the next day. More important he has recorded that the assessee has not given any, let alone satisfactory explanation for the high premium charged on the shares. When shares are allotted within a span of less than one month, the reason for charging high premium in the case of VPC Financial Services P Ltd. , Killa Financial....
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.... of the transaction. But the question before us cannot be resolved merely on the basis of the documentary evidence. The evidence adduced by the assessee has to be examined not superficially but in depth and having regard to the test of human probabilities and normal course of human conduct. Before we proceed to note the findings of the Tribunal and decide whether they have been properly arrived at, it is relevant to note a few judgments of the Supreme Court. In CIT v . Durga Prasad More [1971] 82 ITR 540 Hegde J. speaking for the Supreme Court observed as under: - "Now we shall proceed to examine the validity of those grounds that appealed to the learned judges. It is true that the apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self- serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or exec....
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....are such that no person acting judicially and properly instructed as to the relevant law would have come to the determination in question." In DIT v. Bharat Diamond Bourse [2003] 259 ITR 280 / 126 Taxman 365 , the Supreme Court again reiterated the aforesaid position and held as under: - "As a principle, this court does not disturb findings of fact unless the findings of fact are perverse. It appears to us this is one of those exceptional cases where the correct conclusion recorded by the Assessing Officer, and affirmed by the appellate authority, has been reversed by the Tribunal on account of perverse reasoning, as we shall presently see." 19. The position thus is that even where a reference of a question of law is made to the High Court under Section 66 of the Indian Income Tax Act, 1922 or Section 256 of the Income Tax Act, 1961 over which the High Court exercises advisory jurisdiction, and not appellate jurisdiction, where normally the findings of fact recorded by the Tribunal are binding on the High Court, it has been held by the Supreme Court that the findings are not binding on the High Court if they are perverse or if the findings are such that n....
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.... Court has laid down that the evidence adduced in the assessee has to be examined, not superficially, but in depth and having regard to the test of human probabilities and normal course of human conduct. When we do so in this case we have to uphold the action of the AO. 31. In the case of CIT vs. Global Securities & Finance (P.) Ltd. (2014) 264 CTR 481 (Delhi) it is held as under :- "11. The respondent assessee is a private limited company. It is not the case of the respondent that their Directors or persons behind the companies, who had purportedly made investment in the shares were related or known to them. In the present case substantial investment has been made in a private limited company which includes share premium @ Rs. 40/- per share amounting to Rs. 41 ,88,000/-. It is not a case of the respondent assessee that they had a proven good past track record justifying a hefty premium, four times the face value. What was placed on record were certain papers which showed that the respondent assessee had taken care to ensure legal compliances. The said evidence is primarily documentary evidence. But, what the tribunal has noticed but not given due credence to are....
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.... Section 57 of which the Court can take judicial notice is not exhaustive and indeed the purpose of the section is to provide that the Court shall take judicial notice of certain facts rather than exhaust the category of facts of which the Court may in appropriate cases take judicial notice. Recognition of facts without formal proof is a matter of expediency and no one has ever questioned the need and wisdom of accepting the existence of matters which are unquestionably within public knowledge . .......... ....... No Court therefore insists on formal proof, by evidence, of notorious facts of history, past or present. The date of poll' passing away of a man of eminence and events that have rocked the nation need no proof and are judicially noticed. Judicial notice, in such matters, takes the place of proof and is of equal force. In fact, as a means of establishing notorious and widely known facts it is superior to formal means of proof..... " 13. It is important, to segregate cases of bonafide or genuine investments by third persons in a private limited company, from cases where receipt of share application money is only a facade for conversion of unaccounted f....