AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (3) TMI 323
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.....1. The instant case pertains to the Assessment Year of 2009-10, for which the Respondent Company - Assessee had filed the original Return of Income on 29.9.2009 declaring a total income of Rs. 7,01,870. A Notice was issued u/S. 148 of the Act to re-open the assessment on 13.04.2012 for the reasons recorded therein. 3.2. The Assessee filed submissions on 23.04.2012 to the Notice u/S. 148, and objections on 30.04.2012. The objections were rejected on 13.08.2012. A Show Cause Notice was issued on 13.01.2014. The Assessee filed detailed Written Submissions on 22.01.2014. 3.3. The Assessee Company in its Return showed that money aggregating to Rs. 17,60,00,000/- had been received through Share Capital/Premium during the Financial Year 2009-10 from the following companies situated at Mumbai, Kolkatta, and Guwahati: S. No. Name of the shareholder Amount (A)Mumbai Based Companies 1. Clifton Securities Pvt. Ltd. 95,00,000 2. Lexus Infotech Ltd. 95,00,000 3. Nicco Securities Pvt. Ltd. 95,00,000 4. Real Gold Trading Company Pvt. Ltd. 90,00,000 5. Hema Trading Company Pvt. Ltd. 95,00,000 6. Eternity Mu....
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....investor companies. The Department only received submissions through dak, which created a doubt about the identity of the investor companies. 3.8. The AO independently got field enquiries conducted with respect to the identity and credit-worthiness of the investor companies, and to examine the genuineness of the transaction. Enquiries were made at Mumbai, Kolkatta, and Guwahati where these Companies were stated to be situated. The result of the enquiry is summarised by the A.O. in his Order as under :- S. No. Name of Investor Company AO's Enquiries Amounts invested & Tax returns filed 1. Clifton Securities Pvt. Ltd.- Mumbai Notice Served on 29.11.2011 at the given address but no reply received till date. 95,00,000 2. Lexus Infotech Ltd.- Mumbai Notice Served on 19.11.2011 at the given address but no reply received till date. 95,00,000 3. Nicco Securities Pvt. Ltd. - Mumbai Notice Served on 29.11.2011 at the given address but no reply received till date. 95,00,000 4 Real Gold Trading Co. Pvt. Ltd.- Mumbai Address incorrect. The correct address is 2ndflorr,....
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.... 10. Ganga Builders Ltd. Kolkatta It was submitted, that the company had applied for shares of NRA Iron and Steel Pvt.Ltd. However, they had not specified how many shares, and at what premium they had purchased. The Company had not enclosed their Bank Statement showing the source of fund for share application money. (50,00,000/- Ch. No. 000001 dt. 24.10.2008 & Rs. 40,00,000/- Ch. No. 000002 dt. 24.10.2008 drawn on Kotak Mahindra Bank. The Company had shown income of Rs. 5,850/- for A.Y. 2009-10 Rs. 90,00,000 invested on 21.10.2008 Return income Rs. 5850 11. Gromore Fund Managemen t Ltd. Kolkatta It was submitted, that the company had applied for 47,500 equity shares of Rs. 10/- of NRA Iron and Steel Pvt. Ltd. each at a premium of Rs. 190/- each. The Company had not given any reason for paying such a high premium. The Company had shown income of Rs. 14,130/- for A.Y. 2009-10 Rs. 95,00,000 invested on 24.10.2008 Return income Rs. 14130 12. Bayanwala Brothers Pvt. Ltd. Kolkatta It was submitted, that the company had applied for 47,500 equity shares of Rs. 10/- of NRA Iron and Steel Pvt. Ltd. each at a premi....
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....209681 dt. 5.12.2008 & Rs. 45,00,000/- Ch. No. 209677 dt. 5.12.2008 drawn on Centurion Bank of Punjab Rs. 95 lakhs invested on 5.12.2008 By 2 cheques The Company had shown income of Rs. 9,470/- for A.Y. 2009-10 95,00,000 Return income Rs. 9420 17 Prominent Vyappar Pvt. Ltd. Kolkatta It was submitted, that the company had applied for 47,500 equity shares of Rs. 10/- of NRA Iron and Steel Pvt. Ltd. each at a premium of Rs. 190/- each. The Company had not given any reason for paying such a high premium. (50,00,000/- Ch. No. 205185 dt. 5.12.2008 & Rs. 45,00,000/- Ch. No. 205189 dt. 5.12.2008 drawn on HDFC (Centurion Bank of Punjab) The Company had shown income of Rs. 10,307/- for A.Y. 2009-10 Rs. 95,00,000 invested on 5.12.2008 By 2 cheques Return income Rs. 10307 TOTAL 17,60,00,000 The AO recorded that the enquiries at Mumbai revealed that out of the four companies at Mumbai, two companies were found to be non-existent at the address furnished. With respect to the Kolkata companies, the response came through dak only. However, nobody appeared, nor did they produce t....
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....eptable 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 notice; 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 SLP filed against the judgment was dismissed." The Commissioner of Income Tax (Appeals)-I, New Delhi vide Order dated 11.04.2014 deleted the addition made by the A.O. on the ground that the Respondent had filed confirmations from the investor companies, their Income Tax Return, acknowledgments with PAN numbers, copies of their bank account to show that the entire amount had been paid through normal banking channels, and hence discharged the initial onus under Section 68 of the Act, for establishing the credibility and identity of the shareholders. 5. The Revenue filed an Appeal before the Income Tax Appellate Tribunal (hereinafter referred to as "ITAT"). The ITAT dismissed the appeal, and confirmed the order of the CIT(A) vide Order dated 16.10.2017 on the ground that the Assessee had discharged....
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....heard the Ld. Counsel for the Revenue, and examined the material on record. 8.1. The issue which arises for determination is whether the Respondent / Assessee had discharged the primary onus to establish the genuineness of the transaction required under Section 68 of the said Act. Section 68 of the I.T. Act (prior to the Finance Act, 2012) read as follows: "68. Cash credits- Where any sum is found credited in the book 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" (emphasis supplied) The use of the words "any sum found credited in the books" in Section 68 of the Act indicates that the section is widely worded, and includes investments made by the introduction of share capital or share premium. 8.2. As per settled law, the initial onus is on the Assessee to establish by cogent evidence the genuineness of the transaction, and credit-worthiness of the investors under Section 68 of the....
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....en in that instant case, it is projected by the Revenue that the Directorate of Income Tax (Investigation) had purportedly found such a racket of floating bogus companies with sole purpose of lending entries. But, it is unfortunate that all this exercise if going in vain as few more steps which should have been taken by the Revenue in order to find out causal connection between the case deposited in the bank accounts of the applicant banks and the assessee were not taken. It is necessary to link the assessee with the source when that link is missing, it is difficult to fasten the assessee with such a liability." 9. The Judgments cited hold that the Assessing Officer ought to conduct an independent enquiry to verify the genuineness of the credit entries. In the present case, the Assessing Officer made an independent and detailed enquiry, including survey of the so- called investor companies from Mumbai, Kolkata and Guwahati to verify the credit-worthiness of the parties, the source of funds invested, and the genuineness of the transactions. The field reports revealed that the share-holders were either non-existent, or lacked credit-worthiness. 10. On the issue of unexplaine....
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....SCC 378 , held that if the assessee fails to discharge the onus by producing cogent evidence and explanation, the AO would be justified in making the additions back into the income of the assessee. v. The Guwahati High Court in Nemi Chand Kothari v. CIT [2003] 264 ITR 254 (Gau.) held that merely because a transaction takes place by cheque is not sufficient to discharge the burden. The assessee has to prove the identity of the creditors and genuineness of the transaction. : "It cannot be said that a transaction, which takes place by way of cheque, is invariably sacrosanct. Once the assessee has proved the identity of his creditors, the genuineness of the transactions which he had with his creditors, and the creditworthiness of his creditors vis-a-vis the transactions which he had with the creditors, his burden stands discharged and the burden then shifts to the revenue to show that though covered by cheques, the amounts in question, actually belonged to, or was owned by the assessee himself" (emphasis supplied) vi. In a recent judgment the Delhi High Court CIT v. N.R. Portfolio (P.) Ltd.[2014] 42 taxmann.com 339/222 Taxman 157 (Mag.) (Delhi) held that the cre....
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.... and the premises was owned by some other person. b. The companies at Kolkatta did not appear before the A.O., nor did they produce their bank statements to substantiate the source of the funds from which the alleged investments were made. c. The two companies at Guwahati viz. Ispat Sheet Ltd. and Novelty Traders Ltd., were found to be non- existent at the address provided. The genuineness of the transaction was found to be completely doubtful. ii. The enquiries revealed that the investor companies had filed returns for a negligible taxable income, which would show that the investors did not have the financial capacity to invest funds ranging between Rs. 90,00,000 to Rs. 95,00,000 in the Assessment Year 2009-10, for purchase of shares at such a high premium. For example: Neha Cassetes Pvt. Ltd. - Kolkatta had disclosed a taxable income of Rs. 9,744/- for A.Y. 2009-10, but had purchased Shares worth Rs, 90,00,000 in the Assessee Company. Similarly Warner Multimedia Ltd. - Kolkatta filed a NIL return, but had purchased Shares worth Rs. 95,00,000 in the Assessee Company - Respondent. Another example is of Ganga Bu....