TaxTMI 
TaxTMI 
TaxTMI 
2018 (3) TMI 1782
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....n holding that enquiries regarding genuineness, identity and creditworthiness of the investors were not made during the assessment proceedings by the ld. AO." 2. The facts of the case are that a search and seizure action u/s 132 was carried out on 26.09.2012 at the residential premises of the Directors and business premises of the assessee company. Pursuant to issuance of notice u/s 153A, the assessee company filed its return of income on 15.05.2013 declaring total income at Nil and book profit at Rs. 193,080/- u/s 115JB of the Act. The returned income was accepted and the assessment was finalized on 02.06.2014 u/s 153A read with section 153B and section 143(3) of the Act. Subsequent to the finalization of the assessment proceedings, information was received by the Assessing Officer from the Directorate of Income Tax (Investigation) Mumbai vide letter dated 16.09.2014 stating that assessee company has taken accommodation entry of Rs. 15 lakhs in the form of share capital with huge premium shown to have been received from M/s Alka Diamond Industries Ltd, a bogus concerned operated by Shri Praveen Kumar Jain an entry operator in whose case a search and seizure action was conducted b....
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....h the details of the transaction carried out with M/s Alka Diamond Industries Ltd. and in response, the assessee vide letter dated 21.04.2014 submitted all the details/information required by ld. AO for verifying the genuineness of the transaction and the ld. AO also made further enquiries on the details/information submitted by the assessee. It was submitted that the said issue has already been dealt with by the Assessing Officer in detail during the assessment proceedings, and the assessment order has been passed after making proper enquiries and verification and after due consideration of the reply/submission of the assessee company. It was further submitted by the assessee company that where the assessment order was passed by the AO taking the view in the light of relevant law as applicable, a different view being taken by ld Pr. CIT on the same issue cannot be a basis to invoke provisions of section 263 of the Act. It was further submitted that third party statement of Shri Praveen Kumar Jain cannot be used against the assessee without allowing assessee an opportunity of cross examination. It was further submitted that M/s Alka Diamond Industries Ltd. is not controlled and man....
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....ehalf of the assessee company, he proceeded to examine the details in respect of each of the 7 companies wherefrom the share capital with the huge premium has been received by the assessee company totalling to Rs. 2.35 Crores. 8. It was observed by the ld. Pr. CIT that no independent enquiries have been conducted by the Assessing Officer to verify the genuineness of the transactions, creditworthiness as well as identity and existence of the alleged investors relating to alleged receipt of share capital along with huge premium. It was further observed by the ld. Pr. CIT that certain confirmation/affidavits etc. have been filed by the assessee company during the assessment proceedings before the Assessing Officer and perusal of these documents, it is seen that most of these documents prima facie revealed that none of the alleged investors company has been carrying on any business activities, none of them has been earning any significant income and most of them are shown to have been registered at the residential addresses. It was further observed that in most of the confirmations, the identity of the signatory to the confirmation has not been revealed and no indication under communi....
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....arry out necessary inquiries or verification which should have been made by him under the facts & circumstances of the case thereby making the assessment order passed by him erroneous as well as prejudicial to the interest of revenue. 9.4 As has been amply demonstrated on the basis of incontrovertible facts available on record, as discussed in the foregoing paragraphs, it is clear that in the case of the assessee company no enquiries or verification as were necessary and which ought to have been made by the Assessing Officer were made by him before passing the assessment order on 02.06.2014, wherein the returned income was accepted by him as assessed income. Thus, it is established that the assessment order passed by the Assessing Officer on 02.06.2014 is erroneous and due to such erroneous order, apparently, unaccounted funds introduced by the assessee company in its books of accounts in the guise of share capital with huge premium were accepted as genuine, thereby making the assessment order prejudicial to the interest of revenue as well." 9. The ld. Pr. CIT also referred to the decision of Hon'ble Supreme Court in Malabar Industrial Company Ltd. vs. CIT 243 ITR 83 (SC) wh....
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....(Delhi), J.P. Srivastava & Sons (Kanpur) Ltd. vs. CIT [1978] 111 ITR 326 (All.) and CIT vs. Gabriel India Ltd. [1993] 71 Taxman 585 (Bom.). It was further submitted that ld. Pr. CIT has not appreciated the distinction between lack of enquiry and inadequate enquiry. It was submitted that in the present case, the AO collected necessary details, examined the same and then finalized and assessment. It was accordingly submitted that it is not a case of lack of enquiry by the Assessing Officer. It was further submitted that the ld. Pr. CIT before passing the order u/s 263 should determine whether or not the Assessing Officer has applied his mind before completing the assessment proceedings and in the present case, the Assessing Officer has applied his mind in depth while passing the assessment order and in support, reliance was placed on the decision of Hon'ble Delhi High Court in case CIT vs. Sun Auto 189 taxmann 436 and other Tribunal decisions. It was further contended that the ld. Pr. CIT has stated in his order that the necessary enquiry was not made by the Assessing Officer before the passing the impugned assessment order. In this regard, it was submitted that if any enquiry wh....
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.... by the ld AR that if the ld. Pr. CIT was of the view that necessary enquiries as made by the AO are not sufficient, he could have also made independent enquiries with such investors and in support, reliance was placed on the decision of Hon'ble Delhi High Court in case of ld. Pr. CIT vs. Delhi Airport Metro Express Pvt. Ltd., ITA No. 705/2017. Further reference was drawn to the decision of Co- ordinate Bench in case of Narayan Tatu Rane vs. ITO, Ward 27(1), Mumbai [2016] 70 taxmann.com 227 for the proposition that if the requisite enquiries have been made by the AO then such amended explanation to section 263 has no relevance. The ld. AR also referred to the decision of Co-ordinate Bench of the Tribunal in case of M/s Amira Pure Foods Pvt. Ltd. vs. The Pr. CIT dated 29.11.2017. It was accordingly submitted that the impugned order passed by ld. Pr. CIT deserve to be set aside and the appeal of the assessee may be allowed. 13. The ld. DR again took us through the findings of the ld Pr CIT and submitted that the ld Pr CIT has passed a detailed and speaking order highlighting the material available on record which prima facie show that the assessee company has taken the accommoda....
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....as apparent from the face of the financial statements and there has been an increase in the share capital and also receipt of share premium thrice the face value of the shares, the assessee should be asked to explain the nature and source of such credit appearing in its books of accounts of the assessee and submit the requisite information/documentation/explanation in support thereof. The AO should thereafter examine whether the explanation so offered by the assessee establishes the three ingredients i.e. identity and creditworthiness of the investor company and genuineness of the transactions. What therefore has to be examined by the AO is whether the assessee company has discharged the initial onus placed on it under section 68 in terms of identity and creditworthiness of these investor companies and the genuineness of the transaction. In this regard, the contention of the ld AR is that the same has been duly discharged in the instant case. In this regard, it would be relevant to refer to the various legal authorities on the subject wherein the concepts of identity, creditworthiness, genuineness of the transaction have been examined and how the assessee can demonstrate the same t....
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....rmations 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 application money. The assessing officer has referred to the bank statement, financial position of the recipient and beneficiary assessee and surrounding circumstances. The primary requirements, which should be satisfied in such cases is, identification of the creditors/shareholder, creditworthiness of creditors/shareholder and genuineness of the transaction. These three requirements have to be tested not superficially but in depth having regard to the human probabilities and normal course of human conduct. 14. Certificate of incorporation, PAN etc. are relevant for purchase of identification, but have their limitation when there is evidence and material to show that the subscriber was a paper company and not a genuine investor. Puja Synthetics Pvt. Ltd., Jaipur vs. Pr. CIT (Central), Rajasthan 18. Lovely Exports (P.) Ltd. (supra) was also consi....
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.... the order of the Commissioner of Income Tax (Appeals) and upheld the deletion of the addition. In fact, they substantially relied upon and quoted the decision of its coordinate bench in the case of MAF Academy (P.) Ltd., (supra) a decision which has been overturned by the Delhi High Court vide its judgment in MAF Academy (P.) Ltd (supra). In the impugned order it is accepted that the assessee was unable to produce directors and principal officers of the six shareholder companies and also the fact that as per the information and details collected by the Assessing Officer from the concerned bank, the Assessing Officer has observed that there were genuine concerns about identity, creditworthiness of shareholders as well as genuineness of the transactions. 21. In view of the aforesaid discussion, we feel that the matter requires an order of remit to the tribunal for fresh adjudication keeping in view the aforesaid case law. The question of law is, therefore, answered in favour of the Revenue and against the respondent-assessee, but with an order of remit to the tribunal to decide the whole issue afresh. One of the reasons, why we have remitted the matter is that the cross objections....
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.... 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 creditworthy 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 anything further. In the premises, if the Tribunal came to the conclusion that the assessee has 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 is based on some evidence on which a conclusion could be arrived at, no question of law as such arises." (p. 84) This reasoning must apply a fortiori to large scale subscriptions to the shares of a public company where the latter may have no material other than the application Forms and Bank transaction details to give some indication of the identity of these subscribers. It may not apply in circumstances where the shares are allotted directly by the company/assessee or to creditors of the assessee. This is why this ....
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.... of the assessee it should not be harassed by the Revenue's insistence that it should prove the negative. In the case of a public issue, the Company concerned cannot be expected to know every detail pertaining to the identity as well as financial worth of each of its subscribers. The Company must, however, maintain and make available to the Assessing Officer for his perusal, all the information contained in the statutory share application documents. In the case of private placement the legal regime would not be the same. A delicate balance must be maintained while walking the tightrope ofsections 68 and 69 of the IT Act. The burden of proof can seldom be discharged to the hilt by the assessee; if the Assessing Officer harbours doubts of the legitimacy of any subscription he is empowered, nay duty-bound, to carry out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the Company. 16. In this analysis, a distillation of the precedents yields the following propositions of law in the context of section 68 of the Income-tax ....
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....ssing Officer is in possession of material that discredits and impeaches the particulars furnished by the assessee and also establishes the link between self- confessed "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 modusoperandi is clearly indicated by valid material made available to the Assessing Officer as a result of investigations carried out by the revenue authorities into the activities of such "entry providers". The existence with the Assessing Officer of material showing that the share subscriptions were collected as part of a pre- meditated plan - a smokescreen - conceived and executed with the connivance or involvement of the assessee excludes the applicability of the ratio. In our understanding, the ratio is attracted to a case where it is a simple question of whether the assessee has discharged the burden placed upon him under sec. 68 to prove and establish the identity and creditworthiness of the share applicant a....
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....ch was coming through the bank accounts, which means deposits by way of cash and issue of cheques. The bank accounts, therefore, did not reflect their creditworthiness or even genuineness of the transaction. The beneficiaries, including the respondent-assessee, did not give any share-dividend or interest to the said entry operators/subscribers. The profit motive normal in case of investment, was entirely absent. In the present case, no profit or dividend was declared on the shares. Any person, who would invest money or give loan would certainly seek return or income as consideration. These facts are not adverted to and as noticed below are true and correct. They are undoubtedly relevant and material facts for ascertaining creditworthiness and genuineness of the transactions 29. In CIT v. Nipun Builders & Developers (P.) Ltd. [2013] 350 ITR 407 (Delhi), this principle has been reiterated holding that the assessee and the Assessing Officer have to adopt a reasonable approach and when the initial onus on the assessee would stand discharged depends upon facts and circumstances of each case. In case of private limited companies, generally persons known to directors or shareholders, di....
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....hind the company who take the decisions, controls and manage them." 31. The respondent herein is a Private Limited Company. It is not the case of the respondent that the Directors or persons behind the companies making the investment in their shares were related or known to them. It is highly implausible that an unknown person had made substantial investment in a private limited company to the tune of Rs. 63,80,100/- and Rs. 75,60,200/- in two consecutive assessment years 2002-03 and 2003-04 respectively without adequately protecting the investment and ensuring appropriate returns. Other than the share application forms, no other agreement between the respondent and third companies had been placed on record. The persons behind these companies were not produced by the respondent. On the other hand respondent adopted prevaricate and non- cooperation attitude before the Assessing Officer once they came to know about the directed enquiry and the investigation being made. Evasive and transient approach before the Assessing Officer is limpid and perspicuous. Identity, creditworthiness or genuineness of the transaction is not established by merely showing that the transaction was throug....
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....Tribunal had reached the finding that their identities had been established by the assessee. [Para 10] Applying the principle enunciated by the Supreme Court in CIT v. Orissa Corpn. (P.) Ltd. [1986] 159 ITR 78, the irresistible conclusion was that the conclusion of the Tribunal that the assessee had discharged his initial burden in respect of 6 companies and 9 individual investors, was based on evidence and additions made by the Assessing Officer were enquired into without pursuing correctness of material placed before it by the assessee. No question of law could be said to be arising in such circumstances in respect of finding arrived at by the Tribunal, which was essentially a finding of fact and did not stand vitiated in law. [Para 11]" 18. In case of Riddhi Promoters (P) Ltd (supra), the Hon'ble Delhi High Court held as under: "6. It is not sufficient that the identity of the share applicant or the creditor should be established for the assessee to discharge the initial onus, which is upon the assessee. Under the requirement of section 68, the assessee has to further satisfy the revenue as to the genuineness of the transaction and the creditworthiness of the share applic....
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....would shift leaving it to the Assessing Officer to start inquiring into the affairs of the third party. [Para 39] The Commissioner (Appeals) and consequently the Tribunal were right to the extent of their conclusion that the assessee had come up with some proof of identity of some of the entries in question. But, from this inference, or from the fact that the transactions were through banking channels, it does not necessarily follow that satisfaction as to the creditworthiness of the parties or the genuineness of the transactions in question would also have been established. [Para 41] The Assessing Officer here may have failed to discharge his obligation to conduct a proper inquiry to take the matter to logical conclusion. But the Commissioner (Appeals), having noticed want of proper inquiry, cannot close the chapter simply by allowing the appeal and deleting the additions made. It was also the obligation of the first appellate authority, as indeed of the Tribunal, to have ensured that effective inquiry was carried out, particularly in the face of the allegations of the revenue that the account statements reveal a uniform pattern of cash deposits of equal amounts in the respectiv....
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.... amount to the revenue having discharged the onus if at all which fell upon it. The assessee in this case was incorporated barely few months before the commencement of the assessment year, and there is no further information, or anything to indicate why its mark up of the share premium thousand fold in respect of the shares which were of the face value of Rs. 10 lakhs was justified. [Para 8]" 21. In the case of Ultra Modern Export(P) Ltd (supra), the Hon'ble Delhi High Court has held as under: "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 ....
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....n money, was as a matter of fact, unaccounted money belonging to the assessee company, the finding arrived at by the AO, which is based on suspicion, has rightly been held not sustainable in the eyes of law. Suffice it to say that the finding arrived at by the CIT(A), affirmed by the ITAT, which remains a finding of fact, cannot be said to be capricious or perverse." 23. In case of Softline Creations Pvt Ltd 387 ITR 636 (Del), the Hon'ble Delhi High Court has held as under: "(4) This court has considered the concurrent order of the CIT(A) as well as the ITAT. Both these authorities primarily went by the fact that the assessee had provided sufficient indication by way of PAN numbers, to highlight the identity of the share applicants, as well as produced the affidavits of Directors. Furthermore, the bank details of share applicants too had been provided. In the circumstances, it was held that the assessee had established the identity of the share applicants, the genuineness of transactions and their credit-worthiness. The AO chose to proceed no further but merely added the amounts because of the absence of the Directors physically present themselves before him. 6 We are of t....
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.... limited companies where the large scale subscription are offered through public issue and shares are subscribed by general public. In case of private limited companies, the Courts have laid down a strict approach in terms of satisfying such burden of proof. 24.6 In case of private limited companies, generally persons known to directors or shareholders, directly or indirectly buy or subscribe to shares. Upon receipt of money, the share subscribers do not lose touch and become incommunicado. Call money, dividends, warrants, etc. have to be sent and the relationship remains a continuing one. Therefore, an assessee cannot simply furnish some details and remain quiet when summons issued to shareholders remain un-served and uncomplied. As a general proposition, it would be improper to universally hold that the assessee cannot plead that they had received money, but could do nothing more and it was for the Assessing Officer to enforce shareholders' attendance in spite of the fact that the shareholders were missing and not available. Their reluctance and hiding may reflect on the genuineness of the transaction and creditworthiness of the shareholder. It would be also incorrect to un....
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.... the transaction was entered into through written documentation and due diligence to protect the investment and the pay back on such investment, whether the investor professes and was an angel investor, the object and purpose (profit motive) behind the investment and whether any dividend declared and distributed in the past or not. Whether share subscribers have their own profit making apparatus and were involved in any tangible business activity or were they merely rotated money, which was coming through the bank accounts, which means deposits by way of cash and issue of cheques. Creditworthiness and genuineness of the transaction is therefore not proved by showing merely issue and receipt of a cheque or by furnishing a copy of statement of bank account of share subscriber, when circumstances requires that there should be some more evidence of positive nature to show that the subscribers had made genuine investment. 24.10 The entire evidence available on record has to be considered and a reasonable approach has to be adopted. The final conclusion must be pragmatic and practical, which takes into account holistic view of the entire evidence including the difficulties, which the a....
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....uineness of the transaction. Onus under section 68 can be said to have been discharged only when the assessee proves identity and capacity of the creditor along with the genuineness of transaction to the satisfaction of the Assessing Officer. All the three constituents are required to be cumulatively satisfied. If one or more of them is absent, then the Assessing Officer can lawfully make addition.[Para 13.b.] ■ In case of a closely held company where the shares are issued to the family members or close friends/relatives, the burden of proof rests on the company to properly explain the identity and capacity of shareholders along with the genuineness of the transactions. Ex consequenti, the argument of the assessee that he was not obliged to explain the genuineness of share capital after having furnished preliminary details about the shareholders etc., is not capable of acceptance and hence rejected. In all cases, where the assessee fails to cumulatively prove to the satisfaction of the Assessing Officer, the identity and capacity of the shareholders along with the genuineness of the transactions there can be no escape from section 68.[Para 13.t.] Whether insertion of pr....
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....larificatory or explanatory amendment is declaratory. As the later amendment clarifies the real intent and declares the position as was originally intended, it takes retroactive effect from the date when the original provision was made effective. Normally such clarificatory amendment is made retrospectively effective from the earlier date. It may also happen that the clarificatory or explanatory provision introduced later to depict the real intention of the legislature is not specifically made retrospective by the statute. Notwithstanding the fact that such amendment to the substantive provision has been given prospective effect, the judicial or quasi-judicial authorities, on a challenge made to it, can justifiably hold such amendment to be retrospective. The justification behind giving retrospective effect to such amendment is to apply the real intention of the legislature from the date such provision was initially introduced. The intention of the legislature while introducing the provision is gathered, inter alia, from the Finance Bill, Memorandum explaining the provision of the Finance Bill etc. [Para 13.x.] ■ Any amendment to the substantive provision which is aimed at....
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....on are required to be satisfied even in case of issue of share capital by a closely held company. It shows that the intention of the legislature, as interpreted by the High Court, is always to cast duty on the assessee to prove the satisfaction of the three ingredients in case of transaction of issue of share capital by a closely held company in the same way as is in the case of transaction of loans. [Para 13. ab] ■ A careful perusal of the first para of the Memorandum brings out that the onus of satisfactorily explaining issue of share capital with premium etc. by a closely held company is on the company. Next para recognizes that judicial pronouncements, while considering that the pernicious practice of conversion of unaccounted money through masquerade of investment in the share capital of a company needs to be prevented, have advised a balance to be maintained regarding onus of proof to be placed on the company. After going through the above parts of the Memorandum explaining provisions of the Finance Bill, there remains no doubt whatsoever that the onus has always been on the closely held companies to prove the issue of share capital etc. by the company in terms of se....
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....n analysis of the business model of the assessee it was noted that shareholder companies of one company become investee companies of other companies and in turn, such later company, whose shares are purchased, further invest in the shares of other companies, so on and so forth. This is a striking example of circulation of capital from one company to another and the rotation is continuing in all the companies under consideration. It cannot be a sheer coincidence that hundreds of companies brought into existence, having link with each other and none of them doing any worthwhile business activity, come together to issue shares at such a huge premium. At best, this argument could have been taken into consideration if these companies had issued shares to its related companies at premium and invested the proceeds in some other business activity and not purchasing the shares of other related companies through such a circular route. This shows that the transactions of issuing shares at a premium to related companies and then purchasing the shares of other related companies at a huge market price and none of the companies has any worthwhile business activity, when considered on an overall b....
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.... not possible for the Assessing Officer to inquire into each and every entry recorded in the books of account of the assessee. He has to exercise his acumen in extracting out the relevant points or matters on which he wants to concentrate. But, what is important in this regard is that the operation of section 142(1)/143(2) comes to an end when an assessment is completed after examining such point or matters which the Assessing Officer feels to inquire before finalizing the assessment. It is only thereafter that the revisional powers of the Commissioner under section 263 can come into play for ascertaining if the Assessing Officer examined all the relevant points, which ought to have been examined. If the Commissioner, on examination of records of assessment, comes to the conclusion that the Assessing Officer failed to enquire into certain other relevant aspects which, in fact, necessitated thorough investigation, then he has all the power to revise the assessment order. In the instant case, the assessment already stands finalized and now the Commissioner is examining whether the Assessing Officer properly examined the facts of the case. In such circumstances, it is impermissible to....
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....specifically where the Assessing Officer went wrong in not properly examining the issue of share capital? ■ Where the Assessing Officer has made proper enquiry and still comes to a wrong conclusion, which renders the assessment order erroneous and prejudicial to the interest of the revenue, it becomes the duty of the Commissioner to expressly point out where the Assessing Officer went wrong on merits. But in a case, where no enquiry has been conducted at all or the so- called enquiry conducted by the Assessing Officer is as good as no enquiry, as is the case under consideration, in such circumstances, the Commissioner simply needs to point out those relevant aspects of assessment, which the Assessing Officer lost sight of, but were required to be properly probed. There can be no way for the Commissioner to tell erroneous approach of the Assessing Officer on merits in such circumstances because the view of the Assessing Officer on merits is not available. Requiring the Commissioner to indicate where the Assessing Officer went wrong on merits in the cases of no enquiry cases, is like requiring an impossible thing to be done. It is axiomatic that the law does not require an im....
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....the assessee has submitted the details in the prescribed format specifying no. of shares issued, amount paid along with copy of confirmation, ledger account, bank statements and financial statements of the Alka Diamonds Industries. It was submitted by the ld AR that on similar basis, the documents of the other investor companies have been submitted before the AO. We however find that there is nothing further on record which has been brought to our notice as to the steps/actions taken by the AO to verify these documents except a solitary notice issued under section 133(6) to one of the investor companies namely, M/s Anchor Dealers Pvt Ltd. Now, if we look at the examination carried by the ld PCIT and discrepancy so noticed by him regarding these very documents so submitted by the assessee company, the picture that clearly emerges is that of glaring concern and discrepancies raising a question mark on the genuineness of these transactions. And the AO has merely kept these documents on record and closed his eyes and has put a lid at these matters and did not consider it prudent to examine such shareholders as to their capacity and genuineness of the transactions. Here, we refer to the....
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....In the bank account of the company, the address of the company is shown as 60-B, Rajat Jayanti Complex, SCH No. 54, Vijay Nagar, Indore. The returned income of the company for AY 2007-08 is Rs. NIL. Obviously the company does not have the creditworthiness to make investment of Rs. 10,00,000/- shown to have been made in its name in the books of the assessee company in the form of Share Capital/ huge Premium. c. Naman Equipment & Constructions (India) Pvt Ltd (Mewar Equipment Pvt Ltd): The company is shown to have been registered at residential address, i.e., Flat No. 11, 1st Floor, Yashwant, 5-341, Western Express Highway, Bandra (East), Mumbai. The affidavit purportedly filed by the company was sworn before a Notary in Indore. The affidavit has not been sworn by any Director of the company. It is purported to have been signed by an Authorised Signatory. However, no Authority by Board of Directors of the company is attached. In the same document, which is purportedly a confirmation, the address of the same branch of the Axis Bank from where cheques for investment of Rs. 22,00,000/- are shown to have been issued, is shown at two places, one in Indore and the other in Mumbai. How ca....
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.... make investment of 33,50,000/- in Share Capital with huge Premium in the assessee company appears to be doubtful. g. Anchor Dealer Pvt Ltd: The address of the company is shown as 36, Ganesh Chandra Colony, 4th Floor, Kolkata. As per statement of bank account, the address of the company is shown as 30, Subhash Nagar, Ward No. 44, Bhilwara, Rajasthan. The assessee company is also based in Bhilwara. Income as per return for AY 2009-10 is Rs. 746/- only. Obviously, the creditworthiness of the company to make investment of 1,00,00,000/- in Share Capital with huge Premium in the assessee company appears to be doubtful. Perusal of documents of most of the above-referred companies filed before the Assessing Officers reveal that most of these companies have bank account s in the same bank, i.e., Axis Bank and in most of the cases the credits have been received in the bank accounts from M/s Shriti Enterprises and, thereafter, the funds are shown to have been transferred to the assessee company. This is found to be common feature in almost all the alleged investor companies which on the face of it appear to be unrelated. However, on the basis of analys....
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....ain the nature and source of such credit appearing in the books of accounts of the assessee. Step 3: If the assessee offers no explanation, the sum so credited may be charged to income-tax as the income of the assessee at that previous year. Step 4: If the assessee furnishes an explanation, the AO should examine whether the explanation so offered establishes the three ingredients i.e. identity of the creditor, creditworthiness of the creditor and genuineness of the transactions. Step 5: Whether explanation of the assessee is reliable or acceptable? If yes, no further action is required and the sum so credited may not be charged to income tax. Step 6: If the explanation so offered by the assessee is not acceptable or reliable, the AO should give a detailed reasoning in the assessment order for not accepting the same. Step 7: The reasons for not accepting the explanation of the assessee should be communicated to the assessee. Step 8: The order passed by the AO should be speaking one bringing on record all the facts, explanation furnished by the assessee in respect of nature and source of the credit in its books of accounts and reasons for not accepting the explanation of ....