TaxTMI 
TaxTMI 
2018 (3) TMI 1782
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....case and in law, the ld. PCIT (Central, Rajasthan has erred in 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 ope....
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....d. AO vide letter dated 28.03.2014 has asked the assessee to furnish 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 submit....
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.... to the assessee to show-cause and in absence of any reply/explanation on behalf 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 signat....
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....ents furnished by the assessee company before him, the Assessing Officer failed to carry 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 decisi....
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....Delhi High Court in case of Nabha Investments (P.) Ltd. vs. Union of India [2000] 112 taxman 465 (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 t....
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....en made by the Assessing Officer during the assessment proceedings. 12. It was further submitted 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 ....
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....essing officer is ceased of the matter that such transactions have taken place during the financial year 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, creditwort....
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....ent was made, the fact that payments were received thorough banking channels, filed necessary affidavits of the shareholders or confirmations of the directors of the shareholder companies, but thereafter no further inquiries were conducted. The second set of cases are those where there was evidence and material to show that the shareholder company was only a paper company having no source of income, but had made substantial and huge investments in the form of share 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 ....
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....h creditworthiness of the shareholders. 20. Now, when we go to the order of the tribunal in the present case, we notice that the tribunal has merely reproduced 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 res....
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....ven the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were income-tax assessees. Their index numbers were 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 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 ....
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.... money through the masquerade or channel of investment in the share capital of a company must be firmly excoriated by the revenue. Equally, where the preponderance of evidence indicates absence of culpability and complexity 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 suspicio....
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....e made in the hands of the company under sec. 68 and the remedy open to the revenue is to go after the share applicants in accordance with law. We are afraid that we cannot apply the ratio to a case, such as the present one, where the Assessing Officer is in possession of material that discredits and impeaches the particulars furnished by the assessee and also establishes the link between 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 ....
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....d that the money no doubt was received through banking channels, but did not reflect actual genuine business activity. The share subscribers did not have their own profit making apparatus and were not involved in business activity. They merely rotated money, which 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....
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....rk or documentation but genuineness, creditworthiness, identity are deeper and obtrusive. Companies no doubt are artificial or juristic persons but they are soulless and are dependent upon the individuals behind them who run and manage the said companies. It is the persons behind 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....
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.... shifting of addresses, prima facie established genuineness of such companies as existing persons. It had come on record that another company did exist and was under liquidation, the existence of which at relevant time could not be doubted. Likewise, in the case of individual investors, the 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....
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....nt of explanation being not satisfactory, it naturally follows that the material submitted by the assessee with his explanation must itself be wholesome or not untrue. It is only when the explanation and the material offered by the assessee at this stage passes this muster that the initial onus placed on him 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 addit....
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....other way of looking at the matter is that having given the addresses, the inability of the noticees who are approached by the Assessing Officer to afford any reasonable explanation as to how they got the amounts given the nature of their income which was disproportionally less than what they subscribed as share capital would also 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 retur....
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....any. It is not disputed before this court that the investment made was received by account payee cheque and the same was refunded by an account payee cheque when the company dropped its project. In the considered opinion of this court, in absence of any cogent evidence on record establishing that the money shown to have received as share application 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 app....
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....us stands discharged would depend upon facts and circumstances of each case. 24.5 The degree of burden of proof on the assessee will vary from assessee to assessee. In case of private limited companies where shares are allotted through private placement to persons generally known to directors or shareholders, directly or indirectly, burden of proof is on higher pedestal as compared to public 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 ....
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....t of the genuineness of the transaction and creditworthiness of the shareholder, it would be incorrect to state that the onus to prove the same stands discharged in all cases if payment is made through banking channels. Whether or not onus is discharged depends upon facts of each case. It depends on whether the two parties are related or known to each other; the manner or mode by which the parties approached each other, whether 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 s....
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....m so credited may be charged to income-tax as the income of the assessee of that previous year. This section has received the attention of the Supreme Court and almost all the High Courts in numerous cases. It has been almost unanimously held that the burden under this section is discharged by the assessee only when the assessee proves three things to the satisfaction of the Assessing Officer, viz., identity of the creditor, capacity of the creditor and genuineness 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 ....
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....ovision as to whether it has been made prospective or retrospective, and if retrospective, then from which date. However, some times what happens is that the substantive provision, as originally enacted or later amended, fails to clarify the intention of the legislature. In such a situation if subsequently some amendment is carried out to clarify the real intent, such amendment has to be considered as retrospective from the date when the earlier provision was made effective. Such clarificatory 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 j....
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....on 68 can be no different in respect of issue of share capital by closely held companies vis-à-vis loans or gifts. The High Court in CIT v. Maithan International [2015] 375 ITR 123 (Cal.), CIT v. Active Traders (P.) Ltd.[1995] 214 ITR 583 (Cal.), Mimec (India) (P.) Ltd. v. Dy. CIT[2013] 353 ITR 284 (Cal.) and CIT v. Nivedan Vanijya Niyojan Ltd. [2003] 263 ITR 623 (Cal.)a has specifically held that the three ingredients, viz, identity and capacity of creditor and genuineness of transaction 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....
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....ghly improbable for any person having sound mind to purchase at arm's length the shares of a private limited company, hardly having any worth, with face value of Rs. 10 at a premium of Rs. 190. This mere fact should have been cornerstone for the Assessing Officer to embark upon further enquiry to unearth the truth. The genuineness of transactions of issue of share at such hefty premium in this background of the matter was under dark cloud and it skipped the attention of the Assessing Officer. [Para 17.c.] ■ Upon 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, ....
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....nd prejudicial to the interests of the revenue. [Para 17.i.] Whether Commissioner can set aside the assessment order and direct the Assessing Officer to conduct a thorough enquiry, thereby interfering with the jurisdiction of the Assessing Officer conferred on him in terms of sections 142(1) and 143(2)of the Act? ■ A careful perusal of the provisions of section 142(1)/143(2) unveils that it is the prerogative of the Assessing Officer to require the information 'on such points or matters' as he may require. Ordinarily it is 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 ex....
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.... simply gathers documents and keeps them on record, then such nominal enquiry falls within the overall category of 'no enquiry' because of the inaction on the part of the Assessing Officer to read a writing on the wall. [Para 19.a.] ■ Thus, the instant case is a glaring example of not making relevant enquiry, which amounts to 'no enquiry' and hence it becomes a case of non-application of mind by the Assessing Officer. [Para 19.e.] Whether the order of the Commissioner was based on irrelevant consideration and was he supposed to point out 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 circums....
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....y the AO u/s 142(1) and as part of that, a standard questionnaire dated 28.03.2014 containing 25 odd questions, where the AO has asked the assessee company to furnish the name and address of the applicants/persons who have subscribed to shares during the year in prescribed format along with confirmations indicating their name and address, PAN, their ledger accounts and relevant bank statements. In response, the ld AR took us through the documents submitted for one of the investor companies namely, Alka Diamonds Industries Ltd as part of the assessee company's submission dated 21.04.2014 wherein 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 in....
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....meone as Director at one place and as Authorized Signatory at other place, but nowhere name of the said person is mentioned. Nowhere in the documents, the nature of business of the company has been indicated. The gross total income of the company for AY 2007-08 is shown as Rs. 55,190/- which is ample indication of lack of creditworthiness of the company. b. Kinescope (India) Pvt. Ltd: The company is shown to have been registered at an address, ie. 2/11, Ishwari Mension, Datta Mandir Road, Near Sangeeta Theatre, Malad (East) Mumbai, which appears to be a residential address. None of the documents filed by the said company bear the name of any of the Directors. Share application form does not bear any date. 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 (Mewa....
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....worn 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 Z 33,50,000/- are shown to have been issued, is shown at two places, one in Indore and the other in Mumbai. How can the same Branch exist at two places? In the bank account, the address of Indore is given. Nowhere in the documents nature of business of the company is given. Income as per return for AY 2008-09 is 1,99,613/-. Obviously, the creditworthiness of the company to 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....
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....46/151/2017-A&PAC-1 Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes Dated :10.01.2018 All Pr. Chief Commissioners of Income Tax Chief Commissioners of Income Tax-Central All Directors General of Income Tax (Inv.) Chief Commissioners of Income Tax-International Tax The Chief Commissioner of Income Tax-Exemptions Madam/Sir, Subject:- Standard Procedure for applying provisions of section 68 of Income tax Act,1961 --reg. Assessing Officers should follow the sequence as noted below for applying provisions of section 68 of the Act: Step 1: Whether there is credit of a sum during the year in the books of accounts maintained by the taxpayer. Step 2: If yes, the assessee should be asked to explain 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 s....
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....on and carry out necessary enquiries and verification. Where the AO shuts his eyes and the ld PCIT discovers the glaring discrepancies leading to non-satisfaction of cardinal test of identity, creditworthiness and genuineness of the transactions during the course of his examination of records, we donot think there is any infirmity or illegality in him exercising his revisionary jurisdiction u/s 263 of the Act. It is not a case where the Pr. CIT has set-aside the assessment rather he has examined these transactions and has carried out broad analysis of the documentation so submitted by the assessee company and has come to a conclusion, that the AO has failed to carry out adequate enquiries which he should have conducted especially in light of glaring discrepancies in the documentation so submitted by the assessee company which raises a question mark on the genuineness of the whole transactions and also in light of information received from Directorate of Income Tax (Investigation), Mumbai that the assessee company has taken accommodation entries from Praveen Jain, an entry operator. 20. Our view is fortified by the judgement of the Hon'ble Supreme Court in case of Daniel Merc....