TaxTMI 
TaxTMI 
2019 (7) TMI 737
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.... in both the lower proceedings. The CIT(A)'s detailed discussion to this effect reads as follows:- "Ground No. 3: That the A.O. has, likewise, further erred in making at ad hoc addition of Rs. 5,00,000/- without any basis or material on record only on basis of surmise and conjecture. This ground is against the ad hoc addition of Rs. 5,00,000/- made by the A.O. only on the basis of surmises and conjectures. This issue was dealt with by the A.O. as under: "The assessee company claimed Site Expenses amounting to Rs. 1069081/- but no nature of expenses was furnished nor applicable TDs has been deducted. The A/R of the assessee company has been asked to furnish copy of Bills for expenses incurred but the same was not produced. As the assessee fails to furnish the detail and evidence called for, A sum of Rs. 5,00,000/- has been disallowed for want of detail and evidence, hence added back. " The appellant has made written submission as under:- "We had to take material at site of the client, deliver there and where contract so demand installation is done. Full details of site expenses were filed. Out of total claim of Rs. 10,69,081/- A.O. has di....
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.... managing director. The CIT(A)'s finding to this effect reads as follows:- "Ground No. 4: This ground is against the A.O. has likewise further erred in treating conversion of Rs. 32,50,000/- loan of a Director into share capital an unproved credit and adding said sum u/s, 68 of the Act. The A.O found that an amount of Rs. 32,50,000/- was shown as outstanding on account of share application money credited during the year. The A.D asked the appellant to furnish full Name & current address, identity of directors also with present residential address, copy of PAN, IT return acknowledgement of the said company & principal Director who applied for shares, relationship with those parties, share application form, share certificate issued to substantiate the claim for subscription to the share capital. However, the A.O observed that no detail was furnished by the appellant company to substantiate the genuineness of its claim apart from stating that it had take share application money from I. Sengupata, with copy of Bank statement and share certificate form. However, the appellant was unable to produce the director of the appellant company with relevant details to ....
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....on record, it is found that although the appellant had filed copies of documentary evidences to establish the identity of the share subscriber, it had failed to produce the directors/share subscriber for verification before the A.O during the assessment proceedings. This combined with the fact the appellant is a closely-held private company and the share subscribers were closely related person to the director of the appellant company, it was therefore incumbent upon the appellant to produce the share subscriber for verification of the genuineness of the transactions for share allotment in view of the specific requisition by the Assessing Officer. As regards the issue of establishing the genuineness of an amount credited to the books of accounts of the appellant company, it is well established that the onus to prove his explanation satisfactorily to the Assessing Officer was on the assessee. The appellant has miserably failed to discharge such onus. From the above decision, it is apparent that the genuineness of the impugned transactions of receipt of the impugned share subscriber/allottee as Unsecured loans totaling Rs. 32,50,000/- as detailed in the above paragra....
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....o subscribe to the share capital. The Delhi High Court held that once the initial burden has been discharged, the observations of the Supreme Court in the case of Lovely Exports (P.) Ltd. (supra) would suggest that the Department is free to proceed to reopen the individual assessments in the case of alleged bogus shareholders in accordance with law and is not remediless. This would be more so when the assessee is a public limited company and has issued share capital to the public at large as in such cases the company cannot be expected to know every detail pertaining to the identity and financial worth .of the subscriber. However, the initial burden on the assessee would be somewhat heavy in case the assessee is a private limited company where the shareholders are closely related as in the instant case, because in such a case the assessee cannot feign ignorance about the status of the parties. The Division Bench of the Bombay High Court in CIT v. Creative World Telefilms Ltd. [2011] 203 Taxman 36 (Mag.)/ 333 ITR 100 / 15 taxmann.com 183 (Bom.) is along the same lines. Therefore, in the case of the appellant company which is an unlisted closely- held private company, with t....
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....98 ITR 147 (Ker); Nemi Chand Kothari v. CIT [2003] 264 ITR 254 (Gauhati); and Hindusthan Tea Trading Co. Ltd. v. CIT [2003] 263 ITR 289 (Cal) support the view that Revenue authorities are entitled to consider genuineness of the transactions and to penetrate the veil in order to ascertain the truth. They are entitled to look into the surrounding circumstances to find out the realities of the transactions shown to have been entered into by the parties In view of the above discussion, I am of the view that considering the inferences drawn from materials on record by the A.O., it is held that the appellant was unable to establish the genuineness of the impugned subscribers to the share capital as their genuineness of the transactions and credit-worthiness/sources of income could not be established satisfactorily. Therefore, I hold that there is no infirmity in the finding of the A.O in treating the impugned share allotment money from the two companies amount of share application money including the premium amounting to Rs. 32,50,000/- as unexplained cash credits u/s 68 of the IT. Act, 1961. As a result, the impugned addition on account of treating the cash credits amo....