TaxTMI 
TaxTMI 
2019 (11) TMI 520
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....F.No.1307/Kolkatta/14-15 dated 06.02.2015 from JDIT)Inv.)(Hq) O/o DGIT(Inv.), Chennai forwarding a list of paper/shell companies , dummy directors and entry operators of Kolkatta , who were providing accommodation entries. The AO observed that the assessee has received share capital from nine entry operators of Kolkatta which are mentioned in the aforesaid list, to the tune of Rs. 3.50 crores. The AO also observed that while framing assessment for ay: 2012-13 in the case of the assessee, that all the aforesaid shareholders transferred share application amount by RTGS on the same date viz. 18.05.2010. It was observed by AO that all these entities have meager income. The enquiries were made by AO with these nine entities u/s 133(6) of the 1961 Act , wherein it was found that one person namely Mr. Kedar Nath Dutta has received envelops containing notices issued u/s 133(6) to all these entities based in Kolkatta, except in the case of one entity Arulaga Roche A.C.A.Finance Limited. The said company M/s. Arulaga Roche A.C.A.Finance Limited never replied to the notice issued by AO u/s 133(6) of the 1961 Act The AO further observed that replies to notices u/s 133(6) were posted on the sam....
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....he assessee. Now the assessee has filed an appeal before the Income-Tax Appellate Tribunal , Chennai in ITA No.3080/Chny/2019 for ay: 2011-12 . The assessee has come up with this stay petition in SP 302/Chny/2019 seeking stay of outstanding income-tax and interest thereon of Rs. 2,24,83,719/-. When this stay petition was called for hearing, it was brought to our notice by learned counsel for assessee that no amount stood deposited by assessee pursuant to demand raised by authorities and the entire demand of income-tax and interest raised by the AO is still outstanding for payment. Prayers are made to stay the entire outstanding demand of income-tax and interest accrued thereon. The learned counsel for the assessee submitted that assessee is not in a position to pay any outstanding demand of income-tax and interest , as it is heading for liquidation and in any case Revenue now cannot recover any amount as the assessee does not have any resources to pay this huge liability. Thus, in nutshell the learned counsel for the assessee submitted that the assessee is facing severe financial crisis and outstanding demand be stayed. The assessee has filed stay petition in which the assessee ha....
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....to hold that creditworthiness of these parties as well genuineness of the transaction could not be proved by assessee. The assessee has no doubt proved identity of these entities but other two limbs are also to be satisfied cumulatively by assessee to come out of clutches of Section 68 of the 1961 Act which is deeming section which creates a deeming fiction. The assessee itself is a private limited closely held company and onus shall be very heavy in such cases. We are of the considered view that Section 68 of the Act creates a legal fiction which cast obligation on the assessee to explain to the satisfaction of the AO about nature and source of credit in case any amount is found credited in the books of the assessee maintained for any previous year. This creates a legal fiction and in case the assessee did not offer explanation to the satisfaction of the AO as to the nature and source of credit of any amount found credited in the books of the assessee for any previous year by cumulatively satisfying the AO about the identity and creditworthiness of the creditor and about the genuineness of the transaction, the amount found credited in the books of the assessee shall be treated to....
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....shareholders who are member of public are un-known persons to the company issuing shares and the company issuing shares have no control/mechanism to verify their creditworthiness etc. and the burden of proof in such cases is different, but there is another class of companies which are closely held companies in which public are not substantially interested who are mostly family controlled closely held companies and they raise their share capital from their family members, relatives and friends and in these companies since share capital is received from the close knit circles who are mostly known to the company/promoters, the onus as required u/s. 68 of the Act is very heavy to prove identity and capacity of the shareholders and genuineness of the transaction. The onus of widely held company could be discharged on the submissions of all the information contained in the statutory share application documents and on not being satisfied the AO may proceed against the shareholders u/s. 69 of the Act instead of proceeding against the company, but in the closely held companies the share capital are mostly raised from family, close relatives and friends and the assessee is expected to know t....