TaxTMI 
TaxTMI 
2019 (11) TMI 1028
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.... the share capital of Rs. 4,28,50,000/- , and addition made u/s 68. Notices u/s 144 dated 16-10-2007 and 6-11-2007 were served properly on the assessee but no share capital subscriber was produced before Assessing Officer and Ld. CIT(Appeals) ignored this fact, merely filing documents cannot be treated as sufficient evidences to prove genuiness of credit as reported in 140 ITR 151 (All.) and 50 ITR (SC). 3. That the Ld. CIT(A) has erred in law and on facts by deleting the addition of unsecured loans of Rs. 1,18,63,549/-. The Ld. CIT(Appeals) has accepted fresh / additional evidences produced before him and ignored the request of Assessing Officer to examine the same. 4. That order of the Ld. CIT(A) be set aside and that of the A.O. be restored." [B]. Vide Assessment Order dated 05.12.2007 passed u/s 148/143(3) of the Income Tax Act, 1961 (in short "the Act"). In this Assessment Order, assessed U/s 143(3) of I.T. Act, on income of Rs. 5,75,52,110 ( rounded off). The relevant portion of the Assessment Order is reproduced as under:- "Return of income in original was filed by the assessee company on 31-10-2007 declaring loss at Rs. 2,59,78,987/- which was processed on 15-1-2....
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....gwith the detailed questionnaire on 30.04.2007 and duly served upon the assessee company on 03.05.2007. The date was fixed for compliance on 07.05.2007 but no compliance was made on the date fixed nor any adjournment was sought. However, a letter dated 23.04.2007 was received on 07.05.2007 from the counsel wherein request was made for supply of reasons and ; adjourned the case sine die. Accordingly, assessee company was intimated that reasons have already been supplied vide letter dated 25.01.2007 and company was again asked to make compliance as per questionnaire dated 30.04.2007 and date was fixed for compliance on 11.06.2007 through notice u/s 142(1) dated 30.05.2007 attached with the reply. Again the compliance was made on the dated fixed nor any adjournment was sought. Hence notice u/s 148/ 143(2) /142(1) was issued on 06.11.2007 as under: To, The Principal Officer, M/s Rana Papers Ltd., Jansath Raod, Muzaffarnagar, Sub: Assessment Proceedings u/s 148/143(3) of I.T. Act, 1961 A.Y. 2002-03 notice u/s 144 of the I.T. Act, 1961- Final opportunity- Regarding. Please refer to the above, Your attention is invited to wards following notices issued from time to ti....
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....elong to the assessee are not hence. some more elaborate and specific documentary evidence, if any, in your passions for u/s 148 available, the same may please be communicated so that proper compliance' reply can be made. 2. The assessee has receipt the money for purchase of shares through account payee demand draft only and the application are identifiable, assessed to tax and created worthy, in support of which the copies of the applications receipt for shares purchases are being filed for your ready reference. 3. It is further requested, that the assessee is filing the complete postal addresses of the applicants for your ready reference and it required the applicants may either be contacted u/s 133(6) or may be summons u/s 131. at the cost of the assessee, so that the real picture of these applicants will come out before the department The copies of Share Application are being enclosed as available with the assessee in support of amount received. In any circumstances these entries cannot be assessed and considered accommodation entries as purposed because the assessee has already allotted shares to these parties. The assessee also relied on various judgments and ....
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....unts do not represent income and the issue of genuineness of such credit I to be considered in the light to human probability and surroundings circumstances. In the instant case surrounding circumstances clearly speaks that assessee company has introduced its unaccounted money through accommodation entries. Therefore, assessee's contention is not acceptable and accommodation entries of Rs. 18,54,625/- are treated as income from undisclosed sources and added to the income of the assessee company. (Addition Rs. 18,54,625/-) Share Capital In the year under consideration company's authorized Share Capital has increased from Rs. 4,50,000/- to Rs. 9,05,00,000/-. The Issued, Subscribed and paid up capital in previous year was Rs. 4,08,98,000/- which in the year under consideration has increased to Rs. 8,37,48,000/-. Thus, there is increase of Rs. 4,28,50,000/- in the issued subscribed and paid up capital for which not details, evidences etc. have filed. The company was specifically required to file details of increase in Share Capital that is names, addresses, amount, mode of payment, sources and assessement particulars of the subscribers, confirmation with copies of Share Capital....
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....wise debit and credit entries are appearing. Neither these were signed by the loaner/ depositors nor separate confirmation letter or reply explaining sources of deposits/ assessment particular etc. have been given. Merely filing of copies of ledger account cannot be treated as sufficient evidence to prove genuineness of a credit as held by Hon'ble High Court of Allahabad 140 ITR 151 and Hon'ble SC 50 ITR 1. Reliance is also placed on 57 ITR 532, 53 ITR 623, 49 ITR 112, 35 ITR 416, 34 ITR 80(Al. SC. Judgment). In view of these facts unsecured loans of Rs. 1,19,63,549/- treated as unexplained and added to the income of the assessee. (Addition Rs. 1,19,63,549/-) Income Tax Expenses:- The assessee had debited income tax expenses at Rs. 58,415/- to the P & L account which is not allowable and same are added to the income of the assessee. (Addition : Rs. 58,415/-) Subscription & membership Expenses:- Assessee had debited to P&L account at Rs. 30,261/- under the head of subscription & member ship expenses but during the course of assessment proceedings not detailed / evidences has been filed. Therefore, same is added to the income of the assessee. (Addition Rs. 30,261/-)....
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....r of Income Tax, Circle-1, Muzaffarnagar." [C] Assessee preferred appeal before the Ld. CIT(A) against the aforesaid Assessment Order dated 05.12.2007. Vide aforesaid impugned appellate order dated 27.03.2008 the Ld. CIT(A) deleted the additions of Rs. 18,54,625/- (on account of accommodation entries), Rs. 4,28,50,000/- (on account of addition made U/s 68 of I.T. Act towards share capital) and Rs. 1,18,63,549/- (on account of unsecured loans). The relevant portion of the order of the Ld. CIT(A) is reproduced as under:- "The appeal has been filed against the order of DCIT, Cirlce- I, Muzaffarnagar passed u/s 143(3)of the Act lor assessment years 2002-03 2. In response to notice, Shri Dinesh Mohan, Advocate attended, filed written submission and argued the appeal. 3. The assessee is a company engaged in the business of manufacturing of paper. ROI was filed on 31.10.2002 declaring, lose of Rs. 2,59,78,987/-. Later, notices U/s 148 was issued on 12.12.2006 on the basis of information received from Director of Income Lax (lnv.1), New Delhi through Commissioner of Income-tax, Muzaffarnagar that the assessee company had received following accommodation entries: The asses....
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....the source of deposits etc. were filed. The AO, therefore, treated these amounts of Rs. 1,19,63,549/- as unexplained and added to the income of the assessee. 3.4 The AO disallowed Rs. 58.415/- debited in profit and loss account as Income-tax expenses. 3.5 The AO further disallowed Rs. 30,261/- debited under the head subscription membership expenses for which no details/evidences were filed. 4. Written submissions made by the appellant's counsel during the appellate proceedings are reproduced as under: Sir, With reference \n the above, it A most respectfully submitted us under:- That the assessee is a Private Limited Company carrying business of Manufacturing and Trading of Craft Paper which is a Raw-material for Packaging Industry mainly. The company is using Paper Scrap and Sugar Cane Baggasse and Taut a etc. as a Rawmaterial for pulping purpose and from that by adding certain chemicals, the Craft Paper is being manufactured. For the year under consideration, the Return of Income has been filed on a Book Profit of Rs. 45,66. 713=89 on which tax has been paid at Rs. 4,00,000-00 under MAT. Along with Return of Income, the assessee has filed tax Audited Report as re....
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....the satisfaction must be derived from relevant factors on the basis of proper enquiry envisaged under section 68 is an enquiry which is reasonable and just [Khundelwal Construction v. CIT, (1997)227 JTR 900,904( Gauh )]f In the facts of that case ,it has been held that the amount of cash credits could not be included in the total income of the assessee because the enquiry was not properly made. Amount found credited in the books of a company as receipt of shore application money:- Section 68 is very widely woeded and the Assessing Officer is not precluded from making an enquiry as to the nature and source of a sum credited in the books of account of the assessee-company even if the same is credited as receipt of share application money . Where, therefore ,an assessee-company represents that it has issued shares on receipt of share application money they the amount so received would be entitled to enquire ,and it would indeed be his duty to do so, whether the alleged shareholder do in fact exist or not .If the shareholder exist then, possibly, no further enquiry need he made. But if the Assessing Officer finds that the alleged shareholder do not exist then , in effect fit would m....
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.... of the transaction, and (3) the capability of the person giving the cash credit IJ(dan Timbers v.CIT, (1997)223 ITR 11,17 (Gauh)j The Assessing Officer's rejection, not of the explanation of the assessee, but of the explanation regarding the source of income of the depositor, cannot by itself lead to any inference regarding the non- genuine or fictitious character of the intries in the assessee s books of account /Sarogi Credit Corporation b, CIT,(1976) 103 ITR 344, 349-50(Pat)]. There cannot be one general or universal proposition of law which could be the guiding yardstick in matter, Each case has got to be decided on the facts and circumstances of that case, The surrounding circumstance to be considered must however be objective facts, evidence adduced before the taxing authorities , presumption of facts based on common human experience in life and reasonable conclusions In holding a particulars receipt as income from undisclosed source, the fate of the assessee cannot be decided by the revenue on the basis of surmises, suspicions or probabilities [Northern Bengal Jute Trading Co,Ltd. v, CIT,(1968)70 1TR 407, 415 (Cal)]. Apparent is not real - burden of proof on the de....
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....cious or arbitrary grounds [R.B.N.J.Naidu v. CIT, (1956) 29 ITR 194 (Nag); Kanpur steel Co. Ltd. v. CIT,(1957)32 ITR 56(All)] or on mere suspicion or on imaginary or irrelevant grounds [Lajwanti Sial v. CIT, (1956)30 ITR 228 (Nag)]. Where an assessee furnishes reasonable explanation , there is no justification for accepting his explanation in part and discarding / in relation to the rest [Chunilul Ticamchand coal Co. Ltd. v. CIT, (1955) 27 ITR 602 (Pat); Mehta Parikh & co. v CIT, (1956) 30 ITR [D] This present appeal has been filed by Revenue against the aforesaid impugned appellate order dated 27.03.2008 of the Ld. CIT(A). In the course of appellate proceedings in Income Tax Appellate Tribunal ("ITAT", for short), Paper Books were filed from the assessee's side containing the following particulars: 1. Copy of Notice U/s 148 dated 12.12.2006 2. Copy of the Reason Recorded by the assessing Officer 3. Copy of List of the Share applicant alongwith there addresses 4. Copy of the FORM No. 2 filed before Registrar of Company alongwith the acknowledgment 5. Copy of Documents filed in respect of M/s Sahil Agencies Pvt. Ltd. a) Copy of the Applicants for Equity Shares ....
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....ty Shares b) Copy of Confirmation c) Copy of the Return of Income 21. Copy of Documents filed in respect of Sahgal Fluidline Equipments Pvt. Ltd. a) Copy of the Application of Equity Shares b) Copy of Confirmation c) Copy of the Return of Income 22. Copy of Documents filed in respect of Rabik Exports Pvt. Ltd. a) Copy of the Application of Equity Shares b) Copy of Confirmation c) Copy of the Return of Income 23. Copy of Documents filed in respect of Maestro Marketing & Advertising Pvt. Ltd. a) Copy of the Application of Equity Shares b) Copy of Confirmation c) Copy of the Return of Income 24. Copy of Documents filed in respect of Webnet Suystmens (India) Pvt. Ltd. a) Copy of the Application of Equity Shares b) Copy of Confirmation c) Copy of the Return of Income 25. Copy of Documents filed in respect of KVF Securities Pvt. Ltd. a) Copy of the Application of Equity Shares b) Copy of Intimation U/s 143(1) 26. Copy of Documents filed in respect of Roopin Capital Pvt. Ltd. a) Copy of the Application of Equity Shares b) Copy of the Return of Income 27. Copy of Document filed in respect of Shashi Sales & Marketing....
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....ed in respect of Shri Om Prakash. a) Copy of the Application of Equity Shares b) Copy of Returns of Income 43. Copy of Document filed in respect of Shri Prem Prakash Agarwal. a) Copy of the Application of Equity Shares b) Copy of Returns of Income 44. Copy of Document filed in respect of Shri Niraj Goel. a) Copy of the Application of Equity Shares b) Copy of Returns of Income 45. Copy of Document filed in respect of D.K. Ispat & Timber Ltd. a) Copy of the Application of Equity Shares b) Copy of Returns of Income 46. Copy of Document filed in respect of Smt. Sita Devi. a) Copy of the Application of Equity Shares b) Copy of Returns of Incomes 47. Copy of Document filed in respect of Smt. Raj Rani. a) Copy of the Application of Equity Shares b) Copy of Returns of Incomes c) Copy of Intimation U/s 143(1) 48. Copy of Document filed in respect of Shri Ghanshyam Dass Prop. Navneet Trading Co. a) Copy of the Application of Equity Shares b) Copy of the Intimation U/s 143(1) c) Copy of Order U/s 154 49. Copy of Document filed in respect of Shri Ram Garg. a) Copy of the Application of Equity Shares b) Copy of Returns o....
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....imation U/s 143(1) 65. Copy of Document filed in respect of Shri Jagmohan Ram. a) Copy of the Application of Equity Shares b) Copy of Returns of Incomes c) Copy of Intimation U/s 143(1) 66. Copy of Document filed in respect of Smt. Santosh Kumari. a) Copy of the Application of Equity Shares b) Copy of Returns of Incomes 67. Copy of Document filed in respect of Smt. Rekha Bansal. a) Copy of the Application of Equity Shares b) Copy of the Intimation 68. Copy of Document filed in respect of Shri Subhash Kumar. a) Copy of the Application of Equity Shares b) Copy of Returns of Incomes 69. Copy of Document filed in respect of Shri Rajesh Kumar. a) Copy of the Application of Equity Shares b) Copy of Returns of Incomes c) Copy of Intimation 70. Copy of Document filed in respect of Shri Dinesh Kumar. a) Copy of the Application of Equity Shares b) Copy of Returns of Incomes 71. Copy of Document filed in respect of Shri Sureh Chand. a) Copy of the Application of Equity Shares b) Copy of Returns of Incomes c) Copy of Intimation 72. Copy of Document filed in respect of Shri Vikash Goel. a) Copy of the Application of E....
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....dhu Mati Securities Pvt. Ltd. a) Copy of the Confirmations b) Copy of Returns of Incomes 89. Copy of Document filed in respect of Sahil Agencies Pvt. Ltd. a) Copy of the Confirmations b) Copy of Returns of Incomes 90. Copy of Document filed in respect of Unnti Consultants Pvt. Ltd. a) Copy of the Confirmations b) Copy of Returns of Incomes 91. Copy of Document filed in respect of Tidy Textile Pvt. Ltd. a) Copy of the Confirmations b) Copy of Returns of Incomes 92. Copy of Document filed in respect of VPS Valves & Tubes Pvt. Ltd. a) Copy of the Application of Equity Shares b) Copy of Returns of Incomes 93. Audited Report alonwtih the Financial Statements as on 31.03.02. 94. Copy of the Return of Allotment Pursuant to Sec. 75(1) of the Companies Act Alongwith the list of Shareholders. 95. Copy of the Share Applicants on Instance basis along with the necessary available documents and evidence 96. Ledger Account of Share Application Money 97. Submission to AO vide Letter dt. 15.11.07 98. Submission to CIT(A) dt. 21.02.08 99. Letter to CIT(A) dt. 21.02.08 100. Allahabad High Court in the case of Jaya Securities 101. No....
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....dition to oral arguments: 1. PCIT Vs NRA Iron & Steel (P.) Ltd. T20191 103 taxmann.com 48 (SC)/f20191 262 Taxman 74 (SC)/r20191 412 ITR 161 (SC) (Copy Enclosed) where Hon'ble Supreme Court reverse order of lower Authorities holding that where there was failure of assessee to establish credit worthiness of investor companies, Assessing Officer was justified in passing assessment order making additions under section 68 for share capital / premium received by assessee company. Merely because assessee company had filed all primary evidence, it could not be said that onus on assessee to establish credit worthiness of investor companies stood discharged. 2. PCIT Vs NDR PROMOTERS PVT LTD (f20191 102 taxmann.com 182 (Delhi)/f20191 261 Taxman 270 (Delhi)/r2019l 410 ITR 379 (Delhi)) where Hon'ble Delhi High Court held that where Assessing Officer made additions to assessee's income under section 68 in respect of amount received as share capital from several companies, in view of fact that all of these companies were maintained by one person who was engaged in providing accommodation entries through paper companies and all such companies were located at same address, impugned ....
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....at where assessee-company received certain amount as share capital from various shareholders, in view of fact that summons served to shareholders under section 131 were unserved with remark that addressees were not available, and, moreover, those shareholders were first time assessees and were not earning enough income to make deposits in question, impugned addition made by AO under sec. 68, was to be confirmed 5. Pratham Telecom India Pvt Ltd Vs DCIT (2018-TIQL-1983-HC-MUM-IT) where Hon'ble Bombay High Court held that mere production of PAN numbers & bank statements is sufficient enough to discharge the burden on taxpayer to escape the realms of Section 68 6. Royal Rich Developers (P.) Ltd. Vs PCIT f20191 108 taxmann.com 382 (Bombay) where Hon'ble Bombay High Court held that where revenue authorities made addition to assessee's income under section 68 in respect of share application money received from various investors, since assessee failed to produce them despite various opportunity granted to it and, moreover there was no evidence on record establishing genuine investments on their part in shares of assessee-company, impugned addition was to be confirmed 7. ....
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....and Rajan Jassal to the assessee in compliance with the rules of natural justice. Out of the 22 companies whose names figured in the information given by them to the investigation wing, 15 companies had provided the so-called "share subscription monies" to the assessee. There was thus specific involvement of the assessee-company in the modus operandi followed by Mukesh Gupta and Rajan Jassal. Thus, on crucial factual aspects the present case stands on a completely different footing from the case of Oasis Hospitalities (P.) Ltd. (supra). 42. In the light of the above discussion, we are unable to uphold the order of the Tribunal confirming the deletion of the addition of Rs. 1,18,50,000 made under section 68 of the Act as well as the consequential addition of Rs. 2,96,250. We accordingly answer the substantial questions of law in the negative and in favour of the department. The assessee shall pay costs which we assess at Rs. 30,000/-. " 9. CIT Vs N R Portfolio Pvt Ltd [20141 42 taxmann.com 339 (Delhi)/[2014] 222 Taxman 157 (Delhi)(MAG)/[2014l 264 CTR 258 (Delhi) where Hon'ble Delhi High Court held that if AO doubts the documents produced by assessee, the onus shifts on asse....
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....ise details about such entries and then to cross cheque from the books and bank accounts of the assessee. The AO can and should also obtain information from the respective banks as to whether and in whose accounts these DDs. Were encashed. The AO can also obtain information directly from the 'entry giver', as to in whose favour and for what purpose, these instruments had been issued by them. If only after such purposeful verification, some adverse material, against the assessee, comes to the knowledge of the AO; he can always take remedial measure in the hands of the assessee company." With this line of reasoning, the Ld. CIT(A) went on to delete the aforesaid addition of Rs. 18,54,625/- on account of accommodation entries. [E.2] In respect of the addition of Rs. 4,28,50,000/- made under Section 68 of I.T. Act in respect of share capital. The Ld. CIT(A) has observed in para 9.3.1 of the aforesaid impugned appellate order dated 27.03.2008; "....I have no doubt that if is AO's prerogative to verify the issue more deeply; but for that, he would have to issue letters U/s 133(6) and if required summons U/s 131 of the Act; to enforce their attendance and then to make personal inquiry. ....
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....power of Ld. CIT(A) to set aside an order of assessment has been withdrawn. Therefore, any necessary inquiry / investigation or verification is required to be carried out during pendency of the appellate proceedings before Ld. CIT(A). Further, perusal of Section 250(4) of I.T. Act shows that Ld. CIT(A) has powers, before disposing off any appeal, to make such further inquiry as he thinks fit, or he may direct the Assessing Officer to make further inquiry and report the result of the same to the Ld. CIT(A). It is well settled that powers of Ld. CIT(A) are coterminus with powers of the Assessing Officer. For this purpose, we may refer to the order of Apex Court decision in CIT vs. Kanpur Coal Syndicate 53 ITR 225 (SC) in which it was held that AAC has plenary powers in disposing off an appeal; that the scope of his power is co-terminus with that of the ITO, and that he can do what the ITO can do and can also direct him to do what he failed to do. In the facts and circumstances of the case, therefore, we are of the view, considering the statutory position as discussed, that it was gross error, on the part of the Ld. CIT(A), having himself been of the view that further inquiries / inve....