TaxTMI 
TaxTMI 
2020 (12) TMI 339
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....s)-III ("CIT(A)") erred in upholding the order of Assessing Officer in confirming the additions u/s. 68 of the Act towards share capital made by the Learned Assessing Officer. 3. As a matter of fact there is no cash which has come to the appellant so as to invoke the provisions of sec. 68 of the act, therefore the Appellant humbly prays that the said addition be deleted. 4. Ld. CIT(A) as well as ld. AO have erred in not considering various facts, submissions, explanations and clarifications as given by the appellant. Both the lower authorities have further erred in not appreciating the facts and law in their proper perspective." ITA No. 187/Ahd/2015 (A.Y. 1996-97):- 3. The assessee has raised the following grounds of appeal: "1. The Learned CIT(A) has erred in law in confirming the action of AO in reopening the assessment proceedings u/s. 147 of the Act. The entire reassessment proceedings are bad in law and without jurisdiction and therefore invalid. 2. On the facts and in the circumstances of the case and in law, the Commissioner of Income tax (Appeals)-III ("CIT(A)") erred in upholding the order of Assessing Officer in confirming the add....
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..... 50,50,000/-, Rs. 11,77,000/- and Rs. 1,22,34,000/- for the Assessment Years 1995-96, 1996-97 and 1997-98 respectively. 8. The facts in brief are that the assessee in the present case is a limited company and engaged in the business of manufacturing of paints. The assessee in the years under consideration has shown the addition in the share capital as detailed under: S. No. Assessment year Amount (Rs.) 1. 1995-96 50,50,000/- 2. 1996-97 11,77,000/- 3. 1997-98 1,22,34,000/- 9. The AO during the assessment proceedings was of the view that such addition in the share capital are the unexplained cash credit in pursuance to the provisions of Section 68 of the Act. Accordingly, the AO sought an explanation from the assessee. 10. The assessee in response to show cause notice submitted that it had along with the bank officer, Shri A.K. Parikh, cashier cum clerk of AJWA Branch of Dena Bank, Baroda has manipulated its accounts by generating so-called share capital as discussed above in order to facilitate the public issue. Accordingly, the assessee contended that there is no actual cash deposits in the bank. The assessee in support of his contentio....
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.... the public issue for Rs. 323.81 lakhs. Accordingly, it in connivance with the bank officer had shown promoters contribution in the books of accounts which is based on the manipulation of the accounts. Thus, the assessee contended that such increase in the share capital cannot be termed as unexplained cash credit under Section 68 of the Act. 15. The assessee for the Assessment Year 1995-96 submitted that it has shown in this year to have received/share capital of Rs. 50.50 lakhs from seven parties between the period from 1st March 1995 to 18th March 1995 which was repaid to the same parties with the identical amount as security deposits for taking the office premises on lease at different places like Bombay, Jaipur or Calcutta etc which was nothing but sham/bogus transaction. 16. The assessee for the Assessment Year 1996-97 submitted that out of total addition of Rs. 11,77,000/- made by the AO on account of the addition in share capital, a sum of Rs. 3,25,000 pertains to 13 parties. As such the sum of Rs. 3.25 lakhs represents the bogus/manipulated share capital which was returned to the same parties by showing corresponding security deposits. The contention of the assessee w....
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....ssment years under consideration. 21. Being aggrieved by the order of the Learned CIT(A) the assessee is in appeal before us. 22. The Learned AR before us filed a Paper Books running from pages 1 to 59 for the A.Y. 1995-96, 1 to 66 for the A.Y. 1996-97, and 1 to 90 for the A.Y. 1997-98 and reiterated the contentions as made before the authorities below. 23. On the other hand the Learned DR before us vehemently supported the order of the authorities below. 24. We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the present case relates whether the share capital increased in the respective years under consideration represents the unexplained cash credit within the meaning of Section 68 of the Act. It was contended by the assessee before the authorities below that share capital increased in the year under consideration represents the book entry which was made after manipulating the accounts. Such manipulation in the account was done through the involvement of the cashier of the bank as such no actual cash comes in the books. It was also brought to our notice that such manipulation in the account was done to sh....
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....eged payments by bearer cheques (worth Rs. 122.34 lakhs) were made. The account was deliberately falsified to create illusion of receipts of so called promoters contribution. The company ha thus violated the SEBI Guidelines for Disclosure & Investor Protection by not bringing in subscription of 1,22,34,000 as promoters quota. The company has contravened Regulation 3,5(1)(a) and 6 (d) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to the securities market) Regulations, 1995, by falsely submission the certificate that the promoters quota has been received and through the falsification of books of accounts showing fictitious receipts of application money and showing fictitious outgoings." 27. The above facts were also admitted by Shri Mahendra Shah, the MD of the company before the ADI (Inv) in the statement recorded under Section 131 (1A) of the Act dated 05-12-1997 which has not been disputed by the authorities below. The copy of the statement is placed on pages 8 to 12 of the Paper Book. 28. On conjoint reading of the above stated facts, it is inferred that there was no actual transaction cash inflow carried out by the assessee for enhancing the share ....
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....lied in the case of actual transactions incorporated in the books and not be applied on the transactions which are merely book entries and representing the fake transactions, having no substance. 32. Moving forward, admittedly it is the set-aside proceedings before us. The ITAT on the earlier occasion has set aside the matter to the file of the AO with the direction to verify the identity, credit worthiness and genuineness of the transactions and to adjudicate the issue afresh. Undisputedly, the scope for deciding the issue in the set-aside proceedings is very limited. As such, it is limited to the extent of the direction provided by the higher authority. At this juncture, we are inclined to refer the direction issued by the ITAT which is reproduced as under: "...In our considered opinion, these persons are required to be examined in order to find out as to whether three ingredients of cash credits i.e. identity, credit worthiness and genuineness of the transaction are being established by the assessee with regard to the cash credit to the extent of Rs. 1,20,42,000/- said to have been received from these persons in the form of share application money. The assessee shoul....