TaxTMI 
TaxTMI 
2022 (1) TMI 932
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.... Order u/s. 147/143(3) dated 30.01.2012 1. The assessee company filed its return of income for the assessment year 2010-11 on 29.09.2010 declaring a total income of Rs. 19,340/-. The return was duly processed u/s. 143(1) on returned income. Subsequently, the assessee company has filed a letter where the company has brought to the notice that the company has received consultancy charges of Rs. 37,500/- from various parties in cash in the financial year 2009-10. But the company has not accounted for the above income in the account of the assessee company during the financial year 2009-10 relevant to the assessment year 2010-11, as a result an income of Rs. 37,500/- has escaped assessment. As such, there was reason to believe that the income chargeable to tax had escaped assessment. Thus, notice u/s. 148 of the I.T. Act, 1961 was issued and duly served on the assessee company. In response, the assessee company stated that the return filed on 29.09.2010 may be treated as return in reply to notice u/s. 148. 2. Notices u/s. 143(2) & 142(1) were issued and duly served on the assessee company.......... 3. During the financial year 2009-10, the assessee ....
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....ence, the relevant part of the order u/s. 263 passed by the ld. CIT, Kolkata -2 dated 21.03.2014 is as under: Order u/s. 263 of ld. CIT, Kolkata-2 Before going into the merits of the instant case, it is necessary to highlight the background which led to it, so that the facts are viewed in correct perspective. Firstly, this particular case should not be viewed in isolation. In fact, as in the immediately preceding year, this year too, on identical facts and under similar circumstances, in a very large number of cases, orders under section 148 of the IT Act were passed under different corporate CsIT charges in Kolkata. In all these cases, completed assessments were re-opened at the request of the assessee. The assesses offered paltry amounts as income which had escaped assessment and requested, the A.O to tax it by passing order under section 148 of the IT Act. However, manifestly the real motive was not the sudden awakening of the fiscal honesty of the assessee, but to get the stamp of scrutiny on the huge amount of share capital and share premium which all these assesses have brought in the books................. Facts of the case In the instant ....
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....sment year 2013-14, the genuineness of share capital in a private limited company could be examined in the course of assessment and if found to be not genuine, could be taxed under the deeming provision of section 68 of the I T Act. It is also trite law that the A.O is duty bound to examine the genuineness share holding and if he fails to do so it would render the assessment order erroneous and prejudicial to the interest of revenue. In this connection reliance is placed on following authorities: i) Rampyari Devi Saraogi vs, CIT 67 ITR 84 (SC) ii) Tara Devi Agarwal vs. CIT 88 ITR 323 (SC) iii) Gee Vee Enterprises vs. Addl. CIT 99 ITR 375, 386 (Del) iv) CIT vs. Sophia Finance Ltd. 205 ITR 98 (Del) v) CIT vs. Active Traders P Ltd. 214 ITR 583 (Cal) vi) CIT vs. Nivedan Vanijya Niyojan Ltd. 263 ITR 623 (Cal) vii) CIT vs. Bhagwati Jewels Ltd. 201 ITR 461 (Del) The broad principles emerging out of the above cases can be summed up as under: 1. The Assessing Officer has the powers to investigate the identity of the share holders to satisfy that they exist. 2. The genuineness of the investment has to b....
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....ned order u/s. 148 IT Act is erroneous and prejudicial to the interests of Revenue in the context of section 263 of the IT Act. In this connection, the observation the Delhi High Court in the case of Gee Vee Enterprises Vs Addl. CIT 99 ITR 375, 386 (Del) quoted below is of particular relevance. "Intention of the legislature was to give a wide power to the Commissioner. He may consider the order of the Income-tax Officer as erroneous not only because it contains some apparent error of reasoning or of law or of fact on the face of it but also because it is a stereo-typed order which simply accepts what the assessee has stated in his return and fails to make inquiries which are called for in the circumstances of the case. The AO is both an adjudicator as well as an investigator, and it is his duty to ascertain the truth of the facts stated in the return if such an exercise is 'provoked', or becomes 'prudent'. Section 263 which deals with the Revision of orders prejudicial to the revenue by the Commissioner comes into operation wherever the AO fails to make such an inquiry, because it renders the order of the AO "erroneous." it seems to us that if this....
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....for the entire period should be examined in the course of verification to find out the money trail of the share capital. ii) Further the A.O. should examine the directors as well as examine the circumstances which necessitated the change in directorship if applicable. He should examine them on oath to verify their credentials as director and reach a logical conclusion regarding the controlling interest. iii) The A.O. is directed examine the source of realization from the liquidation of assets shown in the balance sheet after the change of Directors, if any. After conducting the inquiries & verification as directed above, the A.O. should pass a speaking order, providing adequate opportunity of being heard to the assessee. The impugned order u/s. 148 is accordingly set aside and assessment should be done afresh. 6. Following the directions of the ld. CIT, Kolkata, the proceedings u/s. 143(3) have been re-initiated by the Assessing Officer, completed the proceedings culminating into passing of an Assessment Order dated 31.03.2015. For the sake of ready reference, the entire order of the Assessing Officer is reproduced as under: Order of AO dated 31.....
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....d with the additions, the assessee filed appeal before the ld. CIT(A) who adjudicated the issue as under: Order of ld. CIT(A) dated 24.08.2021 In this case, the company filed return of income for AY 2010-11 on 29.09.2010 declaring total income of Rs. 19,340/-. Then the return was processed u/s. 143(1) of IT Act. The AO mentions in his order passed u/s. 147/143(3) of IT Act dated 30.01.2012 that subsequently the assessee company filed letter bringing to the notice of the AO that the company had received consultancy charges of Rs. 37,500/- from various parties in cash in FY 2009-10 but the company has not accounted for this income in the accounts and as a result of the same an income of Rs. 37,500/- has escaped assessment. Therefore income escaping assessment proceeding were initiated by issuing a notice u/s. 148 of IT Act and the assessment was completed by making a addition of Rs. 37,500/- as consultancy charges and Rs. 25,500/- as excess preliminary expenses written off. Therefore returned income of Rs. 19,340/- was assessed at Rs. 42,340/- on 30.01.2012. Thereafter order u/s. 263 of IT Act was passed on 31.03.2014 by CIT-2, Kolkata setting aside the order passed....
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....sessing Officer on page no 2, para 3 mentioned 'During the year, the assesses company has raised share capital by Rs. 42.70 crore (including premium) by private placement which have been duly examined'. 4. Thereafter, the Commissioner of Income-tax, Kolkata - II, invoked the provisions of section 263 and passed an order dated 21.03.2014. Consequently, the Assessing Officer passed an order dated 31.03.2015 under section 143(3) r.w.s. 147 r.w.s. 263 and assessed the total income at Rs. 42,71,24,620, making aggregate addition of Rs. 42,70,00,000 (being share capital Rs. 1,73,28,500 and share premium Rs. 40,96,71,500) that were received during the year under reference. Against the said additions made by the Assessing Officer the appellants on 2th September, 2015 filed appeal with the CIT(A) and the GIT(A) by his order dated 19.07.2019 dismissed the appeal of the appellants for non-attendance. 5. Thereafter, the appellants filed an appeal with the Tribunal against the order of the CIT(A) and the Tribunal by their order dated February 19th, 2020 restored the appeal to the CIT(A) for fresh adjudication; thus, the present appeal. Contentions 6. R....
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.... , 20 , 000 95 , 00 , 000 15 Gajanand Agrotech Pvt Ltd 52 , 400 5 , 24 , 000 1 , 25 , 76 , 000 1 , 31 , 00 , 000 16 Goodfaith Pharmaceuticals Pvt 28 , 000 2 , 80 , 000 67 , 20 , 000 70 , 00 , 000 17 Gulmohar Tradecom Pvt Ltd 36 , 000 3 , 60 , 000 86 , 40 , 000 90 , 00 , 000 18 Kasa Contrade Pvt Ltd 72 , 000 7 , 20 , 000 1 , 72 , 80 , 000 1 , 80 , 00 , 000 19 Kuber Goods Pvt Ltd 22 , 000 2 , 20 , 000 52 , 80 , 000 55 , 00 , 000 20 Kushal Infotech Pvt Ltd 22 , 400 2 , 24 , 000 53 , 76 , 000 56 , 00 , 000 21 Mainstream Commercial Pvt 1 , 03 , 000 10 , 30 , 00 2 , 47 , 20 , 000 2 , 57 , 50 , 000 22 Malavika Merchants Pvt Ltd 20 , 800 2 , 08 , 000 49 , 92 , 000 52 , 00 , 000 23 Matribhumi Commodities Pvt 22 , 000 2 , 20 , 000 52 , 80 , 000 55 , 00 , 000 24 Monalisa Commercial Pvt Ltd 35 , 600 3 , 56 , 000 85 , 44 , 000 89 , 00 , 000 25 Mupnar Trexim Pvt Ltd 400 4 , 000 96 , 000 1 , 00 , 000 26 Naviplast Suppliers Pvt Ltd 32 , 000 3 , 20 , 000 76 , 80 , 000 80 , 00 , 000 ....
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....ing the assessment order under 143(3) r.w.s 147. Thus, the genuineness of the transactions and creditworthiness of the lending-Companies is proved. The appellants therefore, submit that they have furnished all the details to prove the identity of the lending-Companies as also their creditworthiness and the genuineness of the transactions. 6.3. It is imperative to mention that during the course of re-opened proceedings there is total compliance to notices issued by the Assessing Officer under section 133(6) to the lending-Companies from whom share application money is received - refer page nos. 1442 to 1462 of the paper book. 6.4. The Assessing Officer ought to have brought enough positive material on record to support his conclusion that the transactions are not genuine and that share applicants dubious, but he has failed to discharge his duty and has brushed aside all the positive evidences filed by the appellants and has come to the conclusion on the basis of assumptions and presumptions, which Courts have held have no place in framing an assessment under the Income-tax Act. 6.5. It is therefore, contended that the impugned addition under section 68 oug....
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.... contend that the impugned addition made by the Assessing Officer under section 68 of the Act ought to be deleted. Enclosure 1 - Statement giving details of shareholders and their relevant papers and documents in the paper book. Enclosure 2 - Statement giving details of share application monies received by the appellants together with corresponding credit entry in the bank accounts of the respective shareholders'. 7. Discussion & decision on merits of the case: 7.1 Ground no. 1 and 2 pertain to addition of Rs. 42,70,00,000/- on account of share capital and premiums received from various parties. 7.2 The AO in the assessment order observes that the summons issued u/s. 131 of IT Act dated 10.03.2015 to the shareholders as well as directors returned back un-served. Therefore it is clear that the appellant failed to prove the existence and identity of the shareholders. In the paper book filed before the undersigned the details of the shareholders have been given but since the identity and existence of the same could not be proved in the inquiries conducted by the AO, the same cannot be accepted in the appellate proceedings. 7.3 ....
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....heir return of income for the first time ii) The alleged share-holders declared nil/meagre income and had no tangible assets but large reserves and surplus and no revenue from operations. Further, undersigned has noticed that the credit capacity of the creditor also stands unsubstantiated. From the analysis of details of income it has been found, that most of the income of each lender is from the interest received on the loans advanced by it. This income has been shown on the shell company to give it a color of genuine financial concern. Further, a careful, perusal of Bank statements of this alleged creditor reveal the astonishing similarity in the pattern of fund flow. It is invariably noted that the creditor's accounts were deposited with cheque of equivalent or more amount of credit on the same date or prior to advancing the share application money to the appellant company. Thus, the evidence submitted by the appellant does not inspire the confidence regarding credit capacity of the creditors and genuineness of the transactions, especially considering the fact that, share-holders have nil/meagre income in their returns and each credit of share application m....
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....ained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.]" The present facts of the case are squarely covered by the provisions of law mentioned here-in-above, wherein it is imperative for the appellant to simultaneously prove the identity and creditworthiness of the creditors along with the genuineness of transaction. In the instant facts of the case, appellant has miserably failed to prove genuineness of the transaction and creditworthiness of the creditors, made by Assessing Officer is perfectly justified. 8. Before us, both the parties reiterated the arguments taken up before the authorities below as well as the orders of the revenue. 9. Having gone through in detail into the order u/s. 147/143 of the ITO, Ward-6(2), Kolkata dated 30.01.2012, the order u/s. 263 of ld. CIT, Kolkata-2 and the order u/s. 263/143 of the ITO, Ward-1(2), Kolkata, we find that the AO has miserably failed to bring anything on record to prove the case of the revenue. Unfortunately, the detailed instructions given by the ld. CIT have been....
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....and investigation. The ld. CIT(A) confirmed the addition solely on the basis of low returned income of the subscribers. On the other hand, the assessee has filed all the documents to prove their case prima facie and thus discharge the primary onus. At this juncture, it is for the revenue to pick up the addresses, names, locations and carry on further investigations to prove the credibility non-creditability of the parties which was abysmally lacking. On going through the entire order of the ld. CIT(A), other than the theoretical rhetoric, no iota of tangible material has been brought on record. The established adages are that the primary onus to prove that the income is non-taxable lies on the assessee whereas the primary onus to prove that the income is taxable lie with the revenue authorities. In the instant case, we find that nothing has been proved to come to a conclusion that the income falls within the ambit of Section 68. In this connection, we also rely on the spectrum of judgments quoted below to arrive at a conclusion, they are as under: Gangeshwari Metal (P) Ltd. 30 taxmann.com 328 (Del) Whether where assessee in support of transaction of receipt of sha....
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....ances - High Court also considered the fact that the assessee was not able to produce even a single party before the AO despite agreeing before the CIT(A) that it will produce all parties before the AO during remand proceedings. Creative World Telefilms Ltd. 333 ITR 100 (Bom) Assessee had received share application money from shareholders - In order to prove genuineness of said transactions, assessee-company had given names and addresses of shareholders etc. - Assessing Officer rejected assessee's explanation and added amount so received to its taxable income * Tribunal, however, set aside addition made by Assessing Officer holding that if share application money was received by assessee- company from alleged bogus shareholders, whose names were given to Assessing Officer, then department could always proceed against them and if necessary reopen their individual assessments - Whether on facts. Assessing Officer should have found out details of shareholders through PAN cards, bank account, etc., so as to reach them because all relevant details and particulars were given by assessee to Assessing Officer - Held, yes - Whether, therefore, impugned order passed by ....
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....ion Wing's report confirmed unequivocally that the assessee was beneficiary to bogus transactions whereby the genuineness of identity of the shareholders, the genuineness and identity of the share applicants and the genuineness of transactions was suspect. The Court noticed that the assessee had provided several documents that could have showed light into whether truly the transactions were genuine, it was not a case where the share applicants have merely provided confirmation letters - They had provided their particulars, PAN details, assessment particulars, mode of payment for share application money, i.e. through banks, bank statements, cheque numbers in question, copies of minutes of resolutions authorizing the applications, copies of balance sheets, profit and loss accounts for the year under consideration and even bank statements showing the source of payments made by the companies to the assessee as well as their master debt with ROC particulars. The AO strangely failed to conduct any scrutiny of documents and rested content by placing reliance merely on a report of the Investigation Wing. This reveals spectacular disregard to an AO's duties in the remand proceedings....