TaxTMI 
TaxTMI 
2011 (9) TMI 1242
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....d on facts in deleting addition of Rs.5,08,821/- made by the AO on account of low gross profit. 3. That the order of the CIT(A)-II be set aside and that of the AO be restored. 4. That the appellant craves leave to add or amend any Ground of Appeal before it is finally disposed." 3. In Ground No.1, the Revenue contended that the ld. CIT(A), erred in law and on facts, in deleting the addition of Rs.5,68,000/-, made by the AO, on account of undisclosed income of the assessee u/s 68 of the Act. The AO after affording 13 opportunities, to the assessee, made an addition of Rs.5,68,000/-, representing introduction of share capital, in the books of account of the assessee, in the name of certain persons. It was categorically observed by the AO that the assessee remained non-cooperative in the course of assessment proceedings. The AO invoked the provisions of Section 68 of the Act and made the impugned addition. The AO further observed that the assessee filed part of confirmations as is evident from a careful perusal of para 2.3 of the impugned assessment order. It is pertinent to reproduce the text of the findings recorded by the AO, on the issue in question : ....
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....ve reasons it is clear beyond doubt that the assessee has produced the books of account only on the last date of hearing that too in response to final show cause notice and the undersigned has no alternative except to treat the following share application money which was received in cash as income of the assessee from the undisclosed sources u/s 68 of the Act which provides as under : "Where any sum is found credited in the books of an assessee maintained for any previous year and the assessee offers no explanations about the nature source there of or the explanation offered by him is not, in the opinion of the AO, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year". From the facts it is absolutely clear that the assessee has intentionally not filed the requisite information for the reason best known to him although he was afforded ample opportunities as discussed above therefore, I have left with no alternative except to treat share application money of Rs.5,68,000/- introduced during the year as income of the assessee from undisclosed sources, accordingly, an addition of Rs.5,68,000/- is made ....
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....x. Smt.Satwinder Kaur 1,04,000/- Confirmation filed and placed at page 42 of the paper book and photo copy of the PAN is at page 43 of the Paper Book. She is assessed to income tax. Smt.Satwant Kaur 1,19,000/- Confirmation filed and placed at page 38 of the paper book and photo copy of the PAN is at page 39 of the Paper Book. She is assessed to income tax. Smt.Surinder Kaur 40,000/- Confirmation filed and placed at page 36 and photo copy of the Ration Card is at page 37 of the Paper Book. She is assessed to income tax. e) Though it is the claim of the assessee that he had filed the confirmation before the AO and the AO has mentioned that no confirmation was filed, but the confirmation with the identity proof which was before me were forwarded to the AO for verification and in the comments and not doubted the identity of persons and other evidence, the AO has again relied upon in the findings given in the assessment order. A bare look at the chart as reproduced above proves that all the evidences were produced by the assessee, which proves the contribution of share application money by various persons and also evidence as filed with the Regi....
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....TA No. 194 of 2011 dated, 14.07.2011. Ld. DR demonstrated before the Bench that the Hon'ble jurisdictional High Court, in the said decision after considering the ratio of the decisions of the Hon'ble Supreme Court, in the case of CIT V Steller Investment Ltd., 251 ITR 263, CIT V Lovely Exports (P) Ltd., 216 CTR (S.C) 195 adjudicated the issue in favour of the Revenue. Ld. 'DR' was of the opinion that the issue in the present appeal is squarely covered by the said decisions. 6. Ld. 'AR', on the other hand, mentioned that the decision of the Hon'ble jurisdictional High Court in the case of M/s Power Drugs Ltd. (supra) is not applicable to the facts of the present case. Ld. AR stated that the requisite details of identity and PAN number alongwith the confirmation had been filed. Ld. AR pleaded that the issue is covered by the decision of Hon'ble Supreme Court in the case of Lovely Exports P.Ltd. (supra), CIT V Electro Polychem Ltd. 294 ITR 661 (Mad) and the decision in the case of M/s Observer Compounds Pvt.Ltd. in ITA No. 139/Chd/2004 dated 29.04.2011 of the ITAT Chandigarh Bench 'A'. 7. We have carefully perused and considered the fact-situation of the case, ri....
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.... ratio decidendi of a case is determined by taking into account the facts treated by the judge deciding the case as being material, and that his decision is based thereon. The Court further observed that in Steller Investment Ltd. case, the issue which the revenue proposed to raise, related to the issue of propriety of the Tribunal taking resort to Section 263, in the case, by ignoring the material fact that the AO failed to discharge his duty regarding the investigation with regard to genuineness and credit-worthiness of the share holders, many of whom were found students and house-wives. Rejection of appeal u/s 260A is similar to dismissal in-limine by the Supreme Court of SLP. Consequently, the ratio laid down in the case of Steller Investment Ltd. (supra) is not applicable to the facts of the present case. In view of the above, that the Division Benches cannot choose to navigate through waters which have already been voyaged, mapped and channeled by larger Benches. 10. In the instant case, the assessee has recorded in its books of account the receipt of share capital contribution, in the name of certain persons. Consequently, primary onus lies on the assessee, to prove and e....
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....ities to such person. It is inherent in the concept of natural justice that it cannot be stretched by a pedantic approach, to an absurd limit, particularly in respect of such person who is not willing to avail of such opportunities. The concept of natural justice is to be seen in the light of fairness and reasonableness and further, the same should be guided and goaded by a rational, pragmatic and common sense approach. In the present case, factual matrix of the case reveals that the assessee remained unwilling to avail of such opportunities. Therefore, it is impossible to endlessly motivate such an assessee, to avail of the opportunities, afforded to it, to meet the ends of justice. In a nut-shell, in the name of natural justice, unbridled latitude cannot be allowed to a recalcitrant assessee and the revenue cannot be made to suffer prejudice, by an act of failure, on the part of the assessee. The concept of natural justice is applicable to the revenue as well. 13. The assessee has placed reliance on a number of judicial precedents before the CIT(Appeals). However, the assessee failed to demonstrate as to how, the factual situation of its case fits in the fact-situation of the ....
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....ration, the assessee had received Rs. 42,78,756 as share application money through private placing. The assessee was asked to furnish the details thereof. In reply the assessee furnished the names of persons as per Annexure II where mostly the amounts were shown to have been received from some names of village and P.O. Alewa, Jind, Haryana as noted by the Assessing Officer. The Assessing Officer was of the view that the assessee had failed to discharge primary onus to establish the identity, credit worthiness and genuineness of the transactions. The Assessing Officer observed that the assessee had not discharged the primary onus and on perusal of the information noted as under:- i Names only ii Incomplete address in view only village and Post office Alewa iii Share application forms which do not bear photographs of these persons iv Some of applications just bear thumb impression v None of them is an income Tax assessee and do not even have PAN except Ms. Rekha Goal who has allegedly advanced an amount of Rs. 2.00 lakhs in cash. The most important fact to be noted is that huge amounts in lakhs of rupees have been deposited in cash by non ....
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....n of shares, copies of which are placed at pages 7 to 34 of the paper book. The perusal of said share application forms revealed the assessee to have furnished the names, father's name and addresses of the parties which were found to be incomplete by the Assessing Officer/CIT(A). In some cases even the address were found to be incomplete. 11. The issue involved in the present ground came up for consideration before the Hon'ble Apex Court in CIT Vs. Lovely Exports (P) Ltd (supra). The High Court while deciding the issue as reported in Lovely Exports (P) Ltd vs CIT 299 ITR 268 was of the view that in the context of section 68 of the Income Tax Act, the Assessing Officer has to prima-facie establish (i) the identity of the creditor ii) the genuineness of the transactions, whether transmitted through banking indisputable channels iii) the creditworthiness or financial strength of the creditor. The Court further observed that if the relevant details of the address or PAN identity of the creditor / subscriber were furnished along with other details i.e. share holder register, share application form, share transfer register etc. it would constitute acceptable proof or accepta....
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....ad any PAN numbers. In the facts of the present case the assessee has failed to prove the identity of the subscriber and applying the ratio laid down in the case of Lovely Exports (P) Ltd (supra), we are in conformity with the order of CIT(A) and uphold the addition of Rs. 42,78,756/-. "6. The assessee was unable to establish the identity, credit worthiness and the genuineness of the transaction so as to escape from the provisions of Section 68 of the Act. Whether an addition is to be made in the hands of the company or individual assessee in such circumstances depends upon the facts of each case. The primary onus lies upon the assessee to establish that the assessee is not liable for addition under Section 68 of the Act as the amount in fact belongs to the persons who had applied and submitted share application money. The assessee having failed to discharge such onus in the present case, the Tribunal had rightly upheld the additions in the hands of the company." 16. On the facts of the case, the Hon'ble High Court observed that the onus is on the assessee to establish the identity of the subscriber in relation to the share application money. In that case, sha....
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....ence to establish the credit worthiness and genuineness of the transaction. All the applicants, except two, are housewives and one of them is minor and furnished company's address in the confirmatory letter as their addresses. Therefore, having regard to the peculiar fact situation of the present case, it is respectfully submitted that the decision of the Hon'ble Supreme Court in the case of CIT V Lovely Export P.Ltd., 216 CTR (S.C) 195 is not application to the facts of the present case. However, the present case is fully covered by the decision of jurisdictional High Court, in the case of M/s Power Drugs Ltd. (supra). 19. The CIT(A), in the impugned appellate order, recorded under the col. "Proof furnished" as "she is assessed to income tax" against all the applicants except against Smt.Ravinder Kaur. The CIT(A), proceeded to adjudicate the issue in question in favour of the assessee-appellant, on the basis of factually incorrect evidence. No such contention was raised even by the appellant before the AO, CIT(A) and the Bench. The assessee merely filed PAN, in respect of certain parties and at no stage, any documentary evidence establishing the factum that such parties wer....
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....vident from the findings, as contained in para 2.7 of the impugned assessment order : "From the details of trading results of the assessee it was noticed that the gross profit rate has been decreased from 17.13% to 13.63% accordingly the assessee vide this office noting sheet entry date ...on which Shri Rajesh Sharma CA has attended was asked as under : "Reasons for steep fall in gross profit/net profit rate may please be justified." In response to the abovesaid query, the assessee has not furnished any explanation although he was afforded a number of opportunities as per details of sequence of events given in para 5 of this order and also non-production quantitative details as called for at Sr.No.1 and 3 of the questionnaire dated 19.2.2007, therefore I have left with no alternative except to work out the profit by applying the GP rate of 17.13% as declared in the immediate preceding year as under : Gross profit worked out @ 17.13% comes to Rs. 27,35,033/- Less : Gross profit declared by assessee Rs. 21,76,212/- Difference Rs. 5,58,821/- Accordingly an addition of Rs. 5,58,821/- is made to the r....