TaxTMI 
TaxTMI 
2011 (9) TMI 1242
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....e 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 : "2.3 Addition of Rs.5,68,000/- as income from undisclosed sources :- It ....
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....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 to the return income of the assessee." 4. Ld. CIT(A), deleted the impugned addition on the foundation of submissions made by the assessee wherein the assessee placed reliance on the decisions, such as CIT V Lovely Exports (P) Ltd. 216 CTR 195 (S.C), CIT V Steller Investment Ltd. 251 ITR 263 (S.C), CIT V Value Capital....
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.... 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 Registrar of Companies that the shares had already been allotted to all such persons and the reliance by the assessee on various judgments as quoted in the written submission is quite apt including the judgement of the Hon'ble Supreme Court in the case of M/s Lovely Exports and the other judgments of various High Courts and ITAT as mentioned supra and, therefore by relying upon the abovesaid judgements and fact....
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....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, rival submissions, including the case laws cited therein, the Paper Book filed by the assessee and the orders of the lower authorities. The 'AR' placed reliance on the decisions in the case of CIT V Lovely Exports (P) Ltd. 216 CTR 195 (S.C), CIT V Steller Industries Ltd. 251 ITR 263 (S.C), CIT V lector Polychem 294 ITR 661 (Mad) and M/s Observer Compounds Pvt. Ltd., ITA No. 139/Chd/2004 of ITAT, Chandigarh Bench, which....
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....garding 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 establish that the receipt is not its income. The general rule is that onus of proof is always on the party who asserts a proposition or fact which is not selfevident. The burden of proof has two shades of meaning. In its primary sense, it means, the burden of establishing the case. The second meaning of, burden of proof is on the principle of evidence. In the second sense, the burden of proof would be shifted from one party to another as and when b....
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....rix 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 judicial verdicts, on which it placed reliance. These observations of the Court must be read in the context, in which they appear to have been made. Further, the ratio of any decision is determined by taking into account the facts treated by the judge deciding the case as being material and his decision is based thereon. The assessee or the Revenue is not justified in picking of a few sentences of any decision, out of context and then treating the same, ....
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.... 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 assessees having no PAN, without any photographs and without any evidence regarding their credit worthiness to advance such large amount in cash. 8. The Assessing Officer invoked the provisions of Section 68 of IT Act and made the addition of Rs. 42,78,756/-. 9. Before the CIT(A) the stand of the assessee was that under the Company's Act the assessee can receive share application money either in cash or cheque. It was further submitted by the Ld. Counsel for the assessee before the CIT(A) that the applicants did not posse....
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.... 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 acceptable explanation by the assessee. The onus of the assessee therein was held to stand discharged where the identity of the creditor / subscriber was proved and it was further held that the Assessing Officer was duty bound to investigate the creditworthiness of the creditor/subscriber and the genuineness of the transactions and the veracity of the repudiation of the creditor / subscriber. The Special Leave Petition filed by the Revenue against the said decision of the Court was dismissed by the Supreme Court vide its decision reported in (2008) 216 CTR SC ....
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....ends 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, share application was received in cash and none of the persons were assessed to tax. In the present case also, share application was received in cash and none of the applicant is assessed to tax. The applicants also furnished address of the assessee company as their addresses. Further, in the present case, no source of income has been furnished in the confirmatory letters. Therefore, under such fact situation, the findings of the Hon'ble High Court that "Whether an addition is to be made in the hands of the company or individual assessee in such circumstances depends upon the fact....
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....d. (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 were assessed to income tax, was filed. The issuance of PAN is not the same thing as filing if return of income by such parties. It is pertinent to add here that even the appellant never made such assertion that the parties are assessed to income-tax. Thus, the findings of the CIT(A) are founded purely on surmises, conjectures and non-existent evidence. 20. It is strange co-incidence that certain parties preferred to furnish the address of the assessee Company M/s Forex Fastners Ltd. The assessee failed to file the real address of such persons. It is also interesting to note that except one or two, all the subscriber....
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....ara 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 returned income of the assessee on account of low gross profit rate." 24. Ld. CIT(A) deleted the impugned addition by passing a well-reasoned and speaking order. The relevant findings of the ld. CIT(A) are reproduced hereunder : "I have perused the rival submissions and accordingly find that the assessee has filed the report on the basis of audited accounts and the sales of the assessee have increased substantially during the year under consideration and all the sales and purchases are duly vouched. Last year, the sales were to the tune of Rs. 76,51,900/- and this year, the sales have almost doubted and they are to the tune of Rs. 1,65,79,474/- meaning thereby there has been increase in ....