TaxTMI 
TaxTMI 
2023 (7) TMI 677
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....onfirmed the contribution made as representing share application. 3. That while upholding the addition, the learned Commissioner of Income Tax (Appeals) has grossly erred both in law and on fact in disregarding the evidences furnished by the assessee and has sustained the addition purely on suspicion, as such, addition made by the learned AO and sustained by the learned CIT(A) is unsustainable in law. 4. That the Ld. Commissioner of Income Tax (Appeals) has erred in law as well as in facts in confirming the adverse findings recorded by the Ld. AO are perverse and have been recorded by arbitrarily brushing aside the submissions/evidence/material produced on record and hence such findings are vitiated and deserve to be deleted. 5. That in the circumstances of the case and in law, the impugned order passed by the Ld. Commissioner of Income Tax (Appeals) is based upon assumption, presumptions, whims and fancies, conjectures, surmises, preconceived notions and incorrect application of law and therefore liable to be quashed. 3. The learned counsel of assessee submitted that learned Commissioner of Income Tax (Appeals), has erred both in law and on facts in u....
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....acts and circumstances of the case the Assessing Officer was right in making addition in the hands of assessee. Therefore, the learned Senior DR submitted that appeal of the assessee may kindly be dismissed. 5. On careful consideration of above submission, first of all, we note that the assessee engaged in the business of TV News & Teachers Agency on a worldwide network. The Assessing Officer noted that the assessee has received share capital from Sabka Media Pvt. Ltd. of Rs. 4,35,49,200/- out of which face value was Rs. 9,67,760/- and share premium was Rs. 4,25,81,440/-. On being asked by the Assessing Officer the assessee submitted ITR detail and balance sheet of Sabka Media Pvt. Ltd., alongwith copy of bank statement with Yes Bank account no. xxxx1581. On perusal of said documentary evidence particularly statement of bank account the Assessing Officer noted that there were hundreds of credit and debit entries that is money was coming and going out and there was only funds transfer from/to the bank account of assessee and sources of fund were unknown. The Assessing Officer also noted that there was no revenue for business activity of said investor company and in fact no busine....
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....dits. 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year: Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless- (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recor....
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....mation. Hence registration of a company does not prove that it is genuine. Once the company is formed PAN number can be allotted on the basis of registration certificate furnished in respect of company formed. Hence allotment of PAN does not prove the identity of person. No verification is done upto this stage by any government authority. If the companies are genuine and in existence then there was no reason for non production of even a single company. The assessee is making only the legal submissions without any substance. The Hon'ble ITAT Indore in the case of Dasrath Lal Agrawal, Ratlam vs Department Of Income Tax on 9 November, 2011 IT No. 158/Ind/2009 has given findings that "none of the certificates, claimed to be issued by various authorities, does not establish the identity of the share applicants as the certificates were issued without physically verifying the existence of applicants, such as income tax department receives returns of income or documents without verification of existence of the persons filing the returns/documents. PAN is also allotted to the applicants on the basis of applications without verifying the existence of applicants at the address gi....
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.... in case of private placement, the legal regime would not be same. A delicate balance must be maintained while walking the tight rope of section 68 and 69. The burden of proof can seldom be discharged to the hilt by the assessee. However, if the Assessing Officer harbours doubts of the legitimacy of any subscription, he is empowered rather duty bound to carry out investigations. In that case the Tribunal clearly noted that the assessee was a public limited company and subscriptions were received from public at large through banking channel and the shares were allotted in consonance with the provisions of the securities contract (Regulation) Act, 1956 as also the rules and regulations of Delhi Stock Exchange. In para 12 the Hon'ble Delhi High Court has clearly differentiated the cases of share capital of private limited company from public limited company by saying "in the case of private placement, the legal regime will not be the same". Therefore, the case law cited are not applicable to the case of the assessee as it is a private limited company closely held company. Hon'ble Delhi High Court in a latter decision in CIT v. Oasis Hospitalities Private Limited (2011) 333 IT ....
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....ell as the addition of Rs. 2,96,250, both made under section 68 of the Act. The following substantial questions of law arise in the appeal: "(1) Whether the Tribunal was right in law in confirming the order of the Commissioner of Income-tax (Appeals) deleting the additions of Rs. 1,18,50,000 and Rs. 2,96,250 both made under section 68 of the Act, on the ground that the identity and credit-worthiness of the share applicants as well as the genuineness of the transactions were proved? (2) Whether the order of the Tribunal confirming the deletion of the addition of the aforesaid two amounts was perverse having regard to the evidence and the material on record?" Regarding receipt of share application money by cheque and from the companies and genuineness of transaction the Hon'ble Delhi High court gave the finding as below:- "The findings of the Tribunal cannot be upheld as they are based on irrelevant material or have been entered by ignoring the relevant material. The finding that the share application monies have come through account payee cheques is, at best, neutral. The question required a thorough examination and not a superficial examinati....
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....was discharged by assessee, the Income Tax authorities have made enquiries and had communicated the result of the enquiry to the assessee and required the assessee to produce the subscribers who provided such credit, in order to establish its case. But the assessee did not do so. On this basis addition made by the A.O. u/s 68 of I.T. Act was confirmed." Identically, the Hon'ble Calcutta High Court in the case of Hindustan Tea Trading Company Limited; 182 CTR 585 at page 23 (para 21) where the identity of 12 persons Who were not found at the addresses it was held that identity is not established. On the Issue of onus, it was held that "principle regarding onus is laid down u/s 68 whereby Once a reasonable enquiry is made, then the Assessing Officer can do no further except driving at a conclusion. When such conclusion is communicated to assessee, onus shifts on the assessee. Likewise, Hon'ble MP High Court in the case of M/s Rathi Finlease Limited; 215 CT 429 at page 28 when company is not found at the given address against the summons issued by the Assessing Officer observed as under - "The assessee tried to explain the genuineness of the credit o....
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....t if a doubt arises as to the validity or the genuineness of document filed, for the limited purpose of a proceeding before the authority under the Act, such authorities are bound to go into the question of genuineness and validity. The assessee Co. is a Pvt. Ltd. Co. The company was asked to produce any evidence by producing the Director of the investing companies. As such there should have been no difficulty on the part of the assessee to produce somebody for the said entity, had the whole apparatus not been merely a conduit to plough back the money of the assessee company" In view of the facts of the case special reference has to be made to the decision Of Supreme Court in the case of CIT v/S Durga Das More 82 IT 540. In the said decision supreme Court held that the Income Tax authorities are entitled to look in to surrounding circumstances to find out the reality. It was also held as below:- "It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it wi....
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....itworthiness of the subscribers/ depositors inspite of the fact that the confirmations were filed. i) Income Tax Officer - 3(1), v/s. M/s Atul Construction Co., Mathura in ITA No. 266/Agr/2011. ITAT Agra. ii) CIT v/s Independent Media Pvt Ltd ITA No. 405/CHD/2011 Delhi High Court. iii) Dy.CI T, C-IN, V M/s Forex Fastners (P) Ltd., ITA No. 405/CHD/2011, ITAT Chandigarh. 7. Keeping in view of the facts and the circumstances of the case as above, it is held that the assessee company has completely failed to discharge its onus to substantiate identity, creditworthiness and genuineness of the transaction in accordance with section 68 of the Act even after providing so many opportunities even at the convenience of the assessee. Therefore, the share capital and share premium received by the assessee is treated as non-genuine and brought to tax u/s 68 of the I. T. Act, 1961. 8 In view of the facts and the circumstances of the case as above, it is held that the assessee has failed to prove the credit worthiness of Sabka Media Pvt. Ltd. And therefore, the amount of Rs. 4,35,49,200 is added back as unexplained cash credit u/s 68 of the Act to the i....
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....ce, whatsoever, has been produced to prove the genuineness of the transaction. Apart from written submission, the appellant has produced copies of documents produced before AO as mentioned above in appellant's submission. I have examined these documents. Instead of supporting the case of appellant, these documents only reinforces the findings of the AO which are based on his detailed analysis of the facts and circumstances of the case. The AO further noted that no business activity is being carried out by the assessee and there is only fund transfer from/to bank account of the assessee and entries of credit & debit in the bank account are numerous. 7.2 The company which has given share capital to the appellant company, it is obvious from the analysis of their financial statements that the company having substantial capital & reserve created by manipulations with the sole motive of providing entries to the appellant. Bank statements of these companies clearly show that huge amount of money is transferred to these concerns only to be immediately transferred to the bank accounts of the beneficiaries. All the group concerns except PAL New Pvt. Ltd, does not have any busine....
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.... had capital by way of forfeited amount of share application money from M/s PACL Ltd. It is important to mention here that PACL was incorporated in 1996 having registered office at 22, 3rd Floor, Ambar Tower, Sansar Chandra Road, Jaipur and having corporate office at 7th Floor, Gopal Das Bhawan, 28th Barakhamba Road, New Delhi. It is also known as 'Pearls'. It is in public domain that this company has been black-listed in 2015 by SEBI and alleged for indulging in dubious transactions. It is also in public domain that Chairman and Managing Director of PACL Ltd were arrested by CBI. 7.4 Against the above background where the A has demonstrated that filing of Return, registration with ROC, transactions through banks were the deliberate steps taken by these group concerns with the sole motive of imparting a colour of genuineness and to camouflage the real nature of transaction, a heavier onus is cast on the appellant to prove the genuineness of such transactions by adducing evidences and giving explanations, which are capable of proving beyond any doubt that its transactions of share money are distinctly genuine. It is also a settled legal position that the onus of the....
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....vidence is introduced by one side or the others. In this case, once the evidence that assessee has received share capital was introduced by the AO, the burden of evidence shifted to the assessee. During the assessment proceeding and even during the appellate proceeding, the assessee has failed to produce any evidence to prove the creditworthiness of shareholder companies. 7.15 The legal principles laid down in a number of cases, a few of which have been quoted above, are squarely applicable to the facts and circumstances of the present case. It is obvious from these judicial decisions that- * Mere documentary evidences are not sufficient to establish the genuineness of transactions in all situations. * Creditworthiness was not proved by mere issue/ of a cheque or by furnishing a copy of statement of bank accounts. Circumstance might require that there should be some evidence of positive nature to show cause that the said subscribes had made a genuine investment, acted as angel investors, after due diligence or for personal rcasons. * Documents must also stand the tests of human conduct, surrounding circumstances and preponderance of probability. ....
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....volved. 7.19 In view of the facts and circumstances borne out of the assessment order and legal precedents as discussed above, I am of the view that documents submitted as evidences to prove the genuineness of transaction are themselves found to serve as smoke screen to cover up the true nature of the transactions in the facts and circumstances of the case as it is revealed that amount received by the appellant company as share capital are arranged transactions to introduce its unaccounted income through group concerns with the sole motive to account for the undisclosed income. Accordingly, in view of the above discussion and judicial precedents, it is held that AO was justified in making addition of Rs. 4,3,49,200/- as income of the assessee from undisclosed sources u/s 68, of the Act. The grounds of appeal are dismissed. 9. From the orders of the authorities below, we note that the precise arguments of assessee are that i) all the transactions are among sister concerns which are asset to tax and scrutinized u/s. 143(3) of the Act, ii) it is not the case where cash has been deposited and entries are taken, iii) additions have been made on the basis of conjectures and s....
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....roducing directors of the assessee investor company but it failed to do so. Therefore, we inclined to agree with the findings recorded by the ld. CIT(A) that the assessee has failed to produce any evidence to prove creditworthiness of investor/share holding company. 12. Hon'ble Supreme Court in the case of CIT vs. Durgaprasad More 82 ITR 540 (SC), held that thus; "that though an appellant's statement must be considered real until it was shown that there were reasons to believe that the appellant was not the real, in a case where the party relied on self-serving recitals in the documents, it was for the party to establish the transfer of those recitals, the taxing authorities were entitled to look into the surrounding circumstances to find out the reality of such recitals. Science has not yet invented any instrument to test the reliability of the evidence placed before a Court or Tribunal. Therefore, the Courts and the Tribunals have to judge the evidence before them by applying the test of human probability. Human minds may differ as to the reliability of piece of evidence, but, in the sphere, the decision of the final fact finding authority is made conclusive by la....