TaxTMI 
TaxTMI 
2023 (7) TMI 677
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....ation. 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 upholding the addition made us 68 of the Act of Rs. 4,35,49,200/- representing the ....
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....n 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 business activities were carried out by the assessee during relevant financial period. The A....
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.... 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 recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10." However, the reply of the assesse is not found to be satisfactory bec....
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.... 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 given in the application. Likewise, Registrar of companies also register a company without physical verification of the existence of the applicant company. Therefore, the assessee cannot claim to have established the identity of both these companies on the basis of some d....
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....ption, 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 119 held as under : "We are of the view that ratio laid down in Steller Investment Ltd. (2001) 251 |TR 263 is applicable only in those cases where the assessee is a limited company and the shares were quoted in the stock exchange. But whenever the issue is subscribed without quoting it on the stock exchange b....
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....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 examination. If anything, in the light of the material gathered by the Investigation Wing about the modus operandi followed by the entry providers, the statements of Mukesh Gupta and Rajan Jassal the plea that the money was sent through banking channels loses all force. The Tribunal ought to have seen that the modus operandi involves receipt by the entry providers of equivalent amount of ....
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....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 on the basis of letters of confirmations. It could not be explained as to how the transaction was materialized when the companies were not in existence and the amount was paid by cheque only on the date on which the amount was credited to the account of the company. The assessee failed to discharge the burden with regard to the credit in its books and the existence of the creditors to indicate the genuineness of the transaction.....
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.... 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 will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on bli....
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....as 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 income of the assessee. In view of the above discussion I am satisfied that the assessee has furnished inaccurate particulars of income and therefore, penalty proceedings u/s 271(1) (c) are hereby initiated. 7. The ld. CIT(A) after considering the grounds of assessee evaluated the findings of the Assessing Officer and thereafter concluded decided the issue against the assessee with following observations and findings:- 6. The only issue involved in the case is addition of Rs. 4,35,49,200/- on account of share capital u/s ....
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....ee 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 business activity. It is also noted that SABKA Media (shareholder) has received share application money of Rs. 22,84,00,309/-the break-up of the same is as follows: S.No. Name of Company Share Application Money (Rs.) 1 Lemon Entertainment Ltd. 4,81,2,0/- 2 Lemon Network Pvt. Ltd. 11,48,48,49/- 3 PAL News Media Pvt.Ltd. 4,70,26,300/- 4 ACME Digicom Pvt. Ltd. 1,84,00,000/- Total 22,84,00,309/- 7.3 In the appeal proceeding, it is also argued that the revenue is generated in PAL News Media Pvt. Ltd., the group concern of the appellant and part of the money rotated am....
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....ere 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 assessee, of explaining the nature and the source of the credit, does not get discharge merely by filling confirmation letter, or showing the transaction through banking channel and by filing income tax particulars. 7.5 The Id. AR's argument that the money is transacted through banking channel there is no law that transactions entered into by the banking Channel are genuine. No such provision is also under income tax Act. Genuineness of the transaction can only be examined with other circumstances of the whole transactions. It is necessary on the part of appellant to prove genuineness of the transactions, source of the money ....
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....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. * When surrounding circumstances and attending facts predicate a cover-up, the taxing authorities cannot put on blinkers while looking at documents but are required to go beyond documents to look into surrounding circumstances to segregate the real from apparent. 7.16 With respect to the circumstantial evidence and in the matters related to the discharge of onus of proof and the relevance of surrounding circumstances of the case, the relevant observations and findings of Hon'ble Supreme Court in the case of CIT Vs. Durga Prasad More [1972] 82 ITR 540, are "that though an appellant's statement must be considered real until it was shown that there were reasons to believe....
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..../- 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 surmises despite the fact that the assessee has successfully explained not only source but also sources of the source of receipt of share application money and premium. 10. The ld. CIT(A) from the financials statement of investor company noted that the company having substantial capital and reserve created by manipulations with the sole motive of providing entries of investment to the assessee. It was also noted that bank statements of the companies, who contributed investment in the Sabka Media (share holder of assessee company), revealed that huge amount of money was transferred to the accounts of these companies immediately before further transfer of amounts to the Sabka Media in form of share application money. The out of....
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....mstances 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 law. Said preposition was again reiterated by Hon'ble Apex Court in the case of Sumati Dayal vs. CIT 214 ITR 801 (SC) by observing that it is essential on the part of the Assessing Officer to look into the real nature of transaction and what happens in the real world and contextualize the same to such transaction in the real situation and purpose. 13. In the case of CIT vs. Nippon Builders & Developers P Ltd., 350 ITR 407 (Del) Hon'ble jurisdictional High Court of Delhi held that the point at which the initial onus on the assessee to prove the unexplained credit would stand discharged depends upon the facts and circumstances of each case. Their Lordship upholding the action of the Assessing Officer held as follows:- "the assessee cannot....