TaxTMI 
TaxTMI 
2024 (5) TMI 1237
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....the Act. In the course of assessment proceedings, the AO inter alia found that during the assessment year, assessee has received large share application money from various parties as under: S. No. Name of the parties Total share application money received 1. Mrs. Arshpreet Singh Khangur-Resident applicant Rs. 1,85,24,813/- 2. Mr. Arvinder Singh Salariya (NRI) Rs. 3,79,00,674/- 3. Mr. Sukhbir Singh (NRI) Rs. 6,97,15,343/- Total Rs. 12,61,40,820/- 3. The AO accordingly called upon the assessee to prove the identity and creditworthiness of the applicant parties and genuineness of the impugned transactions carried out. The AO also asked the assessee to provide copy of their income tax returns, bank statements and statement of affairs of all the investors. The Assessee was also asked to present the subscribers for examination with a view to solicit appropriate information to determine the bonafides of such subscription. The AO alleged that neither information called for was filed nor the purported subscribers were produced. The AO also observed that the company has neither issued any shares against so called share application money ....
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....uch as PAN of the shareholders, confirmation letter from the shareholders towards infusion of money, confirmation from spouse who transferred money to Mrs. Arshpreet Singh Khangura which was in turn stated to be invested by her in the form of share application money with the assessee co. The CIT(A) called for remand report/ comment from the AO on the additional evidences filed before him by the Assessee. The AO vide letter dated 17.05.2019 furnished a report as reproduced in paragraph 5.6 of the appellate order passed under Section 250 of the Act. As per the remand report, the AO broadly objected to the admission of the additional evidences by the CIT(A) owing to repeated non compliances before the AO. Without prejudice such objections on admission of additional evidences, the AO in a very brief and cryptic or summary report also asserted that even if such additional evidences are taken on record, provisions of Section 68 are still attracted as the assessee has failed to discharge onus placed on it towards identity of applicants, genuineness of transactions and creditworthiness of parties are not fulfilled and a mere production of PAN or a formal letter of confirmation of transacti....
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....eld void-ab-initio, because certain details have been asked by the AO. In this case, it is apparent that nothing has been asked to go beyond the scope of limited scrutiny nor anything specific has been brought on record. Therefore, looking to the additions made and the reasons for limited scrutiny, there is no force in the arguments of appellant and accordingly this ground of appeal is dismissed. 8. Ground nos. 2 to 8 relates to the merits of the addition. It is contended by the appellant, as reproduced earlier that these funds for share application has been received from the existing shareholders. Out of the 3 such applicants, 2 are non-resident, whereas one Mrs. Arshpreet Singh Khangura is Indian. It has been stated by the appellant that in the past also they had provided share application money, which was examined by the AO and no adverse inference made. The appellant stated to have provided various details to establish the identity, creditworthiness of such investors and genuineness of transactions. 8.1 With regard to Mrs. Arshpreet Singh Khangura, the appellant provided her confirmation, details of the source of her funds which is received from her husband an....
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....e creditworthiness and genuineness. In the case of foreign remittance, the applicants are NRI's and hence essential as only share capital has been subscribed. The appellant has provided FIRC certificate regarding receipt through bank and no doubt raised by the AO. 8.6 It is further seen that AO has not made any enquiries either through banking channels or third party investigation, nor any summons have been issued to ensure the appearance of investors. This is also not a case where any report of Investigation Wing has been received nor any information received from any other source to have any doubt/evidences to believe that these share application money are not genuine in nature or provided through any bogus entry operator. No further enquiries have also been made through FTD or other competent authority to examine the genuineness of funds received from foreign country, whereas the appellant has provided all details including FIRC to substantiate its claim. 8.7 It is also observed that show cause notice has been issued on 29.12.2017 to produce the investors on 30.12.2017, whereas the order have already been passed on 29.12.2017, thereby denying opportunity to....
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.... of additional evidences; (c) Mere production of bank statement of the applicants and a formal confirmation thereof filed before CIT(A) by way of additional evidence can not be regarded as sufficient proof to discharge the onus under Section 68 of the Act. The assessee is expected to explain the nature and source of each transaction under question. The explanations towards motive and purpose of making such large investments in a low income yielding company and without any cogent asset base, would give rise to a strong suspicion of clandestine nature of such transactions. The AO unsuccessfully tried to seek assessee to present the applicants to gather understanding on the reasons for making such large investment. The CIT(A) could not have ignored such inaction of the assessee and reject the efforts of the AO and sit back with folded hands. The co-terminus powers enabled the CIT(A) to put enquiries in motion instead of finding lacunae in the order of the AO; (d) The CIT(A) accepted the version of the assessee based on few documents such as bank statements, confirmation, inward remittance cert. which are not per se demonstrative of real intention and boanfides. The Assessee has failed....
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.... of affairs of the company called for the attention of any reasonable person instructed in law. As reported, the assessee has hardly earned any income during the year in proportion to the investments and advances. The total receipt against such large investments stands at meagre 18.80 lakh. Why a person would risk such large money into such a company with obscure potential, is a pertinent question relevant to determine the genuineness of transaction. The relevant facts were not placed before the AO. The CIT(A) has also not examined any of such factors and simply found lacunae in the assessment order without any perceptible opportunity to the AO; (f) The remand report is primarily on the point of admission of the additional evidences. The AO has red flagged the admission of such evidence. The AO has hardly provided any worthwhile comment on merits. No outcome of fresh enquiry on evidences supplied is available before CIT(A). The AO has clearly stated that the identity, creditworthiness and genuineness of the transaction are not supportable of facts. In the circumstances, the AO ought to have been given opportunity to seek justifications from the applicants and offer his comments. De....
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....eceipt of money by way of share application money during the year by the assessee is subject matter of controversy. The issue is essentially factual in nature. 7.1 We straightaway find that certain additional evidences were filed before the CIT(A), A remand report thereon was sought from the AO. The remand report received by the CIT(A) from the AO reads as under: "In this regard, it is submitted that the AO has made addition u/s 68 of the IT Act. The addition was made on account of unexplained share application money credited in the books of account of M/s. Janpath Venture Pvt. Ltd. for the AY 2015-16. The assessee has filed an appeal before your honour contesting the above additions and has filed a letter for admission of additional evidence under Rule 46A of Income Tax Rules, 1962. The application for admission of additional evidence should not be admitted as per the discussion in following paras:- Rule 46A of Income Tax Rules, 1962 provides certain exceptions in which the additional evidence may be produced by the appellant assessee. The text of Rule 46A is appended here under for your kind reference- ...(a) Where the Assessing Off....
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.... Vide note-sheet entry dated 07.09.2017 the AR of the assessee was asked to file the details of share application money, loan, advances and expenses. In response, the AR of the assessee filed only part reply vide reply dated 28.09.2017. Again, vide note-sheet entry dated 16.10.2017, assessee was asked to submit all the details the AR of the with all relevant documents to share application money, loans and investment. In response, the AR again filed only part reply vide latter dated opportunities, 27.10.2017. As regards share application money, despite multiple full details along with the proper supporting documents/evidences, were not provided by the assessee during the assessment proceedings. Therefore, vide note-sheet entry dated 28.12.2018, the AO has recorded his satisfaction that the creditworthiness of non-resident persons from whom the share application money has been received as an investor who is also director in the company has not been proved. In view of the above, the contention of the assessee in the present appeal that all the relevant documents to substantiate the identity and creditworthiness of the investors had been submitted, cannot be accepted. Without ....
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....he transactions. As contended on behalf of the revenue and also noticed by us, the financial statement of the assessee-company is quite loop-sided. The money received by way of share application money in the earlier year as well as in this year has been routed in unquoted investment without allotment against such share application receipts. The Assessee is expected the answer on such vital aspects. No enquiry thereon has been made. 7.4 It is a settled position of law that mere transfer of money through banking channel do not vouch for genuineness of the parties per se. The standard of proof varies from case to case. The existing share capital is a meagre Rs. 1 lakh. A company of such miniscule capital has attracted such large share application money. The CIT(A) has ignored the need for any meaningful inquiry into vital aspects and merrily accepted the version of the assessee. The CIT(A) has also accepted the version of the Assessee towards submission of bank statements without confronting such facts to the AO. 7.5 In our view, a proper opportunity to the AO to conduct enquiries was also not given in the circumstances. The order of the CIT(A) grossly suffers from vice of trans....
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....bservations, the CIT(A) has merely found fault with the order of the AO without looking into the vital aspects such as the circumstances for granting heavy amounts by the applicants to a company having meagre capital and subdued income, allotment thereof in the subsequent years if any, capacity of the applicants and circumstances for making investment. We therefore find apparent fallacy in the action of the CIT(A). The order of the CIT(A) on the issue involved therefore clearly warrants set aside and proper re-examination thereof is called for. Without reiterating the points raised in the preceeding paras, We set aside the order of the CIT(A) on the subject matter of appeal and restore the matter back to the file of the CIT(A) for de novo adjudication in accordance with law after making or causing proper enquiry as may be considered expedient. 8. At this juncture, we may hasten to add that Section 251 of the Act defines the power of the CIT(A) in widest possible terms including power to enhance the assessment. The powers conferred upon the First Appellate Authority by the Income Tax Act are much wider than the powers of an ordinary court of appeal. The First Appellate Authority ....