TaxTMI 
TaxTMI 
2022 (11) TMI 1541
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....hat Department carves leave to add, alter or modify any or all grounds of appeal either before or during course of appellate proceedings". 3. The facts have been lucidly noticed by the ld. 1st Appellate Authority in paragraph no. 3.1 of the impugned order. Therefore, for the sake of brevity of repetition, we take facts from this paragraph, which reads as under:- "3.1. Grounds of Appeal No(s). 1,2,3,4,5 and 6 : Assessee had filed its regular return of income on 25.09.2009 declaring total income of Rs. 4,60,071/-. Return was processed u/s. 143(1) of the Income-tax Act, 1961 on 30.10.2010. Search & seizure action u/s. 132(1) was taken against the Dhandhania Group to which assessee belongs on 19.11.2015. During post search enquiries, it was found that some of the Group companies of Dhandhania Group had raised bogus share capital during AY: 2009-10. Assessee company is one of such Group companies which had raised share capital of Rs. 1,50,00,000/-. This information was passed on to the AO and on the basis of this information assessment proceedings of the assessee for the current year was reopened and notice u/s. 148 was issued on 30.03.2016. In response to notice u/s. 148, a....
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....iled details as asked for and the case was discussed with him. As per the balance sheet of the assessee company as on 31.03.2008 there are insignificant reserves in form of accumulated profit to command premium of Rs 40/ - per share. Even in the year in which capital was raised there was no significant business activity of tilt company, till it managed to raise capital from 10 entities which subscribed to the shares of die assessee company at the rate of Rs. 50/- per share including premium which is five times of the face value, which is not logical. If the creditworthiness of the subscribing company is analysed it is seen that these companies are paper companies with no actual business activity of profit to justify investments of this magnitude in Assessee Company. On going through the balance sheet of the assessee company it is found that the assessee company has invested Rs. 54,47,150/ - towards land & building but no documentary evidence of the same was produced, further the amount which was raised by issue of shares has been advanced to parties without any apparent business objective which further lends credibility to our findings. Any normal company cannot a....
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.... note of the Index of this paper book from Serial No. 7, which reads as under:- "Copies of the relevant documents of the body corporates who had subscribed to the preference shares of the company Sl. No. Particulars Pg. No. Summary sheet of Allottee Companies and the relevant documents produced in respect of each of them 73 Chaturang Commercials Pvt. Ltd. : Rs. 15,00,000/- IT Acknowledgment for AY 2009-10 74 Directors report along with audited financial statements for FY 2008-09 75-89 Summary sheet of allottee companies and the relevant documents produced in respect of each of them 73 Chaturang Commercials Pvt. Ltd. Rs. 15,00,000/- IT Acknowledgment for AY 2009-10 74 Directors report along with audited financial statements for FY 2008-09 75-89 Explanation regarding the source of investments in assessee company. 9 - Relevant extracts of bank statements evidencing that payments were made through proper banking channel. Copy of the Share Application 92 Form fil....
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....Y 2008-09 145-158 Explanation regarding the source of investments in assessee company 159 Relevant extracts of bank statements evidencing that payments were made through proper banking channel 160 Copy of the share application form filed with the assesses company 161 Copy of the Board Resolution authorizing investments 162 Sarkar Sales Pvt. Ltd. Rs. 10,00,000/- Explanation regarding the source of investments in assessee company 163 Relevant extracts of bank statements evidencing that payments were made through proper banking channel 164 Copy of the share application form filed with the assessee company 165 Copy of the Board Resolution authorizing investments 166 Kasturi Merchants Pvt. Ltd.- Rs. 15,00,000/- Audited financial statements for FY 200809 167-171 Explanation regarding the source of investments in assessee company 172 Relevant extracts of bank statements evidencing that payments were made through proper banking channel 173 Copy of the shar....
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....,150/-. Still, the company received share capital along, with substantial amount of premium and only for these reasons the assessment proceedings have been reopened. The information received from Investigation Wing does not mention the names of the doubtful creditors or the reasons why the share capital received from such parties are considered to be bogus. Even during assessment proceedings, AO has not supplied the contents of the information received from the Investigation Wing which might have enabled the assessee to file its counter comments. After receipt of information, AO does not appear to have made any enquiries to establish the real identity and creditworthiness of the creditors, even though, appellant had submitted the details of all the share holders who had contributed to share capital during the current year. The documents relating to share application forms, copies of the relevant bank statements, copies of Board Resolution authorising issue of shares, financial statements of 10 share applicants along with the IT acknowledgement regarding returns filed by them and other supporting documents were submitted during assessment proceedings along with the letter raising ob....
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.... examined on oath and their statements should have been recorded or any adverse evidences found during those enquiries should have been brought on record to establish that the share capital receipt is not genuine. AO has not made any such enquiries and he has not even shared the contents of the investigation report where some adverse observations might have been made in the report against the share holders. Further, AO does not appear to have followed the due procedure laid down by the Hon'ble Supreme Court regarding the disposal of assessee's objections. Search has taken place on the Dhandhania Group but there is evidence that the assessee has taken any entry for share capital. Further assessee had submitted all the details along with supporting documents, regarding share subscribers. To build a case AO should have conducted enquiries to find out discrepancies in those details/documents and these discrepancies/evidences should have been elaborately discussed in the order to justify holding the share capital as bogus. However, AO has failed to bring any adverse material on record. Under the circumstances, the additions made by the AO cannot be sustained. Hence, addition of Rs. ....
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....essee 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 officer, satisfactory the sum so credited may be charged to income tax as the income of the assessee of that previous year." 9. A perusal of the section would indicate that basically this section contemplates three conditions required to be fulfilled by an assessee. In other words, the assessee is required to give explanation which will exhibit nature of transaction and also explain the source of such credit. The explanation should be to the satisfaction of the AO. In order to give such type of explanation which could satisfy the AO, the assessee should fulfill three ingredients viz. (a) identity of the share applicants, (b) genuineness of the transaction, and (c) credit-worthiness of share applicants. As far as construction of section 68 and to understand its meaning is concerned, there is no much difficulty. Difficulty arises when we apply the conditions formulated in this section on the given facts and circumstances. In other words, it has been propounded in various decisions that section 68 contempl....
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....licants, the genuineness of transactions and their creditworthiness; The Assessing Officer chose to proceed no further but merely added the amounts because of the absence of the directors to physically present themselves before him. The Income-tax Appellate Tribunal has relied upon a decision of this court in CIT v. fair Finvest Ltd. [2013] 357 ITR 146 (Delhi), where in somewhat similar circumstances, it was stated as follows (page 152) : "This court has considered the submissions of the parties. In this case the discussion by the Commissioner of Income tax (Appeals) would reveal that the assessee has filed documents including certified copies issued by the Registrar of Companies in relation to the share application, affidavits of the directors, Form 2 filed with the Registrar of Companies by such applicants confirmations by the applicant for company's shares, certificates by auditors etc. Unfortunately, the Assessing Officer chose to base himself merely on the general inference to be drawn from the reading of the investigation report and the statement of Mr. Mahesh Garg. To elevate the inference which can be drawn on the basis of reading of such material into....
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....ent upon the department to have enforced attendance of Shri Mahesh Garg or the erstwhile Directors of the share applicant companies and confronted them with the evidences & affidavits relied upon by the appellant and thereupon given opportunity to the assessee to cross examine these applicants." 12. In the light of above, let us examine the facts of the present case. A perusal of the assessment order would indicate that the ld. Assessing Officer has not conducted any enquiry. The assessee has submitted the material in support of its contention, but those materials have not been rebutted by the ld. Assessing Officer. He made reference to the finding of the DDIT (Investigation), Unit-2(1), Kolkata, but that was not an adjudicatory finding. It was a process of collecting incriminating material against the assessee and preparation of a report to consider that material. The opportunity to the assessee is to be given during an assessment proceeding when it can explain this material and ld. Assessing Officer is bound to verify to the contentions of the assessee in the light of that material in an analytical manner. That exercise is totally missing here. This aspect has been considered ....