TaxTMI 
TaxTMI 
2009 (12) TMI 1072
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.... consideration. In the course of scrutiny, the assessing officer noted that the appellant has introduced fresh share capital to the tune of Rs. 15,00,000/- at a share premium of Rs. 1,35,00,000/-. The details of persons who are stated to have deposited share application money and to whom shares were allotted are as under :- Sl. No. Name Amount 1. M/s. Active Agencies Pvt. Ltd. Rs. 10,00,000/- 2. M/s. Funtime Travels Pvt. Ltd. Rs. 10,00,000/- 3. M/s. Winsome Portfolio Pvt. Ltd. Rs. 10,00,000/- 4. M/s. AKG Portfolio Pvt. Ltd. Rs. 10,00,000/- 5. Spring Medicare Pvt. LTd. Rs. 10,00,000/- 6. M/s. S.J. hosiery Pvt. Ltd. Rs. 10,00,000/- 7. M/s. Sony financial Services Ltd. Rs. 10,00,000/- 8. M/s. Rabicon Associates Pvt. Ltd. Rs. 10,00,000/- 9. M/s. Rapchic Foods Pvt. Ltd. Rs. 10,00,000/- 10 . M/s. Neel Kant Shares Pvt. Ltd. Rs. 10,00,000/- 11. M/s. Warsi Overseas Pvt. Ltd. Rs. 10,00,000/- 12. M/s. Sunit Overseas Pvt. Ltd. Rs. 10,00,000/- 13. M/s. Milap automotive Pvt. Ltd. Rs. 10,00,000/- 14. M/s. Q-Tech Systems India Pvt Ltd. Rs. 10,00,000/- 15. ....
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....T vs. United Commercial & Industrial Co. (P) Ltd. [1991] 187 ITR 596. He further observed that the facts that the amount were paid by account payee cheques do not make it satisfactory as held in CIT vs. Precision finance Pvt. Ltd. 208 ITR 465 (Cal.). Even income -tax file particulars, where the share holder is assessed to tax is not sufficient as found in CIT vs. Korlay Trading Co. Ltd. 232 ITR 820 (Cal.) 2.1.2 The AO also referred the enquiry initiated by investigation wing of the Department in August 2003 which culminated into detection of many entry operators who are operating number of accounts in the same bank/branch or in different branches, in the names of companies, firms, proprietary concerns and individuals. For the operations of these bank accounts, filing income tax returns etc. persons are hired. Like any other business it does requires manpower according to the scale of operation. Except for two or three persons who are required regularly to visit banks and do other spade work like collection of cash etc., most of the other persons involved are on part time basis. The part time employees are called as and when required to sign documents, cheque books etc. Some of t....
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....nt that even if it be assumed that the subscribers to the increased share capital were not genuine, nevertheless, under no circumstances, can the amount of share capital be regarded as undisclosed income of the assessee. It may be that there are some bogus shareholders in whose names shares had been issued and the money may have been provided by some other persons. IF the assessment of the persons who are alleged to have really advanced the money is sought to be reopened, that, would have made some sense but we fail to understand as to how this amount of increased share capital can be assessed in the hands of the company itself. In our opinion, no question of law arises and the petition is, therefore, dismissed." The Hon'ble Apex Court has dismissed the appeal of revenue against this order summarily [251 ITR 263 (SC)] by making following observations : "We have read the question which the High Court answered against the Revenue. We are in agreement with the High Court. Plainly, the Tribunal came to a conclusion on facts and no interference is called for. The Appeal is dismissed. No order as to costs." 2.3.2.2 On a careful perusal of the decision of Hon'bl....
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.... further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises." 2.3.2.4. If we peruse carefully the above decision, it will be noticed that Hon'ble Supreme Court has observed that : (1) There was no effort made to pursue the matter further except issuing summosn u/s 131. (2) The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. In the instant case however facts are slightly different as summons were issued which returned un-served with the remarks "no such person in the above address" as against in that case where summons were returned un-served with the remark "left" that address. There is huge difference between the observation "left" and observation "no such person in the above address" . Further this fact of non service of summon was brought t....
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....ted by the Revenue. Equally, where the preponderance of evidence indicates absence of culpability and complexity of the assessee it should not be harassed by the Revenue's insistence that it should prove the negative. In the case of public issue, the Company concerned cannot be expected to know every detail pertaining to the identity as well as financial worth of each of its subscribers. The Company must, however, maintain and make available to the AO for his perusal, all the information contained in the statutory share application documents. In the case of private placement the legal regime would not be the same. A delicate balance must be maintained while walking the tightrope of Section 68 and 69 of the IT Act. The burden of proof can seldom be discharged to the hilt by the assessee. IF the AO harbours doubts of the legitimacy of any subscription he is empowered, nay duty-bound, to carry out thorough investigations. But if the AO fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the Company." 2.3..2.6 The facts of the present case when analysed in the light of this ....
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....gh banking channel. In some case, the confirmations / affidavits of share applicants containing the above detail were also filed. It is seen that the AO did not carry out any inquiry into the income tax record of the persons who have given the PAN No. / Ward No. in order to ascertain the non-existence of the share applicants in question. The AO has neither controverted nor disapproved the material filed by the assessee. In the case of CIT v. Makhani & Tyagi (P) Ltd. reported in 267 ITR 433 (Del), the jurisdictional High Court has held that when the documentary evidence was placed on record to prove the identity of all the shareholders including their PAN/GIR numbers and filing of other documentary evidence in the form of ration card etc. which had neither been controverted nor disapproved by the AO no interference was called for. The Tribunal was justified in deleing the addition. The AO proceeded to make the impugned addition on the ground that in some case some summons issued were returned unserved and in some case summon though served but there was no compliance . In this connection, it may be mentioned that in the case of CIT v. Orissa Corpn. 159 ITR 78, the Hon'ble Court has h....
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..... Thus it cannot be said that AO has not carried out enquiries except issuing summons. Thus again the facts of the present case are different. 2.3.2.9. What I want to emphasize by mentioning these facts that it is not straight case of applicability of decision of various courts on which appellant has relied upon. The facts are different and therefore the case has also to be dealt with differently. It is true that AO is not able to establish that the entire amount received as shares subscription from these parties are the own money of the appellant itself. But he has reached a dead end of the enquiry and the burden has shifted on the appellant. If we see the facts of the case in the light of guidelines given by Hon'ble Delhi High Court in the case of Lovely Exports (supra), then it will be noticed that the appellant has given the identity of subscribers but genuineness of transaction is not established. Even it cannot be said that identity has been established when letter addressed has returned unserved. Accordingly I hold that straightway the appellant cannot be allowed relief as further investigation is required regarding the genuineness of the transaction and also the cr....
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....cknowledgment of return etc. However when the AO conducted inquiry at the stated address, summons were received back unserved with the postal remark "no such person in the above address". This fact was brought to the notice of assessee also. Thereafter the assessee except producing the papers could not prove existence or availability of the respective share applicants. When the identity of the person is required to be proved so as to examine whether in fact they have applied for allotment of shares, the existence itself is not proved. The existence of a person is not merely on paper. Particularly when the AO required the assessee to produce the share applicants and particularly when at the stated address the share applicants do not found to be existing, it cannot be said that the amount received by assessee is proved to be towards share capital. The transaction cannot be proved merely on paper. Neither before AO nor before Ld. CIT (A) the assessee could make the share applicants available. Therefore when the identity of the person itself is not proved, the amount received by assessee cannot be considered to be genuinely received. 6.1. It is also to be noted that the assessee com....