TaxTMI 
TaxTMI 
2022 (10) TMI 1284
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....ircumstances of the case, the Ld CIT(A) erred in deleting 'Addition u/ s 68 amounting to Rs. 4,07,88,170/ - without appreciating the fact that except for the identity, the assessee has not been able to establish the creditworthiness of the person advancing loan and also genuineness of the transaction. 2. On the facts and circumstances of the case, the Ld CIT(A) erred in holding that the assessee has proved the creditworthiness of the person advancing the loan merely relying on the fact that the said person has been held to a large tax defaulter by the US Revenue authorities ignoring the fact that the said fact does not conclusively prove that the said person has any large real income and cannot be a proof of his creditworthiness on stand alone basis. 3. On the facts and circumstances of the case, the Ld CIT(A) erred in not appreciating that the said investor Shri Samyakant C Veera has invested of about 53.34 million US $ whereas his net income over a period of 6 proceedings years in US was only 3.3 million US$ as revealed from his tax returns filed with US Revenue authorities and hence his creditworthiness has not been proved. 2. The assessees have raised C....
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....learned Commissioner of Income Tax (Appeals) erred in ignoring the position of law laid down in the following decisions, wherein it is held that. on mere suspicion no reopening is possible U/s. 147 of the act, since the satisfaction is based on "reason to believe" and not "reason to suspect" i) CIT V. Jeskaran Bhuvalka (1970) 76 ITR 128 (AP) ii) N. Sundareswaram V. CIT (1972) 84 ITR 173 (Ker) iii) Smt. Hemlata Agarwal V. CIT (1967) 64 ITR 428 (All) iv) ITO V. Lakshmani Mewal Das (1976) 103 ITR 437 (SC) v) India Finance & Construction Co., (P) Ltd V. B.N. Panda, DCIT (1993) 200 ITR 710 (Born) 9. The learned Commissioner of Income Tax (Appeals) erred in ignoring the ratio laid down by Hon'ble High Court of Delhi in the case of Principal Commissioner of Income Tax V. RMG Polyvinyl (I) Ltd (2017) 83 Taxmann.com 348 (Delhi), wherein it is held that, the information received from Investigation Wing could not be said to be tangible material perse without a further enquiry being undertaken by the Assessing Officer to establish link between "tangible material" and formation of reason to believe that income chargeable to tax had escap....
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....d. 15. The learned Commissioner of Income Tax (Appeals) erred in ignoring the ratio laid down by the Hon'ble Delhi Tribunal in the case of Monarch Educational Society V. ITO (Exemption) (2015) 57 Taxmann.com 141 (Delhi) wherein it is held that, simply reproducing details received from Director of Income Tax, Investigation without any verification would not be sufficient reason to believe for the purpose of invoking the provisions of section '147 of the act 16. The learned Commissioner of Income Tax (Appeals) erred in not following the ratio laid down by ITAT. Delhi Bench 'A' in the case of Bir Bahadur Singh Sijwali V. ITO Ward-1, Haldwani (2015) 53 Taxmann.com 366 (Delhi Trib). 17. The respondent craves permission to ad, delete or alter any of the grounds at the time of hearing. 2.1 The assessee has raised additional grounds of appeal in cross objections, which are reproduced as under:- "The Appellant has filed Cross Objection on 06.08.2018 before Hon'ble ITAT. While filing the same, we have 16 grounds of appeal. The last of the grounds is as under: - "16. The respondent craves permission to add, delete or alter an....
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....submitted that as per records, assessee has received a sum of 939952 USD (Rs. 4,07,88,170/-) from Samyak C. Veera, a share capital and share premium and his return of income from the year 2000 to 2006 is only 3312256 USD and he has no enough sources to invest in the assessee's company and in certain years he has also incurred loss to the tune of 56,628,098 USD. As such, he is not in a position to make an investment of above amount in the assessee's company. According to Ld. D.R., the assessee has not proved the sources of Shri Samyak C. Veera to make such huge investment in assessee's company and he has made following investments for which Shri Samyak C. Veera have no source of income:- SI. No. Name of the company Asst. Year Share capital amount given in USD 1 M/s. Kansur Developers India (P) Ltd 2007-08 26,00,000 2 M/s. KJS Realtors (P) Ltd 2007-08 16,22,500 3 M/s. Jasuka Developers (P) Ltd 2008-09 5,99,970 4 M/s. KJS Realtors (P) Ltd 2008-09 10,02,475 5 M/s. Jaico Realtors (P) Ltd 2008-09 9,99,970 6 M/s. Snowshine Realtors (P) Ltd 2008109 4,99,975 7 M/s. Kansur Realtors (P) Ltd 2008-09 ....
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.... 3,000 19,075 2006 77,836 16,50,264 (15,68,428) Net 6,42,46,255 6,09,37,9 33,12,256 5.3 The learned AO has stated that, when Mr. Samyak Veera net income for the years from 2000 to 2006 is only $ 33,12,256, how he could have invested in share capital an amount of $ 5,33,41,067 in various companies. 5.4 In this regard. Ld. A.R. submitted that in respect of the above chart the position of income of Mr. Samyak Veera was based on the Income Tax returns filed by him in US as on date of completion of assessment orders. Subsequently the Internal Revenue Service (IRS) of US has disallowed the claim of losses stating that "based on the fact that the disallowance of $ 57600000 currency option losses would result in substantial under statement of income tax for the year 2003. In support of disallowance of loss claimed of $ 576.00.000 by Mr. Samyak Veera a notice of final partnership administrative adjustments issued by Department of Treasury Internal Revenue Service. USA which is furnished as an annexure to written submission. 5.5 The ld. A.R. submitted that since Ld. D.R. alleged that, the tax returns filed by Mr. Samyak Veera shows that he has no sufficien....
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....Samyak Veera, Pensacola PFI Corp and Lexington Avenue Trust. On 15th April, 2003 membership interests were transferred and additional funds were contributed to Gamma Trading Partners, LLC such that it was owned 100% by Park Avenue Trust, Lexington Avenue Trust and Pensacola PFI Cor. Each (1) Park Avenue Trust (2) Lexington Avenue Trust and (3) Pensacola PFI Corp, were in turn 100% owned by Mr. Samyak Veera. As such, any gains or losses from Gamma Trading Partners flowed through Park Avenue Trust, Lexington Avenue Trust and Pensacola PFI Corp and in turn onto Mr. Samyak Veera personal tax return. In 2003, M/s. Gama Trading Co., has filed an Income Tax return reporting a loss of $ 57,600,000. 5.9 The ld. AR further submitted that investment in share capital made by Mr. Samyak Veera includes items which are not part of present pending appeals before the Tribunal. Hence deserves to be deleted from the Chart. The details are as under: (i) Sl. No. Name of the company Asst. Year Share capital amount given in USD 1 M/s. Kansur Develppers India (P) Ltd 2007-08 26,00,000 2 M/s. KJS Realtors (P) Ltd 2007-08 16,22, 500 3 M/s. Jasuka Develop....
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....ilable for investment. Mr. Samyak Veera was a partner in various partnership firms (LLP) and LLC. the list of which was furnished along with his US Income Tax Returns to the Assessing Officer and also before the Commissioner of Income Tax (Appeals). Most of the LLCs are 100% owned by Mr. Samyak Veera. At the beginning of 2003 M/s. Gama Trading Partners LLC, was owned 100% by Mr. Samyak Veera, Pensacola PFI Corp and Lexington Avenue Trust. On April 15, 2003, membership interests were transferred and additional funds were contributed to Gamma Trading Partners, LLC such that it was owned 100% by Park Avenue Trust, Lexington Avenue Trust and Pensacola PFI Corp. Each of these entities i.e., (1) Park Avenue Trust (2) Lexington Avenue Trust and (3) Pensacola PFI Corp, were in turn 100% owned by Mr. Samyak Veera. As such, any gains or losses from Gamma Trading Partners flowed through Park Avenue Trust, Lexington Avenue Trust and Pensacola PFI Corp and in turn onto Mr. Samyak Veera personal tax return. In 2003, M/s. Gama Trading Co., has filed an Income Tax return reporting a loss of $ 57,600,000. This claim of loss has been rejected by the IRS and disallowed stating as under: - -I....
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....T ORDER IN REGARD TO CREDIT WORTHINESS OF SRI. SAMYAK C VEERA. 5.13 Further, the Ld. A.R. submitted that the Assessing Officer sought for statement of affairs during the course of assessment proceedings and only for the reason that, such statement of affairs was not furnished. concluded that the remitter Sri. Samyak C. Veera does not have the sources for investment. 5.14 On this issue the Ld. A.R. submitted the following before us:- 1) At the outset, under law the source for the source is not required to be proved in regard to the creditworthiness of the investor. Ld. A.R. relied on the following decisions wherein it is held that, the source for the source and origin for the origin need not be proved by the investor. i) Tolaram Daga V. CIT (1966) 59 ITR 632 (Assam) ii) CIT V. Daulat Ram Rawatmull (1973) 87 ITR 349 (SC) iii) Sarogi Credit Corporation V. CIT (1976) 103 ITR 344 (Pat) 5.19 (i) In the present case the appellant has not only proved the source but also the source of the source. The investor Mr. Samyak C. Veera has accepted the investment. It is open for the department to initiate enquiries in his case. The revenue cannot ....
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....nt balances in the bank accounts. In many of the cases the sources for remittances to these bank accounts have also been established. Mr. Samyak C. Veera has confirmed the transactions. Under the circumstances, the following conditions which are requirement of proving the transactions are satisfied. (a) The identity of the investor is established, since the said investor has confirmed the investment. (b) The genuineness of the transaction is established for the reason that, all the transactions are through banking channels and FIRC have been furnished. (c) Evidences in regard to the sources of the investor have been furnished. The revenue is only misinterpreting the fact of notional claim of loss which perhaps was allowable under US laws as actual loss and denying to accept the source. This position is factually incorrect and the US authorities have also denied allowance of such loss. 5.15 In the light of the above position of law as confirmed in the various decisions listed out hereunder the Ld. A.R. submitted that the sources for investment are proved, the genuineness of the transaction established and the onus cast on the assessee is established. ....
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....xix) Commissioner of Income Tax V. Shiv Dhooti Pearls & Investments Ltd (2015) 64 Taxmann.com 329 (Delhi) (xxx) Nemichand Kothari V. CIT (2003) 264 ITR 254 (GUJ) (xxxi) Modi Creations (P) Ltd V. ITO (2013) 354 ITR 282 (Delhi) (xxxii) Kale Khan Mohd. Hanif V. CIT (1963) 50 ITR 1 (SC) (xxxiii) CIT V. United Commercial and Industrial Co (P) Ltd (1991) 187 ITR 596 (Cal) (xxxiv) CIT V. Precision Finance (P) Ltd (1994) 208 ITR 465 (Cal) (xxxv) CIT V. Lachman Dass Oswal (1980) 126 ITR 446 (P & H) (xxxvi) Jiyajirao Cotton Mills Ltd V. CIT & EPT (1958) 34 ITR 888 (SC) (xxxvii) CIT V. Sakarlal Balabhai (1968) 69 ITR 186 (Guj) affirmed by Hon'ble Supreme Court in CIT V. Sakarlal Balabhai (1972) 86 ITR 2 (SC) (xxxviii) Mc.Dowell & Co., Ltd V. CTO (1985) 154 ITR 148 (SC) (xxxix) DCIT, Circle-16(1), Hyderabad V. Madhusudan Rao (2015) 57 Taxmann.com 262 (Hyd-Trib) (xl) Gulshan Verma V. DCIT. Yamunanagar (2015) 61 Taxmann.com 178 (Chandigarh-Trib) (xli) Sahara India Financial Corporation Ltd V. DCIT, Central Circle-6, New Delhi (2014) 41 Taxmann.com 251 (Delhi-Trib) (xlii) CIT V. (i....
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....ts proved the identity of remitter and also the source of the remittance. The onus cast on the assessee has been discharged and the transactions are genuine. Being so, there was no reason to believe that the income chargeable to tax has escaped assessment. The fact that the remitter being a proclaimed tax offender in USA does not prove that he does not have any sources. On the contrary, it is the case of the authorities in USA that the remitter has substantial income but no tax paid. This information cannot form a basis to believe to prove that the remitter has enough sources. Before us, assessee furnished its written submissions along with following documents:- 1. Copy of Standard Chartered Bank account No. 88-7008167-0 of Shri Samyak C. Veera showing the deposit and withdrawal from that account. (PB 59-61) 2. Copies of FIRC in support of remittance (PB 62-63) 3. Confirmation dated 1.7.2008 from VP Bank confirming the KYC of Shri Samyak C. Veera (PB 64) 4. Copies of US IT Returns of Shri Samyak C. Veera for the AYs 2000-01 to 2006-07 (PB 65-107) 6.1 Thus, according to the Ld. A.R., these financial statements along with bank accounts of Shri S....
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....gh banking channel. In the hands of the assessee the money stood transferred from the bank account of Shri Samyak C. Veera in Standard Chartered Private Bank, Singapore to Indian Bank. It is evidenced from page 62 from the following certificate issued by the Indian Bank, which reproduced hereunder:- This confirmation letter was also produced by the assessee before the authorities. 6.3 Thus, to summarize, assessee furnished all the supporting documents to prove the genuineness of the amount received by the assessee in the form of share capital and share premium. Further, as per CBDT Circular No. 5 dated 20.2.1969, which reads as follows:- "Money brought into India by non-resident for investment or other purposes is not liable to Indian Income-tax. Therefore, there is no question of a remittance into the country being subjected to Income-tax in India (Para 2). If the money has been brought into India through banking channels or in the form of assets like plant and machinery or stock-in-trade, for which the necessary import permits had been obtained, no question at all are asked by the ITOs as to the origin of the money or assets brought in (Para 3)." 6.4 It is perti....
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.... No. 547, 549, 555/2013) wherein the Hon'ble High Court affirmed the judgement of the Tribunal by holding as under:- 9. "It then concluded that xxxx xxxx xxxx xxxx "15. Next ground for AY 2005-06 pertains to addition of Rs. 5 lacs bing unsecured loans received by the assessee from M/s. Claridges SEZ Pvt. Ltd., as assessing officer held that creditworthiness of M./s. CSEZ was not established as the assessee had not produced the bank statements. xxxx xxxx xxxx xxxx 17. We have heard rival contentions and perused the relevant material on record. We find merit in the arguments of Id. Counsel that CSEZ also being searched on the same date and the seized record being with the department, department could have verified the same from its record. The interest of justice will be served if the issue is remitted back to the file of assessing officer to verify from the seized record about the bank statement of CSEZ and decide the issue after giving the assessee fair and reasonable opportunity of being heard. The assessee may be allowed to submit necessary evidence in this behalf. This ground of the assessee is allowed for statistical purposes. ....
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....y out thorough investigations. But if the Assessing Officer 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. xxxx xxxx xxxx xxxx 16. In this analysis, a distillation of the precedents yields the following propositions of law in the context of Section 68 of the Income Tax act. The assessee has to prima facie prove (1) the identity of the creditor/subscriber; (2) the genuineness of the transaction, namely: whether it has been transmitted through banking or other indisputable channels: (3) the creditworthiness or financial strength of the creditor/subscriber: (4) If relevant details of the address or PAN identity of the creditor/subscriber are furnished to the Department along with copies of the Shareholders Register, Share Application Forms, Share Transfer Register etc. it would constitute acceptable proof or acceptable explanation by the assessee. (5) The Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices: (6) the onus would not. stand discharged if the....
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.... against the Revenue and in favour of the assessee. The order of the Tribunal is, therefore, affirmed." 6.6 The Madhya Pradesh High Court in the case of CIT vs M/s. Peoples General Hospital (MAIT No. 27/2008 dated 27 June 2013) wherein the Hon'ble Court dismissed the appeals of the Revenue as to the matter of proving the identity and creditworthiness of the person providing share application money. The relevant observation of the Hon'ble Court is as under:- ''16. The aforesaid judgement has been followed by all the judgements relied on by the appellants relates to the period prior to the judgement of Lovely Exports. As the Apex Court has specifically held that if the identity of the person providing share application money is established then the burden was not on the assessee to prove the creditworthiness of the said person. The position of the present case is identical. It is not the case of any of the parties that M/s. Alliance Industries Limited, Sharjah is a bogus company or a non-existent company and the amount which was subscribed by the said company by way of share subscription was in fact the money of the respondent assessee. In the present case, the as....
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....ter did not end there. Assessing Officer took pains to verify from the internet and also from the website of the SEBI and came to the conclusion that the said company is one of the group companies of assessee listed as persons constituting group under Monopolies and Restrictive Trade Practices Act, 1969 and further noticed from the red herring prospectus of M/s. Lanco Infratech Limited, wherein this company was shown as single shareholder company of assessee as on 29-07-2006. This means the existence of the company is accepted by the authorities, not only by SEBI and other statutory authorities but even by the Assessing Officer, as can be seen from the enquiries conducted. We are unable to understand how the Revenue could raise ground on existence of the above company in Ground No. 7 about the identity of the company when Assessing Officer himself acknowledged the same in the assessment order. 11. Coming to the creditworthiness of the amount, assessee's explanation is that the amounts were transferred from his own bank account in Mauritius to the NRI account in India. Therefore, the immediate source of funds is his own account from Mauritius which is not disputed. If f....
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....ssee in support of his appeal and the evidence/material requisitioned from an assessee by the first appellate authority with a view to have proper disposal of proceedings before him. While the provisions of rule 46A apply to the former, the same have no application to the latter. {Para 4] Provision of rule 46A enjoins upon the first appellate authority not to admit any fresh evidence unless he records in writing his reasons for its admission. Further, rule 46A enjoins upon him to provide the Assessing Officer with a reasonable opportunity to examine the fresh evidence or to cross examine the witness produced by the assessee or to produce any evidence or document or any witness ill rebuttal of the additional evidence produced by the assessee. {Para 5} The provisions of section 250(4), cm the other hand, empower the first appellate authority to make such further enquiry as he thinks fit or to direct the Assessing Officer to make further enquiry and report the result of the same. There are many judgments to the effect that in view of the provisions of section 250(4), the first appellate authority is duty bound to make an enquiry even if such an enquiry was not made b....
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....ase made out by the Assessing Officer or to help out the assessee against the findings of the Assessing Officer. The mere fact that the results of the enquiries thus conducted supported the case of the assessee and not that of the revenue, it has no bearing on the jurisdiction and powers of the Commissioner (Appeals). The Commissioner (Appeals) could have confronted the Assessing Officer with the evidence thus received and the material thus gathered and allowed the Assessing Officer to have his say in the matter and perhaps had he done so the dispute in question would not have arisen. But there is no requirement, in law, that the Commissioner (Appeals) should invariably consult or confront the Assessing Officer every time an additional evidence that was not before the Assessing Officer comes on the record of the Commissioner (Appeals). Where the additional evidence is obtained by the first appellate authority on its own motion, there is no requirement, in law, to consult/confront the Assessing Officer with such additional evidence. There may be cases where additional evidence is admitted by the first appellate authority on a request or application made by the assessee. In such case....
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....esent any investment, it is the assessee own money transferred from outside India a/c to Indian NRI A/c. Therefore, Unexplained Investment does not attracts. 69A: Unexplained Money The amount of Rs. 78,04,58,374/- is the credit appearing in the capital account of the assessee. The money transferred from his own foreign bank a/c to his own NRI A/c in India. This will not attract unexplained money. 69C: Unexplained Expenditure This section will not attract as no expenditure is involved. 17. Reference to the Board circular by Assessing Officer is also not correct as the same was extracted and was discussed in detail by the Ld.CIT(A). One cannot quote out the context to take a different meaning of the general circular issued by the Board. Ld.CIT(A) having examined that the principles laid down by the Board circular are clearly applicable to the facts of the case, we do not see any merit in Ground No. 15 raised by Revenue unless it is established that assessee has earned income in India or received in India. Provisions of Section 5 does not permit taxation of amounts remitted to India from sources outside India which are not incomes under the provisions of the Act. ....
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....rued to him in India, or it arose to him in India, or it is deemed to accrue to him in India, or it is deemed to arise to him in India. [para 14.1]. if a non resident person, having money in a foreign country, brings that money to India, through a banking channel, he cannot be called upon to pay income tax on that money in India, firstly, for the reasons stated above and secondly, because the remittance of money into India through banking channel will make, the onus on the assessee under section 69, discharged. [Para 14.2]. Once an amount is received as income, any remittance or transmission of that amount to another place does not result in receipt once again at other place, within the meaning of section 5. Therefore, if certain income, profits or gains was received by the assessee outside India it does not become chargeable to income tax in India by reason of that money having been brought into India. This is because what is chargeable is the first receipt of the money and not a subsequent dealing by the assessee with the said money. In that event the money is brought by the assessee as his own money which he had already received and had control over it and it does not take the c....
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....rrated in the Annexure look curious and suspicious makes no difference to the conclusions that have been drawn in this case, as per law. [Para 16.2]" ''19. In view of the legal principles as stated above, provisions of section 5(2) are also not applicable as the amount received is from assessee's own account outside India and no income has accrued or arisen in India. These funds were also received through banking channel with necessary statutory approvals. Therefore, assessee has proved the source of receipts and discharged the onus. It is the Revenue which failed in proving that this amount is unexplained income of assessee. In view of these facts of the case, we are of the opinion that various case laws relied on by the Revenue does not apply and they are clearly distinguishable. In view of this, we have no hesitation in upholding the order of the CIT(A) and rejecting the Revenue's grounds." 6.8 Thus, in our opinion, money has been credited into India through banking channel and the assessee as per Circular No. 5 dated 20.2.1969 the money brought into India by non-resident for investment or other purpose is not liable to Indian Income Tax in the hands of the prese....
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....004 and 2006 also, the net income was many times more than the amount of remittance received by the assessee from this remitter. Regarding the applicability of the judgment of Hon'ble Apex Court rendered in the case of Pr. CIT Vs. NRA Iron & Steel Pvt. Ltd. (supra), we find that in that case, the shares in question were issued at a very high premium at Rs. 190/- per share, even though the face value of the share was Rs. 10/- per share whereas in the present case, the premium received is only Rs. 50/- per share as against the face value of shares at Rs. 100/- per share. Hence the amount of such premium is 50% of the face value in question in the present case whereas the amount of premium in that case was 19 times of the face value of shares. It is also seen that in that case, it is noted by Hon'ble Apex Court in para 9 of the judgment that the AO made an independent and detailed enquiry, including survey of the so called investor companies from Mumbai, Kolkata and Guwahati to verify the credit-worthiness of the parties, the source of funds invested, and the genuineness of the transactions and the field reports revealed that the share-holders were either non-existent or lacked credit....
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....xamining the documents produced by the appellant during the course of assessment of which the copies were produced before the undersigned and considering the submissions of the appellant's representative, the findings on the above three issues are as under: - 1. Identity of the creditor In support of the identity of the creditor, the Income Tax returns of the creditor which was filed in United States of America has been produced, wherein USA Social Security No. and the citizen ship of the person has been disclosed. Further, the investigation wing of the department also verified the fact. The Assessing Officer has not given any findings against the identity of the creditor and has accepted the identity of the creditor. As far as the identity of the creditor is concerned there is no dispute. 2. Genuineness of the transaction The transactions are through banking channels. Copy of the foreign bank account through which the amounts have been remitted to the bank account of the appellant company has been furnished. The appellant has also furnished the Foreign Inward Remittance Certificates issued by recipient bank in supp....
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.... - Year ending Income determined in US$ Rate of conversion to INR Income in Indian Rupees 31.12.2000 141,86,897 46.75 66,32,37,435 31.03.2001 164,10,419 48.18 79,06,53,987 31.03.2002 291,14,644 48.03 139,83,76,351 Total 59,11,960 285,22,67,773 The Closing agreement of final determination covering specific matters in form 906 of department of treasury - internal revenue service, dated 31.10.2011 duly signed by Commissioner of Internal Revenue Service & Annexure to such closing agreement also discloses various entities in which Mr. Samyak Chandrakant Veera has invested and income earned has been placed on records. As Mr. Samyaka Chandrakant Veera has not paid tax demanded as per investigation wing of the department and same has been informed to the Assessing Officer that, he is a tax defaulter in USA It was argued by the AR that, the huge income earned by Mr. Samyak C Veera during those years was available with Mr. Samyak C Veera for investments till the disputes are closed in 2011 The Assessing Officer states that, the investment is in 2007-2008, whereas the evidences are for the years 2000....
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....ed that, the credit worthiness of the investor is also established. In view of the above facts and submissions, I hold that prima facie the identity of the investor is established, the genuineness of the transaction proved and also the credit worthiness of the creditor established. Under the circumstances, above, since the basic requirements for the provisions of section 68 of the act, were satisfied, there was no case for the Assessing Officer to invoke the provisions of section 68 of the act and consider the share capital of Rs. 4,06,98,779/- as income of the appellant. GROUNDS - 5 & 6 The grounds relate to the extent of proof that the appellant can be called upon to produce and the extent of onus cast on the appellant. The appellant's representative argues that, the following documents have been produced in support of the transactions. v) Copies of FIRCs issued by the receiving bank. vi) Copies of the foreign bank accounts in support of the moneys transferred. vii) Copy of the letter filed by the company for having received foreign inward remittances with RBI. viii)Copies of the Income Tax Retur....
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....ught to India by way of remittance. If such income is shown in the books of accounts of the assessee as in the present case, if the assessee is unable to prove the source of such credit, cannot be taxed u/s 5(2) of the Act, unless it is proved that such money is relatable to the income accrued or arising in India. In the present case, it is not the case of department that such money has been accrued or arising in India. The only contention of the Ld. AO/DR is that the assessee has not proved the sources of sources of credit. Therefore, in our opinion, the said impugned amount in all these cases cannot be taxed u/s 68 of the Act merely on the ground that assessees herein failed to prove the sources of sources of such credit. The Ld. AO/DR wanted to enlarge the scope of section 5(2) of the Act, which cannot be permitted. Further, the receipt of the above amount through banking channels remitted from foreign bank to bank in India. The receipt is supported by FIRC Certificates issued by the receiving bank. Sri Samyak Chandrakanth Veera is a non-resident and assessed to tax in United States of America. Confirmation dated 1.7.2008 from VP Bank confirming the KYC of Samyak Chandrakanth Ve....
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....id proviso, if an assessee company, in which public are not substantially interested, receives money by way of share capital or share premium or any such amount by whatsoever name called, then the source of funds of resident shareholder has to be established by the assessee in order to get out of the kin of the deeming provision u/s 68 of the Act. Hence, the proviso speaks of the source being established only when the shareholder is a resident of India. There is no such requirement, if the shareholder is a non-resident, therefore, the creditworthiness of the shareholders, if he is non-resident, does not have to be established by the assessee in respect of remittance received by him or it. Being so, in the present cases, only identity and creditworthiness of investor and genuineness of the transactions for explaining the credit in the books of account of the assessee is sufficient, and the onus does not extend to explain the source of funds in the hands of the investor. Thus, the proviso to section 68 of the Act is applicable to residents only, who are required to substantiate "source of source of funds". This additional burden cast upon by the proviso was not applicable to non-resi....