TaxTMI 
TaxTMI 
2025 (6) TMI 1392
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....ther sources" on account of unexplained Share Application Money u/s 68 of Income Tax Act, 1961. 2. For that the Learned Commissioner of Income Tax (Appeals) erred in law in upholding the addition u/s 68 of Income Tax Act, 1961 when the pre-conditions for such addition did not exist in the present case. 3. For that the Learned CIT(A) has failed to appreciate the facts and circumstances of the claim for deduction raised before her in regard to liability of Rs. 5,11,68,800/- which was erroneously offered as Income by the appellant company and was thoroughly unjustified in disallowing the claim raised before her. 4. For that the appellant urges leave to raise any further/ additional ground at the time of hearing of the appeal." 3. Brief facts of the case are that the assessee company had e-filed the return of income on 06.06.2011 showing total income of Rs. 1,04,91,100/- which was processed u/s 143(1) of the Act and subsequently, the case was selected for scrutiny through Computer Assisted Scrutiny Selection (in short 'CASS'). Statutory notices u/s 143(2) and 142(1) of the Act were issued and duly served upon the assessee and the assessee filed var....
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....Road, Floor, Howrah-711101 AACCI2544L 35,00,000 Cash 4. Janpragati Merchants Pvt. Ltd. 15/2, Armenium Street, 2nd Floor, Kolkata-700 007 AACCJ0768K 40,00,000 Cash 5. Tulip Goods Pvt. Limited, BN-18/A, North Complex, 35, Lawrence Street, Uttarpara, West Bengal-712258 AACCT6422C 36,00,000 Cash 6. Tulip Goods Pvt. Limited, BN-18/A, North Complex, 35, Lawrence Street, Uttarpara, West Bengal-712258 AACCT6422C 5,00,000 Cash 7. Topmost Tie-Up Pvt Limited 24/25, Becharam Chowdhury Lane, 5th Floor, Howrah AACCT6449F 45,00,000 Cash 8. Victor Commodities Pvt Limited, 24/25, Becharam Chowdhury Lane, 4th Floor, Howrah-711101, West Bengal AACCV4477H 39,00,000 Cash 9. Valentino Tradecom Pvt Ltd. 24/25, Becharam Chowdhury Lane, 5th Floor, Howrah, West Bengal-711101 AACCV4509L 38,00,000 Cash 10. Basanti Tradecom Pvt. Limited 62, Nalini Seth Road, Kolkata -700007 AADCB1003E 35,00,000 Cash 11. Basanti Tradecom Pvt. Limited, 62, Nalini Seth Road, Kolkata- 700007 AADCB1003E 5,00,000 Cash 12. Country Wide Tradecom Pvt Limited, 62, Nalini Seth Road, Kolkata-700007 AADC....
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.....1 Even though the list is of 31 companies and one person however, it was submitted before the Ld. CIT(A) that it had received share application money only from 20 companies and the details are accordingly reworked out as under: Sl. No. COMPANY NAME & ADDRESS PAN AMOUNT Mode 1. Green Valley Sales Pvt. Limited 20, Maharshi Devendra Road, Kolkata-700007 AACCG8192Q 40,00,000 Cash 2. Green Valley Sales Pvt. Limited, 20, Maharshi Devendra Road, 4th Floor, Kolkata-700 007 AACCG8192Q 33,00,000 Cash 3. Improve Vintrade Pvt Limited, 62, Nalini Seth Road, Floor, Howrah-711101 AACCI2544L 35,00,000 Cash 4. Janpragati Merchants Pvt. Ltd. 15/2, Armenium Street, 2nd Floor, Kolkata-700 007 AACCJ0768K 40,00,000 Cash 5. Tulip Goods Pvt. Limited, BN-18/A, North Complex, 35, Lawrence Street, Uttarpara, West Bengal-712258 AACCT6422C 36,00,000 Cash 6. Tulip Goods Pvt. Limited, BN-18/A, North Complex, 35, Lawrence Street, Uttarpara, West Bengal-712258 AACCT6422C 5,00,000 Cash 7. Topmost Tie-Up Pvt Limited 24/25, Becharam Chowdhury Lane, 5th Floor, Howrah AACCT6449F 45,00,000 Cash 8. ....
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.... 28. Shreeyukta Merchants Pvt Limited, 9/12, Lal Bazar Street, Block-A, 1st Floor Room No. 9, Kolkata-700001 AAKCS0581R 38,00,000 Cash 29. Snehpushp Sales Pvt Limited, 20, MaharshiDevendra Road, Kolkata PIN-700007 AAKCS7275C 37,00,000 Cash 30. Shrinu Vinimay Pvt. Ltd. 132/1, M.G. Road, 4th Floor, Kolkata - 700007 AAKCSO436R 38,00,000 Cash 31. Snehpushp Sales Pvt Limited, 20, Maharshi Devendra Road, Kolkata PIN-700 007 AAMCS4127P 5,00,000 Cash 32. Geeta Debnath, Fatasil Ambari, Guwahati-78 008 AHZPD8105D 45,030 Cash 3.2 Thus, a sum of Rs. 8.50 Crore from 20 closely held companies based in Kolkata and another sum of Rs. 45,030/- from Geeta Debnath, an individual based in Guwahati which may be related to the Director of the company were received. The assessee could not furnish the date(s) of the receipt of share application money from the share applicants except for the list produced, the assessee could not file even a single documentary evidence to prove the identity and the creditworthiness of the shareholders and the genuineness of the transaction of the share application money received during the relevant p....
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....f the Ministry of Corporate Affairs and it was found that all the 31 companies were registered in Kolkata with meagre subscribed share capital and also these companies were formed during the last quarter of March, 2007. Further perusal of the LLP Master Data downloaded from the website of Ministry of Corporate Affairs shows that the status of most of the companies was "under process of striking off" which implied that either these companies were not filing their annual return with the ROC regularly or they had filed applications before the ROC for striking off their names. It was also noted by the Ld. AO from the website of the Ministry of Corporate Affairs that there were many common Directors in the above companies and some of the Directors of those companies were Directors in several companies. As an illustration, the names of following four Directors have been mentioned in the assessment order: a. Shri BiswanathGiri, Director of (i) Countrywide Tradecom P. Ltd. (ii) Kohinoor Commodities Private Limited, (iii) Pusphanjali Tie-up Limited is a Director in 41 (forty one) other companies. b. Lalit Jain, Director of (i) Countrywide Tradecom P Ltd, (ii) Kohinoor Comm....
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.... head was nothing but its own unaccounted money which was introduced in the garb of share application money. On considering the facts and the surrounding circumstances and applying the test of human probabilities, the Ld. AO concluded that it was highly improbable that companies from Kolkata would be investing such huge sums of money in the shares of an unlisted company when there are lots of avenues for investing their money in listed companies or other Govt./public securities. The transactions shown by the assessee in respect of the 31 companies' share applications could not be accepted as genuine as it was improbable under the test of human probabilities applied to the surrounding circumstances of the case in entirety. In view of the discussion made, a sum of Rs. 8,50,00,000/- from 31 companies was treated as bogus and was assessed as income from undisclosed sources invested in the garb of share application money in the name of other companies. Further, a sum of Rs. 45,030/- from Smt. Geeta Debnath, Guwahati was also treated as bogus and brought to taxation as undisclosed income of the assessee in absence of any documentary evidence to prove the genuineness of transaction and th....
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....tity, creditworthiness and genuineness. c) Owing to the failure of the assessee to discharge the primary onus, the Assessing Officer could not examine these parties under section 133(6). d) It is highly implausible that an unknown person had made substantial investment in a private limited company. e) The Appellant adopted a prevaricating and non-co-operative attitude before the learned AO. f) The Assessee failed to produced the shareholders before the Assessing Officer for examination. Submission: 1. The Hon'ble CIT failed to appreciate the fact that the burden of proving the nature and source of the cash credit had never been cast upon the assessee. There was no indication from the Assessing Officer at any stage of the assessment that he intended to invoke the provisions of Section 68. * Explanation of nature and source of the Share Application money was never asked for during the course of the assessment. * During the assessment proceedings Notice u/s 142(1) was issued on 30.10.2012 seeking details/explanations on 17 points. During the course of hearing, no further details were ever called for except the....
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....ed by the court was as follows: "3. The appellant filed its IT return for the asst. yr. 1946-47 showing a loss of Rs. 46,415 in the business. The ITO, Patna, however, in the course of the assessment noticed that the appellant had encashed high denomination notes of the value of Rs. 2,91,000 on 19th Jan., 1946. The ITO asked for an explanation which the appellant gave stating that these notes formed part of its cash balances including cash balance in the Almirah account." 2. The Hon'ble CIT(A) failed to appreciate the true facts of the case and confirmed the addition on totally wrong facts which negatively affected his judgement. * The CIT(A) in his order has commented that it is highly implausible that an unknown person had made substantial investment in a private limited company. However sir, a perusal of the list of Share Applicants shows that there were a total of 20 Applicant companies and one individual applicant. Of these 21, 13 were existing shareholders of the assessee company and only 8 companies were new investors (Reference is invited to lists attached at Paper Book Page 34-42). Furthermore, the share applications received from the existing....
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....ed is not known to him, because it was not furnished by the Assessee which could not have been the case if books had been actually examined. * Para 8 of the assessment order clearly states that the issue under enquiry has arisen from a study of the Balance Sheet of the assessee company which showed that the company had raised Share Application Money of Rs 8,50,45,030/- during the relevant period. It is an accepted position that a Balance Sheet cannot be equated with Books of Accounts in as much as it is a mere extract of the books as on a particular date. * Thus invoking Section 68 based merely on the Balance Sheet of the company is not in accordance with the law. 2. No Opportunity to explain Nature and Source of Credit: * The appellant, after having furnished details called for under the notice issued u/s 142(1), was never asked upon to explain the nature and source of the credit in the books of accounts. The question of making additions under Section 68 therefore does not arise at all. Failure to explain the nature and source can only will arise once such explanation is asked for. Since the scrutiny was a general scrutiny and not based on only ....
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....Rs. 5,11,68,800/- shown under the head other Income (Sch. 15 of Profit & Loss Account) which was liability of Company for Advance received from members against Service & FMCG Product but same has not been provided due to full payment was not made and wrongly included in Income and Tax paid thereon, same should be delete and taken as Liability of Assessee Company" 2. This claim was raised for the first time before the CIT(A) based on the following judicial precedents * CIT vs Motor Industries Co. Ltd. 229 ITR 137 (Kar) where it was held that The CIT (A) and ITAT can permit assessee to claim deduction not claimed before ITO when relevant material are an record. * Similarly Kolkata Branch of ITAT in the case of Kandi Industrial (P) Ltd V. DCIT (2006) 100 ITD 462 (ITAT KOL) held that if assessee entitled to certain relief, deduction or benefit, assessee should not be denied or deprived on it even if claim pertaining to some is made for first time before Tribunal during pendency of appeal before it. 3. The Hon'ble CIT(A) very kindly accepted the ground and looked into the claim. However, the claim was rejected by her based on incorrect appreciatio....
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....per book in which the notice issued u/s 142(1) of the Act has been filed. It was stated that at Sl. No. 7 the only query raised was regarding the details of share application money being the name and full postal address of the parties, PAN, date of receipt, amount received and mode of receipt and the details were duly furnished on 28.12.2012 vide page no. 34 of the paper book. However, a perusal of Annexure-B enclosed therein shows that while the date of allotment of shares is mentioned in respect of the 14 applicants as per the details of shareholder and share premium as 31.03.2010, the details of share application money is at page 39 to 41 of the paper book which mentions the date of application but the date of receipt of cash is not mentioned. It was submitted that the details of shareholder and share premium were filed and as per the details of shareholders it is observed that the amount invested being face value of shares of Rs. 100/- per share and except for the two promoters, premium of Rs. 900/- per share on the face value of Rs. 100/- was charged from 12 other applicants for total shares of 8000, while share application money has been received in respect of 34 transactions....
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....led to prove the genuineness, the creditworthiness and the source of the transactions as is mentioned at para 8.2 of the assessment order. The Ld. DR further stated that the investors had no source, and the MCA website showed that these companies were not filing their return. Further, the balance sheet and income-expenditure statement filed now before the Hon'ble Tribunal do not support the case of the assessee. 11. We have considered the submissions made and have also gone through the facts of the case and examined the paper books filed. The assessee has not given any cogent reason as to why the details which were available with him were not filed before the Ld. AO or even before the Ld. CIT(A) as regards the application for shares in the FY 2009-10 relevant for A.Y. 2010-11. 12. On the basis of the submission made all these are fresh evidences and therefore, in the absence of valid reasons for not submitting before the Ld. AO, the same are not liable to be accepted. 13. In the case of these 20 applicant companies the details of income in their returns filed is shown as under which has been compiled from the details filed the course of the appeal before us: Sl. No.....
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....arged, the whole transaction is a make-believe transaction. We also note that on the face value of Rs. 100/-per share, the assessee charged premium of Rs. 900/- without any supporting evidence. The share applicants are based in Kolkata while the assessee was in Guwahati and the entire share application money is claimed to have been received in cash. How the money moved Kolkata to Guwahati could neither be demonstrated before the Ld. AO nor before the Ld. CIT(A). 15. Similar issue arose in the case of Winsher Vinimay Pvt. Ltd. Vs. ITO, Ward-9(2), Kolkata in ITA No.1393/KOL/2018 for AY 2012-13 before the ITAT "A" BENCH KOLKATA in the order dated 06.08.2024 wherein reliance has been placed on a recent decision of the Hon'ble jurisdictional High Court in the case of Principal Commissioner of Income-tax v. BST Infratech Ltd. [2024] 161 taxmann.com 668 (Calcutta) to decide the issue of share premium treated as unexplained cash credit. The relevant extracts from the order are as under: "11. We have gone through the facts of the case, the written submissions filed by both the Ld. AR and the Ld. Sr. DR as well as the case laws cited. A similar issue came up for consideration bef....
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....should be adopted by the assessing officer when verification of facts is required cannot be laid down. The manner and mode of conducting assessment proceedings has to be left to the discretion of the assessing officer and the same should be just, fair and should not cause harassment to the assessee or third person from whom the confirmation or verification is required. 18. It was further held that the provisions of the Evidence Act are not applicable but the assessing officer being a quasi-judicial authority must take care and caution to ensure that the decision is reasonable and satisfies the cannons of equity, fairness and justice. The principle of Preponderance of Probability applies. On the question of creditworthiness and genuineness of the transaction in the said case, the Hon'ble Court recorded the following finding:- 19. On the question of creditworthiness and genuineness, it was highlighted that the money no doubt was received through banking channels, but did not reflect actual genuine business activity. The share subscribers did not have their own profit making apparatus and were not involved in business activity. They merely rotated money, which wa....
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....s required. Thus, no assessee should be harassed and harried but any dishonest facade and smokescreens which masquerade as pretence should be exposed and not accepted. 20. With regard to the identity, creditworthiness and genuineness of the transaction and the onus of prove the Hon'ble Court held as follows:- 30. What we perceive and regard as correct position of law is that the court or tribunal should be convinced about the identity, creditworthiness and genuineness of the transaction. The onus to prove the three factum is on the assessee as the facts are within the assessee's knowledge. Mere production of incorporation details, PAN Nos. or the fact that third persons or company had filed income tax details in case of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up. These facts indicate and reflect proper paper work or documentation but genuineness, creditworthiness, identity are deeper and obtrusive. Companies no doubt are artificial or juristic persons but they are soulless and are dependent upon the individuals behind them who run and manage the said companies. It is the persons behind the comp....
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..... 15 out of the 39 applicants procured the requisite funds by selling the shares and the rest of the applicants of shares, in the share capital of the assessee company, did not disclose the nature of receipt at their end though the source of funds were identified. Further the shares were offered to and subscribed by closely held companies owned by the promoter/director or their close relatives and friends. After noting the facts, the Hon'ble Court held that the identity of the alleged shareholders is known but the transaction was not a genuine transaction. The transaction was nominal rather than real; creditworthiness of the alleged shareholders is also not established because they did not have money of their own, each one of them received from somebody and that somebody received from a third person and therefore prima facie, shareholders are near namelenders. 22. In Principal Commissioner of Income Tax, (Central - 1) v. NRA Iron and Steel Private Limited (2019) 15 SCC 529 the issue which fell for consideration is when share capital/premium is credited in the Books of Account of the assessee company, the onus of prove is on the assessee to establish by cogent and relia....
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....n would not be established. In such a case, the assessee would not have discharged the primary onus contemplated by Section 68 of the Act. 24. In Principal Commissioner of Income Tax, Kolkata v. Swati Bajaj 2022 SCC Online Cal 1572 this court considered as to in what manner the allegation against the assessee has to be proved. It was held that to prove the allegation against the assessee, it can be inferred by a logical process of reasoning from the totality of the attending facts and circumstances surrounding the allegation/charges made and levelled and when direct evidence is not available it is the duty of the court to take note of the immediate and proximate facts and circumstances surrounding the events on which the charges/allegations are founded so as to reach a reasonable conclusion and the test would be what inferential process that are reasonable/prudent man would apply to arrive at a conclusion. It was further held that the proximity of time and prior meeting of minds is also very important factor especially when the income tax department has pointed out the unnatural rise in prices of the scripts of very little known companies. 25. While on this issue ....
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....al onus needs to be placed on such companies to also prove the source of money in the hands of such shareholders or person making payments towards issue of shares before such sum is accepted as genuine credit. If the company fails to discharge the additional onus, the sum shall be treated as income of the company and added to its income. Therefore, it was proposed to amend Section 68 of the Act to provide the nature and onus of any sum credited, as share capital premium etc. in the books of a closely held company shall be treated as explained only if the source of fund is also explained by the assessee company in the hands of the resident shareholders. However, even in the case of closely held companies, it is proposed that this additional onus of satisfactorily explaining the source in the hands of the shareholder, could not apply if the shareholder is a well regulated entity namely a Venture Capital Fund, a Venture Capital Company registered with SEBI. {emphasis supplied} 27. It is no doubt true that this amendment which was made to Section 68 applies in relation to the assessment year 2013-2014 and the subsequent years and it has been argued that the said amend....
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....04.06.2011, Divine Suppliers Private Limited deposited another sum of Rs. 60,00,000/- of which Rs. 50,00,000/- was remitted to the assessee on 06.06.2011. On 06.06.2011 Highlight Goods Private Limited transferred a sum of Rs. 10,00,000/- to this account by taking a closing balance to Rs. 23,08,819/-. On the same day an amount of Rs. 20,00,000/- was remitted to the assessee's account. On 06.06.2011 Divine Suppliers Private Limited RD Fashion transferred Rs. 25,00,000/- Rs. 38,00,000/- and Rs. 37,00,000/-to this account and out of this amount Rs. 1,00,00,000/- was remitted to the assessee's account in two transactions on 07.06.2011. On 14.06.2011, Magnificent Distributors Private Limited remitted an amount of Rs. 35,00,000/- to the account which was immediately transferred to the assessee's account. On 18.07.2011, Superior Retail Private Limited credited an amount of Rs. 50,00,000/- to the account which was remitted to the assessee's account on 19.07.2011. On 20.07.2011 amount of Rs. 30,00,000/- was received through RTGS in the account and the amount was transferred to the account of the assessee on the same day. On 02.01.2012 an amount of Rs. 40,00,000/- was deposited in....
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....nd found that the investors have purchased the shares of the assessee at a premium and all have shown similar characteristics, the revenue from operations are either nil or are negligible; the returns are either of loss or of insignificant income below taxable limit; they have been issued shares at very high premium without having earned any revenue from business operations; they have invested on shares at very high premium in companies who also have not earned anything from business operations; their balance sheet shows that even though they do not earn anything, they invite huge investments in their accounts and this money is used to make further investments at high premiums in other companies and they have also issued unsecured loans to other companies; money obtained from the route of share premium is rerouted for supplying sources of receipts of money to other companies; the circuit of investments remains within a group companies and in this manner through a circular routing of funds, the capital of each of the companies is enhanced and this inflated capital is then used for providing loans etc. to desired entities; the bank accounts show huge sums are received from one concer....
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....te that the company had requisite share capital resource. Various documents which were placed before the tribunal in the form of a paper book was submitted to the court for its perusal. {emphasis supplied} 31. In our view it is not required to show that the money which came to the assessee is ill gotten and what is required to be seen is whether the transaction was genuine. It may be true that the identity of the investor company has been established as they are registered with the Registrar of Companies and they are regularly assessed to income tax. Assuming without admitting that at the relevant point of time when the investor companies invested in the assessee company by purchasing shares at high premium, they had sufficient funds in the bank accounts, the question would be as to whether this by itself will establish the creditworthiness of the investor companies. This is a fit case where the doctrine of "source of source" or "origin of origin" should be made applicable. We say so because the CIT(A) has brought the evidence and the materials on record which manifestly show the involvement of the assessee as the Directors of the five investors companies and the Direct....
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....closely related to the director of the assessee company and the director Mr. Agarwala himself is one of the directors in one of the investor companies namely Pawapuri Mercantile Private Limited and the spouse of Mr. Agarwala is the director of Mubarak Cosmetics Private Limited, an investor company. Therefore, on a deeper scrutiny of the factual position would show that the investor company did not have a genuine creditworthiness and consequently the transaction has to be held to be not genuine. As held in N.R. Portfolio Private Limited (supra) whether or not the onus is discharged depends on facts of each case as well as it depends on whether the two parties are related or known to each other; the manner or mode by which the parties approach each other, the quantum of money, the object and purpose for which payment/investment was made. As held earlier certificate of incorporation of the companies, payment by banking channel etc. cannot tantamount to satisfactory discharge of onus and the facts of the case on hand speaks for itself as it is obvious. Thus, the principle of Preponderance of Probabilities applies with full force to the case on hand which leads to the irresistible concl....
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....he department has adopted the concept of "working backward" leading to the assessee. The department would be well justified in considering the surrounding circumstances, the normal human conduct of a prudent investor, the probabilities that may spill over and then arrive at a decision. 37. Thus the CIT(A) was right in adopting a logical process of reasoning considering the totality of the facts and circumstances surrounding the allegations made against the assessee taking note of the minimum and proximate facts and circumstances surrounding the events on which charges are founded so as to reach a reasonable conclusion and rightly applied the test that a reasonable/prudent man would apply to arrive at a conclusion. On facts we are convinced to hold that the assessee has not established the capacity of the investors to advance moneys for purchase of above shares at a high premium. The credit worthiness of those investors companies is questionable and the explanation offered by the assessee, at any stretch of imagination cannot be construed to be a satisfactory explanation of the nature of the source. The assessee has miserably failed to establish genuineness of the transacti....
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.... It is stated that there is no complaint either from the end of the assessee-company or from the end of the alleged subscriber company. This finding recorded by the Assessing Officer as affirmed by the Commissioner (Appeals), if required to be set aside by the Tribunal, reasons have to be assigned. Therefore, the conclusion arrived at by the Tribunal is insufficient to support its ultimate conclusion in allowing the assessee's appeal. Therefore, the matter has to be remanded back to the Tribunal for fresh consideration. [Para 4] Accordingly, the appeal is allowed. The order passed by the Tribunal is set aside and the matter is remanded to the Tribunal to take a fresh decision on merits and in accordance with law and pass a reasoned order. [Para 5] 11.2 Both the decisions are squarely applicable to the facts of the case. Similar issue also came up before the ITAT Kolkata Bench for the case of Nexcare Agency Pvt. Ltd. Vs. ITO Ward 7(1), Kolkata, dated 26.07.2024. The relevant extract of the aforesaid order is as under: 5.1. The profit and loss account filed by the assessee paints a grim picture about the qualitative aspect of commercial activity which does ....
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....imagination cannot be construed to be a satisfactory explanation of the nature of the source. The assessee has miserably failed to establish genuineness of the transaction by cogent and credible evidence and that the investments made in its share capital were genuine. As noted above merely proving the identity of the investors does not discharge the onus on the assessee if the capacity or the credit worthiness has not been established 38. In the light of the above discussion, we hold that the assessee has failed to discharge legal obligation to prove the genuineness of the transaction and the credit worthiness of the investor which has shown to be so by a "round tripping" of funds. For all the above reasons, the revenue succeeds. 39. In the result the appeal is allowed, the order passed by the learned Tribunal is set aside and the order passed by the CIT(A) dated 28.11.2019 is restored and the substantial questions of law are answered in favour of the revenue." 5.2. We also draw considerable strength from the case of PCIT vs. NRA Iron & Steel (P.) Ltd. reported in [2019] 412 ITR 161 (SC) in which share application money was approved for action u/s 68 of t....
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.... the investment in question, to the satisfaction of the Assessing Officer, so as to discharge the primary onus. ii. The Assessing Officer is duty bound to investigate the creditworthiness of the creditor/ subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of namelenders. iii. If the inquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack credit-worthiness, then the genuineness of the transaction would not be established. In such a case, the assessee would not have discharged the primary onus contemplated by section 68. [Para 11] In the instant case, the Assessing Officer had conducted detailed enquiry which revealed that: i. There was no material on record to prove, or even remotely suggest, that the share application money was received from independent legal entities. The survey revealed that some of the investor companies were non-existent, and had no office at the address mentioned by the assessee. The genuineness of the transaction was found to be completely doubtful. ii. The enquiries revealed that the inve....
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....ants who did file certain documents, were not sufficient in the eyes of law to discharge the burden cast on the assessee regarding proving the genuineness of the transaction. The profit and loss account statement extracted (supra) would normally paint a grim picture to any prudent investor, however, in this case it seems to have encouraged 11 entities to transfer huge sums of money by way of share premium. 6.1. Considering the case laws cited (supra) the financial health of the assessee and the inadequate discharge of onus, we hold this case to be a fit case for application of Section 68 of the Act and thereby confirm the impugned addition. 12. Having considered the submissions filed, the facts of the case and the judicial pronouncement discussed above, there is no justification for the huge premium charged by the assessee nor the assessee has been able to establish the same before the Ld. AO nor even before the Ld. CIT(A). As discussed above, mere identity of the creditor is not sufficient but the genuineness of the transaction as well as the creditworthiness of the creditor has to be established which the assessee has miserably failed to do. The onus is heavy on....