TaxTMI 
TaxTMI 
2025 (6) TMI 1392
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....ation 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 various details including tax audit report in Form Nos. 3CA and 3CD along with....
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....menium 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 AADCC0385J 5,00,000 Cash 13. Country Wide Tradecom Pvt. Limited, 62, Nalini Seth Road, Kolkata-700007 AADCCO385J 36,00,000 Cash 14. Green Valley Mercantile Pvt. Limited, 62, Nalini Seth....
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.... 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. 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....
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....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 period. The Ld. AO examined the provisions of section 68 of the Act and held that the assessee had to establish the shareholders' identity, genuineness of the transaction and the creditworthiness of the shareholders but except for furnishing a list of 31 companies and an individual, the assessee did not furnish any evidence to prove its claim. In order to enquire and verify as to how the companies based in Kolkata had invested in a private limited company based in Guwahati, Shri Tapash Debnath, Managing Director of the assessee company was summoned u/s 131 of the Act for recording his statement u/s 131 of the Act and examining certain issues and his statement was recorded, who confirmed the names and addres....
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....e 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 Commodities Private Limited, (iii) Pusphanjali Tie-Up P Limited is a Director in 9(nine) other companies. c. Ashok Kumar Panday, Director of (i) M/s Tulip Goods Private Limited, (ii) M/s Ashamangal Vanijya P Limited is a Director in 67 (sixty seven) other companies. d. Sunil Kumar Jain, Director of (i) M/s Tulip Goods Private Limited, (ii) Srinu Vnimay Private Limited (iii) Improve Vintrade P Limited and (iv) Sreeyukta Mercantile Pvt limited is a Director in 8(eight) other companies. 3.3 According to the Ld. AO, the above facts indicated that these companies were only letter box companies having no actual existence and were created only to give accommodation entries to some companies in the form of share application mo....
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....e 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 the credit worthiness of the applicant. Thus, an addition of Rs. 8,50,45,030/- was made to the total income of the assessee and the total income was assessed at Rs. 9,50,41,130/-. 4. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) and also raised an additional ground relating to membership fee of Rs. 5,11,68,800/- which was credited under the head 'other income' in the profit and loss account for advance received from members against Service 86 FMCG Product but the same had not been provided due to the fact that full payment was not made and was wrongly included in the income and tax was paid thereon. The same was requested to be deleted and taken as liability of the assessee company. The Ld. CIT(....
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....oke 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 following: a. Hearing Dated 30.11.2012: Books of Accounts were asked to be produced (Paper Book Page 29); b. Hearing dated 06.03.2013: Documentary evidence pertaining to receipt of Share Application Money were asked for (Paper Book Page 32). * During the assessment proceedings recorded on 28.12.2012, where all details required under the 142(1) notice were furnished, the AO recorded that details furnished under Sl No 8 was in incomplete format and needed to be furnished again (Paper Book Page 31). It implied that other details were found satisfactory. * Full list of Shareholders was placed before the AO vide submission dated 28.12.2012 (Paper Book Page 35-38) to explain the addition to share premium. Also complete details of Share Applicants in the format required at Sl No 7 of the 142(1) notice dated 30.10.2012 was p....
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....anies 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 shareholders had already been examined in the scrutiny assessment for the AY 2009-10 and no adverse findings were recorded. * The CIT(A) has commented that the Appellant adopted a prevaricating and non-co-operative attitude before the learned AO. This is not at all borne out by the facts. Your honours kind attention is invited to the Order Sheet of the proceedings (Paper Book Page 27-33) which reveals that the Assessee has responded to each and every notice and has attended every hearing date. It has also furnished all information asked for. * The CIT(A) has also mentioned that the Assessee failed to produce the shareholders before the Assessing Officer for examination. Your honours would appreciate that there was never an occasion when attendance of the share applicants was demanded by the Assessing Officer. No notice u/s 131 or even under 133(6) were ever issued. There was therefore no cause for levelling th....
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.... 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 the issue of share capital, the assessee could not have known in what line the Assessing Officer intended to complete the assessment. * In the absence of opportunity, the appellant could not have produced any documents pertaining to the identity and creditworthiness of the share applicants and the genuineness of the transaction. Such opportunity was neither provided by the Assessing Officer nor by the Hon'ble CIT(A). The assessee company is in a position to discharge the onus once the burden is cast upon it. If permitted, the company would like to place such evidence before your honours. 3. Share Capital do not fall within the ambit of Section 68: * Another legal question which is relevant to the case is whether Section 68 can be invoked in the matter of Share Money at all. The law as existed at that point in time (before amendment made by Finance Act 2012) w.e.f. AY 2013-14) was what was laid down by the Apex Court in Commissioner of Income Tax vs. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195: (2008) 6 D....
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....oked into the claim. However, the claim was rejected by her based on incorrect appreciation of facts. 4. The following facts are laid down in this matter before your honours: a. The sum of 5,11,68,800/- was credited to the Profit & Loss Account for the year ended 31.03.2010 under the head Other Income in Schedule 15, and thus was offered for tax for the AY 2010-11. b. This sum represented advance received from subscribers of its business plans under name & style of "AWM PLAN" & AWM SAVIOUR PLAN" against which the subscriber was entitled to received certain products. The receipt issued against the same is clear proof of the same. It was thus a liability of the company which should have been included as such in the Balance Sheet instead of being shown as income. c. The terms of the plan, as printed in the plan brochure and also on the money receipt issued by the company (Paper Book Page 43-44) nowhere provide that the money will be forfeited if plan conditions were not fulfilled. The CIT(A) was wrong to hold that "On account of non-performance by the customer or below performance, the initial deposits have been forfeited." (Page 37 of CIT(A)'s Order). d. The CIT(A)'....
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....espect of 34 transactions amounted to Rs. 8,50,45,030/- as per the details from page 39 to 42 of the paper book filed. It was also argued that the Ld. AO had not issued any notice to the assessee or 2 the investors but made the addition. The Ld. CIT(A) vide page 15 gave opportunity to the assessee but there were riots in the office which led to misplacement of records and the same being beyond the control of the assessee, the details are required could not be filed and noticed out and placed in paper book 2 filed before us. It was requested that an opportunity may be provided to furnish the same before the Ld. CIT(A). 8.1 The Ld. DR on the other hand submitted that the Ld. CIT(A) has referred to Hon'ble Guwahati High Court's order and multilevel marketing and the initial deposits in 80 cases having been forfeited, the cases being filed against the assessee and the Directors and the money being siphoned off clandestinely which has been brought back in the books of accounts in the guise of share application money. 9. The Ld. AR further submitted in respect of Ground nos. 2 and 3 and the observation of the Ld. CIT(A) that Special Investigation Team (SIT) has yet not given any ve....
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....s: Sl. No. COMPANY NAME & ADDRESS PAN ITR (Rs.) 1. Amazing Sales Pvt. Limited, 20/2/A, M. D. Road, Kolkata- 700007 AAGCA2397B 857/- 2. Abhilasha Vyapaar Pvt. Ltd., 20/2/A, M. D. Road, 3rd Floor, Kolkata-700007 AAGCA2398Q 518/- 3. Ashamangal Vanijya Pvt Ltd. 20A, Maharshee Devendra Road, Kolkata-700007 AAGCA2448F 4. Victor Commodities Pvt Limited, 24/25, Becharam Chowdhury Lane, 4th Floor, Howrah-711101, West Bengal AACCV4477H 648/- 5. Topmost Tie-Up Pvt Limited 24/25, Becharam Chowdhury Lane, 5th Floor, Howrah AACCT6449F 1,051/- 6. Valentino Tradecom Pvt Ltd. 24/25, Becharam Chowdhury Lane, 5th Floor, Howrah, West Bengal-711101 AACCV4509L 7. Pushpanjali Tie-UP Pvt Limited, 2C, Imam Bux Lane, Kolkata- 700006 AAECP2158F 8. Basanti Tradecom Pvt. Limited 62, Nalini Seth Road, Kolkata -700007 AADCB1003E 713/- 9. Improve Vintrade Pvt Limited, 62, Nalini Seth Road, Floor, Howrah-711101 AACCI2544L 0 10. Plesant Sales Pvt. Limited, 62, Nalini Seth Road, Floor, Howrah-711101 AAECP2157L 860/- 11. Country Wide Tradecom Pvt Limited, 62, Nalini Seth Road, Kolkata-700007 AADCC0385J 896/- 12. Green Valley Mercan....
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....nn.com 668 (Calcutta) this issue has been discussed threadbare. Relevant paragraphs from the order of the Hon'ble High Court are extracted and reproduced as under: 14. Before we examine the correctness of the decision rendered by the learned tribunal it will be beneficial to take note of a few decisions which have elaborately dealt with Section 68 of the Act and what are the parameters which are required to be established to prove the creditworthiness or the genuineness of a transaction. 15. Mr. Om Narayan Rai, learned senior standing counsel appearing for the departments submits that though the assessee might have established the identity and creditworthiness of the share applicants at the relevant time but the third and the most important ingredient namely genuineness of the transaction has to be established and unless and until all the three factors are conjointly established, the revenue was fully justified in invoking Section 68 of the Act. 16. In CIT v. N.R. Portfolio Private Limited [2014] 42 taxmann.com 339/264 CTR 258/222 Taxman 157 (Delhi) the substantial question of law which was framed for consideration is whether the tribunal was right in deleting the additions u....
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....ness of the transaction. The beneficiaries, including the respondent-assessee, did not give any share-dividend or interest to the said entry operators/subscribers. The profit motive normal in case of investment, was entirely absent. In the present case, no profit or dividend was declared on the shares. Any person, who would invest money or give loan would certainly seek return or income as consideration. These facts are not adverted to and as noticed below are true and correct. They are undoubtedly relevant and material facts for ascertaining creditworthiness and genuineness of the transactions. 19. The doctrine of "Source of Source" or "Origin of Origin" was explained in the following terms:- 24. We are conscious of the doctrine of 'source of source' or 'origin of origin' and also possible difficulty which an assessee may be faced with when asked to establish unimpeachable creditworthiness of the share subscribers. But this aspect has to be decided on factual matrix of each case and strict or stringent test may not be applied to arms length angel investors or normal public issues. Doctrine of 'source of source' or 'origin of origin' cannot be ap....
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....s or by account payee instrument. It may, as in the present case required entail a deeper scrutiny. It would be incorrect to state that the onus to prove the genuineness of the transaction and creditworthiness of the creditor stands discharged in all cases if payment is made through banking channels. Whether or not onus is discharged depends upon facts of each case. It depends on whether the two parties are related or known to each; the manner or mode by which the parties approached each other, whether the transaction was entered into through written documentation to protect the investment, whether the investor professes and was an angel investor, the quantum of money, creditworthiness of the recipient, the object and purpose for which payment/investment was made etc. These facts are basically and primarily in knowledge of the assessee and it is difficult for revenue to prove and establish the negative. Certificate of incorporation of company, payment by banking channel, etc. cannot in all cases tantamount to satisfactory discharge of onus. The facts of the present case noticed above speak and are obvious. What is unmistakably visible and apparent, cannot be spurred by formal but u....
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.... have held that in the case of cash credit entries, it is necessary for the assessee to prove not only the identity of the creditors but also the capacity of the creditors to advance money, and establish the genuineness of those transaction. The initial onus of proof lies on the assessee. The decision in Roshan Di Hatti v. Commissioner of Income Tax (1977) 2 SCC 378 was referred to wherein it was held that if the assessee fails to discharge the onus by producing cogent evidence and explanation the assessing officer would be justified in making the addition back into the income of the assessee. 23. The decision in N.R. Portfolio Private Limited was quoted with approval wherein it has been held that creditworthiness or genuineness of a transaction regarding share application money depends on whether two parties are related or known to each other, or mode by which parties approached each other, whether a transaction is entered into through written documentation to protect investment or whether the investor was a angel investor, the quantum of money invested, the creditworthiness of the receipt, object and purposes for which payment/investment was made etc. The incorporation of a com....
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....step in order to pluck loopholes and in order to plug certain situation beyond doubts even though there were judicial decisions covering some of the aspects. It was pointed out that even prior to the introduction of Section 68 in the statute book, the courts have held that where any amounts were found credited in the books of the assessee in the previous year and the assessee offered no explanation about the nature and source thereof or the explanation offered, in the opinion of the ITO, not satisfactory, the sum so credited would be charged to income tax as income of the assessee during the relevant previous year. That Section 68 was inserted in the Act only to provide statutory recognition to a principle which had been clearly adumbrated in judicial decisions. Section 68 thus only codified the law as it existed before 01.04.1962 and did not introduce any new principle or rule. 26. We also take note of the Finance Bill, 2012 which brought about certain amendments to the Act with effect from the assessment year 20132014 wherein under the heading "Measures to Prevent Generation and Circulation of Unaccounted Money" it was pointed out that the onus of satisfactory explaining such c....
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....ny new principle or rule and when Section 68 was inserted in the 1961 Act it only provided a statutory recognition to a principle which had been clearly adumbrated in judicial decisions. Therefore, it was held that ratio laid down in the earlier judgments of the Hon'ble Supreme Court is equally applicable to the interpretation of Section 68 of the 1961 Act. Thus, we can very well refer to the objects behind amendment to Section 68 by Finance Bill, 2012 which has taken note of various decision of the court where the courts have drawn a distinction and emphasised that in case of private placement of shares the legal regime should be different from that which is followed in the case of a company seeking share capital from the public at large. 28. Having taking note of the above referred decisions and the legal principles if we revert back to the factual position in this case, we find that the CIT(A) has analysed the three principles which are required to be fulfilled namely identity, creditworthiness and genuineness of the transaction. It is not in dispute that the investors whose details we have referred in the earlier part of this judgment are all either group companies or hav....
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....2012. The CIT(A) has in the above manner examined the factual position and has analysed the pattern of the transactions in the bank accounts of the five investor companies to that of the assessee's bank account. They have received cheques from somewhere and has immediately issued in favour of another company and the balance remaining in the account was very meagre the bank account has been operated solely for the purpose of rotating money. 29. With regard to the other investor namely Mubarak Cosmetics Private Limited on perusal of the bank statements, it was found that the said company had transactions with the assessee between 23.07.2011 to 28.07.2011 and the entire sum remitted to the assessee by Mubarak Cosmetics Private Limited had come from Gainwell Textrade Private Limited. The bank statements of HIL Engineering was also thoroughly examined more particularly the pattern of transaction and it was held that the only apparent purpose for which the bank accounts have been used is to receive money from one account and transfer it to another. With regard to the investor Pavapuri Mercantile Private Limited the bank statements revealed that the entire sums are remitted by Pawap....
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....of the companies as to on what basis they arrived at the value of premium on shares to be issued as neither the assessee nor its investors had followed the guidelines of RBI or ICAI or any other guidelines for determining the rate of premium on their shares. Thus, the fixing of rate for premium is arbitrary and devoid of any financial or accounting rationale; the investors have not bothered to ensure protection of their investments; the investor company do not have any business operations worth noticing yet they have raised huge capital through issue of shares at a premium and also made investments in shares of other companies at a premium even though the other companies like them, did not have any promising business activities. Thus, on analysing the data which was available it is seen that each of the companies have invested in each other and the investments have been made by rotating funds from one account to another. The assessee has not been able to explain why the investors companies had applied for shares in the assessee's company at a high premium even though the face value of the share was Rs. 10/- per share. The pattern of transaction clearly shows that these investor....
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.... other director is the maternal uncle. Mr. Gopal Kumar Agarwala himself is one of the director in Pavapuri Mercantile Private Limited and another director is the sister of Mr; Agarwala. One of the directors of HIL Engineering Private Limited is the brother-in-law of Mr. Agarwala and one of the Directors of Mubarak Cosmetics Private Limited is the wife of Mr. Agarwala. Thus, the facts clearly show that the doctrine of "origin of origin" has to be applied in the case on hand and this exercise has been rightly done by the CIT(A) by lifting the veil and enquiring into the real nature of the transaction. The pattern of remittances made to the five investor companies and immediately thereafter to the assessee company clearly shows that the shares subscriptions were collected as a part of pre-meditated plan which has been conceived by the assessee. 33. The tribunal fell in error in holding that the CIT(A) has not pointed out any doubt or discrepancy with regard to the identity of the investors. The learned tribunal has posed a wrong question which has led to a wrong answer. The question is not whether the identity of the investor has to be established but the question was whether the in....
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....bmission when the assessee filed an appeal before the CIT(A) challenging the addition made by the assessing officer. This is evident from the grounds of appeal which have been set out in the order passed by the CIT(A) in paragraph 2.1 of the order dated 28.11.2019. The finding rendered by the tribunal is probably taken from the written submissions made by the assessee before the tribunal giving certain facts and figures regarding the expanding of business activities of the assessee. The assessee in their submission contended that their business activity has increased considerably and for the purpose of expansion funds were required and therefore the assessee raised funds from various means, increment in share capital from associates being one of them. The fact clearly demonstrates that the source of the funds which have flown into the account of the assessee have substantially come from one company namely Gainwell Textrade Private Limited and the said company had contributed to the other companies and the funds transferred to those companies were transferred to the assessee company invariably on the same day leaving a bank balance which was almost negligible and the bank statements....
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.... 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. 11.1 Further, in another case of Principal Commissioner of Income-tax v. One Point Commercial (P.) Ltd. [2024] 161 taxmann.com 737 (Calcutta) also, it has also been held as under: The impugned order passed by the Tribunal has recorded that from the bare perusal of the documents placed, it is revealed that all the share applicants are income tax assessee's, they are filing their income tax returns, share application form and allotment letter is available on record which were filed in response to the notice under section 133(6), share application money was made by account payee cheques, details of the bank accounts belonging to the share applicants and their bank statements have been furnished and all the share applicants are having substant....
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....chose to repose considerable faith in the commercial future of the assessee to trust them with huge sums of money. It was on a somewhat similar situation when the Hon'ble Jurisdictional High Court upheld the doubtful nature of share premium monies being given to companies having doubtful commercial credentials in the case of PCIT vs. BST Infratech Ltd. reported in [2024] 161 taxmann.com 668 (Calcutta). Hon'ble Calcutta High Court had occasion to observe that in the said case investors had no reason to invest huge amounts in business of that assessee and the entire transaction was done to circumvent the provisions of the Act. It has been held that the action of the assessing officer in treating such share application money u/s 68 of the Act as undisclosed cash credit was justified. The relevant portion from this order deserves to be extracted as under: "36. In Swati Bajaj, the court held that based on the foundational facts the 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 o....
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....ITR 938 (SC) laid down that the onus of proving the source of a sum of money found to have been received by an assessee, is on the assessee. Once the assessee has submitted the documents relating to identity, genuineness of the transaction, and creditworthiness, then the Assessing Officer must conduct an inquiry, and call for more details before invoking section 68. If the assessee is not able to provide a satisfactory explanation of the nature and source, of the investments made, it is open to the revenue to hold that it is the income of the assessee, and there would be no further burden on the revenue to show that the income is from any particular source. [Para 8.2] With respect to the issue of genuineness of transaction, it is for the assessee to prove by cogent and credible evidence, that the investments made in share capital are genuine borrowings, since the facts are exclusively within the assessee's knowledge. Merely, proving the identity of the investors does not discharge the onus of the assessee, if the capacity or credit-worthiness has not been established. [Para 8.3] The Assessing Officer ought to conduct an independent enquiry to verify the genuineness of the c....
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....urthermore, none of the so-called investor companies established the source of funds from which the high share premium was invested. v. The mere mention of the income tax file number of an investor was not sufficient to discharge the onus under section 68. [Para 12] The practice of conversion of un-accounted money through the cloak of Share Capital/Premium must be subjected to careful scrutiny. This would be particularly so in the case of private placement of shares, where a higher onus is required to be placed on the assessee since the information is within the personal knowledge of the assessee. The assessee is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the Assessing Officer, failure of which, would justify addition of the said amount to the income of the assessee. [Para 14] On the facts of the present case, clearly the assessee company - respondent failed to discharge the onus required under section 68, the Assessing Officer was justified in adding back the amounts to the assessee's income. [Para 15]" 5.3. It is seen that in another case on somewhat similar facts, the Hon'ble Calcutta High Court in the case of Ba....
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....s are likely to receive any dividend nor the assessee has carried out any valuation to justify the huge premium charged. Accordingly, the transactions relating to issue of shares are not genuine nor the creditworthiness of the creditors has been established. Hence in view of the decision of the Hon'ble Jurisdictional High Court in the case of PCIT v BST Infratech Ltd. (supra) and others and the discussion made out by the Ld. CIT(A) to demonstrate that the applicants are shell companies, there does not appear to be any justification to interfere with the order of the Ld. CIT(A) and his order is hereby confirmed and ground nos. 2 and 3 of the appeal are accordingly rejected. In the result, the appeal of the assessee is dismissed." 16. Since the entire share application money has been received in cash and the date of transaction was not even filed before the Ld. AO nor before the Ld. CIT(A) nor even now in the additional evidence filed before us, therefore, the documents are self-serving documents and on failure of the Director to appear before the Ld. AO when the examination was to be carried out and to subject himself to examination as there was non-compliance after partial recor....