1990 (11) TMI 183 - AT - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 20,22,200 to the income of the assessee.
2. Genuineness of the business and share subscriptions.
3. Application of Section 68 of the IT Act.
4. Validity of the disclosure under the Amnesty Scheme.

Detailed Analysis:

1. Addition of Rs. 20,22,200 to the Income of the Assessee:
The primary issue in the appeal was the addition of Rs. 20,22,200 to the income of the assessee, which was contested by the assessee on the grounds that the disclosure made under the Amnesty Scheme was genuine and should have been accepted by the Assessing Officer. The Assessing Officer, however, concluded that the entire share contribution was not genuine and thus, the disclosure was not full and true. The CIT(A) restricted the addition to Rs. 20,22,200, the amount actually received during the year, rather than the entire authorized capital of Rs. 40 lakhs.

2. Genuineness of the Business and Share Subscriptions:
The Assessing Officer found discrepancies in the books of accounts, lack of business operations at the registered office, and the non-existence of genuine shareholders. Statements from individuals involved indicated dummy roles and control by non-directors, leading to the conclusion that the share subscriptions were not genuine. The CIT(A) concurred with these findings, noting the absence of business activities and the failure of the assessee to provide evidence to clear doubts about the company's existence and operations.

3. Application of Section 68 of the IT Act:
The Revenue argued that Section 68 of the IT Act was applicable, which states that any sum credited in the books of an assessee, if unexplained, can be charged as income. The assessee failed to prove the nature and source of the credited amount satisfactorily. The Tribunal agreed that the onus was on the assessee to prove the source of the funds and that the Assessing Officer was justified in treating Rs. 12.5 lakhs as income based on the disclosure. However, for the entire amount collected, further enquiry was necessary to determine if it represented the assessee's income.

4. Validity of the Disclosure under the Amnesty Scheme:
The assessee argued that the disclosure was made in good faith under the Amnesty Scheme and should have been accepted. The Tribunal noted that the letters from the IT Department and CBDT referred to by the assessee were not formal circulars and were specific to investment and leasing companies, which the assessee was not. The Tribunal found that the assessee did not comply with the requirements of submitting lists of genuine and fictitious shareholders, thus failing to benefit from the said letters. The Tribunal emphasized that no addition could be made based on presumptions or surmises, and necessary enquiries should have been conducted by the Assessing Officer.

Conclusion:
The Tribunal set aside the orders of the lower authorities and remanded the matter back to the Assessing Officer for further enquiry. The Assessing Officer was directed to summon shareholders or gather other evidence to justify any addition, ensuring that the assessment was based on concrete findings rather than presumptions. The appeal was treated as allowed for statistical purposes.