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TMI Blog2009 (12) TMI 722X X X X Extracts X X X X X X X X Extracts X X X X ..... the onus the moment it has furnished the permanent account number of shareholders, shareholder register, share application form, share transfer register, etc. But in the case of private placement it has to satisfy the AO about the genuineness of the transaction which in the instant case is highly doubtful as some of the applicants during the course of investigation by the Investigation Wing had confessed of having provided entry only. Thus the AO has reached a dead end of the enquiry and the onus has shifted on the appellant to produce the persons for verification. We find that as per section 282(1) a notice under this Act may be served on the person therein named either by post or as if it were a summons issued by a court under the Code of Civil Procedure, 1908. The notice can also be addressed in the name of a company to the principal officer thereof. Therefore the notice can be served in the name of a company either on the company itself or on the principal officer thereof. There is no denying fact that the notice was served on the company itself. Therefore, the same is within the provision of section 282(1) of the Act and hence valid. Accordingly ground is to be dismisse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice under section 143(2) of the Income-tax Act, 1961, is not addressed to the principal officer but is addressed in the name of company itself. (2) The addition of Rs. 1,50,00,000 made under section 68 on account of amount received by way of share capital is not sustainable. Originally this appeal was fixed for hearing on September 7, 2009, on that day counsel for the assessee filed a paper book and sought time. Accordingly the matter was adjourned on September 9, 2009. On September 9, 2009 none appeared on behalf of the assessee. Therefore with the help of the learned Departmental representative we have gone through the orders of the authority below as also the paper book. We now dispose of the appeal on the merits. The assessee-company is engaged in share trading in the year under consideration. In the course of scrutiny, the Assessing Officer noted that the appellant has introduced fresh share capital to the tune of Rs. 15,00,000 at a share premium of Rs. 1,35,00,000. The details of persons who are stated to have deposited share application money and to whom shares were allotted are as under : Sl. No. Name Amount (Rs.) 1. Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... powers of the Assessing Officer was not precluded from making enquiries in share application money, submitted that no addition can be made. The Assessing Officer however was not convinced with the submission of the appellant. He observed that it was only in the course of enquiry that he tried to examine the above share applicants. Since the summons issued to such persons remained unserved, it became the duty of the appellant either to produce them for verification or to state their correct addresses. It appears to be highly improper that in a private limited company the assessee is not in a position to state the exact whereabouts or fail to produce the persons who collectively hold more than 25 percent of its total shareholding. He also observed that mere filing of confirmation letters do not absolve the appellant from its onus to prove the credit entries reflected in its books of account as has been held by the hon ble Calcutta High Court in the case of CIT v. United Commercial and Industrial Co. P. Ltd. [1991] 187 ITR 596. He further observed that the facts that the amount were paid by account payee cheques do not make it satisfactory as held in CIT v. Precision Finance Pvt. Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional directors of such shareholders. In view of these facts and circumstances, the Assessing Officer concluded that the credit in the name of these shareholders are not genuine and represents unexplained cash credits. Accordingly he made addition of Rs. 1.50 lakhs to the returned income. Before the learned Commissioner of Income-tax (Appeals) the assessee raised the same grounds as now raised before us. As regards issuance of notice under section 143(2) the learned Commissioner of Income-tax (Appeals) held that the notice is addressed in the name of the company directly. The notice was received by the appellant and has also complied with the same notice. In view of section 292B the objection is to be rejected. As regards merit of addition the learned Commissioner of Income-tax (Appeals) held : 2.3.2. I have considered the submissions of the appellant very carefully. I have also gone through the case law on which the appellant has relied upon. Some of them which are most relevant are discussed here as under : 2.3.2.1 In the case of CIT v. Stellar Investment Ltd. [1991] 192 ITR 287 the hon ble Delhi High Court has observed as under (page 288) : It is evident that even i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The books of account of the assessee contained three cash credits aggregating Rs. 1,50,000 allegedly received as loans from three individual creditors under hundis. Letters of confirmation as well as the discharged hundis were produced ; but notices/summons sent to them remained unserved because they had reportedly left that address. The view of the Tribunal was that merely because the assessee could not produce these three parties, there was nevertheless no jurisdiction to draw an adverse inference. This approach has accorded approval by the Supreme Court in these words (page 84 of 159 ITR) : In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court while deciding the appeals by the consolidated order in the cases of CIT v. Divine Leasing and Finance Ltd. [2008] 299 ITR 268, CIT v. General Exports and Credits Ltd. [2008] 299 ITR 268 and CIT v. Lovely Exports P. Ltd. [2008] 299 ITR 268. In I. T. A. Nos. 53 of 2005, 56 of 2005, 305 of 2006, 880 of 2006, 953 of 2006, decided on November 16, 2006, on the above observation of the hon ble Supreme Court has given a very significant finding which is reproduced herein below (page 276 of 299 ITR) : This reasoning must apply a fortiori to large scale subscriptions to the shares of a public company where the latter may have no material other than the application forms and bank transaction details to give some indication of the identity of these subscribers. It may not apply in circumstances where the shares are allotted directly by the company/assessee or to the creditors of the assessee. This is why this court has adopted a very strict approach to the burden being laid almost entirely on an assessee which receives a gift. In the same order the hon ble Delhi High Court has again given the following observation which is very relevant and therefore reproduced as under (page 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application money with a huge premium especially when all these shareholders taken together hold more than 25 percent of shares. In a case of public issue it can be said that the appellant has discharged the onus the moment it has furnished the permanent account number of shareholders, shareholder register, share application form, share transfer register, etc. But in the case of private placement it has to satisfy the Assessing Officer about the genuineness of the transaction which in the instant case is highly doubtful as some of the applicants during the course of investigation by the Investigation Wing had confessed of having provided entry only. Thus the Assessing Officer has reached a dead end of the enquiry and the onus has shifted on the appellant to produce the persons for verification. 2.3.2.7. The decision of the hon ble Delhi High Court in the case of CIT v. Lovely Exports P. Ltd. [2008] 299 ITR 268 per se, is reproduced as under (page 286) : I. T. A. No. 953 of 2006 The Income-tax Appellate Tribunal has dismissed the Revenue s appeal and thus there are concurrent findings pertaining to the factual matrix. The following paragraph from the impugned decision adequa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to the effect that the assessee had, by its letter dated March 8, 1999, requested the Assessing Officer to examine the assessment records of the share applicants whose GIR numbers had been supplied. It is not controverted that action was not taken by the Assessing Officer, but it has justifiably been contended that this inaction was due to paucity of time left at that stage since the assessment had to be framed by March 31, 1999. It has been pointed out that several adjournments had been granted by the Assessment Officer on the asking of the assessee. The timing of the assessee s said letter is most suspect. Generally speaking, it is incumbent on the Assessing Officer to manage his schedule, while granting adjournments, in such a manner that he does not run out of time for discharging the duties cast on him by the statute. In the present case, the details had been furnished to the Assessing Officer much before March, 1999, but he failed to react to the shifting of the burden to investigate into the creditworthiness of the share applicants. Therefore, the appeal is dismissed. From perusal of the above decision again it is noticed that the hon ble High Court has allowed the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not able to produce them then it cannot be said that identity is established and in such situation the addition will be upheld. Shri Sanjay Kumar stated as evidenced by the order sheet entry that he will be able to state anything in this regard by February 9, 2009. Accordingly the appeal was refixed for hearing on February 9, 2009. Neither on February 9, 2009 anybody appeared nor any adjournment sought. Actually till date also nobody appeared with offer to produce these shareholders. In the circumstances I hold that identity of these shares subscribers itself is not established, the genuineness of transaction is already suspect and so the creditworthiness could not be established. In the circumstances, I have no option but to uphold the addition made by the Assessing Officer and reject the submission of the appellant. We have perused the orders of the authorities below and the grounds raised before us as well as the paper book filed. As regards objection to the notice issued in the name of the assessee, we find that as per section 282(1) a notice under this Act may be served on the person therein named either by post or as if it were a summons issued by a court under the Code o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to apply for and allot the shares. The company is prohibited from making any invitation for allotment of shares. How the premium was fixed is not forthcoming. Looking at the balance-sheet or past history of the assessee, the assessee-company has never declared dividend in the past. The company has no business plans which can raise its profitability in the near future. The income declared by the assessee is only by way of short-term capital gain and the assessee does not seem to have carried on any business. In such circum-stances the share premium is not found to be justified by any of the act on the part of the assessee. These facts are revealing more than the apparent shown on the paper. All these facts put together reveal that neither the identity of the share applicants are proved nor justification for share premium has been proved. In such circumstances the court cannot put blinker on the eye and look only at the papers presented before it. There is something more than that meets the eye. As rightly contended by the learned Departmental representative in such situation the observation of the hon'ble Supreme Court in the case of CIT v. Durga Prasad More [1971] 82 ITR 540 and i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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