9911796707
TMI Blog2012 (7) TMI 624X X X X Extracts X X X X X X X X Extracts X X X X ..... is nothing but a design to bring in Assessee’s own unaccounted income into the books without payment of taxes. As AO had issued summons u/s 131 to the Managing Director but there was no compliance - the share application money received from the investors were forfeited by the Assessee and for which nothing is on record to prove that the notice was issued to investors to indicate the intention of the Assessee to forfeit the share application money - the assessee had received premium on the share to be allotted though it was a loss making company - A.O. has rightly added the amount to its income - against assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... and relatives. Subsequently, a survey u/s. 133A was carried out at the premises of the assessee in September, 2009 and at that time it was found that the assessee had forfeited the share application money of these 3 applicants though no correspondence with the applicants with respect to the intention of the assessee to forfeit was found of any nature. It was also noticed by the A.O. that the income declared by the companies was too small. The A.O. issued summons u/s. 131 to the Managing Director of the company to establish the identity of the share applicant companies but there was no compliance. The A.O. asked the assessee to produce the audited balance sheet, profit and loss account and the bank statement but the same was not produce. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as received through the banking channels and accordingly the CIT (A) has rightly deleted the additions made by the A.O. He further relied on the decisions of CIT vs. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195, Hindustan Inks & Resins Ltd. vs. DCIT (2011) 60 DTR (Guj.) 18. 5. We have heard the rival submissions and perused the material on record. The undisputed facts of the case are that the assessee is a private limited company and not a Public Limited Company in which the public are substantially interested. As per the provisions of Companies Act the Private Ltd. Co., cannot approach general public at large to raise its capital. The shareholders therefore are known to the management of the Company and are not strangers as in case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the bank accounts of the applicant company were also not made available for verification of the AO. The AO opined that the share applicant companies were very small income earning companies and even their not objecting to the forfeiture of Rs 10 lac each was surprising. As per the Companies Act 1956, certain procedures are prescribed for allotment of shares and also for the forfeiture of shares. Procedure has also been prescribed for increasing the authorised capital of the company. There is nothing on record to prove that the Assessee has complied with the prescribed procedures especially with respect to the increase in authorised capital and for forfeiture of the share application money. The Assessee has not placed any evidence to that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further the assessee had specifically invited the AO to carry out an enquiry and examine the assessment records of the share applicants whose income tax file numbers were given. Though the Ao had sufficient time to carry out the examination, he did not do so but put forth an excuse that the assessee company was taking several adjournments. This court observed that it is for the AO to manage his schedule and he should have ensured that because of the adjournments he did not run out of time for discharging the duties cast on him by law. It was held that when details were furnished by the assessee the burden shifted to the AO to investigate into the creditworthiness of the share applicants which he was unable to discharge. Thus the order of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out by the revenue authorities into the activities of such "entry providers". The existence with the AO of material showing that the share subscriptions were collected as part of a pre-mediated plan - smoke screen - conceived and executed with the connivance or involvement of the assessee excludes the applicability of the ratio. In our understanding, the ratio is attracted to a case where there it is a simple question of whether the assessee has discharged the burden placed upon him u/s 68 to prove and establish the identity and creditworthiness of the share applicant and the genuineness of the transaction. In such a case, the AO cannot sit back with folded hands till the assessee exhausts all the evidence or material in his possession and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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