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TMI Blog2010 (3) TMI 900X X X X Extracts X X X X X X X X Extracts X X X X ..... nha for the Respondent. ORDER I. S. Verma. Judicial Member - In this appeal the assessee has objected to the order ot the Commissioner of Income-tax (Appeals) dated June 1, 2007/ by way of following grounds : "1.The order passed by the learned Commissioner of Income-tax (Appeals)-II, Patna is unjust, unwarranted and bad in law. 2.The learned Commissioner of Income-tax (Appeals)-II, Patna failed to appreciate and/or overlooked and/or did not consider the submissions made by the appellant and as also the other facts of the case. 3.On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals)-II, Patna erred in upholding the addition in respect of share capital induction. 4.The appellant craves leave to add, amend, rectify, modify or otherwise alter any ground of appeal." 2. The brief facts relating to the issue involved in this appeal and as have revealed from the records are that the assessee had furnished its return of income for the assessment year 2003-04 on 19-11-2003 disclosing an income of Rs. 5,24,379. During the course of assessment proceedings, the Assessing Officer noticed that the assessee had shown to have received share capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh deposited Rs. 6,00,000 and Rs. 7,70,000 out of sale of agricultural produce out of which transfer referred in column 2 was made. Total 6,00,000 IV. Manish Kumar Singh Date Amount Source of investment 31-3-2003 2,00,000 Out of bank transfer from account No. 7093 of Sri Tarkeshwar Singh HUF on 31-3-2003. Nature of fund in flow in account No. 7093 has been explained in case of Rajiv Ranjan Singh of Rs. 2 lakhs. 31-3-2003 88,000 Transfer from bank account of Navganga distributors, C/2 Manna Singh Lane, North S. K. Puri, Patna, assessed with ITO, ward 5(3), Patna. Total 2,88,000 V. Sri Uday Pratap Singh Date Amount Source of investment 29-10-2002 73,000 Cash deposited in account Rs. 1,23,000 out of sale of agricultural produce. 31-3-2003 2,00,000 Transfer from bank account of Navganga distributors C/2 Manna Singh Lane, North S. K. Puri, Patna, assessed with ITO ward 5 (3), Patna". 4. The Assessing Officer thereafter deputed the inspector for making certain enquiries, who submitted his report on March 25, 2006, which reads as under : "To Deputy Commissioner of Income-tax, Circle 2, Patna. As directed by you to make an enquiry in the case of Gyan Ganga Dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks of account and vouchers of the mill. He got his statement recorder and gave answer to all questions related with the mill. All his statements and documents submitted have been subsequently ratified by Sri Shyam Prakash Saraogi, one of the directors of the company through an affidavit already filed earlier on February 24, 2006 before your honour. In the affidavit it is well mentioned that he is the person who has signed the income-tax return of the company. 4. The report further lays that 'Enquiry from the labourers present in the vicinity and the Munshi revealed . . .'. In this connection, we humbly submit that the inspector has enquired from munshi only about the owner of the mill and not on any other, matter. We request you to kindly refer affidavit filed by munshi before your honour on next date, i.e., March 23, 2006 (inspection was made on March 22, 2006) that the inspector has enquired about name of the owner. In that affidavit Sri Narayan Prasad has clearly affirmed that on any other matter he has denied to answer as 'Jarurat Nahi Samajhi'. He has also given his intention to answer any question of the authority. Therefore it is crystal clear that subsequent reporting o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce and they were not in a position to look after the agricultural activities. Therefore a family arrangement between father and uncles of Tarkeshwar Singh was made. The gist of that family arrangement was (i) agricultural income shall be enjoyed by late Janardan Singh; and (ii) the uncles shall enjoy their salary and other income alone. Neither the father shall have any interest in the income of uncles, neither the uncles shall claim any share out of fathers' income including those from agriculture. Uncle Sri Shyam Sunder Singh has died in early 1996 without having any child, after his death his widow Smt. Ragunath Pyari is living with us at Patna. Another uncle Sri Ram Singh had retired from service in 1987 and has no good health. He has also no male child. His two daughters were married in the year 1956 and 1975. Late Janardan Singh had added about 74 decimal lands for agriculture. Thus total ancestral land available for agriculture comes to about 46 acre. After the death of my father same scenario is continued and being elder Sri Tarkeshwar Singh became the karta of the HUF with 46 acre ancestral agricultural land, (Annexure-1 : Copy of all relevant papers showing 46 acre agric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the enquiries, came to the conclusion that not only the income in the hands of HUF was sufficient only to meet the expenses and no savings could be made by it. The Assessing Officer, thereafter, recorded his findings as per paragraph 3.11 of the assessment order and considered the whole of the receipt towards share capital as unexplained and added the same in the assessee's income. The relevant paragraph 3.11 reads as under : "3.11 After examining all the explanations and evidences submitted by the assessee, I hold that the assessees has failed to establish the genuineness of agricultural income claimed in the hands of Tarkeshwar Singh HUF to the extent claimed, and thus, failed to explain the sources of the investment in share capital to the extent of Rs. 40,06,362 claimed to be made out of the sale of agricultural produce to M/s. Shree Durga Roller Flour Mills Pvt. Ltd. As held above, the extent of agricultural income available to him is not sufficient to meet the personal and household expenses of Sri Tarkeshwar Singh and members of his HUF, and, therefore, not available for investment in share capital of the assessee-company." 8. Interest under sections 234B and 234C was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the amounts were transferred to the assessee-company by account payee cheques and that the shareholders had confirmed having subscribed to the share capital. Regarding creditworthiness, it was submitted that all shareholders have deposited cash in the respective savings bank account and the immediate source of such deposit was sale of agricultural produce. It was further submitted that the sale proceeds of the wheat was duly confirmed and supported by the books of account, vouchers, truck Nos., the statement of purchase director and affidavit of the director of the purchaser of the produce. It was further submitted that there is no finding by the Assessing Officer that the amount deposited in the bank accounts of the shareholders actually belongs to the assessee-company. It was submitted that the exercise done by the Assessing Officer, viz., HUF or other status, availability of land, produce, income, etc., are required to be done in case of assessment of the concerned HUF or individual assessee. The authorised representative for the appellant placed reliance on the cases of CIT v. Sachdeva Steel Rolling Mills [2002] 254 ITR 168 (Punj. & Har.); 173 CTR 431, CIT v. Heeralal Chaga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Singh (father of Tarkeshwar Singh) comes to only 13.57 acres as against 46 acres claimed to be land available with the HUF of Shri Tarkeshwar Singh. Therefore, the land in possession of the claimed HUF of Tarkeshwar Singh could only be sufficient to meet the personal and household expenses of the members of the HUF. It is further noticed that the quantum of sales of wheat was not commensurate with the agricultural lands in legal possession of the said HUF. It is also observed that the plea of sale of wheat to the flour mill at Gaya has been taken for the first time during the present assessment proceedings and no such plea was ever made either during assessment proceedings before the Assessing Officer or during appellate proceedings before the Commissioner of Income-tax (Appeals) for the assessment year 2001-02 even though transactions with Durga Flour Mills was claimed for the last 4 to 5 years. It is further noticed that the yield of vegetables as claimed by the assessee is without my official documentary basis and there is no evidence regarding cultivation and sale of vegetables and paddy. More so, no evidence of purchase of fertilizers or insecticides was furnished which is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut the hon'ble Tribunal Patna Bench deleted the addition as per the order dated February 5, 2009, passed in the assessee's appeal in I.T.A. No. 53 (Pat.) 2005 for the assessment year 2001-02 and for that purpose drew our attention to paragraphs 16, 17 and 18 of the Tribunal's order, copy of which has been placed on record, which are in the following terms : "16. We have considered the rival submissions and perused the material on record. In our considered view, the additions proposed by the lower authorities cannot be sustained. It is not in dispute that the shareholders, namely Shri Tarkeshwar Singh, HUF, Shri Bharat Singh, Shri Udai Pratap Singh and Shri Bijay Pratap Singh are existing assessees and directors/shareholders in the company. It is a case of increase in share capital. These persons have further made investment in the company and have claimed that it is coming out of agricultural operations of Shri Tarkeshwar Singh, HUF. In support of their claim, evidences of agricultural holdings have been filed which is not in dispute. Some evidences for carrying out agricultural operations are also filed. Though the extent of agricultural income claimed by them cannot be proved on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation of the assessee and added the amount to the taxable income of the assessee. The Tribunal found that the assessee had furnished complete details to the Assessing Officer regarding the transactions in question, which included confirmation, details of bank account and permanent account numbers of the parties in whose favour the share capital was subscribed. The Tribunal also noted that all the payments were received by the assessee by cheques and that the assessee had, in the process, fully discharged the onus that lay upon it for proving the identity of subscriber and the genuineness of the transactions. On that basis, it deleted the addition made by the authorities below. The hon'ble High Court held the deletion as justified and have said that no substantial question of law arises. 2. Shree Barkha Synthetics Ltd. v. Asst. CIT [2006] 283 ITR 377 (Raj.); [2005] 197 CTR 432. If the transactions are made through banking channels and once the existence of persons by name in the share applications in whose name the shares have been issued is shown, the assessee-company cannot be held responsible to prove whether that person himself has invested the said money or some other pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quiry. The hon'ble High Court relying upon the decision of the Delhi High Court reported CIT v. Steller Investment Ltd. [1992] 198 ITR 287 ; [1992] 105 CTR 107 which was upheld by the apex court in CIT v. Steller Investment Ltd. [2001] 251 ITR 263 ; [2000] 164 CTR 287 had held that the apex court has decided the issue in civil appeal and not in SLP. While deciding the SLP, it may not have amounted to confirmation of the reasoning given by the Delhi High Court, but as the apex court has decided the civil appeal expressing in agreement with the reasoning given by the Delhi High Court, it would amount to confirmation of the principles laid down by the Delhi High Court. The hon'ble High Court, held that in view of the settled legal position, the Tribunal was, therefore, not justified in remanding the matter to the Assessing Officer for further enquiries and ought to have decided the appeal on the merits. 8. The Income-tax Appellate Tribunal, Patna Bench judgment unreported in Asst. CIT v. Naba Metal P. Ltd. I.T.A. No. 336/Pat/2005, assessment year 2002-03 order dated April 13, 2007. Dismissing the Departmental appeal relying on the Third Member judgment of the hon'ble Jodhpur Bench in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orjahan's case [1999] 237 ITR 570 observed as under (headnote): "In the corresponding clause of the Bill which was introduced in Parliament, while inserting section 69 in the Income-tax Act, 1961, the word 'shall' had been used but during the course of consideration of the Bill and on the recommendation of the select committee, said word was substituted by the word 'may'. This clearly indicates that the intention of Parliament in enacting section 69 was to confer a discretion on the Income-tax Officer in the matter of treating the source of investment which has not been satisfactorily explained by the assessee as the income of the assessee and the Income-tax Officer is not obliged to treat such source of investment as income in every case where the explanation offered by the assessee is found to be not satisfactory. The question whether the source of the investment should be treated as income or not under section 69 has to be considered in the light of the facts of each case. In other words, a discretion has been conferred on the Income-tax Officer under section 69 of the Act to treat the source of investment as the income of the assessee if the explanation offered by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... state a case.' 56. In Addl. CIT v. Hanuman Agarwal [1985] 151 ITR 150 the hon'ble Patna High Court had observed as under (headnote) : Thus, after the assessee filed the confirmatory letter with the correct name and address of the creditor and the GIR number as well, the onus immediately shifted on the Department which was not discharged by the Department in this case. The deletion of the addition of Rs. 41,500 and allowance of interest on it by the Tribunal was, therefore proper.' Per Hon'ble Sushil Kumar Jha, J : Where an assessee gives the correct name, address and GIR number of the creditor, he has discharged his onus to prove the genuineness of credits in his accounts and unless a notice in due form under section 131 of the Act is issued by the Revenue authority to test the genuineness of the transaction or the capacity of the creditor to pay, the amounts cannot be assessed in the hands of the assessee.' "57. The hon'ble Delhi High Court in CIT v. Divine Leasing and Finance Ltd. [2008] 299 ITR 268 held as under (headnote) : In the case of a company the following are the propositions of law under section 68. The assessee has to prima facie prove (1) the identity of the cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gus shareholders, whose names are given to the Assessing Officer, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment, subject to the above, SLP is dismissed. 59. The Delhi 'D' Bench of the Tribunal in A-One Housing Complex Ltd. v. ITO [2008] 299 ITR (AT) 327 held that the onus on the assessee in the case of share capital by public issue was a lighter one and it would stand discharged if the identity of the share applicant was established. 60. In CIT v. Value Capital Services (P.) Ltd. [2008] 307 ITR 334 , I.T.A. No. 348 of 2008 decided on April 25, 2008 by the hon'ble Delhi High Court held that in case of a public limited company, iden tity of shareholders is sufficient for the purpose of discharging its initial onus. In this regard we refer to the judgment, in that case as under (page 335) : "The Revenue is aggrieved by an order dated June 13, 2007 passed by the Income-tax Appellate Tribunal, Delhi Bench 'C', New Delhi (the Tribunal) in I.T.A. No. 229/Delhi/2005 relevant for the assessment year 2001-02. The assessee had received an amount of Rs. 51 lakhs as share applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cribers. On appeal: Held, dismissing the appeal, that in the light of the concurrent findings of the appellate authorities, no substantial question of law arose for consideration. 62. In Uma Polymers (P.) Ltd. v. Deputy CIT [2006] 284 ITR (AT) 1 (Jodh.) it was held that in respect of share application money received from investors, the assessee has to prove only the existence of person in whose name the share application is received. No further burden is cast on the assessee to prove whether that person himself has invested the said money or some other person made the investment in his name. 63. In Shree Barkha Synthetics Ltd. v. Asst. CIT [2006] 283 ITR 377 , the hon'ble Rajasthan High Court held as under (headnote) : 'If the transactions are made through banking channels and once the existence of person by name in the share applications in whose name the shares have been issued is shown, the assessee-company cannot be held responsible to prove whether that person himself has invested the said money or some other person had made investment in the name of that person. The burden then shifts on the Revenue to establish that such investment has come from the asses-see-company its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee could not be considered unreasonable or not acceptable as the sum was credited in the books maintained by the assessee. The issue was factual in nature and no question of law which was the basic requirement for filing an appeal under section 260A was available.' 66. The hon'ble High Court in CIT v. Electro Polychem Ltd. [2007] 294 ITR 661 (Mad.) held as under (headnote) : 'The assessee filed its returns for the assessment years 1998-99 and 1999-2000. The Assessing Officer made additions in respect of the share application money under section 68 of the Income-tax Act, 1961, on the finding that the assessee had brought the undisclosed income by way of share applications in fictitious names and passed orders accordingly. On appeal by the assessee, the Commissioner (Appeals) deleted the addition made by the Assessing Officer for the assessment year 1998-99 and upheld the addition made for the assessment year 1999-2000. On further appeals by the assessee and the Revenue, the Tribunal allowed the appeal of the assessee and dismissed the appeal of the Revenue. On appeals : Held, dismissing the appeals, that even if it was assumed that the subscribers to the increased s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applicants to the assessee-company. Onus will shift to the Assessing Officer to rebut the explanation and counter the evidence furnished by the assessee-company.' 18. Thus, in the present case, identity of share applicants is beyond doubt and further that they have admitted to have given money to the assessee-company then onus is discharged by the assessee-company. The Assessing Officer thereafter having not brought any material on record to show that it was the assessee-company's money which was routed back as share application money, addition cannot be sustained in its hands. As a result, the addition of Rs. 40,48,400 sustained by the lower authorities is deleted." 12. Since the Revenue has not brought to our notice any fact or proposition of law contrary to that dealt with by the Tribunal in its decision in the assessee's own case dated 5-2-2009 (supra), we are of the opinion that the shareholders who have contributed the share capital during the previous year relevant to the assessment year 2003-04 before us as well as sources of investment being the same as were during the previous year relevant to the assessment year 2001-02, except the quantum, there is no reason for not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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