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TMI Blog2012 (12) TMI 762X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. The assessee felt aggrieved and appealed to the Commissioner of appeals. In the appellate proceedings, the Commissioner sought for a remand report which was furnished to him. The remand report dated 06-11-2009 - a fairly elaborate document which analyzed in meticulous detail the contentions of the assessee and the materials on the record, to the extent it is relevant for disposal of the present appeal reads as follows: "Vide the said summons u/s 131 the said parties were required to furnish the following details/information on 07.11.2009; 1. personal deposition 2. To produce books of account alongwith complete bills & vouchers for the period 01.04.2003 to 31.03.2004. 3. Statement of all the bank accounts related to your company for the period 1.1.2003 to 31.3.2004. 4. Please explain whether you still in possession of the shares allotted by M/s N.R. Portfolio Pvt. Ltd. If not then to whom the said shares have been sold and the date and details thereof alongwith the supporting document. On 23.10.09 the A.R. of the assessee appeared but Shri Chaurasia did not attend. On 30.10.09 Shri Prakash Gupta, A.R. attened and sought adjournment to file reply and he was asked to produce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han Coop Industrial Estate to A-15, B-1 Extn. Mohan Co-op Industrial Estate. These contradictory versions are not reliable and the contention of the assessee made before the CIT(A) that it had shifted its corporate office from A-46 Mohan Co-op during the period when the proceedings u/s 147/148 were initiated is not acceptable at all. ....................... .............................. ...................................... From a perusal of these shares allotment letters it is seen that these letters of allotment of shares are dated 18.2.2004 but the same have been sent to these parties only on 15.6.2004 i.e. after a period of about 4 months from the alleged date of allotment of shares to these parties In para 4(g) the assessee has stated that "it has not paid any dividends to the shareholders". It is quite interesting to note that the assessee company is receiving interest and dividends on investment and loans made by it but it has not paid any dividends to the alleged shareholders. In para 4(h) the assessee has stated that "in support of identity of Corporate share applicants, it has already furnished master details as available on MCA site of Govt. of India which proves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stors were entry providers and that the transactions entered by the assessee with them were bogus. They Commissioner also was of the opinion that they are assessing officer had not made any enquiries to establish that the investors had given accommodation entries to the assessee and that the money received from them was the assessee's own undisclosed income, rooted back to it in the guise of share application amounts. Furthermore, the Commissioner was of the opinion that no opportunity to cross-examine the deponents who had made statements during the course of investigation proceedings had been furnished. On account of these perceived infirmities in the approach and order of the AO, the adding back under Section 68 was directed to be set aside. The revenue appealed to the ITAT; the assessee also filed across objections on the ground that the reopening of assessment was unwarranted. The revenue's appeal was rejected by the impugned order; the cross objections were held to be infructuous and dismissed. The relevant discussion by the tribunal in its impugned order directed itself towards application of the Supreme Court ruling in Commissioner of Income Tax v Lovely Exports 216 CTR 195 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not pay dividends to the so-called shareholders from whom it received capital. Counsel relied on Commissioner of Income Tax v Divine Leasing and Finance Ltd 2008 (299) ITR 268, especially the following observations: "13. There cannot be two opinions on the aspect that the pernicious practice of conversion of unaccounted money through the masquerade or channel of investment in the share capital of a company must be firmly excoriated by the Revenue. Equally, where the preponderance of evidence indicates absence of culpability and complexity of the assessed it should not be harassed by the Revenues insistence that it should prove the negative. In the case of a public issue, the Company concerned cannot be expected to know every detail pertaining to the identity as well as financial worth of each of its subscribers. The Company must, however, maintain and make available to the AO for his perusal, all the information contained in the statutory share application documents. In the case of private placement the legal regime would not be the same. A delicate balance must be maintained while walking the tightrope of Section 68 and 69 of the IT Act. The burden of proof can seldom be discharg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e IT Act. The burden of proof can seldom be discharged to the hilt by the assessed; if the AO harbours doubts of the legitimacy of any subscription he is empowered, nay duty bound, to carryout thorough investigations. But if the AO fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the company." Several judgments on applicability of Section 68 to Share Application amounts, were adverted to, and the position was summed up as follows: "In this analysis, a distillation of the precedents yields the following propositions of law in the context of Section 68 of the IT Act. The assessed has to prima facie prove (1) the identity of the creditor/subscriber; (2) the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels; (3) the creditworthiness or financial strength of the creditor/subscriber. (4) If relevant details of the address or PAN identity of the creditor/subscriber are furnished to the Department along with copies of the Shareholders Register, Share Application Forms, Share Transfer Register etc. it would cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amounts of cash debits and credit entries. 8. This court is conscious of a view taken in some of the previous decisions that the assessee cannot be faulted if the share applicants do not respond to summons, and that the state or revenue authorities have the wherewithal to compel anyone to attend legal proceedings. However, that is merely one aspect. An assessee's duty to establish that the amounts which the AO proposes to add back, under Section 68 are properly sourced, does not cease by merely furnishing the names, addresses and PAN particulars, or relying on entries in a Registrar of Companies website. One must remember that in all such cases, more often than not, the company is a private one, and share applicants are known to it, since they are issued on private placement, or even request basis. If the assessee has access to the share applicant's PAN particulars, or bank account statement, surely its relationship is closer than arm's length. Its request to such concerns to participate in income tax proceedings, would, viewed from a pragmatic perspective, be quite strong, because the next possible step for the tax administrators could well be reopening of such investor's proce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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