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TMI Blog2013 (1) TMI 238X X X X Extracts X X X X X X X X Extracts X X X X ..... heir creditworthiness and the genuineness of the transactions. No attempt was made by the Tribunal to scratch the surface and probe the documentary evidence in some depth, in the light of the conduct of the assessee and other surrounding circumstances in order to see whether the assessee has discharged its onus under Section 68. Thus it appears that there has only been a mechanical reference to the case-law on the subject without any serious appraisal of the facts and circumstances of the case - appeal decided in favour of revenue. - ITA 120/2012 - - - Dated:- 7-1-2013 - MR. S. RAVINDRA BHAT AND MR. R.V. EASWAR, JJ. Appellant : Mr. Sanjeev Rajpal, Sr. Standing Counsel Respondent : Mr. Ajay Vohra with Ms. Kavita Jha and Mr. Somnath Shukla, Advocates. R.V. EASWAR, J. This is an appeal by the revenue filed u/s. 260A of the Income Tax Act. It relates to the assessment year 2004-05. The assessee is a private limited company which filed its return on a figure of loss which was accepted u/s. 143(1). On the basis of a report of the investigation wing of the income-tax department, the assessment was reopened u/s.147 on the ground that income chargeable to tax had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lovely Exports (P) Ltd., (2008) 216 CTR 195: (2009) 319 ITR (St.) 5 held that the addition was not justified. He deleted it. 5. The revenue carried the matter in appeal before the Income Tax Appellate Tribunal in ITA No.557/Del/2010. The Tribunal agreed with the CIT (A) and dismissed the appeal. 6. The revenue has filed the present appeal impugning the aforesaid order of the Tribunal. The following substantial question of law is framed: - Whether the Tribunal was right in law in upholding the order of the CIT(A) deleting the addition made u/s. 68 of the Act on the ground that the assessee has proved the nature and source of the share subscription amounting to Rs.1,47,00,000/- and has established the identity and creditworthiness of the share subscribers and the genuineness of the transactions? The revenue contends that the Tribunal failed to appreciate that the assessee could not establish satisfactorily the nature and source of the monies received as share capital nor could it discharge the onus of proving the identity and creditworthiness of the share subscribers and the genuineness of the transactions which are the fundamental requirements of section 68. 7. We are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned from the addresses furnished by the assessee. Let us see the attitude of the assessee towards discharging its onus in such circumstances. It says that the AO may get the addresses from the ROC s website. We do not think that an assessee can take such an unreasonable attitude towards his onus u/s. 68, little realising that when the finding is that the subscribing companies have not been found existing at the addresses given by the assessee, it is open to the AO to even hold that the identity of the share-subscribers has not been proved, let alone their creditworthiness and the genuineness of the transactions. It was not open to the assessee, given the facts of this case, to direct the AO to go to the website of the company law department/ROC and search for the addresses of the share-subscribers and then communicate with them for proof of the genuineness of the share subscription. That is the onus of the assessee, not of the AO. 8. So far as the creditworthiness of the share subscribers is concerned, the contention of the assessee before us is that it was proved by the bank statements of those subscribers submitted before the AO. The AO has not referred to them in the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... summons sent to the companies came back unserved with the remark no such company , which was also supported by the report of the inspector who made a visit to the addresses. The assessee thus took a very extreme stand which was in our opinion not justified; certainly it did nothing worthwhile to discharge the onus to prove the creditworthiness of the subscribing companies. 9. We referred to the argument of the assessee that it is not part of its onus to prove the source of source and origin and origin of the share subscriptions. In addition to what we had said with reference to that argument in the preceding paragraph we cannot also help observing that the basis of the argument is perhaps the judgment of the Madras High Court in S. Hastimal vs. Commissioner of Income Tax, Madras, (1963) 49 ITR 273. That was a case of reassessment commenced in the year 1957 calling upon the assessee to explain a credit in his favour in the books of account of the firm, made in the year 1947. The assessee explained that he had borrowed the amount from one V in order to provide the monies to the firm. The explanation was not accepted right up to the Tribunal. Commenting on the order of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uirements of Section 68. It may be necessary to know the business activities of the share-subscribers in order to ascertain whether they are financially sound and are able to purchase shares for substantial amounts; if they have borrowed monies for making the investment, whether they were capable of repaying them having regard to the nature of their business, volume of the business, etc. These are very relevant, in our opinion, to establish the creditworthiness of the investors. It is for this purpose that it is necessary for the assessee, in appropriate cases where the facts and surrounding circumstances justify, to seek the assistance of the principal officer of the subscribing companies and present him before the AO so that he will be in a position to explain in detail the source from which the shares were subscribed. A curious aspect of the matter which cannot be lost sight of is that the record reveals the assessee s ability to procure the share applicant s bank statement. This speaks volume about its conduct, and belies the argument about its inability to ensure the presence of such company s principal officers. 10. It was further argued for the assessee that the investig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim. In these circumstances, it was not necessary to have put the report of the investigation wing to the assessee for rebuttal. The assessee can hardly raise the issue, having itself failed to comply with the direction of the AO and having taken an unreasonable attitude towards the discharge of its onus. We, therefore, hold that the non-furnishing of the report of the investigation wing to the assessee was not fatal to the validity of the addition. 11. It was then contended on behalf of the assessee with considerable vehemence that there was nothing to show that the monies represented the undisclosed income of the assessee brought in under the guise of share subscription. It was submitted that it was incumbent upon the AO to show that the monies emanated from the coffers of the assessee in order to sustain the addition under Section 68. We are afraid that these are untenable propositions and were rejected at least on three occasions by the Supreme Court. In A. Govindarajulu Mudaliar v. Commissioner of Income Tax, Hyderabad, (1958) 34 ITR 807 such a contention was rejected in the following words:- Now the contention of the appellant is that assuming that he had failed to estab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and no further burden lies on the Income-tax Officer to show that that income is from any particular source. It is for the assessee to prove that even if the cash credit represents income it is income from a source which has already been taxed. The law as stated above has not undergone any change because of the introduction of Section 68 in the Income Tax Act, 1961. As observed by S.Ranganathan J in Yadu Hari Dalmia v. Commissioner of Income Tax, Delhi (Central), (1980) 126 ITR 48, a decision of a Division Bench of this Court : - It is well known that the whole catena of sections starting from s. 68 have been introduced into the taxing enactments step by step in order to plug loopholes and in order to place certain situations beyond doubt even though there were judicial decisions covering some of the aspects. For example, even long prior to the introduction of s. 68 in the statute book, courts had held that where any amounts were found credited in the books of the assessee in the previous year and the assessee offered no explanation about the nature and source thereof or the explanation offered was, in the opinion of the ITO, not satisfactory, the sums so credited could be c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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