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TMI Blog2013 (12) TMI 554X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee. Of course suspicion or doubts may not be sufficient and care and caution has to be taken that the assessee has limitations but this cannot be a ground to ignore contrary incriminating evidence or material which when confronted, meets silence or no answer. Assessing Officer had conducted enquiries and made a reference to the surrounding facts i.e. deposits/credit of the amounts in the bank account of the share applicants; substantial amount of Rs.41,88,000/- paid as premium and referred to the fact that only one Shri R.C. Verma, CA and Power of Attorney holder of M/s Ritika Finance & Investment Pvt. Ltd. had appeared alongwith Shri Dinesh Kumar, the AR of the assessee company during the assessment proceedings and filed the bank statement and copy of the balance sheet but, failed to file schedule of investments made by the said company. Others had failed to appear. While deciding the question of law against the assessee, matter remanded back to ITAT for fresh decision. - ITA 409/2012 - - - Dated:- 10-12-2013 - Sanjiv Khanna And Sanjeev Sachdeva,JJ. For the Appellant : Mr. Sanjeev Sabharwal, Sr. Standing Counsel For the Respondent : Mr. Salil Kapoor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls by making any further enquiry. He has also noted that there are matching credits in the case of Inter Stellar Exports Pvt. Ltd., Sober Associates Pvt. Ltd. and Ritika Finance Investments Pvt. Ltd. However, further enquiry has not been made in the case of the contributors to establish in any manner that the source of the credits was the assessee. It has also been found that shares were issued in the immediately preceding year and no premium was charged. This does not lead to the inference that the amount of premium received in this year is bogus or that such amount flowed from the coffers of the assessee. Therefore, we are of the view that the enquiries do not establish that source of the contribution was the assessee. On the other hand, the identities of the contributors have been established. In the light of the decision in the case of Lovely Exports (P) Ltd. (supra), the assessee was not required to bring anything further than establishing the identity. Thereafter, if any doubt persisted, the action lied in the case of the contributors. Accordingly, it is held that the ld. CIT(Appeals) was right in deleting the addition. 4. It is an undisputed position that during the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates Pvt. Ltd and Ritika Finance Investments Pvt. Ltd., there were corresponding or substantial deposits and credit entries before the investments were made towards share capital. This is the factual position, not commented upon by the tribunal. 8. It is also accepted as true and correct that the respondent assessee had not charged premium in the immediately previous year from the share subscribers. This factual position is recorded and mentioned in the order of the Tribunal. Further, the shareholder companies had not filed the relevant schedule of the balance sheet relating to details of investments made by them. It is noticeable that for the assessment year in question, the respondent assessee had filed a return declaring income of Rs.71,910/-. The respondent assessee was carrying on business of trading in shares and derivatives besides which they had earned interest income of Rs.23,533/- and dividend income of Rs.21,550/-. The assessment order records that M/s Parivartan Capital and Financial Services Pvt. Ltd. was controlled by Shri Hari Om Bansal and M/s Sober Associates Pvt. Ltd. and M/s Shri Niwas Leasing Finance Ltd. were controlled by Shri Mahesh Garg, who in their s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... track of the transactions. PAN number is relevant but cannot be blindly and without considering surrounding circumstances treated as sufficient to discharge the onus, even when payment is through bank account. 19. On the question of creditworthiness and genuineness, it was highlighted that the money no doubt was received through banking channels, but did not reflect actual genuine business activity. The share subscribers did not have their own profit making apparatus and were not involved in business activity. They merely rotated money, which was coming through the bank accounts, which means deposits by way of cash and issue of cheques. The bank accounts, therefore, did not reflect their creditworthiness or even genuineness of the transaction. The beneficiaries, including the respondent-assessee, did not give any share-dividend or interest to the said entry operators/subscribers. The profit motive normal in case of investment, was entirely absent. In the present case, no profit or dividend was declared on the shares. Any person, who would invest money or give loan would certainly seek return or income as consideration. These facts are not adverted to and as noticed below are tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ublic and it was accordingly observed:- 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 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. 26. Thereafter reference was made to Full Bench decision in the case of Sophia Finance Ltd. s case (supra) wherein it has been observed that if the shareholders exists then, possibly , no further enquiry needs to be made and that the Full Bench had not reflected upon the question of whether the burden of proof rested entirely on the assessee and at which point this burden justifiably shifted to the assessing officer. The Full Bench has observed that they were not deciding as to on whom and to what extent was the onus to show that the amount credited in the books of accounts was share capital and when the onus was dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 68 of the IT Act. The assessee 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 constitute acceptable proof or acceptable explanation by the assessed. (5) The Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices; (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessee nor should the Assessing Officer take such repudiation at face value and construe it, without more, against the assessee; and (7) The Assessing Officer is duty-bound to investigate the creditworthiness of the creditor/ subscriber the genuineness of the transaction and the veracity of the repudiation. Decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me forward to merely reject the same, without carrying out any verification or enquiry into the material placed before him. The case before us does not fall under this category and it would be a travesty of truth and justice to express a view to the contrary. Reference in N.R. Portfolio Pvt. Ltd. (supra) was made to CIT vs. Nipun Builders and Developers [2013] 350 ITR 470 (Del), and it was held as under: 29. In CIT v. Nipun Builders and Developers [2013] 350 ITR 407 (Del) , this principle has been reiterated holding that the assessee and the Assessing Officer have to adopt a reasonable approach and when the initial onus on the assessee would stand discharged depends upon facts and circumstances of each case. In case of private limited companies, generally persons known to directors or shareholders, directly or indirectly, buy or subscribe to shares. Upon receipt of money, the share subscribers do not lose touch and become incommunicado. Call monies, dividends, warrants etc. have to be sent and the relationship is/was a continuing one. In such cases, therefore, the assessee cannot simply furnish details and remain quiet even when summons issued to shareholders under Section 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch includes share premium @ Rs.40/- per share amounting to Rs.41,88,000/-. It is not a case of the respondent assessee that they had a proven good past track record justifying a hefty premium, four times the face value. What was placed on record were certain papers which showed that the respondent assessee had taken care to ensure legal compliances. The said evidence is primarily documentary evidence. But, what the tribunal has noticed but not given due credence to are the surrounding circumstances which include a huge premium i.e. four times of the face value of the shares, credit entries in the bank accounts before transfer of money to the assessee, failure of the companies to file details of the inventories and the fact that the assessee company had not charged any premium earlier. Identity, creditworthiness of the shareholders and genuineness of the transaction in all cases is not established by only showing that the transaction was through banking channels or account payee instrument. It would be incorrect to state that the onus to prove genuineness of the transaction and creditworthiness of the creditor stands discharged in all cases if payment is made through banking channel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial notice, in such matters, takes the place of proof and is of equal force. In fact, as a means of establishing notorious and widely known facts it is superior to formal means of proof 13. It is important, to segregate cases of bonafide or genuine investments by third persons in a private limited company, from cases where receipt of share application money is only a facade for conversion of unaccounted for money or money laundering. The said question cannot be decided without taking notice of the surrounding facts and circumstances, by merely relying upon paper work which at best in some cases would be a neutral factor. The paper work though important may not be always conclusive or determinative of the final outcome or finding whether the transaction was genuine. When and under what circumstances onus is discharged, as held in N.R. Portfolio (supra), cannot be put in a strait jacket universal formula. It will depend upon several relevant factors. Cumulative effect has to be ascertained and understood before forming any objective opinion whether or not onus has been discharged by the assessee. Of course suspicion or doubts may not be sufficient and care and caution has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals) that the assessee in their reply dated 12th December, 2008 had made a specific request to the assessing officer to summon the shareholders. This aspect has been dealt with in the case of N.R. Portfolio (supra) as well as Nipun Builders and Developers (supra). However, we refrain from stating or going into further details or matrix, as we find that the tribunal has not adverted to the said fact in affirmative or negative, in the impugned order dated 4th November, 2011. We find that the assessing officer in the assessment order has not mentioned or recorded that the assessee had made any request for summoning of the shareholders or their Directors or principal officers. Whether any such request was made and if it was made whether it amounts to lapse on the part of the Assessing Officer, why and for what reasons the assessee was not able to produce principal officer or Director of shareholder companies etc. are all aspects which were required to be gone into by the Tribunal in detail. In the given case, an order of remand/remand report or additional evidence may be justified or proper. In these circumstances, we feel that it will be appropriate and proper to pass an order of r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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