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TMI Blog2014 (9) TMI 704X X X X Extracts X X X X X X X X Extracts X X X X ..... tax details in case of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up - These facts indicate and reflect proper paper work or documentation but genuineness, creditworthiness, identity are deeper and obtrusive - Companies are artificial or juristic persons but they are soulless and are dependent upon the individuals behind them who run and manage the companies - It is the persons behind the company who take the decisions, controls and manage them - The apparent, patent, and conspicuous facts were ignored by the first appellate authority and the Tribunal - section 68 of the Act was rightly invoked and is applicable – Decided in favour of revenue. - ITA No. 218/2012 - - - Dated:- 16-9-2014 - Sanjiv Khanna And V. Kameswar Rao,JJ. For the Appellant Through Mr. Sanjeev Sabharwal, Sr. Standing Counsel with Mr. Ruchir Bhatia, Jr. Standing Counsel and Ms. Swati Thapa, Adv. For the Respondent : Ms. S. Krishnan, Advocate. ORDER Sanjiv Khanna, J. This appeal by the Revenue relates to assessment year 2002-03 and was admitted for hearing by order dated 13th November, 2013 on the following substantial question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Some other details were filed consisting of some short notes and a list without PAN numbers and addresses of the investors. In these circumstances, the assessment order passed was under Section 144 read with Section 147 of the Act. Thus, in the present case, the assessee had not cooperated in the assessment proceedings and hence, best judgment assessment was made. 4. The CIT (A) has recorded that the authorized representative of the assessee had brought to his notice relevant pages of the paper book wherein confirmation of the respective share applicants, their income tax returns, their PAN card and election card, etc., were made available. Tribunal had proceeded on the findings recorded by the CIT(A). 5. On being queried in the Court, learned counsel for the assessee accepted that these details might not have been filed during the course of the reassessment proceedings but were filed during the course of the original assessment proceedings, which had resulted in an order under Section 143(3), dated 29th November, 2004. There is no such finding recorded by the CIT(A) or the Tribunal. However, what is clear is that in the reassessment order dated 18th December, 2007, passed u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onducting export business. However, during the first year, i.e. the assessment year 2001-02, no export orders were received and no business was conducted. At the time of incorporation, Virender Oberoi made an investment of ₹ 100/- towards share capital and Alka Oberoi had invested ₹ 3,00,000/-. During the assessment year in question, i.e. 2002-03, no export orders were received but it was contended that the assessee company undertook fabrication work. Total taxable income declared in the return filed on 29th October, 2002, was ₹ 10,880/-. Noticeably, hardly any business activity was undertaken by the respondent assessee in the first two years. During the period relevant to this assessment year, the two directors, viz. Virender Oberoi and Alka Oberoi had invested ₹ 12,50,000/- and ₹ 100/- respectively as share capital. Surprisingly, unrelated third parties had as per the assessee found it attractive and compelling to make huge investments thereby increasing the reserve and surplus by a towering sum of ₹ 55,66,996/-. It is not the case of the assessee that these third parties were in any way related, connected, or known to the assessee or its direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that previous year. The expression no explanation is offered or the explanation offered is not satisfactory puts an onus on the assessee to offer a lucid, reasonable and acceptable explanation before the Assessing Officer and thereupon the Assessing Officer should form an opinion accepting or rejecting the explanation based upon appreciation of facts/materials and other attending circumstances. Section 68 of the Act was examined in Govindarajulu Mudaliar (A.) versus CIT, (1958) 34 ITR 807 (SC) observing that there were ample authorities for the proposition that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during an accounting year, the Assessing Officer is entitled to draw inference that the receipts are of an assessable nature. Whether explanation should be accepted or not is not to be examined factually but having regard to test of human probabilities and normal course of conduct. Reference can be made to CIT versus Durga Prasad More (1971) 82 ITR 540 (SC), CIT versus Daulat Ram Rawatmull, (1973) 87 ITR 349 (SC) and other cases referred to in CIT versus Nova Promoters and Finlease Private Limited, (2012) 342 ITR 169 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... criber the genuineness of the transaction and the veracity of the repudiation. 10. In Nova Promoters and Finlease Private Limited (supra), referring to the aforesaid judgment of Supreme Court in Lovely Export (supra), it has been observed:- 39. So understood, it will be seen that where the complete particulars of the share applicants such as their names and addresses, income tax file numbers, their creditworthiness, share application forms and share holders register, share transfer register etc. are furnished to the Assessing Officer and the Assessing Officer has not conducted any enquiry into the same or has no material in his possession to show that those particulars are false and cannot be acted upon, then no addition can be made in the hands of the company under sec.68 and the remedy open to the revenue is to go after the share applicants in accordance with law. We are afraid that we cannot apply the ratio to a case, such as the present one, where the Assessing Officer is in possession of material that discredits and impeaches the particulars furnished by the assessee and also establishes the link between self-confessed accommodation entry providers , whose business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited (supra) deals with how the burden can be discharged and it has been observed that even assuming bank statements were filed, it may not be sufficient to prove creditworthiness without explanation for the deposits in the accounts and their source. Though while deciding the said aspect, the difficulty which may be faced by the assessee to unimpeachably establish creditworthiness has to be kept in mind. There should be some positive evidence to show the nature and resources of the share subscribers. The conduct of the assessee and his explanation before the Assessing Officer assumes great importance and he should actively participate and cooperate in the assessment proceedings and not take an extreme stand of a quiet spectator after producing certain basic documents, which may in certain cases be only termed as neutral. 12. In Commissioner of Income Tax versus NR Portfolio Private Limited, 206 (2014) DLT 97, the issue was again examined and it was observed:- 12. The Assessing Officer is both an investigator and an adjudicator. When a fact is alleged and stated before the Assessing Officer by an assessee, he must and should examine and verify, when in doubt or when the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns and issues should reflect application of mind on the relevant aspects. 13. When an assessee does not produce evidence or tries to avoid appearance before the Assessing Officer, it necessarily creates difficulties and prevents ascertainment of true and correct facts as the Assessing officer is denied advantage of the contention or factual assertion by the assessee before him. In case an assessee deliberately and intentionally fails to produce evidence before the Assessing Officer with the desire to prevent inquiry or investigation, an adverse view should be taken. We shall now come to the merits and the findings recorded by the Commissioner (Appeals), which as noted above, have been simply affirmed by the tribunal without verifying or referring to the facts. Referring to the term identity reference was made to the observations of the Assessing Officer in the remand report that the word identity meant the condition or fact of a person or a thing being that specified unique person or thing . PAN number or card is relevant but cannot be blindly and without considering surrounding circumstances in all cases be sufficient to treat as a discharge of the onus. Identity is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommercial/business transaction relationship between the parties, statutory postulates etc. However, when there is surrounding evidence and material manifesting and revealing involvement of the assessee in the transaction and that it was not entirely an arm s length transaction, resort or reliance to the said doctrine may be counter-productive and contrary to equity and justice. The doctrine is not an eldritch or a camouflage to circulate ill gotten and unrecorded money. Without being oblivious to the constraints of the assessee, an objective and fair approach/determination is required. Thus, no assessee should be harassed and harried but any dishonest fa ade and smokescreens which masquerade as pretence should be exposed and not accepted. It has also been held:- 29. What we perceive and regard as correct position of law is that the court or tribunal should be convinced about the identity, creditworthiness and genuineness of the transaction. The onus to prove the three factum is on the assessee as the facts are within the assessee s knowledge. Mere production of incorporation details, PAN Nos. or the fact that third persons or company had filed income tax details in case of a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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