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TMI Blog2014 (10) TMI 258X X X X Extracts X X X X X X X X Extracts X X X X ..... arry out the transactions. The explanation of the assessee to the effect that the subscribers were away to their work when the summons were sent to them does not seem to be justified or probable - It is hardly possible that all the persons were away and no one was present at their addresses to receive the summons during the period - It is not a case where summons were served on some persons and could not be served upon other persons - Thereafter the evidences/ affidavits submitted by the assessee, as observed above, are also found to be managed and even the transactions, though claimed to be done through banking channel, but, the circumstances showing the opening of the account in a particular branch on a particular date, issuance of cheque books of the same series and the payment through first leaf of the cheque book of every person, reveals that all the transactions were stage managed - the assessee had failed to establish the creditworthiness of the subscribers and the genuineness of the transactions – thus, the CIT(A) was not justified in deleting the additions made by the AO – Decided in favour of revenue. - ITA No. 1903/M/2011 - - - Dated:- 17-9-2014 - Shri D. Karunaka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere in the same line of business as was that of assessee i.e. builder, developers and contractors. It was submitted that they have to frequently shift their residences as per requirement of their work received by them. The assessee further submitted before the AO that usually the said persons, as per the requirement of their work, remain present at the working site, so, the notices could not have been served on them. However, the AO was not satisfied with the explanation given by the assessee. He held that the assessee had grossly failed to establish the identity, genuineness and creditworthiness of any of the parties in whose name the credit entries had been made in the guise of equity subscribers. He therefore made the addition of ₹ 95,10,000/- into the income of the assessee under section 68 of the Act as unexplained cash credits. The relevant part of the assessment order leading to the above mentioned findings of the AO is extracted as under: 4.9. The gist of the assessee s submission is as under: a. Majority of the share holders have submitted their confirmation along with corroborating evidences. b. Majority of the allotments have been made to its business par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e more than 1 lakh plus as labour charges. - The balance and the investment account for dues and the salary.. Then the ways and means of his sustenance for the period under consideration is a big mystery. These balance sheets abundantly indicate that the persons had no credit worthiness to carry out the alleged transaction as is being claimed by the assessee. 4.11. Having considered the assessee's contentions, the position of law in this regard is examined in the following: i. S.68 provides that- Cash credits. 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. i.e. any sum found in the books of accounts maintained for previous year may be charged to to income tax the income of the assessee as the income of the assessee if a. the assessee offers no explanation about the nature and source of such sum, or b. the explanation offered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... least ascertain the whereabouts of the parties was given to enable this office to carry out independent enquiries. 4.12. On the basis of the above it is held that the assessee had grossly failed to establish the identity, genuineness and the credit worthiness of any of the parties in whose name the credit entries have been made in the guise of equity subscription. In view of the same and in view of the established position of law, the explanation offered by the assessee on the amounts totalling to ₹ 95,10,000 (19,02,000/-in the name of share capital and 70,08,000 in the name of share premium) is found to be unsatisfactory. Consequently, the provisions of S.68 of the IT Act are clearly applicable to the facts of the issue under consideration. Accordingly. the amount of ₹ 95,10,000/- claimed to have been received by the assessee as amounts in lieu of equity share subscription are treated as unexplained cash credits and added back to the total income of the assessee. (Addition of ₹ 95, 10,000/-) v. Assessee by furnishing inaccurate particulars of income has concealed income to the extent of ₹ 95,10,000/- as per the provisions of S.271(1)(c) of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee had discharged its burden to establish the identity of the subscribers and the genuineness of the transactions. The ld. CIT(A) after considering the remand report, the rejoinder submitted by the assessee and the evidences produced by the assessee, deleted the addition so made by the AO, observing as under: 7. I have considered the issue. I have already brought out above the relevant facts. It is true that the AO tried to serve summons u/s 131 through her Inspector on the given addresses which remained unserved on account of their non availability except in one case. The AO confronted non service in 11 cases to the appellant on 18-11-2009 and asked it to produce them in person on 24-11-2009. When the case was taken up next on 27-11-2009, the AO informed the appellant of non service of summons in the remaining 12 cases. She, therefore, asked the appellant to produce all of them on 01-12-2009. The appellant filed its reply vide letter dt.12-12-2009 contents of which have already been explained earlier. It informed that the shareholders might have been away on sites of their work when the summons was sent to them. It is seen from the order sheet entries that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed may be charged to incometax as the income of the assessee of that previous year. A bare reading of section 68 suggests that there has to be credit of amounts in the books maintained by an assessee; such credit has to be of a sum during the previous year; and the assessee offers no explanation about the nature and source of such credit found in the books; or the explanation offered by the assessee in the opinion of the Assessing Officer is not satisfactory, it is only then the sum so credited may be charged to income-tax as the income of the assessee of that previous year. The opinion of the Assessing Officer for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on record. Application of mind is the sine qua non for forming the opinion. The aforesaid propositions were laid down by the Apex Court in CIT vs P. Mohanakala 291 ITR 278 (SC) after considering its all earlier decisions on the subject including that in CIT vs Orissa Corporation P Ltd [1986] 159 ITR 78 (SC). 7.3 In CIT v. Orissa Corporation P. Ltd. (supra), the assessee borrowed loan from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year in order to show credit worthiness. She has, however, doubted their creditworthiness without bringing on record any credible in support. She could have buttressed her case by examining these creditors in course of the remand proceedings. But, she preferred not to do so. It cannot be ruled out that the shareholders might be away when the Inspector of Income tax visited their given addresses. No second attempt was made to serve the summons again either through the Inspector or by Post. The shareholders deposed that they continue to exist at the same addresses. The AO chose not to verify this claim nor did she ask again the appellant to produce the deponents in person for examination. They have again quoted the same PAN, confirmed that they are income tax assessees and have been filing returns of income regularly, maintaining bank account and made payment to the appellant of the impugned sums through the said bank account. In the absence of any material to the contrary, the contents of the affidavits remain uncontroverted. As there was no effort made to pursue the creditors, the appellant could not do anything further. All the cases relied upon by the AO are of no help in view o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not produce them for examination before the AO. In first appeal before the CIT(A), the assessee filed affidavits/confirmations of the said persons. It was pleaded by the assessee before the AO that the addresses of the said persons, due to the requirement of the work, go on changing. However, the addresses mentioned in the affidavits, filed before CIT (A), were the same as were filed before the AO. In the case in hand, the summons were sent to 23 persons and the same was received back unserved in respect of all the persons except one. It does not seem probable that all the 22 persons out of 23 persons, to whom the summons were sent, were not found at their permanent addresses. Even no other representative, family member etc. was present to receive those summons. Suddenly, the assessee found all the said 22 persons and procured affidavit of the said persons. The affidavits were purchased on the same date by all the 22 persons i.e. on 08.04.10 whereas the affidavits have been shown to be executed between the date of 08.04.10 to 13.04.10. A very interesting fact, we may note from the said affidavits, is that the said 22 persons are inhabitants of various localities of Mumbai e.g. one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the share capital of the assessee. She has also noticed that both the said parties owed more than ₹ 1,00,000/- plus as labour charges. She has further observed that the ways and means of sustenance of the above persons for the period under consideration was a big mystery. The balance sheet indicated that the said persons had no creditworthiness to carry out the alleged transactions. 8. In our view, in normal circumstances, the explanation of the assessee to the effect that the said subscribers were away to their work when the summons were sent to them does not seem to be justified or probable. It is hardly possible that all the persons were away and no one was present at their addresses to receive the summons during the period. It is not a case where summons were served on some persons and could not be served upon other persons. Thereafter the evidences/ affidavits submitted by the assessee, as observed above, are also found to be managed and even the transactions, though claimed to be done through banking channel, but, the circumstances showing the opening of the account in a particular branch on a particular date, issuance of cheque books of the same series and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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