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TMI Blog2015 (12) TMI 1462X X X X Extracts X X X X X X X X Extracts X X X X ..... ee failed to produce even a single share applicant before the AO. In the said scenario, the ld. CIT (A) accepting the audited balance sheet for FY 2007-08 i.e. AY 2008- 09 which is subsequent assessment year is not acceptable. The assessee cannot say that it did not had sufficient time to discharge its burden in respect to the share capital money which has come to its account. We find that the AO had investigated the matter fairly and had given enough opportunities to the assessee to come clean with the identity, creditworthiness and genuineness of the transaction. We find that the AO had given sufficient notice and furnished the enquiry reports to the assessee at various stages to show that he was not satisfied with the documents filed by the assessee before the AO. The AO has disproved the evidences brought by the assessee to discharge its burden of proof, which show that the assessee failed to discharge its burden of proof in respect to share application money which has come into its account. The CIT (A) erred in taking the audited balance sheet of subsequent assessment year and documents to prove the creditworthiness which was filed before him to prove the existence of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of various courts, one of them being M/s Lovely Exports (P) Ltd reported in 216 CTR 195, while in the present case identity of the share applicants has been amply disproved by the Assessing Officer through Inspector's report that no share applicant ever existed at the given addresses by assessee, adverse report of handwriting expert, non AIS verification, information from Bank that no Bank Accounts of share applicants existed in their branches etc and as such the orders in case of M/s Lovely Exports (P) Ltd, reported in 216 CTR 195 and others are not applicable in this case. 2. On the facts and in the circumstances of the case, the CIT (A) has erred in law in deleting the addition of ₹ 3,46,00,000/- made by the Assessing Officer under section 68 of I.T. Act, 1961 as unexplained share application money, credited in the books of account ignoring the decision of Hon'ble Apex Court in the case Sumati Dayal Vs CIT (214 ITR-801) and Hon'ble High Court of Chhattisgarh in the case of Kushal Prased Manhar Vs CIT, {(2010) 236-CIT -192)}, without appreciating the full facts of the case. 3. On the facts and in the circumstances of the case, the CIT (A) has erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share capital of ₹ 3,92.00,000/- during the A.Y. 2007-08 out of which ₹ 46,00,000/- were received as share application in earlier year and produced the list of persons to whom the share capital was allotted along with amount of share application money and date of transaction. 5. The Assessing Officer has taken note of the fact that the assessee had been delaying filing of reply to the queries for details of share capital and answer was given only after a gap of three (3) months and nine (9) days knowing very well that the instant case was getting time barred on 31-12-2009; and that there was only 31 working days remaining with him for completing the investigation. So, within 31 working days, the AO, had to cross-check the details furnished by the assessee, and confront the assessee, if need be, with the results of the investigation and thus facilitate completion of the assessment by following the process of natural justice and provisions of law. To demonstrate the conduct of the assessee after issuance of notice on 04.08.2009, the Assessing Officer had given all the details about the number of opportunities granted by him to the assessee to comply with the queries p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r subsequently enhanced the scope of the investigation to find the identity and creditworthiness of the alleged investors and genuineness of transactions involving share application money. The Assessing Officer issued a show cause notice u/s 142(1) on 04.12.2009 asking the assessee to produce the investors/shareholders as claimed by it for examination before him; and the Assessing Officer cautioned the assessee that if it failed to produce these investors for examination, the amount of share application money received by it will be added to the income of the assessee. The Assessing Officer issued another notice dated 10.12.2009 wherein, the assessee was further supplied with Handwriting Expert s opinion, the copies of the report of Inspector and reasons were spelt out as to why the identity, creditworthiness and genuineness of the share holders was under serious doubt and the assessee was asked to submit original affidavits of the shareholder, since the assessee did not produce the original affidavit of the shareholders and had filed before him only the photocopies of the same. Meanwhile AO, cross checked with few banks, the veracity of the bank statements submitted by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26 to 30 of his order), had observed as under :- (i) That the appellant has furnished copy of ration card and/or PAN card in the case of individual, incorporation certificate issued by the Registrar of companies and copy of active status of the company from Ministry of Company Affairs, Government of India sites wherein the addresses of the companies are given. (ii) As per the appellant the I.T.I. s report dated 07.12.2009 was made part of show cause notice issue u/s 142(1) dated 04.12.2009. Further it has also been contended that I.T.I 's report dated 18.12.2009 has been made part of show cause notice issued u/s 142(1) dated 17.12.2009. In the I.T.I's report dated 18.12.2009 it has been specifically reported that on the directions issued by the A.O., on 18.12.2009, the I.T.I. had made spot enquiries. Thus it is not understood how the enquiries conducted by the I.T.I. on 18.12.2009 were known to the A.O. before hand on 17.12.2009. Furthermore, it is also gathered from I.T.I's reports dated 08.12.2009 that interestingly he has made enquiries in Delhi from tea vendors, fruit vendors and passer-by in order to ascertain the addresses of share applicants whereas the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtmental Valuation Officer (D.V.O.) u/s 142A or 55A of the Act. It has also been contended that such action of the AO was unilateral and no opportunity of cross examining the handwriting expert was granted by the AO. Thus, in view of the above facts, the reliance placed by the AO on the report of handwriting expert cannot be given much weightage. (iii) Checking of PANs on Assessee Information System (AIS). Ld. CIT (A) observed that according to the AO, the addresses of the claimed investors were checked in the AIS database but in almost all cases either the address was different or the PAN was simply invalid. After going through the written submissions filed by the assessee on this issue before the ld. CIT (A) (reproduced at pages 34 35 of his order), ld. CIT (A) observed as under :- The A.O. in the assessment order has mentioned that while checking on Assessee Information System either the addresses furnished by the appellant in respect of share applicants were different from those on the AIS or the PANs were simply invalid. It is observed that the AO while holding that PANs were invalid has not made any specific reference of such defective PAN. The appellant has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed the AO s contention about all the share applicants individually in his order which we will discuss later in this order. Before the Ld CIT(A), the assessee had filed copy of PAN from site NSDL, copy of incorporation certificate, copy of income-tax returns, copy of audited balance sheet, copy of bank details, copy of address proof etc. to prove the identity creditworthiness of the share applicants and genuineness of transaction, which the ld. CIT (A) had discussed in the aforesaid pages of his order. After discussing the AO s contention and the submissions of the assessee about each and every share applicants individually, the ld. CIT (A) deleted the addition as under :- It is observed that the share subscribers are identifiable and are assessed to tax. The transactions are genuine as the share application money has been received through undisputed banking channel. The appellant has furnished copies of ITRs, PAN cards, copy of driving licence, voter card, incorporation certificate from R.O.C., active status of the company from Ministry of Company Affairs sites. Further, the A.O. in the assessment order has mentioned that as per returns of income of the share applications fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestment Ltd. (2000) 164 CTR(SC) 287 x) CIT vs. Value Capital Services Pvt. Ltd. (2008) 307 ITR 334 (Delhi) The Hon ble Bombay High Court in the case of CIT vs. M/s. Creative World Telefilms Ltd. (ITANo.2182 of 2009 decided on 12.10.2009) on the impugned issue held as under :- .... In the case in hand, it is not disputed that the assessee had given the details of name and address of the shareholder, their PAN/GIR number and had also given the cheque number, name of the bank. It was expected on the part of the Assessing Officer to make proper investigation nothing except issuing summons which were ultimately returned back with an endorsement not traceable . In our considered view, the Assessing Officer ought to have found out their details through PAN cards, bank account details or from their bankers so as to reach the shareholders since all the relevant material details and particulars were given by the assessee to the Assessing Officer, In the above circumstances, the view taken by the Tribunal cannot be faulted. No substantial question of law is involved in the appeal .... The Court thus clearly held that once documents like PAN Card, bank account details or deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. The Hon ble Apex Court in the case of Ms. Lovely Exports Pvt. Ltd. others 216 CTR 195 (SC) has given the guidelines in respect of onus to be discharged by the assessee in respect of share applicants. Following the decision of Hon'ble Apex Court as per several other Hon'ble Courts rulings, the onus of the person receiving money has been restricted to prove genuineness of the transaction and to provide copies of ITRs, PANs, details of bank accounts. Further, the Hon'ble Delhi High Court in the case of CIT vs. HLT Finance (P) Ltd (ITA 1133/2010) while deciding the issue in respect of addition u/s 68, has cited the observation of the Hon'ble ITAT as under in the impugned order wherein addition made u/s 68 was deleted. .....It was argued by the learned A.R. that all the primary information with regard to shareholders was furnished before the lower authorities. Our attention was drawn to Annexure-I wherein with respect to each and every shareholder the assessee has furnished status of person, relationship with the company and the documents filed before the lower authorities. From this statement, we found that assessee has filed confirmation in respect of Shri N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessments of all such alleged bogus shareholders whose investments in the share capital is found to be explained 5. In view of the above, we allow the appeal of the assessee with the similar direction to the effect that department is at liberty to reopen the individual assessment as alleged shareholders, as per provisions of law. The Hon'ble Court has further opined that the approach adopted by CIT(A) and ITAT is in consonance with the decision of Supreme Court in Commissioner of Income Tax vs. Lovely Exports (P) Ltd., 216 CTR 195 (SC) wherein it has been held as under :- 2. Can the amount of share money be regarded, as undisclosed income under s. 68 of I.T.Act, 1961? We find no merit in this Special Leave Petition for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the A.O. then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment ..... Applying these yardsticks in the appellant's case it is observed that the appellant company has discharged its onus cast upon i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not correct, and nobody by the names given were found to be ever residing or functioning at the said addresses and he took our attention to pages 4 to 13 wherein the copies of the Inspector report of these 9 alleged investors are scanned and made part of the assessment order. He also pointed out that out of these 9 investors, there was common address for two concerns and the Inspector was able to locate the director of these companies who stated that both these companies have stopped functioning way back in March 2006. Ld. DR also took our attention to page 14 where the AO has discussed the report of the handwriting expert, wherein the AO had taken note of the fact that the said expert had prepared a total 32 sets of specimen signature and had disputed signatures on the basis of the names of the persons who have signed the documents. The Ld DR pointed out that the handwriting expert was of the opinion that out of the 32 sets of signature, 20 sets were not matching and two were forged signatures. Ld. DR contended that the assessee was issued a showcause notice on 14.12.2009 stating that the results of the investigation created serious doubts about the identity, creditworthiness of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in respect to the share capital which it has received during the relevant assessment year. Therefore, ld. DR contended that after making extensive investigation within the limited period left with him, the AO had rightly made the addition under section 68 of the Act and the Ld CIT(A) has erred in deleting the same by relying on irrelevant evidences brought by the assessee before him and therefore, the impugned order of the Ld CIT(A) be set-aside and the AO order may be upheld. 11. On the other hand, ld. AR has submitted a written submission and also contended that there were 37 investors in the financial year out of which 23 investors are corporate companies duly registered with the Registrar of Companies, Ministry of Corporate affairs, Govt. of India; and remaining are the individual persons and he submitted that this amount of ₹ 3.46 crores was the fresh share capital received by the assessee company during the relevant year. This share capital of ₹ 3.46 crores was received by the assessee company through account payee cheques during the relevant year and the entire amount of share capital has been duly allotted during the relevant year itself, for which necessa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor could not been served because of the change of the address and the company has tried to get in touch but could not get the positive result and time was very little. The Ld AR submitted that during the assessment proceeding, the AO has straightway formed an adverse opinion against the assessee after going through the Inspector s report without appreciating the fact that Inspector had gone from Muzaffarnagar to Delhi on 08.12.2009 and on the same date, he has given his report; and he pointed out that the travelling distance between the Muzaffarnagar to Delhi will take around at least 6 hours journey due to various reasons like traffic jam, congested road and wondered as to how the Inspector could have covered the said distance and went to each addresses at Delhi on the same day. He further elaborated that from a perusal of the copy of the ITI report as appeared in the assessment order from page nos.8 to 13 suggests that the addresses of these 6 persons was not in one place but in a different location and according to him, it is not possible to inquire within such a short time to locate the independent addresses of all these shareholders on a single day. He contended that as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thers and admittedly there is no dispute by accepting the entire inclusive of above ₹ 51 lacs that the amount has been credited cheque/DD/PO so his reliance solely on the bank letter as appeared on page 51 53 of his order which, according to him, is third party information and cannot be given any weightage; secondly he has not cross checked with the bank official, not examined them and not provided the opportunity for cross-examination to the assessee. He submitted that it is settled law by the Hon'ble Apex Court that third party statement/report/information cannot be relied upon unless the aggrieved party has been provided an opportunity for cross-examination. In this regard, he relied on the judgment of Hon ble Delhi High Court in the case of SMC Share Brokers 288 ITR 345 wherein, after considering the Hon ble Bombay High Court in the case of M/s. One-up shares and stock brokers 266 ITR 275, wherein the Hon'ble High court has held that there is no doubt that the statement of Sh. Manoj Agarwal has evidentiary value but weight could not be given to it without it being tested in cross-examination. Therefore, the Ld AR argued that in the absence of the bank offici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3-16 the assessee has provided all the details of investors who has been already allotted the shares along with PAN / Cheque No/ DD No/ Amount as well as the remaining documents like share applications forms, banks details etc but nowhere these have been verified from the concerned jurisdictional AO of the investors . He further submitted that the AO has finally held that since the investor's creditworthiness is not acceptable and moreover because of non production of any investors he has disallowed the entire share capital of ₹ 3.46 Crores. 12. Ld. AR further submitted while justifying the order of the Ld CIT(A) that the ld. CIT (A) has given his finding of the shareholding companies based on PAN, Financial Statements, ITR etc; and as regards the individual investor he has examined the details of the PAN, Voter Id card towards the genuineness examined the share application form, affidavit and bank account for creditworthiness. According to him, once these documents are on the record the burden shifts upon the AO and the Ld CIT(A) has passed an order / direction as appearing in the last Para 67 68 wherein enquiry has been ordered against the investors. According to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ruling of Hon ble Supreme Court in the case of Lovely Exports case. He submitted that in the case of Orissa Corporation 159 ITR 78, the Hon ble Court exemplifies the category of cases where no action was taken by AO to verify or an enquiry into the particulars provided by the assessee i.e their PAN etc. He further pointed out that opportunity of cross examination if there is any dispute on the fact was essential and relied on 125 ITR 713 (SC), 288 ITR 345 (Del.) and 262 ITR 275 (Bom.) and submitted that in the present case, no opportunity was provided to cross examine the ITI, Handwriting Expert, 3 Bank officials despite a clear demand made by the assessee. The Ld AR also submitted that these are settled laws that in the case of non service of notice u/s 133(6), no adverse view can be taken. And thus ld. AR does not want us to interfere in the impugned order of the Ld CIT (A). 13. We have heard both the parties and perused the records. The case in nutshell as per the assessee is that in the relevant assessment year, certain friends and business associates have invested to the tune of ₹ 3.46 crores in the assessee company and they have been duly allotted shares along wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts the court to believe in its existence. According to section 104, if a person wishes to prove a dying declaration by another, he must prove the death of that other person. According to section 106 of the Evidence Act, when any fact is especially within the knowledge of any person, the burden of proving that fact is upon him. Section 110 of the Evidence Act states that when the question is whether any person is the owner of anything of which he has shown to be in possession, the burden of proving that he is not the owner is on the person who affirms that he is not the owner. In other words, if Income-tax Officer finds that the assessee is in possession of valuable items like bullion, jewellery, etc., he must draw a rebuttable presumption that the assessee is the owner thereof unless the burden of proving that he is not the owner thereof is discharged by the assessee. Whether certain sums of money were claimed by the assessee to have been received from certain persons, it was for the assessee to prove by cogent and proper evidence that these were genuine transactions as these facts were within the exclusive knowledge of the assessee and it should be kept in mind that the assessee c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at page 536) . But sections 68 and 69 relating to cash credits throw the burden of proof on the assessee because in such a case, there is prima facie evidence against the assessee as to the receipt of money in the books of the assessee. The burden of proving that the cash credit is genuine or that receipt is genuine is on the assessee. 16. Though it may be kept in mind that the initial burden is on the assessee to prove the genuineness of the transaction, but when the assessee furnished the details of the shareholders, addresses, etc., this burden is to be taken as discharged, and then the onus will get shifted to the department. But once the materials are scrutinized and it is found by the AO that documents furnished cast serious doubt about the veracity of the same, then the materials of the scrutiny are to be communicated to the assessee, thereafter the onus shifts from the revenue to the assessee. Then, the assessee has to take appropriate steps for proving his case. Unless, there are sufficient materials after such communication, produced by the assessee, the Income-tax officer can do no further. It should be kept in mind that the transactions which had occurred are things ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .12.2009 (i.e. more than 1 year 2 months). So it can be safely inferred that the assessee was aware that during scrutiny proceedings, he had to explain about the share application money/capital which it has received during the relevant assessment year. 19. We find that the Assessing Officer got the case records from Meerut after the transfer of the case on 03.08.2009 and we find that on the next date itself, the Assessing Officer had issued notice on 04.08.2009 u/s 142 (1) along with 35 point questionnaire. Thereafter, we find that the assessee gave details bit by bit and we find that eight opportunities within a period of three months and nine days were granted to the assessee to give answers and produce documents in its support. However, we find that only on 16.11.2009, after three months and nine days, the assessee answered the query no.31 in respect to the details of investors in the share capital of the company. In order to discharge the burden of proof casted on it, we find that the assessee submitted a list of the shareholders, their address and affidavits to prove the identity, to prove the genuineness the assessee filed PAN details, details of the cheques/draft number ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to adjudicate this issue; therefore, we are not going into merits of the handwriting expert s opinion. However, we would like to point out that the Evidence Act, have empowered the judge to compare the handwriting in certain circumstance before him and the AO is a quasi-judicial authority while he is exercising his authority as an assessing officer, so seeking handwriting experts opinion to find out the authenticity of the signature on the affidavits ITR during investigation cannot be faulted as such, but the opinion of expert is not necessary to adjudicate the issue before us. Since we are not taking into consideration the opinion of handwriting expert, we are not going to go into the objection of assessee on this aspect. Thereafter, we find that the AO found from searching the database of Assessee Information System (AIS) that either the addresses given by the assessee were different or the PANs were invalid. The following results emerged from the first round of investigation (as stated before we are not including the handwriting expert s opinion) :- ITO Report 7 of these addresses were wrong and at the common address of the other two con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orm their branch since the inception of their operation. We find that the Assessing Officer, while going through the copy of the ITRs of the alleged shareholders, stumbled across three concerns who were under his jurisdiction (i.e. Prakartik Hotels Private Limited, MLF Classic Finance Limited and Life Line Housing Development Finance Company Limited) whose ITR s for assessment year 2005- 06 was filed before him and noted that these concerns have given common address of 1st Floor, City Centre Market, Muzaffarnagar. The Assessing Officer deputed the ITO to find details about the said shareholders and to his dismay, he got the information that no return of income was filed by these three companies after assessment year 2005-06, as well as there was no such concern ever existed at that address. A copy of the report is scanned and copied at page 22 of the assessment order. 25. We find the following facts emerged from pages 30 31 of the assessment order to dislodge the onus of proof from the Assessing Officer and the burden is seen shifted back to the shoulder of the assessee to prove the identity, genuineness of transaction and creditworthiness of the shareholders which the AO has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g and these companies never existed at those addresses. (ix) The copy of affidavits submitted by the assessee Company were of no evidence value as it was copy of only-one side of affidavit and without giving any date. Moreover, the assessee Company did not submit the original affidavits even when this requirement was clearly expressed in 142(1) notice dated 10-12- 2009. (x) None of these alleged investors had creditworthiness to invest such huge amounts. This fact becomes clear after perusal of their ITRs filed for assessment year 2005-06 or Assessment Year 2004-05 (as the copies of these ITRs were provided by the A.R. of the assessee company). A chart comparing amount of share, application money allegedly invested and gross, total income (before any deduction) of these claimed investors was given in show cause notice dated 17-12-2009. Thereafter a show-cause notice dated 17.12.2009 was issued directing the assessee to produce any 25 of these claimed investors, since the assessee had claimed the same to be his close friends and business associates. We find that the assessee has made a submission on 23.12.2009 that investors could not be approached by the assessee company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mir Gate Brach (Delhi) through which the share application money was allegedly invested in the assessee company was never in existence and this fact was confirmed in writing by the branch of the bank through a letter which is reproduce din the assessment order. It is also observed that different address was given in AIS data base. He also observed that he did not have creditworthiness to invest such amount as for assessment year 2005-06 his total gross income was filed at ₹ 94,200. 2. Chandra Kanta The amount invested by this alleged investor was ₹ 7,50,000/-. The Assessing Officer found that the investor had given bogus address of Delhi as verified by Inspector. He also observed that the account number of HDFC Bank, Chandani Chowk Branch (Delhi) through which the share application money was allegedly invested in the assessee company was never in existence and this fact was confirmed in writing by the branch of the bank through a letter which is reproduce din the assessment order. It was also observed that the different address was given in AIS data base and even this address was found to be bogus when the Inspector went for physical verification. He found that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2005-06, the investor had shown ₹ 1,05,118/- as gross total income. He also observed that the alleged investor has given invalid PAN invalid according to AIS. 6. Saroj Aggarwal The amount invested by this alleged investor was ₹ 5,50,000/-. The Assessing Officer found that the investor had given the bogus address of Delhi as verified by Inspector. He also observed that the account number of HDFC Bank, Chandani Chowk Brach (Delhi) through which the share application money was allegedly invested in the assessee company was never in existence since the opening of this Branch and this fact was confirmed in writing by the branch of the bank through a letter. It was also found that the alleged investor did not have creditworthiness to invest such a huge amount as the investor had shown gross total income of ₹ 1,00,128./- in assessment year 2005-06. 7. Sushma Goel The Assessing Officer observed that the amount invested by this alleged investor was ₹ 5,50,000/-. The Assessing Officer found that the alleged investor had given the bogus address of Delhi which was verified by Inspector. He also observed that the account number of Punjab National B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e creditworthiness to invest such a huge amount as she had shown gross total income of ₹ 1,05,105/- for assessment year 2005-06. 11. Rakesh Kumar Aggarwal Rs.2,00,000/- was invested by this alleged investor. The Assessing Officer found that the signature on ITR did not match with signatures on share application form according to the report of the Hand Writing Expert. It is also observed that different address was given in AIS data base. The Assessing Officer found that the alleged investor did not have creditworthiness to invest such a huge amount as he had shown gross total income at ₹ 78,600/- in assessment year 2005-06. 12. Smt. Indira Devi Rs.6,00,000/- was invested by this investor. The Assessing Officer observed that the investor had given bogus address of Delhi which was verified by Inspector. It was also observed by the Assessing Officer that she did not have creditworthiness to invest such a huge amount as the total gross income was shown at ₹ 1,05,130/- in the assessment year 2005-06. 13. Smt. Rekha Bansal The alleged investor had invested ₹ 15,00,000/-. The Assessing Officer observed that the signature on ITR did not mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leged investor was ₹ 5,00,000/-. He found that bogus address of Delhi was given which was verified by Inspector. He also observed that it did not have the creditworthiness to invest such a huge amount as for assessment year 2005- 06 it had gross income at ₹ 34,080/- only. The PAN given was also not of this company but that of Simarjeet Electronics Pvt. Ltd. (Karol Bagh), Delhi. 18. Sal wan Developers Promoters Pvt. Ltd The amount invested by this alleged investor was ₹ 10,00,000/-. The Assessing Officer found that the Director of the concern, Shri Surender Pal Singh stated that this company was closed down in March, 2006. He also observed that it did not have the creditworthiness to invest such a huge amount as the gross total income of ₹ 18,191/- for Assessment Year 2005- 06. He also found that according to Company Master Details (from Registrar of Companies), this company filed its last Balance Sheet on 31-03-2006. He also found that the given PAN was invalid according to AIS. 19. Yogson Impex Pvt. Ltd. The Assessing Officer observed that the amount invested by this alleged investor was ₹ 5,00,000/-. The Assessing Officer observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... match with signatures on share application form according to the report of the Hand Writing Export and the same Director, Ms Rani Sharma had signed on all the documents referred to the Hand Writing Expert. It was also observed that the company had not filed its Balance Sheet with Registrar of Companies for many years as the last Balance Sheet date was not given in Company Master Details (from Registrar of Companies). The Assessing Officer also observed that the company was in default of filing of Form DIN3/Form 32 and different address was given in AIS data base. The Assessing Officer observed that it did not have creditworthiness to invest such a huge amount as the gross total income in assessment year 2005-06 was shown at ₹ 3096/-. 23. VPS Valves Tubes Private Limited The Assessing Officer observed that the amount invested by this alleged investor was ₹ 10,00,000/-. The Assessing Officer observed that the Company had not filed its Balance Sheet with Registrar of Companies for many years as the last Balance Sheet date was not given in Company Master Details (from Registrar of Companies) and also the different address was given in AIS data base. The Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gnatures on share application form according to the report of the Hand Writing Expert and the same Director, Shri Kamal Sharma had signed on all the documents referred to the Hand Writing Expert. He found that for assessment year 2005-06, this company filed its return of income at Muzaffarnagar but it did not file any return of income for subsequent Assessment Year and the inquiry of the Inspector at the address given on ITR proved that the company never existed at that address. He observed that the inquiry letter U/s 133(6), sent through registered post at the Delhi address of the company, returned unserved. He also found that different address was given in AIS data base. The Assessing Officer observed that it did not have creditworthiness to invest such a huge amount as NIL income was shown in the assessment year 2005-06. 28. SGC Publishing Private Limited The Assessing Officer observed that the amount invested by this alleged investor was ₹ 10,00,000/-. The Assessing Officer observed that the signature on ITR did not match with signatures on share application form according to the report of the Hand Writing Expert and the same Director, Shri Pramod Kumar S/o Sh. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the last Balance Sheet date was not given in Company Master Details (from Registrar of Companies). He also found that the company was in default of filing of Form D1N3/Form 32. He also observed that different address was given in AIS data base. The Assessing Officer found that the company did not have creditworthiness to invest such a huge amount as gross total income at ₹ 20,068/- was shown in assessment year 2004-05 but it did not submit ITR for assessment years 2005-06 or 2006-07. 33. Unique Insulation thermo packaging Private Limited The Assessing Officer observed that the amount invested by this alleged investor was ₹ 7,00,000/-. The Assessing Officer observed that the signature on ITR did not match with signatures on share application form according to the report of the Hand Writing Expert and the same Director, Shri Ghanshyam Sharma, S/o Sh. J.P. Sharma had signed on all the documents referred to the Hand Writing Expert. The Assessing Officer also found that the Company had not filed its Balance Sheet with Registrar of Companies for many years as the last Balance Sheet date was not given in Company Master Details (from Registrar of Companies). It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al income for the assessment year 2004-05 was shown at ₹ 1,590/- and also the company had not submitted ITR for assessment years2005-06 or 2006-07. 36. Rizzer Exim Private Limited The alleged investor had invested ₹ 15,00,000/-. The Assessing Officer observed that the company had given bogus address of Delhi which was verified by Inspector. He also observed that the Company had not filed its Balance Sheet with Registrar of Companies for many years as the last Balance Sheet date was not given in Company Master Details (from Registrar of Companies) and the company was in default of filing of Form DIN3/Form 32. He observed that different address was given in AIS data base. The Assessing Officer observed that the company did not have creditworthiness to invest such a huge amount as ₹ 38,207/- was shown as gross total income in assessment year 2005-06. 37. Satwant Singh Sodhi Construction Private Limited The Assessing Officer observed that the amount invested by this alleged investor was ₹ 16,00,000/-. The Assessing Officer observed that the Director of the concern, Shri Surender Pal Singh stated that this company closed down in March, 2006. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erse inference against the assessee company when it is indisputably a case of share capital receipts by the assessee company and the assessee company has duly discharged the onus in proving the identity and credit worthiness of these shareholders and has also proved the genuineness of the transactions by showing that the amount has been issued as share capital and share certificates have also been issued to all these shareholders. We find that the ld. CIT (A), after considering the remand report, rejoinder and submissions of AR, observed how the AO dealt with the line of investigation and recounts that it was mainly on 3 ways i.e. (i) enquiries conducted through the ITI, (ii) assignment given to handwriting expert for verification of signatures on the documents furnished by the assessee, and (iii) checking of PANs of share applicants on the database of Assessee Information System. The CIT (A), dealing with the enquiries conducted through the ITI, has dealt with the same from pages 25 to 31 of the impugned order. ITI REPORT 29. The ld. CIT (A) has observed at page 26 of the impugned order that the ITI made enquires in respect of nine share applicants in the first round an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said that AO could have mentioned post-dated facts only when the fact remains he had other reports of ITI before him. So, therefore, reports of the ITI cannot be discredited simply because AO is privy to the factual aspect in respect to the investigation conducted by the ITI which was reported in writing on a later date. Therefore, merely because the report of the investigation has been submitted on a later date does not in any manner calls for drawing any adverse inference against the said report. As per section 114(e) of the Evidence Act, a presumption in favour of the official acts in discharge of duty has to be inferred in absence of any rebuttable evidence to contradict the said presumption. Nothing more can be read into it to discredit the same. As per section 114, the Court may presume the existence of any fact which it thinks likely to have happened, regard had to the common course of natural events, human conduct, and public and private business, in their relation to the facts of the present case. Illustrations : The Court may presume (a) .. (b) .. (c) .. (d) .. (e) that judicial and official acts have been regularly performed. The rule embodies in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a question of fact which he was entrusted by his superior officer to verify i.e., whether the purported share holder is existing or not as claimed by the assessee. Rather criticising the investigation done by the ITI, the assessee should have given the correct addresses of the share applicants, if any, or should have made an endeavour to bring the shareholders before the AO, since the onus of proving the identity itself have shifted from the AO to assessee after the first round of investigation done by the AO. Likewise, the ld. CIT (A) has made an observation that much credence need not be given to Shri Sardar Surender Pal Singh statement that the two companies, in which he was the director, have ceased to function from March 2006, since the assessee during the appellate proceedings before him had filed the audited balance sheets of the said companies to prove that the said companies are still in existence. Here, we would like to point out that in no manner, the statement of Shri Sardar Surender Pal Singh can be shot down because audited balance sheet of the company were filed before the ld. CIT (A) for the simple reason that before the assessment was completed, the assessee was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s done by the AO. The AO had only 31 working days in his command to find out the truth/bonafide of the assessee s contention. Here, we find that the AO had looked into AIS database to find out whether the PAN/addresses given by the assessee match with that of the AIS system. Here we find that the addresses were either incorrect or different or the PANs were simply invalid. This finding of the AO cannot be disturbed unless the assessee is able to show that the PANs/ITRs details given by the assessee were correct and the report of the AO is factually wrong. Therefore, in the facts and circumstance of the case, we are of the considered opinion that the finding of the AO in respect to PAN details from the AIS data base cannot be brushed aside. 33. Now, let us see how the CIT (A) dealt with the information collected from the banks. LETTERS FROM THE BANK 34. We find that the AO had enquired from three Banks about nine share applicants/investors about their bank accounts which they had stated to have accounts and had submitted the bank statements to establish their creditworthiness. The banks have reported back (pages 51 to 53 of the AO s order) that there are no such accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fronted the assessee to produce source of source of the shareholders who subscribed/ invested for the shares of the assessee. Here in this case, the AO has simply asked from the banks from which the assessee had claimed that the share applicants had bank accounts to prove their creditworthiness, whether it is true or not. The AO has simply verified about the veracity of the same as to whether they have bank accounts and bank statements submitted by them are correct. Pursuant to the said query from the AO, the banks had informed him that these share applicants do not have an account in their respective banks. Copy of the same is also a part of the assessment order. The ld. CIT (A) erred in relying on an observation of the Hon ble High Court, without appreciating the facts and context of that case. Moreover, the said case-law has no bearing in the case in hand to brush aside the information given by the banks, so the finding of CIT(A) in this regard cannot be countenanced and, therefore, we hold that the information given by the banks are credible evidences to disprove the creditworthiness of the so called investors since the documents furnished by the assessee turned out to be bogus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d sufficient time to discharge its burden in respect to the share capital money which has come to its account. We find that the AO had investigated the matter fairly and had given enough opportunities to the assessee to come clean with the identity, creditworthiness and genuineness of the transaction. We find that the AO had given sufficient notice and furnished the enquiry reports to the assessee at various stages to show that he was not satisfied with the documents filed by the assessee before the AO. The AO has disproved the evidences brought by the assessee to discharge its burden of proof, which show that the assessee failed to discharge its burden of proof in respect to share application money which has come into its account. The CIT (A) erred in taking the audited balance sheet of subsequent assessment year and documents to prove the creditworthiness which was filed before him to prove the existence of the said companies and individuals. 38. Another argument based on case-laws was emphasized by the ld. AR that the AO erred in not appreciating the fact that the book entry in the assessee s account is on account of share capital and the law is very clear that in case of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ITI, has given a copy of the said report to the assessee to controvert/rebut the finding, if any, by other evidences (direct or indirect) to disprove the said report of the ITI or to give correct addresses or the latest addresses of the shareholders if there is a change in address. Thus, it cannot be taken as the AO had taken the ITI report at the back of the assessee for making the impugned addition. Here, it should be remembered that the ITI who was discharging the official duty and had only verified the question of fact as to whether the purported shareholders were residing/functioning from the said premises/addresses in order to prove the identity of the said shareholders as claimed by the assessee. The assessee had ample opportunity to disprove the report of the ITI by adducing evidences to either controvert the finding of the ITI in this respect or to bring the evidences to the effect that shareholders were in fact residing/functioning at that address furnished by it, however has now shifted to a different address. It should be kept in mind that after the ITI report onus shifted back to the shoulder of assessee. Without discharging the onus upon it, we find that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to prove the creditworthiness of the shareholders had provided the bank account numbers and bank statements of the shareholders (randomly selected 9 Nos.) which AO had sent to the respective banks which had been found to be false and bogus; and the copy of the said reports were handed over to the assessee for its explanation further action. In case, the assessee felt that the bank manager s letters were factually wrong, rather than crying foul, the assessee then could have protested about it and produced the documents to prove that the shareholders in fact had bank accounts in the said banks. Without doing so, when the onus got shifted on the shoulder of the assessee, it had to discharge the same. Moreover even before the CIT(A), the assessee has not been able to bring anything on record to state that the bank s letters stating that the alleged share holders / investors had no account, is factually wrong. In the absence of the same, the burden of proof has not been discharged by the assessee, to prove the creditworthiness of the share holders. It may be noted here also that the AO has not brought any fresh evidence to discredit the shareholders, he only cross-verified the docume ..... X X X X Extracts X X X X X X X X Extracts X X X X
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