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TMI Blog2004 (6) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... against whom section 68 would be invoked not the assessee until the link between the assessee-company and the shareholders' unaccounted money is established and thus it could not be regarded as undisclosed income of the assessee. The assessee-company during the financial year 1995-96 relating to the accounting year 1996-97 introduced share capital to the tune of ₹ 29,54,000. Most of the share applicants are of rural areas of Burdwan district in West Bengal. The Assessing Officer proceeded to verify the genuineness of such huge share capital introduced. He issued summons under section 131 of the Income-tax Act to several shareholders. Most of them appeared in response to the summons. In the course of examination the Assessing Officer found that: (a) most of the share applicants were farmers with negligible agricultural land having no other business or source of income; (b) they are mostly potato growers and used to sell and keep potatoes in the cold storage of the appellant; (c) bank accounts were opened in their names on a single day just to deposit a huge sum of money and withdraw it in the next cheque for investment as share capital in the assessee-company; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and creditworthiness of the parties. Reliance was placed by the Tribunal on a reported decision of CIT v. Durga Prasad More [1971] 82 ITR 540 wherein the apex court held that the taxing authorities were entitled to look into the surrounding circumstances to find out the validity of such transactions. Reliance was also placed on CIT v. Precision Finance Pvt. Ltd. [1994] 208 ITR 465 (Cal) wherein it was categorically mentioned that mere furnishing of particulars was not enough. Mr. Dutta, learned counsel for the assessee, had relied on the decision in Hindusthan Tea Trading Co. Ltd. v. CIT [2003] 263 ITR 289, a decision on this point rendered by this particular Bench. Mr. Dutta goes on arguing that in the aforesaid decision it was so held that the power of the Assessing Officer under section 68 is not an absolute one. It is subject to its satisfaction where an explanation is offered. The power is absolute where the assessee offers no explanation. The satisfaction with regard to explanation is in effect an in-built safeguard in section 68 protecting the interest of the assessee. Once it is explained, it is incumbent on the Assessing Officer to consider the same and form an opinio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned on the same date only for the purpose of utilising the amount deposited on the very date for purchasing bank drafts and the bank drafts obtained by all the applicants bore the serial numbers in order and that none of these applicants could produce the share certificate or any other document to established that the transaction was genuine and the money belonged to them. The materials were such that no reasonable man could presume the genuineness of the transaction. Nowhere from the record did it appear that any income-tax file number was disclosed. On the other hand, the particulars of filing of Form No. 4A for that particular previous year were furnished. Furnishing particulars of Form No. 4A would not establish the creditworthiness of the investor in a case where the income earned by the applicants were alleged to have been earned from agriculture outside the purview of the Income-tax Act. It was not known why persons earning between ₹ 8,000 to ₹ 10,000 would submit Form No. 4A for the assessment year 1996-97 when the income exigible to tax under the Income-tax Act, 1961, was far above ₹ 10,000. This clearly indicated a very futile attempt to paint the colour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income-tax file numbers of the share applicants that being so, it cannot be so stated as has been urged by Mr. Shome, learned counsel for the Revenue, that in the instant case there was no scope of any further enquiries as it goes to show prima facie that the share applicants were earning ₹ 8/10 thousand per year and that the payments were made by cheque for payment of the share application amounts. Therefore, in such a situation the ratio decided in CIT v. Ruby Traders and Exporters Ltd. [2003] 263 ITR 300 (Cal) and Hindusthan Tea Trading Co. Ltd. [2003] 263 ITR 289 (Cal) would be applicable. We may refer to the decision cited by the respective counsel for the parties in order to deduce briefly the ratio laid down therein. At the same time, we must keep in mind that a principle of law laid down in the ratio in a decision cannot be treated to be a straightjacket formula to be applied in each case. The facts and circumstances of each case are to be weighed with and examined as to whether a particular ratio decided in a particular case could be applied. The ratio that has been laid down in the case of Ruby Traders and Exporters Ltd. [2003] 263 ITR 300 (Cal) and Hindustha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties, let us now examine the facts and circumstances of the present case and find out as to whether the Assessing Officer and the learned Tribunal was right or not. In the present case in order to establish the creditworthiness, it was shown that the bank account was opened through which the money was invested and that Form No. 4A was submitted. There was nothing on record to show that any income-tax file number was ever disclosed. The assessee had also not attempted to disclose any income-tax file number either before the learned Tribunal or before this court. Through Form No. 4A a sum of ₹ 1,400 was deposited as income-tax. Whereas in the course of deposition, the applicants had stated that their respective annual income was between ₹ 8,000 and ₹ 10,000. They had also disclosed that they had very negligible quantum of agricultural land. Apart from the agricultural land, they did not disclose that they had any other source of income or business. They grew potatoes, which they used to keep in the cold storage of the assessee. Thus, it appears that on the examination the applicants disclosed that they were all farmers growing potatoes and used to keep th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investors. All the bank accounts were also opened on the same single day for utilising the amount for purchasing all the demand drafts on the same day out of the amounts deposited. Therefore, there was no material to show that these amounts were held by the respective investors to prove their creditworthiness. Giving of opportunity in such a case would be an empty formality. The aforesaid two cases are completely different in factual context and have no manner of application in this case and on the admitted position as found on enquiry by the Assessing Officer. Now turning to the question of genuineness of the transaction. The assessee had disclosed the bank account number and the investment through demand drafts. It appears that the bank accounts were opened in a particular branch of a particular bank on the same single day by each of the 40 investors. Each of the 40 investors had withdrawn the amount deposited in the bank account on the same day the accounts were for the purpose of purchasing the demand drafts. These demand drafts bear successive serial numbers continuously in order, namely, were issued in one continuous transaction. The subscribers could not produce the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rming an opinion other than that which the Assessing Officer has formed. In these circumstances, the question is answered in favour of the Department and against the assessee. The appeal, therefore, fails and is accordingly dismissed. D.K. Seth J. -I had the privilege of going through the judgment of my learned Brother, Sinha J. I fully agree and concur with the view taken. However, I would like to add a few words of mine. Section 68 of the Income-tax Act, 1961, confers an extraordinary power upon the Assessing Officer to treat any entry found credited in the books of account of the assessee in the previous year as income of the assessee, if the assessee offers no explanation about the nature and source of such entry or the explanation offered by him, in the opinion of the Assessing Officer, is not satisfactory. There is an inbuilt safeguard in the section itself to protect the interest of the assessee in the form of offering of explanation. We had occasion to deal with this principle in Hindusthan Tea Trading Co. Ltd. v. CIT [2003] 263 ITR 289 (Cal) and CIT v. Ruby Traders and Exporters Ltd. [2003] 263 ITR 300 (Cal). The principle laid down therein was sought to be attrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment by account payee cheque is not sacrosanct, nor can it make a non-genuine transaction genuine. The creditor should be identified; his creditworthiness and the genuineness of the transaction should be proved, as was held in CIT v. Korlay Trading Co. Ltd. [1998] 232 ITR 820, at page 824 (Cal). When these ingredients are established, the onus shifts on the Department. The onus is stated to be shifted only when there is evidence to sufficiently establish a prima facie case in favour of the party on whom the onus lies. Lord Hansworth M.R. in Stoney v. Eastbourne R.D. Council [1927] 1 Ch. 367 at page 397 (CA) observed: . . . there can only be sufficient evidence to shift the onus from one side to the other if the evidence is sufficient prima facie to establish the case of the party on whom the onus lies. It is not merely a question of weighing feathers on the one side or the other, and on saying that if there were two feathers on one side and one on the other that would be sufficient to shift the onus. What is meant is, that in the first instance, the party on whom the onus lies must prove his case sufficiently to justify a judgment in his favour if there is no other evidence. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emitting the case in respect of the particular persons to the learned Tribunal for taking a decision on the basis of the materials. Relying on Hindusthan Tea Trading Co. Ltd. [2003] 263 ITR 289 (Cal), we had allowed opportunity to the assessee in that case to prove its case before the Assessing Officer for returning the findings to the learned Tribunal in order to enable the learned Tribunal to decide the case accordingly. Therefore, the decisions in Ruby Traders and Exporters Ltd. [2003] 263 ITR 300 (Cal); Kundan Investment Ltd. [2003] 263 ITR 626 (Cal) and Hindusthan Tea Trading Co. Ltd. [2003] 263 ITR 289 (Cal) did not lay down an absolute proposition of giving of an opportunity. It is dependent on the facts of each case. In Hindusthan Tea Trading Co. Ltd. [2003] 263 ITR 289 (Cal); Kundan Investment Ltd. [2003] 263 ITR 626 (Cal) and Ruby Traders [2003] 263 ITR 300 (Cal) as discussed above, we had occasion to deal with this question of shifting of onus where we had occasion to hold that after the materials received on the basis of the disclosure by the assessee and when the Assessing Officer. forms an opinion that the explanations given is unsatisfactory, the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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