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TMI Blog2018 (4) TMI 379X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessment year under consideration on 29th September, 2009. During the course of scrutiny proceedings, the AO asked the assessee to file details in respect of the share capital of ₹ 3,26,00,000/- raised during the year. The assessee submitted the details thereof along with evidences. The AO not being satisfied with the reply and evidences submitted by the assessee, added a sum of ₹ 86 Lakh being the share capital received from 4 shareholders during the year. Aggrieved by the order of the AO, the assessee filed an appeal before the CIT(A) and made various submissions. The CIT(A) not being satisfied with the explanation and evidences of the assessee confirmed the addition made by the AO. 3. Aggrieved by the order of the CIT(A), the assessee is in appeal before us and has raised the following grounds of appeal: 1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad both in the eye of law and on facts. 2(i) On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in confirming the addition of ₹ 86,00,000/- made by AO on account of sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho have subscribed the share capital to the extent of ₹ 86 lakhs. The AO on 19th March, 2013 asked the assessee to produce these shareholders on 25th March, 2013. The assessee requested the AO for adjournment of two days only to produce these 4 shareholders. The AO however did not agree with the request of the assessee and made the addition of ₹ 86 lakhs being the share capital received from the following 4 shareholders: 1. M/s Attractive Finlease Ltd. ₹ 30,00,000/- 2. M/s Euro Asia Mercantile (p) Ltd. ₹ 20,00,000/- 3. M/s Shalini Holdings Ltd. ₹ 30,00,000/- 4. M/s Stranger Hotels (P) Ltd. ₹ 6,00,000/- 5. It was pointed out by the Ld. AR that there is no adverse comment by the AO in the assessment order other than the allegation that replies have not been received from 4 shareholders which has led to this addition. It was contended by the Ld. AR that firstly, this allegation of the AO that he did not rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of as held by the Supreme Court in the case of Umacharan Shaw Bros vs. CIT 37 ITR 271 (SC). It was further contended that the reliance placed by the CIT(A) on the judgment of the Supreme Court in the case of McDowell Company Ltd. vs. CTO 154 ITR 148 (SC) and CIT vs. Durga Prasad More 82 ITR 540 (SC) and Kerala High Court Judgment in the case of ITO vs. Diza Holdings Pvt. Ltd. 120 Taxmann 539 (Kerala), is not correct as these judgments have been delivered on entirely different facts. In the present case, it is clear from the facts that there is no allegation of any accommodation entry, nor there is any adverse statement of any entry operator about the share capital received by the assessee company from these 4 shareholders. Further, nothing adverse has been brought on record by the AO nor by the CIT(A). 7. The Ld. AR invited attention to PB. Pg. 65 to 145, which are the evidences in the form of confirmation, acknowledgement of income tax return, share application form, bank statement and audited balance sheet of each of the 4 shareholders to substantiate that it has discharged its onus under Section 68 in respect of these 4 shareholders. The Ld. AR also referred to the bank s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to him, he did not receive replies from these 4 shareholders. Thus, the only reason for which the AO drew adverse inference was non-receipt of replies from these 4 shareholders. The AO has not pointed out any other adverse feature or material in the assessment order. There is no allegation in the assessment order of any accommodation entry or any statement by any person regarding genuineness of the share capital received by the assessee company from these 4 shareholders. Ongoing through the paper book, we note that assessee has submitted complete details in respect of each of these 4 shareholders to substantiate the identity, creditworthiness and genuineness. During the course of the hearing before us with the assistance of the Ld. AR and the Ld. DR, we have gone through each of these documents. (i) The assessee company has received a sum of ₹ 30,00,000/- from Attractive Finlease Ltd. This amount has been paid by this company from its bank account no. 224011618 with Axis bank on 28th May, 2009. Ongoing through the bank statements at PB. Pg. 92-94, we note that there is no cash deposit. This company has total net worth of ₹ 105.05 Crore as per the audited balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to discredit the allegation of the AO that he did not receive reply in response to notice issued by him under Section 133(6). De horse the non-receipt of the reply, even for the sake of argument we assume that the AO has not received the reply, still the fact remains that 133(6) notice were served on these four shareholders. On going through the assessment order we note that it is not the case of the AO that notices have come back unserved or these shareholders were not available at the address given by the assessee. If that be so, we are of the view that no adverse inference can be drawn against the assessee merely because reply has not been received by the AO in response to notice issued under Section 133(6). The AO having issue the notice and such notice having been served on the person concerned, the AO has to take the process to the logical end. He cannot draw adverse inference merely because reply has not been received. Submission of the reply in an independent enquiry being carried out by the AO by issue of notice under Section 133(6) from the person concerned directly is not in the hands of the assessee. The AO may be justified in certain circumstances when notice is not s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds ; because it is equally clear that in making the assessment under sub-section (3) of Section 23 of the Act, the Income-tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under Section 23(3). The rule of law on this subject has, in our opinion, been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh v. Commissioner of Income-tax, Punjab. 12. It is also a settled law that doubt howsoever strong cannot take place of proof as submitted by the Ld. AR relying upon the judgment of the Supreme Court in the case of Umacharan Shaw Bros Vs. CIT [1953] 37 ITR 271. The relevant observations of the Hon ble Supreme Court on this issue reads as under: Taking into consideration the entire circumstances of the case, we are satisfied that there was no material on which the Income-tax Officer could come to the conclusion that the firm was not genuine. There are many surmises and conjectures, and the conclusion is the result of suspicion which cannot take the place of proof in these matters. 13. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Delhi High Court on this issue has held as under: This Court notices that the assessee had provided several documents that could have showed light into whether truly the transactions were genuine. It was not a case where the share applicants are merely provided confirmation letters. They had provided their particulars, PAN details, assessment particulars, mode of payment for share application money, i.e. through banks, bank statements, cheque numbers in question, copies of minutes of resolutions authorizing the applications, copies of balance sheets, profit and loss accounts for the year under consideration and even bank statements showing the source of payments made by the companies to the assessee as well as their master debt with ROC particulars. The AO strangely failed to conduct any scrutiny of documents and rested content by placing reliance merely on a report of the Investigation Wing. This reveals spectacular disregard to an AO s duties in the remand proceedings which the Revenue seeks to inflict upon the assessee in this case. 16. The Bombay High Court in a recent case of CIT vs. Orchid Industries Pvt. Ltd. 397 ITR 136 had occasion to deal with a somewha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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