9911796707
TMI Blog2019 (3) TMI 323X X X X Extracts X X X X X X X X Extracts X X X X ..... essee had filed the original Return of Income on 29.9.2009 declaring a total income of Rs. 7,01,870. A Notice was issued u/S. 148 of the Act to re-open the assessment on 13.04.2012 for the reasons recorded therein. 3.2. The Assessee filed submissions on 23.04.2012 to the Notice u/S. 148, and objections on 30.04.2012. The objections were rejected on 13.08.2012. A Show Cause Notice was issued on 13.01.2014. The Assessee filed detailed Written Submissions on 22.01.2014. 3.3. The Assessee Company in its Return showed that money aggregating to Rs. 17,60,00,000/- had been received through Share Capital/Premium during the Financial Year 2009-10 from the following companies situated at Mumbai, Kolkatta, and Guwahati: S. No. Name of the shareholder Amount (A)Mumbai Based Companies 1. Clifton Securities Pvt. Ltd. 95,00,000 2. Lexus Infotech Ltd. 95,00,000 3. Nicco Securities Pvt. Ltd. 95,00,000 4. Real Gold Trading Company Pvt. Ltd. 90,00,000 5. Hema Trading Company Pvt. Ltd. 95,00,000 6. Eternity Multi-trade Pvt. Ltd. 90,00,000 (B)Kolkata Based Companies 1. Neha Cassettes Pvt. Ltd. 90,00,000 2. Warner Multimedia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd credit-worthiness of the investor companies, and to examine the genuineness of the transaction. Enquiries were made at Mumbai, Kolkatta, and Guwahati where these Companies were stated to be situated. The result of the enquiry is summarised by the A.O. in his Order as under :- S. No. Name of Investor Company AO's Enquiries Amounts invested & Tax returns filed 1. Clifton Securities Pvt. Ltd.- Mumbai Notice Served on 29.11.2011 at the given address but no reply received till date. 95,00,000 2. Lexus Infotech Ltd.- Mumbai Notice Served on 19.11.2011 at the given address but no reply received till date. 95,00,000 3. Nicco Securities Pvt. Ltd. - Mumbai Notice Served on 29.11.2011 at the given address but no reply received till date. 95,00,000 4 Real Gold Trading Co. Pvt. Ltd.- Mumbai Address incorrect. The correct address is 2ndflorr, Big Three Building where office found closed bearing the name Hema Trading Co. 90,00,000 5. Hema Trading Co. Pvt. Ltd.- Mumbai Notice could not be served as Respondent-Assessee not available at the address given. The premises is owned by some 95,00,000 other person. 6. Eternity M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y had shown income of Rs. 5,850/- for A.Y. 2009-10 Rs. 90,00,000 invested on 21.10.2008 Return income Rs. 5850 11. Gromore Fund Managemen t Ltd. Kolkatta It was submitted, that the company had applied for 47,500 equity shares of Rs. 10/- of NRA Iron and Steel Pvt. Ltd. each at a premium of Rs. 190/- each. The Company had not given any reason for paying such a high premium. The Company had shown income of Rs. 14,130/- for A.Y. 2009-10 Rs. 95,00,000 invested on 24.10.2008 Return income Rs. 14130 12. Bayanwala Brothers Pvt. Ltd. Kolkatta It was submitted, that the company had applied for 47,500 equity shares of Rs. 10/- of NRA Iron and Steel Pvt. Ltd. each at a premium of Rs. 190/- each. The Company had not given any reason for paying such a high premium. (50,00,000/- Ch. No. 000020 dt. 06.11.2008 & Rs. 45,00,000/- Ch. No. 000021 dt. 06.11.2008 drawn on Kotak Mahindra Bank Rs. 95,00,000 invested on 6.11.2008 Return income Rs. 10626 The Company had shown income of Rs. 10,626/- for A.Y. 2009-10 13. Super Finance Ltd. Kolkatta It was submitted, that the company had applied for shares of NRA Iron and Steel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; & Rs. 45,00,000/- Ch. No. 205189 dt. 5.12.2008 drawn on HDFC (Centurion Bank of Punjab) The Company had shown income of Rs. 10,307/- for A.Y. 2009-10 Rs. 95,00,000 invested on 5.12.2008 By 2 cheques Return income Rs. 10307 TOTAL 17,60,00,000 The AO recorded that the enquiries at Mumbai revealed that out of the four companies at Mumbai, two companies were found to be non-existent at the address furnished. With respect to the Kolkata companies, the response came through dak only. However, nobody appeared, nor did they produce their bank statements to substantiate the source of the funds from which the alleged investments were made. With respect to the Guwahati companies - Ispat Sheet Ltd. and Novelty Traders Ltd., enquiries revealed that they were non-existent at the given address. 3.9. On the basis of the detailed enquiries conducted, the A.O. held that the Assessee had failed to prove the existence of the identity of the investor companies and genuineness of the transaction. The A.O. found that : i. None of the investor-companies which had invested amounts ranging between Rs. 90,00,000 and Rs. 95,00,000 as share capital in the Respondent Company - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, acknowledgments with PAN numbers, copies of their bank account to show that the entire amount had been paid through normal banking channels, and hence discharged the initial onus under Section 68 of the Act, for establishing the credibility and identity of the shareholders. 5. The Revenue filed an Appeal before the Income Tax Appellate Tribunal (hereinafter referred to as "ITAT"). The ITAT dismissed the appeal, and confirmed the order of the CIT(A) vide Order dated 16.10.2017 on the ground that the Assessee had discharged their primary onus to establish the identity and credit-worthiness of the investors, especially when the investor companies had filed their returns and were being assessed. 6. The Revenue filed an Appeal bearing I.T.A. No. 244/2018 u/S. 260A of the Act before the Delhi High Court to challenge the order of the Tribunal. The Respondent Company - Assessee did not appear before the High Court. Hence, the matter proceeded ex-parte. The High Court dismissed the Appeal filed by the Revenue vide the Impugned Order dated 26.02.2018, and affirmed the decision of the Tribunal on the ground that the issues raised before it, were urged on facts, and the lower appellate au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he income of the Assessee of that previous year" (emphasis supplied) The use of the words "any sum found credited in the books" in Section 68 of the Act indicates that the section is widely worded, and includes investments made by the introduction of share capital or share premium. 8.2. As per settled law, the initial onus is on the Assessee to establish by cogent evidence the genuineness of the transaction, and credit-worthiness of the investors under Section 68 of the Act. The assessee is expected to establish to the satisfaction of the Assessing Officer CIT v. Precision Finance Pvt. Ltd. (1994) 208 ITR 465 (Cal) : * Proof of Identity of the creditors; * Capacity of creditors to advance money; and * Genuineness of transaction This Court in the land mark case of Kale Khan Mohammad Hanif v. CIT [1963] 50 ITR 1 (SC) and, Roshan Di Hatti v. CIT [1977] 107 ITR (SC) laid down that the onus of proving the source of a sum of money found to have been received by an assessee, is on the assessee. Once the assessee has submitted the documents relating to identity, genuineness of the transaction, and credit-worthiness, then the AO must conduct an inquiry, and call for more details ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present case, the Assessing Officer made an independent and detailed enquiry, including survey of the so- called investor companies from Mumbai, Kolkata and Guwahati to verify the credit-worthiness of the parties, the source of funds invested, and the genuineness of the transactions. The field reports revealed that the share-holders were either non-existent, or lacked credit-worthiness. 10. On the issue of unexplained credit entries /share capital, we have examined the following judgments : i. In Sumati Dayal v. CIT [1995] 214 ITR 801 (SC) this Court held that : "if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory, there is prima facie evidence against the assessee, vis., the receipt of money, and if he fails to rebut the same, the said evidence being unrebutted can be used against him by holding that it is a receipt of an income nature. While considering the explanation of the assessee, the department cannot, however, act unreasonably" ii. In CIT v. P. Mohankala 291 ITR 278 this Court held that: "A bare reading of section 68 of the Income- tax Act, 1961, suggests that (i) there has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his burden stands discharged and the burden then shifts to the revenue to show that though covered by cheques, the amounts in question, actually belonged to, or was owned by the assessee himself" (emphasis supplied) vi. In a recent judgment the Delhi High Court CIT v. N.R. Portfolio (P.) Ltd.[2014] 42 taxmann.com 339/222 Taxman 157 (Mag.) (Delhi) held that the credit-worthiness or genuineness of a transaction regarding share application money depends on whether the two parties are related or known to each other, or mode by which parties approached each other, whether the transaction is entered into through written documentation to protect investment, whether the investor was an angel investor, the quantum of money invested, credit-worthiness of the recipient, object and purpose for which payment/investment was made, etc. The incorporation of a company, and payment by banking channel, etc. cannot in all cases tantamount to satisfactory discharge of onus. vii. Other cases where the issue of share application money received by an assessee was examined in the context of Section 68 are CIT v. Divine Leasing & Financing Ltd. (2007) 158 Taxman 440, and CIT v. Value Capital Service (P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y. 2009-10, but had purchased Shares worth Rs, 90,00,000 in the Assessee Company. Similarly Warner Multimedia Ltd. - Kolkatta filed a NIL return, but had purchased Shares worth Rs. 95,00,000 in the Assessee Company - Respondent. Another example is of Ganga Builders Ltd. - Kolkatta which had filed a return for Rs. 5,850 but invested in shares to the tune of Rs. 90,00,000 in the Assessee Company - Respondent, etc. iii. There was no explanation whatsoever offered as to why the investor companies had applied for shares of the Assessee Company at a high premium of Rs. 190 per share, even though the face value of the share was Rs. 10/- per share. iv. Furthermore, none of the so-called investor companies established the source of funds from which the high share premium was invested. v. The mere mention of the income tax file number of an investor was not sufficient to discharge the onus under Section 68 of the Act. 13. The lower appellate authorities appear to have ignored the detailed findings of the AO from the field enquiry and investigations carried out by his office. The authorities below have erroneously held that merely because the Respondent Company - Assessee had fil ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
