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TMI Blog2019 (3) TMI 492X X X X Extracts X X X X X X X X Extracts X X X X ..... Asstt.Year 2012-13. 2. The grounds of appeal taken by the assessee are not in consonance with the Rule 8 of the Income Tax (Appellate Tribunal) Rules, 1963 - they are descriptive and argumentative in nature, though subsequently, the assessee has filed concise grounds of appeal also. In brief, the grievance of the assessee is that the ld.CIT(A) has erred in confirming addition of ₹ 36,33,000/- which was added by the AO on the ground that share application and share premium money received by the assessee is unexplained cash credit under section 68 of the Income Tax Act, 1961. 3. Brief facts of the case are that the assessee-company has filed its return of income on 29.9.2012 declaring total income at ₹ 30,162/-. The case of the assessee was selected for the scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the AO that the assessee had issued share capital of ₹ 2,73,330/- (27,330 nos. of face value of ₹ 10/- each) during the year under consideration. The company has also received share premium of ₹ 38,26,200/- (at the rate of ₹ 140/- per share). The AO has compi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the applicants were produced; copy of communication given to the Registrar of Companies showing allotment of shares was produced before the AO; all the applicants are income-tax assessees; they are individuals, hence the assessee has discharged onus cast upon it by virtue of section 68. Only lapse at the end of the assessee is that it failed to produce share applicants before the AO. According to the ld.counsel for the assessee, this is not such a fatal circumstance, which would amount to rejection of all other evidences so as to disbelieve the version put-forth by the assessee. She made reference to the decisions relied upon before the ld.First Appellate Authority, which has been noticed by the ld.CIT(A) in the submissions of the assessee. 7. On the other hand, ld.DR relied upon orders of the Revenue authorities. He pointed out that ld.AO has specifically directed the assessee to produce all the share applicants because they have very meager source of income, and the AO wanted to verify their credit-worthiness as well as genuineness of the transaction. He made reference to pages 60 to 70 of the paper book and contended that all the cheques and other details are in same hand-wri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dited to the accounts of the assessee, then role of section 68 would come. It is pertinent to take note of this section. It reads as under: "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 officer, satisfactory the sum so credited may be charged to income tax as the income of the assessee of that previous year." 9. A perusal of the section would indicate that basically this section contemplates three conditions required to be fulfilled by an assessee. In other words, the assessee is required to give explanation which will exhibit nature of transaction and also explain the source of such credit. The explanation should be to the satisfaction of the AO. In order to give such type of explanation which could satisfy the AO, the assessee should fulfill three ingredients viz. (a) identity of the share applicants, (b) genuineness of the transaction, and (c) credit-worthiness of share applicants. As far as construction of section 68 and to understand its meaning is concerned, there is no much difficulty. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot real, then claim of the assessee should not be accepted. This can be tested on the surrounding circumstances, making reference to the substantial evidence produced by the assessee as well as collected by the AO. The Hon'ble High Court also made observation that certificates of incorporation/PAN are being referred by the assessee to demonstrate identity of the share applicants. According to the decision of the Hon'ble Delhi High Court, these are not sufficient documents, because they have their own limitation. A permanent account number is being allotted on an application made by an assessee. It is pertinent to observe that in these days, such account number is being allotted on on-line application. There is no investigation about the identity of an assessee who obtains PAN. Similarly, certificate of incorporation can be given a corroborative evidence in support of identity, but it will not exhibit whether share applicant company was a paper company or not. In brief evidence in the shape of PAN, certificate of incorporation would not be sufficient for proving the identity of the share applicant company. Similarly, payments received through banking channels would not be sacrosan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is difficult to apprehend as how the persons who have disclosed total income of ₹ 1,50,000/- to ₹ 2,00,000/- could investment such a huge amount of ₹ 2,00,000/- to ₹ 7,00,000/- in the appellant company on a hefty premium. The appellant has failed to produce any evidence to prove the creditworthiness and genuineness of the transactions of the investors mentioned as above, except Hasmukh Barot HUF. It is also noticeable in this case that all the investors have opened the bank account in the same bank and from there the money is company. It is also noticeable that just before the investment; the bank accounts of all the persons are credited with identical amount as it was to be invested. Another very crucial fact is that all the above investors have opened the accounts in State Bank of Bikaner, C.G. Road, Ahmedabad. The money deposited in these accounts and cheques were issued to the appellant for the purchase of shares. This all leads to the conclusion that it was the unaccounted money of the appellant itself which was being channelized to give it a garb of investment in the name of various persons. No doubt, the appellant has tried to layer it down t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these share applicants. But the assessee failed to produce them. The question, for example, is that the applicant Sushilaben Machhar has filed a return for the Asstt.Year 2012-13 showing gross income of ₹ 6,926/-. She has contributed ₹ 2,18,250/-. Could it be anticipated that a lady having income less than ₹ 10,000/- could contribute a sum more than ₹ 2 lakhs in a transaction where return is 0.08 paisa per share ? There is no justification at the end of the assessee to demonstrate that these shares could be subscribed at such a higher premium that too by a marginal person who has very nominal income. They are not family members, who have some interest in the company. The ld.CIT(A) has appreciated this aspect. It is also noted that in their accounts identical amount of deposits were made before issuance of cheques for share applications. After taking into consideration material available on record as well as finding of the ld.CIT(A) extracted (supra), I do not find any merit in the grounds of appeal of the assessee. It is dismissed.
14. In the result, the appeal of the assessee is dismissed.
Order pronounced in the Court on 5th March, 2019. X X X X Extracts X X X X X X X X Extracts X X X X
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