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TMI Blog2022 (7) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... ransaction cannot be termed as genuine. When assessing officer asked the assessee to explain these inter-connected transactions, it was the duty of the assessee to explain the same. In this regard, a useful reference may be made to the decision of the Hon`ble Apex Court in the case of Biju Patnaik [ 1986 (5) TMI 2 - SUPREME COURT] wherein it was held that in appropriate cases even the source of source has to be proved by the assessee under section 68 of the Act. Although, the issue before us pertains to assessment year 2012-13 where amended provisions of section 68 do not apply, however, considering the facts of the case, the assessee has to explain the source of the source, as the assessing officer has pointed out the trail of money, and in that circumstances owns shifts on the assessee to provide suitable explanation to Assessing Officer. It is the appropriate case to prove source of the source. At the cost of repetition, we state that when Assessing Officer observed that M/s Tax World Fashions Pvt. Limited and M/s Sita Fabric Pvt. Limited had no liability to repay loan, so it was the assessee`s money which came back to the assessee by way of share capital. In that situ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Your appellant prays for leave to add, alter and /or amend all or any of the grounds before the final hearing of appeal. 3.The facts of the case which can be stated quite shortly are as follows: The assessee before us, is a Private Limited Company and engaged in the business of manufacturing and trading of cloth. The original return of income for assessment year 2012-13 was filed by the assessee company on 28.09.2012 declaring its total loss of Rs.88,28,262/-. The return of income was duly processed under section 143(1) of the Income Tax Act, 1961. During the assessment proceedings it was observed by the assessing officer that assessee company has issued shares and introduced share capital amounting to Rs.55 lakhs from M/s Lily enclave Pvt. Ltd. The assessing officer noted that assessee has allotted 27,500/- shares to M/s Lily enclave Pvt. Ltd, during the year under consideration. The shares were issued at face value of 100/- per share and Rs.100/- as premium per share. The assessee was asked to submit the identity and creditworthiness of M/s Lily enclave Pvt. Ltd. and prove genuineness of the transaction. The assessee has submitted income tax return filed by M/s Lily enclav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annels and assessee submitted PAN Number, financial statements of share applicants, therefore assessee has proved the source of the money. The ld Counsel also submitted that assessee need not to prove source of the source, hence, ld Counsel prays that addition made by the Assessing Officer may be deleted. 7.On the other hand, the Ld. DR for the Revenue has submitted that M/s Lily Enclave Pvt. Ltd. is a shell company whose name has been struck off by the Ministry of Corporate Affair. Therefore, during the appellate proceedings, the assessee company`s name was struck off by the Ministry of Corporate Affair. However, ld Counsel submitted before the Bench that assessee company is still active, therefore, the said issue may be remitted back to the file of the assessing officer to examine whether assessee company`s status is active or not. 8. On merits, ld DR stated that M/s Texworld Fashions Pvt. Ltd. and M/s Sita Fabric Mills Pvt. Ltd. have shown receipt of unsecured loans from M/s Lily enclave Pvt. Ltd during A.Y.2009-10. During the assessment proceedings for A.Y. 2009-10 in the case of M/s Texworld Fashions Pvt. Ltd. and M/s Sita Fabric Mills Pvt. Ltd, the unsecured loans of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ministry of Corporate Affair. The allegation of assessing officer that appellant company is a paper company is correct. The Honourable ITAT, Ahmedabad in the case of Pavankumar M. Sanghvi Vs. ITO, Wd. 3(1)(2), Baroda [2017] 81 Taxmann.com 308 hasobserved on such type of transaction as under:- 8. As I proceed to deal with genuineness aspect, it is important to bear in mind the fact that what is genuine and what is not genuine is a matter of perception based on facts of the case vis-a-vis the ground realities. The facts of the case cannot be considered in isolation with the ground realities. It will, therefore,be useful to understand as to how the shell entries, which the loan creditors are alleged to be, typically function, and then compare these characteristics with the facts of the case and in the light of well settled legal principles. A shell entity is generally an entity without any significant trading, manufacturing or service activity, or with high volume low margin transactions to give it colour of anormal business entity used as a vehicle for various financial manoeuvres. A shell entity, by itself, it not an illegal entity but it is their act of abatement, of, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the amount it was not due to receive, the transaction cannot be termed as genuine. 12.We note that Assessing Officer can examine the source of the source, and when assessing officer put query before the assessee, then it was the duty of the assessee to reply it. However, the assessee need not to prove source of the source from his side for assessment year 2012-13 under consideration, as held by the Hon`ble Bombay High Court in the case of Gagandeep Infrastructure (P.) Ltd [2017] 80 taxmann.com 272 (Bombay). The Hon`ble Court held that proviso to section 68 has been introduced by the Finance Act, 2012 with effect from 1-4-2013. Thus, it would be effective only from the assessment year 2013-14 onwards and not for the subject assessment year 2012-13. 13. We note that Hon`ble Supreme Court in the case of Sreelekha Banerjee v. Commissioner of Income-tax [1989] 49 ITR (SC) 114, 120: [1964] 2 SCR 552 (SC), observed: The very words ' an undisclosed source' show that the disclosure must come from the assessee and not from the department. Thus, when assessing officer has examined the source of the source and asked the assessee to explain, then onus shifts on the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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