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TMI Blog2024 (6) TMI 819X X X X Extracts X X X X X X X X Extracts X X X X ..... , we find no infirmity in the order of Ld. CIT(A) so as to call for any interference. Decided against assessee. - Smt. Annapurna Gupta, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member For the Assessee : Shri Divyang Shah, A.R. For the Revenue : Ms. Saumya Pandey Jain, Sr.D.R. ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This is an appeal filed by the assessee as against the order of Commissioner of Income Tax (Appeals)-11, Ahmedabad, in proceeding u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 vide order dated 10/02/2016 passed for the Assessment Year 2009-10. 2. The assessee has raised the following grounds of appeal: 1. Whether, on facts and in circumstances of the case and in law, Ld. CIT(A) has Erred in upholding the addition of Rs. 10,00,000/- under section 68 of the act for share money of Chandrakant V Solanki? 2. Whether, on facts and in circumstances of the case and in law, Ld. CIT(A) has Erred in upholding the addition of Rs. 15,00,000/- under section 68 of the act for share money of Hitendra V Solanki? 3. Whether, on facts and in circumstances of the case and in law, Ld. CIT(A) has Erred in upholding the addition of Rs. 30,00,000/- under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch action conducted, it was found that the assessee has issued shares to 25 parties over the period 25/03/2007 to 31/03/2009 and it was found that above share capital introduced by these persons was the unaccounted investment of the assessee company itself. On the basis of concrete information available with the Department, proceedings u/s. 148 of the Act was initiated for three assessment years i.e. A.Y. 2007-08, A.Y. 2008-09 and A.Y. 2009-10. Out of these 25 parties, Shri Mahendra Purohit, Director of the assessee company in his statement u/s. 132(4) of the Act has admitted that the investments made in the name of 16 parties was actually his own investment and the same was not genuine. Therefore, looking into the totality of facts, the assessing officer had strong reason to believe that even during the impugned year under consideration, the assessee had introduced his own unaccounted money in the garb of issuance of shares at a very high premium to various parties. Secondly, the Ld. D.R. submitted that it is evident from the assessment order itself that the reasons for reopening the assessment was duly furnished to the assessee and adequate opportunity was given to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciency or correctness of the material is not a thing to be considered at this stage. On the scope of re-opening u/s 147 of the Act observed as under: We have only to see whether there was prima-facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. We are of the view that the court cannot strike down the reopening of the case in the facts of this case. It will be open to the assessee to prove that the assumption of facts made in the notice was erroneous. The assessee may also prove that no new facts came to the knowledge of the Income-tax Officer after completion of the assessment proceeding. We are not expressing any opinion on the merits of the case. The questions of fact and law are left open to be investigated and decided by the assessing authority. The appellant will be entitled to take all the points before the assessing authority. The appeals are dismissed. There will be no order as to costs. 8. In the case of Priya Blue Industries (P.) Ltd. v. ACIT [2022] 138 taxmann.com 69 (SC) , the AO sought to reopen assessment in case of assessee on count that assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould prima- facie suggest that the assessee had sold number of shares of a company which was found to be indulging in providing bogus claim of long-term and short-term capital gain. The company was prima-facie found to be a shell company. The assessee had claimed exemption of long-term capital gain of Rs. 1.33 crores by way of sale of share of such company. 12. This was again affirmed by the Gujarat High Court in the case of Sanjay Baulal Surana [2021] 129 taxmann.com 375 (Gujarat). 13. Accordingly, in our view, the Assessing Officer had sufficient material to form a prima facie belief that the assessee had introduced own unaccounted income in term of bogus share capital, thereby leading to escapement of income. Therefore, we find no infirmity in the order of Ld. CIT(Appeals) when he held that issuance of notice under section 147 of the Act was valid in the instant set of facts. 14. On merits , the brief facts of the case are that search and seizure action u/s. 132 of the Act was conducted in the case of B.R. Metal group on 21.09.2010. During the course of search/survey, incriminating documents were seized to the effect that the assessee has introduced unaccounted money in the form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved that the bank account from which the payments was made by him for issuance of shares of the assessee company had been opened only shortly before subscription to share capital of the assessee and another group company BMJ Cables Pvt. Ltd. and before issuance of each cheque to the assessee or its group concerns, there is credit of equivalent amount into the bank account of the share applicant. Further, shortly thereafter, Mr. Solanki sold shares to M/s. Parshvanath Sales Ltd. at cost price without any profit. However the A.O. observed that the shares of the assessee company was purchased by M/s. Parshvanath Sales Ltd. from Shri Chandrakant Solanki only out of funds transferred to the bank account of M/s. Solsons Exports Pvt. Ltd.in which Mr. Chandrakant Solanki himself is the Director. Therefore, looking into the transaction like issuance of shares at a high premium, flow of funds into the bank account of Mr. Chandrakant Solanki, subsequent transfer of such shares to a company (M/s.Parshvanath Sales Ltd.) having no creditworthiness, providing of funds by the seller Mr. Chandrakant Solanki himself to the buyer company i.e. M/s. Parshvanath Sales Ltd. shows that the entire transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the funds to purchase the shares of the assessee company were provided by company in which Shri Hitendra Solanki itself was a Director. Therefore, all these entities are part of a camouflage created by the assessee/its Directors for introduction of unaccounted income in the form of share capital. Further, the assessing officer also observed that from the bank account have credit entries of equivalent of near amounts before issuance of cheque to the assessee company. Therefore, prima facie, it is evident that the account is used for providing accommodation entries. Further the assessing officer observed that in respect to all the four persons/ parties to whom shares were allotted by the assessee company, the claim of the share applicants is that the purpose of investment in the assessee company was to get good returns. However, it is seen that the assessee company did not declare any dividend or paid any interest to the shareholders. The profit motive, normal in the case of investment, was entirely absent in the assessee s set of facts. More importantly, the assessing officer observed that the parties to whom shares have been issued have all been non responsive to notices issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The AO made addition of Rs. 35 lakhs as benami investment made by the assessee in the form of subscription for shares in the name of Chaturbhai G. Patel. The AO sent notice u/s 133 (6) of the Act to this party at the address furnished by the assessee calling for relevant details, however, the same was returned. The assessee was asked to provide any new correspondence address of the party, which was also not complied with. On further inquiry from ROC, the AO found that the shares were not reflected in the name of this investor. Therefore, in view of these facts the AO arrived at a conclusion that the assessee failed to prove identity and creditworthiness of the party and genuineness of the transaction. 5.1 Regarding investment of Rs. 10 lakhs and Rs. 15 lakhs by Shri Chandrakant V Solanki and Shri Hitendra V. Solanki respectively, the AO issued summons u/s 131 of the Act asking Shri Chandrakant V. Solanki and Shri Hitendra V. Solanki. Their statements were recorded. The statements of these persons revealed the following facts. They subscribed to the shares through S.S. Dasani, a Chartered Accountant, that they were not aware of the face value and premium of the shares, that they d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share application money, names and addresses of the share applicants, their confirmatory letters, copies of their bank statements and other documents to establish genuineness of those investors. In other words, the requirements of provision of section 68 were fulfilled by the assessee. In the case of Expo Globe India Lid (supra) the assessee company furnished all the details on the lines of the details furnished in the case of Namastey Chemicals (P) Ltd. The fact of the case relied by the appellant were examined and it was observed that none of them was applicable to the facts of the case of the present case as discussed above. 7. The facts of the case and submissions of the appellant have been gone through The AO discussed in detail about the facts of the case and the result of investigation conducted and established that the investors were used as conduit to introduce the unaccounted funds of the assessee in the form of share subscription. After having regard to all the facts and circumstances of the case, submission of the appellant and position of law on the issue, in my considered opinion the action of the AO was in order, hence, does not warrant any interference. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shares of assessee company within short span of time at cost price only. Both the parties Shri Chandrakant Solanki and Shri Hitendra Solanki had no idea as to at what premium the shares were purchased by them in the assessee company. Even the original shares certificate were not available with these investors. So far as Shri Chaturbhai Patel is concerned, his whereabouts are absolutely unknown. Neither the address of Shri Chaturbhai Patel available, nor his PAN details were furnished. Even as per ROC records, no shares are reflecting in the name of this party and it was stated that these shares were sold by Shri Chaturbhai Patel before the commencement of assessment proceedings. Therefore neither is the identity of this person known nor his creditworthiness has been proved. Accordingly, the assessee has miserably failed to discharge the onus cast upon it. Accordingly, Ld. D.R. placed reliance on the observations made by the assessing officer and Ld. CIT(A) in their respective orders. 21. We have heard the rival contentions and perused the material on record. On-going through the facts of the instant case and the totality of circumstances including the statement of Shri Mahendra P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances and application of test of human probabilities to the given set of facts in the following words:- The transaction about purchase of winning ticket took place in secret and direct evidence about such purchase would be rarely available. An inference about such a purchase had to be drawn on the basis of the circumstances available on the record. Having regard to the conduct of the appellant as disclosed in her sworn statement as well as other material on the record, an inference could reasonably be drawn that the winning tickets were purchased by the appellant after the event. The majority opinion after considering surrounding circumstances and applying the test of human probabilities had rightly concluded that the appellant's claim about the amount being her winning from races, was not genuine . It could not be said that the explanation offered by the appellant in respect of the said amounts had been rejected unreasonably and that the finding that the said amounts were income of the appellant from other sources was not based on evidence. 23. On the issue of circumstantial evidence and in the matters related to the discharge of 'onus of proof' and the relevance of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal ignored vital facts emanating from record that said creditors had not produced evidence to establish their capacity to raise such a huge amount and also that they were not clear about their precise role in transaction involving said amount, its order was to be set aside. High Court further held that creditors admitting that they had made payments to assessee was not sufficient to discharge burden placed on assessee by section 68. The Hon'ble Supreme Court dismissed the SLP filed against the order of High Court. 25. Again, the Supreme Court in the case of Sunil Thomas v, ITO [2021] 127 taxmann.com 275 (SC) dismissed SLP against High Court ruling that where donor (creditor) who was assessee's brother, apart from furnishing his employment particulars and confirming gift, couldn't explain genuineness of transactions or his creditworthiness by proving his monetary ability to make such gifts of substantial amount, gift amount was to be treated as undisclosed income. The facts of this case were that assessee claimed to have received gift from his NRI brother. The Assessing Officer treated it as assessee's undisclosed income on ground that same was not real and genuine. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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