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TMI Blog2018 (11) TMI 1964X X X X Extracts X X X X X X X X Extracts X X X X ..... its return of income on 29.03.2011 declaring total income of Rs. 1.62 crores. The return was selected for scrutiny assessment and accordingly, statutory notices were issued and served upon the assessee. During the course of scrutiny assessment proceedings, the Assessing Officer noticed that there is an increase in the share capital of the assessee from Rs. 11.94 crores to 31.56 crores. The assessee was asked to substantiate the identity, creditworthiness and genuineness of the share capital received. 5. The assessee furnished list of share applicants with full names and addresses. To cross verify the genuineness of the share application money received, the Assessing Officer issued notices u/s. 133(6) of the Act. Reply to all the notices were received by the Assessing Officer alongwith ledger account, bank statements and copies of Income tax returns. 6. The Assessing Officer analysed the details submitted by the share applicants in the following table: Sl. No. Name of the Assessee Share Application Money Remarks 1. Tyagi Portfolio Management Pvt. Ltd. (Earlies known as Tyagi Trading Pvt Ltd.) D-33/100, Sector-16, Rohini, New Delhi-110085 Rs. 50,00,000/- The gross receipt o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Ltd.) 114, Shlvlol (sic.) House-II, Commercial Complex Karampura Delhi-110015 Rs. 55,00,000 The gross receipt of the companies of Rs. 1637173-. Security premium account has Rs. 1,76,94,500/ 13. M/s Premium Autotech Pvt. Ltd. (Earlier known as Mayapuri Finlease Pvt Ltd) 28, Tower-II, Mount Kailash East of Kailash Delhi-110065. Rs. 30,00,000/- The gross receipt of the companies of Nil security premium account has Rs/- 1,75,00,000/- 14. M/s Remote Equity Pvt. Ltd. (Earlier known as Vardhan Retails Pvt. Ltd) 208, Aggarwal Chamber Veer Sarvarkar Block, Shakarpur Delhi-110092 Rs. 20,00,000/- The gross receipt of the companies of Rs. 5,70,398/-. Security Premium account has s/-I 10064000/- 15. M/s Silversmith Marketing Pvt. Ltd. 204, IV, Aggarwal Chamber Savarkar Block, Shakurpur Delhi-11009 Rs. 20,00,000/- The gross receipt of the companies of Rs. 5,51,327/-. Security premium account has Rs. 10,64,16,000/- 16. M/s S3 Infradevelopers Pvt. Ltd. J-221, Sarita Vihar New Delhi-110076 Rs. 20,00,000/- The gross receipt of the companies of Rs. 5,51,327/-. Security premium account has Rs. 10,64,16,000/- 17. M/s United Equity Pvt Ltd. Earlier known as Garg Brothers Woodcraft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer asked the assessee to produce the people from whom the share application money has been received. On receiving no plausible reply and on the strength of the Inspector's report, the Assessing Officer came to the conclusion that the assessee grossly failed to identify the share applicants and, drawing support from the provisions of section 68 of the Act, the Assessing Officer made the addition of Rs. 31.56 crores. 9. The assessee carried the matter before the CIT(A), but without any success. 10. It would be pertinent to mention here that the CIT(A) himself had issued summons u/s. 131 of the Act to the share applicants, which were duly served. 11. Before we embark upon the discussion on factual aspects, it would be better to understand the provisions of section 68 of the Act which read as under: "Where any sum is found credited in the book 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 Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year." 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d income tax. No effort was made to examine as to whether these companies were filing the income tax return and if they were filing the same, then what kind of returns these companies were filing. If there was no return, this could be another factor leading towards the suspicion nurtured by the AO. Further, if the returns were filed and scrutiny thereof reveals that such returns were for namesake, this could yet another be contributing factor in the direction AO wanted to go. Likewise, when the bank statements were filed, the AO could find out the address given by those applicant companies in the bank, who opened the bank accounts and are the signatories, who introduced those bank accounts and the manner in which transactions were carried out and the bank accounts operated. This kind of inquiry would have given some more material to the AO to find out as to whether the assessee can be convicted with the transactions which were allegedly bogus and or companies were also bogus and were treated for namesake. We say so with more emphasis because of the reason that normally such kind of presumption against the assessee cannot be made as per the law laid down in various judgments noted a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company." (Emphasis supplied) 38. Even in the instant case, it is projected by the Revenue that the Directorate of Income-tax (Investigation) had purportedly found such a racket of floating bogus companies with sole purpose of landing entries. But, it is unfortunate that all this exercise is going in vain as few more steps which should have been taken by the Revenue in order to find out causal connection between the cash deposited in the bank accounts of the applicant banks and the assessee were not taken. It is necessary to link the assessee with the source when that link is missing, it is difficult to fasten the assessee with such a liability. 39. We may repeat what is often said, that a delicate balance has to be maintained while walking on the tight rope of Sections 68 and 69 of the Act. On the on hand, no doubt, such kind of dubious practices are rampant, on the other hand, merely because there is an acknowledgement of such practices would not mean that in any of such cases coming before the Court, the Court has to presume that the assessee in questions as indulged in that practice. To make the assessee responsible, there has to be proper evidence. It is equally important ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court of Delhi in the case of CIT v. Sophia Finance Ltd. [1993] 70 Taxman 69/[1994] 205 ITR 98 has laid down the ratio that if the shareholders are identified and it is established that they have invested in the purchase of shares, then the amount received by the company would be regarded as capital received. The assessee has no further onus. 19. Exhibits 123 to 139 of the paper book reveal the proportion of investment made by the share applicant companies in the share capital of the appellant company. The percentage of their investment ranges from 5% to 40%, which means that the share applicant company portfolios include investment in other companies also. There is nothing on record to suggest that the other investments made by the share applicant companies have been treated as bogus in the hands of other companies. 20. In our considered opinion, the applicant company has successfully discharged the initial onus cast upon it by the provisions of section 68 of the Act and, therefore, no addition is called for u/s. 68 of the Act as unexplained cash credit. 21. The ld. DR has relied upon certain judicial decisions and mainly emphasized on the decision of the Hon'ble High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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