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TMI Blog2022 (11) TMI 1541X X X X Extracts X X X X X X X X Extracts X X X X ..... ccording to the assessee, this is the information supplied by the ld. Assessing Officer, but it does not contain complete copy as well as the approval, if any, granted by the Principal CIT, Kolkata. Though to our mind, it is an irregularity and if we are called upon to test the veracity of impugned order only on this fold of dispute, then we would have remitted the issue back for adjudication of the objections against reopening as well as supply of complete copy of the reasons. But we do not deem it appropriate to explore that procedure because we concur with the finding of the ld. CIT(Appeals) on merit. AO has not conducted any enquiry for pointing out faults in the details submitted by the assessee running into more than 140 pages as discernable from the details mentioned in the Index with the paper book. Therefore,we do not find any merit in this appeal. X X X X Extracts X X X X X X X X Extracts X X X X ..... per share, didn't seem logical. AO further mentions that the subscribing companies appeared to be paper companies with no real business activity to justify huge investment in assessee company. AO has further mentioned that assessee had invested Rs. 54.47 lakhs towards lands and buildings but no documentary evidences were produced. Further, substantial amount, out of the funds raised as share capital, were advanced to other parties which did not justify the business objective of the company. AO is of the opinion that any genuine share holder would object to the giving out of the share capital in such manner. Further relying on the investigation report of DDIT (Inv), Unit-2(1), Kolkata, AO has held that assessee has failed to prove the identity and creditworthiness of the investors and also failed to prove the genuineness of the transactions. On the basis of the facts narrated above, AO has concluded that assessee has brought its own unaccounted money in the garb of share capital (including premium). Hence, AO has added the entire amount of Rs. 150,00,000/- u/s. 68 of the Income-tax Act, 1961". 4. The ld. Assessing Officer while making the above addition did not record any analytica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e books of the assessee company and added to the total income u/s 65 of the Income Tax Act, 1961. In view of the above the total income of the assessee is computed as below. Returned income Rs. 4,60,071/- Add.: As discussed above u/s 68 Rs. 1,50,00.000/- Total Assessed Income: Rs. 1,54,60,071/- Total Assessed Income Rounded off : Rs. 1,54,60,070/- Assessed u/s. 147/143(3) of die I. T. Act, 1961 at a Total Income of Rs. 1,54,60,070/- Penalty proceeding u/s 271(1)(c) of the I.T. Act, 1961 is initiated separately. Issue necessary forms, demand notice, penalty notice and copy of order to the assessee Give credit to prepaid taxes. Computation of tax is enclosed winch is an integral part of this order. Sd/- (SANJAY JHA) ACIT, CC-1(2), KOLKATA" 5. While impugning this finding, the assessee contended before the ld. 1st Appellate Authority that reopening is bad in the eyes of law because ld. Assessing Officer has acted on the borrowed reasons for issuing notices under section 148. In its next plea, it was contended that ld. Assessing Officer has not disposed of the objections filed by the assessee and as held by the Hon'ble Supreme Court in the case of GKN Driveshafts India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lution authorizing investments. East Coast Realtors Pvt Ltd - Rs. 15,00,000/- 122 Audited Financial Statements for FY 2008-09. 123-129 Explanation regarding the source of investments in assessee-company 130 - Relevant extracts of bank statements evidencing that Payments were made through proper banking channel along with the 131-132 Copy of the share application form filed with the assessee company 133 Copy of the Board Resolution authorizing investments 134 Sukhsagar Commodities Pvt. Ltd. Rs. 25,00,000/- Audited financial statements for FY 2008-09 135139 Explanation regarding the source of investments in assessee company 140 Relevant extracts of bank statements evidencing that payments were made through proper banking channel 141 Copy of the share application form filed with the assessee company 142 Copy of the Board Resolution authorizing investments 143 Oven Commercial Pvt. Ltd. Rs. 10,00,000/- IT Acknowledgment for AU 2009-10 144 Director's Report along with audited financial Statements for FY 2008-09 145-158 Explanation regarding the source of investments in assessee company 159 Relevant extracts of bank statements evidencing that payments wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant. In the paper book, appellant has submitted the reasons recorded by the AO for reopening the proceedings. Perusal of the recorded reasons shows that AO has mentioned only about some information being received from the DDIT (Inv), Unit-2(1), Kolkata which was gathered during post-search investigation, which says that some Group companies of Dhandhania Group have raised bogus share capital during the financial year 2008-09 relevant to AY: 2009-10. AO has mentioned that M/s. P & P Highrise Pvt. Ltd. did not have any significant assets, except investment in unquoted securities amounting to Rs. 54,47,150/-. Still, the company received share capital along, with substantial amount of premium and only for these reasons the assessment proceedings have been reopened. The information received from Investigation Wing does not mention the names of the doubtful creditors or the reasons why the share capital received from such parties are considered to be bogus. Even during assessment proceedings, AO has not supplied the contents of the information received from the Investigation Wing which might have enabled the assessee to file its counter comments. After receipt of information, AO d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investigation report. Apart from the investigation report, AO has considered only the circumstantial evidences/extraneous factors like charging of high premium, giving away share capital raised as advances etc. to conclude that assessee company has brought in its own unaccounted money as share capital. However, this conclusion appears to be pre-mature. AO should have first concentrated on verifying the contentions of the assessee by going for enquiries related to the identity of the share holders, their creditworthiness etc. If there were any doubts in this regard the share holders should have been examined on oath and their statements should have been recorded or any adverse evidences found during those enquiries should have been brought on record to establish that the share capital receipt is not genuine. AO has not made any such enquiries and he has not even shared the contents of the investigation report where some adverse observations might have been made in the report against the share holders. Further, AO does not appear to have followed the due procedure laid down by the Hon'ble Supreme Court regarding the disposal of assessee's objections. Search has taken place on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of public limited company, the share capital is issued in close-circuit. When companies incorporated under the Companies Act raise their capital through shares, various persons would apply for shares and then give share application money. This amount received from such share holder would naturally be credited in the books of accounts of the assessee. Once the alleged share capital is credited 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt made following observations: "..... This court has considered the concurrent order of the Commissioner of Income-tax (Appeals) as well as the Income-tax Appellate Tribunal. Both these authorities primarily went by the fact that the assessee had provided sufficient indication by way of permanent account numbers, to highlight the identity of the share applicants, as well as produced the affidavits of the directors. Furthermore, the bank details of the share applicants too had been provided. In the circumstances, it was held that the assessee had established the identity of the share applicants, the genuineness of transactions and their creditworthiness; The Assessing Officer chose to proceed no further but merely added the amounts because of the absence of the directors to physically present themselves before him. The Income-tax Appellate Tribunal has relied upon a decision of this court in CIT v. fair Finvest Ltd. [2013] 357 ITR 146 (Delhi), where in somewhat similar circumstances, it was stated as follows (page 152) : "This court has considered the submissions of the parties. In this case the discussion by the Commissioner of Income tax (Appeals) would reveal tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee to produce the Directors of the share applicant companies could not by itself have justified the additions made by the AO particularly when the seven share applicant companies through their present Directors have now again filed fresh affidavits confirming the application and allotment of shares with respect to the total amount of Rs. 45 Lacs. It is observed that no attempt was made by the AO to summon the Directors of the share applicant companies. Moreover, it is settled law that the assessee need not prove the "source of source". Accordingly it was incumbent upon the department to have enforced attendance of Shri Mahesh Garg or the erstwhile Directors of the share applicant companies and confronted them with the evidences & affidavits relied upon by the appellant and thereupon given opportunity to the assessee to cross examine these applicants." 12. In the light of above, let us examine the facts of the present case. A perusal of the assessment order would indicate that the ld. Assessing Officer has not conducted any enquiry. The assessee has submitted the material in support of its contention, but those materials have not been rebutted by the ld ..... X X X X Extracts X X X X X X X X Extracts X X X X
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