TMI Blog2007 (5) TMI 263X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee stand discharged . Consequently, the Ld. CIT(A) was justified in deleting the addition. Addition sustained by the Ld. CIT(A) - In the present case, the onus was on assessee to prove the genuineness of transaction. The confirmation was filed by the assessee. The Assessing Officer issued the summons in response to which the alleged persons, Hament Kumar, denied to have made any investment in such public issue. This fact was admittedly confronted to the assessee. At that stage, the assessee never sought the cross-examination of Mr. Hament Kumar. Thus, assessee accepted the denial made by Hament Kumar. On these facts, it cannot be said that assessee could discharge its onus. Accordingly, it is held that Ld. CIT(A) rightly confirmed the addition. Regarding Laxman Dass Bhatia, we find that assessee had submitted before the Ld. CIT(A) that his address was changed and, therefore, he could not be found from that address. The Ld. CIT(A) asked the Assessing Officer to issue summons at the correct address. It appears that notice was sent at the correct address. However, in the remand report, there is no adverse material in respect of Laxman Dass Bhatia. The confirmation and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arties on 7-3-2002, only three parties responded. Two parties namely Geeta Jain and Hament Kumar refused to make any transaction with the assessee-company. The third letter was received from Ramesh Mangla Co., CA stating that there was no person residing in the name of Laxman Dass Bhatia at the given address. (4) The assessee was confronted in respect of the above three parties vide order sheet entry dated 18-3-2002 and the assessee was requested to produce all the parties on 22-3-2002. Despite the same neither any reply was filed nor any party was produced. 3. In view of the above factual position, the Assessing Officer came to the conclusion that share capital and share application money was nothing but the income of the assessee from undisclosed sources. Reliance was placed on the decision of Hon'ble Delhi High Court in the case of CIT v. Sophia Finance Ltd. [1994] 205 ITR 98 (FB) for the proposition that if the identity of the share application is not established then addition can be made under section 68 of the Act. Accordingly, the addition of Rs. 1,19,10,000 was made by the Assessing Officer. 4. The addition made by the Assessing Officer was challenged in appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... replies. Geeta Jain refused to make investment of Rs. 2 lakhs but M/s. Ganadhipati Finance Leasing Ltd. confirmed the investment of Rs. 2.50 lakhs and filed a copy of bank accounts. In view of the same, the Assessing Officer concluded in his return that the identity and creditworthiness of the shareholders remained unverified. 6. Another letter was sent by Ld. CIT(A) to the Assessing Officer on 13-2-2003 pointing out that many confirmations lying on his assessment record had apparently not been considered while sending the remand report dated 16-12-2002. Accordingly, Assessing Officer was asked to bestow his personal attention and sent a specific report after examining the confirmations lying on his record which contained Permanent Account Numbers of the parties and details of bank accounts. In response to the same, the Assessing Officer sent his report through his letter dated 1-9-2003. In the said report, it was confirmed that apart from Geeta Jain, Hament Kumar, Laxman Das Bhatia, all other shareholders had filed confirmations of investment, given Permanent Account Numbers and bank account numbers from which they had made the investment. However, only ten of them had indepe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was also submitted by him that in some cases, the balance sheet had not been filed by the shareholders along with their returns. Coming to the bank accounts of the shareholders, it was pointed out by him that money had been deposited in their accounts few days before issuing the cheques. He relied on the decision of Hon'ble Calcutta High Court reported in CIT v. United Commercial Industrial Co. (P.) Ltd. [1991] 187 ITR 596 in the proposition that mere payment by cheque was not sufficient to discharge the onus under section 68 of the Act. Lastly, it was submitted that assessee had failed to discharge its onus of proving the identity, creditworthiness as well as genuineness of the cash credits and, therefore, the Ld. CIT(A) was not justified in deleting the addition of Rs. 1,86,25,000. 10. On the other hand, ld. counsel for the assessee Shri Salil Aggarwal has vehemently supported the order of Ld. CIT(A) in respect of the additions deleted by him. He relied on the decision of Hon'ble Delhi High Court in the case of Sophia Finance Ltd. for the proposition that once the identity is proved, nothing more is required to be proved by the assessee regarding the creditworthines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... test decision of the Hon'ble Delhi High Court in the case of CIT v. Devine Leasing Finance Ltd. [2007] 158 Taxman 440. 11. In reply, it has been submitted by ld. AR that Ld. CIT(A) had not verified the identity of the parties himself and simply relied on the confirmations and other material filed by the assessee. According to him, the powers of the Ld. CIT(A) are co-terminus with that of Assessing Officer and, therefore, Ld. CIT(A) himself should have issued the summons to the parties or in the alternative should have restored the matter to the file of Assessing Officer for afresh adjudication. 12. Coming to the appeal of the assessee, the ld. counsel for the assessee has submitted that assessee had committed a mistake in giving the name of the one of the shareholders as Geeta Jain instead of Geeta Arora and, therefore, on that account no adverse inference can be drawn. It was also submitted that assessee had given the correct name and address to the Ld. CIT(A) and the Ld. CIT(A) had asked the Assessing Officer to issue summons at the new address but still the Assessing Officer issued the summons in the name of Geeta Jain. He, therefore, drew our attention to para 4.3 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spective of its nature. Reference can be made to the Full Bench judgment of Hon'ble Delhi High Court in the case of Sophia Finance Ltd. and Divisional Bench decision in the case of CIT v. Dolphin Canpack Ltd [2006] 283 ITR 190 (Delhi) where provisions of section 68 were held applicable to share capital receipts. 14. However, the pertinent question for our consideration is when the onus as assessee can be said to be discharged. In our humble opinion, the degree of onus would depend on the facts of each case and no standard degree of proof can be applied in all cases irrespective of the nature of receipt. It may be stringent or light depending upon the facts of the case. We would like to explain through examples hereafter. (a) The amount may be received from close relatives or friends by way of loan or deposit or gift or otherwise. In such situation, the onus would be stringent since the assessee is supposed to know all the particulars of such creditors. (b) In the case of deposits received by a money lender or a bank, the onus would be lighter as such banker is not supposed to know all the particulars of general public. Any person whether a millionaire or beggar can com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Sophia Finance Ltd.'s case Full Bench had not been drawn to the decision of the Supreme Court in Orissa Corpn. (P.) Ltd.'s case, which if cited would really have left no alternative to the Full Bench but to arrive at the conclusion it did. (2) That section 68 reposes in the ITO or Assessing Officer the jurisdiction to inquire from the assessee the nature and source of the sum found credited in its books of account. If the explanation offered by the assessee is found not to be satisfactory, further enquiries can be made by the ITO himself, both in regard to the nature and the source of the sum credited by the assessee in its books of account, since the wording of section 68 is very wide. (3) That the court had not reflected upon the question of whether the burden of proof rested entirely on the assessee, and at which point, if any, this burden could justifiably be shifted to the Assessing Officer. The Full Bench in fact clarified that they were not deciding as to whom and to what extent is the onus to show that an amount credited in the books of account is share capital and when does that onus stand discharged. This will depend on the facts of each case. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pernicious practice of conversion of unaccounted money through the masquerade or channel of investment in the share capital of a company must be firmly excoriated by the Revenue. Equally, where the preponderance of evidence indicates absence of culpability and complexity of the assessee it should not be harassed by the Revenue's insistence that it should prove the negative. In the case of a public issue, the company concerned cannot be expected to know every detail pertaining to the identity as well as financial worth of each of its subscribers. The company must, however, maintain and make available to the Assessing Officer for his perusal, all the information contained in the statutory share application documents. In the case of private placement the legal regime would not be the same. A delicate balance must be maintained while walking the tightrope of sections 68 and 69 of Income-tax Act. The burden of proof can seldom be discharged to the hilt by the assessee; if the Assessing Officer harbours doubts of the legitimacy of any subscription he is empowered, nay duty bound, to carryout thorough investments. But if the Assessing Officer fails to unearth any wrong or illegal deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is no fold on such confirmation. In our opinion, there is nothing wrong if confirmations are prepared by the assessee and got signed from the share applicants since assessee was required only to prove the identity of the share applicant. Even otherwise, the same have not been found to be false or forged. Secondly, it has been observed that parties did not respond to the notices issued. This observation does not carry any weight since the Assessing Officer did not pursue the matter further as observed by their Lordship in the case of Orissa Corpn. The ld. DR has also stated that certain payments were made from the same bank. There is nothing wrong if some of the shareholders are having account with the same bank. It is not the case of Revenue that such accounts are bogus or operated by the assessee. A query was raised whether any cash was deposited by any of the applicant before issuing cheques. The ld. DR could not point out any such instance. It is also not the case of Revenue that either of the share applicant was benami of assessee-company. Accordingly, the reasons given by the Assessing Officer or submissions of the ld. DR in this behalf are hereby rejected. 21. Now we pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
