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TMI Blog2007 (5) TMI 263X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of assessment proceedings, it was noticed by the Assessing Officer that assessee-company had raised the share capital of Rs. 1,78,60,000 and share application money at Rs. 11,50,000. In support of the same the assessee had filed most of the confirmations. However, on enquiries made by him, the Assessing Officer was of the view that identity of the shareholders was not established and, therefore, the share capital and the share application money was liable to be assessed under section 68. The reasons for coming to this conclusion were as under: (1) Though various parties resided at different locations in Delhi as well as outside Delhi but the language and typing on the confirmations, prima facie, seem to be the same. (2) That there was no fold on the paper of confirmation. (3) Though the notices under section 133(6) of the Act were issued to all the parties 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) Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es given, (ii) non-denial of investment by any of the 108 shareholders, and (iii) confirmations were filed by them, clearly proves that the shareholders were existent and, therefore, the addition could not be made under section 68 of the Act in view of the decision of Hon'ble Delhi High Court in the case of Sophia Finance Ltd. 5. The written submissions filed by the assessee were forwarded to the Assessing Officer an 22-10-2002 with the direction to call the shareholders under section 131/133(6) of the Act and then sent his report. In response to the same, it was reported by the Assessing Officer on 16-12-2002 that summons under section 131 had been issued to 105 parties for 9-12-2002 but only two parties responded namely, Geeta Jain and M/s. Ganadhipati Finance & Leasing Ltd. It is further stated that they did not appear in person but sent written 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank i.e. South Indian Bank Ltd., New Delhi. According to him, different persons from different places could not have obtained the draft from the same bank in the normal circumstances. Further, he drew our attention to pages 75-77 to point out that confirmations were prepared from the same computer. According to him, page 75 shows that confirmation was signed not by the director but somebody else on behalf of the director. Then he drew our attention to various confirmations appearing at pages 113 onward to point out that only GIR Nos. are given instead of Permanent Account Numbers. Even in some cases even the GIR No. was not mentioned. Particular attention was drawn to page 132 of the paper book. Then he referred to various acknowledgements of income-tax returns in respect of the parties to point out that such returns were filed in March 2001. It 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 Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stop there and he made his own enquiries by asking the assessee to file the copies of income-tax return acknowledgements and bank accounts of all the shareholders, which were duly furnished before the Ld. CIT(A) by the assessee. It is only after considering the entire material on record that Ld. CIT(A) had come to the conclusion that identity of the shareholders were well-established and, therefore, no addition was required to be made except the addition of Rs. 3,85,000 in the name of three parties. It has been submitted by the ld. counsel for the assessee that the assessee had done what it could do in the circumstances mentioned. The onus which lies on the assessee was duly discharged. To support this proposition he relied on the decision of Hon'ble Supreme Court in the case of CIT v. Orissa Corpn. (P.) Ltd. [1986] 159 ITR 78 as well as latest 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o drew our attention to the confirmation filed in the name of Geeta Jain to point out that it is not even signed. Therefore, the question of accepting the same does not arise. 13. Rival contentions of the parties have been considered carefully in the light of materials placed and the case law cited by them. There is no dispute to the settled legal position that onus is on the assessee to prove the identity and creditworthiness of the creditors as well as genuineness of the transaction in respect of cash credits appearing in the books of assessee. If the onus is not discharged then such cash credit may be assessed as deemed income of the assessee under section 68 of the Act. It is also not in dispute that application of section 68 is not restricted to receipts by way of loans or deposits. Such provisions are applicable to any receipt irrespective 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 ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no standard proof is required to discharge the onus which lies on the assessee. It would be stringent or light depending upon the facts of the case. 16. At this juncture, it would be appropriate to refer the judgment of Full Bench of Hon'ble Delhi High Court in the case of Sophia Finance Ltd. relied upon by the ld. counsel for the assessee for the proposition that once the identity of the share applicant is established then nothing more is required to be established. The Assessing Officer has also relied on this judgment in support of his conclusion that even the identity could not be established by the assessee. This judgment has been critically analyzed and explained by the court in its later judgment in the case of Devine Leasing & Finance Ltd. by observing as under: (1) We find it indeed remarkable that the attention 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 asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e indication of the identity of the subscribers. That means that where the assessee had furnished (i) the names and addresses of the share applicants (ii) the GIR Nos./PAN. Nos. (iii) the Ward Nos. where assessed (iv) the mode of payment and (v) other information which the assessee knows or possesses, then it can be said that initial burden on the assessee can be said to be discharged. No doubt, the Assessing Officer is not debarred from making further enquiry. If the Assessing Officer fails to bring any adverse material on record then the Tribunal would be justified in coming to the conclusion that onus on the assessee has been discharged. The court also discussed various decisions of its own court as well as of other courts and then concluded in para 13 as under: "There cannot be two opinions on the aspect that the 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial has been brought on the record. As already noted that onus on assessee in the case of share capital by public issue is lighter one and therefore such onus would stand discharged if identity of the share applicant is established. In the present case, the same is established beyond doubt. No doubt, the Assessing Officer could bring adverse material on record by making his enquiries but nothing adverse to assessee has been brought on record in respect of 108 share applicants. Considering the case law discussed by us, it is held that onus on assessee stand discharged. Consequently, the Ld. CIT(A) was justified in deleting the addition. 20. Before parting with this issue, we would refer to certain observations made by the Assessing Officer. Firstly, it is stated that language and type of confirmation is same and there 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 income-tax return acknowledgements are placed on record. Mere non-compliance of notice/summon would not lead to the inference that onus has not been discharged as held by the Apex Court in the case of Orissa Corporation. Therefore, we are of the view that the sum of Rs. 95,000 in the case of Laxman Dass Bhatia cannot be assessed under section 68. Accordingly, the order of Ld. CIT(A) is modified to that extent and consequently, the addition is restricted to Rs. 2,90,000.
22. In the result, appeal of the Revenue is dismissed while the appeal of the assessee is partly allowed.
23. The order pronounced in the court on May 18, 2007. X X X X Extracts X X X X X X X X Extracts X X X X
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