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TMI Blog2009 (12) TMI 722X X X X Extracts X X X X X X X X Extracts X X X X ..... In the course of scrutiny, the Assessing Officer noted that the appellant has introduced fresh share capital to the tune of Rs. 15,00,000 at a share premium of Rs. 1,35,00,000. The details of persons who are stated to have deposited share application money and to whom shares were allotted are as under : Sl. No. Name Amount (Rs.) 1. Active Agencies Pvt. Ltd. 10,00,000 2. Funtime Travels Pvt. Ltd. 10,00,000 3. Winsome Portfolio Pvt. Ltd. 10,00,000 4. AKG Portfolio Pvt. Ltd. 10,00,000 5. Spring Medicare Pvt. Ltd. 10,00,000 6. S. J. Hosiery Pvt. Ltd. 10,00,000 7. Sony Financial Services Ltd. 10,00,000 8. Rabicon Associates Pvt. Ltd. 10,00,000 9. Rapchic Foods Pvt. Ltd. 10,00,000 10. Neel Kant Shares Pvt. Ltd. 10,00,000 11. Warsi Overseas Pvt. Ltd. 10,00,000 12. Sunit Overseas Pvt. Ltd. 10,00,000 13. Milap Automotive Pvt. Ltd. 10,00,000 14. Q-Tech Systems India Pvt Ltd. 10,00,000 15. Pushpanjali Caps Pvt. Ltd. 10,00,000 The Assessing Officer asked the appellant to furnish details of such shareholders mentioning their identity, genuineness of transaction and creditworthiness. The appellant produced confirmation of deposit from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke it satisfactory as held in CIT v. Precision Finance Pvt. Ltd. [1994] 208 ITR 465 (Cal). Even the income-tax file particulars, where the shareholder is assessed to tax is not sufficient as found in CIT v. Korlay Trading Co. Ltd. [1998] 232 ITR 820 (Cal). The Assessing Officer also referred the enquiry initiated by Investigation Wing of the Department in August, 2003, which culminated in the detection of many entry operators who are operating a number of accounts in the same bank/branch or in different branches, in the names of companies, firms, proprietary concerns and individuals. For the operations of these bank accounts, filing the income-tax returns, etc., persons are hired. Like any other business it does require manpower according to the scale of operation. Except for two or three persons who are required regularly to visit banks and do other spade work like collection of cash, etc., most of the other persons involved are on part time basis. The part time employees are called as and when required to sign documents, cheque books, etc. Some of the entry operators have also roped in their own relatives for operation of entry accounts and filing the income-tax returns. Interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved as under (page 288) : 'It is evident that even if it be assumed that the subscribers to the increased share capital were not genuine, nevertheless, under no circumstances, can the amount of share capital be regarded as undisclosed income of the assessee. It may be that there are some bogus shareholders in whose names shares had been issued and the money may have been provided by some other persons. If the assessment of the persons who are alleged to have really advanced the money is sought to be reopened, that would have made some sense but we fail to understand as to how this amount of increased share capital can be assessed in the hands of the company itself. In our opinion, no question of law arises and the petition is, therefore, dismissed.' The hon'ble apex court has dismissed the appeal of the Revenue against this order summarily CIT v. Steller Investment Ltd. [2001] 251 ITR 263 by making the following observations (page 263) : 'We have read the question which the High Court answered against the Revenue. We are in agreement with the High Court. Plainly, the Tribunal came to a conclusion on facts and no interference is called for. The appeal is dismissed. No order as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do anything further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises.' 2.3.2.4. If we peruse carefully the above decision, it will be noticed that the hon'ble Supreme Court has observed that : (1) There was no effort made to pursue the matter further except issuing summons under section 131. (2) The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. In the instant case however facts are slightly different as summons were issued which returned unserved with the remarks 'no such person in the above address' as against in that case where summons were returned unserved with the remark 'left' that address. There is a huge difference between the observation 'left' and observation 'no su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d therefore reproduced as under (page 280 of 299 ITR) : 'There cannot be two opinions on the aspect that the pernicious practice of conversion of unaccounted money through the masquerade of 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 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 the 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-boun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h from the impugned decision adequately encapsulates the necessary details: "Thus, the question is whether in the present case, the Assessing Officer had material to conclude that the share applicants in questions did not exist. It is seen that the assessee-company has furnished the necessary details such as permanent account number/income-tax ward No. /ration card of the share applicants and some of them are assessed to tax. The share application money has been received through banking channel. In some case, the confirmations/affidavits of share applicants containing the above detail were also filed. It is seen that the Assessing Offier did not carry out any inquiry into the income-tax record of the persons who have given the permanent account number/ward number in order to ascertain the non-existence of the share applicants in question. The Assessing Officer has neither controverted nor disapproved the material filed by the assessee. In the case of CIT v. Makhni and Tyagi P. Ltd. reported in [2004] 267 ITR 433 (Delhi), the jurisdictional High Court has held that when the documentary evidence was placed on record to prove the identity of all the shareholders including their perma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e High Court has allowed the appeal on the ground that the Assessing Officer did not carry out any inquiry into the income-tax record of the persons who have given the permanent account number/ward number in order to ascertain the non-existence of the share applicants in question. The Assessing Officer has neither controverted nor disapproved the material filed by the assessee. However, the facts as mentioned earlier in the instant case are different as the Assessing Officer has issued summons which returned unserved with the remarks 'no such person in the above address'. The appellant has also failed to produce these persons. Some of the shareholders are apparently entry providers to the recipient as was stated by them before the Investigation Wing. Thus it cannot be said that the Assessing Officer has not carried out enquiries except issuing summons. Thus again the facts of the present case are different. What I want to emphasise by mentioning these facts that it is not straight case of applicability of the decision of various courts on which the appellant has relied upon. The facts are different and therefore the case has also to be dealt with differently. It is true that the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by a court under the Code of Civil Procedure, 1908. The notice can also be addressed in the name of a company to the principal officer thereof. Therefore the notice can be served in the name of a company either on the company itself or on the principal officer thereof. There is no denying fact that the notice was served on the company itself. Therefore, the same is within the provision of section 282(1) of the Act and hence valid. Accordingly ground No. 1 is to be dismissed. As regards ground No. 2, we find that the assessee has stated to have received fresh share capital to the tune of Rs. 15 lakhs and share premium of Rs. 1,35,00,000, i.e., a share of face value of Rs. 10 each issued at a premium of Rs. 90 totalling to Rs. 100. When the Assessing Officer asked the appellant to furnish the details the assessee produced share application forms and other details like bank statement, copy of acknowledgment of return, etc. However when the Assessing Officer conducted inquiry at the stated address, summons were received back unserved with the postal remark "no such person in the above address". This fact was brought to the notice of the assessee also. Thereafter the assessee except ..... X X X X Extracts X X X X X X X X Extracts X X X X
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