TMI Blog2012 (8) TMI 813X X X X Extracts X X X X X X X X Extracts X X X X ..... Sr. Standing For Respondent: Dr. Rakesh Gupta, Ms. Rani Kiyala and Mr. Piyush Singh, Advocates. Counsel. MR. JUSTICE S.RAVINDRA BHAT 1. This common judgment will dispose of Revenue s two appeals directed against the judgment and order of the Income Tax Appellate Tribunal (ITAT) dated 30.10.2001 in ITA No.1868/DEL/2001 and further order dated 11.05.2006 in ITA-4691/DEL/2002, and cross-objection nos.113/DEL/2006. 2. The question of law framed in these two cases was: (i) whether the ITAT erred on facts and in law in deleting the addition of Rs. 25 Lakhs made by the AO by treating the alleged investment of shareholders as income from undisclosed sources (ITA-183/2002) and (ii) whether the ITAT was correct in law in deleting the penalty of Rs. 44 Lakhs imposed by the AO under Section 271 (i) (c) of the Income Tax Act, 1961. 3. The brief facts necessary to decide the cases are that the assessee company had filed its return declaring the income @ Rs..10,986/- on 29.11.1996. The Revenue received information alleging that assessee had accepted share capital from companies engaged in providing bogus entries in the form of loan and share application money to inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es were not filing IT returns. The availability of particulars of 18 share applicants with the Registrar Of Companies was held to be insufficient. In his order, the AO noticed that out of 18 share applicants, 9 companies were account holders with the Vaish Cooperative Adarsh Bank Ltd in Karol Bagh and Darya Ganj. He also noticed certain common features which emerged from their account opening forms. The introduction of all these were either by M/s Sukriti Foundations, Devlok Finance Pvt. Ltd, Shri R.C. Goela or Akashdeep Offset Printers. The Karol Bagh branch of the Vaish Cooperative Adarsh Bank Ltd. supplied the AO with the list of accounts from where credit entries were made through transfers. The account numbers used for transfer of the amounts were listed and the AO noticed that in fact the cash was deposited in one account and from this account, the amount transferred to the account from where the cheques for share application monies were cleared . 5. The AO further analyzed information relating to names of account holders who operated, the listed and specified accounts and were indulging in entry provision services. The account of some of the share applicants were scrutini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he report that cross verification of the share applicants addresses was sought by sending the Inspectors to the respective places. It was discerned that the PAN/GIR number given by the assessee was not correct and that the said share applicants were not filing their income tax returns in the ward or circle concerned. The remand report also further stated that field enquiry have revealed that out of 18 shareholders 16 were not found at the addresses furnished. After considering the report and after considering the submissions of the assessee - who was also furnished with the copy of the remand report - the Appellate commissioner dismissed the assessee s appeal observing as follows: - I have considered the facts of the case, explanation of the AR and the remand report of the AO, and rejoinder of the; AR on the remand report of the AO. I am not inclined to agree with the view of the AR inasmuch as the question of proving the onus with regard to credits in the accounts of so called shareholders lies upon the appellant and not upon the shareholders who had invested money in the appellant company which the appellant has failed to discharge. The case law of Sophia Finance Co. relied u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Revenue whereby for no apparent reason, the share with a face value of Rs..100/- was sought to be sold at a premium of Rs..900/-. These shares were subscribed by 18 applicants, all except one invested Rs..5 Lakhs. The pattern of investment revealed that monies were deposited through some common accounts within a short time before they were given as share application amounts. Despite summons, the share applicants did not appear or cause appearance. Furthermore, out of 18, 16 share applicants addresses were incorrect. The income tax particulars such as PAN/GIR numbers were also incorrect. After a thorough and detailed scrutiny, the AO inferred that the amounts had to be added back under Section-68; a decision upheld by the Appellate Commissioner. The Tribunal s approach in making a broad generalization that the assessee had discharged its onus by furnishing the names, addresses and GIR particulars is unsustainable in law. 9. Learned counsel for the assessee argued that the reasoning of the Tribunal is well founded. Counsel submitted that in this case, the Department could not have fastened the liability only on the basis of the suspicion. There was no independent material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pies of the Shareholders Register, Shared Application Forms, Share Transfer Register etc. it would constitute acceptable proof or acceptable explanation by the assessee. (5) The Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices; (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessee nor should the AO take such repudiation at face value and construe it, without more, against the assessee. (7) The Assessing Officer is duty-bound to investigate the creditworthiness of the creditor/subscriber the genuineness of the transaction and the veracity of the repudiation. This position, apart from being endorsed by the Supreme Court, has been applied in subsequent decisions. Thus, the assessee is under a burden to explain the nature and source of the share application money received in a given case. For discharging this, the assessee has to establish: (a) the shareholder s identity; (b) genuineness of the transaction ; and (c) the creditworthiness of shareholders. In case the investor/shareholder is an individual, s ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
