TMI Blog2012 (12) TMI 762X X X X Extracts X X X X X X X X Extracts X X X X ..... ings, the AO cannot contact the share applicants, or that the information becomes unverifiable, or there are further doubts in the pursuit of such details, the onus shifts back to the assessee. At that stage, if it falters, the consequence may well be an addition under Section 68. As decided in A. Govindarajulu Mudaliar v CIT, (1958 (9) TMI 3 - SUPREME COURT) whether a receipt is to be treated as income or not, must depend very largely on the facts and circumstances of each case. There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipt are of an assessable nature - Having regard to the totality of facts and circumstances, particularly the remand report, which was not considered by the CIT (A) and the ITAT in its proper perspective, this Court is of the opinion that the question of law requires to be answered in favour of the revenue. - ITA NOS. 134/2012 - - - Dated:- 21-12-2012 - S. RAVINDRA BHAT And R.V. EASWAR, JJ. Appellant : Ms. Suruchi Aggarwal, Sr. Stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annexure-A for your kind perusal. It is brought to your kind notice that the summons u/s 131 so sent to the parties, summons have come back unserved on 27.10.09 in respect of 4 parties mostly with the postal remarks NO SUCH FIRM/COMPANY/PERSON , OR A FEW `LEFT WITHOUT ADDRESS . Out of the remaining 3 parties, neither anybody attended in person, nor filed any application for adjournment nor filed the details asked for in the summons u/s 131. Thus, these parties have not discharged their duty to the department as required u/s 131 of the I.T. Act and these persons will never come before any Income-tax Authority as already discussed in details that they are only entry operators and either absconding or evading service of any kind of notice from the Income tax Department or avoiding appearance before any Income-tax Authority because they do not have any real identity, creditworthiness and business. As regards compliance of letter dated 12.10.2009 sent to the assessee, the A.R. of the assessee has filed a letter dated 29.10.2009 on 30.10.2009 seeking adjournment upto 04.11.2009. The assessee company filed its reply dated 03.11.2009 on 04.11.2009 in support of its contention and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with them. It is pointed out that the summons issued u/s 131 to the said 7 parties, summons have been received back unserved in respect of four parties and in respect of remaining three parties neither any application for adjournment has been received not any reply has been received till date. The bank statement of the assessee shows major amounts as Funds transferred (Dr) and (Cr) and cash deposits. In view of the above facts can it be said that i) Identify of the above said company/firm/individuals has been proved, whereas their identities are proved only on papers. It is noticed that all the documents obtained by the entry operator like PAN, ITR, ROC, No independent verification is undertaken is to provide accommodation entries and nothing else. ii) These entry operators do not have any business of its own. All the monies appearing in its Bank account originate from some other accounts down the line in which cash is deposited. The entities in which cash is deposited are obviously only paper entities and there could be no justification of deposit in cash in the said account. These entities are not into any activity or business in which cash is deposited other than the activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as provided the PAN and other documentary evidence to prove the identity and creditworthiness of the share applicants and the addition u/s 68 is not warranted. ------------------------------ ---- ------------- 9. From the above paragraphs of the Hon ble Jurisdictional High Court decision, it is seen that it has been held by the Hon ble High Court that when assessee has proved the identity of the share applicants by either furnishing their PAN number or income tax assessment number and shown the genuineness of transaction by showing money either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the revenue. In the present case, assessee has discharged its onus to prove the identity of the share applicants. 4. Learned Counsel for the revenue argued that the Tribunal fell into error in not appreciating that corroborative evidence furnished and relied upon by the assessee was worthless. In this regard particular reliance was placed upon the remand report called for by the Commissioner (Appeals). It was highlighted that summons under Section 131 was sent to the seven parties whose particulars had been furnished but all of them were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner (Appeals) and the ITAT correctly deduced that the findings of the AO regarding unexplained income were unsustainable. It was emphasized that Lovely Exports had declared the law, which is that the initial onus lies on the assessee to discharge its source of income, which in this case was done, by furnishing the addresses and other details such as PAN particulars, list of directors, bank account particulars, etc of the share applicants, who were income tax payees. The burden of proving that the amounts received were unexplained income, or unaccounted money of the assessee, lay upon the revenue, which it did not discharge. In these circumstances, the appellate authorities acted within their rights and jurisdiction in directing the addition to be set aside. 6. Before a discussion on the merits, it would be worthwhile to notice the relevant discussion by this Court, in its judgment in Lovely Exports, which was carried in appeal to the Supreme Court. The relevant extracts are produced below: "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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the assessed. (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." The judgment of this Court was affirmed in a brief order, by the Supreme Court; it reads as follows: "Delay condoned. Can the amount of share money be regarded as undisclosed income under s.68 of IT Act, 1961? We find no merit in this Special Leave Petition for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment. Subject to the above, Special Leave Petition is dismissed." 7. In the present case, the assessee claimed that it received ₹ 35 lakhs from seven share applicants. Its assessment was reopened. The assessee did not attend the reassessment proceedings, and suffered an adverse order. On its moving an appeal, the Commissioner sought a remand report. The remand report, an exhaustive 41 page document, discusses thre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 68. This court recollects the robustness with which the issue was dealt with, in A. Govindarajulu Mudaliar v CIT, (1958) 34 ITR 807, in the following terms: - "Now the contention of the appellant is that assuming that he had failed to establish the case put forward by him, it does not follow as a matter of law that the amounts in question were income received or accrued during the previous year, that it was the duty of the Department to adduce evidence to show from what source the income was derived and why it should be treated as concealed income. In the absence of such evidence, it is argued, the finding is erroneous. We are unable to agree. Whether a receipt is to be treated as income or not, must depend very largely on the facts and circumstances of each case. In the present case the receipts are shown in the account books of a firm of which the appellant and Govindaswamy Mudaliar were partners. When he was called upon to give explanation he put forward two explanations, one being a gift of Rs. 80,000 and the other being receipt of Rs. 42,000 from business of which he claimed to be the real owner. When both these explanations were rejected, as they have been it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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