TMI Blog2013 (11) TMI 674X X X X Extracts X X X X X X X X Extracts X X X X ..... he said directors or deponents for cross examination. The same has been disregarded by the Revenue on the ground that sufficient opportunity is toward the same were granted during the course of the proceedings before the investigation wing and which had deliberately evaded by the assessee on pretext or the other - Furnishing of the documentary evidences, viz. the share application money, balance-sheet of the creditor companies is of little evidential value in the facts of unearth and late bear by the Revenue. Rather, it needs to be appreciated that if the evidence by way of book entries were to be itself sufficient to prove cash credits, section 68 would itself to be misconceived and redundant inasmuch as it is only based on the credit appearing in the books of account – Decided against the Assessee. Whether assessee's loss is a speculation loss in view of the provisions of explanation to section 73 o the Act - Assessee's principle business being trading in shares and securities, the A.O. has invoked the said provision and which has found confirmation by the ld. CIT(A) on the same ground – Held that:- There has been no business activity during the year and the impugned loss is o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the maintainability in law of the assessment of share application money in the sum of Rs.2778.50 lacs as unexplained income u/s.68 of the Act. In other words, whether the assessee has been able to prove the said credit in terms of the said provision of the Act? 3.2 It would be relevant to reproduce the background facts of the case, which are not disputed. The assessee filed its return of income on 25.11.2006, disclosing loss at Rs.8.34 lacs. This was followed by filing of the financial statements on 05.10.2007. The return, subsequent to its processing u/s.143(1), was subject to the verification procedure by the issue of notice u/s.143(2). It was observed by the Assessing Officer (A.O.) in the assessment proceedings that the assessee had factual repayment of loan to the tune of Rs.25.61 crores to the bank. The same was done by raising share allotment money in the sum of Rs.2778.5 crores. The same was found to have been received by way of share application money toward 555.7 lacs shares of the face value of Rs.10/- each a premium of Rs.40/- each. The names of the share applicants, being 41 in number, and the corresponding amounts received by way of application money, are listed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obligation to show from what source the income was derived by the assessee and why it should be treated as its concealed income. As stated in Govindarajalu Mudaliar (supra) (at pg.810) the same is as under: "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 we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 bound, to carryout thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the company." We may here emphasis that the share application money is generally received through the public offer route by public company, making it difficult for discharging the burden of proof on the assessee-recipient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter, ignoring the factual aspects and surrounding circumstances present in the case. It should have dealt with the case in a holistic manner dealing with the entire evidence relied upon and having regard to the report of the investigation wing, the manner in which entries were made in the bank accounts of the three companies, the statement of PKJ and denial thereof by AKK, as also the other surrounding circumstances of the case." 3.5 Coming to the facts of the instant case, we find the first observation over the assessee as even, as much as not furnished confirmation letters from the creditors. The Revenue has sufficient material that it impugning the transaction as being in fact a result of a deliberated and orcasted scheme of routing of cash, tracking the money trail, since unearth by the efforts of the Investigation wing of the department (also refer paras 3.2 3.4). The money has been followed upto the point where the cash has been deposited and which extends to the forth tier, as detail transaction-wise by the Revenue per the reports of its investigation wing, and which forms part of the assessment order as Annexure 1 thereto. This is coupled with the statement of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt. As clarified earlier, it is a rule of evidence castig the burden o proof to exhibit that the said credit in act represents a genuine credit transaction. 3.6 At the same time, however, we also find that, rather strangely the matter in the position of the A.O. has not been provided to the assessee. The assessee has raised a specific plea in this regard before the ld. CIT(A) (vide its ground no.2). This is material and definitely amounts to a denial o opportunity to the assessee to present its case. Though, in our view, the assessee ought to have asked for the same; the primary onus being on it, and with it having not even furnished the confirmations. However, the Revenue relying on the findings of its investigation wing which though no doubt are relevant and it is fully entitled to do so. It was incumbent in the fairness of procedure and principle of justice to confront those materials to the assessee. The ld. CIT(A) has not dealt with this aspect of the matter. We decide accordingly. 4. The second ground of the assessee's appeal is in respect of treating the assessee's loss as a speculation loss in view of the provisions of explanation to section 73 o the Act. The assessee' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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