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2015 (12) TMI 1462 - ITAT DELHI

2015 (12) TMI 1462 - ITAT DELHI - TMI - Unexplained share application money - Addition u/s 68 - What is burden of proof? - Held that:- CIT (A) has relied on the audited balance sheet for the FY 2007-08 i.e. AY 2008-09 and the copy of the ITR of AY 2009-10 to uphold that the share applicant / investor companies are existing companies and the audited balance sheet show that the share applicants companies had enough paid up capitals and reserves to subscribe for the shares from the assessee’s compa .....

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ere claimed to have transacted the share application money has been found to be bogus and even during the remand proceedings, the assessee failed to produce even a single share applicant before the AO. In the said scenario, the ld. CIT (A) accepting the audited balance sheet for FY 2007-08 i.e. AY 2008- 09 which is subsequent assessment year is not acceptable. The assessee cannot say that it did not had sufficient time to discharge its burden in respect to the share capital money which has come .....

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proof, which show that the assessee failed to discharge its burden of proof in respect to share application money which has come into its account. The CIT (A) erred in taking the audited balance sheet of subsequent assessment year and documents to prove the creditworthiness which was filed before him to prove the existence of the said companies and individuals.

The case laws relied upon by the ld. AR as aforestated pertains to cases where public issue of shares are involved and the ca .....

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and genuineness of the transaction as found by the ld. CIT (A). This prayer cannot be granted for the simple reason that lot of water has flown the Ganges after the impugned assessment order. Lot of developments have taken place after the addition of ₹ 3.46 crores u/s 68 of the Act. We find that the defunct companies at the time of assessment, as pointed out by the AO, have resurrected back to life after statutory compliances were fulfilled; and the said documents were furnished before th .....

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EY, JUDICIAL MEMBER For The Assessee : Shri V.K. Tulsian, FCA For The Revenue : Shri Vikram Sahay, Senior DR ORDER PER A.T. VARKEY, JUDICIAL MEMBER : This appeal is filed by the Revenue against the order of the Commissioner of Income-tax (Appeals), Muzaffarnagar dated 17.03.2011 for the assessment year 2007-08. 2. The grounds of appeal taken by the revenue read as under :- 1. On the facts in the circumstances of the case the CIT(A) has erred in law in deleting the addition of ₹ 3,46,00,000 .....

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addresses by assessee, adverse report of handwriting expert, non AIS verification, information from Bank that no Bank Accounts of share applicants existed in their branches etc and as such the orders in case of M/s Lovely Exports (P) Ltd, reported in 216 CTR 195 and others are not applicable in this case. 2. On the facts and in the circumstances of the case, the CIT (A) has erred in law in deleting the addition of ₹ 3,46,00,000/- made by the Assessing Officer under section 68 of I.T. Act, .....

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r section 68 of I.T. Act, 1961 as unexplained share application money, credited in the books of account without appreciating the full facts of the case and by ignoring the judicial pronouncements reported in the following cases:- a. Shree Lekha Banarjee Vs. CIT, 49 ITR 112 (SC) b. Ram Lal Agarwal Vs CIT, 280 ITR 547 (Alld) c. ITO Vs. Rai Chand Kothari (HUF) 39 TTJ(Tribunal) d. Shanker Inds. Vs. CIT, 114 ITR 689 (Cal) e. Prakash Textiles Agency Vs. CIT, 121 ITR 89 f. C. Kant & Co. Vs CIT, 126 .....

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risdiction of ACIT, Circle-2, Meerut. But the assessee requested vide letter dated 23.09.2008 to transfer the scrutiny proceedings for the relevant year to ACIT, Circle-1, Muzaffarnagar and the case was transferred to ACIT, Circle-1, Muzaffarnagar on 22.07.2009 as the jurisdiction of the case was with him. Subsequently notices u/s 143(2) & 115WE(2) and 142 (1) of the Act were issued on 04.08.2009 along with a questionnaire wherein the assessee was asked for certain details, which were duly s .....

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capital subscribers with their assessment particular showing sources of income, mode of payment of share application money, copies of share certificates etc. Also prove genuineness, creditworthiness and identity." 4. The assessee filed the reply by stating that the assessee company had subscribed share capital of ₹ 3,92.00,000/- during the A.Y. 2007-08 out of which ₹ 46,00,000/- were received as share application in earlier year and produced the list of persons to whom the share .....

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1 working days, the AO, had to cross-check the details furnished by the assessee, and confront the assessee, if need be, with the results of the investigation and thus facilitate completion of the assessment by following the process of natural justice and provisions of law. To demonstrate the conduct of the assessee after issuance of notice on 04.08.2009, the Assessing Officer had given all the details about the number of opportunities granted by him to the assessee to comply with the queries po .....

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3) of the Act. After going through the written submissions filed by the assessee in which the names of the alleged investors, their addresses, PAN, date of transactions involving share application money and amount of share application money in each case, the Assessing Officer made the investigation initially within the limited time i.e. 31 working days as under : (i) The Inspector of the department was sent to Delhi to serve notice u/s 133 (6) at 9 of the randomly selected addresses of the inves .....

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lts of investigations on the above mentioned lines, the Assessing Officer observed that the same are against the genuineness of share application money transactions and created very serious doubts about the identity and creditworthiness of the share application money. The Assessing Officer has discussed the results of these investigations, in brief, at pages 3 to 14 of his order, which includes scanned copies of the Inspector reports who was entrusted to serve notice on nine (9) shareholders in .....

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nvestors and genuineness of transactions involving share application money. The Assessing Officer issued a show cause notice u/s 142(1) on 04.12.2009 asking the assessee to produce the investors/shareholders as claimed by it for examination before him; and the Assessing Officer cautioned the assessee that if it failed to produce these investors for examination, the amount of share application money received by it will be added to the income of the assessee. The Assessing Officer issued another n .....

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s checked with few banks, the veracity of the bank statements submitted by the assessee in order to prove the credit worthiness of the investors, which also turned out to be bogus. The Assessing Officer, taking into consideration the report of ITO, unserved notices, hand writing expert opinion and the bank report which stated that the share applicants/holders did not had any bank account in their branches, concluded that the assessee company failed to comply with the requirements of the notices .....

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the material available on record, written submissions filed by the assessee, and the remand report of AO, deleted the addition of ₹ 3.46 crores and allowed the appeal of the assessee by addressing the contentions raised by the assessee as under :- (A) The ld. CIT (A), while passing the impugned order, took note of the fact that the AO made the assessment on the basis of his investigations on the following three lines:- (i) Enquiries conducted through the I.T.I. of the office; (ii) Assignme .....

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enquiries in respect of nine share applicants (mentioned at page 26 of the CIT(A) s order) and reported that seven share applicants were non-existent at the given address and the other two companies were closed down after March, 2006. Ld. CIT (A) also observed that AO further conducted enquiries of twelve more share applicants through I.T.I. The ld. CIT (A), after going through the submissions made by the ld. Counsel for the assessee (reproduced at pages 26 to 30 of his order), had observed as u .....

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's report dated 18.12.2009 has been made part of show cause notice issued u/s 142(1) dated 17.12.2009. In the I.T.I's report dated 18.12.2009 it has been specifically reported that on the directions issued by the A.O., on 18.12.2009, the I.T.I. had made spot enquiries. Thus it is not understood how the enquiries conducted by the I.T.I. on 18.12.2009 were known to the A.O. before hand on 17.12.2009. Furthermore, it is also gathered from I.T.I's reports dated 08.12.2009 that interesti .....

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recorded in respect of Sardar Surender Pal Singh should not be given much credence in as much as the appellant has furnished copies of ITRs, audited balance-sheets and active status of the two companies to establish that the aforesaid companies were at present in existence and not closed down as started by aforesaid person. Thus it is held that much credence cannot be given in relying on the reports of the I.T.I. s and also on the statement recorded in respect of Sardar Surender Pal Singh. (ii) .....

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be taken only when there is one fixed base comprising of specimen of handwriting and there are other disputable documents which have to be compared with the indisputable document to verify whether the handwriting tallies or not. However, in the case under consideration, the handwriting expert has based his report on signatures given in photocopies of documents as furnished by the appellant. Further, the AO cannot draw adverse inference solely on the report of the handwriting experts especially w .....

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rovided under the Act just like the Departmental Valuation Officer (D.V.O.) u/s 142A or 55A of the Act. It has also been contended that such action of the AO was unilateral and no opportunity of cross examining the handwriting expert was granted by the AO. Thus, in view of the above facts, the reliance placed by the AO on the report of handwriting expert cannot be given much weightage. (iii) Checking of PANs on Assessee Information System (AIS). Ld. CIT (A) observed that according to the AO, the .....

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share applicants were different from those on the AIS or the PANs were simply invalid. It is observed that the AO while holding that PANs were invalid has not made any specific reference of such defective PAN. The appellant has contended that in the case of M/s Ria Marketing company had changed its name to M/s Simarjeet Electronics (P) Ltd and has also furnished copy of R.O.C. for approval of name change. Whereas in the case of Smt. Saraswati Devi Goel, the appellant has submitted photocopy of .....

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ils as furnished in Form No.49A at the time of applying of PAN. However, due to change of location of assessee's business/ profession / residence, the address given on PAN (AIS) may not be the same as mentioned in the ITRs of the assesses. Even otherwise, the appellant has provided photocopies of PANs/ITRs and details of PANs from NSDL sites and as such, the reliance placed b the A.O. on Assessee Information System is held as half cooked and not brought to a conclusive end. In addition to th .....

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through undisputed banking channels and the applicants had furnished copies of bank statements to establish the genuineness of transaction and accordingly, held that the adverse inference drawn by the AO is untenable and therefore rejected. (ii) Identity, creditworthiness of the share applicants and genuineness of transaction The ld. CIT (A) had discussed about 23 corporate share applicants and 14 individual share applicants with regard to their identity & creditworthiness of the share appli .....

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e share applicants and genuineness of transaction, which the ld. CIT (A) had discussed in the aforesaid pages of his order. After discussing the AO s contention and the submissions of the assessee about each and every share applicants individually, the ld. CIT (A) deleted the addition as under :- It is observed that the share subscribers are identifiable and are assessed to tax. The transactions are genuine as the share application money has been received through undisputed banking channel. The .....

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R or the capital of the company cannot be the sole determinants. It is observed that the capacity to invest fund by an investor depends upon the availability of funds with the investors and not on the tax paid/annual income of the investor. The appellant has furnished latest balance sheets of the share applicant companies which reveal that the investor companies have sufficient funds to invest the money in share application. Furthermore, a set of appellant submissions along with documentary evid .....

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the address furnished appellant. In the assessment order as well as in the remand report, the A.O. has emphasized that the share applicants were not found at the addresses furnished by the appellant, it is observed that the Hon'ble Delhi High Court in the latest judgement vide combined orders in the case Oasis Hospitalities Pvt. Ltd (ITA No.2093 of 2010) and CIT vs. U.P. Bone Mills India Ltd.(ITA N0.2094 of 2010) and CIT vs. Vijay Power Generators Ltd. (ITA No.539 of 2008) while discussing s .....

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004 decided on 18-02-2006) (vii) CIT vs. Arunananda Textiles Pvt. Ltd. (ITA No.1515 of 2005 decided on 02-03-2010) (viii) CIT vs. AKJ Granites Pvt. Ltd. 301 ITR 298 (ix) CIT vs. Steller Investment Ltd. (2000) 164 CTR(SC) 287 x) CIT vs. Value Capital Services Pvt. Ltd. (2008) 307 ITR 334 (Delhi) The Hon ble Bombay High Court in the case of CIT vs. M/s. Creative World Telefilms Ltd. (ITANo.2182 of 2009 decided on 12.10.2009) on the impugned issue held as under :- .... In the case in hand, it is no .....

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o as to reach the shareholders since all the relevant material details and particulars were given by the assessee to the Assessing Officer, In the above circumstances, the view taken by the Tribunal cannot be faulted. No substantial question of law is involved in the appeal .... " The Court thus clearly held that once documents like PAN Card, bank account details or details from the bankers were given by the assessee, onus shifts upon the Assessing Officer and it is on him to reach the shar .....

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made on that basis which was turned down by the Hon'ble High Court in the following words :- 6. Having heard the learned counsel for the parties, we notice that whenever a company invites applications for allotment of shares from different applicants, there is no procedure contemplated to find out the genuineness of the address or the genuinety of the applicants before allotting the shares. If for any reason the address given in the application were to be incorrect or for any reason if the .....

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uld be accepted that such money belongs to the person in whose name it has been shown. However, as per provisions of section 68 of the Act, deeming provisions postulate that it is possible that the assessee may circulate its own unaccounted money in the shape of bogus persons and therefore legal onus has been created. At the same time, it is also possible that some interested person make deposits (advances loan or applies for share capital) in the names of bogus/non-genuineness or benami persons .....

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decision of Hon'ble Apex Court as per several other Hon'ble Courts rulings, the onus of the person receiving money has been restricted to prove genuineness of the transaction and to provide copies of ITRs, PANs, details of bank accounts. Further, the Hon'ble Delhi High Court in the case of CIT vs. HLT Finance (P) Ltd (ITA 1133/2010) while deciding the issue in respect of addition u/s 68, has cited the observation of the Hon'ble ITAT as under in the impugned order wherein additio .....

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der Kaur. In respect of Sh. M.P. Khanna and Shri JP. Khanna, the assessee has filed capital account in the firm from where withdrawal for this investment was made and these two are the directors of the assessee company. The assessee has also filed copies of ledger account. In respect of three private limited companies, the assessee has filed copy of ledger account and in case of Hallmark Healthcare Limited, the assessee has also filed affidavit for advancing the money on account of share capital .....

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Limited dismissed the SLP filed by the Revenue against the order of Hon'ble Jurisdictional High Court, with speaking order. In case of Malwa Capital Service (P) Ltd. in ITA No.348/08, vide order dated 25.04.2008, Hon ble Delhi High court held that it is very difficult for the assessee to show the creditworthiness of strangers and if the Revenue had any doubt with regard to ability to make the investment their returns may be reopened by the department. Hon'ble Supreme Court in the case of .....

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Finance Ltd. in SLP No.375/08 dated 21-1-2008. 4. The various judgments relied on by the learned AR and placed on record clearly lay down, the ratio to the effect that in respect of money introduced by way of share capital, and the assessee company furnished the names and particulars of shareholders for establishing their identity, the department may proceed to reopen the assessments of all such alleged bogus shareholders whose investments in the share capital is found to be explained 5. In view .....

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rded, as undisclosed income under s. 68 of I.T.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 A.O. 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 ..... " Applying these yardsticks in the appellant's case it is obs .....

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ssments for the relevant time period. The AO is directed to inform the jurisdictional AOs of the aforesaid depositors. In view of the foregoing discussion and respectfully following the above quoted decisions of Hon ble Courts, and also on the basis of above directions issue to the A.O., addition u/s 68 made by the AO at ₹ 3,46,00,000/- is held not justified. The same is directed to be deleted. Grounds Nos.1 to 5 are allowed. 8. Aggrieved by the said decision of the ld. CIT (A) to delete t .....

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assessee from date 03.08.2009 to 16.11.2009, i.e. on 10 various dates, the case was listed wherein the ld. AR of the assessee dilly dallied with the information sought by the AO on this issue. Then he took our attention to page 3 wherein the AO has taken note that on 16.11.2009, the ld. AR provided the names of the alleged investors and their addresses, photo copy of affidavits, copy of ITR s bankstatements etc. and stated that the AO immediately sent the Inspector (ITI) to 9 randomly selected .....

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en were found to be ever residing or functioning at the said addresses and he took our attention to pages 4 to 13 wherein the copies of the Inspector report of these 9 alleged investors are scanned and made part of the assessment order. He also pointed out that out of these 9 investors, there was common address for two concerns and the Inspector was able to locate the director of these companies who stated that both these companies have stopped functioning way back in March 2006. Ld. DR also too .....

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essee was issued a showcause notice on 14.12.2009 stating that the results of the investigation created serious doubts about the identity, creditworthiness of its claimed investors and genuineness of the transactions of share application money and it was directed to produce the investors; and in addition to that the ld. AR of the assessee, was also directed to produce the original affidavits of the investors also. The ld. DR also took our attention to page 15 of the AO s order where the AO has d .....

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age 16 where the AO had extended his investigation by seeking information from the banks where the investors had accounts as per the assessee. The ld. DR brought to our notice that out of the 18 transactions involving 9 of the investors were sought by the AO from the respective branches of the bank who reported to AO that there were no such bank accounts of the said persons/ investors. 10. Ld. DR also stated that since the AR of the assessee contested the addresses of the alleged investors from .....

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brought our notice that the AO has investigated and elaborately explained the results of his investigation wherein he found that the identity, creditworthiness and genuineness of the transactions could not be proved by the assessee. Ld. DR took our attention to pages 37 to 44 wherein the AO with the aid of a chart has explained how the transactions were not genuine. Thus, according to the ld. DR, the assessee failed to discharge its burden of proof in support of share applicant/holder s identity .....

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t-aside and the AO order may be upheld. 11. On the other hand, ld. AR has submitted a written submission and also contended that there were 37 investors in the financial year out of which 23 investors are corporate companies duly registered with the Registrar of Companies, Ministry of Corporate affairs, Govt. of India; and remaining are the individual persons and he submitted that this amount of ₹ 3.46 crores was the fresh share capital received by the assessee company during the relevant .....

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ing the relevant year was summarized as under :- Share capital received from 23 companies Duly registered with Registrar of Companies 2,70,00,000/- Amount received from 14 individual shareholders 76,00,000/- Total : 3,46,00,000/- Ld. AR submitted that at the time of proceedings, all of them were the investors and not the share applicants; and their enforcement for appearance before the AO was not in the hand of the company, whereas the AO was requested to call them by using his powers as per law .....

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Exports 2. Ria Marketing P. Ltd. 3. Salwan Developers and Promoters - Director Shri Sardar Surender Pal Singh address have been found and after serving the notice inspector has recorded the statement where he has stated he was the director of two companies and the another company Satwant Singh Sodhi Constructions P. Ltd. and he had also given his PAN No. In recording the statement as appeared on PB No. 220 & 221 reveals that the question and answer is in the hands of the inspector itself an .....

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hange of the address and the company has tried to get in touch but could not get the positive result and time was very little. The Ld AR submitted that during the assessment proceeding, the AO has straightway formed an adverse opinion against the assessee after going through the Inspector s report without appreciating the fact that Inspector had gone from Muzaffarnagar to Delhi on 08.12.2009 and on the same date, he has given his report; and he pointed out that the travelling distance between th .....

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is not possible to inquire within such a short time to locate the independent addresses of all these shareholders on a single day. He contended that as per report, it is nowhere mentioned that he was accompanied by any independent witness and where he has prepared the report and the same has been relied as such blindly by the AO, which, according to Ld AR, clearly establishes that these have been prepared in the office itself because, according to him, if a government officer visits for inquiry .....

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of the handwriting experts although these are not relevant and not acceptable. However he pointed out that in the following cases, the handwriting expert did not find any mismatch in the signatures of investors as under : 1. Munisha Granite as appeared on PB No. 248 2. UP Electricals as appeared on PB No. 248 3. Particular Manage Finlease as appeared on PB No. 252 4. Chandra Kanta as appeared on PB No. 238 5. Rahul Barman as appeared on PB No. 240 6. Saraswati Devi Goyal as appeared on PB No. 24 .....

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e of the company as M/s. Simarjeet Electronics P. ltd. although these investors have filed reply in compliance to the notice u/s 133(6). He contended that the AO relied upon the adverse confirmation from only 3 bank branches from where 9 investors had made/invested ₹ 51 lacs and no adverse report had been obtained from the remaining investors. He further contended that the adverse report of 3 banks which are also not acceptable because first of all the AO has not found any fault in the ban .....

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it is settled law by the Hon'ble Apex Court that third party statement/report/information cannot be relied upon unless the aggrieved party has been provided an opportunity for cross-examination. In this regard, he relied on the judgment of Hon ble Delhi High Court in the case of SMC Share Brokers - 288 ITR 345 wherein, after considering the Hon ble Bombay High Court in the case of M/s. One-up shares and stock brokers - 266 ITR 275, wherein the Hon'ble High court has held that there is n .....

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SLP (C) 20015/2009 before the Apex Court which has been dismissed. He submitted that the AO has stated that the investors identity have not been proved which is factually incorrect because by filing the PAN details etc. are sufficient for establishing the identity and filing of the share application forms, bank account, affidavit etc. proved the genuineness and though the financial statements of the companies provided are of the next year but it includes previous year figures also, which shows t .....

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py was provided to the AO to give his remand report. According to Ld AR, the AO has not formed any adverse view in the remand report on these investors as established from the reproduction of the same in the CIT (A) order page no.20 para no.7.1 & 7.2; and Ld AR pointed out that after allotting the shares to these investors, it has no control over them; despite that efforts have been made to produce them before the AO. However, the AO has formed an adverse opinion on the basis of the returned .....

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holders to justify identity, genuineness, creditworthiness; and further vide letter dated 16.11.2009 as appearing in P.B.NO.13-16 the assessee has provided all the details of investors who has been already allotted the shares along with PAN / Cheque No/ DD No/ Amount as well as the remaining documents like share applications forms, banks details etc but nowhere these have been verified from the concerned jurisdictional AO of the investors . He further submitted that the AO has finally held that .....

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the share application form, affidavit and bank account for creditworthiness. According to him, once these documents are on the record the burden shifts upon the AO and the Ld CIT(A) has passed an order / direction as appearing in the last Para 67 & 68 wherein enquiry has been ordered against the investors. According to him, the assessee is not required to prove the source of source as held by Hon ble Courts reported in 256 ITR 360 and 280 ITR 516 as well as by Hon ble Delhi High Court in the .....

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the Hon ble Delhi High Court in the case Victor Electrodes wherein, it was held that non production of parties could not be a ground for making additions as done by AO as appearing in last para of order. He further relied on the judgment of Hon ble Delhi High Court in the case of Dwarkadeesh Investments in 330 ITR 298 wherein it has been held that if the company establish the identity of the subscriber, the burden shifts to the Department and unless and until any evidence to show that funding w .....

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ue (cheque No. and name of bank also), confirmations from all the shareholders giving complete particulars in the form of address, cheque numbers and the name of bank, PAN and place of assessment, copies of bank statements showing deposit of all these receipts, addition u/s 68 is not warranted. He submitted that the assessee had discharged its primary onus as per law of proving the identity of all the shareholders and it was for the AO to put forth some adverse material in case he was not satisf .....

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ded by the assessee i.e their PAN etc. He further pointed out that opportunity of cross examination if there is any dispute on the fact was essential and relied on 125 ITR 713 (SC), 288 ITR 345 (Del.) and 262 ITR 275 (Bom.) and submitted that in the present case, no opportunity was provided to cross examine the ITI, Handwriting Expert, 3 Bank officials despite a clear demand made by the assessee. The Ld AR also submitted that these are settled laws that in the case of non service of notice u/s 1 .....

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ot discharge the burden of proof regarding the share investors identity, creditworthiness and genuineness of the transactions, so he made an addition of ₹ 3.46 crores u/s 68 of the Act. On appeal, the ld. CIT (A) was pleased to delete the said addition. Aggrieved by the impugned order of the ld. CIT (A), the revenue is before us. 14. Before proceeding further, let us refresh ourselves as to the principles of burden of proof and whom it lies in the case of share capital which has been intro .....

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are about who has the role assigned to it to prove a particular fact that is the discharge of the burden in order to prove his point or to defend it itself. The burden of proof in any ordinary parlance means the duty of proving a fact affirmative of any issue. Burden of proof under the Indian Evidence Act, 1872 (hereinafter the Evidence Act,) can be seen from a perusal of sections 101 to 110 of the Evidence Act, 1872. The said sections broadly give the drift of the Rules which are employed under .....

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burdened with the duty of proving it. Section 102 of the Evidence Act says that burden of proof in a suit or proceeding lies on that person who would fail if no evidence at all were given by either side. Section 103 of the Evidence Act states that the burden of proof as to any particular fact lies on that person who wants the court to believe in its existence. According to section 104, if a person wishes to prove a dying declaration by another, he must prove the death of that other person. Acco .....

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s like bullion, jewellery, etc., he must draw a rebuttable presumption that the assessee is the owner thereof unless the burden of proving that he is not the owner thereof is discharged by the assessee. Whether certain sums of money were claimed by the assessee to have been received from certain persons, it was for the assessee to prove by cogent and proper evidence that these were genuine transactions as these facts were within the exclusive knowledge of the assessee and it should be kept in mi .....

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ablishing a case. This burden rests upon the party, whether plaintiff or defendant, who substantially asserts the affirmative of the issue. It is fixed at the beginning of the trial and remains unchanged and, in this respect, reference may be made to section 101 of the Indian Evidence Act (emphasis given by us). In the second sense, the burden of proof relates to the region of production of evidence. In this sense, the burden of proof is ambulatory and shifting throughout the trial and the scale .....

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hangeable words. But then, the burden of proof, as explained earlier, remains unchanged under all circumstances (emphasis given by us). On the other hand, the onus of proof or onus probandi is shifting and ambulatory. Burden of proof is fixed by statute or contract or agreement or pleadings. Onus probandi is concerned with the weight of evidence on each side and pertains to the region of production of evidence. In the case of Sumati Dayal vs. CIT, 214 ITR 801 (SC), the Hon ble Apex Court has hel .....

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essee because in such a case, there is prima facie evidence against the assessee as to the receipt of money in the books of the assessee. The burden of proving that the cash credit is genuine or that receipt is genuine is on the assessee. 16. Though it may be kept in mind that the initial burden is on the assessee to prove the genuineness of the transaction, but when the assessee furnished the details of the shareholders, addresses, etc., this burden is to be taken as discharged, and then the on .....

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can do no further. It should be kept in mind that the transactions which had occurred are things of which assessee is aware of and it has to come clean before the AO. 17. Dealing with share capital their Lordship of the Apex court has held that 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 prep .....

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are 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 carry out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illeg .....

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he letter of the assessee dated 23.09.2008, the scrutiny assessment was transferred to ACIT, Circle 1, Muzaffarnagar. We find that the case was thus transferred on the request of the assessee to ACIT, Circle 1, Muzaffarnagar on 22.07.2009. These dates are stated only to show that the scrutiny proceedings has in fact started before 23.09.2008 and the assessee was put on notice about the impending scrutiny assessment as early as that of 23.09.2008 and the assessment was completed on 29.12.2009 (i. .....

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naire. Thereafter, we find that the assessee gave details bit by bit and we find that eight opportunities within a period of three months and nine days were granted to the assessee to give answers and produce documents in its support. However, we find that only on 16.11.2009, after three months and nine days, the assessee answered the query no.31 in respect to the details of investors in the share capital of the company. In order to discharge the burden of proof casted on it, we find that the as .....

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hese documents before the AO, we find that the onus shifted from the assessee to the AO. Here it should be remembered that after submission of these documents, if the AO had done nothing but to exhort to the assessee to produce the investors, then assessee not could have been said to have failed to discharge its burden of proof. 21. In order to ascertain the identity of the shareholders as claimed by the assessee, due to paucity of time, the Assessing Officer deputed an ITO to serve notices u/s .....

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the addresses of the two concerns were the same (i.e. common address) wherein the director of the said company (Sardar Surender Pal Singh) had given a statement to the ITI that the said two concerns had ceased to function from March 2006. The report of the inspection done by the Inspector in this respect has been scanned and made part of the assessment order from pages 4 to 13 of the AO s order. 23. The handwriting expert had found mismatches in the signatures and was of the opinion that few of .....

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ever, as said before, we are not looking into the handwriting expert s opinion to adjudicate this issue; therefore, we are not going into merits of the handwriting expert s opinion. However, we would like to point out that the Evidence Act, have empowered the judge to compare the handwriting in certain circumstance before him and the AO is a quasi-judicial authority while he is exercising his authority as an assessing officer, so seeking handwriting experts opinion to find out the authenticity o .....

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invalid. The following results emerged from the first round of investigation (as stated before we are not including the handwriting expert s opinion) :- ITO Report 7 of these addresses were wrong and at the common address of the other two concerns, who have allegedly invested money in the assessee company, one person Shri Sardar Surender Pal Singh was found who claimed to be the Director of these two concerns till March-2006 only; and also mentioned that after March- 2006 both these companies w .....

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at serious doubts have been formed in his mind because of the aforesaid initial enquiry. So, the assessee was put on notice to come out clean with the evidences to prove the identity, genuineness and creditworthiness of the shareholders. On 15.12.2009, the AO takes note that assessee did not produce even a single shareholder and denied having any obligation to produce them. However, in the said letter interestingly, the assessee claimed that these shareholders were his close friends and business .....

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at in all these five addresses, no such person was existing or ever existed. In the aforesaid scenario, we find that the Assessing Officer requested the Banks i.e. Punjab National Bank, HDFC, Chandni Chowk Branch, Delhi and HDFC, Kashmiri Gate Branch, Delhi about the veracity of the bank statements of 9 shareholders filed by the assessee before him. Punjab National Bank vide letter dated 17.12.2009, the HDFC, Chandni Chowk Branch vide letter dated 15.12.2009 and HDFC, Kashmiri Gate Branch inform .....

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ore him and noted that these concerns have given common address of 1st Floor, City Centre Market, Muzaffarnagar. The Assessing Officer deputed the ITO to find details about the said shareholders and to his dismay, he got the information that no return of income was filed by these three companies after assessment year 2005-06, as well as there was no such concern ever existed at that address. A copy of the report is scanned and copied at page 22 of the assessment order. 25. We find the following .....

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wrong and in reality such investors never existed at those addresses. (ii) Later on 6 more addresses in Delhi were verified by the Inspector but here also all were found to be wrong. (iii) Statement of Sh. Sardar Surender Pal Singh, who states that he was not director in two companies M/s. Salwan Developers and Promoter Pvt. Ltd. and Satwant Singh Sodhi Construction Pvt. Ltd. after March, 2006 and moreover these companies closed down after March, 2006. The statement of Sh. Sardar Surender Pal S .....

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addresses were given. Out of these AIS addresses five were randomly selected and on verification- of these the inspector of the department found them bogus in all five cases, (vi) The report of hand writing expert is against the claim of assessee Company as .discussed above. (vii) 19 transactions involving transfer of share application money to the assessee Company through banks were selected but on verification it was found and communicated by respective branches of the banks that no such accou .....

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was found out that none of these companies filed Income Tax Returns after Assessment Year 2005-06 and the address of these companies at Muzarfarnaggar was found to be wrong and these companies never existed at those addresses. (ix) The copy of affidavits submitted by the assessee Company were of no evidence value as it was copy of only-one side of affidavit and without giving any date. Moreover, the assessee Company did not submit the original affidavits even when this requirement was clearly e .....

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e dated 17-12-2009. Thereafter a show-cause notice dated 17.12.2009 was issued directing the assessee to produce any 25 of these claimed investors, since the assessee had claimed the same to be his close friends and business associates. We find that the assessee has made a submission on 23.12.2009 that investors could not be approached by the assessee company as it did not pay any dividend to them. Along with the written submissions dated 23.12.2009, we find that the AR of the assessee had provi .....

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icant company was allegedly invested in the assessee s company). The AO had given Table No.2 at page 32 of his order, depicting the name of 19 companies out of which 13 companies did not give the last date of balance sheet, the other 5 companies had given last date of balance sheet as 31.03.2006 and the remaining 1 company did not file company master details. Thus, the AO came to the conclusion that the said 19 companies are defunct companies in the financial year 2006-07 which is the relevant a .....

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c (India) Pvt. Ltd. the amount of ₹ 31 lakhs and ₹ 15 lakhs has not been transacted in the year under consideration and has not been added by the AO as addition and so there is no dispute about this. Thereafter, we find that in respect to the 37 investors, the AO s view of the alleged investors in respect to their identity, creditworthiness and genuineness of the transaction is as given below :- 1. Anil Kumar Goel The Assessing Officer observed that the amount invested by this allege .....

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ent order. It is also observed that different address was given in AIS data base. He also observed that he did not have creditworthiness to invest such amount as for assessment year 2005-06 his total gross income was filed at ₹ 94,200. 2. Chandra Kanta The amount invested by this alleged investor was ₹ 7,50,000/-. The Assessing Officer found that the investor had given bogus address of Delhi as verified by Inspector. He also observed that the account number of HDFC Bank, Chandani Cho .....

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unt as she had filed total gross income at ₹ 1,05,064/- for assessment year 2005-06. 3. Manohar Lal Gupta Rs.7,50,000/- was invested by this alleged investor. The Assessing Officer found that the signature on ITR did not match with signatures on share application form according to the report of the Hand Writing Expert. He also observed that the account number of HDFC Bank, Chandani Chowk Brach (Delhi) through which the share application money was allegedly invested in the assessee company .....

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sing Officer found that the investor had given bogus address of Delhi as verified by Inspector. He also observed that the account number of HDFC Bank, Kashmeri Gale Brach (Delhi) through which the share application money was allegedly invested in the assessee company was never in existence and this fact was confirmed in writing by the branch of the bank through a letter which is reproduce din the assessment order. He also observed that the different address was given in AIS data base. The AO als .....

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gedly invested in the assessee company was never in existence and this fact was confirmed in writing by the branch of the bank through a letter which is reproduce din the assessment order. The Assessing Officer also observed that it did not have creditworthiness to invest such a huge amount as in the assessment year 2005-06, the investor had shown ₹ 1,05,118/- as gross total income. He also observed that the alleged investor has given invalid PAN invalid according to AIS. 6. Saroj Aggarwal .....

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so found that the alleged investor did not have creditworthiness to invest such a huge amount as the investor had shown gross total income of ₹ 1,00,128./- in assessment year 2005-06. 7. Sushma Goel The Assessing Officer observed that the amount invested by this alleged investor was ₹ 5,50,000/-. The Assessing Officer found that the alleged investor had given the bogus address of Delhi which was verified by Inspector. He also observed that the account number of Punjab National Bank, .....

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ain The alleged investor had invested a sum of ₹ 6,00,000/-. The Assessing Officer observed that the signature on ITR did not match with signature on share application form according to the report of the Hand Writing Expert. He also found that the account number of Punjab National Bank, Khari Baoli Branch, Delhi, through which the share application money was allegedly invested in the assessee company was not in existence at least since 01.04.2006 and this fact was confirmed by the bank thr .....

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is address was found to be bogus when the inspector went for physical verification. The Assessing Officer observed that the account number of Punjab National Bank, Khan Baoli Branch. Delhi, through which the Share application money was allegedly invested in the assessee company was not in existence at least since 01.04.2006 and this fact was confirmed in writing by the branch of the bank through a letter. He found that the investor did not have creditworthiness to invest such a huge amount as th .....

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6. 11. Rakesh Kumar Aggarwal Rs.2,00,000/- was invested by this alleged investor. The Assessing Officer found that the signature on ITR did not match with signatures on share application form according to the report of the Hand Writing Expert. It is also observed that different address was given in AIS data base. The Assessing Officer found that the alleged investor did not have creditworthiness to invest such a huge amount as he had shown gross total income at ₹ 78,600/- in assessment yea .....

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ved that the signature on ITR did not match with signature on share application form according to the report of the Hand Writing Expert. He observed that the she had given the bogus address of Delhi as verified by Inspector. It was also observed that it did not have creditworthiness to invest such a huge amount as ₹ 1,03,225/- was shown as total gross income in the assessment year 2005-06. 14. Ganesh Kumar The amount invested by this alleged investor was Rs.,8,00,000/-. The Assessing Offic .....

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g Development Finance Co. Ltd The Assessing Officer observed that the amount invested by this alleged investor was ₹ 5,00,000/-. He found that for Assessment Year 2005-06, the company filed its return of income at Muzaffarnagar but it did not file any return of income for subsequent Assessment Years and the inquiry of the Inspector at the address given, on ITR, proved that the company never existed at that address. He also found that different address was given in AIS data base and even th .....

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st such a huge amount as total gross income at ₹ 38,315/- was shown for assessment year 2004-05 and it did not submit ITR for A.Ys. 2005-06 or 2006-07. He also found that according to Company Master Details (from Registrar of Companies), this company filed its last Balance Sheet on 31-03- 2006. 17. Ria Marketing Services Pvt. Ltd. The Assessing Officer observed that the amount invested by this alleged investor was ₹ 5,00,000/-. He found that bogus address of Delhi was given which was .....

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h stated that this company was closed down in March, 2006. He also observed that it did not have the creditworthiness to invest such a huge amount as the gross total income of ₹ 18,191/- for Assessment Year 2005- 06. He also found that according to Company Master Details (from Registrar of Companies), this company filed its last Balance Sheet on 31-03-2006. He also found that the given PAN was invalid according to AIS. 19. Yogson Impex Pvt. Ltd. The Assessing Officer observed that the amou .....

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h a huge amount as copy of ITR was not submitted. 20. Singhal Fluidline Equipment Pvt. Ltd. The amount invested by this alleged investor was ₹ 5,00,000/-. The Assessing Officer found that signature on ITR did not match with signature on share application form according to the report of the Hand Writing Expert and the same Director, Shri Rajan Jassal S/o Sh. S.K. Jassal had signed on all the documents referred to the Hand Writing Expert. He also observed that the investor did not have credi .....

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g of Form DIN3/Form 32. The Assessing Officer observed that this PAN was not of the company but that of Sehaj Financial Services Pvt. Ltd., Daryaganj, New Delhi. 21. B-Fin Lease (I) Private Limited The amount invested by this alleged investor was ₹ 10,00,000/-. The Assessing Officer found that the Company had not filed its Balance Sheet with Registrar of Companies for many years as the last Balance Sheet date is not given in Company Master Details (from Registrar of Companies). The Assessi .....

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application form according to the report of the Hand Writing Export and the same Director, Ms Rani Sharma had signed on all the documents referred to the Hand Writing Expert. It was also observed that the company had not filed its Balance Sheet with Registrar of Companies for many years as the last Balance Sheet date was not given in Company Master Details (from Registrar of Companies). The Assessing Officer also observed that the company was in default of filing of Form DIN3/Form 32 and differe .....

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st Balance Sheet date was not given in Company Master Details (from Registrar of Companies) and also the different address was given in AIS data base. The Assessing Officer observed that it did not have creditworthiness to invest such a huge amount as copy of ITRs were not submitted. 24. MLF Classic Finance Limited The amount invested by this alleged investor was ₹ 10,00,000/-. The Assessing Officer observed that the signature on ITR did not match with signature on share application form a .....

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icer also observed that it did not have creditworthiness to invest such a huge amount as it had shown NIL income in assessment year 2005-06 and he also found that the given PAN was invalid according to AIS. 25. Monisha Granite Limited Rs.20,00,000/- was invested by this company. The Assessing Officer observed that the inquiry letter u/s 133(6), sent at the Delhi address of the company through registered post, returned unserved. He found that different address was giver in AIS data base. The Asse .....

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aster Details (from Registrar of Companies). It is also observed that different address was given in AIS data base. The Assessing Officer also observed that it did not have creditworthiness to invest such a huge amount as ₹ 2,08,881/- was shown as gross total income in assessment year 2004-05 but it did not submit ITR for assessment years 2005-06 or 2006-07. 27. Prakartik Hotels Private Limited Rs.20,00,000/- was invested by this company. The Assessing Officer observed that the signature o .....

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t address. He observed that the inquiry letter U/s 133(6), sent through registered post at the Delhi address of the company, returned unserved. He also found that different address was given in AIS data base. The Assessing Officer observed that it did not have creditworthiness to invest such a huge amount as NIL income was shown in the assessment year 2005-06. 28. SGC Publishing Private Limited The Assessing Officer observed that the amount invested by this alleged investor was ₹ 10,00,000 .....

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s gross total income in assessment year 2004-05 and the company did not also submit ITR for assessment years 2005-06 or 2006-07. It was also found that the Company had not filed its Balance Sheet with Registrar of Companies for many years as the last Balance Sheet date was not given in Company Master Details (from Registrar of Companies). 29. UP Electricals Limited The alleged investor had invested ₹ 20,00,000/-. The Assessing Officer found that the inquiry letter u/s 133(6), sent at the D .....

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fund that different address was given in AIS data base. He also observed that it did not have creditworthiness to invest such a huge amount as the gross total income was shown at ₹ 9,360/ in the assessment year 2005-06. The Assessing Officer found that according to Company Master Details (from Registrar of Companies), this company filed its last Balance Sheet on 31.03.2005. 31. Dignity Finvest Private Limited Rs.8,00,000/- was invested by this company. The Assessing Officer found that acco .....

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mpany had not filed its Balance Sheet with Registrar of Companies for many years as the last Balance Sheet date was not given in Company Master Details (from Registrar of Companies). He also found that the company was in default of filing of Form D1N3/Form 32. He also observed that different address was given in AIS data base. The Assessing Officer found that the company did not have creditworthiness to invest such a huge amount as gross total income at ₹ 20,068/- was shown in assessment y .....

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uments referred to the Hand Writing Expert. The Assessing Officer also found that the Company had not filed its Balance Sheet with Registrar of Companies for many years as the last Balance Sheet date was not given in Company Master Details (from Registrar of Companies). It is also observed that different address was given in AIS data base. He observed that it did not have creditworthiness to invest such a huge amount as ₹ 4,581/- was shown as gross total income in assessment year 2004-05 a .....

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nt at the Delhi address of the company through registered post, returned unserved. The Assessing Officer also observed that the Company had not filed its Balance Sheet with Registrar of Companies for many years as the last Balance Sheet date was not given in Company Master Details (from Registrar of Companies). The Assessing Officer observed that different address was given in AIS data base. He also observed that it did not have creditworthiness to invest such a huge amount as it had shown nil i .....

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t. The Assessing Officer observed that inquiry letter u/s 133(6), sent through registered post at the Delhi address of the company, returned unserved. He also observed that the Company had not filed its Balance Sheet with Registrar of Companies for many years as the last Balance Sheet date was not given in Company Master Details (from Registrar of Companies). The Assessing Officer observed that the company was in default of filing of Form DIN3/Form 32. It is observed by the Assessing Officer tha .....

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by Inspector. He also observed that the Company had not filed its Balance Sheet with Registrar of Companies for many years as the last Balance Sheet date was not given in Company Master Details (from Registrar of Companies) and the company was in default of filing of Form DIN3/Form 32. He observed that different address was given in AIS data base. The Assessing Officer observed that the company did not have creditworthiness to invest such a huge amount as ₹ 38,207/- was shown as gross tota .....

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ess to invest such a huge amount as the NIL income was filed for the assessment year 2005-6. It was also found by the Assessing Officer that according to Company Master Details (from Registrar of Companies), this company filed its last Balance Sheet on 31-03-2005 and the company was in default of filing of Form DIN3/Form 32. 27. The AO came to the conclusion based on his investigation as aforesaid that the assessee could not discharge the burden of proof casted upon it to prove the share applica .....

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d also to furnish the ITR for AY 2008-09, 2009-10 and 2010-11. On the date fixed for compliance i.e. 13.01.2011, the assessee could not produce any of the 7 investors as stated at page 21 of the impugned order. On 08.01.2011, the AO issued section 133 (6) notice to 15 share applicants/holders and out of which, 6 were returned back unserved, 6 persons replied back and 3 un-replied till the date of remand report. (For clarity, it is noted that the six share holders who replied to AO during remand .....

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roduced from pages 22 to 25 of the impugned order, wherein the assessee had relied upon the judgment of Hon ble Supreme Court in the case of Lovely Exports reported in 216 CTR 295 to contend that the AO was unjustified in drawing adverse inference against the assessee company when it is indisputably a case of share capital receipts by the assessee company and the assessee company has duly discharged the onus in proving the identity and credit worthiness of these shareholders and has also proved .....

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ents furnished by the assessee, and (iii) checking of PANs of share applicants on the database of Assessee Information System. The CIT (A), dealing with the enquiries conducted through the ITI, has dealt with the same from pages 25 to 31 of the impugned order. ITI REPORT 29. The ld. CIT (A) has observed at page 26 of the impugned order that the ITI made enquires in respect of nine share applicants in the first round and later on, the AO conducted inquiries from ITI against another twelve, thus, .....

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e would like to point out that the ITI report is the outcome of an order passed by the AO to the ITI to verify the addresses given by the assessee to prove the identity of the shareholders/investors. A perusal of page 4 of the AO s order shows that the ITI recorded the statement of Shri Surendra Pal Singh on 04.12.2009 on behalf of two firms i.e. M/s. Satwant Singh Sodhi Construction Pvt. Ltd. and M/s. Salwan Developers & Promoters Pvt. Ltd. in which he was the director. He said that the sai .....

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ge, taking into consideration, the advancement in communication and technology, nothing prevented the ITI to have spoken to the AO the result of his investigation on 04.12.2009 itself and the report being submitted on later date i.e. on 07.12.2009. We do not find anything more to read in respect to the notice dated 04.12.2009 of the AO mentioning about the ITI s information regarding his investigation done on 04.12.2009. The fate of the argument of the assessee fails on the same reason in which .....

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cannot be discredited simply because AO is privy to the factual aspect in respect to the investigation conducted by the ITI which was reported in writing on a later date. Therefore, merely because the report of the investigation has been submitted on a later date does not in any manner calls for drawing any adverse inference against the said report. As per section 114(e) of the Evidence Act, a presumption in favour of the official acts in discharge of duty has to be inferred in absence of any r .....

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l acts have been regularly performed. The rule embodies in the illustration flows from the maxim omnia praesumuntur rite et solemniter esse acta, i.e., all acts are presumed to have been rightly and regularly done. The true principle intended to be conveyed by the rule, omnia praesumuntur rite et solemniter esse acta, . The court cited the following passage from Herbert Broom s A SELECTION OF LEGAL MAXIMS : In these cases the ordinary rule is that everything is presumed to be duly and rightly pe .....

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, however the assessee has not led any other evidences to prove that ITI report was factually wrong, without addressing the said factual aspect, the assessee is seen raising allegations that certain letters of AO, mentions about post-dated reports of ITI, which according to us has no substance or merit and so it has to be rejected for the reasons as aforestated. Likewise, the CIT (A) has criticised the manner of enquiry conducted by the ITI on 08.12.2009 wherein he takes note that the ITI has en .....

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s are not residing or not functioning from the said addresses. It is natural that in order to locate the persons at a particular address or find out more about the said persons in this case he might have made certain enquiries from the shopkeepers who are functioning in the concerned areas / premises in no manner affects the credibility of the physical verification done by the ITI ; and moreover it is a direct evidence given by a public official about a question of fact which he was entrusted by .....

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s made an observation that much credence need not be given to Shri Sardar Surender Pal Singh statement that the two companies, in which he was the director, have ceased to function from March 2006, since the assessee during the appellate proceedings before him had filed the audited balance sheets of the said companies to prove that the said companies are still in existence. Here, we would like to point out that in no manner, the statement of Shri Sardar Surender Pal Singh can be shot down becaus .....

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hat of the relevant assessment year. Not only that if audited balance sheets are filed after the statement was recorded on 04.12.2009 can be termed as an afterthought and in no manner, will affect the credibility of the statement given by Shri Sardar Surender Pal Singh on 04.12.2009. So, we are of the opinion that the ld. CIT (A) erred in giving such a finding based on irrelevant material like document pertaining to subsequent assessment years, which is not legally tenable and on the facts and c .....

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on rendered by the handwriting expert in this matter. 32. Coming to the AO s investigation of the PAN on Assessee Information System (AIS), we find that the CIT (A) has held that since the assessee has provided photocopies of the PANs/ITRs and details of the PAN from NSDL sites, reliance placed by the AO on AIS data-base is half-cooked and not conclusive. Here we would like to point out that the AO has searched into the AIS database and has held that while cross checking PAN details of the alleg .....

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AO is duty bound to do and which in this case was done by the AO. The AO had only 31 working days in his command to find out the truth/bonafide of the assessee s contention. Here, we find that the AO had looked into AIS database to find out whether the PAN/addresses given by the assessee match with that of the AIS system. Here we find that the addresses were either incorrect or different or the PANs were simply invalid. This finding of the AO cannot be disturbed unless the assessee is able to s .....

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s about their bank accounts which they had stated to have accounts and had submitted the bank statements to establish their creditworthiness. The banks have reported back (pages 51 to 53 of the AO s order) that there are no such accounts in these banks by these share holders / investors. The said report of Banks were handed over to the assessee by AO. However, the ld. CIT (A) after relying on the judgment of Hon ble Delhi High Court in CIT vs. K.C. Fibres Ltd. - (2010) 187 Taxman 53 (Del.), has .....

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to come to the aforesaid finding. CIT(A) has reproduced the following extraction from the said order of Hon ble High Court :- It is strange that when the Assessing Officer is questioning the bona fides of M/s. Diamond Protein Ltd. for collecting money to subscribe to the share to the capital of the assessee, but it is the assessee who is fastened with the liability. The Assessing Officer did not question M/s. Diamond Protein Ltd. in this behalf. Insofar as Assessing Company is concerned, it is .....

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ny relationship with each other….. A perusal of the aforesaid order clearly shows that the ld. CIT (A) erred in appreciating the facts and ratio of the said case decided by the Hon ble High Court.The facts and circumstances of that case was totally different and that was a case in which the share applicant, M/s. Diamond Protein Ltd. had issued cheque through bank and the assessee (M/s. K.C. Fibres Ltd) was fastened with the liability simply because assessee could not prove the source of s .....

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of the same as to whether they have bank accounts and bank statements submitted by them are correct. Pursuant to the said query from the AO, the banks had informed him that these share applicants do not have an account in their respective banks. Copy of the same is also a part of the assessment order. The ld. CIT (A) erred in relying on an observation of the Hon ble High Court, without appreciating the facts and context of that case. Moreover, the said case-law has no bearing in the case in hand .....

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saction, we find the ld. CIT (A) has taken each companies and noted the AO s observations and the assessee s contentions from page nos.37 to 63 of his order which is summarised below in a chart to have a bird s eye view and how the CIT (A) has dealt with the observations of the AO :- 37. We find a common thread in each of the alleged share applicants who are juristic personalities i.e. incorporated private limited companies when the matter came before the CIT(A). The AO noted that these companie .....

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009-10 to uphold that the share applicant / investor companies are existing companies and the audited balance sheet show that the share applicants companies had enough paid up capitals and reserves to subscribe for the shares from the assessee s company. Though we find that cheque numbers which are dated between 10.08.2006 to 25.08.2006 have been mentioned by the ld. CIT (A) to uphold the genuineness of the transaction, however, we are unable to accept the said reasoning and finding of ld. CIT ( .....

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balance sheet for FY 2007-08 i.e. AY 2008- 09 which is subsequent assessment year is not acceptable. The assessee cannot say that it did not had sufficient time to discharge its burden in respect to the share capital money which has come to its account. We find that the AO had investigated the matter fairly and had given enough opportunities to the assessee to come clean with the identity, creditworthiness and genuineness of the transaction. We find that the AO had given sufficient notice and f .....

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ditworthiness which was filed before him to prove the existence of the said companies and individuals. 38. Another argument based on case-laws was emphasized by the ld. AR that the AO erred in not appreciating the fact that the book entry in the assessee s account is on account of share capital and the law is very clear that in case of any doubt with regard to the genuineness of the said amount then it should be taxed in the hands of the investor/shareholder and not that of the assessee company .....

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company generally allows the shareholding only to persons who are closely known to them. So, therefore, the contention of the ld. AR cannot be countenanced because assessee in this case is a private limited company and has admitted in its correspondence with the AO that the investors were close friends and business associates. The case laws relied upon by the ld. AR as aforestated pertains to cases where public issue of shares are involved and the case laws regarding share subscription of Public .....

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ers has vitiated the ITI report and should not have been taken into consideration by the AO to discredit the identity of the shareholders. Likewise, the lack of cross examination of the handwriting expert and the bank managers of Punjab National Bank and HDFC Bank have vitiated their respective letters/reports based on which the AO has disbelieved the documents furnished by the assessee and made the impugned additions. Here, we would like to point out that the cross examination of the ITI has in .....

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is a change in address. Thus, it cannot be taken as the AO had taken the ITI report at the back of the assessee for making the impugned addition. Here, it should be remembered that the ITI who was discharging the official duty and had only verified the question of fact as to whether the purported shareholders were residing/functioning from the said premises/addresses in order to prove the identity of the said shareholders as claimed by the assessee. The assessee had ample opportunity to disprove .....

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onducted by the ITI by saying that he had asked from the shopkeepers, street vendors, etc. etc. On the above said factual scenario, we find that the cross examination of ITI was not necessary because burden of proof was casted upon the assessee to prove the identity of the shareholders for that the assessee had furnished addresses which were verified by the ITI who had found it to be wrong and presumption in favour of the ITI report as per section 114 (e) of the Evidence Act needs to be drawn, u .....

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. So, no new evidence has been brought in by the AO, to mulct the impugned additions. 40. Coming to the similar attack on the opinion of the handwriting expert to have been vitiated for lack of cross examination, since we have not considered the report of the handwriting expert to adjudicate this issue so we are not going into the said contention of the ld. AR. Here also, we would like to point out that the handwriting expert s view is basically based on the signatures given in the photocopy of .....

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nto consideration the opinion of the hand-writing expert, we are not going to look in to the said objection against it. 41. Similarly, we find that the bank manager s letters to AO have been challenged for non-cross examination of the officers of the Punjab National Bank and HDFC Bank. Here also, we find that the assessee in order to prove the creditworthiness of the shareholders had provided the bank account numbers and bank statements of the shareholders (randomly selected 9 Nos.) which AO had .....

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f the assessee, it had to discharge the same. Moreover even before the CIT(A), the assessee has not been able to bring anything on record to state that the bank s letters stating that the alleged share holders / investors had no account, is factually wrong. In the absence of the same, the burden of proof has not been discharged by the assessee, to prove the creditworthiness of the share holders. It may be noted here also that the AO has not brought any fresh evidence to discredit the shareholder .....

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ficer. 42. The ld. AR also brought to our notice that during remand proceedings, six shareholders have replied to the AO as noted by the AO in his remand report, so the identity was in fact proved of these six shareholders and three letters have not returned back, meaning they were received by the shareholders. In the said background, addition of the entire amount u/s 68 of the Act is not legally tenable. We have gone into the said contention of the ld. AR, however, nothing turns around as to th .....

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