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TMI Blog2021 (9) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh banking channels and therefore erred in confirming the addition of Rs. 7,30,00,000/-. 5. The ld. CIT(A) ought to have appreciated that the AO failed to provide the information received form DCIT, Central Circle - 3(2), Mumbai, therefore violated principles of natural justice and therefore, the addition of Rs. 7,30,00,000/- is not justified 6. The appellant craves leave to add to, amend or modify the above grounds of appeal either before or at the time of hearing of the appeal, if it is considered necessary." 2. Briefly the facts of the case are that the assessee filed his return of income for the AY 2012-13 on 29/09/2012 declaring NIL income. As per information received from DCIT, Mumbai, the assessee received accommodation entries to the tune of Rs. 7,30,00,000/-. The assessee claimed exempt income u/s 10(38) of the Act of Rs. 1,39,78,696/- which included Rs. 1,08,51,042/- towards long term capital gains on the sale of shares. To verify genuineness of the transaction, the AO reopened the case u/s 147 by issuing notice u/s 148 on 31/03/2017. Based on the information available, the AO completed the assessment u/s 143(3) rws 147 on 31/12/2017 by making addition of Rs. 7,30,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urce thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the Assessee of that previous year" (emphasis supplied) The use of the words "any sum found credited in the books" in Section 68 of the Act indicates that the section is widely worded, and includes investments made by the introduction of share capital or share premium. 8.2. As per settled law, the initial onus is on the Assessee to establish by cogent evidence the genuineness of the transaction, and credit-worthiness of the investors under Section 68 of the Act. The assessee is expected to establish to the satisfaction of the Assessing Officer2 : * Proof of Identity of the creditors; CIT v. Precision Finance Pvt. Ltd. (1994) 208 ITR 465 (Cal) * Capacity of creditors to advance money; and * Genuineness of transaction This Court in the land mark case of Kale Khan Mohammad Hanif v. CIT3 and, Roshan Di Hatti v. CIT4 laid down that the onus of proving the source of a sum of money found to have been received by an assessee, is on the assessee. Once the assessee has submitted the documents relating to identity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ." 9. The Judgments cited hold that the Assessing Officer ought to conduct an independent enquiry to verify the genuineness of the credit entries. In the present case, the Assessing Officer made an independent and detailed enquiry, including survey of the so- called investor companies from Mumbai, Kolkata and Guwahati to verify the credit-worthiness of the parties, the source of funds invested, and the genuineness of the transactions. The field reports revealed that the share-holders were either non-existent, or lacked credit-worthiness. 10. On the issue of unexplained credit entries /share capital, we have examined the following judgments : i. In Sumati Dayal v. CIT8 this Court held that : "if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory, there is prima facie evidence against the assessee, vis., the receipt of money, and if he fails to rebut the same, the said evidence being unrebutted can be used against him by holding that it is a receipt of an income nature. While considering the explanation of the assessee, the department cannot, however, act unreasonably" ii. In CIT v. P. Moha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which he had with his creditors, and the creditworthiness of his creditors vis-a-vis the transactions which he had with the creditors, his burden stands discharged and the burden then shifts to the revenue to show that though covered by cheques, the amounts in question, actually belonged to, or was owned by the assessee himself" (emphasis supplied) vi. In a recent judgment the Delhi High Court13 held that the credit-worthiness or genuineness of a transaction regarding share application money depends on whether the two parties are related or known to each other, or mode by which parties approached each other, whether the transaction is entered into through [2003] 264 ITR 254 (Gau.) CIT v. N.R. Portfolio (P.) Ltd.[2014] 42 taxmann.com 339/222 Taxman 157 (Mag.) (Delhi) written documentation to protect investment, whether the investor was an angel investor, the quantum of money invested, credit-worthiness of the recipient, object and purpose for which payment/investment was made, etc. The incorporation of a company, and payment by banking channel, etc. cannot in all cases tantamount to satisfactory discharge of onus. vii. Other cases where the issue of share application money received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2009-10, for purchase of shares at such a high premium. For example: Neha Cassetes Pvt. Ltd. - Kolkatta had disclosed a taxable income of Rs. 9,744/- for A.Y. 2009-10, but had purchased Shares worth Rs, 90,00,000 in the Assessee Company. Similarly Warner Multimedia Ltd. - Kolkatta filed a NIL return, but had purchased Shares worth Rs. 95,00,000 in the Assessee Company - Respondent. Another example is of Ganga Builders Ltd. - Kolkatta which had filed a return for Rs. 5,850 but invested in shares to the tune of Rs. 90,00,000 in the Assessee Company - Respondent, etc. iii. There was no explanation whatsoever offered as to why the investor companies had applied for shares of the Assessee Company at a high premium of Rs. 190 per share, even though the face value of the share was Rs. 10/- per share. iv. Furthermore, none of the so-called investor companies established the source of funds from which the high share premium was invested. v. The mere mention of the income tax file number of an investor was not sufficient to discharge the onus under Section 68 of the Act. 13. The lower appellate authorities appear to have ignored the detailed findings of the AO from the field enqu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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