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DATE: February 23, 2018 (Date of pronouncement)
DATE: March 6, 2018 (Date of publication)
AY: 2010-11
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CITATION:
S. 68 Bogus share capital: If the assessee has discharged the initial onus regarding the identity, creditworthiness and genuineness, the onus shifts to the AO to bring material or evidence to discredit the same. The fact that the shareholders did not respond to s. 133(6) summons is not sufficient to draw an adverse inference. There must be material to implicate the assessee in a collusive arrangement with person who are accommodation entry providers

In view of the above documents and evidences filed by the assessee, we are of the opinion that these are sufficient to discharge its initial onus regarding the identity, creditworthiness and genuineness as required under Section 68 of the Act. The assessee having discharged its onus, it was upon the AO to bring material or evidence to discredit the same. In the present case, from the assessment order, it is evident that no adverse material is available with the AO

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DATE: February 9, 2018 (Date of pronouncement)
DATE: March 3, 2018 (Date of publication)
AY: 2008-09
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S. 68 Bogus Share Capital: Share premium received can be assessed as undisclosed income if (a) directors are allotted shares at par while others are allotted at premium, (b) the high premium is not justified by a valuation report, (c) the high premium is not supported by the financials, (d) based on financials the value of shares is less and no genuine investor would invest at the premium, (e) there are discrepancies & abnormal features which show transaction as "made up" to camouflage real purpose

The argument of the assessee that the provisions of Sec.56(1)(viib) of the Act does not apply to the case on hand for the year under consideration as it has been introduced by Finance Act, 2012 w.e.f. 1.4.2013 is a misplaced one. From a reading of the order of assessment, it is clear that the Assessing Officer has invoked the provisions of Sec. 68 of the Act. This leads us to the question of whether the provisions of Sec. 68 of the Act can be invoked for the nature of transactions involved in the case, where sums of money are credited in the name of share premium. This question has been addressed by the Hon’ble Calcutta High Court in the case of Pragati Financial Management Pvt. Ltd. Vs. CIT in C.A. 887 & 998 of 2016 and others dt.7.3.2017. In its order (supra) on the issue of whether enquiry under Section 68 of the Act can be carried out for examining the genuineness of the share premium transaction, the Hon’ble High Court held that Sec. 68 of the Act can be invoked to conduct enquiry on the genuineness of share premium transactions

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DATE: January 1, 2018 (Date of pronouncement)
DATE: January 9, 2018 (Date of publication)
AY: 2012-13
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CITATION:
S. 68 Bogus share capital: Share application money cannot be treated as unexplained credit if the AO does not make any investigation on the documentary evidences filed by the assessee or ask for the production of the investors for examination u/s 131 or if adverse material is found during search to prove that share application money is bogus or an arranged affair of the assessee

The A.O. however, did not make any further enquiry on the documents filed by the assessee-company. The A.O. thus, failed to conduct any enquiry and scrutiny of the documents at assessment stage and merely suspected the transaction between the Investor Company and assessee-company because the Investor Company was from Kolkata. The A.O. thus, did not perform his duties at the assessment stage so as to make addition against the assessee-company. No cash was found deposited in the account of the Investor. Therefore, the totality of the facts and circumstances clearly prove that assessee-company discharged initial onus to prove identity of the Investor Company, its creditworthiness and genuineness of the transaction in the matter

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DATE: November 29, 2017 (Date of pronouncement)
DATE: December 5, 2017 (Date of publication)
AY: -
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S. 68 Bogus share capital: Law laid down in Subhlakshmi Vanijya Pvt. Ltd vs. CIT 155 ITD 171 (Kol), Rajmandir Estates 386 ITR 162 (Cal) etc that the CIT is entitled to revise the assessment order u/s 263 on the ground that the AO did not make any proper inquiry while accepting the explanation of the assessee insofar as receipt of share application money is concerned cannot be interfered with

The Commissioner of Income Tax had passed an order under Section 263 of the Income Tax Act, 1961 with the observations that the Assessing Officer did not make any proper inquiry while making the assessment and accepting the explanation of the assessee(s) insofar as receipt of share application money is concerned. On that basis the Commissioner of Income Tax had, after setting aside the order of the Assessing Officer, simply directed the Assessing Officer to carry thorough and detailed inquiry. It is this order which is upheld by the High Court. We see no reason to interfere with the order of the High Court

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DATE: November 14, 2017 (Date of pronouncement)
DATE: November 30, 2017 (Date of publication)
AY: 2008-09
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S. 68 Bogus share capital: In the case of credit as share capital by corporate entity, whose existence is shown by its registration with Registrar of companies and its filing of tax returns, adverse conclusion is not justified merely because its directors are not produced personally before the AO by the assessee. The AO has to demonstrate with specific evidence that the assessee has in reality obtained accommodation entries by showing cash deposits linked to the investors

Section 68 casts the initial burden of proof on the assesse to show prima facie and to explain the nature and source of credit found in its books. When the statute places the burden of proof in income tax cases on the tax payer, it is understood to be only the initial burden. When the tax payer explains the credit by providing evidence of identity, confirmation and credit worthiness, the burden shifts on the revenue to show that the explanation is not satisfactory or incorrect. In the case of credit as share capital by corporate entity, whose existence is shown by its registration with Registrar of companies and its filing of tax returns, adverse conclusion is not justified merely because its directors are not produced personally before the assessing officer by the tax payer

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DATE: April 10, 2017 (Date of pronouncement)
DATE: November 28, 2017 (Date of publication)
AY: -
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S. 68 Bogus share capital: Companies which invest share capital cannot be treated as bogus if they are registered and have been assessed. Once the assessee has produced documentary evidence to establish the existence of such companies, the burden shifts to the Revenue to establish their case. Reliance on statements of third parties who have not been subjected to cross examination is not permissible. Voluminous documents produced by the assessee cannot be discarded merely on the basis of statements of individuals contrary to such public documents

This Court in the Judgments relied upon by the learned Counsel appearing for the Respondents, have come to the conclusion that once the Assessee has produced documentary evidence to establish the existence of such Companies, the burden would shift on the Revenue-Appellants herein to establish their case. In the present case, the Appellants are seeking to rely upon the statements recorded of two persons who have admittedly not been subjected to cross examination. In such circumstances, the question of remanding the matter for re-examination of such persons, would not at all be justified. The Assessing Officer, if he so desired, ought to have allowed the Assessee to cross examine such persons in case the statements were to be relied upon in such proceedings. Apart from that, the voluminous documents produced by the Respondents cannot be discarded merely on the basis of two individuals who have given their statements contrary to such public documents

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DATE: May 22, 2017 (Date of pronouncement)
DATE: September 23, 2017 (Date of publication)
AY: 2008-09
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CITATION:
S. 271(1)(c) penalty: Voluntary disclosure of Rs. 557.50 crores. Entire law on levy of penalty discussed in the context of declaration made during survey, bogus purchases, bogus share capital, accommodation entries, non-application of mind by the AO etc. All important judgements incl Kaushalya 216 ITR 660 (Bom), MAK Data 358 ITR 593 (SC) explained/ ditinguished

A survey action u/s 133A was taken by the Investigation Wing against the assessee on 19/12/2012. The survey took place at the office premises as well as at the factory premises where the manufacturing activity is carried on. Not a single piece of paper is found either from the office premises or from the factory premises which could prove or indicate or suggest that the assessee has earned unaccounted income. However, during course of survey, statement of Director of Company Shri Babu Lal was recorded on 21/12/2012, wherein he offered income earned during the course of business. No iota of proof is also found regarding the manufacturing results disclosed by the assessee. The Investigation Wing has not issued a -single letter or a show cause or a questionnaire after conduct of the survey to the assessee pointing out any discrepancy or defect in the books of account or regarding detection of unaccounted income. The assessee on its own voluntarily filed a letter dated 27/12/2012 on 07/01/2013 with the Investigation Wing offering the income of Rs.557.50 crores for A.V. 2007-08 to 2010-11. As no incriminating material/document was found, the assessee was left with no choice but to state that the said income was generated on account of difference in yield, when in fact and in substance there was no defect or error in the yield which is disclosed by the assessee in the regular books of accounts. The assessee thereafter filed the return of income disclosing the income offered in the letter dated 27/12/2012 on 15/01/2013 and filed a copy of the same with the Investigation Wing. Notice u/s 148 was issued on 25/11/2013 received by the assessee on 27/11/2013. The assessee filed a letter stating that the return filed voluntarily on 15/01/2013 may be treated as return in response to notice u/s 148. The assessments for the impugned assessment years were framed u/s 147 r.w.S. 143(3) of the Income Tax Act(“the Act”). The impugned penalty in respect of impugned assessment years were imposed by the ACIT, Central Circle-41, Mumbai(“AO”) u/s.271(1)(c) of the IT Act.

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DATE: July 5, 2017 (Date of pronouncement)
DATE: July 13, 2017 (Date of publication)
AY: -
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CITATION:
S. 68 Bogus share capital: Mere fact that parties to whom the share certificates were issued and who had paid the share capital money were not traceable and did not appear before the AO in response to summons does not mean that the transaction can be treated as bogus if the documentation shows the genuineness of the transaction

The Assessing Officer added Rs.95 lakhs as income under Section 68 of the Income Tax Act only on the ground that the parties to whom the share certificates were issued and who had paid the share money had not appeared before the Assessing Officer and the summons could not be served on the addresses given as they were not traced and in respect of some of the parties who had appeared, it was observed that just before issuance of cheques, the amount was deposited in their account

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DATE: April 21, 2017 (Date of pronouncement)
DATE: May 30, 2017 (Date of publication)
AY: 2007-08
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CITATION:
S. 68 Bogus share capital: Entire law on the onus of the assessee and the department with regard to the genuineness of the share capital explained in the light of several judgements . Law on effect of not giving cross-examination to the assessee also explained

The assessee duly furnished the proof of identity like PAN, bank account details from the bank, other relevant material, genuineness of the transaction, payment through banking channel and even the source of source, therefore, the assessee has proved the conditions laid down u/s 68 of the Act. It is also noted that in spite of repeated request, the Ld. Assessing Officer did not provide opportunity to cross examine the concerned persons and even the relevant information and allegation, if any, made therein, which has been used against the assessee, was not provided to the assessee. At this stage, we add here that mere information is not enough rather it has to be substantiated with facts. The information may and may not be correct. For fastening the liability upon anybody, the Department has to provide the authenticity of the information to the person against whom such information is used. The principle of natural justice, demands that without confronting the assessee of such evidence, if any, or the information, no addition can be made. Even otherwise, as per Article-265 of the Constitution of India, only legitimate taxes has to be levied and collected

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DATE: April 17, 2017 (Date of pronouncement)
DATE: May 23, 2017 (Date of publication)
AY: 2011-12
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CITATION:
S. 68 Bogus share capital: (i) The AO cannot ignore the documentation produced by the assessee to show that the investors are genuine, (ii) A s. 132(4) statement cannot be relied upon if the assessee is not give right of cross-examination, (iii) Fact that the shareholders did not respond to s. 133(6) notices does not warrant an adverse inference, (iv) Fact that the shareholders have low income does not warrant adverse inference, (v) Assessee is not required to prove source of source

The AO doubted the genuineness of the transaction because notice u/s 133(6) could not be served upon the investors and that the assessee was directed to produce both the parties by 19.03.2014. The Ld. Counsel for the assessee however, referred to Paper Book page 157 which is the reply before the AO dated 24.03.2014 in which the assessee has provided correct and updated address of the entity as per MCA website. The AO instead of issuing fresh notice u/s 133(6) at the correct address of the investor companies merely relied upon the fact that the earlier letter under the above provision has returned unserved. Since the AO did not issue fresh notice at the correct address provided by the assessee and no coercive action has been taken for the production of investors, therefore, no adverse inference could be drawn against the assessee

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