Search Results For: 68


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DATE: June 29, 2020 (Date of pronouncement)
DATE: July 3, 2020 (Date of publication)
AY: 2011-12
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S. 10(38) Bogus capital gains from penny stocks: The assessee has produced contract notes, demat statements etc & discharged the onus of proving that he bought & sold the shares. The AO has only relied upon the report of the investigation wing alleging the transaction to be bogus. He ought to have examined a number of issues (which are enumerated in the order) and shown that the transaction is bogus. The capital gains are genuine and exempt from tax

All these information could have been obtained by the assessing officer by issue of 133 (6) notice to the depository as well as to the stock exchange and the respective broker. However, despite having the basic information available with the assessing officer he has chosen to sit and become a mute spectator. When the assessee has provided the complete information, which would have been available with the assessee in the documentary format, the role of the assessing officer starts as an investigator of the information furnished by the assessee, when he recorded the reason, he formed a prima facie reason to believe that there is an escapement of income. He should have converted his reason into the fact by making an investigation on the information provided by the assessee. For the reasons best known to the assessing officer, he did not do anything on the information provided by the assessee. He merely made the addition holding that assessee has not shown justification for purchase of shares at a very high price.

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DATE: June 12, 2020 (Date of pronouncement)
DATE: June 13, 2020 (Date of publication)
AY: 2003-04
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S. 68 Bogus Cash Credits: In the case of an assessee engaged in providing 'accommodation entries', the entire deposits cannot be assessed as unexplained cash credits. Only the commission (0.15%) earned in providing the accommodation entries can be assessed as income (PCIT vs. NRA Iron and Steel (2019) 103 Taxmann.com 48 (SC) distinguished)

In so far the decision of the Supreme Court in NRA Iron and Steel Pvt. Ltd. (supra) is concerned, the same is not attracted in the present case in as much as facts of the present case are clearly distinguishable. Unlike the present case, the assessee in NRA Iron and Steel Pvt. Ltd. (supra) claimed the cash credits as its income. However, it was found that the creditors had meagre or nil income which did not justify investment of such huge sums of money in the assessee. The field enquiry conducted by the Assessing Officer revealed that in several cases the investor companies were non-existent. Thus, it was held that the assessee had failed to discharge the onus which lay on it to establish the identity of the investor companies and the credit worthiness of the investor companies. In such circumstances, the entire transaction was found to be bogus. But as already discussed in the preceding paragraphs, assessee never claimed the cash credits as its income. It admitted its business was to provide accommodation entries. In return for the cash credits it used to issue cheques to the customers / beneficiaries for slightly lesser amounts, the balance being its commission. Moreover, the cash credits had been accounted for in the respective assessment of the beneficiaries.

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DATE: April 24, 2020 (Date of pronouncement)
DATE: April 24, 2020 (Date of publication)
AY: 1998-99
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S. 68 Bogus Purchases: Though the assessee failed to prove the genuineness of the purchases during the assessment proceedings, he filed affidavits and statements of the dealers in penalty proceedings. That evidence fully supports the claim of the assessee. The CIT (A) accepted the explanation of the assessee and recorded a clear finding of fact that there was no concealment of income or furnishing of any inaccurate particulars of income by the assessee. Consequently, the quantum addition will also have to be deleted

Indeed, at the time of assessment, the appellant/assessee had failed to produce any explanation or evidence in support of the entries regarding purchases made from unregistered dealers. In the penalty proceedings, however, the appellant/assessee produced affidavits of 13 unregistered dealers out of whom 12 were examined by the Officer. The Officer recorded their statements and did not find any infirmity therein including about their credentials. The dealers stood by the assertion made by the appellant/assessee about the purchases on credit from them; and which explanation has been accepted by the appellate authority in paragraphs 17 and 19 of the order dated 13.1.2011. 15. To put it differently, the factual basis on which the Officer formed his opinion in the assessment order dated 30.11.2000 (for assessment year 19981999), in regard to addition of Rs.2,26,000/( Rupees two lakhs twenty six thousand only), stands dispelled by the affidavits and statements of the concerned unregistered dealers in penalty proceedings. That evidence fully supports the claim of the appellant/assessee.

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DATE: February 14, 2020 (Date of pronouncement)
DATE: February 24, 2020 (Date of publication)
AY: 2008-09
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S. 68 Bogus Cash Credits: The expression “any previous year” does not mean all previous years but the previous year in relation to the assessment year concerned. If the cash credits are credited in the FY 2006-07, it cannot be brought to tax in a later AY.

The crucial phrase in Section 68 of the IT Act, which provides that the sum so credited in the books and which is not sufficiently explained, may be charged to the income tax as income of the assessee of “that previous year” also lends support to the contentions of Dr. Daniel

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DATE: February 13, 2020 (Date of pronouncement)
DATE: February 22, 2020 (Date of publication)
AY: 2012-13
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S. 147 Reopening for Bogus Share Capital u/s 68: The parent co does not have sufficient funds to invest such huge amounts in Indian subsidiaries. The funds are routed through a web of entities spread across various jurisdictions, mostly in tax havens. The investments so made, are required to be investigated and the credit worthiness of the investing company is in jeopardy, in view of the information received from the investigation wing. This exercise can be undertaken during the re-reassessment proceedings to finally determine if the amounts represent undisclosed income of the assessee which is required to be taxed in its hands. At the stage of re-opening, only a reason to believe should exist with regard to escapement of income. Definite conclusion would be drawn after raising queries upon the assessee in the light of s. 68 of the Act (All imp verdicts referred)

Whilst it is the settled position in law that the sanctioning authority is required to apply his mind and the grant of approval must not be made in a mechanical manner, however, as noted by the Division Bench of the Calcutta High Court in Prem Chand Shaw (Jaiswal) v Assistant Commissioner, Circle-38, Kolkata [2016] 67 taxmann.com 339 (Calcutta), the mere fact that the sanctioning authority did not record his satisfaction in so many words would not render invalid the sanction granted under section 151(2) when the reasons on the basis on the basis of which sanction was sought could not be assailed and even an appellate authority is not required to give reasons when it agrees with the finding unless statute or rules so requires

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DATE: February 10, 2020 (Date of pronouncement)
DATE: February 15, 2020 (Date of publication)
AY: 2010-11
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CITATION:
S. 68 Bogus Purchases: Though the assessee has not proved the genuineness of the purchases and sales, yet if the AO has accepted the sales, the entire purchases cannot be disallowed. Only the profit element embedded in purchases would be subjected to tax and not the entire amount (Bholanath Polyfab 355 ITR 290 (Guj) followed, Kaveri Rice Mills 157 Taxman 376 (All) & La Medica 250 ITR 575 (Del) referred)

Having found that the purchases corresponded to sales which were reflected in the returns of the assessee in sales tax proceedings and in addition, were also recorded in the books of accounts with payments made through account payee cheques, the purchases were accepted by the two appellate authorities and following judicial dictum decided to add the profit percentage on such purchases to the income of the assessee. While the CIT (A) had assessed profit at 2% which was added to the income of the assessee, Tribunal made further addition of 3% profit, thereby protecting the interest of the Revenue

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DATE: February 4, 2020 (Date of pronouncement)
DATE: February 12, 2020 (Date of publication)
AY: -
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S. 68 Bogus share capital/ premium: Application seeking open court oral hearing is rejected. There is no substance in the Review Petition seeking review of PCIT vs. NRA Iron & Steel Pvt. Ltd (2019) 412 ITR 161 (SC) and the same is dismissed

We have gone through the contents in the Review Petition and do not find any substance in the submissions raised therein. Consequently, this Review Petition is dismissed

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DATE: January 29, 2020 (Date of pronouncement)
DATE: February 5, 2020 (Date of publication)
AY: 2010-11
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CITATION:
S. 68 Bogus share capital: The identity of the investors were not in doubt. The assessee had furnished PAN, copies of the income tax returns of the investors as well as copy of the bank accounts in which the share application money was deposited in order to prove genuineness of the transactions. In so far credit worthiness of the creditors were concerned, the bank accounts of the investors showed that they had funds to make payments for share application money. The assessee was not required to prove source of the source. Nonetheless, the inquiries through the investigation wing of the department at Kolkata proved source of the source (PCIT vs. NRA Iron & Steel 412 ITR 161 (SC) distinguished)

In NRA Iron & Steel (P) Ltd (supra), the Assessing Officer had made independent and detailed inquiry including survey of the investor companies. The field report revealed that the shareholders were either non-existent or lacked credit-worthiness. It is in these circumstances, Supreme Court held that the onus to establish identity of the investor companies was not discharged by the assessee. The aforesaid decision is, therefore, clearly distinguishable on facts of the present case

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DATE: January 22, 2020 (Date of pronouncement)
DATE: February 5, 2020 (Date of publication)
AY: 2010-11
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CITATION:
S. 68 Cash Credits: The assessee is only required to explain the source of the credit. There is no requirement under the law to explain the source of the source. The fact that the source of the source is suspect and that the creditor had no regular source of income to justify the advancement of the credit to the assessee does not mean that an addition can be made in the hands of the assessee (Veedhata Tower 403 ITR 415 (Bom) followed)

Section 68 of the Act has received considerable attention of the courts. It has been held that it is necessary for an assessee to prove prima facie the transaction which results in a cash credit in his books of account. Such proof would include proof of identity of the creditor, capacity of such creditor to advance the money and lastly, genuineness of the transaction. Thus, in order to establish receipt of credit in cash, as per requirement of section 68, the assessee has to explain or satisfy three conditions, namely : (i) identity of the creditor; (ii) genuineness of the transaction; and (iii) credit-worthiness of the creditor

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DATE: January 8, 2020 (Date of pronouncement)
DATE: January 18, 2020 (Date of publication)
AY: 2009-10
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CITATION:
S. 68/ 69C Bogus purchases: Even if the purchases made by the assessee are to be treated as bogus, it does not mean that entire amount can be disallowed. As the AO did not dispute the consumption of the raw materials and completion of work, only a percentage of net profit on total turnover can be estimated (Mohommad Haji Adam & Paramshakti Distributors followed)

Assuming that the purchasers from whom the purchases were made were bogus, in view of the finding of fact that the material was consumed, the question would be of extending the percentage of net profit on total turnover. This would be a matter of calculations by the concerned authority