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DATE: February 4, 2020 (Date of pronouncement)
DATE: February 12, 2020 (Date of publication)
AY: -
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CITATION:
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

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DATE: October 23, 2019 (Date of pronouncement)
DATE: December 28, 2019 (Date of publication)
AY: 2012-13
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CITATION:
S. 147 Reopening for taxing bogus share application money: One is known by the company one keeps. As the investors have dubious character & are known to have engaged in the business of providing accommodation entries., the genuineness of their transactions with the assessee has come under serious cloud, giving rise to reasonable belief in the mind of the AO that the assessee may have indulged in a dubious transaction to launder its undisclosed income. The fact that the assessee produced evidence during assessment is neither here nor there (NRA Iron & Steel 412 ITR 161 (SC) followed). Costs of Rs. 2L imposed on assessee for wasting Court's time

It is true that during the course of the assessment proceedings, the Assessing Officer had required the assessee to disclose information pertaining to the share applicants, the amounts and their source, the mode in which payment was made and confirmatory letters together with PAN details. But it is also trite law that for such cases three important aspects have to be considered by the Assessing Officer, namely (i) the identity of the investors; (ii) the credit worthiness of the applicants; and (iii) the genuineness of the transaction. Ex-facie, the order of assessment which was passed by the Assessing Officer under Section 143(3) does not indicate that the Assessing Officer had brought his mind to bear on either of these aspects

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DATE: December 12, 2019 (Date of pronouncement)
DATE: December 21, 2019 (Date of publication)
AY: 2012-13
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CITATION:
S. 147 reopening for bogus purchases & accommodation entries: The omission of the AO to make an assertion in the reasons that there was a failure to disclose fully and truly all material facts necessary for the assessment is sufficient to set aside the reassessment notice. Also, a notice issued on change of opinion is bad

The reasons also refer to a decision of the Supreme Court in the case of M/s.N.K.Proteins Ltd. (2017-TIOL-23-SC-IT v. DCIT ). Even this decision was before the Assessing Officer in the proceeding pursuant to first reopening notice. The Petitioner, along with its objections, placed explanatory note as to how the said decision of the Supreme Court in M/s.N.K.Proteins did not apply to the facts of the case. Therefore, this aspect was also considered when the proceeding under the first reopening notice was conducted

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DATE: December 6, 2019 (Date of pronouncement)
DATE: December 21, 2019 (Date of publication)
AY: 2008-09
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CITATION:
S. 68/ 69C: In case of bogus purchases where sales are accepted, the addition can be made only to the extent of difference between the GP declared by the assessee on normal purchases vis a vis bogus purchases. The AO is directed to restrict the addition to the extent of lower GP declared by the assessee in respect of bogus purchases as compared to G.P. on normal purchases

It is clear from the above decisions that in case of bogus purchases where sales are accepted, the addition is required to be made only to the extent of difference between the GP declared by the assessee on normal purchases vis a vis bogus purchases

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DATE: October 31, 2019 (Date of pronouncement)
DATE: November 9, 2019 (Date of publication)
AY: 2012-13 to 2017-18
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CITATION:
S. 68/ 69C: Bogus share capital + Bogus purchases: Photocopies of blank share transfer forms, blank signed receipts etc necessary for transfer of shares found with assessee are not admissible as evidence u/s 61 of Evidence Act and not incriminating in nature. On merits, all investors are assessed & have filed confirmations with trail of funds. AO did not make further inquiry into the documentary evidences or verify the trail of source of funds. As regards bogus purchases, the AO cannot blow hot & cold by disallowing the purchases from a party as bogus while treating sales to same party as genuine

Assessee produced sufficient documentary evidences before the A.O. to prove that money routed from the assessee itself which came back to the assessee in the form of share capital/premium, therefore, assessee proved identity of the Investors, their creditworthiness and genuineness of the transaction in the matter and as such have been able to prove ingredients of Section 68 of the I.T. Act. The A.O. however did not make any further enquiry on the documentary evidences filed by the assessee. The A.O. did not verify the trail of the source of funds received by assessee through various entities as explained above. The A.O. thus, failed to conduct scrutiny of the documents at assessment stage and merely suspected the transaction between the Investor Companies and the assessee company despite the fact that in the deviation report the A.O. expressed doubts in making addition into the matter. It may also be noted here that no cash have been reported to have been deposited in the accounts of the assessee, the Investor Companies and other related parties

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DATE: October 16, 2019 (Date of pronouncement)
DATE: October 25, 2019 (Date of publication)
AY: -
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CITATION:
Undisclosed income/ expenditure: A letter written in refutal of allegations contained in a news items with a without-prejudice offer cannot be treated as admission of non-disclosure or as an unconditional offer to pay tax. Also, the disclosure is by the USA Co and not by the assessee. It is not the case of the Dept that the amount has been received in the accounts of the assessee or spent for and on behalf of the assessee so as to be treated as undisclosed income of the assessee

In our opinion, such communication(s) cannot be treated as admission of non-disclosure as such. What is significant to note is that in the present case, the disclosure is attributed to Goodyear Tyre & Rubber Co., USA, filed by it in the proceedings in USA; and not by the assessee as such. It is not the case of the Department that the amount referred to in the said disclosure has been received in the accounts of the assessee or spent for and on behalf of the appellant – assessee under instruction, so as to be treated as undisclosed income of the appellant.

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COURT:
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DATE: August 21, 2019 (Date of pronouncement)
DATE: October 23, 2019 (Date of publication)
AY: -
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CITATION:
S. 68/69 Bogus Purchases: Disallowance cannot be made solely on third party information without subjecting it to further scrutiny. The assessee has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return. The AO has also not provided a copy of the statements to the assessee, thus denying it opportunity of cross examination

The entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Returnthe entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return

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