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DATE: October 12, 2018 (Date of pronouncement)
DATE: October 16, 2018 (Date of publication)
AY: 2008-09
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CITATION:
S. 68 Bogus share capital: If (a) the assessee has furnished the Name, Address, PAN no and Share Application Form to prove that the shares were allotted to the applicants and (b) the bank statement show that money was received through banking channels and there were no immediate withdrawals to suggest that the share application amounts have been returned back to these parties in cash, it means the assessee has discharged the primary onus cast upon it to prove the identity, capacity and genuineness of transactions

The assessee has furnished the Name, Address, PAN no and Share Application Form to prove that the shares were allotted to the applicants. The assessee has also furnished its bank statement to show that the money was received through banking channels and there were no immediate withdrawals from the banks which shows that the share application amounts have not been returned back to these parties in cash. Thus, the assessee has discharged the primary onus cast upon it to prove the identity, capacity and genuineness of transactions. We also find that the CIT(A) provided opportunity to assessee to cross examine Shri Mukesh Choksi by sending the matter to AO for remand report. During remand proceeding, the AO provided opportunity to assessee to cross examine Shri Mukesh Choksi and who in turn during cross examination admitted having invested in assessee company by these two concerns

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DATE: October 1, 2018 (Date of pronouncement)
DATE: October 10, 2018 (Date of publication)
AY: 2004-05
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CITATION:
S. 68 Bogus share capital: Failure by the AO to offer cross-examination of the persons whose statements are relied upon means that no adverse inference can be drawn against the assessee. Dept's plea for a remand is not acceptable if the assessee has discharged primary onus (Nova Promoters 342 ITR 169 (Del) & Jansampark Advertising 375 ITR 373 (Del) distinguished). Paradise Inland 98 CCH 0417 followed

The assessee was supplied with the seized material at the fag end of the assessment proceedings and assessee sought opportunity to cross examine these persons for rebuttal of the allegation. However, the AO did not provide any opportunity to the assessee to cross examine these persons on behalf of assessee to find out the truth. Therefore, such statements cannot be read in evidence against the assessee. We rely upon decision of the Supreme Court in the case of Kishanchand Chelaram 125 ITR 713 (SC) and of Bombay High Court in case of Paradise Inland Shipping Pvt. Ltd

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DATE: September 12, 2018 (Date of pronouncement)
DATE: September 22, 2018 (Date of publication)
AY: -
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CITATION:
S. 68 Cash Credits: In order to avail of the theory of "peak credit", the assessee has to make a clean breast of all facts. He has to explain each of the sources of the deposits and the corresponding destination of the payment without squaring them off. The ITAT cannot proceed merely on the basis of accountancy and overlook the settled legal position

The legal position in respect of an accommodation entry provider seeking the benefit of ‘peak credit’ appears to have been totally overlooked by the ITAT in the present case. Indeed, if the Assessee as a self-confessed accommodation entry provider wanted to avail the benefit of the ‘peak credit’, he had to make a clean breast of all the facts within his knowledge concerning the credit entries in the accounts. He has to explain with sufficient detail the source of all the deposits in his accounts as well as the corresponding destination of all payments from the accounts. The Assessee should be able to show that money has been transferred through banking channels from the bank account of creditors to the bank account of the Assessee, the identity of the creditors and that the money paid from the accounts of the Assessee has returned to the bank accounts of the creditors. The Assessee has to discharge the primary onus of disclosure in this regard

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DATE: August 26, 2008 (Date of pronouncement)
DATE: September 15, 2018 (Date of publication)
AY: -
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CITATION:
S. 68 Bogus Capital Gains From Penny Stocks: The share transaction is genuine because it is supported by contract notes, bills, were carried out through recognized stockbroker of the Stock Exchange and all payments made to, and received from, the stockbroker, were through account payee instruments. A transaction fully supported by documentary evidences cannot be brushed aside on suspicion and surmises

It appears that the share loss and the whole transactions were supported by contract notes, bills and were carried out through recognized stockbroker of the Calcutta Stock Exchange and all the payments made to the stockbroker and all the payments received from stockbroker through account payee instruments, which were also filed in accordance with the assessment

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DATE: August 29, 2018 (Date of pronouncement)
DATE: September 13, 2018 (Date of publication)
AY: 2014-15
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CITATION:
S. 68 Bogus capital gains from penny stocks: Reliance by AO on statements recorded by the Investigation Wing to conclude that the capital gains are bogus without giving an opportunity of cross examination is a complete violation of principles of natural justice as held in CCE Vs Andaman Timber Industries 127 DTR 241(SC). The AO has not controverted the evidence of purchase bills, payment of consideration through bank, DEMAT account, allotment of amalgamated shares, sale of shares through stock exchange at prevailing price, payment of STT etc

The Assessing Officer has not brought any material on record to controvert the fact duly established by the supporting evidence of purchase bills, payment of consideration through bank, dematerialization of shares in the DEMAT account, allotment of the shares amalgamated new entity in lieu of the earlier two companies of equal number of shares. Sale of shares from the DEMAT account through stock exchange and at the prevailing price as on the date of sale and further payment of STT on the transaction of sale has been duly established. In absence of any contrary fact, the mere reliance by the Assessing Officer on the report of Investigation Wing, Kolkata is not sufficient to establish the fact that the transaction is bogus.

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DATE: September 11, 2017 (Date of pronouncement)
DATE: September 8, 2018 (Date of publication)
AY: -
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CITATION:
Bogus Capital Gains from Penny Stocks: If the transaction is supported by documents like contract notes, demat statements etc and is routed through the stock exchange and if the payments are by account-payee cheques and there is no evidence that the cash has gone back to the assessee's account, it has to be treated as a genuine transaction and cannot be assessed as unexplained credit

When the relevant documents are available the fact of transactions entered into cannot be denied simply on the ground that in his statement the appellant denied having made any transactions in shares. The payments and receipts are made through a/c payee cheques and the transactions are routed through Kolkata Stock Exchange. There is no evidence that the cash has gone back in appellants’s account. Prima facie the transaction which are supported by documents appear to be genuine transactions

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DATE: June 23, 2018 (Date of pronouncement)
DATE: September 3, 2018 (Date of publication)
AY: 2009-10
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CITATION:
S. 56(2)(viib), 68, 147 Bogus share capital/ premium: Entire law on whether alleged excessive premium charged for allottment of shares and alleged inability to prove genuineness of transaction can be assessed as unexplained cash credit explained in the light of High Court judgements

It was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders, i.e., they are bogus. The Apex Court in a case in this context to the preamended section 68 has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Incometax Officer to proceed by reopening the assessment of such shareholder and assessing them to tax in accordance with law. It does not entitle the revenue to add the same to the assessee’s income as unexplained cash credit

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DATE: August 23, 2018 (Date of pronouncement)
DATE: August 30, 2018 (Date of publication)
AY: 2005-06
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CITATION:
S. 68 Bogus share capital: A private limited co cannot say that it has no clue about the subscribers to its share capital. The genuineness of the transaction has to be determined by ground realities and not by documents like PAN cards, board resolutions, share certificates etc. Even shell cos have these documents. If the assessee is not able to produce the brains behind these companies and the documents with respect to their financials, the transaction cannot be regarded as genuine

As the things stand now, genuineness of transactions is to be examined in the light of the prevailing ground realities, and that is precisely what we have done. We are of the considered view that there is nothing to establish genuineness of the share subscription transactions on the facts of this case. The assessee does not know anything about these companies or these persons. The assessee has no documents about their financial activities or their balance sheets. The assessee is a private limited company and these entities could not have therefore been rank outsiders like walk in investors and yet the assessee does not throw enough light on these entities. A lot of emphasis is placed on bank transactions, on PAN cards and on board resolutions but all these factors have to be present in the cases of shell companies involved in money laundering as well. Nothing, therefore, turned on these documents so far as genuineness aspect is concerned. It is also a settled legal position that the onus of the assessee, of explaining nature and source of credit, does not get discharged merely by filing confirmatory letters, or demonstrating that the transactions are done through the banking channels or even by filing the income tax assessment particulars

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DATE: August 6, 2018 (Date of pronouncement)
DATE: August 21, 2018 (Date of publication)
AY: 2012-13
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CITATION:
S. 68: If no cash is involved in the transaction of allotment of shares and it is a case of book adjustment, provisions of s. 68 treating it as unexplained cash credit are not attracted. Even if it were to be assumed that the subscribers to the increased share capital are not genuine, the amount of share capital would in no circumstances be regard as undisclosed income of the company

Counsel argued, and rightly, that when there was no cash involved in the transaction of allotment of shares, provisions of Section 68 of the said Act treating it as unexplained cash credit are not attracted

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DATE: August 10, 2018 (Date of pronouncement)
DATE: August 15, 2018 (Date of publication)
AY: 2014-15
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CITATION:
S. 68/ 56(2)(viib)/ Rule 11 UA(2)(a): Law on whether share capital/ share premium received by a Company from investors can be assessed as 'unexplained cash credit' explained in the light of judgements of the Courts and Tribunal (All imp judgements referred)

The A.O. failed to conduct scrutiny of the documents at assessment stage and merely suspected the transactions in question on the irrelevant reasons. The A.O. did not make any enquiry from the Banker of the Investor and Income Tax record of the Investor Company. The valuation report filed by the assessee support explanation of assessee that shares were issued at premium which were below the fair market value per share of Rs.1221. The assessee, thus, proved the identity of the Investor, its creditworthiness and genuineness of the transaction in the matter. No material has been produced before us to rebut the explanation of assessee. We, therefore, did not find any justification to sustain the addition

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