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DATE: July 30, 2018 (Date of pronouncement)
DATE: August 3, 2018 (Date of publication)
AY: 2005-06, 2006-07, 2007-08, 2008-09, 2009-10
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CITATION:
S. 68 Bogus share capital: If copies of the share application form, share allotment Register and Bank Statements showing receipt of funds are on record and if all the shareholders have filed Affidavits declaring the fact that they are investing in the assessee-Company by issuing of cheques from their Accounts, the assessee has fulfilled the requirement of proving genuineness of the transaction, identity and creditworthiness of the shareholders/investors and addition cannot be made u/s 68

So far as the identity is concerned, we find that the persons who invested in the shares of the respondent-assessee had PAN numbers allotted to them which was made available by the respondent to the Assessing Officer. Besides, the shareholders had also filed Affidavits before the Assessing Officer pointing out that they had invested in the shares of the respondent assessee out of their own bank accounts. Copies of acknowledgement of Return of Income of the shareholders was also filed. The respondent also requested the Assessing Officer to summon the shareholders. These evidences have not been shown to be incorrect. Therefore, this objection with regard to identity of the shareholders not being established does not survive

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DATE: July 12, 2018 (Date of pronouncement)
DATE: August 3, 2018 (Date of publication)
AY: -
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S. 56(2)(viib) vs. s. 68: Any premium received by a Company, in which the public does not have substantial interest, on sale of shares, in excess of its face value, can be treated as income from other sources u/s 56(2)(viib). This is not controlled by s. 68 which provides that if the assessee does not provide a satisfactory explanation for the credit, the amount can be assessed as income. If S. 68 is applicable, and the proviso is not satisfied, then the entire amounts credited to the books would be treated as income. If satisfactory explanation is offered as to the source, then the premium paid as revealed from the books will be brought to tax as income from other sources

Any premium received by a Company on sale of shares, in excess of its face value; if the Company is not one in which the public has substantial interest, would be treated as income from other sources, as seen from Section 56(2) (viib) of the Act, which we do not think can be controlled by the provisions of Section 68 of the Act. Section 68 on the other hand, as substituted with the provisos, treats any credit in the books of accounts, even by way of allotment of shares; for which no satisfactory explanation is offered, to be liable to income-tax. Clause (viib) of Section 56(2) is triggered at the stage of computation of income itself when the share application money received, from a resident, by a Company, in which the public are not substantially interested; is above the face value. Then the aggregate consideration received for the shares as exceeds the fair market value will be included as income from other sources. However, when the resident investor is not able to explain the nature and source for the credit seen in the books of accounts of the Company or the explanation offered is not satisfactory then the entire credit would be charged to income tax for that previous year.

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DATE: June 19, 2018 (Date of pronouncement)
DATE: July 9, 2018 (Date of publication)
AY: 2006-07
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CITATION:
S. 68 HSBC Black Money: The assessee being non-resident is not liable to tax in respect of money lying in the foreign country unless the AO bring something on record to show that assessee has not fulfilled the test of taxability of non-resident under the provisions of the Act

We found that CIT(A) as dealt with the issue threadbare and after applying judicial pronouncements laid down by High Court and Supreme Court reached to the conclusion that assessee being non-resident is not liable to tax in respect of money lying in the foreign country unless AO bring something on record to show that assessee has not fulfilled the test of taxability of non-resident under the provisions of the Act. The detailed finding so recorded by CIT(A) are as per material on record and do not require any interference on our part

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DATE: June 1, 2018 (Date of pronouncement)
DATE: July 9, 2018 (Date of publication)
AY: 2003-04
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CITATION:
S. 68 HSBC Black Money: The suspicion of the AO that the deposits in the foreign bank account have Indian origin is not unfounded because the assessee used his Indian passport to open the a/c. The intent of the assessee is not above board. Matter requires investigation because the narrations in the bank accounts do not give any clue that these amounts originate from India

At the time of opening of the bank account in Geneva, the assessee was a US citizen and resident and he was holding a US passport. Still the assessee chose to open the account in HSBC bank account in Geneva by using the address and proof thereof by way of his Indian passport which was no longer valid when he has accepted the US nationality by surrendering Indian citizenship. Here the assessee instead of surrendering his invalid Indian passport has used it to open a bank account in HSBC bank, Geneva. Further, the assessee is not responding that this bank account has been disclosed to the US tax authorities. In such circumstances, the suspicion that the deposits in this bank account have Indian origin is not unfounded

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DATE: June 27, 2018 (Date of pronouncement)
DATE: July 5, 2018 (Date of publication)
AY: -
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CITATION:
S. 68 Bogus share capital: If the alleged share applicants do not appear before the AO pursuant to the s. 131 summons and the documentation is inadequate, it is a "completely bogus claim". The assessee cannot argue that the AO should have made inquiries from the AO of the share applicants as to their credit-worthiness

The appellant-assessee has referred to a judgment of this Court reported at 114 ITR 689 for the proposition that upon the identity of the person who has put in the money being established by the assessee, the onus is on the Revenue to discredit the explanation offered in terms of Section 68 of the Act. In the present case, there was no plausible explanation that was furnished by the assessee. At any rate, the identities of the alleged share applicants could not be established and the documents of the alleged share applicants carried by the assessee before the Assessing Officer did not reveal the investments that the assessee claimed such alleged applicants had made in the assessee

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DATE: June 27, 2018 (Date of pronouncement)
DATE: June 30, 2018 (Date of publication)
AY: 2014-15
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CITATION:
S. 68 Bogus Capital Gains from Penny Stocks: 31000% increase in value of shares over 2 years is highly suspicious but cannot take the place of evidence. The addition cannot be made based on generalizations. Evidence collected from third parties cannot be used against the assessee without giving him a copy & an opportunity to rebut the same

The AO further relies on the shop increase of 31000% of the value of shares over the period of 2 years. Though this is highly suspicious, it cannot take the place of evidence. The Hon’ble Supreme Court has stated that suspicion however strong cannot be the basis for making an addition. The evidence produced by the assessee listed above proves his case and the AO could not controvert the same by bringing on record any evidence. The evidence said to have been collected by the DIT (INV.), Kolkata and the report is not produced before this Bench

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DATE: June 25, 2018 (Date of pronouncement)
DATE: June 27, 2018 (Date of publication)
AY: 2009-10
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CITATION:
S. 68 Bogus share capital: If the AO has remained silent with folded hands and has not made any independent inquiry from the concerned AO of share holder company and has not controverted the evidence produced by the assessee, that itself is sufficient to knock off the addition made. The fact that there is no personal appearance from director of said cash creditor (share holder) does not mean that an adverse inference u/s 68 can be drawn by the AO without the AO discharging the secondary burden lying upon him (All imp judgements referred)

All the relevant and necessary documents required to establish the subject transaction of share capital received are brought on records before AO and Ld CIT(A) and have totally remained uncontroverted. Specially the fact of positive response made by share holder in response to enquiry made u/s 131 and confirmation of subject investment therein by share holder to AO clinches the issue in favor of assessee. Moreover the share holder company having handsome net worth and assessed u/s 153C/153A for subject period also supports assessee’s case. Further AO has remained sited with folded hands and has not made any independent enquiry from concerned AO of share holder company which itself is sufficient to knock off the addition made

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DATE: May 25, 2018 (Date of pronouncement)
DATE: June 21, 2018 (Date of publication)
AY: 2012-13
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CITATION:
'On Money': The fact that the assessee has sold flats at an undervaluation does not mean that he has understated the consideration and earned undisclosed 'on money'. The mere presumption that excess price could have been charged is not a ground for coming to the conclusion that the assessee did charge a higher price. The burden of proving such understatement or concealment is on the Revenue (All important judgements considered)

The case law relied by Assessing Officer in ITO Vs Diamond Investment and Properties ITA No. 5537/M/2009 is not applicable on the facts of the present case. In case of Diamond Investment and Properties (supra), the flats were sold to the related parties was much lower than the price charged from the other parties. However, there is no allegation of related parties’ transaction in the present case. The coordinate bench of Tribunal Neelkamal Realtor & Erectors India (P0 Ltd (2013) 38 taxmann.com 195 held that when the assessee offered an explanation for charging lower price in respect of some of flats sold by it and Assessing Officer without controverting such explanation made addition to income of assessee by applying rate of another flat sold by it, Assessing Officer was not justified in his action. Similar view was taken by another bench of Tribunal in ACIT Vs Rustom Soil Sethna

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DATE: June 12, 2018 (Date of pronouncement)
DATE: June 20, 2018 (Date of publication)
AY: 2011-12
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CITATION:
S. 68: Addition of undisclosed income cannot be made on the basis of (a) entries in dairy found during survey & (b) admission of director in s. 133A survey if assessee has filed a retraction and alleged that the entries/ statement were recorded under pressure. A s. 133A statement is merely information simplicitor and not evidence per se. Addition cannot be sustained if the Dept has not investigated the matter and find material to support the addition

The Tribunal in its detailed order noted that the directors during the course of survey, had retracted the statements by filing affidavits. They also claimed that the diaries were created under the pressure of the survey party. The Tribunal noted decision of the Supreme Court in case of Paul Mathews & Sons v Commissioner Of Income Tax reported in [2003] 263 ITR 101 (Ker) and of Supreme Court in case of The Commissioner Of Income Tax vs M/S.S.Khader Khan Son reported in (2012) 25 taxmann.com 413 (Supreme Court), in which, it was highlighted that the statement under section 133A of the Act was not on oath and would have at best a coroborative value

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DATE: June 14, 2018 (Date of pronouncement)
DATE: June 15, 2018 (Date of publication)
AY: 2012-13
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CITATION:
S. 68 Bogus share premium: Addition cannot be made on the ground that the directors of the share subscribers did not turn up before the AO. The assessee can be required to prove only such facts which are in his knowledge. Creditworthiness of the subscriber cannot be disputed by the AO of the assessee but by the AO of the subscriber. If the assessee has discharged its onus to prove identity, creditworthiness & genuineness of the share applicants, the onus shifts to AO to disprove the documents furnished by assessee. In absence of any investigation, much less gathering of evidence by the AO, an addition cannot be sustained merely based on inferences drawn by circumstance (all judgements considered)

To sum up section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source shall be assessed as its undisclosed income. In the facts of the present case, both the nature & source of the share application received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO’s record. Accordingly all the three conditions as required u/s. 68 of the Act i.e. the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO is based on conjectures and surmises cannot be justified

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