Income Tax Appellate Tribunal - Delhi
Prem Castings (P) Ltd., Muzaffarnagar vs Department Of Income Tax on 11 September, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'F' : NEW DELHI)
BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER
and
SHRI A.T. VARKEY, JUDICIAL MEMBER
ITA No.3401/Del./2011
(ASSESSMENT YEAR : 2007-08)
ACIT, Circle 1, vs. M/s. Prem Castings (P) Ltd.,P
Muzaffarnagar. Meerut Road,
Muzaffarnagar.
(PAN : AACCP3753E)
(APPELLANT) (RESPONDENT)
ASSESSEE BY : Shri V.K. Tulsian, FCA
REVENUE BY : Shri Vikram Sahay, Senior DR
Date of Hearing : 16.06.2015
Date of Pronouncement : 11.09.2015
ORDER
PER A.T. VARKEY, JUDICIAL MEMBER :
This appeal is filed by the Revenue against the order of the Commissioner of Income-tax (Appeals), Muzaffarnagar dated 17.03.2011 for the assessment year 2007-08.
2. The grounds of appeal taken by the revenue read as under :-
"1. On the facts in the circumstances of the case the CIT(A) has erred in law in deleting the addition of Rs.3,46,00,000/- made by the Assessing Officer under section 68 of I.T. Act, 1961 as unexplained share application money, credited in the books of account without appreciating full fact of the case and wrongly relying upon the decision of various 2 ITA No.3401/Del/2011 courts, one of them being M/s Lovely Exports (P) Ltd reported in 216 CTR 195, while in the present case identity of the share applicants has been amply disproved by the Assessing Officer through Inspector's report that no share applicant ever existed at the given addresses by assessee, adverse report of handwriting expert, non AIS verification, information from Bank that no Bank Accounts of share applicants existed in their branches etc and as such the orders in case of M/s Lovely Exports (P) Ltd, reported in 216 CTR 195 and others are not applicable in this case.
2. On the facts and in the circumstances of the case, the CIT (A) has erred in law in deleting the addition of Rs.3,46,00,000/- made by the Assessing Officer under section 68 of I.T. Act, 1961 as unexplained share application money, credited in the books of account ignoring the decision of Hon'ble Apex Court in the case Sumati Dayal Vs CIT (214 ITR-801) and Hon'ble High Court of Chhattisgarh in the case of Kushal Prased Manhar Vs CIT, {(2010) 236-CIT -192)}, without appreciating the full facts of the case.
3. On the facts and in the circumstances of the case, the CIT (A) has erred in law in deleting the addition of Rs.3,46,00,000/- made by the Assessing Officer under section 68 of I.T. Act, 1961 as unexplained share application money, credited in the books of account without appreciating the full facts of the case and by ignoring the judicial pronouncements reported in the following cases:-
a. Shree Lekha Banarjee Vs. CIT, 49 ITR 112 (SC) b. Ram Lal Agarwal Vs CIT, 280 ITR 547 (Alld) c. ITO Vs. Rai Chand Kothari (HUF) 39 TTJ(Tribunal) d. Shanker Inds. Vs. CIT, 114 ITR 689 (Cal) e. Prakash Textiles Agency Vs. CIT, 121 ITR 89 f. C. Kant & Co. Vs CIT, 126 ITR 63 (Cal)
4. The order of the CIT (A) be set aside and that of AO be restored."
3. The assessee is a private limited company deriving income from manufacture and sale of iron and steel products. The return of income was filed on 31.10.2007 declaring NIL income. However, the company had paid taxes as per provisions of Section 115JB of the Income-tax Act, 1961 (hereinafter 'the Act') on book profit shown at Rs.21,77,195/-. The assessee's case was initially selected for 3 ITA No.3401/Del/2011 scrutiny under the jurisdiction of ACIT, Circle-2, Meerut. But the assessee requested vide letter dated 23.09.2008 to transfer the scrutiny proceedings for the relevant year to ACIT, Circle-1, Muzaffarnagar and the case was transferred to ACIT, Circle-1, Muzaffarnagar on 22.07.2009 as the jurisdiction of the case was with him. Subsequently notices u/s 143(2) & 115WE(2) and 142 (1) of the Act were issued on 04.08.2009 along with a questionnaire wherein the assessee was asked for certain details, which were duly served on the assessee on 07.08.2009. In response to these notices, the Assessing Officer observes that assessee filed certain details/ information and that too in bits & pieces. The last reply in respect of the above mentioned 142 (1) notice was submitted by the assessee on 16.11.2009 and this reply was pertaining to query number-31 which was about Share Capital introduced by the assessee. The query number-31 reads as under :-
"Please furnish complete names & addresses of the share capital subscribers with their assessment particular showing sources of income, mode of payment of share application money, copies of share certificates etc. Also prove genuineness, creditworthiness and identity."
4. The assessee filed the reply by stating that the assessee company had subscribed share capital of Rs.3,92.00,000/- during the A.Y. 2007-08 out of which Rs.46,00,000/- were received as share application in earlier year and produced the list of persons to whom the share capital was allotted along with amount of share application money and date of transaction.
5. The Assessing Officer has taken note of the fact that the assessee had been delaying filing of reply to the queries for details of share capital and answer was given only after a gap of three (3) months and nine (9) days knowing very well that the instant case was getting time barred on 31-12-2009; and that there was only 31 working days remaining with him for completing the investigation. So, within 31 4 ITA No.3401/Del/2011 working days, the AO, had to cross-check the details furnished by the assessee, and confront the assessee, if need be, with the results of the investigation and thus facilitate completion of the assessment by following the process of natural justice and provisions of law. To demonstrate the conduct of the assessee after issuance of notice on 04.08.2009, the Assessing Officer had given all the details about the number of opportunities granted by him to the assessee to comply with the queries posed to it; and to demonstrate the delaying tactics adopted by the assessee in Table-1 at page 2 of his order, from which it is discernible that Assessing Officer after receiving the documents pertaining to this case on 03.08.2009, on next day i.e. 04.08.2009 issued statutory notices and gave as much as eight (8) opportunities within an interval of three months and nine days to produce the details and supporting documents as called for by the Assessing Officer to complete the assessment u/s 143 (3) of the Act. After going through the written submissions filed by the assessee in which the names of the alleged investors, their addresses, PAN, date of transactions involving share application money and amount of share application money in each case, the Assessing Officer made the investigation initially within the limited time i.e. 31 working days as under :
(i) The Inspector of the department was sent to Delhi to serve notice u/s 133 (6) at 9 of the randomly selected addresses of the investors out of total 39. Moreover 9 notices U/s 133 (6) were sent to the claimed investors at the given addresses.
(ii) An independent handwriting expert was given assignments of going through the signatures of the alleged investors on the documents supplied by the assessee.
(iii) All the PANs of the alleged investors, as provided by the assessee, were checked in Assessee Information System (AIS), an exhaustive database of all assesses with the Income Tax Department.5 ITA No.3401/Del/2011
6. After going through the results of investigations on the above mentioned lines, the Assessing Officer observed that the same are against the genuineness of share application money transactions and created very serious doubts about the identity and creditworthiness of the share application money. The Assessing Officer has discussed the results of these investigations, in brief, at pages 3 to 14 of his order, which includes scanned copies of the Inspector reports who was entrusted to serve notice on nine (9) shareholders in the respective addresses furnished by the assessee which states that there is no such share applicants/investors had been ever resided or functional from that addresses. After taking note of the hand-writing experts opinion that signature on affidavits and ITRs don't match and the search in AIS data base of PAN yielding negative results, it is seen thereafter that the Assessing Officer subsequently enhanced the scope of the investigation to find the identity and creditworthiness of the alleged investors and genuineness of transactions involving share application money. The Assessing Officer issued a show cause notice u/s 142(1) on 04.12.2009 asking the assessee to produce the investors/shareholders as claimed by it for examination before him; and the Assessing Officer cautioned the assessee that if it failed to produce these investors for examination, the amount of share application money received by it will be added to the income of the assessee. The Assessing Officer issued another notice dated 10.12.2009 wherein, the assessee was further supplied with Handwriting Expert's opinion, the copies of the report of Inspector and reasons were spelt out as to why the identity, creditworthiness and genuineness of the share holders was under serious doubt and the assessee was asked to submit original affidavits of the shareholder, since the assessee did not produce the original affidavit of the shareholders and had filed before him only the photo- copies of the same. Meanwhile AO, cross checked with few banks, the veracity of the bank statements submitted by the assessee in order to prove the credit-
6 ITA No.3401/Del/2011worthiness of the investors, which also turned out to be bogus. The Assessing Officer, taking into consideration the report of ITO, unserved notices, hand writing expert opinion and the bank report which stated that the share applicants/holders did not had any bank account in their branches, concluded that the assessee company failed to comply with the requirements of the notices issued u/s 142(1) and also took note of the fact that assessee failed to produce a single investor to prove the identity, credit worthiness and genuineness of the transactions of the claimed investors, made thus an addition of Rs.3,46,00,000/- u/s 68 of the Act. Accordingly, the Assessing Officer completed the assessment u/s 143(3) of the Act at a total income of Rs.13,53,39,820/-.
7. Aggrieved, the assessee filed an appeal before the first appellate authority who, after going through the material available on record, written submissions filed by the assessee, and the remand report of AO, deleted the addition of Rs.3.46 crores and allowed the appeal of the assessee by addressing the contentions raised by the assessee as under :-
(A) The ld. CIT (A), while passing the impugned order, took note of the fact that the AO made the assessment on the basis of his investigations on the following three lines:-
(i) Enquiries conducted through the I.T.I. of the office;
(ii) Assignment given to handwriting expert for verification of signatures on the documents furnished by the assessee; and
(iii) Checking of PANs of share applicants on Assessee Information System.7 ITA No.3401/Del/2011
(B) The ld. CIT (A) discussed the above said lines of investigation of AO and found fault in the same as under :-
(i) Enquiries conducted through the I.T.I. of the office.
Ld. CIT (A) observed that the AO issued notices u/s 133(6) of the Act at the addresses provided by the assessee and found that I.T.I. had made enquiries in respect of nine share applicants (mentioned at page 26 of the CIT(A)'s order) and reported that seven share applicants were non-existent at the given address and the other two companies were closed down after March, 2006. Ld. CIT (A) also observed that AO further conducted enquiries of twelve more share applicants through I.T.I. The ld. CIT (A), after going through the submissions made by the ld. Counsel for the assessee (reproduced at pages 26 to 30 of his order), had observed as under :-
"(i) That the appellant has furnished copy of ration card and/or PAN card in the case of individual, incorporation certificate issued by the Registrar of companies and copy of active status of the company from Ministry of Company Affairs, Government of India sites wherein the addresses of the companies are given.
(ii) As per the appellant the I.T.I.'s report dated 07.12.2009 was made part of show cause notice issue u/s 142(1) dated 04.12.2009. Further it has also been contended that I.T.I''s report dated 18.12.2009 has been made part of show cause notice issued u/s 142(1) dated 17.12.2009. In the I.T.I's report dated 18.12.2009 it has been specifically reported that on the directions issued by the A.O., on 18.12.2009, the I.T.I. had made spot enquiries. Thus it is not understood how the enquiries conducted by the I.T.I. on 18.12.2009 were known to the A.O. before hand on 17.12.2009. Furthermore, it is also gathered from I.T.I's reports dated 08.12.2009 that interestingly 8 ITA No.3401/Del/2011 he has made enquiries in Delhi from tea vendors, fruit vendors and passer-by in order to ascertain the addresses of share applicants whereas the fact is that in city like Delhi even the neighbours do not know each other what to talk of fruit vendors, tea vendors and passer-by. Thus the enquires made from the aforesaid sets of persons is ridiculous and is brushed aside. Further, the I.T.I's report is not based on specific results of enquiries conducted by him. Furthermore, the statement recorded in respect of Sardar Surender Pal Singh should not be given much credence in as much as the appellant has furnished copies of ITRs, audited balance-sheets and active status of the two companies to establish that the aforesaid companies were at present in existence and not closed down as started by aforesaid person. Thus it is held that much credence cannot be given in relying on the reports of the I.T.I.'s and also on the statement recorded in respect of Sardar Surender Pal Singh.
(ii) Report of Handwriting Expert Ld. CIT (A) observed that the AO discussed in detail about the report of the handwriting experts and had pointed out certain discrepancies in the signatures in the documents furnished by the assessee in respect of share applicants. Ld. CIT (A), while observing the written submissions filed by the assessee during the appellate proceedings (reproduced at pages 32 & 33 of his order), observed as under :-
"It is observed that the opinion of the handwriting expert can be taken only when there is one fixed base comprising of specimen of handwriting and there are other disputable documents which have to be compared with the indisputable document to verify whether the handwriting tallies or not. However, in the case under consideration, the handwriting expert has based his report on signatures given in photocopies of documents as furnished 9 ITA No.3401/Del/2011 by the appellant. Further, the AO cannot draw adverse inference solely on the report of the handwriting experts especially when the appellant has objected to such handwriting expert's report. Furthermore, in some cases the handwriting expert has even accepted the signatures made on the documents furnished in respect of share applicants as genuine. Even otherwise, the report of the handwriting expert is not legally tenable as he is not authorized by the Act which could be taken cognizance of. On the other hand, the appellant has contended that the opinion of a handwriting expert is simply an opinion which is not provided under the Act just like the Departmental Valuation Officer (D.V.O.) u/s 142A or 55A of the Act. It has also been contended that such action of the AO was unilateral and no opportunity of cross examining the handwriting expert was granted by the AO. Thus, in view of the above facts, the reliance placed by the AO on the report of handwriting expert cannot be given much weightage."
(iii) Checking of PANs on Assessee Information System (AIS).
Ld. CIT (A) observed that according to the AO, the addresses of the claimed investors were checked in the AIS database but in almost all cases either the address was different or the PAN was simply invalid. After going through the written submissions filed by the assessee on this issue before the ld. CIT (A) (reproduced at pages 34 & 35 of his order), ld. CIT (A) observed as under :-
"The A.O. in the assessment order has mentioned that while checking on Assessee Information System either the addresses furnished by the appellant in respect of share applicants were different from those on the AIS or the PANs were simply invalid. It is observed that the AO while holding that PANs were invalid has not made any specific reference of such defective PAN. The appellant has contended that in the case of 10 ITA No.3401/Del/2011 M/s Ria Marketing company had changed its name to M/s Simarjeet Electronics (P) Ltd and has also furnished copy of R.O.C. for approval of name change. Whereas in the case of Smt. Saraswati Devi Goel, the appellant has submitted photocopy of the PAN card of the share applicant. Further in two cases namely, M/s Salwant Developers & Promoters Pvt. Ltd and M/s Sahgal Fludline Equipment Pvt. Ltd. There was inadvertent error in quoting of PANs and has submitted copy of PAN details from NSDL before the A.O. at the time of assessment proceedings. Regarding difference in addresses of the share applicants as furnished by the appellant and as given on the A.I.S., it has been contended by the appellant that address on AIS is based on, details as furnished in Form No.49A at the time of applying of PAN. However, due to change of location of assessee's business/ profession / residence, the address given on PAN (AIS) may not be the same as mentioned in the ITRs of the assesses. Even otherwise, the appellant has provided photocopies of PANs/ITRs and details of PANs from NSDL sites and as such, the reliance placed b the A.O. on Assessee Information System is held as half cooked and not brought to a conclusive end."
In addition to the above lines of investigation, the ld. CIT (A) discussed AO's order on the following two more lines of investigation :-
(i) Information collected from Banks Ld. CIT (A), relying on the judgment of Hon'ble Delhi High Court in the case of CIT vs. K.C. Fibers Ltd. (2010) 187 Taxman 53 (Del.), further observed that if the bank accounts of the share applicants are non-existent, the assessee cannot be fastened with the liability. He further observed that the share application money had been received through undisputed banking channels and the applicants had furnished copies of bank statements to 11 ITA No.3401/Del/2011 establish the genuineness of transaction and accordingly, held that the adverse inference drawn by the AO is untenable and therefore rejected.
(ii) Identity, creditworthiness of the share applicants and genuineness of transaction The ld. CIT (A) had discussed about 23 corporate share applicants and 14 individual share applicants with regard to their identity & creditworthiness of the share applicants and genuineness of transaction individually from pages 37 to 63 of his order. The ld. CIT (A) has discussed the AO's contention about all the share applicants individually in his order which we will discuss later in this order. Before the Ld CIT(A), the assessee had filed copy of PAN from site NSDL, copy of incorporation certificate, copy of income-tax returns, copy of audited balance sheet, copy of bank details, copy of address proof etc. to prove the identity & creditworthiness of the share applicants and genuineness of transaction, which the ld. CIT (A) had discussed in the aforesaid pages of his order. After discussing the AO's contention and the submissions of the assessee about each and every share applicants individually, the ld. CIT (A) deleted the addition as under :-
"It is observed that the share subscribers are identifiable and are assessed to tax. The transactions are genuine as the share application money has been received through undisputed banking channel. The appellant has furnished copies of ITRs, PAN cards, copy of driving licence, voter card, incorporation certificate from R.O.C., active status of the company from Ministry of Company Affairs sites. Further, the A.O. in the assessment order has mentioned that as per returns of income of the share applications for A.Ys.2004-05 and 2005-06, the income declared by them is not commensurate with the amount of investment made in share capital. Regarding creditworthiness in returned income shown in the ITR or the capital of the company cannot be the sole determinants. It is observed that the capacity to invest fund by an investor depends upon the availability of funds with 12 ITA No.3401/Del/2011 the investors and not on the tax paid/annual income of the investor. The appellant has furnished latest balance sheets of the share applicant companies which reveal that the investor companies have sufficient funds to invest the money in share application. Furthermore, a set of appellant submissions along with documentary evidence were forwarded to the A.O. for remand report. However, in the remand report dated 28.10.2011 the A.O. has not been able to controvert the documentary evidences furnished by the appellant and rather has reported that notices u/s 133(6) of the Act were issued to share applicants in 15 cases out of which 6 envelops were received back unserved and in 6 cases compliance from share applicants have been made. Thus it can be said that in 9 cases, notices issued u/s 133(6) of the Act were served at the address furnished appellant. In the assessment order as well as in the remand report, the A.O. has emphasized that the share applicants were not found at the addresses furnished by the appellant, it is observed that the Hon'ble Delhi High Court in the latest judgement vide combined orders in the case Oasis Hospitalities Pvt. Ltd (ITA No.2093 of 2010) and CIT vs. U.P. Bone Mills India Ltd.(ITA N0.2094 of 2010) and CIT vs. Vijay Power Generators Ltd. (ITA No.539 of 2008) while discussing section 68 of the Act has also cited decisions of the Hon'ble Supreme Court and Hon'ble High Courts in the following cases:-
(i) CIT vs. Divine Leasing & Finance Ltd. 299 ITR 268(SC)
(ii) CIT vs. Sophia Finance Ltd. (1994) 205 ITR 98 (SC)
(iii) CIT vs. Dolphine Canpack Ltd.(2006) 283 ITR 190
(iv) CIT vs. Lovely Exports Pvt. Ltd. 216 CTR 195 (SC)
(v) CIT vs. Creative World Telefilm Ltd. (ITA No.2182 of 2009 decided on 12-10-2009)
(vi) Madhuri Investments Pvt. Ltd. vs. ACIT (ITA No.110 of 2004 decided on 18-02-2006)
(vii) CIT vs. Arunananda Textiles Pvt. Ltd. (ITA No.1515 of 2005 decided on 02-03-2010)
(viii) CIT vs. AKJ Granites Pvt. Ltd. 301 ITR 298
(ix) CIT vs. Steller Investment Ltd. (2000) 164 CTR(SC) 287 13 ITA No.3401/Del/2011
x) CIT vs. Value Capital Services Pvt. Ltd. (2008) 307 ITR 334 (Delhi) The Hon'ble Bombay High Court in the case of CIT vs. M/s.
Creative World Telefilms Ltd. (ITANo.2182 of 2009 decided on 12.10.2009) on the impugned issue held as under :-
".... In the case in hand, it is not disputed that the assessee had given the details of name and address of the shareholder, their PAN/GIR number and had also given the cheque number, name of the bank. It was expected on the part of the Assessing Officer to make proper investigation nothing except issuing summons which were ultimately returned back with an endorsement 'not traceable'. In our considered view, the Assessing Officer ought to have found out their details through PAN cards, bank account details or from their bankers so as to reach the shareholders since all the relevant material details and particulars were given by the assessee to the Assessing Officer, In the above circumstances, the view taken by the Tribunal cannot be faulted. No substantial question of law is involved in the appeal .... "
The Court thus clearly held that once documents like PAN Card, bank account details or details from the bankers were given by the assessee, onus shifts upon the Assessing Officer and it is on him to reach the shareholders and the Assessing Officer cannot burden the assessee merely on the ground that notices issued u/s 133(6) to the investors were returned back with the endorsement 'not traceable'. Same view is taken by the Hon 'ble Karnataka High Court in Madhuri Investments Pvt. Ltd. vs. ACIT (in ITA No.110 of 2004, decided on 18.02.2006). In this case also, some of share applicants did not appear and notices sent to them were returned with remarks 'with no such person'. Addition was made on that basis which was turned down by the Hon'ble High Court in the following words :-
"6. Having heard the learned counsel for the parties, we notice that whenever a company invites applications for allotment of shares from different applicants, there is no procedure contemplated to find out the genuineness of the address or the genuinety of the applicants before allotting the 14 ITA No.3401/Del/2011 shares. If for any reason the address given in the application were to be incorrect or for any reason if the said applicants have changed their residence or the notices sent by the assessing officer have not been received by such applicants; the assessee company cannot be blamed.... "
Thus the intention of law is that unaccounted money should be brought to tax. As per provisions of section 68 of the Act onus is on the person in whose books of account such money is surfaced. If an amount is surfaced in the books of an assessee either in the shape of share application money or a deposit/loan; it should be accepted that such money belongs to the person in whose name it has been shown. However, as per provisions of section 68 of the Act, deeming provisions postulate that it is possible that the assessee may circulate its own unaccounted money in the shape of bogus persons and therefore legal onus has been created. At the same time, it is also possible that some interested person make deposits (advances loan or applies for share capital) in the names of bogus/non-genuineness or benami persons for investing its own unaccounted money. For discharging that legal onus, the identity genuineness of transaction and creditworthiness of the persons is to be established by the assessee. There are several decisions in respect of sufficiency of discharge of onus by the assessee. The Hon'ble Apex Court in the case of Ms. Lovely Exports Pvt. Ltd. & others 216 CTR 195 (SC) has given the guidelines in respect of onus to be discharged by the assessee in respect of share applicants. Following the decision of Hon'ble Apex Court as per several other Hon'ble Courts rulings, the onus of the person receiving money has been restricted to prove genuineness of the transaction and to provide copies of ITRs, PANs, details of bank accounts. Further, the Hon'ble Delhi High Court in the case of CIT vs. HLT Finance (P) Ltd (ITA 1133/2010) while deciding the issue in respect of addition u/s 68, has cited the observation of the Hon'ble ITAT as under in the impugned order wherein addition made u/s 68 was deleted.
".....It was argued by the learned A.R. that all the primary information with regard to shareholders was furnished before the lower authorities. Our attention was drawn to Annexure-I wherein with respect to each and every shareholder the assessee has furnished status of person, relationship with the company and the documents filed before the lower authorities. From this 15 ITA No.3401/Del/2011 statement, we found that assessee has filed confirmation in respect of Shri N.R. Suri and Mrs. Harvinder Kaur. In respect of Sh. M.P. Khanna and Shri JP. Khanna, the assessee has filed capital account in the firm from where withdrawal for this investment was made and these two are the directors of the assessee company. The assessee has also filed copies of ledger account. In respect of three private limited companies, the assessee has filed copy of ledger account and in case of Hallmark Healthcare Limited, the assessee has also filed affidavit for advancing the money on account of share capital. In respect of all these three companies, the A.O. has directly obtained the bank statement from where relevant cheques on account of share capital were issued. On the basis of these certificates as narrated by the A.O. and CIT(A) we can safely conclude that identity of the shareholders was established and the only grievance of the CIT(A) was with regard to creditworthiness of these shareholders and genuineness of transaction. Hon'ble Supreme Court in the case of Divine Leasing and Finance Limited dismissed the SLP filed by the Revenue against the order of Hon'ble Jurisdictional High Court, with speaking order. In case of Malwa Capital Service (P) Ltd. in ITA No.348/08, vide order dated 25.04.2008, Hon'ble Delhi High court held that it is very difficult for the assessee to show the creditworthiness of strangers and if the Revenue had any doubt with regard to ability to make the investment their returns may be reopened by the department. Hon'ble Supreme Court in the case of Lovely Exports while rejecting the department's SLP No.1993/07 dated 11.1.2008, held that when the share application money is received by the assessee company from alleged bogus shareholders whose names are given to the AO, then the department is free to proceed to reopen their individual assessments in accordance with law. Similar was the finding of Hon'ble Supreme Court in the case of Shipra Retailers (P) Ltd in SLP No 45/08 dated 21.1.2008 as also in the case of Divine Leasing & Finance Ltd. in SLP No.375/08 dated 21-1-2008.
4. The various judgments relied on by the learned AR and placed on record clearly lay down, the ratio to the effect that in respect of money introduced by way of share capital, and the assessee company furnished the names and particulars of 16 ITA No.3401/Del/2011 shareholders for establishing their identity, the department may proceed to reopen the assessments of all such alleged bogus shareholders whose investments in the share capital is found to be explained
5. In view of the above, we allow the appeal of the assessee with the similar direction to the effect that department is at liberty to reopen the individual assessment as alleged shareholders, as per provisions of law."
The Hon'ble Court has further opined that the approach adopted by CIT(A) and ITAT is in consonance with the decision of Supreme Court in Commissioner of Income Tax vs. Lovely Exports (P) Ltd., 216 CTR 195 (SC) wherein it has been held as under :-
"2. Can the amount of share money be regarded, as undisclosed income under s. 68 of I.T.Act, 1961? We find no merit in this Special Leave Petition for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the A.O. then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment ..... "
Applying these yardsticks in the appellant's case it is observed that the appellant company has discharged its onus cast upon it by the statute. The appellant has amply proved and discharged its burden by filing the necessary relevant documentary evidences in support of share capital introduced. Even if there is any doubt on the source of fund; the same be based on inquiry in the hands of the share applicants. Thus the jurisdictional A.O.s of the share applicants are given specific directions u/s 150 read with section 153 of the Act to reopen their assessments for the relevant time period. The AO is directed to inform the jurisdictional AOs of the aforesaid depositors.
In view of the foregoing discussion and respectfully following the above quoted decisions of Hon'ble Courts, and also on the basis of above directions issue to the A.O., addition u/s 68 made by the AO at Rs.3,46,00,000/- is held not justified. The same is directed to be deleted. Grounds Nos.1 to 5 are allowed."
17 ITA No.3401/Del/20118. Aggrieved by the said decision of the ld. CIT (A) to delete the addition, the revenue is before us.
9. Ld. DR relied on the order of the AO and brought to our notice that 31 working days were only there left with the AO to complete the scrutiny assessment. He took our attention to page 2 to demonstrate that how the assessee tried to delay the proceedings by not providing with the information in respect to the share application/capital money which it has received in the relevant assessment year. In the said page, AO states that he has given audience to the assessee from date 03.08.2009 to 16.11.2009, i.e. on 10 various dates, the case was listed wherein the ld. AR of the assessee dilly dallied with the information sought by the AO on this issue. Then he took our attention to page 3 wherein the AO has taken note that on 16.11.2009, the ld. AR provided the names of the alleged investors and their addresses, photo copy of affidavits, copy of ITR's bank- statements etc. and stated that the AO immediately sent the Inspector (ITI) to 9 randomly selected addresses of the claimed investors; and simultaneously has sent the documents like photocopies of affidavits and ITR copies of the share applicants to the handwriting expert for his expert opinion; and also the AO searched in the data of Assessee Information System (AIS) with the Department in respect to PAN details. Further, the Ld DR contented that the Inspector who had gone to serve the notices u/s 133(6) reported back to the AO that the addresses were not correct, and nobody by the names given were found to be ever residing or functioning at the said addresses and he took our attention to pages 4 to 13 wherein the copies of the Inspector report of these 9 alleged investors are scanned and made part of the assessment order. He also pointed out that out of these 9 investors, there was common address for two concerns and the Inspector was able to locate the director of these companies who stated that both these companies have stopped functioning 18 ITA No.3401/Del/2011 way back in March 2006. Ld. DR also took our attention to page 14 where the AO has discussed the report of the handwriting expert, wherein the AO had taken note of the fact that the said expert had prepared a total 32 sets of specimen signature and had disputed signatures on the basis of the names of the persons who have signed the documents. The Ld DR pointed out that the handwriting expert was of the opinion that out of the 32 sets of signature, 20 sets were not matching and two were forged signatures. Ld. DR contended that the assessee was issued a show- cause notice on 14.12.2009 stating that the results of the investigation created serious doubts about the identity, creditworthiness of its claimed investors and genuineness of the transactions of share application money and it was directed to produce the investors; and in addition to that the ld. AR of the assessee, was also directed to produce the original affidavits of the investors also. The ld. DR also took our attention to page 15 of the AO's order where the AO has discussed the reply of the assessee dated 15.12.2009 wherein the assessee has claimed that the alleged investors were its friends and business associates. However, the assessee declined to produce the alleged investors and the reason given by the assessee for not producing the investors was that since the assessee company is running on loss, it is not in a position to give any dividend to them; and so the investors will not cooperate with the assessee at this stage. Ld. DR took our attention to page 16 where the AO had extended his investigation by seeking information from the banks where the investors had accounts as per the assessee. The ld. DR brought to our notice that out of the 18 transactions involving 9 of the investors were sought by the AO from the respective branches of the bank who reported to AO that there were no such bank accounts of the said persons/ investors.
10. Ld. DR also stated that since the AR of the assessee contested the addresses of the alleged investors from the AIS data which the AO had procured in the first 19 ITA No.3401/Del/2011 round of investigation, in all fairness, the AO again took 5 addresses given in the AIS data and deputed the Inspector again to verify from theses addresses whether the share applicants / investors is able to prove their identity. However, the Inspector reported that in all these 5 addresses, neither any such person existed nor ever existed. Copy of the said report has been reproduced from pages 17 to 21 of the AO's order. Likewise, the ld. DR brought our notice that the AO has investigated and elaborately explained the results of his investigation wherein he found that the identity, creditworthiness and genuineness of the transactions could not be proved by the assessee. Ld. DR took our attention to pages 37 to 44 wherein the AO with the aid of a chart has explained how the transactions were not genuine. Thus, according to the ld. DR, the assessee failed to discharge its burden of proof in support of share applicant/holder's identity, creditworthiness and the genuineness of the transaction in respect to the share capital which it has received during the relevant assessment year. Therefore, ld. DR contended that after making extensive investigation within the limited period left with him, the AO had rightly made the addition under section 68 of the Act and the Ld CIT(A) has erred in deleting the same by relying on irrelevant evidences brought by the assessee before him and therefore, the impugned order of the Ld CIT(A) be set-aside and the AO order may be upheld.
11. On the other hand, ld. AR has submitted a written submission and also contended that there were 37 investors in the financial year out of which 23 investors are corporate companies duly registered with the Registrar of Companies, Ministry of Corporate affairs, Govt. of India; and remaining are the individual persons and he submitted that this amount of Rs.3.46 crores was the fresh share capital received by the assessee company during the relevant year. This share capital of Rs.3.46 crores was received by the assessee company through account 20 ITA No.3401/Del/2011 payee cheques during the relevant year and the entire amount of share capital has been duly allotted during the relevant year itself, for which necessary statutory declaration in Form No.2 has already been filed before the ROC on 20.10.2006 as appearing on PB No. 305 i.e. much before the assessment proceedings started. The details of the amount of Rs.3.46 crores received as share capital during the relevant year was summarized as under :-
Share capital received from 23 companies Duly registered with Registrar of Companies 2,70,00,000/-
Amount received from 14 individual shareholders 76,00,000/-
Total : 3,46,00,000/-
Ld. AR submitted that at the time of proceedings, all of them were the investors and not the share applicants; and their enforcement for appearance before the AO was not in the hand of the company, whereas the AO was requested to call them by using his powers as per law. The Ld. AR contented that AO has not exercised his power to enforce their appearance. Ld. AR submitted that admittedly, the AO has accepted as in his letter (Page 535 PB) that he has issued letters u/s 133(6) to 15 share applicants but out of which 9 persons has been served and out of which 6 has already complied with the requirement of law before the AO. The Ld AR brought to notice that the assessee had filed its reply before the AO during the remand proceeding and CIT(A) as under :-
"1. Rabik Exports
2. Ria Marketing P. Ltd.
3. Salwan Developers and Promoters - Director Shri Sardar Surender Pal Singh address have been found and after serving the notice inspector has recorded the statement where he has stated he was the director of two companies and the another company Satwant Singh Sodhi Constructions P. Ltd. and he had also given his PAN No. In recording the statement as 21 ITA No.3401/Del/2011 appeared on PB No. 220 & 221 reveals that the question and answer is in the hands of the inspector itself and there are typographical mistake that he was a director till 31st March, 2006. Therefore the assessee has requested for cross examination of the inspector but no opportunity was given.
4. Mlf Classic
5. MV Marketing P. Ltd.
6. UP Electricals Ltd.
7. Particular Manage Finlease The three parties who have not replied out of which one are Salwan Developers and promoters whose statement has already been taken by I.T.I. as stated in the order.
The other investor could not been served because of the change of the address and the company has tried to get in touch but could not get the positive result and time was very little."
The Ld AR submitted that during the assessment proceeding, the AO has straightway formed an adverse opinion against the assessee after going through the Inspector's report without appreciating the fact that Inspector had gone from Muzaffarnagar to Delhi on 08.12.2009 and on the same date, he has given his report; and he pointed out that the travelling distance between the Muzaffarnagar to Delhi will take around at least 6 hours journey due to various reasons like traffic jam, congested road and wondered as to how the Inspector could have covered the said distance and went to each addresses at Delhi on the same day. He further elaborated that from a perusal of the copy of the ITI report as appeared in the assessment order from page nos.8 to 13 suggests that the addresses of these 6 persons was not in one place but in a different location and according to him, it is not possible to inquire within such a short time to locate the independent addresses of all these shareholders on a single day. He contended that as per report, it is nowhere mentioned that he was accompanied by any independent witness and where he has prepared the report and the same has been relied as such blindly by 22 ITA No.3401/Del/2011 the AO, which, according to Ld AR, clearly establishes that these have been prepared in the office itself because, according to him, if a government officer visits for inquiry then his visit has to be recorded, properly, i.e. mode of transportation, submission of bills, escorts of the persons, at what time he has come back, etc., however from a perusal of the report does not reveal these details. On the very same reasons, according to Ld. AR, similar reports dated 17.12.2009 as appeared in AO's order from page nos. 17 to 22 and page 48 are not admissible and need to be rejected and the Ld CIT(A) has rightly done so. He submitted that the AO has called an opinion of the handwriting experts although these are not relevant and not acceptable. However he pointed out that in the following cases, the handwriting expert did not find any mismatch in the signatures of investors as under :
1. Munisha Granite as appeared on PB No. 248 2. UP Electricals as appeared on PB No. 2483. Particular Manage Finlease as appeared on PB No. 252 4. Chandra Kanta as appeared on PB No. 238 5. Rahul Barman as appeared on PB No. 240
6. Saraswati Devi Goyal as appeared on PB No. 241 7. Saroj Agarwal as appeared on PB No. 242 8. Susham Goyal as appeared on PB No. 242 9. Yogendra Kumar as appeared on PB No. 242 10. Monika Goyal as appeared on PB No. 245 11. Indira Devi as appeared on PB No. 253 The Ld AR argued that therefore, the AO's allegations cannot be accepted and for the others there are so many reasons which make its admission illegal. As regards M/s. Ria Marketing, ld. AR submitted that the department could not trace out the 23 ITA No.3401/Del/2011 PAN details because of change in the name of the company as M/s. Simarjeet Electronics P. ltd. although these investors have filed reply in compliance to the notice u/s 133(6). He contended that the AO relied upon the adverse confirmation from only 3 bank branches from where 9 investors had made/invested Rs.51 lacs and no adverse report had been obtained from the remaining investors. He further contended that the adverse report of 3 banks which are also not acceptable because first of all the AO has not found any fault in the bank account of the others and admittedly there is no dispute by accepting the entire inclusive of above Rs.51 lacs that the amount has been credited cheque/DD/PO so his reliance solely on the bank letter as appeared on page 51 - 53 of his order which, according to him, is third party information and cannot be given any weightage; secondly he has not cross checked with the bank official, not examined them and not provided the opportunity for cross-examination to the assessee. He submitted that it is settled law by the Hon'ble Apex Court that third party statement/report/information cannot be relied upon unless the aggrieved party has been provided an opportunity for cross-examination. In this regard, he relied on the judgment of Hon'ble Delhi High Court in the case of SMC Share Brokers - 288 ITR 345 wherein, after considering the Hon'ble Bombay High Court in the case of M/s. One-up shares and stock brokers - 266 ITR 275, wherein the Hon'ble High court has held that there is no doubt that the statement of Sh. Manoj Agarwal has evidentiary value but weight could not be given to it without it being tested in cross-examination. Therefore, the Ld AR argued that in the absence of the bank officials being tested by cross-
examination by the assessee, it cannot be said that it should be believed completely to the prejudice of the assessee. He further submitted that against the Hon'ble Delhi High Court judgment in SMC Share Broker (supra), the Department filed an appeal being SLP (C) 20015/2009 before the Apex Court which has been dismissed. He submitted that the AO has stated that the investors' identity have not 24 ITA No.3401/Del/2011 been proved which is factually incorrect because by filing the PAN details etc. are sufficient for establishing the identity and filing of the share application forms, bank account, affidavit etc. proved the genuineness and though the financial statements of the companies provided are of the next year but it includes previous year figures also, which shows the creditworthiness of the company. He submitted that moreover, once the AO has all the details of PAN of the companies/ individuals, he could also cross verify from their jurisdictional AO's record all these details but nothing has been done by him. According to Ld AR, as the assessee has provided before the AO the details whatever it has and further entire details of the investors by way of their PAN as well as other details as appearing in PB No. 480 & 481 before the CIT (A) also which copy was provided to the AO to give his remand report. According to Ld AR, the AO has not formed any adverse view in the remand report on these investors as established from the reproduction of the same in the CIT (A) order page no.20 para no.7.1 & 7.2; and Ld AR pointed out that after allotting the shares to these investors, it has no control over them; despite that efforts have been made to produce them before the AO. However, the AO has formed an adverse opinion on the basis of the returned income of these shareholders which, according to him, is not correct and submitted that investment is made not on the basis of the returned income but on the basis of the fund which is available to it and since there is no dispute about the status of the investors that all are genuine income tax payers, no adverse inference was called for. It was further submitted by the Ld AR that the assessee has provided all the details as appearing in PB No. 316-320 inclusive of all the details of the shareholders to justify identity, genuineness, creditworthiness; and further vide letter dated 16.11.2009 as appearing in P.B.NO.13-16 the assessee has provided all the details of investors who has been already allotted the shares along with PAN / Cheque No/ DD No/ Amount as well as the remaining documents like share applications forms, 25 ITA No.3401/Del/2011 banks details etc but nowhere these have been verified from the concerned jurisdictional AO of the investors . He further submitted that the AO has finally held that since the investor's creditworthiness is not acceptable and moreover because of non production of any investors he has disallowed the entire share capital of Rs 3.46 Crores.
12. Ld. AR further submitted while justifying the order of the Ld CIT(A) that the ld. CIT (A) has given his finding of the shareholding companies based on PAN, Financial Statements, ITR etc; and as regards the individual investor he has examined the details of the PAN, Voter Id card towards the genuineness examined the share application form, affidavit and bank account for creditworthiness. According to him, once these documents are on the record the burden shifts upon the AO and the Ld CIT(A) has passed an order / direction as appearing in the last Para 67 & 68 wherein enquiry has been ordered against the investors. According to him, the assessee is not required to prove the source of source as held by Hon'ble Courts reported in 256 ITR 360 and 280 ITR 516 as well as by Hon'ble Delhi High Court in the case of Diamond Products wherein it has been held that examining of source of source is not required for section 68 as reported in 21 DTR 206 (2009) / 177 TAXMAN 331. He assailed the report of the ITI and submitted that report of the inspector was on a later date and show cause notice was pre-dated and by this process the AO has not properly examined the report which is also doubtful; and the AO blindly following the report of the ITI is not legally tenable in the eyes of law. He submitted that the Hon'ble Delhi High Court in the case Victor Electrodes wherein, it was held that non production of parties could not be a ground for making additions as done by AO as appearing in last para of order. He further relied on the judgment of Hon'ble Delhi High Court in the case of Dwarkadeesh Investments in 330 ITR 298 wherein it has been held that if the company establish 26 ITA No.3401/Del/2011 the identity of the subscriber, the burden shifts to the Department and unless and until any evidence to show that funding was done by the company itself, the addition u/s 68 of the Act is untenable He further relied on the judgment of Hon'ble Delhi High Court in the case of Winstral Petrochemicals 330 ITR 603 and also relied on the judgment of Hon'ble Delhi High Court in the case of Rock Fort Metal & Minerals Ltd. reported in (2011) 198 Taxman 497 wherein the Hon'ble High Court held that where the assessee company submitted list of all the shareholders giving full name, addresses, details of payment made by cheque (cheque No. and name of bank also), confirmations from all the shareholders giving complete particulars in the form of address, cheque numbers and the name of bank, PAN and place of assessment, copies of bank statements showing deposit of all these receipts, addition u/s 68 is not warranted. He submitted that the assessee had discharged its primary onus as per law of proving the identity of all the shareholders and it was for the AO to put forth some adverse material in case he was not satisfied with the claim of the assessee. He submitted that the AO should have brought such material on the top of the table with an opportunity of rebuttal and / or cross examination to the opposite party. In this regard, he relied on the ruling of Hon'ble Supreme Court in the case of Lovely Exports case. He submitted that in the case of Orissa Corporation 159 ITR 78, the Hon'ble Court exemplifies the category of cases where no action was taken by AO to verify or an enquiry into the particulars provided by the assessee i.e their PAN etc. He further pointed out that opportunity of cross examination if there is any dispute on the fact was essential and relied on 125 ITR 713 (SC), 288 ITR 345 (Del.) and 262 ITR 275 (Bom.) and submitted that in the present case, no opportunity was provided to cross examine the ITI, Handwriting Expert, 3 Bank officials despite a clear demand made by the assessee. The Ld AR also submitted that these are settled laws that in the case of non service of notice u/s 133(6), no adverse view can be 27 ITA No.3401/Del/2011 taken. And thus ld. AR does not want us to interfere in the impugned order of the Ld CIT (A).
13. We have heard both the parties and perused the records. The case in nutshell as per the assessee is that in the relevant assessment year, certain friends and business associates have invested to the tune of Rs.3.46 crores in the assessee company and they have been duly allotted shares along with share certificates. However, according to the AO, the assessee could not discharge the burden of proof regarding the share investors' identity, creditworthiness and genuineness of the transactions, so he made an addition of Rs.3.46 crores u/s 68 of the Act. On appeal, the ld. CIT (A) was pleased to delete the said addition. Aggrieved by the impugned order of the ld. CIT (A), the revenue is before us.
14. Before proceeding further, let us refresh ourselves as to the principles of burden of proof and whom it lies in the case of share capital which has been introduced into the till of the assessee by investors as claimed by the assessee. We would like to look at the concept of burden of proof. Though the Income-tax Officer is not fettered by the technical rules of evidence as known to the civil and criminal law, any issue has to be determined on the basis of proof of facts and production of evidence. When there are two parties to a dispute either the court or legislature has laid down, to whom the burden of proof so that each of the parties should be aware about who has the role assigned to it to prove a particular fact that is the discharge of the burden in order to prove his point or to defend it itself. The burden of proof in any ordinary parlance means the duty of proving a fact affirmative of any issue. Burden of proof under the Indian Evidence Act, 1872 (hereinafter 'the Evidence Act,) can be seen from a perusal of sections 101 to 110 of the Evidence Act, 1872. The said sections broadly give the drift of the Rules which are employed under the Act while settling the disputes between the parties.
28 ITA No.3401/Del/2011(i.e. in the Income-tax cases, the assessee and the Department). Section 101 of the Evidence Act states that whoever desires any Court to give judgement as to any legal rights or liability depending upon the existence of facts which he asserts, must prove that those facts exist. In other words, when a person is bound to prove the existence of a fact, the burden of proving it lies on that person. One who asserts affirmative of the issue is burdened with the duty of proving it. Section 102 of the Evidence Act says that burden of proof in a suit or proceeding lies on that person who would fail if no evidence at all were given by either side. Section 103 of the Evidence Act states that the burden of proof as to any particular fact lies on that person who wants the court to believe in its existence. According to section 104, if a person wishes to prove a dying declaration by another, he must prove the death of that other person. According to section 106 of the Evidence Act, when any fact is especially within the knowledge of any person, the burden of proving that fact is upon him. Section 110 of the Evidence Act states that when the question is whether any person is the owner of anything of which he has shown to be in possession, the burden of proving that he is not the owner is on the person who affirms that he is not the owner. In other words, if Income-tax Officer finds that the assessee is in possession of valuable items like bullion, jewellery, etc., he must draw a rebuttable presumption that the assessee is the owner thereof unless the burden of proving that he is not the owner thereof is discharged by the assessee. Whether certain sums of money were claimed by the assessee to have been received from certain persons, it was for the assessee to prove by cogent and proper evidence that these were genuine transactions as these facts were within the exclusive knowledge of the assessee and it should be kept in mind that the assessee cannot discharge this burden of merely proving the identity of the share applicant/shareholder, he has to prove all about the transaction, namely, identity, capacity of the shareholder to invest money and genuineness of the transaction.
29 ITA No.3401/Del/201115. What is burden of proof ? As pointed out by Sarkar in his book Indian Evidence Act, the phrase "burden of proof" has two distinct and frequently confused meanings. As a matter of law and pleading, the "burden of proof" is in the nature of establishing a case. This burden rests upon the party, whether plaintiff or defendant, who substantially asserts the affirmative of the issue. It is fixed at the beginning of the trial and remains unchanged and, in this respect, reference may be made to section 101 of the Indian Evidence Act (emphasis given by us). In the second sense, the "burden of proof" relates to the region of production of evidence. In this sense, the "burden of proof" is ambulatory and shifting throughout the trial and the scale of evidence may go up and down with different and conflicting items of evidence pressed into service. However, though the distinction between the two senses is subtle, it is real. The second sense, which is of a shifting and ambulatory nature, may be called "onus of proof" while the "burden of proof" as it is understood in the first sense may be called as such. Though the words "burden" and "onus" have to be understood and have been interpreted as discussed above, they are often loosely used as inter-changeable words. But then, the burden of proof, as explained earlier, remains unchanged under all circumstances (emphasis given by us). On the other hand, the onus of proof or onus probandi is shifting and ambulatory. Burden of proof is fixed by statute or contract or agreement or pleadings. Onus probandi is concerned with the weight of evidence on each side and pertains to the region of production of evidence. In the case of Sumati Dayal vs. CIT, 214 ITR 801 (SC), the Hon'ble Apex Court has held that, "It is not doubt true that in all cases in which a receipt is sought to be taxed as income, the burden lies upon the Department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proof that it is not taxable because it falls within the exemption provided by the Act lies upon the assessee (See Parimisetti Seetharamamma [1965] 57 ITR 532 at 30 ITA No.3401/Del/2011 page 536)". But sections 68 and 69 relating to cash credits throw the burden of proof on the assessee because in such a case, there is prima facie evidence against the assessee as to the receipt of money in the books of the assessee. The burden of proving that the cash credit is genuine or that receipt is genuine is on the assessee.
16. Though it may be kept in mind that the initial burden is on the assessee to prove the genuineness of the transaction, but when the assessee furnished the details of the shareholders, addresses, etc., this burden is to be taken as discharged, and then the onus will get shifted to the department. But once the materials are scrutinized and it is found by the AO that documents furnished cast serious doubt about the veracity of the same, then the materials of the scrutiny are to be communicated to the assessee, thereafter the onus shifts from the revenue to the assessee. Then, the assessee has to take appropriate steps for proving his case. Unless, there are sufficient materials after such communication, produced by the assessee, the Income-tax officer can do no further. It should be kept in mind that the transactions which had occurred are things of which assessee is aware of and it has to come clean before the AO.
17. Dealing with share capital their Lordship of the Apex court has held that there cannot be two opinions on the aspect that the pernicious practice of conversion of unaccounted money through the masquerade or channel of investment in the share capital of a company must be firmly excoriated by the Revenue. Equally, where the preponderance of evidence indicates absence of culpability and complexity of the assessee it should not be harassed by the Revenue's insistence that it should prove the negative. In the case of a public issue, the company concerned cannot be expected to know every detail pertaining to the identity as well as financial worth of each of its subscribers. The company must, however, maintain and make available to the Assessing Officer for his perusal, all 31 ITA No.3401/Del/2011 the information contained in the statutory share application documents. In the case of private placement the legal regime would not be the same. A delicate balance must be maintained while walking the tightrope of sections 68 and 69 of the Income-tax Act. The burden of proof can seldom be discharged to the hilt by the assessee ; if the Assessing Officer harbours doubts of the legitimacy of any subscription he is empowered, nay duty bound, to carry out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the company.
18. Keeping the aforesaid dictum of Law, governing the issue at hand, let us examine the case before us. We find that the assessee filed its return on 31.10.2007 and showed a book profit u/s 115JB at Rs.21,77,195/-. We find that initially, the case was selected for scrutiny under the jurisdiction of ACIT, Circle 2, Meerut. However, taking into consideration the letter of the assessee dated 23.09.2008, the scrutiny assessment was transferred to ACIT, Circle 1, Muzaffarnagar. We find that the case was thus transferred on the request of the assessee to ACIT, Circle 1, Muzaffarnagar on 22.07.2009. These dates are stated only to show that the scrutiny proceedings has in fact started before 23.09.2008 and the assessee was put on notice about the impending scrutiny assessment as early as that of 23.09.2008 and the assessment was completed on 29.12.2009 (i.e. more than 1 year & 2 months). So it can be safely inferred that the assessee was aware that during scrutiny proceedings, he had to explain about the share application money/capital which it has received during the relevant assessment year.
19. We find that the Assessing Officer got the case records from Meerut after the transfer of the case on 03.08.2009 and we find that on the next date itself, the Assessing Officer had issued notice on 04.08.2009 u/s 142 (1) along with 35 point 32 ITA No.3401/Del/2011 questionnaire. Thereafter, we find that the assessee gave details bit by bit and we find that eight opportunities within a period of three months and nine days were granted to the assessee to give answers and produce documents in its support. However, we find that only on 16.11.2009, after three months and nine days, the assessee answered the query no.31 in respect to the details of investors in the share capital of the company. In order to discharge the burden of proof casted on it, we find that the assessee submitted a list of the shareholders, their address and affidavits to prove the identity, to prove the genuineness the assessee filed PAN details, details of the cheques/draft numbers and the date of transaction from the banking channel and to prove the creditworthiness, the assessee filed the bank statement of the investors and ITRs. Since 31.12.2009 was the last day for completion of assessment the Assessing Officer had only 31 working days to complete the assessment.
20. By providing these documents before the AO, we find that the onus shifted from the assessee to the AO. Here it should be remembered that after submission of these documents, if the AO had done nothing but to exhort to the assessee to produce the investors, then assessee not could have been said to have failed to discharge its burden of proof.
21. In order to ascertain the identity of the shareholders as claimed by the assessee, due to paucity of time, the Assessing Officer deputed an ITO to serve notices u/s 133(6) to nine out of thirty seven shareholders which were randomly selected and also sent the notices simultaneously by post. He also sent the copy of the ITRs of the shareholders along with affidavits to Handwriting Expert to get his opinion and also simultaneously, he checked from the Assessee Information System (AIS) the veracity of the PAN details.
22. The ITI reported back to AO that in 7 of these addresses, the said investors were not ever residing/ functioning in the given addresses and the addresses of the 33 ITA No.3401/Del/2011 two concerns were the same (i.e. common address) wherein the director of the said company (Sardar Surender Pal Singh) had given a statement to the ITI that the said two concerns had ceased to function from March 2006. The report of the inspection done by the Inspector in this respect has been scanned and made part of the assessment order from pages 4 to 13 of the AO's order.
23. The handwriting expert had found mismatches in the signatures and was of the opinion that few of the documents were having forged signatures. We would like to state here that we are not going to take into account the handwriting expert's opinion to base our adjudication because we find that the assessee's prayer to cross examine the handwriting expert had not materialised. Though we take note that the copy of the handwriting expert's report was in fact furnished to the assessee for their comments, which they have indeed objected to exhaustively and extensively before the AO and CIT (A). However, as said before, we are not looking into the handwriting expert's opinion to adjudicate this issue; therefore, we are not going into merits of the handwriting expert's opinion. However, we would like to point out that the Evidence Act, have empowered the judge to compare the handwriting in certain circumstance before him and the AO is a quasi-judicial authority while he is exercising his authority as an assessing officer, so seeking handwriting experts opinion to find out the authenticity of the signature on the affidavits & ITR during investigation cannot be faulted as such, but the opinion of expert is not necessary to adjudicate the issue before us. Since we are not taking into consideration the opinion of handwriting expert, we are not going to go into the objection of assessee on this aspect.
Thereafter, we find that the AO found from searching the database of Assessee Information System (AIS) that either the addresses given by the assessee were different or the PANs were invalid. The following results emerged from the first 34 ITA No.3401/Del/2011 round of investigation (as stated before we are not including the handwriting expert's opinion) :-
ITO Report 7 of these addresses were wrong and at the common address of the other two concerns, who have allegedly invested money in the assessee company, one person Shri Sardar Surender Pal Singh was found who claimed to be the Director of these two concerns till March-2006 only; and also mentioned that after March-
2006 both these companies were closed down. He mentioned these facts in a statement given by him.
AIS (PAN) The addresses of the "claimed" investors were checked in the Assessee. Information System (AIS) data base, but in almost all cases either the address was different or the PAN was simply invalid
24. Taking note of the aforesaid outcome of the preliminary enquiry, the Assessing Officer issued notice u/s 142 (1) on 04.12.2009 to produce the shareholders as claimed by the assessee and cautioned the assessee that serious doubts have been formed in his mind because of the aforesaid initial enquiry. So, the assessee was put on notice to come out clean with the evidences to prove the identity, genuineness and creditworthiness of the shareholders. On 15.12.2009, the AO takes note that assessee did not produce even a single shareholder and denied having any obligation to produce them. However, in the said letter interestingly, the assessee claimed that these shareholders were his close friends and business associates. Since the AR contested the address to which the notices were sent by hand as well as by post and contented that addresses should have been taken as reflected in the PAN data base of the department, we find that the Assessing 35 ITA No.3401/Del/2011 Officer thought of giving another shot and selected again five persons from PAN details and again sent the ITO to serve notices. The scanned copy of the report of ITO can be seen from pages 17 to 21 of the assessment order, wherein he has categorically stated that in all these five addresses, no such person was existing or ever existed. In the aforesaid scenario, we find that the Assessing Officer requested the Banks i.e. Punjab National Bank, HDFC, Chandni Chowk Branch, Delhi and HDFC, Kashmiri Gate Branch, Delhi about the veracity of the bank statements of 9 shareholders filed by the assessee before him. Punjab National Bank vide letter dated 17.12.2009, the HDFC, Chandni Chowk Branch vide letter dated 15.12.2009 and HDFC, Kashmiri Gate Branch informed the Assessing Officer that no bank account in the name of such persons is being operated form their branch since the inception of their operation. We find that the Assessing Officer, while going through the copy of the ITRs of the alleged shareholders, stumbled across three concerns who were under his jurisdiction (i.e. Prakartik Hotels Private Limited, MLF Classic Finance Limited and Life Line Housing Development Finance Company Limited) whose ITR's for assessment year 2005- 06 was filed before him and noted that these concerns have given common address of 1st Floor, City Centre Market, Muzaffarnagar. The Assessing Officer deputed the ITO to find details about the said shareholders and to his dismay, he got the information that no return of income was filed by these three companies after assessment year 2005-06, as well as there was no such concern ever existed at that address. A copy of the report is scanned and copied at page 22 of the assessment order.
25. We find the following facts emerged from pages 30 & 31 of the assessment order to dislodge the onus of proof from the Assessing Officer and the burden is seen shifted back to the shoulder of the assessee to prove the identity, genuineness 36 ITA No.3401/Del/2011 of transaction and creditworthiness of the shareholders which the AO has summarized as under in his show-cause notice dated 15.12.2009 wherein he spelt out the same as under :-
"(i) Report of the Inspector which found out that the addresses of seven alleged investors in Delhi are wrong and in reality such investors never existed at those addresses.
(ii) Later on 6 more addresses in Delhi were verified by the Inspector but here also all were found to be wrong.
(iii) Statement of Sh. Sardar Surender Pal Singh, who states that he was not director in two companies M/s. Salwan Developers and Promoter Pvt. Ltd. and Satwant Singh Sodhi Construction Pvt. Ltd.
after March, 2006 and moreover these companies closed down after March, 2006. The statement of Sh. Sardar Surender Pal Singh is strengthened by the fact that the Company Master Details for M/s Salwan Developers and Promoter Pvt. Ltd. and Satwant Singh Sodh'i Construction Pvt. Ltd, have last balance sheet dates as 31-03-2006 and 31-03-2005 respectively for these two Companies.
(iv) Five letters U/s 133(6), sent through registered post, returned unserved when sent to the addresses provided by the assessee.
(v) In AIS data base of the department either the PANs of the alleged investors were invalid or different addresses were given. Out of these AIS addresses five were randomly selected and on verification- of these the inspector of the department found them bogus in all five cases,
(vi) The report of hand writing expert is against the claim of assessee Company as .discussed above.
(vii) 19 transactions involving transfer of share application money to the assessee Company through banks were selected but on verification it was found and communicated by respective branches of the banks that no such accounts ever existed in those banks. The letters of the bank in reply to 133(6) notices are on record. The copies of letters from the bank are pan of this order.
37 ITA No.3401/Del/2011(viii) 3 of the alleged investing companies M/s MLF Classic Finance Limited. M/s Life Line Housing Developers Finance Company Ltd. and Prakartik Hotel Pvt, Ltd. have tiled the return of income at Aayakar Bhawan, Muzaffarnagar for Asstt. Year 2005-06. And have given common address of 1st Floor. City Center, Muzaffarnagar. On verification, it was found out that none of these companies filed Income Tax Returns after Assessment Year 2005-06 and the address of these companies at Muzarfarnaggar was found to be wrong and these companies never existed at those addresses.
(ix) The copy of affidavits submitted by the assessee Company were of no evidence value as it was copy of only-one side of affidavit and without giving any date. Moreover, the assessee Company did not submit the original affidavits even when this requirement was clearly expressed in 142(1) notice dated 10-12- 2009.
(x) None of these alleged investors had creditworthiness to invest such huge amounts. This fact becomes clear after perusal of their ITRs filed for assessment year 2005-06 or Assessment Year 2004-05 (as the copies of these ITRs were provided by the A.R. of the assessee company). A chart comparing amount of share, application money allegedly invested and gross, total income (before any deduction) of these claimed investors was given in show cause notice dated 17-12-2009."
Thereafter a show-cause notice dated 17.12.2009 was issued directing the assessee to produce any 25 of these claimed investors, since the assessee had claimed the same to be his close friends and business associates. We find that the assessee has made a submission on 23.12.2009 that investors could not be approached by the assessee company as it did not pay any dividend to them. Along with the written submissions dated 23.12.2009, we find that the AR of the assessee had provided certain documents like company's certificates of incorporation and company master details.
38 ITA No.3401/Del/201126. However, on scrutiny of the said documents by the AO, it revealed that the said certification of incorporation was not signed by the Assistant Registrar of Companies, the signing authority and AO observed that in most of the cases, the company master details did not reflect the date of last balance sheet submitted with the ROC or that it was filed before FY 2006-07 (the year in which the share applicant company was allegedly invested in the assessee's company). The AO had given Table No.2 at page 32 of his order, depicting the name of 19 companies out of which 13 companies did not give the last date of balance sheet, the other 5 companies had given last date of balance sheet as 31.03.2006 and the remaining 1 company did not file company master details. Thus, the AO came to the conclusion that the said 19 companies are defunct companies in the financial year 2006-07 which is the relevant assessment year under consideration. At pages 37 to 44 of his order, the AO has depicted by a chart as Table No.3 describing the names of alleged investors and the amount of share application money which was purportedly invested by it and the reason why, according to him, genuineness of the transaction of share applicant money cannot be accepted has been given in detail of the 39 companies/individuals, though in respect of the first two companies i.e. Prolon Marketing Pvt. Ltd. And Ja Gang Plastic (India) Pvt. Ltd. the amount of Rs.31 lakhs and Rs.15 lakhs has not been transacted in the year under consideration and has not been added by the AO as addition and so there is no dispute about this. Thereafter, we find that in respect to the 37 investors, the AO's view of the alleged investors in respect to their identity, creditworthiness and genuineness of the transaction is as given below :-
"1. Anil Kumar Goel The Assessing Officer observed that the amount invested by this alleged investor was Rs.7,98,000/-. The Assessing Officer found that signature on 39 ITA No.3401/Del/2011 ITR did not match with signatures on share application form according to the report of the Hand Writing Expert. He also found that the account number of HDFC Bank, Kashmir Gate Brach (Delhi) through which the share application money was allegedly invested in the assessee company was never in existence and this fact was confirmed in writing by the branch of the bank through a letter which is reproduce din the assessment order. It is also observed that different address was given in AIS data base. He also observed that he did not have creditworthiness to invest such amount as for assessment year 2005-06 his total gross income was filed at Rs.94,200.
2. Chandra Kanta The amount invested by this alleged investor was Rs.7,50,000/-. The Assessing Officer found that the investor had given bogus address of Delhi as verified by Inspector. He also observed that the account number of HDFC Bank, Chandani Chowk Branch (Delhi) through which the share application money was allegedly invested in the assessee company was never in existence and this fact was confirmed in writing by the branch of the bank through a letter which is reproduce din the assessment order. It was also observed that the different address was given in AIS data base and even this address was found to be bogus when the Inspector went for physical verification. He found that she did not have creditworthiness to invest such a huge amount as she had filed total gross income at Rs.1,05,064/- for assessment year 2005-06.
3. Manohar Lal Gupta Rs.7,50,000/- was invested by this alleged investor. The Assessing Officer found that the signature on ITR did not match with signatures on share application form according to the report of the Hand Writing Expert. He also observed that the account number of HDFC Bank, Chandani Chowk Brach 40 ITA No.3401/Del/2011 (Delhi) through which the share application money was allegedly invested in the assessee company was never in existence since the opening of this Branch was July 2004 and this fact was confirmed in writing by the branch of the bank through a letter. He found that different address was given in AIS data base. The Assessing Officer also observed that he did not have creditworthiness to invest such a huge amount as he had only shown gross total income of Rs.1,00,045/- for assessment year 2005-06.
4. Rahul Verma The amount invested by this alleged investor was Rs.5,52,000/-. The Assessing Officer found that the investor had given bogus address of Delhi as verified by Inspector. He also observed that the account number of HDFC Bank, Kashmeri Gale Brach (Delhi) through which the share application money was allegedly invested in the assessee company was never in existence and this fact was confirmed in writing by the branch of the bank through a letter which is reproduce din the assessment order. He also observed that the different address was given in AIS data base. The AO also observed that he did not have creditworthiness to invest such a huge amount as for the assessment year 2005-06, the gross total income was shown at Rs.1,00,900/-.
5. Saraswati Devi Goel Rs.5,52,000/- was invested by this alleged investor. The Assessing Officer observed that the investor had given the bogus address of Delhi which was verified by Inspector. He also observed that the account number of HDFC Bank, Chandani Chowk Branch (Delhi) through which the share application money was allegedly invested in the assessee company was never in existence and this fact was confirmed in writing by the branch of the bank through a letter which is reproduce din the assessment order. The Assessing 41 ITA No.3401/Del/2011 Officer also observed that it did not have creditworthiness to invest such a huge amount as in the assessment year 2005-06, the investor had shown Rs.1,05,118/- as gross total income. He also observed that the alleged investor has given invalid PAN invalid according to AIS.
6. Saroj Aggarwal The amount invested by this alleged investor was Rs.5,50,000/-. The Assessing Officer found that the investor had given the bogus address of Delhi as verified by Inspector. He also observed that the account number of HDFC Bank, Chandani Chowk Brach (Delhi) through which the share application money was allegedly invested in the assessee company was never in existence since the opening of this Branch and this fact was confirmed in writing by the branch of the bank through a letter. It was also found that the alleged investor did not have creditworthiness to invest such a huge amount as the investor had shown gross total income of Rs.1,00,128./- in assessment year 2005-06.
7. Sushma Goel The Assessing Officer observed that the amount invested by this alleged investor was Rs.5,50,000/-. The Assessing Officer found that the alleged investor had given the bogus address of Delhi which was verified by Inspector. He also observed that the account number of Punjab National Bank, Khari Baoli Branch, Delhi, through which the share application money was allegedly invested in the assessee company was not in existence at least since 01.04.2006 and this fact was confirmed in writing by the branch of the bank through a letter. The Assessing Officer found that the different address was given in AIS data base. He observed that she did not have creditworthiness to invest such a huge amount as she had shown gross total income of Rs.1,05,054/- in A.Y. 2005-06.42 ITA No.3401/Del/2011
8. Vivek Kumar Jain The alleged investor had invested a sum of Rs.6,00,000/-. The Assessing Officer observed that the signature on ITR did not match with signature on share application form according to the report of the Hand Writing Expert.
He also found that the account number of Punjab National Bank, Khari Baoli Branch, Delhi, through which the share application money was allegedly invested in the assessee company was not in existence at least since 01.04.2006 and this fact was confirmed by the bank through a letter. It is also observed that the investor did not have creditworthiness to invest such a huge amount as Rs.1,34,546/- was shown as gross total income in the assessment year 2005-06 by the alleged investor. The Assessing Officer also observed that the given PAN was invalid according to AIS.
9. Yogendra Kumar The Assessing Officer observed that the amount invested by this alleged investor was Rs.3,00,000/-. He found that different address was given in AIS data base and even this address was found to be bogus when the inspector went for physical verification. The Assessing Officer observed that the account number of Punjab National Bank, Khan Baoli Branch. Delhi, through which the Share application money was allegedly invested in the assessee company was not in existence at least since 01.04.2006 and this fact was confirmed in writing by the branch of the bank through a letter. He found that the investor did not have creditworthiness to invest such a huge amount as the gross total income was shown by the investor at Rs.1,00,784/- in assessment year 2005-06.
10. Monika Goel The Assessing Officer observed that the amount invested by this alleged investor was Rs.3,00,000/-. He found that the alleged investor had given 43 ITA No.3401/Del/2011 bogus address of Delhi as verified by Inspector. The Assessing Officer also observed that she did not have creditworthiness to invest such a huge amount as she had shown gross total income of Rs.1,05,105/- for assessment year 2005-06.
11. Rakesh Kumar Aggarwal Rs.2,00,000/- was invested by this alleged investor. The Assessing Officer found that the signature on ITR did not match with signatures on share application form according to the report of the Hand Writing Expert. It is also observed that different address was given in AIS data base. The Assessing Officer found that the alleged investor did not have creditworthiness to invest such a huge amount as he had shown gross total income at Rs.78,600/- in assessment year 2005-06.
12. Smt. Indira Devi Rs.6,00,000/- was invested by this investor. The Assessing Officer observed that the investor had given bogus address of Delhi which was verified by Inspector. It was also observed by the Assessing Officer that she did not have creditworthiness to invest such a huge amount as the total gross income was shown at Rs.1,05,130/- in the assessment year 2005-06.
13. Smt. Rekha Bansal The alleged investor had invested Rs.15,00,000/-. The Assessing Officer observed that the signature on ITR did not match with signature on share application form according to the report of the Hand Writing Expert. He observed that the she had given the bogus address of Delhi as verified by Inspector. It was also observed that it did not have creditworthiness to invest such a huge amount as Rs.1,03,225/- was shown as total gross income in the assessment year 2005-06.
44 ITA No.3401/Del/201114. Ganesh Kumar The amount invested by this alleged investor was Rs.,8,00,000/-. The Assessing Officer observed that the signature on ITR did not match with signatures on share application form according to the report of the Hand Writing Expert. It is also found that different address was given in AIS data base and even this address was found to be bogus when the Inspector went for physical verification. The Assessing Officer also found that he did not have creditworthiness to invest such a huge amount as he had shown gross total income of Rs. 99,235/- in A.Y. 2005-06.
15. Life Line Housing Development Finance Co. Ltd The Assessing Officer observed that the amount invested by this alleged investor was Rs.5,00,000/-. He found that for Assessment Year 2005-06, the company filed its return of income at Muzaffarnagar but it did not file any return of income for subsequent Assessment Years and the inquiry of the Inspector at the address given, on ITR, proved that the company never existed at that address. He also found that different address was given in AIS data base and even this address was found to be bogus, when the Inspector went for physical verification. He observed that it did not have creditworthiness to invest such a huge amount as for Assessment Year 2005-06, it was having gross income at Rs.13,339/-.
16. Rabik Exports Ltd.
The amount invested by this alleged investor was Rs.5,00,000/-. The Assessing Officer found that different address was given in AIS data base. The Assessing Officer also observed that it did not have the creditworthiness to invest such a huge amount as total gross income at Rs.38,315/- was shown for assessment year 2004-05 and it did not submit ITR for A.Ys. 2005-06 or 2006-07. He also found that according to Company Master Details (from 45 ITA No.3401/Del/2011 Registrar of Companies), this company filed its last Balance Sheet on 31-03- 2006.
17. Ria Marketing Services Pvt. Ltd.
The Assessing Officer observed that the amount invested by this alleged investor was Rs.5,00,000/-. He found that bogus address of Delhi was given which was verified by Inspector. He also observed that it did not have the creditworthiness to invest such a huge amount as for assessment year 2005- 06 it had gross income at Rs. 34,080/- only. The PAN given was also not of this company but that of Simarjeet Electronics Pvt. Ltd. (Karol Bagh), Delhi.
18. Sal wan Developers & Promoters Pvt. Ltd The amount invested by this alleged investor was Rs.10,00,000/-. The Assessing Officer found that the Director of the concern, Shri Surender Pal Singh stated that this company was closed down in March, 2006. He also observed that it did not have the creditworthiness to invest such a huge amount as the gross total income of Rs.18,191/- for Assessment Year 2005-
06. He also found that according to Company Master Details (from Registrar of Companies), this company filed its last Balance Sheet on 31-03-2006. He also found that the given PAN was invalid according to AIS.
19. Yogson Impex Pvt. Ltd.
The Assessing Officer observed that the amount invested by this alleged investor was Rs.5,00,000/-. The Assessing Officer observed that the company has given bogus address of Delhi as verified by Inspector. He found that different address was given in AIS data base and even this address was found to be bogus when the inspector went for physical verification. He also observed that the signatures on documents were forged according to the report of hand writing expert. He also observed that it did not have 46 ITA No.3401/Del/2011 creditworthiness to invest such a huge amount as copy of ITR was not submitted.
20. Singhal Fluidline Equipment Pvt. Ltd.
The amount invested by this alleged investor was Rs.5,00,000/-. The Assessing Officer found that signature on ITR did not match with signature on share application form according to the report of the Hand Writing Expert and the same Director, Shri Rajan Jassal S/o Sh. S.K. Jassal had signed on all the documents referred to the Hand Writing Expert. He also observed that the investor did not have creditworthiness to invest such a huge amount as the investor had shown Rs.Rs.2046/- only as gross total income for assessment year 2004-05. It is also found that he did not submit ITR for assessment years 2005-06 or 2006-07. The Assessing Officer observed that the Company had not filed its Balance Sheet with Registrar of Companies for many years as the last Balance Sheet date was not given in Company Master Details (from Registrar of Companies). He also found that the company was in default of filing of Form DIN3/Form 32. The Assessing Officer observed that this PAN was not of the company but that of Sehaj Financial Services Pvt. Ltd., Daryaganj, New Delhi.
21. B-Fin Lease (I) Private Limited The amount invested by this alleged investor was Rs.10,00,000/-. The Assessing Officer found that the Company had not filed its Balance Sheet with Registrar of Companies for many years as the last Balance Sheet date is not given in Company Master Details (from Registrar of Companies). The Assessing Officer observed that different address was given in AIS data base. The Assessing Officer found that the company did not have creditworthiness to invest such a huge as the total gross income shown was Rs. 1667/- in 47 ITA No.3401/Del/2011 assessment year 2004-05 and also did not submit ITR for assessment years 2005-06 or 2006-07.
22. Shatarchi Finance & Leasing Limited Rs.15,00,000/- was invested by this company. The Assessing Officer observed that the signature on ITR did not match with signatures on share application form according to the report of the Hand Writing Export and the same Director, Ms Rani Sharma had signed on all the documents referred to the Hand Writing Expert. It was also observed that the company had not filed its Balance Sheet with Registrar of Companies for many years as the last Balance Sheet date was not given in Company Master Details (from Registrar of Companies). The Assessing Officer also observed that the company was in default of filing of Form DIN3/Form 32 and different address was given in AIS data base. The Assessing Officer observed that it did not have creditworthiness to invest such a huge amount as the gross total income in assessment year 2005-06 was shown at Rs.3096/-.
23. VPS Valves & Tubes Private Limited The Assessing Officer observed that the amount invested by this alleged investor was Rs.10,00,000/-. The Assessing Officer observed that the Company had not filed its Balance Sheet with Registrar of Companies for many years as the last Balance Sheet date was not given in Company Master Details (from Registrar of Companies) and also the different address was given in AIS data base. The Assessing Officer observed that it did not have creditworthiness to invest such a huge amount as copy of ITRs were not submitted.
48 ITA No.3401/Del/201124. MLF Classic Finance Limited The amount invested by this alleged investor was Rs.10,00,000/-. The Assessing Officer observed that the signature on ITR did not match with signature on share application form according to the report of the Hand Writing Expert and the same Director Sh. Prasham Mishra S/o Sh. Panchanand Mishra had signed on all the documents referred to the Hand Writing Expert. He also observed that for assessment year 2005-06, this company filed its return of income at Muzaffarnagar but it did not file any return of income for subsequent. Assessment Year and the inquiry of the Inspector at the address given on ITR proved that the company never existed at that address. The Assessing Officer also observed that it did not have creditworthiness to invest such a huge amount as it had shown NIL income in assessment year 2005-06 and he also found that the given PAN was invalid according to AIS.
25. Monisha Granite Limited Rs.20,00,000/- was invested by this company. The Assessing Officer observed that the inquiry letter u/s 133(6), sent at the Delhi address of the company through registered post, returned unserved. He found that different address was giver in AIS data base. The Assessing Officer also observed that it did not have creditworthiness to invest such a huge amount as the gross total income was shown at Rs. 15,110/- in the assessment year 2005-
06.
26. MV Marketing Private Limited The Assessing Officer observed that the amount invested by this alleged investor was Rs.10,00,000/-. The Assessing Officer found that the Company had not filed its Balance Sheet with Registrar of Companies for many years as the last Balance Sheet date was not given in Company Master Details 49 ITA No.3401/Del/2011 (from Registrar of Companies). It is also observed that different address was given in AIS data base. The Assessing Officer also observed that it did not have creditworthiness to invest such a huge amount as Rs.2,08,881/- was shown as gross total income in assessment year 2004-05 but it did not submit ITR for assessment years 2005-06 or 2006-07.
27. Prakartik Hotels Private Limited Rs.20,00,000/- was invested by this company. The Assessing Officer observed that the signature on ITR did not match with signatures on share application form according to the report of the Hand Writing Expert and the same Director, Shri Kamal Sharma had signed on all the documents referred to the Hand Writing Expert. He found that for assessment year 2005-06, this company filed its return of income at Muzaffarnagar but it did not file any return of income for subsequent Assessment Year and the inquiry of the Inspector at the address given on ITR proved that the company never existed at that address. He observed that the inquiry letter U/s 133(6), sent through registered post at the Delhi address of the company, returned unserved. He also found that different address was given in AIS data base. The Assessing Officer observed that it did not have creditworthiness to invest such a huge amount as NIL income was shown in the assessment year 2005-06.
28. SGC Publishing Private Limited The Assessing Officer observed that the amount invested by this alleged investor was Rs.10,00,000/-. The Assessing Officer observed that the signature on ITR did not match with signatures on share application form according to the report of the Hand Writing Expert and the same Director, Shri Pramod Kumar S/o Sh. Prakash Chand had signed on all the documents referred to the Hand Writing Expert. He also found that bogus address of Delhi was given which was verified by Inspector. He also found that it did 50 ITA No.3401/Del/2011 not have creditworthiness to invest such a huge amount as Rs. 4110/- was only shown as gross total income in assessment year 2004-05 and the company did not also submit ITR for assessment years 2005-06 or 2006-07. It was also found that the Company had not filed its Balance Sheet with Registrar of Companies for many years as the last Balance Sheet date was not given in Company Master Details (from Registrar of Companies).
29. UP Electricals Limited The alleged investor had invested Rs.20,00,000/-. The Assessing Officer found that the inquiry letter u/s 133(6), sent at the Delhi address of the company through registered post, returned unserved. The Assessing Officer observed that different address was given in AIS data base. He also observed that the company did not have creditworthiness to invest such a huge amount as the gross total income was shown at Rs.1788/- for the assessment year 2005-06.
30. CV Metal Powders (Haryana) Limited The Assessing Officer observed that the amount invested by this alleged investor was Rs.8,00,000/-. The Assessing Officer fund that different address was given in AIS data base. He also observed that it did not have creditworthiness to invest such a huge amount as the gross total income was shown at Rs.9,360/ in the assessment year 2005-06. The Assessing Officer found that according to Company Master Details (from Registrar of Companies), this company filed its last Balance Sheet on 31.03.2005.
31. Dignity Finvest Private Limited Rs.8,00,000/- was invested by this company. The Assessing Officer found that according to Company Master Details (from Registrar of Companies), this company filed its last Balance Sheet on 31.03.2005. He observed that 51 ITA No.3401/Del/2011 different address was given in AIS data base. The Assessing Officer also observed that it did not have creditworthiness to invest such a huge amount as RS.3,867/- was shown as gross total income in the assessment year 2005-
06.
32. Ethnic Creation Private Limited The alleged investor had invested Rs.11,00,000/-. The Assessing Officer found that the Company had not filed its Balance Sheet with Registrar of Companies for many years as the last Balance Sheet date was not given in Company Master Details (from Registrar of Companies). He also found that the company was in default of filing of Form D1N3/Form 32. He also observed that different address was given in AIS data base. The Assessing Officer found that the company did not have creditworthiness to invest such a huge amount as gross total income at Rs. 20,068/- was shown in assessment year 2004-05 but it did not submit ITR for assessment years 2005-06 or 2006-07.
33. Unique Insulation & thermo packaging Private Limited The Assessing Officer observed that the amount invested by this alleged investor was Rs.7,00,000/-. The Assessing Officer observed that the signature on ITR did not match with signatures on share application form according to the report of the Hand Writing Expert and the same Director, Shri Ghanshyam Sharma, S/o Sh. J.P. Sharma had signed on all the documents referred to the Hand Writing Expert. The Assessing Officer also found that the Company had not filed its Balance Sheet with Registrar of Companies for many years as the last Balance Sheet date was not given in Company Master Details (from Registrar of Companies). It is also observed that different address was given in AIS data base. He observed that it did not have creditworthiness to invest such a huge amount as Rs.4,581/- was shown 52 ITA No.3401/Del/2011 as gross total income in assessment year 2004-05 and it did not submit ITR for assessment years 2005-06 or 2006-07.
34. Keshri Industrial Lab Private Limited The alleged investor had invested Rs.30,00,000/-. The Assessing Officer found that the signature on ITR did not match with signatures on share application form according to the report of the Hand Writing Expert and the same Director, Shri Sanjay Mittal had signed on all the documents referred to the Hand Writing Expert. The Assessing Officer observed that inquiry letter u/s 133(6), sent at the Delhi address of the company through registered post, returned unserved. The Assessing Officer also observed that the Company had not filed its Balance Sheet with Registrar of Companies for many years as the last Balance Sheet date was not given in Company Master Details (from Registrar of Companies). The Assessing Officer observed that different address was given in AIS data base. He also observed that it did not have creditworthiness to invest such a huge amount as it had shown nil income in the assessment year 2005-06.
35. Particular Manage Fin lease (India Private Limited The Assessing Officer observed that the amount invested by this alleged investor was Rs.15,00,000/-. The Assessing Officer found that the signature on ITR did not match with signatures on share application form according to the report of the Hand Writing Expert and the same Director, Shri Rajiv Aggarwal, S/o Sh. Radhey Shyam Aggarwal had signed on all the documents referred to the Hand Writing Expert. The Assessing Officer observed that inquiry letter u/s 133(6), sent through registered post at the Delhi address of the company, returned unserved. He also observed that the Company had not filed its Balance Sheet with Registrar of Companies for many years as the last Balance Sheet date was not given in Company Master Details (from 53 ITA No.3401/Del/2011 Registrar of Companies). The Assessing Officer observed that the company was in default of filing of Form DIN3/Form 32. It is observed by the Assessing Officer that different address was given in AIS data base. The Assessing Officer found that it did not have creditworthiness to invest such a huge amount as the gross total income for the assessment year 2004-05 was shown at Rs.1,590/- and also the company had not submitted ITR for assessment years2005-06 or 2006-07.
36. Rizzer Exim Private Limited The alleged investor had invested Rs.15,00,000/-. The Assessing Officer observed that the company had given bogus address of Delhi which was verified by Inspector. He also observed that the Company had not filed its Balance Sheet with Registrar of Companies for many years as the last Balance Sheet date was not given in Company Master Details (from Registrar of Companies) and the company was in default of filing of Form DIN3/Form 32. He observed that different address was given in AIS data base. The Assessing Officer observed that the company did not have creditworthiness to invest such a huge amount as Rs.38,207/- was shown as gross total income in assessment year 2005-06.
37. Satwant Singh Sodhi Construction Private Limited The Assessing Officer observed that the amount invested by this alleged investor was Rs.16,00,000/-. The Assessing Officer observed that the Director of the concern, Shri Surender Pal Singh stated that this company closed down in March, 2006. The Assessing Officer found that the company had given bogus address of Delhi which was verified by Inspector. He also observed that it did not have creditworthiness to invest such a huge amount as the NIL income was filed for the assessment year 2005-6. It was also found by the Assessing Officer that according to Company Master Details 54 ITA No.3401/Del/2011 (from Registrar of Companies), this company filed its last Balance Sheet on 31-03-2005 and the company was in default of filing of Form DIN3/Form
32."
27. The AO came to the conclusion based on his investigation as aforesaid that the assessee could not discharge the burden of proof casted upon it to prove the share applicants'/investors' identity, creditworthiness and genuineness of the transaction; and the said amount to the tune of Rs.3.46 crores was added to the total income of the assessee.
28. We find that on appeal, the first appellate authority had called upon the AO to furnish the remand report which was submitted vide letter dated 28.01.2011 which is part of the impugned order from pages 20 to 22, wherein the AO had again issued notices to the assessee with a direction to it to produce 7 investors and also to furnish the ITR for AY 2008-09, 2009-10 and 2010-11. On the date fixed for compliance i.e. 13.01.2011, the assessee could not produce any of the 7 investors as stated at page 21 of the impugned order. On 08.01.2011, the AO issued section 133 (6) notice to 15 share applicants/holders and out of which, 6 were returned back unserved, 6 persons replied back and 3 un-replied till the date of remand report. (For clarity, it is noted that the six share holders who replied to AO during remand proceedings were private limited companies, whose subsequent year ITRs and balance sheets were filed before the CIT (A).) The assessee was confronted by the AO during remand proceedings to produce the share applicants but assessee failed to bring even a single share applicant / holder before the AO. Therefore, the AO again concluded that the assessee could not discharge the burden of proof which was casted upon it. We find that the assessee had filed a rejoinder to the remand report which is reproduced from pages 22 to 25 of the 55 ITA No.3401/Del/2011 impugned order, wherein the assessee had relied upon the judgment of Hon'ble Supreme Court in the case of Lovely Exports reported in 216 CTR 295 to contend that the AO was unjustified in drawing adverse inference against the assessee company when it is indisputably a case of share capital receipts by the assessee company and the assessee company has duly discharged the onus in proving the identity and credit worthiness of these shareholders and has also proved the genuineness of the transactions by showing that the amount has been issued as share capital and share certificates have also been issued to all these shareholders. We find that the ld. CIT (A), after considering the remand report, rejoinder and submissions of AR, observed how the AO dealt with the line of investigation and recounts that it was mainly on 3 ways i.e. (i) enquiries conducted through the ITI,
(ii) assignment given to handwriting expert for verification of signatures on the documents furnished by the assessee, and (iii) checking of PANs of share applicants on the database of Assessee Information System. The CIT (A), dealing with the enquiries conducted through the ITI, has dealt with the same from pages 25 to 31 of the impugned order.
ITI REPORT
29. The ld. CIT (A) has observed at page 26 of the impugned order that the ITI made enquires in respect of nine share applicants in the first round and later on, the AO conducted inquiries from ITI against another twelve, thus, the physical verification so done against twenty one share applicants/investors (names of 21 investors out of 37 are at page 28 of CIT (A) order). The assessee's argument against the ITI report mainly hinges on the ground that notices of the AO dated 04.12.2009 and 17.12.2009 contained reports of the ITI dated 07.12.2009 and 18.12.2009 respectively and wondered as to how AO, could know what ITI could report on later dates, thus questions the reliability of the show-cause issued by the 56 ITA No.3401/Del/2011 AO. Here we would like to point out that the ITI report is the outcome of an order passed by the AO to the ITI to verify the addresses given by the assessee to prove the identity of the shareholders/investors. A perusal of page 4 of the AO's order shows that the ITI recorded the statement of Shri Surendra Pal Singh on 04.12.2009 on behalf of two firms i.e. M/s. Satwant Singh Sodhi Construction Pvt. Ltd. and M/s. Salwan Developers & Promoters Pvt. Ltd. in which he was the director. He said that the said firms have ceased to function on 31.03.2006. A perusal of pages 6 & 7 of the AO's order which is the report dated 07.12.2009 of the ITI clearly mentions, "As per your direction I went to Delhi on 04.12.2009 to serve the notices u/s 133 (6)..........." and so the said statement clearly repels the allegation of the assessee that the ITI has not gone to the locations situated at Delhi on 04.12.2009 and instead, had made the reports from his office only. Secondly, in this modern age, taking into consideration, the advancement in communication and technology, nothing prevented the ITI to have spoken to the AO the result of his investigation on 04.12.2009 itself and the report being submitted on later date i.e. on 07.12.2009. We do not find anything more to read in respect to the notice dated 04.12.2009 of the AO mentioning about the ITI's information regarding his investigation done on 04.12.2009. The fate of the argument of the assessee fails on the same reason in which it had raised similar allegation in respect to AO's show- cause notice dated 17.12.2009 wherein he mentioned about the ITI report dated 18.12.2009. Moreover, we find that several other reports also of the ITI dated 8.12.2009 (from pages 8 to 13 of the AO's order) another report of ITI dated 17.12.2009 (page 17 to 21) also on record. So it cannot be said that AO could have mentioned post-dated facts only when the fact remains he had other reports of ITI before him. So, therefore, reports of the ITI cannot be discredited simply because AO is privy to the factual aspect in respect to the investigation conducted by the ITI which was reported in writing on a later date. Therefore, merely because the 57 ITA No.3401/Del/2011 report of the investigation has been submitted on a later date does not in any manner calls for drawing any adverse inference against the said report. As per section 114(e) of the Evidence Act, a presumption in favour of the official acts in discharge of duty has to be inferred in absence of any rebuttable evidence to contradict the said presumption. Nothing more can be read into it to discredit the same. As per section 114, the Court may presume the existence of any fact which it thinks likely to have happened, regard had to the common course of natural events, human conduct, and public and private business, in their relation to the facts of the present case. Illustrations : The Court may presume -
(a) .....
(b) .....
(c) .....
(d) .....
(e) that judicial and official acts have been regularly performed.
The rule embodies in the illustration flows from the maxim omnia praesumuntur rite et solemniter esse acta, i.e., all acts are presumed to have been rightly and regularly done. "The true principle intended to be conveyed by the rule, 'omnia praesumuntur rite et solemniter esse acta,'. The court cited the following passage from Herbert Broom's A SELECTION OF LEGAL MAXIMS : "In these cases the ordinary rule is that everything is presumed to be duly and rightly performed until the contrary is shown. The following may be mentioned as general presumptions of law illustrating this maxim : that a man, in fact acting in a public capacity, was properly appointed and is duly authorized so to act; that in the absence of proof to the contrary, credit should be given to public officers who have acted prima facie within the limits of their authority, for having done so with honesty and discretion."
58 ITA No.3401/Del/201130. Admittedly the assessee was in receipt of the ITI report from AO, however the assessee has not led any other evidences to prove that ITI report was factually wrong, without addressing the said factual aspect, the assessee is seen raising allegations that certain letters of AO, mentions about post-dated reports of ITI, which according to us has no substance or merit and so it has to be rejected for the reasons as aforestated. Likewise, the CIT (A) has criticised the manner of enquiry conducted by the ITI on 08.12.2009 wherein he takes note that the ITI has enquired from the tea vendors, fruit vendors and passer-by in order to ascertain the addresses of the share applicants and has tried to water-down the enquiry which, according to us, is not the right manner of looking into the matter where the ITI is the best person on the ground to find out about a fact which he has been asked to investigate or enquire. The ITI has gone to the addresses given by the assessee of the shareholders and has found after verifying from the addresses that the shareholders are not residing or not functioning from the said addresses. It is natural that in order to locate the persons at a particular address or find out more about the said persons in this case he might have made certain enquiries from the shopkeepers who are functioning in the concerned areas / premises in no manner affects the credibility of the physical verification done by the ITI ; and moreover it is a direct evidence given by a public official about a question of fact which he was entrusted by his superior officer to verify i.e., whether the purported share holder is existing or not as claimed by the assessee. Rather criticising the investigation done by the ITI, the assessee should have given the correct addresses of the share applicants, if any, or should have made an endeavour to bring the shareholders before the AO, since the onus of proving the identity itself have shifted from the AO to assessee after the first round of investigation done by the AO. Likewise, the ld. CIT (A) has made an observation that much credence need not be given to Shri 59 ITA No.3401/Del/2011 Sardar Surender Pal Singh statement that the two companies, in which he was the director, have ceased to function from March 2006, since the assessee during the appellate proceedings before him had filed the audited balance sheets of the said companies to prove that the said companies are still in existence. Here, we would like to point out that in no manner, the statement of Shri Sardar Surender Pal Singh can be shot down because audited balance sheet of the company were filed before the ld. CIT (A) for the simple reason that before the assessment was completed, the assessee was aware of the said statement of Shri Sardar Surender Pal Singh and did not do anything to disprove the said statement of Shri Sardar Surender Pal Singh that the said two companies have ceased to function from March 2006 and moreover the document filed before CIT(A) was that of subsequent assessment years i.e. FY 2007-08 i.e. AY 2008-09 and not that of the relevant assessment year. Not only that if audited balance sheets are filed after the statement was recorded on 04.12.2009 can be termed as an afterthought and in no manner, will affect the credibility of the statement given by Shri Sardar Surender Pal Singh on 04.12.2009. So, we are of the opinion that the ld. CIT (A) erred in giving such a finding based on irrelevant material like document pertaining to subsequent assessment years, which is not legally tenable and on the facts and circumstances we cannot discard the statement of Shri Sardar Surender pal Singh given on 04.12.2009 to the ITI.
31. The ld. CIT (A) dealt with the report of the handwriting expert at page no.33 of his order that the reliance placed by the AO on the report of the handwriting expert cannot be given much weightage. We are also of the opinion that the said report of the handwriting expert need not be looked into while adjudicating the issue before us. Therefore, we do not wish to dwell into the opinion rendered by the handwriting expert in this matter.
60 ITA No.3401/Del/201132. Coming to the AO's investigation of the PAN on Assessee Information System (AIS), we find that the CIT (A) has held that since the assessee has provided photocopies of the PANs/ITRs and details of the PAN from NSDL sites, reliance placed by the AO on AIS data-base is half-cooked and not conclusive. Here we would like to point out that the AO has searched into the AIS database and has held that while cross checking PAN details of the alleged investors, he found that the addresses furnished by the assessee in respect to the share applicants were different from those on the AIS or the PANs were simply invalid, that is all he has said. Here it should be remembered that assessee by furnishing the copy of PAN/ITRs to the AO has discharged its initial burden of proof in order to prove the identity of the investors, in that scenario, what the AO has done is to enquire about the veracity of the details furnished by the assessee which the AO is duty bound to do and which in this case was done by the AO. The AO had only 31 working days in his command to find out the truth/bonafide of the assessee's contention. Here, we find that the AO had looked into AIS database to find out whether the PAN/addresses given by the assessee match with that of the AIS system. Here we find that the addresses were either incorrect or different or the PANs were simply invalid. This finding of the AO cannot be disturbed unless the assessee is able to show that the PANs/ITRs details given by the assessee were correct and the report of the AO is factually wrong. Therefore, in the facts and circumstance of the case, we are of the considered opinion that the finding of the AO in respect to PAN details from the AIS data base cannot be brushed aside.
33. Now, let us see how the CIT (A) dealt with the information collected from the banks.
61 ITA No.3401/Del/2011LETTERS FROM THE BANK
34. We find that the AO had enquired from three Banks about nine share applicants/investors about their bank accounts which they had stated to have accounts and had submitted the bank statements to establish their creditworthiness. The banks have reported back (pages 51 to 53 of the AO's order) that there are no such accounts in these banks by these share holders / investors. The said report of Banks were handed over to the assessee by AO. However, the ld. CIT (A) after relying on the judgment of Hon'ble Delhi High Court in CIT vs. K.C. Fibres Ltd. - (2010) 187 Taxman 53 (Del.), has made the said finding "thus if the bank accounts of the aforesaid share applicants are non-existent, the appellant cannot be fastened with the liability. The share application money has been received through undisputed banking channels and the appellant has furnished copies of bank statements to establish the genuineness of transaction." We do not agree to the said erroneous finding of the ld. CIT (A). First of all, the ld. CIT (A) wrongly applied the case law of the decision of Hon'ble High Court to come to the aforesaid finding. CIT(A) has reproduced the following extraction from the said order of Hon'ble High Court :-
"It is strange that when the Assessing Officer is questioning the bona fides of M/s. Diamond Protein Ltd. for collecting money to subscribe to the share to the capital of the assessee, but it is the assessee who is fastened with the liability. The Assessing Officer did not question M/s. Diamond Protein Ltd. in this behalf. Insofar as Assessing Company is concerned, it is not disputed that money was paid to it towards the aforesaid share application money, by means of cheques. It is not for the Assessing Company to probe as to the source from where M/s. Diamond Protein Ltd. collected the aforesaid money. It was for the Assessing Officer, in these circumstances to inquire into the affairs of M/s. Diamond Protein Ltd. which is an independent company inasmuch as no finding is arrived at by the Assessing Officer that the two companies are umbrella companies or have any relationship with each other.....62 ITA No.3401/Del/2011
A perusal of the aforesaid order clearly shows that the ld. CIT (A) erred in appreciating the facts and ratio of the said case decided by the Hon'ble High Court.The facts and circumstances of that case was totally different and that was a case in which the share applicant, M/s. Diamond Protein Ltd. had issued cheque through bank and the assessee (M/s. K.C. Fibres Ltd) was fastened with the liability simply because assessee could not prove the source of source (i.e. source of fund of M/s. Diamond Protein Ltd. share-applicant) which is not the case before us. Here, the AO has not confronted the assessee to produce source of source of the shareholders who subscribed/ invested for the shares of the assessee. Here in this case, the AO has simply asked from the banks from which the assessee had claimed that the share applicants had bank accounts to prove their creditworthiness, whether it is true or not. The AO has simply verified about the veracity of the same as to whether they have bank accounts and bank statements submitted by them are correct. Pursuant to the said query from the AO, the banks had informed him that these share applicants do not have an account in their respective banks. Copy of the same is also a part of the assessment order. The ld. CIT (A) erred in relying on an observation of the Hon'ble High Court, without appreciating the facts and context of that case. Moreover, the said case-law has no bearing in the case in hand to brush aside the information given by the banks, so the finding of CIT(A) in this regard cannot be countenanced and, therefore, we hold that the information given by the banks are credible evidences to disprove the creditworthiness of the so called investors since the documents furnished by the assessee turned out to be bogus.
36. Coming to the next aspect which is the AO's finding that assessee failed to prove the identity, creditworthiness of the share applicants and genuineness of the transaction, we find the ld. CIT (A) has taken each companies and noted the AO's observations and the assessee's contentions from page nos.37 to 63 of his order 63 ITA No.3401/Del/2011 which is summarised below in a chart to have a bird's eye view and how the CIT (A) has dealt with the observations of the AO :-
Sl.No. Name of the Alleged Evidences for considering (i) genuineness of the Investors and the amount transaction, (ii) identity and (iii) creditworthiness of of share application money the share applicants. [Here please note, we have not considered the opinion of Handwriting Expert.] Reliance on the documents Reliance on the by the AO for not accepting documents by the CIT the aforesaid three points (A) for accepting the aforesaid three points
1. Anil Kumar Goel - The account number of Share application money Rs.4,98,000/- HDFC Bank Kashmiri Gate received by cheque/pay Branch (Delhi) through order No.002591 dated which the share application 08.08.2006 of Rs.248,000 money was allegedly & 002625 dated invested was never in 23.08.2006 of existence since the opening Rs.2,50,000/-.
of that Branch (July 2004) which was confirmed by the Documents submitted branch of the bank through before AO were copies of a letter (Page 53 of AO). application form, affidavit, bank account, Different address is given in ITR, PAN and Driving AIS data base. Licence Gross Total Income of Rs.94,200/- for AY 2005- 06.
2. Chandra Kanta - Rs.7,50,000 Bogus address of Delhi as Share application money verified by the Inspector. received by cheque/pay order No.00805 dated The account number of 14.08.2006 of Rs.350,000 HDFC Bank Chandani & 000817 dated Chowk Branch (Delhi) 19.08.2006 of through which the share Rs.4,00,000/-.
application money was
allegedly invested was Documents submitted
never in existence since the before AO were copies of opening of this Branch application form, which was confirmed by the affidavit, bank account, 64 ITA No.3401/Del/2011 branch of the bank through ITR, PAN and Ration a letter (Page 52 of AO). Card Different address in AIS data base and even the address given was found bogus on physical verification Gross Total Income of Rs.1,05,064/- for AY 2005- 06.
3. Manohar Lal Gupta - The account number of Share application money Rs.7,50,000/- HDFC Bank Chandni received by cheque/pay Chowk Branch (Delhi) order No.00806 dated through which the share 14.08.2006 of Rs.350,000 application money was & 000818 dated allegedly invested was 19.08.2009 of never in existence since the Rs.4,00,000/-.
opening of this Branch
which was confirmed by the Documents submitted
branch of the bank through before AO were copies of
a letter (Page 52 of AO). application form,
affidavit, bank account,
Different address is given in ITR, PAN and Ration AIS data base. Card.
Gross Total Income of Rs.1,00,045/- for AY 2005- 06.
4. Rahul Burman - Bogus address of Delhi as Share application money Rs.5,52,000/- verified by the Inspector. received by cheque/pay order No.002592 dated The account number of 14.08.2006 of Rs.252,000 HDFC Bank, Kashmiri Gate & 002627 dated Branch (Delhi) through 23.08.2006 of which the share application Rs.3,00,000/-.
money was allegedly
invested was never in Documents submitted
existence since the opening before AO were copies of of this Branch (July 2004) application form, which was confirmed by the affidavit, bank account, branch of the bank through ITR, PAN and Voter a letter (Page 53 of AO). Identity Card.
Different address is given in 65 ITA No.3401/Del/2011 AIS data base.
Gross Total Income of Rs.1,00,900/- for AY 2005- 06.
5. Saraswati Devi Goel - Bogus address of Delhi as Share application money Rs.5,52,000/- verified by the Inspector. received by cheque/pay order No.00803 dated The account number of 14.08.2006 of Rs.300,000 HDFC Bank, Chandni & 002624 dated Chowk Branch (Delhi) 23.08.2006 of through which the share Rs.2,50,000/-.
application money was
allegedly invested was Documents submitted
never in existence since the before AO were copies of opening of this Branch application form, which was confirmed by the affidavit, bank account, branch of the bank through ITR, PAN and Ration a letter (Page 52 of AO). Card.
Gross Total Income of Rs.1,05,118/- for AY 2005- 06. The given PAN is invalid according to AIS.
6. Saroj Aggarwal - Bogus address of Delhi as Share application money Rs.5,50,000/- verified by the Inspector. received by cheque/pay order No.00804 dated The account number of 14.08.2006 of Rs.250,000 HDFC Bank, Chandni & 002626 dated Chowk Branch (Delhi) 23.08.2006 of through which the share Rs.3,00,000/-.
application money was
allegedly invested was Documents submitted
never in existence since the before AO were copies of opening of this Branch application form, which was confirmed by the affidavit, bank account, branch of the bank through ITR, PAN and Ration a letter (Page 52 of AO). Card.
Gross Total Income of Rs.1,00,128/- for AY 2005- 06.
7. Sushma Goel - Rs.5,50,000/- Bogus address of Delhi as Share application money verified by the Inspector. received by cheque/pay 66 ITA No.3401/Del/2011 order No.970989 dated The account number of 14.08.2006 of Rs.250,000 Punjab National Bank, & 971065 dated Khari Baoli Branch, Delhi) 25.08.2006 of through which the share Rs.3,00,000/-.
application money was allegedly invested was not Documents submitted in existence at least since before AO were copies of 01.04.2006 which was application form, confirmed by the branch of affidavit, bank account, the bank through a letter ITR, PAN and Ration (Page 51 of AO). Card.
Different address is given in AIS data base.
Gross Total Income of Rs.1,05,054/- for AY 2005- 06.
8. Vivek Kumar Jain - Rs.6 The account number of Share application money lakhs Punjab National Bank, received by cheque/pay Khari Baoli Branch, Delhi) order No.970988 dated through which the share 14.08.2006 of Rs.200,000 application money was & 971064 dated allegedly invested was not 25.08.2006 of in existence at least since Rs.4,00,000/-.
01.04.2006 which was
confirmed by the branch of Documents submitted
the bank through a letter before AO were copies of
(Page 51 of AO). application form,
affidavit, bank account,
Gross Total Income of ITR, PAN and Voter
Rs.1,34,546/- for AY 2005- Identity Card.
06.
The given PAN is invalid
according to AIS.
9. Yogendra Kumar - Rs.3 Different address in AIS Share application money
laksh data base and even the received by cheque/pay
address given was found order No.970987 dated
bogus on physical 14.08.2006 of
verification Rs.3,00,000.
The account number of Documents submitted
Punjab National Bank, before AO were copies of
Khari Baoli Branch, Delhi) application form,
67
ITA No.3401/Del/2011
through which the share affidavit, bank account, application money was ITR, PAN and Voter allegedly invested was not Identity Card.
in existence at least since 01.04.2006 which was confirmed by the branch of the bank through a letter (Page 51 of AO).
Gross Total Income of Rs.1,00,784/- for AY 2005- 06.
10. Monika Goel - Rs. 3 lakhs Bogus address of Delhi as Share application money verified by the Inspector. received by cheque/pay order No.776975 dated Gross Total Income of 14.08.2006 of Rs.1,05,105/- for AY 2005- Rs.300,000.
06. Documents submitted before AO were copies of application form, affidavit, bank account, ITR, PAN and Ration Card.
11. Rakesh Kumar Aggarwal - Different address is given in Share application money Rs.2 lakhs AIS data base. received by cheque/pay order No.776974 dated Gross Total Income of 14.08.2006 of Rs.78,600/- for AY 2005- Rs.200,000.
06. Documents submitted before AO were copies of application form, affidavit, bank account, ITR, PAN and Ration Card.
12. Smt. Indira Devi - Rs.6 Bogus address of Delhi as Share application money lakhs verified by Inspector. received by cheque/pay order No.114524 dated Gross Total Income of 25.08.2006 of Rs.1,05,130/- for AY 2005- Rs.600,000.
06 Documents submitted
before AO were copies of
application form,
affidavit, bank account,
ITR, PAN and Ration
Card
68
ITA No.3401/Del/2011
13. Smt. Rekha Bansal - Rs.6 Bogus address of Delhi as Share application money lakhs verified by Inspector. received by cheque/pay order No.151817 dated Gross Total Income of 25.08.2006 of Rs.600000.
Rs.1,03,225/- for AY 2005-
06 Documents submitted
before AO were copies of
application form,
affidavit, bank account,
ITR, PAN and Ration
Card.
14. Ganesh Kumar - Rs.8 lakhs Different address in AIS Share application money data base and even the received by cheque/pay address given was found order No.296901 dated bogus on physical 11.08.2006.
verification of ITI.
Documents submitted Gross Total Income of before AO were copy of Rs.99,235/- for AY 2005-06 application form, copy of affidavit, copy of bank account, copy of ITR and copy of PAN.
15. Life Line Housing For AY 2005-06, filed Share application money Development Finance Co. return of income at received by cheque Ltd. - Rs.5 Lakhs Muzaffarnagar but did not No.404396 dated file any return of income for 11.08.2006.
subsequent assessment year.
Documents submitted Different address in AIS before AO were copies of data base and even the application form, address given was found affidavit, bank account, bogus on physical ITR for AY 2009-10, verification by ITI. audited balance sheet for FY 2007-08 i.e. AY Gross Total Income of 2008-09, investable fund Rs.13,339/- for AY 2005-06 with the applicant company were more than Rs.30 lakhs by way of paid-up capital, PAN, active status of the company from MCA site, incorporation certificate
16. Rabik Exports Ltd. - Rs.5 Different address in AIS Share application money Lakhs data base and even the received by cheque address given was found No.931620 dated bogus on physical 10.08.2006.
69 ITA No.3401/Del/2011verification.
Documents submitted
Gross Total Income of before AO were copies of
Rs.38,315/- for AY 2004- application form,
05. affidavit, bank account,
ITR for AY 2009-10,
According to Company audited balance sheet for
Master details (from FY 2007-08 i.e. AY
Registrar of Companies) the 2008-09, net investable company filed its last fund of Rs.730.00 lakhs, Balance Sheet on PAN, active status of the 31.03.2006. company from MCA site, incorporation certificate
17. Ria Marketing Services Pvt. Different address in AIS Share application money Ltd. - Rs.15 lakhs data base. received by cheque No.131834 dated Gross Total Income of 12.08.2006.
Rs.34,080/- for AY 2005-06
Documents submitted
The given PAN is not of the before AO were copies of said company but that of application form, Simarjeet Electronics Pvt. affidavit, bank account, Ltd. (Karol Bagh), Delhi. ITR for AY 2009-10, audited balance sheet as on 31.03.2005 for FY 2004-05, investable funds of Rs.55.72 lakhs, PAN, active status of the company from MCA site, certificate of name changed by the share applicant company
18. Salwan Developers & The Director of the concern, Share application money Promoters Pvt. Ltd. - Rs. 10 Shri Surender Pal Singh received by cheque lakhs stated that the company was No.751436 dated closed down in March 2006. 11.08.2006.
Gross Total Income of Documents submitted Rs.18,191/- for AY 2005- before AO were copies of
06. application form, affidavit, bank account, According to Company ITR, ITR for AY 2009-
Master details (from 09, audited balance sheet Registrar of Companies) the for FY 2007-08 i.e. AY 70 ITA No.3401/Del/2011 company filed its last 2008-09, investable funds Balance Sheet on of Rs.187.99 lakhs as per 31.03.2006. audited balance sheet as on 31.03.2008, PAN, The given PAN is invalid active status of the according to AIS. company from MCA site, incorporation certificate, PAN.
19. Yogson Impex Pvt. Ltd. - Bogus address of Delhi as Share application money Rs.5 lakhs verified by Inspector. received by cheque No.126649 dated Different address in AIS 12.08.2006.
data base and even the
address given was found Documents submitted
bogus on physical before AO were copies of
verification. application form,
affidavit, bank account,
Copy of ITR not submitted. ITR, ITR for AY 2009-
10, audited balance sheet
for FY 2007-08 i.e. AY
2008-09, the share
applicant company has
paid-up share capital +
reserve of Rs.55 lakhs,
PAN, active status of the
company from MCA site,
PAN.
20. Sahgal Fluidline Equipment Gross Total Income of Share application money Pvt. Ltd. - Rs. 5 lakhs Rs.2,046/- for AY 2004-05 received by cheque and not submitted ITR for No.934639 dated AY 2005-06 or 2006-07. 12.08.2009 of Rs.5,00,000.
The company had not filed
its Balance Sheet with Documents submitted
Registrar of Companies for before AO were copies of many years as the last application form, Balance Sheet date is not affidavit, bank account, given in Company Master ITR for AY 2009-10, as Details (from Registrar of per audited balance sheet Companies). for FY 2007-08 i.e. AY 2008-09, the applicant Company was in default of company has paid-up filing of Form DIN3/Form share capital + reserve of
32. Rs.83.50 lakhs, PAN, active status of the PAN is not in the said company from MCA site, 71 ITA No.3401/Del/2011 company's name and was in incorporation certificate.
the name of Sehaj Financial
Services Pvt. Ltd.
(Daryaganj) New Delhi.
21. B-Fin Lease (I) Private Ltd. The company had not filed Share application money
- Rs.10 lakhs its Balance Sheet with received by cheque
Registrar of Companies for No.767613 dated
many years as the last 17.08.2006 of
Balance Sheet date is not Rs.5,00,000.
given in Company Master
Details (from Registrar of Documents submitted
Companies). before AO were copies of
application form,
Different address is given in affidavit, bank account, AIS data base. ITR, as per audited balance sheet for AY Gross Total Income of 2008-09, the applicant Rs.1,667/- for AY 2004-05 company has paid up and did not submit ITR for share capital + reserve AY 2005-06 or 2006-07. Rs.152.00 lakhs, PAN, active status of the company from MCA site, incorporation certificate.
22. Shatarchi Finance & Leasing The company had not filed Share application money Ltd. - Rs.15 lakhs its Balance Sheet with received by cheque Registrar of Companies for No.932775 dated many years as the last 10.08.2006 of Balance Sheet date is not Rs.5,00,000 and 934565 given in Company Master dated 17.08.2006 of Details (from Registrar of Rs.10,00,000/-.
Companies).
Documents submitted Company was in default of before AO were copies of filing of Form DIN3/Form application form,
32. affidavit, bank account, ITR, ITR for AY 2008- Different address is given in 09, as per audited balance AIS data base. sheet for FY 2007-08 i.e. AY 2008-09, the Gross Total Income of applicant company has Rs.3,096/- for AY 2005-06. paid up share capital + reserve of Rs.88.35 lakhs, PAN, active status of the company from MCA site, incorporation certificate.
23. VPS Valves & Tubes Private The company had not filed Share application money 72 ITA No.3401/Del/2011 Limited - Rs.10 lakhs its Balance Sheet with received by cheque Registrar of Companies for No.934509 dated many years as the last 17.08.2006 of Balance Sheet date is not Rs.10,00,000.
given in Company Master
Details (from Registrar of Documents submitted
Companies). before AO were copies of
application form,
Different address is given in affidavit, bank account, AIS data base. ITR for AY 2008-09, as per audited balance sheet Copy of ITR not submitted for FY 2007-08 i.e. AY by the company. 2008-09, the applicant company has paid up share capital + reserve of Rs.209.70 lakhs, PAN, active status of the company from MCA site, incorporation certificate.
24. MLF Classic Finance For AY 2005-06, filed Share application money Limited - Rs.10 lakhs return of income at received by cheque Muzaffarnagar but did not No.180844 dated file any return of income for 19.08.2006 of subsequent assessment year. Rs.10,00,000.
Gross Total Income Nil for Documents submitted
AY 2005-06. before AO were copies of
application form,
The given PAN is invalid affidavit, bank account, according to AIS. ITR for AY 2008-09, as per audited balance sheet as on 31.03.2008 i.e. AY 2008-09, the applicant company has paid up share capital + reserve Rs.49.45 lakhs, PAN, active status of the company from MCA site, incorporation certificate.
25. Monisha Granite Limited - Inquiry letter u/s 133 (6) Share application money Rs.20 lakhs sent through registered post, received by cheque returned unserved when No.572267 dated posted to the Delhi address 18.08.2006 of of the company. Rs.1000000, 572266 dated 18.08.2006 of Different address is given in Rs.500000 and 572265 73 ITA No.3401/Del/2011 AIS data base. dated 18.08.2006 of Rs.500000.
Gross Total Income of
Rs.15,110/- for AY 2005- Documents submitted
06. before AO were copies of
application form,
affidavit, bank account,
ITR for AY 2009-10, as
per audited balance sheet
as on 31.03.2008 i.e. AY
2008-09, the applicant
company has paid up
share capital + reserve
Rs.451.40 lakhs, PAN,
active status of the
company from MCA site,
incorporation certificate.
26. M.V. Marketing Private The company had not filed Share application money Limited - Rs.10 lakhs its Balance Sheet with received by cheque Registrar of Companies for No.940185 dated many years as the last 22.08.2006 of Balance Sheet date is not Rs.10,00,000/-.
given in Company Master
Details (from Registrar of Documents submitted
Companies). before AO were copies of
application form,
Different address is given in affidavit, bank account, AIS data base. ITR for AY 2009-10, as per audited balance sheet Gross Total Income of as on 31.03.2008 i.e. AY Rs.2,08,881/- for AY 2004- 2008-09, the applicant
05. The company did not company has paid up submit ITR for AY 2005-06 share capital + reserve of or 2006-07. Rs.152.00 lakhs, PAN, active status of the company from MCA site, incorporation certificate
27. Prakartik Hotels Private For AY 2005-06, filed Share application money Limited - Rs.10 lakhs return of income at received by cheque Muzaffarnagar but did not No.148470 dated file any return of income for 22.08.2006 of subsequent assessment year Rs.10,00,000/-.
and the inquiry of the
Inspector at the address Documents submitted
given on ITR proved that before AO were copies of
the company never existed application form,
74
ITA No.3401/Del/2011
at that address. affidavit, bank account,
ITR for AY 2009-10,
Inquiry letter u/s 133 (6) PAN, active status of the sent through registered post, company from MCA site, returned unserved when incorporation certificate posted to the Delhi address of the company.
Different address is given in AIS data base.
Gross Total Income Nil for AY 2005-06.
28. SGC Publishing Private Bogus address of Delhi as Share application money Limited - Rs.10 lakhs verified by Inspector. received by cheque No.235376 dated Gross Total Income of 18.08.2006 of Rs.4,110/- for AY 2004-05 Rs.10,00,000/-.
and did not submit ITR for
AY 2005-06 or 2006-07. Documents submitted
before AO were copies of
The company had not filed application form,
its Balance Sheet with affidavit, bank account, Registrar of Companies for ITR for AY 2008-09, as many years as the last per audited balance sheet Balance Sheet date is not for 2007-08 i.e. AY given in Company Master 2008-09, the applicant Details (from Registrar of company has paid up Companies). share capital + reserve of Rs.84.50 lakhs, PAN, active status of the company from MCA site, incorporation certificate
29. UP Electricals Limited - Inquiry letter u/s 133 (6) Share application money Rs.20 lakhs sent through registered post, received by cheque returned unserved when No.581859 dated posted to the Delhi address 19.08.2006 of of the company. Rs.5,00,000/-, 581854 dated 18.08.2006 of Different address is given in Rs.10,00,000/- and AIS data base. 581855 dated 18.08.2006 of Rs.5,00,000/-.
Gross Total Income of
Rs.1,788/- for AY 2005-06. Documents submitted
before AO were copies of
application form,
75
ITA No.3401/Del/2011
affidavit, bank account,
ITR, ITR for AY 2008-
09, as per audited balance
sheet for 2007-08, the
applicant company has
paid up share capital +
reserve of Rs.434.40
lakhs, PAN, active status
of the company from
MCA site, incorporation
certificate
30. CV Metal Powders Different address is given in Share application money
(Haryana) Limited - Rs.8 AIS data base. received by cheque
lakhs No.930920 dated
Gross Total Income of 22.08.2006 of
Rs.9,360/- for AY 2005-06. Rs.8,00,000/-.
According to Company Documents submitted
Master Details (from before AO were copies of
Registrar of Companies) application form,
this company filed its last affidavit, bank account, Balance Sheet on ITR for AY 2008-09, as 31.03.2005. per audited balance sheet for FY 2007-08 i.e. AY 2008-09, the applicant company has paid up share capital + reserve Rs.210.33 lakhs, PAN, active status of the company from MCA site, incorporation certificate
31. Dignity Finvest Private According to Company Share application money Limited - Rs.8 lakhs Master Details (from received by cheque Registrar of Companies) No.260826 dated this company filed its last 22.08.2006 of Balance Sheet on Rs.8,00,000/-.
31.03.2005.
Documents submitted Different address is given in before AO were copies of AIS data base. application form, affidavit, bank account, Gross Total Income of ITR for AY 2008-09, as Rs.3,867/- for AY 2005-06. per audited balance sheet for 2008-09, the applicant company has paid up share capital + reserve of 76 ITA No.3401/Del/2011 Rs.100.02 lakhs, PAN, active status of the company from MCA site, incorporation certificate
32. Ethnic Creation Private The company had not filed Share application money Limited - Rs.11 lakhs its Balance Sheet with received by cheque Registrar of Companies for No.021991 dated many years as the last 22.08.2006 of Balance Sheet date is not Rs.11,00,000/-.
given in Company Master
Details (from Registrar of Documents submitted
Companies). before AO were copies of
application form,
Company was in default of affidavit, bank account, filing of Form DIN3/Form ITR, ITR for AY 2008-
32. 09, as per audited balance sheet for 2007-08 i.e. AY Different address is given in 2008-09, the applicant AIS data base. company has paid up share capital + reserve of Gross Total Income of Rs.90.00 lakhs, PAN, Rs.20,068/- for AY 2004-05 active status of the and did not submit ITR for company from MCA site, AY 2005-06 or 2006-07. incorporation certificate
33. Unique Insulation & Thermo The company had not filed Share application money Packaging Private Limited - its Balance Sheet with received by cheque Rs.7 lakhs Registrar of Companies for No.935306 dated many years as the last 22.08.2006 of Balance Sheet date is not Rs.7,00,000/-.
given in Company Master
Details (from Registrar of Documents submitted
Companies). before AO were copies of
application form,
Different address is given in affidavit, bank account, AIS data base. ITR, ITR for AY 2008- 09, as per audited balance Gross Total Income of sheet for 2007-08 i.e. AY Rs.4,581/- for AY 2004-05 2008-09, the applicant and did not submit ITR for company has paid up AY 2005-06 or 2006-07. share capital + reserve Rs.125.46 lakhs, PAN, active status of the company from MCA site, incorporation certificate
34. Keshri Industrial Lab Private Inquiry letter u/s 133 (6) Share application money Limited - Rs.30 lakhs sent through registered post, received by cheque 77 ITA No.3401/Del/2011 returned unserved when No.000278 dated posted to the Delhi address 19.08.2006 of of the company. Rs.15,00,000/- and 000279 dated 19.08.2006 The company had not filed of Rs.15,00,000/-.
its Balance Sheet with
Registrar of Companies for Documents submitted
many years as the last before AO were copies of
Balance Sheet date is not application form,
given in Company Master affidavit, bank account, Details (from Registrar of ITR for AY 2008-09, as Companies). per audited balance sheet for 2008-09 PAN, the Different address is given in applicant company has AIS data base. paid up share capital + reserve Rs.60.00 lakhs, Gross Total Income Nil for active status of the AY 2005-06. company from MCA site, incorporation certificate
35. Particular Manage Finlease Inquiry letter u/s 133 (6) Share application money (India) Private Limited - sent through registered post, received by cheque Rs.15 lakhs returned unserved when No.266056 dated posted to the Delhi address 24.08.2006 of of the company. Rs.8,00,000/- and 266057 dated 24.08.2006 of The company had not filed Rs.7,00,000/-.
its Balance Sheet with
Registrar of Companies for Documents submitted
many years as the last before AO were copies of
Balance Sheet date is not application form,
given in Company Master affidavit, bank account, Details (from Registrar of ITR for AY 2007-08, Companies). PAN, active status of the company from MCA site, Company was in default of incorporation certificate. filing of Form DIN3/Form
32. [Regarding creditworthiness, the CIT Different address is given in (A) says it was contended AIS data base. that audited balance sheet as on 31.03.2004.
Gross Total Income of Company had a share Rs.1,590/- for AY 2004-05 capital + Reserve of and did not submit ITR for Rs.45 lakhs.] AY 2005-06 or 2006-07.
36. Rizzer Exim Private Limited Bogus address of Delhi as Share application money 78 ITA No.3401/Del/2011
- Rs.15 lakhs verified by Inspector. received by cheque No.030026 dated The company had not filed 24.08.2006 of its Balance Sheet with Rs.7,00,000/- and 030027 Registrar of Companies for dated 24.08.2006 of many years as the last Rs.8,00,000/-.
Balance Sheet date is not
given in Company Master Documents submitted
Details (from Registrar of before AO were copies of Companies). application form, affidavit, bank account, Company was in default of ITR for AY 2008-09, filing of Form DIN3/Form audited balance sheet for
32. 2008-09, PAN, active status of the company Different address is given in from MCA site, AIS data base. incorporation certificate Gross Total Income of Rs.3,820/- for AY 2005-06.
37. Satwant Singh Sodhi The Director of the concern, Share application money Construction Pvt. Ltd. - Shri Surender Pal Singh received by cheque Rs.16 lakhs stated that the company wasNo.571983 dated closed down in March 2006. 25.08.2006 of Rs.10,00,000/- and Bogus address of Delhi as 571982 dated 22.08.2006 verified by Inspector. of Rs.6,00,000/-.
Gross Total Income of NIL Documents submitted
for AY 2005-06. before AO were copies of
application form,
According to Company affidavit, bank account,
Master Details (from ITR for AY 2008-09, as
Registrar of Companies) per audited balance sheet this company filed its last for FY 2007-08 i.e. AY Balance Sheet on 2008-09, the applicant 31.03.2005. company has paid up share capital + reserve Company was in default of Rs.100.00 lakhs, PAN, filing of Form DIN3/Form active status of the
32. company from MCA site, incorporation certificate 79 ITA No.3401/Del/2011
37. We find a common thread in each of the alleged share applicants who are juristic personalities i.e. incorporated private limited companies when the matter came before the CIT(A). The AO noted that these companies were not existing in FY 2006-07 relevant to AY 2007-08 under consideration because the balance sheets were not filed after AY 2005-06 or return of income were not filed or the ITI could not find the purported share holders / investors in the addresses given by the assessee, therefore, it was held that they were not existing in the FY under consideration. Here, we find that the ld. CIT (A) has relied on the audited balance sheet for the FY 2007-08 i.e. AY 2008-09 and the copy of the ITR of AY 2009-10 to uphold that the share applicant / investor companies are existing companies and the audited balance sheet show that the share applicants companies had enough paid up capitals and reserves to subscribe for the shares from the assessee's company. Though we find that cheque numbers which are dated between 10.08.2006 to 25.08.2006 have been mentioned by the ld. CIT (A) to uphold the genuineness of the transaction, however, we are unable to accept the said reasoning and finding of ld. CIT (A) because the assessee failed to prove the identity of the share applicants by adducing evidences of their existence at the addresses or by cogent materials before the AO. The PAN details were wrong. The transactions from the bank which were claimed to have transacted the share application money has been found to be bogus and even during the remand proceedings, the assessee failed to produce even a single share applicant before the AO. In the said scenario, the ld. CIT (A) accepting the audited balance sheet for FY 2007-08 i.e. AY 2008- 09 which is subsequent assessment year is not acceptable. The assessee cannot say that it did not had sufficient time to discharge its burden in respect to the share capital money which has come to its account. We find that the AO had investigated the matter fairly and had given enough opportunities to the assessee to come clean with the identity, creditworthiness and genuineness of the transaction.
80 ITA No.3401/Del/2011We find that the AO had given sufficient notice and furnished the enquiry reports to the assessee at various stages to show that he was not satisfied with the documents filed by the assessee before the AO. The AO has disproved the evidences brought by the assessee to discharge its burden of proof, which show that the assessee failed to discharge its burden of proof in respect to share application money which has come into its account. The CIT (A) erred in taking the audited balance sheet of subsequent assessment year and documents to prove the creditworthiness which was filed before him to prove the existence of the said companies and individuals.
38. Another argument based on case-laws was emphasized by the ld. AR that the AO erred in not appreciating the fact that the book entry in the assessee's account is on account of share capital and the law is very clear that in case of any doubt with regard to the genuineness of the said amount then it should be taxed in the hands of the investor/shareholder and not that of the assessee company and the CIT (A) has in fact given such directions, so CIT (A) order is valid in the eyes of law. We do not subscribe to the said contention of the ld AR because the case-laws cited are those cases in which the public issue of shares are done and public at large subscribe to the shares, then there is a disability for the public limited company to verify each and every subscriber but that is not how a private limited company shares are allotted and its shares are closely held. The private limited company generally allows the shareholding only to persons who are closely known to them. So, therefore, the contention of the ld. AR cannot be countenanced because assessee in this case is a private limited company and has admitted in its correspondence with the AO that the investors were close friends and business associates. The case laws relied upon by the ld. AR as aforestated pertains to cases where public issue of shares are involved and the case laws regarding share 81 ITA No.3401/Del/2011 subscription of Public Limited company stands on a different footing than the share application money in the context of private limited company and, therefore, the case laws relied on by the ld. AR does not apply to the case in hand.
39. Coming to the contention of the ld. AR that the non-adherence to the request of the assessee to cross examine the Income-tax Inspector whose reports in respect to his visit at the addresses furnished by the assessee has been taken by the AO to disbelieve the identity of the shareholders has vitiated the ITI report and should not have been taken into consideration by the AO to discredit the identity of the shareholders. Likewise, the lack of cross examination of the handwriting expert and the bank managers of Punjab National Bank and HDFC Bank have vitiated their respective letters/reports based on which the AO has disbelieved the documents furnished by the assessee and made the impugned additions. Here, we would like to point out that the cross examination of the ITI has in no way vitiated the finding reported by the ITI because the ITI has only visited the premises/ addresses given by the assessee to cross check the veracity of the claim of the assessee. We find that the AO, after receiving the report of the ITI, has given a copy of the said report to the assessee to controvert/rebut the finding, if any, by other evidences (direct or indirect) to disprove the said report of the ITI or to give correct addresses or the latest addresses of the shareholders if there is a change in address. Thus, it cannot be taken as the AO had taken the ITI report at the back of the assessee for making the impugned addition. Here, it should be remembered that the ITI who was discharging the official duty and had only verified the question of fact as to whether the purported shareholders were residing/functioning from the said premises/addresses in order to prove the identity of the said shareholders as claimed by the assessee. The assessee had ample opportunity to disprove the report of the ITI by adducing evidences to either controvert the finding of the ITI in this respect or to bring the evidences to the effect that 82 ITA No.3401/Del/2011 shareholders were in fact residing/functioning at that address furnished by it, however has now shifted to a different address. It should be kept in mind that after the ITI report onus shifted back to the shoulder of assessee. Without discharging the onus upon it, we find that the assessee was trying to find fault with the manner of investigation conducted by the ITI by saying that he had asked from the shopkeepers, street vendors, etc. etc. On the above said factual scenario, we find that the cross examination of ITI was not necessary because burden of proof was casted upon the assessee to prove the identity of the shareholders for that the assessee had furnished addresses which were verified by the ITI who had found it to be wrong and presumption in favour of the ITI report as per section 114 (e) of the Evidence Act needs to be drawn, unless it has been rebutted by the assessee, who had ample time to disprove it, which the assessee failed to have done, so the burden was still on assessee as per law we have discussed earlier in the order. It should be noted that why we have observed that cross examination does not vitiate the impugned addition because, what the AO did was only cross-check the information adduced by the assessee in respect to the identity of the share-holders, which when enquired by the ITI was found to be false. So, no new evidence has been brought in by the AO, to mulct the impugned additions.
40. Coming to the similar attack on the opinion of the handwriting expert to have been vitiated for lack of cross examination, since we have not considered the report of the handwriting expert to adjudicate this issue so we are not going into the said contention of the ld. AR. Here also, we would like to point out that the handwriting expert's view is basically based on the signatures given in the photocopy of the affidavits and he had compared it with the Income-tax returns of the purported shareholders. Nothing prevented the assessee to have produced the original of the affidavits and also to produce the persons who had signed the affidavits before the AO and could have proved the authenticity of the affidavits as 83 ITA No.3401/Del/2011 per section 73 of the Indian Evidence Act. Rather than doing so, the assessee had been pointing out the objections in respect to the handwriting expert's opinion. Since we are not taking into consideration the opinion of the hand-writing expert, we are not going to look in to the said objection against it.
41. Similarly, we find that the bank manager's letters to AO have been challenged for non-cross examination of the officers of the Punjab National Bank and HDFC Bank. Here also, we find that the assessee in order to prove the creditworthiness of the shareholders had provided the bank account numbers and bank statements of the shareholders (randomly selected 9 Nos.) which AO had sent to the respective banks which had been found to be false and bogus; and the copy of the said reports were handed over to the assessee for its explanation & further action. In case, the assessee felt that the bank manager's letters were factually wrong, rather than crying foul, the assessee then could have protested about it and produced the documents to prove that the shareholders in fact had bank accounts in the said banks. Without doing so, when the onus got shifted on the shoulder of the assessee, it had to discharge the same. Moreover even before the CIT(A), the assessee has not been able to bring anything on record to state that the bank's letters stating that the alleged share holders / investors had no account, is factually wrong. In the absence of the same, the burden of proof has not been discharged by the assessee, to prove the creditworthiness of the share holders. It may be noted here also that the AO has not brought any fresh evidence to discredit the share- holders, he only cross-verified the document i.e. bank statement submitted by the assessee to prove the creditworthiness of the share-holders, so without adducing evidence to prove that the said share-holder had bank account in the said bank branches, the inference drawn u/s 114(e) is in favour of the said letters wrote by the bank managers and without the factual rebuttal of the contents of the letters, the 84 ITA No.3401/Del/2011 lack of cross-examination in no manner affects the veracity of the said letters of the bank officer.
42. The ld. AR also brought to our notice that during remand proceedings, six shareholders have replied to the AO as noted by the AO in his remand report, so the identity was in fact proved of these six shareholders and three letters have not returned back, meaning they were received by the shareholders. In the said background, addition of the entire amount u/s 68 of the Act is not legally tenable. We have gone into the said contention of the ld. AR, however, nothing turns around as to the said contention because 6 investors had replied to the AO during remand proceeding as seen from the letter dated 20.01.2011 (Page 533 PB), because all those six alleged investors were private limited companies, who had been found to be defunct companies by the AO after examining the documents (Master data etc.). It is seen that when the assessee has failed at the hands of AO's investigation, these Private Limited Companies have been brought back to life after the impugned assessment order by filing statutory compliances and is claimed later during appellate proceedings (i.e. before the CIT (A)) as a running concern is clearly an afterthought and cannot be given any credence.
43. Lastly, we would like to deal with the plea of the ld. AR that in case of any doubt regarding the impugned order, the matter may be remanded, if necessary, back to the AO then the AO can satisfy himself about the identity, creditworthiness and genuineness of the transaction as found by the ld. CIT (A). This prayer cannot be granted for the simple reason that lot of water has flown the Ganges after the impugned assessment order. Lot of developments have taken place after the addition of Rs.3.46 crores u/s 68 of the Act. We find that the defunct companies at the time of assessment, as pointed out by the AO, have resurrected back to life after statutory compliances were fulfilled; and the said documents were furnished before the ld. CIT (A) who has erred in relying upon it to delete the addition. So, 85 ITA No.3401/Del/2011 therefore, we cannot allow such a prayer of the assessee for the simple reason that the AO had demolished the case of the assessee to prove the identity, creditworthiness and genuineness of the alleged shareholders. So we are not inclined to send the case back to the AO again for fresh adjudication.
44. In the light of the aforesaid facts and circumstances of the case, we find that AO has given reasoned order which we are inclined to uphold and thereby we reverse the order of the ld CIT (A) and uphold the order of the ld AO.
45. In the result, the appeal filed by the revenue is allowed.
Order pronounced in open court on this 11th day of September, 2015.
Sd/- sd/-
(R.S. SYAL) (A.T. VARKEY
ACCOUTNANT MEMBER JUDICIAL MEMBER
Dated the 11th day of September, 2015
TS
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT(A), Muzaffarnagar.
5.CIT(ITAT), New Delhi.
AR, ITAT
NEW DELHI.