Per Mehar Singh, AM The Revenue filed appeal against the order of the ld. CIT A dated CI T A also deleted the addition of Rs. Aggrieved by the impugned order of the CI T Athe Revenue raised the following Grounds of Appeal:. CIT Aerred in law and on facts, in deleting the addition of Rs. The AO after affording 13 opportunities, to the assessee, made an addition of Rs. It was categorically observed by the AO that the assessee remained non-cooperative in the course of assessment proceedings. The AO invoked the provisions of Section 68 of the Act and made the impugned addition. The AO further observed that the assessee filed part of confirmations as is evident from a careful perusal of para 2. It is pertinent to reproduce the text of the findings recorded by the AO, on the issue in question:. It was f ound that the f ollo wing amount of share appl ication money was taken in cash during the year under consideration but no documentary evidence was produced from the 3 following persons:. In order to verif y the genuineness of share appl ication money, the assessee vide this off ice questionnaire dated From the facts it is absolutely clear that the assessee has intentionally not filed the requisite information for the reason best known to him although he was afforded ample opportunities as discussed above therefore, I have lef t with no 5 al ternative except to treat share application money of Rs. CI T Adeleted the impugned addition on the foundation of submissions made by the assessee wherein the assessee placed reliance on the decisions, such as CI T V Lovely Exports P Ltd. CCIT V Steller Investment Ltd. CCI T V Value Capital Services P Ltd. V DCI T 3 ITR Trib Patna and A-One Housing Complex Ltd. CI T Aalso referred to the remand report filed by the AO. Para 4 d of the impugned appellate order is relevant, as it highlights the findings of the ld. CI T A and the nature of material on which such findings are founded. For the purpose of ready reference and appreciation of the same, the said para is reproduced hereunder:. The detail of shareholders who have contributed to wards 6 the share capital of the company is as under: In the course of present appellate pvt, ld. DR referred to the provisions of Section 68 of the Act tersely highlighting that the provisions of Section 68 of the Act are wide in ambit and covers all kinds of receipts introduced by the assessee, in its books of account. CIT A has recorded in tabular form the names of the parties, amount and proof furnished by the assessee. DR brilliantly analyzed and highlighted the infirmities in the confirmations filed by the assessee in the Paper Book from page 1 to It was also vehemently contended that in a number of confirmations, the applicant had furnished the address of the assessee itself, for the reason best known to them. It was also clearly pointed out by the ld. DR that the assessee has furnished merely PAN number, in respect of such parties and none of the parties filed a photo copy or any evidence in respect of the return of income filed by them. Therefore, it was argued by the ld. It was, further, reiterated by the ld. In the final analysis, the ld. DR demonstrated before the Bench that the Hon'ble jurisdictional High Court, in the said decision after considering the ratio of the decisions of the Hon'ble Supreme Court, in the case of CIT V Steller Investment Ltd. C adjudicated the issue in favour of the Revenue. AR stated that the requisite details of identity and PAN number alongwith the confirmation had been filed. AR pleaded that the issue is covered by the decision of Hon'ble Supreme Court in the case of Lovely Exports P. We have carefully perused and considered the fact-situation of the case, rival submissions, including the case laws cited therein, the Paper Book filed by the assessee and the orders of the lower authorities. The 'AR' placed reliance on the decisions in the case of CIT V Lovely Exports P Ltd. CCI T V Steller Industries Ltd. The interpretation placed on the provisions of Section 68 of the Act, by the Hon'ble Full Bench of Delhi High Court, in the case of CI T V Sophia Finance Ltd. In this decision, the extent of applicability of the decision of CIT V Steller Investment Ltd. The relevant and operative part of the decision of the Delhi High Court in the case of Sophia Finance Ltd. The Hon'ble High Court in the case of Lovely Exports P Ltd. Hence, its ratio cannot be stretched to the extent that it pertains as a reflection on Section 68 of the Act when the enquiry pertained only to Section of the Act. Accordingly, it was observed by the Hon'ble High Court that the ratio decidendi of a case is determined by taking into account the facts treated by the judge deciding the case as being material, and that his decision is based thereon. The Court further observed that in Steller Investment Ltd. Consequently, the ratio laid down in 11 the case of Steller Investment Ltd. In view of the above, that the Division Benches cannot choose to navigate through waters which have already been voyaged, mapped and channeled by larger Benches. In the instant case, the assessee has recorded in its books of account the receipt of share capital contribution, in the name of certain persons. Consequently, primary onus lies on the assessee, to prove and establish that the receipt is not its income. The general rule is that onus of proof is always on the party who asserts a proposition or fact which is not self- evident. The burden of proof has two shades of meaning. In its primary sense, it means, the burden of establishing the case. The second meaning of, burden of proof is on the principle of evidence. In the second sense, the burden of proof would be shifted from one party to another as and when by adequate evidence, to discharge the burden that lay on a party, is produced by that party. In the present case, the assessee asserts that the receipt of share capital contributions from such parties does not represent income of the assessee. Consequentially, the onus squarely lies on the assessee, to establish its case, in the context of the provisions of Section 68 of the Act. In the context of Section 68 of the Act, it is a well settled legal proposition by various decisions of the Ltd Court that the onus of proving a sum of money found to have been received by the assessee is on him. If he disputes the liability for tax, it is for him to show either that the receipt 12 was not income or that if it was, exempt from taxation under the provisions of the Act. In the absence of such proof, the AO is entitled to treat it as taxable income where the AO has failed to prove satisfactorily the source and nature of credit entry appearing in its books of account and it is held that the relevant amount is income of the assessee, it is not necessary for the Department to locate its exact source. In the present case, the assessee was afforded effective, reasonable and more than adequate opportunities, to present its case. However, the assessee chose not to avail of such ltd and remained non-cooperative through-out the assessment proceedings. He also opted not to file requisite detail as called for by the AO. It was statutorily incumbent upon the assessee, to prove the genuineness of such transactions. The principle of natural justice embodied in the Latin maxim "Audi Alteram Partem" simply means that a person has a right to be granted an opportunity forex being heard, should be proper and reasonable so as to enable the person affected, to meet the case against him. It implies that only adequate and proper opportunity is required to be provided to the person and it does not mean to provide infinite opportunities to such person. It is inherent in the concept of natural justice that it pvt be stretched by a pedantic approach, to an absurd limit, particularly in respect of such person who is not willing to avail of such opportunities. The concept of natural justice is to be seen in the light of fairness and reasonableness and further, ludhiana same should be guided 13 and goaded by a rational, pragmatic and common sense approach. In the present case, factual matrix of the case reveals that the assessee remained unwilling to avail of such opportunities. Therefore, it is impossible to endlessly motivate such an assessee, to fastners of the opportunities, afforded to it, to meet the ends of justice. In a nut-shell, in the name ludhiana natural justice, unbridled latitude cannot forex allowed to a recalcitrant assessee and the revenue cannot be made to suffer prejudice, by an act of failure, on the part of the assessee. The concept of natural justice is applicable to the revenue as well. The assessee has placed reliance on a number of judicial precedents before the CIT Appeals. However, the assessee failed to demonstrate as to how, the factual situation of its case fits in the fact-situation of the judicial verdicts, on which it placed reliance. These observations of the Court must be read in the forex, in which they appear to have been made. Further, the ratio of any decision is determined by taking into account the facts treated by the judge deciding the case as being material and his decision is based thereon. The assessee or the Revenue is not justified in picking of a few sentences of any decision, out of context and then treating the same, as the true ratio of the said decision. In the present case, the assessee merely placed reliance on the various decisions, 14 without demonstrating the applicability thereof to the fact situation of the present case. In view of the above discussion, the reliance placed by the assessee, on various decisions is misplaced, and hence, the case of the assessee patently falls beyond the verdict of such decisions. We have heard ld. Counsel f or the appellant. According to him, the department could have proceeded against the individuals in whose name the share application money was deposited. He rel ied upon the ratio laid do wn by the Hon'ble Supreme Court in CIT V Lovely Exports P. C and fastners judgment of the Delhi High Court in ITA No. Counsel also urged that the disallo wance of Rs. Ashok Anand and Mrs. Raj Rani Anand under Section 36 1 iii of the Act was unsustainable. We do not f ind any substance in the submission made by ld. The Tribunal while upholding that the amount of Rs. During the year under consideration, the assessee had received Rs. The assessee was asked to furnish fastners details thereof. In reply the assessee furnished the names of persons as per Annexure II where mostly the amounts were shown to have been received from some names of village and P. Alewa, Jind, Haryana as noted by the Assessing Officer. The Assessing Officer was of the view that the assessee had failed to discharge primary onus to establish the identity, credit worthiness and genuineness of the transactions. The Assessing Officer observed that the assessee had not discharged the primary onus and on perusal of the information noted as under: Rekha Goal who has allegedly advanced an amount of Rs. The most important fact to be noted is that huge amounts in lakhs of rupees have been deposited in cash by non assessees having no PAN, without any photographs and without any evidence regarding their credit worthiness to advance such large amount in cash. The Assessing Officer invoked the provisions of Section 68 of IT Act and made the addition of Rs. Before the CIT A the stand of the assessee was that under the Company's Act the assessee can receive share application money either in cash or cheque. It was further submitted by the Ld. Counsel for the assessee before the 16 CIT A that the applicants did not possess any PAN and the copies of share application forms were furnished before the Assessing Officer, which had requisite details of the said person. It was further pointed out by the Ld. Counsel for the assessee that in view of the ratio laid down by the Hon'ble Supreme Court in CIT V. Lovely Export Pvt Ltd [ CTR S. C ] even though the share application money was received from alleged bogus share holders whose names were given, no addition can be made in the hands of the assessee company and action, if any, is to be taken only in the case of the share applicants. The CIT A further held that the assessee had failed to file the confirmation from the creditors and onus not being discharged, the addition merits to be upheld. The assessee company during the year under consideration had raised share application money of Rs. The entire share application money was received in cash and as per the claim of the assessee the sum was received from 28 persons. The assessee had furnished on record the copies of share application forms submitted for allocation of shares, copies of which are placed at pages 7 to 34 of the paper book. In some cases even the address were found to be incomplete. The issue pvt in the present ground came up for consideration before the Hon'ble Apex Court in CIT Vs. Lovely Exports P Ltd supra. The High Court while deciding the issue as reported in Lovely Exports P Ltd vs CIT ITR was of the view that in the context of section 68 of the Income Tax Act, the Assessing Officer has to prima-facie establish i the identity of the creditor. The Special Leave Petition filed by the Revenue against the said decision of the Court was dismissed by the Supreme Court vide its decision reported in CTR SCwhich reads as under: The Hon'ble Delhi High Court in CIT v Winstral Petro Chemicals Pvt Ltd ITA No. From the above said, it transpires that the onus is upon the assessee to establish the identity of the subscriber ltd relation to the share application money received. Where the assessee fails to establish the identity of the subscriber, the onus cast upon the assessee to prove that the credits are genuine does not stand discharged. The Assessing Officer during the course of assessment proceedings, on the perusal of the information furnished by the assessee found the assessee to have only disclosed the names of the persons and incomplete addresses were furnished by the assessee and some of the share applications were bearing only thumb impression. The total share application money was received in cash and not through banking channels and none of the said persons were income tax assessees nor had any PAN numbers. In the facts of the present case the assessee has failed to prove the identity of the subscriber and applying the ratio laid down in the case of Lovely Exports P Ltd suprawe are in conformity with the order of CIT A and uphold the addition of Rs. The assessee was unable to establish the identity, credit worthiness and the genuineness of the transaction so as to escape f rom the provisions of Section 68 of the Act. Whether an addition is to be made in the hands of the company or individual 19 assessee in such circumstances depends upon the f acts of each case. The primary onus lies upon the assessee to establish that the assessee is not liable f or addition under Section 68 of the Act as the amount in f act belongs to the persons who had applied and submitted share application money. The assessee having f ailed to discharge such onus in the present case, the Tribunal had rightly upheld the additions in the hands of the company. On the facts of the case, the Hon'ble High Court observed that the onus is on the assessee to establish the identity of the subscriber in relation to the share application money. In that case, share application was received in cash and none of the persons were assessed to tax. In the present case also, share application was received in cash and none of the applicant is assessed to tax. The applicants also furnished address of the assessee company as their addresses. Further, in the present case, no source of income has been furnished in the confirmatory letters. Therefore, under such fact situation, the findings of the Hon'ble High Court that "Whether an addition is to be made in the hands of the company or individual assessee in such circumstances depends upon the facts of each case," is applicable to the present case. The primary onus lies upon the assessee to establish that the assessee is not liable for addition under Section 68 of the Act, as the amount infact belongs to the persons who had applied and submitted share application money. The assessee failed to discharge such onus in the present case. The decision of the jurisdictional High Court is applicable to the facts of the present case. The jurisdictional 20 High Court has also appreciated the ratio of the Lovely Exports P Ltd. The Hon'ble Delhi High Court in I. A bare perusal of the decision reveals that in the case of Lovely Export P Ltd. The Hon'ble High Court, adjudicated the issue in favour of this assessee on the basis of above evidence as also keeping in view that the AO failed to refer to the assessment records of the applicant to controvert the documentary evidence filed. The Hon'ble Supreme Court dismissed the SLP of the revenue. In the present case, the share application money was not received through banking channels but in cash. The assessee failed to file evidence indicating that the applicants are assessed to tax. Mere filing of PAN is not sufficient and sacroscent evidence to establish the credit worthiness and genuineness of the transaction. All the applicants, except two, are housewives and one of them is minor and furnished company's address in 21 the confirmatory letter as their addresses. Therefore, having regard to the peculiar fact situation of the present case, it is respectfully submitted that the decision of the Hon'ble Supreme Court in the case of CI T V Lovely Export P. C is not application to ludhiana facts of the present case. The CI T Ain the impugned appellate order, recorded under the col. The CIT Aproceeded to adjudicate the issue in question in ludhiana of the assessee-appellant, on the basis of factually incorrect evidence. No such contention was raised even by the appellant before the AO, CIT A and the Bench. The assessee merely filed PAN, in respect of certain parties and at no stage, any documentary evidence establishing the factum that such parties were assessed to income tax, was filed. The issuance of PAN is not the same thing as filing if return of income by such parties. It is pertinent to add here that even the appellant never made such assertion that the parties are assessed to income-tax. Thus, the findings of the CI T A are founded purely on surmises, conjectures and non-existent evidence. The assessee failed to file the real address of such persons. It is also interesting to note that 22 ltd one or two, all the subscribers had furnished addresses of the assessee company. Further, such persons are residents of Ludhiana Town Punjab and none of them belong to any different place or State. Further, investment in the purchase of shares of the appellant was made in cash by all the parties. No statement of bank account in respect of such persons was filed. In the confirmation letters, no source of income has been indicated. Therefore, non-mentioning of source of income coupled with non-filing of income-tax returns by such parties cannot judicially establish their credit-worthiness and genuineness of transactions. The present assessee- appellant is unlisted company and not made any public issue. In view of the above, it is evident that the assessee failed to file reasonable, fastners and plausible explanation regarding nature and source of such receipts and this forex of explanation is construed as 'no explanation' by the Hon'ble Supreme Court in the context of Section 68 in the case of CIT V P. Mohanakala ITR S. The 23 addition on account of low GP made by the AO was deleted by the CIT A. We have carefully considered the rival submissions, facts of the case and the impugned orders of the lower authorities. Pvt pronounced in the Open Court on 19 t h Sept. R, Income-tax Department, Chandigarh Assistant Registrar, ITAT, Chandigarh. Main Search Premium Members Advanced Search Disclaimer. Cites 6 docs - [ View All ]. Commissioner Of Income Tax - Iv, Section 36 1 iii in The Income- Tax Act, Try out the Virtual Legal Assistant to take your notes as you use the website, build your case briefs and professionally manage your legal research. Also try out our Query Alert Service and enjoy an ad-free experience. Premium Member services are free for one month and pay only if you like it. Income Tax Appellate Tribunal - Chandigarh.
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