Brief of the case:
In the case of ACIT Vs. Prem Castings Pvt. Ltd. ITAT, Delhi Bench reversed the order of CIT (A) who deleted addition of Rs. 3,46,00,000/- after relying upon the decision of Hon’ble SC in the case of Lovely Exports (216 CTR 195) in which it was held that once the assessee has produced documents regarding identity, genuineness and creditworthiness of the share applicants, the onus of proving share application as bogus shifts on the revenue and department is free of open the assessment of share applicant but cannot made addition in the hands of the assessee. Tribunal also explained burden of proof 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 .
Facts of the case:
- 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, on book profit shown at Rs.21,77,195/-.
- In response to notice u/s 142 (1) 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.
- AO 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.
- 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.
- 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 AO 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.
Contention of the revenue:
Many investigations were made due to doubtful behaviour of assessee and response to notices and following facts were elaborated:
- As per handwriting expert signature on affidavit and ITRs of the share applicants were different.
- Assessee did not produce share applicants in response to notice but only filed photocopies of affidavit.
- Investigation with few banks showed that the veracity of the bank statement was turned into bogus.
- 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.
- 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
- 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.
- The assessee was issued a showcause notice 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 assessee was also directed to produce the original affidavits of the investors also.
- 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, which is very doubtful.
- 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.
- After making extensive investigation within the limited period left with him, the AO had rightly made the addition.
Contention of the assessee:
