Income Tax Act, 1961

--Income from undisclosed sources--Addition under section 68 Genuineness of share application moneyAssessing officer noticed that assessee had received certain sum as share application money from the four parties and on being enquiries by the investigation wing and according to the materials in the form of returns, it was found that they were only accommodation entry providers therefore, asked assessee to lead evidence in support of its claim that amounts were received towards share capital money. On being submission by assessee of confirmations, copies of tax returns, bank statements etc. assessing officer noted that the amounts were in fact given by Mukesh Gupta and his associates, a group of entry operators whose statement was recorded under section 131 and also found that --- the assessee's authorized representative, during the course of hearings, furnished statements of various parties, including M/s. Mukesh Gupta, Ranjan Jassal etc. in which they had conceded to admit that the three companies – who were share applicants of the assessee – were not carrying on any business activity and no books of accounts had been maintained the deponents also stated that they were accommodation entry providers. Assessing officer observed that the --- analysis of the bank statements comprehensively established how cash had been deposited in one account and then the same had been routed through two or more accounts before the amounts had returned back to the assessee company in the garb of share application money. It was not sheer coincidence that multiple entities have accounts exiting in the same bank branch therefore, he added back that certain sum under section 68 and also added certain sum being 2.5% of the commission amount paid to the accommodation entry providers out of undisclosed income of the company. Held: Was justified as the pattern of founds moving into the accounts of those investors was common to each of them; the amounts were received within a few days or weeks before the shares were allotted; there was no material to show how they knew that shares could be purchased. Also, assessing officer's efforts to get them involved, through summons were unsuccessful. The applicant made no attempt to assist the assessing officer in these proceedings. While it was true that the assessing officer did look into the investigation report and did not allow cross examination of the individuals who made the statement under section 131 of the Act, that alone cannot be termed as a fatal infirmity in his order. Moreover, the material provided about the share applicants' financial and fiscal standing was sketchy; they did not respond to summons under section 131. Under these circumstances, the inferences drawn by the assessing officer were justified and warranted.

Income Tax Act, 1961 Section 68

In The DELHI High Court

S. Ravindra Bhat & R.V. Easwar,

CIT v. Neelkanth Ispat Udhyog Pvt. Ltd.

ITA 427/2012

30 July, 2012

Deepak Chopra, Harpreet Singh Ajmani, Sampat Sukumaran

S. Ravindra Bhat

1. The Revenue is aggrieved by the order of the Income Tax Appellate Tribunal (ITAT) dated 24-11-2011 in ITA No. 4194/Del/2011. The impugned order had rejected the Revenues appeal.

2. The following questions of law was framed for consideration at the time the matter was heard :