CIT Vs. NIPUN BUILDERS AND DEVELOPERS PVT LTD

JUDGEMENT

(1.) This is an appeal by the revenue filed u/s. 260A of the Income Tax Act. It relates to the assessment year 2004-05. The assessee is a private limited company which filed its return on a figure of loss which was accepted u/s. 143(1). On the basis of a report of the investigation wing of the incometax department, the assessment was reopened u/s.147 on the ground that income chargeable to tax had escaped assessment, in as much as the share capital shown to have been received by the company was alleged to represent mere accommodation entries.

(2.) In the course of the reassessment proceedings, enquiries were sought to be made by the Assessing Officer (AO); summons u/s. 131 were issued on 14.09.2007 to the companies from whom the share capital was stated to be received and they were returned unserved with the remarks "no such company"; the inspector sent to the addresses for verification confirmed the fact. In view of this, the assessee was asked to produce the principal officer of the companies who had subscribed to the shares along with the relevant details. In response, the assessee filed a letter dated 21.11.2007 at the "dak" counter of the office of the AO stating that all the notices of the annual general meeting and call notices for shares were being sent to the same addresses of the share subscribers under certificate of posting and they have not come back unserved, implying that the share subscribers did exist at the addresses given to the AO. It was also submitted that the capital was subscribed through account payee cheques with valid share application forms, copies of the memorandum of association and board resolutions. It was pointed out that the registered offices of the companies could be found in the website www mca gov in. and the AO may visit the site for further verification.

(3.) These submissions were not accepted by the AO as constituting satisfactory explanation of the nature and source of the monies as required by Section 68 of the Act. He held that the genuineness of the transactions was not proved by the assessee and brought to tax the share application money of Rs. 1,47,00,000/- to tax; commission of 2.5% on the amount, which worked to Rs. 3,94,500/- was also added on the ground that the assessee would have paid the same to get the accommodation entries of share capital.