Wednesday, January 29, 2014

PANs are issued without de-facto verification, these can’t solely divulge real identity of individuals

a)  On basis of some information from the Investigation Wing that assessee was identified as one of beneficiaries who had received bogus entries; notice under section 148 was issued to the assessee and it was required to furnish information in respect of persons who had been allotted shares;
b)  The assessee filed confirmation from the respective persons who had subscribed to the share capital;
c)  The Assessing Officer (‘AO’) held that the assessee had failed to discharge the onus in proving the identity of subscribers, genuineness of the transactions and the creditworthiness and, accordingly, made an addition in the hands of the assessee;
d)  The CIT (A) deleted the addition. Further, the Tribunal confirmed the said order. Aggrieved revenue filed the instant appeal.
The High Court held in favour of revenue as under:
1)  PAN is allotted on the basis of applications without actual de facto verification of the identity or ascertainment of the active nature of business activity;
2)  PAN is allotted as a facility to revenue to keep track of transactions and, thus, the PAN cannot be treated as sufficiently disclosing identity of the individual;
3)  The mere filing of share application was not enough as the said application was not an unimpeachable document and did not on its own prove the genuineness or authenticity of the transaction;
4)  Mere production of PAN or assessment particulars does not establish the identity of a person. The identification of a person includes the place of work, the staff and the fact that it is actually carrying on business and further recognition of the said company in the eyes of public;

5) Assessee had not been able to discharge the initial onus and had not been able to establish its identity and creditworthiness of the share applicants and the genuineness of the transaction. Thus, the assessee had not discharged the onus satisfactorily and the additions made by the AO were justified – CIT v. N Tarika Properties Investment (P.) Ltd [2013] 40 525 (Delhi)