2024 (7) TMI 23 - AT - Income Tax

Assessee fails to prove identity and creditworthiness of investors under Section 68 for Rs. 45 lakh share application money

ITAT Raipur upheld addition under Section 68 for share application money received from six persons totaling Rs. 45 lakhs. The assessee company failed to ... Addition u/s 68 - share application money received from six persons - assessee failed to establish the identity, creditworthiness, and genuineness of the transactions - HELD THAT:-Amount claimed to have been received by the assessee company from Shri Munesh Kumar Pandey as the assessee company despite specific direction by the A.O had neither produced the said person nor substantiated the investment made by him as per requirement of Section 68 of the Act, therefore, the sum so received by the assessee company from the said person had rightly been held by the A.O as unexplained cash credit u/s. 68 of the Act. Amount received from Shri Mahavir Prasad Agrawal aforementioned person in his statement recorded u/s. 131 had admitted of having purchased 500 shares @Rs.100/- per shares, from his relative, viz. Shri Manoj Agrawal, director of the assessee company and the said investment is found to have been disclosed by the investor in his “balance sheet” (unsigned) for the year under consideration i.e. A.Y.2015-16 but there is nothing discernible from the record to substantiate to hilt the authenticity of the aforesaid investment as well as source from where the same was made by the said investor. Accordingly, as the investment claimed by the assessee company to have been made by the aforementioned person does not satisfy the statutory obligation cast u/s. 68 of the Act, therefore, we find no infirmity in the view taken by the A.O who had rightly held the same as unexplained cash credit. Amount received from Smt. Shanti Devi Agrawal as observed by the A.O, and rightly so, the return of income of the aforementioned person reveals meagre income and does not inspire any confidence as regards the investment claimed by the assessee to have been received from her. Also, the unsigned balance sheet of the aforementioned person as had been placed on record, Page 12 of APB does on the said stand alone basis either fortify the creditworthiness of the aforementioned person or the nature of income therein disclosed. Amount received from Shri Ajay Kumar Agrawal the assessee company had placed on record copies of return of income of the aforementioned person which reveals meagre income a/w. unsigned balance sheet, which, thus, does not inspire any confidence as regards the authenticity of the assessee’s claim of having received investment towards share application money of Rs. 5 lacs from the aforementioned person. Also, we find that the aforesaid person had in his statement recorded u/s. 131 on being queried about the investment made in the assessee company, had stated that though the director of the aforementioned company, viz. Shri Manoj Bansal was son of his aunt Smt. Mohini Agrawal but he was not sure about the investment made towards purchase of shares of the said company. In fact, he expressed his total unawareness about the transaction of investment in the assessee company. Amount received from Shri Vikash Agrawal we are of the view that though the aforementioned person had admitted the investment made by him towards share application money of Rs. 5 lacs with the assessee company and had also, come forth with an explanation as regards the source of the said investment, i.e., accumulated savings garnered over the last 4/5 years from the trading of paddy husk that was carried out by him, but we cannot remain oblivion of the fact that the said claim of the assessee is not substantiated on the basis of any clinching documentary evidence. We, thus, in terms of our aforesaid observations are of the considered view that the matter, in all fairness, requires to be restored to the file of the A.O who shall carry out necessary verification as regards the satisfaction of the requisite condition contemplated u/s. 68. Amount received from Shri Dinesh Kumar Agrawal assessee company had failed to discharge the onus that was cast upon it as per the “1st proviso” to Section 68 of the Act, i.e., the source out of which the aforesaid investment of Rs. 10 lacs was made by the aforementioned persons towards share application money (including premium) with it, therefore, the said amount had rightly been held by the A.O as unexplained cash credit u/s. 68 of the Act. Amount received from Smt. Mani Devi Kedia thus considering the meagre income as disclosed in the return of income by the aforementioned person a/w. no clear source of income out of which cash deposit of Rs. 10 lacs was made in her bank account clearly rules out any genuine investment made with the assessee company. We are unable to concur with the claim of the Ld. AR that as the aforementioned person had admitted to have made investment with the assessee company, no adverse inference with respect to the same could have been drawn by the A.O. We are of the view that as there is clear lack of any material which would substantiate the source from where the aforementioned person had made investment of Rs. 10 lacs with the assessee company, therefore, onus that was cast upon the assessee company as per “1st proviso” to Section 68 of the Act had not been discharged. Considering the aforesaid facts, we find no infirmity in the view taken by the A.O who had rightly held the amount of Rs. 10 lacs received from the aforementioned person as unexplained cash credit u/s. 68 of the Act. Issues Involved:1. Addition of Rs. 50,00,000/- under Section 68 of the Income-tax Act, 1961 on account of share application money.Issue-wise Detailed Analysis:1. Addition of Rs. 50,00,000/- under Section 68 of the Income-tax Act, 1961 on account of share application money:The assessee company filed its return for A.Y. 2015-16, declaring an income of Rs. 1,26,400/-. During scrutiny assessment, the Assessing Officer (A.O) observed that the assessee claimed to have received Rs. 50,00,000/- as share application money from seven parties. Summons were issued to verify the genuineness of these transactions. Six out of seven parties appeared and their statements were recorded under Section 131 of the Act. The A.O noted that the bank statements of these six persons showed immediate cash deposits before the investments, raising doubts about their financial creditworthiness. Consequently, the A.O added the entire amount of Rs. 50,00,000/- as unexplained cash credit under Section 68 of the Act.Upon appeal, the Commissioner of Income-Tax (Appeals) [CIT(A)] upheld the A.O's decision, stating that the assessee failed to establish the identity, creditworthiness, and genuineness of the transactions. The CIT(A) emphasized that merely claiming the A.O erred in making the additions was insufficient without verifiable evidence.The assessee further appealed to the Appellate Tribunal ITAT Raipur. The Tribunal examined the statements and financial documents of each investor:A. Shri Munesh Kumar Pandey (Rs. 4,00,000/-):The assessee failed to produce this investor before the A.O, and thus, his identity and the investment remained unsubstantiated. The Tribunal upheld the addition as unexplained cash credit.B. Shri Mahavir Prasad Agrawal (Rs. 8,00,000/-):Despite admitting the investment in his statement, there was no substantial evidence to verify the authenticity and source of the investment. The Tribunal upheld the addition.C. Smt. Shanti Devi Agrawal (Rs. 8,00,000/-):Her return of income showed meager earnings, and she denied making any investment with the assessee company in her statement. The Tribunal upheld the addition.D. Shri Ajay Kumar Agrawal (Rs. 5,00,000/-):He expressed unawareness about the investment in his statement, and his financial documents did not inspire confidence. The Tribunal upheld the addition.E. Shri Vikash Agrawal (Rs. 5,00,000/-):Though he admitted the investment and explained the source as accumulated savings from the sale of paddy husk, the Tribunal found the claim unsubstantiated by documentary evidence. The Tribunal remanded the matter back to the A.O for verification.F. Shri Dinesh Kumar Agrawal (Rs. 10,00,000/-):His financial documents revealed meager income, and he failed to provide a plausible explanation for the cash deposits preceding the investment. The Tribunal upheld the addition.G. Smt. Mani Devi Kedia (Rs. 10,00,000/-):Her financial documents showed meager income, and the cash deposits preceding the investment raised doubts. The Tribunal upheld the addition.The Tribunal concluded that the assessee failed to discharge the onus under Section 68 of the Act to explain the nature and source of the investments satisfactorily. Hence, the additions made by the A.O were largely upheld, except for the case of Shri Vikash Agrawal, which was remanded for further verification.Conclusion:The appeal was partly allowed for statistical purposes, with the Tribunal upholding the majority of the additions under Section 68 of the Act, except for one case remanded for further verification.