2016 (10) TMI 321

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....efore, which though had not been admitted by, the first appellate authority. The addition was on account of share application money received from various persons. The AO was of the view that the details filed by the assessee were only reproduction of that filed earlier, and it did not prove the capacity of the creditors or the genuineness of the credit transactions. He, accordingly, confirmed the addition, made at Rs. 80.43 lacs vide assessment dated 28.12.2007, i.e., except for Rs. 10 lacs credited to the account of M/s. Pushkaraj Packaging India (P.) Ltd., in view of the balancesheet and the return of income of that company, evidencing the payment, including its' source. In appeal, the ld. CIT(A) found that the assessee had filed confirmations, bearing verifiable addresses, from all the shareholders, which were not pursued by the AO, who only relied on his findings in the original assessment order to arrive at his conclusions, reproducing them in extenso. The addition being deleted thus, the Revenue is in appeal, raising the following Ground: '1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of Rs. 70,43,00....

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....rmation letter, copies of share applications, copies of Income tax Return of M/s. Pushkaraj Packaging India P Ltd. vii. Confirmation letter, copies of share applications, copy of relevant bank statement of M/s Pushkaraj Corporation, Prop Mrs Sharmila Kashid. viii Confirmation letters, copies of share applications of others including employees.' Confirmations, by themselves do not prove the credit (refer: Bharati P. Ltd. v. CIT (1978) 111 ITR 951 (Cal); CIT v. W. J. Walker & Co., (1979) 117 ITR 690, 694 (Cal); CIT v. United commercial & Industrial Co. (P.) Ltd., (1991) 187 ITR 596, 599 (Cal). The assessee is an unlisted company, whose shares are, therefore, illiquid. There is nothing on record to show that the share subscription had been sought in the course of raising share capital from the public, or by way of private placement, filing the requisite details (viz. Prospectus or, as the case may be, Statement in lieu of Prospectus, etc.) with the concerned Registrar of Companies. Apart from exhibiting its' genuineness, i.e., as a attempt to raise capital from the public following the due process of law, it serves to inform the proposed investor (shareholder) of ....

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....back. The material furnished by the assessee is thus hardly adequate for proving the genuineness (of the credit/s) and/or the capacity of the creditors. The AO, as observed by the ld. CIT(A), has also not examined or sought any further materials in the matter. We, accordingly, vacating the findings of both in relation to the credit for the balance Rs. 58.50 lacs, restore the matter back to the file of the AO to enable the assessee to, once again, establish the credit/s on the anvil of section 68 of the Act. We decide accordingly, and the Revenue gets part relief. Before parting, we may also note the assessee's reliance on the order by the Tribunal for A.Y. 2006-07 (in ITA No. 1162/Mum/2010 dated 18.4.2012/PB pgs. 1- 18). Whether or not an assessee has satisfactorily explained the genuineness of the credit is principally a matter to be decided on the basis of the explanation/s furnished as regards the nature and source of the impugned credit/s (which in the present case stands credited to the share application money account), together with evidences led in support. That is, is a finding of fact. In other words, whether the burden of proof, which is on the assessee-recipient, the ....

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....count, and not the ostensible source, and which may require an investigation into or examination of the money trail. Why, if that be so, the mere credit in the assessee's books of account in the name of another should be sufficient to accept it as a genuine credit (CIT vs. S. Kamaraja Pandian [1984] 150 ITR 703 (Mad), SLP against which stands dismissed in 155 ITR (St.) 66). A reproduction from the same would be elucidative: 'Under section 68 of the Income-tax Act, 1961, the assessee has to establish the identity of the creditor, the capacity of the creditor to advance the loan and the genuineness of the transaction in spite of the entries to that effect in the account books and if the assessee does not offer any explanation about the nature and source of the cash credits or the explanation offered is not satisfactory, then the cash credit may be charged to income-tax as the income of the assessee of that previous year. Only after the assessee prima facie establishes these things, the onus shifts to the department, but where the assessee merely establishes the identity of the creditor and nothing more, the cash credits can be treated as the income of the assessee from undis....