AI Drafter 
TaxTMI 
TaxTMI 
2020 (3) TMI 595
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....corded also offers an explanation about nature and source of sum so credited and such explanation is found to be satisfactory. However, this proviso is applicable only from AY 2013-14 and the same is not retrospective in nature as held by Hon'ble Bombay High Court in the case of CIT Vs. Gagandeep Infrastructure Private Limited [80 Taxmann.com 272]. The said position has also been reiterated by Hon'ble Bombay High Court in its recent decision tilted as Gaurav Triyugi Singh V/s ITO (ITA No.1750 of 207, dated 22/01/2020) which also consider its earlier decision of Pr.CIT V/s Veedhata Towers Pvt. Ltd. (2018 403 ITR 415). 2. It is settled position of law that to avoid the rigors of Section 68, the assessee must prove the identity, creditworthiness of the lenders / investors to advance such monies and genuineness of the transactions. Once these three ingredients are fulfilled by the assessee, the primary onus casted upon him, in this regard, could be said to have been discharged and accordingly, the onus would shift upon revenue to dislodge the assessee's claim by bringing on record material evidences and unless this onus is discharged by the revenue, no addition could be sustained....
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....iness of the creditors. His further contention is that the assessee is also required to prove the source of the source. In this connection, he has placed reliance on a decision of the Supreme Court in Pr. CIT Vs. NRA Iron & Steel Pvt Ltd. He, therefore, submits that the finding returned by the Tribunal is wholly erroneous and requires to be interfered with by this Court. 11. Per contra, Mr. Padvekar, learned counsel for the respondent submits that from the facts and circumstances of the case, it is quite evident that assessee had discharged its burden to prove identity of the creditors, genuineness of the transactions and credit worthiness of the creditors. He submits that the legal position is very clear in as much as assessee is only required to explain the source and not source of the source. Decision of the Supreme Court in NRA Iron & Steel P Ltd (supra) is not the case law for the aforesaid proposition. In fact, the said decision nowhere states that assessee is required to prove source of the source. 11.1. Referring to the orders passed by the authorities below, Mr. Padvekar submits that in the present case, the investigation wing of the department had carrie....
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....the creditor / subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of name-lenders. iii. If the inquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack credit-worthiness, then the genuineness of the transaction would not be established. In such a case, the assessee would not have discharged the primary onus contemplated by Section 68 of the Act." 15. It is also a settled proposition that assessee is not required to prove source of source. In fact, this position has been clarified by us in the recent decision in Gaurav Triyugi Singh Vs. Income Tax Officer-24(3)(1). 16. Having noted the above, we may now advert to the orders passed by the authorities below. 17. In so far order passed by the Assessing Officer is concerned, he came to the conclusion that the three companies who provided share application money to the assessee were mere entities on paper without proper addresses. The three companies had no funds of their own and that the companies had not responded to the letters written to them which could have estab....
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....the companies were in existence and had filed income tax returns for the previous year under consideration but the Assessing Officer recorded that these creditors had very meager income as disclosed in their returns of income and therefore, doubted credit worthiness of the three creditors. Finally, Tribunal held as under: "5.7 As per the provisions of Section 68 of the Act, for any cash credit appearing in the books of assessee, the assessee is required to prove the following(a) Identity of the creditor (b) Genuineness of the transaction (c) Credit-worthiness of the party (i) In this case, the assessee has already proved the identity of the share applicant by furnishing their PAN, copy of IT return filed for asst. year 2010-11. (ii) Regarding the genuineness of the transaction, assessee has already filed the copy of the bank account of these three share applicants from which the share application money was paid and the copy of account of the assessee in which the said amount was deposited, which was received by RTGS. (iii) Regarding credit-worthiness of the party, it has been proved from the bank account of these three companies that they had the funds to....
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....ing of fact that assessee had discharged its onus of proving identity of the creditors, genuineness of the transactions and creditworthiness of the creditors which finding of fact stood affirmed by the Tribunal. There is, thus, concurrent findings of fact by the two lower appellate authorities. Appellant has not been able to show any perversity in the aforesaid findings of fact by the authorities below. 22. Under these circumstances, we find no error or infirmity in the view taken by the Tribunal. No question of law, much less any substantial question of law, arises from the order of the Tribunal. Consequently, the appeal is dismissed. However, there shall be no order as to cost. 4. Keeping abovesaid legal position in mind, we find that the assessee is under appeal before us for Assessment Years [in short referred to as 'AY'] 2011-12 & 2012-13 contesting the order of learned first appellate authority confirming certain addition u/s 68. ITA No. 631/Mum/2019, AY 2011-12 5.1 The assessee assails the order of Ld. Commissioner of Income- Tax (Appeals)-49, Mumbai [in short referred to as 'CIT(A)'], Appeal No. CIT(A)-49/IT-164/2017-18 dated 05/12/2018 on following ground....
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....oceedings. Subsequently, statutory notices u/s 143(2) & 142(1) were issued wherein the assessee was required to file the requisite details / information / documentary evidences etc. in support of certain transactions of Share Capital. 5.3 The reassessment proceedings were triggered pursuant to a search / seizure / survey action conducted by the department in the case of Lotus / Kamdhenu / Greenvalley group of cases wherein it transpired that the assessee received sum of Rs. 207 Lacs as Share Capital from certain Kolkata based companies. The same comprised-off of 20,70,000 equity shares of Rs. 10/- each totaling to Rs. 207 Lacs. The details of the same was as follows: - No. Name of Investor entity No. of Shares Allotted Money recd. As Share Capital 1. Limelight Dealcom P. Ltd. 1.5 Lacs Rs. 15 Lacs 2. Classic Commotrade P. Ltd. 0.5 Lacs Rs. 5 Lacs 3. Divy Prakash Suppliers Pvt. Ltd. 2.5 Lacs Rs. 25 Lacs 4. Goldy Dealcom P. Ltd. 2.5 Lacs Rs. 25 Lacs 5. Nextgen Tradecom P. Ltd. 1.8 Lacs Rs. 18 Lacs 6. Rexnox Trexim P. Ltd. 2.0 Lacs Rs. 20 Lacs 7. Rajlaxmi Dealcom P. Ltd. 1.8 Lacs Rs. 18 L....
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....arent business purposes. The retraction was nothing but an after-thought. Since, the assessee could not prove the source and nature of transactions, the stated amount was added to the income of the assessee u/s 68. 6.1 Aggrieved, the assessee assailed the action of Ld. AO on legal grounds as well as on merits. Challenging reassessment proceedings, the assessee submitted that the assessee's group had no connection with Lotus / Kamdhenu / Greenvalley group except that Shri Bhagwanji Patel of Lotus group was one of the ex-directors in one of the group companies of the assessee viz. Axayraj Buildwell Pvt. Ltd. and Shri Bhagwanji Patel ceased to be director of Axayraj Buildwell Pvt. Ltd. in 2009. The assessee submitted that in the absence of tangible material, Ld. AO had no jurisdiction to issue notice u/s 148. 6.2 However, the legal submissions challenging reassessment proceedings could not find favor with Ld. CIT(A) who observed that no scrutiny took place u/s 143(3) and there was no scope for Ld. AO to examine the share capital / share premium. The Ld. AO had authentic information by way of appraisal report of the search in the case of Lotus group and the assessee's admissions ....
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....he mala-fide intentions of the assessee. Any genuine company with a real motive of doing business would have a concrete object to be followed. Further, there was no justification for Kolkata based entities to make investment in Mumbai based entity and that too, at a premium of Rs. 90/- per share. At para 7.6, it was noted that all the entities purchased the shares of the assessee at premium of Rs. 90/-per share but they exited at face value of Rs. 10/- per share. Further, the retraction would not have any relevance in the light of decision of Mumbai Tribunal in Hiralal Maganlal and Co V/s DCIT (97 TTJ 377). The case laws being relied upon by the assessee were held to be distinguishable rather reliance was placed on the decision of Hon'ble Delhi High Court in Nova Promoters & Finlease Pvt Ltd. 342 ITR 169 to confirm the additions. Finally, the additions were confirmed by observing as under: - 7.8 The Learned Counsel also alleged that the AO made the addition on the basis of suspicion and not evidences. This also is not correct as the AO had brought in enough evidences both direct and corroborative to come to the conclusion that the share capital and premium received by the ....
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....ceedings as well as appellate proceedings, furnished following broad documentary evidences with respect to all the 11 entities: - (i) Share Application Form (ii) Copy of Cheque (iii) Copy of Cheque Deposit Slip (iv) Copy of investor's Bank Statement (v) Copy of Share Certificate Counterfoil (vi) Copy of Audit Report along with financial statements of the investor entity (vii) Copy of ITR acknowledgement of the investor entity (viii) Copy of Certificate of incorporation of investor entity (ix) Memorandum & Articles of Association of investor entity (x) Company Master Data showing status as active (xi) Copy of Board Resolution The assessee's own bank statement was also placed on record which would show that all the transactions have taken through banking channels. Upon careful consideration of these documents, we find that so far as the identity of the investor entities are concerned, the same stand proved by certificate of incorporation which is held to be conclusive proof of registration of a corporate entity. The creditworthiness of the entities would stand satisfied by the financ....
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....ry value unless the same are backed by credible evidences. This position has been settled by Hon'ble Supreme Court in the case of CIT V/s S.Khader Khan & Sons (25 Taxmann.com 413). The CBDT instructions No. F.No.286/98/2013-IT (Inv. II) dated 18/12/2014 also discourages confessional statements without any credible evidences. No incriminating material is shown to have been found during the course of survey proceedings. 8.4 We also find that learned CIT(A) has gone by irrelevant considerations to confirm the impugned additions. The object clause of the investor entities would have no relevance vis-à-vis proposed additions in the hands of the assessee u/s 68. It is trite law that no additions could be made merely on the basis of suspicion, conjectures or surmises. 8.5 The Ld. DR has relied upon the case of Hon'ble Supreme Court in Sumati Dayal Vs CIT (80 Taxman 89) & Durga Prasad More (82 ITR 540 26/08/1971). No doubt that the revenue authorities were not required to put blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the documents produced before them. However, we fi....