TaxTMI 
TaxTMI 
2021 (1) TMI 221
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the year under consideration. 4. However, the AO found that some of the shareholders/investors have declared income between 1.5 lakh to 2 lakh in their respective returns of income whereas they have invested amount in shares for Rs. 5lakh to 10 lakh. Thus, the AO held that these shareholders/investors do not have credit worthiness to invest such huge amount and accordingly, such transactions are not genuine within the meaning of the provisions of Section 68 of the Act. Consequently, the AO disallowed the amount of Rs. 40 lakhunder Section 68 of the Act. 4.1 Likewise the AO found that there are 5 shareholders/investors who have subscribed shares for Rs. 30lakh but the assessee failed to file any document to prove the identity, genuineness and credit worthiness of such parties. Hence, the AO held that the assessee failed to comply the basic conditions as specified under Section 68 of the Act. Finally, the AO disallowed the aggregate amount of Rs. 70 lakh under Section 68 of the Act and added the same to the total income of the assessee. 5. Aggrieved assessee preferred an appeal before the Ld. CIT (A). 6. The assessee before the LearnedCIT(A) submitted that it, during the assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. It is a well settled law-that once an amount is found credited in the accounts of the assessee; it is the assessee who has to prove that identity, source and creditworthiness of such persons/parties/depositors. In all the decision cited by the appellant the Hon'ble Courts have held that the appellant has to prove the identity, source and creditworthiness of such persons/parties/depositors. In view of the abovementioned facts, it becomes clear that appellant introduced its, own and accounted income in the garb of share premium application. The initial source of funds in the case of all allottee persons remains unexplained. Allotment of shares by appellant at the huge premium proves involvement of the appellant. All these facts taking in totality do not leave an iota of doubt that the transactions are bogus. The assessing officer has duly discharged his burden in this case by pointing all various contradictions in the claim of appellant while appellant has miserably failed to discharge his burden to prove genuineness of these transactions 2.7. The issue regarding entry (in respect of share application money has been examined in detail by Hon'ble High Court of Delhi in o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es amounting to Rs. 70,00,000/-which was treated as unexplained cash credit under Section 68 of the Act. The initial onus is upon the assessee to establish three things necessary to obviate the mischief of Section 68 of the Act. These are: (i) identity of the investors; (ii) their creditworthiness/investments; and (iii) Genuineness of the transaction. 15. The departments exercise starts only when these three ingredients are established prima facie, by the assessee and the department is required to investigate into the facts presented by the assessee.As per the statutory provision of Section 68 of the Act and jurisprudence of the Hon'ble Court, it is clear that primarily the onus is on the assessee to discharge that the credit received by it is from the sources whose identity can be proved, the genuineness of the transaction and the creditworthiness of the creditor is proved by documentary evidence. If the assessee presents all these details during the assessment proceeding before the AO, the responsibility shifts to the AO to prove it wrong. If AO accepts such evidences without proving it wrong, it can be said that assessee has discharged his onus. If AO presents some co....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... under Section 131 at the instance of the assessee, did not pursue the matter further and did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the alleged loans. It was further held that there was no effort made to pursue the so called alleged creditors and in those circumstances, the assessee could not do anythingfurther. The findings and conclusion of the Tribunal were upheld that the assessee had discharged the burden that lay on him. 15.3 In Deputy CIT v. Rohini Builders [2002] 256 ITR 360/[2003] 127 Taxman 523 (Guj.), the High Court relying on the judgment of the Hon'ble Supreme Court in the matter of Orissa Corp. (P.) Ltd. (supra) held that the assessee had discharged the initial onus which lays on it in terms of Section 68 of the Act by proving the identity of the creditors by giving their complete addresses, GIR numbers/permanent accounts numbers and the copies of assessment orders wherever readily available and has also proved the capacity of the creditors by showing that the amounts were received by the assessee by account payee cheques drawn from bank accounts of the creditors a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....led to do. Thus, the Learned CIT-A neither called any remand report from the AO on the additional documents filed by the assessee nor conducted any enquiry on such additional documents but rejected the same without pointing out any defect therein. As such, the Learned CIT (A) and the AO assumed that the income declared by the shareholders in their respective returns is not commensurate to the investments made by them in the assessee company. Apparently, the inference of the authorities below appears to be correct, but to our mind that is not sufficient to hold that the parties do not have sufficient creditworthiness for making such investments in the assessee company. As such, it is a matter of verification which has not been done. 19. We also note that the ITAT in the own case of the assessee involving identical facts and circumstances in ITA No. 3619/AHD/2015 for the Assessment Year 2011-12 vide order dated 1st March 2018 has decided the issue in favour of the assessee. The relevant extract of the order is reproduced as under: "8. A perusal of the section would indicate that basically this section contemplates three conditions required to be fulfilled by an assessee. In other ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of Hon'ble Delhi High court in the case of CIT Vs. Fair Finvest Ltd., 357 ITR 146 (Delhi). Hon'ble Delhi High Court made following observations: "..... This court has considered the concurrent order of the Commissioner of Income-tax (Appeals) as well as the Income-tax Appellate Tribunal. Both these authorities primarily went by the fact that the assessee had provided sufficient indication by way of permanent account numbers, to highlight the identity of the share applicants, as well as produced the affidavits of the directors. Furthermore, the bank details of the share applicants too had been provided. In the circumstances, it was held that the assessee had established the identity of the share applicants, the genuineness of transactions and their creditworthiness; The Assessing Officer chose to proceed no further but merely added the amounts because of the absence of the directors to physically present themselves before him. The Income-tax Appellate Tribunal has relied upon a decision of this court in CIT v. fair Finvest Ltd. [2013] 357 ITR 146 (Delhi), where in somewhat similar circumstances, it was stated as follows (page 152) "This court has considered the submissions....
X X X X Extracts X X X X
X X X X Extracts X X X X
....other representative of the applicant companies before the A.O. Therefore failure on part of the assessee to produce the Directors of the share applicant companies could not by itself have justified the additions made by the AO particularly when the seven share applicant companies through their present Directors have now again filed fresh affidavits confirming the application and allotment of shares with respect to the total amount of Rs. 45 Lacs. It is observed that no attempt was made by the AO to summon the Directors of the share applicant companies. Moreover, it is settled law that the assessee need not prove the "source of source". Accordingly it was incumbent upon the department to have enforced attendance of Shri Mahesh Garg or the erstwhile Directors of the share applicant companies and confronted them with the evidences & affidavits relied upon by the appellant and thereupon given opportunity to the assessee to cross examine these applicants." 11. In the light of the above, let us examine the facts of the present case. A notice under section 143(2) providing an opportunity to make submission in support of return of income was served upon the assessee on 28.9.2012. There....