TaxTMI 
TaxTMI 
2021 (9) TMI 469
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.... "1. Whether the ITAT is right in law in reversing the order of the CIT(A) which confirmed the addition under Section 68? 2. Whether, in view of the facts and circumstances, the ITAT has correctly applied the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Lovely Exports P. Ltd. [216 CTR 195] and 3. Whether the ITAT has erred in law in its finding that the Assessing Authority had not brought any evidence or positive material to indicate that the share application money as such represented assessee's own undisclosed money brought back in the garb of share capital and thereby the ITAT failed to apply the settled position of law that the onus is only on the assessee to establish the genuineness of the credits ?" 4. The respondent - assessee is a private limited company engaged in the business of manufacture of Indian Made Foreign Liquor (IMFL). A search was conducted under Section 132 of the Act in the business premises and the factory and the residential premises of the directors of the assessee. Consequent upon the search operations, proceedings under Section 153A of the Act were initiated by issuing a notice on 19.6.2006. The assessee ....
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....f such transaction and that transaction was not reflected by the erstwhile partnership firm M/s.Golden Distilleries; that the addresses of the share applicants namely M/s.D.Kumar Trading and Co., and M/s.Pooja Equitex and M/s.Pentium were not furnished. 8. Thus, the Assessing Officer concluded that the share application money was not property explained to his satisfaction and that the same had to be assessed in the hands of the assessee company. The Assessing Officer appeared to have come to the above provisional conclusion and afforded an opportunity to the assessee to make their submissions as to what, according to them, was the provisional conclusion. 9. The authorized representative of the assessee argued that the amounts were received by the assessee only through cheques and the names and addresses of the shareholders had been furnished. Therefore, they contended that they discharged the onus cast upon them. A written submission to the said effect was filed on 03.12.2007 by the authorized representative of the assessee company. 10. The assessee company further contended that they received share capital of Rs. 13.95 crores from various persons through cheques or demand....
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.... discharged. 15. With regard to the decision of the Hon'ble Supreme Court relied upon by the assessee in the case of Stellar Investments Ltd., the Assessing Officer held that no ratio decidendi was laid down in that decision and it could not be applied to the facts of the assessee's case. 16. With regard to the power of the Assessing Officer to make enquiry about the nature and source of amounts credited under share application money, the Assessing Officer relied upon the decision of the Delhi High Court in the case of CIT Vs. Sophia Finance Ltd. [reported in (1994) 205 ITR 98] and observed that the Assessing Officer was not precluded from making any enquiry with regard to the share capital. To the same effect, reliance was placed on the decisions of the Calcutta High Court in the case of Hindustan Tea Trading Co. Ltd. Vs. CIT [reported in (2003) 263 ITR 289] and in the case of CIT Vs. Ruby Traders and Exporters Ltd. [reported in (2003) 263 ITR 300]. 17. Further, by placing reliance on the decision of the Hon'ble Supreme Court in the case of Juggilal Kamalapet Vs. CIT [reported in (1969) 73 ITR 702], the Assessing Officer held that he was entitled to pierce the....
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....ainst the same, the assessee preferred further appeal to the Tribunal, which was allowed by the impugned order dated 30.6.2009. Thus, the Revenue is before us by way of this appeal. 23. Though the impugned order passed by the Tribunal, at the first blush, appears to be a very elaborate and detailed order, we find that the discussion is only in paragraph 30. From paragraphs 31 to 40, the Tribunal referred to various decisions of the Hon'ble Supreme Court not on the subject issue, but on the issue as to when an order passed by the Hon'ble Supreme Court is a law declared by the Court under Article 141 of The Constitution of India. To say the least, we find that the order passed by the Tribunal to be utterly perverse and devoid of reasons and there was no discussion as to how the Assessing Officer was factually incorrect and as to how the CIT(A) was not right in confirming the order passed by the Assessing Officer. 24. The CIT(A), while confirming the order passed by the Assessing Officer, reexamined the entire facts and the discussions commenced from paragraph 4.1.3 in the order dated 21.7.2008. After noting the submissions, which were recorded by the Assessing Officer d....
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....s had, in turn, collected funds from other parties and the family members of the said single person and they were subsequently transferred to the assessee company by way of share application money. 27. Thus, the CIT(A) agreed with the conclusion arrived at by the Assessing Officer and held that there was no other option left except to treat the source of the aggregate funds brought in by the companies as unexplained. Likewise, the genuineness of other transactions were also examined and the CIT(A) agreed with the Assessing Officer that the alleged investments remained unexplained and the creditworthiness of two ladies, who were stated to have invested a sum of Rs. 30 lakhs was not established. Therefore, the CIT(A) agreed with the findings rendered by the Assessing Officer that the source of entire share application money remained unexplained thereby attracting the provisions of Section 68 of the Act. 28. Before the CIT(A), the assessee placed reliance on the decision of the Hon'ble Supreme Court in the case of Stellar Investments Ltd., and distinguished that decision on facts and contended that the special leave petition filed before the Hon'ble Supreme Court was sum....
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....essee of that previous year. 32. In terms of Section 68 of the Act, the assessee is bound to explain as to how the nature and source of the amounts found credited in their books. If the assessee offers an explanation, which, in the opinion of the Assessing Officer, is not satisfactory, the said sums found credited in the books of accounts of the assessee may be charged to income tax as the income of the assessee. 33. Therefore, the onus is on the assessee to establish the creditworthiness of various persons and as to how the share application money was brought in. Therefore, furnishing the list of names or stating that the monies were paid by cheques will not, by itself, establish the creditworthiness and genuineness of the transaction. The initial onus is on the assessee to discharge the burden cast upon them to prove the creditworthiness and genuineness of the transaction. 34. On going through the factual position as recorded by the Assessing Officer and re-appreciated by the CIT(A), we have no hesitation to hold that the assessee has not established the creditworthiness and genuineness of the transaction to the satisfaction of the Assessing Officer. In fact, the Tribuna....
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....ned addition made by authorities below in respect of amount in question under Section 68 was to be confirmed. 39. In the decision of a Division Bench of this Court, to which, one of us (TSSJ) was a party, in the case of PCIT Vs. M/s.SRM Systems and Software P. Ltd. [TCA.No.875 of 2018 dated 17.2.2021], more or less an identical issue was considered and after taking note of the provisions of Section 68 of the Act, it was held as follows : "8. In terms of the above provision, if the assessee offers no explanation about the nature and source of the amounts found credited in their books or the explanation offered by the assessee is not in the opinion of the Assessing Officer, satisfactory, the same so credited, may be charged to income tax, as the income of the assessee of that previous year. Therefore, to establish, the assessee was required to produce the creditworthiness of various persons, who are said to have made the share capital advance. Therefore, what is required to be established is the identity of the person, who has made the share capital advance, his creditworthiness and genuineness of the transaction. The onus is on the assessee to establish these factors and....
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....o 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. 11.The Review application filed against the above decision was dismissed by a speaking order as reported in (2020) 117 taxmann.com 752 (SC). 12.From the facts of the case, which we have set out in the preceding paragraphs, it is clear that the assessee has not discharged the legal obligation cast upon them to prove the genuineness of the transaction, the identity of the creditors and creditworthiness of the investors, who should have the financial capacity to make the investment in question to the satisfaction of the Assessing Officer so as to discharge the primary onus. Since the assessee did not discharge the primary onus cast upon them, the question of the Assessing Officer to investigate the creditworthiness of the creditors/subscribers would not arise in the case on hand. Therefore, the above decision is a clear answer to the assessee's case, which would necessitate us to decide the same in favour of the Revenue. 13.We m....