AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2021 (9) TMI 547
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....ived by the assessee as bogus and unexplained. The addition so confirmed is wrong on facts as well as in law and is also contrary to the law laid down by Hon'ble Apex Court and Gujarat High Court on the subject. Assessee prays for deleting such wrong and unjustified addition. 2. That the reasons and bases mentioned by ld CIT(A) for confirming the above addition are wrong, invalid and contrary to the vital evidences furnished and are also are contrary to the law and procedure laid down by Hon'ble Gujarat High Court. 3. The assessee craves leave to add, alter, delete or modify any ground of appeal." 3. Succinct facts are that during the course of assessment proceedings, Assessing Officer (A) noticed that assessee company had received a sum of Rs. 1,65,85,000/- towards equity share capital/premium from the following 3 companies, during the year under consideration. 1. Jagdhatri Sales Pvt, Ltd, Rs. 44,00,000/- 2. Kamdhanu Supply Pvt Ltd. Rs. 66,85,000/- 3. Vertex Distributors Pvt. Ltd, Rs. 55,00,000/- Total Rs. 1,65,85,000/- The share premium of Rs. 40/- has been received from 3 companies based at Kolkata. In order to verify the identity, creditw....
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.... from the investigation carried out reveal that the circumstances surroundings the transaction of alleged share capital proves the transactions as not genuine. Undisputedly, the onus of proving of credits in its books of accounts lies with the assessee and the settled position of law is that the assessee is required to prove all the three criteria, that is identity, genuineness and creditworthiness. But in the instant case, the assessee company failed to discharge this onus. Therefore, Assessing Officer was justified in adding share subscription money to assessee's taxable income as unexplained cash credit, hence she prayed the Bench that addition made by the assessing officer may be sustained. 7. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We note that according to section 68 of the Income Tax Act, where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about th....
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....2) PAN Number copies of each share subscriber. 3) Copy of Balance Sheet, Profit and loss account of all share applicant companies. 4) Details of investments sold by all share applicant companies. 5).Transaction with the assessee was duly highlighted in the bank statement 6). Explanation along with evidence of source of source of the funds of the share applicant Companies. 7).Audited Accounts of the share holders. 8) Relevant address proofs / Form filed by the share applicants with ROC. 9). Income Tax Return of share applicant companies. 10) Copy of the Bank Statement of Share applicant companies where from the amount was debited. 11) Copies of Bank statement of the assessee company where the share application money and premium were credited. 12) Information about Common Director of these three share applicant companies. With help of these plethora documents and evidences submitted before AO, during the assessment proceedings, the ld Counsel claimed that the assessee company has proved the identity, genuineness and creditworthiness of all these three share applicant companies in the following manner. Identity of all the share applicants have been proved by the ....
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....k account of investor entities came from the coffers of assessee company. There are no evidences whatsoever relating to any cash transfer made by assessee or payment of alleged commission by assessee to any entry operator. With regard to observation made by assessing officer in para 15 of assessment order that notice issued u/s 133(6) of the Act returned unserved in case of 2 investors and no reply is received from 3rd investor, it is submitted by ld Counsel that two investors namely M/s Kamdhenu Supply Pvt. Ltd. and Vertex Distributors Pvt. Ltd. have directly submitted their replies to department via Post. Further with regard to non receipt of reply from M/s Jagdhatri Sales Pvt. Ltd. adverse inference cannot be drawn in the case of assessee, as assessee has duly filed relevant details to prove the identity of investors. Above explanation offered by assessee along with cogent evidences referred above clearly go on to establish all the three vital ingredients viz. identity and capacity of investors and also genuineness of transactions. As regards the basis for making investment in share capital of assessee company, ld Counsel submitted that assessee is engaged in the business of dye....
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....in AY 2012-13 only to the tune of Rs. 84,35,000/- which may be the subject matter of addition under section 68 of the Act. Therefore, Assessing Officer has erred in making addition to the tune of Rs. 81,50,000/- under section 68 of the Act which is pertaining to the AY.2011-12. 11. Before we adjudicate as to whether the Ld. CIT(A)'s action is right or erroneous, let us look at section 68 of the Act and the judicial precedents on the issue at hand. 12. Section 68 under which the addition has been made by the Assessing Officer reads as under: "68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. " The phraseology of section 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year. In this case the legislative mandate is no....
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....ence against the assessee. in the case of six creditors who appeared before the Assessing Officer and whose statements were recorded by the Assessing Officer, they have admitted having advanced loans to the assessee by account payee cheques and in case the Assessing Officer was not satisfied with the cash amount deposited by those creditors in their bank accounts, the proper course would have been to make assessments in the cases of those creditors by' treating the cash deposits in their bank accounts as unexplained investments of those creditors under section 69. 14. In the case of Nemi Chand Kothari 136 Taxman 213, (supra), the Hon'ble Guahati High Court has thrown light on another aspect touching the issue of onus on assessee under section 68, by holding that the same should be decided by taking into consideration the provision of section 106 of the Evidence Act which says that a person can be required to prove only such facts which are in his knowledge. The Hon'ble Court in the said case held that, once it is found that an assessee has actually taken money from depositor/lender who has been fully identified, the assessee/borrower cannot be called upon to explain, m....
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....ing Officer to make inquiry not only into the source(s)of the creditor but also of his (creditor's) sub-creditors and prove, as a result, of such inquiry, that the money received by the assessee, in the form of loan from the creditor, though routed through the sub-creditors, actually belongs to, or was of, the assessee himself. In other words, while section 68 gives the liberty to the Assessing Officer to enquire into the source/source from where the creditor has received the money, section 106 makes the assessee liable to disclose only the source(s) from where he has himself received the credit and IT is not the burden of the assessee to prove the creditworthiness of the source(s) of the sub-creditors. If section 106 and section 68 are to stand together, which they must, then, the interpretation of section 68 are to stand together, which they must, then the interpretation of section 68 has to be in such a way that it does not make section 106 redundant. Hence, the harmonious construction of section 106 of the Evidence Act and section 68 of the Income- tax Act will be that though apart from establishing the identity of the creditor, the assessee must establish the genuineness o....
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....as to what sources from where the creditor had received the amount, his special knowledge under section 106 of the Evidence Act may very well remain confined only to the transactions, which he had' with the creditor and he may not know what transaction(s) had taken place between his creditor and the sub-creditor... " ********** "In other words, though under section 68 an Assessing Officer is free to show, with the help of the inquiry conducted by him into the transactions, which have taken place between the creditor and the sub-creditor, that the transaction between the two were not genuine and that the sub-creditor had no creditworthiness, it will not necessarily mean that the loan advanced by the subcreditor to the creditor was income of the assessee from undisclosed source unless there is evidence, direct or circumstantial, to show that the amount which has been advanced by the sub-creditor to the creditor, had actually been received by the sub-creditor from the assessee ...." ********** "Keeping in view the above position of law, when we turn to the factual matrix of the present case, we find that so far as the appellant is concerned, he has established the identity o....
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.... held as follows: "In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness" of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness" of transaction through account payee cheque has been established. We find that both the Commissioner of Income Tax (Appeal) and the Tribunal below followed the well-accepted principle which are required to be followed in considering th....