AI Drafter 
TaxTMI 
TaxTMI 
2022 (2) TMI 807
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....s as non-genuine and by treating the same as unexplained cash credits. 2) That the reasons and bases mentioned by ld. Assessing Officer and ld. CIT(A) for making/sustaining above addition of Rs. 2,33,01,950/- are factually incorrect, invalid, unjustified, unsustainable and contrary to the settled law. 3) Without prejudice to above grounds of appeal, that the above addition of Rs. 2,33,01,950/- by treating the share capital and share premium as unexplained cash credits u/s68 of the Act is contrary to the law laid down by Hon'ble Apex Court, Gujarat High Court and other High Courts holding that the share capital/share premium cannot be added in the hands of the company." 3.Brief facts as discernable from the orders of lower authorities are that assessee before is a private limited company and engaged in the business of manufacturing of texturized yarn. The assessee-company field its return of income on 03.09.2012 showing total loss at (-) Rs. 18,22,48,493/-. The return of income was processed u/s 143(1) of the Act. Later, the assessee`s case was taken up for scrutiny and accordingly notice u/s 143(2) of the Act was issued on 06.08.2013. During the course of a....
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.... not attend the hearing proceedings personally nor did they furnish the details before the Investigation Wing. In absence of the basic details by these investors such as books of accounts, balance sheet, complete bank statements, cash book etc, the creditworthiness of the investors could not be proved. The assessing officer observed that these investors were having meager income and had filed return of income u/s 44AD of the Act. The assessing officer noted that these investors were failed to prove their creditworthiness before the DDIT(Inv.) at the time of enquiry u/s 131(l)(d) of the Act.Theassessing officer, on the analysis of the above facts, found that these investors were not identifiable and did not have creditworthiness to make the transactions in the share capital. Therefore, assessing officer held that amount of investment of Rs. 2,33,01,950/-in form of share capital/share premium was in form of cash credit and made an addition u/s 68 of the Act. 4. On appeal, ld CIT(A) confirmed the action of the assessing officer. Aggrieved, the assessee is in further appeal before us. 5.Shri Devesh Poddar, Learned Counsel for the assessee, begins by pointing out that during the a....
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....ins the comprehensive detail in respect of each share applicants, showing Name of the share applicant, PAN number of share applicant, net income of the share applicant, amount of share capital, balance of capital and reserves of each share applicants, documents and evidences submitted by each share applicant before the lower authorities, sources of payment and bank statement of each share applicant. The said chart is reproduced below Sr No Name PAN No Net income of the year Amt. reced. Capital as on 31.03.11 Document submitted sources of payment Page No of bank statement 1 Anil Kejriwal HUF AAGHA2306F 435590 1500000 5308138 ITR Computation of income, Bank statement, balance sheet amount received from Aditya Dhanuka 1250000 and Hindustan Credit Corpn. 200000 which was advance 115 2 Anup Kejriwal HUF AADHA3790G 167690 1500000 2176440 ITR Computation of income, Bank statement, balance sheet Amount received from Shivam Entt. 1465000/- which was advance 120 3 Mohanlal & Sons HUF AAGHM8485D 276990 2000000 9588661 ITR Computation of income, Bank statement, balance sheet Amount re....
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.... 3296543 ITR Computation of income, Bank statement, balance sheet Amount received from Hindusthan Industries 830000 which was advance against coal 180 16 Rupesh Kr.Verma AKZPV4037D 172100 581000 2188474 ITR Computation of income, Bank statement, balance sheet Amount received 418390 from Mango Creatino (loan return) 17 Irshad Khan AXDPK024L 195020 1500000 3517007 ITR Computation of income, Bank statement, balance sheet Amount received from Krishna Rice Mill against sale of paddy 191 18 Krishna Singh BBPPS7333R 557870 300000 4727271 ITR Computation of income, Bank statement, balance sheet Amount received from Mourya Vihar Rs. 488367 against contract work. 198, 199, 200 & 201 19 Roshanlal HUF AAGHR7904A 219240 800000 3582362 ITR Computation of income, Bank statement, balance sheet Amount received from Bus hire charges from Wd.a.v.School and 280000 from Hindustan Credit Corpn. 207 & 208 20 Subodhkumar Sinha HUF AAJHS5698K 196470 200000 2528915 ITR Computation of income, Bank statement, balance sheet Amount received from debtors/advance 2....
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....at Ld. CIT (A) has observed that there is contradictory reports of the AO. It was further observed that the assessee had filed all address of the creditors but due to time gap, It is possible that at the time of enquiry they will have shifted to new address. However, copies of income-tax returns and copy of new address was filed before CIT (A) in respect of 8 person who were not found at the stated address as per enquiry reports. The learned counsel for the assessee referred para No.10 of appellate order wherein the CIT(A) has examined and discussed the issue of identity, creditworthiness and analysis of bank account and genuineness of transaction. It was submitted that that as per para No. 11 of CIT(A) order the AO has not made addition in respect of person mentioned in table at para No. 11.1 observed that the AO has not made addition in respect of Serial No. 45, 46, 47, 49, 50, 51 and 52 without any discussion in the assessment order. There is no discussion authority these loans were treated as explained, whereas fact and circumstances of other creditors are same. 21. The learned counsel relied in the case of CIT v. RanchhodJivabhai Nakhava [2012] 21 taxmann.com 159 (Guj....
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....ssee is not expected to prove: the genuineness of cash deposits in bank accounts of those e creditors because under the law the assessee can be asked to prove source of credit but not the source of the source held by the Hon'ble Bombay High Court in the case of Orient Trading Co. v. CIT [1963] 49 ITR 723 (Bombay). Therefore, in such a situation and considering above fact and finding ,we are in complete agreement with the reasoning given by the Ld. CIT (A) that when full particulars, inclusive of the confirmation with name, PAN, copy of Income-tax returns, balance sheet Profit & Loss Account computation of income are furnished and same reflected in their books of accounts. Further, the findings recorded by the Ld. CIT (A) are also supported by the decision of Hon'ble Gujarat High Court and Hon'ble Supreme Court as discussed above. The addition so made is rightly deleted by the Ld. CIT(A). In view of these facts and circumstances, we do not find any infirmity in the order of CIT(A), accordingly, same is upheld. Accordingly, all the grounds of appeal of as taken by the Revenue are therefore, dismissed." 9.By submitting the documents in respect of each share applicant, a....
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....e Act, it is vivid that all 35 parties are availability at the stated addresses, all these 35 parties have filed their Income Tax Return ( ITR) for A.Y 2012-13,and all of 35 parties have made investment through banking channel. The ld Counsel submits that even books of account, balance sheet, complete bank statement, cash book etc. were submitted before the Income Tax officer. Hence, ld Counsel contended that there is no failure on the part of the assessee to submit Income Tax Return, books of account, balance sheet, complete bank statement, cash book etc, before the Income Tax Authorities. 12. Learned Counsel further drew our attention on page no.6 of the paper book which is annexure of the letter of JCIT(Inv) Ranchi dated 13.03.2015, wherein it is stated that address of parties were genuine and parties were engaged in retail trade, the notices issued by Income Tax Authorities were served upon the parties. The parties have confirmed and disclosed the source of their personal investment made in the assessee-company. Some of the parties made the investment in assessee-company as share applicants out of their own funds; some of the parties have invested in assessee-company out of ....
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....icer, then the Department is free to proceed to reopen the individual assessment in accordance with law. Such amounts cannot be regarded as undisclosed income under section 68 of the Act. Applying the said principles to the facts of the present case, the Assessing Officer having traced out the source of funds to specific persons who had invested the same in share of the assessee-company, it was open for the Assessing Officer to proceed against the said persons. The funds not having emanated from the assessee-company, there was no warrant for making addition of the said amount as undisclosed income under section 68 of the Act in its hands. In the circumstances, the Tribunal was justified in deleting the addition of Rs. 50,00,000 made under section 68 of the Act. The question stands answered accordingly, that is, in favour of the assessee and against the Revenue." 14.We note that law regarding addition u/s 68 on account of the share application money has been laid out by the Hon'ble Supreme Court in the case of CIT v/s Lovely Exports ( 2008) 216 ITR 195 ( SC) wherein it has held that: "if share application money is received by assessee - company from alleged bogus sha....