TaxTMI 
TaxTMI 
2024 (6) TMI 360
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...., 1987 under the Companies Act, 1956 is engaged in the manufacturing and trading of cotton, cotton seed oil, cotton seed cake and allied products. There was no trading of cigarettes during the instant year as wrongly alleged in the assessment order. The assessee filed return of income of Rs. 1,36,800/- for the assessment year 2014-15. The return of income was duly supported by an audited balance sheet profit and loss account and tax audit report for the financial year 2013- 14 relevant to the instant assessment year. The case was selected for scrutiny assessment under CASS. The assessment of the same was completed under section 144 of the Act dated 5.12.2016 by making an addition of Rs. 4,76,43,320/- without giving adequate opportunity of being heard and disregarding the response and evidence filed by the assessee. 3. Appellant / assessee preferred appeal before Learned CIT(A) which was partly allowed and upheld the addition of Rs. 4,19,90,000/-. 4. Being aggrieved appellant / assessee preferred present appeal with following grounds:- 1. "That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding addition made on account of unsecured l....
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.... in accordance with the conditions prescribed under section 144 of the Act." 5. Learned representative for assessee submitted that addition of Rs. 4,19,90,000/- has been made on basis of suspicion without any substantiating material. Assessee had raised loan in the ordinary course of business and identical loans were also raised in the preceding years. The position of unsecured loan for the relevant assessment year was as under:- Name Opening Balance Addition Repayment Closing Balance Deepak Sales Corporation 95,00,000 3,49,00,000 62,50,000 3,81,50,000 Jagan Nath Enterprises ---------- 1,30,00,0000 ----------- 1,30,00,000 Krishan Traders 81,60,000 1,65,00,000 1,61,60,000 85,00,000 Saroj Rani 1,43,000 ---------- -------------- 1,43,000 Bahiya and Co. 2,50,000 ---------------- ----------------- 2,50,000 Total 1,80,53,000 6,44,00,000 2,24,10,000 6,00,43,000 6. Learned representative for appellant/assessee submitted that in the assessment proceedings the Learned AO has accepted the opening balances of the unsecured loan as well as the repayment made during the relevant AY. However, in respect of the net amount of loan raised during the year as reduc....
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....dit report in the case of Sh. Ankush Bansal, proprietor, for the financial year 2013- 14 relevant to assessment year 2014-15 (332-345) vi) Copy of order of assessment dated 3.5.2016 u/s 143(3) of the Act in the case of Sh. Ankush Bansal for the Assessment year 2014-15 (346) iii) Krishan Traders PAN No. AABMPR5913Q TIN No. 03962160297 Address: Shop No. 197, New Grain Market, Budhladha 3,40,000 1) Copy of return of income of Smt. Saroj Rani, proprietor of M/s. Krishna Traders (160-162) ii) Copy of confirmation (134) iii) Copy of ledger account of M/s Krishan Traders Enterprises in the books of appellant company (163) iv) Copy of bank statement of the appellant company (164-177) v) Copy of bank statement of Krishan Traders (178) Alongwith rejoinder to remand report vi) Copy of Form no. 3CB and audited financial statements for the AY 2014-15. Total 4,19,90,000 8. Learned representative for appellant/assessee submitted that the Learned CIT(A) upheld the addition on the basis of observation of the Learned AO that the income reported in ITR is too low of few lakhs to advance such a high amount and therefore, creditworthiness is not established of the lende....
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..... 11. Learned representative for appellant/assessee submitted that ITAT Delhi in ITA No. 71/2015 decided on dated 12.8.2015 titled as CIT v. Vrindavan Farms(P) Ltd. held as under:- "3. The ITAT has in the impugned order noticed that in the present case the Revenue has not doubted the identity of the share applicants. The sole basis for the Revenue to doubt their creditworthiness was the low income as reflected in their Income Tax Returns. The entire details of the share applicants were made available to the AO by the Assessee. This included their PAN numbers, confirmations, their bank statements, their balance sheets and profit and loss accounts and the certificates of incorporation etc. It was observed by the ITAT that the AO had not undertaken any investigation of the veracity of the above documents submitted to him. It has been righty commented by the ITAT that without doubting the documents, the AO completed the assessment only on the presumption that low return of income was sufficient to doubt the credit worthiness of the share holders." 12. Learned representative for appellant/assessee submitted that quantum of income declared by creditor is not a relevant consideration ....
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....burden of the Assessee to prove that the sub-creditor had the creditworthiness to advance the cash credit to the creditor from whom the cash credit has been, eventually, received by the Assessee. It, therefore, further logically follows that the creditor's creditworthiness has to be judged vis-a-vis the transactions, which have taken place between the Assessee and the creditor, and it is not the business of the Assessee to find out the source of money of his creditor or of the genuineness of the transactions, which took between the creditor and sub-creditor and/or creditworthiness of the sub-creditors, for, these aspects may not be within the special knowledge of the Assessee." 14. Learned representative for appellant/assessee submitted that Hon'ble Supreme Court in CIT vs. Lovely Exports (P) Ltd. [2008] 216 CTR 195 (SC) it has held that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the Assessing Officer, then the department is free to proceed to reopen their individual assessments in accordance with law but this amount of share money cannot be regarded as undisclosed income of assessee company unde....