TaxTMI 
TaxTMI 
2024 (7) TMI 23
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....ed. 2. The appellant reserves the right to amend, modify or add any of the ground/s of appeal." 2. Succinctly stated, the assessee company had e-filed its return of income for A.Y. 2015-16 on 23.10.2015, declaring an income of Rs. 1,26,400/-. Subsequently, the case of the assessee company was selected for scrutiny assessment u/s. 143(2) of the Act. 3. During the course of the assessment proceedings, the A.O observed that the assessee company had claimed to have received an amount of Rs. 50 lacs towards share application money (at premium) from seven parties, as under: Sl. No. Year Name of the persons from whom share application money have been taken Amount of share application money received. 1. 2014-15 Shri Mahavir Prasad Agrawal Rs.8,00,000/- 2. 2014-15 Smt. Shanti Devi Agrawal Rs.8,00,000/- 3. 2014-15 Shri Ajay Kumar Agrawal Rs.5,00,000/- 4. 2014-15 Shri Vikash Agrawal Rs.5,00,000/- 5. 2014-15 Shri Dinesh Ku.Agrawal Rs.10,00,000/- 6. 2014-15 Smt. Mani Devi Kedia Rs.10,00,000/- 7. 2014-15 Shri Munesh Kumar Pandey Rs.4,00,000/- Total....
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...., the A.O vide his order passed u/s. 143(3) dated 26.12.2017 after making the aforesaid addition assessed income of the assessee company at Rs. 51,26,400/-. 5. Aggrieved the assessee company carried the matter in appeal before the CIT(Appeals). As the assessee had failed to participate in the course of the proceedings before the CIT(Appeals), therefore, the latter was constrained to proceed with the matter after considering the material available on record in the backdrop of the observations of the A.O. The CIT(Appeals) finding no infirmity in the view taken by the A.O approved the addition of Rs. 50 lacs made by him u/s. 68 of the Act observing as under: "5. Decision on Merits:- Thus, on merits also, the appellant has no case. The appellant has challenged the addition made amounting to Rs. 50,00,000/- u/s. 68 of the I.T. Act 1961. Mere claiming that the AO erred in making the additions does not give an edge to the appellant. The relevant part of the assessment order is reproduced below:- 4. Share Application money received: During the assessment proceedings it came to the knowledge of the department that the assessee had received share applicati....
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....y dated 27/11/2017 which was misleading and not upto the satisfaction of the undersigned. In this regard the statement of the director Shri Manoj L Agrawal were recorded as below ,where he could not explain, the cash deposits made by-all the share holders before issuing the cheques to the company for purchasing of shares:- Therefore, taking all of the above discussion into consideration, there is no doubt, It was assessee's own undisclosed income, introduced in the business in the garb of share application money. In this regard, the following judgements of hon'ble courts can explain the situation better. In the case of CIT -v- Precision Finance Pvt. Ltd. report in 208 ITR 465 (CAL) it has been held that credit in the names of various person - burden of proof assessee must prove identity of creditors and their creditworthiness - fact that transaction were through bank not conclusive - no material to, establish identity of creditors and their creditworthiness. - amount assessable as income from undisclosed source - Income tax Act, 1961. Further, in the case of McDowell & Co. Ltd vs Commercial Tax Officer (1985) 22 Taxman 11 (SC), Hon'ble Supreme....
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....orthiness of the allottes is not acceptable. Hence after taking all of the above discussion and sec. 68 of IT Act into consideration which provides, if any sum found credited in the books of accounts maintained for any previous year and the * Assessee offers no explanation about the nature and source of such credit OR * Explanation offered by assessee is not satisfactory in the opinion of Assessing Officer, the sum so credited may be charged to income tax as the income of the assessee of that previous year. Hence, the share application money of Rs. 50,00,000/- received by the assessee from the above persons whose credit worthiness are in question and as the assessee failed to explain it properly is found bogus and added to the income of the assessee U/s 68 of the IT Act as the income from the undisclosed sources". 6. The AO has elaborately discussed all the issues in the assessment order for making additions of Rs. 50,00,000/- u/s. 68 of the I.T. Act 1961. Further, during appellate proceedings no response was received from the appellant to substantiate its claim in support of grounds of appeal though enough opportunities of bei....
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....ion for the A.O to have characterized the amounts received from the said persons as unexplained cash credit u/s. 68 of the Act. Alternatively, the Ld. AR submitted that as in the case of Shri Vikash Agrawal and Smt. Mani Devi Kedia, the source of source of the respective investors with respect to the share application money invested with the assessee company had been established, therefore, the statutory requirement contemplated in the "1st proviso" to Section 68 of the Act was duly satisfied, and thus, no adverse inferences in their case could be drawn. At the same time, the Ld. AR submitted that the "1st proviso" to Section 68 only did cast an obligation on the investor to explain the "nature" and "source" of the specified investments with the assessee company. It was thus, the Ld. AR's claim that no obligation was cast upon the aforementioned investors to substantiate the source out of which respective investments towards share application money was made by them with the assessee company. 9. Per contra, the Ld. Departmental Representative (for short 'DR') relied on the orders of the lower authorities. 10. Before proceeding any further, we deem it fit to cull out the provis....
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.... credited against the latter's name. Based on the aforesaid mandate of law, we are unable to concur with the claim of the Ld. AR that no obligation was cast upon the assessee company to offer an explanation about the source of the sum as was invested by the aforementioned persons as share application money (including premium) with the assessee company. As the "1st proviso" to Section 68 mandates the explanation of the assessee company about the source of the investor who had invested the sum towards share application money, share capital, share premium or any such amount by whatever name called, therefore, the assessee company in the present case before us was statutorily required to satisfy the said obligation on the basis of supporting documentary evidence in the course of proceedings before the A.O. 11. We shall now in the backdrop of the aforesaid statutory obligation that was cast upon the assessee company u/s. 68 of the Act (post amended) look into the aspect as to whether the onus that was cast upon it had been discharged. (A) Shri Munesh Kumar Pandey (Sr. No. 7) : Rs. 4,00,000/- 12. Apropos the amount of Rs. 4,00,000/- claimed to have been received b....
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....on as share application money as unexplained cash credit u/s. 68 of the Act. (D) Shri Ajay Kumar Agrawal (Sr. No. 3) : Rs. 5,00,000/- 16. As is discernible from the records, the assessee company had placed on record copies of return of income of the aforementioned person which reveals meagre income a/w. unsigned balance sheet, which, thus, does not inspire any confidence as regards the authenticity of the assessee's claim of having received investment towards share application money of Rs. 5 lacs from the aforementioned person. Also, we find that the aforesaid person had in his statement recorded u/s. 131 of the Act dated 11.10.2017, Page 61-62 of APB on being queried about the investment made in the assessee company, had stated that though the director of the aforementioned company, viz. Shri Manoj Bansal was son of his aunt Smt. Mohini Agrawal but he was not sure about the investment made towards purchase of shares of the said company. In fact, he expressed his total unawareness about the transaction of investment in the assessee company. 17. Considering the aforesaid facts, we find no infirmity in the view taken by the A.O who had rightly observed that th....
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....lso, come forth with an explanation as regards the source of the said investment, i.e., accumulated savings garnered over the last 4/5 years from the trading of paddy husk that was carried out by him, but we cannot remain oblivion of the fact that the said claim of the assessee is not substantiated on the basis of any clinching documentary evidence. We, thus, in terms of our aforesaid observations are of the considered view that the matter, in all fairness, requires to be restored to the file of the A.O who shall carry out necessary verification as regards the satisfaction of the requisite condition contemplated u/s. 68 of the Act. Needless to say, the A.O shall in the course of the set-aside proceedings afford a reasonable opportunity of being heard to the assessee company which shall remain at a liberty to substantiate its aforesaid claim on the basis of documentary evidence, if any. (F) Shri Dinesh Kumar Agrawal (Sr. No. 5) : Rs. 10,00,000/- 20. As is discernible from the records, the assessee company had placed on record copy of return of income of the aforementioned person which revealed a meagre income over the years, and thus, does not inspire any confidence ....
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....y of the facts therein involved, i.e., specifically the fact that the aforementioned person in both the years had merely received gifts and has no clear source of income, thus, does not inspire any confidence as regards her creditworthiness which would justify the aforesaid hefty investment made with the assessee company. Also, we find that the very fact that the payment of Rs. 10 lacs made by the aforementioned person from her bank account (joint account with Union Bank of India, Raigarh) to the assessee company towards share application money (including premium) was preceded by cash deposits of an equivalent amount on the same date raises serious doubts about the authenticity of the assessee's claim of having received genuine amount from the aforementioned person. On a perusal of the statement of the aforementioned person recorded u/s. 131 of the Act on 21.11.2017, we find that she had on specifically being queried that in absence of any clear source of income from where the aforementioned substantial amount of investment of Rs. 10 lacs was made with the assessee company, therein submitted that the same was sourced out of interest income that was garnered by her over th....