TaxTMI 
TaxTMI 
2025 (3) TMI 211
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....o obscure and hide the source of money received by the assessee. Since none of these companies has any other business activity except circulation of money from one company to another and by subscribing to or purchasing shares of other companies at a huge premium, there can be no justification of such a huge premium. This shows that the shareholder companies of one company become investee companies of other companies and in turn such other company whose shares are purchased, further invest in the shares of other companies and in turn such other company, whose shares are purchased, further invest in the shares of other company and so on. It can' be seen as a sheer coincidence that many companies brought into existence, having link with each other and none of them doing any worthwhile business activity come together to issue shares at such a huge premium. This when considered on overall basis is nothing but a smokescreen and beneficiary from this arrangement is the assessee. 3. On the facts and circumstances of the case, the learned CIT(A) erred in deleting the above mentioned addition as the assessee was not able to substantiate the genuineness of loan received of Rs 5,8....
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.... the issues in regard to addition of Rs 26,70,000/- shall be decided on merits or may be set aside to the file of the assessing officer." A.Y. 2016-17 "1. On the facts and circumstances of the case, the learned CIT(A) erred in deleting the addition of Rs. 8,31,00,000/- made by the AO u/s 68 of the IT Act, 1961 2. On facts and circumstances of the case, the learned CIT(A) erred not appreciating that an elaborate structure with many layers was created to obscure and hide the source of money received by the assessee. Since none of these companies has any other business activity except circulation of money from one company to another and by subscribing to or purchasing shares of other companies at a huge premium, there can be no justification of such a huge premium. This shows that the shareholder companies of one company become investee companies of other companies and in turn such other company whose shares are purchased, further invest in the shares of other companies and in turn such other company, whose shares are purchased, further invest in the shares of other company and so on. It can be seen as a sheer coincidence that many companies brought into existence....
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.... CIT(A). The assessment was completed for the AY 2015-16 U/s 147/143(3) and for the AY 2016-17 was completed u/s 143(3) of the I T Act. For the sake of brevity, we are taking appeal for Assessment Year 2015-16 and the decision taken for Assessment Year 2015-16 shall apply mutatis mutandis for Assessment Year 2016-17. 3. Briefly stated, the facts of the case are that assessee filed its return of income on 29.09.2015 declaring total income at Rs. 19,16,960/-. While completing the assessment under section 143(3) of the Act for the Assessment Year 2016-17 on 13.12.2018, it was noticed that the assessee has received cash credit of Rs. 8.31 Crores from the entity M/s. Mangal trading and clothing LLP during the relevant previous year and listed the entity as sundry creditors. However, on the basis of detailed enquiry carried out, the AO established that the above said entity was a part of the multiple layers of shell entities for providing accommodation entry. During the course of assessment proceedings, assessee failed to discharge the onus to substantiate the credit entries appeared in the name of M/s. Mangal trading and clothing LLP. Accordingly, AO held that the genuineness of sum ....
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....rns / PAN, etc., of the creditors is not enough to prove the genuineness of cash credits and similarly payment by cheque is also questioned nor can it make a non-genuine transaction genuine. If the assessee has not proved the three ingredients as per section 68 of the Act, the cash credit appearing in the books of accounts is bogus. He further noted that in the case of MRPL, that the MRPL having no taxable income and no evidences are submitted about the activity of MRPL and in the absence of financial statement, the genuineness of transactions, source of loan and credit worthiness of the depositors could not be verified. Further, it was noticed that the assessee has received loan from Sumitra Bai of Rs. 75,000/- and from Ramesh Kumar Sancheti the assessee received Rs. 1,50,000/- on 17.05.2014 but the assessee is unable to prove in terms of section 68 of the Act. During the course of proceedings, the assessee was requested to furnish the details of source in the hands of MRPL which was transferred in the bank account of the assessee as loan but the assessee has never submitted the same. As per the details furnished, the AO noticed that after verification of the bank account of MRPL,....
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....ereof, I find that the appellant has satisfactorily discharged the primary onus last upon it to substantiate the unsecured loan transactions during year, by furnishing all the relevant and material evidence. The identity of the loan creditor is established as the entity is having PAN, CIN and is regularly filing return of income. The creditworthiness of the loan creditor is established from the audited balance sheets and profit and loss accounts, which show that the lender entity has adequate own funds (share capital and reserves). The source of funds in the hands of the loan creditor is explained by way of further loan credits received from various companies. The identity and lending capacity of these companies is also established from their ITRs, audited balance sheets and profit and loss accounts, which show that these other companies have adequate own funds (share capital and reserves), and are also having substantial operating revenue, during the relevant period, to in turn advance the funds to MRPL. The genuineness of the transaction is established form the fact that both the acceptance and repayment of loan has been through banking channel, as evidenced from the bank stateme....
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....ature of share capital, share application money etc., where it is reasonable to presume a continued relationship with the creditor; and not in respect of credits by way of loans or borrowings etc., the "source of source of such credits" is also. required to be explained satisfactorily. This amendment, however, is applicable to the Assessment Year 2023-24 and subsequent assessment years, hence does not apply to the year under consideration. 8.17 It is well-established that the onus lies on the assessee to adduce necessary documentary evidence so as to prove all the three ingredients of section 68 viz. identity and creditworthiness of the creditor, and genuineness of the transaction, as the relevant facts are within the special knowledge of the assessee. It has also been held that the evidence adduced by the assessee have to be examined not superficially but in depth and having regard to the test of the human probabilities and normal course of human conduct. 8.18 Hon'ble ITAT, Mumbai Bench, Mumbai in case of ITO v. Anant Shelters Pvt Ltd (20 taxmann.com 153) (2012) (Mum) has enumerated certain legal principles regarding taxation of cash credits under section 68 ....
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....tion is properly explained for the purpose of section 68. Assessee has to establish identity and creditworthiness of the creditor as well as the genuineness of the transaction. All the three ingredients are cumulative and not exclusive. (vi) In matters regarding cash credit the onus of proof is not a static one. As per the provisions of the section the initial burden of proof lies on the assessee. Amount appearing in the books of a/cs. of the assessee is considered a proof against him. He can prove the identity of the creditors by either furnishing their PANs or assessment orders. Similarly, genuineness of the transaction can be proved by showing that the money was received by an account payee cheque or by draft. Credit worthiness of the lender can be established by attending circumstances. Once the assessee produces evidences about identity, genuineness and credit worthiness of the lender onus of proof shifts to the Revenue. " 5. Further the ld CIT (A) has relied on the following judgements and deleted the additions made by the Assessing Officer :- * Rushabh Enterprises Vs. ACIT (60 taxmann.com) [2015] (Bombay) * Pr.CIT Vs. Ojas Tarmake (P.) Ltd., [20....
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....dentity and independent existence of the purported creditors. He further stated that the confirmation letters submitted by the assessee, from the creditors followed a uniform pattern and appeared to have been prepared by the same individual in all cases. This uniformity indicates that the assessee exercised control over the preparation and submission of these documents, undermining the claim of independent and bona fide transactions. The learned DR contended that the CIT(A) erred in deleting the additions of Rs. 1,50,000 received from Shri Ramesh Kumar Sancheti and Rs. 75,000 received from Mrs. Sumitra Bai during assessment year 2015-16. He argued that the assessee failed to substantiate these transactions during the assessment proceedings by furnishing sufficient evidence to establish the identity of the creditors, the genuineness of the transactions, and the creditworthiness of the lenders. The DR emphasized that the onus to prove the nature and source of these credits' rests squarely upon the assessee under Section 68 of the Act. In the absence of a satisfactory explanation and supporting documentation before the AO, the deletion of the additions by the CIT(A) is not proper. ....
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....advances to the assessee, thereby lending credence to the genuineness of the transactions. 11. The AR for the assessee pointed out that M/s. MRPL received the share capital/premium in question during the A.Y. 2012-13. However, the assessee received amounts from M/s. MRPL during A.Y. 2015-16 and 2016- 17, which is after a gap of three years. The AR argued that the Revenue's contention that the amounts received by the assessee represent its own unaccounted money lacks merit as the significant time gap between M/s. MRPL's receipt of share capital/premium and the assessee's receipt of amounts from M/s. MRPL undermines the Revenue's claim of a direct nexus between the two transactions. 12. The AR for the assessee vehemently argued that the requirement to substantiate the 'source of source' of funds is applicable only for share capital, share premium and share application and not for unsecured loans and he placed reliance on the Supreme Court decisions in CIT vs. Daulat Ram Rawatmall, 87 ITR 349 & CIT vs. Lovely Exports Pvt Ltd, 216 CTR 195. The AR submitted that the provisions of section 68 of the Act were amended by the Finance Act, 2022 by inserting the first pro....
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....om pages 332 to 492. Notably, the balance sheet of MRPL for the year ended March 31, 2012, which is found on page 351 of the Paper Book, discloses reserves and surplus of Rs. 15.62 crores. Additionally, the assessment order passed in the case of MRPL for the assessment year 2012-13 by the ITO, Ward-5(4), Kolkata, is located on page 505. This order reveals that MRPL issued 1,57,200 shares at a face value of Rs. 1 to raise a capital of Rs. 15.64 crores. We note that in order to verify the share capital issued, the Assessing Officer issued notices under Section 133(6) of the Act to the share applicants/allottees. Following a detailed examination and recording of the statements of the directors of the investors of M/s. MRPL, the assessment was concluded by accepting the return of income. 15. The AR for the assessee pointed out that subsequent to the conclusion of the assessment in the case of M/s. MRPL order dated 31.03.2014 completed u/s 143(3) of the I T Act, no adverse action was taken against the said company. There is sufficient reserve and surplus ( Net Worth) had the company in the financial year ending 31.03.2012 and out of this reserve the MRPL ha given loan to the assessee....
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....see has placed on record the copies of the income tax returns and audited financial statements of the investors of M/s. MRPL, thereby established the authenticity and credibility of the investors. The assessee has provided a clear explanation regarding the source of the credit in its books of account as unsecured loan. 18. It was held by Hon'ble Supreme Court in the case of Roshan Di Hatti v. CIT [1977] 107 ITR 938 that onus of proving the source of sum of money found to have been received by the assessee, is of assessee. Once the assessee has submitted the documents relating to identity, genuineness of transactions and creditworthiness, then ld. AO must conduct enquiry and call for more details before invoking section 68 of the Act. If the assessee is not able to provide a satisfactory explanation of the nature and sources, the credit shown in the books of accounts in the assessment year under consideration is open to the lower authorities to hold that it is the income of the assessee and there would be no burden on the revenue to show that the income is from any particular sources. It is to be noted that once the assessee has produced the documents relating to identity, ge....