TaxTMI 
TaxTMI 
2026 (6) TMI 822
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....ssued and in response to those statutory notices, the assessee company has filed detail stating that it was engaged in business of import and trading of chemical and received commission as consignment agent. The assessee company has issued 10,00,000 shares at face value of Rs. 10/- each and taken premium of Rs.20/- per share. The assessee company has received total share capital of Rs. 1,00,00,000/- from three parties namely, Ritika Chawchharia (Rs.22,00,000/-), Anoop Kumar HUF (Rs. 72,00,000/-) and Rishu Agencies Pvt. Ltd. (Rs.6,00,000/-) apart from a total share premium of Rs.2,00,00,000/- from these parties only. Vide submission dated 25.11.2019, the copy of Income Tax Returns, statement of income and bank statement for Financial Year 2016-17 of the three parties to whom share capital was allotted during the year was filed. The AO observed that these three parties has very low gross total income/ total income as compared to amount paid on account of share capital and share premium. Hence, a show-cause notice dated 25.11.2019 was issued. In reply to the show-cause notice, the assessee has explained the source of funds of these three entities but the ld. AO did not found the expla....
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....n treating the aforesaid amount received from the aforesaid 3 persons to be unexplained cash credit, simply on the ground of doubting the creditworthiness of the persons on the basis t hat income reported in the return of income of the year under consideration did not commensurate with the amount of investment made by each such person. 9.2 Refuting the aforesaid finds of the AO, the appellant filed contemporaneous additional evidences listed supra with respect to each pi s establishing the creditworthiness and source of funds with each person before making investment in the assessee company. 9.3 The appellant has even filed application under Rule 46A of the Rules pleading admission of the additional evidences on the ground that sufficient opportunity was not afforded to the appellant during the course of assessment which was raised by the AO for the first time in the show cause notice dated 05.12.2019, giving time of only one day to file the reply on 07.12.2019 and assessment order was also passed on the same date. 9.4 I have gone through the record. I find that the additional evidences furnished by the appellant deserves to be admitted. Firstly, the issu....
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....th which was sufficient in the present case as can be seen com the following: "1. Ritika Chhawchharia The copy of Balance Sheet/statement of affairs as on 31.03.2016, evidencing that her net-worth as on 31.03.2016 was Rs. 4,10,23,379 as against the investment made by her of Rs. 66,00,000 (approximately 16%) during the AY 2017-18. (P.B. Page 58) The copies of ITR's evidencing the gross total income and the exempt income earned by her during the immediately preceding three assessment years, viz., AY 2014-15 to AY 2016-17. The same are reproduced herein below for ease of reference (P.B. Page 54-56) Particulars Ms. Ritika Chhawchharia AY Gross Total Exempted Total Income 2016-17 18,40,141 24,32,800 42,72,941 2015-16 6,87,257 6,210 6,93,467 2014-15 11,97,860 10,87,870 22,85,730 Copies of bank statement for AY 2017-18; evidencing the availability of sufficient funds for investment(s) (P.B. Page 57) 2. Anup Kumar HUF The copy of Balance Sheet/statement of affairs as on 31.03.2016, evidencing that the net-worth of the said HUF as on 31.03.2016 was Rs.12,19,99,515 as against the inves....
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....d in law. 3. That the grounds of appeal are without prejudice to each other." 5. We have heard ld. AR and ld. DR. The ld. AR at the very outset submitted that the ld. CIT(A) has legally admitted the additional evidence submitted by the assessee by following the provisions of Rule 46A as the case for admitting the additional evidence was successfully made out by the assessee. It is further argued that as is evident from the remand report submitted by the AO in pursuance of prayer for admitting additional evidence, the AO has tried to stress the point that source of source is not established. It is argued that though by relevant document the assessee has succeeded in proving even source of source which otherwise became obligatory only w.e.f. assessment year 2023-2024. It is further submitted that ld. AO was misconceived in concluding that the net-worth of the creditor was not sufficient or not commensurate with the investment made by three parties while investing in share capital. It is further submitted that the Assessing Officer did not permit to file the relevant documents when the opportunity was sought by the assessee and has proceeded to pass the assessment order an....
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....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. 4. The Court is of the view that the Assessee by produced sufficient documentation discharged its initial onus of showing the genuineness and creditworthiness of the share applicants. It was incumbent to the AO to have undertaken some inquiry and investigation before coming to a conclusion on the issue of creditworthiness. In para 39 of the decision in Nova Promoters (supra), the Court has taken note of a situation where the complete particulars of the share applicants are furnished to the AO and the AO fails to conduct an inquiry. The Court has observed that in that event no addition can be made in the hands of the Assessee under Section 68 of the Act and it will be open to the Revenue to move against the share applicants in accordance with law. 5. In the facts and circ....