TaxTMI 
TaxTMI 
2026 (7) TMI 1229
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....s a company, engaged in the business of real estate development, purchase and sales of land. The return of income was filed on 28.09.2011, declaring total income of INR 3,76,220/-. The case of the assessee was re-opened after recording the reasons and notice was issued u/s. 148 of the Act on 26.03.2018. In response to which the assessee has filed the return of income on 18.10.2018, declaring the same income as was declared in the return of income filed u/s. 139(1) of the Act. Thereafter, the AO has asked the assessee to furnish the details with respect to the share application money of INR 1.00 crores and unsecured loans of INR 3,65,70,000/- received during the year. In reply, the assessee has filed the confirmation in some cases, copy of the bank statements of the share applicants and lenders and also filed their ITR and financial statements. The AO after examining these details concluded that the assessee has failed to establish the identity and creditworthiness of the lenders/ share applicants and further genuineness of transactions was also remained unverified and made the addition of INR 1.00 crores received as share application money u/s. 68 of the Act and further added the u....
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....the Individual share applicants based on their financial statements to support the contention that they were having sufficient creditworthiness when the funds were invested int eh assessee company. Ld.AR thus, submits that additions made be deleted. Besides this ld. AR further placed reliance on various judicial pronouncements which are placed on records. 9. Per contra, Ld. Sr. DR for the Revenue vehemently supported the orders of the lower authorities and submits that the assessee has failed to discharge the burden casted upon it of proving the genuineness of the share application money received during the year. As per ld. Sr. DR before the lower authorities despite of repeated opportunities provided, assessee has filed to establish the creditworthiness of share applicants. For this, Ld. Sr. DR drew our attention to para 4.1 of the assessment order wherein AO has tabulated details of each and every share applicant and pointed out the shortcomings in their financial statements/creditworthiness. Ld. Sr. DR submits that the AO has issued notices u/s. 133(6) to the share applicants however, in some of the cases, they were returned unserved or wherever the same were served, no compl....
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.... 10 Lakhs 7. Smt. Ritu Vasudeva 154 29.03.2011 INR 10 Lakhs 12. As observed in the case of Seven share applicants, the assessee has been able to establish their creditworthiness by filing their bank statements wherein all these Seven applicants have sufficient funds when the funds were transferred to the assessee company. Regarding source of source, amendment was made in section 68 vide Finance Act, 2012 as per which the "source of source" is to be established in the case of share application money received applicable w.e.f. 01.04.2013. However, in the case, the assessment year involved is AY 2011-12 therefore, the assessee is not required to establish "source of source" in the case of share applicants and once the immediate source of funds given as share application money is established, the assessee had discharged the burden casted upon it u/s. 68 of the Act. As observed above, in all the cases assessee has established their identity by filing their ITRs and their Audited Financial statements. Further, the bank statements were filed therefore, the assessee has discharged the burden to establish the identity and creditworthiness of the transaction and no addition....
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....ion of the Asstt. Collector. Hence, the High Court was justified in interfering with the order of the Tribunal." 15. The Hon'ble Delhi High Court in the case of CIT vs. Vrindavan Farms Pvt. Ltd. etc. in ITA. No.71 of 2015 dated 12th August, 2015 held as under : "The sole basis for the Revenue to doubt their creditworthiness was the low income as reflected in their return of income. lt was observed by the ITAT that the Assessing Officer had not undertaken any investigation of the veracity of the documents submitted by the assessee, the departmental appeal was dismissed by the Hon'ble High court." 16. In the case of CIT v. Sophia Finance Ltd. reported in [1994] 205 ITR 98 (Delhi), the Hon'ble jurisdictional High Court held that in the context of Section 68 of the Act that: (i) "The Assessee has to prima facie prove "(1) the identity of the creditor/subscriber; (2) the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels; (3) the creditworthiness or financial strength of the creditor/subscriber. (ii) If the relevant details of the address of PAN identity of the creditor/subscribe....
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.... observed as under: "... assessee discharged the burden in proving the identity of shareholders, genuineness of the transaction and creditworthiness of the shareholders, thereafter, in case such evidence is to be discarded or it is proved that the assessee has "created" evidence, the Revenue is supposed to make thorough probe before it could nail the assessee and fasten the assessee with such a liability under Section 68 and 69 of the Act..." 20. In view of above discussion and by respectfully following the judgements of the Hon'ble Apex Court and of the Hon'ble Jurisdictional High Court, we are of the considered opinion that the assessee has discharged the burden casted upon it of proving the identity and creditworthiness of the share applicants and the AO has not made any independent enquiries to support the allegation that the applicants has no creditworthiness, therefore the addition of INR 1.00 crores including INR 30.00 Lakhs received from three applicants is hereby, deleted. Accordingly, all the Grounds of appeal raised by the assessee are allowed. 21. In the result, appeal of the assessee is allowed. 22. Now we take appeal of the Revenue in ITA No.138/Del/....
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.... outstanding thus, had deleted the additions. Accordingly, Ld. AR submits that once the assessee has discharged the burden casted upon it of proving the identity and creditworthiness of the lenders and further established the genuineness of the transactions which fact has been accepted by Ld. CIT(A) after making proper verification of the details filed. Thus, it cannot be said that the assessee has not discharged the burden casted upon it, u/s. 68 of the Act and therefore, prayed that Ld. CIT(A) has rightly deleted the addition which order deserves to be uphold. 27. Heard the contentions of both the parties at length and perused the material on record. From the perusal of para 5 of the assessment order, it is observed that before the AO, assessee has failed to file even confirmations of the lenders and neither their bank statements nor their financial statements were submitted therefore the AO has treated the unsecured loans received from 08 parties totaling to INR 3,65,70,000/- as unexplained credit u/s. 68 of the Act. It is further observed that before Ld. CIT(A), the assessee has filed following documents:- (i) Confirmations of accounts (ii) Relevant extract....
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....hat a substantial portion of the amounts was repaid, including entries in the same year; * ledger/cash-book entries of the assessee recording the receipt and repayment of the loans; 11.2 Specific instances may be noted as under: * Khurana Auto Ways (Rs.5,00,000): Loan fully repaid on 10.05.2011. * Smeet Brass Components (Rs.12,00,000): Loan repaid in three instalments - Rs. 7,00,000 on 16.05.2012 Rs. 4,00,000 on 24.05.2012, and Rs. 1,00,000 on 03.07.2012. * Raminik Singh (Rs. 22,00,000): Loan repaid in two instalments - Rs. 11,00,000 on 14.05.2011 and Rs. 11,00,000 on 01.02.2013. * Ambica Tradexpo Pvt. Ltd. (Rs.1,58,00,000): Substantial repayments of Rs. 1,98,00,000 were made, leaving balance only Rs. 29,00,000. * Ambica Buildtrade Ltd. (Rs.1,26,00,000): Repayment of Rs. 97,00,000 has been made, leaving a closing balance of Rs. 29,00,000. * Chetan Pahwa (Rs.7,70,000): Repaid fully. In fact, the amount pertains to share application money received in F.Y. 2009-10, and is not an unsecured loan, which is a mistake apparent in the AO's working. * Satyender Kaur (Rs. 10,00,000): Repaid fully. ....
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....he banking channel and repaid thru the banking channel as under:- 12. From the above, it is clear that the assessee has repaid the loan even before the assessment was reopened. When the assessee takes the loan and repaid along with the interest clearly shows that the transactions are genuine. By returning the loan, the assessee has only utilised the loan for the purpose of business and repaid the same. Merely because some operator has managed the affairs and all the transactions cannot be labelled as non-genuine. Every transaction has to be evaluated on its merit rather than on the basis of suspicion. Therefore, in this case, the assessee has submitted all the documents in support of the transaction before the AO and he has merely rejected the same on the basis of information available with him as the same on the basis of suspicion. Therefore, we are inclined to allow the grounds raised by the assessee. 13. In the result, appeal filed by the assessee is allowed." 11.5 On the totality of the documentary evidence now on the appellate record bank receipts, bank payment proofs for repayments (including same-year repayments), ledger entries and lender confirma....