Income Tax Appellate Tribunal - Agra
T.S.Ice & Cold Storage Pvt. Ltd, Agra vs Department Of Income Tax on 23 March, 2009
IN THE INCOME TAX APPELLATE TRIBUNAL
AGRA BENCH, AGRA
BEFORE SHRI P.K. BANSAL, ACCOUNTANT MEMBER AND
SHRI H.S. SIDHU, JUDICIAL MEMBER
ITA No.273/Agr/2009
Asst. Year: 2004-05
ACIT 4(1), Vs. M/s T.S. Ice & Cold Storage Pvt. Ltd.
Agra. T.S. Market,
Village & Post Khandoli, Agra.
(PAN : AACCT 1158 P)
(Appellant) (Respondent)
Appellant by : Written Submission
Respondent by : Shri Mahesh Agarwal, CA
ORDER
PER H.S. SIDHU, J.M. :
The Revenue has filed the present appeal against the impugned order dated 23.03.2009 passed by the ld. CIT(A)-I, Agra on the following grounds of appeal :-
"1. That the learned CIT(A) has erred in law and on facts in deleting the entire addition made by Assessing Officer u/s 68 amounting to ` 82,12,000/- (47,67,000 + 34,45,000) being unexplained share money and loans without properly appreciating the facts and circumstances of the case and relying on the submission made by the assessee and also without adjudicating the issues raised by the Assessing Officer in the assessment order.
2. That the decision of Ld. Commissioner of Income tax (A)-II, Agra being erroneous in law and on facts deserves to be quashed and that of the Assessing Officer deserves to be restored.2
3. That the appellant craves leave to add or alter any or more ground or grounds of appeal as may be deemed fit at the time of hearing of appeal."
2. The brief facts relating to the issue in dispute are that the assessee is a private limited company and filed its return of income on 01.11.2004 declaring loss of ` 28,83,314/-. The Assessing Officer selected the case of the assessee for scrutiny and issued notices under section 143(2) and 142(1) of the Income Tax Act, 1961 ('the Act' hereinafter). In response to the same, the ld. Ld. Authorised Representative of the assessee appeared and filed written reply. The assessee derives its income from Cold Storage. The assessee company was incorporated w.e.f. 16.04.2003 and the Cold Storage was constructed and installed during the year itself. During the course of assessment proceedings, the assessee was required to furnish details of investment in the Cold Storage, source of share capital, genuineness of loans and to justify such investment and such capital/loans and other expense with reference to books of accounts, bills, voucher, etc. The assessee has though filed some of the details, but has not filed the complete documentary evidence as required by the Assessing Officer. After examining the return filed by the assessee, the Assessing Officer found that the assessee has shown receipt of share money amounting to ` 75,00,000/- from 15 persons which includes ` 64,00,000/- from 4 Directors of the assessee company and balance amount of ` 11,00,000/- was received from 11 persons (` 1,00,000/- each). Apart 3 from the said amount, the assessee has also shown receipt of ` 34,45,000/- by way of unsecured loans from 19 agriculturists. After examining the details filed by the assessee, the Assessing Officer requested the assessee to furnish names and addresses of the persons who had given share application money during the year 2003-04, copy of application filed by them for allotment of shares, date and mode of payment of share application money and copy of bank account in which share application money was deposited by the assessee. Secondly, the Assessing Officer also requested the assessee for supply of name and addresses of all share holders, number of shares applied/allotted to them, date and mode of payment for purchasing the shares, copy of application filed by them for allotment of shares and to file complete names and addresses of shareholders to whom allotment of shares was pending as on 31.03.2004 and the date of allotment of shares to such shareholders in subsequent year with supporting evidence. Thirdly, the Assessing Officer also requested the assessee to furnish complete addresses of the persons from whom the loans were taken, prove their identity, creditworthiness and genuineness of the transaction with supporting documentary evidences, terms and conditions of loans, purpose of taking such loans and file their copy of account as on 31.03.2004 along with confirmation from all such persons in respect of loans taken, rate of interest charged.
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3. In compliance of the aforesaid request of the Assessing Officer, the assessee has only furnished a list of share applicants, giving their names and addresses and amount received from them towards purchase of shares. In support of share application money received from the Directors, the assessee has furnished bank statement of Shri Bhuri Singh, Shri Rakesh Kumar, Shri Pratap Singh, Shri Dallvir Singh and their HUFs, details of loading and nikasi of potatoes from Parabhat Cold Storage, Hathras Road, Agra, a copy of khasra evidencing their land holding and sale bills of potatoes. The assessee stated that Directors had sold their agricultural land in the year 2003 and out of such sale proceeds, share application money was paid. In support, 11 sale deeds amounting to ` 19,55,000/- have been furnished. The details of the same, the Assessing Officer has reproduced in paragraph no.2 at page no.2 in the Assessment Order. The assessee has also filed copy of confirmations, ration card and kisan bahi of loan creditors evidencing land holding by the creditors.
4. After receiving the aforesaid evidences, the Assessing Officer, feeling dissatisfied, again requested the assessee to furnish (1) share application forms filed by the share applicants and file a copy of their ration cards to prove their identity and bank pass books for the period 11.04.2011 to 31.03.2005, (2) furnish a copy of Khatauni for the relevant year along with certificate from the Revenue Authorities proving cultivation of potatoes by the Directors and their family 5 members during the relevant year, (3) bank pass book of the persons from whom loans were taken, (4) to produce all books of accounts, bills and evidences in support of identity, capacity and genuineness of loans and share application money received during the year.
5. In response to the aforesaid request of the Assessing Officer, the assessee filed its reply on 22.12.2006 in which reliance was again placed on the same material which had been filed by the assessee earlier. But the assessee has not filed the evidence required by the Assessing Officer for the verification of the correctness of cultivation of potatoes by the share applicants and loan creditors. The assessee has also not produced certificate of land revenue authorities regarding such cultivation by the above persons by not furnishing such details, the assessee has not co-operated with the Department in verifying the genuineness of its claim regarding source of fund in the hands of share applicants and loan creditors.
6. After examining the said evidence, the Assessing Officer was of the opinion that all the share applicants and loan creditors are mainly agriculturists and their main source of income is agriculture and their annual income is in the range of `40,000/- pr annum. Almost all have family consisting of 4 to 6 persons and it is not possible to save anything after meeting the household expenses and other expenses on account of social and family obligations. 6
7. The Assessing Officer also found that keeping in view of bank accounts of the Directors and others, there are cash deposits or transfer of money just before giving of cheques of share application money of the loans and but for such deposit/credit, they were not having capacity to invest money with the assessee. He has written all the details in the bottom of page no.3 and in the starting of page no.4 in the Assessment Order in dispute. Lastly, the Assessing Officer has accepted the sale consideration of ` 19,55,000/-, as discussed in the Assessment Order at para no.2, page no.2, in the hands of 4 Directors and added the balance amount, i.e. ` 64,00,000.00 - ` 19,55,000.00, as unexplained on account of share application money invested by the 4 Directors. The Assessing Officer also accepted the amount of ` 7,78,000/- representing capitalization of land for the cold storage and at the end the Assessing Officer added ` 47,67,000/- (` 75,00,000 - `19,55,000 - ` 7,78,000) and amount of unexplained loan of ` 34,45,000/- totaling to ` 82,12,000/- and added to the income of the assessee under section 68 of the Act vide his order dated 27.12.2006 passed under section 143(3) of the Act. Aggrieved by the same, the assessee filed appeal before the ld. First Appellate Authority who, vide the impugned order dated 23.03.2009 partly allowed the appeal of the assessee and deleted the addition in dispute. Now, the Revenue has filed the present appeal against the impugned order dated 23.03.2009. 7
8. At the time of hearing, the ld. Departmental Representative did not appear before the Bench due to some reason best known to him, but he filed written submission. For the sake of convenience, the written submission filed by the Ld. Departmental Representative is reproduced as under :-
"F.No.CIT(DR)/ITAT/AGRA/2011-12/ Office of the Commissioner of Income-tax (DR) Income tax Appellate Tribunal, Agra Dated: 20.06.2011 To, The Assistant Registrar, Income tax Appellate Tribunal, CGO Complex, Sanjay Place, Agra Sir, Sub:- ITA No.273/Ag/2009 in the case of M/s T.S. Ice and Cold Storage Pvt. Limited for the A.Y. 2004-05 - regarding.
The assessee's arguments are
a) In respect of cash-credits. Source of source does not require to be established and that once the identity of credit is affirmed and the facts the payment is by cheque - additions cannot be made in the hands of the company.
b) In respect of share capital added u/s 68 - Once shareholder/ creditors are identified - No addition can be made in the hands of the company. Even otherwise, this being the first year of operation of the company, the company could not have earned the said income. And that therefore, the additions, if any, could not be made in the hands of the company.8
In respect of as assessee has relied on 264 ITR 254 (Gauhati) HC Nemi Chand Kothari and the ........ Allahabad HC - 147 Taxman 448 (All.) - Ja........Goel. This is based on the reasoning adopted by the Gauhati High Court - page 16 of assessee's paper book "Once the assessee had established that he had recovered the said amounts from the creditors appear entered by way of cheques, the assessee must be taken to have proved that the creditors had creditworthiness to advance the loans ..........".
This position of law is controverted by the Supreme Court and has been followed by the contrary by various High Courts and the jurisdictional High Court in 280 ITR 547 - Ram Lal Agarwal vs. CIT has itself ............ this logic of "source of source" not being required to be proved.
The department relies upon
a) CIT vs P. Mohan Kala 291 ITR 278 (SC) for the ......... page 280 "That the money came by way of bank cheques and was paid through the process of banking transaction was not by itself of any consequence".
The said proposition has been followed in 294 ITR 219 (AT) - ACIT vs. Rajeev Tandon 267 ITR 308 - CIT vs. Jawahar Lal (Oswal) (P&H) HC and 264 ITR 435 (Del.) HC in Sanjay Das & Sons - "Onus lies on him not only to establish the identity of the "DONOR" but his capacity to make such a Gift".
The jurisdictional High Court in 280 ITR 547 (All) in Ram Lal Aggarwala vs. CIT - explicitly requires the creditworthiness of the source to be proved. In other words source of source is required to be established.
Cash Credit : - Burden of proof - assessee must establish the identity of the creditors and prove their creditworthiness - finding by I.T. Authorities that creditworthiness of depositors was not proved - 9 assessment of the amount shown as cash credits - valid all the .......... found that the persons who were alleged to have made the payments had no source and capacity to make such a payment.
In other words the Allahabad High Court examines the source and capacity of the source to arrive at its findings.
Further, reliance is placed on CIT vs. Lovely Exports P. Limited (Del. HC) affirmed by Supreme Court which on page 282, lays down 7 ............ of law after an analysis of all earlier precedents specifying the assessee has to prima facie prove
3) the creditworthiness or financial strength of the creditors/ subscriber and
7) the officer is duty bound to investigate the creditworthiness of the creditors/subscriber the genuineness of the transaction and veracity of the transaction.
This obviously ought to be done in the light of the ............... that the mere receipt through banking channels is not sufficient evidence and vide 160 ITR 674 (SC) Biju Patnaik - in appropriate cases the source of source ought to be examined by the department as has been done in the case of Ram Lal Aggarwal (Allahabad HC).
Accordingly the legal precedents cited by the assessee stand distinguished.
Further reliance on the said proposition is placed on the decision of Hon'ble Supreme court in 159 ITR 78 (Orissa Corporation (P) Ltd., vs. CIT vide page 84).
In this case, the assessee had given the names and address of the alleged creditors. It was in the knowledge of the revenue that the said creditors were income tax assessees. Their index numbers were in the file of revenue. The revenue apart from issuing notices u/s 131 at the instance of the assessee did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to be found out whether they were creditworthy or were such who could advance the said loan".
10The Hon'ble SC clearly represent in explicit term - that source of source cannot be examined. On the contrary both Lovely Exports and Orrisa Corporation required the assessing officer to examine the source of income of the said creditors and his capacity to advance the said loan.
Accordingly source of source can not be examined and the CIT has not given any finding of her own to establish that the creditor's extent of land holdings his income and savings and the resultant capacity to make such a loan in the light of Human Probabilities.
As regards the second proposition of the assessee (i) share capital cannot be added in the hands of the company (ii) that this is the first year of business - hence no addition in the case of the company.
- In this context please refer to page 82 - of 159 ITR (SC) in Orissa Corporation - section 68.
"The section only gives a statutory recognition to the principle that cash credits which are not satisfactorily explained can be added as income. The section enacts that if a sum is found credits in the books of an assessee maintained for any previous year the cash credits might be in cases where it is treated as undisclosed income, be treated as the income of the previous year ......... even if the undisclosed income was not found to be from the assessee's regular business for which the books were maintained".
Further, it states "under the 1922 Act where a large amount of cash was found credited on the very first day of the accounting year and considering the extent of the business it was not possible that the assessee earned a profit of that amount in the day, the amount could not be assessed as the income of the year on the first day on which it was credited in the books. Under this section (68) even in such a case the unexplained cash credit might be assessed as the income of the accounting year for which the books are maintained." Thus, Orissa Corporation lays down 159 ITR 78 Supreme Court - 11
a) Irrespective of date/year the cash credit can be assessed in the hands of the assessee company - even in cases where it was clear that the assessee could not possibly have earned that income. In the light of the Supreme Court ruling the assessee's reliance on the Allahabad High Court judgment in Jawahar Motor Finance - 141 ITR 706 is mislead, the judgment of 83 ITR 187 (SC) Bharat Engg has been decided on facts as basically finding of fact not on legal prospect and as such cannot be cited as a precedent. The case of India Rice Mills 218 ITR 508 was in the context of cash credits paid to commencement of firm which is not the case here.
The Bench has been kind enough to ask for a copy of P&L account. Perhaps the memorandum of undertaking would have made the scope and extent of assessee's business ................ But as the bench itself has noted sales of 8000 MT turnover 66.77 lacs during the year and selling expenses debited to the profit and loss account. This is because while storage of potatoes is a business of the cold storage are not precluded from speculation and trading in potatoes. In fact the assessee's method of accounting does not permit the recognition of interest income on advances to farmers and the part of storage of potatoes for the months of February and March until the potatoes are sold in the ensuing year.
Thus the assessee is not precluded from earning income since the inception of the company and rental income from potatoes is not the only source of income. Trading/sale of potatoes in its own right too is a source of income.
Now as regards share capital cannot be assessed in hands of company ...........
The department context that (a) the law laid down in 263 ITR 289 Hindustan Tea Trading Company Dolphin Compact Limited 283 ITR 190 and CIT vs. Ruby Traders and Exporters - explicitly specify the distinguish between a public limited company and a private limited company with its intimate knowledge of creditors/subscribers. 12 In case of public issue no additions in hands of company except in cases where there is link between the amount subscribed and the company ..... "(263 ITR 289) and in 263 ITR 300 (Cal. HC) CIT vs. Ruby Traders and Exporters. The court discredited the arguments that there could be no responsibility for the company in respect of its share capital.
Your's honour will note that Lovely Exports - Del.(HC) makes it clear on page 275 that the Steller Investments is no longer has ........... After considering the above decisions the ITAT in 98 ITD part 6 Naper Drugs vs. DCIT (Del.) para 64 :
"That these decisions do not lay down any preposition of law much less the prepositions that in case of a company under no circumstances any additions can be made in the hands of the a company.
Further in case of ACIT vs. Moderen Cement Industries Limited 94 ITD 170 (Ahmedabad) share capital has been added in the hands of the company.
Besides section 68 Orrisa Corporation page 82 can be relied upon to add share capital in the hands of the company.
This is in the factual background, that even if all Khataunies have been provided, there is still no reconciliation/record of land owned by the persons in whose names sale of potatoes have been credited. There is also no proof of cultivation of potatoes, or storage of such potatoes in the cold storage.
Accordingly, submitted, Yours faithfully, Sd/-
(WASEEM ARSHAD)
Addl. Commissioner of Income tax (Sr. DR)
Dated 20th June, 2011 I.T.A.T., Agra"
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9. The ld. Counsel for the assessee also filed his written submission along with photocopy of various decisions supporting his arguments. Ld. Counsel for the assessee has also filed 3 Paper Books containing page nos.1 to 48 in which he has attached copy of submission before the Assessing Officer, copy of submissions dated 26.12.2006 before the Assessing Officer, copy of submissions dated 06.09.2007 before the CIT(A), copy of remand report from the ACIT, copy of Audited Accounts for the Financial Year 2003-04 relevant to Assessment Year 2004-05, copy of computation of income filed, copy of Directors Report for the financial year 2003-04, copy of Aamad Register (for storage of Potatoes) of the financial year 2003-04, copy of Audited Accounts for the financial year 2004-05 and details of expenditure capitalized during the financial year 2003-04.
10. As we stated above, the ld. Counsel for the assessee has filed his written submission on the date of hearing. For the sake of convenience, we reproduce the same as under :-
"BEFORE THE HON'BLE INCOME TAX APPELLAE TRIBUNAL, AGRA BENCH, AGRA In the matter of ITA No.273/Ag/2009 ACIT, Cir.4(1), Agra Vs. M/s T.S. Ice & Cold Storage Pvt. Ltd.
May your honour please, the Respondent assessee submits as follows-14
1. The assessee is a private limited company formed on 16.04.2003.
2. The assessee company was formed to carry on the business of Cold Storage for which storage season commences from February and Nikasi from June onward.
3. This being the first year, activities of the assessee limited to the construction of the cold storage and storage of potato only. There was no inflow of any income during the year.
4. The assessee company raised a share capital of ` 75,00,000/-
from 15 shareholders - ` 64,00,000/- from 4 directors and ` 11,00,000/- from other 11 shareholders. All the shareholders were from the same family having agricultural background with substantial land holdings.
5. To meet the financial needs for construction activities, the assessee also raised loans of ` 34,45,000/- from 19 persons who too were having the agricultural background.
6. During the course of assessment the assessee was asked to provide names, addresses and source of investment of the shareholders and also to prove the identity, creditworthiness and genuineness of loans.
The assessee complied with the same and furnished the requisite information along with evidences.
7. However, the Ld. AO considered ` 27,33,000/-, out of share capital, as explained and added ` 82,12,000/- (47,67,000/- out of share capital and 34,45,000/- of unsecured loans) as income from unexplained sources, mainly for the following reasons -
a) Necessary documents particularly the Khatauni has not been furnished so the correctness of cultivation of potatoes by the share applicants and the loan creditors cannot be conclusively verified. (Pg 3 of AO)
b) Looking to the large number of shareholders, that too agriculturist, residing in villages, it is not possible to 15 examine and verify the money received from all such share applicant. (Pg 3 of AO)
c) From the ration cards it is noted that share applicants and loan creditors are mainly agriculturists and their annual income is in the range of 40,000/- per annum. It is not at all possible to save any thing after meeting house hold expenses and other expenses of social and family obligation. (Pg 3 of AO)
d) The bank accounts of the shareholders and depositors revealed that there were cash deposit/transfers just before giving cheque for share application or loan.
(Pg 3 of AO)
8. All the above reasons are contrary to the acts and evidences on record -
a) Complete names and addresses of all the shareholders and depositors with identity proof, capacity, copy of their accounts and their confirmation were filed. (PB/1-5)
b) Source of capital contribution by various shareholders along with detailed evidences, including the Khatauni and certificates from Gram Pradhan as well from Block Pramukh, were also filed. (PB/6-9)
c) All the shareholders lived in one village only.
d) Per annum income shown in the ration cards is not sacrosanct while huge land holdings and their earning capacity from the agriculture activities i.e. growing and selling of potatoes, is well proved.
e) Credit of cash or transfer of funds in the bank accounts of the shareholders or depositors was their own money generated from the agricultural activities and can not have any adverse impact on the case of assessee company who had not even commenced the business activity.
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9. During the appellate stage the assessee again submitted all the details and evidences and even filed affidavits from the depositors. These submissions were sent, U/s 250(4), to the AO for his comments but, in his remand report, the Ld. AO did not challenge or rebut any of the contention or evidence of the assessee. (PB/10-17 and 18-19) (CIT-A Pg 4)
10. Ld. CIT(A) also sought direct information from the bank of the shareholders and depositors. (CIT-A Pg 12)
11. While allowing the appeal, Ld. CIT(A) noted the following -
Reg: Share Capital - Addition ` 47,67,000/-
a) ` 133250/- were incurred on the formation of company and ` 10,15,000/- on the improvement of land. These expenses were incurred prior to the formation of the company and cannot be considered in the assessment year. (Pg 6 - 7)
b) The shareholders were agriculturists and having substantial land holdings for which evidences in the form of Khasra & Khatauni and certificates from the Gram Pradhan as well Block Pramukh were filed. Certificate from the cold storage where potato grown by the shareholders was kept and copies of bills for its subsequent sale were also filed which proved that potato to the tune of ` 26,24,371/- was sold. Thus to this extent the contribution toward the share capital stands proved. (Pg 7 - 9)
c) Regarding balance capital of around 11.00 lacs, identity of the shareholders and the investment in share capital through their savings bank accounts is not in doubt. Thus source of said deposit is liable to be examined in their respective personal cases. (Pg 9 - 10) Reg: Unsecured Loans - ` 34,45,000/-
a) Appellant furnished confirmation letters, ration cards and Khataunis showing agriculture land holding by various lenders. At the appellate stage affidavits from all the lenders were also filed. (Pg 11) 17
b) All loans, except one of ` 2,00,000/-, have been returned in Dec. 2008 by cheque with interest. (Pg 12 )
c) Information called from the bank in some cases revealed that their bank accounts were old accounts and the occupation was shown as agriculture. (Pg 13 )
d) None of the contention or the evidences, including affidavits, filed by the assessee has been contorverted, challenged or rebutted by the AO even in remand report. Thus, AO failed to establish (1) any falsity in the claim of land holdings of the depositors; (2) the amount claimed to have been advanced from their savings were excessive or unreasonable and (3) the depositors routed the unaccounted funds of the company through their bank accounts particularly when the appellant company had not even commenced operations at relevant point of time. (Pg 14)
e) Since impugned amounts have been deposited in cash in the bank accounts of the respective lenders prior to their advance to the appellant company, the source of deposit is liable to be examined in their respective cases. (Pg 14 ) Thus, the order of CIT(A), after considering all the evidences and obtaining remand report, is well reasoned, fully justified and legally correct.
12. It is humbly submitted that -
a) The assessee company was formed on 16.04.2003 and it was its first assessment year. During the year, upto January 2004, it carried on only construction activities and in the month of Feb.
- March 2004 it only stored potatoes. There was no inflow of income at all during the year under appeal - As a matter of fact, during the year, it had no earning capacity at all. Under these circumstances how it can be assumed that the alleged credits were "unexplained income" of the assessee company.
b) So far credit towards share capital is concerned all the capital stands allotted. Thus share holders are the real owner to the 18 extent of value of shares held by them. It is not a case of share money pending for allotment.
c) Unsecured loans too have been returned with interest by crossed account payee cheques.
d) Assessee had adduced all the relevant information and evidence. Thus it's onus U/s 68 stands fully discharged.
e) Even if the AO was not satisfied with the explanation of the assessee it was not mandatory for him to treat the alleged amounts as unexplained income of the assessee company. Under the circumstances, the AO was factually and legally wrong in making the alleged addition U/s 68 of the Act.
f) In this respect the assessee relies on the following judicial pronouncements -
1) 216 CTR 195 (SC) Lovely Exports (P) Ltd.
2) 307 ITR 334 (Delhi) Value Capital Services P. Ltd.
3) 192 ITR 287 (Delhi) Steller Investments Ltd.
4) 218 ITR 508 (All) India Rice Mils
5) 264 ITR 254 (Guj) Nem Chand Kothari
6) 141 ITR 706 (All) Jaiswal Motor Finance
7) 83 ITR 187 (SC) Bharat Engg. & Cons. Co.
8) 237 ITR 570 (SC) P.K. Noorjahan
Submitted through
Sd/-
AR"
11. We have heard both the parties and also thoroughly gone through the written submissions filed by both the parties along with the orders passed by the Revenue Authorities. The Revenue has challenged the deletion of addition to the extent of `82,12,000/- made by the ld. First Appellate Authority which has been made by the Assessing Officer under section 68 of the Act on account of unexplained share 19 money and loans. The ld. First Appellate Authority has discussed the said addition in two parts i.e. ` 47,67,000/- on account of unexplained share money and `34,45,000/- on account of unexplained loans. As regards to the unexplained share application money amounting to `47,67,000/-, the assessee company was incorporated w.e.f. 16.04.2003 and derives income from Cold Storage which was constructed and commenced during the relevant Financial Year. The Assessing Officer has asked the assessee to furnish the details of investments in the Cold Storage and source of share capital. In response to the same, the assessee furnished bank statements of 4 Directors and their HUFs., details of loading and nikasi of potatoes from Prabhat Cold Storage, Hathras Road, Agra, copy of khasra evidencing their land holding and sale bills of potatoes. The assessee has also furnished 11 Sale Deeds. The total sale consideration received by the 4 Directors aggregates to ` 19,55,000/-. After considering the aforesaid evidences, the Assessing Officer accepted the claim of the assessee to the extent of ` 27,33,000/- comprising of ` 19,55,000/- being sale proceeds of agricultural land and ` 7,78,000/- representing capitalization of land for the Cold Storage and finally he added the balance of `47,67,000/- as unexplained share money. But the ld. First Appellate Authority in the impugned order deleted the same by holding that the Assessing Officer himself in paragraph no.3 of the Assessment Order stated that the assessee has shown receipt of share money amounting to ` 75,00,000/- from 15 persons - ` 64,00,000/- from 4 Directors, who are all brothers and balance amount 20 of ` 11,00,000/- was received from 11 persons (` 1,00,000/- each) and all the share applicants including the Directors are agriculturists. The ld. First Appellate Authority has held that the Assessing Officer has not doubted the assessee's claim that the investment in the assessee company has been made by the persons who are agriculturists and he himself has accepted ` 19,55,000/- as explained on account of sale of agricultural land by the Directors by accepting the share capital as explained to the extent of fund derived from sale of agricultural land. The Assessing Officer accepted that the Directors were holding these lands in the earlier years prior to their sale and was deriving agricultural income therefrom. Secondly, the Assessing Officer has also accepted and allowed the share capital to the extent of ` 7,78,000/- being agricultural land capitalized for construction of Cold Storage. The Ld. First Appellate Authority has also held that the assessee has filed all the necessary details of land holding of the Directors and their family members who are also the share holders which has not been rebutted by the Assessing Officer with any evidence to the contrary. When the Assessing Officer himself accepted that the Directors and their family members are agriculturists and no books of accounts were required to be maintained by them in respect of agricultural operation, therefore, no contemporaneous records showing accumulation of funds/savings out of agricultural income could be produced. We have thoroughly gone through the impugned order and found that the Ld. First Appellate Authority has deleted the addition in dispute after appreciating the 21 evidences produced by the assessee for establishing the source of income, creditworthiness and genuineness of transactions of the amount in dispute, because the assessee has produced copies of all khasaras and khatonis in respect of agricultural land holding, certificates from Gram Pradhan about the respective land holding of each promoter, certificate from the Block Pramukh about the land holding of the respective promoter of the family, copy of 15 Sale Deeds of agricultural land sold during the year 2003, copy of all savings Bank Account of all promoters and copy of Bank Account of the Company where the contribution by each member of the family was deposited. All the above money raised through issue of share capital was routed through banking channel. These evidences produced by the assessee have not been rebutted by the Ld. First Appellate Authority with any evidence to the contrary. The ld. First Appellate Authority has also examined the agricultural income of the Directors relating to the subsequent years which is reproduced at page no.9 in the impugned order. No doubt, the Ld. Departmental Representative as well as the ld. Counsel for the assessee relied upon various decisions rendered by the Hon'ble Supreme Court as well as Hon'ble High Courts on the addition in dispute, but the same are applicable when the facts and circumstances of the cases are identical. We find that the Assessing Office as well as the ld. First Appellate Authority has adjudicated the issue in dispute on the basis of documentary evidences produced by the assessee. Therefore, the case law relied upon by both the parties are of no help to them on the issue in dispute. Keeping in 22 view of the facts and circumstances explained above, we are of the considered opinion that the ld. First Appellate Authority has rightly deleted the addition of `47,67,000/- on account of unexplained share application money after properly appreciating the evidences produced by the assessee. It is also appreciable that the ld. First Appellate Authority has given full opportunity to the Assessing Officer to examine the evidences produced by the assessee during the course of assessment proceedings but the Assessing Officer has not controverted the same with the support of any contrary evidence. Therefore, we fully agree with the reasoning mentioned by the Ld. First Appellate Authority on the deletion of ` 47,67,000/- and we uphold the impugned order on the same.
12. As regards to the deletion of ` 34,45,000/-, the Ld. First Appellate Authority has deleted this addition by observing that in the Assessment Order the Assessing Officer has made the addition of ` 34,45,000/- by way of unsecured loans from 19 agriculturists. To support the claim on the issue in dispute the assessee has filed copy of their confirmation, ration cards and kisan bahi evidencing land holding by loan creditors. The Ld. First Appellate Authority has held that the Assessing Officer himself has written in the Assessment Order that looking to the large number of share holders that too agriculturists residing in villages, it is not possible to examine and verify the money received from all such share applicants. After examining all such documents and evidences and also considering the non- 23 furnishing of required details, the Assessing Officer has made the addition of `34,45,000/- being unsecured loans outstanding in the balance Sheet. The Ld. First Appellate Authority has thoroughly gone through the assessment records, confirmation letters furnished by the assessee, photocopy of ration cards and khataunis showing agricultural land holding by the various lenders as also acknowledged by the Assessing Officer in the Assessing Officer. The Ld. First Appellate Authority has also attached annexure-I to the impugned order showing summarized chart by the assesses on the amount which is in dispute and observed that all the loans have been repaid in December 2008 by cheque along with interest except one loan of ` 2,00,000/- received on 23.02.2004 from one Shri Ravindra Kumar. The Ld. First Appellate Authority has also confronted all documentary evidences to the Assessing Officer and taken the remand report from him in which the Assessing Officer himself admitted that he has not been able to examine the evidences furnished by the assessee due to their volume. The Ld. First Appellate Authority has also issued a requisition on 09.01.2009 under section 133(6) of the Act to the Manager, Oriental Bank of Commerce, calling for information with regard to 4 loan creditors on sample basis (S. Nos. 3, 4, 5 & 19 of Annexure-I mentioned and attached by the Ld. First Appellate Authority in the impugned order) and found that all the lenders own the agricultural land and having their ration cards and confirmation letters for the impugned loans, established the identity of creditors and genuineness of transaction which has not been doubted or 24 disputed by the Assessing Officer. The Ld. First Appellate Authority has also deleted the addition after calling the remand report from the Assessing Officer and after appreciating the evidences produced by the assessee to support the claim in dispute. We have thoroughly gone through the impugned order on the issue in dispute and we are of the considered opinion that the Ld. First Appellate Authority has rightly deleted the addition of ` 34,45,000/- on account of unsecured loans. We fully agree with the reasoning mentioned by the Ld. First Appellate Authority by dismissing the issue involved in ground no.1 i.e. addition of ` 82,12,000/- (` 47,67,000/- + ` 34,45,000/-) being unexplained share money and loans.
13. In the result, appeal filed by the Revenue is dismissed.
(Order pronounced in the open Court on 30.06.2011).
Sd/- Sd/-
(P.K. BANSAL) (H.S. SIDHU)
Accountant Member Judicial Member
Place: Agra
Date: 30th June, 2011
PBN/*
25
Copy of the order forwarded to:
1. Appellant
2. Respondent By Order
3. CIT concerned
4. CIT (Appeals) concerned
5. DR, ITAT, Agra Bench, Agra
6. Guard File Assistant Registrar
Income-tax Appellate Tribunal, Agra
True Copy