Income Tax Appellate Tribunal - Agra
Surajmal Cold Storage Pvt. Ltd, Agra vs Department Of Income Tax on 24 July, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
AGRA BENCH, AGRA
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND
SHRI A.L. GEHLOT, ACCOUNTANT MEMBER
ITA No.345/Agr/2009
Assessment Year : 2004-05
Dy. Commissioner of Income Tax, vs. M/s. Surajmal Cold Storage Pvt. Ltd.,
Circle 4(1), Agra. Paltu Ki Piyau,
Khandauli, Agra.
(PAN: AAICS 2107 D)
(Appellant) (Respondent)
Appellant by : Shri Waseem Arshad, Sr. D.R.
Respondent by : Shri Deependra Mohan, C.A.
Date of Hearing : 24.07.2012
Date of Pronouncement of order : 09.08.2012
ORDER
PER A.L. GEHLOT, ACCOUNTANT MEMBER:
This is an appeal filed by the Revenue against the order dated 26.05.2009 passed by the Ld. CIT(A)-I, Agra for the Assessment Year 2004-05 on the following grounds :-
"1. That the ld. CIT(A) has erred in law and on facts in deleting the addition amounting to Rs.1,04,73,000/- made u/s 68 of the I.T. Act, 1961 being unexplained share money & loans without properly appreciating the facts and circumstances of the case and ignoring the observations and findings of the AO discussed in the assessment order.2 ITA No.345/Agr/2009
A.Y. 2004-05.
2. That the ld. CIT(A) has erred in law and on facts in deleting the addition amounting to Rs.1,04,73,000/- made u/s 68 of the I.T. Act, 1961 being unexplained share money & loans, especially relaying upon the documents furnished by the assessee pertaining to the transactions of the period beginning 1st April, 2004 onwards.
3. That the appellant craves to add or alter any or more ground or ground of appeal as may be deemed fit at the time of hearing of appeal.
4. That the decision of learned CIT(A) Agra being erroneous in law & on facts deserve to be quashed & that of A.O. deserves to be restored."
2. The brief facts of the case are that the assessee derives income from Cold Storage. The assessee company was incorporated w.e.f. 03.06.2003. The Cold Storage was constructed and installed during the year. During the assessment proceedings, the Assessing Officer (A.O.) noticed that the assesses has shown receipt of share money amounting to Rs.90,00,000/- from 140 persons. Rs.12,62,000/- from 5 Directors, namely Shri Bhagwan Singh, his wife Smt. Sheela Devi, his son Shri Bhupendra Singh and Shri Pawan Kumar and his daughter-in-law Smt. Geeta Devi, and balance amount has been received from 135 persons, all are agriculturists. In addition to share application money, the assessee has shown receipts of Rs.25,51,000/- by way of unsecured loan from Directors and share holders. The A.O. asked the assessee to furnish details of name & address of persons who had given share application money, copy of application filed by them for allotment of shares, date and mode of payment of share application money, 3 ITA No.345/Agr/2009 A.Y. 2004-05.
copy of bank account in which share application money was deposited by the assessee. Name and address of all share holders, number of shares applied and allotted to them, date and mode of payment for purchasing shares, copy of application filed by them for allotment of shares. In respect of loan, the A.O. asked the assessee to furnish complete address of persons from whom loans were taken, their identity, creditworthiness and genuineness of the transaction. The documents and evidences filed by the assessee in respect of share money and loans have been examined by the A.O. Looking to the large number of share holders, the A.O. noted that it was not possible to examine and verify the money receipt from all such share applicants. However, few of them such as Smt. Barfi Devi and Shri Pradeep Kumar were examined. The A.O. recorded the details of the facts of his examination party-wise. The party-wise brief observation of the A.O. are as under:-
3. Regarding share money of Rs.3,94,000/- and loan Rs.1,10,000/- from Shri Bhagwan Singh, Main Director: The assessee taken loan of Rs.1,10,000/- through cheque dated 22.07.2003 and share application money Rs.3,94,000/- in cash from Shri Bhagwan Singh. The assessee furnished the confirmatory letter, photocopy of ration card and Kisan Bahi and a copy of Bank pass book of Shri Bhagwan Singh was also furnished. Thus, the A.O. examined the details filed by the assessee and noticed that Shri Bhagwan Singh is aged about 56 years, his main source of income 4 ITA No.345/Agr/2009 A.Y. 2004-05.
is agriculture and his annual income is Rs.70,000/-. The family of Shri Bahagwan Singh consists of 5 persons including three grown up children. The A.O. observed that out of such income it is not possible to save income after meeting household expenses and other expenses on account of social and family obligations. The A.O. while examining the bank account in Canara Bank noticed that balance as on 01.04.2003 was Rs.14,278/- and it remained the same till 24.06.2003 except that 3 cheques totaling Rs.4,00,000/- were credited in this account in the month of May and June. The entire Rs.4,00,000/- was transferred to some other account. Similarly, in the month of July 2 cheque aggregating to Rs.1,60,000/- was credited and out of that loan of Rs,1,10,000/- was given to the assessee. On the basis of these observations the A.O. was of the view that the assessee has failed to prove the capacity to advance sum of Rs.1,10,000/- or Rs.3,94,000/- by way of share money. The A.O., after considering the facts of the case, made the addition of Rs.3.94,000/- on account of share application money and loan of Rs.1,10,000/- treating the same as unexplained.
4. Regarding share money of Rs.3,67,000/- and loan of Rs.6,60,700/- from Shri Bhupendra Singh, S/o. Shri Bhagwan Singh: The A.O. noticed that Shri Bhupendra Singh is aged about 28 years, his source of income is agriculture, his annual income is Rs.48,000/-. The A.O. observed that after considering the household expenses, it is not possible to save anything. The A.O. also examined 5 ITA No.345/Agr/2009 A.Y. 2004-05.
Bank account and noted that bank account was opened on 13.05.2003 by depositing cash of Rs.2,00,000/- and 2,50,000/- on 12.06.2003, Rs.1,99,500 on 07.07.2003 and Rs.1,00,000/- on 17.07.2003. The A.O. noted that immediately after depositing the amount the entire amount was given as loan to the assessee.
5. Regarding share money of Rs.48,000/- and loan of Rs.2,00,000/- from Shri Girraj Singh: The A.O. noticed that Shri Girraj Singh is aged about 48 years, his source of income is agriculture. There are 7 members in his family including three grown up children. The A.O. also examined the bank account and noticed that Rs.2,00,000/- was deposited on 05.05.2003 in cash out of that a loan cheque was given to the assessee. The A.O. made addition of Rs.2,00,000/- and Rs.48,000/- on the ground that the assessee has failed to explain the capacity of Shri Girraj Singh.
6. Regarding loan of Rs.2,00,000/- and share money of Rs.48,000/- from Shri Gopal Singh: Shri Gopal Singh is aged about 38 years, his source of income is agriculture. There were 6 members in his family and his annual income is Rs.30,000/-. The A.O. also examined the bank account of Shri Gopal Singh and noticed that similar observations were made as made in the case of Shri Girraj Singh, Shri Bhupendre Singh and others. The A.O. made addition of Rs.2,00,000/- and Rs.48,000/- on the ground that the assessee has failed to prove the capacity of Shri Gopal Singh.
6 ITA No.345/Agr/2009
A.Y. 2004-05.
7. Regarding loan of Rs.1,00,000/- and share money of Rs.48,000/- from Shri Hambeer Singh: Shri Hambeer Singh is aged about 35years, his source of income is agriculture. There are 5 members in his family and his annual income is Rs.36,000/-. The A.O. examined his bank account also and on similar reasons as discussed above, the A.O. made addition of Rs.1,00,000/- and Rs.48,000/- on the ground that the assessee has failed to prove the capacity of Shri Hambeer Singh.
8. Regarding loan of Rs.4,03,000/- and share money of Rs.49,000/- from Shri Jai Pal Singh Singh: Shri Jai Pal Singh is aged about 40 years, his source of income is agriculture. There are 4 members in his family and his annual income is Rs.40,000/-. The A.O. also examined bank account of Shri Jai Pal Singh. After similar discussions, the A.O. made addition of Rs.4,03,000/- and Rs.49,000/- on the ground that the assessee has failed to prove the capacity to advance the money.
9. Regarding loan of Rs.2,00,000/- and share money of Rs.49,000/- from Shri Prem Singh: Shri Prem Singh is aged about 35 years, his source of income is agriculture. There are 5 members in his family and his annual income is Rs.30,000/-. The A.O. also examined his bank account. After examining, the A.O. made addition of Rs.2,00,000/- and Rs.49,000/- on similar ground that the assessee has failed to prove the capacity of Shri Prem Singh.
7 ITA No.345/Agr/2009
A.Y. 2004-05.
10. Regarding loan of Rs.2,80,000/- and share money of Rs.49,000/- from Shri Sahab Singh: Shri Sahab Singh is aged about 56 years and his source of income is agriculture. There are 4 members in his family, his annual income is Rs.42,000/-. After examining the bank account, the A.O. made addition of Rs.2,00,000/- and Rs.49,000/- on the ground that the assessee has failed to prove the capacity of Shri Sahab Singh.
11. Regarding loan of Rs.3,00,000/- and share money of Rs.49,000/- of Shri Shiv Kumar Singh: Shri Shiv Kumar Singh is aged about 35 years and his source of income is agriculture. The A.O. examined his bank account and made addition of Rs.3,00,000/- and Rs.49,000/- on the ground that the assessee has failed to prove the capacity of Shri Shiv Kumar Singh.
12. The A.O. further noticed that similar is the position with regard to share money received from other persons. The A.O. examined Smt. Barphi Devi and Shri Pradeep Kumar. On examination of them, it has been found that they are almost completely ignorant as to what the share is and how they have acquired the shares. They failed to give satisfactory explanation. The A.O. on the basis of statement of these two persons gathered that the entire affairs regarding investment in share was carried by Shri Bhupendra Singh, Director of the assessee company. 8 ITA No.345/Agr/2009
A.Y. 2004-05.
13. Apart from the above examination, the A.O. has also examined the status of the assessee company and noticed that the assessee is a Private Limited Company. As per the provisions of section 3(1)(iii) of the Company's Act, there cannot be more than 50 members (share holders) in a Private Company, and if there are, then such members will be treated as depositors. On the basis of examination, the A.O. observed that the assessee first invested its undisclosed income in the Cold Storage and thereafter with a view to give a colour of genuineness to the investment receipt cash share application money from agriculturists was arranged. Thus, this aspect also proves the non-genuineness of share money received by the assessee from agriculturists.
14. After considering the facts of the case, the A.O. held that the assessee did not furnish evidence to prove the identity, capacity and genuineness of receipt of share money from the share applicants. However, no addition was made in respect of Rs.10,78,000/- included in the share money in the name of Smt. Sheela Devi because she has contributed her land for cold storage building equivalent to above amount in lieu of share money. The A.O. thus treated Rs.90,00,000 minus Rs.10,78,000 = Rs.79,22,000/- as unexplained share money and Rs.25,51,000/-as unexplained loans and made total addition of Rs.1,04,73,000/- under section 68 of the Act.
9 ITA No.345/Agr/2009
A.Y. 2004-05.
15. The CIT(A) after considering the assessee's submission noticed that there were no doubt that all the persons concerned either by way of depositors for unsecured loans or shareholders were agriculturists. They have made share application and received their share certificates. The statements of two shareholders Smt. Barfi Devi and Shri Pradeep Kumar were recorded by the A.O. wherein they have categorically stated that they have land holdings and become shareholders of the assessee company. They also confirmed having received their share certificates. All the concerned persons have agricultural income. Shri Bhagwan Singh who is both a shareholder as well as a creditor has shown agricultural income in A.Y. 2006-07. The assessment was completed under section 143(3) of the Act accepting the returned income filed by the assessee. There has been no change in the share holding. It has also been noted by CIT(A) that the alleged shareholders were near relatives and friends of the promoters/directors of the company. The A.O. examined two such persons who have confirmed their investment in the assessee company. None of the shareholders and lenders has denied his investment in the assessee company. The lenders/shareholders have used the Cold Storage in the subsequent year for preserving their agricultural produce. The list attached with Balance Sheet shows that their names appear under - "II. Application of Fund - 3. Current Assets, Loans & Advances - Sch. I - Rs.39,60,000/- Schedule - I : Loans & Advances - Advance to Farmers - 39,60,000/-." The CIT(A) noted the details of parties at 10 ITA No.345/Agr/2009 A.Y. 2004-05.
page no.8 of his order. It has also been noted by the CIT(A) that in support of genuineness of the share application money and unsecured loan, the assessee has furnished complete address of the parties, copies of their accounts in the books of the assessee, duly confirmed by respective parties, Kisan Bahis as the lenders are agriculturists, copy of Ration Card, copies of their bank pass book & copies of Income Tax returns. All the share holders have filed affidavits before the A.O. Similarly, confirmation letters of all the lenders along with photocopies of their ration cards, savings bank accounts/kisan bahis and khataunis were also furnished before the A.O. After considering the submission of the assessee, the CIT(A) deleted the addition as under :- (paragraph no.5) "5. I have considered the rival contentions and perused the material available on record. The identity of the shareholders and the lenders and their investment in the share capital of the company and advances of loans respectively are not in doubt. It is seen that barring Smt. Barfi Devi and Shri Pradeep Kumar, none of the remaining shareholders or lenders has been examined and no untruth/falsity has been found in their claims. Various documents have been furnished by the appellant in the form of ration cards, kisan bahis, saving bank account statements, confirmation letters etc. for establishing the identity of the creditors and the genuineness of the transactions, which have not been refuted by the AO with any evidence to the contrary either in the course of assessment proceedings or remand proceedings. The fact that the shareholders and the lenders are agriculturists has not been doubted or refuted by the AO with any evidence to the contrary. In many cases, the shareholders and lenders are found to be depositing cash periodically in their savings accounts as well as Kisan Credit Card accounts, ostensibly out of their agricultural receipts. There is no material or evidence on record to show that the shareholders and lenders did not have agricultural income. On the contrary, the advance of money to several 11 ITA No.345/Agr/2009 A.Y. 2004-05.
lender/shareholder farmers as listed hereinabove from the balance sheet as on 31.03.2004, endorses the above fact. The written submissions field during the course of appellate proceedings on 23.01.2008 enclosing therewith various documentary evidences, as discussed hereinabove, were forwarded to the AO for his report vide this office letter dated 18.03.2008. A report dated 28.05.2008 of DCIT, Cir-4(1), Agra forwarded by Addl. CIT, Range-4, Agra was received in this office, merely reiterating the view given in the assessment order. Thus, neither in the course of assessment proceedings nor in the course of remand proceedings has the AO found - (a) any falsity in the land holdings, bank accounts & other documents furnished by the unsecured loan creditors and shareholders (b) any evidence to show that the amounts claimed to have been advanced by them out or their alleged savings were not advanced or were excessive or unreasonable, (c) that the said creditors had routed the unaccounted funds of the appellant company through their own bank accounts. The AO examined 2 shareholders who confirmed their investments. However, on the strength of these 2 statements, the AO treated the entire share application money amounting to Rs.79,22,000/- received from 140 shareholders as bogus and hence the appellant company's deemed income. As for the unsecured loans of Rs.25,51,000/- received from 9 creditors, the AO treated the same as bogus without examining even a single creditor and without establishing that the appellant had failed to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions. Thus, the adverse conclusion was drawn by the AO on the basis of general and vague observations rather than concrete material and cogent evidence.
There is also a contradiction in the finding of the AO insomuch that he has accepted the advanced given by the appellant company to 21 farmers but rejected the receipts from the same farmers by way of share application money/loans.
The AO has highlighted and drawn adverse inference from the fact that the impugned amounts were deposited in cash in the bank accounts of the respective lenders/shareholders prior to their advance to the appellant company. However, the source of the deposits is liable to be examined and any conclusion as to whether such funds 12 ITA No.345/Agr/2009 A.Y. 2004-05.
are explained or unexplained, is liable to be drawn in their respective cases. It would be illogical to treat the deposits as unexplained cash credits in the hands of the appellant company without first treating the same as unexplained cash credits in the hands of the creditors in whose bank accounts the cash deposits initially appeared. Under these circumstances, the addition of Rs.1,04,73,000/- as unexplained cash credits is not sustainable and hence deleted."
16. The ld. Departmental Representative with reference to the provisions of Company's Act submitted that the status of the Company is not a Private Limited Company but it is a Limited Company. Ld. Authorised Representative, while clarifying the position, submitted that the assessee is a Private Limited Company converted into Limited Company and necessary information/and return/statements in this regard were filed before the ROC. In view of clarification and submission of the ld. Authorised Representative, we do not find any substance in the submission of the ld. Departmental Representative.
17. Ld. Departmental Representative further submitted that before receiving the share application money and loan, the amounts were deposited by the respective applicants and creditors. Ld. Departmental Representative submitted that the CIT(A) did not give finding in each case as to whether the assessee has proved the identity, creditworthiness and genuineness of the transaction. In support of his contention, the ld. Departmental Representative relied upon the Third Member 13 ITA No.345/Agr/2009 A.Y. 2004-05.
decision of I.T.A.T. Jabalpur Bench in the case of DCIT vs. Vishwanath Prasad Gupta, 129 ITD 95.
18. The ld. Departmental Representative while referring relevant pages of Paper Book of the assessee as well as of Department submitted that the assessee has failed to furnish the proof in respect of creditworthiness of share applicants and depositors. He submitted that in respect of Shri Bhagwan Singh & and Shri Bhupendra Singh the assessee has failed to explain the source of deposit in their bank account. Ld. Departmental Representative further submitted that in respect of other parties, there are no bank accounts. Ld. Departmental Representative drew our attention on the affidavits filed by the assessee and pointed out that the parties did not know about what is the company and they are not aware of share certificates. In the affidavits they submitted that they do not have Bank Accounts. Therefore, such affidavits cannot be relied upon. The ld. Authorised Representative clarified that the said clause of affidavit was with reference to agriculture land bank.
19. The ld. Authorised Representative, on the other hand, relied upon the order of CIT(A) and submitted that the assessee company was incorporated on 03.06.2003. Ld. Authorised Representative submitted that the A.O. is not correct in making the addition as held by the Apex Court in the case of CIT vs. Bharat 14 ITA No.345/Agr/2009 A.Y. 2004-05.
Engineering & Construction Company, 83 ITR 187 and amount received before the commencement of assessee's business cannot be added as assessee's business income. Ld. Authorised Representative also relied upon the order of I.T.A.T. Agra Bench in the case of DCIT vs. Sugandhi Cold Storage (P) Ltd. in ITA No.368/Agr/2010 order dated 20.04.2012 wherein it has been held that no business activities were carried out and the assessee was at the stage of formation and completion of the company, therefore, such an addition under section 68 is unjustified. Ld. Authorised Representative has also relied upon the following decisions which are reproduced from Paper Book/written submission :-
a) Judgement of Hon'ble Allahabad High Court in the case of India Rice Mills vs. CIT, 218 ITR 508 (All.)
b) Decision of I.T.A.T., Agra Bench in the case of ITO vs. Sharthi Construction Co. in ITA No.143/Agr/2011 order dated 27th April, 2012.
c) Judgement of Hon'ble Gujarat High Court in the case of Mitesh Rolling Mills P. Ltd. vs. CIT, 258 ITR 278 (Guj.)
d) ITA No.134/Hyd/2011 in the case of ITO vs. M/s Divya Fuels, Mahaboobnagar.
e) ITAT, Lucknow Bench in the case of Surender Prasad Mishra, 7 SOT 457.
f) ITAT, Delhi Bench in the case of Sai Baba Rupadas in ITA No.1543/98.
g) ITAT, Delhi Bench in the case of Ghabiabad Footwear, 142 Taxman 8 Magazine.
h) ITAT, Allahabad Bench in the case of Smt. Meera Devi, 14 SOT 190.
20. The ld. Authorised Representative submitted that the Apex Court in the case of CIT vs. Lovely Export (P) Ltd., 216 CTR (SC) 195 wherein it has been held that share application money cannot be added in the hands of the assessee company. 15 ITA No.345/Agr/2009
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Ld. Authorised Representative has also relied upon the judgment of Hon'ble Delhi High Court in the case of CIT vs. Value Capital Service P. Ltd., 307 ITR 334 (Delhi), Hon'ble Allahabad High Court in the case of CIT vs. Jaiswal Motor Finance, 141 ITR 706 (All.), Hon'ble Supreme Court in the case of CIT vs. Steller Investment Ltd., 251 ITR 263 (SC) & Hon'ble Allahabad High Court in the case of CIT vs. M/s Arjun Cold Storage General Mills Pvt. Ltd. - 2012 (5) TMI 118 (All.). Ld. Authorised Representative has also relied upon the orders of I.T.A.T., Ahmedabad and others. Ld. Authorised Representative submitted that there is additional burden on the Department to show that share applicants did not have the means to make investment, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. Ld. Authorised Representative submitted that the Department has failed to discharge this burden. Ld. Authorised Representative in support of his contention relied upon the judgement of Hon'ble Delhi High Court in the case of CIT vs. Kamadhenu Steel & Alloys Ltd. & Others, 248 CTR 30 (Del).
21. Ld. Authorised Representative submitted that the assessee has furnished affidavits of depositors and share applicants and the contents of the affidavits cannot be disbelieved without rejecting the same. ld. Authorised Representative in support of his contention relied upon the judgement of Hon'ble Supreme Court in the case of Mehta Parekh, 30 ITR 181 (SC) and ACIT vs. S.S. Pharmaceuticals (P) 16 ITA No.345/Agr/2009 A.Y. 2004-05.
Ltd., 87 ITD 119 (All). Ld. Authorised Representative has also relied upon the judgment of Hon'ble Supreme Court in the case of CIT vs. Orissa Corporation P. Ltd., 159 ITR 78 (SC).
22. Ld. Authorised Representative submitted that the A.O. cannot ask the assessee to prove the source of the source. Ld. Authorised Representative in support of his contention relied upon the judgement of Hon'ble Allahabad High Court in the case of CIT vs. Jauharimal Goel, 201 CTR 54 (All) and DCIT vs. Rohini Builders, 256 ITR 360 (Guj.). Ld. Authorised Representative has also relied upon the judgement of Hon'ble Rajasthan High Court in the case of Aravali Trading Co. vs. ITO, 220 CTR 622 (Raj). Ld. Authorised Representative has also relied upon some decisions of I.T.A.T., Agra Bench in support of his contention.
23. We have heard the ld. Representatives of the parties and records perused. The crux of the matter to examine in the case under consideration whether under the facts and circumstances the CIT(A) is correct in deleting the addition on account of cash credit and share application money made by the A.O. under section 68 of the Act. Section 68 of the Act empowers the A.O. to treat any sum found credited in he books of account of the assessee for any previous year, if the assessee fails to offer an explanation about the nature and sources of such fund or if the explanation offered by the assessee is not, in the opinion of the AO, 17 ITA No.345/Agr/2009 A.Y. 2004-05.
satisfactory, as income from undisclosed sources and charge the same to tax as income of the assessee of that previous year. The power of the A.O. under section 68 is not an absolute one. It is subject to his satisfaction where an explanation is offered. The power is absolute where the assessee offers no explanation. The satisfaction with regard to the explanation is in effect an in-built safeguard in section 68 protecting the interest of the assessee. It provides for an opportunity to the assessee to explain the nature and source of the fund. Once it is explained, it is incumbent on the A.O. to consider the same and form an opinion whether the explanation is satisfactory or not. If the conclusion is adverse wholly or in part to the interest of the assessee, it is incumbent on the A.O. to intimate or inform the conclusion arrived at to the assessee. When such information or intimation is received by the assessee, the onus shifts on the assessee. He may furnish further explanation or information to support its contention. If further information or materials are furnished, the A.O. is bound to examine the same and form his final opinion and pass an appropriate order. As stated above that section 68 suggests that there has to be credit of amounts in the books maintained by the assessee, that such credit has to be of a sum during the previous year, and that the assessee offers no explanation about the nature and source of such credit found in the books or the explanation offered by the assessee, in the opinion of the Assessing Officer, is not satisfactory. It is only then the sum so credited may be charged to income-tax as the income of the assessee of that previous year. The expression 'the assessee 18 ITA No.345/Agr/2009 A.Y. 2004-05.
offers no explanation' means where the assessee offers no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. It is true that the opinion of the A.O. for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on record. The opinion of the A.O. is required to be formed objectively with reference to the material available on record. Application of mind is the sine qua non for forming the opinion.
24. As regards the burden of proof, it is settled position of law in respect of cash credit that the burden is on the assessee to explain the three ingredients namely, identity, creditworthiness & genuineness of the transaction.
25. With the above background of general discussion in respect of section 68 of the Act, now we come to have discussion regarding section 68 of the Act and share application money. Where the matter concerns money receipts by way of share application from investors, the assessee has to prove the existence of the person in whose name the share application is received. Once the existence of the investor is proved, it is not further the burden of the assessee to prove whether that person itself has invested the said money or some other person has made investment in the name of that person. The burden then shifts on to the revenue to establish that such 19 ITA No.345/Agr/2009 A.Y. 2004-05.
investment has come from the assessee-company itself. Once the receipt of the confirmation letter from the creditor is proved and the identity and the existence of the investor has not been disputed, no addition on account of share application money in the name of such investor can be made in the assessee's hands.
26. The identity of the shareholder can be proved by either producing the person before the A.O. or by way of documents, registered address, PAN etc. The genuineness of the transaction can be shown from the fact that the money has been received from the share holder. If the money is received by cheque and is transmitted through banking or other indisputable channels, the genuineness of transaction would be proved unless otherwise material found. Other documents showing the genuineness of transaction could be the copies of the shareholders register, share application forms, share transfer register, etc. The creditworthiness of the creditor/subscriber can be proved by producing the bank statement of the creditors/subscribers showing that it had sufficient balance in its accounts to enable it to subscribe to the share capital. Once these documents are produced, the assessee would have satisfactorily discharged the onus cast upon him. The A.O. can discredit the documents produced by the assessee with cogent reasons and materials but not on the realm of suspicion. In this regard, we would like to refer some judicial pronouncements which are as under :-
20 ITA No.345/Agr/2009
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27. Hon'ble Andhra Pradesh High Court in the case of CIT vs. Lanco Industries Ltd., 242 ITR 357(A.P.) observed that how merely by reason of unsatisfactory explanation relating to the source of investment by the shareholders, the money invested on shares should be treated as income of the assessee. If the ostensible shareholders failed to explain the means of investment, that should have been treated as unexplained income in their hands. In order to add it to the income of the assessee there must be a further finding that in fact the shareholders were mere name-lenders and the money allegedly invested by them really belonged to the directors of the assessee-company. In the absence of a finding that the persons to whom the share certificates were issued on receipt of consideration as per the book entries were in fact dummies or stooges of the directors of the assessee-company, the same cannot be treated as unaccounted income of the assessee. There was no such finding by the assessing authority.
28. Hon'ble Karnataka High Court in the case of Tam Tam Pedda Guruva Reddy vs. JCIT (Assessments) & Another, 291 ITR 44 (Karn) held as under :-
(headnote page 45) "Held, allowing the appeal, (i) that the affidavit filed by R showed that he had income from agriculture and from business and that he had two fixed deposits which had matured during the said period. Therefore, the source of income had been clearly spelt out and this credit could not be treated as unexplained credit in terms of section 68. The finding of the authority that the said amount was unexplained income could not be accepted."21 ITA No.345/Agr/2009
A.Y. 2004-05.
29. The Hon'ble Patna High Court in the case of Sarogi Credit Corporation vs. CIT, 103 ITR 344 (Pat.) held as under :- (headnote page nos.344, 345 & 346) "In the books of account of the assessee for the previous year relevant to the assessment year 1962-63, there were credit entries in the name of Z for Rs.12,000 and in the name of R for Rs.8,000. Both Z and R gave statements before the Income Tax Officer that they had deposited the amounts with the assessee. The Income Tax Officer did not accept those statements and added a sum of Rs.20,000 as income of the assessee from undisclosed sources. On appeal, the Appellate Assistant Commissioner deleted the addition. On further appeal, the Appellate Tribunal held that the deposits by Z and R remained unexplained, that the mere admission of the depositors could not lead to the conclusion that they were in a position to advance the moneys to the assessee and, since the assessee could not prove that the depositors were in a position to make the deposits to the extent they stood in the books, the onus that lay on the assessee under section 68 of the Income Tax Act, 12961, had not been discharged. The Tribunal also found that as the depositors were doing some business and later filed income tax returns, it would be fair and reasonable to allow a sum of Rs.5,000/- as effectively explained but the remaining Rs.15,000 should be added to the income of the assessee. On a reference at the instance of the assessee:
Held, that if the credit entry in the books of the assessee stands in the name of the assessee or the assessee's wife and children, or in the name of any other close relation or an employee of the assessee, the burden lies on the assessee to explain satisfactorily the nature and source of the entry. But if the entry does not stand in the name of any such person having a close relation or connection with the assessee, but in the name of an independent party, the burden will still lie on him to establish the identity of that party and to satisfy the Income Tax officer that the entry is real and not fictitious. Once the identity of the third party is established before the Income Tax Officer and other such evidence are prima facie placed before him pointing to the fact that the entry is not fictitious, the initial burden lying on the assessee can be said to have been duly discharged by him. It will not, therefore, be for the assessee to explain further as to how or in what circumstances the third party obtained the money or how or why he came to make an advance of the money as a loan to the assessee.22 ITA No.345/Agr/2009
A.Y. 2004-05.
Once such identity is established and the creditors, as in the present case, have pledged their oath that they have advanced the amounts in question to the assessee, the burden immediately shifts on to the department to show as to why the assessee's case could not be accepted and as to why it must be held that the entry, though purporting to be in the name of a third party, still represented the income of the assessee from a suppressed source. And, in order to arrive at such a conclusion, even the department has to be in possession of sufficient and adequate materials.
The Income tax officer's rejection, not of the explanation of the assessee, but of the explanation regarding the source of income of the depositors, could not by itself lead to any inference regarding the non- genuine or fictitious character of the entries in the assessee's books of account. The Appellate Assistant Commissioner clearly pointed out that the findings recorded by the Income Tax Officer were not positive findings.
Further, the Tribunal had partly accepted the source to the extent of Rs.5,000 and partly rejected it to the extent of Rs.15,000. Having accepted the genuineness of the entries in the books of account, having accepted the explanation offered by the third parties with regard to their sources of money in part at least, there was no material for the Tribunal to hold that the assessee had not discharged the onus on him and the finding to that effect must be held to be without any evidence and, hence, wholly illegal and the conclusions drawn perverse.
Therefore, the assessee had discharged the onus within the meaning of section 68 of the Act for the cash credits and the Appellate Tribunal was not justified in maintaining the addition of Rs.15,000 as the assessee's income from undisclosed sources."
30. The Hon'ble Delhi High Court in the case of CIT vs. (1) Divine Leasing & Finance Limited (2) General Exports & Credits Limited & (3) Lovely Exports Pvt. Ltd, 299 ITR 268 (Delhi) held as under :- (page nos. 275 to 276) 23 ITA No.345/Agr/2009 A.Y. 2004-05.
"We find it indeed remarkable that the attention of the Sophia Finance the Full Bench had not been drawn to the decision of the Supreme Court in CIT v. Orissa Corporation P. Ltd. [1986] 159 IR 78, which if cited would really have left no alternative to the Full Bench but to arrive at the conclusion it did. The books of account of the assessee contained three cash credits aggregating Rs.1,50,000 allegedly received as loans from three individual creditors under hundis. Letters of confirmation as well as the discharged hundis were produced; but notices/summons sent to hem remained unnerved because they had reportedly "left" that address. The view of the Tribunal was that merely because the assessee could not produce these there parties, there was nevertheless no justification to draw an adverse inference. This approach as accorded approval by the Supreme Court in these words (page 84) :
"In this case, the assessee had given the names and addresses 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 the Revenue. The Revenue, apart from issuing notices under section 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 find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do anything further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises."
(Page no.276) "Sumati Dayal v. CIT [1995] 214 ITR 801 (SC) a succinct yet complete précis on the essentials of income tax liability can be discerned from these words (headnote): "In all cases in which a receipt is sought to be taxed as income, the burden lies on the Department to prove that it is within the taxing provision and if the 24 ITA No.345/Agr/2009 A.Y. 2004-05.
receipt is in the nature of income, the burden of proving that it is not taxable because it falls within the exemption provided by the Act lies upon the assessee." This decision is adequate authority for the proposition that by virtue of section 68 of the Income Tax Act the assessee is obliged to establish that amounts credited in the accounts do not represent its income; in that case the assessee's version that she had won them through betting on horse racing in two consecutive years did not attract credibility."
(Page nos.279 to 283) "The Calcutta High Court has held in CIT v. Precision Finance P. Ltd. [1994] 208 ITR 465 that it is not sufficient for an assessee to disclose that credits in their books had been received through banking channels; the identity as well as the creditworthiness of the creditor must nevertheless be proved. In Sajan Dass and Sons v. CIT [2003] 264 ITR 435 (Delhi) the Division Bench was not convinced that merely because moneys could be identified and traced through banking channels the genuineness of the gift in question stood established. This is obviously because an assessee can scarcely be heard to say that he does not know all particulars pertaining to the donor. Thereafter, the same dialectic led the bench to arrive at the opposite conclusion in CIT v. R.S. Sibal [2004] 269 ITR 429 (Delhi). In CIT v. Makhni and Tyagi P. Ltd. [2004] 267 ITR 433, this court has not given its imprimatur to the inaction of the Assessing Officer in doing nothing further after the issuance of summons under section 131 of the Income Tax Act. It did not condone the Assessing Officer, failing to issue coercive process, and in this manner attempting incorrectly to shift the burden on the assessee to establish the legitimacy of the transaction. In CIT v. Antartica Investment P. Ltd. [2003] 262 ITR 493 (Delhi), the court was satisfied that no interference was justified since the assessee had produced the share application forms along with confirmation letters and copies of their accounts, copies of their bank accounts of cheque payments and their auditor's report. The Assessing Officer's conclusion that the genuineness of the transaction had not been made good was not upheld. This conclusion was reached despite the fact that notices received by one of the common directors of the two subscribing companies had been ignored and no information was forthcoming from the latter. However, the Under Secretary (Land Revenue, 25 ITA No.345/Agr/2009 A.Y. 2004-05.
Government of Sikkim, Gangtok) had stated that both the subscribing companies were incorporated in Sikkim and their addresses were disclosed in the return of allotments; the subscribers thus stood identified. Their financial standing or capacity was not investigated by the court. The decision in CIT v. Achal Investment Ltd. [2004] 268 ITR 211(Delhi) is also on the same lines.
There cannot be two opinions on the aspect that the pernicious practice of conversion of unaccounted money through the masquerade or channel of investment in the share capital of a company must be firmly excoriated by the Revenue. Equally, where the preponderance of evidence indicates absence of culpability and complexity of the assessee it should not be harassed by the Revenue's insistence that it should prove the negative. In the case of a public issue, the company concerned cannot be expected to know every detail pertaining to the identity as well as financial worth of each of its subscribers. The company must, however, maintain and make available to the Assessing Officer for his perusal, all the information contained in the statutory share application documents. In the case of private placement the legal regime would not be the same. A delicate balance must be maintained while walking the tightrope of sections 68 & 69 of the Income Tax Act. The burden of proof can seldom be discharged to the hilt by the assessee; if the Assessing Officer harbours doubts of the legitimacy of any subscription he is empowered, nay duty-bound, to carry out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the company.
In CIT v. S. Kamaraja Pandian [1984] 150 ITR 703, the Madras High Court took the view that it is for the assessee to initially prove the genuineness of the loan, and that the onus shifts to the Department only after the assessee has prima facie substantiated this fact. In that case, one of the creditors had denied the transaction. The Patna High Court in Addl. CIT v. Hanuman Agarwal [1985] 151 ITR 150 was faced with the availability of a confirmatory letter filed by the assessee in whose books of account a credit was found. GIR number of the creditor was supplied, and it appears that he had confessed that this transaction was not genuine. The High Court did not act on the confession since it had not been made available to the assessee. The Bench observed that since the correct name and 26 ITA No.345/Agr/2009 A.Y. 2004-05.
address, and the GIR number of the creditor had been supplied by the assessee the initial onus under section 68 of the Income Tax Act had been "completely discharged" by the assessee. It could not be sanguine to conceive of a possibility of a genuine contributor abandoning his investment for diverse reasons. That would not lead to the conclusion that the assessee is automatically guilty of attempt of converting its income into capital.
In Bharati P. Ltd. v. CIT [1978] 111 ITR 951 (Cal) where notices to these alleged creditors had come back unserved, the Division Bench affirmed that the mere filing of confirmatory letters by the assessee did not discharge the onus that lay on the assessee. Different Division benches of the same High Court have opined that the assessee must approve (a) the identity, (b) the capacity of the creditors to advance money, (c) the genuineness of the transaction. (See Shankar Industries v. CIT [1978] 114 ITR 689 (Cal), C. Kant and Co v. CIT [1980] 126 ITR 63 (Cal) and CIT v. United Commercial and Industrial Co. P. Ltd. [1991] 187 ITR 596 (Cal.). In CIT v. Korlay Trading Co. Ltd. [1998] 232 ITR 820 (Cal), certain shares purchased through a broker were lost. The assessee furnished the name of the broker, as also the date of the sale, amount of purchase money and sale money. The broker was found not to have maintained regular accounts. However, the court refused to draw an inference adverse to the assessee's interests. Instead the Calcutta High Court observed that the Income Tax Officer ought to have investigated the matter more thoroughly to controvert the claim of the assessee, and concurred with the conclusion of the Tribunal that the latter had discharged the initial burden that lay on it. The High Court set aside the decision of the Tribunal which had reversed the findings of the Income Tax Officer as well as the Commissioner of Income Tax (Appeals) since the assessee had supplied the income tax file number of the creditor before it. The High Court noted that the mere filing of the income tax number was not sufficient to establish the identity and creditworthiness of the creditor and genuineness of the transaction. Although Orissa Corporation [1986] 159 ITR 78 (SC) was referred to the decision of the Full Bench of this court in Sophia Finance [1994] 205 ITR 98 was not even cited. Korlay Trading [1998] 232 ITR 820 (Cal.) as well as Sophia Finance [1994] 205 ITR 98 (Delhi) was applied by the same Division Bench of the Calcutta High Court in four decisions delivered in March 2003. In Hindusthan Tea Trading Co. Ltd. v. CIT [2003] 263 ITR 289, the Bench opined that in the case 27 ITA No.345/Agr/2009 A.Y. 2004-05.
of a subscription to the share capital of a company, if section 68 of the Income Tax Act is to be resorted to, it is necessary for the assessee to prove and establish the identity of the subscriber, their creditworthiness and the genuineness of the "transaction". Once material to prove these ingredients are produced it is for the Assessing Officer to find out as to whether, on these materials, the assessee has succeeded in establishing the ingredients mentioned above. The Assessing Officer can "lift the veil" and enquire into the real nature of the transaction. CIT v. Ruby Traders and Exporters Ltd. [2003] 263 ITR 300 (Cal), CIT v. Nivedan Vaniya Niyojan Ltd. [2003] 263 ITR 623 (Cal) and CIT v. Kundan Investment Ltd. [2003] 263 ITR 626 (Cal) are the other three.
In this analysis, a distillation of the precedents yields the following propositions of law in the context of section 68 of the Income Tax Act. 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 of financial strength of the creditor/subscriber; (4) if relevant details of the address or PAN identity of the creditor/subscriber are furnished to the Department along with copies of the shareholders register, share application forms, share transfer register, etc., it would constitute acceptable proof or acceptable explanation by the assessee. (5) The Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices; (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessee nor should the Assessing Officer take such repudiation at face value and construe it, without more, against the assessee; and (7) the Assessing Officer is duty-bound to investigate the creditworthiness of the creditor/subscriber the genuineness of the transaction and the veracity of the repudiation.
For a complete understand of the concept of "burden of proof"
attention should be drawn to the decisions delivered in the context of penalty proceedings under section 271 of the Income Tax Act. CIT v. Anwar Ali [1970] 76 ITR 696 was decided by the Apex Court holding that, if there is no evidence on record except the explanation of the assessee, which explanation has been found to be false, it still does not follow that the receipt constitutes taxable income. This decision 28 ITA No.345/Agr/2009 A.Y. 2004-05.
was followed by the Apex Court in Anantharam Veerasinghaiah and Co. v. CIT [1980] 123 ITR 457 opining that the (headnote) "mere falsity of the explanation given by the assessee is insufficient without there being, in addition, cogent material or evidence from which the necessary conclusion attracting a penalty could be drawn."
However, as has been noted in Addl. CIT v. Jeevan Lal Sah [1994] 205 ITR 244 (SC); [1995] Supp. (4) SCC 247 amendments were incorporated by the Finance Act, 1964, into section 271 which had deleted the word "deliberately" in its sub-section (1)(c), thereby shifting the onus of proof onto the assessee, rendering Anwar Ali [1970] 76 ITR 696 (SC) ineffectual. Nevertheless, in CIT v. Mussadilal Ram Bharose [1987] 165 ITR 14 it has been enunciated by the Supreme Court that though the explanation shifts the burden to the assessee to show absence of fraud, this onus is a rebuttable one. The burden is not discharged by the assessee tendering an incredible or fantastic explanation; and very explanation does not have to be accepted. In our opinion, it is for Parliament to introduce legislation if the duty presently resting on the Department is thought to be too onerous. We ought not to twist the language of a statute to remove the burden of proof altogether from the Department even though it has the necessary wherewithal to discharge it. The malaise can also be arrested if unclaimed share subscriptions are taken over by the State and/or if the assessee concerned is precluded from distributing dividends, bonus shares, etc., against such share subscriptions unless they are duly claimed by the original subscribers within a prescribed period, perhaps not exceeding three years. Thereafter, the shares could automatically stand transferred to the State on the principle of escheat. For these events to happen, requisite amendments to the Income Tax Act may be required."
31. The above judgement of Delhi High Court in the case of CIT vs. (1) Divine Leasing & Finance Limited (2) General Exports & Credits Limited & (3) Lovely Exports Pvt. Ltd, 299 ITR 268 (Delhi) confirmed by the Apex Court as under :- 29 ITA No.345/Agr/2009
A.Y. 2004-05.
(319 ITR (Statutes) page nos.5 & 6) "Share application moneys received by company 11-1-2008: Their Lordships S.H. KAPADIA and B. SUDERSHAN REDDY JJ. Dismissed the Department's special leave petition against the judgement dated November 16, 2006 of the Delhi High Court in I.T.A. No.953 of 2006 reported in 299 ITR 268, whereby the High Court affirmed the deletion by the Tribunal of additions made on account of sums received from directors of promoters and also by way of a public issue. The court while dismissing the special leave petition held as follows:-
"Can the amount of share money be regarded as undisclosed income under section 68 of the Income Tax Act, 1961 ? We find no merit in this special leave petition for the simple reason that if the share application money is received by the assessee-company from alleged bogus shareholders, whose names are given to the Assessing Officer, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgement": CIT v. LOVELY EXPORTS P. LTD. : S.L.P. (Civil) No.1153 of 2008."
32. Another aspect of the matter is whether addition under section 68 of the Act can be made before start of business by the assessee. In this regard, we would like to refer the following judgements :-
33. The Hon'ble Supreme Court in the case of CIT vs. Bharat Engineering & Construction Co., 83 ITR 187 (SC) held as under :- (page nos.188 & 189) "The assessee-company is an engineering construction company. It commenced business in May, 1943. In their account books, there are several cash credit entries in the first year of its business. We are concerned with only five of those cash credit entries. On 1st June, 1943, there is a cash credit entry of Rs.1,00,000. 30 ITA No.345/Agr/2009
A.Y. 2004-05.
On 6th July, 1943, there is a cash credit entry of Rs.50,000. On 30th Aug, 1943, there is a cash credit entry of Rs.50,000. On 2nd Dec., 1943, there is a cash credit entry of Rs.15,000 and on 15th March, 1944, there is a cash credit entry of Rs.35,000. These cash credit entries total up to Rs.2,50,000. The ITO called upon the assessee to explain those cash credit entries. The explanation given by the assessee was found to be false by the ITO, the AAC and the Tribunal. But, all the same, the Tribunal felt that these cash credit entries could not represent the income or profits of the assessee-company as they were all made very soon after the company commenced its activities. In our opinion, though the order of the Tribunal is not happily worded, its finding appears to be that in the very nature of things the assessee could not have earned such a huge amount as profits very soon after it commenced its activities. A construction company takes time to earn profits. It could not have earned profit of Rs.1,00,000 within a few days, after the commencement of its business. Hence, it is reasonable to assume that those cash credit entries are capital receipts though for one reason or other the assessee had not come out with the true story as regards the person from whom it got those amounts. It is true that in the absence of satisfactory explanation from the assessee the ITO may assume that cash credit entries in its books represent income from undisclosed sources. But what inference should be drawn from the facts proved is a question of fact and the Tribunal's finding on that question is final."
34. The Hon'ble Allahabad High Court in the case of India Rice Mills vs. CIT, 218 ITR 508 (All.) held as under :- (headnote page nos. 508 & 509) "The assessee-firm which was constituted on August 12, 1977, became operative from February 2, 1978. During the period from 1977 to February, 1978 ten partners of the firm made capital contributions, totaling Rs.1,43,000. Since this was credited in the books of the firm the firm was called upon by the assessing authority to explain the source of the deposit. All the partners had filed returns after the close of the accounting year of the firm and they had not filed any returns in earlier years. Therefore, the assessing authority held that the amount represented the income of the assessee-firm from undisclosed sources. On appeal, the Commissioner of Income Tax (Appeals) held that as the deposits were made by the partners before 31 ITA No.345/Agr/2009 A.Y. 2004-05.
the firm started its business, the same could not be taken to be the income of the firm from undisclosed sources. The Tribunal held that as the amount was credited in the books of the assessee-firm, it was for the assessee-firm to explain the sources of deposits. On a reference :
Held, that all the deposits came to be made during the accounting year in the books of the assessee-firm before it started its business and the deposits represented the capital contribution of the partners. It was for the partners to explain the source of deposits and if they failed to discharge the onus then such deposits could be added in the hands of the partners only. These deposits could in no case be the income of the assessee-firm because the firm started its business after the credits had been made in its books."
35. In the light of above discussions, if we consider the facts of the case under consideration, we find that the assessee has discharged the burden in respect of share application money by furnishing complete details in the form of share certificate, affidavit, khasra khatauni, kisan bahi, KCC ledger account, bank accounts and others. The assessee has filed a chart in which details were furnished along with relevant page nos. of Paper Book of each and every party. The CIT(A) before deleting the addition incorporated detailed chart of the evidence filed by the assessee which he has reproduced at page nos.3 to 5 of his order. In the light of the law laid down by the Apex Court in the case of Lovely Exports, (319 ITR (Statutes) page nos.5 & 6), we find that the CIT(A) has rightly deleted the addition of Rs.79,22,000/- on account of share application money received by the assessee.
The CIT(A) also took care of Revenue by giving directions that the deposits are liable to be examined and any conclusion, as to whether such funds are explained 32 ITA No.345/Agr/2009 A.Y. 2004-05.
or unexplained, are liable to be drawn in their respective cases. In respect of loan of Rs.25,51,000/-, we find that the assessee has also discharged its burden cast under section 68 of the Act. We notice that some of the loans were given by the same persons who had applied for share application money. When the assessee has discharged his burden in respect of share application money and furnished sufficient material, under the circumstances, it cannot be held that the share application money was genuine transaction and loan transaction was bogus. It is pertinent to mention that inspite of details furnished by the assessee, the A.O. did not examine any of the creditors before rejecting the assessee's contention and documents furnished. The A.O. examined two persons wherein they confirmed that they had applied for the shares of the company and share application amount was given by them. Under the facts and circumstances, when the assessee discharged its burden by furnishing necessary evidence and material in respect of identity, creditworthiness and genuineness and there is no contrary material to the finding of the CIT(A) on record or neither has been pointed out at the time of hearing. We are, therefore, inclined to uphold the order of CIT(A).
36. Apart from the fact that the assessee has discharged the burden cast under section 68 of the Act, we notice that the assessee company incorporated w.e.f. 03.06.2003, therefore, in the light of judgement of Hon'ble Supreme Court in the 33 ITA No.345/Agr/2009 A.Y. 2004-05.
case of CIT vs. Bharat Engineering & Construction Co., 83 ITR 187 (SC), the addition is not warranted.
37. In ground no.2, the Revenue raised the issue that the CIT(A) erred in deleting the addition by relying upon the transaction of the period beginning 01.04.2004 onwards. In this regard, objection of the Revenue cannot be sustained because the CIT(A) considered those details and transactions in support of discharge of burden of proving capacity of share applicants and cash credits. These documents were not furnished to support that in fact the money of share application and cash credits were out of those transaction. Further, the judgements relied upon by the Revenue does not help to the Revenue in the light of judgements of jurisdictional High Court and the Apex Court as cited above.
38. In the light of above discussion, the order of the CIT(A) is confirmed.
In the result, appeal of the Revenue is dismissed.
(Order pronounced in the open Court)
Sd/- Sd/-
(BHAVNESH SAINI) (A.L. GEHLOT)
Judicial Member Accountant Member
PBN/*
34 ITA No.345/Agr/2009
A.Y. 2004-05.
Copy of the order forwarded to:
1. Appellant
2. Respondent
3. CIT (Appeals) concerned
4. CIT concerned
5. D.R., ITAT, Agra Bench, Agra
6. Guard File.
By Order
Sr. Private Secretary
Income-tax Appellate Tribunal, Agra
True Copy