2021 (4) TMI 591 - AT - Income Tax

Addition u/s 68 - assessee-company engaged during the year in raising capital by way of share capital and premium on share capital - onus upon assessee to prove identity of the Creditors/Investors, their creditworthiness and genuineness of the transaction - HELD THAT:- A.O. on going through the bank statements of both the Investors found that there is receipt of funds from some source. Thus, even the A.O. did not doubt the creditworthiness of both the Investors in the assessment order. Thus the A.O. did not doubt their source at all. The A.O. did not make any enquiry from the income tax record of both the Investor Companies. It is well settled Law that A.O. cannot ask the assessee to prove source of the source.

We rely upon Judgment of Hon’ble Delhi High Court in the case of CIT vs., Dwarakadhish Investment P. Ltd., [2010 (8) TMI 23 - DELHI HIGH COURT], Rohini Builders[2001 (3) TMI 9 - GUJARAT HIGH COURT], It may also be noted here that when the statement of one of the Director of the Investor Company was recorded, he has explained not only the source of making investment in assessee company, but, also explained the reason why it has made an investment in assessee company at premium.

The assessee has explained before the authorities below the reasons for allotting the shares at premium because the assessee has purchased an immovable property in assessment year under appeal and Delhi Government has issued a Notification in the Master Plan which was about to be implemented through which the Government proposes to develop dwelling houses in low density area which would benefit the assessee and the Investors. All these explanation of assessee and Investors have not been doubted by the A.O.

The Ld. CIT(A) in his findings have also categorically found that the enquiry report have not been confronted to assessee, therefore, it cannot be read in evidence against the assessee. No material is produced before us to contradict the finding of fact recorded by the Ld. CIT(A).

Considering the above evidence and material on record, it is clear that A.O. did not make any enquiry on the documentary evidences filed by assessee and did not doubt the documentary evidences filed by assessee, therefore, initial onus upon the assessee to prove creditworthiness and genuineness of the transaction have been discharged by the assessee.

A.O. merely doubted the capacity of the Investors because they have reported low income in their return of income. This cannot be the sole basis to doubt the explanation of assessee. It may be a suspicion of the A.O. without bringing any evidence on record. Rather the documentary evidences produced on record clearly supports the explanation of assessee. Therefore, there were no basis for the A.O. to hold that assessee failed to prove creditworthiness of the Investors.

As in the case of ACIT, Central Circle-13, New Delhi vs., M/s. Supreme Placement Services (P) Ltd., New Delh [2021 (3) TMI 720 - ITAT DELHI] has dismissed the Departmental appeal. Considering the totality of the facts and circumstances of the case, we do not find any infirmity in the Order of the Ld. CIT(A) in deleting the addition. We, therefore, confirm the Order of the Ld. CIT(A) and dismiss the appeal of the Department.