TMI Blog2015 (10) TMI 2011X X X X Extracts X X X X X X X X Extracts X X X X ..... ME COURT OF INDIA) and CIT vs Anshika Consultants Pvt. Ltd. (2015 (4) TMI 842 - DELHI HIGH COURT), we have no hesitation to hold that in the extant case the identity of the investors, genuineness of the transaction and the creditworthiness of the share applicants have been established by the assessee by way of submission of particulars of the share applicants along with copies of the balance sheets, statement of bank account, income tax reports and PAN details etc. and the onus was shifted on the AO to demolish these supportive evidence and documents. AO himself in his remand report dated 23.5.11 concluded that all the share applicants are existing assesses and the contention/explanation in regard to the impugned contribution appears to be correct - Decided against revenue. - ITA No.4483/Del /2011 - - - Dated:- 16-9-2015 - SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER For The Appellant : ShriVikram Sahay, Sr. DR For The Respondent : Shri M.P. Rastogi, Adv. PER CHANDRA MOHAN GARG, JUDICIAL MEMBER This appeal by the Revenue has been directed against the order of the CIT(A)-Muzaffarnagar dated 29.06.2011 in Appeal No. 220/2010-11/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer also recorded statement of three investors, namely, Suresh Pal, Anil Kumar Gupta and Anil Kumar Sharma and he inferred that those investors were of very little means. He further inferred that it was beyond comprehension that why a person of insufficient means would invest huge amount for making risk investment in the assessee company which was neither a blue chip company nor had safety of Government instrument. In view of the observances, the Assessing Officer held that the assessee failed to prove creditworthiness of the investors and genuineness of the transaction of share investment and therefore he added the entire amount of share capital of ₹ 1,59,00, 000/- u/s 68 of the Act to the income of the assessee. 4. Aggrieved, the assessee filed appeal before the commissioner of Incometax (Appeal). The assessee filed written submissions before the commissioner of Income-tax (Appeal) [in short CIT(A)], which have been reproduced in para 3 of his order. In the submissions, the assessee company explained that Bank accounts were opened by the officer of the bank to meet their target and not by one person as claimed by the Assessing Officer. The ld. Counsel of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some part of the amount was the outcome/income of investment made by them with the appellant company which had been received back by them during the year of investment in share holdings. The amount was kept in the form of FD with the appellant company some years back and the complete amount along with interest had been received back by them. The balance amount of investment was made out of current year income/accumulated amounts. Thus the creditors are creditworthy and the source of investment in share stands explained. All the shareholders are existing assessee in the Income tax Office and regularly filing their return of income and copies of ITRs have been filed. Thus the share applicants are identifiable persons being assessed to tax. The transaction is genuine since the investment in shares have been made through banking channel. Copies of bank accounts have been filed which reflects the transactions. What is relevant is the identity, credit worthiness of the donor and genuineness of the transaction. All these three conditions have been beyond doubt been established and to that extent onus of the assessee/appellant has been discharged. On the basis of the remand report of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted genuineness of the investors after summoning and examining their source of investment, Bank transactions etc. even though in remand proceeding, burden of the assessee to prove the genuineness stands discharged. The identity of the investors was not even disputed by the ld. senior departmental representative. The source of investment has been examined in detail by the Assessing Officer as well by the CIT(A) and nothing adverse has been noted by both authorities. Further the transactions have been carried out through bank and no infirmity has been found in this regard. The assessee company has satisfied all the conditions required for proving the genuiness of cash credits. 9. Further, we may also point out that the allegation of the ld. DR becomes baseless as mere introduction of a group of account holders to bank by a single person does not raise any doubt about their creditworthiness as there is no allegation that the opening of a bank account was intended to introduce assessee s own unaccounted money/income in the garb of share application money. We cannot ignore the factum that major share of share application money was sourced by the respective contributors out of money/f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reputation o the company from related persons such as employees, friends and relatives of the directors and other shareholders of the company and no doubt can be raised about the capacity and creditworthiness of these share application money contributors. Ld. Counsel also pointed out that in this case, confusion arose because at the time of framing assessment, at the time of submitting remand report before the CIT(A) and at the time of filing this appeal before the Tribunal, there were three different Assessing Officers having different points of view but the details and original analysis submitted by the AO in the remand report placed at pages 263 to 310 of the assessee s paper book, it is amply clear that the APO applied the endeavours and mind for proper analysis of the supporting evidence and other documents of the assessee and submitted a fortified unrebutted conclusion that in the statement/affidavit, all the persons/shareholders admitted about having the investment/purchase of shares of the assessee company. Ld. Counsel pointed out that the AO submitted a correct remand report stating that all the persons are existing assesses, their admission and contention appears to be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. An affidavit along with medical papers and relevant ITRs have been filed by the family members of Smt. Ratan Devi. She is mother of Shri Devender Garg who is one of the Director of Company. Statement of another person Shri Dharamveer Singh Dhaka could also not be recorded. His son Shri Suresh Pal attended along with affidavit from his father and also copies of ITRs have been filed by him Shri Dhaka is 86 years old and could not move as stated by his son Shri Suresh Pal. Statements of Shri Anil Gupta and Shri Anil Sharma. Director of M/s Blud Diamond Industries Limited were recorded at the time assessment proceedings. In their statements both admitted of having shares of the company M/s Ravi Organics Limited, Muzaffarnagar. As directed by your good self, a request was made to AMMCO Bank, Muzaffarnagar to furnish certain information along with copy of bank account. Copies of information received from AMMCO Bank is enclosed along with the report which is self explanatory. In the statements/affidavits all the persons/shareholders admitted about having the investments/purchase of shares of the company. It was also contended that the balance investment is from business/salary inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt which are suspect and when the AO acted legitimately in acquiring the matter, the inference drawn by him was not justified at all in the circumstances of the case and the share applicants particulars were available with the AO in the form of balance sheets income tax returns, PAN details etc.. The true identity of the share applicants, their creditworthiness and genuineness of the transaction which are based on sound reasoning do not call for any interference. The relevant operative part of this order of Hon ble High Corut of Delhi reads as under:- 5. The ITAT also noted that the balance sheets of the investors showed that the share applicants were possessed of considerable means and had been existing for a long period of time prior to the transaction in question. The ITAT reasoned as follows: 10. On an analysis of these records, we are of the view that the department was able to lay its hands on the addresses of the share applicants and where the share applicants are assessed. These companies are existing from long period. They have confirmed that they have contributed to the share capital of the assessee company. The next aspect is their creditworthiness. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us cast upon the assessee under Section 68 of the Act to satisfy the department about the true identity of an investor, its creditworthiness and genuineness of a transaction was explained by the Supreme Court in CIT Vs. Lovely Exports (P) Ltd., 216 CTR 295,. Whilst, the AO acted legitimately in enquiring into the matter, the inferences drawn by him were not justified at all in the circumstances of the case. Whether the assessee company charged a higher premium or not, should not have been the subject matter of the enquiry in the first instance. Instead, the issue was whether the amount invested by the share applicants were from legitimate sources. The objective of Section 68 is to avoid inclusion of amount which are suspect. Therefore, the emphasis on genuineness of all the three aspects, identity, creditworthiness and the transaction. What is disquieting in the present case is when the assessment was completed on 31.12.2007, the investigation report which was specifically called from the concerned department in Kolkata was available but not discussed by the AO. Had he cared to do so, the identity of the investors, the genuineness of the transaction and the creditworthiness of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicants and genuineness of the transaction and all these conditions have been established beyond doubt and to that extent, onus of the assessee/appellant, cast u/s 68 of the Act, stands discharged. We may also point out that the CIT(A) has also considered the remand report of the AO as the main basis of deletion of impugned addition and held that the assessee has amply proved and has discharged this onus or burden to prove these requirements by filing the necessary documentary evidence in support of alleged share application money received by it. 16. On the basis of foregoing discussion, we reach to a conclusion that the CIT(A) granted relief to the assessee on the basis of remand report of the AO and other relevant and supportive evidence and documents and the CIT(A) also considered surrounding circumstances and correctly reached to a conclusion that the CIT(A) has discharged its onus cast upon him u/s 68 of the Act by establishing the identity of the investors, along with their creditworthiness and genuineness of the transaction. We may also point out that the case of the assessee was selected for scrutiny through CASS and it is not the case of scrutiny at the instance of Inv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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