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TMI Blog2016 (4) TMI 474X X X X Extracts X X X X X X X X Extracts X X X X ..... officer did not examine them for their creditworthiness, identity or genuineness. The assessing officer failed to do so even after the matter was remanded to him twice by Ld. CIT(A). 4. That the Ld. CIT(A) has made gross errors in facts & law in observing that the identity of shareholders are doubtful on the basis of PAN or Voter ID Cards. As a matter of facts, both are prescribed as identity proofs by Govt. Of India. Quite intriguingly, Ld. CIT(A) has cast a shadow of doubt on authenticity of the identity proof of PAN Card issued by Income Tax Department itself. 5. That the Ld. CIT(A) has made gross errors in law in sustaining the loans which were returned through banking channels after the company ran into heavy losses and its business was discontinued. 6. That the Ld. CIT(A) & the assessing officer has dealt all loans & share capitals in a cumulative manner without discussing individual cases and made high pitched additions without justification. 7. That under the facts & circumstances of the case, the Ld. CIT(A) had made gross errors in facts & law in sustaining the additions made by the assessing officer. 8. That the Ld. CIT(A) has sustained the additions in violatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment but this amount of share application money cannot be regarded undisclosed income of the assessee company u/s 68 of the Act. The CIT(A) forwarded all the documents , which were submitted before him as additional evidence in the Rule 46A of the Income Tax Rules, to the Assessing Officer for his comments. The Assessing Officer though objected to the admission of additional evidences, however, sent remand report stating that the assessee was neither fulfilled the requirements of section 68 of the Act before the AO nor before the CIT(A) and therefore, the addition need to be sustained. The CIT(A) after providing opportunity of hearing to the assessee sustained the addition of 13,00,000/-. Similarly the CIT(A), after forwarding the additional evidence in respect of unsecured loans to the Assessing Officer and getting his report and providing opportunity to the assessee, sustained the addition of Rs. 58,54,200/- for unexplained loan as cash credit. Aggrieved, the assessee is before us. 3.1 In respect of ground No. 1 , the ld. Authorised Representative ( in short AR) submitted that the assessee company was incorporated in the concerned year only and therefore the assessee could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is appeal has been brought by special leave. 2. 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. 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 asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ground Nos. 2 to 10, the assessee has raised issue of holding share capital of Rs. 13,00,000/- and unsecured loans of Rs. 58,54,280/- as unexplained by the Assessing Officer and confirmed by the CIT(A). In respect of the grounds, the ld. AR submitted that the assessee could not be asked to furnish source of source. Further, he submitted that the assessee had supplied addresses of the share holders and persons who provided unsecured loans to the AO, despite that, the AO did not examine the creditworthiness, identity and genuineness of the share holders and unsecured loan providers. The Ld. AR relying on the judgments CIT vs. Orissa Corporation 1986, 159 ITR 78 submitted that the Assessing Officer was required to conduct inquiry in the particulars of the creditors furnished by the assessee. The ld. AR further submitted that the PAN Card or the voter ID is one of the valid identity proof but same was not accepted by the Ld. CIT(A) in support of the identity. The ld. AR also submitted that all the loans were received and returned through banking channel, which confirmed the genuineness of the transaction. He also reiterated the grounds of appeal raised in the appeal. Further he relie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgment of the Hon'ble Court in the case of CIT vs. Orissa Corporation (supra) does not apply to the facts of the assessee. Similarly the facts of the case of Divine Leasing and Finance ltd (supra) are also different as that was the case of a public limited company, where the share applicants were not related to the assessee and mostly applied through public subscription, where as in the case of the assessee all the share holders are relative and friends of the assessee and they have applied in cash. In view of above facts and circumstances, we are of the opinion that the assessee has failed to discharge its onus to establish identity of the shareholders, genuineness of the transactions and creditworthiness of the shareholders in relation to the addition of Rs. 13 lakh made by the assessing officer. Thus we hold that there is no infirmity in the findings of the Commissioner of income tax (Appeals) on the issue in dispute. 6. The second additions is in respect of unsecured loan of Rs. 5854200/- held as unexplained, out of unsecured loans of Rs. 62,09,200/- received by the assessee during the year. The Assessing officer held that no evidence in support of genuineness of the transact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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