TMI Blog2016 (4) TMI 474X X X X Extracts X X X X X X X X Extracts X X X X ..... -2016 - SHRI I.C.SUDHIR, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER For The Assessee : Shri Sanjeev Agarwal, Adv. For The Revenue : Shri T. Vasanthan, Sr. DR ORDER PER O.P. KANT, A.M.: This appeal of the assessee is directed against order dated 23.01.2012 of the CIT(A)-XVIII, New Delhi, for assessment year 2006-07, raising following grounds of appeal :- 1. That the Ld. CIT(A) has made gross error in facts and law in sustaining the additions of share capital unsecured loans taken during the year of incorporation of the company before commencement of the business of the company. 2. That the Ld. CIT(A) has made gross error in law in sustaining the additions of unsecured loans holding that assessee has failed to mentioned the source of the source. 3. That the Ld. CIT(A) has failed to observe that the assessee had already furnished the addresses of all share holders unsecured loans to the assessing officer and despite repeated requests of the assessee, the assessing 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 tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share holders and the share holders were stated to be relatives of the Directors. In view of the facts, the Assessing Officer held the share capital of ₹ 13,00,000/- credited as unexplained cash credit u/s 68 of the Act. Similarly, the Assessing Officer noticed unsecured loans of ₹ 62,09,200/- received from eight parties. In respect of the two parties, the assessee submitted proof in support of identity, bank statement and their Income Tax Returns. The Assessing Officer accepted their creditworthiness and in absence of documents in respect of the other parties, he held the balance unsecured loan of ₹ 58,54,200/- as unexplained cash credit. Aggrieved, the assessee filed appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee filed copy of Voter Identity Card / Permanent Account Number( PAN) Card in case of addition of ₹ 13,00,000/- u/s 68 of the Act and submitted that in view of the judgment of the Supreme Court in the case of CIT vs. Lovely Export Pvt. Ltd., 2008, 216 CTR, 195 (SC) that the department was free to proceed to reopen their individual assessment but this amount of share application money cannot be regarded undisclosed income of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Commissioner of income tax v/s Bharat Engineering And Construction Company (supra) has held as under: The controversy in this appeal is whether a question of law arises from the order of the Tribunal. The Tribunal came to the conclusion that the cash credit entries totalling ₹ 2,50,000 brought to tax by the ITO on the ground that they represented the income of the assessee-respondent from undisclosed sources was not correct. It came to the conclusion that, though the explanation given by the assessee in respect of those cash credit entries is not true, yet from the proved circumstances those cash credits could not be the income of the assessee. Aggrieved by the decision of the Tribunal, the CIT moved the Tribunal under s. 66(1) of the Indian IT Act, 1922, to refer certain questions to the High Court for its opinion. The Tribunal rejected the application on the ground that its findings are findings of fact and that no question of law arose from them. Thereafter, the assessee moved the High Court under s. 66(2). That application was rejected by the High Court. Against that decision this appeal has been brought by special leave. 2. The assessee-company is an e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indus Valley promoters Ltd the issue of share capital under sections 68 of the IT act was involved and the jurisdictional High Court while delivering that this judgement held as under: 19. It is well settled that the assessee must discharge the burden of proving the identity of the creditors and also to give the source of the deposits. In other words, the creditworthiness of the depositors must be established to the satisfaction of the AO. Where there is an unexplained cash credit, it is open to the AO to hold that it is income of the assessee and no further burden lies on the AO to show that income in question comes from any particular source. ( emphasis supplied) 3.4. Thus, respectfully following the judgement of the Hon ble jurisdictional High Court, we hold that once the assessee failed in explaining the share capital and unsecured loans received, there was no option before the Assessing Officer except making addition in the hands of the assessee until and unless, the assessee would have come forward with the name of the person to whom the unexplained cash credit belonged. Accordingly, this ground of the assessee is dismissed. 4. In ground Nos. 2 to 10, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the Assessing Officer no confirmations, proof in support of the identity, genuineness of the transaction and creditworthiness of the creditor were filed. Before the CIT(A), the assessee filed proof in support of identity like copy of PAN card or voter card only and no documents in support of creditworthiness of genuineness of the transactions were filed . Even before the Ld. CIT(A), the assessee only repeated his submission that the department could conduct necessary inquiry or take action in the hands of the individual share holders rather than the assessee, Before the CIT(A), the assessee also stated that the income of the share holders was below taxable limit during the relevant period, however, no evidence in support of the source of income in their hand or the creditworthiness of those persons were filed. It is evident from the above facts that the primary onus was on the assessee to file documents in support of identity, genuineness of the transaction and creditworthiness of the shareholders, however, the assessee has filed only document in support of identity. In absence of documents, the burden of assessee has not been discharged and thus the ratio of the judgment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited in the books was not satisfactory there was, prima facie, evidence against the assessee, viz., the receipt of money. The burden was on the assessee to rebut the same, and, he failed to rebut it, it can therefore be held against the assessee that it was a receipt of an income nature. The appellant has failed to discharge its onus to produce legally acceptable evidence of creditworthiness of the creditor. The expression the assessee offers no explanation means the assessee offers no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. In this case the appellant has offered no creditable explanation about the unsecured loans credited in his books., the receipt of ₹ 58,54,200/-, therefore cannot be treated as explained. Considering the above facts, the addition of ₹ 58,54,200/- made by the AO u/s 68 is confirmed. 7. Thus, we find that though the CIT(A) doubted the identity of the creditors in beginning paras of his order, but finally, he affirmed the unexplained cash credits in view of lack of creditworthiness of the creditors. In hearing before us also the ld. AR could not brought any evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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