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2016 (10) TMI 321 - ITAT MUMBAI

2016 (10) TMI 321 - ITAT MUMBAI - TM - Addition u/ 68 - Held that:- Unless the genuineness of the source of the sum of money found credited in the assessee’s books is satisfactorily established, the assessee cannot be said to have discharged the requisite burden of proof placed on him u/s. 68. The material furnished by the assessee is thus hardly adequate for proving the genuineness (of the credit/s) and/or the capacity of the creditors. The AO, as observed by the ld. CIT(A), has also not examin .....

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iation - asset put to use less than 180 days - Held that:- Trial production could be caused only upon successful commissioning of all the different parts of the plant, stated to be a lamination plant, i.e., in the main. The trial production expenses, including wastages, would also stand to be capitalized, of which there is no reflection. In view of the foregoing, we therefore have no hesitation in upholding the inference of the additions to the machinery being put to use for less than 180 days d .....

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he assessee to its’ claim, as made, or is the same not in accordance with law. That is the only question that is required to be addressed, and the further question that if it was in fact put to use during the relevant year is admitted by both the parties. We decide accordingly, and the Revenue succeeds. - I.T.A. No. 8054/Mum/2010 - Dated:- 12-8-2016 - SHRI SANJAY ARORA, AM AND SHRI PAWAN SINGH, JM For The Appellant : Shri Mohammed Rizwan For The Respondent : Shri Haresh P. Shah ORDER Per Sanjay .....

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on to the deletion of the addition u/s. 68 of the Act in the sum of ₹ 70.43 lacs. This is the second round before the Tribunal, which restored the matter for fresh assessment back to the file of the Assessing Officer (AO) in the first instance in view of the assessee filing additional evidences before, which though had not been admitted by, the first appellate authority. The addition was on account of share application money received from various persons. The AO was of the view that the de .....

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l, the ld. CIT(A) found that the assessee had filed confirmations, bearing verifiable addresses, from all the shareholders, which were not pursued by the AO, who only relied on his findings in the original assessment order to arrive at his conclusions, reproducing them in extenso. The addition being deleted thus, the Revenue is in appeal, raising the following Ground: 1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of ₹ 70,43,0 .....

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ned credits, detailed as under, as to their nature and source, in terms of section 68 of the Act: Name No. of shares Amount (Rs.) (1) Companies (i) Saavi Packers & Printers P. Ltd. 1,20,000 12,00,000 (2) Directors (i) Mr. Shanker Kashid [Director] 4,51,200 45,12,000 (ii) Mrs. Sharmila Kashid [wife] 1,900 19,000 (iii) M/s. Pushkaraj Corporation [Prop. Sharmila Kashid] 11,900 1,19,000 (iv) Mr. Paul D. Macwan 1,900 19,000 (3) Others-63 individuals 1,17,400 11,74,000 Total 7,04,300 70,43,000 The .....

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tails of share applications like name & address of the shareholders, no. of shares with value, PAN wherever available and relationship. ii. Attendance details from Financial Year 2001-05 to 2008-09 (till August, 2008) of employees who had subscribed the shares. iii. Muster Roll of employees for the period from April, 2001 to March,2005 and for the month of August, 2008, showing their daily attendance. iv. Confirmation letter, copies of shore applications, copies of Income tax Return of Shri .....

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ployees. Confirmations, by themselves do not prove the credit (refer: Bharati P. Ltd. v. CIT (1978) 111 ITR 951 (Cal); CIT v. W. J. Walker & Co., (1979) 117 ITR 690, 694 (Cal); CIT v. United commercial & Industrial Co. (P.) Ltd., (1991) 187 ITR 596, 599 (Cal). The assessee is an unlisted company, whose shares are, therefore, illiquid. There is nothing on record to show that the share subscription had been sought in the course of raising share capital from the public, or by way of private .....

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in its absence? Be that as it may, the shares being not marketable, and the investment thus not liquid, a person who is not a promoter, or a concern belonging to him, as, say, Pushkaraj Corporation P. Ltd., the proprietary concern of Sharmila Khasid, the promoters wife, would ordinarily have no reason to invest therein, being, rather, contrary to the normal, natural human behavior and conduct. They are after all parting with their funds as investors, in the hope of and on the premise of a prospe .....

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Further, there is admittedly no material to establish the creditworthiness of the 64 individuals, including, as stated, 30 employees, from whom cash (at a maximum of ₹ 19,000/- each, in their names) has been accepted. What is their financial capacity? What are their regular sources of income? What is their income for the past 2-3 years? Answers to these and like questions are conspicuous by their absence, considering also the material on record, which in fact only forms a part of the asses .....

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un-realized at the relevant time. Also would be relevant is if the shares were indeed issued, and when? This is as where not issued, a genuine investor shall, except in case of a tacit understanding of the money being given for good, recall his money back. The material furnished by the assessee is thus hardly adequate for proving the genuineness (of the credit/s) and/or the capacity of the creditors. The AO, as observed by the ld. CIT(A), has also not examined or sought any further materials in .....

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an assessee has satisfactorily explained the genuineness of the credit is principally a matter to be decided on the basis of the explanation/s furnished as regards the nature and source of the impugned credit/s (which in the present case stands credited to the share application money account), together with evidences led in support. That is, is a finding of fact. In other words, whether the burden of proof, which is on the assessee-recipient, the beneficiary, stands discharged or not is essenti .....

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und - impinging on the genuineness of the credit; share application forms; bank accounts; financial capacity, some of whom are stated to be the assessee s employees, stated to having given cash to the assessee (at is at a maximum of ₹ 19,000/-, i.e., just below the limit as prescribed u/s. 269SS for the receipt of money in cash). Why, even the reason for making an illiquid investment has not been stated? It is also not correct to say that the AO is not entitled to reject the explanation wi .....

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Mohideen Thamby & Co. vs. CIT (1959) 36 ITR 481 (AP); Bachhraj Amolakchand vs. CIT, (1956) 29 ITR 1009 (Nag); R. B. N. J. Naidu vs. CIT, (1956) 29 ITR 194 (Nag); Lal Mohan Krishna Lal Paul vs. CIT (1944) 12 ITR 441 (Cal); Anil Kumar Singh vs. CIT, (1972) 84 ITR 307 (Cal)]. The genuineness of the transaction has itself being found as seriously wanting. For the balance credits for ₹ 58.50 lacs, the assessee giving partial details/materials, so that a view, one way or the other, could no .....

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the mere credit in the assessee s books of account in the name of another should be sufficient to accept it as a genuine credit (CIT vs. S. Kamaraja Pandian [1984] 150 ITR 703 (Mad), SLP against which stands dismissed in 155 ITR (St.) 66). A reproduction from the same would be elucidative: Under section 68 of the Income-tax Act, 1961, the assessee has to establish the identity of the creditor, the capacity of the creditor to advance the loan and the genuineness of the transaction in spite of th .....

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an be treated as the income of the assessee from undisclosed sources. [emphasis, ours] Unless the genuineness of the source of the sum of money found credited in the assessee s books is satisfactorily established, the assessee cannot be said to have discharged the requisite burden of proof placed on him u/s. 68. 5. The only other issue, agitated per its Ground 2 by the assessee, is with regard to the restriction of depreciation qua machinery installed during the first half of the relevant previo .....

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