TMI Blog2017 (1) TMI 1051X X X X Extracts X X X X X X X X Extracts X X X X ..... lusions arrived at. In this case a general view has been taken by the revenue authorities. Each investment has not been examined separately. No material has been gathered by the A.O. to contradict the evidence filed by the assessee. The A.O. merely rejected the evidences without proper reason. Under these circumstances, we are of the considered opinion that the addition made under section 68 cannot be sustained. - Decided in favour of assessee - ITA.No.893/Hyd/2016 - - - Dated:- 18-1-2017 - SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER For The Assessee : Shri Y. Ratnakar For The Revenue : Smt. U. Minichandran ORDER PER J. SUDHAKAR REDDY, A.M. This appeal by the assessee is directed against the order of the CIT(A)-2, Hyderabad dated 31.03.2016 on the following grounds : 1. The order of the learned Commissioner (Appeals) in ITA No.0209/2014-15, dated 31-03-2016 is contrary to law and facts. The appellant submits that the learned Commissioner (Appeals) erred in dismissing the appeal without considering the submissions and evidence produced before him by the appellant. 2. The appellant has adequately proved t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts of the case are that the assessee is a company and had filed its return of income for the A.Y. 2011-12 on 23.09.2011 admitting income of ₹ 3,14,740. The Assessing Officer completed the assessment under section 143(3) by making an addition of ₹ 3,20,00,000 as unexplained credits, under section 68 of the Act. The assessee filed letters of confirmations from the investors giving their full address, income tax PAN details as well as copies of investors, a) bank statements, b) acknowledgments of filing of returns of income, and (c) balance sheets and P L A/c, in proof of the identity, creditworthiness and genuineness of the investments. Certificates of RBI in the case of five investors, which were NBFCs were also filed. The Assessing Officer deputed his Inspector for verification and investigation. Thereafter, on the ground that the investors are having meagre incomes and in some cases minus net worth, he made addition of the entire investment by way of share capital of ₹ 3,20,00,000 u/s. 68 of the Income Tax Act, 1961 (the Act). On appeal, the First Appellate Authority upheld the findings of the Assessing Officer. Further aggrieved, the assessee is in appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Supreme Court does not tantamount to approval of the order of the Hon ble High Court by the Hon ble Supreme Court. 6. Rival contentions heard. On a careful consideration of the arguments of both sides, papers on record, orders of the authorities below, case law cited, we hold as follows. 7. The Assessing Officer has made this addition on the ground that the assessee failed to prove the genuineness of the transaction, as some of the companies which invested had admitted either Nil income or had declared meagre income. He records that the highest income that was declared was of Vaikunth Vintrade P. Ltd., of ₹ 34,445/-. 8. On the other hand, Learned Counsel for the assessee, demonstrates that higher incomes than ₹ 34,445/- were reported by other companies and that the A.O. was factually wrong in his observations. The assessee further filed a statement to demonstrate the creditworthiness of the investing companies. The factual position depicted in this statement was not controverted by the Ld. D.R. We extract the statement for ready reference. Details of funds available with the investor companies as on 31st March, 2011 Amount in Rupees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25,00,000 Waltz Mercantiles Pvt Ltd. 1,44,62,000 6,40,57,451 7,85,19,451 0 7,85,19,451 10,00,000 8.1. A perusal of this chart shows that these companies do have creditworthiness. They do have substantial funds and some are NBFCs. Having NIL income or meagre income cannot by itself lead to a conclusion that the assessee has no creditworthiness. Thus this finding of the Ld. CIT(A) in our opinion is not correct. 9. We also find that some of these investing companies are NBFCs and registered with the RBI. Such companies cannot be treated as paper companies without the A.O. gathering any evidence in support of such a finding. 10. The assessee has furnished letters of confirmations from the investors, their full address, income tax Permanent Account numbers, copies of investors bank statements, acknowledgments of these companies of filing returns of income, balance sheets, P L A/c etc., which does demonstrate the identity of the investing companies. The creditworthiness is proved by the substantial funds that these companies h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of ₹ 1,11,50,000 may not be added to its income. In response, the assessee has submitted that there is no such credit in the books of the assessee. Rather, the assessee company has received the share application money for allotment of its share. It was stated that the actual amount received was ₹ 55,50,000 and not ₹ 1,11,50,000 as mentioned in the notice. The assessee has furnished details of such receipts and the contention of the assessee in respect of the amount is found correct. As such the unexplained amount is to be taken at ₹ 55,50,000. The assessee has further tries to explain the source of this amount of ₹ 55,50,000 by furnishing copies of share application money, balance sheet, etc. of the parties mentioned above and asserted that the question of addition in the income of the assessee does not arise. This explanation of the assessee has been duly considered and found not acceptable. This entry remains unexplained in the hands of the assessee as has been arrived by the Investigation wing of the department. As such entries of ₹ 55,50,000 received by the assessee are treated as an unexplained cash credit in the hands of the assessee an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted certain facts and the statements of Mr. Mahesh Garg that the income sought to be added fell within the description of Section 68. 7. Having regard to the entirety of facts and circumstances, the Court is satisfied that the finding of the Tribunal in this case accords with the ratio of the decision of the Supreme Court in Lovely Exports (supra). 8. The decision in this case is based on the peculiar facts which attract the ratio of Lovely Exports (supra). Where the assessee adduces evidence in support of the share application monies, it is open to the assessing officer to examine it and reject it on tenable grounds. In case he wishes to rely on the report of the investigation authorities, some meaningful enquiry ought to be conducted by him to establish a link between the assessee and the alleged hawala operators; such a link was shown to be present in the case of Nova Promoters Finlease (P) Ltd. (supra) relied upon by the revenue. We are therefore not to be understood to convey that in all cases of share capital added under section 68, the ratio of Lovely Exports (supra) is attracted, irrespective of the facts, evidence and material. 12.4. Thus a clear distin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the directors of the assessee-company, the same cannot be treated as unaccounted income of the assessee. There was no such finding by the assessing authority. In this view of the matter, the ultimate conclusion of the Tribunal cannot be faulted in any case. 12.6. In the case on hand there is no such finding made by the A.O. or the Ld. CIT(A). 13. The CIT-DR relied on the decision of CIT vs. N. Tarak Properties Investments P. Ltd., (supra). In this case, the Assessing Officer noticed that the extracts of the bank accounts submitted by the assessee during the original assessment proceedings were fabricated. Hence, this is the case of fraud played by the assessee on the Revenue. The assessee had adduced false evidence to get undue advantage by giving colour of genuineness to bogus entries through fabricated bank accounts. Under these circumstances, the Hon ble Delhi High Court upheld the additions made under section 68 of the Act. Hence, the facts of that case are distinguishable from the facts of the assessee s case. 14. In view of the above discussion, we are of the considered view that the addition made u/s 68 of the Act is to be deleted. 15. In the result, appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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