TMI Blog2017 (11) TMI 1546X X X X Extracts X X X X X X X X Extracts X X X X ..... about rotation of the funds so long the sources of the funds are explained. The assessee having discharged its onus fully, the Assessing Officer has made the addition merely on the basis of surmises and doubts. - Decided in favour of assessee. - ITA No. 4354/DEL/2014 - - - Dated:- 20-11-2017 - SHRI B.P. JAIN, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER For The Assessee : Shri Ved Jain, Adv Shri Ashish Goel, CA For The Revenue : Shri Surendrapal, Sr. DR ORDER PER B.P. JAIN, ACCOUNTANT MEMBER, This appeal filed by the Revenue is directed against the order dated 21.05.2014 passed by the CIT(A)-IV, New Delhi in appeal No.90/13-14 for the AY 2010-11. 2. Briefly stated, the facts of the case are that the assessee is a company engaged in the business of manufacturing of M S Ingots, Steel of CTD Bars, Channel and Angles. It filed its return of income for the A.Y. under consideration declaring an income of ₹ 3,96,58,690/-. The return was selected for scrutiny. During the course of the assessment the AO raised the issue of the share capital received by the assessee. Not being satisfied with the explanation and evidences submitted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash transaction. The credit in the bank statement of each of the shareholders have been explained with evidences. Not only that supporting document in respect of the person or company from whom such credit has come in the bank account of the shareholder has also been provided. 6. As regards the sum of ₹ 65,00,000/- received from its Director Mr Jitendra Yadav, the learned AR invited attention to PB. Pg. 216 which is an ITR of its director Mr. Jitendra Yadav showing income of ₹ 56,17,881/- and payment of tax of ₹ 17,64,196/-. It was submitted that the assessee company has received ₹ 65,00,000/- from Mr. Jitendra Yadav. The source of the money has been duly explained with the bank statement as well as credit in the said bank statement. Mr. Jitendra Yadav has received ₹ 60,00,000/- from M/s Bhumiputra (India) Ltd. The bank statement of Bhumiputra (India) Ltd. was also filed placed at PB. Pg. 243 with Bank of Maharashtra, Yamuna Vihar Branch, having account no. 60038534806. There is no cash deposit in the bank account of this company as is evident from the bank statement of Bhumiputra (India) Ltd. This company is being assessed to tax as per the ITR pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment made by this company to AJ Power Pvt. Ltd. The Balance Sheet of this company has also been placed at PB. Pg. 183 and the investment schedule of this Balance Sheet at page 185 shows a total investment of ₹ 5.49 crore in the shareholder company i.e. AJ Power Pvt. Ltd. All these transactions being related party transactions have also been disclosed in the balance sheet of shareholder company at PB. Pg. 162-163 and in the case of Iskcon Infotech Pvt. Ltd. at Page 194. On the basis of above it was contended that the assessee has fully discharged its onus about the identity, creditworthiness and genuineness of the share capital received. The AO has made the addition by indulging into surmises. The assessee company has provided complete trail not only of source but source of source. There is no cash transaction. There is no adverse material. In fact, there is no adverse allegation from any quarter. It was submitted that the case of the assessee company is different from the other cases of share capital where there are allegation by the entry operators of having provided accommodation entries in lieu of cash. It is a case of a normal assessment not a case of a reopening of ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-creditors, had actually been received by the sub-creditors from the assessee. In the absence of any such evidence on record, the Assessing Officer could not have treated the said amounts as income derived by the appellant from undisclosed sources. The learned Tribunal seriously fell into error in treating the said amounts as income derived by the appellant from undisclosed sources merely on the failure of the sub-creditors to prove their creditworthiness . 11. In the case of Sarogi Credit Corporation Vs. CIT 103 ITR 344 (Patna), the Hon'ble High Court observed as under:- Once the identity of the third party is established before the Income Tax Officer and such other evidence are prima facie placed before him pointing to the fact that the entry is not fictitious, the initial burden lying on the assessee can be said to have been duly discharged by him. It will not, therefore, be for the assessee to explain further as to how or in what circumstances the third party obtained the money or how or why he came to make advance of the money as a loan to the assessee. Once such identity is established and the creditors, as in the present case, have pledged their oath that they h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that AO was wrong in drawing adverse inference merely because of rotation of money from one Group Company to another Group Company. The AO cannot sit into the judgment of the assessee Group Company about rotation of the funds so long the sources of the funds are explained. In this case as is evident from the facts and the Paper Book, the funds have moved from Group Companies. The two leading companies i.e. the assessee company and M/s Anjani Steels Ltd. are flagship companies and rotation of funds through its investment companies was a normal business decision and AO has gone wrong to name these as sham transactions. It was submitted that the various case laws cited by the AO in the assessment order on share capital are not applicable to the facts of the present case as in all these cases there was allegation of accommodation entry. There was statement recorded by the Investigation Wing to the effect that the share capital received is not genuine. In the present case there is no such allegation nor any finding. 12. The assessee having discharged its onus fully, the AO has made the addition merely on the basis of surmises and doubts. It is a settled law that suspicion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee had filed documents including certified copies issued by Registrar of Companies in relation to share application, affidavits of directors, Form 2 filed with Registrar of Companies by such applicants, confirmations by applicants for company's shares, certificates by auditors, etc., Assessing Officer was not justified in making addition under section 68 on account of share application money merely on general inference to be drawn from the reading of the investigation report. The least that Assessing Officer ought to have done was to enquire into matter by, if necessary, invoking his powers under section 131 summoning the share applicants or directors . 3. Commissioner of Income Tax-9 Versus Vrindavan Farms( P) limited (ITA No. 71,72,85/D/2015) order dated 12.8.2015 4. The Court is of the view that the Assessee by produced sufficient documentation discharged its initial onus of showing the genuineness and creditworthiness of the share applicants. It was incumbent to the AO to have undertaken some inquiry and investigation before coming to a conclusion on the issue of creditworthiness. In para 39 of the decision in Nova Promoters (supra), the Court has taken note of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord. The only issue in this appeal is the addition of Share Capital of ₹ 4.15 crore received by the assessee company from the following three entities: 1. Anjaney Steels Pvt. Ltd. ₹ 1,50,00,000/- 2. AJ Power Pvt. Ltd. ₹ 2,00,00,000/- 3. Jitendra Kumar Yadav ₹ 65,00,000/- 16. The AO has made the addition holding that the transactions are sham and the assessee company has failed to prove the creditworthiness of the shareholders. The CIT(A) has deleted the same holding that the assessee has established not only the identity but also the creditworthiness and genuineness of the share capital received by it. Thus, the issue is whether the assessee has discharged its onus. And also whether the allegation of the AO is justified considering the evidences on record. In order to decide these issues it will be relevant to examine the evidences placed on record in respect of each of the three creditors. 17. The first case is that of Anjaney Steels Pvt. Ltd. The AO has made an addition of ₹ 1, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Pg. 174. The appellant company has also filed the Balance Sheet and ITR of the AJ Power Pvt. Ltd. where this investment in the assessee company has also been reflected as per PB. Pg. 155. Further, under the notes to the accounts appended to the Balance Sheets, transaction with related parties also shows investment by this company in the assessee company as per PB. Pg. 162. Not only that, the assessee company has also filed the audited balance sheet of Iskcon Infotech Pvt. Ltd. This company has net worth of more than 6 crore and investment schedule at PB. Pg. 185 shows the major investment in the shareholder company i.e. AJ Power Pvt. Ltd. Further under the notes to accounts, this company Iskcon Infotech Pvt. Ltd. has also disclosed above transaction as related party transaction. The assessee company has also filed the bank statement of Iskcon Infotech Pvt. Ltd. so as to demonstrate the source of source also. In view of the above facts and evidences on record we are of the view that the assessee has fully discharged its onus for establishing the identity, creditworthiness and genuineness of the transactions. It is a case where assessee has led enough evidences to dispel any doubt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner of Income Tax IX erstwhile CIT-VI vs Vrindavan Farms Pvt. Ltd. (Supra) where the Hon be court has held that the lower return of income is not sufficient to doubt the creditworthiness of the shareholder. Similar view has been taken by the Hon ble Delhi High Court Principal Commissioner of Income Tax (Central) vs M/s Goodview Trading Pvt. Ltd.(Supra) where the court has held that the AO was not justified in drawing adverse inference in respect of minimal or insubstantial of amount paid as tax ignoring the net worth of the companies that had invested in the Share Capital of the assessee company. 20. In view of the above facts, we hold that the AO was not justified in making sweeping observations such as fabricated and prepared documents as a made-up affair and AO was not justified in drawing adverse inference against the assessee when the assessee company has led all the evidences including bank statement etc. The learned AO has further gone wrong in drawing adverse inference on the basis of excel sheet which in fact support the case of the assessee. The AO was not justified in drawing adverse inference in respect of amount received from its director. The Director having appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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