TMI Blog2018 (5) TMI 1261X X X X Extracts X X X X X X X X Extracts X X X X ..... e the AO. The assessee has discharged its burden with regard to the identity, genuineness of share capital and also explained the source of share capital. The AO did not make any enquiry to verify the correctness of the information furnished by the assessee and bring any evidence to establish that the contributors to share capital does not have sufficient source or the source explained by the share holders is bogus. The CIT(A) also observed that the shares were allotted in favour of the contributors. It is evident from the above that the revenue has not discharged it’s burden to prove that the shareholders did not have credit worthiness. - Decided in favour of assessee. - I.T.A.No.306/Viz/2016 - - - Dated:- 18-5-2018 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER For The Appellant : Shri M.R.Bangari, DR For The Respondent : Shri G.V.N.Hari, AR ORDER PER D.S. SUNDER SINGH, Accountant Member: This appeal is filed by the revenue against the order of the Commissioner of Income-Tax (Appeals)[CIT(A)], Rajahmundry vide I.T.A No.25/2014-15/ACIT/C-1/RJY/2015-16 dated 21.03.2016 for the assessment year 2011-12. M/s Gowthami ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... create the infrastructure, the sales would not increase. The Ld.AR further argued that there was increase in sales as well as the profit both in quantity as well as percentages, therefore argued that the expenditure incurred was reasonable and genuine hence no disallowance is called for. M/s Gowthami Chemicals Pesticides (Pvt.) Ltd., Rajahmundry 6. We have heard both the parties and perused the material placed on record. The Ld.CIT(A) deleted the addition holding that the expenditure incurred by the assessee is reasonable and justified. The relevant part of the order of the Ld.CIT(A) is extracted as under: 4.3 I have considered the submissions and also perused the details filed. From theperusal of the Profit and Loss account, it is seen that the sales have increased to ₹ 13.98 crore from ₹ 6.46 crore in the earlier year. Correspondingly the operating expenses have increased from ₹ 6.52 crore to ₹ 14.92 crore. The net profit before taxation has increased to ₹ 21.96 Iakh from ₹ 9.04 lakh. Thus I find that there is proportionate increase in expenditure in tune with the higher revenue generation by way of sales during the year. There is subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... personal expenditure in the guise of marketing, godown and plant and maintenance expenses. In the absence of specific evidence to establish that the expenditure claimed by the assessee is bogus or unsubstantiated with relevant evidences we hold that the CIT(A) has rightly deleted the addition and the same is upheld and the appeal of the revenue on this ground is dismissed. M/s Gowthami Chemicals Pesticides (Pvt.) Ltd., Rajahmundry 7. Ground No. 4 to 7 are related to the introduction of share capital. During the assessment proceedings, the AO found that the assessee has accepted the share capital of ₹ 40,00,000/- from the following individuals: Sl. Name of the Share Holder Amount (Rs. in lakhs) 1. Sri K.Venkata Reddy 6.00 2. Sri K.Srikanth Reddy 6.00 3. Smt.K.N.Vinitha Devi 6.00 4. Sri K.N.R.K.Reddy 6.00 5. Sri K.S.K.Reddy 6.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of thedetails it is seen that the assessee has furnished evidence in support of creditworthiness of the investors in the form of pattadar pass books in relation to some parties and copies of I T returns in the case of four of the above investors. However, the AO was not convinced with their creditworthiness. The AO also disbelieved the genuineness of the investment as the transaction was in cash. Thus the AO concluded that the amount represent undisclosed income of the assessee. However, I find that such conclusion is not drawn with reference to any incriminating material information or records. On the other hand, the Return of share allotment filed in Form Nq.2 clearly indicate that shares have been allotted in favour of the above referred persons in lieu of the above referred amounts invested with the company. With such allotment theabove parties have become share holders of the company. Therefore, I do not find any basis to doubt the genuineness of the above referred investments made. As regards, creditworthiness of the parties also, I find that the assessee has discharged its onus in furnishing the land holding details and pattadar passbooks for the income source of some of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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