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TMI Blog2018 (10) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. 3. Ground No.2 is related to the addition of Rs. 98,00,000/- related to the addition on account of share application money on protective basis u/s 68 of Income Tax Act, 1961(hereinafter called as 'Act') in the hands of the company. During the assessment proceedings, the Assessing Officer (AO) found that the assessee company had accepted the share application money of Rs. 98,00,000/-. On being examined, it was explained by the assessee company that the investment was made by one of the Directors, Shri K.Srinivasa Rao who is non resident Indian (NRI) and self employed in USA. The assessee has been asked to furnish the evidence and the assessee had furnished the confirmation letter from Shri K.Srinivasa Rao stating that he had invested the sum of Rs. 98,00,000/- towards share application money in the company. The AO further asked the assessee to furnish cash flow statement with matching dates for investment made in the company towards share application money of Shri K.Srinivasa Rao and it was explained that he had remitted the funds from the USA to the credit of his bank account in Dhanalakshmi Bank, Guntur in his NRE and NRO accounts and the same funds were used for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri K.Srinivasa Rao, Director had no resources to make the investment of Rs. 98,00,000/- as share application money and accordingly held that though the identity of the creditor was established, the assessee failed to prove the genuineness of the transaction since the transaction was admittedly in cash. The AO further viewed that the credit worthiness of the creditor for the said amount of investment at particular point of time was not established with date of receipt and investment. Since Shri K Srinivasa Rao is not resident of India and had not filed the return of income, the AO held that the amount of Rs. 98,00,000/- required to be included in the assessee's company for the assessment year 2011-12 u/s 68 of the Act under the head 'income from other sources'. However, taking into consideration of the fact that Rs. 98,00,000/- was declared as share application money in the books of the assessee company in the name of Shri K Srinivasa Rao, the Director who has confirmed the investment, the AO held that the addition required to be made in the hands of Shri K.Srinivasa Rao, Director u/ s 69 of the Act substantively and in the hands of the company on protective basis. Accordingly, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... machinery to M/s Vasantha Spinners. 6. M/s Sripathi Spinners - requested the supplier company, Viz., M/s Super Sales India Ltd., Coimbatore - vide letter dated 12.09.2009 to supply the spinning machinery to Vasantha Spinners Ltd., worth Rs. 82,54,600/- 7. M/s Vasantha Spinners Ltd., also made a request in its letter dated 12.09.2009 addressed to M/s Super Steels India Ltd., Coimbatore to supply the above spinning mill machinery worth Rs. 82,54,600/- to it in view of acceptance of the transfer of project order from their sister concern, M/s Sripathi Spinners Pvt. Ltd. Copies of these letters are anenexed. 8. In view of the above, the ister concern, M/s Vasanth Ltd. paid the machinery cost of Rs. 82,54,600/- to the sister concern, byname M/s Sripathi Spinners (P) Ltd. (vide Account statement No.2 annexed herewith) Payments made by M/s Vasantha Spinners to Sripathi Spinners. As recorded above the supplier company supply the machinery to MIS. Vasantha Spinners has requested by Sripathi Spinners who made with the payment for supply of machinery earlier. Hence MIs.Vasantha Spinners paid the followi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India, thus, he did not file any return of income in India. He is self employed in USA and the money was transmitted from USA through banking channels. The assessee had furnished the confirmation letter and confirmed the subscription towards the share application money. Therefore, held that there is no reason to suspect the credit worthiness and genuineness of the transaction and accordingly deleted the addition made by the AO u/s 68 of the Act. The Ld.CIT(A) relied on the decision of Hon'ble Calcutta High Court in the case of Shankar Industries Vs. CIT [114 ITR 689], Hon'be Madras High Court in the case of S.Hastimal Vs. CIT [49 ITR 273]. 6. Aggrieved by the order of the Ld.CIT(A), the revenue is in appeal before us. 7. We have heard both the parties and perused the material placed on record. It is the case of revenue that the assessee had not explained the genuineness of transaction with matching dates for investment in share application money. According to the AO, the cash flow submitted by the assessee does not support the investment with matching time schedule, hence the AO suspected the genuineness of the transaction and the source. The assessee's case is that Shri K.Sriniv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , during the appeal hearing did not provide any evidence to controvert the finding of fact given by the Ld.CIT(A) that the funds were provided by Shri K.Prasada Rao from the withdrawals made for the purpose of real estate business. The department also did not bring any evidence to show that the funds transmitted through banking channels from US and the loans raised in India for Rs. 69,44,000/- and Rs. 50,00,000/- as discussed earlier in this order aggregating to Rs. 1,19,44,000/- apart from the funds transferred from US amounting to Rs. 92,54,600/- was invested in any other manner other than the investment in the assessee company. Therefore, evidences placed by the assessee establish that the sufficient sources are available to Shri K. Srinivasa Rao to make the investment of Rs. 98,00,000/-. Before the Ld.CIT(A) the assessee has given complete cash trail and cash flow to explain the sources and the department did not bring any evidence to controvert the finding given by the Ld.CIT(A). Therefore, in the instant case,. Identity of the investor credit worthiness and genuineness is established and we do not find any reason to interfere with the order of the Ld.CIT(A) and the same is up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f K.Srinivasa Rao before the Ld.CIT(A). The Ld.CIT(A) after verifying the details accepted that Shri Srinivasa Rao had the cash balance of Rs. 1,52,78,047/- which is sufficient source to make the payment of Rs. 50,00,000/- in cash and accordingly held that the transaction is genuine and the assessee has established the identity, credit worthiness of the creditor, therefore, deleted the addition. 10. Aggrieved by the order of the Ld.CIT(A), the revenue filed appeal before the Tribunal. During the appeal hearing, the Ld.DR supported the order of the AO. Per contra, the Ld.AR argued that there was sufficient cash balance in the account of Shri K.Srinivasa Rao to fund the sum of Rs. 50,00,000/-, therefore, there is no case for making any addition u/s 68 of the Act and relied on the order of the Ld.CIT(A). 11. We have heard both the parties and perused the material placed on record. The assessee is owning the property of 4840 sq.yards which was leased out to the tenant represented by Secretary and Correspondent, Sri Alapati Rajendra Prasad. As per the agreement dated 16.05.2009, the tenant has paid Rs. 50,00,000/- as rent deposit to the assessee company and as per the lease agreement, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplained. Since the department did not place any evidence to controvert the finding given by the Ld.CIT(A) with regard to the availability of the cash balance, we hold that the source of the deposit, identity and genuineness of the credit was explained and we do not find any infirmity in the order of the Ld.CIT(A). Accordingly, we uphold the order of the Ld.CIT(A) and dismiss the appeal of the revenue. In the result, appeal of the revenue is dismissed. I.T.A.163/Viz/2017- Shri K. Srinivasa Rao 12. All the grounds of appeal are related to the addition of Rs. 98,00,000/- u/s 69 of the Act. The assessee made the investment of Rs. 98,00,000/- as share application money in M/s Sripathi Agros and Land Developers Pvt.Ltd. While framing the assessment in the case of M/s Sripathi Agros and Land Developers Pvt. Ltd., the AO found that the assessee has made the investment in share application money in the said company for Rs. 98,00,000/- for the assessment year 2011-12. Since the assessee has not filed return of income, the AO issued the notice u/s 148 and taken up the case for scrutiny and consequent notices were issued. The AO made the addition of Rs. 98,00,000/- u/s 68 in the hands of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the account of Shri K.Prasada Rao which were deposited in Lakshmi Vilas bank and Dhanalakshmi bank on various dates in the financial year 2009-10. The funds deposited in the Lakshmi Vilas bank and Dhanalakshmi bank were withdrawn by Shri K.Prasada Rao in cash on various dates and provided to his son Shri K Srinivasa who has invested it as share application money in the company. The entire cash flow was explained in the appeal of Sripathi Agro and Land Developers in this order in ITA No.331/Viz/2016. The fact that the assessee had remitted the funds of Rs. 92.54 lakhs from banking channels and raised the loans with Dhanalakshmi Bank for an amount of Rs. 1,19,44,000/- was not disputed by the AO. As observed by the Ld.CIT(A), there was cash balance of Rs. 1,52,78,047/- as per the financial statement submitted by Shri K.Srinivasa Rao as at the end of 31.03.2010. From the above, it is established that Shri K.Srinivasa Rao is having sufficient source to make the investment of share application money in the company. Therefore, there is no case for suspecting the genuineness of the transaction having established the identity, credit worthiness and source of the capital. Hence, there is n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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