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2019 (1) TMI 109

on behalf of the assessee, therefore, their statements cannot be read in evidence against the assessee. - The only material left for consideration was the documentary evidences filed by the assessee on record which supports the explanation of assessee that assessee received share application money from large number of investors who have made very small investment in assessee-company in each case. No evidence has been brought on record if the investment made by the investors have actually emanated from the coffers of the assessee so as to enable it to be treated as undisclosed income of the assessee. Therefore, considering the smallness of the issue and the fact that assessee was incorporated only in preceding assessment year, therefore, in the light of decision of Bharat Engineering & Construction Co. (1971 (9) TMI 14 - SUPREME COURT), there were no justification for the authorities below to sustain the addition. - Decided in favour of assessee - Addition on account of difference in balance of one creditor - Held that:- ustification to interfere with the Orders of the authorities below. Learned Counsel for the Assessee submitted that no addition can be made under section 6 .....

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lained that no proper opportunity was given to the assessee to ensure the attendance of the depositors. (iii) addition of ₹ 16,11,000/- out of ₹ 18,58,100/- In the opinion of the A.O. the depositors were not having creditworthiness in respect of 33 depositors. The assessee explained that persons whose statements on oath were recorded, have admitted having made investment with the assessee-company. The assessee explained that A.O. has initially issued summons on his own. However, the assessee-company was neither informed of the summons being issued in time and date of attendance of depositors/ witnesses for recording their statements on oath nor was intimated to the assessee-company. The assessee-company was not accorded any opportunity to verify their statements on oath recorded by the A.O. or to cross-examine the witnesses. Their statements were recorded at the back of the assessee and in case of nonattendance of some persons, no intimation have been given to the assessee. The assessee explained the source of the amount received and nature of the transaction. The A.O. has not enquired about their creditworthiness and source. No questions whatsoever has been made regard .....

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ions in respect of explanation that addition is wholly unjustified. The assessee also further highlighted the anomalies or discrepancies in the assessment of the A.O. regarding creditworthiness of the share applicants. The details are noted in the appellate order in which assessee explained that all the Investors were having source of income and the investments are less than ₹ 50,000/- each. Since the assessee produced documentary evidences to prove receipt of genuine share application money and no opportunity was given to the assessee to cross-examine the statements of the investors, therefore, no addition could be made against the assessee. It was also explained that all the deponents, except the three, have admitted having deposited the amount with the assessee and majority of them were related to the Directors of the assessee-company. They have also explained their source of deposits and shares have been issued to all the share applicants. Since small amounts have been invested by various persons, therefore, the same could not be doubted. 4. The Ld. CIT(A) considering the explanation of the assessee and material on record noted that assessee has received the share applica .....

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May, 1943. In its accounts there were several cash credit entries in the first year of its business totalling ₹ 2,50,000. Though the explanation regarding the cash credit entries was found to be false, the Appellate Tribunal held that these cash credits could not represent the income or profits of the assessee as they were all made very soon after the company commenced its activities : Held, that the inference drawn from the facts proved was a question of fact and the Tribunal s finding on that question was final. A construction company took time to earn profits and it could not have earned a huge profit within a few days after the commencement of its business. Hence, it was reasonable to assume that the cash credit entries represented capital receipts though for one reason or another the assessee had not come out with the true story as regards the source of the receipts. Decision of Allahabad High Court affirmed. 5.1. He has, therefore, submitted that no such addition could be made against the assessee. The assessee produced voluminous evidences in respect of the genuine share application money received which have not been properly appreciated. He has relied upon decisions .....

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ssessee on record which supports the explanation of assessee that assessee received share application money from large number of investors who have made very small investment in assessee-company in each case. No evidence has been brought on record if the investment made by the investors have actually emanated from the coffers of the assessee so as to enable it to be treated as undisclosed income of the assessee. Therefore, considering the smallness of the issue and the fact that assessee was incorporated only in preceding assessment year, therefore, in the light of decision of Hon ble Supreme Court in the case of Bharat Engineering & Construction Co. (supra), there were no justification for the authorities below to sustain the addition. I, accordingly, set aside the Orders of the authorities below and delete the addition. 8. In the result, Ground No. 1 to 4 of the appeal of Assessee are allowed. 9. On Ground No.5, assessee challenged the addition of ₹ 2,70,710/- on account of difference in balance of one creditor. 10. The Ld. CIT(A) after considering the facts of the case and submissions of the assessee noted that assessee has shown sundry creditor of ₹ 2,70,710/- M .....

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at ₹ 5,22,554/-. The Ld. CIT(A) noted that no regular of books of account have been maintained by the creditor and that the submissions of the assessee is not based on any authenticated documentary evidences. Therefore, creditworthiness of the creditor has not been proved. Therefore, addition was confirmed and this ground of the assessee was dismissed. 14. After considering the rival submissions, I am of the view that the matter requires re-consideration at the level of the A.O. Learned Counsel for the Assessee submitted that Ld. CIT(A) has noted in the impugned order source of the loan given by the creditor, ₹ 5,22,552/- as advance from customer and sundry creditors which have not been considered. He has also submitted that creditor is Director of the assessee. He has referred to page No.278 of the paper book to show he has sufficient capital to make investment in assessee-company. He has submitted that A.O. cannot ask the assessee to prove source of the source and relied upon decision of the Hon ble Rajasthan High Court in the case of Aravali Trading Company vs. ITO 220 CTR 622. Learned Counsel for the Assessee also submitted that confirmation of the creditor was file .....

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