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TMI Blog2021 (5) TMI 853X X X X Extracts X X X X X X X X Extracts X X X X ..... buted the assessee's failure in respect of 42 of such investors in the light of their meagre land holdings vis-a-vis the investment made. All this made him to add the impugned sum(s) as unexplained share capital u/s. 68 of the Act. 3. The assessee preferred appeal before the CIT(A). It further filed additional evidence(s) as well. The CIT(A) issued corresponding directions to the field authorities. The Assessing Officer filed his remand report dt. 22.6.2018 on the ground reiterating the earlier findings that the share capital of impugned 42 parties was disproportionate to their land holdings. The CIT(A) has thereafter confirmed the impugned addition as under: "10.3 During the appeal proceedings, the appellant submitted additional evidence. Hence, a remand report was called from the Assessing Officer on 15-03-2018. In reply, the Assessing Officer submitted Remand Report vide his letter dated 22-06-2018 which is as under: "The issues have been pleaded before the CIT(A)-5, Hyd contending that the order passed by the ITO is contrary to the facts against the provisions of law, arbitrary in law unwarranted and not based on any valid grounds. In this connection it is pertinent to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant before CIT(A) which requires verification. In view of the foregoing facts the contention for granting relief may be rejected confirming the addition made for the A.Y. 2014-15 as the assessee has not established the genuineness of investments with all the required information due to on co-operation from them." 10.4 The copies of the above remand reports were forwarded to the appellant for its objections/counter comments if any. The appellant vide letter dated 28-08-2019 submitted objections on remand report and the same is reproduced as under: "In relation to the Remand Report submitted by Ld. AO, it is humbly and in all humility submitted that, the Ld. A.O. has submitted a remand report at the instance and direction on the evidence furnished before CIT(A) by the appellant in regard to the evidence for the Share applicants. As per the report submitted, the Ld. A.O. had submitted that during the scrutiny proceedings applicability of provision u/s. 14A IT Act, 1961 and sources for increase in share capital during the year have been examined which resulted in disallowance of expenditure u/s. 14A relatable to earning exempt income to the extent of Rs. 15,51,524/- and additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of Scrutiny Proceedings and the same have been verified by the AO. The assessee even has submitted supporting documents for the same. It is pertinent to mention here that, as per the intent of the above section, the Ld. Assessing Officer cannot make addition u/s. 68 of act, if the assessee proves: * Identity of the person * Creditworthiness of the person and * Genuineness of transaction. Identity and Creditworthiness of the Investors. The assessee company received share application money and many of them are farmers and illiterates. The assessee, in the matter of proving the identity and Creditworthiness of the Share application money received from 42 members, has already submitted the following documents: a) List of total share holders along with amount of Investment made in the company. b) Copies of Land Pattadar pass books of the Farmers who invested in the company. Genuineness of the Transaction The assessee has received has received Rs. 1,15,66,200/- towards share application money which was converted into share capital from various parties majority of them are agriculturists. The assessee, in relation to proving the genuineness of the transaction, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the appellant has discharged its burden. The Assessing Officer, without making any enquiries with the persons about the genuineness or otherwise of such investments towards share capital, has made the addition of Rs. 1,15,66,200/- only on the basis that land holdings being very low compared to the investment in the company. Thus, this action of the Assessing Officer in making addition of Rs. 1,15,66,200/- is against the provisions of the Act; is against the principles of Natural Justice and is bad-in-law. Without prejudice to the above, it is pertinent to bring on record that it is clearly evident from the provisions of Sec. 68 of the I.T. Act that the assessee is not required to prove the nature and the source of the source of the Transaction. The assessee, though not under the obligation to prove the source of the source, has provided substantiates documents to the Ld. AO to prove the genuineness of the transaction. The land holdings and literacy of the investors cannot be the basis for the doubt of bogus transaction and the Ld. AO cannot decide the capacity of investment of the Investor on their land holdings and literacy level. The Ld. Assessing officer, on his own, has d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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