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TMI Blog2021 (9) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... y considering the data as pertaining to some other assessee, without appreciating that the assessee has not received any share capital ever, from the shareholders, whose creditworthiness has been adjudicated in the assessment order and the CIT(A) order. Hence, such impugned addition as made by the learned AO and confirmed by the learned CIT(A) by relying on the data not at all pertaining to the assessee, is not only absolutely erroneous, incorrect and bad-in-law but also shows non application of mind and hence, needs to be shunned out rightly. 2. Without prejudice to the aforesaid ground of appeal no.1, even otherwise on facts and circumstances of the case and in law, the learned CIT(A) has grossly erred in confirming the action of the learned AO in treating the share capital including premium of Rs. 1,00,00,000/- as received by the assessee during the year under consideration, as unexplained cash credits u/s 68 of the Act, which is absolutely erroneous, incorrect and bad-in-law and needs to be deleted. 3. The assessee craves to add, amend, alter, substitute, modify any or all the above grounds of appeal, if necessary, on the basis of submissions to be made at the time of per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to verify the identity, creditworthiness and the genuineness of the transactions, an enquiry was got conducted by the AO in respect of the above four investor companies. The AO found on making bank inquiries related to the investor companies that cash deposits have been made at the third layer of banking transactions and also transfer of funds have been made by known entry operators running various shell companies. The inquiries revealed that these investors companies were not having any income /or extremely low income and therefore did not have creditworthiness to make the investment. The assessee company was directed in the show cause notice to produce the investors before the AO on 09.03.2015 for examination but no compliance was made and the investors were not produced. The AO had provided several opportunities to the assessee company for producing the investors but no compliance was made. The AO on the analysis of the bank account found that these investor companies were not carrying out any actual business activity. The AO held that the amount of investment of Rs. 1,00,00,000/- in form of share capital/share premium was in form of cash credit and therefore, AO made an addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. 1. Nirdesh Trading Pvt.Ltd. Rs. 20,00,000/- 2. Renu Finprop Pvt.Ltd Rs. 35,00,000/- 3. Sneha Residency Pvt. Ltd. Rs. 25,00,000/- 4. Sushmita Distributers Pvt. Ltd. Rs. 20,00,000/- Total Rs. 1,00,00,000 /- The share premium of Rs. 90/- has been received from four companies based at Kolkata. The assessing officer made addition because assessee company has failed to prove the identity, creditworthiness and the genuineness of the transactions. On appeal, ld CIT(A) has confirmed the action of the assessing officer and therefore now the assessee is in appeal before us. We note that according to section 68 of the Income Tax Act, where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not satisfactory in the opinion of the assessing officer, the sum so credited may be charged to income tax as the income of the assessee of that assessment year. The assessing officer may consider such sum as cash credit due to lack of sufficient explanation. It is well known that provisions of section 68 have been introduce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestor companies; (iv) Number of shares allotted; (v) Value of shares allotted; (vi) Share application form as filed by the Investor companies (vii) Confirmation of the Investor companies having made the investment explaining the source of making the investment; (viii) Copy of Income Tax Return of the Investor companies; (ix) Audited annual accounts of the Investor companies; (x) Bank Statement of the Investor companies; (xi) Affidavit of the directors of the Investor companies confirming the investments made by them and also explaining the business prudence by which they made the investments. Learned Counsel for the assessee states before the Bench that by submitting these plethora documents, the assessee company has discharged the primary onus cast under section 68 of the Act to prove the identity, creditworthiness and genuineness of share capital and share premium. 10. We note that on the basis of the details furnished by the assessee company, the assessing officer issued notices u/s 133(6) of the Act, to the four Investor Companies asking them to furnish details, to establish the identity, genuineness and creditworthiness in respect of the share capital recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and furnishing of all the details as required by the learned AO to establish the identity, creditworthiness and genuineness of the transaction, the impugned assessment order as passed by the learned AO is absolutely erroneous. 11. Before we adjudicate as to whether the Ld. CIT(A)'s action is right or erroneous, let us look at section 68 of the Act and the judicial precedents on the issue at hand. Section 68 under which, the addition has been made by the AO, reads as under: "68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year." The phraseology of section 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year. In this case the legislative mandate is not in terms of the words 'shall' be charged to income-tax as the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the lack of creditworthiness and mere non-compliance of summons issued by the Assessing Officer under section 131, by the alleged creditors will not be sufficient to draw and adverse inference against the assessee. in the case of six creditors who appeared before the Assessing Officer and whose statements were recorded by the Assessing Officer, they have admitted having advanced loans to the assessee by account payee cheques and in case the Assessing Officer was not satisfied with the cash amount deposited by those creditors in their bank accounts, the proper course would have been to make assessments in the cases of those creditors by' treating the cash deposits in their bank accounts as unexplained investments of those creditors under section 69. 13. To conclude, we note that the amended provisions of section 68, is not applicable to the assessee company under consideration, as the assessee`s, assessment year is 2012-13, therefore the assessee under consideration need not to prove source of the source. We find that the assessee had given the complete details about the share applicants clearly establishing their identity, creditworthiness and genuineness of transaction prove ..... X X X X Extracts X X X X X X X X Extracts X X X X
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