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2023 (3) TMI 1455 - HC - Income TaxAddition u/s 68 - credit worthiness of the investor questioned/doubted - whether Tribunal was right in holding that the Assessing Officer was not justified in holding investor to be not credit worthy? - Revenue s case is that investor had suffered loss during 2003, 2004 and 2006 and therefore, assessee s claim with regard to his investment in the Company was doubtful - HELD THAT - Tribunal, which is the last fact finding authority has recorded that remittances were made on two dates namely 31.05.2007 and 05.06.2007 and both these dates are relevant for A.Y. 2008-09. Net income of the investor was USD 33,12,256 whereas the remittances are only USD 10 Lakhs. There is no other material on record to draw any contrary inference. Therefore, on facts, the Tribunal having recorded as aforesaid, we find no ground to interfere in the Revenue s appeal insofar as first and second questions are concerned. Whether the Tribunal was right in setting aside the addition made ? - The proper course for the AO as held in para 11(ii) of NRA Iron and Steel (P.) Ltd. 2019 (3) TMI 323 - SUPREME COURT was to investigate the credit worthiness of the creditor and to ascertain whether the transaction was genuine. However, the Assessing Officer has chosen a reverse mode by calling upon the assessee to show that investor was credit worthy. We may record that the investor is none other than the son of the Director. Therefore, the Assessing Officer had all the material before him and power to cause proper investigation. Even otherwise, the factual matrix recorded by the ITAT that the remittances were through Bank and as against a net income of USD 3 Million, the remittances are only to the extent of USD 1 Million. In these facts, the third question also does not merit any consideration. Decided in favour of assessee.
Issues:
1. Credit worthiness of the investor 2. Consideration of total aggregate investment by the investor 3. Setting aside of addition made under Section 68 of the Act Credit Worthiness of the Investor: The case involved questions regarding the credit worthiness of the investor, specifically Shri. Samyak C. Veera. The Assessing Officer had raised concerns about the investor's credit worthiness due to significant losses declared in previous years. The Tribunal noted that despite the losses, the investor had a substantial net income and had made remittances towards the investment. The Tribunal dismissed the Revenue's appeal on this ground, indicating that the investor's credit worthiness was established based on the available facts. Consideration of Total Aggregate Investment: Another issue was whether the total aggregate investment by Shri. Samyak C. Veera was properly considered to determine his credit worthiness. The Tribunal observed specific remittances made by the investor and compared them to his net income. It was concluded that the investor's remittances were proportionate to his income, further supporting his credit worthiness. As a result, the Tribunal dismissed both the Revenue's and the assessee's appeals, deeming the matter infructuous. Setting Aside of Addition under Section 68 of the Act: The third issue pertained to the addition made under Section 68 of the Act, which required the assessee to prove the genuineness of transactions and the credit worthiness of the investor. The Assessing Officer had added a substantial amount to the taxable income due to lack of supporting documents regarding the investor's credit worthiness. However, the CIT(A) and the ITAT found that the evidence provided, including bank documents, supported the investments made by the investor. The Tribunal held that the Assessing Officer should have investigated the credit worthiness of the creditor rather than solely relying on the assessee to prove it. Given the circumstances and available evidence, the Tribunal found no merit in setting aside the addition made under Section 68 of the Act. In conclusion, the High Court dismissed the appeal, answered the questions of law in favor of the assessee and against the Revenue, and decided not to award any costs in this matter.
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