2021 (9) TMI 1217 - AT - Income Tax

Unexplained receipts u/s 68 - Sum received from 5 farmers and the balance sum received from the two directors of the assessee company - CIT-A deleted the addition - HELD THAT - Assessee has discharged initial onus cast upon him to prove the identity of the depositors, creditworthiness, and the genuineness of the transaction. The learned assessing officer did not make any enquiry on the evidences filed by the assessee and further he has not also acted upon the request of the assessee for examining all the agriculturist. In view of this, we do not find any infirmity in the order of the learned CIT-A deleting the addition made in the hands of the assessee with respect to 5 agriculturists. Addition with respect to the 2 directors of the assessee company itself - AO carried out the investigation and after that the learned AO has accepted that the amount invested by the directors of the company that it satisfies the condition of proving the identity, creditworthiness, and genuineness. In view of this, we do not find any reason to upset the order of the learned CIT A with respect to the above investment made by Mr. Gaurav Aseem, director of the company in the share capital of the company. With respect to another director Mr. Kalwa Singh share capital - this director was holding at the beginning of the year the share capital to the extent of ₹ 238,09,800. The share capital in the earlier years issued in the name of the same director has been accepted by the learned assessing officer. The assessee also provided with the permanent account number of the above director, confirmation and also the bank account of the director as well as the certificate from the bank with respect to the above share capital issued. Assessee has also produced the balance sheet of the director wherein as on 31st of March 2012 the shares in the name of the company amounting to ₹ 79,500,000 are outstanding. Therefore, it is apparent that assessee has discharged its onus of proving the identity, creditworthiness, and genuineness of the transactions. - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of addition made by the Assessing Officer (AO) under Section 68 of the Income Tax Act.
2. Creditworthiness and genuineness of investments made by five farmers.
3. Creditworthiness and genuineness of investments made by two directors of the assessee company.

Detailed Analysis:

1. Deletion of Addition Made by AO under Section 68 of the Income Tax Act:
The AO made an addition of ?206,619,800 under Section 68 of the Income Tax Act, which was later contested by the assessee. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the entire addition, but the revenue is aggrieved only with the deletion of ?94,000,000. The dispute is thus limited to this amount.

2. Creditworthiness and Genuineness of Investments Made by Five Farmers:
The AO questioned the creditworthiness of five farmers who invested ?8,409,800 in the assessee company. The AO's skepticism was based on the fact that the farmers' annual income from agricultural activities did not match the amount invested. The AO did not find the mandi receipts and sugar mill statements sufficient to prove the farmers' creditworthiness. However, the CIT(A) found that the assessee had provided substantial evidence, including bank statements, land holdings, and agricultural income details, to prove the identity and creditworthiness of the farmers. The CIT(A) noted that the AO did not conduct further inquiries or summon the farmers for verification despite the assessee's request. The Tribunal upheld the CIT(A)'s decision, stating that the AO's criteria for creditworthiness were flawed and the assessee had adequately discharged its onus.

3. Creditworthiness and Genuineness of Investments Made by Two Directors:
The AO also questioned the investments made by two directors, Mr. Gaurav Aseem (?40,100,000) and Mr. Kalwa Singh (?45,490,200). The AO made the addition without providing specific reasons. The CIT(A) found that the assessee had submitted confirmations, PAN details, balance sheets, and bank statements to prove the directors' creditworthiness. The Tribunal noted that similar additions made in the subsequent assessment year were deleted by the CIT(A) and accepted by the AO during remand proceedings. The Tribunal upheld the CIT(A)'s decision, confirming the genuineness of the investments made by the directors.

Conclusion:
The Tribunal confirmed the order of the CIT(A) and dismissed the appeal of the AO. The Tribunal found no merit in the AO's grounds for making the additions under Section 68 and upheld the deletion of ?94,000,000 on account of unexplained receipts. The Tribunal emphasized that the assessee had adequately discharged its onus to prove the identity, creditworthiness, and genuineness of the transactions, and the AO failed to provide substantial evidence to the contrary.