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TMI Blog2013 (12) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... see to submit the confirmation in respect of share capital introduced and other information. In the absence of full compliance from the assessee, the Assessing Officer completed the assessment under section 144 of the Act by making an addition of Rs. 3,60,18,709 as unexplained credit under section 68 of the Act. 4. On appeal, the Commissioner of Income-tax (Appeals) observed that there is only one issue in appeal and that relates to the addition of Rs.3,60,18,709 under section 68 of the Act. The assessee-company is a cement manufacturer. Notice under section 148 was issued on August 27, 2009. In response, the assessee filed a return admitting nil income. Thereafter, the Assessing Officer noticed that the assessee-company was incorporated during the previous year 2004-05 and did not carry on any commercial activity in the current year. There was capital introduction to the tune of Rs. 4,86,18,709. Confirmation letters were filed to the extent of Rs. 1,26,00,000. Since there were no other confirmation letters, the Assessing Officer made the aforementioned addition by giving the following reasons : "The assessee-company wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has not commenced the business and there was no way to earn such a huge amount outside the books of account and introduced it through share capital in its books of account. According to the Commissioner of Income-tax (Appeals), the assessee discharged the burden cast upon the assessee with regard to identity and creditworthiness of the parties and genuineness of the transaction. Against this, the Revenue is in appeal before us. 7. The learned Departmental representative relied on the order of the Assessing Officer and submitted that the genuineness of the transaction is not proved. The evidence produced before the Assessing Officer does not prove the genuineness of the transaction. He prayed that the order of the Assessing Officer to be confirmed. 8. The learned authorised representative, on the other hand, relied on the order of the Commissioner of Income-tax (Appeals). He also relied on the judgment of Rajasthan High Court in the case of CIT v. Kishorilal Santoshilal [1995] 216 ITR 9 (Raj), the honourable High Court held that in the case of cash credits in the books of accounts of a firm (headnote) : (a) there is no distinction between the cash credit entry existing in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credits could be considered for examination was rejected because the Tribunal had found as a matter of fact that there were no fresh credits as on February 2, 1985. 11. The authorised representative further relied on the judgment of the Madras High Court in the case of CIT v. Taj Borewells [2007] 291 ITR 232 (Mad), amounts shown as capital contribution of partners in the first year of assessment. The honourable court held that section 68 of the Act, is a charging section and it is also a deeming provision. Unless the following circumstances exist, the Revenue cannot rely on section 68 of the Act (headnote) : (a) credit in the books of an assessee maintained for the year ; (b) the assessee offers no explanation or if the assessee offers an explanation the Assessing Officer is of the opinion that it is not satisfactory, and the sum so credited is chargeable to tax as 'income from other sources'. The assessee alone has to offer an explanation. If the assessee makes an explanation, it is for the Assessing Officer to accept or reject it. 12. The authorised representative also placed reliance on the judgment of honourable Supreme Court in the case of CIT v. Bharat Engineering and Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quired the assessee to produce all these persons. The Assessing Officer found that explanation and the statements were accepted by only three persons and the response from the others was either not available or was inadequate. He added an amount of Rs. 46 lakhs pertaining to 30 persons to the income of the assessee. The Department had to show that the investment made by the applicants actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. The honourable High Court held that no substantial question of law arose. 16. The authorised representative submitted that applying the above ratios to the facts of the present case, the assessee had not started any business. In fact, the cement plant had not even been installed completely and the assessee-company was not yet ready to conduct any business. Therefore, there was no scope for the assessee to earn any income leave alone to earn any income outside the books and introduce it into its books in the garb of share capital. The aforementioned ratios squarely apply to the facts of the case, thus, making the addition of Rs. 3,60,18,709 not justified. 17. The learned auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Indian Income-tax Act, 1922. It was held in that case that a large amount of cash appearing on the very first day of the accounting year was not assessable in that year as it was not possible for the assessee to make such a huge income on the very same day on which the assessee started its business for that year. Whereas, under section 68 of the Income-tax Act, 1961, even in a case where an amount is credited on the very first day of the accounting year and the explanation offered by the assessee is not accepted by the Assessing Officer, such amount may be assessed as income of the assessee for the accounting year for which the books are maintained. Being so, we are not inclined to appreciate the finding given by the Commissioner of Income-tax (Appeals) in his order. In the case of VBC Fertilisers Pvt. Ltd. v. Deputy CIT in ITA No.451/Hyd/97 dated July 9, 2003 the co-ordinate Bench of this Tribunal held as follows : "6. We have carefully considered the rival submissions and perused the record. It is well-settled that a decision of a court is an authority for what is actually decides and not for what logically follows from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the honourable Delhi High Court was explained by the Full Bench of honourable Delhi High Court in the case of CIT v. Sophia Finance Ltd. [1994] 205 ITR 98 (Delhi) [FB] and observed at page 105 as under : "In the case of CIT v. Stellar Investment Ltd. [1991] 192 ITR 287 (Delhi), the Income-tax Officer had accepted the increased subscribed share capital. Section 68 of the Act was not referred to and the observations in the said judgment cannot mean that the Income-tax Officer cannot or should not go into the question as to whether the alleged shareholders actually existed or not. If the shareholders are identified and it is established that they have invested money in the purchase of shares then the amount received by the company would be regarded as a capital receipt and to that extent the observations in the case of Stellar Investment Ltd. [1991] 192 ITR 287 (Delhi) are correct but if, on the other hand, the assessee offers no explanation at all or the explanation offered is not satisfactory then, the provisions of section 68 may be invoked. In the latter case section 68, being a substantive section, empowers the Income-tax Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary evidence was placed on record to prove the identity of all the shareholders including their permanent account number/GIR numbers and filing of other documentary evidence in the form of ration card, etc., which had neither been controverted nor disapproved by the Assessing Officer no interference was called for. The Tribunal was justified in deleting the addition. The Assessing Officer proceeded to make the impugned addition on the ground that in some case some summons issued were returned unserved and in some case summon though served but there was no compliance. In this connection, it may be mentioned that in the case of CIT v. Orissa Corporation P. Ltd. [1986] 159 ITR 78 (SC), the honourable court has held that when the assessee borrows the loan and if an assessee gives names and addresses of the creditors, who are assessed to tax and full particulars is furnished then the assessee has discharged the duty. If the Revenue merely issues summons under section 131 and does not pursue the matter further, the assessee does not become responsible for the same even if the creditors do not appear. Addition cannot be made under section 68.' No question of law, far less any substantial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x (Appeals) relied on. The facts are different and, therefore, the case has to be dealt with differently. It is true that the Assessing Officer is not able to establish that the entire amount received as share subscription is the own money of the assessee-company. But he has reached a dead end/enquiry and the burden has shifted on to the assessee. If we see the facts of the case in the light of the judgment of the Delhi High Court in the case of Lovely Exports P. Ltd. [2008] 299 ITR 268 (Delhi), then it will be noticed that the assessee has given the identity of the subscribers but genuineness of the transaction and creditworthiness of the transaction is not established. Being so, in our opinion, the deletion of addition by the Commissioner of Income-tax (Appeals) is not justified. 23. In the present case, in spite of opportunities given, the assessee having failed to prove the genuineness and creditworthiness of the parties, the addition is to be sustained. We place reliance on the judgment of the Delhi High Court Full Bench in the case of CIT v. Sophia Finance Ltd. [1994] 205 ITR 98 (Delhi) [FB] and also on the order of the Delhi Bench in the case of Ekta Agro Industries Ltd. v. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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