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TMI Blog2011 (6) TMI 733X X X X Extracts X X X X X X X X Extracts X X X X ..... t at the time of hearing of appeal. 2. The brief facts relating to the issue in dispute are that the assessee is a private limited company and filed its return of income on 01.11.2004 declaring loss of ₹ 28,83,314/-. The Assessing Officer selected the case of the assessee for scrutiny and issued notices under section 143(2) and 142(1) of the Income Tax Act, 1961 ('the Act' hereinafter). In response to the same, the ld. Ld. Authorised Representative of the assessee appeared and filed written reply. The assessee derives its income from Cold Storage. The assessee company was incorporated w.e.f. 16.04.2003 and the Cold Storage was constructed and installed during the year itself. During the course of assessment proceedings, the assessee was required to furnish details of investment in the Cold Storage, source of share capital, genuineness of loans and to justify such investment and such capital/loans and other expense with reference to books of accounts, bills, voucher, etc. The assessee has though filed some of the details, but has not filed the complete documentary evidence as required by the Assessing Officer. After examining the return filed by the assessee, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had sold their agricultural land in the year 2003 and out of such sale proceeds, share application money was paid. In support, 11 sale deeds amounting toRs. 19,55,000/- have been furnished. The details of the same, the Assessing Officer has reproduced in paragraph no.2 at page no.2 in the Assessment Order. The assessee has also filed copy of confirmations, ration card and kisan bahi of loan creditors evidencing land holding by the creditors. 4. After receiving the aforesaid evidences, the Assessing Officer, feeling dissatisfied, again requested the assessee to furnish (1) share application forms filed by the share applicants and file a copy of their ration cards to prove their identity and bank pass books for the period 11.04.2011 to 31.03.2005, (2) furnish a copy of Khatauni for the relevant year along with certificate from the Revenue Authorities proving cultivation of potatoes by the Directors and their family members during the relevant year, (3) bank pass book of the persons from whom loans were taken, (4) to produce all books of accounts, bills and evidences in support of identity, capacity and genuineness of loans and share application money received during the year. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27.12.2006 passed under section 143(3) of the Act. Aggrieved by the same, the assessee filed appeal before the ld. First Appellate Authority who, vide the impugned order dated 23.03.2009 partly allowed the appeal of the assessee and deleted the addition in dispute. Now, the Revenue has filed the present appeal against the impugned order dated 23.03.2009. 8. At the time of hearing, the ld. Departmental Representative did not appear before the Bench due to some reason best known to him, but he filed written submission. For the sake of convenience, the written submission filed by the Ld. Departmental Representative is reproduced as under :- F.No.CIT(DR)/ITAT/AGRA/2011-12/ Office of the Commissioner of Income-tax (DR) Income tax Appellate Tribunal, Agra Dated: 20.06.2011 To, The Assistant Registrar, Income tax Appellate Tribunal, CGO Complex, Sanjay Place, Agra Sir, Sub:- ITA No.273/Ag/2009 in the case of M/s T.S. Ice and Cold Storage Pvt. Limited for the A.Y. 2004-05 - regarding. The assessee's arguments are a) In respect of cash-credits. Source of source does not require to be established an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have made the payments had no source and capacity to make such a payment. In other words the Allahabad High Court examines the source and capacity of the source to arrive at its findings. Further, reliance is placed on CIT vs. Lovely Exports P. Limited (Del. HC) affirmed by Supreme Court which on page 282, lays down 7 ............ of law after an analysis of all earlier precedents specifying the assessee has to prima facie prove 3) the creditworthiness or financial strength of the creditors/ subscriber and 7) the officer is duty bound to investigate the creditworthiness of the creditors/subscriber the genuineness of the transaction and veracity of the transaction. This obviously ought to be done in the light of the ............... that the mere receipt through banking channels is not sufficient evidence and vide 160 ITR 674 (SC) Biju Patnaik - in appropriate cases the source of source ought to be examined by the department as has been done in the case of Ram Lal Aggarwal (Allahabad HC). Accordingly the legal precedents cited by the assessee stand distinguished. Further reliance on the said proposition is placed on the decision of Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection (68) even in such a case the unexplained cash credit might be assessed as the income of the accounting year for which the books are maintained. Thus, Orissa Corporation lays down 159 ITR 78 Supreme Court - a) Irrespective of date/year the cash credit can be assessed in the hands of the assessee company - even in cases where it was clear that the assessee could not possibly have earned that income. In the light of the Supreme Court ruling the assessee's reliance on the Allahabad High Court judgment in Jawahar Motor Finance - 141 ITR 706 is mislead, the judgment of 83 ITR 187 (SC) Bharat Engg has been decided on facts as basically finding of fact not on legal prospect and as such cannot be cited as a precedent. The case of India Rice Mills 218 ITR 508 was in the context of cash credits paid to commencement of firm which is not the case here. The Bench has been kind enough to ask for a copy of P L account. Perhaps the memorandum of undertaking would have made the scope and extent of assessee's business ................ But as the bench itself has noted sales of 8000 MT turnover 66.77 lacs during the year and selling expenses debited to the profit and loss accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cold storage. Accordingly, submitted, Yours faithfully, Sd/- (WASEEM ARSHAD) Addl. Commissioner of Income tax (Sr. DR) I.T.A.T., Agra Dated 20th June, 2011 9. The ld. Counsel for the assessee also filed his written submission along with photocopy of various decisions supporting his arguments. Ld. Counsel for the assessee has also filed 3 Paper Books containing page nos.1 to 48 in which he has attached copy of submission before the Assessing Officer, copy of submissions dated 26.12.2006 before the Assessing Officer, copy of submissions dated 06.09.2007 before the CIT(A), copy of remand report from the ACIT, copy of Audited Accounts for the Financial Year 2003-04 relevant to Assessment Year 2004-05, copy of computation of income filed, copy of Directors Report for the financial year 2003-04, copy of Aamad Register (for storage of Potatoes) of the financial year 2003-04, copy of Audited Accounts for the financial year 2004-05 and details of expenditure capitalized during the financial year 2003-04. 10. As we stated above, the ld. Counsel for the assessee has filed his written submission on the date of hearing. For the sake of convenience, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible to save any thing after meeting house hold expenses and other expenses of social and family obligation. (Pg 3 of AO) d) The bank accounts of the shareholders and depositors revealed that there were cash deposit/transfers just before giving cheque for share application or loan. (Pg 3 of AO) 8. All the above reasons are contrary to the acts and evidences on record - a) Complete names and addresses of all the shareholders and depositors with identity proof, capacity, copy of their accounts and their confirmation were filed. (PB/1-5) b) Source of capital contribution by various shareholders along with detailed evidences, including the Khatauni and certificates from Gram Pradhan as well from Block Pramukh, were also filed. (PB/6-9) c) All the shareholders lived in one village only. d) Per annum income shown in the ration cards is not sacrosanct while huge land holdings and their earning capacity from the agriculture activities i.e. growing and selling of potatoes, is well proved. e) Credit of cash or transfer of funds in the bank accounts of the shareholders or depositors was their own money generated from the agricultural activities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erted, challenged or rebutted by the AO even in remand report. Thus, AO failed to establish (1) any falsity in the claim of land holdings of the depositors; (2) the amount claimed to have been advanced from their savings were excessive or unreasonable and (3) the depositors routed the unaccounted funds of the company through their bank accounts particularly when the appellant company had not even commenced operations at relevant point of time. (Pg 14) e) Since impugned amounts have been deposited in cash in the bank accounts of the respective lenders prior to their advance to the appellant company, the source of deposit is liable to be examined in their respective cases. (Pg 14 ) Thus, the order of CIT(A), after considering all the evidences and obtaining remand report, is well reasoned, fully justified and legally correct. 12. It is humbly submitted that - a) The assessee company was formed on 16.04.2003 and it was its first assessment year. During the year, upto January 2004, it carried on only construction activities and in the month of Feb.- March 2004 it only stored potatoes. There was no inflow of income at all during the year under appeal - As a matter o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Storage which was constructed and commenced during the relevant Financial Year. The Assessing Officer has asked the assessee to furnish the details of investments in the Cold Storage and source of share capital. In response to the same, the assessee furnished bank statements of 4 Directors and their HUFs., details of loading and nikasi of potatoes from Prabhat Cold Storage, Hathras Road, Agra, copy of khasra evidencing their land holding and sale bills of potatoes. The assessee has also furnished 11 Sale Deeds. The total sale consideration received by the 4 Directors aggregates to ₹ 19,55,000/-. After considering the aforesaid evidences, the Assessing Officer accepted the claim of the assessee to the extent of ₹ 27,33,000/- comprising of ₹ 19,55,000/- being sale proceeds of agricultural land and ₹ 7,78,000/- representing capitalization of land for the Cold Storage and finally he added the balance of ₹ 47,67,000/- as unexplained share money. But the ld. First Appellate Authority in the impugned order deleted the same by holding that the Assessing Officer himself in paragraph no.3 of the Assessment Order stated that the assessee has shown receipt of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and copy of Bank Account of the Company where the contribution by each member of the family was deposited. All the above money raised through issue of share capital was routed through banking channel. These evidences produced by the assessee have not been rebutted by the Ld. First Appellate Authority with any evidence to the contrary. The ld. First Appellate Authority has also examined the agricultural income of the Directors relating to the subsequent years which is reproduced at page no.9 in the impugned order. No doubt, the Ld. Departmental Representative as well as the ld. Counsel for the assessee relied upon various decisions rendered by the Hon'ble Supreme Court as well as Hon'ble High Courts on the addition in dispute, but the same are applicable when the facts and circumstances of the cases are identical. We find that the Assessing Office as well as the ld. First Appellate Authority has adjudicated the issue in dispute on the basis of documentary evidences produced by the assessee. Therefore, the case law relied upon by both the parties are of no help to them on the issue in dispute. Keeping in view of the facts and circumstances explained above, we are of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted all documentary evidences to the Assessing Officer and taken the remand report from him in which the Assessing Officer himself admitted that he has not been able to examine the evidences furnished by the assessee due to their volume. The Ld. First Appellate Authority has also issued a requisition on 09.01.2009 under section 133(6) of the Act to the Manager, Oriental Bank of Commerce, calling for information with regard to 4 loan creditors on sample basis (S. Nos. 3, 4, 5 19 of Annexure-I mentioned and attached by the Ld. First Appellate Authority in the impugned order) and found that all the lenders own the agricultural land and having their ration cards and confirmation letters for the impugned loans, established the identity of creditors and genuineness of transaction which has not been doubted or disputed by the Assessing Officer. The Ld. First Appellate Authority has also deleted the addition after calling the remand report from the Assessing Officer and after appreciating the evidences produced by the assessee to support the claim in dispute. We have thoroughly gone through the impugned order on the issue in dispute and we are of the considered opinion that the Ld. Firs ..... 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