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TMI Blog2017 (1) TMI 1051X X X X Extracts X X X X X X X X Extracts X X X X ..... on extract of the assessment order. He has not appreciated the submissions of the appellant and the relevant documentary evidence produced before him that the Share Capital of Rs. 3.20 crores was received from different persons, and genuine. The appellant has fully discharged the onus cast upon him in explaining the share capital received by him. 4. It is contended that the Preferential Share Capital of Rs. 3.20 crores is contributed by ten different investing companies as shown below and the same cannot be treated as the income of the company. Sl.No. Name of the Investor Amount of Investment in Rupees. 1. Basuki Credit & Finvestment P. Ltd., 10,00,000 2. Mideast Vyapaar P. Ltd., 10,00,000 3. Pathick Trading & Fiscal P. Ltd., 10,00,000 4. Pee Dee Viniyog P. Ltd., 10,00,000 5. Rameswaram Fiscal P. Ltd., 10,00,000 6. Sesun Marketing P. Ltd., 15,00,000 7. Sundrm Consultant P. Ltd., 2,10,00,000 8. Sunflag Viniyog P. Ltd., 10,00,000 9. Vaikunth Vintrade P. Ltd., 25,00,000 10. Waitz Mercantiles P. Ltd., 10,00,000 Total 3,20,00,000 5. For these and other grounds that will be submitted at the time of hearing of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e) That the jurisdictional High Court has held that, to make an addition, under such circumstances u/s. 68 of the Act, it has to be proved by the Revenue that the share holders, were mere name lenders and the money allegedly invested by them really belong to the Directors of the assessee company. He relied on CIT vs. Lanco Industries Ltd., 242 ITR 357 (A.P.). 4. The Ld. D.R. on the other hand controverted the submissions of the assessee and argued that - (a) The incomes of all these companies are meagre and in certain cases the net worth of some companies is minus. Thus he submitted that the creditworthiness has not been proved. (b) The funds by way of share capital were received by the assessee company by way of private placement and hence the assessee should be in a position to collect all the evidences required to prove the identity, creditworthiness and genuineness of the transactions and that onus is wrongly being shifted on to the Revenue by the Ld. Counsel for the assessee. (c) She relied on the order of the Assessing Officer as well as the Ld. CIT(A). She further relied on the decision of the Hon'ble Delhi High Court in the case of Tarak Properties Investment P. Ltd., 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Ltd. 1,63,95,000 11,96,83,873 13,60,78,873 1,45,10,166 15,05,89,039 25,00,000 Waltz Mercantiles Pvt Ltd. 1,44,62,000 6,40,57,451 7,85,19,451 0 7,85,19,451 10,00,000 8.1. A perusal of this chart shows that these companies do have creditworthiness. They do have substantial funds and some are NBFCs. Having NIL income or meagre income cannot by itself lead to a conclusion that the assessee has no creditworthiness. Thus this finding of the Ld. CIT(A) in our opinion is not correct. 9. We also find that some of these investing companies are NBFCs and registered with the RBI. Such companies cannot be treated as paper companies without the A.O. gathering any evidence in support of such a finding. 10. The assessee has furnished letters of confirmations from the investors, their full address, income tax Permanent Account numbers, copies of investors bank statements, acknowledgments of these companies of filing returns of income, balance sheets, P & L A/c etc., which does demonstrate the identity of the investing companies. The creditworthiness is proved by the substantial funds that these companies have. 11. A perusal of the report of the Inspector of Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has submitted that there is no such credit in the books of the assessee. Rather, the assessee company has received the share application money for allotment of its share. It was stated that the actual amount received was Rs. 55,50,000 and not Rs. 1,11,50,000 as mentioned in the notice. The assessee has furnished details of such receipts and the contention of the assessee in respect of the amount is found correct. As such the unexplained amount is to be taken at Rs. 55,50,000. The assessee has further tries to explain the source of this amount of Rs. 55,50,000 by furnishing copies of share application money, balance sheet, etc. of the parties mentioned above and asserted that the question of addition in the income of the assessee does not arise. This explanation of the assessee has been duly considered and found not acceptable. This entry remains unexplained in the hands of the assessee as has been arrived by the Investigation wing of the department. As such entries of Rs. 55,50,000 received by the assessee are treated as an unexplained cash credit in the hands of the assessee and added to its income. Since I am satisfied that the assessee has furnished inaccurate particular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of Section 68. 7. Having regard to the entirety of facts and circumstances, the Court is satisfied that the finding of the Tribunal in this case accords with the ratio of the decision of the Supreme Court in Lovely Exports (supra). 8. The decision in this case is based on the peculiar facts which attract the ratio of Lovely Exports (supra). Where the assessee adduces evidence in support of the share application monies, it is open to the assessing officer to examine it and reject it on tenable grounds. In case he wishes to rely on the report of the investigation authorities, some meaningful enquiry ought to be conducted by him to establish a link between the assessee and the alleged hawala operators; such a link was shown to be present in the case of Nova Promoters & Finlease (P) Ltd. (supra) relied upon by the revenue. We are therefore not to be understood to convey that in all cases of share capital added under section 68, the ratio of Lovely Exports (supra) is attracted, irrespective of the facts, evidence and material. 12.4. Thus a clear distinction has been made out in cases where the AO has conducted certain investigations and in cases where the AO merely rejected t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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