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TMI Blog2018 (5) TMI 1261X X X X Extracts X X X X X X X X Extracts X X X X ..... o the share capital along with the evidence for land holdings and copies of IT returns in 4 cases before the AO. The assessee has discharged its burden with regard to the identity, genuineness of share capital and also explained the source of share capital. The AO did not make any enquiry to verify the correctness of the information furnished by the assessee and bring any evidence to establish that the contributors to share capital does not have sufficient source or the source explained by the share holders is bogus. The CIT(A) also observed that the shares were allotted in favour of the contributors. It is evident from the above that the revenue has not discharged it’s burden to prove that the shareholders did not have credit worthiness. - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd., Rajahmundry 6. We have heard both the parties and perused the material placed on record. The Ld.CIT(A) deleted the addition holding that the expenditure incurred by the assessee is reasonable and justified. The relevant part of the order of the Ld.CIT(A) is extracted as under: "4.3 I have considered the submissions and also perused the details filed. From theperusal of the Profit and Loss account, it is seen that the sales have increased to ₹ 13.98 crore from ₹ 6.46 crore in the earlier year. Correspondingly the operating expenses have increased from ₹ 6.52 crore to ₹ 14.92 crore. The net profit before taxation has increased to ₹ 21.96 Iakh from ₹ 9.04 lakh. Thus I find that there is proportionate increase in expenditure in tune with the higher revenue generation by way of sales during the year. There is substantial increase in sales to the tune of nearly ₹ 752 crore, and I find merit in the contention that such an increase was possible due to the marketing initiatives taken during the year, and in regard to which it was stated marketing expenses to the tune of ₹ 1.24 crore was incurred. The details filed regarding the return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e revenue on this ground is dismissed. M/s Gowthami Chemicals & Pesticides (Pvt.) Ltd., Rajahmundry 7. Ground No. 4 to 7 are related to the introduction of share capital. During the assessment proceedings, the AO found that the assessee has accepted the share capital of ₹ 40,00,000/- from the following individuals: Sl. Name of the Share Holder Amount (Rs. in lakhs) 1. Sri K.Venkata Reddy 6.00 2. Sri K.Srikanth Reddy 6.00 3. Smt.K.N.Vinitha Devi 6.00 4. Sri K.N.R.K.Reddy 6.00 5. Sri K.S.K.Reddy 6.00 6. Sri P.S.Reddy 5.00 7. Sri P.B.Reddy 5.00 Total 40.00 The assessee has furnished the details, but the AO did not believe the credit worthiness of the contributors of the share capital, hence held that the assessee company has introduced its own funds into business and accordingly made the addition of ₹ 40,00,000/-. 8. Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) deleted the additions stating that the assessee has discharged its onus by furnishing the details and confirmations, but the M/s Gowthami Chemicals & Pesticides (Pvt.) Ltd., Rajahmundry revenue failed to discharge its onus. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h allotment theabove parties have become share holders of the company. Therefore, I do not find any basis to doubt the genuineness of the above referred investments made. As regards, creditworthiness of the parties also, I find that the assessee has discharged its onus in furnishing the land holding details and pattadar passbooks for the income source of some of the investors, and, in 4 cases the copies of income returns of the investors. Besides, the Hon'ble ITAT, Vizag Bench in the case of M/s. Merridian Promoters Pvt. Ltd. vs. DCIT, Central Circle-2, has held on similar factual matrix that if the assessee has discharged the initial onus of furnishing the identity of the subscribers to the share capital, then additions cannot be made as to the share capital or share application money in the hands of the assessee-company. The Hon'be Tribunal has taken the said view referring to the decision of the Hon'ble Supreme Court in the case of Lovely Exports 251 ITR 263 and of the Delhi High Court in the case of CIT vs. Stellar Investments Ltd. 192 ITR 287 and the coordinate bench decision in the case of DOT V. PragatiFertilisers (P) Ltd,, ITA 694/Vizag/2004. Taking into account ..... X X X X Extracts X X X X X X X X Extracts X X X X
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