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TMI Blog2018 (12) TMI 1052X X X X Extracts X X X X X X X X Extracts X X X X ..... as confirmed all these aspects. Submitted details of loans given by it to those creditors of the assessee. Thus, the assessee has not only proved source but source of source also, which does not otherwise required under the law. Similarly, loan from SIPL was taken only for one day. It has been taking the loan through RTGS and repaid through account payee/RTGS. Bank details were submitted, then how could it be non-genuine ? Taking into consideration all these aspects, we do not find any merit in this ground of appeal raised by the Revenue. It is rejected. - Decided against revenue. - ITA No.1743/Ahd/2015 - - - Dated:- 1-8-2018 - Shri Rajpal Yadav, Judicial Member And Shri Amarjit Singh, Accountant Member For the Assessee : Shri K.P. Singh, AR For the Revenue : Shri V.K. Singh, Sr.DR ORDER PER RAJPAL YADAV, JUDICIAL MEMBER: Revenue is in appeal before the Tribunal against order of the ld.CIT(A)-5, Baroda dated 27.2.2015 passed for the assessment year 2011-12. Grounds of appeal taken by the Revenue read as under: 1. On the facts and circumstances of the case and in law, whether the Ld.CIT(A) was correct in allowing the appeal of the assessee by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, it has carved out reasons assigned by the AO for making addition and its explanation. The assessee has submitted these details in tabular form which has been reproduced by the CIT(A) in the impugned order. The ld.CIT(A) after taking into consideration submissions of the assessee deleted the addition. The ld.CIT(A) after going through the submissions of the assessee deleted the addition by recording the following finding: Ld. AO's observations Your appellant's reply (C) Background of M/s Associated Tradecom Private Limited. Your appellant has not taken any unsecured loans during the year from A closely held company called M/s Associated Tradecom Private Limited was incorporated on 30.09.2008 with total paid-up share capital of One lakh rupees. As on date, paid-up share capital of M/s Associated Tradecom Private Limited is One lakh rupees only. As per the web-site of Ministry of Corporate Affairs, Government of India, Shri Pareshbhai Babulal Shah and Shri Prakashsinh Kaluji Solanki are the two promoters of M/s Associated Tradecom Private Limited. M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed ₹ 2,00,00,000/- (E). Details of Returned income of the present directors of M/s. Shashavat Infracorn Private Limited for Assessment Years 2010-11, 2011-12 and 2012-13 are provided. Your appellant has not taken any loans from such directors and such the reference made by Id. AO is misleading and not relevant. As a matter of fact Id. AO should have concentrated on the funds brought in by M/s Shashavat Infracorn Pvt. Ltd. because the promoters/ directors are distinct from the Company. However, Id. AO has deliberately tried to mislead Id. Addl. CIT so that Id. AO can make high pitched addition. The said lender is having huge loan funds worth ₹ 42,41,51,348/- against which we have borrowed ₹ 2,00,00,000/- (G) Details of returned income of the alleged depositors - M/s. Associated Infracon Pvt. Ltd., M/s. General Capital - and-Holdings Pvt. Ltd., M/s. Ecocity Sports Recreation Pvt. Ltd. alias M/s. Proper-t Home and Estates LIP and M/s. Shashavat Infracon Pvt. Ltd. for the assessment years 2009-10, 2010-11 and 2011-12 are provided. The Id. AO further stated that it transpires that yearly ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings Co. Pvt Ltd. and M/s. Shashvat Infracon Pvt. Ltd., has ever entered into any high value transaction during the period 01.04.2006 to 31.03.2013 and that also suggest that their financial conditions is not strong at least not that strong that the company of which they are one of the promoters/directors, can give unsecured interest free loans of Crores of rupees to others. Your appellant reiterates that it has not taken any loans from such directors and as such the reference made by Id. AO that the directors/promoters of the lender companies have not entered into any high value transactions during the period from 01.04.2006 to 31.03.2013 have no significance in the given case. The Id. AO has also not appreciated the fact that the promoters/ directors are distinct entity then the companies which has landed funds to your appellant. The Balance sheet of each Company will prove the worth and funds they have to lend it to your appellant. On the contrary they have landed huge funds and your appellant has borrowed very small part of it. (H) The Id. AO has given reference of opening and closing bank balances of depositors for the years 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that Id. AO alleged that the accommodation entries are in the books of depositors and not in your appellant's books then where is the question of making addition u/s 68 of the Act in your appellant's case and more so because your appellant has deployed those funds in making investment in the business of our subsidiary. (K). On 15.01. 2014, the Hon'ble Gujarat High Court in the case of Kaushal H Pate Vs. v ITO in Tax Appeals No.884 885 of 2013, has held that in case an explanation offered by the assessee about the nature and source of amount credited in its books is not satisfactory the burden is on the assessee to rebut the same. Further, in the above case, the Hon'ble jurisdictional High Court that in case assessee fails to rebut the same, it can be held against the assessee and the said amount credited can be treated as assessee's income u/s 68 of the Income-tax Act, 1961. The facts of the case law relied upon by Id. AO is that the donors who gave gifts to the assessee were not related to the assessee and there was no occasion for the donors to give sizable gifts to the assessee. More significantly, the resource ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ptable. In my considered opinion, the Assessing Officer has adopted an erroneous approach on the aspects of genuineness of the transaction in issue and the creditworthiness of the creditors who lent money to assessee. As noticed above, the first aspect, i.e., identity of the creditors was established before the AO beyond any doubt. It will have to be kept in mind that section 68 of the I.T. Act only sets up a presumption against the assessee whenever unexplained credits are found in the books of account of the assessee. It cannot but be gainsaid that the presumption is rebuttable. In refuting the presumption raised, the initial burden is on the assessee. This burden, which is placed on the assessee, shifts as soon as the assessee establishes the authenticity of transactions as executed between the assessee and its creditors. It is no part of the assessee's burden to prove either the genuineness of the transactions the creditors and the subcreditors nor is it the burden of the assessee to prove the creditworthiness of the sub-creditors. These principles have been set by various judicial authorities including jurisdictional High Court has held in the case Apex Therm Packaging (P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. In my considered view, view the Assessing Officer ought to have analyzed the material before him rather than be burdened by the fact that some of the directors have business connections in the creditors. If the Assessing Officer had any doubt about the material placed on record, which was largely bank statements of the creditors and their Income-tax returns, he could have gathered the necessary information from the sources to which the said information was attributable to. No such exercise had been conducted by the Assessing Officer. In any event what the Assessing Officer lost track of was that it was dealing with the assessment of the company, i.e., the recipient of the loan and not that of its directors and shareholders or that of the sub-creditors. If it had any doubts with regard to their creditworthiness, the revenue could always bring it to tax in the hands of the creditors and/or sub-creditors as held by Apex Court in the cases of Lovely Exports (P.) Ltd. [2008] 216 CTR 195(SC) and in the case of Divine Leasing Finance Ltd. [2008] 299 ITR 268 (Del.). I also agree with the Ld.AR that once the identity of the creditors has been proved as well as their creditworthiness ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m so credited may be charged to income-tax as the income of the assessee of that previous year : Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless- (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: 6. A perusal of this section would indicate that basically this section contemplates three conditions which required to be fulfilled by an assessee. In other words, the assessee is required to given explanation which will explain the nature of transaction and explain the source of such credits. The explanation should be to the satisfaction of the AO. In order to give such an explanation which could satisfy the AO, the assessee should fulf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at ₹ 103.50 million. This is not a concern which is just on a paper. Bank statement showing how funds have been transmitted are also available. For example in SIPL copy of bank statement of Punjab National Bank is placed at page no.123 of the paper book. It has disclosed details of RTGS showing money credited from the account of TAPL and how it has transmitted to other concerns. Similar details have been placed with regard to other creditors. 8. The ld.CIT(A) has gone into all these aspects and thereafter satisfied with the explanation of the assessee that it has discharged its onus cast upon by virtue of section 68 of the Income Tax Act. If we have glance of reasoning given by the AO, then it would reveal that the ld.AO failed to distinguish between share application money by a company vis- -vis simple loan or deposits received from other concerns. It is pertinent to note that in so far as companies incorporated under Indian Companies Act, whether private limited or public limited, they raise their share-capital through issue of shares though manner of raising of share capital in private company on one hand, and public limited company on other hand, would be different. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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