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TMI Blog2019 (1) TMI 462X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in ignoring the A.O.'s remand report, wherein the Learned A.O. has accepted the appellant company has received share application money from various parties and their respective source was established save as except Rs. 22,00,000/- which was directly received from the lendee of M/s. Sumit Promoters. 2.01. The Learned CIT(A) has erred in confirming the addition of share application of Rs. 80,200,0007- u/s 68, ignoring the facts that appellant has discharged its obligation about the source of the Investor and capacity of Investors, which have been proved conclusively, during the remand proceeding. 2.02 The Learned CIT(A) erred in stating that Bhadresh Trading Corporation is a holding company, in fact it is a Group Company. 3. The Learned CIT(A) erred in holding that the loan given to farmer (the fund available) which was to be utilized for the Crop, could not have been given for share application ignoring the fact that fund has been utilized in making the share application of the appellant company. 3.01 The Learned CIT(A) erred in holding that the loan received for agriculture purposed cannot be used for any other purpose, and such holding is not supported by the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied by the A.O. 13. Under the facts and in Law, the addition of Rs. 8.02 crores confirmed u/s 68 be deleted and the return of income be accepted. 14. Under the facts and in Law, the levy of interest u/s 234B deleted. 15. The appellant craves leave to add, alter or delete any of the above grounds of appeal. 2. The brief facts of the case are that assessee is a company engaged in the business of dealing in textile, cotton yarn and acting as commission agent. The return of Income for AY 2010- 11 was filed on 13.09.11 declaring total come of Rs. 39,61,617/-. Notice u/s 143(2) dated 29.09.11 was issued and served on the assessee. The AO completed the assessment u/s 143(3) of the I.T. Act on 18.03.13 determining the total income at Rs. 8,42,60,310/- after making aforementioned additions. Aggrieved by the order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of both the parties, dismissed the appeal of the assessee. Now before us, the assessee has preferred the present appeal by raising the above grounds. Ground No. 1 to 15. 3. These grounds raised by the assessee are inter-connected and inter-related and relates to challenging the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into Management Agency Agreement with the Company (BTCL) whereby the Company (BTCL) agreed to identify the farmers who have sold/agreed to sell their agricultural produce to the Company (BTCL) and who would be eligible for financial assistance under the aforesaid Scheme and the Company (BTCL) shall select the farmers based on the criteria/norms for identifying farmers given in Schedule I to the Letter of Intent of the Bank. The above identification is to be carried out by the Company (BTCL) to the satisfaction of the Bank and the Bank in turn agreed to finance the farmers identified and recommended by the Company (BTCL) not exceeding Rs. 20 croces to disburse the loans to ten farmers. 8. Pursuant to the aforesaid understanding and Agreement arrived at between IDBI Bank and the Company (BTCL), the Company (BTCL) had identified the farmers and satisfied their credentials and creditworthiness to the Bank and consequently IDBI Bank entered into an 'Agreement for Loan and Hypothecation of Receivables' with the farmers (Borrowers) who have sold their crop to the Company (BTCL). 9. In consideration of the Bank having agreed to grant / granted the said loan to the farmers, the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd. the audited accounts filed shows that it had Reserves of Rs. 19.79 crores and the Share Capital of Rs. 2.68 crores. As against the same, it has investment in unquoted Equity Shares of Rs. 13.87 crores and under the head 'Current Assets' share application money given by it is of Rs. 3.04 crores. Thus the audited accounts of M/s. Sumeet Promoters Pvt. Ltd. for A.Y. 2010-11 prove the creditworthiness and genuineness of the investment in share application of the assessee company. 13. We noticed that in the course of the Remand Proceedings, the assessee company had filed its letter dated 16th September, 2014 enclosing the bank statements of M/s. Sumeet Promoters Pvt. Ltd. for the period from 1st April, 2009 to 6th March, 2010 (pages 110 to 112). The aforesaid bank statements of M/s. Sumeet Promoters Pvt. Ltd. record the receipts of Rs. 27 lakhs from M/s. Moonrise Suppliers Pvt. Ltd. and Rs. 53 lakhs from M/s. Pyne Estates Finance Pvt. Ltd. on 7th October, 2009 and on the same day sums of Rs. 35 lakhs and Rs. 45 lakhs were transferred by M/s. Sumeet Promoters Pvt. Ltd. to M/s. Britex Cotton International Ltd., the assessee company (page-112). 14. We also noticed that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale proceeds from M/s. Pyne Estates Finance Pvt. Ltd. on 29th September, 2009. The said amount was given as share application money to M/s. Brtex Cotton International Ltd. (the assessee company) and accordingly it is reflected in the bank account of M/s. Britex Cotton International Ltd. (the assessee company) on 7th October, 2009 (page 85). 16. From the documents more particularly, the ledger accounts of M/s. Moonrise Suppliers Pvt. Ltd. and M/s. Pyne Estates Finance Pvt. Ltd. in the books of account of M/s. Sumeet Promoters Pvt. Ltd. (pages 171 & 172) and the bank statement of M/s. Sumeet Promoters Pvt. Ltd. (page 112) the source of the source is proved. By the ledger accoun: of Mr. Sajeed Peerjeda and the bank statement of the assessee company (page-84) it is proved that Mr. Sajeed Peerjeda had directly paid Rs. 22,00,000/- to the assessee company on behalf of M/s. Sumeet Promoters Pvt. Ltd. as share application money. Thus while relying upon the aforesaid evidence, the assessee claimed that it had proved the source of the source, that is, the source of M/s. Sumeet Promoters Pvt. Ltd. which had invested Rs.l,02,00,OOO/- as the share application money with the assessee company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Application Money on three different dates during F.Y. 2009-10. In this regard the assessee has submitted the Audited Balance Sheet and copy of acknowledgement of A.Y. 2010-11 and A.Y. 2012-13. The assessee has also submitted the bank statement account of M/s. Sumeet Promoters Pvt. Ltd. in order to justify source of fund in the hands of M/s. Sumeet Promoters Pvt. Ltd." (d) .... ." 18. After appreciating the remand report, we find that IDBI Bank through the Company (BTCL) granted loans to the farmers against their sale of agricultural produce to the Company (BTCL) and the said loan amount was utilised by the farmers for giving share application money to M/s Britex Cotton International Ltd. i.e. the assessee company, thus proved the creditworthiness and genuineness of the transaction of the share application money given by the three farmers to the assessee company was also accepted by the AO. 19. Similarly, as per the remand report, the AO had accepted regarding investment of Rs. 1.02 crores as share application money by M/s. Sumeet Promoters Pvt. Ltd., the NBFC Company. In order to corroborate and substantiate its arguments, the assessee had also shown copy of ledger account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the farmers cannot be disputed or doubted or treated as non-genuine. 2. Secondly. IDBI granted the credit facilities to EiTCL to enable it to disburse the loan to the farmers to meet the genuine requirements of the farmers. Accordingly, BTCL disbursed loan to 20 such farmers. The requirement of the farmers would mean the requirement towards growing of cotton and related requirements and not investment in shares of the appellant company. Therefore, the source of funds clearly explained as IDBI loan is not at all proper and satisfactory explanation. In this argument, the CIT(A) accepted that the loan was given by IDBI to BTCL for disbursing the same as loan among the farmers and accordingly farmers were granted loan by IDBI which included 3 farmers who utilized loan amounts in the share application for shares aof the assessee company. At this juncture it may be noted that growing of cotton crop is seasonal and it can be grown once in a year. Some time, taking into account the conditions of the land, the same crop cannot be taken from year to year basis and a farmer has to skip a year for growing cotton. Thus the funds with the farmer remain unutilised and therefore, the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... worthiness of the farmers for making investment in shares of the assessee company is proved beyond doubt. The allegation of tailor-made transactions is incorrect inasmuch as only three farmers out of ten farmers invested in the share application of the assessee company. 5. Fifthly, there is a circular rotation of the funds between BTCL and the assessee company. The funds were transferred from BTCL to the assessee company through farmers and later the assessee company made investment in BTCL. This shows a willful motive behind the investment in shares of BTCL. At this juncture, the CIT(A) has failed to appreciate that the issue is about the investment made by the farmers in the shares of the assessee company, i.e. Britex Cotton International Ltd. The said investment is treated as unexplained cash credit on the ground that the assessee company has failed to prove the genuineness of the transaction and creditworthiness of the farmers (share applicants). In fact, the CIT(A) has accepted that the amount invested by the farmers in the shares of the assessee company is the loan granted by IDBI to the farmers through BTCL. Therefore, the genuineness and creditworthiness of the transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of M/s. Sumeet Promoters Pvt. Ltd., the audited accounts filed shows that it had reserves of Rs. 19.79 crores and a share capital of Rs. 2.68 crores (Pages 101 to 109). As against the same, it has investment in unquoted equity shares of Rs. 13.87 crores and under die head 'Current Assets' share application money given by it is of Rs. 3.04 crores. Thus the audited accounts of M/s. Sumeet Promoters Pvt. Ltd. for A.Y. 2010-11 proves the creditworthiness and genuineness of the investment in share application of the assessee company. 9. Ninthly, the confirmation letters filed by the assessee company on the letterhead of BTCL dated 18th October, 2013 which confirms the loan given by the company to the farmers are stereotyped. The above confirmation letters throw no credence to prove the genuineness of the transaction. These are only self-serving documents. Once it is accepted that IDBI gave loan to farmers through BTCL, which are used for making investment in share application of the assessee company, the creditworthiness and genuineness are proved beyond doubt. The confirmation given by BTCL that the loans were given to the farmers are recording the same facts for all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, the assessee company has adduced evidence to prove the creditworthiness and genuineness of the transaction in respect of farmers being the loans received from IDBI Bank and receipt of the sale proceeds on sale of investments by M/s. Sumeet Promoters Pvt. Ltd. Thus the assessee company has proved the identity, creditworthiness and genuineness of the transactions in respect of the receipt of share application money of Rs. 8.02 crores. 13. Thirteenthlv. the bank had stipulated that the loan to each farmer should not exceed Rs. 2 crores, but in the case of Mr. Jeram Devshi Maheshwari the loan given was Rs. 4 crores. This cannot be reason to hold that share application money given by the farmers out of the loan amount received from IDBI Bank does not prove creditworthiness and the genuineness of the transaction. On the contrary it is an accepted fact that Mr. Jeram Devshi Maheshwari was given loan of Rs. 4 Crores which he invested in share application of the assessee company. Thus the genuineness of the transactions and his creditworthiness are proved. 14. Fourteenthly, as per the letter of IDBI dated 1st August, 2013, the loan given to the farmers have been refunded w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rested), 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: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.] " From the above, we noticed that the proviso to Section 68 was inserted by Finance Act 2012 and the same is effective from April 1, 2013 and is not applicable to the year under question. The law applicable for AY 2010-11 casts an obligation on the assessee to provide details only of source of amount credited in its books and not the source of its source. 23. The provisions of Section 68 provide that an assessee sh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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