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TMI Blog2019 (4) TMI 1799X X X X Extracts X X X X X X X X Extracts X X X X ..... estors do not have creditworthiness and that genuineness of the transaction has not been established by the assessee. Therefore, there was no justification for the Ld. CIT(A) to have deleted the entire addition. In view of the above discussion, we set aside the impugned Order of the Ld. CIT(A) and restore the Order of the A.O. Appeal of Revenue is allowed. - ITA.No.190/Del./2009 - - - Dated:- 18-4-2019 - SHRI BHAVNESH SAINI AND SHRI PRASHANT MAHARISHI, JJ. For the Appellant : Smt. Naina Soin Kapil, Sr. D.R. For the Respondent : Shri K.P. Garg, C.A. ORDER BHAVNESH SAINI, J. This appeal by Revenue has been directed against the Order of the Ld. CIT(A)-XIX, New Delhi, Dated 03.11.2008, for the A.Y. 2004-2005, challenging the Order of the Ld. CIT(A) in deleting the addition of ₹ 1.17 crores added by the A.O. on account of unexplained cash credits, under section 68 of the Income Tax Act, 1961. 2. Briefly the facts of the case are that assessee company filed return of income on 30.11.2004 declaring NIL income, but, the tax was paid under section 115JB on the book profit of ₹ 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Era Advertising Marketing Co. Pvt. Ltd., Delhi. 5,00,000 1,17,00,000 2.1. On perusal of the bank statements of the above Companies, A.O. noticed that just before debit entry favouring the assessee company, there was credit entry of the similar amount and in some cases even cash was deposited just before debit entry. Moreover, in some cases, the confirmation was given by the Companies in respect of purchase of shares i.e., they have confirmed that they have purchased the shares with the money so advanced. As against said confirmation, the assessee company has shown only the receipt of share application money pending allotment in the names of those Companies. Moreover, in none of the confirmation letters (All confirmations were on the Letter Head of the respective Companies), the telephone number of the respective Company was mentioned. Besides this, the A.O. observed that Sparton Commerce Ltd., Ludhiana and Savera Commercial Enterprises Ltd., Ludhiana were having their Offices in Ludhiana and have been filing the returns in Ludhiana, but, the Auditors who have conduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed reply from Savera Commercial Enterprises Ltd., Ludhiana and Sparton Commerce Ltd., Ludhiana where notices under section 133(6) could not be served and returned with the remarks no such Company exists . The A.O, therefore, noted that assessee failed to explain the identity, creditworthiness of the Investors and genuineness of the transaction in the matter. The A.O. accordingly made addition of ₹ 1.17 crores under section 68 of the I.T. Act, 1961. 3. The addition was challenged before the Ld. CIT(A). The written submissions of the assessee is reproduced in the appellate order in which the assessee briefly explained that confirmation of the Investors were filed along with their income tax assessment numbers. Assessee relied upon decision of the Hon ble Supreme Court in the case of CIT vs. Lovely Exports Pvt. Ltd., 216 CTR 195 and Others. The parties have confirmed the transactions with the assessee. 3.1. The Ld. CIT(A), considering the findings of the A.O. in the light of written submissions noted that assessee has received the share application money from 16 Investors and assessee has furnished application for shares, I.T. returns, balance-sheet, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lunsford Trade Investment Ltd., vs. CIT [2016] 385 ITR 399 (Cal.) 10. Rick Lunsford Trade Investment Ltd., vs. CIT 2016-TIOL-207-SC-IT 11. Judgment of Hon ble Delhi High Court in the case of Pr. CIT-6, New Delhi vs. NDR Promoters Pvt. Ltd., ITA.No.49/2018, Dated 17.01.2019. 12. Judgment of Hon ble Supreme Court in the case of Pr. CIT (Central)-1 vs. NRA Iron Steel (P.) Ltd., [2019] 103 taxmann.com 48 (SC). 5. On the other hand, Learned Counsel for the Assessee reiterated the submissions made before the authorities below. He has submitted that Investors have made investments through banking channel and documentary evidences were filed before A.O. to prove identity of the Investors, their creditworthiness and genuineness of the transaction. He has submitted that though there is no profit in this year in the case of the assessee, but, there was profit in earlier year. The net worth of the Investor is very good as per their balance-sheet because they are the Finance Companies. The entries are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. It is well settled Law that burden is upon assessee to prove identity of the Investors, their creditworthiness and genuineness of the transaction in the matter. However, the assessee failed to do so. The assessee merely filed confirmation and certain documents which did not inspire confidence of the A.O. Whatever documentary evidences were produced, were full of doubts and did not prove creditworthiness of the Investors and genuineness of the transaction. 6.1. It may also be noted here that assessee filed return of income declaring NIL income. However, the tax was paid under section 115JB on the book profit of ₹ 24,86,664/-. The assessee did not explain when assessee filed NIL returned income, why such Investors would make investment in assessee company that too at Premium without verifying the financials of the assessee, which were mostly from Kolkata and Ludhiana. 6.2. On going through the returned income filed by the Investor Companies, it was found that they have filed their returns of income at meager/low net income which ranges income in hundres to thousands only after claiming deductions. Thus, the assessee as well as the Investors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rove the genuineness of the transaction, the identity of the creditors, and creditworthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the AO, so as to discharge the primary onus. ii. The Assessing Officer is duty bound to investigate the credit-worthiness of the creditor/subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of name-lenders. iii. If the enquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack credit-worthiness, then the genuineness of the transaction would not be established. In such a case, the assessee would not have discharged the primary onus contemplated by Section 68 of the Act. 12. In the present case, the A.O. had conducted detailed enquiry which revealed that : i. There was no material on record to prove, or even remotely suggest, that the share application money was received from independent legal entities. The survey revealed that some of the investor companies were non-existent, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d out by his office. The authorities below have erroneously held that merely because the Respondent Company Assessee had filed all the primary evidence, the onus on the Assessee stood discharged. The lower appellate authorities failed to appreciate that the investor companies which had filed income tax returns with a meagre or nil income had to explain how they had invested such huge sums of money in the Assesse Company - Respondent. Clearly the onus to establish the creditworthiness of the investor companies was not discharged. The entire transaction seemed bogus, and lacked credibility. The Court/Authorities below did not even advert to the field enquiry conducted by the AO which revealed that in several cases the investor companies were found to be non-existent, and the onus to establish the identity of the investor companies, was not discharged by the assessee. 14. The practice of conversion of un-accounted money through the cloak of Share Capital/Premium must be subjected to careful scrutiny. This would be particularly so in the case of private placement of shares, where a higher onus is required to be placed on the Assessee si ..... X X X X Extracts X X X X X X X X Extracts X X X X
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