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TMI Blog2022 (5) TMI 1379X X X X Extracts X X X X X X X X Extracts X X X X ..... e satisfaction of the AO. All the constituents are required to be cumulatively satisfied. If one or more of them is absent, then the AO can make the additions u/s. 68 of the Act as an income. In the closely held companies the share capital are mostly raised from family, close relatives and friends and the assessee is expected to know the share subscribers and the burden is very heavy on the assessee to satisfy cumulatively the ingredients of Section 68 of the Act as to identity and establish the credit worthiness of the creditors and genuineness of the transaction to the satisfaction of the AO, otherwise the AO shall be free to proceed against the assessee company and make additions u/s. 68 of the Act as unexplained cash credit. The use of the word any sum found credited in the books in Section 68 indicates that it is widely worded and the AO can make enquiries as to the nature and source thereof. AO can go to enquire/investigate into truthfulness of the assertion of the assessee regarding the nature and the source of the credit in its books of accounts and in case the AO is not satisfied with the explanation of the assessee with respect to establishing identity and credit wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , is placed on record in file. 2. The grounds of appeal raised by the assessee in its appeal in ITA No. 28/Alld./2020 for assessment year 2016-17, in memo of appeal filed with Income-Tax Appellate Tribunal, Allahabad Bench, Allahabad(hereinafter called the tribunal ) , reads as under:- 1.That in any view of the matter addition as per the assessment order dated Dec 02, 2019 , the assessing officer by determining income of Rs. 20,00,000/- maintained in this respect of investment made by shareholder by ld. CIT(A) is totally incorrect and illegal. 2. That in any view of the matter investment of Rs. 10,00,000/- by Sanjeev Kumar who is one of the shareholder of the company and investment made through bank channel as well cash, assessed to tax, confirmation filled. In this way the appellant discharged the complete burden, hence addition made by assessing officer and confirmed by CIT(A) is uncalled for. 3. That in any view of the matter investment of Rs. 10,00,000/- by Vinod Kumar Sharma who is one of the shareholder of the company and investment made through bank channel as well as cash, assessed to tax, confirmation filled. In this way the appellant discharged the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is observed that similar letter dated 28.09.2021 verbatim was filed by the same Director , CA Shri Ashok Singh requesting for adjournment of hearing before the Division Bench on 29th September, 2021, on the ground that the counsel of the assessee is not keeping well due to fever and cold and when the case came up for hearing before Division Bench on 29th September, 2021, the Bench was pleased to grant adjournment to 20th October, 2021. The assessee has also sought several other adjournments whenever this appeal came for hearing before the Division Bench , on one pretext or other . The assessee sought adjournments on 24.02.2021, 16.03.2021 , 15.04.2021, 29.09.2021, 20.10.2021, 14.12.2021 , 21.12.2021 and 11.05.2022. The adjournment applications are placed on record in file. The assessee did not appear for hearing on 20.01.2021, 31.08.2021 and 15.03.2022, when this appeal was called for hearing nor any application for adjournment was filed by the assessee. The Bench was pleased to grant adjournment on all the earlier occasions, while on 15th March, 2022 , the Division Bench granted Last Opportunity to the assessee. On 11.05.2022 when this appeal was called for hearing , the Divis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. The brief facts of the case are that the assessee is engaged in the business of Micro Finance. The assessee e-filed its return of income on 29th September, 2016, in form ITR-6 declaring taxable income of Rs. 74,380/-. The case of the assessee was selected for framing scrutiny assessment u/s 143(3) read with Section 143(2) of the 1961 Act, under CASS. The AO made additions to the returned income in the hands of the assessee, under Section 68 of the 1961 Act, to the tune of Rs. 75,00,000/- towards the share capital introduced during the year under consideration , as the assessee company failed to prove the creditworthiness of the persons who have contributed the fresh share capital allotted by the company during the year under consideration, vide assessment order dated 23.12.2018 passed by the AO u/s 143(3) of the 1961 Act . 5. Aggrieved by assessment order dated 23.12.2018 passed by AO u/s 143(3) of the 1961 Act ,the assessee filed first appeal before the ld. CIT(A), who was pleased to uphold the additions to the tune of Rs. 20,00,000/- being share capital received from Shri Sanjeev Kumar of Rs. 10,00,000/- and also with respect to share capital received from Shri Vinod Kumar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 376286591313 30,00,000 478743760090215 2014-15 946609600060216 2015-16 621136270140217 2016-17 Sanjeev Kumar BBMPK2869K 582333258223 10,00,000 699680990240815 699583610240815 273794770190716 2014-15 2015-16 2016-17 Vinod Kumar Sharma BHGPS3027R 920327762220 10,00,000 746837340310317 2016-17 As per settled law the initial onus is on the appellant to establish genuineness of the transaction and credit worthiness of the investor u/s 68 of the Income Tax Act with supportive cognizance evidence. A-Proof of the identity of the creditor. B-Capacity to the creditor to advance money. C-Genuineness of the transaction. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant company in the month of November 2015 onwards. The lender is one of the Director of the appellant company. He has filed his both agreement to sale and cancellation deed, his Bank account to prove the withdrawals of cash made, agriculture land papers to prove this investment and his creditworthiness. A perusal of the same shows that the cash was withdrawn from the bank on the stipulated dates as above. Lender has also filed agreement to purchase of the agricultural land and its subsequent cancellation agreement, which goes to prove the source of the amount invested in Shares of the company by its Director. Since the creditworthiness and source of cash withdrawn from bank is evident from the documents submitted, it is held that the ingredients of S. 68 are satisfied and this addition is deleted. With regard to capacity of Mr. Sanjeev Kumar appellant submitted that he is maintaining two bank accounts with ICICI and HDFC having account number 119601504352 and 02261050062963 respectively for last several years. He is employee with M/s. Godrej Boycee Manufacturing Company. He is drawing his income from salary. He is employee for 2012. He filed his ITR regularly. He has purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital .It was submitted by the Ld. Sr. DR that both these investors do not have creditworthiness. The Ld. Sr. DR drew our attention to the written submissions filed by Revenue with Registry , on 13th December , 2021 , which are placed on record in file. The ld. Sr. DR submitted that both these investors invested Rs. 10 lacs each in share capital of the assessee company in cash , during the year under consideration , and sources of these cash investments could not be explained by both these investors. Further, it was submitted that both these investors do not have creditworthiness to invest Rs. 10 lacs each in cash , in the assessee company , towards share capital. The ld. Sr. DR submitted that income declared by these investors is meager which clearly suggest that they do not have creditworthiness to invest Rs. 10 lacs each in cash in the share capital of the assessee company, as detailed hereunder: Creditor s Name Gross Salary Investments for deduction u/s 80C etc. Net Salary Shri Sanjeev Kumar A.Y. 2012-13 1,60,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,00,000/- from Mr. Ashok Kumar Singh, during the year under consideration . The Revenue has not filed an appeal before the tribunal ostensibly on the grounds that tax-effect is lower than the limit prescribed for filing appeal by Revenue before the tribunal as stipulated in CBDT circular dated 08.08.2019, and hence so far as relief granted by ld. CIT(A) to the tune of Rs. 55,00,000/- to the assessee as detailed above , the matter has attained finality. So far as additions confirmed/upheld by ld. CIT(A) to the tune of Rs. 20,00,000/- on account of share capital of Rs. 10 lacs received from Mr. Sanjeev Kumar and Rs. 10 lacs from Mr. Vinod Kumar Sharma during the year under consideration against which the assessee has come in appeal before tribunal, there is a clear finding by ld. CIT(A) that cash of Rs. 10 lacs each were invested by both these shareholders towards share capital of the assessee company subscribed during the impugned assessment year. The sources of aforesaid cash of Rs. 10 lacs each invested by both the afore-stated subscribers could not be explained by both these subscribers. Since the amount is invested in cash by both these investors, the onus is very heavy on the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see is found not satisfactory in the opinion of the AO, the sum so credited may be treated as income and charged to income-tax as income of the assessee of that previous year. The burden/onus is cast on the assessee and the assessee is required to explain to the satisfaction of the AO cumulatively about the identity and capacity/creditworthiness of the creditors along with the genuineness of the transaction to the satisfaction of the AO. All the constituents are required to be cumulatively satisfied. If one or more of them is absent, then the AO can make the additions u/s. 68 of the Act as an income. In the closely held companies the share capital are mostly raised from family, close relatives and friends and the assessee is expected to know the share subscribers and the burden is very heavy on the assessee to satisfy cumulatively the ingredients of Section 68 of the Act as to identity and establish the credit worthiness of the creditors and genuineness of the transaction to the satisfaction of the AO, otherwise the AO shall be free to proceed against the assessee company and make additions u/s. 68 of the Act as unexplained cash credit. The use of the word any sum found credited i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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