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TMI Blog2023 (4) TMI 1352X X X X Extracts X X X X X X X X Extracts X X X X ..... ited in the bank accounts of the creditors, the proper course would be to assess such credit in the hands of the creditor (after making due enquiries from such creditor). When a question as to the creditworthiness of a creditor is to be adjudicated and if the creditor is an Income-tax assessee, it is now well settled by the decision of Dataware (P.) Ltd [ 2011 (9) TMI 175 - CALCUTTA HIGH COURT] that the creditworthiness of the creditor cannot be disputed by the AO of the assessee but the AO of the creditor. We also noted that assessee has submitted essential evidences before assessing officer, such as PAN number, address, income tax returns and audited financial statements of creditors and all transactions were through banking channel. We have also gone through the detailed findings of ld CIT(A) and noted that conclusion reached by ld CIT(A) in deleting the addition is acceptable. Unexplained share capital - In the assessee s case there is no material that the assessee company had collected on money which could be routed back in the investment. The assessee had discharged primary onus of providing the identity, genuineness and creditworthiness of the said shareholders. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though he was requested to do so? (iii) On the facts and circumstances of case and in law, the Ld. CIT(A) has erred in deleting the total additions of Rs. .8,78,28,138/- on account of unexplained cash credit u/s 68 of the Act for unexplained Share capital + Share Premium and unsecured loan as the decision of the Hon'ble 1TAT, Surat in assessee's own case on similar issue for the A.Y 2012-13 has not been accepted by the department and further appeal have been filed before the Hon'ble High Court where decision is pending: (iv) On the facts and circumstances of case and in law, the Ld. CIT(A) failed to appreciate the fact reported by AO in his remand report dated 18-7-2018 that all the parties were merely entry providers and they hardly knew about the business shown by them in their Audited statement and they have failed to explain the sources out of which unsecured loan and investment in shares of assessee company were made. At the time statement recorded on oath during remand proceedings, they have failed to prove genuineness of transactions and their creditworthiness for investment in assessee-company as well for giving unsecured loan to assessee. (v) On the basis of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 4 Master Corporation, Prop. Haresh Vekharia HUF, 39, Kamla Estate, Kohinoor Road, Varachha, Surat 5631100 0 56,31,100 5 Metro Fibres, Prop. Jitendra Vekharia HUF 109, Sachi Complex, Runghnathpura, Nain Road, Lal Darwaja, Surat 5095850 To 50,95,850 6 Shilp International, Prop. Shilpa Prakash Dhanani C-1/101, Krishna Township, Satellite Road, Mota Varachha, Surat 14000000 591150 1,45,91,150 7 Sunflower Enterprise, Prop. Bhavikaben A. Vekharia, (i) 3-C/D, Ashvini Apartment, Opp. Sardar Nagar Soc, Sumul Dairy Road, katargam, Surat 9940850 1000050 1,09,40,900 8 Sunrise Fibre, Prop, Ushaben J Vekharia 109 208, Sachi Complex, Rughnathpura, Main Road, Laldarwaza, Surat 7094950 1000050 8095000 9 Sunstars Creations, Prop. Manishaben Vekharia 38, Kamla EstateKohinoor Road, Varachha Road, Surat 10014200 1000050 11014250 10 Wilson Enterprise, Prop. Ashwin Vekaria HUF. Trading of Textile fabrics, 108, Sanchi Complex, Raghunathpura Main Road, Laldarwaja, Surat 2226000 0 2226000 11 Vinubhai Ramani, A/6/203, Krishna Township, Satelite Road, Mota Varachha, Surat 0 800100 800100 12 Poonam K Dhanani, Prop. Prisha Fashion D-5, 403, Krishna Township, Satelite Road, Mota Varachha, Surat 0 400050 400050 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from those places. In few cases even proprietor herself stated that she was not aware of any concern running from that place. The Inspector's report is reproduced below: Date: 17-3-2016. To The Income-tax Officer Ward-l(1)(4), Surat. Sir, As per your direction I have visited the below mentioned premises for spot verification purpose. Enquiry report in respect of each of the below mentioned premises are as under: Sl. No. Name address Inquiry Report 1. Arya Marketing, Prop Vipulbhai M Savaliya C-401, City Corner Complex, Nandanvan Society, Mota Varachha, Surat. I visit this premise on 15-3-2016. Its residential premises. I met there Smt. Vishwa Thaiseiya (mobile No. 9727142276). She told me that the firm Arya Marketing is not running from this premises. And she has no knowledge about the firm and the place from where it is running. 2 Ashvini Fibres, Prop Sangita Rajesh Vekharia, 8C, Ashwini Apptt, Anmol compound, Sumul Dairy Road, Surat. I visit this premise on 15-3-2016. Its residential premises and no business activities are being carried out from this premise. 3. Creative Fashions, 3-D Ashwini Aptt, Sumul Dairy Road, Surat. I visit this premise on 15-3-2016. Its residential p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reation, is closed two years ago. (ii) I visit this premise on 15-3-2016. Its residential premises and no business activities are being carried out from this premise. 10. Wilson Enterprise, Prop Ashwin Vekharia (HUF) (i) 108, Sanchi Complex, Raghunathpura Main Road, Lal Darwaja, Surat. (ii) 3/C, Ashwini Apptt. Sumul Dairy Road, Surat. (i) I visit this premise on 17-3-2016. I met there Shri. Bhagirath S Narigara (Mobile No. 8460666039) who informed me that the firm Metro Fibres is closed two years ago. Now at present, Ankur Pharma is running from this premise. (ii) I visit this premise on 15-3-2016. Its residential premises and no business activities are being carried out from this premise. 11. Shridhan Corporation, Prop. Ketan G Barvaliya, 45, Pramukh Park Soc. Near Patel Park Soc, Simadagam, Mota Varachha, Surat. I visit this premise on 15-3-2016. I met there Smt. Vaishali Barvaliya (Mobile No. 9624290351). Its residential premise and no business activities are being carried out from this premise. 12. SRV Tex-O-Fab, Prop. Rajesh Vekharia, 503-Trade Center, Ring Road, Surat. In this connection, 1 visit World Trade Centre on 17.03.2016. The given address is incomplete as four shops ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44 0 0 0 0 Salary 289000 0 89500 189400 436000 226000 Rent 0 0 0 0 0 0 Sunstar Creation, Prop. Manishaben Vekharia Wilson Enterprise, Prop. Ashwin Vekharia HUF Prisha Fashion, Prop Poonam Ketanbhai Dhanani Arya Marketing, Prop. Vipulbhai M Savaliya, Creative Fashions, Prop. Haresh Vekharia, Global Exim, Prop. Ashvin Vekaria, Mega Collection, Prop. Jitendra Vekharia 8 9 10 11 12 13 14 AMOUNT INVOLVED 1,10,14250 22,26,000 4,00,050 2,07,75,238 54,88,500 43,26,450 31,27,500 Turn Over 12180438 75896314 268715585 No details were furnished as summon as well as letter u/s 133(6) could not be served 12898914 0 1182280694 Purchase 11540737 70689173 272791120 12360077 o 1170126811 Administration Selling Expenses 18720 342444 238708 19368 2400 1090847 Profit 261817 140742 320266 (-)53540 (-)2465 1542381 Capital 2080261 1330911 915130 2877196 155037 51397581 USL 22603301 0 1000000 43809630 0 87882672 Cr 112557824 92024767 94350198 2146101 12920596 Fixed Assets 0 0 3027 0 0 687575 Loans, Advances 33415853 38485955 10879500 21229265 35000 31172011 VI-A 75761 59631 32869 116070 117861 208497 Total Income 264060 81400 287400 1158010 852230 1694510 Withdraw 86000 125000 60000 0 127056 0 Transportati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrolled by someone else. Investment was many times more than the total capital of that person which clearly establishes that their creditworthiness is not enough to advance that much money with assessee company. The depositors are not capable of giving such loans since they have no investment or even provision for contingencies such day to, day livelihood, disease or even the demise of the bread winner of the family. It is a natural instinct in all living being that it will first be inclined to itself or its own family members. Though lenders are low income group persons and their yearly withdrawals is not that much, that they have advanced in multi lakhs to assessee. No one will part with his hard earned money without receiving interest. 10. The assessing officer noted that even on papers these concerns are not creditworthy enough to justify the claim of assessee regarding their investment/advance to company. This is once again strong evidence typical of entry providers and bogus transactions. One can, however, argue that merely income potential is not the true test of creditworthiness. It is clear from the above table that the concerns are not carrying out any proper activity. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t only been found unsatisfactory but also incorrect as revealed by inquiries conducted by the Department, therefore the sum of Rs. 8,78,28,138/- was, added under section 68 of the Income-tax Act, 1961. 12. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has deleted the addition made by the Assessing Officer observing as follows: 4.12 On perusal of facts, it is noticed that the identity of all the creditors was established as the creditors appeared before the A.O during remand proceedings. In the remand report the AO has only, mentioned that the creditworthiness of the creditors and genuineness of transactions are not proved. In this regard, the following facts are noticed on perusal of the details:- 1. Out of 12 creditors, 9 are individuals and 3 are HUF. 2. All creditors are filling their return of income and copies of their income tax return were produced before the AO. PAN of all the creditors is mentioned in the assessment order. 3. Copies of bank accounts of the creditors were furnished before the AO in which transaction of unsecured loans/share capital is reflected. 4. Confirmation and contra confirmation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Earth Metal Electrical Pvt. Ltd. (SLP 21073/2009)(SC) 4.15 The then Ld. CIT(Appeal), Surat-3 has discussed the case laws and decisions of jurisdictional Gujarat High Court, other High Courts, Hon'ble ITAT in his order in the case of the appellant itself for AY 2012-13. The then Ld. CIT(Appeal), Surat-3 held that In view of the facts discussed above and the applicable binding decisions of the Hon'ble Supreme Court and Hon'ble High Court of Gujarat, and the jurisdictional ITAT, I hereby hold that the addition made u/s 68 of Rs. 5,21,31,100/- on account of 'share application money' in the instant case cannot be sustained. The said discussion is very much relevant in the present appeal also. In that case, the creditors did not appear before the AO and on the basis of the documents/evidences and on the basis of applicable binding decisions of the Hon'ble Supreme Court and Hon'ble High Court of Gujarat, and the jurisdictional ITAT the additions u/s 68 on account of unexplained share applications were deleted. The said appeal order of the CIT(A)-1, Surat for AY.2012-13 has been sustained by the Hon'ble ITAT, Surat. It is noted that the same documents/evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Share Premium and unsecured loans are non-genuine. The ld DR pointed out that during the remand proceedings also the AO came to the conclusion that neither the creditworthiness nor the genuineness of the transactions of share capital and unsecured loans could be proved. Based on these facts, the assessing officer concluded that addition made by the assessing officer may be upheld. 15. Shri Suresh K. Kabra, Learned Counsel for the assessee defended the order passed by the ld.CIT(A). The ld Counsel argued that cash creditors/share applicants are having PAN, have filed returns of income, their scrutiny assessments were done hence their identity as well as creditworthiness has been established. As on date, the majority of loans were squared ups/paid. The concerned persons are closely related to assessee and they have made transactions through banking channels hence their transactions are genuine. This way, ld Counsel contended that conclusion reached by ld CIT(A) may be upheld. 16. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her view would be possible, we see no reason to interfere with the impugned order passed by the ITAT. No question of law, much less substantial question of law arises in the present Tax Appeal. 17. We note that main plank on which the AO made the addition was because some of the creditors did not turn up before him. In such a case the Hon'ble Apex Court in the case of CIT v. Orissa Corpn. (P.) Ltd. [1986] 25 Taxman 80F/159 ITR 78 and the Hon'ble Gujarat High Court, in the case of Dy. CIT v. Rohini Builders [2003] 127 Taxman 523/[2002] 256 ITR 360, has held that onus of the assessee (in whose books of account credit appears) stands fully discharged if the identity of the creditor is established and actual receipt of money from such creditor is proved. In case, the Assessing Officer is dissatisfied about the source of cash deposited in the bank accounts of the creditors, the proper course would be to assess such credit in the hands of the creditor (after making due enquiries from such creditor). In arriving at this conclusion, the Hon'ble Court has further stressed the presence of word may in section 68. Relevant observations at pages 369 and 370 of this report are reprod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness of transaction through account payee cheque has been established. We find that both the Commissioner of Income-tax (Appeal) and the Tribunal below followed the well-accepted principle which are required to be followed in considering the effect of section 68 of the Act and we thus find no reason to interfere with the concurrent findings of fact recorded by both the authorities. 19. We also noted that assessee has submitted essential evidences before assessing officer, such as PAN number, address, income tax returns and audited financial statements of creditors and all transactions were through banking channel. We have also gone through the detailed findings of ld CIT(A) and noted that conclusion reached by ld CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeming the amount credited in the books as the income of the assessee as also held by the Supreme Court in the case of CIT v. Smt. P.K. Noorjahan [1999] 103 Taxman 382/237 ITR 570. 23. In the assessee s case there is no material that the assessee company had collected on money which could be routed back in the investment. The assessee had discharged primary onus of providing the identity, genuineness and creditworthiness of the said shareholders. The assessee has also proved the source of the source. Our view is also fortified by the judgment of the Hon'ble High Court of Gujarat in the case of CIT v. Ranchhod Jivabhai Nakhava [2012] 21 taxmann.com 159/208 Taxman 35, wherein it was held as follows: Once the assessee has established that he has taken money by way of account payee cheques from the lenders who are all income tax assessees whose PAN have been disclosed, the initial burden under section 68 was discharged. It further appears that the assessee had also produced confirmation letters given by those lenders. [Para 15] Once the Assessing Officer gets hold of the PAN of the lenders, it was his duty to ascertain from the Assessing Officer of those lenders, whether in their r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the details as aforesaid which emerges from the paper book filed before us as well as before the lower authorities, it is vivid that all the share applicants are ( i ) income tax assessee's, ( ii ) they are filing their return of income, ( iii ) the share application form and allotment letter is available on record, ( iv ) the share application money was made by account payee cheques, ( v ) the details of the bank accounts belonging to the share applicants and their bank statements, ( vi ) in none of the transactions the AO found deposit in cash before issuing cheques to the assessee company, ( vii ) the applicants are having substantial creditworthiness which is represented by a capital and reserve as noted above. ( viii ). Source of the Source has been proved by the assessee. Therefore, based on these facts and circumstances, we do not find any infirmity in the order of ld CIT(A). That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue are dismissed. 25. In the result, appeal filed by the Revenue is dismissed. Order pronounced on 17/04/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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