Brief Facts:
The facts of the case in brief are that the assessee filed e-return of Income on 28.11.2006 declaring nil income which was processed u/s 143(1) of the Income Tax Act, 1961(hereinafter referred to as the Act) and thereafter the case was selected for scrutiny. During the course of assessment proceedings, the AO noticed that the assessee had raised share capital including share premium amounting to Rs. 10,00,000/- from Shri Vinod Kumar and Rs. 6,50,000/- from Shri Jasbir Singh.
The AO asked the assessee to furnish the confirmation and the sources of investment made by the above mentioned two share holders. He also asked to produce the aforesaid persons to verify the veracity of the transactions. In response the assessee produced both the persons on 5.12.2008. The AO observed that Shri Jasbir Singh was was able to substantiate his sources of investment from sale proceeds of agricultural land but Shri Vinod Kumar could not do so. The AO further observed that the statement of Shri Vinod Kumar was also recorded in which he explained that he made the investment out of his past savings from agricultural activities and out of refund of cash loan given to Shri Jasbir Singh alias Pappu. Shri Vinod Kumar in his statement also stated that he owned approximately 40 bighas of land, however, papers were not available with him since those were mortgaged in was connection with a tractor loan. The AO observed that Shri Vinod Kumar could not explain the exigency under which he had to apply for bank loan specially when a sum of Rs. 10,00,000/- in cash was available with him. He further observed that copy of the Khasra Khatoni of agricultural land at Village Nathupur the names mentioned were Shri Sardare, Shri Tare and Shri Umed Singh as owner of agricultural land and the name of Shri Vinod Kumar was not amongst the co-owners of the land. The AO pointed out that the assessee produced an agreement on the blank paper which revealed that Shri Jasbir Singh of Village Nathupur had refunded and an old cash loan to Shri Vinod Kumar, however, he did not find merit in the submission of the assessee and added Rs. 10,00,000/- to its income by considering the same as unexplained credits u/s 68 of the Act.
Assessee Contention :
The assessee submitted that he produced following evidences before the AO to prove the identity and creditworthiness of Shri Vinod Kumar :-
“(i) Copy of Share Application received from Mr. Vinod Kumar
(ii) Copy of Shares Certificate of shares Allotted to him
(iii) Copy of confirmation received from him
(iv) Copy of Annual Return and Form 2 filed before the Registrar of Companies
(v) Various documents related to assets owned by him, Identity Card.”
It was further submitted that the assessee produced the person who confirmed the amount of contribution to the assessee. It was also stated that the assessee produced various papers related to land and other assets owned by Shri Vinod Kumar which could establish his creditworthiness and to prove the genuineness of the transaction it was necessary to prove the identity and creditworthiness of the creditor. It was submitted that the AO specifically mentioned in his order that Shri Vinod Kumar appeared before him and produced details of assets owned by him. Therefore, assessee discharged the onus cast upon him. It was prayed that the addition of Rs. 10,00,000/- made by the AO may be deleted. Reliance was placed on the following case laws :-
