ITO Vs Hanumant Ingots Pvt. Ltd. (ITAT Raipur)
Facts- The assessee had filed its ROI for the AY 2012-13 on 26.09.2012, declaring an income of Rs.2,82,249/-. Subsequently, the case of the assessee was selected for scrutiny assessment u/s.143(2) of the Act.
During the course of the assessment proceedings, it was observed by the A.O that the assessee during the year under consideration, i.e., its first year of operation was in receipt of share capital/premium amounting to Rs.66,65,000/- from 16 persons. Also, it was noticed by him that the assessee had during the year under consideration raised loans from various parties.
In order to verify the genuineness and veracity of the share capital /premium, the A.O called for certain details from the share applicants vide notices issued u/s.133(6) of the Act. However, the aforesaid notices were not complied with by the respective parties and remained unanswered. Observing, that the assessee had failed to discharge the onus that was cast upon it as regards establishing the identity and creditworthiness of the share applicants, as well as proving the genuineness of the transactions of receipt of share capital/premium from the parties concerned, the A.O held the entire amount of Rs.66.65 lac as the income of the assessee from undisclosed sources u/s.68 of the Act.
As regards the loans that were claimed by the assessee company to have been received during the year under consideration, it was observed by the A.O that the assessee had though placed on record the confirmations of the respective lenders, but had failed to place on record any such documents which would substantiate the authenticity of the respective loan transactions and discharge the onus cast upon the assessee. Observing, that the notice that was issued to one of the lender i.e. M/s Dynamic Architectures Pvt. Ltd. seeking certain information u/s.133(6) of the Act had remained un-complied with, the A.O, for the said reason held the entire amount of the loans aggregating to Rs.98.25 lacs as the income of the assessee from undisclosed sources u/s. 68 of the Act. Backed by his aforesaid deliberations, the A.O vide his order passed u/s. 143(3), dated 25.03.2015 assessed the income of the assessee company at Rs.1,68,15,010/-.
Aggrieved, the assessee assailed the assessment order passed by the A.O u/s.143(3), dated 25.03.2015 before the CIT(Appeals). In so far the addition of the share capital/premium of Rs.66.65 lacs as an unexplained cash credit u/s 68 by the A.O was concerned, it was observed by the CIT(Appeals) that the aforementioned amounts were received by the assessee company from 16 persons wherein 13 persons were either family members or close relatives of the directors of the assessee. It was observed by the CIT(Appeals) that the assessee in the course of the assessment proceedings had furnished with the A.O PAN Nos., copies of returns of income, computation of income, share application forms, bank statements, balance sheets, bank account details a/w. source of payment of the aforementioned amounts by the respective share applicants. It was further noticed by the CIT(Appeals) that the A.O had not drawn any adverse inferences as regards the aforesaid documentary evidence which were filed by the assessee before him. Also, it was observed by the CIT(Appeals) that the bank statements of the respective share applicants that were filed in the course of the assessment proceedings clearly revealed the sources from where the respective amounts were paid by them. Observing, that the share applicants were not artificial entities but persons in existence who had duly substantiated the sources out of which the amounts in question were paid by them towards share capital/premium, the CIT(Appeals) not finding favour with the view taken by the A.O that the assessee had failed to discharge the onus that was cast upon it as regards proving the authenticity of the transactions of receipt of share capital/premium, thus, vacated the addition of Rs.66.65 lacs made by him.
As regards the addition of unsecured loans of Rs.98.35 lacs that was made by the A.O by dubbing the same as unexplained cash credits u/s.68 of the Act, it was observed by the CIT(Appeals), that though the assessee in the course of the assessment proceedings had placed on record loan confirmations a/w. PAN cards of the respective lenders, however, the A.O without giving any reason as to why the same were not being relied upon, had most arbitrarily drawn adverse inferences as regards the authenticity of the said loan transactions. Accordingly, the CIT(Appeals) vacated the addition of Rs.98.25 lac that was made by the A.O by dubbing the loan transactions as unexplained cash credits u/s. 68 of the Act.
Aggrieved with the order of the CIT(Appeals), the Revenue has carried the matter in appeal before us.
Conclusion- We are of the considered view, that as the assessee by placing on record the aforesaid documentary evidence had duly discharged the primary onus that was cast upon it, therefore, the A.O without dislodging the same on the basis of any material and/or evidence could not have held the amounts therein received as unexplained cash credit u/s.68 of the Act.
We are unable to comprehend that as to on what basis the failure on the part of one lender to furnish the requisite details as was called for by the A.O u/s.133(6) of the Act would justify drawing of adverse inferences as regards the authenticity of the loan transactions of the assessee qua the remaining parties.
FULL TEXT OF THE ORDER OF ITAT RAIPUR
The present appeal filed by the revenue is directed against the order passed by the CIT (Appeals)-1, Raipur, dated 01.07.2016, which in turn arises from the order passed by the A.O under Sec.143(3) of the Income-tax Act, 1961 ( in short ‘the Act’) dated 25.03.2015 for assessment year 201213. Before us the Revenue has assailed the impugned order on the following grounds of appeal:
“1. Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in deleting the addition of Rs.66,65,000/- made by the AO u/s.68 of the Income Tax Act, 1961 on account of bogus share capital and share premium received by the assessee, even though the identity, creditworthiness and genuineness of the transactions could not be established?
2. Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in deleting the addition of Rs.98,25,000/- made by the AO u/s.68 of the Income Tax Act, 1961 on account of bogus unsecured loans received by the assessee, even though the identity, creditworthiness and genuineness of transactions could not be established.”
3. Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) has erred by giving a finding which is contrary to the evidence on record as the Ld. CIT(A) has accepted the submission of the assessee which is factually incorrect, thereby rendering the decision which is perverse?
4. The order of the Ld. CIT(A) is erroneous both in law and on facts?
5. Any other ground that may be adduced at the time of hearing.”
2. Succinctly stated, the assessee company which is engaged in the business of manufacturing of M.S. Ingots had filed its return of income for the assessment year 2012-13 on 26.09.2012, declaring an income of Rs.2,82,249/-. Subsequently, the case of the assessee was selected for scrutiny assessment u/s.143(2) of the Act.
3. During the course of the assessment proceedings, it was observed by the A.O that the assessee company during the year under consideration, i.e., its first year of operation was in receipt of share capital/premium amounting to Rs.66,65,000/- from 16 persons. Also, it was noticed by him that the assessee company had during the year under consideration raised loans from various parties.
4. In order to verify the genuineness and veracity of the share capital /premium claimed by the assessee to have been received during the year under consideration, the A.O called for certain details from the share applicants vide notices issued u/s.133(6) of the Act. However, the aforesaid notices were not complied with by the respective parties and remained unanswered. Observing, that the assessee had failed to discharge the onus that was cast upon it as regards establishing the identity and creditworthiness of the share applicants, as well as proving the genuineness of the transactions of receipt of share capital/premium from the parties concerned, the A.O held the entire amount of Rs.66.65 lac as the income of the assessee from undisclosed sources u/s.68 of the Act.
5. As regards the loans that were claimed by the assessee company to have been received during the year under consideration, it was observed by the A.O that the assessee had though placed on record the confirmations of the respective lenders, but had failed to place on record any such documents which would substantiate the authenticity of the respective loan transactions and discharge the onus cast upon the assessee. Observing, that the notice that was issued to one of the lender i.e. M/s Dynamic Architectures Pvt. Ltd. seeking certain information u/s.133(6) of the Act had remained un-complied with, the A.O, for the said reason held the entire amount of the loans aggregating to Rs.98.25 lacs as the income of the assessee from undisclosed sources u/s. 68 of the Act. Backed by his aforesaid deliberations, the A.O vide his order passed u/s. 143(3), dated 25.03.2015 assessed the income of the assessee company at Rs.1,68,15,010/-.
6. Aggrieved, the assessee assailed the assessment order passed by the A.O u/s.143(3), dated 25.03.2015 before the CIT(Appeals). In so far the addition of the share capital/premium of Rs.66.65 lacs as an unexplained cash credit u/s 68 by the A.O was concerned, it was observed by the CIT(Appeals) that the aforementioned amounts were received by the assessee company from 16 persons wherein 13 persons were either family members or close relatives of the directors of the assessee company. It was observed by the CIT(Appeals) that the assessee in the course of the assessment proceedings had furnished with the A.O PAN Nos., copies of returns of income, computation of income, share application forms, bank statements, balance sheets, bank account details a/w. source of payment of the aforementioned amounts by the respective share applicants. It was further noticed by the CIT(Appeals) that the A.O had not drawn any adverse inferences as regards the aforesaid documentary evidence which were filed by the assessee before him. Also, it was observed by the CIT(Appeals) that the bank statements of the respective share applicants that were filed in the course of the assessment proceedings clearly revealed the sources from where the respective amounts were paid by them. Observing, that the share applicants were not artificial entities but persons in existence who had duly substantiated the sources out of which the amounts in question were paid by them towards share capital/premium, the CIT(Appeals) not finding favour with the view taken by the A.O that the assessee had failed to discharge the onus that was cast upon it as regards proving the authenticity of the transactions of receipt of share capital/premium, thus, vacated the addition of Rs.66.65 lacs made by him.
7. As regards the addition of unsecured loans of Rs.98.35 lacs that was made by the A.O by dubbing the same as unexplained cash credits u/s.68 of the Act, it was observed by the CIT(Appeals), that though the assessee in the course of the assessment proceedings had placed on record loan confirmations a/w. PAN cards of the respective lenders, however, the A.O without giving any reason as to why the same were not being relied upon, had most arbitrarily drawn adverse inferences as regards the authenticity of the said loan transactions. It was observed by the CIT(Appeals) that the addition of the loan amount of Rs.98.25 lacs that was raised by the assessee from 9 parties, was made for the reason that one of the lender, viz. M/s Dynamic Architectures Pvt. Ltd. to whom a notice u/s.133(6) of the Act was issued, had failed to comply with the same and had not furnished the requisite details. It was observed by the CIT(Appeals) that the failure on the part of the one of the lender to furnish the requisite details could not have formed a basis for drawing of adverse inferences as regards the authenticity of the loan transactions of the assessee with the other parties. Observing, that the assessee had in the course of the assessment proceedings placed on record confirmations of the landers a/w. their respective PAN cards/copies of returns of income (in some cases), therefore, the onus that was cast upon it to prove the authenticity of the loan transaction stood discharged. It was observed by the CIT(Appeals), that in case if the A.O still had any doubts as regards the authenticity of the loan transactions, then, onus was cast upon her to prove otherwise. The CIT(Appeals) after relying on the judgment of the Hon’ble Supreme Court in the case of CIT Vs. Orrisa Corporation Pvt. Ltd. (1986) 159 ITR 78 (SC) therein observed, that now when the assessee had placed on record the names and addresses of the lenders a/w. their income tax credentials i.e. PAN/copies of returns of income (in some cases) and the Revenue had not chosen to carry out any further verification as regards the creditworthiness of the said lenders, then, no adverse inferences were liable to be drawn as regards the authenticity of the loan transactions in question by the A.O. Accordingly, the CIT(Appeals) on the basis of his aforesaid deliberations vacated the addition of Rs.98.25 lac that was made by the A.O by dubbing the loan transactions as unexplained cash credits u/s. 68 of the Act.
8. Aggrieved with the order of the CIT(Appeals), the Revenue has carried the matter in appeal before us.
9. We have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions.
10. We shall first deal with the grievance of the revenue that the CIT(A) had erred in vacating the addition of Rs. 66.65 lac that was made by the A.O. by treating the share capital/premium that was claimed by the assessee to have been received from 16 parties as an unexplained cash credit u/s 68 of the Act. Adverting to the facts pertaining to the aforesaid issue as are discernible from the order of the CIT(Appeals), we find that the assessee in the course of the assessment proceedings, had duly filed with the A.O the copies of the returns of income, computation of income, balance sheet, confirmations of account, PAN and bank statements of the 16 share applicants from whom an amount of Rs. 66.65 lac was received towards share capital/premium, as under :
