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08-01-2019, Umashakti Steels, Section 69A, 68, Tribunal Delhi

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5 days 23 hours ago #8312 by amit
Section - 69A, 68
Order Date - 08-01-2019
Favouring - Assessee allowed for statistical purposes
Court - Tribunal Delhi
Appellant - Umashakti Steels Pvt. Ltd.
Respondent - DCIT
Justice - R.K. PANDA AM & SUCHITRA KAMBLE JM
Citation - 119Taxpundit108
Appeal No. - ITA No.1592/Del/2016
Asstt. Year - 2012-13

Order

PER : R.K. PANDA, AM

This appeal by the assessee is directed against the order dated 15th January, 2016 of the CIT(A)-9, New Delhi, relating to Assessment Year 2012-13.

2. The facts of the case, in brief, are that the assessee is a company engaged in the business of production of steels (MS Ingots). It filed its return of income on 14th September, 2012 declaring total income of Rs.70,18,180/-. During the course of assessment proceedings, the Assessing Officer observed that the assessee has taken unsecured loans of Rs.5 lakh each from two parties, namely, Kailash Agarwal and Bishwanath Agarwal. He asked the assessee to furnish documentary evidence for identity and credit worthiness of the parties and genuineness of the transaction. The assessee furnished the confirmation of accounts, copies of ITRs and bank statements of the above parties. From the bank account of the above parties, the Assessing Officer noted that there are cash deposits immediately prior to issuance of cheques to the assessee company. He further noted that Shri Kailash Agarwal has declared income of Rs.1,86,432/- and Shri Bishwanath Agarwal has declared income of Rs.1,86,451/- during the assessment year 2012-13. On being further questioned by the Assessing Officer, the assessee submitted that the source of deposit of amount in bank accounts was out of their source of income earned during the year and out of past savings. However, the Assessing Officer rejected the above contention of the assessee on the ground that after considering the h usehold expenses and for their business needs, the above two persons are not in a position to extend a loan of Rs.5 lakhs each in a year. He, therefore accepted Rs.1 lakh each on estimate basis as genuine and made addition of the balance Rs.8 lakhs u/s 68 of the IT Act.

2.1. The Assessing Officer, similarly, noted that the assessee has shown an increase in its share capital. From the details furnished by the assessee, he observed that the assessee has received an amount of Rs.11 lakhs from three persons, the details of which are as under:-

3. From the details filed by the assessee such as confirmation of accounts, copies of IT returns and copies of bank accounts of the above persons, the Assessing Officer observed that they are income-tax payees for the last so many years. However, he observed from the bank accounts that there are cash deposits prior to issuance of cheques to the assessee company. Further, the income declared by them do not justify such huge investment by them and, their credit worthiness is doubtful. After analyzing their return of income and bank account, etc., the Assessing Officer accepted the amount of Rs.4 lakh as reasonable in case of Ms Namita Ginodia and treated the balance amount of Rs.1 lakh as investment made from undisclosed source. Similarly, in the case of Ms Vandana Singh, the Assessing Officer accepted an amount of Rs.2,50,000/- as reasonably explained and the balance Rs.1.5 lakhs as income from other sources. Similarly, in the case of Ms Anita Devi Ginodia, the Assessing Officer accepted Rs.50,000/- as reasonably explained and the balance Rs.1.50 lakhs as income from other sources. Thus, out of the total increase in share capital of Rs.11 lakhs, the Assessing Officer accepted Rs.7 lakh as explained and added the balance amount of Rs.4 lakhs u/s 68 read with section 69A of the IT Act.

3.1. In appeal, the ld.CIT(A) upheld the action of the Assessing Officer by observing as under:-

“3.2 I have considered the submission of the appellant and order of the AO and the issue involved is that the appellant has shown increase in share capital. The share capital were received from the Ms Anita Devi Ginodia debited Rs.2,00,000/-, Ms Namita Ginodia Rs 5,00.000/- and Ms. Vandana Singh Rs 4,00.000/- The AO verified the bank accounts and noted that there were cash deposits prior to the issuance of cheques to the assesses company. So, the AO held that the assessee had failed to discharge its primary onus to prove the creditworthiness of the above said persons. Therefore amounts of Rs. 1,50,000/-, Rs.1,00,000/- and Rs.1,60,000 from the accounts of Ms. Anita Devi Ginodia, Ms Namita Gmodia and Ms. Vandana Singh respectively were treated as assessee's income from undisclosed sources and added back to the total income of the assessed u/s 68 r.w.s 69A of the I.T Act, 1961.

The appellant has submitted that the copy of the ITR and PAN card of the shareholders has been filed as proof of identity. The copy of the bank accounts has been furnished which proves the genuineness and copy of the return was filed which prove the creditworthiness but the appellant has failed to give explanation regarding the cash deposit in the shareholders bank accounts. The source of the amount was not explained and creditworthiness was not proved.

The appellant has submitted that the amount was deposited before five months but what is important fact is whether the source was explained by the appellant. In this case, the appellants argument is only that amount was deposited before five months but the assesses has not explained the sour e of the deposit. The fact is also not denied that amount was deposited in cash The appellant has also argued that AO has not produced any material that amount of Rs 1 lakh deposited in bank but u/s 68 the onus lies on the assesses to prove the identity genuineness and creditworthiness. In this regard the Hon'ble Supreme Court has held in the case of Roshan Di Hatti vs. CIT (1977) 107 ITR 938 (SC)/Kale Khan Mohammad Hanif vs. CIT (1963) 50 ITR 1 (SC) “The law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee is on him Where the nature and source of a receipt, whether it be of money or other property, cannot be satisfactorily explained by the assesses, it is open to the revenue to hold that it is the income of the assessee and no further burden lies on the revenue to show that the income is from any particular source’.. Further the Hon'ble Supreme Court has also held in the case of SumitiDayal v. CIT (1995) 80 Taxman 89/214 ITR 801 (SC) “If the explanation offered by the assessee about the nature and source thereof is in the opinion of the assessing officer, not satisfactory, there is prima facie evidence against the assessee, viz. the receipt of money and if he fails to rebut the same, the said
evidence being unrebutted can be used against him by holding that it is a receipt of an income nature. While considering the explanation of the assessee, the department cannot, however, act unreasonably".

So, the appellant's argument is not acceptable. The appellant has also relied the decision of Hon'ble Supreme Court in the case of Lovely exports. However, subsequently the law has also been changed and the appellant is required to explain the source of the capital and credit worthiness of the person from whom share capital was received. Further in various decisions the Hon'ble Delhi High Court has held that as regards the share application money share capital the

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