TILARA POLYPLAST PRIVATE LIMITED,SHAPAR vs. INCOME TAX OFFICER, WARD 1(1)(1), RAJKOT

In response to the notice of the assessing officer, the assessee furnished the requisite details, before the assessing officer, vide various submission furnished by the assessee on 10/12/2016, 16/12/2016 & 17/12/2016. On perusal of the furnished details, in this regard, it was found by the assessing officer that in many cases substantial amount of cash/cheques were deposited in the bank accounts of such lenders shortly prior to issuance of cheques by them to the assessee- company. Hence, vide assessing officer`s letter dated 21/12/2016, the assessee was requested to show- cause, as to why the amounts received from such persons where cash credits found in the bank passbook of the lenders immediately prior to issuing cheque in favour of assessee- company should not be treated as unexplained cash credits u/s 68 of the Income Tax Act and be added to the income of the assessee. In response, during the course of assessment proceedings, the assessee submitted a detailed reply before the assessing officer, which is reproduced by the assessing officer in the assessment order. In its reply, the assessee submitted the explanation regarding the cash and cheques deposited in the bank account of the share applicants and the source of such amount by furnishing the third-party evidence, from whom the assessee has received cheques and cash and own sources of cash by way of agricultural activities. For each share applicant, the assessee submitted, full address, PAN number, balance sheet, profit and loss account, bank statement showing the source of the money, confirmations, third-party books of accounts and evidences showing source of the source.

However, the assessing officer rejected the contention of the assessee and observed that assessee had failed to establish the genuineness and creditworthiness of the transactions appearing in its books of accounts, for the sum of Rs.71,10,000/-claimed to have been received from the Share applicants, out of total share capital to the tune of Rs.1,50,00,000/- .That is, out of the total share capital including share premium of Rs.1,50,00,000/- received by the appellants, the assessing officer after going through various supporting evidences added Rs.71,10,000/-, under section 68 of the Act, in respect of 20 shareholders to the extent of the amount being sourced from cash deposits from their bank accounts.

Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before the Ld.CIT(A), who has partly deleted the addition made by theassessing officer. The ld CIT(A) noticed that out of total share capital/share premium to the tune of Rs.1,50,00,000/-, the assessing officer made addition to the tune of Rs. 71,10,000/-, under section 68 of the Act, and for balance amount of Rs. 78,90,000/- ( Rs.1,50,00,000-Rs. 71,10,000), the assessing officer held that assessee has explained the identity, genuineness, creditworthiness, of share applicants, therefore assessing officer did not make the addition to that extent. The ld CIT(A) noticed that out of Rs. 71,10,000/- added by the assessing officer, the source of money for the creditors cash deposits in view of the creditworthiness of the creditor is available in the case of the following share applicants:

Shri Rajendra Singhal, Learned Counsel for the assessee, submitted that there should not be two standards for the same share applicants who have filed the same documents and evidences before the lower authorities and the lower authorities did not make the addition. For the remaining amount Rs. 58,40,000/-( Rs. 71,10,000- Rs.12,60,000), same set of documents and evidences were furnished before the lower authorities. However, they did not consider them in a right perspective and did not delete the addition of Rs. 58,40,000/-. The Ld. Counsel for the assessee submitted before us that for each shareholder, confirmations were filed, cash-books were also filed, the PANs, names and addresses, bank statement and audited balance-sheet including Profit & Loss account were also filed before the assessing officer. Therefore, by submitting the PANs, names and addresses, Profit & Loss account and balance-sheet of the shareholders and bank statement of the shareholders, moreover, third- party financial statements and bank details from whom the share applicants took the money, therefore, by submitting these documents and evidences, the assessee has proved source of the source also. Thus, assessee has not only proved the source of the share capital but source of the source was also explained and proved. The Ld.Counsel also submitted that in respect of balance shareholders, the assessing officer,in the subsequent assessment year,(vide paper-book at page No.376 for AY 2015-16,) the assessing officer has considered the cash credit in the hands of the assessee-company, as if ,it is explained, with same set of evidences. The assessing officer also in AY 2017-18, (vide paper-book at Page No.405,) did not make addition on account of cash credit. The assessee has explained the cash credit and assessee submitted necessary documents and evidences, on identical and similar set of facts, the assessing officer did not make any addition in the hands of the assessee- company. Therefore, the Ld. Counsel submitted that in subsequent year, the assessing officer accepted cash credit, as explained, having same facts and circumstances. Therefore, balance addition confirmed by the ld. CIT(A) may be deleted.

On the other hand, the Ld.DR for the revenue, submitted that before the assessing officer, the assessee submitted bank statement, however, there is no proof or evidence that the bank statement so submitted by the assessee, before the assessing officer is a correct bank statement. In addition to this, the assessee has submitted Affidavits before the Ld.CIT(A), who has not been sent back ,by the ld. CIT (A), to the file of the assessing officer for verification. Therefore, the entire issue may be remanded back to the file of the assessing officer.

The Ld. DR for the revenue also submitted that the private documents produced by the assessee, such as cash books and balance sheets indicating specific cash balances on particular dates, are self-serving in nature and hold minimal evidentiary value. These documents cannot be solely relied upon to substantiate the claims made by the assessee, especially when they lack corroboration from independent and credible sources. Therefore, addition sustained by ld. CIT (A) may be upheld.

In rejoinder, the Ld.Counsel for the assessee submitted before us that whatever documents submitted before the assessing officer, such as, bank statement, names and addresses, PANs, balance-sheet, P&L account and third-party financial statements, to prove the source of the source, were submitted before the Ld.CIT(A), during the course of appellate proceedings and the same were submitted before the Tribunal also. The Ld.Counsel submitted that Affidavit is merely one kind of a written submission of the assessee, so the facts already narrated before the assessing officer have been submitted by way of Affidavit before the Ld.CIT(A), therefore, material contained in the Affidavit, is nothing but written submission of the assessee, by narrating the same facts which were before the assessing officer. Therefore, without considering the Affidavit, the adjudication can be made by the Bench and these Affidavits do not contain any additional evidences. In these Affidavits, only written submissions were made by the assessee to explain the evidences already submitted before the assessing officer. Therefore, only the written submission may be considered which were before the assessing officer, hence, it is not a new document or additional evidence before the Ld.CIT(A) and, therefore, the matter should not be remanded back to the file of the assessing officer.

We find that assessing officer had made the addition under consideration, merely on presumption and surmises, without making any independent inquiry. The assessee has furnished all the information, which has been called for during the assessment proceedings for satisfaction of the assessing officer in respect of the cash credits. The assessee has furnished confirmation letters, ITR, bank accounts and cash book of the persons selectively. Majority of the share applicants are regular income tax assessee's and they are filing their return of income regularly. Their identity cards, confirmation letters and acknowledgement of return of income were produced. Those investors, who were not liable to file the returns of income as they are earning exempt agriculture income and their taxable income are below maximum income chargeable to tax, their identity cards, confirmation letters and evidence for their income and agriculture land holding were produced. The share application forms, allotment letters and relevant share certificates, were produced by either the company or the investors. The share application money was paid through the account payee cheques, the details of relevant bank accounts belonging to the share applicants and their bank statements were produced. All the applicants are having substantial creditworthiness which is represented by their independent source of income and funds available with them. The third party financial statements and cash books were produced in cases of those applicants, who were maintaining books of accounts, to prove the source of the source. Accordingly, all the three ingredients to explain a cash credit as required u/s. 68 of the Act, that is, the identity, creditworthiness and genuineness of the transaction was satisfied. Further the investors have explained nature and source of their investment, by producing evidences regarding their own income, fund for investments and amount borrowed from other persons and their identity and creditworthiness. Moreover, in scrutiny assessments for subsequent assessment years, 2015-16 and 2017-18, credits from some of the same investors have been accepted by the assessing officer, as explained.

We note that in respect of addition sustained by the Ld.CIT(A) to the tune of Rs.58,40,000/-, the assessee has submitted the same documents and evidences before the Assessing Officer. Moreover, same documents and evidence were furnished before the Ld.CIT(A), however, Ld.CIT(A) has reduced addition from Rs.71,10,000/- to Rs.58,40,000/-.Therefore, there should not be pick and choose to make addition in the hands of the assessee. That is, there should not be discrimination for the balance amount of Rs.58,40,000/-, as all the documents and evidences of the third party evidences to prove the source of the sources have also been furnished in respect of the addition sustained by Ld.CIT(A) to the tune of Rs.58,40,000/-. The Assessing Officer should not make an addition in the hands of assessee based on the same facts and evidence, on the basis of which the assessing officer deleted the addition in respect of other shareholders. The assessing officer, should act consistently in tax matters, especially when the facts and evidence are identical.Once the identity and genuineness of a transaction in respect of share capital is accepted in the hands of some shareholders, therefore, based on the same facts and evidences, no addition should be made in case of other shareholders, having same facts and evidences, without new adverse evidences. Department cannot blow hot and cold. If the AO accepts transaction, as genuine in case of majority of the shareholders, he cannot treat it as bogus in the hands of other shareholders, having same facts and circumstances, without bringing new material on record.Therefore, we are of the view that balance addition,of Rs.58,40,000/-, based on the same facts, evidences and documents should also be deleted. Hence, the addition sustained by Ld.CIT(A) is hereby deleted.

In the result, the appeal of the assessee is allowed.