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Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI
Before: SHRI ABRAHAM P.GEORGE & SHRI GEORGE MATHAN
आयकर अपील सं./ITA No.1234/Mds/2017 %नधा"रण वष" /Assessment Year: 2011-12 Vs. The Asst. Commissioner of Income Shri V.Rajan, Tax, 31, Kasturibai Nagar, Non-Corporate Circle-3, Madurai. Madurai-625 106. [PAN: AHJPR 9558 A] (अपीलाथ(/Appellant) ()*यथ(/Respondent) : Mrs.S.Vijayaprabha, JCIT Department by : Assessee by Mr.Philip George, Adv. सुनवाई क6 तार"ख/Date of Hearing : 31.01.2018 : 31.01.2018 घोषणा क6 तार"ख /Date of Pronouncement आदेश / O R D E R
PER GEORGE MATHAN, JUDICIAL MEMBER:
the Order of the Commissioner of Income Tax (Appeals)-3, Madurai, in dated 28.02.2017 for the AY 2011-12.
Smt. S.Vijayaprabha, JCIT, represented on behalf of the Revenue and Shri Phillip George, Adv., represented on behalf of the assessee.
It was submitted by the Ld.DR that the assessee is an individual who is doing business of manufacture of fertilizers and is also having :- 2 -: agricultural income. In the course of the assessment, it was noticed that the assessee had shown share advances from his family members for the allotment of the shares in the company M/s.Godavari Farm Chemicals Industries, which was incorporated on 07.07.2011. The share advances were shown to be received from the assessee’s brother-in-law, Shri N.Sekar to an extent of Rs.11,25,000/- from the assessee’s sister Smt.
Indira, to an extent of Rs.10,50,000/-, from the assessee’s brother Shri V.Srinivasan, to an extent of Rs.12,75,000/-, from the assessee’s son Shri R.Nagesh to an extent of Rs.94,000/- from Shri Prabhakaran another brother-in-law of the assessee, to an extent of Rs.13,26,000/- and from Smt.Balalakshmi, sister of the assessee, to an extent of Rs.13,00,000/-.
The AO had asked the assessee to prove the creditors. Shri N.Sekar and Shri V.Srinivasan had appeared before the AO. The other creditors had sent confirmation letters and had excused themselves for not appearing before the AO on the ground that children education and examinations were going on. It was a submission that as the financial capacity of the creditors were disbelieved, the AO had treated the creditors appearing in the names of the said five persons as unexplained cash credits and had brought to tax Rs.61,70,000/- and unexplained cash credits in the hands of the assessee. It was a submission that on appeal, the Ld.CIT(A) had deleted the addition following the principles laid down by the Hon’ble Delhi High Court in the case of M/s.Steller Investment Ltd., reported in 192 ITR 287 (Del) wherein it has been held that if the AO was not satisfied with the explanation given by the persons who had contributed the share :- 3 -: application money, then necessary action was to be taken only in the hands of those persons and no addition can be made in the hands of the company up to the AY 2012-13. It was a submission that the assessee was not a company but was an individual and as the sources of the creditors were not adequately proved, the same was rightly held as unexplained cash credits in the hands of the assessee. It was a prayer that the order of the Ld.CIT(A) was liable to be reversed.
In reply, the Ld.AR submitted that the company, in which, the share applications were being made had been incorporated only on 07.07.2011. For the purpose of investment in the share application, the relatives of the assessee had given the share capital advance. It was a submission that the AY 2011-12 was involved and the company had been incorporated only during the AY 2012-13. The creditors had given confirmation letters in respect of the amounts advanced by them and they have also explained their sources. It was a submission that all the creditors were Income Tax assessees and they have also filed their Income Tax Returns. It was a submission in view of the principles laid down by the Hon’ble Supreme Court in the case of M/s.Orissa Corporation Pvt. Ltd. reported in 159 ITR 0078 (SC), the assessee having given names and addresses of the creditors and it was in the knowledge of the Revenue that the said creditors were Income Tax assessees and their PANs were available on the file of the Revenue. The obligation on the assessee stood discharge in respect of the burden of proving genuineness, creditworthiness and :- 4 -: identity of the creditors, as also the genuineness of the transaction. It was a submission that the order of the Ld.CIT(A) was liable to be upheld.
We have considered the rival submissions.
A perusal of the Assessment Order in the assessee’s case shows that the assessee has admitted a total income of Rs.34,66,851/- and agricultural income of Rs.87,56,810/-. The assessment has been completed treating the part of the agricultural income of the assessee as non-agricultural income. In the course of the assessment, the cash credits as appearing in the capital account of the assessee, has been questioned. The assessee’s brother-in-law Shri N.Sekar and the assessee’s brother Shri V.Srinivasan had appeared. Thus, out of six creditors, two had appeared and four had given their confirmation letters.
The sworn statements have also been recorded from the two persons who have appeared. All the creditors have confirmed having given the share application advance to the assessee. All the persons are close relatives of the assessee. It is also an admitted fact that the creditors have also filed their Income Tax Returns. The AO has only questioned the financial capacity of the each of the creditors and has drawn a presumption that as the creditors are the assessee’s own brothers and sisters and brother-in- law, the advance made by them are the assessee’s own funds. Here, it is noticed that the assessment has been completed only on 28.03.2014. If the AO had really doubted the share advance given by them, considering :- 5 -: the fact that the company has been incorporated on 07.07.2011, it was very much open to the AO to call for the list of shareholders in respect of the Pvt. Ltd. Company to verify as to whether the said persons have actually applied for the shares. In any case, it is noticed that two Creditors have appeared and all the creditors have confirmed the transaction with the assessee. Consequently, it would have to be accepted that the assessee has proved the identity and genuineness of the transaction. Coming to the issue of the creditworthiness of the creditors, the fact that they have accepted the transaction goes to prove that the creditors did have the capacity. This being so, if the AO is still doubted the creditworthiness of the creditors, then, it was opened to him to make the assessment in the hands of such creditors. The creditors having accepted the transaction, the same cannot be considered as unexplained cash credits in the hands of the assessee. This view of ours finds support from the principles laid down by the Hon’ble Supreme Court in the case of M/s.Orissa Corporation Pvt. Ltd. In these circumstances, we find no error in the findings of the Ld.CIT(A) which calls for any interference.
In the result, the appeal filed by the Revenue stands dismissed.
Order pronounced in the Open Court on January 31, 2018, at Chennai. (अ"ाहम पी. जॉज") (जॉज" माथन) (GEORGE MATHAN) (ABRAHAM P.GEORGE) "या%यक सद"य/JUDICIAL MEMBER लेखा सद"य/ACCOUNTANT MEMBER :- 6 -: