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Income Tax Appellate Tribunal, DELHI BENCH “C” NEW DELHI
Before: SHRI I.C. SUDHIR & SHRI PRASHANT MAHARISHI
ORDER
PER I.C. SUDHIR: JUDICIAL MEMBER The assessee has impugned first appellate order on the following grounds:
1. On the facts and in the circumstances of the case and in law, the Learned CIT(Appeals) has passed the order arbitrarily and without least verification and appreciating of facts.
2. The appellant prays that the addition of Rs.16,11,500 made in respect of unexplained cash credit under sec. 68 of the Act be deleted.
Heard and considered the arguments advanced by the parties in view of orders of the authorities below, material available on record and the decisions relied upon.
2 3. The facts in brief are that assessee a company is engaged in the business of leasing, finance and hire purchase. The assessee being a non- banking finance company is bound to follow mandatory guidelines issued by RBI regarding the classification of assets, recognition of income and norms for making provisions. The assessee contended that as per guidelines issued by RBI, income pertaining to non-performing assets should not be considered as income. During the course of assessment proceedings, the Assessing Officer raised query about the receipt of share application money from the subscribers. In compliance of directions by the Assessing Officer, the assessee produced some share applicants who accepted the advancement of money. The Assessing Officer was, however, not satisfied with the explanation of the assessee and made the addition of Rs.16,11,500 under sec. 68 of the Act on account of unexplained cash credits. Learned CIT(Appeals) has upheld the same.
In support of the ground, the Learned AR submitted that the assessee company is duly registered with Reserve Bank of India as a non-banking financial company and is authorized to accept cash from public at large. The transaction in question is pure and simple case of receipt of share application money during the normal course of business. There is no material on record 3 even to assume that any dubious method are applied for injecting unaccounted money in the form of the share capital in the company. It is not the case of the authorities below that assessee has received bogus accommodation entries in the garb of share application money. The Learned AR submitted that the assessee had received an amount of Rs.30,03,500 from the share applicants towards share application money out of which an amount of Rs.8,27,500 was received in cash and rest of the amount of Rs.21,76,000 was received via banking channel. Out of the amount of Rs.21,76,000, the Assessing Officer doubted the credit of Rs.7,84,000 and added the same under sec. 68 on the ground that before the issuance of cheque from these accounts, cash was deposited in these accounts. The Learned AR submitted that against the receipt of share application money in cash, the assessee had filed affidavits and fan of the parties, details of which have been made available at page No. 57 of the paper book. All the persons who had applied in cash had confirmed in their affidavits that they had received the money back from the assessee upon cancellation of their applications for allotment of shares. The money received was thus refunded to them in the next financial year and the date of refunding of money has been mentioned at page No. 57 of the paper book. He pointed out that the case of the assessee was selected for scrutiny on 16.11.2007 and the assessee 4 had refunded the entire share application money before this date. He submitted that though the assessee had refunded the money in next financial year yet the money was refunded before the commencement of assessment proceedings of the impugned year. He submitted that the Assessing Officer had not brought any material on record to establish that the documentary evidences submitted by the assessee vis-à-vis refund of share application money are false. The Assessing Officer very conveniently ignored the affidavits of the parties and also their statements while making the addition even in the next assessment year no adverse inference vis-à-vis repayment of the money to the share applicants has been made by the Assessing Officer.
4.1 So far as second category of persons who had paid the amount by cheque against the share application money, are concerned, their details have been made available as page No. 20 of the paper book. In support of payment made by these persons, the assessee had furnished affidavits of those parties, their income-tax returns and bank statements. The assessee had also allotted shares to these persons and they were the owners of the shares. The authorities below have denied the claim of the assessee regarding these share applicants on the basis that the cash was deposited in their respective accounts immediately before the receipts of share application money.
5 Learned AR in this regard placed reliance on the decision of Hon'ble jurisdictional High Court of Delhi in the case of CIT vs. Kamdhenu Steels & Alloys Ltd. (2014) 361 ITR 220 (Del.) to support his contention that mere suspicion cannot be a basis to make addition of share application money and in such cases the Assessing Officer ought to have examined the source in the assessment of respective share subscribers and not in the case of a company. He also placed reliance on the following decisions: i) CIT vs. Virandvan Farms (P) Ltd. – and Ors. – order dated 12.8.2015 (Del.); ii) CIT vs. Rakam Money Matters Pvt. Ltd. – ITA No. 7778/2015 (Delhi) – order dated 13.10.2015; iii) CIT vs. Shiv Dhooti Pearls & Investment Ltd. –ITA No. 429/2003 – order dated 21.12.2015 (Delhi High Court) iv) Oswal Pumps Pvt. Ltd.. vs. ITO – ITA No.1480/Del/2013 (A.Y. 2004-05) – order dated 31.3.2015; 4.2 The Learned Senior DR on the other hand placed reliance on the orders of the authorities below. He submitted that the share application money has been deliberately has been kept below Rs20,000 per share applicant. He submitted that it does not matter that the money was later on returned well before issuance of notice under sec. 143(2) of the Act by the share applicant. The assessee was asked by the Assessing Officer to produce share applicant to prove their creditworthiness. He submitted that the case 6 laws relied upon by the Learned AR having distinguishable facts are not helpful to the assessee. The Learned Senior DR contended that most of share applicants are not assessed to tax and they are having meager income. He submitted that out of 19 share applicants, only in seven cases, income-tax returns were given. HE submitted further that identical amount was deposited in the accounts of share application before issuance of cheques by them to the assessee. He placed reliance on the following decisions: i) CIT v. P. Mohanakala [2007] - 291 ITR 278 (SC); ii) CIT Vs. Navodaya Castles Pvt. Ltd.; 367 ITR 306- (Del.); & iii) CIT vs. Empire Buildtech P. Ltd. (2014) -366 ITR 110 (Del.).
4.3 He further submitted that the ITAT being a last facts finding authority can always refer the matter to the Assessing Officer to conduct further inquiry if it is so required.
Having gone through the orders of the authorities below, material available on record and the decisions relied upon, we are of the view that primary onus always lie upon the assessee to establish genuineness of its claim. IT can be discharged by furnishing necessary information supported with evidence about the claim i.e. share applicants in the present case. In the 7 present case, the assessee had furnished details of the share applicants supported with some evidence. These are two categories of the share applicants in the present case. The first category was of those share applicants who had paid share application money in cash and the second category of the share applicants was those paid share applicant money through cheque. In the first category of share application, the assessee had furnished their details and confirmations by their affidavit and in case of some parties their PANs were also furnished. Besides, it was also explained that they had received their money back from the assessee upon cancelation of their application for allotment of shares. This refund of money to them was made in the next financial year and the same has been accepted by the Assessing Officer in the assessment of the next year. It is also an important aspect of this category of share applicants that during the course of assessment proceedings, they had appeared before the Assessing Officer and had confirmed of paying and receiving back their respective share application money from the assessee. We are thus of the view that the assessee had discharged its primary onus to establish genuineness of this category of the share applicants. Thereafter, the onus was shifted upon the Assessing Officer to dislodge the claim of the assessee by disproving those evidences and submissions made by the assessee discussed above. In 8 absence of conducting such exercise by the Assessing Officer, the Assessing Officer was not justified in making the addition of Rs.8,27,500 received in cash. The Assessing Officer is thus directed to delete this addition made under sec. 68 of the Act.