Ssp Enterprises Private Limited vs Assistant Commissioner Of Income Tax

P.K. Jaiswal, J.

Heard on the question of admission.

This appeal under Section 260-A of the Income Tax Act, 1961 (for short, “the Act of 1961â€) has been filed by the assessee against the order

dated 21.11.2016 passed by the Income Tax Appellate Tribunal by which the order passed by the CIT with respect to addition of share capital of

Rs.28 lakhs and unsecured loan of Rs.16,39,960/- has been affirmed.

The appellant is a Private Limited Company engaged in the trading and consignment business of plastic granules and PP woven fabrics. The

appellant had filed its return of income and had disclosed the amount of Rs.40 lakhs received as share application money during the assessment year

2006-07 from 10 shareholder companies and had also disclosed the unsecured loan of Rs.16,39,960/- from a proprietorship concern.

The case of the appellant was selected for scrutiny assessment. The Assessing Officer completed the assessment under Section 143(3) of the Act

of 1961 and made the additional of Rs.40 lakhs being the amount received as share application money for allotment of shares of the company and also

added the amount unsecured loan of Rs.16,39,960/- as unexplained income under Section 68 of the Act of 1961.

The appellant being aggrieved by the additions made by the Assessing Officer filed an appeal before the Commissioner, Income Tax (Appeals).

The appellate authority partly allowed the appeal and as against addition of Rs.40 lakhs considering three applicants as genuine deleted the addition of

Rs.12 lakhs, however, in respect of balance application money of Rs.28 lakhs from rest of 7 applicants maintained the additions. Similarly the appellate

authority also maintained the addition of unsecured loan of Rs.16,39,960/- as per the order of Assessing Officer.

The assessee as well as the revenue partly aggrieved by the order of the appellate authority, which had partly allowed the appeal has filed Second

Appeal in Income Tax Appellate Tribunal, Indore. The assessee has taken the ground that the learned CIT (Appeals) was not justified in retaining the

addition to Rs.28 lakhs out of the addition of Rs.40 lakhs under Section 68 of the Act of 1961. In respect of the appeal of the revenue regarding

deletion of Rs.12 lakhs, the authorities came to the conclusion that three parties viz. M/s R.K. Skyline Construction Ltd., M/s Renovision Commece P.

Ltd and Amarjyoti Vyapar Ltd. no cash was deposited and the learned CIT(Appeal) has verified the bank accounts of these parties and he has

treated it as genuine and the addition of Rs. 12 lacs was deleted. In respect of addition of Rs.28 lakhs made under Section 68 of the Act of 1961, the

learned authorities have found that the assessee has made cash sales and the collection from the parties has been deposited in the bank. Out of total

sales, the assessee has cash sales of Rs.4,49,338/-. The entire cash deposit is either from sale proceeds or from the collection against the book debt.

As per section 68 of the Act sum should be credited in the books but the assessee has credited the sale proceeds in its books of accounts which has

been accepted by the Assessing Officer.

The learned ITAT considered the aforesaid in paras 4 and 5 of the impugned order, which reads as under:-

“4. On appeal, the assessee carried the matter in appeal and the learned CIT(A) has deleted the addition of Rs. 35.05 lacs which was added in the

hands of the assessee u/s 68 of the Act by observing as under :-

The first ground of appeal is against addition of Rs.35.05 lacs, which was added by A.O. in hands of appellant u/s 68 of the Income Tax Act, for

the amount of cash deposits seen by A.O. in Citi Bank account of the appellant. The appellant explained that such cash deposits of Rs. 35.05 lacs in

the bank are out of cash sales of Rs. 44,93 lacs which are duly reflected as a part of total sales of Rs.85,11,415/-. Since the amount is already

reflected in sales account by appellant in the profit and loss account, the same cannot be added once again u/s 68 of the Income Tax Act. Hence, the

addition of Rs. 35.05 lacs made u/s 68 of the Income Tax act is deleted. Ground no. 1 and 2 of appeal are allowed.

We have considered the submissions of both the sides. After careful perusal of record we find that the assessee has made cash sales and the

collection from the parties has been deposited in the bank. The entire deposit to the bank account has been recorded in the books of the assessee and

the books were produced before the Assessing Officer. The total sales of the assessee were of Rs. 8511415/-. Out of the total sales, the assessee has

cash sales of Rs.449338/-. The entire cash deposit is either from sale proceeds or from the collection against the book debt. We find that as per

section 68 of the Act sum should be credited in the books but the assessee has credited the sale proceeds in its books of accounts which has been

accepted by the Assessing Officer. The Assessing Officer has nowhere found the defect in the books of accounts, therefore, when the assessee has

credit sale proceeds in cash in the books of accounts and the same is deposited in bank, no addition can be made u/s 68 of the Act. We also get

support from the judgment in the case of CIT vs. Bhaichand H. Gandhji; 141 ITR 67 and Sundarlal Jain vs. CIT; 117 ITR 316. Therefore, the learned

CIT(A) is justified in his action. This ground of the revenue is dismissed.â€​

In respect of deletion of Rs.12 lakhs, the Second Appellate Authority came to the conclusion that the assessee has received the amount of share

application money from 10 companies based at Calcutta being Rs. 4 lakhs received from each company because these companies are at same place

and only some are having addresses. The assessee filed copy of share application money and the copies of cheques issued. Only three cheques were

deposited from share applicants while the assessee has claimed that there were 10 applicants. Besides this, the cheque was deposited on the same

day. Therefore, the Assessing Officer has to verify the genuineness of the transaction and the assessee was asked to submit the accounts of the

share applicants to prove that there was no cash payment.

After examining the bank accounts, the learned Authorities came to the conclusion that only bank accounts of three parties are genuine and the

balance of the share application money of Rs.28 lakhs from rest of the 7 parties is treated as unexplained and confirmed the addition of such amount

under Section 68 of the Act of 1961.

In respect of grounds relate to confirmation of addition of Rs.16,39,960/- made by the Assessing Officer under Section 68 of the Act of 1961, the

learned Tribunal gave the following findings in paras 14 to 16 which reads as under:-

“14. The Assessing Officer added the amount of Rs.16,39,960/- u/s 68 of the Act for the unsecured loan taken by the appellant from M/s Shree

Shyam Polyers. The Assessing Officer has added this amount because this depositor has shown meagre income in his return, no interest is provided

and appellant has failed to prove identity and creditworthiness of this depositor.

Felt aggrieved, the assessee went in appeal before theand the learned CIT(A) observed as under :-

Ground no. 4 of appeal is against addition of Rs.16,39,960/- u/s 68 of the Income Tax Act for the unsecured loan taken by appellant from M/s

Shree Shyam Polymers. The Assessing Officer has added this amount because this depositor has shown meagre income in his return, no interest is

provided and appellant has failed to prove identity and creditworthiness of this depositor. It is a fact that this depositor who is a director in appellant

company has shown income of only Rs.1,49,301/in its return and capital is only Rs. 9,27,309/- and in these circumstances creditworthiness of depositor

is not proved for giving a credit of Rs. 16,39,960/-. Besides this huge cash deposits were seen in bank account of M/s Shree Shyam Polyers in Citi

Bank account no.0- 000449-547 before making cheque payments to appellant which raises serious doubts on the genuineness of these transactions.

As a result, addition u/s 68 of the Income Tax Act of Rs. 16,39,960/- is hereby confirmed. Ground no. 4 of appeal is dismissed.

We have heard both the sides. We find that it is a fact that thisdepositor who is a director in appellant company has shown income of only

Rs.1,49,301/- in its return and capital is only Rs. 9,27,309/- and in these circumstances creditworthiness of depositor is not proved for giving a credit of

Rs. 16,39,960/-. We further find that huge cash deposit was seen in the bank account before making the payment. Therefore, this transaction was

doubtful. Hon'ble Gujarat High Court in the case of Umesh Krishnani vs. ITO; (2013) 35 taxmann.com 598 has categorically held as under :-

As is very eloquent from the record itself, substantial amount of cash was deposited in the bank accounts of all the creditors shortly prior to

issuance of cheques and insufficiency of the fund with the creditors when could be easily established from the overall facts and circumstances of the

case and when it is further found as a m atter of fact that the assessee had no justification for borrowings such amounts at high rate of interest, even

without disturbing the well established principle of not insisting on the assessee proving source of the source, on the robust facts of the revenue

authorities have rightly not concluded in favour of the assessee. All issues are essentially in the realm of appreciation of facts.

We, therefore, find no flaw in the order of the learned CIT(A) and uphold the same.â€​

Counsel for the appellant during the course of arguments very categorically admitted that no document was produced before the Assessing

Officer to establish the genuineness of the transaction. He had submitted the documents was filed on 15.9.2009 before the appellate authority to

establish the genuineness of the transactions. He had also filed all the documents and evidences before the ITAT on 4.11.2016. His contention is that

the appellant had submitted documents before the Appellate Authority as well as before the ITAT for establishing the genuineness of share application

money of Rs.4 lakhs each received from 7 applicants and for establishing the genuineness of unsecured loan of Rs.16.40 lakhs received from M/s.

Shree Shyam Polymers. But these documents were not considered by the learned Appellate Authority while passing the impugned order.

He further submitted that the assessee is not liable to establish source of the source or the credit worthiness of the source of the source and

prayed that the appeal be admitted on the substantial questions of law as framed in para 4 of the appeal.

We have gone through the records of the case and findings recorded by the learned ITAT as well as Commissioner of Income Tax (Appeals).

Paras 7 and 8 of the order passed by the Appellate Authority on 21.11.2016 are relevant, which reads as under:-

“7. The short facts of the case are that the assessee has received the amount of share application money from 10 companies based at Calcutta

being Rs. 4 lacs received from each company because these companies are at same place and only some are having addresses. The assessee filed

copy of share application money and the copies of cheques issued. The Assessing Officer observed that only three cheques were deposited from

share applicants while the assessee has claimed that there were 10 applicants. Besides this, the cheque was deposited on the same day. Therefore,

the Assessing Officer has to verify the genuineness of the transaction and the assessee was asked to submit the accounts of the share applicants to

prove that there was no cash payment. In respect of three parties, M/s R.K. Skyline Construction Limited, M/s Renovision Commerce P. Ltd. and

Amarjyoti Vyapar Limited, no cash deposit was found. In respect of seven parties, the Assessing Officer did not believe the explanation of the

assessee. The matter travelled to the learned CIT(A) and the learned CIT(A) has deleted the addition of Rs. 12 lacs by observing as under :-

As a result while share application money of Rs.12 lakhs of three parties named above whose bank account were furnished by appellant are

treated as genuine and such addition of Rs. 12 lakhs is deleted, the balance of share application money of Rs.28 lakhs from rest of 7 parties is treated

as unexplained and addition of such amount is confirmed u/s 68 of Income Tax Act. As a result this ground no. 3 of appeal is partly allowed.

We have considered the submissions of both the sides. Looking to the facts and circumstances of the case,we find that in case of three parties the

learned CIT(A) was of the view that three parties, viz. M/s R.K. Skyline Construction Ltd., M/s Renovision Commece P. Ltd and Amarjyoti Vyapar

Ltd. no cash was deposited and the learned CIT(A) has verified the bank accounts of these parties and he has treated it as genuine and the addition of

Rs. 12 lacs was deleted. Therefore, our interference is not called for.â€​

On going through the aforesaid so also the order passed by the learned ITAT on 21.11.2016 wherein the learned ITAT has given a clear cut

finding and accordingly the ground relating to addition of Rs.28 lakhs of the assessee has been dealt with while deciding Revenue's appeal, and

deletion of Rs.12 lakhs was confirmed.

In respect of unsecured loan taken by the assessee from Shree Shyam Polymers, this depositor has shown meagre income in his return, no interest

is provided and appellant has failed to prove identity and creditworthiness of this depositor. This depositor, who is a director in appellant company has

shown income of only Rs.1,49,301/- in its return and capital is only Rs. 9,27,309/- and in these circumstances creditworthiness of depositor is not

proved for giving a credit of Rs. 16,39,960/-. The learned Authorities also found that huge cash deposits were seen in bank account of M/s. Shree

Shyam Polyers in Citi Bank account No.0000449-547 before making cheque payments to appellant - assessee which raises serious doubts on the

genuineness of these transactions.

On due consideration of the aforesaid and findings recorded by the learned Appellate Authority which is based on appreciation of evidence on

record and documents filed by the appellant, no case is made out to interfere with the well reasoned order passed by the ITAT.

No substantial question of law is arising in this appeal. The appeal filed by the appellantâ€"assessee has no merit and is, accordingly, dismissed.