Assessee Discharges Primary Onus Submitting Documentary Evidence: ITAT Deletes Addition of Unexplained Cash Credits

The respondent/assessee is in the business of manufacturing M.S. ingots. The assessee had filed its return of income for the assessment year 2012-13 on September 26, 2012, declaring an income. Subsequently, the case of the assessee was selected for scrutiny assessment.

During the course of the assessment proceedings, it was observed that the assessee company, during its first year of operation, was in receipt of share capital/premium amounting to Rs.66,65,000/- from 16 persons. Also, it was noticed that the assessee company had raised loans from various parties.

In order to verify the genuineness and veracity of the share capital or premium claimed by the assessee to have been received during the year under consideration, the A.O. called for certain details from the share applicants. However, the notices were not complied with by the respective parties and remained unanswered. The assessee had failed to discharge the onus that was cast upon it as regards establishing the identity and creditworthiness of the share applicants. The assessee failed to prove the genuineness of the transactions involving the receipt of share capital/premium from the parties concerned. The AO held the entire amount of Rs.66.65 lakhs as the income of the assessee from undisclosed sources under section 68 of the Income Tax Act.

The assessee assailed the assessment order passed by the A.O. before the CIT (Appeals). The CIT (Appeals) observed that the amounts were received by the assessee company from 16 people, wherein 13 of those were either family members or close relatives of the directors of the assessee company.

It was observed by the CIT (Appeals) that in the course of the assessment proceedings, the assessee had furnished with the A.O. PAN numbers., copies of returns of income, computation of income, share application forms, bank statements, balance sheets, bank account details, along with the source of payment of the aforementioned amounts by the respective share applicants. It was further noticed by the CIT (Appeals) that the A.O had not drawn any adverse inferences as regards the documentary evidence which was filed by the assessee before him.

The ITAT found that the A.O had not drawn any adverse inferences qua the documentary evidence that was filed by the assessee company in discharge of the primary onus that was cast upon it. Therefore, the assessee proved the identity and creditworthiness of the share applicants as well as the genuineness of the transaction by having received the share capital/premium from the applicants.

"We are of the considered view, that as the assessee by placing on record the documentary evidence had duly discharged the primary onus that was cast upon it, therefore, the A.O without dislodging the same on the basis of any material and/or evidence could not have held the amounts therein received as unexplained cash credit u/s.68 of the Act," the ITAT said.

Case Title: ITO Versus M/s. Hanumant Ingots Pvt. Ltd.

Citation: ITA No. 335/RPR/2016

Dated: 09.05.2022

Counsel For Appellant: DR G.N Singh

Counsel For Respondent: AR Ravi Agrawal

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