Manoj Kumar Aggarwal ORDER
Manoj Kumar Aggarwal, Member (A)
1.1. As per the provisions of Section 68 of the Income Tax Act, 1961, where any sum is found credited in the assessee's books and assessee offers no explanation about the nature and source thereof or the explanation furnished is found to be unsatisfactory, the sum so credited may be charged to Income-Tax as the income of the assessee of that previous year. A proviso has been inserted to the said section by Finance Act, 2012 w.e.f. 01/04/2013 to provide that where the assessee is a company and the sum so credited consists of share application money, share capital, share premium etc., the explanation furnished by the assessee shall be deemed to be not satisfactory unless the person in whose name such credit is recorded also offers an explanation about nature and source of sum so credited and such explanation is found to be satisfactory. However, this proviso is applicable only from AY 2013-14 and the same is not retrospective in nature as held by Hon'ble Bombay High Court in the case of CIT Vs. Gagandeep Infrastructure Private Limited [MANU/MH/1274/2017 : 80 Taxmann.com 272]. The said position has also been reiterated by Hon'ble Bombay High Court in its recent decision tilted as Gaurav Triyugi Singh V/s ITO (ITA No. 1750 of 207, dated 22/01/2020) which also consider its earlier decision of Pr. CIT V/s Veedhata Towers Pvt. Ltd. (MANU/MH/1175/2018 : 2018 403 ITR 415). More pertinently, the said proviso is not, at all, applicable in case of unsecured loans or deposits.
1.2. It is settled position of law that to avoid the rigors of Section 68, the assessee must prove the identity, creditworthiness of the lenders/investors to advance such monies and genuineness of the transactions. Once these three ingredients are shown to be fulfilled by the assessee, the primary onus casted upon him, in this regard, could be said to have been discharged and accordingly, the onus would shift upon revenue to dislodge the assessee's claim by bringing on record material evidences and unless this onus is discharged by the revenue, no addition could be sustained u/s. 68. The Hon'ble Supreme Court in the case of Lovely Exports P. Ltd. [MANU/SC/8539/2008 : 319 ITR 5], dismissing revenue's appeal, observed as under:-
2. Can the amount of share money be regarded as undisclosed income under section 68 of IT Act, 1961? We find no merit in this Special Leave Petition for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment.
3. Subject to the above, Special Leave Petition is dismissed.
The ratio of said decision has subsequently been followed by various judicial authorities in catena of judicial pronouncements. The said decision has been followed by Hon'ble Bombay High Court in the case of CIT Vs. Gagandeep Infrastructure Private Limited [MANU/MH/1274/2017 : 80 Taxmann.com 272] & subsequently in CIT Vs. Orchid Industries Private Limited [MANU/MH/2217/2017 : 88 Taxmann.com 502]. The Hon'ble Delhi High Court followed the said decision in Pr. CIT V/s Adamine Construction Pvt. L........