2016 (1) TMI 1124 - AT - Income Tax

Addition made u/s 68 of the Act on account of share application money - Held that - The AO himself had written to CBI authorities for copies of documents, which did not invoke any response from CBI. The assessee vide letter dated 16.11.2009 had furnished the name, PAN, addresses, payment details to the AO. When there was CBI enquiry in assessee s case, the notice of the AO did not invoke any response from share-applicants is plausible, however that cannot be the sole ground to justify the addition unless the AO is able to show that details furnished by the assessee in respect to the identity of the share-holders are bogus, their PAN details are false, addresses are wrong and payment details are false. The AO ought to have verified the facts during assessment proceedings or even he could have done when the ld. CIT (A) has forwarded all the details filed before him under Rule 46A, which he did not after seeking one month s time and took three months to sent the remand report which was granted by CIT (A). So, we find that there was sufficient cause for non-filing of evidence before the AO. The AO ought to have scrutinized the evidence and in case, he nurtures any doubt about the veracity of the documents, the discretion is upon him to probe the matter further, which has not been done in the case in hand. He could not have discredited the documents, without giving any cogent reasons and material. Therefore, in view of the material filed by the assessee, we find that that the assessee has discharged the onus cast upon him. Addition u/s 69 - Held that - The books of accounts of the assessee had been audited and entry reflected in the return of income and the balance sheet has been duly audited by a qualified chartered accountant. We find force in the submissions of the ld. AR that even if the AO could not have the opportunity to peruse the books of accounts of the assessee, during the assessment stage because, according to assessee, it was all with CBI and the fact of the matter is that even at the remand stage, the matter could have been looked into by the AO, which has not been done. So, in the light of the transactions through banking channel and audited books of account, it cannot be said that the investments were not reflected in the books of account when there is a clear finding of the CIT (A) that the investments in building WIP was duly accounted for in the books of account and the balance sheet has been duly audited by a qualified chartered accountant. Thus, in our opinion, when the bank account is disclosed, through which the cheques have been issued in each of the cases, the investment in the said plot and the construction thereon cannot be taken as not recorded in the books of accounts of the assessee. In the background of the aforesaid discussions, we do not find any infirmity in the order of the Ld. CIT(A), hence, we uphold the same and decide the ground against the Revenue. Addition on account of purchase of plot - Held that - We find that the addition in dispute has been made because of the inability of the assessee to produce the books of accounts of the assessee because all documents had been in the custody of CBI. We take note that the investments were installments for plots which were made to HUDA, a Government Agency and made through Demand Drafts and have passed through banking channels and the fact is that the books of the assessee was duly audited as per the statute and reflected in the balance sheet. The verification of the books ought to have been done by the AO during the remand proceedings which took three month s time but he has not made any attempt to do so and the addition was based on conjectures and surmises. Since the installments for the plot have been paid through DD to a Government agency and the books of the assessee are statutorily audited as stated by the ld. CIT (A) on the basis of evidence, we do not find the impugned order to be perverse, which does not need any interference on our part, hence, we uphold the same and dismiss the ground raised by the Revenue.

Issues Involved:
1. Deletion of addition made under Section 68 of the Income Tax Act, 1961, on account of share application money.
2. Deletion of addition made under Section 68 of the Income Tax Act, 1961, on account of unsecured loans.
3. Deletion of addition made under Section 69 of the Income Tax Act, 1961, on account of purchase of fixed assets.
4. Deletion of addition made on account of purchase of plot.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Share Application Money:
The revenue challenged the deletion of an addition of Rs. 92,95,000 made under Section 68 of the Income Tax Act, 1961, on account of share application money. The Assessing Officer (AO) issued a questionnaire to the assessee for details regarding the share application money but received insufficient responses. The AO made the addition due to the lack of identity, creditworthiness, and genuineness of transactions. The CIT (A) allowed the additional evidence under Rule 46A, citing the CBI's seizure of documents as a sufficient cause for non-production during the assessment. The CIT (A) found that the assessee provided sufficient documentation, including PAN cards, bank statements, and confirmations, proving the identity, genuineness, and creditworthiness of the shareholders. The Tribunal upheld the CIT (A)'s decision, noting that the AO failed to discredit the documents or further investigate the veracity of the details provided.

2. Deletion of Addition on Account of Unsecured Loans:
The revenue challenged the deletion of an addition of Rs. 52,48,820 made under Section 68 on account of unsecured loans. The AO made this addition based on the same reasoning as the share application money. The CIT (A) deleted the addition, noting that the assessee provided detailed information, including names, addresses, PAN, and confirmations of the loan creditors. The CIT (A) referenced the Supreme Court decision in CIT vs. Orissa Corporation (P) Ltd., which held that the assessee's burden is discharged upon providing such details, and the AO failed to pursue further inquiries. The Tribunal upheld the CIT (A)'s decision, emphasizing that the AO had sufficient information to verify the loans but did not act on it.

3. Deletion of Addition on Account of Purchase of Fixed Assets:
The revenue challenged the deletion of an addition of Rs. 74,84,106 made under Section 69 on account of the purchase of fixed assets. The AO added this amount as unexplained investment due to the lack of documentary evidence. The CIT (A) deleted the addition, noting that the investments were accounted for in the audited books of accounts and reflected in the balance sheet. The CIT (A) found that the payments were made by cheque, and the bank statements corroborated these transactions. The Tribunal upheld the CIT (A)'s decision, stating that the AO could have verified the books during the remand stage but failed to do so.

4. Deletion of Addition on Account of Purchase of Plot:
The revenue challenged the deletion of an addition of Rs. 12,23,707 made on account of the purchase of a plot. The AO made this addition due to the assessee's inability to produce the books of accounts, which were seized by the CBI. The CIT (A) deleted the addition, noting that the payments for the plot were made through demand drafts and reflected in the bank account. The CIT (A) found that the investments were recorded in the audited books of accounts. The Tribunal upheld the CIT (A)'s decision, emphasizing that the AO did not verify the books during the remand proceedings despite having the opportunity.

Conclusion:
The Tribunal dismissed the revenue's appeal, upholding the CIT (A)'s decisions on all grounds. The Tribunal found that the assessee had provided sufficient evidence to substantiate the share application money, unsecured loans, and investments in fixed assets and plots. The AO's failure to pursue further inquiries or verify the documents during the remand stage was a significant factor in the Tribunal's decision.

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