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2017 (12) TMI 1547 - AT - Income TaxRevision u/s 263 - Unexplained cash credit addition by invoking the provisions of sec. 68 - Held that - As assessee did not get fair opportunity to present the evidences before the AO so there was a lack of opportunity as aforesaid therefore it has to go back to AO. Hon ble Supreme Court in three judges bench in the case of Tin Box (2001 (2) TMI 13 - SUPREME Court) has held that since there was lack of opportunity to the assessee at the assessment stage itself the assessment needs to be done afresh - Appeal of assessee is allowed for statistical purposes
Issues Involved:
1. Confirmation of addition of Rs. 8,06,00,000/- as unexplained cash credit under Section 68 of the Income-tax Act, 1961. 2. Adequacy of opportunity provided to the assessee to present evidence. 3. Adequacy and thoroughness of the Assessing Officer’s (AO) investigation following the directions under Section 263 of the Act. Issue-Wise Detailed Analysis: 1. Confirmation of Addition of Rs. 8,06,00,000/- as Unexplained Cash Credit: The primary grievance of the assessee was against the confirmation of the addition of Rs. 8,06,00,000/- made by the AO on account of alleged unexplained cash credit by invoking the provisions of Section 68 of the Income-tax Act, 1961. The AO, following the directions from the Commissioner of Income Tax (CIT) under Section 263, conducted an investigation into the share capital infusion. The AO observed that the shareholder companies had common directors, minimal activities, nominal returns, and funds primarily sourced from the sale of shares of other similar companies. Due to non-appearance of the directors for verification, the AO concluded that the share application money remained unexplained and added it under Section 68. The CIT(A) upheld this addition. 2. Adequacy of Opportunity Provided to the Assessee: The assessee contended that sufficient opportunity was not granted to present evidence. Initially, the AO issued a notice on 16.08.2013, which the assessee complied with by submitting necessary documents. However, subsequent notices were issued at the end of February 2014, and the assessee's directors were out of station until 23.03.2014. The AO's summons dated 24.03.2014 for appearance on 26.03.2014 was allegedly not served, leading to adverse conclusions due to non-appearance. The Tribunal noted that the reassessment order was passed without granting fair opportunity, citing the Supreme Court's decision in Tin Box Company vs. CIT, which emphasized the necessity of providing a reasonable opportunity to the assessee. 3. Adequacy and Thoroughness of the AO’s Investigation: The CIT, exercising revisional jurisdiction under Section 263, directed the AO to conduct a thorough investigation into the source of share capital. The AO was instructed to examine the genuineness and source of share capital for each shareholder, scrutinize bank accounts, and verify the credentials of directors. The AO acknowledged initial compliance by the assessee but based his adverse conclusion on the non-appearance of directors. The Tribunal observed that the AO did not follow the CIT's guidelines adequately and failed to conduct a detailed investigation as directed. The Tribunal referenced similar cases where the CIT's order under Section 263 was upheld by higher courts, including the Supreme Court, and emphasized the need for thorough inquiry as per the guidelines. Conclusion: The Tribunal found that the assessee was not provided with a fair opportunity to present evidence and that the AO did not conduct a thorough investigation as directed by the CIT under Section 263. Consequently, the Tribunal set aside the order of the CIT(A) and remanded the matter back to the AO for de novo assessment, ensuring compliance with legal procedures and providing the assessee a fair opportunity to be heard. The appeal of the assessee was dismissed. Order Pronounced in the Open Court on 15th December, 2017.
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