2012 (5) TMI 164 - AT - Income Tax

Addition u/s 68 - Penalty u/s 271 - share application money - onus to prove - held that - the assessee has to discharge the primary onus by placing on record the basic information about the investors. This initial burden can be said to be discharged if the names and addresses of the investors are placed on record. Further, initial burden can also be said to be discharged if the mode of payment is also placed on record. The initial burden or the primary onus can also be said to be discharged if the genuineness of the transaction, i.e. share applications are also placed on record. Once all those documents were produced, then it can be safely held that the requisite primary onus, as casted upon an assessee, has been discharged. Thereafter, it is for the AO to scrutinize those details. The Hon ble Courts, as cited hereinabove, have suggested that if the AO had made certain enquiries and nurtures any doubt about the creditworthiness of those investors, then he is free to take appropriate action in their respective hands. - Decided against revenue. Condonation of delay as granted by CIT(A) - held that - litigant must not be thrown out of the litigation at the very threshold without providing an opportunity of hearing. Particularly in this case, we have noticed that the assessee was vigilant about his right of appeal and, therefore, knocking one door or the other and seeking for justice. It is not the case that no appeal at all was filed earlier. The first appeal was filed very much in time but it was treated as non-est due to non-payment of tax. A second appeal was filed after making the payment of taxes, stated to be a sum of Rs. 3,47,830/- as T.D.S. and Rs. 10,96,409/- as self assessment tax thus totalling to Rs.14,44,239/- i.e. admitted tax liability. Meanwhile, against the first appeal, the assessee had gone before Tribunal, however, that appeal was withdrawn in the month of November-2005 because by that time the assessee obtained the impugned order of CIT(A) Ahmedabad which was dated 27/10/2005, the impugned appellate order now under appeal before us. On account of these facts, it is not logical to conclude that the assessee was negligent or irresponsible, therefore, did not entitled for any discretion or sympathy. - Decided in favor of assessee.

Issues Involved:
1. Admission of additional ground regarding delay in filing the appeal.
2. Condonation of delay in filing the appeal before CIT(A).
3. Quantum addition under section 68 of the Income Tax Act.
4. Deletion of penalty under section 271(1)(c) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Admission of Additional Ground Regarding Delay in Filing the Appeal:
The Revenue raised an additional ground questioning the CIT(A)'s decision to entertain the assessee's appeal despite a six-year delay in filing. The Tribunal held that no prejudice would be caused to the respondent-assessee by admitting this additional ground. The Tribunal emphasized its statutory obligation to entertain an additional ground if it goes to the root of the cause and if both parties are duly heard. The Tribunal referred to Rule 11 of the Income Tax Appellate Tribunal Rules, 1963, and the case law of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC), and admitted the additional ground for consideration.

2. Condonation of Delay in Filing the Appeal Before CIT(A):
The Tribunal examined the facts regarding the condonation of delay granted by the CIT(A). The assessment order was passed on 16/03/1999, and the appeal was filed on 23/06/2005, resulting in a six-year delay. The assessee argued that the delay was due to a severe financial crunch and subsequent payment of taxes. The Tribunal noted that the assessee was vigilant about its right of appeal and had filed the first appeal in time, which was treated as non-est due to non-payment of tax. The Tribunal referred to the case of Collector, Land Acquisition v. MST Katiji [1987] 167 ITR 471 (SC) and other relevant judgments, affirming that the CIT(A) was correct in condoning the delay, thereby dismissing the Revenue's objection.

3. Quantum Addition Under Section 68 of the Income Tax Act:
The AO had added Rs. 2,19,64,000/- as unexplained cash credit under section 68, questioning the genuineness of the share capital received under the promoter's quota. The CIT(A) deleted the addition, noting that the assessee had furnished all relevant information, including share applications, bank statements, and confirmatory letters. The Tribunal upheld the CIT(A)'s decision, emphasizing that the assessee had discharged its primary onus by providing the necessary details of the investors and the mode of payment. The Tribunal referred to several case laws, including CIT v. Lovely Exports (P.) Ltd. [2008] 299 ITR 268 (Delhi) and CIT v. Steller Investment Ltd. [2001] 251 ITR 263 (SC), concluding that the AO should have further investigated the investors if there were doubts about their creditworthiness. The Tribunal dismissed the Revenue's appeal on this ground.

4. Deletion of Penalty Under Section 271(1)(c) of the Income Tax Act:
The CIT(A) had deleted the penalty of Rs. 1,02,12,690/- levied under section 271(1)(c), noting that the AO had not established that the share-holders were not genuine and had made the addition in a casual manner. The Tribunal agreed with the CIT(A), stating that the issue of addition under section 68 was settled in favor of the assessee, and therefore, the penalty was rightly deleted. The Tribunal dismissed the Revenue's appeal on this ground as well.

Conclusion:
Both appeals filed by the Revenue were dismissed, with the Tribunal upholding the CIT(A)'s decisions on the condonation of delay, deletion of quantum addition under section 68, and deletion of penalty under section 271(1)(c). The Tribunal emphasized the importance of providing a fair opportunity to the assessee and the necessity for the AO to conduct thorough investigations when questioning the genuineness of transactions.

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