2014 (10) TMI 420 - AT - Income Tax

Addition on share capital Shares issued to Shri Deepak Gupta Unexplained cash credits Held that - The assessee has not given any details with regard to the share capital of ₹ 1 lakh, not even the name of the shareholder and the confirmation of the shareholder - Before the CIT(A), the assessee explained that it had received the sum of ₹ 10,10,000/- by cheque from Shri Anupam Nagalia, out of which, ₹ 50,000/- is credited to the share capital account of Shri Anupam Nagalia, ₹ 50,000/- to the share capital account of Shri Deepak Gupta and balance ₹ 9,10,000/- in the loan account - Except this explanation, no confirmation from anybody was produced and moreover, why the cheque received from Shri Anupam Nagalia was credited by share capital by Shri Deepak Gupta is explained - the matter needs proper examination at the end of the AO. So far as cash deposit in the bank is concerned, the only explanation of the assessee is cash withdrawal from the banks two and half months before - the assessee has not produced the cash book from which the AO may verify whether the cash withdrawn two and half months back is available - The assessee is a company which is in the business of real estate revenue rightly pointed out that it needs to be verified whether no expenditure is incurred by the assessee company during the two and half month period. Similarly, with regard to mutation expenses, no vouchers for the expenses are submitted. The only explanation of the assessee is that the payment has been made by M/s Vatika Limited and the expenses were incurred for identification of land, inspection thereof, searching of registrar s record, expenses incurred on reports from advocates, brokerages etc. - Now, if a third party is debiting some account in the name of the assessee, the third party would certainly give the details to the assessee to whom they have made the payment and for which purpose - No such vouchers/details or evidence are produced before the AO either in original assessment proceedings or in remand proceedings despite assurance given to CIT(A) - before the CIT(A), the assessee agreed that he will produce the books of account and supporting evidence for verification before the AO and the CIT(A) directed the AO to call for the relevant vouchers and books of account for verification revenue rightly contended that the entire matter needs complete relook and re-examination by the AO thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for fresh adjudication Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of Rs. 50,000 as unexplained credit in respect of shares issued to Shri Deepak Gupta.
2. Disallowance of Rs. 9,88,377 debited under the head "purchase account on account of mutation expenses."
3. Deletion of Rs. 50,000 addition made on account of unexplained source of share capital from Shri Anupam Nagalia.
4. Deletion of Rs. 10.41 lakhs addition made on account of unexplained cash deposited in the bank account.

Issue-wise Detailed Analysis:

1. Addition of Rs. 50,000 as unexplained credit:
The assessee company disputed the addition of Rs. 50,000 received as share capital from Shri Deepak Gupta, which was part of a total addition of Rs. 1,00,000. The assessee explained that the amount was provided by Shri Anupam Nagalia and confirmed that the shares were issued accordingly. The company was incorporated with a share capital of Rs. 1,00,000, contributed by promoter shareholders. The Assessing Officer (A.O.) added Rs. 1,00,000 as unexplained cash deposit without calling for evidence. The CIT(A) sustained Rs. 50,000 of this addition, stating the identity of Shri Deepak Gupta was not proved. The Tribunal found that the A.O. and CIT(A) erred in their findings as the sum of Rs. 10,10,000 received from Shri Anupam Nagalia was through a cheque, and Rs. 1,00,000 was appropriated towards share capital for both Shri Anupam Nagalia and Shri Deepak Gupta. The Tribunal noted the need for proper examination by the A.O. and set aside the orders for reassessment.

2. Disallowance of Rs. 9,88,377 as mutation expenses:
The assessee challenged the disallowance of Rs. 9,88,377 debited as mutation expenses. The A.O. disallowed the amount, stating the assessee failed to explain the source of these expenses. The assessee argued that M/s Vatika Limited incurred these expenses on its behalf, which was confirmed by M/s Vatika Limited. The CIT(A) sustained the addition due to the lack of supporting vouchers. The Tribunal observed that the expenses were indeed incurred by M/s Vatika Limited and debited to the assessee's account. However, due to the absence of supporting evidence, the Tribunal directed a re-examination by the A.O., requiring the assessee to produce books of accounts and vouchers.

3. Deletion of Rs. 50,000 addition from Shri Anupam Nagalia:
The Revenue contested the deletion of Rs. 50,000 addition made by the A.O. for unexplained share capital from Shri Anupam Nagalia. The assessee had received Rs. 10,10,000 from Shri Anupam Nagalia, out of which Rs. 50,000 was credited to the share capital account of Shri Anupam Nagalia and Rs. 50,000 to Shri Deepak Gupta, with the balance credited to the loan account. The Tribunal noted the A.O. did not verify the explanation properly and directed a fresh examination by the A.O.

4. Deletion of Rs. 10.41 lakhs addition for unexplained cash deposit:
The Revenue also challenged the deletion of Rs. 10.41 lakhs addition for unexplained cash deposits. The assessee explained that the cash deposited was from earlier withdrawals. The A.O. noted a gap of over two months between withdrawal and deposit and questioned the availability of cash. The Tribunal found that the cash book was not produced for verification. The Tribunal directed the A.O. to re-examine the matter, verifying the cash book and ensuring the availability of cash during the period in question.

Conclusion:
The Tribunal set aside the orders of the lower authorities on all points raised in both the Revenue's and assessee's appeals. It directed the A.O. to re-adjudicate the issues afresh, allowing the assessee to produce books of accounts and supporting evidence for verification. The appeals were deemed allowed for statistical purposes.

Order Pronounced:
The order was pronounced in the Open Court on 22.8.2014.