2015 (2) TMI 1032 - AT - Income Tax

Unaccounted share application money - CIT(A) confirmed addition u/s. 68. - Held that - By considering the relevant record produced by the assessee, we find that the assessee has discharged its onus to prove that the payment in question on account of refund of share application money to these three parties have been made by Nath Industrial Chemical Ltd. and Nath Paper & Pulp. Though the CIT(A) has raised a question about the takeover agreement to verify whether liability of repayment was part of the takeover agreement or not however, it is pertinent to note that when the assessee has produced the relevant record to establish that the payment was made by Nath Group of Companies then the takeover agreement will not change the fact of payment made by these companies. Accordingly, in the facts and circumstances of the case, we hold that the assessee has proved the fact that the repayment of application money of ₹ 51,20,000/- was made to these three companies through Nath Group of companies and therefore, addition made by the AO of this account is not sustainable and accordingly deleted. - Decided in favour of assessee.

Summary

Issues Involved:
1. Confirmation of addition of Rs. 51,20,000 on account of share application money under Section 68C.
2. Verification of repayment of share application money by Nath Group of Companies.
3. Admissibility and verification of additional evidence submitted by the assessee.

Issue-wise Detailed Analysis:

1. Confirmation of Addition of Rs. 51,20,000 on Account of Share Application Money Under Section 68C:
The assessee filed its return of income on 31/12/1993 declaring a total loss of Rs. 27,456. During the assessment proceedings for the assessment year 1997-98, the Assessing Officer (AO) noted that the share application money received from three parties, totaling Rs. 51,20,000, was outstanding as on 31/3/1997. These amounts were received during the FY 1992-93. The AO found discrepancies in the assessment records of these companies, leading to the re-opening of the assessment for the year 1993-94. The AO concluded that the creditors did not exist and added Rs. 51,20,000 to the assessee's income. The CIT(A) initially deleted this addition, but the Tribunal set aside this order for further verification.

2. Verification of Repayment of Share Application Money by Nath Group of Companies:
During the set-aside proceedings, the AO issued summons to the three parties to verify the repayment. Summons could not be served to two parties, and the third party could not explain the nature of the advance. The assessee provided fresh evidence, including bank statements and ledger accounts, to show that Nath Group of Companies had repaid the amounts. The AO doubted the veracity of these confirmations, and the CIT(A) confirmed the addition made by the AO. Before the Tribunal, the assessee produced further evidence, including confirmations from Nath Industrial Electrical Ltd. and Nath Pulp & Paper Ltd., showing payments to the three companies. The Tribunal found that the assessee had discharged its onus to prove the repayment of the share application money through Nath Group of Companies.

3. Admissibility and Verification of Additional Evidence Submitted by the Assessee:
The CIT(A) admitted additional evidence submitted by the assessee and referred it to the AO for verification. The AO, in his remand report, doubted the genuineness of the confirmations due to the non-service of summons and lack of satisfactory explanation from the third party. The CIT(A) requested the assessee to produce the takeover agreement, which was not provided. The Tribunal noted that the payment of larger amounts by Nath Group of Companies was not disputed and that the only aspect to be verified was whether the share application money was part of these larger payments. The Tribunal concluded that the assessee had provided sufficient evidence to prove that the payments were made by Nath Group of Companies, thus deleting the addition made by the AO.

Conclusion:
The Tribunal held that the assessee had proved the repayment of the share application money through Nath Group of Companies and deleted the addition of Rs. 51,20,000 made by the AO. The appeal of the assessee was allowed.