2015 (8) TMI 1032 - AT - Income Tax

Bogus capital share introduction - accommodation entries - CIT(A) proceeded to partly accept some of the claims of the assessee and partly rejected and also restored the issue back to the file of the AO for verification on facts.Held that - As far as the statutory mandate is concerned, section 250(6) of the Income Tax Act which sets out the procedure which the CIT(A) in appeal is required to follow it is seen that the statute does not permit the Ld. CIT(A) to remand the issue to the AO. The statute contemplates that an enquiry may be required which he himself may enquire into or may direct the AO to inquire. CIT(A) instead of obtaining a Remand Report from the AO as per the statutory mandate in order to conclusively decide the issue instead restored the issue to the AO contrary to the statutory mandate. In view of this obvious statutory violation, the impugned order cannot be upheld. The issues raised are inter-linked and the finding arrived at it is seen is without considering the relevant material on record. Accordingly in view of the afore-mentioned factual position; legal mandate and considering the submissions of the parties before the Bench, we deem it appropriate to set aside the impugned order and restore the issues back to the file of the Ld. CIT(A) with the direction to pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard. - Decided in favour of revenue for statistical purposes.

Issues Involved:
1. Validity of the addition of Rs. 3,08,00,000 as unexplained cash credits under Section 68 of the Income Tax Act.
2. Verification of share capital contributions from family members of the group chairman.
3. Verification of investments made by M/s HBN Dairies & Allied Limited.
4. Admissibility of additional evidence under Rule 46A of the Income Tax Rules, 1962.

Issue-wise Detailed Analysis:

1. Validity of the Addition of Rs. 3,08,00,000 as Unexplained Cash Credits under Section 68:
The assessment order highlighted that the assessee company, incorporated on 26.06.2006, declared a share capital of Rs. 1,54,50,000 and reserves and surplus of Rs. 1,53,50,000, totaling Rs. 3,08,00,000. This amount was scrutinized due to suspicions of being unexplained cash credits. The AO referred to seized documents and statements from key individuals, including Sh. S.G. Bhavnani and Sh. M.L. Singla, which indicated that accommodation entries were arranged. The AO concluded that the entire sum of Rs. 3,08,00,000 was income from undisclosed sources under Section 68.

2. Verification of Share Capital Contributions from Family Members:
The AO noted that the assessee received share capital contributions from members of the Sran family, totaling Rs. 68,95,000. Despite confirmations and PAN details provided, the AO found inconsistencies and unverifiable details, leading to the inclusion of this amount as unexplained cash credits. The CIT(A) directed the AO to verify these contributions and delete the addition if no discrepancies were found in the assessments of these family members.

3. Verification of Investments by M/s HBN Dairies & Allied Limited:
The assessee claimed that Rs. 1,51,40,000 was invested by M/s HBN Dairies & Allied Limited. The CIT(A) directed the AO to verify this claim and delete the addition if the investment was reflected in the books of M/s HBN Dairies & Allied Limited, which was separately assessed under Section 153A.

4. Admissibility of Additional Evidence under Rule 46A:
The assessee contended that the CIT(A) erred by not admitting additional evidence in the form of confirmations from five parties regarding investments totaling Rs. 34,60,000. The CIT(A) did not address this issue adequately, leading to further contention.

Tribunal's Decision:
The Tribunal found that the CIT(A) improperly remanded issues to the AO instead of obtaining a Remand Report and making a conclusive finding as required by Section 250(6) of the Income Tax Act. The Tribunal set aside the CIT(A)'s order and restored the issues back to the CIT(A) with instructions to pass a speaking order after providing the assessee a reasonable opportunity of being heard. Both the assessee's and the Revenue's appeals were allowed for statistical purposes.

Conclusion:
The Tribunal emphasized adherence to statutory mandates and directed a thorough re-examination of the issues by the CIT(A), ensuring proper verification and conclusive findings based on the material on record. The appeals were allowed for statistical purposes, and the order was pronounced in the open court on 19th August 2015.

← Previous Next →