2015 (10) TMI 409 - AT - Income Tax

Addition u/s.68 - unexplained partners capital - Held that - We are of the view that the proceedings qua the addition of ₹ 1.985 crores is difficult to resolve conclusively unless the outcome of the Settlement Commission proceeding are ascertained.A perusal of the Hon ble Bombay High Court s interim-order dated 12.3.2015 on the petitions of the partners reveals that these petitions were to be placed for final hearing board in the week commencing from 6.4.2015, meaning thereby, the writ petitions are on the board of Hon ble High Court and likely to be disposed of on an early date. Therefore, we deem it appropriate to set aside this issue to the file of the CIT(A) for re-adjudication. The ld. First Appellate Authority will take up the proceedings preferably after ascertaining of outcome of the settlement petitions. In case the outcome is not brought to the notice of ld. First Appellate Authority, within reasonable period, then the ld. First Appellate Authority will be at liberty to proceed in accordance with law. As far as other two issues are concerned, both the parties have conceded that these issues may also be restored to the file of the ld. First Appellate Authority for fresh adjudication, because, the addition u/s.68 has a link with Settlement Commission proceedings. The books were seized by the DRI, therefore, relevant material was not produced. The ld. AO disallowed ₹ 1,00,000/- on account of non-filing of supporting evidence. But from the orders, exact failure of the assessee not discernible. Major item of expenses is for power which can easily be verified from the electricity department. Thus, both these issues also required re-appreciation at the level of ld. First Appellate Authority. Taking into consideration the impugned orders and the stand of the ld.representative, we set aside this issue also to the file of the ld.CIT(A). The ld.CIT(A) shall have a re-look on the total addition of ₹ 84 lakhs made under section 68 of the Income Tax Act. - Decided in favour of assessee for statistical purpose.

Summary

Issues involved:
Cross-appeal against ld.CIT(A) order for Asstt.Year 2003-04 - Descriptive and argumentative grounds of appeal - Addition u/s.68 for unexplained partners capital - Restriction of unsecured loans addition - Lump-sum disallowance of expenses - Deletion of addition by ld.CIT(A) - Settlement Commission proceedings impact on appeals - Addition of unexplained credit and unsecured loans - Reopening of assessment - Fictitious bank accounts and cash credits - Re-adjudication by ld.CIT(A) - Ad hoc disallowance of expenses - Restoration of issues to ld.CIT(A) for fresh adjudication.

Analysis:
The judgment involved a cross-appeal against the ld.CIT(A) order for the assessment year 2003-04. The appellant raised grounds of appeal that were not in line with the Income Tax (Appellate Tribunal) Rule, 1963, being descriptive and argumentative. The substantial grounds of appeal included challenges to the addition of unexplained partners' capital, restriction of unsecured loans addition, and lump-sum disallowance of expenses. The Revenue's appeal focused on the deletion of an addition made under section 68. The ld. AO had made additions for unexplained credits and unsecured loans, which were contested by both parties.

The ld.CIT(A) had deleted a portion of the addition related to unexplained credit based on ownership details provided by one of the partners. The appellant argued that the addition was unjustified given the turnover and operational history. Additionally, the Settlement Commission proceedings involving the partners were deemed relevant to the case. The judgment highlighted the importance of these proceedings in determining the source of funds for capital contributions.

Regarding the addition of unsecured loans, the ld.CIT(A) partially deleted the addition. The appellant contended that confirmations and relevant details were not considered adequately. The judgment emphasized the need for a re-evaluation of the issues at the ld.CIT(A) level. The ad hoc disallowance of expenses was also subject to re-adjudication due to lack of supporting evidence and the need for further verification.

Ultimately, the appeals were allowed for statistical purposes, and all issues were restored to the ld.CIT(A) for fresh adjudication. The ld.CIT(A) was instructed to provide a fair hearing to both sides, ensuring no prejudice to either party. The judgment underscored the complexity of the case, necessitating a comprehensive review and consideration of all relevant factors in the re-adjudication process.