2018 (4) TMI 1591 - AT - Income Tax

Addition u/s 68 - opportunity for cross examination not given - Held that - Hon ble Suprme Court in the case of Andaman Timber Industries 2015 (10) TMI 442 - SUPREME COURT held that where opportunity for cross examination is not given, it is violation of principles of natural justice. Thus it will be in the interest of equity and justice to restore both the grounds to the file of the AO to decide it afresh by providing adequate opportunity of being heard to the assessee. The assessee is also directed to submit the relevant documents/ details as to the case before the AO for resolving the issues in question. Thus Ground No. 1 and 2 of the assessee are allowed for Statistical purposes. Disallowing exemption u/s 10AA of interest on FDR - consideration of additional evidence Held that - Assessee has filed the additional evidence praying that it is a vital matter of the issue in question which goes to the root of the matter. It is also noted that this additional evidence was not produced before the lower authorities. Looking to the present facts and circumstances of the case, it will be in the interest of equity and justice to restore the issue in question to the file of the AO to decide it afresh taking into consideration the additional evidence (supra) and decide the issue by providing adequate opportunity of being heard to the assessee. Ground of the assessee is allowed for Statistical purposes.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal for the Assessment Year 2011-12.
2. Addition under Section 68 of the Income Tax Act, 1961 on account of share capital subscribed.
3. Addition under Section 69 of the Income Tax Act, 1961 on account of alleged undisclosed commission payment.
4. Disallowance of exemption under Section 10AA on account of interest on Fixed Deposit Receipts (FDR).
5. Restriction of deduction under Section 10AA.
6. Addition under Section 43B of the Income Tax Act, 1961.

Detailed Analysis:

1. Condonation of Delay:
The appeal for the Assessment Year 2011-12 was filed late by 22 days. The assessee submitted an application for condonation of delay citing the ill health of the assessee's father. The Tribunal, after considering the affidavit and relevant judicial pronouncements, observed that there was sufficient cause for the delay and condoned it.

2. Addition under Section 68 (Share Capital Subscribed):
The assessee challenged the addition of ?15 lakhs under Section 68. The CIT(A) confirmed the addition, stating that the share applicant companies were engaged in providing accommodation entries, supported by the statements of their directors. The Tribunal noted the assessee's argument that the lower authorities violated principles of natural justice by not allowing cross-examination of the directors. The Tribunal restored the issue to the Assessing Officer (AO) for fresh adjudication, directing the AO to provide an opportunity for cross-examination.

3. Addition under Section 69 (Undisclosed Commission Payment):
The AO added ?22,500 under Section 69, citing statements from the directors of share applicant companies about commission payments for accommodation entries. The CIT(A) confirmed this addition. The Tribunal, considering the principles of natural justice, restored this issue to the AO for fresh adjudication, similar to the issue under Section 68.

4. Disallowance of Exemption under Section 10AA (Interest on FDR):
The AO and CIT(A) disallowed the exemption under Section 10AA on interest income from FDRs, treating it as "Income from other sources" based on various judicial pronouncements. The Tribunal noted the additional evidence submitted by the assessee and restored the issue to the AO for fresh consideration, allowing the AO to examine the new evidence.

5. Restriction of Deduction under Section 10AA:
The assessee did not press the grounds related to the restriction of deduction under Section 10AA, and thus, these grounds were dismissed by the Tribunal.

6. Addition under Section 43B:
The assessee did not press the grounds related to the addition under Section 43B, and thus, these grounds were dismissed by the Tribunal.

Conclusion:
The Tribunal allowed the appeal for the Assessment Year 2010-11 partly for statistical purposes and the appeal for the Assessment Year 2011-12 for statistical purposes. The issues related to additions under Sections 68 and 69 were restored to the AO for fresh adjudication, and the issue of disallowance under Section 10AA on interest income was also restored for fresh consideration. The grounds related to the restriction of deduction under Section 10AA and addition under Section 43B were dismissed as not pressed.