2018 (11) TMI 1775 - AT - Income Tax

Reopening of assessment u/s 147 - unexplained cash credit under the provisions of Section 68 - CIT(A) deleted the addition on the basis of remand report given by the AO wherein AO recorded the statement of the four contributors who had contributed towards time membership. They filed their audit report copies of income tax return and bank statements - HELD THAT - Other share applicants appeared before the Assessing Officer and filed their bank statements and confirmed to have contributed to the share application amount. Under these circumstances the ground raised by the revenue that CIT(A) has not given any opportunity to the Assessing Officer to raise any objection against the admission of additional evidence is without any merit. Since the Ld. CIT(A) has deleted the addition on the basis of remand report of the Assessing Officer wherein he has accepted the contribution towards time membership and the share application money as genuine therefore in absence of any contrary material brought to our notice by the Ld. Dr we do not find any infirmity in the order of the CIT(A) in deleting the addition made by the Assessing Officer on account of time membership commission for arranging the accommodation entries and the share application money. The grounds raised by the revenue are accordingly dismissed.

Summary

Issues Involved:
1. Reopening of assessment based on accommodation entries received by the assessee.
2. Treatment of unexplained cash credit under Section 68 of the Income Tax Act.
3. Addition of share application money received from various parties.
4. Deletion of additions by the CIT(A) based on remand report.
5. Appeal by the revenue challenging the CIT(A) order.

Issue 1: Reopening of assessment based on accommodation entries received by the assessee:
The appeal filed by the revenue was directed against the order of the CIT(A) relating to the assessment year 2011-12. The assessee, a company, initially declared a loss in its return of income, which was later revised due to non-allowability of Short Term Capital Gain loss adjusted in the original return. Subsequently, based on information from the investigation wing, the case was reopened under Section 147 of the IT Act. The Assessing Officer issued notices and summons to parties involved, but there was non-compliance, leading to the treatment of certain transactions as unexplained cash credit under Section 68 of the IT Act.

Issue 2: Treatment of unexplained cash credit under Section 68 of the Income Tax Act:
The Assessing Officer treated certain transactions as unexplained cash credit under Section 68 due to the failure of the assessee to establish the identity and creditworthiness of the companies involved. Additionally, a commission was added based on the rate paid by the assessee for accommodation entries. The total income of the assessee was determined accordingly.

Issue 3: Addition of share application money received from various parties:
The Assessing Officer made an addition of share application money received from seven parties due to the lack of supporting details. However, the CIT(A) deleted this addition after considering additional evidence submitted by the assessee during the appellate proceedings. The CIT(A) found that the share application money was satisfactorily paid out of the bank accounts of the parties involved, and the addition was unjustified.

Issue 4: Deletion of additions by the CIT(A) based on remand report:
The CIT(A) deleted the additions made by the Assessing Officer after considering a remand report that verified the genuineness of the transactions. The parties involved provided necessary documents and explanations, leading to the deletion of the additions related to time membership fees, share application money, and unexplained commission.

Issue 5: Appeal by the revenue challenging the CIT(A) order:
The revenue appealed to the Tribunal challenging the CIT(A) order on various grounds, including the deletion of additions related to share capital, share application money, and unexplained commission. However, the Tribunal dismissed the appeal after finding no merit in the revenue's arguments. The Tribunal upheld the CIT(A)'s decision based on the remand report and the genuineness of the transactions as established by the parties involved.

This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive overview of the case and the decisions made at each stage of the proceedings.