2010 (4) TMI 1233 - AT - Income Tax

Summary

Issues Involved:
1. Confirmation of addition of Rs. 32,56,138/- under Section 68 of the Income-tax Act, 1961.
2. Levy of penalty under Section 271(1)(c) of the Income-tax Act, 1961.
3. Levy of interest under Sections 234A, 234B, and 234C of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Confirmation of Addition of Rs. 32,56,138/- under Section 68 of the Income-tax Act, 1961:

The assessee filed a return declaring a loss of Rs. 29,68,769/-, which was taken up for scrutiny. The Assessing Officer (AO) noticed that the assessee received amounts towards share capital and unsecured loans from various persons. The AO queried the assessee about the list of shareholders and share-application forms. The assessee stated that the company did not possess any applications as most shareholders were relatives and friends of the promoters. The AO observed that certain loans and NRI gifts were not supported by evidence. The AO added amounts under Section 68 of the Act due to the absence of evidence supporting the alleged savings and loans. On appeal, the CIT(A) deleted some additions, but the ITAT restored the matter to the AO. The AO, in the revised assessment, reduced the addition to Rs. 33,78,138/- after verification. The CIT(A) upheld the AO's findings, stating that the genuineness of the cash credits/share deposits was not established. On further appeal, the ITAT remanded the matter to the CIT(A), who again upheld the addition. The ITAT, in the current appeal, noted that the assessee did not place any further material before the CIT(A) and did not consider the decision of the Hon'ble Gujarat High Court in Mitesh Rolling Mills P. Ltd. vs. CIT. The ITAT found that the amount included share capital and unsecured loans and decided the matter based on the available facts. The ITAT deleted the additions on account of share capital but confirmed the addition of Rs. 2,08,000/- due to the lack of evidence.

2. Levy of Penalty under Section 271(1)(c) of the Income-tax Act, 1961:

The AO initiated penalty proceedings under Section 271(1)(c) for furnishing inaccurate particulars of income. The CIT(A) upheld the penalty, stating that the assessee failed to discharge the onus of proving the genuineness of the transactions and the creditworthiness of the creditors/shareholders. The ITAT, in the quantum appeal, reduced the addition of Rs. 32,56,138/- to Rs. 2,08,000/-. Consequently, the penalty on the deleted amount did not survive. However, the ITAT upheld the penalty on the remaining amount of Rs. 10,03,000/- (including Rs. 7,95,000/- surrendered by the assessee) as the assessee failed to substantiate the explanation and discharge the onus laid down under Explanation 1 to Section 271(1)(c).

3. Levy of Interest under Sections 234A, 234B, and 234C of the Income-tax Act, 1961:

The assessee did not make any submissions regarding the levy of interest under Sections 234A, 234B, and 234C. The ITAT noted that the levy of interest under these sections is mandatory as per the decisions of the Hon'ble Supreme Court in Commissioner Of Income Tax vs Anjum M. H. Ghaswala and Others and CIT v. Hindustan Bulk Carriers. Therefore, this ground was dismissed, but the AO was directed to allow consequential relief, if any.

Conclusion:

The ITAT partly allowed the appeals, confirming the addition of Rs. 2,08,000/- and upholding the penalty on Rs. 10,03,000/-. The levy of interest under Sections 234A, 234B, and 234C was upheld as mandatory.