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2020 (1) TMI 1639 - AT - Income Tax


Issues Involved:
1. Validity of additions made under Section 143(3) read with Section 153A of the Income-tax Act, 1961.
2. Addition of Rs. 80,00,000/- under Section 68 of the Income-tax Act, 1961.
3. Addition of Rs. 60,000/- for alleged unexplained expenditure.
4. Disallowance under Section 14A of the Income-tax Act read with Rule 8D of the I.T. Rules, 1962.
5. Violation of principles of natural justice.

Detailed Analysis:

1. Validity of Additions under Section 143(3) read with Section 153A:
The assessee argued that the additions made by the Assessing Officer (AO) under Section 143(3) read with Section 153A were invalid and bad in law. The Tribunal noted that the search and seizure action under Section 132(1) revealed that the assessee had raised preference share capital and received substantial share premiums. The AO scrutinized the case and issued notices under Section 133(6) to verify the details provided by the assessee. However, the AO concluded that the assessee failed to prove the identity, genuineness, and creditworthiness of the transactions, leading to the additions. The Tribunal upheld the AO's approach, emphasizing the need for verifiable evidence.

2. Addition of Rs. 80,00,000/- under Section 68:
The AO added Rs. 80,00,000/- to the assessee's income under Section 68, citing unproven identity, genuineness, and creditworthiness of the share capital received. The Tribunal highlighted that the assessee provided substantial documentation, including PAN, bank statements, and financial statements of the subscribers. However, the AO found inconsistencies and non-responses to notices, leading to doubts about the transactions. The Tribunal referenced the Supreme Court decision in CIT vs. P. Mohanakala, emphasizing that mere documentation is insufficient without credible evidence of the transaction's genuineness. The Tribunal concluded that the assessee failed to discharge the burden of proof under Section 68.

3. Addition of Rs. 60,000/- for Alleged Unexplained Expenditure:
The AO estimated a commission of 0.75% on the share capital received, amounting to Rs. 60,000/-, as probable expenditure for obtaining accommodation entries. The Tribunal noted that the AO's estimation was based on industry practices and the lack of satisfactory explanations from the assessee. The Tribunal upheld the AO's addition, emphasizing the need for credible evidence to counter the AO's findings.

4. Disallowance under Section 14A read with Rule 8D:
The AO disallowed Rs. 38,882/- under Section 14A, citing expenditure incurred in relation to exempt income. The Tribunal referred to its earlier decision in a similar case, where it held that in the absence of incriminating material found during the search, no additions could be made under Section 153A. The Tribunal reiterated that the AO must have incriminating material to support such disallowances. Consequently, the Tribunal directed the AO to delete the disallowance made under Section 14A.

5. Violation of Principles of Natural Justice:
The assessee contended that the order passed by the CIT(A) violated the principles of natural justice. The Tribunal noted that the assessee was provided opportunities to present evidence and respond to the AO's queries. The Tribunal found no merit in the assessee's claim of violation of natural justice, as the procedural requirements were duly followed.

Conclusion:
The Tribunal concluded that the assessee failed to provide sufficient evidence to prove the identity, genuineness, and creditworthiness of the share capital received, justifying the additions made by the AO. The Tribunal also upheld the AO's estimation of probable commission and disallowance under Section 14A, emphasizing the need for credible evidence. The appeals filed by the assessee were dismissed, and the additions made by the AO were upheld.

 

 

 

 

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