2015 (4) TMI 1363 - AT - Income Tax

Unexplained credit u/s 68 - assessee company had received/ taken loan/ amounts - party had not responded to the notice issued u/s 133(6) - AO observed that the copy of account filed by the assessee was simply a piece of paper with a rubber stamp of M/s Sai Soft Securities and copy of account did not bear the PAN no. of the party the details of the AO assailing the above party and its copy of return were not filed so as to establish the identity of the lender and its capacity to lend money HELD THAT - Assessee referred to ledger account of M/s Sai Soft Securities in the books of assessee is contained to demonstrate that there were regular transactions between assessee and M/s Sai Soft Securities. We find from the said ledger account that sum was given by assessee through banking channel and there are two debits regarding sale of shares. Thereafter assessee has again given cheque of Rs. 6 lacs. All these transactions are up to 30-10-2006 and thereafter there are two entries relating to purchase of shares and amounts received from M/s Sai Soft Securities. This ledger account has been confirmed by M/s Sai Soft Securities also giving the circle where it is assessed as well as the PAN no. Considering the fact that the assessment was completed on account of being time barring we are of the opinion that the matter needs to be restored back to the file of AO for de novo adjudication particularly because in the remand report the AO has not given detailed findings. Assessee s appeal is allowed for statistical purposes.

Summary

Issues:
1. Addition of unexplained credit under section 68 of the Income Tax Act 1961.
2. Nature of transaction involving purchase and sale of shares with a share broking concern.
3. Failure to establish genuineness and creditworthiness of the lender.
4. Admissibility of additional evidence during appeal proceedings.

Analysis:
1. Addition of unexplained credit: The appellant contested the addition of Rs. 1,20,77,814 as unexplained credit under section 68 of the Income Tax Act. The Assessing Officer (AO) observed that the copy of the account provided by the appellant from M/s Sai Soft Securities lacked essential details such as PAN number, details of the assessing officer of the party, and its return copy. Consequently, the AO added the amount as the appellant failed to prove the genuineness and creditworthiness of the lender. The appellant argued that the AO did not provide a reasonable opportunity to submit necessary information and that the confirmation copy of M/s Sai Soft Securities was not accepted due to the assessment order being already passed.

2. Nature of transaction with share broking concern: The appellant explained that the transactions in question were related to the purchase and sale of shares with M/s Sai Soft Securities, a share broking firm. The appellant highlighted the communication with the AO regarding the submission of necessary details, including the PAN of M/s Sai Soft Securities. The appellant contended that the AO passed the assessment order without allowing sufficient time to provide the required information, leading to the disallowance of the amount.

3. Failure to establish genuineness and creditworthiness: The appellant emphasized that the ledger account of M/s Sai Soft Securities in the appellant's books demonstrated regular transactions, including payments through banking channels and sale/purchase of shares. The ledger account was confirmed by M/s Sai Soft Securities, providing essential details such as the assessing circle and PAN number. The Tribunal noted the lack of detailed findings by the AO in the remand report and directed the matter to be restored for fresh adjudication, considering the time-barring assessment completion.

4. Admissibility of additional evidence: The appellant attempted to submit additional evidence during the appeal proceedings, including explanations regarding the transactions with M/s Sai Soft Securities. The AO objected to the admission of additional evidence, leading to a dispute over the sufficiency of information provided during the assessment proceedings and the appeal stage. The Tribunal allowed the appeal for statistical purposes, emphasizing the need for a thorough re-examination of the case by the AO.

In conclusion, the Tribunal's judgment highlighted the importance of establishing the genuineness and creditworthiness of transactions, especially in cases involving unexplained credits under the Income Tax Act. The decision to restore the matter for fresh adjudication underscored the significance of providing complete and accurate information during assessment proceedings to avoid disputes and additions based on inadequate documentation.