2017 (6) TMI 482 - AT - Income Tax

Addition u/s 68 - ingenuity of deposits - Held that - As assessee has not furnished any details in respect of alleged applicants for the period under consideration, which could discharge initial onus cast upon assessee u/s 68 of the Act. We feel that it will not serve any purpose to set aside issue again for verification to Ld. AO, as assessee has already admitted in its reply dated 14.11.2011, that these applicants are no longer share holders of assessee and will not be possible to produce their current details. Under above noted facts and documents placed on record, we therefore, do not hesitate to up hold order of Ld. CIT(A). Accordingly, grounds raised by assessee stands dismissed.

Summary

Issues Involved:
1. Violation of the principle of natural justice.
2. Addition of ?42,50,000 as income from undisclosed sources under Section 68.
3. Non-compliance with the directions of the Hon'ble ITAT.
4. Failure of the AO to carry out the investigation as directed by the ITAT.
5. Reliability of inspector's verification.
6. Use of material collected at the back of the assessee without providing an opportunity to rebut.

Issue-wise Detailed Analysis:

1. Violation of the principle of natural justice:
The assessee argued that the CIT(A) passed the order without giving an opportunity of being heard, violating the principle of natural justice. The Tribunal noted that the CIT(A) confirmed the addition made by the AO without addressing the assessee's contention of not being heard.

2. Addition of ?42,50,000 as income from undisclosed sources under Section 68:
The AO added ?42,50,000 as income from undisclosed sources under Section 68, which the CIT(A) confirmed. The assessee contended that the addition was made despite providing all material and evidence to prove the identity of the shareholders. The Tribunal examined the documents provided by the assessee, including share application forms, bank statements, and IT returns, but found inconsistencies and lack of substantial evidence to establish the identity, creditworthiness, and genuineness of the transactions.

3. Non-compliance with the directions of the Hon'ble ITAT:
The Tribunal had earlier remanded the case to the AO for further investigation regarding the share application money received from certain parties. The assessee argued that the AO did not comply with these directions. The Tribunal observed that the AO issued notices and conducted investigations, but the notices were returned unserved, and the inspector's report indicated that the parties did not exist at the given addresses.

4. Failure of the AO to carry out the investigation as directed by the ITAT:
The assessee contended that the AO failed to verify the details from the ROC records and the respective AOs of the shareholders. The Tribunal noted that the AO made efforts to investigate by issuing notices and deputing an inspector, but the parties were not found at the addresses provided by the assessee. The Tribunal emphasized that the onus was on the assessee to provide correct details of the shareholders.

5. Reliability of inspector's verification:
The assessee argued that the inspector's verification, which reported that the parties did not exist at the given addresses, was practically impossible and unreliable. The Tribunal found that the inspector's report was consistent with the AO's findings and supported the conclusion that the parties were not genuine.

6. Use of material collected at the back of the assessee without providing an opportunity to rebut:
The assessee claimed that the addition was made based on material collected at the back of the assessee without providing an opportunity to rebut the same. The Tribunal noted that the AO informed the assessee about the unavailability of the parties and provided opportunities to produce the shareholders, which the assessee failed to do.

Conclusion:
The Tribunal concluded that the assessee failed to discharge the initial onus of proving the identity, creditworthiness, and genuineness of the transactions under Section 68. The documents provided did not pertain to the relevant assessment year and did not establish the credibility of the shareholders. The Tribunal upheld the order of the CIT(A) and dismissed the appeal filed by the assessee.