2018 (2) TMI 1204 - AT - Income Tax

Revision u/s 263 - addition towards share capital and share premium u/s 68 - Held that - Admittedly, the assessee had not appeared before the Ld. CIT despite repeated opportunities. From the Affidavit filed by the Ld. AR before us, we find that the assessee had been dependent on one Chartered Accountant who has been given the brief to handle the income tax affairs before the Ld. CIT and who in turn had not represented the assessee before the CIT and that the assessee was totally in dark with regard to subject mentioned proceedings and it came to the knowledge of the assessee only on receipt of the order of the Ld. CIT u/s 263. We find the reasoning given in the Affidavit is understandable and deserved to be appreciated and hence we deem it fit and appropriate in these facts and circumstances, in the interest of justice and fair play, to remand the order of Ld. CIT to the file of the Ld. CIT for de novo adjudication - Decided in favour of assessee for statistical purposes.

Issues:
1. Justification of enhancing assessment by adding share capital and share premium under Section 68 of the Income Tax Act.
2. Validity of the order passed by the Commissioner of Income Tax under Section 263.
3. Treatment of share capital and share premium as unexplained cash credit.
4. Application of judgments in the case of Lovely Export and Bharat Engineering & Construction Co. Ltd. to the present case.
5. Consideration of the adequacy of inquiry conducted by the Assessing Officer regarding share capital.
6. Assessment of share capital and share premium as genuine or ingenuine based on relevant considerations.

Analysis:
1. The appeal concerned the justification of enhancing the assessment by adding share capital and share premium under Section 68 of the Income Tax Act. The Commissioner of Income Tax had directed the Assessing Officer to make an addition of a substantial amount towards share capital and share premium, considering the lack of commercial activities and low income of the assessee. The Commissioner observed that the share capital and premium were not adequately justified, leading to the conclusion that they should be treated as unexplained cash credit.

2. The validity of the order passed by the Commissioner of Income Tax under Section 263 was challenged on various grounds, including the lack of proper opportunity of hearing and the absence of findings that the assessment was both erroneous and prejudicial to the interest of revenue. The appellant contended that the order was bad in law and should be quashed.

3. The treatment of the entire fresh share capital and share premium as unexplained cash credit was a key issue in the appeal. The appellant argued that the Commissioner was not justified in treating the entire amount as income of the assessee company, emphasizing that no addition under Section 68 could be made based on relevant judgments.

4. The application of judgments in the case of Lovely Export and Bharat Engineering & Construction Co. Ltd. was raised to challenge the enhancement of income by treating the share capital and premium as income under Section 68. The appellant contended that the Commissioner's decision did not align with the principles established in these cases.

5. The adequacy of the inquiry conducted by the Assessing Officer regarding share capital was questioned, with the appellant arguing that proper investigation had been carried out on the issue. The appellant sought consideration of the efforts made by the Assessing Officer before the Commissioner's decision to enhance the assessment.

6. Lastly, the assessment of share capital and share premium as genuine or ingenuine based on relevant considerations was debated. The appellant contended that the Commissioner's conclusion was based on generalized background information and irrelevant considerations, urging a reevaluation of the issue with specific material against the assessee.

In the final judgment, the Tribunal found that the order passed by the Commissioner was ex parte due to the non-appearance of the assessee, leading to a lack of opportunity for the assessee to present relevant details. Considering the circumstances and the affidavit filed by the appellant, the Tribunal remanded the issue back to the Commissioner for de novo adjudication after providing a reasonable opportunity for the assessee to be heard. The appeal was allowed for statistical purposes.

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