2018 (2) TMI 1207 - AT - Income Tax

Unexplained cash credit u/s.68 - proof of the claim of the share application money received - Held that - Perusal of the bank accounts shows that in all the cases transactions are with identical companies from where the money is coming and it is received either on the same day or immediately previous day to the date of transfer of the funds through RTGS. Admittedly these evidences need to be examined in detail. This being so the issues in this appeal are restored to the file of the AO for readjudication. The facts in the present case showed that certain evidences had been produced before the AO. The AO had sent these details to Kolkata for examination as the share applicants are based in Kolkata. Now examining such persons in Kolkata at the back of the assessee would be a clear violation of the principles of the natural justice. In these circumstances keeping in mind the principles of natural justice the issues in this appeal are restored to the file of the AO for re-adjudication. - Appeal filed by the assessee is partly allowed for statistical purposes.

Summary

Issues:
Appeal against Commissioner of Income Tax (Appeals) order for Assessment Year 2013-14 regarding share application money received by the assessee.

Analysis:
The appellant, a Private Ltd. Co. engaged in trading iron and steel, received share application money during the relevant Assessment Year. The Assessing Officer (AO) questioned the legitimacy of the share application money, leading to a dispute. The AO treated the money as unexplained cash credit under section 68 of the Income Tax Act. The appellant provided details of the share applicants, including IT returns, bank statements, and evidence of share issuance through cross-cheques and valid documentation. However, two companies did not respond to notices, and one company could not be located, leading to doubts about the genuineness of the transactions.

The appellant submitted additional documents during the appeal, including statutory forms and balance sheets filed with the Registrar of Companies (ROC) to support the claim of share application money received. The Departmental Representative (DR) argued that prior court decisions cited by the appellant were before the amendment to section 68 and emphasized the lack of cooperation from the share applicant companies in responding to verification requests. The DR highlighted discrepancies in addresses, lack of proper documentation, and suspicious fund movements in the bank accounts of the share applicant companies.

The Tribunal considered the submissions and observed various inconsistencies and lack of proper documentation in the case. It noted discrepancies in company addresses, absence of proper seals on documents, and the lack of PAN details for directors in the submitted evidence. The Tribunal found that financial statements did not align with the share application money transactions claimed by the appellant. Given these concerns and the principles of natural justice, the Tribunal decided to remand the case back to the AO for re-adjudication.

The Tribunal directed the AO to allow the appellant to produce the directors of the share applicant companies for examination and to consider any adverse evidence while providing the appellant with an opportunity to rebut such evidence. The appellant was granted the liberty to present additional evidence to substantiate the claim of share application money received. The Tribunal distinguished prior court decisions cited by the appellant, emphasizing the lack of cooperation from creditors in those cases, which did not apply to the current scenario.

In conclusion, the Tribunal partly allowed the appeal for statistical purposes and remanded the case to the AO for further examination, ensuring the principles of natural justice and providing the appellant with opportunities to substantiate their claims.