2018 (3) TMI 1458 - AT - Income Tax

Revision u/s 263 - Addition of share capital and share premium by treating the same as unexplained cash credit under section 68 - denial of natural justice - Held that - A perusal of the assessment order passed by the Assessing Officer also shows that the reason for non-compliance to the notices issued under section 131 on the part of Mr. M.K. Kedia and Mrs. Sarita Devi Kedia, the then two directors of the assessee company was explained by them as due to change in address and a further opportunity was also sought by them in writing to comply with the requirements of the A.O. It appears from the order of the A.O. that he did not give such opportunity to Mr. M.K. Kedia and Mrs. Sarita Devi Kedia in spite of the fact that their examination was very crucial to decide the issue and a specific direction accordingly was given by the Ld. CIT in the order under section 263 to the A.O. to examine them on oath. The assessment under section 147/143(3)/263/143(3) was made by the A.O. without giving proper and sufficient opportunity of being heard to the assessee and without considering the relevant documentary evidence filed by the concerned share applicants in response to notices under section 133(6). Set aside the orders of the authorities below and restore the matter to the file of the A.O. with the direction to complete the assessment afresh - Decided in favour of assessee for statistical purpose.

Summary

Issues:
1. Addition of share capital and share premium as unexplained cash credit under section 68 of the Income Tax Act, 1961.
2. Lack of proper opportunity given by the Assessing Officer (AO) to the assessee and non-consideration of relevant documentary evidence.

Analysis:
1. The appeal was against the order confirming the addition of a substantial amount as unexplained cash credit under section 68. The original assessment was set aside with directions to examine the genuineness and source of share capital thoroughly. However, the then directors failed to comply with the notices issued, leading to the AO making the addition based on non-compliance. The AO concluded that the fresh share capital remained unexplained, unverified, and unexamined due to the non-appearance of the directors. The CIT(A) upheld the addition under section 68, emphasizing the importance of establishing the genuineness of transactions and creditworthiness of subscribing companies. The CIT(A) rejected the preliminary issue raised by the assessee regarding lack of opportunity, confirming the addition of the share capital amount.

2. The assessee raised concerns about the lack of proper opportunity and non-consideration of relevant documentary evidence by the AO. The AO's failure to consider the documentary evidence submitted by the share applicants in response to notices under section 133(6) was highlighted. The then directors explained their non-compliance due to a change in address and sought further opportunity to comply. The AO did not give them a chance to be heard, despite their crucial role in deciding the issue as directed by the CIT under section 263. The Tribunal found merit in the contention that the assessment was made without proper opportunity and consideration of evidence. The matter was set aside, directing the AO to complete the assessment afresh with proper opportunity for the assessee and consideration of all relevant evidence.

In conclusion, the Tribunal allowed the appeal, emphasizing the importance of providing a fair opportunity to the assessee and considering all relevant evidence in such cases involving additions under section 68 of the Income Tax Act. The judgment highlighted the necessity of thorough examination and compliance with procedural requirements to establish the genuineness of transactions and sources of funds in such matters.