2019 (2) TMI 801 - AT - Income Tax

Addition u/s 68 - notice u/s 131 issued to directors of assessee, was also not answered - Held that - It is observed that notice u/s 131 issued to directors of assessee, was also not answered. CIT (A) has also not himself verified any documents filed by assessee even though he has coterminous powers with that of AO. No enquiries has been made by CIT(A) regarding whether shares were issued to alleged share applicants as Master details of assessee reproduced in assessment order shows paid up shares to be 1 lakh. In our view CIT(A) failed to find out nature of transaction. Merely on basis of Ration Card, Share Application forms, Voter ID etc. CIT(A) deleted addition. We thus reverse the order of CIT(A) as same has been passed without proper verification of facts as per law. Under such circumstances we deem it fit and proper to set aside this issue back to Ld. AO for fresh adjudication to decide the issue in light of decision in case of CIT vs. NDR Promoters 2019 (1) TMI 1089 - DELHI HIGH COURT . AO shall conduct fresh enquiries on basis of documents filed by assessee, and also shall take up any independent enquiries as it deem fit and proper as per law. Assessee shall file all requisite details as called for or any other details as needed to prove its claim. - Appeal by Revenue is allowed for statistical purposes.

Summary

Issues Involved:
Appeal against deletion of addition of share application money - Failure to submit confirmations from parties - Non-compliance with statutory notices - Onus on assessee to prove identity, creditworthiness, and genuineness of transactions - Lack of proper verification by CIT(A) - Setting aside the issue for fresh adjudication.

Analysis:

Issue 1: Deletion of Addition of Share Application Money
The appeal was filed by the revenue against the deletion of the addition of share application money by the Ld. CIT (A). The Ld. AO had disallowed the amount of ?3,52,50,000 received as share application money by the assessee due to non-compliance with providing confirmations from the parties involved. The Ld. CIT (A) deleted the addition, stating that the assessee had submitted additional evidence such as share application forms and identity documents of shareholders, which were accepted without proper verification. The Ld. CIT (A) directed the Ld. AO to make necessary inquiries regarding the genuineness of the shareholders. However, it was observed that the Ld. AO did not conduct any such inquiries, and the Ld. CIT (A) failed to verify the documents filed by the assessee. The Tribunal found that the Ld. CIT (A) had passed the order without proper verification of facts and reversed the decision, setting aside the issue for fresh adjudication.

Issue 2: Failure to Submit Confirmations and Non-Compliance
The Ld. AO issued notices to the directors of the assessee, requesting details of the alleged share application money received. However, there was no compliance from the assessee's side, leading to the Ld. AO passing an ex parte order. The Ld. AO made the addition of the share application money in the hands of the assessee as income from undisclosed sources due to the lack of explanation regarding the credit entries and non-compliance with statutory notices. The Tribunal noted that the onus is on the assessee to prove the identity, creditworthiness, and genuineness of transactions under Section 68 of the Income Tax Act. It was emphasized that both the assessee and the AO should adopt a reasonable approach in such cases.

Issue 3: Lack of Proper Verification by CIT(A)
The Tribunal highlighted that the Ld. CIT (A) did not conduct proper verification of the documents submitted by the assessee, including share application forms and identity proofs of shareholders. The Ld. CIT (A) accepted these documents without making necessary inquiries or issuing summons under Section 131. The Tribunal found that the Ld. CIT (A) failed to ascertain the nature of the transaction and deleted the addition without adequate verification, leading to the reversal of the decision.

In conclusion, the Tribunal allowed the appeal by the revenue for statistical purposes and set aside the issue of the addition of share application money for fresh adjudication by the Ld. AO. The Tribunal directed the Ld. AO to conduct thorough inquiries based on the documents provided by the assessee and follow due process of law to decide the issue afresh.