2019 (5) TMI 1117 - AT - Income Tax

Addition u/s. 68 - unexplained investment in share capital and cash deposit - explanation to immediate source of the cash deposits - admission of additional evidence - search u/s 132 - assessee has made a specific request to the AO to allow time to furnish these details, which was denied - admission of additional evidences in the form of names, addresses, copies of acknowledgement of ITRs, confirmations of accounts of investors - HELD THAT - AO without conducting enquiries to establish otherwise, made the addition for non-compliance in technical manner cannot be sustained in the interest of justice. Over and above, most of the investors are assessed to the income tax at the same place where the AO could have very easily invoked such enquiry, if he had any serious doubts about the genuineness of transactions. This could have been done either by the summons u/s 131 or even by deputing Inspector, which was not done. These facts have not been controverted by the ld. DR. Once the details have been provided by the assessee during the appellate proceedings before the ld. CIT(A) which are also provided to the AO to verify the same. AO was duty bound to invoke the necessary enquiry by way of issuance of summons u/s 131 of the Act or by way of deputing an Inspector which he fails to do so. Investors are regularly assessed to income tax and investments are not disputed and as such investments made by them are not disputed in their respective cases. The addition so made by the AO is not sustainable as rightly deleted by the ld. CIT(A), following the decision of CIT vs. Venkateshwar Ispat P. Ltd. 2009 (5) TMI 290 - CHHATTISGARH HIGH COURT Unexplained cash deposits in bank account - CIT(A) has stated that the assessee has filed copy of banks statements, cash books, audited balance sheet with the relevant schedule for the relevant periods to establish the opening cash balances as an additional evidence on which the AO again did not issue any enquiries and hence ld. CIT(A) has admitted the same as an additional evidence under Rule 46A of the Rules after affording due opportunity to the AO. CIT(A) has observed that the cash deposits have been made out of the cash balance available with the assessee as on the date of deposits. CIT(A) has made specific observation regarding the cash deposits as being made out of cash balance available with the assessee before the date of deposits duly supported by the fact that the assessee has withdrawn from the same bank account and it was lying with him as unutilized which was re-deposited subsequently. Thus, the immediate source of the cash deposits stands explained and no adverse inference could be drawn in this context. We are of the considered opinion that the ld. CIT(A) is correct in holding that the Assessing Officer has made the addition in technical manner. - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of addition of ?56,00,000/- made under Section 68 of the Income Tax Act, 1961 on account of share capital/premium.
2. Deletion of addition of ?24,00,000/- made under Section 68 of the Income Tax Act, 1961 on account of cash deposits.
3. Admission of additional evidence by CIT(A) in violation of Rule 46A of the Income Tax Rules, 1962.

Detailed Analysis:

1. Deletion of Addition of ?56,00,000/- Under Section 68 (Share Capital/Premium):
The Revenue contended that the CIT(A) erred in deleting the addition of ?56,00,000/- made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961, as unexplained share capital/premium. The AO was not satisfied with the explanation provided by the assessee regarding the sources of the share application money and made the addition. On appeal, the CIT(A) allowed the relief by admitting additional evidence, which included copies of acknowledgements of IT returns, confirmation of accounts, and other documents of the investors. The CIT(A) observed that the non-cooperation of the investors was a sufficient cause for not furnishing the evidence earlier and that the evidence established the identity and creditworthiness of the creditors and the genuineness of the transactions. The AO did not conduct any inquiries to establish otherwise and made the addition in a technical manner. The Tribunal upheld the CIT(A)'s decision, noting that the AO could have easily verified the investors but failed to do so.

2. Deletion of Addition of ?24,00,000/- Under Section 68 (Cash Deposits):
The Revenue also challenged the deletion of the addition of ?24,00,000/- made by the AO under Section 68 of the Income Tax Act, 1961, as unexplained cash deposits. The CIT(A) admitted additional evidence, including copies of bank statements, cash books, and audited balance sheets, to establish the opening cash balances. The CIT(A) found that the cash deposits were made out of the cash balance available with the assessee as on the date of deposit. The Tribunal noted that the assessee had withdrawn ?25,00,000/- from the same bank account earlier, which was re-deposited subsequently, thus explaining the immediate source of the cash deposits. The Tribunal upheld the CIT(A)'s decision, finding no adverse inference possible in this context.

3. Admission of Additional Evidence in Violation of Rule 46A:
The Revenue argued that the CIT(A) admitted additional evidence in violation of Rule 46A of the Income Tax Rules, 1962. The CIT(A) admitted the additional evidence after providing due opportunity to the AO, who did not issue any queries or conduct inquiries. The Tribunal observed that the CIT(A) admitted the additional evidence in the interest of justice, considering the circumstances beyond the control of the assessee. The Tribunal found that the AO had all the information but chose not to make any inquiries against the creditors, who were assessed at the same place. The Tribunal upheld the CIT(A)'s decision, noting that the AO's addition was made in a technical manner without proper inquiries.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the additions made by the AO under Section 68 of the Income Tax Act, 1961, and to admit the additional evidence in the interest of justice. The Tribunal found no merit in the Revenue's appeal and affirmed the CIT(A)'s findings that the AO made the additions in a technical manner without conducting proper inquiries.