2019 (10) TMI 443 - AT - Income Tax

Addition on account of share application money along with premium received by the assessee u/s 68 - HELD THAT - The assessee has tabulated complex structure of the transaction in the group by which the money has been deposited in the company as share capital. Based on the structure it is prima facie apparent that shareholders are mere pass through entities but it needs to be demonstrated with the complete facts. There is also a reason that main director of the company who was very old and severely ill and ultimately passed away, is according to us the sufficient cause to admit those evidences. In view of above facts, we admit the additional evidences submitted by the assessee, as there is a sufficient and reasonable cause for non-production of them before the lower authorities. We are also aware about the manner in which the addition has been made by the learned assessing officer and confirmed by the learned CIT A for non-production of certain details by the assessee despite being given repeated opportunities before them. AO has repeatedly requested the assessee to produce the income tax return of the depositors, which the assessee has not produced before any of the lower authorities. Even before us, the assessee has not produced the same. CIT A has also made huge efforts by issuing notices to the shareholders u/s 133 (6) of the act which was not complied with. Appellant is also required to meet the argument of the learned departmental representative with respect to the judicial precedents of the honourable Delhi High Court and honourable Supreme Court. AR has tried to prove all these facts, which are held against him, based on the agreements, memorandum of Understanding by reading clauses contained therein, explaining the financial structure of the w whole transactions, to show the identity, creditworthiness and genuineness of the transactions and shareholders. As those agreements were, MOUs were not available with lower authorities along with other details produced before us, in the interest of justice, we set aside the whole issue back to the file of the AO with direction to the assessee to prove Identity, creditworthiness of the shareholders and genuineness of the transactions meeting the findings of the lower authorities. AO may examine the additional evidences produced before us as well as all other evidences that assessee may like to produce before the lower authorities and then decide the whole issue afresh. Accordingly, ground number 2 of the appeal of the assessee is set aside to the file of the learned assessing officer as directed above to the parties.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Addition of share application money pending allotment.
3. Explanation of source of funds with Navya Infrapower Private Limited.

Issue-wise Detailed Analysis:

1. Condonation of delay in filing the appeal:
The assessee requested condonation of a 71-day delay in filing the appeal, attributing it to the ill health and subsequent death of the Managing Director, unexpected resignation of key employees, and a change in the registered office leading to misplacement of documents. The tribunal condoned the delay, noting that the delay was beyond the control of the assessee and not deliberate, and admitted the appeal.

2. Addition of share application money pending allotment:
The assessee received INR 33,313,960 as share application money from two companies, Navya Infrapower Private Limited and Anandrao Infrastructure Private Limited, which was added to the assessee's income under Section 68 of the Income Tax Act due to failure to prove the creditworthiness and genuineness of the transactions. The CIT(A) confirmed the addition and enhanced the income by INR 13,960. The assessee argued that it could not present complete facts and documentary evidence due to the ill health of the Managing Director and internal disputes. The tribunal admitted additional evidence, including agreements and financial details, and set aside the issue to the Assessing Officer (AO) for fresh examination. The AO was directed to consider the identity, creditworthiness, and genuineness of the transactions in light of the new evidence.

3. Explanation of source of funds with Navya Infrapower Private Limited:
The assessee contended that Navya Infrapower Private Limited made a strategic investment in the assessee company. The CIT(A) noted discrepancies in the financial statements and lack of response to notices. The tribunal, having already set aside the issue of share application money to the AO, did not separately adjudicate this ground but included it in the directions for fresh examination by the AO.

Conclusion:
The tribunal condoned the delay in filing the appeal, admitted additional evidence, and set aside the issues related to the addition of share application money and the explanation of the source of funds to the AO for fresh examination. The appeal was partly allowed for statistical purposes.