2020 (2) TMI 65 - AT - Income Tax

Addition u/s 68 - unexplained cash credit - HELD THAT - It is the submission of the ld. Counsel for the assessee that the assessee has filed various documents to substantiate the identity and credit worthiness of the share applicants and genuineness of the transactions. It is to be noted here that the decision of the Hon ble Supreme Court in the case of PCIT vs. NRA Iron Stee l 2019 (3) TMI 323 - SUPREME COURT and NDR Promoters Pvt. Ltd. 2019 (1) TMI 1089 - DELHI HIGH COURT were pronounced subsequent to the orders passed by the lower authorities. Neither the assessee nor the Revenue had the benefit of these two decisions wherein the issue of share capital at high premium to bogus companies have been elaborately discussed. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the AO with a direction to give one final opportunity to the assessees to substantiate its case by producing the directors of the investor companies for recording of their statements and produce evidence to the satisfaction of the AO regarding the identity and credit worthiness of the investor companies and the genuineness of the transaction. The AO shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee Order of assessing officer without giving the adequate opportunity to the appellant - HELD THAT - As per the provisions of section 250(4) and 250(6), the ld.CIT(A) is supposed to make further enquiry as he thinks fit or direct the AO to make further enquiry. While disposing of the appeal, he shall pass the order in writing and shall state the points for determination, the decision thereon and the reason for the decision. Even though the assessee has not appeared before him, the ld.CIT(A) cannot dismiss the appeal for want of prosecution and he is supposed to pass a speaking order on merit. Since, in the instant case, the ld.CIT(A) has failed to follow the law, therefore, we deem it proper to restore this issue to the file of the CIT(A) with a direction to pass a speaking order on this issue after giving an opportunity to the assessee to substantiate its case. The assessee is also hereby directed to appear before the CIT(A) and cooperate in completion of the hearing without seeking adjournment under any pretext, failing which the ld.CIT(A) is at liberty to pass appropriate order as per law. We hold and direct accordingly.

Issues Involved:
1. Addition of share capital and share premium as unexplained credit.
2. Addition of advances received against property as unexplained credit.
3. Disallowance of loss claimed in income tax return.
4. Addition of interest on unsecured loans.

Detailed Analysis:

1. Addition of Share Capital and Share Premium as Unexplained Credit:
The first issue pertains to the addition of ?4.85 crores as unexplained credit under Section 68 of the Income Tax Act, 1961. The Assessing Officer (AO) made the addition after the assessee failed to prove the genuineness of the transaction and the creditworthiness of the parties. The CIT(A) upheld this addition. The assessee argued that adequate opportunity to cross-examine the persons who admitted to providing accommodation entries was not given. The Tribunal found that the lower authorities did not consider the subsequent decisions of the Supreme Court and Delhi High Court, which elaborated on the issue of share capital at high premium to bogus companies. Therefore, the Tribunal restored the matter to the AO for a fresh examination, giving the assessee one final opportunity to substantiate its case by producing the directors of the investor companies.

2. Addition of Advances Received Against Property as Unexplained Credit:
The second issue involved the addition of advances received against property amounting to ?25.94 crores, ?9.80 crores, and ?2 crores for the assessment years 2008-09, 2010-11, and 2011-12, respectively. The AO made these additions on the grounds that the advances were received from bogus companies. Despite the assessee's request, cross-examination of the persons whose statements were recorded was not allowed. The Tribunal noted that there was no proper representation before the CIT(A), who dismissed the appeal due to non-appearance by the assessee. Therefore, the Tribunal restored the issues to the AO, directing the assessee to substantiate its case by producing the directors of the companies who gave the advances.

3. Disallowance of Loss Claimed in Income Tax Return:
For the assessment years 2008-09, 2010-11, and 2011-12, the AO disallowed the loss claimed by the assessee, amounting to ?35,94,413/-, on the grounds that the assessee could not substantiate the loss with evidence. The CIT(A) upheld the AO's decision. The Tribunal found that the CIT(A) dismissed the appeal due to non-appearance by the assessee without deciding the issue on merit. Therefore, the Tribunal restored the issue to the AO, directing the assessee to substantiate its case.

4. Addition of Interest on Unsecured Loans:
The fourth issue involved the addition of ?44,41,958/- as interest on unsecured loans for the assessment year 2015-16. The AO made this addition because the assessee failed to furnish details about the purpose of the interest paid and the persons to whom it was paid. The CIT(A) upheld the AO's decision without deciding the issue on merit, dismissing the appeal due to non-appearance by the assessee. The Tribunal restored the issue to the CIT(A) with directions to pass a speaking order on merit after giving the assessee an opportunity to substantiate its case.

Conclusion:
The Tribunal allowed all the appeals filed by the assessee for statistical purposes, restoring the issues to the AO or CIT(A) for fresh examination and providing the assessee an opportunity to substantiate its case. The decision was pronounced in the open court on 30.12.2019.

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