2020 (4) TMI 398 - AT - Income Tax

Addition u/s 68 - share application money and unsecured loans - identity of the persons and genuineness of the transaction - HELD THAT - Additional evidence is likely to prove that the assessee has allotted the shares to the applicants who have allegedly invested in the assessee company and advanced unsecured loans to the assessee company. All this information needs verification by the AO. Therefore, we deem it fit and proper to admit and remand the additional evidence to the file of the AO for de novo consideration in accordance with law. The assessee s grounds of appeal on this issue are treated as allowed for statistical purpose. Disallowance of expenditure - assessee submitted that he has submitted all the details before the CIT (A) but the CIT (A) has only allowed part of expenditure and what has been disallowed is also interest on working capital allowance, factory expenses, professional and consultancy charges etc. - expenditure is disallowed and added to the returned income, it would increase the income of the assessee and therefore, the said income is eligible for deduction u/s 80IB of the Act which is the alternate claim of the assessee to the claim of deduction u/s 10AA - HELD THAT - Assessee s claim of expenditure is to be considered by the AO afresh. In view of the same, we deem it fit and proper to remand the issue to the file of the AO for de novo consideration afresh. Further, we also make it clear that if the expenditure is disallowed, which would in turn increase the income of the assessee, the same is allowable as deduction which is allowable to the assessee u/s 80IB of the Act. Disallowance of expenditure - assessee submitted that there is a disallowance of salaries and professional charges on the ground that there was no TDS made by the assessee and therefore, the disallowance was proposed to be upheld u/s 40(a)(ia) - submitted that the assessee has not been treated as assessee in default u/s 201(1) of the Act for such an amount and therefore, the disallowance u/s 40(a)(ia) is not to be upheld - HELD THAT - Since we have set aside the entire issue to the file of the AO, we direct the AO to consider the assessee s arguments on this issue as well. Disallowance u/s 10AA - assessee submitted that the assessee in its return of income had claimed deduction u/s 10AA of the Act but alternatively has filed the revised computation of income making the alternative claim u/s 80IB of the Act - HELD THAT - After hearing both the parties, we deem it fit and proper to admit the additional grounds on this issue and remand the same to the file of the AO with a direction to consider the assessee s claim of deduction u/s 80IB of the Act and if the assessee satisfies all the conditions for allowance of deduction u/s 80IB, we direct the AO to allow the same. In view of the same, the assessee s appeal is treated as allowed for statistical purposes.

Issues Involved:
1. Addition of share application money as unexplained cash credit under Section 68.
2. Disallowance of expenditure under Section 69C.
3. Addition of unsecured loans as unexplained cash credit under Section 68.
4. Disallowance of deduction under Section 10AA.
5. Alternative claim for deduction under Section 80IB.
6. Disallowance of expenditure due to non-deduction of TDS under Section 40(a)(ia).

Detailed Analysis:

1. Addition of Share Application Money as Unexplained Cash Credit under Section 68:
The assessee received ?2,78,00,000 towards share application money but failed to explain the sources satisfactorily. The AO treated this amount as unexplained cash credit under Section 68. The CIT (A) confirmed this addition, stating that the assessee did not prove the creditworthiness of the investors despite submitting PAN, address, Income Tax Return, and confirmation letters. The assessee argued that shares were subsequently allotted to these investors, which should validate the transactions. The Tribunal admitted additional evidence and remanded the matter to the AO for fresh consideration, emphasizing the need to verify the allotment of shares.

2. Disallowance of Expenditure under Section 69C:
The AO disallowed the entire expenditure of ?3,00,78,172, citing the assessee's failure to provide supporting bills and vouchers. The CIT (A) provided partial relief but upheld the disallowance of ?1,48,77,995. The Tribunal noted that the assessee submitted necessary bills and vouchers and remanded the issue to the AO for de novo consideration. The Tribunal also acknowledged the assessee's alternate claim that any disallowed expenditure, if added to income, should be eligible for deduction under Section 80IB.

3. Addition of Unsecured Loans as Unexplained Cash Credit under Section 68:
The AO added ?55,46,619 as unexplained unsecured loans due to the assessee's failure to provide documentary evidence. The CIT (A) confirmed this addition. The assessee argued that it had provided confirmation letters and other details to prove the genuineness of the transactions. The Tribunal admitted additional evidence and remanded the issue to the AO for fresh verification.

4. Disallowance of Deduction under Section 10AA:
The AO disallowed the deduction of ?1,90,03,801 claimed under Section 10AA due to the assessee's failure to submit Form 56F. The CIT (A) upheld this disallowance. The Tribunal admitted the assessee's additional grounds for an alternative claim under Section 80IB, remanding the issue to the AO to consider the eligibility for deduction under Section 80IB if the conditions are met.

5. Alternative Claim for Deduction under Section 80IB:
The assessee made an alternative claim for deduction under Section 80IB, arguing that the disallowed expenditure should enhance the deduction eligibility. The Tribunal admitted this alternative claim and directed the AO to consider it, provided the assessee meets all the conditions for Section 80IB deduction.

6. Disallowance of Expenditure Due to Non-Deduction of TDS under Section 40(a)(ia):
The AO proposed disallowance of certain expenditures due to non-deduction of TDS. The assessee argued that it was not treated as an "assessee in default" under Section 201(1), and hence, the disallowance under Section 40(a)(ia) should not be upheld. The Tribunal remanded this issue to the AO for fresh consideration, directing the AO to consider the assessee's arguments.

Conclusion:
The Tribunal remanded several issues to the AO for fresh verification and consideration, including the addition of share application money and unsecured loans, disallowance of expenditure, and the alternative claim for deduction under Section 80IB. The appeal was allowed for statistical purposes, and the stay application was dismissed as infructuous.

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