2020 (11) TMI 646 - AT - Income Tax

Bogus LTCG - Non genuine Share Application Money (Share Capital) - notice u/s. 133(6) has not be responded - finding of the investigation wing of the Income Tax Department that assessee was receipt of bogus accommodation entries from Shri S.C. Shah Group of companies - HELD THAT - Lower authorities have noted that notice u/s. 133(6) has not be responded. Assessee has submitted that the assessee was not required to produce the director of the investor company. We further note that the issue of additional evidence and additional ground are no more germane to the issue at hand as the assessee has himself produced affidavit from Shri S.C. Shah for the proposition that he is not providing accommodation entry. Examination of the identity, creditworthiness and genuineness of the transaction - The same is not clear from the documents on record. The same is also cogently not brought out in the orders of the authorities below. As assessee submits that if the assessee is asked to produce representative/director of the investor company the same can be attempted - we deem it appropriate to remit this issue of addition u/s. 68 of the Act to the file of the Assessing Office who shall issue necessary notices to the assessee company and shall make the necessary examination with respect to identity, creditworthiness and genuineness of the transaction. He shall properly examine the documents and financial statement being submitted by the assessee company and pass a speaking order - With these directions we remit this issue to the file of the Assessing Officer. Decided in favour of assessee for statistical purposes.

Issues Involved:
1. Addition of Share Application Money as Non-Genuine.
2. Violation of Principles of Natural Justice.
3. Admission of Additional Evidence.

Detailed Analysis:

1. Addition of Share Application Money as Non-Genuine:
The primary issue in this case was whether the share application money amounting to ?4,45,00,000/- received by the assessee from M/s. Speciality Papers Ltd. was genuine or not. The Assessing Officer (AO) added this amount as unexplained cash credit under section 68 of the Income Tax Act, relying on the statement of Shri Shirish Chandrakant Shah, who admitted to providing accommodation entries through various entities. The AO observed that the shareholding pattern and the financial transactions indicated that the funds were routed back into the assessee's business through non-genuine channels. The AO issued notices under section 133(6), which went unresponded. The CIT(A) upheld the AO's decision, emphasizing the need to prove the genuineness of the transaction beyond just payment through cheques.

2. Violation of Principles of Natural Justice:
The assessee contended that the AO's action violated the principles of natural justice as the assessee was not provided with copies of the statements relied upon nor given an opportunity to cross-examine the persons who made those statements. The assessee argued that this issue goes to the root of the proceedings and sought to raise additional grounds of appeal on this basis. The Tribunal noted that the assessee had obtained an affidavit from Shri S.C. Shah, stating that his earlier statements were made under pressure and were not true.

3. Admission of Additional Evidence:
The assessee moved a petition to admit additional evidence under Rule 29 of the ITAT Rules, 1963, including an affidavit from Shri S.C. Shah and other relevant documents. The Tribunal considered the request, noting that the additional evidence could substantiate the legality of the case and had a direct bearing on the present appeal.

Judgment:
The Tribunal found that the addition for share capital and share premium was based on the findings of the investigation wing that the assessee received bogus accommodation entries from Shri S.C. Shah's group of companies. The Tribunal emphasized the need to examine the genuineness, identity, and creditworthiness of the transactions. The Tribunal noted that the lower authorities had not adequately examined these aspects and that the notice issued under section 133(6) had remained unresponded. The Tribunal deemed it appropriate to remit the issue back to the AO for a fresh examination, directing the AO to issue necessary notices and make a detailed examination with respect to the identity, creditworthiness, and genuineness of the transactions. The assessee was granted the opportunity to produce the necessary documents and representatives for examination.

Conclusion:
The appeal filed by the assessee was allowed for statistical purposes, with the issue remitted to the AO for a fresh examination. The Tribunal directed the AO to pass a speaking order after providing the assessee with adequate opportunity to be heard and to submit necessary documents.

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