2021 (7) TMI 56 - AT - Income Tax

Unexplained cash credit u/s 68 - CIT-A deleted the addition - HELD THAT - CIT(A) called for the assessment rcord from M/s M.L. Singhi Associates Private Limited for AY 2012-13 and found that the AO has completed the assessment u/s 143(3) of the Act for AY 2012-13. From the said assessment record he also found that detailed questionnaire was issued by the AO, who examined the source of funds available with the same entity for investment in shares of the assessee company and after being satisfied accepted the claim of the assessee company. It is the settled proposition of law that powers of the learned CIT(A) are co-terminus with that of the Assessing Officer. The learned CIT(A) can do which the AO has failed to do. Since, the learned CIT(A) in the instant case after verification of the assessment record of M/s M.L. Singhi Associates Private Limited, whose assessment was done by the very same Assessing Officer found that it has fully explained the source for making investment in the shares of the assessee company, therefore, we do not find any infirmity in his order in deleting addition. Remaining eleven persons i.e. individuals and corporate entities - we find the AO basically made the addition on the ground that in absence of reply to notice u/s 133(6) of the Act, he could not verify the information/documents filed by the assessee in respect of amount received on account of share capital - as per assessee that all those details were available with the assessee on 31st March, 2015 and the Authorized Representatives of the assessee went to the AO for filing of the same but the AO refused to accept for which those documents were sent by speed post on 31st March, 2015 itself. Although the learned CIT(A) has given a finding that all these concerns are promoters of the assessee company and have sufficient funds available with them and are regular taxpayers, however, due to non receipt of the information u/s 133(6) of the Act, the AO could not verify these details. We deem it proper to restore the issue relating to the remaining 11 parties to the file of the AO with a direction to conduct such enquiries as he deems fit pursuant to the notice u/s 133(6)The grounds raised by the Revenue are partly allowed for statistical purposes.

Summary

Issues Involved:
1. Addition of ?10,38,25,000 as unexplained cash credit under Section 68 of the I.T. Act, 1961.
2. Verification of identity, creditworthiness, and genuineness of transactions related to share capital raised by the assessee.

Issue-wise Detailed Analysis:

1. Addition of ?10,38,25,000 as Unexplained Cash Credit:

The Revenue appealed against the deletion of ?10,38,25,000 added by the AO as unexplained cash credit under Section 68 of the I.T. Act, 1961. The AO had treated this amount as unverified since the notices issued under Section 133(6) to various parties were either returned undelivered or not responded to. The CIT(A) deleted this addition, leading to the Revenue's appeal.

2. Verification of Identity, Creditworthiness, and Genuineness of Transactions:

a. M/s M.L. Singhi & Associates Private Limited:

The CIT(A) verified the assessment records of M/s M.L. Singhi & Associates Private Limited and found that the same AO had assessed this entity and accepted its investment in the assessee company. The CIT(A) noted that the AO had issued a detailed questionnaire and was satisfied with the source of funds for the investment. Therefore, the CIT(A) deleted the addition of ?4,04,25,000 related to this entity, and the Tribunal upheld this deletion, finding no infirmity in the CIT(A)'s order.

b. Remaining Eleven Investors:

For the remaining eleven investors, the AO made the addition due to the lack of replies to notices under Section 133(6), which prevented verification of the information/documents filed by the assessee. The CIT(A) observed that these investors were promoters of the assessee company, had sufficient funds, were regular taxpayers, and had filed income tax returns regularly. However, the Tribunal noted that due to the non-receipt of information under Section 133(6), the AO could not verify these details. Consequently, the Tribunal restored the issue related to these eleven parties to the AO for further verification and directed the AO to conduct necessary enquiries and decide the issue as per law after providing due opportunity to the assessee.

Conclusion:

The Tribunal partly allowed the Revenue's appeal for statistical purposes. The deletion of ?4,04,25,000 related to M/s M.L. Singhi & Associates Private Limited was upheld, while the issue concerning the remaining eleven investors was remanded to the AO for further verification. The Tribunal emphasized the need for the AO to conduct necessary enquiries and provide the assessee with a fair opportunity to present its case.