2021 (9) TMI 239 - AT - Income Tax

Addition u/s 68 - unexplained Bank credits, unexplained share application money, unexplained share premium and unexplained share capital - assessee has failed to discharge the initial onus cast on it by proving the various transactions appearing in the bank account - CIT(A) after admitting the additional evidences and obtaining a remand report from the A.O. granted part relief to the assessee - Assessee submitted that all credits in the Bank account have been added including the credits in the Bank Account from Auto Sweep Account despite the fact that the Sweep Account is merely a credit in the Current/ Savings Account out of the Fixed Deposit Account of the assessee, disregarding the explanation given by the assessee and additions on account of Bank interest, dividend income and share application money received through Banking channels have been made, which were already taxed and therefore the same amounts to double addition - HELD THAT - Considering the totality of the facts and circumstances of the case and in the interest of justice, we deem it proper to restore the issue to the file of A.O. with a direction to grant one more opportunity to the assessee to substantiate its case by filing the requisite details and explaining each and every transaction including the credits in the Bank Account from Auto Sweep Account. Wherever double addition has been made on account of Bank interest, dividend income and share application money etc., the A.O. shall, upon satisfaction, delete the same. The A.O. shall also consider the application of proviso to section 68 w.e.f. 01.04.2013 in respect of share application money received from family members relatives of directors. A.O. shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. The assessee is also hereby directed to appear before the A.O. and substantiate its case by producing the requisite details - Grounds raised by the Assessee are allowed for statistical purposes.

Issues Involved
1. Validity of the search and seizure operation under section 132 of the Income Tax Act, 1961.
2. Jurisdiction and legality of proceedings initiated under section 153C.
3. Validity of additions made by the Assessing Officer (A.O.) on account of unexplained share capital, share premium, share application money, and bank credits.
4. Alleged double addition of income.
5. Application of proviso to section 68 of the Income Tax Act, 1961.

Detailed Analysis

1. Validity of the Search and Seizure Operation
The search and seizure operation under section 132 of the Income Tax Act, 1961, was initiated on 11.04.2011. Documents and books belonging to the assessee were found and seized from the premises of another individual. The case was centralized with Central Circle-14, New Delhi, and a notice under section 153C r.w.s. 153A was issued to the assessee on 20.01.2014. The assessee contended that the search itself was unlawful and invalid, rendering the subsequent proceedings void. However, the tribunal did not provide a conclusive finding on this issue, focusing instead on the procedural aspects and the need for a fresh adjudication.

2. Jurisdiction and Legality of Proceedings under Section 153C
The assessee argued that the proceedings under section 153C were invalid due to the absence of incriminating material belonging to the assessee found during the search. Additionally, the assessee claimed that no satisfaction was recorded by the A.O. of the searched person that the incriminating material belonged to the assessee. The tribunal noted these contentions but decided to restore the matter to the file of the A.O. for fresh adjudication, emphasizing the need for the A.O. to grant the assessee an opportunity to substantiate its case.

3. Validity of Additions Made by the A.O.
The A.O. made significant additions to the total income of the assessee on account of unexplained share capital, share premium, share application money, and bank credits. The assessee contended that these additions were made without proper consideration of the evidence provided. The tribunal acknowledged that the assessee had submitted explanations and reconciliations for the bank credits and other transactions. However, the A.O. had disregarded these explanations, leading to the additions. The tribunal found merit in the assessee's contention and restored the matter to the A.O. for a fresh examination, directing the A.O. to consider the explanations and evidence provided by the assessee.

4. Alleged Double Addition of Income
The assessee argued that certain additions amounted to double addition, as the same income had already been taxed. Specifically, the assessee pointed out that bank interest, dividend income, and share application money received through banking channels were taxed twice. The tribunal directed the A.O. to verify these claims and delete any instances of double addition upon satisfaction.

5. Application of Proviso to Section 68
The assessee contended that the provisions of section 68, as amended w.e.f. 01.04.2013, should not apply to the transactions in question. The tribunal directed the A.O. to consider the application of the proviso to section 68 in respect of share application money received from family members and relatives of directors, as per the amended provisions.

Conclusion
The tribunal allowed the appeals filed by the assessee for statistical purposes, restoring the matters to the file of the A.O. for fresh adjudication. The A.O. was directed to grant the assessee an opportunity to substantiate its case by providing requisite details and explanations for each transaction. The tribunal emphasized the need for the A.O. to consider the application of the amended proviso to section 68 and to avoid double addition of income. The assessee was also directed to cooperate with the A.O. and provide necessary evidence without seeking adjournments.

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