2021 (12) TMI 1070 - AT - Income Tax

Addition u/s. 68 - Unexplained share application money - Unexplained Share Capital and Share Premium - HELD THAT - In this case the impugned additions have been made because of the reason that the assessee was not able to produce the necessary evidences to prove the genuineness of the transactions relating to the share capital share premium and unexplained loans. The assessee had duly explained the reasons for his inability to produce the relevant documents during the assessment proceedings as well as in the quantum appeal proceedings before the Ld. CIT(A) - assessee has been able to procure the evidences from the concerned parties including the confirmations and details of bank account etc. to prove the creditworthiness of the investor and genuineness of the transactions which evidences have been duly considered by the Ld. CIT(A) in penalty appeal and he has deleted the penalty so levied by the AO in respect of the impugned additions made by the Assessing officer. Under the circumstances it seems that the assessee has a fair case on merits. In our view interest of justice will be well served if the assessee is given an opportunity to produce the relevant evidences before the Assessing officer.The impugned order of the CIT(A) is set aside and the matter is restored to the file of the Assessing officer for decision afresh. Appeal of the assessee is treated as allowed for statistical purposes.

Issues Involved:
1. Legality and factual correctness of the CIT(A)'s order.
2. Addition of ?50,00,000/- under Section 68 on account of unexplained share application money.
3. Addition of ?11,50,000/- under Section 68 for unexplained unsecured loans.
4. Disallowance of ?1,59,500/- paid as interest on the unexplained unsecured loans.

Issue-wise Detailed Analysis:

1. Legality and Factual Correctness of the CIT(A)'s Order:
The appellant challenged the order of the CIT(A) dated 18.09.2017, arguing that it was against the law and facts of the case. The CIT(A) upheld the additions made by the Assessing Officer (AO) without considering the submissions and evidence provided by the assessee.

2. Addition of ?50,00,000/- Under Section 68 on Account of Unexplained Share Application Money:
The AO observed an increase in the share capital and share premium of the assessee. The assessee issued 6,18,200 new shares at a premium of ?40 each, totaling ?50,00,000/- from M/s. Balvindera Paper Mills and Shri Teja Singh. The AO deemed this amount as unexplained due to insufficient details regarding the identity, capacity, creditworthiness, and sources of the investors. The CIT(A) upheld this addition, as the assessee failed to furnish the required evidence.

3. Addition of ?11,50,000/- Under Section 68 for Unexplained Unsecured Loans:
The AO noted that the assessee raised unsecured loans from Stuti Gupta (?10,00,000/-) and Kusum Devi Vaid (?1,50,000/-). The assessee provided copies of accounts but failed to confirm the identity, capacity, and creditworthiness of the lenders. Consequently, the AO added ?11,50,000/- to the income, which the CIT(A) upheld due to lack of evidence.

4. Disallowance of ?1,59,500/- Paid as Interest on the Unexplained Unsecured Loans:
The AO disallowed interest payments of ?1,55,000/- to Stuti Gupta and ?4,500/- to Kusum Devi Vaid, totaling ?1,59,500/-, as the loans were deemed unexplained. The CIT(A) upheld this disallowance.

Appellant's Arguments:
The appellant explained that the share application money was received through cheques and provided bank statements. Confirmation from Shri Teja Singh could not be filed as he had expired, and litigation with M/s. Balvindera Paper Mills prevented obtaining their confirmation. The loans from Stuti Gupta and Kusum Devi Vaid were through financial brokers and banking channels, with interest paid after TDS compliance. The appellant cited depression and recovery proceedings initiated by their bankers as reasons for not providing evidence during assessment. During penalty proceedings, the appellant furnished bank statements, returns, and confirmations, which were ignored by the AO.

Penalty Proceedings and CIT(A) Decision:
In penalty proceedings, the appellant provided necessary documentation, leading to the CIT(A) deleting the penalty. The CIT(A) noted that the appellant's failure to furnish documents during assessment did not imply contumacious conduct or non-genuine claims.

Tribunal's Decision:
The Tribunal considered the appellant's inability to produce evidence during assessment due to genuine reasons. It acknowledged the appellant's subsequent procurement of evidence, which was considered in penalty proceedings. The Tribunal set aside the CIT(A)'s order and restored the matter to the AO for a fresh decision, allowing the appellant to produce necessary evidence. The AO was directed to provide a proper opportunity to the appellant and decide the case in accordance with the law.

Conclusion:
The appeal was allowed for statistical purposes, and the order was pronounced on 07.12.2021.

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