2022 (8) TMI 1081 - AT - Income Tax

Addition being the share application money received - accommodation entry transactions - Whether party did not respond to the notice u/s 133(6) of the Act could not ipso facto make the assessee liable for addition? - HELD THAT - AO made addition on the basis that during the year under consideration, the assessee had received certain share application money from share applicants - During the course of assessment proceedings, the assessee issued notice u/s 133(6) to verify the genuineness of the transaction. However, the notice sent by the AO remained unreplied. The assessee has filed a Paper Book wherein a reply by the share applicant is enclosed. Share applicants filed their income tax return and furnished P L A/c, computation of income etc. It is seen that the assessee has also filed part of the bank statement. However, it is seen that the balance sheet and computation of P L A/c filed by the assessee is not commensurate with the investment made by the share applicants. It is also seen that the assessee has not filed the entire balance sheet of the share applicants for the AY 2012-13 - Appeal of the assessee is dismissed.

Issues:
1. Validity of notice issued under section 148
2. Addition of unsecured loan as undisclosed income under section 68
3. Sustaining of addition of share application money

Issue 1: Validity of notice issued under section 148
The appellant challenged the notice issued under section 148 as illegal, void, and without jurisdiction. The appellant argued that the reasons recorded under section 147 were merely a change of opinion based on information from the Investigation Wing, relating to an already examined issue. The appellant contended that the notice was not valid as the original assessment had already been completed by the same Assessing Officer, including the examination of relevant issues. However, the appellant failed to attend the hearings, and the appeal was disposed of based on available records due to non-representation.

Issue 2: Addition of unsecured loan as undisclosed income under section 68
The Assessing Officer made an addition of Rs. 10,00,000 as unexplained cash credit treated as undisclosed income under section 68 of the Act. The appellant disputed this addition, arguing that the necessary documents were provided to explain the transactions, and the party in question did not respond to the notice under section 133(6) of the Act. The Senior DR opposed the appellant's contentions, emphasizing the appellant's failure to prove the genuineness of the transaction, identity of share applicants, and their creditworthiness. The Tribunal upheld the addition, noting the inadequacy of information provided by the appellant and the failure to establish the legitimacy of the transaction.

Issue 3: Sustaining of addition of share application money
The primary contention in the appeal was against the addition of Rs. 10,20,000 as share application money received from a specific company. The appellant argued that the assessment was conducted in a mechanical manner and provided documents to explain the transaction. However, the Senior DR supported the lower authorities' orders, stating the appellant's failure to prove the genuineness of the transaction, share applicants' identity, and their creditworthiness. The Tribunal upheld the addition, considering the incomplete information provided by the appellant and the lack of evidence to support the legitimacy of the transaction.

In conclusion, the Tribunal dismissed the appeal, affirming the additions made by the Assessing Officer. The decision was based on the appellant's failure to adequately substantiate the transactions in question and provide sufficient evidence to establish the legitimacy of the entries. The Tribunal's decision highlighted the importance of fulfilling the burden of proof in demonstrating the genuineness of transactions and the credibility of involved parties to avoid additions of undisclosed income.

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