2022 (9) TMI 503 - AT - Income Tax

Addition u/s 68 - Unexplained share application money and premium thereon - HELD THAT - Assessee sought for adjournment on various occasions and produced a piecemeal, not the relevant information as called for by the AO. In the first occasion, the assessee filed only the details of the shareholders name, address, number of shares and amount of investment, but without furnishing PAN number, copies of Return of Income, confirmation letters and bank statement of the share subscribers. In spite of seven opportunities given to the assessee, assessee could not produce the details before the AO - During the appellate proceedings, the assessee filed as additional documents namely the confirmation letters and cheque amount involved and PAN No. details. The confirmation letters are all dated November 2010. There is no details about the folio number of the shares allotted to the shareholders. Further study of the consent letters of 10 shareholders submitted before the A.O. shows that several of them were not having any d-mat account though they have been shown to have subscribed to huge amounts of shares. The very fact that these shares were not issued by means of public offer shows that the promoters and the directors of the assessee company must know the alleged shares subscribers personally. Despite thus the assessee failed to proof of identity, creditworthiness and genuineness of the transaction of the shareholders with the assessee company. Thus it clearly shows that the assessee has not produced the available documents with it before passing the assessment orders and the same is produced which is six years old before CIT(A) as additional documents which cannot be entertained. Perusal of the list of investors and their returned income was between the range of Rs. 1,65,764/- to Rs. 2,60,109/- but they invested ranging from Rs. 56 lakhs to Rs. 84 lakhs. Thus the creditworthiness of these investors are not proved beyond doubt. No hesitation in confirming the orders of the lower authorities and the ground and additional ground raised by the assessee has no merits and the same are dismissed.

Summary

Issues Involved:
1. Addition under Section 68 of the Income Tax Act for unexplained share capital and share premium.
2. Non-admission of additional evidence under Rule 46A of the Income Tax Rules.
3. Confirmation of additions related to stamp duty and registration fees as capital expenditure.
4. Initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act.
5. Charging of interest under Sections 234B, 234C, and 234D of the Income Tax Act.

Detailed Analysis:

1. Addition under Section 68 of the Income Tax Act for unexplained share capital and share premium:
The assessee, engaged in the business of Motion Picture Productions and Trading of Goods & Trading in Software, filed its return of income declaring a total income of Rs. 19,60,311/-. During scrutiny assessment, the Assessing Officer (A.O.) made an addition of Rs. 19,62,80,000/- under Section 68 of the Income Tax Act for unexplained share capital and share premium. The assessee was unable to provide sufficient details such as PAN, confirmation, return of income, and bank statements of the share subscribers. Despite multiple opportunities, the assessee failed to furnish the required information. Consequently, the A.O. added the amount as unexplained income.

2. Non-admission of additional evidence under Rule 46A of the Income Tax Rules:
The assessee appealed against the assessment order to the Commissioner of Income Tax (Appeals) [CIT(A)], who upheld the A.O.'s decision. The CIT(A) did not admit additional evidence submitted by the assessee during the appellate proceedings, citing that the assessee had sufficient opportunities to provide the details during the assessment process. The CIT(A) relied on the jurisdictional High Court judgment in the case of Fairdeal Filaments Ltd. vs. CIT, which emphasized that additional evidence should not be admitted if the assessee was negligent and non-cooperative during the assessment process.

3. Confirmation of additions related to stamp duty and registration fees as capital expenditure:
The assessee raised a ground of appeal against the confirmation of additions of Rs. 14,28,490/- made on account of stamp duty and registration fees, treating the same as capital expenditure. However, this ground was not pressed during the hearing, and therefore, it was dismissed.

4. Initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act:
The assessee also contested the initiation of penalty proceedings under Section 271(1)(c) for alleged concealment and/or furnishing of inaccurate particulars of income. However, since the main grounds related to the addition under Section 68 were dismissed, this ground was also deemed to have no merit and was dismissed.

5. Charging of interest under Sections 234B, 234C, and 234D of the Income Tax Act:
The assessee challenged the charging of interest under Sections 234B, 234C, and 234D. Given that the primary grounds related to the unexplained share capital and share premium were dismissed, the grounds related to interest charges were also dismissed as consequential.

Conclusion:
The appeal filed by the assessee was dismissed in its entirety. The Tribunal upheld the decisions of the lower authorities, confirming the addition under Section 68 for unexplained share capital and share premium, and the non-admission of additional evidence under Rule 46A. The grounds related to penalty proceedings and interest charges were also dismissed as they were consequential to the primary issue. The order was pronounced in the open court on 09-09-2022.