2022 (10) TMI 315 - AT - Income Tax

Addition u/s 68 - Amount received from shareholders towards allotment of equity shares - whether relevant and detailed enquiry to establish the basic three parameters of identity, genuineness of transactions and creditworthiness of the investor company has not been undertaken both at the assessment level and at the first appellate stage? - HELD THAT - Prayer made by the ld. Counsel for the assessee as also the observation made by the CIT(Appeals) in respect of proving the source of source, we find it proper to set aside the matter to the file of CIT(Appeals) in the interest of justice and fair play. We direct to pass a speaking order considering the submissions made by the assessee, calling requisite remand report from the ld. AO and after making required enquiries/investigation as deem fit. Needless to say that the assessee be given reasonable opportunity of being heard to substantiate its claim by making any further submissions apart from the documents already placed on record. Since the matter is restored to the file of Ld. CIT(A) for fresh adjudication in terms of our observations herein above, we are not expressing any views on the merits of the case so as to limit the appellate procedure before the Ld. CIT(A). Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
1. Addition of Rs. 10,00,000/- under section 68 of the Income-tax Act.
2. Challenge to the jurisdictional aspect of the assessment under section 147.

Analysis:

Issue 1: Addition of Rs. 10,00,000/- under section 68 of the Income-tax Act:
The appeal by the assessee contested the addition of Rs. 10,00,000/- received from shareholders towards allotment of equity shares, which was added under section 68 of the Income-tax Act. The assessee's return of income reported a total income of Rs. 1,020/-, but the assessing officer sought explanation on the amount received from a company towards share capital and share premium. Despite issuing notices and summons, both the investor company and the assessee failed to provide satisfactory explanations regarding the identity, genuineness of transactions, and creditworthiness of the share applicant. Consequently, the assessing officer treated the amount as unexplained cash credit under section 68 of the Act, leading to the addition. The CIT(Appeals) noted the assessee's reliance on MCA portal details but emphasized the onus on the assessee to prove the source of source, as per the amended section 68. The Tribunal found that detailed enquiry to establish the basic parameters was lacking and decided to set aside the matter for fresh adjudication by the CIT(Appeals), allowing the assessee to substantiate its claim with further submissions.

Issue 2: Challenge to the jurisdictional aspect of the assessment under section 147:
The assessee challenged the jurisdictional aspect of the assessment under section 147, filing additional grounds which were later dismissed as not pressed during the appellate proceedings before the Tribunal. The assessing officer had reopened the assessment based on information received, questioning the meagre returned income against the substantial share premium charged. The Tribunal did not delve into the merits of the case but directed the CIT(Appeals) to pass a speaking order after considering the submissions made by the assessee, calling for a remand report from the assessing officer and conducting necessary enquiries. The decision to set aside the matter for fresh adjudication was made in the interest of justice and fair play, ensuring a reasonable opportunity for the assessee to present its case effectively.

In conclusion, the Tribunal allowed the appeal of the assessee for statistical purposes, remanding the matter back to the CIT(Appeals) for a thorough reevaluation based on the observations and directions provided, without expressing any views on the case's merits.