2023 (6) TMI 1112 - AT - Income Tax

Addition u/s 68 - unexplained cash credit - as per DR investor company had source of investment from sale of its investment in various private limited companies and it is not proved on the file that the above source was from sale of shares of genuine companies, thus source of the source was not verified - HELD THAT - AO has categorically mentioned in the assessment order that notices u/s 143(2) and 142(1) were issued and duly served upon the assessee, but there was no compliance. AO has also mentioned that the assessee was required to furnish the various details as noted above but there was no mention in the assessment order that such details were ever filed by the assessee before the Assessing Officer. Though as pointed out by the ld. counsel, some details might have been filed by the assessee before the Assessing Officer but as noted by the AO, all the requisite details as called for by the AO have not been filed. Notice issued u/s 131 along with questionnaire have not been complied with. Even, there is no discussion in the impugned order of the CIT(A) regarding the aforesaid points raised by the assessee. There was no submission of the assessee before any of the lower authorities that the subscribing company was a group company of the assessee. Though, it has been contended before us that the source of the investor company was from sale proceeds of shares, however, no such details have been filed before any of the lower authorities. The case was selected for scrutiny of large share premium and the assessee has not justified about the same by way of either submission or furnishing requisite details. In our view, the entire issue is required to be examined afresh at the end of the AO - We, accordingly, set aside the impugned order of the CIT(A) and restore the issue to the file of the Assessing Officer for de novo assessment. Appeal of the assessee is treated as allowed for statistical purposes.

Summary

Issues Involved:
The appeal against the order of the Commissioner of Income Tax (Appeals) regarding the addition of share capital and share premium under section 68 of the Income Tax Act.

Grounds of Appeal:
- The impugned appellate order confirming the AO's decision is unjustified, perverse, arbitrary, and bad in law.
- The addition of Rs. 1,65,00,000 under section 68 is unjustified and should be deleted.
- The addition of share capital and share premium should be deleted as it was treated as unexplained income.
- The proviso to section 68 was incorrectly invoked, and the addition should be deleted.
- Request for leave to add, alter, modify, amend, delete, or withdraw any grounds of appeal.

Facts of the Case:
- Assessee's case selected for scrutiny due to large share premium received.
- Notices issued for compliance, but no response from the assessee.
- Assessing Officer requested various details related to the share capital increase.
- Final show cause notice issued due to lack of compliance.
- Assessing Officer made an addition of Rs. 1,65,00,000 as unexplained income under section 68.

CIT(A) Decision:
- Upheld the addition made by the Assessing Officer based on lack of proof of identity and creditworthiness of the share subscriber.
- Noted lack of financial credibility of the share subscribing company.
- Referred to the characteristics of a shell company as per judicial decisions.

Tribunal Decision:
- Assessee claimed compliance with details filed, disputed lack of compliance.
- Assessee presented various arguments regarding the share issuance and financial standing.
- Tribunal found lack of compliance with notices and details requested by the Assessing Officer.
- Set aside CIT(A) order, restored the issue to the Assessing Officer for de novo assessment.
- Directed the Assessing Officer to provide adequate opportunity for the assessee to present their case.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, setting aside the CIT(A) decision and ordering a fresh assessment by the Assessing Officer, emphasizing the need for proper compliance and opportunity for the assessee to present their case.