2016 (5) TMI 854 - AT - Income Tax

Addition for the amounts received against allotment of the share capital - Held that - In the present case the ld. CIT(A) observed that nothing was apparent from the assessment order that any adverse material existed in the assessment folder for the relevant period on the other hand claim of the ld. DR is that the additions were made by the AO on the basis of the documents found during the search. Thus there is contradiction in the facts. On merit also the ld. CIT(A) without bringing on record the figures & statistics came to the conclusion that the companies had enough resources to make the impugned investment. Therefore by keeping in view the aforesaid facts we are of the opinion that the issues under consideration require a fresh adjudication. As the principles of natural justice demand that opportunity is to be given to both the parties we therefore deem it appropriate to set aside these issues raised vide additional grounds to the file of the ld. CIT(A) to be adjudicated expeditiously in accordance with law after providing due and reasonable opportunity of being heard to both the parties. The assessee is also directed to co-operate and not to seek any unwarranted or undue adjournment.

Summary

Issues Involved:
1. Addition of ?23,00,000/- for amounts received against the allotment of share capital.
2. Deletion of ?85,00,000/- out of the total addition of ?1,08,00,000/- made under Section 68 of the IT Act.
3. Validity of assessment orders passed under Section 153A and 153C of the IT Act.
4. Admission of additional grounds by the assessee.

Issue-wise Detailed Analysis:

1. Addition of ?23,00,000/- for amounts received against the allotment of share capital:
The assessee argued that the CIT(A) erred in confirming the addition of ?23,00,000/- for amounts received against the allotment of share capital without considering documentary evidence. The CIT(A) found that two companies, Reenu Fincap Pvt. Ltd. and Satellite Marcon Pvt. Ltd., did not file their audited annual accounts, casting doubt on their activities. Thus, the addition was confirmed for these companies.

2. Deletion of ?85,00,000/- out of the total addition of ?1,08,00,000/- made under Section 68 of the IT Act:
The AO had added ?1,08,00,000/- as unexplained cash credits, citing that the shareholding companies lacked creditworthiness. The CIT(A) deleted ?85,00,000/- of this addition, stating that the companies had sufficient resources and regular business activities, thus proving their creditworthiness and the genuineness of the transactions. The department appealed against this deletion, arguing that the transactions were bogus.

3. Validity of assessment orders passed under Section 153A and 153C of the IT Act:
The assessee contended that the additions were not based on any material found during the search and that the assessments were already completed. The CIT(A) did not address this issue as it was not raised before them. The ITAT found that the additional grounds raised were purely legal and admitted them for consideration. The ITAT set aside the issues to the CIT(A) for fresh adjudication, considering the principles laid out in the case of CIT vs. Kabul Chawla, which states that completed assessments can only be interfered with based on incriminating material found during the search.

4. Admission of additional grounds by the assessee:
The assessee raised additional grounds for the first time before the ITAT, arguing that no incriminating material was found during the search and that the assessments were invalid. The ITAT admitted these grounds, citing the Supreme Court's decision in National Thermal Power Co. Ltd. vs. CIT, which allows new legal grounds to be raised if they arise from facts already on record. The ITAT directed the CIT(A) to adjudicate these grounds afresh.

Conclusion:
The ITAT set aside the issues related to the additional grounds and the merits of the additions to the CIT(A) for fresh adjudication. The CIT(A) is to provide a reasonable opportunity of being heard to both parties and decide the issues expeditiously in accordance with the law. The appeals of both the assessee and the department were allowed for statistical purposes.