2018 (11) TMI 132 - AT - Income Tax

Addition u/s 68 - reopening of assessment - no proper opportunity was not given to assessee by AO during the reassessment proceedings - Held that - After examining all the details filed by the assessee company, shareholders of the assessee company and the directors of the share applicant companies the A.O. opined that verification of identity, genuineness and creditworthiness of the share applicants could not be done because the assessee company and the shareholders failed to comply to the summons. Thus the entire amount of share application money received along with premium to the tune of ₹ 91,35,00,000/- was added u/s 68 of the Act. The assessee had successfully explained the source of source of receipt by matching each entry with the bank statement and thus, the assessee has successfully proven the source of source and origin of origin of the receipts as envisaged u/s. 68. It was reiterated by the AR that the Balance Sheet and ITR Acknowledgement were also submitted at the time of hearing. The bank statement showing the sources of fund was being submitted before us for the first time. In such a scenario, for the ends of justice and fair play for both the parties and since the assessee could not produce the directors at the fag end of the assessment, on which ground alone the share capital along with the premium was added u/s. 68 therefore, we hold that proper opportunity was not given to assessee by AO during the reassessment proceedings and so we are, therefore of the opinion that assessee did not get proper opportunity before the AO during reassessment proceedings - Remand the matter back to the file of AO for de-novo assessment and to decide the matter in accordance to law after giving opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Validity of the addition of share application money along with premium under Section 68 of the Income Tax Act.
2. Adequacy of the opportunity provided to the assessee during the assessment proceedings.

Issue-Wise Detailed Analysis:

1. Validity of the Addition under Section 68:
The assessee company was incorporated on 15.09.2010, and the assessment year 2011-12 was its first period of operation. The company declared a total income of ?2851 and issued shares with a face value of ?1 at a premium of ?99. The AO added the entire share application money along with the premium amounting to ?91,35,00,000 under Section 68, citing the non-appearance of the directors for recording statements on oath. The Ld. CIT(A) confirmed this action.

The assessee argued that the share applicants were group concerns and common directors, thereby establishing their identity. The assessee provided extensive documentation, including shareholder lists, share applications, bank statements, and financial statements, to substantiate the transactions. The AO's addition was based on the non-compliance of the directors with the summons, despite the short notice period provided.

2. Adequacy of the Opportunity Provided:
The Tribunal noted that the summons issued under Section 131 were served on 19.03.2014, with a directive for appearance on 20.03.2014, allowing insufficient time for compliance. The Tribunal cited the Supreme Court's decision in Tin Box Company Vs. CIT, emphasizing that the assessment order must be made after the assessee has been given a reasonable opportunity to present its case. The Tribunal also referenced the Delhi High Court's decision in CIT Vs. Jansampark Advertising & Marketing Pvt. Ltd., which highlighted the necessity of a thorough inquiry by the authorities.

The Tribunal concluded that the assessee did not receive a proper opportunity to present its case during the reassessment proceedings. Consequently, the Tribunal set aside the order of the Ld. CIT(A) and remanded the matter back to the AO for a de novo assessment, ensuring compliance with the principles of natural justice.

Conclusion:
The appeal of the assessee was allowed for statistical purposes, with the Tribunal directing a fresh assessment by the AO after providing a reasonable opportunity for the assessee to present its case. The order was pronounced in the open court on 31/10/2018.