2018 (12) TMI 1510 - AT - Income Tax

Addition u/s 68 - treating the share capital and share premium amount as unexplained cash credits - Held that - CIT(A) was not justified in treating the share premium amount of ₹ 28 lacs received by the assessee as unexplained and enhancing the addition made by the AO to that extent. He has contended that the assessee is very much in a position to produce the shareholders for verification before the AO and also to produce all the relevant documentary evidence to explain the share capital as well as share premium amounts in terms of section 68 and urged that an opportunity may be given to the assessee by sending the matter back to the AO. Although the learned DR has opposed this plea made by the learned counsel for the assessee by submitting that proper and sufficient opportunity has already been given by the authorities below to the assessee consider it fair and proper and in the interest of justice to give one more opportunity to the assessee to explain the relevant cash credits representing share capital and share premium amounts in terms of section 68 keeping in view all the facts and circumstances of the case - restore this matter to the file of the AO for deciding the same afresh after giving one more opportunity of being heard to the assessee - Appeal of the assessee is treated as allowed for statistical purpose.

Summary

Issues Involved:
Addition of unexplained cash credits under section 68 - Share capital and share premium amount.

Analysis:
The appeal was filed against the order of Ld. CIT(A) concerning the addition of &8377; 7,00,000/- by the AO under section 68, which was increased to &8377; 35,00,000/- by the Ld. CIT(A) as unexplained cash credits. The assessee, a trading company, could not satisfactorily explain the share capital of &8377; 7,00,000/- raised during the relevant year. The AO treated it as unexplained, resulting in the addition to the total income. The assessee challenged this addition before the Ld. CIT(A), submitting various documents during appellate proceedings to support the share capital and share premium amounts. The A.O. acknowledged the documents corroborated the share applications but cited time constraints for not conducting further investigations. The Ld. CIT(A) disregarded the submissions and confirmed the additions made by the AO. The Tribunal noted that the AO did not give sufficient opportunity to explain the cash credits and remanded the matter to the AO to allow the assessee to present evidence regarding the share capital and share premium amounts. The Tribunal set aside the Ld. CIT(A)'s order, directing the AO to re-decide the issue after affording the assessee another opportunity to be heard and cooperate in the assessment process.

Therefore, the appeal was allowed for statistical purposes, and the matter was remanded to the AO for fresh consideration after providing the assessee with another opportunity to explain the cash credits adequately, ensuring due compliance and cooperation from the assessee during the reassessment process.