2019 (1) TMI 529 - AT - Income Tax

Addition u/s. 68 - Unexplained Share Premium - Held that - There is no discussion, whatsoever, regarding these submissions and evidences in the quantum assessment order. The Ld. AR has also submitted that notices u/s 133(6) were returned undelivered since the same were sent at the wrong address. As submitted that both the entities, upon being informed by the assessee about notices u/s 133(6), confirmed the transactions with supporting documentary evidences. The attention has also been drawn to the fact that valuation of shares was justified by following discounted cash flow method which was placed on record. Similar other submissions / pleas have been raised before us which lead us to reach a conclusion that the issue require re-appreciation by lower authorities. Similar is the position of impugned order where we find that there is no discussion as to how the three ingredients of Section 68 were satisfied by the assessee which led the Ld. CIT(A) to delete the impugned addition. On above facts and circumstances, without delving much deeper, we set aside the impugned issue and remit the matter back to the file of AO for re-adjudication after appreciating the documentary evidences filed by the assessee & pleas raised by Ld. AR. Revenue s appeal stands allowed for statistical purposes.

Summary

Issues:
Appeal by revenue contesting deletion of addition of ?5,00,00,000 under section 68 of the Income Tax Act regarding unexplained share premium.

Analysis:

Issue 1: Deletion of Addition under Section 68
The revenue appealed the deletion of the addition of ?5,00,00,000 under section 68 of the Income Tax Act by the Ld. CIT(A). The original assessment by the Ld. AO included this amount as unexplained cash credit. The assessee, a resident corporate entity engaged in real estate, introduced this sum as Share Application Money and share premium from two entities. However, the financials of the assessee showed minimal business operations, and notices sent to the entities for confirmation were returned. The Ld. AO, based on judicial pronouncements, treated this as unexplained cash credit. The Ld. CIT(A) admitted additional evidence under Rule 46A, concluding that the assessee satisfied the requirements of section 68, citing a decision by the Hon'ble Bombay High Court. The revenue contended that the three ingredients of section 68 were unfulfilled, considering the lack of substantial business activity. The AR argued that the assessee had proven the genuineness of the transactions. The tribunal found that the assessee failed to establish the transactions' genuineness before the Ld. AO, but additional evidence was not confronted to the AO, violating natural justice. The matter was remitted to the AO for re-adjudication, emphasizing the need for the assessee to substantiate their position.

Conclusion:
The tribunal allowed the revenue's appeal for statistical purposes, remanding the matter to the AO for re-examination after considering the documentary evidence and arguments presented by the AR. The assessee was directed to support their position, ensuring a fair hearing.