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2019 (12) TMI 691 - AT - Income TaxAddition u/s 68 - Unexplained cash credit - HELD THAT - We consider it fair and proper and in the interest of justice to give one more opportunity to the assessee-company to explain the relevant cash credit representing share capital and share premium amount in terms of section 68 by producing the concerned share subscribers along with the relevant documentary evidence for verification before the AO. D.R. has not raised any objection for sending the matter back to the Assessing Officer for verification. The impugned order passed by the CIT(Appeals) on this issue is accordingly set aside and the matter is restored to the file of the AO for deciding the same afresh after giving proper and sufficient opportunity to the assessee to support and substantiate its case by producing the concerned share subscribers along with the relevant documentary evidence for verification. Appeal of the assessee is treated as allowed for statistical purposes.
Issues Involved:
1. Addition of ?15,67,92,000/- made by the Assessing Officer under section 68 of the Income Tax Act, 1961. 2. Enhancement of the addition by ?27,80,000/- by the Commissioner of Income Tax (Appeals). Detailed Analysis: 1. Addition of ?15,67,92,000/- under Section 68: The assessee, a company engaged in share trading and investment, filed its return declaring 'NIL' income. During the assessment, the Assessing Officer (AO) demanded an explanation for the share premium amount of ?15,67,92,000/- received. The assessee failed to comply, leading the AO to treat the share premium as unexplained cash credit under section 68. The assessee contested this addition before the Commissioner of Income Tax (Appeals) [CIT(A)], submitting detailed documents including annual accounts, bank statements, and a valuation certificate from M/s. Shanna Naresh and Co., Chartered Accountants. The assessee argued that the premium was justified based on the company's net worth and that the AO had not disputed the share capital amount of ?27,80,000/-. The CIT(A) forwarded these submissions to the AO for verification. The AO reported non-compliance from share subscribers and the assessee's failure to establish the creditworthiness of the investors. Despite the assessee's submission of a valuation report, the AO maintained that the creditworthiness/source of funds in the hands of the share subscribers was not substantiated. 2. Enhancement by ?27,80,000/- by CIT(A): The CIT(A) not only confirmed the AO's addition of ?15,67,92,000/- but also enhanced the addition by ?27,80,000/-, treating the share capital received as unexplained cash credit. The assessee failed to provide an explanation for this enhancement. Tribunal's Decision: The Tribunal heard arguments from both sides. The assessee's counsel argued that neither the AO nor the CIT(A) provided sufficient opportunity to explain the cash credits. The remand report indicated that the share premium was treated as unexplained due to non-compliance with notices under section 133(6) by the share subscribers. The assessee contended that it could produce the share subscribers and relevant documents if given another opportunity. The Tribunal found merit in the assessee's plea for another opportunity, noting the violation of natural justice principles. It decided to set aside the CIT(A)'s order and remand the matter to the AO for fresh consideration, allowing the assessee to produce the share subscribers and relevant documents for verification. Conclusion: The appeal was treated as allowed for statistical purposes, with the matter remanded to the AO for a fresh decision after providing the assessee a fair opportunity to substantiate its claims. The order was pronounced in open Court on December 11, 2019.
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