2020 (7) TMI 520 - AT - Income Tax

Addition u/s 69C OR 68 - Addition of share application money - Wrong mention of section - assessee contends that such unexplained credits are outside the ambit of section 69C - HELD THAT - Wrong mention of section would not vitiate the entire assessment. Moreover, the first appellate authority, at para 4.3 of his order, has also acknowledged this inadvertent error. No merit in this application moved by the assessee. Accordingly, the same stands rejected It is true that the Assessing Officer did not proceed further after serving the summons u/s 131 of the Act. In our considered opinion, if the summons were served and share applicants being family members, the Assessing Officer had all powers to enforce their attendance. Before the first appellate authority, the assessee furnished complete bank statements alongwith source of availability of funds with share applicants, but the same has been discussed summarily by the ld. CIT(A) and also by the Assessing Officer in his remand report. When the income of the share applicants does not justify the share application money, then the burden is heavier on the assessee to prove the credit worthiness of the share applicants. Though the assessee did file documentary evidences, it appears that the same have not been thoroughly examined by the authorities below. Therefore, in the interest of justice and fair play, we deem it fit to restore the entire assessment to the file of the Assessing Officer. The assessee is directed to furnish documentary evidences to show the availability of funds with share applicants and the Assessing Officer is directed to examine thoroughly and decide the issue afresh after giving reasonable and sufficient opportunity of being heard to the assessee. In so far as the addition on account of share application money from Pawan Goyal Sons, HUF is concerned, there is no dispute that this was opening balance brought forward from the preceding Assessment Years and, therefore, it is outside the ambit of section 68. To this extent, we do not find any error or infirmity in the findings of the ld. CIT(A). Addition of ₹ 6,50,000/- stands deleted. - Appeal of the revenue allowed in part for statistical purposes.

Summary

Issues:
Challenge of impugned addition of share application money under section 69C of the Income-tax Act, 1961. Deletion of addition of share application money by the Assessing Officer based on lack of creditworthiness of share applicants.

Analysis:

1. The appeal by the Revenue challenged the addition of share application money under section 69C of the Income-tax Act, 1961. The assessee contended that unexplained credits are outside the scope of section 69C, citing judicial decisions. The Assessing Officer mistakenly referred to section 69C instead of section 68 while making the addition, which was acknowledged as an error by the first appellate authority. The Tribunal rejected the assessee's application based on this technicality.

2. The main issue revolved around the deletion of the addition of share application money by the Assessing Officer due to lack of creditworthiness of the share applicants. The Assessing Officer observed discrepancies in the income of the share applicants and issued summons under section 131 of the Act, which went unanswered. The assessee provided bank statements and I.T. Returns, but the Assessing Officer deemed the credits unexplained and made the addition. The Tribunal noted that the income of the share applicants did not justify the share application money, placing a heavier burden on the assessee to prove creditworthiness.

3. The ld. CIT(A) admitted additional evidence and found explanations for the source of share application money from certain parties, concluding that the genuineness, creditworthiness, and identity of the share applicants were proven beyond doubt. The Tribunal, however, observed that the documentary evidence provided by the assessee was not thoroughly examined by the authorities below. In the interest of justice, the entire assessment was restored to the file of the Assessing Officer for a fresh examination.

4. The Tribunal upheld the deletion of the addition related to share application money from a specific party as it was an opening balance from preceding years and thus outside the purview of section 68. The appeal of the revenue was allowed in part for statistical purposes, directing a re-examination by the Assessing Officer based on thorough examination of documentary evidence provided by the assessee.

5. The Tribunal emphasized the importance of proving the creditworthiness of share applicants when their income does not justify the share application money, highlighting the need for a detailed examination of documentary evidence for a fair decision.