2020 (11) TMI 941 - AT - Income Tax

Addition u/s 68 and 69 - CIT-A deleted addition admitting additional evidence - HELD THAT - There is no proper averment by the Assessing Officer with regard to the admission of additional evidences particularly when huge additions have been made which included the amount added u/ss. 68 69 which are carried forward from the earlier years, and this fact is clearly borne out from the material already on record before Assessing Officer. The additional evidences were in the form of confirmed copy of ledger accounts, confirmations and bank statement, etc. Since, as brought on record by the Ld. CIT(A) there was a clear violation of natural justice by the Assessing Officer, therefore, we hold that Ld. CIT(A) was justified in not only admitting the additional evidence but has also given due opportunity to the Assessing Officer to examine the same. The remissness on the part of the Assessing Officer cannot partake the principles of natural justice. Accordingly, ground no.1 as raised by the Revenue is dismissed. Addition on account of share capital and share premium - CIT(A) has deleted the addition by observing that addition u/s.68 cannot be made, because the amount of ₹ 3 crore are being carried forward from earlier years which is evident from letter filed before the Assessing Officer and there has been no increase in paid up share capital - HELD THAT - CIT-A fact findings has not been controverted by the Assessing Officer and accordingly, the addition made u/s.68 was deleted. On these facts, we do not find any infirmity either in law or on facts because such an addition cannot be made u/s.68 in the relevant Assessment Year. Accordingly, ground no.2 as raised by the Revenue is dismissed. Unsecured loan addition - HELD THAT - Most of the unsecured loan where in fact paid back during the year and only amount of ₹ 2,88,000/- was received in this year as fresh loan. Ld. CIT(A) examined the genuineness of fresh loan of ₹ 2,88,000/- and found that identity and creditworthiness of the lender M/s. DMC Education Ltd. and also the genuineness of the transaction has been substantiated by the assessee by way of various documentary evidences. The aforesaid finding of the Ld. CIT (A) based on proper appreciation of facts cannot be tinkered without any contrary material to rebut. Accordingly, the finding of the Ld. CIT (A) is upheld. Undisclosed investment in equity instruments - HELD THAT - Out of total addition of ₹ 1,31,27,449/-, amount of ₹ 48,27,449/- pertains to the earlier year which is not in dispute and accordingly the Ld. CIT(A) has rightly deleted the said amount from the addition made by the Assessing Officer. With regard to the balance amount, we find that there is a clear cut finding based on material on record that investments have been made by the assessee through proper banking channels and each and every entry have been duly explained from the books of account and bank statement. Once the investments have been made through cheques duly disclosed in the books of account, the same cannot be added as investment made outside the books or from undisclosed sources u/s.69. Therefore, the order of the Ld. CIT(A) is upheld and accordingly the grounds raised by the Revenue is rejected.

Summary

Issues Involved:
1. Admission of fresh evidence by CIT(A) under Rule 46A.
2. Deletion of addition of ?3,00,00,000 on account of share capital and share premium.
3. Deletion of addition of ?27,88,000 on account of unsecured loan.
4. Deletion of addition of ?1,31,27,449 on account of unexplained investments.

Issue-wise Detailed Analysis:

1. Admission of Fresh Evidence by CIT(A) under Rule 46A:
The Revenue contended that the CIT(A) erred in law by admitting fresh evidence without explaining why the assessee could not provide the evidence during the assessment proceedings, violating Rule 46A. The Tribunal found that the CIT(A) forwarded the additional evidence to the Assessing Officer (AO) for examination and verification, providing the assessee an opportunity to be heard. The CIT(A) admitted the evidence because the AO did not issue a show cause notice for the additions, preventing the assessee from submitting evidence during the assessment. The Tribunal upheld the CIT(A)'s decision, noting that the AO's failure to issue a notice constituted a violation of natural justice. Thus, the Tribunal dismissed the Revenue's ground.

2. Deletion of Addition of ?3,00,00,000 on Account of Share Capital and Share Premium:
The AO added ?3,00,00,000 as unexplained cash credit under Section 68, arguing that the assessee failed to explain the high share premium and capital. The CIT(A) deleted the addition, observing that the share capital and premium were recorded in the previous year, not the assessment year under consideration. The Tribunal confirmed that the paid-up share capital and share premium were carried forward from earlier years, evident from the balance sheet and letter dated 4th March 2015. Since there was no increase in the paid-up share capital during the relevant assessment year, the Tribunal found no infirmity in the CIT(A)'s decision to delete the addition and dismissed the Revenue's ground.

3. Deletion of Addition of ?27,88,000 on Account of Unsecured Loan:
The AO added ?27,88,000 as unexplained unsecured loans, alleging that the assessee failed to prove the genuineness, creditworthiness, and identity of the lender. The CIT(A) deleted the addition, noting that ?25,00,000 pertained to the previous year, and only ?2,88,000 was received during the assessment year. The assessee provided confirmation, ledger account, income tax return, and bank statement of the lender, M/s. DMC Education Ltd., as additional evidence. The Tribunal upheld the CIT(A)'s decision, confirming that the identity and creditworthiness of the lender and the genuineness of the transaction were substantiated by documentary evidence. Therefore, the Tribunal dismissed the Revenue's ground.

4. Deletion of Addition of ?1,31,27,449 on Account of Unexplained Investments:
The AO added ?1,31,27,449 as unexplained investments, alleging they were made from undisclosed sources. The CIT(A) deleted the addition, noting that ?48,27,449 pertained to earlier years and the remaining ?83,00,000 was made from disclosed funds. The assessee provided documentary evidence, including ledger accounts, confirmations, and bank statements, showing investments through proper banking channels. The Tribunal confirmed that the investments were made through cheques duly disclosed in the books of account, and therefore, could not be considered as made from undisclosed sources under Section 69. The Tribunal upheld the CIT(A)'s decision and dismissed the Revenue's ground.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on all grounds. The Tribunal found no legal or factual infirmity in the CIT(A)'s orders regarding the admission of fresh evidence, and the deletions of additions on account of share capital and share premium, unsecured loans, and unexplained investments. The order was pronounced in the open court on 27th November 2020.