2021 (1) TMI 477 - AT - Income Tax

Addition u/s 68 - whether the enhancement made by the ld. CIT(A) is in accordance with law? - HELD THAT - AO made no addition in respect of these items of cash credit, though in the course of hearing before him he holds the discussion of such items of income. As per the propositions of law, on such facts only the Pr. CIT or the CIT(A) is empowered to take appropriate action u/s 263 of the Act. Coming to the addition of ₹2,10,00,000/-, the assessee stated that the old address of the company has changed. Notices were sent to the old addresses. As D/R submitted that the addition may be restored to the file of the AO for fresh adjudication after giving the assessee adequate opportunity of being heard, provided the assessee in the case, cooperate and furnish all the necessary details required for the assessment including the present addresses of the companies - we set aside this matter to the file of the AO for fresh adjudication - assessee is directed to produce the principal officers of the share applicant companies before the AO and also furnish the present addresses of those companies. In the result, ground allowed for statistical purposes.

Summary

Issues Involved:

1. Estimation of income at the rate of 8% of the total turnover.
2. Addition of ?2,10,00,000/- as unexplained cash credit under Section 68 of the Income Tax Act.
3. Enhancement of assessment by the CIT(A) regarding the share application money received from additional companies.

Issue-wise Detailed Analysis:

1. Estimation of Income at the Rate of 8% of the Total Turnover:

The assessee, a company involved in civil construction and hiring of heavy machinery, filed its return of income declaring ?74,43,596/- for the AY 2012-13. The AO determined the total income at ?3,46,50,520/- and made an addition of ?1,33,89,565.44 at the rate of 8% of the total turnover of ?16,73,69,568.06. The assessee challenged this estimation before the CIT(A), but the CIT(A) dismissed the ground raised by the assessee against the estimation of income at 8% of the turnover. The assessee did not press this issue further before the Tribunal, and thus, this ground was dismissed as not pressed.

2. Addition of ?2,10,00,000/- as Unexplained Cash Credit Under Section 68:

The AO made an addition of ?2,10,00,000/- under Section 68 of the Act, as the share application money received from five companies was not satisfactorily explained. Notices issued to two companies were returned with the comment "No such building exists," while two other companies replied, and one company did not respond. The AO issued a show cause notice and summoned the principal officers of the share applicant companies, but none appeared. The inspector's report indicated that none of these companies existed at the stated addresses. The CIT(A) confirmed the addition of ?2,10,00,000/- and further enhanced the assessment by adding the share application money received from two additional companies. The Tribunal noted that the assessee had submitted various documents to prove the genuineness of the transactions and the identity and creditworthiness of the shareholders. The Tribunal set aside the matter to the AO for fresh adjudication, directing the assessee to produce the principal officers of the share applicant companies and furnish their present addresses.

3. Enhancement of Assessment by the CIT(A):

The CIT(A) enhanced the assessment by adding the share application money received from M/s. Khetrapati Vinimay Pvt. Ltd. and M/s. BPMK Energy Systems Pvt. Ltd., which the AO had initially accepted as genuine. The Tribunal examined whether the CIT(A) could enhance the assessment on the same set of facts without any fresh information or material. The Tribunal referred to the case of M/s. Matarani Vintrade Pvt. Ltd. vs. ITO and other case laws, concluding that the CIT(A) could not enhance the assessment without providing reasonable opportunity to the assessee and without fresh material. The Tribunal held that the CIT(A) should have issued summons to the directors of the share applicant companies for examination. The Tribunal set aside the enhancement made by the CIT(A) and directed the AO to conduct fresh adjudication.

Conclusion:

The Tribunal allowed the appeal for statistical purposes, setting aside the addition of ?2,10,00,000/- and the enhancement made by the CIT(A) for fresh adjudication by the AO. The estimation of income at 8% of the turnover was dismissed as not pressed. The Tribunal emphasized the need for providing reasonable opportunity to the assessee and conducting thorough enquiries before making any additions or enhancements.