2022 (6) TMI 146 - AT - Income Tax

Addition u/s 68 - Assessee argued no share premium has been received by it during this year, rather it was an opening balance of earlier years. - CIT-A deleted the addition - Revenue has pleaded that the ld. CIT(Appeals) has entertained fresh evidence and did not provide an opportunity to the Revenue for rebutting this fresh evidence and, therefore, the ld. 1st Appellate Authority has violated the conditions enumerated in Rule 46A of the Income Tax Rules, 1962 - HELD THAT - There is no doubt that if on the request of appellant, the ld. 1st Appellate Authority admits certain fresh evidence as an additional evidence, then, an opportunity is to be granted to the ld. Assessing Officer for rebutting that evidence. This has been provided under Rule 46A sub-clause (3) of the Rules. With the assistance of the ld. D.R., we have gone through the record carefully, but she was unable to pin-point, which is the additional evidence, filed before the ld. CIT(Appeals). The ld. 1st appellate authority has re-appreciated the position of accounts available in the balance-sheet right from the earlier years. The ld. 1st appellate authority has categorically recorded a finding that these amounts were not received by the assessee during the accounting year relevant to the assessment year. Therefore, no addition can be made in this assessment year. The ld. 1st appellate authority for buttressing his finding made reference to the CBDT Circular bearing No. 246/151/2017-A PAC-1 dated 10.01.2018. After perusal of the finding of the ld. CIT(Appeals), we do not find any error in it and there is no substance in the grounds of appeal raised by the Revenue. Accordingly, this appeal is dismissed.

Summary

Issues Involved:
1. Whether the CIT(A) violated Rule 46A of the Income Tax Rules, 1962 by relying on evidence produced during appellate proceedings without giving the Assessing Officer (AO) an opportunity for cross-examination and verification.
2. Whether the addition of Rs. 4.75 crores as unexplained cash credit under Section 68 of the Income Tax Act was justified.

Issue-wise Detailed Analysis:

1. Violation of Rule 46A of the Income Tax Rules, 1962:

The Revenue contended that the CIT(A) relied on new evidence during the appellate proceedings without providing the AO a chance to cross-examine or verify this evidence, thus violating Rule 46A. Rule 46A sub-clause (3) mandates that if the appellate authority admits fresh evidence, the AO must be given an opportunity to rebut it.

However, upon review, it was found that the CIT(A) did not admit any new evidence but re-evaluated the existing balance-sheet information from previous years. The CIT(A) confirmed that the amounts in question were not received during the relevant assessment year but were opening balances from earlier years. The CIT(A) also referenced a CBDT Circular to support this position. Therefore, the Tribunal concluded that there was no violation of Rule 46A, and the Revenue's contention lacked substance.

2. Justification of Addition under Section 68:

The core issue was whether the addition of Rs. 4.75 crores as unexplained cash credit under Section 68 was justified. The AO had added this amount as unexplained cash credit for the assessment year 2013-14. The assessee argued that no share premium was received during this year; instead, it was an opening balance from earlier years. The CIT(A) examined the balance sheets from FY 2007-08 to FY 2012-13 and confirmed that the share premium was raised in earlier years (2007-08 and 2008-09) and not in the assessment year 2013-14.

The CIT(A) noted that the AO failed to consider the audited accounts and balance sheets, which clearly showed that the share premium was from earlier years. The CIT(A) cited several judicial precedents and emphasized that Section 68 applies only to sums credited in the books for the relevant previous year. The CIT(A) concluded that the addition was made in the wrong assessment year, making the assessment order legally unsustainable.

The Tribunal agreed with the CIT(A)'s findings, noting that the AO should have assessed the income in the correct year as per the law. The Tribunal found no error in the CIT(A)'s order and dismissed the Revenue's appeal.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the addition of Rs. 4.75 crores as unexplained cash credit. The Tribunal found that there was no violation of Rule 46A and that the addition was made in the wrong assessment year, making the assessment order legally unsustainable. The appeal was dismissed, and the order was pronounced in open court on May 20th, 2022.