2024 (7) TMI 278 - AT - Income Tax

Addition u/s 69 - unexplained cash deposit in the bank account - addition of share capital receipts - HELD THAT - With respect to the unsecured loan received by the assessee company from the father of the Director of the assessee as observed that the confirmation and bank statements are filed. However, loan to the assessee company by the father of the Director is preceded by depositing of cash of similar amount. However, the authorities below have not considered these confirmations and the bank statements of the father of the Director etc. filed by the assessee , and have simply dismissed the appeal of the assessee while these documents have been claimed by the assessee to have been filed before the Assessing Officer and CIT(A). Father of the assessee Director who have advanced loan of Rs. 7,50,000/- to the assessee company has claimed that he is an agriculturist and into husbandry business as well Retired Pro Vice-Chancellor from Agricultural University, Dantiwada, and the source of advances are from these activities. These aspects were not considered by any of the authorities below and simply additions were confirmed. Similar observations are there with respect to the other loans raised by the assessee company wherein the authorities below have not considered the contentions of the assessee. With respect to cash deposits made in the bank, the assessee has claimed same to be cash sales of seeds. The assessee has filed ledger accounts, but the assessee has not filed conclusive evidence to prove that these purchase and sale of seeds has taken place and that the assessee in the business of trading of seeds. These aspects requires further verification by authorities below as the evidence filed are also not considered. Similarly for purchase of seeds, the assessee has claimed that the payments have been made in cash. AO has disallowed purchases to the tune of 10%. The assessee has filed additional evidences before the CIT(A) and has also filed certain additional evidence before the Tribunal . CIT(A) has not called for remand report from the AO on these additional evidences which led to breach of Rule 46A, and the ld. CIT(A) has also have not given his decision whether the additional evidences are to be admitted or not. The additional evidences were also filed before us. Under these circumstances, in the interest of justice, the entire matter wrt all the additions made by the AO and as confirmed by ld. CIT(A), needs to be set aside to the file of Assessing Officer for de-novo assessment. AO shall also admit all the evidences filed by the assessee while framing de-novo assessment on merit in accordance with law after giving proper opportunity to the assessee. Appeal of the assessee is allowed for statistical purpose.

Summary

Issues Involved:
1. Addition of credit entries of Rs. 14,78,000/- including cash deposit of Rs. 5,38,000/-.
2. Addition of share capital amounting to Rs. 1,00,000/-.
3. Addition of Rs. 52,852/- being 10% of the expenses of Rs. 5,28,516/-.
4. Incorrect classification of the appellant's company's activity as agricultural.

Detailed Analysis:

1. Addition of Credit Entries of Rs. 14,78,000/- Including Cash Deposit of Rs. 5,38,000/-:
The assessee did not file a return of income for the assessment year 2012-13, leading to a re-opening of the assessment based on information from the Non-filers Monitoring System (NMS) regarding a cash deposit of Rs. 6 lakhs in the assessee's HDFC Bank account. Despite multiple notices, the assessee failed to provide the necessary details, resulting in the Assessing Officer (AO) adding Rs. 5,38,000/- as unexplained cash deposits under Section 69 of the Income-tax Act, 1961. The AO also added Rs. 9,40,000/- as unexplained credits due to the assessee's failure to provide sufficient documentation to explain these entries. The AO noted discrepancies in the cash book and ledger accounts provided by the assessee, which were deemed not genuine. The CIT(A) upheld these additions, stating that the cash book and vouchers provided by the assessee were incomplete and fabricated.

2. Addition of Share Capital Amounting to Rs. 1,00,000/-:
The AO observed that the assessee's balance sheet showed an addition of Rs. 1,00,000/- in share capital during the year, which was not explained satisfactorily by the assessee. The AO added this amount as unexplained cash credit under Section 68 of the Act. The CIT(A) confirmed this addition, noting that the assessee failed to provide bank details and creditworthiness of the contributors. The assessee contended that the share capital was introduced in the financial year 2010-11, but this was not accepted by the authorities.

3. Addition of Rs. 52,852/- Being 10% of the Expenses of Rs. 5,28,516/-:
The AO disallowed 10% of the purchase expenses amounting to Rs. 5,28,516/- due to insufficient details provided by the assessee. The CIT(A) upheld this addition, stating that the vouchers provided were incomplete and appeared fabricated. The assessee argued that the purchases were made in cash and provided ledger accounts and some purchase bills, but these were not considered adequate by the authorities.

4. Incorrect Classification of the Appellant's Company's Activity as Agricultural:
The assessee contended that the CIT(A) incorrectly classified the company's activity as agricultural, while the company was actually involved in developing and trading seeds. This misclassification was part of the broader issue of the authorities not accepting the assessee's explanations and documentation regarding its business activities.

Conclusion:
The Income Tax Appellate Tribunal (ITAT) noted several procedural lapses, including the CIT(A)'s failure to call for a remand report on the additional evidence submitted by the assessee, which breached Rule 46A of the Income-tax Rules, 1962. The ITAT found that the AO and CIT(A) did not adequately consider the evidence and explanations provided by the assessee. Consequently, the ITAT set aside the entire matter to the AO for a de-novo assessment, instructing the AO to admit all evidence and provide the assessee with a proper opportunity to present its case. The appeal was allowed for statistical purposes, and the ITAT did not comment on the merits of the issues.