2013 (10) TMI 976 - AT - Income Tax

Tribunal Upheld AO Decision on Share Capital & Interest, Rejecting Rectification - Limited Scope

The Tribunal upheld the Assessing Officer's decision, rejecting the appellant's arguments regarding the genuineness of share capital introduction, ... Mistake apparent from record in the order of Tribunal within the scope u/s 254(2) – Held that:- From the order of the Tribunal dated 20th December, 2012, it is evident that the Tribunal considered the arguments of the assessee's counsel as well as the ratio of the decisions of the Supreme Court elaborately discussing the same in the order. Hence, it cannot be said that the Tribunal has not considered the case-law cited by the learned AR for the assessee as alleged in the Miscellaneous Application. On the contrary, the Tribunal in the order, after taking note of the case-law relied upon by the learned AR for the assessee, gave reasoning why it was not relevant to consider the same. The averment of the assessee is that the decision of the Apex Court relied on by him has not been applied by the Tribunal while coming to the conclusion in the Tribunal order, is not a mistake apparent on record falling within the scope of section 254(2) of the IT Act – Miscellaneous Application filed by the assessee is dismissed – Decided against the Assessee. Issues Involved:1. Erroneous order of the Assessing Officer (AO).2. Disbelief in the share capital introduced by 23 shareholders.3. Consideration of shareholders' confirmation letters and their investment capability.4. Acceptance of investments and the company's income status.5. Charging of interest under sections 234A and 234B.6. Rectification of the Tribunal's order dated 20.12.2012.Detailed Analysis:1. Erroneous Order of the Assessing Officer (AO):The appellant argued that the AO's order was erroneous, unjust, and contrary to the facts of the case. The Tribunal, however, upheld the AO's decision, stating that the assessee failed to prove the genuineness and creditworthiness of the parties involved in the share capital introduction.2. Disbelief in the Share Capital Introduced by 23 Shareholders:The AO disbelieved the share capital introduced by 23 shareholders amounting to Rs. 38,40,000. The CIT(A) initially gave relief to the assessee, relying on the Supreme Court judgment in CIT vs. Bharat Engineering & Construction Co., which stated that unaccounted income could not be introduced as share capital before the commencement of business. However, the Tribunal reversed this finding, noting that the judgment was not relevant under the Income-tax Act, 1961, and that the assessee had not proven the genuineness of the transactions.3. Consideration of Shareholders' Confirmation Letters and Their Investment Capability:The appellant contended that all shareholders had filed confirmation letters and stated their capability to invest. The Tribunal observed that affidavits from 11 share applicants were filed, but there was no supporting evidence to show their agricultural holdings or capacity to lend the money. For the remaining 12 parties, no confirmation letters were provided. Thus, the Tribunal upheld the AO's decision.4. Acceptance of Investments and the Company's Income Status:The appellant argued that the AO should have accepted the investments as the company had no income during the relevant previous year. The Tribunal, however, noted that the assessee did not avail the opportunity to prove the genuineness of the cash credits, and the affidavits filed were not supported by any material evidence. Therefore, the Tribunal confirmed the AO's addition under section 68 of the Act.5. Charging of Interest under Sections 234A and 234B:The AO charged interest under section 234A (Rs. 16,33,920) and section 234B (Rs. 30,69,120). The Tribunal did not find any mistake apparent in the order regarding the interest charges and upheld the AO's decision.6. Rectification of the Tribunal's Order Dated 20.12.2012:The appellant sought rectification of the Tribunal's order, arguing that the Tribunal's observations were contrary to the facts and provisions of the Income-tax Act. The Tribunal, however, held that there was no mistake apparent from the record that warranted rectification. It emphasized that the scope of section 254(2) is limited to rectifying mistakes apparent from the record and does not extend to reviewing or recalling the entire order. The Tribunal also noted that it had considered all relevant arguments and case laws while passing the original order and that any error of judgment could be addressed through other legal remedies available to the assessee.Conclusion:The Tribunal dismissed the Miscellaneous Application filed by the assessee, concluding that there was no apparent mistake in the original order that required rectification. The Tribunal reiterated that its power under section 254(2) is limited to correcting manifest errors and does not include the authority to review or recall its decisions. The order was pronounced in the open court on 25th September 2013.