Tribunal allows appeal, removes Rs. 10.17 crores addition for unexplained cash credit. Assessing Officer's actions deemed unfair.

The Tribunal allowed the appeal in part, deleting the addition of Rs. 10.17 crores as unexplained cash credit under section 68. The Tribunal found that the Assessing Officer failed to conduct an independent inquiry and violated natural justice principles by not allowing the assessee to cross-examine the directors whose statements were used against it. The Tribunal emphasized the lack of corroborative evidence and overturned the addition, while dismissing the other grounds as not pressed.

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Issues Involved:
1. Addition of Rs. 10.17 crores as unexplained cash credit u/s 68.
2. Disallowance of business loss as speculation loss.
3. Charging of interest u/s 234B.

Summary:

1. Addition of Rs. 10.17 crores as unexplained cash credit u/s 68:
The assessee, engaged in trading shares and securities, filed a return declaring nil income. During assessment, the AO noted that the assessee repaid a loan of Rs. 10.17 crores to Madhavpura Mercantile Co-operative Bank Ltd. using funds from the allotment of preference shares. The AO investigated and found that directors of 28 companies, who subscribed to the shares, stated they received cash from the assessee in exchange for their investment. The AO, relying on similar findings in the case of M/s Chat Computers Pvt. Ltd., added the amount as unexplained cash credit u/s 68. The CIT(A) confirmed this addition.

The Tribunal observed that the AO did not conduct an independent inquiry and relied solely on the ADIT(Inv) report and un-cross-examined statements. The Tribunal noted that the assessee provided sufficient documentary evidence, including share applications and bank statements, proving the genuineness of the transactions. The Tribunal emphasized the violation of natural justice principles, as the assessee was not allowed to cross-examine the directors whose statements were used against it. Citing precedents, the Tribunal held that the addition could not be sustained without corroborative evidence and deleted the addition made by the AO and confirmed by the CIT(A).

2. Disallowance of business loss as speculation loss:
The assessee did not press this ground during the hearing. Consequently, the Tribunal dismissed this ground as not pressed.

3. Charging of interest u/s 234B:
Similarly, the assessee did not press this ground during the hearing. The Tribunal dismissed this ground as not pressed.

Conclusion:
The appeal of the assessee was partly allowed, with the deletion of the addition of Rs. 10.17 crores u/s 68, while the other grounds were dismissed as not pressed. The order was pronounced in the open court on 20/12/2013.

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