2019 (4) TMI 1764 - AT - Income Tax

Tribunal orders re-examination of unexplained cash credit under section 68, citing recent judicial decisions

ACIT, Central Circle-2, New Delhi Versus Sea Point Trading & Builders Pvt. Ltd.,

The Tribunal directed the CIT(A) to re-examine the addition of unexplained cash credit under section 68, considering precedents, allowing the assessee to ... Addition u/s 68 - HELD THAT:- We find the assessee, in the instant case, has received an amount of ₹ 6.35 crores from M/s Manan Merchandise Pvt. Ltd., a group company, which , in turn, has received the money from Kolkata based paper companies. Neither M/s Manan Merchandise nor the Kolkata based companies from whom M/s Manan Merchandise Pvt. Ltd. has received money are doing any real business and all these companies are paper companies. We find, recently, the Hon'ble Supreme Court in the case of NRA Ispat (P) Ltd. [2019 (3) TMI 323 - SUPREME COURT] had an occasion to decide an identical issue where the decision of the Hon'ble Delhi High Court was reversed on the ground that the share applicants are paper companies without doing any real business and had no capacity to invest such amounts when their returned income was very negligible. Similarly, the Hon'ble Delhi High Court in the case of NDR Promoters Pvt. Ltd., [2019 (1) TMI 1089 - DELHI HIGH COURT] has upheld the addition made by the Assessing Officer u/s 68 on account of share capital and share premium holding that the transactions in question were clearly sham and make believe with excellent paper work to camouflage their bogus nature. We deem it proper to restore this issue to the file of the CIT(A) with a direction to adjudicate the issue afresh in the light of the above decisions. Issues:- Appeal against order relating to assessment year 2012-13.- Addition of unexplained cash credit under section 68 of the Act.- Applicability of recent judicial decisions on similar issues.Analysis:1. The appeal was filed by the Revenue against the order of the CIT(A) relating to the assessment year 2012-13. The case involved the addition of Rs. 6,35,00,000 as unexplained cash credit under section 68 of the Act, received from M/s Manan Merchandise Pvt. Ltd. The original return of income was filed by the assessee declaring a loss of Rs. 4,237. The Assessing Officer observed that the company did not engage in any regular profit-generating activity and received a substantial amount from M/s Manan Merchandise Pvt. Ltd., a company with nil income for the relevant assessment year.2. The Assessing Officer issued notices to companies from whom M/s Manan Merchandise Pvt. Ltd. received money, but they were returned unserved. Upon analysis, it was found that these companies were Kolkata-based paper companies without the capacity to provide such significant amounts. The CIT(A) deleted the addition made by the Assessing Officer, leading to the Revenue's appeal before the Tribunal challenging the deletion of the addition.3. The Tribunal, after hearing the arguments, noted that M/s Manan Merchandise Pvt. Ltd. and the Kolkata-based companies were not engaged in genuine business activities, resembling paper companies. Referring to recent judicial decisions, the Tribunal highlighted the Supreme Court's decision in a similar case where paper companies with negligible income were found to be involved in sham transactions. Citing another case from the Delhi High Court, the Tribunal decided to restore the issue to the CIT(A) for fresh adjudication in light of these decisions.4. Consequently, the Tribunal directed the CIT(A) to re-examine the issue considering the precedents cited, ensuring the assessee's opportunity to present their case. The Tribunal allowed the grounds raised by the assessee for statistical purposes and allowed the appeal filed by the Revenue solely for statistical purposes. The decision was pronounced in open court on 30.04.2019.