2019 (5) TMI 1954 - AT - Income Tax

Tribunal upholds deletion of additions for unexplained share capital and loan, criticizes Assessing Officer's lack of verification

The Tribunal dismissed the Revenue's appeal, upholding the first appellate authority's decision to delete both the additions of unexplained share capital ... Addition u/s 68 - Unexplained share capital - CIT(A) has disallowed the same on the ground that the share application money, in question, was received in the earlier year and not in the current year and hence no addition can be made u/s 68 in current year - HELD THAT:- As DR could not controvert these factual findings. In the result, we uphold the same and dismiss this ground of Revenue. Addition being loan taken from K.G. Construction - HELD THAT:- We find that the ld. CIT(A) after producing the letter of M/s K.G. Construction dated 13.02.2015 at Page No.9 of his order and giving a finding that some of the papers are apparently missing from assessment folder - Having regard to the papers furnished by the appellant in early stages of assessment, the reply of K.G. Construction confirming the transaction and its identity by furnishing copies of several relevant documents and also considering the fact that insistence on personal appearance of Directors of K.G. Construction was suddenly raised in the last half of March, 2015, we get the impression that the A.O was looking for some excuse to make some addition. A.O did not show any inclination to examine the partners of K.G. Construction in early stage of assessment proceedings or at least before reasonable length of time from the time barring dead line - AO had no reasonable basis to make addition of loans claimed to have been taken from K.G. Construction - Decided against revenue. Issues:1. Addition of Rs.50,00,000 as unexplained share capital.2. Addition of Rs.3,15,00,000 as a loan from K.G. Construction.Analysis:Issue 1: Addition of Rs.50,00,000 as unexplained share capitalThe appellant, a company, filed its return of income declaring Nil income. The Assessing Officer added Rs.50,00,000 as unexplained share application money and Rs.3,15,00,000 as a loan received from K.G. Constructions. The first appellate authority deleted both additions. The Revenue appealed the decision. The Tribunal noted that the share application money was received in the earlier year, not the current year, and upheld the deletion of the addition. The Tribunal found that the Assessing Officer did not provide a clear basis for the addition and mixed up irrelevant facts. The Departmental Representative could not challenge these factual findings, leading to the dismissal of the Revenue's appeal.Issue 2: Addition of Rs.3,15,00,000 as a loan from K.G. ConstructionRegarding the loan from K.G. Construction, the Tribunal considered a letter from K.G. Construction and found discrepancies in the assessment process. The Tribunal criticized the Assessing Officer for not verifying the documents properly and demanding the sudden production of partners of K.G. Construction towards the end of the assessment period. The Tribunal concluded that the Assessing Officer lacked a reasonable basis for making the addition and criticized the timing and approach taken. The Departmental Representative failed to challenge these findings, leading to the Tribunal upholding the first appellate authority's decision to delete the addition. Consequently, the Tribunal dismissed the Revenue's appeal.In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the first appellate authority's decision to delete both the additions of unexplained share capital and the loan from K.G. Construction for the Assessment Year 2012-13.