2016 (9) TMI 654 - AT - Income Tax

Tax Appellate Tribunal directs further inquiry on Rs. 99,00,000 addition under Section 68

Income Tax Officer, Ward-6 (3), New Delhi Versus M/s. Meghna Towers Pvt. Ltd. and Vica-Versa

The ITAT set aside the Ld. CIT(A)'s order and directed the Ld. AO to conduct further inquiries regarding the addition of Rs. 99,00,000 under section 68 of ... Addition u/s 68 - racket of bogus accommodation entries - Held that:- As the ITAT is a final fact finding authority we feel that all relevant facts should be allowed to emerge before the issue is decided on merits. We also feel that both sides, Revenue as well as assessee should have got adequate opportunity to bring relevant facts on record. If either of the two sides has not got reasonable opportunity for this purpose it will be appropriate to cause such opportunities to be provided. As we have already noticed neither Revenue nor the assessee has received full opportunity to make relevant facts emerge. Perusal of ground 2.2 of appeal filed by Revenue shows that assesee is one among many persons who may have attempted to benefit from the alleged racketeering. When Investigation Wing of Income Tax Department has busted the racket of bogus accommodation entries ; and when the alleged entry operators have admitted on oath that they ran this racket ; and when name of the assesee is discovered as one of the beneficiaries of the alleged racket ; and when amounts are actually found in the books of assessee to be credited in the name of alleged entry operators ; burden was on the assessee to prove that it was not a beneficiary of the racket. In view of the foregoing we set aside the order of the Ld. CIT(A) and restore the matter to the file of the Ld. Assessing Officer to complete the assessment de novo with the direction to the Ld. Assessing Officer to provide copies of whatever adverse material the Ld. AO has in his possession, which were used or are proposed to be used against the assessee. The Ld. Assessing Officer will be free to carry out further inquiries as per law ; and the assesee will be free to submit / produce further materials / evidences before the Assessing Officer. Issues:Addition of Rs. 99,00,000 under section 68 of the I.T. Act - Genuine subscription or accommodation entries.Analysis:The appeal and cross objection were directed against the order of the Ld.CIT (Appeals) for the Assessment Year 2005-06. The key issue revolved around the addition of Rs. 99,00,000 made by the Ld. AO under section 68 of the I.T. Act, which was subsequently deleted by the Ld. CIT(A). The investigation revealed that certain entities were providing accommodation entries, and the assessee received Rs. 99,00,000 from these entities. The Ld. AO made the addition as the assessee failed to produce the directors of these entities. The Ld. CIT(A) did not adjudicate on the grounds raised by the assessee, leading to appeals and cross objections.The central question was whether the amount received was genuine share capital or mere accommodation entries. Both lower authorities made decisions without allowing all facts to emerge. The failure to produce directors hindered a thorough investigation. Conflicting evidence and lack of reconciliation were noted. The ITAT emphasized the need for all relevant facts to surface before a decision is made. The burden was on the assessee to prove they were not part of the alleged racket. Citing case law, the ITAT set aside the Ld. CIT(A)'s order and directed the Ld. AO to provide copies of adverse material and conduct further inquiries, allowing the assessee to submit additional evidence.The ITAT refrained from expressing an opinion on the merits of the addition due to the incomplete information. The decision to set aside the Ld. CIT(A)'s order and restore the matter to the Ld. AO for a fresh assessment was made to ensure a comprehensive examination of all relevant facts. Both the appeal by Revenue and the cross objection were allowed for statistical purposes, indicating a procedural victory without a definitive judgment on the substantive issue.