2019 (10) TMI 719 - AT - Income Tax

Tribunal restores issues to AO for fresh adjudication, emphasizes transaction genuineness and creditworthiness verification.

DCIT Central Circle-18 New Delhi Versus Landcraft Developers Pvt. Ltd.

The Tribunal allowed the revenue's appeal for statistical purposes, restoring the issues to the AO for fresh adjudication. The additions under Section 68 ... Addition u/s 68 - share application money received - unsecured loan received - HELD THAT:- So far as the amount of share application money received from M/s. Purushotam Vinnimay P. Ltd. is concerned we find neither the assessee nor the revenue authorities have the benefit of the decision of Hon’ble Supreme Court in the case of NRA Ispat [2019 (3) TMI 323 - SUPREME COURT] and decision of the Hon’ble Delhi High Court in the case of NDR Promoters [2019 (1) TMI 1089 - DELHI HIGH COURT] which specifically deal with the issue of share application money received from the companies which do not show sufficient income in the return of income filed by them. We, therefore, deem it proper to restore the issue of share application money received from M/s. Purushotam Vinnimay P. Ltd. to the file of the AO for fresh adjudication of the issue in the light of the decisions cited (supra). The AO shall decide the issue in accordance with law after giving a reasonable opportunity of being heard to the assesse. Amount received from M/s. Raffle Mercantile Private Limited - various details filed by the assessee as per paper book that the money was given by Raffle Mercantile Private Limited towards share application money whereas the addition has been made on account of unsecured loan. Further as stated by the Ld. Counsel for the assessee the amount has been refunded in the assessment year 2014-15. The facts are not coming out clearly from the submission made by the assessee vis-a-vis the order of the AO and the CIT(A) as to whether the same is towards share application money or unsecured loan. A perusal of the page-18 of the paper book shows that Land Craft Developers P. Ltd. has issued 14,80,000/- equity share of ₹ 10/- each. Therefore, if the shares have been allotted, how this could be refunded in A. Y. 2014-15 needs verification. If the same is unsecured loan and if the same has been refunded to the lender during A.Y.2014-15 i.e. much prior the completion of the assessment, the same also needs verification at the level of the AO and in that case it cannot be added in the light of various decisions cited by the Ld. AR. The decisions of the Hon’ble Supreme Court in the case of NRA Ispat (supra) and NDR Promoters (supra) cited in the preceding paragraphs will also be equally applicable to the facts of the present issue - Thus restore the issue of unsecured loan received from Raffle Mercantile Private Limited to the file of the AO for deciding the issue afresh and as per fact and law after giving due opportunity of being heard to the assessee. Grounds raised by the revenue allowed for statistical purpose. Issues Involved:1. Addition of Rs. 2,00,00,000/- under Section 68 for unsecured loan from M/s Raffle Mercantile Pvt. Ltd.2. Addition of Rs. 20,00,000/- under Section 68 for share application money from M/s Purushottam Vinimay Pvt. Ltd.3. Admission of additional evidence by CIT(A).4. Verification of the genuineness and creditworthiness of the transactions.Detailed Analysis:1. Addition of Rs. 2,00,00,000/- under Section 68 for unsecured loan from M/s Raffle Mercantile Pvt. Ltd.:The Assessing Officer (AO) observed that the assessee received Rs. 2 crores as an unsecured loan from M/s Raffle Mercantile Pvt. Ltd. The AO found that the investment was routed through a sham enterprise and the credentials of Raffle Mercantile were dubious. The AO noted that the funds were arranged through bogus entry-providing companies and the financials of Raffle Mercantile did not support such a huge investment. Consequently, the AO invoked Section 68 and added Rs. 2 crores to the assessee's income.The CIT(A) deleted this addition, noting that the assessee provided confirmations and bank statements showing the funds' source. The CIT(A) observed that the funds received were through banking channels, and the source of the source was also explained. The CIT(A) concluded that the onus under Section 68 was discharged by the assessee.The Tribunal found discrepancies in the details provided by the assessee and noted that the money was given towards share application money, not as an unsecured loan. The Tribunal restored the issue to the AO for fresh adjudication, considering the decisions of the Hon'ble Supreme Court in NRA Ispat and the Hon'ble Delhi High Court in NDR Promoters.2. Addition of Rs. 20,00,000/- under Section 68 for share application money from M/s Purushottam Vinimay Pvt. Ltd.:The AO noted that the assessee received Rs. 20 lacs as share application money from M/s Purushottam Vinimay Pvt. Ltd. The AO found that the company was not doing any business and lacked creditworthiness. Consequently, the AO added Rs. 20 lacs to the assessee's income under Section 68.The CIT(A) deleted this addition, observing that the assessee provided confirmations and bank statements showing the funds' source. The CIT(A) noted that the funds were received through banking channels and the source of the source was explained. The CIT(A) concluded that the onus under Section 68 was discharged by the assessee.The Tribunal noted that the revenue authorities and the assessee did not have the benefit of the Hon'ble Supreme Court's decision in NRA Ispat and the Hon'ble Delhi High Court's decision in NDR Promoters. The Tribunal restored the issue to the AO for fresh adjudication in light of these decisions.3. Admission of additional evidence by CIT(A):The Ld. DR argued that the CIT(A) admitted additional evidence in violation of Section 46A. However, the Tribunal noted that the AO did not object to the admission of additional evidence, and no such ground was taken by the revenue. Therefore, the Tribunal did not find merit in this argument.4. Verification of the genuineness and creditworthiness of the transactions:The Tribunal emphasized the need to verify the genuineness and creditworthiness of the transactions. The Tribunal directed the AO to decide the issues afresh, considering the decisions of the Hon'ble Supreme Court in NRA Ispat and the Hon'ble Delhi High Court in NDR Promoters. The Tribunal highlighted that the assessee provided sufficient documents to prove the source and the source of the source, and the transactions were through banking channels.Conclusion:The Tribunal allowed the appeal filed by the revenue for statistical purposes, restoring the issues to the AO for fresh adjudication in light of the relevant judicial decisions and after providing a reasonable opportunity of being heard to the assessee.