2022 (6) TMI 888 - AT - Income Tax

ITAT directs reevaluation by CIT(A) for unexplained cash credit under section 68

ACIT, Central Circle 1, New Delhi Versus M/s. Kapila Buildhome P. Ltd.

The Income Tax Appellate Tribunal (ITAT) allowed the Revenue's appeal, directing a reevaluation by the Commissioner of Income Tax (Appeals) regarding the ... Unexplained Cash Credit u/s 68 - share application money pending allotment treated as undisclosed money - creditworthiness of the parties from whom the assessee company received share application money and the genuineness of the transactions proved or not? - CIT (A) has held that AO has not made any further enquiry and he has deleted the addition - HELD THAT:- This order of ld. CIT (A) is devoid of any application of mind whatsoever. Even for argument sake, it is accepted that assessee has given the details with the AO, nothing stopped the ld. CIT (A) in doing the enquiry himself. There is not a whisper in the order of ld. CIT (A) that he examined the financials of these companies who have given share application money and found any cogency in that. It is settled law that ld. CIT (A) has co-terminus power to that of AO. Though we are not in agreement with the ld. CIT (A)’s finding that everything was submitted before the AO and AO has falsely passed the assessment order that nothing was submitted before the AO, as it is not the case that ld. CIT (A) has called for the assessment records and found that AO has made false observation. The manner in which ld. CIT (A) passed the appellate order needs much to be desired. It was incumbent upon the ld. CIT(A) to give a finding upon the financial statements of the parties reportedly copies of which have been given to the ld. CIT (A). The mystery of the parties responding through assessee and not coming or appearing before AO also needs to be solved. Ld. CIT (A)’s order is palpably wrong. In our considered opinion, in the interest of justice, the issue requires to be remitted to the file of ld. CIT (A). Ld. CIT (A) is directed to give cogent finding as to how the identity, creditworthiness and genuineness of the transactions is established in this case. Appeal of the Revenue stands allowed for statistical purposes Issues:1. Addition of unexplained cash credit under section 68 of the Income-tax Act.2. Failure to discharge the burden of proof regarding the creditworthiness and genuineness of transactions.3. Discrepancy between the findings of the Assessing Officer and the Commissioner of Income Tax (Appeals).4. Lack of application of mind by the Commissioner of Income Tax (Appeals) in deleting the addition.Analysis:Issue 1: Addition of unexplained cash credit under section 68 of the Income-tax ActThe case involved the assessment of an assessee company engaged in real estate activities. The Assessing Officer (AO) observed a significant amount of share application money pending allotment in the company's books. Despite the company's claims, the AO found discrepancies in the information provided by the company and the responses from the parties involved. Consequently, the AO added the share application money as 'Unexplained Cash Credit' under section 68 of the Income-tax Act.Issue 2: Failure to discharge the burden of proof regarding the creditworthiness and genuineness of transactionsThe AO emphasized that the company failed to substantiate the identity, creditworthiness, and genuineness of the transactions related to the share application money. The AO's conclusion was based on the lack of cooperation from the parties involved, non-compliance with notices, and the failure to provide supporting documentary evidence to establish the legitimacy of the transactions.Issue 3: Discrepancy between the findings of the Assessing Officer and the Commissioner of Income Tax (Appeals)The Commissioner of Income Tax (Appeals) reviewed the case and disagreed with the AO's findings. The Commissioner noted that the company had indeed provided replies and information from the concerned parties, contrary to the AO's assertion. The Commissioner criticized the AO for not conducting further inquiries and concluded that the company had fulfilled its obligations, leading to the deletion of the addition by the Commissioner.Issue 4: Lack of application of mind by the Commissioner of Income Tax (Appeals) in deleting the additionThe Income Tax Appellate Tribunal (ITAT) found fault with the Commissioner's decision, stating that it lacked proper consideration and analysis. The ITAT highlighted the Commissioner's failure to independently verify the information provided by the company and the parties involved. The ITAT emphasized that the Commissioner should have conducted a thorough examination of the financial statements and the credibility of the transactions before making a decision.In conclusion, the ITAT allowed the Revenue's appeal for statistical purposes, directing a reevaluation of the case by the Commissioner of Income Tax (Appeals) to ensure a comprehensive assessment of the identity, creditworthiness, and genuineness of the transactions in question.