Tribunal upholds Rs. 121.88 crore addition as unexplained cash credit under Income Tax Act

The Tribunal upheld the addition of Rs. 121.88 crore as unexplained cash credit under Section 68 of the Income Tax Act, 1961, in the case. The appeal of the assessee company was dismissed, with the Tribunal finding no merit in the arguments presented regarding reasonable opportunity of being heard, reliance on judgments, and the right to add, alter, or delete grounds of appeal. The decision was pronounced on 14th August 2023.

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Issues Involved:
1. Reasonable opportunity of being heard.
2. Addition under Section 68 of the Income Tax Act, 1961.
3. Reliance on distinguishable judgments.
4. Disregard of binding judgments.
5. Right to add, alter, or delete grounds of appeal.

Summary:

1. Reasonable Opportunity of Being Heard:
The assessee company argued that the CIT(Appeals), Bilaspur, erred in dismissing the appeal without allowing a reasonable opportunity of being heard. However, the Tribunal found that the assessee was duly represented by its C.A., who argued the matter and filed written submissions. The CIT(Appeals) considered these submissions and passed a speaking order, thus dismissing this ground of appeal.

2. Addition under Section 68 of the Income Tax Act, 1961:
The assessee company, a Non-Banking Financial Corporation, had received share application money of Rs. 121.88 crore from 40 Kolkata-based companies. The A.O. doubted the veracity of these transactions due to the negligible business activities and losses reported by the assessee. The A.O. issued a commission to the DDIT (Inv.), Kolkata, who reported that the share applicant companies had doubtful credentials and lacked identity, genuineness, and creditworthiness. The assessee failed to produce the directors of these companies for examination. The A.O. concluded that the assessee had failed to discharge the primary onus under Section 68, treating the amount as unexplained cash credit. The CIT(Appeals) upheld this addition, and the Tribunal found no infirmity in this view, dismissing the related grounds of appeal.

3. Reliance on Distinguishable Judgments:
The assessee argued that the CIT(Appeals) relied on judgments distinguishable on facts and law. The Tribunal noted that the judgments cited by the assessee were rendered before the amendment to Section 68 and were not applicable to the post-amended provisions. The Tribunal upheld the addition under Section 68, dismissing this ground of appeal.

4. Disregard of Binding Judgments:
The assessee contended that the CIT(Appeals) disregarded binding judgments from higher courts. The Tribunal observed that the CIT(Appeals) and the A.O. had correctly applied the post-amended Section 68, which required the assessee to explain the source of the share application money and the source of funds of the investor companies. The Tribunal found that the assessee failed to discharge this onus, dismissing this ground of appeal.

5. Right to Add, Alter, or Delete Grounds of Appeal:
The Tribunal noted that the assessee had the right to add, alter, or delete grounds of appeal but found no merit in the additional grounds raised. Therefore, this ground was dismissed as not pressed.

Conclusion:
The Tribunal dismissed the appeal of the assessee company, upholding the addition of Rs. 121.88 crore as unexplained cash credit under Section 68 of the Income Tax Act, 1961. The order was pronounced in open court on 14th August 2023.

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