2024 (3) TMI 204 - AT - Income Tax

ITAT deletes section 68 addition on share capital receipts due to inadequate investigation and denial of cross-examination rights

ITAT Kolkata allowed the appeal regarding unexplained cash credit under section 68 for share capital/premium receipts. The AO made additions based on ... Unexplained cash credit u/s 68 - share capital/share premium receipts - as submitted assessee has raised money through banking channel and the evidences qua the money received by the assessee were duly furnished the documents before the AO as well as CIT(A) - HELD THAT:- We note that the AO has also issued summons to share subscribers however the same could not be served to the subscriber at the registered office as the same wads shifted to the new address . AO did not carry out any further investigation despite the AO being apprised with the new address. AO deputed the inspector to visit the subscriber’s office which he could not find as is apparent from the record. The AO did not carry out any further investigation on the evidences filed by the assessee and harped on the Investigation Wing report that Shri Chandan Chowdhury, the director of Satyatej Vyapaar Pvt. Ltd. was dummy director and thus the subscriber was mainly engaged in the business of providing accommodation entries as Shri Chandan Choudhury was also named in the STR by the investigation wing. We find merit in the contentions of Ld. A.R that authorities below have not carried out any investigation on the evidences furnished before them. Besides it was argued before us that the assessee was not allowed any cross-examination of Shri Chandan Choudhury and the report of the wing was relied on the back of the assessee as the piece of evidence to make the addition which is not permissible under the law. In our opinion, the order of Ld. CIT(A) sustaining the addition appears to be incorrect and consequently cannot be sustained. Thus AO directed to delete the addition - Decided in favour of assessee. Issues Involved:1. Addition confirmed by the First Appellate Authority by passing ex-parte order.2. Confirmation of addition of Rs. 55,00,000/- on account of unexplained cash credit under Section 68 of the Income Tax Act.Summary:Issue 1: Addition confirmed by the First Appellate Authority by passing ex-parte orderThe assessee appealed against the ex-parte order passed by the Ld. Commissioner of Income Tax (Appeal)-NFAC, Delhi, for AY 2013-14. The Counsel for the assessee contended that the premises were taken over by the Port Commission, preventing access to necessary documents. The assessment was completed based on available records. The Ld. D.R argued that the appeal was rightly dismissed due to non-appearance before the Ld. CIT(A). After reviewing the contentions, the Tribunal found that the assessee was unable to present necessary evidence due to non-accessibility of the premises. In the interest of justice, the Tribunal restored the issue to the file of AO, directing a reasonable opportunity of hearing for the assessee. The appeal was partly allowed for statistical purposes.Issue 2: Confirmation of addition of Rs. 55,00,000/- on account of unexplained cash credit under Section 68 of the Income Tax ActFor AY 2010-11, the assessee challenged the addition of Rs. 55,00,000/- made by the AO on account of unexplained cash credit under Section 68. The assessee provided various documents to prove the genuineness of the transaction, including bank statements, share allotment letters, and audited balance sheets. The AO, however, added the amount as unexplained cash credit, citing the inability to serve notice to the share subscriber due to an address change. The Ld. CIT(A) upheld the assessment order.Upon review, the Tribunal noted that the assessee had furnished all necessary documents and that the AO did not carry out further investigation despite being informed of the new address. The Tribunal found merit in the assessee's contentions, highlighting that the authorities did not investigate the evidence provided. The Tribunal referenced several judicial precedents supporting the assessee's case, emphasizing that non-production of directors cannot be a ground for addition when other evidence is available. Consequently, the Tribunal set aside the order of the Ld. CIT(A) and directed the AO to delete the addition. The appeal was allowed.Conclusion:The Tribunal restored the issue for AY 2013-14 to the AO for a fresh decision, while for AY 2010-11, it directed the deletion of the addition of Rs. 55,00,000/- under Section 68, allowing the appeal in favor of the assessee.