1995 (1) TMI 124 - AT - Income Tax

Tribunal remands case due to lack of fair opportunity for assessee, stresses right to be heard

The Tribunal allowed the assessee's appeal, setting aside the impugned orders and remanding the matters to the Assessing Officer for fresh consideration. ... Assessing Officer, Cash Credits, Income Tax, Previous Year, S. 10 Issues Involved:1. Addition of Rs. 10,00,000 on account of unproved share subscription.2. Disallowance of lease rent (Rs. 1,53,767).3. Disallowance of interest (Rs. 16,880).4. Disallowance of staff welfare expenses (Rs. 16,655).5. Disallowance of depreciation on carbonising plant (Rs. 55,000).6. Addition from undisclosed sources (Rs. 86,050).Summary:1. Addition of Rs. 10,00,000 on account of unproved share subscription:The main ground of appeal was the addition of Rs. 10,00,000 representing subscription to preference shares, held as income from undisclosed sources by the Assessing Officer (A.O.). The A.O. made the addition on the grounds that the assessee failed to produce the parties, prove their identity, and demonstrate their capacity to invest. The shares were transferred to existing shareholders within a few weeks, raising doubts about the genuineness of the transactions. The CIT (A) confirmed the addition, noting that sufficient opportunities were given to the assessee to produce evidence, which was not done.The assessee argued that the shareholders' identities were not in dispute and that the shares were transferred in accordance with the Companies Act. The assessee cited the Full Bench decision of the Delhi High Court in CIT v. Sophia Ltd., arguing that the A.O. was not justified in calling upon the assessee to prove the creditworthiness of the share subscribers. The Departmental Representative contended that the assessee failed to establish the identity of the subscribers and that the share subscription money actually belonged to the company.The Tribunal noted that the A.O. applied a more onerous test than what was laid down by the Full Bench of the Delhi High Court. The Tribunal found that the assessee was not given a fair opportunity to present evidence and that the A.O. did not properly consider the confirmations from shareholders. The Tribunal set aside the impugned orders and remanded the matter to the A.O. for a fresh decision, allowing the assessee to produce the shareholders for examination.2. Disallowance of lease rent (Rs. 1,53,767):The Tribunal allowed the ground for statistical purposes and remanded the matter to the A.O. for reconsideration in light of the assessee's objections.3. Disallowance of interest (Rs. 16,880):The Tribunal allowed the ground for statistical purposes and remanded the matter to the A.O. for reconsideration in light of the assessee's objections.4. Disallowance of staff welfare expenses (Rs. 16,655):The Tribunal allowed the ground for statistical purposes and remanded the matter to the A.O. for reconsideration in light of the assessee's objections.5. Disallowance of depreciation on carbonising plant (Rs. 55,000):The Tribunal allowed the ground for statistical purposes and remanded the matter to the A.O. for reconsideration in light of the assessee's objections.6. Addition from undisclosed sources (Rs. 86,050):The Tribunal allowed the ground for statistical purposes and remanded the matter to the A.O. for reconsideration in light of the assessee's objections.Conclusion:The Tribunal allowed the assessee's appeal for statistical purposes, setting aside the impugned orders and remanding the matters to the A.O. for fresh consideration and decision, ensuring that the assessee is provided a reasonable opportunity of being heard.