2024 (6) TMI 1192 - AT - Income Tax

Tribunal Orders Reassessment of Unexplained Deposits; Stresses Need for Evidence on Transaction Legitimacy for A.Y. 2009-10.

The appellate tribunal allowed the revenue's appeal for statistical purposes, directing the AO to re-examine the unexplained deposits in share capital and ... Addition u/s 68 - unexplained deposits with regard to amount of share premium and increase in paid up capital - Identity, creditworthiness and genuiness of the creditors were not established by the assessee - CIT(A) deleted addition - HELD THAT:- The findings of the CIT (A) mentioned elsewhere do not have any supporting evidences. It appears that the first appellate authority has simply believed what has been stated before him without making any verification himself and putting the entire blame on the AO. The first error in the findings of the CIT (A) is that the share application money was received in F.Y. 2007-08. The bank statements show that the credits were made in the bank account in the month of August 2008. The contention of the Counsel that the cheques were received in the month of March-2008 and, therefore, the entries are reflected in F.Y.2007-08 is nothing but mockery of the accounting system as no bank in the entire country would validate clearing of check after 8 months. The validity of check is only for 3 months and, therefore, cheques of March-2008 could not have cleared in the month of August-2008. Assuming that fresh cheques were issued then the cheques must have been issued in F.Y. 2008-09 pertaining to year under consideration. When the bench asked the Counsel to give the balance sheet of year ending 31.03.2008 the Counsel showed his inability and sought adjournment. This issue needs fresh examination of facts and, therefore, we deem it fit to restore the impugned issues to the files of the AO. The assessee is directed to demonstrate that the impugned share application money was received in F.Y. 2007-08 and is duly reflected in the balance sheet as on 31.03.2008. The assessee is further directed to furnish all necessary demonstrative evidences to explain the credit of Rs. 1 crore being fresh application money received during the year alongwith documents relating to share application money of Rs. 1.50 crore. The AO is directed to examine the same and decide the issue afresh after affording a reasonable and sufficient opportunity of being heard to the assessee. Appeal of the revenue is allowed for statistical purpose. Issues Involved:Appeal against order of CIT (A) regarding addition of unexplained deposits in share capital and share application money for A.Y. 2009-10.Analysis:1. Addition of Rs. 1.50 crores - Share Capital and Share Premium:The revenue challenged the deletion of this addition, arguing that the assessee failed to establish the identity, creditworthiness, and genuineness of the creditors. The CIT (A) held that the share capital was received in a previous year and all investor details were on record. The appellate tribunal found that the CIT (A) did not verify the documents and merely relied on submissions. It was noted that the share application money was received in a different financial year, and the bank statements showed credits in August 2008, not March 2008 as claimed. The tribunal directed the AO to re-examine the issue and asked the assessee to provide necessary evidence regarding the share application money.2. Addition of Rs. 1 crore - Share Application Money:Similarly, the revenue contested the deletion of this addition due to lack of details provided by the assessee during assessment. The CIT (A) held that the entries did not pertain to the relevant year and that the AO had not verified the evidence submitted by the assessee. The tribunal found discrepancies in the claim that cheques from March 2008 were cleared in August 2008, questioning the validity of such a delay. The tribunal directed a fresh examination of facts by the AO and requested the assessee to substantiate the receipt of share application money in the correct financial year.In conclusion, the appellate tribunal allowed the revenue's appeal for statistical purposes, emphasizing the need for a thorough examination of the facts and evidence regarding the unexplained deposits in share capital and share application money. The judgment highlighted the importance of establishing the timing and legitimacy of financial transactions to comply with the provisions of the Income Tax Act.