M/S. KANDLA MOTORS PVT. LTD.,,VADODARA vs. THE ACIT, CIRCLE-1(1)(2),, BARODA

The instant appeal at the instance of the assessee is directed against the order dated 23.10.2015 passed by the Commissioner of Income Tax (Appeals) – 1, Vadodara arising out of the order dated 13.03.2015 passed by the learned ACIT, Circle-1(1)(2), Baroda under section 143(3) of the Income Tax Act, 1961 (hereinafter referred as to ‘the Act’) for Assessment Year 2012-13 with the following grounds:

The main ground relates to confirmation of addition on account of share application money received from different persons totaling to Rs.24,44,000/- as unexplained cash credit.

The assessee company, an authorized dealer of Ashok Leyland, engaged in the business of trading of chassis, spare parts and providing services filed its return of income on 18.08.2012 declaring therein net taxable income at Rs.12,14,906/-. During the course of assessment proceedings on 19.01.2015, the assessee was asked to furnish the complete details of share premium receipt and the source of investments by the shareholders. It appears that the assessee has been provided share application money by relatives as well as by business associates. The shares were issued at premium of Rs.30/- each on the basis of worth of the company. The details of name of the allottees, number of shares allotted, amount of shares allotted, premium amount and total share amount were duly submitted by the assessee before the AO whereupon certain observations were made and ultimately the said assessment was finalized upon making addition of Rs.81,41,500/-, which was, in turn, restricted to Rs.24,44,000/- by the learned CIT(A). Certain documents being the return of income, statement of total income, P&L account, balance sheet and bank statement of the family members who have been listed in para 4.2 of the assessment order duly submitted before the learned AO. However, other documents like ledger of cash in hands, ledger transport commission receipt of these persons alongwith balance sheet, P&L account for the FY 2011-12 were submitted before the First Appellate Authority, which was not accepted

Heard the parties and perused the materials available on record. It appears that the return of income of those parties, on record, has been relied upon by the assessee in order to show the creditworthiness of these parties. Apart from that the details including the affidavits shown by those persons are also available on record before us, which according to the learned representative for the assessee has already been placed before learned CIT(A), which have not been taken into consideration in its proper perspective since the assessee could not file the application to that effect under the prescribed Rules. Hence, he prays for setting aside the issue to the file of the learned AO for deciding the issue afresh. On the other hand, learned representative for the department relied upon the order passed by the authorities below.

It is clear and settled position of law that once the assessee has given certain documents before the authorities below in support of his claim particularly in order to justify the identity and creditworthiness of the shareholders as the case made out by the assessee before us, these documents, for the ends of justice needs to be verified by the authorities below. Hence, in order to prevent the miscarriage of justice, we find it fit and proper to refer the issue to the file of the learned CIT(A) with a direction upon him to decide the issue de novo on the basis of the evidence on record and any other evidence which the assessee may choose to file other time of hearing of the appeal. The learned CIT(A) will however decide the issue afresh positively upon giving an opportunity to be heard upon the assessee and to pass a reasoned and speaking order thereon.

The ground relating to confirmation of addition on account of share application money is allowed for statistical purposes.

In the result, assessee’s appeal is partly allowed.