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Income Tax Appellate Tribunal, DELHI BENCH ‘C’ : NEW DELHI
PER SHAMIM YAHYA, ACCOUNTANT MEMBER :
This appeal by the Revenue is directed against the order of the ld.
CIT (Appeals)-23, New Delhi dated 11.05.2017 and pertains to assessment year 2013-14.
The grounds of appeal read as under :-
“1. The order of Ld. CIT (A) is not correct in law and on facts. 2. On the facts and circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs.40,00,000/- related to M/s. Justify Vanijya (P) Ltd. & addition of Rs.2,40,00,000/- related to M/s. Sadbhavna Properties (P) Ltd. made by AO on account of
Brief facts of the case are that assessee company is engaged in business of purchase, lease or otherwise acquire land, building to develop and dispose or maintain the same. The Assessing Officer (AO) has taken up the case by prefacing the assessment order that in connection with the search and seizure operation in the case of Amrapali Group on 07.08.2013, the case of the assessee is centralized to his jurisdiction.
In the assessment order, the AO observed that during the year under consideration, assessee in its books has shown ‘share application money pending allotment’ amounting to Rs.211,42,36,245/-. In order to ascertain the creditworthiness of the parties from whom the assessee company received share application money and the genuineness of the transactions, AO made certain enquiries for obtaining information regarding copies of ledger account of the said companies appearing in the books of account of the assessee from 01.04.2007 to 31.03.2014, copies of bank accounts, copies of Income-tax returns, copies of financial statements and share application register. AO noted that there was no reply to notices issued u/s 133(6) of the Income-tax Act, 1961 (for short ‘the Act’) from the said companies. AO also asked the assessee to produce the parties. However, there was no compliance. AO also issued summons u/s 131 of the Act which was also remained unresponded.
AO received the reply of all the parties except M/s. Pigeon Buildhome Pvt. Ltd. and that assessee was producing the above said party for necessary compliance. However, AO observed that this submission is factually incorrect and no reply has been received till date. Further he noted that assessee’s claim that he will produce the above said party, is also wrong. He noted that assessee has nothing to produce and offer to substantiate the genuineness of the shareholders from whom share application money has been received. Placing reliance on several case laws, AO concluded as under :-
“4.7 From the above discussions, the following facts become clear : (i) The investors were not found to be existent. (ii) During the course of assessment proceedings, the assessee was required to produce the main directors/ controlling persons with supportive documentary evidence such as books of account, bank statements to prove the identify, creditworthiness and genuineness of the transaction. However, the assessee failed to discharge the onus cast upon it. (iii) The aforementioned case laws squarely applies to the assessee’s case. 4.8 Therefore, the assessee company has failed to discharge its onus to prove the identity of the share applicants, their creditworthiness and the genuineness of the transactions in respect of share application money amounting to Rs.9,25,36,245/-. 4.9 In view of the field inquiries conducted coupled with the non- compliance of the notices u/s 133(6) and summons u/s 131 of the Act issued by the undersigned, it has been held that the antecedents of the investing companies along with their so called directors could not be established as per the provisions of section 68 of the Income-tax Act, 1961 which casts a statutory obligation on the assessee to satisfactorily ./2017 establish the identify, creditworthiness of the share applicants and genuineness of the transactions through which share application money has been received. 4.10 In view of detailed discussions made in above paras, it is clear that the source of share application money amounting to Rs.9,25,36,245/- as allegedly received by the assessee company is not satisfactorily explained. Accordingly, the same is added as ‘Unexplained Cash Credit’ u/s 68 of the Act to its total income.”
Against the above order, assessee appealed before the ld. CIT (A).
Ld. CIT (A) considered the submissions of the assessee. He was of the opinion that assessee’s submission is correct that AO is wrong in observing that no reply/information was received from any of the four parties. He noted that the assessee’s AR submitted copies of reply of these four parties. Ld. CIT(A) observed that in the said reply which was received by the office of the AO, the signature of the AO was there. He observed that observations of the AO is false and reply from four parties has been duly received by the AO much before the passing of the assessment order. He also found fault with the AO’s observation that preliminary enquiries were conducted. He observed that assessee was not confronted with the results of alleged preliminary enquiries. He observed that all the informations were given to the AO and AO does not make further enquires so adverse inference cannot be taken against the assessee. He found that assessee has discharged its onus and he found no justification in the addition.
Against this order, Revenue is in appeal before the ITAT. proceeding to adjudicate the issue after perusing the records and hearing the ld. DR for the Revenue. We note that in this case, AO has given a finding that assessee has not produced any detail and that the parties have not responded to issue of notice including that u/s 131. Hence AO has treated the share application money as undisclosed money u/s 68 of the Act. Ld. CIT (A) on the other hand has agreed with the assessee that all the submissions were given to the AO. Further ld. CIT (A) has held that AO has not made any further enquiry and he has deleted the addition. We are of the considered opinion that this order of ld. CIT (A) is de void of any application of mind whatsoever. Even for argument sake, it is accepted that assessee has given the details with the AO, nothing stopped the ld. CIT (A) in doing the enquiry himself. There is not a whisper in the order of ld. CIT (A) that he examined the financials of these companies who have given share application money and found any cogency in that. It is settled law that ld. CIT (A) has co-terminus power to that of AO. Though we are not in agreement with the ld. CIT (A)’s finding that everything was submitted before the AO and AO has falsely passed the assessment order that nothing was submitted before the AO, as it is not the case that ld. CIT (A) has called for the assessment records and incumbent upon the ld. CIT(A) to give a finding upon the financial statements of the parties reportedly copies of which have been given to the ld. CIT (A). The mystery of the parties responding through assessee and not coming or appearing before AO also needs to be solved. Ld. CIT (A)’s order is palpably wrong. In our considered opinion, in the interest of justice, the issue requires to be remitted to the file of ld. CIT (A). Ld. CIT (A) is directed to give cogent finding as to how the identity, creditworthiness and genuineness of the transactions is established in this case.