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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGHAND Dr. M.L. MEENA
The first issue in the appeal of assessee in is as regards to the order of CIT(A) confirming the action of AO in upholding the addition of share application money of Rs.69,81,191/- as unexplained credit u/s.68 of the Act.
Brief facts are that the assessee received share application money amounting to Rs.69,81,191/-. The AO required the assessee to explain the sources of receipt of share application money from 15 parties. The AO has narrated that confirmations were received from the following six parties
3 1482, 1487 & 1639/Chny/2018 (i) K.M. Arunkumar, Pollachi Rs.5,00,000 (ii) K.P. Kaleeswaran Rs.5,00,000 (iii) C.K. Shanmugavelyatham Rs.5,00,000 (iv) M.T. Ramesh Kumar Rs.5,00,000 (v) P. Subbathal Rs.5,00,000 (vi) D. Rajiv Mohan Rs.2,40,594 Total Rs.27,40,594 According to AO, the assessee has filed stereotyped letters but no PAN number or other details including identity, date of advancing the said amount, mode of payment, source of share application money, etc., were not filed and hence, genuineness of claim could not be verified. The AO noted that notice was returned as unserved from the following two parties:- (i) N. Senthil Kumar, Pollachi Rs.5,00,000 (ii) P.S. Vimalkumar, Coimbatore Rs.5,00,000 Total Rs.10,00,000 The AO also noted that from the following seven parties, no reply has been received:- 1 D. Prubhu Srikanth, Coimbatore Rs.2,40,596 2 D. Deepak, Salem Rs.5,00,000 3 K. Arunkumar, Vellure Rs.5,00,000 4 C. Nareshkumar, Coimbatore Rs.5,00,000 5 S. Sureshkumar Johnson, Chennai Rs.5,00,000 6 P. Sivaganesh, Pollachi Rs.5,00,000 7 L. Vinoth, Vellure Rs.5,00,000 Total Rs.32,40,596 Therefore, the AO added the credit appearing in the books of accounts of the assessee in the form of share application money
The assessee before CIT(A) could not file any proof, hence in the absence of any proof the CIT(A) confirmed the action of AO vide para 5.1 as under:- 5.1 In the course of appellate proceedings, the appellant produced some confirmation letters from some parties. On a scrutiny of the same, it can be seen in these letters that there is no mention of PAN, nature of payment and source from which it is paid. Hence, the appellant has not discharged the onus of proving the credit by establishing the genuineness of the transaction nor the credit worthiness of the creditor. Hence, I find that the order of the Assessing Officer was correct and there is no reason why his conclusion needs to be disturbed. Therefore, the addition of Rs.69,81,191/- made u/s 68 of the Act which are credit of unproven share application advance is confirmed.”
Aggrieved, now assessee is in second appeal before the Tribunal.
Now before us, assessee filed application under Rule 29 of the Income Tax Appellate Tribunal Rules, 1963 filing additional evidences in the form of confirmation letters along with copy of PAN card, Aadhar card, Voter card from 12 parties, from whom the assessee has received share application money. The ld.AR for the assessee also stated that the assessee is ready to prove the sources
5 1482, 1487 & 1639/Chny/2018 of these share application money. The ld.AR requested for admission of these evidences and requested that matter may be sent back for examination by lower authorities in regard to genuineness of transaction and creditworthiness of the share applications for which assessee will comply with the requirements as per the provisions of section 68 of the Act before the lower authorities.
When this was put to ld. Senior DR, he relied on the assessment order and that of the CIT(A). He argued that these evidences were not filed before the lower authorities and hence, AO as well as CIT(A) was constrained to make addition because assessee has not proved the genuineness of transaction nor the source of credit. The assessee has not discharged its onus as casted u/s.68 of the Act. But, the ld.DR could not controvert regarding admissibility of additional evidences.
After hearing both sides and going through the facts of the case and the evidences filed before us by assessee, we noted from the evidences that the assessee has filed complete ledger copies of share applicants and also filed other details including confirmations.
6 1482, 1487 & 1639/Chny/2018 According to us, these additional evidences filed by assessee will go to the root of the matter and it will help in adjudicating the issue and hence, keeping in mind the principles of natural justice, we admit these evidences and remand the matter back to the file of the AO for fresh adjudication. Accordingly, this issue of assessee’s appeal is allowed for statistical purposes.
The next common issue in both the appeals of Revenue and assessee is as regards to the order of CIT(A) restricting or upholding the addition of Rs.2,58,80,414/- by invoking the provisions of section 41(1) of the Act, as against addition made by the AO on sundry creditors amounting to Rs.10,67,68,912/-.
We noted that the very ground of Revenue is as regards to violation of provisions of Rule 46 of the Income Tax Rules, 1962 that the evidences adduced during appellate proceedings by the assessee has been considered without giving opportunity to the AO. The first ground of Revenue reads as under:- 1. The learned Commissioner of Income tax (Appeals)-I, Coimbatore has erred in allowing the claim of the assessee on Sundry Creditors amounting to Rs.8,08,88,498/- restricting the disallowance to Rs.2,58,80,414/- and held that this has be treated as disallowance u/s 41(1) of the Act. The additional evidences adduced during the appellate proceedings by the assessee has been considered without giving opportunity to the Assessing
Similarly, the assessee has also raised the ground that the CIT(A) has confirmed the addition by invoking the provision of section 41(1) of the Act, having concluded that the provisions of section 68 of the Act is not invocable in respect of sundry creditors and according to assessee, ought not to have invoked the provisions of section 41(1) of the Act. The ld.AR for the assessee took us through para 6.2 of CIT(A) order, which reads as under:- 6.2 I agree with the appellant that the AO was wrong in making the assessment u/s 68 of the Act. He has not concluded that the purchases have not happened. Hence, I hold that the assessment made by the AO u/s 68 of the Act was wrong.
The CIT(A) after considering additional evidences and even remand report from the AO restricted the addition at Rs.2,58,80,414/- to be assessed u/s.41(1) of the Act as against addition made by AO of Rs.10,67,68,912/- assessed u/s.68 of the Act as cash creditors. The CIT(A) recorded his finding in para 6.4 & 6.5 as under:- 6.4 A detailed analysis was done on the ledger accounts furnished by the appellant during the appellate proceedings. Considering the argument that the subsequent payments are an indication of the life of the accounts, these accounts which remain dormant were separated and tabulated as Annexure-I. There is another set of accounts where some efforts are seen to show that the transactions are squared-up by making a journal entry
6.5 These two categories of creditors do not have any activities in the subsequent year. In the course of assessment or during the Remand proceedings, they have neither submitted confirmation of balances nor appeared in person and produced evidences. No evidences were produced to explain the quality issues as submitted during appellate proceedings. These purchases were debited in the year in which purchases were made and are part of the P&L A/c of the respective years. Hence, these credits are believed to be not in existence. In other words, the liability has ceased to exist and the amount of Rs.1,71,12,670/- (as per Annexure-I) and Rs.87,67,735/- (as per Annexure-II) totaling Rs.2,58,80,414/- are to be assessed u/s 41(1) instead of Rs.10,67,68,912/- assessed u/s.68 of the Act.
Now before us the ld.Senior DR stated that the CIT(A) has adjudicated the issue deleting addition of Rs.8,08,88,498/- being addition u/s.68 of the Act, holding the same as sundry creditors without confronting the same to the AO. On the other hand, the ld.AR for the assessee stated that the AO has added these sundry creditors to the extent of Rs.10,67,68,912/- u/s.68 of the Act is wrong whereas actually the AO concluded that the purchases have happened. But CIT(A) came to the conclusion that several parties did not respond or confirmed the balance liability to pay has ceased to exist. The ld.AR now before us stated that based on ledger accounts filed by the assessee that subsequent payments are an indication of the life of the accounts, the CIT(A) confirmed the following additions u/s.41(1) of the Act:-
9 1482, 1487 & 1639/Chny/2018 (i) Accounts which remain dormant - Rs. 1,71,12,670 (As per Annexure I to CIT(A) order) (ii) Transactions squared up by making a journal Entry “Advance to Supplier” - Rs. 87,67,735 (As per Annexure II to CIT(A) order)
The ld.AR for the assessee also requested that the matter can go back to the file of the AO to decide the issue whether the additions are to be made u/s.68 of the Act or u/s.41(1) of the Act after considering the facts of the case, whether the sundry creditors are arising out of sales or not. According to him, the AO can consider the applicability of provisions of section 41(1) of the Act.
After hearing both the sides and going through the facts of the case, we are of the view that in the above given facts and arguments, let the matter go back to the file of the AO for fresh adjudication as argued by both the sides. Hence, we set aside this issue in both the appeals i.e., Revenue as well as assessee, to the file of AO to re-adjudicate. Hence, both the appeals are allowed for statistical purposes. & 1487/Chny/2018, AY 2014-15: 13. The only common issue in these cross appeals is as regards to the order of CIT(A) restricting the addition u/s.41(1) of the Act as
The facts and circumstances are exactly identical to what was in assessment year 2012-13, as discussed above in paras 9 to 11 and arguments are exactly identical, hence on the same lines we restore the issue raised by both i.e., the assessee as well as the Revenue to the file of the AO for re-adjudication. Both the appeals are allowed for statistical purposes.
In the result, the appeals filed by the assessee as well as the Revenue for the assessment years 2012-13 & 2014-15 are allowed for statistical purposes.
Order pronounced in the court on 4th May, 2022 at Chennai.