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Income Tax Appellate Tribunal, DELHI ‘B’ BENCH,
Before: SHRI R.K. PANDA, & SHRI SUCHITRA KAMBLE,
Date of Hearing 19/08/2019 Date of Pronouncement 20 /08/2019 ORDER
PER SUCHITRA KAMBLE, JUDICIAL MEMBER
This appeal is filed by the assessee against the order of the Ld.
CIT(A)-34, New Delhi, dated 12/03/2019 for Assessment Year 2014-15.
2. Grounds of appeal are as under:-
1. BECAUSE on facts and in law the Ld. CIT(A) ought to have admitted the additional evidence in the form of flow chart showing trail of funds out of bank loan to associate companies to the account of appellant as share application money under Rule 46A(l)(c) or 46A(l)(d).
BECAUSE the appellant was prevented by sufficient cause from producing before the Assessing Officer the evidence which is relevant to the grounds of appeal
relating to unexplained cash credit under Section 68 on account of share capital.
3. BECAUSE the Ld. C1T(A) has erred in not admitting the additional evidence. The facts of the case clearly prove that the additional evidence ought to be admitted in the interest of justice and fair play. The Ld. C1T (A) did not take into consideration all facts brought to her knowledge and a gross injustice has been done to the appellant.
4. BECAUSE the Assessing Officer made the order dt. 28/12/2016 appeal against without giving sufficient opportunity to the appellant to adduce evidence relevant to the ground of appeal relating to addition under Section 68 on account of share capital.
5. BECAUSE appellant informed the new addresses of three shareholders and notice under Section 133(6) where served on the addresses given as is evident from the order sheet entry on 14-12-2016. Therefore, the grounds taken by the Ld. AO/CIT(A) that the correct address of all above shareholders was not communicated to the department is factually wrong and unjustified.
6. BECAUSE the appellant vide written submissions dt.14/12/2016 and dt.22/12/2016 requested the Ld. AO to issue summon under Section 131 to the shareholders. The Ld. AO did not allow the request of the appellant and no summon under Section 131 were issued by the department in the complete contravention of ratio of judgment. CIT vs Durga Prasad More, [1971] 82 1TR 540 (SC), Pee Aar Securities Ltd. vs DCIT (2018) taxman.coin 602 (Delhi). CIT vs Navodaya Castle Pvt. Ltd.. Delhi High Conn. 2014, j2014] 51) iaxinan.com 110 (Delhi). 7. BECAUSE on facts and in law and on grounds taken and basis adopted the addition of Rs. 10,31.54,300/- on account of share capital raise by the appellant during the year is unjustified and illegal, the Ld. AO as well as Ld. CIT(A) failed to take into consideration the facts and supporting documents filed by the appellant and also the other material available on record. Due to demonetization in the month of November/December. 2016 the appellant was prevented by sufficient cause from producing the bank loan accounts of associate companies from which the share capital was introduced by transferring the funds to the accounts of shareholders. The Annexure- A4 of the appeal paper book before CIT(A) clearly established and proved beyond doubt the trail of funds out of bank loan accounts of associate companies to the account of appellant as share application money. The addition of Rs. 10,31,54,300/- is therefore unjustified, illegal and unwarranted. The same deserves to be deleted in toto. 8. BECAUSE the Impugned order is perverse and contrary to the principle of natural justice. The Ld. CIT(A) did not take into consideration the fact that in the light of additional evidence the source of source of share application money was duly established. The Ld. OT(A) did not take into consideration the submissions made in the appeal by the appellant and also the facts stated in application under Rule 46A and also reply to the remand report dt. 28/02/2019. 9. BECAUSE the case law relied upon by the Ld. CIT(A) are distinguishable on facts and the Ld. C1T(A) did not take into consideration the facts stated submitted by the appellant. 3. The assessee is engaged in the business of sale of Bio-Briquettes. The assessee filed income tax return declaring total income at Nil and book profits of Rs.6,95,412/- u/s 115J of the Income Tax Act, 1961(hereinafter ‘the Act’). The assessment was completed vide order dated 28/12/2016 after making additions of Rs.10,31,54,300/- u/s 68 of the Act on account of unexplained share capital, Rs.17,85,872/- on account of trade payables, Rs.6,09,000/- of prepaid rent, Rs.15,000/- on account of unexplained expenses and Rs.6,32,500/- on account of increase in share capital. Thus, total addition of Rs.10,61,96,672/- was made by the Assessing Officer.
Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.
The Ld. AR submitted that during the relevant previous year, the assessee raised the share capital from three shareholders. On 05/12/2016, the assessee provided new address of the three shareholders. The Assessing Officer mentioned in the ordersheet entry dated 14/12/2016 that notices issued u/s 133(6) have been served to the parties and reply from the parties were pending. The assessee requested the Assessing Officer to issue summons u/s 131 to the shareholders, but the Assessing Officer did not issue summons and only allow two days time to the assessee to make compliance of show cause notice in clear violation of principles of natural justice. The Ld. AR submitted that the demonetization of currency at relevant time in December, 2016, the assessee was prevented by sufficient cause to file the documents proving source of source. The Assessing Officer has not taken cognizance of any of the evidence or not provided any opportunity to the assessee to file sufficient evidence to support the assessee’s case. During first appeal, before the CIT(A), the assessee filed application under Rule 46A of the Income Tax Rules, 1962 (hereinafter ‘the Rules’) for admitting additional evidence in the form of Annexure-A-4 being the bank loans accounts of Alpine Realtch Pvt. Ltd. and EkdantInfrabuild Pvt. Ltd. along with the chart showing trail of funds out of bank loan to Ekdant and Alpine to the account of the assessee as shear application money. The ld. AR submitted that with the help of the additional evidences the assessee duly proved source of source right up to withdrawal of money out of bank loans i.e. loan from Corporation Bank and Punjab & Sind Bank. The CIT(A) directed the Assessing Officer to file remand report but the Assessing officer vide remand report dated 07/02/2019 did not raise any objections to the chart showing source of source and bank loan accounts of Alpine and Ekdant. Thus, the Assessing Officer never analyzed the documentary evidence filed to the application under Rule-46A and the CIT(A) simipliciter rejected the admissions.
The Ld. DR submitted that the CIT(A) has rightly rejected the application under Rule-46A as the assessee was given ample opportunity before the Assessing Officer for giving details at the time of assessment proceedings. The Ld. DR relied up on the order of the CIT(A) and the Assessing Officer.
We have heard both the parties and perused the relevant material available on record. It is pertinent to note that the Assessing Officer has not issued summons u/s 131 to the shareholders, which amounts to non- verification of the authenticity of the transactions despite having the proper address. The Assessing Officer, without verifying the factual aspect has arrived at the conclusion by making addition without any supporting documents. The CIT(A) despite calling for remand report has simpliciter rejected the evidence produced by the assessee and has not looked in to the merit of the documents. Thus, the Assessing Officer as well as the CIT(A) has totally ignored the evidence produced during the course of appellate proceedings by the assessee. Therefore, it will be appropriate to remand back this issue to the file of the Assessing Officer by taking cognizance of evidences produced before the First Appellate Authority by the assessee.
Needless to say the assessee be given opportunity of hearing by following the principle of natural justice. The appeal of the assessee partly allowed for statistical purposes.
In the result, appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 20/08/2019.