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Facts
The assessee's original assessment for AY 2013-14 was revised by the PCIT under Section 263 due to concerns about equity share premium (Rule 11UA read with Section 56(2)(viib)) and unexplained unsecured loans from Shri K. Sreekumar. Subsequently, the AO made additions under Section 68 for unexplained cash credits and premium, which were confirmed by the CIT(A). The assessee is in appeal against the CIT(A)'s order, noting that the addition was protective and a substantive appeal for the source provider, Shri K. Sreekumar, is pending before the CIT(A).
Held
The Tribunal, noting the protective nature of the Section 68 addition and the pending appeal of Shri K. Sreekumar before the CIT(A), remanded the matter back to the CIT(A). The CIT(A) is directed to redetermine the question of addition under Section 68 based on the outcome of Shri K. Sreekumar's appeal.
Key Issues
Whether the addition of unexplained cash credits and share premium under Section 68 is sustainable when a related appeal for the source provider is pending before the CIT(A).
Sections Cited
143(3), 263, 56(2)(viib), 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM
O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (in short “CIT(A)”), dated 02/01/2025 for Assessment Year (AY) 2013- 14.
Briefly the facts of the case are that the appellant is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of running hotels and resorts. The Return of Income for the AY 2013-14 was filed on 29/09/2013 declaring a loss of Rs. 4,20,12,221/-. Against the said return of income, the assessment was completed by the AO vide order dated 06/01/2016 passed U/s. 143(3) of the Income Tax Act, 1961 (in short “the Act”) at a loss of Rs. 4,15,12,221/-.
Subsequently, on review of the Assessment Order, the Principal Commissioner of Income Tax (in short “PCIT”), Trivendrum in exercise of the power vested U/s. 263 of the Act, set-aside the assessment order with a direction to re-do the assessment to conduct the due verification of the following issues:
(i) During the previous year relevant to the AY 2013-14, 612523 equity shares (face value Rs. 10) issued at Rs. 35/- each (including premium of Rs. 25/-) to Shri Sreekumar Krishnan. As per the Rule 11UA r.w.s 56(2)(viib), if the aggregate consideration received for such shares exceeds the Fair Market Value, the difference is to be treated as income under the head “income from other sources”. (ii) Unsecured loans: As per the copy of balance sheet filed for the Asst. Year 2013-14, Rs. 2,20,20,446/- towards unsecured loan is due to Shri K. Sreekumar, Managing Director of the company. But while verifying the assessment records of Shri R. Sreekumar for the AY 2013-14, no such amount was due from the assessee.
The said order passed U/s. 263 of the Act attained finality as no appeal was filed against the said order. Subsequently, the AO completed the assessment vide order dated 31/12/2018 passed U/s. 143(3) r.w.s 263 of the Act after making the addition of unexplained cash credits of Rs. 2,20,20,446/- on account of receipt of premium of Rs. 2,00,78,504/-.
Being aggrieved by the above assessment order, an appeal was filed before the CIT(A), who vide the impugned order confirmed the action of the AO for the failure on the part of the appellant to discharge the onus of proving the ingredients envisaged U/s. 68 of the Act.
Being aggrieved, the appellant is in appeal before us in the present appeal.
At the time of hearing of the appeal, the Learned Authorized Representative (in short “AR”) submits that the addition U/s. 68 was made protectively by the AO, and the addition in the hands of Mr. K. Sreekumar was made on substantive basis. In the case of Mr. K. Sreekumar, the appeal is pending before the CIT(A) and therefore, it is prayed that the matter may be remanded back to the file of the CIT(A).
On the other hand, the Ld. Sr. AR has no serious objection to remand the matter back to the file of the CIT(A).
We order accordingly and remit the matter back to the file of the CIT(A) with a direction to decide the question of addition U/s. 68 of the Act based on the outcome of the appeal in the case of Sri K.Sreekumar.
In the result, appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 30th June, 2025.