ASR WINES (P) LTD.,BULANDSAHR vs. ITO, WARD- 3(1), BULANDSAHR

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ITA 5440/DEL/2017Status: DisposedITAT Delhi13 November 2018AY 2012-137 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee discharged its initial onus under Section 68 by providing confirmation and details from Shri Achchan Khan, an existing shareholder. The AO should have investigated the source of funds in Shri Khan's hands or issued summons, rather than adding it to the assessee's income.

What were the facts?

The assessee company received share application money of Rs. 8,50,000 from Shri Achchan Khan. The Assessing Officer added this amount as income from undisclosed sources, doubting Shri Khan's financial capacity and inability to produce him.

What were the issues?

Whether the addition of share application money under Section 68 is justified when the assessee has provided confirmation from the investor, and the AO's doubts are based on the investor's financial capacity and non-production.

Which sections of the Income-tax Act were involved?

Section 68,Section 133(6),Section 131

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI ‘SMC’ BENCH,

Before: SHRI N.K. BILLAIYA

For Appellant: Shri Somil Aggarwal, Adv
Hearing: 06.11.2018

PER N.K. BILLAIYA, ACCOUNTANT MEMBER:

1.

This appeal by the assessee is preferred against the order of the Commissioner of Income Tax [Appeals] – Ghaziabad dated 02.03.2017 pertaining to assessment year 2012-13.

2.

The appeal is barred by limitation by 66 days. I have gone through the prayer for condonation of delay. I am convinced that the assessee was prevented by reasonable cause for not filing the appeal in time. The appeal is condoned.

3.

The solitary grievance of the assessee is that the ld. CIT(A) erred in confirming the addition of Rs. 8,50,000/- on account of share application money received from Shri Achchan Khan by treating it as alleged income from undisclosed sources u/s 68 of the Income-tax Act, 1961 [hereinafter referred to as 'the Act'].

4.

During the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has shown share application money of Rs. 8.50 lakhs. The assessee was asked to furnish the details of share application money received from 34 persons, alongwith their confirmations and copy of their bank accounts. After considering the reply of the assessee, the Assessing Officer found that Shri Achchan Khan, who is a share holder, invested share application money of Rs. 4.35 lakhs during the F.Y. 2009-10. He has also deposited share application money of Rs. 8.50 lakhs in F.Y. 2011-12. Accordingly, notice u/s 133(6) of the Act was issued to Shri Achchan Khan, who confirmed the transaction of share application money of Rs. 8.50 lakhs. The Assessing Officer was not convinced with the explanation given by Shri Achchan Khan and insisted for the presence of Shri Achchan Khan from whom share application money was received.

5.

The assessee filed a detailed reply explaining that Shri Achchan Khan is a member in AOP M/s Ahmed Trader BSR from where he has withdrawn the amount out of his capital and invested the same as share application money with the assessee company. The assessee showed his inability to produce Shri Achchan Khan.

6.

The Assessing Officer was of the firm belief that Shri Achchan Khan has no job work and he is hand to mouth and, therefore, is not a man of means to deposit Rs. 8.50 lakhs as share application money with the appellant company. Accordingly, Rs. 8.50 lakhs was added u/s 68 of the Act.

7.

The assessee agitated the matter before the first appellate authority but without any success.

8.

Before me, the ld. AR reiterated what has been stated before the lower authorities.

9.

The ld. DR supported the findings of the Assessing Officer.

10.

I have carefully considered the orders of the lower authorities. The undisputed fact is that Shri Achchan Khan is an existing share holder of the appellant company. Therefore, his identity cannot be disputed. Moreover, the notice issued u/s 133(6) of the Act was duly served upon Shri Achchan Khan, who not only confirmed the transaction, but also furnished necessary details. The Assessing Officer has made addition only because Shri Achchan Khan could not be produced and he was a man of no means. I fail to understand what prevented the Assessing Officer to issue summons u/s 131 of the Act on Shri Achchan Khan. Secondly, when the Assessing Officer was fully aware that Shri Achchan Khan has made investment of Rs. 8.50 lakhs as share application money with the appellant company, nothing could have prevented the Assessing Officer to ask the source of investment from Shri Achchan Khan. In my considered opinion, if the source was not properly explained, addition could have been made in the hands of Shri Achchan Khan as unexplained income. By no stretch of imagination addition can be made u/s 68 of the Act in the hands of the appellant company since it has discharged the initial onus cast upon it by virtue of provisions of section 68 of the Act. Addition is uncalled for and directed to be deleted.

11.

In the result, the appeal filed by the assessee in is allowed.

The order is pronounced in the open court on 13 .11.2018.

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