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Facts
The assessee filed an appeal challenging an ex-parte order upholding additions made by the Assessing Officer (AO) and confirmed by the CIT(A). The AO made additions on account of alleged unexplained cash credit from penny stock transactions and related commission, which the assessee claimed to have explained with documents.
Held
The Tribunal observed that the assessee failed to discharge the onus of proving the identity, creditworthiness of parties, and genuineness of the transactions before the lower authorities. The assessee was also found to be non-compliant with the first appellate authority. However, to adhere to principles of natural justice, the issues were remanded back to the CIT(A) for de novo adjudication.
Key Issues
Whether the additions made on account of unexplained cash credit and commission were justified, and if the assessee was denied natural justice by not being provided with third-party statements for cross-examination.
Sections Cited
68, 250, 143(1), 143(3), 271(1)(C)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
O R D E R Per Kavitha Rajagopal, J M:
This appeal has been filed by the assessee, challenging the ex parte order of the learned Commissioner of Income Tax (Appeals) (‘ld.CIT(A) for short), National Faceless Appeal Centre (‘NFAC’ for short) passed u/s.250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2015-16.
The assessee has raised the following grounds of appeal:
The ld. CIT(A) has erred in upholding the order the learned Assessing Officer (AO) for an addition of Rs.64,84,598/- by treating it as unexplained cash credit under section 68 of the Act even though the same was explained to ld. A.O. with all the requisite documents asked for during the course of assessment proceedings.
2. The ld. CIT(A) has erred in confirming an adhoc addition of Rs.1,94,538/- (being 3% commission on the above Rs.64,84,598/-) by treating it as unexplained expenditure which were duly explained along with supporting during the assessment proceedings. 3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in upholding the A.O. order which was purely on the basis of third party statements which were not furnished to the appellant.
(A.Y.2015-16) Rakesh Chandranath Sharma vs. ITO 4. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in upholding the A.O. order which was passed by not providing an opportunity to cross examine the third parties, whose statements have been used to make the additions. 5. The ld. AO erred in initiating penalty proceedings u/s. 271(1)© of the Act.
The brief facts are that the assessee is an individual and had filed his return of income dated 31.08.2015, declaring total income at Rs.8,67,261/- and the same was processed u/s. 143(1) of the Act. The assessee’s case was then selected for scrutiny under CASS for the reason that the assessee is said to have transacted with scrips alleged to be a penny stock out of which transaction the assessee is said to have claimed long term capital gain amounting to Rs.64,84,398/-. The learned Assessing Officer (ld. A.O. for short) passed the assessment order u/s. 143(3) of the Act dated 29.12.2017, determining the total income at Rs.75,46,400/- after making an addition of RS.64,84,598/-, relating to sale proceeds of shares as unexplained investment and Rs.1,94,538/- being the addition on account of commission for the said transaction as unexplained expenditure.
The assessee was in appeal before the first appellate authority where the impugned addition was upheld by the ld. CIT(A).
The assessee is in appeal before us, challenging the impugned order of the ld. CIT(A).
We have heard the rival submissions and perused the materials available on record. It is observed that the assessee has challenged the addition on account of alleged penny stock of M/s. Sunrise Asian Ltd. which transaction has not been substantiated by the assessee before the lower authorities to be a genuine transaction. The ld. A.O. and the ld. CIT(A) upheld the impugned addition u/s. 68 of the Act as unexplained cash credit
(A.Y.2015-16) Rakesh Chandranath Sharma vs. ITO and also the commission expenditure of 3% on the same. It is observed that neither before the ld. A.O. nor before the ld. CIT(A), the assessee has discharged his onus on proving the identity and creditworthiness of the parties along with the genuineness of the transaction. It is also pertinent to mention that the assessee has been non compliant before the first appellate authority.
The learned Authorised Representative (ld. AR for short) for the assessee prayed that the assessee may be given one more opportunity to present his case before the first appellate authority which was vehemently opposed by the learned Departmental Representative (ld. DR for short).
On considering the submissions placed before us, we are of the considered view that adhering to the principles of the natural justice, all these issues may be remanded back to the file of the ld. CIT(A) for de nova adjudication on the merits of the case. The ld. CIT(A) is directed to dispose of the said issues based on the merits of the assessee’s submission as expeditiously as possible and the assessee is also directed to co-operate with the appellate proceeding without any undue delay on his side. We, therefore, remit these issues back to the file of the ld. CIT(A).
In the result, the appeal filed by the assessee is allowed for statistical purpose.
Order pronounced in the open court on 24.06.2024