DCIT, CHENNAI vs. M/S. ARUNA HOTELS LTD., CHENNAI

आदेश /O R D E R

PER G. PAVAN KUMAR, JUDICIAL MEMBER:

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2.1 The Ld. CIT(A) erred in deleting the addition made u/s. 68 of the Act, without appreciating the fact that no evidence regarding the creditor details or creditworthiness of the creditor was furnished before the Assessing Officer, by the assessee, though the onus of proving the identity of the creditor vests with the assessee, and having not furnished, the AO could not proceed further, resulting in the disallowance?

2.2 The Ld. CIT(A) erred in admitting fresh evidence in terms of details of the creditors, without adhering to the provisions of Rule 46A, and on this account also the order of the CIT(A) is bad in law?

2.3 The Ld. CIT(A) erred in not calling for a remand report from the Assessing Officer, as mandated under Rule 46A, since fresh evidence was furnished by the assessee during the course of appellate proceedings?

In compliance to the notice, the Ld. AR of the assessee appeared from time to time and furnished the details. The Assessing Officer on verification of the :-3-: I.T.A. No. 3108/Mds/2016 details and financial transactions found that the assessee company has share application money pending allotment for Rs. 7.73 crores and issued show cause notice. The Ld. AO also required the partywise breakup of the share allotment money and creditworthiness of applicants. Whereas, the assessee could not prove the creditworthiness and identity of the transactions and the Ld. AO treated the credit entries in the Books of account as unexplained credits u/s. 68 of the Act Rs. 7.73 crores and Assessed income of Rs. 6,33,15,522/- vide order u/s. 143(3) of the Act dated 31.03.2015.

" It is settled in law that the onus of proving the source of a sum of money received would be upon the assessee claiming the credit thereof. Once this primary onus has been discharge the onus would shift to the AO contesting the claim. In the instant case the primary onus remains discharged by the appellant and hence the ratio in Kale Khan Mohammad Hanif vs. CIT 50 ITR 1 (SC) and Roshan Di Hatti vs CIT 107 ITR 938 would apply. Similarly, the ratio in CIT vs. Orissa Corporation Ltd 159 ITR 78 (SC) would apply. In that case it was held by the Apex Court that once the credit was owned up the same could not be brought to tax in the hands of the company and the Revenue was free to proceed to examine the creditworthiness or otherwise of the person owning up the credit. The appellant ha also relied upon the ratio in the case of Lovely Exports (Supra) wherein the Apex Court has held that if share application money is received by the assessee company from alleged bogus share holders whose names are given to the AO, then the department was free to proceed to take remedial action in their individual assessments in accordance with law. In this case Kamal Babbar, the joint managing director had owned up the entire amount of Rs. 7.73 crores and accordingly the AO could not have brought to tax the same in the hands of the appellant as has been done in this case. Taking the sum totality of facts before me into account, I

:-5-: I.T.A. No. 3108/Mds/2016 am of the considered opinion that the addition made by the AO u/s. 68 of the Act is untenable in law and on facts. The AO is directed to delete the addition made u/s. 68. This ground of appeal is allowed."

5. Aggrieved by the CIT(A) order, Revenue has filed an appeal before the Tribunal. Before us, the Ld. DR argued that the Ld. CIT(A) erred in deleting the addition without considering the facts that the assessee has not provided any evidence or details of credit or identity and creditworthiness before the Assessing Officer. The Ld. CIT(A) erred in admitting the evidence and also violation of Rule 46A of the IT Rules as the AO was not provided an opportunity to verify the claims. Further, Ld. CIT(A) has not called for Remand report or comments on the material filed by the assessee company in the appellate proceedings and prayed for set aside of the CIT(A) order and allow the Revenue appeal. Contra, the Ld. AR relied on the orders of CIT(A) and opposed the Revenue grounds.

6. We heard the rival submissions, perused the material on record and judicial decisions. The Ld. DR contention that the CIT(A) has erred in deleting the addition without considering the facts that the assessee has not furnished the evidence before the Assessing Officer in the assessment proceedings. We found the assessee company in the appellate proceedings has filed the details referred at Para 5 of the CIT(A) order and based on the material submissions

:-6-: I.T.A. No. 3108/Mds/2016 and the judicial decisions. The Ld. CIT(A) has allowed the appeal in favour of the assessee. Prima Facie, the Ld. CIT(A) relied on the confirmation Affidavit of the applicant and copy of accounts with credit entries filed by the assessee.

We are of the opinion, that the Ld. CIT(A) has accepted the evidence but has not called for remand report from the Assessing Officer and there is violation of provisions of Rule 46A of IT Rules. As Assessing Officer was deprived an opportunity to verify and examine the documents filed. In the interest of the justice, we remit the disputed issue to the file of the AO to examine the evidence and other details filed and the AO shall provide adequate opportunity of hearing to the assessee company before passing the order on merits. The grounds of Revenue are allowed for statistical purposes.

Order pronounced on Tuesday, the 21st day of March, 2017 at Chennai.