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Facts
The assessee, M/s. Rai Ispat Private Limited, appealed against the CIT(A)'s order confirming additions made by the AO. The additions concerned Rs. 5.31 Crores treated as unexplained share application money and Rs. 40,12,599/- on account of outstanding current liabilities.
Held
The Tribunal noted that the AO's order regarding outstanding current liabilities was cryptic. For the share application money, the Tribunal observed that the assessee requested admission of additional evidence and directed the AO to re-adjudicate the issue after considering the evidence.
Key Issues
Whether the addition of Rs. 5.31 Crores as unexplained share application money and Rs. 40,12,599/- as outstanding current liabilities by the AO was justified. Whether to admit additional evidence in appeal.
Sections Cited
68
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Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI
Before: SHRI ABY T VARKEY & SHRI AMITABH SHUKLA
आदेश / O R D E R PER AMITABH SHUKLA, A.M :
This appeal is filed against the dated 26.03.2019 of the Learned Commissioner of Income Tax [herein after “CIT(A) for the assessment years 2015-16. Through the aforesaid appeal the assesse has challenged the dated 26.03.2019 passed by CIT(A), Chennai. 2.0 Through the grounds of appeal
the appellant is contesting order of Ld. CIT(A) confirming addition of Rs.5.31 Crores u/s 68 made by the Ld. AO in respect of share application money by treating the same as unexplained credits and of Rs.40,12,599/- on account of outstanding current liabilities. 3.0 At the outset it is seen that during the course of appellate proceedings, the Ld. Counsel for the assesse requested for submission of additional evidences within the meanings of Rule-29 of ITAT rules qua addition of Rs.5.31 Crores u/s 68 made by the Ld. AO in respect of share application money by treating the same as unexplained credits. It was submitted that the impugned additional evidences are necessary for adjudication of the matter and that their non-production before the lower authorities was purely unintentional. In support of its contentions, the Ld. Counsel for the assesse relied upon decision of coordinate bench of ITAT,Patna in the case of Abhay kumar Shroff vs ITO
63. ITD 144 postulating admission of additional evidences at the 2nd appellate stage before the tribunal for serving substantial cause. 4.0 We have heard the rival submissions in the light of material placed on records. The Ld. DR would make us believe that the order of the lower authorities is in consonance with the material on records and therefore does not require any interference at this stage. It was alluded that the act of presenting additional evidences now is a clear case of afterthought.
5.0 We have noted that the impugned addition of Rs.5.31 Crores u/s 68 made by the Ld. AO in respect of share application money by treating the same as unexplained credits was done with the following findings:- “……On a perusal of Sch.6 of Balance Sheet as on 31.3.2015, it is seen that Assesse Company has received Share Application Money to the tune of Rs.5,31,10,000/- during the year under consideration. From the Bank Accounts and ledger accounts Submitted in this connection, it is seen that share application money was received from various parties and given as "Short term loans & advances" to the Director of M/s. RAI ISPAT PVT. LTD. and related persons of RKKR group as tabulated below: IDBI Bank Ltd. S.No. Date Name of the Person Vch Amount (in Type Rs.) 1. 17.03.2015 Rablilash Sharma Receipt 11,65,000 2. 17.03.2015 Ramprasad Sharma Receipt 14,06,000 3. 17.03.2015 Mamta Sharma Receipt 12,11,000 4. 17.03.2015 Omprakash Receipt 3,25,000 5. 17.03.2015 Manju Sharma Receipt 7,35,000 6. 17.03.2015 Ramswroop Sharma Receipt 30,45,000 7. 17.03.2015 Bhanawarlal Sharma Receipt 23,48,000 8. 17.03.2015 R.Santosh Receipt 8,90,000 9. 17.03.2015 Hariram Chowdhary Receipt 7,05,000 10. 17.03.2015 Sahadev Ram Chaudhary Receipt 7,10,000 11. 17.03.2015 Omprakash Chaudhary Receipt 4,50,000 12. 17.03.2015 L.Hariram Chaudhary Receipt 7,75,000 13. 17.03.2015 Bidami Devi Receipt 5,35,000 14. 17.03.2015 Rameshwarlal Chaudhary Receipt 10,00,000 15. 17.03.2015 Sahadev Ram Chaudhary Receipt 8,35,000 16. 17.03.2015 Sahadev Ram Chaudhary Receipt 8,65,000 17. 17.03.2015 Ramswroop Sharma Receipt 5,00,000
25.03.2015 Ramswroop Sharma Receipt 75,00,000 19. 26.03.2015 Ramswroop Sharma Receipt 70,00,000 20. 27.03.2015 Omprakash Chaudhry H Receipt 5,00,000 21. 27.03.2015 Hariram Chowdhary HUF Receipt 2,50,000 22. 27.03.2015 Shadev Ram ChaudharyHUF Receipt 5,00,000 23. 27.03.2015 Sahadev Ram Chaudhary Receipt 57,50,000 24. 27.03.2015 Banwar Lal Sharma Receipt 1,50,00,000 S.No. Date Name of the Person Vch Type Amount (in Rs.) 1. 16.03.2015 RKKR Steels Ltd Payment 47,956 2. 16.03.2015 Ritesh Rai Payment 6,51,374 3. 16.03.2015 Rajiv Rai Payment 8,73,780 4. 16.03.2015 Rajiv Rai Payment 6,51,374 5. 16.03.2015 Ram Krishan Kulwant Rai Payment 22,14,378 Holding Pvt.Ltd 6. 16.03.2015 Ram Krishan Kulwant Rai Payment 1,25,00,000 Holding Pvt.Ltd 7. 17.03.2015 Ritesh Rai Payment 5,82,520 8. 17.03.2015 Ritesh Rai Payment 2,91,260 9. 25.03.2015 Radha Industries Payment 70,00,000 10. 26.03.2015 Radha Industries Payment 70,00,000 11. 26.03.2015 Radha Industries Payment 70,00,000 12. 26.03.2015 Ram Krishan Kulwant Rai Payment 46,905 Holding Pvt.Ltd 13. 27.03.2015 Radha Industries Payment 1,50,00,000 The assesse company, vide its letter dated 22.6.17 has also mentioned that "share application money have not been allotted till date and the company is taking steps to refund the money…….. ………………………………………………………. …………………………………………… Thus, it is inferred that the parties are bogus parties and they are only used as a tool to circulate the unaccounted money of the company, Though it is seen frorn the bank statements produced by the parties that the receipt was from BELL TOWER ENTERPRISES LLP, in order to verify the credentials of BELL TOWER LLP, financials and bank statements were called for from that firm, u/s.133(6) of the I.T.Act vide this office letter dated 24.8.17. …………………………….. ………………………………………… In view of the above findings, Share application money of Rs.5,31,10,000/- needs to be treated as unexplained credit u/s. 68 of the Income-tax Act. When this issue was brought to the notice of the assesse vide this office letter dated 16.10.17, the A/R replied vide letter dated 13.11.7 as under: "Mr, Sahadev Chaudhary & family are persons known to the assesse company's group for the last 25 years. The assesse company is not aware of the source where they got their funds from. The assesse company states that the said party has knowledge of share trading as they are businessmen and often sort to trading of various items including shares. Accordingly, they on the request of the assesse company to raise capital have invested in the shares of Rai Ispat and form part of the "friends and family" category. We would submit that genuineness and creditworthiness is beyond doubt as the persons have appeared before your goodself and have testified their Investment In the shares of the assesse company. We would also submit that they have remitted the share capital to the assesse company via banking channels and cannot be called "unexplained credits". Confirmation of balances have also provided before your good self." The contention of the A/R is considered carefully. It is mentioned by the A/R that the parties like family friends and at the request of the company, the parties have invested this huge amount in their company. This contention of the assesses beyond any imagination. The quantum of investment is Rs.5,31,10,000/-. These parties, who do have much source of income as evident from their P & L account, would not have made any investment in this company which is not at all doing well, that too, in this company which is writing off of its investments and not giving any dividend for the past many years, if the money received by them from M/s. BELL TOWER ENTERPRISES LLP is their hard earned money. The parties being family friends to the assesse company surely would not have done this mistake at all knowing fully well that M/s. RAI ISPAT PVT. LTD. is a loss making company. Hence, it is only the money of the assesse company which is routed through these parties. On this ground, the claim of the assesse is rejected and money received in the form the share application money but no shares allotted is treated as unexplained credit u/s.68 of the I.T. Act and brought to tax accordingly. Addition: Rs. 5,31,10,000/-…..”
6.0 It is clear from above that the Ld. AO had made the said addition on account of non-availability of requisite details from the assesse. The Ld. First appellate authority confirmed the addition made by the Ld. AO, inter-alia, containing following observations:- “……I have gone through the assessment order and remand report of the Assessing Officer and written submissions made by the appellant. The assessing officer in the remand report furnished has once again reiterated that the said share applicants do not have source of income as evident from their returns and the accompanied financials. The assessing officer has further stated that the impugned transactions involving the investment in the appellant company in the guise of share application money to the tune of Rs 5.31.10.000/- is bogus. Before me, the appellant through its authorized representatives failed to furnish any such evidence so as to substantiate the credit worthiness of the persons from whom monies received and the genuineness of the transaction…..” 7.0 From the position stated above, it is clear that the impugned addition had direct nexus with the non-availability of supporting evidences. Rule-29 of the ITAT rules empower admission of additional evidences in cases where substantial cause exists. We are of the view that in the case the addition made is for want of supporting evidences. We are of the view that the Ld. AO must be provided an opportunity of examining the same before coming at any conclusion qua application of section 68 of the Act. Accordingly, we set aside the order of the lower authorities with the direction to the Ld. AO to readjudicate the issue of share application money in the light of impugned evidences. The Ld. AO would give all opportunities of being heard to the assesse and the assesse shall be duty bound to comply with all the notices and details solicited by the Ld. AO. 8.0 In the result, the grounds of appeal raised by the assesse qua addition of Rs.5.31Crores in respect of share application money stands allowed for statistical purposes. 9.0 The next issue is regarding the addition of Rs.40,12,599/- on account of outstanding current liabilities. On perusal of the Page-5 of order of the Ld. AO, it is seen that the Ld. AO has noted that above liabilities are outstanding for a long period since FY 12-13. The Ld. AO recorded that the books of said parties do not reflect any corresponding entries and that they have confirmed only advancing of loan to the assesse. The Ld. AO noted that “…the outstanding balance which is not confirmed by the parties and which is outstanding for a long duration is brought to tax as income of the assesse…”. 10.0 We have considered the rival’s arguments in the light of material on records. At the outset, it is noted that the Ld. AO has made the impugned addition without making any reference to any section of the act in which the same is made. Then again the Ld. AO has unequivocally demonstrated and admitted that the impugned addition of Rs.40,12,599/- is a brought forwarded balance from FY-2012-13. The order of the Ld. AO also indicates that he has made enquiries only with two of the three parties who had apparently stated that they have invested only in share application money of the impugned company. The Ld. AO further recorded that in respect of two parties their books did not indicate any amount. Further, out of three, the Ld. AO could enquire only in respect of two parties. Further, according to Ld. AO, the assesse had submitted that said parties have given loan to the assesse. The quantum and character of enquires done by the Ld. AO is also not explicitly clear in the order. On the impugned matter the order of the Ld. AO falls in the category of non-speaking cryptic order. 11.0 Accordingly, we deem it fit to set aside the addition made by the Ld. AO and the order of the Ld. CIT(A) on this account. Accordingly, we set aside the order of the lower authorities with the direction to the Ld. AO to re-adjudicate the issue of outstanding current liabilities. The Ld. AO would give all opportunities of being heard to the assesse and the assesse shall be duty bound to comply with all the notices and details 10 -: solicited by the Ld. AO. The ground of appeal raised by the assesse qua this addition is allowed for statistical purposes. 12.0 In the result, the appeal raised by the assesse is allowed for statistical purposes. Order pronounced on 4th , September-2024 at Chennai.