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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI A. MOHAN ALANKAMONY
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-IV, Chennai, dated 02.09.2013 and pertains to assessment year 2005-06.
The notice of hearing was served on the assessee by affixture through the Assessing Officer. The Assessing Officer has filed a report through Inspector of Income-tax that the premises of the assessee was locked. Therefore, the notice was affixed at the last known address. No one appeared for assessee when the appeal was taken up for hearing. In view of the above factual situation, we have heard the Ld. Departmental Representative and proceed to dispose of the appeal on merit.
Shri A.V. Sreekanth, the Ld. Departmental Representative, submitted that the assessee-company disclosed share application money to the extent of `1,16,00,000/- in the balance sheet. The assessee claimed before the Assessing Officer that 16 individual persons had applied to share application. The Assessing Officer doubted the transaction since all the amounts were received in cash. The Assessing Officer issued summons under Section 133(6) of the Income-tax Act, 1961 (in short 'the Act'). One Shri Lalith Kumar Sharma and Smt. Mayuri Sharma were said to have contributed to the share application. On investigation, the Assessing Officer found that the address given by the assessee with regard to above said two persons is not correct. The assessee claimed before the Assessing Officer that both of them left for Rajasthan long back and the assessee has not produced the correct address even after several requests made by the Assessing Officer.
As for other investors, namely, Shri Jitendra Kumar Sharma, Smt.
Anitha Sharma, Smt. Meenakshi Sharma and Shri Manoj Kumar Sharma, the Assessing Officer found that they do not have enough income for making investment in the assessee-company. Though they are income-tax assessees and filed their respective returns, they do not have sufficient money for making investment.
Therefore, the Assessing Officer found that the transaction was not genuine and creditworthiness of so-called investors for the share application was not established. According to the Ld. D.R., the Assessing Officer found that the assessee has failed to submit documents or proof to explain the creditworthiness and genuineness of the transaction. Since the assessee could not discharge its onus, the share application money to the extent of `1,16,00,000/- was considered as unexplained cash credit under Section 68 of the Act and added to the total income of the assessee.
The Ld. Departmental Representative further submitted that on appeal by the assessee, the CIT(Appeals) found that even if the transaction was not genuine, the same cannot be added in the hands of the assessee as undisclosed income. In fact, the CIT(Appeals) placed his reliance on the judgment of Delhi High Court in CIT v. Steller Investment Ltd. (192 ITR 287). Accordingly, the CIT(Appeals) deleted the addition.
According to the Ld. Departmental Representative, all the monies were received by the assessee in cash, therefore, the genuineness of transaction is doubtful. Placing reliance on the judgment of Delhi High Court in CIT v. Nipun Builders & Developers (P.) Ltd. (2013) 350 ITR 407, the Ld. D.R. submitted that the Delhi High Court found that in the absence of any enquiry to support the claim of investment by shareholders, the addition was confirmed by the Delhi High Court. In view of this judgment of Delhi High Court, according to the Ld. D.R., the CIT(Appeals) is not correct in deleting the addition made by the Assessing Officer.
We have considered the submissions of Ld. D.R. and perused the relevant material available on record. The assessee claims that 16 persons invested in the share application of the assessee-company. The assessment order indicates that the assessee has furnished a list of all the 16 creditors. Though the Assessing Officer observed that the list of the investors was annexed with the assessment order, the assessment order filed before this Tribunal does not have so-called list of the investors.
The Assessing Officer, in fact, issued summons under Section 133(6) of the Act to seven of the investors. The first two investors, namely, Shri Lalith Kumar Sharma and Smt. Mayuri Sharma were found to be left for Rajasthan. The address given by the assessee in the course of assessment proceeding was found to be not correct. In respect of others, namely, Shri Jitendra Kumar Sharma, Smt. Anitha Sharma, Smt. Meenakshi Sharma and Shri Manoj Kumar Sharma, the Assessing Officer found that they do not have sufficient source of income for making the investment in the assessee-company. Therefore, the Assessing Officer disallowed the claim and made addition. However, the CIT(Appeals) deleted the addition by placing reliance on the judgment of Delhi High Court in Steller Investment Ltd. (supra).
7. Now, the question arises for consideration is whether there can be any addition in respect of the money invested in the share application of the assessee by third parties? The Assessing Officer after examination, found that four investors do not have sufficient source of income for making investment and two of the investors were found to be from Rajasthan and they left for Rajasthan long back. The Assessing Officer has not examined the availability of funds with the assessee-company. The Assessing Officer has not examined the flow of funds from the corpus of the assessee- company. The CIT(Appeals) has not considered the flow of funds from the assessee-company. Under normal circumstances, the investment made by the respective parties on the share application money cannot be taken as income of the assessee-company.
Since the Assessing Officer has not examined all the applicants who have invested in the share application, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the Assessing Officer. The Assessing Officer shall examine all the share applicants and find out the available funds with the assessee- company and whether any money was flown from the corpus of the assessee-company. Accordingly, the orders of the authorities below are set aside and the entire issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the issue after examining the available funds with the assessee and whether the assessee has introduced its own money in the form of share application money, thereafter the Assessing Officer shall decide the issue afresh in accordance with law after giving reasonable opportunity to the assessee.
In the result, the appeal of the Revenue is allowed for statistical purposes.
Order pronounced on 9th June, 2016 at Chennai.