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Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH
Before: Shri S. S. Godara & Shri Amarjit Singh
PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-
This Revenue’s appeal for A.Y. 2011-12, arises from order of the CIT(A)-2, Ahmedabad dated 30-03-2015, in proceedings under section 143(3) of the Income Tax Act, 1961; in short “the Act”.
The revenue has raised following grounds of appeal:- “1. The Ld. CIT(A) has erred in law and on facts by admitting additional evidences submitted by the assessee considering them to be contemporary in nature despite objection raised by the AO in the Remand Report.
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The Ld. CIT(A) .has erred in law and on facts in deleting the addition to Rs. 43,96,952/- made by the AO on account of unrecorded investment in stocks u/s. 69B of the I.T. Act.
The Ld. CIT(A) has erred in law and on facts in deleting the addition to Rs. 25,70,000/- made by the AO on account of unexplained cash credit u/s. 68 of the I.T. Act. .
On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer.
It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that of the Assessing Officer may be restored to the above extent.”
In this case, return of income, showing loss of Rs. 27,98,537/- was filed on 22-09-2011. Subsequently, the case was selected under scrutiny by issuing of notice u/s. 143(2) of the act on 21/09/2012. During the course of appellate proceedings, the assessing officer observed that value of stock as on 31/03/2011 was of Rs. 48,68,000/- as per the stock statement furnished to the bank. However, the assessing officer has noticed that value of stock reflected in the books of account was at Rs. 4,71,048/- as on 31/03/2011. Consequently, the assessing officer has added the difference in the value of stock of Rs. 43,96,952/- u/s. 69B of the act to the total income of the assessee as unrecorded investment. Aggrieved against the order of the assessing officer, the assessee preferred appeal before the ld. CIT(A) against the impugned disallowance made by the assessing officer. The ld. CIT(A) has allowed the appeal of the assessee on this issue. He found that assessee has borrowed money from the bank against hypothecation of stock and it was not a case of where the stock has been pledged. The material as per records demonstrate that the bank authority has not done any physical verification. The stock as per the audit report was the same which was reflected in the VAT return submitted to sale
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tax authorities. The ld. CIT(A) has also placed reliance on the judicial pronouncement of the hon’ble high court in the case of Riddhi steel and Tubes Ltd. (Tax Appeal No. 846 of 2013) wherein the hon’ble high court held that the stock statement given to bank was on estimate basis for availing higher loan facilities.
We have heard the Ld. DR and perused the material on record.
Respectfully following the supra decision of the hon’ble juri ictional high court , we uphold the decision of the ld. CIT(A). Therefore, the appeal of the Revenue is dismissed on this issue.
Unexplained cash credit u/s. 68 of the Act.
During the course of assessment proceedings, the assessing officer has noticed that the assessee has accepted share application money/unsecured loans from the following persons:- Sr. No Name of the persons Share application Unsecured money loans
1 Shri Kundan K Patel Rs. 15,00,000/- Rs. 10,70,000/-
Total Rs. 15,00,000/- Rs. 10,70,000/-
In order to verify the genuineness of the share application/unsecured loans, the assessee was asked to furnish the confirmation along with the source of the aforesaid investment. However, the assessee has I.T.A No. 1719/Ahd/2015 A.Y. 2011-12 Page No 4
failed to make any compliance to prove the identity credit worthiness and genuineness of the transactions. Thereafter, the assessing officer has issued show cause vide order sheet entry dated 05/12/2013 to which also the assessee has failed to make any compliance. The assesse has failed to even furnish the basic preliminary information like confirmation of the parties address and PAN etc. Consequently the assessing officer has made addition of Rs. 25,7000/- Unexplained share application Rs. 15,00000+ unexplained loans Rs. 10,70,000) as per the provisions of section 68 of the act. Aggrieved against the order of the assessing officer, the assessee has preferred appeal before the ld. CIT(A). The ld. CIT(A) has allowed the appeal of the assessee by observing as under:- “5.3 Decision: I have carefully considered the facts of the case, the assessment order and the written submission of the appellant. The AO has made an addition, as the appellant could not explain the credits appearing in the appellant's books of accounts in respect of Shri Kundan K. Patel. The appellant had accepted share application money as well as unsecured loan from the depositor. The appellant on the other hand has submitted that the credit entry was genuine. The AO did not give proper opportunity to furnish the evidences and the order was passed in hurry. The shareholder was agriculturist. He had filed Income Tax Return. He had a valid permanent account number. The amount received during the year was only Rs. 10.70 lakh and there was an opening balance in his account of Rs.5.25 lakh. Out of that amount, an amount of Rs. 50 lakh was transferred to the share capital account. The AO has, therefore, made double addition on account of share application money as well as the amount actually received during the year. On a careful consideration of the entire facts of the case, the submission given by the appellant as well as the remand report given by the AO, it is noted that the depositor is regularly assessed to tax. It has given the confirmation of the amount given and also accepted the same during the course of his statement recorded before the AO. The amount has been received through banking channel. The claim of the appellant that it has received only Rs. 10.70 lakh during the year from the Depositor's is also correct. The AO has in fact made double addition for the same amount. The amount given by the shareholder/depositor during the year also has duly been explained. In view of these facts, the appellant has duly discharged its onus of proving the genuineness of the deposit. It has explained the creditworthiness, identity and the genuineness of the deposit. The addition made by the AO is therefore, directed to be deleted. The ground of appeal is accordingly allowed.”
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Ld. departmental representative has vehemently contended that ld. CIT(A) has erred in deleting the addition on making wrong presumption that adequate opportunities were not provided to the assessee. He further contended that in spite of providing adequate opportunities, the assessing officer has not made any compliance during the course of assessment proceedings as a result the assessing officer could not verify the genuineness of the unexplained transaction.
We have heard the Ld. DR and perused the material on record. We observed that in spite of providing adequate opportunities at the time of assessment proceedings, the assesse has not furnished even the basis preliminary information like confirmation, PAN No. and the supporting evidences etc. to prove the genuineness of the transactions. We find from the record that the investment in the share capital of the assessee was made as a share capital amount of Rs. 1.25 lacs a at very high premium of Rs. 13.75 lacs. The ld. CIT(A) has deleted the addition on the ground that the shareholder was agriculturist and regularly assessed to tax. We observed that the ld. CIT(A) has not taken into consideration the complete facts of the case that the Sh. Kundan K. Patel had made investment in the share capital of Rs. 1.25 lacs at a premium of Rs. 13.75 lacs and the assessee has not made any compliance before the assessing officer during the course of assessment proceedings as a result the assessing officer could not make any verification to prove the genuineness of investment in the share capital at a huge premium of I.T.A No. 1719/Ahd/2015 A.Y. 2011-12 Page No 6
211 times the cost of the share price of the company. We observed that the Ld. CIT(A) has deleted the impugned additions simply stating that the amount has been received through banking channel. After perusal of these facts, we are of the considered opinion that the assessee has failed to furnish the basic information and complete facts before the assessing officer during the course of assessment proceedings as a result, the assessing officer could not verify the genuineness and correctness of the transactions of investment of share of Rs. 1.25 lacs at a premium of Rs. 13.75 lacs. In view of the above lacuna in proving the genuineness of transactions experienced by the assessing officer because of non compliance by the assessing, we considered that it will be appropriate in the interest of justice to restore this matter to the file of the assessing officer to decide it as a fresh after affording adequate opportunities to the assessee. Therefore, the appeal of the Revenue is allowed for statistical purposes on this issue.
In the result, the appeal of the Revenue is partly allowed for statistical purposes.
Order pronounced in the open court on 12 -10-2017 (S.S. GODARA) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 12/10/2017
I.T.A No. 1719/Ahd/2015 A.Y. 2011-12 Page No 7
आदेश क" ""त"ल"प अ"े"षत / Copy of Order Forwarded to:-
Assessee
Revenue
Concerned CIT
CIT (A)
DR, ITAT, Ahmedabad
Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील"य अ"धकरण, अहमदाबाद