TMI Blog2018 (9) TMI 1245X X X X Extracts X X X X X X X X Extracts X X X X ..... cogent evidences to substantiate that there is no income component in the said differential amount of ₹ 91, 09, 444/- which is liable to be chargeable to tax within mandate of the 1961 Act. The assessee and revenue erred in ignoring the mandate of the 1961 Act, which is supported by Article 265 of the Constitution of India to bring to tax correct income of the assessee. Under these peculiar facts and circumstances of the case, we are constraint to set aside and restore this issue back to the file of the AO for fresh determination of the issue on merits in accordance with law. We in exercise of powers u/s 254 of the 1961 Act direct AO to admit all necessary evidences and explanations which the assessee files before the AO in denovo assessment proceedings in its defence and thereafter adjudicate the same on merits in accordance with law despite the fact that no revised return of income was filed by the assessee . - I.T.A. No.3633 And 3634/Mum/2015 - - - Dated:- 19-9-2018 - SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Assessee : None For The Revenue : Shri. Manoj Kumar Singh, DR ORDER PER RAMIT KOCHAR, Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt proceedings for AY 1996-97 were underway with AO, survey action u/s. 133A of the 1961 Act was carried out by Revenue on 9. 12. 1998 wherein it was found that there was no manufacturing unit of assessee at Daman. A Search seizure action was also undertaken by revenue in the case of assessee on 27. 02. 1999 and 04. 03. 1999 . It was found by Revenue that the assessee has wrongly claimed deduction u/s. 80IA of ₹ 61, 01, 273/- which was earlier wrongly allowed by the AO. This was the main reason for reopening of the concluded assessment in the hands of the assessee for the impugned assessment year 1995-96 wherein notices u/s 148 of the 1961 Act were issued by the AO on 12. 03. 2001 which were duly served on assessee. The AO framed an assessment u/s. 143(3) r. w. s. 147 of the 1961 Act on 27. 03. 2002 assessing total income of the assessee at ₹ 2, 25, 30, 420/- wherein, inter-alia, deduction u/s. 80IA of ₹ 61, 01, 273/- was denied to the assessee as also an addition of ₹ 1, 00, 00, 000/- u/s 68 of the 1961 Act was made by the AO on account of unexplained share capital . The solitary issue in the appeal before us for AY 1995-96 is with respect to addition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rected the assessee company to get either copies of Balance Sheet, Capital Account or copy of bank statements reflecting the relevant transactions to prove creditworthiness . The assessee submitted that the assessee has duly discharged its initial burden by filing confirmatory letters along with addresses and PAN of the said share holders It was submitted by assessee that these shareholders are appearing in assessee‟s Balance Sheet for AY 2012-13 filed with Revenue and these parties do not have any record to prove their creditworthiness . It was stated the all payments towards Share Capital were received through cheque only. The AO after considering submissions of the assessee held that confirmation letters were filed by the shareholders who subscribed share capital of the assessee wherein these shareholders have confirmed to have subscribed to share capital of the assessee out of their own capital but as per the AO even if the identity of the shareholder stood proved, but genuineness and creditworthiness of the shareholders could not be proved by the assessee. The AO thus confirmed the additions in second round of litigation toward unexplained cash credit vide share subscrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3634/Mum/2015 6 2. 4 In the instant case, only confirmation has been received from the share holders that they have subscribed to the share capital of the company out of their own fund. Even though identity of the share holders is established, the genuineness and credit worthiness of the share holders are not established. In view of the same, the addition of ₹ 1 crore made by the AO is accordingly upheld. 8. Aggrieved by the appellate order dated 15-09-2014 passed by learned CIT(A) in second round of litigation, the assessee carried the matter in appeal before the tribunal and none appeared on behalf of the assessee when the appeal was called for hearing . The Ld. DR supported the order of the authorities below and strongly contended that assessee had not discharged burden u/s. 68 of the Act to prove creditworthiness and genuineness of the transaction of share subscription to the tune of ₹ 1, 00, 00, 000/- in the assessee company. 9. We have considered contentions of the Ld. DR and perused the material on record . We have observed that the assessee is engaged in the business of trading in cloth, manufacturing of yarn export of readymade garments. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 133(6) of the 1961 Act in second round of litigation by furnishing confirmations and other details such as PAN/GIR number etc and it is not the case of the Revenue that these share holders are not available. The directions as were issued by the tribunal in first round of litigation were not rituals or empty formalities to be undertaken by the AO but in our considered view, the AO was infact under an obligation to make effective enquiries with the sharesholders to come to the conclusion whether the said investments by the shareholders in the assessee company satisfy mandate of Section 68 of the Act . More than 17 years had expired since these amounts were invested by these share holders in the assessee company at the time of second round of litigation before the AO, still at the time when the AO conducted enquiries during second round of litigation all these share holders responded to the enquiries made by the AO u/s. 133(6) of the Act and confirmed to have invested these amounts in assessee company. These shareholders further confirmed to have invested these amounts by cheques out of their own capital . The assessee expressed inability to produce balance sheet, capital account or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g that the assessee has discharged its burden/onus as was cast u/s 68 of the 1961 Act with respect to share investment of ₹ 1, 00, 00, 000/- made in the assessee company . We order deletion of the additions as were made by the AO which was later sustained by Ld. CIT(A) by setting aside the appellate order of learned CIT(A) and the assessment order of the AO. The appeal of the assessee, therefore, is allowed. We order accordingly. 10. In the result, appeal of the assessee in ITA no. 3633/Mum/2015 for AY 1995-96 is allowed. ITA No. 3634/Mum/2015-AY1997-98 11. The second appeal in ITA no. 3634/Mum/2015 for AY 1997-98 is an assessee‟s appeal filed against an appellate order dated 15. 09. 2014 passed by learned CIT(A)-8, Mumbai. This is again second round of litigation before the tribunal wherein the solitary issue in this appeal is with respect to an unexplained income to the tune of ₹ 91, 09, 444/- found credited in the Reserve and Surplus Account in the assessee‟s audited Balance Sheet . The brief background is that assessee got two set of accounts audited from two different chartered accountants on the same day namely Sudhir M. Desai Co. and M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial year 1996-97 albeit as part of the previous year figures for financial year 1995-96 while the same was conspicuously missing in the audited accounts prepared for financial year 1995-96. Since the assessee failed to file revised return of income for AY 1997-98 correcting aforesaid errors, the AO refused to accept the explanations of the assessee keeping in view ratio of decision of Hon‟ble Supreme Court in the case of Goetze (India) Limited v. CIT (2006) 284 ITR 323(SC). The learned CIT(A) also dismissed the appeal of the assessee by affirming the stand of the AO. 12. Aggrieved by dismissal of appeal by learned CIT(A) in second round of litigation, the assessee has filed an appeal before the tribunal. None appeared for assessee while learned DR supported the orders of authorities below. 13. We have considered contentions of the learned DR and carefully perused the material on record. We have observed that the assessee on its part is giving explanation as to the justification of having two sets of audited financial statements for financial year 1996-97 mainly due to non availability of old chartered accountant at the time of filing of income-tax return so it en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee to bring on record cogent evidences to substantiate that there is no income component in the said differential amount of ₹ 91, 09, 444/- which is liable to be chargeable to tax within mandate of the 1961 Act. The assessee and revenue erred in ignoring the mandate of the 1961 Act, which is supported by Article 265 of the Constitution of India to bring to tax correct income of the assessee. Under these peculiar facts and circumstances of the case, we are constraint to set aside and restore this issue back to the file of the AO for fresh determination of the issue on merits in accordance with law. We in exercise of powers u/s 254 of the 1961 Act direct AO to admit all necessary evidences and explanations which the assessee files before the AO in denovo assessment proceedings in its defence and thereafter adjudicate the same on merits in accordance with law despite the fact that no revised return of income was filed by the assessee . Needless to say that proper and adequate opportunity of being heard shall be provided by the AO to the assessee in accordance with principles of natural justice in accordance with law. We order accordingly. 14. In the Result appeal of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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