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INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘D’, NEW DELHI
Case Law: ORDER
PER J.SUDHAKAR REDDY, A.M. 2. Facts in brief:- The assessee is a company and is in the business of leasing, finance and investments. It belongs to the Minda Group of Companies. For the A.Y. 2004-05, it filed a return of income on 30.7.2004 declaring total income of Rs.45,57,170/-. The A.O. passed an order u/s 143(3) of the Income Tax Act 1961 (the Act) on 28.12.2006, assessing the total income at Rs.4,01,36,258/- inter alia making an addition u/s 14A as well as u/s 68 of the Act. 2.1. The assessee has received share application money of Rs.3,50,88,000/- (i.e. Rs.3,51,00,000 (-) 12,000/- refund) with premium from 54 companies. The A.O. has given details in his order. When asked to substantiate the genuineness of this share application money, the assessee filed certain details such as copies of confirmation from the companies, Pan details, evidence of filing of income tax returns by these companies and copies of bank statements of the share applicants. The AO at page 4 observed the following defects/deficiencies in the evidences filed.
1. Verification affidavits do not bear the date and month; 2.2. He conducted local enquiries through Inspector. The Inspector’s Report is given at pages 5 to 8 of the paper book. The sum and substance of which is that:
(a) The premises of these companies are locked; “The modus operandi of the assessee to manage share application money of Rs.3,51,000/- is same. Cash is handed over by the assessee to the accommodation entry providers, who deposited in bank accounts of the persons/firms being operated by them and from those accounts, the money is transferred to the bank accounts of the companies who used to provide or issue cheques/DD or pay order in favour of the beneficiaries. It is very much clear from the above that the money received by the assessee company by way of share application money, is its own money but rooted through the bank accounts of various persons/firms/companies.” 2.3. Thereafter the AO referred to the information received from DIT (Investigations), New Delhi and the statements of the alleged Directors of these companies recorded u/s 131 of the Act in the month of April, 2005 by Addl.DIT (Investigation), New Delhi, wherein they had admitted that they are not men of means and were providing accommodation entries on commission basis. Thereafter, he placed reliance on a number of case laws and came to conclusion that the amount of Rs.3,50,88,000/- are unexplained cash credits appearing in the books of accounts. He made an addition u/s 68 of the Act. 3. On appeal the First Appellate Authority deleted the same. 4. Aggrieved the Revenue is in appeal before us on the following grounds. “1. The order of the learned CIT(Appeals) is erroneous & contrary to facts and law. 2. On the facts and in the circumstances of the case, the learned CIT(Appeals) has erred in deleting addition of Rs.3,50,88,000/- - made u/s 68 of the I.T. Act, 1961 in respect of share application money ignoring –
a) that the assessee company has miserably failed to explain the amount introduced and apart from the identity, the genuineness and creditworthiness of the involved entities remained to be proved. 3. The learned CIT(Appeals) has erred In deleting addition U/S 14A of Rs.4,89,587/- notwithstanding –
a) that due to non-furnishing of any details by assessee attributable to earning of exempt dividend income, the Assessing Officer was left with no other alternative except to work out the proportionate disallowable expenses relatable to the earning of dividend Income. 4. The appellant craves leave to add, to alter, or amend any grounds of the appeal raised above at the time of hearing.” 5. We have heard Shri Pradeep Dinodia, the Ld.Counsel for the assessee and Shri R.S.Negi, the Ld.Sr.D.R. on behalf of the Revenue. On a careful consideration of the facts and circumstances of the case, perusal of material on record, orders of lower authorities, case laws cited, we hold as follows. 6. The Ld.CIT(A) in this case has deleted the addition on the sole ground that the identity of the share applicants has been established. On the contentions of the assessee that he was not confronted with the Inspector’s Report, the Ld.CIT(A) provided the report to the assessee and obtained his comments. Regarding statements and information obtained by the A.O. from the ADIT (Investigation) and which was used against the assessee, the Ld.CIT(A) held that no opportunity was given to the assessee to examine the witness or rebut the material gathered from the investors etc. and hence the same cannot be used against the assessee. 7. We observe that in the case of ITO vs. M.Pirai Choodi (2011) reported in 334 ITR 262 (SC) it was held that denial of opportunity to cross examine the witness by itself could not vitiate the assessment proceedings especially when the assessee has not asked for the same. In this case the assessee had not asked for cross examination of the witnesses. Hence the ground of the Ld.CIT(A) on this issue is bad in law. 8. In our view, certain investigations have been done by the A.O. Evidences have been gathered by the A.O. in support of the addition made by him. The deletion by the Ld.CIT(A) of this addition, on the ground that these evidences were not confronted to the assessee, was not proper. When the inspection report can be put to the assessee by the Ld.CIT(A), other evidences should have also been put to the assessee by the Ld.CIT(A). The assessee contends that all the information and material obtained by the A.O. has to be put to him before coming to a conclusion. He further contends that the assessee has furnished whatever material it could, and as considerable time has elapsed no further burden should be put on the assessee to furnish any further evidences. We find force in these submissions of the assessee. The A.O. in our view should not put further burden on the assessee. 9. In view of the above discussion, we are of the considered opinion that this case should be set aside to the file of the AO for fresh adjudication. We issue the following directions to be followed by the A.O.
(a) The assessee should be confronted with the information and material based on which the AO made this addition and there after pass a speaking order after considering the contentions of the assessee. 9.1. In short the AO should confront the assessee with all the material and information which are in his possession and, which he proposes to use against the assessee. 9.2. In the result this ground against addition u/s 68 of the Act is set aside to the A.O. for fresh adjudication and in accordance with law. 9.3. As far as disallowance u/s 14A of the Act is concerned, after considering rival submissions, as the Ld.D.R. could not controvert the finding of the Ld.CIT(A), we agree with the finding of fact given by the Ld.CIT(A) that no part of interest expenditure can be disallowed u/s 14A of the Act. As regards administrative expenses u/s 14A, we are of the opinion that disallowance of Rs.1 lakh on adhoc basis would meet the interest of justice. 10. In the result assessee’s appeal is partly allowed. Order pronounced in the Open Court on 29th January, 2016.
(KULDIP SINGH) (J.SUDHAKAR REDDY)
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