Unexplained Cash Addition u/s 69 Deleted by CIT(A) on Evidence of Source of Share Application Money: ITAT Remands Matter for Fresh Verification of Source [Read Order]

The Mumbai bench of Income Tax Appellate Tribunal (ITAT) remanded the matter relating to unexplained cash addition of Rs. 2.05 crore under Section 69 for fresh verification of the source of share application money to the AO. The tribunal upheld the revenue appeal.

The assessee Ellora Hitech Infra Venture Private Limited filed a return declaring income of Rs. 19,45,950/- for A.Y. 2012-13. The case was selected for scrutiny. During the course of assessment, the assessee company was seen to have acquired a parcel of land at a cost of Rs. 10,28,23,717/-. The AO noticed that out of the total consideration, a sum of Rs. 2,57,00,000/- was paid in cash to various sellers and, therefore, the assessee was directed to produce copy of the cash book from the period 01.04.2011 to 31.03.2012 for examination.

Since the cash book was not produced, the AO held the payment to the extent of Rs. 2,05,45,362/- as out of unexplained cash. Accordingly, an addition of Rs. 2,05,45,362/- was made under Section. 69 of the Act and the assessment was finalised at a total income of Rs. 2,06,91,314/- .

Aggrieved with the order of the AO, the assessee preferred an appeal before the CIT(A). During the course of appellate proceedings, it was contended by the assessee that the source of cash payment was the receipt of share application money in cash from one of the directors, Shri. Vijay Gajra furnished certain documents in support of its claim. The assessee also furnished additional evidence on which a remand report was sought from the AO by the CIT(A). However, despite several reminders, the remand report from the AO was not received, and, therefore, the CIT(A) allowed the assessee’s appeal.

Aggrieved with the order of the CIT(A), the revenue filed an appeal before the Tribunal on the ground that the assessee did not prove and establish the creditworthiness of the source from which the impugned amount in cash was received and, therefore, the. CIT(A) was not justified in granting relief to the assessee.

The revenue argued that since the assessee did not furnish the cash book despite specific directions, the AO had no option but to make the addition with regard to cash payment of consideration made for the purchase of land under Section. 69 of the Act. it was further argued that during the appellate proceedings, CIT(A) admitted the additional evidence filed the assessee. However, the same was not examined by the CIT(A) and simply because no remand report was received from the AO, relief was allowed to the assessee.

On the other hand, the assessee argued that all the requisite documents had been furnished before CIT(A), who had sought a remand report from the AO. Since no compliance was made by the AO during the appellate proceedings, CIT(A), after duly considering the assessee’s submission and documentary evidences, granted the relief and therefore his order deserves to be upheld.

The Tribunal observed that admittedly, the assessee did not furnish the cash book before the AO for verification of the receipt of cash and its source, despite a specific direction to do so. The additional evidence filed during the course of appellate proceedings also do not contain any explanation regarding the source of share capital money stated to have been received in cash from one of the directors, Shri Vijay Gajra.

The two-member bench comprising Kavita Rajagopal (Judicial Member) and Renu Jauhri (Accountant Member) opined that the issue had not been properly examined during the assessment proceedings or during the appellate proceedings. The Tribunal restored the issue to the AO for fresh consideration.

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