2013 (4) TMI 13 - HC - Income Tax

Deletion of additions on account of unex-plained share capital, unexplained share application money, unexplained sundry creditors, difference in the cost of construction being unexplained investment, FDRs purchased by the company, loading and unloading and salary expenses. Held that - the Commissioner of Income-tax (Appeals) and the Tribunal find that the assessee had produced relevant evidence before the Commissioner of Income-tax (Appeals) establishing that all the persons, who had deposited the share application, were not fictitious persons. Most of them were identifiable ; they made the payment by cheques and most of them were assessed to income-tax. The Tribunal has given further relief to the asses-see and has not accepted the argument of the Department that the expla-nation furnished by the assessee for the addition under section 69 on account of the unexplained investment was not to the satisfaction of the Assessing Officer. - Revenue s appeal dismissed - decided in favor of assessee. Regarding charging of interest - held that - Even if any provision of law is mandatory and provides for charging of tax or interest, the view taken in Ranchi Club Ltd. 2000 (8) TMI 79 - SUPREME COURT is that such charge by the Assessing Officer should be specific and clear and the assessee must be made to know that the Assessing Officer has applied his mind and has ordered charging of interest. The mandatory nature of charging of interest and the actual charging of interest by application of mind and the mention of the proviso of law under which such interest is charged are two different things. - Decided in favor of assessee.

Summary

Issues:
1. Appeal against the order dated May 31, 2001, passed by the Income-tax Appellate Tribunal for the assessment year 1988-89.
2. Deletion of additions made by the Assessing Officer regarding unexplained share capital and share application money.
3. Charging of interest under section 215/217 of the Income-tax Act, 1961.

Analysis:
1. The case involved an Income-tax Appeal under section 260A of the Income-tax Act, 1961, against the order of the Income-tax Appellate Tribunal for the assessment year 1988-89. The appellant, a company engaged in running a cold storage, had additions made by the Assessing Officer which were partially deleted by the Commissioner of Income-tax (Appeals). The Tribunal partly allowed the appeals of both the Department and the assessee. The substantial questions of law for this appeal focused on the correctness of deleting additions related to unexplained share capital and share application money, as well as the charging of interest under specific provisions of the Act.

2. The Tribunal, after reviewing the evidence produced by the assessee, found that the share application details were not fictitious and most depositors were identifiable individuals who had paid through cheques and were assessed to income tax. The Tribunal granted further relief to the assessee, disagreeing with the Department's argument on the unexplained investment. Citing relevant case law, including the Supreme Court's decision in Steller Investment, the Tribunal ruled in favor of the assessee regarding the share capital and application money additions.

3. Regarding the charging of interest under sections 215/217 of the Income-tax Act, the Tribunal noted that the Assessing Officer had not made a specific order regarding interest but only mentioned to "charge interest as per the Rules." Relying on precedents like CIT v. Ranchi Club Ltd., the Tribunal found that a specific and clear order for charging interest is necessary, and the mere mention in the order is insufficient. The court's decision aligned with previous judgments emphasizing the importance of a clear and specific directive from the Assessing Officer for charging interest.

4. The judgment referenced various legal precedents, including the Supreme Court's decisions in Steller Investment and Lovely Exports, to support the conclusions reached by the Tribunal. The court upheld the Tribunal's decisions on both issues raised in the appeal, ultimately dismissing the income-tax appeal against the order of the Tribunal for the assessment year in question.