9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (1) TMI 1224 - AT - Income TaxDeletion made u/s 68 of the Act Purchase of land from unsecured loans - Held that - The assessee stated that the company purchased land in earlier years with unsecured loans - During this assessment year, the assessee-company allotted shares with premium in support of which the Balance Sheet, Form 2 of allotment shares also submitted by the assessee before the AO also thus, there is no justice or substantial reason to add the share premium as unexplained cash credit u/s 68 of the Act - the CIT(A) was convinced with the details filed by the assessee-company and he was of the opinion that the addition made on this account is unjustified and illogical - The business of the assessee was set up and the AO recognized the same by accepting the return of income filed by the assessee- company and the assessments also completed for the A.Ys. 2007-08 and 2008-09 - The AO has not taken up any enquiry or verified and not gathered evidential proof to disallow these expenses thus, the additions made by the AO set aside. The Revenue authorities cannot question charging of premium unless there is a provision under the Income-tax Act, 1961 - The AO having examined the parties (creditors) u/s. 133(6) of the Act and found nothing adverse against the assessee to show that the assessee s own money flew back to the assessee to these three creditors as a conduit, the AO cannot question the raising of funds by the assessee-company - having cash/fund flow is important rather than having depreciable assets - even the provisions of section 56 are not applicable to the assessment year under consideration which came into effect only from 1.10.2009 i.e., relevant to the A.Y. 2010-11 thus, the CIT(A) has rightly deleted the addition made by the AO u/s. 68 of the Act Decided against Revenue. Nature of activity and expenditure Necessary for the purpose of carrying out business or not Held that - The assessee filed returns of income for A.Ys. 2007-08 and 2008-09 - The loss returned by the assessee for these assessment years was accepted in summary assessment - Being so, after accepting the return of income for A.Ys. 2007-08 and 2008-09, the AO cannot dispute the same figure in subsequent assessment year - Had the AO has any doubt regarding allowability of loss, first he should have questioned the same in earlier assessment year and not in the assessment year under consideration Relying upon Deccan Goldmines Ltd. vs. ACIT 2013 (11) TMI 185 - ITAT MUMBAI - thus, the AO is precluded in rejecting the claim of carried forward loss in the assessment year under consideration as the business was already set up the order of the CIT(A) upheld Decided against Revenue.
Issues Involved:
1. Low financial capacity of the companies providing share premium. 2. Allegations of the companies being suitcase companies or name-lenders. 3. Commencement of business activities by the assessee. 4. Allowability of business expenditure claimed by the assessee. 5. Treatment of share premium as unexplained cash credit under Section 68 of the Income-tax Act, 1961. Issue-wise Detailed Analysis: 1. Low Financial Capacity of Companies Providing Share Premium: The Revenue contended that the CIT(A) ignored the low financial capacity of Valley Distributors (P) Ltd., Churamani Housing Pvt. Ltd., and PNC Capital Markets Ltd., as evidenced by their profit and loss accounts and balance sheets. The CIT(A), however, observed that the assessee-company had provided sufficient evidence, including balance sheets, profit and loss accounts, and other documents, to demonstrate the genuineness of the transactions. The CIT(A) found no substantial reason to treat the share premium as unexplained cash credit under Section 68 of the Act. 2. Allegations of Companies Being Suitcase Companies or Name-Lenders: The Revenue argued that the companies providing the share premium appeared to be suitcase companies or name-lenders, as evidenced by incorrect or shared telephone numbers and lack of substantial assets. The CIT(A) noted that the AO did not provide valid reasons or logic for singling out these three companies while accepting others. The CIT(A) concluded that the AO's assessment was based on confusion and lack of proper enquiry, leading to the deletion of the addition. 3. Commencement of Business Activities by the Assessee: The AO disallowed the assessee's claim of loss on the grounds that the business had not commenced. The CIT(A), however, observed that the business was set up during the financial year 2006-07 and that the AO had accepted the returns for the assessment years 2007-08 and 2008-09. The CIT(A) concluded that the AO could not dispute the commencement of business in the subsequent assessment year without questioning it in the earlier years. 4. Allowability of Business Expenditure Claimed by the Assessee: The AO disallowed the business expenditure claimed by the assessee, arguing that the business had not commenced. The CIT(A) disagreed, noting that the business was set up in the earlier years and that the AO had accepted the returns for those years. The CIT(A) found no justification for disallowing the business expenditure and deleted the addition. 5. Treatment of Share Premium as Unexplained Cash Credit Under Section 68: The AO treated the share premium received from the three companies as unexplained cash credit under Section 68, arguing that the companies lacked the financial capacity to provide such funds. The CIT(A) observed that the assessee had provided sufficient evidence to demonstrate the genuineness of the transactions and that the AO had not conducted proper enquiries. The CIT(A) concluded that the addition was unjustified and deleted it. Conclusion: The Tribunal upheld the CIT(A)'s order, rejecting the Revenue's grounds of appeal. The Tribunal agreed that the CIT(A) had rightly deleted the addition made by the AO under Section 68 and allowed the business expenditure claimed by the assessee. The Tribunal emphasized that the AO had not provided substantial evidence to support the allegations against the companies providing the share premium and had not conducted proper enquiries. Consequently, the Revenue's appeal was dismissed.
|
