2016 (5) TMI 461 - AT - Income Tax

Addition made on account of redeemable preference share capital - CIT(A) deleted the addition - Held that - CIT(A) recorded a categorical finding to the effect that amount payable and receivable by the assessee was squared off which was in accordance with the provisions of Companies Act. Further finding was recorded to the effect that these companies were assessed with I.T. Department for several years. The identity and genuineness of the transaction was duly accepted. The detailed finding recorded by CIT(A) are as per material on record. Moreover the issue is also covered by the decision of the coordinate bench in the case of Sinhal Products (P) Ltd. 2012 (3) TMI 523 - ITAT DELHI wherein under similar facts and circumstances, the Tribunal has held that the assessee has discharged its initial onus to prove the identity, creditworthiness and genuineness of the transaction. We also found that it is not a case where department has received any information with regard to the fact that the share application were bogus entry or it is in the shape of accommodation entry. The share application is by the associate concern of the assessee which is also assessed with IT Department. Respectfully following the decision of coordinate bench vis- -vis finding recorded by CIT(A), we do not find any reason to interfere in the order of CIT(A) resulting into deletion of addition - Decided in favour of assessee Addition on account of loan taken from M/s Akhil Marketing Pvt. Ltd. - Held that -Transactions are duly recorded in the audited account of M/s Akhil Marketing Pvt. Ltd., which is also assessed to tax. We found that as on 31-3-2007 the party has shown advance of ₹ 6.29 crores including to the assessee also. ₹ 12.55 lakhs was payable as lease. The CIT(A) has recorded a categorical finding on the basis of material placed on record to the effect that all the three conditions regarding identity, creditworthiness and genuineness of the loan creditors were duly established. Since the findings are as per material on record, we do not find any reason to interfere in the findings so recorded by CIT(A).- Decided in favour of assessee

Summary

Issues:
1. Addition made on account of redeemable preference share capital.
2. Addition made on account of loan taken from M/s Akhil Marketing Pvt. Ltd.

Analysis:

Issue 1: Addition made on account of redeemable preference share capital

The appeal filed by the revenue was against the order of CIT(A), Mumbai, for the assessment year 2007-08, regarding the addition made on account of redeemable preference share capital of ?14 crores. The AO observed an increase in share capital by ?14 crores, received from three parties. The AO concluded that the transactions were not genuine, parties lacked creditworthiness, and the companies were merely on paper without any business. However, the CIT(A) deleted the addition, noting that the companies had subscribed to redeemable preference shares of the appellant company, and the amount payable and receivable was squared off in accordance with the Companies Act. The CIT(A) accepted the identity and genuineness of the transaction, leading to the deletion of the ?14 crores addition.

Issue 2: Addition made on account of loan taken from M/s Akhil Marketing Pvt. Ltd.

The AO had added ?1,01,39,592/- as unexplained cash credit due to a loan taken from M/s Akhil Marketing Pvt. Ltd. The AO considered the transaction as an unsecured loan based on the company's financial details. However, the CIT(A) deleted this addition, stating that the transactions were reflected in the audited accounts of M/s Akhil Marketing Pvt. Ltd., who was assessed for tax. The CIT(A) found that the identity, genuineness, and creditworthiness of the party were proven, leading to the deletion of the ?1,01,39,592/- addition. The appellate tribunal upheld the CIT(A)'s decision, citing similar findings in a previous case and the evidence presented by the assessee.

In conclusion, both additions made by the AO were deleted by the CIT(A) and upheld by the appellate tribunal based on the evidence provided, compliance with legal provisions, and the established identity, creditworthiness, and genuineness of the transactions. The judgments were in line with previous decisions and legal principles, resulting in the dismissal of the revenue's appeal.