2017 (2) TMI 214 - AT - Income Tax

Unexplained cash credit addition u/s 68 - Held that - CIT(A) called for remand report from the Assessing Officer and the Assessing Officer vide letter dated 15.02.13 submitted the remand report after examining the copy of agreement between the assessee and TEMPPL which was taken over by the assessee and he has not disputed the genuineness of the transaction entered into by the assessee. There was no adverse comments by the Assessing Officer regarding these transactions. No infirmity in the order passed by the Ld. CIT(A) in accepting the transactions as genuine. In the remand proceedings also the Assessing Officer has not given any adverse comments on the transaction. The observations of the Ld. CIT(A) were not rebutted. Thus we sustain the order of the Ld. CIT(A) on this issue. - Decided against revenue Disallowance made towards direct expenses - addition u/s.40(a)(ia) - Held that - in the remand proceedings the Assessing Officer accepted that the assessee has filed the details in respect of the direct expenses of ₹ 53.21 crores and he has objected only to interest on loan of ₹ 39,75,165/- stating that it is an inadmissible amount under section 40(a)(ia) of the Act and the Ld. CIT(A) has restricted the disallowance to this amount. Thus, we do not find any infirmity in the order passed by the Ld. CIT(A) in restricting the disallowance to ₹ 39,75,165/- and deleting the balance disallowance.- Decided against revenue

Issues Involved:
1. Acceptance of additional evidence without recording reasons as per Rule 46A(2).
2. Acceptance of share swap allotment without a court order.
3. Acceptance of valuation of shares issued at a premium against debenture value.
4. Deletion of addition made on account of unexplained cash credit under Section 68.
5. Deletion of addition made on account of direct expenses under Section 37(1).

Detailed Analysis:

1. Acceptance of Additional Evidence Without Recording Reasons as per Rule 46A(2):
The Revenue contended that the Commissioner of Income Tax (Appeals) [CIT(A)] erred in accepting additional evidence without recording reasons as required by Rule 46A(2). However, this issue was not separately addressed in the detailed judgment, implying that the Tribunal did not find it necessary to delve into this procedural aspect, possibly due to the resolution of substantive issues.

2. Acceptance of Share Swap Allotment Without a Court Order:
The Revenue argued that the CIT(A) erred in accepting the share swap allotment without any court order. The judgment does not provide a detailed discussion on this specific issue, suggesting that it was subsumed under the broader evaluation of the genuineness of the transaction related to the increase in share capital/share premium.

3. Acceptance of Valuation of Shares Issued at a Premium Against Debenture Value:
The valuation of shares issued at a premium against the debenture value was questioned by the Revenue. However, the Tribunal upheld the CIT(A)'s acceptance of the share valuation, as the CIT(A) had relied on the remand report from the Assessing Officer (AO), which did not dispute the genuineness of the transaction after verifying the necessary documents.

4. Deletion of Addition Made on Account of Unexplained Cash Credit Under Section 68:
The primary issue was the deletion of the addition made on account of unexplained cash credit under Section 68. The AO had added ?29,39,40,000/- as unexplained cash credit, treating the increase in share capital/share premium as unexplained due to the assessee's failure to provide complete details. However, the CIT(A) deleted this addition after calling for a remand report from the AO. The AO, in the remand report, did not dispute the genuineness of the transaction after examining the agreement and other supporting documents. The Tribunal upheld the CIT(A)'s decision, noting that the AO did not provide any adverse comments during the remand proceedings, and the CIT(A)'s observations were not rebutted.

5. Deletion of Addition Made on Account of Direct Expenses Under Section 37(1):
The AO had disallowed ?10,69,23,945/- out of direct expenses of ?53,21,19,723/- on an ad hoc basis due to the assessee's failure to provide complete details and supporting documents. The CIT(A), after calling for a remand report, restricted the disallowance to ?39,75,165/-, which was the interest on loan deemed inadmissible under Section 40(a)(ia) for non-deduction of TDS. The Tribunal found no infirmity in the CIT(A)'s order, noting that the AO had accepted the details of direct expenses except for the interest on loan, and upheld the restriction of disallowance to ?39,75,165/-.

Conclusion:
The Tribunal dismissed the Revenue's appeal, sustaining the CIT(A)'s decisions on all issues. The Tribunal found that the CIT(A) had appropriately considered the remand report and supporting documents, and the AO did not provide any adverse comments during the remand proceedings. The Tribunal upheld the deletion of additions made under Sections 68 and 37(1), finding no infirmity in the CIT(A)'s order.

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