2017 (5) TMI 785 - HC - Income Tax

Addition u/s 68 - Held that - AO has made no additions under Section 68 of the Act even in the case of Rapid Packaging Ltd. which is one more of the conduit companies like the Assessee herein. - Decided in favour of assessee.

Summary

Issues involved:
Appeal by Revenue under Section 260A of the Income Tax Act, 1961 against ITAT order for AY 2008-09; Interpretation of Section 68 of the Income Tax Act; Comparison of different ITAT orders regarding conduit companies; Assessment of return income by AO in the case of Rapid Packaging Ltd; Deletion of additions under Section 68 of the Act by ITAT in the case at hand.

Analysis:

1. The appeal before the High Court was filed by the Revenue under Section 260A of the Income Tax Act, 1961, challenging the ITAT's order for the Assessment Year 2008-09. The main question of law framed was whether the findings of the ITAT regarding the inapplicability of Section 68 of the Income Tax Act were justified and sustainable.

2. The Respondent Assessee relied on a previous order by the High Court in a similar case involving Mr. S. K. Gupta and conduit companies, where it was held that the conduit companies were not the beneficiaries of accommodation entries. This decision was followed in subsequent cases involving conduit companies like Vijay Conductors Pvt. Ltd. and Omni Farms Pvt. Ltd.

3. However, a different bench of the ITAT made a departure in the case of Rapid Packaging Ltd., remanding the matter to the Assessing Officer to verify disclosures made by Mr. S. K. Gupta. In the present case, the ITAT followed its earlier decision and deleted the additions made by the AO under Section 68 of the Act.

4. The Revenue's argument was based on the ITAT's order in the case of Rapid Packaging Ltd., where the AO assessed the return income without making any additions under Section 68 of the Act. The High Court found no reason to interfere with the ITAT's decision in the present case, as the treatment of the conduit companies was consistent.

5. Consequently, the High Court dismissed the appeal, affirming the ITAT's decision to delete the additions under Section 68 of the Act in the case at hand, in line with the treatment of similar cases involving conduit companies.