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2018 (10) TMI 732 - AT - Income Tax


Issues Involved:
1. Addition of ?100 crores under Section 68 of the Income Tax Act, 1961.
2. Disallowance under Section 14A read with Rule 8D of the Income Tax Rules, 1962.
3. Admission of additional ground of appeal regarding precedence of assessment order under Section 153C/153A over the impugned order under Section 143(3).

Issue-wise Detailed Analysis:

1. Addition of ?100 Crores under Section 68 of the Income Tax Act, 1961:

The assessee-company filed a return declaring an income of ?19,92,354/- for the assessment year 2008-2009. During the scrutiny, it was found that the assessee had increased its share capital from ?3,02,09,000/- to ?13,02,09,000/- and received a share premium amounting to ?90,00,00,000/-, totaling ?100 crores. The assessee provided a list of shareholders and various documents to prove the identity, creditworthiness, and genuineness of the transactions. However, the Assessing Officer (A.O.) found discrepancies in the bank accounts and the functioning of the shareholder companies, leading to the conclusion that the transactions were sham and added the entire amount to the income under Section 68.

The CIT(A) upheld the addition, noting nominal profits and frequent changes in the directors of the shareholder companies, which indicated non-genuine activities. The assessee's inability to produce shareholders and the Inspector's adverse report further supported this conclusion.

The Tribunal admitted an additional ground of appeal regarding the precedence of the assessment order under Section 153C/153A over the impugned order under Section 143(3). The Tribunal set aside the orders of the authorities below and restored the matter to the A.O. for fresh adjudication, emphasizing the need to confront the assessee with all adverse materials and to consider all documentary evidence in detail.

2. Disallowance under Section 14A read with Rule 8D of the Income Tax Rules, 1962:

The A.O. disallowed ?22,74,040/- under Section 14A read with Rule 8D, as the assessee earned a dividend income of ?590/-. The CIT(A) upheld the disallowance in principle but reduced it to 1/3rd of the expenditure claimed, amounting to ?5,27,32,100/-.

The Tribunal, referring to the Delhi High Court's decision in Joint Investment Pvt. Ltd. vs. CIT, held that the disallowance under Section 14A should not exceed the exempt dividend income of ?590/-. Consequently, the Tribunal restricted the disallowance to ?590/- and partly allowed this ground of appeal.

3. Admission of Additional Ground of Appeal:

The assessee filed an additional ground of appeal, arguing that the assessment order under Section 153C/153A should take precedence over the impugned order under Section 143(3). The Tribunal admitted this additional ground, citing the Supreme Court's decision in National Thermal Power Co. Ltd. vs. CIT, which allows raising new legal grounds if they are necessary to assess the correct tax liability.

The Tribunal found that the additional ground was supported by the Delhi High Court's decision in CIT vs. Anil Kumar Bhatia, which stated that only one assessment order should be passed for each assessment year, including both disclosed and undisclosed income. The Tribunal set aside the orders of the authorities below and restored the additional ground to the A.O. for fresh adjudication.

Conclusion:

The Tribunal partly allowed the appeal, setting aside the orders of the authorities below on the addition of ?100 crores under Section 68 and the disallowance under Section 14A, and restored the matters to the A.O. for fresh adjudication. The Tribunal also admitted the additional ground of appeal regarding the precedence of the assessment order under Section 153C/153A and directed the A.O. to decide this issue in accordance with the law.

 

 

 

 

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