2022 (7) TMI 1269 - HC - Income Tax

Addition u/s 68 - genuineness of transaction, creditworthiness of the company, nature and source of such sum so credited to the assessee s account not provided - Tribunal justification on upholding the deletion - HELD THAT - True nature of a transaction has to be ascertained in the light of the surrounding circumstances and by applying the test of human probabilities. On going through the order passed by the Tribunal, we find that no independent finding has been recorded by the Tribunal as to how the Tribunal was satisfied that the findings recorded by the CIT(A) do not call for any interference. There is nothing on record to indicate that any concession was permitted by the revenue to be made before the Tribunal. Considering the fact that the revenue has been contesting the matter, in our view, the learned Tribunal being the last fact finding authority, in the fitness of things, should record reasons to support its conclusion. Since we find such course having not been adopted by the learned Tribunal, we are inclined to interfere with the order passed by the learned Tribunal and remand the matter back to the learned Tribunal for fresh consideration.

Summary

Issues:
1. Whether the explanation offered by the assessee regarding share application and unsecured loan was satisfactory under section 68 of the Income Tax Act?
2. Whether the Tribunal was justified in upholding the deletion of share application money and unsecured loan?

Analysis:
1. The appeal pertained to the revenue challenging the Tribunal's order regarding the assessment year 2012-13. The assessing officer had raised concerns about the genuineness of transactions related to share application money and unsecured loans. The assessing officer treated these amounts as unexplained cash credits under Section 68 of the Act and added them to the assessee's income. The CIT(A) later allowed the appeal, leading to the revenue's appeal before the Tribunal.

2. The Tribunal, in its order, did not provide independent reasons for agreeing with the CIT(A)'s findings. The revenue contended that the Tribunal failed to assign reasons for supporting the CIT(A)'s decision and did not allow concessions from the revenue's side. The revenue highlighted the assessing officer's findings on the use of shell companies to route unaccounted money and the unsatisfactory nature of the assessee's explanation. Citing relevant case law, the revenue argued that unless the assessing officer's opinion was entirely wrong, the order should not have been interfered with.

3. The High Court observed that the Tribunal did not record independent findings or reasons to support its conclusion in favor of the CIT(A)'s decision. Given that the revenue contested the matter, the Court believed the Tribunal should have provided reasons for its decision. As the Tribunal failed to do so, the High Court decided to interfere with the Tribunal's order and remanded the matter back for fresh consideration.

4. Consequently, the High Court allowed the revenue's appeal, setting aside the Tribunal's order and remanding the case for fresh consideration. The Court directed the Tribunal to decide the case afresh on merits and in accordance with the law, ensuring a reasoned order after providing an opportunity for both the revenue and the assessee to be heard. The substantial questions of law were left open, and the application for stay was closed.