2023 (1) TMI 408 - AT - Income Tax

Addition u/s 68 - creditworthiness of the transactions not proved - summon issued u/s 131 to director in the assessee company as well as the 12 allottee companies - CIT-A deleted the addition - HELD THAT - It is an admitted fact that Shri Sudhir Satnaliwala is a director common in the assessee company as well as the 12 allottee companies along with other family members. He appeared before the Ld. AO in response to summon issued u/s 131 of the Act and complied with all the required details and documentation. Assessment of Shri Sudhir Satnaliwala for AY 2012-13 has been completed without any adverse observation and addition, u/s 143(3) of the Act. Financial statements of Shri Sudhir Satnaliwala were on record which has been accepted in his assessment wherein transaction relating to taking of secured loans from HDFC Bank and Aditya Birla Finance Ltd and giving of security deposits to the 12 allottee companies for securing the lease arrangement in respect of 12 dwelling units from the 12 allottee companies, has been duly reported. We also note that in the paper book all the documents pertaining to share capital transaction with all the 12 allottee companies are placed on record. Thus investment made by the 12 allottee companies has been duly established with corroborative evidence is on record, more particularly when the concerned Assessing Officer in the assessment order of Shri Sudhir Satnaliwala (common director for all) passed under section 143(3) of the Act, has accepted the same, we do not find any reason to interfere with the facts-based finding given by the Ld. CIT(A). Appeal of the Revenue is dismissed.

Summary

Issues:
1. Addition made by the AO under section 68 of the Income Tax Act, 1961.
2. Acceptance of additional evidence during appeal without a remand report.

Analysis:

Issue 1:
The appeal filed by the revenue challenged the deletion of an addition made by the Assessing Officer (AO) under section 68 of the Income Tax Act, 1961. The case involved the issuance of shares by the assessee with a premium, totaling a significant amount. The AO raised concerns about the genuineness of the transactions, creditworthiness, and the justification for the premium. The AO treated the share capital and premium as unexplained income under section 68. However, the CIT(A) noted that the transactions were conducted through banking channels and were duly disclosed. The CIT(A) found that the source of funds was legitimate, as corroborated by the financial statements of the common director involved. The CIT(A) allowed the appeal of the assessee based on the established facts and evidence, leading to the revenue's appeal before the Tribunal.

Issue 2:
The second ground of appeal raised by the revenue questioned the acceptance of additional evidence during the appeal without a remand report from the AO and without providing an opportunity under Rule 46A. The Tribunal considered the submissions made by both parties and examined the material on record. It noted that the common director had complied with the summons issued by the AO and that the financial statements supported the transactions in question. The Tribunal found that the evidence presented by the assessee, including documents related to the share transactions, was sufficient to establish the legitimacy of the source of funds. Given the factual matrix of the case and the acceptance of similar transactions in the director's assessment for a previous year, the Tribunal dismissed the revenue's grounds and upheld the CIT(A)'s decision.

In conclusion, the Tribunal dismissed the appeal of the revenue, emphasizing the established facts and evidence supporting the legitimacy of the transactions in question. The judgment highlighted the importance of corroborative evidence and the acceptance of transactions in previous assessments as key factors in determining the validity of the share capital raised by the assessee.