2024 (4) TMI 747 - HC - Income Tax

Unexplained credit u/s 68 - unexplained bogus share applications - HELD HAT - As observed once the respondent-Company furnished all the relevant and requisite documents, and in the assessment order, there is nothing which could show that the respondent-Company introduced its own income from undisclosed sources in the form of shares; the assessment order was passed only on the basis of suspicion and doubt, which is not permissible under the law, as has rightly been held by the learned CIT in its order, which in turn has rightly been upheld by the Appellate Tribunal vide the impugned order. CIT as well as Appellate Tribunal have rightly ordered deletion of the above-said amounts, because the respondent-Company had furnished all the required the details, and further held that it cannot be said to be an unexplained credit under Section 68 of the Act of 1961. Therefore, the impugned order passed by the Appellate Tribunal is justified in law. Disallowance of various expenses - The said disallowing is on a higher side and the same was considered by the learned CIT, and that the disallowance was restricted to Rs. 75,000/- and the respondent-Company got the relief of Rs. 75,000/-, which is completely justified in law. Disallowance of employees contribution to ESI - CIT directed the AO to verify the contention of the respondent-Company that the employees contribution towards PF and ESI was deposited on or before the due date of filing the return u/s 139 (1) the same was upheld by the learned Appellate Tribunal. Therefore, now the same does not require any reconsideration by this Court. This Court further observes that there are concurrent findings arrived at by the learned CIT as well as learned Appellate Tribunal, which are well reasoned and have been arrived at after taking into due consideration the overall facts and circumstances of the case and upon duly analyzing the material available on record before them. This Court does not find it a fit case so as to grant any relief to the appellant in the present appeal. This Court does not find it a fit case so as to grant any relief to the appellant in the present appeal.

Summary

Issues involved:
The issues involved in the judgment are related to the assessment of income tax, scrutiny of share capital raised by the respondent-Company, addition of unexplained income, disallowance of expenses, and employees' contribution towards ESI.

Assessment of Income Tax:
The respondent-Company filed its e-return declaring a total income, which was later assessed by the Income Tax Department. The Department issued an Assessment Order assessing the total income, including additions and disallowances, leading to penalty proceedings. The respondent-Company appealed against this assessment, which was partly allowed by the CIT. Subsequently, the Department's appeal to the Appellate Tribunal was dismissed.

Scrutiny of Share Capital:
The respondent-Company raised its share capital by allotment of equity shares to 11 companies. The Department found discrepancies in the details provided by the respondent-Company regarding these companies. This led to the issuance of the Assessment Order, which included additions to the total income. The CIT partly allowed the appeal by quashing certain additions made by the Assessing Officer.

Addition of Unexplained Income:
The Assessing Officer made additions to the total income of the respondent-Company based on unexplained credits, expenses, and loans. The CIT partly allowed the appeal by deleting certain additions, stating that the respondent-Company had furnished necessary documents to prove the identity and creditworthiness of the investors. The Appellate Tribunal upheld this decision.

Disallowance of Expenses and ESI Contribution:
The Assessment Order included disallowances of expenses and employees' contribution towards ESI. The CIT restricted the disallowance of expenses and directed verification of the ESI contribution by the Assessment Officer. The Appellate Tribunal upheld these decisions, stating that the respondent-Company had provided sufficient evidence to support these expenses.

Conclusion:
The High Court observed that the respondent-Company had provided all necessary documents to prove the legitimacy of the share capital raised and expenses incurred. The Court noted that the decisions of the CIT and Appellate Tribunal were well reasoned and based on a thorough analysis of the facts. Therefore, the Court found no grounds to grant relief to the appellant in the present appeal.