2024 (8) TMI 1302 - HC - Income Tax

Addition u/s 68 - share capital/premium as unexplained cash credit - assessee has failed to prove the identity, creditworthiness of the subscribers and genuineness of the transaction - ITAT confirmed deletion of addition - HELD THAT - The share subscriber company was a holding company of the assessee company and both the companies were having common directors and that the share subscribing/holding company was interested in the business of the assessee. The nature of business activity was examined by the tribunal and noted that the assessee company had completed multiple pieces of land in the State of UP for developing a project in phases. The estimated cost of the project at the relevant point of time was Rs.300 crores. The assessee company had registered its project before the Real Estate Development Authority, U.P. The tribunal noted that the funds of the investing company and its creditworthiness has been duly considered and discussed by the CIT A in its order dated 22.7.2020. The entire share subscription amount was received by the tribunal from its holding company, i.e., IBIPL which in turn is promoted by Infinity Infotech Parks Limited and provided funds for execution of the project either by own or through subsidiaries. Tribunal also took note that the CIT A called for a remand report from assessing officer in respect of various details and evidence was submitted by the assessee and thereafter after considering the remand report the CIT A passed the order. Tribunal also took note of the decisions of this Court in the case of Anmol Stainless (P) Ltd. 2022 (2) TMI 649 - CALCUTTA HIGH COURT and ultimately dismissed the appeal. No substantial question of law arises.

Summary

Issues:
1. Whether the Income Tax Appellate Tribunal was justified in granting relief to the respondent assessee regarding the addition of unexplained cash credit under section 68 of the Income Tax Act.
2. Whether the Tribunal was justified in upholding the order of the Commissioner of Income Tax [Appeals] despite the non-appearance of directors of the respondent assessee for verification.

Analysis:

Issue 1:
The appeal was against the order passed by the Income Tax Appellate Tribunal regarding the addition of Rs. 17,61,40,800 as unexplained cash credit under section 68 of the Income Tax Act. The Revenue challenged the correctness of the tribunal's order, which dismissed the appeal filed by the Commissioner of Income Tax [Appeals]. The CIT[A] had deleted the addition made by the Assessing Officer, stating that the assessee failed to establish the identity, genuineness, and creditworthiness of the share subscribers. The tribunal and CIT[A] considered the fact that the share subscriber company was the holding company of the assessee, both having common directors and a shared interest in the business. The tribunal noted the nature of the business activity and the financial aspects of the investing company. The entire share subscription amount was received from the holding company, which provided funds for the project.

Issue 2:
The Tribunal examined the fact that none of the directors of the respondent assessee appeared in response to the notice issued under section 131 of the Income Tax Act for verification. However, the CIT[A] conducted a detailed fact-finding exercise, considered various decisions of the Courts, and called for a remand report from the assessing officer. The CIT[A] passed the order after considering the evidence submitted by the assessee. The Tribunal also referred to a decision of the Calcutta High Court in a similar case and ultimately dismissed the appeal, stating that no substantial question of law arose for consideration.

In conclusion, the High Court found no substantial question of law in the appeal and dismissed it based on the detailed analysis of the facts and legal aspects presented before the Tribunal and the Commissioner of Income Tax [Appeals].