2012 (5) TMI 103 - HC - Income Tax

Unexplained credits - Section 68 - Onus to be discharged Held that - amount invested by the share holder company is duly appearing in its audited balance sheets of various years as Investment in unquoted equity shares and such balance sheets were also signed by the directors of the said shareholder company including Mr. Anil Kumar Gupta. - assessees have proved the share capital with overwhelming evidence and there is no adverse legally admissible evidence in possession of Revenue. - Revenue has accepted that the investment has been made by Welcome Coir Industries Limited in the assessees which is evidence from the assessment orders of Welcome Coir Industries Limited placed in the paper book. - Decided against the revenue.

Summary

Issues:
Appeals by Revenue against ITAT judgment on various assessment years for two companies - M/s. LDK Share and Securities (P) Ltd., M/s. LDK Builders (P) Ltd.

Analysis:
The primary issue in the judgment pertains to the treatment of unexplained credits in the accounts of the assessee companies. The Assessing Officer had added certain deposits as unexplained loans based on the affidavit of a director from another company, alleging that the funds were routed through that company. The Commissioner of Income Tax (A) allowed the appeal, finding the deposits fully explained. The department then appealed to the Income Tax Appellate Tribunal (ITAT).

The ITAT dismissed the appeals by the department, confirming the First Appellate Authority's order. The department contended that the ITAT erred in not giving weight to the disputed affidavit. However, the High Court noted that the document in question was a letter and not a sworn affidavit, lacking essential legal elements. The assessee had requested cross-examination of the director who provided the letter but he did not appear, diminishing the evidentiary value of the document.

Another crucial aspect was the identification of the depositor, Welcome Coir Industries Ltd., which was a public limited company assessed for income tax. The assessee proved the identity of the depositors and the source of investment, with share certificates issued and funds transferred through account payee cheques. The High Court emphasized that the findings were based on evidence and not shown to be perverse or illegal.

The Tribunal's findings highlighted the substantial evidence supporting the genuineness of the transactions and investments made by Welcome Coir Industries Ltd. The balance sheets and investment details of the company corroborated the transactions with the assessee companies. The High Court concluded that the assessee had sufficiently demonstrated the source of funds and the legitimacy of the transactions, dismissing the appeals summarily as no substantial questions of law were identified.

In summary, the judgment addressed the treatment of unexplained credits, the evidentiary value of a disputed letter, and the sufficiency of evidence proving the legitimacy of transactions. The High Court upheld the ITAT decision, emphasizing the assessee's fulfillment of disclosure requirements and the lack of legal merit in the department's appeals.