2015 (1) TMI 1160 - HC - Income Tax

Addition u/s 68 - unaccounted share capital and unsecured loans - ITAT deleted the addition - Held that - It is evident that the ITAT went into the record and held that there was a satisfactory explanation and consequently addition under Section 68 was unwarranted. Counsel for the revenue submitted that besides furnishing affidavit of the parties - so far as the inclusion of capital to the tune of ₹ 35 lakhs is concerned, there was nothing on the record to warrant deletion of the said amount. This Court notices that besides the affidavits, the particulars of the bank, the cheque numbers, the ledger account was furnished to the AO. Though this was in the course of remand proceedings, having regard to the bank accounts of the subscribers - who are concededly family members, and whose identities were ascertainable, the AO, failed to probe further. In these circumstances, this Court is of the opinion that considering the law declared in CIT V. Lovely Exports (P) Ltd. 2008 (1) TMI 575 - SUPREME COURT OF INDIA , the inference drawn by the AO, in the circumstances of the case to add back a sum of ₹ 35 lakhs under Section 68 was clearly not warranted. The question of law sought to be urged therefore does not arise. - Decided in favor of assessee.

Summary

Issues:
1. Substantial question of law regarding deletion of amount added back under Section 68 of the Income Tax Act by the assessing officer.
2. Permissibility of additional evidence under Rule 46A.
3. Justification for deletion of amounts under Section 68 by the ITAT.

Analysis:

1. The main issue in this case revolves around the deletion of an amount added back under Section 68 of the Income Tax Act by the assessing officer. The appellant contested the impugned order of the Income Tax Appellate Tribunal (ITAT) directing the deletion of a specific amount. The assessing officer had added back the amount after finding the explanation provided by the assessee unconvincing. The ITAT reviewed the case and concluded that there was a satisfactory explanation for the transactions, leading to the deletion of the added amount. The High Court, following the law declared in CIT V. Lovely Exports (P) Ltd., upheld the decision of the ITAT, stating that the addition under Section 68 was not warranted, given the evidence provided by the assessee.

2. Another issue addressed in this judgment is the permissibility of additional evidence under Rule 46A. The CIT(Appeals) initially disallowed the assessee's request to introduce additional evidence under Rule 46A. However, the ITAT found that the CIT(Appeals) erred in rejecting the request, especially considering the circumstances of the case. The ITAT also noted that a remand report had been sought from the assessing officer during the first appellate proceedings. The High Court acknowledged the importance of allowing additional evidence in certain situations, as seen in this case, where it played a crucial role in establishing the credibility of the transactions in question.

3. The justification for the deletion of amounts under Section 68 by the ITAT was thoroughly analyzed in the judgment. The ITAT examined the evidence provided by the assessee, including ledger accounts, bank certificates, and affidavits of the parties involved. The ITAT found that the assessee had sufficiently discharged the onus put upon them, leading to the deletion of the added amounts. The High Court concurred with the ITAT's decision, emphasizing the importance of thoroughly reviewing the evidence and considering the circumstances of the case before making additions under Section 68. The judgment highlights the significance of providing credible explanations and evidence to support transactions to avoid unwarranted additions by the assessing officer.