2016 (9) TMI 66 - HC - Income Tax

Addition on account of unexplained credit to the capital account of the assessee - Held that - The sources of receipts are reasonably explained by the assessee. There is no dispute that the money was received, through banking channels, from Dubai and even the source of funds in Dubai has been explained and stands accepted. There is no basis for seeking to tax the same income again in the hands of the assessee. Under these circumstances, we are not inclined to disturb very well reasoned conclusions arrived at by the learned CIT (A) and ITAT. No specific infirmities have been pointed out in the reasoning and analysis of learned CIT(A). Learned Departmental Representative seeks an opportunity to examine all these factors, and, for that purpose prays for restoration of matter to the file of the assessing officer. It can thus be seen that concurrently the CIT (Appeals) and the Tribunal came to the conclusion that the amount in question was already taxed before the Settlement Commission in the declarations made by the group companies. We see no reason to interfere - Decided against revenue

Summary

Issues:
Appeal against deletion of addition of unexplained credit to the capital account.

Analysis:
The Revenue appealed against the Income Tax Appellate Tribunal's judgment questioning the deletion of an addition of ?1,76,71,570 on account of unexplained credit to the assessee's capital account. The Assessing Officer wanted to tax this amount, which was already offered to tax by group companies before the Settlement Commission and accepted. The Revenue contended that the amount was directly introduced into the capital account without routing through the Profit & Loss account. The Commissioner noted that the Assessing Officer failed to provide reasons for taxing the amount in the assessee's hands based on accrual or receipt principles. The CIT (Appeals) observed that the undisclosed income from Dubai was declared before the Settlement Commission and taxes were paid by the business concerns. The Tribunal confirmed the CIT (Appeals) decision, stating that the sources of receipts were explained, and there was no basis for taxing the income again in the assessee's hands.

The CIT (Appeals) and the Tribunal both concluded that the disputed amount had already been taxed by the Settlement Commission through declarations made by group companies. They found no reason to interfere with this decision as there was no legal basis for the Revenue's appeal. The Tribunal declined to give the assessing officer another opportunity to explore the matter further, as the foundation of the additions lacked a legally sustainable basis. Consequently, the Tax Appeal was dismissed as no question of law arose from the case.