2017 (4) TMI 714 - AT - Income Tax

Addition u/s 68 - Held that - The assessee has duly furnished all the details and has also explained that the share application money was adjusted against the running account between the parties. Further, all the necessary details like PAN number, annual financial report of subscribers, cash flow statements etc. were also filed and the investment duly shown in the accounts/financial statement of the investor company. Under the circumstances, we do not find any justification on the part of the lower authorities in making addition of the above amount of ₹ 1,96,00,000/- received by the assessee as share application money from M/s. Infomedia 18 Ltd. The addition made by the lower authorities on this account under section 68 of the Act is hereby ordered to be deleted. Ground No.1 of the appeal is therefore allowed in favour of the assessee. Addition on account of non matching/difference of the figure pertaining to form 26AS - Held that - If the receipts have already been booked by the assessee in F.Y. 2008-09, the same cannot be booked as income of the assessee for the next year i.e. F.Y. 2009-10. However, the relevant receipts/entries need to be verified by the AO. We accordingly restore this issue to the file of the AO for reconciliation of these entries and if the claim of the assessee is found to be correct, then no addition will be made in respect of the receipts already booked in the earlier assessment year. This issue is accordingly treated as allowed in favour of the assessee. Disallowing the set off of brought forward losses - Held that - As submitted that information of brought forward losses was very much available on record before the AO in the form of schedule CFL of the e-return of income. Further, the tax auditor has also certified the details of losses and the copy of tax audit report was also available on record. Even the carry forward of losses could very well be verified by the AO from the earlier year assessment orders. He has further submitted that even the factum of brought forward losses can be well verified by the AO at this stage also. Considering the above submissions of the Ld. A.R., this issue is also restored to the file of the AO for verification and if the claim of the assessee is found to be correct, then to allow the same in accordance with law. In view of our findings given above, the appeal of the assessee is treated as allowed.

Issues Involved:
1. Restriction of addition under Section 68 on account of increase in share capital.
2. Confirmation of addition under Section 68 for share capital received from M/s. Infomedia 18 Ltd.
3. Addition of differential receipts as per AS-26 information.
4. Non-allowance of set off of brought forward losses.

Issue-wise Detailed Analysis:

1. Restriction of Addition under Section 68 on Account of Increase in Share Capital:

The Revenue contested that the CIT(A) erred in restricting the addition made under Section 68 from ?4,00,00,000/- to ?1,96,00,000/- without properly appreciating the factual and legal matrix. The Assessing Officer (AO) had observed an increase in share capital by ?4,00,00,000/- and was not satisfied with the details provided by the assessee, leading to the addition of the entire amount as unexplained credits under Section 68 of the Income Tax Act.

The CIT(A) found that only ?1,96,00,000/- was received during the relevant assessment year, while ?2,04,00,000/- was received in the preceding year. The CIT(A) held that the addition of ?2,94,00,000/- was not warranted for the year under consideration. The ITAT upheld the CIT(A)'s decision, noting that the AO had already examined the issue in the previous year and made no additions. Thus, there was no merit in the Revenue's appeal.

2. Confirmation of Addition under Section 68 for Share Capital Received from M/s. Infomedia 18 Ltd.:

The assessee contested the CIT(A)'s decision to uphold the addition of ?1,96,00,000/- under Section 68. The assessee argued that the amount was adjusted against a running account with M/s. Infomedia 18 Ltd., and necessary details such as PAN, address, and financial reports were provided. The ITAT found that the assessee had furnished all relevant details and demonstrated that the share application money was adjusted against a running account. Thus, the ITAT ordered the deletion of the addition of ?1,96,00,000/- under Section 68.

3. Addition of Differential Receipts as per AS-26 Information:

The AO added ?10,84,800/- to the assessee's income due to non-matching figures in Form 26AS, which the assessee claimed were accounted for in the previous financial year. The CIT(A) upheld this addition, noting that the assessee failed to establish a correlation between the receipts and the income accounted for in the previous year.

The ITAT restored the issue to the AO for verification and reconciliation of the entries. If the assessee's claim that the receipts were booked in the previous year was found correct, no addition would be made for the current year.

4. Non-Allowance of Set Off of Brought Forward Losses:

The assessee argued that the lower authorities erred in not allowing the set off of brought forward losses. The CIT(A) summarily rejected this ground, and the AO did not seek information from the assessee regarding the brought forward losses. The ITAT restored this issue to the AO for verification. If the assessee's claim was found correct, the AO was directed to allow the set off of brought forward losses in accordance with the law.

Conclusion:

The ITAT dismissed the Revenue's appeal and allowed the assessee's appeal. The addition of ?2,94,00,000/- was deleted, the addition of ?1,96,00,000/- was also deleted, the issue of differential receipts was sent back for verification, and the issue of set off of brought forward losses was also sent back for verification. The ITAT pronounced the order in the open court on 03.04.2017.

← Previous Next →