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2018 (7) TMI 372 - AT - Income TaxAddition u/s 263 - addition u/s 68 - Held that - AO has prepared the remand report after taking note of the evidence in support of the claim made by the assessee that share capital along with the share premium for the total sum of ₹ 54,95,00,000/- was actually received by the assessee company during the FY 1999-2000 i.e. AY 2000-01 The principle of Rule of Law mandates the Government i.e, in this case the AO to act only in accordance to law. The Rule of law is an over-arching principle of law, which is a basic feature of the Constitution. So read together with Article 265 of the Constitution, that No. tax shall be levied or collected without authority of law , means that AO should assess the income of the assessee only in accordance to law and, therefore, the addition u/s. 68 of the Act could not have been legally added in the hands of the assessee company in this assessment year, so considering the AO s remand report all the documents filed by assessee for substantiating that share subscription relates to earlier assessment years, we find no infirmity in the order of ld CIT(A) and confirm the impugned order of Ld. CIT(A).
Issues Involved:
1. Deletion of addition made by the AO under Section 68 of the Income-tax Act, 1961. 2. Validity of assessment year for taxing the share capital and share premium amount. Detailed Analysis: 1. Deletion of Addition Made by the AO under Section 68 of the Income-tax Act, 1961: The revenue's main grievance was against the Ld. CIT(A)'s action in deleting the addition made by the AO pursuant to the direction given by the Ld. CIT under Section 263 of the Income-tax Act, 1961. The original assessment was completed under Sections 147/143(3) of the Act on 17.05.2010. The Ld. CIT set aside this assessment order under Section 263, deeming it erroneous and prejudicial to the interest of revenue. Consequently, the AO made an addition of ?54,95,00,000 by treating the fresh share capital and share premium for the year ending 31.03.2005 as unexplained cash credit under Section 68. The AO contended that the assessee failed to substantiate its claim of the introduction of fresh share capital during the relevant period. However, the Ld. CIT(A) deleted the addition after considering the remand report and various documentary evidences provided by the assessee, including audited accounts, bank statements, and share applications. 2. Validity of Assessment Year for Taxing the Share Capital and Share Premium Amount: The main contention of the assessee was that the impugned addition was credited in the books for the financial year 1999-2000, relevant to the assessment year 2000-01, and not in the financial year 2004-05, relevant to the assessment year 2005-06. The Ld. CIT(A) observed that the amounts were indeed credited in the books during the financial year 1999-2000 and not in the year under consideration. The AO, in the remand report, confirmed this by verifying the documents submitted by the assessee, including share applications, bank statements, and audited accounts. The Ld. CIT(A) concluded that the addition under Section 68 could not be made for the assessment year 2005-06 when the amounts were already credited in the books for the assessment year 2000-01. The Tribunal noted that the assessment must be done on the right person, right year, and right income, as held by the Hon'ble Supreme Court in ITO Vs. Ch. Atchaiah 218 ITR 239 (SC). The principle of "Rule of Law" mandates that the AO should act only in accordance with the law, and therefore, the addition under Section 68 could not have been legally added in the hands of the assessee for the assessment year 2005-06. Considering the AO's remand report and the documents filed by the assessee, the Tribunal found no infirmity in the order of the Ld. CIT(A) and confirmed the deletion of the addition. Conclusion: The appeal of the revenue was dismissed, and the order of the Ld. CIT(A) was confirmed, emphasizing that the impugned share capital and share premium amounts pertained to an earlier assessment year (2000-01) and could not be taxed as unexplained cash credits in the assessment year 2005-06. The order was pronounced in the open court on 05.07.2018.
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