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2021 (1) TMI 1070 - AT - Income TaxUnexplained Income - addition u/s 68 - Receipt of share application money from group companies - group companies invest in each other - Double additions - non compliance to Summons u/s 131 issued by the AO the directors of the assessee company and directors of all the investor companies - HELD THAT - CIT(A) states that the directors of the appellate company complied with the summons issued u/s 131 of the Act by filling of letter dated 09.03.2015 along with details. He also records finding of facts that there are common directors and common shareholders and hence these are group companies which have invested - Assessing Officer has not considered any of these documents and that there is no adverse material with the AO, to controvert the information or document filed by the assessee. Under such circumstances, he held that money received from the shareholder companies cannot be considered as unexplained income. Most important finding of the Ld. CIT(A) is that scrutiny assessment order were passed u/s 143(3) of the Act, in respect of all the three share allottee companies. Copies of these assessment order filed before the Assessing Officer. This bench of the Tribunal as in the following cases held that no addition can be sustained u/s 68 of the Act where the assessment of the share allottee companies is completed u/s 143(3) See M/S. GOODPOINT COMMODEAL PVT. LTD. 2019 (6) TMI 600 - ITAT KOLKATA and M/S. SANMIN TRADING AND HOLDING PVT. LTD. 2020 (11) TMI 606 - ITAT KOLKATA In this case huge additions were made in the hands of the share allottee companies in their scrutiny assessment u/s 143(3) of the Act. Again making the addition in the case of the assessee company would tantamount to double addition. CIT(A) relied on the judgement of Gyscoal Alloys Ltd. 2018 (10) TMI 1725 - GUJARAT HIGH COURT for the proposition that addition cannot be made of share capital received from group companies. We find no infirmity in the finding of the Ld. CIT(A). The Ld. DR could not point out any factual inefficiency in the order of the Ld. CIT(A). The order of the Ld. CIT(A) is in accordance with law - Decided against revenue.
Issues Involved:
1. Delay in filing the appeal. 2. Addition of unexplained income. 3. Compliance with Section 68 of the Income Tax Act. 4. Identity, creditworthiness, and genuineness of share applicants. 5. Double addition of the same money. 6. Scrutiny assessment orders of share allottee companies. Detailed Analysis: 1. Delay in Filing the Appeal: The appeal was filed by the revenue with a delay of 16 days. After reviewing the petition for condonation of delay, the tribunal was convinced that the revenue was prevented by reasonable cause from filing the appeal on time. Consequently, the delay was condoned, and the appeal was admitted. 2. Addition of Unexplained Income: The assessee, a non-banking financial company, filed its return for A.Y. 2012-13 declaring NIL income. The Assessing Officer (AO) completed the assessment u/s 143(3) of the Income Tax Act, determining the total income at ?2,55,00,000/-, which included an addition of ?2,55,00,000/- (share capital of ?8,50,000/- and share premium of ?2,46,50,000/-) as unexplained income. The AO issued summons u/s 131 of the Act to the directors of the assessee company and the investor companies. Due to non-compliance with the summons, the addition was made as unexplained income. 3. Compliance with Section 68 of the Income Tax Act: The primary issue for consideration was whether the sum of ?2,55,00,000/- received as share capital, including share premium, attracted the provisions of Section 68 of the Act. The Commissioner of Income Tax (Appeals) [CIT(A)] found that the appellant, a non-banking finance company, provided complete details of the share capital raised, including the identity and creditworthiness of the share applicants and the genuineness of the transactions. The AO had issued notices u/s 133(6) to the shareholders, who responded with detailed replies and documents. The CIT(A) concluded that the appellant had discharged its onus u/s 68 of the Act, and without any adverse findings or discrepancies in the documents, the addition could not be sustained. 4. Identity, Creditworthiness, and Genuineness of Share Applicants: The CIT(A) noted that the identity of the share allottees was not in dispute and that both the appellant and the share allottees were group concerns with common directors and shareholders. The appellant provided comprehensive details, including certificates of incorporation, PAN details, income tax returns, bank statements, share application forms, and audited accounts. The AO did not consider these documents and had no adverse material to counter the information provided by the assessee. The CIT(A) emphasized that the transactions were genuine, as evidenced by the banking channels used for payments and the substantial net worth of the share allottees. 5. Double Addition of the Same Money: The CIT(A) observed that scrutiny assessment orders u/s 143(3) were passed for all the share allottee companies, adding the entire share capital raised by these companies to their income. Therefore, making an addition in the hands of the appellant company would result in double addition of the same money. The CIT(A) cited the case of Pr.CIT-2 Vs. Gyscoal Alloys Ltd., where the Gujarat High Court upheld the deletion of the addition of share capital received from group companies. 6. Scrutiny Assessment Orders of Share Allottee Companies: The CIT(A) found that the scrutiny assessment orders for the share allottee companies confirmed the addition of share capital in their hands. This reinforced the argument that no further addition could be made in the hands of the appellant company. The tribunal upheld the CIT(A)'s findings, stating that the AO did not provide any material to dispute the documents filed by the assessee and that the addition could not be sustained under Section 68 of the Act. Conclusion: The tribunal found no infirmity in the CIT(A)'s order. The appeal by the revenue was dismissed, and the addition of ?2,55,00,000/- as unexplained income was deleted. The tribunal emphasized that the assessee had discharged its onus under Section 68 by providing comprehensive details and that the AO failed to provide any adverse findings or discrepancies in the documents. The tribunal also highlighted that making an addition in the hands of the appellant would result in double addition, given the scrutiny assessment orders for the share allottee companies.
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