2022 (3) TMI 82 - HC - Income Tax

Addition u/s 68 - ITAT deleted the addition - HELD THAT - AO on one hand stated that the share application cheques were actually encashed by the assessee for a subsequent financial year. The Tribunal found that there is nothing wrong about the same and merely because there was a time gap between the receipt of cheques and its encashment and in the interregnum there was change of financial year cannot make a transaction as a sham transaction - CIT(A) noted that the AO had admitted that the share application money was obtained, maintained or improved the applicant debt equity ratio so as to lower the interest burden - we find that the entire matter is factual and the facts having been analysed by the CIT(A), relief was granted to the assessee. When the revenue carried out the matter in appeal, a similar case was shown by the Tribunal to examine as to whether the finding of the CIT(A) on facts was justified. After satisfying itself about the same, the Tribunal dismissed the revenue's appeal. Thus, we find that there is no substantial question of law arising for consideration on the said issue. Disallowance under Section 14A - HELD THAT - CIT(A) noted that for the investments made in the earlier year their department has accepted the assessee's explanation that the investments were made out of own funds and there is no question of taking a contrary stand for the year under consideration. This factual position was verified and affirmed by the Tribunal. Therefore, we do not find any substantial question of law arising for consideration on the said issue. Addition under Section 36(1)(iii) - HELD THAT - After analysing the factual position, the CIT(A) held that the AO has not pointed out any inaccuracy or infirmity in the unit-wise accounts maintained by the assessee or the allocation of interest made by the assessee inter se among the units. Further, the assessee had identified the specific sources of funds used for meeting in the cost of capital. Furthermore, the CIT(A) held that in the absence of any material brought on record by the AO that borrowed funds have been additional investment to meet the capital, the AO was not justified in allocating interest costs. This finding of the CIT(A) was examined by the Tribunal and it concurred with the CIT(A) on facts. Therefore, we are convinced that there is no substantial question of law arising for consideration in this appeal on this issue.

Summary

Issues involved:
1. Deletion of addition under Section 68 of the Income Tax Act, 1961.
2. Disallowance under Section 14A of the Income Tax Act, 1961.
3. Deletion of addition under Section 36(1)(III) of the Income Tax Act, 1961.

Issue 1: Deletion of addition under Section 68 of the Income Tax Act, 1961:
The appeal by the revenue challenged the deletion made under Section 68 of the Act by the CIT(A). The CIT(A) examined the facts, emphasizing that share application monies were received through proper banking channels and supported by evidence from bank statements. The explanation provided by the assessee regarding the source of funds was found satisfactory by the CIT(A), supported by documents. The Tribunal confirmed the CIT(A)'s findings, dismissing the revenue's appeal. The Tribunal noted the factual analysis by the CIT(A) and granted relief to the assessee, finding no substantial question of law on this issue.

Issue 2: Disallowance under Section 14A of the Income Tax Act, 1961:
The CIT(A) addressed this issue in its order, noting that for investments made in previous years, the department had accepted the assessee's explanation that investments were made from own funds. The Tribunal affirmed this factual position. Consequently, no substantial question of law arose for consideration on this issue.

Issue 3: Deletion of addition under Section 36(1)(III) of the Income Tax Act, 1961:
The CIT(A) considered this matter and found no inaccuracy in the unit-wise accounts or the allocation of interest by the assessee. The CIT(A) held that the Assessing Officer failed to provide evidence that borrowed funds were used for additional investment. The Tribunal concurred with the CIT(A) on facts, leading to the dismissal of the revenue's appeal. Therefore, no substantial question of law arose for consideration on this issue.

In conclusion, the High Court dismissed the revenue's appeal as no substantial question of law was found in any of the issues raised. The stay application was closed following the dismissal of the appeal.