2022 (9) TMI 509 - HC - Income Tax

Unexplained addition to capital account - additional income surrendered by assessee - Assessee has failed to discharge the burden regarding the source from which the capital was introduced - ITAT concluded that the Assessee has duly explained the source of cash deposits in its bank account as well as the addition made to the capital account - since the surrender of income was made in the previous assessment year and tax was duly paid thereon, the said amount introduced in the accounts in the current assessment year would not be taxable. HELD THAT - Appellant has not disputed the findings of the ITAT that in the remand report there was no adverse inference drawn by the AO with respect to the documentary evidence furnished by the assessee in respect of the unsecured loans. The learned counsel also does not dispute the finding of the CIT(A) that there was a surrender of income by the Assessee in the previous AY to the tune of Rs. 15.22 crores and tax was duly paid thereon. There is no challenge to the finding of the ITAT that in case of addition of Rs. 9.02 crores, the amounts were opening balances from the earlier years. ITAT has after perusing the evidences filed by the Assessee and the remand reports received from the AO, concluded that the addition against the Assessee cannot be sustained. The learned counsel for the Revenue has not been able to point out any error in the findings of fact by the learned ITAT. Admission of additional evidences - As in the facts of the present case, the additional evidences were admitted by the CIT (A) and remand reports were called for from the AO. There is nothing on record which evidences that the Revenue opposed the admission of additional evidence before the CIT (A). In fact, there was no cross objection filed by Revenue before the ITAT challenging the admission of the additional evidence by the CIT (A). The impugned order records that the AO perused the documents and submitted its remand reports which have been considered by the ITAT before deciding the matter. The learned counsel for the Appellant has not pointed out any error in the order of the ITAT in appreciating the remand reports. The objection to admission of additional evidence at this stage is belated and no ground for interference is made out. No substantial question of law.

Summary

Issues:
Appeal by Revenue under Section 260A of the Income Tax Act, 1961 challenging deletion of addition of Rs.24,50,91,663/- made by Assessee to its capital account.

Analysis:
1. The Revenue contested the deletion of the addition of Rs.24,50,91,663/- to the Assessee's capital account, claiming it was unexplained. The Assessee failed to provide evidence regarding the source of this capital during the assessment proceedings.
2. The Commissioner of Income Tax (Appeals) upheld the addition, but the ITAT later deleted it after reviewing the evidence. The Revenue argued that the documents submitted by the Assessee were belated and unverified by the Assessing Officer.
3. The High Court found that the Assessee had submitted detailed information regarding the source of the cash and the addition to the capital account. The Court examined the breakdown of the cash surrendered, deposited in the bank, and added to the capital account, totaling Rs.24,50,91,663/-.
4. The ITAT noted that the Assessee had surrendered additional income in a previous assessment year, duly paid tax on it, and explained the credit of Rs.15 crores in the capital account for the current assessment year. The Assessee also provided evidence for unsecured loans received and advances given, which were credited to the bank account.
5. The ITAT concluded that the Assessee adequately explained the source of cash deposits and additions to the capital account. The amounts received in the bank account as unsecured loans were supported by documentary evidence, and the opening balances from previous years did not warrant additional taxation.
6. The High Court affirmed the ITAT's findings, noting that no adverse inference was drawn by the Assessing Officer on the documentary evidence provided by the Assessee. The Court dismissed the appeal, as no substantial question of law arose from the factual findings.

Judgment:
The High Court upheld the ITAT's decision to delete the addition of Rs.24,50,91,663/- to the Assessee's capital account, as the Assessee sufficiently explained the sources of the funds through documentary evidence and compliance with tax obligations. The Court found no errors in the ITAT's factual findings and dismissed the Revenue's appeal.