2022 (9) TMI 775 - HC - Income Tax

Addition u/s 68 - unexplained share capital and share premium - assessee company had failed to explain the reasons for high share premium /capital which was not commensurate with the assets owned by the assessee company - difference between question of law and a substantial question of law - ITAT deleted the said additions on the ground that out of the said addition, amount pertained to the earlier year which was not in dispute - HELD THAT - A perusal of the paper book reveals that both the Appellate Authorities below have recorded concurrent findings of fact that the Assessing Officer did not issue specific show cause notice with respect to the additions made in the assessment order to the assessee during the assessment proceedings and therefore, there was reasonable cause with the assessee in not filing the evidences before the Assessing Officer. The ITAT also noted that though the AO was given due opportunity under Rule 46A(2) of the Income Tax Rules, 1961, yet the Assessing Officer did not make any proper averment with regard to the admission of additional evidences particularly when huge additions had been made which included the amount added under Sections 68 69 of the Income Tax Act, 1961 ( the Act ) which were carried forward from the earlier years. Unexplained share capital and share premium, both the Appellate Authorities below deleted the said addition on the ground that addition under Section 68 of the Act cannot be made because the said amount was being carried forward from earlier years, which is evident from letter dated 04th March, 2015 filed before the Assessing Officer and there had been no increase in paid up share capital and that this fact was not controverted by the Assessing Officer. Addition on account of unsecured loans - CIT (A) while examining the genuineness of fresh loan found that identity and creditworthiness of the lender M/s. DMC Education Ltd. had been substantiated by the assessee by way of various documentary evidences. The ITAT observed that the finding of the CIT (A) based on proper appreciation of facts cannot be tinkered without any contrary material to rebut. Addition on account of unexplained investments - ITAT deleted the said additions on the ground that out of the said addition, pertained to the earlier year which was not in dispute and accordingly the CIT(A) rightly deleted the said amount from the addition made by the Assessing Officer and with regard to the balance amount, there is a clear finding based on material on record that investments had been made by the assessee through proper banking channels and each and every entry had been duly explained from the books of account and bank statement. ITAT further recorded that once the investments have been made through cheques duly disclosed in the books of account, the same cannot be added as investment made outside the books or from undisclosed sources under Section 69 of the Act. Consequently, this Court finds that there is no perversity in the findings of the CIT(A) and ITAT. The Supreme Court in the case of Ram Kumar Aggarwal Anr. vs. Thawar Das (through LRs) 1999 (8) TMI 1008 - SUPREME COURT has reiterated that under Section 100 of CPC, the jurisdiction of the High Court to interfere with the orders passed by the Courts below is confined to hearing on substantial question of law and interference with finding of the fact is not warranted if it involves re-appreciation of evidence. Thus no substantial question of law arises for consideration in the present appeal.

Issues:
1. Admission of fresh evidence by ITAT overlooking Rule 46A provisions.
2. Deletion of addition on account of unexplained share capital and share premium.
3. Deletion of addition on account of unsecured loans.
4. Deletion of addition on account of unexplained investments.
5. Jurisdiction of High Court to interfere with lower court orders based on substantial question of law.

Issue 1: Admission of Fresh Evidence
The appellant challenged the ITAT's decision to admit fresh evidence, arguing that it contravened Rule 46A as the assessee failed to provide a valid cause for not presenting the evidence before the Assessing Officer. However, both the Appellate Authorities found that the Assessing Officer did not issue a specific show cause notice regarding the additions made, leading to a reasonable cause for the assessee not submitting evidence earlier. The ITAT emphasized that the Assessing Officer did not adequately address the admission of additional evidence, especially for substantial additions under Sections 68 and 69 of the Income Tax Act.

Issue 2: Unexplained Share Capital and Share Premium
The ITAT deleted the addition of Rs.3,00,00,000 on account of unexplained share capital and share premium, citing that the amount was carried forward from earlier years. The Appellate Authorities noted that there was no increase in paid-up share capital, and the Assessing Officer did not dispute this fact, leading to the deletion of the addition under Section 68 of the Act.

Issue 3: Unsecured Loans
Regarding the addition of Rs.27,88,000 on account of unsecured loans, both the Appellate Authorities concluded that most unsecured loans were repaid, with only a small amount received as a fresh loan. The CIT (A) confirmed the genuineness of the fresh loan, and the ITAT upheld this finding, emphasizing that without contradictory evidence, the CIT (A)'s decision should stand.

Issue 4: Unexplained Investments
The ITAT deleted the addition of Rs.1,31,27,449 on account of unexplained investments, as a portion of the amount pertained to an earlier year, which was undisputed. The remaining balance was supported by proper banking channels and explanations in the books of account and bank statements. The ITAT concluded that since the investments were made through disclosed cheques, they could not be considered investments from undisclosed sources under Section 69 of the Act.

Issue 5: Jurisdiction of High Court
The judgment referenced legal precedents emphasizing that the High Court's interference with lower court orders is limited to substantial questions of law. The Supreme Court cases highlighted the distinction between questions of law and substantial questions of law, reinforcing that findings of fact should not be interfered with unless involving re-appreciation of evidence. Consequently, as no substantial question of law was found in the present appeal, it was dismissed.

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