2023 (7) TMI 1048 - HC - Income Tax

Addition u/s 68 - Bogus investment receipts - undisclosed income in the hands of the assessee - HELD THAT - The undisputed facts narrated hereinabove clearly show that the Revenue has issued notices to all nineteen companies. The Companies have appeared before the ADIT and submitted their papers and in the case of Matajwala Infrastructure, addition has been made by the Revenue. In the case on hand, the identity of the investors have been established. They have appeared before the authority and submitted the records showing the source of income. In the facts of this case, additions made by the Revenue are not sustainable. - Decided in favour of assessee.

Summary

Issues involved:
The judgment involves the following Issues:
1. Whether the Tribunal's order is considered perverse in ignoring relevant material evidence regarding investor companies' bank accounts and transactions.
2. Whether the investors' creditworthiness was correctly assessed despite their meagre income, leading to perversity.
3. Whether the assessee discharged the onus u/s 68 of the Income Tax Act.

Issue 1:
The case involved a scrutiny assessment where the AO added unexplained share application money in the hands of the assessee. The CIT(A) enhanced the liability, but the ITAT later deleted the additions. The Revenue contended that the ITAT did not give a fair opportunity to the AO and that the investor companies were 'shell' companies with meagre income. The Revenue relied on the judgment in Principal Commissioner of Income Tax v. NRA Iron and Steel Private Limited. However, the Senior Advocate for the assessee argued that all nineteen companies submitted papers before the ADIT as per the AO's instructions, and the ITAT considered each investment independently.

Issue 2:
The ITAT found that the AO's addition of undisclosed income in the hands of the assessee was not sustainable. The AO had issued notices to all nineteen companies, and the ITAT considered the replies and documents submitted by the companies. It was noted that the Directors of the nineteenth investor company were the same as the assessee company, and the addition was made in the former's assessment. The judgment cited Commissioner of Income Tax v. Lovely Exports Private Limited to support the decision that the share application money could not be regarded as undisclosed income if the investors' identity and source of income were established.

Issue 3:
The judgment addressed the contention regarding the applicability of the facts in the case of NRA Iron and Steel to the present case. It was concluded that the investors in this case had provided all necessary details, unlike the case referred to by the Revenue. Ultimately, the ITAT's decision was upheld, and the appeal was dismissed in favor of the assessee, with no costs awarded.

This summary provides a detailed overview of the judgment, highlighting the key arguments presented by both parties and the court's reasoning in resolving the issues raised during the appeal.