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2024 (10) TMI 775 - AT - Income TaxAddition of increase in Share Capital - unexplained cash credit u/s 68 - HELD THAT - The impugned order is based on detailed findings given by AO in remand report - CIT(A) noted that the assessee furnished details of increase in share capital and unsecured loans. The same were journal entries and the explanation furnished by the assessee was held to be satisfactorily by Ld.AO. Considering the same, CIT(A) deleted the addition of increase in share capital and unsecured loans. The same form part of subject matter of revenue s appeal. Since the above transactions are mere journal entries and the assessee has furnished satisfactory explanation thereof during remand proceedings to the satisfaction of AO, the adjudication of Ld. CIT(A) could not be faulted with. The corresponding grounds raised by the revenue stands dismissed. Disallowance of interest expenditure - CIT(A) deleted the same against which the revenue is in further appeal before us. Since the adjudication of Ld. CIT(A) is based on findings of Ld. AO, no interference is required in the same. Disallowance of Service charges - The same represent service charges, valuation charges, installation charges and computer service charges. The details thereof have been extracted in the impugned order. It could be seen that the payment has been made to procure services from vendors and the payments are to organized sector and through banking channels. Apparently, the expenditure fulfills the requirements of Sec. 37(1). Therefore, we direct Ld. AO to delete the same. The grounds raised by the assessee stand allowed. Addition of Investments - AO accepted the explanation of the assessee after examining the necessary evidences including share transfer application, bank account, confirmation letters etc. Considering the same, the impugned addition was deleted. Since the adjudication of Ld. CIT(A) is based on remand report, no interference is required in the same. Addition of professional fees paid to Chartered Accountant in connection with a loan - assessee paid fees @3% of loan amount. Due tax was deducted at source - AO accepted such claim. The Ld. CIT(A) accepted the claim to the extent of 1% only and confirmed the remaining addition - We find that this is contractual payment and accepted by Ld. AO in the remand report. The assessee has deducted due TDS and the claim is duly substantiated. In the absence of any adverse finding, this claim is to be accepted. We order so. The grounds raised by the assessee stand allowed whereas the grounds raised by the revenue stand dismissed. Disallowance of Electronic Transfer Charges - The expenditure is on account of purchase of share transfer stamps in cash from stamp vendors. The stamps are affixed on the reverse side of share transfer deed @.25% of transaction value. The assessee has purchased stamp of Rs. 2 Lacs each on 30-01-2000 and 01-02-2000. The assessee deals in sale and purchase of shares. Therefore, in our considered opinion, this claim is to be accepted. Hence, the impugned disallowance stand deleted. The assessee succeeds on this ground. Disallowance of brokerage claim - We find that this amount has been paid by the assessee to a corporate entity through banking channels after deduction of tax at source. AO has accepted the claim in the remand report. This is a contractual payment and in the absence of any adverse finding, the same could not be disallowed partly. Therefore, we direct Ld. AO to allow full brokerage claim.
Issues Involved:
1. Validity of the Tribunal's prior order and remand from the High Court. 2. Disallowance of various expenditures by the Assessing Officer (AO). 3. Deletion of disallowances by the Commissioner of Income Tax (Appeals) [CIT(A)]. 4. Admission and consideration of additional evidence by CIT(A). 5. Compliance with Rule 46A of the Income Tax Rules. 6. Specific disallowances related to share capital, unsecured loans, interest expenditure, service charges, investments, electronic transfer charges, office maintenance expenses, and disallowance under Section 14A. Issue-wise Detailed Analysis: 1. Validity of the Tribunal's Prior Order and Remand from the High Court: The Tribunal's prior order had remitted the matter back to the AO to verify the existence of the assessee company. However, the High Court negated this approach, remanding the matter back to the Tribunal to decide on merits, as the assessment was not deemed invalid. The Tribunal, following the High Court's directions, proceeded to adjudicate the cross-appeals on merits. 2. Disallowance of Various Expenditures by the AO: The AO disallowed several expenditures claimed by the assessee, including stamp charges, brokerage, service charges, professional fees, and office maintenance expenses. The AO also added unexplained share capital, unsecured loans, and investments to the assessee's income, citing lack of evidence and inability of the assessee to substantiate claims. 3. Deletion of Disallowances by CIT(A): CIT(A) provided partial relief to the assessee, deleting some disallowances based on additional evidence and explanations provided by the assessee during appellate proceedings. The CIT(A) accepted the explanations for share capital and unsecured loans as journal entries, and allowed the brokerage and professional fees claims, finding them substantiated and contractual. 4. Admission and Consideration of Additional Evidence by CIT(A): The CIT(A) considered additional evidence submitted by the assessee, which was subjected to remand proceedings. The revenue challenged this, citing violations of Rule 46A, as the AO was not given an opportunity to verify new details. However, the Tribunal found that the remand report dated 27-04-2009, which considered the assessee's explanations and evidence, was detailed and rightly considered by CIT(A). 5. Compliance with Rule 46A of the Income Tax Rules: The Tribunal addressed the revenue's grievance regarding Rule 46A violations, noting that the remand report dated 27-04-2009 was comprehensive and considered the assessee's submissions. The Tribunal dismissed the revenue's additional grounds, finding them without substance. 6. Specific Disallowances: - Share Capital and Unsecured Loans: The Tribunal upheld CIT(A)'s deletion of additions related to share capital and unsecured loans, as they were mere journal entries with satisfactory explanations provided during remand proceedings. - Interest Expenditure: The Tribunal found that the interest payment was duly substantiated and accepted by the AO, requiring no interference with CIT(A)'s deletion of the disallowance. - Service Charges: The Tribunal directed the deletion of disallowed service charges, finding them to be legitimate business expenses paid to organized sectors through banking channels. - Investments: The Tribunal upheld the deletion of additions related to investments, as the assessee provided necessary evidence during remand proceedings. - Electronic Transfer Charges and Office Maintenance Expenses: The Tribunal allowed the full brokerage claim and directed the deletion of disallowed office maintenance expenses, except for an unsubstantiated amount, which was not pressed by the assessee. - Disallowance under Section 14A: The Tribunal noted that this issue was not pressed by the assessee. Conclusion: The Tribunal partly allowed the assessee's appeal (ITA No.473/Chny/2010) and dismissed the revenue's appeal (ITA No.549/Chny/2010), basing its decision on detailed findings and remand reports. The order was pronounced on 9th October, 2024.
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