2015 (12) TMI 1082 - HC - Income Tax

Court upholds Revenue's Section 68 additions under Income Tax Act, remands for fresh examination.

The court ruled in favor of the Revenue regarding the validity of additions under Section 68 of the Income Tax Act. The matter was remanded to the ITAT ... Additions under section 68 - ITAT deleted the addition - whether the impugned additions have been made under section 153A /143(3) of the Act without reference to any material found as a result of search? - Held that:- It was for the fact- finding authorities to finally examine the evidence on record and determine whether the Assessee could satisfactorily explain the credit entry in its books and could establish the genuineness of the transactions claimed to have been entered into by it. Clearly, the ITAT has not examined the facts relating to the Assessee. The ITAT had simply proceeded on the basis of the facts obtaining in the case of Pranjul Overseas (P) Ltd. on the statement of the parties that the facts of that case were similar to the facts in the case of the Assessee. However, an examination of the documents filed before us, it does not appear that the facts in the case of Pranjul Overseas (P) Ltd. were similar to that as obtaining in the present case. While it appears that in the case of Pranjul Overseas (P) Ltd., the Assessee disputed that any search took place at its registered office, the written submissions filed by the Assessee in this case, does not indicate that any such dispute was raised. Even before us it has not been contended that no search took place at the declared registered office of the Assessee. In the circumstances, we find it is necessary to remand the matter to the Tribunal to examine the facts relevant to the Assessee for determining whether an addition under Section 68A of the Act was sustainable. Needless to mention that it would also be open for the ITAT to remand the matter for further enquiries if it is so considered necessary. It is not open for the Assessee to challenge the validity of the search under Section 132 of the Act or the assumption of jurisdiction under Section 153A of the Act, as those issues had not been pressed by the Assessee before the ITAT - Decided in favour of the Revenue Issues Involved:1. Validity of additions under Section 68 of the Income Tax Act.2. Validity of search and assumption of jurisdiction under Section 153A.3. Validity of additions in non-abated assessments.4. Perverse findings of the ITAT.Issue-wise Detailed Analysis:1. Validity of Additions under Section 68 of the Income Tax Act:The core issue was whether the ITAT erred in deleting the additions made under Section 68 of the Act. The Revenue argued that the Assessee failed to discharge its onus of proving the credits in its account, thus making the amount liable to be taxed under Section 68. The Assessee contended that the credits were duly explained and supported by affidavits and PAN details of the investors, and no defects were pointed out in these affidavits. The court emphasized that for an addition under Section 68, the Assessee must establish the identity of the payer, the genuineness of the transaction, and the creditworthiness of the payer. The ITAT had not examined these aspects in detail and had relied on the case of Pranjul Overseas (P) Ltd. without verifying if the facts were identical. Therefore, the matter was remanded to the ITAT for a fresh examination of the facts relevant to the Assessee.2. Validity of Search and Assumption of Jurisdiction under Section 153A:The Assessee initially raised issues regarding the validity of the search and the assumption of jurisdiction under Section 153A, arguing no incriminating material was found during the search. However, these issues were not pressed before the ITAT, and thus, the ITAT did not adjudicate on these points. The court noted that since the Assessee did not press these issues before the ITAT, it was no longer open for the Assessee to raise these challenges.3. Validity of Additions in Non-abated Assessments:The Assessee argued that for AYs 2003-04, 2004-05, and 2006-07, which had already been finalized and thus abated, no additions could be made as no incriminating material was found. The ITAT had accepted this contention in the case of Pranjul Overseas (P) Ltd. However, since the Assessee did not press these grounds before the ITAT in its own case, the court did not entertain this argument.4. Perverse Findings of the ITAT:The Revenue contended that the findings of the ITAT were perverse as the ITAT did not independently examine the facts of the Assessee's case and relied on the case of Pranjul Overseas (P) Ltd. The court found merit in this contention, noting that the ITAT had not verified whether the facts in the Assessee's case were identical to those in Pranjul Overseas (P) Ltd. The court highlighted several suspicious factors, such as the Assessee's registered office being a Janta Flat, large cash payments, and the Assessee's lack of significant business activity, which warranted a detailed examination by the ITAT.Conclusion:The court decided in favor of the Revenue on the primary question of the validity of additions under Section 68 and remanded the matter to the ITAT for a fresh decision after considering the specific facts relevant to the Assessee. The Assessee's challenge to the validity of the search and assumption of jurisdiction under Section 153A was not entertained as these issues were not pressed before the ITAT. The court also noted that the ITAT must independently verify the facts of the Assessee's case rather than relying solely on the case of Pranjul Overseas (P) Ltd.