2022 (9) TMI 775 - HC - Income Tax

ITAT Upholds Admittance of Fresh Evidence; High Court Clarifies Jurisdiction on Substantial Questions of Law

Pr. Commissioner of Income Tax -7 Versus M/s. SPG Finvest Pvt. Ltd.

Pr. Commissioner of Income Tax -7 Versus M/s. SPG Finvest Pvt. Ltd. - TMI 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 EvidenceThe 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 PremiumThe 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 LoansRegarding 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 InvestmentsThe 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 CourtThe 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.