2024 (1) TMI 148 - AT - Income Tax

ITAT upholds deletion of section 68 addition for share application money and expense disallowance for suspended airline operations

The ITAT Delhi dismissed the revenue's appeal on two grounds. First, regarding addition under section 68 for share application money, the tribunal upheld ... Addition on account of share application money u/s. 68 - addition made as assessee did not furnish bank statement of the share applicant - CIT(A) deleted addition - HELD THAT:- We have gone through the assessment order passed in the case of share applicant, perusal of the same reveals that AO has accepted the submissions and claims made by him in his return. We also take note of the fact that the share applicant has made investments, both in the preceding as well as succeeding years, details of which has already been tabulated above. Thus, it is not a sole transaction with the assessee in this year only. We do find force in the submission made by the Ld. Counsel and have no reason to interfere with the findings given by the Ld. CIT(A) in deleting the addition - While holding so, we draw force from the decision of Satkar Infrastructure Pvt. Ltd. [2022 (10) TMI 460 - DELHI HIGH COURT] Accordingly, ground no. 1, taken by the revenue in this respect is dismissed. Disallowance of expenditure owing to suspension of business operations by the assessee since year 2009 - CIT(A) deleted addition as on rule of consistency - HELD THAT:- As it is an undisputed fact that airline operations of the assessee are in suspended mode since the year 2009. However, there is no closure of the assessee by way of its liquidation since it is a corporate set up under the Companies Act. We find force in the submissions made by the Ld. Counsel that assessee being a company set up has to incur expenses irrespective of active business. We find that the sole basis of disallowance of expenses by the Ld. AO is in the backdrop that assessee did not carry out any business activity during the year. To our mind, not carrying on any business activities during a particular period cannot be equated with closure of business since it will lead to a narrow view of the scope of cessation of business. There is nothing on record to show that assessee has completely abandoned or closed the business forever by disposing of its assets and going into liquidation. On the contrary, from the perusal of its audited financial statement, it is revealed that assessee had been meeting various statutory and regulatory expenses. We also take note of the fact that such expenses have been allowed both in the preceding and succeeding assessment years, details of which is already tabulated above. From the perusal of the finding of CIT(A), we note that relief has been granted by following the principle of consistency. A specific query was posed to the Ld. Counsel whether rule of consistency should be followed as such to which he submitted that “department should be consistent to themselves”. No reason to interfere with the well reasoned findings given by the Ld. CIT(A) Appeal of revenue dismissed. Issues Involved:1. Addition of Rs. 4,30,78,000/- on account of share application money under Section 68 of the Income-tax Act.2. Addition of Rs. 3,99,18,595/- on account of disallowance of expenditure due to suspension of business operations.Summary:Issue 1: Addition of Rs. 4,30,78,000/- on Account of Share Application MoneyThe revenue challenged the deletion of an addition of Rs. 4,30,78,000/- made by the Assessing Officer (AO) under Section 68 of the Income-tax Act. The AO added the amount due to the assessee's failure to furnish the bank statement of the investor, Shree Gopal Kumar Goyal. However, the assessee provided various submissions and details, including bank statements and a confirmation letter from the investor, which were acknowledged by the AO's office. The investor was assessed by the same AO for the same assessment year, and his income was accepted. The Tribunal found that all necessary evidence was provided and accepted by the AO in the investor's assessment. The Tribunal upheld the CIT(A)'s decision to delete the addition, referencing the Delhi High Court's decision in PCIT Vs. Satkar Infrastructure Pvt. Ltd., and dismissed the revenue's ground on this issue.Issue 2: Addition of Rs. 3,99,18,595/- on Account of Disallowance of ExpenditureThe AO disallowed the assessee's claim of Rs. 3,99,18,595/- in expenses, arguing that no business operations were carried out since 2009 and there was no intention to revive them. The assessee contended that the expenses were incurred on the principle of 'going concern' and were mandatory for statutory and legal compliances. The Tribunal noted that the expenses included statutory charges, professional fees, and other necessary costs for maintaining the company's existence. The Tribunal found that similar expenses were allowed in preceding and succeeding years, and the principle of consistency should apply. Citing the Supreme Court's decisions in CIT Vs. Rajendra Prasad Mody and S. A. Builders Ltd. Vs. CIT, the Tribunal concluded that the AO's disallowance was erroneous. The Tribunal upheld the CIT(A)'s decision to delete the disallowance and dismissed the revenue's grounds on this issue.Conclusion:The Tribunal dismissed the revenue's appeal on both issues, upholding the CIT(A)'s order to delete the additions made by the AO. The decision was pronounced in the open court on 19.10.2023.