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 CIT(A)'s deletion finding the share applicant's assessment was accepted by AO and investments were made in multiple years, not just an isolated transaction. Second, concerning disallowance of expenses due to suspended airline operations since 2009, the tribunal confirmed CIT(A)'s deletion based on consistency principle, noting the company remained incorporated under Companies Act, incurred statutory expenses, and suspension of operations doesn't equate to business closure or liquidation.

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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 Money

The 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 Expenditure

The 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.

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