2024 (5) TMI 1519 - HC - Income Tax

Revenue's Appeal Dismissed: Tribunal's Decision on Share Capital Addition Upheld Under Section 260A of Income Tax Act

The HC of Calcutta dismissed the revenue's appeal under Section 260A of the Income Tax Act, 1961, upholding the Tribunal's decision. The Tribunal had ... Addition u/s 68 - share capital including premium disallowed - ITAT deleted addition - HELD THAT:- Tribunal, as we find from the impugned order, has done a thorough and elaborate examination of the facts. It also took note of the response filed to the notices issued under Section 133(6) of the Act. Thereafter it proceeded to examine the resource and surplus of the companies which had subscribed to the shares of the assessee company and found that all the share subscribers are regularly assessed to tax, they are filing Income tax Returns; books of accounts were regularly maintained, financial statements were duly audited under the Income Tax Act and transactions have been carried out through banking channel and all the formalities required by the Registrar of Companies for the purpose of issuing share capital has been duly adhered and as on the date when the Tribunal considered the matter it found that all the share subscribers are active companies. Thus, Tribunal came to the conclusion that the assessee has successfully discharged the primary onus cast upon them to explain the investment. No substantial questions of law, arising for consideration. The High Court of Calcutta heard an appeal filed by the revenue under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal for the assessment year 2008-09. The revenue raised three substantial questions of law for consideration:1. Whether the Tribunal erred in deleting the addition of Rs. 10,60,50,000/- on account of share capital including premium without examining the facts and materials.2. Whether the Tribunal erred in ignoring the lack of clarification or explanation from the assessee regarding the share capital and premium.3. Whether the Tribunal erred in ignoring the failure of the assessee to prove the identity, genuineness, and creditworthiness of subscribing companies and the genuineness of share transactions.The assessment for the relevant year was initially completed by the Assessing Officer under Section 143(3) of the Act. Subsequently, the Commissioner of Income Tax set aside the assessment order and directed further examination of the transaction's genuineness. The Assessing Officer disallowed the share application money received by the assessee, adding it back to the total income as unaccounted cash credit under Section 68 of the Act.The assessee appealed to the Commissioner of Income Tax (Appeals) who dismissed the appeal as the assessee did not appear. The assessee then appealed to the Tribunal, which thoroughly examined the facts, responses to notices under Section 133(6) of the Act, and the financial standing of the subscribing companies. The Tribunal found that the subscribing companies were tax-compliant, maintained proper records, audited financial statements, conducted transactions through banking channels, and complied with regulatory requirements.Based on this examination, the Tribunal concluded that the assessee had successfully explained the investment, thereby discharging its primary onus. Consequently, the Court held that no substantial questions of law arose for consideration and dismissed the appeal, along with the stay application.In summary, the Court upheld the Tribunal's decision, finding that the assessee had adequately explained the share capital and premium transactions, leading to the dismissal of the revenue's appeal.