2023 (5) TMI 1424 - HC - Income Tax

Revenue's Appeal Dismissed: Tribunal Upholds Decision Granting Relief Over Rs. 17.6 Crore Addition Under Section 68.

The Appellate Tribunal of the Calcutta HC dismissed the Revenue's appeal against the Income Tax Appellate Tribunal's decision granting relief to the ... Addition u/s 68 - share capital/premium treated as unexplained cash credit - assessee has failed to prove the identity, creditworthiness of the subscribers and genuineness of the transaction - ITAT deleted addition - HELD THAT:- The share subscriber company was a holding company of the assessee company and both the companies were having common directors and that the share subscribing/holding company was interested in the business of the assessee. The nature of business activity was examined by the tribunal and noted that the assessee company had completed multiple pieces of land in the State of UP for developing a project in phases. The estimated cost of the project at the relevant point of time was Rs. 300 crores. The assessee company had registered its project before the Real Estate Development Authority, U.P. The tribunal noted that the funds of the investing company and its creditworthiness has been duly considered and discussed by the CIT[A]. The entire share subscription amount was received by the tribunal from its holding company, i.e., IBIPL which in turn is promoted by Infinity Infotech Parks Limited and provided funds for execution of the project either by own or through subsidiaries. Tribunal also took note that the CIT[A] called for a remand report from assessing officer in respect of various details and evidence was submitted by the assessee and thereafter after considering the remand report the CIT[A] passed the order. Tribunal also took note of the decisions of this Court in the case of Anmol Stainless (P) Ltd. [2022 (2) TMI 649 - CALCUTTA HIGH COURT] and ultimately dismissed the appeal. No substantial question of law arising. The appeal before the Appellate Tribunal of the Calcutta High Court concerned the order passed by the Income Tax Appellate Tribunal 'C' Bench, Kolkata in relation to the assessment year 2012-13. The primary issues raised by the Revenue for consideration were whether the Tribunal was justified in granting relief to the respondent assessee concerning the addition of Rs. 17,61,40,800 under section 68 of the Income Tax Act, 1961, and whether the Tribunal was justified in upholding the order of the Commissioner of Income Tax [Appeals] despite the non-response of the directors of the respondent assessee to the notice issued under section 131 of the Income Tax Act, 1961.The Court noted that the CIT[A] had deleted the addition made by the Assessing Officer in respect of a sum treated as unexplained income of the assessee under section 68 of the Act, based on the failure of the assessee to establish the identity, genuineness, and creditworthiness of the share subscribers. The CIT[A] had conducted a detailed fact-finding exercise and considered various court decisions. The Tribunal observed that the share subscriber company, M/s. Infinity BNKE Infocity [P] Ltd., was the holding company of the assessee, with common directors and a vested interest in the assessee's business activities.The tribunal examined the nature of the business activities of the assessee, involving land development projects in Uttar Pradesh, with an estimated project cost of Rs. 300 crores. The tribunal considered the creditworthiness of the investing company, IBIPL, which provided funds for the project execution. The CIT[A] had called for a remand report from the assessing officer, and after reviewing the evidence submitted by the assessee, passed the order in question. The Tribunal also referenced a decision of the Calcutta High Court in the case of Principal Commissioner of Income Tax Vs. Anmol Stainless (P) Ltd. [2022] 138 taxmann.com 535, in support of its dismissal of the appeal.Ultimately, the Court found no substantial question of law arising for consideration in the appeal and dismissed the same.In summary, the key issues considered in the judgment were the justification of the relief granted to the respondent assessee regarding the addition of share capital/premium under section 68 of the Income Tax Act, 1961, and the validity of upholding the order of the Commissioner of Income Tax [Appeals] in light of the directors' non-response to the notice issued under section 131 of the Income Tax Act, 1961. The Court's decision was based on a detailed examination of the facts, including the relationship between the holding company and the assessee, the nature of the business activities, and the creditworthiness of the investing company. The Court's conclusion was that no substantial question of law arose for consideration, leading to the dismissal of the appeal.