The New Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that no addition can be made on any unaccounted share capital when it was already taxed under the category of ‘source of income’.
Subhshree Investment Management Pvt. Ltd, the respondent-assessee was a private company and Surya processed food Pvt. Ltd. was the ultimate beneficiary of the transfer of unexplained credits in the bank accounts of the assessee company. Further, the assessee company cannot shirk from its legal obligation to prove the identity and creditworthiness in respect of the source of the credits and genuineness of transactions by adjudging itself as a shell company.
The revenue appealed against the order passed by the Commissioner of Income Tax (Appeals) for confirming the deletion of an addition made by the assessing officer to the assesses company.
During the hearing of the appeal, none appeared for the appellant and Rishpal Bedi appeared on behalf of the assessee.
The counsel for the assessee contended that the disclosure had been made by the company that had earned the undisclosed income and routed in books through the petitioner companies as unaccounted share capital and the application of the income was taxed in the hands of the assessee companies it seems and sources of income is taxed in the hands of Surya Food and Agro Ltd.
Thus prima facie the case of the assessee shows that there was a double addition, once the source of income and secondly the application of income and the deletion of addition was as per the law.
The bench observed that based on various decisions since the unexplained income had already been taxed in the hands of another company, the application of the said income in the form of share capital cannot be taxed again.
The two-member bench comprising N.K.Billaiya (Accountant) and Anubhav Sharma (Judicial) directed the adjudicating authorities to re-adjudicate the matter while allowing the appeal filed by the revenue.
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