The Kolkata Bench of the Income Tax Appellate Tribunal ( ITAT ) has held that in cases of unabated assessments, no addition can be sustained under Section 68 of the Income Tax Act, 1961, in the absence of any incriminating material found during a search under Section 132.
The assessee, Andromeda Communications Pvt. Ltd., had issued equity shares at a high premium to certain shareholders who were relatives of the company’s directors. During the assessment proceedings for AY 2012-13, the Assessing Officer (AO) questioned the justification for such premium and made an addition of ₹1.65 crore under Section 68, citing unexplained cash credit. The AO primarily relied on the non-compliance with summons issued under Section 131 by the directors of the company.
Also read: CA Exam Update: ICAI to Resume Self-Paced Online Module from May 15
Complete Ready to Use PDFs of 200+ Agreements Click here
However, the assessee furnished ample documentary evidence including Income Tax Returns, bank statements, and financial details of the investors. The AO failed to point out any deficiency in these documents and also did not conduct any further verification to disprove their authenticity.
Despite this, both the AO and the Commissioner of Income Tax (Appeals) confirmed the addition, raising questions over the genuineness and creditworthiness of the transactions.
The ITAT strongly disagreed with the lower authorities’ reasoning, observing that merely not responding to summons under Section 131 could not be a valid ground for making an addition, especially when detailed evidence had already been submitted and no adverse material had been found during the course of a search.
How to Audit Public Charitable Trusts under the Income Tax Act Click Here
The bench of Pradip Kumar Choubey (Judicial member) and Rajesh Kumar (Accountant member) observed that “….. Moreover, the addition cannot be made merely on the ground
that there was no compliance to the summons u/s 131 of the Act, where the assessee has furnished all the evidences/ details before the ld. AO and there was no verification done by the ld. Assessing Officer to establish or to bring on record any contrary facts.”
It was noted that the Assessing Officer (AO) failed to identify or point out any defect in the evidence furnished by the assessee. Therefore, it held that the AO was not justified in making an addition merely on the ground of non-compliance with summons issued under Section 131 of the Income Tax Act.
Accordingly the appeal of the assessee was allowed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
