The Calcutta High Court recently in a case reaffirmed Income Tax Appellate Tribunal ( ITAT ) deletion of addition made on Income Tax under section 68 of the Income Tax Act 1961. Consequently, the appeal contesting the ITAT’s decision was dismissed.
During the financial year 2012-13, the Assessing Officer (AO) added Rs. 17,61,40,800/- to the income of M/s. Snowwhite Infrastructure Pvt. Ltd, the assessee, under Section 68 of the Income Tax Act, 1961 (ITA)
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This section deals with unexplained cash credits, and the AO treated the share capital/premium as unexplained due to the assessee’s failure to prove the identity, creditworthiness, and genuineness of the share subscribers.
The company challenged this addition before the Commissioner of Income Tax (Appeals) [CIT(A)] of Kolkata.
In this appeal, it was established through evidence that the share subscription was genuine, supported by the holding company, M/s. Infinity BNKE Infocity Private Ltd., was the share subscribing company, who had business interest in the assessee company. It was submitted that the assessee had raised a share capital from the said company in the relevant financial year.
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The CIT(A) requested a remand report from the AO, further solidifying the assessee’s case.
Finally, the CIT(A) ruled in favor of the company on 22nd July 2020, finding that the necessary elements to explain the cash credits were satisfactorily established and accordingly deleted the addition made by the AO.
Aggrieved, the Revenue then appealed to the Income Tax Appellate Tribunal ( ITAT ), which also upheld the CIT(A)’s decision on 19th April 2023. Dissatisfied, the Revenue escalated the matter to the High Court of Calcutta, challenging the ITAT’s order.
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After hearing the facts of the case, the bench of Justice T S Sivagnanam and Justice Hiranmay Bhattacharya observed that the share subscriber company was a holding company of the assessee company, and that both the companies had common directors, and also that the share subscribing/ holding company was interested in the business of the assessee.
It was noted that the nature of business activity was examined by the ITAT, who observed that the assessee company had completed multiple pieces of land in the State of UP for developing a project in phases.
The court further noted that the estimated cost of the project at the relevant point of time was Rs.300 crores, and the assessee company had registered its project before the Real Estate Development Authority, U.P.
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It was also noted that the ITAT observed that the funds of the investing company and its creditworthiness had been duly considered and discussed by the CIT[A] in its order dated 22.7.2020.
Plus, the entire share subscription amount was received by the tribunal from its holding company, i.e., IBIPL which in turn was promoted by Infinity Infotech Parks Limited who provided funds for execution of the project either by own or through subsidiaries.
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In light of the observations made, the Court held that there was no question of law, much less substantial question of law arising for consideration in this appeal and the same was dismissed.
The Court also referenced the case of Principal Commissioner of Income Tax Vs. Anmol Stainless (P) Ltd., highlighting that this precedent further supported the dismissal of the appeal.
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