Addition u/s 68 on Share Premium Unsustainable without Fair Hearing: ITAT Sets Aside ₹16.02 Cr Unexplained Income [Read Order]

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) struck down the addition of ₹16.02 crore under Section 68 of the Income-tax Act, 1961 and remitted the matter back to the Assessing Officer for reassessment, observing that the assessee had not been given a fair opportunity of being heard.

The assessee Nathan Anil Rao had sold 5048 shares of PCI Pest Control Pvt. Ltd. to a Singapore based company named Rentokil Initial Asia Pacific Management Pte Ltd. for an amount exceeding ₹20 crore. During the scrutiny of the case, the Assessing Officer had treated the share premium of ₹16.02 crore as cash credit under Section 68 of the Income-tax Act.

This was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)], who dismissed the case by stating that there was a lack of documentary evidence.

However, the assessee claimed that the CIT(A) erred in passing the order without providing adequate opportunities of hearing. It was claimed by the assessee that adjournment of dates was requested since there was a need to collect documents from a non-resident buyer, which would take some time.

On the other hand the Revenue department stood by the decisions of the lower authorities and claimed that the assessee failed to discharge the onus under Section 68 of the Income Tax Act.

The Tribunal comprising Om Prakash Kant (Accountant Member) and Ms. Kavitha Rajagopal (Judicial Member) found that the CIT(A) had dismissed the appeal of the assessee without providing sufficient opportunity for presenting evidence in support of its case as well as the assessee had not been able to furnish evidence in the form of documents at the earlier stage due to reasonable cause particularly in dealing with a foreign entity.

The ITAT held that there was a violation of natural justice and set aside the orders of the lower authorities and directed that the matter be sent back to the file of the Assessing Officer. The AO was directed to look into the matter after obtaining further evidence from the assessee on various aspects of identity, creditworthiness, and genuineness of the transaction.

Accordingly,the appeal was allowed for statistical purposes, reinforcing that additions under Section 68 cannot be sustained where the assessee is denied a fair hearing.

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