ITAT Partly Remands ₹3.25 Cr Share Premium Addition u/s 68 to Verify Claim of Double Taxation [Read Order]

The Raipur Bench of the Income Tax Appellate Tribunal (ITAT) partly allowed an appeal, remanding the adjudication of an income tax addition of ₹3,25,00,000 under Section 68 of the Income Tax Act, 1961, back to the Commissioner of Income Tax (Appeals) ( CIT(A) ) for verifying whether the same income of the assessee had been subjected to assessment earlier, leading to potential double taxation.

The present appeals emanate from a search and seizure action conducted on Sarthak Ispat Pvt. Ltd. on November 26, 2019, as part of proceedings against the Sarthak Group. Pursuant to the search, the assessee was served notices under Section 153A of the Income Tax Act, 1961, in response to which the assessee filed their returns of income on September 23, 2021.

The assessments were thereafter completed for the Assessment Years (A.Y.) 2011-12 to 2013-14, with various additions, including those relating to share capital and share premium.

Aggrieved by the assessment orders and the subsequent appellate order passed by the CIT(A), the assessee appealed the matter before the ITAT.

The assessee, represented by Subhash Agrawal contended that the impugned amount of ₹3.25 crore, attributed to share capital and premium was received through certain Kolkata-based entities and had already been brought to tax in an earlier reassessment order passed under Section 147 on December 19, 2018. Thus it was stated that the income for the same assessment year had been taxed and that the present addition under Section 153A led to double taxation of the same income.

S. L. Anuragi, appearing for the Department, maintained that the Assessing Officer had examined the transactions in detail and found them to be accommodation entries routed through shell entities, with no substantive evidence to establish the identity of the investors, their creditworthiness or genuineness of the transactions.

The two-member Bench of Ravish Sood (Judicial Member) and Arun Khodpia (Accountant Member) examined the record and observed that the Assessing Officer had indeed made detailed findings regarding the non-genuineness of the share premium receipts; the assessee had further failed to discharge the onus on the assessee to explain the nature and source of any sum credited in the books of account as under Section 68 of the Income Tax Act, 1961.

However, the Bench noted that the CIT(A) had not specifically dealt with the assessee’s plea regarding double taxation. Even though the findings on the bogus nature of the transactions remained, the question of duplication of income required proper verification.

Accordingly, the ITAT remanded the matter to the CIT(A) for a fresh examination limited to verifying whether the ₹3.25 crore addition under Section 68 resulted in double taxation of the same income. The Tribunal directed that a speaking order be passed after affording the assessee an adequate opportunity of hearing.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates