No Question of Law: Calcutta HC Dismisses Revenue’s Appeal Against ITAT Order Deleting Share Capital Addition u/s 68 [Read Order]
Both the CIT(A) and the Tribunal had examined the critical requirements under Section 68 identity of the investors, creditworthiness, and genuineness of the transaction and had found that these were fully established by the assessee, observed the court
Share Capital
Share Capital
The Calcutta High Court dismissed an appeal filed by the Income Tax Department disputing an order of the Income Tax Appellate Tribunal ( ITAT ) that had removed an addition made under Section 68 of the Income Tax Act, 1961 for share capital and share premium, reiterating that purely factual findings do not give rise to any substantial question of law.
The department had approached the High Court under Section 260A of the Income Tax Act against the ITAT’s decision that upheld the order of the Commissioner of Income Tax (Appeals) [CIT(A)].
The CIT(A) had set aside the Assessing Officer’s invocation of Section 68 against Rajashree Integrated Gold Chain Pvt Ltd, which deals with unexplained cash credits, for the assessment year 2012-13.
Appearing for the Revenue, Mr. Soumen Bhattacharjee argued that the Tribunal erred in dismissing the appeal without appreciating that the identity and genuineness of the share subscribing companies were doubtful, especially as one of the entities had been struck off despite making large investments in the assessee company in its initial years.
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However, the Division Bench comprising Chief Justice T.S. Sivagnanam and Justice Chaitali Chatterjee (Das) found no merit in the Revenue’s contention.
The Bench noted that both the CIT(A) and the Tribunal had examined the critical requirements under Section 68 identity of the investors, creditworthiness, and genuineness of the transaction and had found that these were fully established by the assessee.
The Court observed that the record showed all share applicants were existing income tax assessees, their returns had been filed, share application forms and allotment letters were on record, payments were made through account payee cheques, and there were no cash deposits before issuing cheques. Furthermore, the applicants’ bank statements and capital position proved sufficient creditworthiness.
The High Court found that no important legal issue was present for its consideration because the Tribunal's judgments were solely based on a factual analysis backed by documentary evidence. Consequently, both the appeal and the related application were rejected.
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