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2015 (11) TMI 282 - HC - Income TaxUnexplained increase in shares capital - CIT(A) deleted the addition confirmed by ITAT - Held that:- Assessee has furnished details of all the 14 subscribers from whom funds had been received by way of share application money. The money was also shown to have been received through banking channels. After obtaining a remand report from the AO, the CIT (A) concluded that "the AO has not commented anything adverse" on the additional evidences, copies of accounts and bank statements furnished by the Assessee to the AO. The AO has not disapproved/doubted "the identity and the genuinely of the subscribers." The CIT(A) accordingly concluded that "all ingredients of Section 68 stands satisfied as far as the receipt of share application money by the Assessee company is concerned." Accordingly, the CIT(A) deleted the additions on this account. ITAT relied on CIT v. Lovely Exports (P) Limited [2008 (1) TMI 575 - SUPREME COURT OF INDIA] - Decided against revenue. Unexplained increase in sundry creditors - CIT(A) deleted the addition confirmed by ITAT - Held that:- The increase in sundry debtors was interlinked with the increase in the sundry creditors and both were on account of the "pure business transaction of purchases and sale of share." The CIT(A) was satisfied that the increase in sundry creditors stands fully explained and established by the Assessee. The ITAT, while observing that "there is no presumption that if increase in sundry creditors is proved, the increase in sundry debtors should also be taken as proved", found that the AO did not examine the details of each credit entry as was required by Section 68 and affirmed the decision of the CIT (A). On this issue this Court finds that the Revenue is not able to controvert the factual finding - Decided against revenue. Disallowance of 50% expenditure claimed under the head of the profit and loss account - CIT(A) deleted the addition confirmed by ITAT - Held that:- CIT (A) deleted the disallowance on the ground that the AO had not spelt out any basis for making the 50% disallowance and that there was no justification for such a huge addition. The ITAT agreed with the CIT (A) that no case for making ad hoc disallowance was made by the AO. The Revenue is not able to persuade this Court to interfere with the impugned order of the ITAT which appears to be on a sound legal basis. - Decided against revenue. Addition on account of stock in trading being shown in the balance sheet and not in the trading account - CIT(A) deleted the addition confirmed by ITAT - Held that:- The effect of the closing stock stands automatically considered and reflected in the accounts. The Assessee had declared a loss on trading in shares. With the Assessee having followed the mercantile system of accounting, it is not possible for it to show the closing stock in trade in the balance sheet without taking into account the effect of the credit entry passed for the closing stock which necessarily had to be routed through the profit and loss account. Since no adverse comment has been made by the auditor and since the same method of accounting had been followed by the Assessee in the earlier as well as the subsequent year, the CIT (A) concluded that there was no justification for the addition. - Decided against revenue.
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