Unexplained Credit Entry concerning Share Capital: Delhi HC quashes Income Tax Addition [Read Order]

The Delhi High Court quashed income tax addition made in relation to unexplained credit entry concerning share capital. By the instant appeal, the appellant/assessee, Kanti Commercials sought to assail the order passed by the Income Tax Appellate Tribunal (ITAT). Before the Tribunal, an appeal was preferred by the respondent/revenue against the order passed by the Commissioner of Income Tax (Appeals) [“CIT(A)”]. The CIT(A) via the said order deleted an addition of Rs. 1,90,00,000/- made under Section 68 of the Income Tax Act, 1961.

The Counsel for the respondent stated that the appellant/assessee was not represented before the Tribunal. Clearly, in view of this circumstance, the appellant/assessee had no opportunity to deal with the decision on which the Tribunal has relied while passing the impugned order dated 18.01.2023. Concededly, no hearing was held between 13.12.2022 and the date on which impugned order was passed. A Division Bench of Justices Rajiv Shakdher and Girish Kathpalia observed that “This addition was made on account of purported unexplained credit entry concerning share capital/share premium.

A perusal of the impugned order shows that the Tribunal concluded in favour of the respondent/revenue, based on the judgment rendered by its Kolkata Bench in ITA No. 271/Kol/2014, titled ITO vs Blessings Commercial Pvt. Ltd. This decision concerned AY 2010- 11. 11. To be noted, according to the AO, Blessings Commercial Pvt. Ltd. was one of the investors in the share capital/share premium received by the appellant/assessee.” “In these circumstances, the impugned order is set aside and the matter is remanded to the Tribunal for a fresh hearing. Needless to add that, we have not examined the merits of the matter.

The Tribunal will, thus, be free to arrive at its own conclusion while deciding the matter on merits. To hasten the proceedings, we direct that the matter will be placed before the concerned bench of the Tribunal, albeit, for directions, on 01.12.2023. The Tribunal will thereafter progress the matter further” the Court concluded.

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