High Court Dismisses Income Tax Appeal Regarding Treatment of Share Application Money as Undisclosed Income

Case Name:

Principal Commissioner of Income Tax, Central-2, Kolkata vs. M/S. Golden Goenka Fincorp Ltd. (High Court of Calcutta)

Key Takeaways:

1. The High Court dismissed the appeal filed by the revenue under Section 260A (of Income Tax Act, 1961) against the order of the Income Tax Appellate Tribunal.

2. The substantial questions of law raised by the revenue were related to the addition made under section 68 (of Income Tax Act, 1961), reliance on judgments, and the burden of proof regarding the alleged undisclosed income.

3. The Court found that the matter revolved around facts that were appreciated and re-appreciated by the CIT(A) and the Tribunal, and no substantial question of law arose for consideration.

4. The Court distinguished the present case from a decision of the High Court of Punjab and Haryana, emphasizing the lack of satisfactory explanation for the retraction in the other case.

Case Synopsis:

The case ITAT/160/2022 involves an appeal filed by the Principal Commissioner of Income Tax, Central-2, Kolkata against M/S. Golden Goenka Fincorp Ltd. The appeal was directed against the order passed by the Income Tax Appellate Tribunal for the assessment years 2013-14 and 2015-16. The appeal was filed under Section 260A (of Income Tax Act, 1961).

Key Details:

Case Name: Principal Commissioner of Income Tax, Central-2, Kolkata vs. M/S. Golden Goenka Fincorp Ltd.

Date: 13th January, 2023

Court: High Court at Calcutta, Special Jurisdiction (Income Tax)

Judges: The Hon’ble Justice T.S. Sivagnanam and The Hon’ble Justice Hiranmay Bhattacharyya

Appearance:

Mr. Soumen Bhattacharjee, Adv. for the appellant

Mr. Abhratosh Majumdar, Adv., Mr. Avra Mazumdar, Adv., Mr. Kausheyo Roy, Adv., Mr.Binayak Gupta, Adv., Mr. Sumon Bhowmick, Adv., Mr. Samrat Das, Adv. for the respondent

Substantial Questions of Law:

The revenue raised the following substantial questions of law for consideration:

1. Whether the Tribunal committed substantial error in law by deleting the addition made under section 68 (of Income Tax Act, 1961) on account of unexplained cash credit?

2. Whether the Tribunal committed substantial error in law by distinguishing certain judgments and the principles related to the reliability and importance of admission made during search proceedings?

3. Whether the Tribunal committed substantial error in law by holding that when the assessee makes certain allegations during the search proceeding and denies the content of the statement recorded from him, the burden shifts to the revenue to prove that the same is income?

Court’s Decision:

The Court considered the assessing officer’s treatment of the sum of Rs.25 crores received by the assessee as undisclosed income, based solely on a statement recorded from the assessee. However, the assessee retracted the statement during the search operations, and the retraction was taken note of by the Commissioner of Income Tax (Appeals) and the Tribunal.

The Court found that the matter revolved around facts that were appreciated and re-appreciated by the CIT(A) and the Tribunal, and no substantial question of law arose for consideration. The Court also distinguished the present case from a decision of the High Court of Punjab and Haryana, emphasizing the lack of satisfactory explanation for the retraction in the other case.

Conclusion:

The appeal (ITAT/160/2022) filed by the revenue was dismissed, and the application for stay (IA No.GA/2/2022) was closed.

FAQ:

Q1: What was the appeal about?

A1: The appeal was related to the treatment of share application money as undisclosed income by the assessing officer.

Q2: What were the substantial questions of law raised by the revenue?

A2: The substantial questions of law were related to the addition made under section 68 (of Income Tax Act, 1961), reliance on judgments, and the burden of proof regarding the alleged undisclosed income.

Q3: What was the Court’s decision?

A3: The Court dismissed the appeal, stating that no substantial question of law arose for consideration.

This appeal filed by the revenue under Section 260A (of Income Tax Act, 1961), (the ‘Act’ for brevity) is directed against the order dated 16th September, 2020 passed by the Income Tax Appellate Tribunal, “B” Bench, Kolkata (the Tribunal) in IT(SS)A No.1/Kol/2019 and IT(SS)A No.2/Kol/2019 for the assessment years 2013-14 and 2015-16.

The revenue has raised the following substantial questions of law for consideration:

“i) Whether the Learned Tribunal has committed substantial error in law by deleting the addition made under section 68 (of Income Tax Act, 1961) on

account of unexplained cash credit?

ii) Whether the Learned Tribunal has committed substantial error in law by distinguishing the judgment of the Hon’ble Madras High Court in the case of B. Kishore Kumar Vs. DCIT reported in (2014) 52 taxmann.com 449 (Madras) and judgment of Rajasthan High Court in the case of M/s. Bannalal Jat Construction Vs. Assistant Commissioner of Income Tax in Income Tax Appeal No.140/2018, judgment dated 31.08.2018 on the principles that addition was made on the basis of admission of the assessee and reliability, importance and sanctity of admission made during search could be refuted only be cogent and convincing evidence?

iii) Whether the Learned Tribunal has committed substantial error in law by holding that when assessee makes certain allegations during the search proceeding and denies the content of statement recorded from him under section 132(4) (of Income Tax Act, 1961), the burden shifts to the revenue to prove that the same is income?

We have heard Mr. Soumen Bhattacharjee, learned standing counsel for the appellant/revenue and Mr. Abhratosh Majumdar, learned senior counsel assisted by Mr. Avra Mazumdar and Mr. Kausheyo Roy, learned Advocates for the respondent/assessee.

The short issue which falls for consideration is whether the assessing officer was justified in treating the sum of Rs.25 crores received by the assessee by way of share application money as the assessee’s undisclosed income. On going through the order passed by the Commissioner of Income Tax (Appeals) [CIT(A)] and the learned Tribunal, we find that the assessment was so completed by the assessing officer solely relying upon a statement which was recorded from the assessee on 17th March, 2015. It is not disputed that during the course of search operations, that is, on the last date of authorisation on 21st April, 2015, the assessee had retracted the statement given earlier as well as the affidavit filed by him earlier. That apart, the assessee has also filed another affidavit contending that coercive measures were resorted to and a statement from him was obtained.

This retraction was taken note of by the [CIT(A)] and it has been factually recorded that there was very elaborate evidence available before the Assessing Officer to treat the said sum as undisclosed income of the assessee. The learned Tribunal on its part re-appreciated the factual position and has affirmed the order passed by the CIT(A).

We find that the entire matter revolves on facts which has been appreciated and re-appreciated by the CIT(A) and the Tribunal respectively and we find that there is no substantial question of law arising for consideration in this appeal.

Mr. Soumen Bhattacharjee, learned standing counsel appearing for the appellant/revenue placed reliance on the decision of the High Court of Punjab and Haryana in the case of Gurdev Agro Engineers, Bhawanigarh vs. Gurdev Agro Engineers, Bhawanigarh, 2016 SCC Online P&H 5506.

On going through the facts in the said case, we find that in the said case the CIT(A) affirmed the order passed by the Assessing Officer after noting that during the course of survey there were several supporting documents to the voluntary statement made by the assessee therein. Furthermore, in the said case the retraction was done after three months and it was found that there was no satisfactory explanation for such delay.

Hence, we find the decision in Gurdev Agro Engineers, Bhawanigarh is clearly distinguishable on facts.

Thus, for the above reasons, the appeal (ITAT/160/2022) fails and is dismissed.

The application for stay being IA No.GA/2/2022 is closed.

(T.S. SIVAGNANAM, J.)

(HIRANMAY BHATTACHARYYA, J.)