ASSISTANT COMMISSIONER OF INCOME TAX, CHENNAI V. SOUTHERN HEALTH FOODS PRIVATE LIMITED, CHENNAI

ITA 2237/CHNY/2024

AI Insights

The case involves an appeal by the Revenue against the order of the Commissioner of Income Tax (Appeals), which had deleted additions made by the Assessing Officer under section 68 of the Income Tax Act, 1961, concerning unexplained cash credits and the addition of share premium exceeding fair market value. The Income-Tax Appellate Tribunal found that the CIT(A) had not adequately discussed or examined the additional documents and evidence provided by the assessee, leading to a decision to remand the matter back to the Assessing Officer for a thorough re-examination.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 125967 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2025
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S. EASWAR
• Assessee Lawyers: G. SRIKANTH
• Keywords: Condonation of delay; Additional evidence; Unexplained cash credit; Fair market value; Valuation report
• Section: 68

Judgement Text

"आयकर अपीलीय अिधकरण, ’ए’ Ɋायपीठ, चेɄई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI ŵी एस.एस. िवʷनेũ रिव, Ɋाियक सद˟ एवं ŵी जगदीश, लेखा सद˟ क े समƗ । Before Shri S.S. Viswanethra Ravi, Judicial Member & Shri Jagadish, Accountant Member आयकर अपील सं./I.T.A. No.2237/Chny/2024 िनधाŊरण वषŊ/Assessment Year: 2017-18 The Assistant Commissioner of Income Tax, Corporate Circle 3(1), Chennai Vs. Southern Health Foods Private Limited, Khivraj Complex-1, Third Floor No. 477- 480, Nandanam, Anna Salai, Chennai 600 035. [PAN:AARCS3296E] (अपीलाथŎ/Appellant) (ŮȑथŎ/Respondent) अपीलाथŎ की ओर से / Appellant by : Shri S. Easwar, JCIT ŮȑथŎ की ओर से/Respondent by : Shri G. Srikanth, C.A. सुनवाई की तारीख/ Date of hearing : 08.04.2025 घोषणा की तारीख /Date of Pronouncement : 25.04.2025 आदेश /O R D E R PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER: This appeal filed by the Revenue is directed against the order dated 13.06.2024 passed by the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi for the assessment year 2017-18. 2. We find that this appeal is filed with a delay of 11 days. The Appellant - Revenue filed a petition for condonation of delay stating the reasons. Upon hearing both the parties and on examination of the said I.T.A. No.2237/Chny/24 2 petition, we find the reasons stated by the Revenue are bonafide, which really prevented in filing the appeal in time. Thus, the delay is condoned and admitted the appeal for adjudication. 3. Ground No. 1 raised by the Appellant-Revenue is general in nature and requires no adjudication. 4. Grounds No. 2 to 5 raised by the Appellant-Revenue in challenging the action of the ld. CIT(A) in deleting the addition made on account of unexplained cash credit under section 68 of the Income Tax Act, 1961 [“Act” in short]. 5. The ld. DR Shri S. Easwar, JCIT drew our attention to para 12 of the assessment order and submits that the assessee received unsecured loans from M/s. Atmaram Builders Pvt. Ltd. and no documents nor confirmation from the said company produced before the Assessing Officer. Further, he drew our attention to page 18 of the impugned order and argued that the ld. CIT(A)/NFAC, without any basis accepted the written submissions of the assessee and deleted the addition made by the Assessing Officer under section 68 of the Act. The ld. DR vehemently argued that nothing is referred nor discussed by the ld. CIT(A) in his I.T.A. No.2237/Chny/24 3 order, however, given relief only on the basis of submissions of the assessee. 6. The ld. AR Shri G. Srikanth, C.A. drew our attention to page 19 of the impugned order and submits that the assessee submitted all the details before the ld. CIT(A) i.e., certified true copy of the ledger account of M/s. Atmaram Builders P. Ltd., letter dated 03.01.2018 on proposed repayment of the loan, letter dated 30.01.2018 from the lender confirming closure of loan. The ld. AR vehemently argued that the arguments of the ld. DR are incorrect that no evidence filed before the ld. CIT(A). He submits that having satisfied with the written submissions of the assessee, the ld. CIT(A) gave relief accepting the explanation offered by the assessee. 7. Having heard both the parties and perused the same, we note that admittedly, there was no representation before the Assessing Officer in respect of the impugned addition made under section 68 of the Act, para 12 of the assessment order clearly shows the same. The assessee filed additional documentary evidence dated 11.01.2021 before the ld. CIT(A) in support of its claim. The relevant part is extracted in the impugned order at para 7.1.1 of the impugned order. On perusal of the same we note that it was explained that the assessee received loan in the FY I.T.A. No.2237/Chny/24 4 2015-16 and the amount was carried forward only as on “opening balance” in the year under consideration. Further it was explained that the same issue was before the Assessing Officer for FY 2015-16 relevant to the AY 2016-17 and the Assessing Officer dropped the same on examination of necessary documents. Further, evidence to the same, certified copy of ledger account of M/s. Atmaram Builders P. Ltd., letter dated 03.01.2018 on proposed repayment of the loan and letter dated 30.01.2018 from the lender confirming closure of loan were also filed before the ld. CIT(A). We note that no examination nor discussion made by the ld. CIT(A) in giving relief, except stating, consideration of the facts of the case, grounds of appeal, statement of facts, online submissions f the assessee along with documentary evidence. We find that no discussion with reference to the assessment order for AY 2016-17, where, the assessee is stated to have been received loan and the same was shown as opening balance in the period under consideration. Further, in the impugned order, there was no discussion by the ld. CIT(A) with regard to the verification of ledger account of M/s. Atmaram Builders P. Ltd., proposed repayment of the loan and lender’s confirmation for closure of loan. Before us, the ld. DR argued that nothing was brought on record by the assessee in this regard for our examination. We find force in the argument of the ld. DR. In the absence of any remand report I.T.A. No.2237/Chny/24 5 obtained from the Assessing Officer and having no relevant material evidence brought on record, we are of the considered opinion that the issue requires re-examination as there was no discussion made by the ld. CIT(A) with reference to the additional documents filed before the ld. CIT(A). Taking into consideration of the same and in the interest of justice, we deem it proper to remand the matter to the file of the Assessing Officer for fresh consideration. Thus, ground No. 2 raised by the Appellant-Revenue is allowed for statistical purposes. 8. Ground No. 3 raised by the Appellant-Revenue in challenging the action of the ld. CIT(A) in deleting the addition made on account of aggregate consideration received for shares which exceeds the fair market value. 9. On perusal of the balance sheet, the Assessing Officer noted that there was an increase in share capital of ₹.6,30,000/- and increase in share premium of ₹.18,90,000/- totalling to ₹.25,20,000/- during the year and the assessee was asked to explain the same. From the details in respect of shares, the Assessing Officer noted that the assessee issued 63,000 shares at ₹.40/- per share and the face value of such share is ₹.10/- only. Since the assessee received share premium of ₹.18,90,000/- [₹.40-10x63000], which exceeds the fair market value of the shares, the I.T.A. No.2237/Chny/24 6 Assessing Officer applied the provisions of section 56(2)(viib) of the Act and the share premium was brought to tax. On appeal, by considering the additional evidence in the form of valuation report, the ld. CIT(A) deleted the addition made by the Assessing Officer. 10. Before us, the ld. DR submits that in the absence of remand report obtained from the Assessing Officer in respect of the additional evidence and considering the same by the ld. CIT(A) is in violation of Rule 46A of the Income Tax Rules, 1962 being not afforded an opportunity to the Assessing Officer. 11. The ld. AR submits that the Assessing Officer has not called for valuation report from the assessee and strongly supported the order passed by the ld. CIT(A). 12. Having heard both the parties, we note that the Assessing Officer found that the share premium received by the assessee exceeds the fair market value of the shares. The assessee was asked to explain the same. The submissions of the assessee were reproduced at page 6 of the assessment order. On perusal of the same, we note that the assessee issued 63,000 shares at ₹.40/- per share and the face value of such share is ₹.10/-. The Assessing Officer held that the share premium I.T.A. No.2237/Chny/24 7 of ₹.30/- per share attracts the provisions of section 56(2)(viib) of the Act. Having no valuation report in respect of the same, the Assessing Officer added the same to the total income of the assessee. Before the ld. CIT(A), the assessee filed written submissions along with valuation report in the form of additional documentary evidence dated 11.01.2021 and by considering the same, the ld. CIT(A) deleted the addition made by the Assessing Officer. Admittedly, the ld. CIT(A) has not obtained any remand report from the Assessing Officer. In the absence of any remand report obtained from the Assessing Officer, we are of the opinion that the issue requires re-examination as no relevant material evidence brought on record. Accordingly, we deem it proper to remand the matter to the file of the Assessing Officer for fresh consideration. Thus, ground No. 3 raised by the Appellant-Revenue is allowed for statistical purposes. 13. In the result, the appeal filed by the Revenue is allowed for statistical purposes. Order pronounced on 25th April, 2025 at Chennai. Sd/- Sd/- (JAGADISH) ACCOUNTANT MEMBER (S.S. VISWANETHRA RAVI) JUDICIAL MEMBER Chennai, Dated, 25.04.2025 I.T.A. No.2237/Chny/24 8 Vm/- आदेश की Ůितिलिप अŤेिषत/Copy to: 1. अपीलाथŎ/Appellant, 2.ŮȑथŎ/ Respondent, 3. आयकर आयुƅ/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय Ůितिनिध/DR & 5. गाडŊ फाईल/GF. "