ITAT Allahabad Judgments — May 2022

The ITAT held that the CIT(A)'s ex parte dismissal without a speaking order was not in conformity with Section 250(6) of the Income Tax Act. Therefore, the CIT(A)'s order was set aside.

The Tribunal dismissed the appeal filed by the assessee. The core issue revolved around the addition of Rs. 20,00,000/- made under Section 68 of the Income-tax Act, 1961, representing share capital introduced by two shareholders, Sanjeev Kumar and Vinod Kumar Sharma. The Tribunal found that the assessee failed to adequately explain the sources of the cash investments of Rs. 10,00,000/- each by these individuals. The reasoning was that the creditworthiness of these shareholders could not be established, considering the material on record, including the income declared in their respective income tax returns. The Tribunal reiterated the legal fiction created by Section 68, which places the onus on the assessee to satisfy the AO cumulatively regarding the identity, creditworthiness of the creditors, and the genuineness of the transaction. Since the assessee failed to meet this burden, the addition was upheld. The Tribunal concluded that the appeal lacked merit and ordered accordingly.

The Tribunal held that an addition can be made under Section 153A even if it's not based on incriminating material found during the search, especially for years where the assessment was not pending. The Tribunal also found no double addition regarding an amount already accepted in original assessment proceedings.

The Tribunal held that the Assessing Officer initiated compulsory scrutiny without prior approval and in violation of CBDT instructions. The notice under section 143(2) was issued before the relevant CBDT instructions for the financial year, rendering the compulsory scrutiny invalid.

The Tribunal set aside the CIT(A)'s order and restored the matter to the AO for fresh determination. The assessee was directed to file a revised tax-audit report, and the AO was to verify it with supporting evidence.

The Tribunal held that if the employee's share of PF/ESI is deposited before the due date of filing the return of income under section 139(1), the assessee is entitled to deduction under section 36(1)(va). The disallowance made by the Assessing Officer was deleted.

The Tribunal held that the assessee failed to discharge the onus of proving the genuineness of the transaction and the creditor's details. However, it provided one more opportunity to the assessee to submit complete evidence before the AO.