Assessing Officer is not required to examine the commercial expediency of the transaction while evaluating the explanation U/S 68: Delhi HC
The Pr. Commissioner of Income Tax-6 v. Nucleas Steel Pvt. Ltd. (ITA 978/2018)
Facts:
1. The Assessing Officer (AO) made an addition to the income as returned by the Respondent (Assessee) under Section 68 of Income Tax Act and disallowed the addition made under Section 14A of ITA.
2. The Respondent filed its return of income but the same was picked up for scrutiny and a notice under Section 143(2) of Income Tax Act was issued. According to the Respondent, it had received a sum of Rs 67.50 crores from Unitech as an advance against sale of certain lands in Maharashtra.
3. The Assessee had executed an Agreement to Sell on a stamp paper. The AO found that the stamp paper was issued after the date on the deed and concluded that the same was executed on a fake and bogus stamp paper.
4. Hence, the AO held that the said credit standing on the books of accounts of the Respondent was unexplained credit and liable to be included in the total income.
5. Being aggrieved, the Respondent filed an Appeal before the CIT(A) and the same was allowed. The Revenue appealed the Order before the ITAT which was rejected and hence, the case was before the High Court.
Hon Delhi HC held as below:
1. In view of the present case, there is no dispute as to the creditworthiness of Unitech and that it had paid the amount of ₹67.5 crores to the Assessee.
2. There are no attendant circumstances, which would suggest that the Assessee had camouflaged its taxable income as an advance against the sale of property.
3. It is material to note that Unitech has also not reflected the payment as an expense and has derived no tax advantage by making a payment of ₹67.5 crores to the Assessee. The transaction is, thus, tax neutral.
4. In absence of any material indicating that the credit reflected in the books, but for being so reflected, may be chargeable to tax, it would not be reasonable for the AO to reject the Assessee’s explanation on account of any irregularity or flaw in the documentation of the transaction.
5. The appeal by revenue is dismissed.
The copy of the order is as under:
