Case Law Details
Fortune Credit Capital Limited Vs DCIT (ITAT Mumbai)
Introduction: In a recent development, the Income Tax Appellate Tribunal (ITAT) Mumbai directed re-adjudication in the case of Fortune Credit Capital Limited vs DCIT (Mumbai). The order, dated 10/05/2023, has implications related to the failure to produce documents concerning loan transactions and the purchase and pledge of shares. This article delves into the details of the case, analyzing the background, arguments, and the ITAT’s directive for re-examination.
Detailed Analysis: The case originated with the Assessing Officer (AO) receiving information suggesting irregularities related to M/s Nivyah Infrastructure and Telecom Services Ltd’s shares. The AO, upon forming a reason to believe that income had escaped assessment, issued a notice under section 148 of the Income-tax Act, 1961. The Assessee responded, providing its e-return of income, declaring total income at Rs. 2,59,35,940/-. The crux of the Assessee’s claim was that Shri Hemant Madhusudan Sheth had taken a loan and pledged shares, which, upon default, were sold, and the remaining amount was written off as bad debts.
The Assessing Officer, however, found the explanation insufficient, noting that the Assessee had not disclosed these facts in the original assessment. Summonses were issued to Shri Hemant Madhusudan Sheth, who failed to provide the required documents. The AO, based on the lack of evidence and non-disclosure, added Rs. 5,01,650/- under section 68 of the Act, treating it as income.
The Assessee contested the addition before the Commissioner, reiterating its stance. The Commissioner, considering the absence of loan transaction documents and shares-related documentation, upheld the addition. The crucial aspects highlighted included the initiation of the sale transaction by the appellant, the absence of cost of acquisition for the shares, and the non-disclosure of income from the sale in the return.
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