Case Law Details
ACIT Vs Rachna Finlease Pvt. Ltd. (ITAT Ahmedabad)
Introduction: The Income Tax Appellate Tribunal (ITAT) Ahmedabad recently ruled on an appeal filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) concerning ACIT Vs. Rachna Finlease Pvt. Ltd. The case involved the addition made on protective basis in the assessment year 2010-11. The ITAT examined whether parallel assessments can be made in respect of the same income on two different persons.
Analysis: The appellant, Rachna Finlease Pvt. Ltd., had its name struck off from the Registrar of Companies. The company received a substantial amount of Rs. 26.68 crores in its bank account from various individuals. The Revenue contended that the credit entries were accommodation entries and thus treated them as the company’s income.
However, the appellant provided substantial evidence proving the identity, genuineness, and creditworthiness of the transactions. The ITAT referred to similar cases where the court had already deleted additions made in the hands of other parties involved in the transactions. The tribunal also noted that the provisions of Section 68 of the Income Tax Act, as applicable for the assessment year 2010-11, did not require verification of the source of the source of the funds. ITAT further held that It is settled principle of law the Income Tax Act nowhere provides that parallel assessments can be made in respect of the same income on two different persons.
Conclusion: Based on the evidence provided and the legal aspects involved, the ITAT ruled in favor of the appellant and deleted the addition made on protective basis. The decision highlighted the importance of establishing the genuineness of transactions and creditworthiness of parties involved in such cases.
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