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.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the Revenue as against the Appellate order dated 24-10-2019 passed by the Commissioner of Income Tax (Appeals), Gandhinagar arising out of the assessment order passed under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2010-11.
2. The brief facts of the case is that the assessee is a Private Limited Company and the name of the assessee company has got struck off from the Registrar of Companies w.e.f. 21-07-2011 as per section 560(5) of the Companies Act and the letter dated 21-072011 issued by Ministry of Corporate Affairs. However the company has received Rs. 26,68,50,000/- in its bank account from Shri Rameshji Gobarji Thakor and Shri Hansaben Manilal Patel as follows:
