ITO Vs Prem Softech Private Ltd. (ITAT Delhi)
In ITO vs Prem Softech Pvt. Ltd. (A.Y. 2014-15), the AO treated ₹12.30 crore invested in mutual funds as unexplained investment u/s 69 and also estimated income on contractual receipts after reopening assessment u/s 147. The CIT(A) deleted the addition after examining bank statements, mutual fund records and financials of Prem Power Construction Pvt. Ltd., which showed that funds were received for software development and later returned in the same year.
Before the ITAT, the Revenue argued violation of Rule 46A and lack of creditworthiness of the lender. The Tribunal held that CIT(A) had exercised appellate powers to call for relevant material and it was not a case of admitting fresh evidence. Bank statements and balance sheet of the lender (showing surplus funds) established genuineness and creditworthiness, and mere failure of the software project could not render the transaction unexplained.
Accordingly, the Tribunal upheld deletion of the ₹12.30 crore addition and dismissed the Revenue’s appeal, affirming that adequately explained mutual fund investments cannot be taxed as unexplained income.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal preferred by the Revenue against the order dated 27.05.2024 of Ld. National Faceless Appeal Centre (NFAC) (hereinafter referred to as the First Appellate Authority or ‘the ld. FAA’ for short) in DIN & Order No : ITBA/NFAC/S/250/2024-25/1065163123(1)arising out of the assessment order dated 29.03.2022 u/s 147r.w.s 144 read with section 144B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by NFAC, Delhifor AY: 2014-15.
