By Legal Cell
Southern Road Carriers Ltd Vs DCIT (ITAT Kolkata)
In a noteworthy legal development, the Income Tax Appellate Tribunal (ITAT) Kolkata has rendered a significant decision in favor of Southern Road Carriers Ltd, resulting in the removal of tax additions imposed on the company. This article aims to dissect the essence of the appeal, elucidate the grounds that underpinned it, and shed light on the rationale behind ITAT’s verdict.
Basis of the Appeal: Share Capital Questioned as Unexplained Cash Credit: The core contention revolved around the Assessing Officer’s decision to include an amount of Rs. 1,06,74,500 in Southern Road Carriers Ltd’s income under Section 68 of the Income Tax Act. The Assessing Officer had categorized the share capital received by the company as unexplained cash credits.
Assessing Officer’s Findings: The Assessing Officer scrutinized a distinct cash flow pattern between the company and its four major shareholders, all of whom happened to be relatives of the company’s directors. Nevertheless, Southern Road Carriers Ltd argued vehemently that these transactions were entirely legitimate, compliant with prevailing laws, and substantiated through due confirmation by the shareholders.
Discrepancy in Sale Value and Stamp Duty Value: The second ground for appeal was lodged against an additional tax demand of Rs. 14,60,000, stemming from the variance between the sale price and the stamp duty valuation of a property divested by the company.
Company’s Defense: Southern Road Carriers Ltd contended that the land had been sold under distressing circumstances, resulting in a market value lower than the prevailing stamp duty value. Additionally, the company requested a departmental valuation, a plea that was regrettably overlooked by the Assessing Officer