2010 (7) TMI 1029 - AT - Income Tax

Summary

Issues involved: Appeal against addition of unexplained cash credit under Section 68 of the Income Tax Act for A.Y. 2004-2005.

Summary:
The appeal was filed against the addition of &8377; 17,74,813/- as unexplained cash credit under Section 68 of the Income Tax Act for the assessment year 2004-2005. The assessee had given an advance to Bharat Jari Works (BJW) during the financial year 1-4-2001 to 31-3-2002, and a major part of the advance was returned. However, a portion of the repayment was mistakenly credited to the account of Shri Sultan Virani instead of BJW. The AO made the addition based on this credit entry in BJW's account. The assessee argued that no actual credit was received from BJW during the relevant accounting year and that the transaction with BJW occurred in the financial year 2001-2002. The Tribunal held that Section 68 can be applied only if there is an actual receipt of money by the assessee during the relevant accounting year. Since no amount was received from BJW during the relevant year and the transaction was completed in the previous financial year, the addition under Section 68 was deleted.

The learned DR contended that the credit entry in BJW's account justified the application of Section 68 by the AO. However, the Tribunal disagreed, emphasizing that Section 68 requires an actual receipt of money during the relevant accounting year. As no amount was received from BJW in the relevant year and the transaction occurred in the previous financial year, the Tribunal concluded that Section 68 could not be applied in this case. Therefore, the addition made by the AO was deleted, and the assessee's appeal was allowed.

The Tribunal ruled in favor of the assessee, stating that Section 68 of the Income Tax Act can only be applied if there is an actual receipt of money by the assessee during the relevant accounting year. Since no amount was received from BJW in the year under consideration and the transaction took place in the previous financial year, the addition made by the AO was deemed unjustified and was consequently deleted.