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2016 (11) TMI 1553 - AT - Income TaxAddition u/s 68 - cash deposits were out of sale proceeds which were reflecting in the sales account because no such explanation was offered before the A.O. during the course of scrutiny proceedings - Held that - The entire deposit to the bank account has been recorded in the books of the assessee and the books were produced before the Assessing Officer. The total sales of the assessee were of ₹ 8511415/-. Out of the total sales, the assessee has cash sales of ₹ 449338/-. The entire cash deposit is either from sale proceeds or from the collection against the book debt. We find that as per section 68 of the Act sum should be credited in the books but the assessee has credited the sale proceeds in its books of accounts which has been accepted by the Assessing Officer. AO has nowhere found the defect in the books of accounts, therefore, when the assessee has credit sale proceeds in cash in the books of accounts and the same is deposited in bank, no addition can be made u/s 68 Unexplained share application money - Held that - In case of three parties the learned CIT(A) was of the view that three parties, viz. M/s R.K. Skyline Construction Ltd., M/s Renovision Commece P. Ltd and Amarjyoti Vyapar Ltd. no cash was deposited and the learned CIT(A) has verified the bank accounts of these parties and he has treated it as genuine and the addition of ₹ 12 lacs was deleted. Therefore, our interference is not called for.
Issues Involved:
1. Addition of cash deposits under section 68 of the Income Tax Act. 2. Addition of share application money under section 68 of the Income Tax Act. 3. Addition of unsecured loan under section 68 of the Income Tax Act. Issue 1: Addition of Cash Deposits under Section 68 of the Income Tax Act: The case involved the deletion of an addition of ?35.05 lakh made by the Assessing Officer under section 68 of the Income Tax Act. The Assessing Officer added the amount as the assessee had not satisfied the identity of the shareholders regarding additional share capital raised. However, the CIT(A) deleted the addition, stating that the cash deposits were from cash sales already reflected in the sales account. The ITAT upheld the CIT(A)'s decision, emphasizing that the cash deposits were from sale proceeds or collection against book debts, duly recorded in the books of accounts. The ITAT referenced relevant case laws to support the decision, concluding that no addition could be made under section 68 of the Act. Issue 2: Addition of Share Application Money under Section 68 of the Income Tax Act: The case also dealt with the addition of share application money received from various companies. The Assessing Officer questioned the genuineness of the transactions, particularly regarding the number of applicants and the timing of cheque deposits. The CIT(A) partially allowed the appeal, deleting the addition of ?12 lakh related to three parties but confirming the addition of ?28 lakh from seven other parties. The ITAT upheld the CIT(A)'s decision, noting that the CIT(A) had verified the bank accounts of the parties in question and found the transactions genuine, leading to the deletion of the ?12 lakh addition. Issue 3: Addition of Unsecured Loan under Section 68 of the Income Tax Act: Regarding the addition of an unsecured loan of ?16,39,960 under section 68 of the Act, the Assessing Officer added the amount due to doubts about the creditworthiness of the depositor and the significant cash deposits before the payment. The CIT(A) confirmed the addition, highlighting the low income and capital of the depositor, along with suspicious bank transactions. The ITAT agreed with the CIT(A)'s decision, citing a precedent from the Gujarat High Court and concluding that the creditworthiness was not established, thus upholding the addition under section 68 of the Act. In conclusion, the ITAT dismissed the departmental appeal and the cross objection of the assessee in all three issues, affirming the decisions made by the CIT(A) regarding the additions under section 68 of the Income Tax Act. The judgment was pronounced on 21st November 2016.
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