2018 (7) TMI 1863 - AT - Income Tax

Unexplained cash credit u/s 68 - Share capital and share premium as unexplained - Held that - As held by the Hon ble Delhi High Court in the case of Usha Stud Agricultural Farms Ltd. (2008 (3) TMI 91 - DELHI HIGH COURT) and Parmeshwar Bohra (2007 (1) TMI 105 - RAJASTHAN HIGH COURT), the amount received by the assessee in the earlier year and not in the year under consideration and duly credited in the books of account of the assessee for such earlier year cannot be added under section 68 as unexplained cash credit for the year under consideration. CIT(A) was fully justified in deleting the addition made by the A.O. under section 68 during the year under consideration by treating the amount in question towards share capital and share premium which was received by the assessee company in the earlier year and not in the year under consideration. - Decided against revenue

Issues Involved:
1. Deletion of addition of ?54.35 crores by Ld. CIT(A) treating share capital and share premium as unexplained cash credit under section 68.
2. Verification and acceptance of documentary evidence by Ld. CIT(A) and A.O.
3. Application of judicial precedents in determining the unexplained cash credit.

Issue-wise Detailed Analysis:

1. Deletion of Addition of ?54.35 Crores by Ld. CIT(A):
The solitary issue in this appeal relates to the deletion by the Ld. CIT(A) of the addition of ?54.35 crores made by the A.O. by treating the share capital and share premium as unexplained cash credit. The assessee, a trading company, did not file a return of income for the year under consideration, prompting the A.O. to issue a notice under section 148. The return filed subsequently declared a total income of ?9,470/-. The A.O. initially accepted this, but the assessment was set aside by the Ld. CIT(A) under section 263, directing the A.O. to re-examine the share capital and share premium amount of ?54.35 crores under section 68.

2. Verification and Acceptance of Documentary Evidence:
Upon re-assessment, the A.O. issued a notice under section 142(1), which was returned unserved. Summons to the directors also went unserved. The assessee failed to establish the identity and creditworthiness of shareholders, and the genuineness of transactions. Consequently, the A.O. treated the entire amount as unexplained cash credit and made an addition to the total income. During appellate proceedings, the assessee contended that the amount was received in the year ended 31.03.2000, not in the year under consideration, and provided documentary evidence including audited accounts, bank statements, and statutory forms. The Ld. CIT(A) forwarded these to the A.O. for verification, who confirmed that the amount was indeed received in the F.Y. 1999-2000.

3. Application of Judicial Precedents:
The Ld. CIT(A) relied on judicial precedents to delete the addition. The Hon’ble Delhi High Court in CIT vs Usha Stud Agricultural Farms Ltd. held that credit balances reflected over past years cannot be treated as unexplained cash credits for the current year. Similarly, the Hon’ble Rajasthan High Court in CIT vs Parmeshwar Bohra held that amounts credited in previous years cannot be considered unexplained cash credits in subsequent years. The Tribunal upheld the Ld. CIT(A)’s order, noting that the A.O. had verified and confirmed the assessee’s claim. The Tribunal also referenced a similar case decided by a coordinate bench, reinforcing that amounts credited in earlier years cannot be treated as unexplained cash credits in later years.

Conclusion:
The Tribunal concluded that the Ld. CIT(A) was justified in deleting the addition made by the A.O. under section 68, as the amount in question was received in an earlier year and not in the year under consideration. The appeal of the revenue was dismissed, affirming the Ld. CIT(A)’s order. The decision was pronounced in the open court on 27th July, 2018.

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