2015 (8) TMI 1463 - AT - Income Tax

Addition u/s 68 - Addition being the commission payment estimated by the AO - Held that - Documents and confirmation letter filed by the share applicant company would show that the identity and credit worthiness of the transactions stand proved. Since the impugned sum of ₹ 10.00 lakhs was received through banking channels, the genuineness of the transactions also stand proved. Thus as noticed the assessee has discharged the initial burden of proof placed upon it. CIT(A) has examined the copy of income tax returns, which may not throw light about the credit worthiness. Further the copy of bank statement also shows that there are continuous transactions of deposits and withdrawals. Hence, in my view, the observations made by the CIT(A) that there were heavy deposits before issuing the cheque of ₹ 10.00 lakhs to the assessee company also appear to be misplaced one. Hence, in my view, the Ld CIT(A) has confirmed the impugned addition without properly appreciating facts. Unable to agree with the conclusions reached by CIT(A) in view of the foregoing discussions. Accordingly, set aside the order of CIT(A) on the issue of ₹ 10.00 lakhs and direct the assessing officer to delete the same. Consequently, the addition of ₹ 10,000/- relating to estimated commission income is also directed to be deleted. - Decided in favour of assessee

Summary

Issues Involved:
Challenge to addition of Rs. 10 lakhs under section 68 of the Income Tax Act, 1961 and another addition of Rs. 10,000 as commission payment for assessment year 2005-06.

Analysis:

Issue 1: Addition of Rs. 10 lakhs under section 68 of the Income Tax Act:
The assessee received share application money of Rs. 10.00 lakhs from a company, which was considered unexplained cash credit by the AO. The AO relied on a statement by the director of the share applicant company, but later it was found that the AO did not possess a copy of the statement. The assessee provided details to prove the identity, creditworthiness, and genuineness of the transaction. The CIT(A) confirmed the addition based on the income tax return and bank account of the share applicant company. However, the Tribunal found that the documents provided by the assessee, including audited balance sheets and confirmation letters, proved the identity and creditworthiness of the transaction. The Tribunal concluded that the genuineness of the transaction was established as the sum was received through banking channels. Therefore, the Tribunal set aside the CIT(A)'s order and directed the assessing officer to delete the addition of Rs. 10.00 lakhs.

Issue 2: Addition of Rs. 10,000 as estimated commission payment:
The AO presumed that the assessee paid commission for obtaining accommodation entries and added Rs. 10,000 as unexplained expenditure. The CIT(A) confirmed this addition based on his findings regarding the share application money. However, since the Tribunal overturned the addition of Rs. 10 lakhs, it also directed the deletion of the addition of Rs. 10,000 as estimated commission payment.

In conclusion, the Tribunal allowed the appeal filed by the assessee, setting aside both additions of Rs. 10 lakhs and Rs. 10,000.