2018 (7) TMI 2044 - AT - Income Tax

Addition u/s 68 - Unexplained cash credit - HELD THAT - As decided in M/S. JELLOTIC SUPPLY PVT. LTD. 2018 (7) TMI 372 - ITAT KOLKATA and USHA STUD AGRICULTURAL FARM LTD. 2008 (3) TMI 91 - DELHI HIGH COURT 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. u/s 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.

Summary

Issues Involved:
1. Deletion of the addition of ?54.70 crores made by the A.O. by treating the share capital and share premium as unexplained cash credit.

Issue-Wise Detailed Analysis:

1. Deletion of the Addition of ?54.70 Crores:

The primary issue in this case revolves around the deletion by the Ld. CIT(A) of the addition of ?54.70 crores made by the A.O. by treating the share capital and share premium as unexplained cash credit under section 68 of the Income Tax Act.

Background:
The assessee, a trading company, did not file a return of income for the relevant year under section 139(1). Consequently, a notice under section 148 was issued, and the assessee filed a return declaring a total income of ?8,870/-. The A.O. completed the assessment accepting this return. However, the Ld. CIT(A) set aside this assessment, directing the A.O. to reassess the issue of share capital and share premium amounting to ?54.70 crores.

Assessment Proceedings:
The A.O. issued a notice under section 142(1), which was returned unserved. Summons issued to the directors also went unserved. The assessee failed to establish the identity and creditworthiness of the shareholders or the genuineness of the transactions. The A.O. treated the entire amount of ?54.70 crores as unexplained cash credit under section 68.

Appeal Before Ld. CIT(A):
The assessee contended that the amount in question was received in the financial year 1999-2000 and not in the year under consideration. They supported this claim with various documents, including audited accounts, bank statements, and forms filed with the Registrar of Companies. The Ld. CIT(A) forwarded these documents to the A.O. for verification.

Verification by A.O.:
The A.O. verified the documents and confirmed that the share capital and share premium were indeed received in the financial year 1999-2000. Based on this verification, the Ld. CIT(A) held that the amount could not be treated as unexplained cash credit for the year under consideration and deleted the addition.

Tribunal's Analysis:
The Tribunal observed that the documentary evidence supported the assessee's claim that the amount was received in the earlier year. The Tribunal noted the decisions of the Hon'ble Delhi High Court in CIT v. Usha Stud Agricultural Farms Ltd. and the Hon'ble Rajasthan High Court in CIT v. Parmeshwar Bohra, which held that amounts received in earlier years cannot be treated as unexplained cash credits in subsequent years.

Conclusion:
The Tribunal upheld the Ld. CIT(A)'s order, emphasizing that the amount received in an earlier year cannot be added as unexplained cash credit for a subsequent year. The Tribunal also referenced a similar decision by its coordinate bench in another case, reinforcing the principle that the year of receipt is crucial for section 68 applicability.

Final Order:
The appeal of the revenue was dismissed, and the deletion of the addition by the Ld. CIT(A) was upheld.

Order Pronounced:
The order was pronounced in the Open Court on 27th July, 2018.