2016 (12) TMI 618 - HC - Income Tax

Unexplained cash credit under section 69 - Held that - The entire amount which is sought to be added by the A.O., entries have been explained by the assessee by producing Special Audit Report and in the Special Audit Report the Special Auditor has stated all the entries, the learned CIT(A) as well as the learned tribunal are justified in deleting the said addition by observing that the A.O. was not justified in making addition of the aforesaid amount on account of unexplained cash credit under section 69 of the Act, which has been explained in the Special Audit Report. - Decided in favour of assessee

Summary

Issues involved:
Appeal against the judgment of the Income Tax Appellate Tribunal regarding the addition of unexplained cash credits under section 69 of the Income Tax Act for a specific assessment year.

Analysis:
1. The revenue challenged the Tribunal's decision to delete the addition of ?56,61,60,657 made by the Assessing Officer under section 69 of the Act. The CIT(A) deleted the addition after considering a Special Audit Report which explained all entries. The CIT(A) emphasized the importance of deciding the case on merit and relied on the exhaustive Audit Report by Chartered Accountants to establish the genuineness of the credits. The CIT(A) concluded that the addition deserved to be deleted based on the evidence provided in the audit report.

2. The Tribunal upheld the CIT(A)'s decision, stating that the auditors had confirmed the genuineness of the credits and income earned by the concerns/persons mentioned. The Tribunal agreed that the addition made by the Assessing Officer was not justified, especially considering that the assessee had offered a portion of the income as unexplained before the Settlement Commission. The Tribunal found no infirmity in the CIT(A)'s order and upheld the deletion of the addition.

3. The High Court observed that the deletion of the addition was justified as the assessee had explained all entries through the Special Audit Report. The Court agreed with the lower authorities that the Assessing Officer's decision to add the amount under section 69 was not warranted. The Court dismissed the appeal, concluding that there was no merit in challenging the decision to delete the addition based on the evidence provided in the audit report.

In summary, the High Court upheld the decision to delete the addition of unexplained cash credits after considering the detailed Special Audit Report, which provided substantial evidence to explain the entries in question. The Court found no justification for the Assessing Officer's initial addition under section 69 of the Income Tax Act and dismissed the appeal accordingly.