2019 (1) TMI 860 - HC - Income Tax

Addition u/s 68 - whether the expression genuineness in the context of the present case has been examined and decided by way of judicial pronouncements? - Held that - The question of genuineness arises in the present case in somewhat a peculiar situation for the Revenue does not dispute payment of ₹ 67.50 crores to the assessee by M/s Unitech Limited on the ground of identity, creditworthiness and even transfer of money. Genuineness is disputed for the reason that the explanation given by the assessee for receipt of the amount, i.e. agreement to sell for land at Taluka Khanpur, District Raigad, State of Maharashtra was rejected for a number of reasons, including sham and bogus backdated agreement to sell, failure to produce the executants, difference between the value indicated and circle rate of the land and the factum that half the value of the alleged transaction was paid in advance. Question would arise whether an addition under Section 68 would be justified and as per the statute, even if the nature and character of the transaction propounded by the assessee is discarded and disbelieved, albeit the transaction otherwise in the form of transfer of money is found to be correct and not doubted.

Summary

Issues:
1. Examination of the expression "genuineness" in the context of the case.
2. Dispute over the genuineness of the explanation for receipt of a significant amount.
3. Justification of addition under Section 68 of the Income Tax Act, 1961.
4. Lack of direct case law on the subject.

Analysis:

1. The judgment delves into the examination of the term "genuineness" in the specific context of the case. The dispute arises due to the rejection of the respondent-assessee's explanation for receiving a substantial amount, attributed to an agreement for land sale. The reasons for disputing the genuineness include the presence of a sham and bogus backdated agreement, failure to produce the executants, discrepancies in the value of the land, and partial advance payment. The court acknowledges the unique situation where the Revenue does not contest the transfer of money but challenges the genuineness of the underlying transaction.

2. A crucial question addressed in the judgment pertains to the justification of adding the amount under Section 68 of the Income Tax Act, 1961. Despite doubts cast on the nature and character of the transaction as presented by the assessee, the court considers whether the mere correctness of the money transfer, unchallenged in its essence, warrants such an addition. The absence of clear precedents on this specific issue prompts the court to issue a notice for further examination and resolution of the controversy.

3. The court's decision to issue a notice returnable on a specified date signifies its intent to delve deeper into the unresolved aspects of the case. This procedural step indicates a proactive approach towards addressing the lack of direct case law and clarifying the applicability of Section 68 of the Income Tax Act, 1961 in scenarios where the genuineness of the transaction is disputed, but the actual transfer of money remains undisputed.

In summary, the judgment navigates through the intricacies of evaluating the genuineness of transactions, the implications of Section 68 of the Income Tax Act, 1961, and the necessity for legal clarity in cases where the nature of transactions is contested. The court's decision to issue a notice reflects a commitment to resolving the existing legal ambiguities and providing a well-founded judicial determination on the matter at hand.