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2020 (3) TMI 1137 - AT - Income TaxAddition u/s 68 as unexplained cash credit - genuineness or otherwise of the MOU - Additions based on statement of third party - HELD THAT - On perusal of the MOU we find that both the parties have agreed therein that the amount to the tune of 5.69 Crores has already been paid by M/s. U-Turn Housing Pvt. Ltd. prior to entering into such fresh MOU and the same shall be adjusted against the total consideration of 9.14 crores. The Court of ld. ADJ Jaipur has also taken cognizance of receipt of 5.69 crores by the assessee company. The said assertion in the MOU has also been confirmed separately by way of annual confirmation statement submitted before the AO duly signed by Shri Nikhil Tripathi and it is not the case of the Revenue that his signature on such confirmation was forged. Further credit notes are issued by M/s. U-Turn Housing Pvt. Ltd. again signed by Shri Nikhil Tripathi drawing reference to MOU dated 14.07.2007 and stating that sum has been credited in account of the assessee company against sale proceeds of specified plots of land. As we have noted above the payment of 3.89 Crores also corroborates with the books of accounts of M/s. U-Turn Housing Pvt. Ltd. The statement of Shri Nikhil Tripathi cannot be held as reliable piece of evidence against the assessee company in view of various discrepancies and lack of corroboration as we have discussed above. Further there is no material on record which can form the basis to hold that the assessee company has received 3.26 crores in cash from M/s U-Turn Housing Pvt. Ltd. which has not been accounted for in its books of accounts during the financial year 2006-07. Addition made by the Assessing officer to this effect is hereby directed to be deleted. - Decided in favour of assessee.
Issues Involved:
1. Non-adjudication of Ground No. 3 in the previous Tribunal order. 2. Legality of addition of ?3,26,00,000/- as unexplained cash credit under Section 68 of the Income Tax Act, 1961. Detailed Analysis: 1. Non-adjudication of Ground No. 3 in the previous Tribunal order: The Tribunal had previously upheld the CIT(A)'s order but failed to adjudicate Ground No. 3 of the assessee's appeal for the assessment year 2007-08. Upon the assessee's request, the Tribunal recalled its earlier order for the limited purpose of adjudicating Ground No. 3, acknowledging the oversight. The Tribunal noted that Ground No. 3 was not common to the assessment year 2006-07 and thus required independent adjudication. 2. Legality of addition of ?3,26,00,000/- as unexplained cash credit under Section 68 of the Income Tax Act, 1961: Background: The assessee, engaged in real estate, filed a return declaring ?1,90,08,880/-. The case was reopened based on information received, and the AO added ?3,26,00,000/- as unexplained cash credit, invoking Section 68. This addition was based on a memorandum of understanding (MOU) with M/s U-Turn Housing Pvt. Ltd. and the statement of its director, Shri Nikhil Tripathi, who confirmed cash payments to the assessee. Assessee's Contentions: - The assessee argued that the MOU dated 22.03.2006 was canceled and a fresh MOU was entered on 14.07.2007. - The assessee claimed to have received ?3,89,00,000/- through banking channels, which was duly accounted for. - The assessee contested the validity of the statement by Shri Nikhil Tripathi, asserting that no cash payments were received and that the entries in M/s U-Turn Housing Pvt. Ltd.’s books were incorrect. - The assessee highlighted discrepancies in the amounts and dates of purported cash payments and argued that the AO failed to conduct a thorough investigation or corroborate the evidence. Revenue's Contentions: - The Revenue relied on the statement of Shri Nikhil Tripathi and the ledger account of the assessee in the books of M/s U-Turn Housing Pvt. Ltd., which reflected cash payments totaling ?3,26,00,000/-. - The CIT(A) upheld the AO's findings, dismissing the assessee's evidence and arguments. Tribunal's Findings: - The Tribunal emphasized the requirements of Section 68, noting that the addition can only be made if the sum is found credited in the assessee’s books, which was not the case here. - The Tribunal found significant discrepancies in the ledger entries and the statement of Shri Nikhil Tripathi, noting that payments purportedly made to the assessee were actually to third parties or through intermediaries without proper linkage to the assessee. - The Tribunal criticized the AO for not conducting a thorough investigation, including not verifying the cash balance of M/s U-Turn Housing Pvt. Ltd. and not seeking forensic verification of the disputed MOU. - The Tribunal noted that the MOU dated 14.07.2007 was found during police investigations and acknowledged by courts, undermining the AO's dismissal of the document. Conclusion: The Tribunal concluded that the statement of Shri Nikhil Tripathi lacked corroboration and could not be relied upon. There was no material evidence to support the addition of ?3,26,00,000/- as unexplained cash credit. Consequently, the addition was deleted, and Ground No. 3 of the assessee’s appeal was allowed. Order Pronounced: The order was pronounced in the open Court on 17/03/2020, allowing the assessee's appeal regarding the addition under Section 68.
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