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2020 (8) TMI 406 - AT - Income TaxAddition u/s 68 - Unexplained cash credit - Year of assessment - whether the assessee is able to discharge of its onus of explaining the source of alleged money received by it or not; or whether this amount is required to be added with aide of section 68 or not ? - HELD THAT - No actual money was received during this year. The assessee has just passed journal entry and ultimately share application was received in the subsequent year i.e. Asstt.Year 2014-15. Therefore, no inquiry could be made in this year. Assessee has filed a paper book containing 287 pages. We have taken note of all the details tabulated by the ld.counsel for the assessee in his paper book with respect to each share applicant. However, we do not deem it necessary to go through all these details, and record some finding of fact because ultimately even if it is held that assessee was not able to prove the identity or credit-worthiness or genuineness of the transaction, then also in this accounting year this amount cannot be added; because section 68 contemplates that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof, or the explanation offered by the assessee is not, in the opinion of the AO satisfactory, then the sum so credited in the accounts may be treated as income of the assessee of that previous year. The assessee has demonstrated that it has not received any money on account of share application during this year. This statement has been proved by the assessee from the details obtained from the bank, which we have taken note of. Thus, it is to be construed that no amount in real sense has been found to be credited in the accounts of the assessee for the Asstt.Year 2013-14 and if that be so, then how an inquiry for the purpose of section 68 can be made. Therefore, there is no need to examine this evidence i.e. confirmation, capacity and genuineness of 28 applicants. - Decided in favour of assessee.
Issues Involved:
1. Whether the addition of ?2.00 crores under Section 68 of the Income Tax Act for the Assessment Year 2013-14 was justified. Detailed Analysis: Issue 1: Addition under Section 68 of the Income Tax Act Facts of the Case: The assessee, engaged in manufacturing iron and steel rolls, filed its return of income for the Assessment Year 2013-14, declaring a total income of ?75,91,120/-. During scrutiny, the Assessing Officer (AO) noted that the assessee had received share application money amounting to ?2.00 crores from 28 persons/entities. The AO added this amount to the taxable income under Section 68 of the Income Tax Act, as the assessee allegedly failed to discharge the onus of proving the source of the funds. Assessee's Contentions: 1. Timing of Cheque Encashment: - The assessee argued that although the cheques from share applicants were dated before 31st March 2013, they were not presented or encashed before this date. The cheques were actually encashed in May and June 2013. - The assessee relied on the ITAT, Chandigarh Bench decision in the case of Luxmi Foodgrains P. Ltd., and ITAT, Kolkata Bench in the case of Bhagvat Marcom P. Ltd., as well as the Calcutta High Court decision in Jatia Investment Co., to assert that no real inflow of cash materialized before 31st March 2013. Hence, no investigation under Section 68 could be made for the Assessment Year 2013-14. 2. Discharge of Burden under Section 68: - The assessee submitted detailed evidence, including confirmations, share application forms, PAN cards, ITR acknowledgments, and bank statements, to demonstrate the genuineness of the share application money. - The assessee argued that the AO did not conduct any proper inquiries or verifications of the documents provided and made the addition based on doubt and suspicion. Revenue's Contentions: - The AO maintained that the assessee had recognized the receipt of money before 31st March in its balance sheet and was thus obligated to explain the source, creditworthiness, and genuineness of the transactions. - The AO's remand report, which was reproduced by the CIT(A), emphasized that the assessee failed to provide satisfactory explanations. Tribunal's Findings: 1. Timing of Cheque Encashment: - The Tribunal noted that all cheques were presented and encashed after 31st March 2013, indicating that no actual money was received during the accounting year relevant to the Assessment Year 2013-14. This was a notional receipt only, and its source could not be inquired in this year. - The Tribunal referred to the ITAT, Chandigarh Bench decision in Luxmi Foods and ITAT, Kolkata Bench decision in Bhagvat Marcom P. Ltd., which held that Section 68 could not be applied to notional receipts. 2. Discharge of Burden under Section 68: - The Tribunal acknowledged the detailed evidence provided by the assessee but deemed it unnecessary to examine the evidence further, given that no actual money was received during the relevant year. - The Tribunal concluded that since no real amount was credited in the books of the assessee for the Assessment Year 2013-14, an inquiry under Section 68 could not be made. Conclusion: The Tribunal allowed the appeal of the assessee and deleted the addition of ?2.00 crores under Section 68 for the Assessment Year 2013-14. The Tribunal emphasized that no actual money was received during the relevant year, and therefore, the addition was not sustainable. Order Pronouncement: The order was pronounced in the Court on 11th August 2020 at Ahmedabad. Result: The appeal of the assessee was allowed.
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