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2021 (8) TMI 1096 - AT - Income TaxUnexplained cash credit u/s 68 - cash received from partners - difference pointed out by the AO as capital introduced by both the partners of the assessee firm different from the capital contribution stated to be claimed by the assessee firm - HELD THAT - The main source of cash in hand was explained by the assessee as capital contribution made by its partners and since the said source was clearly established on the basis of cash book showing introduction of capital by the partners, the difference as pointed out by the AO in the total capital contribution as claimed by the assessee to the extent of ₹ 31,00,000/- was not relevant to the issue and such shortfall cannot be treated as income u/s 68 in the hands of the assessee firm by treating the same as unexplained cash credit. The issue was relating to the source of cash in hand as reflected in the balance sheet of the assessee as on 31.03.2015 and when the same was satisfactory explained by the assessee inter alia in the form of capital contribution by the partners of the assessee firm, it is of the view that the addition as made by the AO and confirmed by the Ld. CIT(A) u/s 68 is not sustainable. We delete the same and allow this appeal of the assessee.
Issues:
Addition of unexplained cash credit u/s 68 of the Income Tax Act, 1961. Analysis: The appeal was against the addition of ?2,69,013/- made by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) (CIT(A)) on account of alleged unexplained cash credit u/s 68 of the Income Tax Act, 1961. The assessee, a wholesale trading company, filed its return declaring a total income of ?48,550/-. During assessment proceedings, the AO questioned the source of cash in hand of ?29,87,730/- as on 31.03.2015. The AO noted a shortfall of ?2,69,013/- in the capital contribution claimed by the assessee and treated this amount as unexplained, along with an additional ?24,00,000/- transferred to the bank account without proper explanation. The AO made an addition of ?26,69,013/- u/s 68 to the total income of the assessee. Regarding the appeal before the CIT(A), it was observed that the AR of the appellant failed to establish the nature and source of the credit in the books of accounts. The CIT(A) found the AO's action justified for the ?2,69,013/- addition but deleted the ?24,00,000/- addition as the accounts were audited, entries were in books of accounts, and complete details were provided by the appellant. The CIT(A) confirmed the ?2,69,013/- addition and deleted the ?24,00,000/- addition. The Tribunal noted the non-appearance of the assessee during the hearings and disposed of the appeal ex-parte. The Tribunal found that the main source of cash in hand was explained by the capital contribution of partners to the extent of ?28,30,987/-. The difference of ?2,69,013/- in the claimed capital contribution was deemed irrelevant, and the Tribunal held that the addition u/s 68 was not sustainable. Therefore, the Tribunal deleted the ?2,69,013/- addition and allowed the appeal of the assessee. In conclusion, the appeal was allowed, and the addition of ?2,69,013/- made by the AO and confirmed by the CIT(A) u/s 68 was deemed unsustainable and deleted by the Tribunal.
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