2021 (9) TMI 1095 - AT - Income Tax

Unexplained cash credit u/s 68 - case of the assessee that the surrender was made on account of receipt of share application/capital from three companies without the presence of any incriminating material - CIT-A deleted the addition - HELD THAT - We find merit in the plea of the Assessee that charging tax on the disclosure made in the individual capacity and bringing the same amount to tax yet again in the hands of the assessee Company would clearly amount to double taxation. Secondly, the assessment of the assessee Company for A.Y. 2011-12 has remained undisturbed where similar subscription of ₹ 7.75 Crores has been obtained and declared by Shri Singhania. The source of share capital thus clearly stand proved on account of disclosure by Singhania - A.O. was patently unjustified in making separate additions in the hands of the assessee Company for the same very disclosure. The reasoning of the CIT(A) for reversal of the action of the A.O. is on sound rationale. Unexplained cash credit on account of trade advance u/s 68 - CIT(A) after obtaining the remand report from the A.O. affirmed the fact that the booking advances received by the assessee have been duly refunded which fact has also been accepted by the prospective buyers - HELD THAT - AO has not made any attempt to rebut the claim of the assessee. The confirmations were filed by the assessee to support the factual position. The assessee has placed the facts which are apparent in nature for which no rebuttal has been done. The Hon ble Gujarat High Court in the case of CIT vs. Ayachi Chandrasekhar Narsangji, 2013 (12) TMI 372 - GUJARAT HIGH COURT , CIT s. Mahavir Crimpers, 2018 (6) TMI 1058 - GUJARAT HIGH COURT have held that when the Department has accepted the factum of repayment, the additions under section 68 is not sustainable in law. Similar view has been expressed in CIT vs. Karaj Singh 2011 (3) TMI 951 - PUNJAB AND HARYANA HIGH COURT Panna Devi Chowdhary vs. CIT, 1994 (3) TMI 80 - BOMBAY HIGH COURT Overwhelming fact of refund of booking advances which transcends all other considerations coupled with the confirmations from prospective buyers, the CIT(A), in our view, has rightly concluded the issue in favour of the assessee. The view of the CIT(A) is based on sound legal principle in the facts of the case and cannot be dislodged. Thus, we see no merit in the grievance of the revenue.

Summary

Issues Involved:
1. Addition of ?4,90,00,000/- made by the A.O. on account of unexplained cash credit under section 68 of the Income Tax Act, 1961.
2. Addition of ?57,95,000/- made by the A.O. on account of unexplained cash credit in respect of Trade Advances received.

Issue-wise Detailed Analysis:

1. Addition of ?4,90,00,000/- on account of unexplained cash credit under section 68:

The Revenue challenged the relief granted by the CIT(A) regarding the addition of ?4.90 Crores made by the A.O. under section 68 of the Act concerning share capital. The assessee, engaged in the real estate business, filed its return for A.Y. 2012-13 declaring an income of ?1,16,71,191/-. During the scrutiny assessment, the A.O. added ?4.90 Crores, invoking section 68 in respect of share capital.

The CIT(A) reversed this addition, noting that the Director of the assessee company, Shri Subodh Singhania, had stated in his statement under section 133A that ?12.65 Crores was his own money introduced as share capital through other companies. He accepted this amount as his income, offering ?4.9 Crores in A.Y. 2012-13 and ?7.75 Crores in A.Y. 2011-12. The CIT(A) observed that no adverse view was taken in A.Y. 2011-12 and no further investigation was carried out by the A.O. to disprove Shri Singhania’s statement. Citing the Supreme Court’s decision in CIT vs. Lovely Exports Pvt. Ltd., the CIT(A) concluded that the same amount could not be taxed twice and deleted the addition.

The Tribunal upheld the CIT(A)’s decision, noting that the A.O. did not conduct any query to displace Shri Singhania’s averment. The Tribunal found merit in the assessee's plea that charging tax on the disclosure made in the individual capacity and bringing the same amount to tax again in the hands of the assessee company would amount to double taxation. The Tribunal also noted that the A.O. was unjustified in making separate additions in the hands of the assessee company for the same disclosure, affirming the CIT(A)'s rationale.

2. Addition of ?57,95,000/- on account of unexplained cash credit in respect of Trade Advances:

The Revenue also challenged the relief granted by the CIT(A) regarding the addition of ?57.95 Lakhs made by the A.O. under section 68 concerning trade advances. The A.O. disbelieved the refund of booking amounts for flats, treating the amount as unexplained cash credit due to discrepancies in the details provided.

The CIT(A) noted that the assessee had furnished the cash book and confirmations from the persons to whom cash was returned. The A.O. commented on the mismatch of PANs and similarity in cancellation letters but did not make further inquiries. The CIT(A) found that the refund of booking advances was duly recorded in the cash book and accepted by the respective persons. The CIT(A) concluded that the onus was on the A.O. to examine the witnesses and establish the genuineness of the amount, which was not done, and therefore deleted the addition.

The Tribunal upheld the CIT(A)’s decision, noting that the booking advances were refunded and accepted by the prospective buyers. The Tribunal cited multiple judicial precedents, including CIT vs. Ayachi Chandrasekhar Narsangji and CIT vs. Mahavir Crimpers, which held that when the factum of repayment is accepted, additions under section 68 are not sustainable. The Tribunal found no merit in the Revenue's grievance and affirmed the CIT(A)’s conclusion.

Conclusion:

The Tribunal dismissed the Revenue’s appeal, upholding the CIT(A)’s decision to delete the additions of ?4.90 Crores and ?57.95 Lakhs made by the A.O. under section 68 of the Income Tax Act, 1961. The Tribunal found that the CIT(A)’s conclusions were based on sound legal principles and factual findings, with no reason to interfere with the relief granted to the assessee.