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2022 (8) TMI 1191 - AT - Income TaxAddition u/s 68 - Unexplained cash credit - HELD THAT - In its return submission assessee has merely relied upon several judicial precedents however did not produce any evidence with respect to the creditworthiness and genuineness of the depositors. According to the provisions of Section 68 it is the duty of the assessee to show if any sum is credited in the books of accounts, the nature and source of such credit is by producing relevant details such as identity of the depositors, creditworthiness of the depositors and genuineness of the transaction of depositing such sum. The assessee has failed to demonstrate the same before the lower authorities. In view of this we do not find any infirmity in the order of the learned that lower authorities in confirming the addition u/s 68 - ground no. 1 of the appeal of the assessee is dismissed. Disallowance u/s 14A - CIT(A) restricted the addition/disallowance only with respect to the administrative expenditure at the rate of 0.5% of the average value of investment whereas the AO made the disallowance of ₹ 45,1927 - HELD THAT - As the disallowance confirmed by the learned CIT(A) is ₹ 55,511/ . We do not find any infirmity in the order of the learned CIT(A). Accordingly, his order is confirmed. Ground number 2 is dismissed.
Issues:
1. Addition under Section 68 of the Income Tax Act 2. Disallowance under Section 14A of the Income Tax Act Issue 1: Addition under Section 68 of the Income Tax Act: The appellant, a company engaged in job work activities, received share application money during the year. The assessing officer found discrepancies in the share valuation and the company's financials, leading to an addition of Rs. 450 lakhs as unexplained cash credit under Section 68. The CIT(A) upheld the addition citing reasons such as disproportionate investments, continuous losses, meager profits, and questionable creditworthiness of investors. The appellant failed to provide evidence of the depositors' creditworthiness and genuineness of transactions, resulting in the dismissal of the appeal. The Tribunal affirmed the lower authorities' decision, emphasizing the appellant's duty to establish the nature and source of credits under Section 68. Issue 2: Disallowance under Section 14A of the Income Tax Act: The appellant received exempt income during the year and was asked to explain a disallowance under Section 14A. The assessing officer invoked Rule 8D and made a disallowance of Rs. 451,927. The CIT(A) restricted the disallowance to 0.5% of the investments' average value, resulting in a confirmed disallowance of Rs. 55,511. The Tribunal found no fault in the CIT(A)'s order, dismissing the appellant's appeal on this ground. The Tribunal upheld the decision, noting the CIT(A)'s reasonable restriction on the disallowance under Section 14A. In conclusion, the Tribunal dismissed the appeal filed by the appellant, affirming the additions under Section 68 and the disallowance under Section 14A. The judgment highlights the importance of substantiating credits and investments to avoid disallowances and additions under the Income Tax Act.
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