2023 (2) TMI 209 - AT - Income Tax

Addition u/s 68 - unexplained cash credit - HELD THAT - AR has produced several documents to prove the genuineness of the transaction such as ledger of Array Export and Investment Pvt. Ltd. and MMB Steel India Pvt. Ltd. which reflects that the amount has been paid in installments in stage by stage depending upon the construction of the building. Further assessee has also produced flat buyers agreement in respect of Array Export and Investment Pvt. Ltd. and MMB Steel India Pvt. Ltd. Thus the amount has been paid by the two parties i.e. Array Export and Investment Pvt. Ltd. and MMB Steel India Pvt. Ltd. as advanced sale consideration for purchase of Flat which has been conclusively proved by the assessee. Therefore, in our opinion, the addition made by the Ld. A.O. u/s 68 is not called for. Accordingly, the addition made by the A.O. which was sustained by the Ld.CIT(A) u/s 68 of the Act is hereby deleted, the Ground No. 1 of the assessee is allowed. Disallowing the deduction of dividend income - A.O. on perusal of the assessee s computation of income found that the assessee had decreased the dividend on unit of mutual fund/shares (offered for tax earlier) as cost of sales - A.O. was of the opinion that the tax exempt income even if not inventorised earlier would not had yielded any tax. Therefore, made addition - HELD THAT - During the assessment proceedings the Ld. A.O. found that the assessee company had decreased the dividend on unit of mutual funds/shares (offered for tax earlier) as cost of sale. The assessee was also confronted by the A.O. that the benefit of the amount which is taxed exempt cannot be taken again. In this regard, the A.O. has observed that tax exempt income even if not inventorised earlier would not have yielded any tax. Therefore, made the addition which was sustained by the Ld. CIT(A). Considering the facts of the case Ground No. 2 of the Assessee is dismissed.

Summary

Issues:
1. Addition u/s 68 - Rs. 11,181,536/-
2. Deduction of dividend income - Rs. 1,524,221/-

Analysis:

Issue 1 - Addition u/s 68:
The appeal was filed against the order of the ld. Commissioner of Income Tax (Appeals) for the assessment year 2014-15. The assessee contested the addition made u/s 68 amounting to Rs. 11,181,536. The Assessing Officer (A.O.) raised concerns about the creditworthiness of the companies from which the assessee received advances. The A.O. was not satisfied with the explanations provided by the assessee and made the addition as unexplained cash credit. The CIT(A) upheld this addition. However, during the appeal, the assessee presented documents including ledgers and agreements to prove the genuineness of the transactions. The documents confirmed that the advances were paid by the companies towards the purchase of flats. After reviewing the evidence, the Tribunal concluded that the addition made by the A.O. was unwarranted. Therefore, the addition u/s 68 was deleted, and Ground No. 1 of the assessee was allowed.

Issue 2 - Deduction of dividend income:
The second ground of appeal was related to the disallowance of deduction for dividend income amounting to Rs. 15,24,221. The A.O. noted that the assessee had reduced dividend income on units of mutual funds/shares as cost of sales, which was previously offered for tax. The A.O. argued that tax-exempt income, even if not inventoried earlier, would not have incurred any tax liability. The CIT(A) rejected the claim of the assessee, upholding the addition. The Tribunal concurred with the lower authorities, stating that the tax-exempt income could not be claimed again as a benefit. Consequently, Ground No. 2 of the assessee was dismissed. The overall appeal was partly allowed by the Tribunal.

In conclusion, the Tribunal ruled in favor of the assessee regarding the addition u/s 68 but upheld the disallowance of deduction for dividend income. The judgment was pronounced on 06/02/2023 by the Tribunal.