2024 (3) TMI 659 - AT - Income Tax

Unexplained cash credit u/s 68 - increase in capital was added to the income of the assessee as unexplained cash credit - Addition made as assessee could not explain the increase in value of the remaining assets - HELD THAT - There is increase in the value of liabilities with corresponding increase in the value of assets. In the absence of any finding that there is actual introduction of new capital through cash or banking channels, no addition could have been made u/s 68 since it is the primary requirement that there should be cash credit in the books of accounts. The same is missing in the present case. Therefore, the impugned addition as made by Ld. AO invoking the provisions of Sec.68 is not sustainable in law. The case law in the case of M/s V.R.Global Energy Pvt. Ltd. ( 2018 (8) TMI 866 - MADRAS HIGH COURT duly supports the case of the assessee as concurred that when there was no cash involved in the transaction of allotment of shares, the provisions of Section 68 of the Act treating it as unexplained cash credit are not attracted. Therefore, we delete the impugned addition and allow the appeal of the assessee.

Summary

Issues:
The judgment deals with the confirmation of addition of unexplained cash credit for Rs. 130.60 Lacs \u/s 68 as made by the Assessing Officer (AO) while framing an assessment \u/s 143(3) on 31-12-2019.

Details:
The Appellate Tribunal considered the appellant's grievance regarding the addition of unexplained cash credit. The appellant's argument was that the addition was based on a comparison of financial statements without actual cash credits in the books of accounts. The Tribunal noted that during assessment proceedings, it was revealed that the appellant's capital had increased significantly. The appellant explained that the increase was due to obtaining a loan from the bank, which resulted in a corresponding increase in the capital account. The AO observed that while the building was revalued without new investment, the increase in the remaining asset value was unexplained. Consequently, the AO added Rs. 130.60 Lacs to the appellant's income as unexplained cash credit \u/s 68. The Tribunal found that there was no new introduction of capital through banking channels and that the increase in assets and liabilities was accounted for without evidence of new capital introduction. As per the case law of the Hon'ble High Court of Madras, it was established that without actual cash involvement in transactions, Sec. 68 of the Act cannot be invoked for unexplained cash credit. Therefore, the Tribunal ruled in favor of the appellant, deleting the impugned addition and allowing the appeal.

The Tribunal allowed the appeal and dismissed the connected stay application, rendering it infructuous. The order was pronounced on 13th March 2024.