2003 (9) TMI 295 - AT - Income Tax

Summary

Issues:
1. Addition of Rs. 8 lacs under section 68 of the Income Tax Act.
2. Addition of Rs. 30 lacs on account of unrecorded receipts in the books of accounts.

Analysis:
1. Issue 1 - Addition of Rs. 8 lacs under section 68 of the Income Tax Act:
The appeal was against the CIT(A)'s order confirming the addition of Rs. 8 lacs on account of credit entries under section 68 of the Act. The assessee had unsecured loans of over Rs. 3 crores from 105 parties during the relevant period, with confirmations from 103 creditors. However, confirmations from the remaining two parties were not procured as they were out of town. The assessee argued that the credits were genuine, supported by account payee cheques. The ITAT found that the assessee's conduct and explanations warranted an opportunity to file evidence regarding the genuineness of the two credit entries. The matter was remanded to the AO for fresh consideration, allowing the assessee to present evidence in support of its plea.

2. Issue 2 - Addition of Rs. 30 lacs on account of unrecorded receipts:
The AO made an addition of Rs. 30 lacs based on notings on loose papers found during search operations at a sister concern of the assessee. The notings were later attributed to the assessee-company. The ITAT noted that the loose paper lacked headings and clarity on whether the amounts were receipts or payments. The actual receipts from the sister concern exceeded the expected amounts noted on the loose paper. The ITAT observed that the addition was made on mere possibilities and presumptions without concrete evidence. It was emphasized that notings on loose papers without corroborative evidence cannot be assessed as income. Relying on case law, the ITAT held that no case for addition was established by the Revenue. Consequently, the addition of Rs. 30 lacs was deleted, and the appeal of the assessee was allowed for statistical purposes.

In conclusion, the ITAT directed a fresh consideration of the first issue regarding credit entries and ruled in favor of the assessee on the second issue, emphasizing the importance of concrete evidence and the burden of proof on the assessee in tax matters.