2024 (7) TMI 534 - AT - Income Tax

Addition u/s 68 - assessee failed to prove identify and genuineness of the transaction - Second round of litigation before ITAT - in the first round AO disbelieved the claim of assessee that the advances were received from various persons and held that the assessee has not proved the identity of the persons and genuineness of the transaction - CIT(A) in the first round upheld the findings of the AO in this round too. HELD THAT - This is the second round of litigation before the ITAT wherein same as in the first round the AO disbelieved the claim of assessee that the advances were received from various persons and held that the assessee has not proved the identity of the persons and genuineness of the transaction. AO this time has however has mentioned about the CBI and EOW inquiry to support his action of making addition u/s 68. CIT(A) as in the first round upheld the findings of the AO in this round too. Before us the assessee has placed the documents of the Government of Odisha referring to the status report on the issue of identifying the depositors in the schemes of Golden Land Developers Ltd and GLP Developers Ltd and of refund of the deposits to them. The assessee has also placed before us the order of Orissa High Court taking cognizance of the issue of identification and return of deposits in the case of GLP Developers Ltd and Another. In view of the Orissa High Court cognizance of the matter and the Government of Odisha correspondence we are of the considered opinion that the details of depositors need further examination and verification in the context of the provision of section 68. We accordingly restore this issue to the file of the AO - AO is directed to examine and verify details of the depositors and decide the issue afresh after giving reasonable opportunity of being heard to the assessee. The assessee is also directed to furnish evidences/documents as required by the AO. Assessee appeal allowed for statistical purposes.

Summary

Issues:
Two separate appeals by the assessee against NFAC orders for A.Ys. 2006-07 and 2007-08 regarding unconfirmed cash credit and disallowed amount under sections 68 and 40A(3) of the Act.

Analysis:
The assessee, engaged in real estate business, received advances in cash for a housing project. The original assessment treated the advances as unconfirmed cash credit under section 68 of the Act and disallowed a specific amount under section 40A(3) for A.Ys. 2006-07 and 2007-08. The CIT(A) modified the quantum of additions but confirmed a significant balance. The ITAT set aside the issue for fresh examination by the Assessing Officer due to lack of proof of genuineness. The Assessing Officer, in the subsequent assessment, reiterated the additions under section 68 and 40A(3) for both years. The assessee highlighted ongoing investigations by EOW and CBI regarding the funds received and provided supporting documents indicating the identification of depositors and refund initiatives. The ITAT acknowledged the Orissa High Court's involvement in similar cases and directed the Assessing Officer to reexamine and verify the details of depositors, emphasizing the need for further investigation under section 68 of the IT Act. The assessee was instructed to provide necessary evidence, resulting in both appeals being allowed for statistical purposes.

This judgment underscores the importance of substantiating transactions and the identity of parties involved in financial dealings, especially when faced with unconfirmed cash credits and disallowed amounts under tax laws. It also highlights the significance of ongoing investigations and court directives in influencing tax assessments, emphasizing the need for thorough verification and examination by tax authorities to ensure compliance with legal provisions.