2013 (9) TMI 975 - HC - Income Tax

Addition u/s 68 of the Income Tax Act - Assessee-firm has not explained these credits and, therefore, the amount was added as unexplained credit Held that - Sri Dule Chand Pandey has sold the land to the assessee-firm. The amount of Rs.2,40,000/- was taken as a loan from Smt. Shyam Kumari Dubey, who was regularly assessed to the income-tax. M/s. Dube Lands and Finance Ltd., was also regularly assessed to the income-tax. The said amount was duly reflected in their income-tax returns, as mentioned by the CIT(A). Necessary confirmation certificate was furnished before the appellate authority, who has asked the remand report from the AO. The AO has accepted the credits in the name of Sri Dule Chand Pandey, and Smt. Shyam Kumari Dubey. M/s. Dube Lands and Finance Ltd., has duly shown the amount in question in their books of accounts - No justification to make any addition Decided against the Revenue.

Summary

Issues:
Appeal under Section 260A of the Income-Tax Act, 1961 against Tribunal's order for assessment year 1989-90. Substantial questions of law: (1) Taxability of advances received against allotment in future. (2) Treatment of cash credit entries in firm's account books.

Analysis:
The Department filed an appeal challenging the Tribunal's order for the assessment year 1989-90 under Section 260A of the Income-Tax Act, 1961. The substantial questions of law raised were related to the taxability of advances received against future allotments and the treatment of cash credit entries in the firm's account books. The case involved the assessee-firm, a coloniser/developer of land, which initially filed a return of loss in response to a notice under Section 148. However, the Assessing Officer completed an ex-parte assessment determining a positive income. The CIT(A) remanded the matter back to the AO, resulting in a revised assessment. Various additions were made under Section 28(iv) and Section 68, which were subsequently deleted by the CIT(A) and confirmed by the Tribunal.

The Department contended that the Tribunal's order was erroneous and relied on precedents to support its argument that deposits in the firm's account should be treated as firm income, not individual partners' income. On the other hand, the assessee justified the Tribunal's order, stating that the credits were genuine, and the burden of proof was discharged. The assessee emphasized that the findings of fact by the Appellate Tribunal should not be disturbed under Section 260A, citing relevant legal precedent.

Regarding the additions made under Section 28(iv), the AO added amounts received from allottees as business benefits. However, it was established that the firm had dissolved, and liabilities were taken over by another entity. The CIT(A) deleted the addition based on evidence and remand reports, finding no justification for the addition. Similarly, additions under Section 68 for liabilities in partners' current accounts were found to be adequately explained and supported by documentation. The CIT(A) deleted these additions after confirming the genuineness of the credits, which was upheld in the appeal.

Ultimately, the High Court ruled in favor of the assessee, dismissing the Department's appeal. The judgment highlighted the importance of factual findings by the Appellate Tribunal and upheld the deletions of additions based on the evidence and remand reports provided. The decision emphasized the need for proper justification before making additions under relevant sections of the Income-Tax Act, ultimately favoring the assessee in this case.