2015 (4) TMI 476 - AT - Income Tax

Disallowance of unexplained credit, impliedly u/s 68 - assessee argued before the ld. CIT(A) that some land was purchased by the assessee from Shri Narender Kumar for a sum of ₹ 18,74,07,000/- which appeared as stock in its balance sheet under the head Inventories. - confirmation could not be obtained from Shri Narender Kumar as the time given by the AO was too short. Considering these facts, the ld. CIT(A) deleted the addition - Held that - In principle, there can be no dispute on the proposition that an addition u/s 68 of the Act can be made only if there is a fresh credit in the books of account of the assessee arising in the previous year relevant to the assessment year under consideration. If the balance is outstanding from earlier year, then, it cannot be a case of making addition u/s 68 in a later year - The balance sheet filed by the assessee, though show the balances at the level stated, but the names of the parties are not given. The explanation tendered before the ld. CIT(A) was not given to the AO, enabling him to examine its veracity w.r.t. the books of accounts. Under such circumstances, we set aside the impugned order on this score and remit the matter to the file of the AO for examining the assessee s claim - Matter remanded back. Case of the assessee is that the sum of ₹ 3,67,395/- was claimed as deduction in the preceding year which was disallowed by the AO and the reversal by means of write back of this amount in the current year could not be charged to tax as it would result in to double taxation of the same amount. - but there is no material to support the contention made before us. Since necessary details in this regard are not available and the impugned order is silent on this aspect, we remit this matter to the file of the AO for examining the veracity of the assessee s contention. If it is found that the addition made to the tune of ₹ 3.67 lac in the preceding year on this account has attained finality inasmuch as the assessee has not challenged it in the appellate proceedings, then, the amount of ₹ 3.67 lac, representing the write back of the same amount, should not be taxed in the assessment of the current year. - Matter remanded back - Decided in favour of Revenue.

Summary

Issues:
1. Deletion of addition of Rs. 2,06,91,000 in the assessment year 2007-08.
2. Taxation of diminution in the value of investment amounting to Rs. 3,67,395.

Issue 1: Deletion of addition of Rs. 2,06,91,000
The case involved a credit of Rs. 2,06,91,000 in the name of a party, which the Assessing Officer (AO) treated as unexplained credit under section 68 of the Income-tax Act, 1961. The assessee contended that the amount was payable for a land purchase transaction from the previous year, reducing the outstanding balance to Rs. 2,06,91,000. The Commissioner of Income Tax (Appeals) (CIT(A)) deleted the addition based on this explanation. However, the Appellate Tribunal observed that if the amount was part of the opening balance, it should not be added in the current year. The Tribunal remitted the matter to the AO to verify the claim and examine if the credit pertained to the opening balance. The Tribunal emphasized the need for the assessee to provide evidence to support its claim and granted the assessee an opportunity to present fresh evidence. The Tribunal found the cross objection by the assessee regarding the deletion of the addition as infructuous due to the remittance back to the AO for further examination.

Issue 2: Taxation of diminution in the value of investment
The second issue revolved around the taxation of diminution in the value of investment amounting to Rs. 3,67,395, which was already taxed in the preceding year. The assessee argued that since the amount was disallowed in the previous year and reversed in the current year, it should not be taxed again to avoid double taxation. The CIT(A) did not address this ground, leading the Tribunal to remit the matter to the AO for verification. The Tribunal agreed with the assessee's contention in principle but required supporting material to substantiate the claim. The Tribunal directed the AO to examine if the amount was already taxed in the preceding year and if so, it should not be taxed in the current year to prevent double taxation.

In conclusion, the Appellate Tribunal allowed the appeal of the Revenue and the cross objection of the assessee for statistical purposes, emphasizing the need for proper verification and evidence to support claims in tax assessments.