2021 (5) TMI 827 - AT - Income Tax

Unexplained cash credit u/s.68 - HELD THAT - As assessee submitted before us that from other business cash has been deposited into the bank account. On perusal of the balance sheet of Shri Sai Wines, there is no investment shown by the assessee as investment in toll of cantonment board of secunderabad and on the liabilities side of the balance sheet filed by the assessee, there is no liability in the name of other business. The balance sheet filed the assessee has shown under the head capital account , the opening balance is O and the capital brought in is ₹ 2,84,64,000/-. Fixed capital has been introduced in the business during the year, the figure of which is tallied with the submissions made by the assessee at paragraph No. 4 as quoted supra. Assessee before us, alternatively, submitted that it is a loan, but not a capital and the same is to be returned to the depositors/creditors. Even if this alternative argument of the assessee is considered by following the judgment of Kedarnath Jute Manufacturing Co Ltd 1971 (8) TMI 10 - SUPREME COURT the entry in the books of account is not relevant, then, still the assessee has to satisfy the AO as per section 68 of the Act. Therefore, we are of the considered opinion that the issue in dispute shall be remitted back to the AO for de-novo assessment. Accordingly, we restore the matter back to the file of the AO for de-novo adjudication, after giving reasonable opportunity of hearing to the assessee in the matter. Appeal of the revenue is treated as allowed for statistical purposes

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Addition of unexplained credit under Section 68 of the Income Tax Act, 1961.
3. Verification and acceptance of additional evidence by CIT(A).

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The Revenue's appeal suffered a 5-day delay in filing. The Assessing Officer (AO) petitioned for condonation, stating the delay was due to the case record being mixed up with other records and not traced immediately. The Tribunal referenced case law, including *Collector Land Acquisition vs Mst. Katiji & Ors* and *University of Delhi Vs. Union of India*, which support condoning delays when supported by cogent reasons to serve substantial justice. The Tribunal held that the delay was neither intentional nor deliberate but due to circumstances beyond control, and thus condoned the delay.

2. Addition of Unexplained Credit under Section 68 of the Income Tax Act, 1961:
The AO made an addition of ?2,72,19,261/- as unexplained credit under Section 68, observing that the assessee could not substantiate the sources of the capital received. The assessee claimed the amount was raised to meet payment obligations to Secunderabad Cantonment Board, supported by contributions from around 60 individuals. However, the AO found inconsistencies in the assessee's submissions and noted that the entire amount was booked as the assessee's own capital in the Income Tax Return (ITR) and balance sheet. The AO concluded that the amount should be treated as the assessee's income and taxed under Section 68.

3. Verification and Acceptance of Additional Evidence by CIT(A):
The assessee appealed to the CIT(A) and submitted additional evidence. The CIT(A) called for a remand report from the AO and, after considering the submissions and remand report, allowed the appeal. The CIT(A) observed that the assessee received capital through RTGS and not in cash, hence deleting the addition to that extent. The CIT(A) also accepted the assessee's explanation regarding profits from liquor and tollgate business and the identity of a contributor, Mr. Kameswara Rao, thereby deleting further additions.

Tribunal's Observations and Decision:
The Tribunal noted that the CIT(A) failed to verify the identity and creditworthiness of the creditors and the genuineness of the transactions as required under Section 68. The Tribunal observed that the assessee's submissions indicated receipt of ?2,84,64,000/- from friends and relatives, which was ignored by the CIT(A). The Tribunal found that the CIT(A) did not address the conditions laid down in Section 68 and the discrepancies in the bank statements and financial statements.

The Tribunal decided to remit the issue back to the AO for de-novo adjudication, directing the assessee to substantiate its claims with documentary evidence. The appeal of the revenue was allowed for statistical purposes, and the matter was restored to the AO for fresh consideration.

Conclusion:
The Tribunal condoned the delay in filing the appeal, found fault with the CIT(A)'s acceptance of additional evidence without proper verification under Section 68, and remitted the issue back to the AO for a fresh assessment, directing the assessee to provide documentary evidence to substantiate the claims. The appeal was allowed for statistical purposes.

← Previous Next →