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2024 (7) TMI 830 - AT - Income TaxAddition of cash deposit in the bank account of the company in the hands of the director and treated the company as dissolved/ non-existence entity - addition of one third amount credited in the bank account of company during the year as income of the appellant/directors of company - HELD THAT - As we agree with the contention advanced by the ld AR that the action against the directors cannot directly be taken under section 179 of the Act and even where the name of the company has been struck off the Register of companies, the action can still be taken against the company in the manner so provided under law. We therefore set-aside the impugned order and the addition so made in the hands of the assessee, being the director of the company. The Revenue is at liberty to take appropriate action against the Company as per law. See MANJULA D. RITA 2023 (6) TMI 1138 - BOMBAY HIGH COURT Addition of gift received from her Grandson who was an NRI during the period - income from unexplained sources u/s 69A - HELD THAT - This money is either to be considered as loan or gift but is not income and the ld. AO has not invoked the provision of section 56 but invoked provision of section 69A of the Act which considering the facts of the case is not applicable and in fact provision of section 68 is not applicable based on the finding recorded here in above. Unexplained amount added in the hands of Grandson os assessee/Sh. Manan Lodha is not required to be added in the hands of assessee as it will amount to double addition of the same amount. We are in agreement with the alternative contention of the ld. AR of the assessee that even if the addition is to be sustained in the hands of the assessee u/s 68 the assessee is supposed to prove the identity genuineness and capacity of the assessee which considering the fact of the case in the case of Sh. Manan Lodha from where the assessee has received a sum is already considered as income and from that source of the money follows from the bank account to the assessee. Whether the assessee has filed any gift deed or not and even if the transaction is considered as loan or gift, the same is not required to be taxed u/s 68 of the Act and 69A of the Act based on the observations and finding given herein above the additionis directed to be deleted - Decided in favour of assessee.
Issues Involved:
1. Sustaining the addition of Rs. 12,02,630/- as income of the appellant. 2. Addition of Rs. 25,00,000/- as unexplained income under Section 69A of the Income Tax Act. Detailed Analysis: Issue 1: Sustaining the Addition of Rs. 12,02,630/- as Income of the Appellant The assessee, a director of M/s AKCL Exports Limited, challenged the addition of Rs. 12,02,630/- made by the Assessing Officer (AO) and sustained by the Commissioner of Income Tax (Appeals) [CIT(A)]. The addition was based on the deposits found in the bank account of AKCL Exports Limited, a company dissolved on 27.10.2010, during a search conducted on 10.08.2017. The AO attributed these deposits as undisclosed income of the directors, including the assessee, and proportionately added 1/3 of the total deposits to each director's income. The assessee contended that the deposits were related to the realization of debtors and payments to creditors post-dissolution, not income. The AO, however, considered these deposits as the assessee's undisclosed income, adding Rs. 12,02,630/- for A.Y. 2012-13, Rs. 66,667/- for A.Y. 2016-17, and Rs. 7,99,772/- for A.Y. 2013-14. The CIT(A) upheld the AO's decision, stating that directors managing the accounts of a dissolved company must explain the deposits' nature and source. The assessee then appealed to the Tribunal, citing a similar case where the Tribunal had ruled in favor of the assessee's husband, also a director of AKCL Exports Limited. The Tribunal, referencing its earlier decision in the husband's case, emphasized that the action against directors under Section 179 of the Income Tax Act requires prior exhaustion of recovery measures against the company. The Tribunal noted that the Revenue had not taken action against the company and directly proceeded against the directors, which was not in accordance with the law. Therefore, the Tribunal set aside the addition, allowing the appeal in favor of the assessee. Issue 2: Addition of Rs. 25,00,000/- as Unexplained Income under Section 69A The second issue concerned the addition of Rs. 25,00,000/- received as a gift from the assessee's grandson, Mr. Manan Lodha, an NRI. The AO added this amount as unexplained income under Section 69A, questioning the grandson's creditworthiness due to his low declared income of Rs. 41,505/- and lack of evidence of earnings abroad. The CIT(A) directed the AO to delete the addition, subject to verification that the amount was already added in Mr. Manan Lodha's hands to avoid double taxation. The assessee argued that the identity, creditworthiness, and genuineness of the transaction were established, and thus, no addition should be made under Section 69A or Section 68. The Tribunal agreed with the assessee, noting that the amount was already taxed in Mr. Manan Lodha's hands, leading to double taxation. The Tribunal found that the AO's application of Section 69A was inappropriate, as the transaction was either a loan or gift, not income. The Tribunal directed the deletion of the Rs. 25,00,000/- addition, allowing the appeal. Conclusion: The Tribunal allowed the assessee's appeals for all assessment years involved, setting aside the additions made by the AO and sustained by the CIT(A). The Tribunal emphasized the need for the Revenue to follow due process under Section 179 before proceeding against directors and the inadmissibility of double taxation for the same income. The judgment was pronounced in the open court on 25.01.2024.
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