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TMI Blog2025 (3) TMI 446X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 68 of the Act, it is evident that where any sum is found credited in the books of the assessee and the assessee offers no explanation about the nature and source thereof or the expansion offered by him is not in the opinion of the AO satisfactory, then the sum so credited may be chargeable to income tax as the income of the assessee.
In the present case, it is discernible that the sum that was treated as unexplained credit by the AO and added to the total income of the assessee u/s 68 is not credited in the assessee's books. Rather, the same is the trade payables, i.e. the trade payable amount outstanding in the books of the assessee, in respect of the purchases made by it, and thus the same represents a liability which was required to be paid subsequently.
As in Kulwinder Singh [2017 (7) TMI 957 - PUNJAB AND HARYANA HIGH COURT] held that provisions of section 68 are not attracted to amount representing purchases made on credits. No infirmity in the findings of the learned CIT(A) in deleting the addition made by the AO u/s 68 of the Act on account of trade payables debited to the profit and loss account of the assessee.
Revenue appeal dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... dditions made of Rs. 2,10,38,677/- under section 68 of the Income Tax Act, without appreciating that such unproved trades payable constitute income within the meaning of section 68 of the Income Tax Act" 4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting addition on account of share application money amounting to Rs. 8,53,94,800/- and of Rs. 2,10,38,677/- as trade payables without appreciating the fact that the Supreme Court in Principal CIT v. NRA Iron & Steel Pvt. Ltd. had reiterated the settled position of law regarding Section 68 of the Income Tax Act, 1961 wherein the initial onus is on the assessee to establish by cogent evidence the identity of the creditors, genuineness of the transaction and creditworthiness of the parties under Section 68 of the Act." 3. The first issue that arises for consideration pertains to the addition made under section 68 of the Act on account of share application money/premium money received by the assessee from the foreign investors. 4. The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is engaged in the business of manufacturing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since the shares were issued to the non-residents, the provisions of Foreign Exchange Management Act, 1999 ("FEMA") were complied with and the transaction of issue of shares was reported to the Reserve Bank of India ("RBI") by submission of Form FC-GPR. To substantiate the aforesaid facts, the learned Authorised Representative ("learned AR"), during the hearing, referred to the copy of the passport issued by the United States of America to Mr. Girish Hiranandani and Mr. Manish Hiranandani, as well as the residence visa issued by the authorities of the United Arab Emirates. In order to establish the identity of both the individuals and to make good their residential status in Dubai, UAE, the assessee has placed on record the electricity bill issued by the Dubai Electricity and Water Authority to Mr. Girish Hiranandani and Mr. Manish Hiranandani. The aforementioned documents form part of the paper book from pages 271-282. Further, the assessee has also placed on record the copy of ITRs of Mr. Girish Hiranandani and Mr. Manish Hiranandani, for the assessment year 2016-17, filed in India. In order to make good the submission that the entire transaction of issuance of shares by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this office. (ii) Creditworthiness: It is the onus of the assessee to provide the details viz tax returns, audit reports filed with the Indian or UAE tax authorities in regard to prove the creditworthiness of the assessee, whether the assessee is capable of such investment or not. The assessee has not submitted anu details in this regard in this office till this date. Further, enough opportunities have been provided to the assessee to submit documentary evidences to prove the identity, genuineness and creditworthiness of Sh. Girish Hiranandani and Sh. Manish Hiranandani from whom share premium of Rs. 8,53,94,800/- is received during the year, but the assessee has failed in providing the said details. It has also been upheld by the SC in the case of PR.CIT Vs. NRA IRON and STEELS case that: Further, The Hon'ble Supreme Court further held in the case of Principal CIT Vs. NRA Iron & Steel Pvt. Ltd. (Supreme Court) "The practice of conversion of un-accounted money through the cloak of Share Capital/Premium must be subjected to careful This would be particularly so in the case of private placement of shares, where a higher onus is required to be placed on the Assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered the various details furnished by the assessee, we find no merits in the addition made by the AO under section 68 of the Act by considering the share application money received by the assessee as unexplained cash credit, as the assessee has proved the identity and creditworthiness of the investors/shareholders, and the genuineness of the transaction. Accordingly, we find no infirmity in the impugned order in deleting the addition made by the AO under section 68 of the Act on this issue. As a result, the same is upheld and the grounds raised by the Revenue pertaining to this issue are dismissed. 9. The next issue that arises for consideration pertains to the addition made under section 68 of the Act in respect of trade payables. 10. The brief facts of the case pertaining to this issue, as emanating from the record, are: During the assessment proceedings, it was noticed that the assessee has debited INR 2,29,74,562 in the profit and loss account towards trade payables. Accordingly, the assessee was asked to provide documentary evidence, viz., name of the parties, address, PAN, ledger details, etc. The assessee submitted various details in response to the notices, viz., name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in PCIT v/s Kulwinder Singh, reported in [2018] 99 taxmann.com 449 (P&H), held that provisions of section 68 are not attracted to amount representing purchases made on credits. The relevant findings of the Hon'ble High Court, in the aforesaid decision, are reproduced as follows: - "4. A perusal of the order passed by the Tribunal shows that the assessee had shown numerous sundry creditors along with details in his balance sheet. The assessee being a road Contractor received material for the construction of the road. The amounts in question represented purchases made on credits. According to Section 68 of the Act, where any sum is found credited in the books of account of an assessee maintained for any previous year and the assessee offers no explanation about the nature and source of the same or the explanation offered by him is not satisfactory in the opinion of the Assessing Officer, the sum so credited may be charged to income tax as the income of the assessee of that previous year. It has been categorically recorded by the Tribunal that the provisions of Section 68 of the Act were clearly not attracted to the amount representing purchases made on credits. Further the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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