INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Share application money treated as unexplained - Assessee merely passed journal entry and share application money actually received in subsequent assessment year

On verification of assessee's balance sheet along with return, noticed that assessee received share application money of Rs. 2.00 crores from 28 persons/entities. He noted the details, viz., names of persons from whom such money was received and amount received by assessee from each individual. Therefore, in a brief assessment order AO recorded that assessee failed to discharge onus cast upon it by virtue of section 68, and made addition of Rs. 2 crores. Assessee submitted that though cheques by share applicants bore dates before 31-3-2013, i.e., 25th March and 26-3-2013, in the balance sheet a journal entry was passed recognizing receipt of share application pending allotment. But actually neither these cheques were presented to bank nor were encashed before 31st March and no real inflow of cash was materialized before 31-3-2013, and therefore, no investigation on this issue under section 68 could be made. Held: Section 68 contemplates that where any sum is found credited in the books of an assessee maintained for any previous year, and assessee offers no explanation about nature and source thereof, or explanation offered by assessee is not, in the opinion of AO satisfactory, then sum so credited in the accounts may be treated as income of assessee of that previous year. In the instant case assessee demonstrated that it had not received any money on account of share application during the concerned year and had just passed journal entry and ultimately share application was received in subsequent year, i.e., assessment year 2014-15. This statement had been proved by assessee from details obtained from the bank, and hence it was to be construed that no amount in real sense had been found to be credited in accounts of assessee for the assessment year 2013-14 and if that be so, then how an inquiry for the purpose of section 68 could be made. Therefore, addition was not sustainable in concerned assessment year 2013-14.

Relied:Luxmi Foodgrains Private Limited [ITAT Bench 'A' Chandigarh -- ITA No. 316/CHD/2019 -- Assessment year 2013-14, dated 7-11-2019] : 2019 TaxPub(DT) 7793 (Chd-Trib), Jatia Investment Co. 206 ITR 718 (Calcutta) : 1994 TaxPub(DT) 0165 (Cal-HC), Bhagvat Marcom Private Limited [ITA No. 223 (Kol)] : 178 ITD 684 : 2019 TaxPub(DT) 5402 (Kol-Trib)

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-14

SUBSCRIBE FOR FULL CONTENT