INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Advances received treated as unexplained credit based on statement recorded by Investigation Wing - No copy of statement given to assessee

AO on the basis of statement recorded by Investigation Wing in case of certain party, treated advance received by assessee from M/s. NCPL as unexplained credit alleging M/S NCPL as shell company. Assessee brought to the notice of AO the JV agreement with MSNCPL to start a manufacturing facility at Silvasa and since it could not materialize money was returned back to M/s. NCPL and filed all the documents before him. However, AO brushed aside the documents as an afterthought on the part of assessee toc over incriminating statement recorded by Investigation Wing against assessee. Held: Statement recorded by Investigation Wing behind the back of assessee could not be relied upon for drawing any adverse finding against assessee without even giving complete copy of recorded statement by Investigation Wing to assessee. AO had not even independently examined the person whose statement was recorded. JV agreement furnished by assessee was executed on Non-Judicial Stamp Paper of Rs. 50 and in case if AO had any doubts about veracity of V agreement, then AO had powers to investigate and find out the truth which could have come to light whether Stamp Paper was purchased or was procured later and JV agreement was executed ante-dated by summoning the stamp vendor itself but it did not do so. Assessee by furnishing copy of JV agreement, copy of the cancellation of JV, proved identity, creditworthiness of NCPL and genuineness of the transaction with M/s. NCPL. NCPL had share capital of Rs. 19,27,000 and Reserve and Surplus of Rs. 18,07,40,956, thus total of Rs. 18 crores. M/s. NCPL, which had funded of Rs. 17 crores to assessee company for which an equitable mortgage of industrial land was given to M/s. NCPL. Later when JV project could not materialize, M/s. NCPL cancelled JV and as such money was returned back to M/s. NCPL by the assessee and mortgage was released. The documents could not be controverted and, therefore, addition made under section 68 only on the basis of statements which could not stand the scrutiny of law, was not warranted.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-14

SUBSCRIBE FOR FULL CONTENT