INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Addition made in reassessment proceedings without specifying as to the nature of impugned amounts and also without examining credits in books of assessee -

AO received information from investigation wing as to immediate source of Rs. 14 lakhs credited in assessee's books was acommodation entry out of the entities controlled by Jain brothers. The diaries of Jain Brothers reflect that assessee had received Rs. 3,00,000 from Manimala Delhi Pro (P) Ltd. and Rs. 4,00,000 from Virgin Capital Services (P) Ltd. The analysis of the ITR by AO reflected increase of share capital by Rs. 99,00,000. AO believed that share capital received by assessee confirmed to the fact of receipt of information from Investigation Wing regarding the entry taken. Thus, belief of AO was that share capital of Rs. 99,00,000 received by the assessee is bogus and only an entry from the entry operator. Accordingly, AO reopned assessment and made addition. Held: From submissions of assessee, the share capital received by the assessee is as under :-- a. Sushil Kumar Jindal HUF Rs. 42,00,000 b. Anil Kumar Jindal HUF -Rs. 37,00,000 c. Anil Kumar Jindal -Rs. 14,00,000 d. Bhaibhav Jindal-Rs. 4,00,000 e. Ekta Jindal-Rs. 2,00,000 Thus, the reasons recorded by AO that assessee-company received share capital from entry operator proved to be incorrect based on the facts. Attributing the entry of Rs. 7,00,000 to the share capital of the company by the AO to increased share capital of Rs. 99,00,000 found to be incorrect based on details of share capital received by company from the five entities above. Further, information available with AO pertained to receipt of Rs. 7,00,000 from two entities namely, Manimala and Virgin Capital whereas AO made addition of Rs. 14,00,000 under section 68. As per the information mentioned an amount of Rs. 7,00,000 had been received by another entity namely, M/s. Jindal Dal Mills (P) Ltd. Sh. Anil Kumar Jindal was the common Director in the assessee company as well as Jindal Dal Mills (P) Ltd. No reasons were given by AO as to why addition of Rs. 14,00,000 had been made in case of assessee. AO had not mentioned whether this Rs. 14,00,000 was on account of share capital or loans or expenses. No details of these entries had been given. The AO failed to examine whether amount of Rs. 14,00,000 credited in books of assessee or not, if so under what head. AO has made addition of Rs. 7,00,000 received by M/s. Jindal Dal Mills (P) Ltd. in the hands of assessee-company. The addition had to be rightly made in the hands of M/s. Jindal Dal Mills (P) Ltd. instead of assessee company. It was also not proved that assessee-company whose name figured in the diary entries and shares of an equivalent amounts had been allotted to the common Directors, Sh. Anil Kumar Jindal. As per the record and bank statement, Sh. Anil Kumar Jindal had received Rs. 14,00,000 from M/s. Jindal Dal Mills (P) Ltd. and purchased the shares of assessee company. In that case, genuineness of receipt of amount by Sh. Anil Kumar Jindal from M/s. Jindal Dal Mills (P) Ltd. was to be enquired and in case found to be bogus or in genuine, the addition should have been made in the hands of Sh. Anil Kumar Jindal, which was totally overlooked. AO. Hence, keeping in view, the reasons recorded which had been proved incorrect, addition made under section 68 without specifying as to the nature of amounts and also without examining credits in books of assessee could not be sustained.

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