INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Advance received against sale consideration of Villas -

Assessee-company was asked to furnish details of sum credited in NRO account of one 'J', from whom advance was received by assessee against sale of villas. It was explained by assessee that it received certain amount from 'J', who was an NRI and assessee also submitted copy of agreement to sell. AO found that the parties kept extending the time till 31-8-2018, when it was mutually agreed to cancel the agreement and return the amount without interest. Thus, AO doubted genuineness of transaction and formed a belief that 'J' was not an NRI and accordingly, made addition of advance received under section 68. Assessee contended that before CIT(A) that 'J' was brother of 'JS', who was director of company. Assessee further contended that all the documents like PAN, ITR, bank statement, agreement for purchase and passport of 'J', were produced before AO in order to establish genuineness of transaction and identity and creditworthiness of 'J'. CIT(A) observed that 'J' was an NRI and transferred funds to assessee from his NRE account and accordingly, deleted the addition. Held: In so far as identity of 'J' was concerned, there should not be any doubt after considering the passport. Further, creditworthiness of lenders could be gathered from bank account of 'J', wherein the impugned transaction was reflected. Further, payments were made out of clear credit balances and there was no evidence whatsoever, to show that 'J' deposited cash before issuing cheque to assessee. Thus, assessee successfully discharged the onus cast upon it by provisions of section 68 and hence, the impugned addition was not sustainable.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2016-17

INCOME TAX ACT, 1961

Section 14A

Income Tax Rules, 1962 - read with Rule 8D

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