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Facts
The assessee appealed an addition of Rs. 80 lakhs made under Section 68 of the Income Tax Act for Assessment Year 1997-98. The assessee claimed the funds were received in FY 1996-97, while the credit entry was made on 01.04.1996, falling within AY 1997-98.
Held
The Tribunal held that Section 68 of the Act mandates that unexplained funds should be considered in the year they are credited to the books of account. Since the Rs. 80 lakh was credited on 01.04.1996, the addition for AY 1997-98 was valid.
Key Issues
Whether the addition of unexplained share application money under Section 68 is to be made in the year of physical receipt or the year of credit in the books of account.
Sections Cited
250, 143(3), 153A, 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘F’, NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI NAVEEN CHANDRA
ORDER PER NAVEEN CHANDRA [A. M]: The above captioned appeal is preferred by the assessee against the order dated 31.10.2019, passed by the Learned Commissioner of Income Tax(Appeals)-5, New Delhi (hereinafter referred to as ‘ld.
CIT(A)), under section 250 of the Income Tax Act, 1961 [hereinafter referred to as, “Act”] for Assessment Year 1997-98. The assessment order in this appeal is passed by the Assessing Officer [for short, AO] under section 143(3) r.w.s. 153A of the Act.
1. That under the facts and circumstances the addition of Rs.80,00,000/- is illegal and unsustainable in law as well as on merits. 1.1. Under the fats, the A.O. failed to carry out the specific directions of Hon'ble ITAT for examining as to whether Rs.80,00,000/- was recd. in A.Y.1996-97 and not in impugned A.Y. 1997-98, as claimed by the assessee, although all relevant information / material was in his records. 1.2 That Rs.80,00,000/- since not recd. in A.Y.1997-98 but in A.Y.1996-97, therefore cannot be considered in A.Y.1997-98 and also sec. 68 is not applicable as amount not recd. in impugned A.Y. 1997-98.
The impugned asstt. is barred by limitation.
That under the facts and circumstances no proper and reasonable opportunity of hearing has been allowed. 3. At the outset, the ld. Counsel for the assessee stated that there is delay in filing of appeal. Considering the explanation of the assessee that the delay is due to severe Covid pandemic, the delay is hereby condoned.
3.1 The ground 2 of assessment being barred by limitation is not pressed and hence dismissed as not pressed.
The core issue in the assessee’s appeal is the addition of Rs.80 lakh made under section 68 of the Act, which was confirmed by the ld. CIT(A). The ld. AR vehemently submitted that the amount of Rs.80 lakh was received in the previous year, in FY 1996-97, which is reflected in the bank of accounts of both the assessee and the lender. However, this amount of Rs.80 lakh was credited in the books of account on 01.04.1996 i.e. FY 1996-97, relevant to Assessment Year 1997-98. The Page 2 of 5
Per Contra, ld. CIT-DR submitted that under section 68, it is statutory requirement to consider unexplained funds in the year in which it is credited in the books of accounts. Therefore, addition under section 68 is valid.
We have heard the rival submissions and perused the material available on record. We find that the case has a history of travelling from AO till ITAT four times and that this is the fourth assessment made by the AO which is under contest. We find that the AO had considered share application money of Rs 80 lakh from four entities as unexplained u/s 68 of the Act. In the previous round of litigation, the assessee has claimed that the said fund of Rs.80 lakh has been received as share application money from four parties in financial year 1995-96 relevant to AY 1996-97.Thereafter, the ITAT set aside the assessment to the file of the AO directing him to verify the year of receipt from the bank statement. The AO, in consequence, reiterated the said addition u/s 68 in the instant year i.e., AY 1997-98.
We find that the such a claim of receipt of share application money and the creditworthiness of the investor companies has not been substantiated by any cogent evidence such as balance sheets of the investors companies. We therefore are of thew view that the Page 3 of M/s Kuber Finance (I) Ltd assessee has not been able to explain, the source of funds and failed to establish the identity, creditworthiness and genuineness of the transaction and therefore, the addition made under section 68 of the Act by the AO is valid.
The only defence furnished by the assessee is that four entries of Rs.20 lakh each has been physically received in the Bank on 31.03.1996 relevant to AY 1996-97 and therefore no addition can be made in AY 1997-98. It is however, undisputed fact that the funds of Rs 80 lakh were credited in the books of accounts of the assessee in AY 1997-98.
The issue left now is what is the year of receipt of the funds for addition u/s 68. We are of the considered view that the law mandates the invocation of provisions of section 68 of the Act on sum in the year in which the said sum is credited in the books of account. In the instant case, since the sum/fund has been credited in the books of account on 01.04.1996, the addition u/s 68 of the Act is to be made in AY 1997-98 only. The addition made u/s 68 of the Act therefore, in AY 1997-98, is valid and legally sustainable.