Adarsh Nursing Institute Private Limited Vs ITO (ITAT Raipur)
Directors’ Cash Deposits Can’t Be Taxed in Company’s Hands – Share Capital from Directors Explained — ITAT Deletes ₹10.5 Lakh Addition for Wrongly Applying Section 68
Raipur Tribunal deleted an addition of ₹10,50,000 made u/s 68 on account of share application money received from two directors. AO had treated cash deposits made by the directors into their own bank accounts (₹3.5 lakh & ₹7 lakh) before issuing cheques to the company as unexplained cash credits, doubting their ability to invest because they earned only salary income. CIT(A)/NFAC upheld the addition without any inquiry or appreciation of evidence.
ITAT held that the directors’ identity, PAN, address, ITRs, balance sheets, affidavits, banking trail & share allotment were all fully furnished & not controverted. Department failed to examine past savings, capital availability or sources other than salary & acted purely on suspicion. Tribunal further held that the issue, if any, related to cash deposits made by the directors, not to the company’s books, & therefore the correct charging provision—if at all—would be section 69A, not section 68. Applying the principles laid down in Sanjeev Kumar (ITAT Delhi) & Sarika Jain (Allahabad HC), the Tribunal held that wrong provision, non-application of mind & suspicion cannot sustain an addition. The addition was thus held void ab initio & ordered to be deleted entirely.
