Sreepathy Trust Vs DCIT (ITAT Amritsar)
Section 68 Addition Cannot Be Sustained Without Confronting Discrepancies and Allowing Reconciliation: Cochin ITAT
Sreepathy Trust, an educational institution registered under Section 12AA, received advances of ₹1.33 crore from 22 persons during AY 2013-14 and loans of ₹12.32 lakh from four persons during AY 2016-17. The Assessing Officer treated the amounts as unexplained cash credits under Section 68, and the CIT(A) confirmed the additions, citing mismatches in the documents and non-production of creditors’ balance sheets and bank statements.
For AY 2013-14, the Cochin ITAT observed that the confirmations contained the creditors’ names, addresses, PANs, occupations, amounts advanced, banking particulars and sources such as savings or retirement benefits. Individuals were not required to maintain personal balance sheets unless mandated by law. Further, if the CIT(A) noticed discrepancies between the amounts stated and the supporting documents, the Trust ought to have been given an opportunity to reconcile them instead of the addition being summarily sustained. Since the confirmations had not been examined by the AO, the matter was restored for verification.
For AY 2016-17, the Tribunal held that confirmation letters, income-tax return acknowledgements and particulars of the four creditors prima facie established their identity, creditworthiness and the genuineness of the transactions. However, since the Trust’s bank statement was not produced, the issue was remanded to the AO for the limited purpose of verifying the receipt of funds. The Tribunal directed that the addition must be deleted if the Trust establishes that the amounts were received from the identified creditors.
FULL TEXT OF THE ORDER OF ITAT COCHIN
1. These two appeals have been filed by Sreepathy Trust, Thrissur (“the assessee”/ “the appellant trust”), for assessment years 2013-14 and 2016-17, against the appellate order dated 17 August 2023 passed by the learned CIT(A), whereby the assessee’s appeals were dismissed to the extent they challenged the additions made under section 68 of the Income Tax Act.
