Agarwal Industries Pvt Ltd Vs DCIT (Telangana High Court)
The Telangana High Court allowed the appeal under Section 260A of the Income Tax Act, 1961 against the Income Tax Appellate Tribunal, Hyderabad Bench ‘A’, Hyderabad order in ITA.No.60/Hyd/2018 decided on 19.01.2023. The ITAT had dismissed the appellant’s appeal against additions under Section 68 of the Act for assessment year 2010-11. The additions comprised Rs.5,25,00,000/- received from Smt. Hema Kedia, Rs.10,00,000/- concerning Smt. Ranjana Agarwal, and Rs.23,18,298/- towards difference in interest as per Form 26AS. The appellant contended that the amounts received from Smt. Hema Kedia and Smt. Ranjana Agarwal had been verified, that the funds belonged to the respective persons, and that their creditworthiness had been accepted. The Revenue contended that the two amounts represented bogus entries introduced to infuse the appellant’s own funds and relied upon CIT vs. P. Mohanakala on the requirements of Section 68. The High Court held that Section 68 requires the assessee to satisfactorily explain the identity of the creditor, creditworthiness or financial capacity, and genuineness of the transaction. For the Rs.5,25,00,000/- received from Smt. Hema Kedia, the Court found that the appellant had furnished confirmation, PAN, bank statement and income-tax returns, and that the amount was received by account-payee cheque. The Court held that her non-appearance in response to summons did not by itself defeat the explanation. Regarding Rs.10,00,000/- concerning Smt. Ranjana Agarwal, the Court found that the amount represented repayment of an unsecured loan earlier advanced by the appellant. The Court also rejected the ITAT’s invocation of the doctrine of real income and approbate and reprobate theory. It held that the assessee had discharged the initial burden under Section 68 and that the Revenue had not produced independent cogent material establishing that the sums represented the appellant’s own unaccounted income. The High Court consequently answered the substantial question of law in favour of the appellant and against the Revenue, set aside the ITAT order dated 19.01.2023 to the extent it sustained the three additions, and allowed the appeal.
Background of the Appeal
The appellant filed the instant appeal under Section 260A of the Income Tax Act, 1961 challenging the order passed by the Income Tax Appellate Tribunal, Hyderabad Bench ‘A’, Hyderabad in ITA.No.60/Hyd/2018, decided on 19.01.2023.
