ITO Vs Mahadev Dairy Pvt. Ltd. (ITAT Delhi)
ITAT Delhi held that addition under section 68 of the Income Tax Act confirmed as assessee grossly failed to discharge initial burden of explaining and proving credit entries in the books of account.
Facts- The assessee during the year under consideration has received credits in form of Share Capital, Share application and unsecured loan from individuals.
Notices u/s. 133(6) were issued to concerned parties but no reply was received from them which was informed to the assessee. The AO further observed that suddenly the replies were received from all the parties. The AO observed that surprisingly none of the share holders acknowledge the payment of share capital of Rs. 1 lac each as claimed by the assessee.
The AO was of the firm belief that the initial onus is upon the assessee to explain the credit entries in its books of account u/s. 68 of the Act which it has grossly failed to discharge and proceeded by making the addition u/s. 68 of the Income Tax Act.
CIT(A) deleted the impugned addition. Being aggrieved, revenue has preferred the present appeal.
Conclusion- Held that the assessee has simply filed documents but has not given any explanation to the adverse observations in respect of the bank statements. Even the CIT(A) has ignored the specific findings of the AO that cash were deposited immediately before issuing the cheque. Merely because the lenders / applicants are promoters / directors of the company would not discharge the assessee from initial onus of proving the credit entries in his books of account. Considering the facts of the case in totality we are of the considered view that the assessee has grossly failed in discharging the initial burden and the CIT(A) erred in accepting the submissions of the assessee without verifying the same. We, therefore, set aside the findings of the CIT(A) restore that of the AO. All the additions made u/s. 68 of the Act are confirmed.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by the revenue is preferred against the order of the CIT(A)-33, New Delhi dated 09.02.2018 pertaining to A.Y.2012-13.
2. The grievance of the revenue read as under :-
1. Whether on the facts and circumstances of the case, the Ld. CIT(A) is legally justified in deleting the addition of Rs.3,00,000/-, Rs.l ,92,58,000/- and 23,59,600/-on account of introduction of Share Capital, Share Application money and unsecured loans respectively u/s 68 of the Income Tax Act, 1961 ( hereinafter referred as “the Act”) by ignoring the findings of the Assessing Officer(hereinafter referred as “the AO”) that during assessment proceedings the assessee failed to prove the three basic conditions ie identity, creditworthiness of investors and genuineness of transactions in this regard ?
2. Whether on the facts and circumstances of the case, the Ld. CIT (A) is legally justified in deleting the addition on account of unexplained cash credits for want of proper enquiry by the Assessing Officer (hereinafter referred as “the AO”) but without making enquiry or directing further enquiry u/s 250(4) of the Act as laid down by Hon’ble Delhi High Court in case of CIT vs Jansamparlc Advertising and Marketing (P) Limited (2015) 375 ITR 373?
3. Whether on the facts and circumstances of the case, the Ld. C1T(A) is legally justified in deleting addition u/s 68 of the Act by holding that creditworthiness of investors was proved by mere production of papers relating to identity of investors, copies of bank statement and use of banking channel by ignoring the ratio decidendi as laid down by Hon’ble Delhi High Court on the issue in the cases of CIT vs. N.R. portfolio (P) Ltd. (2014) 2 1TR-OL-68, CIT vs. Nipun Builders and Developers (P) Ltd. (2013) 350 ITR 407 and CIT vs. Navodaya castles Pvt Ltd (2014) 367 ITR 306 on application of section 68 of the Act?
4. Whether on the facts and circumstances of the case, the Ld. CIT(A) is legally justified in deleting the disallowance of interest expenses of Rs. 6,18,650/-u/s 36(1) (iii) of the Act by ignoring the fact that the assessee had failed to prove the direct nexus between business income and huge interest expenses so claimed even after providing sufficient opportunity to the assessee company?
5. Whether on the facts and circumstances of the case, the Ld. CIT(A) is legally justified in deleting the addition of Rs.l2,26,410/- on account of undisclosed investment in land by ignoring the findings of the AO in assessment order that the assessee had failed to substantiate the reason of difference between circle rate of the land in by ignoring the findings of the AO in assessment order that the assessee had failed to substantiate the reason of difference between circle rate of the land in question and price actually paid to the seller?”
3. The appeal was first listed for hearing on 09.08.2021 on which date none appeared on behalf of the assessee and the appeal was adjourned. Several notices were issued thereafter but on each occasion none represented the assessee. Inspite of so many repetitive notices neither the assessee nor its authorized representative is attending the proceedings, therefore, we are left with no choice but to proceed exparte.
4. The DR was heard at length. Case records carefully perused.
5. Briefly stated the facts of the case are that the assessee during the year under consideration has received following credits :-
