Vokkaligara Thimmaiah Dinesh Kumar Bychanhally Vs ITO (ITAT Bangalore)
Bangalore ITAT Deletes ₹3.31-Crore Section 68 Addition: Journal Entry Recording Pre-existing Assets Is Not Unexplained Cash Credit
The assessee, a government contractor, showed an increase of ₹3.31 crore in his capital account during AY 2018-19. The AO treated the entire increase as unexplained cash credit under Section 68, since the assessee had not furnished supporting documents during assessment. The CIT(A) also refused to admit the additional evidence, despite the assessee explaining that floods and natural calamities had disrupted normal life in his locality.
Before the Tribunal, the assessee explained that the increase comprised:
- ₹50.68 lakh of taxable income already offered during the year, after adjusting drawings; and
- ₹2.80 crore representing pre-existing personal assets and liabilities brought into the proprietary books through a consolidated journal entry on 1 April 2017.
The evidence established that the assets had been acquired in earlier years. These included house plots purchased between 2001 and 2010, a BMW motorcycle acquired in 2015, a Volkswagen car purchased in February 2017, personal bank accounts and capital held in partnership firms. They were introduced into the proprietary balance sheet merely to present a realistic financial position for obtaining banking facilities.
