Case Law Details
DCIT Vs Glass Tech India (ITAT Delhi)
The facts in brief are, the case of assessee, which is a partnership firm, was selected through CASS for scrutiny and statutory notice u/s 143(2)of the Act was issued. The partners of the assessee had issued capital of Rs. 2 crore each in the firm for which explanation was sought to explain the source of the amount of Rs. 4 crores introduced by the partners in the firm. The assessee informed the Ld. AO that amount was introduced by way of cheques by the two partners but the cheques could not be cleared and were returned by the assessee within two days. The assessee also submitted that this exercise was done to improve the bank ratio to satisfy the bankers of the assessee from which credit facilities were obtained.
However, the Ld. AO observed that the explanation is not acceptable as there is no concept of such notional entries. It was observed that the reversal of entry was in the next financial year and the books of accounts of the assessee as existed on 31.03.2014 were to be taken into consideration. Thus, finding the explanation to be not satisfactory according to accounting parameters and on the basis of Income Tax Provisions the amount of Rs. 4 crores shown in the books of accounts as capital contribution by the two partners was considered as unexplained cash credit and added to the income of the assessee u/s 68 of the Act.
However, in appeal by the assessee the Ld. F.A.A. had taken note of the fact that entry was fictitious and there was no movement of cash, therefore, relying the judgment of Hon’ble Calcutta High Court in case of Jatia Investment Company Ltd. vs. CIT (1994) 206 ITR 718 (Cal) and further considering that in any case the amounts could have been taxed in the hands of partners as there unexplained investment, the ld. F.A.A deleted the addition.
Against the Order of F.A.A. department has filed appear Before ITAT.
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