Case Law Details
Prestigious Enterprises Pvt. Ltd Vs ACIT (ITAT Delhi)
Introduction: In a recent case, “Prestigious Enterprises Pvt. Ltd vs. ACIT,” the Income Tax Appellate Tribunal (ITAT) in Delhi ruled on an appeal against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2007-08. The central issue revolved around the failure to establish the creditworthiness of the creditor and the genuineness of a transaction, resulting in an addition under section 68 of the Income Tax Act.
Detailed Analysis
1. Background: The appellant, Prestigious Enterprises Pvt. Ltd, initially declared a loss of Rs. 53,05,870 in its income tax return. However, during the assessment under section 143(3), the assessing officer made two significant additions: Rs. 1,00,00,000 on account of compensation received due to a contract breach and Rs. 50,00,000 as unexplained cash credits. Subsequently, the matter was brought before the ITAT, which set it aside for reconsideration.
2. The Assessment and Appeal: The ITAT’s decision led to a fresh assessment where the appellant was granted relief of Rs. 1,00,00,000 but faced the same addition of Rs. 50,00,000 under section 68 of the Income Tax Act. Dissatisfied with this outcome, the appellant filed an appeal before the Commissioner of Income Tax (Appeals), who, in an order dated 30/09/2019, upheld the addition of Rs. 50,00,000 under section 68 of the Act.
3. Present Appeal: In response to the Ld. CIT(A)’s decision, the appellant raised several grounds in their appeal, challenging the legality of the order and the addition of Rs. 50,00,000. However, the Ld. CIT(A) observed that the appellant had not adequately explained the cash credit in line with the requirements of section 68 of the Act.
4. ITAT Decision: The ITAT, upon review, noted that the appellant had failed to provide the necessary evidence to prove the identity and creditworthiness of the creditor, as well as the genuineness of the transaction. The confirmation provided by the appellant did not contain crucial details, such as the date or the company’s seals/stamps. Additionally, the confirmation did not specify the mode of the advance, whether by cheque or cash. While the appellant’s bank statement indicated a deposit of Rs. 50,00,000, it did not reveal the source of this deposit. Consequently, the ITAT found no error in the decisions of the lower authorities and upheld the addition.
Conclusion: The case of Prestigious Enterprises Pvt. Ltd vs. ACIT serves as a reminder of the importance of providing comprehensive evidence to substantiate claims when dealing with income tax assessments. In this instance, the failure to prove the creditworthiness of the creditor and the genuineness of the transaction resulted in an addition under section 68 of the Income Tax Act. It emphasizes the need for meticulous record-keeping and documentation to support financial transactions, ensuring compliance with tax laws and regulations.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by Assessee is filed against the order of Learned Commissioner of Income Tax (Appeals)-31, New Delhi [“Ld. CIT(A)”, for short], dated 30/09/2019 for Assessment Year 2007-08.
2. Grounds taken in this appeal are as under:
“1. The Hon’ble Commissioner of Income Tax (A)-31, New Delhi, has not followed the law of natural justice while confirming additions and disallowances by the Ld. AO.
2. That the impugned Appeal Order is bad in law, illegal, and in violation of rudimentary principal of contemporary jurisprudence.
3. That the Hon’ble Commissioner of Income Tax (Appeal)-31, New Delhi, has erred in law and on facts by confirming the addition of Rs.50,00,000/-.
4. That the Appellant craves leave to add/alter any/all grounds of appeal before or at the time of hearing of the Appeal.”
3. None appeared on behalf of the assessee. The power of attorney executed by the assessee has been filed but neither the assessee nor the representative of the assessee is present and no adjournment application has been filed. Considering the above facts and circumstances, we are compelled to decide the appeal after hearing the Ld. DR.
4. The brief facts of the case are that assessee company filed its return of income declaring loss at Rs.53,05,870/-. The assessment u/s 143(3) was completed on 31.12.2009 by making addition of Rs.1,00,00,000/- on account of compensation received on breach of contract in respect of purchase of immovable property and Rs.50,00,000/- on account of unexplained cash credits. The matter travelled to this Tribunal and the Tribunal vide order dated 29.11.2017, set aside the matter to the file of the AO and accordingly, the AO completed the assessment u/s 254/143(3) dated 26/03/2018 wherein allowed the relief of Rs.1,00,00,000/-and made addition of Rs.50,00,000/- u/s 68 of the Act.
5. Aggrieved by the assessment order dated 26/03/2018, the assessee preferred the present appeal before the Ld. CIT(A) and the Ld. CIT(A) vide order dated 30/09/2019, dismissed the appeal filed by the assessee by confirming the addition of Rs.50,00,000/- made u/s 68 of the Act. As against the order of the Ld. CIT(A) dated 30/09/2019, the assessee preferred the present appeal on the ground mentioned above.
6. The Ld. DR vehemently submitted that the addition of Rs.50,00,000/- made on account of undisclosed cash credit has not been specifically challenged by the assessee before the Ld. CIT(A), the assessee contested that the said addition claimed to have been made arbitrarily and illegally, but the assessee has produced only confirmation of Treat well Investment Leasing Pvt. Ltd. (merged with BSBK Engineers Pvt. Ltd.) and the copy of acknowledgment for filing of return for AY 2007-08 but not provided any evidence to prove the identity and creditworthiness of Creditor and genuineness of the transaction. It is well settled position that the identity and credit worthiness of the creditor and the genuineness of the transaction have to be proved with cogent evidences, which has not been done by the assessee, therefore, submitted that the present appeal is liable to be dismissed.
7. We have heard the Ld. DR and perused the materials available on record. During the second round of the assessment proceedings after remand by the Tribunal, the assessee has not filed the required details as called for to explain the credits of Rs.50,00,000/-, but the assessee has filed a confirmation, thereafter, which does not contain the date and also not contain the seals/stamp of the company. The said confirmation does not even disclose regarding the mode of advance whether by cheque or cash. Though the bank statement produced by the assessee reflects the depositing of 50,00,000/-, but does not indicates as to whom from the said amount has been received. The assessee has not produced any document before the Ld. CIT(A) or before us to prove the identity to the creditworthiness of the creditor and the genuineness of the transaction. The Ld. CIT(A) has also observed that ‘the assessee has failed to explain cash credit of Rs.50,00,000/- within the meaning of section 68 of the Act’. Therefore, in our considered opinion, the lower authorities have committed no error and we find no infirmity in the order of the CIT(A). Accordingly, we find no merit in the grounds of the appeal of the assessee and the same is dismissed.
8. In the result, the appeal filed by the assessee is dismissed.
Order pronounced in open Court on 12th October, 2023.
