Case Law Details
ITO Vs Hindustan Breweries and Bottling Limited (ITAT Pune)
Introduction: In the case of Income Tax Officer (ITO) versus Hindustan Breweries and Bottling Limited, the Income Tax Appellate Tribunal (ITAT) Pune was faced with a question regarding the nature of share capital credited through journal entries. The primary point of contention was whether such entries should be deemed as ‘unexplained share capital’ under section 68 of the Income Tax Act.
Analysis: The ITAT closely examined the case where the assessee received fresh share capital amounting to Rs.6.00 crore through journal entries. The Tribunal meticulously noted that the said entries merely represented a transformation of unsecured loans into equity share capital. It was observed that the credit to share capital was only through these journal entries and not by actual monetary transaction.
Furthermore, the ITAT dismissed the addition of Rs.6.00 crore made by the AO u/s 68, emphasizing that a mere journal entry does not necessitate an addition under this section. This ruling reinforced that, unless there’s tangible evidence of actual monetary transaction, a mere transfer entry should not trigger addition u/s.68.
The Tribunal also upheld the deletion of other additions made by the AO u/s 41(1) and regarding the advances received by the assessee.
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If the journal entry shown was actually made on the date which was shown in the journal, this can be allowed.But if the entry is made on some other date but not on the date as can be seen from the journal,the department can find it out by going for audit of the hard disc of the assessee’s computer system.This clue should have been in the ITAT order.All members of ITAT know what is computer audit.