Nova Medicare Vs ITO (Telangana High Court)
Summary: The Telangana High Court considered Income Tax Tribunal Appeal No. 318 of 2006 filed by M/s. Nova Medicare against the order dated 28 October 2005 of the Income Tax Appellate Tribunal, Hyderabad Bench, concerning Assessment Year 1998-99. The appeal arose from the assessment order dated 31 December 1999 and the subsequent order of the Commissioner of Income Tax (Appeals), Hyderabad.
The assessee was a registered firm engaged in the business of export of medicines and I.V. fluids. For Assessment Year 1998-99, it declared export turnover and claimed deduction under Section 80HHC of the Income-tax Act, 1961, resulting in nil returned income. During scrutiny assessment, the Assessing Officer found credits relating to three persons: Smt. K. Sujatha, ₹2,00,000 with interest of ₹39,533; Smt. K. Shantha Kumari, ₹1,00,000 with interest of ₹5,000; and Sri K. Prabhakar Reddy, ₹1,00,000 with interest of ₹26,432.
Of the three persons, Smt. K. Sujatha and Sri K. Prabhakar Reddy were partners of the assessee-firm. Smt. K. Sujatha had introduced ₹2,00,000 towards capital of the firm, which was subsequently transferred to the unsecured loan account through a journal entry. The Assessing Officer examined her, concluded that she did not possess the creditworthiness to advance the amount and doubted the genuineness of the transaction. He invoked Section 68 of the Income-tax Act, 1961 and made the addition. Similar additions were made in respect of the other two persons. The CIT(A) upheld the additions, including the related interest amounts, and dismissed the assessee’s appeal. The Tribunal thereafter found no infirmity in the CIT(A)’s order and confirmed the addition of ₹4,70,966.
