Section 68 to 69D and 115BBE: Remove these draconian sections from statute

Remove these draconian sections from the statute to end the mounting Tax Arrears and Tax Disputes

The Sections by which the assessees are suffering too much due to high pitched assessments passed by NFAC are from 68 to 69D and 115 BBE. Many orders are struck down by the High Courts through writs and majority of the orders are appealed against and are cancelled by the Commissioner of Income Tax (Appeals)/Income Tax Appellate Tribunal. The brief contents of the relevant sections are given below:

A. Section 68 – Cash Credits:

• Any sum credited in the books of assessee and
• The Assessee offers no explanation or
• The explanation offered is not satisfactory
• Then, such credit may be charged to income tax as income of that year u/s. 68

Provisions of Section 68:

Section 68 applies not only to cash transaction but also to amounts received by cheque or draft:

• The words used are “Any sum credited in the books of assessee maintained”
• The sum of money is not restricted to cash transactions only.
• The head note to 68 refers to cash credits is not sufficient to support the view.
• 68 is unambiguous & the sum referred in the section would include “the sum of money by whatever mode received”

Source of Source also to be explained:

• Where the assessee is a company (not a company where public are substantially interested) & sum credited consists of share application money, share capital, share premium or any amount
• In addition to explanation offered by assessee-company, “explanation about nature & source also to be offered by the person in whose name such sum is recorded in the books of assessee”
• Such an explanation should be found to be satisfactory in the opinion of AO.

Finance Act 2022 has inserted the following proviso u/s. 68 (applicable w.e.f. AY 2023-24):

• If the sum credited consists of “loan or borrowing”
• In addition to explanation offered by assessee, “explanation about nature & source to be explained by the person in whose name such sum is recorded in the books of assessee”
• Such an explanation should be found to be satisfactory in the opinion of AO

B. Section 69 – Unexplained Investments:

• In any Y., the assessee made investments which are not disclosed in the books, if any maintained
• No explanation about nature & source or
• The explanation offered is not satisfactory
• Then, the value of such investments shall be deemed to be income of that year u/s. 69

C. Section 69A – Unexplained Money, etc:

• In any Y., the assessee is found to be the owner of Money / Bullion / Jewellery / Other valuable article
• Not recorded in Books of accounts, if any maintained and
• No explanation about nature or source of such acquisition or
• The explanation offered is not satisfactory
• Such money etc., may be deemed to be income of that year u/s. 69A.

D. Section 69B – Investments, etc., not fully disclosed in Books:

• The assessee had made investments or found to be the owner of Money / Bullion/ Jewellery / other valuable articles
• The O finds the amount expended exceeds the amount recorded in Books maintained
• No explanation about such excess amount or
• The explanation offered is not satisfactory
• Such excess may be deemed to be income of that year u/s. 69B.

E. Section 69C – Unexplained Expenditure:

• In any year, the tax payer has incurred expenditure
• No explanation about source of expenditure or part thereof or
• The explanation offered is not satisfactory
• Such amount covered by expenditure or part thereof may be deemed as income of that year u/s. 69C.
• Such unexplained expenditure shall not be allowed as deduction under any head of income.

F. Section 69D – Amount borrowed or repaid on hundi:

• Any amount borrowed from / repaid to a person through hundi otherwise than by account-payee
• Such an amount shall be deemed to be the income of the person borrowing / repaying the amount.
• Treated as income for the year in which it was borrowed /repaid.
• If the amount borrowed is taxed u/s. 69D, the same cannot be taxed again while repayment.

G. Section 115BBE:

• Introduced in the Finance Act, 2012 dealing with special rate of tax for sec 68 to 69D @30% e.f. 01.04.2013.
• Later amended by Taxation Laws (Second Amendment) Act, 2016 15.12.2016 w.e.f. A.Y. 2017-18:
  • Tax shall be calculated @ 60% on unexplained income u/s. 68 to 69D
  • Further increased by Surcharge @ 25% and Cess
  • No deduction in respect of expenditure / allowance / set off of any loss in computing income u/s. 68 to 69D

Penalty applicable to Income chargeable to tax u/s. 115BBE Section 271AAC:

• Penalty @ 10% on tax payable u/s. 115BBE shall be imposed if such income is not reflected in Return of Income w.e.f. Y. 2017-18.
• In such a case the burden including penalty will come to 25%

Penalty u/s. 271AAA, 271AAB

271AAA @10%	Applicable to cases where Search has been initiated u/s. 132 “On or after 01.06.2007 but before 01.07.2012”
271AAB (1) @10%	Applicable to cases wherein Undisclosed Income found during Search which has been initiated “on or after 01.07.2012 but before 15.12.2016”
271AAB (1A) @30% or 60%	Applicable to cases wherein Undisclosed Income found during Search which has been initiated “on or after 15.12.2016”

 Section 271AAB (1A):

• 30% of Undisclosed income, if
  • Assessee admitted undisclosed income
  • Paid tax before specified date
  • Filed ROI by declaring such undisclosed income
• 60% of Undisclosed income in any other

From the case laws discussed below one could understand how these sections are misused against the principles of law and natural justice. The sufferings of the assessees are unimaginable due to heavy demand, which in certain cases, are more than the income assessed due to levy of tax @ 60% coupled with interest. Penalty proceedings are adding injury to the wound.

H. Case Studies on Section 115BBE, Section 68, Section 69A, Section 69B, Section 69C and Section 69D

1. Excess stock found during search / survey cannot be treated as deemed income u/s. 69/69B:

• Excess stock found during search – Addition made u/s 69/69B – unexplained investments not fully disclosed in books.
• Assessee stated that excess stock got accumulated out of regular unaccounted business income only & “declared such income in ITR post search”.
• ITAT held that provisions of Sec. 115BBE is not applicable on the excess stock surrendered as business income and the same cannot be treated as unexplained income.

[1. ACIT Vs Shri Anoop Neema- ITA No. 05/Ind/2020

2. Bunty Kumar Vs ACIT – ITA No. 215/Asr/2023

3. Vijay Shriram Gundale Vs ACIT – ITA No. 79/Pun 2023

4. Fathima Jewellers Vs DCIT – ITA 66/Chny/2023

5. CIT Vs Bajargan Traders c/o. Kalani & Co – ITA 258/2017]

2. Once penalty u/s 271AAB applied, invoking 115BBE unjustified:

• Filed ROI by including surrendered income – Penalty proceedings u/s. 271AAB(1)(A) was initiated.
• AO passed order by adding 5,52,241/- as unexplained jewellery in addition to undisclosed income.
• ITAT held that assessee filed ROI in accordance with penal provisions of 271AAB. “Invoking sec. 115BBE is against the law & also against principle of natural justice”.

[Sandeep Sethi Vs DCIT- ITA No.115/JP/2022]

3. Additional Income once accepted cannot be later rectified & taxed u/s. 115BBE:

• Additional income was found during search operation – Income was declared, and taxes were paid.
• Surrendered income was treated as Normal business income by AO.
• Dissatisfied, CIT passed “revision order u/s. 263/rectification order u/s. 154” and taxed @ 60% u/s. 115BBE.
• ITAT held that the provisions of 115BBE cannot be invoked via rectification / revision order and treated the surrendered income as normal business income.

1. Yogesh Kumar Vs PCIT- ITA No. 589/Del/2022

2. Anjanee Vijetha Kasturi ACIT- ITA No. 196/Hyd/2023

3. Sharp Chucks and Machines Ltd Vs. DCIT-ITA No. 169/Asr/2023

4. ITAT deletes addition made during search & seizure solely on basis of WhatsApp Chat:

• Based on WhatsApp chats, salary paid in cash was found during search operation – Addition was made u/s. 69C.
• Assessee was not given an opportunity of being heard.
• ITAT held that WhatsApp chats standalone basis is not having valid evidence to support the action of AO and hence directed the AO to delete the addition.

[Designers Point (India) P. Ltd Vs ACIT – ITA No. 2517/Del/2022]

5. Additional Income cannot be treated as unexplained expenditure u/s. 69C to invoke Sec. 115BBE:

• Loose sheets representing cash payments around 5 Crores was found during search – The same was declared in ITR under the head “PGBP”
• AO rejected & treated the same u/s. 69C and brought to tax u/s. 115BBE.
• ITAT held that “AO should not have treated it as unexplained expenditure without making any further enquiry to disprove the evidence” & directed the AO to tax such income under normal provisions.

[Devender Rao Gaurkanti Vs. ACIT- ITA No. 439/Hyd/2022]

6. No Addition u/s. 68 if sales properly recorded in Books:

• Cash deposits were made after the announcement of demonetization being opening cash balance & cash sales.
• The AO accepted the books but treated the sales as bogus.
• The Tribunal concluded that any addition by treating sales as bogus without rejecting books is unjust, unfair & bad in law.

[ACIT Vs Shri Nitin Sankhla- ITA No.98/RPR/2020]

7. Addition of presumptive income as undisclosed income u/s. 68 is not tenable:

• ROI for the A.Y. 2015-16 was not filed – Form 26AS displayed income u/s. 194J.
• In response to notice u/s. 148, the ROI was filed by computing income u/s. 44AD @ 8%
• Not being satisfied AO treated the income as undisclosed income u/s. 68.
• ITAT held that adopting provisions of sec.44AD is permissible & addition as undisclosed income is not tenable and directed the AO to delete the addition.

[1. Mehjabeen Masood Khan Vs ITO- ITA No.766/MUM/2023

2.CIT v/s Surinder Pal Anand, Surinder Pal Anand – ITA No.156/PUN/2010]

8. No Addition u/s. 68 if depositors are proved:

• Cash deposited by a company to the bank account of assessee was treated u/s.68.
• Assessee proved that such money was interest bearing loan and received through proper banking channel.
• ITAT held that the assessee has proved the identity of the creditor & genuineness of the Hence deleted the addition made u/s. 68.

[Poddar Realtors Vs ITO- ITA No.265/Kol/2023]

9. Section 68 inapplicable in the absence of maintenance of books of accounts:

• Cash deposited into bank account was treated u/s. 68 – Which was from Agriculture activity & OB of cash.
• Assessee had not maintained books of accounts and the ROI was not filed as the TI is below the slab.
• The ITAT held that mere possession of passbook cannot be treated as books of accounts & addition u/s. 68 is unsustainable.

[1. Sh. Satbir Singh Bhullar Vs ITO- ITA No.258/Asr/2022

2. Ishtiaq Ahmad Rather Vs ITO (ITAT Amritsar)]

10. ITAT deletes addition of cash deposits during demonetization period:

• Cash deposited during demonetization was treated u/s. 68 – But the same was reflected in P&L as cash sales.
• Cash books, details of sales, stock registers, VAT returns filed were available and were submitted.
• The ITAT held that assessee has provided substantial information & such addition would amount to double taxation once as sales & again as unexplained credit and hence the addition deleted.

[1. DCIT Vs M/s. Kundan Jewellers P.Ltd- ITA No.1035/Mum/2022

2. ACIT Vs Himachal Fibres Limited- ITA No. 927/Del/2023]

11. No Addition u/s. 68 if genuineness, identity & creditworthiness of creditors proved:

• AO treated unsecured loans as unexplained credits u/s. 68 and passed order u/s. 143(2).
• Bank statements, ledgers, PAN, Confirmation from lenders and other necessary documentary evidence was submitted.
• ITAT held that loans were clearly visible in bank statements and assessee proved the genuineness, identity & creditworthiness of the transaction, directed the AO to delete the addition.

[1. Vachitra Builders P.Ltd Vs ITO- ITA No. 8148/DEL/2019

2. DCIT Vs Shri Jayesh R. Thakkar – ITA No. 34 07/Ahd/2015

3. Dharmvir Merchandise Pvt. Ltd. Vs ITO (ITAT Kolkata)]

12. Addition u/s. 68 merely based on suspicion without cogent evidence:

• Exemption was claimed u/s. 10(38) on LTCG from sale of shares. (Not in effect)
• AO had suspicion that the share prices were rigged and sold at a higher price to arrive at tax free LTCG u/s. 10(38) – entire sale proceeds were treated u/s. 68
• ITAT held that addition by AO merely based on suspicion is unsustainable.

[1. Abhishek Doshi Vs ACIT- ITA No. 3122/MUM/2022

2. ITO Vs Indus Realty Pvt. Limited (ITAT Kolkata)]

13. Addition u/s. 68 unjustified as Trade payable duly explained:

• The Increase in Trade payable compared to previous year were treated u/s. 68.
• The funds were received from one company and paid to other through banking channels the same were properly accounted.
• The ITAT held that additions u/s. 68 is unjustified and liable to be deleted, hence quashed the order passed by AO.

[ITO Vs Shri Mahalakshmi Metal- ITA No. 179/Chny/2020]

14. Addition u/s. 68 unsustainable as revenue failed to discharge its onus:

• Loan were given to assessee as soon as cash was deposited in the lender’s bank a/c.
• AO held that assessee’s own undisclosed cash brought in the guise of loan & also it is not possible for a company with turnover of 3.95 lacs to advance huge loan, hence added as income of the assessee.
• ITAT held assessee discharged its primary onus, further onus was on the revenue to make further enquiry & turnover alone cannot be considered as source of loan
• Addition u/s. 68 couldn’t be sustained.

[Sasi Enterprises Vs DCIT- ITA No. 843/Chny/2018]

15. Addition u/s. 69 unjustified on Late demonetisation cash deposit

• Cash deposited after the time limit during demonetisation period were treated u/s. 69 – Cash flow statements and Month wise cash deposits were submitted.
• ITAT found that AO & CIT failed to adequately respond to these submissions and the assessee is a farmer with no other significant sources of income.
• ITAT concluded that “delay in deposit cannot be a valid basis for addition” anddirected the AO to delete such addition.

[Rajkumar Vs ACIT- ITA No. 378/DEL/2021]

16. Addition u/s. 69 untenable as source of investment duly explained

• The AO has made the entire credits in bank account as unexplained investment u/s. 69
• The Assessee engaged in the business of real estate & no other substantial income and the credits in bank account represents gross receipts of the assessee.
• The ITAT concluded that addition u/s. 69 towards unexplained investment untenable as source of investment stands sufficiently explained.

[DCIT Vs Sukhbir Shokeen- ITA No. 1477/DEL/2020]

17. No Addition u/s. 69 in case of investments out of past savings:

• Entire credit in bank a/c were treated u/s. 69 of IT act – Amount deposited were from Agriculture activities and past savings.
• The ITAT concluded that she had not made any unexplained investment and investments out of past savings or loans taken from relatives cannot be made as addition u/s. 69.

[Anjali Roy Vs ITO- ITA No. 516/KOL/2022]

18. Addition u/s. 69C unsustainable as nature and source explained:

• Documents were found during search operations – where excess salary were paid in cheques and received the excess in cash.
• Office assistant stated that money was spent for day- to-day expenses.
• AO rejected and made additions towards as unexplained expenditure u/s. 69C since expenditure incurred outside the books.
• ITAT stated that source of money and nature of expenditure is very clear, hence the question of making additions towards refund money as unexplained expenditure u/s. 69C does not arise.

[Jeppiaar Educational Trust Vs ACIT- ITA No. 480,481,482&483/Chny/2023]

19. Addition made u/s. 69A due to non-filing of ROI

• Cash deposits were treated u/s. 69A due to non – filing of ROI. – Firm was dissolved but due to inadvertent mistake PAN of the firm still exists in Bank a/c.
• Assessee was carrying on business in the same name as a proprietorship concern & the deposits were duly declared in its ROI.
• The AO rejected the contention of Assessee and appeal was made against the order passed by AO.
• Looking into the facts that order passed against the non-existing entity & also rejecting the responses of assessee, the ITAT directed the AO to delete the impugned [M/s. Kishan Singh & Associates Vs ITO- ITA No.1688/DEL/2021]

20. Calculating Tax u/s. 115BBE the sums which are not taxable under Sections 68 to 69D:

• Delayed deposits of Employee contribution were taxed u/s. 115BBE.
• The Assessee appealed & contended that Sec. 115BBE applies only when sections 68 to 69A are invoked.

21. Calculating Tax u/s. 115BBE the sums which are not taxable under Sections 68 to 69D:

• Delayed deposits of Employee contribution were taxed u/s. 115BBE.
• The Assessee appealed & contended that Sec. 115BBE applies only when sections 68 to 69A are invoked.
• The ITAT directed the AO to delete the addition as the case does not come under the mandate of 115BBE.

[M/s. Apcer Life Sciences India P. Ltd Vs. NFAC Delhi- ITA No. 2882/Mum/2022]

22. Section 115BBE Amendment cannot be applied to search conducted prior to effective date (01.04.2017)

• Excess stock found during search were treated as Business Income by assessee.
• AO treated such stock as “Unexplained Investments” u/s. 69B and applied amended provisions of sec. 115BBE tax @ 60%
• ITAT held that addition made by AO by invoking sec 115BBE is unsustainable as it came into force only on 04.2017 & allowed the appeal.

[Samir Shantilal Mehta Vs ACIT- ITA No.42/SRT/2022]

23. Set off of loss denied to invoke section 115BBE:

• The AO disallowed set off carry forwarded losses by way of invoking the provisions of section 115BBE. AO did not disallow in the assessment order u/s. 143(3) but added in subsequent proceedings u/s. 154.
• AO did not make any addition u/s. 68 to 69D, therefore there was no question of disallowance of set off of losses.
• The A.Y. involved was 2013-14 & the provisions of denial of set off of losses in respect of income u/s. 68 to 69D introduced vide Finance Act,2016.
• Based on these grounds, the ITAT Chandigarh directed the AO to allow set off of losses.

[M/s. Mahaluxmi Food Industries Vs. ITO- ITA Nos.711/CHD/2022]

24. Addition made by using Third party statements without allowing cross examination:

• Notice was issued u/s. 148 without proper enquiry – Assessee proved the source of cash deposit in his bank account
• AO rejected the contention and made addition u/s. 68 by not allowing the opportunity of cross-examination of a third person.
• The ITAT held that third-party statements cannot be used against the assessee unless and until the opportunity of cross-examination is afforded to the assessee, which was not followed by the revenue and deleted the addition.

[1. Shiv Charan Vs. ITO- ITA No. 6003/Del/2017

2. DCIT Vs. Shri Jayesh R. Thakkar – ITA No. 3407/Ahd/2015]

25. No Addition u/s. 68 if amount does not appear in books:

• The AO made addition u/s. 68 where no such income was credited in the books of account maintained and audited.
• The Assessee neither earned nor received such interest income during the year and no TDS has been claimed.
• The ITAT held that addition made u/s. 68 is not sustainable, if amount doesn’t appear in the books of account.

[Balaji Tirupati Buildcon Ltd., Vs. ITO- ITA No. 7582/Del/2019]

26. Purchase & Sale of shares through demat account cannot be declared as unexplained income u/s. 68:

• Shares are purchased and sold through demat account and all transactions are carried through banking channel.
• The AO did not agree with the submissions and declared the sale value as unexplained income u/s.68.
• The ITAT dismissed the appeal filed by the revenue that AO was not justified in assessing the sale value.

[ITO Vs. Sanjay Mahabir Maheshka – ITA No. 6168,9/Mum/2019]

27. Purchase reflected in books cannot be treated as unexplained income:

• The AO treated purchase of jewellery as unexplained investment u/s. 69 and sale of shares as unexplained cash credit u/s. 68.
• The Assessee submitted that these transactions were reflected in the books of account and payment was made through proper banking channel.
• The ITAT allowed both the appeals filed by the assessee and set aside the order passed by AO.

[Vimal Kishore Shah Vs. ITO – ITA No. 1498/Mum/2023]

28. No addition u/s 69 for cash withdrawal & redeposit in unsuccessful property deal:

• Additions were made u/s. 69 – That assessee failed to explain cash deposits & withdrawals.
• Assessee held that deposits comprised transfer from his grandfather’s bank account, withdrawal for property purchase & redeposit when property deal failed.
• The ITAT held that the authorities did not take into the evidence presented & treated the addition as unjustified.

[Inderjeet Vs. ITO – ITA No. 2646/Del/2018]

29. Addition u/s 69C based on dumb documents is unsustainable:

• Documents were found during search operation – Addition was made u/s. 69C.
• AO said that all the distilleries of the assessee were contributing certain cash being used as bribe to pay certain public servants/bureaucrats/politicians.
• ITAT held that these documents only having hearsay value or the documents are dumb which cannot be relied upon and not sustainable in law.

[DCM Shriram Industries Vs. DCIT – ITA No. 374/Del/2015]

30. Assessment of surrendered income as unexplained u/s. 69 is invalid:

• The AO interpreted the voluntary surrender of 30 Lakhs during the survey which is spent on construction of building as unexplained income u/s. 69.
• Further levied tax @ 60% u/s. 115BBE.
• Assessee has paid due taxes @ 30% on the voluntarily surrendered amount.
• ITAT held that voluntary surrenders should not be misconstrued without concrete proof and invocation of this section was inapplicable.

[Jaspreet Singh Mauj Vs. DCIT/ACIT – ITA No. 755/CHD/2022]

31. ITAT deletes addition u/s. 69B as it cannot be proved that crane purchased from  undisclosed income:

• AO made addition us. 69B (investments etc., not fully disclosed in books) due to unexplained difference between agreement price and book value.
• Assessee claimed that the exaggerated cost in the agreement aimed to secure a higher banking loan facility.
• ITAT addition u/s. 69B was unjustified, as it could not be proven that purchases were made from undisclosed income.

[KVR Infra Vs ACIT – ITA No. 323/MUM/2023]

32. ITAT deletes addition of cash deposits as unexplained cash credits u/s. 68:

• Assessee is an NRI who has not filed the return of income, deposited cash into bank She submitted that such deposits were cash withdrawals from previous years.
• The cash deposits were added as unexplained cash credits u/s. 68 and penalty u/s. 271(i)(c) [100% of Tax evaded] was separately initiated for concealment of income.
• ITAT concluded that there is no reason to make addition in the hands of assessee, as the assessee can demonstrate cash withdrawal and availability of cash out of such withdrawal.

[Smt. Madhuvalli Vs ADIT – ITA No. 294/Hyd/2023]

33. No Addition u/s. 69A if all possible evidences are available with the assessee in support of its claim:

• Cash Deposited during demonetization period were treated u/s. 69A.
• The sources of deposits were cash withdrawal from bank and capital withdrawal from LLP and evidence were submitted. However, AO rejected the contention.
• ITAT stated that when assessee has all the possible evidence, they cannot be brushed aside based on surmises and guesswork and deleted the addition made by AO.

[1. Hasmukh Kanjibhai Tadhani Vs ITO – ITA No. 19/SRT/2023

2. S. Tulasidoss Nedunselian Vs ACIT – ITA No. 466 & 472/Chny/2020]

34. ITAT directs AO to accept 50% Demonetized Currency as Sale Proceeds:

• Specified bank notes were deposited during demonetization period. AO contented that appellant should not have accepted after specified date notified by Govt.
• Since the appellant is a distributor & primarily deals with cash transactions, ITAT directed the AO to accept 50% of cash deposits as sale proceeds and remaining 50% as unexplained money.

[J. Kalappa Naidu Sons Vs ITO– ITA No. 252/Chny/2023]

35. 50 times higher assessment without considering request of petitioner for personal hearing, HC quashed Order:

• Additions were made under sections 68, 69A, 145(3), 36(1)(iii)
• Personal hearing through VC was requested and the same was not granted by NeAc -Assessment was rejected and made 50 times more to the income under SCN.
• The HC quashed the order, allowing the NeAC to issue fresh notice, directing adherence to proper procedures and the opportunity for a personal hearing.

[Margita Infra Vs National E-Assessment- Centre Delhi– R/Special Civil Application No. 15756 of 2021]

36. No Addition u/s. 68 in absence of actual receipt of money and for accounting mistake:

• There was a mismatch between the sum received and amount confirmed by the party – Addition was made u/s. 68.
• Assessee stated that it was an accounting error – AO rejected the same.
• ITAT held that differences in accounts were due to an accounting error and there is no actual receipt of money, hence the question of making addition u/s 68 will not arise.

[Mehboob Amirali Kamdar Vs ITO – ITA No. 1969/Mum/2023]

37. Addition u/s. 68 based on Retracted Statement unsustainable:

• The Assessee received share application money from a company which is engaged in providing accommodation entries.
• AO found that share application money and premium does not satisfy the test of genuineness, creditworthiness, and identity even though assessee has submitted necessary documents.
• AO failed to make enquiries and relied only on key person’s statement which was retracted subsequently.
• ITAT held that addition u/s. 68 merely based on statement of the key person which was retracted subsequently unsustainable as genuineness, identity and creditworthiness proved.

[ITO Vs AMS Trading and Investment Pvt. Ltd., – ITA No. 1863/Mum/2021]

38. No addition u/s. 69 in the hands of assessee who had not entered into agreement in personal capacity:

• Payment made by shareholder on behalf of the company was treated as unexplained investment based on the collaboration agreement and nature of payments made by assessee.
• The agreement was made between two companies and investigation should have been conducted with two companies.
• The said agreement was signed by the assessee on behalf of the company, not in assessee’s personal or individual capacity.
• ITAT concluded that no addition u/s. 69 should have been made in the hands of assessee, as he had not entered into any agreement in his personal capacity and deleted the addition.

[JCIT Vs Ajay Sharma – ITA No. 1257/Del/2022]

39. Section 68 addition can be made only in the Assessment year of receipt:

• The assessee filed a ‘NIL’ return of income for the Y. 2012-13.
• Subsequently, the AO issued a notice under section 143(2) to scrutinize the accounts. During the assessment, it was revealed that the sum of Rs. 1,00,00,000 had been credited to the assessee’s account on April 1, 2011.
• Assessee presented crucial evidence that they had received the money in the financial year 2010-11, which was relevant to the assessment year 2011-12.
• The tribunal examined the evidence and clarified that they had indeed received 1,00,00,000 via RTGS in the financial year 2010-11, relevant to the assessment year 2011-12.
• The tribunal agreed that the assessee was responsible for explaining the cash credit of its predecessor or amalgamated company in the assessment year 2011-12, not in 2012-13.
• The tribunal allowed the appeal and deleted the addition.

[Shaktigarh Textile and Industries Ltd. vs. DCIT – ITA No. 848/KOL/2023]

40. Addition u/s 69A towards excess jewellery found unsustainable as assessee belonged to wealthy family:

• AO conducted a search and seizure operation under Section 132 of the Income Tax Act, 1961, at the residential premises of the assessee. During the search proceedings, gold jewellery were found.
• The assessee could not explain the source of this jewellery found during the search.
• AO made addition under Section 69A of the Income Tax Act for excess jewellery found during a search operation was unsustainable.
• In its conclusion, the ITAT Delhi referred to a similar case, where it was held that when the Assessing Officer makes an addition under Section 69A due to jewellery found in a search of the assessee, and the assessee belongs to a wealthy family and received jewellery on occasions from relatives, excess jewellery is Consequently, no addition under Section 69A is warranted.
• The ITAT Delhi directed that the addition made in this case be deleted. [Ankit Sharma vs DCIT (ITAT Delhi) – ITA 1842/Del/2022]

Gifts received in shape of cash “Shaguns” on various occasions kept in Locker shall not   be treated as Unexplained Money u/s 69A  of Income Tax Act:

• The assessee, had a locker that was discovered during a survey carried out at “U&I Vaults Ltd.”
• During the search, cash was found and seized from locker.
• In the absence of any justification or documentary evidence regarding the source of the cash found in locker, it was treated as unexplained money and added to the total income of the assessee under Section 69A of the Income-tax Act, 1961.
• Aggrieved by the order, the assessee filed an appeal before the CIT(A), who confirmed the addition.
• Thus, the assessee filed a second appeal before the tribunal.
• After reviewing the facts and records, the two-member bench, deleted the amount found in the locker during the survey proceedings and held that gifts received in the form of cash shaguns on various occasions like marriages, birthdays, and anniversaries should not be treated as unexplained money under Section 69 of the Income Tax Act.

[ITAT vs Jasmine Anand & Jaswinder Kaur Anand – ITA Nos. 1145 & 1146/Del/2021]

No addition u/s 69A on the basis of statement recorded during survey if there was no supporting evidence:

• Assessee-firm was in the real estate business as a builder and developer.
• It filed a revised return of income declaring a total income of 79,89,053.
• Department had earlier carried out survey action under Section 133A in the hands of the assessee.
• During the course of survey, a statement was recorded in which assessee had agreed to surrender a sum of Rs.4.23 crores for taxation over and above regular profit.
• AO noticed that the assessee did not offer the above said amount as mentioned in the statement.
• According to assessee, AO had computed the addition in respect of unsold flats also, which was not in accordance with law. AO did not conduct any independent enquiry with the buyers of flats in order to ascertain the cash payments made by them.
• All the facts cumulatively prove that AO has made the impugned addition without any basis.
• When there was no basis for arriving at the conclusion that assessee had received any on-money, addition was not justified as held by Hon’ble Supreme Court in the case of PCIT Nishant Construction (P) Ltd (2019)

[DCIT Vs Parshwa Associates (ITAT Mumbai) – ITA. No. 2584/Mum/2022]

High share premium not correct test for section 68 addition:

• AO imposed additions on assessee under Section 68 of the Income Tax Act based on charging a high premium.
• The court emphasized the triple test that an assessee needs to satisfy: identity, creditworthiness, and genuineness of the transaction.
• The court criticized the Assessing Officer for focusing on the high premium without conducting further inquiries into the details of cheque payments. The court reiterated that charging a high premium is not the correct test for making additions under Section 68.

[ACIT Vs Montage Enterprises Pvt. Ltd. (Delhi High Court) – ITA 734/2019]

Section 69B requires evidence, not conjectures:

• The AO noticed discrepancies in the sales bills and sale ledger, suggesting improper accounting of sales and made addition under Section 69B of the Income Tax Act.
• However, there was no instance of non-recording of sales by the assessee.
• The ITAT found that the AO’s addition was speculative and lacked proper justification.
• The ITAT concluded that the addition was unjustified and ordered its deletion.

[1. Babusona Mondal Vs DCIT (ITAT Kolkata) – T.A. No. 749/KOL/2023

2. DDK Spinning Mills Vs DCIT (ITAT Chandigarh)]

Addition u/s 69B merely based on statement without corroborative evidence unsustainable:

• The appellant is a Private Limited Company, filed its return of income admitting Nil total income.
• The appellant company had purchased the property from M/s. Premier Roller Flour Mills Ltd., for a consideration of Rs. 24 crores, and the sale deed was executed for Rs. 12 crores only.
• AO concluded that the evidence clearly shows that the appellant company had paid additional consideration of Rs. 12 crores on or before the registration of the property and thus, rejected explanation furnished by the assessee and made additions of 6.15 crores as unexplained investment u/s. 69B of the Act.
• CIT(A) sustained additions made u/s. 69B of the Act, towards unproved amount paid for purchase of property.
• Being aggrieved, the assessee made an appeal to ITAT
• Thus, ITAT ordered to set aside the order passed by the ld. CIT(A) and direct the Assessing Officer to delete additions.

[ARRS Megamall P. Ltd. Vs DCIT (ITAT Chennai) – ITA No.: 311/Chny/2023]

Sections 115BBE not applicable to income not falling under section 69A:

• The Assessee is a resident individual, underwent a search and seizure operation under Section 132 of the Income Tax Act.
• During this operation, a document was found, indicating an amount of 30.20 crores with the notation “Com Trade.”
• Assessee claimed that this amount represented profits from offline commodity trading.
• Consequently, he voluntarily surrendered this amount as income for the assessment year 2017-18 and duly paid the taxes.
• During the assessment proceedings, the Assessing Officer characterized the surrendered income as unexplained money under Section 69A of the Act and applied the higher tax rate prescribed under Section 115BBE
• The Assessee appealed to CIT(A) who ruled in his favour, stating that the income surrendered should not be treated as falling under Section 69A, and hence, the normal tax rate would be applicable
• The ITAT upheld the decision of the Commissioner (Appeals), emphasizing that the income surrendered by Assessee cannot be treated as unexplained money under Section 69A.

[DCIT Vs Tapesh Tyagi (ITAT Delhi) – ITA No. 1344/Del/2021]

Addition u/s 68 towards unexplained cash credit based on presumptions & conjectures unsustainable:

• The assessee is engaged in the business of share trading and also earn commission income.
• AO found that the assessee has not filed the return of income and therefore has a reason to believe that the income has escaped assessment and issued notice u/sec 148 of the Act.
• The assessee has earned a profit of 73,586/- and similarly incurred Loss of Rs.42,138/-and after claim of setoff of loss with the short-term capital gains, the net income of Rs.31,448/- was offered for taxation.
• AO observed that there is a no correlation of the price rise and fall of the share price and was not satisfied with the explanations and material information
• Came to a unilateral conclusion that transactions are not genuine and made addition of short-term capital gains as unexplained cash credit u/sec 68 of the Act of Rs.73,586/- and rejected the short term loss earned of Rs.42,138/-.
• ITAI held that the AO has not conducted any independent investigation and made additions on presumptions and conjectures.
• And dismissed the grounds of appeal of the revenue.

[ITO Vs RajendraHastimal Mehta (HUF) (ITAT Mumbai) – ITA No. 2400/Mum/2023]

Addition u/s. 68 purely based on assumption is unsustainable in law:

• The assessee is engaged in the business of reporting and monitoring as agencies as well as deriving income from purchase and sale of share and securities.
• AO reopened the assessment by issuing a notice u/s 148, for assessing the income escaped assessment on account of bogus transaction of purchase and sale of shares.
• In response the assessee filed return declaring the same income as it was declared in the original return of income.
• The AO completed the assessment u/s 147 r.w.s. 144 of the Act, whereby an addition u/s 68 of the Act was made to   the   tune   of      2,09,239/-   being   bogus long term capital gains.
• ITAT held that once the assessee has denied the alleged transaction and it is also not found recorded in the books of accounts including the Dmat account of the assessee maintained by the Banks.
• Then the addition made by the AO is purely on the basis of assumption as reported in the communication received from the Investigation Wing
• ITAT ordered to delete the addition.

[Himanshu Botadara Vs ITO (ITAT Indore) – I.T.A. No. 155 & 156/Ind/2023]

Section 68: cash receipts from jewellery sales not unexplained cash credits:

• The assessee is engaged in the trading of gold and jewellery, filed its return for the assessment year 2017-18, admitting a total income of Rs. 15,36,890.
• The ITO, through notices and summonses, sought information from various banks, discovering cash deposits totalling Rs. 48,80,73,000 during demonetization.
• The assessee contended that the source of cash deposits was advances received from customers for a gold scheme, recorded in its books of accounts.
• It claimed a cash balance of 48,82,75,750 as of the demonetization date, originating from sales declared before the event.
• The ITO treated the total cash receipts as unexplained cash credit under Section 68 of the Act.
• The ITAT meticulously examined the case, emphasizing two key aspects. Firstly, it clarified the distinction between cash credits and cash receipts, asserting that trade advances, subsequently converted into sales, couldn’t be assessed under Section 68.
• Secondly, it scrutinized the ITO’s rejection of the assessee’s explanation regarding the source of cash The ITAT found that the assessee, through bank statements and cash books, demonstrated substantial cash withdrawals preceding the demonetization period.

[ITO Vs Sahana Jewellery Exports Pvt. Ltd. (ITAT Chennai) – ITA No.999/Chny/2022]

Section 68: Treating Deposit of normal currencies as SBNs during demonetisation period cancelled by ITAT – ITA 1210/CHNY/2023:

• Cash was deposited to the tune of Rs. 26,49,300/- from 09.11.2016 to 31.12.2016 and the ITO treated a sum of 18,91,407 as unexplained cash credit u.s. 68 after adjusting opening balance, even though the SBNs deposited were below the opening balance in spite of assessee producing documentary evidence being pay-in-slips of the bank with denomination of currencies deposited.
• The ITO had not received reply from the Bank for the notice calling for the details of deposit made by the assessee while passing the order on 28.12.2019. On receipt of the statement of account from Bank by the Department as well as by the assessee, the assessee filed a rectification petition on 06.01.2020, which was not attended to at all.
• The Assessee filed an appeal before CIT (Appeals), who without looking into the statement of account given by the Bank, wherein the deposit SBNs were termed as OHD (Old Higher Denomination), endorsed the order passed by the ITO.
• On appeal by the assessee the ITAT deleted a substantial portion of the addition by considering the statement of account given by the Bank

[Lakshmanan Meenakshi vs. ITO (ITAT Chennai) – ITA 1210/CHNY/2023]

Excess stock found during survey is undeclared business income and not unexplained investment:

• The assessee was engaged in the business of manufacturing and selling of Knitted Cloths, hosiery garments and dyed yarn under the name and style of M/s A.P. Knit Fab, Ludhiana.
• AO observed that during the course of survey, physical stock valued at Rs. 3,34,55,282/- was found.
• as per Trial Balance as on the date of survey, the assessee has shown stock in its books of account at Rs. 2,34,31,000/- and therefore there was excess stock of Rs. 1,00,24,282/- which the assessee has surrendered as business income in its P&L Account.
• As per the AO, the unexplained investment in excess stock falls under the provisions of Section 69B.
• CIT(A) confirmed the action of AO. Being aggrieved, the present appeal is filed.
• ITAT held that the income so surrendered on account of investment in excess stock during the course of survey cannot be brought to tax under the deeming provisions of section 69B of the Act.
• The same has to be assessed to tax under the head “business income”.
• In absence of deeming provisions, the question of application of section 115BBE doesn’t arise and normal tax rate shall apply.

[1. A P Knit Fab Vs DCIT (ITAT Chandigarh)

2. Revathi Modern Rice Mill Vs ACIT]

Mere retracted statement without nexus insufficient for section 69A addition:

• The Assessee is a sole proprietor engaged in the retail business of readymade
• The AO received information regarding alleged undisclosed activities involving cash transactions and the AO initiated proceedings under section 147 of the Income Tax Act, 1961.
• It was alleged that assessee had lent a substantial amount of Rs. 3,25,00,000/- as cash loans during the financial year 2011-12, which had not been disclosed in his return of income.
• AO relied on statements obtained during a search operation, where a certain individual named Shri Nilesh Bharani purportedly admitted to engaging in unaccounted money lending activities. Additionally, a diary seized during the search contained coded entries.
• Assessee contested the additions made by the Assessing Officer, however, the Commissioner upheld the Assessing Officer’s order. Aggrieved by the decision, assessee approached the ITAT Mumbai.
• The ITAT observed that the AO had not granted assessee the opportunity to cross-examine Shri Nilesh Bharani or verify the authenticity of the diary entries. Furthermore, Shri Nilesh Bharani later retracted his statement, casting doubt on its reliability.
• Furthermore, the tribunal questioned the conversion of a coded amount of Rs. 32,500 to Rs. 3,25,00,000/-.
• Consequently, the ITAT ruled in favor of Shah, deeming the additions unjustified and deleting them from his income assessment for the year 2012-13.

[Mayur Kanji Bhai Shah Vs ITO (ITAT Mumbai)]

Addition u/s 68 deleted as genuineness and credit worthiness of lender proved:

• The assessee is a company deriving income from dealing in commodities and letting out of properties.
• After completion of assessment u/s. 143(1), the assessment of the assessee company was sought to be reopened u/s. 148.
• Stating that unsecured loan of Rs. 90 Lakhs received from M/s. Powmex Sales Pvt. Ltd. is liable to be added under section 68 of the Income Tax Act.
• ITAT held that we have no hesitation to delete the addition made on account of unsecured loan received by M/s. Powmex Sales Pvt. Ltd u/s 68 of the Act by holding that the assessee had proved all the three ingredients of section 68 of the Act by furnishing the requisite vadocuments.

[1. Trident Towers Pvt. Ltd Vs ACIT (ITAT Delhi)

2.Wisley Real Estate Pvt. Ltd Vs Income Tax Officer (ITAT Kolkata)]

Addition u/s 69 deleted as receipt of cold storage rent in cash not reason to doubt genuineness:

• Assessee is in the business of running cold storage facility. There was a survey u/s. 133A in the premises of the assessee including its cold storage facility.
• A show cause notice was issued to the assessee to furnish supporting evidences, details to establish the genuineness of the parties along with names and addresses.
• In response to the show cause notice, the assessee further furnished copies of ledger that payments against storage charges which were received from 18 parties.
• Out of 18 parties storage charges were received through banking channels in respect of 10 parties, therefore AO accepted the transactions with the said 10 parties as genuine.
• However, with regard to the remaining 8 parties, AO treated the stock found mentioned against the said 8 parties as belonging to the assessee for the reasons that the parties have paid storage charges in cash and no evidence was furnished to prove the stock belonged to them.
• AO valued the stock taking the rates prevailing as on the date of survey and made an addition of Rs.54,10,76,600/- as an unexplained investment of the assessee u/s. 69 of the Act.
• CIT(A) deleted the addition. Being aggrieved, revenue has preferred the present appeal.
• CIT(A) rightly observed that the goods were directly procured by such party and only kept with the appellant for cold storage purposes.
• ITAT held that the stocks which were valued by the AO belong only to those 8 third-parties and the stock does not belong to the assessee and, therefore, the addition made as unexplained stock is not warranted.

[DCIT Vs Suboli Ice and Cold Storage Pvt. Ltd. (ITAT Delhi)]

Difference in stock found during course of survey duly reconciled hence addition u/s 69 unsustainable:

• The assessee is a firm engaged in sale and purchase of gold jewellery.
• A survey operation u/s 133A of the Act was carried out.
• During the course of survey, physical stock valuing to Rs. 8,53,07,745/- was found, whereas, the value of stock as per books was Rs. 2,39,32,717/-.
• AO after considering the submissions, explanations, documents and evidences, made an addition of Rs.6,13,75,028/- on account of unexplained investments u/s 69 of the Act.
• CIT(A) affirmed the order of AO. Being aggrieved, the present appeal is filed.
• ITAT held that merely because some differences were found in stock during survey would not indicate any automatic addition be made in the hands of the assessee when assessee has duly reconciled the differences with necessary evidences.

[Ultimate Creations Vs ACIT (ITAT Delhi)]

Addition u/s. 68 unsustainable as AO failed to conduct independent enquiry to verify genuineness of transaction:

• The assessee is a private limited company and is engaged in the business of share dealing and investments.
• During proceedings, AO noted that the assessee has failed to explain the sum of Rs. 7,26,50,000/- received towards share capital and share premium and added the said sum u/s 68 of the Act.
• CIT(A) deleted the impugned additions made u/s. 68 of the Act. Being aggrieved, revenue has preferred the present appeal.
• ITAT held that the assessee has successfully discharged the burden of proof primarily cast upon it to explain the identity and creditworthiness.
• Therefore, considering the evidence placed by Ld. A/R to explain the nature and source of the alleged share application money, we find no reason to interfere with the detailed finding on facts by the ld. CIT(A) deleting the addition of Rs.7,26,50,000/- made u/s 68 of the Act.

[ITO Vs Express Tradelink Pvt Ltd (ITAT Kolkata)]

Section 68 not to apply to outgo or payment on account of expenditure:

• The contention primarily revolves around Section 68, which mandates the credit of amounts in the books maintained by the assessee.
• However, in this case, the transactions pertain to outgo or payment on account of expenditure, rendering Section 68 inapplicable. The absence of any credit in the books of account regarding the impugned additions further strengthens this argument.
• Moreover, Section 69C is not applicable as it pertains to explaining the source of expenditure, whereas in this scenario, the focus is on the expenditure itself, not its source of payment.
• The impugned additions cannot be upheld as neither the expenditure has been claimed as revenue expenditure nor does it pertain to the assessment year in question.
• Thus, the actions of the Revenue Authorities, including the modification by the CIT(A), warrant scrutiny and possibly reversal.

[Feather Infotech Pvt. Ltd. Vs DCIT (ITAT Delhi)]

ITAT deletes Section 68 addition of Advance received against Sale:

• The matter revolved around the categorization of funds received from M/s Vishal Gems by Hiral Exports.
• The assessing officer contended that these funds constituted unexplained cash credits under section 68 of the Income Tax Act.
• During the assessment proceedings, Hiral Exports provided substantial evidence to support their claim.
• They presented a letter of confirmation of accounts from Vishal Gems & Jewels, indicating sales transactions and payments received and Hiral Exports furnished copies of sales registers, invoices, and bank statements, corroborating the sale transactions with Vishal Gems.
• The ITAT meticulously analyzed the evidence presented by both parties. It was observed that the assessing officer failed to rebut the relevant supporting evidence furnished by Hiral Exports.
• The tribunal concluded that Hiral Exports had indeed made sales to Vishal Gems against advance payments, negating the notion of unexplained cash credits.

[Hiral Exports Vs ITO (ITAT Mumbai)]

No Sec 69 Addition merely for Property Transfer via Registered Sale Without Payment to Vendor:

• The appellant, Hyfun Frozen Foods Pvt Ltd, challenged the addition made by the Assessing Officer (AO) on the grounds that there was no evidence to support the presumption of cash payment to vendors for the purchase of immovable properties.
• The appellant argued that the cheques issued against the purchase of agricultural lands were outstanding and later cleared through exchange of fresh cheques, negating any presumption of prior cash payment.
• The AO’s contention was that the sale deeds were executed without encashing the cheques issued for payment, and possession of the property was transferred to the appellant.
• The ITAT, after thorough consideration of facts and legal precedents, concluded that the addition under section 69 was not warranted.
• ITAT held that the addition cannot be made merely based on property transfer without prior payment to the vendor. The tribunal directed the AO to delete the addition.

[Hyfun Frozen Foods Pvt Ltd Vs ITO (ITAT Ahmedabad)]

No section 68 addition based on turnover declared under section 44AD:

• The Assessee engaged in various business ventures including trading in Grey clothes, disclosed income under section 44AD of the Act, with a declared profit against gross receipts.
• Despite furnishing details regarding cash deposits, the Assessing Officer treated the trading activity as non-genuine, resulting in an addition under section 68.
• The ITAT’s analysis considered the provisions of section 68, emphasizing the requirement for the sum to be credited in the assessee’s books of accounts, which, in this case, were not maintained due to the presumptive income declaration under section 44AD.
• The ITAT established that in the absence of maintenance of books of account, section 68 cannot be invoked.
• Furthermore, the Tribunal referenced decisions by various High Courts and Tribunals to support its stance that the existence of books of account is pivotal for invoking section 68.

[DCIT Vs Kalpesh Kantilal Gada (ITAT Mumbai)]

No Section 68 addition merely for non-response from directors to notices:

• The matter lay in whether the AO was justified in drawing an adverse inference due to non-response from the directors to notices.
• The ITAT conducted a thorough examination of the factual circumstances.
• Upon review, the High Court found that the AO’s adverse inference based solely on non-response from the directors was unjustified.
• The Tribunal noted that the AO did not comment on the veracity or admissibility of details and documents provided by the assessee.
• Moreover, the Court observed that the Commissioner of Income Tax (Appeals) failed to consider any of the grounds raised by the assessee.
• By dismissing the Revenue’s appeal, the decision underscores the principle that the mere non-response to notices cannot serve as the sole basis for drawing adverse inferences in tax matters.

[PCIT Vs Atlantic Dealers Pvt. Ltd. (Calcutta High Court)]

Section 68 addition invalid if credit worthiness proven:

• The case centers around the validity of an addition under section 68 of the Income Tax Act.
• The Revenue argued that the funds received by the assessee from certain entities lacked creditworthiness and authenticity.
• They alleged that these entities were merely paper companies without substantial income or net worth. However, the assessee contended that the transactions were legitimate and supported by evidence.
• During the assessment, it was revealed that the assessee had received significant sums as share capital/premium from multiple entities.
• The Assessing Officer made additions based on suspicions regarding the nature of these transactions.
• However, the CIT(A) and subsequently ITAT Delhi found in favor of the assessee.
• They held that the assessee had sufficiently demonstrated the legitimacy of the funds received.
• The ITAT emphasized the importance of proving creditworthiness by demonstrating the availability of funds from legitimate sources.
• Through examination of balance sheets and other financial documents, the assessee successfully rebutted the allegations of the Revenue.

[I.T.O Vs Placid Build well Pvt Ltd (ITAT Delhi)]

Section 68 Addition Unjustified if Shares’ Purchase & Sale Validated by Evidence:

• During reassessment proceedings, it was found that the assessee has earned long-term capital gains (LTCG) on the sale of shares.
• Notably, the assessee has purchased 300 shares of M/s Sea view Suppliers Ltd from M/s. Kalimata Tradecom Pvt Ltd through cheque on 24-08-2011 for Rs.1,45,200/- as per the purchase invoice bill.
• Subsequently the M/s Sea view suppliers ltd shares were amalgamated with M/s Access Global. The assessee was allotted 14,100 shares of Access Global Limited.
• During F.Y. 2012-13, the assessee has sold 5000 shares of M/S Access Global Ltd for Rs 13,07,250/- and earned LTCG of Rs.12,55,750/-
• AO not being satisfied with the explanations and material information, made addition of sale proceeds u/s 68 of the Act of Rs. 13,05,707/-and estimated commission expenditure u/s 69C of the Act
• ITAT held that the assessee submitted the requisite details in respect of purchase and sale of shares were not disproved.
• Accordingly, considering facts, circumstances, ratio of judicial decisions, submissions and evidence, rely on the judicial precedents and set aside the order of the CIT(A) and direct the assessing officer to delete the additions.

[Amarjit Kaur Surinder Singh Kochhar Vs ITO (ITAT Mumbai)]

Addition u/s. 68 unsustainable as assessee duly discharged initial burden but AO failed to conduct independent inquires:

• The assessee is a private limited company and is engaged in the business of share dealing and investments.
• During proceedings, AO noted that the assessee has failed to explain the sum of Rs. Rs. 7,26,50,000/- received towards share capital and share premium and added the said sum u/s 68 of the Act.
• CIT(A) deleted the impugned additions made u/s. 68 of the Act. Being aggrieved, revenue has preferred the present appeal.
• ITAT held that the assessee has successfully discharged the burden of proof primarily casted upon it to explain the identity and creditworthiness of all the alleged share applicants and genuineness of the share transactions.
• Therefore, ITAT found no reason to interfere with the detailed finding on facts by the ld. CIT(A) deleting the addition of Rs.7,26,50,000/- made u/s 68 of the Act.

[ITO Vs Express Tradelink Pvt Ltd (ITAT Kolkata)]

Deduction u/s. 80IC eligible on addition u/s. 68 of unsubstantiated share capital:

• The case marks the second round of litigation after the ITSC’s initial order was challenged and set aside by the Delhi High Court, requiring a re-examination of the issues related to unexplained share capital and deductions under Section 80IC.
• The ITSC’s order partially set aside the additions made with respect to the infusion of share capital by M/s Amit Goods and Supplier Private Limited and the denial of benefits under Section 80IC.
• The High Court dismissed the ITSC’s conclusion that the addition of unsubstantiated share capital under Section 68 would not qualify for deduction under Section 80IC, granting the petitioner consequential reliefs.
• The petitioner is entitled to claim deductions under Section 80IC up to AY 2013-14.

[Valley Iron & Steel Co. Ltd. Vs PCIT (Delhi High Court)]

No addition u/s 68 as assessee had not benefited from Round-Tripping of Share Transaction:

• Assessee had issued share application money and subsequently allotted shares.
• The case pertains to the assessment year 2008-09.
• The case was reopened under section 147 based on information suggesting accommodation entry received by the assessee from entities operated by a certain group.
• The assessee issued shares at face value and provided documentation to substantiate the transactions’ genuineness, which the tax authorities initially treated as unexplained cash credits.
• ITAT Mumbai ruled in favor of the assessee, deleting the addition made under section 68 as there was no material to suggest the assessee benefited from round-tripping.
• The tribunal found the share capital issue transactions to be genuine and noted that the assessee did not receive any undue benefit from round-tripping, leading to the deletion of the addition under section 68.

[Lalwani Estates & Realtors Pvt Ltd Vs ITO (ITAT Mumbai)]

Section 69/69A/115BBE not applies to duly explained Excess Stock:

• The assessee declared additional income due to excess stock during a survey, which the AO accepted, but the PCIT argued for a lack of proper inquiry.
• The argument unfolds with the AR for the assessee presenting evidence of thorough inquiry by the AO during assessment proceedings.
• It’s contended that the excess stock is indeed related to the money-lending business, supported by documents of previous years’ financial statements.
• The AR further relies on precedents where similar cases were assessed as regular business income and not subjected to section 69/69A/115BBE.
• The Tribunal concluded that the AO’s order was not erroneous and did not warrant revision under section 263, upholding the original assessment order.
• They uphold the original assessment-order, rejecting the PCIT’s revision-order.

[Naresh Chandra Kalwani Vs PCIT (ITAT Indore)]

No section 68 addition for Share Capital Subscription if assessee submits evidence for source of funds:

• No section 68 addition for Share Capital Subscription if assessee submits evidence for source of funds.
• On the facts and circumstances of the case, the appellant has undisputedly received the subscription money of Rs. 25,00,00,000/- and no unaccounted cash money is involved.
• The assessee’s receipt of subscription money was deemed genuine, and the alleged unauthorized diversion of funds by M/s CDS-NKC(JV) did not warrant an addition under section 68.
• The decision was supported by the judgment of the Hon’ble Delhi High Court in the case of CIT vs. Value Capital Services (P) Ltd., which set a precedent for similar cases.
• The document emphasizes that even if there was an unauthorized diversion of funds, as long as the transaction is genuine and the source of funds is verified, Section 68 cannot be invoked to make additions to the income.
• The Revenue’s appeal was dismissed by ITAT Delhi, upholding the learned CIT(A)’s decision that the provisions of Section 68 could not be applied in this case. The document details the legal reasoning and evidence provided that led to this conclusion.

[DCIT Vs CDS Infra Projects Limited (ITAT Delhi)]

 HC upholds deletion of share capital addition under section 68:

• The appeal before the Calcutta High Court arose from the order of the Income Tax Appellate Tribunal (ITAT) concerning additions made under Section 68 of the Income Tax Act.
• The appellant, the Revenue, contested the deletion of additions amounting to Rs. 19,14,50,500, primarily arguing against the established genuineness of share capital.
• The Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal (ITAT) conducted thorough examinations, affirming the legitimacy of the share capital transactions involving M/s. Honesty Dealers Private Limited and M/s. Seaview Agencies Private Limited.
• The tribunal referenced legal precedents and factual assessments to uphold the deletion of additions under Section 68, reinforcing the importance of factual examinations and adherence to legal principles in tax assessments.
• The High Court dismissed the revenue’s appeal, finding no substantial question of law, thereby affirming the ITAT’s decision and the established criteria under Section 68 of the Act.

[PCIT Vs Narsingh Ispat Ltd. (Calcutta High Court)]

The income voluntarily surrendered during survey related to business is taxable as business       Income:

• During the survey Assessee surrendered an additional income which was subsequently included in his ITR.
• The AO argued that since the income was surrendered during a survey and fell within the ambit of undisclosed investments and it should be taxed u/s 69,69A and 115BBE.
• The AR of the Assessee contended that these provisions, were not applicable because the surrendered income was not undisclosed; rather, it was a voluntary disclosure during the survey and was accounted for in the subsequent tax return.
• The ITAT, Chandigarh, analyzed the provisions and noted that there must be evidence that the investments or assets were not recorded in the books of accounts and that the assessee failed to provide a satisfactory explanation regarding their nature and source.
• The ITAT observed that the assessee had provided explanations and concluded that assessee had adequately disclosed the surrendered income during the survey, and it pertained to his business operations.
• Therefore, the provisions of Section 69, 69A, and 115BBE were not applicable in this case.

[Parmod Singla Vs ACIT (ITAT Chandigarh)]

Share Capital/Premium amount cannot be added twice in payees & recipients’ hands u/s 68:

• The Assessee company raised share capital, including premium.
• The AO accepted the genuineness of the cash credits, except the amount of Rs. 20,00,000 related to M/s. Seacom Merchants.
• Contention of the Assessee was that M/s. Seacom Merchants was assessed to tax for the same amount and the same was evidenced by the order passed by AO.
• The ITAT Kolkata referenced several precedents to support its decision.
• The ITAT Kolkata concluded that no additions could be made u/s 68 in the case of Shreenath Holding Pvt. Ltd. since the share applicant company, M/s. Seacom Merchants, was already taxed for the same amount.

[Shreenath Holding Pvt. Ltd Vs ITO (ITAT Kolkata)]

Section 68 Invoked: Bank Statements treated as Books of Account for Individual Assessee:

• The ITAT Ahmedabad reviewed an appeal against the CIT(A) order that upheld an addition of ₹34.3 lakh as unexplained cash credit under Section 68.
• The Ld. AR argued that Section 68 cannot be applied when the assessee has not maintained formal books of account.
• The unexplained cash credit provision was invoked based on cash deposits and transactions recorded in the assessee’s SB a/c.
• ITAT concluded that verification was necessary and deleted the addition and remanded the case to the AO for proper adjudication.
• The appeal was partly allowed for statistical purposes.

[Bhavanji Jugaji Thakor Vs ITO (ITAT Ahmedabad)]

Notice issued making addition u/s. 68 whereas order confirmed addition u/s 69A untenable: Calcutta HC:

• It is the petitioner’s case that the petitioner was served with a notice, calling upon the petitioner to show cause as to why a sum of Rs.1,50,45,00,000/- should not be added back to the total income of the petitioner, as unexplained cash credits u/s. 68 of the said Act.
• The sum was added back to the petitioner’s income for the Assessment Year on account of unexplained money u/s. 69A of the said Act.
• It is seen that although, the revenue authorities had invoked the provisions of Section 69A of the said Act.
• Held that the determination made by the respondents as is reflected in the AO stands vitiated by reasons of failure on the part of the revenue authorities to put the petitioner on notice in respect of addition under Section 69A of the said Act.
• Since, the above is violative of the principles of natural justice, the order impugned becomes unenforceable in law and is declared as such.

[Vishal Jhajharia Vs Assessment Unit (Calcutta High Court)]

Non-appearance of directors cannot form the sole basis for Section 68 addition:

• The case of the Assessee was selected for scrutiny to examine a large share premium received during the financial year.
• The directors of Assessee company complied with the summons, but the directors of the subscribing companies did not.
• The CIT(A) upheld AO’s decision.
• The ITAT Kolkata carefully reviewed the materials on record, including the written submissions and evidence provided by assessee.
• The tribunal emphasized that Sati Promoters had submitted all required evidence, thereby discharging its onus.
• ITAT Kolkata’s decision to delete the Section 68 addition in the case underscores the importance of thorough investigation by revenue authorities before making additions based on unexplained cash credits.

[Sati Promoters Pvt. Ltd Vs ITO (ITAT Kolkata)]

No Section 69A Addition for Monies Recorded in Bank Statements: ITAT Bangalore

• The case was selected for scrutiny under the CASS due to cash deposits made during the demonetization period.
• Assessee appealed against the addition, claiming that the cash deposits were from earlier bank withdrawals and therefore explained.
• The Commissioner of Income Tax (Appeals) [CIT(A)] dismissed his appeal.
• The ITAT found the AO had not disproven the appellant’s explanations nor provided contrary evidence. The withdrawals were made before de
• monetization, which were later redeposited.
• The ITAT ruled in favor of Assessee deleting the addition.

[Sudarshan Purushothama Vs ITO (ITAT Bangalore)]

No section 68 addition if Assessee company proves credit worthiness:

• The case revolves around the addition under Section 68 of the Income Tax Act.
• The addition amount represented share capital and share premium received from various share applicants.
• The assessee contended that all necessary documents proving the identity and creditworthiness and share applicants were assessed to income tax, and the funds were received through proper banking channels.
• The CIT(A) upheld the AO’s addition.
• The ITAT observed that the AO’s order was cryptic and lacked a detailed examination of the evidence provided by assessee.
• The ITAT concluded that the addition under Section 68 was unjustified. It directed the AO to delete the addition.

[1. BST Infratech Ltd. Vs DCIT (ITAT Kolkata)

2. DCIT Vs Cabcon India (P) Ltd. (ITAT Kolkata)]

No addition u/s. 68 towards unsecured loan if repayment in subsequent year accepted:

• Assessee-company was engaged in the business of NBFC.
• The AO observed that the assessee company has taken unsecured loan and paid interest.
• Post enquiry, AO concluded that these are mere paper companies operated by entry operator for the purpose of providing accommodation entries.
• The AO added the Total income u/s 68 and the Interest paid u/s 69C of the act.
• CIT(A) deleted the additions both u/s.68 and 69C of the Act and allowed the appeal of the assessee. Being aggrieved, revenue has preferred the present appeal.
• ITAT held that the assessee has provided substantial evidence to establish the identity, genuineness, and creditworthiness of the loan creditors.
• CIT(A)’s order deleting the additions under sections 68 and 69C of the Act is upheld.

[DCIT Vs Tripoli Management Pvt. Ltd. (ITAT Ahmedabad)]

ITAT allows taxation of excess stock & unexplained marriage expenses as business Income:

• The assessee operates a business in gold, silver, and diamond jewelry.
• The survey was conducted at his business premises, revealing excess stock and Unaccounted marriage expenses.
• Assessee stated that these amounts were included in his return for the relevant AY. The AO assessed the additional income @ 60% u/s 115BBE.
• The assessee appealed to the CIT(A), arguing that the excess stock and marriage expenses should be considered as business income and taxed at the standard rate of 30%.
• The ITAT Chennai examined the detailed submissions and facts presented by both parties.
• The Tribunal directed that it should not be taxed under Section 115BBE, as it was derived from the regular business activities of the assessee.

[Santhilal Jain Vijay Kumar Vs ITO (ITAT Chennai)]

Hence it is prayed that these sections are removed from the statute to alleviate the sufferings of the assessee due to artificial demands raised by the NFAC by misusing the sections indiscriminately.