Section 68

Section 68 – Meaning of Satisfactory explanation with respect to unexplained income!

Income Tax - This article aims at highlighting the meaning of Satisfactory Explanation to Assessing Officers with respect to Section 68 of the Income Tax Act, 1961....

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Taxation of Share Premium

Income Tax - Taxation of share premium is a relatively new but litigated area of taxation. This article examines the two alternative approaches the AO should adopt while examining the issue where share premium received is in excess of its fair market value, i.e. the route of Section 68 or Section 56 (2)(viib)....

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Tax @ 82.50% even if you received amount via proper banking channels

Income Tax - Yes, in certain case even if assessee received money through proper banking channels still it may attract tax @ 82.50% if assessee could not explain its source, identity and creditworthiness etc of the lender/giver of the amount to the satisfaction of Assessing Officer...

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Investment in Penny Stock- Bogus or Cash Credit U/s. 68?

Income Tax - Now-a-days Income Tax department investigates alleged trading/investment in shares and securities with collusion/connivance with any listed companies or with share broker by conducting Search/ Survey or by asking details u/s 133(6) of the Income Tax Act 1961....

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Income Tax on Shares Buy Back by Unlisted Companies

Income Tax - As we know, a company is a safer form of doing business. A company is a separate person than its shareholders/ members; it has its own personality and having power to assessed separately. The shareholders or members of the company are the real owners of the assets of the company. The company is doing business for the benefit of its stake ...

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Section 68 Addition for Share Capital unjustified if Creditworthiness Proved

Sanmin Trading & Holding Pvt. Ltd. Vs ITO (ITAT Kolkata) - Sanmin Trading & Holding Pvt. Ltd. Vs ITO (ITAT Kolkata) The issue under consideration is whether addition made u/s 68 on the ground that the share capital received is seen not a genuine credit is justified in law? ITAT states that section 68 of the Act provides that if any sum found credited in...

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No addition for Share application money if Recipient company proves identity, genuineness of transactions & creditworthiness of parties

Network Synthetics Pvt. Ltd Vs DCIT (ITAT Mumbai) - Network Synthetics Pvt. Ltd Vs DCIT (ITAT Mumbai) It is observed that the assessee has discharged its initial onus to prove the identity, genuineness of the transaction and creditworthiness of the parties by filing all these documents. The Tribunal in assessee’s group cases while deleting the addi...

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Assessee can be asked to prove Source of Credits but Not Source of Source

Lalchand P. Dhariwal Vs ITO (ITAT Surat) - The issue under consideration is whether the addition made u/s 68 against unexplained creditors will be sustainable in law? Assessee Can Asked to Prove the Source of Credits in his Books of Accounts but Not Source of Source....

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Section 68 Addition Justified for Unexplained Gifts Received from Non-Related Donor

Meenu Jain Vs ITO (ITAT Delhi) - The issue under consideration is whether the CIT (Appeals) has grossly erred in confirming the addition as made by the Assessing Officer (AO) on account of gifts u/s 68? Addition u/s 68 Justified for Unexplained Gifts Received from Non Related Donor....

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No section 68 Addition in Absence of Primary & Independent Enquiry by AO

Homeway Marketing (P) Ltd. Vs ITO (ITAT Delhi) - The issue under consideration is whether the addition made u/s 68 for assessee helped various beneficiaries in providing accommodation entries in relation to capital and expenses is justified in law?...

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SOP to apply provisions of section 68 of Income tax Act, 1961

246/151/2017-A&PAC-1 - (10/01/2018) - Assessing Officers should follow the sequence as noted below for applying provisions of section 68 of the Act: Step 1: Whether there is credit of a sum during the year in the books of accounts maintained by the taxpayer. Step 2: If yes, the assessee should be asked to explain the nature and source o...

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Recent Posts in "Section 68"

Section 68 Addition for Share Capital unjustified if Creditworthiness Proved

Sanmin Trading & Holding Pvt. Ltd. Vs ITO (ITAT Kolkata)

Sanmin Trading & Holding Pvt. Ltd. Vs ITO (ITAT Kolkata) The issue under consideration is whether addition made u/s 68 on the ground that the share capital received is seen not a genuine credit is justified in law? ITAT states that section 68 of the Act provides that if any sum found credited in the […]...

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No addition for Share application money if Recipient company proves identity, genuineness of transactions & creditworthiness of parties

Network Synthetics Pvt. Ltd Vs DCIT (ITAT Mumbai)

Network Synthetics Pvt. Ltd Vs DCIT (ITAT Mumbai) It is observed that the assessee has discharged its initial onus to prove the identity, genuineness of the transaction and creditworthiness of the parties by filing all these documents. The Tribunal in assessee’s group cases while deleting the additions made u/s. 68 of the Act observed a...

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Assessee can be asked to prove Source of Credits but Not Source of Source

Lalchand P. Dhariwal Vs ITO (ITAT Surat)

The issue under consideration is whether the addition made u/s 68 against unexplained creditors will be sustainable in law? Assessee Can Asked to Prove the Source of Credits in his Books of Accounts but Not Source of Source....

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Section 68 Addition Justified for Unexplained Gifts Received from Non-Related Donor

Meenu Jain Vs ITO (ITAT Delhi)

The issue under consideration is whether the CIT (Appeals) has grossly erred in confirming the addition as made by the Assessing Officer (AO) on account of gifts u/s 68? Addition u/s 68 Justified for Unexplained Gifts Received from Non Related Donor....

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No section 68 Addition in Absence of Primary & Independent Enquiry by AO

Homeway Marketing (P) Ltd. Vs ITO (ITAT Delhi)

The issue under consideration is whether the addition made u/s 68 for assessee helped various beneficiaries in providing accommodation entries in relation to capital and expenses is justified in law?...

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No section 36(1)(iii) disallowance unless Direct Nexus between Borrowed Funds & Capital Withdrawals

Lypsa Diamonds Vs ITO (ITAT Mumbai)

The issue under consideration is whether disallowance u/s 36(1)(iii) made by AO forming an opinion that interest bearing funds were withdrawn from the firm being capital withdrawn by the partners and interest free advances is justified in law?...

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Section 68 Bogus Cash Credits: Revenue can examine source of source

CIT Vs Sadiq Sheikh (Bombay High Court at Goa)

Merely pointing out to a source and the source admitting that it has made the payments is not, sufficient to discharge the burden placed on the assessees by Section 68 of the said Act. If this were so, then, it would be sufficient for assessees, to simply persuade some credit- less person or entity to own up having made such huge payments...

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Section 68 – Meaning of Satisfactory explanation with respect to unexplained income!

This article aims at highlighting the meaning of Satisfactory Explanation to Assessing Officers with respect to Section 68 of the Income Tax Act, 1961....

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Section 68 Addition not Justified for Unexplained Deposit in Bank Account

Dirisala Bala Murali Vs ITO ( ITAT Visakhapatnam)

The issue under consideration is whether the AO is justified in making addition u/s 68 towards alleged unexplained deposit in the bank account in as much as a bank account is not a book of account maintained by the appellant?...

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No section 68 Addition for URD Purchase supported with Strong Evidences

Baser Ahmed Sisodia Vs ITO (Supreme Court)

The issue under consideration is whether claim to purchase of goods by the assessee could be dealt with u/s 68 of the Income Tax as a cash credit, by placing burden upon the assessee to explain that the purchase price does not represent his income from the disclosed sources?...

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HC upheld Tribunal decision of estimating Profit @2% of Total Credits

PCIT Vs Shitalben Saurabh Vora (Gujarat High Court)

PCIT Vs Shitalben Saurabh Vora (Gujarat High Court) The issue in the present case relates whether the amount deposited by the assessee in the form of cash/cheques represents the income of the assessee. Admittedly, there was huge deposit of cash/cheques in the bank account of the assessee. But on perusal of the bank statement, it […...

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Bogus long-term capital gain on sale of shares- ITAT upheld Addition

Sudha Eashwar Vs ITO (ITAT Chennai)

Sudha Eashwar Vs ITO (ITAT Chennai) The assesse is claiming exemption by way of long term capital gains claimed by it to be earned on sale and purchase of Turbotech Engineering Ltd. by invoking provisions of Section 10(38) of the 1961 Act and onus is on the assessee to prove that these gains are genuine […]...

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ITAT refers back matter of ₹ 3.2 Crore addition for Share premium to AO

Fabline Engineers Pvt. Ltd. Vs ITO (ITAT Kolkata)

Fabline Engineers Pvt. Ltd. Vs ITO (ITAT Kolkata) This appeal preferred by the assessee is directed against the order of the Ld. CIT (Appeals) – 7, Kolkata dated 28-02-2018 passed ex parte, whereby he dismissed the appeal of the assessee for non-prosecution. 2. The assessee in the present case is a company, which is engaged [&hellip...

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Section 68 addition Not Justified in case of Issue of Shares in Exchange of Shares

ITO Vs DSR Impex Pvt. Ltd. (ITAT Kolkata)

The issue under consideration is whether the addition u/s 68 is justified in case of issuance of shares in exchange of shares?...

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Income already disclosed under PMGKY, 2016 cannot be treated as Unexplained Income u/s 68

Shri Nawal Kishore Soni Vs. ACIT (ITAT Jaipur)

The issue under consideration is whether the CIT(A) was right in deleting the addition made by the AO on account of unexplained investment in purchase of gold?...

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section 68 not apply to allotment of shares for non-cash consideration

ITO Vs Trilokpati Exim Pvt. Ltd. (ITAT Kolkata)

ITO Vs Trilokpati Exim Pvt. Ltd. (ITAT Kolkata) When assessee had allotted shares for consideration other than cash then provisions of section 68 ( cash credit ) does not apply FULL TEXT OF THE ITAT JUDGEMENT The captioned appeal filed by the Revenue, pertaining to assessment year 2012-13, is directed against the order passed by […...

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Purchase credited in books cannot be added under section 68

Sanjay Sharma Vs. ACIT (ITAT Delhi)

Sanjay Sharma Vs. ACIT (ITAT Delhi) Assessing Officer has accepted not only he sales figures but has also accepted that total purchases. Under accounting principles, a liability can only be brought into account by a credit entry in the books of account in favour of the person to whom the money is payable’ Thus, there […]...

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AO cannot treat Share Premium as Bogus without proper investigation

ITO Vs. Aravali Prime Consultants Pvt. Ltd. (ITAT Jaipur)

ITO Vs. Aravali Prime Consultants Pvt. Ltd. (ITAT Jaipur) In this case, it is noted that the AO during the course of assessment proceeding made the addition of Rs. 2,63,15,000/- (138500 shares x Rs. 190 per share) on account of share premium received on issue of shares by the assessee company. Thus the AO observed […]...

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No section 68 addition if Assessee Proves Identity, Creditworthiness & Genuineness

Nimbus (India) Ltd. Vs DCIT (ITAT Delhi)

The issue under consideration is whether the addition made by the AO under section 68 by considering the the amount received as unexplained share capital and premium is justified?...

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ITAT deletes addition for share premium as Assessee establishes identity, genuineness & creditworthiness of investor

ITO Vs M/s Heckyl Technologies Pvt.Ltd. (ITAT Mumbai)

ITO Vs M/s Heckyl Technologies Pvt.Ltd. (ITAT Mumbai) Firstly, the AO has clearly mentioned at paragraph no. 5 on page no’s, 6 and 7 of his order that he had made two references to the tax authorities in Mauritius and the UK. These references had been made under section 90 of the Act and had […]...

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Section 132(4) statement & notings found during search sufficient to invoke section 153A jurisdiction

Lalji Khimjibhai Patel Vs ACIT (ITAT Rajkot)

The issue under consideration is whether the assessee is correct in stating that cognizance taken under section 153A of the Act is illegal at the end of the A.O.?...

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No section 68 Addition if AO fails to properly verify details available with him

PCIT Vs Vishal Plastomers (P) Ltd. (Gujarat High Court)

The issue under consideration is whether the Tribunal is correct in upholding the decision of CIT(A) for deleting the addition made under section 68 of the Act?...

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Taxation of Share Premium

Taxation of share premium is a relatively new but litigated area of taxation. This article examines the two alternative approaches the AO should adopt while examining the issue where share premium received is in excess of its fair market value, i.e. the route of Section 68 or Section 56 (2)(viib)....

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No section 68 Addition if Asessee proves Genuineness & Creditworthiness of Creditors

Prayag Polytech Pvt. Ltd. Vs Addl. CIT. (ITAT Delhi)

The issue under consideration is whether the addition on account of advances from customers treating the same as unexplained liability (Section 68) is justified in law?...

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Loose papers cannot be classified as ‘incriminating material’ unless AO establishes nexus

Mani Square Ltd Vs ACIT (ITAT Kolkata)

For instance, scribbling or rough notings found on loose papers cannot be straightaway classified as ‘incriminating material’ unless the AO establishes nexus or connect of such notings with unearthing of undisclosed income of the assessee. This nexus or connect has to be brought out in explicit terms with corroborative material or evi...

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Tax @ 82.50% even if you received amount via proper banking channels

Yes, in certain case even if assessee received money through proper banking channels still it may attract tax @ 82.50% if assessee could not explain its source, identity and creditworthiness etc of the lender/giver of the amount to the satisfaction of Assessing Officer...

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Investment in Penny Stock- Bogus or Cash Credit U/s. 68?

Now-a-days Income Tax department investigates alleged trading/investment in shares and securities with collusion/connivance with any listed companies or with share broker by conducting Search/ Survey or by asking details u/s 133(6) of the Income Tax Act 1961....

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Assessee fails to explain source of such Cash Deposits- Section 68 Additions justified

Manish Kumar Mukim Vs ITO (ITAT Jaipur)

In view of the above mentioned parameters, ITAT found that the appellant has not been able to discharge even the basic onus to prove the genuineness of cash credits in his bank accounts. Therefore, in their considered view when the existence of the source of such cash deposits is not proven then the A.0 is fully justified in treating such...

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Income Tax on Shares Buy Back by Unlisted Companies

As we know, a company is a safer form of doing business. A company is a separate person than its shareholders/ members; it has its own personality and having power to assessed separately. The shareholders or members of the company are the real owners of the assets of the company. The company is doing business for the benefit of its stake ...

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Gift not unexplained merely because donor holds Low Economic class Ration Card

Lokadri Naidu Vs ITO (ITAT Hyderabad)

The issue under consideration is whether the Ration Card can be considered as a source of determining financial status of assessee and whether gift from person holding Ration Card of Low Economic class can betreated as unexplained Credit under section 68 of Income Tax Act, 1961 ?...

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Source of Source – Section 68- Income Tax Act 1961

Source of Source – Section 68 In the recent judgement of DCIT Vs M/S. Kejriwal Industries Ltd, I.T.A No.1509/AHD/2016 dated 4-5-2020, Hon’ble ITAT Surat held in favour of assessee. On the issue of section 68 of Income Tax Act 1961, Hon’ble ITAT held that assessee need not prove ‘source of source‘. The relevant part o...

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Assessee not liable to justify source of source of money received by him

Mahipal Ishwarlal Sottany Vs ITO (ITAT Ahmedabad)

Assessee is not expected to prove the genuineness of the cash deposited in the bank accounts of those creditors because under law the assessee can be asked to prove the source of the credits in its books of account but not the source of the source...

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Mere cash Deposit in Bank Account prior to issue of cheque not sufficient to held Loan as non genuine

Smt. Leela Kothari Vs ITO (ITAT Jaipur)

ITAT states that, once the source of deposit is explained as prior withdrawal from the bank of more than the amount deposited subsequently then the creditworthiness of the creditor and genuineness of the transaction cannot be doubted....

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No section 68 Addition Merely on Suspicion of Accommodation Entry

ITO Vs Chetan Constructions Pvt. Ltd. (ITAT Delhi)

The issue under consideration is whether the AO is correct in making the addition u/s 68 of the Act for the Advances received for booking of commercial space?...

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AO cannot change Share Valuation Method Opted by Assessee in Return

IBS Fintech India Pvt. Ltd Vs ITO (ITAT Bangalore)

The issue under consideration is whether AO in invoking section 56(2)(viib) of the Act and taxing the share premium under the said provisions?...

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Limited Scrutiny cannot be converted to Complete Scrutiny without following CBDT Circular

Shri Prabir Das Vs ITO (ITAT Guwahati)

whether the AO can expand the assessment from ‘Limited Scrutiny’ to ‘Complete Scrutiny’ without following the procedure as laid by the CBDT Circular?...

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ITAT delhi deletes Addition of LTCG on Penny stock

Shri Suresh Kumar Agarwal Vs ACIT (ITAT Delhi)

Shri Suresh Kumar Agarwal Vs ACIT (ITAT Delhi) ITAT deleted addition made u/s 68 for alleged bogus LTCG of Rs.56,43,084/- on merits holding that Ld AO failed to bring any cogent material in addition to report of Directorate of Investigation Kolkata about Jamakharchi /Penny stock companies and convert its reasons into a fact , thereby [&he...

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Section 68, 69, 69A, 69B and 69C of Income Tax Act, 1961

Comparison between section 68, section 69, section 69A, section 69B and section 69C: -So far as section 68 is concerned, the onus is wholly upon the Assessee to explain the source of the entry. But in cases falling under section 69, 69A, 69B and 69C, the words used show that before any of these sections are invoked, the condition preceden...

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A Transaction not become Genuine merely for receipt via banking Channel

Shri M.Balakrishna Hegde Vs DCIT (ITAT Bangalore)

Whether AO is correct in considering the gift received by the assessee as unexplained gift and made addition u/s 68 when the Gift was received through banking channels?...

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AO cannot disallow Sum credit in books under Section 68

Shri Hitesh Kumar Gupta Vs ITO (ITAT Jaipur)

The issue under consideration is whether the addition made by AO u/s 68 of Income tax Act, 1961 is justified in law?...

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Section 68: Creditworthiness of lender can’t be proved merely on strength of Bank Statement

Siddharth Export Vs ACIT (Delhi High Court)

The issue under consideration is whether AO is correct in treating unsecured loan received by assessee as unexplained credit under section 68?...

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Section 68 -Accommodation entry- Bombay HC in PCIT vs Alag Securities Pvt Ltd

Article on Section 68 with recent development in Case Laws in Bombay High Court in case of Pr. CIT vs Alag Securities Pvt Ltd. vide ITA No. 1512 of 2017 dated June 12, 2020 UNXEPLAINED CASH CREDITS, INVESTMENT, MONEY UNDER PROVISIONS OF INCOME TAX ACT, 1961 CASH CREDIT [SECTION 68]  define as where any sum is […]...

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Section 68 addition merely for deposit of business receipt of Spouse in joint bank account unsustainable

Shri Rajesh Jain Vs ITO (ITAT Indore)

The issue under consideration is whether the addition made by AO under section 68 in respect of the deposit of business of wife in their joint bank account is justified in law?...

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Accommodation entry Business- Entire deposits cannot be assessed as unexplained cash credits.

PCIT Vs Alag Securities Pvt. Ltd. (Bombay High Court)

In the present case, Assessee is engaged in the business of providing accommodation entries to entry seekers. During the assessement proceedings AO held that the identity of the parties involved in the transactions were not furnished as well as genuineness of the transactions relating to total cash deposits were not satisfactorily explai...

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Addition not justified when third party retracted the statement and Assessee not given Opportunity to Cross Examine

Asstt. CIT Vs Sabari Switch Gear (P) Ltd. (ITAT Cochin)

The issue under consideration is whether the addition under section 68 is done by AO is justified in law whenm addition was based on third party statements which were retracted by them and Assessee was not given opportunity to cross examine them and when Addition are based merely on Surmises?...

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Section 68: Sales declared as Income in books cannot be treated as cash credit

Bhagwant Merchants Private Limited Vs ITO (ITAT Kolkata)

ITAT states that the assessee has disclosed the sale of shares in its books of account. Once the sale is declared as income by the assessee, the question of treating the same amount as a cash credit u/s 68 of the Act results in double addition. Thus, the addition is also bad on merits. Hence, the appeal of the assessee is allowed....

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No addition for gifts if Assessee proves Identity, capacity & genuineness of donor

Dr. Vempala Bala Manohar Vs ITO (ITAT Visakhapatnam)

Gifts are normally made by relatives out of natural love and affection and do not necessarily require any particular occasion. Assessee had discharged his burden by furnishing necessary details before AO. In the absence of anything to show that the transactions were by way of money laundering, ...

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Taxation of Unexplained Incomes

Background To begin with, the unexplained income simply means any income for which assessee do not have valid explanation about the nature and / or source or the assessing officer is not satisfied with the explanation provided by the assessee. Under the provisions of Income-tax Act, 1961 (the Act) broadly, the term ‘unexplained income...

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Intricacies in Benami Law

In recent times, the most complex question which has been pondered upon is in relation to the implications of Benami Law and Income Tax Act on the issues of share capital, loans, gift, gold/ jewellery, cash, immovable property or any investment/expenditure....

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Section 68: Issue of shares in lieu of shares was not unexplained credit

ITO Vs Bhagwat Marcom Pvt. Ltd. (ITAT Kolkata)

The issue under consideration is whether the addition u/s 68 on account of share capital and share premium by treating the same as unexplained cash credit is justified in law?...

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Tax Treatment of Cash Credit U/s. 68, 69, 69A, 69B, 69C and 69D

This Article discusses Tax Treatment of Cash Credit, Unexplained investments, Unexplained money, Amount of investments not fully disclosed in books of account, Unexplained expenditure and Amount borrowed or repaid on hundi in cash under section 68,Section 69, Section 69A, Section 69B, Section 69C and Section 69D respectively of Income Tax...

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Section 68- No addition for duly explained cash deposited in bank

ACIT Vs Siddhartha Bhargava (ITAT Kolkata)

ACIT Vs Siddhartha Bhargava (ITAT Kolkata) The issue under consideration is whether Cash deposits in bank account held as unexplained u/s 68 is justified? During the assessment proceedings, the assessee had produced bank account of the assessee in Punjab National Bank (PNB) and HSBC. On verification of the bank accounts, it was found that...

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No section 68 addition as AO not disputed vortex of evidences furnished by assessee

Karuna Garg Vs ITO (ITAT Delhi)

Since neither AO conducted any enquiry nor had brought any clinching evidences to disprove the evidences produced by assessee and assessee had furnished all details including bank statement, share brokers note, ledger account copies, share certificates, in support of purchase and sale of shares and mode of payment and receipts of proceeds...

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CBDT Instruction No. 1916 will not take away the benefit of explained jewellery

Ram Prakash Mahawar Vs DCIT (ITAT Jaipur)

The moot point discussed here is very important where in, the allowed quantity as per the Instruction no 1916 is applicable in case where the assessee does not explain the source of the jewellery and the presumptive quantity is allowed. Such quantity is a Blanket Allowance....

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Loan from directors – Section 68 addition- Additional Evidence- ITAT restore matter to AO

Harina Developers Pvt. Ltd. Vs ITO (ITAT Bangalore)

Harina Developers Pvt. Ltd. Vs ITO (ITAT Bangalore) The issue under consideration is that whether the loan received from two directors can be considered as unexplained cash credit u/s 68 of the Act? In the given case, the assessee has received amount from two of its directors. The assessee could file only ledger account extract […]...

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No Section 68 addition of partners capital contribution in Firm if source of capital proved

Kesharwani Sheetalaya Sahsaon Allahabad Vs CIT (Allahabad High Court)

Addition under section 68 for not proving the source of income of partners who have made the deposit with the firm in their capital account could not be made as partners had shown the agricultural income in their personal returns of the past years which had been accepted by the department as such and the partners were all identifiable and...

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Treatment of Cash Sales as Unexplained Cash Credit | Section 68

Is addition u/s 68 of the Income Tax Act justified in case of Cash Sale duly credited in P & L Account and offered for taxation? During the Demonetization period (i.e. 09/11/2016 to 31/12/2016), there has been a huge deposition of cash in old demonetized currency (or SBN) notes in various Bank Account. It was […]...

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Section 68 cannot be applied in relation to the sales receipt

Shree Sanand Textiles Industries Ltd. Vs DCIT (ITAT Ahmedabad)

The ITAT Ahmedabad has harped upon the mechanical practices adopted by the Assessing Officers to make addition u/s 68. The moot point is that a sale which already forms part of books of account cannot be added again u/s 68 due to the reasons that Sales are already recorded in the books of accounts and the addition of the same amounts t...

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No section 68 addition can be made on the basis of mere statements

Modern Malleables Limited Vs DCIT (ITAT Kolkata)

Modern Malleables Limited Vs DCIT (ITAT Kolkata) Conclusion: Addition made u/s. 68 only on the basis of two statements which could not stand the scrutiny of law, was not justified and therefore, the addition could not be sustained as per law. Held: AO got information from the Investigation Wing pursuant to search operation conducted at [&...

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Theory of telescoping in determining taxability of undisclosed income

This article deals with the theory of telescoping as applied in the Income-tax Law, the manner of its application and as to how and under what circumstances the benefit of telescoping could be claimed / availed by an assessee. Though the said theory has general applicability across the taxability of a wide range of items, […]...

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Section 68 applicability when sales receipt shown in P&L Accounts

Whether Provisions of Section 68 are applicable in case of sales receipt shown in trading and profit and loss account? It has been observed that while passing an order for scrutiny assessment for cash deposited by the assessee during demonetization period, various assessing officers have made addition under various sections of the Income ...

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Bogus Capital Gain: No adverse inference could be drawn against assessee on the basis of untested statements without allowing opportunity of cross-examination

Shankar Lal Daruka Vs ITO (ITAT Kolkata)

We note that the fact that neither the statement relied on by the authorities below were provided to the assessee nor any cross examination was allowed to prove the veracity of the statement. We note that the fact that in the statement of third party, the name of the assessee was not implicated. Even otherwise, according to Learned Counse...

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Section 68 had no application when shares were allotted under a barter system

DCIT Vs Alishan Steels Pvt (ITAT Kolkata)

Section 68 had no application when the shares were allotted by the assessee-company under a barter system as the respective parties did not receive cash nor did pay any cash, there was no real credit of cash in the cash book and the question of inclusion of the amount of the entry as unexplained cash credit could not arise....

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No section 68 addition can be made for non-recording of Statement on Oath by mere one Person

Prerna Developers Vs ITO (ITAT Ahmedabad)

Where out of 14 persons, 13 persons have duly confirmed the booking advances made to assessee and their creditworthiness was also examined by AO but no negative inference was drawn by him, no addition could be made under section 68 just because one person who had only advanced an meager amount, had not recorded the statement under oath as...

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Peak Credit & telescoping theories in assessment proceedings under Income Tax

There may be some cases under Income Tax Assessment proceedings where there are a large number of unexplained credit and debit enteries of a person standing in books of account of an assessee. In such case the AO may tend to add all the aggregate enteries as unexplained income. However, in such case if the assessee does not have any expla...

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Mere statement without backing of credible evidences not justifies addition

Bini Builders Pvt. Ltd. Vs DCIT-Central Range-7(3) (ITAT Mumbai)

Statements recorded during the course of survey proceedings would not have much evidentiary value unless the same were backed by credible evidences. Assessee could not prove the source and nature of transactions, the stated amount was added to the income of the assessee u/s 68 and the original return was processed u/s 143(1) and the only ...

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Section 68 addition justified for unexplained LTCG from penny stock

Bhagwatiben Vinodkumar Surani Vs ITO (ITAT Ahmedabad)

Addition of long-term capital gain against an investor who invested in a penny stock company in connection with the penny stock scam involving Rs. 36,000 Crores was upheld as additions made on account of detailed enquiries being carried out by Kolkata Investigation Directorate with regard to 84 penny stocks company as well as SEBI and no ...

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Section 68 not applicable to Share Purchase against Issuance of Share

ITO Vs Pansu Commercial Pvt. Ltd. (ITAT Kolkata)

This is a simple case of acquiring shares of certain companies from certain shareholders without paying any cash consideration and instead the consideration was settled through issuance of shares to the respective parties. Hence, we hold that provision of section 68 of the Act are not applicable in the instant case and accordingly the ent...

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No section 68 addition for loan transaction with father on mere suspicion

Girish Madhukar Rathi Vs DCIT (ITAT Pune)

The issue under consideration is that confirming the addition made u/s 68 by A.O. in respect of the loan taken from father of the appellant on mere suspicion....

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Section 68 applies only to unexplained credit entries without proper explanation

K N R Roofing Pvt. Ltd. Vs ACIT (ITAT Bangalore)

ITAT are of the view that u/s. 68 of the Act, it is only the credit entry appearing in the books of account of an assessee for the relevant previous year, that can be treated as unexplained cash credit in the absence of proper explanation by the assessee...

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No Section 68 Addition for issue of Shares on Premium in lieu of shares

Blooming Tradelink Pvt. Ltd. Vs ITO (ITAT Kolkata)

The sole issue involved in this appeal of assessee is against the action of Ld. CIT(A) in confirming the addition of Rs.5,01,00,000/- made by AO u/s. 68 of the Income-tax Act, 1961 (hereinafter referred to as the Act) on account of bogus share capital including share premium...

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Assessee not required to explain sources of money provided by creditor

Gaurav Triyugi Singh Vs ITO (Bombay High Court)

The assessee is only required to explain the source of the credit. There is no requirement under the law to explain the source of the source. The fact that the source of the source is suspect and that the creditor had no regular source of income to justify the advancement of the credit to the assessee does not mean that an addition can be...

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Credit worthiness cannot be doubted merely for meager income | Section 68 | Bogus share capital

PCIT Vs Ami Industries (India) P Ltd (Bombay High Court)

The assessee had furnished PAN, copies of the income tax returns of the investors as well as copy of the bank accounts in which the share application money was deposited in order to prove genuineness of the transactions. In so far credit worthiness of the creditors were concerned, the bank accounts of the investors showed that they had fu...

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Section 68 not apply if Assessee proves identity, creditworthiness & genuineness

ITO Vs Sunglow Dealcom Private Limited (ITAT Kolkata)

The assessee is a company and is in the business of investment. An addition of unexplained cash credit u/s 68 of the Act, were made by the Assessing Officer on the ground that the assessee failed to explain the sources of funds for the share capital received by it at a premium. On appeal the ld....

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Sales bogus if investee is a penny stock company, with no credentials, and the sale rates artificially hiked, with no real buyers

Bhagwatiben Vinodkumar Surani Vs ITO (ITAT Ahmedabad)

(a) The scrip is a penny stock, purchased at a low price, which is over a period of time ramped up by operators acting in benami names or name lenders. The purchases are off market purchases, and not reported on the exchange; (b) purchase/s is back dated, i.e., per a back dated contract note, paid for in cash, so that there is no trail...

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Entire purchases cannot be disallowed as Bogus If AO accepted sales

PCIT Vs Rishabhdev Tachnocable Ltd. (Bombay High Court)

It was held that whether the purchases were bogus or whether the parties from whom such purchases were allegedly made were bogus was essentially a question of fact. When the Tribunal had concluded that the assessee did make the purchase, as a natural corollary not the entire amount covered by such purchase but the profit element embedded ...

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No section 68 addition merely based on AO’s surmises & conjectures

Blue Lotus Designers Pvt. Ltd Vs ITO (ITAT Kolkata)

Since both the nature & source of the share application received was fully explained by assessee thus, assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants and addition made by AO u/s 68 was based on conjectures and surmises which could not be justified....

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Tax Treatment of Gifts Received By an Individual or HUF

A very common and frequent question running in the mind of taxpayers is the tax ability of gifts. In this part, an effort has been made to discuss the various provisions relating to taxability of gift received by an individual or a Hindu Undivided Family (HUF) under Income Tax Act. 1. Monetary Gifts: If the […]...

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Posted Under: Income Tax |

Bogus share capital/ premium- SC dismisses Review Petition of NRA Iron & Steel

NRA Iron & Steel Pvt. Ltd Vs PCIT (Supreme Court)

NRA Iron & Steel Pvt. Ltd Vs PCIT (Supreme Court) In this case earlier Hon’ble SC has upheld addition under Section of Share Capital and Share premium Considering the Same as Bogus as Appellant was  failed to prove the genuineness of the transaction of receiving share application money and to prove the creditworthiness. A petit...

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Section 68 addition cannot be made when source of sources proved

ACIT Vs. Veritas (India) Ltd. (ITAT Mumbai)

Veritas (India) Ltd. Vs ACIT (ITAT Mumbai) Conclusion: Assessee had established identity of investors and submitted documents to establish creditworthiness and the certificate issued by the Firm of Accountants for proving the movement of funds from ultimate investors to the foreign companies which establish genuineness of transactions thu...

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Section 68 addition based on handwritten confirmation of lenders

South Shourne Corporation (India) Vs ACIT (ITAT Ahmadabad)

AO was not justified in making addition under section 68 where assessee had furnished evidences such as PAN and copies of bank statements of lenders which proved identity and creditworthiness of lenders and genuineness of impugned loan transactions....

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Cash credits can be taxed only in the year of credit

Shri Ivan Singh Vs ACIT (Bombay at Goa High Court)

Shri Ivan Singh Vs ACIT (Bombay at Goa High Court) Section 68 – Bogus Cash Credit – The expression ‘any previous year’ to mean as not referring to all the previous years, but, the previous year in relation to the assessment year concerned. The expression “any previous year” to mean as not referring to all [&hel...

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Recent Judicial interpretation of Section 68 of Income Tax Act 1961

Let us examine two latest Judgements decided by The High Court of Judicature at Bombay dated 22nd January 2020 and 29th January 2020 involving facts where assessing officers invoked section 68 of the Income Tax Act 1961 while making additions to the returned income. What is section 68 of the Income Tax Act 1961 and […]...

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Posted Under: Income Tax |

Bogus purchases- Entire Purchase amount cannot be disallowed

The Principal Commissioner of Income Tax-25 Vs Pinaki D. Panani (Bombay High Court)

Pr. CIT Vs Pinaki D. Panani (Bombay High Court) Even if the purchases made from the parties in question are to be treated as bogus, it does not necessarily mean that entire amount should be disallowed and that no benefit should be given to the Respondent-Assessee. Assuming that the purchasers from whom the purchases were […]...

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Mere transaction through banking channel not sufficient to prove genuineness

Hillman Properties Pvt. Ltd. Vs ITO (ITAT Delhi)

Assesssee did not furnish PAN and Bank statements or any of the directors of investor companies merely showing that transactions were carried out through banking channel was not sufficient to prove genuineness of transaction in the matter. When investors having nil income had deposited cash in their bank account immediately before giving ...

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Section 68 addition-Separate maintenance of books by assessee and his proprietorship concern

PCIT Vs Ajay Jaysukhlal Mehta (Gujarat High Court)

PCIT Vs Ajay Jaysukhlal Mehta (Gujarat High Court) In a situation in which assessee and it’s proprietorship concern are maintaining separate books of accounts – as in the present case, an assessee may have his own capital of ‘x’ amount, and yet his capital contribution in capital account of a proprietorship concern can be more [&h...

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Taxation of Deposits Made With Banks in SBNs

The Income Tax Returns for the Assessment Year 2017-18 were selected for scrutiny via e-proceedings for those Assessees, who have deposited more than Rs. 2 Lakhs in cash in Banks after 8th November 2016, being the date on which Demonetization was announced by our honourable Prime Minister of India. Cash Books, Sales Invoices, Copies of [&...

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Posted Under: Income Tax |

Genuine Advances from customers cannot be treated as undisclosed income

Shri Sanjay Agarwal Vs ITO (ITAT Kotkata)

When assessee received advances from customers and the same were subsequently adjusted against goods sold to them, then, the advances could not be treated as unexplained cash credit under section 68, therefore, addition under section 68 made by AO on account of unexplained cash advances was deleted....

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Liability payable as a consequence of trading transaction cannot be added U/s. 68

ITO Vs Ashok Transport Co.(ITAT Jodhpur)

Since transaction between assessee and truck owners was a liability which assessee had to pay arising from trade transaction and same could not be added under section 68....

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Section 68 Addition cannot be made without proper enquiry by AO

DCIT Vs Senorita Enterprises Pvt. Ltd. (ITAT Delhi)

Addition under section 68 on account of high premium was unjustified as there was a clear lack of inquiry on the part of AO once assessee had furnished all the relevant material. ...

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Addition only for difference of GP on Normal & Bogus Purchase

Hemant M Mehta HUF Vs ACIT (ITAT Mumbai)

Hemant M Mehta HUF Vs A.C.I.T. (ITAT Mumbai) In case of bogus purchases where sales are accepted, the addition is required to be made only to the extent of difference between the GP declared by the assessee on normal purchases vis a vis bogus purchases. Respectfully following the order of the Hon’ble Jurisdictional High Court […]...

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Assessment of Cash Deposits in OCM Cases

A large number of assessments pertaining to cash deposited in banks during demonetization period are pending. The article analysis relevant sections of I.T. Act as well as various legal issues to assist assessing officers in passing error free sustainable assessment orders....

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Posted Under: Income Tax |

Judgments in Favour of Revenue in Penny Stock Cases

The provision for exemption of long term capital gains from shares requiring payment of securities transaction tax has been taken advantage by unscrupulous tax evaders. An organised tax evasion involving the brokers of stock exchanges, taxpayers and their consultants, entry operators and exist operators was in action for quite some time....

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Posted Under: Income Tax |

ITAT upheld section 68 Addition- Big Jump in Share Price of unknown Company

Harish Kumar HUF Vs ITO (ITAT Chennai)

Assessee has not tendered cogent evidence to explain as to how the shares in an unknown company had jumped to an higher amount in no time when the fantastic sale price was not at all possible as there was no economic or financial basis to justify the price rise. Also, assessee failed to provide details of persons who purchased the shares....

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Addition of bogus share capital u/s 68 and bogus purchases u/s 69 cannot be made in absence of incriminating material with AO

Agson Global Pvt. Ltd Vs ACIT (ITAT Delhi)

Since assessee had sufficient documentary evidences before AO to prove that money routed from assessee itself which came back to assessee in the form of share capital/premium and AO neither made any further enquiry on the documentary evidences filed by assessee nor verify the trail of the source of funds received by assessee through vario...

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Section 68 additions justified on failure to prove identity of share applicants

Royal Rich Developers (P.) Ltd. Vs Pr. CIT (Bombay High Court)

Royal Rich Developers (P.) Ltd. Vs Pr. CIT (Bombay High Court) We notice that during the original assessment as well as the remand proceedings, the assessee was given ample opportunities to produce the share investors which the assessee failed to do. The Assessing Officer thereupon issued the summons to the share purchasers calling upon ...

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Sec. 68 Addition cannot be made for mere non-compliance of notice by shareholders

DCIT Vs Bhaijee Commodities (P) Ltd. (ITAT Delhi)

AO required assessee-company to prove genuineness of share capital along with premium received by it. Assessee furnished various evidences in that regard. However, AO made addition under section 68 on the ground that in response to summons under section 131 shareholder companies had not appeared for personal deposition....

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Disallowance cannot be made solely on third party information- Section 68/69

CIT Vs Ms Odeon Builders Pvt. Ltd. (Supreme Court)

The entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who ...

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Bogus Share Capital: ITAT criticises casual approach of Department

ITO Vs M/s Citymaker Builder Pvt. Ltd. (ITAT Mumbai)

ITO Vs M/s Citymaker Builder Pvt. Ltd. (ITAT Mumbai) As two of the share applicant companies as per the information received by the A.O from the office of the DGIT(Inv), Mumbai, were the companies controlled  an infamous accommodation entry provider, therefore, it was incumbent on the part of the lower authorities to have carried out [&h...

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