Tribunal rejects Income Tax Act section 68 addition for wrong assessment year

The Tribunal held that the addition made by the Assessing Officer under section 68 of the Income Tax Act for the Assessment Year 2012-13 was not justified. As the amount in question was received in the Financial Year 2008-09 and no money was received in the impugned assessment year, the addition was deemed invalid. The Tribunal set aside the order of the CIT(A), deleted the addition of Rs. 3.00 crores, and allowed the appeal of the assessee. Other grounds raised in the appeal were not addressed, and the decision was pronounced on 25th September 2020.

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Issues:
- Addition made by Assessing Officer u/s. 68 of the Income Tax Act, 1961
- Validity of making the addition in the Assessment Year 2012-13 against the credit made in the books of accounts in the Financial Year 2008-09 relevant to the Assessment Year 2009-10

Analysis:
1. The appeal was filed against the order of the Commissioner of Income Tax (Appeals) related to the addition made by the Assessing Officer u/s. 68 of the Income Tax Act. The assessee received 3,00,000 equity shares with a premium from a company in the Financial Year 2008-09 but the shares were allotted in the Financial Year 2011-12 relevant to the Assessment Year 2012-13. The Assessing Officer added the amount of Rs. 3.00 crores u/s. 68 of the Act, which the assessee contested.

2. The CIT(A) upheld the addition, stating that the investor company lacked creditworthiness. The assessee argued that the addition should have been made in the Financial Year 2008-09 relevant to the Assessment Year 2009-10, not in 2012-13. The assessee cited legal precedents to support their argument, emphasizing that the amount received and credited in the relevant previous year should be considered u/s. 68.

3. The Tribunal analyzed the provisions of section 68 of the Act, which require any sum found credited in the books of the assessee to be brought to tax in the previous year. As the amount was received in 2008-09 and journal entries were made in 2011-12, no money was received in the impugned assessment year. Relying on previous decisions and the absence of contradictory evidence from the department, the Tribunal held that the addition for the A.Y. 2012-13 was not justified. Consequently, the order of the CIT(A) was set aside, the addition was deleted, and the appeal of the assessee was allowed.

4. Given the decision on the main issue, the Tribunal deemed it unnecessary to address other grounds raised by the assessee in the appeal. The appeal was allowed, and the order was pronounced in open court on 25th September 2020.

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