Tribunal rules in favor of assessee, deems addition under Income Tax Act unsustainable.
The Tribunal allowed the appeal, ruling that the addition of Rs. 2,69,013/- under section 68 of the Income Tax Act was unsustainable. The Tribunal found the discrepancy in the claimed capital contribution to be irrelevant, ultimately deleting the addition and siding with the assessee.
Issues:
Addition of unexplained cash credit u/s 68 of the Income Tax Act, 1961.
Analysis:
The appeal was against the addition of Rs. 2,69,013/- made by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) (CIT(A)) on account of alleged unexplained cash credit u/s 68 of the Income Tax Act, 1961. The assessee, a wholesale trading company, filed its return declaring a total income of Rs. 48,550/-. During assessment proceedings, the AO questioned the source of cash in hand of Rs. 29,87,730/- as on 31.03.2015. The AO noted a shortfall of Rs. 2,69,013/- in the capital contribution claimed by the assessee and treated this amount as unexplained, along with an additional Rs. 24,00,000/- transferred to the bank account without proper explanation. The AO made an addition of Rs. 26,69,013/- u/s 68 to the total income of the assessee.
Regarding the appeal before the CIT(A), it was observed that the AR of the appellant failed to establish the nature and source of the credit in the books of accounts. The CIT(A) found the AO's action justified for the Rs. 2,69,013/- addition but deleted the Rs. 24,00,000/- addition as the accounts were audited, entries were in books of accounts, and complete details were provided by the appellant. The CIT(A) confirmed the Rs. 2,69,013/- addition and deleted the Rs. 24,00,000/- addition.
The Tribunal noted the non-appearance of the assessee during the hearings and disposed of the appeal ex-parte. The Tribunal found that the main source of cash in hand was explained by the capital contribution of partners to the extent of Rs. 28,30,987/-. The difference of Rs. 2,69,013/- in the claimed capital contribution was deemed irrelevant, and the Tribunal held that the addition u/s 68 was not sustainable. Therefore, the Tribunal deleted the Rs. 2,69,013/- addition and allowed the appeal of the assessee.
In conclusion, the appeal was allowed, and the addition of Rs. 2,69,013/- made by the AO and confirmed by the CIT(A) u/s 68 was deemed unsustainable and deleted by the Tribunal.
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