Tribunal upholds deletion of protective addition under Income Tax Act, emphasizes verification of source of funds.

The Tribunal dismissed the Revenue's appeal, affirming that the CIT(A) correctly deleted the protective addition of Rs. 28.68 crores under Section 68 of the Income Tax Act. The Tribunal held that the source of funds from the individuals was verified by their respective AOs, establishing the genuineness of the transactions. It was emphasized that parallel assessments for the same income on different persons were not allowed. The Tribunal upheld the CIT(A)'s decision, stating that the provisions of Section 68 did not require verification of the "source of the source."

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Issues Involved:
1. Deletion of protective addition of Rs. 28.68 crores made by the AO under Section 68 of the Income Tax Act.
2. Verification of the source of funds and the requirement to prove the "source of the source."

Summary:

Issue 1: Deletion of Protective Addition of Rs. 28.68 Crores

The Revenue filed an appeal against the order of the Commissioner of Income Tax (Appeals), Gandhinagar, which deleted the protective addition of Rs. 28.68 crores made by the Assessing Officer (AO) under Section 68 of the Income Tax Act. The assessee, a Private Limited Company, had its name struck off from the Registrar of Companies as of 21-07-2011. Despite not filing a Return of Income under Section 139(1), the company received Rs. 26.68 crores in its bank account from two individuals. The AO issued a notice under Section 148 and concluded that the credit entries were accommodation entries, making the amount income of the assessee for the Assessment Year 2010-11. However, substantive additions were already made in the names of the individuals who credited the amounts, and thus, the AO made the addition in the hands of the assessee on a protective basis.

Issue 2: Verification of Source of Funds

The CIT(A) deleted the protective addition, noting that the source of funds from the individuals was verified by their respective AOs. The CIT(A) referenced previous appellate orders where similar additions were deleted, establishing the identity, creditworthiness, and genuineness of transactions. The Tribunal also noted that the Income Tax Act does not allow parallel assessments for the same income on two different persons. The assessee had provided sufficient evidence to prove the source of funds, and the AO did not present any contrary evidence. The Tribunal upheld the CIT(A)'s decision, emphasizing that the provisions of Section 68, as they stood before the amendment in 2013, did not require verification of the "source of the source."

Conclusion:

The Tribunal dismissed the Revenue's appeal, affirming that the CIT(A) correctly deleted the protective addition of Rs. 28.68 crores, as the identity, creditworthiness, and genuineness of the transactions were established, and the provisions of Section 68 were appropriately applied. The order was pronounced in the open court on 05-07-2023.

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