2025 (2) TMI 488 - AT - Income Tax

Revenue's appeal dismissed; CIT(A)'s deletion of Rs. 2,00,00,000 under Section 68 upheld due to lack of credit transaction.

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the Rs. 2,00,00,000 addition under section 68 of the Income-tax ... Addition u/s 68 - assessee has given contradictory replies during the course of assessment proceedings - HELD THAT:- It is case where the amount paid by the assessee is an asset in it books of account and not the one where it has received the amount and is a liability. It is claimed that assessee has written off this amount as a bad debt/business loss in the books of accounts for the year ending 31.03.2024 relevant to AY 2024-25. As noted that the amount was advanced by the assessee in its ordinary course of business in AY 2016-17 and that there is no credit transaction pertaining to the sum so advanced to Santosh Trust in the year under consideration. Provisions of Section 68 are attracted only in the case of cash credits in the relevant year of credit. In the present appeal before us, admittedly it is a fact that there is no credit for the amount which has been held to be an unexplained liability. The transaction of advancing the amount to Santosh Trust pertains to Assessment Year 2016-17. We do not find any infirmity in the factual finding arrived at by ld. CIT(A) directed to delete the additions so made. The findings so arrived at is fortified by the decision of Ivan Singh [2020 (2) TMI 850 - BOMBAY HIGH COURT] which observed that “from the plain reading of the provisions of section 68 it does not appear that where any sum is found to be credited in the books of account maintained for any previous year and there is no proper explanation for such credit, the sum so credited can be charged to the income tax as the income of the assessee of ‘that previous year’.” Thus, the grounds raised by the Revenue are dismissed. The appeal filed by the Revenue in this case concerns the deletion of an addition of Rs. 2,00,00,000 made by the Assessing Officer under section 68 of the Income-tax Act. The core legal questions considered by the Tribunal are as follows:1. Whether the CIT(A) erred in deleting the addition without appreciating contradictory replies by the assessee during the assessment proceedingsRs. 2. Whether the CIT(A) erred in deleting the addition without establishing the genuineness of the transactionRs. 3. Whether the CIT(A) erred in directing the AO to delete the addition without considering new facts not submitted before the AORs.The Tribunal analyzed the issues as follows:The brief facts of the case involve the assessee, engaged in the healthcare business, reporting a loss in its income tax return. The Assessing Officer found an unsubstantiated liability of Rs. 2 crores related to a creditor, Santosh Trust. The assessee explained that the amount was an advance payment for goods, not a liability. The Assessing Officer treated this as a bogus credit balance and added it back to the total income under section 68 of the Act.The CIT(A) reviewed the facts and evidence presented by the assessee and concluded that the addition under section 68 was unwarranted. The Revenue appealed to the Tribunal, arguing that the assessee provided contradictory replies and failed to establish the genuineness of the transaction.The Tribunal considered both parties' arguments and examined the evidence on record. It noted that the amount in question was treated as an asset in the assessee's books, not a liability. The Tribunal found that there was no credit transaction in the relevant year and that the transaction with Santosh Trust occurred in a previous assessment year. Citing the decision of the Bombay High Court in Ivan Singh vs. ACIT, the Tribunal held that section 68 does not apply where there is no proper explanation for a credit in the books.The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the addition. The core principle established is that section 68 of the Income-tax Act does not apply when there is no credit transaction in the relevant year and no proper explanation for the credit in the books.In conclusion, the Tribunal's decision affirms that the addition made by the Assessing Officer under section 68 was incorrect, and the appeal of the Revenue is dismissed.