TaxTMI 
TaxTMI 
2013 (12) TMI 479
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....earned Commissioner of Income Tax (Appeals) erred in confirming the decision of the Learned Assessing Officer of considering compensation received on cancellation of gala booking as income under the head "income from Other Sources" instead under the heads "profits and Gains from Business and profession". 2. Ground no.1 regarding the addition made u/s 68 of the Income-tax Act by treating the share application money as unexplained cash credit. The assessee has received Rs. 98,00,000/- from M/s. Patel Enterprises and Rs.2,00,000/- from M/s. Mercury Developers. The said money was credited in the books of account as share application money. The AO issued notice u/s 133(6) to the creditors. In response to the notice reply was received from M/s. Mercury Developers; however no reply was received from M/s Patel Enterprises. The AO asked the assessee to produce the Mr Khan Nasir Ahmed proprietor of M/s Patel Enterprises with necessary details to prove the identity creditworthiness of the party and genuineness of the transactions. After several opportunities, the details and the statement of bank account of M/s Patel Enterprises were submitted. The AO noticed that neither their return of i....
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....plication money has been explained. He has pointed out that the assessee has refunded Rs.50 lakhs received from D.Naresh Kumar on 02.12.2009. The application money received from Mercury Developers of Rs.2 lakhs was refunded on 06.10.2009 and the application money of Rs.98 lakhs received from Patel Enterprises was refunded on 18.08.2009. The details of the refund have been duly shown in the bank account of the assessee as the refund was made through cheque. Thus, the ld. AR had submitted that the assessee has proved the identity & capacity of the creditors by furnishing relevant record of sources of the application money. The assessee has also proved the genuineness of the transactions because when the transaction of allotment of shares was not materialized then the assessee refunded the same. The ld. AR has referred the reply to the remand report and submitted that the assessee has produced the confirmation letter from Shri Nasir Ahmed Khan whereby the genuineness of the share application money was confirmed and thereafter when the assessee refunded the amount to the parties then the genuineness of the transactions cannot be doubted. The ld. AR submitted that the assessee has disch....
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....the identity of the creditors but fail to establish the creditworthiness of the creditors and genuineness of the transactions. He has relied upon the impugned orders of the authorities below and submitted that AO has pointed out that in the case M/s. Patel Enterprises huge cash has been deposited in the bank accounts at regular intervals and even a sum of Rs. 56 lakhs was transferred from overdraft account and again cash was deposited in the current account of M/s. Patel Enterprises. The AO has given a finding that it was not possible to verify the source of this cash deposit in bank account and therefore the assessee failed to establish the creditworthiness of the creditors. He has referred para 5.2.5 of CIT(A) and contended that CIT (A) has relied upon the decision of full Bench of Hon'ble Delhi High Court in the case of Sophia Finance Ltd. (205 ITR 1998) wherein the Hon'ble High Court has held the section 68 is applicable in respect of share application money. The ld. DR referred the remand report and submitted that the AO asked to furnish the various details including return of income, computation of income, balance-sheet, details of share allotted and amount invested by the as....
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....d from the overdraft account. The overdraft was raised from the current account and other amounts deposited. Once the entire details of the amount credited in the bank account of the creditor from where the application money has been paid then doubt of the source of source cannot be reason for making the additions u/s 68 as unexplained cash credit in the hands of the assessee. We further noted that in the remand report, the AO has admitted the particulars furnished by the assessee and inquiry was made from concerned Assessing Officer of the creditors. The AO has mentioned in the remand report that this office has called for report from the Assessing Officer of the creditor to know the status of the assessment but report was still awaited from the AO concerned. Thus it goes to prove that the creditors are subject to assessment and if the sources of application money paid by the creditors is in doubt the revenue in its power to consider the same in the assessment of the creditors. The assessee has refunded the entire share application money to the parties because allotment of shares could not be materialized which further strengthen the case of the assessee that the transaction is ge....