2014 (5) TMI 846

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....ading. For the year under consideration it had filed its return of income declaring loss of Rs.12,37,966/-. During the course of assessment proceedings the AO noticed that the Balance Sheet of the assessee reflected sundry creditors of Rs.1,00,000/- in the name of M/s. Hatima Textiles Ltd. The assessee was asked to explain the nature of the credit entry. In response thereto it was submitted that a sum of Rs.1,00,000/- was received from Mr. Alfred D'souza and Ms. Nandita D'souza in connection with public issue (private placement) of Hatima Textiles Ltd. but the transactions having not been materialised the amount was shown as payable to Hatima Textiles Ltd. 4. It deserves to be noticed that if the amount is paid by Mr. Alfred D'souza and Ms....

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....er section 143(2) of the Act and examined the material placed before him. The case of the assessee was that the assessee collected similar amounts from several other persons also apart from Mr. Alfred D'souza and Ms. Nandita D'souza towards share application money. The understanding was that Hatima Textiled Ltd. shall be coming out with public issue of shares which may result in substantial gains to investors. Subsequently Hatima Textiles Ltd. informed the assessee that they had dropped the proposal to issue shares to the public. Therefore, the assessee had to refund the money to the subscribers. Out of a total sum of Rs.3,00,000/-, Rs.2,00,000/- was repaid to 19 investors between April, 1998 and February, 1999 and the balance amount was re....

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....ction of the AO. 6. Further aggrieved, assessee is in appeal before us. The learned counsel for the assessee submitted that in order to invoke provisions of section 41(1) of the Act it has to be shown that the assessee gained benefit/ claimed deduction in any of the earlier years in the form of liability and only in such an event, in the year of remission of liability it can be brought to tax. In the instant case the plea of the assessee that there was no such benefit obtained in the earlier years was accepted by the learned CIT(A). The AO having not objected to the findings of the CIT(A), it cannot now be said that section 41(1) is applicable to the instant case and, therefore, the issue has to be considered only under section 68 of the A....