TaxTMI 
TaxTMI 
2018 (7) TMI 2342
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....xplained cash credit of share allotment. The assessee has received share application money of Rs. 14624696/- during the Financial Year 2007-08 and share application money of Rs. 5654634/-during the Financial Year 2008-09 and thereafter made allotment of shares against the said receipt of share application money during the Financial Year 2011-12 relevant to A.Y. 2012-13 under consideration. The AO taxed the entire receipt during the year under consideration u/s. 68. 5. By the impugned order, CIT(A) confirmed the action of the AO against which assessee is in further appeal before us. 6. Assessee has also raised an alternate argument as to allow set off of brought forward losses against addition so made. 7. We have heard the rival contentions and carefully gone through the orders of the authorities below. From the record, we found that the assessee company has received an amount of Rs. 2,02,79,380/- against the share application money in A.Y. 2008-09 and 2009-10. Thus in the A.Y. 2012-13, there was a opening balance of Rs. 2,02,79,380/- under the head of share application money pending for allotment against which the assessee company has transferred an amount to share capital accou....
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....ed loan. In this regard, we find that out of these loan of this amount, only Rs. 50,000/- was received in the present year and the balance is on account of opening balance. Hence, only this amount of Rs. 50,0007- can be considered for addition under Section 68 in this year. We, therefore, delete the balance addition. Now on account of the loan of Rs. 50,000/- received by the assessee in the present year, we feel that although the assessee could not properly explain the same but the assessee deserves the benefit of telescoping against the addition in the income made by the Assessing Officer, which is confirmed by us. As against a loss of Rs. 1,22,1007- declared by the assessee in the ROI, income assessed by the A.O is Rs. 36,5067- which means that total addition made by the A.O which is confirmed by us also is Rs. 1,58,6067- whereas the fresh loan is only Rs. 50,0007- only. Hence, this addition, of Rs 50 0007- is also deleted Ground No. 3 is allowed. Ground No. 1 was not pressed and hence, rejected as not pressed. Ground No. 4 is consequential and Ground No. 5 is General." 3. From the above, it can be seen that barring a sum of Rs. 50,000/-, remaining portion of the addition was d....
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....nt of entries, i.e., transfer of figure from one head to another head and, therefore, inference drawn by Assessing Officer could not be sustained - Held, yes [Para 7] [In favour of assessee] 4. ITA No. 153/Mum/2010 - ITO Vs Shri Nasir Khan J. Mahadik (ITAT Mumbai) Mumbai ITAT has in the following case deleted the additions made on account of opening balances of unsecured loans and the notional interest on such loans. The Tribunal held that only fresh loans or additions to the loans during the year in question can be considered for the purpose of addition. Previous years loans cannot be added to subsequent year's income by claiming them to be unexplained. 5. ITA No. 305/Mum/2016 - Soorai Leathers (ITAT Chennai) In a recent judgment, ITAT Chennai has stated that consent/acceptance given by assessee could not give jurisdiction and a right to the assessing authority to make an addition. The taxing authority can act only if there is power under the statute to do so. It further held that if the liabilities are old representing opening balances only, Section 68 cannot be applied. 6. [2008) 21 SOT 22 (DELHIUURO) SURAJ BHAN BAJAJ vs. ITO Section 68 of the Income-tax Act, 196....
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....g balances in both accounts which had been brought forward from earlier years, no addition was merited under section 68 - Held, yes 8. It was also argued by learned AR that Cash Credit on account of Share Application money received from non-resident company is not subject to deemed addition u/s. 68 of the Act. In this respect, it is better to produce the verdict of Section 68 which reads as under:- "Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income- tax as the income of the assessee of that previous year: Provided that where the assesee is a company, (not being a company in which the public are substantially interested) and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless - a) The person, being a resident in whose name such credit is recorded in t....
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....ught into India by non-residents for investments or other purposes is not liable to Indian income-tax. Therefore, there is no question of a remittance into the country being subjected to income-tax in India. The question of assessment to tax arises only when there is no evidence to show that the amount in question, in fact represents such remittance, in other words, in the absence of proper supporting evidence, the taxpayers' story that the money has been brought into India from outside may be disbelieved by the ITO who may then proceed to hold that the money had in fact been earned in India. 3. If the money has been brought into India through banking channels or in the form of assets like plant and machinery or stock-in-trade, for which the necessary import permits had been obtained, no questions at all are asked by the ITOs as to the origin of the money or assets brought in. It is only in cases where the money is claimed to have been brought from outside otherwise than through banking channels and there is no evidence regarding the transfer of money that the Department has to make enquiries about the source thereof. Even in these cases, having regard to the difficulties exp....
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....ther under section 5(2), if any income is already received outside India, same cannot be taxed in India merely on ground that it is brought in India by way of remittances - Held, yes - Whether there is a conflict between provisions of section 5(2) on one hand and section 68 or 69 on other hand only with regard to burden of proof and not on issue of taxability of income - Held, yes - Whether issue as to whether income of a nonresident is taxable or not is to be decided with reference to provisions of section 5(2) and provisions of section 68 or 69 cannot enlarge scope of section 5(2) and, therefore, what is not taxable under section 5(2) cannot be taxed under section 68 or 69 - Held, yes - Whether, consequently, section 68 or 69 would be applicable in case of a non-resident only with reference to those amounts whose origin of source can be located in India - Held, yes - Whether where bank certificates in respect of remittances from abroad credited in NRE account in India were in prescribed form and showed that amounts were remitted from assessee's own bank account with banks at New York, Commissioner (Appeals) was justified in coming to conclusion that income, if any, was alre....
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....herein Court observed as under:- "Section 68 of the Income-tax Act, 1961 - Cash credits - Assessment year - Partners of assessee-firm were members of one 'J' group running ;ral businesses and industries - Accounts of assessee-firm showed that it borrowed certain amount from GB, a proprietary concern of one of its partners JM, which was invested in purchase of shares - ITO found that GB had no cash balance to advance said amount to assessee - He, thus, concluded that source of funds for purchase of shares by assessee was not explained, and consequently, assessed that amount as income from undisclosed sources - It was contended by assessee that notional cash entries were made to reduce indebtedness of three companies of 'J' Group to GB in order to comply with certain directions of RBI - Assessee-firm substituted three companies of 'J' Group as debtor to GB - It was further stated that question of cash credit did not arise, there being no actual passing or receipt of cash but transactions were mere book entries - Whether, in aforesaid circumstances, effect and import of transaction was that assessee took over liability of aforesaid three companies to 'GB&....
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....unt and share premium account respectively. Thus, the assessee has not received any single amount in A.Y. 2012-13 for the allotment of shares. Under section 68, the amount which represents credit of the year that can be added as unexplained credit for that year. Opening balance is not subject to tax u/s. 68 of the Act as the same is representing the credit of another previous year. Shares were allotted by the assessee company to its holding company at 100% premium in expectation of good future earnings and prospectus. Hon'ble Calcutta Tribunal in the case of Global Mercantiles (P) Ltd., 157 ITD 924 held that where assessee received share application monies in earlier year and only shares were allotted to applicants during assessment year under appeal, provisions of section 68 could not be invoked to make addition. 18. In view of the above judicial pronouncements as the amount Rs. 2,02,79,380/- representing credit of earlier years, i.e. A.Y. 2008-09 & 20O9-10, addition cannot be made in assessment year under an appeal merely because of allotment is made in A.Y. 2012-13. [Opening balance cannot be added in A.Y. 2012-13). 19. Furthermore, the law is section 68 is not apply to remitt....