TaxTMI 
TaxTMI 
2026 (6) TMI 215
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.... 3. The learned CIT(A) erred in confirming the addition of Rs. 1,35,48,400/- under section 68 ignoring that the amounts represented share application money received through banking channels in earlier years. 4. The learned CIT(A) failed to consider documentary evidence such as confirmations, bank statements and journal entries placed on record. 5. The order passed is violative of principles of natural justice and liable to be set aside. 6. The appellant craves leave to add, amend or alter any ground at the time of hearing." 3. The brief facts of the case are that the assessee company, M/s. NIMP Healthcare Private Limited, is engaged in the business of manufacturing of chemicals and had filed its return of income for Assessment Year 2014-15 declaring total income at Nil after claiming business loss. The return of income was processed under section 143(1) of the Income-tax Act, 1961 ("the Act") and subsequently the case was selected for scrutiny assessment. During the course of assessment proceedings, notices under sections 143(2) and 142(1) of the Act were issued calling for various details and explanations. The Assessing Officer observed from the aud....
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....see furnishes names, addresses and PAN details of creditors and the creditors are income tax assessees, the initial burden stands discharged and thereafter the onus shifts upon the Revenue to make further enquiry. The assessee further relied upon various judicial precedents including Rohini Builders v. DCIT, Sarogi Credit Corporation v. CIT and CIT v. Radiant Embroideries to contend that where transactions are routed through banking channels and supporting evidences are furnished, addition under section 68 cannot be sustained merely on suspicion or because creditors were not personally produced. 6. The assessee also submitted before the Ld. CIT(A) that there were typographical errors in the tax audit report and that a substantial portion of the amounts added by the Assessing Officer represented the opening balances or conversion of share application money received in earlier years into unsecured loans. The assessee submitted that such opening balances could not legally be brought to tax under section 68 of the Act in the current assessment year. The assessee explained that complete details including confirmations, PAN, income tax return acknowledgements and bank statements had a....
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....onfirmations in several cases, acknowledgements of income tax returns, PAN details, bank statements and details regarding amounts actually received during the year. The chart furnished before us by the learned counsel for the assessee clearly demonstrates the nature and extent of evidences furnished in respect of each creditor and the same materially establishes that the assessee had discharged the initial burden cast upon it under section 68 of the Act. 11. From the documentary evidences placed before us, we find that the identity of the parties stood conclusively proved and established. The creditors are identifiable individuals having valid PAN and are regular income tax assessees. Their income tax return acknowledgements were furnished before the Assessing Officer and the gross total income declared by them was also brought on record. Once the creditors are identifiable tax assessees borne on the records of the Income Tax Department itself, the primary requirement regarding proof of identity stands satisfied. It is well settled that the assessee is only required to establish the identity of the creditor and furnish primary evidences in support thereof. In the present case, t....
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....he relevant previous year. Such conversion entries do not partake the character of fresh cash credits during the year under consideration. It is a settled proposition of law that section 68 of the Act can be invoked only in respect of sums found credited during the relevant previous year and not in respect of opening balances brought forward from earlier years. Therefore, the very foundation of the addition suffers from serious factual as well as legal infirmity. 15. Particularly, on careful perusal of the individual loan accounts and the reconciliation chart furnished by the learned counsel for the assessee, we find that the additions made by the Assessing Officer suffer from serious factual inconsistencies and arithmetical discrepancies. In the case of Shri Haren Naginlal Baxi, it is observed that the Assessing Officer made addition of Rs. 32,50,000/- whereas the actual fresh loan received during the year was only Rs. 7,50,000/-. The balance amount represented conversion of share application money aggregating to Rs. 25,00,000/- received in earlier years and merely reclassified during the year under consideration. Therefore, the substantial portion of the addition did not perta....
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.... and income tax particulars of the creditor. Therefore, even in this case, the addition was made despite availability of primary documentary evidences establishing identity and genuineness of the transaction. 16. The aforesaid factual analysis clearly reveals that the Assessing Officer proceeded mechanically by treating entire closing balances as unexplained cash credits without undertaking proper account reconciliation and without appreciating whether the amounts represented fresh credits during the year or merely opening balances and conversion entries from earlier years. Such an approach is contrary to the scheme of section 68 of the Act which applies only to sums credited during the relevant previous year. These glaring factual discrepancies materially weaken the very foundation of the impugned addition. 17. Another important aspect which cannot be overlooked is that once the assessee furnished primary evidences establishing identity of creditors, their income tax particulars and banking transactions, the onus shifted upon the Revenue to make further investigation if it still entertained doubts regarding the financial capacity of the lenders. However, from the assessment ....