TaxTMI 
TaxTMI 
2026 (8) TMI 697
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....dismissed the appeal preferred by appellant who appealed against the unwarranted addition of unexplained cash credits received by appellant under Section 68 of the Act, for the assessment year 2010-11. 4. The brief facts of the case are that the appellant is a company which filed its return of income on 03.02.2011, admitting an income of Rs. 43,10,278/- under regular provisions of the Act and income of Rs. 3,47,58,664/ under the provisions of section 115JB of the Act. The return was processed under Section 143(1) of the Act. Subsequently, the case was converted to scrutiny through Computer-Assisted Scrutiny Selection (for short, 'CASS'). In response to the notices issued under Section 143(2) and 142(1) of the Act, the authorized representatives of the appellant appeared from time to time and furnished the information called for. After hearing the authorized representatives and after verifying the information filed, the Assessing Officer completed the assessment order by making various additions and passed an order under Section 143(3) of the Act, dated 28.03.2013. 5. Being aggrieved by the order passed by the Assessing Officer, the appellant filed an appeal before the Commiss....
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....he ITAT was unwarranted, since the appellant proved that the funds belonged to Smt. Hema Kedia which was also held confirmed by the statement given by Smt. Hema Kedia before the authority concerned during the assessment proceedings, that the ITAT went into the 'approbate and reprobate theory' against the appellant which did not apply to facts of the case at hand. 10. Au contraire, learned Senior Standing Counsel for Income Tax Department contended that the sums received by the appellant i.e. Rs. 5,25,00,000/- and Rs. 10,00,000/- were nothing but bogus entries to infuse its own funds into its company. During the assessment proceedings, the respondent did not find any share application money in the balance sheet of the appellant which further raised doubts of its origin and legality. Further, upon summons by the respondent, Smt. Hema Kedia refused to appear and depose as to the creditworthiness and genuineness of the transactions made by her against the appellant. Based on the above findings, the respondent made the above mentioned amounts under addition under Section 68 of the Act. 11. Learned Senior Standing Counsel for Income Tax Department placed reliance on the case of CIT....
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....ut the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that where the assessee 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 the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided also that nothing contained in the first proviso or second proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10. A plain reading of the aforesaid provision discloses that it casts a burden on the as....
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....68 of the Act is to satisfactorily explain the credit through material that is available to and within the power of the assessee to produce. It does not extend to compelling the physical presence of an independent third party over whom the assessee has no control. Whereas, in the present case, the creditor has independently confirmed the transaction in writing and the transaction is duly reflected in her disclosed bank account and tax filings. The failure of the creditor to personally depose, for reasons entirely her own, cannot be attributed to the assessee so as to convert an otherwise explained credit into unexplained income. 16. We are also unable to sustain the reasoning of the ITAT insofar as it proceeded to invoke the doctrine of real income and the theory of approbate and reprobate against the appellant. The doctrine of real income has no application whatsoever to a fact situation such as the present, where the dispute is confined to whether a credit entry has been satisfactorily explained under Section 68 of the Act. Equally, the principle that a party cannot approbate and reprobate presupposes that the assessee has taken inconsistent stands at different points in the p....