Asstt. CIT v. Mancherial Cement Company (P.) Ltd.

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The Tax Publishers2013 TaxPub(DT) 0981 (Hyd-Trib) : (2013) 143 ITD 0676 : (2013) 153 TTJ 0001 : (2013) 084 DTR 0018 : (2013) 023 ITR (Trib) 0030 INCOME TAX ACT, 1961 --Income from undisclosed sources--Addition under section 68 Share application money--Assessee-company was engaged in business of manufacture of cement. During course of assessment proceeding assessing officer specifically asked assessee to submit confirmation in respect of share capital introduced and other information. In absence of compliance from assessee assessing officer completed assessment under section 144 making addition as unexplained credit under section 68. Commissioner (Appeals) deleted addition observing that assessee had not commenced business and there was no way to earn such a huge amount outside books of account and introduce it through share capital in books of account. According to Commissioner (Appeals) assessee discharged burden cast upon assessee with regard to identity and credit worthiness of parties and genuineness of transaction. Not justified. In the present case, in spite of opportunities given, assessee having failed to prove genuineness and creditworthiness of parties, addition is to be sustained. Under section 68 even in a case were an amount was credited on very first day of accounting ear and explanation offered by assessee was not accepted by assessing officer. Such amount might be assessed as income of assessee for accounting ear for which books are minuted. Being so, finding given by Commissioner (Appeals) could not be accepted. In this case the Commissioner (Appeals) deleted the addition on the reason that the company is in inception stage and it would not have earned this amount of income from unexplained sources reasons advanced by the Commissioner (Appeals) for deletion of the addition made under section 68 are not correct. A large amount of cash appearing on the very first day of the accounting year was not assessable in that year as it was not possible for the assessee to make such a huge income on the very same day on which the assessee started its business for that year. Whereas, under section 68, even in a case where an amount is credited on the very first day of the accounting year and the explanation offered by the assessee is not accepted by the assessing officer, such amount may be assessed as income of the assessee for the accounting year for which the books are maintained. Being so, Tribunal not inclined to appreciate the finding given by the Commissioner (Appeals) in his order. [Para 20] It is true that the assessing officer is not able to establish that the entire amount received as share subscription is the own money of the assessee company. But he has reached a dead end/enquiry and the burden has shifted on to the assessee. Assessee has given the identity of the subscribers but genuineness of the transaction and creditworthiness of the transaction is not established. Being so, the deletion of addition by the Commissioner (Appeals) is not justified. [Para 22] In the present case, in spite of opportunities given, assessee having failed to prove genuineness and creditworthiness of parties, addition is to be sustained. [ara 23] The assessee is required to prove not only the identity of the parties, genuineness of the transaction has to be proved. In view of this, the entire issue is remitted back to the file of the Commissioner (Appeals) for fresh consideration in the light of our above observation as the finding of the Commissioner (Appeals) in para 5.1 of his order is inappropriate. [Para 24] Income Tax Act, 1961 Section 68 In the ITAT, Hyderabad A Bench Chandra Poojari, A.M. & Asha Vijayaraghavan, J.M. Asstt. CIT v. Mancherial Cement Company (P.) Ltd. ITA No. 115/Hyd/2012 A.Y. 2006-07 18 January, 2013 SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 0981 (Hyd-Trib) : (2013) 143 ITD 0676 : (2013) 153 TTJ 0001 : (2013) 084 DTR 0018 : (2013) 023 ITR (Trib) 0030

INCOME TAX ACT, 1961

--Income from undisclosed sources--Addition under section 68 Share application money--Assessee-company was engaged in business of manufacture of cement. During course of assessment proceeding assessing officer specifically asked assessee to submit confirmation in respect of share capital introduced and other information. In absence of compliance from assessee assessing officer completed assessment under section 144 making addition as unexplained credit under section 68. Commissioner (Appeals) deleted addition observing that assessee had not commenced business and there was no way to earn such a huge amount outside books of account and introduce it through share capital in books of account. According to Commissioner (Appeals) assessee discharged burden cast upon assessee with regard to identity and credit worthiness of parties and genuineness of transaction. Not justified. In the present case, in spite of opportunities given, assessee having failed to prove genuineness and creditworthiness of parties, addition is to be sustained. Under section 68 even in a case were an amount was credited on very first day of accounting ear and explanation offered by assessee was not accepted by assessing officer. Such amount might be assessed as income of assessee for accounting ear for which books are minuted. Being so, finding given by Commissioner (Appeals) could not be accepted.

In this case the Commissioner (Appeals) deleted the addition on the reason that the company is in inception stage and it would not have earned this amount of income from unexplained sources reasons advanced by the Commissioner (Appeals) for deletion of the addition made under section 68 are not correct. A large amount of cash appearing on the very first day of the accounting year was not assessable in that year as it was not possible for the assessee to make such a huge income on the very same day on which the assessee started its business for that year. Whereas, under section 68, even in a case where an amount is credited on the very first day of the accounting year and the explanation offered by the assessee is not accepted by the assessing officer, such amount may be assessed as income of the assessee for the accounting year for which the books are maintained. Being so, Tribunal not inclined to appreciate the finding given by the Commissioner (Appeals) in his order. [Para 20] It is true that the assessing officer is not able to establish that the entire amount received as share subscription is the own money of the assessee company. But he has reached a dead end/enquiry and the burden has shifted on to the assessee. Assessee has given the identity of the subscribers but genuineness of the transaction and creditworthiness of the transaction is not established. Being so, the deletion of addition by the Commissioner (Appeals) is not justified. [Para 22] In the present case, in spite of opportunities given, assessee having failed to prove genuineness and creditworthiness of parties, addition is to be sustained. [ara 23] The assessee is required to prove not only the identity of the parties, genuineness of the transaction has to be proved. In view of this, the entire issue is remitted back to the file of the Commissioner (Appeals) for fresh consideration in the light of our above observation as the finding of the Commissioner (Appeals) in para 5.1 of his order is inappropriate. [Para 24]

Income Tax Act, 1961 Section 68

In the ITAT, Hyderabad A Bench

Chandra Poojari, A.M. & Asha Vijayaraghavan, J.M.

Asstt. CIT v. Mancherial Cement Company (P.) Ltd.

ITA No. 115/Hyd/2012

A.Y. 2006-07

18 January, 2013