Summary and Review of Case Laws Decided by Income Tax Appellate Tribunals
Tuesday, 18 August 2015 13:04

Section 68 - Unexplained Cash Credit - When the genuineness of the transaction is proved the addition is unjustified - Bombay Tribunal

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1. When the assessee has submitted substantial evidence to prove the share application money the addition u/s 68 for unexplained cash credit is not justified

2. When the statement on the basis of the addition made is not available with the revenue the impugned addition proved to be wrong


1. Assessee a private limited company and was subjected to search & seizure operation u/s 132

2. Assessee received share application money of Rs. 10 lacs from Dakcon Impex Private Limited

3. During the course of assessment proceedings assessee furnished details e.g. address, copy of e-return, copies of bank statement, copy of accounts to prove the genuineness of the transaction

4. AO issues summon Dakcon Impex Private Limited which returned back unserved

5. Department conducted survey u/s 133A in the hands of Dakcon Impex Private Limited

6. During the course of survey the director of the company Dakcon Impex Private Limited appears to have stated that his company has given only accommodation entries to the assessee

7. A.O. assessed the share application money of Rs. 10 lacs as unexplained cash credit u/s 68 of the Act.

8. A.O. also presumed that the assessee would have also paid Rs. 10000/- as commission to get these accommodation entries and added Rs. 10000/- as unexplained expenditure

9. Assessment was framed u.s 153A of the act

10. Assessee moved to CIT(A)

11. During the course of appellate proceedings assessee submitted that copy of the said statement from the director was not provided

12. CIT(A) directed the AO to furnish the copy of the statement

13. AO replied that the statement is not available on record instead admitted that there is a reference about the statement in the appraisal report, meaning thereby the AO has relied upon the observation made in the appraisal report for making the addition

14. CIT(A) thus examined the issue independently

15. CIT(A) confirmed the addition on the basis of heavy deposits in the bank account and considering the return of income

16. Assessee moved to Tribunal

17. Tribunal decided the issue in favour of the assessee


1. I notice that the assessee has furnished details to prove the identity of the share applicant company, its credit worthiness and genuineness of the transactions. As stated earlier, the AO made the addition on the basis of a statement alleged to have been given by the director of the share applicant company and the same was found to be not available. Hence, the very basis on which the impugned addition was made was proved to be wrong.

2. As noticed earlier, the Ld CIT(A) has examined the copy of income tax returns, which may not throw light about the credit worthiness. Further the copy of bank statement also shows that there are continuous transactions of deposits and withdrawals. Hence, in my view, the observations made by the Ld CIT(A) that there were heavy deposits before issuing the cheque of Rs.10.00 lakhs to the assessee company also appear to be misplaced one. Hence, in my view, the Ld CIT(A) has confirmed the impugned addition without properly appreciating facts.

3. Hence, I am unable to agree with the conclusions reached by Ld CIT(A) in view of the foregoing discussions. Accordingly, I set aside the order of Ld CIT(A) on the issue of Rs.10.00 lakhs and direct the assessing officer to delete the same. Consequently, the addition of Rs.10,000/- relating to estimated commission income is also directed to be deleted

Cases referred to

DCIT V/s Rohini Builders (2002) 256 ITR 360 (369, 370) (Guj)(HC)

CIT V/s ABT Ltd (2015)370 ITR 159 (Mad) (HC)




Additional Info

Read 14145 times Last modified on Saturday, 13 February 2016 16:21

Amit is a Chartered Accountant and a part of Taxpundit's Support Team. He has experience in various industry sectors including manufacturing, power and utilities, financial services, alternative investments etc. He is a passionate blogger and keep writing articles on Income Tax for various publications.

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1 comment

  • Comment Link deepakkumar Tuesday, 18 August 2015 14:09 posted by deepakkumar

    Million dollar question - where is the recorded statement of the director ? Why and where it has disappeared ? How it is not available with the department ? I think the assessee has gone away with it easily this time....The very basis on which the addition of Rs. 10 lacs was made has suddenly disappeared...

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