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COURT:
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DATE: August 12, 2015 (Date of pronouncement)
DATE: November 16, 2015 (Date of publication)
AY: 2006-07
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CITATION:
S. 68: If the identity and other details of the share applicants are available, the share application money cannot be treated as undisclosed income in the hands of the Co. The addition, if at all, should be in the hands of the applicants if their creditworthiness cannot be proved

The Court is of the view that the Assessee by produced sufficient documentation discharged its initial onus of showing the genuineness and creditworthiness of the share applicants. It was incumbent to the AO to have undertaken some inquiry and investigation before coming to a conclusion on the issue of creditworthiness. In para 39 of the decision in CIT v. Nova Promoters & Finlease Ltd. 342 ITR 169, the Court has taken note of a situation where the complete particulars of the share applicants are furnished to the AO and the AO fails to conduct an inquiry. The Court has observed that in that event no addition can be made in the hands of the Assessee under Section 68 of the Act and it will be open to the Revenue to move against the share applicants in accordance with law

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DATE: August 7, 2015 (Date of pronouncement)
DATE: August 12, 2015 (Date of publication)
AY: 2009-10
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CITATION:
S. 41(1)/ 68: Old unclaimed liabilites which are not written back by the assessee can neither be assessed as "cash credits" u/s 68 nor assessed u/s 41(1) as "remission or cessation of liability"

On the applicability of section 68, we are of the view that those provisions will not apply as the balances shown in the creditors account do not arise out of any transaction during the previous year relevant to AY 2009-10. The provisions of sec. 68 are clear inasmuch as they refer to “sum found credited in the books of account of an assessee maintained for any previous year”. Since the credit entries in question do not relate to previous year relevant to AY 2009-10, the same cannot be brought to tax u/s. 68 of the Act. The proper course in such cases for the Revenue would be to find out the year in which the credits in question were credited in the books of account and thereafter make an enquiry in that year and make an addition in that year, if other conditions for applicability of section 68 are satisfied

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DATE: April 22, 2015 (Date of pronouncement)
DATE: July 27, 2015 (Date of publication)
AY: 2007-08
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CITATION:
S. 41(1)/ 68: Unclaimed liabilities to creditors, even if fictitious and bogus, cannot be assessed u/s 41(1) in the absence of a write-back. The bogus credits can be assessed u/s 68 only in the year the credits were made and not in the year they are found to be not payable

Applying the ratio in the cases mentioned supra, the amount in question cannot be brought to tax in the year under appeal under the provisions of Section 41(1) of the Act. It is trite law that an addition under Section 68 can be made only in the year in which credit was made to the account of the creditors in the books of account maintained. Admittedly, in this case the credit to the account of creditors was made in the earlier years and therefore, the amount even cannot be brought to tax under Section 68 in the year under appeal. However, it is open to the Department to levy tax on such amount by resorting to the remedies available under the provisions of Act by duly following the procedure known to the law

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DATE: July 15, 2015 (Date of pronouncement)
DATE: July 21, 2015 (Date of publication)
AY: 2007-08
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CITATION:
S. 68: If the assessee has furnished the details of the creditors with their PAN, the onus is on the AO to examine their credit-worthiness and source of payment to assessee

If at all the A.O. or CIT(A) had any doubt with regard to creditworthiness of the creditors, it should have triggered an enquiry by the A.O. to find out the real facts. When the identity of the creditors along with their income tax particulars including PAN and assessment details were available with the A.O. it would not have been difficult on the part of the A.O. to verify their bank accounts and other details to ascertain whether the advances were from explained sources. Even the A.O. could have taken up the issue with the concerned A.Os with whom the creditors are assessed

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DATE: July 3, 2015 (Date of pronouncement)
DATE: July 10, 2015 (Date of publication)
AY: 2008-09
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CITATION:
S. 56(2)/ 68: Old liabilities, even if treated as genuine in earlier years and even if on capital account, are liable to be assessed as "income" in year of write-back if assessee is unable to provide confirmations and substantiate genuineness of liabilities

When an amount, which is stated, claimed and accepted as a payable, is no longer so, the assessee gains to that extent. There is nothing unreal or notional about this gain. What is admitted though is that there has been remission/cessation of liability in-as-much as these are no longer payable. Why? No reason is advanced. It is under these circumstances that the law permits the A.O. to draw an adverse inference of it as representing the assessee’s income. As regards the year, there can again be little doubt in the matter

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DATE: March 27, 2015 (Date of pronouncement)
DATE: April 15, 2015 (Date of publication)
AY: 2006-07
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CITATION:
S. 68: Despite documentary evidence and broker’s confirmation, genuineness of penny stock transactions has to be determined on the basis of ‘preponderance of human probabilities’. If assessee is unable to explain ‘intriguing’ facts and circumstances, genuineness of transaction cannot be accepted

Firstly, documentary evidences, in the face of unusual events, as prevailing in the instant case, and without any corroborative or circumstantial evidence/s, cannot be regarded as conclusive. Two, the preponderance of probabilities only denotes the simultaneous existence of several ‘facts’, each probable in itself, albeit low, so as to cast a serious doubt on the truth of the reported ‘facts’, which together make up for a bizarre statement, leading to the inference of collusiveness or a device set up to conceal the truth, i.e., in the absence of credible and independent evidences

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DATE: March 25, 2015 (Date of pronouncement)
DATE: April 15, 2015 (Date of publication)
AY: 2005-06
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CITATION:
S. 68: Only credits received during the year can be assessed as unexplained cash credits. Credits of earlier years, even if unexplained, cannot be assessed

Though the assessee could not furnish the confirmation of the loan and other evidences but such a loan could not have been added in the A.Y. 2005-06 as the same was taken in the earlier years and is being carried forward. In this year it is appearing balance of the current year. Thus, legally such an addition could not sustained in this year

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DATE: April 1, 2015 (Date of pronouncement)
DATE: April 6, 2015 (Date of publication)
AY: 2006-07
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CITATION:
S. 68: Even if the issue share capital is bogus, no addition can be made in assessee's hands if identity of shareholder is established. Assessee is not required to show source of shareholder's funds

Once the identity of the share holder have been established, even if there is a case of bogus share capital, it cannot be added in the hands of company unless any adverse evidence is not on record. It is a certain law that the assessee is to prove the genuineness of transaction as well as the creditworthiness of the creditor must remain confined to the transactions which have taken place between the assessee and the creditor. It is not the business of assessee to find out the source of money of creditors

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DATE: March 11, 2015 (Date of pronouncement)
DATE: March 26, 2015 (Date of publication)
AY: 2004-05
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CITATION:
S. 68: Assessment proceedings under the Income Tax Act are not a game of hide and seek. If AO does not conduct proper inquiry, the obligation to do so is on the CIT(A) & ITAT

The AO here may have failed to discharge his obligation to conduct a proper inquiry to take the matter to logical conclusion. But CIT (Appeals), having noticed want of proper inquiry, could not have closed the chapter simply by allowing the appeal and deleting the additions made. It was also the obligation of the first appellate authority, as indeed of ITAT, to have ensured that effective inquiry was carried out, particularly in the face of the allegations of the Revenue that the account statements reveal a uniform pattern of cash deposits of equal amounts in the respective accounts preceding the transactions in question

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DATE: March 5, 2015 (Date of pronouncement)
DATE: March 16, 2015 (Date of publication)
AY: 2007-08
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CITATION:
S. 41(1)/68: Failure to establish genuineness of old liabilities means that there is a remission/ cessation of such liabilities

The assessee failed to establish the genuineness of these liabilities by producing supporting evidence. Simply the liabilities being reflected against certain names in the books of account would not establish the genuineness of liabilities

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