Allahabad HC upholds Deletion of Income Tax addition u/s 68 of Income Tax Act as Assessee Proves Genuineness of Transaction [Read Order] 

The Allahabad High Court upheld the deletion of Income Tax Addition under section 68 of the Income Tax Act, 1961 as the assessee proved the genuineness of the transaction. The assessee not only disclosed the name of the jewellers to whom the jewellery was sold by the creditors of the assessee but it also established the mode of payment through the banking channel.

Sri Manu Ghildyal, counsel for the Union of India-Revenue and Sri R.R. Agrawal, Senior Advocate, assisted by Sri Nitin Kumar Kesharwani, counsel appeared for the assessee.

The revenue challenged the order of the Income Tax Appellate Tribunal (ITAT) which dismissed the revenues’ appeal and confirmed the order of the first appellate authority which was in favour of the respondent M/S Paswara Papers Ltd. Accordingly, the addition made under Section 68 of the Income Tax Act to the extent of Rs. 3,48,00,852/- has been deleted. Only part addition of Rs. 2,50,000/- has been sustained in the case of Ms. Nitasha Singhal.

While dismissing the appeal the Tribunal held that ” However, the evidence concerning the sale of jewellery is supported with the purchase invoices, details of cheques issued for sale consideration by the jeweller and copies of the bank account of nine parties showing the credit of sale consideration of jewellery in their bank accounts. Apparently, during the assessment proceedings or during the remand proceedings the learned AO has not made any attempt to exercise his powers of inquiry from the jeweller or from another available open source to establish any suspicion.” 

It was evident that no credible/ tangible material was brought on record by the assessing authority to prove the genuineness of the transaction. The assessee not only disclosed the name of the jewellers to whom the jewellery was sold by the creditors of the assessee but it also established the mode of payment through the banking channel

A division bench comprising of Justice Saumitra Dayal Singh and Justice Manjive Shukla observed that no inquiry, whatsoever was made from the jeweller M/s Raghunandan Jeweller Pvt. Ltd. from where it purchased jewellery, valued at Rs. 3,48,00,852/-. Once the money was thus made available to the creditors of the assessee, they had the source available to deposit with the assessee.

The court observed that the findings recorded by the Tribunal are findings of fact, based on the evidence and material on record. They do not give rise to any substantial question of law.

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