The Delhi bench of the Income Tax Appellate Tribunal held that the assessee grossly failed in discharging the initial burden, thus relevant provisions applied by the Assessing Officer (AO) are not applicable.
The assessee, a company who during the year under consideration received certain credits was asked to submit the details of the afore mentioned credit entries.
Notices under section 133(6) of the Income Tax Act were issued to parties but no reply was received from them which was informed to the assessee. The AO observed that suddenly the replies were received from all the parties.
The AO observed that surprisingly none of the share holders acknowledge the payment of share capital of Rs. 1 lac each as claimed by the assessee. The AO was of the firm belief that the initial onus is upon the assessee to explain the credit entries in its books of account under section. 68 of the Act which it has grossly failed to discharge and proceeded by making the addition of Rs. 3,00,000/-+19258000/- +2359600/- under Section 68 of the Income Tax Act.
Proceeding further the AO found that the assessee has made certain advances out of borrowed funds and was of the opinion that the assessee has used borrowed funds in making interest free advances and, therefore, disallowed proportionately interest and bank charges and made addition of Rs.689283/-.
Before the CIT(A) it was strongly contended that all the parties have confirmed the credit transactions and have filed necessary bank statements. It was explained that the share capital of Rs. 3 lacs was received from the promoter/ directors of the company whose identity and credit worthiness can be verified from the submission made during the assessment proceedings.
The CIT(A) further observed that the transactions are recorded in the books of account and there are no indications of devious nature. The CIT(A) was of the opinion that the AO is at liberty to take any action against the lenders/ share holders/ share applicants in their respective return of income through their respective AO and went on to delete the impugned additions.
The tribunal observed that the assessee has simply filed documents but has not given any explanation to the adverse observations in respect of the bank statements. Even the CIT(A) ignored the specific findings of the AO that cash were deposited immediately before issuing the cheque Considering the facts of the case in totality the tribunal viewed that the assessee grossly failed in discharging the initial burden.
The two bench members consisting of N. K. Billaya (Accountant member) and Astha Chandra (Judicial member) set aside the findings of the CIT(A) restore and that of the AO. All the additions made under Section 68 of the Income Tax Act are confirmed grounds.
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