Mere Suspicion cannot take place for the purpose of passing an Order: ITAT deletes Addition made u/s 68 of Income Tax Act [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that mere Suspicion cannot take place for the purpose of passing an order hence addition made under Section 68 of the Income Tax Act, 1961 was deleted.

The Assessee is an individual and proprietor of M/s. Mangal Industries, which is engaged in the business of manufacturing S. S. utensils during the year consideration, offered its business income at Rs. 5,20,897/- and income from other sources at Rs. 13,754/-.

The Assessee borrowed loans of Rs. 20,00,000/- & Rs. 5,00,000/- from M/s. Santoshima and M/s. Vasudev respectively and during the year under consideration, has not taken any fresh loan from such concerns but paid interest of Rs. 2,40,000/- and Rs. 60,000/- respectively to the above two parties/entities.

The Assessing Officer issued the notices under Section 133(6) of the Income Tax Act to M/s Santoshima and M/s. Vasudev. However, notice issued to M/s. Santoshima returned as un-served with the remarks not known and the notice sent to Vasudev P. Rawal (HUF) remained un-complied.

The Assessing Officer construed that said parties have no explanation to offer and treated the interest amount of Rs. 3,00,000/- as unexplained expenditure under Section 68 of the Income Tax Act, and added to the total income of the assessee.

As per the balance sheet, the Assessee has shown the amount of Rs. 20,00,000/- and Rs. 5,00,000/- as liability towards M/s. Santoshima and M/s. Vasudev and also shown to have paid the interest amount of Rs. 2,40,000/- and Rs. 60,000/-.

The Apex Court in the case of CIT vs. P. Mohankala has clearly laid down the dictum “that there has to be credited amount in the books of account of the Assessee and such credit has to be sum during the previous year and the Assessee offers no explanation.

The Two-member bench comprising of BR Baskaran (Accountant member) and N.K. Choudhry (Judicial member) held that neither the Assessee has received any cash nor paid any cash and there was no real cash credit during the year under consideration, therefore the amount in question as unexplained expenditure could not arise, on this count also, the provisions of Section 68 of the Income Tax Act is not applicable and therefore addition under Section 68 of the Income Tax Act is unsustainable.

Thus, the appeal of the assessee was allowed.

To Read the full text of the Order CLICK HERE

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