The Kolkata Bench of Income Tax Appellate Tribunal ( ITAT ) ruled that section 68 of the Income Tax Act,1961 applies only to credits received in the relevant year and not to those from earlier years.
The Revenue-appellant challenged the Commissioner of Income Tax (Appeals) [CIT(A)]’s order dated 12.03.2024, passed under section 250 of the Act, in the case of Pujita Merchandise Pvt. Ltd, respondent-assessee.
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The assessee, a company,filed its return for the assessment year 2012-13 on 27.09.2012, reporting Rs.11,100/- income. The case was selected for scrutiny, and notices under sections 143(2) and 142(1) were issued. The assessee submitted the required documents.
The assessment was completed on 26.03.2015, determining the income at Rs.9,26,11,100/-. The Assessing Officer ( AO) found that the assessee had raised Rs.9,26,00,000/- by issuing equity shares at Rs.10/- each with a Rs.90/- premium. Most of the funds were received earlier, and only Rs.1,00,000/- came in the current year. Rs.21,00,000/- was refunded to M/s Mohan Management Ltd.
Notices were issued to the company and investors, who responded. The AO suspected collusion due to the high share premium and added Rs.9,26,00,000/- under section 68 of the Act.
The assessee appealed to the CIT(A) after being dissatisfied with the order. The CIT(A) found that section 68 applied only to credits in the current year. Since most funds were received in prior years, only Rs.1,00,000/- from M/s Mohan Management Ltd. could be treated as unexplained cash credit. The CIT(A) deleted the addition of Rs.9,25,00,000/- and kept Rs.1,00,000/- as unexplained income, citing relevant judicial precedents.
A 27-day delay in filing the appeal was noted, and the condonation application provided sufficient reasons. The delay was condoned, and the matter was proceeded with.
The two member bench comprising Sonjoy Sarma ( Judicial Member ) and Sanjay Awasthi ( Accountant Member ) after hearing both parties and reviewing the record, agreed with the CIT(A)’s finding that section 68 applied only to credits received in the relevant year, not earlier years.
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Since the Rs.9,25,00,000/- was received in previous years and only Rs.1,00,000/- came in the current year, the tribunal noted that the assessee had provided complete details of the share application money, including receipts, payment modes, and shareholder information.
The CIT(A) had concluded that the assessee had met its burden of proof and no addition could be made under section 68 for the current year. The tribunal upheld the CIT(A)’s order and dismissed the appeal.
In short,the appeal filed by the revenue was dismissed.
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