Sec 68 Can Be Invoked Only If Taxpayer Fails To Explain Amount Found Credited In Its Books: Mumbai ITAT

The Mumbai ITAT upheld the CIT(A)'s order to delete the addition made u/s 68 of the Income Tax Act, 1961 finding no unexplained cash credit in the books of assessee.

The Bench of Pavan Kumar Gadale (Judicial Member) and Prashant Maharishi (Accountant Member) observed that, “It is not disputed that the assessee has not received any share application money in the financial year 2011-12 except allotment of shares. We find that the provisions of section 68 of the Act can be invoked or applicable, where the amount is found credited in the books of accounts of the asssessee in the F.Y.2011-12 and the assssessee fails to offer explanations or explanations are not satisfactory. The assessee has received the share application money along with the share premium in the financial year 2006-07 and not in F.Y.2011-12.” (Para 7)

As per the brief facts of the case, the Assessee's return was selected for scrutiny under CASS. The AO on perusal of the financial statements found that there was increase in authorized capital. The AO found that the assessee has received the share application money along with the share premium. The certain amount was transferred to share capital account and to share premium account. The assessee had filed the detailed submissions through letter and the AO has issued notice u/s 133(6) on the share/investor applicants and there was no compliance to notices. Therefore, the AO had issued a show cause notice and in reply the assessee had filed the detailed explanations by letter mentioning that there is no unexplained cash credit in the books of the assessee and the assessee had only allotted the shares against the share application money pending allotment disclosed and received in earlier years. But the AO was not satisfied with the explanations and observed that the genuiness and creditworthiness of the share applicants are not proved and invoked the provisions of section 68 of the Act and made addition as unexplained cash credit. The CIT(A) deleted the addition made by AO u/s 68.

The Bench noted that the CIT(A) has considered the factual aspects that there is no unexplained cash credit in the books of accounts of the assessee.

The Bench further found that the assessee has received the share application money along with the share premium and subsequently, certain amount was transferred to share capital account and share premium account.

The Bench also noted that the assessee has shown share application money pending allotment which includes the share application money.

Therefore, observing that the assessee has not received any share application money except allotment of shares, and the CIT(A) has passed a reasoned and conclusive order, the ITAT dismissed the Revenue's appeal.

Counsel for Appellant/ Department: Bhumika Patel

Counsel for Respondent/ Assessee: None

Case Title: ITO verses M/s. WinstarEComPvt. Ltd

Case Number: ITA No. 5315 /Mum/2017

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