The Income Tax Appellate Tribunal (ITAT) has held that though the onus is cast upon the assessee to prove the cash credits received by it, the tax authorities shall consider all the documentary evidence brought by the assessee before making an addition in respect of cash credits under section 68 of the Income Tax Act, 1961
Facts of the case:
The assessee, M/s. Harina Developers Pvt. Ltd. is engaged in the business of plotting and selling of housing sites.
The assessee urged for the issues relating to the addition of outstanding liabilities under Section 68 of the Act, addition of loans taken from directors under Section 68 of the Act, addition of Advances received on sale of sites under Section 68 of the Act and charging of interest under Section 234B of the Act. The first issue relates to the addition of outstanding liabilities made under Section 68 of the Act.
Interpretation of law :
The AO noticed that the assessee has purchased lands from certain persons, but was showing a sum of Rs.2,99,20,000/- as still payable to the sellers of land. The AO asked the assessee to produce the creditors, but it could produce only sons of Ms Beeramma, who confirmed that she did not receive the sum of Rs.72 lakhs Accordingly, the AO accepted the outstanding credit balance of Rs.72.00 lakhs and added the remaining amount of Rs.2,27,20,000/- as income in the hands of the assessee under Section 68 of the Act.
The CIT(A) also confirmed this addition. The next issue relates to the addition of Rs.1,07,46,510/-, being the loan received from two directors, as unexplained cash credit under Section 68 of the Act. The assessee could file only ledger account extract of the above creditors. Since the assessee did not file any confirmation letter from them, the assessing officer assessed a sum of Rs.1,07,46,510/- as unexplained cash credit under Section 68 of the Act.
The last issue relates to the addition of Rs.2,25,16,003/-, being the advance received from customers towards the sale of plots. The AO noticed that the assessee had received advances for sale of plots from 15 persons in respect of the Nelamangala Project. The total amount received was Rs.2,40,66,003/-. Since the assessee could not furnish any confirmation letters, the AO issued notices under Section 133(6) to all the 15 persons. Out of the same, eight letters were returned unserved with the noting, addressee left, incomplete address, etc. Seven persons to whom the notices were served did not respond.
The assessee filed copies of bank statements with the submission that some of the advances have been returned back. The AO did not accept the same. Accordingly, he added a sum of Rs.2,25,16,003/- to the total income of the assessee. The Ld CIT(A) also confirmed the same.
The tribunal headed by the Vice President N. V. Vasudevan and an Accountant Member B.R. Bhaskaran held that the onus is cast upon the assessee to prove the cash credits received by it.
“We notice that the assessee has furnished certain documents in respect of some of the advances. It has also given explanations with regard to certain other advances. None of these documents and explanations has been examined by the tax authorities.
Accordingly, we are of the view that this issue also requires examination at the end of the AO. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of the AO for examining it afresh,” the tribunal said.