This case involves an appeal by the Income Tax Officer against the order of the ld CIT(A) -34, New Delhi, regarding the assessment year 2012-13 for Ekkta Buildwell P. Ltd. The primary issue was the deletion of an addition of Rs. 2,15,00,000 made by the AO under Section 68 of the Income Tax Act, which pertains to unexplained cash credits.
The assessee, Ekkta Buildwell P. Ltd, engaged in the real estate sector, showed no income chargeable under ‘Profits and gains of business or profession’ for the year. However, scrutiny of their financial statements revealed an advance of Rs. 2,15,00,000 received, purportedly as collaboration deposits from M/s Indian Bio Diesel Ltd., without adequate supporting documentation to verify the authenticity and creditworthiness of the transaction.
The AO, after issuing notices and not receiving satisfactory responses or documentation from the assessee, added the amount to the assessee’s income, citing a failure to substantiate the creditworthiness and genuineness of the transactions as required by Section 68.
The CIT(A) received additional evidence from the assessee, which was remanded to the AO. Despite this, the AO’s report continued to express concerns due to the late submission of evidence and the low level of transactions recorded by the depositor company, suggesting the insufficiency of funds to make such a deposit.
The CIT(A) accepted the additional evidence, noting that the transactions were made through banking channels and were recorded in the audited accounts of both the assessee and the depositor. The CIT(A) ruled in favor of the assessee, leading to this appeal by the revenue.
The main issues revolved around the acceptability of late-submitted evidence, the adequacy of the verification of the depositor’s creditworthiness, and the overall genuineness of the transaction.
This case highlights the complexities involved in dealing with unexplained cash credits under Section 68 of the Income Tax Act. It underscores the importance of maintaining thorough documentation and the challenges in proving the genuineness of transactions. The tribunal’s decision to remand the matter back to the AO for detailed examination suggests a move towards more stringent scrutiny in similar cases.
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