Non Production Of Persons Despite Summons Leads To Inference Of Routing Own Money : ITAT Delhi

The Assessing Officer (AO) had disallowed expenses and made additions to Assessee's income under Section 68 of Income Tax Act, 1961 on the ground that the transaction of loans and advances by an advisory company for investment in the Assessee Company was not genuine. The Assessee appealed before the Commissioner of Income Tax (Appeals) against the additions made to the income. The CIT (A) had held that the Assessee had failed to discharge the onus under Section 68 of the Act to explain the source of funds for the amount added in the Income, and had dismissed the appeal. The Assessee filed an appeal before the ITAT against this order.

Section 68 of the Income Tax Act, 1961 provides that where any sum is found credited in the books of an assessee for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not satisfactory in the opinion of the Assessing Officer, the sum so credited may be charged to income tax as the income of the assessee in the relevant year.

The ITAT observed that in the present case, in spite of repeated demands and several opportunities, the Assessee had failed to produce any documentary evidence before the authorities in support of the genuineness and creditworthiness of the transaction. The ITAT observed that the lower authorities in the present had recorded that the ambit of Section 68 was wider in the case of a closely held company. The lower authorities had held that in the present case all the characteristics of the Assessee Company were consistent with those of shell companies, and that it operated with minimal assets and employees and merely provided accommodation entries. The ITAT held that when an AO felt it necessary to verify the things beyond the pile of papers submitted by the Assessee, it was necessary for the Assessee to cooperate with him to dispel any doubts. The ITAT observed that the Assessee in the present case had failed to discharge the onus under Section 68 of the Act by not producing the required documentary evidence or the persons summoned by the AO.

"In view of the decisions of the Hon'ble jurisdictional High Court and Hon'ble Supreme Court in the case of NDR Promotors Pvt. Ltd. (supra) and the decision of the Apex Court in the case of NRA Iron and Steel (P) Ltd (supra) we are of the considered opinion that the action of the learned Assessing Officer was legal and non-production of the persons summoned had rightly led to the inference that the assessee had routed their own money in the books of accounts through the conduit of investor companies. On this premise, we agree with the authorities below and uphold the addition made under section 68 of the Act"

The ITAT therefore dismissed the appeal and upheld the order of the CIT (A).

Case Titled: Anandtex International P. Ltd Versus Acit, Circle, Panipat.

Representative For The Assessee: None

Representative For The Department: Mrs. Kirti Sankratyayan

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