Case: DCIT v/s M-s Modern Dalkhola Flour Mills Pvt LTD, ITAT KOLKATA

Listen to the case summary DCIT v/s M-s Modern Dalkhola Flour Mills Pvt LTD, ITAT KOLKATA here

Facts:

  • Share Application money along with premium was received from 11 parties.
  • 3 parties were corporate entities belonging to same group.
  • 8 parties were individuals, all relatives of the director.
  • 1 corporate entity paid share application money through a banking channel, everyone else and paid in cash

Reasoning:

  • Act does not prevent receipt of share application money in cash as long as Identity, Capacity, and Genuineness tests are met.
  • AO could not provide evidence to doubt genuineness of the transaction for most of the investors. 
  • AO’s observation that no cash was available was merely a suspicion
  • For a few individual subscribers, it was assumed that they held some amount of cash based on the return of income filed for recent years. Partial cash payment was allowed and balance would be taxable u/s 68.

Conclusion:

  • Cash credits have to pass the acid test of Identity, Capacity & Genuineness.
  • If cash is deemed unexplainable, the unexplainable amount will be taxed u/s 68  in the hands of the company

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Also Read: Unexplained cash credits: 5 questions and their answers


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