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2015 (10) TMI 2682 - AT - Income TaxAddition on account of unexplained credit - treating the sum as unexplained money of the assessee partnership firm - non commencement of business - AY 2006-07 - Held that:- In the cases of 35 persons, loans have been returned after TDS and in some cases, Form 15H was filed where no tax have been deducted. Since no business activity has commenced in the year under consideration and the commercial production started on April 11, 2006 would clearly prove on record that the assessee was at pre-operative stage, i.e., for installing the plant for the purpose of manufacturing. Therefore, both the decisions in the cases of CIT v. Bharat Engineering and Construction Co. [1971 (9) TMI 14 - SUPREME Court] and Roshan Di Hatti v. CIT [1977 (3) TMI 3 - SUPREME Court] would squarely apply in favour of the assessee and would prove that the assessee has not earned any undisclosed income so as to make addition under section 68 of the Income-tax Act. As regards the addition on account of 11 creditors it is clear that no addition on account of unexplained credit could be made against the assessee of the aforesaid sum because the assessee was in the process of installing the plant and has not commenced any business activities. Therefore, there is no need to discuss all the evidences in detail on record for the purpose of examining the creditworthiness of the creditors and genuineness of the transaction in the matter in the light of the case law relied upon by learned counsel for the assessee. No justification to sustain the addition under section 68 of the Income-tax Act as is made by the Assessing Officer and confirmed by CIT(Appeals). We, accordingly, set aside the orders of the authorities below and delete the additions of ₹ 1,00,10,664 and ₹ 19,55,000. - Decided in favour of assessee. For assessment year 2007-08 held that the issue is same as have been considered in preceding assessment year 2006-07, except that in the year under consideration, the assessee started commercial production of the unit and has therefore, started business activities on April 11, 2006. The assessee has taken loans from April, 2006 to October, 2006 as per the summary of the loan filed by learned counsel for the assessee and reproduced above. The same is supported by the complete details of loans received date-wise in the year under consideration. It is, therefore, clear that the assessee has raised the above loans during six months from the date of commencement of the production and business, i.e., from May, 2006 to October, 2006. In the case of CIT v. Bharat Engineering and Construction Co. [1971 (9) TMI 14 - SUPREME Court] the loans/cash credits were taken after commencement of the business in May, 1943 up to March 15, 1944, i.e., 11 months and additions have been deleted. - Decided in favour of assessee.
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