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2014 (12) TMI 713 - AT - Income TaxAddition of cash credit – Amount to be treated as cash loan or not – Held that:- An amount of ₹ 1,20,000/- was received from Shri Biju Joseph - as evidenced from the bank account of Shri Biju Joseph, he is having enough balances in his account and he is having means to advance a sum of ₹ 1,20,000/- to the assessee - assessee has proved the identity of the parties and the creditworthiness of Shri Biju Joseph to lend ₹ 1,20,000/- to the assessee - it is not proper to make addition u/s 68 of the Act on this count – the AO is directed to delete the addition – Decided in favour of assessee. Addition of ₹ 22,10,051/- which is credited to the capital account – Held that:- These credits continue to be carried forward year after year and the assessee transferred these credits to the capital and current account in the AY - there was a doubt in the mind of the AO regarding these credits - in the normal course, nobody would ordinarily not claim his dues and usually they take steps to recover the dues if it is a genuine liability - the liability remains to be recovered after the assessee transferred these amounts to the capital and current account - in the case of carry forward credit which is from earlier year, provisions of sec. 68 cannot be applied - the liability is outstanding in the books of account of the assessee for the AY under consideration – as decided in CIT vs. Chipsoft Technology (P.) Ltd. [2012 (8) TMI 154 - DELHI HIGH COURT] - the provisions of sec. 41(1) could be applied in this type of credts - section 68 is not applicable to the cash credits recorded in the books of account of the assessee in the earlier previous year not relevant to the AY under consideration - when the cash credits pertain to the earlier previous year, no addition can be made u/s. 68 – thus, the matter is to be remitted back to the AO to find out whether the liability actually ceased to exist and if there is no possibility of revival of the liability, then only the AO has to apply the provisions of sec. 41(1) – Decided partly in favour of assessee.
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