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2022 (8) TMI 433 - AT - Income TaxAddition u/s 56/68 - Unexplained credit in capital account - advances received by assessee for sale of the property - HELD THAT:- As it can be noticed that the assessee has explained the transactions entered with M/s Samarth Enterprises explaining the details of receipt of advance from it. The above said intended purchaser of the land has also confirmed the transaction to the AO in an independent enquiry made by him. The receipt of money was through banking channels only. The AO has not expressed any doubt on the identity of M/s Samarth Enterprises or its credit worthiness. The assessee has also given copies of notices sent to M/s Samarth Enterprises asking them to complete the transaction. The said party has also confirmed the transaction in an independent enquiry. Hence we find no reason to doubt the genuineness of the transaction entered by the assessee with M/s Samarth Enterprises. The question as to whether the assessee should wait for completion of the sale transaction or should forfeit the advance money as per the clause stated in MOU is the matter to be decided by the assessee and, in our view, the tax authorities cannot enter into the shoes of the assessee in this matter. The important point is that there was sufficient reason for the assessee in not completing the sale transaction. Further, the Act contains specific provision with regard to the manner of treatment to be given for advances forfeited in respect of a sale transaction. Hence, in the facts and circumstances of the case, the question of applying the provisions of sec. 56(2) do not arise. Tax authorities have given undue importance to the clauses of MOU and expressed the view as to how the assessee should have dealt with these transactions. Under the provisions of sec. 68, the initial onus placed upon the assessee is to prove three main ingredients, viz., the identity of the creditor, the credit worthiness of the creditor and the genuineness of the transactions. We notice that the AO has not expressed the view that the assessee has not discharged the initial onus placed upon it. The independent enquiry has been made by AO and the intended buyer has also confirmed the transaction and MOU. Hence, the registration or otherwise of MOU may not be relevant here, when the parties to the MOU have confirmed the execution of said agreement. Accordingly, we are of the view that the AO has not made out a case for assessing the amount u/s 68 of the Act, i.e., we are of the view that the assessee has discharged the onus placed upon him in respect of cash credit and the assessing officer could not disprove them. Under these set of facts, we are of the view that the addition made u/s 68 cannot be sustained. - Decided in favour of assessee.
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