ITAT Deletes Section 68 Unexplained Cash Credit Addition as NSEL Account Was Opened After FY 2011-12:

The ITAT Kolkata Bench deleted an addition of Rs 37.14 lakh made under Section 68 of the Income Tax Act, 1961. The Tribunal held that the reassessment was not sustainable because the documents established that the company had opened its account with the National Spot Exchange Limited (NSEL) only after the relevant financial year.

Bliss Dealtrade Private Limited had filed its income tax return (ITR) for the Assessment Year 2012-13, declaring zero (NIL) income. Based on information received from the Investigation Department, the AO believed that the company had received Rs 37.14 lakh through transactions with NSEL during Financial Year 2011-12. As the amount was allegedly not disclosed in the return, the AO reopened the assessment and added the entire amount to the company’s income as unexplained cash credit under Section 68.

The aggrieved assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], challenging the AO's decision; however, the appeal was dismissed. Thereafter, the assessee approached the Income Tax Appellate Tribunal (ITAT), contending that it had no transactions with NSEL during Financial Year 2011-12. The company submitted its bank statements, audited financial statements and NSEL party master records to support its claim.

After examining the documents, the Tribunal noted that "from the submissions made before the Ld. CIT(A) that the assessee furnished documents, and the same documents were produced before me, wherein it is clearly mentioned that the account with National Spot Exchange Limited (NSEL) was opened on 24.05.2012, which is clear from the party master placed at Page No. 37 of the Paper Book. As per the bank statement placed at Page No. 36 of the Paper Book, there were no transactions noted. The opening and closing balances shown in the said Bank of India bank statement for Account Number 401420110000978 are the same, at Rs. 4,840/-, and this is tallies with the audited financial statement."

The Tribunal further observed that the Departmental Representative could not dispute the documents submitted by the company. Accordingly, it held that no NSEL transactions had taken place before March 31, 2012, and the reassessment based on the alleged transactions was unsustainable. The AO was directed to delete the addition of Rs 37.14 lakh.