The provision of s. 68 does not provide that the business of the assessee must start and then after the addition u/s 68 can be made.

Income  cash credits Assessee filed return of income During assessment proceedings, AO found that assessee has obtained unsecured loan from M/s. A during FY 2009-10 AO conducted an enquiry through Investigation Wing and such enquiry confirmed that no such company exists at given address O also noted that he made repeated requests to produce directors of that company which were not complied with Therefore, AO held that assessee failed to prove identity, creditworthiness of lenders as well as genuineness of transaction of unsecured loan and he made an addition u/s 68 Further, he held that as addition was made u/s 68, benefit of application of provision of Ss 11 and 12 were also not eligible to assessee because cash credit was not genuine, was not voluntary contribution Accordingly, AO passed order u/s 143(3) after making addition Before CIT(A), assessee made an application for admission of additional evidence in form of annual accounts of depositor, Form No. 18, copy of ledger account and copy of bank account of lender for subsequent year stating that said amount had also been repaid CIT(A) also obtained remand report from AO which objected to admission of additional evidences CIT(A) admitted additional evidence CIT(A) held that assessee failed to explain credit as required u/s 68 and therefore, AO was justified made addition on account of unexplained unsecured loan Held, balance sheet of company itself shows it was having net worth of Rs. 8.18 cores as share capital and reserves and surpluses, but was locked in advances and investment of identical amounts in private limited company  Lenders which had an asset base of Rs. 8.18 crores had earned a meager income of Rs. 37000/- and income tax payable for AY 2009-10 was a meager sum of Rs. 108/- and Rs. 11739/- for current year Further this company does not have a fixed asset of single rupee Further, balance sheet produced before lower authorities was also not accompanied with schedules and P&L account but a stray paper giving list of various loans and advances etc was given Assessee failed to produce annual accounts of said company Merely producing stray list of advances without producing original schedules to annual accounts, speaks lot about functioning of lenders and genuineness of transaction entered into by assessee with that company Further bank account of lender which was given for 9/1/2009 to 12/1/2009 to AO does not show name of bank to which it pertained to similarly bank statement for repayment period was also 18/2/2010 to 05/3/2010 had similar story to tell Said conduct and balance sheet of lender clearly shows that lender alleged to have deployed funds were non-income producing funds, it does not result into any revenue to that company Lender clearly was a paper company and nothing more than that  Lower authorities had correctly appreciated whole transaction and confirmed addition Unsecured loan had also not been credited naturally to income and expenditure account as income of assessee but showed as an unsecured loan in balance-sheet In present case, addition was made correctly u/s 68 and same also applies to AOP to whom provisions of Ss. 11 and 12 applies, if impugned some was not credited to income and expenditure account but was shown as a liability Assessee’s appeal dismissed.

LAKSHYA EDUCATIONAL TRUST vs. ASSISTANT COMMISSIONER OF INCOME TAX

(2019) 56 CCH 0112 DelTrib