Law:

Section:

Section 68 of the Income-tax Act, 1961 - Cash credit - Assessment year 2005-06 - Where certain amount had been found to be credited in name of assessee-firm by way of a journal entry by which work-in-progress was transferred from old firm to assessee and appellate authority had found that there was no reason to doubt genuineness of transaction or capacity or identity of party, addition made by Assessing Officer treating said amount as unexplained was rightly deleted by appellate authority [In favour of assessee] Certain work of Transport Plaza was undertaken by a firm 'S'. This firm transferred the entire work to assessee-firm which was formed for completion of job of Transport Plaza by addition of two additional partners. The entire expenditure incurred for purchase of materials were transferred to the assessee-firm and the amount was credited to the current capital account of the partner of 'S' and debited to different accounts. The Assessing Officer noted several items, which according to him, were not properly explained and therefore, the said amount was found as unexplained in the accounts of the assessee-firm and addition of the aforesaid amount was made. The matter was carried in appeal before the Commissioner (Appeals). The Commissioner (Appeals) went into all the alleged irregularities found by the Assessing Officer, and after appreciation of the evidence came to the conclusion that the amount was not unexplained at all as contemplated by section 68. The Tribunal upheld the order of the Commissioner (Appeals). Held that the source of the amount found in the books of the assessee had been found to have been properly explained by the Commissioner (Appeals), which had given reasons for the said finding. The amount had been found to be credited in the name of the assessee-firm by way of a journal entry by which the WIP (work-in-progress) was transferred from old firm to new firm. The identity of the party was well established due to the fact that one partner of the old firm was common with new firm and that the amount was credited to his account. The authorities had concluded on facts that there was only a transfer of WIP (work-in-progress) from the…

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