2004 (8) TMI 26 - HC - Income Tax

Additions of Rs. 22, 01, 500 on account of unexplained cash credits and Rs. 94, 602 on account of interest claimed thereon - appellate authorities could have themselves verified the material placed before them with the records of the creditors. This has not been done. Accordingly we are satisfied that the appellate authorities have not dealt with the matter properly. - we set aside the findings of the Assessing Officer and the two appellate authorities on this issue and restore the matter back to the file of the Assessing Officer for fresh adjudication

Summary

Issues:
1. Addition of unexplained cash credits and interest claimed thereon under section 68 of the Income-tax Act, 1961 for the assessment year 1992-93.

Analysis:
The Revenue appealed against the Tribunal's order deleting additions of Rs. 22,01,500 on account of unexplained cash credits and Rs. 94,602 on interest claimed thereon. The assessee had raised loans from various creditors, but failed to produce them for examination by the Assessing Officer. The Commissioner of Income-tax (Appeals) deleted the additions based on the appellant's submissions and documents provided. The Commissioner noted that most creditors were assessed by the same Assessing Officer, and the records were available for verification. The Commissioner relied on a judgment stating that payments via account payee cheques cannot be treated as income. The Tribunal upheld the Commissioner's decision, emphasizing the Assessing Officer's failure to verify records readily available to him. However, the High Court found errors in the approach of the appellate authorities.

The High Court observed that the assessee did not respond to the show-cause notice or request verification by the Assessing Officer. The Court criticized the appellate authorities for accepting the appellant's version without proper verification. While the initial onus was met by providing documents, it did not conclusively prove the genuineness of the creditors. The Court highlighted the Assessing Officer's duty to conduct further verification. The High Court concluded that the appellate authorities failed to address the matter adequately, leading to the decision to set aside their findings.

Therefore, the High Court overturned the decisions of the Assessing Officer and the appellate authorities, directing the matter to be sent back to the Assessing Officer for fresh adjudication. The Court instructed the assessee to present all materials previously submitted and directed the Assessing Officer to conduct further verifications from the creditors' records. If necessary, the Assessing Officer could require the assessee to produce the creditors along with their records. The High Court allowed the appeal in these terms, emphasizing the need for proper verification and due process in assessing unexplained cash credits and interest claimed thereon.