2003 (2) TMI 6 - HC - Income Tax

Cash credits - Whether Tribunal was justified in accepting the cash credit only on the identity of the creditor without verification of capacity/credit worthiness of the creditors? - Assessee has explained satisfactorily the cash credits in the books of account of the firm and discharged the burden. The Department has not brought out material or evidence to rebut the same No substantial question of law is involved in this appeal Revenue s appeal is dismissed.

Summary

Issues:
- Appeal under section 260A of the Income-tax Act, 1961
- Justification for setting aside the order of the Commissioner of Income-tax under section 263
- Verification of capacity/credit worthiness of creditors in accepting cash credit

Analysis:
The judgment pertains to an appeal under section 260A of the Income-tax Act, 1961. Initially, no question of law was framed by the appellant, but later, two questions of law were formulated. The first issue raised was whether the Tribunal was justified in setting aside the order of the Commissioner of Income-tax under section 263 of the Income-tax Act. The second issue revolved around whether the Tribunal was correct in accepting the cash credit solely based on the identity of the creditor without verifying the capacity/credit worthiness of the creditors. The Tribunal examined the facts and concluded that the Assessing Officer had considered the evidence provided by the assessee, including necessary information, GIR/PAN numbers, addresses, and confirmations from creditors. It was noted that the burden of proving the genuineness of parties and transactions had been satisfactorily discharged by the assessee. Moreover, the Department failed to provide any material to disprove the genuineness of the parties or the capacity of the lenders. The Tribunal referenced various judgments to support the assessee's position, emphasizing that the cash credits were not deemed as income of the firm due to the lack of evidence presented by the Department.

The judgment further highlighted decisions from different High Courts, such as the Patna High Court, Allahabad High Court, Calcutta High Court, and Madhya Pradesh High Court, which supported the assessee's explanation of the cash credits in the firm's books. It was noted that the assessee had satisfactorily explained the cash credits and discharged the burden of proof, while the Department failed to provide any material or evidence to counter the explanation. Consequently, based on the factual findings and legal precedents cited, the Court concluded that no substantial question of law was involved in the appeal. As a result, the appeal was dismissed for lacking merit.