2003 (3) TMI 64 - HC - Income Tax

Proceeding under section 68 cash credits - onus or burden to prove identity of the subscribers and prove their credit-worthiness and the genuineness of the transaction - In the facts and circumstances of this case, despite request made by the assessee, no summons under section 131 of the Act was issued. This seems to be a denial of the assessee s right of opportunity in-built in section 68 - Tribunal will remit the matter to the Assessing Officer for issuing summons under section 131 of the Act on the said 21 shareholders and then record the evidence, if available, and return the same after giving opportunity to the assessee and recording it properly to the learned Tribunal.

Summary

Issues involved:
1. Interpretation of the requirement to issue summons under section 131 of the Income-tax Act, 1961.
2. Allocation of burden of proof in proceedings under section 68 of the Act.

Analysis:

Issue 1: Interpretation of the requirement to issue summons under section 131 of the Income-tax Act, 1961.
The case involved a dispute regarding the necessity of issuing summons under section 131 of the Income-tax Act upon the request of the assessee. One party argued that the onus was on the Assessing Officer to issue the summons as soon as a request was made, while the other party contended that the onus would not shift until the prima facie proof was discharged by the assessee. The court examined previous decisions and highlighted the importance of the Assessing Officer enquiring into the materials disclosed by the assessee to determine if the prima facie onus had been discharged. The court emphasized that the Assessing Officer had a duty to examine the materials and issue summons under section 131 to enable the assessee to prove the genuineness of the transaction. Failure to issue summons upon request was deemed to vitiate the process and deny the assessee the opportunity provided under section 68 of the Act.

Issue 2: Allocation of burden of proof in proceedings under section 68 of the Act.
The Commissioner (Appeals) had held that the onus of proving the genuineness of credits was on the assessee, and the Income-tax Officer was not required to issue notice under section 131 to alleged shareholders based solely on names and addresses furnished by the assessee. However, the learned Tribunal found that the assessee had filed sufficient evidence to justify its claim, indicating that the addition under section 68 of the Act was not justified. The court noted discrepancies in the decisions of the Commissioner (Appeals) and the Tribunal, emphasizing the need for a proper examination of the materials to determine the genuineness of the transaction. The court directed the remand of the case to the Tribunal for a fresh decision, instructing the Assessing Officer to issue summons under section 131 to the shareholders in question for further evidence gathering.

In conclusion, the judgment addressed the conflicting interpretations of the requirement to issue summons under section 131 and the allocation of burden of proof in proceedings under section 68 of the Income-tax Act. The court emphasized the importance of the Assessing Officer's duty to examine materials disclosed by the assessee and issue summons upon request to enable a fair assessment of the genuineness of transactions.