2010 (7) TMI 841 - HC - Income Tax

Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in confirming the addition of ₹ 8,50,000 as unexplained cash credit made by the Assessing Officer solely relying on an entry made in the order sheet which has no direct nexus with the present issue and while completely ignoring all the relevant materials and evidence available ? Whether the addition of ₹ 8,50,000 to the income of the assessee as unexplained cash credit by the Tribunal is sustainable in law and/or is not unreasonable and perverse ? Held that - We are constrained to hold in this matter that the Tribunal has not adjudicated upon the case of the assessee in the light of the evidence as found by the Commissioner of Income-tax (Appeals). We also found no single word has been spared to up set the fact finding of the Commissioner of Income-tax (Appeals) that there are materials to show the cash credit was received from various persons and supply as against cash credit also made. Hence, the judgment and order of the Tribunal is not sustainable. Accordingly, the same is set aside. Appeal allowed.

Summary

Issues:
1. Addition of unexplained cash credit by the Tribunal
2. Sustainability of the addition to the income of the assessee

Analysis:
The case involved an appeal concerning the addition of Rs. 8,50,000 as unexplained cash credit by the Tribunal for the assessment year 1994-95. The Income-tax Officer disallowed the deduction claimed by the appellant under section 68 of the Income-tax Act, 1961, as the identity of the creditors of the cash advance could not be established. Despite summons issued under section 131, none of the creditors appeared, leading to the disallowance of the claim. However, the Commissioner of Income-tax (Appeals) found sufficient evidence to support that the cash credit was genuine, considering challans, vouchers, and confirmatory letters. The Commissioner accepted the explanation and evidence of the creditworthiness of the creditors, granting relief to the appellant.

The Revenue challenged the decision before the Tribunal, which reversed the Commissioner's decision based on the timing of summons issuance. The Tribunal held that the appellant failed to prove the cash credit received from various customers, contrary to the findings of the Commissioner. The appellant argued that the Tribunal erred in ignoring material evidence of creditworthiness and confirmatory statements considered by the Commissioner. The appellant cited a Supreme Court judgment emphasizing the Tribunal's duty to consider all material facts and record findings on all contentions raised.

The High Court noted that the Tribunal failed to adjudicate the case in light of the evidence found by the Commissioner. The Court emphasized the importance of proving whether the cash credit was received against future sales, as established by the Commissioner. Citing the Supreme Court's directive, the Court held that the Tribunal's judgment lacked sustainability and set it aside, restoring the Commissioner's decision. The appeal was allowed, with no order as to costs.