2008 (7) TMI 957 - HC - Income Tax

Unexplained deposits in bank account - addition on unsecured loans - creditworthiness of the loan creditors - Assessee had taken loan from 18 parties - AO accepted the loans taken from three persons and the balance amount out of total unsecured loans was opined to be not satisfactory explained and made addition u/s 68 - HELD THAT - In the present case, a perusal of the impugned order passed by the Tribunal reveals that assessee has discharged its onus to prove the genuineness of the cash credit by placing on record before the AO sufficient material/evidence. Not only the identity of the creditor has been established by producing the record of the assessee in which those transactions have been duly accounted for, but the assessee has also discharged its onus in explaining the nature of source and the cash credit. It is also well settled that the assessee can be made to explain the source of the credits in the books of account, but not the source of the source, i.e., source of the creditors. In our view, the CIT(A) as well as the Tribunal while taking into consideration the material and documents and appreciating the evidence available on the record, have recorded a pure finding of fact which cannot be interfered by this court in appeal filed by the revenue. It has been held in Raichand Kothari (HUF) v. CIT 1996 (8) TMI 90 - GAUHATI HIGH COURT that in cash credit cases the Tribunal is the final fact-finding body. Further, it has been held in CIT v. Shree Gopal Co. 1993 (4) TMI 48 - GAUHATI HIGH COURT that the High Court cannot, in a reference/appeal, embark upon a reappraisal of the evidence. The question of the genuineness of a credit or the correctness of the assessee s explanation is a question of fact which cannot be interfered in appeal by this Court u/s 260A of the Act. Thus, we do not find any ground to interfere in the impugned order as the counsel for the appellant could not point out any illegality or perversity in the said finding of fact. Therefore, in our opinion, no substantial question of law, much less a substantial question of law, is arising from the decision of the Tribunal. Dismissed.

Issues:
1. Addition of unsecured loans as undisclosed income under section 68 of the Income-tax Act.
2. Dispute regarding creditworthiness of loan creditors.
3. Appeal against deletion of addition by Commissioner of Income-tax (Appeals).
4. Assessment of evidence and material provided by the assessee.
5. Finality of findings of fact by the Tribunal in cash credit cases.

Analysis:
1. The main issue in this case revolves around the addition of unsecured loans totaling &8377; 17,84,000 as undisclosed income under section 68 of the Income-tax Act. The Assessing Officer treated these loans as undisclosed income due to alleged lack of creditworthiness of the creditors. However, the Commissioner of Income-tax (Appeals) partly accepted the appeal of the assessee and deleted the addition after considering various evidence provided by the assessee, including affidavits, bank statements, and confirmations.

2. The dispute primarily focuses on the creditworthiness of the loan creditors. The Assessing Officer added the amount to the income of the assessee's firm based on the premise that the creditworthiness of certain creditors could not be established. On the contrary, the assessee argued that all creditors' affidavits were submitted during the assessment proceedings, providing details of the loans and their income sources. The Commissioner of Income-tax (Appeals) found that the assessee had sufficiently established the trustworthiness, creditworthiness, and identity of the creditors, leading to the deletion of the addition.

3. The revenue, feeling aggrieved by the deletion of the addition, filed an appeal before the Tribunal. The Tribunal, in its order, dismissed the appeal and upheld the deletion made by the Commissioner of Income-tax (Appeals). Subsequently, the revenue filed the present appeal before the High Court, raising substantial questions of law related to the appreciation of facts by the Tribunal.

4. The High Court analyzed the evidence and material presented by the assessee, emphasizing that the assessee had fulfilled its onus to prove the genuineness of the cash credits. The court noted that the identity of the creditors was established, and the source of the cash credit was adequately explained. Referring to previous judgments, the court highlighted that the Tribunal is the final fact-finding body in cash credit cases, and the High Court cannot reevaluate the evidence in an appeal.

5. Ultimately, the High Court found no grounds to interfere with the Tribunal's findings of fact regarding the identity and creditworthiness of the creditors. The court emphasized that questions of the genuineness of a credit or the correctness of the assessee's explanation are factual issues beyond the scope of interference in an appeal under section 260A of the Act. Consequently, the High Court dismissed the appeal, concluding that no substantial question of law arose from the Tribunal's decision.

← Previous Next →