1996 (10) TMI 44 - HC - Income Tax

Summary

Issues Involved:
1. Treatment of the sum advanced against the sale of scrap as undisclosed income.
2. Onus on the assessee to prove the source of monies paid by the purchaser.
3. Application of Section 68 of the Income-tax Act, 1961, to the sum representing advance against the sale of scrap.
4. Discharge of onus by the assessee.
5. Requirement for the assessee to establish the source or origin of the monies.
6. Justification of treating the advance received as income u/s 68 when the sale price was admitted in the books.

Summary:

Issue 1: Treatment of the Sum Advanced Against the Sale of Scrap as Undisclosed Income
The petitioner, an assessee, contested the Tribunal's decision to treat Rs. 14,12,081 advanced against the sale of scrap to Balaji Steel Traders as undisclosed income. The Tribunal upheld the addition, but the appellate authority deleted it, stating that the advances were genuine and represented consideration for the sale of scrap.

Issue 2: Onus on the Assessee to Prove the Source of Monies Paid by the Purchaser
The Tribunal placed the onus on the assessee to prove the source of monies paid by the purchaser. The appellate authority disagreed, stating that the assessee should not be penalized for the purchaser's inability to explain the source of funds.

Issue 3: Application of Section 68 of the Income-tax Act, 1961
The Tribunal applied Section 68, which deals with unexplained cash credits, to the sum representing the advance against the sale of scrap. The appellate authority argued that the sum should not be treated as unexplained cash credit since the sale was admitted in the books and reflected in business profits.

Issue 4: Discharge of Onus by the Assessee
The Tribunal held that the assessee had not sufficiently discharged the onus of proving the genuineness of the transaction. The appellate authority, however, found that the assessee had provided sufficient evidence, including the appearance of the creditor before the Assessing Officer.

Issue 5: Requirement for the Assessee to Establish the Source or Origin of the Monies
The Tribunal implied that the assessee was required to establish the source or origin of the monies. The appellate authority disagreed, citing precedents that the assessee is not required to prove the source of the depositor's funds.

Issue 6: Justification of Treating the Advance Received as Income u/s 68
The Tribunal justified treating the advance received as income u/s 68, despite the sale price being admitted in the books. The appellate authority found no justification for this, stating that the advances were genuine and related to the sale of scrap.

Conclusion:
The High Court dismissed the petition, agreeing with the Tribunal that the assessee failed to prove the genuineness and creditworthiness of the creditors. The court held that the Tribunal's findings were based on facts and did not raise any question of law. The petition was thus declined.