2010 (8) TMI 970 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Tribunal was correct in law in holding that appellant has failed to prove the creditworthiness of the creditors and confirming the addition of Rs. 14,99,000?
2. Whether the finding of the Tribunal recorded without considering the evidence on record is justified in law and not perverse?
3. Whether the Tribunal was correct in law in confirming the addition of Rs. 50,000 for disallowance of transportation expenses?

Summary:

Issue 1: Creditworthiness of Creditors and Addition of Rs. 14,99,000
The assessee, a sole proprietor of M/s Shradha Fuels, declared a total income of Rs. 1,26,359 for the assessment year 2006-07. The AO disallowed cash credits of Rs. 4,00,000 and Rs. 10,99,000 in the names of S.R. Manhar (Individual) and S.R. Manhar (HUF), respectively, as not genuine. The CIT(A) allowed the appeal, but the Tribunal restored the AO's order, stating that the assessee failed to prove the creditworthiness of the creditors. The Tribunal noted that the creditors deposited cash in their bank accounts and immediately issued cheques to the assessee, which was deemed not credible. The Tribunal emphasized that the assessee must prove the identity, capacity, and genuineness of the transaction, which was not satisfactorily done.

Issue 2: Justification of Tribunal's Findings
The Tribunal's findings were based on the fact that the creditors' IT returns were filed for the first time for the assessment year 2005-06 and were not supported by capital accounts or balance sheets. The loans were given in multiple transactions by depositing cash and issuing cheques immediately, which was considered improbable. The Tribunal held that the assessee failed to prove the creditworthiness of the creditors, and the explanation offered was not satisfactory. The Tribunal's decision was supported by the Supreme Court's rulings in Sumati Dayal vs. CIT and CIT vs. P. Mohanakala, which emphasized that the explanation must be satisfactory to the AO.

Issue 3: Disallowance of Transportation Expenses
The AO disallowed Rs. 50,000 out of Rs. 4,21,150 claimed as transportation expenses due to the absence of proper bills and vouchers. The CIT(A) deleted this addition, but the Tribunal restored the AO's order, stating that the disallowance was reasonable given the lack of proper documentation. The Tribunal found no cogent reason provided by the CIT(A) for deleting the disallowance.

Conclusion:
The High Court dismissed the appeal, stating that the findings of fact by the AO and the Tribunal were based on proper appreciation of the facts, material on record, and surrounding circumstances. The transactions were deemed not genuine, and the assessee failed to rebut the evidence satisfactorily. The case did not involve any substantial question of law, and the appeal was dismissed.