2012 (9) TMI 1064 - HC - Income Tax

Unexplained cash credit under section 68 - Held that - Tribunal rightly held that the assessee had not discharged his burden. The identity of the creditors itself was in doubt. Their creditworthiness was not established. In view of such facts in our opinion no question of law arises.

Summary

Issues:
- Challenge to the judgment of the Income Tax Appellate Tribunal regarding addition of unexplained cash credit under section 68 of the Income Tax Act, 1961.

Analysis:
1. The issue in question pertains to the addition of Rs. 2,60,000 on account of alleged unexplained cash credit under section 68 of the Income Tax Act, 1961. The appellant had shown unsecured loans in his books for the assessment year 2005-06. The Assessing Officer, after scrutiny, called upon the appellant to establish the genuineness of the transactions, identity of the creditors, and their capacity to advance such loans. Despite accepting the genuineness of some transactions, the Assessing Officer treated certain advances as unaccounted cash credit under section 68 due to insufficient evidence provided by the appellant. The appellant failed to provide details and confirmations for these loans, leading to the additions in the assessment order.

2. The appellant appealed the decision, but both the Commissioner and the Tribunal upheld the additions. The Tribunal emphasized that the appellant failed to discharge the initial burden of proving the genuineness of the cash credits. Various legal precedents were cited to highlight the burden on the assessee to establish not only the identity of the creditor but also their creditworthiness and the genuineness of the transactions. The Tribunal noted that the appellant did not provide any evidence to establish the creditworthiness of the creditors or the genuineness of the transactions, leading to the dismissal of the appeal and upholding of the additions.

3. The appellant contended that the genuineness of the transactions, identity of the creditors, and their creditworthiness were established. However, the Court observed that while the transactions being through cheques were established, the identity of the creditors and their creditworthiness remained unproven. Citing legal precedents, the Court reiterated that the burden is on the assessee to prove that the amounts credited did not represent income, as per section 68 of the Act. The Court found that the revenue authorities and the Tribunal had examined the evidence and concluded that the appellant did not provide sufficient proof, leading to the dismissal of the Tax Appeal.

4. In conclusion, the Court upheld the decision of the Tribunal, emphasizing that the appellant failed to discharge the burden of proof regarding the unexplained cash credit under section 68 of the Income Tax Act, 1961. The Court found no question of law arising from the case, as the identity of the creditors and their creditworthiness remained unsubstantiated. The dismissal of the Tax Appeal was based on the lack of evidence provided by the appellant to establish the genuineness of the transactions, leading to the confirmation of the additions made by the revenue authorities.