2010 (5) TMI 897 - AT - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 8,85,000/- as unexplained cash u/s 69.
2. Addition of Rs. 4,13,500/- as unexplained cash u/s 69.
3. Addition of Rs. 20,90,088/- as unexplained cash credit u/s 68.

Summary:

1. Addition of Rs. 8,85,000/- as unexplained cash u/s 69:
The assessee challenged the addition of Rs. 8,85,000/- made by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)] as unexplained cash u/s 69. The AO found excess cash of Rs. 8,85,001/- during a survey and added it as unexplained money. The assessee explained that Rs. 8,41,079/- was payable to three parties against cheque discounting, but failed to provide confirmations or establish the identity of these parties. The Tribunal found that the lower authorities did not verify the assessee's explanation from the bank or the three parties directly. The Tribunal set aside the addition of Rs. 8,41,079/- for proper verification by the AO and confirmed the addition of Rs. 43,922/-. Thus, the ground of appeal was partly allowed for statistical purposes.

2. Addition of Rs. 4,13,500/- as unexplained cash u/s 69:
The assessee contested the addition of Rs. 4,13,500/- found at its Bhavanivad premises, which was explained as belonging to a director from the encashment of a Fixed Deposit Receipt (FDR). The AO and CIT(A) did not accept this explanation due to the lack of evidence linking the cash found to the FDR encashment. The Tribunal found that the initial onus was discharged by the assessee by showing the withdrawal of Rs. 9,10,000/- from the director's bank account. The revenue failed to provide material evidence to disprove the assessee's claim. Therefore, the Tribunal deleted the addition of Rs. 4,13,500/- and allowed the ground of appeal.

3. Addition of Rs. 20,90,088/- as unexplained cash credit u/s 68:
The assessee disputed the addition of Rs. 20,90,088/- as unexplained cash credit u/s 68. The AO found sundry creditors totaling Rs. 21,40,858/- and asked the assessee to prove their genuineness, which the assessee failed to do. The CIT(A) deleted the addition of Rs. 35,000/- for three parties and confirmed the addition of Rs. 20,90,088/- for the remaining ten parties. The Tribunal upheld the CIT(A)'s decision, stating that the assessee did not provide sufficient evidence to establish the nature and source of the cash credits as required u/s 68. The Tribunal dismissed this ground of appeal.

Conclusion:
The appeal of the assessee was partly allowed, with the addition of Rs. 8,41,079/- set aside for verification, the addition of Rs. 4,13,500/- deleted, and the addition of Rs. 20,90,088/- confirmed.