2014 (2) TMI 1272 - AT - Income Tax

Undisclosed cash credit - genuineness of the transaction - creditworthiness of creditor - Held that - There was no dispute regarding identification. As far as the genuineness of the transaction is concerned the A.O. never doubted the same the only reason for making the addition was the A.O. disbelieved the creditworthiness of the creditor although the source was duly explained to him it appears that the A.O. doubted the source of the source. Keeping in view the ratio laid down in S.Hastimal v. CIT reported in 1962 (12) TMI 60 - MADRAS HIGH COURT wherein held assessee should not be placed upon the rack and called upon to explain not merely the origin and source of a capital contribution but the origin of origin and source of source as well. The difficulty on the part of any assessee to explain a transaction which took place before a decade has to be borne in mind by the department and should under no circumstances be underestimated or taken advantage of by them we are of the view that the ld. CIT(A) was justified in deleting the additions. - Decided in favour of assessee

Summary

Issues Involved:
1. Variation in the copies of Capital Account of Sh. Ajay Kumar partner as produced in the Court and copies of account filed with the Income Tax Department.
2. Validity of the assessee's claim without producing books of accounts of M/s. Ajay Electronics, Finance Division, and Bank Passbook before the Assessing Officer (A.O.) to substantiate the claim of Rs. 1,40,00,000/- given to Sh. Ajay Kumar.

Issue-wise Detailed Analysis:

1. Variation in the Copies of Capital Account:
The Revenue questioned the variation in the copies of the Capital Account of Sh. Ajay Kumar partner, as produced in the Court and the copies of account filed with the Income Tax Department, arguing that this discrepancy was material. The Assessing Officer (A.O.) observed that Sh. Ajay Kumar had manipulated the books of account, leading to a variation in the copies of accounts filed with the Income Tax Department. The A.O. made an addition of Rs. 1,70,00,000/- under Section 68, treating it as the assessee's own undisclosed income from unexplained sources.

The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition, finding the assessee's explanations convincing. The CIT(A) noted that the assessee had explained the source of the said investment of Rs. 1,70,00,000/- and was not required to explain the source of the source. The CIT(A) also pointed out that the A.O. did not ask for the source of repayment of such a huge cash amount within a short period. The CIT(A) emphasized that the A.O. failed to invoke the provisions of Section 269SS and 269T and did not bring conclusive evidence on record to justify the addition.

The Tribunal concurred with the CIT(A)'s findings, noting that the assessee satisfactorily explained the source of funds. The Tribunal highlighted that the A.O. did not make a clear case for the addition under Section 68 and did not bring sufficient evidence to prove that the amount belonged to the assessee. The Tribunal also referenced several judgments, including those from the Gauhati High Court, Patna High Court, and Madhya Pradesh High Court, which supported the view that once the identity of the creditor and the genuineness of the transaction are established, the burden shifts to the Revenue to prove otherwise.

2. Validity of the Assessee's Claim Without Producing Books of Accounts:
The Revenue also questioned the validity of the assessee's claim without producing the books of accounts of M/s. Ajay Electronics, Finance Division, and Bank Passbook before the A.O. The A.O. had made a protective addition of Rs. 1,70,00,000/- under Section 68, treating it as the assessee's undisclosed income. The CIT(A) dismissed the legal grounds of the assessee and upheld the reopening of the assessment proceedings under Section 147 read with Section 151 of the Act.

The Tribunal found no infirmity in the CIT(A)'s order, which was well-reasoned. The Tribunal noted that the assessee had provided sufficient explanations and that the CIT(A) had rightly deleted the addition made by the A.O. The Tribunal emphasized that the A.O. failed to prove that the amount belonged to the assessee and did not bring sufficient evidence to support the addition.

Conclusion:
The Tribunal dismissed both appeals of the Revenue, upholding the CIT(A)'s decision to delete the addition of Rs. 1,70,00,000/- under Section 68. The Tribunal found that the assessee satisfactorily explained the source of funds and that the A.O. failed to provide sufficient evidence to justify the addition. The Tribunal also upheld the reopening of the assessment proceedings under Section 147 read with Section 151 of the Act, finding no infirmity in the CIT(A)'s order.