1993 (4) TMI 48 - HC - Income Tax

Summary

Issues involved:
The judgment addresses two questions referred by the Appellate Tribunal under section 256(1) of the Income-tax Act, 1961 for the periods 1974-75, 1975-76, and 1976-77.
1. Whether the Tribunal was justified in confirming the deletion of Rs. 85,000 as unexplained cash credit in the assessee's total income.
2. Whether the Tribunal was justified in confirming the deletion of Rs. 6,000 for each of the two years as interest on cash credits.

Issue 1: Unexplained Cash Credit (Rs. 85,000):
The assessee, a trading Hindu undivided family, borrowed Rs. 85,000 from a creditor. The Income-tax Officer doubted the genuineness of the borrowing due to lack of conclusive evidence. The Commissioner (Appeals) later held that the entries represented genuine borrowings and set aside the Income-tax Officer's decision. The Appellate Tribunal upheld this decision, emphasizing that the burden of proof lies on the assessee to demonstrate the genuineness of entries. The Tribunal's conclusion was deemed justifiable based on the evidence presented.

Issue 2: Disallowance of Interest (Rs. 6,000):
For two subsequent years, the assessee's accounts showed payments of Rs. 6,000 per year as interest to the same creditor. The Income-tax Officer disallowed these payments as interest, suspecting their authenticity. However, the Commissioner (Appeals) disagreed and considered the entries as genuine borrowings. The Appellate Tribunal, concurring with the Commissioner's decision, upheld the deletion of the disallowed interest amount. The Tribunal emphasized that the burden of proof shifts to the Revenue once the assessee provides prima facie evidence, and in this case, the evidence presented was deemed satisfactory.

Conclusion:
The High Court affirmed the decisions of the Appellate Tribunal in favor of the assessee and against the Revenue regarding both the unexplained cash credit and the disallowed interest. The Court highlighted that the Tribunal's conclusions were supported by the evidence and circumstances presented, emphasizing the importance of the burden of proof in such cases.