2010 (12) TMI 732 - HC - Income Tax

Addition - Cash credit - Unexplained income - Since, the creditor had admitted to have advanced the money to the assessee, the source of money deposited in the bank account out of which the money was advanced to the assessee was not explained - The mere statement that a sum of Rs.40,000/- was saved out of house-hold expenses is bereft of substance - The creditor does not have any source of income and therefore, accumulation of Rs.40,000/- cash, advanced to the assessee, routed through bank account is not satisfactorily explained - Mere payment by cheque is not enough to discharge the onus - Therefore, confirm the addition of Rs.40,000/- Decided against of assessee.

Summary

Issues:
1. Interpretation of Section 68 of the Income Tax Act.
2. Justification of the addition of Rs.40,000 under Section 68 of the Act.

Interpretation of Section 68 of the Income Tax Act:
The case involved the interpretation of Section 68 of the Income Tax Act, focusing on whether the Tribunal's findings on the correct interpretation of this provision were justified. The appellant had filed its income tax return for a specific assessment year, declaring an income of Rs.59,110. During scrutiny, the Assessing Officer found certain credits to be genuine while others were deemed unexplained. The Commissioner of Income Tax (Appeals) partly allowed the appeal, affirming the addition of Rs.40,000 as unexplained income under Section 68. Upon further appeal, the Tribunal upheld this addition. The Tribunal emphasized the principle that the onus to prove the genuineness of credits lies with the assessee, and mere documentation may not suffice. Additionally, the Tribunal cited various legal precedents supporting this principle. The Tribunal also highlighted the need for the creditor to explain the source of money, especially when no personal books of accounts are maintained. The Tribunal concluded that the addition of Rs.40,000 was justified under Section 68.

Justification of the addition of Rs.40,000 under Section 68 of the Act:
The Assessing Officer, CIT(A), and the Tribunal concurred that the cash credit of Rs.40,000 in the name of a specific individual was unexplained income under Section 68. Despite the appellant's arguments challenging this conclusion as perverse, the Tribunal's decision was deemed plausible upon reviewing the evidence. The appellant's attempt to reevaluate the evidence did not fall within the scope of Section 260A of the Act. The Tribunal's view was considered reasonable based on the available record. Consequently, the substantial question of law was answered against the appellant, leading to the dismissal of the appeal due to lack of merit.

This detailed analysis of the judgment from the Punjab and Haryana High Court provides insights into the issues surrounding the interpretation and application of Section 68 of the Income Tax Act in a specific case.