2011 (10) TMI 33 - HC - Income Tax

Addition u/s 68/ 69 - Shri Anant Narain Mani was found to be fake person. He filed return in the fake name. The assessment in favour of a fake person would not give any benefit to the petitioner. The petitioner was required in his assessment to prove the identity and creditworthiness of the creditor and the genuineness of the transaction. - The questions of law, as framed, therefore, do not arise for consideration of the Court. - The income was rightly added by the Tribunal to the income of the assessee.

Summary

Issues involved:
Identification of creditor and creditworthiness, genuineness of transaction, addition of undisclosed investment, best judgment assessment, penalty proceedings, assessment of fake person, proving identity and creditworthiness of creditor.

Identification of creditor and creditworthiness:
The Tribunal set aside the order of CIT (A) regarding the addition of Rs.1,00,000 made by the Assessing Officer in the income of the appellant-assessee. The Tribunal found that the assessee failed to prove the identity and creditworthiness of the creditor and the genuineness of the transaction in respect of the cash credit of Rs.1 lakh in the name of Shri Anant Narain Mani. The Assessing Officer had made the addition under Section 69 of the Income Tax Act as unexplained investment in new machinery due to the inability of the assessee to explain the source of the loan of Rs.1 lakh. The Tribunal upheld the addition under Section 68 of the IT Act as the genuineness of the loan/cash credit was not proven.

Addition of undisclosed investment and best judgment assessment:
The Income Tax Officer included Rs.1 lakh as undisclosed investment under Section 69 of the Act in the assessment of Shri Anant Narain Mani, who was found to be a fake person. The Officer observed that the return filed by Shri Anant Narain Mani was in a fake name, indicating a lack of verifiability of the nature of income returned. The Tribunal affirmed that the addition of the same amount in the income of the assessee-appellant was justified, as the assessment in favor of a fake person would not provide any benefit to the petitioner. The petitioner was required to prove the identity and creditworthiness of the creditor and the genuineness of the transaction.

Penalty proceedings and assessment of fake person:
The Income Tax Officer assessed the total income of Shri Anant Narain Mani at Rs.1,22,000, including the undisclosed investment of Rs.1 lakh, and directed the initiation of penalty proceedings. It was noted that the return filed by Shri Anant Narain Mani was in a fake name, and the nature of income returned was deemed unverifiable. The assessment in favor of a fake person was considered invalid, and the petitioner was obligated to establish the identity and creditworthiness of the creditor and the genuineness of the transaction.

Conclusion:
The High Court held that the questions of law framed did not arise for consideration, and the income was rightly added by the Tribunal to the income of the assessee. Consequently, the income tax appeal was dismissed, affirming the addition of the undisclosed investment and upholding the requirement for the assessee to prove the identity and creditworthiness of the creditor and the genuineness of the transaction.