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2010 (12) TMI 861 - AT - Income TaxAddition - Cash credit - It is not in dispute that the creditor Shri Maheshbhai Shah obtained two demand drafts of Rs.2 lacs each on 16-06-2004 and 17-06-2004 for giving the same to the assessee - Since the creditor was not assessed to tax and his income was blow taxable limit, therefore, it would support the findings of the authorities below that the creditor was not having source to make cash deposit in his bank account in June, 2004 and was not a man of means and that the transaction in question is not genuine - The Hon ble Supreme Court in the cases of Durga Prasad More (1971 -TMI - 6269 - SUPREME Court) and Sumati Dayal (1995 -TMI - 5469 - SUPREME Court) held that the Courts and Tribunal have to judge the evidences before them by applying the test of human probabilities after considering the surrounding circumstances - The assessee has failed to establish the source of the cash deposited in the bank account of the creditor as well as failed to prove genuineness of the transaction in the matte - Decided gainst the assessee
Issues Involved:
1. Addition of Rs. 4,00,000/- on account of unexplained cash credit under Section 68 of the Income Tax Act. Issue-Wise Detailed Analysis: 1. Addition of Rs. 4,00,000/- on account of unexplained cash credit under Section 68 of the Income Tax Act: The assessee challenged the addition of Rs. 4,00,000/- made by the Assessing Officer (AO) as unexplained cash credit under Section 68 of the Income Tax Act for the assessment year 2005-06. The AO observed that the amount was received from an individual via demand drafts, which were purchased after depositing cash into the lender's bank account. The lender admitted he did not have a bank account and was only an agriculturist. The AO found no nexus between the lender's agricultural receipts and the cash deposited. The assessee explained that the lender was a well-established agriculturist with substantial agricultural income, part of which was deposited in the bank to give the loan. However, the AO did not accept this explanation and treated the loan as unexplained cash credit. The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], arguing that the creditor confirmed the loan and provided details of agricultural sales. Despite the creditor's confirmation and cash flow details, the CIT(A) upheld the AO's addition, stating that the source of the cash deposit in the bank was not established. The CIT(A) noted that the creditor's behavior of holding large cash amounts and not depositing them in the bank was incomprehensible and suggested that the cash could be the assessee's unaccounted money. The assessee's counsel reiterated the submissions before the authorities below, emphasizing the creditor's confirmation and agricultural income evidence. The counsel cited several judicial decisions supporting the argument that once the identity and creditworthiness of the creditor are established, the burden shifts to the department to disprove the assessee's claim. However, the Departmental Representative (DR) argued that the creditor's financial position and lack of sufficient funds at the relevant time justified treating the credit as unexplained. Upon reviewing the submissions and evidence, the Tribunal found that the creditor's financial position and the timing of cash deposits raised doubts about the genuineness of the transaction. The creditor's statement and financial behavior indicated he was not a man of means to deposit Rs. 4,00,000/- in cash. The Tribunal noted that the creditor's explanation for not maintaining a bank account was false and that no sufficient funds were available to justify the deposits. The Tribunal concluded that the assessee failed to prove the source of the cash deposits and the genuineness of the transaction, supporting the authorities' decision to treat the credit as unexplained. The Tribunal dismissed the appeal of the assessee, affirming the addition made under Section 68 of the Income Tax Act. Conclusion: The appeal of the assessee was dismissed, and the addition of Rs. 4,00,000/- on account of unexplained cash credit under Section 68 of the Income Tax Act was upheld. The Tribunal concluded that the assessee failed to establish the source of the cash deposits and the genuineness of the transaction, supporting the findings of the lower authorities.
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