2010 (1) TMI 879 - AT - Income Tax

Undisclosed income - cash credit treated as income - Bank statements and other documents indicate that the assessee cannot be subjected to tax either under section 68 or under section 69 as the amount stood utilized by the account holder - No corroborative material has been placed on record to establish that lender/borrower may be temporarily or only accommodating be in collusion to hoodwink the Income Tax department - assessee cannot be revisited for explaining either a cash credit or unexplained investment in the assessment year, loan creditor confirms having given loan Held that - no further verification required by the AO under section 68 and having repaid the same by cheque duly accepted by the lender in a subsequent assessment requires no further probe under section 69. The assessee therefore cannot be subjected to tax, appeal by the assessee succeeds and is allowed.

Summary

Issues Involved:
1. Confirmation of addition under Section 69 as 'cash credit treated as income'.
2. Determination of the ownership and source of the Rs.2 lakhs deposit.
3. Examination of the role of the Bank Manager in the transaction.
4. Evaluation of the evidence and statements provided by the parties involved.

Issue-wise Detailed Analysis:

1. Confirmation of Addition under Section 69 as 'Cash Credit Treated as Income':

The assessee contested the CIT(A)'s decision to uphold the addition of Rs.2 lakhs under Section 69, which was treated as 'cash credit' and considered as the undisclosed income of the appellant. Initially, the CIT(A) had reclassified the amount from unexplained credit under Section 68 to unexplained investment under Section 69. The appellant argued that the credit neither appeared as an unexplained cash credit nor as an unexplained investment in their accounts.

2. Determination of the Ownership and Source of the Rs.2 Lakhs Deposit:

The case revolved around a deposit of Rs.2 lakhs in the SB Account No.10875 of one Sri B.V. Ganapathy. The appellant claimed that the amount was a loan from Sri B.V. Ganapathy, which was subsequently repaid. The Tribunal had previously directed the Assessing Officer to examine the Bank Manager and provide the appellant an opportunity to cross-examine him. The Bank Manager, Sri Ramakrishna Bhat, denied receiving Rs.2 lakhs from the appellant and confirmed that he did not deposit the amount in Sri B.V. Ganapathy's account.

3. Examination of the Role of the Bank Manager in the Transaction:

The Tribunal had earlier noted the potential involvement of the Bank Manager in facilitating the transaction. The Assessing Officer was directed to examine the Bank Manager, who denied any involvement in the deposit of Rs.2 lakhs. The appellant's counsel argued that the money did not belong to the appellant and that the Bank Manager's denial should absolve the appellant of any liability.

4. Evaluation of the Evidence and Statements Provided by the Parties Involved:

The appellant provided a paper book containing various documents, including the Tribunal's order, confirmation letter from Sri B.V. Ganapathy, and bank statements. The counsel argued that the authorities failed to probe the actual utilization of the Rs.2 lakhs and that the amount should not be taxed in the appellant's hands. The Tribunal found that the loan was repaid by cheque and that the amount was utilized by Sri B.V. Ganapathy, not the appellant. The Tribunal noted that the revenue did not establish that the amount belonged to the appellant and concluded that the appellant should not be taxed for the Rs.2 lakhs in the impugned assessment year.

Conclusion:

The Tribunal concluded that the appellant could not be subjected to tax under Section 68 or Section 69 for the Rs.2 lakhs deposit, as the amount was utilized by Sri B.V. Ganapathy and not the appellant. The appeal by the assessee was allowed, and the addition of Rs.2 lakhs was directed to be deleted from the assessment. The judgment emphasized the need for proper verification and evidence before attributing unexplained income to an assessee.