2011 (9) TMI 547 - HC - Income Tax

Admissibility of Cases referred to High Court - Unexplained Cash Credits - Held That - Question whether cash credits are genuine or not is question of fact - In view of Addl. CIT v. Noor Mohd. & Co (1973 -TMI - 9329 - Rajasthan High Court) legal presumption has been rebutted or not is always a question of fact and can never be a question of law.

Summary

Issues:
1. Interpretation of Section 256(2) of the Income Tax Act, 1961.
2. Treatment of income from undisclosed sources due to unexplained credits.
3. Discrepancies in the statement of the Managing Director.
4. Application of legal precedents regarding cash credits and legal presumptions.

Analysis:
1. The High Court addressed the interpretation of Section 256(2) of the Income Tax Act, 1961, in a reference application made by the Commissioner of Income Tax against the Tribunal's order. The Tribunal dismissed the reference application, leading to the current appeal.

2. The case involved the treatment of income from undisclosed sources by the respondent-assessee company due to unexplained credits. The Managing Director had received shares and a loan, but failed to prove the source of these credits before the Assessing Officer. The Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) to delete the addition of Rs. 1 lac as income from undisclosed sources.

3. Discrepancies in the statement of the Managing Director, Smt. Manju Kharari, were highlighted, with the Assessing Officer not accepting her explanation for the transactions. Despite contradictions in her statement, the Tribunal upheld the genuineness of the transaction, considering the evidence on record and all facts and circumstances of the case.

4. The High Court referred to legal precedents to support the Tribunal's decision, emphasizing that the question of whether cash credits are genuine is a question of fact. Citing cases such as Shri Caneriwal v. LCIT and Addl. CIT v. Noor Mohd. & Co., the court reiterated that determining the genuineness of cash credits and the rebuttal of legal presumptions are factual inquiries, not questions of law.

In conclusion, the High Court dismissed the reference application, as it found no question of law involved in the case based on the Tribunal's order and the legal principles established by previous judgments.