2013 (8) TMI 755 - AT - Income Tax

Unexplained Credit Addition u/s 68 - Assessee is a Public Limited Company. - Money borrowed through fixed deposit in a scheme under the Company (acceptance of deposit) Rule, 1975. credit worthiness - genuineness of transaction - onus to prove Held that - The Hon ble Calcutta High Court in the case of C. Kant and Company vs. CIT (1980 (6) TMI 21 - CALCUTTA High Court) held that in respect of credit entry it is necessary for the assessee to prove not only the identity of the creditors but also to prove the capacity of the creditors, the advance money and genuineness of the transactions. Similar view has been taken by the Hon ble Rajasthan High Court in the case of Kamal Motor vs. CIT 131 Taxman 155 (Raj.). - mere filing of the confirmatory letters will not discharge the onus that lies on the assessee. In the case under consideration, the assessee failed to furnish even confirmation of the depositors for which the CIT(A) has sustained the addition. The Hon ble Calcutta High Court in the case of CIT vs. Precision Finance Pvt. Ltd. held that mere payment by account payee cheque was not sacrosanct nor could it make a non-genuine transaction as genuine. As per the judgment in the case of CIT vs. United Commercial and Industrial Co. (P) Ltd. 1989 (5) TMI 18 - CALCUTTA High Court , wherein it was held that The primary onus lies on the assessee to prove the nature and source of credits in its accounts. It is necessary for the assessee to prove prima facie the identity of his creditors, the capacity of such creditors to advance the money and lastly the genuineness of the transactions. Only when these things are proved by the assessee prima facie and only after the assessee has adduced evidence to establish the aforesaid facts does the onus shift on to the Department. - Decided against the assessee. Additin where fixed deposits taken during the earlier years - fixed deposits renewed during the year - Held that - In the instant case, fixed deposits which were renewed during the year - In fact these fixed deposits were taken in earlier year, therefore, to that extent addition is not warranted - The assessee has furnished a chart of such 244 depositors amounting to Rs.29,84,000/- which has been placed in the Paper Book Accepted the contention of the Assessee that section 68 requires that credit must be in the previous year and not of earlier year for the purpose of making addition in the income since renewal of fixed deposits are not credit of this year, therefore, addition cannot be made in the year under consideration - Balance addition of Rs.23,98,000/- (Rs.53,82,000.00 - Rs.29,84,000.00) sustained and confirmed and matter pertaining to addition of Rs.29,84,000/- is being sent back to the file of the A.O Appeal of the assessee is partly allowed for statistical purpose.

Issues Involved:
1. Sustaining of addition on account of fixed deposits.
2. Consideration of evidence and written submissions by the Assessing Officer (A.O.) and CIT(A).
3. Compliance with specific directions given by CIT(A) and opportunity for the assessee during remand proceedings.
4. Decision on the alternative claim regarding opening balances included in the addition.
5. Right to amend or withdraw grounds of appeal.

Detailed Analysis:

1. Sustaining of Addition on Account of Fixed Deposits:
The assessee challenged the addition of Rs. 53,82,000/- made by the A.O. under Section 68 of the Income Tax Act, 1961. The A.O. observed that the assessee had borrowed Rs. 2,64,34,000/- through fixed deposits and sought confirmations from depositors. Confirmations for Rs. 56,35,000/- were not received, leading to the addition. The CIT(A) allowed relief of Rs. 2,53,000/- but confirmed the addition for the remaining amount. The Tribunal upheld the CIT(A)'s decision, noting that the assessee failed to prove the identity, creditworthiness, and genuineness of the transactions for the unconfirmed deposits.

2. Consideration of Evidence and Written Submissions:
The assessee argued that the A.O. and CIT(A) did not consider the evidence and detailed submissions provided. The Tribunal found that the A.O. had issued letters to depositors and received few confirmations. The CIT(A) considered the A.O.'s remand report and the assessee's submissions but found the evidence insufficient. The Tribunal emphasized the necessity for the assessee to prove the identity, capacity, and genuineness of the transactions.

3. Compliance with Specific Directions and Opportunity During Remand Proceedings:
The assessee contended that the A.O. did not comply with CIT(A)'s directions and did not provide an opportunity during remand proceedings. The Tribunal noted that the A.O. issued letters and sought confirmations but did not receive satisfactory responses. The Tribunal held that the burden of proof under Section 68 lies with the assessee, who failed to discharge it adequately.

4. Alternative Claim Regarding Opening Balances:
The assessee claimed that the addition included opening balances of Rs. 2,12,000/-, which should not be added under Section 68. The Tribunal accepted this alternative contention, noting that Section 68 applies to credits in the previous year and not to renewals of earlier deposits. The Tribunal directed the A.O. to verify the claim and delete the addition to the extent of Rs. 29,84,000/- if found correct.

5. Right to Amend or Withdraw Grounds of Appeal:
The Tribunal acknowledged the assessee's right to amend, alter, or withdraw grounds of appeal before the hearing date. However, no specific amendments or withdrawals were noted during the proceedings.

Conclusion:
The Tribunal confirmed the addition of Rs. 23,98,000/- and remanded the matter to the A.O. for verification of the alternative claim regarding renewals of fixed deposits amounting to Rs. 29,84,000/-. The appeal was partly allowed for statistical purposes.

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