2013 (10) TMI 154 - HC - Income Tax

Additions u/s 68 - unsecured loans - unexplained cash credit - proof of source of source or origin of the cash credits Held that - Revenue authorities as well as the Tribunal found the entire transaction not genuine. There was sufficient evidence on record to suggest that in case of all the depositors, their bank accounts contained meager balance shortly before sizable amount of Rs. 1 lakh and upward were given to the assessee through such account. In such bank accounts, cash amounts were credited and immediately entire amounts were withdrawn through issuance of such cheques in favour of the assessee - It was noticed that such creditors did not maintain any books of account. Nowhere their capacity to raise such amount for drawing cheque of sizable amounts was established - Very genuineness of the transaction was not established. This therefore, is not a case where the Revenue makes addition on the assessee failing to establish source of the source. All issues are essentially based on facts and appreciation of evidence on record. No question of law arises Decided against the Assessee.

Summary

Issues:
1. Addition of unsecured loans as unexplained cash credit under section 68 of the Income Tax Act, 1961.
2. Justification of applying the fact of not satisfying the authorities about the source of the depositors' money.

Analysis:
1. The case involved a sum of Rs. 13 lakhs treated as cash credit under section 68 of the Income Tax Act, 1961 by the Assessing Officer, a decision upheld by the CIT(Appeals) and the Tribunal. The Assessing Officer raised concerns regarding the capacity and creditworthiness of the depositors of unsecured loans totaling to Rs. 13 lakhs received by the assessee from 8 different individuals. Despite the loans being received through Account Payee cheques and some depositors appearing before the Assessing Officer, it was concluded that the genuineness of the transactions and the creditworthiness of the creditors were not proven by the assessee.

2. The Commissioner(Appeals) re-examined the issue and found that out of the 8 depositors, only one had satisfactorily explained the loan amount, while the remaining 7 depositors were providing bogus accommodation entries. The Tribunal concurred with the Revenue authorities' view, noting that cash was deposited in the depositors' accounts shortly before giving the loans, with no other transactions before or after the loans. The Tribunal held that the evidence produced by the assessee was not acceptable given the surrounding circumstances and natural probabilities, as the creditworthiness of the depositors and the genuineness of the transactions were not established.

3. The appellant contended that the Revenue authorities and the Tribunal erred in requiring the assessee to establish the source of income of the creditors, arguing that the assessee cannot be expected to prove the source of the source while dealing with additions under section 68 of the Act. The appellant emphasized that the identity of the depositors was established, the amounts were received through cheques, and the genuineness of the transactions was not in doubt. However, the Court found that while the legal contention regarding the source of the source was valid, the facts of the case indicated that the transaction was not genuine. The Tribunal, along with the Revenue authorities, concluded that the entire transaction lacked genuineness based on the evidence that the depositors' bank accounts had minimal balances before substantial amounts were given to the assessee, followed by immediate withdrawals through cheques without proper bookkeeping or evidence of capacity to raise such amounts.

4. Ultimately, the Court dismissed the Tax Appeal, stating that the Revenue's decision was based on the lack of establishment of the transaction's genuineness rather than solely on the failure to prove the source of the source. The Court highlighted that all issues were fact-based, involving the appreciation of evidence on record, and no legal question arose from the case.