2013 (12) TMI 1053 - AT - Income Tax

Unexplained cash credits under section 68 Held that - The assessee has furnished only details of bank account through which transaction took place only in respect of only four parties out of the 8 parties - In respect of remaining four parties, the assessee failed to submit any details - Following R. B. Mittal v. CIT 2000 (8) TMI 54 - ANDHRA PRADESH High Court It is incumbent upon the assessee to prove that the credit entry in its books of account does not represent any income and that the party in whose name the amount is credited is not fictitious party but real, and the assessee is also required to prove that the entry made in the books of account is genuine - The assessee is expected to establish proof of identity of the creditors, capacity of the creditors and genuineness of the transactions in order to discharge the onus cast on the assessee - By merely filing bank account details of the alleged creditors, it is not enough to hold that the assessee has satisfied the above ingredients of section 68 Decided in favour of Revenue.

Summary

Issues:
Deletion of addition of Rs. 64,00,000 made towards unexplained cash credits under section 68 of the Income-tax Act, 1961.

Analysis:
1. The case involved the Revenue's appeal against the deletion of an addition of Rs. 64,00,000 classified as unexplained cash credits under section 68 of the Income-tax Act, 1961 for the assessment year 2005-06.
2. The Assessing Officer treated the unsecured loans received by the assessee as unexplained cash credits due to failure in establishing the identity, creditworthiness, and genuineness of the transactions.
3. The Commissioner of Income-tax (Appeals) found that the assessee provided addresses and bank accounts of the parties, leading to a remand report confirming the transactions with four parties but lacking evidence for the other four. The Commissioner held that as the business had just started, the cash credits were trade advances, not falling under section 68 of the Act.
4. The Department argued that the burden of proof regarding the transactions was not adequately discharged by the assessee, citing similar cases where additions were confirmed under section 68.
5. The authorized representative contended that the cash credits were related to a business agreement with another entity, providing details of the transactions and relying on a Supreme Court judgment to support the claim that the cash entries were not unexplained credits.
6. The Tribunal noted that the burden of proof lies with the assessee to explain cash credits satisfactorily, and in this case, only partial evidence was provided. The Tribunal disagreed with the Commissioner's findings, emphasizing the necessity to establish the identity, capacity, and genuineness of the creditors.
7. Referring to a jurisdictional High Court judgment, the Tribunal reversed the Commissioner's decision and upheld the Assessing Officer's order, allowing the Revenue's appeal against the deletion of the addition of unexplained cash credits.

This detailed analysis highlights the legal intricacies surrounding the deletion of the addition of unexplained cash credits under section 68 of the Income-tax Act, emphasizing the burden of proof on the assessee to establish the legitimacy of transactions and the need for comprehensive evidence to support claims in such cases.