2014 (9) TMI 602 - AT - Income Tax

Addition u/s 68 Unexplained credits - Held that - In the first round of appeal the FAA had confirmed certain additions made by the AO and the Tribunal deleted addition in respect of one of the creditors - the assessee chose not to produce the parties before the AO during original assessment proceedings, remand proceedings, appellate proceedings before the FAA as well as during set-aside proceedings - So, now giving him one more chance will amount to allowing premium to an assessee who does not follow the directions of the Tribunal - Matter was remanded by to the AO to produce parties and evidences and even in the second round he chose not to produce parties - principles of natural justice cannot be stretched to an extent that they become unworkable and assessees start taking undue advantage of those principles - If a person who has been forewarned about consequences of travelling without a ticket, boards the train then he cannot avoid the ensuing results of his act - In the cases of cash credits primary onus is on the assessee to prove the three basic ingredients-identity and creditworthiness of the creditor and genuineness of the transaction - the assessee has not proved any of the three thing - Except giving the name of the alleged creditors he has not proved any of the three imperative factors - Documents called for by the AO were the evidences that could have tilted the scales of the weighing machine, if furnished, in favour of the assessee - all the evidences and circumstances are totally against the assessee and he has put himself in an indefensible position by not providing the evidences to the AO. From the date of receipt of loan till date of hearing, the assessee has not produced the basic documents - it is not clear as to whether the bank accounts of the creditors were the NRI accounts or not - FAA has mentioned that it was not explained to him as how and when these advances were made or whether the money was sent through bank channels - The finding of fact given by the FAA has not been challenged by the assessee by filing an application u/s.154 of the Act before him - Thus, it becomes a final finding - It is also a fact that for a period of eight years the advances received by the assessee from both the creditors were not returned, as observed by the FAA - The assessee has not disclosed as to what happened to the loans/deposits received by him after that period - the documents furnished by the assessee do not prove the creditworthiness of the creditors as well as the genuineness of the transaction and the assessee has discharged the initial burden of proof - the order of the FAA does not suffer from any legal or factual infirmity Decided against assessee.

Summary

Issues Involved:
1. Addition under Section 68 for unexplained cash credits in the case of M/s. Pooja Corporation (Rs. 9,00,000).
2. Addition under Section 68 for unexplained cash credits in the case of M/s. Pooja Enterprises (Rs. 7,00,000).
3. Addition under Section 68 for unexplained cash credits in the case of Mr. Ashok Mehta (Rs. 24,00,000).
4. Addition under Section 68 for unexplained cash credits in the case of Mr. Ajay Shah (Rs. 18,00,000).

Issue-wise Detailed Analysis:

1. Addition under Section 68 for unexplained cash credits in the case of M/s. Pooja Corporation (Rs. 9,00,000):
The assessee claimed the amount as an advance towards the sale of premises, which was later refunded. The Assessing Officer (AO) and the First Appellate Authority (FAA) did not find the evidence provided (such as the affidavit from a real estate agent) sufficient to prove the identity, creditworthiness, and genuineness of the transaction. The Tribunal upheld the addition, noting the assessee's failure to produce necessary documents like bank statements and income tax returns of the creditor, and the inability to produce the creditor for examination.

2. Addition under Section 68 for unexplained cash credits in the case of M/s. Pooja Enterprises (Rs. 7,00,000):
Similar to the first issue, the assessee claimed this amount as an advance for the sale of residential premises, which was refunded. The AO and FAA found the evidence insufficient and noted discrepancies in the letterheads and incomplete addresses. The Tribunal upheld the addition, emphasizing the assessee's failure to establish the identity, creditworthiness, and genuineness of the transaction, and the non-production of the creditor for examination.

3. Addition under Section 68 for unexplained cash credits in the case of Mr. Ashok Mehta (Rs. 24,00,000):
The assessee claimed this amount as an advance from Ashok Mehta, a resident of the UK. The AO and FAA found inconsistencies in the documents provided, such as differences in the signatures and the status of the bank account. The Tribunal noted that the assessee failed to produce Ashok Mehta for examination and did not provide sufficient evidence to prove the identity, creditworthiness, and genuineness of the transaction. The addition was upheld.

4. Addition under Section 68 for unexplained cash credits in the case of Mr. Ajay Shah (Rs. 18,00,000):
The assessee claimed this amount as an advance from Ajay Shah, also a resident of the UK. The AO and FAA found similar inconsistencies as in the case of Ashok Mehta, including differences in signatures and the status of the bank account. The Tribunal upheld the addition, noting the assessee's failure to produce Ajay Shah for examination and inability to provide sufficient evidence to prove the identity, creditworthiness, and genuineness of the transaction.

Conclusion:
The Tribunal dismissed the appeal filed by the assessee, upholding the FAA's order. The assessee failed to produce necessary evidence and the creditors for examination, thus failing to prove the identity, creditworthiness, and genuineness of the transactions as required under Section 68 of the Income Tax Act. The Tribunal emphasized that the onus of proof lies on the assessee and noted the importance of providing credible evidence and cooperating with the AO during the proceedings.