2014 (11) TMI 409 - HC - Income Tax

Undisclosed income on loans to creditors - Creditworthiness of the creditors and genuineness of transactions proved or not Held that - A person can still be held to be the owner of a sum of money even though the explanation furnished by him regarding the source of that money is found to be not correct and from the simple fact that the explanation regarding the source of money furnished by him, in whose name the money is lying in deposit, has been found to be false, it would be a remote and far-fetched conclusion to hold that the money belongs to some other person - if no further explanation could be obtained by the revenue upon the creditors failure to present themselves in enquiry, from such simple fact of omission on part of the creditors, it would be remote and farfetched conclusion that the creditors lack identity. The revenue could not contradict the explanation furnished by the assessee - The omission on part of the creditors to subject themselves to enquiry being initiated by the revenue or non-furnishing of accounts by them would, not lead to the conclusion that the creditors lacked identity without any other contradiction of facts and particulars of the transactions between them furnished by the assessee being uncontroverted - Tribunal had discussed seven instances of loan threadbare and deleted the addition had held in substance with regard to each of those loan transactions, that the revenue had failed to bring any other material on record to show that the amounts advanced by the creditors was in reality and in fact, money belonging to the assessee Decided against revenue. Payment made to sundry creditors - Whether the order of the Tribunal is sustainable inasmuch as per the rules of Stock Exchange Shares can be delivered strictly against payment Held that - The payment has been made to share broker after the expiry of the accounting year, relevant to the AY under consideration, that is it has been paid in the month of April, 1995 - There is no material on record to show that the amount had actually been paid by the assessee to the share broker the end of the current year - The subsequent payment made in April, 1995 has not been found to be bogus or non-genuine - It is clear that there was an outstanding liability on account of amount payable against the purchase of shares thus, the order of the Tribunal is upheld Decided against revenue.

Summary

Issues:
1. Addition of undisclosed income on account of loans from alleged creditors.
2. Deletion of addition related to shares transaction.

Analysis:
1. The first issue pertains to the addition of undisclosed income on account of loans from alleged creditors. The appellant argued that the identity, genuineness, and creditworthiness of the creditors were not proven, justifying the addition made by the assessing officer. However, the respondent contended that proper explanations were provided, transactions were through banks, and relevant details were furnished. The respondent relied on legal precedents to support their stance, emphasizing that lack of further explanation from creditors does not imply lack of identity. The Court referenced judgments to establish that the onus is on the assessee to offer explanations and produce supporting material, beyond which they cannot be compelled to do more. The Tribunal, after thorough examination, concluded that the revenue failed to provide evidence that the loan amounts actually belonged to the assessee, leading to the deletion of the addition.

2. The second issue revolves around the deletion of an addition related to a shares transaction. The Tribunal found that the payment for shares was made after the relevant accounting year, supported by documentary evidence such as contract notes, ledger accounts, and bank statements. The authorities had added the amount based on suspicion, disbelieving the assessee's contentions. However, the Tribunal upheld the deletion of the addition, noting that the transaction was genuine and substantiated by bank records. The Court concurred with the Tribunal's findings, emphasizing the lack of evidence to support the revenue's suspicions. Consequently, both questions were answered against the Revenue and in favor of the assessee, leading to the dismissal of the appeal.