2015 (2) TMI 107 - AT - Income Tax

Addition made u/s 68 - not production of conclusive evidence - Held that - The assessee could not adduce any conclusive evidence in support of its contention that the impugned transaction is akin to the security scam transaction. The ld. Counsel for the assessee has repeatedly said that the Revenue Authorities has failed to discharge the burden of proof. As mentioned elsewhere section 106 clearly lay down that the burden of proving fact specially within the knowledge of any person is upon that person. Even today in the year 2014, no such conclusive confirmation has been brought before us either from Andhra Bank or from the broker M/s Champaklal Devidas. After carefully perusing the order and the evidences brought on record, we have to hold that the assessee has miserably failed in discharging the burden of proof cast upon it by virtue of section 68 r.w.s. 106 of the Evidence Act. The explanations of the assessee are full of discrepancies and contradictions and above all unsubstantiated. Considering the facts in totality, the decision of the first appellate authority cannot be faulted with. - Decided against assessee. Disallowance of finance charges payable - Held that - There is a mention of sale of units of ₹ 132,275,000/- from which is deducted purchase of units amounting to ₹ 134,942,875/-. The difference is claimed as finance charges. A perusal of these transactions clearly show that there was a loss on purchase and sale of units. By any stretch of imagination, this cannot be considered as equivalent to finance charges. Interest is paid whenever money is borrowed or some debt is incurred. Both elements are missing in these transactions. Therefore, the finance charges claimed by the assessee is rightly denied by the A.O. and confirmed by the ld. CIT(A).- Decided against assessee.

Issues Involved:
1. Addition under Section 68 of the Income Tax Act, 1961 amounting to Rs. 6,69,35,505/-
2. Disallowance of interest of Rs. 33,96,194/- payable to M/s Champaklal Devidas
3. Disallowance of Rs. 1,06,27,875/- being amount of finance charges payable for A.Y. 1988-89
4. Disallowance of finance charges for A.Y. 1989-90 and 1990-91

Detailed Analysis:

1. Addition under Section 68 of the Income Tax Act, 1961 amounting to Rs. 6,69,35,505/-:
The Assessing Officer (A.O.) scrutinized the return of income for A.Y. 1987-88 and found a balance of Rs. 6,69,35,305/- in the Andhra Bank, Fort branch account. The assessee was asked to provide details of sale and purchase transactions of securities and units but failed to furnish complete details, including counterparty confirmations. The A.O. treated the liability as bogus and added the amount under Section 68, holding that the assessee could not explain the nature, source, and genuineness of the credits.

The assessee argued that the transactions were akin to those involved in the securities scam, as noted by the Janaki Raman Committee, and were essentially unsecured loans. However, the A.O. and later the Tribunal found the explanation unsatisfactory as the assessee did not provide conclusive evidence or confirmation from Andhra Bank or the broker M/s Champaklal Devidas. The Tribunal emphasized that under Section 106 of the Evidence Act, the burden of proof lies on the assessee to prove facts within its special knowledge. The Tribunal upheld the A.O.'s addition under Section 68, concluding that the assessee failed to discharge the burden of proof.

2. Disallowance of interest of Rs. 33,96,194/- payable to M/s Champaklal Devidas:
The A.O. noticed an interest claim of Rs. 33,96,194/- in the sundry creditors list, supposedly payable to M/s Champaklal Devidas. Upon verification, it was found that M/s Champaklal Devidas did not acknowledge any such interest amount. The A.O. disallowed the interest claim, and the CIT(A) upheld this decision. The Tribunal also confirmed the disallowance, noting that the assessee failed to provide sufficient evidence to substantiate the interest liability.

3. Disallowance of Rs. 1,06,27,875/- being amount of finance charges payable for A.Y. 1988-89:
For A.Y. 1988-89, the assessee claimed finance charges of Rs. 1,06,27,875/- on borrowings from Andhra Bank and M/s Champaklal Devidas. The A.O. disallowed the claim due to lack of supporting details and evidence in the assessee's books. The CIT(A) upheld the disallowance. The Tribunal agreed with the lower authorities, finding that the transactions reflected a loss on purchase and sale of units rather than finance charges. The Tribunal concluded that the finance charges claim was not justified and confirmed the disallowance.

4. Disallowance of finance charges for A.Y. 1989-90 and 1990-91:
Similar to A.Y. 1988-89, the assessee claimed finance charges in A.Y. 1989-90 and 1990-91. The A.O. disallowed these claims, and the CIT(A) upheld the disallowances. The Tribunal found that the transactions in these years also reflected losses on the purchase and sale of securities, not finance charges. The Tribunal reiterated that the assessee failed to prove that the transactions were unsecured loans and upheld the disallowance of finance charges for both years.

Conclusion:
The Tribunal dismissed the appeals for assessment years 1987-88, 1988-89, 1989-90, and 1990-91, confirming the additions and disallowances made by the lower authorities. The Tribunal emphasized the assessee's failure to discharge the burden of proof and provide conclusive evidence to substantiate its claims.

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