2015 (2) TMI 214 - HC - Income Tax

Unaccounted cash credits - Held that - From the record, it appears that assessee has claimed that ₹ 3.90 lacs was taken from family members to purchase the plot in Delhi, but the deal was not finalized so, the assessee was returning to Bareilly along-with cash. It also appears that all the creditors have shown the entries in their books of account, a few of them have given a meager amount for which no entry was made out. The order of the custom authorities was not before the CIT (A), who has wrongly observed that the assessee was engaged in the business of gold, especially when the custom authorities have observed (supra) that the assessee was not involved in the business of gold then the statement given by the assessee as well as Driver cannot be relied upon. Regarding creditworthiness of the creditors, it appears that either the amount was meager or the same was shown in the books of accounts. No attempt was made by the Department to verify/examine the creditors. The identity of the creditors has been established. From family members, loan for petty amount can be taken in cash. Hence, it appears that the creditors were genuine - Decided in favour of assessee.

Summary

Issues:
Assessee's appeal against Income Tax Appellate Tribunal's order for Assessment Year 1987-88 regarding addition of Rs. 3.90 lacs.

Analysis:
1. The appeal was filed by the assessee challenging the Tribunal's decision upholding the addition of Rs. 3.90 lacs. The case revolved around conflicting statements given by the assessee and the driver during a customs interception.

2. Initially, the assessee claimed the seized money was from selling gold in Delhi, but later changed the story to money taken from family members for a plot purchase. The Assessing Officer (A.O.) added Rs. 3.90 lacs to the income, which was partially deleted by the first appellate authority and further reduced by the C.I.T.(A).

3. The High Court observed that the A.O. was not satisfied with the explanation provided by the assessee, leading to the addition. The Tribunal restored the full addition based on the custom authorities' observations. The Court analyzed the detailed cash distribution among family members provided by the assessee.

4. The Court noted that the creditors' entries were shown in their accounts, establishing their creditworthiness. However, the Department failed to verify the creditors, as required by legal precedents like C.I.T. Vs. Orissa Corporation Pvt. Ltd. and C.I.T. vs. N. P. Garodia.

5. Relying on legal principles and considering the totality of facts, the Court held that when money was borrowed from family members and was either nominal or accounted for, there was no basis for the addition. Consequently, the Court set aside all previous orders and deleted the addition of Rs. 3.90 lacs, ruling in favor of the assessee.

6. The judgment concluded by stating that all substantial questions were decided in favor of the assessee, allowing the appeal and granting relief accordingly.