2016 (7) TMI 680 - HC - Income Tax

Addition u/s 68 - burden of proof - Held that - As during the penalty proceedings assessee had furnished particulars of 19 creditors who had allegedly advanced money to him. Even that letter does not disclose any address with respect to 8 of the creditors and the creditors whose addresses were furnished by the assessee were not available, according to the finding recorded by the learned Tribunal at the address indicated by the assessee. We, as such, are unable to attach any importance to the submission advanced by Mr.Jhunjhunwalla. The burden is upon the assessee to prove the necessary ingredients of section 68. Once the assessee failed to do so the consequences were bound to follow. In that view of the matter, both the additions are upheld and the questions formulated at the time of admission of the appeal are, accordingly, answered against the assessee

Summary

Issues involved: Appeal against the judgment of the Income Tax Appellate Tribunal regarding additions made on account of share application money and borrowed money by the assessee for the assessment year 1994-95. Questions of law formulated include the verification of loan credits under section 68 of the Income Tax Act and the confirmation of unexplained loan transactions.

Analysis:

1. Verification of Loan Credits under Section 68:
The Tribunal upheld the addition of money allegedly borrowed by the assessee due to the unavailability of loan creditors at the given address and the failure to submit loan confirmations. The Assessing Officer did not fully comply with the directions of the Ld.CIT(A) to make inquiries, as the creditors could not be located at the address provided by the assessee. The Tribunal emphasized that without establishing the genuineness, creditworthiness, and identity of the loan creditors, the alleged loan cannot be accepted as genuine. The burden of proof lies on the assessee to prove the necessary ingredients of section 68, and failure to do so leads to upholding the addition.

2. Confirmation of Unexplained Loan Transactions:
Regarding the addition of money received by the assessee on account of share application money, the Tribunal required proof of identity and genuineness of the transactions. However, the assessee failed to provide the full address of the share applicants or submit copies of the share applications to establish the authenticity of the transactions. Despite the submission of particulars of some creditors during penalty proceedings, the lack of complete addresses for some creditors and their unavailability at the provided addresses led to the rejection of the submissions. The Tribunal upheld the addition as the burden of proof rested on the assessee, and failure to establish the necessary details resulted in the dismissal of the appeal.

3. Miscellaneous Application Dismissal:
A miscellaneous application filed after the dismissal of the appeal was also rejected by the Tribunal. However, since no question of law was raised concerning the dismissal of the miscellaneous application, it was not considered in the judgment. The parties were directed to bear their own costs in the matter.

In conclusion, the appeal against the Tribunal's judgment regarding the additions made on account of share application money and borrowed money was dismissed by the High Court. The Court upheld the additions as the assessee failed to provide sufficient evidence to establish the genuineness and legitimacy of the transactions, thereby affirming the Tribunal's decision based on the burden of proof under section 68 of the Income Tax Act.