2017 (4) TMI 612 - HC - Income Tax

Undisclosed cash credit - receipt from the close relatives of the Assessee - creditworthiness and source - Held that - while the Assessee has not been able to discharge what he claims is the initial onus, satisfactorily, the observations made by the authorities below are findings of fact based upon appreciation of evidence. The onus, in this case, according to us, did not shift to the Revenue. The reason being that while, the Assessee was able to identify the source for whatever it was worth, he definitely failed to establish the creditworthiness of his source. We have ourselves examined the explanation given by the Assessee and are satisfied that there is no fundamental error committed by the authorities below in the appreciation of evidence. Each of the relatives identified as source, clearly, lacked the capability of lending funds to the extent attributed to them by the Assessee. While, the Assessee is not expected to establish the means, by which, funds are generated by the source. In other words, look to the source of the source - the capability of the source to generate funds is an exercise, which needs to be carried. In the instant case, an exercise in that behalf was, in fact, carried out, which led to the conclusion that each source identified by the Assessee did not have the necessary wherewithal to provide funds to the Assessee. We are persuaded to hold that in this case, additions have not been made based on mere suspicion, surmises and/or conjectures, as alleged by the Assessee. - Decided against assessee.

Summary

Issues Involved:
1. Practice of serving advance copies in tax appeals.
2. Sustaining additions made under Section 68 of the Income Tax Act, 1961.
3. Assessment of evidence and creditworthiness of the Assessee's sources.

Issue-wise Detailed Analysis:

1. Practice of Serving Advance Copies in Tax Appeals:

The court identified that the existing practice in tax appeals, where advance copies are not served on the contesting party, delays adjudication. The court directed that henceforth, the counsel for the Assessee must serve an advance set of the appeal paper book to the Revenue's empanelled counsel at least three days in advance. Similarly, the Revenue must send advance intimation along with the grounds of appeal via Registered Post with Acknowledgement Due (RPAD) at least seven days prior to the listing of the case. These directions are applicable only to tax matters.

2. Sustaining Additions Made Under Section 68 of the Income Tax Act, 1961:

The primary issue before the Tribunal was whether the additions made to the Assessee's income under Section 68 of the Income Tax Act, 1961, should be sustained. The Assessee had filed his return for the assessment year 2010-11, and upon scrutiny, the Assessing Officer found unexplained credits amounting to ?30,83,000 in the Assessee's account. The Assessee attempted to explain ?29,68,000 of this amount as received from relatives and his own means, but the explanations were not supported by requisite material.

3. Assessment of Evidence and Creditworthiness of the Assessee's Sources:

The Assessee argued that the initial onus regarding the source of unexplained funds was discharged by identifying the persons who furnished the funds and establishing their creditworthiness. However, the Assessing Officer, CIT(A), and the Tribunal found the explanations unsatisfactory. For instance, the Assessee claimed that ?10,00,000 was received as a gift from his aged in-laws, who purportedly generated the funds through agricultural income and savings, but failed to provide adequate evidence. Similarly, explanations regarding funds from the Assessee's brothers and daughters were found lacking in credibility and supporting documentation.

The court noted that the findings of fact by the authorities below were based on a holistic appreciation of the evidence. The Assessee failed to establish the creditworthiness of the sources, and the authorities' conclusions were not based on mere suspicion or conjecture.

Conclusion:

The court concluded that the Assessee did not satisfactorily discharge the initial onus of proving the sources' creditworthiness. The findings of the authorities below were affirmed, and no substantial question of law arose for consideration. Consequently, the appeal was dismissed with no order as to costs.