2009 (6) TMI 60 - HC - Income Tax

Cash Credit Held that - that merely because the loan transaction was sought to be relied upon by the assessee, as that transaction was given by cheque, by itself will not prove the genuineness of the transaction - that the assessee must prove not only the identity of the creditor but their creditworthiness and genuineness of the transaction has also to be proved beyond any reasonable doubt by the assessee - has not made any legal ground calling for interference of this court and the order passed by the Tribunal in respect of both the claims raised cannot be said to be perverse or illegal appeal dismissed.

Summary

Issues:
Assessment of undisclosed income under section 68 of the Income-tax Act, 1961 based on a credit entry of Rs. 90,000 in the appellant's books of account; Disallowance of interest deduction claimed by the appellant; Appeal against the order of the Commissioner of Income-tax (Appeals) by the Department before the Income-tax Appellate Tribunal; Questions of law raised by the appellant challenging the Tribunal's decision.

Analysis:
The appellant, an individual dealing in radio and spare parts, faced assessment for the year 1992-93 regarding a credit entry of Rs. 90,000 in the books of account under section 68 of the Income-tax Act, treated as undisclosed income by the assessing authority. The appellant also claimed deduction of Rs.14,580 as interest on this credit, which was disallowed. The Commissioner of Income-tax (Appeals) directed the assessing officer to treat the loan as genuine based on evidence provided, but the Income-tax Appellate Tribunal reversed this decision, upholding the addition of Rs. 90,000 as unexplained cash credit and disallowing the interest amount.

The appellant contended that the loan transaction was genuine, supported by evidence of the creditor's identity and the transaction being through a cheque. However, discrepancies emerged during the examination of the creditor, R. Subramanian, revealing contradictions in his statements regarding the source of the money and the nature of the transaction. The Tribunal found these inconsistencies significant, leading to a lack of credibility in the appellant's claims.

The Tribunal emphasized the necessity for the appellant to prove not only the creditor's identity but also their creditworthiness and the genuineness of the transaction beyond doubt, citing relevant legal precedents. Additionally, discrepancies in bank transactions and the timing of deposits raised doubts about the authenticity of the loan transaction. The Tribunal concluded that the appellant failed to meet the burden of proof required for establishing the genuineness of the transaction, resulting in the dismissal of the appeal.

The Tribunal's decision was deemed legally sound, with no grounds for interference by the court. The appeal was dismissed, and the questions of law raised by the appellant were answered against them. The judgment highlighted the importance of substantiating claims of transactions with concrete evidence to avoid assessment as undisclosed income and disallowance of related deductions.