2018 (1) TMI 974 - AT - Income Tax

Addition u/s 68 - genuineness of the transaction - bifurcation of sum of ₹ 1.80 crores in the name of various parties in short time for obtaining the sand contract from the Government. - Held that - 7/12 extracts furnished by the assessee could never demonstrate conclusively that the lands belong to the individual payees and the income is actually earned by them which formed the source of making of cash payments to the assessee. Leave alone the bills evidencing the fact of conducting agricultural operations on the said lands, the payees has no evidence to show the fact of earning the Agricultural income by way of the sale bills for earning of the agricultural income. We also perused the said extracted portions of the order of the AO as well as the order of CIT(A) and find the reasoning given by them is one possible view. Assessee needed a sum of ₹ 1.80 crores in short time for obtaining the sand contract from the Government. Based on the principle of probability, we find it most likely that the assessee had to use the names of the 45 payees for mobilising the said amount - Creation of cash books/records for all the 45 payees and recording the each cash transactions at the rate of ₹ 20,000/- per day, non exclusion of the weekends and Sundays too comments the hurriness of the assessee. It is undisputed fact that the payees are not assessed to tax at that time or at the time of assessment or now. The assessee failed to show up all the payees before the AO. Therefore, we confirm the conclusions drawn by the AO/CIT(A) at the relevant point of time. It is the settled law relating to provision of section 68 that the assessee is under obligation to discharge all the conditions specified in the said section cumulatively to the AO. As such, the entries in the books of account are not determinative. - Decided in favour of revenue

Issues Involved:
1. Addition of ?1,80,00,000 under Section 68 of the Income Tax Act, 1961.
2. Examination of the identity, creditworthiness, and genuineness of transactions of the 45 payees.
3. Violation of principles of natural justice.
4. Request for remand to the Assessing Officer for fresh assessment.

Detailed Analysis:

1. Addition of ?1,80,00,000 under Section 68 of the Income Tax Act, 1961:
The Assessing Officer (AO) added ?1.80 crores to the assessee's income under Section 68, treating it as unexplained cash credits. The assessee, a sand contractor, claimed that this amount was received as advances from 45 individuals for the sale of sand. The AO noted that the amounts were received in cash, with each individual contributing ?4 lakhs in minor transactions of ?20,000 each over 20 days. The AO found discrepancies in the explanations provided by the payees and concluded that the assessee introduced his own unaccounted funds in the names of these individuals.

2. Examination of the identity, creditworthiness, and genuineness of transactions of the 45 payees:
The AO scrutinized the identity, creditworthiness, and genuineness of the transactions. Although the assessee provided confirmation letters and affidavits from the payees, the AO found these to be stereotyped and self-serving. Summons were issued to all 45 payees, but only 18 appeared and confirmed the basic transaction. However, they could not confirm the exact extent of payments or provide evidence for the minor cash transactions. The AO observed that most payees were agriculturists with no substantial means to fund ?4 lakhs in such a short period. The CIT(A) upheld the AO's findings, emphasizing the lack of financial capacity and documentary evidence to support the payees' claims.

3. Violation of principles of natural justice:
The assessee argued that the addition was made in violation of the principles of natural justice. However, the AO and CIT(A) provided ample opportunities for the assessee to present evidence and explanations. The CIT(A) also considered remand reports and counter submissions from the assessee, ultimately finding the transactions to be fabricated.

4. Request for remand to the Assessing Officer for fresh assessment:
The assessee requested that the matter be remanded to the AO for a fresh assessment, arguing that proper opportunities were not given. However, the Tribunal found that the AO and CIT(A) had already provided sufficient opportunities and that the assessee failed to discharge the onus of proving the creditworthiness and genuineness of the transactions.

Conclusion:
The Tribunal upheld the addition of ?1.80 crores under Section 68, agreeing with the AO and CIT(A)'s findings that the transactions were not genuine and that the assessee had introduced his own unaccounted funds. The appeal was dismissed, affirming that the assessee failed to prove the creditworthiness and genuineness of the transactions and that the addition was justified under the circumstances. The Tribunal emphasized the importance of fulfilling all conditions specified in Section 68 cumulatively and found no reason to reverse the findings of the lower authorities.

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