2008 (4) TMI 8 - HC - Income Tax

Rs. 22.97 lakhs deposited in cash in the Bank account of FBSL - Rs. 25 lakhs each transferred from FBSL to BTL to ACL to Assessee on the same day - All the companies having same address - Since AO does not have any evidence regarding geniuses or fictitious identity - addition is not possible

Summary

Issues:
1. Whether the cash deposit made by the Assessee in the bank account of another company should be added as taxable income under Section 68 of the Income Tax Act.
2. Whether the Assessee has successfully proven the identity, capacity, and genuineness of the transaction to avoid the addition of unexplained cash credit.
3. Whether the circular route used by the Assessee to receive a loan should be considered a device to evade tax.

Analysis:
1. The Revenue filed an appeal against the Tribunal's order, contending that the Assessee used a circular route to receive a loan, which should be taxable under Section 68 of the Act. The Assessing Officer believed the cash deposited in another company's account was actually the Assessee's money, leading to an addition of unexplained cash credit. However, the CIT(A) held that the Assessee proved the transaction's genuineness, and no summons were issued before concluding the transactions were from the Assessee's money.

2. Both the CIT(A) and the Tribunal found that the Assessee discharged its burden of proving the identity, capacity, and genuineness of the transaction. The confirmation from the company providing the loan was filed, and the source of funds was explained. It was noted that there was no material linking the Assessee with the cash deposited in the other company's account. The Tribunal upheld this view, stating there was no evidence to suggest the cash credit remained unexplained.

3. The Tribunal found no infirmity in its order, stating that no substantial question of law arose. It was concluded that there was no material for the Assessing Officer to determine the genuineness or fictitious nature of the entries, or the lender's capacity. Therefore, the appeal was dismissed, and the addition under Section 68 was not justified. The judgment emphasized the lack of evidence linking the Assessee to the cash deposit in question, leading to the rejection of the Revenue's appeal.