2018 (6) TMI 1322 - HC - Income Tax

Unexplained cash credit under Section 68 - Held that - Advances received from the parties at Bhiwandi for supply of yarn is not acceptable. This is particularly in view of the facts as indicated hereinabove while recording its findings the Tribunal particularly found that the return of money was made not to the creditors concerned but to the sister concerns of the Appellant and thereafter the amounts were also withdrawn from the partners and family members of the sister concern. Remand report indicating that the letter similar or identical in nature by all the parties who responded is that reason is similar i.e. the amounts were received for purchase of yarn as an Advance. Thereafter, yarn was not supplied and consequently refund was given. Thus, view taken on the remand report is not perverse. View taken by the authorities under the Act is on the basis evidence before is leading to a finding of fact which is not shown to be perverse. Therefore, the question raised would not give rise to substantial question of law.

Summary

Issues:
Appeal challenging order of Income Tax Appellate Tribunal for Assessment Year 2003-04 - Unexplained cash credit under Section 68 of the Income Tax Act, 1961 - Genuineness of transactions and creditworthiness of creditors questioned.

Analysis:
1. The appellant, a commission agent for a yarn company, received advances from dealers which were treated as unexplained cash credit by the Assessing Officer under Section 68 of the Act due to lack of details about the parties. The appellant's explanation about the delays in transactions and subsequent refunds was not accepted, resulting in an addition of ?36.77 lakhs.

2. The Commissioner of Income Tax (Appeals) confirmed the Assessing Officer's order after considering a remand report and the appellant's explanation, leading to dismissal of the appeal. The Tribunal reduced the addition to ?36.26 lakhs but upheld the CIT(A)'s decision, except for a minor adjustment based on evidence provided by one party.

3. The Tribunal found discrepancies in the appellant's claims regarding advances received from certain parties, highlighting the lack of documentary evidence, correspondence, and credibility in the transactions. The cheques issued were not in favor of creditors but sister concerns, with funds eventually transferred to partners and family members, raising doubts about the genuineness of the transactions.

4. The appellant argued that confirmation letters from parties varied, indicating the genuineness of the transactions, but the court upheld the authorities' findings based on facts presented. The Tribunal's decision was deemed reasonable, considering the evidence and lack of proof regarding the transactions' legitimacy.

5. The court concluded that the authorities' rejection of the appellant's explanation for the cash credits was justified based on the evidence and findings, dismissing the appeal. The decision was based on factual determinations and not deemed to raise substantial questions of law, leading to the appeal's dismissal without costs.