2019 (2) TMI 120 - HC - Income Tax

Addition u/s 68 - non discharge the burden/condition as given in section 68 - Held that - The appellant could not discharge the burden/condition as given in section 68. It was noticed by the Tribunal as well as the lower authorities that the assessee has failed to prove the credit worthiness of the creditor and the genuineness of the transaction. It was also noticed that the assessee has neither before the CIT (Appeals), nor before the Tribunal could discharge the burden/condition as prescribed under section 68 with regard to credit worthiness and genuineness of the transactions in the matter. In our opinion, the Tribunal had taken all the relevant facts into consideration and the conclusions arrived at by the Tribunal were not perverse or unreasonable in confirming the order of Commissioner of Income Tax (Appeals). In view of the aforesaid facts, the case, in hand, is squarely covered by the judgment & order rendered by this Court in the case of Ram Baboo Agrawal ( 2017 (11) TMI 740 - ALLAHABAD HIGH COURT). - Decided in favour of the Revenue and against the Assessee

Summary

Issues:
1. Consideration of all material facts and records by ITAT
2. Addition under section 68 of the Income Tax Act

Analysis:

Issue 1: Consideration of all material facts and records by ITAT
The appeal was filed against the judgment & order passed by the Income Tax Appellate Tribunal for the Assessment Year 2007-08. The appellant questioned whether the ITAT, while deciding the appeal, failed to consider all material facts and records with due care. The appellant argued that the ITAT did not sufficiently address the contentions raised by the appellant in light of the evidence presented, leading to a flawed order. However, the court noted that the appellant could not prove the creditworthiness of the creditors and the genuineness of the transactions, as required under section 68 of the Income Tax Act, 1961. The court found that the ITAT had considered all relevant facts and its conclusions were reasonable, leading to the dismissal of the appeal.

Issue 2: Addition under section 68 of the Income Tax Act
The appellant contended that the addition of ?7,00,000 under section 68 of the Act was unjustified as the appellant had submitted conformity letters, identity, and creditworthiness of the creditors to the Assessing Officer. However, the Assessing Authority found discrepancies in the explanations provided by the appellant regarding cash credit entries in the books related to advances and loans. The appellant's explanations regarding the transactions were deemed unsatisfactory, leading to the addition of ?7,00,000. The Commissioner of Income Tax (Appeals) and the Tribunal upheld the assessment order, as the appellant failed to prove the genuineness of the transactions and the creditworthiness of the creditors. The court relied on precedent and concluded that the appellant did not meet the conditions specified under section 68 of the Act. Therefore, the appeal was dismissed in favor of the Revenue and against the Assessee, affirming the addition made under section 68.

In conclusion, the judgment highlighted the importance of proving the genuineness of transactions and the creditworthiness of creditors under section 68 of the Income Tax Act. The court emphasized that the burden of proof lies with the assessee, and failure to meet this burden can lead to additions being made by the Assessing Authority. The decision reinforced the significance of complying with statutory requirements and providing satisfactory explanations during scrutiny proceedings to avoid adverse outcomes in tax assessments.