1978 (3) TMI 91 - HC - Income Tax

Summary

Issues Involved:
1. Whether the sum of Rs. 3,10,000 is the income of the assessee from undisclosed sources.
2. The burden of proof regarding the genuineness of cash credits in the assessee's books.

Summary:

Issue 1: Income from Undisclosed Sources
The Tribunal examined cash credits in the assessee's books for the assessment year 1963-64, including amounts from Sureka Jute Co., Ram Kumar Chotaria, and Chouthmull Raghulall. The Income-tax Officer (ITO) found that the sources of these credits were not satisfactorily explained. Vidyanand Sureka of Sureka Jute Co. had confessed that his loan transactions were not genuine. Ram Kumar Chotaria's firm had been assessed under section 144 with negligible income, and no one appeared on behalf of Chouthmull Raghulall. The ITO, therefore, treated these amounts as the assessee's income from undisclosed sources. The Appellate Assistant Commissioner (AAC) confirmed these additions, and the Tribunal upheld the ITO's findings, concluding that the assessee had not discharged its burden of proof.

Issue 2: Burden of Proof
The assessee contended that it had discharged its burden by providing confirmatory letters and producing creditors before the authorities. The Tribunal, however, held that the assessee failed to prove the capacity of the creditors to advance the loans and the genuineness of the transactions. The Tribunal noted that Vidyanand Sureka's confession and non-committal statements, the negligible income of Ram Kumar Chotaria, and the insufficient initial cash balance of Chouthmull Raghulall were sufficient grounds to reject the assessee's explanation.

Legal Precedents and Arguments
The assessee's counsel cited several cases, including *Sreelekha Banerjee v. Commissioner of Income-tax* and *Orient Trading Co. Ltd v. Commissioner of Income-tax*, arguing that the primary burden was on the assessee to explain the cash credits, which had been discharged. The revenue's counsel cited *Sriram Jhabarmull (Kalimpong) Ltd. v. Commissioner of Income-tax*, emphasizing that the assessee must prove the identity, capacity, and genuineness of the creditors.

Court's Conclusion
The court concluded that there was material before the Tribunal to sustain the additions. The assessee had only established the identity of the creditors but failed to prove their capacity to advance the loans and the genuineness of the transactions. The court answered the question in the affirmative, in favor of the revenue, and held that the sum of Rs. 3,10,000 was rightly treated as the assessee's income from undisclosed sources.

There was no separate judgment delivered by the judges. The judgment was unanimous, and there was no order as to costs.