2019 (9) TMI 1061 - AT - Income Tax

Addition of unexplained cash deposits u/s 68 - onus to prove - HELD THAT - Onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessed nor should the AO take such repudiation at face value and construe it, without more, against the assessed. AO is duty-bound to investigate the creditworthiness of the creditor/subscriber the genuineness of the transaction and the veracity of the repudiation. Appellant has not been able to discharge even the basic onus to prove the genuineness of cash credits in his bank accounts. Therefore, in my considered view when the existence of the source of such cash deposits is not proven then the AO is fully justified in treating such cash deposits as unexplained and liable to be taxed. We find that the finding of the AO as well as the ld. CIT(A) is based on the specific facts detected during the enquiry conducted by the AO whereas the assessee has failed to produce any evidence which can be independently verified in support of his claim - Decided against assessee.

Issues Involved:
1. Confirmation of addition of ?8,62,66,333/- as unexplained income.
2. Failure to prove genuineness of cash credit in the bank account.
3. Ignoring the claim that cash deposits were from sale proceeds.
4. Non-production of parties involved in transactions.

Detailed Analysis:

1. Confirmation of Addition of ?8,62,66,333/- as Unexplained Income:
The primary issue in this appeal is the confirmation of the addition of ?8,62,66,333/- by the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] as unexplained income. The AO received information from the Investigation Wing, Kolkata, regarding the assessee's cash deposits in various bank accounts and reopened the assessment under Section 148 of the Income Tax Act. The AO conducted an enquiry and concluded that the deposits were unexplained, as the alleged transactions of fabric trading were found to be non-existent. The CIT(A) upheld this addition, noting that the assessee failed to provide substantial evidence to prove the genuineness of these deposits.

2. Failure to Prove Genuineness of Cash Credit in the Bank Account:
The AO and CIT(A) held that the assessee failed to prove the genuineness of the cash credits. The assessee claimed that the deposits were from the sale proceeds of fabrics, but could not produce credible evidence to substantiate this claim. The AO issued commissions to the Investigation Wing, Kolkata, which reported that the parties involved in the transactions were not found at the given addresses. This led to the conclusion that the transactions were bogus, and the deposits were treated as unexplained income.

3. Ignoring the Claim that Cash Deposits were from Sale Proceeds:
The assessee argued that the cash deposits were from the sale proceeds of fabrics, which were reflected in the trading and profit & loss accounts. However, the AO found discrepancies in the confirmations provided by the parties and noted that there were no details or particulars of the purchasers. The CIT(A) observed that the assessee's claim of achieving a turnover of over ?13 crores in a short period, without any fixed assets or significant expenses, was not credible. The AO's enquiry revealed that the alleged transactions did not take place, leading to the rejection of the assessee's claim.

4. Non-Production of Parties Involved in Transactions:
The assessee failed to produce the parties involved in the transactions for verification. The AO issued notices under Section 133(6) of the Act, which were returned with remarks indicating that the parties did not exist at the given addresses. The CIT(A) noted that the assessee did not avail the opportunity to produce these parties during the assessment proceedings. This failure to substantiate the transactions with credible evidence led to the confirmation of the addition as unexplained income.

Conclusion:
The appellate tribunal upheld the findings of the AO and CIT(A), confirming the addition of ?8,62,66,333/- as unexplained income. The tribunal noted that the assessee failed to provide substantial evidence to prove the genuineness of the cash credits and the existence of the transactions. The appeal was dismissed, and the order was pronounced in the open court on 07/08/2019.

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