2019 (9) TMI 1238 - HC - Income Tax

Addition u/s 68 - unsecured cash credit - tribunal upholding the action of the authorities in invoking Section 68 - HELD THAT - The appeal has to fail. The Tribunal noticed that it was very strange that the appellant would keep his entire savings in cash. We further find it strange that if on 16.5.2013, the appellant decided to change his method of saving and put his money in the bank, why he did not put the entire savings in the bank and why he retained a sum of ₹ 2,40,000/- with him in cash. Chiman Lal is admittedly not an income tax assessee, thereby strengthening the view that not only he is not a rich man but he is barely able to make the ends meet. - Decided against assessee.

Summary

Issues:
Delay in re-filing appeal, Invocation of Section 68 of the Income Tax Act, 1961, Proof of creditworthiness and genuineness, Application of deeming provision for additions u/s 68, Capacity to pay, Comparison with a previous judgment.

Delay in re-filing appeal:
The appellant filed an application for condonation of a 45-day delay in re-filing the appeal, which was allowed by the court. The delay was condoned, and the appeal was re-filed successfully.

Invocation of Section 68 of the Income Tax Act, 1961:
The appeal was filed against the order of the Income Tax Appellate Tribunal, which upheld the action of invoking Section 68 of the Income Tax Act, 1961. An amount of ?5,40,000 was added to the income of the assessee based on this section.

Proof of creditworthiness and genuineness:
The case revolved around an employee advancing a sum of ?5,40,000 to the assessee, which was returned with interest within the same year. However, the authorities found discrepancies in the employee's financial transactions, leading to doubts about his creditworthiness. The court concluded that the creditworthiness of the employee was not proved.

Application of deeming provision for additions u/s 68:
The appellant argued that the deeming provision for making additions under Section 68 should not have been applied since the identity, creditworthiness, genuineness, bonafide, and capacity to pay were proven. The court, however, found the appeal to fail based on the evidence presented.

Capacity to pay:
The court questioned the appellant's decision to keep a significant sum of money in cash despite having the option to deposit it in the bank. The financial decisions of the appellant and the employee raised doubts about their capacity to pay, leading to the dismissal of the appeal.

Comparison with a previous judgment:
The appellant cited a previous judgment where credit was given by income tax assesses who could prove the infusion of funds in their banks. The court distinguished the present case from the cited judgment, emphasizing the differences in the facts and circumstances. As a result, the appeal was dismissed based on the unique circumstances of the case.