2004 (10) TMI 21 - HC - Income Tax

Cash credits - assessee had failed to discharge the burden which lay upon it to prove the genuineness of the credits shown in its account - therefore, it is not possible to agree with learned counsel that the Assessing Officer had illegally made additions to the income of the assessee - findings recorded by the CIT (A) and the Tribunal are pure findings of fact & none of the questions raised by assessee can be treated as question of law requiring opinion of this court - petition is dismissed

Issues Involved:
1. Sustaining the addition of Rs. 38,518 as the income of the assessee.
2. Justification of the addition despite the statement confirming the credits.
3. Interpretation of Section 68 of the Income-tax Act.
4. Use of statements recorded behind the back of the assessee.
5. Sustaining the additions in the accounts of Smt. Kamlesh and Smt. Krishna.
6. Assessment of credits aggregating to Rs. 98,025 as the income of the assessee.
7. Investment by the creditors being assessed as the income of the assessee under Section 68.
8. Justification of the addition of Rs. 98,025 under Section 68.
9. Relationship between Sections 68 and 69 of the Income-tax Act.
10. Impact of creditors being assessed under regular provisions versus the amnesty scheme.

Detailed Analysis:

1. Sustaining the addition of Rs. 38,518 as the income of the assessee:
The Tribunal upheld the addition of Rs. 38,518 credited in the account of Shri Dalip Singh, citing the lack of genuineness in the credit. Despite the identity and source of income being agricultural, the pattern of deposits and withdrawals indicated that the credit was not genuine.

2. Justification of the addition despite the statement confirming the credits:
The Tribunal noted discrepancies in the statements and the behavior of transactions, such as small deposits and withdrawals, which suggested that the credits were not genuine. The Tribunal emphasized that the creditworthiness alone was insufficient without evidence of sufficient funds at the time of the transaction.

3. Interpretation of Section 68 of the Income-tax Act:
The Tribunal interpreted Section 68 to mean that the assessee must not only prove the identity and creditworthiness of the creditor but also the genuineness of the transaction. The pattern of deposits and withdrawals failed to establish the genuineness of the credits.

4. Use of statements recorded behind the back of the assessee:
The Tribunal considered the statements and evidence presented, including those recorded without the assessee's knowledge. The Tribunal found no effort by the assessee to challenge these statements, thus upholding the addition based on cumulative evidence.

5. Sustaining the additions in the accounts of Smt. Kamlesh and Smt. Krishna:
The Tribunal upheld the additions of Rs. 49,316 and Rs. 48,709 in the accounts of Smt. Kamlesh and Smt. Krishna, respectively. Despite their statements confirming the credits, discrepancies and lack of evidence supporting their income from tailoring and knitting led to the conclusion that the credits were not genuine.

6. Assessment of credits aggregating to Rs. 98,025 as the income of the assessee:
The Tribunal found that the assessee failed to prove the genuineness of the credits aggregating to Rs. 98,025. The cumulative discrepancies and lack of credible evidence supported the addition as income from undisclosed sources.

7. Investment by the creditors being assessed as the income of the assessee under Section 68:
The Tribunal held that the investment by Smt. Kamlesh and Smt. Krishna, despite being assessed in their hands, was rightly added to the assessee's income under Section 68 due to the lack of genuine evidence supporting the credits.

8. Justification of the addition of Rs. 98,025 under Section 68:
The Tribunal justified the addition of Rs. 98,025 under Section 68, emphasizing that the credits in the assessee's books were not genuine and the burden of proof was not discharged by the assessee.

9. Relationship between Sections 68 and 69 of the Income-tax Act:
The Tribunal found that Section 68 was applicable in this case, and the addition was justified under this section. The provisions of Section 68 were not overridden by Section 69.

10. Impact of creditors being assessed under regular provisions versus the amnesty scheme:
The Tribunal noted that the creditors were assessed under regular provisions, not the amnesty scheme, but this did not impact the genuineness of the credits. The lack of credible evidence and the pattern of transactions led to the addition being upheld.

Conclusion:
The petition was dismissed as the assessee failed to prove the genuineness of the credits. The Tribunal's findings were based on pure appreciation of evidence, and no substantial questions of law arose for determination by the court. The additions made by the Assessing Officer were upheld, and the Tribunal's decision was found to be justified.

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