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Issues Involved:
1. Addition of Rs. 10,000 as cash credit from Shri Laljibhai Manga. 2. Addition of Rs. 40,000 as cash credit from Shri Masri Jivabhai. Detailed Analysis: 1. Addition of Rs. 10,000 as Cash Credit from Shri Laljibhai Manga: The Commissioner (Appeals) had deleted the addition of Rs. 10,000 made by the Income Tax Officer (ITO) on account of a cash credit appearing in the books of the assessee. However, the learned counsel for the assessee conceded that he could not support the order of the Commissioner (Appeals) regarding this deletion. Consequently, the Tribunal had no hesitation in reversing the order of the Commissioner (Appeals) on this point, thereby reinstating the addition of Rs. 10,000 made by the ITO. 2. Addition of Rs. 40,000 as Cash Credit from Shri Masri Jivabhai: The ITO had added Rs. 40,000 to the assessee's income, questioning the genuineness of the cash credit from Shri Masri Jivabhai. The ITO's rationale included discrepancies in the creditor's financial behavior and the improbability of advancing such a loan without documentation. The ITO noted that the creditor had substantial agricultural income but no corroborative evidence, such as bills for crop sales or banking transactions, and had taken a loan of Rs. 12,000 for installing a pipeline, which was inconsistent with having Rs. 40,000 in savings. In appeal, the Commissioner (Appeals) deleted the addition, accepting the assessee's argument that the ITO failed to appreciate the case properly. The Commissioner (Appeals) found that the assessee had produced sufficient evidence to establish the genuineness of the loan and the creditworthiness of the creditor. The department's representative strongly relied on the ITO's order and cited the Bombay High Court decision in Velji Deoraj & Co. v. CIT to argue that the Commissioner (Appeals) should have upheld the addition. The assessee's counsel, however, supported the Commissioner (Appeals)'s decision, arguing that the assessee had discharged the onus by producing the creditor and providing evidence of the loan's genuineness. The Tribunal, after considering the submissions and material on record, upheld the Commissioner (Appeals)'s decision. The Tribunal noted that the assessee had discharged the initial onus by proving the loan's genuineness and the creditor's creditworthiness. The ITO's reliance on irrelevant material, such as the creditor's previous loan for the pipeline, was deemed unjustified. Separate Judgment by Accountant Member: The Accountant Member disagreed with the decision to delete the Rs. 40,000 addition, arguing that the provisions of Section 68 of the Income-tax Act, 1961, required the assessee to provide satisfactory evidence of the cash credit's nature and source. The Accountant Member highlighted several inconsistencies in the creditor's statement, such as the lack of tax assessment, the improbability of saving Rs. 8,000 annually in cash, and the absence of a receipt or promissory note for the loan. The Accountant Member concluded that the Commissioner (Appeals) erred in deleting the addition, as the assessee failed to prove the creditor's capacity to advance the loan and the genuineness of the transaction. Third Member's Decision: The Third Member was called upon to resolve the difference of opinion. The Third Member agreed with the Judicial Member, emphasizing that the assessee had done all in his power to prove the genuineness of the loan. The Third Member noted that the creditor's peculiar financial behavior did not affect the assessee's responsibility to prove the loan's genuineness. The Third Member concluded that the assessee had successfully discharged the onus, and the addition of Rs. 40,000 should not be made to the assessee's income. Conclusion: The appeal was partly allowed, with the addition of Rs. 10,000 reinstated and the deletion of Rs. 40,000 upheld. The matter was referred back to the Bench for proper disposal based on the Third Member's decision.
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