1996 (1) TMI 150 - AT - Income Tax

Summary

Issues:
- Addition of Rs. 1.50 crores made on account of cash credits in the names of two creditors deleted by CIT(A)
- Genuineness of cash credits from M/s Prakash Cotton Mills Pvt. Ltd. and M/s Amarchand Dharamchand questioned
- Lack of evidence regarding the transfer of money from Delhi to Bombay

Analysis:
The case involved an appeal by the Department against the CIT(A)'s order deleting the addition of Rs. 1.50 crores made on account of cash credits in the names of two creditors, M/s Prakash Cotton Mills Pvt. Ltd. and M/s Amarchand Dharamchand. The Department contended that the creditworthiness of the creditors was not proven and details of the transfer of money from Delhi to Bombay were not provided by the assessee.

The facts revealed that cash credits totaling Rs. 1.50 crores appeared in the books of the assessee, allegedly received from the two creditors. The ITO raised concerns about the genuineness of the transactions and requested confirmation letters and details of the money transfer. The assessee explained that the confusion in entries was due to a misunderstanding by the accountant and that the money was not immediately utilized.

The CIT(A) deleted the addition based on supporting evidence from the books of account of the creditors and the bank accounts. The CIT(A) emphasized that the assessee had proven the nature and source of the credits, leading to the deletion of the addition by the ITO.

However, upon further review, the Tribunal found that the assessee failed to provide concrete evidence regarding the transfer of money from Delhi to Bombay. The Tribunal noted the absence of details on how the money was brought to Bombay and the failure to account for travelling expenses. The Tribunal concluded that the genuineness of the transaction was not proven, casting doubt on the actual receipt of money in Bombay.

Ultimately, the Tribunal reversed the CIT(A)'s decision and reinstated the addition of Rs. 1.50 crores as the assessee's income. The Tribunal highlighted the lack of evidence regarding the transfer of money, the failure to recall essential details, and the absence of accounting for travelling expenses as factors leading to the decision.

In conclusion, the Tribunal's decision emphasized the importance of proving the genuineness of transactions and providing concrete evidence to support claims, especially in cases involving substantial amounts of money and complex financial transactions.