1993 (11) TMI 101 - AT - Income Tax

Assessing Officer, Assessment Proceedings, Book Entries, Cash Credits, Natural Justice, Unexplained Money

Summary

Issues Involved:
1. Genuineness of cash credits for assessment years 1982-83 and 1983-84.
2. Interest paid to cash creditors for assessment year 1983-84.
3. Unexplained investments and cash found during the search.
4. Procedural fairness and opportunity for cross-examination.

Detailed Analysis:

1. Genuineness of Cash Credits for Assessment Years 1982-83 and 1983-84:
The primary issue in both appeals was the genuineness of cash credits. The Tribunal examined the cash credits for the assessment years 1982-83 and 1983-84 together due to their interconnected nature.

Assessment Year 1982-83:
- Cash Credits of Rs. 3,80,000: The Tribunal scrutinized the cash credits from five individuals: Sri Ravi Ammayya, Sri Kadiyala Koteswara Rao, Sri Kadiyala Parasuramaiah, Sri Adusumilli Samba Siva Rao, and Sri Nalluri Seshagiri Rao. The Tribunal found the cash credit from Sri Ravi Ammayya to be genuine, supported by corroborative evidence like the demand draft from Tamil Nadu Mercantile Bank and the affidavit from Sri Ravi Ravindranath. However, the cash credits from Sri Kadiyala Koteswara Rao and Sri Kadiyala Parasuramaiah were remanded for verification by a handwriting expert due to conflicting statements and the need to compare specimen signatures.
- Other Cash Credits: The Tribunal found the cash credits from Sri Adusumilli Samba Siva Rao and Sri Nalluri Seshagiri Rao to be genuine based on corroborative evidence and consistent statements.

Assessment Year 1983-84:
- Cash Credits of Rs. 1,81,000: The Tribunal examined six cash credits from Sri Aretla Viplav Kumar, Sri V. Gyaneswar, Sri V. Seetharama Reddy, Sri K.V. Subramanyeswara Rao, Sri Kollipara Venkateswara Rao, and Sri Maganti Gopalakrishnaiah. The Tribunal found discrepancies and lack of supporting evidence for the cash credits from Sri Aretla Viplav Kumar, Sri V. Gyaneswar, and Sri V. Seetharama Reddy, leading to their rejection. The Tribunal also rejected the cash credits from Sri Kollipara Venkateswara Rao, Sri K.V. Subramanyeswara Rao, and Sri Maganti Gopalakrishnaiah due to lack of evidence and conflicting statements.

2. Interest Paid to Cash Creditors for Assessment Year 1983-84:
The Tribunal found that the interest claimed on the cash credits was not substantiated by the evidence provided. The Tribunal observed discrepancies in the repayment dates and the absence of interest claims in the relevant assessment years, leading to the conclusion that the interest payments were not genuine.

3. Unexplained Investments and Cash Found During the Search:
- Unexplained Cash of Rs. 80,000: The Tribunal analyzed the cash found during the search and the explanations provided by the assessee. It accepted the explanations for Rs. 26,000 belonging to Sri K. Gyaneswar, Sri P. Krishna Reddy, and Sri P.S. Jagdish but rejected the explanation for Rs. 50,000 claimed to belong to Smt. V. Sailaja due to lack of supporting evidence. Thus, Rs. 54,000 was added as unexplained income.
- Investment in Bhagyanagar Club: The Tribunal upheld the addition of Rs. 1,20,000 as unexplained investment, rejecting the assessee's claim that the investment was made by others. The Tribunal found inconsistencies in the assessee's statements and lack of evidence to support the claim.

4. Procedural Fairness and Opportunity for Cross-Examination:
The Tribunal addressed the assessee's contention regarding the lack of opportunity to cross-examine the creditors. It held that the assessee had ample opportunity to produce the creditors and request their cross-examination but failed to do so. The Tribunal cited relevant case law to support its decision that the absence of cross-examination did not violate principles of natural justice, especially when the assessee did not discharge the primary onus of proving the genuineness of the cash credits.

Conclusion:
The appeals for assessment years 1982-83 and 1983-84 were partly allowed, with the Tribunal upholding some of the additions made by the Assessing Officer while remanding certain issues for further verification. The Tribunal emphasized the importance of corroborative evidence and consistency in statements to establish the genuineness of cash credits and related transactions.