1987 (7) TMI 163 - AT - Income Tax

Summary

Issues Involved:
1. Justification of the addition of Rs. 1,00,000 as unexplained cash credits by the Income-tax Officer.
2. Burden of proof regarding the genuineness of cash credits.
3. Evaluation of evidence presented by both the assessee and the Income-tax Officer.
4. The relevance of previous similar transactions in determining the genuineness of current transactions.

Detailed Analysis:

1. Justification of the Addition of Rs. 1,00,000 as Unexplained Cash Credits:
The primary issue revolves around whether the addition of Rs. 1,00,000 made by the Income-tax Officer as unexplained cash credits is justified. The Income-tax Officer identified cash credits in the name of Ibrahim Haji Shakoor of Akola on two dates: Rs. 75,000 on 16-4-1981 and Rs. 25,000 on 10-5-1981. The peculiarity was that on the dates the cheques were issued, there were insufficient funds in the creditor's bank account. Funds were deposited just before the cheques were presented for encashment, raising suspicions about the genuineness of these transactions.

2. Burden of Proof Regarding the Genuineness of Cash Credits:
The Commissioner deleted the addition, stating that the assessee had established the identity of the creditor, who accepted having advanced the loans. Thus, the burden shifted to the department to disprove the claim. However, the department contended that the burden is on the assessee to prove the genuineness of the cash credit, not just the identity of the creditor. The department cited the Calcutta High Court's decision in Shankar Industries v. CIT and the Supreme Court's decision in CIT v. Durga Prasad More, emphasizing that the evidence must be reasonable and acceptable, judged by the test of human probabilities.

3. Evaluation of Evidence Presented by Both the Assessee and the Income-tax Officer:
The Tribunal analyzed the evidence, noting several suspicious features:
- The creditor's bank account had insufficient funds when the cheques were issued, with funds deposited just before encashment.
- The creditor did not have business connections in Hyderabad, making it unlikely he traveled there just to deposit funds.
- The amounts were repaid by bearer cheques encashed by the assessee's accountant, indicating the money might have returned to the assessee.
- The creditor's bank account did not reflect receipt of such amounts, and the books maintained were in the nature of a memorandum, lacking proper entries and dates.

The Tribunal concluded that these factors collectively indicated that the loans were not genuine. The evidence, when viewed cumulatively, suggested that the transactions were not bona fide.

4. Relevance of Previous Similar Transactions in Determining the Genuineness of Current Transactions:
The Commissioner referred to a similar credit in the previous assessment year, accepted by the department as genuine. However, the Tribunal noted that the facts were different in that case, involving a demand draft from Bombay by Ratan Lal Company. The Tribunal held that acceptance of a credit in one year does not prevent the department from making further inquiries in subsequent years. The Tribunal restored the Income-tax Officer's order, finding it reasonable based on the facts and circumstances.

Conclusion:
The Tribunal allowed the departmental appeal, restoring the Income-tax Officer's addition of Rs. 1,00,000 as unexplained cash credits. The Tribunal emphasized that the burden of proof lies with the assessee to establish the genuineness of the cash credits, and the evidence presented did not sufficiently discharge this burden. The cumulative effect of the suspicious features and lack of proper evidence led to the conclusion that the loans were not genuine.