2009 (11) TMI 333 - HC - Income Tax

Cash Credit- In the course of verification of the books of accounts, the Assessing Officer noticed that the assessee had recorded the liability of Rs. 33,50,000 as due to 179 persons. The accounts containing this as cash credits were initially explained by the assessee as amounts due to various suppliers of country materials. However, in appeal before the Commissioner (Appeals), the assessee changed the stand that the amount represented cash borrowed from workers. The Appellate authority called for a remand report from the Assessing Officer. The Assessing Officer reported that claim was bogus. The Tribunal also concluded that the assessee s claim was bogus. Held that- the assessee failed to prove the genuineness of cash credits to the Assessing Officer. However the Commissioner (Appeals) was considerate in giving an opportunity to the assessee to prove cash credit before the officer. However, once again the assessee failed to establish the same before the officer in the course of pendency of appeal before the Commissioner (Appeals), there was no justification for the Tribunal again to remand the matter. The assessment made by the Assessing Officer and confirmed by Commissioner (Appeals) is valid.

Summary

Issues:
Appeal challenging order of remand by Tribunal on grounds of justification.

Analysis:
The respondent, engaged in civil construction work, recorded a liability of Rs.33,50,000 due to 179 persons in the year 2001-02. Initially explained as amounts due to suppliers, later claimed as cash borrowed from workers. The appellate authority sought a remand report from the Assessing Officer, who examined 30 persons, none of whom proved the assessee's case, leading to a report of the claim being bogus. Despite dismissals by the Commissioner of Income-tax (Appeals) and the Tribunal, the matter was remanded again to give the assessee another opportunity. The burden of proof to explain cash credit lies with the assessee, who failed to do so, with the alleged creditors denying advancing any loans. The Tribunal's remand was deemed unjustified, as the assessee had already failed to establish the cash credits, shifting the burden to the Department. The Tribunal's decision was seen as prolonging the process unnecessarily. The High Court allowed the appeal, reversing the Tribunal's order and restoring the initial assessment confirmed in the first appeal.

This judgment highlights the importance of the burden of proof in cases involving cash credits, emphasizing that it lies with the assessee to explain such transactions. The Tribunal's decision to remand the matter despite the assessee's failure to prove the cash credits was considered unjustified, as it shifted the burden to the Department. The Court's ruling serves as a reminder of the necessity for the assessee to substantiate claims and provide evidence to support their case, failing which the burden of proof remains unfulfilled. The judgment reinforces the principle that the burden of proof in tax matters rests with the taxpayer, and failing to discharge this burden can have adverse consequences on the outcome of the case.