2010 (8) TMI 59 - HC - Income Tax

Unexplained cash credit - The Assessing Officer came to the conclusion that the two persons could not show their creditworthiness and therefore made additions of Rs. 2, 26, 592 as unexplained cash credit. Certain other additions were also made which included unexplained income of Rs. 37, 550 and capital gain to the extent of Rs. 35, 000 - Held that - It is clear from the amounts of gifts that these are small amounts given by the relatives - findings of the Tribunal are totally perverse as the cogent and supportive evidence is not looked into or considered. The aforesaid evidence clinches the issue in favour of the assessee who had duly explained the cash received in the accounts of Mrs. Yojana Garg and Mr. Rajiv Garg from where the payments were made - decided in favor of assessee

Summary

Issues:
1. Whether the order adding unexplained cash credits to the appellant's assessment is erroneous and illegal?
2. Whether the additions made by the Assessing Officer were justified?

Analysis:

Issue 1: Unexplained Cash Credits
The appellant, an Ex. Service Man, had instructed his sister and brother-in-law to make payments for a flat he was allotted. The Assessing Officer added &8377; 2,26,592 as unexplained cash credit, alleging lack of creditworthiness of the payers. The Tribunal sustained this addition along with other amounts. The appellant contended that the payments were made from gifts received by his sister and brother-in-law. Affidavits and bank statements were submitted to support this claim. The High Court found the Tribunal's findings to be perverse as it did not consider the evidence provided. The Court noted the small amounts of the gifts and the supporting bank statements, concluding in favor of the appellant and deleting the &8377; 2,26,592 addition.

Issue 2: Unexplained Income and Capital Gain
Regarding the addition of &8377; 37,550 as unexplained income, the Tribunal's decision was upheld as the amount remained unexplained by the appellant. The Court found no reason to interfere with this finding. As for the capital gain, the appellant did not contest its addition, and it was not pressed in the appeal. The Court allowed the appeal partly, deleting the addition of &8377; 2,26,592 as unexplained cash credit while upholding the addition of &8377; 37,550 as unexplained income. The penalty proceedings initiated by the Assessing Officer were expected to be dropped following the deletion of most additions.