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2012 (4) TMI 243 - HC - Income TaxWhether I.T.A.T was justified in upholding CIT (A) s order deleting the additions made u/s. 68 by AO, when the creditors have no creditworthiness to advance the loans - The CIT (A) observed that all the creditors appeared before the AO and their statements were recorded on oath and all of them have affirmed the fact of giving the said loans to the assessee.They had also indicated their source and financial capacity for making the impugned deposits with the assessee explaining the details of repayment of the deposits or interest to them by the assessee - CIT further held that the A.O. disbelieved the depositions made by the creditors and substituted his own personal presumptions to conclude that the creditors did not have adequate sources to make the said deposits - Held that - AO without conducting local enquiries or collecting material evidence on record proved the statements of the creditors as false - thus, the finding of the CIT(A) that the observation of the A.O. with regard to dissatisfaction was on the basis of surmises and conjectures, is just and proper - the findings recorded by the CIT(A) and affirmed by the I.T.A.T. are based on proper appreciation of facts and are not perverse, being correlated with each and every transaction. Thus, the issue is purely question of facts appeal dismissed.
Issues:
1. Validity of assessment order under Section 260-A of the Income Tax Act, 1963. 2. Addition of unexplained cash credit under Section 68 of the I.T. Act in the Assessment Year 1990-91. 3. Justification of upholding CIT(A)'s order deleting additions made under Section 68. 4. Application of mind by the Assessing Officer regarding creditworthiness of creditors. Issue 1: Validity of Assessment Order The appeal arose from an order passed by the Income Tax Appellate Tribunal (I.T.A.T.) in 1990-91. The original assessment was set aside by the Commissioner of Income Tax (CIT) in 1997, leading to subsequent orders and appeals. The High Court quashed the I.T.A.T.'s order of 1999, restoring the CIT's order of 1997. The Assistant Commissioner of Income Tax added a sum under Section 68 in 1999, which was later deleted by the CIT(A). The revenue appealed, leading to the I.T.A.T. observing that the Assessing Officer did not apply judicious mind, and the addition deserved deletion. Issue 2: Addition of Unexplained Cash Credit The Assessing Officer added a sum under Section 68 due to creditors' lack of creditworthiness. However, the CIT(A) found that the creditors had proven their capacity and transactions, discharging the assessee's burden. The CIT held that the Assessing Officer had not conducted proper inquiries or collected evidence, making the addition unsustainable. The I.T.A.T. concurred that the Assessing Officer did not apply judicious mind, leading to the deletion of the addition. Issue 3: CIT(A)'s Order Deletion The CIT(A) observed that all creditors had proven their creditworthiness, source of income, and transactions. The Assessing Officer's disbelief in creditors' statements without proper verification was deemed unjust. The CIT(A) held that the assessee had satisfactorily explained the cash credits, discharging the burden under Section 68. The I.T.A.T. found that the Assessing Officer's rejection lacked valid reasons, leading to the deletion of the addition. Issue 4: Application of Mind by Assessing Officer The Assessing Officer's failure to conduct proper inquiries and accept creditors' statements led to the deletion of the addition under Section 68. The CIT(A) and I.T.A.T. found the Assessing Officer's conclusions unjust and not based on proper evidence. The High Court affirmed the findings, stating that the issue was purely a question of facts. The appeal was dismissed for lacking merit. ---
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