2014 (2) TMI 995 - HC - Income Tax

Addition u/s 68 of the Act Burden to prove Furnishing of Satisfactory explanation - Whether the Tribunal fall into an error in holding that the assessee had not discharged the initial onus cast upon it under Section 68 and furnishing satisfactory explanation Held that - There is no need for any authority for the proposition that the scope of enquiry of lower authority or Court in the face of a remand is confined to the points required of it to return a finding - Having regard to this aspect, once the Tribunal had spelt out what was expected of the assessee, it was not now open for the latter to contend that the requirement was unreasonable - The assessee did not appeal against the remand nor seek dilution of points on which the Tribunal recollected finding after due enquiry - it is now not open for the assessee to state that even though it could afford explanations by way of affidavits of the two individuals and the foreign national, its inability to secure any confirmation or documentary proof in support of its contention that the two foreign remitters did not have any independent transaction carries no consequence - Since the aspect goes to the root of the second requirement under Section 68 - the genuineness of the transaction by the assessee cannot be said to have been shown by it in discharge of the initial burden placed on it by Section 68 of the Income Tax Act Decided against Assessee.

Summary

Issues Involved:
1. Whether the assessee discharged the initial onus under Section 68 of the Income Tax Act.
2. The genuineness of the transactions and the identity of the remitters.
3. The adequacy of the evidence provided by the assessee to substantiate the credit entries.

Detailed Analysis:

1. Whether the assessee discharged the initial onus under Section 68 of the Income Tax Act:
The primary issue was whether the assessee had discharged the initial onus cast upon it under Section 68 of the Income Tax Act by providing a satisfactory explanation for the total amount of Rs. 29,70,900/-. The Assessing Officer (AO) noted that the assessee received two amounts from two Non-Resident Indians (NRIs) but found discrepancies as the remittances were made by two companies, not individuals. The AO treated these as unexplained and brought them to tax under Section 68. The CIT initially deleted the additions based on the sale deed evidence, but the Tribunal remanded the matter for further consideration. The Tribunal later found that the assessee failed to provide a satisfactory explanation, leading to the restoration of the AO's order.

2. The genuineness of the transactions and the identity of the remitters:
The assessee argued that the amounts were received for purchasing land on behalf of the NRIs, supported by sale deeds and affidavits. However, the AO and Tribunal were not convinced about the genuineness of the transactions due to the lack of evidence linking the remitting companies to the individuals. The Tribunal emphasized that the remand was specifically to establish the link between the remitters and the purchasers, which the assessee failed to do. The Court noted that the identity of the investor and the genuineness of the transaction are crucial under Section 68, and the assessee did not meet these requirements satisfactorily.

3. The adequacy of the evidence provided by the assessee to substantiate the credit entries:
The assessee provided affidavits from the purchasers and a facilitator but failed to secure confirmations from the remitting companies. The Tribunal and the Court found this evidence insufficient. The Court highlighted that the remand order required the assessee to prove the ownership or substantial shareholding of the remitting companies by the individuals, which was not done. The Court concluded that the assessee did not discharge the initial burden under Section 68, as the missing link in the chain of transactions was not established.

Conclusion:
The appeal was dismissed, and the Court upheld the Tribunal's decision, emphasizing that the assessee failed to provide a satisfactory explanation for the credit entries as required under Section 68. The Court noted that the genuineness of the transactions and the identity of the remitters were not adequately proven, and the evidence provided was insufficient to meet the statutory requirements.