2015 (3) TMI 809 - HC - Income Tax

Addition under section 68 - assessee failed to prove the genuineness of the transaction - Tribunal deleted addition - Held that - The attempt made to contend that the burden is upon the assessee to prove the identity of the person, creditworthiness of the person and the genuineness of the transaction are to be examined in context to the existence of the person concerned, the factum of actual money in possession of the person and having paid to the asseessee and the mode of payment. Thereafter, if the person concerned is in existence and has actually paid the amount from his account by cheque, it can be said that the initial burden is discharged so far as explanation to be considered under section 68 of the Act. Thereafter, the burden would be upon the revenue to show that either the person was bogus or there was no financial capacity to make the payment and the arrangement of money was artificial or that the money has not passed over and it was only by way of an eye wash. Such could be proved by the Revenue in the present case through the statement of the persons, but unfortunately, they were not made available for crossexamination and therefore, the statements could be used as an evidence against the asseessee. No other evidence was available with the Revenue. Under these circumstances, if the Tribunal has found that the explanation under section 68 of the Act was acceptable in absence of nondischarge of the burden upon the Revenue, such a finding of fact would not call for interference when the appeal before this Court is limited to the substantial questions of law. - Decided in favour of assessee.

Summary

Issues:
- Whether the appellate Tribunal erred in deleting additions made under section 68 of the Income Tax Act without proving the genuineness of the transactions.
- Whether the Tribunal's decision to delete additions of Rs. 70 lakhs and Rs. 2 crores was justified.

Analysis:
1. Issue 1:
- The Revenue challenged the Tribunal's decision to delete additions under section 68 of the Income Tax Act without proving the genuineness of the transactions. The AO added the share money credited in the books as unexplained income due to lack of proof of creditworthiness of the purchaser and subsequent share transfer. The Commissioner (Appeals) upheld this decision.
- The Tribunal noted that the initial burden under section 68 was discharged by the assessee by providing various documents. The Department failed to provide substantial evidence to justify the additions, relying on statements not subject to cross-examination. The Tribunal found these statements inadmissible, leading to the deletion of the additions.
- The Tribunal's decision was based on the lack of substantial evidence from the Revenue to support the additions, as the burden shifted to the Department after the assessee provided necessary documents. The Tribunal emphasized the importance of admissible evidence and the assessee's right to cross-examine witnesses.

2. Issue 2:
- The Revenue argued that the Tribunal erred in accepting the explanation without proving creditworthiness and genuineness of the transactions. They contended that the Tribunal should have considered the lack of proof despite witnesses' unavailability for cross-examination.
- The Tribunal found that the initial burden was discharged by the assessee, and their decision was based on factual findings that could not be challenged unless perverse. The inability to cross-examine witnesses did not affect the Tribunal's decision, as the burden was on the Revenue to disprove the transactions' genuineness.
- The Court upheld the Tribunal's decision, emphasizing that once the initial burden is met by the assessee, the Revenue must provide concrete evidence to challenge the explanation. In this case, the Revenue failed to do so, leading to the deletion of the additions.

3. Conclusion:
- The Court dismissed the appeals, stating that no substantial question of law arose from the Tribunal's decision. The burden of proof under section 68 was correctly analyzed by the Tribunal, and the lack of substantial evidence from the Revenue justified the deletion of the additions. The Court affirmed the importance of factual findings and the burden of proof in such tax matters.