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2019 (6) TMI 1007 - HC - Income TaxUnexplained cash credit u/s 68 - genuineness of the cash credits - HELD THAT - Assessee as well as the creditor had offered their explanations. The creditor had explained his source of income, the transactions were effected through bank, which fact was substantiated by producing a certificate from the bank. It was in such circumstances that the CIT (Appeals) and the ITAT found that the assessee had established the identity of the creditor, source for the credit and genuineness of the transaction. Department had accepted a similar explanation offered in the previous assessment year assume relevance in the above context. Further, the Settlement Commission had also held similar cash transactions during the previous years to be genuine. Finding of the AO is that the assessee had not proved the credits by producing satisfactory evidence regarding the capacity of the remitter to advance the money and that the wife of the remitter being a partner in Chandragiri Construction, the proper course was to credit the amount in the capital account of the wife or to show the same as a loan from the creditor. A careful reading of the decision in Mohanakala 2007 (5) TMI 192 - SUPREME COURT shows that even after rejecting the explanation given by the assessee, the assessing authority should consider the crucial aspect as to whether on the facts and circumstances of the case it could be inferred that the sums credited in the books of the assessee. As far as the instant case is concerned, both CIT(Appeals) as well as the ITAT had found the assessee to have discharged his burden of explaining the genuineness of the cash credits in his account by providing confirmation from the creditor regarding remittance and the source of funds and certificate from the assessee's bank. The explanation offered by the assessee, coupled with the fact that a similar explanation regarding remittances during the previous year was accepted by the Assessing Officer and similar remittances during the period prior had been accepted by the Settlement Commission, had weighed with the CIT(Appeals) and the ITAT. - Decided against revenue.
Issues Involved:
1. Legality of the finding that the assessee had offered a satisfactory explanation about the nature and source of the sums credited in his account. 2. Whether the Tribunal was correct in law in deleting the unexplained cash credits without indicating the nature of receipts. 3. Relevance of the Settlement Commission's order in determining the genuineness of the credit. 4. Whether the ITAT should have considered the case in light of alleged fraud and misrepresentation. 5. Whether the assessee discharged the burden of proof regarding the cash credits. 6. Whether the deletion of the addition by the ITAT was perverse against all canons of law and procedure. Detailed Analysis: 1. Legality of the finding that the assessee had offered a satisfactory explanation about the nature and source of the sums credited in his account: The court examined Section 68 of the Income Tax Act, which requires the assessee to offer an explanation about the nature and source of any credit found in their books. The assessee provided explanations and documents, including a confirmation letter from the bank and details from the creditor, Dr. K.P. Ali. The CIT (Appeals) and ITAT found that the assessee had established the identity of the creditor, the source of the credit, and the genuineness of the transaction. The court upheld these findings, noting that the explanation offered by the assessee was satisfactory and that the department had accepted similar explanations in previous assessment years. 2. Whether the Tribunal was correct in law in deleting the unexplained cash credits without indicating the nature of receipts: The Tribunal found that Section 68 would only be attracted if the assessee offered no explanation or if the explanation was unsatisfactory. In this case, the assessee had provided sufficient evidence to establish the identity of the creditor, the source of the funds, and the genuineness of the transaction. The Tribunal concluded that the assessee had discharged the initial burden required by law, and thus, the deletion of the cash credits was justified. 3. Relevance of the Settlement Commission's order in determining the genuineness of the credit: The Tribunal considered a previous decision by the Settlement Commission, which had accepted similar cash transactions during earlier years as genuine. This precedent supported the assessee's case, reinforcing the credibility of the transactions in question. The court agreed with the Tribunal's reliance on this order, noting that it added weight to the assessee's explanation. 4. Whether the ITAT should have considered the case in light of alleged fraud and misrepresentation: The revenue argued that the ITAT should have taken into account allegations of fraud and misrepresentation, as well as the assessee's admission of operating undisclosed bank accounts. However, the court found that the CIT (Appeals) and ITAT had already considered all relevant facts and circumstances, including the previous acceptance of similar explanations. The court held that the findings of fact by the lower authorities were not perverse and did not warrant interference. 5. Whether the assessee discharged the burden of proof regarding the cash credits: The court cited the Supreme Court's decision in Commissioner of Income Tax, Orissa v Orissa Corporation (P) Ltd., which held that providing the names and addresses of creditors can discharge the assessee's burden of proof. In this case, the assessee provided detailed information about the creditor and the source of funds. Both the CIT (Appeals) and ITAT found this evidence satisfactory, and the court upheld their conclusion. 6. Whether the deletion of the addition by the ITAT was perverse against all canons of law and procedure: The court determined that the deletion of the addition was not perverse. The CIT (Appeals) and ITAT had carefully considered the evidence and found the assessee's explanation credible. The court noted that the opinion of the Assessing Officer must be based on a proper appreciation of material and circumstances, and in this case, the lower authorities had applied their minds appropriately. Consequently, the court dismissed the appeal, finding no substantial question of law for consideration. Conclusion: The appeal was dismissed, with the court upholding the findings of the CIT (Appeals) and ITAT that the assessee had provided a satisfactory explanation for the cash credits in question. The court found no reason to interfere with the conclusions reached by the lower authorities, noting that they were based on a proper evaluation of the evidence and circumstances.
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