2022 (12) TMI 1168 - HC - Income Tax

Addition u/s 68 - genuineness and credit worthiness of the transaction in question - HELD THAT - Under Section 68 of the Income Tax Act, if any sum is found credited in the Books of account of the assessee and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not satisfactory in the opinion of the Assessing Officer, the sum so credited may be charged to income tax as to the income of the assessee of that previous year. Therefore, what has to be inquired into by the AO is about the nature and source of the deposit. If the explanation with regard to the nature and source is found unsatisfactory, only then the amount so credited may be treated is income. It is evident that the assessee though has disclosed the source of the deposit but could not establish the nature thereof. Three conditions which are required to be proved by the Assessee as per Section 68 of the Income Tax Act, 1961, could not be proved by him. The burden would, therefore, not shift on the revenue, as the assessee has failed to discharge her burden. The assessee has failed to prove the transaction as per Section 68 - No substantial question of law, arises in the instant appeal for consideration.

Summary

Issues: Amendment Application, Nature and Source of Deposit, Burden of Proof under Section 68 of the Income Tax Act, 1961, Failure to Prove Transaction, Substantial Question of Law

Amendment Application:
The judgment begins with an Amendment Application seeking to amend the substantial question of law framed in the memo of appeal. The court notes that the application is formal in nature, and no objection is raised by the respondent's counsel. Consequently, the court allows the amendment, directing the necessary changes to be made.

Nature and Source of Deposit - Burden of Proof under Section 68 of the Income Tax Act, 1961:
The crux of the judgment revolves around Section 68 of the Income Tax Act, which deals with unexplained cash credits. The court emphasizes that if a sum is found credited in the assessee's account without a satisfactory explanation, it may be charged as the assessee's income. The burden lies on the assessee to prove the nature and source of the deposit. Referring to a previous case, the court highlights the three conditions the assessee must establish: identity of the creditor, capacity to advance money, and genuineness of the transaction. If these conditions are not met, the burden does not shift to the revenue. In this case, despite disclosing the source of the deposit, the assessee failed to establish its nature, leading to the burden not shifting to the revenue.

Failure to Prove Transaction - Substantial Question of Law:
The court finds that the assessee could not prove the transaction as required under Section 68 of the Income Tax Act, 1961. Consequently, no substantial question of law arises for consideration. The court dismisses the appeal, stating that the appellant's reliance on previous judgments does not benefit the case. The judgment underscores that the appellant's plea regarding the disclosure of income source, creditworthiness, and transaction genuineness could not be substantiated. Ultimately, the court finds no merit in the appeal and dismisses it accordingly.

In conclusion, the judgment delves into the intricacies of burden of proof under Section 68 of the Income Tax Act, emphasizing the importance of establishing the nature and source of deposits to avoid them being treated as income. The court's analysis underscores the significance of meeting the statutory requirements and evidentiary standards to shift the burden of proof effectively.