2023 (7) TMI 1258 - AT - Income Tax

Addition u/s 68 - Unexplained cash deposits - ingenuineness of the transactions noting that the three parties had issued cheques to the assessee for advances made from cash deposited in their accounts immediately before the cheques were issued - HELD THAT - Cash deposits were attributed to loans taken from several farmers who were never verified to the AO - improbability of so many farmers giving loans to these persons was clearly made out by the AO pointing out that all these farmers are residing at a far away Taluka Gondal and had come to Rajkot apparently to open a bank account and to make these cash deposits only for advancing it to these persons. Their bank accounts were also found to be opened in the same bank where these depositors had bank accounts. Even the person introducing the farmers was found to be the director of the assessee-company. The preponderance of probability of such circumstances clearly is that the genuineness of the advances was clearly not established as rightly held by the AO. Advances made to the assessee were suspect and the assessee having failed to discharge its onus of clearing all these suspicions in any whatsoever - be it by producing parties for confirmation or the farmers for confirmation, the AO, we hold that, has rightly held that the cash deposits were unexplained. We, therefore, see no reason to interfere with the order of the learned CIT(A) confirming the addition - Decided against assessee.

Issues Involved:

1. Legality of the order passed under Section 144 of the Income Tax Act.
2. Confirmation of the determined income of Rs. 51,95,100/- against the returned income of Rs. 2,860/-.
3. Specific additions made under Section 68 of the Act for unexplained cash credits from various parties.
4. Charging of interest under Sections 234B and 234C of the Act.
5. Adequacy of opportunity provided to the assessee during the assessment and appeal proceedings.
6. Double taxation of the same income in the hands of the assessee and the creditors.

Detailed Analysis:

1. Legality of the Order Passed Under Section 144:

The assessee contested the legality of the order passed under Section 144 of the Income Tax Act. The order was initially passed on 30.03.2000, determining the total income at Rs. 31,90,204/-. The CIT(A) set aside the additions and directed re-examination. The Assessing Officer (AO) then passed another order on 08.03.2002, enhancing the addition to Rs. 49,30,000/-. This order was also contested and eventually, the ITAT restored the matter to the AO for reconsideration. The AO reconfirmed the additions in the absence of any information submitted by the assessee. The Tribunal found that the assessee had failed to produce necessary evidence and did not cooperate during the assessment proceedings, leading to the order under Section 144.

2. Confirmation of Determined Income:

The AO determined the income at Rs. 51,95,100/- against the returned income of Rs. 2,860/-. This determination included additions under Section 68 for unexplained cash credits. The Tribunal noted that the assessee had not provided adequate evidence to support its claims, leading to the confirmation of the determined income.

3. Additions Under Section 68 for Unexplained Cash Credits:

The primary issue was the addition of cash credits from three parties: Shri H.K. Kesaria (HUF), Shri Bharat P. Shingala, and Shri Maganlal H. Padalia. The AO found these deposits to be unexplained due to the following reasons:
- Huge cash deposits were made in the bank accounts of the depositors immediately before issuing cheques to the assessee.
- The depositors had minimal initial balances and could not substantiate the source of the cash deposits.
- The depositors claimed to have received loans from farmers, but no farmers were produced for verification.

The AO concluded that the transactions were not genuine, and the cash credits were treated as unexplained under Section 68. The Tribunal upheld this view, noting the improbability of the circumstances and the failure of the assessee to discharge its onus of proving the genuineness of the transactions.

4. Charging of Interest Under Sections 234B and 234C:

The assessee contested the charging of interest under Sections 234B and 234C. However, the Tribunal did not find merit in these contentions due to the lack of evidence and cooperation from the assessee during the assessment proceedings.

5. Adequacy of Opportunity Provided:

The assessee argued that it was not provided with adequate opportunity during the assessment and appeal proceedings. The Tribunal noted that multiple opportunities were given to the assessee to present evidence and produce witnesses, but the assessee failed to comply. Therefore, the Tribunal found no merit in this contention.

6. Double Taxation:

The assessee claimed that the same amounts had been taxed in the hands of the creditors and should not be taxed again in its hands. However, the Tribunal found no substantiation for this claim, as no assessment orders of the creditors were provided. Hence, this contention was also rejected.

Conclusion:

The Tribunal dismissed the appeal of the assessee, confirming the addition of Rs. 49,30,000/- as unexplained cash credits under Section 68 and upholding the order passed under Section 144. The Tribunal found that the assessee had failed to provide necessary evidence and did not cooperate during the proceedings, leading to the confirmation of the determined income and the charging of interest under Sections 234B and 234C.

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