2025 (3) TMI 1274 - AT - Income Tax

Unexplained cash credit u/s 68 - onus to prove - HELD THAT - As examined all the evidences as placed before us and observe that the assessee has discharged the burden by furnishing all the documents before the authorities below and therefore provisions of section 68 can not be invoked. The case of the assessee is squarely covered by the decisions of Orient News Prints Ltd 2018 (11) TMI 396 - SC ORDER M/S ADAMINE CONSTRUCTION PVT. LTD. 2018 (9) TMI 1861 - SC ORDER and M/S. HIMACHAL FIBERS LTD. 2018 (8) TMI 873 - SC ORDER Thus where the assessee has discharged the onus by furnishing all the evidences and AO has not conducted any enquiry then no addition can be made u/s 68 - Decided in favour of assessee.

Summary

ISSUES PRESENTED and CONSIDERED

The primary issue considered in this judgment is whether the addition of Rs. 90,00,000/- as unexplained cash credit under Section 68 of the Income Tax Act, 1961, was justified. The court also considered whether the delay in filing the appeal by the assessee should be condoned.

ISSUE-WISE DETAILED ANALYSIS

Condonation of Delay

Relevant legal framework and precedents: The court considered the principles applicable to the condonation of delay, which generally require a demonstration that the delay was due to a reasonable cause and not attributable to the negligence of the appellant.

Court's interpretation and reasoning: The court noted that the delay was due to the appellate order being sent to an outdated email address, despite the assessee having updated their email information on the e-filing portal and in the appeal form. The court found that the delay was not attributable to the assessee.

Key evidence and findings: The evidence presented included the updated email details on official records and the fact that the notices were sent to an old email address.

Application of law to facts: The court applied the principle that delays not attributable to the appellant should be condoned, especially when due diligence was exercised in updating contact information.

Treatment of competing arguments: The Revenue opposed the condonation, arguing that the notices were sent to the email on record. However, the court found that the email used was outdated and thus condoned the delay.

Conclusions: The court concluded that the delay in filing the appeal should be condoned as it was not due to the fault of the assessee.

Unexplained Cash Credit under Section 68

Relevant legal framework and precedents: Section 68 of the Income Tax Act pertains to unexplained cash credits, requiring the assessee to provide satisfactory explanations for any sums credited in their books. The court referenced several precedents, including decisions by the Hon'ble Apex Court, which establish that if the assessee provides sufficient evidence, the burden shifts to the Assessing Officer to conduct further inquiries.

Court's interpretation and reasoning: The court found that both the Assessing Officer and the CIT(A) failed to adequately examine the evidence provided by the assessee. The authorities relied on the general modus operandi of accommodation entry operators without specific evidence against the assessee.

Key evidence and findings: The assessee provided comprehensive documentation, including the name, address, PAN, audited financial statements, and assessment orders related to the investor company, M/s. Canary Tradecom Pvt. Ltd.

Application of law to facts: The court applied the principle that when an assessee has discharged their initial burden by providing sufficient evidence, the onus shifts to the tax authorities to prove otherwise. The court found that this burden was not met by the authorities.

Treatment of competing arguments: The Revenue argued that the share capital was the assessee's own money routed through accommodation entries. However, the court noted that this argument was not substantiated by specific evidence or inquiry.

Conclusions: The court concluded that the addition under Section 68 was not justified and directed the Assessing Officer to delete the addition.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: The court stated, "We have examined all the evidences as placed before us and observe that the assessee has discharged the burden by furnishing all the documents before the authorities below and therefore provisions of section 68 can not be invoked."

Core principles established: The judgment reinforces the principle that when an assessee provides sufficient evidence to explain cash credits, the burden of proof shifts to the tax authorities to conduct further inquiries and substantiate claims of accommodation entries.

Final determinations on each issue: The court condoned the delay in filing the appeal and allowed the appeal by setting aside the addition of Rs. 90,00,000/- under Section 68, directing the Assessing Officer to delete the addition.