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TMI Blog2008 (2) TMI 276X X X X Extracts X X X X X X X X Extracts X X X X ..... ENT The judgment of the court was delivered by SUSHIL HARKAULI J.— The following questions have been referred for the opinion of this court: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that in the case of cash credits in the assessee's books in the names of close relatives, the burden of proof on the assessee under section 68 of the Income-tax Act, 1961, extended to requiring the assessee to establish the nature and source of the amount ?" 2. For ready reference section 68 of the Income-tax Act, 1961 (called "the Act" for brevity), is reproduced below: "68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 63,800 against which he is said to have given Rs. 69,300 to the assessee. 6. For a clear understanding the contents of section 68 of the Act may be divided into two parts. 7. The first part requires the assessee to explain the sum found credited in the books of the assessee about the nature and source thereof. This part only requires the assessee to disclose the source from which the money has been received by the assessee. This does not require the assessee to disclose the source of that source, i.e. the source from which the donor or investor has received the money which has been invested. 8. The second part of section 68 of the Act consists of offering an explanation which is "satisfactory" in the opinion of the Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5) CIT v. Jauharimal Goel [2008] 296 ITR 263 (All); [2005] 147 Taxman 448. 13. Each of these cases turned on their own facts. As already stated, what explanation would be "satisfactory" would depend upon the facts and circumstances of each case. 14. It is well-settled that under section 68 the assessee has to prove three conditions, viz., (1) the identity of the creditor, (2) the "capacity" of such creditor to advance the amount, and (3) the genuineness of the transaction. 15. The second condition, referring to the "capacity" of the creditor, cannot be said to have been established on the facts and circumstances of the present case, in the absence of the details referred to above, viz., the source from which the non-earning ..... X X X X Extracts X X X X X X X X Extracts X X X X
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