Karnataka H.C : Whether since persons in whose names credits were shown had denied transaction, mere production of DDs did not substantiate case of assessee and, therefore, order of Assessing Officer was to be restored

High Court Of Karnataka

CIT, Central Circle, Bangalore vs. S.L.N. Traders

Assessment Year : 1996-97

Section : 68

V.G. Sabhahit And Ravi Malimath, JJ.

IT Appeal No. 954 Of 2006

July 13, 2011

JUDGMENT

V.G. Sabhahit, J. – Appeal filed by the Revenue has been admitted for consideration of following substantial question of law :

“Whether the appellate authorities were right in holding and recording a finding that a sum of Rs. 16,00,000/- and Rs. 10,75,000/- treated as income of the assessee under Sec.68 of the Income Tax Act by the Assessing Officer on the basis of admission made by the assessee and the denial issued by Sri Thimmegowda and Sri D.S. Kumar, the persons who had advanced these amounts was not taken into account and consequently a perverse finding came to be recorded?”

2. The material facts leading up to this appeal for considering the above said substantial question of law are as follows:

The Assessing Officer by order dated 28.03.2002 in exercise of power under Sec. 143(3) read with Sec. 147 of the Income Tax Act, held that the undisclosed credit in respect of Thimmegowda amounting to Rs. 24,00,000/; Rs. 8,00,000/- assessable for the assessment year 1997-98 and Rs. 16,00,000/- assessable for the assessment year 1996-97 and undisclosed credit advanced by Sri Shreyas Kumar in a sum of Rs. 10,75,000/- not been satisfactorily explained as the said Thimmegowda and Kumar denied such transaction. Wherefore, added the undisclosed credit for the assessment years 1996-97 and 1997-98. Being aggrieved by the same, the assessee filed appeal before the Commissioner of Income-tax(Appeals)-VI, Bangalore in ITA No. 103/CC-1(2)/CIT(A)-VI/02-03 and the appellate authority by order dated 17.07.2002 held that the assessee had discharged his onus of furnishing details and sources of DDs and the credit shown in the name of Sri D.S. Kumar, is liable to be deleted and so far as the credit shown in the name of Thimmegowda, the assessee did not challenge the same and accepted for addition of the said credit. Accordingly, the appeal was allowed.

3. Being aggrieved by the same. Revenue preferred appeal before the Income Tax Appellate Tribunal (hereinafter called as Tribunal’ for brevity) contending that in view of the fact that both Thimmegowda and Sri. D.S. Kumar had appeared before the Assessing Officer and denied the transaction, the assessee has miserably failed to prove the said transaction. The Tribunal rejected the contention of the Revenue and confirmed the order passed by the appellate authority and dismissed the appeal. Being aggrieved by the same, this appeal is filed by the Revenue and the appeal has been admitted for consideration of the above said substantial question of law.

4. We have heard the learned counsel appearing for the appellants and the learned counsel appearing for the respondent.

5. The learned counsel appearing for the appellants has taken us through the order passed by the Assessing Officer, appellate authority and the Tribunal and submitted that when Thimmegowda and D.S. Kumar had themselves appeared and denied the transaction, DD would not assume any significance. Wherefore, the assessee had failed to explain the said cash credit. Wherefore, addition of the cash credit was justified as ordered by the Assessing Officer. The first appellate authority was not justified in deleting the undisclosed credit in respect of D.S. Kumar and the Tribunal was also not justified in deleting the undisclosed credit in respect of both the persons; D.S. Kumar and Thimmegowda. He has produced the statement of D.S. Kumar.

6. Learned counsel appearing for the respondent submitted that the finding of the appellate authority for deleting the cash credit in the name of D.S. Kumar, is justified and the Tribunal was also justified in deleting the cash credit in the name of Thimmegowda as sufficient explanation had been offered by producing the DD drawn in favour of Thimmegowda and D.S. Kumar. Wherefore, the finding is justified and substantial question of law has to be answered against the Revenue.

7. We have given careful consideration to the contention of the learned counsel appearing for the parties and scrutinised the material on record.

8. The material on record would clearly show that during the scrutiny for the assessment years 1996-97 and 1997-98 it was found that there was undisclosed credit in the name of Thimmegowda and D.S. Kumar. Though confirmation letters said to have been given by Thimmegowda and D.S. Kumar were produced, said persons had appeared before the Assessing Officer and have stated that they did not have any such financial transaction. Wherefore, it is clear that when the persons in whose name credit is shown, they themselves denied the transaction, mere production of DDs would not in any way substantiate the case of the respondent-assessee that sufficient explanation is offered and the finding of the appellate authority and the Tribunal for deleting the undisclosed credit added by Assessing Officer, is clearly perverse and arbitrary as they have proceeded only on the basis that DDs were produced. The assessee has discharged his onus. Therefore, the credit has been satisfactorily explained, which is clearly perverse as the said persons; Thimmegowda and D.S. Kumar themselves have stated before the Tribunal that they did not had any financial transaction, which has not at all been taken into account in the said oral statement, was the basis for the Assessment Officer to add the undisclosed credit in the name of Thimmegowda and D.S. Kumar. Wherefore, the order passed by the appellate authority and the ‘Tribunal, deleting the undisclosed credit added by the Assessing Officer in respect of Thimmegowda and D.S. Kumar, is perverse and unsustainable in the eye of law.

Accordingly, we answer the substantial question of law in favour of the Revenue and pass the following:

ORDER

Appeal is allowed. The order passed by the Tribunal dismissing the appeal and confirming the order passed by the Commissioner of Income-tax (Appeals)- VI, Bangalore dated 17.07.2002, is set aside and order passed by the Assessing Officer dated 28.03.2002, is restored.

[Citation : 341 ITR 232]

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