Punjab & Haryana H.C : addition on the ground of lack of explanation for the source of money is correct

High Court Of Punjab And Haryana

Saraswati Tractors Corporation Vs. CIT

Assessment Year 1994-95

Section : 68

Adarsh Kumar Goel And Ajay Kumar Mittal, JJ.

ITA No. 68 Of 2004

November  23, 2010

JUDGMENT
 
Ajay Kumar Mittal, J. – This appeal under section 260A of the Income-tax Act, 1961 (for short “the Act”), has been filed by the assessee against the order dated July 16, 2003, passed by the Income-tax Appellate Tribunal, Chandigarh Bench (A), Chandigarh (in short “the Tribunal”) in I.T.A. No. 1248/Chandi/98 relating to the assessment year 1994-95.

2. The assessee has claimed the following substantial question of law for determination by this court :

“Whether, under the facts and circumstances of the case and on the true and correct interpretation of the provisions of section 68, the Tribunal is justified in upholding the addition on the ground of lack of explanation for the source of, whereas when the genuineness of the transaction and the identity of the creditors along with the explanation of the credit stands established thereby complying with the requirements of the provisions of the Act ?”

3. Briefly stated the facts necessary for adjudication, as narrated in the appeal are that the appellant-assessee is engaged in the business of purchase and sale of tractors and its parts. During the assessment year under reference, the assessee received loans from eight persons. The Assessing Officer made addition of Rs. 95,000 in respect of the following cash credits received by the assessee :

Name                       Amount (Rs.)

Smt. Shanti Diwan      20,000

Smt. Renu Diwan        20,000

Shri Yogesh Kumar     25,000

Income from commission received by Yogesh Kumar and converted into loan account    30,000

4. Though according to the assessee, all the aforesaid cash credits were received by it through account payee’s drafts, and many other proofs in support of that fact were also produced before the Assessing Officer, but the Assessing Officer did not accept the genuineness of cash credits and made addition of an amount of Rs. 95,000, noticed above, vide order dated February 25, 1997, annexure A2. The appeal carried by the assessee against the said addition was allowed by the Commissioner of Income-tax (Appeals), (for short “CIT(A)”) by order dated September 18, 1998, annexure A7, whereby the addition of Rs. 95,000 was deleted.

5. Aggrieved by the order of the Commissioner of Income-tax (Appeals), the Revenue preferred an appeal before the Tribunal. The Tribunal by order under appeal reversed the order of the Commissioner of Income-tax (Appeals) in so far as the addition of Rs. 20,000 each, advanced by Shanti Diwan and Renu Diwan ; and Rs. 25,000 by Yogesh Kumar is concerned, and confirmed the order of the Commissioner of Income-tax (Appeals) in so far as it related to the deletion of Rs. 30,000. In other words, the Tribunal, while observing that the Assessing Officer had rightly rejected the genuineness of cash transactions in respect of which it had made additions, and put its seal of approval on the addition of Rs. 65,000 except the addition of Rs. 30,000 advanced by Yogesh Kumar.

6. We have heard learned counsel for the parties and have perused the record.

7. Whether disallowance under section 68 of the Income -tax Act, 1961, on account of cash credits being ingenuine is the point for consideration in this appeal. The Tribunal had concluded that the addition of Rs. 65,000 on account of cash credits being not genuine, on appreciation of evidence available on record, was justified. The finding recorded by the Tribunal affirming the disallowance is as under :

“Coming to the balance additions of Rs. 20,000, Rs. 20,000 and Rs.25,000 received from Shanti Diwan, Renu Diwan and Yogesh Kumar, we find that the Assessing Officer has given opportunity to the assessee to produce the cash creditors, so that the identity and genuineness of the transactions could be verified. None of the parties is a regular assessee.

We have gone through a copy of girdawari and find that it stands in the name of Ram Gopal and not in the names of Shanti Diwan, Renu Diwan or Yogesh Kumar, although it has been shown that Yogesh Kumar son of Ram Gopal was cultivating the land. Thus, the ownership of the land vests with Ram Gopal and Shanti Diwan, Renu Diwan and Yogesh Kumar did not own land. There is no evidence on record to prove that Ram Gopal has gifted amount to Shanti Diwan, Renu Diwan and Yogesh Kumar or has given the said amount as loan to them. The money has been advanced to the assessee not by Ram Gopal but by Shanti Diwan, Renu Diwan and Yogesh Kumar. Therefore, the onus lies on the assessee to prove the creditworthiness of these parties. Creditworthiness of Ram Gopal will not discharge the onus which lies on the assessee to prove the creditworthiness of Shanti Diwan, Renu Diwan and Yogesh Kumar. Under the Income-tax Act, each individual is a separate person/entity. Thus, the assessee must prove that all the ingredients of section 68 are complied with. There is nothing on record that the parties were having bank account. The assessee has no doubt filed affidavits confirming advance of money received from these parties but the onus cannot be said to be discharged when the parties are closely related to the managing partner by merely filing affidavits when the Assessing Officer asked for production of the parties. The hon’ble Calcutta High Court has held so in the case of CIT v. United Commercial and Industrial Co. (P.) Ltd. [1991] 187 ITR 596 (Cal). Capacity, creditworthiness to lend money are not proved. The law is clear, if direct evidence is not available, then circumstantial evidence has to be looked into. No evidence has been produced which may prove that the parties have ever made investments in earlier year/s to the extent that they have shown that they have received the money during the year out of agricultural income to advance the same to the assessee. The money has not been advanced through cheques but through drafts and there is nothing on record which may prove that the drafts were made out of bank account of these parties. Even the assessee has not claimed that the parties here having regular bank account. The only inference which could be drawn is that drafts were made by paying cash. Even the assessee has not paid any interest to these parties. Therefore, on totality of facts and circumstances of the case, we feel that the Assessing Officer has rightly rejected the genuineness of these transactions and made the additions. We set aside the order of the Commissioner of Income-tax (Appeals) so far as the deletion of cash credits of Rs. 65,000 (Rs. 20,000 advanced by Shanti Diwan, Rs. 20,000 by Renu Diwan and Rs. 25,000 by Yogesh Kumar) is concerned and confirm his order so far as it relates to deletion of Rs. 30,000 advanced by Yogesh Kumar is concerned. Ground stands partly allowed.”

8. The Tribunal on appreciation of evidence had concluded that the cash credits amounting to Rs. 65,000 in the names of Smt. Shanti Diwan ; Smt.Renu Diwan and Yogesh Kumar were not proved to be genuine, whereas Rs. 30,000 which was an income from commission received by Yogesh Kumar and converted into loan account, stood proved and could not be added under section 68 of the Act.

9. Learned counsel for the appellant has not been able to show any perversity or error of law in the findings recorded by the Tribunal so as to persuade this court to interfere therewith. The Tribunal while setting aside the order of the Commissioner of Income-tax (Appeals) has elaborately examined the matter in the light of the material available on record and come to the conclusion regarding cash credits of Rs. 65,000 not to be genuine transactions of loans received by the assessee. The Tribunal has taken a possible view on appreciation of evidence on record. That being so, we find no merit in the appeal and the same is dismissed.

[Citation : 335 ITR 468]

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