2007 (1) TMI 567 - HC - Income Tax

Additions u/s 68 - Cash credits found in the books of the account - Identity of the creditors - failed to discharge onus - HELD THAT:- The fact that the explanation furnished by the aforementioned four creditors about the sources wherefrom they acquired the money was not acceptable by the revenue could not provide necessary nexus for drawing inference that the amount admitted to be deposited by these four persons belonged to the assessee. The assessee having discharged his burden by proving the existence of the depositors and the depositors owing their deposits, he was not further required to prove source of source.

Accordingly the Tribunal, and the Assessing Officer had seriously erred and misdirected themselves in law by not correctly appreciating the legal principle about necessity of establishing such nexus once the assessee has discharged his onus by proving the existence of the depositors and the depositors having accepted their deposits with the assessee. Once this onus is discharged the presumption raised u/s 68 stands rebutted and it becomes burden of revenue to prove that source of such deposits is traceable to assessee before the same can be treated as undisclosed income of the assessee concerned.

Accordingly, the appeal is allowed. The orders passed by the Tribunal, the CIT(A) and the Assessing Officer are set aside to the extent of additions in respect of the cash credits found in the books of the account of assessee were added in the income of the assessee. The additions made in the income of the assessee's account are directed to be deleted and demand notice to be accordingly modified.

In favour of assessee