2014 (8) TMI 679 - PUNJAB AND HARYANA HIGH COURT

Penalty proceedings u/s 271(1)(c) r.w Explanation 1(1A) – Addition u/s 68 – onus to establish the genuineness of transaction – Credit entry in account books – Held that:- It is for the assessee to prove the genuineness of the transaction by identifying the creditor and its capacity to advance money - The onus lies upon the assessee to explain the credit entry but it shifts upon the Assessing Officer under certain circumstances - Where the assessee shows that the entries regarding credit in a third party's account were in fact received from the third party and are genuine, he has discharged the onus - it cannot be charged as the assessee's income in the absence of any material to indicate that they belong to the assessee.

Relying upon Orient Trading Co. Ltd. v. CIT [1962 (8) TMI 69 - BOMBAY HIGH COURT] - If the AO had any doubts about the entry, instead of drawing any inference, the AO could have summoned the proprietor of the firm - No attempt was made by the AO to ascertain the factum of clearance of cheque from the bank and subsequent refund of the amount – thus, the assessee had sufficiently discharged the burden which lay upon it to explain the nature and source of the credit entry appearing in its accounts and the burden clearly shifted on to the Department to prove to the contrary and hold that in spite of the assessee's explanation, the entries could still be held to represent the assessee's income - The AO failed to invoke the provisions u/s 131 of the Act, the Tribunal has rightly concluded that it was sufficient to delete the addition – Decided against Revenue.