2014 (3) TMI 152 - HC - Income Tax

Reversal of CIT(A) s order - Proper explanation not made - Addition made u/s 68 of the Act Unaccounted cash credit Whether the assessee offer explanation for different amounts credited in his account Held that - The Tribunal had not committed any error so as to give rise to substantial question of law - Entire issue was based on facts - The tribunal on the basis of evidence came to the conclusion that explanation was not acceptable - Different creditors were agriculturists and odd amounts were deposited - There was no explanation for this phenomena - the CIT(Appeals) decided the issue in favour of the assessee without pointing out as to which additional evidence admitted by the tribunal and considered by him had clinched the issue in favour of the assessee Thus the CIT(Appeals) in essence shifted the burden of establishing such facts on the Revenue rather than on the assessee the entire issue is based on appreciation of facts thus no question of law arises Decided against Assessee.

Summary

Issues:
1. Addition of Rs.13,69,700 under section 68 of the Income Tax Act 1961.
2. Consideration of additional evidence in appeal proceedings.
3. Verification of identity, creditworthiness, and genuineness of loan by Assessing Officer.

Analysis:

Issue 1: Addition under section 68 of the Income Tax Act:
The case involved the addition of Rs.13,69,700 under section 68 of the Income Tax Act 1961 by the Assessing Officer. The CIT(Appeals) initially confirmed the addition, but in the first round of appeal, the tribunal remanded the issue back to CIT(Appeals) for fresh consideration due to the non-acceptance of additional evidence by the CIT(Appeals). In the second round, the CIT(Appeals) allowed the challenge by the assessee, deleting the addition based on the provided evidence of the identity, capacity, and genuineness of the creditors. However, the tribunal reversed the decision of the CIT(Appeals) citing lack of verification of creditworthiness of loan creditors and failure to establish genuineness, ultimately restoring the decision of the Assessing Officer.

Issue 2: Consideration of additional evidence in appeal proceedings:
The tribunal criticized the CIT(Appeals) for not specifying which additional evidence clinched the issue in favor of the assessee. The tribunal highlighted the failure of the CIT(Appeals) to inquire into odd amounts deposited by creditors and the lack of creditworthiness verification beyond the submission of 7/12 registers. The tribunal emphasized the importance of establishing the creditworthiness of loan creditors as an essential requirement under section 68 of the Act, ultimately rejecting the argument that subsequent repayment of loans justified the genuineness of the transactions.

Issue 3: Verification by Assessing Officer:
The Assessing Officer's failure to verify the identity, creditworthiness, and genuineness of the loan despite being given an opportunity was a crucial point of contention. The CIT(Appeals) was criticized for shifting the burden of proof onto the Revenue rather than the assessee. The tribunal emphasized the need for detailed verification of creditworthiness beyond the submission of basic documents, ultimately leading to the reversal of the CIT(Appeals) decision.

In conclusion, the High Court upheld the tribunal's decision, emphasizing that the entire issue was fact-based, and no substantial question of law arose. The dismissal of the tax appeal was based on the appreciation of facts and the failure to establish the essential requirements under section 68 of the Income Tax Act.