2008 (7) TMI 1127 - HC - Income Tax

Summary

Issues:
1. Whether the Assessee discharged the onus under Section 68 of the Income Tax Act for the cash credits.
2. Whether the Tribunal was justified in deleting the addition on account of cash credits without considering the evidence on record.

Analysis:

Issue 1:
The assessment year 2002-03 saw the Assessee filing a return of income totaling Rs. 3,00,210, with the assessment completed on March 30, 2005, resulting in a total income of Rs. 54,47,370. The addition of Rs. 50,00,000 on account of unexplained cash credit and motor car depreciation was made. The Assessing Officer noted that the company received Rs. 50,00,000 from five parties as share application money without due compliance. However, all five parties eventually submitted confirmations and bank statements. An inquiry was conducted, leading to the addition under Section 68 of the Act. The Commissioner of Income Tax (Appeals) affirmed this addition, prompting the Assessee to appeal to the Income Tax Appellate Tribunal, which subsequently deleted the Rs. 50 lakhs addition.

Issue 2:
The Revenue, dissatisfied with the Tribunal's decision, filed a tax appeal. The Revenue contended that the Tribunal erred in deleting the addition without proper consideration of the evidence and by not establishing the creditworthiness of the five companies. The Tribunal's decision was challenged citing the case of Rameshchandra M. Luthra v. Asst. CIT (2002) 257 ITR 460. However, the Tribunal, after reviewing all relevant documents submitted by the Assessee during the assessment proceedings, found that the Assessee had fulfilled the onus of proving the identity of parties, genuineness of transactions, and creditworthiness of share applications. The Tribunal disagreed with the Assessing Officer's adverse inference and noted that the Assessing Officer's doubts were unfounded. The Tribunal referenced the decision in CIT v. Pragati Co-operative Bank Ltd. (2005) 278 ITR 170 to support its conclusion. Ultimately, the High Court upheld the Tribunal's decision, stating that all findings were adequately considered, and no substantial question of law arose.

In conclusion, the High Court dismissed the appeal, affirming the Tribunal's decision to delete the addition of Rs. 50 lakhs under Section 68 of the Income Tax Act for the assessment year 2002-03.