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Issues: Determination of unexplained cash credits in the books of the assessee and the burden of proof regarding the source of such credits.
Analysis: 1. The assessee, an individual engaged in diamond polishing business, had cash credits in his books totaling Rs. 72,500 from three creditors. The Income Tax Officer (ITO) added this amount to the total income of the assessee, alleging that the credits were not established. 2. The Commissioner of Income Tax (Appeals) [CIT (A)] held that the ITO failed to prove that the loans represented the assessee's income and deleted the addition. The Revenue appealed this decision. 3. The Revenue argued that since the creditors were from a different district than where the assessee conducted business, and they were farmers with no evidence of substantial savings, the cash credits should be treated as unexplained investments, citing a relevant case law. 4. The assessee's counsel contended that the creditors were agriculturists with significant land holdings and irrigation facilities, providing details of their transactions with the assessee and explaining how they utilized the funds. The counsel argued that the assessee had met the primary onus by obtaining confirmations from the creditors and demonstrating their financial stability. 5. The Tribunal noted that while the initial burden is on the assessee to explain the source of cash credits, once the source is identified and confirmed, the burden shifts to the Revenue. In this case, the Revenue failed to prove that the creditors were not financially capable or that the transactions did not occur. As the Revenue did not provide evidence to discredit the transactions, the addition to the income was deemed unjustified, confirming the CIT (A) order. 6. Consequently, the Tribunal dismissed the Revenue's appeal, upholding the decision that the assessee had successfully explained the cash credits, and the Revenue had not disproved the genuineness of the transactions or the financial capability of the creditors.
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