DYAL SINGH AND SONS vs. COMMISSIONER OF INCOME TAX

Income Tax Appeal No. 73 of 2004 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 73 of 2004 Date of decision: 23.11.2010 Dayal Singh and Sons through its Proprietor Dayal Singh --- Appellant. Versus Commissioner of Income Tax Karnal --- Respondent CORAM: HON’BLE MR. JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present: Mr. Pankaj Jain, Advocate for the appellant. Mr. Yogesh Putney, Central Government Standing Counsel for the respondent-Revenue. --- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-Tax Act, 1961 (for short “the Act”) has been filed by the assessee against the order dated 16.7.2003, passed by the Income Tax Appellate Tribunal Chandigarh Bench ‘A’, Chandigarh (in short “the Tribunal”) in ITA No. 1249/CHANDI/1998, relating to the assessment year 1995-96. The following substantial question of law has been claimed for determination by this Court: Income Tax Appeal No. 73 of 2004 2 “Whether under the facts and circumstances of the case and on the true and correct interpretation of the provisions of Section 68, whether the Tribunal is justified in upholding the addition on the ground of lack of explanation for the source of income whereas when the genuineness of the transaction and the identity of the creditors along with the explanation of the credit stands established thereby complying with the requirements of the provisions of the Act?” The facts, in brief, necessary for adjudication, as narrated in the appeal are that the appellant-assessee is engaged in the business of manufacturing, sale and re-sale of wheat thrasher and various agricultural implements. A survey was conducted on the premises of the assessee on 7.3.1995. The assessment was completed on 27.3.1998. The assessing authority made an addition of Rs. 50,000/- on account of one cash credit received by the assessee through an account payee’s cheque No. 858325 on 24.2.1995 from the saving bank account of one Manjit Kaur in the State Bank of Patiala. In response to a questionnaire issued in the process of probe, said Manjit Kaur got recorded her statement on 22.12.1997 whereby she confirmed the advancing of the amount of Rs. 50,000/-. The assessing authority did not feel satisfied with the explanation furnished on behalf of the assessee and consequently made an addition of the said sum vide order dated 27.3.1998. Aggrieved by the order of the assessing officer, the assessee filed appeal before the Commissioner of Income Tax (Appeals), for short [“CIT(A)”]. The CIT(A) deleted the said addition Income Tax Appeal No. 73 of 2004 3 vide order dated 18.9.1998. In the appeal carried by the Revenue before the Tribunal, the order of the CIT(A) deleting the addition of Rs. 50,000/- was set aside and that of the assessing authority restored, vide order under appeal. We have heard learned counsel for the parties and have perused the record. The point for determination in this appeal is, whether the Tribunal had rightly sustained the addition made under Section 68 of the Income Tax Act, 1961 by disagreeing with the explanation furnished by the assessee and, holding that the cash credit was not genuine. Findings recorded by the Tribunal may be reproduced with advantage which read as under:- “In respect of ground no.2 AO noted that the assessee received a sum of Rs.50,000 from Smt. Manjit Kaur as cash credit through account payee cheque No.858325 dated 24.2.95. Statement of Manjit Kaur was recorded, wherein she confirmed the loan being advanced AO noted that a sum of Rs.50000 was deposited in cash on the same date when the cheque was advanced to the assessee firm. About source, Manjit Kaur stated 'I don't remember at the moment'. AO ultimately made the addition which came to be deleted by CIT(A) in first appeal. 3.1 Ld. DR relied on order of AO and pointed out that a sum of Rs.50,000 no doubt was advanced through cheque but on the same date cash was deposited in the a/c of Manjit Kaur. In respect thereof, she could not explain the source. Income Tax Appeal No. 73 of 2004 4 She is not a regular assessee. Her affidavit is incomplete and simply states that loan was given out of money sent by her husband from abroad and also from agricultural savings. No evidence was, however, filed to prove her creditworthiness and genuineness of transaction. Ld. AR on