C.I.T.UDAIPUR vs. BHIM SINGH

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ITA/36/2014HC RajasthanRJHC01020487201401 June 20164 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal held that the findings of the CIT(A), affirmed by the ITAT, regarding the identity of creditors, their creditworthiness, and the genuineness of transactions, were findings of fact. The Tribunal noted that the CIT(A) had discussed the creditworthiness and genuineness of each transaction and found 13 creditors to be genuine. The ITAT had found that the assessee had established the creditworthiness to the extent required by law. The Tribunal opined that creditors had accepted advancing credits and provided details of their deposit sources. It was further held that the assessee cannot be burdened with proving the 'source of source' and that cash credits should not be deemed ingenuine by excessively stretching the ingredients of Section 68. These findings of fact did not give rise to any substantial question of law. The appeal was dismissed.

What were the facts?

The Revenue is in appeal against an order of the Income Tax Appellate Tribunal (ITAT) dated August 30, 2013. The ITAT had dismissed the Revenue's appeal against the order of the Commissioner of Income Tax (Appeals) [CIT(A)], Udaipur, dated November 30, 2012. The CIT(A) had restricted an addition of Rs. 1,81,46,869/- made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961, for assessment year 2006-07. The assessee, proprietor of Anchal Associates, showed unsecured loans of Rs. 1,28,32,430/- in its balance sheet for the financial year 2005-06, whereas no such loans existed in the previous year. The AO treated these as bogus advances and added them to the assessee's income. The CIT(A), after remanding the matter to the AO, found advances from 13 creditors to be genuine, restricting the addition to Rs. 13,39,750/-.

What were the issues?

1. Whether the Tribunal erred in not discussing the specific shortcomings that disproved the creditworthiness of the creditors, thereby failing to uphold the AO's finding that the credits did not meet the three parameters of Section 68 (identity, creditworthiness, and genuineness of transaction)? (Question of law) Assessee's Contention: Not recorded in the judgment. Revenue's Contention: The ITAT erred by not discussing the specific grounds of appeal highlighting the shortcomings in disproving the creditors' creditworthiness. The AO had categorically found that the credits did not fulfill the three parameters of Section 68. While the assessee proved the identity of creditors, they failed to prove creditworthiness and genuineness of transactions, making the ITAT's confirmation of the CIT(A)'s restricted addition erroneous.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

1 (D.B.INCOME TAX APPEAL NO.36/14) Dated:- 1.6. 16. HON'BLE MR.JUSTICE SANGEET LODHA HON'BLE MR.JUSTICE KAILASH CHANDRA SHARMA Mr.K.K.Bissa, for the appellant.

1.

This appeal is directed against order dated 30.8.13 of Income Tax Appellate Tribunal (ITAT), Jodhpur Bench, Jodhpur, whereby an appeal preferred by the Revenue against the order of Commissioner of Income Tax (Appeals) [CIT(A)], Udaipur, dated 30.11.12, deleting the addition of Rs.1,81,46,869/- made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961 ( for short “the Act”), vide assessment order dated 31.12.08 for the assessment year 2006-07, has been dismissed.

2.

The relevant facts are that the assessee, the proprietor of Anchal Associates, engaged in business of collection of Toll Tax, Sales Tax and Royalty on contract basis, filed the return of income for the assessment year 2006-07 on 30.10.06 declaring total income of Rs.32,93,790/-. During the financial year 2005- 06 under the head 'unsecured loans' an amount of Rs.1,28,32,430/- was shown by the assessee in the Balance Sheet, whereas in the previous assessment year i.e. 2005-06, no such loan existed. The assessee vide notice under Section 142

2 (1) was asked to furnish the confirmation alongwith the copy of the return and complete enclosures in case of the parties from whom new unsecured loans were acquired during the previous year relevant to the assessment year 2006-07. In response to the notice, the assessee furnished copy of the account of the parties as appearing in the books of accounts giving the details of credit obtained from the creditors. After due consideration of the evidences gathered, the AO arrived at the finding that the cash credits appearing in books of assessee during the financial year 2005-06 are bogus advances received by the assessee and accordingly, the same were added back to his income under Section 68 of the Act. Aggrieved by the order passed by the AO, the assessee preferred an appeal before the CIT (A), Udaipur. Before the CIT (A), the assessee furnished the written submissions which were remanded by the CIT (A) to AO and called for his report. The AO submitted the report. After considering the remand report, CIT(A) discussed each and every cash credit entry and found the advances by 13 creditors as genuine and accordingly restricted the addition made on account of unexplained cash credit to Rs.13,39,750/- under Section 68 of the Act. The appeal preferred by the Revenue against the order passed by the CIT(A) stands dismissed by the ITAT. Hence, this appeal.

3.

Learned counsel for the appellant contended that ITAT has 3 seriously erred in not discussing the various grounds of the appeal of the Revenue wherein the specific short comings disproving the credit worthiness of the creditors are highlighted. Learned counsel submitted that AO had arrived at a categorical finding that credits do not fulfil three parameters of Section 68 i.e. to prove identity of creditors, their creditworthiness and genuineness of their transaction. Learned counsel submitted that the assessee was able to prove the identity of the creditors but failed to prove creditworthiness and genuineness of the transaction and therefore, the ITAT has seriously erred in confirming the order passed by the CIT(A) restricting the addition made to Rs.13,39,750/-.

4.

A bare perusal of the order passed by the CIT(A) reveals that the CIT(A) discussed the creditworthiness and genuineness of each and every individual transaction and found 13 creditors as genuine. The ITAT has arrived at the finding that the assessee has established the creditworthiness of the creditors to the extent he is obliged under the law to do so. The ITAT found that the creditors have accepted that they had advanced their respective credits to the assessee and also given the details of the sources of the deposit. The ITAT opined that the assessee cannot be burdened with proof of 'source of source' and the cash credit cannot be held to be ingenuine by stretching the ingredients of Section 68 too far. We are of the considered

4 opinion that the findings arrived at by the CIT(A), affirmed by the ITAT regarding identity of the creditors and creditworthiness and genuineness of the transactions remain findings of facts, which do not give rise to any substantial question of law.

5.

In the result, the appeal fails, it is hereby dismissed. (KAILASH CHANDRA SHARMA),J. (SANGEET LODHA),J. Aditya/

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