E.UMMER BAVA vs. THE COMMISSIONER OF INCOME TAX, KOZHIKODE

PDF · subscribers
ITA/13/2015HC KeralaKLHC01025414201520 May 2016Bench: HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU,HONOURABLE MR.JUSTICE ANTONY DOMINIC5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the appeal fails and is dismissed. The Court noted that it was an admitted factual position that the assessee received ₹10 lakhs each as a loan from two NRIs working in the Middle East. Although the assessee claimed it was a loan, he failed to furnish any documents to prove the creditworthiness of these two individuals. The Court reiterated the settled law under Section 68 of the Income Tax Act, which places the initial burden on the assessee to prove the identity, capacity, and genuineness of the transaction. Since the assessee could not produce any material substantiating the creditworthiness of the loan providers, the Court found no fault with the Tribunal's decision to uphold the additions made under Section 68. Consequently, the Court concluded that the order of the Tribunal did not give rise to any question of law for its consideration.

What were the facts?

The assessee, E. Ummer Bava, a contractor, is in appeal before the High Court of Kerala against an order of the Income Tax Appellate Tribunal (ITAT), Cochin Bench. The ITAT had confirmed the addition of ₹20 lakhs to the assessee's income for the assessment year 2008-09. The Assessing Officer had made this addition on the grounds that the assessee failed to prove the requirement of Section 68 of the Income Tax Act. Specifically, the assessee had received loans of ₹10 lakhs each from Sri. E. Sameer and Sri. P.M. Mohammed Ali, who were Non-Resident Indians (NRIs) working in the Middle East. The first appellate authority had also upheld the Assessing Officer's order.

What were the issues?

The High Court was asked to decide the following questions of law: 1. Whether, in the facts and circumstances of the case, the authorities were right in invoking Section 68 of the Act for amounts received from the appellant's nephew and his son-in-law's father, when payments were sent through normal banking channels and instruments issued by foreign banks, credited to the appellant's account through a bank in India? 2. Whether the Assessing Authority was required to conduct enquiries regarding the appellant's claim of receiving the amount as a loan, given that the finding was that the appellant had not fully proved the creditworthiness and capacity of the creditor, which itself would indicate the appellant had discharged the initial burden? 3. Whether the authorities erred in applying the principles laid down by the Supreme Court in Commissioner of Income Tax vs. P. Mohanakala to the facts of the case? 4. Whether the authorities should not have found that the decision in Mohanakala covers only cash loans and not receipts via cheques/DD as provided by the Act? Assessee's Contentions: The assessee argued that the loans were received through normal banking channels and instruments issued by foreign banks, credited to his Indian bank account. He also contended that the authorities should have conducted further enquiries and that the Supreme Court's decision in Mohanakala applied only to cash loans, not to those received via cheques/DD. Revenue's Contentions: The Revenue's contentions are not explicitly recorded in the judgment, but it is implied they supported the findings of the lower authorities.

Which sections of the Income-tax Act were involved?

Section 68,Section 260A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC & THE HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU FRIDAY, THE 20TH DAY OF MAY 2016/20TH VAISAKHA 1938 ITA.No. 13 of 2015 () ---------------------- AGAINST THE ORDER/JUDGMENT IN IT 296/COCH/2013 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 25-10-2013 APPELLANT(S)/APPELLANT: ------------ E.UMMER BAVA CONTRACTOR, SAKEENA MANZIL, DOWN HILL, MALAPPURAM, 676519

BY ADVS.SRI.P.RAGHUNATH SRI.PREMJIT NAGENDRAN RESPONDENT(S)/RESPONDENT: -------------- THE COMMISSIONER OF INCOME TAX, KOZHIKODE - 673 006.

R BY SRI.P.K.R.MENON, SC, INCOME TAX R BY SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 20-05-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

APPENDIX IN ITA.13/15 APPELLANT'S EXHIBITS: ANNEXURE A: PHOTOCOPY OF ASSESSMENT ORDER DT.25.11.2010 ANNEXURE B: PHOTOCOPY OF ORDER OF CIT(A) DT.18.2.201 IN ITA-31/TR/CIT/CLT 2010-11.. ANNEXURE C: CERTIFIED COPY OF ORDER OF ITAT DT.25.10.2013 IN ITA NO. 296/COCH/2013. /TRUE COPY/ PS TO JUDGE

ANTONY DOMINIC & DAMA SESHADRI NAIDU, JJ. ----------------------------------- I.T.A.No.13 of 2015 ----------------------------------- Dated this the 20th day of May, 2016 JUDGMENT Antony Dominic, J. 1. This appeal filed by the assessee in terms of section 260 A of the Income Tax Act calls in question the order passed by the Income Tax Appellate Tribunal, Cochin Bench in ITA.No.296/13. On facts, it is relevant to note that the Assessing Officer noticed that for the assessment year 2008-09, the assessee had received a loan of `10 lakhs each from Sri.E.Sameer and Sri.P.M.Mohammed Ali, who were NRIs working in the Middle East. On the ground that the assessee did not prove the requirement of section 68 of the Act, the Assessing Officer added the aforesaid `20 lakhs to the income of the assessee. This order was confirmed by the first appellate authority and the Tribunal and it is in this background, this appeal is filed raising the following questions of law for the consideration of this Court: a) Whether, in the facts and circumstances of the case, the authorities were right in invoking the provisions of Sec.68 of the Act in respect of the amounts received from

ITA.13/15 2 the appellant's nephew and his Son-in-Law's father when the payments have been sent to the Appellants through normal banking channels, Instruments issued by Foreign Banks and credited to the account of the Appellant by negotiation through a Bank in India where he maintains account? b)Whether the Assessing Authority was not required to conduct enquiries regarding the claim of the Appellant that the amount was received as loan when his finding is that the appellant had not proved the credit worthiness and capacity of the creditor fully and beyond doubt, which itself would indicate that the Appellant had discharged the initial burden case on the Appellant? c) Whether the authorities erred in applying the principles laid down by the Hon'ble Supreme Court in COMMISSIONER OF INCOME TAX VS. P.MOHANAKALA - [2007] 291 ITR 278 [SC] to the facts of the case? d) Whether the authorities should not have found that the decision in Mohanakala [supra] will cover only loans taken in cash and not to receipts as per Cheques/DD as provided by the Act? 2.We heard learned counsel for the assessee and learned senior standing counsel for the Revenue. 3.Reading of the order shows that it was the admitted factual position that the assessee had received `10

ITA.13/15 3 lakhs each as loan from the aforesaid two persons who were NRIs working in the Middle East. Though the assessee contended that it was a loan, he could not furnish any document to prove the creditworthiness of the aforesaid two persons. Law is settled that under section 68 of the Income Tax Act, the initial burden is on the assessee to prove the identity of the creditor or the capacity of the creditor to advance money and the genuineness of the transaction. In so far as this case is concerned, the assessee could not produce

any

material

substantiating

the creditworthiness of the persons who alleged to have granted him the loan. In such circumstances, we cannot find fault with the decision of the Tribunal upholding the additions made under section 68. According to us, the order of the Tribunal does not give rise to any question of law for the consideration of this Court.

Appeal fails and is therefore dismissed.

Sd/- ANTONY DOMINIC, Judge. Sd/- DAMA SESHADRI NAIDU, Judge. kkb.

More judgments on Section 68

All 29,931 judgments and leading authorities on Section 68 →

Recent GST High Court judgments

Search GST case law →