Ashoka Trading Co. V. Commissioner of Income Tax, Karnal

ITA/456/2006

AI Insights

The case involves M/s Ashoka Trading Co., the appellant, contesting the addition of Rs.40,000 to their income as unexplained cash credit under Section 68 of the Income Tax Act for the assessment year 1997-98. The Assessing Officer initially found some credits to be genuine but deemed the credit of Rs.40,000 in the name of Smt. Sarla Devi unexplained. This decision was upheld by the CIT(A) and the Tribunal, leading to the present appeal in the High Court. The core legal issue was the interpretation and application of Section 68 concerning the burden of proof on the assessee to explain the source of cash credits.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 808115 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 03-12-2010
• Assessment Year: misc
• Other Referred Cases: Sree Lekha Banerjee & others Vs. CIT, CIT Vs. Nivedan Vanijay Niyojan Ltd., Shankar Industries Vs. CIT, CIT Vs. Ruby Traders & Exports Ltd., CIT Vs. Nivedan Vanijya Niyojan Ltd., CIT Precision Finance Pvt. Ltd., Smt. Shanti Devi
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: YOGESH PUTNEY
• Assessee Lawyers: RUSHTAM KAPOOR
• Keywords: Burden of Proof; Income tax assessment; Section 68; Unexplained cash credit
• Section: 68

Judgement Text

"ITA No. 456 of 2006 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 456 of 2006 Date of Decision: 3.12.2010 M/s Ashoka Trading Co. ....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. Rushtam Kapoor, Advocate for the appellant. Mr. Yogesh Putney, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1. This appeal was admitted by this Court vide order dated 22.1.2007 for determination of the following substantial question of law:- “Whether under the facts and circumstances of the case the Tribunal is justified in arriving at the findings on the true and correct interpretation of the provisions of Section 68 which are misconceived?” 2. Briefly stated the facts for adjudication as narrated in the instant appeal are that the assessee filed its return of income on 31.8.1997 for the assessment year 1997-98 declaring an income of Rs.59,110/-. The case of the assessee was taken up for scrutiny and the Assessing Officer found the credits in the names of Ram Kumar and ITA No. 456 of 2006 -2- Risal of Rs.40,000/- and Rs.86,012/- respectively to be genuine whereas credit of Rs.40,000/- in the name of Smt. Sarla Devi was held to be unexplained. Accordingly, vide order dated 31.1.2000 the Assessing Officer made various additions and completed the assessment at Rs.1,42,560/-. Feeling aggrieved, the assessee approached the Commissioner of Income Tax (Appeals) [in short “the CIT(A)”] who vide order dated 5.5.2003 partly allowed the appeal. However, the addition of Rs.40,000/- made by the Assessing Officer on account of cash credit in the name of Sarla Devi to be unexplained income of the assessee under Section 68 of the Act was affirmed. On further appeal by the assessee, the Income Tax Appellate Tribunal, Bench “A”, Chandigarh (hereinafter referred to as “the Tribunal”) vide order dated 24.3.2006 while partly allowing the appeal of the assessee, upheld the aforesaid addition of Rs.40,000/-. Hence, the present appeal by the assessee. 3. We have heard learned counsel for the parties. 4. The solitary question in this appeal is with regard to the addition of Rs.40,000/- under Section 68 of the Act which has been sustained by all the three authorities below. 5. The Tribunal while upholding the aforesaid addition had held as under:- “We have given our careful consideration to the rival contentions. It is well settled principle of law that the onus to establish the genuineness of the credit in the books of accounts is upon the assessee. Mere filing of confirmatory letters or particulars is not enough to discharge the onus. Even filing of the affidavit of the creditor is not sufficient to discharge the onus. This ITA No. 456 of 2006 -3- principle of law is established by the ratio of following decisions: i) Sree Lekha Banerjee & others Vs. CIT 49 ITR 112(SC). ii) CIT Vs. Nivedan Vanijay Niyojan Ltd. 263 ITR 623 (Cal). iii) Shankar Industries Vs. CIT 114 ITR 689 (Cal). iv) CIT Vs. Ruby Traders & Exports Ltd. 182 CTR 596 (Cal). v) CIT Vs. Nivedan Vanijya Niyojan Ltd. 182 CTR 605 (Cal). vi) CIT Precision Finance Pvt. Ltd. 208 ITR 465 (Cal). Moreover, the Assessing Officer has rightly placed reliance on the decision of the jurisdictional High Court of Punjab & Haryana in the case of Smt. Shanti Devi (supra) to support the finding that where the creditor did not maintain any personal books of accounts, the Assessing Officer is entitled to enquire and satisfy himself about the sources of money in the hands of the creditor. In this case, though the creditor had admitted to have advanced the money to the assessee, the source of money deposited in the bank account out of which the money was advanced to the assessee was not explained. The mere statement that a sum of Rs.40,000/- was saved out of house-hold expenses is bereft of substance. The lady creditor does not have any source of income and therefore, accumulation of Rs.40,000/- cash, advanced to the assessee, routed through bank account is not satisfactorily explained. The Assessing Officer was, therefore, justified in making the addition of Rs.40,000/-. The additional evidence furnished by the assessee before us is also of no consequence in so far as the source of credit of ITA No. 456 of 2006 -4- Rs.40,000/- has not been satisfactorily explained. Mere payment by cheque is not enough to discharge the onus. We, therefore, confirm the addition of Rs.40,000/-.” 6. The Assessing Officer, CIT(A) and the Tribunal on appreciation of the evidence on record had arrived at the conclusion that the cash credit of Rs.40,000/- in the name of Smt. Sarla Devi was unexplained income of the assessee under Section 68 of the Act as the explanation furnished by the assessee was not satisfactory. Learned counsel for the appellant made valiant efforts to demonstrate that the finding recorded was perverse but only effort was to reappreciate the evidence and conclude otherwise. This does not fall within the domain of Section 260A of the Act. The Tribunal has taken a plausible view on appreciation of material on record. Accordingly, the substantial question of law is answered against the assessee and finding no merit in the appeal, the same is hereby dismissed. (AJAY KUMAR MITTAL) JUDGE December 3, 2010 (ADARSH KUMAR GOEL) gbs JUDGE "