Blowell Auto P. Ltd. V. Assistant Commissioner of Income Tax Circle I, Faridabad

ITA/430/2007

AI Insights

The case revolves around an appeal by M/s Blowell Auto P. Ltd. against the order of the Income Tax Appellate Tribunal, which sustained an addition of Rs. 2,50,000 to the assessee's income for the Assessment Year 1993-94. The addition was initially made by the Assessing Officer under Section 143(3) of the Income Tax Act, 1961, on the grounds that the assessee failed to prove the creditworthiness of the creditors and the genuineness of the transactions. The Commissioner of Income Tax (Appeals) upheld this addition, which was partially contested at the ITAT level, resulting in the deletion of a smaller amount but the sustenance of the larger addition. The High Court, after reviewing the affidavits and the materials presented, concurred with the findings of the lower authorities, emphasizing the need for the assessee to establish not only the identity but also the capacity and genuineness of the financial transactions.

• Counselvise Citation: [2008] 140 COUNSELVISE.COM (IT) 691517 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 27-03-2008
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: A P JAIN
• Keywords: Credit-worthiness; Genuineness of transactions; Loan; Share capital investment; Unexplained cash credit
• Section: 143(3); 260-A

Judgement Text

"IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.A. No. 430 of 2007 DATE OF DECISION : 27.03.2008 M/s Blowell Auto P. Ltd. .... APPELLANT Versus Assistant Commissioner of Income Tax Circle I, Faridabad ..... RESPONDENT CORAM :- HON'BLE MR. JUSTICE SATISH KUMAR MITTAL HON'BLE MR. JUSTICE RAKESH KUMAR GARG Present: Mr. A.P. Jain, Advocate, for the appellant-assessee. * * * SATISH KUMAR MITTAL, J. ( Oral ) The instant appeal filed by the assessee under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as `the Act') is directed against the order dated 19.1.2007 passed by the Income Tax Appellate Tribunal, Delhi Bench `SMC' Delhi (hereinafter referred to as `the ITAT') in ITA No. 4135 (Del) 2005 in case of the assessee for the Assessment Year 1993-94, by raising the following substantial question of law :- “1. Whether in the facts and circumstances of the case and in law, the ITAT was correct in sustaining an aggregate addition of Rs. 2,50,000/-, representing the loans and share capital investment, as unexplained cash credit? ITA No. 430 of 2007 -2- In the present case, the Assessing Officer framed the assessment under Section 143 (3) of the Act while making an addition of Rs. 2,85,000/- on the ground that the appellant has failed to prove the credit worthiness of the creditors, namely Mrs. Sukha Goyal, Mr. Lav Goyal and Smt. Sumita Shekhar, and the genuineness of the transactions of loan and investments made by those creditors. The said order was challenged in appeal by the assessee. The Commissioner of Income Tax (Appeals) [hereinafter referred to as `the CIT (A)'], vide its order dated 22.8.2005, dismissed the appeal and confirmed the addition made by the Assessing Officer. Aggrieved against the said order, the assessee filed appeal before the ITAT, which was allowed in part vide order dated 19.1.2007 and the addition of Rs. 35,000/- on account of unsecured loan of Smt. Sumita Shekhar, sustained by the CIT (A), was deleted. However, the finding recorded by the Assessing Officer that the assessee failed to establish the source of income, genuineness and credit worthiness of Mrs. Sukha Goyal, Mr. Lav Goyal was confirmed. We have heard counsel for the appellant and gone through the impugned order, passed by the CIT (A). In this case, one Smt. Shikha Goyal had advanced loan of Rs.55,000/- and subscribed Rs. 45,000/- as share application money. Another creditor, namely Mr. Lav Goyal, had advanced a loan of Rs.1,05,000/- and subscribed Rs. 45,000/- by way of share application money. Though the assessee has established the identity of both these ITA No. 430 of 2007 -3- creditors by filing their affidavits, but in the affidavits, they have not mentioned any specific source of money which was advanced by them. It is well settled that it is for the assessee to prove not only the identity of the creditor, but the capacity of the creditor to advance the money and also the genuineness of the transaction. In the instant case, the assessee has though established the identity of both the aforesaid creditors by producing their affidavits, but a finding of fact has been recorded to the effect that the assessee has failed to prove the capacity of these creditors to advance the money and genuineness of the transaction. A perusal of the affidavits, annexed with the appeal, shows that the creditors have only mentioned that they advanced the amount to the assessee from their savings, but no saving account number of the bank or any other material showing the source of income has been mentioned. Except these two affidavits, no other material was produced to establish the credit worthiness of the creditors. Since the authorities have recorded a pure finding of fact, which in our view is neither illegal nor perverse, we are of the opinion that no substantial question of law is arising from the order of the ITAT, therefore, we do not find any merit in this appeal. Dismissed. ( SATISH KUMAR MITTAL ) JUDGE March 27, 2008 ( RAKESH KUMAR GARG ) ndj JUDGE "