G. Madhava Rao V. Assistant Commissioner of Income Tax Circle 8(1) Hyderabad

ITTA/123/2013

AI Insights

The case involves G. Madhava Rao, the appellant, who appealed against the decision of the Income Tax Appellate Tribunal which sustained the addition of Rs.30,00,000 as undisclosed income. The primary legal question was whether the Tribunal was correct in its decision. The Tribunal had found that while the identity of the creditor was established, the creditworthiness was not proven by the appellant. The court referenced several precedents to support the legal principle that the initial burden to prove the creditworthiness of the creditor lies with the assessee. The court dismissed the appeal, agreeing with the Tribunal's findings.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 796397 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 27-06-2013
• Assessment Year: misc
• Other Referred Cases: Shankar Industries v. C.I.T., Prakash Textile Agency v. C.I.T., Dhanalaxmi Steel Re-rolling Mills v. C.I.T., C.I.T. v. Divine Leasing and Finance Limited, C.I.T. v. Dwarkadhish Investments Pvt. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Keywords: Burden of Proof; Creditor; Creditworthiness; Loan; Undisclosed income
• Section: 68

Judgement Text

"THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE Ms. JUSTICE G. ROHINI INCOME TAX TRIBUNAL APPEAL NO.123 OF 2013 DATED:27.6.2013 Between: G. Madhava Rao … Appellant And Assistant Commissioner of Income Tax Circle 8(1) Hyderabad … Respondent THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE Ms. JUSTICE G. ROHINI I.T.T.A NO.123 OF 2013 JUDGMENT: (per the Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta) This appeal is sought to be admitted on the following suggested question of law. “Whether on the facts and circumstances of the case, the Hon’ble Income Tax Appellate Tribunal is right in sustaining the addition of Rs.30,00,000/- made by the authorities below as the undisclosed income of the assessee in terms of Section 68 of the Income Tax Act, 1961? We have heard the learned counsel for the appellant and gone through the impugned judgment and order of the learned Tribunal. It appears, the appellant before us was partly successful before the Tribunal. However, he is aggrieved by the portion of the judgment of the learned Tribunal whereby the learned Tribunal held that the assessee has failed to prove that the sum of Rs.30,00,000/- was received by way of loan from a creditor. It is settled position of law that it is the initial burden of appellant to prove the identity of the creditor and the creditworthiness of the creditor. The initial burden casts upon the assessee to establish the identity of the creditor and his creditworthiness by producing documents, which show that the creditor had sufficient means to advance loan. In this case, only the identity of the creditor was established, but creditworthiness of the said creditor was not established. Therefore, the initial burden to prove the creditworthiness of the creditor was not discharged. The learned Tribunal has followed the two decisions of Calcutta High Court in Shankar Industries v. C.I.T.[1] and Prakash Textile Agency v. C.I.T.[2], and a decision of this Court in Dhanalaxmi Steel Re-rolling Mills v. C.I.T.[3] in coming to the conclusion that the assessee has failed to prove that the sum of Rs.30,00,000/- was received by way of loan from a creditor. Learned counsel for the appellant has relied on two decisions of Delhi High Court in C.I.T. v. Divine Leasing and Finance Limited[4] and also another case in C.I.T. v. Dwarkadhish Investments Pvt. Ltd.[5] in support of his case. The above cited two decisions of the Delhi High Court are also on the same principle of law. In Dwarkadhish Investment Private Limited, the Delhi High Court held that though the initial burden of proof lies on the assessee yet once he proves the identity of the creditors by either furnishing their PAN number of income-tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the Revenue. Therefore, initial burden to prove the creditworthiness of the creditor is upon the assessee. The aforesaid consistent legal position has been carefully followed by the learned Tribunal. We, therefore, do not find any cogent reason to interfere with the order of the Tribunal. The appeal is accordingly dismissed. No order as to costs. ________________________ K.J. SENGUPTA, CJ ______________________ G. ROHINI, J 27.6.2013 bnr [1] [1978] 114 ITR 689 [2] [1980] 121 ITR 890 [3] [1997] 228 ITR 780 [4] [2008] 299 ITR 268 [5] [2011] 330 ITR 298 "