Ita.7 Of 2006 v. We Notice That The Decision Of The Delhi Highcourt Was Rendered Without Noticing Section 68 Of The Act.section 68, As It Stood Then, Reads As Under

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN& THE HONOURABLE MR. JUSTICE ASHOK MENON TUESDAY, THE 18TH DAY OF SEPTEMBER 2018 / 27TH BHADRA, 1940 I.T.A.No.7 of 2006 AGAINST THE ORDER IN ITA 326/COCH/2002 DATED 28-06-2006 OF I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT/ RESPONDENT IN I.T.A:- M/S.S.T.REDDIAR & SONS (P)LTD.MAIN ROAD, KOLLAM. BY ADVS.SRI.E.K.NANDAKUMAR (SR.) SRI.ANIL D. NAIR RESPONDENT/S: ASST. COMMISSIONER OF INCOME TAX,INVESTIGATION CIRCLE, KOLLAM. BY SENIOR COUNSEL FOR GOI (TAXES)SRI.P.K.R.MENON STANDING COUNSEL FOR GOI(TAXES)SRI.JOSE JOSEPH THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 18.09.2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:- JUDGMENT The appeal is by the assessee, against the order of the Tribunal. The questions of law framed are as follows: "i.In the facts and circumstances of the case theTribunal ought not to have come to the conclusionthat the genuineness and capacity of the creditorhad not been proved, when positive evidence hadTribunal ought not to have come to the conclusionthat the genuineness and capacity of the creditorhad not been proved, when positive evidence had been tendered by the appellant and the departmenthad no evidence at all to disprove the above provedfacts. ii.The income tax Appellate Tribunal ought to havecome to the conclusion based on the decision of theHon'ble Supreme Court in 251 ITR 263 that under nocircumstances could the amount of share capital beregarded as undisclosed income.iii. In the facts and circumstances of the case, theDepartment is not entitled to draw inferences basedon surmises and conjunctures. iv. In the facts and circumstances of the case, theTribunal ought to have found that the sum of Rs.2lakhs cannot be treated as an undisclosed income ofthe Appellant". 2. The short facts to be noticed are that in the assessment year 1992-93, there was detected an amount ofRs.3,25,000/- credited to the accounts of the assessee termedas "advance" towards allotment of shares in the Company. TheAssessing Officer [for brevity "AO"] treated the same as"cash credit” under Section 68 of the Income Tax Act, 1961[for brevity "the Act"]. There was a notice issued and theassessee submitted an explanation. Rs.1,25,000/-, which wasreceived from five persons, was accepted as advance share allotment money. As far as Rs.2,00,000/-, the assesseesubmitted that it was received from one Smt.Rukmini Ammal. The AO was not satisfied about the source of income and,hence, the finding earlier made with respect to that amountwas reiterated. The assessee took it in appeal before thefirst appellate authority. The first appellate authorityfound, relying on the decisions in CI.T. v. StellarInvestment Ltd. [(1991) 192 ITR 287 (Delhi)] and C.I.T. v.Steller Investment Ltd. [(2001) 251 ITR 263 (SC)], thatproceedings could be taken only against the person who issaid to have made such investment, whose identity isdisclosed, as an unexplained investment under Section 69 ofthe Act. The Tribunal reversed the order of the firstappellate authority and found the amounts liable to betreated as cash credit under Section 68. The assessee is inappeal. 3. We notice that the decision of the Delhi HighCourt was rendered without noticing Section 68 of the Act.Section 68, as it stood then, reads as under: "S.68. Cash Credit.- Where any sum is found credited in the books of anassessee maintained for any previous year, and theassessee offers no explanation about the nature andsource thereof or the explanation offered by him isnot, in the opinion of the Assessing Officer,satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of thatprevious year". 3. We notice that the decision of the Delhi HighCourt was rendered without noticing Section 68 of the Act.Section 68, as it stood then, reads as under: "S.68. Cash Credit.- Where any sum is found credited in the books of anassessee maintained for any previous year, and theassessee offers no explanation about the nature andsource thereof or the explanation offered by him isnot, in the opinion of the Assessing Officer,satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of thatprevious year". Hence, when a sum is credited in the books of accounts of theassessee, there should be an explanation offered by theassessee as to the nature and source thereof. If no suchexplanation is offered and when the explanation is notsatisfactory, then the sum credited can be charged toincome-tax as the income of the assessee of the previousyear. Here, though there was an explanation offered, the samewas found to be not satisfactory.4. Though this is an appeal under Section 260A ofthe Act and we are not obliged to look into the facts; wehave still gone through the order of the AO to understand asto the explanation submitted. By the time the assessment wastaken up, the investor died. The daughter-in-law of thedeceased submitted that her mother-in-law would have madesuch investment out of cash in hand. In fact, the specificsubmission made by the daughter-in-law before the AO was thather husband, the son of the investor, died in the year 1965and her father-in-law died in 1975. The mother-in-law is saidto have been carrying on small chitty and financing business.It is very unlikely that a person carrying on small chittyand financing business could raise Rs.2,00,000/- as advance for investment in a Company in the year 1992. We, hence, findthat the essential question raised is on facts as to thesatisfactory nature of the explanation offered. 5. We do not think that the reliance placed on thedecision of the Delhi High Court can be sustained especiallyin view of the fact that Section 68 was not noticed by theDelhi High Court. We, hence, refuse to answer the questionsof law, on the ground that there was no positive evidencetendered by the assessee as to the source of the amountsshown in the accounts and the explanation offered was alsofound to be not satisfactory. The appeal, for the above reasons, would standrejected. Parties are left to suffer their respective costs. Sd/- K.VINOD CHANDRAN JUDGE Sd/- ASHOK MENONJUDGE ITA.7 of 2006 APPENDIX PETITIONER'S/S ANNEXURES: ANNEXURE ATRUE COPY OF THE ASSESSMENT ORDER NO.1992-93DATED 24.3.2000 ANNEXURE B TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 20.4.02 ANNEXURE CTRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH DATED 28.7.06 '-RESPONDENTS/S ANNEXURES: NIL. Vku/- [true copy]