M/S. Sunit Engineering And Industrialcorporation Kotkapura v. The Commissioner Of Income-Tax Jalandhar

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH --- Income-tax Reference Nos. 200 and 201 of 1995Date of Decision: July 1, 2010 M/s. Sunit Engineering and IndustrialCorporation Kotkapura --- Petitioner Versus The Commissioner of Income-tax Jalandhar --- Respondent CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTAL *** PRESENT: Mr. Sanjay Bansal, Senior Advocate with Ms. Sweta , Advocate for the petitioner. Ms. Sweta , Advocate for the petitioner. Mr. Vivek Sethi, Advocatefor the respondent. --- AJAY KUMAR MITTAL, J. This order will dispose of Income-tax Reference Nos. 200 and 201 of 1995. The Income-tax Tribunal, Amritsar Bench, Amritsar hasreferred the following questions of law, for the opinion of this Court: 1- Whether in the facts and circumstances of the case,the Tribunal was justified in law in admitting andbringing on its file additional evidence furnished by theassessee in its Paper Book at the time of hearing ofthe Tribunal was justified in law in admitting andbringing on its file additional evidence furnished by theassessee in its Paper Book at the time of hearing of the appeal, which had been collected by the AssessingOfficer after the passing of the assessment order andeven after the decision of assessee’s first appealwithout recording reasons therefor in violation of themandate of Rule 29 of the Income-tax AppellateTribunal Rules, 1963? 2- Whether in the facts and circumstances of the case,the finding recorded and the conclusion reached bythe Tribunal that the assessee had failed to explainwithin the ambit of section 68 of the Income-tax Act,1961, the cash credits in question totaling Rs.9,51,200/-, are vitiated by errors of law, failure to takeinto account the relevant material and considerationtaking into account irrelevant consideration andinadmissible evidence.”the finding recorded and the conclusion reached bythe Tribunal that the assessee had failed to explainwithin the ambit of section 68 of the Income-tax Act,1961, the cash credits in question totaling Rs.9,51,200/-, are vitiated by errors of law, failure to takeinto account the relevant material and considerationtaking into account irrelevant consideration andinadmissible evidence.” The controversy herein pertains to the assessment year 1983-84. The assessing officer while framing assessment hadcome to the conclusion that the cash credit amounting to Rs.9,51,200/- in respect of 12 persons was not genuine and had,therefore, added the same to income of the assessee under Section68 of the Act. The Commissioner of Income-tax (Appeals) whileupholding the order of the assessing officer whereby addition of Rs.9,51,200/- was made in the returned income of the assessee in para7.3 of his order had recorded as under: “7.3. I have considered the contention of the appellantcounsel on facts and arguments on the concluding datecounsel on facts and arguments on the concluding date of hearing and the earlier submissions made and I havealso considered the contentions of the Department.However, all these case law relate to one point that forproving the cash credits introduced in the books ofaccount in the name of third party following threeingredients must be satisfied in view of Calcutta HighCourt 114 ITR 689: i)Identity of the creditor is to be established byappellant.appellant. ii)The genuineness of the transaction is to be provedby the appellant.by the appellant. iii)The credit worthiness of the creditor is also to beestablished by the appellant.established by the appellant. “7.3. I have considered the contention of the appellantcounsel on facts and arguments on the concluding datecounsel on facts and arguments on the concluding date of hearing and the earlier submissions made and I havealso considered the contentions of the Department.However, all these case law relate to one point that forproving the cash credits introduced in the books ofaccount in the name of third party following threeingredients must be satisfied in view of Calcutta HighCourt 114 ITR 689: i)Identity of the creditor is to be established byappellant.appellant. ii)The genuineness of the transaction is to be provedby the appellant.by the appellant. iii)The credit worthiness of the creditor is also to beestablished by the appellant.established by the appellant. And further so far as the addition of cash credits asincome from undisclosed sources, it is a question onfacts only and for deciding the same in view of 119 ITR785 and 166 ITR 632 (MP) the facts and circumstancesof each case are to be considered. Hence so far the caselaw quoted by the appellant and the ITO are concernedthese are relevant no doubt but are not of anyconsequence to either of the party because the questionwhether the cash credit is the income of the appellant oris to be proved keeping in view the facts andcircumstances of each cash credit. I am, therefore,keeping this principle in view giving the finding as under: i)The ITO has following the legal formalities correctly whenhe gave opportunity to the appellant to produce the affidavit and thereafter he cross examined the so calledcash creditors in order to find out the contents of theaffidavits and to know whether the cash credits aregenuine or not and for that purpose he has given fullopportunity of cross examination to the appellant andthereafter he came to the conclusion that loanoutstanding in the name of all the 12 parties referred toabove are not genuine rather the appellant hasintroduced his own concealed amount in the garb ofcredits in the name of third parties. He based hisconclusion that only the identity of the creditor wasestablished and the transactions were not genuine andthirdly all the 12 creditors were not men of means toadvance such heavy amounts to the appellant. ii)He has found that these so called creditors were therelation of one Mr. Vijay Kumar, partner of the appellant-firm;relation of one Mr. Vijay Kumar, partner of the appellant-firm; iii)The amounts have been advanced in cash only and notthrough cross cheques or bank drafts; through cross cheques or bank drafts; iv)There is no bank account of all the creditors.” The said order was upheld by the Tribunal. A perusal ofthe orders passed by the authorities below confirms that theconcurrent findings recorded by them are based on appreciation ofevidence. Learned counsel for the petitioner-assessee could notdemonstrate before us that there was any error of jurisdiction or thatthe findings recorded by the authorities below that the cash credits in Income-tax Reference Nos. 200 and 201 of 1995 the sum of Rs. 9,51,200/- are unexplained and would fall withinpurview of the provisions of Section 68 of the Income-tax Act, 1961are perverse or illegal in any manner. Accordingly, question No.2, asreferred to above, is decided against the assessee. Once the answer to question No.2 is against theassessee, it was not seriously disputed by the counsel for thepetitioner that question No.1 does not survive for consideration of thisCourt. In view of the above, the Reference stands answeredaccordingly. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) JUDGE