Saraswati Tractors Corporationthrough Its v. Commissioner Of Income Taxkarnal

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 68 of 2004Date of decision: 23.11.2010 Saraswati Tractors Corporationthrough its Proprietor Manju Singla --- Appellant Versus Commissioner of Income TaxKarnal --- Respondent CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTAL ---- PRESENT:Mr. Pankaj Jain, Advocatefor the appellant. Mr. Yogesh Putney, SeniorStanding Counsel for the respondent. ---- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-tax Act,1961 (for short “the Act’”) has been filed by the assessee against theorder dated 16.7.2003, passed by the Income Tax Appellate Tribunal,Chandigarh Bench (A), Chandigarh (in short “the Tribunal”) in ITA No.1248/CHANDI/98 relating to the assessment year 1994-95. The assessee has claimed the following substantialquestion of law for determination by this Court: “Whether under the facts and circumstances of the case and on the true and correct interpretation of theprovisions of Section 68, whether the Tribunal is justifiedin upholding the addition on the ground of lack ofexplanation for the source of, whereas when thegenuineness of the transaction and the identity of thecreditors along with the explanation of the credit standsestablished thereby complying with the requirements ofthe provisions of the Act?” Briefly stated the facts necessary for adjudication, asnarrated in the appeal are that the appellant-assessee is engaged inthe business of purchase and sale of tractors and its parts. Duringthe assessment year under reference, the assessee received loansfrom eight persons. The assessing officer made addition of Rs.95,000/- in respect of the following cash credits received by theassessee: Though according to the assessee, all the aforesaid cashcredits were received by it through account payee’s drafts, and manyother proofs in support of that fact were also produced before theassessing officer, but the assessing officer did not accept thegenuineness of cash credits and made addition of an amount of Rs.95,000/-, noticed above, vide order dated 25.2.1997, Annexure A-2. The appeal carried by the assessee against the said addition wasallowed by the Commissioner of Income Tax (Appeals), [for short“CIT(A)”] by order dated 18.9.1998, Annexure A7, whereby theaddition of Rs. 95,000/- was deleted. Aggrieved by the order of the CIT(A), the Revenuepreferred appeal before the Tribunal. The Tribunal by order underappeal reversed the order of the CIT(A) insofar as the addition of Rs.20,000/- each, advanced by Shanti Diwan and Renu Diwan; and Rs.25,000/- by Yogesh Kumar is concerned, and confirmed the order ofthe CIT(A) insofar as it related to deletion of Rs.30,000/-. In otherwords, the Tribunal, while observing that the assessing officer hadrightly rejected the genuineness of cash transactions in respect ofwhich it had made additions, and put its seal of approval on theaddition of Rs. 65,000/- except the addition of Rs. 30,000/- advancedby Yogesh Kumar. We have heard learned counsel for the parties and haveperused the record. Whether disallowance under Section 68 of the IncomeTax Act, 1961 on account of cash credits being ingenuine is the pointfor consideration in this appeal. The Tribunal had concluded that theaddition of Rs.65,000/- on account of cash credits being not genuine,on appreciation of evidence available on record, was justified. Thefinding recorded by the Tribunal affirming the disallowance is asunder:- “Coming to the balance additions of Rs.20,000,Rs.20,000 and Rs.25,000 received from Shanti Diwan, We have heard learned counsel for the parties and haveperused the record. Whether disallowance under Section 68 of the IncomeTax Act, 1961 on account of cash credits being ingenuine is the pointfor consideration in this appeal. The Tribunal had concluded that theaddition of Rs.65,000/- on account of cash credits being not genuine,on appreciation of evidence available on record, was justified. Thefinding recorded by the Tribunal affirming the disallowance is asunder:- “Coming to the balance additions of Rs.20,000,Rs.20,000 and Rs.25,000 received from Shanti Diwan, Renu Diwan and Yogesh Kumar, we find that the AO hasgiven opportunity to the assessee to produce the cashcreditors, so that the identity and genuineness of thetransactions could be verified. None of the parties is aregular assessee. We have gone through copy ofgirdawari and find that it stands in the name of RamGopal and not in the names of Shanti Diwan, Renu Diwanor Yogesh Kumar, although it has been shown thatYogesh Kumar son of Ram Gopal was cultivating theland. Thus, the ownership of the land vests with RamGopal and Shanti Diwan, Renu Diwan and Yogesh Kumardid not own land. There is no evidence on record to provethat Ram Gopal has gifted amount to Shanti Diwan, RenuDiwan and Yogesh Kumar or has given the said amountas loan to them. The money has been advanced to theassessee not by Ram Gopal but by Shanti Diwan, RenuDiwan and Yogesh Kumar. Therefore, the onus lies on theassessee to prove the creditworthiness of these parties.Creditworthiness of Ram Gopal will not discharge theonus which lies on the assessee to prove thecreditworthiness of Shanti Diwan, Renu Diwan andYogesh Kumar. Under IT Act, each individual is aseparate person/entity. Thus, the assessee must provethat all the ingredients of section 68 are complied with.There is nothing on record that the parties were havingbank a/c. The assessee has no doubt filed affidavitsconfirming advance of money received from these parties but the onus cannot be said to be discharged when theparties are closely related to the managing partner bymerely filing affidavits when the AO asked for productionof the parties. Hon'ble Calcutta High Court has held so inthe case of CIT v. United Commercial and Industrial Co(P) Ltd. 187 ITR 596. Capacity, creditworthiness to lendmoney are not proved. The law is clear, if direct evidenceis not available, then circumstantial evidence has to belooked into. No evidence has been produced which mayprove that the parties have ever made investments inearlier year/s to the extent that they have shown that theyhave received the money during the year out ofagricultural income to advance the same to the assessee.The money has not been advanced through cheques butthrough drafts and there is nothing on record which mayprove that the drafts were made out of bank a/c. of theseparties. Even the assessee has not claimed that theparties here having regular bank a/c. The only inferencewhich could be drawn is that drafts were made by payingcash. Even the assessee has not paid any interest tothese parties. Therefore, on totality of facts andcircumstances of the case, we feel that the AO has rightlyrejected the genuineness of these transactions and madethe additions. We set aside the order of CIT(A) so fardeletion of cash credits of Rs.65000/- (Rs.20,000advanced by Shanti Diwan, Rs.20,000 by Renu Diwanand Rs.25,000 by Yogesh Kumar) is concerned and confirm his order so far as it relates to deletion ofRs.30,000 advanced by Yogesh Kumar is concerned.Ground stands partly allowed.” The Tribunal on appreciation of evidence had concludedthat the cash credits amounting to Rs. 65,000/- in the name of Smt.Shanti Diwan; Smt. Renu Diwan and Yogesh Kumar were not provedto be genuine, whereas Rs. 30,000/- which was an income fromcommission received by Yogesh Kumar and converted into loanaccount, stood proved and could not be added under Section 68 ofthe Act. confirm his order so far as it relates to deletion ofRs.30,000 advanced by Yogesh Kumar is concerned.Ground stands partly allowed.” The Tribunal on appreciation of evidence had concludedthat the cash credits amounting to Rs. 65,000/- in the name of Smt.Shanti Diwan; Smt. Renu Diwan and Yogesh Kumar were not provedto be genuine, whereas Rs. 30,000/- which was an income fromcommission received by Yogesh Kumar and converted into loanaccount, stood proved and could not be added under Section 68 ofthe Act. Learned counsel for the appellant has not been able toshow any perversity or error of law in the findings recorded by theTribunal so as to persuade this Court to interfere therewith. TheTribunal while setting aside the order of the CIT(A) has elaboratelyexamined the matter in the light of the material available on recordand come to the conclusion regarding cash credits of Rs. 65,000/-not to be genuine transactions of loans received by the assessee.The Tribunal has taken a possible view on appreciation of evidenceon record. That being so, we find no merit in the appeal and thesame is dismissed. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) November 23, 2010 JUDGE*rkmalik*