Facts of the Case

The assessee, M/s Dharmendar Pratap Singh, was subjected to scrutiny assessment under Section 143(3) of the Income-tax Act. During assessment proceedings, certain amounts were found credited in the books of accounts. The Assessing Officer treated these credits as unexplained cash credits under Section 68 on the ground that the assessee failed to substantiate the nature and source of such amounts. The CIT(A) confirmed the additions, leading the assessee to file an appeal before the Income Tax Appellate Tribunal.

Issues Involved

  1. Whether the additions made under Section 68 for unexplained cash credits were justified.
  2. Whether the assessee discharged the burden of proving identity, creditworthiness, and genuineness of the transactions.
  3. Whether the orders of the lower authorities required interference by the Tribunal.

Petitioner’s (Assessee’s) Arguments

  • The assessee contended that the credits recorded in the books were genuine.
  • Necessary details and explanations had been furnished before the Assessing Officer.
  • It was argued that the additions were made without properly appreciating the evidence on record.
  • The assessee sought deletion of the additions sustained by the CIT(A).

Respondent’s (Revenue’s) Arguments

  • The Revenue submitted that the assessee failed to discharge the statutory burden under Section 68.
  • The identity and creditworthiness of the persons from whom the credits were received were not satisfactorily established.
  • The genuineness of the transactions remained unproven.
  • Therefore, the Assessing Officer rightly treated the amounts as unexplained income.

Court Order / Findings (ITAT Allahabad)

The Tribunal observed that under Section 68, the burden lies upon the assessee to satisfactorily explain the nature and source of any sum credited in the books of account. This includes proving:

  • Identity of the creditor
  • Creditworthiness of the creditor
  • Genuineness of the transaction

In the present case, the assessee failed to furnish sufficient evidence to establish these essential ingredients. Mere entries in the books or general explanations were held insufficient.

Accordingly, the ITAT upheld the findings of the Assessing Officer and the CIT(A), sustaining the addition made under Section 68.

Important Clarification

The Tribunal reiterated that the onus under Section 68 is substantive and cannot be discharged by mere assertions. Documentary evidence demonstrating financial capacity and genuine transaction is mandatory. Failure to provide such evidence empowers the tax authorities to treat the credits as unexplained income.

 

Link to download the order –https://itat.gov.in/public/files/upload/1606470683-ITA%20197%20OF%202018.pdf

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