ITAT, AGRA BENCH Requirement of section 68 of IT Act, 1961 to prove identity, creditworthiness and genuineness of cash credits

Requirement of section 68 of IT Act, 1961 to prove identity, creditworthiness and genuineness of cash credits



When the particulars regarding income-tax assessments and bank account of creditors have been filed then initial burden has to be held to be discharged by the assessee and then the burden shifts on the Revenue to show that what is stated or explained by the assessee is not satisfactory.



ITAT, AGRA BENCH (THIRD MEMBER) AGRA

Kalyan Memorial & Charitable Trust

v.

ACIT

ITA NO. 233/Agr./2006

May 20, 2009



RELEVANT EXTRACTS:

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17. I have carefully considered the rival submissions. I have also carefully gone through the orders of learned Judicial Member and Accountant Member and also the impugned assessment order & order of CIT (A). So far as it relates to the evidences submitted by the assessee to prove the cash credits, there is no dispute that the same were placed on record. The evidences, as discussed above, are in the shape of confirmations, copies of bank accounts, and acknowledgements of Income-tax returns filed for the preceding 4 to 5 years in the case of each creditor. In all the confirmations, the P.A. Number has been mentioned alongwith the address of the creditor. It is not the case of the AO that the P.A. Number given on the confirmations does not found place in the Income-tax records of the respective creditors. It is also not the case of the AO that the copies of bank account which have been given to substantiate the cash credit are not the copy of bank account of the creditors. If it is so, the AO could have verified either from the Income-tax record or from the record of bank to establish that such creditor was unidentifiable and the addresses given by the assessee were not correct addresses. From the entire assessment order, it cannot be made out that at any moment, ^ie AO had asked the assessee to produce the creditors. It is only stated that the summons issued to the creditors could not be served and therefore, the assessee was required to submit evidences to substantiate the cash credits found in its books of accounts in respect of these creditors. Each of the creditors was having substantial opening credit balance in the books of the assessee which has also been confirmed in the confirmations filed before the AO. Unless it is established that the creditor is not found at the P.A. Number given by him and the bank account of the creditor does not reveal the correct position, it cannot be presumed that the credit in the books of assessee is non-genuine.

18. According to section 68 where any sum is found credited in the books of assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to Income-tax as the income of the assessee for that previous year. Therefore, according to the requirement of section 68, the sum credited in the books of accounts can be considered to be the income of the assessee in a case where the assessee does not offer any explanation or the explanation offered by him, in the opinion of AO, is not satisfactory.

19. Now the explanation of the assessee in the present case is that all these creditors are Income-tax assessees and their P.A. Numbers have been given alongwith their copy of bank account as well as proof of filing returns of income for the year under consideration as well as preceding years. Whether by filing these evidences, it can be said that the assessee had discharged the initial burden laid upon him u/s. 68. Certainly, when the particulars regarding Income-tax assessments and bank account have been filed then initial burden has to be held be discharged and then the burden shifts on the Revenue to show that what is stated or explained by the assessee is not satisfactory. No material, whatsoever, has been brought on record by the department to show that what was explained by the assessee, was not a correct state of affairs. If any sum is found credited in the accounts of the creditors, then the creditors may be examined so as to explain the credit. So far as the source of deposit in the account of the assessee is concerned, the assessee can be considered to have explained by bringing the material on record in the shape of confirmations, bank account and Income-tax Numbers of that person. This proposition is supported by the decision of Hon'ble Supreme Curt in the case of CIT vs. Orissa Corporation (supra). It has also been so held by Gujrat High Court in the case of DOT vs. Rohini Builders (supra) that where the assessee had given the proof regarding identity of the creditors and the amounts were received by account payee cheques. P.A. / GIR numbers were also given and it was held that initial burden of proving the credit was discharged. It was also held that the sources of credit need not to be proved.

20. The reliance by the Id. CIT(A) on the decision in the case of CIT vs. Precision Finance Ltd. (supra) is misplaced, as in the said case enquiry was made by the department through Inspector which revealed that the creditors were not round at the Income-tax files which were mentioned by the assessee and also the creditors were not found at the addresses given. It was found that the identity of the creditors was not established. I lowever, in the present case, it is not the case of the AO that the creditors are not found in the record of revenue at the P.A. Numbers given by the assessee.

21. Similarly, in the case of CIT vs. United Commercial Co. Ltd. (supra) relied upon by the Id. CIT(A), the creditors have confessed before the AO and confirmatory letters filed by them were found to be collusive, fictitious and false. Thus, it was held that mere confirmation and the fact that the transaction was made through bank account, do not establish their genuineness. In the present case, there is no confession of the creditors and the confirmatory letters are also not found to be collusive, fictitious and false.

22. As against this, the judgment of Hon'ble M.P. High Court in the case of CIT vs. Barjatiya Children Trust (supra) relied upon by the Id. AR clearly supports the case of the assessee. In that case, it was held by the Tribunal that where the amount was mentioned in the balance sheet of the creditor, the AO should have taken pain to examine the Income-tax file of the creditor, but instead he chose the easier way of ordering the production of the creditor, which was not found appreciable by the Tribunal. The production of cash creditor was observed to be insisted upon only when the genuineness of the transaction could not be established with the help of documents and the records of Income-tax Department itself. Such observations of the Tribunal were upheld. '

23. In view of the above discussion, I concur with the finding of the learned Judicial Member that ample evidences were produced by the assessee to discharge the initial burden. The AO has not brought any material on record to show that the explanation filed by the assessee was, in any manner, unsatisfactory. The evidences filed by the assessee remain un-rebutted. Therefore, the addition could not be made u/s. 68 of the Act and the learned Judicial Member was right in holding that the addition was liable to be deleted.

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