1998 (2) TMI 32 - HC - Income Tax

Court denies assessee's appeal, upholds tax authority's decision on cash credit source.

The High Court ruled against the assessee in a case involving the assessability of a cash credit under section 68 of the Income Tax Act, 1961. The Court ... Income, Cash Credit, Burden Of Proof Issues Involved:1. Assessability of cash credit u/s 68 of the IT Act, 1961.2. Impact of assessee's statement in proceedings under a different statute on the explanation for the source of cash credit u/s 68 of the IT Act, 1961.Summary:Issue 1: Assessability of Cash Credit u/s 68 of the IT Act, 1961The assessee, an individual, had a cash credit entry of Rs. 50,000 in their books on 29th Dec., 1975, which the ITO added to the total income for the assessment year 1976-77, as the source was not satisfactorily explained. The assessee had made a voluntary disclosure of Rs. 50,000 under the Voluntary Disclosure of Income and Wealth Act, 1976, but the declaration was not accepted due to late submission. The Tribunal, however, held that the declaration under the Voluntary Disclosure Act should be accepted as true unless discredited by evidence, and deleted the addition made by the ITO. The High Court found that the Tribunal's reliance on the unaccepted voluntary disclosure and its conclusions based on probabilities and conjectures were not sustainable. The Court emphasized that u/s 68, the onus is on the assessee to satisfactorily explain the nature and source of the credit entry, which was not done in this case. Therefore, the Tribunal's finding was not based on material evidence and was overturned.Issue 2: Impact of Assessee's Statement in Proceedings under a Different StatuteThe Tribunal accepted the assessee's explanation that the credit represented undisclosed profits of earlier years based on the voluntary disclosure. However, the High Court held that since the declaration under the Voluntary Disclosure Act was not accepted by the CIT, it could not be used to explain the source of the credit entry. The Court noted that even if the statement in the disclosure was considered, it needed corroboration by independent evidence, which was lacking. The Tribunal's conclusion that the credit entry could not be the income of the relevant year and might be from earlier years was based on conjecture and not on concrete evidence. The Court ruled that accepting such an explanation would undermine the purpose of s. 68, which places the onus on the assessee to provide a satisfactory explanation for the credit entry.Conclusion:The High Court answered both questions of law in the negative and in favor of the Revenue, stating that the Tribunal's findings were not based on valid materials and were unsustainable in law. The request to remit the matter to the Tribunal was denied due to the significant passage of time since the assessment year in question.