1998 (8) TMI 77 - HC - Income Tax

Court rules in favor of assessee in cash credit case under Income-tax Act

Roopchand Manoj Kumar Versus Commissioner Of Income-Tax

The High Court of GAUHATI ruled in favor of the assessee in a case concerning cash credits totaling Rs. 18,000. Despite initial doubts by tax authorities, ... Cash Credits Issues involved: Determination of whether the assessee had discharged the onus as required u/s 68 of the Income-tax Act, 1961, in relation to two cash credits.Summary:The High Court of GAUHATI considered a case where the Income-tax Officer doubted the genuineness of cash credits in the name of two individuals, Smt. Probha Bothra and Kumari Sonita Bothra, totaling Rs. 18,000. Despite efforts by the assessee to prove the identities of the creditors, creditworthiness, and genuineness of the loans, both the Income-tax Officer and the Commissioner of Income-tax (Appeals) added the amounts to the assessee's income. The matter was then brought before the Income-tax Appellate Tribunal and subsequently to the High Court for a decision.The Court noted that the primary burden of proof in cases of cash credits lies on the assessee. Referring to relevant case law, the Court highlighted that the assessee must establish the identity of creditors, their creditworthiness, and the genuineness of the transaction. In this instance, it was acknowledged that the identities of the creditors were genuine, and the legal guardian explained that the loans were accumulated from customary gifts received by the young ladies over several years. Despite the lack of direct evidence regarding the age of the creditors, the Court found the explanation plausible given societal customs of gift-giving to young individuals.Regarding the genuineness of the transaction, the Court considered the familial relationship between the assessee-firm and the creditors, suggesting a legitimate investment scenario. Confirmation letters were presented to the Income-tax Officer as evidence. The Court emphasized that the confirmatory letters were not deemed bogus, unlike in a separate case cited by the Revenue where inquiries were conducted by the Assessing Officer.After a thorough analysis of the facts and circumstances, the Court concluded that the assessee had satisfactorily discharged the primary onus to prove the nature and source of the credits. The reference was answered in favor of the assessee, rejecting the Revenue's contentions and upholding the legitimacy of the cash credits.