1994 (7) TMI 45 - HC - Income Tax

Tribunal Orders Reevaluation of Investments, Emphasizes Burden on Taxpayer

The Tribunal remitted the case back for individual assessment of investments, expressing dissatisfaction with the explanations provided by the assessee. ... Cash credits under section 68 - burden of proof on the assessee - unexplained investment - individual entry scrutiny - plausibility of explanation not sufficient - remand for fresh consideration - tribunal's finding vitiated by internal contradictionCash credits under section 68 - burden of proof on the assessee - individual entry scrutiny - plausibility of explanation not sufficient - tribunal's finding vitiated by internal contradiction - remand for fresh consideration - Validity of the Tribunal's confirmation of the Commissioner (Appeals) order where the Tribunal simultaneously expressed doubt that some investments were not genuine, and the appropriate remedy. - HELD THAT: - Section 68 imposes on the assessee the burden of satisfactorily explaining cash credits; if the explanation is unsatisfactory the amounts may be treated as assessable income. The assessing officer relied on several cogent factors and many creditors were not produced; the Commissioner (Appeals) accepted the assessee's explanation as plausible. The Tribunal, however, while upholding the Commissioner (Appeals), recorded that some investments appeared not genuine and expressed doubt about the correctness of the explanation. Such internal contradiction vitiates the Tribunal's confirmation because the Tribunal was not satisfied that all investments were satisfactorily explained. The Court emphasised that each credit/entry must be examined individually on the evidence and explanation offered; plausibility or lapse of time does not convert unexplained investments into explained ones. Where the Tribunal is in doubt about genuineness of particular investments, the proper course is to remit to the Tribunal (or lower authority) to consider each individual investment and allow only those amounts which are satisfactorily explained, or to give the assessee opportunity to prove those entries, rather than confirming the Commissioner (Appeals) order in toto.The Tribunal was not justified in confirming the Commissioner (Appeals) order in view of its own doubt about the genuineness of some investments; the matter is remitted for fresh consideration of each individual investment and allowance only to the extent satisfactorily explained.Final Conclusion: Reference answered for the Revenue; the Tribunal's order is set aside to the extent indicated and the matter is remitted to the Tribunal to examine each investment entry individually and to allow only those investments which are satisfactorily explained. Issues involved:The judgment addresses the question of law referred by the Income-tax Appellate Tribunal regarding the justification of confirming the Commissioner of Income-tax (Appeals') order in relation to unexplained investments made by the assessee.Details of the Judgment:The case involved investments made by the assessee in a company, with the source of acquisition being explained as borrowed money from transporters. However, the Income-tax Officer found discrepancies in the explanations provided, leading to the investments being considered unexplained.Upon appeal, the Commissioner of Income-tax (Appeals) found the additions to be explained and proved, with confirmations from creditors submitted. The Tribunal noted the difficulty in conclusively determining the sources of the investments and upheld the Commissioner's decision based on the lack of verifiable information.The Tribunal's observations highlighted doubts regarding the genuineness of some investments, leading to a finding that some cash credits were not genuine. This raised concerns about the overall explanation provided by the assessee and the need for a more thorough verification process.The judgment emphasized the burden on the assessee to satisfactorily explain cash credits found in their books, with failure to do so resulting in the sum being charged to income tax. The Tribunal's duty was to either remit the matter for further investigation or allow the assessee to prove the legitimacy of the investments.The Tribunal's acknowledgment of doubts regarding the investments indicated a lack of satisfaction with the explanations provided, leading to a conclusion that not all investments were genuine. This inconsistency in the Tribunal's decision was deemed unjustified, resulting in the matter being remitted back for individual investment assessment.In conclusion, the judgment favored the Revenue, highlighting the need for a detailed examination of each investment with satisfactory explanations required for their allowance. The Tribunal was directed to reconsider each investment based on the provided explanations, emphasizing the importance of thorough verification in such cases.