2014 (5) TMI 508 - HC - Income Tax

Court affirms Tribunal's decision on cash credit validity, upholding genuineness of creditor transactions.

The High Court dismissed the Department's appeal, upholding the Tribunal's decision that the cash credit received by the assessee from eight creditors ... Genuineness of cash credits - 100% EOU into Manufacturing and export of shoes – Difference of opinion – Held that:- The issue relating to the cash credit was also examined by the Tribunal, who observed that the assessee had filed the confirmation list from the creditors, all the creditors are assessed to tax - The money was paid through account payee cheque - the identity of the creditor is established when the confirmation has been filed in each case - The payment was made through account payee cheque, so the transaction is genuine - The creditors were the income tax assessees and they have shown the amount in their accounts - creditworthiness has been proved - All the three ingredients of cash credit have been established – thus, there is no reason to interfere with the order passed by the Tribunal - no substantial question of law arises for consideration – Decided against Revenue. Issues involved:Challenge to the validity of cash credit in assessment under Section 143(3) of the Income Tax Act, 1961 for the assessment year 2003-04.Analysis:The case involved an appeal by the Department under Section 260A of the Income Tax Act, 1961 against a judgment and order passed by the Income Tax Appellate Tribunal for the assessment year 2003-04. The assessee, engaged in manufacturing and export of shoes, had received a cash credit of Rs. 17,50,000 from eight creditors during the assessment year. The Assessing Officer (A.O.) initially treated the cash credit as genuine, but the Commissioner of Income Tax (CIT) ordered a re-examination under Section 263 of the Act. The Tribunal, after a difference of opinion among its members, upheld the original assessment order, concluding the cash credit as genuine.Upon hearing both parties, the High Court observed that the A.O. had thoroughly examined the material before passing the assessment order under Section 143(3) of the Act. The Tribunal also scrutinized the cash credit, noting that the creditors were tax-assessed, payments were made through account payee cheques, and the creditors had shown the amounts in their accounts. This established the identity of the creditors, the genuineness of the transaction, and the creditworthiness of the creditors, satisfying all three key aspects of a cash credit. Consequently, the Court found no reason to interfere with the Tribunal's decision, as no substantial question of law arose from the order.In conclusion, the High Court dismissed the appeal filed by the Department at the admission stage, affirming the Tribunal's decision regarding the genuineness of the cash credit in the assessment for the relevant assessment year.