1983 (9) TMI 25 - HC - Income Tax

Court upholds deletion of income addition, emphasizes burden of proof shift failure by Department.

The High Court upheld the Tribunal's decision to delete the addition of Rs. 41,500 to the assessee's income, citing that the Department failed to shift ... Burden Of Proof, Cash Credits Issues Involved:1. Legality of the deletion of the addition of Rs. 41,500.2. Allowing the interest by the Tribunal.Summary:Issue 1: Legality of the Deletion of the Addition of Rs. 41,500The assessee, a registered firm deriving income from jute, had a credit of Rs. 41,500 in its books in the name of M/s. Laxmi Narayan Atma Ram. The ITO added this amount to the assessee's income, citing a confession by the creditor before income-tax authorities at Bombay that their transactions were not genuine. The AAC confirmed this addition, stating that the confirmatory letter from the creditor became meaningless due to the confession. However, the Tribunal deleted the addition, noting that the primary onus was discharged by the assessee by providing the creditor's address and G.I.R. number. The Tribunal found that the Department did not verify the creditor's statement or produce the confession. The High Court agreed with the Tribunal, stating that the initial onus was discharged by the assessee and the Department failed to shift the onus back to the assessee by not summoning the creditor or verifying the statements.Issue 2: Allowing the Interest by the TribunalThe Tribunal allowed the interest on the disputed amount, reasoning that the confession by the creditor was not made available to the assessee or the Tribunal. The High Court upheld this decision, emphasizing that the Department did not take necessary steps to verify the creditor's capacity or the genuineness of the transaction. The High Court concluded that the assessee had fulfilled its obligation under s. 68 of the I.T. Act by providing the correct name, address, and G.I.R. number of the creditor, and the onus shifted to the Department, which was not discharged.Additional Observations:Justice Sushil Kumar Jha concurred with the judgment but added that the purpose of s. 131 of the Act is to verify the capacity and genuineness of the creditor's transaction. He emphasized that once the assessee provides the creditor's identity, address, and G.I.R. number, the onus shifts to the Department to use its powers under s. 131 to verify the creditor's capacity and the genuineness of the transaction. The assessee is not expected to know the sources of the creditor's income, and it is the Department's duty to investigate further if there is any suspicion.Conclusion:The High Court answered the question in the affirmative, holding that the deletion of the addition of Rs. 41,500 and allowing the interest by the Tribunal was legal and proper. The judgment was in favor of the assessee and against the Revenue.