2017 (12) TMI 133 - HC - Income Tax

High Court upholds Tribunal decision on disputed tax amount under Income Tax Act Section 68

The Commissioner of Income Tax Versus M/s Lal Mohar And Others, M/s Rajendra Kumar And Others

The Commissioner of Income Tax Versus M/s Lal Mohar And Others, M/s Rajendra Kumar And Others - [2018] 409 ITR 95 (All) Issues:1. Whether members of AOP have distinct identity vis-a-vis as its constituent firm as in the case of partners & firm u/s 184.2. Whether the unexplained capital introduced by member of AOP can be assessed as unexplained capital of the constituent firm.3. Whether AOP by merely providing PAN/GIR and Income Tax Return its members establish their creditworthiness and also discharge its onus u/s 68.Analysis:Issue 1: The case involved an appeal under Section 260A of the Income Tax Act against the order of the Income Tax Appellate Tribunal regarding the assessment year 2001-02. The Assessing Officer disbelieved cash credit entries in the books of the assessee, an Association of Persons (AOP), and added the amount to its income. The Tribunal remanded the matter for fresh assessment. The CIT (Appeals) allowed the appeal, emphasizing the identity, genuineness, and creditworthiness of the depositors. The Tribunal noted that the revenue relied on judgments from the High Courts but did not challenge the genuineness of the cash credit entries. The High Court held that no addition can be made in the first year of business without any business activity generating income, distinguishing previous cases and upholding the Tribunal's decision.Issue 2: The revenue argued that the genuineness of the transactions and creditworthiness of the depositors were not established. The High Court found that the CIT (Appeals) had recorded findings based on material and evidence on record, which the revenue failed to rebut. The Court held that the revenue did not raise these issues before the Tribunal, and the evidence presented by the assessee was not disapproved. Consequently, the Court ruled in favor of the assessee on this issue.Issue 3: The High Court dismissed the appeal, upholding the Tribunal's decision to delete the addition of the disputed amount under Section 68 of the Act. The Court found that the revenue's arguments were not substantiated, and the findings of the lower authorities were based on sufficient evidence. The Court concluded that the revenue failed to provide any evidence to challenge the genuineness of the cash credit entries, leading to a decision in favor of the assessee.In conclusion, the High Court dismissed the appeal, emphasizing the importance of establishing the identity, genuineness, and creditworthiness of transactions in tax assessments. The judgment highlighted the significance of evidence and material on record in determining the validity of cash credit entries and upheld the decision of the lower authorities in favor of the assessee.