1978 (7) TMI 41 - HC - Income Tax

High Court confirms undisclosed income assessment based on lack of evidence supporting loan authenticity

Prakash Textile Agency Versus Commissioner Of Income-Tax, West Bengal III

Prakash Textile Agency Versus Commissioner Of Income-Tax, West Bengal III - [1980] 121 ITR 890, 4 TAXMANN 323 Issues Involved:1. Whether there was any material and/or evidence to support the inference and conclusions of the Tribunal that the sum of Rs. 1 lakh in question represented the assessee's income from undisclosed sources.2. Whether the conclusion arrived at by the Tribunal that the loans in question represented the assessee's income from undisclosed sources was perverse in the sense that no reasonable man could come to the above conclusion.Summary:Issue 1: Material and/or Evidence to Support Tribunal's InferenceThe Tribunal disbelieved the evidence of Vidyanand Sureka, the creditor, and held that only the payment of interest by cheque was recorded in the books of the creditor to give a color of genuineness to the transactions. The Tribunal found that neither the loan nor the repayment was recorded, and the creditor was not in a position to advance the loan on the 16th September 1964. The Tribunal concluded that the assessee had not proved the source of the said sum of Rs. 1 lakh credited in the books of account. The High Court agreed with the Tribunal's findings, stating that the assessee failed to establish the ability of the creditor to advance the loan or the genuineness of the transaction.Issue 2: Perverse Conclusion by the TribunalThe High Court examined whether the Tribunal's conclusion was perverse. The Tribunal had found that the interest was shown to be paid by cheque to give a color of genuineness to the transaction, the assertion by Vidyanand Sureka was not corroborated by entries in his books, and the reasons given for not recording the same were not accepted. The Tribunal also found that the maximum capital available to Sureka did not establish his creditworthiness to advance the loan. The High Court held that the Tribunal's conclusion was based on careful consideration of all relevant materials and was not perverse. The assessee had established the existence and identity of the creditor but failed to establish the ability of the creditor to advance the loan or the genuineness of the transaction.Legal Precedents and Arguments:Dr. Debi Pal, learned counsel for the assessee, cited several decisions including CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC) and Sarogi Credit Corporation v. CIT [1976] 103 ITR 344 (Pat) to argue that the assessee had discharged its onus of proving the genuineness of the loan. However, the High Court found that these decisions did not apply to the facts and circumstances of the instant case. Mr. Ajit Sengupta, learned counsel for the revenue, argued that the Tribunal had found sufficient material to support its conclusion and that the assessee had failed to establish the creditworthiness of the creditor and the genuineness of the transaction.Conclusion:The High Court concluded that there was material and evidence to support the Tribunal's inference that the sum of Rs. 1 lakh represented the assessee's income from undisclosed sources. The Tribunal's conclusion was not perverse, and the assessee had failed to establish the ability of the creditor to advance the loan or the genuineness of the transaction. The questions referred to the High Court were answered in favor of the revenue.