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<h1>Cash credit treated as income from undisclosed sources when creditor identity, capacity and genuineness are not proved; Tribunal upheld.</h1> Where a cash credit appears in the name of an independent third party, the assessee must prima facie establish the creditor's identity, the creditor's ... Cash Credits, Income From Undisclosed Sources Issues: (i) Whether there was material and evidence to support the Tribunal's inference that the sum of Rs. 1,00,000 represented the assessee's income from undisclosed sources; (ii) Whether the Tribunal's conclusion that the loans represented the assessee's income from undisclosed sources was perverse, i.e., one which no reasonable person could reach.Issue (i): Whether there was material and evidence to support the Tribunal's inference that the sum of Rs. 1,00,000 represented the assessee's income from undisclosed sources.Analysis: The Tribunal found that although the creditor's books showed certain cash transactions, neither the alleged loan nor its repayment to the assessee were recorded; the only entry corroborating the transaction was payment of interest by cheque, which the Tribunal regarded as giving a colour of genuineness. The creditor's oral evidence was disbelieved and the Tribunal concluded that the creditor's available resources on the relevant date did not establish capacity to advance Rs. 1,00,000 and that the creditor's creditworthiness was not proved. The Court examined the evidence and the Tribunal's findings on identity, capacity and evidential reliability.Conclusion: There was material and evidence to support the Tribunal's inference that the sum represented income from undisclosed sources.Issue (ii): Whether the Tribunal's conclusion was perverse.Analysis: The Court considered whether no reasonable tribunal could have reached the conclusion arrived at by the Tribunal. Having reviewed the primary findingsdisbelief of the creditor's testimony, absence of entries for loan and repayment in the creditor's books, and lack of proof of the creditor's capacity to advance the sumthe Court concluded that the Tribunal's conclusion fell within permissible evaluation of evidence and credibility.Conclusion: The Tribunal's conclusion was not perverse.Final Conclusion: The reference is answered against the assessee; the Tribunal's findings that the Rs. 1,00,000 credit was income from undisclosed sources are supported by evidence and are not perverse.Ratio Decidendi: Where a cash credit stands in the name of an independent third party the assessee must prima facie establish the identity of the creditor, the creditor's capacity or creditworthiness to advance the amount and the genuineness of the transaction; if the assessee fails to establish these ingredients and the fact-finding authority reasonably disbelieves the evidence, the entry may be treated as income from undisclosed sources.
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