1980 (4) TMI 138 - AT - Income Tax

Tribunal dismisses Department's appeal, allows assessee's cross objection on cash credits case. Credible explanations prevail

The Appellate Tribunal dismissed the Department's appeal and allowed the assessee's cross objection in a case involving cash credits totaling Rs. 18,000. ... - Issues:Identification of cash credits totaling Rs. 18,000 - genuineness of credits - addition as income from other sources - appeal by Department against deletion of sum - cross objection by assessee claiming credits as genuine.Analysis:The judgment involves the examination of cash credits totaling Rs. 18,000 attributed to different individuals by the Income Tax Officer (ITO). The ITO, after assessing confirmatory letters and examining the parties involved, concluded that the genuineness of the credits was not established, adding the entire amount as income from other sources. The Appellate Authority Commissioner (AAC) agreed with the ITO's inference but accepted the assessee's argument that the firm had just commenced business, and the deposits were made within a short period at the beginning of the business, considering them as initial capital introduction. Consequently, the AAC deleted the addition of Rs. 18,000. The Department appealed against this deletion, while the assessee filed a cross objection asserting the genuineness of the credits.Upon hearing the parties, the Appellate Tribunal found the argument presented by the assessee regarding the impossibility of earning such profits within a short period unconvincing. The AAC's acceptance of this argument and subsequent deletion of the additions were deemed incorrect. The AAC, although not convinced by the assessee's explanations for individual credits, acknowledged the evidence provided by the assessee and gathered by the ITO. Notably, the AAC's statement 'I agree with the ITO' was interpreted to imply disagreement with the ITO based on the facts presented, rather than a revenue standpoint.Analyzing each credit individually, the Tribunal found merit in the explanations provided by the creditors. For instance, Dinesh Parikh, a student receiving a monthly stipend, deposited a small sum of Rs. 2,500, which seemed plausible given his circumstances. Similarly, Tharilik R. Gandhi, a resident in the USA, confirmed her deposit, and Jyotshnaben, an employed individual with a substantial salary, also accepted the advance. The Tribunal highlighted the importance of considering the financial backgrounds and circumstances of the creditors, emphasizing that the deposits were not implausible given their respective situations.In the case of Shantilal Parikh, despite the ITO's disbelief due to his monthly salary, the Tribunal noted the possibility of undisclosed additional resources, especially considering his children's education expenses. The Tribunal, after reviewing detailed statements and evidence provided by the creditors, concluded that there was no reason to doubt the genuineness of the credits. Consequently, the Departmental appeal was dismissed, and the assessee's cross objection was allowed, indicating that the additions were not justified based on the comprehensive analysis of the creditors' circumstances and statements.