1995 (12) TMI 90 - AT - Income Tax

Tribunal upholds inclusion of cash credits as undisclosed income, assessee's appeals dismissed.

RAMKUMAR JALAN. Versus INCOME TAX OFFICER.

The Tribunal dismissed the assessee's appeals for the assessment years 1976-77 to 1980-81, confirming the decisions of the ITO and CIT(A) to include the ... - Issues Involved:1. Source of cash credits in the assessee's books2. Burden of proof for establishing the source of income3. Requirement to establish the same facts year after year4. Addition of cash credits to the total income5. Applicability of the doctrine of res judicata in tax mattersDetailed Analysis:1. Source of Cash Credits in the Assessee's Books:The primary issue was whether the sum of Rs. 25.49 lakhs credited in the assessee's books for the assessment year 1976-77 originated from 'Lohia Agricultural Farm' (LAF). The assessee argued that LAF had substantial agricultural income, which should have been accepted by the Income Tax Officer (ITO) based on past disclosures under the Voluntary Disclosure Scheme of 1975. However, the ITO and the Commissioner of Income Tax (Appeals) [CIT(A)] required the assessee to provide evidence of the source of the cash credits for each assessment year independently. The assessee failed to produce any evidence such as books of account, land details, crop production, and sales records to substantiate the claim that the cash credits were derived from agricultural income of LAF.2. Burden of Proof for Establishing the Source of Income:The Tribunal emphasized that under Section 68 of the Income Tax Act, the onus is on the assessee to explain the nature and source of any cash credits found in their books. The assessee must prove the identity of the creditor, the capacity of the creditor to advance the money, and the genuineness of the transaction. The Tribunal noted that the assessee did not discharge this onus as no satisfactory evidence was provided. The ITO's investigation revealed that LAF did not possess the claimed agricultural land or income during the relevant periods, further discrediting the assessee's claims.3. Requirement to Establish the Same Facts Year After Year:The assessee contended that once the agricultural income of LAF was accepted in the past, it should not be required to prove the same facts every year. However, the Tribunal held that each assessment year is a separate and independent unit of assessment. Thus, the assessee must provide evidence for each year to substantiate the source of cash credits. The Tribunal found that the assessee's reliance on past acceptance of agricultural income was insufficient without current evidence.4. Addition of Cash Credits to the Total Income:The Tribunal upheld the ITO's decision to add the cash credits to the assessee's total income for the assessment years in question. The ITO's detailed investigation, including visits to the agricultural site and examination of revenue records, revealed that LAF did not have the claimed agricultural land or income. The Tribunal agreed with the ITO and CIT(A) that the assessee failed to prove the genuineness of the cash credits, thereby justifying their inclusion as income from undisclosed sources.5. Applicability of the Doctrine of Res Judicata in Tax Matters:The assessee argued that the findings of the CIT during the Voluntary Disclosure Scheme should preclude the ITO from re-examining the source of the cash credits. However, the Tribunal clarified that the doctrine of res judicata does not apply to income tax matters. Each assessment year is independent, and the tax authorities are not bound by decisions made in previous years. The Tribunal cited various legal precedents to support this view, affirming that the ITO was within his rights to investigate and challenge the source of the cash credits for each assessment year.Conclusion:The Tribunal dismissed the assessee's appeals for the assessment years 1976-77 to 1980-81, confirming the decisions of the ITO and CIT(A) to include the cash credits as the assessee's income from undisclosed sources. The Tribunal emphasized the assessee's failure to provide satisfactory evidence to substantiate the source of the cash credits and upheld the ITO's thorough investigation and findings.