2010 (12) TMI 2 - SC - Income Tax

Unexplained cash credits treated as income under Section 68 where assessee failed to rebut presumption

Vijay Kumar Talwar Versus CIT

The SC upheld the lower tribunals' findings that the assessee failed to rebut the presumption under Section 68 regarding unexplained cash credits, ... Cash Credit - Cash Receipts - seizure of incriminating documents - amount received by proprietor after discoloration of firm - receipt from old debtors - HELD THAT:- We are of the opinion that in the instant case the High Court has correctly concluded that no substantial question of law arises from the order of the Tribunal. All the authorities below, in particular the Tribunal, have observed in unison that the assessee did not produce any evidence to rebut the presumption drawn against him under Section 68 of the Act, by producing the parties in whose name the amounts in question had been credited by the assessee in his books of account. In the absence of any cogent evidence, a bald explanation furnished by the assessee about the source of the credits in question viz., realisation from the debtors of the erstwhile firm, in the opinion of the assessing officer, was not satisfactory. It is well settled that in view of Section 68 of the Act, where any sum is found credited in the books of the assessee for any previous year, the same may be charged to income tax as the income of the assessee of that previous year, if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the assessing officer, not satisfactory. (See: Sumati Dayal vs. Commissioner of Income Tax, Bangalore [1995 (3) TMI 3 - SUPREME COURT] and Commissioner of Income Tax vs. P. Mohanakala [2007 (5) TMI 192 - SUPREME COURT]. We are of the opinion that on a conspectus of the factual scenario, noted above, the conclusion of the Tribunal to the effect that the assessee has failed to prove the source of the cash credits cannot be said to be perverse, giving rise to a substantial question of law. The Tribunal being a final fact finding authority, in the absence of demonstrated perversity in its finding, interference therewith by this Court is not warranted. Issues Involved:1. Whether the High Court was correct in dismissing the appeal under Section 260-A of the Income Tax Act, 1961, on the grounds that no substantial question of law arose.2. Whether the findings of the Income Tax Appellate Tribunal (ITAT) were perverse due to reliance on irrelevant materials.3. Whether the assessee satisfactorily explained the source of cash credits under Section 68 of the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Dismissal of Appeal under Section 260-A:The High Court dismissed the appeal filed by the assessee under Section 260-A of the Income Tax Act, 1961, holding that the order of the ITAT did not give rise to any substantial question of law. The High Court observed that the findings recorded by the Commissioner of Income Tax (Appeals) and the ITAT were pure findings of fact. The Court stated, 'Appreciation of evidence does not fall within the realm of this Court's jurisdiction under section 260-A of the Income Tax Act.' The Supreme Court affirmed this view, stating that an appeal to the High Court from a decision of the Tribunal lies only when a substantial question of law is involved. The Court referred to the definition and interpretation of 'substantial question of law' from various judicial pronouncements, concluding that no such question arose in this case.2. Alleged Perversity in ITAT's Findings:The assessee contended that the ITAT's findings were perverse as they were based on irrelevant materials. However, the Supreme Court noted that the Tribunal had relied on the assessing officer's order regarding the factual position and found no reason to interfere with the same. The Tribunal observed that the assessee did not produce any evidence to rebut the presumption under Section 68 of the Act. The Tribunal had stated, 'We are also of the opinion that the confirmations filed by the appellant are of no use because they have not been co-related with the transactions alleged to have been found entered in the register seized during the time of search.' The Supreme Court held that the Tribunal's conclusion that the assessee failed to prove the source of the cash credits could not be said to be perverse, thus, no substantial question of law arose.3. Explanation of Cash Credits under Section 68:During the assessment proceedings, the assessee claimed that the cash receipts were realisations from past debtors of the erstwhile firm. However, the assessing officer found this explanation unsatisfactory, noting the lack of corroborative evidence and the failure to produce the account books of the Calcutta branch. The ITAT and the Commissioner of Income Tax (Appeals) upheld this view. The Supreme Court reiterated that under Section 68 of the Act, if the explanation about the nature and source of any sum found credited in the books of the assessee is not satisfactory, it may be charged to income tax as the income of the assessee. The Court referred to precedents such as Sumati Dayal vs. Commissioner of Income Tax and Commissioner of Income Tax vs. P. Mohanakala, affirming that the assessee's bald explanation without cogent evidence was insufficient.Conclusion:The Supreme Court concluded that the High Court was correct in holding that no substantial question of law arose from the ITAT's order. The findings of the ITAT were not perverse, and the assessee failed to satisfactorily explain the source of the cash credits under Section 68 of the Income Tax Act, 1961. Consequently, the appeals were dismissed with costs quantified at Rs.20,000/-.