TaxTMI 
TaxTMI 
2004 (8) TMI 26
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....the Commissioner of Income-tax (Appeals) deleting the additions of Rs. 22,01,500 on account of unexplained cash credits and Rs. 94,602 on account of interest claimed thereon has been dismissed. The relevant facts pertaining to this issue may first be noticed. The assessee had filed its return of income for the assessment year 1992-93 on March 12,1993 declaring a total income of Rs. 3,45,370. Prior to this, a search and seizure operation had been carried out in the business premises of the assessee on September 25, 1992 and certain information and documents had been seized. During the course of assessment proceedings, the Assessing Officer noticed that the assessee had raised the following loans during the year under consideration: Rs. 1.....
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....bsp; ------------- He required the assessee to file confirmation with permanent account numbers from the creditors and also produce them for examination. Since the assessee failed to produce the creditors, a show-cause notice was issued by the Assessing Officer requiring it to explain as to why the said amount be not treated as unexplained cash credit under section 68 of the Act and added to its income. No reply to the show-cause notice was furnished by the assessee and, accordingly, while framing the assessment on March 20, 1995, the Assessing Officer treated the cash credits of Rs. 22,01,500 as unexplained and added it to the inco....
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....r to place the relevant copies and documents to prove the genuineness of these loans. It is hoped that in the presence of the facts stated in the memorandum of appeal and the relevant data being produced with your honour's permission, the addition made shall be deleted." The two additions were deleted by the Commissioner of Income-tax (Appeals) vide his order dated December 4, 1995. We deem it appropriate to reproduce his findings on these issues as under: "2.3 I have perused the assessment order. I have also considered the written submissions of the appellant as well as his contention pleaded during the course of hearing of appeal and I feel inclined to agree with the same. As has been brought to my notice these creditors except M/s. Rib....
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.... the appellant. The amounts of the credits were received by the appellant by means of crossed account payee cheques, the creditors were existing income-tax assessees and the Assessing Officer had access to their records for verification. Under these circumstances I feel convinced that the Assessing Officer was not right in treating these creditors as not genuine and was not justified in making the addition of Rs. 22,01,500. I also feel that it would not be fair to restore the issue back to the Assessing Officer since the mode of receiving these credits from existing assessees in the absence of any incriminating or contradictory information do not cast any doubt on the genuineness of credits as far as the appellant's case is concerned. If at....
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....a counter check and verification of the version of the assessee with regard to the credits. The Assessing Officer should have tried to carry out the requisite verification from such records which could be easily available but he has not done so. Therefore, this ground fails." We have purposely reproduced the findings of the two appellate authorities in extenso as we are of the view that their approach has been totally erroneous. The assessment order clearly shows that the assessee did not care to respond to the show-cause notice issued by the Assessing Officer requiring it to explain why in the absence of production of the creditors, the amount standing to their credit be not treated as unexplained cash credit under section 68 of the Act. ....
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....ne. The appellate authorities have failed to appreciate that in the present case the assessee had totally failed to respond to the notice of the Assessing Officer. Further, even if they were of the view that the Assessing Officer should have made cross-verifications with the records of the creditors available with him, they ought to have directed the Assessing Officer to do so instead of straightaway accepting the assessee's version without affording any opportunity to the Assessing Officer to make the verification. In the alternative, the appellate authorities could have themselves verified the material placed before them with the records of the creditors. This has not been done. Accordingly, we are satisfied that the appellate authorities....