HC upheld section 68 addition as Assessee failed to prove 3 conditions*****

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Rupal Jain Vs CIT (Allahabad High Court)

Considering the provision of Section 68 that the assessee has to prove three conditions i.e. (i) identity of the creditor; (2) capacity of such creditor to advance money; and (iii) genuineness of the transactions. If all the aforesaid three conditions are proved, the burden shifts on the revenue to prove that the amount belong to the assessee. However, the assessee cannot be asked to prove source of source or the origin of origin.

In the present case it is evident that the assessee though has disclosed the source of the deposit but could not establish the nature thereof. Three conditions which are required to be proved by the assessee as per Section 68 of the Income Tax Act, 1961, could not be proved by him. The burden would, therefore, not shift on the revenue, as the assessee has failed to discharge her burden.

The assessee has failed to prove the transaction as per Section 68 of the Income Tax Act,1961. No question of law, much less substantial question of law, arises in the instant appeal for consideration and the plea of the learned counsel for the assessee that the assessee has disclosed the source of income with the credit worthiness and genuineness of transaction could not be established by him.

HC sustains the addition made by revenue.

FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT

Amendment Application

The amendment application seeking amendment in the substantial question of law framed in the memo of appeal is found to be formal in nature. No objection has been taken by Sri Krishna Agarwal, learned counsel appearing for the respondent-Revenue.

The amendment application is allowed.

Necessary amendments be incorporated during the course of the day.

On Memo of Appeal

Heard Sri Shubham Agarwal, learned counsel for the appellant-assessee and Sri Krishna Agarwal, learned counsel appearing for the respondent-Revenue.

Having heard learned counsel for the appellant, we find that there is correct finding of fact with regard to the genuineness and credit worthiness of the transaction in question, in the order impugned herein. Under Section 68 of the Income Tax Act, if any sum is found credited in the Books of account of the assessee and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not satisfactory in the opinion of the Assessing Officer, the sum so credited may be charged to income tax as to the income of the assessee of that previous year. Therefore, what has to be inquired into by the Assessing Officer is about the nature and source of the deposit. If the explanation with regard to the nature and source is found unsatisfactory, only then the amount so credited may be treated is income. Section 68 came up for consideration in the decision in the case of Anil Rice Mill vs. Commissioner of Income Tax reported in 2005 LawSuit(All)1051), relied upon by the learned counsel for the petitioner, wherein it has been noted considering the provision of Section 68 that the assessee has to prove three conditions i.e. (i) identity of the creditor;(2) capacity of such creditor to advance money; and (iii) genuineness of the transactions. It is held therein that if all the aforesaid three conditions are proved, the burden shifts on the revenue to prove that the amount belong to the assessee. However, the assessee cannot be asked to prove source of source or the origin of origin.

Taking note of said decision, having considered the findings by the assessing Authority, CIT (Appeal) and the Tribunal, it is evident that the assessee though has disclosed the source of the deposit but could not establish the nature thereof. Three conditions which are required to be proved by the assessee as per Section 68 of the Income Tax Act, 1961, could not be proved by him. The burden would, therefore, not shift on the revenue, as the assessee has failed to discharge her burden.

The assessee has failed to prove the transaction as per Section 68 of the Income Tax Act,1961. No question of law, much less substantial question of law, arises in the instant appeal for consideration and the plea of the learned counsel for the assessee that the assessee has disclosed the source of income with the credit worthiness and genuineness of transaction could not be established by him.

Reliance placed by the learned counsel for the appellant upon judgments of this Court in Income Tax Appeal No. 17 of 2007(M/s. Kesharwani Sheetalaya Sahsaon Allahabad vs. Commissioner of Income Tax Allahabad) and in the case of Anil Rice Mill vs. Commissioner of Income Tax reported in 2005 LawSuit(All)1051), has no benefit to the appellant.

We do not find any merit in the appeal and the same is, accordingly, dismissed.

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