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The Revenue preferred an appeal to the Tribunal in ITA 398/Del/2006. As seen from paragraphs 6 & 7 of the impugned order of the Tribunal, the Revenue disputed before the Tribunal the contention of the assessee that it had furnished the confirmation letters from the share applicants along with their income tax details, statement of bank accounts etc. The assessee, as seen from paragraph 5 of the impugned order had contended that the share subscribers were assessed to tax and since their identity stood established, no addition can be made in the hands of the assessee, having regard to the judgment of the Supreme Court cited above.
Where there was difference of amount in question somewhere as per cash in hand as per books of account and lesser cash as per seized documents, it would also not suffice to make addition under section 68 or 69A because every person is at liberty to spend their own amount anywhere as per his choice and assessee had not claimed any deduction in this case. Examining the case of assessee from every possible angle, addition of Rs.37,30,710/- was wholly unjustified.
The principle is that the assessee has to prove the identity of the creditor, the genuineness of the transaction and the creditworthiness of the creditor in order to discharge the burden cast on him, that a particular cash credit found in his books is genuine having regard to the nature and the source thereof and, therefore, cannot be added to his income under section 68.
Assessee had received a gift of Rs. 22,76,750/-in U.S. dollars from an NRI, N.Mohan and the assessee had filed two confirmation letters, one in December 2006 and another on 10-07-2007 given by the donor stating that he had gifted the above amount to the assessee, that the assessee is his close relative, that he is a man of means owning a software company of a net worth of US $ 25 million, that he had gifted during the year 2002-03 Rs. 2.00 crores to rebuild a government school,
AO and the CIT(A) did not make any effort to verify the confirmations, identity and creditworthiness of the creditors in question and they also ignored the fact that the transaction of cash credits received and its repayment were made through bank and we also hold that the authorities below did not bring any incriminating material or evidence against the assessee trust to establish that the amount shown in the balance sheet as cash credits amounting to Rs.1,70,000 actually belonged or was owned by the assessee trust itself.
We are unable to uphold the view of the Tribunal that it is incumbent upon the Assessing Officer, on the facts and circumstances of the case, to establish with the help of material on record that the share monies had come or emanated from the assessee’s coffers. Section 68 of the Act casts no such burden upon the Assessing Officer.
On going through the records, we find that an important query was raised by the Department as to whether these two donors had the financial capacity to make the gift(s) in favour of the assessees herein. This query has not at all been answered by the Income Tax Appellate Tribunal [‘ITAT’, for short].
Section 68 of the Act – substantive provisions (post amendment by Finance Act 2012) – Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.
Coming to the facts of the case, the assessee was afforded sufficient opportunities to furnish confirmations in respect of the impugned credits by the Assessing Officer (refer page 2 of the assessment order). A final show-cause notice was issued by him on 22/03/2006, stating the said fact, and by way of allowing a last opportunity to the assessee to substantiate its case, for 24/03/2006, and which (notice) again remained un-responded, even up to the date of passing of the assessment order, i.e., 29/03/2006 (refer page 3 of the assessment order).
In the present case, it is an admitted fact that the partners Shri C.P. Mathur and Shri L.C. Mathur contributed Rs. 8 lacs and Rs. 4,30,000/- respectively as their capital and the Assessing Officer made the addition by invoking the provisions of section 68 of the Income-tax Act. On a similar issue, the Hon’ble Jurisdictional High Court in the case of Kewal Krishan & Partners, Sri Ganganagar (supra) held as under :-
