Mithila Credit Services Ltd vs. ITO (ITAT Delhi)

S. 68: Primary burden is on AO to show that share application money is assessable as unexplained cash credit. AO cannot sit back with folded hands & simply reject assessee’s evidences

(i) Even if the reopening is sustained, the primary burden that income has escaped assessment is on the shoulder of the AO and after discharging this burden only, the onus shifts to the shoulder of the assessee. There are two types of cases. One in which the AO carries out the exercise which is required in law and the other in which the AO ‘sits back with folded hands‘ till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. On facts, nothing has been brought on record by the AO to substantiate his serious allegation that these two entries are accommodation entries which was the sole ground and basis for reopening;

(ii) The assessee produced the necessary documents before the authorities below and discharged the obligation to explain the transaction with it. If the AO was still not satisfied with the aforesaid documents & explanation of the assessee, he should have resorted to s. 131 and other provisions in the Act to investigate and check the veracity of the documents. A cloud of suspicion and doubt can be raised by stating that a lot of cash was deposited in the accounts of M/s Gupta and Gupta and immediately thereafter cheque transaction could be evident from the side of M/s Gupta and Gupta to some other person/ legal entity. However, a judicially trained mind will search from the said cloud brought before it, relevant admissible evidences if any from the records before it, to see whether the said evidence support the transaction as alleged by the AO which is under consideration before it, and not get swayed by other irrelevant materials which comes on record. Suspicion howsoever cannot take the place of evidence or proof (Ram Narain Goel 224 ITR 180 (P&H), Gangeshwari Metal (HC), Nova Promoters and Finlease 342 ITR 169, Lovely Exports 319 ITR (St)(SC) & Pradeep Kumar Gupta 303 ITR 95 (Del) referred)