|COURT:||Bombay High Court|
|CORAM:||Milind D. Jadhav J, Ujjal Bhuyan J|
|CATCH WORDS:||onus, Section 68 cash credit, source of income|
|DATE:||January 22, 2020 (Date of pronouncement)|
|DATE:||February 5, 2020 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|S. 68 Cash Credits: The assessee is only required to explain the source of the credit. There is no requirement under the law to explain the source of the source. The fact that the source of the source is suspect and that the creditor had no regular source of income to justify the advancement of the credit to the assessee does not mean that an addition can be made in the hands of the assessee (Veedhata Tower 403 ITR 415 (Bom) followed)|
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INCOME TAX APPEAL NO. 1750 OF 2017
Mr. Gaurav Triyugi Singh … Appellant.
R/at. 3005-A, Oberoi Woods, Mohan
Gokhale Marg, Goregaon (E),
Mumbai- 400 063.
The Income Tax Officer-24(3)(1),
having his office at C-11, 7th floor,
Pratyakshakar Bhavan, Bandra-Kurla
Complex, Bandra (E), Mumbai -51. … Respondent.
Mr. Dharam V. Gandhi, Advocate for the Appellant.
Mr. Sham Walve, Advocate a/w. Mr. Pritesh Chatterjee,
Advocate for the Respondent.
CORAM : UJJAL BHUYAN AND
MILIND N. JADHAV,JJ.
DATE : JANUARY 22, 2020.
ORAL ORDER :
1 Heard Mr. D. V. Gandhi, learned counsel for
the Appellant; and Mr. Sham Walve, learned standing
counsel Revenue for the Respondent.
2 Considering the subject matter of the appeal,
we are of the view that the same can be disposed of
at this stage itself. Consequently, notice is made
returnable forthwith and by consent of the parties,
appeal is taken up for final disposal.
3 This Appeal has been preferred by the
assessee under section 260-A of the Income Tax Act,
1961, assailing the legality and correctness of the order
dated 11.05.2017 passed by the Income Tax Appellate
Tribunal, Mumbai Bench “G”, Mumbai (Tribunal) in
Income Tax Appeal No. 6160/Mum/2016 for the
assessment year 2010-11.
4 Short point for consideration in this Appeal is
the addition of a sum of Rs. 14 lakhs to the income of
the assessee by the Assessing Officer under section 68
of the Income Tax Act, 1961 (briefly, “the Act”
hereinafter), as modified by the Tribunal.
5 Assessee is an individual and for the
assessment year under consideration, he filed return of
income disclosing total income of Rs. 17,04,320.00.
During the assessment proceedings, Assessing Officer
found that assessee had taken unsecured loan from
amongst others Smt. Savitri Thakur for an amount of
Rs. 17,04,320/-. Assessee was asked to submit loan
confirmation as well as copy of the returns of income
and bank statements of Smt. Savitri Thakur. Though
those were submitted, Assessing Officer was not
satisfied and took the view that genuineness of the
loan was not established by the assessee; besides credit
worthiness of Smt. Savitri Thakur was found to be
suspect. Consequently, the aforesaid amount of Rs.
17 lakhs was added back to the total income of the
assessee under section 68 of the Act as unexplained
cash credit vide the assessment order dated
6 As against the above, assessee preferred
appeal before the Commissioner of Income Tax
(Appeals)-42, Mumbai. By order dated 04.07.2016, the
Appellate Authority upheld and confirmed the order of
the Assessing Officer.
7 Assessee carried the matter further in appeal
before the Tribunal. Out of Rs. 17 lakhs loan given by
Smt. Savitri Thakur to the assessee, Tribunal held that
loan amount of Rs. 3 lakhs was properly explained as
assessee had proved genuineness of the transaction,
creditworthiness and identity of the creditor. However,
regarding the balance amount of Rs. 14 lakhs,
Tribunal held that source of the said amount was full
of doubts and explanation provided by the assessee
could not be accepted. Accordingly addition of Rs. 14
lakhs was upheld while deleting the addition of Rs. 3
lakhs vide the order dated 11.05.2017.
8 Aggrieved, present appeal has been
9 Though a number of questions have been
proposed by the Appellant as substantial questions of
law, we find that the following question covers the
controversy in question, which is as under :
Whether on the facts and in the circumstances of
the case and in law, the Tribunal was justified in
upholding the addition in respect of unsecured
loan of Rs. 14,00,000/- under section 68 of the
Act, inspite of the fact that the initial onus laid
down on the Appellant was duly discharged ?.
10 Submissions made have been considered.
11 Regarding Smt. Savitri Thakur, it is seen that
she had issued cheque payment of Rs. 14 lakhs dated
21.07.2009 to the Appellant. Prior to the issuance of
the cheques, this amount was credited into the bank
account of Smt. Savitri Thakur maintained in the State
Bank of India, Rae Baraeli Branch. There were three
transfers of Rs. 5 lakhs, Rs. 5 lakhs and Rs. 4 lakhs into
the above account of Smt. Savitri Thakur before issue
of cheques by her to the assessee. Smt. Savitri Thakur
claimed that these amounts were received by her as
gifts from one Shri Rajendra Bahadur Singh and Smt.
Sarojini Thakur. Shri Rajendra Bahadur Singh is the
brother of Smt. Savitri Thakur and Smt. Sarojini Thakur
is the sister of Smt Savitri Thakur. Shri Rajendra
Bahadur Singh had gifted Rs. 5 lakhs to Smt. Savitri
Thakur and Smt. Sarojini Thakur had gifted to Rs. 5
lakhs and Rs. 4 lakhs to Smt. Savitri Thakur. Result of
verification and remarks by the Department in respect
of Shri Rajendra Bahadur Singh is as under :
“The donor had retired in 2003 and claims to
earn tuition income of Rs. 1.5 Lacs p.a. and this
money has been claimed to have been hoarded
and kept in cash by him over several years and he
claims that out of this accumulation he
deposited a sum of Rs. 5,00,000/- in cash in his
bank account with SBI Rae Baraeli on 20.07.2009
and it was transferred to Savitri Thakur on
20.07.2009. The donor has not filed any income
11.1. Similarly in respect of Smt. Sarojini Thakur,
result of verification and remarks by the Department
is as under :
“This donor has ostensibly retired from service in
2007 and she has deposited cash of Rs.
9,00,000/- in her bank with SBI, Rae Baraeli on
18.07.2009 before issuing two cheques to Savitri
Thakur. She has not filed any return of income
admittedly from A.Y. 2008-09. She also claims to
receive agricultural income of Rs. 1.5 lacs p.a.
which is claimed to be kept in cash with her since
12 At this stage, it would be apposite to advert
to section 68 of the Act, relevant portion of which reads
as under :
“68. Where any sum is found credited in the
books of an assessee maintained from 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
12.1. From a reading of section 68, as extracted
above, it is seen that if an amount is credited in the
books of an assessee maintained from 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 the
relevant previous year.
13 Section 68 of the Act has received
considerable attention of the courts. It has been held
that it is necessary for an assessee to prove prima
facie the transaction which results in a cash credit in
his books of account. Such proof would include proof
of identity of the creditor, capacity of such creditor to
advance the money and lastly, genuineness of the
transaction. Thus, in order to establish receipt of credit
in cash, as per requirement of section 68, the assessee
has to explain or satisfy three conditions, namely : (i)
identity of the creditor; (ii) genuineness of the
transaction; and (iii) credit-worthiness of the creditor.
14 In Principal Commissioner of Income
Tax vs. Veedhata Tower Pvt. Ltd., (2018) 403 ITR
415 (Bom), this court has held that assessee is only
required to explain the source of the credit. There is
no requirement under the law to explain the source of
the source. In the instant case, there is no dispute as
to the identity of the creditor. There is also no dispute
about the genuineness of the transaction. That apart,
the creditor has explained as to how the credit was
given to the assessee. Thus assessee had discharged
the onus which was on him as per the requirement of
section 68 of the Act. What the Assessing Officer held
was that sources of the source were suspect i.e., he
suspected the two sources Shri Rajendra Bahadur Singh
and Smt. Sarojini Thakur of the source Smt. Savitri
15 In view of discharge of burden by the
assessee, burden shifted to the revenue; but revenue
could not prove or bring any material to impeach the
source of the credit. Though Mr. Walve, learned
standing counsel, has pointed out that the creditor had
no regular source of income to justify the
advancement of the credit to the assessee, we are of
the view that the assessee had discharged the onus
which was on him to explain the three requirements,
as noted above. It was not required for the assessee
to explain the sources of the source. In other words, he
was not required to explain the sources of the money
provided by the creditor Smt. Savitri Thakur i.e. Shri
Rajendra Bahadur Singh and Smt. Sarojini Thakur.
16 Considering the above, we are of the view
that the Tribunal was not justified in sustaining the
addition of Rs. 14 lakhs to the total income of the
assessee as undisclosed cash credit under section 68
of the Act.
17 Consequently, finding of the Tribunal to the
above extent is set aside. The question framed is
answered in favour of the assessee and against the
18 Appeal is accordingly allowed but with no
order as to cost.
(MILIND N. JADHAV, J.) (UJJAL BHUYAN, J.)