Failure to Prove Genuineness of Creditors: Jharkhand HC upholds Income Tax Addition [Read Order]

The Jharkhand High Court upheld the income tax addition on failure to prove genuineness of creditors.

The case of both the assessee’s were selected for scrutiny and statutory notices were issued during the course of assessment proceeding. In the case of Harmeet Singh; the assessee filed copy of deed, profit and loss account, capital account, balance-sheet and computation of income for the Assessment Year 2012- 13 and 2013-14.

In the case of Rajmeet Singh, the Assessing Officer verified the copy of Income Tax Return, sale deed, Bank Account and other details filed during the course of assessment and the Assessing Officer concluded after verifying the records that the appellant was not able to satisfactorily explain entries of Rs. 10 Lakhs and Rs. 6,50,000/- respectively and accordingly added a sum of Rs. 16,50,000 to the total income of assessee on account of cash credit under Section 68 of the Income Tax Act.

In the case of Harmeet Singh, the CIT has held in a similar manner that is to say, that the source of cash deposit in the Bank Account was not satisfactorily explained by the assessee, Harmeet Singh.

The Assessing Officer has categorically mentioned that the assessee, Rajmeet Singh could not explain the cash deposit of Rs. 10 Lakhs and Rs. 6,50,000/- to the satisfaction of the Assessing Officer and accordingly added the same.

The counsels representing the appellants in the appeals submitted that Section 68 of the Income Tax Act has no application to the facts of the present case as the assessee in both the cases is not maintaining any books of account; as such Section 68 does not apply in the case for the simple reason that balance-sheet and statement of affair cannot be equated to the Books of Account.

It was further submitted that perusal of Section 68 of the Income Tax Act would show that in relation to the expression books, the emphasis is on the word “any amount found credited in the books of the assessee”. He contended that such books have to be the books of the assessee himself and not of any other person.

A Division Bench of Justices Rongon Mukhopadhyay and Deepak Roshan observed that “Even assuming the contention of the petitioner that passbook cannot be treated as part of Books of Accounts to be true; admittedly, the source of income in the case of both the assesses has not been proved; inasmuch as, both the assesses have failed to prove the identity/creditworthiness/genuineness of the creditors, who have given cash loan as claimed by them. Further, the assessee has submitted the balance-sheet, profit and loss account, Bank account and computation of income and other details before the Assessing Officer.”

“Thus, in the peculiar facts and circumstance of the case, we are of the considered view that no error has been committed by the Tax Authorities and/or the Tribunal in adding the amount not disclosed to the total income of the respective Assessee. For the reasons stated herein above, the judgments cited by the senior counsel for the appellants has no bearing in the facts and circumstance of these cases” the Court noted.

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