Commissioner of Income Tax vs Tania Investments P. Ltd.

The Revenue is in appeal on the following question:

Whether on the facts and in the circumstances of the case and in law the hon''ble Tribunal was right in deleting the addition of Rs. 7,41,17,495 made by the Assessing Officer towards unexplained cash credits even though the assessee-company had not proved the creditworthiness of the creditors to advance the loans to the assessee-company?

In the instant case, the Assessing Officer has disallowed the loss on the ground that there was no material. Before the Commissioner of Income Tax (Appeals) remand report was called from the Assessing Officer. The Assessing Officer on remand in his report admitted that the identity of the parties and also that there was corresponding entries in the books of account. The Commissioner of Income Tax (Appeals) consequently allowed the appeal. The Revenue came in appeal before the Income Tax Appellate Tribunal which was dismissed and consequently, the present appeal.

At the hearing on behalf of the Revenue, the learned Counsel submits that in the case of entries in books of account pertaining to cash credit, the assessee has to establish (i) the identity of the party, (ii) capacity, and (iii) the genuineness of the transaction. In the instant case, the learned Counsel admits that so far as identity is concerned, the parties have been identified and similarly in the books of account produced by them corresponding entries were found. The learned Counsel submits that one of the predicate, namely, capacity to advance loan was not established, and the Income Tax Appellate Tribunal ought to have restored the matter to the Assessing Officer for reconsideration.

The learned Tribunal in its order, in order to answer the said contention, observed as under:

The learned Assessing Officer having any doubt with regard to capacity of the party to advance loan, no one prevented him to verify the capacity of the creditors.

In our opinion, the books of account were available to the Assessing Officer. The books of account itself would indicate the capacity of the party to advance loan. There was no further need on the part of the assessee to prove the capacity of the creditors.

In the instant case, it is not possible to hold that the reasoning adopted by the Tribunal is devoid of merit and/or unsustainable. In the light of that, there is no merit in the appeal, which is accordingly, dismissed.