Karnataka High Court
Sri N Narasimaiah vs The Deputy Commissioner on 13 June, 2012
Bench: D.V.Shylendra Kumar, B.Manohar
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IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 13TH DAY OF JUNE, 2012
PRESENT
THE HON'BLE MR.JUSTICE D V SHYLENDRA KUMAR
AND
THE HON'BLE MR.JUSTICE B MANOHAR
Income Tax Appeal No.90 of 2011
BETWEEN:
SRI N NARASIMAIAH
NO.49/42, 16TH CROSS,
11TH MAIN,
HANUMANTHANAGAR,
BAGNALORE - 560 070 ... APPELLANT
[BY SRI V CHANDRASHEKAR, ADV. FOR
SRI A SHANKAR, ADV.]
AND:
THE DEPUTY COMMISSIONER
OF INCOME TAX
CIRCEL 3(1)
UNITY BUILDING ANNEXE
MISSION ROAD,
BANGALORE - 560 027 ... RESPONDENT
[BY SRI E I SANMATHI, ADV.]
THIS APPEAL IS FILED UNDER SECTION 260A OF THE
INCOME TAX ACT, 1961, PRAYING TO SET ASIDE ORDER DATED
24.11.2010 PASSED IN ITA NO. 38/BANG/2010 FOR THE
ASSESSMENT YEAR 2000-01 AND ETC.,
THIS APPEAL COMING ON FOR ADMISSION THIS DAY, D V
SHYLENDRA KUMAR.J., DELIVERED THE FOLLOWING:
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JUDGMENT
This appeal by the assessee under section 260-A of the Income Tax Act, 1961 [for short 'the Act'] raising the following questions for examination as arising from out of the order of the Tribunal.
"1. Whether the Tribunal was justified in law in confirming the addition of cash credits under section 68 of the Act on the facts and circumstances of the case?
2. Whether the Tribunal was justified in law in not appreciating the evidence in the form of 131 statements where in the creditors have confirmed the loans on the facts and circumstances of the case?
3. Whether the Tribunal justified in confirming the loans without giving telescoping effect to the addition income offered for the said assessment year?"
2. The assessee is an individual and assessment year is 2000-01. The assessing officer found in the books of accounts that in the previous year corresponding to the assessment year, the assessee had good number of cash credit entries attributable to as many as eight persons and 3 totaling a sum of Rs.10,77,171/-. The Assessing Officer having found that all the persons were one way or the other related to the assessee and that the amounts were by way of loan raised against fixed deposits made jointly in the name of the assessee and the creditors and also noticing that creditors themselves were not financially capable of depositing such amount or lending such amount, rejected the explanation of the assessee and proceeded to bring to tax the cash credit amount as income of the assessee in terms of section 68 of the Act.
3. The assessee being aggrieved had appealed to the Commissioner of Income Tax [Appeals] - II, but without success and a further appeal to the Tribunal not having made much headway, is in appeal before this court.
4. Appearing on behalf of the appellant, submission of Sri. V. Chandrashekar, learned counsel is that the assessee, in fact, had got confirmation from all the creditors acknowledging that they had lent the amount to the 4 assessee; that when once the creditors had affirmed credit to the assessee, in terms of the law declared by the Supreme Court in the case of 'COMMISSIONER OF INCOME TAX [CENTRAL], CALCUTTA v. DAULAT RAM RAWATMULL' reported in 1973 [87] ITR 349, cash credit entries had to be accepted as genuine and that such view is also affirmed by the Supreme Court in the case of 'COMMISSIONER OF INCOME TAX v. LOVELY EXPORTS [P] LTD.,' reported in [2008] 216 CTR Reports 195 and therefore question is covered by these Judgments of the Supreme Court and authorities are all in error in thinking that the cash credit amount are unexplained credit liable to be brought to tax in terms of section 68 of the Act.
5. It is also submitted that when the assessing authority had examined the source of credit, namely, deposit in the bank, if at all such deposits could have been proceeded against as unexplained investments in terms of section 69 of 5 the Act and the amount could not have been brought to tax under section 68 of the Act in the hands of the assessee.
6. Yet another submission is that when once creditors had admitted, if at all the course of action that was required to be taken by the revenue was to proceed against such persons and to bring that amount as income in their hands if they had not already disclosed and not to add that as income of the assessee etc; that cash credit entries relating to two persons, in fact, had figured in books of accounts of the assessee as debtors for the earlier years and the amount so received was only to return the amount that had been borrowed by the assessee and therefore also that could not have been brought to tax under section 68 of the Act.
7. The amount in question is one which can otherwise be taxed as income in terms of section 68 of the Act reading as under:
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"68. Cash credits:-
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."
8. Section 68 of the Act enables the authorities to assess to tax any cash credit entries found in the books of accounts of the assessee in the previous year where such entries are made if the assessee either does not offer any explanation or explanation offered is not to the satisfaction of the Assessing Authority.
9. It is in the course of examination of the books of accounts, these facts have come to light and the assessing authorities have followed up.
10. Insofar as the cash credit entries are concerned, it is essentially a question of fact to which fact situation the law which operates is section 68 of the Act.
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11. In this regard, Sri. E I Sanmathi, learned junior standing counsel appearing for the respondent - revenue, as notice had been issued to the revenue, submits that even in the bank deposits on the security of which amount had been borrowed and the assessee had shown as a credit taken from several persons was a deposit jointly held by the assessee and the persons who were shown as creditors.
12. It is also brought to our notice that persons were close relatives such as kith and kin of the assessee. The circumstances weighed with the assessing authority to infer that the explanation is not satisfactory; that they were not genuine cash credits, but so indicated in the books of accounts of the assessee. This finding has not been disturbed either by the first appellate authority or second appellate authority - the Tribunal.
13. In our considered opinion, ratio of the Judgment of the Supreme Court in the case of DAULAT RAM RAWATMULL 8 [supra] is not attracted to the facts of the present case as the matter of fact, three authorities below have found that the explanation offered by the assessee to claim that the amount was genuine cash credit was not acceptable and had been rejected and therefore we do not find scope for reversing this finding in an appeal under section 260-A of the Act and even otherwise, we find that the view taken by the authorities below is plausible view in the circumstances and not resulting in illegality or contrary to the statutory provisions.
14. The argument that the assessing authority should have proceeded under section 69 of the Act in respect of fixed deposits in the bank is not very germane as while it may so constitute as unexplained investment in terms of section 69 of the Act and that question could be examined independently, that will not in any way alter the legal position and the operation of section 68 of the Act in respect of cash credits which are not explained to the satisfaction of the assessing authority. The possibility that the amount 9 would also attract the provisions of section 69 of the Act is not a ground for excluding the applicability of section 68 of the Act. It may so happen in a given case while section 68 is attracted in the hands of one assessee, the same facts can give rise to liability in terms of section 69 of the Act in the hands of some other assessee. Be that as it may, there is no speculation and not very relevant for the present case and therefore the argument is rejected.
15. We do not find any error of law which arises for examination in the decision of the Tribunal and therefore this appeal is dismissed.
Sd/-
JUDGE Sd/-
JUDGE AN/-