Law:

Section:

Section 68 of the income-tax act, 1961-Cash credits-Assessee-firm allegedly obtained loan from a creditor whose identity was established but not ability to advance loan-ITO included the same in assessee's income from undisclosed sources -AAC and tribunal confirmed said addition-Whether tribunal had any material and/or evidence to sustain addition-Held, on facts, yes-Whether tribunal's finding perverse-Held, on facts, no Facts In the assessment for the assessment year 1965-1966, the ITO summoned, under section 131, a creditor who had allegedly advanced to the assessee-firm a loan of Rs. 1 lakh on 16-9-1964. While the creditor confirmed in writing about the said loan, he failed to produce relevant account books as they were seized by the Income-tax Department. The ITO, therefore, added the sum in the assessee's income as income from undisclosed sources. This was upheld by the AAC. On second appeal to the Appellate Tribunal the assessee contended, inter alia, ( i) that the creditor, an income-tax assessee, had duly confirmed the loan which had been duly repaid in cash (in two instalments of Rs. 50,000 each on 15-4-1965 and 30-4-1965) and along with the interest of Rs. 5,412 due thereon by an account payee cheque on 25-5-1965; (ii ) that the creditor could not produce his account books as they were seized by the Income-tax Department; and (iii ) that it had, thus, discharged its onus of proving the genuineness of the loan as also the existence of the creditor. The Tribunal examined the creditor and his account books requisitioned from the Income-tax Department. It found that, although several cash transactions were recorded in his books, neither the said loan nor its repayment by it were recorded therein. It disbelieved the creditor's explanation and evidence as to the source of the alleged loan and sustained the addition, holding (i) that the payment of interest by cheque was recorded in his books to give a colour of genuineness to the transaction; and (ii ) that the creditor was not in a position to advance the loan. On reference, the assessee reiterated, inter alia, (i) that its only burden was to establish (a) identity of the creditor, and (b) the genuineness…

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