Law: Income Tax Act, 1961

Section: 68

Law: Income Tax Act, 1961

Section: 68

Under section 68 of Income-tax Act creditor's creditworthy- ness has to be judged vis-a-vis transactions, which have taken place between assessee and creditor, and it is not business of assessee to find out source of money of his creditor or genuineness of transactions, which took place between creditor and sub-creditor and/or creditworthiness of sub-creditors for these aspects may not be within special knowledge of assessee Section 68 of the Income-tax Act, 1961, read with section 106 of the Indian Evidence Act, 1872 - Cash credits - Assessment year 1992-93 - Whether burden of assessee to prove genuineness of transactions as well as creditworthiness of creditor must remain confined to transactions, which have taken place between assessee and creditor and it is not burden of assessee to prove genuineness of transactions between his creditor and sub-creditors nor is it burden of assessee to prove that sub-creditor had creditworthiness to advance cash credit to creditor from whom cash credit has been, eventually, received by assessee - Held, yes - Whether since it is not business of assessee to find out source(s) from where creditor has accumulated amount, which he has advanced in form of loan to assessee, section 68 cannot be read to show that in case of failure of sub-creditors to prove their creditworthiness, amount advanced as loan to assessee by creditor shall have to be treated, as a corollary, as income from undisclosed source of assessee himself - Held, yes FACTS The assessee had taken loans of Rs. 4,35,000 and Rs. 5,00,000 from 'N' and 'P', respectively, by cheques. The Assessing Officer examined 'N' under section 131, who in his statement so recorded confirmed to have advanced loan of Rs. 4,35,000 to the assessee on two different dates by cheques and explaining the source from where he had received the said amount of Rs. 4,35,000 stated that he had taken loans from three different persons amounting to Rs. 1,20,000, Rs. 1,25,000 and Rs. 1,20,000, respectively by cheques and that out of the said amount of Rs. 4,35,000 advanced to the assessee, a sum of Rs. 70,000 was from his own source. The Assessing Officer held that no genuine loan had been taken by…

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