Law: Income Tax Act, 1961

Section: 147,147(a)

Income-tax---Reassessment---Cash credits---Sums shown as hundi loans accepted in original assessments---Assessments reopened on basis of statements of creditors---Reopening held valid---Burden of proof on assessee to prove identity and capacity of creditors and genuineness of loan---Failure to do so--Additions justified---Indian Income Tax Act, 1961, S.147. For the assessment year 1960-61, the assessee had shown certain credits on account of hundi loans. The assessment was completed treating these hundi loans as genuine. Thereafter, it was brought to the notice of the Income-tax Officer by some employees of the assessee that the hundi loans were not genuine. On this basis, the assessment was reopened under section 147(a) of the Income Tax Act, 1961. After reopening of the assessment, the Income-tax Officer issued notices to the creditors at their addresses given by the assessee but the notices came back unserved with the remarks "Not known" and "nobody in this name stays here". In the absence of response, the Income-tax Officer came to the conclusion that all the hundi loans represented the assessee's income from undisclosed sources and he reassessed the income by addition of hundi loans. On appeal, the assessment order was cancelled on the ground that the reopening was bad in law. The Tribunal, however, found that the reopening was in accordance with law and restored the matter to the Appellate Assistant Commissioner for fresh disposal on the merits. The Commissioner of Income-tax (Appeals) called upon the assessee to produce the persons who had advanced the loans. The assessee expressed inability to produce the persons. The Commissioner of Income-tax (Appeals) was of the view that the assessee had not discharged the burden to prove the genuineness of the loans and dismissed the appeal. In the second appeal before the Tribunal, the Tribunal also confirmed this view. On a reference: Held, that there was no dispute on the facts that the burden lay on the assessee to prove the genuineness of the cash credits. The assessee had to prove the identity of the creditors, the capacity of such creditors to advance sums and lastly the genuineness of the transactions. The…

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