INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Receipt of loan - Assessee failed to prove capacity of the creditor, source and genuineness of transaction

AO noticed that amount of Rs. 8,49,49,888 was credited by M/s. P into the accounts of assessees by cheque and further one of the partners of M/s. P owned up to making such payment to assessee by way of loan. As per AO, there was overwhelming evidence on record which established beyond reasonable doubt that firm M/s. P could never have made such huge payment to assessee and partners of this firm were virtually persons of straw. Accordingly, AO taxed said amount under section 68 in assessee's hands. Assessee's case was that amount of Rs. 8.49 crores was transferred into assessee's bank as a transfer through a 'normal banking channel' out of bank accounts of Siraj Sheikh (assessee's brother/brother-in-law) and Vijay Kumar Rao (assessee's close friend) held in the same bank and identity of the source was thus established and once assessee indicated the source from whom amounts were received by cheque and further, such source confirmed payment, burden, which the law casts upon assessee, was fully discharged and thereafter, onus shifted upon Revenue to establish that nevertheless, the amount represented an unexplained income of assessee. Held: Mr. S (brother/brother-in-law of the assessee) and Mr. V Rao, (a close friend of assessee) were not at all clear about their precise role in the transaction involving amount of Rs. 8.49 crores. At one stage, they refer to themselves as source of this amount but at another stage, they claimed to be mere 'conduits' or 'facilitators' for transfer of this amount of Rs. 8.49 crores from M/s. P to the assessee. Mr. S and Mr. V had not produced even shred of evidence to establish even prima facie their capacity to raise such a huge amount, the assessee quite reluctantly, might have indicated, but not established identity of the source. In any case, assessee failed to establish capacity of the source and genuineness of transaction, even merely pointing out to a source and the source admitting that it has made the payments was not, sufficient to discharge the burden placed on the assessees by section 68. Accordingly, AO was justified in making addition.

REFERRED :

FAVOUR : Against the assessee

A.Y. :

INCOME TAX ACT, 1961

Section 68

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