Facts of the Case

The assessee, Shri Manoj Kumar Gupta of Singrauli (M.P.), was subjected to assessment proceedings by the Income Tax Officer, Mirzapur. During the course of assessment, certain amounts credited in the books of account or reflected in financial records were treated by the Assessing Officer as unexplained.

The Assessing Officer concluded that the assessee had failed to satisfactorily explain the nature and source of these credits and accordingly made additions under the Income-tax Act, 1961.

Issues Involved

Whether the impugned cash credits or financial entries could be treated as unexplained income under Section 68 due to failure of the assessee to substantiate the source with credible evidence.

Petitioner’s (Assessee’s) Arguments

The assessee contended that the additions were unjustified and that the amounts in question were supported by legitimate transactions. It was argued that relevant explanations and supporting documents had been furnished to establish the authenticity of the credits. The assessee submitted that the Assessing Officer had disregarded the material evidence without proper justification.

 Respondent’s (Revenue’s) Arguments

The Revenue argued that the assessee had not discharged the statutory burden imposed under Section 68. According to the department, the evidence produced was insufficient to prove the identity and financial capacity of the parties involved or the genuineness of the transactions. Therefore, the Assessing Officer was justified in treating the credits as unexplained income.

Court Order / Findings (ITAT)

The Tribunal examined the material on record and reiterated the settled legal principle governing Section 68. It observed that the assessee must satisfactorily establish:

  1. Identity of the creditor or source
  2. Creditworthiness or financial capacity
  3. Genuineness of the transaction

Failure to prove any of these essential elements empowers the Assessing Officer to treat the credited amount as income of the assessee. The Tribunal adjudicated the matter based on whether the assessee had successfully discharged this burden through reliable evidence.

Important Clarification

The decision reinforces that mere entries in books or submission of basic documents do not automatically establish genuineness. The explanation must be credible, verifiable, and supported by substantive evidence demonstrating real financial capacity and bona fide transactions.

Link to download the order –https://itat.gov.in/public/files/upload/1582192574-MANOJ-318(CITA).pdf

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