Unexplained Cash Credited To Assessee's Book Would Be Treated As Taxable Income Under Income Tax Act, 1961: Chhattisgarh High Court

Recently, the Chhattisgarh High Court reiterated a settled position of law that the assessee would be liable to pay the income tax on the unexplained cash credited into its books if the assessee fails to prove the source of a sum of money found to have been received by an assessee.

The Court said that under Section 68 of the Income Tax Act, 1961 the initial onus to prove the genuineness of the money credited into the assessee's books of account falls on the assessee, and if the assessee fails to discharge the onus than the unexplained cash credited into the assessee's books of account would be deemed as a taxable income being earned from the previous year.

“The Supreme Court in the matter of Principal Commissioner of Income Tax (Central-1) Vs. NRA Iron and Steel Private Limited {(2019) 15 SCC 529} has laid down the parameters and the issues which arises for determination whether the respondent assessee has discharged the primary onus to establish the genuineness of the transaction required under Section 68 of the Act, 1961. It primarily laid down that the initial onus is on the assessee to establish proof of identity of the creditors; capacity of creditors to advance money; and genuineness of transaction.”, the bench comprising Justices Goutam Bhaduri and Rajani Dubey said.

In the present case, the appellant/assessee contended that its books of account were credited with unexplained cash amounting to Rs.1,87,00,000/- from two companies. Since the credible explanation regarding the amount credited to the company was not explained by the assessee, neither the existence of the companies from whom money was invested in the assessee was the amount of unexplained cash credit was established, therefore the department added the unexplained cash credited into assessee books under Section 68 of the Act, 1961 to charge income tax on the said amount.

The Supreme Court in NRA Iron's case (supra) held that once the assessee could not provide a satisfactory explanation about the generation of the income than it is open to the Revenue to hold that it is the income of the assessee, and there would be no further burden on the Revenue to show that the income is from any particular source.

Hence, the court held that the onus of Section 68 of the Act, 1961 is to be discharged by the assessee, and having failed to do so, the department could assess the amount credited into the books of the assessee as the income earned from the previous financial year.

The appeal was accordingly dismissed.

Appearance:

For Appellant : Shri Sidhdharth Dubey, Advocate

For Respondent : Ms. Naushina Afrin Ali, Advocate along with Shri Ajay Kumrani, Advocate on behalf of Shri Amit Chaudhari, Advocate

Case Details: M/s. Sumit Global Pvt. Ltd Versus The Income Tax Officer-1 Raigarh, TAXC No. 120 of 2024

Citation: 2024 LiveLaw (CH) 16

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