Once Assessee Shows Genuineness Of Transactions, No Additions Can Be Made: Gujarat High Court

The Gujarat High Court has held that the assessee has discharged the primary onus to prove the creditworthiness of the transaction.

The division bench of Justice Sonia Gokani and Justice Sandeep N. Bhatt has observed that the initial burden, even if not discharged at the level of the assessing officer, can be discharged by the production of documents before the CIT (Appeals), where two remand reports have been called for. Every transaction has been made through a banking channel, there is no reason to also question the creditworthiness.

The appellant/assessee company is operating as an educational institution. A survey operation was carried out on the premises of the assessee, and incriminating materials reflecting unaccounted cash payments made for the land as well as unaccounted expenses incurred were found.

The assessing officer compared the entries with the payment details as per the books of accounts and found the payment schedules to have been followed on the page that had been found. In the absence of any signature against the payment, the assessing officer concluded that since the cheque payments were made before the date, even the cash payments must have been made as per the schedule. The Assessing Officer assessed Rs. 5.68 crores as an unexplained investment under Section 69B and added Rs. 1.35 crores.

The CIT (Appeals) had closely examined and also admitted the additional evidence furnished by the assessee. After calling for the remand, reports from the Assessing Officer held that there was no evidence found during the survey in the case of the appellant and, during the course of the search, in the case of the directors of the company.

The assessee contended that the monies were received and subsequently repaid through account payee cheques or bank transfers, and they had been recorded in the books of accounts. The lenders also confirmed the transactions, and thus, the company discharged the onus regarding the said deposits.

The court has held that once the identity, genuineness of transactions, and creditworthiness have been established, no additions can be made.

Case Title: PCIT Versus M/s.Neotech Education Foundation [ R/Tax Appeal No. 390 of 2022]

Case Citation: 2023 Livelaw (Guj) 8

Date: 02/01/2023

Counsel For Appellant: Advocate Dev D. Patel

Counsel For Respondent: Advocate Varun Patel

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