THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON'BLE SRI JUSTICE RAMESH RANGANATHAN ITTA.No.40 of 2009 Dated:27.08.2010 Between: Sri S.Nanda Gopal Reddy. …Appellant and The Income Tax Officer, Ward-I, Gudur …Respondent THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON'BLE SRI JUSTICE RAMESH RANGANATHAN ITTA.No.40 of 2009 JUDGMENT: (per Hon’ble Sri Justice Ramesh Ranganathan) This appeal arises from the order of the Income Tax Appellate Tribunal, Hyderabad, in ITA No.634/Hyd/08 dated 21.11.2008, for the assessment year 2004-2005. The appellant, both before us and the Tribunal, is a builder engaged in the business of construction of flats. For the assessment year 2004-2005 the appellant filed the return on 01.11.2005 disclosing an income of Rs.62,250/-. The assessment was taken up for scrutiny and, by order dated 29.12.2006, the assessing authority assessed the total income of the appellant as Rs.37,32,250/-. The assessing authority invoked Section 68 of the Income Tax Act, 1961 (the Act), treated cash credits for a sum of Rs.12,45,000/- as the undisclosed income of the assessee and Rs.24,25,000/-, representing the gift from S.Ravindra babu, was also added. The reason assigned for such addition was that there were alleged contradictions and falsities in the statements of the creditors. Aggrieved thereby, the appellant preferred an appeal before the Commissioner of Income Tax (Appeals) and, on the appeal being rejected, he preferred a second appeal to the Income Tax Appellate Tribunal. The Tribunal, in its order dated 21.11.2008, noted the contentions of the assessee that the creditors had appeared before the lower authority and had confirmed the credits; when the assessee had proved the identity of the creditors, as also their creditworthiness, the revenue was not right in invoking Section 68 of the Act, and the impugned addition was unjustified. The assessee also contended that no opportunity of cross examining the creditors was given to him. The Tribunal held that the advances received by the assessee were in cash, and not through any banking channel; in most of the cases, the creditors did not furnish details of their land holding; they could not also produce details regarding their savings, or any other evidence to show that they had the capacity to give the advance to the assessee; and they had no knowledge of the proposed venture of the assessee. The Tribunal further held that the burden was on the assessee to prove the identity of the party, and that the assessee had failed to discharge his primary onus of establishing the genuineness of the transactions. The Tribunal, therefore, confirmed the order of the Commissioner of Income Tax (Appeals). Before us Sri Pushyam Kiran, learned Counsel for the appellant, would submit that the amount treated as undisclosed income by the authorities were advances received from the flat owners; an inspection was carried out on 27.12.2006 and six persons were examined; however the enquiry was not properly conducted; since the appellant had discharged the onus of establishing the source from which the money was received, the burden shifted on the assessing authority to establish that the cash credits were not genuine, and the assessee cannot be asked to prove the source of the source or the origin of the origin. Learned Counsel would rely on Khandelwal Constructions v Commissioner of Income Tax[1] in this regard. On the other hand, Sri Narasimha Sarma, learned Counsel appearing for the Department, would submit that the initial burden, to establish the source from which cash credit had been received, is on the assessee; the assessee had failed to discharge the said burden; the persons, who are alleged to have given advances to the appellant, were his friends and relatives; their capacity to advance the said amounts was not established in the enquiry; and the order of the Tribunal does not necessitate interference in an appeal under Section 260A of the Act, as there is no question of law which arises for consideration. We have carefully examined the records and have given our detailed considerations to the contentions urged by either side. A perusal of the assessment order would reveal that the assessing authority had observed that the amounts withdrawn were very unusual except in one case; on no other occasion had those persons drawn such highly odd figures; cash withdrawal for such odd amounts was highly unusual; and the assessee himself had collected the cheques from those persons and had withdrawn the cash. As such he held that the cash credits made in the books of accounts of the assessee, during the financial year 2003-2004 amounting to Rs.12,45,000/-, were not genuine, and should be treated as the unexplained income of the assessee under Section 68 of the Act. Regarding the gift of Rs.24,25,000/-, the assessing authority, based on the evidence on record, came to the conclusion that the assessee had not proved the genuineness of the gift satisfactorily and the alleged gift amount of Rs.24,25,000/- was treated as the income of the assessee from undisclosed sources under Section 68 of the Act. It is evident that the assessing authority, the Commissioner of Income Tax (Appeals) and the Tribunal have carefully examined all factual aspects, and have recorded their satisfaction that the cash credits were not genuine. It is the assessee who relied on the notarized affidavits said to have been given by persons who had advanced money for the purchase of flats constructed by him. It is these persons who were examined during the enquiry. The very fact that they are persons, who the assessee claims had paid him certain amounts as advance for purchase of the flats constructed by him, would negate his contention that he was entitled to cross examine these persons. It is only in cases where the assessee had discharged the initial burden of establishing that the cash credits were genuine, would the burden shift to the assessing authority to establish that they are not. In the case on hand the assessee has failed to discharge the initial burden. Reliance placed by the learned Counsel on the judgment of the Division Bench of the Gauhati High Court, in Khandelwal Constructions, is misplaced. The said case, before the Gauhati High Court, was one where the creditors had been filing income returns continuously for a long time ranging from five to six years, and this aspect was not considered by the Assessing Officer. It is in such circumstances that the Gauhati High Court held that the enquiry to be conducted under Section 68 of the Act must be reasonable, in consonance with principles of natural justice, and a hasty conclusion on a perfunctory enquiry cannot be the basis for rejecting the claim of the assessee. We are satisfied that, in the case on hand, the enquiry conducted is reasonable and is not perfunctory. The assessing authority has recorded his satisfaction based on material evidence on record. We have also examined the reasons recorded by all the authorities and are satisfied that the conclusions arrived at by the assessing authority, the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal are on the basis of the material on record, and do not necessitate interference in an appeal under Section 260A of the Act. The appeal is, accordingly, dismissed. __________________ (V.V.S.RAO, J) ______________________________ (RAMESH RANGANATHAN, J) 27.08.2010 vs [1] (1997) 227 ITR 900 (Gauhati)