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2007 Supreme(SC) 734
SUPREME COURT OF INDIA
S.H. Kapadia & B. Sudershan Reddy
Commissioner of Income Tax-PETITIONER
VERSUS
P. Mohanakala-RESPONDENT
Appeal (civil) 2540 of 2007
CIVIL APPEAL NO. 2540 OF 2007
(Arising out of SLP(c) No. 17358 of 2006)
WITH
CIVIL APPEAL NOs. 2541,2542,2543,2544,2545,2546
and 2547 OF 2007
(Arising out of SLP(C ) Nos. 17356,
17364,17365,19565,19563,21066 & 19566 of 2006
DECIDED ON : 15/05/2007
Under Section 68 of the Income Tax Act, 1961, unsatisfactory explanations for cash credits create prima facie evidence against the assessee, shifting the burden to them to rebut it. High Courts cannot substitute concurrent factual findings of lower authorities absent a substantial question of law.
Headnote:(A) Income Tax Act, 1961 - Section 68 - Cash credits - Where any sum is found credited in the books of an assessee and the explanation offered is not satisfactory in the opinion of the Assessing Officer, such sum may be charged to income-tax as the income of the assessee - The receipt of money constitutes prima facie evidence against the assessee, and the burden lies on the assessee to rebut this evidence by offering a reasonable and acceptable explanation (Paras 18, 20, 24)
(B) Income Tax Act, 1961 - Section 260(A) - Scope of High Court's jurisdiction - High Court cannot substitute its own findings of fact for those of the Tribunal and other authorities unless the findings are perverse or based on no evidence - Re-appreciation of evidence by the High Court in the absence of a substantial question of law is impermissible (Paras 14, 30)
Facts of the case:
Several assessees received substantial sums through banking channels from a foreign donor, claiming the amounts were gifts. The revenue authorities, after recording statements and examining evidence, rejected this explanation, concluding that the transactions were not genuine gifts but likely compensatory payments. This view was concurrently held by the Assessing Officer, the Commissioner of Income Tax (Appeals), and the Income Tax Appellate Tribunal. The High Court reversed these findings, treating the conclusions of the lower authorities as being based on surmises and conjectures.
Findings of Court:
The concurrent findings of the lower authorities were based on a proper appreciation of the material on record and surrounding circumstances. The High Court misdirected itself by disturbing these concurrent findings of fact, as no substantial question of law arose for its consideration.
Issues: Whether the High Court was justified in reversing the concurrent findings of fact regarding the genuineness of gifts under Section 68, and whether the failure to provide a satisfactory explanation allows the treatment of the credit as income if the assessee fails to rebut the prima facie evidence of the receipt.
Ratio Decidendi: Under Section 68, if the explanation for a cash credit is unsatisfactory, the receipt of money is prima facie evidence against the assessee. The burden shifts to the assessee to rebut this evidence; if they fail, the sum can be treated as income. Furthermore, a High Court cannot re-appreciate evidence to substitute concurrent findings of fact unless they are perverse or illegal, as it is limited to deciding substantial questions of law.
Result: Appeals allowed.
Legal Category Hierarchy
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income tax law
-
cash credits
- section 68
- burden of proof
- gifts
-
cash credits
-
practice and procedure
-
appeals
-
high court jurisdiction under section 260a
- substantial question of law
- interference with concurrent findings
-
high court jurisdiction under section 260a
-
appeals
JUDGMENT
B.SUDERSHAN REDDY,J.
Leave granted.
These appeals have been filed against the judgment of Madras High Court dated 29.3.2006 in TC (A) Nos. 74 to 76 and 78 to 82 of 2002 whereby the following questions have been answered by the High Court in favour of the assessees and against the revenue:
(a)Whether in the facts and circumstances, the Income Tax Appellate Tribunal was correct in law to accept the principle of preponderance of probabilities in holding that the claim of the appellant that the sum of Rs. 15,62,500/- received him by way of gifts through normal Banking Channels was not genuine an that it was liable to be assessed under Section 68 of the Income Tax Act, 1961?
(b)Whether in the light of the law established and based on the facts and in the circumstances of the case, the learned Income Tax Appellant Tribunal is legally justified in concluding that burden of proof cast on the appellant under Section 6B of the Income Tax Act, 1961 has not been discharged and the ingredients for invoking section 68 of the Income Tax Act are present?
(c)Whether in the facts and circumstances of the case, the conclusion of the Tribunal that the claim of gift is not genuine is reasonable and based on relevant material and not perverse?
These appeals relate to the assessment years 1995-96 and 1996-97. The dispute in all these appeals essentially relates to the addition made by the Assessing Officer in respect of several foreign gifts stated to have been received by the assesses from one common donor namely Sampath Kumar. The gifts received were from one Ariavan Thotan and Suprotoman. It is during the enquiry by the Revenue it is asserted that they were the aliases of Sampathkumar. These gifts were made to A. Srinivasan and his wife, Smt. S. Kalavathy, his son, S. Balaji Manikandan and to one of his brothers, Rajendran and Smt. Mohanakala. Each one of them is an assessee within the jurisdiction of the appellant. The foreign gifts are received by the assesses during the assessment years 1993-94 to 1996-97. The detail of the gifts received by each one of the assessees is as under:
Assessment years
Shri/Smt. 93-9494-9595-9696-97
A. Srinivasan 6,40,75814,46,93326,47,6478,64,500
S. Kalavathy1,47,79716,19,67921,82,8471550,00
S.Balaji Manikandan84,4235,68,01521,85,6048,64,500
A. Rajendran 15,62,500
R. Mohankala15,62,500
8,72,97836,34,627101,41,09832,79,000
In all the aggregate gifts received by the assessees is to the extent of Rs. 1,79,27,703/-. The Assessing Officer did not accept the explanation offered by the respective assessees that the amount of credit is a gift from NRI and proceeded to add it as the income of the assessees from undisclosed sources. The credit entries have been made during the period from 8.7.1992 to 19.10.1995. There is no dispute that the payments were made by instruments issued by a foreign bank and credited into the respective assessees account by negotiation through a bank in India. Most of the cheques sent from abroad were drawn on Citibank, N.A. Singapore.
The Assessing Officer dealt with the controversy as regards the cash credit entries received from the foreign donor. He noticed that the gifts have been sent in the name of Ariavan Thottan and received by A. Srinivasan and others who are all his family members. Each one of them is an individual assessee.
That all the assessees were summoned and their statements have been recorded by the Assessing Officer. Srinivasan who is the key person in his statement said that he knew Sampathkumar for the last 20 years and he had been helping Sampathkumar prior to 1985 by paying Rs. 100/- to 200/- every month as he had no source of income to get himself educated. There are material inconsistencies in the statements made by other assessees which we are not required to notice in detail. Sampathkumar in his own statement stated that he was in Indonesia up to the year 1992 and employed as an Engineer. Thereafter, he shifted to England and started consultancy pr
