Tribunal's Order Reversed; Commissioner of Income Tax (Appeals) Decision Restored in Favor of Rajnandani Projects Pvt. Ltd.
In a significant judgment, the Patna High Court has set aside the order of the Income Tax Appellate Tribunal, Patna Bench, which had previously reversed the decision of the Commissioner of Income Tax (Appeals) regarding an addition of Rs. 1,91,00,000 under Section 68 of the Income Tax Act. The appeal was filed by Rajnandani Projects Pvt. Ltd. against the Tribunal's decision that questioned the genuineness and creditworthiness of a cash credit transaction.
The appellant, Rajnandani Projects Pvt. Ltd., engaged in civil construction, had declared a total income of Rs. 1,96,95,520 for the Assessment Year 2015-16. During scrutiny, the Assessing Officer flagged a transaction involving Rs. 1,91,00,000 received from M/s Champion Group of Companies and treated it as unexplained cash credit. The Commissioner of Income Tax (Appeals) later deleted this addition after considering the evidence presented by the appellant, including identity confirmation, banking trails, and explanations regarding the transaction.
However, the Tribunal reinstated the addition, doubting the transaction's genuineness and the creditor's creditworthiness, primarily due to the creditor's non-filing of income tax returns for the relevant year. The Tribunal's order was challenged by Rajnandani Projects Pvt. Ltd., leading to the present appeal under Section 260A of the Income Tax Act.
The High Court examined substantial questions of law, focusing on whether the Tribunal had erred in its approach. The Court found that the Tribunal had applied an incorrect legal standard and did not adequately justify its reversal of the appellate authority's well-reasoned order. The Court emphasized that the appellant had satisfactorily discharged its burden under Section 68 by providing comprehensive documentary evidence, which the Tribunal failed to refute with concrete findings.
The judgment underscores the importance of adhering to established legal principles when considering appeals under Section 68 and highlights the evidentiary requirements for proving the genuineness of transactions and creditworthiness. The High Court's decision reinstates the Commissioner of Income Tax (Appeals)'s order, providing relief to Rajnandani Projects Pvt. Ltd.
This ruling is expected to have implications for similar cases where the burden of proving the nature and source of cash credits under the Income Tax Act is contested.
Bottom Line:
Income Tax Act, 1961 - Section 68 - Tribunal reversing the appellate order deleting addition of cash credit - Appellant produced documents establishing identity of creditor, banking trail, and explanation regarding transaction - Tribunal failed to demonstrate any perversity, misreading of evidence, or application of incorrect legal standard by the appellate authority - Substantial questions of law arose due to Tribunal's approach.
Statutory provision(s): Income Tax Act, 1961 - Section 68, Section 260A
