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Mere cheque payment does not make a transaction genuine

A division bench of the Delhi High Court, in Principal Commissioner of Income Tax v. Bikram Singh, held that assesse cannot prove the genuineness of the transaction by merely establishing of the identity of the creditors and the fact that the amounts have been transferred through cheque payments.

Earlier, the ITAT finding the fact that merely because the payments were through cheques, has held that the transactions were genuine.

In the instant case, the department has made additions in respect of loans/advances received from eight persons, on the ground that the Assessee was unable to establish the identity, creditworthiness and genuineness of the said persons and transactions.

Justice S Muralidhar and Justice Prathiba M Singh observed that the ITAT has ignored the evidence on record and did not even examine the genuineness of the transaction or the financial strength of the creditor as required in law. “Merely because the transaction was by payments through cheque, the ITAT presumes them to be genuine. A creditor who opens a bank account with just Rs. 500/-, depositing huge sums of cash into the account and then lending a sum of Rs. 1,10,00,000/- to the Assessee, without any agreement, interest payment or security, is `fantastic’ and `incredible’ to say the least. The ITAT ignored vital and tell-tale evidence which showed that the transaction was far from being genuine. The Assessee had clearly failed to discharge the onus cast upon him qua this creditor,” the bench said.

Article referred: http://www.taxscan.in/transaction-cannot-treated-genuine-merely-transaction-payments-cheque-delhi-hc/10585/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+Taxscan+%28Top+Stories+%E2%80%93+Taxscan+%7C+Simplifying+Tax+Laws%29

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