The Madras High Court on 28 September dismissed a review application seeking to reopen a Rs. 10 crore unexplained cash credit addition against an individual engaged in civil contract business.

A Division Bench comprising Chief Justice Sushrut Arvind Dharmadhikari and Justice G. Arul Murugan dismissed the review application, holding that the petitioner failed to show due diligence in producing documents relied upon as new evidence and failed to establish the identity and creditworthiness of the creditor and genuineness of the transaction. The judges observed:

“A mere paper arrangement or routing of funds through a personal bank account does not discharge the statutory burden under Section 68 of the Act.”

V. Babu, the petitioner, who was engaged in civil contract business, had filed his return for the Assessment Year 2007-08, declaring a total income of Rs. 16,27,456. During a survey conducted under Section 133A of the Income Tax Act in March 2010, the Revenue detected a Rs. 10 crore credit in the petitioner's bank account on 9 February 2007.

The petitioner explained that Commercial Buildwell Pvt Ltd had made the payment as an accommodation entry at the request of his friend, K.R. Elangovan. He claimed that he retained Rs. 3 lakh as commission and transferred the remaining Rs. 9.97 crore to Mohanlal Jewellers.

The Assessing Officer reopened the assessment and treated the entire Rs. 10 crore as unexplained cash credit under Section 68 of the Act. The Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal upheld the addition.

Subsequently, his tax appeal was dismissed by the High Court in 2016 for want of a substantial question of law. His Special Leave Petition before the Supreme Court was dismissed in 2017.

Thereafter, the petitioner approached the High Court in review, relying on sale deeds obtained under the Right to Information Act and an ITAT order concerning a co-confirming party.

He contended that the sale deeds showed that the recipient was Babu & Associates, a partnership firm represented by C. Karthikeyan, rather than the petitioner in his individual capacity. He also relied on the ITAT's order in the case of P. Elango, where the matter had been remitted for fresh consideration.

Opposing the review, the Revenue argued that there was no error apparent on the face of the record. It pointed out that the Rs. 10 crore had been credited into the petitioner's personal bank account and that he had failed to establish the identity and creditworthiness of the creditor and the genuineness of the transaction.

The Court held that the initial burden under Section 68 of the Income Tax Act was on the petitioner to establish the identity of the creditor, the creditor's creditworthiness and the genuineness of the transaction.

It found that the petitioner's explanation that he had merely accommodated the transaction and subsequently transferred Rs. 9.97 crore to a third party had already been examined by the authorities and found unsatisfactory.

Further, the Bench found that the sale deeds and tribunal orders relied upon by the petitioner were available in public records during the original assessment and appellate proceedings. The petitioner had failed to demonstrate due diligence in producing them earlier. It said:

“In this case, the documents now relied upon by the assessee (sale deeds of 2007 and tribunal orders of 2015) were available in public records during the original assessment and appellate proceedings. The assessee failed to demonstrate due diligence. Re-evaluating the same set of factual explanations under the guise of 'new material' amounts to seeking a re-hearing of the appeal, which review jurisdiction strictly forbids.”

Lastly, the judges held that seeking to re-evaluate the same factual explanation under the guise of new material amounted to an attempt to seek a rehearing, which is impermissible in review jurisdiction.

They concluded that the Rs. 10 crore credit remained undisputed, the petitioner's explanation had already been examined and rejected by the fact-finding authorities, and no error apparent on the face of the record had been demonstrated.

Accordingly, the High Court dismissed the review application, with no order as to costs.

For Appellant: N.V.Balaji, Advocate 

For Respondent: T.Ravikumar, Senior Standing Counsel asst by Mr.Umesh Rao.K. Junior Standing Counsel 

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Case Title :  V. Babu v. Deputy Commissioner if Income TaxCase Number :  REV.APPL.No. 107 of 2021CITATION :  2026 LLBiz HC(MAD) 298
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