Is discovery of new evidence a ground for review only where the review petitioner demonstrates that, despite due diligence, it was not within his knowledge?

Income-tax Act, 1961 — s.68 — Unexplained cash credit — Accommodation entry — Code of Civil Procedure, 1908 — s.114 — Order XLVII Rule 1 — Review — Discovery of new evidence — Due diligence — Error apparent on the face of the record —

Code of Civil Procedure, 1908 — Order XLVII Rule 1 — Review — New evidence — Due diligence —

Held: New evidence supports a review only if the review petitioner shows that, despite due diligence, it was not within his knowledge; documents lying in public records during the original proceedings do not qualify, and review is not an appeal in disguise. (¶9, 10, 11)

Income-tax Act, 1961 — s.68 — Bank credit — Burden of proof —

Held further: Where a credit in the assessee's account is admitted, he must prove the identity and creditworthiness of the creditor and the genuineness of the transaction; routing funds through a personal account does not discharge that burden. Review application dismissed. (¶7, 8, 12)

Is discovery of new evidence a ground for review only where the review petitioner demonstrates that, despite due diligence, it was not within his knowledge?

Yes. Discovery of new evidence is a ground for review only where the review petitioner demonstrates that, despite due diligence, it was not within his knowledge. Sale deeds of 2007 and tribunal orders of 2015 lay in public records throughout the assessment and appellate proceedings, so relying on them as new material only sought a re-hearing; under Malleeswari, a review is not an appeal in disguise. [¶9, ¶10, ¶11]

Is an admitted bank credit income under Section 68 of the Income-tax Act where the assessee fails to explain its nature and source?

Yes. An admitted bank credit is income under Section 68 of the Income-tax Act where the assessee fails to explain its nature and source. The assessee bears the initial burden of proving the identity and creditworthiness of the creditor and the genuineness of the transaction; a plea that Rs.10 Crores was an accommodation entry routed through his personal account and passed on to a jeweller, rejected by the fact-finding authorities, does not discharge it. [¶6, ¶7, ¶8, ¶12]

What did the High Court decide on the assessee's review application?

The review application was dismissed as no error apparent on the face of the record was shown in the judgment of 23.02.2016 dismissing the Tax Case Appeal. There were no costs and the connected miscellaneous petition was closed. [¶12]

“7. In the case at hand, the receipt of Rs.10 Crores into the bank account of the assessee on 09.02.2007 is uncontroverted. The initial burden lies entirely on the assessee to establish three essential conditions: (i) Identity of the creditor; (ii) Creditworthiness of the creditor; and (iii) Genuineness of the transaction. The explanation offered by the assessee that he received Rs.10 Crores as an accommodation entry and passed on Rs.9.97 Crores to a third party, was tested by the authorities and found completely unsatisfactory. 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.”

“8. The Supreme Court has repeatedly held that Section 68 of the Act places a strict burden of proof on the assessee. Where money is admitted to have entered the assessee’s account, the assessee must offer a plausible, evidence-backed explanation regarding its nature and source. Failure to do so legally justifies treating the entire credit as income.”

“10. As per paragraph 17.1 of the decision in Malleeswari (supra), on which reliance was placed by learned counsel for the assessee, the discovery of new evidence can be a ground for review, but that ground can be raised only if the review petitioner demonstrates that, despite exercising due diligence, such evidence was not within his knowledge or could not be produced when the original order was passed.”

“11. 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.”