2004 (8) TMI 49 - HC - Income Tax

Unexplained Money - 1. Whether, Tribunal was justified in applying the S. 145, in respect of the assessee s income in the sale effected by it during the relevant period? 2. Whether, Tribunal was justified in not considering that the burden lies on the Department to prove that the amount belonged to the assessee it was more so when the four partners had admitted that the amount belonged to them and was consequently justified in holding that the sum of Rs. 52,000 from out of Rs. 92,000 found in the assessee s premises was owned by the assessee? - Tribunal has recorded a categorical finding that the explanation offered by the applicant that it was from the savings/withdrawal of the partners, had not been established. Moreover, the assessment has been made on the partners on the protective basis - It is seen that where an assessee is found to be the owner of any money, which is not recorded in the books of account and the explanation offered by him is not found to be satisfactory, the money is to be deemed the income of the assessee for such financial year. Here the explanation offered by the applicant has been disbelieved. The findings recorded by the Tribunal are based on appreciation of evidence and material on record and do not suffer from any illegal infirmity.

Summary

Issues:
1. Application of section 145 of the Income-tax Act, 1961 to the assessee's income in the sale during the relevant period.
2. Justification of not considering the burden of proof on the Department regarding the ownership of a certain amount found in the assessee's premises.

Analysis:
1. The case involved the application of section 145 of the Income-tax Act, 1961 to the income of a registered firm derived from selling various items. The Income-tax Officer rejected the trading results of the firm due to discrepancies in stock maintenance and estimated sales at a higher amount. The Tribunal upheld the invocation of section 145, directing the Income-tax Officer to determine the gross profit at 11% on the declared turnover. The High Court found that since the stock details were not maintained on a daily basis, the Income-tax Officer was justified in invoking section 145 for best judgment assessment, as the stock position was not verifiable.

2. The second issue revolved around the ownership of a specific amount found in the assessee's premises. The Tribunal disbelieved the explanation provided by the assessee regarding the amount of Rs. 52,000 found during a survey. The Tribunal held that the burden of proof was on the assessee to establish that the amount belonged to the partners collectively. The Tribunal found the explanation insufficient and added the amount to the income of the applicant. The High Court referred to section 69A of the Act, which deals with unexplained money, and noted that the explanation offered by the applicant was disbelieved, leading to the amount being deemed as the income of the assessee. The Court held that the findings were based on evidence and material on record, affirming the Tribunal's decision.

In conclusion, the High Court answered both questions of law in favor of the Revenue and against the assessee, upholding the application of section 145 and the addition of the disputed amount to the income of the applicant based on the evidence and legal provisions cited in the judgment.