2005 (4) TMI 52 - HC - Income Tax

Powers Of Appellate Tribunal - Addition u/s 68 - Unproved credits appearing in the accounts of the assessee in the names of his daughters - benefit of Amnesty Scheme - HELD THAT - In the present case, the assessee offered the explanation both about the nature and source of the money. It is not the case where the assessee claimed any immunity from tax on account of the disclosure of income by Smt. Vimlesh Aggarwal and Smt. Shashi Aggarwal. It is the case where the assessee was asked to explain the deposits in its books of account about the nature and source, which the assessee has explained. The Assessing Authority though not accepted the explanation but the CIT (A) and the Tribunal have accepted the explanation. The finding of the Tribunal is finding of fact in this regard learned Standing Counsel is not able to show that the findings recorded by the Tribunal are perverse. No dispute that the income tax return under the Amnesty Scheme in the case of Smt. Vimlesh Aggarwal and Smt. Shashi Aggarwal have been accepted. We also do not find any error in the order of the Tribunal where the Tribunal held that in case the amount deposited in the bank account of Smt. Vimlesh Aggarwal and Smt. Shashi Aggarwal are to be treated as the amount belonging to the assessee and the deposits made by the assessee, then it would be a case of investment made by the assessee in the name of Smt. Vimlesh Aggarwal and Smt. Shashi Aggarwal and the provision of section 69 of the Act would apply and not section 68 of the Act and for that purpose the financial year would be relevant and then such investment may be deemed to be the income of the assessee of such financial years which falls to the assessment year 1986-87 and not 1987-88. Section 68 applies when the amount is found deposited in the books of account of the assessee and not in third party. Deposit in the account of Bank would amount to investment and section 69 would apply and not section 68. Thus, both the questions are answered in the affirmative, i.e., in favour of the assessee and against the Revenue.

Summary

Issues Involved:
1. Deletion of addition of Rs. 95,000 under section 68 of the Income-tax Act.
2. Assessment of unproved credits in the relevant assessment year under section 68 of the Income-tax Act.

Detailed Analysis:

Issue 1: Deletion of Addition of Rs. 95,000 under Section 68 of the Income-tax Act

The Income-tax Appellate Tribunal (ITAT) deleted the addition of Rs. 95,000 made under section 68, which was credited in the names of the assessee's daughters, Smt. Vimlesh Aggarwal and Smt. Shashi Aggarwal. The assessee explained that the deposits were made from their respective bank accounts, and both were assessed under the Amnesty Scheme. The ITAT found that the assessee had discharged its burden of proving the source of the money, which flowed from the bank accounts of the daughters. The Tribunal noted that the creditors had confirmed the deposits on oath, and the amounts deposited came from their bank accounts, which were disclosed under the Amnesty Scheme.

The Commissioner of Income-tax (Appeals) supported the assessee's explanation, stating that if the Assessing Officer believed that the daughters did not have independent income sources, the proper course would have been to add the entire amounts deposited in the bank accounts of the daughters to the assessee's income under section 69, not section 68. The Tribunal agreed, emphasizing that the immediate source of the deposits was established, and the assessee had thus discharged the initial onus to prove the cash credits.

Issue 2: Assessment of Unproved Credits in the Relevant Assessment Year under Section 68

The Assessing Officer added the amounts as income of the assessee under section 68, arguing that the Amnesty Scheme was not available for introducing black money and benami investments in the names of others. The Assessing Officer relied on the Supreme Court's ruling in Jamunaprasad Kanhaiyalal v. CIT, which stated that the protection under the voluntary disclosure scheme was extended only to the declarant and not to third parties. However, the Tribunal observed that the assessee had explained the nature and source of the deposits, and the explanation was found satisfactory by the Commissioner of Income-tax (Appeals) and the Tribunal.

The Tribunal held that the Assessing Officer had not provided any material evidence to show that the amounts deposited in the bank accounts belonged to the assessee or that the assessee was responsible for making the deposits. The Tribunal concluded that section 68 applies to sums found credited in the books of the assessee, and if the amounts were to be treated as the assessee's income, section 69 would apply, considering it an investment made by the assessee. Consequently, the relevant assessment year would be 1986-87, not 1987-88.

Conclusion:

Both questions were answered in the affirmative, in favor of the assessee and against the Revenue. The Tribunal's findings were based on the assessee's satisfactory explanation of the nature and source of the deposits, and the Revenue's failure to prove that the amounts belonged to the assessee. The Tribunal's decision was upheld, confirming that the provisions of section 69, not section 68, would apply if the deposits were considered investments by the assessee.