2014 (4) TMI 1103 - AT - Income Tax

Undisclosed source of cash deposited in the Vijaya Bank account - it is the case of the assessee that such amounts cannot be treated as income in his hands as his only income is the margin/commission in the auction proceedings - Held that - The assessee is making only pleadings before lower authorities that he is an auctioneer; his income is only the margin/commission; and the deposits in the bank account cannot be treated as his income, etc. It is the duty of the assessee to prove before the assessing authority that the cash deposits reflected in his Vijaya Bank account in fact related to the monies received from the persons who participated in the auctions. The responsibility cannot be discharged by just explaining that he is carrying on the business of auctioning. An auctioneer is in fact bound to keep meticulous accounts and particulars regarding his auction activities. Inspite of that, the assessee did not produce any details before the assessing authority. The result is that the assessee could not explain to the satisfaction of the Assessing Officer, the source of cash deposited by him in the Vijaya Bank account. The cash deposits reflected in the Vijaya Bank account always remained unexplained. In these circumstances, the only course of action available to the Assessing Officer is to treat those cash deposits as unexplained credits. Therefore, we find that the Assessing Officer has rightly made additions in the hands of the assessee. During the course of hearing, the learned counsel has argued that even if additions were called for, the gross amounts of cash deposits could not be added for the reason that the assessee being an auctioneer, is entitled only for margin/commission. The learned counsel also contended that alternatively the peak amount alone should have been added. But, we are not in a position to accept the above alternative grounds, because the facts of the case do not justify even those alternative grounds. The basic reason for addition is the absence of evidence and details with the assessee to prove the genuineness of the source of deposits. When that is the case, the argument of margin/commission is not sustainable. As the assessee has not produced any of the details regarding the flow of funds, it is also not possible to adopt the peak amount theory. Thus we find that the lower authorities are justified in making and confirming the additions in the hands of the assessee - Decided against assessee

Summary

Issues:
- Reopening of assessment under Section 147 for the assessment year 1998-99
- Invocation of Section 153C for the remaining assessment years
- Confirmation of additions made by the assessing authority

Reopening of Assessment under Section 147 for the Assessment Year 1998-99:
The judgment involves eight appeals filed by the assessee against orders passed by the Commissioner of Income Tax (Appeals)-II at Chennai for various assessment years. The appeal for the assessment year 1998-99 arose from the assessment completed under Section 143(3) read with Section 147. The Assessing Officer reopened the assessment for this year based on materials collected during a search operation at the premises of certain individuals, leading to the conclusion of income escapement. The Tribunal upheld the reopening of the assessment for the said year.

Invocation of Section 153C for the Remaining Assessment Years:
For the remaining assessment years, except 2005-06, the assessments were completed under Section 143(3) read with Section 153C. The search operation revealed transactions between the assessee and other parties, prompting the assessing authority to invoke Section 153C. The Tribunal found this invocation justified as the search materials implicated the assessee in auctioning activities on a large scale, both public and private.

Confirmation of Additions Made by the Assessing Authority:
The main issue raised by the assessee in all appeals was the confirmation of additions made by the assessing authority. The assessee argued that cash deposits in the bank account represented amounts received from auctioneers, not income. However, despite conducting a significant auctioning business, the assessee failed to maintain proper accounts or provide details of transactions. The Tribunal noted the lack of evidence to support the source of deposits, leading to the cash deposits being treated as unexplained credits and added to the assessee's income. The Tribunal rejected alternative arguments regarding the quantum of additions, affirming the lower authorities' decisions to confirm the additions.

In conclusion, the Tribunal dismissed the appeals filed by the assessee, upholding the orders of the Commissioner of Income Tax (Appeals) and confirming the additions made by the assessing authority.