2014 (8) TMI 1080 - AT - Income Tax

Undisclosed source of money - Held that - The assessee has received over ₹ 6 crores and deposited the same in the bank account and has also withdrawn the same and given to other persons. Now the assessee is not at all prepared to divulge the names or to provide any detail whatsoever. In our considered opinion the Revenue is very much correct in treating the same as income of the assessee.

Issues Involved:
1. Whether the CIT(A) erred in overlooking the findings of the Hon'ble Madras High Court and Supreme Court.
2. Whether the CIT(A) erred in accepting the assessee's contention without documentary evidence and books of account.
3. Whether the entire deposit in the undisclosed bank account should be treated as the assessee's undisclosed income or only the peak credit balance.

Detailed Analysis:

Issue 1: Overlooking Findings of Higher Courts
The Revenue argued that the CIT(A) ignored the decisions of the Hon'ble Madras High Court and the Supreme Court, which were relied upon by the Assessing Officer (AO). The AO had cited the case of M. Sundaram vs ACIT (287 ITR 145) and Kale Khan Mohammad Hanif vs CIT (50 ITR 1) to support the addition of the entire amount deposited in the undisclosed bank account as the assessee's income. These cases established that the onus of proving the source of a sum of money lies on the assessee, and in the absence of satisfactory explanation, the amount can be treated as income.

Issue 2: Acceptance of Assessee's Contention Without Evidence
The CIT(A) accepted the assessee's explanation that the deposits were related to finance commission for providing accommodation entries, despite the lack of supporting documentary evidence and books of account. The AO had repeatedly requested details regarding the parties involved and the nature of the transactions, but the assessee failed to provide any substantial information. The AO concluded that the assessee's claim was bogus and that the entire deposit amount should be treated as undisclosed income.

Issue 3: Entire Deposit vs. Peak Credit Balance
The CIT(A) determined that only the peak credit balance in the undisclosed bank account should be added to the assessee's income, rather than the entire deposit amount. The CIT(A) reasoned that there was no evidence showing that the withdrawn amounts were used for expenses or investments. This approach was challenged by the Revenue, which argued that the entire deposit should be considered as income due to the lack of transparency and failure to substantiate the source of funds.

Tribunal's Findings:
The Tribunal found that the CIT(A) erred in ignoring the higher courts' decisions. It emphasized that the law is well-settled regarding the onus of proving the source of money received by the assessee. The Tribunal noted that the assessee failed to provide evidence to support the claim that the deposits were related to finance commission. Additionally, the Tribunal highlighted that the assessee did not disclose the identities of the parties involved in the transactions.

The Tribunal concluded that the CIT(A)'s decision to tax only the peak credit balance was incorrect. It reiterated that, according to higher judicial precedents, the entire deposit amount should be treated as the assessee's income if the source of the funds is not satisfactorily explained. Consequently, the Tribunal set aside the order of the CIT(A) and restored the AO's order, treating the entire deposit of Rs. 6,30,89,413 as the assessee's undisclosed income.

Conclusion:
The appeal by the Revenue was allowed, and the Tribunal upheld the AO's decision to treat the entire deposit in the undisclosed bank account as the assessee's income due to the lack of satisfactory explanation and supporting evidence from the assessee. The Tribunal emphasized the importance of adhering to higher judicial precedents in such matters.

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