2011 (12) TMI 69 - HC - Income Tax

Onus in proving the source of funds - Assessee deposited cash in bank a/c AO asked source - Held That - Where assesee failed to produce any cogent and convincing material to establish that the deposits were on account of sale of land, the addition made by the assessing officer could not have been deleted. - Decided against assessee.

Summary

Issues:
Determining the justification of upholding the order of the CIT (A) regarding the failure of the assessee to prove the source of funds with documentary evidence.

Analysis:
The judgment involved Income Tax Appeal Nos. 373 to 375 of 2006, addressing a common question of law. The primary issue revolved around whether the ITAT was justified in upholding the CIT (A)'s order, considering the failure of the assessee to discharge the onus of proving the source of funds with documentary evidence. The case pertained to deposits made by the assessee in different bank accounts, totaling Rs. 60,80,000, with the assessing officer questioning the source of these funds. The CIT (A) had accepted the appeal and deleted the addition made by the assessing officer, leading to an appeal by the Revenue before the Tribunal.

The Revenue contended that the deposits amounting to Rs. 36,80,000 remained unexplained as the assessee failed to provide satisfactory evidence regarding the source of these funds. The assessing officer had added this amount under Section 68 of the Income Tax Act, 1961, due to the lack of satisfactory explanation from the assessee. The crux of the matter was whether the cash deposits in the bank accounts were adequately explained by the assessee, justifying the deletion of the addition by the CIT (A) and the Tribunal.

The judgment emphasized the burden of proof in tax matters, stating that the Department must establish that a receipt falls within the taxing provision, while the burden lies on the assessee to show that it is not taxable or falls within exemptions. Under Section 68 of the Act, if the explanation offered by the assessee regarding credited amounts is unsatisfactory, it can be charged as the assessee's income. In this case, the assessing officer found that the initial onus on the assessee was not discharged, leading to the addition of Rs. 36,80,000.

The assessing officer highlighted discrepancies in the explanations provided by the assessee regarding the source of funds, indicating that the deposits were not substantiated as proceeds from the sale of land. The judgment concluded that the CIT (A) and the Tribunal erred in placing the initial onus on the Revenue and deleting the addition, as the assessee failed to provide convincing evidence regarding the source of funds. Consequently, the substantial question of law was answered in favor of the Revenue, leading to the allowance of the appeals.